:00:06. > :00:16.Borgnine. Warped time now for the money news with Sally and World
:00:16. > :00:17.
:00:17. > :00:22.Business Report. Welcome to World Business Report.
:00:22. > :00:26.The headlines: The deputy governor of the Bank of England must explain
:00:26. > :00:30.his role in the interest-rate fixing scandal.
:00:30. > :00:40.Welcome news for China's government and consumers as falling food
:00:40. > :00:41.
:00:41. > :00:44.prices lead inflation to cool. It could be a career defining
:00:44. > :00:48.moment for Paul Tucker, the deputy governor of the Bank of England who
:00:48. > :00:53.has ambitions of becoming its next governor. He has before politicians
:00:53. > :00:57.today to explain his role in the Barclays rate fixing scandal. What
:00:57. > :01:01.MPs would like to know it is if he encouraged the bank to lower the
:01:01. > :01:05.rate at which it lends to other banks, the so-called libel rate.
:01:05. > :01:13.Questions will centre around a phone call between Bob Diamond and
:01:13. > :01:18.Mr Tucker in which Mr Tucker discussed the high interbank
:01:18. > :01:21.lending rates. After the discussion, Barclays' rates fell. In his
:01:21. > :01:26.testimony to Parliament, Bob Diamond said he did not consider
:01:26. > :01:30.that Mr Tucker was asking him to lower the rate, but that a
:01:30. > :01:36.misunderstanding arose further down the line. I didn't take it as a
:01:36. > :01:42.directive, I took it as either an indication that we were high for an
:01:42. > :01:52.audience that we were high. What I said, I am not quoting exactly, I
:01:52. > :01:54.
:01:54. > :01:57.said that the reality was that we at Barclays were coasting at the
:01:57. > :02:01.levels at which we had to borrow, and other institutions who had to
:02:01. > :02:04.take government money were posting below those levels.
:02:04. > :02:07.What do you think Paul Tucker will say later today?
:02:08. > :02:16.I think he will say that he was not trying to tell Barclays or any
:02:16. > :02:19.other bank to the libel rates or a fixed interest rates. -- lower. He
:02:19. > :02:25.will say he was just asking why Barclays was higher than other
:02:25. > :02:29.banks during a time of huge stress in the banking system - in 2008. He
:02:29. > :02:32.will ask if it is not a reasonable question to ask - the bank needed
:02:32. > :02:36.to know what was going on at the time. He will say it was perfectly
:02:36. > :02:40.innocuous. And that the Financial Times, what
:02:40. > :02:45.do you suspect? Last week in the middle of this process when Bob
:02:45. > :02:50.Diamond was giving his testimony, you had a graph to show a dramatic
:02:50. > :02:53.drop in the interest rate. The conversations that went on between
:02:53. > :03:00.Mr Tusk and Bob Diamond. There is no doubt that Barclays
:03:00. > :03:03.Fixed its rate after the phone call -- and Mr Tucker. It is pretty
:03:03. > :03:08.clear that other banks were doing something similar at the same time.
:03:08. > :03:13.The question is, how much did the Bank of England No and was it given
:03:13. > :03:19.tacit approval? I'm sure they didn't give instruction to the bank,
:03:19. > :03:23.but was there a nod and a wink and was it appropriate? That is what we
:03:23. > :03:26.will be trying to find out today. How effective you think this
:03:26. > :03:31.committee is? Some who are on it have told the press that they think
:03:31. > :03:35.they are powerless to get to the bottom of this.
:03:35. > :03:39.The day-to-day stuff of finding out what is going on in the UK, they
:03:39. > :03:43.are OK. When it comes to specific wrongdoing, they are not lawyers
:03:43. > :03:47.and they do not have legal support. They don't have reams of evidence
:03:47. > :03:49.so they are finding it difficult. They didn't really lay a finger or
:03:49. > :03:53.a Bob Diamond except for the beginning when the chairman, who
:03:53. > :03:59.had been clearly briefed by somebody, had the latest
:03:59. > :04:02.authorities have you that Barclays' culture was very bad, which was a
:04:02. > :04:07.shock to Bob Diamond. But after that it petered out.
:04:07. > :04:11.Where will this finish? Is there a larger parliamentary inquiry into
:04:11. > :04:15.what went on coming? Other banks will come to the forefront and be
:04:15. > :04:18.named and shamed - what do you think the ultimate outcome will be?
:04:18. > :04:22.I think it will be that the authorities will not be seen to
:04:22. > :04:25.have done something wrong, although the taint of it might mean that
:04:25. > :04:30.Paul Tucker might damage his chances of becoming the Governor of
:04:30. > :04:34.the Bank of England. Briefly, the libel system will
:04:34. > :04:38.probably be changed? Yes, it will be changed, as will
:04:38. > :04:48.other markets that depend on the Lords and winks and things going on
:04:48. > :04:54.
:04:54. > :04:58.behind the scenes. -- on nods and winks.
:04:58. > :05:01.Now we move on to other stories. Finance ministers in the eurozone
:05:01. > :05:04.at our meeting in Brussels today amid concerns about the high rates
:05:04. > :05:09.of interest that Italy and Spain are having to pay to borrow money
:05:09. > :05:14.on the bond markets. Splits are emerging between southern and
:05:14. > :05:19.northern members of the eurozone about how decisions are taken.
:05:19. > :05:23.The new Greek government won a confidence vote late on Sunday,
:05:23. > :05:26.which was widely expected. It followed a three-day debate during
:05:26. > :05:33.which the Prime Minister promised to win back the trust of foreign
:05:33. > :05:43.lenders. He also said he would ask Europe and the IMF with more -- for
:05:43. > :05:52.
:05:52. > :05:58.output from Tuesday... Much-needed breathing space for
:05:58. > :06:01.Chinese policy makers as inflation hits a 29-month low. Selling price
:06:01. > :06:05.rises make it easier for the government and Central Bank to
:06:05. > :06:12.continue their campaign to cut interest rates and boost growth.
:06:12. > :06:17.The Consumer Price Index rose 2.2% in June, that is five months below
:06:17. > :06:23.target. This comes after Wen Jiabao said that the economy is still
:06:23. > :06:33.facing a huge pressure. Joining was met from Beijing is the deputy
:06:33. > :06:41.
:06:41. > :06:45.director of the China forecasting service -- joining one...
:06:45. > :06:50.Inflation is definitely in the control of the government now. We
:06:50. > :06:54.see this figure at 2.2% - that is the third month in a row we are
:06:54. > :07:01.reading a negative amount of growth. What we will see in the next few
:07:01. > :07:05.months is that inflation will keep on being very low, although it will
:07:05. > :07:08.become higher towards the end of the year. It is easy to say that we
:07:08. > :07:14.will have no difficulty achieving the 4% CPI target for the
:07:14. > :07:18.government. Yesterday Wen Jiabao said he was fairly pessimistic in
:07:18. > :07:27.terms of what he said. What is he saying to us? How worried do we
:07:27. > :07:32.need to be about where China is heading? If you combine today's CPI
:07:32. > :07:35.with his report yesterday and last Thursday's surprise interest-rate
:07:35. > :07:41.cut, I think that is telling us that the government already saw
:07:41. > :07:47.that the CPI number will be below the market consensus and that the
:07:47. > :07:53.second quarter GDP figure will not be looking very good. We are
:07:53. > :07:57.looking at a 7.7% GDP for the second quarter, which will be the
:07:57. > :08:01.bottom of the Year. The government is watching this very carefully.
:08:01. > :08:05.They are very risk-averse. They do not want to see the economy
:08:05. > :08:08.collapse. Especially because this is the year of a political change
:08:08. > :08:14.of guard. They need to make sure there is good and steady economic
:08:14. > :08:18.growth to lead for a good tradition for the government. What could be
:08:18. > :08:22.the element that could cause real problems for the Chinese economy,
:08:22. > :08:26.then? You say they are risk-averse. They have been very proactive at
:08:26. > :08:29.the moment, we saw that rate cut last week which was a surprise.
:08:29. > :08:32.What could cause real headaches here? Is that the property market?
:08:32. > :08:37.The amount of credit that is swirling around the market at the
:08:37. > :08:40.moment and what happens when that runs out? Good question.
:08:40. > :08:46.Fundamentally, there are two main challenges for the Chinese economy
:08:46. > :08:49.now. One is the export sector and the other one is investment. Export
:08:49. > :08:54.is not as important to the Chinese economy compared to before, but it
:08:54. > :08:57.still comprises about 30% of its total GDP. Especially what's going
:08:57. > :09:02.on in the western world - especially what's happening in the
:09:03. > :09:05.eurozone. The EU is China's largest export destination and their
:09:05. > :09:10.biggest trading partner. Whatever is going on there will have a large
:09:10. > :09:16.impact in China. When it comes to the investment story, that's still
:09:16. > :09:24.very important because it comprises about 50% of Chinese total GDP. The
:09:24. > :09:27.property market is very important. Wen Jiabao said clearly that they
:09:27. > :09:31.were not letting the price shoot up to the sky as we saw in the last
:09:31. > :09:34.seven years. Fundamentally, the demand is there, so the investment
:09:34. > :09:37.into the property market will eventually pick up. Thank you for
:09:37. > :09:43.your analysis of what is going on in China.
:09:43. > :09:46.Let's look at the markets now, they are not having a good session today.