BBC News - China exports beat forecasts on strong US demand

Chinese exports rose more-than-expected in February, adding to optimism over a recovery in its economy.

Demand from the US and South East Asia has driven a rise in exports

Shipments jumped 21.8% from a year earlier, boosted by strong demand from the US and South East Asia. Most analysts had expected a 15% rise.

Exports, which are a key driver of China's growth, have been hurt recently by a slowdown in its key markets.

Analysts said the data may be skewed due to the Lunar New Year, but added that the trend was that of a recovery.

"Exports in January and February were both quite strong. This shows a recovering trend," said Sun Chi, an economist at Daiwa in Hong Kong.

Holiday season impact

However, there was a big fall in imports, which declined 15.2% from a year earlier.

Analysts said that the Lunar New Year celebrations, which see factories and businesses in China shut for days, played a key role in that decline.

Last year, the Lunar New Year was celebrated in January, while this year it was observed in February.

This meant that factories operated for fewer days in February this year than in 2012.

"Since the factories worked for a fewer number of days, they imported far less raw materials than they would normally have done," said Dariusz Kowalczyk, senior economist with Credit Agricole CIB in Hong Kong.

"That is why you have to combine the data for January and February to see the real picture."

Mr Kowalczyk said that the combined data for the two months indicated a jump of 5.1% in imports from a year earlier.

He added that the the jump in exports for February may also have been much stronger if the factories had worked the usual number of days.

Reuters News - U.S. economy, world's engine, remains in "neutral": Fed's Fisher

Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, speaks during a conference before the Committee for the Republic Salon at the National Press Club in Washington January 16, 2013.

Credit: Reuters/Jose Luis Magana

By Jim Forsyth

SAN ANTONIO | Wed Mar 6, 2013 10:27pm EST

(Reuters) - Despite the efforts of the U.S. Federal Reserve to use easy monetary policy to boost jobs, the country's economy is stuck in "neutral" more than three years after the end of the recession, a top Fed official said on Wednesday.

"It is not possible to create jobs through monetary policy alone," Dallas Fed President Richard Fisher said at a World Affairs Council of San Antonio event. "The U.S. remains the economic engine of the world ... it's not China, it's not Europe, it's the U.S., and the U.S. remains in neutral."

Fisher, repeating a well-worn analysis of the limits of the Fed's super-easy monetary policies, said the U.S. central bank did not have the power to pull the economy from its standstill as long as U.S. lawmakers did not do their part.

"You know how horrid things are in Washington," Fisher said. "We have provided fuel for an economic recovery because Congress and the executive have not provided the incentives for growth."

The U.S. central bank has kept interest rates at rock bottom for more than four years and is currently buying Treasury and mortgage bonds in an effort to keep longer-term borrowing costs low enough to spur spending and hiring.

Yet unemployment is relatively high, at 7.9 percent, and inflation remains stubbornly below the Fed's 2 percent target, curtailing the boost that near-zero short-term interest rates can give the economy.

Fisher, who does not vote on the Fed's policy-setting committee this year, has been a vocal opponent of the Fed's bond-buying program, saying it can do little as long as lawmakers do not address the nation's debt problem and provide businesses with needed fiscal certainty.

U.S. political leaders have so far failed to bridge a dispute over the budget, triggering broad spending cuts that both political parties deplore and setting the stage for fiscal tightening that could drag economic growth down sharply. <ID: L1N0BZ12Z>

Fisher has questioned the bond-buying program's effectiveness at keeping interest rates low, and on Wednesday gave partial credit for historically low U.S. interest rates to China's massive purchases of U.S. debt

"They help us keep interest rates down and it is an expression of faith in the U.S. economy," he said, referring to the Chinese.

(Writing by Ann Saphir in San Francisco; Editing by Lisa Shumaker and Peter Cooney)

Sky News - Identity Crime Pushes Fraud To A Record High

The UK's tough economic environment drives up the number of fraudsters in Britain, according to the latest research.

Credit card fraud rose by 44% in 2012 when compared with the year before

Fraud in the UK has risen by 5%, with more crimes recorded in 2012 than in any previous year, according to the UK's Fraud Prevention Service.

CIFAS recorded 248,325 frauds last year, with identity crime - when people misuse the personal data of victims - accounting for almost two-thirds of this total.

The internet remained a key tool for the fraudster, with 80% of identity crime perpetrated online, the organisation said in its Fraudscape report.

Men were most likely to be victims of impersonation, CIFAS said, as were people living in large, urban areas.

It identified the Gosport/Portsmouth, Middlesbrough, Peterborough and Manchester regions as fraud hotspots in 2012.

In London, boroughs in the east of the city - Newham, Barking and Dagenham, Greenwich and Bexley - were described as "fraud epicentres".

The tough economic environment in Britain played a "prominent role" in driving up fraud, the report said, acting as a likely incentive for many different types of the crime.

But CIFAS's Richard Hurley said this was just one factor contributing to the increasing amount of fraud.

"Fraud is a complex subject, affected by a wide range of factors, and the variations recorded during 2012 are proof of that," he said.

"The role of organised crime, consumer awareness, the economic situation in the UK, changing business practices and the rapid development of digital technologies are just a few of the influencing factors."

Identity fraudsters most commonly targeted bank, credit card and mail order accounts, with fraud relating to plastic cards up 44% in 2012, the organisation said.

Fraud against loan products was also up by around 45% in 2012 compared with the year before, which the report said was due in part to the increased popularity of payday loans.

Mr Hurley added that the question of whose responsibility it is to defeat fraud needs to be addressed because the crime remains a threat both to organisations and individuals.

"By examining the ways in which frauds are attempted, CIFAS is able to cast light on the murky realities of the problem," he said.

"This underlines the need for more public and private organisations to act responsibly and share data to prevent fraud before having to recover losses, together with greater moves made by individuals and law enforcement."

Reuters News - Analysis: Egypt is in for trouble with or without the IMF

Traders work at the Egyptian stock exchange in Cairo January 22, 2013.

Credit: Reuters/Mohamed Abd El Ghany

By Marwa Awad and David Stamp

CAIRO | Tue Mar 5, 2013 6:35am EST

(Reuters) - Egypt is at risk of a "revolution of the hungry" two years after Hosni Mubarak was ousted in a popular uprising, as food and energy prices will soar with or without an IMF deal.

Failure to get the $4.8 billion loan or some other funding would have dire consequences: if Egypt keeps burning foreign currency at the rate it has done since the 2011 uprising, it will have none left in little more than a year.

But success would also stir Egypt's boiling social and political cauldron. In return for a lifeline, the International Monetary Fund will demand reform of a subsidy system that long ago became unaffordable.

The rich benefit most from the energy subsidies that exhaust state finances but the poor will suffer most if they go.

"Whether we have the IMF or not there will be difficulty ... the IMF requires certain economic reforms," said Salah Gouda, an economics professor. "If we lift subsidies right away then you are looking at a revolution of the hungry."

The economic gloom has dragged Egyptians from the high of the "Arab Spring" revolution to deepening poverty.

Constant feuding between the ruling Islamists of President Mohamed Mursi and the opposition over the future character of Egypt has heightened tensions and cast serious doubt on any hopes for a political consensus on reforming the economy.

The United States, the largest shareholder in the IMF, is worried about how the economic crisis could further destabilize a strategic ally in a turbulent region.

"It is paramount, essential, urgent that the Egyptian economy gets stronger, that it gets back on its feet," Secretary of State John Kerry said on a weekend visit to Cairo. "It's clear to us that the IMF arrangement needs to be reached, that we need to give the market that confidence."

The figures speak for themselves. The foreign currency reserves have slid to $13.5 billion at the end of February from $36 billion on the eve of the uprising.

The dive slowed sharply last month. However, reserves have fallen roughly $865 million a month since the end of 2010, meaning the current levels would last only about 15 months if this rate were to continue unabated.

"Egypt's foreign exchange reserves are still extremely low and below what the central bank previously called a critical minimum level," said William Jackson of Capital Economics in London. "Our bigger concern is if there is a fresh eruption in political turmoil, and investors and Egyptians lose confidence."

If Egypt were to run out of money - both foreign and local currency - the subsidy system would probably collapse anyway, leading to shortages and price rises in a chaotic return to the free market. Such a scenario of upheaval in the Arab world's most populous country supports those who say an IMF deal is vital.

SAFETY NETS

Confidence is already in short supply. The central bank has spent more than $20 billion trying to prop up the Egyptian pound but it has still lost 14 percent against the dollar since before the revolution - more than half of this since the end of last year.

This slide has added to the huge burden on the budget from the subsidy system which dates back to the rule of nationalist President Gamal Abdel Nasser who seized power in 1952.

Its cost has been soaring for years along with the population, most of whom are squeezed into the five percent of Egyptian territory that is not desert.

Now the government is having to buy most of the oil and much of the wheat for subsidized energy and bread on international markets with a devaluing local currency. Subsidized bread, which goes to the poor as better-off Egyptians prefer higher quality loaves, consumes about five percent of the state budget.

A far bigger problem is energy, which devours about 20 percent of the budget. Petroleum Minister Osama Kamal estimated last month that the energy subsidy bill would hit 120 billion Egyptian pounds ($17.8 billion) in the financial year to June.

Egypt cannot afford this kind of money. In an economic plan produced last month for the IMF, the government forecast the budget deficit would reach 189.7 billion pounds this financial year. That would equal 10.9 percent of Egypt's total annual economic output and assumes that reforms will go ahead.

Without such action, the deficit would reach 12.3 percent of GDP. By contrast Portugal, a country where living standards are at least three times those of Egypt, had to seek a bailout from the IMF and European Union in 2011 even though its deficit peaked below 10 percent.

INEFFICIENT

Inevitably the IMF will be gunning for the subsidies in negotiations for the loan, which have yet to start.

Masood Ahmed, who heads the IMF's Middle East and Central Asia Department, says that blanket subsidies are an inefficient way of protecting the weakest in society.

In an article looking at the Arab countries in general, he said that only about 20 to 35 percent of spending on subsidies reaches the poorest 40 percent of the population.

"Now that budgetary pressures make it all the more urgent to reform generalized subsidies, it has become equally urgent to develop better and more robust safety nets that target the needy," he wrote in this month's edition of the IMF's online Finance and Development magazine.

Two fifths of Egyptians live on less than $2 a day and while the poor don't own cars a big rise in fuel costs due to subsidy cuts would feed through to higher transport costs which would push up the price of the food they buy.

"When prices go up, there will be protests on the street as no one can afford the rising costs of living. The poor will suffer the most," said Gouda, who works at Beni Suef University in the Nile Delta.

Research by the African Development Bank backs him up. "Energy subsidies are often intended to support the poor but in practice benefit the rich," Vincent Castel, a program coordinator at the bank, wrote in an article on Egypt.

"Although the welfare loss is imposed on the entire population the poor and near-poor are most vulnerable because energy expenses account for a larger portion of their income."

Already tension is high across much of Egypt. Violence erupted in November and December after Mursi temporarily gave himself sweeping powers. This has subsided but around 60 were killed in the Suez Canal city of Port Said in January and unrest flared there again this week.

Such an explosive atmosphere will not make reform easy.

"In my view, there will be massive popular protests should these austerity measures be implemented," said Salwa Al-Antary, former head of research in Egypt's National Bank who now heads the economic committee in the Egyptian Socialist Party.

"Egyptians will feel squeezed with the rise in prices after having hope of improvement with the revolution."

Removal of subsidies would have startling results. Petroleum Minister Kamal has promised that subsidized fuel would remain available for some Egyptians under a rationing system. This is due to start in July but few details have yet been announced.

Costs outside this scheme would jump. According to projections compiled for the IMF, the commonly used 90 octane gasoline would leap to 5.71 Egyptian pounds ($0.85) a liter from 1.75, and diesel would go up to 5.21 pounds from 1.10.

Such increases would probably be phased in gradually but that risks prolonging any angry public response.

The IMF says reform cannot be sacrificed merely for the sake of stability in the Arab countries. "Important as it is now to focus on maintaining economic stability, it is vital not to lose sight of the more fundamental medium-term challenge of modernizing and diversifying the region's economies, creating more jobs, and providing fair and equitable opportunities for all," wrote Ahmed, who met Mursi in January.

POLITICAL SUPPORT

However, reform remains the art of the possible. "In a second-best world, it may be necessary to move ahead with reforms that garner sufficient support and postpone others: some progress is better than none at all," Ahmed wrote.

He said the onus is on politicians to explain why the pain is needed and that money saved on wasteful spending can be redirected to items such as health and education.

"Policymakers should explain how expensive and inefficient existing subsidies are and the costs they impose on other parts of the budget," he wrote.

"In any reform involving revenue increases or expenditure cuts, it is important to demonstrate that the proceeds are being used to good effect."

On his visit to Cairo, Kerry stressed the need for Egyptian politicians across the spectrum to back reform. But the chances of that seem slim. Most of the liberal and leftist opposition parties have announced they will boycott parliamentary elections that start in April.

Any IMF deal should open the door to other help, such as from the World Bank, African Development Bank, Gulf Arab countries and the EU. However, many Egyptians doubt a deal would draw vital private sector investment in its wake.

"The IMF loan will not solve anything," said Gouda. "There is no security in the country and no one will want to invest in Egypt when there is political turmoil. With the IMF, Egypt would still need to beg for money." ($1 = 6.7421 Egyptian pounds)

(Additional reporting by Asma Alsharif; editing by Anna Willard)

BBC News - NPC: China keeps growth target at 7.5%

China has left its economic growth target for the year unchanged at 7.5%, as it looks to expand at a steady pace and maintain social stability.

Martin Patience reports on economic expectations at the National People's Congress in Bejing

The country also set a lower inflation goal of 3.5%, aimed at keeping prices in check.

The forecast was outlined by Premier Wen Jiabao in his last appearance at China's annual parliamentary session.

The world's second-largest economy has seen expansion slide after a slowdown domestically and in key markets.

The National People's Congress will seal China's leadership handover, with the new president and premier to be formally named.

Hard work

After years of experiencing a blistering pace of growth, China has seen its economic expansion slow.

In 2012, the country grew at a pace of 7.8%, its weakest performance in 13 years.

This is a cause for concern not only domestically, where analysts say a fast pace of growth is needed to create jobs, but also for the rest of the world which relies partly on China to drive the global economy.

But China, in turn, is dependent on key markets such as the US and Europe buying its goods. Weakness in those economies has led to a drop in demand.

"We deem it necessary and appropriate to set this year's target for economic growth at about 7.5%, a goal that we will have to work hard to attain," said Mr Wen. China regularly exceeds the growth target set by Beijing for the year.

Analysts said a further slowing is expected.

"The Chinese economy will decelerate from the second quarter, but the slowdown is not significant enough to derail the economic recovery," said Dariusz Kowalczyk, from Credit Agricole CIB in Hong Kong.

"The 7.5% growth target announced today is safe," he added.

Mr Wen also spoke of transforming China's economy to one less dependent on exports by boosting domestic spending.

"We should energetically change the growth model," he said, something the country has been trying to achieve for many years.

Rising prices?

China has also struggled to maintain a fast pace of growth, but keep prices of consumer goods and property affordable.

The property market has seen prices sky-rocket in part because of domestic pressures, but also because of investment flowing into China from developed countries who have been increasing liquidity in their economies.

Analysts feared that asset bubbles were forming in the Chinese economy.

Mr Wen said prices were at risk of rising again this year.

"There are relatively big inflationary pressures this year, mainly because there are pressures on China's land, labour, agricultural products and services. And major countries are stepping up loose monetary policy, so we can't overlook imported inflationary pressures."

He also promised that more affordable housing would be made available, something ordinary Chinese people complain about on social networking sites.

"This year we will basically finish construction of 4.7 million units of affordable housing, and start building 6.3 million units," he said.

Last week Beijing announced more steps to cool the property market.

BBC News - Swiss referendum backs executive pay curbs

Swiss voters have overwhelmingly backed proposals to impose some of the world's strictest controls on executive pay, final referendum results show.

There was outrage in Switzerland over a $78m pay off, later scrapped, to the outgoing Novartis chairman

Nearly 68% of the voters supported plans to give shareholders a veto on compensation and ban big payouts for new and departing managers.

Business groups argued the proposals would damage Swiss competitiveness.

But analysts say ordinary Swiss are concerned about a growing economic divide in the country.

The vote came just days after the EU approved measures to cap bankers bonuses.

'Fat cat initiative'

The final results showed that all 26 Swiss cantons backed the proposals.

In all, 1.6 million voters said "Yes" against 762,000, who rejected the idea.

The BBC's Imogen Foulkes, in Berne, says multibillion dollar losses by Swiss banking giant UBS, and thousands of redundancies at pharmaceutical company Novartis, have caused anger in Switzerland - because high salaries and bonuses for managers continued unchanged.

The new measures will give Switzerland some of the world's strictest corporate rules, our correspondent adds.

Shareholders will have a veto over salaries, golden handshakes will be forbidden, and managers of companies who flout the rules could face prison.

The "fat cat initiative", as it has been called, will be written into the Swiss constitution and apply to all Swiss companies listed on Switzerland's stock exchange.

Support for the plans - brain child of Swiss businessman turned politician Thomas Minder - has been fuelled by a series of perceived disasters for major Swiss companies, coupled with salaries and bonuses staying high.

Our correspondent says the main example is banking giant UBS, which wrote off billions in the wake of the 2007 sub-prime mortgage crisis, and then had to be bailed out by the Swiss government.

A further incident came in February when it was announced that the outgoing chairman Novartis', Daniel Vasella, would be receiving a 72m Swiss francs (£51m; $78m) "non-compete" pay off over six years, designed to stop him working for other related industries.

The payment was later scrapped, but it provoked anger and amazement in Switzerland, because his salary had been regarded as too high and the firm had been cutting jobs, our correspondent adds.

One of the organisers of the referendum, Brigitte Moser Harder, told the BBC she thought the Swiss people agreed with the proposals because the gap between rich and poor had become wider.

"From the beginning, 2006, we had the support of the people of Switzerland because you know not everybody in Switzerland is rich.

"It's also a social problem because the high wages got higher and the small ones sometimes just got lower. I think people have the support of the Swiss people because of that."

Meanwhile, under an EU deal agreed last week by the bloc's 27 nations, bonuses will be capped at a year's salary, but can rise to two year's pay if there is explicit approval from shareholders.

The UK argued the EU bonus rules would drive away talent and restrict growth in the financial sector.

Reuters News - U.S. stares down start of steep "automatic" budget cuts

By Richard Cowan

WASHINGTON | Fri Mar 1, 2013 11:56am EST

(Reuters) - The U.S. government hurtled on Friday toward deep spending cuts that threaten to hinder the nation's economic recovery, as President Barack Obama met Republican and Democratic leaders at the White House in search of an alternative fiscal plan.

The inflexible plan, locked in during a bout of deficit-reduction fever in 2011, initiates time-released, across-the-board cuts that can only be halted by agreement between Congress and the White House.

That deal has proved elusive so far.

Both sides still hope the other will either be blamed by voters for the cuts or cave in before the worst effects predicted by Democrats - like air traffic chaos or furloughs for hundreds of thousands of federal employees - start to bite in the coming weeks.

Mitch McConnell, the Republican leader in the Senate, all but killed any hopes that Obama and top congressional leaders can hammer out a deal in talks that began shortly after 10 a.m. EST (1500 GMT).

"I'm happy to discuss other ideas to keep our commitment to reducing Washington spending at today's meeting. But there will be no last-minute, back-room deal and absolutely no agreement to increase taxes," McConnell said before the meeting.

Obama huddled at the White House with Senate Majority Leader Harry Reid, McConnell, House of Representatives Speaker John Boehner, the top U.S. Republican, and House Democratic leader Nancy Pelosi.

Barring any breakthroughs, across-the-board cuts totaling $85 billion will begin to come into force at some time before midnight on Friday. The full brunt of the belt tightening, known in Washington as "sequestration," will take effect over seven months so it is not clear if there will be an immediate disruption to public services.

No matter how Obama and Congress resolve the 2013 battle, this round of automatic spending cuts is only one of a decade's worth of annual cuts totaling $1.2 trillion mandated by the sequestration law.

Democrats insist tax increases be part of a solution to ending the automatic cuts, an idea Republicans reject.

Congress can stop the cuts at any time after they start on Friday if the parties agree to that. In the absence of any deal at all, the Pentagon will be forced to slice 13 percent of its budget between now and September 30. Most non-defense programs, from NASA space exploration to federally backed education and law enforcement, face a 9 percent reduction.

If the cuts were to stay in place through September, the administration predicts significant air travel delays due to layoffs of airport security workers and air traffic controllers.

The International Monetary Fund warns that U.S. economic growth could be slowed by 0.5 of a percentage point this year, hitting the global economy.

The non-partisan Congressional Budget Office predicts 750,000 jobs could be lost in 2013 and federal employees throughout the country are looking to trim their own costs.

NO VISITS TO MOVIES, RESTAURANTS

"The kids won't go to the dentist, the kids might not go to the doctor, we won't be spending money in local restaurants, local movie theaters," said Paul O'Connor, president of the Metal Trades Council, which represents some 2,500 workers at the Portsmouth Naval Shipyard in Kittery, Maine.

But some Republicans accused Obama of exaggerating the severity of possible disruptions in government services to force them to call off sequestration on his terms.

The public, Republican Representative Lee Terry of Nebraska said, is "being told ... that Armageddon occurs on Saturday: You're never going to fly, you can't buy any meat at a grocery store, every illegal alien is going to be released, that our borders are going to be overrun by terrorists and al Qaeda will establish themselves in every city of the United States if this goes through."

Terry said Republicans "want the cuts" to trigger, but with more flexibility on how they are carried out.

Even some Republicans keen to rein in government spending are wary of sequestration because of its potential to cause pain. The cuts are designed to hurt by hitting a wide range of government programs regardless of whether cost reduction is warranted.

Instead of these indiscriminate cuts, Obama and Democrats in Congress urge a mix of targeted spending cuts and tax increases on the rich to help tame the growth of a $16.6 trillion national debt.

Republicans want to cut the cost of huge social safety nets, including Social Security and Medicare, that are becoming more expensive in a country with an aging population.

By midnight, Obama is required to issue an order to federal agencies to reduce their budgets, and the White House budget office must send a report to Congress detailing the spending cuts. In coming days, federal agencies are likely to issue 30-day notices to workers who will be laid off.

(Additional reporting by Steve Holland, Thomas Ferraro, Roberta Rampton and Deborah Zabarenko, Writing by Alistair Bell; Editing by Philip Barbara)