Bloomberg
Australia to Further Boost Economy If Growth Slumps, Swan Says
By Gemma Daley
Nov. 30 (Bloomberg) -- Australia’s government will follow up yesterday’s A$15.1 billion ($10 billion) spending package with additional stimulus measures if growth slows more than expected, Treasurer Wayne Swan said.
National and state leaders yesterday agreed on a five-year funding plan focused on education and health, following up A$10.4 billion in grants announced last month, as the country seeks to cope with the global financial crisis.
“It does stimulate the economy; it does create 133,000 jobs over five years,” Swan told Nine Network television. “We will do whatever we need to do in the next period to stimulate the economy should growth slow more than has been expected, or would have been expected some months ago.”
Prime Minister Kevin Rudd announced the spending plan, forecast to create 133,000 jobs, after annual talks with state leaders yesterday on national government funding for the states. The package adds to A$332 billion of spending forecast for this and the next three financial years.
Swan said he doesn’t expect the financial crisis to last five years and the government will accept a budget deficit if needed for extra economic stimulus. Australia’s budget was last in deficit in the year ended June 2002.
“If growth were to slow further than expected, then a temporary deficit would be the responsible thing to do to invest in the strength of the economy and to create jobs,” Swan said. “At the moment we are forecasting a modest budget surplus.”
Surplus Shrinks
Swan on Nov. 5 slashed the forecast budget surplus by 75 percent, citing the slowest economic growth in eight years. Reserve Bank Governor Glenn Stevens said Nov. 19 he would be comfortable if state and federal governments increased public spending, “even if that involves some prudent borrowing.”
Australia would join other developed nations forecasting budget deficits in 2009. The U.S. government shortfall may top $1 trillion next year and spending in the U.K. will push the deficit to 118 billion pounds ($181 billion) in the year starting April 1.
“The global financial crisis is still unfolding,” Deputy Prime Minister Julia Gillard told Channel Ten’s Meet The Press program today. “Its effects on our economy are still unfolding.”
The Reserve Bank of Australia this month reduced its 2008 economic growth forecast to 1.5 percent from 2 percent. The central bank has slashed its benchmark interest rate 2 percentage points since September to 5.25 percent.
Australia’s leading economic index fell in September, signaling the nation may slip into a recession, ending 17 straight years of economic expansion, Westpac Banking Corp. and the Melbourne Institute said on Nov. 19.
Australian business confidence plunged in October to a record low, consumers were pessimistic in November for a 10th straight month and house prices dropped in the third quarter by the most since 1978.
Last Updated: November 29, 2008 20:02 EST
Sunday, November 30, 2008
Housing Hit to U.S. Economy Nearing End, Economist Minack Says
Bloomberg
Housing Hit to U.S. Economy Nearing End, Economist Minack Says
By Carlos Torres
Nov. 28 (Bloomberg) -- The U.S. housing-market slump has been so severe it’s almost “impossible” for declines in residential construction to hurt the world’s largest economy as much in 2009, said Morgan Stanley’s Gerard Minack.
As housing’s share of gross domestic product has diminished, so too will its influence on growth, Minack, chief equity strategist at Morgan Stanley Australia Ltd. in Sydney, said in a note to clients.
“It is now (almost) impossible for housing to detract as much from GDP growth next year as it has this year,” wrote Minack. “This may have been an extreme cycle for housing, but it is a cycle -- and it seems clear it is in the latter stages of decline.”
The biggest plunge in homebuilding in a quarter century has left housing accounting for just 3.3 percent of U.S. GDP as of last quarter, near a record low and well below the long-term average of around 4.5 percent, according to Minack.
Inventories, another volatile category that often determines the length and magnitude of U.S. contractions, now also makes up a smaller share of the economy, Minack said. The ascendance of the services industry, where inventories of unsold goods are less relevant, explains the change.
“Inventories are set to be a drag in the next quarter or two, but that drag is very likely to moderate thereafter,” according to Minack.
Still, the smaller influence of housing and inventories doesn’t imply the economic slump will be “mild,” Minack said. Economists at Morgan Stanley project the decline in consumer spending, which accounts for about 70 percent of the economy, will be the biggest in the post World War II era, he said. That means the downturn “may even stretch into 2010.”
Last Updated: November 28, 2008 11:30 EST
Housing Hit to U.S. Economy Nearing End, Economist Minack Says
By Carlos Torres
Nov. 28 (Bloomberg) -- The U.S. housing-market slump has been so severe it’s almost “impossible” for declines in residential construction to hurt the world’s largest economy as much in 2009, said Morgan Stanley’s Gerard Minack.
As housing’s share of gross domestic product has diminished, so too will its influence on growth, Minack, chief equity strategist at Morgan Stanley Australia Ltd. in Sydney, said in a note to clients.
“It is now (almost) impossible for housing to detract as much from GDP growth next year as it has this year,” wrote Minack. “This may have been an extreme cycle for housing, but it is a cycle -- and it seems clear it is in the latter stages of decline.”
The biggest plunge in homebuilding in a quarter century has left housing accounting for just 3.3 percent of U.S. GDP as of last quarter, near a record low and well below the long-term average of around 4.5 percent, according to Minack.
Inventories, another volatile category that often determines the length and magnitude of U.S. contractions, now also makes up a smaller share of the economy, Minack said. The ascendance of the services industry, where inventories of unsold goods are less relevant, explains the change.
“Inventories are set to be a drag in the next quarter or two, but that drag is very likely to moderate thereafter,” according to Minack.
Still, the smaller influence of housing and inventories doesn’t imply the economic slump will be “mild,” Minack said. Economists at Morgan Stanley project the decline in consumer spending, which accounts for about 70 percent of the economy, will be the biggest in the post World War II era, he said. That means the downturn “may even stretch into 2010.”
Last Updated: November 28, 2008 11:30 EST
Amid credit crunch, gold may be safe haven
China Daily
Amid credit crunch, gold may be safe haven
By Hui Ching-hoo
Updated: 2008-11-29 11:39
The price of gold will likely hit $1,000 per ounce next year, on speculation that international capital will flow to bullion markets, say pundits. Gold may become a safe haven for investors concerned about the credit crunch.
Gold will likely regain the momentum it had earlier this year, when international prices reached a record high of $1,002 per ounce in March in view of imminent inflation, said a World Gold Council investment manager. The high prices tapered off in July, as the global economic downturn loomed, eventually bottoming out below $750 per ounce.
"Many countries are still under the threat of inflation, creating a strong demand for gold to hedge against a material hike," said Natalie Dempster, a World Gold Council investment manager.
The financial crisis is making central banks in many countries unwilling to lend gold reserves, said UBS. The banks predict the credit squeeze will boost gold prices in the near future.
Demand for gold in developing countries such as China and India will buoy its price, said Convoy Asset Management director Ernest Chan.
"Forget investment purposes. Gold has an emotional significance to Chinese and Indians and gold ornaments are very common wedding and birthday gifts," said Chan.
But it may be too early to say gold prices will rebound, given the European central banks' interest rate cut, said Hong Kong Baptist University associate professor Billy Mak.
The European cut strengthens the dollar against the Euro and the pound, which may draw capital to the dollar instead of gold, he said.
Physical gold, gold futures and gold ETF (exchange trade fund) are the three most common forms of gold investment. Pundits advised investors to assess their risk tolerances for each of the forms before purchasing.
Physical gold is not a 'popular' tool for short-term speculation because it's inconvenient to store and offers no interest payment, said Mak.
Gold futures have higher leverage, but losses can be greater than investors' initial capital and there are exchange fees and commissions added to the trading cost.
"Investors (in gold futures) should be able to bear high risk and maintain a strong cash position," said Chan.
The first gold ETF SPDR debuted in the Hong Kong market on July 31. A share of the trust is set at the value of a tenth of an ounce of gold. The minimum subscription size is 10 shares (one ounce).
"ETF provides a convenient platform for gold trading because its operation is as easy as equities and it's very liquid. Also it's highly correlated with the underlying movement in spot," said Mak.
But ETF's drawback is that trading is not round-the-clock, making it vulnerable to large gap openings.
Amid credit crunch, gold may be safe haven
By Hui Ching-hoo
Updated: 2008-11-29 11:39
The price of gold will likely hit $1,000 per ounce next year, on speculation that international capital will flow to bullion markets, say pundits. Gold may become a safe haven for investors concerned about the credit crunch.
Gold will likely regain the momentum it had earlier this year, when international prices reached a record high of $1,002 per ounce in March in view of imminent inflation, said a World Gold Council investment manager. The high prices tapered off in July, as the global economic downturn loomed, eventually bottoming out below $750 per ounce.
"Many countries are still under the threat of inflation, creating a strong demand for gold to hedge against a material hike," said Natalie Dempster, a World Gold Council investment manager.
The financial crisis is making central banks in many countries unwilling to lend gold reserves, said UBS. The banks predict the credit squeeze will boost gold prices in the near future.
Demand for gold in developing countries such as China and India will buoy its price, said Convoy Asset Management director Ernest Chan.
"Forget investment purposes. Gold has an emotional significance to Chinese and Indians and gold ornaments are very common wedding and birthday gifts," said Chan.
But it may be too early to say gold prices will rebound, given the European central banks' interest rate cut, said Hong Kong Baptist University associate professor Billy Mak.
The European cut strengthens the dollar against the Euro and the pound, which may draw capital to the dollar instead of gold, he said.
Physical gold, gold futures and gold ETF (exchange trade fund) are the three most common forms of gold investment. Pundits advised investors to assess their risk tolerances for each of the forms before purchasing.
Physical gold is not a 'popular' tool for short-term speculation because it's inconvenient to store and offers no interest payment, said Mak.
Gold futures have higher leverage, but losses can be greater than investors' initial capital and there are exchange fees and commissions added to the trading cost.
"Investors (in gold futures) should be able to bear high risk and maintain a strong cash position," said Chan.
The first gold ETF SPDR debuted in the Hong Kong market on July 31. A share of the trust is set at the value of a tenth of an ounce of gold. The minimum subscription size is 10 shares (one ounce).
"ETF provides a convenient platform for gold trading because its operation is as easy as equities and it's very liquid. Also it's highly correlated with the underlying movement in spot," said Mak.
But ETF's drawback is that trading is not round-the-clock, making it vulnerable to large gap openings.
Carlyle Group moves further into private education in China
China Daily
Carlyle Group moves further into private education in China
By Diao Ying
Updated: 2008-11-28 14:33
Carlyle, the global private equity firm, today tapped into China's education industry by investing $50 million in a private education group here.
This is the investor's second investment in China's education sector. "We are attracted to the resilient nature of the sector, which has the proven potential to grow even in a challenging economic climate," says Wayne Tsou, head of Carlyle Asia Growth Partners Group (CAGP).
The move reflects that China, with its steady economic growth, remains appealing to foreign investors especially as the economy gets worse elsewhere. Carlyle Asia Growth Partners Group (CAGP) has invested US$200 million of equity capital in existing portfolio companies and three new companies in 2008 so far.
"Despite the global market turmoil, CAGP remains committed to forging durable partnerships in China," said Tsou.
The investment goes to Hao Yue Education Group, a private school based in Beijing. It is to support the local school to expand its campus and acquire other private vocational schools. It will also support launching some short-term training programs, the company said.
The business model of Hao Yue puts career training and development at the core of its service proposition. It has two campuses in Beijing and enrolls over 30,000 students.
"Our partnership with The Carlyle Group represents the next big step in expanding our business. We now have a stable, long-term source of capital that will allow us to fully realize our firm’s potential," says Zhou Jiting, chairman of Hao Yue.
Carlyle Group moves further into private education in China
By Diao Ying
Updated: 2008-11-28 14:33
Carlyle, the global private equity firm, today tapped into China's education industry by investing $50 million in a private education group here.
This is the investor's second investment in China's education sector. "We are attracted to the resilient nature of the sector, which has the proven potential to grow even in a challenging economic climate," says Wayne Tsou, head of Carlyle Asia Growth Partners Group (CAGP).
The move reflects that China, with its steady economic growth, remains appealing to foreign investors especially as the economy gets worse elsewhere. Carlyle Asia Growth Partners Group (CAGP) has invested US$200 million of equity capital in existing portfolio companies and three new companies in 2008 so far.
"Despite the global market turmoil, CAGP remains committed to forging durable partnerships in China," said Tsou.
The investment goes to Hao Yue Education Group, a private school based in Beijing. It is to support the local school to expand its campus and acquire other private vocational schools. It will also support launching some short-term training programs, the company said.
The business model of Hao Yue puts career training and development at the core of its service proposition. It has two campuses in Beijing and enrolls over 30,000 students.
"Our partnership with The Carlyle Group represents the next big step in expanding our business. We now have a stable, long-term source of capital that will allow us to fully realize our firm’s potential," says Zhou Jiting, chairman of Hao Yue.
Expert: China's exports to grow 15 percent in 2009
XinHua News
Expert: China's exports to grow 15 percent in 2009
2008-11-29 12:48:46
BEIJING, Nov. 29 (Xinhua) -- China's export volume is expected to achieve a growth rate of around 15 percent in 2009 despite the impact of the financial crisis and global economic downturn, a trade expert with the Ministry of Commerce (MOC) has said.
"It is true that coastal provinces such as Guangdong have been facing much pressure as global demand for traditional commodities has weakened significantly," Mei Xinyu, an expert with the MOC Academy of International Trade and Economic Cooperation.
In China, the so-called "traditional commodities" of export refer to garments, accessories, textile, shoes and furniture, among others.
It is also true that China's exports of electrical and electronic products has maintained a 20-percent growth rate this year, Mei said.
"The electrical and electronic manufacturing industry, featuring advanced technology, holds the key to the development of the Chinese economy. As long as the exports of electrical and electronic products continue to grow, China's export prospect won't be too bad," Mei said.
Figures from the China General Administration of Customs show China's exports of electrical and electronic products were worth 288.89 billion U.S. dollars in the first 10 months, jumping 21 percent from the same period last year.
During the economic crisis, multinationals in the manufacturing industry are likely to speed up the process of moving their production into China or source more made-in-China products in an effort to cut cost, he said.
In addition, the Chinese government had raised tax rebate rates for exports three times since late July to create more favorable environment for exporters, he said. He predicted that the government would adopt more favorable policies in the future to encourage both exports and imports.
CGAC figures showed that China's foreign trade volume in the first 10 months to October hit 2.189 trillion U.S. dollars, up 24.4 percent over a year earlier. The volume was larger than that for the entire year of 2007, which stood at 2.174 trillion U.S. dollars.
The total comprised 1.202 trillion U.S. dollars in exports, up 21.9 percent year on year, and 986.34 billion U.S. dollars in imports, soaring 27.6 percent.
Guangdong, in South China, has long been the country's export powerhouse. In the first 10 months, Guangdong recorded 577.83 billion U.S. dollars in foreign trade volume, accounting for 26.3 percent of the country's total, according to the CGAC.
Editor: Yao
Expert: China's exports to grow 15 percent in 2009
2008-11-29 12:48:46
BEIJING, Nov. 29 (Xinhua) -- China's export volume is expected to achieve a growth rate of around 15 percent in 2009 despite the impact of the financial crisis and global economic downturn, a trade expert with the Ministry of Commerce (MOC) has said.
"It is true that coastal provinces such as Guangdong have been facing much pressure as global demand for traditional commodities has weakened significantly," Mei Xinyu, an expert with the MOC Academy of International Trade and Economic Cooperation.
In China, the so-called "traditional commodities" of export refer to garments, accessories, textile, shoes and furniture, among others.
It is also true that China's exports of electrical and electronic products has maintained a 20-percent growth rate this year, Mei said.
"The electrical and electronic manufacturing industry, featuring advanced technology, holds the key to the development of the Chinese economy. As long as the exports of electrical and electronic products continue to grow, China's export prospect won't be too bad," Mei said.
Figures from the China General Administration of Customs show China's exports of electrical and electronic products were worth 288.89 billion U.S. dollars in the first 10 months, jumping 21 percent from the same period last year.
During the economic crisis, multinationals in the manufacturing industry are likely to speed up the process of moving their production into China or source more made-in-China products in an effort to cut cost, he said.
In addition, the Chinese government had raised tax rebate rates for exports three times since late July to create more favorable environment for exporters, he said. He predicted that the government would adopt more favorable policies in the future to encourage both exports and imports.
CGAC figures showed that China's foreign trade volume in the first 10 months to October hit 2.189 trillion U.S. dollars, up 24.4 percent over a year earlier. The volume was larger than that for the entire year of 2007, which stood at 2.174 trillion U.S. dollars.
The total comprised 1.202 trillion U.S. dollars in exports, up 21.9 percent year on year, and 986.34 billion U.S. dollars in imports, soaring 27.6 percent.
Guangdong, in South China, has long been the country's export powerhouse. In the first 10 months, Guangdong recorded 577.83 billion U.S. dollars in foreign trade volume, accounting for 26.3 percent of the country's total, according to the CGAC.
Editor: Yao
Expert: China expects economic growth by 10% in 2009
XinHua News
Expert: China expects economic growth by 10% in 2009
2008-11-30 14:40:34
BEIJING, Nov. 30 (Xinhua) -- China's economy is expected to grow by 10 percent in 2009 despite the impact of the financial crisis and global economic downturn, a researcher with the country's Cabinet said.
"Although dim world economic situation has led to weak overseas demand, domestic consumption and investments, vast development potential decided the country's economy will grow at fast paces," said Zhang Liqun, the Development Research Center of the State Council researcher.
He forecasted China's economic growth would accelerate largely at the second half of next year.
Zhang said his remarks were based on the country's huge domestic consumption, and investment potentials; sufficient fund, technology, labor and social security, and the government's gradually mature macro-economic control measures.
"Personal income continues to increase as millions of migrant workers flow into the city to get their lives improved. Enlarging demand for houses and autos will form huge and lasting consuming power," he said.
"However, domestic enterprises need to accelerate their paces in upgrading business structure, in a bid to better cope with severe world economic situation," he said.
China's gross domestic product (GDP) grew to 20.16 trillion yuan (2.96 trillion U.S. dollars) in the first three quarters of this year, up 9.9 percent from the same period of last year. The growth rate was 2.3 percentage points lower than the same period of last year.
In addition, Zhang expected the country's consumer price index, or the main inflation gauge, to increase by three percent in 2009 year on year. The index hit a record of 8.7 percent in February, and went up seven percent in the first nine months, far high from the government's aim of 4.8 percent.
Editor: Yao
Expert: China expects economic growth by 10% in 2009
2008-11-30 14:40:34
BEIJING, Nov. 30 (Xinhua) -- China's economy is expected to grow by 10 percent in 2009 despite the impact of the financial crisis and global economic downturn, a researcher with the country's Cabinet said.
"Although dim world economic situation has led to weak overseas demand, domestic consumption and investments, vast development potential decided the country's economy will grow at fast paces," said Zhang Liqun, the Development Research Center of the State Council researcher.
He forecasted China's economic growth would accelerate largely at the second half of next year.
Zhang said his remarks were based on the country's huge domestic consumption, and investment potentials; sufficient fund, technology, labor and social security, and the government's gradually mature macro-economic control measures.
"Personal income continues to increase as millions of migrant workers flow into the city to get their lives improved. Enlarging demand for houses and autos will form huge and lasting consuming power," he said.
"However, domestic enterprises need to accelerate their paces in upgrading business structure, in a bid to better cope with severe world economic situation," he said.
China's gross domestic product (GDP) grew to 20.16 trillion yuan (2.96 trillion U.S. dollars) in the first three quarters of this year, up 9.9 percent from the same period of last year. The growth rate was 2.3 percentage points lower than the same period of last year.
In addition, Zhang expected the country's consumer price index, or the main inflation gauge, to increase by three percent in 2009 year on year. The index hit a record of 8.7 percent in February, and went up seven percent in the first nine months, far high from the government's aim of 4.8 percent.
Editor: Yao
China losing competitive edge?
The Business Times
Nov 30, 2008 |
China losing competitive edge?
BEIJING - CHINESE President Hu Jintao warned that China has started to lose its competitive edge in trade amid the global financial crisis as he told Communist Party leaders the challenge posed a test to the government's ability to rule.
China's economic growth is expected to fall to about 9 per cent this year, down from last year's 11.9 per cent. That would be the fastest decline of any major economy, but Chinese leaders worry about possible unrest as unemployment rises, especially in export industries where factories are shutting down as global demand plummets.
'External demand has obviously weakened and China's traditional competitive advantage is being gradually weakened,' Hu said, according to the Communist Party's official People's Daily newspaper.
Mr Hu told members of the Communist Party's powerful Political Bureau that the financial meltdown posed critical challenges to a government that has staked its legitimacy in part on competent management of a rapidly developing society.
'Whether the pressures can be turned into a driving force and the challenges turned to opportunities ... is a test of our ability to control a complex situation, and also a test of our party's governing ability,' Mr Hu said.
Mr Hu urged party leaders to step up efforts to reform its economic growth model to achieve development that is sustainable.
He said greater effort should be made to raise living standards, use resources more efficiently and develop rural and urban areas, the report said.
The remarks come after China's top economic planner Zhang Ping, chairman of the Cabinet's National Development and Reform Commission, warned Thursday that the impact of the global financial crisis is worsening and that rising job losses could fuel instability.
But a government researcher said that despite the impact of the global slowdown, the country's economy is expected to grow by 10 per cent next year as domestic consumption grows with rising personal incomes.
'Personal income continues to increase as millions of migrant workers flow into the city to get their lives improved. Enlarging demand for houses and autos will form huge and lasting consuming power,' said Mr Zhang Liqun, a researcher at a think tank attached to the Cabinet's planning agency.
On Wednesday, Beijing announced its biggest interest rate cut in 11 years to increase consumer and company spending. A multibillion-dollar stimulus package launched on Nov 9 aims to boost growth through heavy new spending on construction, tax cuts and aid to the poor and farmers.
Beijing plans to spend 18 trillion yuan (S$3.93 trillion) in 2009 alone to help blunt the impact of the global financial crisis, using the immense capital accumulated over years of double-digit economic growth and booming exports to build railways, roads, airports and electricity networks. -- AP
Nov 30, 2008 |
China losing competitive edge?
BEIJING - CHINESE President Hu Jintao warned that China has started to lose its competitive edge in trade amid the global financial crisis as he told Communist Party leaders the challenge posed a test to the government's ability to rule.
China's economic growth is expected to fall to about 9 per cent this year, down from last year's 11.9 per cent. That would be the fastest decline of any major economy, but Chinese leaders worry about possible unrest as unemployment rises, especially in export industries where factories are shutting down as global demand plummets.
'External demand has obviously weakened and China's traditional competitive advantage is being gradually weakened,' Hu said, according to the Communist Party's official People's Daily newspaper.
Mr Hu told members of the Communist Party's powerful Political Bureau that the financial meltdown posed critical challenges to a government that has staked its legitimacy in part on competent management of a rapidly developing society.
'Whether the pressures can be turned into a driving force and the challenges turned to opportunities ... is a test of our ability to control a complex situation, and also a test of our party's governing ability,' Mr Hu said.
Mr Hu urged party leaders to step up efforts to reform its economic growth model to achieve development that is sustainable.
He said greater effort should be made to raise living standards, use resources more efficiently and develop rural and urban areas, the report said.
The remarks come after China's top economic planner Zhang Ping, chairman of the Cabinet's National Development and Reform Commission, warned Thursday that the impact of the global financial crisis is worsening and that rising job losses could fuel instability.
But a government researcher said that despite the impact of the global slowdown, the country's economy is expected to grow by 10 per cent next year as domestic consumption grows with rising personal incomes.
'Personal income continues to increase as millions of migrant workers flow into the city to get their lives improved. Enlarging demand for houses and autos will form huge and lasting consuming power,' said Mr Zhang Liqun, a researcher at a think tank attached to the Cabinet's planning agency.
On Wednesday, Beijing announced its biggest interest rate cut in 11 years to increase consumer and company spending. A multibillion-dollar stimulus package launched on Nov 9 aims to boost growth through heavy new spending on construction, tax cuts and aid to the poor and farmers.
Beijing plans to spend 18 trillion yuan (S$3.93 trillion) in 2009 alone to help blunt the impact of the global financial crisis, using the immense capital accumulated over years of double-digit economic growth and booming exports to build railways, roads, airports and electricity networks. -- AP
Saturday, November 29, 2008
Housing Hit to US Economy Nearing End
Bloomberg
Housing Hit to U.S. Economy Nearing End, Economist Minack Says
By Carlos Torres
Nov. 28 (Bloomberg) -- The U.S. housing-market slump has been so severe it’s almost “impossible” for declines in residential construction to hurt the world’s largest economy as much in 2009, said Morgan Stanley’s Gerard Minack.
As housing’s share of gross domestic product has diminished, so too will its influence on growth, Minack, chief equity strategist at Morgan Stanley Australia Ltd. in Sydney, said in a note to clients.
“It is now (almost) impossible for housing to detract as much from GDP growth next year as it has this year,” wrote Minack. “This may have been an extreme cycle for housing, but it is a cycle -- and it seems clear it is in the latter stages of decline.”
The biggest plunge in homebuilding in a quarter century has left housing accounting for just 3.3 percent of U.S. GDP as of last quarter, near a record low and well below the long-term average of around 4.5 percent, according to Minack.
Inventories, another volatile category that often determines the length and magnitude of U.S. contractions, now also makes up a smaller share of the economy, Minack said. The ascendance of the services industry, where inventories of unsold goods are less relevant, explains the change.
“Inventories are set to be a drag in the next quarter or two, but that drag is very likely to moderate thereafter,” according to Minack.
Still, the smaller influence of housing and inventories doesn’t imply the economic slump will be “mild,” Minack said. Economists at Morgan Stanley project the decline in consumer spending, which accounts for about 70 percent of the economy, will be the biggest in the post World War II era, he said. That means the downturn “may even stretch into 2010.”
Last Updated: November 28, 2008 11:30 EST
Housing Hit to U.S. Economy Nearing End, Economist Minack Says
By Carlos Torres
Nov. 28 (Bloomberg) -- The U.S. housing-market slump has been so severe it’s almost “impossible” for declines in residential construction to hurt the world’s largest economy as much in 2009, said Morgan Stanley’s Gerard Minack.
As housing’s share of gross domestic product has diminished, so too will its influence on growth, Minack, chief equity strategist at Morgan Stanley Australia Ltd. in Sydney, said in a note to clients.
“It is now (almost) impossible for housing to detract as much from GDP growth next year as it has this year,” wrote Minack. “This may have been an extreme cycle for housing, but it is a cycle -- and it seems clear it is in the latter stages of decline.”
The biggest plunge in homebuilding in a quarter century has left housing accounting for just 3.3 percent of U.S. GDP as of last quarter, near a record low and well below the long-term average of around 4.5 percent, according to Minack.
Inventories, another volatile category that often determines the length and magnitude of U.S. contractions, now also makes up a smaller share of the economy, Minack said. The ascendance of the services industry, where inventories of unsold goods are less relevant, explains the change.
“Inventories are set to be a drag in the next quarter or two, but that drag is very likely to moderate thereafter,” according to Minack.
Still, the smaller influence of housing and inventories doesn’t imply the economic slump will be “mild,” Minack said. Economists at Morgan Stanley project the decline in consumer spending, which accounts for about 70 percent of the economy, will be the biggest in the post World War II era, he said. That means the downturn “may even stretch into 2010.”
Last Updated: November 28, 2008 11:30 EST
Friday, November 28, 2008
The New Stock Market
Yahoo Finance
The New Stock Market
Tuesday November 25, 10:00 am ET
By Mr. Practical
First, as my trader friends point out, there no longer really is a stock market. Liquidity is so bad that prices do not really reflect new information. Rather is reflects volatility due to buying and selling by fewer and fewer participants as either people neither have the money or desire to trade. The stock indexes have moved more in the last 50 days than they have for the last 50 years.
Secondly, stock prices are being driven more and more by currency movements. Why is this? As governments take on more and more risk, as they price more and more assets for the market, and as they transfer debt from private to public, the common denominator, or release valve, becomes the currency.
When a government that can create its own money becomes insolvent, it is manifest in a much lower currency. Ironically it is manifest in a higher currency in the first stages as debt is destroyed. But as government take on more and more assets financed by printed dollars it becomes weaker. We are seeing that struggle play out each day. When the dollar goes up due to deflationary pressures, stocks go down. When the government replaces debt with its own by printing currency and takes the risk as it did with the Citigroup bailout (a huge amount for one company), the amount of dollars printed to finance the bailout causes the dollar to drop and stocks to go up.
Why do stocks go up when the dollar goes down? Imagine one person owning all the shares of a company who is willing to sell the stock for $50 a share. If the dollar drops 50% over-night and you go to that person to give them $50 for a share of stock they will say 'no, no, today I need twice as many dollars for a share of stock because the dollar is worth half as much.' so the stock price rises to $100.
So you say let's just devalue the dollar fully and watch stocks go soaring. Well be careful what you wish for as I have explained the consequences of that: total debasement of a currency will lead ultimately to a deflationary collapse. Study your history. A total debasement of currency creates no wealth and the stockholder is no better off, it just looks that way for awhile. But if all confidence is lost, the fiat currency system fails altogether.
The point is nothing really matters anymore besides currency, so watch them closely. Governments are systematically destroying stock markets and changing how they work. They are being replaced with socialism and determined pricing.
Risk is very high.
Nothing contained in this article is intended as a solicitation for business of any kind or for investment in the firm.
The New Stock Market
Tuesday November 25, 10:00 am ET
By Mr. Practical
First, as my trader friends point out, there no longer really is a stock market. Liquidity is so bad that prices do not really reflect new information. Rather is reflects volatility due to buying and selling by fewer and fewer participants as either people neither have the money or desire to trade. The stock indexes have moved more in the last 50 days than they have for the last 50 years.
Secondly, stock prices are being driven more and more by currency movements. Why is this? As governments take on more and more risk, as they price more and more assets for the market, and as they transfer debt from private to public, the common denominator, or release valve, becomes the currency.
When a government that can create its own money becomes insolvent, it is manifest in a much lower currency. Ironically it is manifest in a higher currency in the first stages as debt is destroyed. But as government take on more and more assets financed by printed dollars it becomes weaker. We are seeing that struggle play out each day. When the dollar goes up due to deflationary pressures, stocks go down. When the government replaces debt with its own by printing currency and takes the risk as it did with the Citigroup bailout (a huge amount for one company), the amount of dollars printed to finance the bailout causes the dollar to drop and stocks to go up.
Why do stocks go up when the dollar goes down? Imagine one person owning all the shares of a company who is willing to sell the stock for $50 a share. If the dollar drops 50% over-night and you go to that person to give them $50 for a share of stock they will say 'no, no, today I need twice as many dollars for a share of stock because the dollar is worth half as much.' so the stock price rises to $100.
So you say let's just devalue the dollar fully and watch stocks go soaring. Well be careful what you wish for as I have explained the consequences of that: total debasement of a currency will lead ultimately to a deflationary collapse. Study your history. A total debasement of currency creates no wealth and the stockholder is no better off, it just looks that way for awhile. But if all confidence is lost, the fiat currency system fails altogether.
The point is nothing really matters anymore besides currency, so watch them closely. Governments are systematically destroying stock markets and changing how they work. They are being replaced with socialism and determined pricing.
Risk is very high.
Nothing contained in this article is intended as a solicitation for business of any kind or for investment in the firm.
Malls, hotels next victims in new mortgage crisis
Associated Press
Malls, hotels next victims in new mortgage crisis
By MATT APUZZO
28 November 2008
WASHINGTON (AP) — The full scope of the housing meltdown isn't clear and already there are ominous signs of a new crisis — one that could turn out the lights on malls, hotels and storefronts nationwide.
Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure.
Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.
That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.
"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.
That's bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.
Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.
But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.
"It's a toxic drug and nobody knows how bad it's going to be," said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.
Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.
The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.
Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.
Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.
Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.
California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.
The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won't write mortgages as long as investors won't purchase them.
"Credit markets have seized up," corporate securities lawyer Michael Gambro said. "People are not willing to take risks. They're not buying anything."
That drives down investments already on the books. Insurance companies are seeing their stock prices fall on fears they are too invested in commercial mortgages.
"The system has never been tested for a deep recession," said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.
One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.
"He's created havoc in the marketplace by changing the rules," Rosen said. "It was the stupidest statement on Earth."
The Securities and Exchange Commission is considering another option that might ease the crisis, one that would change accounting rules so banks don't have to declare huge losses whenever the market declines.
But the only surefire remedy is for the economy to stabilize, for businesses to start expanding and for investors to trust the market again. Until then, Tross said, "There's going to be a lot of pain going forward."
Malls, hotels next victims in new mortgage crisis
By MATT APUZZO
28 November 2008
WASHINGTON (AP) — The full scope of the housing meltdown isn't clear and already there are ominous signs of a new crisis — one that could turn out the lights on malls, hotels and storefronts nationwide.
Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure.
Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.
That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.
"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.
That's bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.
Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.
But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.
"It's a toxic drug and nobody knows how bad it's going to be," said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.
Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.
The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.
Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.
Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.
Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.
California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.
The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won't write mortgages as long as investors won't purchase them.
"Credit markets have seized up," corporate securities lawyer Michael Gambro said. "People are not willing to take risks. They're not buying anything."
That drives down investments already on the books. Insurance companies are seeing their stock prices fall on fears they are too invested in commercial mortgages.
"The system has never been tested for a deep recession," said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.
One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.
"He's created havoc in the marketplace by changing the rules," Rosen said. "It was the stupidest statement on Earth."
The Securities and Exchange Commission is considering another option that might ease the crisis, one that would change accounting rules so banks don't have to declare huge losses whenever the market declines.
But the only surefire remedy is for the economy to stabilize, for businesses to start expanding and for investors to trust the market again. Until then, Tross said, "There's going to be a lot of pain going forward."
China - Analysts split on impact of interest rate, reserve ratio cuts
China Information News
Analysts split on impact of interest rate, reserve ratio cuts
28 November 2008
Analysts on Thursday offered widely diverging views of the impact of an unusually large interest rate cut and a reduction in banks' reserve ratio, which were announced by the People's Bank of China (PBOC, central bank) after the markets closed on Wednesday.
Some said banks would benefit from the reductions, while others took a negative view.
The PBOC cut the benchmark one-year lending rate to 5.58 percent from 6.66 percent and the one-year deposit rate to 2.52 percent from 3.60 percent. These cuts, of 108 basis points each, were the largest since the Asia crisis of the late 90s and took effect on Thursday.
The PBOC also said as of December 5, it would lower the reserve requirement ratio by 1 percentage point at large banks and 2 percentage points at other banks.
Jin Xin, an Everbright Securities analyst, said the rate cuts were definitely good news for banks, whose profitability has been deteriorating. Jin said the move would widen the gap between lending and deposit rates, which is where banks make their money.
For example, about 90 percent of domestic banks' profits come from the rate gap, which had been narrowed by previous asymmetric rate cuts.
As a result, Jin estimated, the net profit of banks would expand by 4.2 percentage points in 2009.
The reduced reserve requirement would also free up more money for banks to lend, pumping around 640 billion yuan (US$91.4 billion) into the system, he added.
Lower lending rates would reduce enterprises' financing costs and boost their investment sentiment, said a report by the Bank of Communications. Cheaper financing would also make borrowing less of a burden for companies and thus would lower banks' bad-loan ratios.
Wu Yonggang, a researcher with Guotai Junan Securities, said his calculations showed different results. He said the rate cuts would in fact narrow the interest rate spread of deposits and loans, although the negative effect could be largely offset by the reduced reserve requirement, which he estimated would pump 710 billion yuan into the banking system.
For the 14 listed banks, the change in the interest rate spread would actually reduce net profit by up to 0.19 percent, Wu said.
He said the effects would be positive for big banks like the Industrial and Commercial Bank of China and China Construction Bank but negative for small and medium-sized banks.
She Minhua, a CITIC Jiantou Securities analyst, said the latest rate cuts had mostly eliminated the potential for further reductions next year, and as a result, listed banks were likely to see their profits wiped out or might even experience a loss in 2009.
Bank stocks on Thursday under-performed the benchmark Shanghai stock index, which rose 1.05 percent while banks were up just 0.5 percent on average.
Wednesday's cuts were the fourth since mid-September. They were also the largest since October 1997, when the PBOC slashed the one-year rate by 1.44 percentage points to support growth amid the Asian financial crisis.
Large lenders are Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China.
(Xinhua News Agency November 28, 2008)
Analysts split on impact of interest rate, reserve ratio cuts
28 November 2008
Analysts on Thursday offered widely diverging views of the impact of an unusually large interest rate cut and a reduction in banks' reserve ratio, which were announced by the People's Bank of China (PBOC, central bank) after the markets closed on Wednesday.
Some said banks would benefit from the reductions, while others took a negative view.
The PBOC cut the benchmark one-year lending rate to 5.58 percent from 6.66 percent and the one-year deposit rate to 2.52 percent from 3.60 percent. These cuts, of 108 basis points each, were the largest since the Asia crisis of the late 90s and took effect on Thursday.
The PBOC also said as of December 5, it would lower the reserve requirement ratio by 1 percentage point at large banks and 2 percentage points at other banks.
Jin Xin, an Everbright Securities analyst, said the rate cuts were definitely good news for banks, whose profitability has been deteriorating. Jin said the move would widen the gap between lending and deposit rates, which is where banks make their money.
For example, about 90 percent of domestic banks' profits come from the rate gap, which had been narrowed by previous asymmetric rate cuts.
As a result, Jin estimated, the net profit of banks would expand by 4.2 percentage points in 2009.
The reduced reserve requirement would also free up more money for banks to lend, pumping around 640 billion yuan (US$91.4 billion) into the system, he added.
Lower lending rates would reduce enterprises' financing costs and boost their investment sentiment, said a report by the Bank of Communications. Cheaper financing would also make borrowing less of a burden for companies and thus would lower banks' bad-loan ratios.
Wu Yonggang, a researcher with Guotai Junan Securities, said his calculations showed different results. He said the rate cuts would in fact narrow the interest rate spread of deposits and loans, although the negative effect could be largely offset by the reduced reserve requirement, which he estimated would pump 710 billion yuan into the banking system.
For the 14 listed banks, the change in the interest rate spread would actually reduce net profit by up to 0.19 percent, Wu said.
He said the effects would be positive for big banks like the Industrial and Commercial Bank of China and China Construction Bank but negative for small and medium-sized banks.
She Minhua, a CITIC Jiantou Securities analyst, said the latest rate cuts had mostly eliminated the potential for further reductions next year, and as a result, listed banks were likely to see their profits wiped out or might even experience a loss in 2009.
Bank stocks on Thursday under-performed the benchmark Shanghai stock index, which rose 1.05 percent while banks were up just 0.5 percent on average.
Wednesday's cuts were the fourth since mid-September. They were also the largest since October 1997, when the PBOC slashed the one-year rate by 1.44 percentage points to support growth amid the Asian financial crisis.
Large lenders are Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China.
(Xinhua News Agency November 28, 2008)
China to operate 16,000-km passenger-dedicated lines by 2020
XinHua News
China to operate 16,000-km passenger-dedicated lines by 2020
2008-11-27 20:24:43
BEIJING, Nov. 27 (Xinhua) -- The Chinese Ministry of Railways (MOR) on Thursday increased the mileage of passenger-dedicated lines planned to be in service by 2020 to 16,000 km in a revised Medium- and Long-term Railway Network Plan.
According to the revised plan, announced officially on Thursday, China plans to have more than 120,000 km of rail lines by 2020, about 60 percent of which are to be electrified.
This is an increase on a 2004 plan for about 100,000 km of railways and 12,000 km passenger-dedicated lines by 2020. The old plan had only 50 percent of the country's railways electrified.
At a press conference held to announce the plan, MOR vice minister Lu Dongfu said the plan was approved by the State Council, or the Cabinet, on Oct. 31.
"The 16,000-km express passenger rail network (capable of speeds of more than 200 km/hour) is designed to link provincial cities with a population of more than 500,000. The network will significantly cut journey times," Lu said.
"Construction of all railway projects in the revised Medium- and Long-term Railway Network Plan will need a total investment of some 5 trillion yuan (732 billion U.S. dollars)," Lu said.
This revised Medium- and Long-term Railway Network Plan covers the years 2004-2020, and so includes money already spent and lines already built.
In addition some of the funding for the Medium- and Long-term Railway Network Plan money will come from the 4 trillion yuan economic stimulus package announced earlier this month (which covers the period 2009-2010), but the vice minister did not elaborate on which projects they were or how much money was involved.
New lines revealed in the plan, and not part of the economic stimulus package, include a line in Liaoning Province linking Shenyang to Dandong, and a line in Henan Province linking Zhengzhou (the provincial capital) and Luoyang.
"The revised plan is set to modernize the network and help the economy achieve sound and rapid development," said Lu.
"Railway has been the weakest chain in the country's infrastructure with insufficient capacity. Railway transportation has long lagged behind the economic development," Lu said.
China's laggard railway system has been having a hard time keeping up with the huge mobility needs and booming economy, Yang said. With many trains running near or above capacity, the country's rail network is strained, but the demands on it are increasing.
By the end of this year, Lu said China would have over 79,000-km rail lines in operation, about 6,000 km more than that at the end of 2003.
China currently only has one high-speed rail line in operation - the Beijing-Tianjin link, which is 120 km in length.
Editor: An
China to operate 16,000-km passenger-dedicated lines by 2020
2008-11-27 20:24:43
BEIJING, Nov. 27 (Xinhua) -- The Chinese Ministry of Railways (MOR) on Thursday increased the mileage of passenger-dedicated lines planned to be in service by 2020 to 16,000 km in a revised Medium- and Long-term Railway Network Plan.
According to the revised plan, announced officially on Thursday, China plans to have more than 120,000 km of rail lines by 2020, about 60 percent of which are to be electrified.
This is an increase on a 2004 plan for about 100,000 km of railways and 12,000 km passenger-dedicated lines by 2020. The old plan had only 50 percent of the country's railways electrified.
At a press conference held to announce the plan, MOR vice minister Lu Dongfu said the plan was approved by the State Council, or the Cabinet, on Oct. 31.
"The 16,000-km express passenger rail network (capable of speeds of more than 200 km/hour) is designed to link provincial cities with a population of more than 500,000. The network will significantly cut journey times," Lu said.
"Construction of all railway projects in the revised Medium- and Long-term Railway Network Plan will need a total investment of some 5 trillion yuan (732 billion U.S. dollars)," Lu said.
This revised Medium- and Long-term Railway Network Plan covers the years 2004-2020, and so includes money already spent and lines already built.
In addition some of the funding for the Medium- and Long-term Railway Network Plan money will come from the 4 trillion yuan economic stimulus package announced earlier this month (which covers the period 2009-2010), but the vice minister did not elaborate on which projects they were or how much money was involved.
New lines revealed in the plan, and not part of the economic stimulus package, include a line in Liaoning Province linking Shenyang to Dandong, and a line in Henan Province linking Zhengzhou (the provincial capital) and Luoyang.
"The revised plan is set to modernize the network and help the economy achieve sound and rapid development," said Lu.
"Railway has been the weakest chain in the country's infrastructure with insufficient capacity. Railway transportation has long lagged behind the economic development," Lu said.
China's laggard railway system has been having a hard time keeping up with the huge mobility needs and booming economy, Yang said. With many trains running near or above capacity, the country's rail network is strained, but the demands on it are increasing.
By the end of this year, Lu said China would have over 79,000-km rail lines in operation, about 6,000 km more than that at the end of 2003.
China currently only has one high-speed rail line in operation - the Beijing-Tianjin link, which is 120 km in length.
Editor: An
5 trillion yuan to expand railways
XinHua News
$730 bln plan to expand railways
2008-11-28 14:36:00
BEIJING, Nov. 28 -- The national rail network is set to grow by 41,000 km by 2020, thanks to a 5 trillion yuan (730 billion U.S. dollars) government spending plan, a senior railways official said Thursday.
By 2020, the country's rail network will stretch 120,000 km, Lu Dongfu, vice-minister of railways, said at a press conference in Beijing.
The large-scale projects will be good news for passengers, as journey times between capital cities will be "cut in half", he said.
The increased spending is part of the country's mid- to long-term railway plan, revisions to which were approved by the State Council on Oct 31, but announced only on Thursday.
The project will include the construction of new rail lines, "doubling" existing ones, and the electrification of certain other sections, Lu said.
"By 2020, 41,000 km of new lines will be in place, up from the original plan to build 16,000 km of track," he said.
The massive plan will include the construction of routes linking China to Russia, Mongolia and other neighboring countries, and the expansion of cross-country routes, he said.
The high-speed rail network will also be extended by 16,000 km, rather than 12,000 km as originally planned, he said.
By 2020, the length of railways on which passenger trains can run at up to 200 kph will be 50,000 km, up from the planned 30,000 km, Lu said.
By linking all provincial capitals and cities with more than 500,000 residents, the network will be accessible to 90 percent of the population, he said.
The changes to the railway plan were made partly in response to the need to boost domestic demand, he said.
Yang Zhongmin, director of the railway ministry's planning department, said the project will create 6 million jobs, and consume 20 million tons of steel and 120 million tons of cement.
A number of rail projects, valued at 1 trillion yuan, are already under construction across the country, he said.
Next year, 600 billion yuan will be spent on the construction of track and 100 billion yuan on buying rolling stock, Yang said.
Also yesterday, Zheng Jian, deputy chief engineer with the ministry, responded to recent suggestions in the media that China has a shortage of skilled manpower.
"We have about 30,000 professionals in railway design and geological surveying, which is more than enough to meet our requirements," he said.
Also, stringent control mechanisms have been developed to monitor construction quality and the use of funds, he said.
By the end of this year, the country's rail network will have grown to 79,000 km.
(Source: China Daily/By Xin Dingding)
Editor: Lin Liyu
$730 bln plan to expand railways
2008-11-28 14:36:00
BEIJING, Nov. 28 -- The national rail network is set to grow by 41,000 km by 2020, thanks to a 5 trillion yuan (730 billion U.S. dollars) government spending plan, a senior railways official said Thursday.
By 2020, the country's rail network will stretch 120,000 km, Lu Dongfu, vice-minister of railways, said at a press conference in Beijing.
The large-scale projects will be good news for passengers, as journey times between capital cities will be "cut in half", he said.
The increased spending is part of the country's mid- to long-term railway plan, revisions to which were approved by the State Council on Oct 31, but announced only on Thursday.
The project will include the construction of new rail lines, "doubling" existing ones, and the electrification of certain other sections, Lu said.
"By 2020, 41,000 km of new lines will be in place, up from the original plan to build 16,000 km of track," he said.
The massive plan will include the construction of routes linking China to Russia, Mongolia and other neighboring countries, and the expansion of cross-country routes, he said.
The high-speed rail network will also be extended by 16,000 km, rather than 12,000 km as originally planned, he said.
By 2020, the length of railways on which passenger trains can run at up to 200 kph will be 50,000 km, up from the planned 30,000 km, Lu said.
By linking all provincial capitals and cities with more than 500,000 residents, the network will be accessible to 90 percent of the population, he said.
The changes to the railway plan were made partly in response to the need to boost domestic demand, he said.
Yang Zhongmin, director of the railway ministry's planning department, said the project will create 6 million jobs, and consume 20 million tons of steel and 120 million tons of cement.
A number of rail projects, valued at 1 trillion yuan, are already under construction across the country, he said.
Next year, 600 billion yuan will be spent on the construction of track and 100 billion yuan on buying rolling stock, Yang said.
Also yesterday, Zheng Jian, deputy chief engineer with the ministry, responded to recent suggestions in the media that China has a shortage of skilled manpower.
"We have about 30,000 professionals in railway design and geological surveying, which is more than enough to meet our requirements," he said.
Also, stringent control mechanisms have been developed to monitor construction quality and the use of funds, he said.
By the end of this year, the country's rail network will have grown to 79,000 km.
(Source: China Daily/By Xin Dingding)
Editor: Lin Liyu
Food prices likely to rise
The Straits Times
Nov 28, 2008 |
Food prices likely to rise
Food manufacturers still trying to rebuild eroded margins, say experts
NEW YORK: The prices of oil, grains and other commodities have been plunging but why have the prices of most groceries in the supermarket not dropped?
Experts warn that consumers should not expect lower prices any time soon on most food items. They project that the overall cost of food will continue to climb next year, led by increases for meat and poultry.
A big reason, they say, is that food companies still have not caught up with the prolonged run-up in commodity prices, which remain above historical averages despite coming down from their highs early this year.
For more than a year, food manufacturers have been shaving package sizes and raising prices, declaring that they had little choice because of unprecedented increases in the cost of raw ingredients like corn, soya beans and wheat.
Now, with the price of grains and other commodities plunging, it may seem logical that grocery prices will follow.
But while some grocery items like milk and fresh produce are dropping, the prices of most packaged items and meat are holding firm or even increasing.
The United States Agriculture Department is forecasting that food prices will increase 3.5 to 4.5 per cent next year, compared with an estimated 5 to 6 per cent increase by the end of this year.
Some economists project even steeper increases next year.
For instance, Bill Lapp, principal at Advanced Economic Solutions, said he expected food prices to jump 7 to 9 per cent next year.
'For the last 21 months, food manufacturers, restaurants and livestock producers have been absorbing significant costs that in my view are likely to be passed on to consumers next year and beyond,' said Mr Lapp, a former chief economist at ConAgra Foods.
While predicting future food prices is an inexact science, data released by the US Labour Department last week suggested the forecasters might be right.
Overall consumer prices recorded the biggest drop in the history of the consumer price index (CPI), but food prices continued to inch upward, albeit at a slower pace than in previous months. The CPI showed that grocery prices rose 0.1 per cent in October.
Hershey's, for instance, locked in high cocoa prices this year only to see prices drop this fall, analysts say. And even though ingredient costs like corn and wheat have dropped, meat and poultry providers say they still have not raised prices enough to cover their increased costs.
Packaged food manufacturers are unlikely to lower prices because commodity costs remain relatively high and they are still trying to rebuild eroded margins.
Mr Michael Mitchell, a spokesman for Kraft Foods, said the company's food ingredient costs this year were running US$2 billion (S$3.02 billion) higher than last year, a 13 per cent increase, but that the company had raised its overall prices by only 7 per cent.
Mr William P. Roenigk, senior vice-president and chief economist for the National Chicken Council, said his industry had been losing money for more than a year. Chicken producers are now trying to recover those costs by reducing production, which will eventually alter the balance between supply and demand.
'The time is coming when we're going to see a very significant increase in the retail price of chicken,' he said.
Many economists acknowledge that predictions about food prices over the next couple of years are guesses, because commodity prices are unpredictable.
Mr Ephraim Leibtag, an economist for the Agriculture Department, said food inflation would slow by the middle of next year if commodity prices remained low. 'Right now, the forecast is about 4 per cent, but that would be lowered if we do not see any surge in commodity costs over the next few months.'
NEW YORK TIMES
Nov 28, 2008 |
Food prices likely to rise
Food manufacturers still trying to rebuild eroded margins, say experts
NEW YORK: The prices of oil, grains and other commodities have been plunging but why have the prices of most groceries in the supermarket not dropped?
Experts warn that consumers should not expect lower prices any time soon on most food items. They project that the overall cost of food will continue to climb next year, led by increases for meat and poultry.
A big reason, they say, is that food companies still have not caught up with the prolonged run-up in commodity prices, which remain above historical averages despite coming down from their highs early this year.
For more than a year, food manufacturers have been shaving package sizes and raising prices, declaring that they had little choice because of unprecedented increases in the cost of raw ingredients like corn, soya beans and wheat.
Now, with the price of grains and other commodities plunging, it may seem logical that grocery prices will follow.
But while some grocery items like milk and fresh produce are dropping, the prices of most packaged items and meat are holding firm or even increasing.
The United States Agriculture Department is forecasting that food prices will increase 3.5 to 4.5 per cent next year, compared with an estimated 5 to 6 per cent increase by the end of this year.
Some economists project even steeper increases next year.
For instance, Bill Lapp, principal at Advanced Economic Solutions, said he expected food prices to jump 7 to 9 per cent next year.
'For the last 21 months, food manufacturers, restaurants and livestock producers have been absorbing significant costs that in my view are likely to be passed on to consumers next year and beyond,' said Mr Lapp, a former chief economist at ConAgra Foods.
While predicting future food prices is an inexact science, data released by the US Labour Department last week suggested the forecasters might be right.
Overall consumer prices recorded the biggest drop in the history of the consumer price index (CPI), but food prices continued to inch upward, albeit at a slower pace than in previous months. The CPI showed that grocery prices rose 0.1 per cent in October.
Hershey's, for instance, locked in high cocoa prices this year only to see prices drop this fall, analysts say. And even though ingredient costs like corn and wheat have dropped, meat and poultry providers say they still have not raised prices enough to cover their increased costs.
Packaged food manufacturers are unlikely to lower prices because commodity costs remain relatively high and they are still trying to rebuild eroded margins.
Mr Michael Mitchell, a spokesman for Kraft Foods, said the company's food ingredient costs this year were running US$2 billion (S$3.02 billion) higher than last year, a 13 per cent increase, but that the company had raised its overall prices by only 7 per cent.
Mr William P. Roenigk, senior vice-president and chief economist for the National Chicken Council, said his industry had been losing money for more than a year. Chicken producers are now trying to recover those costs by reducing production, which will eventually alter the balance between supply and demand.
'The time is coming when we're going to see a very significant increase in the retail price of chicken,' he said.
Many economists acknowledge that predictions about food prices over the next couple of years are guesses, because commodity prices are unpredictable.
Mr Ephraim Leibtag, an economist for the Agriculture Department, said food inflation would slow by the middle of next year if commodity prices remained low. 'Right now, the forecast is about 4 per cent, but that would be lowered if we do not see any surge in commodity costs over the next few months.'
NEW YORK TIMES
'Crisis has cost US$5 trillion'
The Straits Times
Nov 28, 2008 |
'Crisis has cost US$5 trillion'
PARIS - US$5 trillion (S$7.5 trillion) have been lost in the global financial crisis, the head of the Davos economic forum said on Thursday as he announced a record presence of world leaders at the conference in January.
Russian Prime Minister Vladimir Putin will give the opening speech at the World Economic Forum in the Swiss resort on January 28 where the theme will be 'Shaping The Post Crisis World", said its founder Klaus Schwab.
The Swiss economist, on a visit to Paris, said: 'As it stands now, about five trillion dollars has been lost in the financial crisis and now has to be reconstituted' by governments.
The forum had forecast the crisis in the financial system in its annual risk report at the start of the year.
'I am not dramatically pessimistic about the future, just realistically pessimistic and I think there are also enormous opportunities in terms of using technology and changing the environment,' Mr Schwab told AFP.
He said the turmoil, the worst financial crisis since the Great Depression, meant that the 39th annual Davos meeting would be the most important ever and it will have the biggest participation.
Mr Schwab said there would be more than 160 leaders of head of state or government or ministerial rank among the 1,200 business, social and trade union leaders at the five day forum.
Mr Putin was the only world leader whose presence was confirmed but forum officials said many leaders from the Group of Eight industrial powers and emerging economic powers were expected to attend.
The full list will only be released in January. -- AFP
Nov 28, 2008 |
'Crisis has cost US$5 trillion'
PARIS - US$5 trillion (S$7.5 trillion) have been lost in the global financial crisis, the head of the Davos economic forum said on Thursday as he announced a record presence of world leaders at the conference in January.
Russian Prime Minister Vladimir Putin will give the opening speech at the World Economic Forum in the Swiss resort on January 28 where the theme will be 'Shaping The Post Crisis World", said its founder Klaus Schwab.
The Swiss economist, on a visit to Paris, said: 'As it stands now, about five trillion dollars has been lost in the financial crisis and now has to be reconstituted' by governments.
The forum had forecast the crisis in the financial system in its annual risk report at the start of the year.
'I am not dramatically pessimistic about the future, just realistically pessimistic and I think there are also enormous opportunities in terms of using technology and changing the environment,' Mr Schwab told AFP.
He said the turmoil, the worst financial crisis since the Great Depression, meant that the 39th annual Davos meeting would be the most important ever and it will have the biggest participation.
Mr Schwab said there would be more than 160 leaders of head of state or government or ministerial rank among the 1,200 business, social and trade union leaders at the five day forum.
Mr Putin was the only world leader whose presence was confirmed but forum officials said many leaders from the Group of Eight industrial powers and emerging economic powers were expected to attend.
The full list will only be released in January. -- AFP
Spanish government launches 11b-euro stimulus package
Channel News Asia
Spanish government launches 11b-euro stimulus package
Posted: 28 November 2008 0130 hrs
MADRID: Spanish Prime Minister Jose Luis Rodriguez Zapatero announced on Thursday an 11-billion-euro (14.3-billion-dollar) economic stimulus package to help the country cope with the global financial crisis.
The package, which will be approved at a regular cabinet meeting on Friday, represents 1.1 percent of Spain's gross domestic product (GDP) and could create 300,000 jobs in 2009, he told parliament.
"This is a strong arsenal to fight the slowdown in economic activity," Zapatero said, adding the world was facing its first global recession since World War II.
"A crisis as quick and intense as this one is without precedent and it has taken its toll on employment in our country," he said.
The bulk of the funds, 8.0 billion euros, will go to local municipalities to be used in public works projects; 500 million euros will be used for research and development, and 400 million euros will be earmarked to modernise police barracks.
The prime minister said 800 million euros would be used to support the "strategic" auto sector which has suffered an "important" drop in demand in the European Union and which was affecting Spain.
Spanish car plants will make 300,000 fewer vehicles this year compared to 2007, a 10.3 percent drop to a level of production that is similar to that recorded in 1997, Spain's auto manufacturers' association ANFAC said on Tuesday.
Spain's auto sector, which exports 80 percent of its production and accounts for 10 percent of gross domestic product, has appealed for state aid to face up to the decline in demand, which has already led several factories to fire workers or reduce their hours.
Spain is experiencing an abrupt economic slowdown as the global credit crunch puts the squeeze on an already weakened construction sector, causing the unemployment rate to hit 11.3 percent in the third quarter - its highest level in over four years and the highest rate in the 27-member European Union.
The Spanish economy contracted for the first time since 1993 in the third quarter, shrinking 0.2 percent, leaving it on the brink of recession, which is defined as two consecutive quarters of negative growth.
Last week, the Paris-based Organisation for Economic Co-operation and Development (OECD) predicted the Spanish economy would contract 0.9 percent next year, with unemployment rising to 14.2 percent.
Zapatero unveiled the stimulus package one day after the EU proposed its own 200-billion-euro stimulus package, of which 170 billion euros will come from national government budgets and the rest from the EU and European Investment Bank.
"It is time to show our determination, to have confidence in the action of governments, of the public sector, of public investments and social cohesion," he said.
Zapatero's socialist government, which was re-elected to a second term in March after a campaign whose central theme was the slowing economy, has already spent 16 billion euros this year, mostly in the form of tax cuts, to bolster activity. - AFP/de
Spanish government launches 11b-euro stimulus package
Posted: 28 November 2008 0130 hrs
MADRID: Spanish Prime Minister Jose Luis Rodriguez Zapatero announced on Thursday an 11-billion-euro (14.3-billion-dollar) economic stimulus package to help the country cope with the global financial crisis.
The package, which will be approved at a regular cabinet meeting on Friday, represents 1.1 percent of Spain's gross domestic product (GDP) and could create 300,000 jobs in 2009, he told parliament.
"This is a strong arsenal to fight the slowdown in economic activity," Zapatero said, adding the world was facing its first global recession since World War II.
"A crisis as quick and intense as this one is without precedent and it has taken its toll on employment in our country," he said.
The bulk of the funds, 8.0 billion euros, will go to local municipalities to be used in public works projects; 500 million euros will be used for research and development, and 400 million euros will be earmarked to modernise police barracks.
The prime minister said 800 million euros would be used to support the "strategic" auto sector which has suffered an "important" drop in demand in the European Union and which was affecting Spain.
Spanish car plants will make 300,000 fewer vehicles this year compared to 2007, a 10.3 percent drop to a level of production that is similar to that recorded in 1997, Spain's auto manufacturers' association ANFAC said on Tuesday.
Spain's auto sector, which exports 80 percent of its production and accounts for 10 percent of gross domestic product, has appealed for state aid to face up to the decline in demand, which has already led several factories to fire workers or reduce their hours.
Spain is experiencing an abrupt economic slowdown as the global credit crunch puts the squeeze on an already weakened construction sector, causing the unemployment rate to hit 11.3 percent in the third quarter - its highest level in over four years and the highest rate in the 27-member European Union.
The Spanish economy contracted for the first time since 1993 in the third quarter, shrinking 0.2 percent, leaving it on the brink of recession, which is defined as two consecutive quarters of negative growth.
Last week, the Paris-based Organisation for Economic Co-operation and Development (OECD) predicted the Spanish economy would contract 0.9 percent next year, with unemployment rising to 14.2 percent.
Zapatero unveiled the stimulus package one day after the EU proposed its own 200-billion-euro stimulus package, of which 170 billion euros will come from national government budgets and the rest from the EU and European Investment Bank.
"It is time to show our determination, to have confidence in the action of governments, of the public sector, of public investments and social cohesion," he said.
Zapatero's socialist government, which was re-elected to a second term in March after a campaign whose central theme was the slowing economy, has already spent 16 billion euros this year, mostly in the form of tax cuts, to bolster activity. - AFP/de
Thursday, November 27, 2008
Macquarie to cut Asia jobs?
The Straits Times
Nov 27, 2008
Macquarie to cut Asia jobs?
SYDNEY - MACQUARIE Group, Australia's top investment bank, is cutting 10 to 15 per cent of jobs in Asia, the latest in a wave of worldwide job cuts at banks hit by the financial crisis, two sources said on Thursday.
Macquarie spokesman Paula Hannaford in Sydney said the bank would not comment on market rumours, and spokesmen in Seoul and Hong Kong declined to comment.
When asked on Nov 18 about possible job losses, Macquarie Chief Executive Nicholas Moore said there was no overall figure for job cuts across the group, which has 13,800 staff around the world. He said it was up to individual divisions to manage staff levels depending on market conditions.
'Each of the businesses will have their own plans,' Mr Moore said at the group's results briefing last week.
Macquarie cut 45 out of just over 300 staff in South Korea, a person with direct knowledge of the matter said.
Last week Citigroup announced 52,000 job cuts, but Asia was left relatively unscathed.
Unlike its Wall Street rivals, Macquarie reported a first-half profit last week of A$604 million (S$593 million), albeit down 43 per cent on a year ago, dented by A$1.14 billion in gross asset writedowns.
In the April-September half, it slashed employee costs nearly in half, largely by cutting bonuses. -- THOMSON REUTERS
Nov 27, 2008
Macquarie to cut Asia jobs?
SYDNEY - MACQUARIE Group, Australia's top investment bank, is cutting 10 to 15 per cent of jobs in Asia, the latest in a wave of worldwide job cuts at banks hit by the financial crisis, two sources said on Thursday.
Macquarie spokesman Paula Hannaford in Sydney said the bank would not comment on market rumours, and spokesmen in Seoul and Hong Kong declined to comment.
When asked on Nov 18 about possible job losses, Macquarie Chief Executive Nicholas Moore said there was no overall figure for job cuts across the group, which has 13,800 staff around the world. He said it was up to individual divisions to manage staff levels depending on market conditions.
'Each of the businesses will have their own plans,' Mr Moore said at the group's results briefing last week.
Macquarie cut 45 out of just over 300 staff in South Korea, a person with direct knowledge of the matter said.
Last week Citigroup announced 52,000 job cuts, but Asia was left relatively unscathed.
Unlike its Wall Street rivals, Macquarie reported a first-half profit last week of A$604 million (S$593 million), albeit down 43 per cent on a year ago, dented by A$1.14 billion in gross asset writedowns.
In the April-September half, it slashed employee costs nearly in half, largely by cutting bonuses. -- THOMSON REUTERS
Merrill Lynch: First net fund inflow to China stock market in 8 weeks
In the week from 13 to 19 November, redeem of funds in the emerging markets are still ongoing, reaching a value of about 838 million USD. According to Merrill Lynch latest liquidity report, according to regions, accept for Asia which show a net fund inflow, Latin America, emerging economies, Africa and Middle East show a net outflow of funds. According to countries, China has shown a first net fund inflow in 8 weeks.
MSCI emerging market index has dropped to a 4 year low. S&P500 has dropped to a 11 year low. Comparing to the highest point in the past, global stock market value has evaporated over 35 trillion USD, which is equivalent to what US consumers spent in total from 2004 to 2007.
On the redemption wave, due to pressures to raise funds and risk aversion, investors tend to hold cash. The report believes that investors with enough liquidity are waiting for 3 things to happen. 1) Low fluctuations and low rate differences. 2) Global economic figures to stop worsening. 3) EPS showing a big drop. The nearest time these 3 things happening at the same time could be in February 2009. Other than that, observations should also be on credit spreads, inventory data and China stock market movements. Through credit spreads, it can be known whether are there any loosening in credit tightening. Inventory data tend to show whether is it the end for economic movement inertia. From the movements of the China stock market, it can be known whether the current China economic stimulus policies are taking effect.
The report suggests that stocks able to resist deflation can be the main investing target such as Brazil's water and electrical utilities, China and India's daily necessities, most fixed line telecommunications equipments needed by most countries, etc.
MSCI emerging market index has dropped to a 4 year low. S&P500 has dropped to a 11 year low. Comparing to the highest point in the past, global stock market value has evaporated over 35 trillion USD, which is equivalent to what US consumers spent in total from 2004 to 2007.
On the redemption wave, due to pressures to raise funds and risk aversion, investors tend to hold cash. The report believes that investors with enough liquidity are waiting for 3 things to happen. 1) Low fluctuations and low rate differences. 2) Global economic figures to stop worsening. 3) EPS showing a big drop. The nearest time these 3 things happening at the same time could be in February 2009. Other than that, observations should also be on credit spreads, inventory data and China stock market movements. Through credit spreads, it can be known whether are there any loosening in credit tightening. Inventory data tend to show whether is it the end for economic movement inertia. From the movements of the China stock market, it can be known whether the current China economic stimulus policies are taking effect.
The report suggests that stocks able to resist deflation can be the main investing target such as Brazil's water and electrical utilities, China and India's daily necessities, most fixed line telecommunications equipments needed by most countries, etc.
Obama: Help is on the way
The Straits Times
Nov 27, 2008 |
Help is on the way
CHICAGO - PRESIDENT-ELECT Barack Obama sought to reassure Americans about the ailing economy, as beleaguered stores braced for a rough holiday shopping season.
'Help is on the way,' he proclaimed on Wednesday at his third news briefing on the economy this week. Fifty-five days away from taking office, he declared he would have an economic plan ready for action 'starting day one.' Investors' improved spirits kept pace. The Dow Jones industrials climbed 247 points, marking the first time since last spring that the average had risen for four straight sessions.
To help with ideas from outside the White House, Mr Obama announced he was forming a new team of advisers with former Federal Reserve Chairman Paul Volcker as the head.
'There is no doubt that during tough economic times family budgets are going to be pinched,' Mr Obama said. 'I think it is important for the American people, though, to have confidence that we've gone through recessions before, we've gone through difficult times before, that my administration intends to get this economy back on track.'
In a separate television interview, Mr Obama struck a cautionary tone when asked whether the public was expecting too much from him.
'We've been able to start giving people some assurance,' he told Barbara Walters in an interview broadcast on Wednesday night.
'Now when it comes to the economy, we're not going to get out of the hole that we're in overnight. ... I'm not a miracle worker.' The crucial holiday shopping season gets under way in earnest on Friday, the day after the US harvest holiday of Thanksgiving and nearly a month before the Dec 25 Christmas holiday, with deep discounts already in place as stores try to lure buyers who are worried about losing their jobs and homes.
Mr Volcker, 81, will head the President's Economic Recovery Advisory Board. The board's top staff official will be Austan Goolsbee, a University of Chicago economist, Mr Obama said.
Mr Volcker is no stranger to economic crises, having led the Fed under two presidents from 1979 to 1987. Mr Volcker is a legendary central banker who raised interest rates and restricted the money supply to tame raging inflation in the 1980s. It was a painful prescription that helped send the economy into one of the nation's worst recessions.
However, he is largely credited with ushering in nearly three decades of relatively low inflation - an unthinkable feat in the 1970s, when the country was grappling with high unemployment, high interest rates and ever-rising prices.
'He pulls no punches,' Mr Obama said of Mr Volcker. 'He seems to be fairly opinionated.' There was more bad news on the economy's current state.
The government reported on Wednesday that jobless claims had remained at recessionary levels, consumers had cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to US factories had plunged anew and home sales had fallen to the lowest level in nearly 18 years.
As the stock market rallied, fresh government bailout programs this week were given much of the credit. But Mr Obama's encouraging words seemed to help as well. On Monday, he announced plans for a massive economic stimulus plan that Democrats have said could cost as much as US$700 billion (S$1.05 trillion).
'People should understand that help is on the way. And as they think about this Thanksgiving shopping weekend, and as they think about the Christmas season that is coming up, I hope that everybody understands that we are going to be able to get through these difficult times,' Mr Obama said.
'We're just going to have to make some good choices.' As for his own choices for top officials, he defended his selection of former Clinton officials to help run his administration.
'The American people would be troubled if I selected a treasury secretary or a chairman of the National Economic Council at one of the most critical economic times in our history who had no experience in government whatsoever,' Mr Obama said.
'What we are going to do is combine experience with fresh thinking,' he said. 'But understand where the vision for change comes from. First and foremost, it comes from me. That's my job.'
Mr Obama, who will be the first black US president, said he is not worried about his own security, despite a higher level of threats against him than any other president-elect in history.
Mr Obama said he will announce the remaining members of his new economic panel in the coming weeks. He already has named New York Federal Reserve President Tim Geithner as his treasury secretary and Congressional Budget Office Director Peter Orszag as his candidate to run the White House Office of Management and Budget.
Mr Geithner was a Treasury Department official during the Clinton administration, and Lawrence Summers, who will head Mr Obama's National Economic Council, was Mr Clinton's treasury secretary. Other Clinton administration names include Eric Holder, who will be Mr Obama's attorney general, and Rahm Emanuel, the president-elect's chief of staff.
After his news conference, Mr Obama and his wife took their daughters to work at a food bank on the day before Thanksgiving. He told reporters that he wants the girls 'to learn the importance of how fortunate they are, and to make sure they're giving back.' In an interview with Barbara Walters airing on Wednesday, Mr Obama and his wife, Michelle, said Sasha, 7, and Malia, 10, will have lives as normal as possible in the White House, including having chores.
Mr Obama also said he plans to sit down with the chief usher for the presidential mansion and do an evaluation of its energy efficiency.
His economic team largely complete, Mr Obama is expected to introduce national security officials next week, including Hillary Rodham Clinton as his secretary of state. He is expected to announce that he has asked Defence Secretary Robert Gates to remain at the Pentagon for a year. James Jones, a former Marine Corps commandant and Nato commander, is Mr Obama's pick to be national security adviser. -- AP
Nov 27, 2008 |
Help is on the way
CHICAGO - PRESIDENT-ELECT Barack Obama sought to reassure Americans about the ailing economy, as beleaguered stores braced for a rough holiday shopping season.
'Help is on the way,' he proclaimed on Wednesday at his third news briefing on the economy this week. Fifty-five days away from taking office, he declared he would have an economic plan ready for action 'starting day one.' Investors' improved spirits kept pace. The Dow Jones industrials climbed 247 points, marking the first time since last spring that the average had risen for four straight sessions.
To help with ideas from outside the White House, Mr Obama announced he was forming a new team of advisers with former Federal Reserve Chairman Paul Volcker as the head.
'There is no doubt that during tough economic times family budgets are going to be pinched,' Mr Obama said. 'I think it is important for the American people, though, to have confidence that we've gone through recessions before, we've gone through difficult times before, that my administration intends to get this economy back on track.'
In a separate television interview, Mr Obama struck a cautionary tone when asked whether the public was expecting too much from him.
'We've been able to start giving people some assurance,' he told Barbara Walters in an interview broadcast on Wednesday night.
'Now when it comes to the economy, we're not going to get out of the hole that we're in overnight. ... I'm not a miracle worker.' The crucial holiday shopping season gets under way in earnest on Friday, the day after the US harvest holiday of Thanksgiving and nearly a month before the Dec 25 Christmas holiday, with deep discounts already in place as stores try to lure buyers who are worried about losing their jobs and homes.
Mr Volcker, 81, will head the President's Economic Recovery Advisory Board. The board's top staff official will be Austan Goolsbee, a University of Chicago economist, Mr Obama said.
Mr Volcker is no stranger to economic crises, having led the Fed under two presidents from 1979 to 1987. Mr Volcker is a legendary central banker who raised interest rates and restricted the money supply to tame raging inflation in the 1980s. It was a painful prescription that helped send the economy into one of the nation's worst recessions.
However, he is largely credited with ushering in nearly three decades of relatively low inflation - an unthinkable feat in the 1970s, when the country was grappling with high unemployment, high interest rates and ever-rising prices.
'He pulls no punches,' Mr Obama said of Mr Volcker. 'He seems to be fairly opinionated.' There was more bad news on the economy's current state.
The government reported on Wednesday that jobless claims had remained at recessionary levels, consumers had cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to US factories had plunged anew and home sales had fallen to the lowest level in nearly 18 years.
As the stock market rallied, fresh government bailout programs this week were given much of the credit. But Mr Obama's encouraging words seemed to help as well. On Monday, he announced plans for a massive economic stimulus plan that Democrats have said could cost as much as US$700 billion (S$1.05 trillion).
'People should understand that help is on the way. And as they think about this Thanksgiving shopping weekend, and as they think about the Christmas season that is coming up, I hope that everybody understands that we are going to be able to get through these difficult times,' Mr Obama said.
'We're just going to have to make some good choices.' As for his own choices for top officials, he defended his selection of former Clinton officials to help run his administration.
'The American people would be troubled if I selected a treasury secretary or a chairman of the National Economic Council at one of the most critical economic times in our history who had no experience in government whatsoever,' Mr Obama said.
'What we are going to do is combine experience with fresh thinking,' he said. 'But understand where the vision for change comes from. First and foremost, it comes from me. That's my job.'
Mr Obama, who will be the first black US president, said he is not worried about his own security, despite a higher level of threats against him than any other president-elect in history.
Mr Obama said he will announce the remaining members of his new economic panel in the coming weeks. He already has named New York Federal Reserve President Tim Geithner as his treasury secretary and Congressional Budget Office Director Peter Orszag as his candidate to run the White House Office of Management and Budget.
Mr Geithner was a Treasury Department official during the Clinton administration, and Lawrence Summers, who will head Mr Obama's National Economic Council, was Mr Clinton's treasury secretary. Other Clinton administration names include Eric Holder, who will be Mr Obama's attorney general, and Rahm Emanuel, the president-elect's chief of staff.
After his news conference, Mr Obama and his wife took their daughters to work at a food bank on the day before Thanksgiving. He told reporters that he wants the girls 'to learn the importance of how fortunate they are, and to make sure they're giving back.' In an interview with Barbara Walters airing on Wednesday, Mr Obama and his wife, Michelle, said Sasha, 7, and Malia, 10, will have lives as normal as possible in the White House, including having chores.
Mr Obama also said he plans to sit down with the chief usher for the presidential mansion and do an evaluation of its energy efficiency.
His economic team largely complete, Mr Obama is expected to introduce national security officials next week, including Hillary Rodham Clinton as his secretary of state. He is expected to announce that he has asked Defence Secretary Robert Gates to remain at the Pentagon for a year. James Jones, a former Marine Corps commandant and Nato commander, is Mr Obama's pick to be national security adviser. -- AP
China facing bigger economic downside risk
China Information News
China facing bigger economic downside risk
27 November 2008
The downside risk to China's economy is increasing, and some economic indicators deteriorated in November, said China's top economic planner on Thursday.
Deepening economic woes worldwide are casting a larger shadow on China, once the world's fastest growing major economy. Some major economic indicators have shown evident signs of worsening since the beginning of November, Zhang Ping, minister of the National Development and Reform Commission (NDRC) said during a press conference in Beijing.
Although Zhang did not detail those indicators, analysts said they include the gross domestic product (GDP), exports, capital investments, and the consumer price index (CPI).
China's GDP slowed to 9 percent in the July-September period, down from 9.9 percent in the second quarter. Many economists predict that the growth for the last quarter of 2008 could tumble to as low as 6 percent.
The worst has yet to come as the global financial crisis has not bottomed out, Zhang said.
Chinese enterprises, especially those export-oriented businesses, are experiencing growing difficulties, with some having been forced to halt or reduce production. "Without doubt, the situation will hurt employment," he said. Some workers have chosen to go back to their rural homes as the employers have shun down factories, he added.
With such a grave situation, China will continue to implement "strong and effective" fiscal and monetary instruments to check the slowing pattern, and yesterday's 108-percentage-points interest rate cut is one of the measures, Zhang said.
On Wednesday, China's central bank announced a massive cut of the benchmark interest rate by 1.08 percentage points, as part of the intensified moves to further stimulate domestic demand, and to give substantial support to enterprises, especially enterprises affected by worsening exporting circumstances.
(China Daily November 27, 2008)
Latest Updates
27 November 2008
China facing bigger economic downside risk
27 November 2008
The downside risk to China's economy is increasing, and some economic indicators deteriorated in November, said China's top economic planner on Thursday.
Deepening economic woes worldwide are casting a larger shadow on China, once the world's fastest growing major economy. Some major economic indicators have shown evident signs of worsening since the beginning of November, Zhang Ping, minister of the National Development and Reform Commission (NDRC) said during a press conference in Beijing.
Although Zhang did not detail those indicators, analysts said they include the gross domestic product (GDP), exports, capital investments, and the consumer price index (CPI).
China's GDP slowed to 9 percent in the July-September period, down from 9.9 percent in the second quarter. Many economists predict that the growth for the last quarter of 2008 could tumble to as low as 6 percent.
The worst has yet to come as the global financial crisis has not bottomed out, Zhang said.
Chinese enterprises, especially those export-oriented businesses, are experiencing growing difficulties, with some having been forced to halt or reduce production. "Without doubt, the situation will hurt employment," he said. Some workers have chosen to go back to their rural homes as the employers have shun down factories, he added.
With such a grave situation, China will continue to implement "strong and effective" fiscal and monetary instruments to check the slowing pattern, and yesterday's 108-percentage-points interest rate cut is one of the measures, Zhang said.
On Wednesday, China's central bank announced a massive cut of the benchmark interest rate by 1.08 percentage points, as part of the intensified moves to further stimulate domestic demand, and to give substantial support to enterprises, especially enterprises affected by worsening exporting circumstances.
(China Daily November 27, 2008)
Latest Updates
27 November 2008
The Straits Times
Nov 27, 2008 | 2:34 PM
China's downturn deepens
CHINA warned on Thursday its economic downturn was deepening with the spread of the global financial crisis, raising the spectre of job losses and social unrest in the world's most populous nation.
The warnings from the country's top planner came a day after China's central bank slashed interest rates by the biggest margin in 11 years to shield its economy from the worst global downturn in decades.
The crisis that began last year with the collapse of the US housing market spread around the world, bringing several top financial institutions to their knees and pushing the United States, Japan and Europe into recession or to the brink of it.
China's economy, the world's fourth biggest, is still expanding, but the growth engine is sputtering, hit by a sharp drop in demand for its exports. This quarter is expected to be its worst in three years.
'The global financial crisis has not bottomed out yet. The impact is spreading globally and deepening in China. Some domestic economic indicators point to an accelerated slowdown in November,' Mr Zhang Ping, chairman of the National Development and Reform Commission, told a news conference.
The State Information Centre, a government think-tank, forecast annual growth would slow to eight per cent this quarter from nine per cent in the third quarter, still a respectable figure but a far cry from blistering double-digit growth rates recorded in the past five years.
With factories closing by the thousands, Chinese officials have grown increasingly concerned in recent weeks that slowing growth may threaten the stability that the ruling Communist party craves for its 1.3 billion people.
'Excessive bankruptcies and production cuts will lead to massive unemployment and stir social unrest,' Mr Zhang warned.
He said Wednesday's 108 basis point rate cut would reinforce the impact of the government's 4 trillion yuan stimulus package unveiled on Nov 9.
The package that aims to boost domestic demand over the next two years and offset the slump in exports, should boost growth by about 1 percentage point each year, he said.
Asia stocks rise
China's unexpectedly big rate cut helped Asian stock markets chalk up a fifth gain in a row, even as India, Asia's other new economic power, was shaken by militant attacks in the financial capital Mumbai that killed at least 100 people.
US markets are closed for Thanksgiving on Thursday after a rare four-day gaining streak in the S&P 500 stocks index.
In a sign how essential was China's success for the rest of the world, top global miner BHP Billiton cited a drop in China's demand for iron ore when it painted a gloomy outlook for its business and defended its decision to drop a US$66 billion (S$99.8 billion) bid for rival Rio Tinto.
Aggressive interest rate cuts and trillions of dollars in financial sector bailouts and stimulus packages have been the order of the day since the financial crisis culminated with the collapse of Lehman Brothers in September, freezing lending and spreading the pain to consumers and businesses.
South Korea, which has already pledged more than US$150 billion in debt guarantees, financial sector aid, tax cuts and extra spending, on Thursday offered to do more to shield Asia's fourth-biggest economy from global headwinds.
The government plans to buy bad debt from banks and said it would also tap a US$30 billion swap line with the US Federal Reserve to supply scarce dollars.
On Wednesday, the European Commission called for an EU-wide fiscal stimulus worth 200 billion euros (US$260 billion) in an attempt to stave off recession in the 27-nation bloc.
National packages already announced by countries including Germany, Britain, Spain, the Netherlands and Hungary amount for about half of the total, raising questions over how much of a boost it will really give the EU economy.
European Central Bank policymakers made plain that the ECB was ready to do its part and cut interest rates again.
ECB governing council members Christian Noyer and Axel Weber said there was room for lower rates given an expected drop in euro zone inflation below the bank's two per cent target next year. ECB President Jean-Claude Trichet was more cautious but also left the door open for another rate cut at the Dec 4 policy meeting in Brussels.
Analysts polled by Reuters expect the ECB to cut its benchmark rate by another half a point to 2.75 per cent, its lowest in more than two years.
Earlier this week the Fed unveiled a US$800 billion plan to buy mortgage-related debt and back consumer loans, bringing the total potential rescue bill to as much as US$8.3 trillion, more than half of the US gross domestic product.
Grim data
The moves come against the backdrop of a steady flow of grim economic data and corporate profit warnings and amid market anxiety whether and when the rescue efforts would lure consumers, now gripped by fear for their jobs, back to shops.
On Wednesday, data showed US consumer spending fell at the steepest rate in more than seven years in October and durable goods orders tumbled at twice the rate economists expected.
In Europe, euro zone business and consumer sentiment surveys due later on Thursday are expect to show a worsening of economic and business conditions in the 15-member single currency area.
In yet another sign that no one is spared the pain, Japanese electronics maker Panasonic Corp is likely to cut its annual operating profit forecast by a third, according to a source familiar with a matter. -- REUTERS
China - NDRC: 350b yuan for environmental industry
China Information News
NDRC: 350b yuan for environmental industry
27 November 2008
Among the country's 4-trillion-yuan financial stimulus plan, 350 billion yuan will be spent on improving the ecological environment and treating pollution, Zhang Ping, minister of the National Development and Reform Commission, told a press conference in Beijing today.
The four-trillion-yuan investment will not be spent in the energy and resource-intensive industries or high-pollution industries, Zhang said.
Zhou Shengxian, minister of environmental protection, said earlier that the main targets of environment investment will go to beef up rural environmental efforts.
China's fledgling green industries, such as those involved in the development of renewable energies and pollution treatment, will also benefit from the investment plan, according to Zhou.
(China Daily November 27, 2008)
NDRC: 350b yuan for environmental industry
27 November 2008
Among the country's 4-trillion-yuan financial stimulus plan, 350 billion yuan will be spent on improving the ecological environment and treating pollution, Zhang Ping, minister of the National Development and Reform Commission, told a press conference in Beijing today.
The four-trillion-yuan investment will not be spent in the energy and resource-intensive industries or high-pollution industries, Zhang said.
Zhou Shengxian, minister of environmental protection, said earlier that the main targets of environment investment will go to beef up rural environmental efforts.
China's fledgling green industries, such as those involved in the development of renewable energies and pollution treatment, will also benefit from the investment plan, according to Zhou.
(China Daily November 27, 2008)
China - 55 billion yuan support for state owned enterprises
China Information News
55 billion yuan support for SOEs
27 November 2008
The State Council has approved the operational payment budget for centrally-administrated State-owned enterprises (SOEs) of 54.78 billion yuan (US$8.02 billion) for 2008, according to the website of the State-owned Assets supervision and Administration Commission of the State Council (SASAC) on Wednesday.
According to the announcement, some 27 billion yuan, or about 49 percent of the budget will be spent on increasing assets of key SOEs pertaining to the national economy and the livelihood of the people and the national economic security. SOEs which claimed great losses in natural disasters will receive 19.63 billion yuan for reconstruction, or 36 percent of the budget. The budget also included 8.15 billion yuan for SOEs to adjust their industry deployment and structure.
"The State Council's approval of the budget is a part of the government's recent macro economic control policy, which will help SOEs set off the impact of the global financial crisis and pull through", an SASAC official told Securities Daily yesterday.
Centrally-administrated SOEs, excluding financial institutions, gained profits of 826 billion yuan in the first 10 months of this year, down 14 percent from the same period last year. Profits for power and petrochemical industries sharply dropped, said the Ministry of Finance yesterday. Centrally-administrated SOEs have posted declining profits for seven successive months.
The government's capital injection to key SOEs pertaining to the livelihood of the people and national economic security is reasonable, when they are faced with crisis arising from policies or other uncontrollable events, said the report, quoting Li Shuguang, professor with the China University of Political Science and Law. Yet the capital injection should follow certain standards, rather than just acting as compensation for those posting losses.
(China Daily November 27, 2008)
55 billion yuan support for SOEs
27 November 2008
The State Council has approved the operational payment budget for centrally-administrated State-owned enterprises (SOEs) of 54.78 billion yuan (US$8.02 billion) for 2008, according to the website of the State-owned Assets supervision and Administration Commission of the State Council (SASAC) on Wednesday.
According to the announcement, some 27 billion yuan, or about 49 percent of the budget will be spent on increasing assets of key SOEs pertaining to the national economy and the livelihood of the people and the national economic security. SOEs which claimed great losses in natural disasters will receive 19.63 billion yuan for reconstruction, or 36 percent of the budget. The budget also included 8.15 billion yuan for SOEs to adjust their industry deployment and structure.
"The State Council's approval of the budget is a part of the government's recent macro economic control policy, which will help SOEs set off the impact of the global financial crisis and pull through", an SASAC official told Securities Daily yesterday.
Centrally-administrated SOEs, excluding financial institutions, gained profits of 826 billion yuan in the first 10 months of this year, down 14 percent from the same period last year. Profits for power and petrochemical industries sharply dropped, said the Ministry of Finance yesterday. Centrally-administrated SOEs have posted declining profits for seven successive months.
The government's capital injection to key SOEs pertaining to the livelihood of the people and national economic security is reasonable, when they are faced with crisis arising from policies or other uncontrollable events, said the report, quoting Li Shuguang, professor with the China University of Political Science and Law. Yet the capital injection should follow certain standards, rather than just acting as compensation for those posting losses.
(China Daily November 27, 2008)
China - Economic planner unveils stimulus breakdown
China Information News
Economic planner unveils stimulus breakdown
27 November 2008
The National Development and Reform Commission (NDRC) lifted a veil on the government's 4-trillion-yuan stimulus package at a press conference this morning.
This has not only reaffirmed the government's commitment to reviving the economy, but more importantly, clarified the direction and application of the funds earmarked in the stimulus package.
Against the backdrop of yesterday's unexpectedly steep cut in interest rates by the central bank, the NDRC move shows the central government has reached a widely-expected consensus as to how to bail out the economy that risks going down to as low as 7 percent in the fourth quarter. Just a year ago, it was soaring at nearly 12 percent to stir the fear about overheating.
On November 9, China's nearly US$600 billion economic stimulus package did provide a shot in the arm of the market. But that policy framework seems to have been kicked off without much deliberation and details. In the following days, the local governments provided much bolder investment plans that amount to US$2.6 trillion.
Although the ambitious investment pledges have aroused a knee-jerk reaction in the capital market, people are not sure to what an extent the central policymakers have been determined to carry out those plans and whether the central and local policymakers can ultimately make it. The recent lacklustre performance of the domestic A-share market is a clear reflection of that lack of confidence.
Moreover, those investment plans have focused mainly on infrastructure with a view of using government spending to get private investors involved so that the fixed-asset investment level would not drop too drastically as exports are set to fall sharply next year.
However, they will not do much to help the corporate sectors and ordinary consumers. Closure of factories would lead to unemployment, which in turn would further reduce consumption.
Yesterday's interest rates cut, which moves in the right direction, will in particular help the real estate sector and cut the borrowing costs of enterprises across the board; meanwhile, it will cut the interest costs of individual home-buyers who borrow from the banks by as much as US$50 billion, based on mortgage lending figures by this March.
The next step should be focused on the taxation policies to cut taxes for both enterprises and individuals. It would be the most effective way to stimulate domestic demand. Only when the well-being of enterprises and individuals improve can confidence in the overall economy be restored.
The NDRC has vowed in today's press conference to further improve the income of retirees and the poor. It also said the authorities would take more measures to boost consumption and reform the taxation regime to reduce tax burdens of enterprises.
It, together with the interest rates cut, sends a clear signal that the policymakers are not only determined to do the right thing, but knowledgeable how to do it.
(China Daily November 27, 2008)
Economic planner unveils stimulus breakdown
27 November 2008
The National Development and Reform Commission (NDRC) lifted a veil on the government's 4-trillion-yuan stimulus package at a press conference this morning.
This has not only reaffirmed the government's commitment to reviving the economy, but more importantly, clarified the direction and application of the funds earmarked in the stimulus package.
Against the backdrop of yesterday's unexpectedly steep cut in interest rates by the central bank, the NDRC move shows the central government has reached a widely-expected consensus as to how to bail out the economy that risks going down to as low as 7 percent in the fourth quarter. Just a year ago, it was soaring at nearly 12 percent to stir the fear about overheating.
On November 9, China's nearly US$600 billion economic stimulus package did provide a shot in the arm of the market. But that policy framework seems to have been kicked off without much deliberation and details. In the following days, the local governments provided much bolder investment plans that amount to US$2.6 trillion.
Although the ambitious investment pledges have aroused a knee-jerk reaction in the capital market, people are not sure to what an extent the central policymakers have been determined to carry out those plans and whether the central and local policymakers can ultimately make it. The recent lacklustre performance of the domestic A-share market is a clear reflection of that lack of confidence.
Moreover, those investment plans have focused mainly on infrastructure with a view of using government spending to get private investors involved so that the fixed-asset investment level would not drop too drastically as exports are set to fall sharply next year.
However, they will not do much to help the corporate sectors and ordinary consumers. Closure of factories would lead to unemployment, which in turn would further reduce consumption.
Yesterday's interest rates cut, which moves in the right direction, will in particular help the real estate sector and cut the borrowing costs of enterprises across the board; meanwhile, it will cut the interest costs of individual home-buyers who borrow from the banks by as much as US$50 billion, based on mortgage lending figures by this March.
The next step should be focused on the taxation policies to cut taxes for both enterprises and individuals. It would be the most effective way to stimulate domestic demand. Only when the well-being of enterprises and individuals improve can confidence in the overall economy be restored.
The NDRC has vowed in today's press conference to further improve the income of retirees and the poor. It also said the authorities would take more measures to boost consumption and reform the taxation regime to reduce tax burdens of enterprises.
It, together with the interest rates cut, sends a clear signal that the policymakers are not only determined to do the right thing, but knowledgeable how to do it.
(China Daily November 27, 2008)
China - Official hints China may raise people's income to boost spending
XinHua News
Official hints China may raise people's income to boost spending
2008-11-27 00:40:02
BEIJING, Nov. 26 (Xinhua) -- China's economic planning agency said on Wednesday the country may raise the income of residents to create more favorable conditions for people to spend more.
The government would improve the consumption environment and work on people's anticipation of future spending, an unidentified official of the National Development and Reform Commission (NDRC) said in a statement posted on its website.
However, the official did not give further details on these measures.
"To carry out policies that stimulate domestic demand is a very important footing of the country to weather through the global financial turmoil," he said.
He continued to argue that such policies to bolster domestic demand should persist for a long time, as the policies play an important role in spurring the economy right now and will also boost market confidence and increase the momentum of the economy in the long run.
The commission is trying to allocate the new funding from central government for more projects as early as next month, so as to mobilize more investment, he said.
Both the acceleration of industrialization, urbanization, industrial restructuring and the improvement of people's living conditions will create new demand and lay a good foundation for the economy to grow fast and steadily, he added.
Editor: Sun
Official hints China may raise people's income to boost spending
2008-11-27 00:40:02
BEIJING, Nov. 26 (Xinhua) -- China's economic planning agency said on Wednesday the country may raise the income of residents to create more favorable conditions for people to spend more.
The government would improve the consumption environment and work on people's anticipation of future spending, an unidentified official of the National Development and Reform Commission (NDRC) said in a statement posted on its website.
However, the official did not give further details on these measures.
"To carry out policies that stimulate domestic demand is a very important footing of the country to weather through the global financial turmoil," he said.
He continued to argue that such policies to bolster domestic demand should persist for a long time, as the policies play an important role in spurring the economy right now and will also boost market confidence and increase the momentum of the economy in the long run.
The commission is trying to allocate the new funding from central government for more projects as early as next month, so as to mobilize more investment, he said.
Both the acceleration of industrialization, urbanization, industrial restructuring and the improvement of people's living conditions will create new demand and lay a good foundation for the economy to grow fast and steadily, he added.
Editor: Sun
China makes policies to address difficulties of enterprises, promote economic growth
XinHua News
China makes policies to address difficulties of enterprises, promote economic growth
2008-11-26 21:45:10
BEIJING, Nov. 26 (Xinhua) -- China's State Council, or the Cabinet, said on Wednesday that more efforts would be made to encourage enterprises to upgrade technology and engage in independent innovation.
It also said there would be policies to promote merger and acquisition among enterprises.
The policies were clinched at an executive meeting of the State Council, presided over by Premier Wen Jiabao. The meeting was held to discuss measures to address difficulties faced by enterprises and promote economic growth and deliberate plans to reform finished oil pricing mechanism and fuel taxes and fees.
According to the meeting, plans would be drawn up to help some key industries, including steel, auto, ship manufacturing, petrochemical, light industry, textile, nonferrous metals, equipment manufacturing and information technology.
The meeting urged banks to increase credit supply to help small and medium enterprises overcome difficulties.
To offset adverse global economic conditions, the State Council on Nov. 9 has announced a 4 trillion yuan (585.7 billion U.S. dollars) stimulus package to boost domestic demand. This will be combined with other boosting measures, such as loosening credit conditions and cutting taxes.
The huge amount of money will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding after several disasters, most notably the May 12 earthquake.
The State Council also discussed the reform plans of finished oil pricing mechanism and fuel tax and fees at the meeting. It decided to make public the two draft reform plans to solicit public advice.
According to the National Development and Reform Commission, the government has been studying a fuel tax to replace the current road tolls imposed upon vehicles.
The long-awaited fuel tax and fee reform was first proposed in 1994.
The State Council meeting also reached decisions to increase the storage of key materials and resources, accelerate development of the service industry and enhance measures to promote employment and social security.
More education and job training would be provided among the government's efforts to increase employment. This education and training should also cover the lay-off workers and rural laborers who returned from cities because of unemployment, according to the meeting.
Editor: Du Guodong
China makes policies to address difficulties of enterprises, promote economic growth
2008-11-26 21:45:10
BEIJING, Nov. 26 (Xinhua) -- China's State Council, or the Cabinet, said on Wednesday that more efforts would be made to encourage enterprises to upgrade technology and engage in independent innovation.
It also said there would be policies to promote merger and acquisition among enterprises.
The policies were clinched at an executive meeting of the State Council, presided over by Premier Wen Jiabao. The meeting was held to discuss measures to address difficulties faced by enterprises and promote economic growth and deliberate plans to reform finished oil pricing mechanism and fuel taxes and fees.
According to the meeting, plans would be drawn up to help some key industries, including steel, auto, ship manufacturing, petrochemical, light industry, textile, nonferrous metals, equipment manufacturing and information technology.
The meeting urged banks to increase credit supply to help small and medium enterprises overcome difficulties.
To offset adverse global economic conditions, the State Council on Nov. 9 has announced a 4 trillion yuan (585.7 billion U.S. dollars) stimulus package to boost domestic demand. This will be combined with other boosting measures, such as loosening credit conditions and cutting taxes.
The huge amount of money will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding after several disasters, most notably the May 12 earthquake.
The State Council also discussed the reform plans of finished oil pricing mechanism and fuel tax and fees at the meeting. It decided to make public the two draft reform plans to solicit public advice.
According to the National Development and Reform Commission, the government has been studying a fuel tax to replace the current road tolls imposed upon vehicles.
The long-awaited fuel tax and fee reform was first proposed in 1994.
The State Council meeting also reached decisions to increase the storage of key materials and resources, accelerate development of the service industry and enhance measures to promote employment and social security.
More education and job training would be provided among the government's efforts to increase employment. This education and training should also cover the lay-off workers and rural laborers who returned from cities because of unemployment, according to the meeting.
Editor: Du Guodong
China's social investment to total 18 trillon yuan in 2009
XinHua News
China's social investment to total 18 trln yuan in 2009
2008-11-27 13:20:32
BEIJING, Nov. 27 (Xinhua) -- China's total social investment is predicted to reach 18 trillion yuan (2.64 trillion U.S. dollars) in 2009, National Development and Reform Committee (NDRC), the country's top economic planner, announced here on Thursday.
"The 4 trillion (586 billion U.S. dollars) stimulus package is only part of the whole picture. China's total social investment exceeded 13 trillion yuan in 2007 and is expected to top 16 trillion yuan this year," said NDRC head Zhang Ping.
Zhang said the central stimulus package was roughly divided into seven parts, with 1.8 trillion yuan going towards large-scale infrastructure projects such as railways, roads, airports and the national grid.
One trillion yuan is for reconstruction in areas most affected by the May 12 earthquake in the southwestern Sichuan Province.
The rest of the stimulus money will be spent on an affordable housing project, rural well fare and infrastructure construction, medical and cultural development, environmental protection as well as industrial restructuring.
Next year's total social investment will have the same focus with the central plan which involves improving people's lives and promoting rural development, according to Zhang.
Editor: Yao
China's social investment to total 18 trln yuan in 2009
2008-11-27 13:20:32
BEIJING, Nov. 27 (Xinhua) -- China's total social investment is predicted to reach 18 trillion yuan (2.64 trillion U.S. dollars) in 2009, National Development and Reform Committee (NDRC), the country's top economic planner, announced here on Thursday.
"The 4 trillion (586 billion U.S. dollars) stimulus package is only part of the whole picture. China's total social investment exceeded 13 trillion yuan in 2007 and is expected to top 16 trillion yuan this year," said NDRC head Zhang Ping.
Zhang said the central stimulus package was roughly divided into seven parts, with 1.8 trillion yuan going towards large-scale infrastructure projects such as railways, roads, airports and the national grid.
One trillion yuan is for reconstruction in areas most affected by the May 12 earthquake in the southwestern Sichuan Province.
The rest of the stimulus money will be spent on an affordable housing project, rural well fare and infrastructure construction, medical and cultural development, environmental protection as well as industrial restructuring.
Next year's total social investment will have the same focus with the central plan which involves improving people's lives and promoting rural development, according to Zhang.
Editor: Yao
Wednesday, November 26, 2008
What Buffett's Investing In - And How to Learn From Him
Yahoo Finance
What Would Warren Do?
Pat Dorsey
November 26, 2008
Or better yet - what is the Oracle up to in this market, and can you do the same?
Warren Buffett has already told the world what he's doing in this frightful market. The Oracle of Omaha proudly proclaimed that he's "been buying American stocks" with his personal funds.
But it should also be noted that Buffett has been putting his investors' money on the line as well. After sitting on piles of cash for several years and lamenting the lack of attractive opportunities, Buffett has made several key acquisitions through his investment conglomerate, Berkshire Hathaway, culminating in a flurry of late- September and early-October deals.
In just a two-week span, Buffett picked up Constellation Energy for the relative bargain price of $4.7 billion. He bought $5 billion in preferred stock from Goldman Sachs, receiving a fat 10% yield. And he purchased $3 billion in preferred shares of GE, also yielding 10%.
This doesn't mean Buffett is saying go out and buy Goldman or GE stock. In fact, there are plenty of reasons why you shouldn't try to follow his lead, not the least of which is the fact that Berkshire gets deals that individuals simply can't.
But that's not the point. The opportunity here is to pick up some valuable investing wisdom from the greatest practitioner alive. In this spirit, here's what I think you can learn from Buffett's moves:
Be Greedy When Others Are Fearful
It's the most famous of all Buffett-isms: "Be fearful when others are greedy and greedy when others are fearful." Today there's ample evidence that people are scared, as fund investors have been redeeming record amounts of money from their stock portfolios.
By contrast, Buffett is putting his money to work. Berkshire's cash balance, by my estimate, is at its lowest level in recent memory.
Now, this doesn't mean the market will turn around tomorrow. But Buffett's point is that this is not the time to flee U.S. stocks. In fact, now is a great time to be looking for shares of high-quality firms that have been beaten down to affordable levels.
For examples of attractively priced industry leaders, see the suggestions to the right.
Don't Be Hobbled by Past Mistakes
Buffett's investment in Goldman Sachs was surprising to many, given his frequent digs at Wall Street's casino culture and a problematic investment he made in Salomon Brothers.
In 1987, Buffett bought a stake in Salomon to ward off a hostile takeover, but the firm nearly collapsed amid a bond bid-rigging scandal a few years later, and Buffett had to step in as interim chairman.
Although the investment eventually worked out - Salomon was bought by Travelers, which merged with Citicorp to form Citigroup - it's safe to say that it was a longer and harder road than he had anticipated.
Still, Buffett understood that investment banking, for all its recent woes, is an attractive business if managed properly. The group of top-tier firms is fairly small, and it would be hard for a new competitor to break into the business, which gives Goldman Sachs tremendous bargaining power over its customers.
There's an important lesson in this for individual investors. Just because many financial stocks in your portfolio have imploded recently, it doesn't mean you should sell out of this sector entirely - or turn your back on these stocks for good.
Don't Fall in Love With Your Stocks
Buffett is famous for having said that his favorite holding period is "forever." But he will sell a stock he loves if conditions warrant. For example, late last year, as crude-oil prices were approaching $100 a barrel, Buffett jettisoned his stake in PetroChina.
Why? After multiplying more than fivefold since he bought it a few years earlier, PetroChina shares had reached fair value, so he sold. Since he cashed out, PetroChina shares have been cut in half.
Chalk this up to a lesson the Oracle learned in the late '90s. As he admitted in 2003, "...I made a big mistake in not selling several of our larger holdings during the Great Bubble."
Buffett similarly made what may be one of his best decisions when he sold Berkshire Hathaway's long-held stake in Freddie Mac in 2000. He's never written about exactly why, but he noted presciently at his 2001 annual shareholder meeting that Freddie Mac's "risk profile had changed."
Keep Your Powder Dry
While the rest of the world gorged on cheap credit, Buffett maintained Berkshire's conservative profile. This hindered his returns when times were good, but having lots of cash on hand enabled Buffett to snap up once-in-a-lifetime deals, like Constellation Energy.
Buffett, who owns several utilities, jumped on Constellation in September after its shares tumbled from around $60 to his purchase price of $26.50 in a mere matter of days. The result: He nabbed a company that produces nearly $1 billion in earnings a year for less than $5 billion.
Now, you may not be in a position to keep $40 billion in the bank. But as Buffett showed, it's smart to have some cash on hand for opportunistic purchases. What's more, there's nothing wrong with being disciplined enough to turn your back on stocks that you're not 100% confident in. That's sage advice.
Why He's Warren Buffett — and You're Not
If investing were as simple as mimicking Warren Buffett, then all you'd have to do to retire rich would be to download a free copy of the Berkshire Hathaway annual shareholder letter and shadow the Oracle's moves.
Given that you're reading this article instead of relaxing at your seaside villa, it's clear copying Buffett is no easy task. So as you marvel at the Sage, keep the following in mind:
Warren Can Strike Deals You Can't
Buffett's reputation and Berkshire's financial heft are enormous advantages that regular investors simply don't share. Take his recent investment in Goldman Sachs. It was made in preferred stock that was offered only to Berkshire and pays a 10% fixed yield.
That's twice what Uncle Sam is initially earning on the preferred shares it got from Goldman in exchange for injecting capital into the bank. But chalk that up to the Buffett premium. Firms want the Oracle to invest in them for his seal of approval.
Berkshire's purchase of Constellation Energy offers a great example. Constellation's shares had fallen 75% from their highs because the market was worried about the financial health of the company's energy-trading operations.
If you or I bought the stock at that level, we would have been making a bet that Constellation would pull through. But we would not have been able to affect the odds. However, Berkshire's financial strength and Buffett's name assured Constellation's survival, making the investment more valuable as soon as Warren bought the company.
Warren Is Smarter Than You Are
Many casual observers assume that Buffett simply buys great companies and hangs on to them. Simple, right? But the real key to Buffett's success is far more complicated.
Buffett has created enormous value for Berkshire by buying all kinds of securities, from common stock and preferred shares to currencies, distressed debt and options.
He has also made money through merger arbitrage and fixed-income arbitrage. These are all areas that only the most sophisticated investor should dabble in.
Why Mimic Warren When You Can Hire Him?
Your best bet for benefiting from Buffett's wisdom is the most obvious: Buy Berkshire Hathaway stock.
It's really an investment company. But unlike a fund, it doesn't charge annual management fees. Buffett has deployed a lot of cash into attractive deals lately, which should add value for years to come.
What Would Warren Do?
Pat Dorsey
November 26, 2008
Or better yet - what is the Oracle up to in this market, and can you do the same?
Warren Buffett has already told the world what he's doing in this frightful market. The Oracle of Omaha proudly proclaimed that he's "been buying American stocks" with his personal funds.
But it should also be noted that Buffett has been putting his investors' money on the line as well. After sitting on piles of cash for several years and lamenting the lack of attractive opportunities, Buffett has made several key acquisitions through his investment conglomerate, Berkshire Hathaway, culminating in a flurry of late- September and early-October deals.
In just a two-week span, Buffett picked up Constellation Energy for the relative bargain price of $4.7 billion. He bought $5 billion in preferred stock from Goldman Sachs, receiving a fat 10% yield. And he purchased $3 billion in preferred shares of GE, also yielding 10%.
This doesn't mean Buffett is saying go out and buy Goldman or GE stock. In fact, there are plenty of reasons why you shouldn't try to follow his lead, not the least of which is the fact that Berkshire gets deals that individuals simply can't.
But that's not the point. The opportunity here is to pick up some valuable investing wisdom from the greatest practitioner alive. In this spirit, here's what I think you can learn from Buffett's moves:
Be Greedy When Others Are Fearful
It's the most famous of all Buffett-isms: "Be fearful when others are greedy and greedy when others are fearful." Today there's ample evidence that people are scared, as fund investors have been redeeming record amounts of money from their stock portfolios.
By contrast, Buffett is putting his money to work. Berkshire's cash balance, by my estimate, is at its lowest level in recent memory.
Now, this doesn't mean the market will turn around tomorrow. But Buffett's point is that this is not the time to flee U.S. stocks. In fact, now is a great time to be looking for shares of high-quality firms that have been beaten down to affordable levels.
For examples of attractively priced industry leaders, see the suggestions to the right.
Don't Be Hobbled by Past Mistakes
Buffett's investment in Goldman Sachs was surprising to many, given his frequent digs at Wall Street's casino culture and a problematic investment he made in Salomon Brothers.
In 1987, Buffett bought a stake in Salomon to ward off a hostile takeover, but the firm nearly collapsed amid a bond bid-rigging scandal a few years later, and Buffett had to step in as interim chairman.
Although the investment eventually worked out - Salomon was bought by Travelers, which merged with Citicorp to form Citigroup - it's safe to say that it was a longer and harder road than he had anticipated.
Still, Buffett understood that investment banking, for all its recent woes, is an attractive business if managed properly. The group of top-tier firms is fairly small, and it would be hard for a new competitor to break into the business, which gives Goldman Sachs tremendous bargaining power over its customers.
There's an important lesson in this for individual investors. Just because many financial stocks in your portfolio have imploded recently, it doesn't mean you should sell out of this sector entirely - or turn your back on these stocks for good.
Don't Fall in Love With Your Stocks
Buffett is famous for having said that his favorite holding period is "forever." But he will sell a stock he loves if conditions warrant. For example, late last year, as crude-oil prices were approaching $100 a barrel, Buffett jettisoned his stake in PetroChina.
Why? After multiplying more than fivefold since he bought it a few years earlier, PetroChina shares had reached fair value, so he sold. Since he cashed out, PetroChina shares have been cut in half.
Chalk this up to a lesson the Oracle learned in the late '90s. As he admitted in 2003, "...I made a big mistake in not selling several of our larger holdings during the Great Bubble."
Buffett similarly made what may be one of his best decisions when he sold Berkshire Hathaway's long-held stake in Freddie Mac in 2000. He's never written about exactly why, but he noted presciently at his 2001 annual shareholder meeting that Freddie Mac's "risk profile had changed."
Keep Your Powder Dry
While the rest of the world gorged on cheap credit, Buffett maintained Berkshire's conservative profile. This hindered his returns when times were good, but having lots of cash on hand enabled Buffett to snap up once-in-a-lifetime deals, like Constellation Energy.
Buffett, who owns several utilities, jumped on Constellation in September after its shares tumbled from around $60 to his purchase price of $26.50 in a mere matter of days. The result: He nabbed a company that produces nearly $1 billion in earnings a year for less than $5 billion.
Now, you may not be in a position to keep $40 billion in the bank. But as Buffett showed, it's smart to have some cash on hand for opportunistic purchases. What's more, there's nothing wrong with being disciplined enough to turn your back on stocks that you're not 100% confident in. That's sage advice.
Why He's Warren Buffett — and You're Not
If investing were as simple as mimicking Warren Buffett, then all you'd have to do to retire rich would be to download a free copy of the Berkshire Hathaway annual shareholder letter and shadow the Oracle's moves.
Given that you're reading this article instead of relaxing at your seaside villa, it's clear copying Buffett is no easy task. So as you marvel at the Sage, keep the following in mind:
Warren Can Strike Deals You Can't
Buffett's reputation and Berkshire's financial heft are enormous advantages that regular investors simply don't share. Take his recent investment in Goldman Sachs. It was made in preferred stock that was offered only to Berkshire and pays a 10% fixed yield.
That's twice what Uncle Sam is initially earning on the preferred shares it got from Goldman in exchange for injecting capital into the bank. But chalk that up to the Buffett premium. Firms want the Oracle to invest in them for his seal of approval.
Berkshire's purchase of Constellation Energy offers a great example. Constellation's shares had fallen 75% from their highs because the market was worried about the financial health of the company's energy-trading operations.
If you or I bought the stock at that level, we would have been making a bet that Constellation would pull through. But we would not have been able to affect the odds. However, Berkshire's financial strength and Buffett's name assured Constellation's survival, making the investment more valuable as soon as Warren bought the company.
Warren Is Smarter Than You Are
Many casual observers assume that Buffett simply buys great companies and hangs on to them. Simple, right? But the real key to Buffett's success is far more complicated.
Buffett has created enormous value for Berkshire by buying all kinds of securities, from common stock and preferred shares to currencies, distressed debt and options.
He has also made money through merger arbitrage and fixed-income arbitrage. These are all areas that only the most sophisticated investor should dabble in.
Why Mimic Warren When You Can Hire Him?
Your best bet for benefiting from Buffett's wisdom is the most obvious: Buy Berkshire Hathaway stock.
It's really an investment company. But unlike a fund, it doesn't charge annual management fees. Buffett has deployed a lot of cash into attractive deals lately, which should add value for years to come.
Monster in closet is recession, not deflation
The Business Times
26 November 2008
Monster in closet is recession, not deflation
By JOHN M BERRY
GIVEN all the real problems facing the US economy, dragging out the remote danger of deflation is foolish. It's just short of fear-mongering. Yes, this is the worst financial crisis since the Great Depression, when consumer prices fell by one-fourth. Yet the economy, weak as its current prospects may be, bears little resemblance to that of the early 1930s.
In his radio address on Saturday, president-elect Barack Obama promised a massive stimulus package of tax cuts and spending increases to stimulate growth. On Sunday, Democratic congressional leaders said a programme worth several hundred billion dollars would be ready for passage on Inauguration Day, Jan 20. That's exactly what the economy needs at this point, and the promises ought to defuse the deflation scare.
Warnings about deflation increased after the Labour Department reported on Nov 19 that consumer prices fell one per cent in October. That was the largest monthly decline since seasonally adjusted figures began being published in 1947.
A close look shows the decline, while noteworthy, didn't signal that deflation lurks around the corner. Core prices, which exclude food and energy, dipped only 0.1 per cent. Most of the decline in the overall index was the result of the accelerating drop in energy prices, which fell 8.6 per cent, the fourth consecutive monthly decrease. This is part of a broad contraction in commodity prices, a reversal of a huge run-up that peaked in July.
While there will be more bank failures, they won't be widespread. And with accounts federally insured, depositors aren't going to see their money vanish, as happened in the Depression. Nor is there any sign whatsoever that wages will collapse, as they did when unemployment soared to 25 per cent in 1933. Pay is likely to increase more slowly in coming months, as it usually does in a slump. Pay cuts will be rare.
While it's true that the Standard & Poor's Case-Shiller home price index is down 20 per cent from its peak in July 2006, it's still higher than it was in May 2004. In other words, the value of many homes, probably most, is as high as it was 3 1/2 years ago.
Keep in mind that deflation is a broad, sustained decline in prices, not just an occasional monthly dip. Should we really expect the cost of medical care, tuition, textbooks, movie tickets and other services to decline steadily? It's not impossible, of course, though I think the bottom truly would have to fall out of the economy for even mild deflation to occur.
CPI debate
Only a few months ago, many economists - and several Federal Reserve policy makers - were debating whether the 12-month change in the overall CPI, which hit 5.6 per cent in July, would move down toward the core index, or the core would accelerate.
With the October decline, the overall index was still up 3.7 per cent from October 2007. The 12-month increase in the core, after peaking at 2.5 per cent in July, was 2.2 per cent last month.
On Nov 19, Fed vice-chairman Donald L Kohn said during a conference at the Cato Institute in Washington that he agrees the economy is 'very weak'. Asked about the prospect of deflation, Mr Kohn replied: 'There is a risk out there, but in my mind it is still small'. He said the risk was substantial enough to warrant being 'aggressive in our monetary policy'. Jeffrey Lacker, president of the Richmond Federal Reserve Bank, said in an interview the following day: 'The risk is still quite minor'.
First rate increase
Mr Lacker said he expects the economy to begin picking up sometime next year. When it does, he is intent on moving promptly on monetary policy to make sure inflation doesn't worsen again. 'I worry about us keeping rates too low, too long,' Mr Lacker said. 'There is always a hesitation about making that first rate increase.'
If the economy does begin to expand again next year - as many economists expect to happen - it will be in part because the Fed has been aggressive in using monetary policy. The central bank failed to do that at the beginning of the Depression. So did the Bank of Japan during much more modest deflation in the 1990s.
Fed officials are conscious of the example of Japan. That was the key reason the Federal Open Market Committee (FOMC) lowered its target for the overnight lending rate to one per cent in 2003, when inflation threatened to disappear entirely.
In response to the current financial crisis, the Fed has lowered the target once more to one per cent, down from 5.25 per cent in September 2007. The FOMC may reduce it again, perhaps by 50 basis points, when it meets on Dec 15-16. It has also flooded the banking system with cash and extended loans in unprecedented fashion.
Mr Obama and congressional Democrats say they will provide fiscal stimulus as soon as he takes office. Too bad that, in the meantime, President George W Bush is just sitting on his hands.
The writer is a Bloomberg News columnist. The opinions expressed are his own.
26 November 2008
Monster in closet is recession, not deflation
By JOHN M BERRY
GIVEN all the real problems facing the US economy, dragging out the remote danger of deflation is foolish. It's just short of fear-mongering. Yes, this is the worst financial crisis since the Great Depression, when consumer prices fell by one-fourth. Yet the economy, weak as its current prospects may be, bears little resemblance to that of the early 1930s.
In his radio address on Saturday, president-elect Barack Obama promised a massive stimulus package of tax cuts and spending increases to stimulate growth. On Sunday, Democratic congressional leaders said a programme worth several hundred billion dollars would be ready for passage on Inauguration Day, Jan 20. That's exactly what the economy needs at this point, and the promises ought to defuse the deflation scare.
Warnings about deflation increased after the Labour Department reported on Nov 19 that consumer prices fell one per cent in October. That was the largest monthly decline since seasonally adjusted figures began being published in 1947.
A close look shows the decline, while noteworthy, didn't signal that deflation lurks around the corner. Core prices, which exclude food and energy, dipped only 0.1 per cent. Most of the decline in the overall index was the result of the accelerating drop in energy prices, which fell 8.6 per cent, the fourth consecutive monthly decrease. This is part of a broad contraction in commodity prices, a reversal of a huge run-up that peaked in July.
While there will be more bank failures, they won't be widespread. And with accounts federally insured, depositors aren't going to see their money vanish, as happened in the Depression. Nor is there any sign whatsoever that wages will collapse, as they did when unemployment soared to 25 per cent in 1933. Pay is likely to increase more slowly in coming months, as it usually does in a slump. Pay cuts will be rare.
While it's true that the Standard & Poor's Case-Shiller home price index is down 20 per cent from its peak in July 2006, it's still higher than it was in May 2004. In other words, the value of many homes, probably most, is as high as it was 3 1/2 years ago.
Keep in mind that deflation is a broad, sustained decline in prices, not just an occasional monthly dip. Should we really expect the cost of medical care, tuition, textbooks, movie tickets and other services to decline steadily? It's not impossible, of course, though I think the bottom truly would have to fall out of the economy for even mild deflation to occur.
CPI debate
Only a few months ago, many economists - and several Federal Reserve policy makers - were debating whether the 12-month change in the overall CPI, which hit 5.6 per cent in July, would move down toward the core index, or the core would accelerate.
With the October decline, the overall index was still up 3.7 per cent from October 2007. The 12-month increase in the core, after peaking at 2.5 per cent in July, was 2.2 per cent last month.
On Nov 19, Fed vice-chairman Donald L Kohn said during a conference at the Cato Institute in Washington that he agrees the economy is 'very weak'. Asked about the prospect of deflation, Mr Kohn replied: 'There is a risk out there, but in my mind it is still small'. He said the risk was substantial enough to warrant being 'aggressive in our monetary policy'. Jeffrey Lacker, president of the Richmond Federal Reserve Bank, said in an interview the following day: 'The risk is still quite minor'.
First rate increase
Mr Lacker said he expects the economy to begin picking up sometime next year. When it does, he is intent on moving promptly on monetary policy to make sure inflation doesn't worsen again. 'I worry about us keeping rates too low, too long,' Mr Lacker said. 'There is always a hesitation about making that first rate increase.'
If the economy does begin to expand again next year - as many economists expect to happen - it will be in part because the Fed has been aggressive in using monetary policy. The central bank failed to do that at the beginning of the Depression. So did the Bank of Japan during much more modest deflation in the 1990s.
Fed officials are conscious of the example of Japan. That was the key reason the Federal Open Market Committee (FOMC) lowered its target for the overnight lending rate to one per cent in 2003, when inflation threatened to disappear entirely.
In response to the current financial crisis, the Fed has lowered the target once more to one per cent, down from 5.25 per cent in September 2007. The FOMC may reduce it again, perhaps by 50 basis points, when it meets on Dec 15-16. It has also flooded the banking system with cash and extended loans in unprecedented fashion.
Mr Obama and congressional Democrats say they will provide fiscal stimulus as soon as he takes office. Too bad that, in the meantime, President George W Bush is just sitting on his hands.
The writer is a Bloomberg News columnist. The opinions expressed are his own.
China can hit target of 7.5% growth next year: report
The Business Times
26 November 2008
China can hit target of 7.5% growth next year: report
Higher government spending will play a key role, says World Bank
By ANTHONY ROWLEY
IN TOKYO
CHINA can pull off its gamble on achieving 7.5 per cent GDP growth next year, when most other major economies are expected to be in recession, by means of massive government spending on the economy, the World Bank said yesterday.
And the huge switch from private to public-sector consumption and investment planned for 2009 should not strain China's budget unduly, officials suggested.
Speaking from Beijing, the World Bank officials also had praise for what they said was China's contribution to helping preserve 'stability' in Asia and beyond during the current financial and economic crisis by allowing the renminbi to appreciate in line with a strengthening US dollar, rather than seeking to depreciate it in the interests of protecting exports.
'Domestic factors have made China's economy slow down in 2008,' the World Bank said in its latest China Quarterly Update, while forecasting GDP growth of 9.4 per cent for this year compared with 11.9 per cent in 2007.
But 'Chinese authorities have adopted a more expansionary macro-economic stance and higher government-influenced spending is going to play a key role in 2009,' the World Bank said.
Some economists predict a hard landing for China next year as the developed world slumps into recession, with growth forecasts going as low as 5 per cent. But in its latest update on China, the World Bank argues that even with low export growth and weak domestic demand the Chinese economy can still move forward strongly in 2009 on the back of planned fiscal stimulus.
The size of the shift from private to public sector-led growth means that public spending will account for 56 per cent of next year's growth in China compared with 24 per cent in 2007, World Bank officials said. China announced a US$586 billion package of infrastructure and other public-sector spending on Nov 10 and other official measures are expected to be rolled out, including some aimed at boosting household spending.
This should not strain China's finances, according to World Bank country director for China David Dollar. 'The government is in a better position to undertake fiscal expansion than in most other countries,' he said.
Government revenues have been healthy in recent years and any shortfall can be financed by issuing bonds or drawing on government deposits with the central bank, he added.
Speaking from Beijing, Mr Dollar and other officials declined to comment on concerns by some economists that China's growth next year could fall to levels where unemployment causes social strains. Improved official 'safety nets' should ensure minimum pay plus health and education benefits for unemployed workers to ride out a period of unemployment, they said.
The unemployment risk is greatest in China's light manufacturing sector, such as toys and textiles, where export demand has fallen, causing factories to close and forcing migrant workers to return from urban to rural areas. Planned job creation in infrastructure areas such as urban transport, water and sanitation and public housing cannot compensate for this, officials acknowledged.
But most of the more than 50 per cent of China's total exports which goes to emerging economies in Asia and elsewhere takes the form of machinery and equipment such as electronics and motor vehicles and these exports have held up relatively well so far, officials said.
China has so far been able to compensate for weakening export demand by increasing its competitiveness and gaining market share, they added.
While problems in China's real estate sector have moved 'upstream' to impact demand for raw materials such as steel and cement, they have not had a very damaging effect on the Chinese banking system, said World Bank senior China economist Louis Kuijs. Only around 20 per cent of bank assets consists of mortgages and construction loans, he added.
26 November 2008
China can hit target of 7.5% growth next year: report
Higher government spending will play a key role, says World Bank
By ANTHONY ROWLEY
IN TOKYO
CHINA can pull off its gamble on achieving 7.5 per cent GDP growth next year, when most other major economies are expected to be in recession, by means of massive government spending on the economy, the World Bank said yesterday.
And the huge switch from private to public-sector consumption and investment planned for 2009 should not strain China's budget unduly, officials suggested.
Speaking from Beijing, the World Bank officials also had praise for what they said was China's contribution to helping preserve 'stability' in Asia and beyond during the current financial and economic crisis by allowing the renminbi to appreciate in line with a strengthening US dollar, rather than seeking to depreciate it in the interests of protecting exports.
'Domestic factors have made China's economy slow down in 2008,' the World Bank said in its latest China Quarterly Update, while forecasting GDP growth of 9.4 per cent for this year compared with 11.9 per cent in 2007.
But 'Chinese authorities have adopted a more expansionary macro-economic stance and higher government-influenced spending is going to play a key role in 2009,' the World Bank said.
Some economists predict a hard landing for China next year as the developed world slumps into recession, with growth forecasts going as low as 5 per cent. But in its latest update on China, the World Bank argues that even with low export growth and weak domestic demand the Chinese economy can still move forward strongly in 2009 on the back of planned fiscal stimulus.
The size of the shift from private to public sector-led growth means that public spending will account for 56 per cent of next year's growth in China compared with 24 per cent in 2007, World Bank officials said. China announced a US$586 billion package of infrastructure and other public-sector spending on Nov 10 and other official measures are expected to be rolled out, including some aimed at boosting household spending.
This should not strain China's finances, according to World Bank country director for China David Dollar. 'The government is in a better position to undertake fiscal expansion than in most other countries,' he said.
Government revenues have been healthy in recent years and any shortfall can be financed by issuing bonds or drawing on government deposits with the central bank, he added.
Speaking from Beijing, Mr Dollar and other officials declined to comment on concerns by some economists that China's growth next year could fall to levels where unemployment causes social strains. Improved official 'safety nets' should ensure minimum pay plus health and education benefits for unemployed workers to ride out a period of unemployment, they said.
The unemployment risk is greatest in China's light manufacturing sector, such as toys and textiles, where export demand has fallen, causing factories to close and forcing migrant workers to return from urban to rural areas. Planned job creation in infrastructure areas such as urban transport, water and sanitation and public housing cannot compensate for this, officials acknowledged.
But most of the more than 50 per cent of China's total exports which goes to emerging economies in Asia and elsewhere takes the form of machinery and equipment such as electronics and motor vehicles and these exports have held up relatively well so far, officials said.
China has so far been able to compensate for weakening export demand by increasing its competitiveness and gaining market share, they added.
While problems in China's real estate sector have moved 'upstream' to impact demand for raw materials such as steel and cement, they have not had a very damaging effect on the Chinese banking system, said World Bank senior China economist Louis Kuijs. Only around 20 per cent of bank assets consists of mortgages and construction loans, he added.
China cuts interest rates by 108 basis points, bank reserve ratio by 100 basis points
Reuters
RPT-China cuts interest rates by 108 basis points
Wed Nov 26, 2008 3:55am EST
BEIJING, Nov 26 (Reuters) - China's central bank cut banks' benchmark lending and deposit rates by 1.08 percentage point on Wednesday, the fourth cut since mid-September.
The cost of one-year bank loans will fall to 5.58 percent from 6.66 percent, while the benchmark one-year deposit rate falls to 2.52 percent from 3.60 percent, the People's Bank of China (PBOC) said.
The cut in interest rates takes effect on Thursday, the central bank said on its website (www.pbc.gov.cn).
The cut in the lending rate was the biggest since October 1997.
The PBOC said the easing was meant to ensure sufficient liquidity in the banking system to ensure growth.
The central bank also cut interest rates on Oct. 29, Oct. 8 and Sept. 15.
The PBOC is also lowering banks' required reserves. The requirement for big banks will decrease by 1 percentage point, while that for smaller banks will be cut by 2 percentage points, effective Dec. 5.
The five biggest banks will have to hold 16.0 percent of their deposits in reserve at the PBOC, down from 17.0 percent. The requirement for other lenders drops to 14.0 percent from 16.0 percent.
The PBOC last cut required reserves on Oct. 8. (Reporting by Eadie Chen and Zhou Xin; Editing by Alan Wheatley)
Latest Updates
26 November 2008
RPT-China cuts interest rates by 108 basis points
Wed Nov 26, 2008 3:55am EST
BEIJING, Nov 26 (Reuters) - China's central bank cut banks' benchmark lending and deposit rates by 1.08 percentage point on Wednesday, the fourth cut since mid-September.
The cost of one-year bank loans will fall to 5.58 percent from 6.66 percent, while the benchmark one-year deposit rate falls to 2.52 percent from 3.60 percent, the People's Bank of China (PBOC) said.
The cut in interest rates takes effect on Thursday, the central bank said on its website (www.pbc.gov.cn).
The cut in the lending rate was the biggest since October 1997.
The PBOC said the easing was meant to ensure sufficient liquidity in the banking system to ensure growth.
The central bank also cut interest rates on Oct. 29, Oct. 8 and Sept. 15.
The PBOC is also lowering banks' required reserves. The requirement for big banks will decrease by 1 percentage point, while that for smaller banks will be cut by 2 percentage points, effective Dec. 5.
The five biggest banks will have to hold 16.0 percent of their deposits in reserve at the PBOC, down from 17.0 percent. The requirement for other lenders drops to 14.0 percent from 16.0 percent.
The PBOC last cut required reserves on Oct. 8. (Reporting by Eadie Chen and Zhou Xin; Editing by Alan Wheatley)
Latest Updates
26 November 2008
XinHua News
China central bank cuts interest rates by 1.08 percentage points
2008-11-26 17:08:03
BEIJING, Nov. 26 (Xinhua) -- China's central bank slashes the lending and deposit rates by 1.08 percentage points as of Thursday in the latest effort to stimulate economy.
Editor: Du Guodong
Reuters
UPDATE 1-China delivers big rate cut to support growth
Wed Nov 26, 2008 4:22am EST
(Adds details, reaction)
By Zhou Xin and Eadie Chen
BEIJING, Nov 26 (Reuters) - China lowered interest rates on Wednesday for the fourth time since mid-September, stepping up the pace of monetary easing to help cushion the blow of the global financial crisis the world's fourth-largest economy.
The People's Bank of China (PBOC) said the benchmark rates for one-year loans and deposits will both fall by 1.08 percentage points, bringing the cost of one-year borrowing to 5.58 percent and the rate on one-year certificates of deposit to 2.52 percent.
The cut in the lending rate was the biggest since October 1997; that in the deposit rate was the biggest since June 1999.
The central bank also reduced the proportion of deposits that banks must hold in reserve, giving them more money to lend to businesses reeling from a drop in export demand and a downturn in the property market.
The cuts come on the heels of a 4 trillion yuan ($586 billion) stimulus package unveiled on Nov. 9 designed to ramp up investment in short order in roads, railways, affordable housing and an array of public works.
"They are continuing what is the best policy prescription in these times, which is increased fiscal spending and easier monetary policy. This is a good move," said Patrick Bennett, Asia foreign exchange and rates strategist with Societe Generale in Hong Kong.
"China is out to save itself here. The rest of Asia is strong, but all policy makers in the region and on the planet need to take their own steps. China is showing good leadership by what it has done."
Like other countries, China has watched its economy slow dramatically since the bankruptcy of Lehman Brothers in mid-September opened a new, dark chapter in the financial crisis, shaking confidence and prompting banks to cut credit lines.
Industrial growth slumped last month to a seven-year lows; exports, imports, retail sales and fixed-asset investment all weakened, while power generation fell 4 percent from a year earlier, the first drop in a non-holiday month for a decade.
CUTS ACROSS THE BOARD
The cut in interest rates takes effect on Thursday, the central bank said on its website (www.pbc.gov.cn).
The PBOC said the easing, which follows interest rate cuts on Oct. 29, Oct. 8 and Sept. 15, was meant to ensure sufficient liquidity in the banking system to ensure growth.
To that end, it also carried out big cuts in banks' reserve requirements. The ratio for big banks will decrease by 1 percentage point, while that for smaller banks will be cut by 2 percentage points, effective Dec. 5.
The five biggest banks will have to hold 16.0 percent of their deposits in reserve at the PBOC, down from 17.0 percent. The requirement for other lenders drops to 14.0 percent from 16.0 percent.
Leaving no doubt about its message of easing, the PBOC also cut the one-year relending rate by 108 basis points, and decreased the interest rate payable on required reserves and excess reserves by 27 basis points.
"All my colleagues were shocked by such a big easing. It signals the government may believe the economic situation is really serious for it to call for such a drastic move," said Liu Dongliang, a currency analyst at China Merchants Bank in Shenzhen.
"No doubt it will be negative for the yuan's exchange rate in the medium and long run, though the central bank may work to keep the currency stable in coming days." (Additional reporting by Beijing, Shanghai and Hong Kong bureaus; Editing by Jason Subler)
Channel News Asia
Steep rate cut in China to boost economic growth
Posted: 26 November 2008 1731 hrs
BEIJING - China's central bank announced on Wednesday a steep cut in its interest rates -- by four times the usual margin -- in a signal that it would pull all the stops to boost weakening economic growth.
The benchmark one-year lending and deposit rates will both be reduced on Thursday by 108 basis points, compared with the usual 27 basis points in
Chinese rate cuts, the People's Bank of China said.
"It means the government is moving on more fronts to stimulate growth," said Stephen Green, a Shanghai-based economist with Standard Chartered.
It was China's fourth interest rate cut since mid-September, and the deepest rate cut since October 1997.
Earlier this month, China announced an unprecedented four-trillion-yuan (590-billion-US-dollar) spending package to lift the economy, which grew at its slowest pace in five years last quarter.
The central bank move came a day after the World Bank said it expected China's economy to grow by 7.5 per cent in 2009, a 19-year low.
"The economic situation now is even worse than in 1998," said Xing Zhiqiang, a Beijing-based analyst with China International Capital Corporation, referring to the year just after the outbreak of the Asian financial crisis.
He said China was likely to see deflation -- or falling prices -- from next year.
"The bubbles in international commodity prices have burst and the prices of many raw materials are falling," he said.
"Moreover, the slowdown in China's own economic growth has gotten worse, triggering overcapacity and unemployment, which are likely to cause deflation as well."
After the rate cut, one-year lending rates in China will be 5.58 per cent, while one-year deposit rates will drop as low as 2.52 per cent.
With inflation at 4.0 per cent in October, it means that borrowing money from the bank is very cheap.
At the same time, putting money in the bank will be a guaranteed way to lose cash, as the real interest rate is defined as the deposit rate minus inflation.
This will provide the Chinese with a strong incentive to spend, boosting domestic consumption.
Even so, the impact may be limited, since interest rate cuts tend to mean less in China than in more developed economies, because households do not generally borrow money for spending purposes.
"To be honest, it probably helps with the margin. But at the moment the bigger impact is going to come from fiscal policy," said Standard Chartered's Green.
However, the steep cuts could also serve the purpose of making debt service cheaper, paving the way for government bond issues to finance the ongoing aggressive fiscal policies, economists said.
The central bank also announced cuts in the amount of money banks must keep in reserve.
Beginning from December 5, large banks will see their required reserve ratio drop by one percentage point, while it will go down by two percentage points for smaller financial institutions.
The reserve ratio cut will release an estimated 700 billion yuan into the banking system, analysts said.
- AFP/ir
XinHua News
China central bank cuts interest rate, reserve requirement to stimulate economy
2008-10-08 19:14:31
BEIJING, Oct. 8 (Xinhua) -- China's central bank on Wednesday announced cuts in both the interest rate and reserve-requirement ratio in the latest effort to boost the domestic economy amid worries over the deepening global financial crisis.
The deposit and lending rates would be lowered by 0.27 percentage points from Thursday and the reserve-requirement ratio would be down by 0.5 percentage points from Oct. 15, the People's Bank of China (PBOC) said.
"This was mainly out of concerns over an economic slowdown," said Ba Shusong, deputy chief of the Finance Research Institute under the Development Research Center of the State Council.
"The rate cut was expected as the world was faced with a cycle of interest rate cuts," he told Xinhua.
OUT OF SLOWDOWN CONCERNS
The loosening in monetary policy, the second such move in less than a month, highlighted the government's rising concern over the slowing economy and slumping capital market.
The PBOC cut the benchmark one-year lending rate by 0.27 percentage points on Sept. 16, the first rate cut in six years. It also lowered the reserve requirement at medium- and small-sized lenders by 1 percentage point as of Sept. 25.
Tang Min, China Development Research Foundation deputy secretary, echoed Ba's viewpoint.
Tang said the government made the move mainly out of concerns over domestic problems. "The deepening U.S.-originated credit crisis has impacted the psychology of Chinese and also the real economy," he told Xinhua.
Investors, gripped by lingering fears of global economic downturn, dumped equities to drive the stock market down 66 percent from its peak last October.
China's gross domestic product (GDP) expanded 10.1 percent in the second quarter of the year, marking a deceleration for four consecutive quarters.
Its exports, a major driver behind the economy, reported slowing growth this year as the credit crisis reduced overseas demand for its goods. This has led to the closures of tens of thousands of local exporters and also job losses.
Local businesses bore the brunt of higher borrowing costs and were even finding it difficult to get credit after last year's tightening measures aimed at curbing inflation and averting economic overheating.
The easing in inflation has given room for the authorities to loosen monetary policy. The consumer price index rose 4.9 percent in August, off from the 12-year-high of 8.7 percent in February.
"Inflation is no longer a threat with the declining commodities prices," Tang said.
The monetary policy has been starting to loosen and the trend would not change in the short term, said Zhuang Jian, an Asian Development Bank (ADB) economist. "The whole world doesn't have strong confidence in the economic outlook."
TAX CUT TO BOOST DEMAND
In another move to boost domestic demand, the State Council, China's Cabinet, said it would scrap the 5 percent individual income tax on savings interest earnings starting on Thursday.
China began levying a 20 percent individual income tax on interest earnings in 1999 to narrow the income gap and encourage consumption and investment. The tax rate was slashed to 5 percent on Aug. 15, 2007.
The income tax cut was a must as it would help alleviate the erosion on personal income by high prices, especially given the cut in the deposit rate, Li Yang, head of the Finance Research Institute under the Chinese Academy of Social Sciences.
The tax cut, together with lower borrowing costs, would boost domestic demand, an increasingly more important driver of economy in the global credit crisis, Zuo Xiaolei, China Galaxy Securities chief economist, said.
GLOBAL COORDINATED RESPONSE
The move was also a timely response to the rate cuts by other major central banks and part of a coordinated effort to stem the global crisis, Tang said.
Six other major central banks, including the U.S. Federal Reserve, slashed interest rates on the same day to cope with the current financial crisis.
The U.S. Federal Reserve lowered its target for the federal funds rate by 0.5 percentage points to 1.5 percent. The Bank of England cut its rate by half a point to 4.5 percent and the European Central Bank cut by the same margin to 3.75 percent.
Central banks of Canada, Sweden and Switzerland took similar actions. The Bank of Japan said it strongly supported these policy actions.
Australia's central bank on Tuesday slashed the interest rate by 1 percentage point, the largest cut since 1992.
Editor: Du Guodong
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