Thread: China's yuan strengthens after US anger

Major airline targets Australia for massive Chinese tourist boom
http://www.smh.com.au/travel/travel-...919-15hwb.html

CHINA'S biggest airline says it is punting its future on a boom in Chinese tourists to Australia, starting with a fourfold increase in direct flights.

The ambitions of China Southern Airlines president Tan Wangeng reflect the rapid growth of China's middle class and confidence in the stability of Australia-China relations under the Gillard government.

''1.3 billion Chinese people have become rich; they need to travel abroad and they need to consume their money,'' Mr Tan told The Age.

''Why Australia? … Australia is well endowed with tourism resources, the climate is different to China and the people of Australia and China are friendly without any conflict.''

A Chinese tourism boom could help balance China's imports of natural resources from Australia and revive Australian destinations hit by a drop in Japanese tourists.

''Resources and energy are very much part of our future, but so is tourism,'' Minister for Resources and Tourism Martin Ferguson said. ''It's the lifeblood of many of our regional communities.''

Last year 366,000 Chinese tourists visited Australia and spent $2.8 billion. This year China overtook Japan to become Australia's fourth-largest source of tourists, behind New Zealand, Britain and the US.

''Three years ago we used to talk about China as an emerging market, but it has fully emerged,'' said Tourism Australia managing director Andrew McEvoy.

The relatively high spending rate of Chinese tourists in Australia means China is forecast to be the highest-value market within seven years.

By 2020, Mr McEvoy predicts 830,000 Chinese travellers will be spending $8 billion a year.

These projections will prove too low if China Southern succeeds in its strategy of expansion, promotion and discount fares. Mr Tan said the number of Chinese tourists to Australia could grow by 50 per cent next year alone.

He has spent 130 million yuan ($20.6 million) this year on ads that currently feature a young couple barbecuing prawns and lobsters on a yacht in front of the Sydney Harbour Bridge, with the Chinese character slogan: ''Australia, it's really not that far''.

China Southern now runs three flights a week out of Guangzhou to Melbourne and daily flights to Sydney, giving it a greater market share than its two Chinese competitors combined.

Qantas has also been left behind, with just one daily flight to Shanghai, after the carrier dumped its Beijing flight in the wake of the financial crisis.

From November 1 Mr Tan said he would introduce twice-daily flights from Guangzhou to Sydney, daily flights to Melbourne and three flights a week to Brisbane. By next March he plans to have twice-daily fights to Melbourne, daily flights to Brisbane and flights to a fourth city such as Cairns.

Australia faces challenges in adapting to the coming influx. Mr Ferguson said he was cracking down on forced shopping tours to make sure Chinese tourists were ''not being ripped off by rogue operators''.

Annie Luo, a 25-year-old languages teacher who is booked to fly Southern Airlines to Australia this week for a two-week holiday, is perhaps indicative of her generation.

''I want to meet people, I want to go wherever I want to and take charge of myself,'' she said. And she will.

Meanwhile, a 14 per cent increase in international passengers to Melbourne has been driven by Victoria's tourism promotion in Asia, Melbourne Airport says.

The Airport on Monday released figures showing the number of passengers passing through the airport rose 11.5 per cent from August 2009 to August 2010.

International numbers rose 14.6 per cent, an increase of almost 61,000, to make a total of 477,127 people, driven primarily by increasing numbers from Asia.

Japanese passport holders were up 69 per cent and Chinese passport holders were up 58 per cent, the airport said in a statement.

There was also a 46 per cent increase in passengers from Singapore, a 33 per cent increase from Malaysia, a 31 per cent increase from Taiwan, 30 per cent increase from Hong Kong, 24 per cent increase from Thailand, 19 per cent increase from South Korea, 18 per cent increase from Sri Lanka and a nine per cent increase from Indonesia.

Melbourne Airport chief executive Chris Woodruff is predicting there will be more "significant Asian growth" in the coming year, putting this down to Victoria's tourism promotion in Asia.

"Our airline customers are responding with a record increase in capacity," Mr Woodruff said in a statement.

"For example, from November Air India commences daily operations to and from Delhi and Air China flights from Beijing and China Southern flights from Guangzhou are increasing to daily services.

"From December, Jetstar is flying daily to Singapore."

He said Melbourne Airport would be investing a "significant amount" to upgrade terminal facilities, airfield and road infrastructure to meet the increasing demand.

with AAP

Play China Through US Stocks
http://www.cnbc.com/id/15840232?video=1600979898&play=1

Airtime: Sun. Sept. 26 2010 | light e) ET
There are many U.S. stocks that investors can buy to bet on China's growth story, according to Jerry Lou, MD & China strategist at Morgan Stanley. He reveals the names he's looking at, with CNBC's Bernard Lo.

G-20 Pledges to Avoid Devaluations in Push to Defuse Global Trade Tensions
http://www.bloomberg.com/news/2010-1...ven-rates.html

Group of 20 finance chiefs sought to calm trade frictions that threaten the world economy by pledging to avoid weakening their currencies to boost exports and to let markets increasingly set foreign-exchange values.

The G-20 agreed to “move towards more market-determined exchange-rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies,” finance ministers and central bankers said after talks yesterday in Gyeongju, South Korea. U.S. Treasury Secretary Timothy F. Geithner and Chinese Vice-Premier Wang Qishan may continue the debate today when they meet in Qingdao, China, for previously unscheduled talks.

It was the first time the finance officials made a joint stance on exchange rates as they tried to end concern that nations from the U.S. to China are relying on cheap currencies to spur growth, risking a protectionist backlash. The policy makers delayed further debate over a U.S. proposal for current account targets until next month’s Seoul summit of leaders, while agreeing the gaps should be made more sustainable.

“The terms of the currency policy are so vague and broad that they can be interpreted into different meanings by each country as well as market players,” said Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul. “I’m not sure whether the currency war is over. We need to see actions in line with the verbal vows.”

Recycle

The finance officials previously avoided joint statements on currencies for fear of alienating China. The communique still recycles language used at previous G-20 leaders’ summits in London and Toronto and falls short of the currency accords of the 1980s.

The group also called the economic recovery “fragile and uneven.” Seeking to increase the influence of emerging nations in running of the International Monetary Fund, it endorsed what IMF Managing Director Dominique Strauss-Kahn called the “biggest reform ever” of its governance.

Europe will surrender two seats on the lender’s 24-member executive board and a majority of countries will shift more than 6 percent of so-called quotas to under-represented countries. Quotas determine voting rights, financial commitment and access to aid.

Dollar’s Slide

The policy makers met as China’s restraint of the yuan and the U.S. dollar’s recent slide force trade partners including South Korea and Brazil to temper gains in their own floating currencies to remain competitive. The dollar has dropped as the Federal Reserve mulls easing monetary policy to lift growth.

The currency on Oct. 22 completed its first weekly advance since early September against a basket of currencies, according to IntercontinentalExchange Inc.’s Dollar Index, rising 0.6 percent. Yuan forwards dropped the most in 22 months on the same day amid speculation China will rely more heavily on interest- rate hikes to damp inflation after raising its benchmark for the first time since 2007.

China should open its markets and Fed Chairman Ben S. Bernanke heard “criticism” of its current policy stance from within the G-20, German Economy Minister Rainer Bruederle said.

“It’s the wrong way to try to prevent or solve problems by adding more liquidity,” Bruederle said. “Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate.”

Combating Deflation

European Central Bank President Jean-Claude Trichet said combating deflation risks “was also a contribution to global prosperity.”

To dilute the focus of such meetings on currencies and make a revaluation of the yuan more palatable to China, Geithner suggested countries set goals for their current account surpluses or deficits. While South Korea and Canada were among those to back the initiative, it was challenged by major exporters Germany and Japan.

The group will “pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account imbalances at sustainable levels,” the statement said. The IMF will deepen its monitoring of currencies and persistently large trade gaps.

The G-20 members will flesh out details by the Seoul forum, a U.S. official said. Although Japanese Finance Minister Yoshihiko Noda said Geithner wanted a 4 percent cap on trade imbalances, the official said the U.S. doesn’t expect a fixed target and may instead push for a range with an eye on having sustainable trade positions by 2015.

Balanced Growth

“We need to work to achieve more balance in the pattern of global growth,” said Geithner. “This requires a shift in growth strategies by countries that have traditionally run large trade and current account surpluses, away from export dependence and toward stronger domestic demand led growth.”

Bundesbank President Axel Weber, who also attended the talks, said Germany shouldn’t be blamed for having a current- account surplus.

A current account is the broadest measure of trade because it includes investment and transfer income, and it would be hard to achieve any correction in one without a currency shifting. Saudi Arabia, Germany, Russia and China all run surpluses larger than 4 percent of gross domestic product, while Turkey and South Africa have deficits bigger than that, according to the IMF.

The G-20 has long attempted to narrow such imbalances and pivot the world economy away from its reliance on excess U.S. demand and Chinese savings after those fault lines helped trigger the credit crisis. Limiting talks to foreign exchange is too inflexible for nations with trade surpluses and refocusing them on current accounts would allow tools other than currencies to be used, officials said.

Yuan’s Rise

Even as it runs a trade surplus and builds currency reserves, China has curbed the yuan’s rise to about 2 percent since a June pledge to introduce more flexibility, arguing anything other than a gradual appreciation would cause social and economic disruption. At the same time, the Fed has sent the dollar tumbling by leaning toward the purchase of more assets to tackle unemployment near a 26-year high and weak inflation.

Caught in the middle, emerging markets are embracing capital controls or intervening themselves to stay competitive with China and slow the inflow of speculative cash. South Korea is discussing several measures including a bank tax or levy on financial transactions, and Brazil last week raised taxes on foreign capital for the second time this month.

Advanced economies agreed to be “vigilant against excess volatility and disorderly movements in exchange rates,” the G- 20 statement said. Geithner said the U.S. backs a “strong dollar” and recognizes its global responsibility to support it.

Trading Edge

The G-20’s statement will encourage Asian nations to allow their exchange rates to rise without having to worry they will end up doing so alone and lose a trading edge, said Douglas Borthwick, head of foreign-exchange trading at Stamford, Connecticut-based Faros Trading. He said the yuan may climb to 6.60 per dollar in November from 6.66 at the end of last week and predicted the dollar will drop against the euro and yen.

For all the complaints it faces, China let the yuan gain the most versus the dollar since 2005 in September and by more than 20 percent in the last five years. The Bloomberg-JPMorgan Chase & Co. Asia Currency Index is up about 3 percent since August.

“China and its neighbors see the need to strengthen their currencies,” said Borthwick, whose firm executes currency transactions on behalf of hedge funds and institutional clients. “Going forward they will all move together and allow their currencies to strengthen, over time resulting in a more balanced economy.”

PM seeks "much stronger" China relationship
http://www.google.com/hostednews/afp...8fc63ac880.1f1

LONDON — Prime Minister David Cameron said Monday he wanted to forge a "much stronger relationship" with China ahead of a business-boosting visit to the Asian superpower.
"This is a vitally important trade mission," Cameron said before the two-day trip, which begins on Monday.
"Our message is simple: Britain is now open for business, has a very business-friendly government, and wants to have a much, much stronger relationship with China."
The Conservative party leader will head Britain's biggest ever delegation to China with finance minister George Osborne and business secretary Vince Cable accompanying 50 business leaders on the visit.

China’s oil majors come of age in M&A rush
http://www.ft.com/cms/s/0/9945e75a-e...#axzz14f4PkdBO

China Newspaper Warns of Disaster Over Fed Move
http://www.cnbc.com/id/40061641

Washington's latest move to print more money is a form of indirect currency manipulation that could lead to a new round of currency wars and even global economic collapse, a leading Chinese newspaper warned on Monday.

The Chinese currency is expected to resume its ascent later this week, albeit in a controlled fashion, and could hit 6.60 yuan per dollar by late November before Beijing again slows its pace of appreciation. The yuan CNY=CFXS was trading around 6.66 against the dollar on Monday, falling from its post-revaluation high of 6.6404 hit shortly before the interest rate rise, China's first since December 2007.

Renminbi to Touch Fresh Highs Before 2011
http://www.cnbc.com/id/15840232?video=1714175127&play=1

Thio Chin Loo, senior currency strategist at BNP Paribas, believes the yuan will approach new highs before the end of 2010. She explains why to Yu-Dee Chang of ACE Investment Strategists, Arjuna Mahendran of HSBC Private Bank and CNBC's Martin Soong & Adam Bakhtiar.