Fed to cut interest rate

Billionaire publisher Steve Forbes urged the US Federal Reserve on Sunday to cut a key interest rate by a full percentage point when it meets later this month, to solve an ongoing credit crisis.
The central bank should also focus on addressing the root of the problem - excess liquidity in the economy, Forbes said at lunch hosted by the Singapore Press Club.
Forbes said the Fed should cut the interest rate, now at 5.25 percent, by 100 basis points when it meets September 18 and make it clear "that while they're going to solve the short-term crisis, they will, over the next year or so, start to mop up the excess liquidity.
"Removing excess liquidity - the Federal Reserve selling bonds from its portfolio and withdrawing funds from the market - that is tightening which the Fed has not done," he said.
Economists increasingly believe the Fed will cut the rate by at least one-quarter percentage point at the September meeting.
The Fed has not lowered the rate in four years, but pressure has been building on it to do so to help ease credit conditions. Lower rates would reduce borrowing costs for everyone from potential homeowners to companies looking to finance activities and purchases.

China to raise reserve requirement ratio

China will raise the reserve requirement ratio by 0.5 percentage points for commercial banks as of September 25, the People's Bank of China (PBOC) announced on Thursday.
It is the seventh time this year the Chinese government has opted to raise the reserve requirement ratio to curb excess liquidity.
The central bank said the move was aimed at "strengthening liquidity management in the banking system and checking excessive money and credit growth".
PBOC statistics show that China's foreign exchange reserves reached US$1.33 trillion at the end of June, up 41.6 percent over the same period last year.
A total of US$266.3 billion was added to the country's foreign exchange reserves in the first half of 2007, US$144 billion more than a year earlier.

"8,530-TEU", First China-made Container Ship

The first 8,530-TEU container ship, of which China owns the full intellectual property rights, had been delivered to China Shipping Container Lines Co. Ltd. (Shanghai) and left for its maiden voyage to the United States on Sunday.
It has made China the fourth country in the world, after the Republic of Korea, Japan and Denmark that is able to design and build such giant container ships, said experts.
The ship, named "New Asia", is the first of five container ships of the same type to be designed and built by Hudong-Zhonghua Shipbuilding (Group) Co. Ltd. for the China Shipping Container Lines Co., Ltd.
The 101,000-dwt container ship, 335 meters long and 42.8 meters wide, can sail at a speed of 25 knots an hour.
The Shanghai-based shipbuilding company spent six years to build the ship, the largest container ship independently designed and built by China. It is one of the mainstream type of container ships in the world.
So far the company has confirmed nine orders for its 8,530-TEU container ships, including four for the Greek Costamare Shipping Co.

Property industry to remain hot next 10 years

Due to the wide demand-supply gap in the property market in China, the property industry in the country is expected to maintain a rapid growth in the next ten years.
According to Yang Shen, former Vice Minister of Construction, total floor space of houses had increased by 8.86 billion sq m in 1980 – 2006. The average floor space of houses per capita in China is larger than the figure in many other countries.
In the past decade, the property industry has been soaring continuously at an average annual growth of 14%, contributing to 4.5% of China’s GDP. It is estimated that the growth of the property industry will take up 8% of the country ‘s GDP by 2010.
With nuclear family taking the place of extended family in China, housing demand has become stronger and stronger in the market.
In the next 10 years, commercial houses with the total floor space of 9.9 billion sq m will be needed. That is to say, the property industry must manage to keep an annual growth of 13.2%. However, taking China’s shortage of farmland into consideration, it will be very hard for the property industry to achieve it.
Nevertheless, the shortage of land might also present a chance of rapid growth of business value of the property industry.

ARJ21... Time to fly

China's first self-developed regional aircraft ARJ21 completed the specific design and started manufacturing in April 2006 by China Aviation Industry Corporation I (AVIC I)
AVIC I and the Lao Airlines signed a Memorandum of Understanding of two ARJ21 jets, which marked a milestone for the exportation of China self-made aircraft.

The picture shows the cabin section of ARJ21 aircraft which attracted many visitors at the Asian Aerospace International Expo and Congress 2007 currently held in Hong Kong.

China's immunity from global turmoil

Rate hike reflects China's immunity from global turmoi 2007-8-22

BEIJING (XFN-ASIA) - China's bid to tighten liquidity while most central banks worldwide are battling to boost cash flows underlines the Asian giant's status as largely immune from the troubles afflicting global markets. The financial insulation, highlighted in a decision to raise interest rates again, is an arrangement of China's own making, as it combines a not fully convertible currency with limited access to the capital markets. ""Fundamentally speaking, the impact the global economy has on China is much, much smaller than on other Asian economies,"" said Ma Jun, a Hong Kong-based economist with Deutsche Bank. Worries about problems in the US mortgage market have caused liquidity to dry up in money markets as private banks withhold funds, prompting US and other central banks to offer extra cash. China is doing the opposite, sucking up as much cash as possible in an only partly successful attempt to prevent it flooding into stocks and property. ""China's central bank is not concerned about the global financial market havoc creeping into the domestic market,"" said Stephen Green, a Shanghai-based economist with Standard Chartered. ""China is still a different universe it seems when it comes to liquidity and growth momentum."" China's central bank raised the benchmark lending rate by 0.18 percentage point to 7.02 pct Tuesday, while the deposit rate was hiked by 0.27 percentage point to 3.60 pct. This was the latest chapter in China's prolonged struggle with excess liquidity, boosted directly by foreign fund inflows under the current exchange rate regime. ""The high level of liquidity is mainly from our large trade surplus plus incoming foreign direct investment,"" said Feng Yuming, a Shanghai-based economist with Orient Securities. ""In addition, there's a great deal of hot money, although it's tough to estimate exactly how much."" The surprise interest rate hike, which is the fourth this year, suggested a more hawkish central bank than many had expected. It also served as a message to local markets about the continued independence of Chinese economic policy-making. ""It's also a signal to the domestic market: Even at a time of a liquidity crunch overseas, China will not change its policy of tightening,"" said Sun Lijian, an economist at Shanghai's Fudan University. But it will not be without risks, especially given the fact that it takes place at the same time as the United States is lowering interest rates. ""It will strengthen the pressure for the Chinese currency to rise, and even more money will flow into China,"" said Han Zhiguo of Beijing Banghe Fortune Research. ""This, in turn, will greatly boost liquidity and heighten inflationary pressures,"" he said. It would seem as a never-ending story, as the policy response might be more rate hikes, which in turn, would encourage fund inflows, and so on. Little by little, however, China is opening up for greater integration with overseas financial markets. This is reflected in a move this week to allow one bank branch in north China's Tianjin city to offer direct investment in Hong Kong stocks. It could lead to 40 bln hkd flowing to Hong Kong stocks in the coming 12 months, according to Deutsche Bank's Ma. ""But it will be another three to five years before China is heading towards full convertibility, and only then will it be possible to say that it has genuinely linked up with global financial markets,"" he said.

China to maintain strong despite US....

China to maintain strong growth despite US subprime woes - Goldman Sachs

BEIJING (XFN-ASIA) - A potential US slowdown is likely to reduce overheating pressure in China rather than have any significant negative impact on the Chinese economy, Goldman Sachs said. China's continued robust growth also proves that it can decouple from an external slowdown, the brokerage said in a note to clients. While US economic growth in the first half slowed to 1.5-1.8 pct, compared with 3.2-3.3 pct a year earlier, China's economy continued to power ahead, expanding 11.5 pct in the first six months of this year. In the US, significant downward pressure could be exerted on consumer spending because of the US subprime crisis, which has raised the risks of a sharper correction in its housing market, Goldman noted. This would affect China's exports, but as this sector is already showing signs of overheating, a slowdown in demand would help alleviate pressure, it said. ""A slowdown in external demand, led by a weakening US, would reduce the overheating pressures in China, and thereby reduce the risks of more aggressive policy tightening,"" the note said. Manufacturers of consumer-related products, such as textiles, apparel, footwear and consumer electronics are likely to be the most adversely affected, Goldman Sachs said. Slower export demand would also leave more room for China's domestic demand to grow, it added. ""A slowdown in the US and elsewhere would potentially help reduce inflationary pressures in China and encourage policymakers to place more emphasis on the need to preserve domestic demand,"" it said. Conversely, if softening of external demand remains muted, the need for China to rein in growth will persist, Goldman Sachs added. The brokerage has an above-consensus GDP growth forecast for China for this year at 12.3 pct. For 2008, Goldman Sachs sees China's economic growth at 10.9 pct. ""Unless the US economy dips into recession, China is likely to be able to maintain its growth rate at 10 pct or above,"" it said.

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