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Daily Dispatches – China growth by a thousand perks

Making sure the economy is not set in stone (image: Wikipedia)

Making sure the economy is not set in stone (image: Wikipedia)

The Financial Times reports that on Wednesday China has unveiled measures to boost its sluggish economic growth, which slowing more than expected. The last raft of measures reported by the FT is, it says, ‘the strongest indication yet’ of the leadership’s concern about the slowdown and one that also underscores a shift in Beijing’s approach to managing its economy.

The “mini stimulus”, though limited in size, could herald more policy moves to prop up growth. The government will eliminate taxes on small businesses, reduce costs for exporters and line up funds for the construction of railways.

The State Council, China’s cabinet, said late on Wednesday it hoped to “arouse the energy of the market” with a three-pronged approach:  it has temporarily scrapped all value-added and operating taxes on businesses with monthly sales of less than Rmb20,000 (USD$3,250), which would help more than 6 million enterprises employing tens of millions of people.

It has also pledged to simplify approval procedures and reduce administrative costs for exporting companies, and finally, China says it will create more financing channels to ensure it can fulfil its ambitious railway development plans.

Chinese growth slowed to 7.5% year-on-year in the second quarter. Most analysts expect it to weaken further.

Kiwi rate hike on the cards

Bloomberg reports that New Zealand’s central bank says the pace of future interest-rate increases will depend on the booming housing market’s impact on prices, but the NZRB says it will keep borrowing costs at a record low this year.

The central bank maintained the official rate at 2.5% today, saying that “…although removal of monetary stimulus will likely be needed in the future, we expect to keep the official cash rate unchanged through the end of the year.

“The extent of the monetary policy response will depend largely on the degree to which the growing momentum in the housing market and construction sector spills over into inflation pressures.”

Arctic melt lands global economy in hot water

Bloomberg reports that the cost to the world from melting Arctic ice is equal to almost a year of global economic output as releasing methane trapped in the frozen continent leads to extreme weather, flooding and droughts.

The methane emissions are an “economic time-bomb” that may cost USD$60 trillion from effects on the climate, according to research published by the University of Cambridge and the Rotterdam School of Management at Erasmus University. Extreme weather events would mainly affect developing nations.

India tightens liquidity

The Financial Times reports that Indian bank stocks fell heavily again on Wednesday in the aftermath of moves by the country’s Reserve Bank to tighten liquidity.

Private institution Yes Bank was the hardest hit by measures aimed at siphoning money from India’s economy to underpin the rupee, which has fallen to record lows.

Yes Bank closed down around 13% indicating its vulnerability to increases in wholesale funding costs, which have been targeted by the RBI. The Bombay Stock Exchange’s benchmark index of leading bank shares fell by about 5%, while shares in other smaller private banks including Kotak Mahindra Bank fell by a similar amount.

Aussie boost for Macquarie

The Sydney Morning Herald reports that Macquarie Group expects to lift profits this financial year, thanks in part to the fall in the Australian dollar.

The investment bank says a rise in base and improvement fees and the fall in the local currency should see its net profit increase in the the 2013/14 financial year.

The company told investors that while market volatility made forecasting difficult, it was expected that profits for the full 2014 financial year would be higher than in 2013.  Macquarie Group reported a 17% increase in net profit to AUD$851 million in the year to March 31 2013.

Pork deals brings the bacon home for Chinese M&A

Finance Asia reports that Chinese buyers have spent USD$25.1billion on overseas M&A this year, a record 9% share of cross-border global M&A, according to Dealogic. This makes China the second largest originator of cross-border M&A after the US, which has spent USD$97 billion, comprising 24% of global M&A.

China’s 2013 performance has been boosted Smithfield pork bid – but it is by no means a done deal yet, with US lawmakers stiull evaluating the potential impact on US food security.

Richest Chinese families

People’s Daily reports that Tencent boss Ma Huateng has unseated Sany’s Liang Wengen as the wealthiest person in China, according to the list of the richest Chinese families 2013 published by Chinese wealth management journal Money Week.

Ma Huateng, Chairman of Tencent Holding, is worth 46.7 billion yuan (USD$7.61 billion). Born in 1971, he is much younger than most others on the list. He founded Tencent in 1998, which is now China’s largest Internet company well-known for its instant messenger QQ.

Li Yanhong (Robin Li) is CEO and chairman of Baidu, China’s main Internet search engine. He ranked the second with wealth of 41.1 billion yuan (USD$6.69 billion).

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