US world credit/currency war!

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BEIJING (Reuters) - The United States is effectively printing cheap dollars as it implements an ultra-loose policy to spur its flagging economy, setting the stage for "a world credit war," a Chinese rating agency said on Friday.

The Beijing-based Dagong Global Credit Rating, a relative newcomer in the sovereign debt rating realm, said in its 2011 Sovereign Credit Risk Outlook that quantitative easing by the U.S. Federal Reserve has "eroded the legitimacy of the global monetary system that takes the dollar as the key reserve currency."

The policy easing was also "bringing the U.S. dollar's credit-worthiness to a vulnerable position," it said.
Dagong, which has been rating Chinese corporate bonds since 1994, created a splash by rating the United States at double-A, below China's AA-plus, in July 2010.

It downgraded the U.S. sovereign credit rating last November, following the Fed's decision to pump more dollars into the U.S. economy.

Although Dagong's statement does not fully represent Beijing's view, it was in line with the government's unhappiness with the U.S. policy easing, which has been blamed by Chinese officials for fuelling global inflation risks.

As China's $2.85 trillion foreign exchange reserves are mainly denominated in U.S. dollars, Chinese Premier Wen Jiabao had publicly voiced concerns of the assets.

President Hu Jintao told a recent G20 summit at Seoul that China wanted "an international reserve currency system with stable value, rule-based issuance and manageable supply."

But Dagong said in the English-language report that the United States is trying to "haircut" its creditors by permitting a weakening currency.

"The behavior that the United States ignores international creditors' legitimate interests indicates a dramatic decline of the country's willingness to repay the debt," Dagong said.

In defining the "credit war," Dagong said "it aims at encroach on other countries' interests through continuous depreciating the actual value of the currency; and it arouses all the countries in the world to take various credit resources as a financial weapon to safeguard the national interests."

It added that the capital flows into emerging economics stemmed from cheap dollar is "a destructive factor to the healthy economic development in different countries."

For full version of Dagong's report, see here

PORTUGAL AND SPAIN

Dagong added the sovereign debt crisis in the euro zone countries would intensify in 2011 and it may downgrade of sovereign credit ratings on Portugal and Spain.

"Countries, such as Portugal and Spain, will have to ask for bailouts in 2011," it said.

Earlier this month, China reaffirmed a commitment to buying Spanish bonds while newspapers in December said Beijing was ready to buy Portuguese debt to help it through Europe's spreading debt crisis.

Echoing the International Monetary Fund and western rating agencies, Dagong also warned that the governments in the United States, Japan and Germany will face higher pressure on debt repayment in case of inflation, economic downturns or if investors start dumping their bonds. It did not elaborate.

Ratings agency Standard & Poor's cut Japan's long-term debt rating on Thursday for the first time since 2002, and hours later Moody's Investors Service warned the risk of the United States losing its top AAA rating, although small, was rising.

The International Monetary Fund said the G7's two biggest economies needed to spell out credible deficit-cutting plans before the markets lose patience and dump their bonds.

(Reporting by Zhou Xin and Kevin Yao; Editing by Kim Coghill)
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Google censors peer-to-peer search terms

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Google's famous "don't be evil" commitment, made in the firm's infancy, has elicited two kinds of response over the years. Fans of corporate responsibility hail the commitment, while more cynical tech-watchers suggested that it was only a matter of time before the need to compete forced Google to make some unsavoury decisions.

The latter group can now notch up another point in their favour. TorrentFreak, a tech blog, revealed today that Google has begun censoring search terms relating to torrent files, a file-sharing system. Terms such as "uTorrent", the name of a piece of torrent software, now no longer appear in the instant results that appear as you type terms into Google's search box.

The censorship is not complete: results for torrent-related terms do appear when you do a full Google search. They're just missing from the instant results. This is in line with changes announced by Google in early December.

Why is this evil? Many people will say it isn't. The internet is awash with torrents for pirated movies, music and software. The recording industry, for one, has long argued that Google and others should do more to restrict access to this content.

The problem is that Google is taking a clumsy approach. Many file-sharing sites are omitted from the list of censored terms. More importantly, uTorrent and some of the other terms refer to perfectly legal pieces of software, or the also legal companies behind the software. The software might be used for illegal purposes, but it also has legitimate applications, such as allowing new bands to release music for free.

So why did Google throw out an anti-piracy net that catches the good with the bad? The company isn't commenting on the changes, but many observers suspect that pressure from copyright holders, notably the music industry, has forced Google to implement a less than perfect fix.

On a final note, it looks like Google has either tweaked its censorship, or hasn't yet rolled out all the changes to all users. My searches, made around 10:30am Pacific time today, produced instant results for "uTorrent" and other terms that TorrentFreak says have disappeared. Some terms, like "Rapidshare", a file-sharing website, did appear to be censored.

Jim Giles posts at http://twitter.com/jimgiles3
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A lesson from China

Why Not? By Wong Sai Wan

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Huawei Technologies Co Ltd is a tale that could have easily been a Malaysian one if only we had taken the route blazed by the Chinese firm.

IN the late 1970s, telecommunications companies worldwide were investing heavily into PBX (Private Branch Exchange) believing it to be the future of the industry.

It was the in-thing then to have your own telephone exchange and operators to make and receive as many calls as the system allows through a single telephone number.

But when the world went cellular, most of these companies abandoned the PBX system for wireless telephony.

While some went into the actual business of providing cellular phone services, others went into production of the phone itself.

Yet others turned their attention to solutions for the industry.

Of course, there were some who went into all three aspects of the business. Scandinavian companies Nokia, Ericsson and Benephone were among those that had their fingers in every pie.

Here in Malaysia, it was no different. Our telecommunications giant in the mid-1980s was a company called Sapura Telecommunications Bhd under the stewardship of Tan Sri Shamsuddin Abdul Kadir.

Sapura then owned a flourishing PBX system business with many of its solutions largely developed locally, a thriving public phone box business – also with many locally-developed technologies – and a cellular phone network called Adam with the prefix 017, which was eventually bought by Maxis.

Sapura was a company way ahead of its time, like Google or Facebook. I remember being introduced to its then head of technology at a warung outside its headquarters in Wangsa Maju.

He showed me a cellular phone they were working on, thin as any digital phone we have today.

A state-of-the-art item then, it had all the fancy buttons and functionality that we take for granted today.

Sapura was then the company to work for, and Shamsuddin and his sons Sharil and Shariman were looked up to, as how we look up to Steve Jobs of Apple fame.

Shamsuddin ploughed back much of the company’s profits into research and development. It even had R&D centres and manufacturing plants in the United States.

But for reasons best known to Shamsuddin, Sharil and Shariman, Sapura gave up the telecommunications business. It is now an oil and gas company.

I will not speculate on why they did it, but wonder what might have been had they stuck with it.

At about the same time as Sapura was making headway in the telco industry, an ex-People’s Liberation Army (PLA) officer Ren Zhengfei – among hundreds of thousands then “retrenched” – was told by Chinese leader Deng Xiaoping to go forth and venture into business.

Ren did just that and set up Huawei Technologies in a small area outside of Shenzhen, which Deng had just declared as a Special Economic Zone. Like Sapura, Huawei’s initial venture in 1988 into the telecommunications business was in the realm of the PBX.

It stuck with this business for four years, with most of its customers in Hong Kong.

But when the world started going cellular, instead of trying to get a licence from the central government in Beijing, Ren turned the company’s attention towards providing solutions for cellular telephony.

As Ross Gan, Huawei’s corporate communications worldwide head, tells it, Ren recognised the importance of being a solution provider – both hardware and software – in the industry, and the importance of providing these solutions in the rural areas, away from the more established competitors.

In the early days, switches, base stations and networks were realms of the likes of Scandinavian giants Ericsson and Siemens.

Investing in the rural areas meant Huawei had to come up with the most efficient and hardy hardware. Today, that is being put to good use all over the world.

By 1995, Huawei had generated sales of about US$18.4mil (RM56.2mil), most of which came from its efforts in the rural venture in China.

It only expanded into the urban areas three years later. Ren knew that if Huawei were to take on the best at home and abroad it had to benchmark itself against the best – including international consulting companies IBM, Hay Group, Mercer, PricewaterhouseCoo­pers (PWC), and Fraunhofer-Gesell­schaft (FhG).

With the rest of the world admiring the economic miracles of China and India, Huawei, in 1999, set up the first and largest R&D centre in Bangalore.

The centre is still among the most advanced not only for Huawei but also for the whole of Bangalore today.
The following year, its total sales from the international market alone reached US$100mil (RM305mil).

There has been no looking back since. Huawei’s growth since then has been phenomenal. Of course, like most Chinese companies, its Western competitors accused it of all sorts of misconduct – from being “re-engineering experts” to “price under-cutters when tendering for projects”.

Whatever the truth may be, Huawei has left its competitors behind. Among its achievements:

> OVER 100,000 people are employed by Huawei worldwide;
> IT remains a private company, with 98.58% owned by the workers through the Union of Shenzhen Huawei Investment & Holding Co Ltd; Ren holds just 1.85% equity;
> LARGEST applicant under the UN World Intellectual Property Organisation’s Patent Cooperation Treaty programme with 1,737 filings lodged;
> PROVIDES software and hardware solutions to all European telcos and 45 of the world’s top 50 players;
> DEPLOYED the world’s first Long-Term Evolution (LTE) commercial network for TeliaSonera in Oslo, Norway, in 2009, and in the same year was awarded a contract to build the world’s largest LTE network for Telenor in Norway; and,
> ACHIEVED US$3.1bil (RM9.5bil) profit from total revenue of US$21.8bil (RM66.53bil) in 2009.

The management also recognises the importance of talent and research, says Gan, pointing to the fact that over 46% of its employees are engaged in R&D.

Of this number, a little over 70% have a Masters degree, and their average age is 29.

Huawei is now among the most exciting companies to work for in China because of the management style of Ren and his team, as well as its emphasis on the future.

But here in Malaysia, to most people on the street, Huawei is the plug and play USB modem commonly called the dongle by those in the industry.

The company was the first to come out with such a modem, which is now widely used by many Malaysians to access the Internet via mobile broadband.

Huawei has been in the country for the past decade and the country’s three main operators (Maxis, Celcom and Digi) are major customers of this Chinese giant of a company.

Someone in China could have been writing a similar article about a Malaysian company if the likes of Sapura had stayed in the business.

> Executive editor Wong Sai Wan was more than impressed with the Chinese company’s head office in Shenzhen and noted the numerous signboards pointing to Huawei City all along the expressway.