China's manufacturing growth quickens 13-month high

(Reuters) - China's vast manufacturing sector saw expansion accelerate in November for the first time in 13 months, preliminary results from a factory survey showed, a sign that the pace of economic growth has revived after seven consecutive quarters of slowdown.

The China HSBC Flash Manufacturing Purchasing Managers Index (PMI) rose to a 13-month high of 50.4 in November, the latest indicator of recovery in the real economy after data showing solid credit growth, firmer exports and rising industrial output in the previous month.

A sub-index measuring output rose to 51.3, also the highest since October 2011.

"This reflects that conditions for smaller firms, especially exporters, are looking up," said Li Wei, a Shanghai-based economist for Standard Chartered. "The consensus in the market is already for a small, gradual improvement."

An uptick in key economic activity indicators in October, following encouraging signs in September, cemented the view of many analysts and investors that a rebound in the world's second largest economy gathered momentum as it entered the fourth quarter, thanks to a raft of pro-growth policies rolled out by the government over recent months.

China is currently shuffling its senior officials after the seven top leaders of the ruling Communist Party were selected at a congress last week. The new appointments should end months of uncertainty in the highest ranks, although economic policy is not expected to change abruptly in the near-term.

Even before the congress, the central bank had moved to ease liquidity by pumping short-term cash into money markets rather than resorting to the interest rate cuts or reduction in banks' required reserve ratios that many investors had expected.

STEADY THROUGH YEAR-END

This month's PMI reading above 50 is likely to be seen as a turning point by the market, particularly if it is born out by the final reading due on December 1 and by official indicators.

Asian shares extended gains slightly after the data to stand up nearly 1 percent on the day and the Australian dollar, sensitive to demand from the biggest customer for Australia's resources, rose as far as $1.04.

"This confirms that the economic recovery continues to gain momentum towards the year-end," Qu Hongbin, chief China economist at index sponsor HSBC, said in a statement accompanying the data.

"However, it is still the early stage of recovery and global economic growth remains fragile. This calls for a continuation of policy easing to strengthen the recovery."

With a one-month exception in October 2011, the HSBC PMI -- which largely reflects the private manufacturing sector -- has remained stubbornly below the 50-point level separating accelerating from slowing growth since June 2011.

Unlike the patchy results seen in previous months, in November almost all the sub-indices in the HSBC survey concurred in showing an improving economy.

The one exception was a fall in the sub-index measuring output prices, demonstrating that manufacturers are still struggling with overcapacity and relatively weak domestic demand.

That could also reflect the weight in the survey of exporting firms, which have less ability to raise sales prices, said Standard Chartered's Li.

Indeed, China's exporters are increasingly squeezed by rising domestic costs and competition from new international suppliers, Zhou Haijiang, head of Chinese textile exporter Hodo Group, told reporters this month.

"Not only Western countries manufacture industrial goods, but also a lot of developing countries including former socialist countries who now have market economies are all exporting, thus creating a global surplus that cannot be changed," Zhou said.

"Because of this it is hard to raise sales prices, everyone is selling and it is hard for manufactured goods prices to rise. In some cases prices have even fallen."

Analysts expect no further cuts to interest rates this year or next after back-to-back cuts in June and July, and only one more 50 basis point cut to banks' required reserve ratios (RRR) in 2012 after three since late 2011 that have freed an estimated 1.2 trillion yuan for new lending.

Chinese banks are on course to make new loans worth more than 8.5 trillion yuan ($1.4 trillion) in 2012, expansionary versus the 7.5 trillion of new loans extended in 2011 and above the 8 trillion yuan that sources told Reuters back in February was the target for 2012.

Total social financing aggregate, a broad measure of liquidity in the economy, weakened to 1.29 trillion yuan in October, down from 1.65 trillion yuan in September, but still remained on track to hit a record 14 trillion yuan this year.

China also opened many previously-closed sectors to private investment with a view to funding new infrastructure projects and supporting economic growth without piling on more debt that local governments can ill-afford.

Although analysts expect fourth quarter GDP growth to outpace the 7.4 percent seen in the third quarter, full-year expansion for 2012 is expected to be the slowest in 13 years.

By Lucy Hornby, (Editing by Alex Richardson)
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What’s the intention of Obama’s visit to Asia?

From Nov. 18 to Nov. 20, U.S. President Barack Obama visited Thailand, Myanmar and Cambodia, and attended the 4th ASEAN-U.S. Leader’s Meeting and 7th East Asia Summit in Phnom Penh, Cambodia. It is his first diplomatic visit after the reelection, and he has become the first sitting U.S. president to visit Myanmar.

A woman takes a photo of a wall painting created by Myanmar graffiti artists to welcome President Obama in Yangon, Myanmar on Saturda(Photo: AP)

The three-day visit reflects Asian strategies of the Obama administration in the second term, which can be summarized into one focus, dual purposes and three pillars.

One focus refers to that Obama will promote the “rebalance” strategy in Asia during his second term. Southeast Asia is the focus of the Obama administration’s “rebalance” strategy. In other words, the U.S. will devote more political, economic, military, security and strategic resources to Southeast Asia in the course of shifting its strategic focus back to Asia Pacific.

Dual purposes mean that the United States, on the one hand, maintains dominance in Asia Pacific and, on the other hand, benefits from rapid economic development in Asia Pacific. The U.S. has for long been worried that the rise of emerging powers like China will squeeze its strategic room in Asia Pacific, its allies in the region might be alienated and it might be excluded from economic integration of Asia Pacific. Obama’s visit to Asia is designed to achieve the dual purposes mentioned above.

Three pillars are strengthening existing alliance, expanding new partnership and benefiting from the multilateral mechanisms. In Thailand, Obama highlighted the significance of traditional allies. Under the disguise of democracy, human rights and freedom, Obama tried to develop new partnership to expand the U.S. presence and influence on Southeast Asia in Myanmar. To achieve the end, the U.S. phased out political, military and economic sanctions against Myanmar, and claimed to provide an aid of 170 million U.S. dollars. In Cambodia, the U.S. attended the East Asia Summit, 4th ASEAN-U.S. Leader’s Meeting and Trans-Pacific Partnership Summit to secure a foothold in the Asian multilateral mechanisms.

Furthermore, the Obama administration is making slight adjustments to the “rebalance” strategy. He attached proper importance to economy and culture during his visit since the United States has received criticism for overplaying the military and security issues, as well as ill-disguised hostility against China.

The Obama administration is playing trick in the “rebalance” strategy. But, Man proposes, God disposes. The “God” refers to the regional and global trends. Those who bow before it survive and those who resist perish.

Read the Chinese version: 奥巴马亚洲之行的小九九, source: Jinghua Times, author: Jia Xiudong

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Politics and religion just don’t mix

I READ “Keep faith out of politics” (Sunday Star, Nov 11; related post: Don't mess religion with politics!) with great interest. As you rightfully said “religion and politics, that’s a potent mix to be explosive”.

My name is Joseph Sta Maria, 50, and I am a member of the Portuguese community in Malacca. Having once been involved in politics, I can understand how dangerous it is for religion and politics to be mixed.

But sadly, many leaders of the Roman Catholic Church and churches from the various Protestant denominations seem to be getting carried away with their political beliefs and cloud this with their religious obligations.

While it is all right for them to support any political party as individuals even if the policies of the parties that they support go against the grain of their religious beliefs, preaching politics from the pulpit instead of spreading the word of God is a gross perversion and can be the biggest sin they are committing.

I am deeply saddened that the Church has been dragged into the political debate in the country.

The Church must always remain apolitical and priests and pastors must confine themselves to preaching the gospel and help provide spiritual guidance to their flock.

What we are seeing instead are sermons slanted towards one side of the political divide and the spreading of political hate against the other.

There appears to be blatant support to political leaders of questionable morality or a tendency to “close one eye” when it comes to their misdeeds and political shenanigans.

I can proudly say that my ancestors brought the Catholic faith to this part of the world, particularly to Malacca, in the 15th century from which it spread to the region.

As such, I feel I am qualified to give an opinion of the present position of some of the Catholic churches.

As custodians of the Catholic faith, the Malacca Portuguese community will take the lead in urging all Catholic churches to stop allowing politicians from using the premises and its congregation as a means of wooing votes for the next general election.

It is sad that some church grounds are been used by irresponsible people to spew partisan hate to the congregation.

As Catholics, we should never have allowed this to happen.

As for the leaders of the church, they must be made aware that they are taking a big risk by throwing their support behind any political party.

As you pointed out, politics and religion must never be mixed especially in Malaysia where religion is a matter, which can raise sentiments to boiling point.

If anything goes wrong, the Malacca Portuguese community will hold these errant leaders of the church responsible.

As the adviser of the Malacca Portuguese village community, I wish to remind all churches to be mindful of the possible consequences and the irreparable damage to the religious harmony that we have been enjoying all these decades.

I reiterate that the Church is a house of worship and it must never be allowed to be misused by politicians whether they are from the BN or the Opposition for the repercussions would be very serious.

I believe there are many people like me who object strongly to churches being used by politicians but are too afraid or just don’t want to raise their objection to their pastors and church leaders knowing that their objections will be shot down.

I urge all those who agree with me to come out loudly and clearly to do justice for their religion and their belief.

This paragraph from the Bible, Mark 12:17 clearly shows Christians the difference between politics and religion: Then Jesus said to them: “Give to Caesar what is Caesar’s and to God what is God’s.” And they were amazed at him.

JOSEPH STA MARIA Malacca

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US Fiscal Cliff poses threat to economy worldwide!

Falling off the fiscal cliff would have a global economic impact, analysts say

The so-called "fiscal cliff" has been on the horizon for two years, but now the 31 December deadline is almost here.

Now that the presidential election is over it is hoped that policymakers will knuckle down to find a solution.

US fiscal cliff may hamper Malaysian economy, says economist

KUALA LUMPUR: Malaysia could experience a slower economic growth of between 3% and 4% next year if the US fiscal cliff kicks in by next January, OCBC Bank Bhd's economist Gundy Cahyadi (pic) said.

“It's going to create a huge impact if this were to happen. The fiscal cliff will create a recession in the US where its economy will likely contract by 0.5% and this may lead to a bigger than expected recession in the eurozone. The spill over effects may lead to global trade falling quite significantly.

“On the whole, we expect a growth of between 3% and 4% for next year,'' he said at a press briefing on OCBC's regional and global economic outlook for 2013. Fiscal cliff involves the simultaneous move to increase tax and spending cuts to reduce budget deficit.

He said on the whole OCBC was projecting the country's gross domestic product (GDP) for next year to be at 5.2% year-on-year, adding that at this juncture, the risk posed by the fiscal cliff was expected to be limited as the US government might finalise a new deal.

Gundy said the economic growth would be supported by Malaysia's investment growth, which was more than 20% for the first three quarters of this year, and strong positive momentum in private consumption growth.

However, he added the 20% investment growth would not recur next year but it would still expand by close to double digit, at least in the first half of 2013 as the Government was expected to continue ramping up infrastructure overhaul currently in progress.

The main risk to the bank's projection he said was the possible slump of global demand, especially as exports remained a main drag to Malaysia's growth in 2012.

External demand had continued to be a large drag on the country's economy, he said, noting that in terms of nominal value and its contribution to GDP growth, net exports were at a record low in the third quarter of this year.

Exports growth had been sluggish throughout the year, he said partly on the back of commodity price correction, and falling exports earnings would not only affect growth directly but would have negative spillover effects to households' spending behaviour.

There may be further pressure from the recent slump in crude palm oil prices which could be quite detrimental given the commodity boom seen in the past several years had led to a spike in investment in palm oil related industries, Gundy added.

On inflation, he said OCBC expected it to trend higher next year to about 3% from the likelihood of below 2% this year.

BY DALJIT DHESI The Star/Asia News Network

Related

Asean nations feud over South China Sea

PHNOM PENH - Southeast Asian leaders feuded on Monday over how to handle tense maritime territorial disputes with China, overshadowing talks at a regional summit meant to strengthen trade and political ties.

The leaders of the 10-member Association of Southeast Asian Nations had hoped to present a united front on the South China Sea row as they host Chinese Premier Wen Jiabao and US President Barack Obama for annual talks.

But that effort broke down just before Southeast Asian leaders were scheduled to meet Wen, amid divisions between Chinese ally Cambodia and the Philippines.

Cambodia, this year's ASEAN chair, said on Sunday that Southeast Asian leaders had agreed not to "internationalise" the disputes and would confine negotiations to those between the bloc and China.

The apparent deal would have been a victory for China, which has long insisted that it should only negotiate directly with rival countries and that the Philippines should not seek support from the United States.

However Philippine President Benigno Aquino on Monday publicly rebuked Cambodian Prime Minister Hun Sen, telling his fellow leaders no such consensus had been reached and he would continue to speak out on the global stage.

"The Philippines... has the inherent right to defend its national interests when deemed necessary," Philippine Foreign Secretary Albert del Rosario told reporters, quoting Aquino's comments to his fellow leaders on Monday morning.

The feud echoed unprecedented infighting at an ASEAN foreign ministers' meeting in Phnom Penh in July, which ended for the first time in the bloc's 45-year history without a joint communique.

The Philippines and Vietnam had wanted the communique to make specific reference to their disputes with China. But Cambodia, the hosts of the talks and a close China ally, blocked the moves.

ASEAN members Vietnam, the Philippines, Malaysia and Brunei, as well as Taiwan, have claims to parts of the sea, which is home to some of the world's most important shipping lanes and believed to be rich in fossil fuels.

But China insists it has sovereign rights to virtually all of the sea.

Tensions have risen steadily over the past two years, with the Philippines and Vietnam accusing China of increasingly aggressive diplomatic tactics to stake its claims.

Temperatures could rise again later Monday when Obama arrives in Phnom Penh to join the East Asia Summit, a two-day event also involving the leaders of Japan, South Korea, India, New Zealand and Australia.

Obama has previously angered China, and emboldened the Philippines, by calling for the rival claimants to agree on a legally binding code of conduct to govern their actions over the sea.

Analysts said he would likely repeat that call in Phnom Penh, as well as make comments highlighting the importance of freedom of navigation in the sea.

ASEAN officials had said they would push Wen during their talks on Monday to quickly start high-level, formal negotiations on a code of conduct.

But Chinese foreign ministry spokesman Qin Gang insisted that China wanted to continue with the current arrangement of lower-level talks on the issue. "We already have good discussions with ASEAN," Qin said.

Even with the South China Sea row festering, countries involved in the East Asia Summit were expected to focus on ways to expand economic ties.

ASEAN nations are set to officially launch negotiations on Tuesday for an enormous free trade pact with China, Japan, India, South Korea, Australia and New Zealand.

And despite their own territorial rows, China, Japan and South Korea are likely to hold talks in Phnom Penh on Tuesday aimed at kickstarting three-way free trade negotiations, according to Qin. - AFP

China opposes 'internationalisation' of sea row

Phnom Penh (AFP) Nov 19, 2012 - Chinese Prime Minister Wen Jiabao told Southeast Asian leaders Monday that negotiations to end territorial disputes in the South China Sea should only be held between claimant countries.

Wen stressed Beijing's position during a summit with the 10-member Association of Southeast Asian Nations (ASEAN) in the Cambodian capital of Phnom Penh, Chinese foreign ministry spokesman Qin Gang told reporters.

Qin said Wen quoted from a 2002 deal reached between ASEAN and China in which they agreed to limit negotiations to "directly concerned" countries.

Wen said that among the principles under the 10-year-old declaration is to "oppose the internationalisation of the issue".
"So Premier Wen quoted the principles... enshrined in the declaration," according to Qin.

ASEAN members Vietnam, the Philippines, Malaysia and Brunei, as well as Taiwan, have claims to parts of the sea, which is also believed to be rich in fossil fuels.

But China insists it has sovereign rights to virtually all of the sea.

Tensions have risen steadily over the past two years, with the Philippines and Vietnam accusing China of increasingly aggressive diplomatic tactics to stake its claims.

The Philippines has consistently sought wider help, such as from close ally the United States, in dealing with its more powerful Asian neighbour on the South China Sea issue.

The controversy of "internationalisation" flared again in Phnom Penh this week with the Philippines insisting it should not have to confine its negotiations to just with China.

US President Barack Obama, who arrived in Phnom Penh on Monday night for an 18-nation East Asia Summit, was also expected to raise his concerns over the South China Sea, which would anger the Chinese but embolden the Philippines.

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