Have You Heard...
Saturday, November 14, 2009
APEC concludes first-day meeting
Source: AgenciesSINGAPORE - Leaders and representatives of the 21 APEC economies Saturday concluded a retreat session of the APEC Economic Leaders' Meeting (AELM) held at the Istana, the office of the Singapore President.
Focusing on trade issues, the leaders resolved to inject a strong political push to conclude the Doha Round of WTO negotiations by the end of 2010.
There was a sense of urgency that as negotiations moved into the end-game, strong political will was critical to break the impasse. In a robust defense of free trade, APEC Leaders also reiterated their commitment to reject all forms of protectionism.
There was also a good discussion on APEC's long-term vision of a Free Trade Area of the Asia-Pacific (FTAAP). There was consensus among the leaders that APEC economies should step up their efforts to realize this vision, by laying the necessary building blocks and exploring possible pathways. In this regard, several leaders highlighted the Trans-Pacific Strategic Economic Partnership Agreement (TPP) as a possible pathway.
They welcomed U.S. President Barack Obama's announcement Saturday that the U.S. will engage in the TPP and work towards a broad-based and high-quality agreement. Singapore Prime Minister Lee Hsien Loong acknowledged, however, that political conditions need to be right before negotiations for a region-wide FTAAP could be launched.
The theme of free trade resonated strongly among APEC leaders. They agreed that apart from traditional trade and investment liberalization issues, the APEC also needed to focus on new areas like regulatory reform and connectivity and take a more practical approach to connect the markets.
Some leaders suggested enhancing regional connectivity by improving cross-border transport linkages of all forms, including land, air and sea connectivity. Others highlighted the need to focus more on structural reforms to raise productivity and enhance the region's economic competitiveness.
They noted that the recent initiative to cut the costs of doing business in the APEC region by 25 percent by 2015 was a timely and important one. Leaders will continue their retreat session Sunday, after which a declaration is expected to be issued. The APEC 2009 theme is " Sustaining Growth, Connecting the Region."
A Superpower Stirs
Source: The Wall Street Journal by Andrew Browne600 years after bringing home its armada, will China once again stride the world's stage?
The wooden treasure ships commanded by Admiral Cheng-ho, a Chinese Ming dynasty eunuch, were among the largest vessels ever built, nautical monsters that by some accounts carried nine masts.
Bigger by far than the ships of Christopher Columbus that set out decades later for the New World, they were the flagships of an armada that ventured as far as the east coast of Africa on seven naval expeditions. The first embarked in 1405 bearing some 30,000 men; the seventh in 1430.
Then the expeditions suddenly stopped. Cheng-ho's adventures had helped to ruin Ming finances. The emperors put a halt to sea trade and closed the shipbuilding industry; China looked inward for the next four centuries. The expeditions to the "Western Seas" were a glorious aberration.
Now, at the dawn of the 21st century, the world is looking to China to assume an unfamiliar role of global leadership. At a time when American prestige is fading, China's status is rising.
President Barack Obama arrives in China next week seeking help on everything from climate change to North Korea's nuclear threat. At meetings of the Group of 20 nations, China's opinions are urgently sought on issues such as banking reform and executive pay. Persuading China to take a lead will be a challenge.
History has done little to prepare this country for the kind of leadership that an anxious international community seems so ready to thrust on it.
Unlike the U.S., China doesn't aspire to remake the world: Its longstanding mantra is "nonintervention" in the internal affairs of other countries. Even under Chairman Mao's reign, China never sought world domination, like the former Soviet Union—although it stirred up revolution in other parts of Asia and beyond. Now that China has largely discarded socialism, it's hard to find a definition for what remains of its ideology, values and world view.
Recently, at a dinner in a Beijing restaurant of a group of young Chinese professionals—several of them Communist Party members—somebody raised a question that should have been simple to answer. Can anybody list the "Three Represents"? The reference was to the political theory of former President Jiang Zemin, which has been written into the state constitution and is taught in schools. Not a single hand went up. Could anybody name two? Nobody. One? With difficulty.
A hard-nosed pragmatism is generally considered to be China's guiding principle at home and abroad: whatever produces growth in gross domestic product.
China's aloofness from the world was interrupted when the West came knocking. In 1793, Lord Macartney was dispatched to China by Britain's King George III to open the country to trade. He arrived with presents meant to dazzle the court of the Qianlong emperor—mechanical clocks, chronometers, telescopes and mathematical instruments. The 600 packages required 200 horses and 3,000 porters to transport.
"There is nothing we lack," the emperor famously told the royal emissary. "We have never set much store on strange and ingenious objects." The British forced open the doors to trade with gunboats; an enfeebled China was carved up by Western powers in what China calls its "century of humiliation."
It's easy to forget, driving by Beijing's Olympics-inspired landmarks—the Birds Nest Stadium, the Water Cube, the colossal CCTV Tower—that until quite recently China had closeted itself again.
For most of the first 30 years of Communist rule in China, which started in 1949, it was hard and often outright impossible to get a visa. Businessmen were granted access once a year for the Canton Trade Fair. In neighboring Hong Kong, tourist buses would deliver groups of camera-toting Americans and Japanese to the border to catch a glimpse of "Red China" on the other side. The rare Chinese official who ventured to the West was a curiosity, much like North Koreans today.
China was in turmoil. To divine what was going on inside the country, foreign intelligence decamped in Hong Kong to monitor local radio stations.
Deng Xiaoping put an end to Chairman Mao's era of murderous seclusion—its endless class struggles and man-made disasters, including the world's worst famine—with his "Open Door" reforms in 1978.
The decision to open the country to foreign trade and investment, initially through Special Economic Zones along the coast, set China on its path of supercharged economic growth. China is shortly expected to overtake Japan as the world's second largest economy.
China's achievements have provided a beacon for much of the developing world: its success in lifting 300 million people out of poverty; its fight against disease and illiteracy; its embrace of technology that has put Chinese astronauts in space. All this, while allowing an unprecedented flowering of personal freedoms.
Now, as the global economy emerges shakily from the worst recession since World War II, China is attracting admiration from new corners.
While the Western world hurtled towards the financial abyss, China was moving ahead cautiously. It has emerged from the crisis with an economy growing powerfully. Its banks are unpolluted by toxic assets; hardly a ripple disturbs its vast pools of national savings. This year, property markets in Beijing and Shanghai are sizzling.
There are hopes, too, that China will use its new strategic heft—and its apparently deft touch—to help resolve the most pressing security issues of the times. Zbigniew Brzezinski, the U.S. national security adviser under Jimmy Carter, proposed a drastically slimmer G20—a G2, the U.S. and China—to deal with the nuclear threat posed by Iran and North Korea; the Israeli-Palestinian conflict; India-Pakistan tensions; climate change.
When he arrives in Beijing, Mr. Obama will be clutching a geopolitical "to-do" list that looks quite similar. America's broad goal has been to persuade China to assume the global responsibilities that go with its growing economic influence in a way that strengthens, rather than threatens, existing international arrangements. China, urged former U.S. Deputy Secretary of State Robert Zoellick, should become a "responsible stakeholder."
Yet China's official commitment to a "harmonious world" is often at odds with an assertive America fighting two wars in Iraq and Afghanistan. More often than not, it has meant that China has been a reluctant follower not a leader. Critics say that China's record in the world's trouble spots, from North Korea to Iraq and Darfur, suggests that it defines its responsibilities in ways that enhance its economic interests.
On North Korea, China has been heading diplomatic efforts to try to rein in Pyongyang's nuclear program. But it is hesitant to threaten the flow of Chinese oil and food that keeps the regime alive. Skeptics in the U.S. say that China holds back because it fears a collapse of North Korea that would not only unleash a flood of refugees across its border but also place U.S. forces face-to-face with its own.
Similar tensions between China's economic interests and international obligations play out in Africa, where Chinese companies are investing massively in energy and raw materials to fuel China's growth. The "no-strings" investments from Nigeria to Ethiopia fly in the face of Western efforts to link investment with improvements in human rights and the environment. In Sudan, China has sent peacekeepers to the war-torn region of Darfur, while bolstering the government by buying oil and selling arms.
Iran may provide the biggest test to date of China's willingness to lead. Washington and its European allies see China's role as critical in the effort to pressure Tehran over its nuclear program. So far, China has resisted tougher sanctions against a country that is its second-largest oil supplier after Saudi Arabia.
China's leaders wrap their great power aspirations in modesty. They point out that China is still a poor developing country, with one tenth of the per capita GDP of the U.S.
Yet China is rapidly modernizing its military forces. Every schoolchild in China knows the story of the Dowager Empress who used funds earmarked for the navy to build stone boats at the Summer Palace in Beijing. The story has become a metaphor for national weakness, and a call to arms.
A military parade last month to mark the 60th anniversary of the founding of the People's Republic of China sent a powerful message to China's 1.3 billion people. The intercontinental ballistic missiles that rumbled down Beijing's Avenue of Eternal Peace, and the tanker planes that lumbered overhead, signaled that China not only was at last a strong country, but also could project power beyond its shores.
These days, China's appetite for "ingenious objects" from the West knows no bounds. It has 650 million mobile phones; it has passed America as the world's largest auto market.
No emerging nation on earth has seized the opportunities of global trade more enthusiastically than China. Its decision to join the World Trade Organization in 2001 launched its economy into a new orbit. Surpluses from foreign trade—particularly with the U.S.—have helped China rack up more than $2 trillion in foreign-exchange reserves.
So what does China want to do with the enhanced status that it craves, and which the world seems equally anxious to concede to China?
Some two-and-a-half millennia ago, the Chinese philosopher Laozi wrote: "Governing a large country is like frying a small fish." The advice was aimed at the scholar-officials that ran China—a Mandarin class that became a model of governance for the ancient world. The light touch has never been a hallmark of Communist rule, or of its statecraft. That matters greatly in a world in which influence and legitimacy derive more than ever from the attractiveness of a country's governing ideals.
Last month, the Frankfurt Book Fair offered the world a glimpse into the internal workings of the Chinese state, and a case study on the limitations of China's "soft power" and its ability to lead.
China was invited to the fair as the guest of honor. The Chinese government had invested millions of dollars in the event, lining up some 2,000 Chinese writers, publishers and artists to attend. All went well until organizers invited two Chinese dissidents to a prefair symposium titled "China and the World—Perception and Reality." Furious Chinese officials threatened to boycott the event and backed down only when organizers withdrew the invitations.
"We did not come to be instructed about democracy," Mei Zhaorong, China's former ambassador to Germany, icily declared.
"Two principles also apply to the Frankfurt Book Fair," said a German foreign ministry spokeswoman. "Guests are treated like guests, and art without freedom is inconceivable."
Few people buying into luxury home expo
Source: By Yu Tianyu/Bao Chang (China Daily)A showcase of luxury Beijing properties aimed at the country's most wealthy inhabitants has so far failed to draw the crowds organizers hoped for.
The four-day Beijing International Top Property and Luxury Show kicked off on Thursday at the Beijing World Trade Center, the capital's financial hub and home to a mall selling luxury goods.
The show featured high-end homes with price tags of at least 30,000 yuan ($4,777) per sq m.
But some among the sparse crowd were not impressed.
"These houses are too expensive not only for working people, but also for the middle class," said Lily Wu, a 40-year-old visiting the show with her German husband. "And their locations are usually in the suburbs. I think they would not be a suitable and smart choice for most Chinese."
Many homes featured at the show were 10-million-yuan luxury houses complete with the world's leading brands in household goods, cars, jewelry, pianos, wines and other items, said show organizers.
The most expensive property was the 50,000-yuan-per-sq-m Legacy Home located near Olympic Forest Park in Chaoyang district. Its neighbors include last year's Olympic icons, the Bird's Nest stadium and Water Cube. Villas there cost more than 20 million yuan.
But if organizers were hoping for a crush of super-rich people in the grand exhibition hall they may have been disappointed.
Most were property agents hoping to make a sale.
Some pointed to the stiff admission fee as one of the reasons why so few people visited the event.
Usually, people gain entry to property exhibitions in Beijing for around 5 yuan. The Beijing International Top Property and Luxury Show was charging a 100-yuan entrance fee. The ticket price was slashed to 50 yuan for the second day. Ticketing agents refused to link the price cut to the show's slow start.
Usually, people gain entry to property exhibitions in Beijing for around 5 yuan. The Beijing International Top Property and Luxury Show was charging a 100-yuan entrance fee. The ticket price was slashed to 50 yuan for the second day. Ticketing agents refused to link the price cut to the show's slow start.
A Hurun Report on China's wealthiest people said there are 143,000 multimillionaires and 8,800 billionaires in Beijing.
The report said China has 825,000 individuals worth more than 10 million yuan and 51,000 individuals with more than 100 million yuan.
Despite the lukewarm reception during the show's opening days, high-end property developers remain optimistic.
Tristan Marshall, director of the Kinetic Group from Australia, was among several overseas developers promoting homes in their home countries. Others came from countries such as the US and Malaysia.
"We have 50 houses here for Chinese customers and 22 of the 50 have been sold so far," Marshall said.
Dong Zouji, director of the Ministry of Land and Resources' planning department, said prices of ordinary commercial property had gained value too fast in China.
Tesco to open malls via venture
Source: Shanghai DailyBritish retailer Tesco Plc will form a partnership with a group of Asian enterprises to open three malls in China.
Tesco said it plans to invest 100 million pounds (US$166 million) in a joint venture with HSBC Nan Fung China Real Estate Fund, Metro Holdings Ltd and Hong Kong's Nan Fung Group. Tesco will own 50 percent of the venture.
The venture's first project is to build Tesco's first shopping mall in a 500,000 square meter residential community in the northeast Fushun city. Tesco also plans to build another two shopping malls in Anshan and Qinhuangdao, the retailer said, without giving a timetable.
Analysts said the move signaled Tesco may expand rapidly in China, where other foreign retailers are battling to gain a bigger market share.
"But it may still take some time for Tesco to catch up with foreign rivals such as Wal-Mart and Carrefour," said Liu Jinhu, an analyst at Sealand Securities Co Ltd.
Source article: http://www.china.org.cn/business/2009-11/14/content_18886174.htm
Friday, November 13, 2009
Have You Heard...
- Obama Can’t Avoid Immovable Yuan as Dollar Sinks Asia
- Hong Kong Is New Target of U.S. Crackdown on Taxes
- Honda, Guangzhou Auto mull capacity expansion
- Costa Rica Coffee Growers Eye China Free Trade Deal
- Tesco to Open 18 Hypermarkets in China Before February
- S&P to set HQ in Shanghai
- China to enhance copyright management for online video content
Obama Can’t Avoid Immovable Yuan as Dollar Sinks Asia
Source: By Bloomberg NewsPresident Barack Obama may find on his Asian visit that began today that discontent about China’s currency peg to the dollar isn’t confined to Washington’s lawmakers and business lobbyists.
From Mumbai-based Alok Industries Ltd., which supplies Wal- Mart Stores Inc. with textiles, to Bangkok-based semiconductor packager Hana Microelectronics Pcl, Asian companies say Chinese rivals have an unfair advantage because of the yuan-dollar link. The dollar has declined 14 percent in the past year against the currencies of six major trading partners.
In meetings at the Asia Pacific Economic Cooperation summit in Singapore and then in Beijing, Obama probably will discuss China’s fixed-rate policy, which has prompted central banks in India, South Korea, Thailand and Taiwan to accelerate dollar purchases to curb currency appreciation.
“It’s just outrageous, the impact on their neighbors and on relatively poor countries,” said Simon Johnson, chief economist at the International Monetary Fund in 2007 and 2008 and now a senior fellow at the Peterson Institute for International Economics in Washington.
As Obama seeks to push the Group of 20 goal of rebalancing the world economy from excessive U.S. consumer spending and Asian exports, South Korea’s won gained 8 percent against the yuan in the past six months. Japan’s yen has risen 6 percent, while India’s rupee gained 6 percent and the Thai baht 4 percent. The yuan is a denomination of China’s currency, the renminbi.
Capital Flows
The People’s Bank of China this week said foreign-exchange policy will take into account global capital flows and changes in major currencies and scrapped language in a previous report to keep the yuan “basically stable.” The economy expanded by 8.9 percent in the third quarter from a year earlier.
“There has been a subtle message sent that as China’s economy starts to recover, it’s probably appropriate for the PBOC to move back to a managed float,” Stephen Roach, chairman of Morgan Stanley Asia in Hong Kong, said in an interview. A shift may not be imminent and wouldn’t reach the 15 percent to 20 percent that some U.S. lawmakers have demanded, he said.
Investors see a rising yuan. Twelve-month non-deliverable forwards for the yuan rose 0.2 percent to 6.5925 per dollar as of 3:33 p.m. in Shanghai, signaling trader bets on a 3.5 percent gain from the spot rate of 6.8259. China has kept its currency at about 6.83 per dollar since July 2008, after a 21 percent gain the previous three years.
‘Some Progress’
“This is a more multilateral issue and I am glad the G-20 is looking into it,” Bimal Jalan, former governor of the Reserve Bank of India and a retired lawmaker, said in an interview from New Delhi.
Mahindra & Mahindra Ltd., India’s largest sport-utility vehicle maker, says it is unfair to compete with China in global exports when the rupee floats and the yuan is fixed.
“There should be world pressure on China to respond more to global market forces and play the game right,” Managing Director Anand Mahindra said in an interview in Singapore.
Banks are predicting that an end to the yuan’s peg will allow currency gains across the region. The won will gain 7 percent by the end of the third quarter of 2010 as both the yuan and the rupee appreciate by 3 percent, according to the median forecasts in separate Bloomberg surveys of analysts.
Buying Contracts
“Over time the yuan will gradually appreciate against the U.S. dollar,” said Michael Hasenstab, who oversees $45 billion of fixed-income investments at Franklin Templeton Investments in San Mateo, California and whose $13.2 billion Templeton Global Bond Fund has beaten 98 percent of peers during the past five years, according to data compiled by Bloomberg. He bought yuan forward contracts last year. “The economic recovery is pretty strong in China.”
China’s purchases of dollars to prevent appreciation gave it foreign-exchange reserves totaling $2.3 trillion in the third quarter, the world’s largest. The country is the biggest foreign holder of U.S. government debt, with $797.1 billion in August, up 10 percent from Jan. 1, Treasury data show.
APEC forum finance ministers called for “market-oriented exchange rates that reflect underlying economic fundamentals” in a statement released in Singapore yesterday. They stopped short of naming any currencies.
Obama, 48, and his Chinese counterparts are unlikely to clash on the yuan as he seeks broader cooperation on avoiding trade disputes between the two countries, said Kenneth Rogoff, a professor at Harvard University in Cambridge, Massachusetts and former IMF chief economist.
Bargaining Power
“The Americans have very little bargaining power at the moment,” Rogoff said. “This is going to end when the Chinese decide they don’t want it any more, they want to have a more domestically oriented growth strategy.”
Treasury Secretary Timothy Geithner said yesterday that Asian countries had shown a “commitment to moving over time to a more flexible market-determined exchange system. We’ve seen a lot of progress in that direction over the last several years,” he said in a Bloomberg Television interview in Singapore.
In Washington, Senator Christopher Dodd was less optimistic. Asked in a Nov. 11 Bloomberg Television interview whether Obama should discuss the yuan, the Connecticut Democrat and chairman of the Banking Committee responded: “He’s got to raise that issue. You can’t give your competitor, your adversary in this case, a 40 percent advantage in global economies.”
Congressional Legislation
Steelmakers such as Nucor Corp., the second-largest U.S.- based steelmaker by sales, unions such as the United Steelworkers, corn growers and textile companies have ramped up pressure on Congress to enact legislation aimed at forcing China to raise the value of its exchange rate.
“They’ve had a pretty good deal for a long time,” AFL-CIO President Richard Trumka said yesterday at a Washington conference hosted by Bloomberg Ventures, a unit of Bloomberg LP, parent of Bloomberg News. “They’ve not played by the rules.”
China’s trade surplus will probably be half last year’s level at $200 billion, which means less pressure on the yuan to appreciate, said Liu Yuhui, director of the Center for Chinese Economic Evaluation in Beijing at the Chinese Academy of Social Sciences, which advises the government on policy.
“As global trade is still shrinking, which government would prefer a stronger currency?” he asked. “Most calls for a stronger yuan now come from Europe and other emerging-market countries. Pressure from these countries alone isn’t strong enough. The U.S. doesn’t want a stronger yuan because that would cause a collapse in the dollar in the short term.”
Chinese President Hu Jintao today ignored the currency issue in his speech to APEC leaders, instead focusing on steps the country is taking to boost domestic consumption. reliance on investment and exports for economic growth.
Chinese Consumers
“We have been working hard to improve the consumption environment,” he said. China wants to “increase people’s ability to spend and foster new areas of consumer demand,” he said.
Goldman Sachs Group Inc. yesterday reiterated its three, six and 12-month forecasts for the yuan to stay at 6.83.
Asian nations may also be reluctant to criticize: China’s 4 trillion-yuan ($586 billion) stimulus plan is helping lift their economies from recession. Chinese demand for minerals boosted the Australian economy enough to make it the first country to raise interest rates in the Group of 20.
Asian companies say their governments should take a tougher line.
“Southeast Asia is at a competitive disadvantage if the yuan is linked to the declining dollar,” said Richard Han, chief executive officer at Hana Microelectronics, which competes against Chinese companies.
Han, who also has operations in China, said a rising yuan would further erode any advantage Chinese companies have over rivals in southeast Asian nations. “China is becoming less and less competitive to Thailand,” he said.
Indian Exporters
Alok Industries, which has invested $1 billion in clothing and textile factories in the past five years to match its Chinese rivals, said it will be “difficult” to maintain its current growth pace as a stronger rupee puts pressure on profit margins.
“Indian exporters are getting hit,” Chief Financial Officer Sunil Khandelwal said in an interview in Mumbai. “China now has considerably less international pressure to reform the yuan and capital flows are pressuring the rupee higher.”
Chinese export manufacturers are enjoying their currency’s weakness. Rugged Tu, 33, a sales manager at electric toothbrush- and razor-maker Zhejiang San’an Industry Co., said sales to Europe increased 20 percent this year, as the yuan fell 9 percent against the euro, and remained stable for the U.S.
“I hope the yuan exchange rate will stay steady,” Tu said in a Hong Kong interview. “It matters a lot for the export market, which is very important for China.”
More Dollars
Asian central banks this year have increased their holdings of U.S. dollar assets, including Treasuries, to prevent their currencies from appreciating and thus making exports more expensive relative to China’s. While China’s holdings of U.S. Treasuries rose 10 percent this year, Japan’s increased 16 percent and those in the rest of Asia by 25 percent, according to Bloomberg data.
At the same time, China’s Asia hand has strengthened: It has replaced the U.S. as the biggest trading partner for most of the region’s economies. In 2002, U.S. two-way trade with Japan, South Korea, Thailand, Indonesia, Malaysia and Singapore exceeded Chinese trade with those countries. In 2008, each of those countries traded more with China than with the U.S.
“The dam is really going to burst if America’s can-do president can’t convince the Chinese that it is in their own self-interest to deal with this threat to the global economy,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “No nation on its own can enjoy a trade advantage that benefits its own citizens to the detriment of those in the rest of the world forever.”
Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=al7q1khJ9o3k
Hong Kong Is New Target of U.S. Crackdown on Taxes
Source: (Bloomberg)Hong Kong is a new target of U.S. prosecutors pursuing a global campaign against evaders of federal taxes, spurred by data acquired in their crackdown on Swiss banks.
Prosecutors are trying to determine what role financial professionals in Hong Kong play in tax evasion, according to people familiar with the matter. They are examining how much taxable money was moved to the former British colony that returned to China in 1997, whether accounts were based there in name only and what banks were involved, the people said.
The push follows the government’s success in penetrating Swiss bank secrecy and learning from insiders how UBS AG helped Americans evade taxes. UBS, the largest Swiss bank by assets, avoided prosecution by agreeing in February to pay $780 million and disclose account data on 250 clients. In August, it agreed to supply information on another 4,450.
“They must have reason to believe this is a target-rich environment and a very significant amount of tax evasion is going on there,” said Peter Zeidenberg, a former federal prosecutor now at DLA Piper LLP in Washington.
Since the February settlement, prosecutors have won guilty pleas from six UBS clients who described a web of bankers, lawyers and advisers who helped conceal income and assets. All six hid money in shell companies outside Switzerland. Four used Hong Kong corporations, including toy salesman Jeffrey Chernick.
Probes Beyond Switzerland
Debriefings of Chernick started probes of financial institutions in Switzerland and beyond, “in particular tax- haven jurisdictions such as Hong Kong,” prosecutor Michael Ben’Ary said Oct. 30 at Chernick’s sentencing in Florida.
“From the public statements at the Chernick hearing and elsewhere, the government has made it very clear that they are interested in other secrecy jurisdictions, especially Hong Kong,” said Douglas Tween, an attorney for Chernick, 70.
Chernick told prosecutors he hid sales commissions in an $8 million UBS account in the name of a Hong Kong corporation.
Hong Kong is already changing its laws to implement the Organization for Economic Cooperation and Development’s efforts to enhance tax transparency, said Katherine Kwong, a spokeswoman for the government’s Financial Services and Treasury Bureau.
These changes would help “significantly enhance Hong Kong’s position as a transparent tax jurisdiction,” she said yesterday.
Global Tax Standards
The OECD has a so-called gray list of countries that haven’t complied with global tax standards. Hong Kong announced in February it would put forward legislation to meet them, according to Pascal Saint-Amans, who heads the tax competition division at the OECD. Singapore exited the list today after signing its 12th agreement to share tax information.
The UBS clients who used Hong Kong corporations told prosecutors how their bankers and lawyers helped them set up offshore corporations so their assets would be hidden in accounts that didn’t bear their names, court records show.
Roberto Cittadini, a retired Boeing Co. sales manager, told a federal judge in Seattle Oct. 5 that he didn’t report income from a $1.86 million UBS investment account nominally owned by a Hong Kong corporation.
He said Swiss banker Hansruedi Schumacher and Zurich lawyer Matthias Rickenbach helped him with the account. Schumacher is a former NZB Neue Zuercher Bank manager who once ran the cross- border business for Zurich-based UBS, according to court papers. Both men were indicted Aug. 20 in federal court in Fort Lauderdale, Florida.
Left the Bank
Schumacher no longer works at NZB, said Patrick Hunger, corporate secretary, in a telephone interview. He declined to say when Schumacher left the bank and wouldn’t provide
Schumacher’s new contact details. Messages left at Rickenbach’s office and home weren’t immediately returned.
John McCarthy, a businessman in Malibu, California, admitted Oct. 20 that he failed to declare $1 million in a UBS Swiss account tied to a Hong Kong entity.
“I’ve been told there are active investigations on the West Coast of Hong Kong account holders,” said McCarthy’s attorney, Steven Toscher, of Hochman, Salkin, Rettig, Toscher & Perez in Beverly Hills.
Hong Kong hasn’t been the only tax jurisdiction implicated in the past year. UBS admitted in February that it helped U.S. clients create sham companies in Panama and the British Virgin Islands, while hiding the true owners from the U.S. Internal Revenue Service. UBS clients who pleaded guilty also implicated Singapore, Liechtenstein, Mexico and the Cayman Islands.
Information Trove
The IRS is analyzing a trove of information from more than 7,500 taxpayers who voluntarily disclosed their offshore accounts this year to avoid prosecution. To qualify, clients had to disclose everyone who handled their money overseas and everywhere it went.
“We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers cheat on taxes, IRS Commissioner Douglas Shulman said Oct. 14.
He said the IRS is hiring 800 people in the next year and increasing staff in eight overseas offices, including Hong Kong. It also will open offices in Beijing, Sydney and Panama City.
“There is a phenomenal amount of money in undeclared status in Singapore, Hong Kong and maybe now China,” said Scott Michel, an attorney at Caplin & Drysdale in Washington. “The IRS has decided that the template has worked so well for Switzerland that it wants to mimic that investigative strategy with other countries.”
Nominee Accounts
While Hong Kong has strict anti-money laundering measures, it is easy to set up nominee and trust accounts there that obscure the ownership and control of assets, according to the Financial Action Task Force, an inter-governmental body.
“The availability of corporate services and the relative ease with which shell companies can be purchased contribute to the risk of Hong Kong being used for structuring of the proceeds of financial crime, corruption, tax evasion and smuggling,” according to a June 2008 report by the task force, which works to combat money laundering.
Cittadini trusted UBS, as well as Schumacher and Rickenbach, when they advised setting up accounts in Hong Kong and the British Virgin Islands as a way to keep his assets hidden, his lawyer John Colvin said.
“It’s totally routine,” said Colvin, of Chicoine & Hallett PS in Seattle. “It would cost a few hundred or a few thousand dollars at most to set up.”
Reporting Requirement
Schumacher and Rickenbach told Cittadini such accounts were the easiest way to continue investing in U.S. securities while not reporting the income to the IRS, Colvin said. UBS was required to report the income under an agreement it signed with the U.S. in 2000.
David Ellis, a lawyer in Hong Kong, said he was a “bit surprised” to hear that corporations had been used there to help evade U.S. taxes.
“I suspect it’s probably more for the legitimate tax benefits of operating through Hong Kong that Hong Kong companies are used rather than its efficiency in evading U.S. tax,” said Ellis of Mayer Brown JSM. “I would have thought for evading U.S. tax you would want a different jurisdiction. But Hong Kong is maybe the legitimate end of it.”
Zetland Corporate Services in Hong Kong sets up companies for foreign clients, said its managing director, Michael Foggo.
“Our client can act as director and shareholder,” Foggo said. “Sometimes our clients do want us to act as directors for them and provide nominee shareholders if they are looking for confidentiality for whatever reason. It’s not something unique to Hong Kong or any other place in Asia.”
Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aoY9mGd1juOY
Honda, Guangzhou Auto mull capacity expansion
Source: (Agencies)Honda Motor and Guangzhou Automobile may expand the capacity of their China plant by a third next year to meet robust demand in the world's largest market, chairman of the Chinese automaker said on Thursday.
The No 2 Japanese automaker and its partner operate two plants making Accord, City Odyssey and Fit models in south China, with a combined capacity of 360,000 units.
"Our second plant is smaller with only 120,000 units. We may double the capacity next year," Zhang Fangyou told Reuters on the sidelines of an industry forum in Shanghai.
A spokesman with Honda's China operations said the expansion plan is under consideration but no final decision has been made so far.
China is a major bright spot this year as the government's policy incentives bolstered automobile demand, making the country a safe heaven for global automakers, battered by a sharp-than-expected industry downturn.
Volkswagan AG had in September unveiled a plan to invest 4 billion euros ($5.99 billion) in China till 2011, while Ford Motor, a conservative player, also broke ground for its third China plant recently.
Car sales in China jumped 75.77 percent to 946,400 units in October, with sales in the first 10 months up 45.18 percent at 8.19 million units, official data showed.
And positive signs that Beijing may continue its efforts to boost domestic consumption, including automobiles, are raising hopes for another bumper year ahead.
A report by China's Ministry of Industry and Information Technology indicated last week that the government might extend some of the existing incentives, including cuts in sales tax for small cars, as well as introduce other steps.
Dong Yang, secretary general of the China Association of Automobile Manufacturers, told reporters on Thursday that he expected China's overall vehicle sales, including trucks and buses, to grow 10 percent in 2010 if the government renews its tax incentives.
Guangzhou Auto, China's sixth-largest, expects its sales to grow 12 to 13 percent this year and to maintain a double-digit growth rate next year, Zhang said.
It is scheduled to start building a joint venture plant with Fiat at the end of this month with completion scheduled for 2011, Zhang added.
The expansionary moves are expected to boost Guangzhou Auto's annual production capacity to more than 1 million units in 2011 from its current 800,000, Zhang added.
Guangzhou Auto also operates a car venture with Toyota Motor in south China.
Costa Rica Coffee Growers Eye China Free Trade Deal
Source: ReutersA planned trade deal between Costa Rica and China might bring a bounty to coffee growers in the Central American country which has an advantage over its neighbors who are still allied with Beijing's rival Taiwan.
If a text is agreed for the trade pact, currently in the last round of negotiations, Costa Rica could become the third Latin American country after Chile and Peru to reach such a deal with China.
The tiny Central American nation is seeking "immediate access" of its high quality beans to the Asian giant, Costa Rica's chief negotiator, Fernando Ocampo said. China is Costa Rica's second-largest trade partner after the United States.
Last week, the two countries concluded a fifth round of free trade talks, but will draw up norms on coffee, sugar and other agriculture products in a sixth and final round of negotiation in mid-February.
On Thursday, coffee industry leaders from around the world are gathering in the Costa Rican province of Guanacaste for the annual Sintercafe three-day coffee conference.
Coffee demand in traditionally tea-drinking China has risen in recent years as the country's fast economic growth means a growing class of young, upwardly mobile consumers could be next to adopt coffee drinking habits.
"It's such a big market that there are always opportunities for different kinds of coffee," said Juan Carlos Vargas, general manager of Coopetarrazu, which groups 250 small producers in the lush Tarrazu region of western Costa Rica.
Vargas said the Chinese market is developing a taste for Costa Rica's fine coffee, not just cheaper, lower-quality Vietnamese robusta or domestically-grown coffee.
"They are going to be interested in our coffee. In fact, Starbucks is already there," he said.
Starbucks Corp , a top buyer of Costa Rican coffee, has nearly 700 cafes in China now and sees the potential for thousands of new stores. China has seen double-digit growth in coffee sales in the past couple of years.
Wants Beans Protected
Costa Rica ended a 60-year diplomatic ties with Taiwan and forged relations with mainland China in 2007.
China shuns commercial relationships with governments like Guatemala -- Central America's No. 1 coffee producer -- that recognize Taiwan as a country.
But an untapped market of China's size is not enough to win the immediate support of all farmers, who have called on the government to protect the high-quality reputation of Costa Rican coffee with a certification clause in the trade pact.
Ronald Peters, executive director of the government-funded Costa Rica Coffee Institute, said local farmers worry Chinese importers could mix their specialty beans in blends and pass it off as Costa Rican, diluting the brand.
"We have a clear position in terms of demanding a strict origin norm to inform (buyers) that the Costa Rican coffee was produced in Costa Rica," Peters said.
Costa Rica's small-scale coffee farmers, who grow the famed beans on parcels of just 5 hectares or less, comprise more than 90 percent of the country's production.
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