US fiscal cliff deal on a knife-edge
The wheels could come
off the US economy even before it has shifted out of second gear unless
politicians reach a last-minute deal to avoid $600bn in tax rises and spending
cuts that kick in next month.The rest of the world would be unable to avoid the
pile-up if America does fly off the so-called fiscal cliff.That is why, even in
a holiday-shortened week, eyes will be peeled for signs that Democratic
President Barack Obama and his divided Republican opponents can bury the
hatchet.The White House on Friday tried to rescue the stalled talks, but there
was little headway to resolve what Alan Blinder, an economics professor at Princeton
University, called the biggest near-term risk facing the global economy.Seen
from abroad, US policymakers were looking "clownish", the former
vice-chairman of the Federal Reserve said: "This will do us a tremendous
amount of damage."Until last Thursday, markets had assumed a compromise
would be struck, averting the risk of a relapse into recession. The slow-motion
car crash had been so well signaled that surely the drivers would swerve in time?But after
Republicans abandoned a fix proposed by House of Representatives
Speaker John Boehner, businesses and households head into the year-end knowing
the clarity they crave on tax and spending plans could be weeks away."The
longer uncertainty persists, the greater the negative impact on the
economy," Lewis Alexander, chief US economist at Nomura,
told clients."It may take the imminent threat of a breach of the debt
limit in February, or March at the latest, to force an agreement," he
added, referring to the Congressional approval that the Treasury will need to
extend its borrowing authority.By sapping consumer confidence, the political
brinkmanship could already be enough to sap short-term US growth.If America
then does tumble over the cliff for more than a few days, triggering fiscal
tightening that could reach 4% of GDP, the repercussions would be felt around
the world via trade and financial links."If our economy goes into a
recession, especially a serious recession, a deep recession, that's going to
hit imports from the rest of the world. And to the extent that it messes up
financial markets, that has a contagion effect," said Martin Feldstein, an
economics professor at Harvard University.Like Blinder, he was speaking on a
conference call organised by Foreign Affairs magazine. Indeed, the resulting
turbulence in financial markets could end the period of relative calm enjoyed
by the eurozone, said Christian Schulz, an economist at Berenberg Bank in
London.Failure to put the US budget on a more sustainable path could well crush
hopes that the world's largest economy is finally shaking off the effects of
the financial crisis and returning to a path of steadier if not spectacular
growth.Credit Suisse on Friday raised its forecast for fourth-quarter GDP
growth to an annualised pace of 1.8% from 1.1% after consumer spending in
November rose at the briskest rate in three years.A recovery in housing is an
increasingly important motor of growth, and figures on Thursday are expected to
show new home sales rose to 380 000 in November from 368 000 in October, according to
economists polled by Reuters.Two of the top trading recommendations for 2013 by
economists at Goldman Sachs are premised on a deepening housing market
recovery. Existing homes changed hands in November at the quickest pace in
three years, while confidence among home builders rose to a 6-1/2-year high in
December.Edward Jamieson, chief investment officer in Franklin Templeton's
equity group, said housing was benefiting from record-low interest rates, a
gradual reduction in household debt and significant pent-up demand."Higher home
prices have also helped reduce the number of individuals with negative equity
in their homes while also providing a strong wealth effect, which we think
bodes well for continued improvement in the housing sector," he said in a
report.That markets in the last days of 2012 should be held hostage to events
in Washington is fitting in one sense: this has been a year in which politics
has shaped economic developments more than ever.In the eurozone, a commitment
by paymaster Germany to keep bailing out backsliding Greece, building on a
pledge by European Central Bank President Mario Draghi to do whatever it takes
to preserve the euro, largely allayed market doubts about the imminent disintegration
of the single currency.In Japan, Prime Minister-elect Shinzo Abe, whose cabinet
will be sworn in on Wednesday, campaigned on a platform of more aggressive
monetary and fiscal policy to jolt the economy out of two decades of anaemic
growth and gently falling prices.The yen has weakened and Japanese stocks have
risen in response even though many are sceptical that Abe will introduce the
reforms Japan needs.The Bank of Japan, sensing which way the political winds
are blowing, duly relaxed policy last week, and inflation figures on Friday are
likely to reinforce expectations that there is more to come from the central
bank. Economists polled by Reuters expect core prices to have fallen by 0.1%
nationwide in the year to November and by 0.5% in Tokyo in the year to
December."We expect quantitative easing to continue aggressively in the
first half of 2013, especially after a new governor takes the helm from the
April 26 monetary policy meeting," Izumi Devalier, an economist with HSBC,
wrote in a report.
Monti unveils 'change Italy' agenda
Italian Prime Minister
Mario Monti unveiled an agenda to "change Italy, reform Europe" at a year-end presser on
Sunday and said the country had managed to pull itself out of the eurozone debt
crisis, without having to call for aid."The agenda focuses on avoiding
very dangerous steps backwards", and will take the reforms already begun
forward, said Monti, who stepped down on Friday after a year in which he
dragged the eurozone's third largest economy out of a fiscal mire."The
financial crisis has been overcome. . . I was always sure that Italy had all
the resources needed to make it on its own, and so it was," said the
former eurocrat, who many European leaders hope will play a role in any future
government to keep the reform accomplished on track. Monti, who took over the
reins of power after Silvio Berlusconi was ousted amid a sex scandal and the
financial crisis, also commented that he was 'perplexed' by the ex-premier. "I
am perplexed by my predecessor. I find it difficult to follow his line of thought," he said, referring
to media magnate Berlusconi's frequent changes in position over the past few
weeks, first supporting Monti then attacking him.Berlusconi has said he will
run in February's general election and now seems to have settled on winning
votes on the back of an anti-Monti drive.
China's wealthy buy 'Rolls-Royce' bikes
Rich Chinese are buying
bicycles that cost more than the average citizen makes in three years,
motivated by nostalgia for the days when two wheels were the primary means of
transport.China is now the world's biggest auto market, but high-end bike sales
are expected to grow by 10% a year as they become a status symbol for wealthy
executives.Yu Yiqun, the creative director at an advertising company in the
Chinese capital, cycles to work on his favourite bike - a 100 000 yuan ($16
000) hand-made Alex Moulton."It might be the only one in Beijing. It's like the
Rolls-Royce of bicycles. Very classical, purely hand-made," said the
40-year-old Yu, who has about 35 high-end bikes."I remember my father used
to ride me to the city in the winter - about 40km and minus 30 degrees centigrade.
Back then, it was a means of transport that fulfilled your dream of travelling
afar, which was relatively cheap but required brawn."Yu symbolises a new bike culture in China,
where wealthy, health-conscious executives are upgrading their lifestyle, in
some cases abandoning flashy cars and taking to the road on high-end bicycles
that can cost more than a car."Demand for mainstream luxury items such as
premium cars,watches has come to a point of saturation.
High-income groups now turn to high-end bikes to show off the uniqueness in
taste and healthy lifestyle," said Zhou Jiannong, general manager of Rbike
Networks Ltd in ChinaAnalysts estimate about 10% annual growth in the Chinese
bicycle market over the next few years, with the high-end segment forecast to
grow by as much as 15% a year.Companies are also getting in on the act, with a
Hong Kong-based supplier taking an order for 1 000 pricey bikes from a Chinese
financial firm as a year-end bonus for employees."People are sick
of conventional gifts such as wines and tobacco. For mainlanders, a bike is a
great gift that shows your unique lifestyle," said Adam Wong, managing
director at Hong Kong's Komda Bicycles.Wong declined to name the bank that had
ordered the bikes, but he said they had an average price tag of 3,000 yuan
($480).Fashion statementFashion label Shanghai Tang, eager for a slice of this
growing pie, teamed up with Dutch bike maker Colossi Cycling to make bicycles
aimed specifically at China, where bike demand is estimated at about 28 million
units a year"The high-end sector is going to be the major source of growth
in the Chinese market. In China, bikes are more than
just a means of transportation. It has become a fashion," said Terry Liu,
an analyst at Fubon Research in Taiwan.It can cost up to HK$300 000 ($38,700)
for an imported limited edition of expensive brands such as Italy's Colnago or
France's Look, nearly 100 times the price of a Flying Pigeon, China's official
bike since it was born in 1950.But the cost as no object for many high-income
Chinese looking for the best two-wheeled vehicle."For businessmen, they
are not looking at the price. They are looking at the quality. They assemble
their bike with import components in accordance to their taste and needs,"
said Zhang Lei, a director of a Zhuhai paper products supplier, who plans to
spend 10,000 yuan to upgrade his current bikeYu, the advertising executive in
Beijing, has orders in for four more hand-made bikes, expanding his vast
collection which includes brands such as Trek, Bianchi and Colnago.He and his
wife have two cars but he says he doesn't drive."I always bring my bike
when I go on a business trip," Yu said. "When I go to Harbin, I bring a small,
folding bicycle since it's easier for me to get around the city. When I go to Dalian, I bring a bigger
bike since it's a mountainous city."
China to crackdown on brand violations
China plans to change
the law to crackdown on "malicious" trademark registrations, state
media said on Monday, after a series of cases in which well-known international brands and individuals have had their
names or copyright misused.Foreign governments, including the United States,
have for years urged China to take a stronger stand against intellectual property
rights violations on products ranging from medicines to software to DVD movies.
Basketball legend Michael Jordan is one of the latest to accuse a company of
using his name without permission, and French luxury group Hermes International
SCA and Apple Inc have faced trademark problems too. The proposed amendment
will offer protection to major international brands, giving copyright owners
the right to ban others from registering their trademarks or from using similar
ones, even if such trademarks are not registered, the official Xinhua news
agency reported. "The draft is intended to curb the malicious registration of trademarks,"
Xinhua said.The country's legislature - which performs a largely rubber stamp
role will discuss the amendment this week, it said, without saying when the
new rules could be put in place or providing other details. The move comes after basketball
star Michael Jordan filed a lawsuit in China in February against a
Chinese sportswear company, accusing the firm of unauthorised use of his name.
The Naismith Memorial Basketball Hall of Fame recipient and former Chicago Bulls star said that
Qiaodan Sports, a company located in the southern Fujian province, had built
its business around his Chinese name "Qiaodan" and jersey number
without his permission. The lawsuit has yet to go to trial, Chinese media have
reported. France's Hermes International SCA has also had problems in China with its trademark,
and in July Apple Inc agreed to pay $60 million to Proview Technology
(Shenzhen) to end a protracted legal dispute over the iPad trademark in China. China has insisted it is
serious about tackling intellectual property violations. Incoming Japan PM to
review Fukushima Japan's incoming pro-nuclear premier Shinzo Abe said on Sunday
his government will again investigate the Fukushima atomic crisis, after which
the country's reactors could be restarted, reports said.His comments will add
to speculation that plans to ditch atomic power in disaster-scarred Japan will
be shelved by his Liberal Democratic Party (LDP) when it takes power after
scoring a landslide election win last week."We are yet to
completely clarify what went wrong (in Fukushima)," he told a
political show on Fuji TV on Sunday. "As a government, we want to once again analyse why Fukushima Daiichi failed,"
he said. He gave no further details and did not set out a timeframe for
a probe."After that, I wish to think of next steps, including the restart
of reactors," he said on the programme, according to
broadcaster NHK."Could it have been avoided? Was it a man-made disaster?
As a government, we must study that," said Abe, according to Jiji Press.
He has previously derided the zero-nuclear goal of the ousted Democratic Party
of Japan as unrealistic. All but two of Japan's 50 reactors remain switched off
after the worst atomic accident in a generation and anti-nuclear sentiment has
run high, but that failed to translate into support at the polls for
anti-atomic parties.Several probes have already been conducted into the
accident in March last year, which saw the Fukushima plant suffer meltdowns and
explosions after being hit by an earthquake-triggered tsunami. A damning
parliamentary report in July concluded that the Fukushima accident was a
man-made disaster caused by Japan's culture of
"reflexive obedience" and not just the tsunami that hit the plant. Shares
in Fukushima operator Tepco have soared since Abe's election win.
