Senior US expert with the Chinese Academy of Social Sciences Zhou Qi said that China and the US must concrete and practical solution acceptable to both countries and must coordinate, therefore both sides have to make compromises.

The growing concern has recently among politicians and the public around the world, UN climate talks on enlarge the fight against global warming since it has been largely stalled. These make the outcome of the Copenhagen summit uncertain.

The last round of the talk was held in Bangkok between Sept 28 and Oct 9, which resulted in progress to a draft text for a likely agreement, but finally failed to break the deadlock in key areas.

And also China and India were called on to commit to reduce carbon emissions.

But, developing countries will not agree to the reduction without a transfer of financial and tech from rich nations.

The head of the Institute of US Studies Yuan Peng, which affiliated to the China Institute of Contemporary International Relations said that a compromises calls from the US to agree to the tech transfer while China must agree to a detailed carbon reduction target.

He also said that the US has to accept that China, coz as a developing country is not in the position to commit to a binding emission reduction target.

Maria Cantwell, who is the Washington senator, said early last month that the US and China are likely to sign an agreement to combat climate change during Obama’s visit to Beijing in November. Also said any deal between thee two countries would bring back the global confidences in the fight against global warming.

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The largest bank in Europe is in the process of offering 5.1 billion new shares at 254 pence apiece, or a 48% discount on Friday’s closing price, for subscription by its current shareholders. In Hong Kong, the issue price per new share is HK$28, or a 50.2% discount on its Friday close of HK$56.95.

Stephen Green, the Group Chairman, disagreed that the rights issue had appeared too late. He said it was the right time when they got the information about their performance in 2008.

Douglas Flint, the HSBC finance director, said: “We want to position ourselves both defensively for turbulent years and opportunistically for the options that will appear.”

Patrick Shum, Karl Thomson Securities’ chief portfolio strategist, said HSBC had lost the golden time for issuing new shares—when the Hang Seng Index was above the 150000-mark. He said that the management might think that they could deal with the problems by themselves. According to Patrick Shum, individual shareholders have no option but to buy the new shares. Otherwise, their shareholding will be diluted and they will lose money, since many of them have been holding the shares for long.

The rights issue is subject to shareholder approval on March 19. This will add 150 basis points to HSBC’s capital ratios, strengthening the core tier 1 ratio to 8.5 percent.

HSBC Holdings also said that after it was hit by a goodwill impairment charge of $10.6 billion in the US, the pretax profit of 2008 fell 62% to $9.3 billion from $24.2 billion of 2007. Excluding the charge, pretax profit fell by 18% to $19.9 billion, slightly ahead of the $19 billion predicted by the analysts.

HSBC cut its dividend for the full year by 29% to 64 cents per share and said it would close its troubled US consumer loans business. The bank maintained a dividend growth of 10% or more per year up to 2007.

HSBC’s losses in North America in 2008 was $15.5 billion in total, including the $10.6 billion goodwill impairment charge, due to its troublesome acquisition of Household, the US consumer lending business it bought six years ago for $14 billion.

“With the benefit of hindsight, this is an acquisition we wish we had not undertaken,” Stephen Green said, admitting for the first time that HSBC had made a wrong decision in the acquisition of Household. He also said the credit environment has experienced fundamental changes over the past year. “It’s a painful decision to close the business,” he said, “We don’t want to make people redundant as well.”

HSBC said it would close most of its HFC and Beneficial-branded US branch network, leading to a loss of 6,100 jobs and that, with the exception of credit cards, the US divisions would write no further consumer finance business.

Group-wide, the bank said that losses on bad loans jumped 44% versus 2007 to $24.9 billion.

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As a result of cut in retail taxes on small vehicles, GM’s minivan venture sales in China have had a 32% rise in the first 2 months. Recently, the government is giving out 5 billion yuan in subsidies in order to promote the auto sales in countryside.

Because of the tax cut and subsidies, GM predicted that it would enjoy a double growth in China. However, in the US market, it saw a 51% slide in the sales, which forced GM to ask for about $16.6 billion aid from government.

Compared with the previous prediction that sales would rise by less than 3%, GM’s vehicle sales may rise by 5% to 10% this year. With the help of SAIC-GM-Wuling Automobile Co, the largest minivan-maker in China, GM expects that it could surpass the original goal by 3% points. SAIC-GM-Wuling Automobile Company accounts for nearly half of the GM’s sales in China.

Nick Reilly, GM’s Asia-Pacific president said that government’s efforts to boost rural consumption have positive effect on Wuling’s rising sales, and government is trying to stimulate the auto and stock markets, which encourage people to invest again.

China Association of Automobile Manufacturers reports that SAIC-GM-Wuling sold 72,947 vehicles in February which is half more than last year. In January, the government cut the retail tax on vehicles with engines of 1.6 liters or less by 50%, and this action stopped the 3-month decline of auto sales.

According to the new policy, when purchasing a car, Chinese farmers or other rural residents can have a subsidy which equals 10% of the sale price, with a maximum of 5000 yuan.

In addition, if rural drivers buy a new truck or minivan to replace his own light truck, they can get a further 3,000 yuan.

This policy helped Wu Tao, who owns a store in Hebei province, to have the first vehicle of his family. Wu said that with the money given from the government, he could afford the car recently.

According to Shenyin & Wanguo Securities Co, this minivan sales may have a 30% rise this year.

Though subsidies increased the auto sales, there seems to be little profits for the car makers. The fact is that GM only holds about 34% of SAIC-GM-Wuling, while SAIC Motor owns 50.1 percent and the rest is owned by Liuzhou Wuling Motors Co. Generally, farmers will prefer the cars of low prices that could be 30,000 yuan.

Chairman of Anhui Jianghuai Automobile Group Co, Zuo Yanan said that farmers cared nothing but the price.

Tax policies are constantly changing, and especially in international tax laws, so consult with a top tax attorney to ensure your company is limiting its tax liabilities.

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The main purpose of the ‘Buy American’ clause in a bill that President Barack Obama made law on Tuesday is to release $787 billion to rescue the US economy. The stimulus law says US iron and steel would be used for government projects.

It also states that the ‘Buy American’ provision be applied reducing US responsibilities without international agreements, and this will not improve US’s trade with BRIC countries – Brazil, Russia, India and China. The US and 38 other countries have signed World Trade Organization pacts, which state its objection about restrictions on government purchases between member countries.

“These protectionist fears are most significant in relation to China,” said Water Russell Mead, a Henry A. Kissinger senior fellow for US Foreign Policy at the Council of Foreign Relations. “Alienating Asia and China and setting up the potential for bitterness and rivalry could dog this planet for decades. That is probably the most dangerous thing we could do.”

Burt Folsom, a professor of History at Hillsdale College, Michigan, said that such protectionism would make US spend more and gain less. He made such statements during interview with China Daily, “We would pay higher prices for our manufactured goods that use steel. And we would discourage the Chinese from trading with us and supplying us with cheaper goods.”

California’s Bay Area may have the most possibilities to be impacted by the measure’s effect on overall trade, since Bay Area manufacturers earn 60 percent of their revenue from overseas with huge technological exports.

Jim Wunderman, president of Bay Area Council worried about the clause may cause negative effect on relations with other countries. He said, “The Bay Area Council is extremely concerned about this provision and its potential effects on trade, competitiveness and our most important relations with China.”

“The number of jobs the Buy American clause will create is small compared to the size of our global trade,” Sean Randolph, president & CEO of Bay Area Economic Forum, said in a telephone interview, “The US has set a bad example.”

General Administration of Customs (GRC) of the PRC submit the latest statistics showing that trade between the US and China recorded its slowest growth rate in 7 years last year with a total sum of $ 333.74 billion.

Meanwhile, the share of Chinese products in the US market is reducing and Canada has taking over China as the largest exporter to the US in the first 10 months of 2008. The market share of China’s products fell to 15.7 percent from 16.4 percent in the same period in 2007.

Others are skeptical if the clause can stimulate the economy or create any real working opportunities considering highway, transit and airport programs are already covered by similar Buy American requirements that have been running for years.

Gary Hufbauer and Jeffrey Schott, both senior fellows at the Peterson Institute for International Economics, evaluate that the additional US steel production fostered by the provision will amount to around 0.5 million metric tons. This creates about 1,000 new jobs in the steel industry. Since steel is a capital intensive industry, the job impact is not so strong as other industries. In the giant US economy, compared with a labor force of roughly 140 million people, 1,000 jobs could even be ignored as a rounding error. On the other hand, if other countries object US policies, the ‘Buy American’ provision could also cost jobs.

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Roach said that during the recession while the America’s unemployment gets high, it is inevitable for people to believe what Geithner has commented—China is playing a more influential role in this crisis. His words were rooted from what Treasury Secretary Timothy Geithner had said at a Senate confirmation. The latter blamed China for controlling the Renmibi exchange rate.

There are three factors for US to think China should be responsible for the crises—an expansion of bilateral trade deficit, manipulation of the currency exchange rate and the low disposable income for US domestic employees.

In Roach’s point of view, US administrators and leaders have to shift attention from the serious crisis to other aspects. Therefore, China becomes a scapegoat by being accused of responsible for this recession.

He said that the bilateral deficit was grounded on some factors. A bubble-prone, savings-short US economy needs a foreign saving surplus to balance its inflation. In this sense, the economy tries to attract capital inflow by massive current account and deficits.

In fact, besides China, the US runs a multilateral trade deficit with 100 other trading partners, which of course is not resulted from Sino-US trading imbalance. So, Roach thinks it is incorrect to blame China for US domestic problems.

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In February 10, China Association of Automobile Manufacturers (CAAM) said that China sold totally 735,500 units of vehicles in January, 14.5 percent less year-on-year because of the falling demand, and, compared with December, it drops slightly 0.83 percent. However, it is still well over that in the US. Statistics shows that automobile’s monthly sales in the US dropped 37 percent from the last January to about 656,693 vehicles, which was the lowest point since 1963.

Associate Secretary General of CAAM Zhu Yiping said that the encouraging sales figures in January showed how effectively the new government policies work in the promotion of vehicle sales.

Since the January sales of 2008forecast doom prosperity of the market, the high stock of domestic ran down as the producers of automobile reduced the production while the demand for the product increased without expectation.

According to the association, automobile inventories declined more than 80,000 units and down to the new low in the recent 13 months.

There was an output of 658,800 units of vehicles last month in China, 20.22 percent less than that in a year earlier, but 5.07 percent more than that in December.

A stimulus package was passed last month, according to which tax on vehicles with engine capacity of less than 1.6 liters will be cut by 50 percent and 5 million yuan on subsidies will be spent for farmer to replace three-wheeled vehicles and outdated trucks with small, 1.3-liter or less, vehicles. The action is taken in the purpose of getting automobile sales in rural regions forward and put spurs to more energy efficient vehicles. Therefore, the only kind of automobile with rising sales in the auto section in January would be the small passenger cars, with engine capacity of less than 1.6 liters.

In the expectation of Ricon Xia, auto analyst at Daiwa Securities, the tax adjusted would increase the automobile sales by 3 – 6 percent this year.

Yale Zhang, director, Greater China Vehicle Forecasts for US consultancy CSM Worldwide Corp. believed that the measures adopted was to make enormous progress in the sales, and the automobile market in China is to be refreshed in the later part of this year. However, he added that no conclusion could be obtained just on the base of a monthly figure that China had become the leading automobile market in the world.

And, Jia Xinguang, an auto analyst based in Beijing, stated that it made little sense to be the one-month-sales winner as it was groundless of comparing China’s auto industry with the US’ just with a monthly figure, and China should attach greater importance to implement a minute restructured scheme in the long run.

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It is obvious that trade protection is certain to rise, said Mei Xinyu, a trade expert form the Ministry of Commerce. The current situation will stay for some time, he said, referring to the lasting effects caused by the US stimulus package.

The package was passed late on Friday with the proposal of distributing tens of billion of dollars into public building projects, and tends to impose conditions, for instance, only US-made steel and products can be used.

Mei also said that China could be greatly suffered from the action since it is a major manufacturing exporter that supplied enormous goods to all the other countries.

The trade barrier comes when efforts are needed to fight the devastated economic crisis in more than fifty years.

It is impossible that protectionism will do any good to anyone, said Feng Jun, a Shanghai-based WTO expert,  the package is not feasible in the age of globalization since the world today is not the same as that of the 1930.

He added that the “buy American” plan “is impossible to work”. On the contrary, it would cause trade barriers. At the same time, “short-sighted” governments will constrains foreign products and overseas investments to protect jobs and industries within the country.

Mei doesn’t agree with the move that China will not use protectionism when implementing its $586-billion stimulus package. He urged Chinese government to create an even favorable field for domestic business under the WTO framework. “We should not wait to be a victim,” he said.

It is found that the number of anti-dumping and anti-subsidy investigations into Chinese products has increased. For example, India has made an announcement that it’s 17 “trade remedy” will be made to restrict Chinese products since October 2008.

Over the weekend, Group of Seven (G7) finance ministers promised that they will not use protectionism in the process of making efforts to stimulate their domestic economies to fight the world’s most awful economic crisis.

Italian Finance Minister Giulio Tremonti, the meeting’s host, said the other ministers insisted on offending protectionism. It is a specific dangerous thing not only for economies which is heavily based on exports, he said in Rome.

US Treasury Secretary Timothy Geithner made an assurance to his competitors that the $787-billion package would not break the US’s promise of free trade.

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China’s economy has boomed in the past 30 year. Data showed that China has been ahead of Germany. But overtaking the US is another matter.

According to Merrill Lynch economist Ting Lu, it will only take China three to four years to replace Japan being the second-largest economy in the world, but catching up with the US could take decades.

There’s a sharp contrast in China that Chinese people are the world’s poorest on average while China has experienced an explosive growth as it transformed from a long-isolated nation to the world’s factory.

The estimate of 2007 growth has already been revised by the government from 11.9% to 13%, which is the fastest rate since 1994.

The statistics bureau said that the new estimate raised gross domestic product to 25.7 trillion yuan, or $3.5 trillion at 2007 exchange rates. That would be ahead of Germany’s 2007 GDP of 2.4 trillion euros, or $3.3 trillion at an exchange rate produced by averaging rates on the 15th of each month during that year.

The revision appears with China’s export-driven economy struggling to reverse a slump caused by global crisis and ease the worsening situation.

A $586 billion stimulus package is announced by the government who is taking the oath that they will help struggling exporters. China’s export fell with a fastest rate in a decade last month. The Cabinet cut fuel prices and a tax on auto sales yesterday.

The change in economic ranking won’t help China out of its slump, according to Moody’s Economy.com analyst Sherman Chan.

The only effect is perhaps negative that the slowdown in 2008 would be more upsetting comparing with the stronger 2007, Chan said in a report.

The US’s economy ranked the first place with $13.8 trillion in 2007, followed by Japan at $4.4 trillion. Germany’s 85 million people were still far ahead of China in GDP per person in 2007 at $38,800.

The per capita GDP of China was $2,800 in 2007, but many people in China live on far less than that due to the large population. Chinese officials say more than 100 other countries have a higher income per person.

The data from International Monetary Fund showed that the GDP was just $300 billion three decades ago in 1979, which was one tenth of the level in 2007.

The living standard of Chinese people has been greatly improved and cities been modern with forests of skyscrapers and private cars in the streets.

It is estimated that China’s economy grew would get another 9% in spite of the economic slowdown. Figures for 2008 are expected to be unveiled this month.

But the economic growth rate of 6% has been slashed by economists, the number which would be the highest for any major economy but is worrisome for country leaders who need to make public satisfied through raising their incomes and easing the tight job market.

China still needs decades to overtake US, even if US gets no growth in economy.

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The assets planed to be sold include not only 1.92 million sq m of completed properties and properties under development but also its interest in five joint ventures and a property fund but also include a retail joint venture with a book value of $53 million and 289 hectares of land with a carrying value of $213 million. Its 20 percent interests equaling a value of $348 million in Japan property funds are also listed to be sold.

The deal, which is expected to close in January, would reduce ProLogis’ development pipeline by $1 billion, including $255 million to complete development of projects in China.

In Prologis chief executive Walter Rakowich’s opinion, the transaction is a substantial step to help Prologis deliver its balance sheet, relieve near-term refinancing pressure and enhance liquidity.

Although Prologis entered China in 2003, now it has expanded into 20 Chinese cities and has managed more than 40 logistics parks.

Last year, Jeffery Schwartz, Prologis’s former CEO, said in China that, in the coming years, the company planned to invest up to $500 million in China. However, caused by the global economic crisis, the company had to make a decision to sell their China operations to strengthen its balance sheet to meet the current environmental challenges.

This decision, selling China assets, will help Prologis offset its huge losses in the European market, and will be transacted at a fairly good price. Only in China could the assets be put up for sale for a reasonable price right now, given the current global economic circumstances. Actually Prologis may come back to China again as it never lose its interests in China.

“In the context of the global economic recession, China remains a relatively attractive investment (market for property),” CBRE, a global real estate consultancy, said in a research note yesterday.

ProLogis’ team of associates will join affiliates of GIC RE to manage its China business portfolio.

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Fierce domestic debate has resolved around the continual increases in US debt holdings in recent months, as the country has spent $2 trillion of foreign exchange reserves in US treasury securities.

According to Wei Weixian, economist with the University of International Business and Economics, it is a fairly acceptable option because in the long term, US treasuries are still a relatively safe investment for China.

In spite of the economic crisis, the US economy is still the strongest, he added, China does not have many choices in deploying its massive amounts of foreign exchange reserves.

China Investment Corporation (CIC) once suffered severe losses in its investment in the US private equity firm Blackstone due to the tumbling international financial markets. CIC said it would be more cautious in investment abroad.

The US treasury debt is relatively a low risks and good liquidity investment, said Guo Tianyong, economist with the Central University of Finance and Economics.

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