THE NATION FRIDAY, JUNE 20, 2014
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BUSINESS INTERNATIONAL China rejects shipping alliance
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•Branch Manager, Standard Chartered Bank (SCB), Trans Amadi Branch, Port Harcourt, Okeke Chika (right), congratulating winner of N1million prize Mr Erefaa Emine Tom-Jack in the ongoing SCB Mega Rewards Promo during the prize presentation at the bank’s office.
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IMF warns over Argentina ruling
HE International Monetary Fund (IMF) has warned that Argentina’s legal defeat in its fight against hedge fund investors may have wider implications. On Monday, a US Supreme Court ruling sided with bondholders demanding Argentina pay them $1.3billion (£766million). The IMF said it was concerned about “broader systemic implications”. Meanwhile the ratings agency S&P cut Argentina’s credit rating, warning the ruling made it more likely that the country would default. “The Argentine government has limited capacity to pay the plaintiff creditors while servicing its current debt”, S&P said. S&P reduced the credit rating by two notches from “CCC+” to “CCC-”. The move theoretically makes it more expensive for Argentina to bor-
row money. However, the country has been unable to raise funds on the international market since its 2001-02 debt default. Argentina’s Economy Minister, Axel Kicillof, said the government was “starting to take steps” to restructure the debt under Argentine law - as a way of avoiding complying with the US order. In a press conference Mr Kicillof said this would allow the country to honour its commitments with those creditors who had accepted the initial agreement. Argentina has agreed a restructuring with the bulk of investors holding its defaulted debt, but the socalled “hold-outs” have been fighting for 100 per cent of the value. Mr Kicillof added that he would be sending lawyers to speak to the US judge behind the ruling, Thomas
Griesa. On Monday President Cristina Fernandez de Kirchner said her country would not bow to “extortion”, in a reference to the court’s ruling. She urged people to “remain tranquil” in the days ahead. This realistically is the end of the road for Argentina’s decadelong fight” End Quote The Supreme Court rejected Argentina’s appeal against an order to pay the full value of bonds that some hedge funds bought after the country defaulted more than a decade ago. Also, the bondholders won the right to use the US courts to force Argentina to reveal where it owns assets around the world. The court’s decision means that bondholders should find it easier to collect their debts.
fall in inflation, as wage growth was “very sluggish”. “Lower prices for transport, food and clothing will work to ease pressure on disposable incomes – especially in Northern Ireland where a larger proportion of household income is spent on food and clothing relative to the rest of the UK. “The latest data from the government family expenditure survey shows that Northern Ireland households spent £159 a week on food, clothing and transport in 2012 relative to the UK average of £142.60. “With inflation now at its lowest level for over four years, consumers should hopefully be able to maintain the recovery that we have recently seen in the local economy”. Air fares, which were lower due to the timing of Easter, had a sig-
nificant downward effect, while petrol pulled in the other direction as pump prices crept up. PwC Chief Economist Dr Esmond Birnie said everyday goods were coming down in price – but real earnings growth was still far off as inflation was still above the 0.7 per cent rate of wage increases. “Food and non-alcoholic beverages fell by 0.6 per cent year-on-year in May, the biggest fall in a decade, with basics like bread, cereals and vegetables the main contributors to the fall. “By implication, the UK economy is moving closer to a position where earnings grow in real terms although there is probably some distance to go before that happens. This is good for consumers’ purses and wallets and household purchasing power.”
Family to benefit from fall in prices
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OUSEHOLDS in Northern Ireland are expected to benefit from a four-year low in inflation as supermarket price wars pushed food and drink costs to their steepest decline in nearly a decade. The Consumer Prices Index (CPI) measure of inflation dropped more heavily than expected to 1.5 per cent, from 1.8 per cent the month before, the Office for National Statistics (ONS) said. CPI equalled the rate seen in October 2009. It was last lower, at 1.1 per cent, in September 2009. The latest figures mark the sixth month in a row when the rate has been at or below the Bank of England’s two per cent target, the first time this has happened since 2009. Danske Bank Chief Economist Angela McGowan said households in Northern Ireland would welcome the
Bank of England names London Chinese currency clearing hub
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HE Bank of England has appointed one of China’s “big four” banks as the Chinese currency clearing bank in London. The China Construction Bank will be the London renminbi clearing house. The appointment is part of a plan to make London a hub for Chinese currency dealing. Standard Life chair Sir Gerry Grimstone said renminbi trading is the most important issue facing the City of London at the moment. In March, the Bank of England signed a memorandum of understanding with the People’s Bank of China setting out the deal. The banks have said they want to encourage the cross-border use of renminbi, or yuan, to rebalance the global economy. Bank of England governor Mark
Carney said the appointment was an “important milestone”, because the Chinese bank would “play a valuable role in facilitating greater use of the RMB (renminbi) for trade, investment and other economic activities in the UK”. Mr Grimstone, who chairs financial services trade body The CityUK and Standard Life, helped broker the memorandum. He said the deal could help to secure City jobs for decades. “We’re moving down a track very rapidly where London is going to become ... the offshore centre for trading renminbi,” he told the British Broadcasting Corporation (BBC). Two-thirds of Chinese currency traded outside of China is already done in London, he added.
On Tuesday, Prime Minister David Cameron announced that trade deals worth more than £14billion had been signed during a state visit by Chinese premier, Li Keqiang. Mr Li said the yuan clearing house deal “will further consolidate and promote London’s status as an international financial hub” and help “promote trade and investment liberalisation and facilitation”. During Mr Li’s visit, the London Stock Exchange (LSE) said that it had signed agreements with two of China’s biggest banks to develop UK renminbi trading. The LSE deal with the Bank of China will see the two firms design clearing and financing processes for financial products.
HINA has rejected a shipping alliance initiative aimed at saving the industry money, despite approval from the US and the EU. The “P3 Network” was intended to operate in a similar way to code-sharing deals between airlines. The idea was to allow the world’s top three containershipping operators by volume to cut costs by sharing ships and port facilities. A successful alliance would have seen about 250 ships participating in P3. The idea, announced last year, came from a proposed collaboration among three shipping groups: Maersk from Denmark, Mediterranean Shipping Company (MSC) from Switzerland and CMA CGM from France. The network was supposed to begin operating in the second quarter of this year, subject to approvals from various authorities including China, US and the EU. The US Federal Maritime Com-
mission approved the alliance in March, while EU competition authorities said earlier this month they would not raise any anti-trust issues in connection with the deal. However, China’s Ministry of Commerce has now rejected the tie-up. Maersk said in a statement: “The Ministry of Commerce (MOFCOM) of the People’s Republic of China announced that they have not approved the P3 Network. The MOFCOM’s decision follows a review under China’s merger control rules.” China’s state-owned news agency Xinhua said the commerce ministry rejected the alliance “due to monopoly concerns”. According to various publications, the P3 Network would have positioned the three partners to control up to 40 per cent of all cargo capacity along three trade routes: Asia to Europe, trans-Pacific and trans-Atlantic. The shippers had agreed to deploy about 250 ships between the three of them and share capacity of 2.6 million containers along the busiest sea routes.
‘No wage rise until jobless rate falls to 5%’
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HE members of the Monetary Policy Committee voted unanimously to hold interest rates at 0.5 per cent. Average wages may not rise until the jobless rate has fallen to five per cent, a Bank of England policymaker has suggested. Martin Weale said there may be more spare capacity in the economy than policymakers had previously estimated. If so, it means employers have room to keep hiring for some time before they have to increase wages to attract scarce workers. He said low wage growth could also keep interest rates at 0.5 per cent for longer than currently expected. But he added policymakers should start to raise interest rates before any sustained rise in real wages occurred. In a speech to business leaders at a Confederation of British Industry (CBI) conference in Northern Ireland Dr Weale said for every one percent-
age point that unemployment was “above its equilibrium,” quarterly pay growth was likely to be 0.3 per cent lower “than it would otherwise be”. He added: “If I put all of the weakness in wages over the past year down to the unemployment gap being larger than we currently believe, this points to extra spare capacity of over half a per cent of GDP. “This is consistent with a mediumterm unemployment rate closer to five per cent than our current range of six per cent to 6.5 per cent (the Bank’s current consensus estimate of the point at which employers will have trouble recruiting suitable people).” In its February quarterly inflation report the Bank of England estimated there was between one per cent and 1.5 per cent of spare capacity in the UK economy, but Dr Weale’s remarks suggest that could be as high as two per cent.
PBOC’s Zhou: China’ll enjoy steady growth
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EOPLE’S Bank of China Governor Zhou Xiaochuan said he was confident China would enjoy steady growth and financial stability that would ensure market confidence in its currency. According to Reuters, Zhou said that China was in the process of liberalising its capital markets, and that markets would determine the extent of the use of the yuan as an international currency, which is also
known as the renminbi (RMB). “Although we are faced with many challenges ... we have full confidence that we will maintain steady economic growth and financial stability,” he said. “We will provide a very solid foundation, a very good macro environment for RMB,” he said. Zhou was speaking in London at a conference to promote financial links between Britain and China.
General Motors CEO to face US Congress
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ENERAL Motors chief executive Mary Barra is set to appear once more in front of US lawmakers. Ms Barra appeared in Washington 11 weeks ago, but questions have lingered over the car giant’s botched recall procedures. She is expected to face intense questioning from lawmakers over GM’s handling of the safety scandal. The firm’s failure to recall car models with faulty ignition switches has been linked to at least 13 deaths. In prepared testimony, Ms Barra said the firm accepted a “brutally tough and deeply troubling” report into why the carmaker failed to issue a recall or safety notice earlier, after the problems had been reported nearly ten years ago. She promised that changes had been made at the firm, and that those responsible for failing to report the problem had been disciplined or fired.
The report - which was carried out by former US Attorney Anton Valukas - exonerated Ms Barra and other top executives, saying that lower level employees failed to alert them to the safety issue. Many lawmakers have expressed scepticism that Ms Barra, who was head of product development for a period before rising to leadership, remained unaware of the problem with the switches. The hearing comes days after GM announced another recall of three million cars. Safety actions have cost GM a total of $2bilion (£1.2bllion) this year. That includes the $35million the car maker was fined by the National Highway Traffic Safety Administration for its failures to report the safety defect. That was the maximum amount allowed under US law.