Stalling European factories and slowing China leave world economy looking to America

reuters

By Jonathan Cable and Koh Gui Qing | Reuters

European manufacturing appeared no closer to recovery last month while growth in Asia cooled, according to business surveys and trade data on Friday that pointed to ongoing weakness in global demand.

Purchasing managers’ reports from the United States due later, however, are expected to show growth picking up in the world’s largest economy, after a weak fourth quarter.

In China, factory growth slowed to multi-month lows. Sluggish domestic demand added pressure to already depressed foreign sales, two separate purchasing manager indexes (PMI) showed.

Worryingly for European Central Bank policymakers balancing the needs of 17 different economies, euro zone reports painted a picture of ongoing divergence, with a dire performance in France offsetting a return to growth in economic powerhouse Germany.

Markit’s Eurozone Manufacturing PMI was unchanged at January’s 47.9 last month, just pipping an earlier flash reading of 47.8, but holding below the 50 level that divides growth from contraction for the 19th month running.

Germany, Europe’s largest economy, and Ireland (OTC BB: IRLD – news) were the only two countries in the 17-nation bloc to see growth. PMIs from Spain and Italy showed activity in their factory sectors deteriorated again with the situation worsening in Italy.

The euro zone output index, which feeds into the Composite PMI, a broader gauge of the economy due out on Tuesday, sank to 47.8 from January’s 48.7.

“Most of it is driven by Germany. Germany has outperformed the rest of the euro zone for quite a while now and that divergence is going to persist,” said Evelyn Herman at BNP Paribas (Milan:BNP.MI – news) .

In other upbeat news German retail sales grew at the fastest monthly rate in more than six years in January, rebounding from a deep fall in December, confirming signs it has turned the corner after a dismal end to 2012.

But unemployment in the currency union hit a new high in January of 11.9 percent, official data showed, and the PMI data pointed to factories reducing headcount for the thirteenth month.

Some 44 out of 55 economists polled by Reuters said the European Central Bank would have to step in and buy bonds from its struggling members.

Inflation among the countries using the euro fell to 1.8 percent last month, according to official data released on Friday, below the ECB’s two percent target ceiling and giving them room to ease policy.

That said, only a handful of the 76 economists polled by Reuters this week predict the ECB will reduce rates from their current record low of 0.75 percent.

British manufacturing shrank unexpectedly in February and new orders dwindled, making it likely the sector will put a drag on economic growth in the first quarter in a country at risk of sinking into a triple-dip recession.

Chances are rising that the Bank of England will rekindle its asset purchase programme next week and the PMI data coupled with figures showing mortgage approvals for home buyers dropped in January will only increase those odds.

FRAGILE CHINA

China’s official PMI from the National Bureau of Statistics eased to 50.1 after seasonal adjustments in February, the weakest reading in five months and just above the 50-point level separating growth from contraction on a monthly basis.

A second PMI issued by HSBC (LSE: HSBA.L – news) fell to a 4-month low of 50.4 after seasonal adjustments, off January’s 2-year high and in line with a flash, or preliminary, reading late last month.

But the bigger-than-expected retreat in the purchasing managers’ indexes does not signal China’s economy is slipping into another slowdown, analysts said. Instead, they show China’s growth recovery this year would be mild, as widely expected.

The Lunar New Year holiday, China’s biggest annual holiday and widely observed across much of East Asia, fell in February this year making it harder to draw firm conclusions, even though the data was seasonally adjusted.

“Today’s data point to a stabilisation of economic activities in coming months, not a strong recovery of growth,” said Jian Chang, a Barclays (LSE: BARC.L – news) analyst.

Tim Condon, head of Asian economic research at ING in Singapore, argued China’s economic data in January and February has “a lot of noise” due to the festive season. “When it settles down we expect the data will reveal that industrial production is growing around 10 percent,” he said.

In South Korea, trade data showed a sharp fall in exports, while a PMI report from last year’s emerging market investor favourite Indonesia showed a slight improvement in manufacturing overall, but a fall in new export orders.

Read more of this post

How Ending Currency Manipulation Will Help Manufacturers

Thomas small logo

by 

Many American economists and policymakers believe that currency manipulation by U.S. trading partners such as Japan and Singapore – and especially China – creates a drag on the U.S. economy and depresses the country’s manufacturing sector.

Currency Manipulation

Currency manipulation by U.S. trading partners such as Japan and Singapore – and especially China – creates a drag on the U.S. economy and depresses the country’s manufacturing sector.

Currency manipulation involves artificially reducing the value of a country’s own currency, in effect providing a subsidy for national exports. Currency manipulators often buy U.S. treasury bonds to prevent their own currencies from strengthening. In the case of China, the country’s trade with the U.S. brings in an excess of U.S. dollars and would normally create a shortage of yuans. But to avoid the yuan’s appreciation and prop up its manufacturing sector, China buys up U.S. treasuries to keep the yuan out of currency exchange markets, thus maintaining an artificially low value.

About one out of every six U.S. private-sector jobs is in manufacturing, 17.2 million in total, according to the National Association of Manufacturers(NAM). However, manufacturing dominates when it comes to U.S. trade goods, accounting for 86 percent of exports in 2011, the U.S. International Trade Commission (USITC) says. So a U.S. trade deficit, exacerbated by currency manipulation, has a disproportionately negative effect on the manufacturing sector.

Robert E. Scott, Helen Jorgensen, and Doug Hall of the Economic Policy Institute (EPI) explain that reviving the crucial U.S. manufacturing sector “requires eliminating a jobs-destroying U.S. trade deficit in goods,” in large part by ending currency manipulation. Currency manipulation, the group says, “distorts international trade flows by artificially lowering the cost of U.S. imports and raising the cost of U.S. exports,” thereby displacing American manufacturing jobs.

Eliminating currency manipulation would reduce the U.S. trade goods deficit by at least $190 billion and as much as $400 billion over three years, allowing the U.S. to “reap enormous benefits” without any increase in federal spending or taxation. This would reduce U.S. unemployment by 1 to 2.1 percentage points and create between 2.2 million and 4.7 million jobs; between 620,000 and 1.3 million of those jobs would be in manufacturing. In addition, U.S. GDP would increase between 1.4 percent and 3.1 percent.

The Group of Seven (G7) top industrial nations is concerned that continued currency manipulation is creating dangerous instability in the global economy. The organization, which is comprised of the U.S., Canada, France, Germany, Italy, Japan, and the U.K., recently saidits members are committed to market-determined exchange rates and “will remain oriented towards meeting our respective domestic objectives using domestic instruments.”

The G7 affirmed that they “will not target exchange rates” – meaning they themselves refuse to be involved in currency manipulation. “We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability,” the group declared.

Artificially lowering a country’s exchange rate can make its exports cheaper and promote growth internally, but that only causes problems for other countries because one currency can fall only if another rises. This imbalance, the EPI warns, “could spark a ‘currency war’ – a destabilizing battle where countries compete against one another to get the lowest exchange rate.” This scenario “conjures up images of the 1930s, when countries pursued tit-for-tat devaluations in order to get an edge… the outcome was to decimate global trade, accentuate the depression, and sow the seeds for World War II,” according to the institute.

 

Scott Paul, president of the Alliance for American Manufacturing (AAM), argued that policymakers need to act now to prevent further harm from unfair trade practices.

“Congress is obsessed with the wrong deficit,” Paul said. “To grow jobs and boost the economy, we must eliminate the trade deficit. Ending currency manipulation will get us part of the way there, but we also need a smart manufacturing policy, one that focuses on innovation, public investment, skills, and trade enforcement.”

According to the EPI report, any U.S president could end currency manipulation with a stroke of the pen: “The president could simply declare that the United States will no longer sell Treasury bills and other government assets to China and other countries that refuse to allow the United States to purchase their government assets… Refusing to sell assets to currency manipulators would eliminate the principal tool used by foreign central banks to manipulate their currencies: purchases of Treasury bills and other government securities…”

Olli Rehn, top monetary affairs official for the European Commission (EC), told the Associated Press that joint governmental efforts are needed to fight the adverse effects of “excess volatility and disorderly movements” in exchange rates. “That’s why we need to lean on active international policy coordination in order to prevent a wave of competitive devaluations.”

 

 

Source: http://news.thomasnet.com/IMT/2013/02/26/how-ending-currency-manipulation-will-help-manufacturers/

Senators raise alarm over another possible sale of taxpayer-backed firm to Chinese

Fisker 660

A solar roof is seen on a Fisker Karma hybrid electric car during the North American International Auto Show in Detroit, Michigan. (Reuters)

Republican senators complained Wednesday that U.S. taxpayer dollars could end up boosting the Chinese economy, following reports that a Chinese firm is leading the pack of companies bidding for a majority stake in government-backed Fisker Automotive.

The troubled California-based electric car maker, which was backed by U.S. taxpayers to the tune of nearly $530 million, for months has been looking for a financial partner. Reuters reported earlier this week that China’s Zhejiang Geely Holding Group is favored to take over, though Fisker is also reportedly weighing a bid from another Chinese auto maker.

The development comes after Fisker’s main battery supplier — U.S. government-backed A123 Systems — was recently purchased by a separate Chinese firm.

Sens. John Thune, R-S.D., and Chuck Grassley, R-Iowa, voiced concern Wednesday that Chinese companies are benefiting from U.S. taxpayers’ investment.

“Obama’s green energy investments appear to be nothing more than venture capital for eventual Chinese acquisitions,” Thune said in a statement. “After stimulus-funded A123 was just acquired by a Chinese-based company, it’s troubling to see that yet another struggling taxpayer-backed company might be purchased under duress by a Chinese company.”

Grassley added: “Like A123, this looks like another example of taxpayer dollars going to a failed experiment. Technology developed with American taxpayer subsidies should not be sold off to China.”

Despite the Reuters report, Fisker stressed that the bidding process is still very much open.

“The company has received detailed proposals from multiple parties in different continents which are now being evaluated by the company and its advisors,” Fisker spokesman Roger Ormisher said in a statement.

The Obama administration also defended the Energy Department’s overall loan program, which originally extended the nearly $530 million loan to Fisker in 2010.

Read more of this post

Commercial cyberspying and theft gives rich payoff

For state-backed cyberspies, stealing commercial secrets promises rich payoff

By Joe Mcdonald, AP Business Writer | Associated Press

China and US Flag

Associated Press –
In this Nov. 7, 2012 photo, U.S. and Chinese national flags are hung outside a hotel during the U.S. Presidential election event, organized by the U.S. embassy in Beijing. As public evidence mounts that the Chinese military is responsible for stealing massive amounts of U.S. government data and corporate trade secrets, the Obama administration is eyeing fines and other trade actions it may take against Beijing or any other country guilty of cyberespionage. The Chinese government, meanwhile, has denied involvement in the cyber-attacks tracked by Mandiant. Instead, the Foreign Ministry said that China, too, is a victim of hacking, some of it traced to the U.S. Foreign Ministry spokesman Hong Lei cited a report by an agency under the Ministry of Information Technology and Industry that said in 2012 alone that foreign hackers used viruses and other malicious software to seize control of 1,400 computers in China and 38,000 websites. (AP Photo/Andy Wong)

BEIJING (AP) — For state-backed cyberspies such as a Chinese military unit implicated by a U.S. security firm in a computer crime wave, hacking foreign companies can produce high-value secrets ranging from details on oil fields to advanced manufacturing technology.

This week’s report by Mandiant Inc. adds to mounting suspicion that Chinese military experts are helping state industry by stealing secrets from Western companies possibly worth hundreds of millions of dollars. The Chinese military has denied involvement in the attacks.

“This is really the new era of cybercrime,” said Graham Cluley, a British security expert. “We’ve moved from kids in their bedroom and financially motivated crime to state-sponsored cybercrime, which is interested in stealing secrets and getting military or commercial advantage.”

Instead of credit card numbers and other consumer data sought by crime gangs, security experts say cyberspies with resources that suggest they work for governments aim at better-guarded but more valuable information.

Companies in fields from petrochemicals to software can cut costs by receiving stolen secrets. An energy company bidding for access to an oil field abroad can save money if spies can tell it what foreign rivals might pay. Suppliers can press customers to pay more if they know details of their finances. For China, advanced technology and other information from the West could help speed the rise of giant state-owned companies seen as national champions.

“It’s like an ongoing war,” said Ryusuke Masuoka, a cybersecurity expert at Tokyo’s Center for International Public Policy Studies, a private think tank. “It is going to spread and get deeper and deeper.”

Mandiant, headquartered in Alexandria, Virginia, said it found attacks on 141 entities, mostly in the United States but also in Canada, Britain and elsewhere.

Attackers stole information about pricing, contract negotiations, manufacturing, product testing and corporate acquisitions, the company said. It said multiple details indicated the attackers, dubbed APT1 in its report, were from a military unit in Shanghai, though there was a small chance others might be responsible.

Target companies were in four of the seven strategic industries identified in the Communist Party’s latest five-year development plan, it said.

“We do believe that this stolen information can be used to obvious advantage” by China’s government and state enterprises, Mandiant said.

China’s military is a leader in cyberwarfare research, along with its counterparts in the United States and Russia. The People’s Liberation Army supports hacker hobby clubs with as many as 100,000 members to develop a pool of possible recruits, according to security consultants.

Mandiant said it traced attacks to a neighborhood in Shanghai’s Pudong district where the PLA’s Unit 61398 is housed in a 12-story building. The unit has advertised online for recruits with computer skills. Mandiant estimated its personnel at anywhere from hundreds to several thousand.

On Wednesday, the PLA rejected Mandiant’s findings and said computer addresses linked to the attacks could have been hijacked by attackers elsewhere. A military statement complained that “one-sided attacks in the media” destroy the atmosphere for cooperation in fighting online crime.

Many experts are not swayed by the denials.

“There are a lot of hackers that are sponsored by the Chinese government who conduct cyberattacks,” said Lim Jong-in, dean of Korea University’s Graduate School of Information Security.

The United States and other major governments are developing cyberspying technology for intelligence and security purposes, though how much that might be used for commercial spying is unclear.

“All countries who can do conduct cyber operations,” said Alastair MacGibbon, the former director of the Australian Federal Police’s High Tech Crime Center.

“I think the thing that has upset people mostly about the Chinese is … that they’re doing it on an industrialized scale and in some ways in a brazen and audacious manner,” said MacGibbon, who now runs an Internet safety institute at the University of Canberra.

China’s ruling party has ambitious plans to build up state-owned champions in industries including banking, telecoms, oil and steel. State companies benefit from monopolies and other official favors but lack skills and technology.

Last year, a group of Chinese state companies were charged in U.S. federal court in San Francisco in the theft of DuPont Co. technology for making titanium dioxide, a chemical used in paints and plastics.

In 2011, another security company, Symantec Inc., announced it detected attacks on 29 chemical companies and 19 other companies that it traced to China. It said the attackers wanted to steal secrets about chemical processing and advanced materials manufacturing.

Read more of this post

Barron’s Made in America: The Next Boom

Barrons's Logo

By: KOPIN TAN Barron’s JANUARY 2013

Barron's Made in America

Photo: Barron’s John Kuczala

Cheap natural gas and increasingly competitive labor costs are bringing factories and jobs back to the U.S. Eight ways to win.

 As the only industrialized superpower not decimated by World War II, the United States once made nearly 40% of the planet’s goods. These days, that number has shrunk to 18%. We make American Girl dolls in China, Levi’s jeans in Mexico, and enough movies in Vancouver to nickname it Hollywood North.

After decades of outsourcing, however, the U.S. is quietly enjoying a manufacturing revival, and companies like Apple (ticker: AAPL), Caterpillar (CAT), Ford Motor (F),General Electric (GE), and Whirlpool (WHR) are making more of their goods on American soil again. It isn’t just U.S. companies that are drawn to our cheap energy, weak dollar, and stagnant wages. Samsung Electronics (005930.Korea) plans a $4 billion semiconductor plant in Texas, Airbus SAS is building a factory in Alabama, and Toyota (TM) wants to export minivans made in Indiana to Asia.
The Rust Belt owes its new shine to many factors, including rising wages and industrial-land costs in Asia. But none is bigger than the U.S. energy boom. Thanks to a head start in extracting oil and gas from shales, North America now produces far more natural gas than any other continent. Unlike oil, gas isn’t easily transported across oceans, and a result is some of the world’s cheapest energy within our reach: Natural gas here costs $3.55 per million British thermal units, versus roughly $12 in Europe and $16 in Japan. Cheap energy not only reduces our trade deficit and our addiction to Middle East oil, it also makes our factories more competitive globally — a boon for a country that had gone from exporting American goods to exporting American jobs.The biggest beneficiaries are energy-guzzling companies like chemical producers and steelmakers, and Barron’s has identified eight stocks that should prosper in our gas-fueled manufacturing upswing. They are Southwestern Energy, LyondellBasell Industries, Nucor, Dover, Calpine, CF Industries, Williams, and Union Pacific. But any glow will also rub off on regional lenders, home builders, and local small businesses. “The U.S. is the Saudi Arabia of natural gas,” declares Nancy Lazar, co-head of the New York research firm International Strategy & Investment. “And Middle America is my favorite emerging market.”

Our energy boom got cracking with fracking, a controversial process in which pressurized fluids are pumped through rock formations, often a mile or more under the ground, to extract oil and gas. Critics condemn fracking, which they contend causes environmental harm, but even they agree that it’s led to an abundance of cheap gas. Over the past six years, U.S. production of petroleum and natural gas has jumped from 15 million barrels of oil-equivalent a day to 20.1 million, a 20-year high. Over the same period, imports have fallen from 14 million barrels a day to below eight million, a 25-year low.

It’s a sign of the times: Graduates from the South Dakota School of Mines & Technology — acceptance rate: 88%; mascot: Grubby the Miner — now command a median starting salary 16% higher than that of Yalies.

By 2020, the U.S. will become the world’s biggest oil producer, says the International Energy Agency. By 2025, North America will be a net energy exporter, predicts ExxonMobil (XOM).

That edge should remain ours for decades. “It isn’t just the huge reserves we have underground,” says Tim Parker, who manages T. Rowe Price’s natural-resource stock portfolios. “No one else has our predictable cocktail of infrastructure already in place, know-how, a relative abundance of water, and a favorable royalty regime that give landowners a stake in the exploration game.” Europe, for instance, is averse to fracking and has little infrastructure; Japan has hardly any shales; and while China has vast reserves, only shales nudging the Yangtze River have enough water for fracking.

Of course, an especially frigid winter could send gas prices soaring, but any such spike should be temporary. Given our expanding reserves and record inventory, commodity strategists expect U.S. natural gas to stay between $3 and $5 per million BTUs for years — well below prices abroad.

CHEAP GAS ISN’T THE ONLY booster in our tank. In the decade since China joined the World Trade Organization in 2001, that nation has become Earth’s low-cost factory. But wages and benefits there are rising 15% to 20% a year, while they’re stagnant here. Despite Beijing’s efforts to hold it down, the yuan has gained 33% against the dollar since 2005. Industrial land averages $10.22 a square foot across China, but rises to $11.15 in the coastal city of Ningbo and $21 in Shenzhen — compared with $1.30 to $4.65 in Tennessee and North Carolina. “Within five years, the total cost of producing many products will be only about 10% to 15% less in Chinese coastal cities than in parts of the U.S. where factories are likely to be built,” says Hal Sirkin, a senior partner at Boston Consulting Group. Add duties and shipping, and the cost gap shrinks further.

Read more of this post

China’s space activities raising U.S. satellite security concerns

Reuters/Reuters - Soldiers stand in front of the Long March II-F rocket loaded with China's unmanned space module Tiangong-1 before its planned launch from the Jiuquan Satellite Launch Center, Gansu province in this September 29, 2011 file photo. REUTERS/Petar Kujundzic/Files

Reuters/Reuters – Soldiers stand in front of the Long March II-F rocket loaded with China’s unmanned space module Tiangong-1 before its planned launch from the Jiuquan Satellite Launch Center, Gansu province in this September 29, 2011 file photo. REUTERS/Petar Kujundzic/Files

WASHINGTON (Reuters) – The United States is concerned about China’s expanding ability to disrupt the most sensitive U.S. military and intelligence satellites, as Beijing pursues its expanded ambitions in space, according to multiple sources in the U.S. government and outside space experts.

A classified U.S. intelligence assessment completed late last year analyzed China’s increasing activities in space and mapped out the growing vulnerability of U.S. satellites that provide secure military communications, warn about enemy missile launches and provide precise targeting coordinates, said the sources, who were not authorized to speak publicly.

“It was a very credible and sobering assessment that is now provoking a lot of activities in different quarters,” said one former government official who is familiar with U.S. national security satellite programs.

The intelligence report raised red flags about Beijing’s ability to disrupt satellites in higher orbits, which could put the most sensitive U.S. spacecraft at risk, according to the sources. China has already conducted several anti-satellite tests at lower orbital levels in recent years.

Given the heightened concerns, Washington is keeping a watchful eye on Chinese activities that could be used to disrupt U.S. satellites. It is also urging Beijing to avoid a repeat of its January 2007 test that created an enormous amount of “space junk,” said one senior defense official.

Details of the latest Chinese moves that have raised U.S. concerns remain classified.

U.S. officials charge that China’s anti-satellite activities are part of a major military modernization that has seen Beijing test two new stealth fighters; step up cyber attacks on foreign computer networks; and launch more commercial and military satellites in 2012 than the United States.

China still lags behind the United States in most military fields.

“What we’re seeing is a heightened sense in the United States that China is a potential threat and that it has the technology to be a threat if it wishes to,” said Jonathan McDowell, with the Harvard-Smithsonian Center for Astrophysics.

“As China becomes a space superpower, and given that it does have a significant military component to its space program, it is inevitable that the U.S. will be concerned about threats to its most valued satellite systems, whether or not China actually intends to deploy such aggressive systems,” he said.

CREATING SPACE DEBRIS

Six years ago, on January 11, 2007, China destroyed one of its own defunct weather satellites in low-earth orbit, which created over 10,000 pieces of debris that pose a threat to other spacecraft. A less-destructive test followed on January 11, 2010.

Space experts and U.S. officials say they expect China to continue testing anti-satellite technologies, although they doubt it would repeat the 2007 test, given the massive international outcry it triggered.

Gregory Kulacki, a respected researcher with the Union of Concerned Scientists, reported earlier this month on the group’s website that there was “a strong possibility” of a new anti-satellite test by China within the next few weeks.

He said Chinese sources had told him in November that an announcement about an upcoming anti-satellite test had been circulated within the Chinese government, and a high-ranking U.S. defense official confirmed in December that Washington was “very concerned” about an imminent Chinese anti-satellite test.

Read more of this post

U.S. Panel Calls 2 Chinese Firms ‘National Security Threat’

MICHAEL S. SCHMIDT, KEITH BRADSHER and CHRISTINE HAUSER

WASHINGTON — The House Intelligence Committee recommended on Monday that American companies should be blocked from carrying out mergers and acquisitions involving two Chinese telecommunications firms, saying their equipment could be used for spying in the United States. The recommendations, the result of a yearlong investigation, also said the United States government should not use equipment from the companies, the giant Huawei Technologies and ZTE Inc., and that American companies should find alternative suppliers as well.

A report on the inquiry described the companies as a “national security threat” to the United States, saying that the committee had obtained internal documents from former employees of Huawei that show it supplies services to a “cyberwarfare” unit in the People’s Liberation Army. The committee said that the United States government should go through the federal Committee on Foreign Investment to carry out its recommendations to block any business or other transactions involving the Chinese companies.

The report was presented by Representative Mike Rogers, Republican of Michigan, the chairman of the House Intelligence Committee, and Representative C. A. Dutch Ruppersberger of Maryland, the top Democrat on the committee.

It was the latest development to highlight the sensitive terrain that the United States and China are navigating as they try to build their commercial ties. Those efforts have formed part of the political dialogue just weeks ahead of the presidential elections, as both candidates have spoken of the importance of United States ties with China and have promised to act strongly on Chinese currency and trade practices that are damaging to American business interests.

Mitt Romney, the Republican presidential candidate, has called repeatedly during his campaign for a more confrontational approach to China on business issues, although he has focused his warnings more on Chinese currency market interventions than on the business activities of Chinese telecommunications companies.

President Obama has also taken a tougher stance on China recently. Late last month, Mr. Obama, through the Committee on Foreign Investment, ordered a Chinese company to divest its interest in four wind farm projects near an Oregon Navy base where drone aircraft training takes place. It was the first time a president had blocked such a deal in 22 years. Also this month, the Obama administration filed a case at the World Trade Organization in Geneva accusing China of unfairly subsidizing its exports of autos and auto parts, the ninth trade action the administration has brought against China.

The report on Monday opened up the potential for a new salvo, broadening the discussion of China’s expansion plans in the telecommunications sector.

The report included a classified annex, but several cybersecurity officials said they did not know whether the Congressional Committee had discovered evidence that the telecommunications firms had added “backdoors” making it possible to surreptiously gain access to the products.

In testimony before the Committee in September officials from both Huawei and a second Chinese Telecommunications vendor ZTE, said that alleged backdoors were actually software flaws and not intentional vulnerabilities.
Read more of this post

China escalates U.S. trade dispute, requests WTO decision

The low cost of labour, coupled with the massive scale of production at its 14,000-person plant, have enabled China’s Suntech to become the global industry leader in solar power in just a decade

GENEVA (Reuters) – In a move that escalates a trade row with the United States, China said it would ask the World Trade Organization (WTO) to adjudicate a dispute over U.S. punitive import duties on 22 Chinese exports, including solar panels and steel products.

China first brought the complaint to the WTO in May by asking the United States for formal “consultations” to explain the duties, which Washington says are intended to offset illegal subsidies that gave Chinese goods an unfair price advantage.

WTO rules entitle China to demand adjudication after a 60 day period of consultations. China will make the demand for adjudication at a meeting of the WTO’s Dispute Settlement Body on Aug 31, China said in a statement circulated to WTO members this week.

The office of the U.S. Trade Representative said in May that China’s decision to bring the dispute to the WTO was “premature and not an appropriate use of dispute settlement system resources”, because the U.S. Department of Commerce was already working to address the issues raised by China.

But China’s statement said two subsequent rounds of talks, on June 25 and July 18, had failed to resolve the dispute, which includes wind towers, as well as certain types of steel pipe, wire, cylinders and wheels, aluminum extrusions, wood flooring, magnesia bricks, thermal and coated paper and citric acid.

China is by far the world’s biggest producer of steel and is also a leading maker of clean energy equipment such as solar panels and wind towers, helped by Beijing’s ambition of tackling carbon emissions without slowing China’s growth.

Foreign competitors complain that its oversupply is the result of a market that is driven by forces such as government edicts and subsidies rather than fundamental supply and demand, and China has created surpluses that distort the global market.

China decided to bring the latest WTO complaint, which it says affects exports worth $7.3 billion, after winning a previous WTO dispute last year over U.S. duties on imports of Chinese steel pipes, off-road tires and woven sacks.

Many of China’s grievances might have been dealt with by a U.S. court decision last year, which struck down the Commerce Department’s ability to impose anti-subsidy duties on “non-market economies” like China.

But the U.S. Congress voted to restore it in March, ensuring U.S. duties on about two dozen Chinese goods stayed in place.

The case is one of several currently “live” disputes between the United States and China at the WTO.

Read more of this post

Betrayal of the American Dream’ analyzes how the middle class came under siege

By Hector Tobar Los Angeles Times

You may be old enough to remember the era in the United States lamented for its passing by authors Donald L. Bartlett and James B. Steele on nearly every page of their new book, “The Betrayal of the American Dream.”

In that bygone America, you could buy bell-bottom pants, a color television or a pair of high-platform shoes and very likely find a label on those products saying “Made in the U.S.A.” American companies made big profits, but they invested in the local communities where their products were made. The rich paid their fair share in taxes.

Bartlett and Steele pinpoint the moment when this America began to disappear as June 1979. More people were employed at U.S. factory jobs at that time than during any month before or since. About the same time, the share that the wealthiest Americans paid in taxes began to fall sharply.

American factory jobs soon started migrating to Mexico, and then to China. Not long afterward, all sorts of other tasks once performed by the guy next door — including your friendly customer service representative — were performed elsewhere, such as Bangalore, India, and Taipei, Taiwan.

Since then, three decades of laissez-faire business strategies and government policies have undercut the American middle class and the underpinnings of American democracy. At least, that’s the central argument of “The Betrayal of the American Dream,” a book that’s essential reading for those trying to make sense of our country’s current malaise.

Since the 1980s, a host of politicos, both Republican and Democrat, have sold their business-friendly reforms to the American people in the name of economic efficiency: Corporate America saves, and we all save! But the real winner, Bartlett and Steele argue, is the American “ruling class.” Among other things, the economic elite have quietly, methodically and ruthlessly restructured the tax code on behalf of the wealthiest Americans, the authors say. Tax cuts on unearned income and carried interest allow the richest of the rich to pay less income tax with each passing year.

“America’s founders, who were very well aware of how the aristocracy rigged the system to guarantee its own perpetuation, up to and including the king, would shudder,” Bartlett and Steele observe. With the American middle class under assault, the United States now is increasingly divided between rich and poor. In “The Betrayal of the American Dream,” the U.S. ruling class is portrayed as eating the American middle class for lunch and giving the leftovers to the impoverished, incipient middle classes in China and India.

Read more of this post

A123 Systems gets $465 million rescue from Chinese auto parts maker

Struggling battery maker A123 Systems (AONE.O), which got a quarter-billion dollar green technology grant from the Obama administration, has won a $465 million rescue by Chinese auto parts maker Wanxiang Group Corp.

A123 Systems said the planned investment includes an initial credit extension of $25 million that it expects to receive this week. The rest coming through a mix of convertible notes and bridge finance with warrants, as certain conditions are met.

The line of credit would help A123 keep making batteries for electric and hybrid cars. Last month, the company said it was left with only 5 months of cash.

If all the warrants and notes are later converted to shares, Wanxiang will own 80 percent of the firm, A123 said in a statement.

The agreement follows the non-binding memorandum of understanding that A123 signed last week.

A123 shares were trading up 2 percent at $0.48 on Thursday morning on the Nasdaq.

A foreign rescue of A123 has the potential to ignite a political firestorm in this election year, as President Barack Obama could face criticism for bankrolling technology that ends up in Chinese hands.

The advanced car battery industry has been hurt in part by too much capacity and weak U.S. demand for electric cars.

%d bloggers like this: