The Bank of England will raise its target for asset purchases next week as the debt crisis in Europe may have already pushed Britain
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China announced more help Wednesday for its struggling private business sector, unveiling a $2.5 billion fund to finance new small businesses and promising tax breaks and more lending for entrepreneurs.
The Cabinet announcement was one of the first concrete measures announced by the government following repeated pledges to help entrepreneurs who have been squeezed by a slump in U.S. and European demand and curbs on bank lending.
Entrepreneurs generate most of China’s new jobs and wealth, but thousands have been driven out of business. The survivors have slashed payrolls, raising concern among China’s communist leaders about possible unrest.
A Cabinet statement issued after a meeting led by Premier Wen Jiabao, the country’s top economic official, said small companies were essential to helping China keep growth fast and stable despite the global downturn.
The government will create a 15 billion yuan ($2.5 billion) fund “primarily to support the start-up of small and micro-enterprises,” it said.
It gave no details but also promised a cut in taxes and fees and said small businesses will be guaranteed a portion of government purchases of goods and services.
Beijing ordered the state-owned banking industry to lend freely to help China’s economy rebound from the 2008 global crisis. But it clamped down on credit to preventing overheating after annual economic growth soared above 10 percent in 2010.
Economic growth fell to a 2 1/2-year low of 8.9 percent in the final quarter of 2011.
Two surveys released Wednesday gave mixed signals on manufacturing activity in January but both showed it largely unchanged.
The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index rose 0.2 points to 50.5 from December’s 50.3 on a 100-point scale on which numbers above 50 indicate growth.
HSBC Corp. said its HSBC China Manufacturing PMI was little changed at 48.8 from December’s 48.7, suggesting a “moderate deterioration.”
The credit clampdown battered entrepreneurs as banks channeled their limited lending to politically favored government companies. Entrepreneurs turned to high-interest underground lenders. Thousands went bankrupt, leaving employees and suppliers unpaid.
The government responded in October by ordering banks to step up lending to small businesses, though it is unclear whether credit has increased.
Wednesday’s statement promised to create more small-scale financial institutions to serve entrepreneurs and rural companies.
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European Central Bank President Mario Draghi
The Greek government resumed stalled talks with its private creditors in Athens on Wednesday in the hope of sealing a euro100 billion ($128 billion) debt relief deal needed to avoid a disastrous default this spring.
Charles Dallara, a top official at the Institute of International Finance, a global banking association, returned to Greece after negotiations stalled last week, and held a nearly three-hour meeting with Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos.
“A very crucial meeting, that lasted several hours, has just finished at the prime minister’s office,” Venizelos told Parliament shortly afterward. “The meetings between the Greek government and the IIF have resumed and they will continue (Thursday).”
Earlier, he said the talks “are without a doubt at a very sensitive stage.”
The so-called private sector involvement, or PSI, deal is meant to write off half of the debt Greece owes private bondholders. Creditors would get most of the remaining debt in new bonds with extended repayment periods, as well as a cash payment.
“We want this (deal) to happen in a way that is safe for Greece _ with Greece in the eurozone _ and safe for the real economy and the financial system,” Venizelos said.
Since May 2010, Greece has kept solvent with rescue loans from its European partners and the International Monetary Fund. In the event of bankruptcy, Greece would likely have to abandon the euro and revert to a devalued currency. Since the country imports more than it exports, the costs of fuel and basic consumer goods would skyrocket, further frustrating a population angered by two years of harsh austerity.
The PSI talks have mainly been held up by a disagreement on interest rates for the new bonds.
“The interest rate on the new loans is a key issue here,” Dallara told CNN before Wednesday’s meeting. “Some seem to have a view that we should actually extend the loans at interest rates even lower than what the IMF and (the Europeans) extend their loans at, and there’s not much logic in that in our viewpoint.”
Dallara urged the EU to make clear that a similar deal would not apply to other troubled eurozone countries. “Greece really is a unique situation,” he said.
A Greek government official said Athens is still considering whether to impose so-called collective action clauses on its bonds. Such clauses could force private debt holders resisting a settlement to fall in line with the majority if an agreement is reached. The official asked not to be identified, citing the sensitive nature of the talks Payday advance.
A second government official, who also spoke on condition of anonymity, said Athens estimates there could be an agreement by the end of the week.
Greece needs to clinch the deal quickly to qualify for more bailout loans before it faces a euro14.5 billion ($18.6 billion) bond repayment on March 20. The bond swap is a key part a new euro130 billion ($166 billion) bailout package in loans and bank support from international rescue creditors.
Recession-bound Greece needs to write off some of its borrowings, if it is to have a fighting chance of emerging from its debt hole.
It has so far relied on austerity measures, which were a condition for it to receive the emergency loans. The Greek government has cut pensions and salaries, raised taxes and sold some state property.
Yanis Varoufakis, a professor of economics at the University of Athens, argued that even with a debt deal Greece could do little to eventually avoid default.
“Let the truth be revealed. Let’s have a default because Greece is insolvent and insolvent entities have to default. It’s a law of nature and of society and of reason, and we should simply succumb to that,” Varoufakis told AP Television.
“If European leaders are worried about the effect this will have on banks, they might as well recapitalize them, not continue to drip-feed the Greek state,” he said.
Dallara, the Institute of International Finance official, said that if Greece is forced to default, it will be messy. “I personally believe that there is no such thing as an orderly default for Greece,” he told CNN. “If there is a default, it is likely to be very disorderly.”
As austerity measures have cut deeply into incomes and unemployment has risen, unions have held frequent strikes and protests over the past two years.
Unions and employers were to start talks on Wednesday on reducing labors costs, but the negotiations were disrupted when protesters from a Communist-backed labor union occupied the central building where the meetings were to take place.
EU-IMF debt inspectors are back in Athens this week to monitor progress of those reforms aimed at slashing the country’s high budget deficits.
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Derek Gatopoulos and Theodora Tongas in Athens contributed to this report.
A handful of large websites will go dark on Wednesday to protest an anti-piracy bill that critics say will wreck the Internet as we know it.
Wikipedia, user-submitted news site Reddit, the blog Boing Boing and the Cheezburger network of comedy sites all plan to participate in the blackout. The protest is their response to the Stop Online Piracy Act (SOPA) bill, a piece of proposed legislation that is working its way through Congress.
Introduced in the House of Representatives in late October, the bill aims to crack down on copyright infringement by restricting access to sites that fuel it. Its targets include "rogue" overseas sites like torrent hub The Pirate Bay, which essentially operates as a trading ground for illegal downloads of movies and other digital content.
A similar bill called the Protect IP Act was approved by a Senate committee in May and is now pending before the full Senate.
The controversial legislation has turned into an all-out war between Hollywood and Silicon Valley. Media companies have united in favor of it, while tech’s power players are throwing their might into opposing it.
If SOPA passes, copyright holders would be able to complain to law enforcement officials and get websites shut down. Search engines and other providers would have to block rogue sites when ordered to do so by a judge. Sites could be punished for hosting pirated content in the first place — and Internet companies are worried that they could be held liable for users’ actions.
As BoingBoing wrote: "Making one link would require checking millions (even tens of millions) of pages, just to be sure that we weren’t in some way impinging on the ability of five Hollywood studios, four multinational record labels, and six global publishers to maximize their profits."
White House jumps in: The House Committee on Oversight and Government Reform was supposed to hold a hearing with industry experts on Wednesday, which is why sites targeted that day for a blackout.
But Rep. Darrell Issa, a Republican from California who opposes SOPA, postponed the hearing on Friday after House Majority Leader Eric Cantor said the bill won’t move in its current form.
Cantor’s comments sparked some news reports claiming that SOPA is dead, but an aide in Issa’s office said "that’s probably a little premature."
Reddit founder Alexis Ohanian was slated to testify in Washington, but he said he will now instead attend a protest rally in New York City organized by the group NY Tech Meetup. They plan to assemble outside the offices of New York senators Chuck Schumer and Kirsten Gillibrand.
The White House released its first statement about the bill on Saturday. The Obama administration wrote that it would not support legislation that mandates "tamper[ing] with the technical architecture of the Internet through manipulation of the Domain Name System (DNS) bad credit payday advance."
As originally written, SOPA would have required Internet access providers and other companies to block access to targeted sites in ways that were rife with potential unintended consequences. The White House said its analysis of the original legislation’s technical provisions "suggests that they pose a real risk to cybersecurity."
The White House’s statement came shortly after one of SOPA’s lead sponsors, Texas Republican Lamar Smith, agreed to remove SOPA’s DNS blocking provisions.
Issa’s aide says that isn’t enough: "Merely taking out the DNS-blocking provisions doesn’t not rectify a bill that’s fundamentally flawed."
The controversial bill, once expected to sail quickly through committee approval in the House, is now being extensively reworked before it comes up for a commitee vote.
Rupert Murdoch, the CEO of News Corp. (), voiced his frustration with the White House’s stance in a series of tweets over the weekend.
"Obama has thrown in his lot with Silicon Valley paymasters who threaten all software creators with piracy, plain thievery," Murdoch wrote on Twitter.
In addition to Murdoch, SOPA has drawn support from groups including the Motion Picture Association of America and the Recording Industry Association of America, which say that online piracy leads to U.S. job losses by depriving content creators of income. Time Warner, the parent company of CNNMoney, is among the industry supporters of the legislation.
Proponents of the bill dismiss accusations of censorship, saying that the legislation is meant to revamp a broken system that doesn’t adequately prevent criminal behavior.
But SOPA’s critics say that say that the bill’s backers don’t understand the Internet, and therefore don’t appreciate the implications of the legislation they’re considering.
Meanwhile, a bipartisan group of House members has proposed an alternative bill, the Online Protection and Enforcement of Digital Trade Act (OPEN).
This legislation would allow rights holders to ask the U.S. International Trade Commission (ITC) to enforce current laws by targeting the actual content pirates. OPEN’s backers have posted the draft legislation online and invited the Web community to comment on and revise the proposal.
SOPA supporters counter that the ITC doesn’t have the resources for such enforcement, and that giving it those resources would be too expensive.
British and Hong Kong leaders said Monday they will team up to develop London into an international trading center for China’s currency.
British Treasury chief George Osborne said in Hong Kong that his trip to Asia this week, which also includes stops in Beijing and Tokyo, furthers dialogue with Chinese authorities and Chinese and British banks “on establishing London as a new hub for the renminbi market as a complement to Hong Kong.”
Hong Kong’s leader, Chief Executive Donald Tsang said a new private sector-led group will be set up to look at strengthening ties between Hong Kong and London in terms of settlement systems, market liquidity and the development of renminbi financial products.
Beijing is promoting the international use of the renminbi, also known as the yuan. It’s also promoting Hong Kong, a semiautonomous Chinese territory with its own financial system and currency, as an offshore trading center for the yuan.
Last year, yuan-denominated bank deposits in Hong Kong doubled to 630 billion renminbi ($100 billion) as savers sought higher returns from the yuan, which has been strengthening 4-5 percent a year.
Beijing would like to see the currency become an alternative to the dollar, although tight capital controls limit its circulation overseas.
“It’s clear that there’s scope for substantial expansion of the renminbi market in coming years,” said Osborne, who was speaking at a financial conference.
He said that in June 2011, China’s share of world trade was 11 percent but the yuan’s share of global foreign exchange trading last year was only 0.9 percent.
Hungary
Wall Street is heading higher on the last day of trading at the end of a raucous year on positive signals this week about jobs and, depending how you look at it, housing.
Oil prices edged higher in the absence of any major economic data Friday.
The government said Thursday that the number of people applying for unemployment benefits each week has dropped by 10 percent since January and pending home sales jumped to their highest point in a year and a half.
Still, investors will wait to see if those home sales actually close and also for a raft of data next week on manufacturing.
Dow futures rose 0.07 percent, to 12,225 and S&P 500 futures added 0.17 percent to 1,259.50. The Nasdaq composite rose 0.13 percent to 2,280.25.
Enthusiasm for riskier assets such as stocks faded Monday as skeptical investors assessed a new European fiscal pact aimed at fixing the continent’s debt crisis and preventing a breakup of the euro currency bloc.
Benchmark oil dropped below $99 per barrel while the dollar rose against the euro and the yen.
European stock markets skidded in the first day of trading after the European Union adopted a new fiscal pact meant to prevent the kind of financial fiasco that is now sweeping across countries that use the euro.
Britain’s FTSE 100 fell 0.5 percent to 5,500.94. Germany’s DAX dropped 0.8 percent to 5,940.05 and France’s CAC-40 lost 0.7 percent to 3,149. Wall Street also headed for a lower opening, with Dow Jones industrial futures dipping 0.4 percent to 12,090 and S&P 500 futures down 0.5 percent at 1,247.50.
Asian stocks registered approval of the deal earlier in the day: Japan’s Nikkei 225 index jumped 1.4 percent to close at 8,653.82. South Korea’s Kospi added 1.3 percent to 1,899.76 and benchmarks in Singapore, Taiwan, Australia and Indonesia also rose.
Hong Kong’s Hang Seng swung from early gains to end trading in the red, albeit marginally, at 18,575.66. China’s Shanghai Composite Index fell 1 percent to 2,291.54 as a three-day economic conference of Chinese leaders got under way.
No major shifts in policy for 2012 are expected during a conference of Chinese leaders that began Monday. China has made headway in slowing inflation _ raising some hopes for a looser monetary policy _ while weak demand for exports from the West has sparked concerns that the economy may slow too quickly.
Under the deal, all 17 countries that use the euro agreed to allow a central European authority to oversee their future budgets and impose tighter controls on spending. They also agreed to automatic penalties if countries spend too much.
Europe’s new “fiscal compact” also calls for the launch of a permanent bailout fund for euro nations in 2012 _ a year ahead of schedule _ and an additional 200 billion euros ($267 billion) to the International Monetary Fund for a separate emergency fund for countries in crisis.
But some analysts wondered where debt-stricken Europe, which many economists say is hurtling toward recession, will find the money to make good on the pledges.
“It’s so easy for ministers to say they will contribute to this, but we’ll find out in a week or 10 days time who is,” said Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong.
Another caveat is that the deal doesn’t help cut debt today, which in Italy, Greece and Spain has driven government borrowing costs close to levels considered unsustainable.
That loose end brought into focus the future monetary policy of the European Central Bank, and whether it would be willing to buy enough national bonds from troubled countries to keep interest rates down.
Analysts at Credit Agricole CIB said “the lack of ECB action in terms of stepping up to the plate as lender of the last resort” still weighed on investment sentiment.
There were also doubts about the willingness of each individual country to ratify the agreement.
In Tokyo, Toyota Motor Corp., Japan’s biggest car maker, fell 0.7 percent after sharply downgrading its earnings forecast for the fiscal year due to a strong yen and massive flooding in Thailand that disrupted production.
Camera and medical equipment maker Olympus Corp. surged 7.8 percent amid renewed investor faith in the embattled company. Olympus recently admitted falsifying accounting records to cover up huge investment losses from the 1990s and has vowed to investigate about 70 people, including current board members, for their possible involvement.
In Australia, energy shares led the gains. Woodside Petroleum rose 1.5 percent and mining giant BHP Billiton rose 1.9 percent.
Australian miner Whitehaven Coal Ltd. fell 1.4 percent after it agreed to a 5.1 billion Australian dollar ($5.2 billion) business combination with Aston Resources Ltd. that will create one the country’s biggest coal producers. Aston rose 1.4 percent.
High-tech shares posted strong gains. Japanese chipmaker Elpida Memory rose 4.5 percent. South Korea’s LG Electronics, which ranks No. 2 globally in flat screen televisions, also gained 4.5 percent.
Benchmark oil for January delivery was down 85 cents to $98.57 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.07 to finish at $99.41 per barrel on the Nymex on Friday.
In currencies, the euro fell to $1.3300 from $1.3370 late Friday in New York. The dollar rose to 77.66 yen from 77.54 yen.