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POLITICAL ECONOMY
ADB revises down regional growth as China and India slow
by Staff Writers
Hong Kong (AFP) Sept 22, 2015


Chinese investors protest over metals exchange
Beijing (AFP) Sept 22, 2015 - Chinese speculators who claim to have lost money on risky investments mounted a rare protest in Beijing Tuesday, a uncommon sight in the capital despite plunging prices on the country's stock exchanges.

Several dozen investors -- surrounded by police -- stood outside the office of China's top anti-graft agency complaining they were tricked by the Fanya metals exchange.

Many Chinese financial institutions offer high return investment schemes based on increasing asset prices, but slowing growth has heightened fears that such products could go bust, potentially sparking social unrest.

The Fanya exchange in southern China offered investors a bet on increased metal prices, promising some double-digit returns on their investments.

But with commodities plunging worldwide, metals prices have fallen this year and some of the exchange's reported 220,000 investors say that they are not able to withdraw funds as promised.

The problems date back to mid-April, reports said, predating the Chinese stock market plunges that began in June.

China's main financial institutions are government-run, and many expect the state to step in when the investments they have chosen go bad.

One protester named Peng Yuan told AFP he invested more than one million yuan ($160,000) in the product, using family savings and credit card debt.

"I'm in debt -- hundreds of thousands that I put in were borrowed money," said Peng, who is unemployed and in his 50s. "This is outright fraud and robbery."

Zhou Yuanyue, a retired woman from Jinggangshan in Jiangxi province, said she poured more than three million yuan into Fanya, including from her siblings and her parents' pensions, who trusted her to manage their investments.

"They took our money and it's gone."

Investors wore white t-shirts calling Fanya a "scam" and appealing for a police investigation into the exchange, pictures posted online showed, with officers far outnumbering protesters.

On its website, Fanya has blamed "macro-economic conditions and policy factors" for difficulties traders were having "getting their cash back", adding it was taking "measures to restore market liquidity".

Tuesday's demonstration was the latest in a series by Fanya investors, and followed a larger one on Monday, when several hundred gathered outside the office of China's top securities regulator, according to images online which were rapidly censored.

Large-scale protests are rare in the tightly-policed capital.

Last month, investors seized Fanya's chairman Shan Jiuliang at a Shanghai hotel and handed him over to police, reports said. He was later released.

Impact of China slowdown bigger than expected: IMF chief
Washington (AFP) Sept 22, 2015 - The impact of China's economic slowdown on the global economy is bigger than previously thought, the head of the International Monetary Fund said Tuesday.

The slowdown of Chinese growth has "probably more spillover effects in the region in particular than what was anticipated," Christine Lagarde said in a speech at the Brookings Institution, a Washington think tank.

According to Lagarde, the Chinese cooling has "downside risks... greater than they were estimated."

"Growth is lower," she said, referring to the global economy.

China's slowdown, and questions about the government's ability to manage it, have spurred concerns about the health of the world's second-largest economy that have rattled financial markets in recent months.

Lagarde noted the easing Chinese growth had already helped push commodity prices lower, putting pressure on export-led economies and their public finances.

Weaker growth in China this year is expected to cause a slowdown in the rest of Asia, the Asian Development Bank said Tuesday as it became the latest major body to revise down its forecasts for the world's number two economy.

It also warned central banks to prepare for an expected Federal Reserve interest rate rise, with many nations already seeing huge capital outflows as dealers look for safer US investments.

The report comes as markets have been hit by extreme volatility driven by fears over the Chinese economy -- and its leaders' management of it -- after last month's surprise devaluation of its yuan currency.

"The combination of a moderating prospect in China and India, together with delayed recovery of advanced countries, weighed on our forecast for the region as a whole," said ADB Chief Economist Shang-Jin Wei, who presented the report at the Foreign Correspondents' Club in Hong Kong.

In an update to its flagship Asian Development Outlook released in March, the Bank said growth in the region would hit 5.8 percent this year and 6.0 percent in 2016. March's forecast was for 6.3 percent for both years.

Inflation in the developing Asia region was forecast to ease further, partly due to lower global commodity prices.

Wei said that the overall outlook for the region was "still positive" but had been impacted by capital flow reversals and weakened commodity prices for exporters, partly related to the China slowdown.

"Developing Asia is expected to continue to be the largest contributing region to global growth despite the moderation," he added.

However, it tipped China -- the main driver of global economic growth -- to expand 6.8 percent this year, instead of the 7.2 previously estimated, following a stream of weak indicators including on trade, inflation, investment and consumer spending.

- US rate worries -

The ADB predicted growth rate would be the slowest since 1990, a year after the Tiananmen Square crackdown that led to global sanctions against Beijing. It is also below China's official target for the year of "about" 7 percent.

But Wei said talk of a collapse in Chinese growth was "overblown".

"Consumption growth continues to look relatively strong. Retail sales look relatively resilient... job market employment looks relatively resilient," he said.

Wei added that stocks volatility was unlikely to have a long-lasting effect on growth.

It added that Southeast Asia was bearing the brunt of China's slowdown, with growth in Southeast Asia this year put at 4.4 percent, before rising to 4.9 percent in 2016.

Jurgen Conrad, head of the ADB's economic unit, told reporters in Beijing that the revision was "mainly due to the delayed recovery in industrial countries reducing export demand".

Last week the OECD cut its 2015 growth forecast for China by 0.1 percentage points to 6.7 percent.

Forecasts for India were also lowered to 7.4 percent from 7.8 percent, weighed by the slow pace of reform by the new government and weak external demand, the report said.

The ADB urged regional central banks to move now on monetary policy to prepare for a US rate hike, which Fed chief Janet Yellen has said will come before the end of the year.

"To counter the impacts of a US rate rise, monetary policy authorities in developing Asia will need to find a balance between stabilising the financial sector and stimulating domestic demand," the report warned.

A tightening of US monetary policy would likely lead to the flight of much-needed capital from developing nations as traders move into the US in search of better returns.

This would in turn put pressure on central banks to lift rates themselves in a bid to protect their currencies, at a time when they are struggling to kickstart tepid growth at home.

World markets were rocked after the Fed on Thursday held off announcing a rise, with Yellen citing the threats to the US economy caused by China's economy as a key reason for the decision.


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