Finance and Economic

When production lines close in the United States, protectionism tends to rear its head. In China, the opposite is happening.

A volatile mix of inflation, a rising yuan and new labor legislation has corroded profits in the country’s manufacturing heartland. Hundreds, possibly thousands, of factories have been forced to close or leave the Pearl River Delta, which churns out more than a quarter of China’s exports.

Some are moving inland. Others are going to places like Vietnam, where labor is even cheaper.

But analysts say the movement dovetails with — and in no small way results from — state policies designed to propel China’s economy up the value ladder. Guangdong led reforms, and it is leading the reinvention of China’s manufacturing industry.

China, like other rapidly industrializing economies, is learning it cannot compete forever by churning out cheap, simple goods while gobbling up increasingly costly resources such as oil and iron ore cash till payday. Policymakers are keen to promote more efficient industries and higher-value products as a route to more predictable and sustainable economic growth.

“The factories that are closing are really victims of creative destruction,” said consultant Edith Terry, author of a report on the changes in the Delta published in February.

Industry estimates put the number of factories closing in the Pearl River Delta as high as 15,000, although the Guangdong trade bureau has said fewer than 300 were shutting. Most were labor-intensive, small- or medium-sized producers of metal or plastic products, toys, garments and shoes, the government said.

About 90 percent are based in Hong Kong or Taiwan, which explains why industry groups there have been so vocal in calling for relief from the pernicious effects of fast-rising costs. 

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WASHINGTON – The European refueling tanker that won a $35 billion Pentagon contract last week "was clearly a better performer" than its U.S. rival, Air Force Secretary Michael Wynne told lawmakers Wednesday.

Speaking at a Senate Armed Services Committee hearing, Wynne said the plane offered by European Aeronautic Defence and Space Co. and its U.S. partner, Northrop Grumman Corp., was determined to be less expensive and less risky than the plane offered by Chicago-based Boeing Co.

The planes were judged on nine key criteria, he said, and "across the spectrum, all evaluated, the Northrop Grumman airplane was clearly a better performer."
Committee Chairman Carl Levin of Michigan and the panel’s top Republican, John Warner of Virginia, said they would want more information on how the contract was won after the companies are briefed Friday.

Jim Albaugh, top executive of Boeing’s Integrated Defense Systems, said the company was surprised to lose the contract, and believes its proposal would have been a better choice.

"We offered an airplane that was more cost-effective. We offered an airplane that met the requirements better than the competition, and of lower risk," Albaugh told a Citigroup conference of defense analysts in New York.

But Warner, who oversaw the tanker deal as head of the committee before Levin, commended the Air Force’s process and said he supports the decision.

Reacting to heavy criticism that the Pentagon is outsourcing military purchasing, Warner said lawmakers should back off.

"I feel very strongly that Congress should not get into the business of trying to rewrite a contract, particularly one of this magnitude and complexity," he said.

The contract calls for the Air Force to buy 179 in-flight tanker aircraft over the next 15 years as it replaces its Boeing-built KC-135 tankers, which are on average 47 years old.

Boeing had been heavily favored to win the new contract, and the Air Force’s decision helps EADS _ maker of Airbus _ break into the world’s largest military market and opens the door to possible follow-up contracts.

The EADS/Northrop Grumman team plans to perform its final assembly work in Mobile, Ala., although the underlying plane would mostly be built in Europe paydayloans.com. And it would use General Electric engines built in North Carolina and Ohio.

The contract award could still be challenged by Boeing or members of Congress. Boeing will protest the decision only "in the event that we think there is an irregularity in the proposal phase," Albaugh said.

Boeing shares, which have shed more than a quarter of their value since reaching an all-time high of $107.83 last July, rose 94 cents, or 1.2 percent, to $80.56 in afternoon trading.

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Facebook said on Tuesday it had named Google Inc’s global sales head, Sheryl Sandberg, as the social networking site’s new chief operations officer, accelerating a decline in Google shares to year lows.

Google shares slid as much as 4.6 percent, trading below a 52-week low for the first time since its IPO and removing a technical crutch that had supported the stock.

The departure of Sandberg, who in six years at Google was instrumental in developing its fast-growing online advertising business, marks one of the first senior executives at the Web search leader to leave since its sensational initial public offering in August 2004.

“Sandberg’s departure is a significant loss for Google,” RBC Capital analyst Jordan Rohan said. “It signals that the company has reached a level of scale and bureaucracy with which some early Google employees are uncomfortable.”

“It is a significant move,” Oppenheimer analyst Sandeep Aggarwal agreed cash advance. “This could be the start of others leaving.”

Chief Financial Officer George Reyes said he would retire last August, the three-year anniversary of Google’s IPO, when pre-IPO stock options had fully vested for executives. Reyes remains at Google as it seeks to hire a replacement.

Symbolically, Sandberg’s hiring represents a passing of the crown as Silicon Valley’s hottest start-up from Google to Facebook, which has gained momentum over the past year.

“While there is no comparison between Google and Facebook in revenue terms, Facebook, in terms of popularity and impact, has a very similar profile to the pre-IPO Google,” Aggarwal said. 

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Two Federal Reserve officials said Friday that the housing market could damage the economy even more severely than it has already if measures are not taken to correct it.

In speeches at the U.S. Monetary Policy Forum in New York, Eric Rosengren, president of the Federal Reserve Bank of Boston, and Frederic Mishkin, a member of the Federal Reserve board of governors, spoke about the critical nature of the housing market crisis.

"Further declines in housing prices could depress residential investment, reduce consumer spending, generate elevated foreclosures, and contribute to financial instability," said Rosengren.

"Taking appropriate monetary, regulatory, and fiscal actions to mitigate this risk seems prudent."

Mishkin worried that the housing market could pose an even greater threat to the economy if the United States enters a recession and does not demonstrate the modest growth that economists expect.

"It is important to understand … how significant the downside would be if the rise in the unemployment rate and the decline in housing prices were significantly greater than currently expected," he said.

Both officials said they believe this slump will be more pronounced than other historical downturns. They said financial institutions have been unwilling to expose themselves to the mortgage market, and lenders are hesitant to lend to risky borrowers in a declining house price market after the subprime meltdown.

"The housing malaise could be more protracted and the recovery more anemic than we have experienced in previous housing downturns," said Mishkin.

"Unfortunately, we have little historical precedent for sustained declines in national housing prices, which makes it difficult to forecast future home prices," Rosengren added in his speech.

But Rosengren said a solution may not solely be related to monetary policy.

As mortgage rates continue to decline, he said that foreclosures and unemployment should come down with them no fax payday loan. He also said that as borrowers shy away from risky subprime loans, they should instead look into FHA loans - home mortgages that allows for a purchase or refinance with a low down payment.

"Examining how FHA programs could continue to be modernized and streamlined and become a more viable choice for borrowers may be an important mitigant for housing problems," said Rosengren. 

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Venezuelan state oil firm PDVSA told a UK court on Friday that a $12 billion freeze on its assets should not have been granted to Exxon Mobil (XOM.N: Quote, Profile, Research) as the oil major’s arguments were “sheer fantasy land”.

PDVSA lawyer Gordon Pollock said the amount frozen was excessive. He said a claim that PDVSA would try to hide its assets was not credible and the English court which awarded the freeze had exceeded its jurisdiction.

Pollock said the $12 billion figure Exxon asked to be frozen was based on adding up all the projected cash flows of the Venezuelan heavy oil project seized by President Hugo Chavez as part of his nationalization drive, without any discount made for the fact they run to 2035.

He said this argument was “simply economically and financially illiterate.”

“There’s only one way to describe that argument and that’s ‘weird’.”

He said any amount Exxon could claim legitimately was “an absolute tadpole” compared to the $12 billion which the U.S online cash advance. major oil company managed to have frozen so that compensation could be secured if it won arbitration over its lost oil fields.

He said the U.S. company justified the need for the freeze by alleging bad faith on the part of the Venezuelan government and by claiming state oil company PDVSA could rapidly sell its refineries and pipelines around the world and stash the cash away from Exxon’s grasp.

“This is sheer fantasy land,” he said. “Refineries don’t get up in the middle of the night and sneak away across the border.” 

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National Fuel Gas Co. and New Mountain Vantage GP, L.L.C., a leading shareholder of the energy company, have settled a disagreement involving several issues.

As part of the agreement, Williamsville-based National Fuel will increase the size of its board to 11 directors from 10 and to nominate, as a new director, Vantage's candidate Frederic Salerno.

Salerno will receive no compensation for his board service for as long as Vantage continues to own common stock of the company. The company said Salerno will be added to the original slate of the following continuing directors: Robert Brady, Rolland Kidder and John Riordan.

All four candidates will be nominated to serve for a term to expire in 2011. Upon election to National Fuel's board, Salerno will join the compensation and the nominating/corporate governance committees.

The parties, who have been at odds for several months, also agreed to resolve a dispute involving development of acreage Appalachian, including the Marcellus Shale, propetty which is considered extremely valuable faxless payday advance.

Also, National Fuel said that it intends to evaluate the divestiture of its assets in the Gulf of Mexico as one key alternative if performance targets set by the company are not met during this fiscal year.

"We have always sought to achieve a productive relationship with National Fuel's management and Board for the benefit of all shareholders," said a statement David DiDomenico, managing director of Vantage. "We believe that together we can successfully advance the Company's interests by focusing on developing the Appalachian acreage, including the Marcellus Shale, by carefully evaluating ongoing and future activities in the Gulf of Mexico, by considering Vantage's other suggestions, and by taking important steps to improve corporate governance."

Shares of National Fuel Gas (NYSE: NFG) closed up 18 cents thursday to $41.35.

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