Mexico to trump Japan as No. 2 car exporter to US

Mexico is on track to become the United States' No. 1 source of imported cars by the end of next year, overtaking Japan and Canada in a manufacturing boom that's turning the auto industry into a bigger source of dollars than money sent home by migrants.

The boom is raising hopes that Mexico can create enough new jobs to pull millions out of poverty as northbound migration slows sharply, but critics caution that most of the new car jobs are low-skill and pay too little. Mexico's low and stagnant wages have kept the poverty rate between 40 and 50 percent since the passage of the North American Free Trade Agreement two decades ago.An $800 million Honda plant that opened Friday in the central state of Guanajuato will produce more than 200,000 Fit hatchbacks and compact sport-utility vehicles a year, helping push total Mexican car exports to the U.S. to 1.7 million in 2014, roughly 200,000 more than Japan, consulting firm IHS Automotive says. And with another big plant starting next week, Mexico is expected to surpass Canada for the top spot by the end of 2015.

Source: Washington Post

Japan: The nation's real estate investment trusts are offering the most bonds since 2012 as Prime Minister Shinzo Abe's stimulus...

The nation's real estate investment trusts are offering the most bonds since 2012 as Prime Minister Shinzo Abe's stimulus steps spark a property-market boom and cut costs for REITs to refinance.

Five issuers, including Sekisui House SI Investment Co. and GLP J-Reit, have sold ¥25 billion in notes so far this month, the most since November 2012, data compiled by Bloomberg show. Sekisui offered five-year debt at 0.374 percent on Feb. 18, compared with 0.63 percent for similar-maturity bonds a year earlier. The average yield on U.S. REIT debt was 3.1 percent, according to Bank of America Merrill Lynch data.Abe's stimulus program to beat deflation has spurred a revival in the real estate market that has seen one gauge of prices stay near the highest in more than four years. Mizuho Securities Co. expects the trusts to focus on refinancing debt after industry data showed they raised ¥1.1 trillion via equity sales last year, more than double the amount in 2012.

Source: Japan Times

China pharmaceutical industry sees steady growth

China's pharmaceutical industry, despite the challenges resulted from sluggisheconomies in the European Union and United States,has managed steady growth in 2013,official data showed

Main business revenues in the industry amounted to 2.17 trillion yuan ($355.4 billion) last year, a year-on-year increase of 17.9 percent, said a statement on the website of the NationalDevelopment   and Reform Commission.

The pharmaceutical industry saw profits rise 17.6 percent to 219.7 billion yuan last year, with   fast growth seen in Traditional Chinese Medicine, according to the commission.

In 2013, exports and imports in the industry totalled $89.7 billion, rising 10.3 percent from theyear earlier. Exports gained 6.8 percent while imports jumped 15.2 percent, the statement said.

Source: Xinhua

China to finance new farming practices

 China will offer customized financial services to new farming practices to pushagricultural modernization, China's central bank said on Friday.

Financial institutions should give more credit support to innovative farming entities such as familyfarms and agricultural cooperatives by adjusting loan rates, maturity length and collateral,according to a statement released by the People's Bank of China.

The move is designed to promote moderate-scale farming operations and modern agriculture byeasing financing difficulty for farmers.

Loans' maturity length can be extended up to 10 years if farmers plant fruits, trees and othercrops with long growth circles, the statement said.

Diversified and innovative financing choices will be offered to meet different farming businessneeds, with support focusing on production materials and machinery purchase, land contractsand other infrastructure development.

Qualified family farms may enjoy specially designed approaches in the inter-bank market to sellbonds to investors publicly or privately , the statement added.

Last December's central agricultural work conference and the No. 1 central document onagricultural development issued in early January both highlighted the promotion of new farmingbusiness models and the need to encourage diversified agriculture practices.

Source: Xinhua

China's manufacturing activities are likely to contract for a second consecutive month in February

China's manufacturing activities are likely to contract for a second consecutive month in February, reaching their lowest point since July, British bank HSBC Holdings Plc said onThursday.

The manufacturing Purchasing Managers' Index is forecast to drop to a seven-month low of 48.3from 49.5 in January and 50.5 in December, due to slumps in each sub-index, including output,new orders and employment, HSBC said.

The flash reading of the HSBC manufacturing PMI in February may have reflected reneweddestocking activities as new orders and production contracted, said Qu Hongbin, chiefeconomist in China and co-head of Asian Economic Research at the bank.

"The building up of disinflationary pressures implies that the underlying momentum formanufacturing growth could be weakening," said Qu, who still expressed confidence about thegovernment's current policy and possible fine-tuning to stabilize growth.

Louis Kuijs, chief economist in China at the Royal Bank of Scotland, said "not to read too much"into the weak February PMI reading as the Lunar New Year holidays made it difficult to interpretthe figure.

"We remain quite confident that most of China's growth drivers remain in place, and the globaleconomy is recovering, and this will help China's economy, too," he said.

Kuijs said the economy will not slow dramatically, because of strong credit and financing supportthat was released by the central bank.

In January, new loans increased to 1.32 trillion yuan ($218 billion), compared with 482.5 billionyuan in December, and total social financing rose to 2.58 trillion yuan from 1.23 trillion yuan inDecember, data from the People's Bank of China, the country's central bank, showed. Thegrowth rates of both readings were higher than expected.

The central bank highlighted the facts that the economy's dependence on investment and debtfinancing continues to rise and that potential risks in the financial sector are the key concerns.

Worries about a further slowdown in the Chinese economy surfaced after the fourth quarter of2013, when the government released no signals about easing monetary policy in the short term.

The official manufacturing PMI for January dropped to a six-month low of 50.5 from 51 inDecember and 51.4 in November, lower than market expectations, according to the NationalBureau of Statistics.

The China MNI business sentiment index fell further in February to 50.2, compared with 52.2 inJanuary and 58.4 in December, according to a research note from Nomura Securities Co Ltd.

Zhang Zhiwei, chief Chinese economist at Nomura, said: "We continue to believe that China'smonetary policy stance has a moderate tightening bias and expect GDP growth to slow to 7.5percent in the first quarter and 7.1 percent in the second, despite favorable base effects."

In 2013, the growth of the world's second-largest economy slowed to 7.7 percent from 7.8percent during the third quarter.

The government will likely loosen monetary policy in the second quarter to support the economy ifthe government decides to keep its 7.5 percent growth target for this year.

A research note from North Square Blue Oak Ltd, a United Kingdom investment bank, said thatgiven concerns regarding the overall slowdown, the government is expected to support moresmall and medium-sized enterprises in its reform scheme, a potential hot topic in next month'sNational People's Congress and Chinese People's Political Consultative Conference sessions.

China hopes to see united, stable, developing, amicable Afghanistan: FM

Chinese Foreign Minister Wang Yi said here Saturday that China hopes to see a united, stable, developing and amicable Afghanistan, adding that this is what China's policy targets at.

Afghanistan is a major neighbor to China and a country of unique and important influence in the region, Wang said at a press conference held after his meeting with Afghan Foreign Minister Zarar Ahmad Osmani.

The peace and stability of Afghanistan has a bearing with security in western China and, more importantly, peace and development of the entire region. "The Chinese side attaches great importance to developing the good neighborly relations with Afghanistan and hopes to see a united, stable, developing and amicable Afghanistan," Wang said.

Afghanistan is a country of many ethnic groups and diverse cultural characteristics. Since the ancient time, the people of Afghanistan have worked together to not only create a splendid civilization but also maintain national unity, independence and dignity, he said.

Citing an old Chinese saying that "if the family lives in harmony, all affairs will prosper," Wang said that for the Afghan people to really get hold of their own destiny, it is imperative they unite as one. Especially for the present day Afghanistan, only unity can bring power and separation will only lead to a dead end.

The people of Afghanistan have suffered long-time wars and have longed for peace and stability. Stability produces conditions for peace. "Only when all sections are allowed access to the peace process, can prolonged political stability be realized in the country," the Chinese foreign minister said.

"A stable Afghanistan is beneficial to not only its own fundamental interest but also the common interest of countries of the region, including China," Wang said, adding, "The Chinese side expects Afghanistan could achieve broad and inclusive political reconciliation as early as possible and is willing to continue playing a constructive role in this regard."

For Afghanistan at the current stage, Wang said, development remains the absolute need and prosperity brings peace. "Only by developing the economy, can poverty be reduced and the soil for terrorism and extremism be eradicated."

The Chinese side always holds that the international community should keep the commitment of providing aid for the sustainable development of Afghanistan, he said, adding that China will continue to do what it can to help Afghanistan to enhance capabilities for independent development and capacity building in various fields.

"China's aid is limited but very sincere and will be provided without any political condition," Wang said.

The people of Afghanistan are sincere, friendly and kindhearted by tradition, Wang said. A peace-loving Afghanistan that exits with neighbors in amity is the common expectation of all countries in the region.

China supports Afghanistan to improve relations with all countries, especially neighboring countries, and supports Afghanistan to participate in regional cooperation, including that with the Shanghai Cooperation Organization, he said.

Wang said China will host the fourth foreign ministers' meeting of the Istanbul Process and welcomes Afghanistan to participate in the development of the Silk Road economic belt that China has initiated.

A united, stable, developing and amicable Afghanistan is not only the good fortune of the Afghan people but also all countries in the region, Wang said. As a good neighbor, good friend and good partner of Afghanistan, China will continue to do its utmost and make consistent efforts to promote the reconciliation and rejuvenation of Afghanistan.

Source: Xinhua

China calls for joint efforts to assist Afghanistan's transition

Chinese Foreign Minister Wang Yi said here Saturday China will work closely with all parties concerned for pragmatic outcomes of the Fourth Foreign Ministerial Conference of the Istanbul Process on Afghanistan slated for August in Tianjin, China.

Wang made the remarks at a press conference after meeting with his Afghan counterpart Zarar Ahmad Osmani.

In face of the upcoming presidential and provincial council elections and the withdrawal of American and NATO-led troops this year, Afghanistan is experiencing transition in political, security and economic sectors, which bring about both challenges and opportunities.

Under such circumstances, it is of great significance for the foreign ministers to meet at the conference, he said.

The Istanbul Process is the only international platform on the Afghanistan issue led by countries in region, who have connections with Afghanistan in both history and practical benefits and are willing to make contributions to realizing lasting peace in the country, Wang noted.

By hosting the Fourth Foreign Ministerial Conference, China hopes all parties will build consensus and make concerted efforts to assist Afghanistan in its transition to true and lasting peace, he said.

Wang arrived in Kabul Saturday morning for an official visit to Afghanistan at the invitation of Osmani. Afghan President Hamid Karzai will meet Wang during his stay in Afghanistan.

Source: Xinhua

Uneasy rest begins for China's troubled Yutu

China's lunar rover Yutu entered its third planned dormancy on Saturday, with the mechanical control issues that might cripple the vehicle still unresolved.

According to the State Administration of Science, Technology and Industry for National Defence (SASTIND), Yutu only carried out fixed point observations during its third lunar day, equivalent to about two weeks on Earth.

Yutu's radar, panorama camera and infrared imaging equipment are functioning normally, the control issues that have troubled the rover since January persist.

Source: Xinhua

Chinese Internet firms have been exploring business opportunities based on big data analytics during the Spring Festival travel rush.

Chinese Internet companies have been exploring business opportunities based on big data analytics during the world's largest human migration.

Baidu, China's top search engine, launched a real-time migration map during the Spring Festival travel rush, which the Ministry of Transport estimates will witness 3.62 billion trips before it ends on Feb. 24.

The "Baidu Migrate" heat map gathers data from smartphones installed with Baidu Maps or other applications using Location Based Service (LBS) platforms, which receive 3.5 billion position requests every day in China, according to Baidu.

By analyzing the mass data, the map depicts the most popular destinations, points of origin and travel routes throughout the country during the Spring Festival.

It shows the trip between Chengdu, capital of southwest China's Sichuan Province, and Beijing has been the most popular travel route, which surprised many Internet users.

Giving the general public such insight on social phenomena is just one of the applications of big data, which refers to collection of enormous sets of data that can not be analyzed using traditional processing. The statistics can also be used by businesses and governments to look at trends and optimize service.

It is hard to put a figure on the estimated value of this emerging market, but online enterprises are eager to harness big data's potential.

Baidu is not the only Internet company in China digging the perceived goldmine. Alipay, the country's largest third-party online payment platform under ecommerce giant Alibaba Group, set up a similar program last month.

Another Alibaba subsidiary, key consumer-to-consumer sales platform Taobao.com, also took a share of the spoils. It released Chinese migration data for the whole of 2013 that was based on analysis of changes to users' default delivery addresses.

POTENTIAL

Nevertheless, it is Baidu's real-time migration map that has really manifested the power and scope of big data analytics, especially for business and social management.

According to the China Internet Network Information Center, the country has about 500 million mobile Internet users, accounting for 81 percent of all its web users as of the end of 2013.

Statistics professor Sun Feng with Tsinghua University said the fact that most Chinese people have mobile phones today makes collecting large and complex data more time-efficient and cost-effective for Internet companies.

As more large-scale data is built up, analyzing it is likely to become more profitable, added big data expert William Huang, who works with a top Chinese firm that he did not wish to be named.

The potential of this market has not gone unnoticed by small Internet enterprises in China.

The owner of one such firm, a man surnamed Yao, told Xinhua he had designed an app on which users can express opinions about popular TV shows. Yao's team can analyze this data and sell the results to interested parties.

"Users expect better experiences now, so we want to know who they are and give them what they need," said Huang.

He explained that after acquiring information about netizens' favorite restaurants, Internet companies could recommend similar places to them through apps or other products and attract restaurants to post adverts.

More opportunity is found in business district management, according to Deng Zhongliang, an expert on LBS at the Beijing University of Post and Telecommunications.

"For example, in a certain business district, if the migration map shows it is crowded in some shopping malls and empty in others, we could optimize resources allocation based on this data analysis," said Deng.

According to Taobao.com, people's online footprints could mirror their movements in the real world.

Its latest data showed that among tens of millions of Chinese migrant workers using Taobao, the growth in those moving to Beijing slowed by two-thirds year on year in 2013.

Meanwhile, last year witnessed nearly 1.53 million Taobao users moving to south China's Guangdong, the most attractive province for migrant workers.

"This data could help government decision making," Deng noted. "Big data analytics also benefits megacities like Beijing in population management, material supply and traffic congestion monitoring."

RISK

But Huang pointed out there are privacy concerns to big data's use.

"Users should have to opt into location services first before their information can be collected. But many worry their private information will be sold on by irresponsible enterprises," he said.

Baidu's response to such criticism is that the big data it collects does not correspond to individuals' true identities. In other words, such systems concentrate on group trends rather than personal behavior, so they will not threaten people's privacy.

Easing privacy concerns nevertheless requires improved laws and regulations as well as self-discipline among enterprises, said Deng.

Source; Xinhua

Xi's cross-Strait speech shows courage to break ground of political issues

Xi Jinping's recent speech on cross-Strait relations showed the courage and commitment to face up to political differences, said the mainland's Taiwan affairs chief here Friday.

When meeting visiting Kuomintang Honorary Chairman Lien Chan in Beijing on Tuesday, Xi, general secretary of the Communist Party of China (CPC) Central Committee, suggested that the two sides talk about political differences on an equal basis under the One-China principle.

Cross-Strait relations have moved into uncharted waters, said Zhang Zhijun, director of the State Council Taiwan Affairs Office, in an interview with Xinhua.

"There will be more difficult problems. Compared with other issues, political differences between the two sides are much harder but can no longer be put aside," Zhang said.

The two sides of the Taiwan Strait will need greater courage and confidence to handle political issues and push the relations further, he said.

Last October, at a meeting with Vincent Siew, honorary chairman of the Taiwan-based Cross-Straits Common Market Foundation, ahead of the 21st informal economic leaders' meeting of the Asia-Pacific Economic Cooperation (APEC) in Bali of Indonesia, Xi said the two sides will have to settle political disputes step by step, instead of delaying it forever.

"Xi showed the courage and sense of responsibility as a statesman," Zhang said.

The Chinese mainland and Taiwan made a breakthrough last week as their chiefs of cross-Strait affairs met formally for the first time since 1949 in Nanjing, capital of east China's Jiangsu Province. Zhang attributed the meeting to a proposal from Xi.

Since 2008 the two sides have improved their relations to an unprecedented degree, particularly in terms of political mutual trust, Zhang said.

"However, such trust is not solid enough and shaken from time to time," he said, adding that this is why Xi stressed adhering to the 1992 Consensus, opposing "Taiwan independence", and fostering the common understanding of One China.

In his speech, Xi showed an open attitude towards what Taiwan people think of and want, as well as the sincerity to work through the historic problems with them, Zhang said.

The major point of his speech is that the two sides of the Strait are family and the mainland will treat Taiwan compatriots as their blood, no matter where they are originated and which ethnic groups they belong to, Zhang said.

Xinhua: Mishandling Taiwan issues won't do Japan any good

 If a government claims to recognize you as the sole legal government of a country, but at the same time allows some of its lawmakers to institute a relationship act with part of your territory, you have good reason to feel cheated and ask why.

The attempt by 70 Japanese lawmakers of the governing Liberal Democratic Party to institute a so-called Japanese version of the Taiwan Relation Act is nothing short of a sheer and senseless provocation, which will further damage Japan's reputation and the stability of the region.

In fact, the 1972 Sino-Japanese Joint Communique, a cornerstone of the China-Japan relationship, states clearly that the Japanese government fully understands and respects the Chinese government's position on Taiwan as an inalienable part of the territory of China.

Let's make it clear: the Taiwan issue concerns China's core interests. It also concerns the political basis of China-Japan relations in handling Japan-Taiwan relations.

A simple assumption could help these lawmakers better understand the bitter irony behind the harebrained act: if lawmakers of a country with diplomatic ties with Japan try to make a relations act with Okinawa, what they will do? Will they also hold it as a challenge to Japan's sovereignty and a diplomatic fraud? The answer would probably be positive.

Meanwhile, given the fact that the lawmakers are led by Nobuo Kishi, senior Vice Foreign Minister and Prime Minister Shinzo Abe's younger brother, we have reason to believe that this is another step taken by Abe's nationalistic cabinet to infuriate China for cheap political gain.

By denying and whitewashing the history of invasion, Abe and his cabinet have launched a political campaign to deviate Japan rightward at the expense of not just relations with neighbors, but regional peace and stability.

What lies behind the campaign is simple -- Abe needs to appeal to right-wing conservative voters so he can remain in the political arena. By pandering to the increasingly radical right-wing elements in Japanese politics, he is chasing his own interests at the expense of the whole nation, leading Japan down a dangerous path of provocation and isolation.

The provocative attempt of these lawmakers further ruins Abe's efforts to present Japan as a responsible and reliable partner in the international community, bringing nothing but doubt and suspicion to an already-volatile East Asia.

If Japan really wants to repair its relations with China, as claimed by Abe, it should immediately stop challenging China's bottom line. After all, leveraging Taiwan cards is simply playing with fire.

China: Former Party official jailed for taking bribes

A former Party official of a city in central China's Henan Province has been sentenced to 14 years in prison for taking bribes, a court statement said on Sunday.

Zhang Yinghuan, 49, former member of the Standing Committee of the Sanmenxia City Committee of the Communist Party of China (CPC), was convicted of taking huge sums of bribes, according to the statement issued by Xuchang Intermediate People's Court.

Zhang accepted bribes of over 7 million yuan (about 1.15 million U.S. dollars), including 5.85 million yuan and 30,000 U.S. dollars in cash, as well as a property worth 1.45 million yuan, when he served as deputy secretary of the CPC's Hubin District Committee in Sanmenxia, secretary of the CPC's Yima City Committee and deputy mayor of Sanmenxia, the statement said.

The court handed down a 14-year jail term to Zhang. Most of the bribes have been turned in by Zhang's family members, according to the statement.

Zhang said after the ruling that he would not appeal.

Source: Xinhua

Xinhua In-Depth: China Focus: What is this "middle way" the Dalai Lama preaches?

A bylined opinion article was published on Saturday to expose the true nature of the "middle way" approach preached by the Dalai Lama.

Following is the translation of the article:

What is this "middle way" the by Dalai Lama preaches?

by Qi Xuan

According to news from the White House, U.S. President Barack Obama met with the Dalai Lama on Friday and expressed his support for the high monk's "middle way" approach.

What on earth is this "middle way"?

Since the 1980s, the Dalai clique has failed in their pursuit of "Tibet independence" by extremist means, under the backdrop of significant changes of international situation and the reform and opening up in China.

To get themselves out of trouble, the Dalai clique changed their approach, playing the "middle way" trump card and attempting to find a new way for the so-called "Tibet cause."

The Dalai clique claim the "middle way" is within the framework of China's constitution, and nothing more than "a high degree of autonomy" over a proposed "Greater Tibet."

Though the "middle way" appears to respect China's sovereignty and territorial integrity, and does not specifically seek "Tibet independence", it is at odds with China's constitution and state system in every conceivable way. It is nothing but smoke and mirrors, camouflage and deceit.

Firstly, "Middle-way" rhetoric has never recognized Tibet as a part of China. The "middle way" calls Tibet an "occupied state". The "middle way" is nothing but a historical and legal means of peddling "Tibet independence" when "conditions are ripe".

Secondly, the rhetoric proposes a "Greater Tibet", -- a region extending to Tibetan areas in the provinces of Qinghai, Gansu, Sichuan and Yunnan -- or roughly one fourth of China.

Thirdly, the "middle way" demands "a high degree of autonomy", leaving all affairs but military and diplomacy under the control of the Dalai Lama. This amounts to the overthrow of China's state system on the Qinghai-Tibet Plateau.

Fourthly, the "middle way" requires the Chinese government to pull out the People's Liberation Army from "Greater Tibet" and turn the area into an "international peace zone."

Fifthly, the "middle way" will drive other ethnic groups out of "Greater Tibet.

The "middle way" means establishing "a state within a state" which rejects the leadership of the Communist Party of China (CPC). It does not adopt socialist system, does not follow national laws and policies, does not allow the presence of the national military, and prevents other "nationalities" from entering.

The "middle way" is nothing more than a political word game to realize "Tibet independence" step by step.

Since the founding of the People's Republic of China, Tibet -- after important developmental stages including peaceful liberation, democratic reform, establishment of an autonomous region, reform and opening up -- has been on a development track in line with the development of modern China and the world. After more than half century of development, Tibet today, compared to the 1950s, has undergone profound changes.

The Tibetan people have gained freedom, equality and dignity. They enjoy the fruits of modern civilization and strive for a new socialist Tibet featuring unity, democracy, prosperity, civilization and harmony.

Over 60 years, in the embrace of the big family of the Chinese nation and with commitment to the socialist path, people of all ethnic groups in Tibet have become masters of the fate of their society and themselves. Tibet has turned from poverty and backwardness to prosperity and civilization.

Only by persisting with the leadership of the CPC, the socialist system and regional ethnic autonomy, can the people remain masters of their land, that all rights of all the people can be realized, and the fundamental interests of Tibetans be defended and developed.

The monk's "middle way" contradicts history and reality. It is against the will and demands of the Chinese people of all ethnic groups including Tibetans. The approach is a dead end.

Relevant country should be able to tell right from wrong and should not make false judgements and bad choices. It should do more deeds that truly benefit all Chinese people, including people in Tibet.

Source: Xinhua

ICBC's Singapore branch makes loan to firms in SH FTZ

The Singapore branch of the Industrial and Commercial Bank of China, or ICBC, says it has made cross-border RMB loans to two state-owned companies in the Shanghai Free Trade Zone.

Thursday’s report came shortly after China’s central bank cleared the way for cross-border RMB transactions. 100 million yuan or about 16 million US dollars was lent to a subsidiary of the Shanghai Baosteel Group. 70 million yuan went to a Sinopharm Group distribution center.

The funds were transferred immediately through ICBC Singapore clearing platform. China’s central bank gave the green light to cross-border RMB transactions on Thursday, but restricted their use to the Shanghai free-trade-zone.

Source: CCTV

China: PBOC issues 2014 loan focus on real economy, agriculture

China’s central bank unveiled its 2014 working focus on bank loans Friday, emphasizing support for the real economy and agriculture.

One of the top goals for China’s banks is to improve financial services in rural areas. That includes experimenting with the usage of farm land as loan collateral. Another key focus is to offer better services to all sectors involved in urbanization, including construction and migration.

China’s central bank is also asking the country’s financial institutions to help promote industrial integration by issuing green loans to sectors such as energy conservation, while reducing loans to over-producing divisions.

Source: CCTV

China: PBOC issues new measures to lift farming sector

The People’s Bank of China has issued new guidelines that urge banks to grant longer term loans at lower interest rates to family farms.

The PBOC wants banks to increase lending support to the agriculture sector, mainly family farms, and streamline their loan approval procedures.

The PBOC also is calling for favorable terms for agriculture loans that include below-average lending rates with maturities of up to 10 years for longer-cultivation-cycle crops.

The PBOC says each family farm is entitled to a loan of as much as 10 million yuan, or about 1.64 million U.S. dollars.

Source: CCTV

London in talks to establish RMB clearance bank

The British and Chinese governments are in talks to establish a clearing bank in London for the RMB.

The move would put London in a leading position to offer yuan trade business in Europe. Hong Kong now is the largest yuan offshore hub and more than 80 percent of yuan trade settlement transactions are handled there. London presently relies mainly on Hong Kong’s offshore yuan infrastructure to obtain yuan liquidity and clearing services. The UK signed a 200 billion yuan three-year bilateral currency swap deal with China last year, and later was further granted an 80 billion yuan quota for a yearly investment plan.

Source:  CCTV

G20 summit had 'excellent spirit', says IMF chief Christine Lagarde

Christine Lagarde, the chief of the International Monetary Fund, says the Sydney meeting of the G20 finance ministers and central bank governors had an ''excellent spirit'' of global co-operation.

There were predictions of a rift between developing economies and advanced nations over the winding back of stimulatory economic policies in the United States and Europe. But Ms Lagarde said the ''difficult debates'' were not forthcoming.

She did warn, however, of the likelihood of global financial instability in future ''because monetary policies will not change as they will have to change without a degree of volatility.''

Ms Lagarde described Australia's presidency of the G20 as ''action-oriented'' following the two-day meeting in which members agreed to boost global growth by 2 per cent above the IMF's current projected levels over the next five years.

Source: The Sydney Morning Herald

WSJ: Russia Stung By Ally Yanukovych's Defeat in Ukraine

               The Wall Street Journal reports,"the dramatic,collapse of the authority of President Viktor Yanukovych in Ukraine looks like a major reversal for the Kremlin, pulling Russia's southern neighbor toward Europe just weeks after it appeared Moscow had succeeded in drawing Kiev back into its embrace".

"This is a major defeat," said a senior Kremlin adviser, adding that the events of the last 24 hours bitterly remind Russian officials of the 2004 Orange Revolution, when Mr. Yanukovych saw his fraud-tainted election victory overturned after massive street protests brought a pro-western government to power".

 "We made the same mistakes again" this time, said the Kremlin adviser, who spoke on condition of anonymity. "For us, the conclusion is that the West succeeded in engineering a coup d'état."

Just what Russia's reaction to this apparent setback would be wasn't immediately clear. Western officials seemed to be going out of their way not to provoke Moscow. Some Kremlin aides in recent weeks had suggested Moscow could intervene to protect pro-Russian regions if Ukraine were to slide into civil war, but there is been no indication of high-level Kremlin support for such a move.

A pro-European government in Kiev, however, could find itself under heavy economic pressure from the Russians, who are a major fuel supplier and trade partner. "They have a lot of economic levers they can pull," said Steven Pifer, a former U.S. ambassador to Kiev.

Russian officials fumed publicly on Saturday, as news of the dramatic reversal in Kiev spilled out, and the Ukrainian parliament, which had swung behind the opposition, voted to remove Mr. Yanukovych from office and call new elections for May.

Even Mr. Yanukovych's political allies voted for the measures, as government authority melted away on the streets and protesters took over. Mr. Yanukovych left the capital for his political heartland in the east of the country and denounced the day's events as a "coup d'état," but he seemed powerless to stop them.

By evening, the political nemesis Mr. Yanukovych had jailed—opposition leader and former Prime Minister Yulia Tymoshenko —had been released from prison and was cheered by thousands of demonstrators on Kiev's main square.

Russian Foreign Minister Sergei Lavrov worked the phones with his European and U.S. counterparts, according to statements from his ministry, telling them that "illegal extremist groups" had taken control over Kiev. He called on his partners to pressure the opposition in Ukraine to return to the terms of the European-brokered political compromise signed on Friday, which called for Mr. Yanukovych to remain in office until new presidential elections late in the year. But western capitals seemed unsympathetic, moving instead to work with the new opposition-led government.

As late as on Thursday, when bloody fighting between police and demonstrators in Kiev had riveted international attention, Russian Prime Minister Dmitry Medvedev warned Ukraine's government against behaving "like a doormat that people wipe their feet on."

Foreign Minister Lavrov blasted the EU for calling on Mr. Yanukovych to agree to early elections. But that is just what Mr. Yanukovych agreed to in Friday's deal, along with constitutional changes that would reduce presidential powers in favor of the parliament. He also agreed to the formation of a new coalition government that would likely to be led by his pro-European opponents.

But protesters proved unwilling to wait for new elections and Mr. Yanukovych fled the capital late on Friday.

Alexei Pushkov, chairman of the International Affairs Committee in Russia's parliament, on Friday called the situation "an ideal scenario for an Orange Revolution." Hours earlier, it had said: "The West is giving Yanukovych a final push. It's not just a matter of Ukraine on its own. The ultimate goal, if you remove all the chaff, is to bring NATO closer to the borders of Russia."

On Saturday, Mr. Pushkov's Twitter feed noted that Mr. Yanukovych had fled the capital and protesters were roaming through his unguarded residence outside the capital. "A pathetic end for a president," it said.

Photography:Paracas,Ica, Peru.

Why hasn’t Japan’s massive government debt wreaked havoc (yet)?

The potential sovereign debt crisis in Japan looks even grimmer than those in the Eurozone economies if one looks only at the gross general government debt-to-GDP ratio. According to the OECD, this ratio ranged from 90 to 166% in some developed economies in 2012 (“only” 166% in Greece, 140% in Italy, 139% in Portugal, 123% in Ireland, and 91% in Spain—collectively referred to as the PIIGS economies) but was a full 219% in Japan in the same year. Thus, Japan’s gross general government debt-to-GDP ratio is more than twice the OECD-wide average (109 percent) and by far the highest in the developed world. Moreover, the OECD projects that Japan’s gross general government debt-to-GDP ratio will increase even further to 231% in 2014.

What makes Japan different?

Why has Japan been able to avoid the fiscal crises of the magnitude faced by the PIIGS economies even though her gross general government debt-to-GDP ratio is much higher? What is different about Japan? The most commonly given answer is that domestic saving is much higher (relative to domestic investment) and home bias is much stronger in Japan, as a result of which a much higher proportion of her massive government debt could be absorbed domestically without having to rely on foreign investors.

However, Reinhart and Rogoff (2008) have argued that domestic sovereign debt is just as important as external sovereign debt and that it is the total amount of sovereign debt that is of paramount importance. Why then has Japan’s massive government debt not wreaked havoc – at least not yet? This column tries to answer to this question.

Trends over time in the share of foreign holdings of Japanese government securities

Horioka, Nomoto, and Terada-Hagiwara (2013) analyse trends over time in holdings of Japanese government securities by sector and find that Japanese government securities were held primarily by domestic savers until recently. The reason is that robust domestic saving, especially household saving (and, in more recent years, corporate saving), combined with strong home bias, made it possible for domestic savers to absorb most of the government debt. Direct holdings of government securities by households remained relatively low, but household savings in the form of bank and postal deposits, insurance policies, and pension funds were funnelled into government securities through government financial institutions, private banks, and insurance companies. As a result, the share of foreign holdings of Japanese government securities was at most 11% until 2006.
Starting in 2007, however, the share of foreign holdings of short-term Japanese government securities skyrocketed to as high as 30% although the share of foreign holdings of medium- and long-term Japanese government securities remained below 7%.

Why the share of foreign holdings of short-term Japanese government securities skyrocketed starting in 2007

In our recent papers we perform an analysis of why the share of foreign holdings of short-term Japanese government securities skyrocketed starting in 2007. We find that it can largely be explained by the fact that:

• Their yields increased relative to the yields on alternative government securities as yields elsewhere – in the US and Eurozone in particular – fell sharply in 2008-09 due to monetary easing in response to the Lehman crisis; and
• The gap between risk levels on Japanese government securities and those on alternative government securities widened dramatically from late 2008 until early 2010 not because risk levels in Japan declined but because risk levels elsewhere increased sharply due to the advent of the Eurozone crisis.

Both factors caused risk-adjusted hedged returns on government securities in the US and the Eurozone to converge to Japanese levels in 2008-09, and remain below Japanese levels thereafter as well in some cases. This induced foreign investors to (at least temporarily) shift their portfolios from government securities of other economies and regions to Japanese government securities and caused foreign holdings of short-term Japanese government securities to increase sharply.

Future prospects

The surge in foreign holdings of Japanese government securities will not continue indefinitely because risk in the rest of the world will eventually decline (in fact, risk levels on government securities in the US and the Eurozone had already declined sharply by early 2010). This is because investors’ appetite for risk will eventually return as the Eurozone crisis subsides, and because bond markets are developing in emerging Asia and creating increasing competition for Japanese bonds (especially since they offer higher yields and the possibility of currency appreciation as their economies grow further). However, there is a possibility that there will be a revival of yen carry trade utilizing the interest rate gap between the US and Japan, as observed around 2007, and this may have the effect of stabilizing foreign holdings of short-term Japanese government securities at a high level; although as of this writing, the share of foreign holdings of short-term Japanese government securities has fallen somewhat since peaking at 30% in September 2012, presumably for all of the aforementioned reasons, and was only 28% in September 2013.

The current situation is even more tenuous than appears at first blush. The increasing share of foreign holdings and the shortening of maturities on Japanese government securities – especially on foreign holdings – increase the difficulty of rollover and the risk of sudden reversals in trends, as we are now observing. Additionally, the household and private saving rates in Japan can be expected to decline even further due to the aging population, meaning that domestic banks and insurance companies will not continue to have sufficient bank and postal deposits, insurance policies, and pension funds from the household sector to invest in Japanese government securities.

Policy implications

The policy implication is that, although Japan was able to ‘buy time’ by inducing foreign investors to invest temporarily in Japanese government securities, the Japanese government faces increasing pressures to reduce its massive government debt-to-GDP ratio. One way of doing so is to increase tax revenues (for example, by raising the consumption tax, which is very low by international standards, as the Japanese government is in the process of doing) and/or by cutting government expenditures (for example, by reforming the public pension system and other social safety nets). The other way of doing so is by stimulating economic growth, which Prime Minister Shinzo Abe is trying to do using the three arrows of ‘Abenomics’ (massive fiscal stimulus, more aggressive monetary easing, and structural reforms to boost Japan’s competitiveness). Prime Minister Abe is trying to use both ways simultaneously, but it is a Herculean task to skilfully combine all of the policy levers at his disposal since the two ways are often conflicting (for example, raising the consumption tax will reduce the government debt but may at the same time put a damper on economic growth).

The answer

To answer the question in the title of this column, Japan’s massive government debt has not wreaked havoc in the past because of robust domestic saving, especially household saving (and, in more recent years, corporate saving) and a temporary inflow of foreign capital caused by the Global Financial Crisis, but it may wreak havoc in the future as both of these factors become less applicable unless the government debt-to-GDP ratio can be brought under control quickly.

Source: Vox, Charles Yuji Horioka, Takaaki Nomoto, Akiko Terada-Hagiwara, 21 January 2014

References:Horioka, Charles Yuji, Takaaki Nomoto, and Akiko Terada-Hagiwara (2013), “Why Has Japan’s Massive Government Debt Not Wreaked Havoc (Yet)?” NBER Working Paper 19596, National Bureau of Economic Research, Inc., Cambridge, Massachusetts, USA.

Oldest known star in the Universe discovered

A team of astronomers at The Australian National University (ANU) working on a five-year project to produce the first comprehensive digital survey of the southern sky has discovered the oldest known star in the Universe. Just a 6,000 light year astronomical hop, skip and jump from Earth, the ancient star formed shortly after the Big Bang 13.7 billion years ago.

Similar to the Sloan Digital Sky Survey (SDSS), which is mapping the Northern Hemisphere sky, the SkyMapper Southern Sky Survey is casting its telescopic eye on the southern sky. In the first year of the five-year project, the ANU SkyMapper telescope at the Siding Spring Observatory about 500 km (310 miles) north west of Sydney has photographed some 60 million stars.

As well as creating a comprehensive census of the stars in the southern sky, SkyMapper is also tasked with mapping dark matter and uncovering the first quasars and stars to form after the birth of the Universe. The SkyMapper telescope is able to find such ancient stars through its ability to detect, through their color, stars with low iron.

"The stars we are finding number one in a million," said team member Professor Mike Bessell, who worked with Dr Stefan Keller of the ANU Research School of Astronomy and Astrophysics on the research.

he researchers say the discovery will provide a better idea of what the Universe was like in its infancy by allowing the study of the chemistry of the first stars. According to the team, the composition of the newly-discovered star shows it formed in the wake of a primordial star, which had a mass 60 times that of our Sun.

"To make a star like our Sun, you take the basic ingredients of hydrogen and helium from the Big Bang and add an enormous amount of iron – the equivalent of about 1,000 times the Earth’s mass,” said Dr Keller. "To make this ancient star, you need no more than an Australia-sized asteroid of iron and lots of carbon. It’s a very different recipe that tells us a lot about the nature of the first stars and how they died."

Although it was previously believed that the death of primordial stars involved extremely violent explosions that spread iron over huge volumes of space, the ancient star shows signs of lighter elements, such as carbon and magnesium, but no sign of iron.

"This indicates the primordial star’s supernova explosion was of surprisingly low energy," said Dr Keller. "Although sufficient to disintegrate the primordial star, almost all of the heavy elements such as iron, were consumed by a black hole that formed at the heart of the explosion."

The ancient star's discovery was confirmed using the Magellan telescope in Chile, and a paper detailing the discovery is published in the journal Nature. Data collected by the survey, which is funded by the Australia Research Council, will also be made freely available on the internet.

Source: Australian Natuional Univeristy

Fed’s Fisher Continues to Support Tapering of Bond Purchases

                 The Wall Street Journal reports, "Federal Reserve Bank of Dallas President Richard Fisher reiterated his support Friday for the central bank’s effort to wind down its bond-buying stimulus program".

“One is hard pressed to argue that there is much efficacy derived from additional expansion of the Fed’s balance sheet,” Mr. Fisher said in the text of a speech prepared for delivery in Austin, Texas. “This is why I’ve been such a strong proponent of dialing back our large-scale asset purchases and will continue advocating that we do so.”

Late last month, the Fed cut the pace of monthly bond buying to $65 billion from $75 billion. It is expected to continue to cut the pace of purchases and end the buying later this year. Mr. Fisher has long opposed the bond-buying program.

“There is abundant liquidity outside the banking system.” “We don’t need to add more to it” at a time where the amount of cash in the system outstrips demand in the form of loans. “I’ll continue to advocate for ending, as soon as practical, the large-scale asset purchases,” he said, although he added the pace of the wind-down would depend on the economy.

Mr. Fisher again blamed much of the current troubles on Congress.

“It is my firm belief that the fault in our economy lies not in monetary policy but in a reckless and feckless federal government that simply cannot get its fiscal and regulatory policy geared so as to encourage business to take the copious amount of money we at the Fed have created and put it to work creating jobs and growing our economy,” Mr. Fisher said. He added, “fiscal policy is not only ‘not an ally of U.S. growth,’ it is its enemy.”