04/04/2014 Asia Business Report

independent review had concluded that unbranded packets would help

cut smoking rates and make cigarettes less attractive to

children. Now it is time for Asia Business Report. Feeding the nation.

China's recent moves to secure food supplies. Can we expect better times

ahead for the global shipping industry? Welcome to Asia Business

Report. We start with China's efforts to provide a secure food

supply for its booming population. That has led to some huge business

deals. This week China's largest grain trader seals its biggest

global deal to date, with the purchase of a majority stake in

Singapore 's Noble Group. global deal to date, with the

purchase of a They are making an initial payment of $1.5 billion.

purchase of a They are making an initial payment The deal comes just

weeks after they also bought a big stake in a Dutch agricultural

trader. Their acquisitions will help China shore up support supplies of

animal feed. I asked a law specialist what implications this

will have? What is clear is that China has prioritised stockpiling

agricultural commodities within its national policy.

China has prioritised stockpiling agricultural commodities One, as a

way of guaranteeing incomes, but also as a way of keeping food

inflation in check. It has done this mainly by securing supplies

domestically. There has been a subtle shift in policy recently.

China has lowered the threshold. Moving to about 90% to 80%. What

that means is that they are looking outside China for a supply which can

help improve supplies for agricultural commodities

domestically. Therefore, we see more consolidation in the industry as

China looks through the supply chain and tries to acquire capability

where it has seen deficits. As you say, China is doing this for a

number of reasons, as you say. Insufficient funding resources they

have to meet their food and so on. Will this have implications

internationally? Will prices rise? There are other factors like bad

weather and political tensions and so on. Absolutely. Obviously, China

is an important importer of a number of key commodities, particularly

feed meal like soy beans. When China goes into the market, prices move

up. Apart from China, there are other issues. As you rightly

mentioned, very dry weather in Brazil recently and parts of India

which undermines key agricultural commodity yields. In addition to

that, you have got geopolitical tensions in Ukraine which is a grey

trading hub for seeds and wheat and that is adding to the momentum.

Earlier this week we mentioned how China will embark on a stimulus

package to boost growth. The government has said it will cut

taxes on small firms and speed up infrastructure projects. What is

interesting about this latest development is the way China plans

to paper that stimulus. Our chief business correspondent explains. If

China was not worried about hitting its growth target of 7.5%, then it

would not be trying to boost growth through government spending on

railways and infrastructure. What is different this time, as compared to

the assistance package after the 2008 global financial crisis is that

the Chinese government is borrowing from bond markets to finance it. In

the past, they relied on local governments borrowing from

state`owned banks to pay for the stimulus which led to concerns about

a build`up of debt. Some of the government spending is just pushing

forward infrastructure projects such as rail, social housing, which had

been planned. The exhilaration itself as a sign of concern. ``

acceleration. It is what China did in 2009 when it injected fresh

stimulus to support the economy alongside planned spending on roads

and railways. At the time, it was criticised for not spending enough

on social welfare that could boost easier way to grow for China. As a

consumption`based investment is an result, an excessive reliance on

credit was another worrying legacy. So, this new stimulus is pushing

output forward to help China meet its growth target this year. Many

countries would not worry about coming in below an impressive 7.5%

growth rate but, for Chinese officials, targets are not to be

missed. It certainly is a sign that they are worried that financing the

fiscal stimulus measures by the Central government and bond markets,

rather than local governments and bank lending. It is progress. The US

is urging Japan to open up its farm and auto markets to overseas

competition. US trade representatives told US lawmakers

that the reluctance to lower trade barriers is holding up the agreement

on the ambitious 12`nation TPP. All eyes are on Japan, not just Europe

but all of us. Japan needs to provide competitive access to their

market, both the agricultural side and other sides. We are reminding

Japan what it and all TPP members agreed to when they joined TPP. This

is intended to be a high standard, ambitious, conference agreement. ``

comprehensive agreement. One country cannot feel entitled to take off the

table and exclude vast areas of market access while other countries

are putting more ambitious offers on the table. Barack Obama will press

on the case for the TPP deal to go through with the Japanese prime

ministers when he visits Japan later this month. Washington had hoped to

complete the trade deal by the end of last year but the timetable has

now moved to sometime this year. The CEO of Mozilla has stepped down. He

was appointed last month but came in for heavy criticism about his views

on same`sex marriage. He had made a $1000 donation in 2008 to

organisations supporting an anti`gay marriage law. His resignation comes

days after online dating site OKCupid called for a boycott of

Mozilla. For more on that and other corporate headlines from around the

world, you can go to our website. The shipping industry offers a good

gauge of the state of the global economy as a way of tracking demand

through movement of traded goods. After a downturn last year there are

now some glimmers of hope. The fourth`largest port operator in the

world earned a higher net profit last year in Dubai. Is there a more

rosy outlook? In the near term? Earlier we spoke to an expert on

shipping. We expect 2014 to be a better year than 2013 in terms of

the fundamental market values. `` balance. Pressure will be put on the

commercial market. Demand will outstrip supply, and most major

shipping segments will grow. We are confident of earnings that will go

higher. You say that demand will outstrip supply, but that will not

be what we have seen from the major port operators, for example in Dubai

and China. They have not had great results recently, so this does not

suggest that demand will pick up. We see definitely that the exports will

go from Far East Asia to Europe, and they will become stronger. We also

heard that the Chinese Prime Minister said that he is looking at

strong exports even though China is on track for a softer landing and

rebalancing of the economy. Towards more private consumption, as

compared to previous years when there was more investment and public

demand. You talk about this switch in the Chinese economy moving away

from exports. A lot of those are on ships to the rest of the world. How

will China's moving away from that alter sense of growth and trajectory

of the shipping industry? Shipping demand will be negatively affected,

but it will come as a pricetag. The Chinese economy will be more

sustainable. In the growth model in coming years. When you compare that

to the growth now seen in the US and Europe, the counterbalancing should

be positive for the global economy. And for the shipping industry as

such. When you look at the world from the widest perspective, we see

it as economies are taking a smaller share of the global GDP even though

more trade is generated in advanced economies. We are foreseeing a new

normal in global trade and a slower demand growth going forward. A quick

look at the markets. Mostly lower. Most markets here in Asia are down.

The US jobs report is due out later today. That is partly why there is

caution in the markets today. That's it from us at Asia Business Report.

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