Still at the centre of the world’s news coverage

A range of issues keeps China in its coveted position as the most watchable country.

CHINA’S global profile remains undiminished this week, despite many other issues competing for international headline space.

The buzz among foreign investors is whether it is too late to “enter the Chinese market.” There is a strong implicit element of time for what will soon be, if not already, the world’s biggest market.

China Daily on Monday ran a piece on how opportunities still exist, particularly for SMEs. A consensus seems to be that while doing business in nominally communist China is better than ever because of improvements in institutional frameworks and the regulatory environment, competition from Chinese rivals particularly “tech companies” is getting tough.

The Google-Baidu competition could be an object lesson here. With incentives like the recent 4 trillion yuan (RM1.88 trillion) stimulus package for state-owned enterprises, China’s capitalist ethic is doing well.
The number of private companies grew more than 4,600% to 6.6 million over the past 18 years. Among foreign corporations, 96% of Fortune 500 companies are already operating in China.

Then there is the negative side as well, including that which reinforces negative stereotypes. This often involves Beijing’s attempts to control cyberspace, and what China’s 384 million Netizens may or may not do.

A Bill of amendments requiring Internet companies and telcos to report on users passing state secrets is up this week for its final reading in the National People’s Congress Standing Committee before becoming law. Associated Press reports that the move has already attracted criticism at home and abroad.

Officially, tightening the law on communications use is to ensure greater national security. Among the problems is that interpretation of what is a “state secret” is open to interpretation and abuse, so the law would be arbitrary and draconian.

More legislation attracting controversy this week concerns modifications to the law on the detention of suspects. When police have been required to pay compensation to persons wrongly detained, now compensation applies only to wrongful and prolonged detention beyond 37 days (one week and one month).

There would be no huge claims; sums derive from the average daily wage of a state employee in the preceding year. However, there are provisions for further compensation in cases of police brutality. Such laws may not be the best indicators of social change. A better measure would be the impact of public debate and argument on the policymaking process.

China’s next international extravaganza, following on the 2008 Olympics, is Shanghai’s World Expo that opens tomorrow. Singapore’s Straits Times bills it as the “glitziest and greenest” Expo of them all.

The organisers would make it the most glamorous World Expo yet. But, mindful of critics who would condemn a commercial showcase with doubtful environmental value, Shanghai’s show would also be the most environment-conscious.

For symbolism, there would be the world’s largest solar panel; for novelty, a restaurant would recycle excess food to produce electricity; and for visitors’ convenience, 1,000 vehicles powered by renewable energy would ferry people around the site.

Four large parks would act as “green lungs” while 3,000 inefficient factories have been closed. The Expo, due to run for six months, took nine years to prepare. The environmental aspects alone cost US$33bil (RM106bil), which is twice that of the Beijing Olympics. This indicates something of the scale with which China operates, ever since the Great Wall. Inevitably, the growing clout of a rising superpower would be reflected in its role in major multilateral institutions. Perhaps the most appropriate here is the World Bank, where this week China nearly doubled its voting power to 4.42%.

This places China as third-powerful in the bank after the US and Japan, reflecting its number three position in world GDP terms. That could soon change again: China’s economy is already bigger than Japan’s in PPP (purchasing power parity) terms, and is set to be number two even in GDP terms this year.

Every other country in the 186-member institution had its share reduced to make way for China’s increased strength except the US, which retained its share at 15.85%. But since the world’s largest debtor nation owes so much of its wherewithal to China’s economy, relations among Bank members may have to change further to remain relevant.

MIDWEEK By BUNN NAGARA

In China we trust,again

Will China crash economically?

Capital Talk

CHINA bashing by now must surely be the most popular sport among Western investors, mass media and institutions. China crashing now, China crashing a few years later, China crashing anytime and crashing forever is the mantra.

A mantra is like a hymn. If you chant it endlessly and repeatedly, it gets stuck in one’s head. However, the fact that it may get stuck in one’s head does not mean that it will happen or that it represents the reality.
In fact, a mantra based on superfluous analysis or worse, an inherent bias, would block the real realities from surfacing. An objective analysis of the global economic conditions would show that this is what is actually happening.

With all the high profile, high publicity given to China bashing, all eyes are centred on China in general and its property sector in particular. Will China crash? When will China crash? i Capital’s managing director gets these questions all the time.

In contrast to all the dire predictions about China, i Capital expects China’s economy to nicely soft land this year. When the Lehman Panic broke out in September 2008, and almost collapsed the world economy, China was ahead of every other economy in implementing economic expansion measures.

China very quickly bottomed out and pulled the global economy out of its worst conditions (which, of course, no Western country has given China any credit). While the US led the world economy into possibly the worst recession in a long time, China and the rest of Asia quickly pulled the world economy out of a US-created catastrophe (see charts).

As China’s economy recovered quickly and strongly, the Chinese government has subsequently acted very quickly and effectively again. Measures to cool the hot property sector down have already been announced months ago.

China’s government is ahead of the property “bubblet” curve. However, it takes time for the impact to be felt, which is expected to take place in the coming months.

Selected segments of the property sector will cool down but the rest of the economy will still be performing well. China’s economy is huge and a cooling of the property sector will not crash the continental economy.
The decision by The People’s Bank of China not to raise interest rates so far is correct. Why kill the rest of the economy when there is no need to? There are many other effective ways to tackle the property “bubblet”, especially when the cause of the rise in property prices is not low interest rates.

Another unnoticed development that favours China soft-landing this year is that the current global economic recovery is not synchronised. The recovery in the United States is behind that of China and the rest of Asia but it is gathering momentum.

The growth in US exports and the recovery in the industrial sector have led the US recovery. Consumer spending is also recovering and will gather momentum as the US job market improves further. The US housing sector is also expected to contribute positively this year.

As 2010 progresses, the US economic recovery will play a greater role in global economic growth. This is ideal, as it will allow China to turn to other economic sectors for growth while it tackles its property bubblet.
In short, as the US economic recovery gathers momentum in 2010, China’s GDP growth would slow to a healthy, high single-digit rate.

Based on the economic outlook of the United States and China, i Capital sees a benign global economy. Unlike 2006 or 2007, 2010 will see a healthy unsynchronised global recovery. This upbeat view can, of course, be turned topsy-turvy by unexpected events. There seems to be plenty nowadays.

One, while the currency pressure on China seems to have reduced somewhat, the United States is now cleverly turning to other countries and US-dominated global institutions to crack China’s position. Apparently, even India and Brazil are now joining in the bandwagon as prominently headlined on the front page of the Financial Times.

So, although the currency pressure cooker is not boiling over for now, the threat of a trade war needs close watching.

Is China crashing the real worry? Or is the eurozone breaking up the real worry? Actually, an economy that has crashed but that has not been described in this way is the eurozone a.k.a a continent of discontent.

First, it was the PIGS (Portugal, Ireland, Greece and Spain). The budget deficit for Iceland is 14.3%, Greece 13.6%, Spain 11.2%, Portugal 9.4% and China 2.2%. The China bashers say that China’s budget deficit is actually higher because it does not include the local governments. We wonder why the clever Greeks did not think of this simple trickery.

Anyway, the Greek civil servants are on strikes and the budget deficit is running at unsustainable levels. No wonder the Greek economy is not in a sustainable mode. This continent of 35-hour working week but with wages paid equivalent to 350-400 hours of work in China or India is declining fast, faster than what is generally realised or acknowledged.

Greece, supposedly the birthplace of democracy, has transformed itself into a “debtmocracy”. Will China crash, as we all are led to believe, or will Greece be the Sword of Damocles for the eurozone and thus the global economy?

Then, as if Greece et al is not enough, as if an evil spell has been cast on Europe, we all discovered that cash-starved Iceland is actually rich with ashes. Imagine Iceland, more than 1,800km away from London and more than 2,100km away from Germany, taking revenge on the eurozone. Who would imagine that?

The hiatus caused by the volcanic eruption is not small. That a volcano from Iceland is causing so much havoc in the eurozone is symbolic of the very difficult period that this fledgling economic bloc is undergoing.

Almost every economy in the eurozone, including that of the United Kingdom, is in trouble. As i Capital wrote above, this is the reality, this is what is actually happening.

China and the rest of Asia are not crashing. The United States crashed and the eurozone has crashed. Should the East follow the West?

i Capital does not think so although there are many out there who would want to see this happening.
Once again, we have to say, In China We Trust. As i Capital advised previously, “This decoupling is here to stay”.

Aussie 'fraud mastermind' Daniel Tzvetkoff to stay in jail

Happier days ... Daniel Tzvetkoff and his former Gold Coast mansion.

A US judge has crushed former Australian internet high-flyer Daniel Tzvetkoff's hopes of winning release from prison ahead of his trial.Just a week ago Tzvetkoff, 28, accused of being the mastermind of a $US540 million ($590 million) internet gambling money laundering and bank fraud scheme, was granted bail by District Court Judge Peggy A. Leen in Las Vegas.

The decision infuriated US government prosecutors who believe Tzvetkoff may have a secret stash of $US100 million and would flee if released from prison.

At a fresh hearing on Wednesday in the New York District Court, where the trial will be held, Judge Lewis A. Kaplan sided with prosecutors and reversed the decision.

He declared Tzvetkoff "a serious risk" of fleeing if granted bail.

"No condition or combination of conditions will reasonably assure the presence of the defendant as required," Judge Kaplan noted.

Tzvetkoff has been locked up in the North Las Vegas Detention Center since his arrest at a casino in the city on April 16 despite Judge Leen's bail decision last week.

With Judge Kaplan's ruling, Tzvetkoff faces a tough road.

The complicated money laundering and bank fraud charges he faces could take two years to be finalised in court, resulting in Tzvetkoff spending that time in jail even if he is ultimately found not guilty.

If convicted of the charges Tzvetkoff faces up to 75 years in jail.

US Marshalls will transport Tzvetkoff from the jail in Las Vegas to a prison in New York.

The decision is a major blow to Tzvetkoff and his family, including fiancee Nicole Crisp who is eight months pregnant and hoped to live with Tzvetkoff in New York until the trial was completed.

Tzvetkoff's father, Kim, flew to Las Vegas last week to support his son in court and agreed to put up his $US1.17 million Brisbane home as bond and also drive his son from Las Vegas to New York for the proceedings.

If Judge Leen's bail decision had not been overruled, Tzvetkoff would have lived in New York and submitted to electronic monitoring, maintained a verified residence in New York and abide by a curfew.

Wednesday's court decision is the latest fall from grace for Tzvetkoff, who created highly-profitable Brisbane-based internet payment processing company Intabill, bought a $27 million home on the Gold Coast, drove Lamborghinis and Ferraris, sponsored a professional motor racing team and had was once estimated to be worth of $82 million.

Tzvetkoff has since filed for bankruptcy.

Source: http://newscri.be/link/1086509