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China must lower trade barriers and do more to protect intellectual-property rights or risk losing foreign investment, European Union Trade Commissioner Catherine Ashton said.

“With global competition for the best investment rising, governments should be seeking to attract not restrict investment,” Ashton said today at an investment fair in Xiamen, China. “Barriers in China not only cost European business, but also deprive the Chinese economy of investment inflows and significant tax revenues.”

A number of what Ashton called “warning signs” have emerged, signaling that China and EU are growing skeptical about investing in each other. EU investment in the world’s fastest- growing major economy dropped to 4.5 billion euros ($6.5 billion) last year from 7.1 billion euros in 2007, while Chinese investment in Europe fell by half a billion euros.

While part of the decline stems from the impact of the global financial crisis on capital markets, “this is not the whole story,” Ashton said. “Foreign direct investment should not be curtailed by equity caps, unnecessary joint-venture obligations or restrictions in sectors considered strategic.”

EU-China ties have soured in recent years amid growing European criticism of China’s human-rights record and its failure to crack down on counterfeiting, plus a rash of trade spats. While China is the 27-nation EU’s second-largest trading partner, the Asian nation is attracting “much less” foreign direct investment from Europe than other emerging economies such as India, Brazil and Russia, Ashton said paydayloans.

Ownership Caps

China is backsliding on reforms to open its economy to foreign business, which are impeded by a lack of legal and political transparency and violations of intellectual-property rights, the EU Chamber of Commerce in China said last week. Forced joint ventures and ownership caps are making China less appealing as an investment destination for many European companies, the chamber said.

Europe’s carmakers, for instance, can’t establish their own manufacturing facilities in China and must operate via 50-50 joint ventures, it said. And local governments are required to buy Chinese products for projects under China’s 4 trillion-yuan ($585 billion) stimulus plan.

“Protection of intellectual property, especially patents, is also crucial if more companies are to bring their ideas and their technology to China,” Ashton said. “Without the promise of protection for their innovations, European companies are sometimes hesitant to invest here. It is therefore very encouraging that the Chinese leadership sees the necessity of a well-enforced IPR system as a stepping-stone to future economic development.”

Chinese Premier Wen Jiabao said on June 25 that the nation didn’t discriminate against foreign enterprises or products.

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Japan’s new top currency official said the government would consider stepping into the foreign- exchange market only if abrupt yen moves hurt the economy.

“We’ll make judgments based on whether excessive movements in the currency market will adversely affect the economy,” Rintaro Tamaki, who this week replaced Naoyuki Shinohara as vice finance minister for international affairs, said in a group interview in Tokyo today.

The yen gained against all 16 of the world’s major currencies in the past year, and has surged 3 percent against the dollar this month, making exporters’ products less competitive while lowering import costs. Japan last stepped into the foreign-exchange market to sell yen in 2004.

“Japanese authorities may be saying that excessive yen strength is undesirable, given the present level of the yen,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency trader. “The speed of such a move would likely be a problem for them.”

Tamaki affirmed the view held by the Group of Seven nations that excessive currency moves are undesirable, while adding that the G-7’s stance is “based on the view that the market decides foreign exchange rates.”

The yen rose to 93.64 per dollar at 5:33 p.m. in Tokyo from 93.93 late yesterday in New York.

Never Say Never

“I won’t comment on whether we’ll intervene in the market or not, but if you were to ask me if we’d never intervene, the answer would be no,” Tamaki said.

Tamaki, 55, said Japan will keep supporting the dollar’s status as the world’s reserve currency and there’s no plan to change a policy of investing mainly in U.S. Treasuries, echoing remarks made by Yasutake Tango, the new vice finance minister, in an interview last week cash advance.

Their stance contrasts with that of Masaharu Nakagawa, the shadow finance minister in the opposition Democratic Party of Japan, which leads in polls ahead of elections next month. He said in an interview last week that the nation should consider shifting its foreign reserves away from the dollar.

Japanese investors are the biggest foreign holders of Treasuries after China with $677.2 billion of the securities in May. Japan’s total foreign reserves total $1.02 trillion.

“Japan’s foreign reserves are for the stabilization of the foreign exchange market,” Tamaki said. “Liquidity and safety is the most important factor when we manage the foreign reserves.”

Record Sales

Japan hasn’t entered into the foreign-exchange market since the central bank, at the request of the Finance Ministry, sold a record 14.8 trillion yen ($158 billion) in the first quarter of 2004 in an effort to weaken the currency.

The G-7 said in April that “excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.”

Tamaki, who served under Shinohara as the head of the ministry’s international affairs department, said the global economy remains in a severe state.

Tamaki worked at the Japanese embassy in Washington from 2002 to 2005. He’s a certified wine adviser and likes classical music and opera.

Some lawmakers at the opposition DPJ grilled Tamaki in parliament on how he handled former Finance Minister Shoichi Nakagawa’s misbehavior at a G-7 press conference in Italy in February. Nakagawa resigned after being criticized for appearing drowsy and slurring his speech at a news conference following the meeting.

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South Korea’s economy will shrink less than previously expected this year and rebound at a faster pace in 2010 as government spending and lower borrowing costs drive a recovery, the International Monetary Fund said today.

The central bank should keep its interest rate unchanged at a record-low 2 percent following the 3.25 percentage points in reductions since October last year and the government should maintain fiscal stimulus through 2010, Subir Lall, division chief for the IMF’s Asia-Pacific department, said in Gwacheon.

The fund forecast gross domestic product will contract 3 percent in 2009 before expanding 2.5 percent next year, compared with its April estimates of a 4 percent decline and 1.5 percent growth respectively. The Kospi stock index climbed 28 percent this year as government relief measures helped the economy avoid following Taiwan, Japan, and Singapore into recession.

“The authorities’ rapid and comprehensive fiscal, monetary and financial policy response helped limit the depth of the downturn in the wake of the global financial turmoil,” the IMF said in a statement today following a two-week review of Asia’s fourth-biggest economy.

“The outlook is, however, subject to substantial uncertainty although overall risks are now titled slightly to the upside cash loans in 1 hour.”

All 15 economists surveyed by Bloomberg News forecast the central bank will leave its key rate unchanged for a fifth month on July 9. The government has pledged more than 67 trillion won ($53 billion) in stimulus measures and also set up funds to replenish Korean lenders’ capital and buy distressed assets.

Exports Rebound

Exports, which are equivalent to about half of GDP, climbed 17 percent in June from the previous month to the highest level since October and factory production increased for a fifth month in May from April, reports last week showed.

The government last month raised its GDP forecasts, saying fiscal stimulus and lower rates are stoking consumer confidence. The economy will shrink 1.5 percent this year and grow 4 percent in 2010, the finance ministry said in its semiannual outlook.

South Korea avoided a technical recession in the first quarter, with GDP edging up 0.1 percent from the previous three months, when it shrank 5.1 percent.

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Indonesia’s economic growth may accelerate to 7 percent starting in 2011, providing a case for its inclusion in the so-called BRIC economies along with Brazil, Russia, India and China, Morgan Stanley said.

Political stability and buoyant domestic demand will help boost expansion in the $433 billion economy, Morgan Stanley said in a report dated June 12 that compares Indonesia with India. President Susilo Bambang Yudhoyono is expected to win the July 8 elections, polls show.

“What this means for the investor community is that they need to look at this asset class more seriously,” Chetan Ahya, a Singapore-based economist at Morgan Stanley, said in an interview today. Political stability, improved government finances and “a natural advantage from demography and commodity resources are likely to unleash Indonesia’s growth potential,” he said.

Southeast Asia’s largest economy may grow 60 percent in the next five years to $800 billion due to a stable administration, lower capital costs and a government plan to spend as much as $34 billion to build roads, ports and power plants by 2017, Morgan Stanley said. Leaders of the nations known as BRIC will meet this week in the Russian city of Yekaterinburg.

Indonesia may expand as much as 4 percent this year, making it the fastest-growing major economy in Southeast Asia, according to the International Monetary Fund. Morgan Stanley expects 3.7 percent growth this year.

Economic growth of 7 percent starting in 2011 is “possible and achievable,” Finance Minister Sri Mulyani Indrawati told reporters in Jakarta today.

Presidential Election

Yudhoyono may win an overall majority in next month’s election, avoiding the need for a second round of voting in September, polls show. Yudhoyono’s Democrat party won more than 25 percent of seats in parliamentary elections this year, becoming the only party to be able to nominate a presidential candidate without seeking outside support.

The 2009 parliamentary election results “suggest continued stability in this democratic political framework and is a critical factor in unleashing Indonesia’s growth potential,” Ahya said car insurance. “Coincidently, the India story has also recently been given a fillip from the strong political mandate of the Congress-led coalition in the 2009 general elections.”

Indian Prime Minister Manmohan Singh’s Congress party won the most seats in parliament since 1991 in results announced last month.

Higher Education

Indonesia still lags behind the BRIC economies in the quality of higher education, which is “crucial in moving the economy up the value-added ladder,” Ahya said in the Morgan Stanley report.

“We still have a problem with the supply side, especially infrastructure and human capital,” said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. The nation may not be able to exceed 7 percent economic growth starting 2011 until the investment and education infrastructure is upgraded, Damayanti said.

Leaders of the BRIC nations may use their first summit on June 16 to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more influence over policies.

Developing countries say their votes in the IMF, founded at the end of World War II to promote global trade, don’t reflect the shift in economic power. Brazil, the world’s 10th-largest economy, has 1.38 percent of the IMF board’s votes, less than 2.09 percent for Belgium, an economy one-third the size.

The BRICs may overtake the combined $30.2 trillion gross domestic product of the Group of Seven nations by 2027, Jim O’Neill, the London-based Goldman Sachs Group Inc. chief economist who coined the term for the four countries in a 2001 report, has said. That is a decade sooner than he had forecast earlier.

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The number of Americans signing contracts to purchase previously owned homes probably rose in April for the fourth time in five months as lower prices attracted buyers, economists said before a report today.

The projected 0.5 percent increase would follow a 3.2 percent gain in March, according to the median estimate of 32 economists surveyed by Bloomberg News.

Foreclosure-driven declines in values may put more houses within reach of first-time buyers, helping to stabilize the market and stemming the biggest drag on economic growth. Still, with mortgage rates no longer dropping and unemployment climbing, the real-estate industry may flounder near recent lows for months before a sustained recovery takes hold.

“The housing market is grinding out a bottom,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. Even so, “despite strong affordability, there’s still no real improvement. Consumers are holding back because they fear they’ll lose their jobs.”

The report from the National Association of Realtors is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a 2 percent drop to a 4 percent gain.

Pending resales are considered a leading indicator because they track contract signings. NAR’s existing-home sales report tallies closings, which typically occur a month or two later. The group, whose pending data goes back to January 2001, started publishing the index in March 2005.

Slump Easing

The agents’ association reported last week that home resales increased 2.9 percent in April, buttressing the case that the industry’s slump, now in its fourth year, will end in 2009. The median price dropped 15 percent from a year earlier, the second-biggest decline on record.

Sales gains have been most pronounced in areas such as California and Florida where foreclosures have surged, indicating the drop in prices is stimulating demand.

The Realtors group’s affordability index, which takes into account home values, household incomes and mortgage rates, reached a record high of 176.9 in January. The index was at 166 cash advance loans.7 in March, and readings greater than 100 indicate a family earning the median income can afford a median-priced home at current borrowing costs.

The market is nearing “equilibrium” as inventory shrinks and homes become more affordable, billionaire property investor Sam Zell said last week in a Bloomberg Television interview.

Builder Shares

“We never would have gotten into the position we’re in today if everybody was focusing on where they wanted to live and what was a good value for living as opposed to what they could buy it and flip it for,” said Zell, chairman of Chicago-based Equity Residential, the largest publicly traded apartment company in the U.S.

Builder shares have rebounded in tandem with other stocks on growing speculation the housing market may be steadying. The Standard & Poor’s Supercomposite Homebuilding Index is up 27 percent over the last three months compared with a 28 percent increase for the S&P 500.

Still, an improving economic outlook has pushed up borrowing costs, raising concern the real-estate industry will not rebound.

The average rate on a 30-year fixed mortgage climbed to 4.91 percent last week, according to figures from Freddie Mac. The rate had reached a record-low 4.78 percent in April.

“Home-purchase activity could wallow at moribund levels,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. The emerging “green shoots” of recovery may be stamped out, “forcing us to yet again downgrade our outlook for the economy,” he wrote in a May 29 note to clients.

Job Losses

A weak job market is another reason economists say any rebound in housing would be slow to develop. The unemployment rate, which reached a 25-year high of 8.9 percent in April, may climb to almost 10 percent by the end of 2009, according to the median forecast of economists surveyed by Bloomberg last month.

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Consumer spending rose in February, rebounding for the second month in row after falling for six straight months, according to government figures released Friday.

The Commerce Department said spending by individuals rose 0.2%, after increasing a revised 1.0% in January. February’s results were in line with a forecast from Economists surveyed by Briefing.com.

After adjusting for inflation, however, real personal spending declined 0.2%. In January, it rose 0.7%.

"It appears the majority of the declines in consumption for this cycle are behind us," Adam York, an economist at Wachovia Economics Group, wrote in a client note.

February’s spending uptick came as the Commerce Department reported personal income fell 0.2%. Income rose 0.4% in January, but last month’s decline marks a return to the recent downward trend as unemployment has risen.

The report also showed that personal savings declined $27.4 billion in February to $450.7 billion. The personal savings rate, expressed as a percentage of disposable personal income, fell to 4.2% from 4.4% in January.

"The personal saving rate remains near recent highs, as consumers attempt to rebuild their damaged balance sheets," said York instant cash advance. "However, weaker income growth is offsetting slower spending."

Consumer spending makes up nearly two thirds of the nation’s gross domestic product, which is the broadest measure of economic activity.

The government said Thursday that GDP fell at an annual rate of 6.3% during the final three months of 2008, with spending by consumers falling at an annual rate of 4.3%.

If the consumer spending figures reported Friday carry over into March’s report, GDP could see a 1.2% annualized gain during the first three months of 2009, according to Ian Shepherdson, chief U.S. economist at High Frequency Economics.

However, the outlook for consumer spending and second quarter GDP is less optimistic.

"We look for a renewed decline in the second quarter on the back of falling incomes and the lagged effect of the massive destruction of housing and other wealth," Shepherdson wrote in a research note. "The first quarter is a correction, not a recovery." 

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A New York state judge said Friday he will decide within a week whether Bank of America Corp. has to turn over a list of performance bonuses given to the 200 highest-paid employees of Merrill Lynch & Co.

State Supreme Court Justice Bernard Fried didn’t indicate how he would rule, but during the court hearing, he questioned Bank of America’s claim that salary information was a trade secret and suggested he was unlikely to order confidentiality merely to save Merrill Lynch workers from a public shaming payday loans for bad credit.

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One of the European Union’s biggest priorities in the economic crisis is to fight what appears to be a growing trend toward protectionism, the bloc’s head of economic and monetary affairs said on Monday.

“We are living through an unprecedented crisis that is hitting every country and region around the world. Growth is contracting and unemployment is rising everywhere,” Commissioner Joaquin Almunia said in a speech in Prague cash advance payday loans.

“One of our highest priorities is to resist the rise in protectionism, which is showing warning signs of gaining ground.”

(Reporting by Martin Dokoupil; Editing by Michael Winfrey)

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Bank stocks took a nosedive Friday, as investors worried about dour economic data and questions about how soon aid for the financial sector will arrive.

Among the biggest losers were two institutions that have been at the center of the bailout controversy, Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500). Shares in Citi slid nearly 9% and Bank of America slipped about 3%.

Other big decliners included Cincinnati-based Fifth Third (FITB, Fortune 500), which dropped more than 20% after an analyst downgraded the stock.

The selloff comes on a day dominated by the news that the economy contracted at a 3.8% annualized rate in the fourth quarter. That’s the steepest quarterly decline in economic activity in more than two decades.

Meanwhile, announced layoffs topped 100,000 for the week.

The entire market fell Friday, leaving the S&P 500 with its biggest ever January loss. But banks in particular have been hard hit. Citigroup has lost nearly half its value this year, for example. And the KBW Bank Index has plunged more than 35%.

Adding to the gloom for banks, a news report indicated that progress may have slowed in the government’s efforts to devise a plan to remove toxic assets from bank balance sheets. Citing unnamed sources, CNBC said key details of the plans have yet to be worked out.

Friday’s slide comes two days after bank stocks staged a substantial rally on word that the Obama administration was making headway on a multifaceted effort to ease strains in the banking industry.

The plan is expected to include a government-backed so-called aggregator bank that would take over bad loans and securities from private lenders, and an insurance plan that would reduce the risk of substantial losses on other bank holdings.

Investors have been hopeful that a comprehensive federal response to the banking crisis could lure private capital back into the markets after a year where several major global stock indexes plunged more than 40% and numerous financial institutions collapsed my credit score.

Treasury Secretary Tim Geithner has said the administration is working on a program that may be ready for public consumption in coming weeks.

But observers say the administration will likely need to go to Congress for more money to fund any rescue plan — an overture that isn’t likely to be popular with the public or Republicans in Congress, who unanimously opposed the fiscal stimulus plan that passed the House this week.

Geithner told Congress earlier this month that he hadn’t reached the conclusion that the administration will need more money than the $350 billion available under the Troubled Asset Relief Program, but he stressed that this could change were the economy to worsen.

Obama spokesman Robert Gibbs told reporters at a White House briefing Friday afternoon that officials are still discussing the shape of any financial stability package. He said that for now, the administration is more focused on making sure that spending under the second half of the TARP is more precisely focused and better managed than the first half.

The Bush administration drew scathing criticism in Congress for its failure to insist that banks getting money use it for lending, and for generally failing to give taxpayers a good handle on how the money was being spent.

"I know there have been different reports about different ideas and different money figures that have floated around," Gibbs said. "The administration right now is focused on ways of changing the way that program has been administered for this set of money differently than that last set."  

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U.S. lawmakers hardened their opposition on Tuesday to releasing $350 billion in financial rescue funds that President-elect Barack Obama wants, setting up a political showdown that regulators warned could have troubling economic consequences.

In the first big test of how he will work with Congress and tackle dissent from within his own Democratic party, Obama tried to rally support at a lunch with Senate Democrats and sent top economic aide Lawrence Summers to a closed-door meeting with members of the powerful Senate Finance Committee.

“It’s very, very important that we be in a strong position on financial recovery,” Summers, who will become director of the National Economic Council, said after his meeting.

Obama — who takes over from President George W. Bush on January 20 — may face the awkward situation of having to quickly wield his veto power to push through an unpopular policy if Congress votes to block the release of the money. A vote could come as early as Thursday.

Many lawmakers are unhappy with how the government has spent the first half of a $700 billion bailout fund, which was hastily approved shortly after the financial crisis intensified following the failure in September of Lehman Brothers.

But top U.S. regulators argued that the still-ailing financial system urgently needed the second $350 billion, and without it the recession, now over a year old, may deepen.

At a Congressional hearing, they suggested that some of the money could be used to buy bad assets that banks are struggling to value or sell — which was the stated intent when the Bush Administration originally proposed the bailout fund fast payday loan.

At Obama’s request, Bush formally asked on Monday for the second half of the bailout fund, starting a 15-day countdown for Congress to reject it or let the money flow.

Democrats and Republicans alike have complained that there was too little transparency into how the government doled out the first half of the cash. They have demanded more details from Obama before the remaining money is released.

Some Republicans are reluctant on political grounds to promote more government intervention in the economy, while many Democrats object to how the first $350 billion has been handled.

ENOUGH VOTES

Illinois Democrat Sen. Dick Durbin said winning Senate approval for releasing the money would be “challenging” and Utah Republican Sen. Orrin Hatch told Reuters that there were probably enough Senate votes to block it.

If that happens, Obama could overturn the decision with a veto after he takes office on January 20. Congress would then need to muster a two-thirds majority to override it.

“It’s a high hurdle to clear,” Tennessee Republican Sen. Lamar Alexander said in an interview, referring to the two-thirds majority.

That would certainly not be an ideal start to Obama’s presidency, and his economic aides were keen to quell the opposition before a vote. 

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