Asia's wealthy surpass North Americans for first time

The number of rich Asians surpassed North Americans for the first time last year, but their fortunes shrank slightly and still trailed total wealth on the other side of the Pacific, Capgemini and RBC Wealth Management said on Wednesday.

The Asia-Pacific region is now home to 3.37 million high net worth individuals (HNWI) - people with $1 million or more to invest - compared with 3.35 million in North America and 3.17 million in Europe, the firms said in a report.

Asia's wealthy - 54 percent of whom are concentrated in Japan, almost 17 percent in China and more than 5 percent in Australia - saw their total fortunes slip to $10.7 trillion last year from $10.8 trillion in 2010, and lag North America's $11.4 trillion.

The Asia-Pacific Wealth Report, compiled by Capgemini and RBC Wealth Management, is closely watched by wealth managers, high-end property agents, luxury goods retailers and other businesses for signs of how and where the ultra-wealthy are investing and how their fortunes are faring.

Many of Asia's rich made their millions and billions through family businesses and property.

"We don't see massive shifting in the allocations of portfolio management," Claire Sauvanaud, vice president of Capgemini Financial Services, told a news conference.

Wealth fell most significantly last year in Hong Kong (20.1 percent) and India (18 percent) and grew most strongly in Thailand (9.3 percent) and Indonesia (5.3 percent). Growth was more modest in Japan (2.3 percent) and in China (1.8 percent).

Weakness in Europe and other global trends played their part in the slight fall in total Asian wealth, the report said, but the "region grappled with its own economic challenges, including inflation, slowing growth and capital outflows."

"Nevertheless, Asia-Pacific is expected to continue showing stronger growth than other regions going forward, and its HNWI population and wealth are likely to keep expanding," it said.

As part of that, Asia's rich are looking more to offshore wealth centres close to home, such as Singapore and Hong Kong, in search of wider access to products and services, tax advantages and financial confidentiality, the report said.

Challenges for the offshore wealth management industry include a scarcity of skilled talent, lower profitability, and the costs of compliance and restrictions on services due to higher regulatory scrutiny, it said.

Diversity of the backgrounds and expectations of rich clients means there is more demand for tailored products and a greater desire to play an active role in managing their portfolios, the report added.- Reuters

Events in East Asia, stakes and realities

Meaning in the region’s mishmash

In decoding the latest events in East Asia, it is important to know the stakes and the realities.

DAILY news reports span events with their highs, lows and in-betweens. As a whole, they suggest a world of randomly unconnected currents and irrationally contradictory events with insubstantial or unpredictable outcomes.

There may be times when the planet is like that, but most of the time it may look that way while being something else again. If not exactly a method in the madness, there is usually meaning in the mishmash.

That is why policymakers and their advisers have their work to do, acting proactively or retroactively. For sleuths, it is important to expose conspiracies without necessarily resorting to conspiracy theories.

In recent days alone, global society learned that Miss China won the Miss World contest in Ordos, Inner Mongolia. This was the second time that a Miss China won, and the fact that it happened in front of a home crowd made it that much more special.

Meanwhile at the intergovernmental level, China and the US established a Sino-US Partnership on Smoke-free Workplaces to restrict smoking and its consequences in public and private sector workplaces. Several such agreements involving governments and NGOs have emerged between China and the US in recent years.

In economics, much more continue to happen between East Asia and the rest of the world, spurred particularly by China’s spectacular growth profile. Despite ideological differences and occasional bumps over specific trade, investment or currency issues, the Chinese and US economies have never been more closely linked or interdependent, and increasingly so.

Periodic spats continue between countries across national borders, sometimes over where those borders should be. While they gain wider attention with diplomatic forays or military missions, in involving social, economic and political dimensions, these disputes become far more intractable.

The latest dispute to flare again over the week has been rival claims over the Pinnacle Islands in the East China Sea, which Japan calls the Senkaku, China calls the Diaoyu and Taiwan calls the Diaoyutai.

Earlier this month, a group of Japanese lawmakers and right-wing NGO members had planned a trip to the islands to reaffirm Japanese sovereignty as well as to commemorate Japanese victims of the Second World War. This followed spats between China and the Philippines, and Vietnam, earlier in the year over rival claims to other islands in the South China Sea.

Japan had already been administering the Pinnacles with its presence. The government of Prime Minister Yoshihiko Noda felt the nationalists’ trip would be unduly provocative and tried to stop it, earning the rebuke of nationalist groups and the right-wing mayor of Tokyo.

In the event, some 150 Japanese activists aboard 20 boats landed in the Pinnacles last Sunday. By then, Chinese activists from the Hong Kong-based Action Committee for Defending the Diaoyu Islands had landed on the Pinnacles’ biggest island four days before.

The activists were detained by Japanese authorities, who had earlier failed to dissuade them with water cannons and ramming their boat, Kai Fung No. 2. As Chinese protesters insisted on the activists’ release and Japanese nationalists demanded their imprisonment, Japan deported them.

Earlier in January, Hong Kong authorities had refused Kai Fung No. 2 permission to leave port “because the Marine Department had grounds to believe that the vessel would not be used for fishing and fishing-related purposes”. The boat’s owner is a known Chinese nationalist activist.

But during the week, Chinese activists on board the boat returned to Hong Kong to a public hero’s welcome. The governments in Beijing and Taipei protested when Japan detained the activists, but once they were freed, the general public in China and Taiwan took over the spotlight.

The governments involved wanted to show a measure of restraint without halting such activism altogether. It helps to keep popular support for official claims alive, without allowing it to overwhelm official policy or relations.

The Chinese activists had planted the flags of both China and Taiwan, symbolising a unity of the claims by the “two Chinas”. While previously both claims were handled separately by their respective governments, they lately appear to merge in relation to other countries.

The common misperception remains that Chinese communism is an evil that compounds differences with other countries. That classic ideological posture from the Cold War ill serves anyone in the present era.

As communist ideology wanes and the Chinese Communist Party’s grip nationwide recedes, the only framework that Beijing can access to mitigate the country’s multiple challenges is nationalism. And on the other side of the Taiwan Straits, the Kuomintang party in government is defined by Chinese nationalism.

If and when single party rule on the mainland ceases, a much more nationalist government is likely to emerge. A party in such a government would be more amenable to popular nationalist sentiment, while also less inclined to limit nationalist activism, creating new challenges for other countries.

China already has to confront multiple rival claims over territory with other countries. It behoves Chinese policymakers to minimise and streamline the issues for easier handling, such as by neutralising the dispute over sovereignty between Beijing and Taipei.

Until recent years, the Taiwan Straits and the South China Sea had been persistent flashpoints in East Asia. Now that cross-straits relations have improved, disputes in the South China Sea simmer while East China Sea territory is being contested again.

There is an apparent trade-off in flashpoint potential between sub-regions. China’s immediate neighbours have at the same time contributed to friction in the adjoining waters.

Two weeks ago, South Korean President Lee Myung-bak visited the Dokdo islands occupied by his country but which are also claimed by Japan. While there, Lee declared that the Japanese Emperor had to apologise to Koreans for Japan’s wartime misconduct before he could visit South Korea.

The Japanese Foreign Minister replied by calling South Korea’s presence in Dokdo an “illegal occupation”. The spat continued for weeks, with Seoul filing a formal protest against Tokyo two days ago.

However dramatic, these disputes are unlikely to cause a major conflagration. While China always looms larger because of size and potential, there are also opportunities amid the risks.

China’s historic transition is led by econo­mics, but not without social and political ramifications. One feature here is the transformation of the foreign policymaking elite.

Maoist China’s policymakers in the Foreign Ministry had long been typical party ideologues. But as its economy blossomed, a new array of inputs have come to constitute an elite sourced from both the private and government sectors.

Meanwhile, the People’s Liberation Army (PLA) has still been less amenable to change. It is still constitutionally required to serve in the defence of the nation without interfering politically, but there is a growing temptation to signal its political positions.

So far the party and the state have mitigated this by allocating bigger budgets for defence, while also keeping PLA pressure on policymaking at bay. A party or government more vulnerable to populist pressure or lobbying may have to give the military more leeway.

The challenge for other countries is to work constructively with the more progressive elements in China’s political establishment towards more agreeable foreign relations. But from some of the latest events in the region, that challenge may be very difficult to meet.

Behind The Headlines By Bunn Nagara

Related posts:
Japanese right-wingers seek political gains landed on Diaoyu Islands
China demands Japan release Chinese activists landed ... 
China, S.Korea demand Japan own up to its wars ...

Japan, the deputy sheriff in Asia? 

Who owns the South China Sea islets in the eyes of the ...  

Restoring unity at South China Sea

Eurozone woes tilt financial power in Asia’s favour

LONDON: As European banks retrench to recover from the global financial meltdown, they are finding ready buyers in Asia for everything from loans to entire insurance and broking operations.

There are other tell-tale signs of a shift in power: this year's two biggest initial public offerings after Facebook were launched not in the United States or Europe, but in Malaysia.

Yet perhaps what is more striking is that, with one or two exceptions, Asian financial firms are not doing more in Europe itself to capitalise on the eurozone's festering debt and banking crisis.

Take China. The economy has more than doubled in size in five years. It has some of the biggest banks in the world.

And its appetite for snapping up natural resources is undiminished: witness last month's US$15.1bil agreement by state oil company CNOOC Ltd to buy Canada's Nexen Inc, the biggest foreign acquisition to date by a Chinese company.

When it comes to the financial sector, however, the glass is half-empty, not half-full, said Andre Loesekrug-Pietri, chairman of A Capital, a China-Europe investment fund.

“There's a front-cover story every other month about China buying up the world, but China is still a very small player in international M&A,” he said.

David Marsh, co-founder of a forum in London that connects central banks and sovereign wealth funds with banks and asset managers, said the West no longer had a monopoly on innovation and dynamism in financial services.

But China was playing a long game, biding its time and waiting for bargains. With plenty of bankers and traders being made redundant, Chinese firms have the chance gradually to build up teams and expertise rather than making giant acquisitions.

“They'll be much more clever than simply buying moribund banks at high prices: they'll be buying people,” Marsh said.

“What we're seeing now is just the precursor of a much bigger shift that will take place over the next 10 years, but it won't happen in one fell swoop.”

China has not been completely asleep on the acquisitions front.

Two Chinese private equity funds are on the final shortlist of bidders for the asset management arm of Franco-Belgian financial group Dexia, a deal that could be worth 500 million euros or more.

And CITIC Securities has agreed to buy CLSA Asia-Pacific Markets, a highly regarded Hong Kong-based brokerage, from its French parent, Credit Agricole SA, in a two-stage transaction worth US$1.25bil.

The deal is symbolic. Whereas CITIC is China's biggest brokerage, Credit Agricole is battling mounting losses in Greece, the epicenter of the eurozone crisis, where it owns the country's sixth-largest bank, Emporiki.

“Distressed banks selling good assets always happens in a crisis like this. Banks which don't want to raise capital by issuing new equity end up selling their offshore assets, and typically they sell the crown jewels,” said Ken Courtis, founding partner of Themes Investment Management and a former vice-chairman of Goldman Sachs Asia.

A clutch of other European financial institutions is also beating the retreat in Asia.

Britain's Royal Bank of Scotland has offloaded some of its Asia-Pacific investment banking operations to Malaysia's CIMB Group Holdings Bhd, while ING is selling its US$7bil Asia insurance business. Both banks had to be bailed out by their governments during the crisis.

Integrating independent-minded CLSA would be one of the biggest challenges for CITIC, Courtis said. Chinese financial institutions in general have a narrow bench of executives with the right linguistic and overseas management expertise - one reason why they are initially beefing up their offshore presence in more-or-less familiar Hong Kong, he said. Reuters

Japanese right-wingers seek political gains landed on Diaoyu Islands; China strongly protests

Japanese right-wingers seek political gains by exploiting Diaoyu Islands issue

A pack of Japanese right-wingers landed on the Chinese-owned Diaoyu Islands in the East China Sea on Sunday, in a blatant move that they claimed to "mourn the war dead", but in fact it was a scheme to net political leverage.

More than 150 Japanese right-wing activists participated in the event, including eight members of parliament. After gathering in the surrounding waters in 21 ships, 10 people landed on the island and stayed for over two hours.

Their gross violation of China's sovereignty has raised an uproar in China, with demonstrations flaring up in numerous cities in the country.

"China strongly opposes Japanese rightists landing on the Diaoyu Islands on Sunday, and urges Japan to put an end to its actions that seek to undermine China's territorial sovereignty," the Chinese Foreign Ministry said Sunday in a statement.

A quick background-check of the right-wing politicians and organizations that sponsored this provocative bid shows that their target of much-sought prize may not be the islands themselves, but rather political leverage that could put them back in the driver's seat back at home.

Tokyo governor Shintaro Ishihara, who prompted the Japanese government to "nationalize" the Diaoyu Islands with his "island-buying" farce, was notorious for denying the 1937 Nanjing massacre, during which the Japanese aggressor troops killed more than 300,000 Chinese citizens in World War II

Yoshitaka Shindo, another right-wing politician and a member of Japan's House of Representatives, is the grandson of Tadamichi Kuribayashi, a general of the Imperial Japanese Army during the Second World War who was killed in Iwo Jima.

Behind the drape of "mourning the war dead," what these right-wingers are really pursuing is personal political gains, even if it meant exploiting the public's sympathy toward the deceased.

Japanese scholars believe that as the Japanese society is bedeviled by sustained economic downturn and lack of confidence, publications advertizing "the Japan crisis theory" and the "China threat theory" could bring comfort to the public.

Moreover, widespread sorrowful sentiment among the public that Japan has been economically overtaken by China also feeds the right-wingers who advocate getting tough with China.

The narrow-visioned nationalism would only bring destruction to a country, warned Makoto Iokibe, former president of the National Defense Academy of Japan in an article published by the Asahi Shimbun on Sunday.

"Every country is easily emotionalized when it comes to issues of territory. The rightward tendency in Japan has been enhanced recently," he said.

Against this backdrop, if the voices and moves of the right-wingers were unchecked or event expanded, hostility across the East China Sea would increase, further dampening the perspective of closer bilateral ties between Asia's two largest economies and regional stability.

Therefore, "the Japanese government and people should speak in more rational voices and avoid being hijacked by the right-wingers and heading to the extreme," Iokibe said.- Xinhua

Update:
Aug. 24 (Xinhua) -- China on Friday expressed strong displeasure at the Japanese leader's remark on Diaoyu Islands, with Foreign Ministry spokesman Hong Lei saying that it "sabotages China's territorial sovereignty."

On the same day, Japanese Prime Minister Yoshihiko Noda told the press that Japan claimed Diaoyu Islands were part of its territory. The Meiji government integrated them into Japan in 1895 without the signs of rule by the Qing Dynasty of China at that time.

Hong stressed that the Diaoyu Islands and surrounding islets "have been the inherent territory of China since ancient times" because they "were first found, named and used by the Chinese."

The earliest historical record of Diaoyu Islands can be dated back to China's Ming Dynasty (1368-1644) in a book titled "Departure Along the Wind" (published in 1403), in which the names of "Diaoyu Islet" and "Chiwei Islet" were used. The names refer to the nowadays Diaoyu Islands and Chiwei Islet, Hong said.

He went on to say that Hu Zongxian, the Zhejiang governor of Ming Dynasty, marked Diaoyu Islands and surrounding islets in China's maritime defense.

"It demonstrated that these islands were at least within China's maritime defense sphere since the Ming Dynasty," Hong said.

Japan claimed its sovereign requirement during the China-Japanese War in 1895 and seized the islands with illegal means. "The saying that Diaoyu Islands were inherent territory of Japan is totally groundless," Hong said.

The Cairo Deceleration issued after the World War II regulated that all territory illegally taken by Japan, including China's northeast, Taiwan and Penghu islets, must be returned to China, according to the spokesman.

In August 1945, Japan announced its unconditional surrender under the terms of Potsdam Proclamation. "It means Japan must return Taiwan, the Diaoyu Islands and surrounding islets to China," he said.

On Sept. 18, 1951, then Chinese Premier and Foreign Minister Zhou Enlai made a solemn statement on behalf of the Chinese government that the Treaty of Peace with Japan signed in San Francisco of the United States was illegal and invalid, and it absolutely would not be recognized without the preparation and signing of the People's Republic of China.

In June 1971, Japan and the United States signed a pact to hand over Okinawa to Japan. Diaoyu Islands were mapped in the handover area.

"It is a private trading of the Chinese territory," Hong said.

China's Foreign Ministry announced on Dec. 30 of 1971 that such a move was "totally illegal" and reiterated that Diaoyu Islands and surrounding islets were "an integral part of the Chinese territory", he said.

Related:

China urges Japan to take practical action to improve ties

BEIJING, Aug. 24 (Xinhua) -- China on Friday urged Japan to take practical action to improve bilateral relations amid a territorial dispute regarding nearby islands.

A resolution adopted by the Japanese House of Representatives said that as important partners with shared interests, relations between Japan and China should be deepened so as to promote regional and international peace, stability and prosperity.  Full story

China urges Japan to stop territorial sovereignty violations

BEIJING, Aug. 17 (Xinhua) -- China on Friday urged Japan to refrain from any action that might violate China's territorial sovereignty and use dialogues and negotation to solve an ongoing dispute over the Diaoyu Islands.

"The Japanese side should maintain Sino-Japanese relations through concrete action," said Foreign Ministry spokesman Qin Gang, when talking about the recent illegal detainment and release of 14 Chinese nationals by Japan.  Full story

 • The Japanese coast guard confirmed that at least nine Japanese activists landed on Diaoyu Islands.

    • They arrived at the waters near the Diaoyu Islands with a group of 150 Japanese activists.

 • The group plans to hold a ceremony for people died in the war in 1945.

TOKYO, Aug. 19 (Xinhua) -- The Japanese Maritime Safety Agency confirmed that 10 Japanese activists landed on the Diaoyu Islands Sunday, local media reported.

VIDEO: CHINA PROTESTS JAPANESE VISIT TO DIAOYU ISLAND CCTV News - CNTV English

The Japanese coast guard's patrol vessels found 10 people swam to the Diaoyu Islands from their fleet at around 7:30 Sunday, and called them to leave as soon as possible after their landing.

The 10 people, no parliamentarians, remained at the island for about two hours and unfurled several Japanese flags. All of them left the island and swam back to their boats before 10:00.

A fleet of around 150 Japanese activists and 21 vessels departed from the Ishigaki city Saturday and arrived at the waters near the Diaoyu Islands early Sunday morning. The Japanese government had rejected their landing application earlier this month.

The group also plans to hold a ceremony for people who died in World War II and investigate fishery conditions in the waters near the Diaoyu Islands to declare the islands are Japanese territory.

China on Saturday lodged solemn representations with Japan as the group comprising some Japanese lawmakers and members of right- wing groups plan to go to the Diaoyu Islands waters to hold activities. Foreign Ministry Spokesman Qin Gang said that China has urged the Japanese side to immediately stop the action that seeks to undermine China's territorial sovereignty.

Thousands of people in a number of Chinese cities, including Guangzhou, Shenzhen, Shenyang, Hangzhou, Harbin and Qingdao, took to the street on Sunday morning to voice their opposition to the Japanese activists' landing on the Diaoyu Islands.

The act of the Japanese activists came after 14 Chinese activists arrived at the Diaoyu Islands by a Hong Kong fishing vessel to assert China's territorial claim to the islands last Wednesday. They were illegally arrested shortly after and were released last Friday.



Related:

China lodges solemn representations with Japan on Diaoyu Islands
BEIJING, August 18 (Xinhua) -- China on Saturday lodged solemn representations with Japan as some Japanese lawmakers and members of right-wing groups plan to go to the Diaoyu Islands waters to hold activities. Full story

China urges Japan to stop territorial sovereignty violations

BEIJING, Aug. 17 (Xinhua) -- China on Friday urged Japan to refrain from any action that might violate China's territorial sovereignty and use dialogues and negotation to solve an ongoing dispute over the Diaoyu Islands.

"The Japanese side should maintain Sino-Japanese relations through concrete action," said Foreign Ministry spokesman Qin Gang, when talking about the recent illegal detainment and release of 14 Chinese nationals by Japan.  Full story

China holds "firm stance" over Diaoyu Islands
 
BEIJING, Aug. 17 (Xinhua) -- China holds a "firm stance" over the Diaoyu Islands, and any of Japan's unilateral moves against Chinese nationals is illegal and invalid, the Foreign Ministry said Friday.

As Japan decided to release 14 Chinese nationals it was detaining, Chinese Foreign Ministry spokesman Qin Gang said: "China holds a clear and firm stance on the issue of Diaoyu Islands." Full story

China strongly protests against Japanese rightists' landing on Diaoyu Islands

People in a number of Chinese cities, including Guangzhou, Shenzhen, Shenyang, Hangzhou and Harbin, took to the street Sunday morning to voice their opposition to Japanese right wing activists' landing on the Diaoyu Islands. [Sina Weibo]

People in a number of Chinese cities, including Guangzhou, Shenzhen, Shenyang, Hangzhou, Harbin and Qingdao, took to the street Sunday morning to voice their opposition to Japanese ring wing activists' landing on China's Diaoyu Islands.

Around 8:50 a.m., over 100 protestors gathered near the Consulate-General of Japan in Guangzhou, Guangdong Province, holding Chinese national flags and banners reading, "Defend China's territory over the Diaoyu Islands."

They also shouted, "Japan, get out of the Diaoyu Islands!"

From 9:40 a.m., protestors marched on major roads in Guangzhou, as police maintained order.

The protestors returned to the Consulate-General of Japan in Guangzhou around 10:30 a.m., and some Guangzhou residents staged a sit-in at the gate of the compound.

In downtown Shenzhen, Guangdong Province, protestors gathered at SEG Plaza around 9:00 a.m., holding Chinese national flags and shouting about defending China's territory.

From 10:30 a.m., protestors marched on major roads in the city's downtown area.

As of 11:00 a.m., about 1,000 protestors had assembled in Shenzhen.

In Harbin, capital of northeast China's Heilongjiang Province, hundreds of residents gathered at Dragon Tower Square, a city landmark.

The protestors organized online, and some local residents arrived at the scene to support the protestors by offering them Chinese national flags and drinking water, according to the protestors.

The protestors were led along the city's major roads by two cars flying Chinese national flags. Police maintained order and directed traffic, as the group gained more protestors throughout the march.

In the capital of northeast China's Liaoning Province, about 100 protestors gathered at a square near the Shenyang municipal government building and marched to the Consulate-General of Japan in Shenyang.

Some of the protestors wore red dresses bearing the Chinese characters for "China" and held loudspeakers. Police were on hand to maintain order.

The Japan Coast Guard confirmed that nine Japanese activists landed on the Diaoyu Islands early Sunday morning, Japanese media reported.

 Related posts:
 
China demands Japan release activists over landing their own territory Diaoyu Islands   
 
China, S.Korea demand Japan own up to its wars criminal past

Japan, the deputy sheriff in Asia?

China demands Japan release Chinese activists landed on the Chinese-owned Diaoyu Islands

By James Pomfret and Linda Sieg
HONG KONG/TOKYO | Wed Aug 15, 2012 11:52am EDT

(Reuters) - China demanded Japan immediately and unconditionally free 14 Chinese activists held over a protest landing on disputed islands on Wednesday, as tensions between Tokyo and its neighbors flared on the anniversary of the end of World War Two.



 Video:Review: Diaoyu Islands dispute CCTV News - CNTV English
Video: Japan arrests 14 Chinese activists on Diaoyu Islands issue CCTV News - CNTV English

The landing by the activists on an island chain in the East China Sea and their detention by Japan's coastguard came on a day of regional diplomatic jousting, underscoring how history dogs Japan's ties with China and South Korea.

In a meeting with Japan's ambassador to Beijing and a phone call with a Japanese official, Chinese Vice Foreign Minister Fu Ying lodged "solemn representations" over the latest territorial quarrel between Asia's two biggest economies.

Fu "demanded that Japan ensure the safety of 14 Chinese nationals and immediately and unconditionally release them", the Chinese Foreign Ministry said on its website.

Japan arrested five members of a group of activists from China, Hong Kong and Macau who landed on the island, Japan's coastguard said. China's Xinhua news agency said Japan's coastguard later detained nine activists on their boat. Japanese media also said that in all, 14 activists had been detained.

Earlier, South Korea prompted an official protest from Japan after comments by South Korean President Lee Myung-bak which some saw as going too far by insulting Japanese Emperor Akihito.

And in a move likely to add to the anger of Japan's neighbors, two Japanese cabinet ministers paid homage at a controversial Tokyo shrine for the war dead.

Memories of Japan's wartime occupation of much of China and colonization of South Korea run deep despite close economic ties in one of the world's wealthiest regions.

Japan protested to China's ambassador over the landing and Prime Minister Yoshihiko Noda said Tokyo would deal with the matter strictly in accordance with the law.

Xinhua said Japan had pushed tension "to a new high".

"The tensions are fully due to irresponsible clamoring and attempts by some Japanese politicians and activists to claim the islands, which ... indisputably belong to China," it said.

Friction over the uninhabited isles, near potentially rich gas deposits, had been heating up already.

Several of the activists, who set out from Hong Kong, jumped into the sea, swam and waded ashore. The group said its boat had been rammed by the coastguard and hit with water cannon. A Japanese official denied that any serious damage had been done to the boat.

Media published photographs of the activists planting a Chinese flag on a rocky shore.

"We've waited 10 years for this... We finally managed to get ashore," the captain of the protest ship was quoted as saying on Hong Kong television.

A separate row over rival claims by South Korea and Japan to other islands has also intensified, signaling how the region has failed to resolve differences nearly seven decades after Japan's defeat at the end of World War Two.

WARTIME MEMORIES LINGER

The friction in part reflect skepticism over the sincerity of Japan's apologies for wartime and colonial excesses.

On Tuesday, South Korea's Lee told a group of teachers that Emperor Akihito should apologize sincerely if he wants to visit South Korea, saying a repeat of his 1990 expression of "deepest regrets" would not suffice.

Japan, noting that it had never broached the idea of a visit by the emperor to South Korea, lodged a protest with Seoul over the remarks. Akihito has spent much of the past two decades trying to heal the wounds of a war waged in his father's name.

Lee, whose Friday visit to the islands claimed by South Korea and Japan frayed ties between the two U.S. allies, called Japan an "important partner that we should work with to open the future".

But in remarks commemorating Korea's liberation from Japan's 1910-1945 rule, he also said the countries' tangled history was "hampering the common march toward a better tomorrow".

He urged Japan to do more to resolve a dispute over compensation for Korean women abducted to serve as sex slaves for wartime Japanese soldiers, known by the euphemism "comfort women" in Japan and long a source of friction.

"It was a breach of women's rights committed during wartime as well as a violation of universal human rights and historic justice. We urge the Japanese government to take responsible measures in this regard," Lee said.

Japan says the matter was closed under a 1965 treaty establishing diplomatic ties. In 1993, Tokyo issued a statement in the name of its then-chief cabinet secretary apologizing to the women and two years later set up a fund to make payments to the women. South Korea says those moves were not official and so not enough.

Speaking at a ceremony marking the war's end on Wednesday, Japanese Prime Minister Yoshihiko Noda acknowledged the "enormous damage and suffering" caused by Japan to other countries, especially in Asia.

"We deeply reflect upon (that) and express our deepest condolences to the victims and their families," he said, vowing that Japan would never go to war again.

Tapping into anti-Japanese sentiment remains a way to seek public support in South Korea and China, which face leadership changes in coming months. And some experts say a new strain of nationalism is surfacing in Japan amid gloom about the future.

In a sign of the domestic pressures in Japan, National Public Safety Commission Chairman Jin Matsubara and Transport Minister Yuichiro Hata visited the Yasukuni shrine for war dead, defying Noda's urgings to stay away.

Many see the shrine as a symbol of Japan's past militarism because 14 Japanese wartime leaders convicted as war criminals by an Allied tribunal are honored there with Japan's war dead.

(Additional reporting by Kaori Kaneko and Stanley White in Tokyo, and Ben Blanchard and Chris Buckley in Beijing; Editing by Louise Ireland and Robert Birsel)

Newscribe : get free news in real time

Backgrounder: History proves Diaoyu Islands are China's territory

Xinhua | 2012-8-17 19:02:23

The Japanese government on Friday decided to release the 14 Chinese illegally detained Wednesday by Japanese authorities at the Diaoyu Islands after the Chinese government repeatedly demanded their "immediate and unconditional" release.

The 14 Chinese, despite obstruction by Japan Coast Guard patrol ships, arrived at the Diaoyu Islands by a Hong Kong fishing vessel to assert China's territorial claim to the islands.

Japanese police arrested them on suspicion of "illegal entry."

After their detention, China's Vice Foreign Minister Fu Ying reiterated China's sovereignty over the Diaoyu Islands and the affiliated islets, and demanded that the Japanese guarantee the safety of the citizens and free them immediately and unconditionally. On Thursday, China once again urged Japan to "immediately and unconditionally" release its nationals.

Demonstrators across China staged protests Thursday demanding the release of the 14 Chinese nationals.

The Diaoyu islands, in the East China Sea between China and Japan, have belonged to China since ancient times.

The islands are 120 nautical miles northeast of China's Taiwan province, 200 nautical miles east of China's mainland and 200 nautical miles west to Japan's southernmost island Okinawa.

Geologically the islands are attached to Taiwan. The waters around the islands are 100 to 150 meters deep and there is a 2,000-meter-deep oceanic trench between the islands and Japan's Okinawa islands.

Fishermen from China's Taiwan and Fujian and other provinces conducted activities such as fishing and collecting herbs in this area since ancient times.

The islands appeared on China's map since the Ming Dynasty (1368-1644).

There are records about the islands in a book published during the rule of Yong Le (1403 to 1424) in the Ming Dynasty, more than 400 years before Japan claimed discovery of the Diaoyu islands in 1884.

After the Ming Dynasty, the islands were recorded in many historical documents.

On a map published by Japan between 1783 and 1785, marking the boundary of the Ryukyu Kingdom, the Diaoyu islands were shown as belonging to China.

Japan never questioned China's sovereignty over the islands before the Sino-Japanese war of 1894-1895.

In April 1895, the government of the Qing Dynasty was forced to sign the Treaty of Shimonoseki, under which China ceded the whole island of Taiwan and its surrounding islands including the Penghu Islands to Japan.

Only since then has Japan had its own name for the area where the Diaoyu islands are located. Before that, Japanese maps marked the islands by their Chinese names.

Japan was occupied by the United Sates after it was defeated in the Second World War.

In 1951, Japan and the United States illegally signed a treaty in San Francisco without the presence of China, which was one of the victor countries in the Second World War.

Although article two of the treaty said that Japan surrendered its claim over Taiwan and the Penghu islands, article three wrongly assigned the Diaoyu islands, which Japan had stolen from China, and other islands, to the Ryukyu zone which was under US control.

The then Chinese Premier Zhou Enlai lodged a strong protest and said the Chinese government would never recognize the San Francisco Treaty.

In a statement on territorial waters in 1958, the Chinese government said that Japan should return all the territory of the People's Republic of China including Taiwan and the islands around it to China.

Consequently, there is no room for argument that the Diaoyu islands have historically been a part of China's territory.

Related:
Japan, the deputy sheriff in Asia?
China, S.Korea demand Japan own up to its wars criminal past

Google gets the Baidu blues again after mapping losses

Chinese rival set to overtake Google Maps

Google looks like being beaten again in China, as Baidu leaps ahead in the mobile mapping space.

The text ads giant was still second in the Quarterly Survey of China's Mobile Map Client Market, but only just, according to Beijing-based Analysys International.

Chinese player Autonavi was the market leader by a long way, with 25.7 per cent, and Google Maps came in second with 17.5 per cent, but had Baidu breathing down its neck in third with a 17.3 per cent share.

The momentum is with the Chinese search firm too – Baidu Maps' market share rose from 13.6 per cent in Q1 to 17.3 per cent in Q2 while Google’s fell from 23.2 per cent. As a result, Baidu is predicted to supplant Google in the current quarter.

To add to Google’s woes, the analyst said local users were having problems updating their version of its mapping client, while Apple is set to drop Google Maps as a pre-install on the next version of iOS, with reports suggesting Cupertino is working with Autonavi now in the region.

“If the above problems are not solved quickly, it's hard for Google map to reverse the situation,” wrote Analysys International in a blog post.

Baidu and Google are of course old foes in the search space, where the home-grown firm routed its Californian rival after Google moved its search servers to Hong Kong in 2010 over censorship concerns.

Google's market share is now around 16 per cent while Baidu dominates with around 78 per cent.

The mobile map market in China is growing at a staggering pace, jumping 206 per cent year-on-year last quarter to 229 million accounts, according to Analysys International.

The analyst predicted it would be a key battle ground for the next phase of the mobile internet given that maps and associated apps are closely tied to up to a quarter of mobile advertising. ®

By Phil Muncaster 
Newscribe : get free news in real time

Will Malaysian audit have its day in court?

Silver Bird may well be the first local listed company to sue its internal and external auditors.

IF ever there were Malaysian parents who had hoped that their kids would go into audit, there's probably quite a bit of serious rethinking going on right now. It looks like the audit profession is in for some harsh scrutiny and painful soul-searching.

On Aug 1, Silver Bird Group Bhd and two wholly-owned subsidiaries filed an action in the Kuala Lumpur High Court in relation to financial irregularities at the three companies. One of the 10 defendants named in the suit was Crowe Horwath, Silver Bird's longtime external auditors.

According to Silver Bird's announcement through Bursa Malaysia, the suit against the accounting firm is premised on alleged negligence and breach of duty of care and/or its duties and responsibilities to the plaintiffs as external auditors.

The bread and confectionery maker links this to Crowe Horwath's “failure to discover and/or detect the financial irregularities”.

It is believed to be the first such legal action by a listed company in Malaysia against its external auditors.

In recent years, it's increasingly common to hear of auditors in the United States, Britain and elsewhere (Japan, India and Hong Kong, for example) being sued for professional negligence because they had failed to spot fraud and warning signs of business collapses.

It's perhaps an indication of the current thinking that when companies go under, certain parties should be held accountable for the huge losses and suffering, and these include the auditors, whose opinion on the companies' financial statements are widely relied upon.

The day after Silver Bird initiated the civil suit, Crowe Horwath issued a press release to deny the allegations in the suit, as laid out in the Silver Bird announcement. The auditors pointed out that they had, in fact, discovered the irregularities and immediately reported these to Silver Bird's audit committee and board of directors.

“We believe that the suit by Silver Bird is frivolous in nature and without basis. We strongly believe that we have fully discharged our duties professionally and will vigorously defend our position in court,” added the firm.

Indeed, as that last line in the press release indicates, right or wrong will be decided before the judge, unless the case doesn't go to trial.

However, there were no such statements from Audex Governance Sdn Bhd and Focus Internal Audit Solutions (FIAS), who are also among the defendants. Both are on the list because they have done internal audit work for Silver Bird, which had outsourced its internal audit function to Audex Governance before switching to FIAS.

Suits against internal auditors appear to be rare overseas and it's almost certain that Silver Bird's civil action against Audex Governance and FIAS is a first for Malaysia.

The Silver Bird case has thrown the spotlight on the roles and responsibilities of internal auditors.

Internal audit became a more visible component of corporate governance in Malaysia when it was made mandatory beginning Jan 31, 2009, for a listed company to have an internal audit function.

Bursa Malaysia's listing rules require that the internal audit function be independent of the activities it audits and that it reports directly to the audit committee.

In addition, the listed company's annual report have to include a statement relating to the internal audit function, informing whether the function is performed in-house or is outsourced, and the costs incurred for the function in respect of the financial year.

Despite these rules, most people tend to underestimate the importance of internal auditors, probably because few people really appreciate what internal auditors do.

In a brochure, The International Institute of Internal Auditors (IIA) reports this lament: “There is a universal lack of understanding of the internal audit profession, how it makes a difference in regard to organisational governance, risk, and internal control; and its value to stakeholders.”

In addition, there's more emphasis on the audit opinion of the external auditors as it's a tangible product of their work.

Also, the external auditors are seen as independent of the management, whereas an in-house internal audit function is undertaken by those on the company's payroll.

The IIA defines internal audit activity as a “department, division, team of consultants, or other practitioner(s) that provides independent, objective assurance and consulting services designed to add value and improve an organisation's operations”.

It adds: “The internal audit activity helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes.”

On the other hand, as Crowe Horwath puts it in Silver Bird's financial statements for the year ended October 2011, the external auditors are called in primarily to express an opinion on the financial statements “based on our audit in accordance with approved standards on auditing in Malaysia”.

Silver Bird's move to sue the internal auditors tells us that it's time to take a closer look at the internal audit function, whether in-house or outsourced. The regulators and the internal audit profession should be asking some tough questions.

Would it be possible for companies to sue internal auditors for professional negligence if they are employees? Who watches over the outsourcing of the internal audit function and the firms that take on such jobs? What more can be done to ensure the independence and quality of the internal audit function?

When financial irregularities are not picked up by the internal and external auditors, is it possible for one of the auditors to be exonerated while the other is found to be at fault?

The Silver Bird case may or may not lead to answers to these questions, but if the audit profession is truly proactive and dynamic, it wouldn't wait for the case to be resolved before responding to the reality that in Malaysia, resistance to the idea of suing auditors is waning.

> Executive editor Errol Oh hopes he will have the stamina and patience to follow closely the developments in the Silver Bird lawsuit.

Standard Chartered Bank shares plunge on laundering charges

Shares of Standard Chartered have tumbled despite the bank denying allegations that it illegally "schemed" with Iran to launder money.

Shares in London fell 16.7%, about as much as its Hong Kong stock dropped.

The New York State Department of Financial Services said the UK-based bank laundered as much as $250bn (£161bn) over nearly a decade.

It said the bank hid transactions for "Iranian financial institutions" that were subject to US economic sanctions.

The regulator said that Standard Chartered had hidden 60,000 such secret transactions.

However, the bank denied the allegations, saying that it "strongly rejects the position or portrayal of facts as set out in the order" issued by the regulator.

'Not a full picture' Continue reading the main story

Standard Chartered

Last Updated at 07 Aug 2012, 15:30 GMT *Chart shows local time

price
change
%
1228.50 p
-

-241.50

-

-16.43

The US regulator labelled UK-based Standard Chartered a "rogue institution" and ordered the bank to "explain these apparent violations of law" from 2001 to 2010.

It accused Standard Chartered of falsifying payment directions by stripping the message of unwanted data that showed the clients were Iranian, replacing it with false entries.

"It provided step-by-step, wire-stripping instructions for any payment messages containing information that would identify Iranian clients," the complaint said.

The regulator also said that it would hold a formal hearing over the "assessment of monetary penalties". The bank, which currently only operates in the US in New York, has also been threatened with having its New York banking licence revoked.

The regulator also pointed the finger at consultancy firm Deloitte, suggesting it could have aided Standard Chartered in its alleged deception.

Deloitte had "intentionally omitted critical information" in a report, it said.

Deloitte responded by saying its financial advisory service division "performed its role as independent consultant properly and had no knowledge of any alleged misconduct by bank employees. Allegations otherwise are unsupported by the facts."

Account freeze
 

Standard Chartered also said the order issued by the US regulator did not present "a full and accurate picture of the facts".

It said that it had conducted a review of its transactions, primarily those relating to Iran for the period between 2001 to 2007, and had given regular updates to the US authorities on the results of the investigation.

"As we have disclosed to the authorities, well over 99.9% of the transactions relating to Iran complied with U-turn regulations," the bank said.

"The total value of transactions which did not follow the U-turn was under $14m."

The so-called U-turn transactions are those started outside the US by non-Iranian foreign banks that pass through the US financial system on the way to other non-Iranian foreign banks.

To ascertain whether these transactions are permitted or not under current regulations, US clearing banks use the wire-transfer messages they get from the banks involved.

If the banks do not have enough information, they are supposed to freeze the assets.

Senior management were also said to have codified their illegal procedures in formal operating manuals, including one labelled "Quality Operating Procedure Iranian Bank Processing".

Penelope Lepeudry, managing director of Kroll Advisory Solutions, a consulting firm specialising in financial investigations, told the BBC that "if the allegations are confirmed, this is a very serious development".

"The regulators are not going to be merely convinced by a statement from the bank - they need to see the details," she said.

Other schemes found
 
The regulator said it had also uncovered evidence with respect to what are apparently similar schemes to conduct business with other countries under sanctions - Libya, Burma and Sudan.

"Investigation of these additional matters is ongoing," it added.

Who is Standard Chartered?

• Standard Chartered is headquartered in London and its chief executive and chairman are based in the UK capital
• Its roots are in Asia; the Chartered Bank was founded by Royal Charter and opened in Bombay, Calcutta and Shanghai in 1858
• Standard Chartered Bank was formed in 1969 through the merger of Standard Bank of British South Africa and the Chartered Bank of India, Australia and China
• It currently makes two-thirds of its profit in Asia; only 10% of its operating profit last year came from the Americas and Europe
• It currently has 1,700 offices in 70 territories
• The bank made a pre-tax profit of $6.8bn in 2011
• The bank's New York office was first granted its foreign-branch bank licence in 1976

• Q&A: Standard Chartered-Iran scandal
• HSBC report: Key findings

The regulator said that its nine-month investigation, which involved looking through more than 30,000 pages of documents, including internal bank emails, showed that the bank reaped "hundreds of millions of dollars in fees".

"SCB's actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity," it said.

'Staggering cover-up'
 
In numerous emails going back as far as 1995, Standard Chartered's lawyers advised on ways to go about circumventing US sanctions.

In March 2001, the bank's legal adviser counselled that "our payment instructions [for Iranian clients] should not identify the client or the purpose of the payment".

By 2006, there were concerns raised about the bank's conduct in its New York branch.

The chief executive for the Americas sent an email to London saying the programme needed to "evaluate if its returns and strategic benefits are... still commensurate with the potential to cause very serious or even catastrophic reputational damage to the group".

But those warnings were ignored by senior management in London in what the regulator called a "staggering cover-up".

Among the violations of the law, the bank is accused of:

• falsifying business records
• failing to maintain accurate books and records
• failing to report misconduct to the regulator in a timely manner
• evading federal sanctions

The US Treasury, which implements the sanctions, said that it treated violations "extremely seriously". - BBC

The yuan goes global: Money talks and London is listening to the yuan

The Chinese currency is fast gaining weight worldwide and becoming a key topic of conversation for bankers.

THE fashionable youths in hot pants flocking to high-end department stores in London and bankers in dark suits walking in and out of skyscrapers in the financial district have one thing in common, a growing interest in the Chinese currency.

During the recent holiday to celebrate the Diamond Jubilee of Queen Elizabeth II, Harrods, a department store known for its ties with the British royal family, launched its own Sina Weibo, a popular Chinese social media platform, to attract more Chinese customers. Shoppers can find “the very latest, limited edition and exclusive products”, with Hermes, Chanel and Louis Vuitton among the most popular brands, according to the store’s spokesman.

More than 100 UnionPay payment terminals in the store also help to make Chinese shoppers feel more at home. Through the machines, part of China’s unified bank card network, Chinese visitors can pay for their purchases with the same cards they use at home.

Hear, hear: A man walking past the London Stock Exchange in London. London is now a yuan offshore trading centre, which will help both Chinese and European business people to avoid foreign exchange risks. — China Daily/Asia News Network

 

A few streets from Harrods, a billboard featuring a green jade dragon shaped like the yuan symbol stands outside a bank. The ad reads: “A new global currency is emerging. Be part of it.” The commercial is for HSBC, a bank rooted in the silk and tea trade between China and Britain in the 19th century.

The UnionPay terminals, the jade dragon advertisements and the shops on the streets of London offering exchange services between the British pound and the yuan are the tip of the iceberg in the biggest story in the financial markets today: the internationalisation of the Chinese currency.

As people search for a bright spot amid sluggish economic growth in the West, beset as it is by the European debt crisis, companies, investors and financial institutions are increasingly focused on the yuan. From Beijing to Hong Kong, Tokyo to London, policymakers and businesses are part of the push.

There are several forces driving this move, both at home and abroad. The People’s Bank of China has made several moves this year to liberalise the exchange rate; George Osborne, the UK chancellor of the exchequer, took the initiative to develop London into an offshore trading centre for the yuan earlier this year; and this month, the yuan became convertible with the Japanese yen under an agreement between the Chinese and Japanese governments.

“All of it demonstrates that the Chinese government is pushing forward the internationalisation of the yuan and encouraging the use of yuan offshore. That will help the global economy in many ways,” said Adam Tyrrell, head of European capital markets for Standard Chartered in London.

Greenback to redback

These initiatives will have a profound influence on the development of trade. For instance, China and Europe are each other’s largest trading partners, but, up till now, the bulk of that trade has been settled in the US dollar. If a Chinese company buys pork from a UK company, it does not buy and sell in yuan, the pound or the euro. It settles in dollars.

That paradox is changing. Now the same pork company can open a yuan account at a British bank such as HSBC or Standard Chartered, or a Chinese bank that operates in Europe, such as Bank of China or Industrial and Commercial Bank of China, and can then invoice the goods or settle the deal with its Chinese clients in their national currency.

The advantage of this is clear: Settling in yuan helps both sides to avoid foreign exchange risks and reduces transaction costs. For instance, in 2008, many companies in southeast China had to lay off workers and close factories because they were losing money through currency appreciation.

That situation would have been different if the contracts had been signed in yuan, because the agreements would have a fixed value no matter what the change in the exchange rate.

The initiative can also benefit companies outside the European time zone, given London’s position as the world’s foreign exchange centre. “The beauty of London is not just about London,” said Patrick Law, Hong Kong-based managing director and head of trading for Greater China at Barclays. “If you look at the London time zone, it covers both the northern and southern hemispheres.” And that means it will also help facilitate business between China and Africa and the Middle East.

“Africa is a very interesting market to look into because China and Africa have a lot of business together,” Law said. He added that Barclays, a bank with strength in commodity trading, began to conduct trade between the South African rand and yuan from April.

Uncle Sam to dim sum

The internationalisation of the yuan will also offer a new platform for companies and investors looking for alternative methods of financing.

The “dim sum bond” got its name from delicacies in Chinese cuisine such as spring rolls, shrimp dumplings and steamed buns. The name has been appropriated for fixed income denominated in yuan and was started in Hong Kong when the city became the first offshore centre for yuan trading. The bond has become increasingly popular outside Asia and grew rapidly in Europe last year, according to Standard Chartered’s Tyrrell.

British banks were involved in five dim sum bond deals with European companies and financial institutions last year. It has also been involved in three client deals so far this year, according to Tyrrell: “Over time, as the yuan is used more, more European corporations and financial institutions will be interested in transacting in yuan, either for their China business, when they can remit onshore, or as a way of diversifying their investor base.”

The motivation for getting involved in dim sum bonds is also changing, he said. When the yuan market first developed offshore, a lot of investors were looking for a currency play rather than a bond play. At first, investors were looking to invest in the currency because they thought it was going to appreciate.

“Over time, it is developing into a more mature bond market,” said Tyrrell. “It will tend to be more driven by traditional bond market influences.”

Chances and problems

That’s particularly true this year, because of the fragile state of the global economy. If the investor sentiment is not there, there will be fewer bond issuances, according to Tyrrell. “There is definitely momentum in the yuan. It will not stop. It will grow,” he said.

Given the fact that the yuan is still not fully convertible, there is still a lot of work to be done to encourage people to hold it and conduct business with it, as they do with dollars.

The main issue for London as it attempts to develop into an offshore yuan trading centre revolves around the lack of liquidity. That’s due to both a paucity of knowledge about the yuan market and the limits of infrastructure to facilitate trade flows.

“Without liquidity, we cannot grow the pie and make the market more efficient,” Law said. “Everybody is definitely very interested. The current situation is that people have just started looking into it,” he said. “The involvement is still relatively small, but the amount of interest is actually very high.”

Some observers have suggested that the pool of yuan liquidity in London can grow through a huge variety of sources. For instance, Standard Chartered recently issued yuan-denominated European Commercial Paper to investors in Europe.

“ECP is issued to investors. Then Standard Chartered holds the liquidity in yuan and can use that for trade finance. This will help to increase trade flows with China for European clients,” Tyrrell said.

“As investors become more comfortable holding yuan, it will help build liquidity here.”

By Diao Ying, China Daily/Asia News Network