• China loses round one in Philippines dispute over islands - FT.com
    http://www.ft.com/intl/cms/s/0/1e4b779e-7e93-11e5-a1fe-567b37f80b64.html?ftcamp=crm/email/20151030/nbe/ChinaBusiness/product#axzz3q2T3eQVm
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    China has lost the first round of a major legal fight with the Philippines after an international tribunal agreed to hear a case about contested islands in the resource-rich South China Sea.
    The Philippines last year asked a court in The Hague to invalidate the “nine-dash line” — a demarcation on Chinese maps that China uses to lay claim to most of the South China Sea. China has refused to participate in the case, but has made clear through other channels that it does not believe the court has jurisdiction. But the court decided on Thursday that it had such authority.

    Manila brought the case after concluding that efforts to address assertive Chinese behaviour in the region had run their course without any resolution. China and its maritime neighbours have had bitter disputes over dozens of islands, reefs and atolls in the waters for decades, but tensions have risen in recent years as China has grown its maritime presence in the waters.
    “It is big and welcome news,” said a senior US military official. “It demonstrates the relevance of international law to territorial conflicts in the South China Sea and it shows that sovereignty claims are not indisputable.”

    #Chine #Mer_de_Chine


  • Growth data buoy China at ‘pivotal moment’ in economic rebalancing - FT.com
    http://www.ft.com/intl/cms/s/2/df727b0c-763c-11e5-8564-b4bb9a521c63.html?ftcamp=crm/email/20151020/nbe/ChinaBusiness/product#axzz3p1wv9HGq
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    “Chinese rebalancing is at a pivotal moment. Should it fail the global economy, it could be pushed into a major downturn,” wrote Angus Nicholson, a market analyst at IG.
    Consumption accounted for 58 per cent of that growth, or 4 percentage points. Investment, which includes construction of new houses and factories, contributed only 43 per cent, or 3 percentage points. Services, whose share of overall output passed 50 per cent this year, grew 8.6 per cent, well ahead of the 5.8 per cent expansion in the struggling industrial sector.
    Analysts say rising incomes amid a still-tight labour market are fuelling consumption.
    “The consumption share of GDP is bigger and bigger because ordinary people’s share of national income is higher and higher,” Huang Yiping, professor at Peking University’s China Center for Economic Research, told local media on Monday. Mr Huang sees telecommunications, education, travel, elderly care and financial services as sectors likely to benefit most from increasing consumption.

    Yet for analysts sceptical of China’s official GDP data, the latest figures compound that suspicion. They doubt that services could have remained so strong given the steep declines in the stock market in the second quarter. Financial services were the biggest contributor to services growth earlier in the year.
    “It is somewhat puzzling how the service sector maintained strong growth in the third quarter, given that the strong service sector growth in the first half was mainly driven by the financial sector,” wrote Zhu Haibin, chief China economist at JPMorgan. “The recent stock market correction should have led to service sector deceleration.”

    #Chine #croissance


  • China’s Great Game: New frontier, old foes - FT.com
    http://www.ft.com/intl/cms/s/0/60f33cf8-6dae-11e5-8171-ba1968cf791a.html?ftcamp=crm/email/20151014/nbe/Analysis/product#axzz3oWytVTIj
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    For the architects of Mr Xi’s Silk Road project, the slaughter at the Sogan coal mine — which neither the Chinese government nor state media have acknowledged — was a reminder of the challenges that lie ahead as Beijing begins playing a “Great Game” of its own in central Asia and beyond.
    To realise this dream of an infrastructure-led revival of commerce and prosperity across the Eurasian land mass, the Chinese government will first have to tame its own Wild West. At the moment, however, it is refusing to budge from policies that seem only to be fanning the flames of ethnic unrest.
    Over the past 60 years, the Han, China’s dominant ethnic group, have increased their proportion of Xinjiang’s population from 6 per cent to more than 40 per cent, fuelling widespread resentment among Uighurs who see the influx as part of a deliberate attempt by Beijing to dilute their community’s religious and cultural identity.
    A modern-day Silk route is Xi Jinping’s signature foreign policy
    “Xi Jinping sees Xinjiang as absolutely critical for his agenda. It’s not just about security and solving the Uighur issue, it’s also about building this new Silk Road economic belt,” says James Leibold, a China scholar at La Trobe University in Melbourne. “The party needs to convince a weary Han public and foreign governments that the anti-terror campaign has succeeded, and shift the narrative to Xinjiang as the gateway to the new Silk Road and the countless opportunities [that] await those willing to invest in the region.”

    #Chine #Route_de_la_soie #Xinjiang


  • Japan: End of the rice age - FT.com
    http://www.ft.com/intl/cms/s/0/f4db3b26-6045-11e5-a28b-50226830d644.html?ftcamp=crm/email/2015922/nbe/Analysis/product#axzz3mNnW4h25
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    Japan’s rice crisis starts with its older, smaller stomachs. As the population ages, appetites are shrinking. Diets among younger Japanese favour wheat and the country is eating about 20 per cent less rice than it did two decades ago.
    Other sources of demand are also vanishing: Japan drinks about a third as much (rice-based) sake as it did in 1970 and consumption of fish — the traditional accompaniment to rice — is down 30 per cent since 2005. In desperation, the agriculture, forestry and fisheries ministry has been forced to find ways of promoting a grain whose very name in Japanese — gohan — means “meal”.
    After hitting a peak of 2,670 in 2006, Japan’s average daily calorie intake has been on the decline, falling to 2,415 last year, says a spokesman from the rice department of the ministry.
    “The difference is that people are not eating as much because the population is getting older,” he says. “I think that peak of 2,670 was the limit of what Japanese people will eat.”
    The industry has watched helplessly as Japanese-grown rice has become cheaper than its Californian-grown equivalent for the first time since 1953. The price may recover in the short term, but the fundamentals suggest it is the start of a long-term trend. This inflection point, say Japan’s leading rice experts, demands a wholesale revision of the way the nation thinks about its staple.
    Agricultural arrow
    According to some, the politics and protectionism behind Japan’s relationship with rice — defining features of the way the ruling Liberal Democratic party has maintained power and the country has been governed since the second world war — are already in flux. The public may see Prime Minister Shinzo Abe’s new national security law, passed last week after the biggest protests Japan has seen since the 1960s, as his most radical bid at reform. But the changes he may have in store for agriculture could be far more profound, analysts say.
    Rice Japan analysis 1
    Earlier this year, Mr Abe’s party forced the JA-Zenchu union to waive its right to supervise and audit farming groups — a move intended to dilute the power of the union. The idea, considered to be among the reforms that make up the “third arrow” of Abenomics, could give greater autonomy to co-operatives. The government has also relaxed some of the limits on corporate farm ownership and created ways to merge small holdings into larger ones. Mr Abe may seek to expand the policy.
    JA’s control over the distribution of Japan’s crops gives it a stranglehold on farming. Breaking that is likely to remain a priority for the prime minister.
    Despite its enduring status as the sole symbol of Japan’s self-sufficiency in food, and the rescuer of a nation from postwar hunger, the rice industry has fewer defenders than in the past. The demographics of the rice industry, in which the average age of farmers is 70, are working against it. About 64 per cent of Japan’s farmers grow a crop that represents just 21 per cent of the country’s agricultural output by value, says the Canon Institute for Global Studies.
    Japanese consumers may be wealthy enough to shun imports that have been 20-30 per cent cheaper. But former agriculture ministry sources say even they have begun to notice the absurdity of a system which funnels billions of their taxes into subsidies that cause more fields to lie empty and inflate prices.
    The beef and wheat lobbies, say government insiders, now wield more influence at the top levels of government. It has finally become acceptable to question precisely how a rice industry this rickety holds the nation in its thrall. “As we are now starting to see very clearly, without its protections, Japanese domestic rice policy does not actually work at all,” says Tokyo University’s Masayoshi Honma.
    #Japon #Agriculture #FTA


  • North Korean song of ‘bumper crop’ strikes a discordant note - FT.com
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    Severe drought followed by flooding has caused havoc in North Korea’s agricultural system this year, underscoring the country’s continuing lack of food security, with the state cutting rations this summer to less than half the level needed for basic nutrition.
    The grim outlook has tempered optimism about the impact of agricultural reforms in recent years, as described to UN agencies by North Korean officials. In June 2012, six months after Mr Kim took power, the state promulgated new guidelines allowing smaller work teams on farms of as few as 10 people.
    Two years later, a new set of guidelines declared that teams could now be as small as two households, and that they would be allowed to work the same plot of land for many years at a time.
    Crucially, these changes have been combined with reforms allowing the teams to keep up to 70 per cent of what they produce instead of handing it all to the state.
    State media did not announce the changes but have subsequently referred to them.
    “The advantage of the ‘field responsibility’ system is that the workforce at each farm regards a small plot of land as their own,” Ji Myong Su, head of agriculture management research at Pyongyang’s Academy of Agricultural Science, told the state Tongil Sinbo newspaper in June.
    The speed of grain planting had doubled at the farms where the new system had been implemented, involving some teams as small as four people, he added.

    Another important change in 2014 was a dramatic increase in the maximum permitted size of “kitchen gardens from 100 to 3,300 square metres, which will encourage more private food production, says Cristina Coslet, an FAO official covering east Asia. “I could really see the difference between the fields and kitchen gardens [during a 2012 visit] — they look after [the latter] carefully and water them,” she says.”

    #Corée_du_Nord, #Agriculture


  • Chine, réforme des entreprises publiques version libéralisme
    China plans shake-up of state-owned enterprises to boost growth - FT.com
    http://www.ft.com/intl/cms/s/0/aff90924-5a01-11e5-9846-de406ccb37f2.html?ftcamp=crm/email/2015914/nbe/ChinaBusiness/product#axzz3lgz39xUk
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    “The guidelines suggest that by 2020, the goals in all the main reform areas should be accomplished, constituting a system that is more suitable to the nation’s socialist-market economy,” said Xinhua. “The SOE system should be more modernised and market-oriented. It should make for higher economic vitality, higher control, greater influence and SOEs will be more risk-resistant.”
    China has more than 155,000 SOEs, employing tens of millions of people in all sectors from banks to hotels and airlines to oil refiners. But while the vast majority are managed by local governments, there is a core of more than 100 large nationally strategic groups, including ICBC, the world’s biggest bank by assets, and China Mobile, the world’s biggest network by subscribers, controlled by Beijing.
    The update from the State Council came as manufacturing and investment statistics revealed further weakening in the world’s biggest economy by purchasing power parity.


  • Study claims China emissions much lower than expected - FT.com
    http://www.ft.com/intl/cms/s/0/236fedce-462e-11e5-af2f-4d6e0e5eda22.html?ftcamp=crm/email/2015820/nbe/ChinaBusiness/product#axzz3jLCdSE9j
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    “A lot of people feel surprised because we normally don’t expect that China’s emissions are underestimated,” said Dabo Guan, one of the lead authors of the study from the School of International Development at the University of East Anglia.
    At issue is the method of calculation used to estimate Chinese emissions. Observers calculate emissions based on estimates of units of energy consumed, a measure that in turn relies on a conversion factor for converting the physical coal used into standard coal units.
    The study built upon a national survey of about 5,000 coal mines covering about 85 per cent of Chinese coal production to conclude that coal quality was generally poorer than that used in the west. Poor-quality coal emits more air pollutants per unit of energy but up to 50 per cent less carbon dioxide per tonne.

    That means the formula used to convert units of physical coal to units of standard coal, and therefore emissions, is distorted for China, resulting in an overestimation of emissions. That is the case even when assuming the country consumes 10 per cent more coal than reflected in official statistics, the researchers argue.
    China’s official statistics often fail to capture smaller or private coal mines, industrial facilities and even relatively large power plants and coal-to-chemicals refineries. That was particularly true when the economy was booming, but now slowing growth and tighter government policies are driving many of those plants out of business.

    #Chine #CO2


  • China migration: Dying for land - FT.com
    http://www.ft.com/intl/cms/s/0/33ae0866-3098-11e5-91ac-a5e17d9b4cff.html#axzz3iOcJwo7p
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    To the people, it looked like an invasion. For three years farmers in Fuyou village had been fighting the government-backed developer who turned their land into a giant construction site. Thugs circled after dark, threatening and sometimes beating the residents. Villagers armed with hoes and scythes had taken shifts guarding the entrance to their narrow streets.
    Now, truck after truck packed with men in hard hats labelled “police” and carrying long staves, electric prods and riot shields rolled down the highway. Relatives working in a nearby town say they called ahead to warn that the convoy was on its way. The villagers grabbed steel rods from the construction site, and waited.

    The two forces clashed on the wide roads between half-finished buildings under the bright southern sun in China’s Yunnan province — more than 2,000km from Beijing. The crowd overturned three silver Chevrolets. Small running battles left men bloodied and beaten on the ground.
    Villagers captured eight of the “police”, bound them with packing tape and plastic twine, and held them in the village function hall. On closer inspection, the outsiders had the same weathered peasant faces as the villagers. Their dark blue uniforms turned out to be ill-fitting security guard outfits pulled on over normal clothes. One woman called the real police repeatedly.
    Late in the afternoon with tensions high, the villagers dragged four of the hostages out to the road, bound them together with a red cloth banner, and splashed them with petrol, demanding that the other side withdraw. Instead, they surged forward.
    When the smoke cleared on October 14 last year, the charred and bloody bodies of the hostages lay still bound on the pavement. At least two villagers and two outsiders were found dead in nearby fields.
    “We had no choice but to defend ourselves,” says one villager who asks not to be named for fear of retaliation. “If we hadn’t killed them they would have killed more of ours.”
    The battle of Fuyou was remarkable for its savagery, but not for the fact that it happened. Land grabs are the top cause of unrest in the Chinese countryside and in the sprawling villages-turned-slums surrounding every city.
    Urban vs rural

    China’s rapid urbanisation has been driven primarily by the pull of higher wages in the city, and the opportunity to escape a life of back-breaking farm work. For three decades, cheap labour from the countryside has driven China’s “economic miracle”, as the nation’s premier, Li Keqiang, acknowledged in an address in March.

    #Chine, #Paysans, #Migrants


  • Emerging markets: Redrawing the world map - FT.com
    http://www.ft.com/intl/cms/s/0/4a915716-39dc-11e5-8613-07d16aad2152.html#axzz3hpikjclj
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    Already, some commentators are proposing alternatives to the definition, seeking to identify ordering principles and shared dynamics among clusters of developing countries. This, they hope, will allow institutions, companies and multilateral organisations to assess more accurately the balance of risk and opportunity in large parts of the world.

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    What’s in a name?

    At its inception, “emerging market” was not designed as a definition with specific criteria. Antoine van Agtmael, then an economist at the International Financial Corporation, the private sector arm of the World Bank, coined it as a marketing catchphrase in the 1980s.
    The attraction was clear: it sounded aspirational. Countries previously known by monikers such as “less developed” or “third world” were suddenly imbued with the promise that they might be on a journey towards something better.
    Since the 1980s, the stunning success of the term has spawned several attempts to nail down a set of commonly recognised characteristics — with the unintended consequence that different organisations such as the International Monetary Fund, the UN and financial index providers such as MSCI, JPMorgan and FTSE use a clutter of conflicting criteria to categorise emerging markets.
    Adding to the confusion, the term is sometimes used to describe equity, bond or currency markets in developing countries and sometimes to describe the countries themselves. Different criteria make a world of difference. The MSCI equity index identifies 23 emerging markets countries and puts 28 into a “frontier emerging markets” category. The IMF, by contrast, defines 152 “emerging and developing economies”.

    #Economie_mondiale #Pays_émergents


  • China trade surplus reaches $137bn - FT.com
    http://www.ft.com/intl/cms/s/0/dacd209e-291f-11e5-8613-e7aedbb7bdb7.html?ftcamp=crm/email/2015714/nbe/ChinaBusiness/product#axzz3fkqjzWHU
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    The overall first-half trade surplus, of Rmb1.6tn, was some 150 per cent higher than the same period a year ago.
    Surging net exports have provided an important cushion for the Chinese government, which may struggle to reach its gross domestic product growth target of 7 per cent this year. According to a Bloomberg survey of economists, second-quarter GDP is expected to come in at 6.8 per cent, down from the first quarter’s 7 per cent figure.
    China’s annual growth rate has slowed to its lowest level in a quarter century as government officials say the economy enters a “new normal” less dependent on debt-fuelled infrastructure and real estate investment.
    Without the large increase in first-quarter net exports, which made up for plummeting investment figures, China’s economy would have expanded less than 6 per cent over the first three months of the year.
    China’s ballooning trade surplus, however, reflects the collapse in commodity prices over the past year rather than a robust export sector.
    Exports rose in June for the first time in four months, increasing 2.1 per cent over the same month last year.
    China’s overall foreign trade fell 6.9 per cent in the first half to Rmb11.5tn. Of this, exports were down 0.9 per cent compared with a 15.5 per cent decline in imports. The latter figure represents steep falls in the prices of many commodities, which have been driven down in part by slower economic growth in China.

    #Chine, #Croissance_ralentie


  • China’s military goes to war on corruption - FT.com
    http://www.ft.com/intl/cms/s/0/62c7cb6c-23c0-11e5-9c4e-a775d2b173ca.html?ftcamp=crm/email/201577/nbe/WorldNews/product#axzz3f6IND9CY
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    China’s military says it is moving to close loopholes in its financial regulations as part of a two-year crackdown on corruption that has snared more than 200 senior officers.
    The People’s Liberation Army said it had found in the regulations 69 loosely worded areas it termed “vague” and “unclear”, and which experts said meant misappropriation of funds often went unpunished.

    #Chine, #armée


  • Russia: Powers in the balance - FT.com
    http://www.ft.com/intl/cms/s/0/1b27cd0e-209e-11e5-ab0f-6bb9974f25d0.html?ftcamp=crm/email/201576/nbe/Analysis/product#axzz3f6IND9CY
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    The continent now faced a new cold war which — with a real east-west conflict at the heart of Europe and Russia “sabre-rattling” with nuclear missiles — was more perilous than the first.
    “If we don’t handle it right,” says one participant, “we’re all going to be regretting it for ever.”
    Though the fighting in east Ukraine still simmers despite a February ceasefire agreed in Minsk, the crisis has faded from the daily headlines. Yet as the EU rolls economic sanctions against Russia into a second year, and amid next week’s anniversary of the downing of Malaysia Airlines flight MH17 over eastern Ukraine with the loss of 298 lives, it is no nearer a resolution.
    One problem for the west in figuring out how to respond to Moscow’s military intervention has been understanding what Russia is really aiming to achieve. Vladimir Putin’s Kremlin telegraphs its intentions in oblique ways. But through the fog of propaganda emanating from Moscow, the outlines of the real goals behind Russia’s actions are starting to emerge. Policy makers are grappling with how any long-term settlement might be found, not just of the Ukrainian conflict, but its underlying causes.


  • China makes rapid progress on reclaimed islands’ facilities - FT.com
    http://www.ft.com/intl/cms/s/0/519bb548-2077-11e5-ab0f-6bb9974f25d0.html?ftcamp=crm/email/201573/nbe/ChinaBusiness/product#axzz3eoER1h97
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    The building of the 3km runway on Fiery Cross Reef is a step some analysts say may presage an attempt to claim the airspace over the disputed waters.
    A year and a half ago the reef in the Spratly Islands was a mere lump of coral but it is now a small island, following a concerted effort by high-tech dredging barges.
    Meanwhile, a port has been added to facilities at Johnson South Reef, another reclaimed island in the Spratlys, with up to six security and surveillance towers under construction.
    Fiery Cross and Johnson South are among just over half a dozen submerged rocks and coral atolls that China has dredged into islands in the past 18 months, an effort Harry Harris, commander of the US Pacific Fleet, likened in April to “a great wall of sand”.
    China insists the facilities it is building on the islands are for peaceful purposes but western analysts say there is clear evidence China plans to use them as military bases in an effort to back its hegemonic maritime claims in the South China Sea. China claims sovereignty over 90 per cent of the Sea.

    #Chine, #Mer_de_Chine, #Spratley


  • North Korea: The secrets of Office 39 - FT.com
    http://www.ft.com/intl/cms/s/0/4164dfe6-09d5-11e5-b6bd-00144feabdc0.html?ftcamp=crm/email/2015625/nbe/Analysis/product#axzz3e3zVebof
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    North Korea: The secrets of Office 39
    Tom Burgis

    The businessman Sam Pa in front of the Pyongyang skyline. His Queensway Group is linked with KKG, a North Korean enterprise

    In the middle of last year, the residents of Pyongyang began to notice a new fleet of taxis operating in the North Korean capital. With their maroon and gold bodywork, the gleaming sedans were easy to spot as they cruised the city’s orderly streets. The cars bore the taxi company’s logo: KKG.
    The swiftness with which KKG edged out rival taxi operators — one of which was rumoured to be linked to the security services — piqued curiosity about who was behind the new outfit. The same logo has been spotted on 4x4s, on a billboard displaying a planned riverside property development and on buses at Pyongyang airport. Like other North Korean cabbies, the drivers of the KKG taxis asked their fares to pay in foreign currency: mainly Chinese renminbi, but also euros or dollars. And therein lay a clue.

    #Corée_du_NOrd


  • Investors seek a road map for Asian infrastructure - FT.com
    http://www.ft.com/intl/cms/s/0/5f888e52-1897-11e5-a130-2e7db721f996.html?ftcamp=crm/email/2015624/nbe/AsiaPacificBusiness/product#axzz3dxoYrpm5
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    Zhou Yuan told a conference in Hong Kong last week that he could not promise to inform them, but that he hoped to entertain them. The dry-humoured head of strategy for China Investment Corporation then proceeded to do both as he talked about how China would view infrastructure investment in the region.
    Few subjects generate more interest and debate in Asian financial circles than infrastructure. Participants want to know how the new China-led Asian Infrastructure Investment Bank will operate and what roles other groups, such as banks and long-term investors, might play.

    #Chine, #Banque_asiatique_d'investissement_dans_les_Infrastructures(BAII)


  • The Chinese renminbi is ready to take its place on the global stage - FT.com
    http://www.ft.com/intl/cms/s/0/7460b8d6-052d-11e5-8612-00144feabdc0.html?ftcamp=crm/email/2015616/nbe/ChinaBusiness/product#axzz3dD6vgkJR
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    The renminbi is on a seemingly inexorable march towards becoming a global currency. It is already widely used in international trade and finance transactions. Now China wants the International Monetary Fund to label the renminbi an official reserve currency by including it in the exclusive group that make up its unit of account, the Special Drawing Rights. That group comprises the dollar, the euro, the yen and sterling.
    There are good reasons to welcome the renminbi’s rise. Its trajectory is closely correlated with banking and other reforms that will make China’s economy more market friendly. These are necessary to establish a more balanced and less-risky growth path, one that is less dependent on investment, generates more employment and reduces environmental degradation

    #Chine,#Internationalisation_du_yuan


  • Beijing’s migrant children forced out of the city - FT.com
    http://www.ft.com/intl/cms/s/0/ffafd8fa-0a9a-11e5-a8e8-00144feabdc0.html?ftcamp=crm/email/2015616/nbe/ChinaBusiness/product#axzz3dD6vgkJR
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    The battle faced by migrants for a basic education in Beijing and other major urban centres shows how China is struggling to accommodate the millions flowing to its cities despite a national policy of stimulating urbanisation. “His father could move with him but then what about me? I would still be far from the child,” Ms Yang says, her voice cracking.
    About 40 per cent of the primary schoolchildren in Beijing lack a city hukou , the official household residency permit that grants access to social services, including education, healthcare and the right to buy homes. Nonetheless, in recent years they have been permitted to attend primary school in the city, a concession that has allowed many migrant couples to keep young children by their side. This school year alone, 470,800 non-Beijing hukou — or migrant — students attended primary and middle school in Beijing.

    #Chine, #Migrants, #Hukou



  • Greece has nothing to lose by saying no to creditors - FT.com

    If Greece were to default on all of its official-sector debt, France and Germany alone would stand to lose some €160bn. Angela Merkel and François Hollande would go down as the biggest financial losers in history. The creditors are rejecting any talks about debt relief now, but that may be different once Greece starts to default. If they negotiate, everybody would benefit. Greece would stay in the eurozone, since the fiscal adjustment to service a lower burden of debt would be more tolerable. The creditors would be able to recoup some of their otherwise certain losses."

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    TEXTE COMPLET :

    So here we are. Alexis Tsipras has been told to take it or leave it. What should he do?
    The Greek prime minister does not face elections until January 2019. Any course of action he decides on now would have to bear fruit in three years or less.

    First, contrast the two extreme scenarios: accept the creditors’ final offer or leave the eurozone. By accepting the offer, he would have to agree to a fiscal adjustment of 1.7 per cent of gross domestic product within six months.
    My colleague Martin Sandbu calculated how an adjustment of such scale would affect the Greek growth rate. I have now extended that calculation to incorporate the entire four-year fiscal adjustment programme, as demanded by the creditors. Based on the same assumptions he makes about how fiscal policy and GDP interact, a two-way process, I come to a figure of a cumulative hit on the level of GDP of 12.6 per cent over four years. The Greek debt-to-GDP ratio would start approaching 200 per cent. My conclusion is that the acceptance of the troika’s programme would constitute a dual suicide — for the Greek economy, and for the political career of the Greek prime minister.
    Would the opposite extreme, Grexit, achieve a better outcome? You bet it would, for three reasons. The most important effect is for Greece to be able to get rid of lunatic fiscal adjustments. Greece would still need to run a small primary surplus, which may require a one-off adjustment, but this is it.
    Greece would default on all official creditors — the International Monetary Fund, the European Central Bank and the European Stability Mechanism, and on the bilateral loans from its European creditors. But it would service all private loans with the strategic objective to regain market access a few years later.
    The second reason is a reduction of risk. After Grexit, nobody would need to fear a currency redenomination risk. And the chance of an outright default would be much reduced, as Greece would already have defaulted on its official creditors and would be very keen to regain trust among private investors.
    The third reason is the impact on the economy’s external position. Unlike the small economies of northern Europe, Greece is a relatively closed economy. About three quarters of its GDP is domestic. Of the quarter that is not, most comes from tourism, which would benefit from devaluation. The total effect of devaluation would not be nearly as strong as it would be for an open economy such as Ireland, but it would be beneficial nonetheless. Of the three effects, the first is the most important in the short term, while the second and third will dominate in the long run .
    Grexit, of course, has pitfalls, mostly in the very short term. A sudden introduction of a new currency would be chaotic. The government might have to impose capital controls and close the borders. Those year-one losses would be substantial, but after the chaos subsides the economy would quickly recover.
    Comparing those two scenarios reminds me of Sir Winston Churchill’s remark that drunkenness, unlike ugliness, is a quality that wears off. The first scenario is simply ugly, and will always remain so. The second gives you a hangover followed by certain sobriety.
    So if this were the choice, the Greeks would have a rational reason to prefer Grexit. This will, however, not be the choice to be taken this week. The choice is between accepting or rejecting the creditors’ offer. Grexit is a potential, but not certain, consequence of the latter.
    If Mr Tsipras were to reject the offer and miss the latest deadline — the June 18 meeting of eurozone finance ministers — he would end up defaulting on debt repayments due in July and August. At that point Greece would still be in the eurozone and would only be forced to leave if the ECB were to reduce the flow of liquidity to Greek banks below a tolerable limit. That may happen, but it is not a foregone conclusion.
    The eurozone creditors may well decide that it is in their own interest to talk about debt relief for Greece at that point. Just consider their position. If Greece were to default on all of its official-sector debt, France and Germany alone would stand to lose some €160bn. Angela Merkel and François Hollande would go down as the biggest financial losers in history. The creditors are rejecting any talks about debt relief now, but that may be different once Greece starts to default. If they negotiate, everybody would benefit. Greece would stay in the eurozone, since the fiscal adjustment to service a lower burden of debt would be more tolerable. The creditors would be able to recoup some of their otherwise certain losses.
    The bottom line is that Greece cannot really lose by rejecting this week’s offer.


  • Pour les investisseurs, le Grexit s’avère moins inquiétant que la perspective d’une réussite de Syriza

    “Debt restructuring in Greece could potentially inflame the anti-austerity sentiment that is establishing itself in other parts of the Eurozone, namely Spain and this is becoming a worry for Europe’s leaders,” said Angus Campbell, senior analyst at FX Pro.

    Greek stocks suffer further pummelling - FT.com
    http://www.ft.com/intl/cms/s/0/0c45e4ee-10d9-11e5-8413-00144feabdc0.html#axzz3cpso4LB9
    http://im.ft-static.com/content/images/434f65bd-cbbf-4b39-8152-88d1d13428a2.img