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EU trade chief pressures China over procurements
by Staff Writers
Hong Kong (AFP) Feb 16, 2012

Foreign investment in China falls in January
Beijing (AFP) Feb 16, 2012 - Foreign direct investment in China fell in January for the third straight month, figures showed Thursday, and a commerce official warned of a tough year ahead due to the European debt crisis.

Investment by overseas companies fell 0.3 percent year-on-year to $10.0 billion last month, the commerce ministry said, compared with $12.2 billion in December.

"The foreign investment situation this year is relatively grim," commerce ministry spokesman Shen Danyang told reporters.

He said uncertainties over global economic growth, particularly Europe's fiscal woes, had dragged on foreign investment in China.

Inward investment from Europe fell 42.49 percent from a year earlier to $452 million in January, figures showed.

But US investment rose 29.05 percent to $342 million as Walt Disney Co. brought in funds for a theme park currently being built in the commercial hub of Shanghai, Shen said.

He gave no figures, but investment in the Disney park has been estimated at $3.7 billion.

Foreign investment from countries in the Asia-Pacific region -- which accounted for the bulk of total investment -- rose slightly, edging up 0.77 percent to $8.59 billion.

China's own overseas direct investment in non-financial sectors, meanwhile, reached $4.38 billion in January -- up 59.9 percent from a year earlier, Shen said.

He pointed out that growth in foreign direct investment was weak all over the world, but added China's rising costs and labour strife would have a negative impact on overseas investment in the Asian powerhouse.

China has been hit by a series of strikes at foreign and domestic firms since November last year, as workers protest over low salaries, wage cuts and poor conditions amid cutbacks due to the global economic slowdown.

A survey published Wednesday also showed that US companies in China said they were growing less optimistic about their operations, as rising costs and violations of intellectual property rights hurt their businesses.

More than 90 percent of 300 firms surveyed by the American Chamber of Commerce in Shanghai said higher costs for labour and materials were hindering their business, threatening China's competitive advantage.

However, analysts have warned that economic data for January may be distorted by the unusually early Chinese Lunar New Year holiday, which fell in January.

Many companies close their doors during the week-long break, also known as the Spring Festival, so employees can travel home to celebrate the most important festival in the Chinese calendar with their families.

China is protecting a domestic market for public procurements worth $1.1 trillion, EU Trade Commissioner Karel De Gucht said Thursday as he appealed to Beijing to open up further to global trade.

De Gucht dismissed fears of an escalating trade war with China but said people around the world were sceptical of Beijing's commitment to a rules-based global trade system, undermining faith in free markets everywhere.

He cited the World Trade Organization's recent ruling that Beijing's limits on key raw material exports broke its international obligations, and China's massive but tightly restricted market for domestic government contracts.

"No country more than China has benefited more from the current framework," De Gucht said in a speech in the southern Chinese city of Hong Kong.

"As it gains prominence and in some areas even achieves dominance, China needs to adapt to its new position of strength and leadership.

"It must help ease anxieties about open markets among its partners by applying and underwriting the rules, even if this means changing long-held government practices."

He said purchases by governments represented 17 percent of the world economy, and businesses that depended on such contracts represented 25 percent of the European Union's gross domestic product.

The EU was "one of the most open procurement markets in the world", offering almost twice as much business to foreign bidders as the United States.

"This openness has meant huge business opportunities for non-EU firms, including companies from China," the commissioner said.

"China is certainly not the only country where there are problems, but problems there certainly are."

He said China's domestic public procurements market was valued at 830 billion euros ($1.1 trillion), but "only a small fraction is open to foreign business".

Much of the business goes to state-owned Chinese companies, he said, adding that Brussels reserved the right to deny Chinese firms access to European procurements if Beijing refused to open up its market.

De Gucht said he had spoken to internal markets commissioner Michel Barnier about developing a legal response to China's refusal to reciprocate Europe's openness.

De Gucht said he was confident Beijing would respond positively to last month's WTO ruling that it liberalise duty and export quota measures on elements including magnesium and zinc.

Beijing had argued that measures on some of the metals were justified to conserve its natural resources -- the same reasoning it uses to defend its export restrictions on rare earths, which are used to make high-tech products.

"We expect China to re-visit its overall export restriction regime in light of this ruling," De Gucht said.

Despite differences over market access, EU-China trade will set new records in 2012, he said. The relationship was worth 428.3 billion euros last year, having come from "almost nothing" 20 years ago.

"As we understand the strains of liberalisation among the Chinese people, so too must China grasp that European support for open markets can only be guaranteed if accepted by the public at large," he said.

"And that acceptance can only be guaranteed by a perception of fairness."

He added that "there is a general feeling among European companies and governments that economic openness in China is improving too slowly or not at all."

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China to surpass India as top gold buyer: industry
Mumbai (AFP) Feb 16, 2012 - China is set to overtake India as the world's largest gold buyer this year as demand for the metal for jewellery and as a safe-haven investment surges, the World Gold Council said Thursday.

Global demand hit 4,067.1 tonnes in 2011 -- edging up 0.4 percent year-on-year -- worth an estimated $205.5 billion, the first time demand has surpassed $200 billion, the WGC said in its latest annual report.

Gold prices rose to a record over $1,920 an ounce in September on frenzied buying by individuals, investment funds and central banks in the aftermath of a US credit rating downgrade and plunging global equity markets.

Prices have slipped since but still hover around $1,700 per ounce.

India, the largest gold consumer and importer, saw a 7.0-percent decline in demand year-on-year to 933.4 tonnes last year, while demand from China jumped 20.0 percent to 769.8 tonnes in the same period.

"There was a major boost to the overall demand from China, a trend we see continuing in the new year," said Marcus Grubb, WGC's investment managing director.

"It is likely that China will emerge as the largest gold market in the world for the first time in 2012."

India and China, which have been battled high inflation, combined account for more than half of the world's gold demand.

India, where gold is widely purchased for religious and ceremonial occasions, consumed less of the yellow metal in 2011 largely because of a weak rupee, which made imports of gold -- priced in dollars -- more expensive.

"The domestic currency fell precipitously in the second half of 2011, on foreign capital outflows. The rapid rise and fall in the rupee and resulting local gold price swings impacted gold buying," the report said.

India's gold demand was down 27.0 percent year-on-year in the second half of 2011.

The WGC said it expects global demand for gold to remain strong in 2012.

Despite the recent softening in demand, India is likely to record steady demand for gold this year, in-line with 2011 trends, analysts and the WGC said.

"The sentiment is likely to remain upbeat this year as inflation is moderating and various tax incentives are likely to support purchases," WGC's Middle East and India managing director Ajay Mitra told reporters.

Analyst Hareesh V. of research firm Geojit Comtrade expects India's gold demand to rise marginally by 2-3 percent this year.

"India could consume close to 965 tonnes in 2012, with the rupee rising against the dollar and inflationary pressures easing, which would boost the import of gold," Hareesh said.


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Obama celebrates return of jobs from China
Milwaukee, Wisconsin (AFP) Feb 15, 2012
A day after telling China's next leader his country must play by global economic rules, President Barack Obama Wednesday celebrated the return of US jobs from the vast Asian economy. Obama, seeking to boost manufacturing in key swing states hit by high unemployment as he cranks up his reelection campaign, touted plans to offer tax breaks to companies which bring jobs home from low-wage econo ... read more

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