07/03/2014 World Business Report


07/03/2014

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resort of the justice system in China. Appealing directly to the

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leaders. The latest headlines. And all the financial news with the

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World Business Report. A tiny solar equipment company in China looks set

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to default on its bond repayments. It is being seen as a landmark for

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market discipline for the world 's second-largest economy. Out of the

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darkness power is restored in South Africa as the energy emergency ends.

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But will the lights stay on? We talk to the experts. A very warm welcome

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to you. This is World Business Report. In just a minute we will

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have more on how Internet entrepreneurs in New York upbringing

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Newsweek back into print. But first this hour of tiny loss-making solar

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equipment company in China looks set to default on its bond repayments.

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If it happens this would be the country's first ever domestic bond

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default. It could trigger a shakeup in China's corporate sector. Up

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until now some kind of a lout has always emerged for firms in trouble.

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The government has feared a string of defaults could spark unrest. A

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default could benefit the economy in the long run by heralding the end of

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an era of risk-free credit in China. Local governments have often used

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public funds to rescue companies and prevent instability. Is this

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China's moment of reckoning. We talk to our China correspondent in

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Beijing. Linda, is this the beginning of a new chapter in

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China's approach to how it manages its companies and banks? The small

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solar company may well become a test case for how China is going to deal

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with the expansion in the financial sector. Since about 1999 when the

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Chinese government stopped regulating the corporate debt

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market, it would be the first time that a public traded debt has not

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been paid. It is not huge amount. Just about $15 million worth of

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interest payments but the company has said on Tuesday that it would

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not be able to make the payment today. The company has been not

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traded for two years. In many ways it would not be a surprise if the

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payment was not made. But if it was not made and there is no bailout, it

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would be the first technical default on the corporate debt market in

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China. One of the reasons why markets are watching it is because

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the attitudes are actually quite sanguine. The debt market over the

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past decade has increased to an impressive amount. But without the

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ability to let some companies go through the normal process of

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default in bankruptcy, a lot of observers were worried the Chinese

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government couldn't possibly stand behind a market of that size. For

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this market to expand, they need to feel as if there is a process of

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creative destruction in terms of companies. This company stand apart

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for instance from the other bailouts that the Chinese governor has done.

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For instance the shadow banks or trust institutions. There is a

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bailout in January because the government does not want that sector

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to be dragged into something which could trigger a much more systematic

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problem. The unregulated lending. In many ways this company could

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actually be a good test case because it is corporate, publicly traded

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company. The government knows this is a company which is really in

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trouble and hasn't said anything in the intervening days about what it

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will do about the default. If it were to go ahead, markets may

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actually view this as a positive development for China in the non-

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ranking capital market. One thing to be aware of is that once you start

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to hear the word default in association with China's financial

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system with the government. Should they decide to intervene, it will be

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because they don't want that were to become known across China. In other

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words, savers in China have deposit insurance. If there is a possibility

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the government will have to ensure savings and deposits that would be

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the kind of loss of confidence the government would be keen to avoid.

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It will be a close case to watch. Usually the company has until the

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end of the business day to make a payment. It certainly is something

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that will be watched I am sure not just in China but globally. It will

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be fascinating to see how this plays out both within China and across the

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world. All the BBC's economic editor has been in China to find out how

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the economic powerhouse has been able to grow at such a fast pace.

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And whether it is sustainable. You can catch that programme, how China

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fooled the world, this weekend. Let's move to South Africa's power

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emergency. It has just been lifted according to the state energy

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company. The firm which provides 95% of the nation 's electricity. They

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had imposed rolling blackouts during the day. They had earlier blamed

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heavy rains for making the coal too wet to burn. Industrial customers

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had been asked to cut energy usage by at least 10%. Big firms switched

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to generators but many smaller enterprises had no backup at all.

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After seven days of rain, could more blackouts be on the way? Let's cross

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live now and talk to Adrian Murray who is following this for us from

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Johannesburg. Good to talk to you. Are we install for more blackouts?

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It has been lifted, the emergency, at 10pm last night. It is said that

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the power situation is now stable but constrained. It does not seem

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that there will be any more shedding today. But a spokesman has been

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appearing on TV to reassure the public. It is not clear is how this

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will play out in the coming days. Bad weather was blamed. We have had

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several days of heavy rains and they blamed the weather for making coal

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stocks wet. It is forecast to continue raining into next week so

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it is not entirely clear how this will play out. It has exposed how

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fragile the system is. We have had a number of emergency declarations

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over the past year marks. So far these have only been asking big

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industry to curb their consumption. They had to ask ordinary people to

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curb bears as well this time and issue these rolling blackouts which

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affected urban areas as well. -- curb theirs. There were rolling

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blackouts yesterday and power cuts perfecting a widespread part of the

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country even Johannesburg. Driving across the city traffic lights were

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not working. Lots of businesses will have backup generators but some of

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the smaller ones didn't. People don't expect this to happen in what

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is really Africa's economic powerhouse. That was a shock to

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people. There has been a lot of anger and a backlash on social

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media. People have been complaining about being taken back to the Dark

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Ages. They ask why the state power company couldn't cope with bad

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weather. It was particularly damaging as there is only two months

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before the national elections and there have been lots of reference

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back to 2008 when South Africa was in a big power crisis. Households

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were dumped into darkness and businesses were affected, costing

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the economy billions of dollars at that time. How has this happened

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again? Thank you for that. Let's move to Asia now. To Japan and's

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struggle with the virtual currency Bitcoin. Their government has now

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announced that it considers Bitcoin not a currency at that some

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transactions should be taxed. Our correspondent is in Singapore and

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has more news. Is it a currency, is it not a currency? The perpetual

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question goes on. Does indeed. It is something the Japanese government is

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having to grapple with. What has happened today is the chief Cabinet

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Secretary says that if there are gains in the transactions it is only

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natural to consider how to impose taxes. They have said that banks

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cannot provide Bitcoin as a product to customers. They have said in a

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statement that they are still trying to gather information on the virtual

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currency. They want to determine the total value of the coins in

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circulation. Some estimates are around $7 billion. It is a virtual

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currency which can be created online through public hated computer

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algorithms but that debate on whether they are real currencies

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continues. Several countries have had them. I will be talking about

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Bitcoin in just a moment. Stay with us. A little bit more news for you

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here from London. A highly resistant superbug which has caused 16 deaths

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in the north-west of England since 2010 is being investigated by health

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authorities. It causes

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