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Friday, August 31, 2012

Clinton says US can work with China in Pacific - Reuters

U.S. Secretary of State Hillary Clinton (R) participates in an arrival ceremony at Rarotonga International Airport in Rarotonga, August 30, 2012. REUTERS/Jim Watson/Pool

U.S. Secretary of State Hillary Clinton (R) participates in an arrival ceremony at Rarotonga International Airport in Rarotonga, August 30, 2012.

Credit: Reuters/Jim Watson/Pool

RAROTONGA | Fri Aug 31, 2012 10:37pm EDT

RAROTONGA (Reuters) - The United States will buttress security partnerships across the Pacific as it strengthens ties with island nations, but also hopes to work more closely with China as Beijing expands its own influence in the region, U.S. Secretary of State Hillary Clinton said on Friday.

Clinton arrived in the tiny Pacific outpost of the Cook Islands for this year's Pacific Islands Forum, part of Washington's effort to woo nations across the Asia-Pacific which are increasingly coming under China's shadow.

Clinton told the gathering, which represents 16 independent and self-governing states ranging from Australia and New Zealand to smaller islands such as Tuvalu and Nauru, that the United States was in the region for the long haul.

But she also played down growing perceptions of a U.S.-China rivalry in the region, declaring "the Pacific is big enough for all of us" and dismissing the notion that expanded U.S. activity was "a hedge against particular countries."

"We think it is important for the Pacific Island nations to have good relationships with as many partners as possible, and that includes China as well as the United States," Clinton told a news conference with New Zealand Prime Minister John Key.

"We want to see more international development projects that include the participation of China," Clinton said, citing disaster relief, maritime security and preserving bio-diversity.

"We think that there's a great opportunity to work with China and we're going to be looking for more ways to do that," she said.

Despite her softer tone on China -- which comes just four days before she pays a visit to Beijing next week -- Clinton also sought to underscore the benefits of the "American model of partnership" in a region where China has in recent years dramatically stepped up its diplomacy and foreign assistance.

She announced more than $32 million in new U.S. programs on issues ranging from sustainable development, climate change and marine protection.

But Clinton also stressed that the United States plays a crucial security role in the region, noting that the U.S. Coast Guard already has formal partnerships with nine Pacific Island nations and was working to build more as part of a broader "pivot" to the Asia-Pacific.

"All of us have an interest in maintaining peace and security in the Pacific," Clinton said, adding the United States was committed to helping fight illegal and unregulated shipping, patrol fishing grounds, and combat other human trafficking.

In a signal of Washington's security emphasis on the region, U.S. Pacific Command (PACOM) chief Admiral Samuel Locklear also traveled to Rarotonga to hail joint maritime exercises and cooperation on issues such as cleaning up unexploded ordinance left over from the Second World War.

"U.S. PACOM is committed to supporting our Pacific Island partners," Locklear said.

RIVALRY WITH CHINA

Clinton's trip to the South Pacific has spurred some criticism in China, where some commentators accused the United States of seeking to stir up trouble as Beijing's economic and political influence expands.

In recent trips to other regions of the world, most notably Africa, Clinton has sought to contrast the U.S. approach to cooperative economic development with other models such as China's, which focus more on condition-free loans and extractive industries such as mining and timber.

China is also represented at the Pacific forum, with a delegation led by Vice Foreign Minister Cui Tiankai, and Beijing is financing projects across the region including constructing parliament buildings, airports, roads and hospitals and giving out grants for Chinese language instruction.

Clinton depicted these efforts, which some local analysts say appear aimed at building Beijing's influence in multilateral organizations such as the United Nations, as not necessarily at odds with U.S. interests -- although she pointedly noted that sometimes China's methods were open to criticism.

"Here in the Pacific we want to see China act in a fair and transparent way," Clinton said.

The three-day visit by Clinton and the 60-odd person U.S. delegation to the Cook Islands - which is in free association with New Zealand - was a major event for the nation's main island of Rarotonga, which has only about 11,000 people.

"We are encouraged by you and your government's commitment to strengthen the United States government's engagement in our region," Cook Islands Prime Minister Henry Puna said in his welcoming remarks.

Clinton's trip will continue to Indonesia and China next week, where her new conciliatory tone will be put the test in talks expected to focus on rising tensions in the South China Sea where Beijing is at odds with several of its southern neighbors over territorial claims.

Clinton will finish the trip with stops in Brunei and East Timor before heading to the Russian port city of Vladivostok, where she will represent U.S. President Barack Obama at this year's Asia Pacific Economic Cooperation (APEC) summit of regional leaders.

(Editing by Michael Perry)


China Manufacturing Contracts for First Time in Nine Months - Bloomberg

China’s manufacturing shrank for the first time in nine months, an official survey showed, signaling the growth slowdown in the world’s second-biggest economy may be deepening.

The Purchasing Managers Index fell to 49.2 in August from 50.1 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compares with the median forecast in a Bloomberg News survey for a reading of 50, which marks the dividing line between expansion and contraction.

Today’s data increase pressure on Premier Wen Jiabao to step up stimulus to reverse a growth slowdown that may extend into a seventh quarter, after export gains stalled in July and new lending declined. Stabilizing expansion is the key task for the economy in the second half, Wen said last month.

“Downside risks to economic growth are increasing,” Chang Jian, a Hong Kong-based economist at Barclays Plc who formerly worked for the World Bank, said before the release. “Slowing external demand and policy inaction may cause growth to slide further.”

The government may further reduce interest rates and roll out more fiscal support including investment spending and tax cuts to stabilize growth at 7.5 percent to 8 percent this year, Chang said.

Stocks Slump

Estimates from 25 economists for the gauge ranged from 49.2 to 50.5. The index is based on responses from purchasing managers at 820 companies in 31 industries.

The benchmark Shanghai Composite Index (SHCOMP) fell 0.3 percent yesterday to the lowest level since February 2009, capping a fourth month of losses, after declining earnings from companies including Sany Heavy Industry Co. underscored the impact of the nation’s economic slowdown.

The yuan strengthened for the fifth week, the longest winning streak since April 2011, on bets policy makers will act to revive the economy. The currency has lost about 0.9 against the U.S. dollar this year after strengthening 4.7 percent in 2011.

China’s gross domestic product expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years, as Europe’s debt crisis crimped exports and property curbs at home damped domestic demand. Estimates for growth this quarter ranged from 7.4 percent to 8.3 percent in a Bloomberg News survey last month.

Stabilizing Growth

The central bank cut interest rates in June and July and lowered the reserve-requirement ratio for banks three times starting in November as part of the government’s efforts to support lending and boost growth.

The difficulties in stabilizing growth are “relatively large,” the official Xinhua News Agency cited Wen as saying during an inspection tour to Guangdong province on Aug. 24 and 25. Wen called for extra measures to promote exports to meet the economic expansion target, according to Xinhua. The premier in March set a 7.5 percent growth goal for this year.

A separate purchasing managers index released by HSBC Holdings Plc and Markit Economics indicated that manufacturing may have contracted for a 10th month in August, according to a preliminary reading on Aug. 23. The final number for the survey, which covers more than 420 companies and is weighted more toward smaller businesses, is due Sept. 3.

Manufacturers’ earnings are falling as the slowing economy curbs demand. Chinese industrial companies’ profits declined in July by the most this year, a government report showed Aug. 27.

Anhui Conch Cement Co., China’s biggest maker of the material, said Aug. 14 that first-half profit slumped 51 percent as demand was damped by the government’s property curbs. Xinjiang Goldwind Science & Technology Co., China’s second- biggest maker of wind turbines, said Aug. 24 that its first-half profit dropped 83 percent as competition intensified and market growth slowed.

--Zheng Lifei. With assistance from Ailing Tan in Singapore and Penny Peng in Beijing. Editors: Scott Lanman, Nerys Avery

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Clinton in South Pacific with China in mind at start of 6-nation Asia tour - Washington Post

RAROTONGA, Cook Islands â€" U.S. Secretary of State Hillary Rodham Clinton on Friday pledged renewed American commitment to security in the Asia-Pacific, where tensions are rising between China and its smaller neighbors over territorial disputes and many nations face threats from climate change.

Speaking at a meeting of leaders of South Pacific island nations, Clinton said the United States would not abandon its long history of protecting maritime commerce in the region and serving as a counterbalance to domination by any particular world power.

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But, she also stressed that the U.S. wants to cooperate with China in the vast Pacific and encouraged other countries to do the same.

“The Pacific is big enough for all of us,” she told reporters at a news conference with New Zealand’s Prime Minister John Key, whose country handles defense and foreign relations for the Cook Islands.

Yet she pointed out that China’s interests in the region are not necessarily the same as others, a point she also made clear earlier this month on a trip to Africa when she contrasted U.S. goals for that continent as aimed at adding rather than extracting value. The comment was a veiled shot at China, which some complain is using its overseas investments to exploit resources at the expense of local populations.

“Here in the Pacific, we want to see China act in a fair and transparent way,” Clinton said. “We want them to play a positive role in navigation and maritime security issues. We want to see them contribute to sustainable development for the people of the Pacific, to protect the precious environment, including the ocean and to pursue economic activity that will benefit the people.”

Earlier, at the meeting, Clinton said the U.S. would remain a big player in the region and pointed to past accomplishments.

“We have underwritten the security that has made it possible for the people of this region to trade and travel freely,” she said, noting nearly a century of American military presence in the Asia-Pacific.

“We have consistently protected the Pacific sea lanes through which a great deal of the world’s commerce passes. And now we look to the Pacific nations in a spirit of partnership for your leadership on some of the most urgent and complex issues of our time.”

She noted that hundreds of U.S. naval, Coast Guard and commercial vessels ply the Pacific and called for them to play an enhanced role in maintaining free trade and combatting crime, such as human trafficking and illegal fishing.

Clinton is the first secretary of state to participate in the Pacific Island Forum and the first to visit the sprawling but sparsely populated Cook Islands.

Her visit to the main island, population 10,000, in the remote Cook chain has created a buzz of excitement and she was welcomed on arrival by dozens of colorfully clad local traditional dancers and dignitaries amid lots of drumming.

Signs of greeting dotted the main street of Rarotonga, which runs around the 26-kilometer (16-mile) circumference of the island. And well-wishers waved American flags outside the beachfront restaurant where Clinton ate breakfast with other leaders before the meeting that was held in the partly enclosed National Auditorium that doubles as a basketball court.

Her speech, as well as those of other participants, was occasionally punctuated by the crows of roosters, which run freely through the island’s small communities and main town.

Clinton also announced a new contribution of more than $32 million for programs throughout the region aimed at boosting economic development while protecting biodiversity in the face of rising waters attributed to climate change. The U.S. already spends $330 million a year on development in the Asia-Pacific.

Clinton is on the first leg of an 11-day, six-nation tour that keep her half a world away from U.S. politics at the height of the presidential conventions but put her at the center of maritime disputes between China and its neighbors.

Clinton will visit Beijing at the midpoint of the trip, which will take her from the Cook Islands next to Indonesia, the seat of the secretariat of the Association of Southeast Asian Nations, whose members are sharply divided over how to deal with China’s expansion of influence and increasingly aggressive claims on disputed territory.

A summit of ASEAN leaders in July failed to reach consensus on how to handle the disputes. Clinton will press them to find common ground and hash out a framework for negotiating with China, U.S. officials said.

China has bristled at the U.S. claiming to have a national security interest in the resolution of the disputes and maintains that they should be resolved between it and each of the other claimants individually, a position that American officials and others say puts the smaller nations at a disadvantage.

___

Online:

Clinton’s trip: http://tinyurl.com/9ousbr8

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Merkel's China Trip Focuses on Economy, Not Rights - New York Times

SHANGHAI â€" Chancellor Angela Merkel of Germany ended a two-day visit to China on Friday with a renewed call to strengthen ties between Germany and China and a new pledge from Beijing that it would continue to invest in Europe.

Ms. Merkel visited China at the invitation of Prime Minister Wen Jiabao at a time when both countries are facing the prospect of slower growth and weakening demand for their exports.

Traveling with a large delegation of German officials and business executives, the chancellor held talks in Beijing with President Hu Jintao and Mr. Wen, as well as the two men expected to succeed them early next year, Xi Jinping and Li Keqiang.

Neither side indicated any significant progress on political or economic issues, but Mr. Wen called for the European Union to take bolder steps to resolve its debt crisis. He also said China intended to invest more in European debt.

Experts on China say Beijing is eager to have Europe welcome more Chinese investment in key areas, not just the debt market.

“The significance of this visit lies primarily in the bilateral economic relations,” said Shi Yinhong, a professor of international relations at Renmin University in Beijing and an adviser to the State Council, or cabinet. “There has been a lot of discussion over China providing financial assistance to Europe. But Germany cannot solely represent Europe, and Europe as an integrated entity still has some concern over receiving Chinese assistance.”

To soothe Chinese concerns, Ms. Merkel reassured Beijing about the stability of the euro, and China showed its hospitality by organizing big trade ceremonies to coincide with the visit.

On Wednesday, German and Chinese companies signed more than a dozen business contracts, including a deal in which a state-owned Chinese company agreed to purchase 50 Airbus aircraft worth about $3.5 billion.

The trip was not entirely favorable to German companies. Ms. Merkel refused to back Germany’s largest producer of solar panels in its efforts to initiate a trade dispute with China over the alleged dumping of low-cost panels in Europe.

The company, SolarWorld, filed a complaint against Chinese competitors in July with the European trade commissioner, but Ms. Merkel said in the past week that she favored negotiation over a trade case.

“We still have time for this, and it would be better if we could resolve it through discussion,” she said.

Mr. Wen seemed pleased with the comments, and said the principle should be applied in other areas, not just solar panels. “This is an important foundation of our cooperation,” he said, according to Xinhua, the state-run news agency.

Ms. Merkel also steered clear of human rights issues on the trip, at least publicly, which drew the ire of some human rights groups.

Ms. Merkel has faced such criticism before when visiting China. But it was highlighted in Beijing this week after the artist provocateur Ai Weiwei, who is popular in Germany, began poking fun at Ms. Merkel and posting comments online showing his disappointment at not being invited to meet her for lunch. He even uploaded photos onto the Web of himself striding outside, wearing Chinese slippers and carrying a cardboard cutout of Ms. Merkel. He called it “Taking Merkel to Lunch.”

If anything, the trip highlighted Ms. Merkel’s efforts to build closer diplomatic ties with China and to foster what the Chinese and Germans alike have dubbed “a special relationship.”

The Chinese news media noted repeatedly that it was Ms. Merkel’s sixth visit to China since taking office, and her second this year.

This time, with Mr. Wen preparing to leave office early next year, he arranged for Ms. Merkel to visit the Forbidden City in Beijing and to travel by high-speed train to his hometown, Tianjin, to visit an assembly plant managed by the European Aeronautic Defense & Space, the parent company of Airbus.

Xu Yan contributed research.

China and Germany Strengthen Ties and Talk Money - New York Times

SHANGHAI â€" Chancellor Angela Merkel of Germany ended a two-day visit to China on Friday with a renewed call to strengthen ties between Germany and China and a new pledge from Beijing that it would continue to invest in Europe.

Ms. Merkel visited China at the invitation of Prime Minister Wen Jiabao at a time when both countries are facing the prospect of slower growth and weakening demand for their exports.

Traveling with a large delegation of German officials and business executives, the chancellor held talks in Beijing with President Hu Jintao and Mr. Wen, as well as the two men expected to succeed them early next year, Xi Jinping and Li Keqiang.

Neither side indicated any significant progress on political or economic issues, but Mr. Wen called for the European Union to take bolder steps to resolve its debt crisis. He also said China intended to invest more in European debt.

Experts on China say Beijing is eager to have Europe welcome more Chinese investment in key areas, not just the debt market.

“The significance of this visit lies primarily in the bilateral economic relations,” said Shi Yinhong, a professor of international relations at Renmin University in Beijing and an adviser to the State Council, or cabinet. “There has been a lot of discussion over China providing financial assistance to Europe. But Germany cannot solely represent Europe, and Europe as an integrated entity still has some concern over receiving Chinese assistance.”

To soothe Chinese concerns, Ms. Merkel reassured Beijing about the stability of the euro, and China showed its hospitality by organizing big trade ceremonies to coincide with the visit.

On Wednesday, German and Chinese companies signed more than a dozen business contracts, including a deal in which a state-owned Chinese company agreed to purchase 50 Airbus aircraft worth about $3.5 billion.

The trip was not entirely favorable to German companies. Ms. Merkel refused to back Germany’s largest producer of solar panels in its efforts to initiate a trade dispute with China over the alleged dumping of low-cost panels in Europe.

The company, SolarWorld, filed a complaint against Chinese competitors in July with the European trade commissioner, but Ms. Merkel said in the past week that she favored negotiation over a trade case.

“We still have time for this, and it would be better if we could resolve it through discussion,” she said.

Mr. Wen seemed pleased with the comments, and said the principle should be applied in other areas, not just solar panels. “This is an important foundation of our cooperation,” he said, according to Xinhua, the state-run news agency.

Ms. Merkel also steered clear of human rights issues on the trip, at least publicly, which drew the ire of some human rights groups.

Ms. Merkel has faced such criticism before when visiting China. But it was highlighted in Beijing this week after the artist provocateur Ai Weiwei, who is popular in Germany, began poking fun at Ms. Merkel and posting comments online showing his disappointment at not being invited to meet her for lunch. He even uploaded photos onto the Web of himself striding outside, wearing Chinese slippers and carrying a cardboard cutout of Ms. Merkel. He called it “Taking Merkel to Lunch.”

If anything, the trip highlighted Ms. Merkel’s efforts to build closer diplomatic ties with China and to foster what the Chinese and Germans alike have dubbed “a special relationship.”

The Chinese news media noted repeatedly that it was Ms. Merkel’s sixth visit to China since taking office, and her second this year.

This time, with Mr. Wen preparing to leave office early next year, he arranged for Ms. Merkel to visit the Forbidden City in Beijing and to travel by high-speed train to his hometown, Tianjin, to visit an assembly plant managed by the European Aeronautic Defense & Space, the parent company of Airbus.

Xu Yan contributed research.

Clinton seeks to boost US Pacific ties as China expands - Reuters

U.S. Secretary of State Hillary Clinton (R) participates in an arrival ceremony at Rarotonga International Airport in Rarotonga, August 30, 2012. REUTERS/Jim Watson/Pool

U.S. Secretary of State Hillary Clinton (R) participates in an arrival ceremony at Rarotonga International Airport in Rarotonga, August 30, 2012.

Credit: Reuters/Jim Watson/Pool

RAROTONGA | Fri Aug 31, 2012 6:21pm EDT

RAROTONGA (Reuters) - The United States will expand security partnerships across the Pacific as it strengthens ties with island nations that sit at the intersection of vast maritime resources and key shipping routes, U.S. Secretary of State Hillary Clinton said on Friday.

Clinton arrived in the tiny Pacific outpost of the Cook Islands to participate in this year's Pacific Island Forum, part of Washington's growing effort to woo nations across the Asia-Pacific which are increasingly coming under China's shadow.

Clinton told the gathering, which represents 16 independent and self-governing states ranging from Australia and New Zealand to smaller islands such as Tuvalu and Nauru, that the United States was in the region "for the long haul."

"Seventy years ago, Americans made extraordinary sacrifices on many of these islands represented here and we have since then underwritten the security that has made it possible for the people of this region to trade and travel freely," Clinton said.

"We've consistently protected the Pacific sea lanes through which a great deal of the world's commerce passes. And now we look to the Pacific nations in a spirit of partnership for your leadership on some of the most urgent and complex issues of our time, such as climate change."

Clinton sought to highlight the benefits of the "American model of partnership" in a region where China has in recent years dramatically stepped up its diplomacy and foreign assistance.

She announced more than $32 million in new U.S. programs on issues ranging from sustainable development, climate change and marine protection.

But Clinton also stressed that the United States plays a crucial security role in the region, noting that the U.S. Coast Guard already has formal partnerships with nine Pacific Island nations and was working to build more.

"All of us have an interest in maintaining peace and security in the Pacific," Clinton said, adding the United States was committed to helping fight illegal and unregulated shipping and other crimes that take place at sea such as human trafficking.

She was due to outline more of the U.S. security strategy in the region at an event later on Friday with the head of the U.S. Pacific Command, Admiral Samuel Locklear.

RIVALRY WITH CHINA

Clinton's trip to the South Pacific has spurred some criticism in China, where some commentators accused the United States of seeking to stir up trouble as Beijing's economic and political influence expands.

In recent trips to other regions of the world, most notably Africa, Clinton has sought to contrast the U.S. approach to cooperative economic development with other models such as China's, which focus more on condition-free loans and extractive industries such as mining and timber.

China is also represented at the Pacific forum, with a delegation led by Vice Foreign Minister Cui Tiankai, and Beijing is financing dozens of development projects across the region including constructing parliament buildings, airports, roads and hospitals and giving out grants for Chinese language instruction.

Despite what is increasingly being portrayed as a great power rivalry, Clinton said the United States welcomed the chance to work with China and other Pacific development partners including Japan and the European Union.

"We all have important contributions and stakes in this region's success, to advance your security, your prosperity and your opportunity. And I think the Pacific is big enough for all of us," she said.

The three-day visit by Clinton and the 60-odd person U.S. delegation to the Cook Islands - which is in free association with New Zealand - was a major event for the nation's main island of Rarotonga.

"We are encouraged by you and your government's commitment to strengthen the United States government's engagement in our region," Cook Islands Prime Minister Henry Puna said in his welcoming remarks.

Clinton will travel on to Indonesia and China next week for talks that are expected to focus on rising tensions in the South China Sea where Beijing is at odds with several of its southern neighbors over territorial claims.

She will finish the trip with stops in Brunei and East Timor before heading to the Russian port city of Vladivostok, where she will represent U.S. President Barack Obama at this year's Asia Pacific Economic Cooperation (APEC) summit of regional leaders.

(Editing by Mohammad Zargham)


Despite China slowdown, Australia miners bet on Africa - Reuters

Fri Aug 31, 2012 7:52am EDT

* W. and Central Africa to be "the next Pilbara"

* China's drive to diversify iron ore sources to support Africa

* Increased African transparency to draw more foreign investment

By Rebekah Kebede

PERTH, Aug 31 (Reuters) - Australian miners are betting that Africa will be the next frontier for iron ore, as they look beyond a fall this week in the price of the steel-making ingredient to its lowest level in nearly three years, battered by cooling Chinese demand.

African countries could eventually rival Pilbara, Australia's main iron ore mining region and producer of about half of the world's seaborne iron ore supply, mining executives gathered at a meeting in Perth said on Friday.

The demand downturn caused by China's slowing growth was a blip, Australian explorers and miners said, and as China seeks to diversify its iron ore supply, unexplored resources in Africa promise better value for shareholders' money.

"Africa is going to ride the same story that BHP and Rio and Hancock have ridden in the last 40 years in Australia," John Welborn, the managing director of Equatorial Resources, which is developing two iron ore projects in the Republic of Congo, told Reuters.

Top miners BHP Billiton , Rio Tinto , and the privately-held Hancock Prospecting are some of Australia's largest producers of iron ore.

The comments come against a backdrop of fears that Australia's decade-long resource boom may be fading, following sharp price falls in key commodities, such as iron ore and coal, combined with delays to some projects proposed by miners including BHP Billiton.

"NEW PILBARA"

If all the projects in the pipeline in West and Central Africa were to come online, the region could export just as much as Australia currently does - 500 million tonnes - by the end of the decade, Welborn said.

Not all the proposed projects are likely to be developed in that timeline, he acknowledged, however. Project developers in the region must grapple with inadequate infrastructure and power supply, and face several political and regulatory hurdles.

But as costs rise in Australia, where the iron ore deposits of the Pilbara are well-trodden territory, Africa is emerging as "the new Pilbara", Welborn added.

The countries of West and Central Africa, such as Guinea, Cameroon, the Republic of Congo, and Gabon offer new frontiers for explorers and miners.

"You can walk into countries in Africa that have never been explored, we know in West Australia there are a lot of areas that have already been explored," said Peter Turner, the managing director of Nemex Resources, which is developing the Telimele resource in Guinea.

"I would prefer to take my shareholders' money and spend it in Africa because I do think t here is bigger upside than perhaps in Australia."

Guilio Casello, managing director of Sundance Resources , said he was not concerned about the slowdown in Chinese commodities demand, which has spurred several Australian companies to shelve major resource projects.

"What's happening at the moment in the iron ore price is a short term dip...in the end, China wants this project," said Casello, whose firm is developing a $4.7 billion mine on the Congo-Cameroon bo r der that will supply China with 35 million tonnes of iron ore each year.

This compares with Australia's No. 3 iron ore miner Fortescue Metals, which is producing at a rate of 55 million tonnes a year.

But there are some naysayers.

Although miners such as Brazil's Vale and China's Minmetals, are flocking to Africa, attracted by the resources and low operating costs, others, such as BHP Billiton , worry about how fast resource development will proceed, hobbled by a lack of power and infrastructure and political and regulatory hurdles.

For instance, Rio Tinto's development of the Simandou iron ore deposit in Guinea was held up after a change in government led to a revision of terms.

The Simandou mine, scheduled to begin producing 95 million tonnes per year from 2015, will be the largest iron ore mine and infrastructure project developed in Africa, the company says.

But others say the continent offers a better investment climate after becoming more transparent in recent years.

"Most countries are getting a bit more transparent," said Bert de Waele, a principal consultant at mining consulting firm SRK Consulting, which has operations across the continent.

"You can get everything online - you go to the ministry of mines in Burkina Faso, you can get everything in French and in English, which tells you exactly what to do."

The situation contrasts with former years when investors had to plead with individual ministers for permits and bribery was not unheard of, he said.


Clinton to Cook Islands: US cares (more than China) - Christian Science Monitor

Secretary of State Clinton is visiting the Cook Islands as the South Pacific, long a strategic backwater, attracts new attention amid Washington-Beijing competition for regional influence.

When US Secretary of State Hillary Clinton arrives in the Cook Islands today, her entourage and an aircraft carrier in tow, the message for the tiny South Pacific territory and its fellow island nations should be clear: America cares.

Skip to next paragraph

Or more precisely, “America cares more than China.”

Ms. Clinton is dropping in on little-known Rarotonga, the Cook Islands’ capital, to meet leaders of 15 countries in the Pacific Island Forum (PIF) after their annual summit.

Never before has such a high-ranking US diplomat attended such a meeting; even against the background of China’s growing ties in the South Pacific and Washington’s strategic “pivot to Asia,” the visit has taken some regional observers by surprise. 

“It is serious overkill to send the world’s most senior diplomat to the after-party of an obscure regional meeting,” says Fergus Hanson, an expert on the South Pacific at the Lowy Institute, a think tank in Sydney, Australia. “It’s not exactly a sign of confidence.”

But after nearly two decades of ignoring Polynesia, Micronesia, and Melanesia â€" Washington closed its regional aid office and even its Peace Corps program in the 1990s â€" other analysts think it is time to make amends.

“At this point, it is prudent and appropriate to make contact with the sub-region,” argues Denny Roy, an analyst at the East-West Center in Honolulu. “The island states might have felt worthless in US eyes, but this visit will buy Washington a lot of goodwill.”

What about China? 

China, meanwhile, has sent the same level delegation as it has for several years, led by Vice Foreign Minister Cui Tiankai. “They’ve been consistent,” says Samuela Savou, the Pacific Islands Trade Commissioner in Beijing, approvingly.

Beijing’s interest in the South Pacific was long driven by fierce competition with Taiwan for diplomatic recognition. An informal truce in the “checkbook war,” in which each side sought to outbid the other for support from tiny nations such as Kiribati and Nauru, ended the rivalry in 2007. 

That did not lead to a Chinese withdrawal from the region, however. Over the past five years, since Premier Wen Jiabao attended a summit with the island nations recognizing mainland China, Beijing has given about $600 million to the region in soft loans and grants, according to an estimate by the Lowy Institute.

If Clinton looks out of her SUV window on Rarotonga, she might see a new courthouse and police station, built by the Chinese. China also helped construct the island’s airport.

But China’s aid amounts to less than 1/10th of what the region’s largest donor, Australia, provides, and is also 1/5th of New Zealand’s contribution.

Which superpower has the advantage?

The South Pacific, long a strategic backwater far from military or commercial sea lanes, is attracting new attention as Washington and Beijing vie for influence in the Asia-Pacific region, but there is no doubt as to which superpower has the advantage.

The 14 island nations in the PIF are solidly pro-Western. Six of them do not even recognize the People’s Republic of China, maintaining diplomatic relations with Taiwan instead. And of the rest, three let the US or New Zealand run their foreign and defense policy and two others are heavily dependent on Australia.

Only Fiji, cold-shouldered by Western powers since a military coup in 2006, has sought to build an alternative alliance with China, and Beijing has recently shown itself uncomfortable with the prospect.

“If we were to compete seriously for political influence in the South Pacific, the first casualty would be our relations with Australia and New Zealand, and we do not want that,” says Han Feng, a Pacific affairs analyst at the China Academy for Social Sciences, a government-linked think tank in Beijing.

 Australia is China’s primary source of iron ore, critical to its steel industry and thus to its future economic development.

‘Not just about the South Pacific’

China’s increased presence in the South Pacific, with investments in a nickel mine in Papua New Guinea, a bauxite mine in Fiji, and fisheries licenses around the region, merely reflects the Asian giant’s moves around the world, argues Professor Han. “This is not just about the South Pacific,” he says. “China is expanding its attention to every corner of the globe.”

 As in other parts of the world, China’s involvement in the Pacific island nations has not been trouble-free for Western powers. Beijing’s aid comes without strings, Han points out. “There are no political conditions and we do not monitor how our aid is used,” he says. That undermines Australian and New Zealand efforts to improve governance in corruption-prone countries by tying aid to performance criteria.

A joint New Zealand-Chinese project to improve water supplies in the Cook Islands, due to be announced Friday, could mark a turning point on this front. “We are open to explore further ways of expanding such cooperation,” Mr. Cui told the official Chinese news agency Xinhua.

Beijing has shown little sign of concern at Clinton’s high-profile visit to Rarotonga. Xinhua published a commentary describing her tour as a bid “to contain China’s increasing influence” and “to defend [US] dominance and hegemony in the Asia-Pacific region,” which the commentator described as “unwise,” but no official has remarked on the secretary of State’s plans.

“The US is concerned by China’s rising influence in the South Pacific so it is paying more attention,” comments Zhang Guihong, a professor of international relations at Fudan University in Shanghai. “That’s America’s concern, not ours. It doesn’t worry us.” 

Merkel urges China to avoid solar cell clash - Deutsche Welle

Chancellor Angela Merkel has sought to defend Europe's stuttering solar cell industry by urging China to stop alleged price dumping by its manufacturers. She said talks instead of an EU anti-dumping probe should ensue.

Attending German-Chinese trade talks in the northern Chinese port city of Tianjin, Merkel said Germany would ask the EU Commission to waive an anti-dumping probe wanted EU ProSun, a grouping of some 20 European solar companies.

Q-Cell logo behind electicity transformer station Foto: Jan Woitas dpa/lah

Germany's troubled Q-Cells has a South Korean bidder

Several German firms, seen as pioneers in Germany's drive to replace its nuclear power sector with renewables, have filed for insolvency in recent months. 

In July, ProSun called on Brussels to open a probe, saying their cell prices were undercut by Chinese firms benefiting from state loans and subsidies. Chinese firms retorted that the allegations were "groundless" and warned of a trade war.

Respect fair trade, urges Merkel

At Friday's Tianjin talks, Merkel said Chinese solar firms wanting to compete in Europe must respect EU fairness rules which prohibit subsidies and cheap credit. The EU-China solar issue was still like a "cow on the slippery ice," she warned.

Solar-cell workers in Germany display a banner protesting job losses. Photo: Jan Woitas/lah

Germany's solar industry blames Chinese dumping for job losses

Merkel said her request to China was "simply to lay its cards on the table."

Chinese premier Wen Jiaboa who hosted Merkel in Tianjin, his home city, said an EU decision not to pursue probes against Chinese firms in the solar and other sectors was a "very important basis for our relationship."

Last year, China exported 60 percent of its solar shipments to the EU while it imported cell-manufacturing equipment and raw materials.

Leading German companies represented at the Tianjin talks called on China to open its market fairly to outside competitors. Peter Löscher, the head of the Munich-based giant Siemens, said German firms expected Chinese manufacturers to respect product certification as well as patents and copyright as international norms.

Wen said China did not intend to constrain its exports of highly sought-after rare earth minerals used to make consumer devices like Smartphones - while admitting that mining them resulted in significant environmental degradation.

Merkel, a former environment minister, proposed Chinese-German cooperation to minimize the damage in China.

An Airbus A320 on the assembly line at the Airbus Tianjin plant. Photo: Imaginechina/Bao fan dpa

Airbus opened its works at Tianjin. China, in 2009

Airbus rollout in Tianjin

To wind up Friday's itinerary, Merkel was due to visit Tianjin's Airbus assembly plant to witness the rollout of its 100th A320. In 2009, Tianjin became home to Airbus' only outer-European facility alongside its plants in Toulouse and Hamburg.

On Thursday, China confirmed that it would purchase of 50 new A320 and sustain the Tianjin plant beyond 2016.

ipj / rc (dpa, AFP, Reuters, dapd)

Clinton in South Pacific With China in Focus - ABC News

U.S. Secretary of State Hillary Rodham Clinton arrived Thursday in the South Pacific at the top of a six-nation Asia tour during which she aims to reassert American interests in the face of China's growing influence and calm rising tensions over territorial disputes in the South China Sea.

Clinton was welcomed to the Cook Islands by exotic, colorfully clad local traditional dancers and dignitaries and lots of drumming. Her visit is clearly a big deal on this little island and she was beaming as she was presented with lei-type garlands called ae'i made with scented white flowers and 'ei maire, made with green leaves.

Clinton's far-flung travels will keep her half a world away from U.S. politics at the height of the presidential conventions. But it will put her at the center of maritime disputes between China and its smaller neighbors.

Clinton will visit Beijing at the midpoint of the 11-day tour that began in the remote Cook Islands, where she was the first secretary of state to visit the South Pacific island chain that's home to just 10,000 people. On the main island of Rarotonga, she will attend an annual gathering of officials from Australia, New Zealand and the tiny nations scattered across the Pacific Ocean.

U.S. officials said Clinton will stress America's commitment to the sprawling yet sparsely populated area. It is threatened by rising waters, which are attributed to climate change, and faces a choice of whether to continue tight ties with the West or embrace burgeoning Chinese investment and power.

From there, Clinton heads to Indonesia, the seat of the secretariat of the Association of Southeast Asian Nations, whose members are sharply divided over how to deal with China's expansion and conflicting claims over territory in the South China Sea.

A summit of regional leaders in July failed to reach consensus on how to handle the disputes. Clinton will press them to find common ground and hash out a framework for negotiating with China, U.S. officials said.

One senior official told reporters that it was "absolutely manifest" that ASEAN nations find a way to deal with China. "It's not a matter of geo-strategy, it's a matter of geography," the official said.

The official, who spoke on condition of anonymity because he was not authorized to publicly preview the discussions, said Clinton would be stressing the U.S. view "that it is absolutely essential that cooler heads prevail in every capital and that great care be taken on these issues."

The U.S. takes no position on the sovereignty of the disputed territories, though some are claimed by allies such as South Korea, Japan and the Philippines as well as China, but "insists that they are dealt with diplomatically, without coercion (and) without the threat of the use of force."

China has bristled at the U.S. claiming to have a national security interest in the resolution of the disputes and maintains that they should be resolved between it and each of the other claimants individually, a position that American officials and others say puts the smaller nations at a disadvantage.

After Clinton departs Beijing, U.S. Defense Secretary Leon Panetta is to make his first visit to China as Pentagon chief in a few weeks to underscore the U.S. message.

Clinton in South Pacific with China in focus - The Associated Press

Clinton in South Pacific with China in focus

RAROTONGA, Cook Islands (AP) â€" U.S. Secretary of State Hillary Rodham Clinton arrived Thursday in the South Pacific at the top of a six-nation Asia tour during which she aims to reassert American interests in the face of China's growing influence and calm rising tensions over territorial disputes in the South China Sea.

Clinton was welcomed to the Cook Islands by exotic, colorfully clad local traditional dancers and dignitaries and lots of drumming. Her visit is clearly a big deal on this little island and she was beaming as she was presented with lei-type garlands called ae'i made with scented white flowers and 'ei maire, made with green leaves.

Clinton's far-flung travels will keep her half a world away from U.S. politics at the height of the presidential conventions. But it will put her at the center of maritime disputes between China and its smaller neighbors.

Clinton will visit Beijing at the midpoint of the 11-day tour that began in the remote Cook Islands, where she was the first secretary of state to visit the South Pacific island chain that's home to just 10,000 people. On the main island of Rarotonga, she will attend an annual gathering of officials from Australia, New Zealand and the tiny nations scattered across the Pacific Ocean.

U.S. officials said Clinton will stress America's commitment to the sprawling yet sparsely populated area. It is threatened by rising waters, which are attributed to climate change, and faces a choice of whether to continue tight ties with the West or embrace burgeoning Chinese investment and power.

From there, Clinton heads to Indonesia, the seat of the secretariat of the Association of Southeast Asian Nations, whose members are sharply divided over how to deal with China's expansion and conflicting claims over territory in the South China Sea.

A summit of regional leaders in July failed to reach consensus on how to handle the disputes. Clinton will press them to find common ground and hash out a framework for negotiating with China, U.S. officials said.

One senior official told reporters that it was "absolutely manifest" that ASEAN nations find a way to deal with China. "It's not a matter of geo-strategy, it's a matter of geography," the official said.

The official, who spoke on condition of anonymity because he was not authorized to publicly preview the discussions, said Clinton would be stressing the U.S. view "that it is absolutely essential that cooler heads prevail in every capital and that great care be taken on these issues."

The U.S. takes no position on the sovereignty of the disputed territories, though some are claimed by allies such as South Korea, Japan and the Philippines as well as China, but "insists that they are dealt with diplomatically, without coercion (and) without the threat of the use of force."

China has bristled at the U.S. claiming to have a national security interest in the resolution of the disputes and maintains that they should be resolved between it and each of the other claimants individually, a position that American officials and others say puts the smaller nations at a disadvantage.

After Clinton departs Beijing, U.S. Defense Secretary Leon Panetta is to make his first visit to China as Pentagon chief in a few weeks to underscore the U.S. message.

After visiting China, where she will raise South China Sea issues along with matters such as the unrest in Syria and Iran and North Korea's nuclear programs, Clinton will stop in East Timor, Brunei and then represent the U.S. at a summit of leaders from Pacific Rim countries in Vladivostok, Russia.

Clinton will be the first secretary of state to travel to East Timor when she makes a brief stop in Dili, the capital.

In another U.S. diplomatic first, the well-traveled Clinton will become the only secretary of state to touch ground in all 10 members of ASEAN when she holds talks in the small oil-rich nation of Brunei.

Clinton made history in December and then July by going to two ASEAN nations that had not seen America's top diplomat since the mid-1950s â€" Myanmar, which is emerging from decades of isolation, and Laos.

After Brunei, Clinton will move on to Vladivostok to stand in for President Barack Obama at the Asia-Pacific Economic Cooperation forum, which is expected to center on trade and food security.

In meetings with foreign leaders there, Clinton also will discuss Syria, Iran and North Korea, and will lay the groundwork for the upcoming U.N. General Assembly, officials said.

China shares sink for third-straight month, Hong Kong weak too - Reuters

Fri Aug 31, 2012 5:19am EDT

(Updates to close)

* HSI down 0.4 pct, sheds 1.6 pct in August

* CSI300 slips 0.3 pct, slumps 5.5 pct on the month

* Citic Pacific hammered, iron ore prices at near 3-yr low

* Esprit, Sands China top August performers, Li & Fung lags

By Clement Tan and Vikram Subhedar

HONG KONG, Aug 31 (Reuters) - Hong Kong shares slipped and China sank to levels not seen since early 2009 on Friday, with both markets ending August in the red after first half corporate earnings disappointed and there seemed little chance of an imminent recovery.

Turnover was lackluster ahead of an annual meeting of central bankers in Wyoming later on Friday, with the market expecting Federal Reserve Chairman Ben Bernanke to keep expectations of monetary easing intact into September, but not immediately take any measures.

A scheduled quarterly rebalancing of the MSCI China index at Friday's close did little to help boost Friday's volumes.

In August, investors parked money in shares of companies able to project resilient earnings growth in a sluggish economic environment.

"People have been generally defensive in August, with earnings visibility overriding other considerations, such as low valuations," said Alan Lam, Julius Baer's Greater China equity analyst.

The CSI300 Index of the top Shanghai and Shenzhen listings shed 0.3 percent on Friday and 5.5 percent this month, suffering a third-straight monthly loss. The Shanghai Composite Index shed 2.7 percent in August.

The Hang Seng Index lost 0.4 percent to 19,482.6, holding above the 38.2 percent Fibonacci retracement of its rise from June lows to August highs at about 19,443. The benchmark shed 1.6 percent in August, its first monthly loss in three.

"September will be very busy policy-wise, so there might be a switch into cyclical names. There are meetings in Europe and the U.S., but I don't expect China to do too much ahead of its National Congress meeting likely in October," Lam added.

Lam was referring to a meeting, to take place before year-end, that will mark the start of a once-in-a decade political leadership transition. New leaders do not typically make big changes in their first year, but could be forced into action if data suggests China could miss economic growth targets for the year, he said.

Beijing is expected to post China's official manufacturing managers' index reading on Saturday. A Reuters poll sees the index easing to a 9-month low of 50 in August.

The state-run China Securities Journal reported on Friday that the combined first-half net profit of China's 2,453 listed companies dipped 0.38 percent from a year earlier to 1.01 trillion yuan ($159.07 billion).

On Friday, Citic Pacific slumped 7.1 percent to its lowest since April 2009 after iron ore looked set to hit nearly three-year lows.

In August, the stock had its worst performance in 10 months as Chinese steel producers shunned fresh cargoes in the face of waning demand.

Sany Heavy Industries dived 4 percent after missing forecasts with a 28 percent fall in second-quarter net profit, its biggest quarterly profit drop since 2008, as the country's economic slowdown led to a jump in unpaid bills.

ESPRIT, LI & FUNG AT AUGUST EXTREMES

Within the Hang Seng Index, August's top performing stocks are skewed towards those that rely on the relative safety offered by the Chinese consumer as investors pulled money out of cyclical sectors most linked to a slowing economy at home and abroad.

Top performing stock Esprit Holdings rose almost 30 percent in the month as it rebounded from a year-low of HK$8.83 on July 25. Macau casino company and the latest entrant into the Hong Kong benchmark Sands China was the second-best performer, up nearly 20 percent.

At the other end of the spectrum, shares of Li & Fung , exporter for top U.S. retailers such as Wal-Mart , fell 18 percent, the worst monthly performance since the October 2008 peak of the financial crisis.

Suffering from limp demand from its core markets in the U.S., Europe and China, the company reported on Aug. 9 a sharp drop in profits as well as shrinking margins sending investors scurrying for the exits and wiping out about a fifth of the company's value in a day. (Editing by Richard Borsuk)


Exclusive: China's Hu seeks clean power handover with ally's promotion - sources - Reuters

China's President Hu Jintao smiles during a meeting with German Chancellor Angela Merkel (not pictured) at the Great Hall of the People in Beijing August 30, 2012. REUTERS/Diego Azubel/Pool

China's President Hu Jintao smiles during a meeting with German Chancellor Angela Merkel (not pictured) at the Great Hall of the People in Beijing August 30, 2012.

Credit: Reuters/Diego Azubel/Pool

BEIJING | Fri Aug 31, 2012 4:19am EDT

BEIJING (Reuters) - China's outgoing President Hu Jintao is angling to promote one of his closest allies to the military's decision-making body, sources said, in a move that would allow him to maintain an influence over Beijing's most potent instrument of power.

Three sources with ties to the top leadership said Hu hopes to cut all of his direct links to the top echelons of power by early 2013, on the understanding that his protégé, Vice Premier Li Keqiang, is made a vice chairman of the military commission at the party's five-yearly congress later this year.

Hu wants a clean handover of the party leadership, the presidency and the top military post to his anointed successor, Xi Jinping, over the next seven months, to avoid a repeat of the past internal rancor when a transition of power took place, sources say.

They point to the example of his predecessor, Jiang Zemin, who clung onto the top job at the Communist Party's Central Military Commission for two years after stepping down as party chief and president, a move seen as unpopular with party cadres and the public.

Hu, as president, is the current military commission chairman and, like Jiang, could choose to stay on as its chief for another couple of years beyond his handover of the presidency to Xi in March 2013.

In what is seen as the ultimate bulwark of power, the commission oversees the 2.3-million strong People's Liberation Army (PLA) as well as the People's Armed Police which enforces domestic security.

Hu has not made public his plans for retirement but, unlike in the West where former presidents and prime ministers tend to fade from the public eye, Chinese leaders seek to maintain influence to avoid possible adverse political repercussions down the road.

The government generally does not comment on elite politics and personnel changes before the official announcement.

As a senior member of the commission, Li, who is also set to be named as the next premier in March 2013, would be expected to help protect Hu's legacy in the area of military affairs, which has included a more moderate approach towards Taiwan and to territorial disputes in the South China Sea and East China Sea.

"Hu hopes to go down in history as the first leader (since 1949) to step down when his term ends instead of being reluctant to go," a businessman with leadership ties said.

As well as helping to preserve Hu's legacy, analysts say Li's promotion will ensure there is no political retribution against Hu or his family by rivals who remain in power once he is gone.

But bargaining over the next leadership line-up is not over, and there is still room for change and surprises.

"CHECK AND BALANCE"

Some political analysts interpreted Hu's plan to promote Li as a move to bolster civilian oversight over the PLA - the world's biggest armed force.

But other analysts saw it as an attempt to dent Xi's political influence.

"It'll be a check and balance on Xi," a Chinese analyst said of the push to install Li, asking not to be identified due to the sensitivity of the issue.

Xi, 59, has been vice chairman of the military commission for two years and has military experience under his belt when he worked for then defense minister Geng Biao from 1979 to 1982.

Xi, like Hu, is a pragmatist seen as being keen to seize on opportunities from crises to perpetuate Communist rule and strengthen his own position, analysts say.

Though Xi is acceptable to both the Hu camp and the rival Shanghai Gang faction, the incoming premier, Li, is much closer politically to the outgoing president and belongs to Hu's own faction of the party, the Communist Youth League.

As vice chairman of the military commission, Li would oversee the 660,000-strong paramilitary People's Armed Police which acts against unrest, guards government compounds and foreign embassies and mobilizes during natural disasters.

The People's Armed Police is under the direct jurisdiction of the military commission and the State Council, or cabinet.

If Li held the positions of both premier and commission vice chairman, he would be in a stronger position to react to domestic emergencies than outgoing Premier Wen Jiabao.

Without a seat on the commission, and no say in military affairs, Wen had difficulty mobilizing the People's Armed Police to help with rescue work after the 2008 earthquake in Sichuan province which killed about 87,600 people.

"This will change if Li Keqiang becomes vice chairman of the military commission," a third source with leadership ties said.

Two People's Liberation Army generals are expected to also be named vice chairman of the commission, the sources added.

(Editing by Mark Bendeich and Jeremy Laurence)


China's Stocks Head for Longest Monthly Losing Streak Since '04 - Businessweek

China’s benchmark stock index fell, capping a fourth month of losses, after declining earnings at companies from Citic Securities Co. (600030) to Sany Heavy Industry Co. showed the impact of the nation’s economic slowdown.

Citic Securities, the nation’s biggest listed brokerage, dropped 1.2 percent and Sany Heavy sank to its lowest level since October 2010. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, slipped 0.8 percent after earnings growth slowed. Qingdao Haier Co., the largest refrigerator maker, climbed 3.9 percent after first-half profit rose.

“Corporate earnings aren’t likely to have a big rebound in the second half of the year given the sluggish economy,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “The government may step in to boost confidence in the market through measures such as encouraging share buybacks.”

The Shanghai Composite Index (SHCOMP) fell 0.3 percent to 2,047.52 at the close, the lowest level since February 2009. The CSI 300 Index (SHSZ300) slipped 0.3 percent to 2,204.87. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 0.4 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, slid 0.9 percent in New York yesterday.

Signs that China’s economic slowdown is deepening dragged the Shanghai Composite down 2.7 percent in August, a fourth straight month of declines. That’s the longest streak since August 2004, according to data compiled by Bloomberg.

Worst Performer

Macquarie Group Ltd. lowered China equities to neutral from overweight, citing the deteriorating outlook for banks amid a “disturbingly” widespread weakness in the economy, according to a note dated yesterday.

The Shanghai gauge has tumbled 8 percent this quarter, the worst performer after Cyprus among 93 global stock benchmark index tracked by Bloomberg, and has lost 6.9 percent for the year. The measure trades at 9.3 times estimated earnings, the lowest level since January, according to weekly data compiled by Bloomberg.

Citic Securities fell 1.2 percent to 10.22 yuan after saying net income dropped 24 percent from a year earlier in the first six months. Sany Heavy, the biggest machinery maker, slid 4 percent to 9.87 yuan after it said first-half profit fell 13 percent.

Profit Slowdown

ICBC dropped 0.8 percent to 3.82 yuan. Net income climbed 11 percent in the second quarter to 61.8 billion yuan ($9.73 billion), according to first-half figures reported yesterday by the Beijing-based bank. Combined earnings of China’s five biggest lenders increased 13 percent to 203.6 billion yuan in the quarter, slowing from 33 percent a year earlier.

Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund, bought more yuan-denominated A shares of the nation’s four largest banks including ICBC in the second quarter, the Shanghai Securities News reported today, citing lenders’ interim reports.

China’s 2,453 publicly traded companies’ combined first- half net income dropped 0.38 percent from a year earlier to 1.01 trillion yuan, the China Securities Journal reported today, citing the newspaper’s own statistics. First-half average earnings per share fell 28 percent and combined inventory rose 17 percent, it said.

Disappointing Earnings

Listed companies finish releasing first-half earnings reports today. Fifty-eight percent of companies in the Shanghai Composite missed analysts’ estimates for second-quarter profit, while 41 percent beat projections, according to data on 242 earnings reports compiled by Bloomberg.

Qingdao Haier advanced 3.9 percent to 10.45 yuan. The appliance maker said first-half profit rose 21 percent from a year earlier.

“Company earnings are not coming in great and they are somewhat disappointing,” Arjun Jayaraman, who manages $400 million in emerging-market equities at Causeway Capital Management, said in a phone interview from Los Angeles yesterday. “That shows the impact of China’s slowdown. It will take longer for corporate earnings to recover than it takes the economy to rebound.”

The National Bureau of Statistics and China Federation of Logistics and Purchasing are due to release a manufacturing index for this month tomorrow. The Purchasing Managers’ Index may fall to 50 from 50.1 in July, according to the median estimate of 24 economists by Bloomberg. Fifty marks the dividing line between expansion and contraction.

Thirty-day volatility in the Shanghai Composite was at 11.7 today, compared with this year’s average of 17.1. About 4.6 billion shares changed hands in the gauge today, 41 percent lower than the daily average this year.

The iShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., slid 1.6 percent to a one- month low of $32.95 yesterday.

--Zhang Shidong. Editors: Richard Frost, Darren Boey

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

Hong Kong, China shares weak, set for August losses - Reuters

Fri Aug 31, 2012 1:05am EDT

(Updates to midday)

* HSI down 0.3 pct, CSI300 flat

* Indices set for monthly losses

* Citic Pacific dives, plagued by iron ore weakness

* China insurers lifted by policy to boost medical coverage

By Clement Tan and Vikram Subhedar

HONG KONG, Aug 31 (Reuters) - Hong Kong shares slipped, while China hovered near levels not seen since early 2009 on Friday, with both markets set to end August in the red after first half corporate earnings disappointed with little prospect of imminent recovery.

Turnover was sluggish ahead of an annual meeting of central bankers in Wyoming later, with the market now expecting Federal Reserve chairman Ben Bernanke to keep easing expectations intact going into September, but short of delivering fresh measures.

Investors have in August rolled into stocks of companies that were able to project resilient earnings growth in a sluggish economic environment, with little prospect of next month's economic data for China showing improvement.

The CSI300 Index of the top Shanghai and Shenzhen listings was flat at midday, remaining at its lowest since March 2009 and poised for a third-straight monthly loss. It is down 5.2 percent on the month, compared to a 2.5 percent loss for the Shanghai Composite Index.

The Hang Seng Index closed down 0.3 percent at 19,492.2, holding above the 38.2 percent Fibonacci retracement of its rise from June lows to August highs at about 19,443. The benchmark is down 1.5 percent in August, set for its first monthly loss in three.

"People have been generally defensive in August, with earnings visibility over-ridding other considerations, such as low valuations," said Alan Lam, Julius Baer's Greater China equity analyst.

"September will be very busy policy-wise, so there might be a switch into cyclical names. There are meetings in Europe and the U.S., but I don't expect China to do too much ahead of their 18th National Congress meeting likely in October," Lam added. He was referring to a meeting, likely in October, that will mark the start of a once-in-a decade political leadership transition.

Beijing is expected to post China's official manufacturing managers' index reading on Saturday, which is likely to ease to a 9-month low of 50 in August after a preliminary survey last week showed China's factories contracting in August by the most in nine months.

Citic Pacific, one of China's leading iron ore miners, tanked 5.5 percent to its lowest since April 2009, plagued by iron ore prices that lingered near three-year lows.

On Friday, Chinese insurers were outperformers in the mainland. The country's top two players in the sector were the top boosts on A-share market indices. China Life Insurance rose 2.7 percent, while Ping An gained 0.8 percent.

The rises were linked to a statement by China's State Council, or cabinet, that the government will shoulder at least 50 percent of the cost of treating critical illnesses and allow local governments to tap on existing funds to purchase commercial insurance for serious illness.

Morgan Stanley analysts said this will not only improve the quality of medical care, but also boost the demand for related medical products.

ESPRIT, LI& FUNG AT AUGUST EXTREMES

Within the Hang Seng Index, August's top performing stocks are skewed towards those that rely on relative safety offered by the Chinese consumer as investors pulled money out of cyclical sectors most linked to a slowing economy at home and abroad.

Top performing stock Esprit Holdings is up 28.5 percent this month as it rebounded from a year-low of HK$8.83 marked on July 25. Macau casino company and the latest entrant into the Hong Kong benchmark Sands China is the second-best performer and is up nearly 20 percent.

At the other end of the spectrum, shares of Li & Fung , exporter for top U.S. retailers such as Wal-Mart , are down 18 percent and poised for the worst monthly performance since the peak of the financial crisis in October 2008.

Suffering from limp demand from its core markets in the U.S., Europe and China, the company reported on Aug. 9 a sharp drop in profits as well as shrinking margins sending investors scurrying for the exits and wiping out about a fifth of the company's value in a day. (Editing by Ron Popeski)


Breakingviews-China's burdened banks can't stop the slowdown - Reuters

Fri Aug 31, 2012 10:34am IST

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By John Foley

BEIJING, Aug 31 (Reuters Breakingviews) - China’s indentured banks are at a turning point. For six decades, the government has treated them as tools of the state: dictating when to lend, and when to stop. The trick is becoming less effective, even as it may be getting more necessary.

When the economy slumped in 2008, banks were part of the solution. They leveraged up the government’s 1.6 trillion yuan fiscal stimulus, mainly by offering loans to local government and large industrial companies. Bank credit added 4.2 trillion yuan to the economy in 2008, and twice that in 2009 - the equivalent of 29 percent of GDP.

Now the economy is slowing again. Industrial earnings fell 5.4 percent in July, year on year. Rail cargo, a good indicator of activity, has shrunk for two months in a row. But some things are different. Though big lenders are liquid and bad debts are low, some are showing signs of deterioration. China Construction Bank’s (601939.SS) overdue loans in the export-rich Yangtze River Delta doubled in the first six months of 2012. Agricultural Bank (601288.SS) saw its overall pile of loans overdue by less than a year increase by 39 percent.

This time it would be hard for banks to pull out the stops. Smaller banks have hit their lending limits, set at 75 percent of their deposit base. In July they lent an alarmingly small 7 billion yuan of medium-to-long term loans, the kind most likely to go into real investment. To get around these limits, many have issued off-balance sheet loans, some disguised as â€Å"wealth management products”, of which there are 10 trillion yuan outstanding, according to Fitch Ratings.

The government could help by reducing the amount banks have to keep on reserve with the central bank. It could, at a push, lift the 75 percent lending cap. But the relationship between these blunt instruments and money growth is complicated. The risk is that the sheer scale of off balance sheet activity means banks might just use higher lending limits to move existing loans back onto the balance sheet.

A more dramatic approach would be to set the banks free by reducing government influence and allowing them to lend and borrow on commercial terms. Of course, that raises the risk that lenders could take far bigger risks – or hold back until the economy picks up.

That leaves a third option: bind the banks tighter. Ten years ago the state bought lashings of bad loans from burdened banks. It has room to do that again, giving them carte blanche to lend again, possibly in return for bigger equity stakes. That would stunt the banks’ development, and deal a big blow to investors’ confidence. But if the economy slows further, a return to enforced infancy may be the best tool policymakers have.

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CONTEXT NEWS

- Industrial and Commercial Bank of China, the world’s biggest lender by market capitalisation, reported 123 billion of earnings for the first half of 2012, a 13 percent increase on the same period in 2011. Loans increased 8 percent over the six months, while deposits grew 7 percent. ICBC’s share of non-performing loans was 0.9 percent, but loans overdue by fewer than 90 days increased by 60 percent to 80 billion yuan.

- Reuters: China AgBank Q2 profit disappoints as loan margins shrink [ID:nL4E8JS1PY]

- Reuters: ICBC Q2 sees weakest profit growth since financial crisis [ID:nL4E8JT3N6]

- For previous columns by the author, Reuters customers can click on [FOLEY/]

(Editing by Peter Thal Larsen and Katrina Hamlin)

((john.foley@thomsonreuters.com)) Keywords: BREAKINGVIEWS CHINA BANKS

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