China now world’s No. 1 trading nation

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Published on Sunday, 10 February 2013 20:42

Written by Bloomberg News

CHINA surpassed the US to become the world’s biggest trading nation last year as measured by the sum of exports and imports, a milestone in the Asian nation’s challenge to the US dominance in global commerce that emerged after the end of World War II in 1945.

US exports and imports last year totaled $3.82 trillion, the US Commerce Department said last week. China’s Customs administration reported last month that the country’s total trade in 2012 amounted to $3.87 trillion. China had a $231.1-billion annual trade surplus, while the US had a trade deficit of $727.9 billion.

China’s emergence as the biggest global trading nation gives it increasing influence, threatening to disrupt regional trading blocs as it becomes the most important commercial partner for countries including Germany, which will export twice as much to China by the end of the decade as it does to neighboring France, said Goldman Sachs Group Inc.’s Jim O’Neill.

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“For so many countries around the world, China is becoming rapidly the most important bilateral trade partner,” O’Neill, chairman of Goldman Sachs’s asset management division and the economist who bound Brazil to Russia, India and China to form the BRIC investing strategy, said in a telephone interview. “At this kind of pace by the end of the decade, many European countries will be doing more individual trade with China than with bilateral partners in Europe.”

Still, the US economy is more than double the size of China’s, according to the World Bank. In 2011 the US gross domestic product reached $15 trillion, while China’s totaled $7.3 trillion.

“It is remarkable that an economy that is only a fraction of the size of the US economy has a larger trading volume,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, said in an e-mail. “The surpassing of the US is not because of a substantially undervalued currency that has led to an export boom,” Lardy said, noting that Chinese imports have grown more rapidly than exports since 2007.

The US emerged as the preeminent trading power following World War II as it spearheaded the creation of the global trade and financial architecture and the UK began dismantling its colonial empire. China began focusing on trade and foreign investment to boost its economy after decades of isolation under Chairman Mao Zedong. Economic growth averaged 9.9 percent a year from 1978 through 2012.

China became the world’s biggest exporter in 2009, while the US remains the biggest importer, taking in $2.28 trillion in goods last year compared with China’s $1.82 trillion of imports. HSBC Holdings Plc. forecast last year that China would overtake the US as the top trading nation by 2016.

China was last considered the leading economy at the height of the Qing dynasty. The difference is that in the 18th century, the Qing Empire—unlike rising Britain—did not focus on trade. The Emperor Qianlong told King George III in a 1793 letter that “we possess all things. I set no value on objects strange or ingenious, and I have no use for your country’s manufactures.”

While China is the biggest energy user, has the world’s biggest car market and the world’s largest foreign currency reserves, a significant portion of China’s trade involves importing raw materials and parts to be assembled into finished products and re-exported, an activity that provides “only modest value added,” Eswar Prasad, a former International Monetary Fund official who is now a professor at Cornell University in Ithaca, New York, said also in an e-mail.

Last month China’s trade expanded more than estimated, with exports rising 25 percent from a year earlier and imports increasing 28.8 percent, government data released on Saturday showed. China’s trade figures in January and February are distorted by the week-long Lunar New Year holiday that fell in January of last year and started also on Saturday.

Economists from banks including UBS AG and Australia & New Zealand Banking Group Ltd. recently questioned the veracity of China’s export data after the Customs administration reported an unexpected 14.1-percent export gain in December. The General Administration of Customs defended the data last month, saying all statistics are based on actual Customs declarations, and the Ministry of Commerce said the jump was caused by exporters who hurried shipments before a waiver of inspection fees expired at the end of the month.

The US’s bilateral trade deficit with China that peaked in 2012 could remain a flashpoint of tension between the two countries, Prasad said.

“This trade imbalance is not representative of the amount of goods actually produced in China and exported to the US, but this perspective tends to get lost amid the heated political rhetoric in the US,” he added.

According to O’Neill, the trade figures underscore the need to draw China further into the global financial and trading architecture that the US helped create.

“One way or another, we have to get China more involved in the global organizations of today and the future despite some of their own reluctance,” he said, mentioning China’s inclusion in the International Monetary Fund’s Special Drawing Rights currency basket. “To not have China more symbolically and more important actually central to all these things is just increasingly silly.”

Bloomberg

Pope Benedict XVI resigning for health reasons

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Published on Monday, 11 February 2013 21:29

Written by Bloomberg News and AP

POPE Benedict XVI will resign on February 28—the first pontiff to do so in nearly 600 years—for health reasons, according to Vatican Spokesman Ciro Benedettini.

The decision sets the stage for a conclave to elect a new pope before the end of March.

The 85-year-old pope announced his decision in Latin during a meeting of Vatican cardinals on Monday morning.

He emphasized that carrying out the duties of being pope—the leader of more than a billion Roman Catholics worldwide—requires “both strength of mind and body.”

“After having repeatedly examined my conscience before God, I have come to the certainty that my strengths due to an advanced age are no longer suited to an adequate exercise of the Petrine ministry,” he told the cardinals. “I am well aware that this ministry, due to its essential spiritual nature, must be carried out not only by words and deeds but no less with prayer and suffering.

“However, in today’s world, subject to so many rapid changes and shaken by questions of deep relevance for the life of faith, in order to govern the bark of Saint Peter and proclaim the Gospel, both strength of mind and body are necessary—strengths which in the last few months, has deteriorated in me to the extent that I have had to recognize my incapacity to adequately [serve] the ministry entrusted to me.”

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The last pope to resign was Pope Gregory XII, who stepped down in 1415 in a deal to end the Great Western Schism among competing papal claimants.

Benedict called his choice “a decision of great importance for the life of the church.”

The move sets the stage for the Vatican to hold a conclave to elect a new pope by mid-March, since the traditional mourning time that would follow the death of a pope doesn’t have to be observed.

There are several papal contenders in the wings, but no obvious front-runner, as was the case when Benedict was elected pontiff in 2005 after the death of Pope John Paul II.

The Pope will step down two months before his 86th birthday after serving for almost eight years.

Benedict is the 265th leader of the Roman Catholic Church. 

When Benedict was elected pope at age 78—already the oldest pope elected in nearly 300 years—he had been already planning to retire as the Vatican’s chief orthodoxy watchdog to spend his final years writing in the “peace and quiet” of his native Bavaria.

Contenders to be his successor include Cardinal Angelo Scola, archbishop of Milan; Cardinal Christoph Schoenborn, the archbishop of Vienna; and Cardinal Marc Ouellet, the Canadian head of the Vatican’s office for bishops.

Longshots include Cardinal Timothy Dolan of New York. Although Dolan is popular and backs the Pope’s conservative line, the general thinking is that the Catholic Church doesn’t need a pope from a “superpower.”

All cardinals under age 80 are allowed to vote in the conclave, the secret meeting held in the Sistine Chapel where cardinals cast ballots to elect a new pope. As per tradition, the ballots are burned after each voting round; black smoke that snakes out of the chimney means no pope has been chosen, while white smoke means a pope has been elected.

Popes are allowed to resign; church law specifies only that the resignation be “freely made and properly manifested.”

Only a handful have done so, however, and there’s good reason why it hasn’t become commonplace: Might the existence of two popes—even when one has stepped down—lead to divisions and instability in the church? Might a new resignation precedent lead to pressures on future popes to quit at the slightest hint of infirmity?

Benedict himself raised the possibility of resigning if he were simply too old or sick to continue on in 2010, when he was interviewed for the book Light of the World.

“If a pope clearly realizes that he is no longer physically, psychologically and spiritually capable of handling the duties of his office, then he has a right and, under some circumstances, also an obligation to resign,” Benedict said.

The former Cardinal Joseph Ratzinger had an intimate view as Pope John Paul II, with whom he had worked closely for nearly a quarter-century, suffered through the debilitating end of his papacy.

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In Photo: This June 16, 2010, photo shows Pope Benedict XVI leaving at the end of his weekly general audience in Saint Peter’s Square, at the Vatican. On Monday, February 11, the Vatican announced that Pope Benedict XVI will resign on February 28. (AP)

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Investment grade within grasp

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Published on Wednesday, 13 February 2013 20:41

Written by Paul Anthony A. Isla | Reporter

WITHOUT doubt, Budget Secretary Florencio B. Abad said on Wednesday, the Philippines will soon reach investment grade.  Toward that end, Abad added, the Aquino administration is determined to create an environment that will not only facilitate the credit-rating promotion but also ensure sustainability and inclusiveness of the country’s growth.

He cited at the Philippine Economic Briefing the government’s strong fiscal strategy, continued commitment to key reforms and mounting investor confidence in the Philippines as a major investment hub in Southeast Asia.

“We’ve already posted 11 favorable credit actions since the Aquino administration began its work of socio-economic reform, thanks to our strong economic fundamentals and robust fiscal management strategy, as well as our dedicated drive for improved governance,” Abad said.

He  underscored the significance of an investment-grade rating for the Philippines, particularly in view of the administration’s goal to bring about inclusive growth in the country.

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“Achieving investment grade will result in improvements in our risk profile, as well as cement the Philippines’s reputation as a most promising investment destination. The result? Greater private-sector confidence in the country’s economic and political capacity, more jobs and a country of empowered citizens who finally have direct access to the benefits of good governance,” Abad said.

According to him, the government is keenly anticipating a year of improved efficiency and transparency in the management of public funds, even as they align their budgetary priorities with President Aquino’s social contract with the people to ensure high-impact expenditures.

Abad said zero-based budgeting and other reforms that they had instituted will be enhanced by other initiatives.

“One of these is our careful transition toward a regime where the General Appropriations Act will stand as the release document. This removes us from the circuitous process of requesting and approving fund releases across the year, all while making plain where public funds are directed to,” he added.

Abad said they have also shortened the lifespan of appropriations to just one year, which will spur departments and agencies to make swift use of their available budgets and facilitate quick and efficient delivery of goods and services to the public.

Philippine stocks, bonds and the peso rose also on Wednesday on optimism that economic growth and stable inflation will help the nation win its first investment-grade credit rating.

The Philippine Stock Exchange index headed for a record-high close and the yield on 10-year government debt fell to a two-month low as Bangko Sentral ng Pilipinas (BSP)  Deputy Governor Diwa Guinigundo said that the country can win a credit upgrade this year. Moody’s Investors Service, Fitch Rating and Standard & Poor’s rank the Philippines at the highest junk grade. The country’s $225-billion economy expanded 6.6 percent in 2012, the most in two years. Annual inflation was 3 percent in January, little changed from 2.9 percent in December.

“The market is anticipating an upgrade and is putting to work the flush liquidity in the system,” said Dave Estacio, an assistant vice president at First Metro Investments Corp. in Manila.

The benchmark share index climbed 0.7 percent to 6,505 as of 11:03 a.m. in Manila. The measure rallied 12 percent this year, beating a 3.4 percent gain in the MSCI Asia-Pacific Index.

The yield on the 4-percent peso bonds due December 2022 fell five basis points, or 0.05 percentage point, to 3.725 percent, the lowest since the notes were first sold two months ago, according to Tradition Financial Services.

The peso rose 0.1 percent to 40.65 per dollar, according to Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, held at 4.25 percent.

Inflation is expected to range from 3 percent to 5 percent until 2015, Guinigundo said at the economic briefing.

“This means Bangko Sentral will have enough monetary space for providing an environment where credit and liquidity growth will remain supportive of economic activity,” he added.

Gross domestic product (GDP) will likely increase 6 percent to 7 percent this year and even faster in 2014, spurred by consumption and spending, socioeconomic Planning Secretary Arsenio Balisacan said at the same forum in Manila.

Improving government revenue will help boost spending on infrastructure to 5 percent of GDP by 2016 from the current 2 percent, Finance Secretary Cesar Purisima said also on Wednesday.

Universal Robina Corp. advanced to a record after the nation’s largest snack food-maker and bottler of iced tea said that its margins improved to 11.6 percent in its fiscal first quarter, from 10.9 percent a year earlier. Metropolitan Bank & Trust Co., the nation’s second-largest bank by assets, rose 1.3 percent to an all-time high after the central bank approved its proposed 5-percent cash dividend.

Last year’s budget deficit may have reached P235.3 billion ($5.8 billion), or 2.2 percent of GDP, according to Purisima’s presentation at the briefing. That compares with the 2011 shortfall of P197.8 billion.

Bloomberg

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In Photo: (From left) Tourism Secretary Ramon Jimenez Jr., Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo, Trade Secretary Gregory Domingo, Finance Secretary Cesar Purisima, Budget Secretary Florencio Abad, Socioeconomic Planning Secretary Arsenio Balisacan, Public Works Secretary Rogelio Singson and Agriculture Secretary Proceso Alcala field questions at the Philippine Economic Briefing held on Wednesday at the Philippine International Convention Center in Pasay City. (Roy Domingo)

Commercial lending, money supply grew faster in December

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Published on Wednesday, 13 February 2013 20:44

Written by Miguel R. Camus / Reporter

Total lending by large banks grew at a faster pace in December while the country’s money supply growth also accelerated, the Bangko Sentral ng Pilipinas (BSP) said in separate statements on Wednesday.

The BSP added that total outstanding loans of commercial banks, net of reserve repurchase placements (RRP) with the central bank, grew 16.2 percent to P3.24 trillion in December, faster than the 14 percent recorded in November. Including RRPs, the central bank said that lending grew faster at 15.4 percent to P3.48 trillion from 13.3 percent the previous month.

According to the BSP, loans for production activities, which comprised over 80 percent of the total loan portfolio, rose 16.6 percent in December from 14.6 percent the previous month. Production loans were led by financial intermediation (38.5 percent), transportation, storage and communication (37.5 percent), and real estate, renting and business services (29.7 percent).

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A dip was noted in lending to mining, agriculture, hunting and forestry.

“The continued growth in bank lending, particularly to the productive sectors, is expected to support the growth momentum of the economy,” the BSP said in the statements.

The central bank added that money supply or M3 grew 10.6 percent to P5.2 trillion year-on-year in December, faster than the 9.8-percent expansion the previous month. On a monthly basis, seasonally-adjusted M3 expanded by 1.3 percent compared to the 2.0 percent (revised) month-on-month growth in November, the BSP said.

“The continued expansion in domestic liquidity indicates that previous policy actions of the BSP to help support non-inflationary economic growth continue to work their way through the economy,” according to  the statements.

It noted that money supply growth was driven by the expansion in net domestic assets, up 19.2 percent year-on-year,  mainly on the sustained increase in net domestic credits, which grew 7.8 percent due to gains in private-sector claims from strong lending by banks.

Claims on the public sector contracted further by 14.0 percent in December (after declining by 9.5 percent in the previous month) as deposits of the national government increased, reflecting the proceeds from the issuance of 25-year retail Treasury bonds in October, the BSP said.

Metro Pacific-JG Summit consortium takes charge of P16-B airport facelift

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Published on Wednesday, 13 February 2013 20:48

Written by Jun Vallecera | Reporter

Metro Pacific Investments Corp. (MPIC) has joined forces with JG Summit to execute the P16-billion project transforming the outdated facilities of the Mactan Cebu International Airport (MCIA) into a premier gateway.

This was learned on Wednesday from MPIC Chairman Manuel V. Pangilinan who, at the sidelines of events that the TV5 network hosted at the Resorts World Hotel, said that MPIC and JG Summit have come to an interim agreement to manage the MCIA on a joint basis.

“We have reached an agreement in principle to manage the MCIA as a consortium,” according to Pangilinan.

Under the agreement, JG Summit was limited to owning no more than 30 percent of the special purpose vehicle that will be created should the partners win the public-bidding process.

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This was because JG Summit has interest in Cebu Pacific Airlines as its fully-owned subsidiary.

The original bidding rule prospectively excluded airline operators from participating in the bidding process, a regulatory restriction that Transportation Secretary Joseph Emilio Abaya would later relax to finally allow airline operators to participate.

At the pre-qualification process that the Department of Transportation and Communications held at the Edsa Shangri-La Hotel also on Wednesday, executives said that prospective bidders for the MCIA transformation program have reportedly increased from seven original participants to around 11.

This cannot be independently validated at press time, however.

Along with JG Summit, which owns Cebu Pacific Airlines, San Miguel Corp., which controls the flag carrier Philippine Airlines, also expressed interest in participating in the MCIA expansion and transformation program.