Archive for August, 2009

U.S. recession to end in second half of 2009: Survey

Saturday, August 29th, 2009

The U.S. recession will be over in September, but not the unemployment, which may continue to rise until the second half of 2010, says a survey released Friday.

The Blue Chip Economic Indicators survey of private economists predicts a 5 percent and 1.8 percent contraction in U.S. gross domestic product for the first two quarters of the year respectively. The third quarter of 2009 brings a more hopeful prediction of 0.4 percent growth.

The survey, conducted April 3-6, revealed a “long road ahead” attitude from the economists.

It showed much of the anticipated turnaround in the economy, now in its 16th month of recession, would be driven by some improvement in consumer spending, housing, business inventories and exports. Yet, above-trend growth was not expected until the second half of 2010.

“The end of the decline isn’t the beginning of the recovery,” said David Resler of Nomura Securities. “It’s like a boxing match. Even if you win the fight, it’s not going to feel as good when you get out of the ring as when you went in.”

Indeed, economists’ prospects for the labour market remain bleak and just 12 percent expect the unemployment rate to fall some time this year.

More than a third of respondents expect the jobless rate to peak in the first half of 2010, while about half did not see unemployment declining until the second half of next year.

By December of this year, the economists on average expect the unemployment rate to reach 9.5 percent, up from the 8.5 percent reported for March. They see the rate of decline slowing, forecasting 2.6 million job losses in the next 12 months compared with the 4.8 million jobs shed in the previous period.

A new G2 in Asia to help steer the way

Wednesday, August 26th, 2009

We have a financial crisis that has forced any traditional superpower to understand that the emerging economies must be given a more important role when global economic policy is being developed. So far this has resulted in G8+5, a bigger role for G20 and a number of crisis meetings.

But the financial crisis is nothing more than the tip of an iceberg and much more is needed. Below the surface we have a number of trends that require a dramatic change in how the current global governing system works, including the Bretton Woods institutions that were created after World War II.

The firm action that the current financial crisis requires is a perfect opportunity to begin looking toward a new global architecture. At the very center of this architecture are two different G2’s that will play a very important role.

The first G2 is the one that has been discussed in media since the beginning of the financial crisis, that of China and the United States. This is the G2 that follows the logic of the current system. Few would disagree that the G8 that exists today is increasingly outdated and that something new is needed. The G8 was a response to the oil crisis in 1973 and when it was formed in France in 1975 it was the major Western countries that came together. That time is gone and we have a different situation today.

The two major economies on the planet should have a special relationship and the “strategic and economic dialogue” mechanism that was launched during the G20 meeting in London provides a great opportunity.

It is important that China is clear and does not allow the old, polarized agenda to dominate, so that G2 becomes a smaller, more effective version of G8. China’s global role so far has been a breath of fresh air as it does not seek global leadership, but instead wants to work in collaboration with all countries and on all levels.

With the U.S. as a major consumer and China as a major producer, we can hope for a “global collaboration” initiative. This could focus on the major challenges we face and how China and the U.S. could together, with other countries, to find solutions for them.

These solutions could range from major initiatives with incentives that support sustainable innovation and standards that ensure future buildings are net producers of energy. Instead of being the largest problem for climate change and resource use, the buildings of the world could become the epicenter for climate-smart and resource-efficient solutions. For this to happen, China and the US must cooperate.

This G2 could also encourage micro collaborations. I myself carry around a bag with solar panels that can charge my laptop; it is made in the U.S. and costs a lot. I would like to see these kinds of solutions being made in places like Baoding, the city south of Beijing that wants to be a center for renewable energy production that Silicon Valley is to the computer industry. At the same time, companies in China could be invited to the U.S. to explore how joint construction projects for solar buildings can be launched.

This kind of practical collaboration could be linked to more strategic collaboration in trade, investments and finance, as well as in security policy and other important areas.

In order to identify the second G2, we must take a step back to the macro level. It is easy to see that the center of the global economy is moving east. The need to find long-term solutions for a financial system where the money can move at the speed of light will require new regulations and new institutions.

But there are other issues that are harder to see, issues that will not hit the headlines before it is too late, as they happen slower. These include issues such as the demographic crunch with an aging global population, the increased population pressure as the world moves toward 10 billion people, growing inequalities within and between countries, and finally an accelerated development of new technologies.

All these can bring humanity fantastic gifts if they are met with the right framework, but they could also drive the world into conflict and problems beyond imagination. Especially since natural resources on the planet are not enough to provide everyone with a “G8 lifestyle”.

This brings us to what I think is the more interesting, and less discussed, G2 - China and India. I was fortunate to be in Delhi during President Hu Jintao’s visit in 2006. During this trip, a number of initiatives were started and it is clear that the 2 billion-plus population countries share many challenges and opportunities.

Cynical observers have focused on the differences between the countries and many Western observers seem to view China and India as pawns in the power play between the G8 countries. But anyone that can do the math and look at the history of these two countries will realize that there will be a very interesting G2, whether we like to call it that or not.

By ensuring closer and more strategic ties between China and India, the world will get two countries with long, proud histories that are a welcome balance to the dominating Western narrative in most of today’s global institutions. The world would also get two countries that are reflections of how the world as a whole looks like, with a mix of rich and poor people and different development paths.

The most interesting aspect of the “Chindia G2″ would probably be the end of the idea of Western countries as the goal of “development”. We could also get a discussion about where the world can and should go next. We need a global circular economy for that and the two countries that probably have the best opportunity to provide guidance on how this can be done in a practical way are China and India.

Every time I visit China and India, I see more and more similarities when it comes to the big challenges. With their roles as global economic engines, it becomes very important what direction those engines will move and what fuel they will use. If China and India start collaborating in a way that shows the world the two countries - which together contain about 40 percent of the world’s population - can develop joint innovative strategies for global sustainability, it will be a very good step forward for this current crisis.

This G2 understands the need for innovative solutions that deliver more than incremental improvements, as this is necessary to lift people out of poverty and deliver solutions that do not result in conflict over natural resources a few years from now.

So while most people are looking for a U.S.-China G2 along the lines of the old school, the most important G2 will probably be that of China and India. We should see these two in a relationship that is mutually beneficial.

With a global agenda that delivers global benefits, China would start building a global governance culture beyond narrow self-interest that also includes scientific consideration for the planet in a way that the current economic system has failed to do. This would be a very good start for the 21st century and a way to turn the current economic crisis into something that will benefit both the people and the planet in a way that we never done before, but that we urgently need.

Deng Xiaoping once said that a real Asian century will arrive only when China and India are developed - this time is now emerging and for it to deliver a positive outcome, the two G2s could play a crucial role.

The author is a global environment policy advisor specializing in China and India.

Thai workers gather to demand government’s help

Tuesday, August 25th, 2009

About 1,000 workers from private sectors and state enterprises gathered in front of the Government House on the Labor Day Friday, demanding for better welfare as the Thai economy showed a downward trend in the first quarter amid the ongoing global economic crisis, Thai media reported.

According to the website of Bangkok Post, representatives of labor groups went to meet Prime Minister Abhisit Vejjajiva to hand in a letter voicing their demands, saying the workers are exposed to severe impact of the economic crisis and the government must do something to end the crisis and to assist them.

They want legislation to improve safety in their workplace, structural reform of the social security system to enhance its transparency.

They also demanded the government stop the privatization of state enterprises.

Abhisit said he would review the demands and try to solve the problems they outlined.

Somsak Kosaisuk, a People’s Alliance for Democracy (PAD) leader and chairman of the labor union of the State Railway of Thailand, said the government does not care much about manual laborers and has not done much to help those being laid off in the economic crisis.

He called on workers to join hands with each other, creating a new politics that would offer their representatives a chance to be in the parliament and help shape society.

Earlier in the day, Abhisit told workers not to worry about economic problems as the government is working to provide them with assistance.

In a televised address marking the Labor Day, Abhisit said the government is trying to help the more than 20 million manual laborers throughout the country by creating job opportunities and improved welfare.

The prime minister said it is projected that some 800,000 workers would be laid off in 2009 and that new graduates expecting to enter the job market would be severely affected.

The government has realized the situation, he said, and is working to find the best solution.

The Thai economy in the first quarter is estimated to have contracted by 5-6 percent from the same period last year as a result of a decline in exports and the domestic economy in March, according to the Bank of Thailand’s latest economic assessment.

Singapore revises down growth forecast with Q3 GDP decline

Sunday, August 23rd, 2009

The Singapore government on Friday revised down its 2008 growth forecast to around 3 percent from a previous estimate of 4 to 5 percent with the latest advance estimates showing its economy declined by an annualized rate of 6.3 percent in the third quarter.

The Monetary Authority of Singapore (MAS), the country’s de facto central bank, announced on Friday that it is shifting its monetary policy stance to a “zero percent appreciation”.

Gross domestic product (GDP) shrank at an annualized, seasonally adjusted rate of 6.3 percent in the third quarter, following a 5.7 percent decline in the previous quarter, the Trade and Industry Ministry said in a separate statement.

The contraction for a second straight quarter means the city-state has entered a recession for the first time since 2002.

The Trade Ministry also said the advance estimate, based largely on July and August data, showed that GDP in the third quarter declined by 0.5 percent in real terms over the same period last year.

The central bank said the Singapore’s economy has weakened over the course of 2008, alongside an escalation in the turmoil in financial markets and a more severe deceleration in global economic activity.

“The slowdown was generally broad based as external shocks were transmitted to the domestic economy via both the financial and trade channels,” it added.

Looking ahead, it said, the outlook for the global economy has deteriorated and a more severe global downturn cannot be discounted.

Inflation, which reached a 26-year high earlier this year, has peaked, the MAS said, adding that the consumer price index (CPI) has declined from 7.5 percent in the second quarter to 6.5 percent in July-August on a year-on-year basis.

It reflects a moderation of both external and domestic price pressures, it said.

The central bank predicted that the CPI is expected to trend down in 2009 as the global and domestic economies slow and for the year as a whole it is forecast to moderate, coming down to around 2 percent.

In terms of monetary policy, the MAS announced its easing of the Singapore dollar for the first time since 2003.

It said it was shifting its Singapore dollar nominal effective exchange rate from the gradual appreciation band to “zero-appreciation”.

“This policy maintains the current level of the policy band, and there will be no re-centering of the band or change to its width,” it added.

It said it also stands ready to intervene to dampen excessive volatility in the Singapore dollar should this become necessary.

Experts warn men buying sex aggravates AIDS spread in Asia

Saturday, August 22nd, 2009

The large number of men in Asia who seek prostitution has become an important medium for the spread of HIV/AIDS in the Asia Pacific region, UN health officials warned here Friday.

At the launching ceremony of a on-line database on HIV/AIDS on Friday, Anupama Rao Singh, head of UNICEF East Asia-Pacific Regional office said there are estimated 75 million Asian men “regularly” buying sex from about 10 million Asian females who sell it, according to studies of the Commission of AIDS in Asia.

“We cannot overlook the threat of HIV’s continued transmission through the sex trade,” Singh said. “Because the implications on HIV trend among women and children are grave.”

She said that throughout Asia, an alarmingly large number of wives were found infected by their husbands or sex partners who engaged in unprotected sex trade. And the virus can still be passed on to the next generation when the wives become pregnant.

Experts of the United Nations Children’s Fund (UNICEF), the Joint United Nations Program on HIV/AIDS (UNAIDS), World Health Organization (WHO), and the Asian Development Bank (ADB) gathered Friday in the Philippine capital of Manila to unveil the on-line database that will facilitate researchers, policy-makers and civil groups who would need to do AIDS/HIV research in the region.

The site (www.aidsdatahub.org) contains consistently updated information on core HIV/AIDS indicators and national response in 24 countries and regions in east, southeast, and south Asia.

At the ceremony, Amala Reddy, regional program advisor of UNAIDS Asia and the Pacific, warned that because the “relatively large size” of men who buy sex, they have become a “powerful factor” in the spread of HIV/AIDS in the region.

She said that in Asia, about 50 million women who have no other behavior other than being the wives of men who are on this trend (buying sex) unfortunately risk being contracted with HIV/AIDS.

According to data revealed by UNICEF, Asian women, categorized as low-risk group, now represent less than 25 percent of all HIV infections but the proportion could have shoot up to 30 percent by2015, mostly infected through their husbands and sex partners.

Quoting UNAIDS report, Reddy said currently there are 5 million people in Asia living with HIV/AIDS with around 400,000 people being newly infected every year.

She said the number is likely to soar to 500,000 by 2010 when the accumulated number of HIV infection cases in Asia rise up to 10 million.

Reddy said, however, UNAIDS experts don’t expect the infection percentage of population in Asia will be as high as the case of Africa, for most infection in Asia are concentrated in high risk groups such as sex workers, intravenous drug users, men who have sex with men.

In Asia, there are around 20 million intravenous drug users and men who had sex with men, according to the report of Commission of AIDS in Asia, published earlier this year.

Massimo Ghidinelli, WHO regional advisor on HIV/AIDS, said besides men who buy sex, men who have sex with men (MSM) without using condom is another high-risk group that needs particular attention in the region.

He said WHO even could not get a “fully accurate picture” on the exact magnitude of the contribution of MSM to AIDS spread because of the sensitivity of the issue and neglects of the governments.

“It is a new phenomenon and we have insufficient understandings and studies.” Ghidinelli said. “The problem may be much greater than what we have believed.”

But UN health officials said the use of condom has been proved an effective way to stem the virus spread.

“There should be mass awareness campaigns, aggressive promotion of condom usage. The experience in Thailand and Cambodia proves it works,” Reddy said.

“We know the ways. It is only that political leaders have to have the political will to do the right things,” she added.

International hotels draw elites and terror threat

Friday, August 14th, 2009

Consider how a city looks to a terrorist seeking targets. There’s the airport — inviting, but heavily secured. There’s the U.S. Embassy, perimeter guarded by crack local forces and Marines. And there’s the plush international hotel, open to anyone with a decent outfit and money for a cup of coffee.

Across the world, the finest hotels draw foreign businessmen, droves of tourists, and local movers and shakers who crowd the restaurants and bars to see and be seen. There are society weddings, banquets and even “Sweet Sixteen” birthday parties for the daughters of the well-to-do.

In places where Western-style amenities are rare, international hotels are often the most vital connection to the rest of the world. Their business model demands openness and accessibility for visitors and guests, making total security virtually impossible despite security barriers, metal detectors and high-tech surveillance gear.

That’s why, experts say, hotels have been attacked by terrorists in Pakistan, Jordan, Afghanistan and now Mumbai, India, where commandos battled security forces for three days in a deadly rampage focused on the renowned Taj Mahal and Oberoi hotels.

“There is obviously a trend for hotels to be targets,” said Christopher Newberry, general manager of the Serena Hotel in Kabul, Afghanistan, where three militants slaughtered eight guests in January.

The Marriott in Islamabad, Pakistan is being rebuilt with a 16-foot high security wall to protect against bomb blasts after a massive truck bomb explosion in September that killed 54 people and wounded more than 250. A series of Pakistani hotels have been targeted in attacks dating back to 2002, when 14 people were killed by militants targeting the Sheraton in Karachi.

Security has been tightened around hotels in Islamabad, with direct access to hotels blocked by heavy concrete barriers. Motorists have to drive past surveillance cameras and over a bomb detector to get in, and paramilitary troops are deployed at kiosks built of sand bags.

“The threat against diplomatic targets persists, but due to target hardening, the terrorists seek to attack international hotels,” terrorism analyst Rohan Gunaratna said in a report on the bombing of the Islamabad Marriott. “As Westerners frequent such hotels, they should be considered second embassies.”

In many parts of the world, the best hotels are used as a personal playground by the city’s elite. The public relations value of attacking a symbol of national pride like the Taj Mahal makes it even more attractive to terrorists. And the sheer size of major hotels, with hundreds of rooms, dozens of hallways, and many hiding places, makes them tough to defend.

The social scene of a big-city hotel lured jihadists in Jordan in 2005 when suicide bombers killed 60 people in three coordinated attacks that targeted, among other things, a wedding party with 300 guests at the Radisson hotel in Amman.

“Many of these hotels are landmarks, very dramatic venues, like the Taj Mahal in Mumbai,” said Brian Jenkins, a security analyst with the Rand Corporation. “What they are going to see in any major hotel is number one a very cosmopolitan collection of foreign visitors and local elites.”

At the Marriott Hotel in Cairo, Egypt, lush gardens are a rare splash of green, drawing the chic and the wealthy, who take their sweet tea and cardamom-spiced coffee at wicker tables under shade umbrellas while checking each other out from behind their designer sunglasses.

The hotel, a former palace built in 1869 for the visiting French Empress Eugenie, has nearly a dozen restaurants, including the much loved outdoor garden, a rooftop movie theater and a casino. It is also one of the preferred venues for splashy Egyptian weddings, featuring belly dancers and pop stars.

Life at the Marriott used to be free and easy for visitors who looked like they belonged, but layers of security have been added since Islamic unrest spread in Egypt in the 1990s, and new procedures have been put in place since a series of car bomb attacks on luxury hotels in other parts of Egypt in 2004 and 2005. Now each car is checked for bombs before it can enter the grounds, and guests must pass through metal detectors.

The same is true in Amman, where major hotels now seem like armed camps because of the security barriers, bomb checks and rifle-toting guards.

Magnus Ranstorp, a terrorism analyst with the Swedish National Defense College said terrorists often attack hotels as a way to paralyze the tourist industry, which is vital to countries like Egypt.

“No matter what security measures are taken, there are so many hotels that they really become easy prey,” he said. “This is the greatest fear over time. Other groups are looking at Mumbai and will probably mimic this type of attack because it seemed to work.”

Jenkins said the best hotels usually have well-developed security systems that make corporate chiefs feel safe sending their employees there. He said a recent Rand inquiry found that people in a hypothetical place called Hotel Land_comprised of all the world’s hotel guests at any given point_are 140 times less likely to meet a violent death than a citizen in the United States.

Still, terrorism experts warn that, despite recent improvements, most hotels are vulnerable if terrorists spend sufficient time and money developing a plan.

Newberry, the manager of the Serena, said hotels around the world have dramatically upgraded security procedures in response to the increased threat but agreed that they are still vulnerable.

“Inevitably if a gang of terrorists want to get into a particular location, whether it’s a hotel or another location, they’re going to do it one way or another,” he said.

“Safe Sleeping Day” for babies launched in Los Angeles

Thursday, August 13th, 2009

Health authorities launched a “Safe Sleeping Day” in Los Angeles on Friday in a bid to promote the practice of safe sleeping.

Safe sleeping means placing babies in a crib instead of in their bed, child safety advocates said.

Recent surveys show that 77 percent of parents in Los Angeles County co-sleep with their infants, said Cynthia Harding, the Los Angeles County Public Health Department’s Director for Maternal Child and Adolescent Health.

In 2006-07, 86 babies in Los Angeles County suffocated while sharing a bed with adults, according to coroner’s reports compiled by the Interagency Council on Child Abuse and Neglect (ICAN).

Deanne Tilton Durfee, executive director of ICAN, said parents of newborns should be required to have cribs or side-sleepers before their babies can be released from hospitals, just as they must have special car seats for babies.

“ICAN is making a plea to various retailers to offer discounts or donations for side-sleepers or cribs for families who may place the baby with them in bed because this is the only surface they have,” she said. “Make sure that these side-sleepers and cribs are available to them as car seats are.”

Durfee refuted suggestions that babies are meant to be with their parents, and that sleeping together fosters bonding and encourages breastfeeding.

It’s not worth the risk, Durfee said, adding that “We’re talking about tiny helpless babies who can’t walk or talk or call 911, and can’t lift their heads out from under a pillow, a blanket, or you.”

Dr. Carol Berkowitz, former president of the American Academy of Pediatrics, suggested that parents who cannot afford a crib use a laundry basket instead.

She offered the following safe sleeping tips for infants:

– place babies on their backs for sleeping;

– keep a baby’s sleep area close to, but separate from, where others sleep;

– place babies on a firm sleep surface; and

– keep soft objects, like toys and loose bedding, away from a baby’s sleep area.

City Councilman Richard Alarcon, who has a 16-month-old daughter, called co-sleeping “a very, very dangerous thing to do.”

“As the father of an infant, I am well aware of the desire to be close to your child, to protect them and shield them from danger,” Alarcon said. “But sometimes, what we think is protecting them is actually putting them in harm’s way. Sleeping in the same bed as an infant can be fatal.”

Wen: maintaining economic stability a priority

Monday, August 10th, 2009

Premier Wen Jiabao has called it a prime job to maintain a stable and relatively fast economic development and take more direct, powerful and effective measures to implement central policies on increasing domestic demands and promoting economic growth in a substantial way.

Next year, it is an important target to stop the declining trend of economic growth and it is a must to focus on increasing domestic demands so as to promote economic growth,” said the premier during an inspection tour in southwest China’s Chongqing Municipality from Dec. 21 to 22.

During his trip, Wen visited a number of local factories, communities, villages and worksites, with the company of Chongqing Communist Party chief Bo Xilai and Mayor Wang Hongju.

In his talks with local people, Wen discussed ways to get over the current financial difficulties and speed up reform and development in Chongqing.

In a visit to the reservoir worksite, Wen was told that Chongqing plans to invest 40 billion yuan (US$5.88 billion) in water conservation projects in the coming five years as part of its efforts to increase domestic demand and improve the quality of life. “We must make a good use of every coin of the people,” he said.

At a workshop of the Chang’an Group, the premier showed great concerns over the negative impacts of the global financial crisis on the city’s automobile industry.

The company’s car sales have been declining since November. It is expected to further decrease in December and the first quarter of next year, said the company’s president Xu Liuping. “We must brave the difficulties by ourselves, but we also need government support,” Xu said.

Wen said that difficulties in the country’s automobile industry are temporary as it a promising industry, because “China has a huge market.”

Wen urged the company to depend on innovation and reform while improving quality and decreasing the cost. “Company leaders must be bold to shoulder responsibilities and the staff should unite as one, to get over the difficulties together,” he said.

On Monday morning, the premier paid a visit to a communal social security center to learn about the life of low-income families. “The more financially challenged we are, the greater attention we should pay to those in need,” he stressed.

At the home of 76-year-old Ren Guoqing, the premier said the government has decided to continue increasing the pension of retirees, as well as the subsidiaries for low-income families and other families who receive government subsidies.

During his tour in the city, Wen paid an unplanned visit to Chongqing University, where he met thousands of students and encouraged them to be confident in the difficult times.

Wen: maintaining economic stability a priority

Monday, August 10th, 2009

Premier Wen Jiabao has called it a prime job to maintain a stable and relatively fast economic development and take more direct, powerful and effective measures to implement central policies on increasing domestic demands and promoting economic growth in a substantial way.

Next year, it is an important target to stop the declining trend of economic growth and it is a must to focus on increasing domestic demands so as to promote economic growth,” said the premier during an inspection tour in southwest China’s Chongqing Municipality from Dec. 21 to 22.

During his trip, Wen visited a number of local factories, communities, villages and worksites, with the company of Chongqing Communist Party chief Bo Xilai and Mayor Wang Hongju.

In his talks with local people, Wen discussed ways to get over the current financial difficulties and speed up reform and development in Chongqing.

In a visit to the reservoir worksite, Wen was told that Chongqing plans to invest 40 billion yuan (US$5.88 billion) in water conservation projects in the coming five years as part of its efforts to increase domestic demand and improve the quality of life. “We must make a good use of every coin of the people,” he said.

At a workshop of the Chang’an Group, the premier showed great concerns over the negative impacts of the global financial crisis on the city’s automobile industry.

The company’s car sales have been declining since November. It is expected to further decrease in December and the first quarter of next year, said the company’s president Xu Liuping. “We must brave the difficulties by ourselves, but we also need government support,” Xu said.

Wen said that difficulties in the country’s automobile industry are temporary as it a promising industry, because “China has a huge market.”

Wen urged the company to depend on innovation and reform while improving quality and decreasing the cost. “Company leaders must be bold to shoulder responsibilities and the staff should unite as one, to get over the difficulties together,” he said.

On Monday morning, the premier paid a visit to a communal social security center to learn about the life of low-income families. “The more financially challenged we are, the greater attention we should pay to those in need,” he stressed.

At the home of 76-year-old Ren Guoqing, the premier said the government has decided to continue increasing the pension of retirees, as well as the subsidiaries for low-income families and other families who receive government subsidies.

During his tour in the city, Wen paid an unplanned visit to Chongqing University, where he met thousands of students and encouraged them to be confident in the difficult times.

Experts: China’s recent decrease in forex reserves considered good

Monday, August 10th, 2009

It is a good phenomenon for China’s mammoth foreign exchange reserves to diminish for the timebeing, some experts believed.

China’s forex reserves peaked at 1.9 trillion U.S. dollars at the end of September, now they were below that figure, Tuesday’s Shanghai Securities Journal quoted Cai Qiusheng, head of the foreign debts section under the capital-account management department of the State Administration of Foreign Exchange, as saying.

This was the first decline in China’s forex reserves since the end of 2003.

Cai made the remarks at the 7th annual meeting of China’s import and export enterprises held over the weekend. But Cai did not reveal in which month, October or November, the country’s foreign reserves fell below the 1.9-trillion-dollar level, nor did he disclose the exact size of the forex reserves at present.

Central Bank data show that at the end of September, China’s forex reserves stood at 1.9056 trillion U.S. dollars, a growth of 32.92 percent over the same period of last year. The reserves increased 377.3 billion dollars in the first nine months of this year, 10 billion dollars more than the year-earlier increment. The total increase included 21.4 billion dollars recorded in September, 3.6 billion dollars less than the increment for the same month of last year.

Qu Hongbin, chief economist with HSBC China operations, analyzed that since growth of China’s exports and imports had slowed down, China’s trade surplus kept increasing and that foreign direct investment (FDI) had been rising though at a slower pace. Therefore he considered trade and FDI were not the factors behind the forex reserves decrease.

Yuan Yuedong, a senior researcher with the global financial market department of the Bank of China, believed the reduction for the time being would not affect the Chinese economy adversely.

He attributed the reduction to the recent slower appreciation and a short-term depreciation of the Chinese currency, renminbi, against the U.S. dollar. He reckoned that possible increasing offshore investment by Chinese companies also contribute to the downward trend of the forex reserves. But he said data were not yet available to support the estimate.

Qu Hongbin believed the renminbi’s depreciation against the euro, which was also a major currency in China’s forex reserves, was another important factor.

An investment-bank analyst who declined to be named, said the forex reserves decrease might be related to capital withdrawal from China by some foreign institutions whose liquidity was tight.

But Commerce Minister Chen Deming said earlier that there was no sign of large amounts of capital flowing out of China and that China remained a good target for FDI.

To combat the impact from huge capital outflows in the short-term, the foreign exchange administration has taken a string of measures, including a registration management system for offshore equities under the corporate cargo trade accounts.