Data shows NSW trade performance has improved

28 Feb 2013 – AAP –


China remains New South Wales’ largest bilateral trading partner and coal continues to be the largest export, new figures show.

Releasing the latest NSW Trade and Investment Report, Mr Stoner said NSW exports are up again after a drop in 2009/10 due caused by the global financial crisis and slowdown in world growth.

In 2011/12, total exports rose by 7.8 per cent, with goods exports rising by 11 per cent.

Services exports increased by 1.2 per cent, which Mr Stoner said was driven largely by growth in financial and professional services exports.

“Coal continues to be the state’s largest export,” he said, adding it was worth $14 billion or 24 per cent of total exports in 2012.

Education-related travel and tourism were NSW’s largest services exports.

“Japan remains our largest goods export market and China is our largest bilateral trading partner,” Mr Stoner said.

The value of goods exports dropped by 2.5 per cent in the second half of the 2012 calendar year.

Mr Stoner said the diversity of the NSW economy should allow it to cope with moderating mineral export prices.

He said NSW’s trade performance has improved despite continuing global financial uncertainty.

“We have engaged with business and industry to understand their issues, we are addressing strategic infrastructure needs and we are raising the global profile of Sydney and NSW,” he said in a statement.

Chinese Army Unit Is Seen as Tied to Hacking Against U.S.

21 Feb 2013 – David Sanger – NYT –

This 12-story building on the outskirts of Shanghai is the headquarters of Unit 61398 of the People’s Liberation Army. China’s defense ministry has denied that it is responsible for initiating digital attacks.
This 12-story building on the outskirts of Shanghai is the headquarters of Unit 61398 of the People’s Liberation Army. China’s defense ministry has denied that it is responsible for initiating digital attacks.


On the outskirts of Shanghai, in a run-down neighborhood dominated by a 12-story white office tower, sits a People’s Liberation Army base for China’s growing corps of cyberwarriors.

The building off Datong Road, surrounded by restaurants, massage parlors and a wine importer, is the headquarters of P.L.A. Unit 61398. A growing body of digital forensic evidence — confirmed by American intelligence officials who say they have tapped into the activity of the army unit for years — leaves little doubt that an overwhelming percentage of the attacks on American corporations, organizations and government agencies originate in and around the white tower.

An unusually detailed 60-page study, to be released Tuesday by Mandiant, an American computer security firm, tracks for the first time individual members of the most sophisticated of the Chinese hacking groups — known to many of its victims in the United States as “Comment Crew” or “Shanghai Group” — to the doorstep of the military unit’s headquarters. The firm was not able to place the hackers inside the 12-story building, but makes a case there is no other plausible explanation for why so many attacks come out of one comparatively small area.

“Either they are coming from inside Unit 61398,” said Kevin Mandia, the founder and chief executive of Mandiant, in an interview last week, “or the people who run the most-controlled, most-monitored Internet networks in the world are clueless about thousands of people generating attacks from this one neighborhood.”

Other security firms that have tracked “Comment Crew” say they also believe the group is state-sponsored, and a recent classified National Intelligence Estimate, issued as a consensus document for all 16 of the United States intelligence agencies, makes a strong case that many of these hacking groups are either run by army officers or are contractors working for commands like Unit 61398, according to officials with knowledge of its classified content.

Mandiant provided an advance copy of its report to The New York Times, saying it hoped to “bring visibility to the issues addressed in the report.” Times reporters then tested the conclusions with other experts, both inside and outside government, who have examined links between the hacking groups and the army (Mandiant was hired by The New York Times Company to investigate a sophisticated Chinese-origin attack on its news operations, but concluded it was not the work of Comment Crew, but another Chinese group. The firm is not currently working for the Times Company but it is in discussions about a business relationship.)

While Comment Crew has drained terabytes of data from companies like Coca-Cola, increasingly its focus is on companies involved in the critical infrastructure of the United States — its electrical power grid, gas lines and waterworks. According to the security researchers, one target was a company with remote access to more than 60 percent of oil and gas pipelines in North America. The unit was also among those that attacked the computer security firm RSA, whose computer codes protect confidential corporate and government databases.

Contacted Monday, officials at the Chinese embassy in Washington again insisted that their government does not engage in computer hacking, and that such activity is illegal. They describe China itself as a victim of computer hacking, and point out, accurately, that there are many hacking groups inside the United States. But in recent years the Chinese attacks have grown significantly, security researchers say. Mandiant has detected more than 140 Comment Crew intrusions since 2006. American intelligence agencies and private security firms that track many of the 20 or so other Chinese groups every day say those groups appear to be contractors with links to the unit.

And the Chinese Ministry of Foreign Affairs said Tuesday that the allegations were ‘‘unprofessional.’’

‘‘Making unfounded accusations based on preliminary results is both irresponsible and unprofessional, and is not helpful for the resolution of the relevant problem,’’ said Hong Lei, a ministry spokesman. ‘‘China resolutely opposes hacking actions and has established relevant laws and regulations and taken strict law enforcement measures to defend against online hacking activities.’’

Who’s afraid of China’s big bad rebalancing?

Interesting article today by Geoff Raby – BusSpec

31 Jan 2013


China’s GDP growth this year is now expected to exceed 8 per cent according to Lou Jiwei, the head of CIC, China’s biggest sovereign wealth fund. Last year, China accounted for about a third of global growth. This year, with shrinking economies in Europe and Japan and, despite firm signs of recovery, still lacklusture growth in the US, China is likely to contribute more again.

It is prudent then to consider what are the main downside risks to China’s growth outlook. China has demonstrated over recent years that domestic demand is more than capable of making up for a comparatively weak export performance. The risk of political shocks can be set aside – though ever present, the probability of one destablising the economy in the short to medium term must be considered very low.

Some economists – more so among foreigners than locals – are concerned about the great imbalance between savings and investment in China as a result of deliberate government policies to repress consumption. The result via the savings and investment identity in GDP accounting is accumulating external surpluses. That is to say, output which is neither consumed nor used in investment ends up as exports.

The leading proponent of this view is Michael Pettis, a Beijing-based economist and scholar. He has recently published a new book setting out his arguments. In The Great Rebalancing: Trade, Conflict and the Perilous Road Ahead for the World Economy Pettis argues that that with rising levels of debt in China a sharp and disruptive correction will be inevitable.

This will see an end to China’s three-decade old, investment-led growth model. The Great Rebalancing will require domestic household consumption to rise and savings to fall, so investment as a share of GDP will fall. Pettis believes this adjustment, once started, will be wrenching. Economic growth could be expected to fall to politically dangerously low levels of 3 per cent to 4 per cent and stay there for over a decade.

These are serious arguments that command a great deal of respect among experts on the Chinese macroeconomy. Reassuringly, however, for Australia and others who depend so heavily on China’s continuing economic growth, there is an emerging view critical of the Great Rebalancing arguments. This view is much more sanguine about the sustainability of China’s growth.

The relevance of trade to China’s economic growth has diminished significantly since the global financial crisis, as one would expect when China has been growing so much faster than its trading partners. Since 2009, exports minus imports, that is, net exports, have been negative. So trade has been a drag on China’s GDP growth, not a contributor to it.

On the savings and investment identity, investment has increased dramatically since 2009. The lower share of savings relative to investment during this period has caused the current account surpluses to fall. This is far from the ideal way to rebalance the current account, but at least it also will ease one of Pettis’ main policy challenges, which is rising tensions in China-US trade relations.

On the question of debt levels – the trigger for an abrupt and disruptive Great Rebalancing – China’s total debt-to-GDP ratio does not seem to be as worrisome as many think. Recent work by the Washington-based Peterson Institute for International Economics concluded that China’s debt levels have “not increased significantly since the lending boom of 2008-09 [and] while on the high side for an emerging market economy, are not yet at a crisis point”.

The Great Rebalancing thesis also underestimates China’s consumption, or exaggerates the degree of repression caused by negative real interest rates on bank deposits, restrictions on labour organising to raise wages, an undervalued exchange rate and a poor social safety net. It might be because many of these things (other than negative real interest rates) have been changing that consumption has grown on average by 9.5 per cent for the past five years, higher than China’s GDP growth over the same period. Chinese scholars recently argued in the Global Times that because of a number of well known measuring problems, the share of consumption in GDP may be as much as 10 to 15 percentage points higher, or 60 to 65 per cent of GDP, which is more in line with the historical experience of other fast growing developing economies.

Perhaps the biggest weakness with the Great Rebalancing is the assumption that it will need to be abrupt and disruptive and require, for China, exceptionally low rates of GDP growth. China is still a poor developing country. It is not what you see – when you can actually see something through the blanketing smog – from your window in Beijing, Shanghai or Guangzhou.

China has decades of consumption catch up ahead of it. Its per capita income is just 11 per cent of the US’s. It is the 93rd poorest country in the United Nations league table. And it has decades of rural to urban migration ahead, with some 300 million people to settle permanently in urban areas.

Urban people consume a lot more than peasant farmers. This is why the major brand stores from around the world still have ambitious expansion plans, opening stores in emerging cities the names of which none of us have heard of before. The Great Rebalancing is underway, but it is neither disruptive nor harmful to economic growth.

HSBC Flash Chinese PMI hits two-year high

25 Jan 2013 – AAP –



HSBC’s Flash Chinese manufacturing purchasing managers index (PMI) recorded a stronger than expected reading in January, hitting a 24-month high.

The index rose to 51.9 in January, from 51.5 in December and slightly above expectations of a 51.7 reading.

The positive reading indicates operating conditions in China are improving at the quickest pace in two years.

Any reading above 50 on the index signals expansion.

“At 51.9, January’s HSBC China manufacturing PMI rose for the fifth consecutive month to the highest level in two-years, heralding a good start to the New Year,” Hongbin Qu co-head of Asian economic research at HSBC said.

“Thanks to the continuous gains in new business, manufacturers accelerated production by additional hiring and more purchases.

“Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China’s ongoing recovery in the coming months.”

The Chinese economy expanded 7.9 percent in the final quarter of last year, up from 7.4 percent in the previous quarter, according to data released this month.

For all of 2012, the economy expanded 7.8 percent, the slowest annual performance since the 1990s.

Many analysts predict the rebound will peak in coming months before easing off to produce growth of about 8 percent this year.

HSBC’s index is based on responses from 85 to 90 percent of purchasing executives surveyed at 420 manufacturers. The full version is due next week.

China not Australia’s biggest security threat

24 Jan 2013 – AAP –


Federal Opposition Leader Tony Abbott says Australia has more pressing security concerns than those posed by the rise of China.

Prime Minister Julia Gillard has delivered a key speech on national security, which singles out China and cyber attacks as key concerns.

Mr Abbott said the most important security threats Australia faced were “Islamist terrorism” and global instability.

“We live in an unstable world and it’s important Australia can play its part in our region, and further afield, to do what we can to make the world safer and better, and that’s why we are involved in Afghanistan, for instance,” he said.

He said the economic, and therefore military rise of China, and cyber attacks were part of that mix of global instability.

“That’s obviously an element,” he said.

“But in the end, we have to be ready to defend our interests, our values, and our people wherever they are at risk.”

He said the rise of China had been extremely good for Australia.

“The rise of China has enabled us to sell far more iron ore, far more coal, far more education exports to Chinese students,” Mr Abbott said.

“Inevitably as China becomes more economically powerful, it will become more militarily powerful, and that does raise some issues.

“But in the end, the most important security threats we face are Islamist terrorism” and an unstable world, he said