Showing posts with label China. Show all posts
Showing posts with label China. Show all posts

Tuesday, 11 October 2011

Financial Times: Beijing intervenes to help stabilise banks


High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. The Chinese government will boost its stakes in the country’s largest banks, as it attempts to shore up slumping financial stocks and to restore investor confidence.
Central Huijin, the domestic arm of China’s sovereign wealth fund, will purchase shares in Agricultural Bank of ChinaBank of ChinaChina Construction Bank and Industrial and Commercial Bank of China, the official Xinhua news agency announced on Monday. Xinhua added that the purchases by Huijin – its first such public intervention since a similar decision at the onset of the financial crisis three years ago – would “support the healthy operations and development of key state-owned financial institutions and stabilise the share prices of state-owned commercial banks”.
The announcement came too late for the Chinese stock market, which had closed at a 30-month low, but had an immediate effect on late trading in Hong Kong. ICBC’s Hong Kong-listed shares, which had been down 3 per cent, rallied to close up 1 per cent. Analysts said the sharp rebound may have partly reflected short covering. Chinese bank shares have fallen 30 per cent during recent months.
“They [Huijin] are trying to signal to the market that they feel confident,” said Sanjay Jain, a Chinese bank analyst with Credit Suisse. “And of course valuations are depressed, so it’s not a bad idea to buy at these levels for a long-term strategic investor.”
Although Chinese growth has so far held up well, the European debt crisis and fears of a double-dip recession in the US have cast a shadow over the country’s economic prospects. With inflation running near three-year highs and debt levels swollen by heavy spending, economists doubt that Beijing can launch another massive stimulus programme, as it did when the global financial crisis struck in 2008.
Beijing also allowed the renminbi to record its biggest one-day gain in years on Monday. It rose 0.6 per cent against the dollar, squeezing traders who have been betting that the currency will weaken in tandem with a slowing economy.
The motivation for the sudden appreciation appeared to be diplomatic. The US Senate is poised to vote on Tuesday on legislation that would punish China for deliberately undervaluing the renminbi.
The government, by means of Huijin, is already the majority shareholder in all of the country’s important banks. The Xinhua announcement gave no details about how many more shares the fund intends to buy.
Investors have turned against China, driving down commodity prices and dumping Chinese bank shares. Global investors worry that bad debt levels will soar because of a lending spree that began in 2008. To short Chinese bank shares in Hong Kong has become a popular play for investors betting that the world’s fastest-growing major economy will soon slow.

China plans new economic zones in Xinjiang border towns


BEIJING: China announced on Saturday that it plans to use subsidies and tax incentives to build two new economic zones in the far western region of Xinjiang, to open up the landlocked west and boost trade with Central and South Asian neighbours.
In a detailed policy outline posted on the central government’s website (www.gov.cn), the State Council, or cabinet, aims to “basically complete” infrastructure for economic development zones (EDZ) at Kashgar and Khorgos.
China aims to complete infrastructure for economic development zones at Kashgar and Khorgos.
Xinjiang is strategically vital to China, accounting for one-sixth of the country’s land mass and rich in oil, gas, coal and other mineral resources. It borders Russia, Kazakhstan, Pakistan, Mongolia, Kyrgystan, Tajikistan, Afghanistan and India, and is a politically sensitive region as many Uighurs, a Turkic-speaking Muslim people native to Xinjiang, resent Chinese controls on religion, culture and language.
Electronics, textiles, metallurgy and renewable energy manufacturing would be key areas for development in Kashgar, an oasis in south-western part of Xinjiang, the statement said, while Khorgos would focus on chemicals, farm products and pharmaceuticals.
“By 2020, the two economic zones would see a great leap in competitiveness in these industries and overall economic strength,” the statement said. Khorgos, already an entry point of the landmark Turkmenistan-China natural gas pipeline, has also won government approval to become an import point for and automobiles.
The government also plans to encourage Chinese and international airlines to open new routes to neighbouring countries and speed up construction of rail lines linking Xinjiang with Uzbekistan and Pakistan, the statement said.

Monday, 10 October 2011

China factor in Afghanistan


THE signing of the India-Afghanistan Strategic Partnership last week reaffirmed the establishment’s narratives about Pakistan’s real concerns across its western border: it’s not about militancy or instability, but about Indian hegemony.
The timing of the pact, and its focus on security cooperation, intimates Pakistan’s nightmare scenario of encirclement by India. Former military ruler Pervez Musharraf pointed to the pact as proof that India is seeking to create “an anti-Pakistan Afghanistan”. And so we’re back to binaries: India versus Pakistan in a potential proxy war in Afghanistan.
But things are never as straightforward as they seem. Most political dynamics in South Asia are seen through the bilateral lens of tense India-Pakistan relations. However, in most cases, those tensions are actually trilateral, with Sino-Indian tensions playing out in the background. Afghanistan is no exception.
In recent days, Pakistan has dwelled on the Strategic Partnership between New Delhi and Kabul because of the security implications of India playing a bigger role in training Afghan security forces. This narrow focus has prevented Islamabad from emphasising the significance of two other pacts signed by India and Afghanistan last week. One MoU calls for enhanced cooperation in the exploration and production of hydrocarbons, primarily oil and gas. A second MoU, signed between the Indian and Afghan ministries of mines, calls for promoting mineral exploration and investment in Afghanistan’s mines.
These MoUs were signed in the same week that it was revealed that the China National Petroleum Corp (CNPC) — the largest state-owned Chinese company — has won the rights to explore and develop oil fields in Afghanistan’s Amu Darya basin.
Writing in Foreign Policy, Alexander Benard and Eli Sugarman explain that Amu Darya contains five known fields containing 80 million barrels of crude oil, which amounts to 11,000 barrels per day for 20 years.
It is no secret that the Chinese government covets Afghanistan’s natural resources. In 2007, China won another major tender for the Aynak copper deposit, estimated to be worth $80bn. Indeed, China has recently invested in various Central Asian natural resources to supply energy and raw materials for its booming industries.
Rather than obsess purely about India’s security designs in Afghanistan vis-à-vis Pakistan, Islamabad should also plan for the China factor. It is clear that India and China are competing for access to Afghanistan’s rich mineral and energy resources. It is also clear that this competition fuels some of New Delhi’s strategic thinking regarding its presence in Afghanistan. Pakistan’s repeated failure to account for India’s concerns about China in a security and nuclear context has driven the country into an endless arms race.
Billions have been spent on conventional and nuclear weapons as Pakistan tries to compete with the testy economic powerhouses on its periphery. Before it makes the same mistake in Afghanistan, Pakistan should account for the fact that there are more than two players interested in present-day Afghanistan. Leaving India aside, Pakistan should also consider the medium- and long-term ramifications of Chinese investment in Afghanistan.
On the positive side, Pakistan could find ways to collaborate with China on its extractive and energy-related initiatives in Afghanistan. Such an involvement would expand Pakistan’s interface with Afghanistan beyond political interference to substantial investment and infrastructure development work. Given Pakistan’s worsening energy crisis, any additional options for access to energy must be pursued.
The political benefits of Chinese presence in Afghanistan are also worth noting: as a major investor in Afghanistan’s natural resource industries, China will also enjoy a fair amount of political influence in Kabul. The durability of the Sino-Pak relationship suggests that Beijing would intervene with Kabul in the future if Afghanistan chose to pursue policies hostile to Pakistan. Knowing that China would defend Pakistani interests should give Islamabad the confidence not to pursue paranoid or self-destructive policies in the name of ‘strategic depth’.
Of course, an expanded Chinese presence in Afghanistan could work against Pakistan, but only if Islamabad continues to pursue its current tack of backing militant groups as proxies. Beijing will have little patience for militants receiving Pakistani support if they in any way detract from China’s ability to reap the benefits of its investments (for example, if poor security prevents CNPC from exploring the oil fields at Amu Darya). Right now, China is letting the US do the dirty work of slapping Pakistan on the wrist for backing militant groups. Once US troops withdraw from the region in 2014, we can expect China to take a harder line: remember, it was on Beijing’s insistence that the Pakistan Army conducted Operation Silence at Lal Masjid in 2007.
China will also not tolerate any activities that could lead to a full-blown confrontation between Pakistan and India. While Beijing and New Delhi are engaged in fierce competition on the global stage, they also enjoy a significant trading relationship.
China does seven times more trade with India than it does with Pakistan, and is India’s largest trading partner, even over the US. China is aware that its long-standing strategic partnership with Pakistan would disrupt these strong economic ties in the event of a crisis. For that reason, it will pressurise Pakistan in the medium term to abandon the use of proxies against Indian interests in Afghanistan.
Finally, Beijing will probably bring in low-cost labour from China to work on extractive and explorative projects in Afghanistan. The last thing China needs is for these workers to become radicalised as a result of exposure to Pakistan-backed militant groups before returning to the mainland.
In sum, Pakistan’s adherence to the proxy war narrative is likely to prove misguided and counterproductive in years to come.
In the context of Chinese interests in Afghanistan, it also threatens to leave Pakistan isolated, even from its closest allies.