U.S. Secretary of Treasury Jack Lew in the East Room of the White House in Washington, March 4, 2013.

WASHINGTON | Fri Mar 15, 2013 12:30pm EDT

WASHINGTON (Reuters) - Treasury Secretary Jack Lew will press China to take "serious steps" to stop cyber attacks directed at the United States and urge the administration of new Chinese President Xi Jinping to accelerate economic reforms, a U.S. official said on Friday.

Lew's visit to Beijing on Tuesday and Wednesday comes at a crucial time, the official told reporters on condition of anonymity. "China is undergoing their once-in-a-decade leadership transition and, of course, their reform process is at a crossroads."

"It's important to deepen our relationship with China's new leadership team at this time," the official said.

Lew lacks the international stature of his predecessor, Timothy Geithner, and is signaling the importance the United States put on its economic relationship with China by making his first international trip as secretary to Beijing.

Secretary of State John Kerry in coming weeks will also make his first trip to China since taking office last month.

Both Kerry and Lew will host their Chinese counterparts in Washington in the middle of this year for the annual U.S-China Strategic and Economic Dialogue, the official said.

China's legislature formally chose Li Keqiang as premier on Friday, installing the English-speaking bureaucrat as the man in charge of the world's second-largest economy.

President Barack Obama raised U.S. concerns about computer hacking in a phone call with Xi on Thursday, just days after U.S. intelligence leaders said for the first time that cyber attacks and cyber espionage had supplanted terrorism as the top security threat facing the United States.

"We will press China to take serious steps to investigate and put a stop to these activities and to engage with us in a constructive direct dialogue to establish acceptable norms of behavior in cyberspace, recognizing it is a growing challenge for both of us," the senior U.S. official said.

Lew will also press China to allow its currency to rise further against the dollar and push on other concerns such as increased market access for U.S. goods and better protection of intellectual property rights, the official said.

China's yuan has appreciated 16 percent in real terms against the dollar since June 2010. "More progress, however, is needed," the official said.

(Reporting by Doug Palmer; Editing by Doina Chiacu)

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1 of 2. A man walks in front of a company logo outside an Apple store in downtown Shanghai January 24, 2013.

SHANGHAI | Fri Mar 15, 2013 2:14pm EDT

SHANGHAI (Reuters) - Technology giant Apple Inc and car maker Volkswagen AG were singled out by state-run China Central Television (CCTV) in its annual corporate malpractice expose.

On its "3.15" investigative special aired late on Friday, CCTV said that Chinese customers were not given the same post-sales service from Apple as it gave to users in other markets.

The report also said that the direct shift gearbox (DSG) transmission, a long-standing issue for Volkswagen, was causing cars to speed up or slow down during driving.

Volkswagen, which plans to almost double production capacity in China to 4 million cars in the next five years, promised action in response to the "3:15" show, whose name refers to the date of World Consumer Rights Day.

"We take this report very seriously and we will quickly make contact with our consumers to resolve the issue," it said on its official Chinese Weibo microblog.

In a statement Apple China said: "Our team is always striving to exceed our customers' expectations, and we take any customer concerns very seriously."

Apple looks to China not just as its main production base, but also to re-energize slowing growth, the result of rising smartphone penetration in mature markets. CEO Tim Cook sees the world's No. 2 economy as virgin expansion territory, and Apple singles out the region in every quarterly results report.

The television show has named and shamed a number of prominent Western companies in the past, hitting the sales and stocks of its targets in a retail market that is forecast to be the world's largest in three years.

Last year "3:15", one of the most widely watched shows in China, singled out fast-food giant McDonald's Corp and French hypermarket chain Carrefour SA for food safety violations.

The companies were forced to apologize and their shares slumped as China's army of half a billion microbloggers unleashed their anger online.

U.S. retailer Wal-Mart Stores Inc. and Korea's Kunho Tire Co Inc also have been blasted by state TV on Consumer Rights Day.

SAFETY CONCERNS

In December, a separate state television report triggered a food safety scare at Yum Brands Inc. restaurants, cutting its China same-restaurant sales by 20 percent in January and February.

Chinese companies have not been spared from scrutiny.

Public concern about food safety, pollution and corporate corruption has intensified over the last few years, after state media exposed malpractice at local firms including web search engine Baidu Inc and milk producer Inner Mongolia Yili Industrial Group Co.

"These TV exposes create the impression that you can't trust that brand," said Torsten Stocker, head of Greater China consumer practice at Monitor Deloitte. "If there's some smoke then maybe there's much bigger fire."

In a bid to preempt any negative publicity on Consumer Rights Day, some companies launched customer-friendly promotions ahead of the TV show. McDonald's will give out free breakfasts on Monday and Wal-Mart launched an "adopt-a-tree" campaign.

But some Chinese consumers said that the revelations from the "3.15" show would nonetheless have a significant impact on their choice of products in the future.

"I think the exposure of these companies makes them hard to believe again, at least I myself will boycott these companies," Sherry Chen, a clerk at DBS bank in Shanghai, told Reuters in the city's affluent financial district ahead of Friday's show.

The show also stirred up vitriol online in China. Within an hour of the broadcast, Apple had been mentioned 50,000 times on popular web microblog Weibo, China's version of Twitter which has more than half a billion users.

While many posts on Weibo were negative, the targeted companies may take solace that some users were not entirely convinced by the "3.15" show, which is a colorful mixture of under-cover footage and pro-consumer song-and-dance routines.

"Tonight's 3.15 hit out against corruption. But the most fraudulent thing at the end of the night was the show itself," posted Weibo user 'Soledad Horse'. "Oh CCTV, can't you try and find some intelligence from now on?"

(Additional reporting by Fang Yan; Editing by Miral Fahmy and Michael Roddy)

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BEIJING | Mon Feb 18, 2013 4:48am EST

BEIJING (Reuters) - China's Zhejiang Geely Holding Group is favoured to secure a majority stake in troubled U.S. electric car maker Fisker Automotive, according to two sources familiar with Fisker's search for a strategic investor or partner.

Fisker, the Anaheim-based plug-in hybrid maker, is currently weighing bids from two Chinese auto makers: Geely, the owner of Sweden's Volvo, and state-owned Dongfeng Motor Group Co..

The interest in Fisker reflects China's strong push into alternative fuel cars as it seeks to foster the green technology sector and clear the increasingly polluted skies of its cities.

The knowledgeable individuals said both offers, which Fisker received in the last three weeks, were worth between $200 million to $300 million. A deal would give the suitors a majority stake in the southern Californian company, they said.

The sources, who are close to Fisker, said Geely appeared to be the preferred suitor.

Fisker's corporate leaders and their advisers believe Geely is "more serious" and "passionate" about Fisker and its technology, one of the individuals said.

The Hangzhou-based company also "can move fast" in making decisions -- unlike Dongfeng, whose responsiveness could be hampered by its multi-layered decision-making structure typical in a Chinese state-owned enterprise, the source said.

That quality is likely to work against Dongfeng, since Fisker is under a tight deadline to find a suitor, he added.

"Most of all, with Geely we're dealing with one decision maker," the individual said, referring to its charismatic founder and chairman, Li Shufu.

Geely's Li is also deemed a better suitor due to his experience in making cross-border acquisitions. In 2010, Geely acquired all of Volvo from its previous owner Ford Motor Co.

"Overall, we think Geely is a better fit," the knowledgeable individual said.

The sources noted that Geely had already sent a team of engineers to Anaheim to evaluate Fisker and its technology for battery-powered electric cars with a small gasoline engine used to extend the car's driving range.

Victor Yang, a Geely spokesman in Hangzhou, said: "we are not in position to comment on this at the moment."

Dongfeng also declined to comment. "Dongfeng pays attention to all potential opportunities of international cooperation to cope with future market development both at home and abroad," said spokesman Zhou Mi in an email on Monday.

INTEREST FROM EUROPE, SOUTH KOREA

Fisker -- the producer of the $100,000-plus Karma which it began selling in late 2011 -- fielded interest from several companies including from both South Korea and Europe.

But it received only two firm bids, from Geely and Dongfeng, the sources said. Fisker is hoping to sew up a deal by mid-March, another person said.

Any deal is likely to also involve another Chinese player, Wanxiang Group, an auto parts maker that has purchased bankrupt U.S. lithium-ion battery maker A123 Systems, Fisker's primary battery supplier. A Wanxiang executive declined to comment.

"The company has received detailed proposals from multiple parties in different continents which are now being evaluated by the company and its advisors," Fisker spokesman Roger Ormisher said in an email over the weekend.

He declined to comment further.

A strategic pact would give Fisker the funds to start building its second and more affordable model, the Atlantic plug-in hybrid, which is expected to start at around $55,000 and be Fisker's high-volume vehicle.

Over the last several months, Fisker Chief Executive Tony Posawatz and other Fisker executives have traveled to Europe and Asia to meet investors and automotive makers.

The two bids Fisker is weighing now stem from the trip to Asia that Posawatz and his top executives made in late January.

During that trip, they traveled to Hangzhou, where Geely is based, to meet its chairman Li and his technology chief, Frank Zhao. They also traveled to Wuhan for a meeting with top executives from Dongfeng and then to Beijing for a meeting with Beijing Automotive Industry Holding Co.

The search for financial backers comes after a tough 2012 marred by the rocky and delayed introduction of Fisker's Karma, A123's bankruptcy and an election season that turned the U.S. government-backed company into a political punching bag.

(Additional reporting by Li Ran in Beijing and Deepa Seetharaman in Detroit; Editing by Alex Richardson)

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1 of 2. The China Central Television (CCTV) building is seen next to a construction site in heavy haze in Beijing's central business district in this January 14, 2013 file photo.

BEIJING | Sun Jan 20, 2013 12:11am EST

BEIJING (Reuters) - Beijing is to unveil unprecedented new rules governing how China's capital reacts to hazardous air pollution, the official Xinhua news agency said, as deteriorating air quality threatens to become a rallying point for wider political dissatisfaction.

The rules will formalize previous ad-hoc measures, including shutting down factories, cutting back on burning coal and taking certain vehicle classes off the roads on days when pollution hits unacceptable levels.

Air quality in Beijing, on many days degrees of magnitude below minimum international health standards for breathability, is of increasing concern to China's leadership because it plays into popular resentment over political privilege and rising inequality in the world's second-largest economy.

Domestic media have run stories describing the expensive air purifiers government officials enjoy in their homes and offices, alongside reports of special organic farms so cadres need not risk suffering from recurring food safety scandals.

Smog blanketed most of the city from late Friday, prompting the government to warn people to reduce outdoor activities.

On Saturday, an index measuring PM2.5, or particulate matter with a diameter of 2.5 micrometers (PM2.5), rose as high as 400 in some parts in the city. A level above 300 is considered hazardous, while the World Health Organization recommends a daily level of no more than 20.

The reading was still lower than last weekend, when it hit a staggering 755.

Lung cancer rates in the city have shot upward by 60 percent in the last decade, according to a report by the state-run China Daily in 2011, even as smoking rates have flattened out.

The pollution has also deterred foreigners from living and working in "Greyjing". Now it appears that the government has adopted a more transparent approach to addressing the problem than in the past.

Officials once tried to spin the city's poor air quality by not including PM2.5 readings in reports and referring to smog as "fog" in weather reports. One official accused the U.S. embassy in Beijing of meddling in China's internal affairs for publishing its own PM2.5 readings online.

But this time around, state media appears to have been cleared to cover pollution as a major problem.

Vice Premier Li Keqiang, who is expected to take over as premier in March, said earlier this week that tackling pollution would be a long-term process.

(Reporting by Kevin Yao; Writing by Pete Sweeney; Editing by Nick Macfie)

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WASHINGTON | Fri Jan 18, 2013 3:36pm EST

WASHINGTON (Reuters) - A U.S. trade panel on Friday narrowly approved punitive duties for five years on hundreds of millions of dollars of wind towers from China and Vietnam.

The U.S. International Trade Commission voted 3-3 that U.S. producers were either materially injured or threatened with material injury by unfairly priced and subsidized imports from the two countries.

A tie vote goes to the petitioner in U.S. anti-dumping and countervailing duty cases.

The United States imported $222 million of wind towers from China last year and about $79 million from Vietnam.

The tall steel towers support turbines that generate electricity from the wind.

U.S. producers have complained that unfair Asian competition was forcing them to close plants and shed jobs.

The ITC vote clears the way for the Commerce Department to issue anti-dumping and countervailing duty orders on the wind towers.

The department announced its final duty determinations last month in the case.

It set final anti-dumping duties ranging from 44.99 to 70.63 percent on utility-scale towers manufactured in China and additional countervailing duties of 21.86 to 34.81 percent to combat Chinese government subsidies.

The department slapped final anti-dumping duties of 51.40 to 58.49 percent on wind towers from Vietnam. There was not a subsidy component to the complaint against Vietnam.

Importers have been required since last year to post bonds or cash deposits based on preliminary anti-dumping and countervailing duty rates.

(Reporting by Doug Palmer; Editing by Cynthia Osterman)

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JAIPUR, India | Thu Jan 24, 2013 9:33am EST

JAIPUR, India (Reuters) - Two authors who had books banned in their home countries featured prominently in the list of 10 nominees for the 2013 Man Booker International Prize, the judging panel said on Thursday.

Chinese author Yan Lianke and Russia's Vladimir Sorokin stood out from a list of nominees from nine different countries in the running for the 60,000 pound ($95,000) prize for global writers whose fiction is written in or translated into English.

"These are writers who we have found ourselves enduringly grateful to, who we will re-read," said Christopher Ricks, chairman of the five-man judging panel, at the Jaipur Literature Festival in India where the list was released.

"They write in ways that are astonishingly different."

Around 150 authors were considered for the prize, which will be awarded on May 22 in London, Ricks added.

Marie NDiaye, from France, is the youngest ever nominee for the prize, at 45, and joins Peter Stamm, Switzerland's first nominee, on the list.

The United States has two nominees, Lydia Davis and Marilynne Robinson, the only writer this year to have been shortlisted for the prize in the past.

Canadian Josip Novakovich, Israeli Aharon Appelfeld, Indian U.R. Ananthamurthy and Intizar Husain from Pakistan complete the list of nominees.

The Man Booker International Prize is awarded every two years to a living author who has published fiction either originally in English or whose work is generally available in translation in the English language.

The judging panel for the Man Booker International Prize 2013 consists of the scholar and literary critic, Christopher Ricks; author and essayist, Elif Batuman; writer and broadcaster, Aminatta Forna; novelist, Yiyun Li and author and academic, Tim Parks.

Philip Roth won the prize in 2011, Alice Munro in 2009, Chinua Achebe in 2007 and Ismail Kadaré won the inaugural prize in 2005. In addition, there is a separate award for translation and, if applicable, the winner may choose a translator of his or her work into English to receive a prize of 15,000 pounds.

The Man Booker International Prize is significantly different from the annual Man Booker Prize in that it highlights one writer's continued creativity, development and overall contribution to fiction on the world stage.

The 2012 Man Booker prize was won by British author Hilary Mantel for "Bring Up the Bodies", the second novel in her ongoing trilogy set in the court of Henry VIII. She also won in 2009 for the first novel of the series "Wolf Hall".

(Editing by Paul Casciato)

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A security guard stands next to an Apple retail store during the release of the iPhone 5 in Shanghai December 14, 2012.

SHANGHAI | Fri Dec 28, 2012 8:30am EST

SHANGHAI (Reuters) - A Chinese court has fined Apple Inc 1 million yuan ($160,400) for hosting third-party applications on its App Store that were selling pirated electronic books, the official Xinhua news agency reported on Friday.

Apple is to pay compensation to eight Chinese writers and two companies for violating their copyrights, the Beijing No.2 Intermediate People's Court ruled on Thursday, Xinhua said.

Earlier in the year, a group of Chinese authors filed the suit against Apple, saying an unidentified number of apps on its App Store sold unlicensed copies of their books. The group of eight authors was seeking 10 million yuan in damages.

"We are disappointed at the judgment. Some of our best-selling authors only got 7,000 yuan. The judgment is a signal of encouraging piracy," Bei Zhicheng, a spokesman for the group, told Reuters.

Apple said in a statement that it takes copyright infringement complaints "very seriously".

"We're always updating our service to better assist content owners in protecting their rights," Apple spokeswoman Carolyn Wu said.

China has the world's largest Internet and mobile market by number of users, but piracy costs software companies billions of dollars each year.

Apple, whose products enjoy great popularity in China, has faced a string of legal headaches this year. In July, Apple paid 60 million yuan to a Chinese firm, Proview Technology, to settle a long-running lawsuit over the iPad trademark in China.

($1 = 6.2360 Chinese yuan)

(Reporting by Shanghai Newsroom and Melanie Lee; Editing by Kazunori Takada and Matt Driskill)

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BEIJING | Sun Dec 30, 2012 12:43am EST

BEIJING (Reuters) - China plans to release hourly air pollution monitoring data in 74 of its biggest cities starting on New Year's Day, state media said on Sunday, in a sign of increasing responsiveness to quality-of-life concerns among prosperous urban people.

Choking pollution and murky grey skies in Chinese cities is a top gripe among both Chinese and expatriates.

Microscopic pollutant particles in the air have killed about 8,600 people prematurely this year and cost $1 billion in economic losses in Beijing, Shanghai, Guangzhou and Xi'an, according to a study by Beijing University and Greenpeace that measured the pollutant levels of PM2.5, or particles smaller than 2.5 micrometers in diameter.

The new monitoring will include not only PM2.5, but also sulfur dioxide, nitrogen dioxide, ozone and carbon monoxide, the Xinhua news agency said, citing a Friday announcement by the Ministry of Environmental Protection.

Data will be collected from 496 monitoring stations, it said.

First Beijing, then other cities have become more public about their air quality data since the U.S. embassy in Beijing began publishing hourly data from a pollution monitor installed on embassy grounds in Beijing.

The embassy's monitor often diverged with official air quality readings, adding to public pressure for the city to come clean about the state of its air.

The United States has extended its monitoring program to its consulates in China.

Sunday was a clear and sunny winter day in Beijing, with the levels of ozone and PM2.5 declared "moderate" or "good", according to embassy data. The Beijing Municipal Environmental Monitoring Center (www.bjmemc.com.cn) rated PM10 concentrations as "excellent".

Many Chinese cities have removed belching smokestacks and coal-burning factories from their centers in the past few years, but a rise in the number of cars during the same period has created new air quality problems.

(Reporting By Lucy Hornby; Editing by Robert Birsel)

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1 of 4. A policeman films his co-workers trying to persuade protesters from gathering near the Beijing Olympic Tower December 22, 2012.

SHANGHAI | Sat Dec 22, 2012 2:07am EST

SHANGHAI (Reuters) - As the end of middle school approached this year, Zhan Haite, 15, faced two choices: attend vocational school in Shanghai in the fall or move to her ancestral home in distant Jiangxi province to take the high school entrance exam and study there.

Taking the test and going to senior high school in cosmopolitan Shanghai, where she had lived since she was four, was not an option.

Zhan is one of millions of children whose parents belong to China's vast migrant workforce and are barred from taking senior high school or college entrance exams where they live by half-century-old policies on household registration, or hukou.

The hukou system has split China's population in two for decades, affording different privileges and opportunities to urban and rural residents. It is a major challenge for China's new economic policymakers under Premier-in-waiting Li Keqiang as they try to push urbanization as an engine of growth.

Not content with her choices, Zhan launched a microblog in May where she argued her case online, igniting a heated national debate.

In the process, she has become the poster child for a loose-knit but growing campaign for equal education opportunities.

"She is, of course, very important because she is a victim, and all along we have been hoping one of the children who have been hurt by these policies would stand up and represent all the victims so that the community more broadly can pay attention to the issue," said Xu Zhiyong, a Beijing civil rights lawyer, who has campaigned for people like Zhan.

Zhan, who has been home schooling since May, seems comfortable in the role.

"I am representative of students like me, our needs, our hopes," she said in her the two-bedroom apartment where she lives with her parents, grandmother, brother and sister.

"People should be able to take the tests where they study. There is no need to debate this."

SECOND-CLASS CITIZENS

But there has been debate, and people have taken to the streets. Beijing police on Saturday broke up a small protest and detained some of the demonstrators calling for hukou reform.

"We are doing this for the right of our children to an education," one of the protesters, who gave his family name as Tie, told Reuters on a freezing street.

"We want them to get rid of these restricting rules on household registration and give equal rights to education. We will keep fighting for it," he added.

For as long as there have been migrants after market reforms started more than three decades ago there have been complaints about the hukou system's inadequacies. Discussion of hukou reform has circulated for years, but steps have been cautious.

China's 230 million migrant workers have been the oarsmen of the world's second-biggest economy but have long been treated as second-class citizens with unequal access to education, health and other services tied to official residence status.

The education issue has been particularly divisive.

Zhan's father, Zhan Quanxi, was detained for several days this month after publicly protesting for education rights in central Shanghai, but criminal charges were dropped.

Still, his online posts have been met with sharp criticism from Shanghai hukou holders, some of whom have claimed to be part of a "Shanghai Defence Alliance".

The verbal mud slinging reflects a battle over turf in big cities where high school seats can help students get into top universities, said Ralph Litzinger, an anthropology professor at Duke University who studies Chinese migrant issues.

"In an increasingly stratified and almost insanely competitive society, of which the rural-urban hukou system is one part, Zhan Haite's case is ultimately, in my view, about uncertain and unpredictable Chinese futures," he said.

(Additional reporting by Maxim Duncan and Ben Blanchard in BEIJING; Editing by Nick Macfie)

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1 of 2. An attendant stands inside a high-speed train during an organized experience trip from Beijing to Zhengzhou, as part of a new rail line, December 22, 2012. China will open the world's longest high-speed rail line next week when a link between Beijing and the southern metropolis of Guangzhou is inaugurated, officials said on Saturday.

BEIJING/ZHENGZHOU, China | Sat Dec 22, 2012 6:32am EST

BEIJING/ZHENGZHOU, China (Reuters) - China will open the world's longest high-speed rail line next week when a link between Beijing and the southern metropolis of Guangzhou is inaugurated, officials said on Saturday, underscoring its commitment to a trouble-plagued transport scheme.

The 2,298-km (1,428-mile) line, parts of which are already in operation, will begin full service on Wednesday, halving travel time to less than 10 hours on trains which will run at 300 kph (186 mph).

The new route offers a chance for China's railways ministry, which has been dogged by scandals and missteps, to redeem itself.

A July 2011 crash of a high-speed train killed 40 people and raised concerns about the safety of the fast-growing network and threatened plans to export high-speed technology.

"We have developed a full range of effective measures to manage safety," Zhou Li, head of the ministry's science and technology department, told reporters on a trial run from Beijing to the central city of Zhengzhou.

"We can control safety management," he added.

Last year's accident near the booming eastern coastal city of Wenzhou occurred when a high-speed train rammed into another stranded on the track after being hit by lightning.

Rail investment slowed sharply in the wake of that accident and state media reported earlier this year that the government had cut planned railway investment by 500 billion yuan ($80.27 billion) to 2.3 trillion yuan under a five-year plan to 2015.

But that may reflect cuts that have already taken place as the Ministry of Railways has raised its planned investment budget three times this year as part of government efforts to bolster a slowing economy.

The ministry plans to spend a total of 630 billion yuan in 2012 and has been given clearance to sell more bonds to finance the investments - one of the few outright spending commitments made by the central government in a slew of project approvals worth $157 billion which have not specified how they will be funded.

The approvals include 25 rail investments, state media say.

Despite its expanding network, the Ministry of Railways struggles to make money. It suffered an after-tax loss of 8.8 billion yuan in the first half of 2012 in the face of rising operating costs and mounting debts.

However, the government says it remained committed to building high-speed railways between its major cities, with China eventually planning to run them into Russia and down to Southeast Asia.

"High-speed railways are needed for national development, for the people and for regional communication. Many countries have boosted their economies by developing high-speed rail," Zhou said.

China said in May it would open up the railway industry to private investment on an unprecedented scale, but private investors have been skeptical.

The need for funding is acute. China still needs billions more in rail investment to remove bottlenecks in cargo transport, ease overcrowding in passenger transport and develop commuter lines in its sprawling megacities.

($1 = 6.2286 yuan)

(Reporting by Sabrina Mao and Ben Blanchard; Additional reporting by Nick Edwards; Editing by Nick Macfie)

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U.S. Federal Reserve Chairman Ben Bernanke talks at the Economic Club of Indiana in Indianapolis October 1, 2012.

TOKYO | Sun Oct 14, 2012 3:03pm EDT

TOKYO (Reuters) - Federal Reserve Chairman Ben Bernanke on Sunday said it was far from clear that the U.S. central bank's highly stimulative monetary policy hurts emerging economies, defending a policy raising concerns in China, Russia and Brazil.

In a blunt call for certain emerging economies to allow their currencies to rise, he also said that foreign exchange intervention encouraged destabilizing inflows of foreign capital, but he did not specify China by name.

"The perceived advantages of undervaluation and the problem of unwanted capital inflows must be understood as a package - you can't have one without the other," Bernanke said in Tokyo.

Bernanke has often defended Fed actions against domestic critics, who argue the policy of keeping interest rates near zero while ramping up asset purchases hurts savers and risks future inflation.

But in the Tokyo speech, Bernanke addressed critics abroad, saying stronger growth in the United States bolsters global prospects as well, countering the likes of Brazil's Finance Minister Guido Mantega who has labeled the Fed's latest stimulus effort "selfish".

Critics say the Fed's unorthodox policies weaken the U.S. dollar and boost the currencies of developing countries, hurting their ability to export.

"It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies," Bernanke said at an event sponsored by the Bank of Japan and the International Monetary Fund. While the speech was delivered in private, the Fed provided a text to the media.

Restating a theme that he has addressed in the past, the Fed chief also said that if emerging economies stopped intervening and allowed their currencies to rise, this would help insulate their financial systems from external pressure.

"Under a flexible exchange-rate regime, a fully independent monetary policy, together with fiscal policy as needed, would be available to help counteract any adverse effects of currency appreciation on growth," Bernanke said.

The Fed last month announced a new program of open-ended bond purchases that will be continued until there is substantial improvement in labor market conditions, barring a sustained and unexpected spike in inflation.

To start off, the central bank will buy $40 billion in mortgage-backed securities per month.

"This policy not only helps strengthen the U.S. economic recovery, but by boosting U.S. spending and growth, it has the effect of helping support the global economy as well," he said.

FRIEND OR FOE

In 2010, when the Fed launched its second round of monetary policy stimulus, known as quantitative easing, many finance ministers around the world accused the United States of pursuing a beggar-thy-neighbor policy.

Criticism of the current round of bond purchases, known as QE3, has been more muted, but nonetheless evident.

Brazil's Mantega told the IMF's 188 member countries in Tokyo on Friday that the policy was "selfish" and harming emerging markets both by stealing their share of exports and by spurring destabilizing capital flows and currency movements.

"Advanced countries cannot count on exporting their way out of the crisis at the expense of emerging market economies," he told the IMF's governing panel. "Brazil, for one, will take whatever measures it deems necessary to avoid the detrimental effects of these spillovers."

In opening remarks at the conference that Bernanke addressed on Sunday, IMF chief Christine Lagarde said aggressive steps by the Fed, the European Central Bank and the Bank of Japan were "big policy actions in the right direction."

But she took note of the distress those policies were causing elsewhere and called for central banks to step-up their dialogue and cooperation.

"Accommodative monetary policies in many advanced economies are likely to entail large and volatile capital flows to emerging economies," she said. "This could ... lead to (economic) overheating, asset price bubbles and the buildup of financial imbalances."

Critics of the Fed's policy, both foreign and domestic, contend it is likely to do little to help the U.S. economy, while risking unwanted inflation.

Central banks "should consider draining excessive liquidity injected into the market and eliminate inflationary pressure in the long-term," People's Bank of China Governor Zhou Xiaochuan was quoted as saying by the official state news agency Xinhua, which cited the Journal of Public Research, a PBOC magazine.

Russia also is worried.

"Everything is getting done, from my perspective, blindly, without regard to the consequences it could have," Russian Finance Minister Anton Siluanov told reporters in Tokyo.

"NO PANACEA"

For his part, Bernanke stressed that inflation in the United States was projected to run below the Fed's 2 percent goal over the next few years.

And while he admitted that QE3 was "no panacea," he argued the open-ended nature of the third round of bond buying makes the program more flexible and should make people feel more certain that U.S. economic growth, which registered a paltry annual pace of 1.3 percent in the second quarter, will pick up.

"An easing in financial conditions and greater public confidence should help promote more rapid economic growth and faster job gains over coming quarters," Bernanke said.

In response to the financial crisis and deep recession of 2007-2009, the Fed cut overnight interest rates to near zero and bought some $2.3 trillion in mortgage and U.S. Treasury securities to try to stimulate spending and boost employment.

U.S. job growth remains lackluster, but the unemployment rate did fall to 7.8 percent in September, its lowest in nearly four years.

For Bernanke, what is good for the world's largest economy is ultimately good for the world as well.

"Assessments of the international impact of U.S. monetary policies should give appropriate weight to their beneficial effects on global growth and stability," he said.

(Writing by Pedro Nicolaci da Costa in Washington and Tim Ahmann in Tokyo; Additional reporting by Anna Yukhananov in Tokyo and Alister Bull in Washington: Editing by Theodore d'Afflisio)

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BEIJING | Sun Oct 14, 2012 10:37pm EDT

BEIJING (Reuters) - China's annual consumer price inflation ticked down to 1.9 percent in September from August's 2.0 percent, official data showed on Monday, leaving plenty of room for further policy easing to shore up growth.

The headline consumer inflation number matched the forecast of economists polled by Reuters.

Analysts say consumer inflation running well below the 4 percent annual target set by the government leaves room for policymakers do more to support the economy, which Q3 data due on October 18 is likely to confirm has suffered a seventh successively slower quarter of annual growth.

"This is little surprise in the inflation data. It's mainly caused by the drop in food costs," said Zhou Hao, an economist at ANZ Bank in Shanghai. "On monetary policy, we can only say that there is a little more room for further policy easing. Exports have showed signs of stabilisation, but the economy still needs some policy loosening."

The National Bureau of Statistics said China's producer price index in September dropped 3.6 percent from a year earlier, which was also in line with forecasts.

It marked the seventh straight month of producer price deflation, hurting corporate profits and underpinning expectations that consumer inflation will stay tame in the coming months.

The central bank is widely expected to ease policy further, having cut interest rates twice since June and trimmed banks' required reserves three times since November.

Easing consumer prices and outright falls in factory gate prices are signs that the world's second-biggest economy is struggling to escape the tug of a global slowdown that has set China on course for its weakest full year of growth since 1999.

Yi Gang, deputy governor of the People's Bank of China, said in a speech at last week's annual meeting of the International Monetary Fund that he expected inflation to be about 2.7 percent for the full year, with growth around 7.8 percent.

But he said signs of resurgence in property prices, which the government has fought for more than two years to rein in, posed a dilemma for policymakers.

Real estate directly affects about 40 different business sectors in China and the government-induced slowdown is widely regarded by analysts as putting an extra brake on the economy.

(Reporting by Lucy Hornby; Editing by Alex Richardson)

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Two men chat in front of a polka dot covered Sotheby's signage, part of an installation by Japanese artist Yayoi Kusama, at Sotheby's newly opened gallery in Hong Kong May 18, 2012.

HONG KONG | Tue Oct 9, 2012 12:12pm EDT

HONG KONG (Reuters) - Sotheby's sold HK$2 billion ($258 million) worth of Asian and Chinese artwork and luxury goods in its autumn sales in Hong Kong on Tuesday, a 37 percent decline from the same period last year as the market consolidates on a weaker China economy.

The tally was also some 18 percent less than the $316 million Sotheby's sold in its Hong Kong spring sales.

The modest showing comes as two major Chinese auction houses muscle into the Hong Kong market for the first time, posing a fresh competitive threat for Sotheby's and rival Christie's whose revenues in Hong Kong have soared on the Chinese art boom in recent years, but which may now be difficult to sustain.

Anchoring the five-day auction series was again Chinese imperial ceramics with a pair of yellow ground famille-rose double-gourd Qianlong vases fetching HK$107 million ($13.7 million) while a pair of turquoise-glazed "pomegranate" vases from the Qianlong period that sold for HK$23 million from the prominent J.M. Hu collection of Qing monochrome wares.

Faring less well, however, were pieces of lesser quality and minor flaws amid more discriminating bidding, with buyers indifferent to some porcelain pieces from even great old European collections such as the Meiyintang.

"It's still quite strong, but more selective," said John Berwald, a London dealer in the room. "It's not so crazy and I think it's better like this. It has just lost some of its exuberance," added Berwald who bid for several Qing wares.

China last year accounted for nearly 44 percent of global auction revenue, according to the French government's Conseil des Ventes art market report, and is a vital driver for the global art market now, making Sotheby's results a stress test of sorts with broader art sector repercussions.

But the market has been dogged by a proliferation of issues including a large-scale Chinese customs probe into tax evasion on art imports that has cooled recent sentiment, while high art taxes, complex regulations, widespread fakes and market manipulation remain tangible risks.

China's annual economic growth is expected to slow for a seventh straight quarter to the weakest level since the global financial crisis, with luxury demand having waned substantially.

"To cool down a bit is a good thing," said Zheng Hong, a mainland Chinese buyer at the ceramics sale. "Last year, it was too high ... China's economy is weakening, property and other sectors are not booming as before, so this is a natural result."

In Sotheby's contemporary Asian art sales, demand was again patchy, even for blue chip artists with 27 percent of lots going unsold, though master works like a 1992 painting by Liu Wei, "Revolutionary Family Series - Invitation to Dinner," made an artist record of $2.24 million, while Indonesian modern artist Lee Man Fong's "Fortune and Longevity" also fetched a record $4.4 million after competitive bidding.

Sotheby's fine Chinese paintings sale was strong with 97 percent of works sold by lot, including auction favourite, Chinese ink master Zhang Daqian's "Swiss Peaks; calligraphy in Xingshu", and Fu Baoshi's "Lady at the Pavilion" that each sold for HK$23 million.

New Hong Kong auction debutante China Guardian, now ranked among the world's top four auction firms is shaking up the landscape in older Chinese paintings, having sold some of the most expensive ink brush paintings in the world in recent years including Qi Baishi's "Eagle Standing on Pine, 1946" that fetched 425 million yuan ($57.2 million) in a Beijing sale.

At Guardian's debut Hong Kong auction on Sunday, a landscape series by Chinese ink painting master Qi Baishi, "Album of Mountains and Rivers, 1922" sold for HK$46 million, helping the Chinese house notch up an eye-catching HK$455 million sales total, nearly a quarter that of Sotheby's overall autumn tally.

Sotheby's, however, recently forged a breakthrough partnership with a Chinese art firm to enter the mainland Chinese market in Beijing for the first time, which could lead to fully fledged sales early next year and let them take on Guardian in their home base.

Chinese authorities have long refused to grant licenses to Sotheby's and Christie's for the lucrative mainland market, with Beijing topping even New York and London for art and collectibles revenues last year with sales of 6.4 billion euros ($8.30 billion) according to the Conseil des Ventes French government annual art market report.

(Reporting by James Pomfret, editing by Paul Casciato)

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1 of 7. Chinese writer Mo Yan gestures during a news conference in his hometown of Gaomi, Shandong province October 12, 2012. Chinese Nobel Literature Prize winner Mo Yan said on Friday that he hoped the jailed 2010 Nobel Peace Prize winner, Liu Xiaobo, can ''achieve freedom soon''.

Credit: Reuters/Jason Lee

GAOMI, China | Fri Oct 12, 2012 9:54am EDT

GAOMI, China (Reuters) - Chinese Nobel Literature Prize winner Mo Yan unexpectedly called for the release of jailed compatriot Liu Xiaobo, who won the Nobel Peace Prize two years ago, having come under fire from rights activists for not speaking up for him.

The author, a portly 57-year-old whose adopted pen name Mo Yan means "don't speak", said he had read some of Liu's literary criticisms in the 1980s, but that he had no understanding of Liu's work once it had turned towards politics.

"I hope he can achieve his freedom as soon as possible," Mo told reporters on Friday in his hometown of Gaomi in the northern province of Shandong, in bold remarks likely to embarrass Beijing which has lauded his victory and denigrated Liu's prize.

Liu should be able to research his "politics and social system", Mo said without elaborating

A number of dissidents and other writers have said Mo was unworthy of winning as he had shied away from commenting on Liu's plight. They have also denounced him for commemorating a speech by former paramount leader Mao Zedong.

But Mo, whose real name is Guan Moye, shot back at those criticisms.

"I believe that the people who have criticized me have not read my books," he said. "If they had read my books they would understand that my writings at that time took on a great deal of risk and were under pressure.

"Many of the people who have criticized me online are Communist Party members themselves. They also work within the system. And some have benefited tremendously within the system," he added.

"I am working in China," he said. "I am writing in a China under Communist Party leaders. But my works cannot be restricted by political parties."

Mo, who was once so destitute he ate tree bark and weeds to survive, is the first Chinese national to win the $1.2 million literature prize, awarded by the Swedish Academy.

He is best known in the West for "Red Sorghum", which portrays the hardships endured by farmers in the early years of communist rule and was made in a film directed by Zhang Yimou. His books also include "Big Breasts and Wide Hips" and "The Republic of Wine".

Prominent dissident Hu Jia, a close friend of Liu's, praised Mo's apparent sudden change of heart.

"What has happened in the last 24 hours has changed him. A Nobel prize, whether for peace or for literature, bestows on one a sense of wrong and right," Hu told Reuters.

China, long used to wringing its hands at perceived snubs or insults by the Nobel organizers, has worked its propaganda machine into overtime to hail Mo's win as a breakthrough for the entire nation, and recognition of its place as a great country.

Senior Communist Party official and China's propaganda chief Li Changchun congratulated Mo, state media reported, saying he hoped "Chinese writers will focus on the country's people in their writing and create more excellent works that will stand the test of history".

But the mention of Liu by Mo, a vice-chairman of the government-backed Chinese Writers' Association, could make things awkward for the Chinese authorities, who jailed Liu for 11 years in 2009 for inciting subversion of state power.

Chinese Foreign Ministry spokesman Hong Lei repeated government criticism of Liu's award, saying it amounted to "grave meddling in China's internal affairs and judicial sovereignty".

COUNTRY BOY

Mo's interest in literature dates back to his childhood in Gaomi. When he was six, he was an avid reader of Chinese classics, said Mo's elder brother Guan Moxin, 62. The youngest of four children, Mo loved telling stories.

But Mo's farmer father and brother, who are still living in the dusty, hardscrabble village in Gaomi where Mo grew up, had no idea they had a Nobel Literature Prize winner in their midst.

"What are the chances that a country boy without anything to his name could become a great author?" Guan Moxin told Reuters.

"He is just a man from this remote land, and this poor family; he is not from some big city."

Mo, already hugely popular in China, has become something of a celebrity in Gaomi. Thrilled residents set off fireworks the night Mo's award was announced. Reporters started streaming into the nondescript town. A hotel put up a digital banner congratulating Mo.

"I couldn't quite believe it. It took me awhile before I could believe it. It seemed so impossible. We were all (the village) celebrating, lighting firecrackers," Guan Moxin said.

Mo's books reflect the tumult of modern China. He has credited his early suffering for inspiring his works, which tackle corruption, decadence in Chinese society and rural life.

"When he was little at school he was very naughty," Mo's 90-year-old father, Guan Yifan, told Reuters. "But afterwards he had to stop and do farm work. At the time we had to eat wild vegetables, and he had to go and dig wild vegetables."

(Additional reporting by Sui-Lee Wee, Terril Yue Jones and Ben Blanchard in BEIJING; Editing by Nick Macfie)

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1 of 7. Chinese writer Mo Yan gestures during a news conference in his hometown of Gaomi, Shandong province October 12, 2012. Chinese Nobel Literature Prize winner Mo Yan said on Friday that he hoped the jailed 2010 Nobel Peace Prize winner, Liu Xiaobo, can ''achieve freedom soon''.

GAOMI, China | Fri Oct 12, 2012 9:54am EDT

GAOMI, China (Reuters) - Chinese Nobel Literature Prize winner Mo Yan unexpectedly called for the release of jailed compatriot Liu Xiaobo, who won the Nobel Peace Prize two years ago, having come under fire from rights activists for not speaking up for him.

The author, a portly 57-year-old whose adopted pen name Mo Yan means "don't speak", said he had read some of Liu's literary criticisms in the 1980s, but that he had no understanding of Liu's work once it had turned towards politics.

"I hope he can achieve his freedom as soon as possible," Mo told reporters on Friday in his hometown of Gaomi in the northern province of Shandong, in bold remarks likely to embarrass Beijing which has lauded his victory and denigrated Liu's prize.

Liu should be able to research his "politics and social system", Mo said without elaborating

A number of dissidents and other writers have said Mo was unworthy of winning as he had shied away from commenting on Liu's plight. They have also denounced him for commemorating a speech by former paramount leader Mao Zedong.

But Mo, whose real name is Guan Moye, shot back at those criticisms.

"I believe that the people who have criticized me have not read my books," he said. "If they had read my books they would understand that my writings at that time took on a great deal of risk and were under pressure.

"Many of the people who have criticized me online are Communist Party members themselves. They also work within the system. And some have benefited tremendously within the system," he added.

"I am working in China," he said. "I am writing in a China under Communist Party leaders. But my works cannot be restricted by political parties."

Mo, who was once so destitute he ate tree bark and weeds to survive, is the first Chinese national to win the $1.2 million literature prize, awarded by the Swedish Academy.

He is best known in the West for "Red Sorghum", which portrays the hardships endured by farmers in the early years of communist rule and was made in a film directed by Zhang Yimou. His books also include "Big Breasts and Wide Hips" and "The Republic of Wine".

Prominent dissident Hu Jia, a close friend of Liu's, praised Mo's apparent sudden change of heart.

"What has happened in the last 24 hours has changed him. A Nobel prize, whether for peace or for literature, bestows on one a sense of wrong and right," Hu told Reuters.

China, long used to wringing its hands at perceived snubs or insults by the Nobel organizers, has worked its propaganda machine into overtime to hail Mo's win as a breakthrough for the entire nation, and recognition of its place as a great country.

Senior Communist Party official and China's propaganda chief Li Changchun congratulated Mo, state media reported, saying he hoped "Chinese writers will focus on the country's people in their writing and create more excellent works that will stand the test of history".

But the mention of Liu by Mo, a vice-chairman of the government-backed Chinese Writers' Association, could make things awkward for the Chinese authorities, who jailed Liu for 11 years in 2009 for inciting subversion of state power.

Chinese Foreign Ministry spokesman Hong Lei repeated government criticism of Liu's award, saying it amounted to "grave meddling in China's internal affairs and judicial sovereignty".

COUNTRY BOY

Mo's interest in literature dates back to his childhood in Gaomi. When he was six, he was an avid reader of Chinese classics, said Mo's elder brother Guan Moxin, 62. The youngest of four children, Mo loved telling stories.

But Mo's farmer father and brother, who are still living in the dusty, hardscrabble village in Gaomi where Mo grew up, had no idea they had a Nobel Literature Prize winner in their midst.

"What are the chances that a country boy without anything to his name could become a great author?" Guan Moxin told Reuters.

"He is just a man from this remote land, and this poor family; he is not from some big city."

Mo, already hugely popular in China, has become something of a celebrity in Gaomi. Thrilled residents set off fireworks the night Mo's award was announced. Reporters started streaming into the nondescript town. A hotel put up a digital banner congratulating Mo.

"I couldn't quite believe it. It took me awhile before I could believe it. It seemed so impossible. We were all (the village) celebrating, lighting firecrackers," Guan Moxin said.

Mo's books reflect the tumult of modern China. He has credited his early suffering for inspiring his works, which tackle corruption, decadence in Chinese society and rural life.

"When he was little at school he was very naughty," Mo's 90-year-old father, Guan Yifan, told Reuters. "But afterwards he had to stop and do farm work. At the time we had to eat wild vegetables, and he had to go and dig wild vegetables."

(Additional reporting by Sui-Lee Wee, Terril Yue Jones and Ben Blanchard in BEIJING; Editing by Nick Macfie)

View the original article here

HONG KONG | Sun Oct 7, 2012 5:56am EDT

HONG KONG (Reuters) - A leading China auctioneer holds a debut sale in Hong Kong on Sunday, lured by the city's international buyers, low tax regime and stable regulatory framework in a trend that could bring more competition for global firms.

China Guardian's sale of Chinese art and classical furniture in the former British colony follows its rise as the world's third largest auction house on the crest of China's art market boom, with sales of $1.77 billion last year.

"We want to win over more overseas market and buyers," said Wang Yannan, the president of China Guardian and the well-connected daughter of former Communist Party leader Zhao Ziyang.

The sale, though relatively small, is seen as a symbolic foray by China's top auction firm into the turf of goliaths Christie's and Sotheby's who have long dominated international auction hubs like Hong Kong, New York and London.

China Guardian's key rival, Poly International is also planning an inaugural Hong Kong sale in late November, while A&F Auction and Beijing Rongbao Auction aim to enter Hong Kong in one or two years, according to art market reports.

China's wave of millionaire buyers and investors have helped propel Hong Kong into the world's fourth largest art auction hub, with nearly 7 percent of global art auction revenue in 2011, according to French art database Artprice.com.

"It's great for competition," Francois Curiel, Christie's Asia president, told Reuters. "Whenever I see more auction houses coming into the market, the pie became larger."

Some, however, felt the field was getting crowded.

"It's like separating a bowl of rice into two," said Tim Lin of the Lin & Lin Gallery in Beijing and Taipei, referring to increased competition for Hong Kong's multi-billion dollar art auction market.

"How long will they last? It's everyone's guess."

Art dealers and experts say the Chinese expansion into Hong Kong is also being driven by a tightening regulatory environment in China, that has grappled with widespread art crimes including tax evasion, a proliferation of fakes, money laundering and manipulative bidding practices.

TAX PROBE BLOW TO CHINA ART MARKET

In April, a large-scale Chinese customs probe into tax evasion on art imports delivered a blow to the art market, with at least six prominent art dealers, collectors and artists being investigated, according to art dealers and Chinese media reports.

"The tax probe had a huge impact on the spring auctions in China," said the owner of an art gallery in Taipei who is a frequent buyer in the Chinese art market but who declined to be identified because of the sensitivity of the matter.

"Everyone finds himself in danger so the market is extremely cold."

According to market research firm ArtTactic, total auction sales this spring from the biggest four auction houses in the China market dropped to $1.5 billion, 32 percent lower than the autumn season in 2011 and 43 percent less than a year before.

"The tax investigation has cast a shadow on the Chinese art market," said Lin from the art gallery.

"It has a psychological effect on buyers and sellers in China ... The chain reaction is going to last for a while."

China Guardian's 2012 auction sales tally dropped 46 percent to 2.14 billion yuan ($340 million) this spring season, from 3.98 billion yuan in the 2011 autumn auction, but Wang attributed this largely to a stuttering Chinese economy.

"It also has something to do with the slowdown in the economy, but it has nothing to do with the tax," Wang of China Guardian, told Reuters.

Art market experts, however, say Hong Kong's laissez-faire economy, solid regulatary framework and zero-tariffs on art imports, make it a secure and stable alternative for China's auction firms.

Although Beijing has lowered its import duties on arts to 6 percent from 12 percent since the beginning of 2012, another 17 percent of value-added tax still poses a huge burden to Chinese auction houses.

"Hong Kong is a more liberal tax region," said Simon Young, a law professor at the University of Hong Kong.

"One would have wondered why they didn't move sooner."

(The story corrects name in paragraph 16)

(Editing by James Pomfret and Sanjeev Miglani)

View the original article here

HONG KONG | Sun Oct 7, 2012 5:56am EDT

HONG KONG (Reuters) - A leading China auctioneer holds a debut sale in Hong Kong on Sunday, lured by the city's international buyers, low tax regime and stable regulatory framework in a trend that could bring more competition for global firms.

China Guardian's sale of Chinese art and classical furniture in the former British colony follows its rise as the world's third largest auction house on the crest of China's art market boom, with sales of $1.77 billion last year.

"We want to win over more overseas market and buyers," said Wang Yannan, the president of China Guardian and the well-connected daughter of former Communist Party leader Zhao Ziyang.

The sale, though relatively small, is seen as a symbolic foray by China's top auction firm into the turf of goliaths Christie's and Sotheby's who have long dominated international auction hubs like Hong Kong, New York and London.

China Guardian's key rival, Poly International is also planning an inaugural Hong Kong sale in late November, while A&F Auction and Beijing Rongbao Auction aim to enter Hong Kong in one or two years, according to art market reports.

China's wave of millionaire buyers and investors have helped propel Hong Kong into the world's fourth largest art auction hub, with nearly 7 percent of global art auction revenue in 2011, according to French art database Artprice.com.

"It's great for competition," Francois Curiel, Christie's Asia president, told Reuters. "Whenever I see more auction houses coming into the market, the pie became larger."

Some, however, felt the field was getting crowded.

"It's like separating a bowl of rice into two," said Tim Lin of the Lin & Lin Gallery in Beijing and Taipei, referring to increased competition for Hong Kong's multi-billion dollar art auction market.

"How long will they last? It's everyone's guess."

Art dealers and experts say the Chinese expansion into Hong Kong is also being driven by a tightening regulatory environment in China, that has grappled with widespread art crimes including tax evasion, a proliferation of fakes, money laundering and manipulative bidding practices.

TAX PROBE BLOW TO CHINA ART MARKET

In April, a large-scale Chinese customs probe into tax evasion on art imports delivered a blow to the art market, with at least six prominent art dealers, collectors and artists being investigated, according to art dealers and Chinese media reports.

"The tax probe had a huge impact on the spring auctions in China," said the owner of an art gallery in Taipei who is a frequent buyer in the Chinese art market but who declined to be identified because of the sensitivity of the matter.

"Everyone finds himself in danger so the market is extremely cold."

According to market research firm ArtTactic, total auction sales this spring from the biggest four auction houses in the China market dropped to $1.5 billion, 32 percent lower than the autumn season in 2011 and 43 percent less than a year before.

"The tax investigation has cast a shadow on the Chinese art market," said Lin from the art gallery.

"It has a psychological effect on buyers and sellers in China ... The chain reaction is going to last for a while."

China Guardian's 2012 auction sales tally dropped 46 percent to 2.14 billion yuan ($340 million) this spring season, from 3.98 billion yuan in the 2011 autumn auction, but Wang attributed this largely to a stuttering Chinese economy.

"It also has something to do with the slowdown in the economy, but it has nothing to do with the tax," Wang of China Guardian, told Reuters.

Art market experts, however, say Hong Kong's laissez-faire economy, solid regulatary framework and zero-tariffs on art imports, make it a secure and stable alternative for China's auction firms.

Although Beijing has lowered its import duties on arts to 6 percent from 12 percent since the beginning of 2012, another 17 percent of value-added tax still poses a huge burden to Chinese auction houses.

"Hong Kong is a more liberal tax region," said Simon Young, a law professor at the University of Hong Kong.

"One would have wondered why they didn't move sooner."

(The story corrects name in paragraph 16)

(Editing by James Pomfret and Sanjeev Miglani)

View the original article here

A customer looks at products on sale at a supermarket in central Beijing June 12, 2012.

BEIJING | Sun Oct 7, 2012 9:00am EDT

BEIJING (Reuters) - China's retail sales growth slowed during the Golden Week holiday, local media said on Sunday, providing a snapshot of increasingly important sources of demand in the world's second-largest economy.

Overall retail sales revenue grew 15 percent to hit 800.6 billion yuan ($127.4 billion) during the National Day holiday, which coincided with the Mid-Autumn Festival to provide a rare eight-day break, China's state television China Central Television said.

That marked a cooldown from the 17.5 percent growth last year during a seven-day holiday. No further details were given,

The Golden Week holiday, when millions of people take time out to travel and spend more than usual, brings huge discounts and promotions as retailers battle for market share.

Economists are watching China's 1.3 billion consumers closely during the National Day Golden week holiday, running from Sept 30 to Oct 7, amid escalating worries about China's hard landing. ($1 = 6.2849 Chinese yuan)

(Reporting by Judy Hua and Koh Gui Qing; editing by Ron Askew)

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Employees make circuit boards at an electronic component factory in Hefei, Anhui province May 2, 2012.

BEIJING | Sat Sep 29, 2012 12:34am EDT

BEIJING (Reuters) - China's economy has almost certainly suffered a seventh straight quarter of slowing growth, with a new private sector survey of factory managers revealing a near year-long decline in business activity and a fresh fall in export orders in September.

The HSBC China Manufacturing purchasing managers index (PMI) showed overall factory activity shrank for an 11th consecutive month in September, despite the 47.9 final index level being slightly ahead of a preliminary, or flash, estimate of 47.8 and the August reading of 47.6.

It extends the longest run of readings below 50 - which separates expansion from contraction - in the survey's 8-year history, with the need for more pro-growth government policies signaled by a fall in the output sub-index to its lowest since March and a slide in export orders to a 42-month trough.

"The sharper contraction of new export orders and the lingering pressures on job markets mean that Beijing should step up easing to support growth and employment," Qu Hongbin, chief China economist for survey sponsor HSBC, said in a statement.

Two cuts to interest rates, the easing of bank reserve requirements that freed about 1.2 trillion yuan ($190 billion) for lending and the approval of infrastructure projects worth more than $150 billion have so far failed to arrest the decline in China's overall economic growth.

"Fiscal measures should play a more important role in the coming months," Qu said.

Analysts expect 2012 to be China's weakest full year of growth since 1999 at just 7.7 percent, according a Reuters poll which forecasts annual growth of 7.4 percent in Q3, down from Q2's 7.6 percent.

The slide in the PMI's export orders sub-index to a three-and-a-half-year low of 44.9 is a crucial gauge for the accuracy of that call.

EXPORT SLIDE

Exports generated 31 percent of gross domestic product in 2011, according to World Bank data, and support an estimated 200 million jobs - around a quarter of the country's workforce.

Export growth this year is averaging around 7.8 percent versus 2011. August's growth slumped to 2.7 percent compared with a year ago and the Commerce Ministry sees a risk that things get worse in the months ahead - jeopardizing the official 10 percent target for expanding trade this year.

An adviser to China's central bank conceded on Thursday that Beijing policymakers had underestimated the severity of this year's global economic slowdown and said that further cuts to interest rates or reserve requirements would hinge on any new deterioration in the external environment.

China's exports have been hit hard by the festering sovereign debt crisis in the European Union, where a slide back towards recession has sapped demand in the single biggest foreign market for Chinese factory goods.

Analysts say the destocking it has triggered has dragged down industrial production growth and will ultimately show up when Q3 economic data is published in mid-October.

"We expect the data to show that demand remained weak, destocking continued and the recovery has yet to happen," said Tao Wang, China economist at UBS in Hong Kong.

"We forecast that industrial production growth slowed to about 8.6 percent year-on-year in September, while Q3 GDP growth slowed to 7.3 percent year-on-year," she wrote in a client note.

Tao believes the deterioration is so entrenched that GDP growth will slow to an annual rate of 7.0 percent in Q4 before rebounding through the course of 2013.

The consensus view is that Q3 is the nadir of this cycle and the HSBC PMI offers some sign that this may be the case, despite the index having consistently pointed to a more bearish economic backdrop this year than China's official PMI.

The official PMI is set to be released by the National Bureau of Statistics (NBS) on October 1 and analysts polled by Reuters expect it to have rebounded to 49.8 from August's 49.2.

A difference in samples and survey methodology largely explain the discrepancy. The NBS captures data from China's biggest firms - the dominant state-owned enterprises - while Markit, the UK-based data provider that compiles the survey sponsored by HSBC, tracks mainly smaller private sector firms.

SOME SIGNS OF STABILISATION

Markit said its survey detected some signs of stabilization in manufacturing activity in September as the rate of deterioration in the sector eased.

Backlogs of work remained steady for 77 percent of respondents, while only 13 percent reported a decrease.

And it said the rate of job cuts reported was relatively modest, with nearly 85 percent of survey respondents indicating no change in employment levels on the previous month.

Unemployment is a vital indicator for China's ruling Communist Party, which is acutely sensitive to anything that could trigger discontent in the run-up to its party congress - expected later this autumn - when a new generation of leaders will be named ahead of a once-a-decade handover of power.

The loss of millions of Chinese factory jobs in a matter of months in late 2008 as world trade ground to a halt during the depths of the global financial crisis triggered a massive 4 trillion yuan ($635 billion) stimulus package from Beijing.

The lack of job cuts so far and persistent signs of tightness in the labor market are cited by analysts as one reason for the government's reluctance to open the stimulus taps this time around, along with attendant inflationary and speculative risks that it could unleash.

Credit ratings agency Fitch said on Friday it had downgraded its 2012 growth forecast for China to 7.8 percent, from 8 percent previously, on a combination of slowing exports and efforts to squeeze speculative risks from the economy.

But it said it did not expect Beijing to deploy any more than marginal monetary and fiscal tools to boost growth, unless there was a sudden deterioration in the labor market.

"The resilience of the labor market seen in current data suggests growth of 7.5-8.0 percent may be in line with the economy's potential rate," Fitch said.

(Editing by Alex Richardson)

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