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POLITICAL ECONOMY
Bubble trouble hits Hong Kong jade sales
by Staff Writers
Hong Kong (AFP) Sept 15, 2013


World Bank chief says China to meet 7.5% growth target
Shanghai (AFP) Sept 15, 2013 - China is likely to achieve its growth target of 7.5 percent this year despite planned structural reforms to rebalance the world's second largest economy, the World Bank president said Sunday.

Jim Yong Kim is making a four-day visit focusing on issues relating to carbon emission reductions and China's urbanisation push.

"We think the growth (for China this year) will be at about 7.5 percent," Kim told a press conference in Shanghai on the first day of his visit.

"The data from August suggests that China will reach its goal of 7.5 percent."

Earlier this month the government announced a series of better-than-expected indicators for August, including strong exports and industrial output, that pointed to a pick-up in the domestic economy.

China's economy expanded 7.7 percent last year, its slowest growth since 1999.

Growth eased to 7.5 percent in April-June, from 7.7 percent in the first quarter of this year and 7.9 percent in the final three months of 2012.

Authorities have so far been reluctant to introduce large-scale stimulus measures. But they have pledged to push forward structural reforms to shift the economy from dependence on big-ticket investments and more towards consumer demand as the key growth engine.

"The government is committed to financial-sector reforms and also fiscal policy reforms that we think will pave the way for meeting the long-term growth," Kim told reporters in Shanghai.

"We think this is the right path."

China is preparing an "experimental" free trade zone (FTZ) in its commercial hub Shanghai as it tries to promote economic reforms.

Unfettered exchange of the yuan currency will be allowed within the proposed zone, according to a draft plan seen by AFP.

"I think it's a very positive development," Kim said of the FTZ. "This free trade zone will allow China to become more competitive."

China confirms new gas pipeline through Tajikistan
Dushanbe, Tajikistan (AFP) Sept 14, 2013 - China's Xi Jinping at a regional summit signed a deal to build a gas pipeline through the impoverished ex-Soviet country of Tajikistan, Tajik television reported Saturday.

The pipeline will transport gas from energy-rich Turkmenistan to China in as part of a huge supply deal.

"Carrying out this project will allow us to attract more than $3 billion of direct investments from Chin into the economy of Tajikistan," said the press service of Tajik President Emomali Rakhmon.

It will supply China with 25-30 billion cubic metres of oil per year, the press service said.

China is eyeing the vast oil and gas resources of ex-Soviet Central Asia for its fast-growing domestic economy and is also keen to assert political influence in a region that was dominated by Moscow for decades.

Xi and Putin met at a regional security conference held by the Shanghai Cooperation Organisation in Bishkek.

The new pipeline is due for completion in 2016 and will run for more than 400 kilometres (250 miles) within Tajikistan.

The mountainous country is the poorest ex-Soviet republic and dependent on remittances from its nationals doing manual labour in Russia.

Xi is carrying out a four-nation tour of Central Asia.

Prized as a magical imperial stone, jade is a status symbol of the super rich in Asia, but rocketing prices in the top-end of the market have left traders in Hong Kong struggling to find buyers.

With the cost of high-quality raw jade and jade products surging repeatedly in the past eight years, prices tags are now becoming prohibitive and experts predict the bubble must soon burst as buyers are stepping back.

Driven up by the appetite of wealthy Chinese, the rising cost of jade is also being fuelled by fears of a shortage in supply from Myanmar, the key source.

"Consumers cannot accept the current high prices, therefore, no deal is reached," Hong Kong jade dealer Li Kwong-kei told AFP at the Hong Kong Jewellery and Gem Fair Friday.

Li, who has participated in the fair for more than 10 years, said it was quieter than in 2011 and 2012.

"We are forced to raise prices -- it is increasingly hard to get high-quality raw jade from Myanmar. If you do not pay more, the good raw materials will be owned by the others," Li added, holding a green jadeite bangle with a price of HK$2 million (US$260,000).

"I have decided to wait for the prices of high- and mid-end jade to drop," said Judy Chen, a Taiwanese buyer at the fair.

"It appears to me that their prices are kind of at the peak."

Small businesses have also been affected -- stallholders at Hong Kong's famous outdoor jade market while away hours chatting with their neighbours, as customers remain sparse.

"I have seen some of my peers quit their businesses," said 54-year-old stall owner Wong Fung-ying. "The prices are high while the market is quiet."

Jade holds mythical properties in China, where it is believed to ward off evil spirits and bring better health.

With no international pricing system, values have been increasing since 2005 as the newly-rich in China have bought up jade products. Seen as a classier option than gold, it has become a status symbol.

Dealers are now worried that quality raw jade from Myanmar is dwindling as the country plans to process and sell its own jade products.

Myanmar keeps its cards close to its chest in a famously murky trade, and rumours are rife among dealers about its plans as the country opens up economically.

Jade dealer Liang Jianhui, based in southern China's Guangdong province and one of 7,000 buyers at the gem auction in Myanmar's capital Naypyidaw in June, told AFP that he could no longer afford to buy high-quality jade.

One bidder told AFP the auction had been less busy in the past two years than previously, with high prices putting dealers off.

"I set aside more than two million euros for the auction, only to find that I am too poor to win a bid for one single piece of top-end jade," said Liang.

"If a piece of raw jade sold for 100,000 euros in the past, people would make an offer of 500,000 euros for the same one this year."

One dealer said Chinese buyers had backed out of collecting their jade after having second thoughts about the high prices, while another said Chinese bidders had gone in high purposely to put the raw jade out of reach of their rivals.

Up to 90 percent of the world's jadeite -- the most sought-after type of jade -- is mined in the northern Myanmar town of Hpakant and hundreds of tonnes are transported to state gem auctions, which have until now been held at least twice a year.

But in 2013 there was only one major auction, which saw the number of jade lots down by 38 percent compared with the previous auction in March 2012, according to local media quoting official figures, although it was still reported to have reaped $2.4 billion in sales.

"What they want now is not only to export raw materials, but also to process jade domestically and sell it to China," said Li Lianju, a deputy director of Yunnan Land and Resource Department, who oversees the jade trade between Myanmar and China's Yunnan province, a major commercial hub for the gemstone.

"The value of raw jade rises more than twentyfold after being carved and turned into rings, bangles or necklaces," said Zu Engdong, head of Gemology at Kunming University of Science and Technology in Yunnan.

"So it makes full sense for the Myanmarese to process jade themselves."

Some fear Myanmar will close the jade mines altogether or slow down production to protect jade sources. Fighting in Kachin state may also have affected jade mining.

What is certain is that prices for those buying raw high-grade jade are astronomical, trickling down to merchants who are upping prices to maintain their profit margin.

Yunnan's Li says prices of lower-grade jade are already dipping.

"The bubble of low to middle end jade has burst first given the little fear of raw material shortage," he said.

While prices of high-end jade are likely to jump after the raw material from the June auction is processed, Li predicts such surges cannot continue in the face of lack of trade.

"By the end of the year, the prices will start to drop from the sky," Li said.

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