Beijing tightens bank lending reins

China’s central bank stepped up its efforts to rein in inflation by ordering domestic banks to increase the level of deposits they hold in reserve, the third time it has done so this year

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Swaps Fall Most in Two Years as Lending Drops 25%: China Credit

The cost of locking in China’s money-market rates is sliding at the fastest pace in two years on speculation slowing credit growth will ease the need for more monetary tightening this month to combat inflation.

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Chinese Bank Lending Slows

Banks in China reined in new lending more sharply than expected in February, while money supply growth slowed, a sign the government’s monetary tightening efforts are working and further measures to cool the economy may not be necessary for now.

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China Alters Liquidity Gauge

China eliminated a key policy tool in its arsenal to control liquidity and inflation: its annual target for new bank lending, overhauling how it looks at lending and changing the way it regulates banks.

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Geithner confident U.S. economic recovery can withstand Middle East turmoil

Washington, D.C., United States (AHN) – Treasury Secretary Timothy Geithner tried to reassure the Senate Thursday about the risk to the U.S. oil supply from political turmoil in the Middle East. He said international oil production capacity and U.S. oil reserves are adequate to prevent spikes in prices that could potentially devastate the nation’s economic recovery from recession.

“If necessary, those reserves could be mobilized to help mitigate the effect of a severe, sustained supply disruption,” Geithner told the Senate Foreign Relations Committee.

The committee is considering what actions it should take to secure the U.S. economy amid revolution in Libya and Egypt, as well as standoffs with China over its import-export policy.

“In the United States, rising gasoline prices have left consumers with less money to spend, but underlying inflation across all goods and services is still modest,” Geithner said.

In addition, the U.S. economy continues to lose jobs to foreign competitors in China and elsewhere.

Meanwhile, the U.S. unemployment rate remains at 9 percent despite the fact the recession that started three years ago is officially over, the Labor Department reported this week.

Gasoline prices have risen steadily all this year, hitting an average of $3.39 per gallon this week.

Geithner’s testimony followed by one day Secretary of State Hillary Clinton’s recommendation to the Senate Foreign Relations Committee that international aid should not be cut.

Otherwise, U.S. strategic interests worldwide could be damaged, she said.

Clinton’s testimony was timed to influence Congress as it seeks to balance the federal budget by cutting spending.

Some State Department programs could lose their funding under the next fiscal year’s budget, which begins Oct. 1.

Congress already voted last month to reduce the State Department budget by 16 percent this year. The U.S. Agency for International Development, which provides humanitarian aid to underdeveloped countries, also suffered a 16 percent budget cut this year.

Foreign Relations Committee Chairman John Kerry (D-Mass.) said hundreds of thousands of people worldwide could die if a proposal to cut U.S. humanitarian aid by half wins approval.

Now is not the time to “pull back from the world,” Kerry said.

Clinton said further reductions in the State Department budget would make China an even greater threat to the U.S. economy.

The United States is competing with China for energy projects in the Asia Pacific region, where major oil reserves were discovered recently.

A drop in foreign aid to the region could give China the political upper hand in negotiations to win the projects, Clinton said.

“Let’s put aside the humanitarian, do-good side of what we believe in,” Clinton told the Senate committee. “Let’s just talk straight real politik. We are in competition with China.”

Anyone who believes the United States can diminish its influence in countries where it competes with the Chinese and still maintain international leadership is following “a mistaken notion,” Clinton said.

Her warnings are similar to an economic report this week from the financial giant Citigroup.

Willem Buiter, chief economist at Citigroup, said the world’s wealth is likely to increase through the first half of this century but the United States will lose its place as the biggest economy.

“China should overtake the U.S. to become the largest economy in the world by 2020, then be overtaken by India by 2050,” he wrote in an economic report.

Oil prices in the Middle East are likely to continue rising, creating unknowns for economic trends, Buiter said.

“Expect booms and busts,” he wrote. “Occasionally, there will be growth disasters, driven by poor policy, conflicts, or natural disasters. When it comes to that, don’t believe that ‘this time it’s different.’”

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Mideast arms deals in doubt amid spreading turmoil

Jerusalem, Israel Arieh O’Sullivan – The unrest that has brought down two Middle Eastern leaders and threatens a host of others could be bad news for the global arms industry, which regards the region, with its security issues, deep pockets and little domestic manufacturing, as a choice market.

Faced with demands for more political pluralism and economic policies that spread the wealth, governments across the region have stepped up subsidies for basic commodities and promised make-work schemes, all of which will put pressure on their defense budgets. Meanwhile, violent crackdowns in Bahrain and Libya have given European governments cold feet about doing arms deals.

Iraq, which has undertaken such consumer purse-pleasing steps as 1,000 kilowatt-hours of free electricity a month and increased food rations, announced Feb. 14 that it had diverted the money previously allocated for U.S.-made Lockheed Martin F-16 fighter jets to save the $900 million it needs.

“If the internal pressures of civil discontent in Iraq continue and percolate, I can definitely see more of that money going the way it has gone …diverted toward food and relief for the most poverty stricken Iraqi,” Dan Darling, Middle East Defense analyst for Forecast International, told The Media Line.

Arms sales to the Middle East rose nearly 40 percent in the last five years, according to the Stockholm International Peace Research Institute (SIPRI). As late as mid-January, industry analysts predicted that defense spending in the region would continue to grow dramatically. Forecast International said spending on modernization programs would expand 14 percent, with Iraq alone investing an average of $12.5 billion every year through 2015 to bolster internal-security challenges.

But in the space of a month, those forecasts have been dashed. Egypt faces a fiscal squeeze as its economy slows and the government has promised pay raises and other handouts. Jordan has taken similar measures to calm the streets. In Oman, where police shot dead as many as six demonstrators on Sunday, the government ordered a monthly allowance of 150 riyals ($390) for each registered job seeker and announced 50,000 new jobs.

Even countries such as the United Arab Emirates (UAE), which has remained calm so far and has considerable wealth from oil and trade, may be looking to save money by shopping around for cheaper weaponry.

Last week, the UAE announced that it had stopped talks with the Italian firm Aermacchi over a $1.37 billion deal to buy 48 M-346 jet trainers. It is now expected that they will return to talks with South Koreans to purchase the T-50 trainer, a move that manifested a greater readiness to engage in deals with Far East nations. Current annual UAE trade with the U.S. is $13 billion, but it is $25 billion with China, according to Defense News.

Iraq, which faces serious security issues both domestically and on its border, may return to the arms market but look for cheaper tanks, guns and jets. “Iraq is going to have some serious security issues in terms of border security and their position in the Middle East,” Darling said, adding they may seek cheaper alternatives for arms with France or even Russia.

Thousands of weapons dealers were in Abu Dhabi last week for IDEX 2011, the Middle East’s largest arms fair. It drew over 1,060 companies from 53 countries. A spokesperson for IDEX told The Media Line that the arms fair saw a “wealth of deals” and that the UAE armed forces alone said it had signed deals worth about $4 billion.

Despite a hefty public relations campaign, participants told The Media Line that the fair was greatly toned down from previous years, particularly since the delegations from Egypt, Tunisia, Libya and Yemen never showed up. “The opening ceremony was very short and a lot of people left early,” said one, who declined to be named.

As demand falls, arms makers are also being pressured from the supply side, as their host governments clamp down on weapons sales to countries that have used their lethal weapons against protestors. Hundreds were killed in Egypt and Tunisia before their leaders were toppled. The death toll in Libya, where Muammar Gaddafi has used bombers and helicopter gunships against rebels, has probably passed 1,000.

British Prime Minster David Cameron, who visited Egypt and the Gulf last week, to urge on democratic opponents of the regimes, also had a group of arms executive in his entourage, provoking controversy back at home with the mixed message he was sending the region. Britain, which exports some $6.5 billion in arms annually, suspended sales to Libya and revoked 44 licenses to sell arms to Bahrain, where at least seven have been killed.

The U.S. was sending mixed signals, too, after The Wall Street Journal reported that the Obama administration had launched a review of military assistance and prospective weapons sales to countries experiencing popular revolts.

“I don’t think that in the short term we are going to see any interruption in arms trade at least from the U.S. Europe probably will review each country. They are a little more hesitant. They don’t seem to feel they are shaping the Middle East the way the U.S. does,” Forecast International’s Darling said.

Such hesitancy is unlikely to be felt by China and other emerging arms-export powers in Asia. China advertised its ambitions at IDEX 2011, where it set up a large and glitzy pavilion. Besides its heavy arms, the state-owned Chinese companies were also hawking at IDEX their sophisticated avionics and shipbuilding expertise.

“This has been an excellent business opportunity for us,” said Yuan Jun, marketing director for China North Industries, which produces rocket launchers, tanks and artillery. “We will certainly have a presence at every event for the foreseeable future.”

The U.S., by far the world’s largest weapons producer, sells about a third of its arms exports to the Middle East, and a drive by China into the region would be a serious loss, “China is interested in seeing the geopolitical order become more multi-polar and not one of U.S. hegemony,” a senior Israeli official told The Media Line.

The political turmoil is also a headache for Russia’s arm industry as long-time client regimes, like Libya, fall to the opposition, Defense Minister Anatoly Serdyukov admitted this week. “There’s a chance we might lose something,” he said on a visit to Russia’s Pacific port city of Vladivostok. “But I hope that the main weapons and military equipment agreements will be fulfilled.”

Russia stands to lose some $3.8 billion of orders contracted or under negotiation to Libya after the United Nations Security Council declared an embargo on Libya, Russia’s Interfax news agency quoted a military source as saying. Nevertheless, Russia is going ahead with a $300 million deal to sell anti-ship Yakhont cruise missiles to Syria.

But Russia isn’t the only country whose weapons sales are threatened by regime change. Political uncertainty is likely to grip the Middle East for some time, as transition governments struggle to win support and gain legitimacy. Some of them may fall, raising concerns that sophisticated arms could find themselves in the hands of anti-Western governments possibly controlled by Islamic radicals, as happened when the Shah of Iran was overthrown in 1979.

“This is definitely on the minds of a lot of people in Congress, probably some people in the Pentagon and I have no doubt within the administration. I imagine it is a bit of a wait-and-see approach,” Darling of Forecast International said. “Egypt is definitely something to keep an eye on. We sold an awful lot of equipment to them in the past.”

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More China cities move to limit home purchases

24(Xinhua)–Three big Chinese cities Thursday unveiled new rules to restrict home purchases in the latest efforts to rein in rapidly rising housing prices.

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US asks China to be responsible and constructive while extending military might

Hong Kong, China (AHN) – The Unites States has issued a warning to China, saying that it should extend its naval dominance in the region in a “responsible and constructive” manner, adding that the US Navy would soon start boosting its military presence in Asia.

The Pentagon is concerned with recent technological advancements made by China and the fact that the Asian giant was planning to build “counter-space” weaponry that could destroy satellites in space and jam signals.

Beijing has also started asserting itself on the high seas and is planning to commission its first aircraft carrier soon. The US has confirmed that China is refitting a former Soviet aircraft carrier, Varyag, in the northeastern port city of Dalian.

Commander of the US 7th fleet, Vice Adm. Scott Van Buskirk, said in a speech in Hong Kong Monday that the carrier could become partly operational as early as this year. “It is our sincere hope that as China continues to develop a blue-water navy — one which may soon include an aircraft carrier — it will employ that navy in a way that is responsible and constructive,” Van Buskirk said.

The navy commander also trashed rumors that the US was planning to reduce its military presence in the region, saying that there were roughly 70 US naval ships and aircraft in Asian waters daily, which was up from 50 to 60 a decade back. He termed as unfounded reports that the sluggish US economy and its engagements in Afghanistan and the Gulf would force the US to cut its military presence in Asia.

“Some worry that the US — with our sluggish economy and continued military engagement in Afghanistan — is weakening its position and its commitment to Asia. I can tell you that our commitment to this region has never been stronger.”

When his attention was drawn to a spike in sea piracy incidents around the coast of Africa, especially in the Gulf of Aden, Van Buskirk said the problem had now spread to the Indian Ocean with Somali pirates becoming more daring. He said that no one country could fight the menace and that a concerted effort from all the affected nations was the need of the hour.

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China raises bank reserve to curb lending

The central bank’s order Friday says banks must raise their reserves by 0.5 percent of deposits. Reserves vary by institution but are about 20 percent for China’s biggest state-owned lenders.

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China New Lending Is 1.2 Trillion Yuan, Xinhua Says

Lending matched the median estimate in a Bloomberg News survey of 22 economists and adds to overheating risks in the fastest-growing major …

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China, Colombia eye Pacific-Atlantic rail link to boost Asia-Latin America trade

Bogota, Colombia (AHN) – China and Colombia are planning to build a railway running from the Latin American country’s Pacific coast up to its Atlantic coast to boost trade between Asia and South America.

Colombian President Juan Manuel Santos revealed the plan on Monday as he recognized Asia as the engine that will power the world economy.

China, on the other hand, recognizes Colombia as the port of entry to Latin America, according to Gao Zhengyue, Chinese ambassador to Colombia.

The planned 138-mile long railway will run from the port of Cupica on the Pacific coast to the Gulf of Uraba on the Atlantic coast. From Uraba, the railway will extend to a new city near Cartagena on the northern Atlantic coast of Colombia.

China, now the world’s second largest economy, plans to import coal from Colombia, the world’s fifth largest coal producer and China’s second biggest trade partner. The coal will be transported through the planned railway from the mines in the Atlantic coast to the Cupica port, where it will then be shipped by sea across the Pacific Ocean to China.

Trade between China and Colombia was worth $5 billion in 2010.

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World moving too slowly to wean itself from oil, experts warn

Tel Aviv, Israel David Rosenberg – Energy experts speaking at a conference near Tel Aviv on Tuesday warned that the world was moving too slowly in finding energy alternatives to oil, some saying technology-based solutions were being deterred by low prices; many lashing out at the indifference of Western governments to their reliance on the Middle East for energy.

While most of the attention has been focused on solar and other technologies, Brenda Shaffer, an energy expert from Israel’s Haifa University, said oil was quietly being displaced by natural gas as the world’s chief source of energy. She said the transition would shift the energy balance of power away from the Middle East.

“With natural gas, the Middle East is less important despite Qatar, which is the world’s largest energy exporter. Exporters are spread around the world, especially if you consider shale gas,” Shaffer told The Media Line on the sidelines of the Herzliya Conference, an annual gathering of Israeli and foreign policy makers. “The energy map could totally change.”

The experts spoke as Brent crude trades above the psychological barrier of $100 a barrel, which it passed on Jan. 31 to reach its first triple-digit level since 2008. While fears that unrest in Egypt could spread across the oil-producing Arab world have stoked prices higher, growing global demand will likely keep the pressure on prices over the long term.

Oil consumption is growing by about 2 million barrels a day every year as China and other emerging economies raise living standards and industrial output. China has emerged in recent years as the biggest importer of Middle East oil.

The shift away from oil has been underway for the past four decades, with its share gradually declining from almost half of all energy consumption to about a third today. BP forecasts in its 2010 energy report that oil, gas and coal – the big three of the fossil fuel world – would each account for between 27 and 36 per cent of total energy use by 2030, with the remainder coming from alternative fuels.

The move away from oil would have significant implications for the Middle East, which has 753 billion barrels of proven oil reserves, according to the U.S. Energy Information Administration (EIA). That equals about 56 percent of the world’s 1.35 trillion barrels of reserves. The share of the Organization of Petroleum Exporting Countries (OPEC) in global production will increase from 40 percent in 2010 to 46 percent by 2030, its biggest since 1977, according to BP.

By comparison, the region’s proven natural gas reserves are estimated by the EIA at 2,660 trillion cubic feet, or about 40 percent of the world’s 6,609 trillion total. BP estimates that its share in global production grows from 15 percent in 2010 to 19 percent in 2030. Shaffer said countries like Poland and China are likely to emerge as major natural gas exporters. Israel has also discovered major reserves in the past two years and could become a significant exporter as well.

Israel has an interest in seeing the energy power balance shift away from oil and the Middle East. But the experts said the global economy has reasons of its own to wean itself out of its century-old oil addiction, among them because demand for oil is outstripping the growth of supply.

It’s also enriched the oil exporting countries of the Middle East, fueling Muslim extremism, said James Woolsey, a former Central Intelligence Organization chief and now an investor in alternative energy.

The U.S. economy can’t grow at time when oil costs exceed 4 percent of GDP, a level that it currently reaches at $80 a barrel. Yossi Hollander, chairman of Israel’s Institute for Economic Planning, said high oil prices would wreak the most serious damages on poor countries such as Africa nations that don’t have the resources to pay for expensive oil.

The 1970s oil price spike forced African countries to borrow to pay for their energy costs, saddling them with debt for decades and choking economic growth. If oil prices continue rising and global supply and demand gets seriously out of balance, Africa faces a severe oil shortage again as richer economies outbid them for energy.

He drew a direct connection between the oil wealth accruing to Saudi Arabia and world terrorism, saying Saudi money was being used to fund schools where the country’s extremist version of Islam was being taught. He asked the audience to consider when they hear news of another suicide bombing who is paying for the infrastructure that creates the propaganda and infrastructure behind the phenomenon.

“When you pull into a filling station and take out your credit card, stop and turn to the rearview mirror and look into it at your own eyes,” he said. “Now you know who’s paying for it.”

Woolsey said the solution was to focus on transportation, where oil is the dominant form of energy, by encouraging the use of oil additives such as ethanol and making improvements in the internal combustion engine.

But David Hobbs, chief energy strategist at HIS Cambridge Energy Research Associates, said that oil prices were not yet high enough to coax Western economies into funding alternatives to oil. While he said he was convinced that technology would ultimately come to the rescue, he said a dire warning about future petroleum shortages wasn’t incentive enough for governments or companies to act.

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“Dr. Doom” tells Davos audience that overall risks to global economy are easing

Davos, Switzerland (AHN) – Economist Nouriel Roubini, also known as “Dr Doom,” told an audience at the annual World Economic Forum meeting on Wednesday that overall risks to the global economy are balanced.

Roubini, of Roubini Global Economics, did not discount the threat from the euro zone’s ongoing sovereign-debt crisis. However, he said that such threats were offset by the strength of the economies of emerging markets, which continue to lead global economic growth.

Roubini earned his nickname from previous accurate calls the global financial crisis a few years ago.

Now, Roubini told the audience that the global economic picture could be viewed as either a glass half-full or a glass half-empty. Roubini said that among the risk factors that feed a half-empty view are the euro zone’s sovereign debt crisis, continued high unemployment in the United States, the financial problems of municipal, state and federal governments there, global food and commodity price inflation, stagnant economic growth in most developed nations coupled with high household debt.

He said that the factors that feed a half-full view include emerging markets showing economic growth that is accelerating beyond the growth in China or India even as fears of a double-dip recession fade.

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Faxless Payday Loan

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Doctorate holder in China sells thesis to pay loan

A PhD holder in Shanghai has opened an online store to sell his thesis to pay for his mortgage.

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