theSun | TUESDAY APRIL 14 2009 17

business KLCI
STI
941.41
1,876.77
0.03
48.26
Nikkei
TSEC
8,924.43
5,857.64
39.68
75.68
Hang Seng CLOSED KOSPI 1,338.26 2.22
SCI 2,513.70 69.48 S&P/ASX200 CLOSED

Competition

South Korea wary with China

is expected
to intensify in
such export
markets as Latin
briefs
Report: BT to slash

of China’s rise to
America and 10,000 jobs
Asia because LONDON: British telecoms operator BT
China’s recent will cut 10,000 jobs when it reveals its
currency swap preliminary results next month, reports
arrangements said Sunday.
will enable BT will also make a £1.5 billion (RM8.25 China eyes new stimulus to

economic power
SEOUL: South Korea yesterday expressed its
yuan to be
used in trade
settlements.”

its giant neighbour in global markets and should

concern about China’s rise as a global economic
power in a rare note that said the ascent of its
powerful neighbour could harm its own economic
growth.
The Ministry of Strategy and Finance said in
an eight-page “reference material” that China’s
growing clout was likely to intensify competition
between the two countries especially in export
markets and energy diplomacy.
That contrasted with the past practice of
describing China’s economic growth as an oppor-
tunity for South Korea to keep producing export
goods for other markets using cheap labour, as
well as a threat to its own exports.
“Competition with China is expected to in-
tensify in such export markets as Latin America
and Asia because China’s recent currency swap
arrangements will enable yuan to be used in trade
settlements,” the ministry said in the statement.
China has grabbed the media headlines around
the world in the past for its fast emergence as
a driver of global economic growth and more
recently as the potential saviour of the global
economy mired in the worst recession in many
decades.
In response to the spreading ‘Beijing Consen-
sus’, our country also needs to adopt pre-emptive
external economic policy,” the finance ministry
said, referring to a phrase used to describe Chi-
na’s growing influence.
Analysts in Seoul said South Korea lacked the
economic scale or resources to compete with
therefore focus its diplomatic and economic
capabilities in select areas where it excels.
“China would pay much higher prices than
the market value when acquiring energy projects
abroad, so (South Korea) can’t compete with it,”
said Park Bun-soon, a senior fellow at Samsung
Economic Research Institute.
“If China has ‘hard power’, we have to think
about utilising ‘soft power’,” he said, referring to
South Korea’s non-government organisations and
corporate networks.
The finance ministry’s statement also came af-
ter South Korea’s efforts to secure more offshore
energy supplies hit a snag early this year after
Nigeria cancelled exploration rights at oilfields
first awarded in 2005.
South Korea, which lacks natural resources,
has relied heavily on exports to power its rise
from the rubble of the 1950-53 Korean War to
become the world’s 13th-largest economy.
But Chinese industry, with its abundance of
cheap labour and strong backing from the com-
munist government, has emerged as a strong
rival in key export markets for products ranging
from clothes to consumer electronics, sparking
concerns it could jeopardise South Korea’s ef-
forts to catch up with the world’s most developed
economies.
China, with which Seoul normalised diplomatic
ties in 1992, has become South Korea’s biggest
trade partner and main investment destination.
– Reuters
billion) writedown in its under-fire Global Services
division and slash its dividend by about 60%, ac-
cording to the Daily Telegraph’s website.
The job losses are expected to be spread
across the company’s 160,000-strong global
workforce.
BT’s results are likely to be among the worst
since it was privatised in 1984, the Telegraph and
the Sunday Times reported.
Its poor financial performance in the face of
the global economic slowdown is compounded
by the cost of trying to plug its huge pension
deficit.
A BT spokesman said the reports of 10,000
job cuts were “speculative numbers.”
“The company is focusing on cost reductions,”
he said. – AFP
US directs GM to prepare for bankruptcy filing
WASHINGTON: The US Treasury Department is
directing General Motors to lay the groundwork
for a bankruptcy filing by June 1, even though the
automaker has publicly stated it could reorganise
outside of court, The New York Times reported on
Sunday.
GM is operating under emergency US govern-
ment loans. It has been told by the Obama admin-
istration’s task force overseeing its bailout that it
must cut costs and reduce its debts in order to
continue to receive aid.
The White House-appointed autos task force
has given GM 60 days to come up with a restruc-
turing plan and it is trying to determine whether
boost spending: State media
SHANGHAI: China is drawing up a fresh
economic stimulus aimed at boosting con-
sumption, state media reported yesterday,
on top of a previous multi-billion-dollar plan
targeting investment.
The move comes as the government looks
to increase personal spending due to plum-
meting exports amid the global financial
meltdown.
Beijing will continue to drive economic
growth with fiscal spending, the China Se-
curities Journal reported, citing Gao Huiqing,
of the economic forecast department at the
State Information Centre, a government
think tank. – AFP
the automaker can be a viable company.
Quoting sources who had been briefed on the
GM plans, the Times said the goal was to prepare
for a fast “surgical” bankruptcy.
The newspaper said preparations are aimed
at assuring a GM bankruptcy filing is ready if
the company is unable to reach agreement with
bondholders to exchange roughly US$28 billion
(RM105 billion) in debt into equity in GM and with
the United Automobile Workers union.
A plan under consideration would create a new
company that would buy the “good” assets of GM
after the carmaker files for bankruptcy, the Times
said. – AFP

China begins long campaign

for yuan greatness
BEIJING: China is pushing aggressively for the
wider use of its currency abroad, but it will likely
take decades before it assumes a truly global role
and challenges the US dollar, analysts say.
The drive has seen a series of currency swap
agreements in the past few months, while public
criticism of the dollar-based global system by the
central bank governor has given China’s recent
actions a more ambitious-looking edge.
“It’s evident that the weight of the yuan on
the international market is growing,” said Zhang
Taowei, a finance professor at Beijing’s Tsinghua
University.
The yuan so far plays only a minor role globally,
partly because it is not convertible on the capital
account, which makes it harder to remit money
in and out of China.
However, Chinese thinking on the issue looks
to be gradually changing, not least because of a
weakened faith in the greenback brought on by
the global economic crisis.
Premier Wen Jiabao last month warned he
was concerned about China’s huge investment
in dollar-denominated assets.
As a first step for the yuan, China since De-
cember has signed six currency swap contracts
totalling 650 billion yuan (RM345.6 billion), with
Hongkong, South Korea, Malaysia, Belarus, Indo-
nesia and Argentina.
The agreements make it possible for overseas
importers of Chinese goods to borrow yuan from
their central banks, reducing their exposure to
volatility in the US dollar.
But apart from the concrete purposes they
serve, the agreements fit into a broader pattern
of experimenting with new uses of the currency,
including trial schemes for yuan trade settlement
between Hongkong and south China.
“The facts on the ground suggest the central
bank would like to see the yuan more popularly
used as an offshore trade settlement currency,”
said Ben Simpfendorfer, Honkong-based China
economist for Royal Bank of Scotland.
“That won’t happen overnight. It will take
years, but nonetheless, it may happen faster than
people expect.”
China is not alone in promoting the yuan, and
has seen a measure of support from other major
emerging economies.
Brazilian President Luiz Inacio Lula da Silva
said this month he had proposed to his Chinese
counterpart, Hu Jintao, conducting bilateral trade
through each country’s local currency.
It could be the beginning of growing South-
South collaboration to chip away at a dollar
supremacy that seldom arouses enthusiasm in
the less-developed parts of the world.
“If the US dollar framework remained un-
changed, the emerging markets would have no
channel to have a bigger say,” said Lu Zhengwei, a
Shanghai-based economist with Industrial Bank.
Alongside the swaps and other small-scale
practical steps, China has also launched a more
direct rhetorical challenge to the US dollar.
Central bank governor Zhou Xiaochuan last
month published an essay on his bank’s website
calling for a replacement of the US dollar as the
global reserve currency.
“Theoretically, it’s a good idea. But in reality, it
would be very difficult to implement,” said Lu of
Industrial Bank.
“It could be a direction for open discussion.
But in the foreseeable future, that’s not going
to happen.”
Any major global role for the yuan might be as
long as 10 years to 30 years away, China’s state-
run Xinhua news agency reported.
The agency quoted Chen Yulu, a finance
professor and vice president at the People’s
University of China, as laying out a three-decade
timetable for yuan greatness.
First China would need 10 years to expand
the yuan’s use in neighbouring countries, then
another decade to bolster its role in Asia and a
final 10 years to make it a reserve currency, the
Beijing-based professor told Xinhua.
“Currencies don’t become popular until they
are widely adopted and transaction costs are
low and there is some sense that you can use
this currency to buy things in any country,” said
Simpfendorfer.
“It is (a question of reaching a critical mass),
and in that respect China has an advantage in
being a very large trading country. But we need to
see a stronger domestic demand, more Chinese
buying goods from abroad.” – AFP