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[sandi66]

Canada’s PM urges G20 to halve deficits
By Bernard Simon in Toronto

Published: June 19 2010 17:44 |
Last updated: June 19 2010 17:44

Canada’s prime minister Stephen Harper has urged G20 countries to agree to halve their budget deficits by 2013 and to put their government debt-to-GDP ratios on a downward path by 2016.

Mr Harper, who will chair the G8 and G20 summits in Ontario next week, said in a letter to his fellow leaders that “our primary objective must be to encourage economic growth and promote job creation for our citizens”.

EDITOR’S CHOICE
Obama urges G20 to boost demand - Jun-18In depth: G20 - Jun-04Text of Obama’s G20 letter - Jun-18Obama highlights impact of $787bn stimulus - Jun-18G20 drops support for fiscal stimulus - Jun-06China warns G20 currency critics - Jun-17At the same time, he added, “advanced countries must send a clear message that as their stimulus plans expire, they will focus on getting their fiscal houses in order. This requires credible plans for fiscal consolidation to dispel the uncertainty and financial volatility that can impair our future growth prospects.”

Mr Harper’s prescription is more restrictive than the strategy proposed by President Barack Obama on Friday, in which the US president urged other G20 countries to boost domestic demand and increase exchange rate flexibility to encourage global growth and rebalance the world economy.

In what appeared to be a warning aimed at China and Germany, Mr Obama said in a letter to the other leaders: “I am concerned by weak private sector demand and continued heavy reliance on exports by some countries with already large external surpluses.”

Reopening the debate over G20 fiscal policy, the US president warned that “we must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn”.

Mr Harper’s “exit strategy” from fiscal stimulus reflects Canada’s relatively healthy public finances. Although Ottawa ran a record deficit of about C$47bn in the year to March 31, the shortfall amounts to slightly over 3 per cent of gross domestic product, compared to the US’s 11 per cent.

Mr Harper’s Conservative government aims to virtually eliminate the deficit by 2015. It has pledged not to extend a two-year stimulus package of spending and tax breaks, due to end next March.

The International Monetary Fund estimates Canada’s debt-to-GDP ratio at about 31 per cent this year, compared to 67 per cent for the US, 75 per cent for the UK and 115 per cent for Japan. The finance minister Jim Flaherty said recently that “their ratios will continue to climb, while Canada’s will begin falling in 2011”.

www.ft.com/cms/s/0/2c15e9fc-7bc1-11df-aa88-00144feabdc0.html

[sandi66]

China currency move overdue, more needed -Grassley
WASHINGTON

Sat Jun 19, 2010 1:36pm EDT

WASHINGTON June 19 (Reuters) - The top Republican on the U.S. Senate's tax-writing committee on Saturday called China's yuan move overdue and said the United States should continue pressing for the currency to appreciate in value.

"China's announcement is long overdue. Congress and the administration need to keep the pressure on until China takes concrete actions to appreciate its currency exchange rate in a meaningful way," Republican Senator Charles Grassley said in a prepared statement.

www.reuters.com/article/idUSWEN608920100619

[sandi66]

Three Canadians charged with anti-G8, G20 arson
(AFP) – 6 hours ago

OTTAWA — Three Canadian men suspected of ties to an anti-G20 group have been arrested and charged in last month's firebombing of a Royal Bank of Canada (RBC) branch in Ottawa, police said Saturday.

The May 18th blast that destroyed the branch's automated teller machine area and blew out its windows for damages estimated at 500,000 dollars was claimed by an anti-establishment group.

In a video posted online, the group railed against the leaders and bankers of the G8 and G20 world powers, which meet in Ontario next week.

Police placed arson, possession of incendiary material, explosives and mischief charges on Friday against the three suspects -- retired government employee Roger Clement, 58, engineer Claude Haridge, 50, and Matthew Morgan-Brown, 32, all from Ottawa.

Police said they recovered hundreds of rounds of .762 caliber ammunition for machine guns stored in a box with .50 caliber markings for sniper rifles.

"While I am very pleased to bring this portion of the RBC arson file to a close, I ask Ottawa residents to remain vigilant, before and during the G8-G20, and continue to report any suspicious activity to police," Ottawa Police Chief Vern White said in a statement.

The three men made a brief appearance at the Ottawa Court House earlier Saturday and were remanded into custody. Morgan-Brown and Haridge are due in court on Monday and Clement has a court appearance scheduled for Friday.

www.google.com/hostednews/afp/article/ALeqM5j9sfBjoq7DZMsY5ZUm6PsQdCQ28w

[sandi66]

On the Agenda: A look at the plans for the G8 summit


June 19, 2010 – 2:00 pm

Iran, terrorism & the ‘Muskoka Initiative’: Kathryn Blaze Carlson looks at plans for the G8 Summit

ACCOUNTABILITY

Accountability is both a signature agenda item at the G8 and a general theme at both leadership summits. The Harper government has emphasized that the summits will be less about new commitments and more are about ensuring progress on past commitments. To that end, the recently created Accountability Working Group will present a report on G8 action on development-related commitments since the 2005 Gleneagles Summit. The report will evaluate commitments on a country-by-country basis, and is expected to be particularly embarrassing for Italy and Germany, which have poor track records on compliance and who pushed for a less d**ning summit-by-summit assessment. “I don’t think the intention was to name and shame, but that will inevitably happen,” said Alan Alexandroff, co-director of the G20 Research Group at the University of Toronto’s Munk School of Global Affairs. In the lead-up to the summit, G8 leaders said they are open to adopting a comprehensive accountability mechanism that could monitor future commitments, although it is unclear whether they will be able to agree on the details.

HEALTH (MATERNAL AND CHILD)

Maternal and child health is the issue Canada is bringing to the G8. Deemed the “Muskoka Initiative,” these discussions on efforts to improve maternal and child health in the world’s poorest regions are expected to set the tone for the upcoming United Nations summit on Millennium Development Goals. Although firm financial commitments have so far not been tallied ahead of the G8 summit, Canada and Britain are expected to commit somewhere between $1 billion and $1.4 billion each to the cause, while the United States appears willing to commit double that amount. “The lead actor on this is definitely Canada, and the US is walking lock step with us on this,” said Teresa Chiesa, CARE Canada’s program manager for Africa. It will likely be difficult for the summit to secure big sums from austerity-focused countries like Italy, Germany and Japan — a challenge that may overshadow any success paved by Canada. Outside the G8, meantime, countries like Norway, New Zealand and the Netherlands have committed large sums, and the Bill & Melinda Gates Foundation has made a $1.5-billion commitment. The Initiative was initially overshadowed by Prime Minister Stephen Harper’s refusal to include support for family planning and abortion services, but the furor has largely quieted. “I think everyone will respect each other’s positions, and will stay focused on averting maternal and newborn mortality,” Ms. Chiesa said.

NON-PROLIFERATION

Nuclear non-proliferation — with a strong and united position against Iran — is expected to top the G8 agenda. “The main issue is going to be the signal towards Iran that the G8 stands together on this, and that they stand firm in asking Iran to cooperate and stop enrichment,” said Anthony Seaboyer, a nuclear proliferation expert at the Queen’s University Centre for International Relations. “North Korea has more or less developed the capability at least to test nuclear weapons, and Iran hasn’t yet. Iran is like a gate — the question is whether the international community is going to be able to close that gate.”

The G8 leaders are also expected to build on the recent Nuclear Security Summit in Washington, DC, where leaders pronounced the danger of fissile material falling into terrorist hands. There is currently no consensus on measures to keep technologies away from non-state actors, and the G8 is not likely to bear fruit in terms of a plan to deal with Iran and North Korea (the latter will also come under fire amid allegations that it was responsible for the explosion that sank a South Korean warship in March). Another major issue, Mr. Seaboyer said, will be the Global Partnership Against Weapons and Materials of Mass Destruction, which was created the last time Canada hosted a summit in 2002. The Kananaskis-born program committed $20 billion over ten years to secure nuclear weapons and fissile materials in the former Soviet Union, and is set to expire in 2012. At the urging of Canada, the United States, and Japan — and despite past concerns over transparency and corruption in the Russian government — the G8 leaders are expected to extend the partnership program with a further commitment of $10 billion, Mr. Seaboyer said.

VULNERABLE AND FRAGILE STATES

“The terminology ‘Vulnerable and Fragile States’ is very polite shorthand for states like Pakistan or Yemen, where there is a functioning national government but there’s a lot of terrorism that originates from there,” said John Thompson, a security expert with the Toronto-based Mackenzie Institute. “The tricky part is determining whether and how to intervene without further muddying up the situation.” G8 leaders are expected to receive a report recommending how to improve national and multilateral programs designed to assist fragile states. “The conventional response is to try to prop the government up with money, expertise, and political support, which has had mixed results in the past,” Mr. Thompson said. “Most former colonial powers are hesitant to get involved again, whereas the Americans are more interventionist.” Ahead of the G8, Canadian planners made it clear that there would be a focus on strengthening customs and immigration controls at the Afghanistan-Pakistan border. Indeed, G8 leaders are expected to reiterate their support for a dialogue between Afghanistan and Pakistan, especially on matters concerning governance and security along the volatile border region. Drug trafficking, piracy, terrorism, and transnational organized crime coming out of South America, Caribbean, Africa, are also likely to be among the key issues up for discussion. Haiti, meantime, is expected to dominate on the development front.

CLIMATE CHANGE

Climate change was added to the G8 and G20 agendas at the urging of the European Union, the United Nations, Mexico, and environmental groups, but is not expected to have a high profile at the meeting. Nonetheless, in a bid to pave the way for December’s UN climate change summit in Mexico, the European Union and others may press to seal the tentative deal reached at the UN summit in Copenhagen last year. “There might be some movement on the big-picture finance package that was widely discussed at Copenhagen, which looked at providing large amounts of cash to developing countries to reduce emissions and adapt to climate change impacts,” said Dave Martin, Greenpeace Canada’s Climate Energy Coordinator. He said fossil subsidies will also likely be discussed. “There was a consensus at the G20 meeting in Pittsburgh that countries would come to this summit with their firm commitments to roll back subsidies,” he said. France might also discuss its call for a tax on financial transactions in order to raise money to tackle climate change — a measure the United States has staunchly opposed. An expert-level working group on ‘energy poverty’ in Africa is also expected to report.

TERRORISM

Terrorism has been a frontline issue in the decade since the Sept. 11 terrorist attacks, and is expected to be a key part of the agenda again in Muskoka. “There is a history of very effective agreements on terrorism coming out of the G8 and G20 summits,” said Mr. Thompson, of the Mackenzie Institute. Key issues at this year’s summit will likely include efforts to curb money-laundering and deeper international cooperation on investigations. Mr. Thompson said the conflicts in Afghanistan and Iraq are expected to be “sticky” issues, and there may be calls for more resources and involvement by member countries. “Canada might be asked by the United States to keep combat troops in the frontline roles in Afghanistan after 2010,” he said. The fragile state of Yemen was also reportedly added to the terrorism agenda at the behest of Canadian Foreign Minister Lawrence Cannon.

DEBTS

Amid concerns that the European debt crisis could jeopardize global economic recovery, G20 finance ministers recently urged EU countries to speed up their efforts to curb their public deficits. “Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” said the ministers’ final communiqué, issued after their two-day meeting in Busan, Republic of Korea, earlier this month. Morris Goldstein, a senior researcher at the Washington-based Peterson Institute for International Economics, said that while debt will be one of the top issues, the G20 is likely to produce little more than rhetoric on the subject. “The G20 is not going to tie anyone’s hands on when to reduce their debt,” he said. “It’s more about reassuring the markets that the members are aware that debts are too high and that there are general plans to reduce debts.” Because each country is facing different economic pressures, coordination on debts is neither likely nor desired. “The US, for example, has taken the view that one ought to make plans, but one ought not to implement them too quickly because the recovery is still fragile,” said Mr. Goldstein. “Others, particularly Europe, are of the view that they need to tighten up fiscal policy right away because markets are obviously very nervous about too much debt, especially after Greece.” There is considerable pressure on some countries to reduce their debt, including Spain, Italy, Portugal and Ireland.

LEVIES ON BANKS

Prime Minister Stephen Harper recently said there would be a “lively debate” over the divisive global bank levy — the so-called Robin Hood tax, which involves taxing banks and then putting the money into a fund that could be accessed to bail out banks in the event of crisis. “In principle, all the leaders are in agreement that they don’t want the taxpayer to have to bail out banks the way hey did before, but after the finance meeting in Busan, it appeared that the leaders were not going to agree on a global approach,” said Alan Alexandroff, co-director of the G20 Research Group at the University of Toronto’s Munk School of Global Affairs. Canada is expected to reiterate its opposition to the tax, arguing that the levy is inappropriate for the Canadian banking system because there are already regulatory mechanisms in place that limit reckless risk. Canada’s Finance Minister Jim Flaherty, last month said “some” G20 countries are warming up to Canada’s alternative to a global bank tax — which is called embedded capital and would see financial institutions insure themselves against failure by issuing debt that could be converted into equity — is gaining “some support” among key countries. France and Germany, however, are steadfast in their support for the global bank tax: In the lead-up to the summit, German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin to reaffirm their position, and warned that they will craft a letter to Prime Minister Harper detailing their joint support for the levy. The United States and the United Kingdom are also expected to confirm their desire for a levy. Mr. Alexandroff said that if Canada can prevent a global bank tax, “then they will view that as a positive.”

GLOBAL IMBALANCES

After meeting in Busan earlier this month, G20 finance leaders emphasized that while the global economy is recovering faster than expected, the recovery is occurring at an uneven pace across countries and regions. In the midst of the European and Greek debt crises, and with fears that Spain, Portugal and Italy might follow suit, the leaders stressed the need to coordinate exit strategies and get national debts under control. The Framework for Strong, Sustainable and Balanced Growth, adopted at the G20 in Pittsburgh last year, calls for aligning fiscal, monetary, foreign exchange, trade and structural policies among the member nations. Mr. Alexandroff said the G20 is essentially looking to spur growth but in a balanced way, and will look to the Framework for direction. In a letter released last week, US President Barack Obama called for “sustainable” public finance, and said he is “concerned by weak private sector demand and continued heavy reliance on exports” among some G20 nations. “For example, G20 leaders might encourage China — which has a huge current account surplus — to focus on increasing domestic demand.” More broadly, Mr. Alexandroff said the G20 is expected to talk about “improving the picture in Europe in general.”

REGULATION AND SUPERVISION

In Busan, the G20 finance ministers reaffirmed their commitment to accelerating international reform, with a particular view to strengthening capital and liquidity standards and capping leverage. The United States is expected to push regulatory reforms in areas such as financial supervision, consumer protection, and the regulation of derivatives — reforms that seek to limit the financial wizardry blamed for the recent and far-reaching economic downturn. “Countries seem to have agreed on a lot of this in principle, but the real rub is in the details,” said Mr. Goldstein, of the Peterson Institute, adding that the “big issues” will be bank liquidity, capital, and leverage requirements. “That’s something that’s supposed to be handled internationally, and the hope was that they would get agreement by the end of this year and then implement in 2012.” Mr. Goldstein said the prospect for such an agreement is not likely, as countries like France and Germany are squeamish to make changes that could prove “too much, too quick.” The United States, meantime, will likely press for swift international cooperation on regulatory reform so that the details can be ironed out in time for the G20 summit in Seoul at the end of this year. Mr. Goldstein said that when it comes to the issue of banks and risk, there is also likely to be some general language on contingency plans in case a bank faces failure. “They might announce that everyone should have a wind-down plan, but they’re probably not going to specify what it has to look like.” Canada, for its part, is liable to tout its regulatory system, and is expected to recommend active supervision to limit reckless risk and increase transparency.

ENERGY

On the heels of the recent and disastrous BP oil spill, energy may move from the sidelines toward centre stage at the behest of US President Barack Obama. The president’s recent Oval Office address promised to look at accelerating the transition from fossil fuels to clean energy, whether through action against tax breaks or lax regulations. “The oil spill in the Gulf has brought the hazards of oil and gas into the forefront of everybody’s mind, so there’s bound to be discussions surrounding environmental damage,” said University of Toronto geology professor Andrew Miall, adding that President Obama’s push on the issue would likely resonate domestically. “The spill will certainly bring some urgency to this agenda item.” Prof. Miall said G20 leaders might discuss broad “encouragements for change,” including research funds for alternative sources, conservation measures, and transportation initiatives. Leaders are also poised to discuss fossil fuel subsidies. At the G20 in Pittsburgh last year, leaders recommitted to prepare strategies and timetables to phase out fossil fuel subsidies, which essentially put additional dollars into the hands of companies that find and process fossil fuels. “There was a consensus there that countries come to this summit with their firm commitments to roll back subsidies,” said Dave Martin, of Greenpeace Canada. The leaders may also take a look at the issue of oil derivative markets, which France has said should be better regulated and more transparent.

STIMULUS AND EXIT STRATEGIES

“Right now, the biggest fiscal issue for the G20 countries is the massive fiscal deficits that have become a legacy of the massive stimulus spending,” said Niels Veldhuis, director of fiscal studies and a senior economist at the Fraser Institute. “That really has to be on the forefront of the agenda.”

Indeed, the International Monetary Fund recently warned G20 finance ministers that the lack of credible exit strategies could exacerbate market nervousness about sovereign debt. However, G20 countries such as France have warned against withdrawing stimulus measures too abruptly, arguing that it could prompt a collapse in the world economy. G20 leaders have so far agreed on a need for worldwide cooperation and communication to limit any further unexpected turbulence in the global economy, but have taken the position that each country will need a different exit strategy. “They always talk about coordinated efforts, but what we now is uncoordinated efforts,” Mr. Veldhuis said. “We need countries to lead the way and return to balanced budgeting, and I think Canada has the opportunity to shine in that regard.” China, South Korea and Japan may reiterate their support for a global financial safety net to shield economies, but the proposal has so far received lukewarm response among European representatives.

news.nationalpost.com/2010/06/19/on-the-agenda-a-look-at-the-plans-for-the-g20-summit/

[sandi66]

Secret service plotting Obama's trip

Last Updated: June 19, 2010 5:17pm

Members of the U.S. Secret Service have been in and out of Toronto checking every detail of this week’s trip by President Barack Obama to attend the G8 and G20 Summits.

Obama is expected to arrive at Pearson airport on Friday and will travel to Huntsville for the G8 by motorcade or by Marine One, the presidential chopper, police sources said.

Officers said there will be little opportunity for Canadian fans to see him since he’ll be staying in secure locations with no public access. Obama’s air and land travel has to be approved by the secret service whose armed agents are responsible for presidential protection. The service never comments on presidential security details.

Obama, and other leaders, will likely fly to Huntsville for the G8 and back to Toronto because of security concerns and the distance involved.

Marine One would be accompanied by a Canadian Forces chopper and CF-18 fighters as air cover.

“Three hours by road to Huntsville is a long time,” the source said. “There is too much open ground to cover.”

Marine One usually flies in a formation with identical choppers and is equipped with flares to counter heat-seeking missiles and chaff to foil radar-guided missiles.

Meanwhile, military helicopters have been practising drills near the downtown Metro Convention Centre, where the meeting will take place and a helipad has been created in a parkette near the Rogers Centre.

Toronto Police spokesman Sgt. Tim Burrows said he couldn’t comment on operational security issues.

Officials said a fleet of CF-18s are on alert in Toronto and Huntsville for any violation of airspace during the summits.

Some of the military aircraft, along with other police vehicles, are being kept at Pearson.

www.torontosun.com/news/g20/2010/06/19/14449896.html

[sandi66]

Merkel signals G20 clash with Obama on finance

Sunday, June 20, 2010

* Obama urges world’s leading economies to avoid scaling back govt spending too quickly or risk derailing global recovery

BERLIN: German Chancellor Angela Merkel said on Saturday spending cutbacks are needed following the spate of throwing money at the global economic crisis, in a direct counter to US President Barack Obama.

Referring to the G20 summit in Canada next weekend, Merkel said in a videotaped message that “we are going to discuss when to quit the phase of short-term measures and go on to lasting budget consolidation.”

Such a move was “urgently necessary, in the view of the Europeans and particularly of Germany,” she said.

Obama urged the world’s leading economies Friday to avoid scaling back government spending too quickly or risk derailing the global recovery.

“We worked exceptionally hard to restore growth; we cannot falter or lose strength now,” Obama said in a letter to G20 leaders ahead of a June 26-27 summit in Toronto.

“Our highest priority in Toronto must be to safeguard and strengthen the recovery,” Obama said in the letter dated June 16, but released Friday amid concerns about the pace of the global recovery.

The warning — a clear shot at European governments reining in budget deficits — comes after months of worry about the health of the eurozone, fueled by huge public debts in Greece and Spain.

Germany, Europe’s biggest economy, is working on a multibillion-euro package of spending cuts designed to bolster government finances and recoup market confidence.

But those moves have led to US concerns that the global recovery — from the worst slowdown in decades — might be stopped in its tracks by withdrawing government stimulus.

Obama also expressed concern about “weak private sector demand and continued heavy reliance on exports” by some nations within the G20, in a clear reference to Germany.

Merkel retorted on Saturday, “We know of course that the European Union must make its contribution to ensure lasting world economic growth,” but added, “We believe we have put the stresses on the right spot.”

“Europe will make its point of view clear at the G20,” she warned.

She also said that the European Union will “pledge at the G20 to develop a worldwide tax on financial transactions,” even though there were doubts about its feasability. “There will certainly be controversy,” she added. afp

www.dailytimes.com.pk/default.asp?page=2010%5C06%5C20%5Cstory_20-6-2010_pg5_24

[sandi66]

China’s Hu Buys Time With Yuan Announcement Before G-20 Summit

June 20, 2010, 12:15 PM EDT

June 21 (Bloomberg) -- Chinese President Hu Jintao may have succeeded in removing the yuan’s valuation from debate at this week’s Group of 20 leaders’ summit, economists and political analysts say. How much time he’s bought depends on how flexible the currency will become.

Days before China’s central bank announced on June 19 that the yuan’s “flexibility” would increase, officials said the currency’s value was not a suitable item for discussion at the G-20 meeting in Toronto. Hu will meet with President Barack Obama and other world leaders at the June 26-27 summit to discuss items ranging from the global response to the European sovereign-debt crisis to increasing the influence of developing countries in the International Monetary Fund.

U.S. lawmakers threatened to thwart China’s wish to keep the yuan off the meeting’s agenda. House Ways & Means Chairman Sander Levin, a Michigan Democrat, said on June 16 that China needed to act by the end of the summit or risk U.S. legislation which could levy penalties on Chinese imports.

“I think the announcement is in a sense preemptive and will probably keep currency off the agenda at the G-20 meeting, a well advertised Chinese goal,” said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington. “My view is that they have at a minimum bought some time.”

Constructive Step

Obama, in a statement, called China’s decision a “constructive step.” U.S. lawmakers said China’s move was insufficient.

Senator Charles Schumer, the New York Democrat who is co- sponsor of legislation that would allow for duties on Chinese imports, said he was dissatisfied with a statement that didn’t indicate the timing or amount of adjustment.

“We hope the Chinese will get more specific in the next few days,” Schumer said on June 19. “If not, then for the sake of American jobs and wealth, which are hurt every day by China’s practices, we will have no choice but to move forward with our legislation.”

Senator Charles Grassley of Iowa, the Finance Committee’s ranking Republican, said the Obama administration and Congress “need to keep the pressure on until China takes concrete actions to appreciate its currency exchange rate in a meaningful way.”

China’s central bank yesterday reaffirmed it would maintain the yuan’s 0.5 percent daily trading band and said greater yuan flexibility would help cut the trade surplus and reduce the reliance on exports as a driver of growth.

Lawmakers’ Ire

The yuan has been held at about 6.83 to the dollar since mid-2008. The currency appreciated 21 percent in the three years after a peg to the dollar was scrapped in July 2005 and replaced by a managed float against a basket of currencies including the euro and the Japanese yen.

The persistent surplus has been a driving force of Washington lawmakers’ ire. China is the second-biggest trading partner of the U.S. after Canada and the U.S. is China’s biggest single-country export market. Two-way trade last year amounted to $366 billion, with China recording a $226.8 billion surplus, according to U.S. Commerce Department data.

Should the yuan resume its appreciation against the U.S. dollar, which was suspended in July 2008 as world economic growth slowed, then China can “avoid becoming a target in the spotlight” at the G-20, said Li Cheng, head of research at the John L. Thornton China Center at the Brookings Institution in Washington.

China’s Agenda

That will allow China to focus on its own agenda at the meeting. Vice Foreign Minister Cui Tiankai told reporters on June 18 that China wanted to discuss new quotas for the IMF that would boost the power of developing countries, promote the overhaul of global financial regulations, speak out against trade protectionism and pay more attention to economic development in poorer countries.

Zhang Tao, head of the central bank’s international department, said at the same briefing that Europe’s sovereign debt crisis was also a high priority for discussion.

China, by moving on its currency ahead of the Toronto summit, has shifted attention to the budget deficits of developed nations, said Eswar Prasad, a senior fellow at the Brookings Institution and a former head of the China division at the International Monetary Fund. Vice Finance Minister Zhu Guangyao said June 18 that China’s fiscal debt was about 20 percent of gross domestic product. That compares with almost 100 percent in the U.S.

Trade Surplus

Still, Hu’s respite may be cut short if China’s trade surplus rises and the yuan only makes a small appreciation of about 2-3 percent against the dollar in the coming months, Lardy said.

Reports this month from the U.S. and China highlighted concern that trade imbalances, which reached record levels before the global financial crisis, may be reemerging. Chinese exports climbed 48.5 percent in May from a year earlier. In the first four months of the year the U.S. posted a $71.0 billion trade deficit with China, up 5.7 percent from the year-ago period.

“China could come under renewed pressure,” Lardy said.

www.businessweek.com/news/2010-06-20/china-s-hu-buys-time-with-yuan-announcement-before-g-20-summit.html

[sandi66]

JUNE 20, 2010

A Well-Timed Currency Kowtow
China's currency reform is meant to appease foreign politicians, not rebalance the domestic economy.

By JOHN LEE
The statement by the People's Bank of China Saturday that it will again insert more "flexibility" into its exchange-rate regime is being heralded as a big economic move. In reality, it's more about deflecting global attention away from China's currency policies in the lead-up to Group of 20 meeting in Toronto next weekend than it is about Beijing's determination to fundamentally rebalance its growth model away from exports and toward domestic consumption.

Beijing accepts that a large reevaluation of the yuan upward versus the dollar is in the country's long-term interest. As Premier Wen Jiabao himself admits, China's "unbalanced" economy depends too much on exports and fixed investment and not enough on domestic consumption. China imports around half of its basic consumer goods as well as fuel. Making imports cheaper through currency reevaluation would be one way of enhancing citizens' purchasing power.

China has also come under strong political pressure from the United States to revalue its currency upward to correct trade "imbalances." Senator Chuck Schumer is threatening, as he did in 2005, to whack Chinese exports with duties if the yuan isn't appreciated soon. President Obama underlined this call last week in a letter to the Group of 20 when he underscored "market-determined exchange rates are essential to global economic vitality."

Seen in that light, China's announcement can be seen as a political salve—because economically, there are sufficient clues in Saturday's statement to believe that any exchange-rate adjustment will be insignificant. No timeframe was given for any move, and the statement ruled out "large-scale appreciation." As from 2005-2008, a more "flexible" yuan exchange rate will likely only mean methodological tinkering with the make-up of the basket of currencies on which the peg is based. Beyond the statement itself, there are several reasons why any significant yuan reevaluation is unlikely in the foreseeable future.

First, a surprising number of Communist Party officials believe that Washington is attempting to manufacture a Chinese slowdown by pressuring Beijing over its currency. These officials recall Japan's experience in the 1980s when Congress struck a remarkably similar tone. Tokyo eventually signed an accord with Washington in 1985 to revalue the yen upwards. The dollar fell to 160 from 240 yen over the next two years, but the current-account imbalance between the two countries was unaffected. When Japanese growth subsequently slowed, Tokyo boosted government spending and lowered interest rates, leading to the rise of a real-estate bubble that eventually burst and is still haunting that economy today.

China has its own property-market bubble to deflate following record government spending and bank lending, much of which state-controlled enterprises and local government officials have used to invest in real-estate assets. Housing starts almost doubled in late 2009 from a year earlier and property prices in cities such as Shanghai and Beijing have risen around 50% in a matter of months. Beijing can't afford a further slowdown in its exports since it is already committed to deflating asset bubbles by decreasing government spending and bank lending that has propped up its economy since the 2008 financial crisis.

Second, Beijing still cares more about creating jobs at home than it does about macroeconomic rebalancing. Although official unemployment hovers between a respectable 4-5%, these figures measure less than one-tenth of the Chinese workforce. Local officials have privately admitted to me that joblessness is likely more than double the official figure. According to official figures, there were over 127,000 instances of "mass unrest" in 2008, up from 87,000 in 2005. The vast majority of these arise due to job losses, or inadequate or unpaid wages, in addition to illegal land seizures. An estimated 20-40 million export-related manufacturing jobs were lost in the year following the Lehman collapse, which explains why Beijing abruptly put a stop to the yuan's gradual rise against the dollar that occurred from 2005-2008.

The regime can hardly countenance any further damage to the export sector. Beijing conducted extensive stress tests on over 1,000 export companies as recently as March 2010 to determine the effects of any significant yuan appreciation. The majority of firms examined were surviving on profit margins of around 2-4%. The results suggested that for every 1% in the yuan appreciation against the dollar, the profit margin of labor-intensive exporters would decline by around 1%, giving the central bank little room to move.

Furthermore, government policies enacted during the global financial crisis have worked to strengthen the state sector at the expense of the private sector. Between 80-90% of the 2008-2009 stimulus and bank loans were offered to state-controlled enterprises, according to official statistics. While the state sector grew from 2008 onward, the private sector has shrunk in both relative and absolute terms. This is important since private businesses both in export and nonexport sectors in China are doubly as efficient at job creation than the state-led sector.

Beijing's Saturday announcement ignores the pleas of its own economists, who have consistently counseled leaders to liberalize the yuan or at least let it rise substantially. Given the obsessive but understandable focus on employment, this would first require more emphasis on China's vibrant private enterprise to drive job creation, leading to a gradual loosening of the Party's grip on economic power. Unfortunately, Beijing is unwilling to take such a risk.

Far from a new era of global rebalancing, the latest People's Bank of China statement is better understood as a well-timed kowtow to relieve the political pressure on President Hu Jintao to "do something" about the Chinese currency prior to his arrival in Toronto Saturday.

Mr. Lee is a foreign-policy fellow at the Centre for Independent Studies in Sydney, a visiting scholar at the Hudson Institute in Washington and the author of "Will China Fail?" (CIS, 2007).

online.wsj.com/article/SB10001424052748704050804575318163802704600.html?mod=WSJ_Opinion_LEFTTopBucket

[sandi66]

JUNE 20, 2010

The China Currency Syndrome
World leaders would do better to worry less about imbalances and more about whether their own nations are pursuing policies that contribute to global prosperity

The best that can be said for China's weekend decision to drop its dollar peg and again adopt more "exchange-rate flexibility" is that it may avert a trade war. What no one should believe is that China's move will "rebalance" the world economy or send manufacturing jobs rushing back to America.

The People's Bank of China asserted that its decision was made in China's own economic interests, and no doubt that's true. But its timing a week before the Group of 20 meeting in Toronto is no coincidence, comrade. China did not want its exchange rate to become the global diversion from the failures of U.S. and European economic policies.

Senator Chuck Schumer and other U.S. protectionists have also been promising a new tariff against Chinese goods if Beijing didn't move on the exchange rate. And this time the New York Democrat seemed to have corralled such key party colleagues as Max Baucus, chairman of Senate Finance, and Sander Levin of House Ways and Means as his Smoot and Hawley.

Given the Democratic panic about their November election prospects and President Obama's ebbing political authority, a protectionist mistake from the U.S. Congress cannot be ruled out. China's move reduces the odds of such a blunder, at least in the short run, and that should help the fragile world recovery.

We say "short run" because China's decision won't end the global demands for a revalued yuan. The People's Bank of China statement made clear that a big one-time revaluation is not in the offing, and the band in which the currency trades daily will not be widened. U.S. Treasury Secretary Timothy Geithner immediately responded that China's move "is an important step but the test is how far and how fast they let the currency appreciate."

Beijing knows that yuan volatility will only hurt its domestic exporters, the main driver of employment, and deter the kind of stable, long-term foreign investment it wants to attract. So a "flexible" exchange rate probably means a managed crawl, akin to the policy that let the yuan appreciate by some 21% against the dollar from 2005 until the financial panic hit in 2008. However, the expectation of a gradually stronger yuan will only invite more global "hot money" betting on further yuan appreciation.

These capital inflows have made it increasingly difficult for Chinese monetary authorities to control both the exchange rate and domestic inflation. So has the U.S. Federal Reserve's extraordinarily loose monetary policy, which shows no signs of changing and is producing price bubbles in Asia, notably in Chinese property. The decision to unpeg the yuan from the dollar frees China's central bank to pursue a monetary policy independent of the Federal Reserve and thus reduce the risks of imported inflation.

On the other hand, China's central bank will have to continue its accumulation of dollar assets, which it will then recycle around the world into the likes of U.S. Treasury bonds. A better solution would be to make the yuan more convertible and give private market actors more influence over trade and capital flows, rather than depending on the central bank. But that won't happen until the Communist Party agrees to depoliticize the allocation of credit and give more power to private citizens. The political irony is that China's rulers prefer the West's preoccupation with the exchange rate, which is easier to accommodate, rather than having to undertake more fundamental reform.

Another illusion is that a revalued yuan will reduce global "imbalances" and especially the U.S. trade deficit. The 2005-2008 revaluation did little to move the trade numbers. And as Stanford economist Ron McKinnon has documented, the U.S. forced a similar revaluation on Japan in the 1990s, and the result was little long-term change in the trade deficit between the two countries.

To the extent that a revalued yuan raises production costs in China, some of its manufacturing will move to Vietnam, Bangladesh or other lower-cost countries. Meanwhile, U.S. consumers will pay more for imported goods, and Chinese producers will be forced to become even more competitive and thus a bigger global challenge to U.S. companies.

As for the U.S., the yuan has become a convenient scapegoat for Washington's policy mistakes. The neo-Keynesians who've been running U.S. economic policy since 2007 promised that their stimulus would deliver millions of new jobs. Now that those jobs have failed to materialize, Democrats blame China's exchange-rate policy. But no country in history has devalued its way to prosperity, and the U.S. won't be the first.

The dollar has benefitted in recent months from the investor flight to safety amid the European sovereign debt panic. This has masked the risks to the dollar from the easiest Federal Reserve policy in modern history. Those risks will accelerate if the panic eases and investors look once again to protect themselves against the dollar's decline. One by-product of the last period of yuan revaluation (and dollar decline) was a spike in the price of global commodities traded in dollars. Another such spike would not help global growth.

The pursuit of some ideal global "balance" in trade and capital flows is an illusion of IMF officials and other central planners. World leaders would do better to worry less about imbalances and more about whether their own nations are pursuing policies that contribute to global prosperity. In the U.S. and Europe, that means a major policy turn toward spending restraint, lower taxes, freer trade and less political control of business.

online.wsj.com/article/SB10001424052748704365204575317691493370612.html?mod=WSJ_Opinion_LEFTTopBucket

[sandi66]

China's removal of currency peg paves way for successful G20 summit

By: Heather Scoffield, The Canadian Press

20/06/2010 3:52 PM

OTTAWA - The log jam blocking the way to a successful G20 summit in Toronto this week is beginning to break up.

After months of deadlock over how much major countries should sacrifice for the good of global stability, the United States and China have each taken small steps to rebalance the precarious state of the world economy.

"We can see the outlines of what could make Toronto a 'success'," said Wendy Dobson, co-director of the University of Toronto's Institute for International Business.

"The moves in China and the U.S. are in their own as well as the global interest."

Late Thursday, U.S. President Barack Obama sent a letter to his G20 colleagues presenting a medium-term plan to grab control of his country's ballooning deficit.

The goals are moderate, and analysts wonder if Obama will be able to turn the plan into a reality. But the fact that Obama made the commitment in a letter to the most powerful leaders in the world is significant.

Prime Minister Stephen Harper followed up on Friday by publicly suggesting standards for indebted countries to meet in order to bring their debts and deficits under control before it's too late.

Then on Saturday, China surprised the world by announcing it would stop pegging its currency to the U.S. dollar, and instead allow the yuan to fluctuate within a range tied to a basket of currencies.

Chinese authorities warned that the move would not result in an immediate major fluctuation of its currency. But they also briefed key G20 ambassadors as the move was being announced, to let the world know they were serious, sources say.

The Chinese announcement comes just days after officials warned harshly that they would not be pressured by an angry U.S. Congress into making changes to China's currency regime. The United States has long argued that the Chinese yuan is drastically undervalued, and serves as an export subsidy that destabilizes global trade.

So the announcement shows that China has enough good will to work with the G20 toward a productive summit, analysts said.

"It's a start," said Thomas Bernes, acting executive director at the Centre for International Governance Innovation in Waterloo, Ont.

The G20 needs three major actions in order to reach a deal on how to make the global economy stable, he said: a credible U.S. plan to control its deficit; greater exchange-rate flexibility from China, and a plan for economic growth in Europe.

"There is some progress on the first two, although uncertainties clearly remain," Bernes said in an email. "Can Obama really deliver, given that it is Congress and not the president who will determine in the end? How much flexibility will China allow?"

Indeed, China sought to dampen the celebrations on Sunday. Central bank officials posted a notice on their website saying they did not expect any major fluctuations — although market watchers were still on edge, not knowing quite what to expect at market open on Monday morning.

Until Thursday night, expectations for the G20 Toronto summit were low.

The group has proven successful in the past, coming together to mitigate the effects of the global financial crisis by agreeing to a massive worldwide stimulus program.

But with the pressure of the global recession abating, countries were squabbling endlessly about how to best bolster their banking systems, prevent future bank collapses, and rebalance global growth over the long term.

Leaders and analysts alike feared that another crisis would be in the offing without commitments from the United States to control its spending and from China to encourage more spending and allow its currency more flexibility.

"At a time when market uncertainty persists, it is imperative that we deliver credible and real measures that show we are committed to a sustained and durable recovery to the benefit of all our citizens," Harper wrote in a letter to the G20 leaders last week.

He welcomed the Chinese currency announcement as "an important step forward" that he hopes will inspire other G20 countries at the summit.

Harper has been burning up the phone lines in recent weeks, contacting most of the G20 leaders to enlist their support for progress on financial regulations and austerity plans.

It's not uncommon for countries to make key moves just before a summit, says John Kirton, who heads the G20 Research Group at the University of Toronto.

"No major power wants to be seen at home as being dictated to by the summit, and making its moves just after the summit," Kirton said by email.

Even though the steps taken so far are small, the G20 will have its work cut out for it in making sure they are not empty promises, said Bernes.

"Efforts will be required to ensure credibility for these policy stances, so they are not seen as tokens," he said.

And there's still another elephant in the room, he added: Europe.

Many European countries have been spooked by Greece's sovereign debt crisis, and are taking bold measures to cut their spending and reduce deficits. But some analysts feel they may be acting too hastily, and could well be undermining European and global growth at a delicate time.

Plus, European banks have not gone through the same purging as those in the United States, after the financial crisis. So there remain fears that financial institutions on the continent are not strong enough.

www.winnipegfreepress.com/business/breakingnews/chinas-removal-of-currency-peg-paves-way-for--successful-g20-summit-96759439.html

[sandi66]

ECB's Noyer sees gradual return of market confidence

PARIS

Sun Jun 20, 2010 9:47pm

BSTPARIS (Reuters) - European Central Bank (ECB) governing council member Christian Noyer told French paper La Tribune that he expected a gradual return to market confidence in the wake of the sovereign debt crisis.

Business | G20

"Since Europe has put in place a very complete support mechanism for countries which need it, confidence will come back gradually," Noyer, who is also governor of the Bank of France, told La Tribune in an interview due to be published in Monday's paper.

Noyer said the current lack of confidence, which was resulting in banks depositing money with the ECB, was a result of the sovereign debt crisis.

Asked if plans for a global banking tax would ever see the light of day, Noyer replied: "The tax plan is a matter for the states."

"What is important for us, is that there is a consensus among the G20 countries to strengthen the banks' ability to resist crises, especially concerning their markets and securitisation activities which have been shown to be the most risky," he added.

Noyer also said there was no firm timetable yet over the Basel III rules governing banks' capital requirements.

Noyer added that there was no reason for concern over a recent widening of spreads between French and German government bonds and described a recent decision by Moody's credit rating agency to downgrade Greece as "incomprehensible."

uk.reuters.com/article/idUKTRE65J2TH20100620

[sandi66]

Saudi King begins 4-nation tour

Mon, 2010-06-21 04:37

Jeddah, 21 June, (Asiantribune.com): King Abdullah, Custodian of the Two Holy Mosques, arrived in the Moroccan city of Casablanca Saturday at the start of a four-nation tour that will also take him to Canada, the United States and France.

The King will participate in the G-20 summit in Toronto on June 26-27.

Then he will arrive in the US on a state visit, followed by visits to Morocco and France.

At Mohammad V Airport here, King Abdullah was received by Prince Rashid Bin Al-Hasan II, Prince Saud Al-Faisal, the Saudi Foreign Minister, Prince Fahd Bin Miqrin Bin Abdul Aziz, and Saudi Ambassador to Morocco Dr. Muhammad Bin Abdulrahman Al-Bishr.

Before his departure from Jeddah, King Abdullah issued a Royal Order deputizing Crown Prince Sultan, Deputy Premier, Defense and Aviation Minister and Inspector General, to run the country’s affairs and to look after the interests of the people during his absence.

The King said: “As I intend to travel outside the Kingdom , I deputized Crown Prince Sultan Bin Abdul Aziz to administer the State’s affairs and to take care of the people’s interests during the period of my absence.”

Canadian Prime Minister Stephen Harper made a phone call to the King Friday to discuss the Toronto G20 Summit.

Harper outlined the areas of priority discussion at the Summit, which include the need for G20 countries to follow through with stimulus; the need for the advanced economies to take credible action on fiscal consolidation; the need to make real progress on the reform of the financial sector; and the need for the emerging economies to take steps to stimulate demand in their own markets.

King Abdullah thanked the prime minister for his call.

In the US, King Abdullah will meet President Barack Obama, and on July 12 he will travel to France to meet President Nicolas Sarkozy.

Their talks are expected to focus on the situation in the Middle East and global economic issues as well as the enhancement of bilateral relations. The King is expected to visit the Saudi exhibits wing at the Louvre Museum on July 12 and is expected to deliver a speech at UNESCO headquarters in Paris.

An invitation to visit and address the UN organization was extended to the King by UNESCO Director General Irina Bokova during her visit to the Kingdom when she attended the Janadriya Festival last March

www.asiantribune.com/news/2010/06/21/saudi-king-begins-4-nation-tour

[sandi66]

Climate change commitments "missing" in G8 Accountability Report

Posted on 20 June 2010

Ottawa, Canada: WWF is critical of the G8 Accountability Report released today for not measuring progress on one of the most substantial G8 development and climate change commitments to date: to limit temperature rise to an identified 2 degrees Centigrade threshold of dangerous climate change.

“If we don't limit global warming to as far below two degrees as possible, all development ambitions will be in serious danger,” said Kim Carstensen, leader of WWF's Global Climate Initiative.

“The G8 countries have yet to make sufficient emission cuts to reach this goal, and this accountability report should be assessing – not ignoring – this issue.”

"This report indicates that the world's leading economies have yet to integrate climate change and development plans in a real and meaningful way."

The G8 stated in 2009 that they would “take the lead” to ensure global and national emission peaks could “take place as soon as possible.” They recognized that an “increase in global average temperature” shouldn’t “exceed 2 degrees C.”

This followed the Gleneagles 2005 commitment - also not included in the Accountability Report - to make “substantial reductions” to stabilize emission concentrations in the atmosphere “at a level that prevents dangerous anthropogenic interference with the climate system.”

“If anything should be in the Accountability Report, even one focused on development, it should be climate change. The G8 – and now G20 – should be sending clear messages to the rest of the world that they are working to cut emissions to reduce impacts on the most vulnerable, and stimulate a low carbon economy for all.”

Of 56 indicators, there are five in total on energy and the environment. The Report does include the UN Copenhagen Accord promise on fast-track and long-term financing – both UN decisions that require the leadership of the G8 and G20 respectively.

The Report also notes that the G8 will fail to meet its 2010 objectives on reducing the loss of biodiversity. A temperature rise of 2 degrees C would put 30% of biodiversity at risk.


wwf.panda.org/wwf_news/?193905/Climate-change-commitments-missing-in-G8-Accountability-Report

[sandi66]

Canada's economy is suddenly the envy of the world
By ROB GILLIES (AP) – 3 hours ago

TORONTO — Canada thinks it can teach the world a thing or two about dodging financial meltdowns.

The 20 world leaders at an economic summit in Toronto next weekend will find themselves in a country that has avoided a banking crisis where others have floundered, and whose economy grew at a 6.1 percent annual rate in the first three months of this year. The housing market is hot and three-quarters of the 400,000 jobs lost during the recession have been recovered.

World leaders have noticed: President Barack Obama says the U.S. should take note of Canada's banking system, and Britain's Treasury chief is looking to emulate the Ottawa way on cutting deficits.

The land of a thousand stereotypes — from Mounties and ice hockey to language wars and lousy weather — is feeling entitled to do a bit of crowing as it hosts the G-20 summit of wealthy and developing nations.

"We should be proud of the performance of our financial system during the crisis," said Finance Minister Jim Flaherty in an interview with The Associated Press.

He recalled visiting China in 2007 and hearing suggestions "that the Canadian banks were perhaps boring and too risk-adverse. And when I was there two weeks ago some of my same counterparts were saying to me, 'You have a very solid, stable banking system in Canada,' and emphasizing that. There wasn't anything about being sufficiently risk-oriented."

The banks are stable because, in part, they're more regulated. As the U.S. and Europe loosened regulations on their financial industries over the last 15 years, Canada refused to do so. The banks also aren't as leveraged as their U.S. or European peers.

There was no mortgage meltdown or subprime crisis in Canada. Banks don't package mortgages and sell them to the private market, so they need to be sure their borrowers can pay back the loans.

In Canada's concentrated banking system, five major banks dominate the market and regulators know each of the top bank executives personally.

"Our banks were just better managed and we had better regulation," says former Prime Minister Paul Martin, the man credited with killing off a massive government deficit in the 1990s when he was finance minister, leading to 12 straight years of budget surpluses.

"I was absolutely amazed at senior bankers in the United States and Europe who didn't know the extent of the problem or they didn't know that people in some far-flung division were doing these kinds of things. It's just beyond belief," he told the AP.

The Conservative Party government of Stephen Harper that took over from Martin's Liberals in 2006 broadly stuck to his predecessor's approach, though he cut taxes and, when recession struck, pumped stimulus money into the economy, with the result that Canada again has a large deficit.

But it is recovering from the recession faster than others, and although its deficit is currently at a record high, the International Monetary Fund expects Canada to be the only one of the seven major industrialized democracies to return to surplus by 2015.

This month Canada became the first among them to raise interest rates since the global financial crisis began.

George Osborne, Britain's Treasury chief, has vowed to follow Canada's example on deficit reduction.

"They brought together the best brains both inside and outside government to carry out a fundamental reassessment of the role of the state," Osborne said in a speech.

It's a remarkable turnaround from 1993, when the Liberals took office facing a $30 billion deficit. Moody's downgraded Canada's credit rating twice. About 36 percent of the government's revenue went toward servicing debt.

"Our situation was dire. Canada was in a lot of trouble at that point," Martin said. "If we were going to preserve our health care and our education system we had to do it."

As finance minister, he slashed spending. A weak currency and a booming U.S. economy also helped Martin balance the books. In the 1998 budget the government estimated that about 55 percent of the deficit reduction came from economic growth and 35 percent from spending cuts.

"The rest of the world certainly thinks we're the model to follow," said Martin, who was prime minister from 2003 to 2006. "I've been asked by a lot of countries as to how to go about it."

Don Drummond, Martin's budget chief at the time, says the U.S. and Europe won't have it that easy, because the economic climate was better in the late 1990s than it is now, with large trade gains and falling interest rates.

"There's a lot to learn from Canada but their starting conditions are worse," he said. "Even though we were on the precipice of a crisis we weren't in as bad a shape as many of them are."

www.google.com/hostednews/ap/article/ALeqM5hM5MvpNJ2D2tMn8sVqk_qKObY8DwD9GF5JBO0


ty fisty

[sandi66]

Vatican cardinal faces corruption inquiry over Rome property dealsCatholic church dragged into public works scandal that has sent shockwaves through Italian government

Sunday 20 June 2010 22.24 BST

A senior Vatican cardinal is under investigation for corruption, dragging the Catholic church into a public works scandal that has sent shockwaves through the Italian government.

Italian media reported today that Cardinal Crescenzio Sepe, the archbishop of Naples, was suspected of striking cosy deals while head of the Congregation for the Evangelisation of Peoples, the Vatican congregation that uses proceeds from a property empire including 2,000 Rome apartments to fund missionary efforts.

Sepe allegedly oversaw the sale in 2004 of a building in Rome to the then transport minister, Pietro Lunardi, for the suspiciously low price of €4.16m, newspapers reported, adding that magistrates wanted to know why Lunardi then freed up €2.5m in state funding the following year for the congregation to create a museum in its headquarters, and why that museum never opened.

Lunardi, who is also under investigation, said he would contact the magistrates looking into the deal "as soon as possible... to clear everything up".

Sepe gave a fiery homily today in Naples, asking his congregation: "How many martyrs are there, even today, who in the name of the truth... are tortured, humiliated and disrespected?"

Magistrates are reportedly looking into Sepe's links to builder Diego Anemone and former public works official Angelo Balducci, both suspected of being at the centre of a web of alleged kickbacks and corrupt state construction contracting.

Italy's industry minister, Claudio Scajola, has already resigned after claims that Anemone paid €900,000 to subsidise the purchase of his luxury Rome flat.

Newspapers said magistrates suspected Sepe and Anemone were involved in furnishing accommodation on Rome's Via Giulia to Guido Bertolaso, Italy's powerful civil protection chief.

The case has shed light on the links between Roman politics and the Vatican.

Balducci was a papal usher but was dismissed when the corruption inquiry brought to light his suspected involvement with a Vatican chorister in a male prostitution ring. The Vatican said it hoped the investigation could be wrapped up fast "to eliminate any shadows, be they on the person [Sepe] or church institutions".

www.guardian.co.uk/world/2010/jun/20/vatican-cardinal-corruption-inquiry-rome-property-deals

[sandi66]

Corruption scandal spreads to Vatican

Reuters


Monday, 21 June 2010


A prominent Catholic cardinal and a former minister have been put under investigation as a corruption scandal that has tainted the Italian government spread to touch the Vatican.


Magistrates told Cardinal Crescenzio Sepe and Pietro Lunardi, a former infrastructure and transport minister, that they were being investigated for aggravated corruption, judicial sources said.

Magistrates in Perugia are investigating corruption and favours involving public works contracts, mostly in construction. Cardinal Sepe, 67, is being investigated for alleged corruption when he was a Vatican official running the Congregation for the Evangelisation of Peoples, a department of the Vatican that finances the work of missions abroad. Cardinal Sepe, who ran the department until he was moved to Naples in 2006, is suspected of aggravated corruption with Mr Lunardi in connection with a real estate deal.

According to Italian newspapers La Stampa, Corriere della Sera and La Repubblica, Mr Lunardi bought a building in Rome from Cardinal Sepe's department in 2004 at a price well below market value.

The next year, when Mr Lunardi was minister, he approved a decree allocating funds for the restoration of historic church buildings.

The Vatican said it hoped the situation "could be cleared up fully and rapidly in order to eliminate any shadows, be they on the person or Church institutions".

www.independent.co.uk/news/world/europe/corruption-scandal-spreads-to-vatican-2006125.html

[sandi66]

Blackwater: Knights of Malta in Iraq

Sunday, June 20, 2010 6:01

“The painful saga of modern Arab-Muslim history evokes the battles fought in Crusades of the 11th centry - when the Knights of Malta began their operations as a Christian militia whose mission it was to defend the land conquered by the Crusaders. These memories return violently to mind with the discovery of links between the so-called security firms in Iraq such as Blackwater have historic links with the Order of Malta. You cannot exaggerate it. The Order of Malta is a hidden government or the most mysterious government in the world.”

- Jordanian MP Jamal Muhammad Abidat, from an editorial in the United Arab Emirates daily Al-Bayan entitled “The Knights of Malta - more than a conspiracy”. Abidat describes the role played by the Knights of Malta during the Crusades, and that the Order is playing a similar role in the Middle East today, citing the conflicts in Iraq and Afghanistan.



Successor to Fascist Dictator Francisco Franco and Knight of Malta, King Juan Carlos, with Grand Master of the Sovereign Military Order of Malta, Andrew Cardinal Bertie, 2000
…

Blackwater is more than just a “private army”, much more than just another capitalist war-profiteering business operation. It is an army operating outside all laws, outside and above the US Constitution and yet is controlled by people within and outside our government whose allegiance is primarily to the foreign Vatican state. In other words, Blackwater is a religious army serving the Pope in Rome through the Order of Malta, which is itself considered under international law, as a sovereign entity with special diplomatic powers and privileges. Like Blackwater, the Order of Malta is “untouchable” because it is at the heart of the elite aristocracy.

The Knights of Malta is not merely a “charitable organization”. That’s just an elaborate front, as should become clear to you later. As the name Sovereign Military Order of Malta confirms, it is a military order based on the crusader Knights Hospitaller of Jerusalem and is interwoven with Freemasonry. Most people have never even heard of SMOM, much less that it is a part of Freemasonry. But that is the way the aristocratic elite like it.

One of the symbols of the military orders of the Vatican, the masonic double-headed eagle emblazoned with the Maltese cross, signifies omnipotent royal dominion over both East and West. The orb signifies temporal dominion over the globe of Earth, and the scepter signifies control over the spiritual and religious impulses of humanity. This eagle symbol is used in the masonic rite of Memphis and Misraim, under which it reads, “Order Out of Chaos”, the Hegelian method of crisis creation. It is found on the seals of many European and Eurasian nation states including that of Russia, indicating direct Vatican control over those countries. It symbolizes the desire of a predatory elite with virtually unlimited resources, to totally dominate the entire world under a New World Order global government system using secrecy, manipulation, coercion and terror with the ends justifying the means.

See: Double-Headed Eagle Symbol at Wikipedia





The two-headed eagle emblem of the Byzantine Empire (Roman Empire) on a Red Shield was adopted in 1743 by the infamous goldsmith Amschel Moses Bauer. He opened a coin shop in Frankfurt, Germany and hung above his door this Roman eagle on a red shield. The shop became known as the “Red Shield firm”. The German word for ‘red shield’ is Rothschild. After this point, the Rothschilds became the bankers to kings and pontiffs alike, among the richest families in the world. Ever since, they have financed both sides of every major war and revolution using the Hegelian Dialectic to engineer society toward their New World Order.



The Rothschilds and their agents, such as the Rockefellers, have been engineering America and its foreign policy almost since its inception. They and their Skull and Bones Wall Street partners staged and funded both sides in WWII, and out of that hellish nightmare was born their infant global government, the United Nations, and their tool of tyranny, the CIA. The father of the CIA, “Wild Bill” Donovan, was a Knight of Malta. In order to be a director of the CIA you must be a crusading Knight of Malta and it doesn’t hurt if you are a member of Skull and Bones either. In order to reach the highest levels in the Pentagon establishment, you must be an illuminated Freemason and/or a Knight of one order or another. Notable US military members of SMOM include top crusading generals such as Alexander Haig, William Westmoreland, and Charles A. Willoughby, an admitted Fascist.

beforeitsnews.com/news/82/358/Blackwater:_Knights_of_Malta_in_Iraq.html

More:

Other notable members include:

•Reinhard Gehlen (Nazi war criminal)
•Heinrich Himmler (Nazi war criminal)
•Kurt Waldheim (Nazi war criminal)
•Franz von Papen (Hitler enabler)
•Fritz Thyssen (Hitler’s financier)
•Rupert Murdoch
•Tony Blair
•Pat Buchanan
•William F. Buckley, Jr.
•Precott Bush, Jr.
•Edward Egan (Archbishop NY)
•Licio Gelli
•Ted Kennedy
•David Rockefeller
•Phyllis Schlafly (Dame)
•J. Edgar Hoover
•Joseph Kennedy
•Henry Luce
•Thomas ‘Tip’ O’Neill
•Ronald E. Reagan
•Giscard d’Estaing
•Allen Dulles
•Avery Dulles
•Frank C Carlucci
•Nelson Mandela
•Rick Santorum
•Juan Carlos (King of Spain and Jerusalem)
•Oliver North
•George H.W Bush
•Augusto Pinochet
•William Randolph Hearst
•Francis L. Kellogg
Such a list should make you sit up and pay attention, but it is only the tip of the iceberg unfortunately. Then we come to another SMOM member, important to what is transpiring in Iraq. Educated at the Jesuit Georgetown University, former Pentagon Inspector General Joseph Edward Schmitz, Blackwater’s operations chief, is a member of both SMOM and Opus Dei.



Former Pentagon Inspector General Joseph Edward Schmitz quit in 2005 to work for Blackwater. He is a member of Opus Dei and Knights of Malta. At least $2 trillion went “missing” from the Pentagon during his watch.

The Knights of Malta in Iraq?

Malta Star | Sep 29, 2007

An American investigative journalist compared the US firm Blackwater, the biggest security services provider in post war Iraq, to the Knights of Malta.

The company is currently in the midst of a controversy after some of its 20,000 personnel stationed in Iraq killed a number of civilians.

In his book, ‘Blackwater: The Rise of the World’s Most Powerful Mercenary Army’, Jeremy Scahill links the modern security firm to the Knights of Malta.

The writer argues that “Blackwater’s employees… share the same religious zeal of ancient crusaders”, the Egyptian weekly newspaper Al-Ahram reported.

All the top Nazis in our government are connected in some way to the Vatican, Jesuits and Knights of Malta and have been for decades, as were the Italian Fascists and German Nazis of WWII. After all, what was their favorite symbol after the swastika? The Maltese Cross of course!

Catholic Nazi Connections

www.youtube.com/v/sEATQF5lCYo

These SMOM knights are behind most of the trouble in the world and they must be exposed as the criminals that they are. They are not nice people helping the poor, though they use good people in the lower ranks as useful idiots. They are behind drug-trafficking, assassinations, most wars, communism, fascism, feudalism, theocracy, Nazism, Zionism, globalization, crime-syndicates, major terrorist events, a new torture inquisition, total information surveillance, economic collapses, social demoralization and seek to completely enslave the human species in a global Big Brother totalitarian regime as they kill off the majority of us in the process. In fact, all of it has either come to pass or is in the process of being implemented. We are on the brink of WWIII which has been entirely staged by these profoundly evil men. Therefore, we have no time left for girl thingyfooting around.

But don’t take my word for it, do you your own research, find out and expose them yourself before these dirty Blackwater mercenary thugs are allowed to patrol American streets and confiscate guns during the next staged disaster. We can’t let this happen in America.

PW

BlackWater coming to a disaster near you.

www.youtube.com/v/nqM4tKPDlR8

Further Google the following:

P-2 freemasonry, Gladio, Nazi Concordat, Vatican CIA, Knights Templar, Order of the Seraphim, Order of the Garter, Hospitallers, Sovereign Order of Saint John of Jerusalem, Knights of Malta, SMOM, Knights of Rhodes, Illuminati, 9/11, Jesuits, Opus Dei, Black Pope, Maltese Cross, Fascism, Zionism, Blackwater Katrina, etc

Combine these in various searches to uncover the linkages.



The highest levels of Freemasonry, including and especially, the Knights of Malta and the Royal Orders of Chivalry are guided by the Vatican, the hub of both religious and temporal power on planet Earth.

Order of the Knights of Malta

video.google.com/googleplayer.swf?docId=-4219410387467725964

See also:

Freemasonry in Malta

Many knights of the Order of St. John and some of the Maltese nobility were freemasons. In 1756, the Grand Master of the Order was a freemason named E. Pinto de Fonseca. De Rohan, who was Grandmaster of the Order of St. John between 1775 and 1797, is reported also to have been a freemason, and is said to have helped the spread of freemasonry in Malta…This lodge noted in its petition that the most important members of the Order of St. John ranked amongst its membership. The lodge obtained an English warrant as the Lodge of St. John of Secrecy and Harmony.


The Rite of Misraïm

Since 1738, one can find traces of this Rite filled with alchemical, occult and Egyptian references, with a structure of 90 degrees. Joseph Balsamo, called Cagliostro, a key character of his time, known how to give it the impulse necessary for its development. Very close to the Grand Master of the Order of the Knights of Malta, Manual Pinto de Fonseca, Cagliostro founded the Rite of High Egyptian Masonry in 1784. He received, between 1767 and 1775, from Sir Knight Luigi d’Aquino, the brother of the national Grand Master of Neapolitan Masonry, the Arcana Arcanorum, three very high hermetic degrees. In 1788, he introduced them into the Rite of Misraïm and gave a patent to this Rite.

. . .

Related Information



Movers and Shakers of the Sovereign Military Order of Malta
Identity of the Sovereign Military Order of Malta
Connections of those in power related to the Knights of Malta and affiliated groups


The picture that proves ‘torture flights’ are STILL landing in the UK (and Malta)


The European Parliament report describes these as shell companies operating as subsidiaries of Blackwater USA, ‘an important contractor for the CIA and the US military’ which bases the planes in Malta. Tracking technology shows that the plane was en route from Canada to Greenland two days before it was sighted at Mildenhall: the internet software does not extend beyond American airspace, but the expert explained that its route would be consistent with a refuelling stop in the Arctic – it only has a range of about 2,000 miles – followed by a further refuel in East Anglia, before heading to Malta.

Malta ‘is Blackwater’s operational base’


A European Parliament working document drawn up by Giovanni Claudio Fava has claimed “Malta is the operational base of Blackwater, the organiser of private military militia which are increasingly taking on more and more roles which used to be undertaken by US forces in Iraq and elsewhere”. In 2004, Cofer Black passed from CIA to the State Department and thence became Blackwater’s vice-president. While still in the CIA, Black was in charge of the “special extraditions” organising the secret transfer of prisoners from Iraq or Afghanistan to countries less rigid against the practice of torture, such as Poland, Romania, Egypt, and so on. These planes, which travelled between Abu Ghraib, Guantanamo and Afghanistan often made stopovers in many European countries such as the UK, Italy, France, Germany and Malta many times without the countries themselves being informed what was going on. Now the Swiss procurator Dick Marty has sent documents regarding the “CIA’s flying prisons” to the European Parliament and names two Blackwater subsidiaries – Presidential Airways and Aviation Worldwide Services.

Blackwater’s Owner Has Spies for Hire

Ex-U.S. Intelligence Operatives Dot Firm’s Roster

First it became a brand name in security for its work in Iraq and Afghanistan. Now it’s taking on intelligence. The Prince Group, the holding company that owns Blackwater Worldwide, has been building an operation that will sniff out intelligence about natural disasters, business-friendly governments, overseas regulations and global political developments for clients in industry and government. The operation, Total Intelligence Solutions, has assembled a roster of former spooks — high-ranking figures from agencies such as the CIA and defense intelligence — that mirrors the slate of former military officials who run Blackwater. Its chairman is Cofer Black, the former head of counterterrorism at CIA known for his leading role in many of the agency’s more controversial programs, including the rendition and interrogation of al-Qaeda suspects and the detention of some of them in secret prisons overseas.

Bush’s Shadow Army

Blackwater has repeatedly cited Rumsfeld’s statement that contractors are part of the “Total Force” as evidence that it is a legitimate part of the nation’s “warfighting capability and capacity.” Invoking Rumsfeld’s designation, the company has in effect declared its forces above the law — entitled to the immunity from civilian lawsuits enjoyed by the military, but also not bound by the military’s court martial system. While the initial inquiries into Blackwater have focused on the complex labyrinth of secretive subcontracts under which it operates in Iraq, a thorough investigation into the company reveals a frightening picture of a politically connected private army that has become the Bush Administration’s Praetorian Guard.

Blackwater’s impunity

Neither Iraqi nor U.S. laws apply to its contractors, so a controversial shooting may go unpunished. ‘They can get away with murder” has been the cry of critics of hiring private companies such as Blackwater to provide security for the U.S. military and diplomats in Iraq and other war zones. Now it looks as though the critics may be right — and in the worst way.



Pope Benedict with SMOM Grandmaster Andrew Willoughby Ninian Bertie

Knights of Malta


The Sovereign Military Order of Malta, also known as the original Sovereign Military Order of St. John of Jerusalem, is a closed fraternity of the Roman Catholic Church. Its initiated members must be Catholic and have served in the military. They participate in secret ceremonies and feudal ritual dress, and embrace a strong class/caste mentality as part of their initiation into Rosicrucian dogma.

The upper grades are fastidiously aristocratic and must be able to display a family coat-of-arms dating back at least 300 years in unbroken succession from father to son. The Sovereign Grand Master of the order is recognized as a head of state, and his authority is ensured by his secular ranking as a Prince, and his ecclesiastical ranking as a Cardinal. Under international law this organization has independent Sovereign status, which assures nationalistic loyalty from its members, above and beyond allegience to their own country–they also have Permanent Observer status at the United Nations. The current Grand Master, Andrew Willoughby Bertie, is descended from Mary Stuart (Mary Queen of Scots) which places him firmly in the Sion/Grail historical scenario.

The order and its members have been proven to be linked with the “Rat Run”, the post-WWII escape route used by high-ranking Nazis and death camp scientists from defeated Germany to the Americas. Sovereign Knight of Malta passports were issued with false identities that allowed escape from prosecution for war crimes.

The privatisation of security in Iraq threatens more than innocent civilians


The killing of 11 civilians in Baghdad two weeks ago has once again put Blackwater on the spot. The US security firm first came into the public eye in early April 2004, when four of its personnel were killed and mutilated by mobs in Falluja. Although Iraqi religious parties denounced the attacks at the time, Bush gave the town four days to deliver the perpetrators before ordering an all-out attack, one in which thousands of Falluja inhabitants perished. In his book, Blackwater: The Rise of the World’s Most Powerful Mercenary Army, American investigative journalist Jeremy Scahill links the modern security firm to the Knights of Malta, an offshoot of the Knights Templar. Blackwater’s employees, he argues, share the same religious zeal of ancient crusaders.

US Theocons Fight Battle in Iraq


Many has been written about the privatization of the Iraq war, but in his new bestseller book Jeremy Scahill sheds much needed light on the ideological roots of the largest US private mercenary firm and its links to the theocons and the Christian militia Sovereign Military Order of Malta. Prince, writes Scahill, shows how “politically powerful Christian fundamentalists and Neocons are pressing forward with their battle for what they call ‘freedom’ and ‘democracy.’” He has connections with conservative Catholic groups and funds rightwing organizations through his Freiheit Foundation. Senior Blackwater executives such as Joseph Schmitz do not only subscribe to the theocon ideology but are also members of the Sovereign Military Order of Malta, a Christian militia that had a mission of defending territories the Crusaders captured from Muslims.

Schmitz, says Scahill, “comes from one of the most bizarre, scandal-plagued, right-wing political families in US history.” The Sovereign Military Order of Malta began as a Christian charity in Al-Quds in 1080 to provide care for poor and sick pilgrims to the Holy Land. After the conquest of the holy city in 1095 during the First Crusade it became a Catholic Military Order. After the Muslims restored Al-Quds, the Order operated from Rhodes and later from Malta where it administered a vassal state under the Spanish viceroy of Sicily. The Order’s fighters, known as the Knights Hospitaller, helped the Crusaders in raids on Muslim countries near the coasts of Italy, including Tunisia, Libya and Morocco. The Sovereign Military Order of Malta is now a state located in Rome and is recognized by 50 countries worldwide.

BLACKWATER CHIEF JOSEPH E. SCHMITZ:
KNIGHT OF MALTA


Joseph Edward Schmitz is the son of the late John G. Schmitz, former California State Senator, Member of the U.S. House of Representatives, and U.S. Presidential candidate (1972). Columba Bush’s sister is married to John P. Schmitz, a beneficiary of the fellowship programs subsumed under the Carl Duisberg gesellschaft and the brother of Joseph Schmitz, currently the head of the Blackwater security outfit. John P. Schmitz has close links to the elder George Bush, the 9/11 milieu…
Ex-Pentagon IG Joseph Schmitz At Prince/Blackwater

Joseph Schmitz is active in the Washington Lawyers’ Chapter of the right-wing Federalist Society, the same group with which the new Chief Justice John G. Roberts was affiliated. Schmitz is also a member of the Sovereign Military Order of Malta. Schmitz was accused of covering up several investigations into fraud, waste and abuse within the Rumsfeld Pentagon.

Joseph E. Schmitz: Georgetown, Opus Dei and Sovereign Military Order of Malta.


From Wikipedia, the free encyclopedia
Joseph Edward Schmitz is an American lawyer, former Inspector General of the Department of Defense and executive with Blackwater USA, a private contractor providing security services to the U.S. military.Schmitz attended Catholic schools as a child and Georgetown Preparatory School while his father served in Congress. He is a member of Opus Dei and the Sovereign Military Order of Malta.

General Joseph Schmitz member of the Sovereign Order of Malta


In addition to Prince, “A number of Blackwater executives are deeply conservative Christians, including corruption-smeared former Pentagon Inspector General Joseph Schmitz, who is also a member of the Sovereign Order of Malta, which Scahill describes as ‘a Christian militia formed in the eleventh century [to defend] territories that the Crusaders had conquered from the Moslems,’” Chris Barsanti wote in a review of the book for In These Times. Blackwater USA is the brainchild of Erik Prince — a former Navy SEAL and son of Edgar Prince, a wealthy Michigan auto-parts supplier — described by Scahill as a “radical right wing Christian mega-millionaire” who is a strong financial backer of President George W. Bush, as well as a donor to a host of conservative Christian political causes.

In the 1980s “the Prince family merged with one of the most venerable conservative families in the United States,” when Erik’s sister Betsy — nine years his senior — married Dick DeVos, whose father Richard, founded the multilevel marketing firm Amway. The two families exercised enormous political influence both inside and outside Michigan. “They were one of the greatest bankrollers of far-right causes in U.S. history, and with their money they propelled extremist Christian politicians and activists to positions of prominence,” Scahill writes.

www.dejanlucic.net/Blackwater.html

[sandi66]

JUNE 20, 2010, 9:58 P.M. ET

HKMA: CNY Flexibility Has No Impact On USD/HKD Currency Peg

HONG KONG (Dow Jones)--The Hong Kong Monetary Authority said China's central bank announcement over the weekend to increase the yuan's flexibility has no impact on the Hong Kong dollar's peg to the U.S. dollar, but any appreciation in the yuan will likely have a "modest" impact on the city's inflation.

"We have no plan to alter the USD/HKD peg as the currency regime has been effective," a HKMA spokesman said.

Under Hong Kong's currency board system, the Hong Kong dollar is allowed to trade between HK$7.75 and HK$7.85 to the U.S. dollar.

online.wsj.com/article/BT-CO-20100620-704715.html?mod=rss_Currencies

[sandi66]

China, Japan, Korea, Philippines: Asian Bond, Currency Preview

June 20, 2010, 6:39 PM EDT

June 21 (Bloomberg) -- The following events and economic reports may influence trading in Asia’s local bonds and currencies today. Bond yields and exchange rates are from the previous trading session unless stated otherwise.

China: The People’s Bank of China two days ago indicated it’s abandoning the 6.83 yuan peg to the dollar adopted during the global crisis to shield exporters. The central bank said while there’s no basis for “large scale” moves in the currency, the exchange rate will be allowed increased “flexibility.”

The government plans to sell 28 billion yuan ($4.1 billion) of 10-year bonds on June 23. The yield on the 3.25 percent bond due May 2020 was 3.54 percent, according to data compiled by Bloomberg. The yuan was at 6.8262 per dollar.

Japan: Chief Cabinet Secretary Yoshito Sengoku will hold media briefings at 11 a.m. and 4 p.m. in Tokyo. Prime Minister Naoto Kan will hold a press briefing at 5 p.m.

The yield on the 1.3 percent government bond due in June 2020 was 1.20 percent, according to Japan Bond Trading Co., the nation’s largest inter-dealer debt broker.

The yen traded at 90.38 per dollar at 7:16 a.m. in Tokyo.

South Korea: The government will auction 1.5 trillion won ($1.25 billion) of 10-year bonds today. The yield on the 4.5 percent bond due in March 2015 was 4.42 percent. The won was at 1,202.65.

Indonesia: The government plans to sell tomorrow bonds maturing in seven and 15 years as well as one-year bills.

The yield on the 11 percent bond due November 2020 was 8.37 percent, according to the Inter Dealer Market Association. The rupiah was at 9,090 per dollar today.

Thailand: The government will offer to sell 28-, 91- and 182-day bills. The yield on the 3.875 percent bond maturing in June 2019 was 3.20 percent. The baht was at 32.28 today.

Malaysia: The central bank plans to offer 1.5 billion ringgit ($461 million) of 180-day debt and 500 million ringgit of 182-day Islamic notes. The yield on the 4.378 percent note due November 2019 was 4.31 percent. The ringgit was at 3.2470 today.

Philippines: The government plans to sell 8.5 billion pesos ($185 million) of 10-year bonds. It will report today its budget balance for May. The budget surplus was 2.6 billion pesos in April.

The yield on the 7.75 percent debt due February 2020 was 7.96 percent, according to Philippine Dealing & Exchange Corp. The peso was at 45.899 per dollar.

--With assistance from Ronnie Harui in Singapore. Editors: Ven Ram, Nate Hosoda

www.businessweek.com/news/2010-06-20/china-japan-korea-philippines-asian-bond-currency-preview.html

[sandi66]

Asian stocks up after China currency announcement
(AP) – 7 hours ago

SHANGHAI — Asian stock markets rose early Monday after China ended its two-year peg to the dollar over the weekend, though there was no immediate change in the yuan's exchange rate.

Japan's benchmark Nikkei 225 stock index gained 146.33 points, or 1.5 percent, to 10,141.35.

South Korea's Kospi rose 1.5 percent to 1,737.12, and Australia's S&P/ASX 200 was up 1.4 percent at 4,616.20.

China's main share benchmark, the Shanghai Composite Index, added 0.8 percent to 2,534.08, while Hong Kong's Hang Seng index climbed 2.1 percent to 20,702.33.

The Hang Seng was led by heavyweights such as China Life Insurance, which advanced 2.7 percent and Bank of China, up 2.3 percent.

The official exchange rate for China's currency stood unchanged Monday morning in line with the central bank's warning the value of the yuan would not dramatically rise after its two-year peg to the dollar ended.

The People's Bank of China left the yuan's parity rate against the U.S. dollar unchanged Monday at 6.8275, the official Xinhua News Agency said. The rate is a weighted average of prices given by market makers, excluding highest and lowest offers.

"The Chinese side announcing the possibility of greater flexibility for the renminbi, which raises hopes for reminbi appreciation and gives more impetus to Hong Kong stocks," said Ben Kwong Man Bun, chief operating officer at KGI Securities in Hong Kong, using the other Chinese term for its currency.

The impact of any change in the yuan's value will be mixed, he noted, with exporters likely to suffer and importers and airlines, whose debts are denominated in U.S. dollars, gaining.

The yuan's value has been pegged to the U.S. dollar for two years, causing friction with countries who say it is undervalued for China's own benefit. A stronger yuan would make Chinese exports more expensive and bring relief to foreign manufacturers that have struggled to compete.

Beijing has long refused to allow the yuan to float and denied accusations it is unfairly undervalued.

The central bank said it would rely more on a basket of currencies that includes the U.S. dollar to determine the exchange rate, rather than the dollar alone.

In currencies, the dollar rose to 90.47 yen in Tokyo on Monday morning from 90.36 yen in New York late Friday. The euro stood at $1.2432, little changed from $1.2435.

www.google.com/hostednews/ap/article/ALeqM5h3kgMAkbLwyfxBdjzw8Pc4KZ7DhQD9GFDGI80

[sandi66]

Singapore Says Yuan Move Won’t Affect Currency Regime (Update1)

June 20, 2010, 11:08 PM EDT

(Updates with comment from Singapore central bank in third paragraph.)

By Stephanie Phang

June 21 (Bloomberg) -- China’s decision to allow greater flexibility in its currency won’t affect Singapore’s exchange- rate policy, the Southeast Asian nation’s central bank said.

The People’s Bank of China on June 19 indicated it’s abandoning the 6.83 yuan peg to the dollar adopted during the global crisis to shield exporters. The central bank said while there’s no basis for “large scale” moves in the currency, the exchange rate will be allowed increased “flexibility.”

The “announcement will not have an impact on Singapore’s exchange-rate regime,” the Monetary Authority of Singapore said in an e-mailed statement today. “The policy of a modest and gradual appreciation” of the island’s currency announced on April 14 “remains unchanged and is appropriate against underlying economic conditions,” it said.

Singapore, which manages the local dollar against a weighted basket of currencies of the island’s major trading partners, said in April it would undertake a one-time revaluation and seek a gradual appreciation of the currency as the nation rebounded from last year’s global slump. The central bank said today it will monitor the impact of overseas developments on the economy.

The policy of managing the Singapore dollar against a group of currencies “allows us to accommodate the changes within the existing framework of our exchange-rate system,” the Monetary Authority said, adding that it “will continue to be vigilant over developments in the external environment and their impact on the domestic economy, and stands ready to curb excessive volatility” in the Singapore dollar.

Chinese authorities will resume a managed float of the yuan, also known as the renminbi, against a basket of currencies, according to the June 19 statement. Before the exchange rate was frozen in July 2008, Premier Wen Jiabao’s government had allowed a 21 percent advance versus the dollar over three years.

www.businessweek.com/news/2010-06-20/singapore-says-yuan-move-won-t-affect-currency-regime-update1-.html

[sandi66]

Yuan gains but China warns it won't fix economy

By ELAINE KURTENBACH (AP) – 2 hours ago
June 21, 2010

SHANGHAI — China followed through Monday on its pledge to allow greater flexibility in exchange rates, but said an appreciation in its currency alone could not rebalance world growth as it urged world leaders to carry out more fundamental reforms.

By late Monday, the yuan was trading at about 6.8012 to the U.S. dollar in the spot market, strengthening from 6.8272 on Friday — as the central bank delivered on its weekend promise to give up the dollar peg imposed two years ago to help Chinese exporters cope with the global downturn.

For the past two years, Beijing has kept the yuan trading in a much narrower band around 6.83 to $1.

But analysts said the move was mainly aimed at countering criticism of Beijing's currency policies ahead of this weekend's summit of the Group of 20 leading economies and would not result in any significant shifts in exchange rates. The yuan is still subject to a 0.5 percent daily trading range, limiting potential volatility.

"The yuan will gain very soon, but definitely not much. It was more of a strategic maneuver to silence outside criticism," said Qian Qimin, a market analyst at Shenyin Wanguo Securities, in Shanghai.

The central bank said plans to allow greater currency flexibility were in line with China's own needs and would help Beijing fight inflation, encourage manufacturers to improve efficiency and reduce the country's reliance on exports as a key driver for growth.

China's economy surged 11.9 percent in the first quarter of this year and exports jumped by nearly 50 percent over a year earlier in May, despite expectations that Europe's debt crisis would hit demand in the 27-nation European Union, China's biggest trading partner.

"The large trade surplus gives the government confidence and room to loosen controls over the exchange rate," Qian said, since a stronger yuan would make Chinese exports more expensive.

The announcement by the People's Bank of China that it would revert to relying on a basket of currencies that includes the U.S. dollar to determine the exchange rate, rather than the dollar alone, reflects a return to policies in force before the global financial crisis walloped Chinese manufacturers in 2008, putting millions of workers out of their jobs.

But while it has pledged to keep moving gradually toward more market-based exchange rates, Beijing still insists that its policy of keeping the currency stable is crucial for economic recovery, ruling out any significant one-off revaluations.

"The official announcement should be interpreted first and foremost as an important signal towards a more flexible exchange rate, rather than a significant revaluation of the Chinese yuan," UBS economist Wang Tao said in a report on the change.

China let the yuan to rise by about 20 percent beginning in 2005, but halted its rise in 2008. The government sets the rate each day before the start of trading and retains powerful tools to control its movement.

Many countries have slammed Beijing for this policy, complaining that an undervalued yuan unfairly drives down the price of Chinese products and makes them impossible to compete with.

China has sought to deflect this criticism, noting that the causes of the global crisis lay well beyond its door, and a commentary Monday by the official Xinhua News Agency said the G-20 leaders must focus on more urgent global reforms.

"If they cannot make good use of the coming G20 summit to press ahead with the much-needed overhaul of the global financial system, the international community will soon find to its disappointment that its leaders look only for red herrings, rather than real solutions, at a time when true leadership is badly needed," it said.

Regional markets gained Monday, as investors relieved of uncertainty over China's currency policy bought airlines and other heavyweight shares.

"The markets were boosted because investors are becoming less risk averse than before. They are more aggressive," said Ben Kwong Man Bun, chief strategist for KGI Securities in Hong Kong.

While foreign manufacturers have welcomed the relief a stronger yuan would bring, exporters in China, already operating on razor-thin margins, were less pleased.

"The exchange rate problem is one we would have to face sooner or later. That is a fact we have to accept," said Bai Ming, deputy general manager of Zhejiang Mingfeng Car Accesories Co., which exports car covers to the Americas, Europe and South Korea.

Bai, whose factory employs 950 people, said his company's export orders were outpacing his capacity to meet them. But with labor and other costs rising, the company will have to find a ways to stay competitive.

"What we are trying to do is to raise productivity and save costs. We cannot just sit back and wait," he said.

www.google.com/hostednews/ap/article/ALeqM5i-U1bQxgH2wJzlhvl4VPAyH6JMnQD9GFIG9G0

[sandi66]

JUNE 21, 2010, 6:38 A.M. ET

MOF:Germany Welcomes China's Forex Move Toward More Flexibility

BERLIN (Dow Jones)--Germany Monday welcomed China's announcement that it will allow a more flexible foreign exchange rate regime.

"We believe that China can make a decisive contribution to reducing global imbalances", finance ministry spokesman Michael Offer said, welcoming the move.

But he added that Germany is waiting for China to give more details of its plan.

China's central bank said Sunday that there will be no one-off adjustment of the yuan, clarifying its pledge on Saturday to increase the currency's flexibility. The pledge was seen as a clear signal that Beijing is set to stop pegging the yuan to the dollar.

Saturday's statement was widely interpreted to mean that China will let the yuan appreciate against the dollar--possibly as soon as Monday--after nearly two years of being effectively pegged around 6.83 yuan per dollar.

Sunday's follow-up statement clearly indicates that any rise in the currency will be controlled and gradual.

-By Andrea Thomas, Dow Jones Newswires; [phone]; [e-mail]

(The China office contributed to this report)

online.wsj.com/article/BT-CO-20100621-703120.html?mod=WSJ_World_MIDDLEHeadlinesEurope

[sandi66]

MidEast funds take big bite of AgBank IPO
Michael Flaherty and Kennix Chim

HONG KONG
Mon Jun 21, 2010 7:05am EDT

HONG KONG (Reuters) - The Kuwait Investment Authority has invested $800 million in Agricultural Bank of China, two sources said on Monday, giving Middle East funds a big slice of AgBank's likely record $23 billion IPO.

Deals | China

The same sources confirmed a weekend report that the Qatar Investment Authority agreed to invest $2.8 billion in AgBank, a bigger-than-expected sum that gets underwriters closer to their goal of raising around $6 billion through cornerstone investors in the planned Hong Kong offering.

Excluding over-allotment shares, the bank that Mao Zedong founded in 1951 as the rural unit of the central bank hopes to raise around $12 billion through its Hong Kong offering and around $11 billion through a listing in Shanghai.

AgBank and the sovereign funds were unavailable for comment. The sources are directly involved with the deal, but could not be named as the information is not yet public.

Non-Chinese investors cannot take part in China IPOs, but international corporations and funds can buy into AgBank, China's third-largest lender with $1.4 trillion in assets, through the Hong Kong H-share offering.

That list now includes European banks, Hong Kong tycoons and U.S. agricultural conglomerate Archer Daniels Midland, according to other sources involved in the deal.

The parent company of state-run consumer group China Resources Enterprise Ltd will invest $200 million in AgBank, another source familiar with the matter said on Monday.

"If investors take a long-term investment view, I think AgBank can provide a very attractive return," said Patrick Yiu of CASH Asset Management. Yiu said short-term investors will likely get burned if AgBank prices at a higher-than-expected valuation.

AgBank, run by 53-year-old war hero Xiang Junbo, had hoped to raise $30 billion through its dual-market initial public offering, but China's share markets have dropped by a fifth, forcing the bank to scale back its fundraising.

Anything above the $21.9 billion raised by Industrial and Commercial Bank of China (ICBC) in 2006 would make it the world's biggest IPO.

POWL IN JAPAN

In order to attract a wide variety of investors across Asia, AgBank also plans to launch a public offer without listing (POWL) in Japan, one of the sources said.

"The POWL process allows you to distribute more broadly," the source said, adding this could allow another $1 billion of the Hong Kong offering to be taken up by outside investors.

The IPOs of China Mobile and China Construction Bank also came with a POWL tranche in Japan, attracting both Japanese institutional and retail investors.

Both POWL and cornerstone investors are a key step for state-owned AgBank as it hopes that signing up big name investors ahead of its Shanghai and Hong Kong listings in mid-July will help attract other investors despite weak market sentiment.

Cornerstone investors agree to buy into an IPO before it prices. They are normally barred from selling their shares for 6-12 months, helping build confidence in the offer before it goes to institutional investors.

AgBank boasts nearly 24,000 branches and employs more than 441,000 staff, eclipsing ICBC and CCB, the world's two biggest banks by market value. It has 320 million customers, more than the population of the United States.

www.reuters.com/article/idUSTRE65G4QR20100621

[sandi66]

Qatar and Kuwait eye Chinese bank flotation

updated at 09:54 GMT, Monday, 21 June 2010 10:54 UK

Qatar and Kuwait are said to be lining up to invest $3.6bn (£2.4bn) in the flotation of the Agricultural Bank of China.

The share sale is set to be the world's biggest initial public offering (IPO).

News agencies Reuters and Dow Jones both reported that unnamed sources had confirmed the investment plans.

The Qatar Investment Authority would buy a $2.8bn stake making it the biggest single investor. Kuwait would put in another $500m-$1bn.

Agricultural Bank of China plans to sell a 14% stake on the Hong Kong and Shanghai stock exchanges for $23bn.

UK-based bank Standard Chartered is also expected to invest some $500m in the initial public offering.

Other likely investors include Singapore's sovereign wealth fund Temasek Holdings, Holland's Rabobank and Hong Kong businessman Li Ka Shing.

news.bbc.co.uk/2/hi/business/10364196.stm

[sandi66]

China can crash gold prices and support yuan

June 21, 2010

China will reassure the growth of gold prices
In brief: China likes gold. Gold prices may begin to decline if China has to get more precious metal.

Gold prices will depend on China. Total gold reserves in China grew by 454 tons and at the end of 2009 amounted to 1,054 tons. According to this index, China ranks fifth in the world ranking. The significance of gold as the currency has declined substantially, although it is not completely removed from the monetary system of the country (the volume of China’s foreign exchange reserves exceeding 2 trillion U.S. dollars, the proportion of gold in them is less than 2%), according to a report on foreign exchange operations of the State foreign exchange control of China.


From 2002 to the end of 2007, total gold reserves of China remained at the same level – about 600 tons. Late last year the volume of gold reserves exceeded 1000 tons, which enabled the country to take fifth place in the world on this indicator. The first four positions are held by the U.S. (8,133.5 tons, the proportion of precious metal in the total gold reserves of the country is 76%), Germany, Italy and France (on average 40%). Earlier versions appeared on the market that China intends to acquire gold the IMF in order to improve the structure of foreign exchange reserves, writes the China International Internet Center. But these versions were not confirmed. In November last year, India bought 200 tons of gold and became the largest buyer of gold the IMF. From that moment began a new round of growth in gold prices. Central banks in many European countries and the United States significantly reduced the volume of gold sales, and increase the volume of its purchases to diversify risks. Amid the financial crisis and a weak U.S. dollar, many developing countries have started to transfer foreign exchange reserves in gold assets. For example, in China in the past five years, growth in demand for gold increased by 13% annually. According to the World Gold Council in the coming decade, demand for gold in China could rise twice. In view of the fact that the capacity of the gold market is limited, China’s proactive in this market will lead to higher prices in the international market.

According to statistics from the World Gold Council, in late 2009, the total gold reserves, including international organizations such as the IMF, reached 30,100 tons, a 17.2% decrease compared to 1976, when it was concluded Jamaica agreement, proclaimed the special drawing right base of the new monetary system, which recorded demonetization of gold and legitimize the regime of floating exchange rates. Last year, the International Monetary Fund has implemented in the market more than 400 tons of gold.

Ukrainian Globalist
2010-06-20 16:30, Commodities.

globalist.org.ua/eng/1443570-china-can-crash-gold-prices-and-support-yuan

[sandi66]

Newly flexible yuan surges

June 21, 2010 7:42 AM

Sends a clear signal ahead of this weekend’s G20 summit that Beijing is sticking to its word of allowing greater currency flexibility
By Jason Subler and Lu Jianxin , Reuters


SHANGHAI — China’s yuan surged on Monday the most since its revaluation in 2005, sending a clear signal ahead of this weekend’s G20 summit that Beijing is sticking to its word of allowing greater currency flexibility.

The central bank has maintained the peg since the middle of 2008, a controversial policy aimed at steadying the world’s fastest-growing major economy during the global economic downturn.

But the central bank stepped aside on Monday to back up its surprise weekend announcement that it would allow greater flexibility for the yuan, buying some time against Western critics who argue the currency is undervalued and gives China an unfair advantage in world trade.

After the People’s Bank of China (PBOC), the central bank, set the daily reference point for trading, the yuan rose by 0.45% to as high as 6.7969 per dollar — the biggest intraday rise since China revalued the currency in 2005.

Still, while the yuan’s rise may signal China’s intention to let financial markets play a bigger role, the central bank showed it had ultimate control of the market by setting the reference rate for the day’s trading at the same level as Friday’s fixing.

“If they want to show that the exchange rate is more market driven, then why not allow the market to drive the change rather than drive a change through the fixing?” said Stephen Green, head of China research at Standard Chartered in Shanghai.

“Some people suspect the PBOC guides the fixing, so if you allow the market to determine the rate and intra-day trading, then that’s a more flexible exchange rate than guiding the fixing,” he said.

The yuan is permitted to rise or fall 0.5% from the daily reference rate, but it has rarely tested that band.

China’s economic strength gave policymakers confidence to end the peg, but they remain worried demand for China’s exports is not on a solid footing given risks like Europe’s debt woes.

The central bank ruled out a one-off revaluation of the currency and suggested the yuan’s value was close to fair value.

Still, analysts said China needs to show the G20, whose leaders meet June 26-27 in Canada to discuss issues including global trade imbalances, that it is serious in its commitment to make the yuan more flexible.

Indeed, the United States called for “vigorous implementation” of the policy.

“You have to assume the yuan will rise this week given all the political angst. They need to turn up at the G20 with something real,” said Sean Callow, senior currency strategist at Westpac in Sydney.

China’s decision to keep the currency pegged to the U.S. dollar since the middle of 2008 has been a lightning rod for criticism that Beijing has been gaining an unfair trade advantage during the global downturn.

Its announcement at the weekend that it would give the currency greater flexibility was welcomed globally, albeit with some caution as policymakers waited to see what the words would mean in practice.

Markets, for their part, were not so circumspect.

Asian currencies and stocks rose and U.S. Treasuries fell on expectations that China’s promise to give the currency new room to move would ease political tensions with the West and encourage investors to snap up riskier assets.

Commodities and oil also surged, as a stronger currency would give the world’s third-biggest economy more purchasing power to buy foreign goods, which would be positive for world trade, especially for commodity exporters such as Australia, Brazil, Canada and New Zealand.

Crude prices rose 2% to the highest since early may, while copper and zinc traded in Shanghai both rose by their daily limits.

Many economists see the currency strengthening further in coming days, albeit at a very modest pace, meaning some of Monday’s early exuberance could turn out to be overdone.

A Reuters poll of 33 economists showed they expected the yuan to end the year at 6.67 per dollar, a rise of 2.4% from late last week before China’s policy announcement and similar to the appreciation implied by offshore non-deliverable forwards.

The central bank may also be keen in the months ahead to increase the volatility of the yuan to discourage the hot-money flows that accompanied its steady appreciation from 2005 to 2008.

Economists say a higher yuan could help temper inflation in China by pushing down import prices, which in turn could reduce the need for Beijing to tighten monetary policy. Markets had been worried that China could over-tighten and suffer a hard landing.

Still, some in China were not so pleased to see what they viewed as their government’s bowing to outside pressure on its yuan, also known as the renminbi.

“The renminbi should appreciate, but not now, only when our national power has also risen. We’re still a country that relies on exports,” wrote one online reader of popular tabloid the Global Times.

“The renminbi’s appreciation should be based on the national need, and should not be forced on us by any other country,” wrote another.

© Thomson Reuters 2010

www.montrealgazette.com/business/Newly+flexible+yuan+surges/3180978/story.html

[sandi66]

Stocks Set to Surge on China's Yuan Decision

06/21/10 - 07:49 AM EDT

NEW YORK (TheStreet) -- U.S. stock futures pointed to a much stronger open Monday on news that China will allow the yuan to appreciate against the dollar.

Futures for the Dow Jones Industrial Average were up by 134 points at 10,507 and were 113 points above fair value. S&P 500 futures were ahead by 17 points at 1127 and were 17 points above fair value, while futures for the Nasdaq were up by 30 points and were 25 points above fair value.

Stocks managed to finish Friday with slight gains after hugging the flat line for most of the session.

Overseas on Monday, Hong Kong's Hang Seng soared 3.1%, and Japan's Nikkei jumped 2.4%. The FTSE in London was climbing 1.1% higher, and the DAX in Frankfurt was up by 1.5%.

www.thestreet.com/story/10787836/1/stocks-set-to-surge-on-chinas-yuan-decision.html?cm_ven=GOOGLEFI

[sandi66]

China Currency at Strongest Level in Nearly Two Years
By BETTINA WASSENER
Published: June 21, 2010
HONG KONG — The Chinese currency strengthened Monday to the highest level in nearly two years in the biggest one-day move since 2005, an early indication that China would allow a gradual rise in the renminbi that it had hinted at over the weekend.
Officials from Japan to Thailand to Germany on Monday hailed China’s pledge Saturday to “proceed further with reform” of the exchange rate and “enhance” flexibility as a potential boon to their exports and national economies. Many economists believe the stronger renminbi will increase the purchasing power of ordinary Chinese citizens and companies, helping promote global trade in one of the world’s largest markets.

But China on Monday continued to play down the significance of the renminbi’s value in helping to re-balance the global economy. A commentary in the state-run China Daily placed the onus on global leaders to overhaul the global financial system.

If leaders don’t to make progress at a forthcoming Group of 20 summit to overhaul the financial system, “the international community will soon find to its disappointment that its leaders look only for red herrings, rather than real solutions, at a time when true leadership is badly needed,” the commentary said.

By the close of business in Asia, the renminbi had advanced 0.42 percent to 6.7976 per dollar. Though seemingly small, the one-day gain is the largest in five years and marks an extraordinary change in China’s currency stance. China has hardly allowed the currency to budge over the past two years as it tried to promote its exports during the global economic and financial crisis.

At the same time, the announcement triggered an across-the-board rally in Asian and European equity markets as investors cheered the political and economic implications of the move.

The key market indexes in mainland China and Hong Kong rallied 2.9 percent and 3.1 percent, respectively, and the Nikkei 225 index in Japan closed 2.4 percent higher. European markets also were higher by midday.

Mainland Chinese airlines were among the biggest gainers in Shanghai: China Southern Airlines soared 8.1 percent, China Eastern jumped 5.6 percent, and Air China rallied 6.4 percent.

The reason: Investors believe that a rise in the Chinese currency will ultimately bolster passenger and cargo business while reducing airlines’ fuel costs. Because oil is denominated in dollars on the world markets, a rise in the renminbi would make oil cheaper for Chinese purchasers.

Oil also rose on expectations that a stronger renminbi will bolster demand from China. U.S. crude for July delivery rose $1.69 to as high as $78.87, its highest level since early May.

China’s announcement stopped well short of an all-out revaluation for the Chinese currency and provided little detail as to what the added flexibility for the renminbi would entail, or when it would be introduced.

And in a sign that underscored that the authorities in Beijing are in no hurry to initiate marked reform — a step that might fuel criticism at home that they were succumbing to pressure from abroad — the central bank on Monday left its reference rate for the currency unchanged from Friday’s level, at 6.8275 per dollar.

Officially the renminbi is allowed to trade as much as 0.5 percent below or above Beijing’s daily reference rate to the dollar, but in reality the divergence from that level has been much smaller over the past two years.

Monday’s gain showed a striking hands-off attitude on the part of Chinese authorities who manage the exchange rate. But analysts will closely watch Beijing’s announcement Tuesday morning of its daily reference rate to get a better sense of how swiftly China will allow financial markets to determine the renminbi’s level.

The weekend’s statement and Monday’s gains in the currency were widely interpreted as a precursor to a gradual and modest appreciation of the renminbi, which has been informally pegged against the dollar since the middle of 2008.

That policy has caused political tensions with the United States: Many economists and U.S. policy makers believe that the renminbi exchange rate is artificially low, giving Chinese exporters an unfair competitive advantage over U.S. manufacturers.

Saturday’s announcement, coming just days before the G-20 meeting of world leaders in Canada later this week, appeared aimed at defusing the currency debate and shifting the focus of the meeting toward other issues, like Europe’s debt troubles, analysts

“The renminbi is a political tool. Clearly the timing of the move was politically determined. It is not an economic tool yet. This will take years, not days or weeks,” Bill Belchere, a global economist at Mirae Asset in Hong Kong, wrote in a note Monday.

He added: “This is a move in the right direction: politically and economically. Market disappointment may grow if China’s actions remain slow and don’t add up to real shift in policy. But the verdict is out.”

Economists at Bank of America Merrill Lynch echoed this, writing in a note that although they did not expect a significant appreciation against the dollar, Saturday’s announcement was a “key step for Chinese macro policy.”

Foreign exchange flexibility would help China to control asset price bubbles and reduce the threat of protectionism, economists believe.

The stock markets took the news unequivocally well, shrugging off both the lack of clarity on the timing and likely small size of any actual appreciation.

Most analysts expect Beijing to allow an increase of between only 2 percent and 5 percent by the end of the year. A Reuters survey Monday showed that economists broadly expected the renminbi to end 2010 at 6.67 per dollar.

In addition to China and Japan, major indexes elsewhere also gained, with rises of 1.8 percent in Singapore, 1.9 percent in Taiwan and 1.6 percent in South Korea. The Sensex in India was 1.7 percent higher in late trading, and the benchmark index in Australia closed up 1.3 percent.

Consumer goods companies and overseas companies that export their goods and services to China are seen as the biggest winners of a stronger renminbi.

The Swiss watch maker Swatch rose 5.6 percent by early afternoon in Europe, and the French luxury groups LVMH and Richemont climbed 3.2 percent and 4.6 percent, respectively.

The exact impact on companies will depend to a large extent on how much they export to and from China and whether they have manufacturing operations there.

Longer term, analysts said, a renminbi appreciation could have far-reaching macroeconomic implications.

An appreciation of the renminbi against the yen is “clearly good for Japanese companies that stand to benefit from growth in the Chinese market,” analysts at Nomura wrote in a note on Monday, though they added that it also would have some negative implications for Japanese companies that have manufacturing operations in China and that export to other regions.

The Japanese finance minister, Yoshihiko Noda, said he expected the move “to be a plus for the China and Asia economies as well as the world economy. Basically I welcome it,” Reuters reported.

And Bandid Nijathaworn, the deputy governor of the Thai central bank, said gains in the renminbi, also commonly known as the yuan, would buoy exports to China and help reduce trade imbalances in the long term. “China is a Thai export market. If the yuan strengthens and our exports can still compete with others, we should benefit,” he said, according to Reuters.

www.nytimes.com/2010/06/22/business/global/22yuan.html?src=busln\

[sandi66]

WRAPUP 1-Canada welcomes yuan move, will wait for results
Mon Jun 21, 2010 1:03pm EDT* PM Harper says China's announcement on yuan very positive

Regulatory News | Bonds | Global Markets

* G20 to discuss currency, but as part of broader talks

* Canada says G20 needs to focus on risks posed by debt

By David Ljunggren and Louise Egan

OTTAWA, June 21 (Reuters) - Canada welcomes China's move to let its currency become more flexible but will wait to see what the results are before passing final judgment, Prime Minister Stephen Harper told Reuters on Monday.

The Chinese move was widely seen as a way of reducing international tensions over the yuan before a Toronto summit of leaders from the Group of 20 leading and emerging nations on June 26-27.

"The proof will be in the pudding over time, but I think it's fair to say this is a very positive announcement by China. More broadly it does show China not simply doing some positive things, but China assuming a more global view," Harper said in a wide-ranging interview.

Western nations have long argued that China's policy of effectively pegging the yuan to the U.S. dollar gave it an unfair trading advantage by ensuring Chinese exports remained cheap, even as much of the world was struggling to emerge from recession.

Some of China's strongest critics in the U.S. Congress have already made it clear they are unimpressed with the announcement, and the United States itself called for "vigorous implementation" of the policy.

The currency question is still very sensitive and Canadians officials warn against putting too much focus on China at the summit in case it starts to feel it is being singled out.

Harper said the G20 would discuss China's move as part of a broader assessment of policies designed to ensure balanced and sustainable growth.

"I've never wanted to focus strictly on one country or strictly on one issue but it's an important part of seeing emerging economies increase domestic demand which is a big part of the puzzle going forward," he said.

When asked whether the G20 would ask China to give more of a commitment to let the yuan strengthen, he replied: "This is always an issue of discussion. I think there will be some discussion around that but, as I said, I think people will be looking to see what actually happens going forward."

DEFICITS AND STIMULUS

The G20 will also have to focus on splits emerging between nations such as the United States, which fears a focus on debt reduction rather than continued stimulus spending will choke off a global recovery, and Germany, which wants the question of spiraling deficits to be urgently addressed.

Harper sent a letter to his G20 peers last week suggesting countries cut their deficits in half by 2013 and stabilize, or start reducing, their debt-to-GDP ratios by 2016. The targets are relatively easy for some nations but will be very hard for others to achieve.

"The targets set out in my letter are probably minimalist," Harper said. "These are the things that, at a minimum, advanced countries are going to have to achieve."

Ottawa sees a balancing act required to protect growth, with an immediate focus on stimulus while preparing for fiscal consolidation in the medium term.

"In the short term, we need to continue to deliver stimulus ... we are not suggesting the early or premature termination of that," Harper said.

Yet at the same time, he said, markets wanted to see that G20 leaders understand the risks posed by heavy sovereign debt levels in some advanced economies.

"We're starting to see interest rates creep up in some countries ... and that's a signal that people have to take a look at their debt stock. If your debt stock is enormous, even a small interest rate increase could have quite serious effects on growth," he said.

Harper also hopes the G20 will send a signal to markets that it will meet its self-imposed timelines for financial sector reform, aimed at stricter bank capital and liquidity rules to prevent future crises.

As the United States and Europe push ahead with quite different rules for their own domestic banks, Harper said he did not expect countries to have identical systems and was satisfied with the level of co-ordination in the G20 around the core changes for banks.

www.reuters.com/article/idUSN2124955120100621