Negotiating With China: Bottom Line (07/11)

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July 11 (Bloomberg) -- On today's "Bottom Line," Mark Crumpton provides insight at the trading day's critical hour, with careful analysis of big events for investors. (Source: Bloomberg)

From bloomberg world headquarters, i'm mark crumpton.

This is "bottom line," the intersection of business and economics with a main street perspective.the economic dialogue in house passes a farm bill.

And discussing the train disaster in quebec and the keystone pipeline.

We have with us carol massar.

And u.s. china talks.

That is right.

They are in the middle of two days of talk in washington on issues ranging from exchange rates to cybersecurity.

Jack lew we are informative and insightful and sometimes direct.

The company has made good progress on a number of fronts, most notably an agreement to begin negotiation on a bilateral investigation between the two countries.

It is a first for the world's second-largest economy.

China's reform process is in early stages.

I'm starting to see positive changes.

Let me give you a few examples.

China has announced intention to negotiate a bilateral investment treaty.

It will include investment and all sectors.

A significant breakthrough and the first time china has agreed to do so.

Lew also said during a press conference that the chinese have made good progress on the currency, but that more is needed.

There are also concerns echoed across the u.s. government regarding cybersecurity and the cyber threat.

Ciber that has become one of the hot button issues on the hill and among u.s. officials.

China has been targeted as a primary instigator.

Where do the countries stand on that front?

What difficulties do they still face?

U.s. and chinese officials said if there is something to talk about over the course over the two days, this has been a focus.

This is something the u.s. really wants china to keep an eye on.

There is one major problem that has reared its head, and the name is edward snowden.

He revealed to chinese media that the u.s. is spying on china.

That flipped the debate on its head a bit.

It also cause problems diplomatically.

U.s. deputy secretary of state expressed extreme disappointment with how china allowed snowden to leave hong kong.

An exquisite finger pointed at chinese.

Chinese officials said that hong kong did everything that was above approach.

What has a message from china officials been on the economy during that time in washington?

Chinese officials are stressing that they are in the middle of a large- scale reform process.

There are also taking a a look at the u.s. economy.

Obviously it is growing.

Saw big gains in the market.

The chinese are focused on the fed.

What the fed needs to recognize is based on the $85 billion monthly bond buying program they have, what happens in the u.s. has repercussions around the world.

When tapering begins, when they take their foot off of the gas, they need to pay attention to how how that will affect the global economy.

Phil, thank you.

Lenovo is bringing manufacturing jobs back to the united states will stop it is one of the latest tech companies to restore employees -- did the nine states.

It is one of the latest tech companies to restore employees.

Good evening.

We are about 50 miles outside of raleigh, north carolina.

It is near the research triangle.

It is also near where they set up shop to make products made in the usa.

A time nearly forgotten.

We are the first that has done it in over a decade.

Lenovo is part of a growing trend in the tech community.

Any such as google and motorola are bringing manufacturing slowly back to the u.s. the investment of this facility is the locality of it and getting it here quicker.

We are importing components which is much cheaper than soapboxes.

We are saving saving their and paying a bit more in labor.

They're still an incremental cross -- costs.

The cost of shipping goods from china has made manufacturing china more expensive.

Lenovo is the biggest pc maker in the world.

It is headquartered in beijing.

11 5 will be assembling laptops and pcs and servers in california -- north carolina.

When it says made in usa, what does that say?

This happens to be made in one part of the globe.

They have made recent bounds.

Revenue has increased 10 times since.

You look at your latest quarterly results hearing you know what the numbers say.

They want tablets.

They want smartphones.

We are focused on winning in pcs and expanding into tablets and servers more aggressively.

Winning the pc market is key.

They make up 80% of lenovo's revenue.

Also important is expanding the brand.

It is not easy considering the company is not a household name.

It is not a brand that folks say, i have got to have a lenovo jerod -- lenovo.

A lot of companies -- a lot of consumers do not know us.

The company ranks number two in the smartphone market.

And the u.s., -- we have to continue to build our brand and distribution network.

And our manufacturing capability to make that a reality.

We are committed.

We would like to believe this is only the beginning.

Lenovo says it might take at least six months to a year before it can make any judgment on the success of investment in many faction in the u.s. they can expand that to a third ship.

The market does have room to add a line if there is demand.

Where is the demand coming from?

Good question.

Think about local, state, federal government.

Maybe there is a contract that can use taxpayer dollars to buy tech merchandise and those goods have to be produced in the united states.

Keeping track, it means 51% has to be manufactured here in the united states.

Carol massar, thank you.

The biggest names in media and tech are gathered in sun valley, idaho the annual conference.

Jon erlichman has been covering all of the dealmaking.

Early today you spoke with one of the biggest names of venture capital.


yes i did.

I hear somebody who a lot of people look to where the industry is going in part because he is an entrepreneur.

He is on the boards of companies like hp and facebook.

He has received a lot of headlines recently for his view on ipos, technology ipos, and the idea that there will be more companies that will not go public because of the headaches that come with being a public company.

One of the companies that everyone talks brooklyn public -- the executives are here, twitter.

One of the most anticipated companies that could go public and the next couple of years.

I asked him given all the money that the company has, they can avoid going public.

Here is what he said.

I think they can avoid going public for a long time, but i think they have built themselves into a powerful company.

It is a more powerful business than people think.

They can go public whenever they think they are ready.

The ceo of twitter was it here and did not want to comment on any ipo plans.

Google glass has been getting a lot of buzz in the tech industry.

What did he have to say about that?

He is a big fan.

He has partnered with google in terms of finding ways to develop google glass.

He is using it to figure out how he can do better in driving and navigating.

Some key headlines coming out of sun valley, eric schmidt is here.

He was speaking over the last hour and addressing all sorts of google issues, including google glass.

When will this be available to the masses?

I know google glass is only available to developers.

He has says, soon.

Not specific, but google has seen the momentum for that product.

If they can get it out to market, they will.

Jon erlichman joining us from sun valley, idaho.

Thank you.

Coming up, gas gets a push from fed chairman ben bernanke's comments.

We look at the cause and effect next." ? welcome back.

Gasoline prices on a roller coaster.

Prices function waited after jumping to a three-month high.

Ben bernanke called for continuing monetary stimulus.

For more on the market, let's bring in the president and ceo of a gas company.

He joins us from dallas.


Thank you for coming on.

Good evening.

Is this ben bernanke's oil rally?

I think that is one way you could look at it.

You have also got other input that needs to be factored.

Some are demands are at an all- time high refineries are cranking out 9 billion there'll's of gasoline.

That is up from 8 billion on average.

Oil is surging on news from egypt.

A third of all of the oil in the world comes from.

Those things are creating that geopolitical turmoil and tailwind that is causing the market to react.

In recent days we have seen a dramatic drop in supplies of oil in the u.s. does that translate into rising demand?

It does.

We are down 20 million barrels out of our supply, surplus if you will.

That is a 30 year low.

Oil is moving better throughout the united states, almost one million barrels of oil moving every single day by rail.

The backlog is being alleviated.

The infrastructure in the u.s. has allowed us to move oil from the midwest down to the refinery.

Who will see high gasoline prices?

The midwest will see the highest gasoline prices.

Chicago up 51%. another $.35 to go by the end of august.

Is that what you are expecting?

Potentially, yeah.

We have got some economic issues in the eu and other parts of the world.

I do not think there'll be a hard landing.

I'm optimistic they will be able to avoid that attentional crater.

The u.s. demand is low, but we are having housing numbers that are better and jobs numbers looking better.

There is tailwind from economics.

I think we still have that $95 crude rice number going into 2014. how do you account for the fact we are seeing oil prices rise question mark their peers to be a enough supply.

-- how do you account for the fact we are seeing oil prices rise?

There appears to be enough supply.

There is volatility from egypt.

If the unrest in egypt wants to cause problems, that is a concern.

Number two, what we are seeing is that rise of dti catching up.

It is setting itself up to world energy markets.

Unless something happens in egypt that would cause them to shut down or the middle east to north africa he comes part of this uprising we are seeing, they are kind of the dictator for the muslim community.

If that inroads into north africa, we have a bigger issue with oil.

I think we are still in that five dollar number.

You mentioned egypt and north africa.

Explain to us a little bit more with that ripple effect might look like in the united states.

We are producing 7.5 million barrels of oil.

We are importing the same amount.

A lot of it comes from mexico and more comes from canada.

We're still importing oil from other parts of the world, including the middle east.

Some of that supply even though it is not heading to the u.s., just at the sheer fact it be interrupted causes the market to be at.

That is what you see -- causes the market to react.

That is what you have seen the past few days.

If anything were to happen, it would be a different story.

A similar thing happened last year.

Does the talk of a closure caused the market -- just the talk of the closure cause the market to move.

Chris joining us from dallas.

Thank you for your time.

We appreciate it.

Thank you.

Let show you how the equity markets finished for thursday, july 11, 2013. stocks surge with the s&p 500 and conduits highest closing level ever.

Metals gained as the dollar slid.

Bernanke called for maintaining stimulus.

The dow was up 169 points.

The nasdaq composite index was up 57 points.

Let's get you the stories behind the numbers.

Olivia sterns has the details.

Good evening.

Looks like another record high for the s&p today.

You heard ben bernanke saying it was highly accommodating monetary policy for the first table future.

Investors are taking that as a signal.

Equities are high across the board.

Technology and home building , shares posting the biggest gains.

Metals prices soared.

Analyst upgraded their ratings on the stock.

The big story of the day is once again dell.

Carl icahn saying he will sweeten his offer.

He told trish regan he is upping the ante.

Listen how he explains how he is going to do it.

I have talked to a number of shareholders the last two days.

I think a little bump on my part is what they're looking for.

They say you're giving us $14. we only get 73% taken.

We think of it now is superior -- bid now is superior.

We will add to that bid.

We will add a warrant to that.

I will not go into details.

We are still working them out.

The bid will be superior.

As you know, he has been battling michael dell for months now to take control of the pc maker.

He says his new offer will be vastly superior to dell's proposal to take the company private.

It is up more than 30% since the start of the year as this battle continues to boil.

Back to you.

Olivia sterns, thank you.

Coming up, if you thought the farm bill debate was interesting before, stay with us.

Now the house has voted and it is shaping up to be a showdown with the obama administration.

We will have that next.

? now let's head to washington where the house passed a farm bill.

Allen joins us with more.

Let's talk about week.

Inventory has dropped 13% with today's crop report.

What is that doing to the price of bread?

It was not expected.

It was about 50 million bushels below estimates.

Isn't wheat prices to the longest rally.

-- it sent wheat rices to the longest rally.

Food inflation is pretty stable.

Exports go up and there is difficulty with the harvest.

Wheat harvest season is underway.

You were out there earlier.

What did you see?

I was on the high plains in kansas and eastern colorado earlier.

They are seeing a poor harvest in terms of the yields.

About half of what you are expecting in the field.

Some of the quality is on tv.

A lot of the farms are pleased with what they are getting, but they are not getting enough of it.

What have farmers been telling you?

They have been telling me that they are having less work to do as far as they're cutting.

A lot of the cutting on the crops are done by harvest crews that go up and down the harvest.

They're not getting as much work simply because there isn't as much props to harvest.

Back to washington.

House republicans approved a farm bill.

They left out money for food stamps.

What is the latest in this battle?

Last month there was an attempt to cut out the farm bill.

That failed.

Conservatives and house republican leadership decided if it stems are a problem, we can pass a republican only built.

There was a bill that was passed, but did not have a single democratic vote.

That is because the senate supports food caps on -- food stamps.

The chances that this plan would be sent to the white house would be low.

It would have to get past senate democrats before it even got to president obama's desk.

You were in kansas.

What are the farmers saying about the farm bill?

Are they following what is going on?

What is important to them?

They are following the farm bill.

They are not as concerned as they would have been 10 years ago.

Profitability in the farming sector is higher than it used to be.

They're looking a lot at the legislation.

There are labor shortages on the great plains.

They are realizing that the farm bill is on the glass pieces of legislation.

That makes a lot of people on easy and not just farmers.

Alan joining us from washington.

Good to talk with you.

Thank you.

Asia's biggest holding retailer looks to the u.s. to boost profits.

The top stores in asia when we continue in a moment.

? welcome back to the second half hour of "bottom line." i'm mark crumpton.

Thank you for staying with us.

Stocks jumped, sending the s&p 500 to a record closing level.

Ben bernanke backing sustained monetary stimulus and give the markets a boost.

The broader market was up 1.3% at 1675. the dow jones rising as well and up about 1.11%. the nasdaq composite index rising as well at 1.6%. let's get a check of some of the top stories we are following.

Here is olivia sterns.

We begin with the latest on the asia on a flight -- asiana flight 214. two of the pilots wanted to abort the landing seconds before they crash landed at the san francisco airport.

The pilots made no mention of the flight speed until less than nine seconds before the crash.

Early today, senate negotiators reach an agreement to cancel the doubling of student loan rates that went into effect july 1. that is exporting -- that is according to a republican.

The good -- the deal could hit a snag.

It would cost taxpayers $22 billion.

The federal government budget surplus in june was the biggest in more than five years.

Spending plunged 47% and a stronger economy.

The deficit will shrink to a near $759 billion.

That is a look at the top stories in the news.

Olivia sterns, thank you.

Japan's central bank upgrades its view of the economy and refers to a recovery for the first time since the 2011 earthquake that hit the country.

Mia has the top stories in asia.

She joins us from hong kong.

Good day.


You are right.

Japan is coming and a vicious grand scheme.

This was the first time since january 2011 that central banks use the word "recovery" in a statement.

The japan economy will recover moderately.

If you look at the monetary base, that will be annually.

The inflation front, they're confident they can hit that 2% target in two years time.

The recent move is helping the japanese stocks climb higher.

If you look at the nikkei, the best performer in the world.

Despite the rosier outlook on the economy, the japanese companies retailer is looking to the west.

Our japanese consumers not buying at this point?

It is interesting.

The latest earnings would indicate not necessarily that japanese consumers are not buying, but perhaps they are buying more so when shops and their merchandise heavily.

Look at the figures.

This discounting and increased marketing expenses affects profits.

That is higher than their overseas profits.

The company plans to expand further into the u.s. they'll open 10 stores in the fall.

That is almost a doubling.

Next year they will open about 20 stores each year in the u.s. you probably cannot wait for that to happen.

That was mia in hong kong.

Thank you.

Legislation in limbo on capitol hill.

This is despite strong support from the business community.

President obama will met with the matter schumer and senator mccain to discuss immigration reform -- with senator schumer and senator mccain to discuss immigration reform.

It was productive, but it does not solve the challenge president obama has.

The choice as been made more difficult.

Obama is considering visiting a lot for all battlegrounds and constituencies.

States like nevada and florida.

Jay carney said the meetings thursday morning went well, but he also tried to seize upon any good news coming out of the house.

The president had a good discussion with senators schumer and mccain about the importance of commonsense immigration reform.

It is clear there is a broad coalition to support common sense and immigration reform.

We are pleased the house recognizes the in action is not an option -- that inaction is not an option.

Yesterday he called a meeting of house republicans.

He said the party would be in a much more weaker position if they do not act on immigration.

Republicans insisted they would take a piece by piece approach.

It was a two and a half hour meeting.

Republicans were clear they would not pass the senate bill or anything that looks like it.

Senator john mccain said the senate wants to negotiate with the house.

We are ready to negotiate.

The are ready to talk.

We are ready to sit down and negotiate and bring this issue to a conclusion that we all agree has to be addressed.

On thursday, boehner said that that majority of republicans do want to do something on immigration, but would not be held to artificial deadlines.

Back to you.

South carolina congressman, chairman of the house immigration and border security, will be al hunt's guest on "political capital" on friday night at 9 p.m. still ahead, we will talk trade as we look at aud i and eu talks going on.

Stay with us.

? be sure to check out the latest edition of "bloomberg businessweek." it hits newsstands.

You can read it on the go with our new louvered business week after.

-- with our new bloomberg businessweek cap -- app.

Audi to zappa.

Megan hughes explains.

What do companies like audi and zapa have in common?

An interest in the u.s.-eu trade talks.

The german automaker has lobbied regulators to allow automatic dimming headlights and u.s. cars . u.s. rules does not allow them.

But they hope that will change.

The music industry wants consistency on royalty payments, like how much is the trusted paid when it is played on the radio?

? record labels argue that radio broadcasters should pay artists the same way that the eu does.

Changes could mean big money.

The deal would create the largest free trade zone would nation representing a third of the world commerce.

Trade analysts warn agree on the details will be a challenge.

It is different the regulations of the u.s. from europe.

There are deep-seated reasons for doing that.

Labeling is another big sticker point.

Some only one sparkling wine to be labeled champagne.

In 2006, american producers were allowed to be grandfathered in, prayer france would like to amend that.

Campbell soup is looking to end an import restriction.

Consumer advocates are worried corporate influence on the trade talks will lead to back door deregulation.

There are strong genetically modified labeling laws.

U.s. companies want to steamroll into the european market.

Corporations are lobbying hard on both sides of the olympic.

Megan hughes, bloomberg, washington.

Stay with us, when "bottom line" week turns, christie todd whitman with a focus on energy.

We will be back.

? welcome back.

This is "bottom line" on bloomberg television and streaming on your phone and tablet and

Transporting fuel.

Earlier today i spoke with former epa administrator christie todd whitman.

I asked her if the incident in canada boosted the case of those that say that oil should be transported via pipelines.

That will certainly lend more credit to their remarks.

If you think about it and how many cars were involved in that, get to look at the overall fuel sources.

How many cars and how much does it take for the kind of thing that we need?

Israel transport the only other option?

-- is rail transport the only other option?

There is pressure on our infrastructure.

One of the things that i think nuclear should be part of our overall mix is because it takes little uranium to produce so much power.

You talk about infrastructure.

Is it time to read visit the conversation about infrastructure bank?

Why has that not taken off?

We cannot get anything to take off at the national level at the moment.

They're looking at trillions of dollars of interest rupture need.

-- infrastructure need.

There are electricity demand.

However we do that and meet that need, we will need to move that power around.

That means not just new lines to existing infrastructure grid, but upgrading the grid to handle that energy.

We are not prepared with that yet.

Does it have to be a partnership between the public and private sector to get that done?

No one part can fund it all.

It will have to be a partnership here at utilities have to be involved.

The taxpayer is always involved.

The government has a big role to play.

The keystone pipeline -- the debate is continuing in washington.

Our environmental concerns and job concerns mutually exclusive?

I do not think anything is mutually exclusive.

You weigh them against one another.

What are you trading for which?

However, if they are going to go ahead and mine this anyway, it it would be safer to do it in a pipeline provided that it has been routed in a way that exposes us to the least environmental sensitive areas.

Said you worked at both the state and federal levels, there has been concern that if this does not get approved, the keystone is left to lag, there could be some tension between the u.s. and canada.

Does this threaten our relationship with the canadians?

I do not think there are a lot of things right now.

And there are other issues making our friends nervous.

There will be a lot of things.

The canadians will move this matter what.

They will find other places for it to go if we do not take it.

When you are at epa commented situations like this come up where you have on one hand people are saying this is a job creating mechanism, but on the other hand people still have that not in my back yard mentality.

They do not want to be there when they see something like quebec happen.

It is not part of a criminal investigation.

People do not want this stuff coming through their region.

We are good at saying no.

We can find something wrong with anything.

The problem is we like our ipads and computer and our power.

We want it to be reliable and affordable.

We want it there 24/seven.

We will have to start saying yes to some things.

There are trade-offs.

We need to make energy as safe and clean as he possibly can make it.

There will be trade-offs.

But to say a green environment and a thriving environment are mutually exclusive is wrong.

Or will be a balance.

U.s. -- there will be a balance.

U.s. and chinese officials are having talks.

And climate change be addressed if the two strongest economies in the world are not on the same page?

Does the rest of the world need the u.s. and china to take this on board before they will?

It is hard.

The president has been clear in saying we need to take action.

I think the american people are recognizing what they are seeing happening -- things are changing.

There are real economic consequences.

How do we do things?

We want our power.

We want to have jobs.

We can do that in a green economy.

That takes you back to one of the things i have proposed and we need to keep nuclear as part of our energy mix.

Speaking of nuclear, you are co-chair of an organization that advocates for green energy.

Nuclear will have to be part of the mix.

Is it not going forward?

It will be part of the mix.

It will be all of the above.

We love nothing better than for some and to say and do this one thing it will up problems.

It does not work that way.

Nuclear is not a silver bullet.

90% of energy overall mix and power -- a 60% of our clean energy.

Even when we bring on more of the solar and wind, they are not 24/7. they need backup power.

That you're back to fossil fuels or nuclear.

You mentioned 60% of clean.

People here nuclear and the might be a stigma to it.

They say they do not want that in their region.

Do they understand that part of the clean energy paradigm going forward is probably going to have to include that?

What they do not understand is nuclear power.

They have not had an opportunity to think about the safety record in our country, which is extraordinary.

There's a high high degree of regulations for that purpose.

The jobs that it brings an impact that it it has on clean air and our health.

There is some impact there.

We need to educate them.

We give them facts and let them ask the tough questions and come back with real answers.

Most people will say, it should be part of the mix.

I monday, more of my interview with christie todd whitman.

She will be discussing what the republican needs to know to move forward.

Dom chu will focus on energy and the oil dollar relationship and this week's addition of bloomberg university.

That is tomorrow night right here on "bottom line." is it a bird or a plane?

No, it is -- we will tell you after the break.

Hot shots is next.

? it is time for hotshots, a look at some of the most compelling images of the day.

? here are some shoes that lady gaga might want to try out.

It is inspired by one of her hits "open face." they are part of an extreme shoe event being held in vietnam.

Other shoes on display are a pair of boots with a trail of leaves and a shoe shaped like a kneeling woman made a fragrant wood found in vietnam.

The vietnamese designer says it is meant to represent women's hardship.

Thousands of galloping horses marked the beginning of an international force festival and northwestern china.

It beaches race is and horse adoption -- it features races and horse adoption.

And the ultimate amazing race through the alps is getting tighter.

31 athletes kicked off a race in austria with the goal of traveling to monaco in the fastest time possible.

The athletes are at one of the mandatory goal posts.

The paragliding mecca of interlaken, switzerland.

They are flying like birds.

The competitors can only use two methods of transport -- by foot or the paraglider that they carry on their back.

You can get the latest headlines at the top of the hour and on bloomberg radio and streaming on your tablet and on

That does it for this edition of "bottom line." i'm mark crumpton.

Thank you for joining us.

See you tomorrow night.


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