11/02/2013 World Business Report

BBC World News. Now for the latest financial news with World Business

China at a crossroads: it's the year of the water snake and

millions of people are celebrating. But what lies ahead for the world's

second-largest economy? As Japan and America takes steps to lower

the value of their currencies, a strong Euro is seen as problem for

Welcome to World Business Report. Confidence among its two British

business leaders have dived last month. Gong Hey Fat Choy! That's

Happy New Year. We are now in the year of the water snake and as many

in China take a week off to celebrate and relax the inevitable

question of what will the new year bring is being discussed. In a

moment we'll be live in Beijing to get an economic perspective. But

first, Jennifer Pak reports from Hong Kong on how the celebrations

are going there. In China, snakes end up on the dinner-table and

medicine cabinets. At this market in Hong Kong, the animal is said to

be cute and cuddly. According to fortune-tellers, the year of the

stake brings a change of luck. the Year of water over fire and

fire is the element of happiness and that's why we will create

positive energy and bring more confidence to people and increased

economic activity and that will be a strong economic recovery in this

year of the snake. The sources said the could you to start a family.

State babies find it easy to make friends and work for a good boss.

For non-believers, the predictions of a hoax. -- more hope. That gives

your perspective from the celebrations. Patrick Chovanac, is

an economist and former professor at Tsinghua University. He joins me

I'm ar, I'm sure you're celebrating. What

do you think the year has in store for those in China and beyond in

terms of the economy? It's a feisty debate right now between optimists

who see the Chinese economy recovering and moving forward to

this new year strongly and sceptics that China has a difficult

adjustment ahead. Right now, the Government has pumped up the

economy a bit but in some ways, that may actually contribute to an

imbalance will drive the economy down. In terms of the new regime as

the handover of power and that was a huge event and many are trying to

assess what that means in terms of the policies and decision making.

We get snapshots now about decisions about the minimum wage

which was quite a big deal. Tell us more about what we know about the

new regime. The new leaders have come in with a lot of expectation.

They will reform the economy. That means different things to different

people. Everybody reads into this something pleasant. That's part of

the challenge. They have an agenda which is quite broad. It embraces

reforming the banking system and the state owned enterprises in

China and shifting the focus of the economy away from investment and

export into consumption meaning change in taxation and it's a ball

plate and many things that were discussed last week, proposals to

try to affect the exchange, things have been spoken about the some

time. Would not see much action. There's a reason for that. It's

very difficult. They actually may slow down the economy. China is

under a lot of pressure to keep the growth high. Some of these reforms

may slow down mac growth. It may put China on a healthier path

forward but nobody wants to see the growth slowing so we will see how

much they are willing to do to implement the change. Briefly, you

say you were a sceptic about the debate and there's many optimists

out there. But they did avoid what we feared, a hard landing, which

may have set the global economy back on to recession. They did

manage that well, the shift in that economy in China recently. I'm not

so sure about that. What the official numbers say it 7.8%,

there's reason that many analysts question the numbers, whether they

actually have slowed down and what's driven that but be on those

statistics, when the numbers come up for the Chinese companies in the

next few weeks, to show how they perform last year, it was a tough

year for them. They did see a boost at the end of the year but that was

due to pumping a lot of money into the economy in ways that may cause

problems later on. Enjoy the week ahead it will be interesting to see

how this plays out. Its focus on Europe. It's not just the EU budget

which has been keeping European politicians awake at night. The

welcome improvement in sentiment towards the single currency has had

an unwelcome side effect. In the past six months, the Euro has

gained over 6% against a basket of other world currencies. It's

especially painful for those Eurozone countries battling

recession and struggling to become more competitive. A strong Euro

makes their exports more expensive for overseas buyers. France is

raising the issue today when the zone's finance ministers meet in

Brussels. There's no end of new food that the world wants to eat

but Europe cannot sell much outside its borders if the price is not

right. As they market and distribute groceries to

supermarkets, they feel that the rate is just bearable for now but

supplies are battling price rises for commodities such as wheat and

spices. We're pushing back on the supplies in Europe. We need think

about where the margin will go if you want to keep your export

business and its concerning but not something that keeps me awake night

yet. We're only in January and we have until the end of the year. Who

knows where the currency will be with that the fluctuations we see

now that a far greater than we saw before the euro. We never saw these

big fluctuations before. What do different country say about this?

The Germans distance themselves from that St it's up to the

financial markets to determine the value of the euro. The Italians say

that air is tension but it's far from a currency war. The fringe do

seem a bit worried about exports. - - the French. But the markets are

picking up on this. The world has moved on to use the currency as the

competition but you need to be competitive with wages and France

is a bit more twitchy because the numbers show that the

competitiveness is declining with the rest of Europe and they need

the exchange rate help a bit more than the others. The European

Central Bank president has begun to talk about the single currency

talking it down without a rate cut but will the euro worry about the

strength? It's definitely progress however painful for the exporters.

In other news: confidence among UK businesses hit its lowest level in

at least 21 years last month, a survey suggests. Accountancy firm

BDO, which published the survey, struggle

struggle to grow in the first quarter of this year. That is

despite signs of improvement in the labour market, it said, with firms

intending to hire more staff. Findus Sweden plans to sue France's

Comigel for breach of contract and fraud, according to the CEO of

Findus Nordic. He says the company's deal with French supplier

Comigel stipulates the beef in the lasagna should come from Germany,

France or Austria, but that has not been the case. It seems like the

meat came from a number of slaughterhouses in Romania.

Shoppers in Venezuela are out panic buying, after Friday's surprise

devaluation of the bolivar currency. They are trying to snap up goods

imported at the old exchange rate of 4.3 bolivars to the dollar. The

new rate is 6.3. This is the fifth devaluation since 2003. It is a

quiet day for the markets in Asia with most of them closed for the