http://time.com/3995873/apple-work-ipad/
Apple Wants to Make the iPad More Work-friendly
Victor Luckerson @VLuck Aug. 13, 2015
Company is working with developers to make workplace software
With consumers growing cool toward the iPad, Apple is turning to businesses to boost sales of the five-year-old device. The tech giant has partnered with more than 40 companies that make business software to develop a suite of interconnected enterprise apps, according to the Wall Street Journal. The apps include software for accounting, sales presentations and point-of-sale systems, among other tools. Apple and its partners are also holding seminars where they pitch business owners in different sectors on the usefulness of their products. Internally the initiative is called the “mobility partner program.”
After rapid sales growth initially, interest in the iPad has tapered off in recent years. Sales of the device have declined for six straight quarters and revenue from the iPad was down 24% in the nine months ending in June. Analysts expect the business sector to be a growth spot for tablets in the future, so it makes sense for Apple to compete with the likes of Microsoft, Google and Samsung in the space. The company made its intentions clear last year when it partnered with IBM to create a collection of apps and services targeting enterprise customers.
Monday, August 31, 2015
Sunday, August 30, 2015
Pharma industry warns on threat to Greek drug supplies - Financial Times
http://www.ft.com/intl/cms/s/0/f981cd1e-1e6b-11e5-aa5a-398b2169cf79.html#axzz3eSZQamqC
June 29, 2015 7:00 pm
Pharma industry warns on threat to Greek drug supplies
Andrew Ward, Pharmaceuticals Correspondent
An employee informs customers in a pharmacy of the National Organization for Healthcare Services Provision (EOPYY) how to receive their prescribed medicines, in the centre of Athens, Greece, 08 June 2012. Reports state that on 06 June 2012 that EOPPY announced the disbursement of several expensive pharmaceuticals, particularly anti-cancer medications. The announcement came after heated reactions in recent days as a result of a shortage in the particular drugs, reportedly due to payment disputes. EPA/ALKIS KONSTANTINIDIS©EPA
Customers queue at an Athens pharmacy. Greece has already run up unpaid bills in excess of €1bn with drugmakers
Europe’s pharmaceuticals industry has warned that drug supplies to Greece could be jeopardised if the country leaves the euro, and called for urgent action from Brussels to help prevent shortages.
Greece has run up unpaid bills in excess of €1bn with drugmakers, and the industry wrote to the European Commission on Monday to raise alarm over strains on the country’s pharmaceuticals market.
“In the worst-case scenario of ‘Grexit’, we believe the integrity of the medicines supply chain may be in jeopardy, which would create a risk to public health,” wrote Richard Bergström, director-general of the European Federation of Pharmaceutical Industries and Associations.
His comments will reinforce fears of disruption to supplies of critical products such as medicines and oil if Greece fails to find a way out of its debt crisis.
Mr Bergström warned that the “technical breakdown in infrastructure supporting transactions, uncertainty on the validity of contracts, coupled with general social unrest” could imperil pharmaceuticals supplies in the event of euro exit.
Shortages could be exacerbated by an increased economic incentive for drugs to be exported from Greece, and sold at a higher price in neighbouring markets if the euro is replaced by a sharply depreciated drachma, Mr Bergström said.
Individual drug companies were working on measures to maintain supplies but competition laws made it hard for the industry to come up with a co-ordinated response, he added in his letter to Vytenis Andriukaitis, EU health commissioner, seen by the Financial Times.
Mr Bergström called for an urgent meeting with Mr Andriukaitis and other commissioners to discuss “concrete contingency plans”.
In depth
Greece debt crisis
The Syriza government is facing resistance to its plans to tackle the country’s massive debt burden
In addition to supply risks, drugmakers are also worried that falling prices in Greece could put downward pressure on pricing elsewhere in Europe because of the widely used system of “reference pricing”, under which drug prices in one country are often pegged to those in others.
Mr Bergström urged the commission to seek an agreement among European health ministers that EU members would not use Greece as a reference when setting prices.
Pharmaceuticals manufacturers and patients alike have been hit by sharp cuts in Greek healthcare spending during the country’s financial crisis.
Industry executives and healthcare analysts say the country suffers from an especially inefficient pharmaceuticals market hobbled by the vested interests of hundreds of wholesalers and powerful pharmacists.
This is reflected in among the lowest penetration of off-patent generic drugs in Europe because these interest groups have favoured more pricey branded medicines. The European Commission has been pressing Athens to tackle this problem as part of its economic reforms.
June 29, 2015 7:00 pm
Pharma industry warns on threat to Greek drug supplies
Andrew Ward, Pharmaceuticals Correspondent
An employee informs customers in a pharmacy of the National Organization for Healthcare Services Provision (EOPYY) how to receive their prescribed medicines, in the centre of Athens, Greece, 08 June 2012. Reports state that on 06 June 2012 that EOPPY announced the disbursement of several expensive pharmaceuticals, particularly anti-cancer medications. The announcement came after heated reactions in recent days as a result of a shortage in the particular drugs, reportedly due to payment disputes. EPA/ALKIS KONSTANTINIDIS©EPA
Customers queue at an Athens pharmacy. Greece has already run up unpaid bills in excess of €1bn with drugmakers
Europe’s pharmaceuticals industry has warned that drug supplies to Greece could be jeopardised if the country leaves the euro, and called for urgent action from Brussels to help prevent shortages.
Greece has run up unpaid bills in excess of €1bn with drugmakers, and the industry wrote to the European Commission on Monday to raise alarm over strains on the country’s pharmaceuticals market.
“In the worst-case scenario of ‘Grexit’, we believe the integrity of the medicines supply chain may be in jeopardy, which would create a risk to public health,” wrote Richard Bergström, director-general of the European Federation of Pharmaceutical Industries and Associations.
His comments will reinforce fears of disruption to supplies of critical products such as medicines and oil if Greece fails to find a way out of its debt crisis.
Mr Bergström warned that the “technical breakdown in infrastructure supporting transactions, uncertainty on the validity of contracts, coupled with general social unrest” could imperil pharmaceuticals supplies in the event of euro exit.
Shortages could be exacerbated by an increased economic incentive for drugs to be exported from Greece, and sold at a higher price in neighbouring markets if the euro is replaced by a sharply depreciated drachma, Mr Bergström said.
Individual drug companies were working on measures to maintain supplies but competition laws made it hard for the industry to come up with a co-ordinated response, he added in his letter to Vytenis Andriukaitis, EU health commissioner, seen by the Financial Times.
Mr Bergström called for an urgent meeting with Mr Andriukaitis and other commissioners to discuss “concrete contingency plans”.
In depth
Greece debt crisis
The Syriza government is facing resistance to its plans to tackle the country’s massive debt burden
In addition to supply risks, drugmakers are also worried that falling prices in Greece could put downward pressure on pricing elsewhere in Europe because of the widely used system of “reference pricing”, under which drug prices in one country are often pegged to those in others.
Mr Bergström urged the commission to seek an agreement among European health ministers that EU members would not use Greece as a reference when setting prices.
Pharmaceuticals manufacturers and patients alike have been hit by sharp cuts in Greek healthcare spending during the country’s financial crisis.
Industry executives and healthcare analysts say the country suffers from an especially inefficient pharmaceuticals market hobbled by the vested interests of hundreds of wholesalers and powerful pharmacists.
This is reflected in among the lowest penetration of off-patent generic drugs in Europe because these interest groups have favoured more pricey branded medicines. The European Commission has been pressing Athens to tackle this problem as part of its economic reforms.
Saturday, August 29, 2015
Greece Appoints Its First Female Prime Minister -TIME
http://time.com/4014419/greece-female-prime-minister/
Greece Appoints Its First Female Prime Minister
Elena Becatoros and Nicholas Paphitis / AP 2:15 AM ET
Vassiliki Thanou
Petros Giannakouris—AP
(ATHENS, Greece) — Greece’s first female prime minister, a top judge, was sworn in Thursday to head a caretaker government ahead of early elections next month in the bailout-dependent country.
Supreme Court head Vassiliki Thanou, 65, was appointed after radical left Prime Minister Alexis Tsipras resigned, seeking a stronger mandate to implement tough austerity measures demanded by Greece’s creditors in return for a third bailout worth 86 billion euro ($97 billion).
Her main task will be to hold the reins until a new government emerges from the vote expected on Sept. 20.
“But, given the circumstances … I believe that this government will also have to handle crucial matters,” Thanou said in her first public comments in office, singling out for mention Greece’s immigration crisis.
Since January, the financially struggling country has received more than 160,000 mainly Syrian refugees and economic migrants — a record number — who arrive in boats from Turkey before heading to wealthier European countries.
Tsipras was forced to step down last week, barely seven months into his four-year term, following a rebellion in his radical left Syriza party over his agreement to the new income cuts and tax hikes.
Syriza hardliners were furious that Tsipras signed the deal with even harsher terms than those he had vowed to abolish when he was elected in January. The deal was approved with support from pro-European opposition parties, who now accuse him of rushing to call elections before voters are hit by the full force of the new tax measures.
The 41-year-old outgoing prime minister has argued he was left with no choice but to accept European creditors’ demands, to save Greece from defaulting on its debts and being forced out of the euro currency it shares with another 18 European nations.
Thanou will appoint a Cabinet that will be sworn in on Friday, when the election date will be formally confirmed.
Greek President Procopis Pavlopoulos announced her appointment after parliament’s three largest parties failed to find willing coalition partners. The last to hold the mandate to form a government was former energy minister Panagiotis Lafazanis, who created the new Popular Unity party last week after splitting from Syriza.
Greece has relied on funds from two bailouts by other European countries and the International Monetary Fund totaling nearly 240 billion euros ($270 billion) since 2010. In return for the loans, successive governments imposed deeply resented spending cuts that slashed incomes by more than a third, deepened a dire recession and pushed unemployment well over 25 percent.
The second bailout expired earlier this year, and Tsipras insisted he could negotiate a better deal for his country. But the talks with creditors floundered and eventually collapsed in June, with Tsipras calling a referendum and urging Greeks to vote against creditor demands. They overwhelmingly did so, but the prime minister eventually signed up to even stricter demands in return for the third, three-year rescue loan agreement.
Despite his about-face on policies, Tsipras is expected to win the next election although it’s unclear whether he will secure enough parliamentary seats to govern alone. He has ruled out a coalition with any of the centrist opposition parties: center-right New Democracy, the socialist PASOK party or the small centrist To Potami party.
Unless other smaller parties manage to enter Parliament, that would leave his current coalition partner, the nationalist Independent Greeks — which, however, may struggle to cross the 3 percent parliamentary threshold.
Tsipras is not expected to form a government with the new Popular Unity party, the Nazi-inspired Golden Dawn, whose leader and lawmakers still face criminal charges, or the communist KKE party.
Greece Appoints Its First Female Prime Minister
Elena Becatoros and Nicholas Paphitis / AP 2:15 AM ET
Vassiliki Thanou
Petros Giannakouris—AP
(ATHENS, Greece) — Greece’s first female prime minister, a top judge, was sworn in Thursday to head a caretaker government ahead of early elections next month in the bailout-dependent country.
Supreme Court head Vassiliki Thanou, 65, was appointed after radical left Prime Minister Alexis Tsipras resigned, seeking a stronger mandate to implement tough austerity measures demanded by Greece’s creditors in return for a third bailout worth 86 billion euro ($97 billion).
Her main task will be to hold the reins until a new government emerges from the vote expected on Sept. 20.
“But, given the circumstances … I believe that this government will also have to handle crucial matters,” Thanou said in her first public comments in office, singling out for mention Greece’s immigration crisis.
Since January, the financially struggling country has received more than 160,000 mainly Syrian refugees and economic migrants — a record number — who arrive in boats from Turkey before heading to wealthier European countries.
Tsipras was forced to step down last week, barely seven months into his four-year term, following a rebellion in his radical left Syriza party over his agreement to the new income cuts and tax hikes.
Syriza hardliners were furious that Tsipras signed the deal with even harsher terms than those he had vowed to abolish when he was elected in January. The deal was approved with support from pro-European opposition parties, who now accuse him of rushing to call elections before voters are hit by the full force of the new tax measures.
The 41-year-old outgoing prime minister has argued he was left with no choice but to accept European creditors’ demands, to save Greece from defaulting on its debts and being forced out of the euro currency it shares with another 18 European nations.
Thanou will appoint a Cabinet that will be sworn in on Friday, when the election date will be formally confirmed.
Greek President Procopis Pavlopoulos announced her appointment after parliament’s three largest parties failed to find willing coalition partners. The last to hold the mandate to form a government was former energy minister Panagiotis Lafazanis, who created the new Popular Unity party last week after splitting from Syriza.
Greece has relied on funds from two bailouts by other European countries and the International Monetary Fund totaling nearly 240 billion euros ($270 billion) since 2010. In return for the loans, successive governments imposed deeply resented spending cuts that slashed incomes by more than a third, deepened a dire recession and pushed unemployment well over 25 percent.
The second bailout expired earlier this year, and Tsipras insisted he could negotiate a better deal for his country. But the talks with creditors floundered and eventually collapsed in June, with Tsipras calling a referendum and urging Greeks to vote against creditor demands. They overwhelmingly did so, but the prime minister eventually signed up to even stricter demands in return for the third, three-year rescue loan agreement.
Despite his about-face on policies, Tsipras is expected to win the next election although it’s unclear whether he will secure enough parliamentary seats to govern alone. He has ruled out a coalition with any of the centrist opposition parties: center-right New Democracy, the socialist PASOK party or the small centrist To Potami party.
Unless other smaller parties manage to enter Parliament, that would leave his current coalition partner, the nationalist Independent Greeks — which, however, may struggle to cross the 3 percent parliamentary threshold.
Tsipras is not expected to form a government with the new Popular Unity party, the Nazi-inspired Golden Dawn, whose leader and lawmakers still face criminal charges, or the communist KKE party.
Friday, August 28, 2015
China Falters, and the Global Economy Is Forced to Adapt - New York times
http://www.nytimes.com/2015/08/27/business/international/china-falters-and-the-global-economy-is-forced-to-adapt.html?emc=edit_th_20150827&nl=todaysheadlines&nlid=56381892&_r=0
China Falters, and the Global Economy Is Forced to Adapt
With deepening economic fears about China, multinational corporations and countries are having to respond to a new reality as a once sure bet becomes uncertain.
By KEITH BRADSHERAUG. 26, 2015
HONG KONG — The commodities giant BHP Billiton spent heavily for years, mining iron ore across Australia, digging for copper in Chile, and pumping oil off the coast of Trinidad. The company could be confident in its direction as commodities orders surged from its biggest and best customer, China.
Now, BHP is pulling back, faced with a slowing Chinese economy that will no longer be the same dominant force in commodities. Profit is falling and the company is cutting its investment spending budget by more than two-thirds.
China’s rapid growth over the last decade reshaped the world economy, creating a powerful driver of corporate strategies, financial markets and geopolitical decisions. China seemed to have a one-way trajectory, momentum that would provide a steady source of profit and capital.
As Markets Flail, China Investigates Large Brokerage FirmsAUG. 26, 2015
Waiting for customers at a Rolex store in the Causeway Bay section of Hong Kong. Spending on luxury goods in China contracted 1 percent last year, to about $18 billion.China’s Big Spenders Pull Back, as Stock Market ShuddersAUG. 26, 2015
Across China, millions of workers and thousands of companies are feeling the pain of the country’s slowing economy, as sales slip and incomes drop.China Turned to Risky Devaluation as Export Machine StalledAUG. 17, 2015
Diners at a table lifted by a crane to a height of about 100 feet, with a view of a residential construction site in Kunming, China.Devaluation Hints at China’s Rising Distress Over EconomyAUG. 12, 2015
But deepening economic fears about China, which culminated this week in a global market rout, are now forcing a broad rethinking of the conventional wisdom. Even as markets show signs of stabilizing, the resulting shock waves could be lasting, by exposing a new reality that China is no longer a sure bet.
China, while still a large and pervasive presence in the global economy, is now exporting uncertainty around the world with the potential for choppier growth and volatile swings. The tectonic shift is forcing a gut check in industries that have built their strategies and plotted their profits around China’s rise.
Industrial and commodity multinationals face the most pressing concerns, as they scramble to stem the profit slide from weaker consumption. Caterpillar cut back factory production, with sales of construction equipment in China dropping by half in the first six months of the year.
Smartphone makers, automobile manufacturers and retailers wonder about the staying power of Chinese buyers, even if it is not shaking their bottom line at this point. General Motors and Ford factories have been shipping fewer cars to Chinese dealerships this summer.
It is not just companies reassessing their assumptions. Russia had been turning to China to fill the financial gap left by low oil prices and Western sanctions. Venezuela, Nigeria and Ukraine have been heavily dependent on investments and low-cost loans from China.
The pain has been particularly acute for Brazil. The country is already faltering, as weaker Chinese imports of minerals and soybeans have jolted all of Latin America. The uncertainty over China could limit the maneuvering room for officials to address the sluggish Brazilian economy at a time when resentment is festering over proposed austerity measures.
The weakness in China is even compelling officials at the United States Federal Reserve to think more globally, as they consider raising interest rates. William C. Dudley, the president of the New York Fed, said on Wednesday that a September rate increase looked less likely than it did a few weeks ago.
“The entire world is focusing now on China, watching this crisis unfold,” Armando Monteiro Neto, Brazil’s minister of development and foreign trade, told reporters on Tuesday in Brasília. “Brazil is already feeling the effects of China’s deceleration. If the situation gets worse, the impact will get bigger.”
The trouble is, the true strength of the Chinese economy — and the policies the leadership will adopt to address any weaknesses — is becoming more difficult to discern.
China’s growth, which the government puts at 7 percent a year, is widely questioned. Large parts of the Chinese service sector, like restaurants and health care, continue to grow, supporting the broader economy. But the signs in industrial sectors, in which other countries and foreign companies have the greatest stake through trade, paint a bleaker picture.
Articles in this series explore how China's financial heft and economic clout influence the world.
PART I
China’s Global Ambitions, With Loans and Strings AttachedJULY 25, 2015
Adding to the worries are recent events like the deadly explosion of a hazardous chemicals warehouse in Tianjin, which has delayed shipments through one of China’s biggest ports. Labor protests, already rising, jumped sharply across coastal China last week over unpaid wages at struggling export factories.
The leadership, concerned with maintaining social stability, has been quick to act, making aggressive moves to prop up the stock market, inject money into the financial system, and generally stimulate the economy. But President Xi Jinping doesn’t have much experience managing a downturn, and some economists worry that the government is making knee-jerk decisions that will do more harm than good.
Many company executives and global economists say that forecasting China’s growth has become so hard that they are hedging their bets for the time being. “This is a complete black art right now,” said Tim Huxley, the chief executive of Wah Kwong Maritime Transport Holdings, a large Hong Kong shipping company. “I can’t make any long-term decisions based on what is happening today, and so I just keep our fleet running until we get a bit of direction.”
The problems have been building for months in areas like commodities and industrials where just modestly slowing growth in China has been having outsize effects.
For more than a decade, prices surged for iron ore, a main ingredient in making steel, as new skyscrapers, rail lines and other infrastructure were built across China. Last year, BHP Billiton shipped enough iron ore each day to China to fill the Empire State Building.
Now, the industry is retrenching in the face of China’s weaker prospects and diving commodity prices.
Vale, the Brazilian mining giant, is racing to unload assets. In Australia, Vale and its Japanese partner, the Sumitomo Corporation, sold a coal mine in July for just $1, after it had been valued at more than $600 million three years ago. In Argentina, Vale is trying to sell a potash mine in which it invested more than $2 billion.
The fallout in commodities has been especially painful for emerging markets that depend on sales of those resources.
With Brazil’s revenues declining sharply this year, President Dilma Rousseff’s government is coming under criticism over the country’s dependence on China, which surpassed the United States as the top trading partner in 2009. Brazil’s exports to China fell 23.6 percent, to $24.7 billion, in the first seven months of the year from the same period in 2014.
The World According to China
China’s enormous overseas spending has helped it displace the United States and Europe as the leading financial power in large parts of the developing world.
In an editorial on Tuesday, the newspaper O Estado de S. Paulo described Brazil’s relationship with China as “semi-colonial,” claiming that the country’s economy “depends in excess on Chinese prosperity.”
Ilan Goldfajn, chief economist at Itaú Unibanco, one of Brazil’s largest banks, said he was already forecasting the economy to contract about 2.3 percent this year, without factoring in the possibility of a hard landing in China. “China is the most important risk factor for Brazil,” Mr. Goldfajn said.
China was supposed to be the financial savior for Russia.
Last year, Russia signed a $400 billion natural gas deal with China. China would help finance a nearly 2,500-mile pipeline to ship fuel from Siberia. Russia trumpeted that it would eventually sell more natural gas to China than Germany, now its biggest customer.
But the prices that China is willing to pay for the gas are dropping so low that it may no longer be worthwhile to build a pipeline. The Russian energy giant Gazprom has cut its planned capital outlays this year for the first leg of the pipeline by half, Dozhd television reported.
“China is an unclear country for us, opaque,” said Aleksandr Abramov, a professor of finance at the Higher School of Economics in Moscow. “We don’t know what to expect,” he said, adding, “Clearly, the situation will worsen in Russia.”
Some of the latest pressures reflect a belated recognition by businesses and politicians that China had been slowing down.
Automobile manufacturers cut their shipments of new cars to dealers by 7 percent in July, compared with a year earlier. Retail sales had not suddenly tanked, said Cui Dongshu, the secretary-general of China’s Passenger Car Association, which represents manufacturers.
Rather, too many cars had been sent to dealers’ lots in previous months, he said. In other words, manufacturers were slow to see the economy’s deceleration and waited too long to throttle back their factories.
BUSINESS By JONAH M. KESSEL 4:59
To Understand Renminbi, Follow the Bacon
Continue reading the main storyVideo
To Understand Renminbi, Follow the Bacon
From market to table, pork can explain a lot about what’s going on with China’s turbulent currency markets. By JONAH M. KESSEL on Publish Date August 14, 2015. Photo by Adam Dean for The New York Times. Watch in Times Video »
“What manufacturers are doing is adjusting inventory levels to the ‘new normal,’ ” said Bill Russo, a former chief executive of Chrysler China, using a favorite phrase of President Xi Jinping of China in recent months to describe an economy that is expanding at a slower pace.
Similar adjustments are taking place around the globe.
For years, Germany has been well positioned to profit from Chinese growth because it specializes in machine tools and other factory equipment. Most important, China acted as a counterweight to the chronically slow-growing markets in Europe.
Now, major German exporters are seeing signs of pressure.
Trumpf says that sales of its signature product, machines that automakers use to cut sheet metal that sell for about 500,000 euros ($566,000) each, have continued to grow in China. But in May and June, sales of less-expensive cutting machines flattened and began to decline. At the bottom of Trumpf’s product line, sales have fallen sharply since November for machines often purchased by start-up companies.
How industries and economies ultimately fare will depend on how long the slowdown and how deep the economic woes.
Demand remains strong at Boeing for its 777-300ER and 787 jets, models that are capable of flights lasting 10 hours or longer, to Europe or North America. Long-haul international travel from mainland China soared nearly 30 percent in the first half of this year compared with the same period last year, Randy Tinseth, the vice president for marketing at Boeing’s commercial aircraft division, said during a visit to Beijing on Tuesday.
So far, it has been mixed for technology players. Timothy D. Cook, the Apple chief executive, said on Monday that business had stayed strong in China in July and August. But Meg Whitman, the chief executive of Hewlett-Packard, said in an earnings call last week that China’s consumer market for printers and computers was “pretty soft,” although demand from businesses was holding up better.
In the end, much of the China story will come down to whether the expectations meet the reality. Andrew Mackenzie, the chief executive of BHP, captured a broader corporate view on Tuesday when he spoke glowingly about China’s potential in the decade to come and predicted continued profitability. But he conceded that the country’s steel production would most likely “grow a little more slowly,” citing a forecast that works out to just 1.4 percent annually — a figure that sounds more like Europe than the formerly go-go economy of China.
A similar realization is taking place in various corners. “We had five fabulous years in China, of course, where we grew strong double-digit, and it has been gradually slowing down,” Frans van Houten, chief executive of Royal Philips, the Dutch conglomerate, said on July 27. “I think, going forward, we need to be much more modest on expectations with regard to China growth: That’s just being realistic.”
Reporting was contributed by Simon Romero from Brasília, Brazil; Jack Ewing from Athens; Andrew E. Kramer from Moscow; Paul Mozur from Hong Kong; and Vinod Sreeharsha from São Paulo.
China Falters, and the Global Economy Is Forced to Adapt
With deepening economic fears about China, multinational corporations and countries are having to respond to a new reality as a once sure bet becomes uncertain.
By KEITH BRADSHERAUG. 26, 2015
HONG KONG — The commodities giant BHP Billiton spent heavily for years, mining iron ore across Australia, digging for copper in Chile, and pumping oil off the coast of Trinidad. The company could be confident in its direction as commodities orders surged from its biggest and best customer, China.
Now, BHP is pulling back, faced with a slowing Chinese economy that will no longer be the same dominant force in commodities. Profit is falling and the company is cutting its investment spending budget by more than two-thirds.
China’s rapid growth over the last decade reshaped the world economy, creating a powerful driver of corporate strategies, financial markets and geopolitical decisions. China seemed to have a one-way trajectory, momentum that would provide a steady source of profit and capital.
As Markets Flail, China Investigates Large Brokerage FirmsAUG. 26, 2015
Waiting for customers at a Rolex store in the Causeway Bay section of Hong Kong. Spending on luxury goods in China contracted 1 percent last year, to about $18 billion.China’s Big Spenders Pull Back, as Stock Market ShuddersAUG. 26, 2015
Across China, millions of workers and thousands of companies are feeling the pain of the country’s slowing economy, as sales slip and incomes drop.China Turned to Risky Devaluation as Export Machine StalledAUG. 17, 2015
Diners at a table lifted by a crane to a height of about 100 feet, with a view of a residential construction site in Kunming, China.Devaluation Hints at China’s Rising Distress Over EconomyAUG. 12, 2015
But deepening economic fears about China, which culminated this week in a global market rout, are now forcing a broad rethinking of the conventional wisdom. Even as markets show signs of stabilizing, the resulting shock waves could be lasting, by exposing a new reality that China is no longer a sure bet.
China, while still a large and pervasive presence in the global economy, is now exporting uncertainty around the world with the potential for choppier growth and volatile swings. The tectonic shift is forcing a gut check in industries that have built their strategies and plotted their profits around China’s rise.
Industrial and commodity multinationals face the most pressing concerns, as they scramble to stem the profit slide from weaker consumption. Caterpillar cut back factory production, with sales of construction equipment in China dropping by half in the first six months of the year.
Smartphone makers, automobile manufacturers and retailers wonder about the staying power of Chinese buyers, even if it is not shaking their bottom line at this point. General Motors and Ford factories have been shipping fewer cars to Chinese dealerships this summer.
It is not just companies reassessing their assumptions. Russia had been turning to China to fill the financial gap left by low oil prices and Western sanctions. Venezuela, Nigeria and Ukraine have been heavily dependent on investments and low-cost loans from China.
The pain has been particularly acute for Brazil. The country is already faltering, as weaker Chinese imports of minerals and soybeans have jolted all of Latin America. The uncertainty over China could limit the maneuvering room for officials to address the sluggish Brazilian economy at a time when resentment is festering over proposed austerity measures.
The weakness in China is even compelling officials at the United States Federal Reserve to think more globally, as they consider raising interest rates. William C. Dudley, the president of the New York Fed, said on Wednesday that a September rate increase looked less likely than it did a few weeks ago.
“The entire world is focusing now on China, watching this crisis unfold,” Armando Monteiro Neto, Brazil’s minister of development and foreign trade, told reporters on Tuesday in Brasília. “Brazil is already feeling the effects of China’s deceleration. If the situation gets worse, the impact will get bigger.”
The trouble is, the true strength of the Chinese economy — and the policies the leadership will adopt to address any weaknesses — is becoming more difficult to discern.
China’s growth, which the government puts at 7 percent a year, is widely questioned. Large parts of the Chinese service sector, like restaurants and health care, continue to grow, supporting the broader economy. But the signs in industrial sectors, in which other countries and foreign companies have the greatest stake through trade, paint a bleaker picture.
Articles in this series explore how China's financial heft and economic clout influence the world.
PART I
China’s Global Ambitions, With Loans and Strings AttachedJULY 25, 2015
Adding to the worries are recent events like the deadly explosion of a hazardous chemicals warehouse in Tianjin, which has delayed shipments through one of China’s biggest ports. Labor protests, already rising, jumped sharply across coastal China last week over unpaid wages at struggling export factories.
The leadership, concerned with maintaining social stability, has been quick to act, making aggressive moves to prop up the stock market, inject money into the financial system, and generally stimulate the economy. But President Xi Jinping doesn’t have much experience managing a downturn, and some economists worry that the government is making knee-jerk decisions that will do more harm than good.
Many company executives and global economists say that forecasting China’s growth has become so hard that they are hedging their bets for the time being. “This is a complete black art right now,” said Tim Huxley, the chief executive of Wah Kwong Maritime Transport Holdings, a large Hong Kong shipping company. “I can’t make any long-term decisions based on what is happening today, and so I just keep our fleet running until we get a bit of direction.”
The problems have been building for months in areas like commodities and industrials where just modestly slowing growth in China has been having outsize effects.
For more than a decade, prices surged for iron ore, a main ingredient in making steel, as new skyscrapers, rail lines and other infrastructure were built across China. Last year, BHP Billiton shipped enough iron ore each day to China to fill the Empire State Building.
Now, the industry is retrenching in the face of China’s weaker prospects and diving commodity prices.
Vale, the Brazilian mining giant, is racing to unload assets. In Australia, Vale and its Japanese partner, the Sumitomo Corporation, sold a coal mine in July for just $1, after it had been valued at more than $600 million three years ago. In Argentina, Vale is trying to sell a potash mine in which it invested more than $2 billion.
The fallout in commodities has been especially painful for emerging markets that depend on sales of those resources.
With Brazil’s revenues declining sharply this year, President Dilma Rousseff’s government is coming under criticism over the country’s dependence on China, which surpassed the United States as the top trading partner in 2009. Brazil’s exports to China fell 23.6 percent, to $24.7 billion, in the first seven months of the year from the same period in 2014.
The World According to China
China’s enormous overseas spending has helped it displace the United States and Europe as the leading financial power in large parts of the developing world.
In an editorial on Tuesday, the newspaper O Estado de S. Paulo described Brazil’s relationship with China as “semi-colonial,” claiming that the country’s economy “depends in excess on Chinese prosperity.”
Ilan Goldfajn, chief economist at Itaú Unibanco, one of Brazil’s largest banks, said he was already forecasting the economy to contract about 2.3 percent this year, without factoring in the possibility of a hard landing in China. “China is the most important risk factor for Brazil,” Mr. Goldfajn said.
China was supposed to be the financial savior for Russia.
Last year, Russia signed a $400 billion natural gas deal with China. China would help finance a nearly 2,500-mile pipeline to ship fuel from Siberia. Russia trumpeted that it would eventually sell more natural gas to China than Germany, now its biggest customer.
But the prices that China is willing to pay for the gas are dropping so low that it may no longer be worthwhile to build a pipeline. The Russian energy giant Gazprom has cut its planned capital outlays this year for the first leg of the pipeline by half, Dozhd television reported.
“China is an unclear country for us, opaque,” said Aleksandr Abramov, a professor of finance at the Higher School of Economics in Moscow. “We don’t know what to expect,” he said, adding, “Clearly, the situation will worsen in Russia.”
Some of the latest pressures reflect a belated recognition by businesses and politicians that China had been slowing down.
Automobile manufacturers cut their shipments of new cars to dealers by 7 percent in July, compared with a year earlier. Retail sales had not suddenly tanked, said Cui Dongshu, the secretary-general of China’s Passenger Car Association, which represents manufacturers.
Rather, too many cars had been sent to dealers’ lots in previous months, he said. In other words, manufacturers were slow to see the economy’s deceleration and waited too long to throttle back their factories.
BUSINESS By JONAH M. KESSEL 4:59
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From market to table, pork can explain a lot about what’s going on with China’s turbulent currency markets. By JONAH M. KESSEL on Publish Date August 14, 2015. Photo by Adam Dean for The New York Times. Watch in Times Video »
“What manufacturers are doing is adjusting inventory levels to the ‘new normal,’ ” said Bill Russo, a former chief executive of Chrysler China, using a favorite phrase of President Xi Jinping of China in recent months to describe an economy that is expanding at a slower pace.
Similar adjustments are taking place around the globe.
For years, Germany has been well positioned to profit from Chinese growth because it specializes in machine tools and other factory equipment. Most important, China acted as a counterweight to the chronically slow-growing markets in Europe.
Now, major German exporters are seeing signs of pressure.
Trumpf says that sales of its signature product, machines that automakers use to cut sheet metal that sell for about 500,000 euros ($566,000) each, have continued to grow in China. But in May and June, sales of less-expensive cutting machines flattened and began to decline. At the bottom of Trumpf’s product line, sales have fallen sharply since November for machines often purchased by start-up companies.
How industries and economies ultimately fare will depend on how long the slowdown and how deep the economic woes.
Demand remains strong at Boeing for its 777-300ER and 787 jets, models that are capable of flights lasting 10 hours or longer, to Europe or North America. Long-haul international travel from mainland China soared nearly 30 percent in the first half of this year compared with the same period last year, Randy Tinseth, the vice president for marketing at Boeing’s commercial aircraft division, said during a visit to Beijing on Tuesday.
So far, it has been mixed for technology players. Timothy D. Cook, the Apple chief executive, said on Monday that business had stayed strong in China in July and August. But Meg Whitman, the chief executive of Hewlett-Packard, said in an earnings call last week that China’s consumer market for printers and computers was “pretty soft,” although demand from businesses was holding up better.
In the end, much of the China story will come down to whether the expectations meet the reality. Andrew Mackenzie, the chief executive of BHP, captured a broader corporate view on Tuesday when he spoke glowingly about China’s potential in the decade to come and predicted continued profitability. But he conceded that the country’s steel production would most likely “grow a little more slowly,” citing a forecast that works out to just 1.4 percent annually — a figure that sounds more like Europe than the formerly go-go economy of China.
A similar realization is taking place in various corners. “We had five fabulous years in China, of course, where we grew strong double-digit, and it has been gradually slowing down,” Frans van Houten, chief executive of Royal Philips, the Dutch conglomerate, said on July 27. “I think, going forward, we need to be much more modest on expectations with regard to China growth: That’s just being realistic.”
Reporting was contributed by Simon Romero from Brasília, Brazil; Jack Ewing from Athens; Andrew E. Kramer from Moscow; Paul Mozur from Hong Kong; and Vinod Sreeharsha from São Paulo.
Thursday, August 27, 2015
Beijing works to calm tumbling stock market - Financial Times
http://www.ft.com/intl/cms/s/0/aa850ec6-1ed2-11e5-aa5a-398b2169cf79.html#axzz3eSZQamqC
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Last updated: June 30, 2015 8:44 am
Beijing works to calm tumbling stock market
Gabriel Wildau in Shanghai and Josh Noble in Hong Kong
Beijing’s efforts to revive swooning share prices are beginning to bear fruit, adding weight to the view that the government will do whatever it takes to avert a collapse in the stock market.
Chinese shares have been on a wild ride over the past year, rising rapidly to a seven-year high in mid-June amid record-breaking trading volumes. But the market has since turned sharply, tumbling more than a fifth and wiping more than $2tn off the value of listed companies over the past two weeks.
Chinese authorities had already taken some steps to boost both sentiment and liquidity, including a cut to interest rates last week. But a range of extra measures aimed at calming markets appeared to reach a breakthrough on Tuesday, sending share prices soaring.
The Shanghai Composite closed the day with a 5.5 per cent gain, having been as much as 5.1 per cent lower. The Shenzhen index rose 4.8 per cent, while the small-cap ChiNext board swung from a 8.1 per cent drop in the morning session to finish 6.4 per cent higher.
The gains snap a losing streak that has wiped more than $2tn off the market capitalisation of companies listed on China’s two stock exchanges since June 12.
“It is clear the authorities are keen to promote stability and we are seeing signs the various Chinese markets are responding,” said Chris Weston, strategist at IG.
Earlier on Tuesday, the Asset Management Association of China issued a statement titled “Beautiful sunlight always comes after wind and rain”, urging members to “seize the investment opportunity” following a near-25 per cent fall in the Shanghai market over the past fortnight.
“As we pursue personal profit, we should also pay attention to others’ profits and not abandon our integrity as we grab for riches, not kill the goose that laid the golden egg,” the industry body said.
The government itself has been intervening to soothe fears of a stock market collapse. On Monday, China’s securities watchdog said an “excessively fast correction” was not healthy, while the finance and social security ministries published draft rules that would permit the state pension fund to buy stocks. Such a move could allow up to Rmb600bn ($97bn) to enter the market.
Greater freedom would allow fund managers to seek higher returns and help plug a looming pension shortfall as China’s ageing population swells the ranks of retirees. The draft rules would allow up to 30 per cent of the fund to be in stocks.
China’s stock market is widely seen as policy-driven, with investors taking cues from state media and official pronouncements about the degree of government support for the market.
During the 2007 bull run that propelled the Shanghai index to a record high, the finance ministry increased a stock transaction levy to cool the market. As the market was collapsing in 2008, the tax was cut and eventually abolished.
The China Securities Regulatory Commission has in the past restricted approvals for initial public offerings in times of market weakness to avoid diverting demand from existing shares. IPOs were frozen from October 2012 to January 2014.
The state also periodically deploys public funds to boost the market by directly buying shares.
In spite of Monday’s fall, stock exchange data show net inflows worth about Rmb95bn for four blue-chip ETFs, including those tracking the SSE 50 and CSI 300 large-cap indices. Local media speculated the inflows may have come from Central Huijin, a subsidiary of the sovereign wealth fund that holds stakes in major domestic financial institutions.
Central Huijin has frequently stepped in to buy blue-chips in periods of flagging confidence. Late last month, an unexpected share sale by Huijin helped spark a big loss.
Wednesday, August 26, 2015
The six Cs of the China stock slump - BBC News
http://www.bbc.com/news/world-asia-34048556
The six Cs of the China stock slump
By Andreas Illmer & Tessa Wong
BBC News
25 August 2015
From the section Business
The repercussions from "Black Monday" - the global markets turmoil caused by a plunge in Chinese stocks - continue to be felt on Tuesday.
To the uninitiated, the situation may seem bafflingly complex, here's a breakdown of the issues:
China
The story of China has been one of extraordinary growth in the last decade, but there have been recent concerns that there will be a significant economic slowdown.
One worry is that this would trigger panicked reactions from domestic investors and lead to a stock market crash.
With China establishing its Shanghai stock exchange only in 1990, its market is considered immature compared to the rest of the world.
Investors monitor screens showing stock market movements at a brokerage house in Shanghai on 13 August 2015.
China's stock market is dominated by small-time investors
The shares are almost entirely owned by domestic traders, many of whom are 'mom and pop' investors with little experience in investing.
The lack of large, experienced and professional organisations as investors means that the market can be much more volatile.
Central bank
Over the last few months, China's central bank has been repeatedly propping up the stock market to ensure stability.
China's central bank
There were expectations over the weekend that the central bank would pull another drastic move
They have been doing it through several big measures, such as cutting central bank interest rates - which allows more money to flow easily - and buying up shares to stop them from falling.
After losses last week, there was an expectation on Friday that there would be yet another such drastic move.
But that did not happen - causing panic to ripple out and a dramatic drop in shares on Monday. The stock market saw its worst single-day plunge since 2007.
Currency
One of the possible triggers for the drop in past trading sessions was the earlier decision by the central bank to devalue the yuan and allow it to trade more flexibly.
Unlike most currencies, the Chinese currency is not allowed to trade freely according to the number of buyers and sellers in international markets.
Rather, the central bank sets a daily rate to the US dollar and for the rest of the day, the yuan is allowed to trade 2% up or down from that rate.
How many yuan you get for a dollar is crucial for exports
Earlier in August, the bank cut that rate by almost 2%, sending a first wave of insecurity through markets. The move was seen as an attempt to help exports by making Chinese goods cheaper abroad.
The central bank also said it would set the daily rate based on how the yuan traded the previous day, which means that it could fall a lot further in future.
Contagion
China's stock market slump caused investor uncertainty to spread across the region and then around the globe, destabilising stock markets in New York and Europe.
This knock-on effect has highlighted how much of a linchpin China's stock market is in the global marketplace.
Hong Kong-based investment analyst Peter Churchouse says China's market was "irrelevant" 35 years ago and as recent as a decade ago, it merely followed trends in the global economy.
But now the tables have turned, he says. "The global economy and global markets have a 'Made in China' label on them."
Read more: How China's share slump affects the world
A woman talks on a phone at a shop counter in Beijing on 18 June 2009 with a huge logo saying 'Made in China' on the wall
The sell-off highlighted how much of a linchpin China's stock market has become in the global marketplace
Correction or Crash?
Monday's global turmoil sparked fears of another international financial meltdown, but analysts say it was merely over-inflated markets correcting themselves. They are however warning of further slumps in the long run.
Nicholas Teo of financial analysis firm CMC Markets says financial markets were "intoxicated" by easy and cheap funding in recent years, boosting stocks' value and consumer spending.
The turmoil caused by China's stock slump "suggested that the great unwind of the excesses is beckoning".
As for China itself, analysts say that as the market matures over the years and investors become more experienced, it will become less volatile.
This could also happen if China's government removes some of the restrictions that hinder foreign ownership of shares, thus paving the way for bigger more professional firms to come in and inject stability. Currently foreigners only own 2% of stocks.
An investor checks stock prices on his smart phone at a securities company in Beijing on 9 July 2015.
The Chinese government restricts foreigners' trading of shares on its stock exchange
Consequence
Observers have described this incident as a "rude awakening" for global investors who have paid scant attention to China.
Extreme movements in China's market will probably become a more common sight, given its peculiarity of being dominated by small-time inexperienced investors.
Meanwhile China's economy is still expected to slow which in turn would affect the global economy, particularly Western growth, says the BBC's Duncan Weldon.
Read more: How worried should we be about Chinese share price falls?
The BBC's Robert Peston says that in the short term, the world will have an increase in spending power, but over the long term, this would make some countries like the UK considerably poorer.
Read more: Will China's slowdown make us poorer?
But many anticipate that the Chinese government will continue to prop up the economy one way or the other, and even more so in light of this recent financial volatility.
"It's difficult to see officials allowing the economy to slide further without some countervailing action," says Frederic Neumann, who co-heads Asian economics research at HSBC.
The six Cs of the China stock slump
By Andreas Illmer & Tessa Wong
BBC News
25 August 2015
From the section Business
The repercussions from "Black Monday" - the global markets turmoil caused by a plunge in Chinese stocks - continue to be felt on Tuesday.
To the uninitiated, the situation may seem bafflingly complex, here's a breakdown of the issues:
China
The story of China has been one of extraordinary growth in the last decade, but there have been recent concerns that there will be a significant economic slowdown.
One worry is that this would trigger panicked reactions from domestic investors and lead to a stock market crash.
With China establishing its Shanghai stock exchange only in 1990, its market is considered immature compared to the rest of the world.
Investors monitor screens showing stock market movements at a brokerage house in Shanghai on 13 August 2015.
China's stock market is dominated by small-time investors
The shares are almost entirely owned by domestic traders, many of whom are 'mom and pop' investors with little experience in investing.
The lack of large, experienced and professional organisations as investors means that the market can be much more volatile.
Central bank
Over the last few months, China's central bank has been repeatedly propping up the stock market to ensure stability.
China's central bank
There were expectations over the weekend that the central bank would pull another drastic move
They have been doing it through several big measures, such as cutting central bank interest rates - which allows more money to flow easily - and buying up shares to stop them from falling.
After losses last week, there was an expectation on Friday that there would be yet another such drastic move.
But that did not happen - causing panic to ripple out and a dramatic drop in shares on Monday. The stock market saw its worst single-day plunge since 2007.
Currency
One of the possible triggers for the drop in past trading sessions was the earlier decision by the central bank to devalue the yuan and allow it to trade more flexibly.
Unlike most currencies, the Chinese currency is not allowed to trade freely according to the number of buyers and sellers in international markets.
Rather, the central bank sets a daily rate to the US dollar and for the rest of the day, the yuan is allowed to trade 2% up or down from that rate.
How many yuan you get for a dollar is crucial for exports
Earlier in August, the bank cut that rate by almost 2%, sending a first wave of insecurity through markets. The move was seen as an attempt to help exports by making Chinese goods cheaper abroad.
The central bank also said it would set the daily rate based on how the yuan traded the previous day, which means that it could fall a lot further in future.
Contagion
China's stock market slump caused investor uncertainty to spread across the region and then around the globe, destabilising stock markets in New York and Europe.
This knock-on effect has highlighted how much of a linchpin China's stock market is in the global marketplace.
Hong Kong-based investment analyst Peter Churchouse says China's market was "irrelevant" 35 years ago and as recent as a decade ago, it merely followed trends in the global economy.
But now the tables have turned, he says. "The global economy and global markets have a 'Made in China' label on them."
Read more: How China's share slump affects the world
A woman talks on a phone at a shop counter in Beijing on 18 June 2009 with a huge logo saying 'Made in China' on the wall
The sell-off highlighted how much of a linchpin China's stock market has become in the global marketplace
Correction or Crash?
Monday's global turmoil sparked fears of another international financial meltdown, but analysts say it was merely over-inflated markets correcting themselves. They are however warning of further slumps in the long run.
Nicholas Teo of financial analysis firm CMC Markets says financial markets were "intoxicated" by easy and cheap funding in recent years, boosting stocks' value and consumer spending.
The turmoil caused by China's stock slump "suggested that the great unwind of the excesses is beckoning".
As for China itself, analysts say that as the market matures over the years and investors become more experienced, it will become less volatile.
This could also happen if China's government removes some of the restrictions that hinder foreign ownership of shares, thus paving the way for bigger more professional firms to come in and inject stability. Currently foreigners only own 2% of stocks.
An investor checks stock prices on his smart phone at a securities company in Beijing on 9 July 2015.
The Chinese government restricts foreigners' trading of shares on its stock exchange
Consequence
Observers have described this incident as a "rude awakening" for global investors who have paid scant attention to China.
Extreme movements in China's market will probably become a more common sight, given its peculiarity of being dominated by small-time inexperienced investors.
Meanwhile China's economy is still expected to slow which in turn would affect the global economy, particularly Western growth, says the BBC's Duncan Weldon.
Read more: How worried should we be about Chinese share price falls?
The BBC's Robert Peston says that in the short term, the world will have an increase in spending power, but over the long term, this would make some countries like the UK considerably poorer.
Read more: Will China's slowdown make us poorer?
But many anticipate that the Chinese government will continue to prop up the economy one way or the other, and even more so in light of this recent financial volatility.
"It's difficult to see officials allowing the economy to slide further without some countervailing action," says Frederic Neumann, who co-heads Asian economics research at HSBC.
Tuesday, August 25, 2015
Advice After Stock Market Drop: Take Some Deep Breaths, and Don’t Do a Thing - New York Times
http://www.nytimes.com/2015/08/22/your-money/stocks-and-bonds/advice-after-stock-market-drop-take-some-deep-breaths-and-dont-do-a-thing.html?emc=edit_my_20150824&nl=your-money&nlid=56381892&ref=your-money-email&_r=0
Advice After Stock Market Drop: Take Some Deep Breaths, and Don’t Do a Thing
By RON LIEBERAUG. 21, 2015
A trader at the New York Stock Exchange on Friday. The Dow Jones industrial average dropped 3.1 percent on the day and the Standard & Poor’s 500-stock index fell below the 2,000 mark. Credit Brendan Mcdermid/Reuters
The impulse when the stock market falls hard for a few days in a row is to do something. Anything. Our life savings are often on the line, after all.
But that’s just the thing: Stocks are most useful for long-term goals. So unless those goals have changed in the last few days, it probably doesn’t make much sense to overhaul an investment strategy based on a blip of market activity.
So pour yourself a drink, or sit down with a pint of ice cream, and consider the following six things.
First, you are not the stock market. Chances are, your portfolio is a diverse mix of investments. Many people save in target-date mutual funds that do the work of diversification for them. Vanguard’s 2035 fund was down 4.6 percent last week, better than the 5.77 percent decline in the Standard & Poor’s 500-stock index from where it closed a week earlier.
Mike Pistillo, a specialist trader, at his post on the floor of the New York Stock Exchange on Friday.Economic Trends: This Week’s Market Sell-Off May Not Be Such a Bad ThingAUG. 21, 2015
Second, if you have been investing in stocks in the last six years, you most likely are a big winner. It’s generally a bad idea to look at your investment statements too often, but take a quick peek.
That outsize gain you see is one reason you are in stocks in the first place. Plenty of research shows that if you miss just a few days of the market’s biggest gains, your long-term portfolio will suffer badly. If you decide to put a bunch of your money in cash this week, how will you know when to get back in the market? You’ll probably be looking for a sign, and that sign will be the very rebound days that you will have missed out on.
Still uneasy? Consider a third point: At some time in the past, when you were not scared, you made a decision to construct your portfolio a certain way. You knew that stocks involved risk and that the returns they have traditionally delivered, above and beyond what cash and bonds do, was the reward for your persistence.
Nothing about the events of recent days suggests that the fundamentals of capitalism have changed. So neither should your confidence in very long-term ownership of the pieces of the for-profit enterprises that benefit from your fortitude.
Nobody knows for sure whether we’re in for a decline in the stock market of 25 percent or more. But if such a decline does happen and you are a regular investor, you’ll be buying more when prices are lower.
How worried are you about the recent declines in global markets? Do you plan to change your investments?
Share your thoughts »
Which brings us to point No. 4: Long-term investors have time to recover. I know too many 70-year-olds who sold all of their stocks in 2009 and are healthy enough to live to 100. They’d be going on a lot more vacations now and be worrying less about long-term care if they had held firm.
Worried about a 529 college savings plan for a 12-year-old? Hopefully, you weren’t 100 percent in stocks with six years to go before needing money for tuition. Still, you have at least nine years for a portion of that portfolio to recover from any sustained downturn. If that 12-year-old is the oldest of at least two children, you could use cash to pay some tuition bills for the eldest and let some of the account ride even longer for the next child.
Let’s say you still have trouble sleeping. Then you may be the sort of person who needs to consider a fifth point: Some people cannot handle the stress of investing in stocks. But try to give this more time, and consider the alternatives. There are few investments that can deliver the kinds of returns that stocks can without their own accompanying anxiety.
Another alternative is to save a lot more in safer investments like cash or certain bonds. Most people don’t have enough income to do that easily, so settling for lower returns will mean a combination of working longer and living modestly, forever. For some people, that is a fine trade-off.
One final point for new investors (and their parents and grandparents, who ought to be counseling them right about now): This is what markets do. There is absolutely nothing abnormal about what is going on here.
Most of us have to save somewhere, and history suggests that stocks are the most accessible route to get the returns you’ll need to retire someday. It would take decades of systemic economic erosion to prove otherwise, and a few days of market declines do not suggest that anything like that is upon us.
Advice After Stock Market Drop: Take Some Deep Breaths, and Don’t Do a Thing
By RON LIEBERAUG. 21, 2015
A trader at the New York Stock Exchange on Friday. The Dow Jones industrial average dropped 3.1 percent on the day and the Standard & Poor’s 500-stock index fell below the 2,000 mark. Credit Brendan Mcdermid/Reuters
The impulse when the stock market falls hard for a few days in a row is to do something. Anything. Our life savings are often on the line, after all.
But that’s just the thing: Stocks are most useful for long-term goals. So unless those goals have changed in the last few days, it probably doesn’t make much sense to overhaul an investment strategy based on a blip of market activity.
So pour yourself a drink, or sit down with a pint of ice cream, and consider the following six things.
First, you are not the stock market. Chances are, your portfolio is a diverse mix of investments. Many people save in target-date mutual funds that do the work of diversification for them. Vanguard’s 2035 fund was down 4.6 percent last week, better than the 5.77 percent decline in the Standard & Poor’s 500-stock index from where it closed a week earlier.
Mike Pistillo, a specialist trader, at his post on the floor of the New York Stock Exchange on Friday.Economic Trends: This Week’s Market Sell-Off May Not Be Such a Bad ThingAUG. 21, 2015
Second, if you have been investing in stocks in the last six years, you most likely are a big winner. It’s generally a bad idea to look at your investment statements too often, but take a quick peek.
That outsize gain you see is one reason you are in stocks in the first place. Plenty of research shows that if you miss just a few days of the market’s biggest gains, your long-term portfolio will suffer badly. If you decide to put a bunch of your money in cash this week, how will you know when to get back in the market? You’ll probably be looking for a sign, and that sign will be the very rebound days that you will have missed out on.
Still uneasy? Consider a third point: At some time in the past, when you were not scared, you made a decision to construct your portfolio a certain way. You knew that stocks involved risk and that the returns they have traditionally delivered, above and beyond what cash and bonds do, was the reward for your persistence.
Nothing about the events of recent days suggests that the fundamentals of capitalism have changed. So neither should your confidence in very long-term ownership of the pieces of the for-profit enterprises that benefit from your fortitude.
Nobody knows for sure whether we’re in for a decline in the stock market of 25 percent or more. But if such a decline does happen and you are a regular investor, you’ll be buying more when prices are lower.
How worried are you about the recent declines in global markets? Do you plan to change your investments?
Share your thoughts »
Which brings us to point No. 4: Long-term investors have time to recover. I know too many 70-year-olds who sold all of their stocks in 2009 and are healthy enough to live to 100. They’d be going on a lot more vacations now and be worrying less about long-term care if they had held firm.
Worried about a 529 college savings plan for a 12-year-old? Hopefully, you weren’t 100 percent in stocks with six years to go before needing money for tuition. Still, you have at least nine years for a portion of that portfolio to recover from any sustained downturn. If that 12-year-old is the oldest of at least two children, you could use cash to pay some tuition bills for the eldest and let some of the account ride even longer for the next child.
Let’s say you still have trouble sleeping. Then you may be the sort of person who needs to consider a fifth point: Some people cannot handle the stress of investing in stocks. But try to give this more time, and consider the alternatives. There are few investments that can deliver the kinds of returns that stocks can without their own accompanying anxiety.
Another alternative is to save a lot more in safer investments like cash or certain bonds. Most people don’t have enough income to do that easily, so settling for lower returns will mean a combination of working longer and living modestly, forever. For some people, that is a fine trade-off.
One final point for new investors (and their parents and grandparents, who ought to be counseling them right about now): This is what markets do. There is absolutely nothing abnormal about what is going on here.
Most of us have to save somewhere, and history suggests that stocks are the most accessible route to get the returns you’ll need to retire someday. It would take decades of systemic economic erosion to prove otherwise, and a few days of market declines do not suggest that anything like that is upon us.
Monday, August 24, 2015
The falling FTSE: How worried should we be ? - BBC News
http://www.bbc.com/news/business-34039767
The falling FTSE: How worried should we be?
By Brian Milligan
Personal Finance reporter
The index of the UK's biggest 100 companies, the FTSE 100, has now fallen by 15% since its all-time high on 27 April 2015.
That makes it more serious than a technical correction, normally thought of as a fall of 10%. However, it is not yet a bear market, which is the term used when the index drops 20% or more.
The index of the next biggest companies - the FTSE 250 - is down by 10% since its peak on 3 June.
While the current rout of prices was initially confined to commodity and mining stocks, hit by the slowdown in China, the slump now looks much more widespread.
"We are in the midst of a full-blown growth scare, with China at the epicentre," said a note from analysts at JP Morgan.
So how worried should we be by such events - or is there even a silver lining to this crisis?
How big is the fall?
Monday's fall on the FTSE 100, of between 2% and 3% at the time of writing, is not that big in historical terms.
On 19 October 1987, otherwise known as Black Monday, the index fell by 10.84%. The following day, it fell by a further 12.22%.
On 28 October 1929, at the start of the Wall Street crash, the Dow Jones Industrial Average fell by 12% - and a further 11% the day after.
What is more significant, however, is not the individual one-day falls, but the longer-term declines.
In 1987, for example, Black Monday was followed by a true bear market. By the end of the month, the FTSE 100 had fallen by more than 26%.
During the financial crisis of 2007-08, the FTSE 100 peaked at 6,724 on 12 October 2007, reaching a trough of 3,512 on 3 March 2009 - in all, a drop of 47%.
Bank of England
Interest rates
One immediate impact of the current market turbulence is likely to be a further delay in an interest rate rise.
The Bank of England's Monetary Policy Committee (MPC) primarily looks at inflation expectations when considering any change in rates - but it also looks at wider market confidence as well.
Despite recent suggestions by the governor of the Bank of England that a rise might be expected as soon as the end of 2015, analysts now expect that rise to come considerably later.
In other words, those on variable-rate mortgages can now breathe more easily, and may not have to hurry to switch to a fixed-rate deal.
"I think it's good news for mortgage holders, as it must put back the date of the next rate rise," said mortgage expert Ray Boulger of brokers John Charcol.
On the other hand, the news will inevitably not be so good for savers, who will have to stomach record low savings rates for a while longer.
Investors
How much you should worry about the stock market fall probably depends on your age.
Those in their 50s, approaching retirement, will have much more to be concerned about than younger people. In particular, anyone about to take out a pension, or indeed thinking of cashing in their pension, may have to think again. (See pensions below).
But younger people with pensions, or those investing in the stock market directly, may have little to fear.
Admittedly, some analysts worry that the markets have further to fall.
"Against this backdrop, it would take an investor with nerves of steel to contemplate dipping back into the market at this point," said Michael Hewson, analyst at CMC Markets.
But other experts say that young investors will have plenty of time to make their money back - and indeed could make a lot of money by investing now.
"For younger investors, falls like this are great," says Mark Dampier, investment analyst at Hargreaves Lansdown.
"You're buying the market way cheaper. You should be adding."
retirement fund
Pensions
But you don't need to hold shares directly to be hit by the current slump.
If you are paying into a pension, the chances are that about 70% of it is invested in shares or share-based funds.
While you will now be feeling considerably poorer, it only really matters if you are about to cash in your pension, buy an annuity or set up a drawdown policy.
In that case, your capital will have shrunk, and now may not be the best time to buy a pension.
Mark Dampier is particularly concerned about those who already have a drawdown scheme in place.
Pensioners in drawdown leave their capital invested and "draw down" an income from it. But falling share prices can erode the capital quickly.
"If you are in a drawdown plan, this is definitely the time to check you are not drawing down too much from your capital," he told the BBC.
Those who do are in danger of running out of money before they die.
'Nasty'
On the other hand, many pension pots will not have fallen in value by as much as the FTSE 100.
Smaller companies - particularly those not in mining or commodities - have fared better.
And while many funds typically invest 70% in shares, 30% is often invested in bonds - which may even have gone up in value over the last few months.
Those whose pensions are in so-called lifestyle funds will anyway have seen some of their capital gradually transferred into bonds, as they get nearer retirement age.
The outstanding question, as ever, is whether the slump has further to go, and how long it may take markets to recover.
"This is a nasty correction," said Mark Dampier. "And nobody knows whether there's more to come. That's what makes it scary. But unless this is the death of capitalism, stock markets do recover."
The falling FTSE: How worried should we be?
By Brian Milligan
Personal Finance reporter
The index of the UK's biggest 100 companies, the FTSE 100, has now fallen by 15% since its all-time high on 27 April 2015.
That makes it more serious than a technical correction, normally thought of as a fall of 10%. However, it is not yet a bear market, which is the term used when the index drops 20% or more.
The index of the next biggest companies - the FTSE 250 - is down by 10% since its peak on 3 June.
While the current rout of prices was initially confined to commodity and mining stocks, hit by the slowdown in China, the slump now looks much more widespread.
"We are in the midst of a full-blown growth scare, with China at the epicentre," said a note from analysts at JP Morgan.
So how worried should we be by such events - or is there even a silver lining to this crisis?
How big is the fall?
Monday's fall on the FTSE 100, of between 2% and 3% at the time of writing, is not that big in historical terms.
On 19 October 1987, otherwise known as Black Monday, the index fell by 10.84%. The following day, it fell by a further 12.22%.
On 28 October 1929, at the start of the Wall Street crash, the Dow Jones Industrial Average fell by 12% - and a further 11% the day after.
What is more significant, however, is not the individual one-day falls, but the longer-term declines.
In 1987, for example, Black Monday was followed by a true bear market. By the end of the month, the FTSE 100 had fallen by more than 26%.
During the financial crisis of 2007-08, the FTSE 100 peaked at 6,724 on 12 October 2007, reaching a trough of 3,512 on 3 March 2009 - in all, a drop of 47%.
Bank of England
Interest rates
One immediate impact of the current market turbulence is likely to be a further delay in an interest rate rise.
The Bank of England's Monetary Policy Committee (MPC) primarily looks at inflation expectations when considering any change in rates - but it also looks at wider market confidence as well.
Despite recent suggestions by the governor of the Bank of England that a rise might be expected as soon as the end of 2015, analysts now expect that rise to come considerably later.
In other words, those on variable-rate mortgages can now breathe more easily, and may not have to hurry to switch to a fixed-rate deal.
"I think it's good news for mortgage holders, as it must put back the date of the next rate rise," said mortgage expert Ray Boulger of brokers John Charcol.
On the other hand, the news will inevitably not be so good for savers, who will have to stomach record low savings rates for a while longer.
Investors
How much you should worry about the stock market fall probably depends on your age.
Those in their 50s, approaching retirement, will have much more to be concerned about than younger people. In particular, anyone about to take out a pension, or indeed thinking of cashing in their pension, may have to think again. (See pensions below).
But younger people with pensions, or those investing in the stock market directly, may have little to fear.
Admittedly, some analysts worry that the markets have further to fall.
"Against this backdrop, it would take an investor with nerves of steel to contemplate dipping back into the market at this point," said Michael Hewson, analyst at CMC Markets.
But other experts say that young investors will have plenty of time to make their money back - and indeed could make a lot of money by investing now.
"For younger investors, falls like this are great," says Mark Dampier, investment analyst at Hargreaves Lansdown.
"You're buying the market way cheaper. You should be adding."
retirement fund
Pensions
But you don't need to hold shares directly to be hit by the current slump.
If you are paying into a pension, the chances are that about 70% of it is invested in shares or share-based funds.
While you will now be feeling considerably poorer, it only really matters if you are about to cash in your pension, buy an annuity or set up a drawdown policy.
In that case, your capital will have shrunk, and now may not be the best time to buy a pension.
Mark Dampier is particularly concerned about those who already have a drawdown scheme in place.
Pensioners in drawdown leave their capital invested and "draw down" an income from it. But falling share prices can erode the capital quickly.
"If you are in a drawdown plan, this is definitely the time to check you are not drawing down too much from your capital," he told the BBC.
Those who do are in danger of running out of money before they die.
'Nasty'
On the other hand, many pension pots will not have fallen in value by as much as the FTSE 100.
Smaller companies - particularly those not in mining or commodities - have fared better.
And while many funds typically invest 70% in shares, 30% is often invested in bonds - which may even have gone up in value over the last few months.
Those whose pensions are in so-called lifestyle funds will anyway have seen some of their capital gradually transferred into bonds, as they get nearer retirement age.
The outstanding question, as ever, is whether the slump has further to go, and how long it may take markets to recover.
"This is a nasty correction," said Mark Dampier. "And nobody knows whether there's more to come. That's what makes it scary. But unless this is the death of capitalism, stock markets do recover."
Here’s Why China Devalued Its Currency - Fortune
http://time.com/3992323/china-currency-renminbi-yuan/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29
Here’s Why China Devalued Its Currency
Scott Cendrowski / Fortune Aug. 11, 2015
China’s central bank devalued the country’s currency, the renminbi, by about 2% against the U.S. dollar on Tuesday. It was the biggest one-day move since the renminbi, or yuan, officially de-pegged from the U.S. dollar in 2005. The yuan maintains a close relationship with the dollar and trades 2% in each direction from a midpoint selected by China. Today, that midpoint went from 6.11 yuan per U.S. dollar to 6.22.
Trump and others may say China is purposely devaluing its currency to help exports. After all, its economy is struggling to hit the government 7% growth target.
But is that what’s really going on?
For the most part, China has recently actually wanted its currency to steadily rise, for political reasons and to keep capital from flowing out of China. China’s domestic and international goals align with a stronger yuan. That helps explain why presidential candidates like Trump haven’t been spouting off about China’s currency management as much of late.
The answer to why China’s government devalued its currency Tuesday probably has more to do with the dynamics of global currency markets than a sudden urge to help Chinese exporters make their goods cheaper on the world market.
First, the yuan is strongly related to the dollar because China still manages the exchange rate within a range against the dollar. When the U.S. dollar rises rapidly against world currencies, like it has in the past year to pull almost even with the euro, the yuan also rises against China’s trading partners’ currencies.
China has wanted the yuan to steadily rise against trade-weighted partners for a while. To keep that appreciation gradual, as the dollar rockets upwards, it may have to devalue a little, says Jonathan Anderson, at Emerging Advisors Group, one of the clearest observers of China’s markets. “But this is not the same as a “competitive devaluation” of the renminbi —and there’s nothing like that on the cards,” he wrote today.
“All China is doing today is managing the pace of trade-weighted renminbi appreciation,” Anderson continued. “Any attempt to gain truly meaningful competitiveness vis-à-vis trading partners would require, say, a 20% to 40% devaluation against the dollar.”
If China had devalued the yuan by, say, 20%, it would clearly be an effort to boost exports for its advantage. A 2% devaluation is different: it simply keeps the yuan a little more in line with trading partners’ currencies, which have lost value relative to the U.S. dollar. (For more on the U.S. dollar’s rise, read this recent Fortune piece.)
As mentioned, China actually wants a stronger currency. As recently as April, it was actively trying to strengthen the yuan, the Wall Street Journal reported. The country’s central bank purchased the yuan in the currency markets and sold U.S. dollar holdings, a move aimed at stemming capital outflows from China as the yuan was falling.
As Chen Long of Gavekal Dragonomics in Hong Kong recently explained, China has twin (and sometimes competing) goals for exchange rates. On the domestic front, it wants to help exporters with a cheaper currency, but it also wants to maintain a strong currency to prevent capital outflows that may weaken the country’s economy further. On the international side, China wants to avoid a trade war with the U.S., which it would have if it severely weakened the currency. It also wants to boost international use of the yuan for political purposes, as China asserts itself more strongly around the world. The country’s recent campaign to have the yuan join the mostly meaningless IMF reserve currency is one example of China desiring a strong currency. In the end, these multiple goals again promote a slightly stronger currency.
China’s central bank said Tuesday’s yuan depreciation was a way to make the country’s financial system more market-oriented. The bank said market spot prices would now determine the daily position, implying that the central bank would step in less to influence it. Over the past few months the yuan-dollar spot price had been lower than the exchange rate, and it became clear the central bank was supporting a stronger yuan.
There are reasons the government doesn’t deserve the benefit of the doubt when it says it’s in the business of market-based approaches. President Xi Jinping’s administration said the same thing before pledging around $800 billion in government money last month to prop up the falling stock market. China’s words and actions don’t always match.
But there are also reasons that today’s devaluation shouldn’t only be viewed through the prism of trade. First, other exporters in Asia, including South Korea and Taiwan, are hurting because of weak demand abroad. Sluggish economies in Europe and the U.S. influence China’s exports. That’s is not all solved by currency devaluations. Second, China can use other mechanisms to boost its economy. Internet rates and bank reserve requirements can still be cut considerably, and analysts expect that to happen. More government spending is already in the works: China’s banks will issue 1 trillion yuan worth of bonds for infrastructure spending, according to recent reports.
For now, it’s too early to say China is starting a currency war, even if that may be the West’s first inclination.
Here’s Why China Devalued Its Currency
Scott Cendrowski / Fortune Aug. 11, 2015
China’s central bank devalued the country’s currency, the renminbi, by about 2% against the U.S. dollar on Tuesday. It was the biggest one-day move since the renminbi, or yuan, officially de-pegged from the U.S. dollar in 2005. The yuan maintains a close relationship with the dollar and trades 2% in each direction from a midpoint selected by China. Today, that midpoint went from 6.11 yuan per U.S. dollar to 6.22.
Trump and others may say China is purposely devaluing its currency to help exports. After all, its economy is struggling to hit the government 7% growth target.
But is that what’s really going on?
For the most part, China has recently actually wanted its currency to steadily rise, for political reasons and to keep capital from flowing out of China. China’s domestic and international goals align with a stronger yuan. That helps explain why presidential candidates like Trump haven’t been spouting off about China’s currency management as much of late.
The answer to why China’s government devalued its currency Tuesday probably has more to do with the dynamics of global currency markets than a sudden urge to help Chinese exporters make their goods cheaper on the world market.
First, the yuan is strongly related to the dollar because China still manages the exchange rate within a range against the dollar. When the U.S. dollar rises rapidly against world currencies, like it has in the past year to pull almost even with the euro, the yuan also rises against China’s trading partners’ currencies.
China has wanted the yuan to steadily rise against trade-weighted partners for a while. To keep that appreciation gradual, as the dollar rockets upwards, it may have to devalue a little, says Jonathan Anderson, at Emerging Advisors Group, one of the clearest observers of China’s markets. “But this is not the same as a “competitive devaluation” of the renminbi —and there’s nothing like that on the cards,” he wrote today.
“All China is doing today is managing the pace of trade-weighted renminbi appreciation,” Anderson continued. “Any attempt to gain truly meaningful competitiveness vis-à-vis trading partners would require, say, a 20% to 40% devaluation against the dollar.”
If China had devalued the yuan by, say, 20%, it would clearly be an effort to boost exports for its advantage. A 2% devaluation is different: it simply keeps the yuan a little more in line with trading partners’ currencies, which have lost value relative to the U.S. dollar. (For more on the U.S. dollar’s rise, read this recent Fortune piece.)
As mentioned, China actually wants a stronger currency. As recently as April, it was actively trying to strengthen the yuan, the Wall Street Journal reported. The country’s central bank purchased the yuan in the currency markets and sold U.S. dollar holdings, a move aimed at stemming capital outflows from China as the yuan was falling.
As Chen Long of Gavekal Dragonomics in Hong Kong recently explained, China has twin (and sometimes competing) goals for exchange rates. On the domestic front, it wants to help exporters with a cheaper currency, but it also wants to maintain a strong currency to prevent capital outflows that may weaken the country’s economy further. On the international side, China wants to avoid a trade war with the U.S., which it would have if it severely weakened the currency. It also wants to boost international use of the yuan for political purposes, as China asserts itself more strongly around the world. The country’s recent campaign to have the yuan join the mostly meaningless IMF reserve currency is one example of China desiring a strong currency. In the end, these multiple goals again promote a slightly stronger currency.
China’s central bank said Tuesday’s yuan depreciation was a way to make the country’s financial system more market-oriented. The bank said market spot prices would now determine the daily position, implying that the central bank would step in less to influence it. Over the past few months the yuan-dollar spot price had been lower than the exchange rate, and it became clear the central bank was supporting a stronger yuan.
There are reasons the government doesn’t deserve the benefit of the doubt when it says it’s in the business of market-based approaches. President Xi Jinping’s administration said the same thing before pledging around $800 billion in government money last month to prop up the falling stock market. China’s words and actions don’t always match.
But there are also reasons that today’s devaluation shouldn’t only be viewed through the prism of trade. First, other exporters in Asia, including South Korea and Taiwan, are hurting because of weak demand abroad. Sluggish economies in Europe and the U.S. influence China’s exports. That’s is not all solved by currency devaluations. Second, China can use other mechanisms to boost its economy. Internet rates and bank reserve requirements can still be cut considerably, and analysts expect that to happen. More government spending is already in the works: China’s banks will issue 1 trillion yuan worth of bonds for infrastructure spending, according to recent reports.
For now, it’s too early to say China is starting a currency war, even if that may be the West’s first inclination.
Sunday, August 23, 2015
Yuri Milner: Why I Funded the Largest Search for Alien Intelligence Ever
http://time.com/3964238/yuri-milner-breakthrough-listen/
Yuri Milner: Why I Funded the Largest Search for Alien Intelligence Ever
Matt Vella @mattvella July 20, 2015
And why it’s worth $100 million over the next decade for him to help do so
On July 20, a consortium of scientists funded by billionaire investor Yuri Milner announced a $100 million project to answer one of the biggest questions in the universe: Is there intelligent life beyond our solar system? Milner, 53, a former scientist who was CEO of Russia’s largest Internet portal Mail.ru before making prescient investments in Facebook, Twitter and Alibaba, has focused his philanthropic efforts on science. The endowment—dubbed Breakthrough Listen—will fund telescope time in North America and Australia as well as data processing to look for radio signals in distant solar systems. Milner spoke to TIME about the announcements; what follows is a lightly edited transcript.
Q: You founded the Breakthrough Prize three years ago to recognize scientists in much the way the Oscars recognize Hollywood. The show also draws famous celebrity presenters like Benedict Cumberbatch. Why do this? Where does your interest in science come from?
A: In my previous life I was a physicist, maybe that explains my interest in science. I was named Yuri after Yuri Gagarin, the first human to journey into outer space. So I kind of carry this name, and I think, a mission to support science.
We don’t celebrate intellectual achievement. We celebrate athletic achievement. We celebrate artistic achievement. If you were to look at the 200 most famous people in the world, Stephen Hawking wouldn’t make the list—or maybe he’d be number 199 or something. With [Breakthrough], we’re making some progress on that. We don’t pay celebrities to come; they come because they want to. When we started it was the only black tie event in Silicon Valley. This year for the first time, it’ll be broadcast on a major network—Fox—and we’ll be televising it live.
Why focus on the question of life in the universe now?
We’re announcing on July 20, the anniversary of the Apollo Moon landings. I think interest in space is rising again after a long period of dormancy. Look at the excitement over Pluto, over possibly reaching Mars. This project is easy to explain. It’s high impact, low probability which is scientifically legitimate. And everyone in his life has thought about this question.
What are you looking for exactly?
An artificial signal not explainable by science.
SETI [search for extraterrestrial intelligence] has a long history. What’s changed?
In the 1960s, Frank Drake did pioneering SETI work and it was partially funded through the 1980s. But then the idea sort of faded away—except for the question of course. Today several things have changed that will allow us in one day to pull down as much data as we’re currently doing in a year.
We now know for a fact that there are candidates in the galaxy, a few billion. Telescope time used to be harder to get, but now there is an opportunity for private endeavors to buy telescope time. And finally Moore’s Law: we can design a backend infrastructure capable of processing huge amounts of data much faster than ever before. We want to marry the best of Silicon Valley’s capabilities with the best science can offer.
There’s a lot of space, to put it mildly. Even if we get a better look, what’s to say somebody is looking back at us?
There’s been a lot of very serious scientific work done on this and a lot of very interesting philosophical work. The thinking is if there is a civilization even a little more advance than us, they might be able to tell there is oxygen in our atmosphere and that we’re worth looking at. If they have something even as big as Arecibo [a radio telescope in Puerto Rico], and they point it at us they can communicate.
And what about the societal consequences of finding an answer either way?
Either answer is kind of cool and frightening. We’re alone is kind of cool and frightening. And we’re not alone is kind of cool and frightening. Although it would be a fundamental discovery, life will not change a lot. He will got work. I will make an investment. You will write something.
What do you think personally?
The universe is not teeming with life, but we’re probably not alone. If we were alone it would be such a waste of real estate. But I don’t want to be the judge, I just want to help find an answer.
You say this is an “open” project. What does that mean?
We’re making all the data open and available to scientists and amateurs alike. A lot of projects claim to be open but really aren’t. We will be totally open. There will be no need to apply and the data won’t be delivered in a manner so complex as to make it unintelligible. We’re also using the SETI infrastructure—a network of 9 million personal computers that forms one of the largest super computers in the world. Now they’ll have a lot more data to chew on. The more people participate, the better. I’m sure there will be plenty of false positives, but it’s worth it.
The funding will last for a decade. What if we haven’t found anything by then?
I’ll fund it for another 10 years. This thing can go on forever. It’s our responsibility as human beings to keep looking for a signal.
Saturday, August 22, 2015
Worries about a full-blown crash could be a bit premature - BBC News
http://www.bbc.com/news/business-34013514
Worries about a full-blown crash could be a bit premature
By Karishma Vaswani
Asia Business Correspondent
21 August 2015
Are concerns over a new crash justified?
Emerging markets' currencies tumbling to near record lows. Millions of dollars worth of foreign funds pulled out of stock markets in the region. And some investors around the world fearing a major financial meltdown.
It certainly feels like we've been here before.
Many in Asia's financial circles are calling this a re-run of the 1997-1998 Asian financial crisis.
I remember that crisis well. I was a university student interning for the BBC in the summer of 1997 in Jakarta, and I witnessed the full brunt of the Asian financial crisis on some of the most vulnerable in society.
The Indonesian rupiah lost more than 80% of its value - going from 2,500 rupiah against the US dollar to 16,000 at its lowest point. The stock market wasn't spared - it fell by more than 50% by December 1997 and businessmen lost tens of thousands of dollars in a single trading session.
There was panic everywhere. People thought banks had run out of money (and some had), so they formed long lines outside branches, trying to withdraw all their savings. Factories shut down, and workers lost their jobs. The price of basic foods like cooking oil and baby milk soared.
An economist friend of mine in Indonesia once told me that you know you're dealing with a crisis when the "ibu-ibus" (Indonesian for housewives) are affected. Housewives in South East Asia's biggest economy saw the price of imported formula milk for their babies triple, leading to protests outside supermarkets across the country. One Newsweek article described how cooking oil was rationed and sold at police stations. "If they didn't, people would kill each other," the article said.
The meltdown in Asia was set off when Thailand floated the baht in 1997, setting off a domino effect in the region where one by one, currencies fell against the US dollar.
Today, many are worried that China's devaluation last week could set off a similar trend.
Jump media playerMedia player helpOut of media player. Press enter to return or tab to continue.
Media caption
The BBC's economics editor Robert Peston examines the prospects for the world's economy.
Bad news by the day
Some analysts are even warning the impact will be far bigger than 1997 because China's economy is far more important and integrated into the world economy than Thailand ever was.
China's devaluation has already led to the tumbling of currencies around the region.
And it seems like every day we get bad news about the world's second largest economy.
On Friday, data showed that China's factory activity shrank at its fastest pace in more than six years.
All of this adding to increased concerns that China's economy is slowing down - which it is - and how much of an impact the slowdown will have on the rest of the world.
Even the US Fed has raised concerns about the Chinese economy's outlook in its latest minutes.
The thinking goes that if China keeps slowing down, then it won't buy as much "stuff" from Asia as it has in the past, and that will mean Asian economies that have grown thanks to the commodity boom and Chinese demand will slow down too. We're already seeing evidence of this across the region.
Since China and Asia together make up more than half of global growth, a slowdown here is bound to have an effect on the health of the overall world economy.
So if at this point you are starting to feel a little unsettled about the future, I wouldn't blame you.
But, when in doubt, reach for the hard facts and take a deep breath - and here's what Julian Evans-Pritchard, China Economist at Capital Economics, says:
"Sentiment [on China] is currently overly downbeat," he wrote on Friday. "The downside risks to short-run growth are now overstated.
"Credit growth has begun to accelerate on the back of recent policy easing, which should feed through into stronger activity, albeit with a lag. The fiscal stance is also set to loosen in coming months as local governments accelerate spending to hit annual budget targets. "
So if that's true - and credit growth in China is starting to pick up, those effects are typically often seen in the real economy within three to six months.
Emerging markets are also in a far stronger position than they were back in 1997-98. They have stronger current account balances, higher foreign exchange reserves and mostly floating as opposed to fixed exchange rates - which means they don't have to be defended from speculative attacks.
The other factor to consider is India's economy - it now claims higher growth than China's (although many analysts have questioned how those figures have been calculated) and its stock exchange - the Sensex - has seen record inflows in the last six months, attracting investors who have fled from the volatility in Chinese shares.
So it could provide an alternative engine for global growth, if the government's figures are to be believed. I'll be in Mumbai, India's financial capital next week, to see first-hand how much of that growth is actually being felt on the ground.
So that's all good news - and should have investors and policy-makers breathing a sigh of relief.
Daily stock market fluctuations in a highly connected and globalised world are to be expected, but they shouldn't necessarily be seen as the beginning of the end of the world.
What we should be paying more attention to, perhaps, is whether there are long lines outside of our banks and supermarkets. Now that's what you call a crisis.
Worries about a full-blown crash could be a bit premature
By Karishma Vaswani
Asia Business Correspondent
21 August 2015
Are concerns over a new crash justified?
Emerging markets' currencies tumbling to near record lows. Millions of dollars worth of foreign funds pulled out of stock markets in the region. And some investors around the world fearing a major financial meltdown.
It certainly feels like we've been here before.
Many in Asia's financial circles are calling this a re-run of the 1997-1998 Asian financial crisis.
I remember that crisis well. I was a university student interning for the BBC in the summer of 1997 in Jakarta, and I witnessed the full brunt of the Asian financial crisis on some of the most vulnerable in society.
The Indonesian rupiah lost more than 80% of its value - going from 2,500 rupiah against the US dollar to 16,000 at its lowest point. The stock market wasn't spared - it fell by more than 50% by December 1997 and businessmen lost tens of thousands of dollars in a single trading session.
There was panic everywhere. People thought banks had run out of money (and some had), so they formed long lines outside branches, trying to withdraw all their savings. Factories shut down, and workers lost their jobs. The price of basic foods like cooking oil and baby milk soared.
An economist friend of mine in Indonesia once told me that you know you're dealing with a crisis when the "ibu-ibus" (Indonesian for housewives) are affected. Housewives in South East Asia's biggest economy saw the price of imported formula milk for their babies triple, leading to protests outside supermarkets across the country. One Newsweek article described how cooking oil was rationed and sold at police stations. "If they didn't, people would kill each other," the article said.
The meltdown in Asia was set off when Thailand floated the baht in 1997, setting off a domino effect in the region where one by one, currencies fell against the US dollar.
Today, many are worried that China's devaluation last week could set off a similar trend.
Jump media playerMedia player helpOut of media player. Press enter to return or tab to continue.
Media caption
The BBC's economics editor Robert Peston examines the prospects for the world's economy.
Bad news by the day
Some analysts are even warning the impact will be far bigger than 1997 because China's economy is far more important and integrated into the world economy than Thailand ever was.
China's devaluation has already led to the tumbling of currencies around the region.
And it seems like every day we get bad news about the world's second largest economy.
On Friday, data showed that China's factory activity shrank at its fastest pace in more than six years.
All of this adding to increased concerns that China's economy is slowing down - which it is - and how much of an impact the slowdown will have on the rest of the world.
Even the US Fed has raised concerns about the Chinese economy's outlook in its latest minutes.
The thinking goes that if China keeps slowing down, then it won't buy as much "stuff" from Asia as it has in the past, and that will mean Asian economies that have grown thanks to the commodity boom and Chinese demand will slow down too. We're already seeing evidence of this across the region.
Since China and Asia together make up more than half of global growth, a slowdown here is bound to have an effect on the health of the overall world economy.
So if at this point you are starting to feel a little unsettled about the future, I wouldn't blame you.
But, when in doubt, reach for the hard facts and take a deep breath - and here's what Julian Evans-Pritchard, China Economist at Capital Economics, says:
"Sentiment [on China] is currently overly downbeat," he wrote on Friday. "The downside risks to short-run growth are now overstated.
"Credit growth has begun to accelerate on the back of recent policy easing, which should feed through into stronger activity, albeit with a lag. The fiscal stance is also set to loosen in coming months as local governments accelerate spending to hit annual budget targets. "
So if that's true - and credit growth in China is starting to pick up, those effects are typically often seen in the real economy within three to six months.
Emerging markets are also in a far stronger position than they were back in 1997-98. They have stronger current account balances, higher foreign exchange reserves and mostly floating as opposed to fixed exchange rates - which means they don't have to be defended from speculative attacks.
The other factor to consider is India's economy - it now claims higher growth than China's (although many analysts have questioned how those figures have been calculated) and its stock exchange - the Sensex - has seen record inflows in the last six months, attracting investors who have fled from the volatility in Chinese shares.
So it could provide an alternative engine for global growth, if the government's figures are to be believed. I'll be in Mumbai, India's financial capital next week, to see first-hand how much of that growth is actually being felt on the ground.
So that's all good news - and should have investors and policy-makers breathing a sigh of relief.
Daily stock market fluctuations in a highly connected and globalised world are to be expected, but they shouldn't necessarily be seen as the beginning of the end of the world.
What we should be paying more attention to, perhaps, is whether there are long lines outside of our banks and supermarkets. Now that's what you call a crisis.
Friday, August 21, 2015
Here’s What Could Happen Next in Greece - Fortune
http://time.com/3948475/greece-euro/
Here’s What Could Happen Next in Greece
Geoffrey Smith / Fortune July 7, 2015
No one cares enough to save Greece with their own money
All sides say they still want Greece to stay in the euro, and as long as that’s the case, then there’s always a chance that they will make the necessary compromises.
However, all sides are acting like they would rather Greece were out of it: Greece’s government has made impossible promises about keeping the euro without austerity. The Eurozone’s last offer was a deal that pretended Greece has a realistic future in the currency union without growth. The European Central Bank is pretending that Greece’s banks are solvent, but still refusing to lend them any more money to cover a massive run by depositors.
So where do things go from here?
1. How long can the current deadlock last?
The best guess is still July 20th. This is the day when Greece is due to repay the ECB €3.5 billion. It will miss that payment barring some kind of miracle. On that day, it becomes politically impossible for the ECB to continue making emergency short-term loans to Greek banks. If the ECB won’t take the Greek government bonds as collateral, their value will collapse, and the banks will become insolvent (for supervisory purposes, their current troubles are deemed to be ‘temporary’ liquidity difficulties).
No sensible investor would put new money into a bank in that situation, so you would have to use administrative measures to reduce the banks’ liabilities to a level where they are properly covered by assets. The only realistic ways to do that are to convert deposits into equity, or to “haircut” them. That can either be done by simply writing them down or by redenominating them in a new currency.
2. Is there no hope that the creditors will back off on the demand for austerity?
Actually, yes, there is. The creditors’ red line is to write off part of the money Greece owes them. But they can achieve the same effect by rescheduling the debt so that it’s paid off over a much longer time (say 50 years) and with a long grace period. That way, Athens wouldn’t have to run as tight a budget as is currently being demanded, giving the economy more room to grow. If the economy is growing and the debt level isn’t, then pretty much everybody would be satisfied with that.
But there are a lot of problems even with that. For one thing, Greece is already paying less, proportionately, on debt servicing than countries such as Italy and Belgium (whose coat-tails they would be riding on). For another, it would encourage radicals in other countries, bolstering the kind of tax-and-spend leftism that is anathema to Berlin and the European Commission. And most importantly, growth depends on more than writing debt off. The IMF, which suggested the above idea on debt re-profiling last week, despairs of the Greek government ever reforming enough to generate growth.
3. Will Germany relent?
German press coverage has started to swing against Chancellor Angela Merkel as the risk of breaking up the Eurozone rises (see above), but it’s happening too late to change a groundswell of public opinion bitterly opposed to lending Greece any more money. Merkel herself said that there are “only a few days left” to avoid the worst as she arrived for today’s summit. In that timeframe, she has more to lose politically by caving in to Greece than by refusing them. The most likely outcome is that she will try to spin a “Grexit” as a measure to strengthen the euro’s credibility. The Eurozone’s political elite would dearly like to believe that, but the evil Anglo-Saxon speculators who dominate global finance will take more convincing.
4. Can anyone else stop Greece being forced out?
It’s clear that governments from China to the U.S. are concerned by what could happen if Greece goes (President Barack Obama has called Merkel and France’s President Hollande in recent days to voice those concerns). There will be major market volatility (and China’s are quite volatile enough already), huge question marks over the future direction of the E.U., another slowdown in its economy (the world’s largest), and a failed state right on the front line of a migrant crisis that is a major humanitarian disaster.
Despite all this, no-one (not even Vladimir Putin or Nobel Prize-winning liberal economists) seems to care enough about the Greek state, in its current dysfunctional form, to save it with their own money.
5. Would Greece be better off without the euro?
Who better to ask than the Greeks themselves? A Bloomberg poll last week showed 81% of people wanting to keep the euro, and only 12% wanting a return to the drachma. That’s because a euro is a hard currency, with real spending power. Nobody knows what the value of a currency printed at will by Greek governments would be worth, but Greeks remember the last one well enough to have very serious doubts about it. For more on what a drachma would be worth – read this by Fortune’s Stephen Gandel.
6. So why did Greeks vote ‘no’ at the referendum?
Because the government’s message–that this was about austerity–drowned out the warnings from the rest of Europe that it was actually about keeping the euro. That suggests that Greeks are still suffering from acute cognitive dissonance, believing that they can keep the euro without the conditions that everyone else in the Eurozone says are necessary.
7. Will Greece cave at the last minute?
Maybe. The government has to pay pensions and public-sector wages again at the end of every month, and it will not be able to gather together the euros to do that after July 20th. So at some stage it has to admit who has ultimate control over the supply of euros. At that point, it could accept the creditors’ demands. But so many of Tsipras’ party would rebel that the country will need new elections and a new parliament to have any hope of implementing a new deal. On the bright side, once Tsipras and Syriza are out of power, the European might be more inclined to grant debt relief. Politics is a personal business, after all.
This article originally appeared on Fortune.com
Here’s What Could Happen Next in Greece
Geoffrey Smith / Fortune July 7, 2015
No one cares enough to save Greece with their own money
All sides say they still want Greece to stay in the euro, and as long as that’s the case, then there’s always a chance that they will make the necessary compromises.
However, all sides are acting like they would rather Greece were out of it: Greece’s government has made impossible promises about keeping the euro without austerity. The Eurozone’s last offer was a deal that pretended Greece has a realistic future in the currency union without growth. The European Central Bank is pretending that Greece’s banks are solvent, but still refusing to lend them any more money to cover a massive run by depositors.
So where do things go from here?
1. How long can the current deadlock last?
The best guess is still July 20th. This is the day when Greece is due to repay the ECB €3.5 billion. It will miss that payment barring some kind of miracle. On that day, it becomes politically impossible for the ECB to continue making emergency short-term loans to Greek banks. If the ECB won’t take the Greek government bonds as collateral, their value will collapse, and the banks will become insolvent (for supervisory purposes, their current troubles are deemed to be ‘temporary’ liquidity difficulties).
No sensible investor would put new money into a bank in that situation, so you would have to use administrative measures to reduce the banks’ liabilities to a level where they are properly covered by assets. The only realistic ways to do that are to convert deposits into equity, or to “haircut” them. That can either be done by simply writing them down or by redenominating them in a new currency.
2. Is there no hope that the creditors will back off on the demand for austerity?
Actually, yes, there is. The creditors’ red line is to write off part of the money Greece owes them. But they can achieve the same effect by rescheduling the debt so that it’s paid off over a much longer time (say 50 years) and with a long grace period. That way, Athens wouldn’t have to run as tight a budget as is currently being demanded, giving the economy more room to grow. If the economy is growing and the debt level isn’t, then pretty much everybody would be satisfied with that.
But there are a lot of problems even with that. For one thing, Greece is already paying less, proportionately, on debt servicing than countries such as Italy and Belgium (whose coat-tails they would be riding on). For another, it would encourage radicals in other countries, bolstering the kind of tax-and-spend leftism that is anathema to Berlin and the European Commission. And most importantly, growth depends on more than writing debt off. The IMF, which suggested the above idea on debt re-profiling last week, despairs of the Greek government ever reforming enough to generate growth.
3. Will Germany relent?
German press coverage has started to swing against Chancellor Angela Merkel as the risk of breaking up the Eurozone rises (see above), but it’s happening too late to change a groundswell of public opinion bitterly opposed to lending Greece any more money. Merkel herself said that there are “only a few days left” to avoid the worst as she arrived for today’s summit. In that timeframe, she has more to lose politically by caving in to Greece than by refusing them. The most likely outcome is that she will try to spin a “Grexit” as a measure to strengthen the euro’s credibility. The Eurozone’s political elite would dearly like to believe that, but the evil Anglo-Saxon speculators who dominate global finance will take more convincing.
4. Can anyone else stop Greece being forced out?
It’s clear that governments from China to the U.S. are concerned by what could happen if Greece goes (President Barack Obama has called Merkel and France’s President Hollande in recent days to voice those concerns). There will be major market volatility (and China’s are quite volatile enough already), huge question marks over the future direction of the E.U., another slowdown in its economy (the world’s largest), and a failed state right on the front line of a migrant crisis that is a major humanitarian disaster.
Despite all this, no-one (not even Vladimir Putin or Nobel Prize-winning liberal economists) seems to care enough about the Greek state, in its current dysfunctional form, to save it with their own money.
5. Would Greece be better off without the euro?
Who better to ask than the Greeks themselves? A Bloomberg poll last week showed 81% of people wanting to keep the euro, and only 12% wanting a return to the drachma. That’s because a euro is a hard currency, with real spending power. Nobody knows what the value of a currency printed at will by Greek governments would be worth, but Greeks remember the last one well enough to have very serious doubts about it. For more on what a drachma would be worth – read this by Fortune’s Stephen Gandel.
6. So why did Greeks vote ‘no’ at the referendum?
Because the government’s message–that this was about austerity–drowned out the warnings from the rest of Europe that it was actually about keeping the euro. That suggests that Greeks are still suffering from acute cognitive dissonance, believing that they can keep the euro without the conditions that everyone else in the Eurozone says are necessary.
7. Will Greece cave at the last minute?
Maybe. The government has to pay pensions and public-sector wages again at the end of every month, and it will not be able to gather together the euros to do that after July 20th. So at some stage it has to admit who has ultimate control over the supply of euros. At that point, it could accept the creditors’ demands. But so many of Tsipras’ party would rebel that the country will need new elections and a new parliament to have any hope of implementing a new deal. On the bright side, once Tsipras and Syriza are out of power, the European might be more inclined to grant debt relief. Politics is a personal business, after all.
This article originally appeared on Fortune.com
Thursday, August 20, 2015
China’s Currency Move Clouds Its Policy Goals - New York Times
China’s Currency Move Clouds Its Policy Goals
By KEITH BRADSHERAUG. 11, 2015
HONG KONG — As President Xi Jinping of China prepares for a state visit to Washington next month to smooth over troubled relations, his government has just turned the spotlight back on a recurring issue: the value of his country’s currency.
The currency, the renminbi, is part of the fabric of the global economy, providing a way for China to further its diplomatic and investment goals. The renminbi is also an important tool for the leadership’s domestic agenda, namely supporting its economy.
China now faces the difficult dilemma of trying to balance its needs at home and abroad.
When China abruptly devalued its currency nearly 2 percent on Tuesday morning, authorities said market forces would play a bigger role in determining the value of the renminbi. After the renminbi fell further during trading on Tuesday, the central bank set the currency another 1.6 percent lower on Wednesday morning.
China's central bank set the official exchange rate for the renminbi at 6.33 per dollar on Wednesday, or 1.6 percent lower than the previous day.China Weakens Its Currency FurtherAUG. 11, 2015
Counting renminbi in Beijing last month. On Tuesday, China’s central bank set the value of its currency nearly 2 percent weaker against the dollar.China Devalues Its Currency as Worries Rise About Economic SlowdownAUG. 10, 2015
A fruit vendor in Beijing on Tuesday. China's central bank devalued the nation's currency.Economic Trends: Why Did China Devalue Its Currency? Two Big ReasonsAUG. 11, 2015
The United States and others have long called for Beijing to let the currency move more freely, rather than keeping it under such tight control. China’s restrictions on the renminbi have also been a concern of the International Monetary Fund, which is weighing whether to include the renminbi in an elite group of world currencies along with the dollar, the euro and the yen.
How China Is Trying to Stabilize Its Economy
China’s devaluation of the renminbi was the latest in a series of moves over the past two months to help boost the slowing Chinese economy.
But China has another, seemingly contradictory, motive. In devaluing its currency, China is giving priority to its domestic needs. As China’s economy slows, a weaker currency will help buoy the country’s exporters and create jobs at home.
Surging blue-collar wages in China coupled with recent declines in the currencies of rival exporters like South Korea and Taiwan have made it harder for Chinese companies to compete in labor-intensive industries like garment manufacturing and shoe production. Chinese exports fell 8 percent last month compared with a year ago.
“When the renminbi was appreciating, our customers, who are mainly from North America and Europe, had complained about our prices being too high,” said Anna Cho, sales manager of the Shanghai Kaiyuan Pump Industrial Company, a maker of water and sewage pumps. “They will be happy about this new development,” she said, referring to the currency devaluation.
The coming months will provide a test of whether the leadership is focused more on reforms or on the nation’s economy. While Beijing wants a weak currency, it does not want it to go too low.
Editorial: China’s Currency DilemmaAUG. 11, 2015
On Tuesday, traders bet heavily that the renminbi would continue to fall. If Beijing follows through on its pledge to let the market play a much bigger role, more declines will follow.
“If they really do it, it may be going down and down and down,” said Diana Choyleva, the chief economist at Lombard Street Research, a consulting firm in London.
Devaluing the renminbi weeks before President Xi’s visit to the United States also poses clear political challenges at a time when China is trying to smooth over trans-Pacific disputes.
In recent weeks, China announced a halt to its controversial construction of artificial islands in the South China Sea. It has also had an uncommonly muted response to American accusations of digital espionage.
The devaluation risks inflaming a seemingly dormant political issue in the United States: whether China manipulates its currency to gain a trade advantage. Critics in Congress have long argued that the renminbi is undervalued and that this dynamic has prompted many companies to move production to China.
“For years, China has rigged the rules and played games with its currency, leaving American workers out to dry. Rather than changing their ways, the Chinese government seems to be doubling down,” said Senator Chuck Schumer, Democrat of New York.
Under President George W. Bush and now under President Obama, the Treasury has been cautious about publicly criticizing China on currency policy. Treasury officials have not wanted to incite Chinese defiance, and they have tended to respect China’s contention that its trade surpluses, though huge, have shrunk as a percentage of its growing economy.
Buses wait to be exported at the Lianyungang port in China. Credit Agence France-Presse — Getty Images
“We will continue to monitor how these changes are implemented and continue to press China on the pace of its reforms, including additional measures to transition to a market-oriented exchange rate and its stated desire to move towards an economy that is more dependent on domestic demand, which is in China and America’s best interests,” a Treasury representative said in a statement on Tuesday. “Any reversal in reforms would be a troubling development.”
China’s action could also factor into the Federal Reserve’s thinking.
The Fed’s leaders have been talking for months about raising interest rates as a way to curb the considerable monetary stimulus they have delivered to the strengthening American economy. But a weakened renminbi — and the possibility that other countries may follow suit — could mean further weakening of American exports and slower economic growth.
Continue reading the main story
RECENT COMMENTS
dorothy Anderson 2 days ago
Looks like Trump is right about Chjna anyway!
Prometheus 2 days ago
China is our banker. You are always at the mercy of your banker.You wanted global capitalism you got it, enjoy.
Mark 2 days ago
This is a puzzling news report that raises questions about whether the author fully understands currency markets. China has been accused of...
SEE ALL COMMENTS
“It could lower the odds of a Fed rate hike in the near term,” said Thomas Lam, the chief economist for industrialized economies at RHB Securities Singapore, a unit of a Malaysian financial conglomerate, the RHB Group.
The currency situation puts China in a tricky position.
China has the means to stop any unwanted drop in currency. The country has $3.5 trillion in foreign exchange reserves, which it can use to buy back renminbi globally and push up the value.
But the devaluation also comes at a time when China is pushing for broader acceptance of the renminbi, and the exercise of tight currency controls undermines that effort.
The International Monetary Fund contended for years that the renminbi was undervalued, but it dropped that assertion in May. Still, the I.M.F. in a staff report last week suggested that China would need more time to finish preparations for including the renminbi as a global reserve currency.
The I.M.F., in particular, wants to see more evidence that the renminbi is being used outside China, notably for central bank reserves or bonds. The appetite among overseas central banks and bond investors for renminbi-denominated assets has gradually increased.
But part of the demand has been a speculative bet that the renminbi will continue to rise against the dollar. Even small, occasional hints in the last 18 months that the renminbi might weaken have tended to erode such players’ enthusiasm. So Tuesday’s devaluation could damage China’s bid to bolster international use of its currency.
The I.M.F. on Tuesday said that China’s new plan for determining the value of the renminbi “appears a welcome step as it should allow market forces to have a greater role.” But “the exact impact will depend on how the new mechanism is implemented in practice.”
Senator Schumer warned that the devaluation might lower the chances that the renminbi will be recognized by the I.M.F. as a leading currency, as part of the fund’s so-called special drawing rights.
“Unless and until China stops artificially devaluing their currency,” he said, “the renminbi should be barred from consideration as a global reserve currency by the I.M.F.”
By KEITH BRADSHERAUG. 11, 2015
HONG KONG — As President Xi Jinping of China prepares for a state visit to Washington next month to smooth over troubled relations, his government has just turned the spotlight back on a recurring issue: the value of his country’s currency.
The currency, the renminbi, is part of the fabric of the global economy, providing a way for China to further its diplomatic and investment goals. The renminbi is also an important tool for the leadership’s domestic agenda, namely supporting its economy.
China now faces the difficult dilemma of trying to balance its needs at home and abroad.
When China abruptly devalued its currency nearly 2 percent on Tuesday morning, authorities said market forces would play a bigger role in determining the value of the renminbi. After the renminbi fell further during trading on Tuesday, the central bank set the currency another 1.6 percent lower on Wednesday morning.
China's central bank set the official exchange rate for the renminbi at 6.33 per dollar on Wednesday, or 1.6 percent lower than the previous day.China Weakens Its Currency FurtherAUG. 11, 2015
Counting renminbi in Beijing last month. On Tuesday, China’s central bank set the value of its currency nearly 2 percent weaker against the dollar.China Devalues Its Currency as Worries Rise About Economic SlowdownAUG. 10, 2015
A fruit vendor in Beijing on Tuesday. China's central bank devalued the nation's currency.Economic Trends: Why Did China Devalue Its Currency? Two Big ReasonsAUG. 11, 2015
The United States and others have long called for Beijing to let the currency move more freely, rather than keeping it under such tight control. China’s restrictions on the renminbi have also been a concern of the International Monetary Fund, which is weighing whether to include the renminbi in an elite group of world currencies along with the dollar, the euro and the yen.
How China Is Trying to Stabilize Its Economy
China’s devaluation of the renminbi was the latest in a series of moves over the past two months to help boost the slowing Chinese economy.
But China has another, seemingly contradictory, motive. In devaluing its currency, China is giving priority to its domestic needs. As China’s economy slows, a weaker currency will help buoy the country’s exporters and create jobs at home.
Surging blue-collar wages in China coupled with recent declines in the currencies of rival exporters like South Korea and Taiwan have made it harder for Chinese companies to compete in labor-intensive industries like garment manufacturing and shoe production. Chinese exports fell 8 percent last month compared with a year ago.
“When the renminbi was appreciating, our customers, who are mainly from North America and Europe, had complained about our prices being too high,” said Anna Cho, sales manager of the Shanghai Kaiyuan Pump Industrial Company, a maker of water and sewage pumps. “They will be happy about this new development,” she said, referring to the currency devaluation.
The coming months will provide a test of whether the leadership is focused more on reforms or on the nation’s economy. While Beijing wants a weak currency, it does not want it to go too low.
Editorial: China’s Currency DilemmaAUG. 11, 2015
On Tuesday, traders bet heavily that the renminbi would continue to fall. If Beijing follows through on its pledge to let the market play a much bigger role, more declines will follow.
“If they really do it, it may be going down and down and down,” said Diana Choyleva, the chief economist at Lombard Street Research, a consulting firm in London.
Devaluing the renminbi weeks before President Xi’s visit to the United States also poses clear political challenges at a time when China is trying to smooth over trans-Pacific disputes.
In recent weeks, China announced a halt to its controversial construction of artificial islands in the South China Sea. It has also had an uncommonly muted response to American accusations of digital espionage.
The devaluation risks inflaming a seemingly dormant political issue in the United States: whether China manipulates its currency to gain a trade advantage. Critics in Congress have long argued that the renminbi is undervalued and that this dynamic has prompted many companies to move production to China.
“For years, China has rigged the rules and played games with its currency, leaving American workers out to dry. Rather than changing their ways, the Chinese government seems to be doubling down,” said Senator Chuck Schumer, Democrat of New York.
Under President George W. Bush and now under President Obama, the Treasury has been cautious about publicly criticizing China on currency policy. Treasury officials have not wanted to incite Chinese defiance, and they have tended to respect China’s contention that its trade surpluses, though huge, have shrunk as a percentage of its growing economy.
Buses wait to be exported at the Lianyungang port in China. Credit Agence France-Presse — Getty Images
“We will continue to monitor how these changes are implemented and continue to press China on the pace of its reforms, including additional measures to transition to a market-oriented exchange rate and its stated desire to move towards an economy that is more dependent on domestic demand, which is in China and America’s best interests,” a Treasury representative said in a statement on Tuesday. “Any reversal in reforms would be a troubling development.”
China’s action could also factor into the Federal Reserve’s thinking.
The Fed’s leaders have been talking for months about raising interest rates as a way to curb the considerable monetary stimulus they have delivered to the strengthening American economy. But a weakened renminbi — and the possibility that other countries may follow suit — could mean further weakening of American exports and slower economic growth.
Continue reading the main story
RECENT COMMENTS
dorothy Anderson 2 days ago
Looks like Trump is right about Chjna anyway!
Prometheus 2 days ago
China is our banker. You are always at the mercy of your banker.You wanted global capitalism you got it, enjoy.
Mark 2 days ago
This is a puzzling news report that raises questions about whether the author fully understands currency markets. China has been accused of...
SEE ALL COMMENTS
“It could lower the odds of a Fed rate hike in the near term,” said Thomas Lam, the chief economist for industrialized economies at RHB Securities Singapore, a unit of a Malaysian financial conglomerate, the RHB Group.
The currency situation puts China in a tricky position.
China has the means to stop any unwanted drop in currency. The country has $3.5 trillion in foreign exchange reserves, which it can use to buy back renminbi globally and push up the value.
But the devaluation also comes at a time when China is pushing for broader acceptance of the renminbi, and the exercise of tight currency controls undermines that effort.
The International Monetary Fund contended for years that the renminbi was undervalued, but it dropped that assertion in May. Still, the I.M.F. in a staff report last week suggested that China would need more time to finish preparations for including the renminbi as a global reserve currency.
The I.M.F., in particular, wants to see more evidence that the renminbi is being used outside China, notably for central bank reserves or bonds. The appetite among overseas central banks and bond investors for renminbi-denominated assets has gradually increased.
But part of the demand has been a speculative bet that the renminbi will continue to rise against the dollar. Even small, occasional hints in the last 18 months that the renminbi might weaken have tended to erode such players’ enthusiasm. So Tuesday’s devaluation could damage China’s bid to bolster international use of its currency.
The I.M.F. on Tuesday said that China’s new plan for determining the value of the renminbi “appears a welcome step as it should allow market forces to have a greater role.” But “the exact impact will depend on how the new mechanism is implemented in practice.”
Senator Schumer warned that the devaluation might lower the chances that the renminbi will be recognized by the I.M.F. as a leading currency, as part of the fund’s so-called special drawing rights.
“Unless and until China stops artificially devaluing their currency,” he said, “the renminbi should be barred from consideration as a global reserve currency by the I.M.F.”
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