Oct 20 - 26 , 2003









China will trim tax rebates on exports by an average of three percentage points, a move that is expected to ease upward pressure on the yuan and assuage concerns by trading partners over China's surging exports. The lower rebates could mean higher prices for some Chinese exports, helping Beijing fend off strident critics such as US manufacturers that complain an undervalued yuan is making the country's goods artificially cheap. The cuts, to take effect on January 1, follow calls last week by Premier Wen Jiabao to reform 




















the rebate system, which he said had put pressure on swelling government spending and spawned economic imbalances.

"The cuts will push up costs of exports and weaken their competitiveness on international markets," said Zheng Weigang, a senior capital market analyst at Shanghai Securities. "As a result, it will help relieve pressure for a revaluation of the yuan, a direct result of strong trade surpluses." The State Council, China's cabinet, also decided tax rebates would be divided into five categories to better manage shipments of different commodities, officials and state media said recently. "It is a milestone in China's trade reform," said an official with the Ministry of Finance, which along with the State Administration of Taxation is responsible for working out export tax rebate policies.

China exported nearly $266 billion of goods in the first eight months, a jump of nearly 33 percent over the same period a year earlier. That has brought a flood of dollars into the country, putting pressure on the yuan, which is fixed at about 8.28 to the dollar, to rise in value.Analysts said the cuts would not push China's trade balance into serious deficit. "China's exports are competitive due to the country's cheap labour," said economist Wang Chuanglian at China Southern Securities. "The cuts are unlikely to drive China's exports into deficit, or at most the deficit would be tiny." Some state media put current export tax rebates at 15 percent while others have reported a 17 percent figure. The official said calculating averages was complex but that those reported figures were "about right". He declined to give further details. State media said the cuts were in line with state policies to support exports of certain goods and restrict others.


A tentative revival in the US economy accelerated last month, according to a closely-watched survey. The US Federal Reserve said it its 'beige book,' a snapshot of economic conditions around the country, that the pace of economic expansion had picked up in most regions, helped by robust consumer spending and an increasingly buoyant manufacturing sector. "On balance, the pace of economic expansion has picked up since the last report," the Fed said. The report, which will feed into the Fed's interest rate decision later this month, will be welcomed by investors looking for confirmation that a recovery is under way after three years of patchy growth.

However, most analysts still expect the Fed to leave interest rates on hold at their current 45-year low of 1% at their meeting on 28 October. The latest report, one of eight compiled every year, said prices and wages were stable across the country, in a sign that inflationary pressures remain weak. It also held out a glimmer of hope that the depressed jobs market may be improving, highlighting an increase in demand for temporary workers in New York, Chicago, Dallas and other cities. An increase in temporary job vacancies is sometimes seen as a sign that companies are starting to hire again. US unemployment has surged to its highest level in a decade in the past three years, fuelled by a swathe of lay offs as firms rush to cut costs in the face of a protracted downturn. The Fed also highlighted evidence that the manufacturing sector, which has been hit harder than any other part of the economy, may also be beginning to emerge from the doldrums.


US President George W Bush has arrived in Japan at the start of a tour of Asia which will take in six countries. Mr Bush will spend the next few hours in Tokyo where the issue of North Korea and its nuclear ambitions is likely to be high on the agenda. The president said he and Japanese Prime Minister Junichiro Koizumi would discuss ways to strengthen multi-party talks over Pyongyang's nuclear programme. "I will talk to the prime minister about... what we need to do to keep the process alive and strong and to keep the coalition of the peaceful united so that we have one message and one voice," he said. Mr Bush has described Mr Koizumi as a true friend, and the two men are likely to build on a relationship cemented during the Japanese leader's trip to Texas earlier this year.


European leaders are holding a second day of meetings in Brussels in an attempt to forge a future for the European Union.It follows a day of tough negotiations by 25 heads of state and government representing existing member countries and those soon to join on a new constitution for the EU. French President Jacques Chirac is due to speak on behalf of the German Chancellor Gerhard Schroeder who has had to return home for a crucial parliamentary vote. It is a very public display of closeness between two of the EU's most powerful countries, says the BBC's Tim Franks in Brussels. The talks have been marked by divisions as leaders stuck to their positions set out two weeks ago in Rome, raising doubts about whether a new constitution can be agreed before the end of the year. The draft constitution envisages important changes to the status quo, and what one country sees as a good idea, a handful of others see as a catastrophe in waiting.




Japan's prime minister is banking on his fragile reform credentials to carry his government through a snap election next month. In a policy platform for the poll launched last week, Junichiro Koizumi promised 3 million new jobs by 2005. He also aimed for 2% economic growth in 2006 and a halving of the bad debt burden crippling Japan's banks. Many of the reforms repeat pledges made when he became premier in 2001, but have since run into the sand. Mr Koizumi has faced repeated opposition from within his Liberal Democratic Party to his more extreme plans to shake up the struggling economy. The LDP is riddled with factions who rely on industries which might face closures or financial pain from reform for election funding. But Mr Koizumi said all the party's MPs would be backing the platform, a new development in a political system where MPs have traditionally rewritten party policy to match local biases.


Malaysian Prime Minister Mahathir Mohamad has called on Muslims to use brains as well as brawn to fight Jews who "rule the world". However, Dr Mahathir also called on Muslims to build their military might. "The Europeans killed six million Jews out of 12 million. But today the Jews rule this world by proxy... 1.3 billion Muslims cannot be defeated by a few million Jews," he said, speaking at the opening of the Organisation of the Islamic Conference in the Malaysian administrative capital Putrajaya.Dr Mahathir, who is renowned for using such conferences to make scathing attacks on the West, bows out as prime minister in a week's time after a 22-year rule.


Online auction site eBay has reported an almost 70% in profits. The success story made $103.3m (61.5m) over the past three months compared to $61m made in the same period a year earlier.


Ford, the world's second largest car maker, has announced a $1bn expansion into China the day after reporting narrower losses over the past three months.


Samsung made a net profit of 1.84 trillion won ($1.6bn) in the three months between July and September, well ahead of expectations and 6.6% higher than during the same period a year earlier.


UK manufacturing is at its weakest level since late 2001, a survey by the British Chambers of Commerce (BCC) suggests. Its survey of UK plc's performance during the third quarter of 2003, from July to September, has confirmed the UK is "a two speed economy, with the gap between manufacturing and services widening". The survey suggests recent signs of a pick up in the UK economy during the second quarter of 2003 were a one-off.


China's first astronaut has landed back on Earth to a hero's welcome after an historic mission in which he orbited the globe 14 times. The Shenzhou 5 craft touched down on Thursday morning in northern China, 21 hours after being rocketed into space. Astronaut Yang Liwei emerged from the capsule saying: "I'm feeling good. I'm proud of my motherland," before being whisked away to meet political leaders in the capital Beijing.


Computing giant IBM has turned in results in line with Wall Street forecasts, while warning that it is still too early to celebrate the start of a tech sector revival. The company said profits for the July to September quarter had come in at $1.8bn (1bn), up from $1.3bn during the same period last year, and precisely in line with analysts' expectations.


The European Union (EU) says it now has scientific evidence to support its ban on imports of beef raised using growth promoting hormones. The ban is the subject of a long standing dispute with the United States, which currently has retaliatory sanctions on some imports from Europe. A European Union spokeswoman says it can prove that growth promoting hormones used by cattle farmers in some countries can cause cancer and should therefore be banned. She said the evidence is being shared with the US. Washington made a complaint to the World Trade Organisation about the EU's hormone ban in 1996.




The number of UK workers out of a job has risen slightly during the three months to August, but levels of people claiming benefit is at its lowest since 1975. The so-called ILO jobless survey, the government's preferred measure for unemployment rose unexpectedly by 5,000 people to 1,479,000. This equates to a jobless rate of 5%, which was unchanged from the previous month.


Intel, the world's biggest semiconductor maker, has turned in higher than expected profits, helped by record sales. The California-based firm said net income for the July to September quarter had come in at $1.7bn (1.02bn), or 25 cents a share, up from $686m during the same period last year.


Mobile phone maker Sony Ericsson has reported a quarterly profit, the first time it has done so since being created in October 2001. Sony Ericsson reported a pre-tax profit of 39m euros ($45.7m; 27.2m) for the third quarter of 2003, which compared with a loss of 116m euros in the same period of 2002.


US car giant General Motors (GM) has reported better than expected profits thanks to a strong performance from its financial services business. GM, the world's biggest carmaker, said profits for the three months to September came in at $425m (255m), or 79 cents per share, compared with a loss of $804m during the same period last year.


Bank of England governor Mervyn King has warned that Britain faces a more challenging economic climate over the next few years. Speaking to business leaders in Leicester, Mr King said the UK had benefited from favourable economic circumstances over the last decade, but that these would not persist.

He said the economy had grown above its trend rate during the 1990s because there had been enough unused resources in the system to absorb inflationary pressures, making big interest rate increases unnecessary.




The annual rate of inflation dipped slightly to 2.8% last month, its lowest level since June, official figures show. A drop in the price of clothes and shoes especially for women were the biggest downward influences on the figures, the Office for National Statistics (ONS) said. But the impact was minimised by the hot summer which pushed food costs, especially the price of fresh vegetables, higher.


Excessively high business taxes are harming the UK's international competitiveness, the CBI has warned. The CBI said the cumulative tax bill faced by firms was on track to hit 54bn by 2005/06.That means the total annual levy on businesses will be some 7.6bn higher in 2006 than it was when the Labour government first took office in 1997.