INTERNATIONAL

 

July 21 - 27 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

CHINESE GROWTH SLACKENS AFTER SARS

China's growth has slowed from the power-house performance of the first few months of 2003, as the impact of the Sars respiratory virus hit home.The expansion over the second quarter equivalent to 6.3% growth over a full year in the massive mainland economy is the lowest for the April-June period since 1992.But after a breakneck 9.9% expansion in the first quarter of the year, the figure for the first half of 2003 is 8.2%, well ahead of expectations and enviable by most countries' standards.

 

 

 

The after-effects of the Sars virus, which devastated travel and trade across Asia, were evident in the services sector, which grew just 0.8%.The Chinese government had rejected warnings of Sars' impact till late April, sparking criticism that it had unnecessarily hindered efforts to control the virus's effects.

Before the announcement earlier this month that China was finally Sars-free, the epidemic killed more than 340 people and infected more than 5,300.The belated announcement saw much of the country grind to a near-standstill, with the number of people travelling down by almost a quarter.

"After entering April, because of the impact of Sars, some industries were severally affected leading to a clear slowdown in economy growth," National Bureau of Statistics chief economist Yao Jingyuan said in a statement.

The government is counting on continued growth to feed the demand for jobs in China as more and more workers are pushed out of work in market-oriented reforms.But although exports are up a third and imports up 45%, retail sales are still weak, causing some to fear the economy could overheat.

US SLASHES GROWTH FORECAST

The sluggish US economy is taking longer to pick up than anticipated, according to the latest figures and comments from the Federal Reserve chairman Alan Greenspan.

Mr Greenspan, in his twice-yearly testimony to Congress, said the central bank was cutting its forecast for US economic growth this year by three quarters of a percentage point to 2.5-2.75%.

The downgrade came on the day the Bush administration predicted that the federal deficit would surge to a record $455bn this year thanks to tax cuts, economic weakness, and the cost of war in Iraq and the fight against terrorism.Mr Greenspan described economic growth in the first half of 2003 as "sluggish".

He blamed the war in Iraq and ongoing caution by businesses, reluctant to invest or hire more workers.But he said the Federal Reserve Bank expects economic activity to "accelerate in the second half of this year and to gather momentum in 2004"."We believe that we are at a turning point," Mr Greenspan said, hinting that there are already some signs of an economic recovery.

A glimmer of hope for the economy came from figures for US retail sales, which rose by 0.5% in June, the biggest increase in three months.Retail sales are seen as a reliable guide to the health of the economy in the US, where consumer spending accounts for two thirds of all economic activity.

Economists said last month's increase reflected lower interest rates, with homeowners taking advantage of cheaper borrowing costs to remortgage their properties.

EU TO RECEIVE DRAFT CONSTITUTION

The final draft of the EU constitution is set to be handed over to Italian Prime Minister Silvio Berlusconi, who as holder of the EU presidency will chair delicate negotiations on the document.

Former French President Valery Giscard d'Estaing head of the European Convention, which drew up the draft will formally hand over the constitution to Mr Berlusconi in Rome.

The governments of the 15 EU members and future members are due in October to begin examining the draft, which aims to streamline the bloc's institutions and prevent decision-making gridlock when it expands to 25 nations next May.

The document is the product of 16 months of debate and Mr Giscard d'Estaing is expected to again recommend it be left intact as far as possible.But there are lingering worries among EU member states, and there is still much talking to be done before the constitution is formalised.

 

 

THE DOLLAR BOUNCES BACK

The long-battered dollar has jumped sharply in Europe and Asia, reacting to positive sentiment about US economic prospects.

Comments from Federal Reserve chief Alan Greenspan, while downbeat, were seized on as evidence that the US could at last be in definite recovery.A wave of interest-rate cuts around the world, most recently in Britain and Canada, has also encouraged US investors to shift out of overseas assets.

And Japan has been rumoured to be intervening on the markets to support the dollar, hoping that a weak yen will help kick-start its stagnant economy.At July 15 close, the euro stood at $1.12, well below the highs of almost $1.19 achieved a month ago.

SURPRISE FALL IN UK INFLATION

UK inflation unexpectedly fell in June, largely because of cheaper foreign holidays.The underlying rate, which excludes mortgage interest payments, fell to 2.8% from 2.9% in May.This keeps inflation above the government's 2.5% target.The falls give extra justification to the Bank of England's decision to cut interest rates last week to a 48-year low of 3.5%.

The harmonised inflation rate, which the government plans to target from November, fell to just 1.1%, according to the Office for National Statistics.There is widespread speculation that the eventual target for that rate will be 2%.

AFRICA'S MAMMOTH OIL PROJECT COMES OF AGE

One of Africa's most ambitious but typically controversial oil projects came to fruition on July 15, when Chad began pumping oil for export via Cameroon.

The total cost of extracting the oil from Chad and piping it to Cameroon is estimated at $3.7bn (2.2bn), one of the biggest investments ever made in the region.When production gets up to full speed next year, this one project alone is expected to account for 45-50% of Chad's national budget.

ERICSSON LOSSES SHRINK

Swedish phone firm Ericsson has reported its ninth quarterly loss in a row but has come much closer to breaking even than investors had expected, and vowed to return to the black by the end of the year.

The company said it lost 2.7bn kronor ($328m; 206m) before tax but after restructuring costs in the three months to 30 June.

COSMETICS GIANTS

Some of the world's top cosmetics firms and retailers are to give away make-up worth $175m (110m), as part of the settlement in a California price-fixing case.

MIXED MESSAGE FROM MICROSOFT

Microsoft has taken the shine off better than expected sales figures by narrowly missing profit forecasts and disappointing investors hoping for a dividend increase.

The company, the world's biggest software maker, said sales for the three months to late June came in at just over $8bn (4.8bn), up 11% on the same period last year, and comfortably ahead of the $7.8bn forecast by analysts.

TAIWAN TELECOM SALE NETS $1.65BN

Taiwan's finances got a boost last week after the government raised $1.65bn (1.04bn) by selling a 12% stake in state-controlled Chunghwa Telecom.

Most of the sale - 965 million of the 1.165 billion shares on offer went to foreign investors, in the shape of bundles equivalent to 10 shares apiece sold on the US markets.

The move reduces the government's stake in Chunghwa to 69%, and the success of the current offering should help the state sell its holding down to 50% by the end of the year as intended.

POWER SHORTAGES 'HIT CHINA'

Power prices in China may have to rise to cope with the power shortages spreading across the country, the state media reported.

According to the English-language China Daily, power consumption rose by almost a sixth in the first half of this year as economic growth topped 8%.Blackouts are expected to multiply in the east and south of the vast country, the paper said.

 

 

FINANCE DEALS HIT GM PROFITS

GM, the world's biggest carmaker, has unveiled a sharp decline in profits for the April to June period.The Detroit-based car giant said profits for quarter came in at $901m, (540m), down by nearly a third compared with the same period last year.

SAO TOME COUP SPELLS OIL DELAY

The hoped for oil bonanza in the tiny African island state of Sao Tome and Principle will have to wait, in the wake of last week's coup, experts believe.

The government of the twin islands, inhabited by about 170,000 people, finally clinched a deal with massive neighbour Nigeria over oil rights in the Gulf of Guinea earlier this year.

HK JOBLESS RATE SOARS

The pressure on Hong Kong's government increased last week as unemployment levels rose to unheard-of highs.

The proportion of people out of work in the former British colony reached 8.6% for the three months to June, 0.3% up on the previous record set only a month earlier.

NEW PAY OFFER FOR SA MINERS

South Africa's major mining companies have raised their pay offer in the hope of avoiding a strike.The Chamber of Mines (COM), which is negotiating on behalf of gold mining firms, said it has raised its pay offer to 8.5% from 7%, Reuters news agency reported.

Coal mining employers have also upped their offer to 9% from 8%, while one major producer, Xstrata, has offered 10%.

SAMSUNG

Plunging chip and other product prices have driven a 41% fall in profits at hi-tech giant Samsung Electronics.

Samsung earned 1.13 trillion won (600m; $960m) net profit in the three months to end-June, down from 1.92 trillion won a year earlier.

S KOREA VOTES FOR EMERGENCY CASH

South Korea's parliament has passed an extra government spending package, in the hope of revitalising an economy that has slipped into recession.

In a rare display of cohesion, the opposition-led parliament pushed through the 4.5 trillion won ($3.8bn; 2.4bn) supplementary budget in a 228-1 vote last week.

The need for the extra money almost 10% more than originally expected was underlined by figures from the finance ministry showing that the economy shrank by 0.5% between April and June.

Given the 0.4% shrinkage in the first three months of the year, that leaves South Korea technically in recession, defined as two consecutive quarters of contraction.

TOBACCO GIANT BUYS ITALY'S ETI

British American Tobacco has bought the state-owned Italian tobacco firm Ente Tabacchi Italiano (ETI) for 2.3bn euros ($2.59bn;1.6bn).

 

 

The deal will give BAT, the world's second largest cigarette group, a key position in Europe's second largest tobacco market where 26% of adults smoke.ETI has a 26% share of the Italian market through its MS and Sax cigarette brands.

UK JOBLESS TOTAL FALLS

The UK's unemployment rate has fallen to its lowest level for two years as the labour market remains strong, according to official figures.

Data from the Office for National Statistics (ONS) showed the number of people out of work in the three months to May fell by 20,000 to 1,474,000, bringing the unemployment rate down to 5%.

LULA ATTACKS US TRADE STANCE

The president of Brazil has spoken out against any notion of the United States being the dominant force in the Free Trade Area of the Americas (FTAA) and called for fairer negotiations.

In an exclusive interview with BBC News Interactive's Talking Point, President Luiz Inacio Lula da Silva, known as Lula, said the FTAA "was not owned by the United States" and that all countries wanting to join should have an equal voice.

He said that if this were not possible, then the matter would be taken to the World Trade Organisation (WTO).