Liz Ann Sonders. Fed's future plans

"As for the Fed's future plans:  "If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course…"

In the press conference following the release of the statement, Fed Chairman Ben Bernanke suggested that the Fed anticipates similar-sized ($10 billion) reductions in purchases at upcoming meetings.  That would suggest a finale to quantitative easing toward the end of 2014, given that there are eight meetings each year.  When asked about likely-incoming Chair Janet Yellen's perspective, he mentioned she was fully supportive of the decision to taper.

Today's market reaction may ease some of the consternation of Fed watchers that believe there is no way the Fed can engineer a benign exit from its unprecedented policy easing/unwinding of its near-$4 trillion balance sheet.  But history may be instructive.  As Schwab's fixed income strategist Kathy Jones has noted in her recent commentary, in the post-World War II era, the Fed's holdings of US securities totaled about 22% of GDP- the same as the current level.  In the 1940s and 1950s, the Fed pursued very similar policies to deal with the debt that was incurred during the war.  Eventually the Fed's policies were unwound and the balance sheet restored to normal with limited disruptions; including no major uptick in either inflation or interest rates".

Source: Liz Ann Sonders, Schwab.

  It sounds really optimistic,time will tell. Still the global economy has a lot of headwinds to deal with.

Liz Ann Sonders. Tapering is not tightening

Tapering is not tightening

"The Fed, at least so far, appears to have done a better job than last summer in anchoring expectations for short-term rates; reinforcing the notion that "tapering is not tightening."  Looking at the Fed's economic outlook, there is very little chance it raises short-term rates in 2014; although two voting members believe it would be appropriate.  Most of the FOMC (12 members) expect at least one hike by the end of 2015; with three members believing the first increase won't come until 2016".

"Before I get to the qualitative analysis, let's start with an analysis of the Fed's statement accompanying today's decision.  One key sentence:  "The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal.  When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."

Fed officials now predict the unemployment rate could be as low as 6.3% by the end of 2014, compared with a September projection of 6.4-6.8%. In fact, in general, the Fed's tone was relatively optimistic; removing the reference to downside risks that had been in prior statements:  "The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced."  The Fed also mentioned less fiscal drag:  "Fiscal policy is restraining economic growth, although the extent of restraint may be diminishing."

"The Fed, at least so far, appears to have done a better job than last summer in anchoring expectations for short-term rates; reinforcing the notion that "tapering is not tightening."  Looking at the Fed's economic outlook, there is very little chance it raises short-term rates in 2014; although two voting members believe it would be appropriate.  Most of the FOMC (12 members) expect at least one hike by the end of 2015; with three members believing the first increase won't come until 2016".

Before I get to the qualitative analysis, let's start with an analysis of the Fed's statement accompanying today's decision.  One key sentence:  "The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal.  When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."

Fed officials now predict the unemployment rate could be as low as 6.3% by the end of 2014, compared with a September projection of 6.4-6.8%. In fact, in general, the Fed's tone was relatively optimistic; removing the reference to downside risks that had been in prior statements:  "The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced."  The Fed also mentioned less fiscal drag:  "Fiscal policy is restraining economic growth, although the extent of restraint may be diminishing."

Source: Schwab, Liz Ann Sonders. Senior Vice President, Chief Investment Strategist, Charles Schwab & Co., Inc.

The Vicuñas

The vicuña is a member of the camel family. It is the smallest of the six species of camel, and is thought to be the wild ancestor of the alpaca. It lives on the high, grassland plateaus of the Andes mountains which range from southern Peru to northern Chile and into parts of Bolivia and Argentina. Only tough bunch grasses and festuca grows here. The sun's ultraviolet rays burn through the thin atmosphere during the day. At night the heat of the day escapes into the atmosphere and the temperatures go down to freezing. Although they look fragile, the vicuña is specially adapted to its high-altitude habitat. It has an incredibly thick, soft coat that traps layers of warm air close to its body and protects it from freezing

temperatures. The lower teeth of the vicuña grow constantly, like a rodent's, so they can eat the tough grasses. The vicuña also walks on the soles of its feet so it can flex its toes and grab on to the rocks and gravel-covered slopes. Vicuña milk is very rich so the babies grow quickly.

Vicuñas weigh between 75-140 pounds. They are about 4-6 feet long and stand 2-3 1/2 feet at the shoulders. They have very long necks, round heads, and large, forward facing eyes. Their ears are long and pointed and stand up on their heads. Their fur is a rust color, with white around the muzzle,the chest, belly, and the insides of the legs. The white hair on their chests is longer than their other hair.

Vicuñas graze mostly on grasses. Their teeth are large and grow constantly like those of a rodent. They chew their cud when resting getting more nutrients out of the nutrient poor grass.

Vicuñas are very shy animals and run away fery quickly.They have two territories that they defend from other herds; a feeding territory or about 45 acres, and a smaller sleeping area on higher ground where they are more protected. The vicuña live in herds of 5-10 members, which includes one dominant male and several females and their young. They mate in March and April and their young are born 11 months later. The young stay with their mother and the herd for another 10 months, when they are driven off by the herd. Young males will form bachelor groups and the young females try to find another group to join. This ensures that the herd stays the same size, which is important with their limited food supply.

The vicuña was almost hunted to extinction for its beautiful soft wool. The Incas used to round up the wild vicuñas and pen them in stone corrals, where they were sheared for their wool. In modern times they were almost wiped out for their meat and wool. By 1960 there were only 6,000 vicuñas left in the wild. Chile and Peru established protected national parks and put a halt to trade in vicuña wool. Now there are about 125,000 vicuñas, but they are still listed as threatened. The vicuña is classified as vulnerable by the IUCN, and as endangered by the USDI.

China: Funny translations in College English Test. Dire need of training to improve.

China held the National College English Test last Saturday. This year's exam laid more emphasis on subjective questions rather than objective ones. The result was some very funny translations from Chinese into English.

"GPS" for compass, "Pizza Yue" for moon cake. Translations such as these were quite common in this year’s college English test. And once they were published on China’s twitter like service Weibo, they were an instant hit.

"I really don’t know how to translate our traditional cultural concepts." College student said.

"I’d rather answer objective questions because I can at least take chances."

This year’s test required students to translate a passage with 140 to 200 Chinese characters into English within 30 minutes. The passages dealt with Chinese history, culture and economy. But students were baffled. Some translated "royal family" into "the stars of VIP", and "government officials" into "government boss".

"I kept laughing when I saw the translation questions. I believe there are a lot of bizarre translations." College student said.

The new change in the format of the College English Test is part of the overall education reform efforts in China. Some teachers believe the poor translation reflects the drawbacks of China’s exam-oriented system. And there is much to improve.

"We are in dire need of training students to enhance their practical use of the English language." English teacher Ren Ruigang said.

The National College English Test, which began in the 1980s, is a biannual test that determines the English language proficiency of undergraduate students. Some universities will not allow students to graduate without obtaining the certificate, and it is a prerequisite for those entering the job market.

Source: CCTV

Executives in Asia top the global pay league

Executives in the Asia-Pacific region earn the highest base salaries in the world.

According to the Association of Executive Search Consultants, he base annual salary for senior executives in this region during 2013 stands at around 244,000 US dollars. In contrast, executives in the Americas have an annual base salary of 229,000 US dollars.

While the figure for bosses in the emerging markets of Europe, the Middle East and Africa, or EMEA, stands at 212,000 US dollars. In the Asia-Pacific region, most executives made between 201,000 and 250,000 US dollars.

The majority of executives in the Americas were in the same pay range, while the highest percentage of executives in the EMEA made between 151,000 and 200,000 US dollars.

Source: CCTV

Chinese companies seek to expand overseas. Paying Competitive salaries for foreign executives.

Executives in the Asia-Pacific region earn the highest base salaries in the world. According to the Association of Executive Search Consultants, he base annual salary for senior executives in this region during 2013 stands at around 244,000 US dollars. In contrast, executives in the Americas have an annual base salary of 229,000 US dollars.
Source: CCTV

Chinese companies recruit more foreign executives

As China looks to upgrade its exports and open its market, a growing number of foreigners are being hired as executives, by both state-owned and private enterprises. Among them, the former Vice President of Google Android, Hugo Barra - who now works for the firm dubbed "China's answer to Apple", Xiaomi.

It was one of the highest-profile departures from Silicon Valley. In August, Hugo Barra, former Vice-President of Google Android, left for one of China’s most popular smartphone makers, Xiaomi, to lead its overseas expansion.

"China is probably one of the most exciting places to be right now and as an Android guy as a product guy working in the mobile industry for the past 10 years I’ve been following Xiaomi for a while and think it is probably one of the most disruptive companies we’ve seen for a while. So I really wanted to be part of that story and build this new wave which is Xiaomi worldwide.’’ Barra said.

About a week ago, Barra said it’s ready to expand overseas.

Reporter: "As China seeks to make its exports more valuable, a growing number of Chinese companies are hiring foreigners with creative or technological expertise, so Chinese brands can better compete in China and abroad."

Recruiters say foreign executives are entering many industries in China.

"I.T. is doing more hiring in those areas. Oil companies and energy companies are still looking for that foreign expertise as well." Stephen Rice, China training director of Antal International Executive Consultancy, said.

New fast-track visas for so-called "foreign talents" and the possibility of foreign investment into Chinese state-owned enterprises may also lead them to hire more foreigners. And encourage more to take part in their reform. But they don’t come cheap.

"If they’re going to be moving a foreigner from an American company to a company here, most likely they’re going to have to meet or beat their previous salary. Moving a whole family over here, a company has to pay for that moving, has to pay for their housing, often has to pay for one or two drivers. On top of that, if you do have children, you have school to pay for and the company usually takes care of that as well. There also used to be a ’hardship stipend,’ being that life here was seen as being more difficult. Yes and No. Not so much anymore." Rice said.

Experts say pay inequality is a growing source of friction between foreign and Chinese managers.

"They are paid higher at home, so therefore, you cannot expect them to offer a discount by working with Chinese companies... Whereas Chinese managers are paid more on the local level... So that can cause some discomfort, or even jealously." Professor Liu Baocheng form China’s University of International Business & Economics, said.

As more foreigners join the senior ranks of Chinese companies, fitting them in is likely to be a growing challenge.

Source:  CCTV

China’s economy sees smooth sailing ahead

The Chinese economy continues to strengthen in October after economic growth rebounded in the second quarter, confirming a stabilizing economy as China strives to shift its growth model to a more sustainable one.

Retail sales, one of the three main growth drivers for the Chinese economy,rose by 13.3 percent, unchanged compared with September. Growth of urban fixed-asset investment edged down slightly during the first 10 months to 20.1 percent, compared with the 20.2 percent for January to September. Exports witnessed a surprising jump of 5.6 percent year on year, reversing the decline of 0.3 percent in September.

Industrial output increased by 10.3 percent year on year compared with 10.2 percent in September. The increase was led by an 11.4-percent increase in manufacturing, indicating stronger activities in the sector.

Steady consumption and investment demand, expanding industrial production growth and a rebound in exports all suggest that China's growth recovery is consolidating.

Discussions of an economic slowdown of the Chinese economy has intensified in recent months as the country's economy now grows at a more moderate 7.5 percent rate after years of double-digit growth.

Improving October indicators, together with the rebound of China’s economic growth to 7.8 percent in the third quarter, helped build market confidence and ease concerns that structural reform might further slowdown in the world’s second largest economy.

China's new leadership has been pressing ahead with transforming its growth model towards a consumption-led one from an export- and investment-led one. Under such policy environment, China’s economic growth has been consciously slowed down, which economists believe is an inevitable and worthwhile choice to make.

“China used to primarily focus on fast growth and large scale (of economic development), which although brought us 30 years of at least 10-percent growth, also resulted in massive energy consumption, low production efficiency and lack of refined management strategies and innovation,” said Zhao Xijun, vice dean of the School of Finance at Renmin University of China. “If we continue to go down this path, the anticipated economic collapse might actuallycome true,” said Zhao.

According to Zhao, China’s economic development path can be seen as a process from quantitative to qualitative changes. China has entered the stage of qualitative change, during which growth quality, competence and competitiveness, instead of growth rate, should be valued more. From this aspect, China is witnessing improving indicators including lowering energy consumption and increasing production efficiency, said Zhao.

“Therefore, our economy is not heading towards a collapse, but rather an advanced level with higher quality,” said Zhao.

Ding Yifan, aresearcher at a top government think tank, shared Zhao’s view.

Ding, deputy director of the Institute of World Development of the Development Research Center of the State Council, also thinks the current growth rate level of about 7 percent is reasonable. “The current growth rate allows China to effectively implement its economic transformation policies,” said Ding, “We actually don’t want China’s economy to growth too fast, because it would bring many negative impacts such as high inflation.”

Although China’s recovery momentum is stronger than previous expectations, its sustainability lies in the success of the country’s structural reform. Economists believe the deepening and broadening of the reform is the key to a sustained recovery and a more healthy growth model.

“Reform plays a vital role in taming the slowdown and reviving the economy. Unless major and substantial measures are taken in the reform, it can be difficult to thoroughly change negative economic conditions,” said HuoJianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce.

The long-awaited third plenum of the 18th Communist Party of China Central Committee convened in Beijing last week. The meeting laid out a full package of economic reform, including giving prominence to the market, opening wider to foreign and private investors and building more free trade zones. These measures, hailed by investors and experts as breakthroughs, are expected to change China’s economic landscape in the next decade.

The Large Magellanic Cloud, a satellite galaxy of the Milky Way

CCTV

Japan: F35 stealth fighters may replace aging JSDF planes

Japan's Defense Ministry is considering the introduction of F35 stealth jets as the Air Self-Defense Force's next mainstay fighter aircraft.

The move is based on the government's new defense program guidelines, approved by the Cabinet on Tuesday.The guidelines call for maintaining superior air-combat capability, possibly to defend remote islands in southwestern Japan, as China moves to increase its maritime presence in the area.
Separately, Japan has already decided to introduce 42 F35s to replace the country's retiring F4 fighters.

Source: NHK

What will happen in Latin American's Economies if the cycle crashes?

Which country will be damaged most if the price of basic goods falls?

In its 2013 macroeconomic report on Latin America and the Caribbean, the Inter-American Development Bank estimates the impact on incomes as a potential percentage of gross domestic product for Latin American countries in the event of a 25 percent reduction in the prices of primary goods. Under the title “Rethinking Reforms: How Latin America and the Caribbean Can Escape Suppressed World Growth,” the report estimates that the biggest loser would be Ecuador, with a fall of 4.5 percent in its GDP potential, followed by Bolivia, where it would drop by 3.8 percent. Venezuela and Mexico would end up with sizable reductions in their GDP potentials, 2 percent for Mexico, and 3 percent for Venezuela, while Chile and Peru would see their GDP potential decline by 1 to 1.5 percent. Argentina and Colombia would be the least affected countries in the region in this scenario, with a dip in GDP potential of about 0.5 percent.

Source: LatinTrade

Global economy is improving, but remains vulnerable: UN report

Global economy is improving, but remains vulnerable to new and old headwinds that could derail growth, a UN report said here Wednesday, adding that a bumpy exit from quantitative easing by major central banks poses risks for financial stability and global growth.

Global economic growth should increase over the next two years with continuing signs of improvement, according to the United Nations World Economic Situation and Prospects 2014 (WESP) report, which is launched here Wednesday.

The global economy is expected to grow at a pace of 3.0 percent in 2014 and 3.3 percent in 2015, compared with an estimated growth of 2.1 percent for 2013.

The world economy experienced subdued growth for a second year in 2013, but some improvements in the last quarter have led to the UN's more positive forecast. The euro area has finally ended a protracted recession.

Growth in the United States strengthened somewhat, the report said, adding that a few large emerging economies, including China and India, managed to backstop the deceleration they experienced in the past two years and veered upwards moderately. These factors point to increasing global growth.

According to WESP, inflation will remain tame worldwide, but the employment situation will continue to be challenging. While growth in international trade flows is expected to pick up moderately to 4.7 percent in 2014, the prices of most primary commodities are projected to be flat, although any unexpected supply-side shocks, including geo-political tensions, could push some of these prices higher.

The report warns that international capital flows to emerging economies are expected to become more volatile.

"Our forecast is made in the context of many uncertainties and risks coming from possible policy missteps as well as non-economic factors that could stymie growth," Shamshad Akhtar, the UN assistant secretary-general for economic development, said at a press conference here to launch the report.

In the United States, fiscal tightening and a series of political gridlocks over budgetary issues weighed heavily on growth; however, quantitative monetary easing boosted equity prices. The U.S. labor market and housing sector continued to recover, the report said. Gross Domestic Product (GDP) in the U.S. is expected to increase 2.5 percent in 2014.

Western Europe emerged from recession in 2013, but growth prospects remain weak, as fiscal austerity will continue and the unemployment rates remain elevated. GDP in Western Europe is expected to grow by 1.5 percent in 2014.

Growth in Japan has been boosted by a set of expansionary policy packages, but the effects of forthcoming structural reforms remain uncertain and an anticipated increase in Japan's consumption tax rate is expected to curb growth. GDP is forecast to grow by 1.5 percent in 2014.

DEVELOPING COUNTRIES

Growth prospects among large developing countries and economies in transition are mixed. Growth in Brazil has been hampered by weak external demand, volatility in international capital flows and tightening monetary policy, but growth is expected to rebound to 3 percent in 2014, said the report.

A slowdown in China has been stabilized and growth is expected to maintain at a pace of about 7.5 percent in the next few years. India experienced its lowest growth in two decades, along with large current account and government budget deficits plus high inflation, but growth is forecast to improve to above 5 percent in 2014.

In Russia, growth weakened further in 2013, as industrial output and investment faltered, and is expected to recover modestly to 2.9 percent in 2014.

Among developing regions, growth prospects in Africa remain relatively robust. After an estimated growth of 4.0 percent in 2013, GDP is projected to expand by 4.7 percent in 2014, the report said.

The report emphasized the dependence of Africa's growth on investment in infrastructure, trade and investment ties with emerging economies, and improvements in economic governance and management.

More detailed regional forecasts from WESP will be released in January 2014, UN officials said here.

RISKS AND UNCERTAINTIES

The report stressed that the risks associated with a possible bumpy exit from the quantitative easing programs by the U.S Federal Reserve (Fed) threaten the global economy, the UN report said.

As already seen somewhat during the summer of 2013, efforts by the Fed to pull out of quantitative easing programs could lead to a surge in long-term interest rates in developed and developing countries.

Tapering could also lead to a sell-off in global equity markets, a sharp decline of capital inflows to emerging economies and a spike in the risk premium for external financing in emerging economies.

These first-round shocks in international financial markets could transmit quickly to developed and developing economies.

The report warns that as the Fed is expected to taper and eventually unwind its quantitative easing programs, emerging economies will face more external shocks. While economic fundamentals and the policy space in many emerging economies are better than when the Asian financial crisis erupted in 1997, emerging economies with large external imbalances remain particularly vulnerable.

Other uncertainties and risks include the remaining fragility in the banking system and the real economy in the euro area and the continued political wrangling in the U.S. on the debt ceiling and the budget, said the report.

Beyond the economic domain, geopolitical tensions in Western Asia and elsewhere remain serious risks. These and other risk factors, unfolding unexpectedly, could derail the world economy far beyond the report's projections.

GREATER POLICY COORDINATION NEEDED

With multiple and complex challenges facing the world economy, the report calls for strengthening international policy coordination.

"The primary focus of globally-concerted and coherent policy actions should be a stronger recovery, particularly the recovery of jobs," Pingfan Hong, an expert on world economy and UN team leader for the report, said at the press conference.

"We must also increase attention to reducing the spillover effects coming from the large-scale, unconventional monetary policies adopted by major developed countries on developing countries and economies in transition, particularly when major developed countries start to unwind these policies," he said.

International policy cooperation and coordination are also needed to advance the reforms of the international financial system. Progress in financial regulatory reform has been slow, encountering growing resistance from the financial industry.

The report said that more forceful efforts are needed to address the issues of international tax avoidance and evasion, particularly through tax havens. WESP also reiterated that international policy cooperation should ensure sufficient resources to the least developed countries.

Source: Xinhua

Japanese cabinet approves new national security package

Japan has approved a new security strategy, which will boost its national defense spending. It's been widely seen as aimed at China, as well as potential threats from the Democratic People's Republic of Korea. Prime Minister Shinzo Abe said he aims to boost Tokyo's standing as a contributor to global peace and security, amid suspicion among neighboring countries on what Japan has claimed.

Japan’s cabinet has approved a new national security strategy on Tuesday.

Beefing up its defense spending over the next five years, reenforcing its defenses with hardwares including drones, aircraft and amphibious vehicles.

Tokyo is also aiming to build a new amphibious force, similar to the US Marines, capable of retaking islands.

The announcement comes weeks after China declared its new air defense identification zone (ADIZ) which over laps with Japan’s.

"This new security strategy will show Japan’s diplomatic and security policy to the Japanese people, as well as the international community, with clarity and transparency. Through international cooperation and our ’proactive’ peace policy, we will continue our effort to make even more of a contribution to international peace and stability." Abe said.

Analysts say it was apparent that Tokyo shifted its priorities from northern Japan to the East China Sea.

"Taking into consideration the recent security situation - for example the case of North Korean missiles, or the current tension in the East China Sea - we believe we have shown our position, that the safety and security environment is changing and Japan needs to resolve issues head-on." Japanese defense minister Itsunori Onodera said.

Many worry that tensions in East China sea is already heightened and military build up in both sides would only raise risk of conflict.

"Japan should ask what is the best security measure for the country. Maintaining a healthy relation with China would be the most sound solution for Japan’s security." Columnist Mo Bang-fu said.

Reporter: "Prime Minister Shinzo Abe has accelerated his move to strengthen Japan’s security, even with the risk of loosing considerable amount of public support. Setting up National Security Council, the new security strategy and issues on whether to change Japan’s pacifist constitution still to be debated next year. Experts fear that these recent events would slim chance for dialogue between Tokyo and Beijing.”

Source: Xinhua

Abe's three shots at pacifism

It is hardly cheering news that a country whose leaders still salute war criminals has formally launched its military reconstruction.

Approving Japan's security strategy, defense program guidelines and mid-term defense program on Tuesday, the Cabinet of Japanese Prime Minister Shinzo Abe officially mandated his doctrine of "proactive pacifism", which heralds a new round of Japan's military buildup.

Serving as a guideline for Japan's foreign and defense policies, the first national security strategy sets Japan on a course toward greater involvement in military-related matters, with reduced emphasis on diplomacy.

Based on the national security strategy, Japan's national defense program guidelines and mid-term defense program show a Japanese army that will be beefed up in the coming decade.

If this is what Abe's "proactive pacifism" is about, he is steering his country along a dangerous path.

It spells a radical break with Japan's post-World War II tradition of keeping a distance from international conflicts and trying to build peace through nonmilitary means, which has earned Japan the trust of the international community. Pacifism is one of postwar Japan's central values many Japanese have accepted.

Abe's "proactive pacifism" doctrine is essentially turning Japanese self-defense forces into "ordinary armed forces".

Since coming into power in December 2012, Abe's government has openly criticized China, toughened its stance on Japan's territorial dispute with China, boosted military spending and taken steps to free the country's military from the constraints imposed by the Japanese Constitution.

The revision of the guidelines for the Japan-US defense cooperation, which is due next year, will formalize "robust" new military arrangements between the two countries and facilitate Abe's plan to build "a strong military".

It is worthwhile noting that this advocate of the doctrine of "proactive pacifism" is a historical revisionist who minimizes or ignores Japan's wartime atrocities.

He succeeded in having his doctrine incorporated into the joint statement the Japan-ASEAN summit issued on Saturday.

In doing so, he asked the Southeast Asian nations to take sides with Japan to contain China. He has been planting seeds of distrust and even hatred in Southeast Asia, driving a wedge between the region and China.

If this is part of his "proactive pacifism" doctrine, it will invite confrontation rather than make peace.

The catchy but vague expression "proactive pacifism" is Abe's camouflage to woo international understanding of Japan's move to become a military power.

Source: China Daily

Xinhua Insight: Tianjin's abrupt car-buying restriction raises doubts

 A newly imposed limit on private car ownership in north China's Tianjin Municipality has caught citizens unprepared, prompting questions over the rule's abruptness and necessity.

The Tianjin municipal government announced on Sunday evening that the city would impose a quota on its new car license plates, requiring residents to obtain a plate through either bidding in auctions or joining lotteries.

The policy, as part of the city's efforts to battle congestion and air pollution, took effect only five hours after its announcement at 7 p.m., touching off panic-buying of both new and second-hand vehicles.

On Sunday night, car dealers in Tianjin were teeming with anxious customers, some of whom rushed to the store even without changing their pajamas or work clothes.

To handle the purchase frenzy, some stores temporarily required all buyers to pay in full and rejected phone orders.

"The rule came in such a hurry. Why not hold a hearing beforehand to solicit opinions from citizens? Or at least they can pilot the scheme for some time before making it a permanent policy," said a postgraduate student surnamed Cao in Tianjin.

Cao planned to purchase a home in the city's outskirts, where house prices are much lower than downtown areas, and then buy a car to commute to work after her graduation next year. However, the car-buying restriction wrecked her plan.

"Also, I don't think bidding for car plates is fair to ordinary working-class people, since the rich can simply pay extra money to bypass the limit," she said.

So far, the city government has not revealed details on the quota or how many plates will be allocated by lottery compared with auction.

Previously, Beijing, Shanghai, Guangzhou and Guiyang have restricted the number of vehicles registered each year.

Beijing and Guiyang issue plates through a lottery while Shanghai uses a bidding scheme. Guangzhou adopts both systems, half issued through bidding, the other half through a lottery.

Between the Guangzhou city government announcing the limit in June and the rule taking effect, there were only three hours for residents to snap up cars.

Guan Xinping, a sociology professor at Tianjin-based Nankai University, said the government of Tianjin made the abrupt announcement of the car-buying limit in the evening in order to avoid stronger social panic and other over-reactions.

"If the policy had been unveiled a month before it took effect, that would have triggered a longer period of panic-buying," said Guan.

Even though the government's intention was understandable, he said, its approach may not be the best option.

"Authorities should fully consult the public before rolling out a rule like this, which affects the interests of many people," according to the professor.

In fact, there were hints of the car-buying limit in Tianjin earlier this year. In August, a development guideline issued by the city government said it would consider curbing the number of cars on the road. In early December, the city's deputy mayor made similar remarks in a TV show on the state television network CCTV.

QUICK FIX

Another controversy swirling around the policy is whether the city, with 2.36 million motor vehicles registered in 2012, really needs to follow the step of Beijing, which has 5.3 million cars.

In addition to the purchase limit, the Tianjin government said on Sunday that it would also adopt a traffic restriction scheme, which keeps cars off the roads depending on the last digit of their plates, copying Beijing's move starting five years ago.

The ban, which will come into force on March 1 next year, is expected to take one-fifth of the city's private cars off the roads on workdays.

A statement from the city government said the "explosive" growth of car ownership, a surge of a million in the past three years, has resulted in severe traffic gridlock.

Previous government data indicated that vehicle emissions account for 16 percent of the city's fine particulate matter PM2.5, constituting an important contributor to its lingering smog.

The buying limit and traffic restriction will certainly restrain the number of vehicles, but they are not permanent solutions, warned Li Yuheng, a senior researcher with CIConsulting, a leading domestic consulting firm specializing in industry research.

The fundamental problems are the excessive concentration of the city's resources and defective transport planning, Li said. He suggested the government transfer some industries away from the city's core areas.

Auto industry insider Jia Xinguang added that the most effective measure to alleviate traffic jams is to develop rail transit, which should handle at least 60 percent of the city's traffic flow.

"Counting on restrictions on vehicles to cure the 'city disease' is like giving cancer patients pain killers," Jia said.

Tianjin's mass transit systems lag far behind Beijing and Shanghai, as the city of 14 million people has only three subway lines.

In a guideline issued in September, the government of Tianjin set goals for the development of the public transport network.

It vowed to extend the length of the city's subway lines to 183 km and the length of exclusive bus lanes to 194 km, as well as increase its bus routes to 621 by 2015.

Xinhua Insight: Brakes slammed on official car abuse

 Five out of six government vehicles will be auctioned off, and civil servants will have to budget car use, Xinyu City in east China's Jiangxi Province announced on Tuesday.

The move is one more step forward in the crackdown on inappropriate use of government vehicles and the resulting waste of public funds.

The remaining one-sixth of government vehicles -- about 130 cars -- will be managed and supervised collectively by a public vehicle service center, according to the new regulations which go into effect on Jan. 1.

According to the city, estimated administrative costs of up to 15 million yuan (2.47 million U.S. dollars) will be saved each year.

Public servants will receive a transportation card for car use with limited credit based on their rank. When the credit runs out, they will have to take a bus or taxi, at their own expenses.

Car use will be policed across the whole authority to ensure vehicles are available for law enforcement, confidential communication, emergency services, special and technical needs, said Hu Yongliang, of the city' s discipline inspection commission. The vehicle auction will go to auction agencies that can stand up to supervision by the public, media and discipline authorities.

Courts, procuratorates, public security bureaus, schools, hospitals and some other administrative bodies are temporarily excluded from the reform, but labels and GPS monitoring will monitor any illicit private use, Hu said.

"The regulations are more stringent than the requirements of central authorities, and more innovative compared with other cities," said Fu Shuizhu, deputy head of vehicle reform.

PUBLIC ENEMY

Official vehicles are one of the "three guzzlers" of public funds (the other two being overseas trips and receptions) that are most likely to offend the public.

Last December, the new leadership issued a package of rules specifically attacking misuse of official vehicles.

In November, the central government standardized fund management and banned Party and government extravagance, specifically identifying management of official vehicles as a defining problem. Those who violate the rules could have their behavior exposed to the public, be demoted or even fired.

In November, the Communist Party of China (CPC) disciplinary watchdog cited 4,851 cases of private use of government cars by officials, about one-third of all violations of the frugality rules.

Plenty of government officials treat official cars as if they were their own and use them to send children to school, go shopping or for long distance travel.

"I never had to worry about gas or expressway tolls going home in an official car at weekends," said a deputy county head in central China who works some 300 km away from his hometown, "but the good old days are gone."

China may have over two million government cars, according to Ye Qing, vice director of the Hubei Statistics Bureau in central China. It is hard for discipline officials to monitor the use of every car, Ye said.

NATIONAL MOVEMENT

Less stringent, but still effective, moves have been implemented in other cities.

Yongsheng County of Lijiang City in southwest China's Yunnan Province labels "name cards" on government cars, meaning the public can easily identify them and report misuse. The practice is shared by the government of Sihong County in east China's Jiangsu Province.

In south China's Guangzhou, GPS technology and a user identification system were adopted two years ago, which the discipline commission estimates saved 40 million yuan in a single year.

The 400 government vehicles in Qitai County of northwest China's Xinjiang Uygur Autonomous Region are monitored 24 hours a day via GPS.

"It is an irresistible trend for local governments to demolish general use of official cars. With a significant decrease in government cars, related discipline violation will naturally diminish," said Wu Zhongmin, a professor of sociology at the Party School of the Central Committee of the CPC.

Source: XINHUA

Melco bets on Japanese culture as casino debate heats up

Casino operator Melco Crown Entertainment Ltd on Wednesday said it had pledged $10 million for cultural projects in Japan, a signal of its commitment to the country as lawmakers take steps to legalise casino gambling.

Melco is one of several global casino operators including Las Vegas Sands lobbying for a position in the Japanese market, seen as the next big Asian gaming opportunity after the spectacular rise of Macau.

The Hong Kong-listed, Macau-based casino operator made no mention of its commercial interest in Japan when it announced its commitment to Tokyo's University of the Arts, although its desire to participate in any liberalisation of the Japanese industry is well known.

Melco Crown is the fourth biggest casino operator by market capitalisation in Macau, which overtook Las Vegas as the global gaming capital in 2006. The southern Chinese territory is on course to generate over $43 billion in gaming revenue this year.

A group of lawmakers earlier this month submitted a bill towards legalising casino gambling in Japan. They hope to pass the bill in the first half of next year, and enact concrete regulations by 2015.

The bill is backed by Prime Minister Shinzo Abe and is thought to have a decent chance of passing. Lawmakers hope the first casino resort could open in time for the Tokyo Olympics in 2020.

Source: Reuters

Tokyo Governor Inose to resign over Tokushukai loan

Tokyo Governor Naoki Inose has decided to step down over an undeclared 500-million-yen loan he received from scandal-tainted medical group Tokushukai ahead of the Tokyo gubernatorial election in December last year, informed sources said Wednesday.

Inose, 67, will hold a press conference Thursday morning to announce his decision to step down, the sources said. He will thus leave only a year after he won his first term as governor of the Japanese capital in the election on Dec. 16, 2012.Inose became vice Tokyo governor in June 2007, asked by Ishihara, then governor of Tokyo. He had worked as a writer before.

Source: Jiji Press

Songs announced for NHK's New Year's Eve concert

NHK has announced the list of songs to be performed at its annual New Year's Eve concert.

The public broadcaster's Red and White Singing Contest is one highest rated TV show's every year and a showcase for the music industry.

Fifty-one artists, both solo vocalists and groups, will take part in the marathon song festival, which lasts 3 hours and 15 minutes. This year's theme is "A song for here and now."

Veteran singer Mariko Takahashi will appear for the first time in 29 years, performing her well-known standard "for you...."

Enduring pop idol Seiko Matsuda will sing a duet with Chris Hart from the United States called "New Year's Eve Special Love Song Medley 2013".

Source: NHK

Japan: Itai-itai disease case settled

The issue of itai-itai disease, one of Japan's four major pollution-related diseases, was fully resolved on Tuesday as the company that caused the pollution and a victims' group agreed on a compensation package.

Mitsui Mining & Smelting Co., which is responsible for the pollution that caused the disease in areas along the Jinzugawa river in Toyama Prefecture, will pay compensation to sufferers of cadmium nephropathy, a kidney disorder.

Cadmium nephropathy is regarded as a preceding stage leading to itai-itai, or "it hurts, it hurts," disease. However, sufferers are not recognized by the government as victims of pollution-related diseases.

Mitsui Mining President Sadao Senda and Kunihiro Takagi, head of the victims' organization, signed the deal in Toyama city. Toyama Gov. Takakazu Ishii acted as a witness.

Due to kidney tubule failure, nephropathy patients suffer from brittle bones due to a loss of calcium through urine.

Itai-itai disease affected people who consumed water and rice contaminated by cadmium in the Jinzugawa river. The cadmium came from the Kamioka mine in Gifu Prefecture.

Source: Yomiuri

Japan exports rise but trade gap widens on weak yen

Japan's exports rose for a ninth consecutive month in November, led by car shipments to the United States and China, a sign the weak yen and a recovery in global demand are energizing a major growth driver in the world's third-biggest economy.

The 18.4 percent rise roughly matched the median estimate of a 17.9 percent increase from a Reuters poll of economists, and followed an 18.6 percent gain in October, Ministry of Finance data showed on Wednesday.The weak yen, however, also inflated the cost of imported fuels resulting in a widening trade gap.
The persistent trade deficit could be a source of concern for Japanese policymakers who had hoped a weakening currency would be more of a boon for the economy by making Japanese goods cheaper overseas.
While the yen has fallen around 16 percent against the dollar this year, export growth has largely fallen short of early expectations, falling 0.2 percent in November from the previous month on a seasonally adjusted basis.

Source: NewsOnJapan

China protects key river sources

China plans to strengthen the environmental protection of the Sanjiangyuan region of the Qinghai-Tibet plateau, the source of important rivers. With an average altitude of 4,000 meters, Sanjiangyuan, which means "source of three rivers" in Chinese, lies in the hinterland of west China's Qinghai-Tibet Plateau and is home to China's biggest and highest wetlands ecosystem. A newly-approved protection plan for the region aims to expand the rehabilitation area from 152,000 to 395,000 square kilometers, according to a statement released after Wednesday's executive meeting of the State Council, the country's Cabinet, presided over by Premier Li Keqiang. According to the plan, efforts will focus on protecting and rehabilitating vegetation in the area while improving a monitoring and warning network for local ecological conditions. Meanwhile, a separate plan on lakes whose water quality are relatively sound was also approved at the meeting. It called for adjusting the industrial structure and distribution in major lake areas and strengthened pollution control of rivers that flow into these lakes. The statement encouraged strengthened scientific management, wider use of proper technology and the strictest source protection rules, calling for greater government investment and a balance among environmental protection, economic development and people's livelihoods. Also at the meeting, a report was delivered on combating sandstorms in Beijing and Tianjin, urging more forestation subsidies from the central government and a responsibility pursuit system for forests management. "Unapproved tree felling, land reclamation, farming, digging and the use of water resources in the forested areas must be strictly cracked down on," said the statement. In addition, the meeting approved a blueprint on establishing a multifunction ecological experimentation zone in northwest China's Gansu Province that incorporates water saving, ecological protection, industrial restructuring, resettlement of residents and poverty relief.

Hong Kong has more room for development: Xi

President Xi Jinping has promised more room and opportunities for Hong Kong's development.

Xi made the remarks on Wednesday after hearing a report by Leung Chun-ying, Chief Executive of Hong Kong Special Administrative Region (HKSAR), on the regional situation and HKSAR government work in the past year.

Xi said that the central government fully affirms the work of Leung and the HKSAR government in maintaining stability while seeking changes, giving priority to people's livelihoods and solving obvious issues in social and economic development.

According to Xi, last month's decision on reform by the Third Plenary Session of the 18th Communist Party of China Central Committee will lead to strengthened cooperation and exchanges between the mainland and Hong Kong, and Hong Kong will gain more opportunities and space for development.

Xi said that the central government standpoint on the election of Hong Kong's next Chief Executive by universal suffrage in 2017 is persistent and clear.

Xi expressed his hope that people from all walks of life in Hong Kong would unite and lay the foundation for a smooth election.

Source: Xinhua

China urges U.S. to be cautious on South China Sea issue

China on Wednesday rebuffed U.S. Secretary of State John Kerry's remarks on the South China Sea issue and urged the country to be cautious in its words and deeds.

"We have noticed his remarks," said Foreign Ministry spokeswoman Hua Chunying at a regular press briefing in response to Kerry, who said on Tuesday that the United States would speak out when China took unilateral actions that raised the potential for conflict.

"We hope the relevant country will respect the efforts made by China and countries of the Association of Southeast Asian Nations  on the South China Sea issue, strictly abide by its commitment of not taking a position, and be cautious with its words and deeds," she said.

Hua noted China always stands for a resolution of the South China Sea issue through direct negotiations among relevant countries, and keeps smooth and effective communication with ASEAN countries on the South China Sea code of conduct.

The spokeswoman urged the United States to be more helpful for the mutual trust among countries in the region and the peace and stability of the region.

Hua also slammed criticism by Japan and the Philippines on China's East China Sea Air Defense Identification Zone (ADIZ), urging them to stop sowing discord.

"The performance of relevant parties is enough and should be stopped. If they really care about the region's peace and stability, they should treat this objectively and fairly and stop sowing discord," Hua said.

Source: Xinhua

Premier Li supports Macao administration

Premier Li Keqiang on Tuesday met with Chui Sai On, chief executive of the Macao special administrative region, pledging full support for the region's lawful administration.

Li praised the regions' achievement in boosting economy and improving people's livelihood as "positive", saying that the overall situation in Macao is good.

Li said that the central government will uphold the "one country, two systems" policy and fully support governance of Chui and the Macao government in accordance with law.

The decision on "comprehensively deepening reform," which was announced after a plenum of the Central Committee of the Communist Party of China in November, is expected to bring more development opportunities for Macao, the premier said.

More efforts should be made by people from all walks of life in Macao in order to prompt the region's sustainable development, as well as contribute to the whole country's modernization drive, Li added.

Source; Xinhua

LatinTrade: By 2030 half of the world's capital stock will be in developing countries

By the year 2030, half of the world’s capital stock will be in developing countries. This is suggested in Capital for the Future: Saving and Investment in an Interdependent World, from the World Bank, which studies different investment and savings scenarios for the next 20 years. Global capital stock will move to the developing world and, along with South Asia, Latin America and the Caribbean, will be the region that will get the lion’s share in this transition. However, a fairer distribution of welfare and capital on a global scale does not necessarily mean that the same redistributive changes will occur within countries. In developing economies, welfare and capital savings are still very much limited to high-income households. Moreover, the less educated groups of population tend to have lower incomes throughout their lives, and thus to make very little or no savings at all. This is why they cannot escape the poverty trap, an undeniable situation in Latin America. For this reason, the book states that to avoid the perpetuation of unduly differences in income, savings and welfare, it is necessary to have a thorough “redistribution” of education amongst workers.

Developing countries will represent more than half of global capital stocks by 2030. (a. 2030 Panel projections assume a gradual convergence scenario of annual world economic growth of 2.6 percent over the next two decades, of which developing (high-income) growth will average 5.0 (1.0) percent annually.)

LatinTrade: Entrepreneurship and social mobility

The Inter-American Development Bank (IDB) has published the study Is Entrepreneurship a Channel of Social Mobility in Latin America? in which its authors, Francesca Castellani and Eduardo Lora, find that entrepreneurship doesn’t occur among people by chance. In fact, the evidence shows that entrepreneurs are found more frequently among higher-income groups who have more probability of having experienced intergenerational social mobility – that is, who have more years of education than their parents. The authors also show that in Colombia, for example, entrepreneurship is more common among more educated older men. In Uruguay, the children of entrepreneurs receive more years of education than the children of those who are not in business, regardless of the education level of the parents. The results of these two countries suggest that entrepreneurs are as much the result of more social mobility, as they are the cause of it. In Mexico, the authors found that the probability of becoming an entrepreneur increases when the father has also established a business of his own, which suggests that there is a high “model to follow” effect.

LatinTrade: Growth Opportunities in the United States over next 10 years.

According to Game Changers: Five opportunities for US growth and renewal, a report published by McKinsey Global Institute (MGI), growth in the United States over the next 10 years will come from five sectors: energy, trade, technology, infrastructure and talent. The latter two sectors will be important sources of growth until 2030. Latin America has enormous opportunities in some of the five catalysts identified by the global consultant, mainly in trade, infrastructure and energy, given that, in addition to favoring trade with the United States, the region could increase the investment of its multinationals by having a presence in these sectors there. To identify the catalysts, MGI looked for developments that are at the point of achieving scale, as well as areas with an immediate opportunity for action. The catalysts could have an effect on the demand from stimuli that the economy will receive in the short run and could also have longer-term effects which favor American competitiveness and productivity. If we are to take seriously the recommendations of the report, we would be close to a takeoff point for the American economy that Latin America could capitalize on.

IMF: Commodity Market Review. Impact of slowing emerging market growth on commodity prices metals and energy.

Metals prices have declined while energy and food prices have edged up. The IMF’s Primary
Commodities Price Index is unchanged from March 2013, with declines in metal prices offset
by small gains in food and energy prices of 1 and 2 percent, respectively.
 The steep fall in metal pricesowes much a continuing rise in metals mine supply from large investments in recent years and some signs of a slowing real estate sector in China.
Oil demand has slowed particularly in China, India and the Middle East. Although coal and natural
gas prices have fallen , oil spot prices have remained above US$ 105 a barrel, reflecting various supply outages and renewed geopolitical concerns in the Middle East and North Africa. In addition
new pipeline infrastructure in the U.S. has allowed surplus crude in the mid-continent to reach
coastal refineries and U.S. crude prices to rise. Elevated crude oil prices have played a role in keeping food prices relatively high because energy is an important cost component.Despite
slowing growth demand for food has remained high in China, and is particularly reliant on world markets for oilseeds, imports accounted for nearly 60% of total oilseeds consumption in 2013.
A slowdown in economic activity in emerging markets is a driver of commodity price declines.
The correlation between growth in commodity prices and growth in macroeconmic activity in emerging markets is very high;the correlation between the first principal components of the two is
0.80. Moreover declines in economic growth lead to substantial declines in commodity price
growth for several months.
Commodity price declines can have important and disparate effects on trade balances across and
within regions. The estimated direct(first-Round) effects on trade balances from commodity
price declnes of the magnitude seen during the past six months can be important for some regions.

As shown in Table 1, a 30 percent decline in metals prices and a 10 percent decline
in energy prices would broadly lead to deterioration in balances for the Middle East,
economies in the Commonwealth of Independent States, Latin America, and Africa, offset by
improvements in Asia and Europe. Within regions, the impacts are heterogeneous—for
example in Africa, the Western Hemisphere and the Middle East.
  The IMF has estimated that the impacts of a slowdown in Chinese growth of 10% during the
previuos decade to an average 71/2% over the coming decade. The calculations are the
declines in net revenues(as a percentage of GDP, adjusted for Purchasing Power Parity) for various commodity exporters as a result of lower Chinese demand. For example, Mongolia's GDP level in
2025 is estimated to be about 7% lower than otherwise,primarily as a result of slower chinese demand for coal,iron ore and copper.



To the degree that the chinese slowdown is anticipated in forward-looking prices, some of this
slowdown may already have begun to affect exporters.Nevertheless this chart provides an approximate and illustrative ranking of countries that, in the absence of policy responses or offsetting favorable shocks, might be somewhat vulnerable in the short run to chinese demand
rebalancing. In addition to oil exporters, countries that appear vulnerable by this metric include
Australia,Brazil,Chile and Indonesia.

Source: Commodity Market Review.
            World Economic Outlook . October 2013
             International Monetary Fund