18/10/2011 World Business Report


18/10/2011

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morning. Stay with us. We switch now for the latest

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Welcome. This is World Business Report. The headlines: China, the

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global engine of growth, expands at this -- its slowest rate in two

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years. As the UK, consumers feel the

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squeeze as prices rise at their fastest rate for three years while

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China's growth rate is the envy of most of the industrialised world.

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Wealth expanded at an annual rate but things are changing. The aim

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was to reduce growth gradually. But the rest of the world his county on

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China to get the balance right because they hope Chinese buyers

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will replace cash-strapped consumers in Europe and the US. In

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a moment we hope to go live to Beijing to speak to an expert about

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the latest growth numbers out of China and what they need for the

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rest of the global economy. -- what they mean. New data is set to show

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prices rising at their fastest rate for three years. Higher fuel and

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energy costs are to blame. Terrible timing as incomers are frozen and

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the number of people out of work is on the up.

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As autumn takes hold in the UK, many homes will be turning up their

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central heating. But with energy prices are rising from three of the

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main suppliers, it could be a costly card for households and

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businesses. The rise in the cost of energy has been singled out as the

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biggest influence in UK inflation this mark. Putting the brakes to

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the highest level in three years. - - pushing the rate. Prolonged debt

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crisis in the eurozone means the UK is at a virtual standstill.

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Inflation is set to flow sharply in the next 12 months. The current

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rate of inflation is unlikely to concern the Bank of England

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Coberley, even though we had been - - it has been above their target

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every month since December 2009. The bank recently increased its

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quantity of -- quantitative easing programme. There is a general

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expectation that the eurozone could fall back into recession in the

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final quarter of this here and next year. The UK's major trading

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partner is the eurozone so that will impact us as well. UK growth

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will stay week from now export markets. And we have problems at

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home that will weaken domestic economies. The major supermarkets

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have begun a price war in advance of the festive season. But those

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price cuts are not expected to show until late in the year. So with

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consumers feeling the pressure of higher energy costs, lower food

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costs will be a relief. Many will be keen to see if inflation does

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peak as promised by the bank at this level.

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The Bank of America and Goldman Sachs are the latest major US banks

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to report earnings later today. On Monday, Citigroup said they saw a

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drop in revenue compared to the same period last year. Banks have

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been hurt by the market turmoil and the fall in consumer and business

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confidence. Protesters are demonstrating

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against corporate greed. But there may be less for them to occupy as

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banks continue to struggle and try to count cost. Take the Bank of

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America. The country's largest lender plans to lay off about

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30,000 employees of the next few years. It has been busy baffling

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lawsuits relating to mortgagors and its investment banking division

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which lifted profits for the first half of this year is unlikely to

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repeat that again. One man explains why. We will hear a lot of bad news,

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for to the Lea. Banks are a reflection of the US economy and

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when that is slow, Bledisloe. When it comes to revenue, things will be

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down. We sit inside this bilby also appear to be using their magic

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touch. -- inside this building. In July, golden and sacks said they

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would lay-off 1,000 around 1,000 employees. They are neck and neck.

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They are good competitors. Morgan Chase's were soft. That will be the

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case with Goldman Sachs as well. Their results are based on

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investment banking. This crowd is unlikely to shed too many tears.

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But for the finance industry faced with new banking rules and tough

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economic conditions the answer to the current slowdown is lower

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bonuses and fewer jobs. Returning to the top storey, the

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news that growth in China has slowed in the third quarter. That

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is the 7th quarter in a row or two- year period of growth slowing down.

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We speak to an associate professor at a school of economics in Beijing.

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Thank you for joining us on the line. What is your interpretation

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of growth slowing in China? Is this something to be concerned about or

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have Chinese authorities got it right, they are slowing it at a

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sustainable level? The concern is not so much slowing-down. The

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government is trying to introduce a slowdown. The concern is if China

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comes off the high level of growth, that cracks emerge in the financial

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system in China. There are people who have debts on high levels of

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growth. Especially real estate developers and others. If they are

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not able to achieve these incredibly high levels of growth,

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they will not be able to pay their loans. That means local government

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cannot continue to sell property to pay off their loans. Then you get a

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domino effect. So there are already cracks emerging in the financial

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system in China. Even though growth has not slowed that much, it is

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still quite high. They want growth to slow at a sustainable level, as

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I said. But you are implying that unless it has better at double-

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digit growth numbers, we are heading for real problems? Yes. It

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is very difficult for them... They want to stage a correction without

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having a correction. That is what they mean when they say soft

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landing. In fact, China needs to undergo a quality of adjustment in

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what is driving economic growth. What they need to do is develop a

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consumer economy in China. But it has not been happening. Consumer

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demand has been increasing but not enough to tilt the balance. So

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