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LONDON — As Europe slouches toward a monetary union that aims to force euro area governments to cede control over their banks and budgets, a crucial question remains unanswered: how to persuade investors to buy, and hold for the long term, the bonds of at-risk economies like Italy and Spain.
Interactive FeatureTracking Europe's Debt Crisis
Germany Cedes Some Ground in Steps to Bolster Euro (June 30, 2012)
Today's Economist: What Must Be Done Now to Save the Euro?(June 29, 2012)
Markets Cheer Europe’s Bailout Plan (June 30, 2012)
Both countries have debt and deficit levels that are no worse, and in some cases better, than those of Britain, Japan and the United States. But because they cannot devalue their currencies and must instead impose growth-sapping economic measures to regain competitiveness, their bonds have traded as if their economies are near insolvent. Meanwhile, the securities of debt-racked Britain, for example, are snapped up with abandon.It is a paradox that lies at the heart of the European debt crisis. On Friday at its most recent summit meeting, Brussels took a halting first step to addressing this issue on a permanent basis. Euro zone leaders proposed that Europe’s current and future rescue facilities might buy Italian and Spanish bonds as long as these countries fulfilled Germany’s austerity demands and met debt and deficit targets. The market, expecting more waffling, jumped and the yields on 10-year Spanish and Italian bonds dropped sharply as investors celebrated the prospect that Europe might become a buyer of last resort of its beaten-down bonds.Still, Friday’s euphoria notwithstanding, economists and market participants remain doubtful that the bond market fears can be permanently assuaged until the European Central Bank intervenes with the force and conviction shown by its peers in the United States and Britain.Paul De Grauwe, a Belgian economist at the London School of Economics, says he believes that the latest step will not be enough. Mr. De Grauwe has written extensively on how the cycle of fear and panic in the bond markets is pushing countries that may not need a bailout to ask for one.The euro zone’s temporary bailout fund, the European Financial Stability Facility, which has only 248 billion euros at its disposal and must first raise the money on the bond market, does not have the firepower to convince skittish investors that Europe is serious, he said. Italy and Spain alone have a total of nearly 2.5 trillion euros in sovereign bonds outstanding.Mr. De Grauwe proposes instead, that the European Central Bank announce that it will be an aggressive buyer of Spanish or Italian bonds until the spread — or the difference between the yields on these bonds and benchmark German bonds — reaches a certain level, say 300 basis points, compared with the recent level of 500 basis points and above.“You would then have a floor on bond prices and it would be attractive for investors to buy Spanish bonds again,” said Mr. De Grauwe.His most recent paper claims that the Spanish and Italian bond rout has been driven more by the psychology of fear than hard and true economic numbers.“The E.F.S.F. does not have the credibility given its resources,” Mr. De Grauwe said. “What you need are the unlimited resources of a central bank.”Such a forceful approach has been resisted by Germany, the bank’s largest shareholder, on the basis that countries would not proceed with necessary reforms. It is also true that the E.C.B. has intervened in the markets before and is said
to own close to 150 billion euros of weak euro zone country bonds.http://www.nytimes.com/2012/06/30/business/global/return-of-long-term-bond-buyers-seen-as-crucial-to-europe.html
Xi Jinping Millionaire Relations Reveal Fortunes Of Elite
By Bloomberg News - Jun 29, 2012 3:32 AM ETXi Jinping, the man in line to be China’s next president, warned officials on a 2004 anti-graft conference call: “Rein in your spouses, children, relatives, friends and staff, and vow not to use power for personal gain.”As Xi climbed the Communist Party ranks, his extended family expanded their business interests to include minerals, real estate and mobile-phone equipment, according to public documents compiled by Bloomberg.Enlarge image
Xi Jinping, vice president of China, visits the China Shipping terminal at the Port of Los Angeles in Los Angeles, California, U.S., on Thursday, Feb. 16, 2012. Source: BloombergEnlarge image
The Belleview Drive property is viewed along with other residential buildings in Repulse Bay, Hong Kong. Source: BloombergEnlarge image
The Belleview Drive property, bottom second right, is viewed along with other residential buildings in Repulse Bay, Hong Kong. Source: BloombergEnlarge image
The entrance to the Belleview Drive property is seen in Repulse Bay, Hong Kong. Source: BloombergEnlarge image
A screen grab from the website www.1921.org.cn shows Xi Zhongxun's family photograph taken in 2000. Front, from left: daughter Xi Qianping, wife Qi Xin, grandson Mingzheng, Xi Zhongxun, daughter Qi Qiaoqiao. Second row, from left: grandson Zannong, son-in-law Wu Long, daughter Qi An'an, son Xi Jinping, son Xi Yuanping, son-in-law Deng Jiagui, grandson Dongdong. Source: www.1921.org.cn via BloombergEnlarge image
Qi Qiaoqiao leads Tsinghua University EMBA students in a drum performance on Sept 18, 2010. Source: ImaginechinaEnlarge image
Hiu Ng, center, attends the Boao Forum for Asia Conference 2011, 'Young Leaders Roundtable: Charting Growth - Include the Excluded', in Hainan, China, on April 14, 2011. Source: ImaginechinaEnlarge image
Daniel Foa, founder of 51Sim, right, and Chinese actress Li Bingbing at the Sustainable Innovation Student Competition in Beijing, China, on Nov. 2, 2009. Source: ImaginechinaEnlarge image
A screen grab shows the website of New Postcom Equipment Co. Source: www.newpostcom.com via BloombergEnlarge image
A screen grab shows the website of Hiconics Drive Technology Co. Source: www.hiconics.com via BloombergThose interests include investments in companies with total assets of $376 million; an 18 percent indirect stake in a rare- earths company with $1.73 billion in assets; and a $20.2 million holding in a publicly traded technology company. The figures don’t account for liabilities and thus don’t reflect the family’s net worth.No assets were traced to Xi, who turns 59 this month; his wife Peng Liyuan, 49, a famous People’s Liberation Army singer; or their daughter, the documents show. There is no indication Xi intervened to advance his relatives’ business transactions, or of any wrongdoing by Xi or his extended family.While the investments are obscured from public view by multiple holding companies, government restrictions on access to company documents and in some cases online censorship, they are identified in thousands of pages of regulatory filings.The trail also leads to a hillside villa overlooking the South China Sea in Hong Kong, with an estimated value of $31.5 million. The doorbell ringer dangles from its wires, and neighbors say the house has been empty for years. The family owns at least six other Hong Kong properties with a combined estimated value of $24.1 million.Standing Committee
Xi has risen through the party over the past three decades, holding leadership positions in several provinces and joining the ruling Politburo Standing Committee in 2007. Along the way, he built a reputation for clean government.He led an anti-graft campaign in the rich coastal province of Zhejiang, where he issued the “rein in” warning to officials in 2004, according to a People’s Daily publication. In Shanghai, he was brought in as party chief after a 3.7 billion- yuan ($582 million) scandal.A 2009 cable from the U.S. Embassy in Beijing cited an acquaintance of Xi’s saying he wasn’t corrupt or driven by money. Xi was “repulsed by the all-encompassing commercialization of Chinese society, with its attendant nouveau riche, official corruption, loss of values, dignity, and self- respect,” the cable disclosed by Wikileaks said, citing the friend. Wikileaks publishes secret government documents online.A U.S. government spokesman declined to comment on the document.Carving Economy
Increasing resentment over China’s most powerful families carving up the spoils of economic growth poses a challenge for the Communist Party. The income gap in urban China has widened more than in any other country in Asia over the past 20 years, according to the International Monetary Fund.“The average Chinese person gets angry when he hears about deals where people make hundreds of millions, or even billions of dollars, by trading on political influence,” said Barry Naughton, professor of Chinese economy at the University of California, San Diego, who wasn’t referring to the Xi family specifically.Scrutiny of officials’ wealth is intensifying before a once-in-a-decade transition of power later this year, when Xi and the next generation of leaders are set to be promoted. The ouster in March of Bo Xilai as party chief of China’s biggest municipality in an alleged graft and murder scandal fueled public anger over cronyism and corruption. It also spurred demands that top officials disclose their wealth in editorials in two Chinese financial publications and from microbloggers. Bo’s family accumulated at least $136 million in assets, Bloomberg News reported in April.Revolutionary Leader
Xi and his siblings are the children of the late Xi Zhongxun, a revolutionary fighter who helped Mao Zedong win control of China in 1949 with a pledge to end centuries of inequality and abuse of power for personal gain. That makes them “princelings,” scions of top officials and party figures whose lineages can help them wield influence in politics and business.Most of the extended Xi family’s assets traced by Bloomberg were owned by Xi’s older sister,Qi Qiaoqiao, 63; her husband Deng Jiagui, 61; and Qi’s daughter Zhang Yannan, 33, according to public records compiled by Bloomberg.Deng held an indirect 18 percent stake as recently as June 8 in Jiangxi Rare Earth & Rare Metals Tungsten Group Corp. Prices of the minerals used in wind turbines and U.S. smart bombs have surged as China tightened supply.Yuanwei Group
Qi and Deng’s share of the assets of Shenzhen Yuanwei Investment Co., a real-estate and diversified holding company, totaled 1.83 billion yuan ($288 million), a December 2011 filing shows. Other companies in the Yuanwei group wholly owned by the couple have combined assets of at least 539.3 million yuan ($84.8 million).A 3.17 million-yuan investment by Zhang in Beijing-based Hiconics Drive Technology Co. (300048) has increased 40-fold since 2009 to 128.4 million yuan ($20.2 million) as of yesterday’s close in Shenzhen.Deng, reached on his mobile phone, said he was retired. When asked about his wife, Zhang and their businesses across the country, he said: “It’s not convenient for me to talk to you about this too much.” Attempts to reach Qi and Zhang directly or through their companies by phone and fax, as well as visits to addresses found on filings, were unsuccessful.New Postcom
http://www.bloomberg.com/news/2012-06-29/xi-jinping-millionaire-relations-reveal-fortunes-of-elite.html
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