Archive for October, 2010

China trials yuan investment settlement in Xinjiang

Friday, October 29th, 2010 | Finance News

SHANGHAI (Reuters) – China will let some cross-border investment flows in the far western region of Xinjiang be settled in yuan, the country's first such trial after a scheme for yuan trade settlement was expanded this year, the Xinhua news agency said.

The experiment marks the latest step by authorities to give the yuan a greater role internationally as it gradually lifts the capital controls that are at the heart of debate about the currency's value.

Xinhua cited Hu Xiaolian, vice governor of the central bank, as telling a launch ceremony for the project in regional capital Urumqi that it was aimed at mitigating foreign exchange risks and fostering Xinjiang's economic ties with neighboring countries, which include Mongolia, Kazakhstan and Russia.

Beijing has announced a series of policies this year to fuel more economic growth for the restive but resource-rich region, including ordering banks to provide more credit to the region and cutting corporate income taxes.

Xinjiang may now also take part in the yuan trade settlement program, Xinhua said.

Yuan trade settlement has taken off in recent months after an initially slow start, as Beijing has allowed for the currency to be used for more investment products offshore, especially in Hong Kong. The lack of such uses for yuan held offshore had been the main factor constraining the program's growth.

That opening has prompted such interest that Hong Kong's central bank this week had to step in to settle trade-related yuan transactions, after the sole lender authorized to clear such trades between Hong Kong and mainland China ran out of its quota for the year.

The Hong Kong Monetary Authority said it had activated a swap line with the People's Bank of China to clear currency transactions tied to exports and imports after the Bank of China (Hong Kong) (2388.HK) suddenly used up its 8 billion yuan ($1.2 billion) quota.

(Reporting by Jason Subler)

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Canadian provinces push Ottawa to block Potash bid

Friday, October 29th, 2010 | Finance News

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TORONTO/OTTAWA (Reuters) – Potash Corp's home province is ratcheting up pressure on the Canadian government to block BHP Billiton's hostile approach, while the company still insists that rival bids could emerge.

Saskatchewan, where fertilizer producer Potash Corp is based, wants Ottawa to reject the Anglo-American mining giant's $39 billion offer, the largest takeover bid of 2010.

It says a deal would rob Canada of a key strategic resource, as well as cutting jobs, Saskatchewan's tax take and its royalty payments, and it says the provinces of Alberta, Manitoba, New Brunswick and Quebec also oppose the bid.

Alberta, Manitoba and Saskatchewan alone account for 48 of the 142 seats the ruling Conservatives hold in the House of Commons, and the minority government needs those seats to stay in power.

"How do you overcome the strategic concern? ... This is more important going forward for the country than maybe it ever has been because the world is prizing food security and energy security," Saskatchewan Premier Brad Wall said in Toronto.

"Isn't it time that we maybe got a little bit circumspect about deals that involve this size of a reserve and this size of a company? I guess that's our position."

Potash Corp is the world's biggest producer of its namesake crop nutrient, demand for which is soaring as food prices climb and demand for fertilizers rise. It has flatly rejected BHP's $130 a share offer as inadequate.

Potash Corp stock was up just over 2 percent at $145.75 on the New York Stock Exchange. The shares spiraled above BHP's the offer price in August, when BHP launched its bid, and have stayed above that level, signaling that investors expect a higher offer to emerge.

POLITICAL CHALLENGE

The issue of whether to approve the offer has become a huge political challenge for the federal Conservative government, which has said it would meet a legal deadline of midnight on November 3 (0400 GMT November 4) to approve or block it.

In comments that appeared to make a delay highly unlikely, federal Industry Minister Tony Clement said a decision would come "sometime between a minute from now and midnight November 3."

If the government blocks the bid, it risks damaging Canada's reputation as a country that's open to foreign investment.

But accepting it might drive voters in Saskatchewan and in other provinces to other parties, jeopardizing the Conservatives' chances of staying in power after a federal election widely expected in the first half of 2011.

Speaking later to CPAC television, Clement said foreign investment had traditionally been a net benefit to Canada, bringing jobs, competition, innovation and production.

"We can't close our borders, and nor would we want to, because different companies may want us to export to other countries, or invest in other countries," he said.

"I think we have to be an open market, but at the same time everybody should know what the rules are. The rules are net benefit to Canada."

A Saskatchewan aboriginal group said it saw no net benefit from the BHP proposal, and said the federal government had a duty to consult it. It was not clear if these consultations would take place, or if that could delay any decision.

Polls put the Conservatives just 6 percentage points in front of the Liberals, their main rivals, and they would lose seats if an election were held now.

The Liberals and the left-wing New Democrats both oppose the BHP offer.

"This is one of the principal nutrients required for food production around the world and will be required for generations to come," said Ralph Goodale, the Liberals' only member of parliament in Saskatchewan.

"If one transaction can take that out of Canadian hands forever, that's a pretty strategic, pretty serious consideration."

Canadian government approval is far from the final stage in the process, and the Saskatchewan Financial Services Commission is due to hold hearings on November 8 and 9 on whether to overturn Potash shareholder rights plan.

In a filing to the commission, Potash Corp said it had spoken with 15 strategic, financial and state-sponsored potential bidders and investors. But in a tough market, a white knight would need more time to raise financing, it said.

That slightly strengthened a message that the company has beamed out many times already, but at least one leading Canadian investment banker remained skeptical.

"We're still waiting for them to show up," said the banker, who asked not to be identified.

(Additional reporting by Rod Nickel; writing by David Ljunggren; editing by Janet Guttsman, Gary Hill)

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Chrysler opens 570 million dollar engine plant in Mexico

Friday, October 29th, 2010 | Finance News

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MEXICO CITY (AFP) – US automaker Chrysler inaugurated a 570-million-dollar engine plant in northern Mexico Friday, the Mexican presidency said in a statement.

Chrysler plans to produce its new Pentastar V-6 engine at the plant in Saltillo, in Coahuila state, for Chrysler, Dodge, Jeep and Ram vehicles.

Chrysler's sixth plant in Mexico will produce up to 440,000 engines per year, the statement said.

President Felipe Calderon said the plant would create 700 jobs.

Mexico produced 1.66 million vehicles in the first nine months of 2010, 67 percent more than in the same period the previous year, according to the Mexican Automobile Industry Association.

It exported 1.37 million vehicles, mainly to the United States.

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