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Business this week
Aug 13th 2009
From The Economist print edition
America’s Federal Reserve decided not to increase its $300 billion programme of buying Treasury debt
with newly printed money, though it did push back the completion date and left open the option of future
purchases. The Bank of England decided recently to expand its plan to purchase assets, mostly gilts, by
£50 billion ($83 billion), to £175 billion. Mervyn King, the governor of the Bank of England, hinted that,
given the parlous state of the British economy, “quantitative easing” would continue. See article
Chinese officials downgraded an accusation against four employees of Rio Tinto from state espionage
to the less serious complaint of obtaining trade secrets. The case against the Anglo-Australian mining
group is complicated by contradictory signals from China’s state-secrets watchdog, which backed away
from an earlier claim that through “deceit”, Rio had cost China $100 billion by overcharging for its iron
ore. See article
Australia’s Felix Resources pondered a takeover bid from China’s Yanzhou Coal Mining, the latest
instance of China’s growing appetite for acquisitions in Australia’s mining sector.
BHP Billiton, Rio Tinto’s larger rival, ended a six-year run of record profits. Net income for the year to
June 30th fell by 62%, to $5.9 billion.
Feeding the dragon
China notched up record imports of oil and iron ore last month, amid rising demand for exports. China
imported 4.6m barrels of oil a day in July (equivalent to over half of Saudi Arabia’s daily output) and
58.1m tonnes of iron ore.
America claimed an “important step” had been taken towards opening market access for American
goods in China after the World Trade Organisation published a ruling that Beijing must lift restrictions on
imports of copyrighted films, DVDs and books. The distribution of entertainment products is limited to
state enterprises, which America says increases the demand for pirated goods.
Principles in the principality
Britain reached an accord with Liechtenstein in which the tiny country’s banks will be required to ask
their British clients if their tax records are in order, and given the chance to pay back taxes in return for
lighter penalties. In April the G20 declared a clampdown on tax havens.
A judge postponed a decision to approve Bank of America’s proposed deal with the Securities and
Exchange Commission, which settles allegations that the bank misled investors about executive
bonuses at Merrill Lynch. BoA took over Merrill during last September’s financial maelstrom; the bonuses
sparked a furore when they came to light. The judge said he had “continued misgivings” about the
settlement, in which BoA neither admits nor denies wrongdoing.
American International Group posted its first quarterly net profit since the third quarter of 2007. The
troubled insurer benefited from a change in the way financial companies can value troubled assets. Robert
Benmosche, formerly of MetLife, started his job as AIG’s new chief executive. See article
Royal Bank of Scotland lost £1 billion ($1.7 billion) after tax in the first half of the year as impairment
charges on toxic loans soared. ING, a Dutch bank that has racked up huge losses, reported a small
quarterly profit, its first for a year.
After a lengthy pursuit, Friends Provident, a British life insurance and pensions provider, agreed to a
£1.9 billion ($3.1 billion) takeover from Clive Cowdery’s Resolution.
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