[华尔街日报亚洲版].WSJA-030811-COMPLETE

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XXXV NO. 236 * * Wednesday, August 3, 2011 Beijing Buries the Train-Crash Story OPINION Pages 9, 11 Beijing Buries the Train-Crash Story OPINION Pages 9, 11 China’s Imitation Retailers: Beyond Simple Fakes BUSINESS & FINANCE Page 15 ASIA As of 12 p.m. ET DJIA 12031.64 g 0.83% FTSE 100 5718.39 g 0.97% Nikkei 225 9844.59 g 1.21% Shanghai Comp. 2679.26 g 0.91% Hang Seng 22421.46 g 1.07% Sensex 18109.89 g 1.12% S&P/ASX 200 4433.60 g 1.43% asia.WSJ.com (India facsimile Vol. 3 No. 41) Australia:A$6.00(InclGST),Brunei:B$7.00,China:RM B25.00,Hong Kong:HK$18.00,India:Rs25.00,Indonesia:Rp18,000(InclPPN),Japan:Yen500(InclJCT),Korea:W on2,500, M alaysia:RM 6.00,Pakistan:Rs140.00,Philippines:Peso80.00,Singapore:S$4.00(InclGST),SriLanka:Slrs180(InclVAT),Taiw an:NT$60.00,Thailand:Baht50.00,Vietnam :US$2.50 KKDN PP 9315/10/2011 (026992) M ICA (P) NO.164/10/2010 SK.M ENPEN R.I.NO:01/SK/M ENPEN/SCJJ/1998 TGL.4 SEPT 1998 Going for Gold South Korea bought gold for the first time in 13 years, echoing a global trend of central banks seeking to diversify their reserves and reduce dependence on the U.S. dollar. Page 3 U.S. Vote Averts Default Debt Plan Clears Senate 74-26; Obama Signs Bill WASHINGTON—The Sen- ate voted 74-26 Tuesday to approve sweeping legislation to raise the country’s $14.29 trillion debt ceiling and cut the budget deficit by at least $2.1 trillion over the next de- cade, a major victory for Re- publicans who have long bat- tled to shrink the size of the U.S. government. With the vote, the Senate concluded an intense political fight that dominated the agenda of the president, se- nior congressional leaders and Washington lobbyists for weeks. Republican lawmakers who were opposed to the bill said it didn’t do enough to tackle federal deficits, while the Democrats who voted no de- cried the package for gutting federal programs that fund education and programs for the poor and elderly. The Senate action sent the bill to the White House for President Barack Obama’s sig- nature, just hours before a deadline to avert the U.S. gov- ernment’s running out of money to pay its bills. Failure to act could have triggered a U.S. credit default. Senate Minority Leader Mitch McConnell (R., Ky.) called the bill the beginning of “a new way of doing busi- ness in Washington.” Treasury Department offi- cials, financial-market partici- pants and Federal Reserve Board Chairman Ben Ber- nanke have all warned a U.S. default could lead to another economic recession, and it also would drive down the value of the dollar and push up interest rates, forcing mil- lions of ordinary Americans to face higher borrowing costs. “Our country was literally on the brink of disaster,” Sen- ate Majority Leader Harry Reid (D., Nev.) said on the floor shortly before the vote. “But with one day left we were able to get together to avert that disaster.” An unusual coalition of lib- eral-leaning Democrats and conservative-minded Republi- cans joined together to op- pose the compromise agree- ment. Just six Democrats opposed the measure—liber- als such as Sens. Kirsten Gilli- brand of New York, Tom Har- kin of Iowa and Robert Menendez of New Jersey— while 19 Republicans voted no, including Sen. Orrin Hatch of Utah and Jim DeMint of South Carolina. Overall, voting yes were 45 Democrats, 28 Republicans and one independent, while the no votes came from 19 Re- publicans, six Democrats and one independent. The eventual agreement was short of the $4 trillion in deficit reduction Mr. Obama proposed at one stage in the talks. Still, budget experts said the final deal was his- toric since it changed the tone of the fiscal debate in Wash- ington. “We were on the verge of Please turn to page 12 By Corey Boles, Michael R. Crittenden and Kristina Peterson President Barack Obama, after the Senate passed the bill Tuesday, urged Congress to be ready to compromise to further cut spending. Re ut er s Pressure Increases On Spain And Italy MADRID—Spanish and Italian borrowing costs hit new euro-era highs on Tues- day, making it clear the Euro- pean sovereign-debt crisis isn’t over, and national lead- ers sought to fend off the tur- bulence in financial markets. Spanish Prime Minister José Luis Rodríguez Zapatero postponed his vacation to dis- cuss the market turmoil with domestic and European Union political leaders, and a high- level Italian committee met late Tuesday in Rome to dis- cuss the trends in the sover- eign-debt markets. Prime Minister Silvio Berlusconi is set to address Parliament on Wednesday about his plan to cope with a crippling jump in debt-servicing costs. A new bout of risk aver- sion, caused by the debt crisis and worsening economic indi- cators in both the U.S. and the euro area, sent the spread be- tween Spanish 10-year bonds and German bunds to four percentage points for the first time earlier Tuesday. It later fell back slightly. Italian 10-year yields rose sharply at the open, with the spread to bunds widening more than 0.3 percentage point. By midafternoon in Eu- rope, Italian 10-year yields were over 6%, and Spanish yields were over 6.2%. London Please turn to page 14 By Jonathan House, Christopher Emsden and Santiago Perez Exploration Makes for China Sea Tension After appearing to make progress in cooling tensions over the South China Sea in recent weeks, Southeast Asia and China face the potential for more trouble ahead as oil and gas companies expand their exploration work in the contested waters. In the latest move, an en- ergy company controlled by Philex Mining Corp. of the Philippines plans to drill at least two wells and conduct more seismic surveys starting next year in a natural-gas prospect in the Reed Bank, one of the most-disputed ar- eas in the South China Sea near the Philippines, Philex’s chairman said Tuesday. That move comes after the Philex- controlled exploration com- pany, London-listed Forum Energy PLC, wrapped up an earlier round of seismic sur- veying earlier in the year in the region, which has already been the subject of numerous dust-ups in the past. Other companies, includ- ing China National Offshore Oil Corp., or Cnooc, and Viet- nam’s state-run Vietnam Oil and Gas Group, or Petroviet- nam, are also ramping up sur- veying efforts in the South China Sea. “There should be more ex- ploration in the area,” said Philex Chairman Manuel Pan- gilinan, whose Philex group owns 65% of Forum Energy, and who envisions spending as much as $86 million in the area between now and 2013. “Obviously, the issue will be a political one,” he said in Ma- nila. “My only request to the claimants, and this is the ideal situation, is allow us to do our work.” There was no immediate response to the plan from China, which also claims parts of the Reed Bank and which has opposed exploration there before. In one incident this year, Philippines authorities dispatched two military air- craft to the area after a Phil- ippines oil-exploration vessel said it was being intimidated by Chinese patrol boats, though China has said it wasn’t intruding. However, an official Chi- nese newspaper on Tuesday accused the Philippines of lacking sincerity in its efforts to resolve territorial disputes, and warned of unspecified consequences if China is ig- nored. The editorial in the Communist Party’s flagship People’s Daily cited recent Please turn to page 14 BY PATRICK BARTA AND CRIS LARANO dingbat Deal is already fodder for campaigns.................................... 12 dingbat Tea party sees no triumph in compromise................................. 13 dingbat Washington’s haggling left Wall Street dangling.............. 17 2 * * THE WALL STREET JOURNAL. Wednesday, August 3, 2011 THE WALL STREET JOURNAL ASIA Dow Jones Publishing Company (Asia) 25/F, Central Plaza, 18 Harbour Road, Hong Kong Tel 852-2573 7121 Fax 852-2834 5291 www.wsj-asia.com SUBSCRIPTIONS and Address Changes, please telephone our local customer service hotline, Hong Kong/Taiwan: 852-2831 2555; Beijing: 86-10 6581 4090; Shanghai: 86-21 5836 8228; Indonesia: 62-21 527 7592; Japan: 81-3 6269-2760; Korea: 82-2 756 1695; Malaysia: 60-3 2026 4061; Philippines: 63-2 848 5873; Singapore: 65-6415 4000; Thailand: 66-2 690 4222 to 7; India: 91-11 6462 0215. Or email: service@wsj-asia.com ADVERTISING SALES worldwide through Dow Jones International. Hong Kong: 852-2831 2504; Singapore: 65- 6415 4300; Tokyo: 81-3 6269-2701; Frankfurt: 49 69 29725390; London: 44 207 842 9600; Paris: 33 1 40 17 17 01; New York: 1-212 659 2176. Or email: wsja.publisher@dowjones.com Trademarks appearing herein are used under license from Dow Jones & Company. USPS 337-350ISSN 0377-9920 PAGE TWO ONLINE TODAY Most read in Asia 1. Uneasy House Passes Debt Deal 2. Sea Change in Debt Markets 3. Italy Grapples With Influx of Migrants 4. China Points to Pakistan in Attack 5. HSBC Shift Cuts Jobs, Branches Most emailed in Asia 1. China Points to Pakistan ... 2. How Economy Could Grow—or Shrink 3. Korea Takes Fresh Swing at M&A 4. Opinion: Barack Obama the Pessimist 5. Crash Spotlights China’s Train Crisis India Real Time blogs.wsj.com/indiarealtime What does it take to turn ‘slacktivism’ into activism? Some of the work has to be done in the real world—and not just online. Driver’s Seat Which car is no longer ‘recommended’ by Consumer Reports? blogs.wsj.com/drivers-seat Sports blogs.wsj.com/dailyfix A look at why being the coach of the U.S. national soccer team is different from coaching any other sport in the country. i i i Business & Finance n Japan’s Kirin is paying $2.57 billion to buy a majority stake in Schincariol, Brazil’s No. 2 beer brewer, in a bid to establish a foothold in the market. 15 n Northumbrian Water said the U.K. utility’s board will recom- mend shareholders accept a $3.93 billion takeover bid from a con- sortium controlled by Hong Kong investor Li Ka-shing. 16 n Japan’s finance minister called the yen “strongly overvalued” amid speculation the government may step in to stem the yen’s rise, while in Europe, the specter of the Swiss franc reaching parity with the euro is causing alarm. 3, 5 n Carlyle plans to invest up to $194 million in Haier Electronics in a deal that will give Carlyle an approximate 9% stake in the Chi- nese home-appliance giant. 16 n China is considering tightening regulations on exports of rare- earth metals amid concerns over smuggling and the export of by- products that aren’t included in current limits. 4 n Banks across Europe are in re- trenchment as they try to shield themselves from the Continent’s financial crisis and an increasingly bleak U.S. economic outlook. 19 n BNP Paribas posted a 1.1% rise in second-quarter profit as the im- pact of the Greek rescue plan nearly offset a robust perform- ance at the lender’s corporate and investment banking division. 19 n China ordered state-owned companies planning to restructure assets to seek approval from bondholders. 19 n HSBC CEO Stuart Gulliver said Hong Kong authorities could con- sider pegging the local dollar to a basket of currencies, instead of the U.S. dollar or the yuan. 20 n Singapore Exchange posted flat quarterly profit, hurt by a de- cline in revenue from its securi- ties business. 19 n The top executive of NYSE Eu- ronext said an EU review of its tie-up with Deutsche Börse will likely result in conditions being placed on the combined firm. 21 n Fed officials face constraints in how they can help the U.S. economy. 5 n U.S. car sales stayed weak for a third straight month in July. 17 i i i World-Wide n Japan intensified its rhetoric against China’s military, accusing Beijing of “assertiveness” and say- ing it needs to watch how China views contested waters. 4 n Rebels in Libya marked the start of Ramadan, inspired that the Muslim holy month would fire their resolve. 6 n Syrian troops tightened their siege on the city of Hama, sending residents fleeing. n A former managing editor of the News of the World was ar- rested in the phone-hacking inves- tigation in the U.K. 6 n Indigenous Papuans rallied in Indonesia’s Papua, demanding a referendum for independence. At least one person drowned in floods that swamped parts of the Philippine capital after monsoon rains closed schools and government offices. Nearly 800 people evacuated their homes along the Marikini River in Manila as waters rose to dangerous levels. Above, a boy swims along a main street in the capital. Re ut er s What’s News— Inside Business & Finance: Toyota raises outlook despite profit slump. 15 Innovation Awards: A new herbal drug from Hutchison. 22 The Property Report: Saudi Arabia to build world’s tallest tower. 23 Heard on the Street: Asian nations seek new homes for reserves. 28 Wednesday, August 3, 2011 THE WALL STREET JOURNAL. 3 WORLD NEWS Japan Steps Up Warnings on the Yen TOKYO—Japanese authorities, in- creasingly worried about the high value of the yen and its impact on an already weak economy, have increas- ingly hinted at market intervention, while the Bank of Japan is set to consider steps to pump more cash into the economy by purchasing bonds and other assets. Finance Minister Yoshihiko Noda said on Tuesday that the yen is “strongly overvalued” and made it clear he has been in touch with over- seas authorities on currency matters, fueling speculation that the govern- ment may act to stem the yen’s steady rise. “In principle, it is desirable for fundamentals to be reflected in the market, and in this sense, the yen is strongly overvalued,” Mr. Noda said at a regular morning news confer- ence. “Its movement continues to be one-sided.” The Bank of Japan, meanwhile, prepared for a meeting of its policy board on Thursday and Friday, when it is expected to consider additional purchases of assets on the open mar- ket, measures that could help to push the yen lower. Despite Japan’s lackluster eco- nomic outlook and massive govern- ment debt, the yen has emerged as a haven for investors facing growing uncertainty in the U.S. and Europe. The strong yen is worrying Japanese officials as it handicaps exporters trying to recover from disruptions caused by the March 11 earthquake and tsunami. The dollar fell briefly to ¥76.29 on Monday in New York trading, put- ting it near its post-World War II low of ¥76.25 that was reached on March 17. It recovered some ground follow- ing the U.S. House’s approval of an increase in the debt ceiling. The yen’s jump in late March prompted Japan to undertake joint intervention with the other Group of Seven leading industrialized nations on March 18 in the wake of the disas- ters. Asked whether consultations with foreign authorities on the yen are under way, Mr. Noda said he had been communicating with “every” overseas authority on the yen. It is natural for Japan’s govern- ment to alert the U.S. in advance if it decides to intervene, a person famil- iar with currency policy affairs said. The person said he didn’t know whether Tokyo has already won a go- ahead from U.S. Treasury Secretary Timothy Geithner for intervention. While Mr. Noda has been warning about the problems of a strong yen for the past few weeks, signs are growing that Japanese officials are at near the end of their patience. “Japan can stage an intervention at any time,” another person said. Currency traders, who had been skeptical that Japan would act, now generally concur that intervention is becoming increasingly likely. Japan’s authorities are waiting to see how the dollar would respond af- ter the U.S. Senate’s expected ap- proval of raising the U.S. debt ceil- ing, which came early Wednesday Tokyo time, several people familiar with the matter said. Uncertainty over the debt talk “has been a reason behind the recent selling of dollars,” one person said. Also on Japanese officials’ radar screen are U.S. jobs data for July, due Friday, which would shed light on whether the dollar’s recent weakness is in line with economic fundamen- tals, they said. Bank of Japan officials have like- wise become increasingly concerned that the stronger yen could weigh on Japanese business and household sentiment and prompt domestic firms to shift their business opera- tions overseas. The central bank’s most likely step would be to expand its asset- purchase program. In an unusual program for a central bank, the Japa- nese central bank has a ¥10 trillion fund to buy financial assets ranging from government and corporate bonds to exchange-traded funds and real-estate investment trusts. Japanese manufacturers have been stepping up calls on the gov- ernment to intervene in the market. There was a similar clamor for in- tervention in the days before Ja- pan’s yen-selling on Sept. 15, 2010, the first such solo action in more than six years. Other senior officials have also weighed in. Trade Minister Banri Kaieda said on Tuesday that “the government as a whole must con- sider countersteps” against the yen rises. —Andrew Monahan and Megumi Fujikawa contributed to this article. BY TAKASHI NAKAMICHI Dollar vs. Yen Howmany yen one dollar buys A broker works in front of a TV showing Japan's Finance Minister Yoshihiko Noda in Tokyo Tuesday. Sources: WSJ Market Data Group; Reuters (photo) ¥95 75 80 85 90 '112010 Stronger yen Korean Move Into Gold Reflects a Growing Trend SEOUL—South Korea’s move to buy gold for the first time in 13 years is the latest in a growing trend of central banks diversifying their reserves and reducing dependence on the U.S. dollar as the reserve cur- rency comes under greater scrutiny. Analysts say a potential down- grade of the U.S. by at least one of the major ratings firms could hasten moves out of dollar-denominated as- sets, though the change still is likely to be gradual as international trade remains predominantly in the dollar and as central banks lack alterna- tives. Gold, widely considered a safe haven during crises, looks set to see more buying interest, particularly from Asian central banks, whose re- serves are in low single-digit per- centages. Holdings in Europe and the U.S. are in high double-digits. The Bank of Korea on Tuesday said it bought 25 metric tons of gold from the global market in June and July, bringing its total gold reserves to 39.4 tons as of the end of July. While that represents just 0.7% of the country’s foreign-exchange re- serves, which stood at a record $311.03 billion at the end of July, the move still marked a significant change in strategy. “More and more central banks are interested in buying gold. As the purchasing power of some tradi- tional reserve paper currencies comes down, it’s a reminder that gold is a good store of value,” said Yan Chen, head of metals and min- ing research at Standard Chartered. European central banks, big sell- ers of gold just a few years earlier, have all since stopped unloading the metal. India and Sri Lanka were among major buyers when the Inter- national Monetary Fund sold gold last year, while China, which has the world’s biggest foreign reserves, has been increasing its gold holdings, though its purchases have been mainly from domestic producers. The push into gold comes as countries such as Russia and China continue to question the dollar’s pre-eminence as a reserve currency and its role in international trade and investment. In a speech Monday, Russian Prime Minister Vladimir Putin said Russia, which keeps almost half of its reserves in dollar assets, and other countries should seek new re- serve currencies to hedge against “a systemic malfunction” in the U.S. His remarks reflect concerns among many countries over the labored ne- gotiations in Washington to avoid a potentially devastating debt default. Meanwhile, the chaotic U.S. debt talks in have aggravated longstand- ing concerns in China about its over reliance on the dollar and fueled an- ger over what many in Beijing see as irresponsible behavior in Washing- ton. Officials have been relati