Japan Demands Investigation After Attack On China Envoy’s Car
By Bloomberg News - Aug 27, 2012 10:04 PM CT
Japan demanded an investigation after assailants in Beijing blocked an official car carrying its envoy to China and snatched a Japanese flag, amid escalating tension over islands claimed by both nations.
Two vehicles stopped Ambassador Uichiro Niwa’s car around 4 p.m. yesterday and a man jumped out and took the flag, Chief Cabinet Secretary Osamu Fujimura told reporters today in Tokyo. The government lodged a protest, and Prime Minister Yoshihiko Noda is sending a letter to Chinese authorities, he said.
“China has told us this was an extremely regrettable incident,” Fujimura said. “The authorities said they will make every effort to prevent a re-occurrence of such an incident, and guarantee the safety of Japanese citizens and businesses.”
The attack came days after protests erupted in China during tit-for-tat visits to the islands, known as Diaoyu in Chinese and Senkaku in Japanese, by activists from both sides. The dispute soured ties at a time when Japan is embroiled in a similar row with South Korea, while China is mired in spats with Vietnam and the Philippines involving offshore oil rights.
“The current tensions are much more a symptom of China’s troubled relations with Japan than with China’s overall approach to territorial disputes,” said Taylor Fravel, a political science professor specializing in China at the Massachusetts Institute of Technology. “The dispute over the Senkakus now features more prominently in ties between the two sides than a decade ago.”
The islands in the East China Sea have been a flash point between the world’s second and third-largest economies, underlined by a 2010 collision between a Chinese fishing vessel and Japanese Coast Guard ships that damaged ties for months. Sovereignty over the area gives the holder control of undersea natural gas and oil fields and the two countries signed a joint development agreement in 2008 that has yet to be implemented.
China yesterday offered offshore oil and gas blocks for joint development with foreign companies, including some near the Paracel Islands that are jointly claimed by China, Taiwan and Vietnam. Tensions have risen after China decided to establish a city and military garrison on one of the isles.
Noda last week said Japan will increase security around its outlying islands given its maritime territorial disputes. His administration yesterday denied an application by the Tokyo metropolitan government to land on the Senkakus.
Tokyo Governor Shintaro Ishihara’s announcement in April that he would try to buy the islands from a private Japanese owner set off the latest episode in the dispute. The Japanese- controlled chain is about 140 kilometers (87 miles) north of Japan’s Ishigaki island, which is located between Taiwan and Okinawa.
Ambassador Niwa criticized Ishihara’s plan in an interview with the Financial Times in June, saying it could cause “an extremely grave crisis.” Fujimura said at the time that Niwa had been cautioned for his comments.
Fujimura yesterday declined to comment on a Kyodo News report that Noda’s government had made a 2 billion yen ($25.4 million) offer to the family that owns four of the five islands and intended to nationalize them as soon as next month.
“The sale might create an opportunity for China and Japan to reach a consensus on managing the dispute, as the islands would now be under the control of the central government and perhaps some understanding could be achieved,” M.I.T.’s Fravel said.
Chinese police two days ago broke up an anti-Japanese protest of 500 people in the city of Dongguan in Guangdong province, the South China Morning Post reported yesterday.
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Law · Asia · China · Japan · Health Care
Merkel’s Green Shift Forces Germany To Burn More Coal
By Stefan Nicola and Tino Andresen - Aug 20, 2012 10:59 AM CT
Chancellor Angela Merkel’s government says RWE AG (RWE)’s new power plant that can supply 3.4 million homes aids her plan to exit nuclear energy and switch to cleaner forms of generation. It’s fired with coal.
The startup of the 2,200-megawatt station near Cologne last week shows how Europe’s largest economy is relying more on the most-polluting fuel. Coal consumption has risen 4.9 percent since Merkel announced a plan to start shutting the country’s atomic reactors after last year’s Fukushima disaster in Japan.
Germany’s largest utilities RWE and EON AG (EOAN) are shunning cleaner-burning natural gas because it’s more costly, while the collapsing cost of carbon permits means there’s little penalty for burning coal. Wind and solar projects, central to Germany’s plans to reduce nuclear energy and cut the release of heat- trapping gases, can’t produce electricity around the clock.
“Angela Merkel’s policy has created an incentive structure which has the effect of partially replacing nuclear with coal, the dirtiest fuel that’s responsible for much of the growth in the world’s greenhouse-gas emissions since 1990,” Dieter Helm, an energy policy professor at the University of Oxford, said by phone Aug. 17. Building new coal stations means “locking them in for the next 30 years” as a type of generation, Helm said.
Germany’s increasing coal consumption is part of a global return to the fossil fuel that’s cheaper than most alternatives. The amount of coal burned worldwide rose 5.4 percent to account for 30 percent of total energy use last year, the highest proportion since 1969, according to BP Plc (BP/) data.
European Union carbon emissions may rise 43 million metric tons this year because of increased coal burning at power stations, according to Barclays Plc analyst Trevor Sikorski.
The German clean-dark spread, a measure of profit that utilities can earn from selling coal-generated power after accounting for the cost of carbon-emission permits, was about 9.86 euros ($12.17) a megawatt-hour today for the year ahead, according to broker data compiled by Bloomberg. At the same time, utilities are set to lose about 10 euros a megawatt-hour from burning gas according to data compiled by Bloomberg.
“Lignite is the lowest-priced type of power generation and thus increasingly stormed the market,” Martin Pack, an RWE spokesman, said by phone from Essen, referring to a type of soft coal that dominates RWE’s consumption of the fuel.
EON generated 10 percent more electricity from burning coal in the first half than in the same period a year ago. RWE’s coal-fired power output in Germany rose by 12 percent in the same period. Reliance on coal may continue to increase after Statkraft SF shuttered its gas-fired plant in Emden in March and EON and RWE warned they may mothball generators that lose money.
Reliance on Coal
EON fell 0.6 percent to 18.15 euros by the Frankfurt close and RWE rose less than 0.1 percent to 33.40 euros.
Coal is being used in part because the prices for permits that allow the emissions of carbon dioxide linked to climate change are too low to spur other forms of generation. The price of carbon-dioxide permits in the European Union has dropped 43 percent over the past year.
Switching to coal from gas is “a consequence of the low prices” in Europe’s carbon market, Helm said. “Germany needs to exit coal and switch to gas as a transitionary fuel, not the other way around, as quickly as possible if it really cares about the climate.”
Merkel’s government wants utilities to build 10,000 megawatts of coal- and gas-fired generators this decade to replace older, dirtier generators and underpin a growing share for wind turbines and solar panels.
“The European Commission is on the right track if, as planned, the number of emissions allowances is reduced,” Johannes Teyssen, EON’s chief executive officer, said last week on a conference call with journalists. He also called for long- term binding carbon-reduction targets and said curbing emissions by half is feasible by 2030.
Building new coal generators in Germany isn’t easy. A group of local utilities last month scrapped plans to spend 3.2 billion euros to construct the nation’s biggest hard-coal plant in Schleswig-Holstein after resistance from environment groups and the state government led by the Social Democratic Party and Green Party.
The Greens, Germany’s second-biggest opposition group, are against building new coal plants and favor gas ahead of Germany’s federal elections scheduled for the fall of 2013, when Merkel seeks to win a third term as chancellor.
“We need to do a lot of things to make the German energy switch a success, but building new coal plants is not among them,” Oliver Krischer, energy spokesman for the Green Party’s parliamentary group, said in a statement last month.
The so-called BoA coal plant near Cologne shows how new fossil fuel plants, which are more efficient than their older models, “not only help to reduce carbon emissions but can also make an outstanding contribution to the success of the energy industry’s transformation,” Environment Minister Peter Altmaier, who was present at the plant’s opening last week, said in a statement distributed by RWE.
RWE says coal plants are key to ensuring supply security as Germany raises the market share of renewable generation to at least 35 percent by the end of the decade, and to 80 percent by 2050. BoA, which has an efficiency of 43 percent, can raise or lower output by 500 megawatts per unit within 15 minutes, Peter Terium, RWE’s CEO, told reporters in a call on Aug. 14.
It can “step in immediately when the wind is not blowing or the sun is not shining,” Terium said. Like most power plants in Germany, BoA burns lignite, a soft coal that’s sourced from domestic open-cast strip mines and emits about 29 percent more carbon dioxide than hard coal when burned. Environmental groups are concerned about the growing use of the fuel.
“It’s very alarming that leading German politicians praise a plant run on lignite,” Gerald Neubauer, a Greenpeace campaigner in Germany focusing on energy issues, said by phone on Aug. 16. “Burning lignite spews more carbon dioxide than using most other energy sources, and mining it inflicts major damage on the environment.”
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Japan condemns ‘illegal’ landings by Chinese activists, SKorean president on disputed islands
By Associated Press, Published: August 24
TOKYO — Japan on Friday called on South Korea to end its “illegal occupation” of tiny islets and condemned China for its claims over separate islands, saying it would not tolerate recent unauthorized landings by Chinese activists and the South Korean president.
Parliament passed symbolic resolutions condemning South Korean President Lee Myung-bak’s visit to the tiny, rocky outcroppings in the Sea of Japan earlier this month and accusing China of allowing activists to land a few days later on a disputed East China Sea island chain.
Noda said that Lee had “illegally landed” on the islands that Japan and South Korea both claim. They are called Takeshima in Japanese and Dokdo in Korean.
“We condemn (Lee’s landing) and strongly demand South Korea end its illegal occupation of Takeshima as soon as possible,” a resolution passed Friday by lawmakers said. It was the strongest language so far in a dispute that has sent the two countries’ relations to the lowest levels in years.
Then last week, a boatful of Chinese activists travelled from Hong Kong to islands in the East China Sea that are controlled by Japan but also claimed by China and Taiwan to push China’s claim. All 14 activists were arrested for illegal entry onto one of the islands — known as Senkaku in Japan and Diaoyu in China — released two days later and deported.
Noda, who has come under pressure from critics to take tougher action to protect the islands, announced that Japan would strengthen its patrols in the area around the Senkaku/Diaoyu so further “incursions by foreigners” do not take place. He also said Japan would further push its position that the islands are Japanese territory in international forums.
Chinese Foreign Ministry spokesman Hong Lei reiterated Beijing’s claim to the islands. “It is illegal and futile for Japan to strengthen its claim by approving the resolution,” he said in a statement. “It does not change the fact that the islands belong to China.”
The Chinese activists’ landing and a retaliatory one to the same islands last weekend by nationalist Japanese have made the issue one of the biggest territorial flare-ups between the two Asian giants in years, amid persistent animosities over Japan’s imperialist past and new fears of China’s rising economic and military clout.
Adding to the pressure, Tokyo’s nationalist governor Shintaro Ishihara said he wants to visit the Senkaku in October to accompany a coastal and land survey of the islands.
“If I get arrested, that would be fine with me,” Ishihara said.
In April, Ishihara announced a plan to use public funds to buy several of the isles from a private Japanese citizen whom Japan says has legal ownership. He acknowledged the move was largely intended to put pressure on Noda’s government to play tougher in the islands’ administration. Tokyo has since received more than 1 billion yen ($12 million) in donations for the purchase, which is expected to cost between 2 billion and 3 billion yen.
The islands are important mainly because of their location near key sea lanes. They are surrounded in the East China Sea by rich fishing grounds and as-yet untapped underwater natural resources.
Japan annexed them in 1895, saying no other nation exercised a formal claim.
Koichi Nakano, professor of political science at Sophia University, said Japan in some ways is seizing the latest territorial flaps to “publicize Japan’s claim, that there is a dispute. To that extent, the Japanese government has been successful. “
Japan’s row with China is more complicated than that with South Korea, he said, because the issue has more to do with the relative changes in the international standing of the two countries.
“China is trying to expand its sphere of influence, and that is much more ingrained in the changing geopolitics and therefore unlikely to go away any time soon,” he said.
Associated Press writers Malcolm Foster and Eric Talmadge in Tokyo, and Didi Tang in Beijing contributed to this report.
S&P 500 Falls Most In One Month Amid Concern Over Europe
By Inyoung Hwang - Aug 23, 2012 4:01 PM CT
U.S. stocks fell, as the Standard & Poor’s 500 Index posted its biggest decline in a month, amid investor concern that European leaders aren’t making progress in solving the region’s debt crisis.
Hewlett-Packard Co. (HPQ) dropped 8.2 percent after forecasting full-year earnings that missed analysts’ estimates as demand slumped. Big Lots Inc. (BIG) tumbled 21 percent after lowering its annual earnings projection. Boeing Co. retreated 3.4 percent after losing 35 orders for 787-9 planes, the biggest Dreamliner cancellation. Alcoa Inc. (AA) erased 2.7 percent, pacing declines among raw-material stocks.
Aug. 23 (Bloomberg) -- The number of Americans filing applications for unemployment benefits climbed last week to a one-month high, showing little progress in the labor market. Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed today in Washington. Deidre Bolton, Dominic Chu and Sara Eisen report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Aug. 23 (Bloomberg) -- Christopher Low, chief economist at FTN Financial, talks about the outlook for Federal Reserve monetary policy and the U.S. economy. Low speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)
The S&P 500 (SPX) slumped 0.8 percent to 1,402.08 at 4 p.m. in New York. The benchmark index for American equities is heading for its first weekly decline in almost two months, with a four- day drop of 1.1 percent. The Dow Jones Industrial Average lost 115.3 points, or 0.9 percent, to 13,057.46 today. Volume for exchange-listed stocks in the U.S. was 5.3 billion shares, 16 percent below the three-month average.
“We’re tipping over into a corrective phase in stocks,” Barry James, who helps oversee $3.3 billion as president of James Investment Research in Xenia, Ohio, said in a telephone interview. “Europe is the key driver in the world right now. European leaders aren’t really addressing the root problems.”
German Chancellor Angela Merkel said Europe is in one of its deepest crises, and while the path to a solution is “arduous,” the euro region will emerge stronger. She hosted French President Francois Hollande today as the leaders of Europe’s two biggest economies seek common ground on Greece and the wider debt crisis. Greece’s prime minister, Antonis Samaras, will follow Hollande to Berlin tomorrow and travel on to Paris on Aug. 25.
Stocks extended declines after the European Union said it is focused on its aid program for Spain’s banks and hasn’t received a request for a full bailout from the euro-area nation. Earlier, German Finance Minister Wolfgang Schaeuble said that allowing Greece more time to meet its debt obligations would not solve the country’s problems and would increase costs for creditors.
“People aren’t willing to invest,” Stephen Hammers, the chief investment officer at Brentwood, Tennessee-based Compass EMP Funds, which manages about $1 billion in assets, said in a telephone interview. “If Europe gets worse, U.S. investors will see that as a warning sign.”
Investors also watched for signs of future monetary policy. The S&P 500 has rallied 9.7 percent since June 1 on speculation global central banks will take action to stimulate growth. U.S. stocks erased losses yesterday as minutes from the Federal Open Market Committee’s last meeting showed many members judged that more stimulus “would likely be warranted fairly soon.”
James Bullard, the Fed Bank of St. Louis President, said today on CNBC the minutes of this month’s meeting were no longer as relevant because the U.S. economy has picked up in the past month. Earlier, Fed Bank of Chicago President Charles Evans said in Beijing that easing policies would support economic growth around the world, including in China, broadening his call for more stimulus in the U.S.
Purchases of new U.S. homes rose more than projected in July. Sales climbed 3.6 percent to a 372,000 annual pace, compared with the median estimate of 365,000. A separate report showed the number of applications for unemployment benefits climbed last week to a one-month high, showing little progress in the labor market. Jobless claims rose for a second week to reach 372,000. The median forecast called for 365,000.
A Chinese report today indicated that manufacturing will contract at a faster pace in August, signaling the country’s economy needs more stimulus to secure a rebound in growth. The preliminary reading for a purchasing managers’ index for China was 47.8. If confirmed, it would be the weakest level since November and the 10th month that the reading has stayed below 50, the longest run in the index’s eight-year history.
Companies most tied to economic growth posted declines. The Morgan Stanley Cyclical Index (CYC) fell for the fourth straight day, losing 1.2 percent for the biggest drop in a month. The Dow Jones Transportation Average, a gauge of 20 shipping companies from FedEx Corp. (FDX) to Southwest Airlines Co. (LUV), tumbled 1 percent for the biggest retreat since Aug. 1. The KBW Bank Index (BKX), made up of 24 lenders, slid 1.1 percent.
Hewlett-Packard, the biggest maker of personal computers, dropped 8.2 percent to $17.64 for the biggest decline in a year. Profit excluding some costs will be $4.05 to $4.07 a share in the year that ends in October, Palo Alto, California-based Hewlett-Packard said yesterday in a statement. That’s at the low end of a forecast for $4.05 to $4.10 issued in May and below the average $4.08 analyst estimate compiled by Bloomberg.
The company suffered another quarter of slumping demand for personal computers and services aimed at businesses, underscoring the turnaround challenge facing Chief Executive Officer Meg Whitman.
Other technology stocks also declined. Intel Corp. (INTC), the world’s largest chipmaker, slid 2.7 percent to $25.04, while Microsoft Corp. (MSFT), the biggest software maker, slumped 0.9 percent to $30.26.
Big Lots, the Columbus, Ohio-based discount retailer, plunged 21 percent to $30.76 for the biggest drop in the S&P 500. Profit excluding some items will decline to $2.80 to $2.95 a share this year, reduced from a previous projection of $3.25 to $3.40 a share. Analysts anticipated $3.30, the average of 16 estimates compiled by Bloomberg.
Boeing slumped 3.4 percent to $70.36, after losing 35 orders for 787-9 planes, the biggest Dreamliner cancellation, as Qantas Airways Ltd. scrapped a contract after delivery delays and losses on international routes. Qantas’s pullback on jets worth about $8.5 billion at current list prices reduced Chicago- based Boeing (BA)’s backlog for the 787-9 by about 10 percent.
Raw-material stocks fell 1.7 percent for the biggest drop out of 10 groups in the S&P 500. Alcoa, the largest aluminum producer in the U.S., erased 2.7 percent to $8.63, while DuPont Co., the most valuable U.S. chemicals producer, lost 1.1 percent to $50.24.
Patterson Cos. tumbled 4.9 percent to $34.15. The St. Paul, Minnesota-based maker of medical devices for dental and veterinary clinics reported first-quarter earnings of 45 cents a share, missing the average analyst estimate by 4 cents.
Guess? Inc. (GES), an apparel maker that operates 511 stores in the U.S. and Canada, sank 23 percent to $25.95 after cutting its annual profit and revenue forecasts amid a drop in North American store sales. Comparable-store sales, a measure of a retailer’s growth that excludes new stores, fell 8.5 percent in the quarter ended July 28.
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Australia’s Mining Bonanza Is Over, Resources Minister Says
By Jason Scott - Aug 22, 2012 11:11 PM CT
Australian Resources Minister Martin Ferguson said the nation’s mining boom has ended as BHP Billiton Ltd. (BHP) delayed approval of its Olympic Dam expansion Deutsche Bank AG estimated at A$33 billion ($34.7 billion).
“You’ve got to understand, the resources boom is over,” Ferguson told Australian Broadcasting Corp. radio today. “It has got tougher in the last six to 12 months.”
An undated handout photograph shows BHP Billiton Ltd.'s iron ore operations at Port Hedland in the Pilbara region of Western Australia, provided to the media. Source: BHP Billiton Ltd. via Bloomberg
Australia’s economy has been powered by the biggest resource bonanza since a gold rush in the 1850s as Chinese-led demand for iron ore, coal and natural gas brought investment projects the government estimated to be worth A$500 billion. BHP, the world’s biggest mining company, said yesterday it doesn’t expect to approve any spending on major projects this fiscal year as metal prices decline amid sluggish global growth.
Prime Minister Julia Gillard’s government is seeking to end four years of budget deficits and return to surplus by mid-2013, and weaker resource investment may threaten that goal ahead of elections due next year. The opposition Liberal National coalition has attacked Gillard’s new taxes on carbon emissions and mining profits, saying they have created investor uncertainty and risk stifling economic growth.
“The investment environment is nowhere near as healthy as before this government came into office and implemented these policies,” Julie Bishop, deputy leader of the Liberal-National opposition, told reporters in Canberra today.
Ferguson’s suggestion that the boom has run its course contrasts with a forecast from the Reserve Bank of Australia, which said in its quarterly statement on monetary policy Aug. 10 that “it is estimated that the peak in spending on resource investment will be sometime in 2013-14.”
There is a “very large stock of work in the pipeline,” the RBA said in minutes released this week of its Aug. 7 policy meeting, when it left the benchmark interest rate at 3.5 percent. “This had occurred despite some mining companies adopting a more cautious approach to potential, but yet to be approved, investment projects.”
The Australian dollar advanced for a fourth straight day, trading at $1.0523 at 2:10 p.m. in Sydney. The currency has jumped about 50 percent since the end of 2008.
The local dollar’s strength has contributed to what policy makers have called a two-speed Australian economy, led by the resource-rich regions in the north and west, while tourism and manufacturing in the south and east struggle.
The unemployment rate in Western Australia state that’s a hub of iron-ore mining was 3.6 percent in July, compared with 5.4 percent in South Australia, where BHP’s Olympic Dam project is located, according to government figures.
Finance Minister Penny Wong said the mining-investment surge wasn’t over.
“We’ve still got a long way to run when it comes to this investment boom,” Wong told ABC radio today. “We’ve got over half a trillion dollars of investment, and over half of that, over half of that, is at the advanced stage. The doom and gloom that some are putting about isn’t appropriate.”
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Asia · Australia & New Zealand · Commodities
American Middle Class Slipping Behind Leans Toward Obama
By William Selway and Frank Bass - Aug 22, 2012 11:00 AM CT
The middle class is shrinking and is now barely a majority in the U.S., underscoring the challenge President Barack Obama and Mitt Romney face as they argue over who can best protect the wealth of struggling Americans.
The proportion of middle-income earners, or those making from $39,000 to $118,000 for a family of three, narrowed as the housing-market crash erased two decades of gains in wealth since 2001 and average incomes fell for the first time since World War II, a Pew Research Center report shows. The middle class shrank to 51 percent of adults in 2011 from 61 percent in 1971.
“We think of ourselves and pride ourselves as being a middle-class society,” said Paul Taylor, the center’s executive vice president and the editor of the report, released today. “But there’s a sense that the middle class is getting smaller. It’s hollowing out.”
Middle-class people are reluctant to lay much of the blame on Obama, with Congress, banks, corporations, the Bush administration and overseas competition more commonly cited as the cause of their problems, according to the survey. More than half, 52 percent, say Obama’s policies would aid the middle class, a 10-percentage-point advantage over Romney.
The report, “The Lost Decade of the Middle Class,” highlights the effects of the longest recession since the Great Depression, which left 12.8 million currently unemployed and pushed more into poverty. The plight of middle-income Americans in an economy that has yet to fully rebound more than three years after the recession ended is a central theme of the presidential campaign.
Romney, who co-founded private-equity firm Bain Capital and served as Massachusetts’ governor, has faulted Obama for failing to spur a stronger recovery. Obama has cast himself as a defender of the middle class and criticized his opponent, who has an estimated net worth of as much as $250 million, for seeking to cut taxes on higher-income Americans.
Obama’s pitch may resonate with middle-income voters, the Pew poll indicates. Republicans favor the rich, according to 62 percent of self-described middle-class respondents. That compares to 16 percent who said the same of Democrats. The survey showed 37 percent said Democrats were more likely to favor their interests while 26 percent said that of Republicans.
“Obama is perceived as more sympathetic to the middle class,” said John Sides, who teaches politics at George Washington University in the nation’s capital and is working on a book about the election. “The challenge for Romney is that he is seen as someone who’s competent, but you want to be seen as someone who’s in touch. There’s enough of a gap there that it may be a liability for him.”
In Columbus, Ohio, Marla Caslin, 62, said she blamed the economic collapse on Republican policies that fostered Wall Street excesses. She was fired from her $44,000-a-year job in the accounts-payable department of a gas company five years ago, and wound up on public assistance until she landed a job at the YWCA last year.
She said Obama has done the best he can with a crisis he inherited, while Romney’s wealth distances him from the plight of typical Americans.
“He can’t relate to us,” Caslin said as she waited for Obama to appear at a campaign rally.
The past decade was a drain on middle-income earners, the Pew study shows. Median household income, adjusted for inflation and household size, dropped 6.6 percent to $59,127 in 2010 from $63,277 in 2000, according to the Washington-based center.
The median wealth of all U.S. families, adjusted for inflation, dropped 39 percent from 2007 to 2010, when it stood at $79,431, just 7 percent higher than it was in 1983, according to the Pew report.
For middle-income families, which have almost half their wealth tied up in their homes, their median wealth increased 2 percent in 2010 from 1983. By comparison, the wealth of upper- income families jumped by 87 percent, the study shows.
It’s not just nongovernment workers who are feeling the pinch. In Atlanta, Rick Lagotta, 48, who has worked for the fire department for the past eight years and is a member of its union, said he has had to forgo raises, or use them to pay for higher health-care costs, as the economic rout hit the city’s tax collections.
He now earns about $38,000 a year, less than half of what some firefighters make because they started at a time when raises were common. With one child in college and another in high school, Lagotta has drawn on retirement savings from his prior job at a car dealership to avoid taking on a second job.
“Everybody is out there trying to get part-time jobs, putting even more stress on their families,” he said.
The Pew study is based on an analysis of Census Bureau and Federal Reserve Board data, as well as a telephone survey of 2,508 adults from July 16-26, 1,287 of whom identified themselves as middle class. The poll has an overall margin of error of plus or minus 2.8 percentage points, and 3.9 percentage points for the middle-class segment.
Most who consider themselves middle class say it’s a struggle to maintain their standard of living. Eighty-five percent say it’s harder to do than it was a decade earlier, according to Pew. Tight finances led 62 percent to reduce spending in the past year, compared with 53 percent who said so in 2008, soon after the onset of the recession.
The rout has tempered middle-income Americans’ optimism. When asked about their children’s future, 43 percent said they would have a higher standard of living than their own, while 26 percent said it would be worse. That’s less sanguine than four years earlier, when 51 percent said the kids would be better off, and 19 percent said they wouldn’t.
In Lower Makefield Township, Pennsylvania, Frank Arcoleo, 59, who has relied on his wife’s income since his consulting business slowed, said he’s afraid his two teenagers won’t be able to match his standard of living when they’re older.
“I just don’t know what life is going to be like for my son,” Arcoleo said. “He’s having to be much more practical about his education than I ever had to be, because being well- educated isn’t enough. You have to have specific skills these days.”
Such worries aren’t uncommon. “It’s been a lot of years of bad times,” said Taylor, the Pew executive. “The mood of optimism is still there, but there’s a little less optimism than there used to be.”
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China Export Growth Slides As World Recovery Slows
By Bloomberg News - Aug 10, 2012 5:13 AM CT
China’s export growth was close to zero in July, raising the odds the government will take more-aggressive measures to support growth after industrial output and retail sales data yesterday missed estimates.
Outbound shipments increased 1 percent from a year earlier, the customs bureau said today in Beijing, after an 11.3 percent rise in June. New local-currency lending was 540.1 billion yuan ($85 billion), the central bank said, lower than all 30 estimates in a Bloomberg News survey, compared with 919.8 billion yuan in June.
Stocks slid as the data boosted evidence that China’s interest-rate cuts and accelerated approval of investment projects have yet to propel growth, after a report yesterday showed industrial output rose the least since 2009. The slowdown intensifies risks of a seventh quarter of deceleration in the world’s second-largest economy.
“Monetary policy easing has to be more aggressive in the remainder of the year,” said Liu Li-Gang, Hong Kong-based head of Greater China economics at Australia & New Zealand Banking Group Ltd. He said there’s a risk of a “hard landing” and the government may lower banks’ reserve requirements as soon as today.
The MSCI All-Country World Index (SHCOMP) of global stocks fell 0.3 percent as of 11:02 a.m. in London. China’s Shanghai Composite Index dropped 0.2 percent, the first decline in six days.
Separate reports showed industrial output growth unexpectedly slowed last month to 9.2 percent from a year earlier and retail sales rose 13.1 percent, trailing analysts’ forecasts.
New yuan lending in July compared with the median estimate of 700 billion yuan in a Bloomberg survey. It was the lowest monthly figure since September 2011. Growth in M2, the broadest measure of money supply, was 13.9 percent last month, compared with the median forecast for a 13.8 percent gain.
The growth in July exports compared with the 8 percent median estimate in a Bloomberg News survey. Imports rose 4.7 percent, versus the survey estimate for 7 percent and a 6.3 percent increase in June.
The trade surplus was $25.1 billion in July compared with $31.5 billion a year earlier. The median projection was $35.1 billion.
Excluding distortions caused by the timing of the Lunar New Year holiday, it was the worst export growth since 2009. The figures put China further at risk of missing its 10 percent goal of trade expansion for the year. China is still “confident” of achieving the target, Gao Hucheng, a vice commerce minister, said at a briefing today.
China’s sales to European Union countries fell 16.2 percent last month and growth in U.S. exports slowed to 0.6 percent from 10.6 percent in June, customs data showed.
The odds the government will “greatly step up” policy easing or stimulus are “surely on the rise,” Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note today. The central bank may cut banks’ reserve requirements “soon” and another interest-rate reduction is “in the pipeline,” Lu said, after two so far this year.
Barclays Plc yesterday cut its estimate for third-quarter growth to 7.7 percent from 8.2 percent while Deutsche Bank AG lowered its forecast to 7.5 percent from 7.9 percent.
China’s central bank halted gains in the yuan in the first half of the year, providing some help to exporters amid deteriorating global demand. The currency has fallen 1 percent against the U.S. dollar this year.
The yuan was little changed against the dollar today at 6.3600, according to the China Foreign Exchange Trade System.
Li & Fung Ltd., the world’s largest supplier of clothes and toys to retailers, plunged in Hong Kong trading by the most since listing in 1992 after slowdowns in the U.S. and Europe caused a slump in first-half operating profit. The company, whose customers include Wal-Mart Stores Inc. and Target Corp., sells goods that are made in China.
Separately today, the Ministry of Finance said fiscal spending rose 37 percent in July from a year earlier, while fiscal revenue rose 8.2 percent.
Elsewhere in the Asia-Pacific region, Singapore said its economy shrank an annualized 0.7 percent last quarter, less than the preliminary reading of a 1.1 percent contraction. Hong Kong said gross domestic product expanded 1.1 percent in the second quarter from a year earlier, compared with the median estimate for a 1.2 percent rise.
German inflation unexpectedly slowed in July to 1.9 percent from 2 percent in June. French industrial production stagnated in June, the latest sign that the euro area’s second-largest economy may be heading for its first recession in three years.
The Russian central bank refrained from raising borrowing costs for an eighth month, highlighting “significant” inflation risks from a weaker harvest and higher interbank rates that constrain lending growth.
Brazil’s unemployment rate probably fell to 5.7 percent in June, the third monthly decline, based on the median estimate of 35 economists. Canada’s jobless rate may have been unchanged at 7.2 percent in July.
Exports present the biggest uncertainty to China’s outlook, Song Guoqing, an adviser to the People’s Bank of China, said last month. He estimated economic growth may slow to 7.4 percent this quarter.
In its second-quarter monetary policy report released Aug. 2, the central bank said the “primary risk for the global economy is still the European debt crisis,” and that the possibility of Europe “triggering a double dip in the global economy can’t be ruled out.”
--Zhou Xin. With assistance from Zheng Lifei in Beijing, James Mayger in Tokyo and Ailing Tan, Shamim Adam and Stephanie Phang in Singapore. Editors: Nerys Avery, Scott Lanman
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Cnooc Bid For Nexen Presses Harper Amid Investor Concern
By Andrew Mayeda and Theophilos Argitis - Aug 7, 2012 11:00 PM CT
Prime Minister Stephen Harper and his cabinet are wrestling with how to handle the proposed takeover of Calgary-based Nexen Inc. (NXY) by China’s Cnooc Ltd. (883) as some investors anticipate Canada will block the bid.
Cnooc’s $15.1 billion agreement to buy Nexen will be part of the discussions when Harper meets his ministers in Ottawa today, according to a person with knowledge of the matter who spoke on condition he not be identified because the talks aren’t public.
The state-owned company’s bid tests Harper’s ability to balance the need to bolster economic relations with China while ensuring the Asian country doesn’t gain too much influence over the oil sands, the world’s third-largest pool of oil reserves. Options for Harper include capping investments by Chinese enterprises or placing strict conditions on their operations in Canada as allowed under the country’s foreign investment law.
Jack Mintz, director of the University of Calgary’s School of Public Policy, favors the first option.
“You could see with the amount of capital that’s available from China and some of the other Asian countries that they could be back looking at mining companies, they could be back looking at oil and gas companies, and even bigger ones than Nexen,” Mintz said yesterday in a telephone interview.
“What’s our policy going to be in the longer run?” said Mintz, who is also and a board member of Imperial Oil Ltd. (IMO), the Canadian unit of Irving, Texas-based Exxon Mobil Corp. (XOM)
Concerns that the deal may not get government approval has kept Nexen stock below Cnooc’s $27.50 per-share takeover bid. The shares reached as high as $26.21 in New York trading the day after the July 23 bid was announced and closed at $25.77 yesterday.
Based on the close, the shares were trading at a 6.7 percent discount to the offer, the biggest of any Canadian takeover target valued at $1 billion or more, according to data compiled by Bloomberg.
Nexen’s oil and gas assets include production platforms in the North Sea, the U.S. portion of the Gulf of Mexico and in Nigeria, as well as oil-sands reserves at Long Lake, Alberta, where it already produces crude in a joint venture with Cnooc. Those assets produced 207,000 barrels a day in the second quarter, which would boost the Beijing-based company’s output by about 20 percent. The acquisition would augment Cnooc’s position in Canada’s oil sands after last year’s $2.4 billion purchase of Opti Canada Inc.
The Nexen takeover needs approval from regulators in Canada, and the U.S., where the Committee on Foreign Investment in the United States examines whether foreign purchases of U.S. assets raises security risks. Senator Charles Schumer of New York has already asked Timothy Geithner, chairman of CFIUS, to block the deal until China gives U.S. companies more access to its market.
Sam La Bell, a research analyst at Veritas Investment Research Corp. in Toronto, said the U.S. poses a greater regulatory risk for the bid.
“There is an increasing sense that there could be delays in closing the deal due to regulatory issues,” La Bell said yesterday by phone, citing concerns raised by Schumer.
The Canadian government may have fewer requests for reciprocity, La Bell said.
“We’re happy having the one-way investment coming into Canada,” he said. “We’d like to make investments in China but it would never be on the same scale as the U.S.”
Under the Investment Canada Act, the federal government reviews acquisitions worth more than C$330 million ($331 million) in assets to determine if they represent a “net benefit” to the nation. Under the law, the government can force companies to make written commitments before it agrees to the deal.
“There is a process in place through the Investment Canada Act to review this transaction and determine if it is a net benefit to Canada,” Carl Vallee, Harper’s press secretary, said in an e-mail. “This transaction will be scrutinized very closely.” He declined to comment on cabinet discussions.
Harper’s government rejected a $40 billion hostile bid by Melbourne-based BHP Billiton Ltd. (BHP) for Potash Corp. of Saskatchewan Inc. in 2010, in what was only the second rejection of a foreign takeover in Canada in 25 years.
Harper said Jan. 26 in a speech in Davos, Switzerland, that diversifying Canada’s energy exports to Asia had become a “national priority” in a bid to reduce the country’s reliance on the U.S., and he traveled to China in February with a delegation of business executives. Canada sent 98.5 percent of the crude oil it exported last year to the U.S., according to National Energy Board data.
In February, Canada and China concluded negotiations on an agreement that would protect foreign investors from discrimination by either country’s government.
Canadian officials, including Trade Minister Ed Fast, also have pressed China to ease restrictions in sectors such as financial services and mining.
“This lack of openness is an obvious source of frustration for Canadian investors, particularly given the recent dramatic increase in Chinese investment in Canada,” John Manley, a former foreign minister who heads the Canadian Council of Chief Executives, an industry group of the country’s top CEOs, said in a Nov. 21 speech in Beijing. “Canadian investors ought to be afforded the same access to China that Chinese investors are afforded.”
Peter Hunt, a Calgary-based Cnooc spokesman, declined to comment in an e-mail on the reciprocity issue. Davis Sheremata, a Nexen spokesman, declined to comment on the matter when reached by phone.
Canadian direct investment in China was C$4.5 billion in 2011, less than 1 percent of Canada’s total, according to Statistics Canada. Chinese investment in Canada totaled C$10.9 billion last year, about 1.8 percent of the total.
The Canadian government should push for an investment treaty that would require China to automatically approve foreign takeovers by Canadian companies of equivalent size to the Nexen acquisition, Roger Martin, dean of the University of Toronto’s Rotman School of Management, argued in an article published in the Globe and Mail on July 26.
“If the answer is no, we should turn down the Nexen acquisition on the principle of the absence of reciprocity,” he said in the article.
The rejection of the Potash Corp. takeover has increased uncertainty among investors about what kind of foreign acquisitions Canada will accept, said John McCallum, a Liberal lawmaker.
The government could use the foreign-investment treaty it plans to sign with China as a way to implement “some form of reciprocity,” McCallum, a former defence minister and former chief economist at Royal Bank of Canada, said by phone.
“I met Hu Jintao once, and he said five words to me, ‘We like your oil sands,’” McCallum said last week of the Chinese president. “The fact they’re asking us to accept a $15 billion investment sort of gives us the right to say, ’OK, we just want the same treatment.’”
Enforcing reciprocity with China would be tricky, said Lawrence Herman, a lawyer at Cassels Brock & Blackwell LLP in Toronto who specializes in international trade.
“Are we talking about reciprocity in general terms, or are we talking about equivalent treatment in the same sector under the same or equivalent circumstances involving the same or similar kinds of investors?” Herman said in a telephone interview.
Inserting a reciprocity clause into any trade treaty with China may also violate international trade laws, since Canada would enjoy access to the Chinese market that other countries do not, Herman said.
“If the government of Canada is concerned about reciprocity or the lack thereof in any kind of foreign acquisition, it should state the policy openly before the investment is made so that the world knows that there is a requirement for some kind of balanced treatment for Canadian investors,” Herman said.
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Steelmakers' profits plummetUpdated: 2012-08-01 09:08 By Du Juan ( China Daily)
Coated and galvanized steel plates at a Baoshan Iron and Steel Co Ltd plant in Huangshi, Hubei province. The profits of large steelmakers plunged 95.8 percent in the first half of the year amid the economic slowdown. [Photo/China Daily]
Expert: Govt is pondering tax rebates to help steel industry
The profits of China's large and medium-sized steel companies plunged 95.8 percent year-on-year in the first half of the year, as a slowing economy curbed demand and prices were slashed, a senior industry official said on Tuesday.
The total profit of the steel industry was 2.39 billion yuan ($376 million), while the companies that were in the red reported a total loss of 14.25 billion yuan, according to the China Iron and Steel Association.
"The profitability of the industry is on the verge of becoming a deficit," said Zhang Changfu, association vice-chairman. "Production capacities are increasing in the current oversupply market while investment is growing, which will make the glut worse."
Li Xinchuang, head of the China Metallurgical Industry Planning and Research Institute, said at a news conference on Tuesday that the central government is considering restoring a value-added tax rebate on high-end steel products that are purchased from domestic steelmakers.
He said China imported about 15 million metric tons of high-end steel products annually, and half those products are purchased overseas for domestic processing companies that have duty-free imports.
"It will help increase domestic supplies and reduce imports if the new policy can be carried out," Li said. "Chinese companies can provide 7 million to 8 million tons of steel products at the most to replace imports if the plan goes well."
Since the fourth quarter of 2011, the steel industry has been battered by falling prices and rising raw material costs, which led to high domestic inventories.
In February, China had a record-high steel inventory consisting of 12.46 million tons of the metal.
In the first half, the central government continued to impose strict control policies on the real estate industry, and railway and road infrastructure construction has decreased.
"Crude steel's apparent consumption in the first six months had no increase compared with last year," Zhang said.
According to the association, China exported 21.40 million tons of crude steel in the first half, 4.36 million tons more than last year, showing an annual growth rate of 25.6 percent.
"The exports have helped ease the pressure of the supply glut in the country," Zhang said. "However, the average unit price of exported steel products is $960 a ton, while that of imported steel products is an average of $1,326 a ton."
"Chinese companies cannot continue to buy iron ore at high prices from abroad and export steel products at low prices. The export structure has to be changed."
Chinese companies should reduce their consumption of raw materials and gradually export fewer low value-added steel products. Meanwhile, they need to continue to expand overseas and try to gain more iron ore resources to diversify the country's iron ore import channels, Zhang said.
He said Chinese steel companies should control production capacities, reduce costs and make a greater effort to produce high-end steel products.
Currently, the European debt crisis has dampened overseas demand for Chinese steel products.
In 2011, China exported 5.17 million tons of steel products to 27 EU countries, showing a 33 percent growth year-on-year. But China's steel products exported to the EU in the first half this year dropped 27 percent year-on-year.
The export increase in the first half came mainly from markets in areas in the Middle East, South Africa and Africa and the United States, according to the association.
Zhang estimated the weak global market will make exports even more difficult for Chinese machinery manufacturers and steel producers in the second half of the year.
Han Weidong, senior analyst at Lange Steel Information Research Center, predicted that many steelmakers might soon go bankrupt, "which will lead to a new balance".
"However, the process will take time," Han said.
He predicted that some large steelmakers will soon reduce their output, which could benefit the domestic market.
"It is still possible to get better in August or September because supportive policies will continue," he said.