tv World Business Today CNN January 20, 2011 4:00am-5:00am EST
dictator jean-claude duvalier says he's convinced his client will remain a free man. authorities in brazil warn the flooding death toll could soar over 1,000 people. hundreds are still missing after days of floods and landslides in the state of rio de janeiro. rescuers still haven't been able to reach some hard-hit areas. it looks as though the people of southern sudan have voted overwhelmingly for independence. final results are expected next month. those are the headlines, i'm zain vergee at cnn london. "world business today" starts now.
good morning, from cnn london, i'm max fofter. >> and a very good afternoon from cnn hong kong, i'm andrew stephens. you're watching "world business today." our top stories thursday, january 20th. accelerating into the unknown, china's economy races ahead for concern about overheating. raises the prospect of interest rate hikes. china and the u.s. strike $45 billion worth of deals. and we'll tell you why shanghai is fast becoming the new land of opportunity for entrepreneurs. >> the european stock markets, though, u.s. markets took a hit in the last trading session closing down after disappointing earnings at goldman sachs and wells fargo, for example. europe seemed to have followed that lead. there's also concern here, though, about that chinese news. will there be tightening on the
chinese economy, big trading partner for europe, that's a concern here as well. all the main indices are down. the ftse down nearly 1%. this is what's happening in the currency markets, the euro is down a shade against the dollar. that is largely due to profit-taking we understand. one ye the pound is flat against the green backer. >> the news about china and weather the economy is overheating certainly rattling investors here as well, max. also, wall street's down day is sparking something of a sell-off across asia. there are the numbers as the markets close. japanese exporters also lower. shanghai, the biggest loser, down nearly 3%. it was down nearly 3% on monday. the fear remains the same. latest growth figures now are
leading to more concerns that interest rate increases are on the way. we'll have more on that in just a moment. property stocks, some of the hardest hit in shanghai. hong kong down as well. obviously very sensitive to what's going on in china, particularly as hong kong becomes more integrated with the mainland chinese economy. in sydney, financial resources stocks dragging the market lower as well. bhp gets a lot of its revenues these days from china. now, as we said, new figures show the world's biggest growing economy is still growing. let's take a look now at some of the numbers. we'll start with the big number today, the headline number, 9.8%. that's the gdp, economic growth for the fourth quarter of last year. it was strong and much more
strong than expected. we're looking at 9.2%, coming in at 9.8%. put that in context with what it did last year, for the whole of last year, the chinese economy grew by 10.3 precious. robust growth in the first half of the year. that 10.3% equates to an economy now the size of $6 trillion. certainly a pretty big jump for the chinese economy. but here's where the worry starts. the growth look goods. but that is breeding inflation. inflation measured by consumer price index, the cpi fell in december down to 4.6% from 5.1% in november. but look at this, the government target is 3%. so it's well above the government target. why is inflation so high in the main la main reason at the moment, food prices, up 9.6% compared with one year ago. it's down from the 11.7% we saw in november but still worryingly
high. food is the problem, not the only problem. this is the producer price index, it measured the price of goods that leave the factory gates. as you see there, those up by 5.9%, 6% in december, more than expected. there you have it in a nutshell. just to give you a comparison, here are the two of the trillion. that happened this year when it overtook japan to become the biggest. certainly there's fears now about more interest rates to bring down thin flags. we'll be talking to dong tao, to get his take on what happens next in china. when will we see an interest rate rise? now it's when rather than if. >> those decisions aeffect the
whole world economy. thanks so much indeed. those figures came out during hu jintao first full day in washington. a state dinner held for the leader of china, the first in 13 years. mr. obama repeated the u.s. position that china should let its currency appreciate and the two men talked about the huge trade imbalance between the two countries. mr. hu met with ceos of some of america's top companies. and white house officials announce billions of dollars in deals for u.s. exporters to china. >> translator: china's domestic spending has been growing at a double digit rate every year. in 2010 our domestic market h
has -- $2 trillion. here in the united states, you're also working all out to stimulate your economy. president obama has launched a program to double your exports. those in the dinner last night and in my meeting with president obama just now, we discussed how to advance economical situation between our two countries across the board. >> i am very pleased that we've completed dozens of deals that will increase u.s. exports by more than $45 billion and increase china's investment in the united states by several billion dollars, from machinery to software, aviation to agriculture, these deals will support some 235,000 american jobs. and that includes many manufacturing jobs. so this is great news for america's workers. i did also stress to president
hu that there has to be a level playing field for american companies competing in china. the trade has to be fair. so i welcomed his commitment that american companies will not be discriminated against when they compete for chinese government procurement contracts. >> and today's big number as president obama said there, more than $45 billion of chinese contracts for american companies. among those companies is planemaker boeing. boeing will build 200 planes for chinese airlines over the next three years. that deal will support 100,000 jobs. another big winner is alcoa. china power investment corporation, they'll work together on wind and solar power. all 70 contracts have been signed which the courthouse says will provide jobs for 235,000
american workers. in addition to aviation and energy, deals include technology, industrial materials as pell. >> it's what mr. obama wants to announce. hundreds of thousands of new job opportunities because of the deals next. let's get an idea of just how china is reacting to this latest economic data and how that may play into president hu's visit. stan, these numbers coming out of china underline the fortunes between -- the different between the world's two biggest economies, don't they? >> reporter: they really do, don't they? you were reporting out there before that china has a way to go to overtake the united states. it's firmly now the world's second biggest economy. china growing 10.3% over the past year, 9.8% just in the last
quarter. in the third quarter in the united states, the u.s. was growing at less than 3%, just a little over 2.5%. you can have too much of a good thing as we all know. while the economy continues to stave ahead, there is this worrying trend with inflation. it dropped a little from the previous month. it's now at 4.6%. way over where the government wants it to be. it increased interest rates last year, also limited credit last year as well. they're probably going to have to do the same this year, at least one, perhaps two, even more interest rate rises this year as they grabble with inflation. the real worry here, too, andrew is this underlying pressure on food prices, because as you know, there are big gaps between rich and poor here in china and that fuels social unrest as well. look at the united states. they're going to look at these figures and say, china continues to grow, it continues to power ahead and why? because it's also exporting its head off. why is it exporting? the u.s. would say because china
continues to manipulate its currency to keep its currency low to give it an export advantage and to some in the united states that means it's cost american jobs. good news on the one hand but interpreted very differently depending on where you are in the world. andrew? >> certainly findication china will change that stance on its foreign currency policy. speaking of the problems the chinese are facing with the rising food prices, what sort of coverage did president hu get? is this getting huge press coverage in china, this one? >> reporter: yes, it certainly is, blanket coverage on state television in the state newspapers, state-run newspapers as well. you mentioned the last visit there. of course, that wasn't technically a state visit. george bush was in power then and he didn't want to confer all the privileges and respect of a state visit if you like. it was deemed an official visit.
there wasn't a state dinner that went with it. things were different then. i suppose this is a reflection now of china's increased standing in the world. but also a reflection, this is being reported here of the tensions that have existed between the two countries as well. last year was a rocky one. if you look at the tensions over currency, the trade imbalances, the issue of north korea, the issue of china's relationship with iran as well. the u.s. carrying out military exercises, war games with japan and south korea off the coast of china. all of those things served to ramp up the pressure on this relationship. this is being seen as an attempt to try to get this relationship back on a more sure footing and when it comes to this trip, of course, the symbolism of a full state visit of hu jintao being accorded that respect, a recognition as far as china is concerned that it does have a significant place in the world and can sit at the opposite side of the table from the united states. andrew? >> okay.
stan, thanks very much for that analysis. stan grant joining us live from cnn beijing. later this day, thursday, mr. hu will be heading to capitol hill in washington to address members of the congress. we'll continue to cover this story. wall street ended the day lower on wednesday in the u.s. after what was seen as lackluster earn innings goldman sachs. at the close the dow was off 0.1%. the dow and the s&p really took a beating. the s&p 500 fell 1%. shares in goldman sachs fell almost 5% after the firm reported its third straight decline in quarterly earnings. still not bad, though. they reported earnings of $2.4 billion in the fourth quarter. that is just short of last year and forecasts. they blame slowdowns.
this is where u.s. futures stand in premarket action. all the main markets -- all the main indices expected to be down but at the most, 0.25%. we'll take a short break. when we come back, we're going to continue with our coverage, looking at all things china. we want to tell you about a china sports success story that's aiming to take on the world starting in superbrand nike's own backyard. stay with us. and try...and try. [ male announcer ] honey nut cheerios tastes great and can help lower cholesterol. bee happy. bee healthy. ♪
some of its biggest businesses. today we want to introduce to you one of the country's leading sports brand. it's called li ning. it was formed by olympic gold medalist in the 1980s, li ning. he was the guy who literally flew around the bird's nest beijing in the spectacular opening ceremony of the 2008 beijing olympic games. it culminated in this iconic shot, really it's a fantastic shot. that's him setting the olympic flame ablaze to start the olympic games. very successful games they were, too, back to li-ning. currently revenues around $1.3 billion, up 25% from 2008. this year's full-year figures aren't out yet but the company does expect to see similar
growth. right now, the company's revenue comes from domestic sales, 98.9% of all sales in fact come from chi china. but the country is on a mission and that mission is to expand its international reach and first up is america. the chinese brand is hoping to give u.s.-based nike a run for its money. >> who is this kid? >> his name is henry. he's from china. >> reporter: this viral video starts like a "csi" episode where they suspect a chinese company is bringing fake sneakers into the u.s. these shoes are legit. the product of chinese sportswear-maker li -ning. >> when we tried to import those shoes into the united states, we didn't know how to classify them. they got stuck in the customs clearing process for a couple months. >> reporter: just working out the kinks as li-ning prepares to
compete in the u.s. >> these are launching as we speak right now. >> reporter: now li-ning is bringing the battle to nike's backyard, opening its first store in portland, oregon why do you feel it's important to go into the u.s. market? >> it's by far the largest sporting goods market in the world. all the kids in beijing and shanghai are on the internet checking out the scores of the houston rockets, the philadelphia 76ers. they are following the nba stars. we're finding that influence going west to east quite significantly. >> reporter: a lot of people associate chinese products with cheap, possibly copied goods. how do you deal with that ben trying to build your own brand? >> that's precisely what we wanted to avoid is that made in china trap.
we carry aa lot of heritage with us in performance sport. that's why we wanted to go to the united states as a brand rather than a manufacturing powerhouse. >> reporter: nike is still a dominant player in china. do you think they have anything to worry about? >> you know, nike is still 17, 18 times our size at this point. i don't think they have anything to worry. >> reporter: you don't? >> i don't. >> reporter: unless americans start to go ga-ga for li-ning. >> welcome to america. these are shoes. >> reporter: eunice uhn, cnn. some of the country's top appliancemakers are also doing the same. we'll tell you which ones have their sights set overseize. our brand china series continues right here on "world business today." we'll have much more on the chinese president's visit to the u.s. in the next half hour of "world business today."
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welcome back. you're watching "world business today" live on cnn. floodwaters are starting to recede in some parts of the brazilian state of rio de janeiro but the death toll is ticking up. what can you tell us, ivan? max, we are talking about more rain unfortunately across this same area. we'll begin to see the water moving down to the south of the heaviest of the rain. this is the region we're talking about here. this is like an earthquake, it's sudden. landslides don't give you much warning here. because of the topography and the incredible amount of rain in brazil over the last few days.
in fact, it rained about 25 centimeters in 24 hours. that's 10 inches in one day. unbelievable amounts of water. a gorgeous region here. the problem is just like in california, folks build along the hillside to get closer to nature. it's a pretty scene but the problem is, when you get that much water you'll run into trouble. some of the structures that were decimated were poorly built as well. here is the trough. it has been hanging around the same region over the last couple of days. going to begin to move on to the south and west. i think we'll begin to at least clear things out a little bit. scattered showers, but the heaviest of the weather will transition to the south and west. take a look at some of the scenes from the devastation. just unbelievable, torrents of water here. as i mentioned, a record amount of rain in a short amount of time. that concentration resulted with the topography in the scenes that you see there. they will be recovering there for quite some time. they'll also be doing that for months not years, in queensland,
australia. here, better news. things have begun to try out. a few pockets of showers and thunderstorms but not the steady, heavy rain we've seen over the last several days, really weeks and months because of la nina here. brisbane, a half inch over the next 24 to 48 hours. another snowstorm. if you're watching this from the u.s., impacting with the missouri valley right now, this is heading off to the east coast. probably 3 to 5 inches for the mid-atlantic and northeast. that is your wrap on the international weather forecast. i'm ivan cabrera, cnn "world business today" continues after the break. i realized i needed an aarp... medicare supplement insurance card, too. medicare is one of the great things about turning 65, but it doesn't cover everything. in fact, it only pays up to 80% of your part b expenses. if you're already on or eligible for medicare, call now to find out how an aarp...
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from cnn hong kong i'm andrew stephens. >> i'm in london. welcome back to "world business today." we'll go straight to the european markets. it's looking pretty bloomy here in the first 90 minutes of the trading day. the ftse was down more than 1%. it's actually picked up a bit. the concern is about china, will they raise interest rates. also some retail gloom here in london, because christmas wasn't great for a lost the retailers. >> the interest rate question rattling markets in asia today, not surprising. the whacker close on wall street didn't help the sentiment either. let's take a look at the numbers. as you see, pretty sharp sell-o sell-off, right across this region. it's been a while since we've seen a sell-off as consistently bad across the major markets.
banking stocks in tokyo down, helping pull the nikkei down. that was on the disappointing earnings from goldman. exporters also lower. eventually everything did tie into what's going on in china. shanghai, the biggest loser today. unsurprisingly. that came on the back of the gdp numbers, showing the economy still roaring ahead. inflation is still high and the concern now is more interest rate rises on the way. that hit the shanghai market to the tune of 2.9%, hong kong down by 1.7%. and even in sydney, the market down by 1% bhp, one of the big mining stocks on the sydney exchange, down almost more than 2% because it does so much business now with china. max? >> over in the u.s., a lack of risk-taking in the wake of the financial crisis has taken its toll on goldman sachs' bottom line. goldman blames it on a slowdown in its trading and investment banking arms. those results weighed on wall
street on wednesday, the dow fell slightly, the nasdaq lost 1.5%. s&p 500 fell 1%. ebay rose 5% after the online auction website says net income rose to 42 cents a share or $559 million. that's on the back of a strong performance from its online payment service paypal. okay. those big numbers out from china, let's give you an idea of exactly what they were. certainly growth is strong in the second biggest economy in the world. inflation is worryingly high. gdp, 9.8% in the fourth quarter. the economy as a whole last year expanded 10.3%, up from something like 9.2% in 2009. inflation in the final quarter -- final month i should say, in december, was 4.6%. it's down from the 5.1 in november. worryingly high and over the 3%
targ target. food prices up 9.6%. on the manufacturing front, the producer price index shows that the price of goods leaving the factory gate up by more than 5%. up by almost 6% in fact. so the question now is with these numbers, does it mean we are going to get an interest rate rise sooner or later? let's go to dong tao. you get 9.8% growth despite the fact that the government -- the central bank in china has moved seven times to try and cut lending. they cut interest rates twice yet we get an economic growth of 9.8%. what's going on? >> first off, china's growth is very strong. retail sales doing fantastic. in the meantime, inventory is also building up.
the gdp growth has been quite strong. i would expect this to continue in the year of 2011. >> is that a worry in itself or is it only a worry because the inflation rate is going up? >> gdp is good. gdp is no longer in double digits. it's slowing but it is still robust as far as the gdp growth is concerned. >> inflation. >> inflation, actually what worries me is not just the food inflation. the nonfood inflation is also picking up. we haven't seen 2% plus of nonfood inflation for a while. and that has been fueled by continues in large scale of salary increase in 2010. >> wages are going up too sharply for the government -- >> no, actually, this is the story. the government actually is very much encouraging salary increase, because china is in the face of economic transformation.
the old model of relying on exports to drive growth probably will not last very long. china has to find somewhere else for growth. domestic demand, especially con sum sgts source. >> they have to have more money in their pock tote spend on home-made goods? >> that's right. we are seeing quite significant salary increase last year. and this year and perhaps over the next few years, we are going to see continued salary increase. >> okay. so where does that leave us as far as the possibility of another interest rate rise or perhaps several? >> i would say you're going to see quite a lot of interest rate hikes. don't get too worried by that. even after another 150 basis point hikes, china's interest rates are barely back to the pre-lehman's level. at this moment, it's not really tightening. it's normalization. >> it's getting back to normal? >> that's right. inflation is picking up, property market is overheated.
china is not a u.s. >> if we have another 150 basis points or 1.5 percentage point rise anyone treft rates back to the normal level, is that going to be enough? >> i'm not quite sure. interest rates is only part of the equilibrium. the liquidity is the bigger issue. china has been doing quantitative easing for a while. >> it's interesting saying you listen it's okay to go 150 basis points because on expectations, the mark set down 3% today. investors are much more worried than you. >> for a fast-growing emerging market economy like china, 4% or 5% inflation is nothing. okay? it was the past decades of deflation exceptional. getting back to 4%, 5% in my
open is no big deal. what's really wrong is not china's inflation, the market mentality and the china decisionmakers' mentality need to be adjusted. china's inflation no longer 1%, 2%. it's getting back to 4%, 5%. that's the normal level for china over the next decade. >> always good to talk to you. thanks for coming in. chief economist at credit suisse for asia based in hong kong. max? many feel china's support of domestic companies makes it difficult for them to get significant contracts there. that's why the announcement that beijing has approved $45 billion in new export contracts for u.s. firms was so welcome in washington. mr. hu says he's all for a healthy u.s./china trade relationship. >> translator: according to figures, our two-way trade has
brought about 60 billion u.s. dollars of benefits to u.s. consumers. if we look out to the future, our trade cooperation enjoys a promising future. >> now, until he became president, hu jintao wasn't well known outside china, really but his state visit to washington during a time when china is rapidly ascending on the world economic stage puts him firmly in the global limelight. mr. hu comes from relatively humble beginnings. he attended beijing's prestigious king qua university and stud did hydraulic engineer. he was party secretary in tibet during protests by ethnic
tibetans. he moved up through the political ranks, becoming president of china in 2003. his leadership style is being described as low key, methodical and consensus-seeking. now, 68 years old, hu is married and has a son and a daughter and he keeps more details about his private life, well, private. mr. hu is also getting a taste of american humor. during a state visit his name is just too tempting a target for america's late night comedians it seems. witness the fun david letterman had with president hu. >> tonight or tomorrow night, big state dinner for the president of china down in washington, d.c. president of china, that's president hu is visiting the united states. president hu. that's the man's name, hu. that's what i said, hu is the man's name. >> who is the man's name?
>> hu is the president of china. hu, that's what i'm trying to tell you. the man's name is hu. hu is the president of china, yes. hu is the president of china. >> okay. so hu is the president of china. hu. >> david letterman, of course, debating that. he is well known in america. i'm not sure how that will be taken on your end of things, andrew. >> i would say it's nothing we haven't seen before, max. let's leave it at that, shall we? china's leader is talking diplomacy and business in washington. in a moment, china's pearl of the orient is getting back its former luster with plenty of americans in the mix. that's just ahead.
london and hong kong, this is "world business today." >> as china's president hu jintao plays statesman in washington, back home, his nation's most popular city is seeing renaissance with some help. many well-placed americans are leaving home and heading east to opportunities in shanghai. we hear from our senior international correspondent stan grant again. a look at the economic and social boom. >> reporter: inside this nightclub, you can imagine it's the 1930s again. andrew is riding the wave, bringing back burlesque, reliving shanghai's glory days right here into his club that used to be a chinese temple. >> you can hardly keep a good town down. >> reporter: shanghai's a good
town, right? >> yes. >> reporter: shanghai is a melting pot of people and cultures. ignite a dazzling cityscape, great wealth and back streets. spencer dottington came here in 1995 and fell in love with it all. the accent is all texan. >> at night it becomes one of shanghai's red light districts. a lot of shady bars. >> reporter: but he can just as easily switch to local shanghai-nese. ten years ago he quit the high-flying world of finance to indulge his love of the city's buildings. >> this was purple and white marble inlaid dragons intertwined, adding good, positive fung-shei to the flat.
>> reporter: he's recaptured the look and feel of the 1920s shanghai era, a time before japanese occupation, war and hard-line communists turned out the lights. >> you belong here. this is where you became who you are in a sense. >> ask me in 20 more years. >> reporter: when spencer came here, the few ex-pats in shanghai all knew each other. now americans are everywhere. kelly lee is chinese but american born and raised. trained as a chef in paris, now running shanghai's most popular mexican restaurant. confused? well, imagine how the chinese feel. >> the chinese usually don't come to me and look at me and say i am american. they come to me first and they say your chinese is a little strange. where are you from? >> thank you. >> reporter: for a mexican
restaurant for lunch to a mic microbrewery in the evening, kelly is bringing a bit of american culture to shanghai and it's paying off big time. cheers. kelly lee now has six restaurants across the city employing nearly 200 staff. while some in the u.s. worry china is stealing their jobs for americans like kelly, shanghai is the new promised land. >> every year i keep saying to myself i'm going to go back to the states, every year that i'm here, i find there's more opportunities. ♪ >> reporter: these old jazz players have seen it all. as young men they played the sound track to shanghai's heyday, a wonderful world. ♪ now, the music is playing again. a new generation. and out front tonight, a chinese trumpet player from seattle. america in china, in shanghai,
in perfect harmony. stan grant, cnn, shanghai. >> our week-long series on luxury living continues next on how the high-end watch industry is ticking over despite rising gold prices. ordinary rubs don't always work on my arthritis. try capzasin-hp. it penetrates deep to block pain signals for hours of relief. capzasin-hp. take the pain out of arthritis.
gold is at just about $1,400 an ounce recently. we go to geneva. >> last year when we were considering the global -- we could say we were in a crisis time. it was a little bit too early to confirm that prices were completely over. they are all taking a positive attitude. not only a positive attitude but showing positive numbers. >> what are the factors that contributed to this positivity? >> definitely there is something
linked to this, from the emerging markets that has contributors. after the crisis, a move from being markets that showing growth to major contributors to the growth of the company. >> reporter: the gold prices have shot up to all-time highs. the currency fluctuations when it comes to the american consumer and the consumers were the euro zone have not been favorable for them if you will. how does that translate to how you create new timepieces and new products that will reflect that, those that can definitely spended? >> it's a precious metal. again, it gets a lot of respect. in any single news or gold price, every variation of gold price is repeated to be something important. when anybody touch a watch made with a gold case, they will kind
of remember it as a strong value. it's not an easy game for others. it takes 178 years where craftsmanship of new watchmakers take just years to adopt yourself on a weekly basis or adapt yourself on a monthly base zblis would you ever be in a position to redefine your price point. >> we have 1,000 people working in our factory where we began 107 years ago. all all that time, it seemed it was what created the difference. we have fabulous craftsmanship, engraver, the gem setter, and when you see -- between the designer and these people, then
it's what creates the emotion. it's probably in these people -- they are somehow the guardians of the style. >> the series continues for the rest of this week. right now we'll have a final look at the markets this hour. there's one story in global markets this hour and that is concern that chinese interest rates are on the way up. it affects the whole global economy and that is one of the main factors driving all of those markets down here. and the ftse has been hovering around down 1%. really quite bad day for london traders. >> bad but let's put this relatively. take a look at what shanghai did today, down 2.9%, hong kong down 1.7%. the concern is interest rates
and when they will raise in china. they're already up twice in the last six months or so. watch this space. and you have been watching "world business today." thanks so much for joining us. i'm andrew stevens in hong kong. >> here's zain. >> thanks, guys. he's met president obama now he plans to meet with members of congress and they're not too happy. china's president prepares for his second full day in washington. denied entry, the u.s. pastor that planned to burn the koran was told he can't visit the uk. and ricky gervais speaks out about those jokes at the golden globes. that's just minutes away, live on cnn.