06/03/2014 World Business Report

for an intruder. Those are the latest headlines from

BBC World News. Now for the latest financial news in

World Business Report. Investors await the latest European

Central Bank policy meeting. Will it cut rates? Or take measures to

combat low inflation? In China, 3,000 delegates attend a

second day of The National People's Congress, billed as China's 'supreme

organ of state power. The Premier vows comprehensive reforms.

Welcome to World Business Report. I'm Alice Baxter. In a minute we'll

be looking ahead to the French economy ahead of some jobs figures

later. But first, ECB President Mario Draghi holds his monthly news

conference following the bank's board meeting in a few hours.

Observers are undecided whether the ECB will hold, or whether interest

rates could be cut further to historic 0%. And even if the bank

doesn't cut rates, it may take other action. Much of this is down to how

worried the ECB is about the risk of deflation and of Europe following

Japan into a 20-year downward spiral. Here's ECB president Mario

Draghi. Write-down we have a level of

inflation way below 2%, on the low side. -- right now. We have had this

for a protracted period of time. We know the longer it stays at this

level, the higher it will be the risk that it won't return to 2% in

any reasonable time. In other words, the risk will be inflation

expectations could be worse and we don't want that.

Well let's get more from Sarah Hewin who is the Regional Head of

Research, Europe, Global Research, Standard Chartered Bank. Good to see

you this morning. Ali cited will we be? Will the ECB vote to keep rates

on hold or cut them to a further low of 0%? The markets have been excited

about this meeting, anticipating measures taken. But over recent

days, the expectations have dimmed and we think they will keep interest

rates on hold. We had an inflation number which came out last week that

was better than expected, higher than expected, suggesting inflation

is no risk any time soon. Activity data suggest that the euro economy

is gaining momentum. This suggests that the ECB doesn't need to take

action just yet. Positive research coming out. If we do see them held

at the current value, what other action will we see the ECB take Paz

they have a range of options available. None of them are

palatable. If they feel the need to cut rates, as you mentioned, they

will take them to zero, but the deposit rate will go negative so

banks will have to pay the ECB to keep money on deposit at the central

bank. Wanted to give easing is another option. -- quantitative. It

is much more problematic in Europe. Deciding which bonds to buy is

difficult and there is opposition from Germany that fears higher

inflation. How worried should the eurozone be about this prospect of a

period of deflation following the route we have seen set by Japan's we

have heard warning shots from Christine Lagard that such a future

isn't totally unimaginable. Yesterday, the IMF warned the ECB

that they should cut interest rates and embark on easing and inject

liquidity into the system. The problem is that with inflation below

1%, which is where it is at the moment, there is a risk that you

think lower and go negative. Once you have negative inflation and have

rice is falling, people postpone buying decisions, businesses decide

to invest later. -- prices. That impacts economic activity overall

and it is worrisome for central banks. The has a greater tolerance

for low inflation than the Bank of England and the Fed. It is why they

have not acted yet. We will have to see what comes out of the ECB

meeting. Thank you for coming to talk to us.

China's economy is a major story because its enormous size and rapid

expansion helps spark growth around the world. Company profits or jobs

may well depend on it. So the annual National People's Congress in

Beijing is a major world event. On day one the country's Premier Li

Keqiang has told the summit that the economy can maintain rapid growth,

but that tough challenges lie ahead. Lets get more from our chief

business correspondent. On the second day, attention turns to

detail. The finance minister has spoken. One of the strong emphasis

is that this comes through is that they need to ensure they regulate

financial risk. There is a concern the buildup of debt in China, very

rapid since the global crisis when they used credit to power growth,

could be leading to potential problems. I interviewed a local

official who had acquired the banking crisis and is at the

forefront of an effort to reform shadow banking. -- shadow banking.

He has insisted they will get on top of it at that shadow banks in --

create a great risk for the economy. Wii TRANSLATION: Shadow

banking has reached a high levels . There is zero supervision before,

during and after the loans are made and the government only stepped in

when it is so risky. -- when the crisis occurred. It is so risky.

What is frightening is how many shadow loans could be brought out.

On the first day where shadow banking is good declare their loans

and be brought into the system, I was there and no one turned up. They

have three months to do this but it shows why it is getting a -- why

getting a hold of this will be a big problem. We will hear more about

that through the National People's Congress until Thursday. Thank you.

Let's get update on all the other Asia business stories with Rico

Hizon, who is in Singapore. Good to see you. Let's begin with the Bank

of Japan says it will adjust policy appropriately if risks to its

economic outlook threaten the 2% inflation target.

At this point, the central bank is trying to calm investor nerves that

they will be ready to act if inflation goals aren't attained

because of the rise in consumption tax next month. The deputy governor

said the country's recovery will continue moderately despite the tax

hikes to 8% from the current 5% which takes effect on the 1st of

April. The economy is on a steady track, achieving its goal. Views

have been mixed as to whether the tax increase will impact growth. It

might add liquidity to the market to cushion this tax hike.

Australia's better-than-expected trade and retail sales data for

January. They have come out, haven't they? The positive numbers than the

Australian dollar to a one-week high. The surplus rising by $1.3

billion, highest in three years while retail sales gain a 1.2% for

the ninth month in a row. This is the silver lining amongst the end of

the mining boom and the reports follow fresh economic growth data

showing better than expected numbers for the last quarter of last year.

One economist said that combining all of these figures, it seems the

economy is going from gloom to boom. A quick look at how markets are

getting on this morning. While not morning in Asia where you are,

apologies for that. Let us see how they are doing. Green

across-the-board. Markets around the board of wait to see what decision

the ECB will reach. Will it cut interest rates or keep them on hold?

All eyes on them. From me and the team, I for this. I will look

Thank you Alice for that. Care services for older people in

England are in crisis with rising demand and falling resources

according to a new analysis from Age UK. The charity claims that hundreds

of millions of pounds has been cut from social care budgets over the

last three years