24/09/2012 World Business Report


24/09/2012

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Working Chinese factories face a slowdown after a dispute over

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clerical processes hold Japanese business on the mainland.

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-- halt. During the weekend, German

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chancellor Angela Merkel and the French President clashed on the

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timing of the introduction of oversight of the banking sector in

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Europe. The leaders were meeting in Germany to celebrate the nation's

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reconciliation after the Second World War. Francois Hollande called

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for the banking oversight to be implemented as soon as possible,

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whereas Angela Merkel says the process needs to be thorough, as

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she balances Europe, who would like to forge ahead, and Germany, who

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would like to... The French finance minister on

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Sunday said he is in favour of giving Greece more time as long as

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they are sincere on austerity measures.

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We also have Mario Monte holding a conference on structural reform in

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Italy. This brings together government ministers, experts and

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academics to discuss ways to boost competitiveness, growth and jobs.

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If we start with France and Germany to begin with - the two together

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for other reasons than the eurozone debt crisis. The media read between

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the lines and saw more dissension between the two and little

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agreement. That seems to be the conclusion this morning. There is

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still a prospect of a compromise. Both countries have an interest in

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making it possible that banks can receive direct support from the E S

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M. I think it is just a question of how far that can go. There is a

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hidden agenda - the German banks have a significant reserve fund

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already paid in. There is the fear that these reserve funds, which are

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there to protect German interests, may be used to bailout Spanish

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banks. I think the fear with the debt crisis is always that the

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politics gets in the way. It causes unnecessary delays and that causes

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more pain for Spain and Italy. The interest rate on their debt goes up

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and up while politicians procrastinate. That's correct, but

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there are two areas of political endeavour - one is the formation of

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solidarity mechanisms. The E S M is one of those. On the other hand,

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the countries themselves which are in trouble have to make efforts

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themselves as well. There hasn't been that much progress, even

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though the pain has been felt. This is not necessarily because of

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austerity, it is more because some areas have imploded. Is it

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important that the French Prime Minister has said that he feels

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that Greece should be given more time to implement austerity

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measures? That puts France against Germany again. Germany has also

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indicated that it is not totally against more time, but it is

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against more money. In a way, you can't have one without the other.

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More time probably means more money. The latest news from the troika,

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which has been in Athens to investigate the state of progress,

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they say Greece needs possibly twice as much extra money on top of

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what it has received, in order to plug the gap. Wartime means more

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money, but the German government doesn't want to go back to its

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parliament to get more approval for a third bailout package -- more

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time. And in Italy today a big conference to try to work out how

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to afford that expending Italy's debt burden. -- how to move forward

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without expanding. Mario Monty has left it open - what he wants to

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pursue. He hasn't had much fun so far. We shouldn't forget that

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Italy's deficit is much less than that of other countries, including

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the UK. In a way, he can at least say that they can move forward.

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Thank you very much. Let's take a look at Europe's

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luxury goods sector. It has been on tenterhooks ever since Burberry

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issued a warning to shareholders earlier this month, saying that

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sales in China have slumped. It is the new rich of China who has kept

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the sector a float. The fear is that even they have now started to

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watch their spending. Today, Prada will release its second quarter

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earnings and investors will scrutinise the figures to see

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whether Chinese slowdown has been done.

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In the past week, the stars of Italy's fashion industry have had a

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chance to dazzle the world. Trying to get the at -- tempt consumers

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with thousands of new designs. There is a race for luxury items

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amongst the new rich of China. Prada has been one of the winners.

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Last yet it said its sales in China had risen by 40% over the year. But

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on 10th September, British Red Bairbre warned that its sales in

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China were stalling. -- of British company Burberry. Other luxury

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goods also fell by about 5%. That is a sign of investor doubt about

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the luxury sector as a whole. a big company warns about

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profitability and sales, the fear is that the whole sector is

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unravelling. The emerging markets have been been drivers for these

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businesses over the last couple of years as the new wealthy find these

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brands very aspirational. There are fears that economic will growth is

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slowing there, so the growth for these companies will come to a stop

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as well. Burberry's poor results may not mean bad news for others.

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Burberry is different to other brands because it has only recently

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climbed into this category. Before it was seen somewhere at the high

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end of the popular retail market. It is now no surprise that it is

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the first to fall out of favour with Chinese luxury buyers.

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Established luxury brands like Prada will keep their love for

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longer. You might argue that Prada will stay for longer and that

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people will increasingly say - if you want through Western luxury

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there are only a few brands that really matter, and Prada is one of

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them. Prada has opened no less than 25 stores in China. Whether or not

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the Chinese economy is slowing, it must continue making big sales

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there for that investment to pay off.

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Toyota has resumed operations in China after protests over

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territorial disputes caused disruption for Japanese businesses

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in China. Toyota is back on track?

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Yes, but the president of the car giant has said that Japanese auto

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sales in China will be damaged next month as a result of these ongoing

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tensions between the Japanese and the Chinese. Last week car

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companies from Japan were attacked and some production was stopped.

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And eastern city in China is where Japan's largest carmakers all

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reported attacks on dealerships. They suspended production at

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manufacturing facilities. Honda has resumed production. Other Japanese

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businesses have started resuming operations as well. This includes

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Sony.... Chinese sales from last week are expected to be about 20%

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less for many Japanese retailers. Let's show you the market quickly.

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We have losses across the board in Asia. That is partly to do with the

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discord coming out of the meeting between Angela Merkel and Francois

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Hollande. This has caused the euro to fall a little bit. There is also

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