So possibly approx 3 trillion CFG of reserves to GKP (60% RF of average 10 TCFG @ 51% WI) based on the same deal would give GKP's gas a value of approx USD16 billion!
That's 21 dollars per share! or about 1260p!
Come on Nabucco!
"If you look at the proven reserves that PetroChina are getting it is one trillion cubic feet of gas for $5.4 billion, so it looks to be about $5.40 per mscf (million cubic feet) on the current proven reserves which looks to be expensive."
Our gas will play a large part in any take over negotiations and may actually double in quantity if SA/BB are on trend.
Hope your reading this BBBS
.................
By Jeffrey Jones and Farah Master
CALGARY, Alberta/HONG KONG | Thu Feb 10, 2011 9:41am GMT
CALGARY, Alberta/HONG KONG (Reuters) - PetroChina is purchasing half of a prolific shale gas project from Canada's Encana Corp for C$5.4 billion ($5.4 billion), marking the largest Chinese investment yet in a foreign natural gas asset.
Chinese companies such as PetroChina and CNOOC have been scouring globally for unconventional gas assets to reduce reliance on coal and satisfy its energy hunger to fuel its economy, now the world's second-largest.
In January, CNOOC struck a $570 million shale deal with U.S. natural gas company Chesapeake Energy Corp, its second such deal with the American company in about four months.
On Thursday, shares of PetroChina, Asia's largest oil and gas producer, fell more than 2 percent in Hong Kong trade, lagging the Hang Seng's 0.7 percent fall, as analysts said the deal, to be paid all in cash, was pricey. Encana shares closed down 60 Canadian cents, or 2 percent, at C$30.65 on the Toronto Stock Exchange. It announced the deal after the market closed.
"Not too dissimilar to the CNOOC/Chesapeake deals, the PetroChina/Encana tie-up is another win-win that enables China to acquire quick exposure to the long term shale oil/gas boom in North America," said Gordon Kwan, an analyst with Mirae Asset Management in Hong Kong.
Kwan said the deal will also allow Chinese companies like PetroChina to migrate the technology back to China for its development in domestic unconventional oil and gas resources.
Encana, one of the North America's largest gas producers, and state-owned PetroChina agreed to form a 50-50 joint venture to develop the Cutbank Ridge lands in the westernmost province of British Columbia over several years.
The deal, which is subject to approval by the Canadian and Chinese governments, came after nine months of talks, both companies said.
The venture will allow Encana to accelerate development of its vast reserves while keeping a lid on capital investments at a time when natural gas markets are weak. For the Chinese, it's another step toward the country's goal of tripling the use of the lower-carbon fuel over the next decade.
The venture is likely to go ahead without much political fanfare as the purchase of a 50 percent stake in the Canadian firm's unconventional gas assets was not nearly as threatening as an outright acquisition.
"You can't guarantee it is going to go ahead but I think it is quite likely. These guys are more than happy to take a few billion dollars in there, that is ultimately what it is all about," said Brynjar Bustnes, analyst at JP Morgan in Hong Kong.
The value of the deal surpasses PetroChina's $3.1 billion joint bid with Royal Dutch Shell to buy Australia's coal-seam gas player Arrow Energy last year.
It is also worth more than the largest previous Canadian energy buy, Sinopec Corp's $4.65 billion acquisition of ConocoPhillips' stake in the Syncrude Canada oil sands venture."
It looks expensive to us," said Neil Beveridge, analyst at Sanford C. Bernstein in Hong Kong
====
Feature: China's hot property: a guide for the perplexed
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
By John Foley
HONG KONG, March 31 (Reuters Breakingviews) - China's property bubble is so big you can practically see it from space. House prices have been driven skyward by cheap money, aspiring middle classes and rising numbers of city dwellers. Taxi drivers, politicians and hedge fund managers talk of little else. The government tolerated a boom for too long, but prices need to return to earth.
-- Why do people say China has a housing bubble?
The speed of price rises has been dizzying. In ten of the country's biggest cities, the price of new mass-market houses rose more than 10 percent in the last year. And from 2004 to 2009, prices in 35 cities doubled. As with any bubble, there is no definitive proof. The National Bureau of Statistics has abandoned its headline price indicator, saying it masked huge variations. The International Monetary Fund has decided that, on a country-wide basis, Chinese property is not yet a bubble. But in some urban centres, it's a different story.
Consider affordability. In most markets, a comfortable ratio of house prices to average annual household income is around four times. In a metropolis like Beijing, Shanghai or Shenzhen, the current level is more like 12. Even with wages rising rapidly, that's excessive.
The financial conditions for a speculative bubble are also present. Broad money supply has increased 39 percent in the past two years. Real interest rates are negative. A hoarding mentality, the result of decades of grievous shortages, looks conducive to investment manias. Investors have only three places to put their funds: in the bank, in stocks, or in real estate.
What's missing is leverage. As buyers have to put down at least 40 percent of the purchase price in most cases, a bursting bubble would look different from the recent U.S. housing crash. Still, the fact that prices have reached such levels in the absence of easy mortgage credit shows how much expectations of capital gain have risen.
-- So who owns all those empty buildings?
That's the wrinkle: China has a supply bubble too. Rising prices have attracted new investment, but buyers and sellers can't agree, so apartments sit empty. Ordos, a city in Inner Mongolia, shows up on Google Earth as a pristine ghost town. And a widely circulated rumour in 2010 suggested that 65 million Chinese homes had used no electricity in the previous six months.
The government has helped create this excess. Provinces depend on revenue from selling land for development. Officials at every level have tacitly welcomed building activity, since it pushes up GDP, on which their success tends to be measured. Even wealthy cities like Tianjin and Dalian boast visibly empty stretches of prime real estate.
Sellers also have no reason to cut a deal in a hurry. Rental yields, as low as 1-2 percent, are less than the cost of depreciation, so there is little pressure to rent out properties. And since many speculative owners have little or no leverage, they often do not face cash flow pressure.
The authorities see the problem. China's banks are being told to clamp down on property-related loans, which made up a quarter of last year's total, and keep 20 percent of their deposits on reserve to curb frivolous(Unworthy of serious attention; trivial: a frivolous novel) lending. That doesn't help Ordos(A sandy desert plateau region of Nei Monggol (Inner Mongolia) in northern China bounded on the south and east by the Great Wall) much, but it should ensure ghost towns don't become a bigger feature of China's landscape.
-- What can China's leaders do about it? So far, politicians have tried to buy time by stopping the market in its tracks. Shanghai and Beijing now limit purchases by non-residents, and third homes are taboo. That has slowed the pace of transactions, which fell 70 percent from January to February, according to real estate website SouFun.
Speculators, though, are merely waiting for the market to thaw. An annual property tax, which makes it more costly to leave properties empty, has been introduced in Chongqing and Shanghai but is too small to have an effect.
Why not really grab the bull by the horns? The reason may be that if prices fell, construction of new projects would plunge, and GDP with it. Housing construction makes up around a sixth of China's economy. Put another way, if building activity were to drop by a third in one year, GDP growth would halve. That would cost thousands of jobs, and put social stability -- China's bugbear(A fearsome imaginary creature, especially one evoked to frighten children.
) -- at risk.
Meanwhile, authorities are trying to increase the supply of affordable housing. That won't bring down prices at the top end. But it does have the benefit of pacifying the unhoused poor, and may provide a boost to construction even if house prices fall.
What would really make a difference is a sharp increase in interest rates. Even with little mortgage lending, a big hike -- say two percentage points -- would make owners lower their expectations of future value. The problem is that it could also cause a broader economic slump. For now, the housing bubble is holding monetary policy hostage.
-- Who gets hurt if the bubble bursts?
The victims can be divided into three camps. First, the banks. Since most mortgages are worth less than 50 percent of the value of the property, big lenders have plenty of security in the event of widespread default. Agricultural Bank of China, one of the big four lenders, claims a 50 percent price drop would increase its bad loans by just 0.5 percent, though that might be an overly rosy assessment.
Smaller lenders may be more exposed and might have to be swallowed by larger ones. But China's banking industry has healthy capital ratios, and bad debts are currently just 1 percent of the total loan book. Even if soured loans do go through the roof, China could afford to recapitalize its banks by drawing on savings elsewhere in the public sector, or tapping its $2 trillion of foreign reserves, as it has before.
The second set of victims would be property developers. Again, the biggest may be shielded, and some have eschewed debt financing. Others, though, are already raising funds at high rates, notably through bond issues in Hong Kong. Inventories are bloated(much bigger), especially in second-tier cities like Wuhan and Taiyuan. Officially, a quarter of loans made in 2010 were to the property sector, but the real number is no doubt higher.
The final group would be house buyers. The number of people affected by a property slump may be larger than it looks, since families often club together to buy, or borrow informally from other sources. One apartment may tie up three generations' savings.
Faced with that outcome, Beijing may feel that the best thing to do is nothing. But that would be folly(A lack of good sense, ). The lesson from other property crashes is that if regulators and policymakers don't prick bubbles, an external crisis or sudden reversal of sentiment eventually causes a much more savage(Ferocious; fierce: ) sell-off. Governments that attempt to cure investment manias are damned if they do, but much more damned if they don't.
CONTEXT NEWS
-- China's property market is being driven by some "irrational factors", the China Banking Regulatory Commission warned on March 29. The regulator said that further action was needed to cool speculative fervour, and said it would monitor the banking sector closely.
-- Shanghai has pledged that the rate of price increases in newly built homes would be lower than GDP and per-capita income growth in 2011 -- the first Chinese city to do so.
-- China's government launched a series of tightening measures on Jan. 26, including increasing down payments for second-home buyers to 60 percent of the price, from 50 percent.
((john.foley@thomsonreuters.com))
(Editing by Peter Thal Larsen and Martin Langfield)
===
China worries, investors should too
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
(Note language in Context News)
By John Foley
HONG KONG, April 7 (Reuters Breakingviews) - Detaining an internationally renowned artist is a bold move by China's authorities. That they have done it sends a clear message: Beijing is increasingly anxious about social stability. When the mandarins worry, investors should too.
Ai Weiwei, detained on April 3 and now being investigated for "economic crimes", is known in China for subversive artworks, some overtly political, others merely tasteless. He crossed swords with authorities over the death toll from the 2008 Sichuan earthquake. Straying even closer to the "red line", Ai recently told a Hong Kong magazine that the impetus for an uprising in China was very strong.
His arrest may just be paranoia. China's rapidly growing incomes should make it more stable than restive Middle Eastern countries. But fads travel fast in China, and numbers are large. A bizarre rumour that salt could cure radiation sickness from Japan's nuclear crisis cleared supermarket shelves in days. On April 6, the Health Ministry had to refute reports of a new disease, "Negative AIDS", in six provinces.
Investors remain gung-ho. Foreign direct investment in the first two months of 2011 grew 27 percent year-on-year, after a record haul in 2010. The benchmark stock index is up 13 percent from January's lows, while foreign investors have lapped up some 40 billion yuan of renminbi bonds in Hong Kong in the last six months, convinced that China's currency will trend upwards.
At the very least, they should be increasing their calculations of the China risk premium. If unrest really became a problem -- and Beijing is implicitly suggesting it could be -- none of the three likely outcomes would be good for foreign investors. A heavy-handed response by authorities would dent the 10 percent rate of GDP growth. An ineffectual response might see it ridden off the rails altogether.
Most likely is the third way, where stability and GDP growth hold up, but with dissidents arrested, freedoms curbed and reforms postponed. That too brings an economic cost, through less innovation, and greater reluctance by large economies like the United States to help China engage with the world financial system. So even if China isn't in line for a shake-up, investors in it might be.
CONTEXT NEWS
-- China's Foreign Ministry said that detained artist and activist Ai Weiwei was being investigated "in accordance with the law" for "suspected economic crimes". Ai, the artist behind the display of millions of porcelain sunflower seeds in London's Tate Modern gallery, was detained at Beijing airport on April 3 while attempting to travel to Hong Kong.
-- Ai has spoken publicly on censorship, and challenged China's authorities through controversial art installations including "Fuck off" and "Dropping a Han Dynasty Urn". He also campaigned for authorities to investigate student deaths in the 2008 Sichuan earthquake, which led to his detention in 2009.
-- Foreign ministers from the United Kingdom and Germany expressed their displeasure with the detention on April 5. An editorial in Communist Party newspaper Global Times warned the West against "attempts to modify the value system of the Chinese people", in an editorial on April 6 entitled "Law will not concede before maverick".
-- Global Times: Law will not concede before maverick http://en.huanqiu.com/opinion/editorial/2011-04/641187.html
((john.foley@thomsonreuters.com))
(Editing by Hugo Dixon and Sarah Bailey)
===
Real estate: A ‘secret’ tax shelter
Brett Gundlock/National Post
.Comments Twitter LinkedIn Email .Special to the Financial Post Apr 6, 2011 – 11:03 AM ET | Last Updated: Apr 6, 2011 11:35 AM ET
By Jason Heath
TFSAs have been a welcome addition to the tax shelter landscape in Canada, but they leave something to be desired for those with substantial assets and maxed out RRSP and TFSA room.
Film limited partnerships have disappeared, charitable donation tax shelters were flawed from the start and the investment tax credit for flow-through shares may or may not be extended in the next budget.
Real estate is often overlooked in the quest for tax reduction and deferral, let alone income generation and inflation protection. If real estate is all of these things, why doesn’t everyone own a rental property? The answer is simple – money.
It’s not that investors don’t have the money to get into the rental property market, because this can be easily accomplished with leverage and minimal monthly carrying costs. The problem is there is simply no money to be made by financial professionals when it comes to rental real estate. The result is that rental real estate is a secret tax shelter that few people ever consider.
Investment advisors sell stocks, bonds and mutual funds. Insurance agents sell insurance policies. Accountants sell tax preparation services. Real estate agents sell real estate, but they tend to sell real estate from a vendor to a purchaser to be used solely as a principle residence.
So rental real estate ends up being a golden goose, elusive, yet attractive.
According to Harvard professor Niall Ferguson in The Ascent of Money, “The original property game we know today as Monopoly was actually invented back in 1903 to expose the unfairness of a social system where a small minority of landlords [took advantage of] the majority of tenants.
“What the game of Monopoly tells us, contrary to its inventor’s intentions, is that it’s smart to own property.”
First, a lesson in rental real estate taxation. Rental income is taxable and rental expenses, including mortgage or line of credit interest, are tax-deductible. In many cases, if a property is financed, it will run at a loss for tax purposes creating a tax deduction against all other sources of income and therefore, a tax refund.
In the meantime, real estate values grow tax-deferred until an eventual sale. Even if a property runs at positive cash flow for tax purposes, depreciation can be claimed to wipe out some or all of the taxable income inclusion.
Rental real estate has been described by some as the equivalent of a super-charged RRSP. What is a traditional RRSP? It’s a tax-deferred savings vehicle; contributions are tax-deductible; it provides a future income stream; and it’s an investment asset. Rental real estate incorporates all of these features, plus there’s no pre-determined maximum tax deduction limit like with RRSPs; withdrawals aren’t forced at age 71 like with RRIFs; contributions can be financed and the interest can be deducted, unlike RRSP loans; and the taxes paid on selling a rental property are at the 50% capital gains tax rate, unlike RRSP withdrawals which are fully taxable.
The Harvard and Yale endowment funds have more than 50% of their assets invested in non-traditional asset classes, like real estate. The Ontario Teacher’s Pension Plan, the largest single-profession pension plan in Canada, has 18% of their pension assets invested in real estate. Maybe Harvard, Yale and the OTTP know something the mainstream investment community doesn’t know.
Jason Heath is a fee-only Certified Financial Planner (CFP) for E.E.S. Financial Services Ltd. in Markham, Ontario.
.Posted in: Personal Finance Tags: Deferral, jason heath, Real estate, rrsps, tax shelter, taxes .
===
When China worries, investors should too
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
(Note language in Context News)
By John Foley
HONG KONG, April 7 (Reuters Breakingviews) - Detaining an internationally renowned artist is a bold move by China's authorities. That they have done it sends a clear message: Beijing is increasingly anxious about social stability. When the mandarins worry, investors should too.
Ai Weiwei, detained on April 3 and now being investigated for "economic crimes", is known in China for subversive artworks, some overtly political, others merely tasteless. He crossed swords with authorities over the death toll from the 2008 Sichuan earthquake. Straying even closer to the "red line", Ai recently told a Hong Kong magazine that the impetus for an uprising in China was very strong.
His arrest may just be paranoia. China's rapidly growing incomes should make it more stable than restive Middle Eastern countries. But fads travel fast in China, and numbers are large. A bizarre rumour that salt could cure radiation sickness from Japan's nuclear crisis cleared supermarket shelves in days. On April 6, the Health Ministry had to refute reports of a new disease, "Negative AIDS", in six provinces.
Investors remain gung-ho. Foreign direct investment in the first two months of 2011 grew 27 percent year-on-year, after a record haul in 2010. The benchmark stock index is up 13 percent from January's lows, while foreign investors have lapped up some 40 billion yuan of renminbi bonds in Hong Kong in the last six months, convinced that China's currency will trend upwards.
At the very least, they should be increasing their calculations of the China risk premium. If unrest really became a problem -- and Beijing is implicitly suggesting it could be -- none of the three likely outcomes would be good for foreign investors. A heavy-handed response by authorities would dent the 10 percent rate of GDP growth. An ineffectual response might see it ridden off the rails altogether.
Most likely is the third way, where stability and GDP growth hold up, but with dissidents arrested, freedoms curbed and reforms postponed. That too brings an economic cost, through less innovation, and greater reluctance by large economies like the United States to help China engage with the world financial system. So even if China isn't in line for a shake-up, investors in it might be.
CONTEXT NEWS
-- China's Foreign Ministry said that detained artist and activist Ai Weiwei was being investigated "in accordance with the law" for "suspected economic crimes". Ai, the artist behind the display of millions of porcelain sunflower seeds in London's Tate Modern gallery, was detained at Beijing airport on April 3 while attempting to travel to Hong Kong.
-- Ai has spoken publicly on censorship, and challenged China's authorities through controversial art installations including "Fuck off" and "Dropping a Han Dynasty Urn". He also campaigned for authorities to investigate student deaths in the 2008 Sichuan earthquake, which led to his detention in 2009.
-- Foreign ministers from the United Kingdom and Germany expressed their displeasure with the detention on April 5. An editorial in Communist Party newspaper Global Times warned the West against "attempts to modify the value system of the Chinese people", in an editorial on April 6 entitled "Law will not concede before maverick".
-- Global Times: Law will not concede before maverick http://en.huanqiu.com/opinion/editorial/2011-04/641187.html
((john.foley@thomsonreuters.com))
(Editing by Hugo Dixon and Sarah Bailey)
=====
COPY: China risks civil strife with support for foreign dams-activists
20 Apr 2011 08:51
Source: reuters // Reuters
By Ben Blanchard
BEIJING, April 20 (Reuters) - Chinese support for controversial dam-building schemes around the world risks a backlash from affected communities and even violence due to a lack of transparency and the ignoring of residents' wishes, activists said on Wednesday.
Chinese companies and banks are becoming deeply involved in such projects in Africa and Asia, and despite a growing awareness they have to be more transparent and accountable, this frequently does not happen, the activists said.
"We are dismayed to see a reckless role of many companies," Peter Bosshard, policy director of California-based International Rivers, told the Foreign Correspondents Club of China.
"There is still often a complete lack of transparency and consultation, particularly with civil society groups in the host countries," he added.
Beijing says that Chinese companies operating abroad have to comply with relevant national laws and that they must respect people there and the environment.
Rights groups say this frequently does not happen.
In Myanmar, Chinese companies are building or funding some particularly divisive dam schemes, Bosshard said.
"If such huge infrastructure projects go forward, the (Myanmar) army takes over and occupies the villages," he said.
"There's no question that the indigenous populations are very unhappy with these projects which they see as an extension of military rule in Burma, and that this will lead to serious conflict."
Last year, a series of bombs exploded at a hydropower project site being jointly built by a Chinese company in northern Myanmar's Kachin state. [ID:nSGE63G036]
In neighbouring Laos, plans for the first dam across the lower Mekong River are putting it on a collision course with its neighbours and environmentalists who fear livelihoods, fish species and farmland could be destroyed. [ID:nL3E7FJ1QR]
While the $3.5 billion Xayaburi Dam is a mostly Thai-led project, another mooted scheme not too far away, the Paklay Dam, is Chinese-led, said Bosshard.
"That would be a matter of serious concern if they took that up. What has been said about Xayaburi also applies to Paklay and the other downstream dams."
KENYAN CONCERNS
There is not just a threat of unrest in the former Burma.
Ikal Angelei, director of Friends of Lake Turkana in Kenya, which is trying to stop a partly Chinese-funded dam being built upstream in Ethiopia, said she worried the dam could lead to fights for water in the arid region.
"We are pastoralist communities who are constantly struggling for resources. Any more pressure on resources, which are depleting due to climate change, would lead to increased conflict," she said.
"Pastoralist communities right now are more armed than any government. More and more old men and women are saying if it means that we have to pick up our arms and go and fight then we are willing to do it."
Policy lenders like China Exim Bank are now increasingly being joined by commercial lenders such as Industrial and Commercial Bank of China , the world's biggest bank by market value, in financing foreign dams.
Johan Frijns, coordinator of BankTrack, said Chinese banks funding dam schemes had to ensure they did not lend when there were serious environmental or human rights concerns.
"We know that Chinese banks within mainland China make a great effort towards sustainability," he said. "We call upon Chinese banks to ... align with their European and U.S. peers who have all adopted standards for lending."
China's dam projects at home, on the upper reaches of both the Mekong and Brahmaputra, have caused concern too. Some have worried China could use these dams politically, withholding water from downstream countries as a bargaining tool.
Chinese Foreign Ministry spokesman Hong Lei on Tuesday said China had "always adopted a responsible attitude" towards such projects and "fully considered the impact on downstream countries".
"Using these projects as political clout ... I think China has every reason not to do that," said Bosshard.
"But of course, once the dams are built it always has the potential and I certainly understand if downstream countries are worried." (Editing by Robert Birsel)
====
China's clamp down on gas oil exports may fuel Asia rally
By Francis Kan and Florence Tan
SINGAPORE:China's moves to clamp down on diesel exports come at a bad time for Asian buyers of the transport fuel, sapping supplies just as demand rises to meet summer demand from tractors and air conditioners.
Sapping: Erosion along the base of a cliff by the wearing away of softer layers, thus removing the support for the upper mass which breaks off into large blocks and falls from the cliff face. Also known as undermining.
The expected tightness may help diesel return towards the 30-month high hit in April after the Japan earthquake, boosting concerns about inflation that is already around multi-year highs in many countries in the region.
Diesel typically has a far deeper impact on costs than any other oil product as it is the most common transportation fuel and is used for a variety of applications - from running water pumps to irrigate fields to backup diesel generators to cope with power outages.
China is bracing for its worst power shortage since 2004, which has led to it clamping down on diesel shipments, while Japan, one of the region's top exporters, struggles to restore shipments to pre-quake levels.
"Overall we expect gas oil to remain strong this year with China limiting exports to satisfy domestic demand," said Sushant Gupta, an analyst with energy consultancy Wood Mackenzie in Singapore.
"The cracks will depend more on what happens in China than Japan."
The front-month June gas oil crack spread was valued at a premium of $17.42 a barrel to Dubai crude on May 13. While this is down from the 30-month peak of $24 seen a month earlier, it is still higher than the 2010 high of $15.14.
Gas oil premiums have been high since the end of last year after China faced a diesel supply squeeze caused by nationwide power restrictions that led companies to fire-up generators and refiners to slash diesel exports.
They surged following the massive earthquake and tsunami in Japan that forced refiners there to shut, raising concerns that Asia's second-largest exporter of the fuel will turn importer. The resumption of shipments from Japan, much to the surprise of the market, prompted a steep correction.
Gas oil is part of group of refined products known middle distillates, which accounts for around 40 per cent of a refinery's output, and generally its most profitable product.
CHINESE SUPPLIES SLIDE China will suspend diesel exports in order to conserve domestic supplies during the peak consumption season, according to a notice issued on Friday by the country's state planning agency.
The move follows an announcement by Asia's largest refiner Sinopec last month it had already stopped exports of oil products and would continue cutting supplies to Hong Kong and Macau.
Along with that, the country's refiners have ramped up output to ensure ample domestic supplies of key fuels ahead of the expected demand surge, resulting in its implied oil demand hitting its third highest monthly level ever in April, official data showed earlier this month.
"It's more profitable for refiners to export, but they will have to first meet their domestic obligations. We saw this happen a few years back," said Gupta.
Even after initiating so many measures, China may face a shortage because of lower capacity addition. The nation is likely to add 300,000 barrels per day of new capacity this year, compared to almost 900,000 bpd in 2010, Gupta added.
He forecasts Chinese diesel demand to rise 7 per cent year-on-year, reaching 3.2 million barrels per day in 2011.
"High oil prices are to have a bigger impact in China than in most OECD countries, as retail prices for diesel have increased by 30 per cent from June 2008," said James Zhang, a commodity strategist at Standard Bank.
"However, gas oil demand will continue to be strong in China driven by still strong industrial production and agricultural demand."
The tight supply situation comes as the world's second-largest economy is grappling with a rise in prices. Inflation this year will be kept below 5 per cent but slightly higher than the government's annual target of 4 per cent, an official said.
Strong growth and a narrower refinery capacity surplus raised the likelihood that China will return to being a net importer for this year, analysts at Deutsche Bank said.
If China's diesel demand grows at an average 9 per cent this year, it would have to import about 10,000 bpd, marking "a dramatic shift" after exporting an average 60,000 bpd in the past two years, said Soozhana Choi, head of commodities research at Deutsche Bank in Singapore.
JAPAN TO SUPPORT The resumption of exports from Japan may have helped prices nose dive, yet analysts said it will still take a while before sales of the fuel reach pre-quake levels.
Japan shipped almost 115,000 tonnes of diesel in the week ended May 11, versus more than 300,000 tonnes in the week prior to the earthquake, official data showed.
Even if it is able to ramp up output at most plants, Japan may not be in a position to boost exports because it may need the fuel for trucks to carry cement, steel and building blocks for reconstruction, and to cover for lost power from nuclear plants.
"Japan's domestic gasoil balance may be under additional pressure as diesel generators are likely to be used, particularly during the peak summer demand period, to offset for the sustained loss of nuclear and some coal power generation," said Choi.
Japan will use diesel for some power generation, but most of the barrels will be channelled into reconstruction and recovery efforts, as the country is likely to increase trucking activities to supply essential items and cover product shortages in disaster areas.
http://economictimes.indiatimes.com/news/international-business/chinas-clamp-down-on-gas-oil-exports-may-fuel-asia-rally/articleshow/8367275.cms
===
http://www.reuters.com/article/2011/05/18/petrochina-idUSL4E7GI0AQ20110518
UPDATE 2-PetroChina to double oil, gas trade volumes by 2015
Wed May 18, 2011 6:32am EDT
* PetroChina says plans to double oil trading volume, value by 2015
* Hopes for Russian gas pipeline breakthrough on eastern route
* To build Caribbean storage, transportation facilities
* Expects oil to be priced at about $95 per barrel in H2 (Adds details, background)
BEIJING, May 18 (Reuters) - PetroChina Co Ltd , Asia's largest oil and gas producer, plans to produce half its oil and gas from outside China and double its trading volumes by 2015, but isn't looking to make major foreign acquisitions, its chairman said on Wednesday.
China's top state-owned energy firms have been aggressively expanding on the international stage as they look to not only secure energy supplies to feed the country's rapid growth, but to reduce their reliance on a market where profits are crimped by state-set controls on fuel prices.
PetroChina aims to produce 400 million tonnes of oil equivalent by 2015, with half coming from existing overseas projects, Chairman Jiang Jiemin told a news conference on Wednesday.
The company was able to achieve its 200 million tonnes overseas production target without making more acquisitions, Jiang said.
"People in the oil industry all know that when the price is high it's not a good time to buy new projects," he said.
The company also aims to be trading 400 million tonnes of oil equivalent with a value of $200 billion annually, double the size and turnover in 2010, with a network of trading hubs in Singapore, London and New York.
"Trading is the only way and a necessary way to resolve the imbalance among different regions," Jiang told reporters.
As part of its expansion in the Americas, it said it would build storage and transportation facilities in the Caribbean.
PetroChina has been flexing its muscles across the world, expanding its international trading network and buying refineries over the past few years, a departure from the days when its state-owned parent, China National Petroleum Corp, led the overseas expansion.
Outside of China, PetroChina will focus on Central Asia, the Middle East, Africa, South America and the Asia-Pacific region for cooperation in both upstream and downstream businesses in the next five years, Jiang said.
One oil stake known to be up for grabs is Exxon Mobil Corp's stake in an Angolan offshore oil block, but PetroChina was not in the running, Jiang said.
"No research has been made on the Angola project," he said.
He saw no impact on the company from political unrest in North Africa and the Middle East.
PetroChina expects oil prices to remain high, at about $95 per barrel in the second half of 2011. U.S. light crude CLc1 was trading at about $98.50 per barrel on Thursday.
The company said it intended to further expand its domestic gas business, which was expected to benefit from a Russian pipeline deal in coming months.
Jiang said China and Russia had reached a consensus on most technical and commercial terms, but a few key questions remained.
The talks have focused on a western pipeline route that crosses the narrow stretch of the China-Russia border between Mongolia and Kazakhstan, but Jiang said PetroChina is hopeful of a breakthrough on an eastern pipeline, which would serve a more mature part of the Chinese market.
The company will step up efforts to develop unconventional gas and aims to be a leader in coal-bad methane (CBM) in China, both in terms of technology and output, he said.
PetroChina has CBM blocks in the Qinshui basin, Shanxi province, and a tight gas business in Erdos. It plans to speed up work on tight gas development in the Turpan-Hami basin in Xinjiang in western China, Jiang said. (Reporting by Judy Hua, Xu Wan and Tom Miles; Editing by Chris Lewis and Michael Urquhart)
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http://www.thenational.ae/business/energy/exxonmobil-predicts-huge-rise-in-global-gas-demand
ExxonMobil predicts huge rise in global gas demand
Tamsin Carlisle
Last Updated: May 19, 2011
Natural gas, not renewable energy, will supply the major share of incremental global energy requirements between now and 2030, the world's biggest private-sector petroleum company forecasts.
Rob Gardner, the manager of the economics and energy division of the corporate strategic planning department at ExxonMobil said the US oil and chemicals group had identified gas as a "particular area" for future business development.
"We're making big investments in gas," he said at a briefing in Dubai on the company's latest long-term energy outlook, extending to 2030.
The company was expecting to use technology developed to exploit prolific shale-gas deposits in the US to develop similar resources overseas, Mr Gardner said.
According to ExxonMobil's forecast, rapid growth in emerging economies would drive up global energy demand 70 per cent by 2030 from its level in 2005. Fossil fuels - oil, gas and coal - would continue to meet most of the world's energy needs during this period, with gas showing the highest growth in global consumption.
"It is very clear from our energy outlook that the world will require more energy as hundreds of millions of people experience improved living standards and greater access to electricity," Mr Gardner said.
"We will need more of all forms of energy, with increasing supplies of oil and natural gas remaining critical to meet this expanded demand."
Although the supply of wind and solar power, as well as biofuels, was set to increase sharply in the next two decades, their contribution to global energy supplies by 2030 would still be unlikely to constitute more than 20 per cent, Mr Gardner said.
The expanding use of gas and, to a lesser extent, nuclear power, combined with energy efficiency improvements, would be the major developments helping to mitigate carbon emissions and environmental impacts from higher energy consumption. Nevertheless, the most significant policy issue affecting the global energy sector would be climate policy and the pace at which it developed, Mr Gardner predicted.
Electricity demand was poised to rise twice as fast over the forecast period as total energy consumption, ExxonMobil said.
In the Middle East, projected regional power demand would climb by 150 per cent between 2005 and 2030, almost twice the 80 per cent increase expected globally, the company projected.
As in the rest of the world, gas would be the major fuel used for generating additional electricity in the Middle East, even if that meant importing supplies, Mr Gardner predicted.
The region had sufficient gas reserves to satisfy its power requirements in the long term, he said.
Iran, Iraq, Saudi Arabia and the UAE all have large gas reserves which, for various reasons, they have failed to exploit efficiently. Qatar, with the world's third-largest gas reserves after Russia and Iran, has recently emerged as the global leader in liquefied natural gas (LNG) exports, but has been reluctant to export gas to Gulf neighbours that have traditionally resisted paying international prices for the fuel.
In the transportation sector, which was likely to remain largely dependent on liquid fuels, most of the projected increase in oil demand until 2030 would come from heavy-duty vehicles, while oil consumed by cars and light utility vehicles would flatten out, ExxonMobil predicted.
China would show the fastest growth in vehicle use, with the number of personal vehicles on the road quadrupling by 2030. Gas demand would also grow the fastest in China, but with the increase driven mostly by industrial requirements. By contrast, increased gas consumption in North America and Europe is expected to result mostly from power sector demand.
By 2030, China's per capita energy consumption would be about equal to that in Europe, but still only half of the US level, ExxonMobil predicted.
====
China's Inner Mongolia urges better safety after protests
30 May 2011 14:54
Source: reuters // Reuters
* Major square in Hohhot sealed off
* Politburo vows to increase social management
* Search term for 'Inner Mongolia' blocked on certain websites (Adds small sympathy protest in Mongolia)
By Ben Blanchard
HOHHOT, China, May 30 (Reuters) - Police tightened security in the capital of China's Inner Mongolia region on Monday after nearly a week of protests and authorities said they would improve mining safety rules following an accident which triggered the unrest.
In a rare display of public anger, ethnic Mongolians took to the streets early last week in protest over the hit-and-run death of a herder, killed when struck by a coal truck in China's biggest coal producing region.
The government of the huge northern region, increasingly dominated by ethnic Han Chinese, told agencies to address safety and environmental concerns related to the mining industry, Xinhua news agency reported.
"All relevant departments, enterprises and local governments must promptly report and resolve injuries and accidents that occur in mining areas and transportation links, which have caused serious problems and reactions from the people," Xinhua said, citing a statement from Friday but without making a direct reference to the protests.
The government announced earlier the arrest of two Han Chinese for homicide over the coal truck incident, but that failed to quell the anger. [ID:nL3E7GT01U]
Inner Mongolia is China's biggest coal producing region and the protests come as severe power shortages loom ahead of the summer peak energy season.
But infrastructure is poor and the race by truck drivers, drawn by high margins, to transport coal to the country's east has been accompanied by a spate of accidents.
In an unusual sign of defiance, hundreds of ethnic Mongolians, who make up less than 20 percent of the roughly 24 million population of Inner Mongolia, have protested in other parts of the province in recent days.
Authorities last week sealed off parts of the region and dispatched paramilitary police and others in riot gear to patrol Xinhua Square in the capital, Hohhot, after calls for protests spread online.
On Monday, main gates at Inner Mongolia University in Hohhot were closed and small groups of paramilitary police carrying batons stood guard in the streets, though students entered through smaller side gates.
"The university is under lockdown today. It's to prevent any disturbances," said one student.
Xinhua Square remained cordoned off with paramilitary police posted every few metres and large groups of police in the square and surrounding streets. Residents in the city appeared to carry on as normal.
Police pulled two Reuters reporters out of a car by the square and told them not to conduct interviews.
"Today there is a special situation," said one. "You have to leave."
The heavy security appeared to be effective.[ID:nL3E7GS022]
"We haven't received any information about any protests there," said Enghebatu Togochog of the Southern Mongolian Human Rights Information Centre, though he added difficult communications made it hard to get up-to-date information.
"Security is exceptionally tight. The authorities appear to be sending text messages to people warning them not to leave their homes."
GOVERNMENT JITTERY
Uprisings across the Arab world have made Chinese authorities jittery about any sign of instability.
In a meeting on Monday that was chaired by Chinese President Hu Jintao, the Politburo, the nation's top ruling body, said "elements that can cause disharmony" should be reduced by "the largest degree".
"As the situation changes, our country's concept of social management, institutional mechanisms, laws and policies ... are still unsuitable in many places," Xinhua reported the Politburo as saying. "Resolving the problems in social management is urgent and requires long-term effort."
Searches for the words "Inner Mongolia" on China's most popular microblogging site, Weibo, appeared to have been blocked on Monday, returning the message: "According to relevant laws, the search query cannot be displayed".
Resentment of ethnic majority Han Chinese by ethnic Mongolians goes back decades.
Inner Mongolia was the first autonomous region set up by the Communist Party and was meant to serve as a model for Tibet and Xinjiang in offering a high degree of self-government. [ID:nL3E7GS00Z]
But a flood of migration by Han Chinese in the years following the 1949 revolution has rapidly diluted the Mongolian population.
Ethnic Mongolian herders have complained that their traditional grazing lands have been ruined by mining and desertification, and that the government has tried to force them to settle in permanent houses.
In Ulan Bator, capital of the independent country of Mongolia, about 50 protesters gathered in support of their ethnic cousins in China. Some held banners calling for an end to "oppression" and justice for the herder killed by the truck.
Nicholas Bequelin of Human Rights Watch said from Hong Kong rising tension had the Party worried that instability could spread to other ethnic groups.
"The situation points to the wholesale failure of the Party's policies toward ethnic minorities -- that they are alienating and disenfranchising each to the point that they are willing to protest even when they know the consequences can be severe," Bequelin said.
(Additional reporting by Sui-Lee Wee and Michael Martina in Beijing and Jargal Byambasuren in Ulan Bator, writing by Michael Martina, editing by Jonathan Thatcher)
==
China's CO2 emissions rose 10 pct in 2010 -BP data
08 Jun 2011 12:56
Source: reuters // Reuters
CNsmokewoman510
A woman walks across a bridge in front of a chimney billowing smoke from a coal-burning power station in central Beijing on February 25, 2011. REUTERS/David Gray
* Global CO2 emissions grew at fastest rate since 1969
* Coal use, nuclear output, renewables, biofuels grew
(Recasts first paragraph, adds detail)
By Nina Chestney
LONDON, June 8 (Reuters) - China's carbon dioxide emissions rose 10.4 percent in 2010 compared with the previous year, as global emissions rose at their fastest rate for more than four decades, data released by BP on Wednesday showed.
"All forms of energy grew strongly (last year), with growth in fossil fuels suggesting that global CO2 emissions from energy use grew at the fastest rate since 1969," energy major BP's annual Statistical Review of World Energy said.
The rapid growth is happening as U.N. talks look unlikely to agree on a legally binding deal to curb emissions and fight climate change before the existing Kyoto Protocol expires in 2012.
Global carbon dioxide emissions are widely seen as a major factor responsible for an increase in world temperatures.
They grew 5.8 percent last year to 33.16 billion tonnes, as countries rebounded from economic recession, BP said. China's emissions accounted for 8.33 billion tonnes.
The International Energy Agency estimated last month that global CO2 emissions rose by 5.9 percent to 30.6 billion tonnes in 2010, mainly driven by booming coal-reliant emerging economies.
BP data showed that China accounted for a quarter of global emissions. The United States was the second largest emitter, showing a 4.1 percent rise in emissions last year to 6.14 billion tonnes.
Chinese emissions have grown strongly in the past decade as the country built many new coal plants to power its economic growth. Its energy consumption swelled by over 11 percent last year, compared to global growth of 5.6 percent. [ID:nLDE75715U]
COAL, RENEWABLES
Global coal consumption increased by 7.6 percent last year in its fastest growth since 2003, as industries began to recover from the global economic downturn.
Coal now accounts for 29.6 percent of global energy consumption, up from 25.6 percent 10 years ago, BP said.
Chinese coal use grew by 10.1 percent last year. It consumed 48.2 percent of the world's coal, slightly up from around 47 percent in 2009.
Meanwhile, global coal production rose by 6.3 percent, with China up 9 percent, accounting for two thirds of global growth.
Elsewhere, coal production grew robustly in the United States and Asia but fell in the European Union, explaining the relative strength of coal prices in Europe, BP said.
In terms of cleaner energy, global hydroelectric and nuclear output each experienced their strongest rises since 2004.
Hydroelectric output grew by 5.3 percent, with China accounting for more than 60 percent of global growth due to new capacity coming online and wet weather.
Worldwide nuclear output grew by 2 percent last year, with OECD countries accounting for three quarters of that increase.
French nuclear output rose 4.4 percent, representing the largest increase in the world.
Other renewable sources also grew. Global biofuels production was up 13.8 percent at 240,000 barrels a day.
The United States and Brazil drove most of that growth, rising 17 percent and 11.5 percent respectively.
Renewable power generation grew by 15.5 percent, driven by robust growth in wind energy, which was up 22.7 percent.
"The increase in wind energy in turn was driven by China and the U.S., which together accounted for nearly 70 percent of global growth," the report said.
"These forms of renewable energy accounted for 1.8 percent of global energy consumption, up from 0.6 percent in 2000." (Editing by Anthony Barker)
---
Risk-tolerant China investing heavily in Iraq as U.S. companies hold back – report
7/3/2010 11:26 AM
BAGHDAD / Aswat al-Iraq: The Washington Post reported that China didn't take part in the U.S.-led invasion of Iraq or the bloody military battles that followed. It hasn't invested in reconstruction projects or efforts by the West to fortify the struggling democracy in the heart of the Middle East. But as the U.S. military draws down and Iraq opens up to foreign investment, China and a handful of other countries that weren't part of the "coalition of the willing" are poised to cash in. These countries are expanding their foothold beyond Iraq's oil reserves -- the world's third largest -- to areas such as construction, government services and even tourism, while American companies show little interest in investing here. "The U.S. really doesn't know what to do in Iraq," said Fawzi Hariri, Iraq's industry minister. "I have been personally, as the minister of industry, trying to woo U.S. companies into Iraq. There is nothing yet. Nothing tangible." In the past two years, Chinese companies have walked away with stakes in three of the 11 contracts the Iraqi Oil Ministry has signed in its bid to increase crude output by about 450 percent over the next seven years. They also renegotiated a $3 billion deal that dates to when Saddam Hussein was in power. Only two American firms won stakes in oil deals, an underwhelming showing that industry analysts and U.S. officials say reflects deep concerns about doing business in a country besieged by insecurity, corruption and political turmoil. "They made a mistake and overestimated the risk," said Ruba Husari, an oil analyst in Baghdad who runs the Iraq Oil Forum, a trade Web site. "I think they did not realize on the spot that it was the biggest window of opportunity, and they missed out." In an effort to meet the rising energy demands of its fast-growing economy, China has invested aggressively in oil-rich nations. Chinese companies have made notable inroads in the Middle East and Africa, in part because of a higher tolerance for risk and a savvy diplomatic corps that has laid the groundwork for advantageous deals. Iraqi officials say they are heartened by their expanding ties with China but are still pursuing investment from other nations. "They have gained a number of plum contracts for energy," Iraqi Foreign Minister Hoshyar Zebari said of the Chinese. "Wherever there is an oil well in the world, you'll see a Chinese flag next to it." Working 'as partners' At al-Ahdab oil field in Wasit province, roughly 100 miles south of Baghdad, about 200 Chinese laborers have begun work under a contract renegotiated in 2008 by a Chinese state-owned consortium, Al Waha Oil Co. Workers in red jumpsuits operate imported oil rigs alongside their Iraqi counterparts. Their workplaces are heavily protected by barricades and guards. "People know they didn't participate in the invasion or the sanctions, and they have an old participation in Iraq that predates Saddam Hussein," said Ahmed Abdul-Redha al-Zanki, the senior engineer for Iraq's North Oil Co., which is working with the Chinese to develop the field. "They work with us as partners," in stark contrast to the condescending practices of Western companies, he said. The French and Chinese have also made forays into the cement industry. The Chinese have started building a billion-dollar power plant in the south. The Chinese and the United Arab Emirates are in advanced talks to build residential complexes. The French automaker Renault and Germany's Mercedes-Benz are in advanced talks to make trucks for industrial transport, according to Iraqi officials. The South Koreans signed a memorandum of understanding to build a multimillion-dollar steel mill in the south and a power plant, and the Turks have scored a series of construction and government services contracts. Except for a $3 billion General Electric contract to provide power-generating equipment and a Boeing deal, Iraqi and U.S. officials are hard pressed to point to any significant U.S. investment in Iraq. Outside of the two oil service contracts that American companies were awarded and U.S. government contracts, the United States "consistently ranks in the bottom" among investors, according to a 2009 study by Dunia Frontier Consultants, which tracks private investment in Iraq. The United Arab Emirates is Iraq's top private investor, with plans to invest $70 billion across the country, followed by South Korea, a 2010 study by the same firm said. Turkey and Iran also are major trade partners with Iraq. "We're coming off a financial crisis," a senior U.S. diplomat said, speaking on the condition of anonymity because of embassy rules. "You have to look at your bottom line. It's not the best time to be suddenly in the market as a new place to invest." Worth the risk? U.S. companies will probably continue to shy away, particularly after the State Department's latest Iraq investment climate assessment, issued in March. "Potential investors should prepare themselves for significant security costs; cumbersome and confusing procedures for business visas or new business registrations; long payment delays on some Iraqi government contracts; and sometimes unreliable, non-transparent dispute resolution mechanisms," the assessment said. "Allegations of corruption are still endemic, and the legacy of central planning and inefficient state-owned enterprises continue to inhibit economic development." But several countries have come to see Iraq as an incredibly promising market despite the risks. The French government, which also did not participate in the war, recently set up a center in Baghdad to support French companies seeking to test the waters. "This is a rich country," French Ambassador Boris Boillon said. "In this world of recession, in this period of global crisis, we need to get growth and expansion wherever you can find it." Last fall, the French government helped arrange for 100 French businessmen to attend a five-day trade fair in Baghdad. Most other European and American delegations decided at the last minute that attending would be too risky. The French chartered five buses and ferried the businessmen daily to the fairgrounds. "I think Americans are fed up," Boillon said. "There is Iraq fatigue in the U.S. When you tell an American: 'You can go to Iraq and make business, because there are opportunities,' the guy thinks twice and says, 'Oh, Iraq -- that bloody country.' " MH (I)/SR
Iraq, China sign deal to write off 80% of debts
4/1/2010 6:22 PM
BAGHDAD / Aswat al-Iraq: The Iraqi government signed in Beijing on Thursday an agreement with the Chinese government to write off 80% of Iraq’s debts due for China, according to a foreign ministry press release. "Iraqi Finance Undersecretary Fadel Nabi Othman signed for Iraq while the secretary of the committee of companies indebting Iraq signed for China," read the statement as received by Aswat al-Iraq news agency. "The agreement was signed in light of memorandums of understanding signed by Iraqi President Jalal Talabani during his visit to China in June 2007," it added. Iraq has been seeking to have its debts $120 billion debts accumulated during the former regime’s time, some of them in compensations over was, be dropped. The war-torn nation has managed to have most of that sum - $55 billion due for the Paris Club members – dropped. Iraq still owes debts to some Arab countries, including Gulf states, at $21 billion: $15 billion to Saudi Arabia and $6 billion to Kuwait. AmR (P)
==
next accounting worry could be the VIE
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
By John Foley
HONG KONG, June 22 (Reuters Breakingviews) - Investors are worried about Chinese accounting practices after a string of alleged frauds at U.S.-listed companies. But it's not just the numbers they should be concerned about. Risks may also lie in a complex structure used by companies from search engine Baidu to recently-listed social network Renren to get around rules on foreign ownership. Some have already gone wrong; more could follow.
The device in question is the "variable interest entity". A VIE facilitates foreign investment in taboo sectors like internet and advertising. It puts the company's sensitive operating licence in a separate box, owned by Chinese citizens -- often the founder or a relative. The foreign-invested holding company gets a contractual right to use and control the licence, and claim earnings from it, but doesn't have outright ownership.
The structures are pretty common: two-thirds of NASDAQ Chinese listings used them in 2010, according to independent analyst Fredrik Oqvist. There is also a criss-cross of provisions in place to keep the licence holder honest. Strongly worded contracts are the first. An "equity pledge" is the second. This usually says that if the licence holder breaks the contract, the operating company can seize the licence back.
Yet it's not clear what would happen if VIEs were put under real strain. Contracts in China, where there is no independent judiciary, are hard to enforce. Shareholders might find themselves pursuing a claim in a local court against a tycoon with powerful connections. Since there are no legal precedents on VIEs, investors may even avoid pursuing claims, in case a ruling against them starts a pernicious domino effect.
The other problem is that the government may yet step in and deem VIEs illegal, since the structures are plainly designed to circumvent the rules. Authorities have turned a blind eye so far, but that's no guarantee they will do so in future. A spat between Yahoo and Chinese ecommerce partner Alibaba over their online payment system may have started after regulators decided, according to local media, that control through a VIE was too close for comfort.
In a couple of cases, VIEs have already started to go wrong. Singaporean online gaming company Gigamedia tried to sack the owner of its Chinese licence, only for him to abscond with it. Gigamedia has decided to start again from scratch rather than pursue the claim further. In March, steelmaker Buddha Steel pulled a U.S. stock listing because local government deemed its VIE to be "against public policy".
Investors can't say they haven't been told. Renren's prospectus warned that contractual agreements may not be as effective as ownership, and may not even be legal. Some investors assume that because some of the companies involved are so big -- Baidu's market capitalisation is $41 billion -- there is almost no chance of these structures being challenged. Maybe. But if recent accounting scandals have created a "sceptic's discount" over China stocks, VIEs seem a good place to apply it.
CONTEXT NEWS
-- Stocks in Chinese companies listed abroad have plunged after allegations of accounting frauds raised fears among investors. Sino-Forest, a Toronto-listed forestry company, lost 89 percent of its market capitalisation between June 2 and June 21 after a short-seller called the company's figures into question.
((john.foley@thomsonreuters.com))
(Editing by Robert Cole and David Evans)
==
China eyes Canada oil, US's energy nest egg
AP
Related Quotes ^GSPC 1,268.45 -15.05
^IXIC 2,652.89 -33.86
By ROB GILLIES, Associated Press – Sun Jun 26, 2:18 am ET
CALGARY, Alberta – In the northern reaches of Alberta lies a vast reserve of oil that the U.S. views as a pillar of its future energy needs.
China, with a growing appetite for oil that may one day surpass that of the U.S., is ready to spend the dollars for a big piece of it.
The oil sands of this Canadian province are so big that they will be able to serve both of the world's largest economies as production expands in the coming years. But that will mean building at least two pipelines, one south to the Texas Gulf Coast and another west toward the Pacific, and that in turn means fresh environmental battles on top of those already raging over the costly and energy-intensive method of extracting oil from sand.
Most believe that both will eventually be built. But if the U.S. doesn't approve its pipeline promptly, Canada might increasingly look to China, thinking America doesn't want a big stake share in what environmentalists call "dirty oil," which they say increases greenhouse gas emissions.
Alberta has the world's third largest oil reserves, more than 170 billion barrels. Daily production of 1.5 million barrels from the oil sands is expected to nearly triple to 3.7 million in 2025. Overall, Alberta has more oil than Russia or Iran. Only Saudi Arabia and Venezuela have more.
Alberta is one of the few places where oil companies can invest, as the majority of the world's oil reserves are controlled by national governments. Only 22 percent of the total world reserves are accessible to private sector investment, 52 percent of which is in Alberta's oil sands, according to the Canadian Association of Petroleum Producers.
Canada's only major oil export market is the U.S. But with the product of oil sands and pipeline delivery to the U.S. under perennial clouds of environmental objections, and with Asian demand growing, this country wants to diversify its market, and China is eager to oblige.
Sinopec, a Chinese state-controlled oil company, has a stake in a $5.5 billion plan drawn up by the Alberta-based Enbridge company to build the Northern Gateway Pipeline from Alberta to the Pacific coast province of British Columbia. Alberta Finance Minister Lloyd Snelgrove met this month with Sinopec and CNOOC, China's other big oil company, and China's largest banks.
"They are sitting there saying if you need money, we've got money; if you need expertise, we've got that; whatever you need we've got," Snelgrove said.
Alberta Premier Ed Stelmach said American government officials have expressed concern about a pipeline to the Pacific. They have raised it in terms of "Well, are you still going to be able to supply us?" Stelmach said the U.S. will remain Canada's primary oil customer. he said.
That fear may already have fallen aside.
"There are people who still feel that one barrel of oil going from Canada to China could be one more barrel going to the United States. But those are people in the minority. It is a concern but it is not a big concern," said Wenran Jiang, a professor at the University of Alberta and a senior fellow of the Asia Pacific Foundation.
But aboriginal and environmental opposition to the Pacific pipeline is fierce. The opponents fear it will leak. The local member of Parliament, Nathan Cullen, says accidents are inevitable in the rough waters around Kitimat, British Columbia, where the pipeline will end. And no one has forgotten the Exxon Valdez oil spill of 1989, some 1,300 kilometers (800 miles) north of Kitimat.
However, Canadian Prime Minister Stephen Harper, freshly and convincingly re-elected, is an oil man who has suggested he supports building the pipeline. Also, Calgary-based Kinder Morgan has plans to expand an existing pipeline route to Vancouver so that oil can be shipped to Asia.
Critics dislike the whole concept of oil sands, because extracting the oil requires huge amounts of energy and water, increases greenhouse gas emissions and threatens rivers and forests. Keystone XL, the pipeline that would bring Alberta oil to Texas Gulf Coast refineries to serve the U.S. market, compounds the issue.
Pipeline leaks can affect drinking water and sensitive ecosystems, the U.S. Environmental Protection Agency warns. In a letter to the State Department this month, it cited major pipeline spills last year in Michigan and Illinois, as well as two leaks last month in the Keystone pipeline, a 1,300-mile line owned by the same company that wants to build Keystone XL. The U.S. pipeline safety agency briefly blocked Calgary-based TransCanada from restarting the Keystone pipeline this month because of safety concerns.
But Keystone XL could substantially reduce U.S. dependency on oil from the Middle East and other regions, according to a report commissioned by the Obama administration. It suggests that the pipeline, coupled with a reduction in overall U.S. oil demand, "could essentially eliminate Middle East crude imports longer term."
The U.S. imports about half its oil. The biggest foreign supplier is Canada, at 23.3 percent, followed by Venezuela at 10.7 percent. The biggest Mideast supplier is Saudi Arabia, 10.4 percent.
The report was made public ahead of President Barack Obama's meeting in February with Harper, who is urging Obama to endorse it.
Environmental groups want him to reject it, seeing it as a test of Obama's will to fight climate change.
The State Department, which must approve any pipeline entering the U.S. across an international border, has promised a decision by year's end. But Republicans on the House Energy and Commerce Committee want it by Nov. 1.
Committee chairman Fred Upton, R-Mich., said the pipeline will create at least 100,000 jobs and that the U.S. needs Canadian oil.
Michael A. Levi, the senior fellow for energy and the environment at the U.S. Council on Foreign Relations, said environmentalists are exaggerating the impact on the oil sands.
"A lot of people have been convinced that this is the cutting edge of the climate change fight," he said. "In the end this is the equivalent to half a percent of U.S. emissions."
He said the choice of pipeline was a critical decision in U.S-Canada relations and that turning down the Texas route would go over very badly in Canada.
But David Goldwyn, a former State Department energy official who left this year to work as a consultant, said he's confident the pipeline to Texas will be approved, especially considering the potential for Middle East turmoil to disrupt supplies in the future.
"I think it would be a huge waste of a great opportunity to provide supply security. We don't often get the choice of where we can get our oil from. In this case we get to choose Canada. That's an opportunity we shouldn't miss," he said in an interview.
He saw no threat from Chinese inroads into Canada because there is more than enough oil for all concerned.
By investing to boost Canadian production the Chinese "are growing the pie to meet their own demand. That's a whole lot better than mopping up supply from the existing pie and creating competition for resources," Goldwyn said.
But China would almost certainly react badly to a rebuff. Alberta Energy Minister Ron Liepert fears Chinese investment will dry up should Canada not approve a pipeline to the West Coast.
Zhang Junsai, China's ambassador to Canada, said his country is willing to invest heavily in Canada. He told The Associated Press that the fact that China's $300 billion sovereign wealth fund, China Investment Corp., chose Toronto as the venue for its first overseas office is a "very good sign." The fund invested $800 million in Calgary-based Penn West Energy last year and $1.5 billion in Canadian mining company Teck Resources in 2009.
Apart having a stake in the $5.5 billion in the Northern Gateway pipeline plan, Sinopec paid $4.6 billion for a nine percent stake in Syncrude, Canada's largest oil sands project. And in 2009 PetroChina, Asia's largest oil and gas company, bought a $1.7 billion stake in Athabasca Oil Sands Corp.
William Cohen, who was secretary of defense in the Clinton administration, said any Chinese-Canadian oil partnership must be done "with some diplomacy and care," in a way that isn't "a threat to the United States."
Canada can do whatever it wants, but "Canada knows it has a very close and vital relationship with the United States. I'm sure there will be discussions," he said in Toronto after a public debate about whether China will dominate the 21st century.
Eddie Goldenberg, chief of staff to former Prime Minister Jean Chretien, said in an interview that Canada should care less if some American officials are leery(Suspicious or distrustful; wary: ) about Canada selling oil to China.
"We're not the 51st state. It's not the business of the United States to decide where Canada sells its resources," he said.
==
China signs $1.4bn of trade deals with UK and pledged to support the Eurozone: Is trade put before human rights?
By Anissa Haddadi | June 27, 2011 9:01 AM EDT
Britain and China unveiled a series of deals worth 1.4 billion pounds ($2.3 billion) during a visit by Chinese Premier Wen Jiabao on Monday, including a new agreement between energy group BG Group and Bank of China to help BG expand there.
"Our target is a hundred billion dollars of bilateral trade by 2015, something we discussed and agreed again this morning. To achieve that both countries must continue to make the case for mutual commitment to market access," UK Prime Minister David Cameron said.
"I'm delighted that today's summit has seen new deals signed worth another 1.4 billion pounds. This includes BG's memorandum of understanding with the Bank of China."
Cameron was speaking at a news conference with Wen following a summit between the two leaders. Wen is in the middle of a European tour taking in Hungary, Britain and Germany.
"The breadth of deals agreed today shows that we can all gain from freer markets and that the EU and China should continue to open up to trade in both directions," Cameron said.
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The summit builds on Mr Cameron's visit in November when he led the largest ever British ministerial delegation to China, securing a range of commercial and Government arrangements, including a Rolls Royce deal worth $1.2 billion.
This was followed by the visit to the UK of vice Premier Li Keqiang when deals to the value of $2.6 billion were concluded.
Bilateral trade between the two countries is expected to reach $100 billion by 2015 and British goods exports to China are up by more than a fifth since the PM was in Beijing.
The summit is expected to concentrate on three key areas that will enable both countries to increase bilateral trade and cooperation. Discussions will thus review new opportunities to help boost UK growth through a package of deals, likely to be worth more than £1 billion, focus on developing closer ties in areas like education, science and culture, architecture, civil engineering and research and development, climate change and international security.
However, as the two leaders are also due to sign an agreement enabling UK firms to exploit opportunities beyond Beijing and Shanghai in China's fast-growing regional cities, the issue of Human rights came back on the agenda.
Downing Street said it regards freedom of speech and the rule of law as essential to the long-term prosperity and stability of the world's fastest-growing major economy.
Asked whether he had raised human rights during the talks, Mr Cameron said: 'There is no trade-off in our relationship. It is not about either discussing trade or human rights.
'Britain and China have such a strong and developed relationship. We have a dialogue that covers all these issues, and nothing is off limits in the discussions that we have.'
'We are different countries, we have different histories, different stages of development.
'We should show each other respect. But we're very clear that political and economic development should go hand in hand, that one supports the other.'
Mr Wen said: 'On human rights, China and the UK should respect each other, respect the facts, treat each other as equals, engage in more co-operation than finger-pointing and resolve our differences through dialogue.'
He went on: 'China is not only pursuing economic development but also political structural reform and improvement in democracy and the rule of law.'
Mr Wen, who arrived in the UK with his delegation on Saturday night visited Shakespeare's birthplace in Stratford-upon-Avon, Warwickshire, and Longbridge car plant in Birmingham.
However, in Birmingham, the leader faced human rights protests as several dozen activists with banners and loudspeakers had gathered outside the factory.
Yellow-shirted supporters of the banned Falun Gong spiritual movement were among those waving placards denouncing China's human rights record.
'Cameron and Wen. Human rights before trade,' their banners read.
Protesters also gathered outside London's Mandarin Oriental Hyde Park Hotel in anticipation of the Chinese premier's arrival and chanted 'shame on China' and held banners reading 'Tibet will be free'.
However they were soon outnumbered by supporters of pro-China demonstrators, who came to support Mr Wen's visit, with many waving Chinese and UK flags.
A Downing Street spokeswoman said Mr Wen's visit would mark 'the next step in our strengthened relationship' with China.
'China's rapid economic rise is good news for the UK. It means more money flowing into our economies and has the potential to create more jobs and investment opportunities for British business at home and in China.
'The summit will be an opportunity to tap that potential and to continue to work closely with China to find global solutions to a range of issues from climate change to global security.'
As Greece stands on the verge of an economic collapse, China has also vowed to increase its support of the Eurozone after pledging to spend billions of pounds propping up the single currency and Wen told reporters Europe could count on his 'unremitting' support.
===
Reuters
China's profligate officials show economy run amok
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
By John Foley
HONG KONG, June 28 (Reuters Breakingviews) - One of China's biggest economic unknowns has finally been quantified. China's local governments owe 10.7 trillion yuan ($1.6 trillion), says a National Audit Office report released on June 27. The figure is likely to be on the low side. Yet it still speaks volumes about China's headlong pursuit of growth.
The new number may be a good first stab. But it isn't conclusive, and jars with previous estimates. Take the special financing vehicles set up to fund infrastructure projects. The audit bureau probed 6,575 of them, and found 4.9 trillion yuan of debt. The People's Bank of China has counted some 10,000, with up to 14.4 trillion yuan of debt. Taxonomic differences aside, the audit bureau's report looks partial: it doesn't include loans to state-owned enterprises, for example, even though many of those borrowings may have been taken out at local authorities' behest.
On the audit board's numbers, local government debt alone won't cause the banks to collapse. China's biggest nine banks are expected to make around 2 trillion yuan in earnings over the coming three years. That would be enough to absorb -- with discomfort -- a scenario where a quarter of the government loans coming due before 2015 go bad with no recovery.
But there's a strong impression here of an economy run amok. Rule-bending appears systemic: half the debt total came from outside of the special vehicles, even though these were meant to be governments' only way to borrow directly. Over half of loans in some areas, like motorway construction, were simply rolled over when repayment came due. Meanwhile, a recent ban on borrowing didn't stop governments from securing a further 1.9 trillion yuan of lending in return for guarantees.
Further borrowing is now effectively on hold, and the central government looks likely to backstop what's already out there. But that's hardly an end to it. It is unclear how half-finished projects will be completed -- or how much China's rapid growth has been sustained by infrastructure projects with unstable, or unapproved, financing. Putting a number on local government profligacy was presumably intended to draw a line under the matter. But as with most of China's big numbers, it raises more questions than it answers.
CONTEXT NEWS
-- China's National Audit Office said that local governments owed 10.7 trillion yuan ($1.6 trillion) at the end of 2010, equivalent to 27 percent of the country's GDP in that year. The amount of borrowings taken on by local authorities to fund infrastructure projects has been hotly debated, with conflicting estimates from various government agencies and ministries.
-- The audit office surveyed 25,590 government agencies and departments and 6,576 special financing vehicles set up by local governments to circumvent restrictions on direct borrowing. It found that local governments were directly on the hook for 63 percent of the debt, and had offered guarantees for a further 22 percent, with the remainder as contingent liabilities.
-- Around half of the debt reported had been accrued since 2009, when China enacted a 4 trillion yuan stimulus package to sustain growth following the global financial crisis. Some 24 percent of the debt was due for repayment in 2011, and a further 45 percent between 2012 and 2015.
((john.foley@thomsonreuters.com))
(Editing by Chris Hughes and David Evans)
===
China calls for "prudence" on Libya war crimes warrants
Tue Jun 28, 2011 11:02am GMT
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[-] Text [+]
BEIJING (Reuters) - China on Tuesday called on the International Criminal Court (ICC) to be prudent and objective in carrying out its duties, a day after the court ordered the arrest of Libyan leader Muammar Gaddafi, his son and the country's intelligence chief.
"China hopes the ICC can prudently, justly and objectively carry out its duties, and ensure that its relevant work genuinely aids regional peace and stability," Foreign Ministry spokesman Hong Lei said when asked about the arrest warrants.
Hong's statement stopped short of condemning or endorsing the court's actions, though China has denounced its war crimes indictment of Sudanese President Omar Hassan al-Bashir, currently on a state visit in Beijing.
The two leaders are the only sitting heads of state facing warrants from the court.
The Hague-based court on Monday issued warrants for Gaddafi, his son Saif al-Islam and Libyan intelligence chief Abdullah al-Senussi on charges of crimes against humanity for their alleged role in the killing of civilian protesters who rose up in February against Gaddafi's 41-year rule.
China is not a member state of the court.
"China consistently opposes violent actions toward civilians, and advocates that all parties resolve Libya's problems through peaceful political negotiations," Hong said, speaking at a regular news briefing in Beijing.
China has hosted Libyan government and rebel representatives in recent weeks in what it has called an effort to encourage a ceasefire and a negotiated end to the war.
About half of China's crude oil imports last year came from the Middle East and North Africa, where Chinese companies have a big presence.
Beijing generally avoids entangling itself in nations' domestic affairs, but Foreign Minister Yang Jiechi told Libyan rebel leaders last week that they had become an "important domestic political force" in the country.
The ICC ruling is unlikely to lead to Gaddafi's arrest as long he remains in power and inside Libya, because the court does not have the power to enforce its warrants. Rebel forces on Monday advanced 30 km (18 miles) north toward Tripoli, Gaddafi's main power base.
China did not use its veto power as a permanent member of the U.N. Security Council in March to block the authorisation of the NATO-led air strikes on Gaddafi's forces, but it quickly condemned the strikes.
---
Laws and Regulations Governing Foreigners in China
English.news.cn 2009-09-05 14:45:24
The Chinese government is strict concerning adherence to its laws and regulations. If a foreign teacher breaks the Chinese laws, they are subject to Chinese punishment, incarceration, and/or deportation, depending on the infraction.
In most cases, embassies are powerless to help the teacher in trouble other than notify family and act as consultant. Breaking Chinese regulations can be as small as not having your Residency Permit in a timely manner (fine is involved) to being involved in a traffic accident where the blame is put on the foreigner (large fines, possible incarceration, probably deportation depending on the circumstances). The foreign teachers should realize that any infraction in their own country is probably an infraction in China.
Foreigners should not participate in any political gatherings and should be aware that underground churches are monitored. Participation can be perceived as breaking the law and arrest can follow. Proselytizing is also not allowed, in or out of the classroom.
If a teacher of Chinese background enters China using only an ID card, they are treated as a Chinese citizen in cases of breaking the law. The embassies have no jurisdiction over that person, even if a citizen of another nation.
If there are questions concerning specific regulations, these should be discussed with the school/institution foreign affairs officer.
(State Administration of Foreign Experts Affairs October 18, 2006)
===
Rules for the Administration of Employment of Foreigners in China
English.news.cn 2009-09-05 14:45:23 FeedbackPrintRSS
(Promulgated jointly by the Ministry of Labor, Ministry of Public Security, Ministry of Foreign Affairs and the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China on 22 January, 1996)
Contents
Chapter I General Provisions
Chapter II Employment License
Chapter III Application and Approval
Chapter IV Labour administration
Chapter V Penalty Provisions
Chapter VI Supplementary Provisions
Chapter I
General Provisions
Article 1 These Rules are formulated in accordance with the provisions of the relevant laws and decrees for the purpose of strengthening the administration of employment of foreigners in China.
Article 2 The term "foreigners" in these Rules refers to the persons, who under the Nationality Law of the People's Republic of China, do not have Chinese nationality.
The term "employment of foreigners in China" in these Rules refers to acts of foreigners without permanent residence status to engage in remunerative work within Chinese territory in accordance with it laws.
Article 3 These Rules shall apply to employed foreigners within Chinese territory and their employers.
These Rules shall not apply to foreigner who enjoy diplomatic privileges and immunities employed by foreign embassies or consulates, or the offices of the United Nations and other international organizations in China.
Article 4 The labor administrative authorities of the people's government of the provinces, autonomous regions and municipalities directly under the Central Government and those at the prefecture and city level with their authorization are responsible for the administration of employment of foreigners in China.
Chapter II
Employment License
Article 5 The employer shall apply for the employment permission if it intends to employ foreigners and may do so after obtaining approval and the People's Republic of China Employment License for Foreigners (hereinafter referred to as the "Employment License")
Article 6 The post to be filled by the foreigner recruited by the employer shall be the post of special need, a post that cannot be filled by any domestic candidates for the time being but violates no government regulations.
No employer shall employ foreigners to engage in commercialized entertaining performance, except for the persons qualified under Article 9 (3) of these Rules.
Article 7 Any foreigner seeking employment in China shall meet the following conditions:
(1) 18 years of age or older and in good health;
(2) with professional skills and job experience required for the work of intended employment;
(3) with no criminal record;
(4) a clearly-defined employer;
(5) with valid passport or other international travel document in lieu of the passport (hereinafter referred to as the "Travel Document")
Article 8 Foreigner seeking employment in China shall hold the Employment Visas for their entry (In case of agreement for mutual exemption of visas, the agreement shall prevail.), and may work within Chinese territory only after they obtain the Employment Permit for Foreigner (hereinafter referred to as the "Employment Permit") and the foreigner residence certificate.
Foreigners who have not been issued residence certificate (i.e. holders of F, L, C or G type visas), and those who are under study or interim programs in China and the families of holders of Employment Visas shall not work in China. In special cases, employment may be allowed when the foreigner changes his status at the public security organs with the Employment License secured by his employer in accordance with the clearance procedures, under these Rules foreigners changes his status at the public security organs with the Employment License and receives his Employment Permit and residence certificate.
The employment in China of the spouses of the personnel of foreign embassies, consulates, representative offices of the United Nations System and other international organization in China shall follow the Provisions of Ministry of Foreign Affairs of the People's Republic of China Concerning the Employment of the Spouses of the Personnel of Foreign Embassies, Consulates and the Representative Offices of the United Nations System in China and be handled in accordance with the clearance procedures provided for in the second paragraph of this article.
The Employment License and the Employment Permit shall be designed and prepared exclusively by the Ministry of Labour.
Article 9 Foreigners may be exempted from the Employment License and Employment Permit when they meet any of the following conditions:
(1) foreign professional technical and managerial personnel employed directly by the Chinese government or those with senior technical titles or credentials of special skills recognized by their home or international technical authorities or professional associations to be employed by Chinese government organs and institutions and foreigners holding Foreign Expert Certificate issued by China's Bureau of Foreign Expert Affairs;
(2) foreign workers with special skills who work in offshore petroleum operations without the need to go ashore for employment and hold "Work Permit for Foreign Personnel Engaged in the Offshore Petroleum Operations in the People's Republic of China";
(3) foreigner who conduct commercialized entertaining performance with the approval of the Ministry of Culture and hold "Permit for Temporary Commercialized Performance".
Article 10 Foreigners may be exempted from the Employment License and may apply directly for the Employment Permit by presenting their Employment Visas and relevant papers after their entry when they meet any of the following conditions:
(1) foreigners employed in China under agreements or accords entered into by the Chinese government with foreign governments or international organizations for the implementation of Sino-foreign projects of cooperation and exchange;
(2) chief representatives and representative of the permanent offices of foreign enterprises in China.
Chapter III
Application and Approval
Article 11 The employer when intending to employ a foreigner, stall fill out the Application Form for the Employment for Foreigners (hereinafter referred to as the "Application Form") and submit it to its competent trade authorities at the same level as the labor administrative authorities together with the following documentation:
(1) the curriculum vitae of the foreigner to be employed;
(2) the letter of intention for employment;
(3) the report of reasons for employment;
(4) the credentials of the foreigner required for the performance of the job;
(5) the health certificate of the foreigner to be employed;
(6) other documents required by regulations.
The competent trade authorities shall examine and approve the application in accordance with Articles 6 and 7 of these Rules and relevant laws and decrees.
Article 12 After the approval by the competent trade authorities, the employer shall take the Application Form to the labor administrative authorities of the province, autonomous region or municipality directly under the Central Government or the labor administrative authorities at the prefecture and city level where the said employer is located for examination and clearance. The labor administration authorities described above shall designate a special body (hereinafter referred to as the "Certificate Office") to take up the responsibility of issuing the Employment License. The Certificate Office should take into consideration of the opinions of the competent trade authorities and the demand and supply of labor market, and issue the Employment License to the employer after examination and clearance.
Article 13 Employers at the central level or those without the competent trade authorities may submit their application directly to the Certificate Office of the labor administrative authorities for the Employment Permit.
The examination and approval by the competent trade authorities is not required for foreign-funded enterprises to employ foreigners, and such enterprise may submit their applications directly to the Certificate Office of the labor administrative authorities for the Employment License, bringing with them the contract, articles of association, certificate of approval, business license and the documentation referred to in Article 11 of these Rules.
Article 14 Employers with permission to employ foreigners shall not send the Employment License nor the letter of visa notification directly to the foreigners to be employed, and they must be sent by the authorized unit.
Article 15 Foreigner with permission to work in China should apply for Employment Visas at the Chinese embassies, consulates and visa offices, bringing with them the Employment License issued by the Ministry of Labor, the letter or telex of visa notification sent by the authorized unit and the valid passport or Travel Document.
Personnel referred to in Article 9 (1) of these Rules should apply for the Employment Visas by presenting their letter or telex of visa notification by authorized unit; personnel referred to in Article 9 (2) should apply for the Employment Visas by presenting their letter or telex of visa notification issued by the China National Offshore Oil Corporation; personnel referred to in Article 9 (3) should apply for the Employment Visas by presenting their letter or telex of visa notification issued by the foreign affairs office under the people's government of provinces, autonomous regions or municipalities directly under the Central Government and the relevant documents of approval of the Ministry of Culture (addressed to the Chinese embassies, consulates or visa offices).
Personnel referred to in Article 10 (1) of these Rules should apply for the Employment Visas by presenting their letter or telex of visa notification by authorized unit and the documentation on projects of cooperation and exchange; personnel refereed to in Article 10 (2) should apply for the Employment Visas by presenting their letter or telex of visa notification by the authorized unit and the registration certification issued by the administrative authorities of industry and commerce.
Article 16 The employer should, within fifteen days after the entry of the employed foreigner, take to the original Certificate Office the Employment License, the labor contract with the said foreigner and his passport or Travel Document to receive his Employment Permit while filling out the Foreigner Employment Registration Form.
The Employment Permit shall be effective only within the area specified by the Certificate Office.
Article 17 Foreigners who received their Employment Permit should, within thirty days after their entry, apply for the residence certificate with the public security organs bringing with them their Employment Permit. The term of validity of the residence certificate may be determined in accordance with the term of validity of the Employment Permit.
Chapter IV
Labor administration
Article 18 The employer and its foreign employee should, in accordance with law, conclude a labor contract, the term of which shall not exceed five years. Such contract may be renewed upon expiration after the completion of clearance process in accordance with Article 19 of these Rules.
Article 19 The Employment Permit of the employed foreigner shall cease to be effective upon the expiration of the term of the labor contract between the foreigner and his employer. If renewal is required, the employer should, within thirty days priors to the expiration of the contract, submit an application to the labor administrative authorities for the extension of term of employment, and after approval is obtained, proceed to go through formalities for the extension of the Employment Permit.
Article 20 The foreign employee should, within ten days after obtaining the approval for extension of his term of employment in China or the change of his employment location or his employer, go through formalities for the extension or change of his residence certificate at the local public security organs.
Article 21 After the termination of the labor contract between the foreign employee and his employer, the employer should promptly report it to the labor and public security authorities, return the Employment Permit and the residence certificate of the said foreigner, and go through formalities for his exit from China.
Article 22 The wage paid to the foreign employee by the employer shall not be lower than the minimum wage in the locality.
Article 23 The working hours, rest and vacation, work safety and hygiene as well as the social security of the foreign employees in China shall follow the relevant provisions of the state.
Article 24 The employer of the foreign employee in China shall be the same as specified in his Employment License.
When the foreigner switches employers within the area designated by the Certificate Office but stays in a job of the same nature, the change must be approved by the original Certificate Office and recorded in his Employment Permit.
If the foreigner is to be employed outside the area designated by the Certificate Office or switch employer within original designated area while taking up jobs of a different nature, he must go through formalities for a new Employment License.
Article 25 For foreigner whose residence status is revoked by public security organs due to his violation of Chinese law, his labor contract should be terminated by his employer and his Employment Permit be withdrawn by the labor administrative authorities.
Article 26 Should the labor disputes arise between the employer and its foreign employee, they should be handle in accordance with the Labour Law of the People's Republic of China and the Regulations of the People's Republic of China on Settlement of Labour Disputes in Enterprises.
Article 27 The labor administrative authorities shall conduct an annual inspection of the Employment Permit. Within thirty days prior to the end of every year of employment of the foreigner, the employer should go through formalities of the annual inspection at the Certificate Office of the labor administrative authorities. The Employment Permit shall automatically cease to be effective when the deadline is passed.
In case of loss or damage of the Employment Permit during the term of his employment in China, the foreigner should promptly report it to the original Certificate Office and go through formalities for the issuance of the Employment Permit.
Chapter V
Penalty Provisions
Article 28 Violation of theses Rules, i.e. foreigners who work without the Employment Permit or employers which hire foreigner without the Employment License, shall be handled by the public security organs in accordance with Article 44 of the Rules Governing the Implementation of the Law of the People's Republic of China on the Entry and Exit of Aliens.
Article 29 For Foreigner who refuse to have their Employment Permit inspected by the labor administrative authorities, change their employers and professions at will or extend their term of employment without permission, the labor administrative authorities shall withdraw their Employment Permit and recommend that their residence status be canceled by the public security organs. In case of deportation, the costs and expenses shall be borne by the said foreigners or their employers.
Article 30 For foreigners and employers who forge, alter, falsely use, transfer, buy and sell the Employment Permit and the Employment License, the labor administrative authorities shall take over the Employment Permit and the Employment License in question, confiscate the illegal proceeds and impose a fine between ten thousand and one hundred thousand RMB yuan. In serious cases which constitute a crime, their criminal responsibility of the perpetrators shall be looked into by the judicial authorities.
Article 31 In case of abuse of power, illegal collection of fees, and fraudulent practices on the part of official personnel of the Certificate Office or other departments, they shall be investigated in accordance with the law for their criminal responsibility if crimes are committed, or they shall be subject to administrative disciplinary measures if the cases do not constitute a crime.
Chapter VI
Supplementary Provisions
Article 32 The employment in the mainland of the residents of Taiwan, Hong Kong and Macao region of China shall follow the Rules for the Administration of the Employment in the Mainland of the Residents of Taiwan, Hong Kong and Macao.
Article 33 These Rules do not apply to the employment of foreigners in China's Taiwan, Hong Kong and Macao region.
Article 34 Individual economic organizations and private citizens are prohibited from employing foreigners.
Article 35 The labor administrative authorities of the provinces, autonomous regions and municipalities directly under the Central Government may formulate their own rules for implementation of these Rules in conjunction with the public security and relevant authorities in the locality, and report it to the Ministry of Labour, Ministry of Public Security, Ministry of Foreign Affairs and the Ministry of Foreign Trade and Economic Cooperation for putting on record.
Article 36 The Ministry of Labors shall be responsible for the interpretation of these Rules.
Article 37 These Rules shall enter into force as of 1 May 1996. The Provisions Concerning the Employment in China of the Foreigners Who Have Not Yet Obtained Residence Certificate and Foreigners Who Study in China jointly promulgated by the former Ministry of Labour and Personnel and the Ministry of Public Security on 5 October 1987 shall be annulled simultaneously.
Notice: In case of discrepancy, the original version in Chinese shall prevail.
(Source: gov.cn)
====
China silencing Uighurs two years after protests-Amnesty
05 Jul 2011 09:59
Source: reuters // Reuters
(Adds comment from exile group)
By Ben Blanchard
BEIJING, July 5 (Reuters) - China has jailed dozens of ethnic Uighurs in the far western region of Xinjiang for speaking out about riots in the regional capital two years ago, Amnesty International said on Tuesday, part of a broader campaign against voices of dissent nationwide.
In July 2009, the capital city of Urumqi was rocked by violence between majority Han Chinese and minority Uighurs that killed nearly 200 people. Many of the Turkic-speaking Muslim Uighurs, who call Xinjiang home, chafe at Beijing's rule.
Since then, China has executed nine people it blamed for instigating the riots, detained and prosecuted hundreds of others and ramped up spending on security, according to state media and overseas rights groups.
Last month, Kazakhstan extradited a Uighur schoolteacher who had been granted U.N. refugee status to face charges of terrorism in China, brushing off concerns he could be tortured and that the charges against him were trumped up.
"The government is not only still muzzling people who speak out about July 2009, it is using its influence outside its borders to shut them up," said Sam Zarifi, Amnesty's director for the Asia-Pacific.
"The general trend towards repression that we see all over China is particularly pronounced in Xinjiang, where the Uighur population has become a minority in its own homeland."
China is in the midst of a sweeping campaign against rights activists, following calls on-line for Arab-style "Jasmine protests" in China which have spooked Beijing.
Other Uighurs have been jailed for speaking to foreign reporters about the events two years ago, or for discussing the unrest on Uighur websites.
"Attacking every Uighur who speaks freely is no way to resolve the underlying grievances that led to the 2009 protests in the first place," Zarifi added.
"The Chinese government has to listen to the grievances of the Uighur community and address their demands to have their rights respected and their culture protected."
ALWAYS ON GUARD
Chinese Foreign Ministry spokesman Hong Lei said that while Xinjiang was generally stable and its people happy, it remained threatened by separatists, who Beijing accuses of wanting to set up an independent state called East Turkistan.
"We are always on our guard against the damaging activities of splitists," Hong told a regular news briefing in Beijing.
Xinjiang is strategically vital to China and Beijing has shown no sign of loosening its grip.
A vast swathe of territory, accounting for one-sixth of China's land mass, Xinjiang holds oil, gas and coal deposits and borders Afghanistan, Pakistan, India and Central Asia.
Dilxat Raxit of the Germany-based World Uyghur Congress said the two-year anniversary of the rioting had been marked by even tighter security.
"Uighurs are scared to go outside today lest they get picked up by the police just for being in a group of three or four people. They are choosing to stay at home," he said by telephone.
Since the unrest, China has turned its attention to boosting development in Xinjiang and providing greater job opportunities, especially for Uighurs, to try and address some of the root causes of the violence.
But the government has also installed some 40,000 surveillance cameras in Urumqi and increased by more than half this year's regional security budget, to 2.89 billion yuan ($447 million), according to state media.
Xinjiang's Communist Party boss, Zhang Chunxian, visited a night market on Monday, the government said, in a show of ethnic unity and to demonstrate normalcy has returned to Urumqi.
($1 = 6.463 yuan) (Additional reporting by Sui-Lee Wee; Editing by Sanjeev Miglani)
===
EXCLUSIVE-China's Min Zhu may get new senior IMF post-sources
06 Jul 2011 18:25
Source: reuters // Reuters
WASHINGTON, July 6 (Reuters) - New IMF chief Christine Lagarde is considering appointing Min Zhu, a Chinese national and special advisor to the fund, to a new senior management post, IMF board sources said on Wednesday.
The sources said Zhu, a former deputy governor of the People's Bank of China, would fill a deputy managing director post yet to be created by Lagarde. China has long pressed for a senior-level position at the global lender.
"Min Zhu is expected to be elevated to deputy managing director," one source said, adding that the IMF board of member countries would first have to approve the move. (Reporting by Lesley Wroughton)
===
Reuters
China's old shares may spoil appetite for new
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own)
By Wei Gu
HONG KONG, July 11 (Reuters Breakingviews) - Shares in Chinese banks are already a tough sell given growing worries about bad debts. So it is worrying that there may be $36 billion of locked-up stock about to hit the market. Bank of America is one that may sell its holdings once restrictions expire in coming weeks. Singapore's Temasek has already trimmed $3.6 billion of Chinese bank stocks. If a wave of selling follows, it may have a negative effect on new issues.
Foreign strategic shareholders such as HSBC and Goldman Sachs together own about $70 billion in Chinese banks, most of it available to sell from this year, according to Thomson Reuters. BofA may sell most of its $20 billion stake in China Construction Bank to help meet new capital requirements. Temasek has $14 billion of various Chinese banks remaining, while Qatar Investment Authority has $2.8 billion of stock in Agricultural Bank of China. Up to $36 billion of shares could hit the market were BofA, Temasek, and QIA all to sell out.
The old shares may curb investors' appetite for new - particularly mid-size lenders like China Everbright Bank and Guangdong Development Bank, which planned to raise a combined $10 billion in the second half of 2011. They may look less desirable than existing shares from large lenders, who are more likely to be bailed out if China's bank sector gets into difficulty.
Underwriters may not like it if their IPO pipelines suffer -- but they have little reason to deter the sellers. Selling large chunks of shares through so-called block trades is a lucrative business, much faster than IPOs, and come with more certainty of completion.
The glut of for-sale shares raises questions about the Hong Kong custom of having "cornerstone investors" in big IPOs. Big investors get guaranteed allocations by offering to commit to a 6-12 month lock-up. Well-known names help to attract retail investors, and their subscriptions can't be easily pulled. But when a big portion of the deal is allocated to those investors they potentially create a big overhang.
Hong Kong's cornerstone practice has allowed underwriters to get big offerings like AgBank away in tough markets. But if the resulting overhangs prevent those who follow from raising new capital, they may not be such a good idea after all.
CONTEXT NEWS
-- Lock-up agreements, which block big shareholders from selling stock in a company for a specified period, were set to expire for several Chinese financials including Agricultural Bank of China.
-- Bank of America will be allowed to sell 92 percent of its 10 percent stake in China Construction Bank's Hong Kong-listed shares from Aug 29. Its stake is worth $20.5 billion in total based on the closing price on July 11.
-- The Qatar Investment Authority, Kuwait Investment Authority (KIA) and Standard Chartered will be allowed to sell a combined $5.5 billion stake in Agricultural Bank of China from July 15, after the one-year lock-up agreements expire. KIA said in May it will not sell its $800 million stake.
-- Temasek on July 4 sold $3.6 billion worth of shares in China Construction Bank and Bank of China and committed to a new three-month lock-up on the same day. It still owns about $11.5 billion CCB shares and $2.5 billion of Bank of China shares.
China Everbright Bank delayed the roadshow for its $6bn Hong Kong share offering in June, after markets weakened. Guangdong Development Bank, a southern Chinese bank partly owned by Citigroup, may file a $5.4 billion IPO in Hong Kong and Shanghai at the end of 2011.
((wei.gu@thomsonreuters.com))
(Editing by John Foley and David Evans)
=============
Trust busting
China's property market faces crisis of trust
27 September 2011 | By John Foley
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A favourite financing wheeze of Chinese property developers is starting to show cracks. Regulators have sounded the alarm over Greentown, a real estate company in the picturesque city of Hangzhou, which used trust companies to funnel debt to new projects. Many others have done the same. But trusts, which provide short-term financing secured on illiquid collateral like land and half-built apartments, are inherently vulnerable to a crisis of liquidity and confidence.
Trusts filled a funding gap left when banks, responding to official worries about bubble-some asset prices, pulled back from real estate lending last year. Trusts have provided more than 40 percent of the last year’s new borrowings for big developers like Agile, KWG and Poly, according to Credit Suisse. Typically they lend to a project, take equity as collateral, and sell on slices to investors. But the structures are designed to be repaid after a year or two. Since many projects take longer than that to finish, many trusts often need to find new investors to pay back old ones.
If a project flops, investors often enjoy protection in the form of a guarantee from the developer. But delays or outright failure threaten the solidity of the guarantees. With developers low on cash, trust investors could find themselves forced to take ownership of collateral like land and empty properties. The proceeds of selling those in a hurry might fall short of what investors are owed, and push down the market elsewhere. Nasty feedback loops could be created.
The chances that developers experience a serious cash crunch are rising. Greentown had 6.7 billion yuan of cash on its balance sheet at the end of June, but 14 billion yuan of debt repayable within a year. Housing transaction volumes have dropped sharply, year on year, and inventory is rising.
Meanwhile, banks are delaying delivery of mortgage loans to meet rules on credit tightening. This could strain developers’ cash flows even after they have agreed sales.
Trusts have spread rapidly to become a critical source of funding for property companies. Authorities are aware of the problem, but may not have the tools to deal with it. If a crisis of confidence sees even healthy developers unable to refinance their trusts, the resulting unravelling could be very messy.
=============
Context News
Shares in Chinese property developers listed in Hong Kong fell after Reuters reported that regulators were enquiring into the financing methods of Greentown China Holdings on Sept. 22. Greentown’s shares fell 25 percent between the close of Sept. 21 and the close of Sept. 26.
The China Banking and Regulatory Commission ordered trust companies, which package up loans and securities and sell stakes to investors, to report their exposure to Greentown. It did not give a reason for the move. Greentown said in a filing it had received no official notice from the CBRC.
Trust companies became a popular source of financing for real estate developers after regulators asked banks to restrict their lending to property and measures to rein in runaway real estate prices.
New trust company financing to real estate developers totalled 208 billion yuan in the first half of 2011. This compares with formal bank lending of 211 billion yuan, and other domestic financing of 283 billion yuan, according to official data.
Credit ratings agency Standard & Poors warned on Sept. 27 that developers faced liquidity pressures over the coming six to twelve months, and named Greentown as being among the most vulnerable among the 30 developers it rates.
===========
U.S. official says China's banks at risk from Iran deals
28 Sep 2011 11:36
Source: Reuters // Reuters
By Michael Martina
BEIJING, Sept 28 (Reuters) - Iran is increasingly looking for access to global financial markets to fund its nuclear programme, a top U.S. Treasury official said on Wednesday, urging Chinese regulators and banks to be prepared to block transactions and impede Iran's efforts.
David Cohen, the U.S. Treasury's under secretary for terrorism and financial intelligence, said Beijing took seriously its responsibilities to uphold U.N. Security Council resolutions on Iran, but reminded Chinese banks to implement tougher safeguards.
"China has strictly implemented the provisions of the Security Council resolution that require specific steps, but it has not taken any steps that are similar to what some of these other jurisdictions have done to deal with the risk of Chinese financial institutions engaging in financial transactions with Iranian financial institutions," Cohen said.
Tehran's refusal to halt enrichment has provoked four rounds of U.N. sanctions on the world's No. 5 oil exporting state and tighter U.S. and European Union restrictions.
Iran has insisted countries recognise its right to enrich uranium, which it says it wants to fuel power plants. The Western states say enriched uranium could be used to make a bomb, and the demand is an unacceptable precondition for talks.
Cohen was speaking to reporters in Beijing, where he has been meetings with Chinese Ministry of Foreign Affairs and Ministry of Finance officials.
The Beijing leg of Cohen's trip followed a visit to Hong Kong, where he sought to impress upon international banks, including the big four state-owned Chinese banks, the need to protect themselves from Iranian shell companies seeking to finance the country's nuclear programme.
The U.S. Treasury has said a provision embedded in 2010 U.N. sanctions on Iran calls on member states to cut off bank services to any Iranian institution if they could contribute to the development of Iran's nuclear programme.
Cohen said such transactions could "entangle the Chinese bank in transactions that would be terribly damaging to their reputation and contrary to the international effort to impede the Iranian nuclear program and to put pressure on Iran to bring it back to the negotiating table".
LEGAL ACTION
In Hong Kong, where he emphasized the need to prevent shipping companies and exporters from doing business with Iran's national carrier, the Islamic Republic of Iran Shipping Lines, Cohen said he got a "very positive reception".
"The government authorities there are as motivated to ensure that illicit actors don't abuse the system there as anyone," he said.
Part of his message to bankers was a recap of the impact of 2010 U.S. legislation -- the Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA) -- that tries to dissuade foreign financial institutions from doing business with sanctioned Iranian firms by threatening to cut them off from the U.S. market.
"I think the teeth are quite sharp," Cohen said, adding that Chinese financial firms were "as much in jeopardy as a bank anywhere else of being the subject of a CISADA action".
But Cohen said there is "no disagreement whatsoever between the U.S. and the Chinese" that Iran's nuclear programme is out of compliance with the non-proliferation treaty and a series of Security Council resolutions.
Chinese Foreign Ministry spokesman Hong Lei said that Beijing has always implemented Security Council resolutions conscientiously, but also had a right to trade with Iran, China's third-largest oil supplier.
"China's normal business relations with Iran do not violate any Security Council resolutions nor undermine the interests of other countries in the international community," he said. (Additional reporting by Ben Blanchard; Editing by Sanjeev Miglani)
==============
China's MCC protests World Bank ban, says impact limited
02 Oct 2011 08:13
Source: Reuters // Reuters
* World Bank bars MCC construction arm for three years
* China company says conduct were clean, plays down financial impact
Oct 2 (Reuters) - Chinese construction conglomerate China First Metallurgical Group Co Ltd (CFMCC) has appealed against a ban on participation in World Bank projects and said its exclusion for alleged irregularities would have only a limited impact on revenues.
The World Bank announced on Thursday it had banned CFMCC, a subsidiary of the China Metallurgical Group Corp (MCC), from its projects for three years because of the company's "fraudulent misconduct" in an urban transport project in Bangladesh.
In a statement published on its website (www.cfmcc.com) CFMCC said it had sent letters to the World Bank twice to seek an overturn of the decision, but to no avail.
"We continue to have reservations over the decision," CFMCC said.
It World Bank ban marked the latest setback for MCC, with a listed unit named Metallurgical Corp of China Ltd , in its "venturing-abroad" process following the suspension of two of its construction projects in Libya this year and allegations of graft in a Afghan mining venture.
Chinese state-owned companies are encouraged by their government to "go out" as part of China's grand plan of gaining international influence, but setbacks and misconduct allegations often accompany ambitious plans.
The World Bank's Integrity Vice Presidency, the anti-fraud unit of World Bank-financed projects, said last week that it had detected instances of irregularities in a CFMCC Bangladesh bridge project. It did not give further details.
CFMCC said the Bangladesh project, with a contractual value of $20.7 million, was won through the bidding process of the World Bank and the main construction work was completed in November 2004.
According to the company's statement, the World Bank questioned its purchase and installation of shock bearing parts on the bridge after an investigation in December. CFMCC said it purchased the equipment from TechStar, a U.S. company, and the installation process was conducted under professional advice.
CFMCC also played down the financial impact of the World Bank decision, saying income generated from overseas projects only accounted for 6.5 percent of its total revenues in the last three years, and the Bangladesh bridge was the only World Bank project it had taken in the last decade.
However, the company added that it would "take a lesson from this and take immediate actions to seriously review overseas project management processes, step up controls and regulate management behaviour".
MCC has come under scrutiny in 2008 over its $4.4 billion Aynak copper mine in Afghanistan and was accused of paying up to $30 million in bribes to the Minister of Mines and Industries to win the contract. The ministry denied the allegations. (Reporting by Zhou Xin in Kabul; Editing by Martin Petty and Robert Birsel)
=============
FACTBOX-Key political risks to watch in China
03 Oct 2011 11:08
Source: Reuters // Reuters
By Chris Buckley
BEIJING, Oct 3 (Reuters) - China's ruling Communist Party is preparing for a leadership transition while it deals with protests and price rises, but for now economic growth and firm controls are likely to avert serious ructions.
RATINGS (unchanged since September unless stated):
S&P: AA-
MOODY'S: A1
FITCH: A+
The cost of insuring against default on 5-year sovereign debt rose steeply in September, along with many other sovereign debt markets, as fears of a global recession grew.
((Bonds issued by a national government in a foreign currency, in order to finance the issuing country's growth. Sovereign debt is generally a riskier investment when it comes from a developing country, and a safer investment when it comes from a developed country. The stability of the issuing government is an important factor to consider, when assessing the risk of investing in sovereign debt, and sovereign credit ratings help investors weigh this risk.
An unfavorable change in exchange rates, and an overly optimistic valuation of the payback from the projects that the debt is used to finance, can make it difficult for countries to repay sovereign debt. The only recourse for the lender is to renegotiate the terms of the loan - it cannot seize the government's assets. A country that defaults on its sovereign debt will have difficulty obtaining a loan in the future.
7 Things You Didn’t Know About Sovereign Debt Defaults
Posted: September 27, 2011 1:53PM by Eric Fox
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Filed Under: Economy
Investors have renewed their obsessing over the risk of sovereign default, as fear creeps back into the market that contagion will lead to a replay of the financial crisis and the return of a recession. While sovereign debt defaults are frightening, they are actually quite common and may not lead to the worst-case scenario that many are expecting. Here are seven facts about sovereign debt defaults that might surprise you.
TUTORIAL: Credit Default Swaps: Introduction
1. PIIGS
The PIIGS countries - or Portugal, Italy, Ireland, Greece and Spain - are on everyone's watch list as having the greatest risk of sovereign default. These five countries have a mixed historical record of sovereign default over the last 200 years, with Ireland never defaulting on its obligations and Italy only once during a seven-year period in World War II. (For many emerging economies, issuing sovereign debt is the only way to raise funds, but things can go sour quickly. For more, see How Countries Deal With Debt.)
Portugal has defaulted four times on its external debt obligations, with the last occurrence in the early 1890s. Greece has defaulted five times and has spent a total of 90 years in this status since achieving independence in the 1820s.
Spain holds the record on the PIIGS list and has defaulted six times, with the last occurrence in the 1870s. If you extend the date range back another three centuries and start in 1550, the default count rises to 12.
2. Pristine
There are a number of countries that have pristine record of paying on sovereign debt obligations and have never defaulted. These nations include Canada, Denmark, Belgium, Finland, Malaysia, Mauritius, New Zealand, Norway, Singapore, Switzerland and England.
Don't think that these countries skated through the last 200 years without financial problems, because endemic banking crises were a common occurrence. England has suffered 12 banking crises since 1800 or an average of about one every 17 years.
3. The U.S. Has Defaulted on Debt (Technically Speaking)
Although the conventional wisdom is that the United States has never defaulted on its sovereign debt obligations, there have been some instances that may qualify under a strict and technical definition.
In 1790, the United States passed a law that authorized the issuance of debt to cover the obligations of individual states in the union. Since some of this new debt didn't start paying interest until 1800, some purists consider this a technical default.
Many issues of U.S. government bonds issued prior to the 1930s contained a gold clause under which bondholders could demand payment in gold rather than currency. In 1933, President Roosevelt and Congress decided that this promise was against "public policy" and obstructed the "power of the Congress" and ended this right. The issue was litigated and ended up before the Supreme Court, which ruled in favor of the government.
In 1979, the government could not make timely payments on portions of three maturing issues of treasury bills due to operational problems in the back office of the Treasury Department. These payments were later made to holders with back interest.
4. Ground Zero
Ground zero for modern sovereign debt default seems to be in South America and Central America where Venezuela and Ecuador share the dubious honor of 10 defaults each. (For related reading, see Why Bad Bonds Get Good Ratings.)
Brazil, which today is one the fastest growing of the emerging economies, has defaulted nine times, while Costa Rica and Uruguay have disappointed foreign investors nine times as well over the last 200 years.
5. China
Another oasis of financial strength today is China, which has trillions of dollars in reserves and suffered only marginally during the recent recession. China has defaulted only twice, both times during times of external and internal conflict.
6. Confrontation
The Western Powers sometimes reacted with military force when a country decided not to pay back money that was borrowed. In 1902, Venezuela refused to pay on its foreign obligations and after negotiations failed to resolve the issue, Britain, Germany and Italy imposed a blockade on Venezuela.
The conflict escalated quickly and a number of Venezuelan ships were sunk or captured, ports were blocked and coastal areas were bombarded by the Europeans. The U.S. eventually intervened to mediate and after several years of negotiation Venezuela combined its outstanding debt into a new issue, added back interest and made payments until the issue matured in 1930.
7. Revolutions
Some sovereign defaults are intentional and are not necessarily due to a lack of financial resources. In February 1918, the new government in Russia repudiated(To refuse to recognize or pay: repudiate a debt.
) all debt issued by the previous Tsarist government. Bondholders have long memories and this default officially lasted until 1986, when Russia settled with British holders of this paper. In 1997, an agreement was reached with French bondholders as well.
The Bottom Line
Sovereign debt default is a terrifying thought to many investors and the dread is only amplified in the current environment of financial gloom that pervades the market. Investors that examine the issue more rationally, and in the context of the history of such events, will realize that the global financial system has seen this before and survived. (For related reading, see The Risks Of Sovereign Bonds.)
Read more: http://financialedge.investopedia.com/financial-edge/0911/7-Things-You-Didnt-Know-About-Sovereign-Debt-Defaults.aspx#ixzz1ZifXvb13
Read more: http://www.investopedia.com/terms/s/sovereign-debt.asp#ixzz1ZiejWfYO
Read more: http://www.investopedia.com/terms/s/sovereign-debt.asp#ixzz1ZieRahph))
Here is a summary of key political risks in China:
SUCCESSION POLITICS
Chinese President Hu Jintao and Premier Wen Jiabao are due to give up their main Communist Party posts in late 2012 and their government posts in early 2013, making way for a new leadership generation most likely to be led by current Vice President Xi Jinping.
Most other members of the nine-member Standing Committee -- the Party's decision-making core -- are likely to retire in late 2012.
The politics of determining who will fill those vacancies will increasingly preoccupy decision-makers, slowing policymaking and deterring the government from grappling with contentious decisions. It will also make the Party even more wary of unrest.
There will be competition for positions in the next phalanx of leaders. Some likely candidates have made little secret of their ambitions, including Bo Xilai, the charismatic Communist Party chief of Chongqing, and Wang Yang, the chief of Guangdong province.
Chinese elite politics is largely circumscribed by the norms of conformity and unity around a leader, and the muted competition is unlikely to break out into open feuding or lead to major policy shifts.
The growing public prominence of Vice President Xi and Vice Premier Li Keqiang indicates they are increasingly sure of succeeding President Hu and Premier Wen respectively.
One key issue will be whether Hu will remain chairman of the Central Military Commission, which controls the People's Liberation Army. Staying on would give him more sway over his successors.
What to watch:
-- Which emerging leaders make substantive policy statements and announcements. That can be a signal of their prospects and likely areas of authority.
-- Signs of political and ideological rivalry among aspiring leaders. This rivalry is likely to remain constrained, but serious economic problems, political scandals or external shocks could heat up the competition.
-- Meetings, such as a gathering of the Central Committee, the Party's top 370 or so officials, expected in October, that will move forward the succession process.
SOCIAL UNREST -- INFLATION, CORRUPTION AND THE INTERNET
The Chinese government fears that social unrest could escalate into broader protests and threaten its authority.
That has been exacerbated this year by the worry of contagion from anti-authoritarian uprisings across the Middle East and North Africa, and the general security tightening is likely to persist, especially with the leadership handover amplifying official jitters.
The most widespread sources of rancour are land confiscations and home demolitions for development, persistent prices rises and "corruption", a term that covers the whole spectrum of graft and illicit self-enrichment.
Annual inflation eased to 6.2 percent in August from a three-year high of 6.5 percent in July, but food price rises remain a focus of public grumbling.
Most outbursts of unrest are small and local protests by farmers, workers and other disgruntled groups; the chances of mass unrest challenging Party rule soon remain scant.
One riot in southern China in late September involved hundreds of villagers, enraged by government land seizures, who protested over three days, ransacking government buildings.
Public anger, spread and magnified by the Internet, can flare into nationwide controversies that may erode public confidence in the government.
Widespread ire over the handling of a deadly high-speed train crash in July underscored public distrust of officialdom, and a collision between two Shanghai subway trains in late September renewed fears about China's aggressive rail building plans.
The far western regions of Tibet and Xinjiang also remain tense, experiencing periodic protests and violence by ethnic minorities who call the areas home.
Such pressures encourage a mixture of tough security and aversion to policy gambles. They may also prompt tighter censorship, especially of Sina.com's popular "Weibo" microblogging website, which has become a forum for public criticism of officials.
What to watch:
-- Protests and strikes that, while local, put the government on edge.
-- Flare-ups of ethnic discontent.
-- Chinese government efforts to contain sources of protest, which could also affect companies, especially Internet and telecoms ones.
FRICTION OVER TAIWAN AND REGIONAL MARITIME CLAIMS
Taiwan is a persistent point of tension between China and the United States. China deems the self-ruled island an illegitimate breakaway that must accept eventual reunification.
The U.S. says it is obliged by law to help Taiwan defend itself, and U.S. arms sales to Taiwan have long been a key dispute between Washington and Beijing.
China's reaction in late September to the White House's latest proposed weapons sales to Taiwan, however, was relatively muted, showing Beijing does not want to risk confrontation before an election on Taiwan in early 2012, when the relatively China-friendly president, Ma Ying-jeou, faces the voters.
Also, tensions over rival territorial claims in the South China Sea setting China against Vietnam and the Philippines, have eased since July and are very unlikely to break out into armed confrontation. Still, in late September, the Global Times, owned by Chinese Communist Party mouthpiece People's Daily, conducted a poll that asked readers: "To quell the South China Sea dispute, should China use targeted force?"
In its English-language edition, the newspaper published a commentary that said it was "time to teach those in the South China Sea a lesson."
Taiwan, the disputes in the South China Sea, and Beijing's festering dispute with Tokyo over competing claims in the East China Sea all remain points where China's growing military capabilities rub up against neighbours, and could flare into unsettling quarrels.
What to watch:
-- How China and the United States handle the Taiwan issue, and if Beijing hardens its response to the proposed arms sales.
-- Jostling incidents between ships or aircraft in the South China Sea and East China Sea that could escalate into confrontation.
-- Protests and public pressure in the countries involved, which could force governments to take a harder line.
-- China's stance in the run-up to Taiwan's presidential and parliamentary elections in January, especially if it looks like the pro-independence Democratic Progressive Party will perform strongly. (Additional reporting by Suilee Wee; Editing by Daniel Magnowski)
===============
China’s gross domestic product in the third quarter of 2011 was 2.3 percent higher than in the second quarter and 9.1 percent up on the same period of 2010. The consensus forecast was 9.2 percent annual growth. The annual growth rate was the slowest since September 2009.
Industrial production increased by 13.8 percent year-on-year in September, up from a 13.4 percent annual increase in August, representing a 1.2 percent month-on-month increase. Retail sales in September increased 17.7 percent year-on-year, slightly beating consensus forecasts of 17 percent.
Shanghai’s benchmark stock index fell 2.3 percent after the GDP data was released on Oct. 18. The Hang Seng China Enterprises Index, which tracks mainland Chinese stocks listed in Hong Kong, fell 5.4 percent.
Grow your troubles away
Slower Chinese GDP growth adds to financial risk
18 October 2011 | By John Foley
China’s annual GDP growth of 9.1 percent in the third quarter is still the envy of the developed world. But the lowest rate in two years shows that the era of double-digit increases is at an end. China can no longer rely on using economic growth to smooth over the damage from a financial system run amok.
Growth helped China out of a financial hole in the late 1990s, when bad loans were 30 percent of bank assets. Lenders got new equity, and their toxic assets were popped into special, bond-funded vehicles. The $300 billion injected in three waves represented around 20 percent of 2004’s GDP. Those special vehicles probably never recovered their money – but because China’s economy has quadrupled in dollar terms since then, the missing billions have become a mere accounting footnote.
The losses are bigger now, and more complicated. Credit Suisse estimates 12 percent of bank loans could go bad, equivalent to 17 percent of GDP. But the financial system has burst its banks. So-called “shadow banking”, including sketchy underground lending, could be 15 trillion yuan, says Societe Generale, equivalent to around a third of GDP this year. No-one knows how much of that will go bad, or in what form the government may be called in to plug the hole, but the bill will be high.
In the 1990s, finance provided a solution, but now it looks like the problem. The U.S. subprime mortgage dilemma provides a grim precedent. An explosion of cheap financing helped to push up growth rates. But eventually financing got too top heavy. Lenders floundered and the property sector collapsed, knocking out the engine that might have helped America to grow itself back to health.
In China, the shadow system has kept property developers and small companies in business, creating jobs, houses, wages and prosperity when banks wouldn’t lend. But if the developers run out of money, the economy will be deprived of the best way to grow out of a rut. China is in danger of following the United States into a toxic financial-economic interaction.
====
BREAKINGVIEWS-U.S. housing policy tilts further to richest 1 pct
21 Oct 2011 15:14
Source: Reuters // Reuters
(Updates Context News)
By Christopher Swann
NEW YORK, Oct 21 (Reuters Breakingviews) - Legislators seem hell-bent on defending the millionaire property market. Raising the limit on government-backed loans and giving home-linked visas to rich foreigners won't help the worst-hit low end. Tea Partiers and OWS protesters can find common cause in opposing these turkeys.
Full view will be published shortly.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Get Breakingviews alerts directly to your inbox three times a day. To sign up click here: www.breakingviews.com/TOPNewsSubscription ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
CONTEXT NEWS
-- The U.S. Senate on Oct. 20 backed a measure to raise the maximum size of home loans that can be bought by government agencies.
-- The Senate voted 60-38 to restore the size of the loans the government buys or insures to a peak of $729,500 from the previous cap of $625,500.
-- The cap, known as the "conforming loan limit," determines the maximum size of loans the Federal Housing Administration and the government's mortgage buyers, Fannie Mae
-- Senators Charles Schumer of New York and Mike Lee of Utah are introducing a bill that would give residence visas to foreigners who spend at least $500,000 on U.S. property.
-- Reuters: U.S. Senate backs plan to help Americans buy homes [ID:nN1E79I261]
RELATED COLUMN
Deductive reasoning [ID:nLDE6AE0KJ]
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
-- For previous columns by the author, Reuters customers can click on [SWANN/]
(Editing by Rob Cox and Martin Langfield)
=============
Propping up mansions
U.S. housing policy tilts further to richest 1 pct
21 October 2011 | By Christopher Swann
American legislators seem hell-bent on defending the millionaire property market. Two new initiatives - raising the limit on government-backed loans and giving home-linked visas to rich foreigners - won’t do a thing to help the worst-hit low end of the property market. Tea Partiers and Occupy Wall Street protesters can find common cause in opposing these distortive ideas.
U.S. housing policy has always done most for those who require least assistance. About three-quarters of the benefit from the mortgage interest tax deduction goes to the top 20 percent of earners, according to a study by the Tax Policy Center. Most of these people would be buying houses with or without government help. The latest proposals circulating on Capitol Hill follow in this wasteful tradition.
Restoring the size of home loans that can be backed by the government to $729,500 is an unnecessary subsidy to top earners. This lofty limit, which was introduced as an emergency measure during the financial crisis and lapsed at the end of September, may now become permanent. It will help only buyers in the swankiest zip codes - including Manhattan and Washington, D.C. - that generally suffered less during the housing downturn.
Senator Charles Schumer’s brainchild - giving resident visas to high-end foreign home-buyers - targets a still more exclusive niche. Since visas would only be handed out to those with $500,000 or more in cash to invest and would not give the right to work, all but the very rich would be excluded. Added to this, international buyers account for less than 4 percent of the value of existing home sales, according to Capital Economics, so it would take a massive surge to make a meaningful difference to housing prices.
All this focus on luxury accommodation seems misplaced. Since the peak in 2007, low end housing has tumbled fastest - with the cheapest third of houses losing 45 percent of their value against 25 percent for the top third. If government help is necessary at all, it’s on the low end, where buyers are less able to fend for themselves.
Populist protesters on the left and right will find such policies equally offensive, if for different reasons. Government meddling in the housing market should run counter to the Tea Party’s ideology. Meanwhile, the Occupy Wall Street campaign will undoubtedly see added proof that lawmakers care most for the richest 1 percent. Both have good reason to object.
====
China flash PMI rebounds to ease hard-landing fears
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By Kevin Yao
BEIJING | Mon Oct 24, 2011 2:58am EDT
(Reuters) - China's vast manufacturing sector expanded moderately in October to snap three months of contraction, reflecting the resilience of robust domestic demand that is likely to soothe fears of an abrupt slowdown in the world's second-largest economy.
HSBC's flash purchasing managers' index (PMI) also showed price pressures eased in China, underlining consumer price data that has shown a slight pullback in inflation from three-year peaks.
The flash PMI, designed to give an early snapshot of the month's factory activity, rose to 51.1 in October from September's final reading of 49.9 as new orders and new export orders expanded.
((An estimate of the Manufacturing Purchasing Managers' Index (PMI) for a country, based on about 85% of total PMI survey responses each month. It is intended to provide an accurate advance indication of the final PMI data. Because flash PMIs are among the first economic indicators for each month and provide evidence of changing economic conditions ahead of comparable government statistics, they can have a significant effect on currency markets.
PMIs are based on monthly questionnaire surveys of selected companies that provide an advance indication of the performance of the private sector. This is achieved by tracking changes in variables such as output, new orders and prices across the manufacturing, construction, retail and service sectors.
Read more: http://www.investopedia.com/terms/f/flash-manufacturing-pmi.asp#ixzz1blC8lUk2))
The reading surpassed the 50-point level demarcating expansion from contraction for the first time since June, when the PMI was 51.6.
"Thanks to the pick-up in new orders and output, the headline flash PMI rebounded back into expansionary territory during October, marking a steady start to manufacturing activities in the four quarter," said Qu Hongbin, China economist at HSBC.
"Meanwhile, inflation components within the PMI results confirmed stable output prices growth and slower input price inflation. All these data confirm our view that there is no risk of a hard landing in China," he said.
Qu expects annual industrial output growth to hover around 13 percent in October and the central bank to keep monetary policy stable in the coming months.
Both new orders and new export orders sub-indexes rose above the 50-point mark in October. Given the gloomy global outlook, however, it is too early to determine if the rebound in export orders can be sustained.
Still, the data provided support to financial markets, which were already firm on hopes that euro zone leaders were moving closer to stemming the debt crisis. Hong Kong stocks were up 4 percent.
China is vulnerable to fading demand from the United States and Europe, its two biggest export markets. China's trade surplus narrowed in September for the second straight month and annual exports growth to the European Union more than halved compared with August.
But robust domestic demand -- consumption and investment -- and solid export growth to emerging markets have provided some protection.
The worst for China's economy and the rest of the world could come if Europe fails to contain the sovereign debt crisis, said George Worthington, chief economist for the Asia Pacific at IFR Markets, a Thomson Reuters unit.
"But domestic demand conditions seem solid and enough to keep the economy growing by around 9 percent, judging from the rebound in the PMI from a low of 49.3 back in July," he said.
GRADUAL SLOWDOWN
China's annual economic growth slowed to 9.1 percent in the third quarter from 9.5 percent in the second quarter and 9.7 percent in the first.
Growth is expected to slow further. A Reuters poll showed analysts expect growth to weaken to 8.6 percent in 2012 from 9.3 percent this year.
Most analysts believe data points to an economic soft landing, rather than a crash for China. Many define a hard landing as a sudden dip in quarterly GDP growth below 8 percent, which they say could drive up unemployment.
However, the government has announced some measures to support the economy. In comments published on Sunday, Premier Wen Jiabao said the government will make job creation a more urgent priority.
Many of the country's small firms are breathing easier since the government took steps to expand financing support to small firms, said Zhu Jianfang, chief economist at CITIC Securities.
In addition, the central bank appears to be slowing down the appreciation of the yuan, partly to help Chinese exporters.
NO IMMINENT POLICY SHIFT SEEN
The HSBC data showed factory price pressures eased in October, offering some comfort to Chinese policymakers who have been trying to bring inflation under control.
The input price sub-index fell to 54.3 in October from 58.8 in September.
Annual consumer inflation eased to 6.1 percent in September, retreating further from three-year highs, although stubborn food price pressures will keep the central bank guarded about loosening policy prematurely.
Inflation could ease further in coming months but the full-year rate is almost certain to overshoot the government's 4 percent target.
The central bank has raised interest rates five times and lifted banks' reserve requirements nine times since last October. It last raised interest rates in July.
"We may have to wait until the end of the year to see a relaxation of monetary policy, although there could be some structural policy fine-tuning before that," Zhu said.
(Reporting by Kevin Yao; Editing by Ken Wills and Neil Fullick)
===============
China increased trade with Iraq in 2011
26/10/2011 14:06
Baghdad, Oct. 26 (AKnews) - Salam al-Quraishi, an economic adviser in the Iraqi government, claimed that the volume of commercial exchange between Iraq and China reached $8 billion USD (9.4 trillion IQD) during the first nine months of 2011.
Allegedly, the trade volume in 2010 was only $6 billion USD (7 trillion IQD).
"China is working to increase its influence in the Iraqi market and especially in the fields of electricity, oil, housing, infrastructure development and in water and sewage projects," Quraishi said.
However, Quaraishi did not give any more details.
He only added that the Iraqi government "is working to facilitate the entrance of Chinese companies."
China is heavily involved in several sectors in Iraq, including electricity, water, manufacturing and, most significantly, oil. Currently, there are allegedly already 108 Chinese companies working in Iraq.
In June, China’s largest oil company China National Petroleum Corporation opened the first major new oil field in Iraq in 20 years at al-Ahdab in South Iraq.
Reported by Jaafar al-Wannan
===================
China vulnerable to asset bubbles, warns IMF
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By Koh Gui Qing – 45 mins ago
BEIJING (Reuters) – China's biggest commercial banks face systemic risks if a combination of credit, property, currency and yield curve shocks that could be withstood in isolation were to occur together, the International Monetary Fund warned on Tuesday.
But China can contain these dangers by freeing up financial markets to give investors, commercial banks and the central bank greater autonomy from government control, the fund said in its first-ever review of the Chinese financial system.
While not predicting an imminent disaster, the IMF made clear China needed to act quickly because it is vulnerable to destabilizing asset price booms.
"The existing configuration of financial policies fosters high savings, structurally high levels of liquidity, and a high risk of capital misallocation and asset bubbles, particularly in real estate," the IMF said.
The report, which was completed in June but published only on Tuesday, contains 29 key recommendations. The fund said it ran a stress test on 17 banks that account for 83 percent of China's commercial banking system.
(For a link to the full report, click on https://www-ombc.imf.org/protected/contents/pubs/ft/other/2011/f
ssachina2011.pdf)
The test, done in collaboration with the Chinese central bank and bank regulator, showed banks' non-performing-loan ratios rose by at least one percentage point for each one-percentage-point drop in gross domestic product.
Under a severe scenario where banks suffer a confluence of shocks, capital adequacy ratios -- or credit safety nets -- of lenders accounting for about a fifth of China's total banking assets fell below the regulatory minimum of 8 percent.
The IMF said the severe scenario assumed annual economic growth of 4 percent, sharply below the 9.1 percent posted in the third quarter; M2 (money supply) growth of around 10 percent; a property price tumble (fall) of nearly 26 percent, and a change in deposit and lending rates of 95 basis points.
However, the Chinese government's response on Tuesday to the report suggested Beijing is not rushing to heed the fund's advice.
"We have also noticed that the report contains several points of view that are not sufficiently comprehensive and objective," the People's Bank of China said in a statement published on its website.
"The government's sway over financial markets has already evolved from direct intervention to asserting influence through regulation of financial companies," the central bank said.
It added that China needs to do its own studies to gauge the feasibility of the IMF's recommendations.
RISK RESILIENCE
But since Chinese banks would have to suffer several of those shocks all at once to face the risk of systemic failure, the fund was otherwise upbeat on their resilience, even as it noted they are lending more outside their balance sheets.
"The banking sector's basic liquidity indicators appear healthy," the IMF said, adding that banks also get stable funding from an enormous pool of low-cost Chinese deposits.
Even if non-performing-loan ratios were to quadruple in two years to around 6 percent, the IMF said no banks would see their capital adequacy ratio fall below the minimum regulatory requirement.
Equally, it said higher interest rates and a 30 percent slide in home prices would only have a "limited impact" -- by shaving less than 0.25 percentage points off the aggregate capital adequacy ratio.
On China's notoriously exuberant real estate sector, where prices have clung to record highs even after nearly two years of market cooling measures by Beijing, the IMF did not judge it to be bubbly at the time of writing.
"There does not appear to be significant over-valuation of residential real estate prices in China as a whole, though there are signs of overvaluation in some market segments," it said.
To keep the house market growing healthily, the IMF said Beijing needed to liberalize interest rates and the exchange rate, develop the capital market, free the capital account and reform fiscal policy by rolling out a broad-based property tax.
The fund said a full assessment of the extent of the risks and how they could spread was hindered by data gaps, the lack of sufficiently long and consistent time series of key financial data, weaknesses in the informational infrastructure, and constraints on the team's access to confidential data.
(Editing by Nick Edwards, Ken Wills and Alex Richardson)
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Guangdong jade dealers protest over rent rises - paper
29 Nov 2011 02:46
HONG KONG, Nov 29 (Reuters) - Thousands of jade vendors in a city in southern Guangdong province confronted riot police during a protest over a sharp increase in shop rents, the South China Morning Post reported on Tuesday.
Several thousand vendors at a jade market in Zhaoqing took to the streets, blocking traffic and smashing the market's property management office before confronting police on Friday and Saturday to vent their anger over rising rents, the newspaper quoted a witness as saying.
The jade traders were angry that rental costs had shot up in the past few years but their retail prices were almost unchanged, the paper said, adding that clashes had stopped but riot police were still patrolling.
Another witness was quoted by the newspaper as saying that she saw riot police beating demonstrators with their truncheons at the jade market on Saturday afternoon.
Officials at Zhaoqing Public Security Bureau were not immediately available for comments.
In a separate case, more than 300 villagers gathered outside Guangdong provincial government headquarters in Guangzhou on Monday to protest over alleged illegal land sales and embezzlement of land sale revenue by local officials, the official Xinhua News Agency reported.
Guangdong, dubbed "China's world factory", has also been rocked by a series of strikes in recent months amid falling orders from the West. (Reporting by Charlie Zhu; Editing by Chris Lewis)
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China's Real Estate Market, Central Bank Policy
Dec. 1 (Bloomberg) -- Nicole Wong, a Hong Kong-based property analyst at CLSA Asia-Pacific Markets, talks about China's real estate market and the decision by the nation's central bank to cut banks' reserve requirements for the first time since 2008. She speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
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