Stocks see biggest fall in 10 years

China's stock market plummeted from record highs Tuesday as investors took profits when concerns arose that the Chinese government may try to temper its ballooning economy by raising interest rates again or reducing more of the money available for lending.
"Corrections usually happen because of a catalyst, and this may be it," said Ed Peters, chief investment officer at PanAgora Asset Management. "The move in China was a surprise, and when a major market has a shock it ripples through the rest of the market. With all the trade that goes on with China, there tends to be a knee-jerk reaction with that kind of drop."
The Shanghai Composite Index tumbled 8.8 percent to close at 2,771.79, its biggest decline since it fell 8.9 percent on Feb. 18, 1997. Since Chinese share prices doubled last year as investors poured money into the market after the completion of shareholding reforms, trading in Shanghai has been very volatile.
The Shenzhen Composite Index sank 8.54 percent on Tuesday to 709.81.
On Monday, the Shanghai index gained 1.4 percent to 3,040.60, extending a spate of record high closes.
Tuesday's fall in the Chinese market was caused not by any bad figures, or gloomy forecast. While some analysts cited pressure for profit taking as the major reason, others said the loss of about 800 billion yuan ($102 billion) in market capitalization was primarily triggered by a rumor about capital gains tax.
Well-renowned economist Wu Jinglian, a senior fellow with the Development Research Center of the State Council, has long called for collection of such a tax.
China Daily had no way to confirm that the government may be planning to levy a capital gains tax on investors but none of the government agencies has officially declared it was just a rumor either.
The government does not usually issue an official statement about something it was not doing or planning to do, according to Li Zhenning, president of Shanghai Rising Fund Management Co. He predicted that the market would pick up after one or two days.
The scale of the decline, however, surprised many.
He Jun, vice-president of Anbound Consultation Co, said: "Although the market index was at a high level and people were expecting a correction, what happened was astonishing."
The Shanghai index soared 130 percent last year.
He Jun said he had heard market rumors about a possible capital gains tax.
"This could have been a major trigger for such a plummet, promoting profit-taking funds to leave the market," he said.
But he believed the market would continue to be bullish this year.
Some analysts looked to the fundamentals to explain the unexpected fall.
Dong Chen, a senior analyst at CITIC China Securities, said: "Investors will unlikely be satisfied by the annual reports to be released by many listed companies. Their performance will provide no support for the high share prices."
Sources from Xiang Cai Securities said that the P/E ratio of the yuan-denominated A shares was double that of the world's average, indicating growing risks.
So yesterday's correction, Dong said, was "a good thing because it will pave the way for a healthy market in the long-run".
So long as China's macro-economic environment remains sound, investors still have a good chance to earn from the A-share market, analysts said.
Despite worries about too high share prices and management problems at large State-owned companies, analysts interviewed by China Daily all said the market stands a good chance this year.
Stephen Green, senior economist with the Global Research Division of Standard Chartered Bank, said the plunge has nothing to do with the overall economic situation.
"I don't think the drop is caused by the central bank's latest reserve ratio hike," he said.
The People's Bank of China, the central bank, required that commercial banks set aside 10 percent of their deposits starting February 25, up from 9.5 percent.
But Green said he sees at least one interest rate hike in the pipeline.
"You can lock some of the funds up in the banking system, but sooner or later if you want to control credit growth and investment, you simply have to make borrowing more expensive."
Globle Markets Plunge
US stocks had their worst day of trading since the Sept. 11, 2001, terrorist attacks, hurtling the Dow Jones industrials down more than 400 points on a worldwide tide of concern that the US and Chinese economies are stumbling and that share prices have become overinflated. The steepness of the market's drop, as well as its global breadth, signaled a possible correction after a long period of stable and steadily rising stock markets that had not been shaken by such a volatile day of trading in several years.
A 9 percent slide in Chinese stocks set the tone for US trading. The Dow began the day falling sharply, and the decline accelerated throughout the course of the session before stocks took a huge plunge in late afternoon as computer-driven sell programs kicked in, and also as a computer glitch caused a delay in the recording of a large number of trades.
The Dow fell 546.02, or 4.3 percent, to 12,086.06 before recovering some ground in the last hour of trading to close down 416.02, or 3.29 percent, at 12,216.24, leaving it in negative territory for the year. Because the worst of the plunge took place after 2:30 pm, the New York Stock Exchange's trading limits, designed to halt such precipitous moves, were not activated.
The decline was the Dow's worst since Sept. 17, 2001, the first trading day after the terror attacks, when the blue chips closed down 684.81, or 7.13 percent.
The drop hit every sector across the market, and a total of US$632 billion was lost in total in US stocks on Tuesday, according to Standard & Poor's Corp. Riskier issues such as small-cap and technology stocks suffered some of the biggest declines, but big industrial companies, those that are often hurt the most in an economic downturn, also were pummeled, with raw materials producers among the hardest hit.
But analysts who have been expecting a pullback after a huge rally that began last October and sent the Dow to a series of record highs, were unfazed by Tuesday's drop.
"This corrective consolidation phase isn't just going to be one day, but we don't believe this is going to be a bear market," said Bob Doll, BlackRock's global chief investment officer of equities.
Some investors also tried to put Tuesday's slide into a longer-term perspective.
All who invest should feel grateful that we've had a great run for the last 12 to 18 months," said Joel Kleinman, a Washington, DC attorney, adding that he has learned to not read too much into any short-term ups and downs. "This is another day in the market."
Still, traders' dwindling confidence was knocked down further by data showing that the economy may be decelerating more than anticipated. A US Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated jitters about the direction of the US economy, just a day after former Federal Reserve Chairman Alan Greenspan said the United States may be headed for a recession.
"It looks more and more like the economy is a slow growth economy," said Michael Strauss, chief economist at Commonfund. "Moderate economic growth is good -- an abrupt stop in economic growth scares people."
The market had been expecting the US government on Wednesday to revise its estimate of fourth-quarter GDP growth down to an annual rate of about 2.3 percent from an initial forecast of 3.5 percent, and grew increasingly nervous on Tuesday that the figure could come in even lower.
But a growing feeling that Wall Street, which has had a big run-up since October, was due for a correction also played into Tuesday's decline.
"I think that the market was prepared to pull back. The constellation of issues that were worrying the market came to a head," said Quincy Krosby, chief investment strategist at The Hartford.
Still, the market will need to pull back further before its decline can officially be called a correction, which is considered a 10 percent decline in a bull market. Just a week ago, the Dow had reached new closing and trading highs, rising as high as 12,795.92; it's now down 4.5 percent from that level.
The broader Standard & Poor's 500 index fell 50.33, or 3.47 percent, Tuesday to 1,399.04, and the tech-dominated Nasdaq composite index was off 96.65, or 3.86 percent, at 2,407.87. Both indexes have also turned negative for the year.
The Russell 2000 index of smaller companies dropped 31.03, or 3.77 percent, to 792.66.
Hong Kong's benchmark Hang Seng Index dropped 1.8 percent, and Malaysia's Kuala Lumpur Composite Index fell 2.8 percent. Japan's Nikkei stock average fell a more moderate 0.52 percent, but European markets were rattled -- Britain's FTSE 100 lost 2.31 percent, Germany's DAX index dropped 2.96 percent, and France's CAC-40 fell 3.02 percent.
Bond prices shot higher as investors bought into the safe-haven Treasury market, pushing the yield on the benchmark 10-year Treasury briefly note down to 4.47 percent, its lowest level so far this year, from 4.63 percent late Monday; the yield settled at 4.52 percent.
The durable goods drop raised the chance of the US Federal Reserve easing interest rates later in the year -- a possibility that makes the bond market an attractive place to be right now.
The hope for slowing inflation could be dashed, though, if energy costs keep rising. Oil prices initially fell Tuesday on worries that Chinese demand could be dampened should its economy slow down, but later rose on escalating tensions in the Middle East. Light, sweet crude for April delivery added 7 cents to settle at $61.46 a barrel on the New York Mercantile Exchange.
The dollar slipped against other major currencies, while gold also fell.

林黛玉

Lin Daiyu
Lin Daiyu (林黛玉) is one of the principal characters of Cao Xueqin's classic Chinese novel Dream of the Red Chamber. She is described as having been sickly and prone to illness since childhood; indeed, when she is first introduced, a couplet describes her "with a heart like Bi Gan's, yet even more intelligent; and with an illness like Xi Zi, yet even more beautiful". She is a well-educated and intelligent young woman who is portrayed in a highly sympathetic light. The romance between Daiyu and Jia Baoyu forms one of the main threads of the book and in many readers' eyes, Lin Daiyu is the book's leading lady.
Daiyu is an emotional girl, prone to mood swings. Her character complements that of her cousin, Xue Baochai. Indeed, it has been suggested that the two women are complements of one another - each has exactly the attributes of Cao Xueqin's ideal woman which the other lacks. Baoyu's maid Skybright (Qingwen, 晴雯) is often considered to be Daiyu's "double," in that they have similar temperaments and a similar "ethereal" beauty.
Daiyu's emotional tirades make sense in the context of the supernatural. It is strongly suggested that Daiyu is a reincarnated vermillion pearl (the "Crimson Pearl Flower" in the Hawkes translation) that through good care by a spirit in the heavens (the reincarnation of which is strongly suggested to be Baoyu) was imbued with life. In exchange for this gift, the Vermillion Pearl vowed to be reincarnated as a human, and pay back her caregiver in the form of as many tears as a girl may weep in a lifetime.

West meets East on Valentine's Day

foreign newly-wed couple people kiss at a plaza in Hong Kong where they hold their Chinese-Western blended flavor wedding ceremony a day ahead of today's Valentine's Day.

Six-Party nuclear talks yield breakthrough

The Democratic People's Republic of Korea (DPRK) yesterday agreed to shut down and seal its nuclear facility in Yongbyon within 60 days in exchange for energy a process widely seen as a major breakthrough.
Under the deal reached at the Six-Party Talks to denuclearize the Korean Peninsula, Pyongyang will as the first step also accept monitoring from, and verification by, the International Atomic Energy Agency within the timeframe.
In return, it will receive an initial 50,000 tons of heavy fuel oil or equivalent of economic and humanitarian aid, Wu Dawei, the chief Chinese negotiator, said in Beijing yesterday.
The DPRK will subsequently take complete measures to irreversibly "disable" its nuclear programs and receive 950,000 tons of fuel oil, or the equivalent in the form of economic or humanitarian aid, from China, the United States, the Republic of Korea (ROK) and Russia.
The 1 million tons of fuel would be worth around $300 million at current prices for Asian benchmark high-sulphur heavy fuel oil, which is used in power stations, shipping and elsewhere.
The joint agreement outlining the initial actions the DPRK will take to end its nuclear drive and the economic rewards it will receive in return was reached after five days of hard negotiations.
All the parties agreed to take coordinated steps to implement the joint statement of September 19, 2005 in a phased manner in line with the principle of "action for action".
Under that agreement, Pyongyang pledged to give up its nuclear program in exchange for energy aid and security guarantees.
According to the new agreement, bilateral talks will start between the DPRK and the United States, and between the DPRK and Japan, to find ways to resolve bilateral disputes and move toward diplomatic relations.
Washington will also begin the process of clearing the DPRK from a list of state sponsors of terrorism.
The initial actions also cover the establishment of five working groups within 30 days on denuclearization, normalization of DPRK-US and DPRK-Japan relations, economic and energy cooperation, and Northeast Asia peace and security.
Meeting with heads of delegations to the talks after the closing ceremony, State Councillor Tang Jiaxuan said the just-concluded session is a major breakthrough and the Six-Party Talks mechanism itself has entered a substantive period.
"The Chinese government firmly supports the document and will spare no efforts to take on its responsibilities," Tang said.
He said the result has once again showed that diplomatic negotiations are the "correct and practical way" to resolve political disputes.
US Assistant Secretary of State Christopher Hill, also the country's chief negotiator to the talks, told reporters: "Obviously we have a long way to go, but we're very pleased with this agreement. It's a very solid step forward."
In Washington, the White House said the agreement is "a very important first step" toward the denuclearization of the Korean Peninsula.
Chinese analysts were pleased with the breakthrough.
Ruan Zongze, a senior researcher at the China Institute of International Studies, described the agreement as a New Year's gift.
He said "Pyongyang and Washington, like the other four sides in the talks, had made great compromises on their positions during Monday's 16-hour marathon-like session", which showed their sincerity to make substantive progress.
He said it is of great political significance that the six parties reiterated that they would fulfil the commitments made in the 2005 joint statement.
Qi Baoliang, a researcher with the China Institute of Contemporary International Relations, said the initial actions are "the first important and concrete steps toward nuclear disarmament, and the agreement charts the direction for future development."
Agencies contributed to the story

Yangge(秧歌)

Yangge(秧歌) is a kind of folk dance accompanied by music with strongly accented rhythms. It is popular in many areas of north China. Nowadays, it is a keep-fit activity. It is especially popular among middle-aged and elderly women. It's Friday and the streets of downtown Beijing are full of activity. The sound of drumbeats and cymbals blare from the sidewalk while thousands of elderly people on street corners dance "Yangge," a traditional dance using brightly colored fans and costumes. In a nearby square, two groups of dancers swing, stamp and work up a sweat as they move to the beat. As the men beat the drums in a little competition to see who does best, the sound they create is deafening. Beijing is definitely ready to drum up its desire for exercise. Since ancient times, yangge has become the trademark sound of energy in motion. People dance yangge, sometimes with folk music, when celebrating festivals, triumphs, anniversaries and at wedding ceremonies. "Today, yangge is more a physical exercise than an art performance," says He Chuan, an expert of local custom and traditional arts in Beijing. Yangge doesn't require expensive instruments and a formal stage. A passerby may just join the group and strut his or her stuff. You can dance for five minutes or five hours. "In a yangge dance, you just stretch out your limbs and and forget about your frustrations by moving to the rhythm of the drumbeats," says Yang Linghua, 67, a regular yangge street dancer. "When you sweat and forget all the troubles in life, you will feel extreme lightheartedness and relaxed both mentally and physically." In fact, yangge has become such a popular form of entertainment among elder people that groups from various districts of the city hold contests regularly. For example, 451 groups of dancers from 18 districts and suburban counties of Beijing participated in the first municipal yangge contest in January 1998. The number of participants topped 16,000. It is estimated that more than 100,000 people, mostly elders, dance yangge regularly in the city.

Chinese New Year

Chinese New Year is the longest and most important celebration in the Chinese calendar. The Chinese year 4705 begins on Feb. 18, 2007.Chinese months are reckoned by the lunar calendar, with each month beginning on the darkest day. New Year festivities traditionally start on the first day of the month and continue until the fifteenth, when the moon is brightest. In China, people may take weeks of holiday from work to prepare for and celebrate the New Year.
A Piggy Year
Legend has it that in ancient times, Buddha asked all the animals to meet him on Chinese New Year. Twelve came, and Buddha named a year after each one. He announced that the people born in each animal's year would have some of that animal's personality. Those born in pig years tend to have excellent manners, make and keep friends, work very hard, and appreciate luxury. They are very loving and make loyal partners. Lucille Ball, Humphrey Bogart, Hillary Rodham Clinton, Wolfgang Amadeus Mozart, Ernest Hemingway, Alfred Hitchcock, Mahalia Jackson, David Letterman, and Arnold Schwarzenegger were all born in the year of the pig.
Fireworks and Family Feasts
At Chinese New Year celebrations people wear red clothes, decorate with poems on red paper, and give children "lucky money" in red envelopes. Red symbolizes fire, which according to legend can drive away bad luck. The fireworks that shower the festivities are rooted in a similar ancient custom. Long ago, people in China lit bamboo stalks, believing that the crackling flames would frighten evil spirits.
The Lantern Festival
In China, the New Year is a time of family reunion. Family members gather at each other's homes for visits and shared meals, most significantly a feast on New Year's Eve. In the United States, however, many early Chinese immigrants arrived without their families, and found a sense of community through neighborhood associations instead. Today, many Chinese-American neighborhood associations host banquets and other New Year events.
Chinese New Year ends with the lantern festival on the fifteenth day of the month. Some of the lanterns may be works of art, painted with birds, animals, flowers, zodiac signs, and scenes from legend and history. People hang glowing lanterns in temples, and carry lanterns to an evening parade under the light of the full moon.
In many areas the highlight of the lantern festival is the dragon dance. The dragon—which might stretch a hundred feet long—is typically made of silk, paper, and bamboo. Traditionally the dragon is held aloft by young men who dance as they guide the colorful beast through the streets. In the United States, where the New Year is celebrated with a shortened schedule, the dragon dance always takes place on a weekend. In addition, many Chinese-American communities have added American parade elements such as marching bands

Nation boosts political, economic ties with Zambia

China and Zambia will boost political and economic collaboration, strengthen dialogue and increase people-to-people and cultural interaction, said a joint communique issued yesterday.
The document, signed by Zambian President Levy Patric Mwanawasa and his visiting Chinese counterpart Hu Jintao, said the two sides also agreed that their joint efforts will focus on infrastructure, agriculture and mining.
It said Zambia recognizes China as a market economy.
Mwanawasa expressed appreciation to China for selfless assistance over the years, while Hu applauded Zambia's remarkable achievements in economic development and its contribution to peace.
A day earlier, Hu announced a package of measures designed to boost bilateral relations.
They include:
Cancel debts in the form of interest-free government loans that were due by the end of 2005.
Open up the Chinese market by increasing zero-tariff items from 190 to 442.
Set up an economic and trade zone in Zambia.
Build a stadium in the city of Ndola, which could help turn Zambia into a major host of sports events in Africa.
Build an agricultural technology demonstration center, two rural schools, a hospital, and an anti-malaria center.
Offer 117 Chinese government-funded scholarships between 2007 and 2008 and train more professionals for Zambia.
Hu yesterday also met Kenneth Kaunda, former Zambian president and an old friend of China. Quoting a Chinese proverb, "Those who drink water will never forget the people who dig the well", Hu praised Kaunda's contribution to the "all-weather" friendship.
Kaunda is one of the few surviving African leaders who have met several generations of Chinese leaders. During his tenure, China assisted Zambia and Tanzania to build Tazara, a railway linking land-locked Zambia with a port in Tanzania in the 1970s.
Hu also met Amusaa Mwanamwambwa, speaker of the national assembly, yesterday.
Zambia is the fourth leg of Hu's eight-nation African tour, which has taken him to Cameroon, Liberia and Sudan. He will also visit Namibia, South Africa, Mozambique and the Seychelles.