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- A new China in the making?
- Gulf carriers’ 15 minutes of buying hysteria
- Berjaya Auto aims double digit growth in the Philippines
Posted: BEIJING: China has pledged to make the most sweeping changes to the economy and the country's social fabric in nearly three decades with a 60-point reform plan that may start showing results within weeks. Some financial and fiscal reforms are likely to be the first out of the blocks, analysts said. But the more wrenching changes such as land reform, reining in the power of state-behemoths, and a more universal social welfare system may take years as the Communist Party leaders balance reorganising the economy with a need to maintain stability. "It's clear that they understand what reforms are needed. They will probably start with reforms that could offer the highest returns with the lowest costs," said Lu Zhengwei, chief economist at Industrial Bank in Shanghai. China unwrapped its boldest reforms since Deng Xiaoping set the country on a course of opening up to the world in the 1970s and 1980s. The Communist Party pledged to let the market play a "decisive" role in the economy and outlined changes designed to unleash new sources of growth that it said would yield results by 2020. After three decades of breakneck expansion, the economy is showing signs of spluttering under the weight of industrial overcapacity and piles of debt. Chinese leaders have made clear that reforms will be carried out in a more concerted way by setting up a high-level group to lead them, but analysts believe they will move first with some less controversial reforms, such as interest rate and price deregulation on utilities and natural resources. "They are likely to start with some easier ones or reforms that have already been kicked off," said Chen Letian, an economist at Rising Securities in Beijing. The central bank is likely to unveil a long-awaited deposit insurance system by the end of this year or early in 2014 to pave the way for freeing up bank deposit rates, which are now subject to administrative caps, analysts say. The insurance scheme would protect depositors as Beijing is concerned some smaller lenders could go under as banks compete for deposits in a more open regime. Earlier this year, the central bank removed controls on lending rates. They expect qualified private investors will get the green-light in the coming months to set up banks to compete with big state lenders that currently dominate. The government will further loosen its controls on prices of water, electricity and natural resources, in line with the pledge to let the market play a "decisive" role, with changes sooner rather than later. Fiscal reform is likely to gain some urgency as a lack of constraint on the finances of heavily indebted local governments will make interest rate reform less effective. A bigger slice of tax revenues would reduce their need to borrow heavily or to sell land to raise revenues. The leadership pledged to push fiscal reform to improve budget management and let the central government assume more spending obligations. SOME REFORMS MAY LAG But some changes will require much more preparation and may not show any signs of happening for months or years, analysts say. Reform to allow farmers to sell their land more freely is still being tested in parts of the country, so the government appears a long way off from deciding exactly how the new idea will work in practice. Policymakers also want to make sure that urban areas can absorb the hundreds of millions of rural migrants they want to move to cities to help promote a consumer-led economy. That means social welfare systems, from healthcare to education, have to be strong enough to cope with the influx of people and importantly that jobs are available in the cities. Policymakers worry a sudden rise of landless and jobless migrants could upset the national stability central to the Communist Party's justification for one-party rule. "The pre-condition for reforms is that economic growth will be steady and social stability will be maintained," said Xu Gao, chief economist at Everbright Securities in Beijing. A relaxation of the household registration system, or hukou, which currently means that migrants leave behind the public services they are entitled to as resident of their home villages, will only gradually be expanded from smaller cities to bigger ones, analysts say. But Beijing is attempting to overturn a social system in place since 1958, so change will take probably some years, they say. Reforming state-owned companies will also take years, analysts say. The Communist Party signalled it was in no rush to break up the monopolies that dominate many sectors of the Chinese economy. Instead, it appears to be targeting a slow squeeze on these companies, which analysts say probably reflects a more practical approach given the political power of the big state firms and the ministries that back them. The Communist Party has raised the amount of profit the state-owned enterprises have to set aside for dividend payouts, will allow private firms to enter some protected business sectors and will allow markets to play a greater role in pricing assets, suggesting these bloated companies will have to become more efficient over time to cope with market forces. The government has previously tried to open up sectors currently monopolised by state firms – such as oil and gas, banking, telecommunications, electricity, and transportation – to private investors, but with little success. The reforms pledge to quicken the process of making the yuan fully convertible, but some government economists caution against high expectation amid fears among some policymakers that allowing the currency to move freely too quickly could expose the economy to volatile capital flows, such as the ones blamed on the US Federal Reserve's economic stimulus programme. The central bank has pledged to make the yuan "basically convertible" by 2015 but it has not given a clear definition of what that means. Still, Beijing can not be too cautious, said Zhu Baoliang, chief economist at State Information Centre, a top government think-tank in Beijing. "They may have to quicken reforms in all fronts, otherwise they may not achieve the tasks by 2020," Zhu said. THORNIEST ISSUE The team leading reform is likely to be more powerful than the State Commission for Restructuring the Economy, which was responsible for drawing up a reform blueprint that led to the shutdown of thousands of inefficient state-owned firms and the loss of millions of jobs in the 1990s. A top party official could head the team, they said. Some speculate that Premier Li Keqiang could take charge, while others pointed to Han Zheng, Shanghai's party chief. Eventually, Beijing may have to deal with the thorniest issue. "Over the longer term, both central and local governments will have to downsized and they will no longer need so many people," said Xu at CCIEE – Reuters. |
Gulf carriers’ 15 minutes of buying hysteria Posted: DUBAI: It was a security consultant's nightmare and a moment to savour – royalty, airline bosses, planemakers and press hordes wedged into the same overcrowded room wanting to see the same thing: the colour of money in the oil-rich and fast-growing Gulf. Gulf airlines dropped US$100bil in 15 minutes on the opening day of the Dubai Airshow, as they ordered hundreds of passenger jets to expand a common ambition to turn the region into a global aviation hub. After one mega-deal, as Emirates airline and Qatar Airways ordered 200 of Boeing's newly re-launched 777 jet, a quick decor change brought Airbus to the stage to sign a deal with Emirates for 50 of the world's largest jetliner, the A380 superjumbo. "I don't have my calculator," Sheikh Ahmed bin Saeed al Maktoum, chairman of Dubai airline groups Emirates and flydubai joked when asked to estimate the value of deals just unveiled. The rapid burst of deal-making captured both the frenzy of business activity in the region and the ambition, shared by Gulf states, to diversify their economies away from energy wealth. But the carefully choreographed event also masked bitter competition between the region's airlines to attract passengers, amid weak margins and high fuel costs. Airlines jostled for position ahead of the show, each wanting to go first, people aware of the arrangements said. "The press conferences were changed several times as all of them wanted to be the first to announce," said one source familiar with the closed-door discussions. Missing from the main announcement, where Boeing launched its revamped 777 jet, was Abu Dhabi's Etihad Airways, a rival of neighbouring Dubai's Emirates which had agreed to announce orders at the show only after behind-the-scenes talks. "We rarely announce plane orders at air shows but when we do, the world takes notice," Etihad chief executive James Hogan declared after kicking off the show with his own 777 order. ECONOMIC WEAPON OF CHOICE The hub cities in the Gulf – Dubai, Abu Dhabi and Doha – are spending billions on infrastructure to draw more travellers from former hubs in Europe and Asia to the Middle East. While Western carriers are languishing amid weak margins and high fuel costs, airlines are economic weapon of choice in the Gulf to globalise its economy and diversify oil-based revenue. The deep-pocketed Gulf carriers are taking bigger roles in global aviation, with planemakers Airbus and Boeing depending increasingly on them for the success and sales of their planes. "The Middle East three (Emirates, Etihad and Qatar Air) have successfully expanded their global route networks over the past decade, in part through the economics of securing highly competitive deals for long haul aircraft – particularly at a time when airlines in other areas of the world faced many challenges to their businesses," said Peter Morris, chief economist at the London-based consultancy Ascend. Emirates, the oldest of the Gulf carriers, uses Dubai's hub airport status to fill its large fleet of A380 superjumbos that reach all the way to Europe, the US and Australia. "I would say that the successful and profitable development of Emirates airline is perhaps the most significant factor of last 20 years that has put Dubai on the map for its economy, trade, tourism and growth," Morris said. Etihad, which completed its 10 years in service this month, is catching up through equity partnerships in airlines around the world, including Air Berlin, Virgin Australia, Aer Lingus and India's Jet Airways. Qatar Airways has chosen the more traditional route – it became part of the oneworld alliance of airlines in October after decades of resistance from its European rivals. While competing with each other, the new breed of Gulf airline faces criticism from carriers in the US and Europe which say such large plane orders could disrupt markets. US airline pilots have said the huge growth is unfair, while some have called for curbs on the use of US export credits to smooth the plane orders to foreign carriers. "We have to accept competition and never fear it," Sheikh Ahmed said. "People have the right to expand, grow their business and prepare for newcomers to the market." – Reuters – Reuters. |
Berjaya Auto aims double digit growth in the Philippines Posted: KUALA LUMPUR: Mazda car retailer Berjaya Auto Bhd, which staged a solid debut on the Main Market of Bursa Malaysia on Monday, sees potential for double-digit growth in total industry volume in the Philippines from about 4% now, said CEO Datuk Yeoh Choon San. Its Philippine operations, via 60%-owned Berjaya Auto Philippines, is already contributing to 5.2% of group sales despite starting only in January. In the longer-term Berjaya Auto is targeting for revenue from the Philippines to grow to 15% to 20% of group turnover, Yeoh told reporters after the listing ceremony. The company is the sole importer and distributor of Mazda cars there. He also said Typhoon Haiyan was unlikely to have a major impact on its business in the Philippines as the damage was limited to the Tacloban province. Berjaya Auto opened with a premium of 85 sen, or 121%, to its IPO price of 70 sen at RM1.55, with a first trade of 2.32 million shares. At mid-morning the stock was trading at RM1.90 after hitting a high of RM2.20, on volume of 42.66 million shares. The IPO raised RM58mil from an offer for sale of 82.76 million shares. Most of the proceeds will be used for working capital. Berjaya Corp Bhd remains Berjaya Auto's single largest shareholder post-listing with a 68% interest, followed by Yeoh with 7.1%. |
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