Mar 31, 2012

Vietnam - New trend: students get married and go to school at the same time

VietNamNet Bridge – It is a growing tendency that university students get married when they still have to go to school.


Most of the students are third year or fourth year students, born in early 1990s. It is the time for them to learn hard and enjoy the life. However, many of them decide to follow another way. They get married to become wives and the mothers-students.

The office management class of the Thanh Do University has become more well-known among students as the class which has many members getting married. The monitor of the class said that the class’ fund would have to spend much money in 2012 on the foreseen wedding parties.

Two members of the class got married last year, while some others are preparing for their weddings.

Nguyen Thi Hong Tham, born in 1990, is now the third year student of the school, got married in November 2011. Right after the wedding, Tham has returned to her normal life. Her husband is working in Son La province, while Tham is staying in Hanoi to follow the university study. Especially, Tham shares the same rent room with other classmates.

La Thi Khuyen, a classmate of Tham, born in 1991, just organized the wedding some days ago. Khuyen said her husband has a job as a designer in Lao Cai province. Meanwhile, Khuyen needs to keep studying, trying to obtain the university degree, while she does not intend to give up school or have baby right now.

“Four other female students would organize weddings in 2012,” said Vu Thi Lan, a student of the same class.

Unlike Khuyen and Tham, who vowed to obtain university degree before having babies, Tao Thi Thuy Tien, born in 1990, a student of the Da Nang Economics University, expects a baby in May 2012. However, the young mother still has flippant manner like many other single students.

She has affirmed that the marriage would not influence her plan to follow university education. Though she now is a little tired in the pregnancy period, she still follow the internship and prepare for the graduation exams.

The world of the married students

Though the students still go to school every day like many other students, their lives have been upset because of the too many duties they have to fulfill. 

As students, they do not have to take jobs to earn their living, while they can live on the parents’ money. Meanwhile, after getting married, they not only have to spend time on studying, but also have to think about how to earn money.

“My main duty now is keeping studying. However, a lot of problems have arisen which I could not imagine before,” Tham said.

Lan, a Tham’s classmate, has also noted that Tham and Khuyen now have more problems to think about, while they cannot spend their time with friends any more.

“I now have to think twice before spending money. I cannot learn well as before. Sometimes I stay late at night and could not believe that I got married already,” Tham added.

Tien said that she does not have to take a job to earn money, but she also has her problems. Therefore, sometimes she feels regret that she got married too soon. It was because she wanted to satisfy the parents, who wanted to have grandchildren in 2012, the year of Dragon. Meanwhile, her mother, who suffers from heart disease, wanted to see the daughter get married soon.

Source: VTC


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Vietnam - What to gain from a Ramsar site?

Tram Chim National Park, in Tam Nong District of Dong Thap Province, has been recognized as the 2,000th Ramsar site of the world and the fourth of Vietnam by the Ramsar Convention – the International Union for Conservation of Nature (IUCN). 


Nguyen Huu Thien, an ecologist with over 20 years of experience in conserving wetlands in the Mekong Delta, talks about the site.


According to you, why has Tram Chim been certified as a Ramsar site of the world?

A: Tram Chim deserves the title of a Ramsar site as it meets eight of the nine criteria of the Ramsar Convention. In addition, BirdLife has also ranked Tram Chim among important bird areas in Vietnam. Today, the original scenes of Dong Thap Muoi have almost disappeared and only some important areas remain, such as Tram Chim in Dong Thap and Lang Sen in Long An. Conserving such remaining areas has multiple meanings in biodiversity, ecology, tourism, culture and scientific research.

What makes Tram Chim special compared with other Ramsar sites?

This is one of the last areas of Dong Thap Muoi, a wild wetland covering nearly one million hectares, stretching from Dong Thap to Tien Giang and Long An provinces. Dong Thap Muoi in the old days was a paradise of several fauna species, including crocodiles and monkeys. Many places in the old Dong Thap Muoi remind this image of wilderness such as Bung Sau Hi (a swamp with many crocodiles), Ca Dam Canal and Lam Vo Hill, which were named after the trees that are scarce now. The meadow of Tram Chim is a sight that is hardly seen elsewhere in the Mekong River basin. In addition, the wild rice fields in Tram Chim are the biggest growing area of this rice strain that still remains in the Mekong Delta. In particular, in the dry season every year, from January when the water level in the field begins to go down until the beginning of the rainy season in late May, Tram Chim welcomes a colony of Sarus cranes coming here to live.

What is the benefit for Tram Chim when it has become a Ramsar site?

Being certified as a Ramsar site is a good opportunity for preserving the wetland in Tram Chim. The first advantage for a Ramsar-certified wetland of international importance is that the name of that area and even of the country will be better known as it is mentioned more at international forums on conserving and using wetlands wisely. Tram Chim is recognized as the 2,000th Ramsar site of the world, and this very figure will also attract a special attention to Tram Chim. In addition, when becoming a Ramsar site, Tram Chim will have opportunities to receive support from experts as well as to apply internationally recognized standards.

What problems in Tram Chim do you think scientists have helped deal with?

Over the past few years, Tram Chim National Park has received support from many individuals, agencies and organizations at home and abroad such as National University of Hanoi, Can Tho University, HCMC University of Natural Sciences, International Crane Foundation (ICF), IUCN, World Wild Fund for Nature (WWF) and many local and foreign experts. Thanks to that, we have managed to settle important issues threatening the ecosystem of Tram Chim, the most important of which was the successful experimentation of managing water appropriately, maintaining the two-season hydrological regime in compliance with the natural principles of Dong Thap Muoi. Local people have also grouped to use resources controllably inside the national park.

Scientists seem to be concerned about the water in Tram Chim, don’t they?

The biggest threat for the Tram Chim ecosystem is that dikes around Tram Chim are too high. These dikes were raised in 2003 to 4-5 meters over the ground in order to store water all year round inside Tram Chim to prevent fires. The system of low dikes with the height of about two meters around Tram Chim like before 2003 is necessary to maintain the suitable humidity, making up for the amount of evaporated water from the surface and leaves, and the absorbance in the dry season. In the context of hydrologic changes in Dong Thap Muoi, if there is not a system of surrounding low dikes, the water level will drop to about 1.5-2 meters below the earth surface in the dry season and the plants and weeds will wither and die. The system of low dikes like those before 2003 still allows floodwater to overflow it. However, since the system was hightened, Tram Chim has been isolated from the outside environment.

As floodwater cannot overflow the dikes, fish eggs and fry from the Mekong River can only enter Tram Chim in small quantities through the openings of floodgates. The decrease in fish results in the decrease in waterfowls due to the lack of feed.

The solution to this problem is probably to lower some sections of the dikes or build dams for water to overflow in the flood season to bring in fish eggs and fry, and create conditions for the vegetation waste inside to disintegrate better to improve the water environment and reduce the risk of fires. We should also note that a small number of annual fires are necessary for the wetland of Tram Chim.

SGT



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Vietnam - Highest number of poor households in northern mountainous region

VietNamNet Bridge – According to the latest survey of the Ministry of Labor, War Invalids and Social Affairs (MoLISA), Vietnam has nearly 2.6 million of poor households, over 1.5 million others that approach the poverty threshold.


The survey was carried out in 63 provinces and cities of Vietnam, divided in eight regions: northwestern and northeastern regions, the Red River Delta, the IV region, coastal central region, Central Highlands, southeastern region and the Mekong Delta.

The northwestern region has the highest rate of poor families, with over 33 percent, followed by the northeastern region with over 21 percent, the Central Highlands with nearly 19 percent, the IV region with over 18 percent, the coastal central region with over 14 percent, the Mekong Delta with over 11 percent, the Red River Delta with 6.5 percent and the southeastern region with nearly 2 percent.

There are eight provinces and cities which have the rates of poor households less than 5 percent: HCM City (0.006 percent), Binh Duong (0.01 percent), Dong Nai (1.24 percent), Ba Ria-Vung Tau (2.95 percent), Danang (2.98 percent), Hanoi (3.14 percent), Tay Ninh (4.27 percent) and Quang Ninh (4.89 percent).

Some northern mountainous provinces have the highest rates of poverty: Dien Bien (over 45 percent), Lai Chau (nearly 39 percent), Ha Giang (over 35 percent) and Lao Cai (over 35 percent).

The IV region has the highest rate of households that approach the poverty threshold, followed by the northwestern region. The lower rate is in the southeastern region.

The survey is the basis for implementing social welfare and other social policies in 2012.

The rate of poor households in Vietnam reduced from 22 percent in 2005 to 9.45 percent in 2010.

According to new standards applied for the 2011-2015 period: households that earn less than VND400,000 ($20) per person/month in the rural and VND500,000 ($25) in the urban areas are considered as poor. They are considered to approach the poverty threshold if earning from VND401,000 to VND520,000/person/month in the rural and from VND501,000 to VND650,000/person/month in the urban areas.

Le Ha



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Vietnam - Interest rates on the decline

VietNamNet Bridge – The recent moves taken recently by the State Bank of Vietnam and the market performance, all show that the interest rate reductions would take place soon.


The State Bank of Vietnam has reported that the interbank interest rates for many kinds of loans have dropped to below 10 percent. Banks now can borrow at the interest rates of 8-9 percent per annum for 12 month term loans. The interest rates for one and two week loans are 8.67 percent and 9.75 percent, respectively. 

However, banks still have to pay more than 10 percent per annum for other loans with the highest interest rate at 13.14 percent per annum, applied for 3 month term loan.

Bankers have also said that the interest rates have been decreasing significantly. However, they said it is still difficult to borrow money on the interbank market, because of the strict requirements on the collaterals.

Meanwhile, the State Bank of Vietnam has requested big banks to cut down expenses by 5-10 percent in order to be able to slash the lending interest rates, step by step. The big banks include Agribank, VietinBank, Vietcombank, BIDV and MHB. All of the five are either state owned banks or joint stock banks, in which the State holds more than 50 percent of the chartered capital.

In fact, right after the State Bank released the decision to lower the dong ceiling deposit interest rate by one percent in early March 2012, the above said banks all have announced the 1-2 percent lending interest rate reductions. 

Dr Tran Du Lich, a well-known economist, Member of the National Advisory Council for the Finance and Monetary Policies, said on Dau tu, that once the ceiling deposit interest rate went down, banks would have to slash the lending interest rates in order to push up lending. Since early February, the credit has not increased because of the overly high lending interest rates.

Ceiling deposit interest rate may be removed in June

As the interest rate is on the decrease, experts have called on to remove the ceiling deposit interest rate mechanism, emphasizing that the non-market measure should not be applied in a market economy. 

Le Trong Nhi, a well known economist, has noted that the State Bank of Vietnam is still hesitant to remove the ceiling interest rate mechanism, fearing that if the bank does this now, the interest rates may skyrocket, because small banks, which are facing liquidity problem, will raise the deposit interest rates. This would trigger a new interest rate race.

Tran Hoang Ngan, Member of the National Advisory Council for Finance and Monetary Policies, in an interview given to VnExpress, said that the ceiling deposit interest rate mechanism should not be removed until June, because the current problems would be fixed only by that time.

Meanwhile, General Director of Eximbank Truong Van Phuoc, also thinks that the central bank has its own reason to keep cautious with the move to remove the ceiling interest rate mechanism, since weak liquidity remains a big problem for many banks.

“The interest rates would go down in the future, but it’s still unclear when,” Phuoc said.

He went on to say that the State Bank needs to speed up the process of restructuring banks to stabilize the system. If the job can be done well, the lending interest rates may go down to 15 percent by July or August. If so, the deposit interest rates would go down as well. In general, banks do not care much about the interest rates, but care more about the gap between the deposit and lending interest rates.

Phuoc has warned about the high possibility of the high inflation returning. Consumer goods prices have been increasing sharply after the fuel price increases. Meanwhile, the interest rate reductions should be seen as a threat to the inflation.

C. V



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Vietnam - M&As to fuel investments


A research team for the annual M&A Vietnam Forum, to take place in June with Vietnam Investment Review (VIR) the organiser, puts Vietnam’s foreign-related M&A activities and prospects in 2012 under the microscope.

Cross-border mergers and acquisitions activities are valued at thousands of billions of dollars annually and create conditions for investors to access their target markets very quickly.

In Vietnam, figures from mergers and acquisitions (M&A) research organisations including Thomson Reuters, IMAA and AVM Vietnam show that the total value of M&A deals in Vietnam last year reached nearly US$4 billion, an impressive step up from the 2010 figure of US$1.7 billion. Of this, over $2.6 billion originated from deals involving foreign investors.

Thus, M&A in general and foreign-related M&A in particular, have played an important role in Vietnam’s investment activities. This presentation will deal with prominent characteristics of Vietnam-based foreign-related M&A activities, and provide a forecast for M&A while giving future recommendations.

Characteristics and trends
Foreign-related deals made up 66 per cent of the value and 77 per cent of the quantity of the total value of US$4 billion of Vietnam’s M&A deals last year. The highest profile deals in 2011 included Russian VimpelCom increasing its ownership rate in the joint venture Gtel-Mobile to 49 per cent, IFC purchasing a 10 per cent stake in Vietinbank, Mizuho purchasing a strategic holding in Vietcombank, and Carlsberg buying out Hue Brewery Company to become the sole owner of that firm.

The main reason for the rise in the foreign-related M&A deals in Vietnam is that foreign investors have realized that there are more favourable investment opportunities in purchasing local firms than directly investing in the country. Besides, in 2011, deals related to selection of strategic investors were also realized.

Financing, consumption and property as foreign investors’ targets
Foreign investors had their eyes glued on the consumer goods, banking and property sectors for M&A deals concluded in 2011.

The consumer goods sector saw the most attractive growth, with a total value of US$1 billion in M&A deals, occupying 25 per cent of total value of all deals in Vietnam last year. Large deals coupled with purchasing of dominant stakes have demonstrated a trend in which foreign investors are expanding their value chains and markets via M&A. Deals such as the Unicharm - Diana, Marico - ICP and Carlsberg – Hue Brewery are emblematic.

The financing-banking sector has also been of interest to foreign investors. The Mizuho - Vietcombank, IFC - Vietinbank and PVI - Talanx deals show that foreign investors still want to become strategic investors in large local equitised financial organizations.
As for the property sector, it was a difficult 2011 that fuelled property-related M&A activities, with the total value of deals estimated to be US$250 million.

Japan’s investment trend
Last year, Japanese groups contributed the largest amount of cash to Vietnam’s M&A market, with the deals involving these groups totalling $596 million. Japanese investors tended to pour their cash into the consumer goods and financial sectors, which have witnessed high growth over the past few years and are also the investment targets of many foreign financial institutions.

The most typical deal in the financial sector was Vietcombank’s sale of a 15 per cent stake to Mizuho. This was the second time that a Japanese bank had become a strategic stakeholder of a Vietnamese bank. The first involved Sumitomo Mitsui Banking Corporation’s purchase of a 15 per cent stake from Eximbank.

Meanwhile, the consumer goods sector saw Unicharm purchasing a 95 per cent stake from Diana, with the total value of the deal estimated to be $129 million. The sector also saw Kirin Holding purchasing a dominant stake from Interfood (IFS), Daio Paper buying a holding from Saigon Paper, and Glico buying 10.5 per cent of Kinh Do Company.

Assessment and forecast
As with attracting foreign direct investment, the most important factor for luring foreign investors into M&A in Vietnam is a stable macroeconomic climate. It is also necessary to put in place legal regulations that are in line with international practices.

Vietnam’s restructuring of state-owned enterprises is also important to coax more foreign direct investment via M&A activities. Thus the government needs to accelerate equitisation of large state-owned enterprises operating in the sectors coveted by foreign investors.

As for local companies, the lack in transparency in corporate governance and weak cooperative culture are bottlenecks in attracting foreign investors. Thus local companies need to renew themselves to make themselves more attractive to foreign investors. Vietnam’s M&A growth rate over the past five years has been 30 per cent on average. Thus we believe that this rate will continue to exceed 30 per cent annually in future.

Foreign-related M&A activities will continue to play an important role in the growth of M&A deals in Vietnam. Fuelled by the government’s restructuring of state-owned enterprises, more large M&A deals can be expected. This is especially true for deals to select foreign strategic partners in large equitised state-owned enterprises like Mobifone and VNSteel.

A survey conducted in preparation for an M&A Vietnam forum last June in Ho Chi Minh City revealed some 65 per cent of surveyed foreign investors said they were interested in M&A opportunities in Vietnam and would come to the country to hunt out these opportunities. This shows Vietnam can expect more high value foreign-related M&A deals this year.

VIR



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Vietnam - Ministry ready to submit housing saving fund scheme

The Ministry of Construction will submit to the Government the scheme on housing saving fund this April, aiming to start the pilot operation in Hanoi and HCMC late this year or early 2013.



This was informed by Nguyen Manh Ha, head of the Department of Housing and Property Market Management under the construction ministry, at the seminar on comprehensive solutions for the realty market in 2012 held by the Vietnam Real Estate Association and InfoTV in Hanoi on Wednesday.
The scheme consists of two models. The first one will focus on low-income people in need of budget housing and enterprises in search for capital to build low-cost houses, while the second one will target average-income earners.
The housing saving fund will be financed by the existing capital of the housing development fund, contributions of the fund participants, the central budget and 30% of the profits from lottery and housing bond issuance.
The fund’s mobilization rate will be equal to half of the commercial lending rate, possibly at 5% per annum, and the lending rate will be one percentage higher than the deposit rate.
Ha said the fund participants will not make contributions based on their incomes, but mostly on their demand to borrow capital in the future.
Specifically, participants will have to contribute to the fund an amount equivalent to 30% of the money they want to borrow in the future. After 4-5 years, they can access the remaining 70%, and will pay back to the fund in ten years with fixed interest rates.
The housing saving fund was originally planned to follow the model of social insurance, requiring participants to contribute 1% of their monthly incomes to the fund. Such a model is applied in many countries, but the construction ministry deemed it unfeasible in Vietnam because apart from monthly salaries, local laborers also earn from extra jobs and their own businesses.
The fund will offer loans with fixed interest rates despite volatility of the bank lending rates in order to facilitate people to access capital to purchase houses, Ha stressed.
SGT



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Hong Kong - Behind the Arrests of Hong Kong's Property Tycoons


Sun Hung Kai's owners the highest-profile arrests in 30 years

The March 29 arrest by Hong Kong’s Independent Commission Against Corruption (ICAC) of a former government chief secretary and two of the Kwok brothers, among Asia’s most powerful property developers who control the giant Sun Kung Kai Properties concern, was a stunning development.

The implications are as yet unclear, although it appears to hand Chief Executive-elect Leung Chun-Ying a golden opportunity to clean up a sector long believed to be uncomfortably close to the government. Leung is already viewed with alarm by the property oligarchs. If two of their most stellar members have been arrested less than a week after Leung was given the job, it gives him additional cachet with the community to start to clean the stables and seek ways to moderate housing prices, among the highest in the world.

The former government official, Rafael Hui, not only occupied the number two post in government for several years until 2007, but he was particularly close to Chief Executive Donald Tsang. He is the most senior official ever arrested by the ICAC. The Kwok brothers are the most high profile arrests of business figures since the Carrian scandal of the early 1980s which saw the arrest of its boss George Tan and several associates and various corrupted bankers.

The investigation is said to center on Hui, who allegedly disclosed confidential information to helpful to Sun Hung Kai pertaining to certain parcels of land. Former Sun Hung Kai Executive Director Thomas Chan was arrested on 19 March. Four others have been arrested in connection with the case, although they are not believed to be either Sun Hung Kai staff or high level government officials.

At one level the latest arrests are very surprising. The public has long believed in the existence of collusion between the government, which controls land supply and development policy, and the top six or so developers who dominate the property market. Nine of the ten richest people in Hong Kong are in property. Developers are known to have close links with officials, some of whom later benefit by retiring early and taking well-paying jobs with the developers. Land use decisions and sales procedures have often been seen to favor them at the expense of smaller developers and the public. However, corruption is easily disguised and hard to prove.

In the Kwok case however, strong leads for the ICAC appear to have come from a third brother who fell out with his siblings a few years ago and who was removed from the board. Another director of SHKP was also arrested earlier and may have provided additional leads. Hui’s past links to the company when he was in the private sector were no secret, but presumably there is now evidence either of payments or other advantages in return for information or favorable decisions when he was Chief Secretary for Administration.

However, it seems more than possible that none of this would have reached he arrest stage if Donald Tsang himself was not a lame duck, even facing investigation himself in connection with a large property in neighboring Shenzhen and acceptance of almost free rides on private yachts and planes from tycoons. The ICAC reports only to the chief executive who has thus had the final say in prosecutions leading to suspicions in the past that big fish would be allowed to go free to avoid wider scandals leaving the ICAC to focus mainly on low level corruption by petty bureaucrats and police. The ICAC has mostly been headed by a rising bureaucrat whose career might suffer from stirring up too much mud.

The arrests thus may be indirectly connected to Tsang’s own weak position and an ICAC emboldened by the victory of CY Leung in Sunday’s selection process for the next chief executive. Leung is viewed as unsympathetic to the developers – as a property surveyor he knows all too well the potential for manipulating the system.

Hui must have had some inkling of an investigation well before the selection in which he participated as one of the 1,200 electors. He had run Tsang’s campaign five years ago and was widely expected to do the same for Henry Tang. But he backed out at the last minute, leaving the Tang campaign rudderless.

It remains to be see what charges are laid and whether they can be made to stick – not easy without smoking guns such as obvious payments or emails evidence of collusion. But for the public they are at once a shock and an apparent confirmation of what they already believed. Given revelations over recent weeks about other sleaze at the top in government – the illegal palace underground at Henry Tang’s palatial home and Donald Tsang’s links with the Macau gambling fraternity and a Shenzhen tycoon in particular – the arrests can only add to pressure for greater transparency in government, in particular relations between officials and the place where big money is most easily made with the right connections – property development and megabuck infrastructure projects. The latter have been proliferating without much economic justification.

So Leung will start with high expectations that he really will be a new broom, sweeping away cozy old relationships and re-examining some of the mega projects. Whether he can fulfill popular expectations is another matter given how deeply rooted at the vested interests in the status quo.

Asia Sentinel



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China - The End of the Run for the Yuan?


The much-feared rise of the Chinese currency may be coming to a close, giving American politicians a breather

In a few years’ time, it is possible that we could well see the Chinese yuan return to the kind of relative obscurity (at least by large country standards) that it so richly deserves -- an emerging markets version of the Japanese yen.

It is not an exaggeration to say that the yuan has been one of the biggest economic issues to come out of the emerging universe in the past decade. It is difficult to think of another topic that cuts across so many different lines including politics, market investment strategy, structural development debates and international relations – starting with fears that China was unfairly distorting global trade and growth through a massively undervalued exchange rate, and ending with the idea that the yuan is now destined to topple the US dollar as the world’s reserve currency.

Attention has been based on four key macro trends: an extraordinarily high trade surplus, rising global market share in virtually every export category, steady, almost guaranteed trend yuan appreciation, and the rapid policy-led opening of offshore trading.

The fun is now winding down. Each of these trends is now likely coming to an end – which, in turn, implies the end of the Great Yuan Trade.

This doesn’t just mean the end of one-way yuan appreciation – although that change is indeed looming on the horizon – but also the end of the Chinese currency as a an important topic that dominates the attention of US congressmen, global reserve managers, academics and conspiracy theorists everywhere.

The End of Surpluses and Market Share

The bottom line is simple: China’s current account surplus is slowly but surely disappearing. It is already well under the “Geithner threshold” of 4 percent of GDP that constitutes a structural imbalance according to US Treasury guidelines, with no real sign of any turnaround over the past 12 months. We understand that past performance is no guarantee of future trends, but there are at least three good arguments why the trade balance is not going to rebound sharply any time soon.


First, there has been nothing close to a global recovery that would lead to sustained strong double-digit trend volume export growth to developed markets, and we don’t expect such a vibrant scenario going forward.

Second, there is little indication from China’s macro data that excess domestic capacity is pushing the surplus higher from the supply side – and this is after many quarters of policy tightening and weak demand.

Third, with local unskilled wages exploding upwards, China is already losing market share in traditional manufacturing export industries such as toys, textiles, footwear and sporting goods. Mainland firms are still gaining ground in higher value-added sectors such as IT electronics, of course, but the days of China eating everyone’s lunch are clearly over.

We do not expect the trade balance to go careening into serious deficit, however, for the simple reason that the government is not easing policy today and shows no interest in stimulating the economy a la 2008-09. Indeed, we expect the most import-intensive parts of local demand such as construction and infrastructure spending to remain flattish for much of 2012.

All of which means that the political noise over Chinese external imbalances, unfair currency practices and exchange rate manipulation will probably continue to fade from here. The yuan is no longer under major strengthening pressure and it should come as no surprise that the exchange rate has traded essentially flat against the US dollar since the beginning of the year, with an unprecedented magnitude of two-way trade as well. We don’t mean to say that the yuan can’t appreciate moderately. But it is increasingly clear that this is no longer a unidirectional trade with guaranteed returns.


Could we actually see the currency depreciate sharply from here, as some bears would have it? Not really. To begin with, as we argue, domestic demand is simply not strong enough to push the trade balance into sizeable deficit any time soon.


Moreover, the popular idea that China is threatened with a potential flood of portfolio capital outflows is sorely misguided. Any top-down measure of implied “hot money” inflows shows that there haven’t actually been any over the past few years, at least not on a sustained basis in any significant magnitude (Chart 4 above). Which leaves relatively little to go flooding back out again. And need we even mention the US$3 trillion-plus pile of official FX reserves?

The bottom line is that (i) there’s precious little chance that the yuan will be anything but a heavily managed currency going forward, and (ii) it is likely to be far more range-bound as well – some upside, perhaps some downside, but no real drama.

The end of liberalization?

We would feel differently, of course, if we thought that China was on the verge of dramatic capital account liberalization that would open the doors to far larger portfolio movements. This would not only make exchange rate trading a more exciting proposition, it could also push the yuan onto the global stage in a much bigger way and provoke a longer-term shake up of international portfolios.

There’s just one problem: it’s not happening.

There are three key points to make here. The first is that despite the rapid development of the offshore Hong Kong “CNH” market over the past few years, there has been no corresponding opening of the onshore market.

How can we tell? As regular readers know, there is a quick and easy way to measure the effectiveness of cross-border flows in any economy: simply compare domestic short-term interest rates with the interest rate implied in the internationally traded FX forward market.

Chart 5 below shows the behavior of the two rates series for China’s more open neighbors, including Korea, Malaysia, Singapore and Taiwan. As you can see, they are extremely close at any point in time, indicating a high degree of capital mobility and thus close arbitrage.


Although Hong Kong deposits may sound like a significant figure, this is still a tiny, even imperceptible drop in the bucket in terms of global financial markets.


Nor, finally, do we expect the government to follow through to the logical conclusion of its offshore yuan experiment, i.e., the integration of local and overseas markets through a more radical liberalization in the near future – or anything even remotely close to it. Despite some of the political rhetoric coming from leadership circles, it’s not just that they “won’t” open the capital account ... in a very real sense they can’t, at least not fast enough to matter.

For more than two decades the entire philosophy of monetary management and financial system development has been based on a closed-economy system: maintaining low and stable interest rates without having to worry about external arbitrage; breezily adopting economic stimulus when needed without concern about underlying banking system asset quality; propping up banks with historically high NPL ratios and fixed-cost pricing, and keeping iron-clad control over the value of the exchange rate. All of these only work when foreign portfolio funds cannot influence asset prices, and when locals have nowhere else to go

And although it may be very much in China’s theoretical interest to move to a more open and market-driven system over time, it is certainly not in policymakers’ interest to jump-start the reform process at a time when the economy is overextended with credit, banks are facing another wave of bad loans and the government is in the middle of trying to slow the economy without causing an undue shake-out in sensitive property markets.

That is, they are bound to get around to external liberalization at some point, but it certainly isn’t happening today and won’t really be happening tomorrow. So in the meantime get ready for the new, more obscure Chinese yuan.

Jonathan Anderson
Asia Sentinel



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South Korea - Korea's Nuclear Summit a Damp Squib


Little of significance despite the presence of the world’s most powerful leaders

The Nuclear Security Summit held on March 26-27 in Seoul, has turned out to be a half-baked extravaganza that produced little of significance except for proclaiming the lofty goal of a nuclear-free world vision – while one of the world’s nuclear outlaws lurked just 65 km to the north, rattling rockets in the face of the world’s most powerful leaders.

Much effort has been spent in the last several months through Sherpa and sous-Sherpa meetings at the highest political level, the 51 heads of state and global organizations including the leaders of the world’s most potent nuclear-tipped countries, who gathered in Seoul for the second security summit. They issued a 2200-word Seoul Communiqué that was long on words and short on commitment except for a series of non-binding vows to take observable actions around the end of 2013. They unanimously affirmed that “measures to strengthen nuclear security will not hamper the rights of States to develop and utilize nuclear energy for peaceful purposes.”

As well they should. These commitments will be supported by each of the signatories in the hopes of promoting a global recognition that a nuclear explosion anywhere is a serious danger everywhere, reflected by the tragedy of the Fukushima earthquake and tsunami and the subsequent near-meltdown of the Fukushima Dai-Ichi nuclear plants, which continue to cook menacingly today, more than a year after the temblor. Meaningfully, the leaders noted the nexus between nuclear security and nuclear safety, while addressing these ‘different chapters of the same book’ issues in a coherent manner.

In truth, the interface between nuclear security and safety will likely represent another step toward expanding the perceptions of nuclear power in a dangerous world. It also marks the opening of broader maneuvering to counter the emerging nuclear threats of the 21st century. The United States currently has 2,100 deployed strategic warheads, and Russia 2,600, according to the Federation of American Scientists and the Natural Resources Defense Council.

In reality, nuclear terrorism has emerged as one of the most challenging threats to global security – a danger that people began to recognize after the 9/11 attacks on the World Trade Center in New York and the Pentagon in Washington, DC, in which Al-Qaeda, a non-state actor, was able to kill more people than the imperialist Japan killed at Pearl Harbor in 1941. A nuclear 9/11 attack would certainly incinerate hundreds of thousands in a single blow at the heart of New York, for example.

Unfortunately, there is a misbelief among numerous nuclear skeptics that even if non-state actors like terrorists could obtain nuclear material clandestinely and make a crude bomb, it would be the United States’ and Russia’s problem, not a grave issue for other countries. It is a grave issue for any country faced with a deranged and capable non-state organization.

Meanwhile, the political leaders underlined the importance of securing, accounting for and consolidating highly enriched uranium and separated plutonium, while encouraging each state to take measures to minimize the use of HEU, including efforts to down-blend HEU into low enriched uranium. Given that approximately 25 kg of highly enriched is needed for making one nuclear warhead, it is realistic to point out that the United States and Russia in particular should take a more urgent action to speed up their own rates of down-blending and dismantlement rather than focusing attention on securing fissile materials globally.

That’s why the leaders, if not participating in the summit meeting merely for a photo opportunity, should continue to find common ground necessary to make ‘binding’ efforts toward strengthening nuclear security. Coming up with obligatory actions is, to be sure, a tough nut but it should be, after all, made in one way or another, since another fuzzy communiqué which embraces voluntary arrangements cannot secure the global security, safety and safeguards.

Bland commitments and sterile debates over unpredictable nuclear threats emanating from non-state actors and over dangers beyond men’s imagination will do nothing to fend off the opponents of the summit who are in strong favor of eliminating all nuclear weapons and dismantling nuclear reactors on the planet.

Equally alarming, waste and spent fuel which are stored on an interim basis in pools of water or in casks are of the greatest concern about the vulnerability of the materials to disasters like the Fukushima accident or possible terrorist attacks. Given that the effectiveness of concrete to contain nuclear waste is much less than 100 years, it raises rational questions about whether these sensitive materials can be effectively stored for periods that will exceed recorded human history so far, many times over.

Nevertheless, it is worthy to note that the Seoul Summit set a target date of 2014 for bringing the 2005 Amendment to the Convention on the Physical Protection of Nuclear Material into force by 2014. Plus, agreement between the U.S., France, Belgium, and the Netherlands was made to produce medical isotopes without the use of HEU by 2015. The move could encourage other countries to act boldly over time.

Lee Byong-chul
Asia Sentinel



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YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com