Brazil's Labor Minister Miguel Rossetto said on Friday the detention of former President Luiz Inácio Lula da Silva for questioning in an anti-corruption probe was not "justice" and described it instead as "violence."

"The act is a clear attack on what Lula represents, as a political and social leader," the minister said in an emailed statement.

http://www.reuters.com/article/brazil-corruption-lula-rossetto-idUSE6N13Z02L

The central government has put de-capacity as this year's top priority for the first time in years, followed by destocking, deleveraging, lowering costs and improving weak growth areas. It shows its urgency and complexity.

China's economy has entered a new normal. Given the mounting downward pressure, cutting excessive capacity is crucial for three reasons.

First, as demand in some sectors is close to or has already reached a peak level, industrial development can only be achieved through cutting overcapacity. China is in its late stage of industrialization, after its tertiary sector surpassed secondary sector in 2012. Such transition is often accompanied by a shift of leading industries from garment manufacturing, mining and building materials to high-tech and services.

For instance, as demand for heavy chemicals already peaked, overcapacity is in absolute sense instead of cyclical, therefore it can no longer be dissolved through demand expansion or the next economic cycle. According to industry sources, domestic consumption in crude steel peaked at 764 million tons in 2013 and fell 3.4 and 5.5 percent in 2014 and 2015 respectively. Such downward trend is expected to continue this year. In a longer term, as China's railway construction nears completion and the growth in real estate and auto industries slows, a drastic recovery in the steel demand will be less likely.

Second, overcapacity is the major reason behind China's economic slowdown. Excessive capacity is to blame for the slump in industrial products, corporate earnings as well as fiscal revenue, while increasing the risk. Sectors suffering severe loss are those plagued by overcapacities. According to statistics by the industry, 90 major mining groups reported 91 percent decline in their profit and the loss among registered steel companies totaled 64.53 billion yuan. Profit margin in mining sector was merely 1.76 percent, way below the industrial average 5.76 percent.

Third, only through cutting capacity, can the economy return into a better shape. Excessive capacity can lead to vicious competition, let alone the structural transformation and innovation. What's more, such unhealthy situation can have a ripple effect on the supply chain, causing financial and credibility risk. Therefore, if there is no real progress in cutting capacity, the whole economy will fall into deflation, low efficiency and low growth. It is therefore crucial to get the corporate profitability and development back to normal and ward off financial risks.

Addressing the overcapacity issue may cause some pain in the short term such as putting local economy and job market under pressure, however we should have no illusion. Sooner beats later. We have to choose between strangling the whole industry and allowing the bankruptcy of a few.

Cutting capacity should be government-led and market-driven

The State Council recently put forward a general layout for de-capacity, stating that such task should combine the market mechanism with government's support.

Market should play a crucial role in cutting excessive capacity. According to market mechanism, price would fall in sectors faced with overcapacity, and some companies would suffer a loss and finally go bankrupt and the demand and supply would reach a balance. Such case has already been seen in sectors such as consumption, garment and photovoltaic.

However, government should also strive to maintain a healthy and fair business environment. The reason behind the current overcapacity issue is unfair competition. For instance, due to the weak enforcement of regulation, some firms known for causing high energy consumption and pollution didn't pay for the environmental cost. In these situations, bad money could drive out the good ones.

Therefore, the government should enhance enforcement of laws and regulations, and punish unsafe production or other wrongdoings. For sectors plagued by severe overcapacity such as steel and coal, it should also take necessary steps to alleviate the issue.

First, the government should launch clear guidance on withdrawal. Companies should hold accountable to their own investment decisions. Specific supporting guidance can help ease the exit process and ensure social stability. Such consideration is already underway.

Second, multiple measures can be used to address re-employment issue. Amid capacity slash, how to allocate laid-off workers is the key. The government should enhance training service and basic social security coverage, and encourage employment across the region.

Third, the government should adopt fiscal and financial measures to address zombie companies that consume a large amount of capital and land resources but actually are no longer sustainable on their own. They should be cut off from any fiscal or financial support and roll out liquidation plan.

Fourth, the government should push ahead industrial transformation and updates, along with de-capacity. The "Made in China 2025" and the Internet Plus drive will help companies move up the industrial chain and improve their competitiveness

http://en.chinamining.com.cn/News/2016-03-04/1457061696d75519.html

China's economy is facing greater difficulties and challenges in 2016 as the government forges ahead with structural reforms, state radio on Friday quoted Premier Li Keqiang as saying.

The government will keep economic growth within a "reasonable range" this year, Li said.

China's top economic planner has said the government would target economic growth of 6.5 percent to 7 percent this year, confirming a Reuters report, and sources said the money supply and inflation forecasts were in line with that target.

http://www.reuters.com/article/us-china-economy-growth-idUSKCN0W6132

China plans to launch several mixed ownership pilot programmes in the oil, natural gas and rail sectors as it deepens reforms of state-owned enterprises, the country's top economic planner said on Sunday.

As China restructures its state-owned companies, it will also moderately increase investment in infrastructure and public services, Xu Shaoshi, head of the National Development and Reform Commission (NDRC), told reporters at a briefing in Beijing.

In September last year, China issued guidance on reforming state-owned enterprises, including the introduction of so-called mixed ownership of state firms, as part of the most far-reaching reforms of its sprawling and inefficient state sector in two decades.

China has about 150,000 state-owned enterprises, managing more than 100 trillion yuan ($15.37 trillion) in assets and employing over 30 million people, according to the official Xinhua news agency.

http://www.reuters.com/article/china-parliament-soe-reform-idUSB9N15B00F

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China will put a cap on annual energy consumption between 2016 and 2020 to promote energy saving, a draft outline of the country's five-year development plan said on Saturday.

China's energy consumption will stay below 5 billion tonnes of standard coal, according to the draft outline of the 13th Five-Year Plan on national economy and social development, which is presented to the National People's Congress annual session for review.

The country consumed 4.3 billion tonnes of standard coal of energy last year, official data showed.

China will push forward an energy consumption revolution in industries, construction, transportation and public institutions in the five-year period, and actively promote energy-saving technologies, the draft said.

Given a continued economic downturn, the country is seeking to make its economy grow in a cleaner and more efficient manner.

China aims to lower its energy consumption per unit of GDP by 15 percent by 2020, the draft said.

The country is also promoting the use of clean energy, including wind, solar and nuclear power, to restructure energy consumption currently dominated by coal.

http://en.chinamining.com.cn/News/2016-03-07/1457311440d75524.html

German newspaper Der Spiegel reported yesterday that theBavarian Banking Association has recommended that its member banks start stockpiling PHYSICAL CASH.

Europe, of course, has been battling with negative interest rates for quite some time.

What this means is that commercial banks are being charged interest for holding wholesale deposits at the European Central Bank.

In order to generate artificial economic growth, the ECB wants banks to make as many loans as possible, no matter how stupid or idiotic.

They believe that economic growth is simply a function of loans. The more money that’s loaned out, the more the economy will grow.

This is the sort of theory that works really well in an economic textbook. But it doesn’t work so well in a history textbook.

Cheap money encourages risky behavior. It gives banks an incentive to give ‘no money down’ loans to homeless people with no employment history.

It creates bubbles (like the housing bubble from 10 years ago), and ultimately, financial panics (like the banking crisis from 8 years ago).

Banks are supposed to be conservative, responsible managers of other people’s money.

When central bank policies penalize that practice, bad things tend to happen.

Traditionally when a commercial bank in Europe wants to play it safe with its customers’ funds, they would hold excess reserves on deposit with the European Central Bank.

In the past, they might even have been paid interest on those excess reserves as an extra incentive to be conservative.

Now it’s the exact opposite. If a bank holds excess reserves on deposit at the ECB to ensure that they have a greater margin of safety, they must now pay 0.3% to the ECB.

That’s what it means to have negative interest rates. And for the bank, this eats into their profits, especially when they have tens of billions in excess reserves.

Talk about being between a rock and a hard place.

On one hand, banks stand to lose a ton of money in negative interest. On the other hand, they put their customers’ deposits at risk if they don’t hold extra reserves.

Well, the Bavarian Banking Association has had enough of this financial dictatorship.

http://www.zerohedge.com/news/2016-03-04/revolution-begins-german-banks-told-start-hoarding-cash