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US firms moving operations out of China: survey
by Staff Writers
Beijing (AFP) Jan 20, 2016

China offers banks $91 bn ahead of holiday
Shanghai (AFP) Jan 20, 2016 - China's central bank has pledged more than 600 billion yuan ($91 billion) in funding support for banks to provide sufficient liquidity around the traditional Chinese New Year, when demand for cash surges.

Chinese companies typically pay salaries and bonuses before the holiday, also known as the Spring Festival, which falls in early February this year. People also traditionally exchange cash and gifts during the period.

The People's Bank of China (PBoC) said it will provide funds through its lending facilities, as well as through the money market, according to a statement posted on its website late Tuesday.

"The People's Bank will strengthen advance fine-tuning for liquidity arrangements before and after the Spring Festival to effectively meet the liquidity needs of financial institutions," it said.

Although the demand is seasonal, some analysts likened the move to a loosening of monetary policy after China's economy grew at its slowest rate in a quarter of a century in 2015 at 6.9 percent, raising expectations for further cuts in interest rates or reserve requirements for banks.

Nomura International said the move had lessened the chance of a cut in the reserve requirement ratio (RRR) for banks -- the amount of funds they must put aside -- later this month.

"The PBoC would like to turn to open market operations to manage liquidity and interbank interest rates, rather than to use regulatory monetary policy tools like the RRR or benchmark (interest) rates," it said in a research report on Wednesday.

"The bottom line is that the PBoC will keep liquidity abundant."

Worries over China's slowing economy have caused capital to flow out of the country, analysts say.

The government allowed the yuan to depreciate early this year, before stepping in and stabilising the exchange rate.

On Wednesday, the central bank fixed the yuan at 6.5578 to $1.0, slightly stronger than the previous day.

China maintains tight capital controls, only allowing the yuan to move up or down two percent against the US dollar from the daily fix.

One out of four US companies active in China has moved some operations out of the country or is planning to, as conditions worsen in the world's second-largest economy, an American business group said Wednesday.

Foreign investment has been a key part of China's transformation in recent decades, which has seen it become the workshop of the world and its largest trader in goods, but growth is now slowing and it faces rising competition on labour costs from rivals in Asia and elsewhere.

The American Chamber of Commerce in the People's Republic of China said more than three-quarters of respondents to its annual business climate survey -- 77 percent -- said they felt "less welcome" in the country last year.

It was a significant jump on the 47 percent in 2014, and came in the wake of wide-ranging monopoly probes that have targeted foreign firms, some of which have paid huge penalties to Chinese authorities.

"Some of the policies which are being considered or have already been enacted are fundamentally leading China in the wrong direction," said Lester Ross, the chamber's vice chairman.

Among the 25 percent who have moved some of their capacity elsewhere in the last three years, or are planning to do so, the most common driver was rising labour costs.

But the chamber said almost one in 10 said they were doing so because of "regulatory challenges".

Internet censorship emerged as a major concern for many firms, with almost 80 percent saying that China's sprawling online control apparatus had a negative impact on them.

Chinese authorities strictly censor websites in the country, and limit access to those outside with a web of controls known as the Great Firewall of China.

More than 70 percent of US firms said that as a result they were unable to access websites and information sources crucial to their business.

More than half found the inability to use some online tools -- Facebook, Dropbox, Instagram, YouTube, and Gmail are all blocked in China -- hindered their ability to operate.

Among the firms that were switching operations away, almost half -- 49 percent -- moved them to other developing Asian countries, while 38 percent went to North America.

US firms sometimes face controversy in their home country over operations in China, with accusations that they are exporting jobs, and some have moved capacity back in recent years, drawn in part by cost savings due to an energy boom and stable wages.

China's GDP grew 6.9 percent last year, its slowest in a quarter of a century, government figures show, and the economy faces challenges including industrial overcapacity and a stagnant property sector, as well as stock market volatility.

Among survey respondents, 45 percent reported flat or declining revenues last year, with only 64 percent saying their China businesses were profitable -- the lowest proportion in five years.

The chamber's 18th annual survey had responses from 496 of its 961 company members.

China outbound investment nears $120 bn in 2015: govt
Beijing (AFP) Jan 20, 2016 - Chinese overseas direct investment (ODI) rose to nearly $120 billion last year, official data showed Wednesday, as the world's second-largest economy sought to acquire foreign technologies, expand markets and diversify energy supply.

ODI leapt 14.7 percent from a year earlier to $118.0 billion in 2015, just ahead of the previous year's expansion, according to the commerce ministry.

It remained below inward foreign direct investment (FDI) of $126.3 billion, so the world's second-largest economy remained a net importer of capital. Both ODI and FDI exclude financial sectors.

Outbound investment in the 10-member ASEAN group of Southeast Asian nations jumped 60.7 percent and was up a similar 60.1 percent to the US, the ministry said in a statement, without providing totals.

The biggest individual acquisition was state-owned ChemChina's purchase of emblematic Italian tyremaker Pirelli, ministry spokesman Shen Danyang told reporters.

Chinese firms' takeovers were "large in value and broad in terms of industries and countries involved", he said, adding they remained active in the field despite a sluggish global economy.

Beijing encourages Chinese firms to expand overseas under a so-called "go abroad" strategy as the country faces multiple development bottlenecks.

Among these are manufacturing overcapacity, insufficient domestic demand and increasing energy and resources consumption.

Slumping international commodity prices have also reduced the cost of their investments, as have some currency swings such as the weakening euro.

State-backed Unisplendour Corporation Limited announced in September it would buy 15 percent of US data storage company Western Digital Corp for $3.8 billion.

Chinese power company Three Gorges in November won the right to operate two large hydropower plants in Brazil for 13.8 billion reals ($3.4 billion).

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