Tepid US growth
fuel part-time hiring
US businesses are hiring at a robust rate. The only problem is that
three out of four of the nearly 1 million hires this year are part-time and
many of the jobs are low-paid.
Faltering economic growth at home and abroad and concern that President
Barack Obama's signature health care law will drive up business costs are
behind the wariness about taking on full-time staff, executives at staffing and
payroll firms say.
Employers said part-timers offer them flexibility. If the economy picks
up, they can quickly offer full-time work. If orders dry up, they know costs
are under control. It also helps them to curb costs they might face under the
Affordable Care Act, also known as Obamacare.
This can all become a less-than-virtuous cycle as new employees, who are
mainly in lower wage businesses such as retail and food services, do not have
the disposable income to drive demand for goods and services.
Some economists, however, say the surge in reliance on part-time workers
will fade as the economy strengthens and businesses gain more certainty over
how they will be impacted by Obamacare.
Executives at several staffing firms told Reuters that the law, which
requires employers with 50 or more full-time workers to provide healthcare coverage
or incur penalties, was a frequently cited factor in requests for part-time
workers. A decision to delay the mandate until 2015 has not made much of a
difference in hiring decisions, they added.
"Us and other people are hiring part-time because we don't know
what the costs are going to be to hire full-time," said Steven Raz,
founder of Cornerstone Search Group, a staffing firm in Parsippany, New Jersey.
"We are being cautious."
Raz said his company started seeing a rise in part-time positions in late
2012 and the trend gathered steam early this year. He estimates his firm has
seen an increase of between 10% and 15% compared with last year.
Other staffing firms have also noted a shift.
"They have put some of the full-time positions on hold and are hiring
part-time employees so they won't have to pay out the benefits," said
Client Staffing Solutions' Darin Hovendick. "There is so much uncertainty.
It's really tough to design a budget when you don't know the final cost
involved."
Cautious strategy
The delay in the Obamacare employer mandate "confused people even
further," said Bill Peppler, managing partner at Kavaliro, a technology
staffing firm in Orlando, Florida. "When we talk to customers, I still don't think anyone has a
handle on this."
Obamacare appears to be having the most impact on hiring decisions by
small- and medium-sized businesses. Although small businesses account for a
smaller share of the jobs in the economy, they are an important source of new
employment.
Some businesses are holding their headcount below 50 and others are
cutting back the work week to under 30 hours to avoid providing health
insurance for employees, according to the staffing and payroll executives.
Under Obamacare, any employee working 30 hours or more is considered full-time.
An effort to trim hours might have helped push the average work week down to a
six-month low in July.
"As organizations and companies reduce the hours of part-time
workers, they still have to replace the capacity, so they go out and hire
additional part-time workers," said Philip Noftsinger, president of CBIZ
Payroll in Roanoke, Virginia, which manages payroll for more than 5 000 small
businesses.
Some large companies are also leaning more heavily on part-timers.
Walmart has been hiring more part-time workers, although it says the
move is to ensure proper staffing when stores are busiest and is not an effort
to cut costs.
Spokesperson Kory Lundberg said the world's largest retailer promotes
about 75000 people from part time to full time work each year and is on track
to do so again in 2013.
Similarly, a memo that leaked out from teen and young adult retailer
Forever 21 last week showed it was reducing a number of full-time staff to
positions where they will work no more than 29.5 hours a week, just under the
Obamacare threshold.
In a statement, the company said the move will affect fewer than 1% of
its US store employees, and was taken to better align staffing with sales
expectations - not to lower costs under the Affordable Care Act.
Some public school boards and local governments, including the city of Long Beach in California, are also cutting
hours.
"The difference between 30 and 40 hours can be the difference
between being able to make ends meet month-to-month," said Heidi
Shierholz, a senior economist at the Economic Policy Institute in Washington.
"That contributes to reduced living standards for American families
and translates into having less income to spend on goods and services, which
holds back the economy."
Weak economy not helping
Obamacare is only one factor. The surge in part-time employment also
reflects an economy that has struggled to maintain decent growth.
That has left business owners such as Jason Holstine, who owns a
building supply store in Baltimore, Maryland, reluctant to take on full-time staff.
Holstine said he was more concerned about budget policy in Washington
than about Obamacare, given that federal government furloughs tied to
across-the-board spending cuts led some of his clients to put home renovations
on hold.
"We are still working in an environment that is very hard to
forecast the near future and remains very cash-constrained," said
Holstine. "We were always nimble, but we had to become more reactive. Using
part-timers gives us more flexibility."
In a paper published last month, the San Francisco Federal Reserve Bank
said uncertainty over fiscal and regulatory policy had left the US unemployment rate 1.3
percentage points higher at the end of last year than it otherwise would have
been. The jobless rate stood at 7.8% in December; it has since fallen to 7.4%.
"That's about 2 million jobs below where we should have been in
2012 because of policy uncertainty," said Keith Hall, a senior research
fellow at George Mason University's Mercatus Center in Arlington, Virginia.
Economists and staffing companies are cautiously optimistic that
part-time hiring and the low wages environment will fade away as the economy
regains momentum, starting in the second half of this year and through 2014.
But businesses, accustomed to functioning with fewer workers, might not
be in a hurry to change course. A study by financial analysis firm Sageworks
found that profit per employee at privately held companies jumped to more than
$18 000 in 2012 from about $14 000 in 2009.
"Private employers are either able to make more money with fewer
employees or have been able to make more money without hiring additional
employees," said Sageworks analyst Libby Bierman. "The lesson learned
for businesses during the recession was to have lean operations."
Disasters cost insurers $20bn
Catastrophes cost global insurers more than $20bn (€15bn) in just the
first six months of 2013, including $17bn for natural disasters alone,
Switzerland-based reinsurance giant Swiss Re said on Wednesday.
While the insurance bill is huge, it is below the average for the past decade.
And it covers less than half of the estimated $56bn in global economic
losses suffered during the first six months of the year owing to man-made and
natural disasters, Swiss Re said in a statement.
About 7 000 lives were lost because of such catastrophes during the same
period, it pointed out.
Flooding was responsible for $8.0bn of the disaster-related insurance
claims during the first half of the year, according to a Swiss Re survey called
sigma.
This noted that massive June floods in Central and Eastern Europe alone cost insurers
$4bn and killed 22 people, while floods in Alberta, Canada left insurers with a
$2bn bill.
At least 1 150 people meanwhile died in India because of floods in June,
while Australia, Southern Africa, Indonesia and Argentina also experienced
cyclones and heavy rains that sparked large-scale flooding.
"As a result, 2013 is already the second most expensive calendar
year in terms of insured flood losses on sigma records," Swiss Re said,
pointing out though that in 2011, flooding in Thailand caused record flood
losses of more than $16bn.
Other natural disasters during the first half of the year included
deadly tornadoes in the Midwestern United States, which left 28 people dead and slapped insurers with $1.8bn in claims.
"Though 2013 has so far been a below-average loss year, the
severity of the ongoing North Atlantic hurricane season, and other disasters such as winter storms in Europe, could still increase insured
losses for 2013 substantially," Swiss Re chief economist Kurt Karl warned
in the statement.
UK govt
criticised for tax cut
Britain's government has come under fire for abolishing a tax on top
earners after data released on Tuesday showed companies delayed paying
employees £1.7bn ($2.66bn) in bonuses until the tax cut took effect.
Bonuses are traditionally paid between December and March, the so-called
"bonus season", but an Office of National Statistics (ONS) report
revealed that a number of companies deferred payouts until April, after the top
income tax rate was reduced from 50 percent to 45%.
Bonuses paid to Britain's workers were £2.9bn in April 2013 compared to £1.9bn in April 2012,
according to the ONS. In the finance and insurance industry, which pays more
than a third of all bonuses, bonuses in April totalled £1.3bn, more than double
the figure a year earlier.
The data show almost 30% of companies in the finance and insurance
sector deferred bonus payments until April.
Chris Leslie, from the opposition Labour party which introduced the tax
in 2010 and the shadow financial secretary to the Treasury, said on Tuesday the
data showed the government was putting the richest before ordinary Britons.
"While ordinary families on low and middle incomes are seeing their
living standards fall, those at the top are reaping the benefits of David
Cameron's tax cut for millionaires," he said in a statement, adding that
millions of pounds of revenue will have been lost as a result.
The issue of bankers' bonuses has triggered public anger in Britain, where despite signs of an economic recovery, ordinary citizens'
incomes remain stuck at some of their lowest levels in a decade.
In January, US investment bank
Goldman Sachs scrapped plans to delay paying bonuses to its Britain-based
bankers after the then Bank of England Governor Mervyn King criticised the idea.
A spokesman for The Robin Hood Tax Campaign, which is lobbying for
financial transaction taxes to help the government fund welfare programmes and
reduce poverty, attacked the government's tax cut on top earners.
"The Government's manipulation of the tax code to benefit the
super-rich has made a bad situation worse. It should put substance to its
phrase that 'we are all in this together' and ensure the City pays its
dues," a statement said.
A spokeswoman for the Treasury said the bonus figures were in line with
forecasts in finance minister George Osborne's budget and said bankers' bonuses
were well below their peak before the financial crisis.
The ONS figures show bonuses across the UK economy stood at
£37bn in the 2012/2013 financial year (April to March), up 1% from the year
earlier. Workers in finance and insurance got the largest bonuses, taking home
on average an £11 900 bonus, nearly twice the next highest payment of £6 700
paid to those working in mining and quarrying.
Risky crisis derivatives return
Collateralised debt obligations, the complex financial instruments that
cratered disastrously in the financial crisis, are back.
The market for the instruments, which were based on subprime mortgages,
shrank from $520bn in 2006 to just $4.3bn in 2009 after the housing bust.
Warren Buffett once called CDOs "financial weapons of mass
destruction" because of their riskiness.
This time around, the investment has shifted from a mortgage-based CDO
into a "collateralised loan obligation," a cash-generating asset
structured similarly to CDOs, but consisting of loans to businesses.
Financial institutions have issued $50bn in CLOs in the US in 2013, estimates
the Loan Syndication and Trading Association, a trade group. The LSTA estimates
the industry will issue $7bn worth in the US overall in 2013 and
$100bn worldwide.
Goldman Sachs, Morgan Stanley, Barclays and Citigroup are among the
banks most active in structuring CLOs in 2013. Citigroup alone has sold about
20 of the instruments this year.
"There really isn't a CDO market anymore," but "the CLO
market has been quite active" for a couple of quarters, said an executive
at a major Wall Street bank, who asked not to be named.
Still, observers note the comeback is only partial.
"There's an uptick, but it's still small compared with the
pre-crisis peak," said Campbell Harvey, a finance
professor at Duke University.
CLOs are structured financial products in which financial institutions
pool loans of varying risk and market the securities to investors.
The securities can be sliced into tranches of different underlying loan
risk levels. The riskiest "junior" or "equity" tranches -
which were at the heart of the financial crisis of 2008 - remain popular with
speculative funds because they pay higher yields.
"With interest rates still very low and borrowing costs so cheap,
some investors are searching for risk," said Ruben Marciano, a trader at
Societe Generale.
Tranches packed with loans of moderate risk are known as
"mezzanine" loans, while "senior" tranches are the safest.
Before the financial crisis, many CDO slices that were categorised
"senior" and rated highly by credit ratings agencies were actually
high-risk and contained many subprime mortgages that ended up in default.
Moreover, because all of the loans packaged in the same derivative
products were in the same sector - housing - the instrument itself was
vulnerable when the housing market collapsed.
An analyst who specialises in CDOs for a large British bank said the
investments are better bets when they contain loans from different sectors.
Buyers of the current batch of CLOs have hired independent specialists
to analyse the instruments and no longer rely on credit-rating agencies, said
the analyst.
Even as new CDO issues have vanished, Marciano said there remains an
active secondary market since the crisis.
"There are investors out there who have made a lot of money from
buying low-quality CDOs at very low prices," Marciano said.
EU set for big wheat crop
The European Union's main wheat producers have gathered a bumper harvest
despite worries the long winter and hot summer would damage crops, traders and
analysts said on Tuesday.
"It looks as though wheat came through the long winter and
scorching start to the summer better than feared," one German trader said.
"EU wheat supply for export and domestic use will be better than expected
only a few weeks ago and the problems in Britain have not spoiled the overall good picture."
In France, the EU's largest wheat producer, harvesting is almost over
and a bumper crop is expected.
Analyst Agritel estimates France's 2013 soft wheat
crop at 37.0 million tonnes, up 4 percent on 2012 and the largest in nine
years.
"There were fears at first but the good weather at the end of the
growth cycle helped yields," a French trader said.
Harvesting is 90% complete in France, but some producers
said harvesting could last until mid-September in the far north of the country.
The French crop's specific weight and Hagberg values, two essential
criteria for bread-making, are good but protein levels differed, sometimes
below the 11 percent threshold for export in large producing regions such as
Poitou-Charentes, analyst Strategie Grains said.
In the EU's second largest producer Germany, harvesting is in its final stages. Germany's Farm Cooperatives
Association forecasts Germany will harvest 24.35 million tonnes of wheat in
2013, up 8.8% from 2012.
"Overall quality is satisfactory and the crop size good," a
German trader said. "The extreme weather we had this year has led to some
regional variations in quality but overall the crop is reaching a decent
quality standard and I think there will be ample supplies of bread-quality
wheat for German exports in the coming year."
In the UK, the third largest producer, harvesting is now in full swing, with
traders forecasting a crop of around 12 million tonnes, down from 13.3 million
tonnes last year and the smallest crop in over a decade.
ODA UK consultant Jake French estimates around 28% of the crop has now been
collected. He said yields were better than expected, pegging the estimated
average yield at 7.26 tonnes per hectare, close to the five year average of 7.7
tonnes.
He said quality is generally good but better quality wheat may be
harvested first so early cuttings may not indicate the end result.
The wheat area in England fell to a 30-year low this season after wet autumn weather ruined
sowings.
In the EU's number four wheat producer Poland, the harvest should
rise to 9.03 million tonnes from 8.6 million tonnes last year, said ODA Polska
director Regis Miola.
"Wheat has been harvested from over 80% of the sown area but there
have been delays, especially in north Poland due to recent
rain," Miola said.
"Yields are good and grain quality good until now, but we have to
be careful about making overall judgements because recent showers may have
impacted quality parameters."
Better weather is expected at the end of this week and 3-4 days without
rain should see the harvest complete, Miola said.
Harvesting of wheat in Italy, a major grain
importer, has ended, and the smaller crop was gathered after earlier heavy
rains delayed and reduced plantings.
"The qualities are good," said Paolo Abballe, crop analyst at
farmers group Coldiretti.
Soft wheat output is seen at 2.99 million tonnes, down from 3.41 million
tonnes last year. The durum wheat crop, used for making pasta, is forecast at
3.71 million tonnes from 4.18 million tonnes.
Vatican freezes
funds of a cleric
The Vatican said on Friday it had frozen funds belonging to a senior cleric at the
centre of a suspected money smuggling operation, and could open investigations
into other individuals.
Monsignor Nunzio Scarano, who has close links to the Vatican Bank, was
arrested last month, accused of plotting to bring millions of euros in cash
into Italy from Switzerland for rich friends.
The case was the latest in a series of scandals to tarnish the Catholic
Church's image.
Details of the investigations, including police wiretaps and allegations
of plots to smuggle the cash past customs, were also seen as a particular
embarrassment for Pope Francis who has focused on the Church's duty to care for
the poor since his election in March.
The Vatican's chief judicial official had ordered the freezing of Scarano's own
funds in the Vatican Bank, the tiny city state said in a statement.
"The inquiries may also be extended to other persons," it
said, without giving details.
The bank, known formally as the Institute for Works of Religion (IOR),
had appointed US financial consultancy Promontory Financial Group to conduct a
review of all accounts potentially affected, and was cooperating with the
investigation, the statement added.
Scarano, a former senior accountant in the Holy See's financial
administration, was arrested with Giovanni Zito, an Italian secret service
agent, and financial broker Giovanni Carenzio.
They have been accused of plotting to bring in €20m ($26.08m) for
Scarano's rich friends in the shipping industry in the southern city of Salerno.
Although the Vatican bank has not been directly implicated in the case, it is already caught
up in a separate investigation into suspected money laundering.
Scarano, currently held in Rome's Queen of Heaven jail, is also under
investigation in another case linked to his accounts in the Vatican bank.
Two of IOR's top managers resigned earlier this month in the wake of
Scarano's arrest and prosecutors are considering seeking to have the two,
former director Paolo Cipriani and former deputy director Massimo Tulli, sent
to trial.
Britain, carmakers
invest in research
The British government and the auto industry will invest £1bn pounds
($1.5bn) in a research centre to develop low-carbon technologies and help
secure the jobs of 30 000 people working in the country's car engine supply
chain.
The government and a group of 27 firms including oil major BP, Indian
carmaker Tata Motors and component maker GKN will each invest £500m over the
next decade in an Advanced Propulsion Centre, which will look to research,
develop and commercialise those technologies.
Sixteen straight months of rising car sales in the UK are a rare bright
spot for Europe's recession-hit motor industry and the government aims to persuade more
of the world's top carmakers and automotive suppliers to base operations in Britain.
"The UK automotive sector has been incredibly successful in recent times, with
billions of pounds of investment and new jobs," Business Secretary Vince
Cable said on Friday. "With the next generation of vehicles set to be
powered by radically different technologies we need to maintain this momentum
and act now."
Other companies backing the investment include BMW, Bosch, Ford,
Caterpillar and Nissan.
US surprises
with large budget surplus
The US government posted an unexpectedly large budget surplus in June, a
further sign of the rapid improvement in public finances that has taken the
heat off Congress to find savings and raise the nation's borrowing limit.
Rising tax revenue, public spending cuts and big payments to the
Treasury from government-backed mortgage companies helped the government take
in $117bn more last month than it paid out, the US Treasury said on Thursday.
Analysts had expected a surplus of $39.5bn.
June's surplus was the largest on record for that month.
While the government is still $510bn in the red with three months to go
in the fiscal year, June's big surplus will buy it time before it runs up
against the limit on borrowing set by Congress. Analysts expect the Treasury to
hit the debt ceiling by early November.
The surplus in June also highlighted how much an improving economy and
existing legislation have helped improve the fiscal outlook. That has made
overhauling public pension and healthcare systems a little less pressing.
Rising incomes and tax increases enacted earlier in the year helped
cause government receipts to rise to $287bn in June, up 10% from a year
earlier. While economic growth has been lackluster in the first half of 2013,
job growth has been more steady. In June, 195 000 jobs were added to the
nation's nonfarm payrolls.
Across-the-board budget cuts that began in March also contributed to the
surplus.
Gross outlays at the department of defence and for military programmes,
for example, are down about 7% in the fiscal year to date from the same period
a year earlier. The current fiscal year began in October 2012.
Government-backed mortgage companies Fannie Mae and Freddie Mac, which
were bailed out by taxpayers during the financial crisis but have since
returned to profitability, also helped drive June's surplus by pouring billion
of dollars into public coffers.
Fannie Mae, which said in May it would return $59bn to the Treasury in
quarterly dividends, provided most of the funds. The big dividend payment
reflected an extraordinary gain from the reversal of a tax-related writedown.
Doubts over UK 'no work'
contracts
No work, no pay, but still employed? Welcome to Britain's 'zero-hours contracts', which offer no guaranteed amount of work and
pay, and some weeks provide nothing.
Almost unheard of in the rest of Europe and the United States, the rapid
growth of this type of work helps explain how Britain's barely growing economy
has nonetheless been able to provide jobs for a record number of people.
One in five jobs created in Britain since late 2008 has come with a
zero-hours contract, many of them in low-paid roles such as caring for the
elderly or stacking shelves, but increasingly in work that requires more
qualifications.
Under a zero-hours contract, an employer has no obligation to provide a
minimum number of shifts, unlike other jobs.
Workers are not obliged to accept hours either. But critics argue that
the flexibility mostly benefits employers because workers who reject being
called up on one occasion risk being frozen out of all future work.
This has engendered criticism. Opposition Labour party leader Ed
Miliband said the contracts make some British workplaces "nasty, brutish
and unfair".
His colleague Julie Elliott, who led a parliamentary debate criticising
the contracts, said it put too many people's life "on call".
Some Labour politicians are trying to push through legislation to ban
the contracts. But they stand little chance of success, with the governing
coalition of Conservatives and Liberal Democrats convinced there is a place for
them.
Flexibility in hiring is viewed by many as key to employment growth, and
Britain has long had easier rules on hiring and firing workers than other
European countries.
Even so, some change may still be on the way. Britain's business
ministry is holding informal talks with employers and unions, which Lib Dem
Employment Minister Jo Swinson said this week may presage a more in-depth
inquiry.
Lawmakers also say plenty of their constituents face difficulties with
the contracts. The experience of one 26-year-old man who spoke to earlier this year is typical.
He worked in warehouse jobs in central England for several months under a zero-hours contract from an employment
agency. He did not wish his name to be published in case he got sacked.
Usually he gets a text message to tell him if there is work the
following day. But often the number of hours is unclear, and sometimes he is
required at even shorter notice.
"It is very sporadic and unpredictable, making it virtually
impossible to budget or plan for my other commitments," he said. "I
don't earn enough, and since I've been doing zero-hours contracts I've been
getting more and more in debt."
Some weeks he works eight hours, others more than 40, generally at a
minimum wage of £6.19 an hour. The unpredictable income plays havoc with his
state benefit entitlements, which assume a steady amount of work each week.
'Dodgy' data
How many people are in a similar situation is unclear.
The latest official data from the Office for National Statistics - which
covers the last three months of 2012 - suggests just 200 000 people are
employed under zero-hours contracts, up from 116 000 in late 2008.
This is 0.7% of the workforce, but the 70% increase is a fifth of the
net jobs increase over the period.
But the numbers may significantly undercount the number of people on
zero-hours contracts, as its survey relies on workers knowing the precise legal
status of their jobs.
Earlier this week the government said that it was possible that 300 000
people were employed on zero-hours contracts last year in the social care
sector alone.
"The numbers are dodgy, really dodgy," said Ian Brinkley, a
former chief economist for Britain's Trades Union Congress who now heads the Work Foundation, a labour
market think.
Brinkley said he expected such contracts to grow further in the future
and did not advocate a ban, but he predicted a damaging effect on worker morale
would limit their use.
Data on whether the contracts acted as a stepping stone into more
permanent employment or left workers stuck in a rut was largely absent, he
added.
Kevin Green, director of the Recruitment and Employment Confederation,
whose members place a lot of people into temporary work, does not dispute that
some bad practice exists.
But he questions whether it is more prevalent in zero-hours work than in
other types of contract, and added that it benefited people who might not be
able to work otherwise.
"It's hugely important for businesses that they can flex and
provide the right resource and the right capability to meet their customers'
needs."
China watchdog
warns against nepotism
China's regulator of major state-run industries has warned senior executives
to control their impulses and manage their family connections as the government
steps up the fight against corruption.
Zhang Yi, Communist Party chief of the State-Owned Assets Supervision
and Administration Commission (Sasac), told a meeting of more than 150 senior
executives that they should treat battling graft as one of their most important
tasks.
"Cultivate your moral character and nurture virtue, raise your
ability to fight corruption," the watchdog quoted Zhang saying on its
website (www.sasac.gov.cn) on Friday.
"Properly manage your relatives and those close to you; don't be
encumbered by your emotions, damaged by your emotions or misled by your
emotions," he added.
Sensitive to public outrage and warning that corruption threatens the
party's very survival, President Xi Jinping has pledged to crack down on
corruption at all levels, though only a few senior officials have been fired or
investigated for corruption since he came to power last year.
Sasac is a ministerial-level body run by China's cabinet, the State
Council, and is directly responsible for 116 state-owned companies, including
national industrial champions such as CNOOC, PetroChina, China Mobile, State
Grid Corp and Air China.
Xi has gone after extravagance and warned officials to be morally
upstanding as part of his graft-fighting strategy.
Government departments and ministries have held meetings similar to the
State-Owned Assets Supervision and Administration Commission gathering over the
past few weeks and months.
A string of high-profile incidents, including a high-speed Ferrari crash
reportedly involving the son of a senior public official, and numerous scandals
with family members of government employees, have enraged many Chinese who have
taken to the internet to vent their anger.
US, China restart
investment treaty talks
The United States and China agreed on Thursday to restart stalled negotiations on an investment
treaty, with Beijing dropping previous efforts to protect certain sectors of its economy
from the start.
The agreement to resume negotiations was welcomed by the U S
business community as a major advance during annual Strategic and Economic
Dialogue talks in Washington, which have often produced few agreements of substance.
Top officials from both sides strived to project a friendly,
businesslike tone as they tried to build what China calls a "new
model of major country relations" between the world's two biggest
economies in the first year of Chinese President Xi Jinping's mandate.
But talks struck a sour note over China's handling of former
spy agency contractor Edward Snowden, who hid out in the Chinese territory of Hong Kong last month as he
revealed a secret US surveillance
programme before fleeing to Russia.
Disputes over cyber security topped the agenda going into this year's
talks, which were launched in 2008 to manage a relationship that was growing
more complex and tense with China's emergence as major
economic and military power.
US Treasury Secretary Jack Lew hailed the investment treaty
commitment as a sign of positive change in Beijing, as China retools its economic
growth model away from heavy investment and exports toward growth driven by
consumption.
"China announced its intention to negotiate a high standard
bilateral investment treaty with us that will include all stages of investment
and all sectors - a significant breakthrough, and the first time China has
agreed to do so with another country," he said as the talks concluded.
China and the United States began negotiations on a pact to govern bilateral investment in 2008
under then-US president George W Bush, but discussions were put on hold after
President Barack Obama took office the following year.
Previously, Beijing had agreed to talks only if certain Chinese industries, especially in
its service sector, were exempt. But it agreed to drop blanket restrictions for
the current talks, a US Treasury
official said.
The official, briefing reporters at the US-China economic talks, said
the move was an encouraging sign the world's second-largest economy was willing
to open up more sectors to foreign competition.
Chinese Commerce Minister Gao Hucheng told reporters China and the United States share "a common purpose, which is to try to find ways to reduce
and mitigate differences and barriers that both sides place in our trade and
investment relations".
Explaining China's motives for
reopening the investment talks, Chinese Vice-Finance Minister Zhu Guangyao said
China had about $20bn of direct investment in the United States and $1.2trn in US treasury bills.
"With such an extensive investment relationship, it is necessary
for the two sides to have an institutional environment for the protection of
these investments," he told reporters.
In addition, Zhu said: "Business leaders from China and the United States have a strong desire to invest in the market of the other. They both
want an open and more transparent market."
Analysts and US officials said another factor was a relative reversal of
fortunes from previous years, with the United States enjoying economic recovery while China grappled with a
slowing economy that showed the limits of its model.
"This set of meetings, as many of the meetings that I've had in
recent months have had this character to them, that there's a renewed
recognition and respect for the resilience of the American economy," said
Lew.
US business groups welcomed the agreement to resume negotiations, but
warned that both sides still faced many other tough issues and that
negotiations on a treaty could be lengthy. Any pact would need to be ratified
by the US Senate.
"The US chamber called for this last year as a pre-condition, and
we are very pleased that both governments rose to the challenge," said
Myron Brilliant, head of international affairs at the US Chamber of Commerce.
Barriers to business
US investors face barriers or ownership limits in about 90 Chinese
sectors, while Chinese companies seeking to invest in the United States often fear a political backlash in Congress or rejection on national
security grounds.
"If China negotiates a treaty that not only protects investments
after they are made but also improves US investors' access to the Chinese
market, this would be a real breakthrough," said Michael Smart of
consultants Rock Creek Global Advisors, who worked on investment issues in the
Bush White House.
The talks opened just weeks after Snowden' disclosure of extensive US electronic
surveillance of American citizens and foreign countries, including China, which undercut years
of complaints from Washington about Chinese hacking.
In remarks at the end of the talks, the United States said it had made
clear its displeasure that Chinese authorities allowed Snowden, on the run in
Hong Kong, to leave for Moscow rather than send him back to face US justice.
"We were disappointed with how the authorities in Beijing and Hong Kong handled the Snowden case, which
undermined our effort to build the trust needed to manage difficult
issues," US Deputy Secretary of State William Burns said.
Chinese State Councilor Yang Jiechi swiftly brushed off Burns' criticism
of Hong Kong, the former British colony that h is a special administrative
region of China. Hong Kong answers to Beijing on matters of foreign policy, but unlike
China, it has an extradition treaty with the United States.
"The central government has always respected the Hong Kong SAR government's handling of cases
in accordance with law," he said.
"The Hong Kong government handled the Snowden case in accordance with law, and its
approach is beyond reproach," Yang said about the decision to not detain
Snowden.
Douglas Paal, of the Carnegie Endowment for International Peace, said
Snowden's case "makes it impossible for any countries to make concessions
to the United States for the time being, because we look like big cyber offenders."
Burns said the two powers "need to reach a shared understanding of
the rules of the road" in cyber space and repeated US complaints about the
cyber theft of intellectual property that most American experts blame on China.
"The cyber-enabled theft of trade secrets, intellectual property,
and confidential business information is unacceptable," he said.
Chinese leaders did not publicly address the cyber-theft issue during
the Washington talks, although Gao said China was determined to
improve protection of intellectual property.
A US official said that Washington's lobbying on the
issue had made some headway - in part because China was generating more
of its own intellectual property.
"What we're seeing is an acknowledgment that this realm of activity
is distinct, is important and needs to be addressed," said the official,
speaking on condition of anonymity.
Both countries' officials said they were clear-eyed about the
differences in political system, wealth and values that divided them, saying
the key was to manage relations.
"Of course, because of differences, there's a need for us to make
rules. And to formulate those rules, we need to have dialogue," Chinese
Vice-Premier Wang Yang said in a dinner speech late on Thursday.
French super rich thrive despite crisis
The economic crisis in France has spared the super
rich, according to a survey published Thursday, which showed the combined
wealth of the country's 500 richest people up nearly 25% in the last year.
Challenges magazine's 2013 ranking of the country's biggest fortunes
estimated the top 500 earners to have combined assets of €330bn ($423bn), the
highest level since the ranking began in 1996.
The 500 richest people accounted for 16% of gross domestic product and
10% of the total financial assets of the French, meaning
one-hundredth-thousandth of the population controlled one-tenth of the nation's
wealth.
"It's enough to make you dizzy and to lend arguments to a country
that has always hated the rich, especially in times of crisis," Challenges
wrote.
Keeping his top spot was the boss of luxury goods conglomerate LVMH,
Bernard Arnault, who was estimated to be worth €24.3bn.
Second came Liliane Bettencourt, the elderly heiress to the L'Oreal
cosmetics fortune, with an estimated fortune of €23.2bn.
Luxury goods, defence, retail, telecommunications and wines and spirits
were all represented in the Top 10.
Bertrand Puech, chief executive of high-end handbags-maker Hermes and
the Hermes family were ranked fourth behind Gerard Mulliez, founder of Auchan
supermarket chain, and his family.
Of the richest 500, 55 were billionaires, 10 more than in 2012.
The statistics showed the 10 wealthiest people getting richer faster
than others in the elite club, meaning more wealth concentrated in the hands of
a few.
The Top 10 accounted for 40% of the riches of the Top 500, up from 25%
in 1996.
The survey was likely to reignite debate about whether France's highest earners are
sharing the burden of the crisis.
President Francois Hollande's attempts to push through a 75% super tax
on top earners last year was condemned by business leaders, who warned of an
exodus of top talent if it passed.
He was eventually forced to abandon the proposal after it was struck
down by the Constitutional Council.
