29/07/2016

Disgorging | The Economist

OUTSIDE China, the monster Three Gorges dam across the Yangzi river is one of the most reviled engineering projects ever built. It is blamed for fouling the environment and causing great suffering among the 1.2m people who were relocated to make way for its reservoir. Inside China, officials insist that the dam is an “unsung hero” (in the recent words of the Yangzi’s chief of flood control). But controversy over the project occasionally flares. Amid the country’s worst flooding in years, it is doing so again.

The Communist Party took enormous pride in the completion of the Three Gorges dam a decade ago; officials said it would play a vital role in taming a river which, when it flooded, often claimed hundreds or thousands of lives. Recently, however, censors have permitted a few ripples of complaint to disturb the glassy surface of state-run media. Online critics have asked whether the dam has failed to protect cities from flooding or whether it has caused earthquakes—and have not had their posts deleted. Granting permission to complain may seem surprising. But officials have reason to feel confident. The much-denounced dam seems to be passing its first big test as a flood barrier.

This season has been one of the wettest in China’s recent history, with 150 towns and cities suffering record amounts of rain. The Yangzi basin has been particularly hard hit. In the week to July 6th Wuhan, a giant city downstream from the dam, received 560mm (22 inches) of rain, its biggest ever downpour (residents are pictured on a temporary bridge).

China’s most recent experience of weather like this was in 1998, which was also the last time El Niño, a shift in the weather patterns of the western Pacific, had a big impact on the world’s weather. That summer the Yangzi burst its banks, causing more than 1,300 deaths. So far this year fewer than 200 people have died in the river’s basin.

One big difference is that in 1998 the Three Gorges dam was still under construction (it went into full operation in 2012). By July 24th it had held back about 7.5 billion cubic metres (260 billion cubic feet) of potential floodwater, which would have compounded disasters caused by torrential rain in the middle and lower reaches: some of the heaviest rains have occurred downstream from the dam. It is too soon to declare victory over the floods. The rainy season is only halfway through and more downpours are expected in August. But so far, as a method of flood control, the dam has done more or less what it was supposed to.

That doesn’t necessarily justify the project. One of the most important criticisms of it, by the late Huang Wanli, a hydrologist at Tsinghua University in Beijing, is that so much silt will eventually build up behind the dam that it will have to be taken down, leaving the Yangzi basin worse off than if the barrier had never been built. The region in which the dam stands is also one of the world’s most seismically active. Geologists worry that the weight of water in the sinuous reservoir, 600km (370 miles) from end to end, and the rise and fall of it, is causing more frequent tremors along the fault lines. Even small earthquakes can cause perilous landslides.

Considered purely as a means of flood control, the dam is a mixed blessing. The silt-free water that gushes through it fails to replenish embankments downstream, thus weakening them as flood barriers (several have collapsed this year). Below the dam, the water now runs faster; it has scraped away and lowered the Yangzi’s bed by as much as 11 metres, according to Fan Xiao, a geologist working for Probe International, a Canadian NGO. As a result, nearby wetlands drain into the river, damaging their ability to act as sponges during a flood.In 2000 another academic at Tsinghua, Zhang Guangduo (who had done the environmental feasibility studies for the dam), told the man in charge of building the barrier that “perhaps you know that the flood-control capacity of the Three Gorges Project is smaller than declared by us,” according to leaked documents. Peter Bosshard of International Rivers, an environmental NGO, asks whether it was wise to spend so many billions on one project, rather than strengthen flood-protection measures all along the Yangzi.

That point has been borne out by the many failures of local flood-control measures that have also occurred this year. In July parts of Wuhan’s metro system filled with water. This seems to be the result of bad management or corruption. According to People’s Daily, a party newspaper, only 4 billion yuan ($600m) of the 13 billion yuan allocated to improving drainage in the metro was actually spent. Local media say that one of the people responsible for drainage projects in the city is under arrest for taking huge bribes.

Such problems have been exacerbated by urban expansion. Wuhan used to have more than 100 lakes, but it has lost two-thirds of them to construction sites since 1949. The city’s wetlands have been gobbled up, too. Those that remain are too small to store flood waters. It is a relief that far fewer people have died in floods along the Yangzi this year compared with 1998. But it is no indication of the basin’s broader environmental health.

The Three Gorges dam has a historical parallel. In 1928 a tropical hurricane caused Lake Okeechobee, in central Florida, to flood, drowning 2,500 people in the southern half of the state. Determined that such a thing would never happen again, America’s Army Corps of Engineers over the next few decades drained much of the Everglades, which then covered much of the southern part of the state. No human disaster has recurred but the Everglades is a shadow of its former self and conservationists are battling to save it from destruction. The Yangzi is in danger not only from floods but from its flood controls.

Source: Disgorging | The Economist

29/07/2016

Strike hits Indian banks, but treasury functions normal | Reuters

A nation-wide bank strike in India hit the public transactions like cheque clearances and cash deposits, but the vital treasury operations including a 150 billion rupee ($2.24 billion) government bond auction are unlikely to be affected, traders said.Staffing in treasuries of banks are likely to be less than normal days but officials will ensure that functions like bidding at the auction will run smoothly, three traders at state-run banks said.

“Treasury people have been allowed to enter the head office of the bank, so there is no problem for us in trading or bidding at the auctions,” said a senior trader at a large state-run bank.

However, there could be some issues in some banks settling the previous day’s trades due to thin staffing.

“Settlement will be a problem at back office,” said a senior official with State Bank of India.The RBI was also not too worried about the impact of the strike on treasury operations and settlements of banks.

“There shouldn’t be any problem. Primary dealers are also there to underwrite if needed. But auctions should go through smoothly,” the official said.

An estimated 1 million bank staff are expected to strike work, opposing the government’s proposal to merge SBI‘s associate banks with itself. In addition, unions are against the government’s proposed move to privatise IDBI Bank.

($1 = 66.9800 Indian rupees)

Source: Strike hits Indian banks, but treasury functions normal | Reuters

29/07/2016

Why India Is Spending $1 Billion on Boeing Jets – The Short Answer – WSJ

India is beefing up its maritime patrol and anti-submarine warfare capabilities with an order for four Boeing Co.-made P-8I aircraft.

The order is the latest evidence of booming defense ties between India and the U.S. The South Asian nation’s arms imports from the U.S. in the five years through 2015 were 11 times the amount in the previous five years, according to the Stockholm International Peace Research Institute.

India imported 14% of its weapons from the U.S. in the same period, although its longstanding supplier Russia continued to dominate its defense market with a 70% share, according to the think tank.

India spent how much?

India will pay about $1 billion for the four P-8I planes. That is about half the amount the country spent in 2009 for eight of the aircraft. That order had an option for India to acquire four more jets at the 2009 price, something it is exercising now.

What can the planes do?

The P-8I—a military variant of Boeing 737-800 commercial jetliner—is fitted with state-of-the-art sensors and radars for maritime surveillance and reconnaissance, and to snoop on submarines. It can also be fitted with the Harpoon all-weather anti-ship missiles made by Boeing.

The aircraft–a variant of the U.S. navy’s P-8A Poseidon plane–can also be used for anti-piracy and other intelligence operations. It was deployed in 2014 when India joined the multinational search for the missing Malaysia Airlines Flight 370. It is currently being used in the search for an Indian air force AN-32 aircraft that went missing on Friday over the Bay of Bengal.

Why does India want the jets?

The latest acquisition of the P-8I is a milestone in India’s strategy to replace its aging equipment, much of which was bought from Russia during the Soviet era. The twin-engine jet has a range of about 2,222 kilometers, or more than 1,200 nautical miles, which allows the Indian navy to monitor the country’s vast coastline.

Has this got anything to do with China?

India’s expansion of the P-8I fleet comes as China increases its naval presence in the Indian Ocean, alarming New Delhi.

In recent years, China has been improving its submarine power with a nuclear-powered sub travelling all the way to the Persian Gulf via Sri Lanka. China and India are also locked in a long-running land-border dispute.

The new planes will bolster India’s capabilities to keep an eye on movement on Chinese warships and submarines in the region.

What else is on the shopping list?

India’s government, led by Prime Minister Narendra Modi, has promised to upgrade the country’s military capabilities. But a long-delayed deal to buy 36 Rafale fighter jets from Dassault Aviation S.A. of France is still being negotiated–more than a year after it was announced.

India also has plans to buy howitzers, warships, submarines, as well as to acquire fighter jets.

Source: Why India Is Spending $1 Billion on Boeing Jets – The Short Answer – WSJ

29/07/2016

China Steels Its Resolve, But ‘Zombies’ Abound – China Real Time Report – WSJ

China’s steel industry is a test case for the nation’s ability to restructure overbuilt parts of the economy, and so far it’s not going very well.

Seven months into 2016, China has cut just 30% of the 45 million tons of steel capacity it has pledged to pare this year. And a Renmin University study found that more than half of China’s steel companies are “zombies.

”They define zombie firms as companies that have received below-market interest rates for two years running — a sign that they are being artificially propped up by their local governments or other government financing. Essentially, they are dependent on cheap financing to stay alive.Steel firms led the list, with 51.4% zombies in the sector, followed by the property sector, with 44.5% zombies and construction with 31.2%.

Renmin economists said local governments long nurtured sectors such as steel with the central government’s blessing. Now that the pressure is on to scale back, they tend to resist central government calls for cuts, given the impact on jobs, local economic growth and officials’ promotions, economists say.

An indication of that resistance is seen in recent data. Despite calls from Prime Minister Li Keqiang on down to turn off blast furnaces and shutter steel production lines, the industry posted record daily crude steel production in June, driven by easy money policies and a speculation-fueled upturn in the property market — which is itself suffering from overcapacity. Industry Vice Minister Fei Feng told reporters this week he didn’t expect a recent rebound in steel prices to last.

“For the purpose of political performance and maintaining stability, local governments continued to give blood to those zombie firms in various forms that were on the brink of bankruptcy,” the Renmin report said, adding that governments should interfere less in how companies operate and accelerate reform of state companies.

Officials have blamed this year’s slow progress on capacity trim on the lengthy negotiations required to allocate those cuts among China’s 28 provincial governments.

China, which accounts for half of global steel production, remains confident it will fulfill capacity cut targets for 2016, industry Vice Minister Feng told reporters, adding that the reductions so far this year are in line with expectations.

In all, China has vowed to cut up to 150 million tons of extraneous steel production over the next five years. Even that goal targets only 10% of the nation’s excess steel capacity, which is currently around 30%, according to industry analysts. This comes as rising exports fuel tension with overseas companies and labor groups alleging that China is selling steel at prices below its cost of production.

Beijing’s counter argument is a bit of a circular one: The problem isn’t that China is making too much steel, but that global demand is inadequate.

A disproportionate number of steelmakers are state-owned enterprises, a group that accounts for some 55% of China’s corporate debt but only produces 22% of economic output, according to International Monetary Fund data. China’s corporate debt hit approximately 145% of gross domestic product in 2015, up from less than 100% in 2007, according to the International Monetary Fund, a level it characterized as “high by any measure.

”Across all sectors, zombie firms make up 7.5% of the 800,000 industrial companies between 2005 and 2013 that Renmin studied, down from a peak of about 30% in 2000 shortly before China embarked on its last serious reform of the state sector. President Xi Jinping has called for state companies to remain a core part of China’s economy.

As companies age, they are increasingly likely to become zombies. About 30% of firms founded more than three decades ago qualify as zombie firms, according to Renmin’s research, compared with just 3% among firms with less than five years’ history.

Source: China Steels Its Resolve, But ‘Zombies’ Abound – China Real Time Report – WSJ

28/07/2016

Furniture Retailing With Chinese Characteristics – China Real Time Report – WSJ

At the opening of Zaozuo’s first furniture store this month in Beijing, a shopper snoozed on a couch while others clambered onto wall-mounted shelves to take selfies perched in chairs. Welcome to furniture retailing with Chinese characteristics.

Online furniture startup Zaozuo Zaohua Zworks Ltd. opened the outlet in an upscale mall after hitting resistance from customers wary of buying bulky items without so much as a feel of the fabric, let alone a bit of shuteye.

Liu Yusi, a 33-year old human-resource executive living in Beijing, said the showroom is a good idea given that buying large pieces of furniture without a test drive can be a leap of faith, although she was a little disappointed there weren’t any beds on display. “Maybe the store is too small,” Ms. Liu said. “But I think a mattress is something you really need to lay on before you decide to buy.

”Zaozuo has tried to distinguish itself from competitors by letting customers vote on the design and style of furniture items at the prototype stage before they’re mass produced, a strategy it says reduces inventory and cuts cost. This is a Chinese adaptation of business models used by the likes of U.S. website Threadless.com — which conducts online polls of crowd-sourced T-shirt designs before producing winning entries – and by crowd-funding sites that have investors vote on ventures they’re willing to fund.

The approach has its skeptics. Guangdong Weiyuhua Furniture Co. says it thinks Zaozuo’s voting is a gimmick and questions whether selling furniture online is sustainable. “It targets a few rich people in cities like Beijing or Shanghai,” said company sales manager Li Songzhi. “Traditional furniture companies like ours have real stores all over China.

”With nearly 700 million online users, Chinese consumers are driving explosive growth in the e-commerce sector, undercutting traditional retailers and leaving new online ventures fighting for an edge. Zaozuo co-founders, Stanford business school graduates Shu Wei and Guan Zishan, say China’s struggling manufacturing sector needs a wakeup call as it battles rising debt and excess capacity.

“The old system is not working very well,” said Ms. Shu. “That was the starting point of our business model.

”One potential problem with the company’s voting system is possible voter fraud, says Travis Wu, China research director with consultancy Forrester Research Inc. “In China, everything is a bit tricky, and lots of people try to game the system,” Mr. Wu said. That could see designers tilt results toward their own models, for example, or allow competitors to steer Zaozuo into producing money-losing items, he said.

Another concern: with Zaozuo opening a showroom, it risks driving up costs and undercutting its advantage over traditional furniture makers. Mr. Guan says users must be registered before voting, the company watches carefully for unusual online activity and the new store is not a major investment.Zaozuo, which attracted several thousand curious shoppers to its store launch on a recent weekend, sees itself inhabiting a competitive space between expensive designer brands and mass marketers like Sweden’s IKEA, a company that attracts its share of showroom lounge lizards. On any given weekend, entire families can be found snoozing on beds in Ikea’s massive showrooms, luxuriating in the air conditioning and enjoying the inexpensive food.

China’s fragmented furniture industry with around 5,000 large companies and combined revenue of 244.5 billion yuan [$37.3 billion] in 2015, up 16.1% increase from the previous year, is tradition-bound and due for a shakeup, say online companies. Internet furniture companies only command a tiny slice of the market but are growing rapidly. Privately held Zaozuo said sales are increasing by 40% annually although it has yet to break even. MZGF Furniture Studio Co., another online firm, said sales have been expanding by as much as 200% year on year in some months.Zaozuo, which works with 50 Chinese factories and more than 80 European designers, has attracted $17.5 million in venture funding and hopes to eventually go public. Anna Fang, chief executive of venture capital group Zhen Fund, which has invested $1.3 million in Zaozuo, said prospects for the industry are promising but the startup may need to shorten delivery times, which range from three to 35 days. “Ikea can get furniture to you right away,” she added.

At its store opening, Zaozuo said it tried to discourage shoppers from getting too comfortable on its furniture. “The customer might be comfortable, but the image is not that good for other customers who can’t feel the fabrics if someone’s sleeping on it,” said Mr. Guan. “Maybe they do it because they’re tired. Shopping can be very tiring.”

Source: Furniture Retailing With Chinese Characteristics – China Real Time Report – WSJ

28/07/2016

With eye on China, India doubles down on container hub ports | Reuters

Indian conglomerate Adani Group has started building the country’s first transshipment port, conceived 25 years ago, and the government will construct another $4-billion facility nearby to create a shipping hub rivalling Chinese facilities in the region.

New Delhi will grant billionaire Gautam Adani 16 billion rupees ($240 million) in so-called “viability gap” funding to help the new port at Vizhinjam in Kerala win business from established hubs elsewhere in Asia.

Once Vizhinjam is operational the central government will start building the port of Enayam in neighbouring Tamil Nadu, said a senior shipping ministry official. Enayam alone will save more than $200 million in costs for Indian companies every year, he said.India’s 7,500-km (4,700-mile) coastline juts into one of the world’s main shipping routes and Prime Minister Narendra Modi wants to capitalise on that proximity by developing ports that can shift freight on to huge vessels capable of carrying up to 18,000 20-foot containers.

By bringing onshore cargo handling now done at entrepots in Sri Lanka, Dubai and Singapore, Modi’s government expects cargo traffic at its ports to jump by two-thirds by 2021 as India ramps up exports of goods including cars and other machinery.

The lack of an Indian domestic transshipment port forces inbound and outbound containers to take a detour to one of those regional hubs before heading to their final destination.

New Delhi expects the new ports to save Indian companies hundreds of millions of dollars in transport costs, as well as ease concerns over the growing strategic clout in South Asia of rival China, which has invested hundreds of millions of dollars in Sri Lankan ports at Colombo and Hambantota.

Adani wants the Vizhinjam port, which an arm of his Adani Group is building at a cost of around $1 billion, to be operational in 2018. The port lies hard by the Gulf-to-Malacca shipping lane that carries almost a third of world sea freight.

“The port can attract a large share of the container transshipment traffic destined for, or originating from, India which is now being diverted primarily through Colombo, Singapore and Dubai,” said an Adani Group executive who declined to be named.

But officials acknowledge that it would be difficult for the new ports to win international clients unless they offered discounts.”A major part of transshipment is happening at nearby ports. We can win some of that business,” said A.S. Suresh Babu, who heads a government agency set up by Kerala to facilitate the construction of Vizhinjam.

“There’s a viability issue in the first few years. Already the Chinese are operating there. So unless you give some discount you can’t attract these ships. So that’s why the government of India has approved the viability gap funding.”

Source: With eye on China, India doubles down on container hub ports | Reuters

27/07/2016

India’s farmers seize offer of free registration of land sold on ‘plain paper’ | Reuters

When Telangana announced a three-week window for free registration of land that had exchanged hands via handwritten notes on plain paper, the offer triggered more than a million applications.

All over the state the sale of land on notes known as “sada bainamas” has been customary because of widespread inability to pay the registration fees, illiteracy or ignorance of the law.

Around a million farmers in Telangana lack secure title to land bought this way, according to a 2014 survey carried out in the state by Landesa, a U.S. based charity .

Guram Muttaya is a beneficiary of the registration drive and one of many farmers who occupy land they have been cultivating for 30 to 40 years on the strength of informal documents.

“Registering the land will bring me government agriculture loans, compensation for crop damages and crop insurance too,” Muttaya told the Thomson Reuters Foundation, holding up a torn piece of paper bearing a signature.

The piece of paper is his only proof of ownership of a fifth of a hectare of land he bought in Kannayapally village 27 years ago for $67 and whose market value has risen to $3,000.

Studies have shown that broadly distributed secure land rights for farmers can help to pull families out of poverty and boost sustainable economic development.

Source: India’s farmers seize offer of free registration of land sold on ‘plain paper’ | Reuters

27/07/2016

China’s Fosun to sign agreement for $1.4 billion Gland Pharma buy – paper | Reuters

Shanghai Fosun Pharmaceutical (Group) Co (2196.HK) will sign a definitive agreement on Wednesday to buy a controlling stake in India’s Gland Pharma in a $1.4 billion deal, the Economic Times newspaper reported, citing a source with direct knowledge.

In May, Shanghai Fosun had made a non-binding proposal to buy Gland Pharma, which is backed by KKR & Co (KKR.N), to boost its drug manufacturing and research and development capacity.

Fosun did not immediately comment, when contacted by Reuters. Gland Pharma made no immediate comment on the report.

The paper said KKR declined to comment.

Source: China’s Fosun to sign agreement for $1.4 billion Gland Pharma buy – paper | Reuters

27/07/2016

Parliament passes controversial child labour bill | Reuters

Parliament on Tuesday approved a controversial law that would allow children to work for family businesses, despite widespread concern by the United Nations and other rights advocates that it will push more children into labour.

A week after the bill was passed by the Rajya Sabha, the Lok Sabha approved the measure that brings a raft of changes to a three-decade-old child labour prohibition law. The bill now goes for the President’s assent before becoming law.

The U.N. Children’s Agency (UNICEF) as well as many others have raised alarm over two particular amendments – permitting children to work for their families and reducing the number of banned professions for adolescents.

A 2015 report by the International Labour Organization (ILO) put the number of child workers in India ages 5 to 17 at 5.7 million, out of 168 million globally.

More than half of India’s child workers are employed in agriculture and more than a quarter in manufacturing – embroidering clothes, weaving carpets or making match sticks. Children also work in restaurants, shops and hotels and as domestic workers.The new legislation extends a ban on child labour under 14 to all sectors. Previously, only 18 hazardous occupations and 65 processes such as mining, gem cutting and cement manufacturing were outlawed.

It also stiffens penalties for those employing children, doubling jail terms to two years and increasing fines to 50,000 rupees ($740) from 20,000 rupees ($300).

While child rights groups have welcomed such changes, there has been concern over other amendments proposed by Prime Minister Narendra Modi‘s government.

For example, children will be allowed to work in family businesses, outside of school hours and during holidays, and in entertainment and sports if it does not affect their education.

Also, children 15 to 18 will be permitted to work, except in mines and industries where they would be exposed to inflammable substances and hazardous processes.

The government says the exemptions aim to strike a balance between education and India’s economic reality, in which parents rely on children to help with farming or artisanal work to fight poverty or pass on a family trade.

“The purpose of this very act is that we should be able to practically implement it,” Labour and Employment Minister Bandaru Dattatreya told parliament. “That’s why we are giving some exemptions.”UNICEF had urged India to exclude family work from the proposed law and include an “exhaustive list” of hazardous occupations.

“To strengthen the Bill and provide a protective legal framework for children, UNICEF India strongly recommends the removal of ‘children helping in family enterprises’,” it said in a statement on Monday.

“This will protect children from being exploited in invisible forms of work, from trafficking and from boys and girls dropping out of school due to long hours of work,” it said.

Source: Parliament passes controversial child labour bill | Reuters

27/07/2016

India orders 4 more maritime spy planes from Boeing worth $1 billion | Reuters

India has signed a pact with Boeing Co for purchasing four maritime spy planes at an estimated $1 billion, defence and industry sources said, aiming to bolster the navy as it tries to check China’s presence in the Indian Ocean.

India has already deployed eight of these long-range P-8I aircraft to track submarine movements in the Indian Ocean and on Wednesday exercised an option for more planes, a defence ministry source said.

“It has been signed,” the source familiar with the matter told Reuters. An industry source confirmed the contract, saying it was a follow-on order signed in New Delhi early on Wednesday.

Source: India orders 4 more maritime spy planes from Boeing worth $1 billion | Reuters

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