WSJ: Markets Start to See Russian Threats More as Bluster than Real

         THE WALL STREET JOURNAL reports,''world markets are taking what they can from the latest news out of Russia over the crisis in Ukraine. In the absence of any further ratcheting of additional military action beyond the incursion of Russian troops into the Crimea, its threats—including one that it would respond to U.S. sanctions by dumping U.S. dollar assets – are being seen as rather hollow. Investors are less afraid of full-blown war''.

When it comes to using its monopoly power of gas supplies to keep its neighbors in check, Russia has great power. But if it were to take on the U.S. and the rest of the world – either by launching war against the Ukraine or by living out a threat to withdraw its reserves from U.S. Treasurys, it would do more harm to itself than anyone else. The Russian ruble had already been one of the weakest performing currencies in the world this year.  Russian citizens are notoriously prone to capital flight into dollars, which would offset the Russian central bank’s exit Treasurys – holdings that rank behind those of the U.K. and are a tenth of China’s. The country’s own economic fragility ties President Putin’s hands. He’s no Kim Jong-un. He‘s surely not willing to sacrifice Russia’s economic health and international influence to make this point. At least we hope not. (MC)

RUSSIA: Russia ordered soldiers involved in massive military drills planned last week to return to their bases. President Vladimir Putin also held a press conference in which he declared the government in the Ukraine to be illegitimate, denounced plans for foreign sanctions against Russia and explained his country’s military incursions in the Crimea region as an act of defense solely to protect Russian assets, but refrained from making any fresh threats of military action.  Meanwhile, in a twist, a senior Kremlin adviser said Russia could respond to any U.S. sanctions by abandoning the U.S. dollar as a reserve currency and not repaying U.S. bank. Despite all the tough talk, markets warmed to the idea that an escalation in conflict could be avoided. They rallied globally in a rebound from Monday’s sharp losses.

The way things played out Tuesday, and despite the continued presence of Russian troops in the Crimea, there’s a sense that Russia own options are limited … And the unexpected move to cancel a military drill that would have involved 150,000 troops was read as a welcome bid to dial down the tension. The situation is far from resolved but the sense that events were rapidly being driven towards regional war has lifted somewhat. 

GLOBAL MARKETS-World shares, Russian assets bounce back after Ukraine hit

World shares and hard-hit Russian assets rebounded on Tuesday after Russia's president ordered troops in military exercises to return to base in what was seen as a dampening down of immediate tensions in the East-West crisis over Ukraine.

Russian stocks and the rouble gained while gold and the safe-haven Japanese yen fell sharply after President Vladimir Putin ordered back troops that took part in military exercises in central and western Russia.


There was no word, however, on Russian forces that have effectively occupied much of Crimea, and financial assets failed to retrace the entirety of the sharp moves seen globally on Monday.

European stock markets opened higher, with the pan-European FTSEurofirst 300  up 1.1 percent, recouping some of the previous session's steep losses.

"There’s a perception that maybe we’re going to see a ratcheting down of tensions and there’s a possibility that President Putin may be open to dialogue... that’s why markets are bouncing,” Michael Hewson, chief market analyst at CMC Markets UK, said.

"I would be sitting on the sidelines still because it’s a very fluid situation. We’re going to continue to see a certain amount of volatility and it would be a brave investor who dives back in now."

The FTSEurofirst 300 had sunk 2.2 percent on Monday, with Russian also having paid a heavy financial price for its military intervention in Ukraine's Crimea region.

Russian stocks, bonds and the rouble had plunged as Putin's forces tightened their grip in Crimea, whose population is mainly ethnic Russian. The rouble-denominated MICEX stock index  was up 3.3 percent on Tuesday.

MSCI's broadest index of Asia-Pacific shares outside Japan  added about 0.2 percent in afternoon trade.

The Nikkei <.N225> ended up 0.5 percent, erasing earlier losses, on cautious bargain-hunting by investors hopeful that conflict will be avoided.

The euro stood at $1.3757 , up about 0.2 percent. While it remained off Friday's peak of $1.38255, it hit its session high of $1.3773 after news of the Russian troop move to base.

Investors were looking for clues from European producer price data, out at 1000 GMT, after European Central Bank President Mario Draghi said on Monday that inflation in the euro zone is "way below" the European Central Bank's goal.

He added the longer it stays at such low levels the harder it will be to get it back up to the target, and low inflation has stoked talk that the bank could take policy action to ward off the threat of deflation, perhaps as early as a policy meeting on Thursday.

Yields on top-rated European bonds rose as investors moved out of safe-haven assets, while yields on the lower-rated Italian and Spanish bonds remained close to eight-year lows, showing remarkable resilience to global risk aversion in a further sign worries over the euro zone debt crisis have eased.

"Turn the clock back a few years and these markets would be hit by contagion," said Nick Stamenkovic, a bond strategist at RIA Capital Markets in Edinburgh.

"But you see more signs of growth in these countries ...(and) the ECB has backstops in place."

Investors' risk-averse mood had helped the yen, whose gains unravelled late in the session after the Russian developments. The yen fetched 101.77 yen to the dollar , down 0.3 percent, and moved away from a one-month high of 101.20 hit on Monday.

Gold, another traditional safe-haven asset, skidded 0.8 percent late in the Asian session, trading at $1,339.84 per ounce at 0846 GMT, after the risk-averse mood saw it touch a four-month high of $1,354.80 on Monday .

Gains in U.S. Treasuries sent the benchmark 10-year yield to a one-month low of 2.592 percent as prices rose on Monday, but the yield was last at 2.633 percent in Europe, up from its U.S. close of 2.608 percent.

The Australian dollar pared initial gains after the Reserve Bank of Australia kept rates steady at a record low, as widely expected. The Aussie was flat at the end of Asian trade, although it edged higher again at the start of the European day to $0.8959.

SOURCE; REUTERS

IMF Europe—The Path to Sustainable Economic Growth

Remarks by By Christine Lagarde

Managing Director, International Monetary Fund
Bilbao, Spain, March 3, 2014

''Thanks to the formidable actions over the past five years, Europe—and Spain—are now turning the corner. Yet the task is far from finished. Growth remains too low and unemployment too high for us to declare victory on the crisis.

In this context, I would like to speak about two main themes:

• Where we stand on moving away from the crisis in Europe—and the next steps needed to lay the foundations for strong and sustainable growth and job creation; and in turn:
• Where Spain stands in moving out of the crisis—and key next steps to ensure those considerable efforts bear a fruitful harvest.

A Roadmap for Growth and Jobs in Europe

Let me start with Europe. The Euro Area is finally emerging from a deep recession. Momentum in domestic and external demands is growing, and financial conditions have eased somewhat. Our projections in January place growth in the Euro Area at 1 percent in 2014 and 1.4 percent in 2015. This is good news.

Yet in many countries, unemployment is still unacceptably high, especially among young people—1 in every 4 Europeans under the age of 25 looking for a job cannot find one.

High debt levels continue to hold momentum back, and financial fragmentation persists. In addition, the risk of prolonged low inflation—inflation substantially below the ECB’s price stability objective of 2 percent—is also looming and could derail the recovery.

So what does Europe need to attain a trajectory of strong and sustainable growth and job creation? We see three key priorities.

First: strengthen the architecture of the monetary union. This means completing banking union and repairing bank balance sheets.

Why is this so important? A more complete banking union is essential to reduce financial fragmentation and sever the link between banks and sovereigns that has been so destructive.

By the same token, restoring bank health is essential for credit and investment to recover. Here, the work by the ECB on the forthcoming asset quality review (AQR) and stress tests is ambitious but appropriate. It is a complicated exercise, so good communication and implementation are important.

The second priority is to sustain demand through monetary and fiscal policies.

The ECB has already taken a number of strong measures to help the Euro Area. Even further accommodative policies and targeted measures are needed to address low, below-target inflation and achieve lasting growth and jobs.

In terms of the fiscal stance planned for the euro area for 2014, we believe it is broadly appropriate—but it must be complemented at the national level with credible medium-term frameworks, and appropriately paced consolidation.

The third priority is to continue advancing product and labor reforms, which can make a significant contribution in unleashing productivity and restoring competitiveness. Simpler tax systems, streamlined procedures for entry and exit of firms, and stronger national insolvency regimes—all of these can help release investment and increase employment.

In sum, the challenge now for European leaders is to accelerate reforms that would set the stage for a more robust monetary union—one that is able to sustain higher growth and more jobs''.

Russian President Vladimir Putin Conciliatory remarks at News Conference

*Russian President Vladimir Putin Speaking at News Conference

*Putin: Yanukovych Has ‘No Political Future’

*Putin: Russia Took Yanukovych In for ‘Humanitarian Reasons’

*Putin: Russia Not Considering Annexation of Crimea

*Putin: Future of Crimea Up to Crimean Residents

*Putin Says He Advised Yanukovych Not to Pull Police Out of Kiev on Feb 21

*Putin: Yanukovych Decision to Pull Police From Kiev on Feb 21 Led to ‘Anarchy’

*Putin: Hopes to Avoid Need to Recall Russian Ambassador From U.S.

Source: WSJ

Russia's ETF top Components by Weight

Stock	Weight	Amount
Gazprom Oao-spon Adr	8.36%	$68,900,547
Sberbank-sponsored Adr	7.40%	$60,991,528
Lukoil Oao-adr	6.90%	$56,829,787
Novatek Oao-spons Gdr Reg S	6.60%	$54,370,598
Mmc Norilsk Nickel Jsc-adr	6.35%	$52,365,546
Magnit Ojsc-spon	5.55%	$45,724,359
Rosneft Ojsc-reg S Gdr	5.23%	$43,114,227
Tatneft-sponsored Adr	4.71%	$38,832,728
Surgutneftegas-sp Adr	4.47%	$36,803,903
Yandex Nv-a	4.12%	$33,440,157
Uralkali-spon Gdr-reg S	3.98%	$32,768,636
Mobile Telesystems-sp Adr	3.81%	$30,930,691
Surgutneftegas-pfd	2.77%	$22,850,818
Sistema Jsfc-reg S Spons Gdr	2.75%	$22,674,574
Vtb Bank Ojsc-gdr-reg S	2.48%	$20,467,216
Rostelecom-sponsored Adr	2.39%	$19,731,775
Ak Transneft-pfd	2.23%	$18,374,587
Megafon-gdr	1.90%	$15,655,845
Sberbank-preference	1.40%	$11,526,182
Polyus Gold International Lt	1.38%	$11,366,667

Putin ends army exercise, Russian markets rally despite Ukraine tension

President Vladimir Putin ordered troops involved in a military exercise in western Russia back to base on Tuesday in an announcement that appeared intended to ease East-West tension over fears of war in Ukraine.

Russian financial markets rebounded after sharp falls on Monday, and the euro and dollar rose in Japan, though Moscow's forces remained in control of Ukraine's Crimea region, seized bloodlessly after Russian ally Viktor Yanukovich was ousted as Ukrainian president last month.

Russia paid a heavy financial price on Monday for its military intervention in Ukraine, with stocks, bonds and the rouble plunging as Putin's forces tightened their grip in Crimea, whose population is mainly ethnic Russian.

The Moscow stock market fell 10.8 percent on Monday, wiping nearly $60 billion off the value of Russian firms, but Russian stock indexes rose more than 4 percent early on Tuesday before slipping back again slightly, though still up on the day.

Putin declared at the weekend that he had the right to invade Ukraine to protect Russian interests and citizens after Yanukovich's downfall following months of popular unrest. Russia's Black Sea Fleet has a base in Crimea.

But the military exercises in central and western Russia, which began last week and raised fears that Russia might send forces to neighbour Russian-speaking regions of east Ukraine, were completed on schedule.

"The supreme commander of the armed forces of the Russian Federation, Vladimir Putin, gave the order for the troops and units, taking part in the military exercises, to return to their bases," Kremlin spokesman Dmitry Peskov was quoted as saying by Russian news agencies.

Although the end of the exercises had been planned, the announcement sent a more conciliatory message than much of the rhetoric from Russian officials, who say Moscow must defend national interests and those of compatriots in Ukraine.

The Organisation for Security and Cooperation in Europe, or OSCE, said it was trying to convene an international contact group to help defuse the crisis after Germany said Chancellor Angela Merkel had persuaded Putin to accept such an initiative.

Switzerland, which chairs the pan-European security body, said the group could discuss sending observers to Ukraine to monitor the rights of national minorities.

"There will be very, very broad consensus for that monitoring mission. We call on Russia to join that consensus, make the right choice and pull back its forces," U.S. Assistant Secretary of State Victoria Nuland told OSCE envoys in Vienna.

Source: Reuters

"WSJ: Ukraine's False Spark for Oil Prices

         The Wall Street Journal reports,it is characteristic for oil prices to jump at the first whiff of a potential conflict, and Brent crude obliged Monday with a 2% increase, taking it back above $110 a barrel. But Ukraine's crisis is, if anything, likely a bearish development for oil.

Ukraine's own oil supply is negligible. Russia's, at about 11 million barrels a day, is vital. But its sheer size means a broad embargo encompassing all major oil-consuming nations mean that is both highly unlikely and likely unenforceable. If anything, the crisis could encourage a release of strategic oil stocks on the part of the U.S. and allies. In the longer term, it could swing U.S. politicians toward allowing more exports of crude oil.

Meanwhile, the threat to demand is real, and warning signs have appeared immediately. Russian stocks dropped 12% Monday, part of a broader selloff of equities around the world. And yields on havens such as U.S. Treasurys fell.

Crimea has spooked a world that was already nervous, especially about emerging markets reliant on foreign capital flows facing pressure from the Federal Reserve winding down its bond-purchasing program.

That matters because developing markets are projected by the International Energy Agency to account for more than 100% of global oil-demand growth this year; consumption in the developed world is poised to fall slightly. Weaker currencies make oil-import bills higher. In India and Brazil, for example, oil priced in local currency is more expensive than in 2008, when it peaked in dollar terms.

An increasing oil burden on economic growth, predicated on broad geopolitical risk rather than a specific threat to supply, won't offer sustained support for prices. Oil bulls should find the Russian bear lives up to its name.

China: Survivors of terrorist attack recount nightmare

The events of Saturday night in Kunming are deeply engraved in the mind of Xie Qiming, who narrowly escaped death in the terrorist attack at the city's railway station.

The 48-year-old policeman intervened to stop the butchering of unarmed civilians, saving many from death and injury, but he was injured in the process.

Lying in a hospital bed, his head and nose marked by serious hacking wounds - one more than 20 centimeters long - Xie recounted his actions on the day he describes as a nightmare.

"I shot at them but fell to the ground during the fighting. After the shots, the terrorists turned their attention to the police and several of them surrounded me and stabbed me like crazy," he said. "There is no humanity in them."

Xie is from the Beijinglu Police Station, the closest to the attack, and four police officers from the station were the first to respond. He survived because he was wearing a bulletproof vest, which was damaged by the attackers.

When the officers arrived, the attackers were running out of the ticket hall, attacking people with long knives.

Xie and his colleagues tried to stop the attack, which is when Xie was injured. In addition to the deep cuts, his skull was fractured, and at the time of writing he was awaiting further surgery.

"A wave of fierce anger rose up in my mind, and we all forgot to think about the possible danger to us," said Hu Zhe, 23, a police officer trainee at the Beijinglu Police Station.

Having no firearm, he fought the terrorists with a wooden baton, but it got broken in the fighting. He sustained a 6-centimeter wound to his left eyebrow.

Wan Weiqing, a neurosurgeon from Beijing Tiantan Hospital, learned of the attack at 2 am on Sunday and took the first flight to Kunming, where he has been helping the victims.

He said that 71 victims are being treated at the Kunming First People's Hospital, most of them with severe multiple injuries.

"There is one victim whose rib, breastbone, lung and even heart were all injured in one chopping action. The attackers had obviously prepared and practiced for a long time," he said.

Zhou Hongmei, director of the Medical Reform Office at the Yunnan Health Department, said a team of medical experts including 29 doctors had arrived in Kunming by Monday night. They have been working at the five hospitals treating victims of the attack.

Chen Min, a Neurology Department nurse at Kunming First People's Hospital, said the department usually had seven nurses in the daytime and three at night. "But all the other nurses who were not on duty returned to the hospital voluntarily on Saturday night," she said.

In the past three days, none of them had more than 10 hours of rest.

"The crucial factor in saving lives in such incidents is treatment without delay," said Chai Wenzhao, associate director of the Intensive Care Unit in the Peking Union Medical College Hospital. Chai has participated in many emergency rescue efforts.

He said that the victims will need psychological counseling once their physical injuries have been dealt with, because the emotional impact of such an incident can be severe.

Four psychologists from Anding Hospital in Beijing have begun treating some of the victims

Private equity investors are cautiously returning to Asian markets

Private equity (PE) investors are cautiously returning to Asian markets, this time with greater savvy.

Capital began flowing into the region after the global financial crisis, but that was reversed in 2011 and 2012 because investors sought relatively cheap deals in the safer developed markets depressed by the crash.

Investors have been more reticent to invest in PE following the crisis. In a survey of 50 managers worldwide, Private Equity International found it had raised $586 billion between 2008 and 2013, about 17 percent less than in the five years to 2007. In 2007 alone, 18 mega funds raised $182 billion.

The total value of PE deals dropped 16 percent in 2012 from a year earlier, according to management consultancy Bain & Co.

PE investments are growing again, particularly in China, some parts of the Association of Southeast Asian Nations (ASEAN) and a few other Asian markets where opportunities again beckon.

A study by London-based research group Preqin of 100 institutional investors in June 2013 found that 50 percent thought Asia presents the best opportunities among all emerging markets.

But investors are now much more cautious and regulators less likely to spread the welcome mat without careful consideration.

"In 2013, European and American markets recovered, which is obvious. Capital was withdrawn (from Asia). The Asian market was less active in 2013," says Li Yao, CEO of the China-ASEAN Investment Cooperation Fund, a PE fund with investment from the Chinese government.

"Asian emerging markets' performance in 2013 was not as good as 2012," he says. "The market stepped into a fluctuation period in 2013."

But interest is definitely rising among investors.

Kohlberg Kravis Roberts & Co (KKR), one of the world's largest PE outfits, raised a record $6 billion to invest in Asia last year. It is the largest single pool of investments in the region. TPG, one of its competitors, also raised a fund that exceeded its $5 billion target. Carlyle Capital raised $3.5 billion. Bain Capital raised $2.3 billion in 2012.

Preqin said Asian funds managed to attract $30 billion in 2012.

China: Chalco reverses losses in 2013

The Aluminum Corporation of China Ltd. (Chalco), the listed arm of the country's largest maker of lightweight metal, said it made net profits of 948 million yuan ($154.87 million) in 2013, reversing heavy losses in 2012.

Total revenues last year hit 173.04 billion yuan, up 16 percent year on year, according to the company's unaudited annual business report filed with the Shanghai Stock Exchange on Saturday.

The company attributed the loss-to-profit transition to better management and control over spending as well as capital operations.

It also said a reduction in costs in the production of aluminium oxide and aluminium electrolyte attributed 530 million yuan of profits.

Source: ChinaDaily

With too few borrowers, Japan's regional banks are urged to merge

Japanese regulators are increasing the pressure on regional banks to consolidate, worried that shrinking populations outside the nation's major cities will leave lenders too weak to stand on their own.

After direct prodding from the head of the Financial Services Agency (FSA) for the more than 100 regional banks to slim down through mergers or takeovers, the regulator has set up meetings with regional bank presidents to grill them on their long-term business plans.

The agenda is implicit but clear, bankers and regulators say: show how you plan to survive over the coming decades as local economies wither, or look for tie-ups. The FSA's push will likely accelerate a process, dictated by demographics, that had been expected to take decades, banking industry insiders say.

Top executives at regional banks have shown no public signs of moving toward consolidation. They tend to be local heavyweights, reluctant to share power by merging with other lenders and diluting their status. "Many bank presidents are thinking it's not going to happen on their watch," said an executive at one regional bank.

"Regional banks are feeling growing pressure from authorities to consider consolidation," said Natsuko Ishida, a financial sector analyst at Moody's Japan. "Bank executives who were thinking about consolidation in a timeframe like 10 years are now under pressure for a shorter time span."

Source: NewsOnJapan

Why young people in Japan will work for companies that don't exist -- yet

A 10-year-old in Japan today will likely be hired by a company that does not exist yet. That's because, according to two researchers from Hitotsubashi University and Nihon University here in Japan, Japanese companies created after 1996 contributed a net positive of 1.2 million new jobs. But older companies shed a net 3.1 million jobs in that time.

It’s not news that startups are the jobs engine for Japan. It’s the same in the United States.But what is troubling is that according to research from the Wharton School at the University of Pennsylvania using World Bank data, Japan, ranks dead last among modern, industrial nations in the average annual entry rate of new enterprises. In other words, Japan is reliant on new companies for jobs but creates the fewest new businesses.
There are many reasons Japan lags in entrepreneurship. One is that Japan dramatically under-utilizes women.

Source: NewsOnJapan

Japan's plutonium stocks no reason for concern - IAEA chief

There is no reason for concern that plutonium held by Japan could be diverted for nuclear arms purposes, the U.N. atomic watchdog said on Monday, after objections raised by China in another dispute between the east Asian neighbours.

Last month, Beijing said it was "extremely concerned" by a report that Japan has resisted returning to the United States more than 300 kg (660 lb) of mostly weapons-grade plutonium.

Japan's Kyodo news agency said that the United States had pressed Japan to give back the nuclear material, which could be used to make up to 50 nuclear bombs. Japan had balked, but finally given in to U.S. demands, Kyodo said.

The material was bought for research purposes during the 1960s and the two governments will likely reach an official agreement on its return at the Nuclear Security Summit in The Hague in March, an official at Japan's Education Ministry said.

Japan also has plutonium contained in spent nuclear fuel at civil reactor sites and reprocessing plants - totalling 159 tonnes at the end of 2012, according to Japanese data posted on the website of the International Atomic Energy Agency.

Source: Reuters

Special Report: China on a fresh start of reform

At a corner of the Aegean Sea along the east coast of the Saronic Gulf lies the ancient Port of Athens -- Piraeus. Merely a dozen kilometers away from central Athens, it has long been the largest passenger port in Europe, bustling with ferries and cruisers.

Miles away to the west of the passenger terminal, there is also a real buzz in the container piers: towering cranes hoisting containers from giant ships by the water and trucks loaded with containers rumbling around in the yard. One logo is particularly striking - COSCO.

Since the largest Chinese shipper took over container operations at Pier II, Piraeus has enjoyed brisk growth of cargo traffic, and the pace has picked up even further since the June 2013 inauguration of Pier III. It became the third largest container port in the Mediterranean Sea last year, and its potential is yet to be fully tapped.

Behind the upswing of COSCO' s shipping and port services is China' s manufacturing boom, which has turned the once industrially backward country into "the factory of the world" and seen "Made in China" products closely woven into the life and work of people in virtually every corner of the world.

Such epic transformation is the main theme of the Chinese story since the inauguration of its opening-up and reform more than 35 years ago. Yet undeniably, the splendid process has also brought about some side effects that are now too dangerous and damaging to wait another day to deal with.

As Chinese political advisers kicked off their annual national meeting Monday in the Chinese capital, which formally lifted the curtain on this year's "two sessions," Beijing was enveloped in a thick pall of smog.

The inescapable canopy of air pollution is an alarming reminder that, after more than three and a half decades of rapid development, China has now reached a critical juncture similarly significant as the one in the late 1970s. But this time around the holy grail is a sustainable socioeconomic development model.

Late last year, the Communist Party of China Central Committee decided at a key plenary session to deepen reform in an all-round way, pledging to further improve China's economic structure and growth pattern, among others.

During their ongoing annual conferences, Chinese lawmakers and political advisers are expected to pool their wisdom and translate the epochal decision into concrete state policies and measures.

The impact of the decision and the upcoming policies on the world is very likely to equal that of their counterparts three and a half decades ago.

CLOSER ECONOMIC SYMBIOSIS

Change is already afoot in that direction.

Thanks to China's efforts in economic restructuring, the denotation of the "Made in China" label is gradually shifting: Clothes and shoes are being replaced by much fancier stuff like laptops and bullet trains; the nation that used to clothe the world is now equipping it for better development with innovative products and cutting-edge technology.

An illustrative example is China' s high-speed rail systems. Boasting high performance and competitive prices, Chinese speedy trains have become increasingly attractive across the world. The first Chinese-built high-speed railway on foreign land was completed in Turkey in mid-January, and other cooperation deals have been reached with Thailand, Hungary and Serbia.

The mounting popularity of Chinese express trains, along with the global expansion of such Chinese behemoth manufacturers as SANY Group, is vividly emblematic of the rising status and influence of China's manufacturing sector.

The China-world economic symbiosis, however, is not confined to textiles and steel. Something less visible yet no less important is picking up momentum as well, and is playing an increasingly contributive role in undergirding the international trade.

That is the internationalization of the Chinese currency. Thanks to its unique advantages, Hong Kong has established itself as an offshore RMB center, but several others are catching up.

In April 2012, the City of London launched an initiative to turn the Square Mile into a center for RMB business. Besides, "red-back" business is gaining steam in Singapore too. Meanwhile, more and more countries have reached local currency settlement arrangements with China, promoting its international use.

Because of Washington' s flirtation with sovereign default, the world' s confidence in the dollar has been eroded. Worldwide traders are propelled to look for options, and the yuan is offering them a promising alternative.

During the "two sessions," representatives from across the country will explore ways to build upon the past progress and further push forward China' s economic and financial reform, which will benefit both China itself and the world at large.

THE BEIJING SOLUTION

On Sept. 3, 2013, some 20 African civil servants from Ethiopia, Rwanda, Zimbabwe and Nigeria, began their first lesson under a tailored training program on public administration at China's National School of Administration in Beijing.

The project is just one of many. China's success has become a paragon that scholars and officials from across the world are eager to study and learn from. The reform policies due to be hammered out at this year's "two sessions" will add to the valuable trove of Chinese experience.

Without any doubt, some of the new measures will be about urbanization, a buzzword of the year and one of the hottest subjects during the "two sessions" at lower levels.

Analysts have predicted that the central points of a "human-centered" urbanization process will include lowering the barriers for China's 230 million migrant workers and 70 million non-local urbanites to settle in the cities where they work and live, and removing restrictions on hukou, or household registration, in towns and small cities.

Given that China spent 30 years to reach the level of urbanization that took Britain some 200 years and the United States 100 years, the future chapters of China' s urbanization story are also worth expecting.

Beneath the surface of China's successful story is a vein of pragmatic and strategic thinking. It is thanks to such thinking that China has decided to focus more on the quality rather than the speed of its economic development.

In essence, what China has been doing is thoroughly studying its own actualities and external environment, actively drawing lessons from the successes and failures of other countries, and eventually coming up with its own solutions based on the former and supplemented by the latter.

As China' s trajectory has eloquently proved, different conditions need different approaches, and every country can find its own way forward based on its national realities. History will not end in the way Francis Fukuyama has predicted.

Source: Xinhua

Xinhua Commentary: Nothing justifies civilian slaughter in China's "9-11"

China was outraged and the world shocked after separatists from Xinjiang knifed down innocent civilians at a crowded train terminal in Kunming Saturday night.

It was a typical terrorist attack and also a severe crime against the humanity.

It was China's "9-11."

Any explanation for the attack, like those in previous cases elsewhere in China, would be feeble at the bloody scene, where mothers, sons and daughters were slaughtered by strangers. Nothing justifies such a carnage against innocent civilians.

This was a random attack, with the sole purpose of causing the greatest casualties and impact within the shortest period of time.

It seems that the terrorists have had their way. Their killing spree has left 29 dead and over 130 injured, shrouding the southwestern city and the whole nation in terror.

This is not the first time that terrorists from Xinjiang launched deadly attacks over the past months, years and decades. In October 2013, Xinjiang separatists on a vehicle slammed into the Tian'anmen Square in Beijing, killing five and injuring 40.

The latest attacks in Beijing and Kunming have clearly indicated a despicable trend that separatists are targeting civilians out of Xinjiang.

It also showed a shift in their attack strategies from targeting symbols of the government, such as public security stations and police vehicles, to roadside civilians.

If the proliferation of their terrorist attack is not reined in, more innocent people will fall victim.

The latest attack showed that China's recent decision to set up a state security committee, headed by President Xi Jinping, to improve systems and strategies to ensure national security is very timely and necessary.

A nationwide outrage has been stirred. Justice needs to be done and terrorists should be punished with iron fists.

Countries and institutions such as the UN and France have condemned the attack. More voices of condemnation are expected.

Anyone attempting to harbor and provide sympathies for the terrorists, calling them the repressed or the weak, is encouraging such attacks and helping committing a crime

WSJ What Could Cause a Ukraine Default?

      The Wall Street Journal reports,''Ukraine’s economic and political crisis may be heating up, but Kiev still has enough emergency cash reserves to cover its obligations for the next two months.
But what would it take to push the country into default? Tensions escalating over Russia’s Crimea incursion, Moscow increasing natural gas prices and any delay in international bailout talks, say economists''.
“The military stand-off heightens Ukraine’s risk of default,” says Lilit Gevorgyan, a senior sovereign risk analyst at the IHS consultancy, in a research note.

If the military standoff turns into violent conflict, pitting the interim government in Kiev against Moscow and pro-West Ukrainians against their pro-Russia countrymen, the hyrvnia could fall much deeper into the danger zone.

“We suspect geopolitical risks emerging in the Ukraine are not likely to dissipate anytime soon,” said Eric Green, a TD Securities analyst.

Moscow could also raise the price it charges for the natural gas Ukraine depends on from Russia. To keep Kiev in the Kremlin’s political orbit, Russia has long kept fuel export prices below-market. The cheap imports allowed the government to subsidize lower fuel prices.

But with the IMF estimating that overall energy subsidies in Ukraine topping 7.5% of the country’s gross domestic product in 2012, any upward pricing adjustment has hard-hitting consequences.

The IMF wants a phased-in natural gas price hike to relieve the burden on government finances.

“Yet to do it too fast will be very disruptive, and likely to plunge the economy into further turmoil,” said Brown Brothers Harriman’s currency strategy team said in an email to clients.

Russian President – and former KGB officer – Vladimir Putin knows that. To press Ukraine and the Western officials trying to support the fledgling government in Kiev, Mr. Putin could end the 33% price discount agreed with the now-ousted pro-Russian government last December when the contract comes up for review in April. He could also insist on Ukraine paying off its overdue natural gas bills worth $1.5 billion.

To help buy time for negotiations, the IMF can offer a short-term line worth $1 billion within week. Other countries have also talked about similarly-sized options to encourage the new government.

But for the longer-term, large-scale financing Ukraine needs over the next couple of years to stabilize the economy could prove elusive.

“Without the expected financial assistance from Western donors, Ukraine is likely to default,” Mr. Gevorgyan said.

Europe Ties with Russia

WSJ, Russia's Power Play Hits Economic Weak Spot

         The Wall Street Journal reports,''markets experienced a classic flight to safety Monday, with stocks down, bonds up and emerging markets falling further from favor. But the harshest judgment was reserved for Russian assets: The RTS stock index plunged 12%, Russian dollar-denominated sovereign bonds fell and the ruble dropped sharply against the dollar".

Russia hasn't faced quite the same pressures as other emerging markets that have been grappling with the impact of U.S. monetary policy this year. But the country already had problems even before the Ukrainian crisis hit. Russia's current account risks moving into deficit and the central bank is forecasting growth of just 1.5%-1.8% this year. January's data showed a sharp drop in fixed investment, a contraction in industrial production and slowing retail sales growth, Royal Bank of Scotland  notes. Russia's actions in Ukraine will only be a further red flag for foreign investors.

The ruble in particular looks like a weak point, despite the country's stock pile of $493 billion in foreign-exchange reserves. The currency has already come under severe pressure this year, falling more than 9% against the U.S. dollar. The Central Bank of Russia responded to the volatility Monday with an emergency rate hike of 1.5 percentage points to 7%, a move that it described as "temporary."

But Russia's central bank is caught in a tricky spot: rates rises threaten to push the economy into recession, but failing to tighten policy could lead to a rout in the ruble and higher inflation. For the moment, further ruble weakness seems unavoidable, particularly since the central bank is in the midst of moving to a more flexible exchange-rate regime.

Economic sanctions from Western countries look more likely than military intervention. But Mr. Putin may be gambling that Europe will stop short of measures that could seriously destabilize the Russian economy, such as major restrictions on trade. Russia is clearly reliant on revenues from trading in oil and gas. But by the same token, Europe needs Russian energy supplies: Russia accounts for 31% of European Union natural gas imports and 27% of crude oil imports, Citigroup notes. Asset freezes and travel restrictions might be less dramatic, but could yet cause problems for Mr. Putin, as Russia's political and business elite have increasingly become global players.

Geopolitical risk is always hard for investors to assess: it is impossible to predict how the crisis in Ukraine will play out. Ultimately, it remains to be seen whether Mr. Putin's apparent political ambitions to keep a grip on Ukraine are a stronger force than the undoubted costs his tactics could inflict on Russia's economy. Until that becomes clearer, investors have good reason to shun Russia.

Asian Shares Inch Lower

      The Wall Street Journal reports, "Asian stocks mostly edged lower on Tuesday, while the cost of oil pulled back, as the selling sparked by the crisis in Ukraine moderated.

Although Japan and South Korea continued to weaken, the moves were small, as the situation in Ukraine hadn't deteriorated significantly and stocks had already sold-off in the previous session. On Monday, Ukraine accused the Kremlin of taking border posts and increasing the size of its forces in the Crimea''.

Japan's Nikkei fell by 0.3% as the yen softened slightly against the dollar in Asian trade. The dollar was last at ¥101.53 compared with ¥101.44 late Monday in New York.

"The immediate and likely largest impact from the risk-off sentiment due to the crisis in the Ukraine may have already passed," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Elsewhere in the region, South Korea's Kospi was down just 0.2% and Australia's S&P/ASX 200 added less than 0.1%.

The price of oil, which had jumped 2.3% on Monday, also eased early on Tuesday. Nymex crude fell by 0.2% to $104.70 a barrel.

The situation in the Ukraine is the latest crisis to hurt sentiment this year, and the performance of global markets overnight was broadly negative with stocks in both the U.S. and Europe dropping on Monday. Russia was hit the worst, as the Micex index plunged 11% and the ruble touched a record low against the dollar.

Asia has already weathered shocks from a number of emerging markets in 2014, which has put much of the region in the red for the year. Most notably, investors were spooked by concerns over unrest in Turkey and renewed fears over the state of China's economy. As a result, stocks spent much of February recovering from a sell-off that started in January.

Hostile emergency meeting at the United Nations security council ends.

10.54 p.m. GMT

The “feisty” emergency meeting on Ukraine has just wrapped up at the UN security council, the Guardian’s Ed Pilkington (@EdPilkington) reports:

It turned into a pretty feisty slanging match between the Russian ambassador, Vitaly Churkin, on the one hand, and the combined might of the US, UK and France on the other.

Samantha Power, the US ambassador to the UN, addressed Russia’s professed desire to protect the rights of Russian speakers in the Crimea. “There are so many options available to Russia to safeguard the rights of ethnic Russians short of military action,” she said. “So the very simple question today is why not support international efforts, why not support an observer mission, why not pull back your forces instead of sending more?”

Churkin insisted he was open to observer missions, which encouraged the UK representative Sir Mark Lyall Grant to ask him directly would he agree to the Organization for Security and Co-operation in Europe sending observers to Crimea. The Russian ambassador looked uncomfortable at that suggestion.

“We are not talking about the OSCE,” he said bluntly.

As frustration levels rose, Churkin lashed back at the repeated accusations from his fellow ambassadors that Russia was fabricating the truth about its military intervention.

“There’s too much disinformation going on,” Churkin said, using the exact words that had previously been levelled against him.

Source: theguardian

Remarks of Ambassador Samantha Power at the emergency meeting of the UN security council

10.39 p.m. GMT

Excepts of full remarks of Ambassador Samantha Power  to the emergency meeting of the UN security council :
“Listening to the representative of Russia, one might think that Moscow had just become the rapid response arm of the Office of the High Commissioner for Human Rights,” she began. “So many of the assertions made this afternoon by the Russian Federation are without basis in reality.”

Let’s begin with a clear and candid assessment of the facts.

It is a fact that Russian military forces have taken over Ukrainian border posts. It is a fact that Russia has taken over the ferry terminal in Kerch. It is a fact that Russian ships are moving in and around Sevastapol. It is a fact that Russian forces are blocking mobile telephone services in some areas. It is a fact that Russia has surrounded or taken over practically all Ukrainian military facilities in Crimea. It is a fact that today Russian jets entered Ukrainian airspace. It is also a fact that independent journalists continue to report that there is no evidence of violence against Russian or pro-Russian communities.

Russian military action is not a human rights protection mission. It is a violation of international law and a violation of the sovereignty and territorial integrity of the independent nation of Ukraine, and a breach of Russia’s Helsinki Commitments and its UN obligations.

Source: the guardian