Japan:Saturday classes could be restarted

Aiming to restart Saturday classes at all public primary, middle and high schools nationwide, the education ministry has decided to establish a subsidy program to encourage schools to invite instructors from local communities.

The Education, Culture, Sports, Science and Technology Ministry is aiming to reintroduce Saturday classes starting on a monthly basis by the 2017 academic year in an effort to improve students' scholastic ability.

The subsidy program, which is also intended to strengthen ties between schools and their communities, is scheduled to begin next academic year. Under the program, the state will partially cover the costs of Saturday classes, including payment for instructors and fees for educational materials.

Also from next academic year, the ministry plans to provide subsidies or other forms of assistance to 6,700 schools, or about 20 percent of all public schools. The ministry plans to include ¥2 billion for this purpose in its initial budget request for fiscal 2014.

Source: Xinhua

Wary of Abenomics, wives cut husbands' pocket money

Japanese men hoping to reap the benefits of the economic upturn with an increase in their monthly spending cash will be disappointed to find this won't be happening anytime soon. It seems their wives, who typically control family purse strings in Japan, have yet to buy into Abenomics.

According to an online survey of 3,300 individuals carried out by Orix Bank Corp. in July, the average monthly spending allowance of men fell by 11% compared with last year's survey, falling to Y30,468 ($310).

In some ways, the survey result released Tuesday is not a big surprise since Prime Minister Shinzo Abe's policies to bolster the economy have yet to translate into a rise in wages for the average Japanese worker.

Many economists say it will take longer for the policies - known as Abenomics - to boost the base salaries of company employees and seep into the spending patterns of average Japanese homes. Spending so far has mainly been driven by those profiting from a rise in share prices from late last year, leading to a splurging on luxury items by the wealthy.

While the reasons are unclear, the survey also indicates that most men didn't even attempt to have their pocket money increased. Only 5.1% of respondents said they negotiated to have their allowances raised. And of those who did bargain with their partners, 70% didn't actually succeed in getting a raise.

Source: NewsOnJapan

Japan no longer sees U.N. chief's remarks as questionable

The government said Thursday it no longer sees U.N. Secretary General Ban Ki Moon's remarks that were taken as criticizing Japanese political leaders' perception of wartime history as questionable.

Ban's "true intent has become clear," Chief Cabinet Secretary Yoshihide Suga told a press conference, a day after a senior Japanese official met with Ban in the Netherlands and asked what he meant by his comments.

Ban was quoted by Suga as telling Japan's Senior Vice Foreign Minister Masaji Matsuyama that he "is well aware" of Prime Minister Shinzo Abe's position on the perception of history and Japan's longtime efforts as a peaceful nation.

Speaking to journalists Monday in Seoul, Ban said Japanese leaders should have "deep reflection and vision to look toward the international future in an effort to foster friendly ties with a correct view of past history."

Source: NewsOnJapan

Volkswagen pioneers westward movement in China

China's far west Xinjiang Uygur Autonomous Region is set to become a new industrial powerhouse, as the first car rolled off the production line of Shanghai Volkswagen, a joint venture with the German car maker, here on Thursday.

The plant in the regional capital of Urumqi expects an annual production of 50,000 units of the new Santana, with the first phase of investment close to 2 billion yuan (325 million U.S. dollars).

It is a big step for Volkswagen, becoming a pioneer of the auto industry in western China, said Jochem Heizmann, CEO of Volkswagen Group China, as the first Xinjiang sedan production line started operations.

In 2012, Volkswagen produced 2.6 million cars in China. Sales in China accounted for nearly one third of the company's global total.

Heizmann earlier told Chinese media that by 2018, Volkswagen's annual capacity in China will reach at least four million vehicles.

"The Urumqi plant will help Volkswagen maintain a 20 percent market share in passenger vehicle sales in China," said Meng Yongsheng, associate professor of finance and economics at Xinjiang University .

Meng said the Xinjiang plant is only step one in the Volkswagen's plan to move out of the Yangtze River Delta and settle in the booming west.

Xinjiang covers an area of 1.6 million square kilometers, making it China's largest provincial-level administrative region. The auto market is flourishing as the roads linking Xinjiang to neighboring central Asian countries and inland provinces have been completed in recent years.

In Urumqi, the number of cars doubled from 200,000 in 2009 to 400,000 in 2011.

The German company is not the only auto maker with designs on the west. Hyundai, from Republic of Korea, has set up a passenger vehicle base in southwest China's Sichuan Province.

Between April 2012 and May 2013, at least six automobile manufacturing projects have chosen west China, with total investment exceeding 36 billion yuan.

Experts say auto industry's westward movement is the epitome of a new round of Chinese manufacturing growth, with a transfer from east to central and west China.

Bordering on eight countries, resource-rich Xinjiang is especially alluring for manufacturing enterprises.

Chinese manufacturing giants, including SANY, Shaanxi Automobile Group, Dongfeng Motor and XCMG, have already set up their plants in the region, planning expansion into Central Asia and Europe.

According to the regional statistics bureau, growth of 12 of 31 sectors in the manufacturing industry exceeded 50 percent in 2012 in Xinjiang. Total industry investment increased by 36 percent year on year.

"Low costs, rich resources and favorable policies are the reasons why enterprises are going west in a steady flow," said Meng.

The National Development and Reform Commission, the country's top economic planner, encourages auto makers to build plants in central and western provinces and regions by offering favorable conditions, including tax breaks.

Land prices in central and western areas are half or one third of those in east China. In addition, "infrastructure in the area is better than some southeast Asian countries, including Cambodia and Vietnam, which also have a cheap labor force," said Zheng Yongnian, head of the East Asia Institute, National University of Singapore.

Enterprises also value the consumption potential of western cities.

Cities with a population of one to three million people are considered small, but they are big cites compared to those in Europe. In these "small cities," there are only 20 cars for every 1,000 residents, which means the consumer market will be huge for a long time into the future, said Heizmann.

Source: Xinhua

Iran likely to intervene if Western powers attack Syria

Iran will intervene if the West pushes for regime change in Syria amid mounting calls for military intervention after alleged use of chemical weapons in the battered Arab country, analysts here say.

Iran's new government does not want direct confrontations with the West over Syria, with President Hassan Rouhani having said " the world's people, particularly the people in the Middle East, are not prepared for a new war."

But Tehran may well be forced into the conflict, Sadeq Zibakalam, a professor on politics from Tehran University, told Xinhua on Thursday.

Iran will become involved directly in Syria when it finds that world and regional powers like the United States, Britain and Saudi Arabia are already there attacking Bashar al-Assad. "In such a scenario, Iran will do whatever it takes to keep Assad in power, " said the expert.

In light of possible attack by the West, Iranian officials have warned of its regional plight in which the Islamic republic cannot stay aloof as a disinterested spectator.In his latest comment on Syria, Iran's Supreme Leader Ayatollah Ali Khamenei warned of "disastrous" consequences of a possible U.S. attack on Syria, saying that the military intervention will be a " catastrophe" for the region.

The Middle East is like a "powder keg" and its future will be unpredictable if something happens, he said.

Iranians are warning the West: "Don't think that if you attack Syria, it will remain limited to Syria. It's just like fire. You cannot control it. It will engulf other areas as well," said Zibakalam.

Iran will consider "U.S. military bases wherever in the region as a legitimate target," he said.

In addition to indirect involvement in the Syrian crisis with actions targeting Western interest in the Middle East, Iran may have to confront the West in battlefield as well. "If it comes to the question of survival of Assad, it is possible that Iran will send troops to keep him in power. That would mean direct confrontation between Iran and the West," he said.

Iran will definitely offer support, as it has done in the past, to the Syrian government since the Arab state is Iran's "strategic ally" in the region, said Zibakalam.

Earlier in August, Rouhani reiterated Iran's loyalty to the amicable ties with Syria, saying that nothing will change the two countries' close alliance and no power could shake the strategic ties of the two countries.

Iran's close relations with Syria dated back to the Islamic revolution in Iran in 1979 and have been steady since then. During the Iran-Iraq war (1980-1988), Syria was the only Arab state that provided Iran with political, moral and military support.

Other than historical ties, Iran also relies heavily on Syria to carry out its strategies in the region.

Syria is a key logistic route bridging Iran's support with anti- American and anti-Western forces in the region, such as Hezbollah, Hamas and other Palestinian groups, Zibakalam said. "If the Syrian regime is no longer there, it would be tantamount to the collapse of Iranian strategic policies in the middle east."

Source: Xinhua

China, ASEAN vow to consolidate strategic partnership

 China and the Association of Southeast Asian Nations (ASEAN) on Thursday agreed to consolidate and deepen their strategic partnership.

The pledge came out of a meeting between Chinese Premier Li Keqiang and foreign ministers of ten ASEAN members as well as ASEAN Secretary-General Le Luong Minh, on the sidelines of the special China-ASEAN foreign ministers meeting to mark the 10th anniversary of the formation of the China-ASEAN strategic partnership.

Li lauded the development of China-ASEAN relations as promoting regional stability and prosperity. He said China steadily pursued the way of peaceful development, took the relationship with ASEAN as a priority in its regional diplomacy, and pursued the policy of good

Li said China will continue to consolidate the strategic partnership with ASEAN, support ASEAN's integration, and be glad to see ASEAN play a leading role in regional cooperation.

He noted that through friendly consultation, China and ASEAN countries will respect each other, increase mutual trust and handle disputes with to promote long-term friendship and win-win situations.

Source: Xinhua

China's Chamaleon Shadow Banking

   In an article published in the Wall Street Journal about the Shadow banking in China, it describes
how Chinese banks managed to make loans off balance sheet, each time that regulators limited
several ways of shadow banking, banks worked out a way to get around the last one as well.
"The China Banking Regulatory Commission’s headaches started at the end of 2009, when it tried to rein in bank credit after a year of massive lending growth Beijing initiated to stimulate the economy in the face of the global financial crisis. While the headline figure for new lending in 2010 was lower than the 2009 figure, banks managed to keep total new credit ticking upward by using trust companies  at the time minor players in China’s financial system , to move loans off-balance-sheet. But the loans only departed temporarily, with the banks promising to buy them back after a short period.
Soon after, the sale of wealth-management products at Chinese banks started to go mainstream. Wealth-management products are typically short-term funds that banks raise from clients to invest in assets — such as bonds, interbank loans, shares and index futures — that generate a higher return than the anemic deposit rates they are required to offer. While banks had been selling such products to wealthy customers for years, in 2011 the market started to rapidly expand, with banks aggressively marketing them and savers attracted by the promise of seemingly risk-free investments (after all, the banks were backing them).
The banks arranged for a trust company to package a loan for a corporate borrower, and the bank then used wealth-management funds to buy the loan.    

In mid-2011, the CBRC intervened again, clamping down on the use of wealth-management-product funds to buy trust products backed by loans.
But soon the banks worked out a way to get around that as well.
Instead of buying the trust product directly from a trust company, the wealth-management product would buy the trust beneficiary rights — the right to the income stream from the trust product — from a third-party firm.
    The business really took off in mid-2012, when the securities regulator vastly expanded the range of businesses that securities firms and fund-management companies could get involved with. Securities brokerages and fund companies readily stepped into the third-party role, positioned between the trust and the wealth-management product.
In March of this year, the banking regulator stepped in yet again.This time it put a cap on the amount of ‘non-standard credit assets’ – a catch-all to cover trust loans, trust beneficiary rights and hopefully anything else the banks could dream up – that could be repackaged as investments for customers.

   Some banks have turned to private equity as a way to continue offering high returns on their wealth-management products without running afoul of limits on non-standard credit assets. 
Still, some of the private-equity offerings look surprisingly like debt, with the companies the funds are nominally buying equity in promising to repurchase the equity at a pre-agreed upon point in the future—at a higher price—ensuring the investor a healthy return.
According to Simon Ho, a bank analyst at Citigroup in Hong Kong, the off-balance-sheet exposure of China’s major banks  is equivalent to only 10% of their total assets. For smaller banks it’s as high as 30% or 40%, for some.
  If those loans go sour it won't be a crippling crises for major banks".

Chinese Xiaomi Hires One of Google Inc's top android executives

One of Google Inc.'s top Android executives has left the company for a little-known Chinese phone maker, furthering a change in leadership at the company's mobile-software division.

Hugo Barra will help with a new push by Xiaomi—pronounced sheow-mee—to develop its international business and be responsible for its strategic cooperation with Google, Xiaomi said Thursday. Xiaomi, based in Beijing, has grown quickly in the world's largest smartphone market by offering inexpensive Android devices with top hardware specs.

Xiaomi's business model doesn't revolve around the hardware it sells, but rather software, service offerings and accessories.

The company, which uses its website as its primary sales platform, offers an array of accessories as diverse as multicolored batteries, casings, hats and even dolls of Xiaomi's rabbit mascot.

It also now offers a set-top box that streams licensed Internet content for television sets and is integrated with the software the company runs on its phones, which are based on Google's Android operating system.

The hiring of Mr. Barra shows Xiaomi has ambitions to grow beyond China. In April, the company made its first foray into markets outside of the Chinese mainland, selling its phones in Taiwan and Hong Kong.
Source: WSJ

Japan: Abe, big data, bad dreams.

Although Prime Minister Shinzo Abe target is to get Japan's Economy out of deflation and stagnation
through monetary easing,buying time and afterwads making a fiscal reform , to reach a fiscal consolidation.
 All governments have limited capacity to make significant change, so - as in business and indeed life in general  it is essential to choose and focus.
Much of the Japanese elite want to transform the country into a national version of "industrial Internet" General Electric, and are moving to implement those aims. But Abe could derail these efforts with his divisive and dangerous constitutional and historical obsessions. 
As we know from markets for mobile devices and the incredible resurrection of Apple,Information and Computer Technology (ICT) is an area where it pays to be competitive through innovation. Moreover, ICT competitiveness appears likely to pay off very well indeed over the coming years and decades. One crucial reason is that ICT sensors and data processing are becoming increasingly cheap, as described in a concise June 2013 overview by McKinsey and Company. 
For energy, this reduction in the costs of gathering, transmitting, and processing information on such system parameters as temperature, vibration, and the like have led to significant efficiency and reliability gains in jet engines, wind turbines, locomotives and other systems. Those results mean large savings by customers, and a great deal of money earned by vendors who innovate disruptive business models. Setting aside the good news for sustainability,  that bottom-line fact is one reason General Electric (GE) announced, very publicly on June 18, that it was going to be an "industrial Internet" firm as much as a maker of things. 

ICT is a huge opportunity, but despite its technological strengths, Japan has to run hard to catch up to the leaders. Perhaps the most astute observer of Japan's ICT policy and its political economy aspects is Steven Vogel, Professor of Political Science at the University of California Berkeley.
Vogel also lists a number of factors that hinder Japanese firms in the ICT sector. These can perhaps be best summed up as an institutionalized lack of flexibility in the face of an economic environment that is increasingly interactive (indeed, "user-driven") and global. But at the same time, he notes that Japan still possesses core strengths in its "capable bureaucracy, strong government-industry ties, and close collaboration among firms, suppliers, banks, and workers".
ICT is very realistically depicted as a means for reducing a range of costs while at the same time opening up opportunities. For example, the LDP Commission's ICT report very sensibly calls for putting "ICT in concrete" as well as diffusing the renewable and smart model being developed in the devastated Tohoku (Northeast) region across the nation.
 Japan's ICT industry in 2010 was worth 85.4 trillion yen worth of a total 928.9 trillion yen in nominal market size. In other words, the ICT industry represented 9.2% of the economy, making it much larger than construction, iron and steel, and other sectors. Yet the ICT sector as a whole has not increased markedly from its 1995 level of just over 78 trillion yen, in step with an economy that has not grown significantly since the mid-1990s. 
Japanese manufacturing as a whole as well as in several core business sectors is notably behind that of the Germans and the Americans. 
Japan is gifted with very fast and cheap broadband, but has not diffused it to the extent that the Americans and the Germans have. It therefore has an opportunity to undertake very productive investment and at the same time innovate new technologies and business models. 
The Ministry of Interior and Communications (MIC), in cooperation with other agencies that have significant presence in local areas,  is eagerly supportive of an ICT-centered growth strategy. 
Japan is, in short, undertaking promising investment in smart and green sectors against a backdrop of accelerating opportunity. Japan is also guided by many of the "resilience" concerns that are emerging as concerns in virtually every country. 
Abe is certainly not going to interfere in the MIC and other ministries' ICT budgets and their allied smart city, smart grid, distributed generation and other projects. He in fact sits on committees related to these initiatives. Abe is perhaps unlikely to spearhead these ICT endeavors.

By Andrew Dewitt
Asian Times

U.S. real GDP growth in Q2 increased to 2.5% better than estimate.

Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 2.5 percent in the second quarter of 2013
(that is, from the first quarter to the second quarter), according to the "second" estimate released by the
Bureau of Economic Analysis.  In the first quarter, real GDP increased 1.1 percent.

      The GDP estimate released today is based on more complete source data than were available for
the "advance" estimate issued last month.  In the advance estimate, the increase in real GDP was 1.7
percent.  With this second estimate for the second quarter, the increase in exports was larger than
previously estimated, and the increase in imports was smaller than previously estimated.

      The increase in real GDP in the second quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), exports, private inventory investment, nonresidential fixed
investment, and residential fixed investment that were partly offset by a negative contribution from
federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the second quarter primarily reflected upturns in exports and in
nonresidential fixed investment and a smaller decrease in federal government spending that were partly
offset by an acceleration in imports and decelerations in private inventory investment and in PCE.

__Source: Bureau of Economic Analysis

          Department of Commerce___

Precious Metals Prices 7.03 a.m. Eastern Time

Gold Price Futures    3 months      US$   1,412.45

Silver Price Futures   3 months      US$       24.19

Japan, GCC to launch strategic ministerial dialogue

Japanese Prime Minister Shinzo Abe and his counterpart of Bahrain, Khalifa bin Salman Al Khalifa, agreed Saturday to hold a strategic ministerial dialogue between Japan and the Gulf Cooperation Council at an early date.

The strategic dialogue will bring together the Japanese foreign ministers and ministerial officials of the GCC countries. Bahrain currently dispatches an official to serve as the secretary-general of the six-nation GCC.At his meeting in Manama, the capital of Bahrain, Khalifa informed Abe of his country's decision to lift the restrictions on food imports from Japan that have been in place since the March 2011 earthquake and tsunami.

Source: NewsOnJapan

Abe visits gas-rich Qatar

Japanese Prime Minister Shinzo Abe discussed strengthening cooperation with gas-rich Qatar as he met emir Sheikh Tamim al-Thani in Doha on Wednesday as part of a regional tour.

The two leaders agreed to strengthen cooperation in the political and security fields, they said in a joint statement.

Abe's tour of the Gulf is seen as his latest push to promote nuclear technology exports.

And the Japanese government says Qatar and Kuwait have shown an interest in nuclear safety, out of concerns that neighbouring countries plan to build nuclear plants.

In May, Japan signed a nuclear cooperation deal with another Gulf state, the United Arab Emirates, during a similar visit by Abe.

A day later, he visited Turkey and signed a long-awaited deal to build a sprawling nuclear power plant on the country's Black Sea coast, in a milestone for the Japanese nuclear industry.

Opinions mixed over Japan sales tax hike

Opinions were mixed on the second day of a government hearing on Japan's two-stage sales tax hike plan as Prime Minister Shinzo Abe and his administration ask experts for their views on how to balance economic growth and fiscal rehabilitation.

Nine experts took part in the second session on Tuesday, including Yale University Prof. Koichi Hamada, a special adviser to Mr. Abe, as well as Tokyo University Prof. Takatoshi Ito, Credit Suisse Chief Japan Economist Hiromichi Shirakawa and Mitsumaru Kumagai, chief economist at the Daiwa Research Institute.

Economy minister Akira Amari, who briefed reporters after the meeting, said five participants indicated that the government should go ahead with the current plan, while four others suggested alternatives to avoid the negative impact the tax hike might have on the economy.

"Those who were in favor of the current plan cited the importance of maintaining confidence in the nation's finances, the necessity of avoiding market risks from not implementing the tax hikes, securing social security resources and investing in the future," he said.

Mr. Hamada suggested Tokyo should delay the two-stage tax hike by one year, or possibly take an incremental approach of an annual 1 percentage point increase starting next year. But Mr. Amari also said Mr. Hamada voiced support in the idea of cutting the corporate tax rate to cover the negative impact a sales tax hike may have on the economy. Mr. Amari added that he himself believed tax breaks had the effect of improving corporations' growth potential in the face of a slumping economy.

Source: NewsOnJapan

Japan's population drops for 4th straight year

Japan's population under its resident registry network system fell 266,004, or 0.21 pct, from a year before to 126,393,679, excluding foreign residents, as of the end of March 2013, down for the fourth straight year, the internal affairs ministry said Wednesday.

The drop renewed the previous year's record decline of 263,727.

The natural population decline, or the number of deaths over that of births, stood at a record high of 226,118.

The country's total population came to 128,373,879, including 1,980,200 foreign residents who became newly subject to the registration system following a reform of the system in July 2012.

Source: JiJi Press

Nissan plans to sell self-driving cars by 2020

Officials at Japanese automaker Nissan have announced plans to put self-driving cars on the market by 2020.

The firm became the first manufacturer in Japan to announce such a timeframe.

Nissan officials unveiled the prototype of a self-driving car at an event in California on Tuesday.

The firm's engineers equipped an electric vehicle with 5 cameras that can recognize information such as road signs.

They also added devices that measure the distance between the car and obstacles near it using lasers and ultrasonic technologies.

Precious Metals Prices 10.12 p.m. Eastern Time

Gold Price Futures    3 months    US$  1,409.68

Silver Price Futures   3 months    US$       24.12

China joins global combat tax evasion efforts

China on Tuesday signed the multilateral convention on mutual administrative assistance in tax matters to boost its participation in global efforts to combat tax avoidance and evasion by cooperating with other states in the assessment and collection of taxes.

Wang Jun, Administrator of the State Administration of Taxation of China, signed the convention on behalf of the Chinese government, in the presence of Angel Gurria, Secretary-General of the OECD, at the headquarters of the OECD in Paris.

By signing the Convention, China became the 56th signatory to the multilateral agreement designed to facilitate international cooperation among tax authorities to improve their ability to tackle tax evasion and avoidance and ensure full implementation of their national tax laws, while respecting the fundamental rights of taxpayers.

"This is the first multilateral tax instrument that has ever been signed by China," Chinese Administer Wang Jun told the audience at the signing ceremony.

He said the signing of the convention is of significance as it comes at a time when China has begun economic transition, marking a new step in opening-up and reform in tax matters.

Hailing China's participation in the convention, OECD chief Gurria said: "Today's signing is both timely and important. The G20 has endorsed automatic exchange of information as the new global standard. This also represents another significant step in the strengthening of collaboration between China and the OECD."

He added the convention provided the ideal instrument "to swiftly implement automatic exchange, and to do so with a wide range of partners."

Developed by the OECD and the Council of Europe in 1988, the convention on mutual administrative assistance in tax matters is the most comprehensive multilateral instrument available for tax cooperation and exchange of information.

China to deepen tax reforms

Tax systems concerning business turnover, consumption, resources and property will continue to be reformed in order to promote economic development, China's Financial Minister Lou Jiwei said on Wednesday.

The country will widen its pilot scheme of replacing turnover tax with value-added tax (VAT) to sectors including railway transportation, postal services and telecommunications, Lou said at the ongoing bimonthly session of the National People's Congress Standing Committee, which started on Monday and ends on Friday.

Started in January last year, the trials have benefited 1.34 million enterprises and helped save businesses 50 billion yuan (8.1 billion U.S. dollars) in the first half of 2013 in 12 provinces and municipalities. From Aug. 1, VAT reforms will expand nationwide to further reduce tax burdens on businesses.

VAT refers to a tax levied on the difference between a commodity's price before taxes and its cost of production, while turnover tax refers to a levy on a business's gross revenues.

Since Aug. 1, China has suspended VAT and turnover tax for businesses with monthly revenues below 2 million yuan, benefiting more than 6 million small and micro enterprises, according to Lou.

The expansion of the trials nationwide is expected to bring structural changes to the entire tax system and bolster economic reform, said Bai Jingming, deputy director of the financial sciences institute under the Financial Ministry.

China will also impose its consumption tax on goods that could cause severe environmental pollution and over-exploitation of resources. The tax will also be applicable to more luxury goods, Lou said.

It could help curb over-consumption of unhealthy goods including alcohol and cigarettes and promote energy conservation, said Zhang Bin, who is in charge of revenue research with the Chinese Academy of Social Sciences.

He suggested applying the taxation to high-end entertainment in addition to luxury goods.

Experts also warned that taxation could increase the price of taxed goods, leading to transfer of taxes to consumers and consumption abroad to evade high taxes domestically.

As part of efforts to enhance the efficiency of energy usage, China will extend resource tax to coal based on prices instead of sales volume, Lou said. The current tax covers crude oil and natural gas.

It was expected that the tax adjustment will drive the coal industry to enhance technologies, curb overcapacity and protect the environment.

The government is also mulling whether to expand property tax trials currently in place in Shanghai and Chongqing municipalities, Lou said.

The trial imposition of the tax is part of China's efforts to cool its property market in response to public concerns over runaway housing prices.

Source: Xinhua

Christine Legard: IMF do not suggest a rush to exit easy money policy

We need to work better together to understand more fully the impact of these unconventional monetary policies local and global and how that affects the path of exit. And, above all, we must use the time wisely and not waste the space provided by unconventional policies. Global policymakers—all policymakers, within countries and across countries have a responsibility to take the full range of actions needed to restore stability and growth, and to reduce imbalances.

Where do we stand with UMP today?

Let me say it up front: I do not suggest a rush to exit. UMP is still needed in all places it is being used, albeit longer for some than for others. In Europe, for example, there is a good deal more mileage to be gained from UMP. In Japan too, exit is very likely some way off.

The day will come when this period of exceptionally loose monetary policy, both conventional and unconventional, must end,in line with economic recovery and its impact on inflation. We need to plan for that day, especially since we do not know exactly when it comes.

One thing we can say for certain: the path to exit will and should depend on the pace of recovery, the latter mitigating the potential downsides of the former.

Together, we need to keep an eye on both financial stability and growth, watch whether the benefits of UMP are subject to diminishing returns, and analyze whether the financial side-effects get worse over time.

Just as with entry, exit will take us into uncharted territory.

So, the Fund and policymakers need to start thinking about what exit will eventually look like. That includes the implications for global economic and financial stability: the whole system, not just one part of it. This is an issue that the Fund has been watching and will continue to watch closely. It is, after all, the IMF’s raison d'être.

Federal Reserve Shouldn’t Ignore Emerging Market Crisis

  According to an article published today in the Wall Street Journal:
"Broadly, the thinking seems to be that emerging market economies brought their problems on themselves. By keeping their currencies undervalued in the aftermath of the global financial meltdown of 2008, even as their own economies performed robustly, they triggered massive hot-money inflows. The scale of these inflows is reflected in very large current-account deficits. The International Monetary Fund forecasts that Brazil will have a shortfall equivalent to 2.4% of GDP this year, after running surpluses before the financial crisis. Indonesia has swung to a deficit of 3.3% of GDP this year from a surplus of 2.7% in 2006. India’s deficit is seen at 5% of GDP, South Africa’s at 6.4% and Turkey’s at a whopping 6.8%.
Policymakers in these economies are just as quick to blame developed market central bankers for their woes. There was very little they could do in the face of the massive flood of liquidity pumped into financial markets by the European Central Bank, Bank of Japan, Bank of England and, especially, the Federal Reserve. Little, that is, short of allowing their currencies to appreciate so high and so fast, or tightening domestic fiscal or monetary policy so hard, that their economies would have been driven into a severe
downturn.

Wherever the responsibility for the recent mania for emerging markets happens to fall–on these countries or on developed economy central bankers–the end result was credit booms driven by hot-money inflows.

The problem with hot money is that as fast as it flows in one direction, the current can be even stronger in the other. As the1997 Asian crisis showed. Then too, hot money made for booming economies until investors got cold feet. The consequent crisis was crippling to a number of economies across the region.

But the pain didn’t end there. The 1997 Asian crisis was followed by the 1998 Russian crisis and together they combined to cause the spectacular collapse of Long-Term Capital Management.

What are the chances that some major developed-country bank, hedge fund or other financial institution is exposed to emerging markets in ways that perhaps even its risk officers aren’t completely aware of–be it through derivatives or counterparty deals with emerging market institutions that are themselves suffering serious problems. After all, that was one of the big lessons of 2008: no one’s really quite sure what their full exposures are until the dust settles".

  

Oil Adds To Emerging Market Problems

According to an article published today by the Wall Street Journal:
"By late June, the price of West Texas Intermediate was at $93 a barrel from just below $86 in April. It’s now hovering around $110 a barrel.
That the dollar price of oil is going up as many of emerging countries currencies are close to regular historic lows against the dollar, makes the local currency effects of the recent Syria-driven rises that much worse.
The rising panic is palpable. Losses on some of these currencies are accelerating away. The Indian rupee was at 54 against the dollar in May, was at 61 at the start of this month and has now breached 68.

The result is likely to be stagflation as the Indian industry reacts to climbing prices and rising interest rates with belt tightening and desperate efforts to preserve margins by marking up their own prices.

What’s more, the degree to which India’s boom was sustained by credit expansion will also determine how much interest rates cause default rates to rise.

And India isn’t alone. Turkey, Brazil, South Africa and Indonesia are all suffering similar(albeit not quite as immediately severe problems. With most of these countries dependent on imported energy, the rising oil prices will tend to push them towards stagflation as well''.

U.S. July Pending Home Sales Slip. National Association of Realtors Press Release

Pending home sales were down in July, with higher mortgage interest rates slowing the market, according to the National Association of Realtors.

The Pending Home Sales Index ,* a forward-looking indicator based on contract signings, declined 1.3 percent to 109.5 in July from 110.9 in June, but is 6.7 percent above July 2012 when it was 102.6; the data reflect contracts but not closings.  Pending sales have stayed above year-ago levels for the past 27 months.

Lawrence Yun, NAR chief economist, said there is an uneven pattern around the country.  “The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown.  However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West,” he said.  “More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems.”

The PHSI in the Northeast fell 6.5 percent to 81.5 in July but is 3.3 percent higher than a year ago.  In the Midwest the index slipped 1.0 percent to 113.2 in July but is 14.5 percent above July 2012.  Pending home sales in the South rose 2.6 percent to an index of 121.5 in July and are 7.7 percent higher than a year ago.  The index in the West fell 4.9 percent in July to 108.6, and is 0.4 percent below July 2012.

NAR projects existing-home sales to increase 10 percent for all of 2013, totaling about 5.1 million, and reach approximately 5.2 million next year.  With ongoing supply imbalances, the national median existing-home price is expected to grow nearly 11 percent this year, and moderate to a gain of 5 to 6 percent in 2014, with rising construction taking some of the pressure off of home prices.

Possible U.S. military strike in Syria pounds emerging markets assets

Emerging stocks,bonds and currencies took another hammering on Wednesday as mounting expectations of Western action against Syria pushed up oil prices and drove investors to seek shelter in dollar assets.
The Turkish lira and the Indian rupee  already under heavy pressure due to their large current account deficits and an imminent rollback in U.S. money printing - were at the forefront of selling, with both hitting new record lows as oil prices surged to six-month highs above $117 a barrel.
The higher cost of oil and the depreciation of their currencies, will make it even more difficult for the two energy importers to contain their current account gaps.
The Syrian crisis has aggravated a selloff in emerging market assets that was triggered by expectations the U.S. Federal Reserve will start scaling back its massive stimulus program, as soon as next month.

Losses on emerging currencies come as investors stampede to exit emerging stocks and bonds, raising concerns of a vicious circle that will induce more and more investors to sell out.

Dubai's stockmarket dived 7.5 percent at one point, after a 7 percent slide on Tuesday, although it later recovered.

Stocks in the Philippines tumbled as much as 6 percent, while Indonesian and Thai bourses fell 2.5-3 percent as Asian currencies suffered fierce selling, with the Indonesian rupiah touching a new four-year low.

Foreign investors sold $1 billion of Indian shares in the eight sessions through Tuesday while dumping almost $3 billion in debt over 13 successive sessions. Indonesia has seen equity outflows of $1.3 billion in the past seven sessions.

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