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Thursday, 8 January 2009

China fears recession riots

PARIS - A STARK warning by state media on Wednesday of possible mass unrest in China signalled deepening fears over the global recession, as Europe grappled with more job losses and an energy cutoff during a winter freeze.

The economy of Asian powerhouse China might become so bad in the next few months that the fabric of the world's most populous nation could start unraveling, the authoritative weekly Outlook, published by the Xinhua news agency, warned in its latest edition.

The magazine said that 'enterprise closedowns, layoffs and labour disputes have significantly increased' and with workers' livelihoods threatened, 'their pent-up discontent could easily burst out... and spark mass conflicts.'

European workers are also feeling the brunt of the global recession with official data showing that the number of people out of work in Germany rose by 114,000 in December to 3.1 million.

On Britain's high street, iconic retailer Marks & Spencer said it would slash up to 1,230 jobs and close 27 stores as consumer spending, the driver of the British economy, shrinks.

Analysts expect the Bank of England to intervene in this recessionary climate Thursday and cut its key interest rate to the lowest ever level.

The British finance minister, Alistair Darling, said in an interview that he could not predict an economic turnaround any time soon as recession in Britain was expected to officially confirmed by data later this month.

'In the current climate, no responsible finance minister could say that's the job done, far from it. We are far from through this,' Mr Darling told the Financial Times.

As most of Europe shivered in freezing temperatures, Russian state-run energy giant Gazprom cut Europe-bound gas deliveries through Ukraine, carrying out its threat to reduce deliveries each day by the same amount that Russia has accused Ukraine of stealing - a charge Kiev denies.

More than a dozen European countries have reported shortfalls or complete cutoffs in gas delivery as a result of the Russia-Ukraine payment dispute.

About 80 per cent of Russian gas exports to the European Union pass through Ukraine.

'The Czech EU Presidency and the European Commission demand that gas supplies be restored immediately to the EU and that the two parties resume negotiations at once,' the European Union said in a statement on Tuesday.

After recent rallies, oil prices slid on Wednesday in morning trade on London's InterContinental Exchange as traders awaited the latest weekly snapshot of crude inventories in key energy consumer the United States.

The grim US economic outlook led European stocks to open lower Wednesday, following a mixed performance in Asian stock markets.

The US Federal Reserve Tuesday indicated that the world's biggest economy would likely be stuck in recession well into 2009 with a 'moderate recovery' in 2010, according to minutes from last month's policy meeting.

In Asia, Tokyo's Nikkei climbed to a two-month high, still optimistic about stimulus plans and on overnight gains on Wall Street, which also gave the dollar a slight gain in Asian trade at 93.94 yen up from 93.65 yen in New York late Tuesday. The euro slid to 1.3493 dollars from 1.3531.

But in India stocks plunged 7.25 percent on a billion-dollar fraud scandal at major software firm Satyam Computer, and Hong Kong closed 3.4 per cent lower on China telecoms and banking stocks, dealers said.

In the world's biggest mobile phone market with currently 634 million subscribers, the Chinese government issued long-awaited third-generation mobile phone licences which are expected to pour billions of dollars into new networks for video- and Internet-enabled handsets.

Analysts said although it may be years before 3G services become popular in China, issuing the licences will immediately benefit global equipment makers such as Siemens, Ericsson and Nokia, as well as local rivals.

With economic growth forecast at 7.5 per cent this year, a level not seen since 1990, Chinese communist leaders likely appreciated the optimistic note from the United States, which is marking 30 years of diplomatic ties with Beijing.

'There are many different possibilities in the US-China relationship, and I'm sure in the next 30 years, it will only get better,' US Deputy Secretary of State John Negroponte told reporters on his high-profile visit to the Chinese capital. -- AFP

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