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pute could have broader effects on a

still-struggling global economy. Trade between the two Asian giants, estimated at more than US$340 billion, props up other regional economies and supply chains. Disruption in the supply of finished

goods manufactured in China – many utilizing Japanese parts and machines – could spur shortages and raise prices. Jap- anese exports to China fell 14% year-on- year in September amid the dispute, with car exports decreasing 44.5% annually.

A diplomatic exit

Te dispute has reemerged during sen- sitive political times. China is heading into a once-a-decade political transition, while simultaneously combatting slowing growth numbers and rising unemploy- ment. In Japan, poor approval ratings and a

standoff in parliament with the opposi- tion party threaten to throw Noda out of office. In these troubled times, leaders on both sides may be eager to allow nation- alistic sentiment to distract their people. Chinese leaders have bolstered anti-

Japanese sentiment in the past. In 2005, authorities tacitly supported an online petition calling on Beijing to oppose Japan’s membership on the UN Security Council until the country acknowledged historic crimes. Officials looked the other way as demonstrations turned into beat- ings and lootings, cracking down only as protestors turned to march toward Tiananmen Square. However, there are signs that both

countries are looking for an exit. New talks between senior officials suggest heads are cooling as both countries feel the economic effects. In an interview with Bloomberg in

mid-October, Noda struck a more concil- iatory note. “If our ties cool, particularly economic ones, then it isn’t a question of one or the other country suffering. Both countries lose out.”

ECONOMICS & TRADE China’s GDP growth slipped to 7.4% year-over-year in the third quarter, the seventh consecutive quarter of declining growth. Consumer prices rose just 1.9% in September, the slowest pace in two years, while producer prices hit a three- year low. However, the pace of retail sales, industrial production and fixed- asset investment growth each picked up in September, triggering speculation of a coming recovery. Industrial production expanded 9.2%, up from 8.9% in August, while retail sales grew 14.2%. Growth in fixed-asset investment, excluding rural households, improved to 20.5%. Trade figures also surpassed expectations, with exports reaching a monthly record of US$186.4 billion, a 9.9% gain on the previous year, and imports increasing 2.4%. The World Bank lowered its projected full-year 2012 growth rate for China from 8.2% to 7.7%. “China’s slowdown this year has been significant, and some fear it could still accelerate,” the World Bank report stated.

CONSUMER Retail sales growth during the October National Day holiday slowed compared to last year, climbing 15% during the eight-day break, down from 17.5% growth during a seven-day holiday a year earlier. Nike reported a 12% decline in fiscal first- quarter profits, and its futures orders in China dipped for the first time since 2009. In comparison, Yum! Brands increased its annual profit forecast as a result of higher-than-anticipated earnings in the third quarter. Strong growth in China continued to drive sales and operating profits for the parent company of KFC, Taco Bell and Pizza Hut. China’s Lenovo overtook Hewlett-Packard as the world’s largest personal-computer maker. The company’s shipments accounted for 15.7% of the world’s PC shipments last quarter, ahead of the former No. 1 at


Travelers on China’s highways on the first day of the October National Day holiday

8m 10 $1

Losses China’s biggest solar panel makers will suffer for every US$3 of sales this year

Estimated turnover of key positions in China’s political transition

70% Source: Xinhua, The New York Times, China Leadership Monitor, Xinhua,, Reuters

TAKING STOCK: The Shanghai Composite Index fell below 2,000 for the first time since 2009

15.5%, figures from market research firm Gartner showed. Bain & Co predicted that growth in China’s sales of luxury goods will slow to 8% this year from 30% last year, triggering a global slowdown in the market.

FINANCE & MARKETS The Shanghai Composite Index fell below 2,000 points for the first time since 2009, as the economic downturn weighed on stocks. Chinese banks lent US$99.5 billion in September, according to the central bank, down from US$112.5 billion in the month before and missing analysts’ expectations of roughly US$111.6 billion. M2, the broadest measure of money supply, jumped 14.8% year-on-year at the end of September. Reports citing anonymous bank officials said China’s top four banks were resisting government



CREDIT: achimh

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