Direct investment from Japan, US plunges as China shifts gear

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FDI in service sector shows steady growth, benefits from new policies 

Direct investment from Japan and the United States in China plunged between January and October of this year, which the government said highlighted the country’s transition from a low-profit to a high-end manufacturing economy, and ongoing levels of overcapacity.

During the 10-month period, direct investment from Japan fell 42.9 percent, and from the US by 23.8 percent from a year earlier, but that from South Korea and the United Kingdom surged 26.4 percent and 32.4 percent, respectively, the Ministry of Commerce said.

FDI inflows, which exclude investment in the financial sector, totaled $95.88 billion, a drop of 1.2 percent from the same period a year earlier, although a slight improvement on the 1.4 percent drop registered over the first nine months of the year.

Shen Danyang, the ministry’s spokesman, said as the US and Japan had previously focused on investing in China’s manufacturing industry, the country’s ongoing economic upgrading and measures to tackle industrial overcapacity and protect the environment had affected investment activity in the sectors.

As China continues restructuring its economy, the service sector has become a strategic priority, with the central government issuing a number of guidelines this year to support its development.

As a result, Shen said the ministry had noticed fast growth in service sector FDI. The sector will “continue to benefit from further development policies”, he said.

Shen said future FDI to China is likely to continue to shift from manufacturing to the service sector as well as other high-tech manufacturing industries such as rail, telecommunications and electronic equipment.

The latest ministry figures show that $53.1 billion worth of FDI went to China’s service industry in the first 10 months, a 6.6 percent rise on the same period a year earlier, while $32.5 billion still flowed into the manufacturing industry.

China has gradually opened up its finance, logistics, energy saving, telecom and environmental protection sectors to overseas companies, and encouraged Chinese and foreign companies to cooperate in knowledge-intensive sectors such as software engineering and cross-border e-commerce.

“Rising manufacturing costs are another pressing problem that can be solved by improving the service sector,” said Zhao Zhongxiu, a professor at the University of International Business and Economics in Beijing.

“Increases in labor and resource costs in China and other Asian economies have prompted many American companies to move back to the US.”

China has relaxed its policies to attract more FDI, meaning foreign or joint venture investments between $100 million and $1 billion in value need to be approved by the central government, and projects worth $2 billion or more also need to register with the State Council, according to the 2014 Catalogue for the Guidance of Industries for Foreign Investment, also released on Tuesday.

Only projects in sensitive countries or regions, as well as in sensitive industries, will require approval by the Ministry of Commerce.

“Sensitive” countries or regions are defined as those that have no diplomatic relations with China or those under United Nations sanctions. Other overseas investment projects need only be registered with the ministry.

 

Source : China Daily | November 19, 2014

Thomas D’Innocenzi

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China among world’s top investors in science

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China, Japan, Singapore and South Korea have vividly demonstrated how significant investment in science can help to fuel national economic growth, according to latest research of Nature.

The Nature magazine, a prominent interdisciplinary scientific journal, published its Nature Index on Nov 13, a database of author affiliations and institutional relationships that are used to track contributions to articles published in top-class science journals.

At world level, East and Southeast Asia ranks the third measured by the countries’ average contribution to each scientific research paper, while three of the world’s top 10 biggest contributors – China, Japan and South Korea – are from the region.

“The most important factor is the absolute increase in the budgets spent on R&D in the region,” Nick Campbell, Executive Editor of Nature and Greater China Head of Nature Publishing Group, told China Daily in an email.

“As the prime funder of fundamental research, the government of any nation with serious science and technology ambitions naturally plays an enormous role in determining how that translates into knowledge-based economic outcomes,” he said.

China’s R&D spending reached as high as 1.18 trillion yuan ($192.81 billion) in 2013, or 2.08 percent of the country’s GDP, according statistics released by the National Bureau of Statistics.

At the same time, China’s weighted fractional count (WFC) – a measure of a country’s relative contribution to each paper – increased by 15 percent in 2013 over 2012.

“This is even more impressive when com¬pared to an increase of less than 1 percent, or even a decrease, for all other top 10 WFC countries,” Campbell said.

China’s heavy R&D investment came along with the central authority’s innovation-oriented strategy, which was put forward at the 18th CPC National Congress in Nov 2012.

With changes in China’s development, the strategy takes innovation has as the key to transforming development and optimizing the economic structure, which, on the other side, rose criticism for the relatively low investment on fundamental research.

For example, the country’s spending on fundamental research remained around 5 percent to the total R&D fund since 2006.

“Compared to China and South Korea, Japan has greater funding for basic science,” KAIST’s Soon Park was quoted in the Nature Index Global, adding that science in these latter two countries is often perceived in “utilitarian terms”.

“Every country is unique in terms of how such development plays out, but China, like any country, can learn from the experiences of others. For example there is a lot to be admired in how Korea innovates in its high-tech industry, driven by several world-leading companies,” Campbell said.

“I am sure there are many in China that would advocate for a bigger focus on fundamental research if it could guarantee a long-awaited Nobel Prize winner.”

 

 

Source : China Daily | November 19, 2014

Thomas D’Innocenzi

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India hopes to drive broader growth in services sector

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India has the second fastest growing services sector, after China, in Asia. The sector is growing at about 9 percent per year, outperforming GDP growth in the last 13 years.

India has the second fastest growing services sector, after China, in Asia. The sector is growing at about 9 percent per year, outperforming GDP growth in the last 13 years. That has prompted the government to foster development in areas like education, health and tourism in a bid to drive broader growth.

India’s services sector accounts for 57 percent of the country’s GDP. Annually, India exports US$151 billion worth of services. But, it exports twice as much merchandise. Now, the government wants to re-balance that growth, by moving up the export value chain.

Finance Minister Arun Jaitley said: “The real job creation is in manufacturing sector and that’s why one of our national challenges is this 15 percent of share of manufacturing today has to be increased by 25 percent, and that’s an uphill task. Therefore that leaves us essentially with the services sector whose growth is a low-hanging fruit in India.”

India hopes to bank on high-tech sectors, like animation, gaming and designing. But it needs to build a competitive talent pool and a skills development programme.

Minister of State for Commerce & Industry, Nirmala Sitaraman, said: “Whether it’s film, entertainment, hospitality, wellness…professional services and so on, all of which have on their own – with probably minimum assistance from the government – shown excellence over the decades.

“They have striven over the decades and established such quality which has given them excellence in international recognition. Most of them are accredited all over the world. So at this stage – where it is already contributing substantially to the GDP – we also recognize untapped potential existing within this sector.”

Analysts said one area with strong potential is tourism. With nine million foreigners expected to visit India each year by 2020, the government is hoping this will boost consumer spending and foster job creation at home.

 

 

Source : Channel News Asia | November 18, 2014

Thomas D’Innocenzi

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Australia and China set to sign free trade deal

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Agriculture Minister Barnaby Joyce refused to reveal details of the deal, but said he was confident it would be “extremely well received”.

Australia and China were expected to ink a multi-billion dollar free trade deal later Monday (Nov 17) during a visit by President Xi Jinping, officials said.

Agriculture Minister Barnaby Joyce refused to reveal details of the deal, but said he was confident it would be “extremely well received”. The FTA would boost agricultural exports and help counter the downturn in mining which hurts the Australian economy.

“If we can alleviate that in some way by exports in dairy and exports of beef and exports of wine, horticultural produce, fish, then that is a good outcome for us,” Joyce told ABC radio.

The Australian Financial Review said the agreement “will liberate more than 90 per cent of Australian exports from tariffs over the next four years”.

Australian financial services providers would have access to China second only to that of providers in Hong Kong and Macau, both part of China. This would include sectors such as banking, securities, futures and insurance, the daily said.

The Sydney Morning Herald said the deal should open up “billions of dollars in new markets for Australian exporters”. It would allow dairy farmers tariff-free access to China’s lucrative infant formula markets without restrictive safeguard caps that apply to New Zealand.

Existing 30 per cent tariffs on Australian wine sold to China would be eliminated over four years, the Herald said. China is Australia’s biggest trading partner, with the two-way flow exceeding A$150 billion (US$131 billion).

The trade talks began in 2005, but stalled last year over agriculture and China’s insistence on removing investment limits for state-owned enterprises. Over the past year Australia has sealed free trade deals with Japan and South Korea.

With China’s insistence on removing investment limits for state-owned enterprises, the two sides have struggled to seal agreement with Beijing since talks began in 2005.

The scheduled post-G20 summit visit by President Xi became a target to finalise the marathon negotiations. Xi was due to address the Australian parliament in Canberra on Monday afternoon.

Parliamentary Secretary to the Prime Minister Josh Frydenberg told ABC radio the FTA would prove “a game-changer” and be worth up to US$18 billion to the Australian economy over the next few years.

“It will supercharge our trade with China,” he said. “Up to 95 per cent of our exports over time will enter the Chinese market tariff free.” China sought greater access to invest in Australia, Frydenberg added.

The FTA is expected to cover an array of issues, including agricultural tariffs and quotas, manufactured goods, services, temporary entry of people and foreign investment.

Last week, Canberra unveiled a deal to ship to China one million Australian cattle worth A$1 billion (US$860 million) in an agreement that will double the size of the live export industry.

 

 

Source : Channel News Asia | November 17, 2014

Thomas D’Innocenzi

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‘Thailand could become financial hub’ rivalling Singapore, Malaysia

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Thailand has the potential to be a financial hub in Asean, especially for Cambodia, Laos and Myanmar, which need funds to drive their growth, Twin Pine Consulting Co managing director Adisorn Singhsacha said.

He added that his company had advised the Laotian government to issue debentures totalling Bt9.59 billion in Thailand’s capital market from 2013 through this year. It also advised Laotian firm EDL-Generation to issue debentures worth Bt6.5 billion in the Thai market.

The company is also advising the governments of Myanmar and Cambodia to do the same to support their infrastructure investment plans.

In his view, Thailand could eventually rival Singapore and Malaysia as a source of financing for Asean countries.

Adisorn established Twin Pine Consulting in 2011 as a financial advisory firm. The company has focused on advising governments and the private sector in this region to raise capital in the Thai market.

“We saw strong demand for funds from Asean countries, especially Laos, Myanmar, Cambodia, Indonesia and Vietnam, to develop their infrastructure. We also saw the business opportunities for Thailand’s capital and financial markets to be sources of funds to support them. As a result, we decided to do this business, starting in Laos,” he said.

Two years after its establishment, the company successfully advised Laos’ government to issue debentures worth Bt1.5 billion in Thailand’s capital market in mid-2013, then issue Bt3 billion worth at the end of last year, and make the final Bt5.09-billion issue last month.

“We aim to advise Asean countries, especially Laos, Cambodia and Myanmar, both the government and private sectors, to issue debentures in the Thai capital market worth between Bt12 billion and Bt20 billion a year from 2015 onwards,” he said.

This is a challenge for Thailand’s capital and financial markets to transform from borrowers to creditors in this region. It is also the way to have the best relationship with neighbouring countries, he said.

Source : The Nation | November 12, 2014
Thomas D’Innocenzi
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APEC leaders back China’s free trade ‘roadmap’

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Chinese President Xi Jinping hailed endorsement of the plan as a “historic” step towards realising the Free Trade Area of the Asia-Pacific (FTAAP).

Asia-Pacific leaders on Tuesday (Nov 11) backed China’s roadmap for a vast new free trade area rivalling US plans for the region at a summit in Beijing where Russian leader Vladimir Putin had a tense showdown with Barack Obama.

Chinese President Xi Jinping hailed endorsement of the plan as a “historic” step towards realising the Free Trade Area of the Asia-Pacific (FTAAP). He said it reflected the “confidence and commitment of APEC members to promote the integration of the regional economy”.

The 21-member Asia-Pacific Economic Cooperation forum accounts for more than 50 percent of global GDP and nearly half of world trade.

Beijing has embraced the broader FTAAP which is seen as a rival to the proposed Trans-Pacific Partnership pushed by Washington as part of its much-vaunted “pivot” to Asia but which notably excludes China. The FTAAP is a longer-term concept for the entire region that would build on the TPP and other free-trade initiatives.

The US president has insisted he wants China “to do well” despite simmering tensions between the world’s two largest economies. “The United States welcomes the rise of a prosperous, peaceful and stable China,” Obama said in a speech on Monday at the APEC summit.

DIPLOMATIC TENSIONS

China has been keen to underscore its rising trade and diplomatic clout during the summit which takes place against a backdrop of growing big-power rivalries.

Ahead of the gathering, Xi promised ever-closer cooperation with Obama’s combative diplomatic rival Putin, saying it was “time to gather the fruit” of their deepening ties. Russia and China have been brought together by mutual geopolitical concerns, among them wariness of the United States.

In less friendly encounters, the Russian leader had a close-up brush with Western anger over Ukraine and the downing of Flight MH17 in meetings on Tuesday with Obama and Australian Prime Minister Tony Abbott.

Obama held talks of about 15-20 minutes with Putin, according to the White House, with their conversations covering Iran, Syria and Ukraine.

Putin also met Abbott, who has publicly declared his fury at the downing of Malaysia Airlines flight MH17 over eastern Ukraine, killing 298 people including 38 Australian citizens and residents.

Using colourful Australian sporting terminology ahead of their face-to-face encounter, Abbott had pledged to “shirtfront” – physically confront – the Kremlin strongman over the fate of the plane.

Abbott’s office underlined that evidence suggested a Russian-supplied missile from a launcher that was then returned to Russian territory was responsible, labelling it “a very serious matter”.

“The leaders have robustly spoken out in favour of speeding up the investigation of the reasons for the tragedy,” the Kremlin said after their meeting.

‘WE NEED EACH OTHER’

For its part China is embroiled in territorial and historical disputes with Japan, with relations at their lowest point in decades. A rare meeting between Xi and Prime Minister Shinzo Abe on Monday, the first by leaders of the world’s second- and third-largest economies in three years, has raised hopes of a possible thaw.

Abe stressed cooperation with Beijing after the summit, calling for the neighbours to press ahead with tentative efforts to put their deep hostility behind them.

“Japan and China, we need each other. We are in a way inseparably bound with each other,” Abe told reporters. “Japan and China both have responsibility for peace and prosperity of the region and of the world.”

China and Japan are closely linked economically, but political tensions have endured between Asia’s two heavyweights for decades, stemming largely from lingering anger over Japan’s brutal World War II invasion of its neighbour.

Washington welcomed the Xi-Abe meeting as “an opportunity to reduce the tensions between the two countries”, deputy national security advisor Ben Rhodes told reporters in Beijing.

China and the United States have jousted over differing visions of Asia-Pacific trade integration while Beijing’s increasing economic and military prominence has also lead to tensions.

But at the meeting Obama himself praised China for focusing attention on APEC’s role in eventually achieving the FTAAP, first proposed in 2006, but also reiterated the US priority was the smaller TPP.

“The many regional initiatives will contribute to the eventual realisation,” he said. “We see our engagement in the Trans-Pacific Partnership as a contribution towards that effort.”

Xi hosted Obama for a private dinner on Tuesday and they were to meet again on Wednesday. Both sides say they want to manage their relationship to avoid clashes in the past that have occurred between rising and established powers.

In a sign that they can work together, the White House announced on Tuesday that they had “reached an understanding” on an agreement to reduce tariffs on information technology trade.

Obama also announced in Beijing the two governments had reached a reciprocal agreement to extend visa validity periods to as long as a decade.

 

Source : Channel News Asia | November 12, 2014

Thomas D’Innocenzi

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APEC leaders seek free trade progress at annual summit

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US President Barack Obama, Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe, who helm the world’s three biggest economies, are among the leaders of the Asia-Pacific Economic Cooperation (APEC) forum.

Asia-Pacific leaders gather on Tuesday (Nov 11) for the climax of their annual summit with region-wide free trade the key focus as they try to narrow differing views on how to achieve it.

US President Barack Obama, Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe, who helm the world’s three biggest economies, are among the leaders of the Asia-Pacific Economic Cooperation (APEC) forum.

China wants the 21-member APEC meeting to endorse a stronger commitment to the Free Trade Area of the Asia-Pacific (FTAAP) idea, a longer-term concept for the entire region that would build on other free-trade initiatives including the US-backed Trans-Pacific Partnership (TPP).

The US has long pushed TPP, which aims for a loosening of trade restrictions, but so far excludes China while embracing 11 other Pacific Rim countries including Japan, Canada, Australia and Mexico.

Some Chinese analysts and state media have framed the TPP as an attempt to check Beijing’s growing economic clout, allegations Washington dismisses.

The 10-member Association of Southeast Asian Nations, meanwhile, champions the Regional Comprehensive Economic Partnership, which would bring together ASEAN and six countries with which it has FTAs, including China, Japan and India.

APEC accounts for more than 50 percent of global gross domestic product, nearly half of world trade and 40 percent of the Earth’s population.

Set up 25 years ago, it has long pushed free trade among its members, who have separately pursued bilateral and multilateral deals with other economies both inside and outside the organisation.

APEC summits combine group meetings with a chance for leaders to meet on the sidelines in one-to-one bilateral sessions to discuss issues that affect their direct relations.

Xi and Abe on Monday held the first summit between Chinese and Japanese leaders since December 2011 as they seek to repair relations soured by disputes over territory and World War II history.

But APEC, a consensus-based grouping that has over the years sometimes been criticised as an expensive talking shop, also combines serious policy discussions with pomp and colour.

At Monday’s formal dinner that kicked off the summit, the hosts rolled out a gleaming red carpet for the leaders who arrived decked out in sleek, high-collared tunics, with hundreds of wildly cheering dancers dressed in the costumes of China’s dozens of ethnic minorities outside the venue.

On Tuesday the summit venue moves from Beijing to a scenic lake outside the Chinese capital.

Despite its tendency to paper over differences, APEC’s diversity masks the great power rivalries at play inside it.

Xi offered the world a vision of a Chinese-driven “Asia-Pacific dream” on Sunday in a speech to APEC business leaders, while Obama, speaking to the same audience on Monday, stressed US global leadership, calling his country a “thoroughly Pacific nation”.

 

 

Source : Channel News Asia | November 11, 2014

Thomas D’Innocenzi

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