World Bank: China to Meet Growth Target in 2014

       The WSJ reports, "China's economy is expected to record slower growth over the medium term, the World Bank said on Friday, but Beijing has the ability to roll out economic support measures to meet its official target of about 7.5% this year.

The bank said in its China Economic Update, a regular report on the state of the economy, that the prospect of growth falling below the target would likely trigger accommodative fiscal and monetary policies.

It said, however, that such support measures run the risk of "perpetuating a traditional growth model that relies on government-led investment fueled by credit expansion." It said these growth-oriented policies might result in China failing to push through structural reforms needed for more sustainable development.

China unveiled a program of broad reforms in November aimed at reducing its reliance on investment and exports and expanding the role of consumption. The reforms promised to give a "decisive" role to the market in determining prices of scarce resources and limit government intervention in the economy.

The World Bank maintained its forecast made earlier this year that China's growth will slow to 7.6% in 2014 and 7.5% in 2015, down from 7.7% in 2013.

It added, however, that economic activity—including industrial production—has shown signs of a pickup in recent weeks. It said it expects a recent acceleration to continue into the next two quarters as a result of robust consumption, a recovery of external demand and further growth support measures.

The World Bank also said that risks to an orderly and gradual adjustment remain. The main channels of a possible disorderly unwinding are related to local-government financing, which could trigger a sharp slowdown in investment growth, and from the sluggish real estate.

China needs to address the rapid accumulation of local government debt as well as the buildup of credit in the economy overall, according to the World Bank, adding this will require fiscal and financial reforms. "Even though aggregate credit growth has started to decelerate, the economy is highly leveraged," the World Bank said.

Outstanding bank loans reached 135% of GDP in 2013, up from 105% in 2007, the World Bank said. It added that the debt run-up is even starker using China 's broadest credit measure—the total stock of aggregate financing—which was more than three times GDP in 2013, up from 124% in 2007. Corporate debt to GDP is now at about 125%, among the highest in Asia.

"The rebalancing will be uneven reflecting tensions between structural trends and near-term demand management measures," Chorching Goh, lead economist for China at the World Bank, said in a statement released with the report.

Source: The WSJ

China: Reviving Silk Road to promote economic integration

Reviving the ancient Silk Road in Asia has been a frequent point of discussion among Chinese policy makers recently. The New Silk Road is not about rebuilding the ancient Silk Road as it existed many centuries ago. Instead, it is about re-connecting those countries that have had a shared trading past, to build bilateral and multilateral free trade agreements, joint infrastructure projects, and promoting other forms of high-level economic and cultural exchanges.

The New Silk Road will begin in Xi’an in Northwest China before stretching west through Urumqi, which is near the border with Kazakhstan. It then runs southwest from Central Asia to northern Iran before swinging west through Iraq and Turkey. From Istanbul, the Silk Road heads northwest through Europe, and finally meets up with the Maritime Silk Road.

The Maritime Silk Road will begin from East China’s Fujian province, heading south to the Malacca Strait. It then crosses the Indian Ocean to Nairobi and goes north into the Mediterranean.

Source: Xinhua

China: Risk control crucial to growth

Containing financial risks and avoiding further stimulus measures should be the main priorities for policymakers in China, as they contemplate fresh strategies for sustained economic growth, the International Monetary Fund said on Thursday.

"We consider that vulnerabilities have risen to the point where containing them should be a priority. Therefore, additional stimulus should only be deployed if growth slows significantly below this year's target," David Lipton, first deputy managing director of IMF, told a news conference in Beijing.

The IMF retained its annual GDP growth forecast for China at 7.5 percent but lowered growth projections for next year from 7.3 percent to around 7 percent—a level that Lipton said is realistic if China carries out extensive financial reforms.

"We are not counseling stimulus at this point," Lipton said when asked if he thought the government should do more to shore up flagging economic growth.

"We don't think there are sufficient signs that would warrant that," he said. "But we are counseling vigilance because there are various sectors where the future is somewhat uncertain."

China has become too dependent on credit and investment, including in real estate, since the global financial crisis (in 2008), the IMF said in a statement after two weeks of talks with Chinese officials for its annual assessment of the nation's economy.

"Continuing reliance on credit-fueled growth means that risks are still rising, and although the government still has sufficient buffers to prevent a disorderly adjustment and sharp growth slowdown in the near term, more sustained efforts to reduce vulnerabilities are necessary," the statement said.

China's total non-financial debt rose to 210 percent of GDP in 2013 from 197 percent in 2012, Zhu Haibin, chief China economist at JPMorgan Chase & Co, said in a report this week. Corporate debt rose to 130 percent of GDP in 2013 from 92 percent in 2008.

Fiscal reforms, strengthening of local government finances, liberalization of deposit interest rates and the introduction of deposit insurance to remove distortions in the pricing of risk and borrowing costs are other measures that need immediate attention, the IMF said.

China also needs to implement changes to bring its current account surplus "in line with fundamentals" which would support the country's economic transition away from investment and savings, according to the IMF. These include greater exchange-rate flexibility by further widening the yuan's trading band and reducing currency intervention "so that the exchange rate can find the market-clearing level as soon as possible".

The IMF also urged the government to establish "a level playing field" for private and State-owned enterprises by opening up for competition the sectors that were hitherto reserved only for the SOEs. Such steps are necessary to make the market a more "decisive" force, it said.

The government had in March indicated that it was anticipating a GDP growth rate of 7.5 percent this year. However, the 7.4 percent year-on-year growth recorded in the first quarter has triggered concerns that China might miss the annual target for the first time in decades.

Although some experts have called for more decisive stimulus policies to ensure that the growth targets are met, Beijing has refrained from doing so. Lipton praised the government's approach and urged it to "carry through the reform goals listed in the Third Plenum" (of the 18th Central Committee of the Communist Party of China).

According to Lipton, the Chinese regulators have taken several praiseworthy steps, like slowing credit expansion, cooling down the property sector and reining in shadow banking.

"We think these are risk reduction actions that have been well taken. It would not make sense to reverse these policies for the sake of growth, as the risks may return again," he said.

"We believe that China should focus on having the fastest sustainable growth, rather than the fastest possible growth."

Source: Xinhua

ChinaDaily: Naval drill may calm choppy ties with the US

Event highlights positive interaction between Beijing and Washington

China's participation in the upcoming Rim of the Pacific naval drill could mean smoother sailing for relations that have been through some choppy seas recently.

Just days ago, US Secretary of Defense Chuck Hagel accused China of destabilizing regional waters, but the drill, to start later this month, may provide an opportunity for both countries to better utilize channels of communication, analysts said.

In the past, military exchanges have been on and off with fluctuations in the relationship. China's plan to stick to its plan to participate in the drill despite the indictment of five People's Liberation Army (PLA) officers by the US Justice Department for alleged cyber theft has been seen as a sign of maturity in the bilateral relationship.

Four Chinese vessels, including one home-developed destroyer, will make their debut at the US-led Rim of the Pacific exercise - the world's largest naval war games - also known as RIMPAC.

The PLA Navy will send destroyer Haikou, frigate Yueyang, supply ship Qiandaohu and hospital ship Peace Ark to the drill.

Zhang Junshe, a researcher at the People's Liberation Army Naval Military Studies Research Institute, said: "The Chinese task force, which includes major advanced vessels for combat operations, has shown Beijing's goodwill and sincerity regarding the exercise."

He said the destroyer and the frigate are excellent examples of Chinese naval surface ships, and the Peace Ark has vast experience in international humanitarian aid programs in Africa and other Asian countries.

The Chinese task force will mainly participate in activities targeting nontraditional security threats, through which the Chinese and US navies will enhance their capabilities to jointly tackle these common challenges, Zhang said.

The exercise, from June 26 to Aug 1, will take place in and around the Hawaiian islands under the theme of "Capable, Adaptive, Partners" and will be the first time that China has participated in the biennial exercises, which began in 1971.

The drill will involve 47 ships, six submarines, more than 200 aircraft and 25,000 personnel from 23 countries. It claims to help participants foster and sustain cooperative relationships that are critical to ensuring the safety of sea lanes and security on the oceans.

It will be the first time for China to participate in the RIMPAC, after former US Defense Secretary Leon Panetta extended an invitation during his visit to China in September 2012.

Xu Qiyu, a researcher at the National Defense University of the PLA, said China's participation has highlighted the positive interaction between Beijing and Washington, as well as the country's determination to contribute more to multilateral security frameworks.

"In this exercise and many joint exercises from now on, China and the US should learn from each other instead of perceiving each other as opponents. Communication can help avoid miscalculation," Xu said.

"The two countries will also need to expand their substantial cooperation in traditional security areas," he added.

According to the announcement, participants will conduct disaster relief and maritime security operations as well as complex maritime maneuvers.

The drill will examine the ability to conduct amphibious operations, as well as missile, anti-submarine and air defense exercises with a focus on counter-piracy and mine clearance operations, explosive ordnance disposal and diving and salvage operations.

China and the US have maintained frequent military exchanges since Chinese President Xi Jinping and US President Barack Obama vowed to build more communicative military relations at Sunnylands, California, last June.

Zhao Weibin, a researcher at the Center for China-US Defense Relations at the PLA Academy of Military Science, said: "One positive signal is that the number of joint exercises between China and the US has multiplied in the past few years.

"It helps overcome communication difficulties between the two militaries and the vulnerability of overall China-US relations," Zhao said.

During PLA Chief of General Staff Fang Fenghui's visit to Washington in May, China and the US agreed to hold consultations on setting up a mechanism for notification of major military actions, as well as a code of conduct for maritime behavior.

Both countries will also upgrade the hotline between military heads into a secure video-conferencing system.

In April, during Hagel's visit to China, Beijing and Washington agreed to engage in more positive interactions in the Asia-Pacific.

Yan Xuetong, dean of the Institute of Modern International Relations at Tsinghua University, said the US has accepted China's growing capability in everything from the number of Olympic gold medals to the size of the economy, but not its growing military power, which the US has long used as an important tool to maintain its superpower status.

Michael O'Hanlon, a senior fellow at the Brookings Institution, said China has played a positive role in world peace, stability and prosperity and since 2008, China's growth has been a major dynamic of the world's economy and has helped the world to avert a great disaster.

"The US should be probably more appreciative of what China has done, while China should be more appreciative of what the US has done," he said at a recent talk at the Brookings-Tsinghua Center.

"If the two countries can be more appreciative of the other sides' good doings, we may have a more positive feeling of each other," O'Hanlon said.

China will respond to provocation: FM spokesman

A Chinese Foreign Ministry spokesman said on Thursday China will not hesitate to respond to provocations infringing China's sovereignty or that undermining maritime peace and stability.

Spokesman Hong Lei made the remarks at a regular press briefing when he was asked to comment on the G7 summit's latest communique expressing concern over the East and South China Sea.

Hong said China has always been a steadfast force in maintaining peace and stability in the East and South China Sea as well as in safeguarding the United Nations charter, basic codes of international relations and fundamental principles of international law, noting that China hopes there is no instability in surrounding areas, including the East and South China Sea.

China has firmly safeguards its territorial sovereignty, maritime rights and national security, maintains order and navigation freedom in its water area and airspace, according to relevant international law and conventions, Hong said.

China has committed to resolving disputes regarding the East and South China Sea through bilateral negotiation and discussions with directly concerned parties, which is also important consensus reached between China and relevant countries and conforms to the peoples' interests in the majority countries in the region, he added.

Practices have proven negotiation and discussions among directly concerned parties are the most effective way for resolving disputes, and it will deteriorate the disputes and increase the instability of the region if more parties are involved, Hong said.

China hopes countries outside the region to resolve disputes with respect of objective facts and a fair position, instead of intensifying the tension, building antagonism and complicating the regional situation, said the spokesman.

Source: Xinhua

China:52 websites probed for publication of porn, violence

China's media regulator announced on Thursday that it will investigate 52 websites on suspicion of publishing online literature that contains pornography and violence.

The State Administration of Press, Publication, Radio, Film and Television announced the campaign as part of its ongoing campaign to clean up the Internet.

The administration said that the 52 websites include Baidu Tieba, the largest Chinese communication platform provided by the Chinese search-engine company Baidu Inc; and NetEase Blog, provided by Internet giant NetEase Inc.

A publicity officer with Baidu Inc said on Thursday that the company would not comment on the authority's decision.

The move is part of a campaign called "Cleaning the Web 2014", launched by the National Office Against Pornographic and Illegal Publications under the media authority from April to November to weed out illegal content and keep it out of the reach of children.

Other websites investigated include video-sharing website tudou.com and doc88.com, an online platform for sharing documents.

The authority said it will impose punishments on the websites if the allegations, including publishing content that has violence and pornography, are confirmed.

Many of the websites published unhealthy "fairy tales" for children, with some bearing similar names to the classic German collection Grimms' Fairy Tales. Among them was one collection called Horrifying Grimms' Fairy Tales, written by an online writer under the name of Tongshengcao.

An online forum on Horrifying Grimms' Fairy Tales at Baidu Tieba, which has run posts with complete stories, was still accessible at around 4 pm on Thursday.

But the forum was quickly closed and all the posts were deleted one hour later.

The investigation into the 52 websites followed an investigation in April into Sina Internet Information Service Co, one of China's Internet giants, which was suspended from engaging in Internet publication and audio and video dissemination for placing pornographic content online.

The authority later revoked the two licenses of Sina.com, including those for Internet publication and network distribution of audiovisual programs, and fined the company up to 5 million yuan ($800,000) for publishing as many as 20 obscene articles in its reading channel and posting four Internet audiovisual programs that spread obscene information.

Ding Junjie, a media professor at the Communication University of China, said online literature is more difficult to censor due to the large number of sources and the difficulty of obtaining evidence.

"The online platforms may never have meant to host such content. But it is their duty to supervise it," he said.

Bu Wei, director of the Research Center for Media and Children with the Chinese Academy of Social Sciences, said online service providers have obligations to protect their audiences, especially children, from unhealthy contents online, as is stated by the Convention on the Rights of the Child, an international human rights treaty.

Source: ChinadailyUSA

China is inching closer to ending the State monopoly in the oil sector

China is inching closer to ending the State monopoly in the oil sector after it allowed a Xinjiang-based private energy firm to import crude oil, industry sources said on Wednesday.

Guanghui Energy Co Ltd, the largest private firm in Xinjiang, with a wide range of businesses covering energy, vehicles and real estate, has got the green light from the State Council, China's cabinet, to import crude oil, the China Business News reported on Tuesday quoting an unnamed company official.

The energy firm, which is the only non State-owned company in China with upstream oil and gas assets, is also seeking oil exploration rights to fully enhance its oil production chain.

A spokesman of the Xinjiang-based company, however, declined to comment on the issue.

Before 2011, China had been gradually increasing the amount of non-State imports to serve the few refineries that are not controlled by China's two State-owned refining giants.

"China is moving toward a milestone as the permission given to the Xinjiang-based company enables it to import crude oil directly from its overseas fields and also refine it in oil refineries not owned by the two oil majors - China National Petroleum Corp, or PetroChina, and SinopecGroup. What this means is that Guanghui Energy will now have more say in the upstream industry," said Yan Pengfei, a senior analyst at the industry services department of Guan Tong Futures Co Ltd.

The crude oil license of the gas and property conglomerate is mainly for its oil and gas fields in Central Asia, experts said.

In 2009, Guanghui Energy purchased a 49 percent stake in Kazakhstan's Tarbagatay Munai LLP for about 303 million yuan ($48.6 million) to develop an oil and gas field covering about 8,300 sq m in eastern Kazakhstan.

Source: ChinaDailyUSA

IMF encourages China to lower target GDP growth for next year

The IMF's Deputy Managing Director David Lipton has pressed China to lower its growth target next year to 7% as a result of reforms that can reduce its size in the near term. China has already set a growth target of about 7.5% for this year, compared with 7.7% last year. The IMF and many Chinese economists think that the current Chinese growth model has become counterproductive, even leading to heavy pollution and financial weakness.
Source: Seeking Alpha

BofA in Talks to Pay At Least $12 Billion to Settle Probes

        The WSJ reports,"Bank of America Corp.  is in talks to pay at least $12 billion to settle civil probes by the Justice Department and a number of states into the bank's alleged handling of shoddy mortgages, an amount that could raise the government tab for the bank's precrisis conduct to more than $18 billion, according to people familiar with the negotiations.

At least $5 billion of that amount is expected to go toward consumer relief—consisting of help for homeowners in reducing principal amounts, reducing monthly payments and paying for blight removal in struggling neighborhoods, these people said. As the negotiations with the government heat up, the bank is being pressed to pay billions more than the $12 billion it is offering.

The potential tab would leap ahead of other large penalties levied by the Justice Department and U.S. regulators. Even at a giant firm like Bank of America, the second-largest bank in the country by assets, a $12 billion fine would exceed the firm's 2013 profit of $11.43 billion. That profit was the bank's highest in six years, but the looming record legal settlement threatens to break the firm's momentum under Chief Executive Brian Moynihan.

The bank's shareholders have been bracing for a big settlement since April's quarterly earnings announcement. The bank swung to a surprising loss because it set aside more money than expected for legal expenses. It said then that the charges were for previously disclosed mortgage issues, a hint that it was referring to Justice Department negotiations.

Bank of America's legal charges have been a bane to its earnings, with the bank paying more than $60 billion since the financial crisis to settle lawsuits and buy back mortgage securities, said a person close to the bank. At an investor conference last week, Mr. Moynihan noted that the impending Justice Department settlement is a remaining wild card. "Of the big stuff," he said, "that's really the one that's left out there."

Paying at least $5 billion to help homeowners is part of a broader scenario Bank of America has floated, in which it would pay a total $12 billion in addition to the previous $6 billion FHFA settlement, these people said. That $12 billion would include both "hard money," or fines, and "soft money," or consumer relief. The bank has floated the idea of paying more than half of its settlement via soft money.

Government negotiators, however, are pushing the bank to pay billions more and put up more cash as part of the deal. Under the terms of a recent proposal made by the bank, at least half of the settlement would be in the form of help for homeowners, but that can be done in ways that make the actual cost to the bank significantly less than a direct cash payment to agencies".

B2Gold Acquires Papillon Resources For US$550 Million

World leaders gather for D-Day tribute, hope for thaw on Ukraine

 World leaders and veterans gather by the beaches of Normandy on Friday to mark the 70th anniversary of the Allied D-Day landings that helped turn the tables in World War Two, with host France hoping the event will bring a thaw in the Ukraine crisis.

Wreaths, parades, parachute-landings and fireworks will be staged in honour of history's largest amphibian assault on June 6, 1944 when 160,000 U.S., British and Canadian troops waded ashore to confront Nazi Germany's forces, hastening its defeat.

French President Francois Hollande will be joined at the commemorations by 17 leaders including U.S. President Barack Obama, Britain's David Cameron, Canada's Stephen Harper, Germany's Angela Merkel and Vladimir Putin of Russia.

But while the unity of allies and their bloody sacrifices will be the big theme of the D-Day remembrance, the government leaders will be sounding each other out in private on the worst security challenge in Europe since the Cold War: Ukraine.

Russia's annexation of Crimea in March and the current standoff in eastern Ukraine between government forces and pro-Russian separatists have driven Russia's relations with the United States and European Union to a post-Cold War low.

French diplomats say Hollande hopes to get Putin to at least shake the hand of Ukrainian president-elect Petro Poroshenko on the sidelines of the ceremonies, in what could represent a first step in defusing tensions. 

Putin, who has said he is open to meeting both Obama and Poroshenko while in France, has yet to recognise the legitimacy of the Ukrainian leader who is set to be sworn in on Saturday.

At a Group of Seven (G7) summit of world leaders in Brussels on Thursday, Hollande called the D-Day tribute "an important occasion to express gratitude and fraternity.

"But it is also a major international event which should serve the interests of peace," Hollande added, evoking the diplomatic challenges under the surface of the ceremonies.

The G7 summit - to which Putin was not invited because of Western anger over Russia's intervention in Ukraine - was intended "to speak with a single voice ... above all on Ukraine," Hollande said.

Obama told reporters on Thursday that Russia would face new sanctions if it fails to recognise Ukraine's new government and does not try to calm violence from militants in the east of Russia's fellow former Soviet neighbour.

"There is a path in which Russia has the capacity to engage directly with President Poroshenko now. He should take it," Obama said. "If he does not - if he continues a strategy of undermining the sovereignty of Ukraine, then we have no choice but to respond."

Further complicating the diplomatic meetings on Friday is U.S. opposition to a 1.2 billion euro ($1.63 billion) French contract to sell two Mistral helicopter carriers to Russia.

The U.S. government says the deal sends the wrong message to Russia at a time of economic sanctions imposed by Western states on Moscow over the conflict in Ukraine.

Putin's relations with Ukraine as well as with the European Union and the United States have been tense since pro-Western protesters ousted a Moscow-friendly Ukrainian president from power in February and Russia then seized Crimea.

Obama and Hollande dined together in Paris on Thursday evening and discussed ways of easing the Ukraine crisis before Hollande held a second, separate dinner with Putin.

The separate meals showed the lengths to which French officials have gone to keep the estranged Obama and Putin apart in Paris, at U.S. request, before the D-Day commemorations.

Source: Reuters

Chinese military spending exceeds $145 bln, drones advanced -U.S.

Chinese military spending exceeded $145 billion last year as it advanced a program modernizing an arsenal of drones, warships, jets, missiles and cyber weapons, the Pentagon said on Thursday, offering a far higher figure than Beijing's official tally.

The Pentagon's estimate, using 2013 prices and exchange rates, was 21 percent above the $119.5 billion figure announced by China. It was detailed in an annual report to Congress that cited steady progress in Chinese defense capabilities.

It acknowledged that estimating Chinese spending can be difficult, in part because of "poor accounting transparency and incomplete transition from a command economy."

The report came just days after Defense Secretary Chuck Hagel, using unusually strong language, accused Beijing of destabilizing the region in pursuit of territorial claims.

China claims almost the entire oil- and gas-rich South China Sea and dismisses competing claims from Taiwan, Brunei, Vietnam, the Philippines and Malaysia. Japan also has a territorial dispute with China over islands in the East China Sea.

The 96-page report said China was placing emphasis on preparing for potential contingencies in the South and East China Seas, noting an October drill named Maneuver 5 in the Philippine Sea.
The drill, the Pentagon said, was the largest Chinese Navy open-ocean exercise seen to date.

"China's military investments provide it with a growing ability to project power at increasingly longer ranges," the report said.

The United States last month charged five Chinese military officers and accused them of hacking into American nuclear, metal and solar companies to steal trade secrets, ratcheting up tensions between the two world powers over cyber espionage.

The Pentagon report renewed warnings over cyber intrusions.

"China is using its ... capability to support intelligence collection against the U.S. diplomatic, economic, and defense industrial base sectors that support U.S. national defense program," it said.

The Pentagon also cited advances in Chinese drone technology. It pointed to a Defense Science Board report cautioning Beijing's push "combines unlimited resources with technological awareness that might allow China to match or even outpace U.S. spending on unmanned systems in the future."

It noted that in September 2013, a "probable" Chinese drone was noted for the first time conducting reconnaissance over the East China Sea. China also unveiled details of four drones under development in 2013, including the Ligian, China's first stealth drone, it said.

Source: Reuters

China port probe into metal financing rattles banks, trade houses

Global trading houses and banks are scrambling to check on their exposure to a probe into metal financing at China's Qingdao port, as concerns intensify that a crackdown on commodity financing could hit trade in the world's top metal buyer.

The investigation at the world's seventh-largest port is looking into whether single cargoes of metal were used multiple times to obtain financing, according to industry sources.

This means different banks and trading houses were holding separate titles for the same metal, they said.

The inquiry has revived worries about the impact of China's deepening credit crunch on its metal imports, many of which pile up in warehouses to be used as collateral.

"Now the banks are all flying down to the port and literally, together with the warehouse people and the traders, are physically counting the stocks," said a source at a global trading company who visited the port this week.

"When we were there we did hear a couple of traders holding the same title. One was saying that one (cargo) belongs to me the other trader said it belongs to him. They had the same document."

Concern over what is happening at Qingdao has unsettled metal markets, although for now the investigation is known to centre on a single trading company and firms related to it.

It remains unclear if it signals the start of a wider investigation by Chinese authorities into metal financing, although checks so far with officials at several other major Chinese ports such as Ningbo have said operations were normal.

Reflecting concern among banks, Standard Chartered has suspended new metal financing to some customers in China, three sources familiar with the matter said.

The bank, which has been monitoring the situation at Qingdao, said on Thursday: "Specific to this incident, Standard Chartered is reviewing metals financing to a small number of companies in China."

At least one other Western bank with operations in China is reviewing its exposure to copper and aluminium financing, a source with direct knowledge said.

New York-based Citigroup Inc is among banks financing copper on behalf of clients at the port, according to people familiar with the situation.

In a statement to Reuters, the bank said: "To the extent Citi's clients are affected, Citi will work closely with the relevant authorities, warehousing companies and clients to resolve the matter."

The risk of losses likely varies between banks, depending on whether they lent to a trading firm believed to be directly involved with any alleged fraud, or to clients who owned metal at the port and are able to cover any losses, said a person who had been briefed on the U.S. bank's situation.

Concern over the situation has extended to domestic banks. A Chinese state-owned bank has sent a team from head office to Qingdao to investigate trade financing problems, said a source with direct knowledge of the situation.


FINANCING DEALS

Copper prices in London fell to their lowest in more than three weeks on Wednesday, partly on worries that bankers would restrict access to credit for financing deals after the probe. Prices steadied on Thursday.

Most metal financing deals in China are done outside exchanges, and in those deals warehouse receipts are used as proof of ownership of metal. This is agreed typically by a bank or a trading house with a warehouse.

In contrast, in some other developed financial centres there is greater oversight. The London Metal Exchange licenses warehouses and monitors stocks held in exchange inventories.

A spokesman for Trafigura said this week that the trading house was following events at the port and gathering information.

On Wednesday, Standard Bank Group and a part-owned unit of Louis Dreyfus Corp , Singapore-listed GKE Corp , also warned of potential losses.

"Standard Bank Group is not yet in a position to quantify any potential loss arising from these circumstances," it said.

Source: Reuters

ECB hurls cash at euro zone economy, says not done yet

The European Central Bank cut interest rates to record lows on Thursday, launched a series of measures to pump money into the sluggish euro zone economy, and pledged to do more if needed to fight off the risk of Japan-like deflation.

For the first time, the ECB will charge banks for parking funds at the central bank overnight in an attempt to force them to lend to small- and medium-sized businesses.

The measures were also aimed at easing pressure on the strong euro, which is threatening economic recovery and importing disinflation.

Euro zone inflation has been stuck in what Draghi has called

"the danger zone" below 1 percent since October, mainly because of weaker commodity and food prices, but also because of wage and other adjustments in euro zone crisis countries.

The bank stopped short of full-fledged quantitative easing

(QE) - printing money to buy assets - but ECB President Mario Draghi said more action would come it necessary. Asked why the ECB had not gone ahead with QE, he told a news conference:

"We think (what we've done is) a significant package. Are we finished? The answer is no. We aren't finished here. If need be, within our mandate, we aren't finished here."

RBS economist Richard Barwell said this comment would fuel market expectations for more action:

"We doubt the knee-jerk response to further bad news will be

'give the June package more time'; expectations of a broad-based asset purchase programme will rapidly start to build," he said.

Draghi outlined a four-year 400 billion euro ($544.86 billion) scheme giving banks that have been holding back credit due to looming stress tests an incentive to increase lending to businesses in the euro zone.

"Now we are in a completely different world," Draghi said, citing "low inflation, a weak recovery and weak monetary and credit dynamics".

The package, adopted unanimously, was aimed at increasing lending to the "real economy", he said.

Other steps included extending the duration of unlimited cheap liquidity for euro zone banks, injecting about 170 billion euros by stopping tenders that withdrew funds spent on past government bond purchases, and preparing for possible future purchases of asset-backed securities to support small business.

Projections published by the ECB showed inflation would be just 0.7 percent this year, 1.1 percent next year and 1.4 percent in 2016, a downward revision and far below the ECB's target of below-but-close-to 2 percent.

"If required, we will act swiftly with further monetary policy easing," he said, adding that the policy-setting Governing Council was unanimous in its commitment to use unconventional instruments if needed "to further address risks of too prolonged a period of low inflation".

Most of the measures had been widely anticipated. The euro initially fell to a four-month low of $1.3505 after Draghi's statement before recovering to trade above $1.3600, slightly up on the day. European shares rose and yields on the government bonds of stressed euro zone countries fell.

Source: Reuters

Samsung: Tizen TV Coming Soon

    the WSJ reports,"Samsung Electronics has lots of work to do to attract developers to write software for its homegrown mobile operating system, Tizen.

Samsung is pushing the new operating system so it can control its own destiny. It sells more mobile devices than any other company, but today the vast majority run Google’s Android operating system, making it hard for Samsung to differentiate its devices among dozens of Android competitors.

Considering that there aren’t any Tizen smartphones on the market yet — the first one will launch in Russia in the third quarter — it was a testament to Samsung’s backing for the platform that had developers investigating the nascent operating system.

Microsoft sent a team from Skype to hear Samsung’s pitch, for instance, though none would comment about the company’s plans.

“Samsung is one of the largest companies out there,” said Benjamin Curley, Manager of Systems Operations for cloud phone service Line2, “You’ve gotta pay attention.”

Curley said he’s not yet sure if Line2 will develop its app for Tizen, but he was there with a colleague to investigate whether it would be easy to repurpose his company’s Android app for the new platform.

The problem for Tizen is chicken-egg. It needs developers to make great apps in order to entice consumers to buy devices, but developers aren’t inclined to devote energy to the platform until consumers start buying them.

Vidal Graupera, the Director of Engineering for Walmart Labs, which works on technology for the giant retailer, was enthusiastic in particular about Samsung’s Gear2 smartwatch running Tizen. But he thinks the operating system will have to go “mainstream” before many big companies would want to develop for it.

Samsung nevertheless is pushing hard this year to launch more Tizen-based products.

Choi, unveiling the prototype Tizen TV at the conference said: “For the first time in three years, today we can finally show multiple Tizen products on the market…read my lips, this will be on the market very soon.”"

WhatsApp Co-Founder “I think we can build a substantial amount of revenue for Facebook,”

      The WSJ reports,"WhatsApp co-founder Brian Acton spoke Wednesday night to a small crowd of mostly Stanford students about founding the mobile messaging service and the company’s $19 billion deal with Facebook.

Acton, who attended Stanford in the late ’90s, said the wide-ranging forum was his first speaking engagement. The event was sponsored by StartX, a Stanford-affiliated incubator for startups.

Acton took pains to emphasize WhatsApp’s independence from Facebook. He said the company’s motto was “no ads, no games, no gimmicks,” and that he planned to keep things that way.

The goal, he said, was to maintain the simplicity and ease of use of the WhatsApp platform. At one point, though, his vision for WhatsApp sounded similar to that of Facebook CEO Mark Zuckerberg, who routinely says his aim is to connect everyone in the world. “It’s the best if everyone in the world could talk to each other,” Acton said.

After the acquisition was announced in February, privacy advocates voiced concerns over Facebook gaining access to information about WhatsApp users. Acton described the relationship between Facebook’s Messenger app and WhatsApp, as well as between the two companies’ policies on user data, as “separate but equal.”

He didn’t go into detail about how the two platforms would work together but compared the situation to an insurance provider who has a person’s phone number, but doesn’t merge that data with their Facebook identity.

Acton said that long-term questions of “how we generate revenue” still needed to be resolved, as well as questions of “interoperability” between the two platforms.

To grow WhatsApp, which has roughly 450 million users — many in developing countries — Acton said that he and co-founder Jan Koum studied differing communications styles across regions. “You learn a lot about how people in the world talk to each other,” he said.

For example, the two made the app free in India because people there aren’t accustomed to making payments over the phone or through credit cards. In the Middle East, people tend to broadcast messages to groups, he said, so he’s been studying how people communicate during the Muslim holiday of Ramadan.

Acton said WhatsApp could have done a better job growing its user base in Japan and Taiwan with more focus and concentration, he said.

“I think we can build a substantial amount of revenue for Facebook,” he said. The business model wouldn’t be based on advertising, he said, but didn’t comment further".

WSJ: Deal-Hungry Alibaba Enters New Field: the Soccer Pitch

        The WSJ reports, "Alibaba said Thursday it bought a 50% stake in China's Guangzhou Evergrande soccer team for 1.2 billion yuan ($192 million), a deal that Alibaba's founder said was ironed out in a mere 15 minutes.

The transaction is the latest in a string of purchases by Alibaba and takes the company into the terrain of sports, where many high-profile companies have stumbled.

Speaking in the southern Chinese city of Guangzhou on Thursday, Mr. Ma said the deal to buy the stake in Guangzhou Evergrande Football Club only came together in recent days after Mr. Ma had drinks in Hong Kong with club owner Xu Jiayin, a property magnate.

"It's actually cheap," Mr. Ma said. "I had no idea how much a soccer club is worth."

The team is owned by Mr. Xu's Evergrande Group, a property developer. Mr. Xu has a net worth of $7.7 billion, according to the Hurun Report wealth-tracking service. He also has political clout, serving as a member of the country's top legislative advisory body, the Chinese People's Political Consultative Conference.

Chinese President Xi Jinping, a professed soccer fan, has said he wants China to qualify for and perhaps host the World Cup.

In the run-up to its U.S. listing, Alibaba has been making a slew of deals to bolster its core business and to broaden its appeal.

As China's hundreds of millions of Internet users have increasingly turned to smartphones to access the Internet, Alibaba has faced challenges attracting users, who are much more accustomed to shopping on Alibaba's PC-based websites. The turn to entertainment could be one way for the company to ensure a steady flow of traffic to its mobile e-commerce sites.

Simon Wong, a corporate-governance expert at the London School of Economics, said buying a stake in a soccer club may raise red flags to prospective investors. "You should focus on what you're good at and this seems so ancillary to what they're doing today," he said.

Even after Alibaba lists, Mr. Wong said, "there will be a small group of shareholders that can make decisions without consulting outside institutional investors, that makes me think twice."

Still, the investment pairs China's best soccer club with one of its most successful entrepreneurs and is likely to prove popular with the country's myriad soccer fans".

Russia ponders partially selling state-owned satellite service Era-Glonass

Source:  M2 Communications

China's May HSBC services PMI eases to four-month low of 50.7

Growth in China's services sector retreated to a four-month low in May, a private survey showed, contrasting with other data which had raised hopes that the world's second-largesteconomy may have steadied last month.

The services purchasing managers' index (PMI) compiled by HSBC/Markit slipped to 50.7 in May from April's 51.4, but still above the 50-point level demarcating a monthly growth in activity from a contraction.

In a sign that some companies remained cautious about their prospects, businessexpectations fell to 58.1, a one-year low and the second-worst reading ever recorded since collection of the data began in November 2005.

The findings buck the trend seen in other China PMI data in recent days which suggested the economy may be stabilising after a weak start to the year and raise the question of whether Beijing needs to do more to put a floor beneath growth.

"Growth momentum remains slow and private sector sentiment is weak," HSBC economist Qu Hongbin said in reference to the "slight disappointment" in the latest PMI poll.

"We think policymakers should continue to ease monetary and fiscal policies in coming months to help support growth."

To shore up the economy, the Chinese government has loosened policy in small and incremental steps so that growth can be lifted in areas it deems appropriate and which do not fuel pure financial speculation. Just last week, authorities said they will lower the reserve requirements for some banks.

Three separate PMI polls released in the past week all showed China's factory and services sectors enjoying their best performances in four or five months in May as foreign and domestic demand improved.

Taken together, the PMI releases signal that China's economic outlook remains uncertain, even if a mild recovery may be at hand.

Businesses appear to agree.

Firms surveyed in Thursday's PMI indicated they are not as confident as before due to the murky economic outlook. And the guardedness has led companies to delay hiring new workers, HSBC/Markit said, citing anecdotal evidence.

For the month, the employment sub-index in the services PMI hovered around the 50-point mark, indicating marginal growth.

Source: Reuters