The Wall Street Journal Asia - October 19 2012, Literatura, Gazety, Magazyny
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MANSION
W9
ASIA EDITION
VOL. XXXVII NO. 35
**
FRIDAY - SUNDAY, OCTOBER 19 - 21, 2012
China Sees
Its Growth
SlowFurther
Investors
Return
To Asian
Shares
Protest Turns to Clash at Indonesia Shoe Factory
B
Y
D
ANIEL
I
NMAN
Investors are jumping back
into Asian stocks, pushing a
regional benchmark index up
13% since this year’s low in
June, as tentative evidence
emerges that the region’s
economy could be nearing the
end of a slowdown.
Chinese equities, Asia’s
worst performers in 2012,
have rebounded lately on im-
proving data in the world’s
second-biggest economy. In
Japan, stocks have rallied 5.3%
this week, regaining ground
lost in recent weeks.
“Sentiment is finally turn-
ing a little bullish. People are
starting to warm up to Asia,”
said Howard Wong, managing
director at Doric Capital Corp.
in Hong Kong, which manages
assets worth $50 million.
Investors are focused on
China. On Thursday, the coun-
try released data showing that
economic growth last quarter
matched expectations, at 7.4%,
while earlier figures showed
strong exports in September,
up 9.9% from a year earlier.
The numbers have reinforced
Please turn to page 20
B
Y
B
OB
D
AVIS
A
ND
T
OM
O
RLIK
slowdown. Hong Kong’s Hang
Seng Index rose 0.5% while
Shanghai’s benchmark index
was up 1.2%.
J.P. Morgan forecast that
year-to-year growth would sta-
bilize in the fourth quarter at
7.4%, matching the third quar-
ter, and “begin to turn up
steadily” beginning in the first
quarter of 2013.
Others were more conser-
vative. UBS forecast additional
slowing in the fourth quarter,
to 7%, before a turnaround in
2013. “While this recovery is
modest at best and nothing to
write home about, at least one
can see that the growth mo-
mentum has stabilized,” UBS
analysts wrote.
Analysts were split on
whether they expected Beijing
to try give the economy a
boost by easing reserve re-
quirements for banks before
Please turn to page 14
BEIJING—China said its
economy continued to slow in
the third quarter just weeks
before it embarks on a once-a-
decade change in leadership,
compounding concerns about
the outlook for one of the
world’s major
engines of
growth.
Growth in China’s gross do-
mestic product fell to 7.4% in
the third quarter compared
with a year earlier, China’s Na-
tional Bureau of Statistics said
Thursday, down from 7.6% in
the second quarter and the
weakest since the beginning of
2009. The seventh consecutive
deceleration reflected a combi-
nation of weak demand from
abroad, flagging investment at
home, and insufficient spend-
ing by China’s households to
pick up the slack.
Asian markets rose on
Thursday as the GDP figures
met expectations and as some
economists said they pointed
to a bottoming out of China’s
Agence France-Presse/Getty Images
Shippers see U.S. appetite
for China goods ........................ 4
Heard on the Street: A
premier view of slump........ 26
More than 1,300 people clashed with security guards Thursday at a shoe factory that supplies
sportswear giants Adidas and Mizuno. The workers had been laid off over the summer from the
Panarub Dwikarya factory in Tangeranf, west of Jakarta, after demanding pay increases.
Google Stock Takes Hit
After Results Leak Out
Oracle Cloud
Applications, Platform, Infrastructure
Inside
B
Y
J
OHN
L
ETZING
A
ND
B
EN
F
OX
R
UBIN
The filing provided
Google’s financials for the
quarter, but was obviously re-
leased prematurely, as it in-
cluded near the top “PENDING
LARRY QUOTE” in a reference
to Google CEO Larry Page.
Google issued a statement
blaming R.R. Donnelley &
Sons Co., the company that
prints its financial documents,
for the early release and said
it planned to hold its confer-
ence call with investors at
4:30 p.m ET.
“Earlier this morning R.R.
Donnelley, the financial
printer, informed us that they
had filed our draft 8-K earn-
ings statement without autho-
rization,” the Google state-
ment read. “We have ceased
trading on Nasdaq while we
work to finalize the docu-
ment. Once it’s finalized we
will release our earnings, re-
sume trading on Nasdaq and
hold our earnings call as nor-
mal.”
In a statement, R.R. Don-
nelly said it was “fully en-
gaged in an investigation to
determine how this event
took place and are pursuing
our first obligation—which is
to serve our valued cus-
tomer.”
A representative for R.R.
Donnelly wasn’t immediately
available. An SEC spokesman
declined to comment.
For the third quarter, the
average cost that advertisers
paid Google per click fell 15%
from a year earlier, and fell
Please turn to page 14
Oracle
Cloud
Oracle Managed
Private Cloud
Google
Inc. prematurely
released its quarterly earn-
ings midday Thursday, report-
ing that profit declined 20%
as total costs jumped and ad-
vertising prices continued to
slide.
The unexpected release,
via a filing with the U.S. Secu-
rities & Exchange Commis-
sion, triggered a selloff in
Google shares. The stock
dropped about 9% before
trading was suspended and
weighed on the broader Nas-
daq Stock Market. The results
missed expectations and the
company released its results
several hours earlier than ex-
pected.
and
As Obama and Romney
vie for the women’s
vote, public opinion
polls suggest men and
women look at both the
economy and the
election differently.
Election 2012......12-13
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U.S. home building hit
its highest level in four
years in September.
U.S. News................13
Copyright©2012,Oracleand/oritsaffiliates.Allrightsreserved.
2
| Friday - Sunday, October 19 - 21, 2012
THE WALL STREET JOURNAL.
PAGE TWO
What’s News—
Inside
iii
Business & Finance
n
Morgan Stanley swung
to a
third-quarter loss on an account-
ing charge tied to its debt but
posted a sharp rebound in fixed-
income trading revenue. Some cli-
ents resumed doing business with
the firm following a credit-rating
downgrade in June.
15
n
ING Groep is close
to selling its
Hong Kong and Thai life insurance
units to Richard Li for about $2.2
billion, marking a return to the in-
dustry for the Hong Kong-based
businessman.
16
World News:
Ukrainian boxer scores
in political ring.
6
n
A Chinese company suing
the
Obama administration for block-
ing its investment in a wind farm
said Chinese firms are unfairly
discriminated against in the U.S.
and that the decision threatens
further foreign investment.
3
n
A bidding war for A123
Sys-
tems broke out Thursday in bank-
ruptcy court between American
auto-parts maker Johnson Con-
trols and spurned Chinese suitor
Wanxiang Group.
17
World News:
Drug-resistant TB
proves hard to spot.
8
n
China’s effort to shut down
dozens of small, privately owned
oil refineries is instead making
them grow bigger, threatening
plans to regulate the industry.
4
Tens of thousands of Greeks took to the streets of Athens in a demonstration, marred by violence, against spending cuts
and tax rises. The demonstration was linked to a 24-hour general strike that brought much of Greece to a halt. Page 6
control the London-listed coal
company’s Indonesian mines.
15
n
Newsweek would drop
its print
edition to become digital-only by
the end of the year.
18
n
Some Syrian rebel factions
have obtained advanced antiair-
craft weapons, raising concerns
that such weapons could end up
in the hands of anti-Western Isla-
mist militias.
7
n
Iranian hackers renewed
a
campaign of cyberattacks against
U.S. banks, openly defying U.S.
warnings to halt.
7
n
Australia’s interest-rate cuts
are cushioning the impact of fall-
ing commodity prices on eco-
nomic growth, a Treasury Depart-
ment executive said.
5
n
Sprint Nextel began
making its
expected move to control Clear-
wire by agreeing to buy shares
from the founder of the struggling
mobile broadband carrier.
18
iii
World-Wide
n
Hawker Beechcraft ended
talks
to sell itself to Superior Aviation
Beijing after the two aircraft mak-
ers couldn’t agree on terms.
17
n
The Colombian government
and the FARC guerrilla group for-
mally launched peace talks in Nor-
way in a bid to end nearly 50
years of conflict.
n
Nokia reported
its sixth con-
secutive quarterly loss but deliv-
ered stronger-than-expected sales
of basic mobile phones.
18
n
Nestlé is opening
two new re-
search and development centers
in China as the country plays a
bigger role in driving growth.
16
n
South Korea’s president
visited
an island near the border with
North Korea that was shelled by
Pyongyang two years ago, and
vowed to punish any further mili-
tary provocation by the North.
5
n
Palestinians in the West Bank
go to the polls Saturday for the
first time in six years, holding mu-
nicipal elections that could
deepen the rift between the West
Bank and the Gaza Strip.
8
n
ABN Amro sold
a one billion
Singapore dollar (US$822 million)
bond, providing the latest illustra-
tion of the market’s growing so-
phistication and popularity.
19
Business & Finance:
Jakarta writes script
for medical sector.
15
n
Bumi is investigating
possible
email hacking at the firms that
Vijay Mallya, the chairman of
Kingfisher Airlines Ltd. and United
Breweries Group, topped the list of In-
dian executives making headlines over
the past month, according to data on
regional and global media mentions
compiled by Dow Jones Insight.
But Mr. Mallya has been in the
news for the wrong reasons.
Kingfisher Airlines announced this
month, after its workers went on
strike demanding their salaries, that it
would suspend its flights until Oct. 20.
The airline hasn’t paid its workers’ sal-
aries since March.
India’s aviation regulator earlier
said it may cancel the airline’s license
because of its problems, while Mr.
Mallya had earlier said he was looking
to sell a stake of his airline to a for-
eign carrier. Kingfisher Airlines has
never posted a profit since its incep-
tion in 2005.
Mukesh Ambani, chairman and
managing director of Reliance Indus-
tries Ltd., came second on the list. Mr.
Ambani was recently named India’s
richest man by Chinese research firm
Hurun. According to Hurun’s report, his
total worth is $19.3 billion.
—Saptarishi Dutta
Vijay Mallya
Chairman,
United Breweries
Mukesh Ambani
Chairman and Managing Director,
Reliance Industries
Heard on the Street:
Digging into the
dirt in India.
26
Pratip C. Chaudhuri
Chairman,
State Bank of India
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The Wall Street Journal
THE WALL STREET JOURNAL.
Friday - Sunday, October 19 - 21, 2012 |
3
WORLD NEWS: ASIA
Chinese Firm Says U.S. Discriminates
B
Y
D
INNY
M
C
M
AHON
Economic Cooperation, said the
Ralls decision undermines those ef-
forts.
“I don’t know what signal Mr.
Obama is trying to give to foreign
investors around the world. Maybe
it’s ‘come to invest in the U.S. and
you will end up pantless and penni-
less,’ ” said Mr. Mei, who was speak-
ing at the same news conference. “I
think a dark shadow will be cast in
the minds of potential investors be-
cause they don’t know how their in-
vestments will end up.”
Chinese investment in the U.S.
has been on the rise in recent years,
with efforts by U.S. state govern-
ments in particular helping to break
down perceptions the U.S. is off-lim-
its to Chinese investors. According
to Rhodium Group, a New York con-
sulting firm that closely tracks Chi-
nese outward investment, Chinese
companies invested $3.6 billion into
U.S. companies and projects in the
first half of 2012. Rhodium esti-
mates that Chinese companies could
invest as much as $8 billion in the
U.S. this year, clearing the previous
record of $5.8 billion invested in
2010 and up from $2 billion in 2005.
Rhodium forecasts that if current
trends continue, the U.S. units of
Chinese companies will directly sup-
port between 200,000 and 400,000
jobs by 2020, up from 27,000 cur-
rently.
“There’s a lot of hostility and
prejudice in the U.S. against Chinese
investors,” said Xiang Wenbo, presi-
dent of Sany. Still, he added that he
hopes to send his son to study in
the U.S. one day. “Regardless of our
treatment, I personally feel that the
U.S. is a great nation.”
Sany built a construction-ma-
chinery factory in Peachtree, Ga., in
2007 for $60 million.
BEIJING—A Chinese company
suing the Obama administration for
blocking its investment in an Ore-
gon wind farm said that Chinese
companies are unfairly discrimi-
nated against in the U.S. and that
the president’s decision threatens
further foreign investment.
Speaking to journalists in Bei-
jing, executives from Sany Group
said that their company and
Ralls
Corp., the affiliate that made the in-
vestment, pose no threat to U.S. se-
curity and that the decision to block
the investment was groundless.
“When it comes to Chinese-
owned companies, there seems to be
a presumption of guilt,” said Wu Ji-
aliang, the chief executive of Ralls
and deputy general manager at
Sany. “What else could it be other
than discrimination?”
A spokesman at the U.S. embassy
in Beijing declined to comment. On
Sept. 29, the administration said in
a written statement that the move
demonstrates its commitment “to
protecting national security while
maintaining the United States’ long-
standing policy on open invest-
ment.”
In late September, Mr. Obama ef-
fectively nullified the purchase of
four wind-farm projects by Ralls, a
Delaware-registered company
owned by two Chinese nationals and
backed financially by closely held
machinery maker Sany. The wind
farms were located either in or near
restricted military airspace. Mr.
Obama struck down the investment,
citing national-security concerns.
Ralls CEO Wu Jialiang suspects U.S. discrimination against Chinese-owned firms.
Chinese firms invested
$3.6 billion into U.S.
companies and projects
in the first half of 2012.
TO BREAK THE RULES,
YOU MUST FIRST MASTER
THEM.
Sany is only the most recent Chi-
nese company to run into political
opposition while trying to do busi-
ness in America. U.S. advisers on
cross-border investment say failed
deals—most notably the 2005 bid by
Chinese oil company
Cnooc
Ltd. for
Unocal Corp., which was withdrawn
in the face of opposition in Wash-
ington—deter would-be investors in
the U.S.
Earlier this month, a congressio-
nal committee issued a report warn-
ing that telecommunications equip-
ment made by Chinese companies
Huawei Technologies Inc. and
ZTE
Corp. pose a threat to U.S. security.
The companies have denied the alle-
gations.
“If this unwarranted action takes
hold of the U.S. over and over again,
it will intimidate foreign capital,”
said Mr. Wu about the Ralls deci-
sion. “It won’t be to the benefit of
U.S. citizens.”
China has become a major issue
in the U.S. presidential campaign,
with the Obama administration hav-
ing filed a series of trade complaints
against China in recent months and
Republican candidate Mitt Romney
saying that he would push Beijing
harder to let its currency appreciate
from his first day as president.
Meanwhile, both federal and
state governments have been ac-
tively trying to court investment
from China as a way to lift a slug-
gish economy and create jobs at
home.
Mei Xinyu, a researcher under
the Ministry of Commerce’s Chinese
Academy of International Trade and
THIS ICONIC PIECE CELEBRATES THE PURPOSEFUL
ROYAL OAK ARCHITECTURE, OFFSET WITH A CROWN OF
DIAMONDS OF ULTIMATE PEDIGREE. ALLURING MASTERY
OF BOTH WATCHMAKER’S AND JEWELLER’S ART;
SIGNATURE AUDEMARS PIGUET.
ROYAL OAK
IN STAINLESS STEEL
WITH DIAMOND-SET BEZEL.
WITH DIAMOND SET BEZEL.
EL
4
| Friday - Sunday, October 19 - 21, 2012
THE WALL STREET JOURNAL.
WORLD NEWS: ASIA
More China Goods Ship to U.S.
Wal-Mart
Accused of
Illicit India
Investment
B
Y
C
OLUM
M
URPHY
SHENZHEN, China—U.S. consum-
ers are rediscovering their appetite
for China’s products, according to a
senior shipping executive and a
number of companies, but its slow
comeback won’t be enough to offset
slumping European demand anytime
soon.
The comments by
Neptune Ori-
ent Lines
Ltd. President and Chief
Executive Ng Yat Chung, as well
customers and other shipping-in-
dustry observers, come as compa-
nies and economists closely watch
conditions in a nation sometimes
called the world’s factory floor.
Weak exports have exacerbated a
slowdown in China’s domestic econ-
omy, which in the third quarter
grew at its slowest pace since the
global financial crisis—7.4% from a
year earlier.
Last weekend, Chinese officials
said September exports were up an
unexpectedly strong 9.9% from a
year earlier, bolstered in part by de-
mand from the U.S. The results
cheered some economists looking
for a bottom for China’s slowdown.
But in an interview on Thursday,
Mr. Ng said “exports from this part
of the world have fallen off a cliff,
mainly due to demand problems in
Europe, and I don’t see that turning
around any time soon.” Neptune
Orient owns APL, one of the world’s
largest container-shipping compa-
nies and a key mover of goods from
China and elsewhere to European
and U.S. markets.
Speaking on the sidelines of a
shipping-industry conference in the
Chinese city of Shenzhen, he said
B
Y
R
UMMAN
A
HMED
A
ND
R
AJESH
R
OY
NEW DELHI—India is considering
whether to act on an accusation by
a politician that
Wal-Mart Stores
Inc. illegally invested in a local su-
permarket despite a ban on foreign
direct investment in the sector.
The complaint, made in a letter
to Prime Minister Manmohan Singh
in September, alleges that a unit of
Wal-Mart bought debentures in a
holding company that owns Bharti
Retail Ltd., which manages the Easy-
day supermarket chain in India.
The government hasn't launched
an official probe into Wal-Mart, said
Pankaj Pachauri, a spokesman for
Mr. Singh. A Commerce Ministry of-
ficial said the matter had been re-
ferred to the central bank.
A spokeswoman for the central
bank said she couldn’t confirm this.
She added that the bank didn’t have
the powers to investigate such a
matter.
The Financial Times reported
Thursday that India was investigat-
ing the allegations.
A spokeswoman for Wal-Mart in
India, Arti Singh, on Thursday de-
nied wrongdoing and said the com-
pany was in compliance with all In-
dian laws, which allow foreign
outlays in wholesale retail opera-
tions but not supermarkets. A
spokesman for Bharti Retail also de-
nied the allegations.
A person involved with Wal-
Mart’s operations confirmed a unit
of the U.S. company made a $100
million investment in debentures is-
sued by a holding company that con-
trols Bharti Retail, but denied this
was in contravention of Indian laws.
The accusations were raised in
Parliament in September by M. P.
Achuthan, an Indian lawmaker. In
the letter to Mr. Singh, Mr. Achuthan
claims a unit of Wal-Mart in 2010
bought $100 million of convertible
debentures in the holding company,
Cedar Support Services Ltd.
He claims this was illegal as the
money was used by Bharti Retail to
fund investments in its supermar-
kets.
The allegations come as Wal-
Mart is hoping to increase its pres-
ence in India. Last month, India un-
veiled economic overhauls that
would allow foreign supermarkets to
own up to 51% in local supermarket
ventures. The sector is expected to
grow rapidly in the years ahead as
India’s local markets give way to
larger retail stores.
The accusations against Wal-
Mart underscore a deep distrust of
foreign investment among some pol-
iticians in India. The decision last
month to allow investment in super-
markets spawned a backlash, even
from the government’s own coalition
allies.
In 2007, Wal-Mart set up a joint
venture with
Bharti Enterprises
,an
Indian conglomerate that controls
Bharti Retail through Cedar Support
Services.
The joint venture, Bharti Wal-
mart Pvt. Ltd., manages 17 wholesale
stores across India and handles
technology and logistics, which has
been allowed since 2006. Wal-Mart
has said it expects to apply by the
end of November for government
permission to set up a full super-
market joint venture.
A container ship in Ningbo, in eastern China’s Zhejiang province. Shippers say U.S. appetite for China goods is on the rise
improving consumer sentiment in
the U.S. “is certainly helpful” and
that volumes in recent months have
looked better than expected.
Still, that could shift quickly, he
said, adding, “consumers can be
fickle, so to what extent the U.S.
government addresses the so-called
fiscal cliff issue is going to have a
material impact.”
Another shipping company,
Ori-
ent Overseas Container Line
, sees
some North American growth “even
though the economy has not fully
recovered in the U.S.,” said Stephen
Ng, director of trades. “It’s coming
back in a slow manner.” The firm is
an arm of Hong Kong-based
Orient
Overseas (International)
Ltd.
A number of makers of products
from furniture to power tools in
China said they saw promise in the
uptick in U.S. demand.
For Swedish home-appliance
company
Electrolux
AB, shipments
to North America are about 10%
higher than forecast due to the re-
surgence in the housing market,
said Bjorn Vang Jensen, vice presi-
dent of global logistics. “Our busi-
ness rests on people buying new
houses, renovating their old ones
and replacing their current appli-
ances,” he said. “And in the US, all
those are currently trending up.”
HTL International Holdings
,
which makes leather sofas, said its
export volumes to the U.S. have
been increasing as the company re-
duces its dependency on Europe. In
the first half of the year roughly
50% of its shipments were to Eu-
rope, compared with 60% last year.
“We’re cautiously optimistic on the
U.S.,” said David Macleod, logistics
director.
Shipments for the Christmas sea-
son, typically made in August and
September, has been mixed, said
Alan Mctaggart, director of global
logistics for
Techtronic Industries
HK. Its products include power
tools, outdoor equipment like chain-
saws and floor-care tools like vac-
uum cleaners and carpet washers.
He said most of the Christmas
shipments for Europe have gone al-
ready, and ships were “quite light in
the water at the moment.” But U.S.
trade is holding up better, he said.
“We are budgeting increased vol-
umes in the States, at least over 5%
growth to the U.S. going forward,
whereas a lot of people are target-
ing flat or 0% growth to the U.S.,”
he said.
The slowdown in trade has the
shipping industry swimming in red
ink. Neptune Orient, which is about
66% owned by Singapore state in-
vestment company
Temasek Hold-
ings
, posted a net loss of US$118
million in the second quarter, wider
than the year-earlier loss of US$57
million. Its Singapore-traded shares
ended Thursday at 1.175 Singapore
dollars (97 U.S. cents), 22% below a
52-week high reached in February.
“Temasek is very much focused
on returns,” said Mr. Ng, Neptune
Orient’s chief executive. “It’s my job
to prove that we are the right man-
agement team to back and that we
have a way out to create share-
holder value.” The company is on
target to achieve $500 million in
savings this year, he added.
The delivery of new ships indus-
trywide—ordered during the
pre-2008 trade boom—is expected
to further drive down shipping
rates. Neptune Orient has 34 ships
worth $4 billion on order that will
join the fleet by early 2014.
But recent decisions by
A.P.
Moller-Maersk
A/S and other liners
to remove capacity was an “encour-
aging pattern,” Mr. Ng said. “It’s a
sign of optimism that carriers are
behaving well.”
Mr. Ng said the company is on
the lookout to raise financing, citing
low interest rates, but he said its li-
quidity is secure and it has ample
access to credit lines.
Divergent Markets
China’s exports to the U.S. and EU,
change from a year earlier
Sept.
Jan.-Sept.
10
%
5
0
–5
–10
U.S.
EU
Source: General Administration of Customs
The Wall Street Journal
AmidCrackdown, SmallRefineriesExpand
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China’s top-down policies can run
into resistance at a local level.
Continued increases in China’s
capacity would be bad news for re-
finers globally, especially in the in-
dustrialized world, where plants are
being shut or run at losses due to
overcapacity and weak demand.
In its latest medium-term out-
look, the IEA, a global energy
watchdog, said China could become
a petroleum-product exporting pow-
erhouse with current expansion
plans.
The IEA last week forecast that
global oil demand would rise to 95.7
million barrels a day by 2017, but re-
fining-sector expansion plans will
likely take global refining capacity
to 100.5 million barrels daily.
China will account for more than
40% of global refining capacity
growth in the next five years. How-
ever, the viability of the country’s
refining sector is under question be-
cause of recently sluggish demand
and a weaker economic growth out-
look, which has prompted some
state-run oil firms to scale back ex-
pansion plans, the IEA said.
expand by 37% to 5.23 million bar-
rels a day by 2015, according to an
Argus Media study. If so, together,
the teapots will rival the entire oil
refining capacity of big energy-con-
suming nations like India and Japan.
Beijing faces tough choices in
dealing with the teapots. Often, they
are key to preventing fuel shortages
when demand swings up, but their
growing scale and significance
threatens to loosen Beijing’s control
over the industry and weaken the
sector domination of two powerful
state-run groups, China Petrochemi-
cal Corp., known as Sinopec Group,
and China National Petroleum Corp.
One way China’s National Devel-
opment and Reform Commission is
managing the growing prowess of
independent refiners is by pushing
them to integrate with state-run gi-
ants, says Tian Miao, an energy ana-
lyst at North Square Blue Oak.
China’s effort to shut down doz-
ens of small, privately owned oil re-
fineries is instead making them
grow bigger, threatening Beijing’s
plans to regulate an industry that
the International Energy Agency
says is already overheating.
Government policies in the re-
sources sector have caused the clo-
sure of hundreds of small Chinese
coal mines and cement and steel
factories, but a similar push in oil
refining is playing out differently.
Faced with a potential crack-
down next year on refineries pro-
cessing fewer than 40,000 barrels of
oil a day, some independent refin-
ers—called teapots because of their
small size—are responding by rais-
ing capacity, and their efforts to re-
sist closure are being backed by re-
gional governments, reflecting how
China will account for
more than 40% of global
refining capacity growth
in the next five years.
Analysts say while Beijing can
slow the pace of expansion by its
state-owned oil companies, a surge in
capacity addition by private refiners
could undermine its balancing act.
Teapot refineries, which already
make up more than a quarter of
China’s total refining capacity, may
THE WALL STREET JOURNAL.
Friday - Sunday, October 19 - 21, 2012 |
5
WORLD NEWS: ASIA
South Korean Leader
Visits Shelled Island
Rate Cuts Could Cushion
Australia’s Economy
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AMES
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LYNN
within the bank’s 2%-3% target
band. The remarks, in a testimony
to lawmakers in Canberra, come as
the federal government is set to re-
lease its midyear budget update as
soon as next week.
In May, Treasury forecast the
economy would grow at 3.25% this
fiscal year, slowing to 3% the year
after. It also forecast a wafer-thin
budget surplus of 1.5 billion Austra-
lian dollars (US$1.6 billion) for the
fiscal year ending June 30—a goal
the government of Prime Minister
Julia Gillard has staked its chances
of retaining office in an election due
late next year on achieving.
The revenue to pay for this blue-
print was supposed to come partly
from a new tax on profits from the
sale of mineral resources and higher
corporate-tax receipts.
But the sharp slide in commodity
prices and signs of retrenchment by
Australian miners over recent
months has put that plan at risk.
From copper mines in tropical
Queensland state to big iron-ore pits
in the country’s west, mining com-
panies are idling equipment and lay-
ing off workers.
In the latest example, Mount
Gibson Iron Ltd. said Thursday it
was laying off about 270 workers,
slowing production and cutting pay
for senior managers to curb costs
and help it ride out the commodity
price fall.
Mr. Gruen said investment in the
resources sector would likely in-
crease by about 45% this fiscal year,
down from 75% a year earlier.
SYDNEY—Recent interest-rate
cuts by Australia’s central bank are
cushioning the impact of falling com-
modity prices on economic growth, a
top executive at the country’s Trea-
sury Department said Thursday.
Slowing growth in China, the
country’s biggest trading partner,
has triggered sharp falls in indus-
trial commodity prices, buffeting
Australian exports. David Gruen,
head of economic forecasting at the
Australian Treasury, said there is
“no question” those falling prices
will dent growth and crimp govern-
ment tax revenue.
But after taking into account re-
cent interest-rate cuts, the economy
is tracking broadly in line with the
government’s May budget, Mr.
Gruen added.
The comments are at odds with
the Reserve Bank of Australia,
which has indicated it will down-
grade its growth forecasts for the
resource-rich economy in an update
due Nov. 9.
The central bank has slashed in-
terest rates by 1.5 percentage points
since November, with financial mar-
kets expecting the benchmark lend-
ing rate to fall to about 2.50% by
the middle of next year as the coun-
try’s mining industry slows and un-
employment rises. The cash rate is
currently 3.25%—a three-year low.
Mr. Gruen said Thursday the RBA
has scope to cut interest rates fur-
ther “if it sees fit,” especially as in-
flation
B
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OO
N
AM
SEOUL—South Korean President
Lee Myung-bak on Thursday made a
surprise visit to an island near the
border with North Korea that was
shelled by Pyongyang two years ago,
and vowed to punish any further
military provocation by the North.
“We all should bear in mind how
important it is to defend [the mari-
time border] for the peace in this
country,” a statement quoted Mr.
Lee as saying as he inspected an an-
tiartillery radar unit and artillery
company on Yeonpyeong island,
which he visited for the first time
since he took office in early 2008.
“If North Korea provokes us, we
have to retaliate strongly.”
In November 2010, shells from
the North killed four people on Yeo-
npyeong, the site of the only attack
on South Korean soil by North Ko-
rea since the 1950-53 Korean War.
President Lee’s administration at
the time faced sharp criticism for its
slow response to the attacks.
Presidential spokeswoman Lee
Mi-yon said Mr. Lee’s visit was
aimed at “checking the security sta-
tus there ahead of the second anni-
versary of the shelling and following
the latest visit by North Korean
leader Kim Jong Eun in that area.”
North Korea recently threatened
a further attack on the island during
military drills by the South. And last
President Lee Myung-Bak with Marines on Yeonpyeong island on Thursday.
month, Kim Jong Eun visited the
North Korea-controlled islands from
which its army fired on Yeonpyeong.
Mr. Lee’s visit comes amid grow-
ing security concerns in South Ko-
rea following a recent defection by
a North Korean soldier to the South
through the heavily armed Demilita-
rized Zone.
Mr. Lee last week criticized De-
fense Minister Kim Kwan-jin over
the lax military discipline.
Tensions on the Korean penin-
sula also have been raised in recent
weeks by a series of maritime bor-
der confrontations with the North,
and a new U.S.-South Korean deal to
nearly triple the range of
the
South’s missile system.
On Thursday, South Korea an-
nounced it would launch next week
a military drill with U.S. soldiers
stationed in the country aimed at
countering threats from North Ko-
rea.
There are concerns in the South
that Pyongyang might take provoca-
tive actions in the run-up to South
Korea’s presidential election in De-
cember.
remains well-contained
BOJ to Consider Fresh Easing
After Missing Inflation Goal
TIMBERpROcEssIngAssETsFOR
IMMEDIATEsALE
Gunns Timber
Products
B
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EGUMI
F
UJIKAWA
A
ND
T
ATSUO
I
TO
CPI to rise by 0.7% in the fiscal year
starting April 2013.
In a rare revelation of the tug-of-
war between the government and
the central bank over monetary pol-
icy, a former junior cabinet minister
said Thursday he had specifically
told the policy board the inflation
target should be strengthened, but
the idea had largely been ignored.
Katsuyuki Ishida, a vice economy
minister until earlier this month
who attended the Bank of Japan’s
policy board meetings as a govern-
ment representative, said he told
BOJ officials on the sidelines of one
of the gatherings to toughen the
language on its 1% inflation goal.
stocks turn higher. BOJ officials have
said that even though they don’t tar-
get these areas in formulating policy,
they are still watched for their im-
pact on the broader economy.
The yen has been falling in re-
cent days amid signs of a recovering
U.S. economy, pushing the dollar
above the ¥79 level for the first
time since Aug. 22. Tokyo shares are
moving higher, meanwhile, posting
a 2% gain Thursday.
Still, missing the inflation goal
will likely increase political pressure
to loosen monetary policy further,
especially as the government also
started to make its own renewed ef-
forts to revive the nation’s economy.
Prime Minister Yoshihiko Noda
ordered his cabinet on Wednesday
to draft an economic stimulus pack-
age. He needs to show the economy
is healthy enough to withstand a
planned increase in the national
sales tax, a measure that is a critical
part of his plan to improve the
country’s grim fiscal state.
If the central bank were to act, in-
creased purchases of exchange-traded
funds and real-estate investment
trusts would likely be on the table.
Recent additional moves have been
focused on the purchase of Japanese
government bonds, which make up
the bulk the ¥80 trillion program.
The BOJ has already bought such
risk assets to near the upper limit
under the program. As of Oct. 10, it
held ¥1.416 trillion of ETFs and ¥102
billion in J-REITs, compared with
ceilings of ¥1.6 trillion and ¥120 bil-
lion, respectively.
—Takashi Mochizuki
contributed to this article.
TOKYO—The Bank of Japan’s
policy board, under growing politi-
cal pressure, is expected to consider
fresh easing measures at its coming
meeting after concluding that its
goal of reaching a 1% rise in prices
is more than two years away, ac-
cording to people familiar with the
bank’s thinking.
The BOJ is due to release its ini-
tial forecast for the fiscal year be-
ginning April 2014 at the Oct. 30
meeting in its semiannual outlook
report on the economy and prices.
The forecast is expected to show
that the economy will fail to meet
the 1% inflation goal the central
bank considers the benchmark for
indicating that Japan is finally leav-
ing behind nearly 20 years of defla-
tionary pressure.
“While there hasn’t been much
bright news in the past month,
some additional negative factors
have appeared, such as lowering
production activity in China,” one of
the people said. “Sentiment has
worsened sharply.”
BOJ Gov. Masaaki Shirakawa ac-
knowledged in October that the
bank had downgraded its view on
prices when it decided to increase
the size of its asset-purchase pro-
gram by ¥10 trillion ($126 billion) in
September. Previously, Mr. Shi-
rakawa had said he expected 1% in-
flation would kick in some time af-
ter the April start of the 2014 fiscal
year.
In its interim review issued in
July, the BOJ said it expected core
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thetruturaloftwoodetoriAutralia
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The yen has been falling
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“They say it’s an inflation ‘goal,’
but the wording isn’t clear,” Mr.
Ishida, who left the post in a cabinet
reshuffle this month, said in an ex-
clusive interview. “I suggested that
the board step up its language so
that everyone would agree it’s a
‘target.’”
Despite the added political pres-
sure for the BOJ to act, other signs
appear to suggest the bank could
stand pat.
The strong yen, a source of con-
cern since it acts as a brake on ex-
ports, has lately been weakening
slightly, which in turn is helping
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