NORTH AMERICA

US asked to drop barriers against Chinese firmsThe?top?official?from?one?of?China’s?most?affluent?provinces asked the United States to pull down trade barriers against Chinese high-tech companies during the first ChinaUS Governors Forum opened in Salt Lake City on July 15， 2011， jointly organized by Chinese People’s Association for Friendship with Foreign Countries (CPAFFC) and the National Governors Association (NGA) of the United States.Zhao Hongzhu， Party secretary of Zhejiang province who led?the?Chinese?delegation?of?officials，?also?called?for?the?establishment of free trade and a more open investment environment.On July 14th， at least 20 deals were inked between local governments of China and the US.During the forum， which ended July 16th and is the most expansive diplomatic effort between US governors and Chinese?officials，?leaders?discussed?trade，?investment，?education exchanges， green energy and environmental protection.Zhao said there is a trade imbalance between his province and the US， partly because of US export controls on hightech products to China.“To strike a more balanced local trade relationship， we should adopt some comprehensive measures to promote free trade and investment as well as fight against protectionism and the export control，” he said.“So far， Zhejiang has set up several national-level economy and trade cooperation zones in Russia， Thailand and Vietnam and we hope our province can build such platforms in the United States，” Zhao said.The East China coastal province boasts one of the most dynamic private economies in the country and a strong export and import industry.He said its 2010 export volume was US$180.5 billion， nearly one-tenth of China’s export output. The US is the largest export destination for Zhejiang and the third largest import country.The US is also the top overseas investment destination for Zhejiang companies. More than 700 companies from the province?have?established?offices?in?the?US，?such?as?auto?parts? maker Wanxiang Group， which has over 5， 000 US employees and more than US$2 billion in sales last year.Zhao’s?worries?are?shared?by?many?Chinese?officials?and? experts. They stem from the failed attempts by several Chinese companies last year to invest in the US or acquire companies based in the US. In several cases， the Committee on Foreign Investment in the US (CFIUS) pushed to stop the investment attempts due to national security concerns. (China Daily)Starbucks to launch joint venture in ChinaStarbucks Coffee will launch a joint venture with a Chinese coffee-growing company later this year as the two sides signed a business cooperation memorandum of understanding(MOU) on July 14.John Culver， president of Starbucks Coffee International， signed the deal with Liu Minghui， founder and chairman of Ai Ni Group， a coffee-growing and -processing firm in the southwestern province of Yunnan at a ceremony held at Little America Hotel on the sidelines of the inaugural China-US Governors Forum， which run from July 13 to 16.“We are very excited about the partnership，” Culver said in an exclusive interview with Xinhua.Culver said Starbucks will teach local farmers how to grow high-quality coffee beans through sustainable practices， and ultimately help them increase their yield.Starbucks will not only sell coffee grown in Yunnan in its 450 stores across China， but export it to 17， 000 stores around the world.Starbucks first entered China in 1999， and has over the years focused on opening more chain stores in primary and secondary cities around the country. It is the Seattle-based beverage seller’s new strategy to get involved in the coffee-growing and -processing chain， so as to stabilize raw material supply and meet a growing demand for high-quality coffee from Chinese consumers.China is the coffee chain’s second-largest market after the United States. Starbucks plans to increase its China-based stores to 1， 500 in the coming four years， Culver said. (Xinhua)Sino-US chief auditors meet on boosting cooperationLiu?Jiayi，?head?of?China’s?National?Audit?Office?(NAO)，? has held talks with his US counterpart， Comptroller General Gene L. Dodaro， to discuss the role of auditing in state governance and ways to enhance bilateral cooperation， a statement released by the NAO said on June 16th.Liu， currently on a three-day work visit to the US Government?Accountability?Office?(GAO)，?told?Dodaro?June?15th?that? the NAO， like audit organs in other countries， plays an important role in the management of state affairs through supervising execution of power， exposing corruption and preventing crimes， according to the statement.He said that， regardless of the difference in the model and organizational structure of audit agencies in different countries， auditing remains an important part of the state governance. It has immunizing functions that contribute to safeguarding democratic rule of law， national security， sustainable economic development and legal interests of citizens.Dodaro briefed Liu on the new GAO strategic plan， which focuses on three main areas: paying close attention to issues related to homeland security， education and medical care; producing proposals on solving problems in certain high-risk sectors and upgrading systems that need reforms， and helping protect the healthy operation of the economy and society through oversight?of?the?use?of?funds?in?highly?efficient?manner.The two agreed to increase bilateral audit cooperation between the two sides in the future. Liu also gave a speech entitled The Role of Auditing in State Governance， to more than 100 GAO staff and representatives from US financial and economic circles. (Xinhua)China faces a dilemma in US treasuriesChina has “little choice” but to continue buying US Treasury bonds in the short term despite the potential risk of Washington defaulting on its obligations to foreign bondholders， analysts said on July 19th.China， the largest foreign holder of US Treasuries， increased its holdings by US$7.3 billion to US$1.16 trillion for the second straight month in May， according to the US Treasury Department.Since reaching the limit on May 16， the US Treasury has relied on accounting maneuvers to prevent a federal default. US Treasury Secretary Timothy Geithner said that if the debt ceiling was not raised by the Aug 2 deadline， the government would default on its obligations to its foreign bondholders.“China faces a dilemma in its holding of the US T-bonds，”said Dong Yuping， an economist with the Institute of Finance and Banking at the Chinese Academy of Social Sciences(CASS).“Beijing has little choice but to continue to buy the US debt because Beijing wants a stable dollar. And the US Treasury bonds remain the most liquid investment product in the market， given China’s huge foreign exchange reserves.”“But China has to come up with a backup plan of investing its foreign reserves as a long-term strategy because the trend of a weakening US dollar has become almost a certainty，” he said.China’s foreign exchange reserves rose by a faster-thanexpected 30.3 percent year-on-year by the end of June to reach US$3.2 trillion. Analysts said that this indicated an increasing inflow of “hot money” after the latest interest rate hike by the People’s Bank of China， the central bank， to contain inflation and asset bubbles.Yao Wei， an economist for China at the French bank Societe Generale SA， said that China needs to speed up the pace of structural reforms to rebalance its economy to reduce external surpluses， internationalize the yuan， and diversify foreign exchange reserves.The May data of the Treasury International Capital report shows that foreign investors will still keep investing in US government debt， with Japan and the United Kingdom， the second- and third-largest holders of US Treasuries， also increasing their holdings. (China Daily)Possible US QE3 sparks concernsThe Federal Reserve said on July 14th it could ease monetary policy further if the United States failed to see solid growth， which analysts said may add to China’s inflation and endanger its US$3.2 trillion foreign exchange reserves.“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might re-emerge， implying a need for additional policy support，” Ben Bernanke， Fed chairman， told the House of Representatives Financial Services Committee. His remarks were generally interpreted as a signal of a possible QE3 (quantitative easing).In late 2009， the Fed launched an unprecedented bondbuying drive to boost the economy and make credit more available， spending some US$1.7 trillion on mortgage-backed securities and Treasuries before it ended in March 2010. It then initiated a second round of easing wrapped up in June， in which$600 billion of bonds were bought.“If the Fed continues to print more money (as Bernanke hinted)， it will drag China into a protracted war to limit liquidity and tame inflation，” Lu Zhengwei， chief economist with Industrial Bank Co Ltd， said.China’s consumer inflation already surged to a three-year high of 6.4 percent in June， according to the National Bureau of Statistics. This was partly attributable to quantitative easing measures by the US， which drove global capital into the more lucrative developing markets， including China， analysts agreed.Moreover， the potential injection of money in the US is likely to raise global commodity prices. Crude-oil futures finished higher on Wednesday boosted by Bernanke’s comments. The rising prices may force emerging economies， such as China， Brazil and India， to pay more for imported commodities， further exacerbating their inflationary problems.Those countries may have to continually tighten their monetary stance， such as by raising interest rates， further incurring capital inflows， Lu said.The Foreign Ministry said on Thursday that it hoped the US government would take a responsible attitude to protect investor interests.Bernanke’s hint of a QE3 could also be a strategy to pressure lawmakers to agree on raising the US debt ceiling， analysts said.US President Barack Obama and the Republicans are bogged down in negotiations to raise the borrowing limit before the Aug 2 deadline. (China Daily)Golden Dragon to build first US plant in Alabama“The first U.S. factory of Golden Dragon Precise Copper Tube Group Inc. is here，” Sheldon A. Day， Mayor of Thomasville， standing beside U.S. Highway 43 (SR-13) in Clarke County in Alabama， told the 21st Century Business Herald on July 18.The mayor said the relevant infrastructure and electricity supply are in place and that he expects Golden Dragon to start work on a US$100 million plant soon and fulfill its promise of providing 300 jobs for the local community.Golden Dragon Precise Copper Tube Group Inc. is the leading supplier of precision copper products throughout the world. Its products are mainly applied in air conditioners. Overseas markets are the company’s largest source of revenue.This story of cross-border investment has several main actors， including a Chinese enterprise moving manufacturing facilities to U.S. soil to get around anti-dumping duties and a local U.S. government innovating policy to attract foreign investors. (21st Century Business Herald)