EU: No agreement on Failing Banks

"European Union finance ministers are under pressure to agree who pays for failing banks after failing to reach a deal last week, with Germany and France at odds on how to distribute the costs.

The law on rescuing and closing banks in the EU is central to the 27-nation bloc's banking union, which aims to prevent future financial crises and get the economy out of recession.

It is also a highly controversial element as it will dictate who decides what happens to a failing bank and who is to pay for it, bringing national sensitivities to the fore.

After talks failed last Friday following almost 20 hours of talks, EU leaders have asked for a deal on the directive by Thursday and talks have been scheduled for Wednesday.

Any slippage could further set back the banking union project, which has been delayed twice because of the complexity of negotiations between EU governments and institutions.

Ever since banking union started to take shape in mid-2012, Germany has been wary, concerned that as the currency union's largest and most powerful economy, it will end up on the hook for other countries' debts if a single, EU-wide system for sorting out problems is put in place.

While there is no immediate deadline for an agreement, the risk of a negative market reaction to another failure has been growing since the U.S. Federal Reserve made clear that it might not be printing any more money by this time next year.

Adding to the pressure are rising peripheral euro zone borrowing costs, which threaten to reignite the sovereign debt crisis, in abeyance since the European Central Bank declared it could buy unlimited amounts of bonds.

"Failure to comply with this agenda would cast serious doubt on the ability of European member states to implement the banking union on time, and would undermine its credibility, with possible adverse impacts on bank funding costs," British bank Barclays said in a research note to clients"

Source:  Reuters.

Gold Prices fell on Monday, after 7% drop last week

Gold prices fell Monday, following last week’s 7 percent drop, weighed down by a stronger U.S. dollar and increasing fears over an early end to the Federal Reserve’s stimulus efforts.

The metal sank back towards a three-year low hit last week in a sharp sell-off triggered when the Fed said it would cut back its stimulus by mid-2014, which supported interest rates and therefore made gold comparatively less attractive.

Spot Gold was down 1% at $1283.68 per ounce at 11:52 a.m. ET (15:52 GMT), after suffering the worst weekly performance since September 2011 last week, which saw gold drop as low as $1268.89 per ounce.

Gold is down around 24% so far this year.

The dollar traded near its highest in nearly three weeks against a basket of currencies, bolstered by expectations the Fed was considering scaling back its $85 billion monthly bond purchases.

The Fed`s remarks helped push up the benchmark 10-year U.S. Treasury yield to its highest in almost two years at above 2.5 percent.

Given that gold pays no interest, the rise in returns from U.S. bonds and other markets is seen as a negative signal.

Gold was also hurt as interest rates for short-term funds in China rose to extraordinary levels last week after big commercial banks held back on lending in the interbank market.

Bullish Outlook cut

Hedge funds and money managers slashed their bullish bets in gold futures and options for a second consecutive week to the lowest level in a month, a report by the Commodity Futures Trading Commission showed.

Holdings in SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, fell a further 0.54 percent to 989.94 tonnes on Friday, the lowest in over four years.

Goldman Sachs cut its year-end 2013 gold price forecast to $1,300 an ounce from $1,435.

Source:  Forextribe

Space Dream is part of a Dream to make China Stronger. President Xi Jinping

 China will take bigger steps in space exploration in pursuit of its space dream, President Xi Jinping said during a video call with the astronauts on the Shenzhou X manned mission on Monday.

Speaking via a video link from the Beijing Aerospace Control Center, Xi said the space dream is part of the dream to make China stronger.

"With the development of space programs, Chinese people will take bigger strides to explore further into space," Xi said.

Having blasted off on June 11, the Shenzhou X spacecraft is scheduled to return to Earth on Wednesday. The spacecraft's re-entry capsule is expected to land on the prairie of the Inner Mongolia autonomous region.

Having been in space for 13 days on Monday, the three astronauts — crew commander Nie Haisheng, Zhang Xiaoguang and Wang Yaping — reported to Xi that they are in good condition.

Xi expressed his sincere greetings to the astronauts and especially asked how Zhang and Wang felt, as the mission is their first time in space.

Zhang, who was one of China's first batch of astronauts recruited in 1998 but only realized his space dream 15 years later, said he and his fellow astronauts had adapted to the microgravity environment quickly.

Wang, China's second woman in space and first space teacher, said they all had normal appetites and were able to rest seven to eight hours each day.

Wang, China's second woman in space and first space teacher, said they all had normal appetites and were able to rest seven to eight hours each day.

Xi said the country's first space lecture would play an important role in fostering young people's interest in sciences and exploring space.

The manned space mission also reflected the courage to defy hardships and explore, a spirit that would inspire the entire nation, he said.

Source:  Xinhua

China's Vice-Finance Minister is elected Director General of Unido

China's Vice Finance Minister Li Yong is elected to the post the Director-General of the United Nations Industrial Development Organization (UNIDO) in the Board session on Monday.

Li won 37 ballots from member states in the first round of voting in the Development Board of UNIDO, and the selection process will conclude with a final decision by the General Conference at a special session on 28 June. He is supposed to be officially appointed the Director-General of UNIDO in the General Conference on 28 June.

The newly elected Director-General said UNIDO is faced with both opportunities and challenges, and that he would try his best to work together with member states to win a bright future.

Li is a senior economic and financial policy-maker of China and has been a member of the Monetary Policy Committee of the Chinese central bank for a decade.

"I am very optimist that we will have even better situation from now on with the support of China," Asghar Soltanieh, Iran's envoy to UNIDO told Xinhua after Li Yong won the election, adding that he hopes to witness further progress of UNIDO's work and promote the South-South corporation.

Source: Xinhua

Takahiro Mitani,World's Biggest Manager of Retirement Savings , Doubts 2% Inflation in Japan

Japan’s central bank probably promised too much when it set a goal of lifting inflation to 2 percent within two years, according to Takahiro Mitani, president of the country’s public pension fund.

History is against the Bank of Japan as it undertakes unprecedented asset purchases in pursuit of a pledge to overcome 15 years of deflation, Mitani, the 64-year-old head of the 112 trillion yen ($1.14 trillion) Government Pension Investment Fund, said in a Tokyo interview June 21. The world’s biggest manager of retirement savings, which said on June 7 that it’s cutting local bond holdings to buy more stocks and foreign securities, plans to leave its asset allocations at the new levels until at least March 2015, he said.

The BOJ has pledged to double the monetary base by the end of next year while Prime Minister Shinzo Abe is promising public spending, tax reform and freer markets to reinvigorate Japan’s economy. It’s been 21 years since annual inflation in Japan exceeded 2 percent, according to the World Bank.

“It’s going to be very difficult,” Mitani said. “The BOJ think that if they say they will take bold measures to bring about inflation, then inflation expectations will rise and as a result prices will rise. But reality isn’t that smooth. Even in the bubble, inflation was only about 1 percent."

Harsh Outlook

Mitani said in February that if Abe and the BOJ are successful then a 67 percent allocation for local bonds would look “harsh.” The fund cut its target holding for local government bonds to 60 percent from 67 percent, while the proportion of foreign and local shares will rise to 12 percent each, from 9 percent and 11 percent respectively. The allocations announced this month are close to what the fund already holds, he said.

The central bank can add to its unprecedented monetary easing announced two months ago should economic conditions change significantly, BOJ Governor Haruhiko Kuroda told lawmakers last week. The bank is buying 7.5 trillion yen of bonds a month, which Kuroda said in April will mean the bank is buying the equivalent of 70 percent of government bond issuance, along with more risk assets like real estate investment trusts and exchange-traded fund

Another Angle

“I don’t know what they will do next,” Mitani said. “If they do need another hand, I don’t think they can buy much more bonds. So they’ll have to come at things from another angle. Kuroda-san said something about J-Reits and they have increased up to upper limit but they could expand that, so maybe they could buy other things.”

The BOJ’s policy is to boost its holdings of exchange-traded funds and Japan real-estate investment trusts by about 1 trillion yen and about 30 billion yen per year respectively. That contrasts with about 50 trillion yen for purchases of Japanese government bonds.

Benchmark 10-year government bond yields have swung from an all-time low of 0.315 percent to as much as 1 percent since the BOJ announced its plan in April. The yield rose 1.5 basis points to 0.865 percent on June 21.

Yields will “calm down below 1 percent,” Mitani said. “I don’t think many in the market think it’ll be 2 percent in two years.

ON JAPAN'S STOCK MARKET CORRECTION

Stocks surged after the BOJ’s April announcement, taking gains since elections were announced that brought Abe to power to as much as 77 percent before the rise in bond yields triggered a correction that began on May 23. The Topix index, the country’s broadest equity measure, closed at 1,099.4 on June 21, almost 14 percent below its May 22 high.

“The markets are very demanding,” Mitani said. Even if the BOJ increases its stimulus efforts “just a little bit, it’s not as good as they want, they will ask for more. I don’t think the BOJ have to keep dealing with what the market wants at every turn. I don’t know what hand they have. I’d like them to think about it.”

The GPIF will release results and more details on its holdings in July, Mitani said. The fund didn’t alter the structure of its holdings during the 2008 financial crisis or in response to the 2011 earthquake and nuclear disaster. The reweighting of its portfolio wasn’t a response purely to the change in policy by the BOJ or Abe, Mitani said.

Historical Analysis

“Some people think that we changed our core portfolio just because of market changes,” Mitani said. “But it’s not like that. We decided to look back over past data and recalculate things. That was how we came to our new portfolio decision. For instance, we use data looking back to 1973.”

The shift toward higher-yielding assets comes as the manager prepares to fund retirements in the world’s oldest population. Stocks extended their declines after Abe said on June 6 that a legislative campaign to loosen rules on businesses, the “third arrow” of his economic plan, won’t begin until after upper house elections next month.

“Maybe some have been disappointed by the economic growth strategies they have seen from Japan so far,” Mitani said. “When people tell me they are disappointed, I tell them that there is the elections, so once the elections are over, we may see an Arrow 3.5. Abe has basically said that too.”

Source : Bloomberg.net

POBC Country's liquidity remains at a reasonable level

BEIJING, June 24 (Xinhua) -- China's central bank on Monday told the country's overextended lenders to manage liquidity risks to stabilize the monetary environment.

In a circular posted on the People's Bank of China (PBOC) website, the central bank said the country's liquidity stance remains at a reasonable level.

However, with multiple changing factors in the financial system, including regularly high borrowing demands in the middle of the year, commercial banks should strengthen liquidity management.

The statement comes as short-term interbank rates rose steeply in the past two weeks, but the PBOC has been reluctant to pump cash into the money market, a necessary move to restrain the lending binge, which is blamed for inflating the asset bubbles.

Banks should allocate positions beforehand and keep abundant reserves. Prudence is needed to arrange asset portfolios and control the liquidity risks arising from the credit binge, the circular said.

Marc Faber's thoughts

Gold is Very Oversold Posted: 23 Jun 2013 10:13 PM PDT “Well, right now equities, bonds and gold are very oversold. They can easily rally on the S&P. We could rally 43, 50 points, but I don’t expect a new high. Just in case a new high would be achieved in the next two months or so, it would not be confirmed by the majority of shares. In other words, very few stocks would lead the advance. In terms of bonds, they are also incredibly oversold. Where the sentiment about equities is actually still rather positive and all of these super bulls still predicting the market to continue to rise into 2014, 2015. In bonds and gold, sentiment is by historical standards incredibly negative. As a contrarian, I would rather buy bonds and gold than equities.”

Investor's Confidence Indicators in US markets

Fear and Greed Index      10            Extreme Fear

Vix Index                        20.35             + 7.72%

From the WSJ, the $11.9 trillion U.S. government-bond market showed no signs of respite today, sending the yield on the benchmark 10-year note to as high as 2.667%, the highest level since Aug. 1, 2011.

In early trade, the benchmark 10-year note fell 1 5/32 in price, yielding 2.663%. Bond prices move inversely to their yields.

Since May 1, the 10-year yield has soared from 1.61%, the low for the year.

Demand for safe assets has diminished as the outlook for the U.S. economy has brightened. That, in turn, has raised fears that the era of accomodative monetary policy by the Federal Reserve may soon come to an end, generating heavy selling of Treasury debt over the past few weeks. 

Fear of Domestic Credit Squeeze in China

The WSJ reports today China's stock market had a big correction as fear of a domestic credit
squeeze, pushed Shanghai -5.3%.
"The selloff was sparked by further signals over the weekend that China's cash crunch would persist, after a commentary by state-run Xinhua suggested that the government won't be taking any action soon. In addition, the People's Bank of China made no direct reference to the recent surge in borrowing costs for banks, at the same time saying that it will maintain prudent monetary policy.

China's medium sized banks continued to suffer heavy losses, despite a drop in the interbank lending rate, as the market was worried about their large exposure to wealth management products. Fitch Ratings estimates that more than 1.5 trillion yuan worth of these products will mature in the last 10 days of June.

China Minsheng Banking Corp. 600016.SH -9.95% plunged 9.9% in Shanghai andIndustrial Bank 601166.SH -9.98% skidded 9.9%.

China's broader indexes were weighed by financial concerns, with the Shanghai Composite crashing 5.3% to 1963.24 in the mainland. Hong Kong's benchmark Hang Seng Index fell 2.2% to 19813.98, while the city's measure of Chinese companies, the Hang Seng China Enterprises Index, dropped by 3.2% to 8938.63.

The fear over the banking system also translated into a shock for the local currency, as the yuan fell to 6.1411 to the dollar, compared with 6.1343 late on Friday".

Bank for International Settlements. It is Time to Exit from Easy Money Policies. Part 1

Since the beginning of the financial crisis almost six years ago, central banks and fiscal
authorities have supported the global economy with unprecedented measures. Policy rates
have been kept near zero in the largest advanced economies. Central bank balance sheets have
doubled from $10 trillion to more than $20 trillion. And fiscal authorities almost everywhere
have been piling up debt, which has risen by $23 trillion since 2007. In emerging market
economies, public debt has grown more slowly than GDP; but in advanced economies, it has
grown much faster, so that it now exceeds one year’s GDP.
Without these policy responses of easy money, the global financial system could
easily have collapsed, bringing the world economy down with it. But the subsequent global
recovery has remained halting, fragile and uneven. In the United States, the expansion
continues, albeit at a moderate pace. In major emerging market economies, growth is losing
momentum. Most of Europe has fallen back into recession. At the same time, the general
downward trend in productivity growth has not been receiving enough attention from
policymakers.
As the risks mounted around mid-2012, central banks rode to the rescue yet again. The
ECB addressed market fears with the promise that it would do “whatever it takes” within its
mandate to save the euro. It followed up with a conditional programme to buy sovereign debt
of troubled euro area countries. Central Banks of the U.S., U.K. and Japan likewise pushed forward with additional expansionary measures.

As global financing conditions eased further, private credit continued to grow at a rapid
pace in some countries, lending standards weakened, equity prices reached record highs
worldwide, long-term yields hit record lows and credit spreads compressed. Even highly
leveraged firms could borrow at long-term rates far below the rates they had to pay before the
crisis.
But easy financial conditions can do only so much to revitalise long-term growth when
balance sheets are impaired and resources are misallocated on a large scale. In many advanced
economies, household debt remains very high, as does non-financial corporate debt. With
households and firms focused on reducing their debt, a low price for new credit is not terribly
relevant for spending. Indeed, many large corporations are using cheap bond funding to
lengthen the duration of their liabilities instead of investing in new production capacity. It does
not matter how attractive the authorities make it to lend and borrow – households and firms
focused on balance sheet repair will not add to their debt, nor should they.
 And, most of all, more stimulus cannot revive productivity growth or remove the
impediments that block a worker from shifting into a promising sector. Debt-financed growth
masked the downward trend in labour productivity and the large-scale distortion of resource
allocation in many economies. Adding more debt will not strengthen the financial sector nor
will it reallocate resources needed to return economies to the real growth that authorities and
the public both want and expect.

As the stimulus is sustained, it magnifies the challenges of normalising monetary policy; it increases
financial stability risks; and it worsens the misallocation of capital.
Finally, prolonging the period of very low interest rates further exposes open economies to
spillovers that are now widely recognised. The challenges are particularly severe for the
emerging market economies and smaller advanced economies where credit and property
prices have been rapidly growing. The risks from such a domestic credit boom at a late stage of
the economic cycle are hard enough to manage. Strong capital inflows exacerbate such risks
and challenges for market participants and authorities; and they expose economies to large
sudden reversals if markets expect an exit from unconventional policies, as volatility during the
past few weeks seems to indicate.

Source:  Bank of International Settlements, June 2013.

China's surveys Lower Confidence about Growth and Increasing worries over Capital Markets

 "Surveys conducted by China's central bank have indicated that bankers, entrepreneurs and depositors are worried about the economy and have less confidence, the Shanghai Securities News reported Saturday.

According to the reports, 34.1 percent of surveyed bankers and 36.4 percent of surveyed entrepreneurs believe the macroeconomy has slowed.

The index for loan demand was 72.5 percent, declining 4.9 percentage points from the previous quarter, while the index for the manufacturing sector posted the largest drop of 5.5 percentage points.

Just 30 percent of all surveyed companies said they are optimistic about capital turnover and fund withdrawals.

Affected by increasing worries over the capital market, 46.2 percent of respondents said they were inclined to make greater deposits, while 35.7 percent stuck to investment, 1.9 percentage points lower than in the previous quarter.

The reports said that 59.1 percent of respondents believe commodities prices are too high, while 66.7 percent said housing prices are not acceptable".

Source: Xinhuanet

Report of the International Energy Agency . Natural Gas future Golden Age?

"Natural gas is poised to enter a golden age, but will do so only if a significant proportion
of the world’s vast resources of unconventional gas – shale gas, tight gas and coalbed
methane – can be developed profitably and in an environmentally acceptable manner.
Advances in upstream technology have led to a surge in the production of unconventional
gas in North America in recent years, holding out the prospect of further increases in
production there and the emergence of a large-scale unconventional gas industry in other
parts of the world, where sizeable resources are known to exist. The boost that this would
give to gas supply would bring a number of benefits in the form of greater energy diversity
and more secure supply in those countries that rely on imports to meet their gas needs, as
well as global benefits in the form of reduced energy costs.
Yet a bright future for unconventional gas is far from assured: numerous hurdles need
to be overcome, not least the social and environmental concerns associated with its
extraction. Producing unconventional gas is an intensive industrial process, generally
imposing a larger environmental footprint than conventional gas development. More wells
are often needed and techniques such as hydraulic fracturing are usually required to boost
the flow of gas from the well. The scale of development can have major implications for
local communities, land use and water resources.
 We assume that the conditions are in place, including approaches to unconventional gas development consistent with environment safe production and social concerns resolved
which would allow for a continued global expansion of gas supply from unconventional resources,
with far-reaching consequences for global energy markets. According to the latest report from the IEA greater availability of gas would have
a strong moderating impact on gas prices and, as a result, global gas demand rises by more
than 50% between 2010 and 2035. The increase in demand for gas is equal to the growth
coming from coal, oil and nuclear combined, and ahead of the growth in renewables. The
share of gas in the global energy mix reaches 25% in 2035, overtaking coal to become the
second-largest primary energy source after oil.
 Production of unconventional gas, primarily shale gas, more than triples in the Golden
Rules Case(study scenario shale production in a safe an environmentally clean and
friendly towards communities, land and water resources)to 1.6 trillion cubic metres in 2035. This accounts for nearly two-thirds of
incremental gas supply over the period to 2035, and the share of unconventional gas in total
gas output rises from 14% today to 32% in 2035. Most of the increase comes after 2020,
reflecting the time needed for new producing countries to establish a commercial industry.
The largest producers of unconventional gas over the projection period are the United
States, which moves ahead of Russia as the largest global natural gas producer, and China,
whose large unconventional resource base allows for very rapid growth in unconventional
production starting towards 2020. There are also large increases in Australia, India, Canada
and Indonesia. Unconventional gas production in the European Union, led by Poland, is
sufficient after 2020 to offset continued decline in conventional output.
Global investment in unconventional production constitutes 40% of the $6.9 trillion (in
year-2010 dollars) required for cumulative upstream gas investment in the Golden Rules
Case. Countries that were net importers of gas in 2010 (including the United States)
account for more than three-quarters of total unconventional upstream investment,
gaining the wider economic benefits associated with improved energy trade balances and
lower energy prices. The investment reflects the high number of wells required: output at
the levels anticipated in the Golden Rules Case would require more than one million new
unconventional gas wells worldwide between now and 2035, twice the total number of gas
wells currently producing in the United States". 

Mexico's Project: Reform of Energy Legistation.

 "It  was the first great nationalisation of oil outside the Soviet Union and created the first major national oil company. Women queued to donate jewellery and chickens to pay the bill. It shaped the nation's evolution, with oil sustaining a near one-party state for 71 years. But now Mexico's March 18, 1938, nationalisation may be on its way out.

Indeed, an unaccountable state within a state, providing a third of government revenues, Pemex arguably distorted the whole course of Mexican democracy.
.

  Mexico's President Enrique Peña Nieto, is hoping to end Pemex's monopoly before the year is out. It's essential he succeeds as the company's failings are holding back the whole economy.

Production has dropped year since 2004 as Pemex's flagship, Cantarell, once the world's second-biggest producing field, went into steep decline.

Falling Mexican output helped to undermine non-Opec production and drive the price boom of the past decade.

Mexico could become a net oil importer by 2020, while despite its hydrocarbon riches, it imports a third of its gas, mostly from its northern neighbour.

The famous Eagle Ford formation, one of the US's two leading shale oil plays, extends across the border from Texas. Yet Mexico, which could have the world's sixth-largest shale gas resources, has drilled just 15 wells; more than 4,000 wells were permitted in the Texas Eagle Ford alone last year.

The country's most promising new exploration province is the Gulf of Mexico. Shell and others have found oil in 3,000 metres of water, the deepest producing wells in the world, just over the US side of the border, but Mexico has barely ventured into these deep waters.
The case for reform has long been clear, but was blocked by Pemex's powerful trade unions, the company's ties to state governments, and by the constitution's commitment - still passionately backed by many Mexicans - to national ownership of mineral resources.

Mr Peña Nieto has to keep a tricky coalition of Mexico's three largest parties together to pass reform of oil and the voting system.

It's likely under his plans that the state would still own the oil, while sharing profits with private investors in shale and deep-water exploration".

Source: TheNational

China's Central Bank reiterates a stable and pro growth monetary policy

China's central bank said on Sunday that the country will continue to implement the prudent monetary policy while fine-tuning it at the proper time.

It will keep a stable and moderate growth in its credit supply as well as social financing, said the People's Bank of China in a statement issued after a quarterly meeting of its monetary policy commission.

Sovereign Funds The Wealth of Countries The case of Norway

The Government Pension Fund of Norway

Inception            Origin       Assets Billions
                                               US$

   1990                 Oil               737.2

 The Goverment Pension Fund of Norway is a sovereign fund, where the surplus wealth,
produced by Norwegian petroleum income is held. They changed their fund's name fron
the original one, The Petroleum Fund of Norway.

Origin

In 1969 oil was dicovered in the North Sea.
The Norwegian State Oil Company was founded as a private limited company owned by the Government of Norway on 14 July 1972 by a unanimous act passed by the Norwegian parliament.  The political motivation was Norwegian participation in the oil industry.
In 1973 the company started work acquiring a presence in the petrochemical industry.
Later in 1990,in the Norwegian Parliament The Petroleum Fund of Norway was created,to counter the effects of the volatile price of oil in the international markets and the diminishing oil reserves in the future . So that the income received by the Goverment would be more smooth and avoiding the disruptive effects of the oil
prices and volume of Reserves.And to support a long-term management of the petroleum revenues.

CHINA AND RUSSIA INCREASING BILATERAL TRADE

The trade volume between China and Russia is expected to hit 100 billion U.S. dollars in 2014, a year ahead of the target set by leaders from the two countries, a Russian trade representative forecast Friday.

China's imports from Russia mainly include oil and raw materials, the price of which has fallen remarkably in past months.

In addition to energy cooperation, the two countries can strengthen cooperation on technology, agriculture and tourism, said Lu Nanquan, deputy director of the Russian Research Center under the Chinese Academy of Social Sciences.

Aerospace, nanotechnology, high-end manufacturing, energy conservation and environmental protection, biochemistry and information technology are key areas in which China and Russia can compliment each other, said Lu.

China is currently Russia's largest trading partner, with the trade volume between the two countries reaching 88.16 billion U.S. dollars in 2012.

Source: Xinhuanet

Meet Li Keqiang (李克强) China’s new premier

-Li Keqiang, 57, was appointed Chinese premier on , at a time when China has become the world's second largest economy. He is the first premier born after the founding of the People's Republic of China in 1949 to hold dual academic degrees in economics and law.

Li chaired a seminar on reform six days after the conclusion of the 18th National Congress of the Communist Party of China (CPC) in November.

At the seminar, Li put forward the "reform as dividends" theory. "Reform at present has entered deep water and has to sail in a head tide. We may spare mistakes if we make no endeavor, but we must bear a historical responsibility," he said.
Administrative reform became a top priority after the 18th CPC National Congress.
Li insisted on cutting down the cabinet departments down to 25 to bring more efficiency. This round of cabinet restructuring is the seventh to take place in China since the country's reform and opening up in the late 1970s. Like any reform of its kind, this round represents a difficult challenge.
 He called for decentralizing power over the market, society and local authorities by decreasing government intervention.
 He has also pushed to reduce and decentralize government approvals for investment and businesses, as well as cut market access examinations and administrative charges. Since many entrepreneurs complain the business registry procedures are too complicated, Li helps change the system by granting licenses more freely. Entrepreneurs are now allowed to register their companies by agreeing upon registered capital, instead of actual contributions.
While reviewing a price reform plan for coal and electricity, Li approved of its market orientation but believed that it was too characteristic of a planned economy. "Given that all coal is sold at market price, why are there still restrictions on quantity and price? The contracts between enterprises brook no checks from the government. The contract law shall solely apply," he once said.

Transformation
The 18th CPC National Congress urged the synchronized development of industrialization, IT application, urbanization and agricultural modernization.
Li believes that the deep integration of industrialization and IT application is the orientation and impetus of industrial upgrades. He has noticed that the integration of IT and power-generating technology in developed countries can significantly boost the utilization of renewable energy generation by opening to small companies and families.
Since it is difficult to integrate wind and solar power into the grid, Li has called for studying energy development of foreign countries and opening the grid to small-scale distributed power generation by utilizing information technology. China's National Grid has since been connected to several small solar power generators operated by small companies and families.

Urbanization

He considers urbanization to be the biggest source of development for the coming decades.

Li's doctoral thesis at Peking University, "On the Ternary Structure of China's Economy," won the Sun Yefang Economics Prize, the highest honor in China's economic circles. It reflected his thorough understanding on both world trend and China's reality. Through deliberation and practices of more than 20 years, Li has nurtured strategic theories of new urbanization.

He believes that China's urbanization should be conducted using advanced concepts and managerial expertise from abroad. He was deeply impressed by the urban layout of European cities, as well as their living environment and public services, during visits in the 1980s and 1990s.

In 2012, when he was preparing to visit Europe as vice premier, he proposed holding a high-level China-Europe forum on urbanization. One month later, almost 600 experts, businessmen and officials from China and Europe gathered in Brussels to discuss sustainable city planning and infrastructure-building. The forum became a new platform for strategic and practical cooperation between China and Europe.

Li has been pondering how to achieve a unification of scientific development and cultural progress in the process of urbanization. He has repeatedly stressed that urbanization should be a people-first drive which will eventually enrich rural residents and benefit the entire population. A key issue is to help over 200 million farmer-turned migrant workers gradually adapt to urban life.

Li Keqiang has paid close attention to the development of service industry, employment and low-income subsidized housing. Over the past five years, China has started the construction or renovation of 30 million units of affordable housing. Seventeen million units have been completed, improving housing conditions for millions of people.

Li has called for closing not only the gap between urban and rural areas, but the gap between different districts within cities. More than 12 million dilapidated urban homes were renovated over the last five years. In February, Li called on to initiate the second round of slum renovation.In the coming five years, another 10 million urban households can expect to bid farewell to slums. A total of nearly 100 million people will benefit from the two rounds of renovation.

China should not "build high-rises on the one side and keep slums on the other side" in the course of urbanization. He called for greater efforts to renovate the city's dilapidated areas and provide better houses for its residents. "This is an overarching issue concerning people's livelihoods that should be pushed ahead against all odds," he said.

Responding to mounting complaints over worsening air pollution in some cities, Li called for the monitoring and release of PM2.5 (air-borne fine particles measuring 2.5 microns or less in diameter) data to be conducted nationwide at a conference on environmental protection held in December. As a result, China has adopted stricter air quality standards, and PM2.5 monitoring is now conducted in 113 cities.

Li brings modern managerial expertise when analyzing China's actual condition. He said the government should prioritize basic needs when providing social services, as well as build an all-inclusive security network.

Problem Resolver

To sidestep difficulties is not Li's style. He always comes to resolve conflicts with resolution, far-sightedness and systematic knowledge. Overseas media deemed Li as a master hand in resolving complicated difficulties.

Li said that in China's modernization drive, "we must have the resolution and confidence similar in scaling high peaks and also the courage, wisdom and perseverance similar in walking a tightrope.

After leaving his post at the Central Committee of the Communist Youth League of China in 1998, Li became head of Henan Province, followed by a post as head of Liaoning Province. The two provinces' problems were typical of modern China. The agricultural province of Henan was struggling to modernize its agriculture and push ahead with urbanization, while industrial Liaoning was facing painful transformation of its outdated economic structure.

Li proposed a comprehensive approach to develop Henan. He put forward a raft of policies, including building a "national granary," mapping out the province's industrial layout and building a city cluster in central China. He consolidated Henan's agricultural strength while pushing it to become an industrial center and a new growth engine in central China.

As CPC chief of Liaoning, he confronted an economy burdened with poorly operated state-owned enterprises and an industry that had failed to open up, despite the province's vast coastline. Li encouraged the province to turn toward the sea and develop a coastal economic belt.

His efforts helped connect the inland areas of Liaoning to the sea and boosted urban integration in the cities of Shenyang and Fushun. Today, the development of Liaoning's coastal economic zone becomes a national economic strategy. Li also helped resolve social security problems of millions of workers and promote the transformation of resource-exhausted cities.

When serving as the vice premier of the State Council, Li was tasked to oversee the country's healthcare system reform, a challenge for policymakers around the world. The reform has been progressing with the goal of providing a basic medical system as a public service to all.

"Reform is 'the biggest dividend' for China, and the dividend shall benefit the country's 1.3 billion people," Li said. China now boasts the largest medical insurance network in the world after its coverage was expanded from 30 percent to 95 percent within three years.

Li is known for his love of reading, a habit he has nurtured since adolescence. His most favored books include literary and historical classics written in both Chinese and English. Li has a profound knowledge of law and economics and is also an eloquent English speaker.

Li is married to Cheng Hong, an English professor at the Beijing-based Capital University of Economics and Business. Cheng graduated from college in 1982 and met Li while studying at Peking University. The couple has one daughter.

Source: Xinhuanet

Getting back to normalcy in interest rates. It won´t come easy

The latest Bubble was in the Bonds Market,and it will come to an end with lots of pain and volatility
in the financial markets.After the FOMC meeting,Mr Bernanke hinted, that if the economy continues to get better, the Federal Reserve will start to tap its bond purchases program . This statement  heralded the end of easy money by the Fed, and it roiled financial markets on Wednesday, continued yesterday and today was a volatile session with mixed results.
  The peril is not that the easy money is going to end smoothly according to the Federal Reserve schedule. Institutional investors are not going to wait, they will make their decisions in terms of risk and reward as always. How much will they gain keeping bond investments(not much), towards how less risk they take by selling bonds,avoiding price losses and increasing yields, in a new scenario of increasing interest rates.
  Today is a Triple Witching day when stock market indexes,stock market index options,stock
options expire on the same day,which are days with greater volatility. And it has been a unstable
day for markets in  the US, although indexes closed with mixed results,with DJIA at 14,779.40   0.28% higher,Nasdaq at 3,357.25  0.22% lower, and S&P 500 at 1592.43 higher 0.27%.
 Prices of US bonds closed lower, US$ 10 year Bond Price changed -31/32 with a 2.54 yield, and the 30 year Bond  Price changed 16/32 with a yield of 3.589%
And has continued to pressure to the downside the bonds prices of emerging markets and developing
countries,and the depreciation of their local currencies.

Rosneft wants to become important in the Global Energy Sector

From Russia Beyond the Headlines

"Rosneft has taken a 30 percent stake in 20 deepwater exploration blocks in the Gulf of Mexico held by U.S. giant Exxon Mobil, the Russian company announced after its CEO, Igor Sechin, set out the company’s ambitious plans to an international audience of investors on March 6 at the Cambridge Energy Research Associates (CERA) Week in Houston, Texas.
Sechin, an influential former deputy prime minister and close ally of President Vladimir Putin, emphasized Rosneft’s increased collaboration with foreign oil companies, such as Exxon, Italy’s Eni and Norway’s Statoil, to attract investment for the exploration of Russia's offshore energy fields. Rosneft already has a strategic partnership with Britain’s BP, which last year became a major 
shareholder in Rosneft in exchange for its 50 percent stake in TNK-BP.

"After the acquisition closing, which is expected to take place early in the second quarter of 2013, Rosneft will provide to its investors an updated synergies forecast for the united company," Sechin said during the CERA conference.

Rosneft is in the process of buying 100 percent of TNK-BP. According to a Rosneft statement, the purchase is slated to be completed in the first half of this year. Rosneft will pay BP some $12 billion in cash and the British company will be getting a 19.7 percent stock interest in the Russian outfit. Rosneft plans to pay the AAR consortium (Alfa Group, Access Industries and Renova), the other TNK-BP shareholder, $28 billion in cash for its stake.

After the Rosneft´s TNK-BP takeover is completed.

BP´s partnership with Rosneft could increase, joint ventures could be done in the Artic and off shore

fields, and they will might include joint production by BP and Rosneft in Venezuela.

The deal with ExxonMobil will give Rosneft 30 percent in offshore blocks covering a total area of 450 square kilometers. Seventeen are located in the western Gulf of Mexico, and the other three are in the central Guld. Depths vary from 640 meters to 2,070 meters.

ExxonMobil is also expected to participate in the exploration of Rosneft's offshore fields in Russia together with Eni and Statoil. Together, Rosneft’s partners could invest up to $14 billion into geological exploration".

From Russia Beyond the Headline. International Economic Forum in St Petersburg

Russian and Western officials universally lauded the Customs Union of Belarus, Kazakhstan and Russia at a panel on economic integration at the St. Petersburg International Economic Forum (SPIEF).
“If our overall growth in foreign trade totalled about three percent last year, growth within the Customs Union exceeded nine percent. The annual growth in trade of manufactured goods within the Customs Union has gone from 18 percent at its founding three years ago to 23 percent now,”said Tatiana Valovaya, Minister for Integration and Macroeconomics of the Eurasian Economic Commission (EEC).
Russian Deputy Prime Minister Igor Shuvalov emphasized the economic nature of the project. “There are people in all three countries – mostly the older generation – with fond memories of the USSR who would like to think of the Customs Union as a political force in the world. I say with complete honesty – the union of political institutions is not on the agenda of this organization at any level.”
The Customs Union of Russia, Belarus and Kazakhstan came into existence on January 1, 2010 as part of an attempt to create a single EU-type Eurasian Economic Space by 2015. In July 2011 customs borders were removed between the three countries, leading to surging trade levels.
Other countries that have expressed interest in joining the EEC include Armenia, Kyrgyzstan, Tajikistan, Ukraine and Vietnam.

Former US Secretary of State Hillary Clinton denounced the EEC as an attempt by Russia to reassert control over the post-Soviet space.

From Reuters. The People´s Bank of China is trying to choke Shadow Banking

The banks have been using cheap official funds to finance the vast "shadow banking" market, which Beijing worries is siphoning credit from industry and creating asset-price bubbles.

The People's Bank of China (PBOC) has tried to put an end to this over the past three weeks, declining to inject significant funds into the money markets even as the interest rate for some banks to borrow short-term funds has soared to 25 percent or higher.

This new approach, where you are trying to tighten the funding in the system available for the shadow  banking, is much more effective.

Some calm returned on Friday after rumors of some major banks needing emergency funding were quelled. There was also market talk the central bank had guided the biggest state lenders to provide more short-term funds to smaller banks.

China's cabinet this week affirmed its commitment to reducing financial risks and ensuring that credit growth supported the real economy.

China´s Central Bank will keep prudent monetary adding liquidity on a reasonable scale

Amid market concerns over a liquidity crunch, Bank of China, one of China's "big four" banks, on Thursday evening denied a media report alleging the bank had defaulted earlier in the day.
The 21st Century Business Herald on Thursday reported through its official Sina Weibo account that BOC had defaulted on Thursday afternoon.

In response to the allegation, BOC posted a statement on its official Sina Weibo, saying that it has never had monetary defaults and had timely completed all outbound payments on Thursday.

BOC also said that the rumors are "seriously unfounded" and the bank reserves the right to pursue legal action against those who started the rumors out of malicious intent.

Recent interest rate increases in China's inter-bank market have raised market concerns over a liquidity crunch.

The Shanghai Interbank Offered Rate (SHIBOR) overnight rate surged 578.40 base points to 13.44 percent on Thursday, and fixing Repo 7-day, another gauge of interbank interest, gained 292.9 base points to 11 percent.

However, the central bank issued three-month bank bills worth 2 billion yuan ($324 million) on Tuesday and Thursday, respectively, missing market expectation over large-scale liquidity injection.

China´s Central Bank officials have said yesterday, that they will maintain a prudent monetary policy with reasonable scale of monetary aggregates.

From Reuters Asian Markets fall to a nine month low

Asian stocks hit a fresh 9-1/2-month low on Friday while spot gold slipped to its lowest price in nearly three years as the U.S. Federal Reserve's plan to scale back stimulus continued to worry investors.

But China's central bank offered some comfort to stressed money markets, relieving Thursday's crushing liquidity squeeze with "window guidance" to major state banks to resume supplying funds, after indicative interbank rates reached highs above 25 percent on Thursday.

The benchmark weighted-average seven-day bond repurchase rate tumbled 351 basis points to 8.12 percent, and the overnight repo rate fell 378 bps to 7.96 percent.

The two short-term rates hit record highs on Thursday as the central bank again ignored market pressure to inject funds into the market, a move traders and analysts see as an attempt to force banks and other financial institutions to trim non-essential businesses.

Press Conference Mr Gerry Rice, Director,Communications Department IMF

On suggestions to the Fed to taper smoothly their accomodative monetary policy.

I would refer you to our concluding statement on the Article IV Consultation with the United States, which we issued just late last week where we said that the microeconomic benefits of asset purchases continue to outweigh the costs and the Fed should continue its preparations for a gradual and smooth exit. The highly accommodative monetary policy has provided important support to the United States and to global economic recovery. And under our staff growth projections in that Article IV a continuation of large-scale purchases through at least end 2013 is warranted.

Obviously, the Fed has a range of tools to manage the exit from its highly accommodative policy stance. And in our Article IV concluding statement, we highlighted in particular the importance of effective communication and careful calibration of timing to avoid disruptions for the United States and for other countries.