Monday, December 21, 2015

China leaders flag more stimulus; Oil falls to 11-year low; Record loss, job cuts at Toshiba

1 China leaders flag more stimulus (Straits Times) China's leaders signaled they will take further steps to support growth, including widening the fiscal deficit and stimulating the housing market, to put a floor under the economy's slowdown.

While the leadership also endorsed structural reforms and reining in China's increasing reliance on credit, the macroeconomic policy statements indicated concern about letting the economy's expansion slow too much.

The government's annual growth target is typically set at the gathering, though not announced. President Xi Jinping has previously suggested the nation must meet a minimum annual average growth pace of 6.5 percent through 2020. The growth target this year was for a rate of about 7 per cent. Even meeting that, China would see its weakest expansion since 1990.

Officials also pledged assistance for rural residents seeking to buy homes in urban areas and encouraged cheaper residential prices, which would help shrink a glut of unsold properties. Monetary policy flexibility has been a theme in recent months as China's central bank moves toward creating what it calls an interest-rate corridor to guide borrowing costs, away from the old model of setting lending and deposit rates directly.

The People's Bank of China recently surveyed banks on the possibility and potential impact of removing its benchmark deposit and lending rates, people familiar with the matter said. The latest round of economic data showed signs the economy is stabilizing after policy makers unleashed several rounds of monetary and fiscal stimulus. Industrial output climbed 6.2 per cent in November from a year earlier, while retail sales gained 11.2 per cent for the best reading of 2015.


2 Oil falls to 11-year low (Sean Farrell in The Guardian) Oil has fallen to an 11-year low as traders took fright at the prospect of a glut caused by fresh supplies that will outstrip global demand. Brent crude prices dropped almost 2% to as low as $36.17 a barrel, the lowest since July 2004 and weaker than during the worst of the financial crisis. The price fell to $36.20 on Christmas Eve 2008 as the global economy headed for recession following the collapse of Lehman Brothers.

The price of the global benchmark nudged back up to $36.42 but prices were still below those of the previous trading day. Global production is hovering around a record high and the market faces fresh supplies from Iran as western sanctions are lifted and Iran seeks to win back customers from Saudi Arabia and Russia. Extra supplies are also looming from the US, where stockpiles are growing as extra drilling rigs are put into operation.

Oil prices have fallen by more than two thirds since summer 2014 as demand has slowed with the global economy and higher production in the US and elsewhere has increased supplies. Prices revived partly in May but have almost halved since. US West Texas Intermediate (WTI) futures, which show the value of the US benchmark, fell 36 cents to $34.37 a barrel, close to last week’s 2015 lows.

Moody’s, the credit rating agency, slashed its 2016 Brent crude price forecast by $10 a barrel to $43 last week, highlighting excess supply and the re-entry of Iran to the global market. Some analysts are gloomier, predicting prices falling to near $20 a barrel.

Opec said this month it had no plans to rein in production. The Saudi-dominated bloc has pumped out hundreds of thousands of unwanted crude each day in an effort to hold on to its share of the market and force US shale producers out of business.

Russian production has hit a post-Soviet record and the number of rigs deployed in the US rose for the first time in five weeks last week by 17 to 541, according to industry figures supplied by the driller Baker Hughes. Last week’s increase in US interest rates has also put pressure on oil prices by strengthening the dollar and reducing the dollar price of commodities.


3 Record loss, job cuts at Toshiba (Gulf News) Toshiba Corp. forecast a record 550 billion yen ($4.5 billion) loss and will cut more jobs and restructure businesses that include chips, televisions, personal computers and home appliances following a long-running accounting scandal.

The projected net loss for this fiscal year includes 260 billion yen in taxes because of a reversal of deferred income-tax assets, it said in a statement. The forecast doesn’t include possible impairment of goodwill and fixed assets at the company’s nuclear power systems business because Toshiba is still checking that, it said.

Toshiba is trying to recover from an accounting scandal that padded profits for almost seven years by halting development and sales of TVs outside Japan, cutting costs at its PC and home appliances businesses and considering alliances with third parties. Job cuts at these segments amount to about 30 per cent of the lifestyle division’s workforce.

The company will end consignment of design and manufacturing to outside vendors for its PC business, while concentrating on business-to-business sales and focusing the consumer portion of the segment to the Japan and US markets. Product platforms will be reduced to less than one-third of the current number, the company said.

Toshiba’s Indonesia TV plant will be sold to China’s Skyworth for an estimated 3 billion yen, the Tokyo-based company said. Plans also include accounting training, corporate governance reviews, management seminars and an evaluation system for the president and chief executive officer.

In addition to workforce cuts in the lifestyle business, the company will reduce its corporate division by 1,000 people and chip operations by 2,800 workers. Toshiba had about 198,700 employees as of March 31, the lowest since at least 2009.

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