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QUEST MEANS BUSINESS

Is China Facing a Bear Market?

Aired August 19, 2009 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, CNN INTERNATIONAL HOST: The Shanghai market falls sharply, the Chinese dragon at bay. Is this the start of a new bear market? And a taxing row. Secretive UBS gives up thousands of names to the U.S. government.

It is early morning here in Hong Kong. I'm Richard Quest, and yes, I mean business.

Good evening from the 16th floor of the Intercontinental Hotel once again, overlooking Victoria Harbor. And tonight, you'll notice, yes, we've actually managed to get more lights left on. It seems to be working.

But the news from the markets is not nearly so good. Investors in China are cashing in, getting out. The rest of the world's feeling pretty mixed up about all that's taking place, after a season when the bulls seemed to be in charge. Now, those bulls are nowhere to be seen.

Look at these numbers. The Shanghai Composite Index lost 4.5 percent on Wednesday, adding to several days of sharp falls. In a little over two weeks, the index has dropped by 19.8 percent. At one moment, it actually dipped below 20 percent, a technical bear market.

The index charged up a mountain the first seven months of the year. By early August, it had risen 90 percent. Many investors see Chinese stocks as a bit of a canary in the coal mines. Its ups and downs do sometimes foreshadow trends in other markets.

Investors in Europe struggled, though, to stay positive in the face of such grim news. In London, the FTSE closed more or less unchanged. Energy stocks little support. In Frankfort, the DAX off a third of a percent. Volkswagen lost 14 percent due to a report that Qatar (ph) is paying Porsche (ph) less than the market view. The deal was announced last week.

To New York, where the Dow Jones is currently trading just a couple of hours before the closing bell. And the Dow is actually managing to buck something of the trend. The Dow is actually up nearly 80 points. It is a gain of just roughly 1 percent.

Now, putting this into perspective, the news on the economic front, besides coming from China, also came from the International Monetary Fund. It says a recovery from the global recession is clearly under way, but it will only continue if some of the leading economists change their ways pretty fundamentally. The U.S. has to step up its performance in manufacture, and of course, Asia has to increase domestic demand.

Let's talk about this with my first guest of the evening, Jerry Lou. He is executive director and China strategist of Morgan Stanley. We have a fascinating scenario tonight. You have Shanghai down, the Dow is up. What's going on?

JERRY LOU, CHINA STRATEGIST, MORGAN STANLEY: I think this is a moment when the world is starting to focus on the uncertainties in (INAUDIBLE) risk. This is a risk that only comes when the economy recovery starts to look more real than before, and people start to worry about the regulators, what are they going to do next. So, that's why you've got less volatility when, you know, the economy was not nearly recovered. And now you've actually got more volatility when the economy is recovered.

QUEST: So, what is fundamentally going on in China on the markets? Why should the Shanghai fall? We had a 6 percent fall on Monday, a four and a half percent fall, a technical bear market at the moment.

LOU: Well, I actually think it's a bull market correction. I think...

QUEST: Oh, so there's a difference between a bear market rally and a bull market correction.

LOU: Absolutely. I think if you call it a bear market, you have to get the underlying, you know, economy being restricted by the liquidity of whatever conditions, the global conditions. And you need recovery operations to be fairly disrupted. And we don't have that in China.

QUEST: So, I repeat again, why did the market fall? And not just fall, but tumble?

LOU: It tumbled because of the panic selling of the local investors who typically invest in, like, two weeks' time horizon, OK? Typically in a developed market, when a market falls 20 percent, you would imagine something really bad fundamentally is going on there, and this I think is purely driven by profit-taking as well as some worries about the liquidity conditions.

QUEST: By that, you're talking about there's hundreds of billions of U.S. dollars that the Chinese government poured in, basically building bridges to nowhere and a lot of other things, as well, giving away money almost. Is the fear that they're going to stop doing that, that it's now going to be withdrawn?

LOU: I don't think they're going to withdraw that. I think - if you look at July new loan (ph) growth, it's about 12 percent annualized to GDP.

QUEST: But it can't continue.

LOU: And that's very - well, the July number can (ph) continue. I mean, that is why the market is worried. The market is worried because, in the first half, the loan was explosive. It was like 50 percent of the GDP, and in July it's like 12 percent. The normal level, let me tell you, is 15 percent. So, it's normalizing. It's not tightening.

QUEST: Let's talk about the IMF saying that the recovery is under way, but it's going to be slow and painful. Now, I don't think that's anything new. I think everybody pretty much accepted that. But we've been here in Asia all week. Because what I think we need to get to grips with is how the Asian economic circumstance has changed over since last year.

LOU: I think you know, there are quite a few noticeable change, you know, at least. In the export business in China is stabilizing, OK, you've got a PMI above 50 for a couple of months already. Power generation numbers are actually positive starting from July, and consumer confidence in China specifically rebounded after (ph) lows.

QUEST: But if the Asian region let's say generally only grows between 3 and 5 percent, that is par-sub (ph) trend to what you'd normally expect.

LOU: Well, that's - for Asia, that's below trend.

QUEST: Right.

LOU: But for Asia to achieve that, you need China to grow between 8 and 9 percent, and I think that's quite achievable.

QUEST: You think so? You think it is achievable...

LOU: I think it is achievable.

QUEST: ... to get back to 8 and 9?

LOU: Yes.

QUEST: You seem to be maybe (ph) on your own on that sense.

LOU: Well, I don't really think so. I think if you look at the major (INAUDIBLE) forecast this year, actually the GDP forecast for this year is between 8 and 9 percent.

QUEST: If it continues at 3 to 5 percent, what's the effect on this particular part of - if Asia does not generally make 8 to 9, what's the effect?

LOU: Well, I don't think - well, first of all, I never thought Asia's going to make general 8 to 9. I'm saying China's going to be at 8 to 9. I'm sorry.

QUEST: Oh, I do beg your pardon. Now I see what you're saying. But we're talking pan-Asian growth. If pan-Asian growth doesn't get back above 5 to 6 percent, what is the effect?

LOU: I think the effect will probably be a little bit more painful regional economy situation and the pan-Asian trade. And remember, other than China, the rest of Asia is actually quite dependent on the global economy. I mean, China is a continental economy, but the rest of Asia generally are not. So, I think, you know, it's probably more painful for the ex-China Asia, but I think China market itself, we should do fine.

QUEST: We clarified that. Very grateful that we sorted that out, and we're very, very grateful that you came in tonight to talk to us. Many thanks to you. You can go home to bed now. Middle of the night. And I promise you, it's not always easy to ask people to turn up at, what, just after five past 2 in the morning. We thank you very much.

You're up to date with what has been a very busy day in terms of markets, particularly in this part of the world, spilling over elsewhere. Now to bring you up to date with the news, Max Foster is at the CNN news desk in London.

(NEWS BREAK)

QUEST: Thank you, Max. See you in about 20 minutes.

The old estate agents saying location, location, location. It was ever never more true than right here in Hong Kong. And yet here, high property prices are actually back where they were before the crisis. Can this be true? In a moment we'll explain.

(COMMERCIAL BREAK)

QUEST: If you own property in the United States or in the UK and other parts of Europe, you've watched very closely as the value of your property has fallen sharply during the financial crisis. Here in Hong Kong, they've been watching the property prices for a very different reason: They're virtually back to where they were before the crisis began.

It may sound slightly remarkable, but even at the luxury end, prices have rebounded in quite an outstanding fashion.

(BEGIN VIDEOTAPE)

(voice-over): The towers of Hong Kong. From the crowded blocks just feet from each other to the high point of the Luxury Peak district.

After September last year, prices dropped by about 25 percent across the board. Buying and selling slowed to a crawl. Now deals are being done again, and at the Luxury Inn, agents say prices are back to where they were.

RICKY POON, COLLIARA (ph) INTERNATIONAL: It's actually -- this apartment is actually on the market for sale at $8 million U.S. dollars.

QUEST (on camera): $8 million?

POON: Yes, that's right.

QUEST (voice-over): Two years ago, this two-bedroom apartment was sold for a similar amount. It's back on the market after a brief decline in value. The price? Fully restored.

(on camera): And if I wanted to rent this place, how much would it cost me to rent it? Per month?

POON: Per month? Well, I would say between $18,000 U.S. to about $20,000 U.S.

QUEST: A month?

POON: A month.

QUEST: (INAUDIBLE).

(voice-over): Ricky Poon's been selling property for 15 years. Even he's surprised that property rebounded so fast.

POON: Assuming this one, actually, the location in the Peak and also the supply -- very limited. And also we have fantastic view.

QUEST: It's not only apartments that are selling.

(on camera): So what have we got here?

POON: So, Richard, this is a house. Normally a house in Hong Kong would have more premium. So, this house is worth about $40 million U.S. dollars.

QUEST (voice-over): The premium for a house with these sorts of views is even greater. And this house has many bedrooms.

POON: This is one of the bedrooms.

QUEST (on camera): So, this isn't a master bedroom?

POON: This isn't a master bedroom. This is not the master bedroom here. This is just a second bedroom with on switch (ph).

This would be the first bedroom here.

QUEST: The master bedroom?

POON: Nope. The third bedroom.

QUEST: Still not the master bedroom.

Master bedroom.

POON: Yes! You have the better view (ph) now, right?

QUEST: Now you've got -- yes.

POON: You've got a view.

QUEST (voice-over): There were terraces everywhere.

POON: (INAUDIBLE). $40 million U.S. dollars.

QUEST: Ricky's pretty confident he will sell it.

POON: Nowadays, we have 15 to 20 percent, you know, mainland China -- people's -- they want to enter into the Peak.

(END VIDEOTAPE)

QUEST: And Ricky Poon joins me now to talk more about $40 million dollars. And you're confident you will sell it in some shape.

POON: Yes, I am.

QUEST: Where is this money coming from? You alluded in the report that China was coming into the market - money from mainland China. Tell me more about that.

POON: Well, actually, we're facing a lot of money -- hot money or you know, money from the mainlanders (ph) or even those with Europe money from elsewhere coming to Hong Kong for the last six months. And especially the mainlander, they actually quite like to buy the super-luxuries residential in Hong Kong.

QUEST: So, is it fair to say that the mainland hot money is propping up the market here, to some extent?

POON: Well, I shouldn't --yeah, we couldn't say, you know, it's just (INAUDIBLE) hot, mainland money because we actually have Hong Kong end (ph) user, actually, you know, buying property in Hong Kong, too. But, like the mainlander, they always like to buy the luxuries, the super-luxury residential.

QUEST: So, why -- because everybody I've talked to about this story -- why has the market come back so fast and so far?

POON: Well, I think a couple of reasons is the global economy is actually stabilizing, and also, we are in Hong Kong -- we are actually facing a very low mortgage rate. We are actually talking about, if you're using the high ball (ph), it's just about a little over 1 percent. If we're just using a normal mortgage rate, we're talking about 2.5. So, actually, the bull rate is quite low. And the people who's just buying a residential, instead of just investing elsewhere, some people are actually make profits from the stock market.

QUEST: Ahh, you're smiling at that point. So, you are seeing this bull market that we saw from March the ninth running right the way -- you are seeing that money come into property?

POON: That's right.

QUEST: Is it everywhere? What about the sort of property -- you have a wonderful phrase for this. You call it the "mass market."

POON: Mass market.

QUEST: The mass market.

POON: The mid-market.

QUEST: Oh, the mid-market. That's more polite. What sort of prices are we talking about there?

POON: Well, normally in a mass market, we talk about in Hong Kong dollars, talking about the ratio (INAUDIBLE ) to about $7 million. So, which is equivalent to about $1 million U.S.? Less than $1 million U.S.

QUEST: Do you believe that these prices are sustainable, or do you see the beginning of a bubble here?

POON: Well, to be honest, you know, we don't see the bubble yet, but we believe the price can be sustained for you know, another 6 or 12 months before the interest rate goes up, and we do expect the price to go up by another 5 to 10 percent.

QUEST: Ricky, many, many thanks indeed for staying up late and joining us. And thank you also for that fascinating tour yesterday. I -- the one -- OK, $14 million had a great view. But I still can't believe $18,000 U.S.

POON: (INAUDIBLE)

QUEST: For a two-bedroom apartment.

POON: That's right.

QUEST: And you will rent it

POON: I will try. But I will try to sell it first.

(LAUGHTER)

QUEST: Not to me, you won't! Ricky Poon, many thanks indeed. We thank you for that.

That is the picture in Hong Kong? What about other countries? Back in Britain, where you'll usually find me, it's a similar story of property prices. Anyone who says they are not interested in how the value of their flat, apartment or house has gone down is probably not necessarily being completely truthful.

As Charles Hudson found out, though, some parts of the London market have escaped relatively, and I use that word advisedly, unscathed.

CHARLES HUDSON, CNN INTERNATIONAL CORRESPONDENT: Well, the general picture here in the property market is that things are stabilizing. That's the perception most people don't think that prices are going to go much lower from here.

But what about the high end of the market? Properties costing $10 million or more? I'm off to one of the smartest addresses in London, Earls Terrace in Kensington to find out.

(BEGIN VIDEOTAPE)

(on camera): Good morning. Charles Hudson from CNN.

TOM TANGNEY, REAL ESTATE AGENT: Good morning. Tom (INAUDIBLE). Come on in.

HUDSON: See, it has lovely garden, south-facing, wonderful views looking out onto Edward Square. I mean, what -- could ask for more?

So, the asking price is eighteen quarter million.

TANGNEY: Correct. Yes.

HUDSON: It's about $12 million or $13 million dollars. How does that compare with what you might have charged, say, a year ago? Or even at the start of this year?

TANGNEY: Well, the market actually really hasn't changed for this sort of property too significantly. Last year, we had this house on the market for 8.5 million pounds.

HUDSON: Actually, slightly more.

TANGNEY: Slightly more.

HUDSON: What would you estimate to have been the maximum sort of price that you could have charged? I mean, you sell a lot of properties in this row. So, you must roughly know what the maximum was that you could charge.

TANGNEY: I think probably eight -- probably five million (INAUDIBLE).

HUDSON: So, this is actually not very -- not very far below the peak.

TANGNEY: It's not, no. It's because it's a rare beast in that respect. We have parking, we have a big garden, we have communal gardens behind us.

HUDSON: I believe there's a swimming pool under us.

TANGNEY: A swimming pool under the garden as well. It's a good family house for what everybody wants in central London, and the quiet part of central London as well.

HUDSON: Do you think the market is going to remain relatively firm going forward into the autumn?

TANGNEY: I think so because there is a lack of stock. And (INAUDIBLE) you have stock in any trading position, your prices will remain quite high and will remain firm, as well. I don't think the margins of negotiations are going to get any wider. If anything, probably narrower.

HUDSON: Crisis? What crisis?

TANGNEY: Well, it's a bit like that at the moment, although admittedly at the beginning of the year, trading levels were down because people didn't know what was going on. But in these recent months, we've seen the market improve (ph).

HUDSON: Well, Tom, thank you very much. You've told me everything I need to know about the market in about two minutes.

(LAUGHTER)

HUDSON: Close the door?

TANGNEY: Oh, this way.

(END VIDEOTAPE)

HUDSON: So, clearly, not too much of a problem in some of the smartest addresses. It's almost like there hasn't really been too big a dip. But the issue for everyone else is, what about money and finance? The rest of the property market is still dependent on the banks. The credit crunch is ending, but only slowly.

QUEST: Charles Hudson reporting there.

Now, it used to be said if you wanted that fake Rolex or those counterfeit goods, Hong Kong was the place to come and get it. These days, though, there are other parts of the world that they're looking at stopping counterfeiting goods. Particularly east Africa. When we come back, Africa Inc. looks at the question of counterfeiting. This is QUEST MEANS BUSINESS. We're in Hong Kong.

(COMMERCIAL BREAK)

QUEST: Welcome back QUEST MEANS BUSINESS. Now, East Africa is becoming the new battleground in counterfeit and parroted goods. Counterfeiters are sucking millions of dollars out of the economy of the region doing business in fake goods.

It's hurting business, it's hurting consumers and most perhaps important, it's hurting the reputation of the continent. Cigarettes, drugs, televisions, auto parts, the list goes on and on. Copies of authentic branded goods are blowing a hole in the government's tax revenues. It's costing half a billion dollars a year. And those figures from the Investment Climate Facility for Africa, a partnership set up to improve business conditions.

The ICF cites the example of Kenya, where it says more than 30 percent of medicine sold are fakes. Manufacturers blame lack surveillance at African ports for an increase in commercial piracy. But there's little to deter smugglers. Counterfeiting in East Africa is not considered illegal.

Now, the situation of counterfeiting goods is one that is increasingly more serious,not just because of the lost revenues but because of what it says about doing business on the continent.

(BEGIN VIDEO CLIP)

OMAR ISSA, INVESTMENT CLIMATE FACILITY FOR AFRICA: If you take the case of East Africa, where are helping to fight member states, Kenya, Uganda, Tanzania, at one time Burundi, through the East African community, governments are losing half a billion dollars every year in lost taxes because of counterfeit. Businesses are losing 50 to 70 percent of their revenues because of counterfeits.

If I used the example of Ever Ready (ph), they've lost 70 percent of their businesses. If I take Toyota East Africa, they've lost 65 percent of their business on auto parts. We talk about road accidents. How many of those road accidents are due to fake products? Fake brake pads, fake steering rods and so on.

Even worse, in the pharmaceutical industries, Kenya alone -- in Kenya, it is estimated that over 30 percent of pharmaceutical products are fake. Now, that has huge implications on peoples' health. People are dying.

JIM BOULDEN, CNN CORRESPONDENT: Is it the case that Africa -- or East Africa, specifically, is an easy target? Or are these products actually being made in the region and being just smuggled between the countries?

ISSA: No. The majority, the bulk of the products are coming from overseas, imported from many, many countries. And the approach we are taking is that rather than try to work with a single country, we are approaching it at the regional level because, as you know, come next year, there will be a common market in East Africa so goods will move freely.

BOULDEN: That also means though, of course, ports will have to tighten up their security.

Do you see any evidence that that's happening?

ISSA: Not happening. I think that's the differentiating word here. That is what will happen. It's not happening today because if you look at the current legislation in these countries, the legislations that dates back, 10, 15, in some countries, actually 40 years. The applicable legislation is outdated so the most you can actually fine a convicted person is $50 to $100. That's about it. Things have to change. It's not a criminal offense in any of these countries.

BOULDEN: Really? Even with medicine, it's not a criminal offense?

ISSA: It's not a criminal offense, not today. And that is one of the issues we're addressing so the new legislation will make it a criminal offense.

BOULDEN: Do you find that people know they're buying counterfeit, fake products, or is this more case of that's what's on offer and they don't really have a choice?

ISSA: I'm very delighted you've raised that issue because part of our support to the five member states is actually raising public awareness. So, we'll be working with civil society, we'll be working with parliaments to ensure that communities are aware.

BOULDEN: Are you finding that the issue of counterfeit and fake is getting worse, or is it just now is the time to tackle it and you think you now have the mechanisms to begin to tackle it?

ISSA: It's a growing industry, no doubt. I think that globally we are talking at maybe over $600 billion per year. If we address the issue of copyrights -- in East Africa we have assessed that Microsoft alone loses something like $100 million a year because of infringement of copyrights.

But think of the artists in Kenya, in Tanzania, in Uganda, Rwanda and Burundi, whose songs or whose creative works are being copied and they don't get any benefit whatsoever.

BOULDEN: Certainly it's not unique to East Africa, at all. But, do you have any timeline in your mind of when you think it will get to a point where these companies will be able to make the money they think they can make and the governments will be getting the tax that they think they should be getting?

ISSA: The governments were alarmed when they discovered that actually they are losing half a billion dollars every year. And the question I put to them, do you know how many hospitals or how many schools you could build, how many mega watts of electricity you can generate with half a billion dollars every year?

They were alarmed so they are keen now to act.

(END VIDEO CLIP)

QUEST: Jim Boulden with that report.

When we come back, second half of QUEST MEANS BUSINESS, we meet George, the man who's given away billions of dollars. he continues to give money away -- $35 million for schools for needy children, supplies.

We meet him when we come back in a moment. QUEST MEANS BUSINESS IS CNN.

(BEGIN VIDEOTAPE)

QUEST: Good evening from our (INAUDIBLE) studio on the 16th floor of the InterCon here in Hong Kong. I'm Richard Quest. QUEST MEANS BUSINESS.

The Swiss banking UBS, normally secretive in the extreme, the soul of discretion, has now been forced to spill the names of four and a half thousand people -- American clients -- and those names have gone to -- wait -- the U.S. tax authorities. Details of a major agreement between UBS and the IRS; between the Swiss government and the American government is now becoming clear.

It means UBS will no longer face trial in a Miami courtroom.

Now, straight to New York; Maggie Lake is there.

These 4500 people whose names are going to be handed over, do they have a lot to worry about?

MAGGIE LAKE, NEW YORK: Oh, it appears they do, Richard. The taxman cometh, indeed. You know, tax experts we spoke to say this is a major breakthrough. The 5000 number - nearly 5000 - certainly a lot less than the 52,000 that the U.S. government was originally going for, but they say these 5000 are thought to be the worst offenders -- the big fish, if you will, in the tax evasion world and the fact that -- that the IRS estimated, at one point, estimated their assets were about $18 billion, sort of backs that up.

Importantly, also, by targeting these sort of big names, these big, big sort of suspects, the government is hoping that thousands of others are going to (AUDIO GAP) accounts there to turn (AUDIO GAP) that they are advising their wealthy clients who have accounts there to turn themselves in and participate in this tax amnesty program. The IRS set that up. They set it up in March and its in effect until September 23rd.

Not only that -- and this is very interesting and important -- the people who are voluntarily coming forward and participating for fear that they might be one of those 5,000 or they might be next, are giving the government information about other European banks. So the IRS commissioner himself, in a conference today, Doug Shulman, saying it is just the beginning of this. And, in fact, a tax expert who specializes in these offshore havens that we spoke to on the phone today agrees, saying this, after all these years, is finally a strong message to both the wealthy and to global banks -- Richard.

QUEST: Yes. Now, in terms of Switzerland, I saw a statement from the Swiss justice minister claiming that the Swiss banking secrecy rules, if you like, were untouched, they were still pristine. That simply can't be the case, surely, after this ruling...

LAKE: Yes.

QUEST: (INAUDIBLE)...

LAKE: Yes, I think that that is a stretch to say that, although the Swiss are able to sort of save a little bit of face here and say that they didn't just roll over or five the U.S. government all 52,000 names. And that is why this is a settlement, because the Swiss were able to sort of hold the line just a bit.

The American government, though, seems like they got what they wanted, which is the worst of these. And it was enough to sort of trigger this voluntary move by all the other thousands.

But certainly, Richard, once you sort of -- and I know Frederik Pleitgen, our correspondent in Germany, has talked about this a lot. Once you chink that armor and once you give a little bit, it calls into the question whether there really is a sort of steadfast veil of secrecy anymore.

Clearly not. There are some holes there, although there is probably better than -- than, say, if you were operating in some other European countries.

But the Swiss and the people that rely on that have got to be a bit worried about this.

QUEST: Maggie Lake, who is in New York, following that story.

The lengths to which some people will go to hang onto their money is only matched when some people give it away by the billions.

George Soros, the philanthropist, the man who allegedly broke the Bank of England, has given away a bit more of his wealth.

Poppy Harlow is also in New York and has been talking to Mr. Soros.

Who has he been giving the money away to?

POPPY HARLOW, ANCHOR, CNNMONEY.COM: Who hasn't he been giving the money away to, Richard?

I think that's the question here. I mean, George Soros, obviously, much more than a billionaire financier. He's a well-known philanthropist.

Actually, over the past 25 years, he's given away about $7 billion. He came into the studio this morning and we sat down with him one-on-one to talk about his charitable work, which it's interesting that he's been ramping it up during this recession -- the deepest since the end of World War II, when so much capital has been destroyed around the world. He's giving away more and more of his.

I asked him why he's giving so much, Richard, and why he's giving it now.

Take a listen to what he told me.

(BEGIN VIDEO CLIP)

GEORGE SOROS, INVESTOR AND PHILANTHROPIST: These are not normal times. This is a serious recession and philanthropy has been hit by the same recession. So the amount of available from the usual sources has actually gone down at a time when the need has gone up.

So I think that people who -- who -- who can afford it should step up to the plate and give more than normal.

We are focused particularly on children, because that is the future. And I think that if you can assure that it -- kids get a decent education, they then have a decent start in -- in life.

(END VIDEO CLIP)

HARLOW: Well, Richard, as you can hear, George Soros focusing on giving to children in need. His latest donation, $35 million to help children prepare for school in the city and the state of New York. It's going to give 850,000 kids $200 vouchers to use on school supplies to get ready for school.

And what's interesting about this donation, Richard, is he said there's no strings attached. And he told me a story about when he was a student at the London School of Economics and he got a donation that was similar to this and it helped him so much. So he's paying it forward, doing the same thing. A very interesting man, giving away quite a bit of money right now -- Richard.

QUEST: What I found interesting, as well, about what (INAUDIBLE) is this idea that philanthropy, obviously, takes a hit during recessions. And if you listen to Bill Gates and Warren Buffett and George Soros, they're almost making a clarion call to other wealthy people, who've still got it, to join them.

HARLOW: Richard, you nailed it. That's exactly right. I mean he said that exceptional times call for exceptional measures. It almost seemed to him -- to me, as these moves that he's made -- he recently gave another $50 million investment to fight poverty in New York; he, before that, in June, gave another $100 million to a number of communities across Eastern Europe. It seems like this really is a call to other, not just billionaires, but millionaires and those of us who are better off than others to jump in at this point in time because there has been such a destruction of wealth and -- and people need it now more than ever.

I did ask him where he's focusing on and he said he's focusing on Haiti; also, Sierra Leone; the Congo; and, also, Liberia; as places where he sees more stable governments forming, believe it or not. And he thinks they just need the resources to really get some action underway. So that's where he's focusing on now.

That full interview, you can see shortly on the Web site, CNNMoney.com -- Richard.

QUEST: Indeed, we'll have a look on -- at that.

Poppy Harlow, who is in New York.

We thank you, Poppy.

I'll see you next week when I'm actually in New York, as our NiLongKong (ph) coverage continues.

More news -- commercial news this time, from this part of the world. It's (INAUDIBLE) actually.

The Australian airline, Qantas -- interesting -- an airline that's made a first part year loss but -- in its first half year loss in six years, but actually showed better than expected results for the year overall.

Qantas lost $77 million between January and June. It's the first time since the start that it failed to make a half yearly profit.

However, the results for the full year were still positive -- $150 million profit. And that was down by nearly 9/10 compared to last year.

Tomorrow night, we'll be talking to the chief executive of Qantas, Alan Joyce. We'll be asking him how he made money, what setbacks he expects to have to make and, of course, how his A380s have moved into service. That's tomorrow night on QUEST MEANS BUSINESS.

The news headlines now. There's been a lot happening in the world.

Max Foster is at the CNN News Desk.

MAX FOSTER, CNN CORRESPONDENT: Richard, a new development to bring you on the fate of Lockerbie bomber, Abdul Baset Ali al-Megrahi. The Scottish government now says it will announce a decision on Thursday on whether to release him from prison on humanitarian grounds. Megrahi is suffering from terminal cancer and wants to return in the final months of his life.

Megrahi is serving a life sentence for the bombing of PanAm Flight 103, which killed 270 people.

In other headlines, Indonesian police ramp up a hunt for fugitives linked to last month's bombings in Jakarta. They released images of four suspects on Wednesday. At least one of the men is accused of recruiting the suicide bombers who carried out the attacks on the J.W. Marriott and Ritz Carlton Hotels. Seven people were killed in the attacks.

More political fallout from Typhoon Morakot. Public discontent is sweeping out more officials in Taiwan. The defense minister and chief cabinet officer have offered to resign after criticism that the government was too slow to react and the island's president has apologized again after being confronted by angry residents during a visit to a town buried by a mud slide.

The doctor under investigation in the death of Michael Jackson is breaking his silence. In a video posted online, Conrad Murray says he has "faith the truth will prevail." He also thanked patients and friends who have been sending letters and messages of support. It's Murray's first public comments since Jackson's death.

And just before I go, if you thought milk needed an improvement, well, Coca-Cola is testing out a new drink, a cross between good old moo juice and a fizzy soft drink. Vio or Vio, we're not quite sure, is being test marketed in New York, with mango, peach and other fruity flavors. "Time" magazine, which has the same owner as CNN, says Vio or Vio is on its list of top -- of the top 10 bad beverage ideas.

But Coke says it tastes like a birthday party for a polar bear, which would make anyone drink it -- Richard.

QUEST: I have a nasty feeling somebody -- when I'm in New York next week, somebody is going to expect me to try that concoction.

FOSTER: Yes, it's worth a go. You know, it might be all right. They've been right in the past.

QUEST: Well, right.

Max Foster, we thank you for that.

Keep you go -- keep your ideas to yourself in future. Vio or Vio will remain exactly where it is, not on my dining room table.

A year ago, we were reporting of heavy monsoons and the damage in India -- the flooding that it caused. This year, the story is very different -- the monsoon simply hasn't lived up to expectations.

What's the effect on the people of India, the rural poor?

Our report on that is next.

(COMMERCIAL BREAK)

QUEST: A finance minister in India once told me that there's not much you can do about the monsoon. It happens or it doesn't. Well, India's stock market has been retreating very sharply this month because the investors are worrying about the poor monsoon season.

Agriculture accounts for more than 17 percent of Indian economic activity. Analysts say if it's hit by lack of rain, it could cut GDP growth by as much as 1 percent.

From Mumbai, Mallika Kapur shows us how drought is affecting ordinary Indians.

(BEGIN VIDEOTAPE)

MALLIKA KAPUR, CNN CORRESPONDENT (voice-over): Indian agriculture has always been a gamble on the monsoons. Only 40 percent of the country's farm land is irrigated. The rest of it relies heavily on annual monsoon rains.

The rains are almost 30 percent below normal this year, leaving a quarter of India facing a drought. It's wiping out livelihoods and pushing up food prices across the country.

UNIDENTIFIED FEMALE: Momkidal (ph)?

KAPUR: "What used to cost 20 rupees six months ago now costs 100," says this shopper. "It's all because of the weak rains."

DHARMAKIRTI JOSHI, CRISIL: On the average, Indians can spend about 55 percent of their income on food. And then you go down the income strata, you spend more than -- a higher and higher proportion on food. So it hurts the poor most.

KAPUR: Even though agriculture now accounts for less than a fifth of Indian GDP, almost 60 percent of the population still depends on farming for a living. Wipe out their incomes and you wipe out a key engine for India's growth -- rural demand. It's what helps the economy stay afloat during recessionary times.

MEHRABOON IRANI, CENTRUM BROKING: Growth, according to me, is going to take a bit stronger demand. And if that happens for (INAUDIBLE) going to have it, (INAUDIBLE) in all the industries which ultimately have rural population as a major, I would say, (INAUDIBLE) force. So if you don't have demand coming for (INAUDIBLE) rural demand getting affected for (INAUDIBLE) cement, building products and hydroelectric power, a whole lot of things could happen.

KAPUR: Already threatened because of the global recession, India's GDP growth was expected to be around 6.5 to 7 percent this year. Thanks to the dry spell, it will probably be just under 6 percent, say economists.

The economy grew by 6.7 percent last fiscal year. Not bad, but disappointing when compared to the mere 9 percent growth rate India has enjoyed for much of this decade.

The prime minister says his priority is to return India to 9 percent growth. He says he's offering drought stricken farmers all the assistance they need to get the economy back on track and ensure no one goes hungry.

Mallika Kapur, CNN, Mumbai.

(END VIDEO TAPE)

QUEST: Mallika Kapur reporting.

And Mallika Kapur will be continuing to watch the events taking place in India with a failure of the monsoon season.

Now let's catch up with the weather forecast, because those monsoon or lack of monsoon rains causing problems there. But elsewhere, there are some nasty weather conditions.

And Guillermo is at the World Weather Center.

GUILLERMO ARDUINO, CNN METEOROLOGIST: But I see that your weather looks fine, Richard. And you can actually bring some knowledge from there, right?

It looks OK. It's going to remain warm.

What do you feel?

What do you think?

QUEST: I think, at the moment, we're OK, but I live in trepidation of rain suddenly dumping large amounts of water on my head.

ARDUINO: Well, the Meteorological Service in Hong Kong is saying that there is a chance for that thundershower or thunderstorms. But usually the trend is partly cloudy now.

We see high pressure that has built in very nicely in the area of Southern China. Now it's in the clear. We see how they pop up here closer to Werjo (ph), some rain showers or day time heating rain showers. So that's what's going on right now.

I think, though, that into Japan, we see some problems. Look at the long- term forecast for Hong Kong Thursday, Friday, Saturday. It's warming up. It will -- it's going to continue to be warm and mostly sunny.

I wonder if you're going to be sleeping at that time -- but mostly sunny.

And this is what I was talking about. As you notice, away from the coast is where we see most of the action. Then in coastal parts it remains OK.

So, with some delays, probably, at the airport in Inchon, Tokyo -- Narita with some thunder, probably, tomorrow; Delhi with some thunder, as well.

Let me tell you briefly about Hurricane Bill here -- a clearly defined center of the system, a major hurricane, category four, moving toward the Bermuda area. We are not suggesting that we're going to see a direct impact, but an indirect impact in this case, because of the outer feeder bands and the massive -- the sheer size of it.

Now, more coming up, of course. And in Europe, it's extremely warm. The temperatures continue to be above average. London is enjoying, at least for tonight -- and I think that tomorrow we'll see rain -- nice conditions and warm.

But look at Berlin -- above average, 10 degrees for Thursday. Then we see a respite of those conditions the next day.

Also, Paris -- 10 or 11 degrees above average. Zurich, the same thing, but some rain showers are moving there. And Rome also pretty warm, indeed -- Richard.

QUEST: We thank you, Guillermo, at the World Weather Center.

Thank you for that.

Now, yesterday, we showed you the report of my -- of me getting measured for a suit. Well, tonight, allow me to show you the final product. The suit was delivered by Mr. Rajah (ph), planned. This is it. It's a very lightweight cashmere suit. It's not the sort of suit you would wear every day, but it has been made within 24 hours. And I'm pleased to say, as they used to say, it -- it rides well with (INAUDIBLE).

So you may want to know what's so important about the suit and why it has to be made in a particular way. Well, besides the rather nice lining, look at all the electronic paraphernalia that one has to have for making television. And, of course, what you don't want is all this stuff rocking the line of your suit.

By the way, you be the judge. A suit in a day -- let me give you your opinion, what you think -- quest@cnn.com or the Twitter address, as always, @richardquest.

And there you see my suit actually being made.

When we come back in a moment, we'll be looking at an anniversary of Google. We also have a Profitable Moment about banks in China.

(COMMERCIAL BREAK)

QUEST: People have been Googling now for the best part of a decade, but it was only five years ago that you were able to buy a piece of the company. If you had bought five years ago, you'd have more than a Google in your pocket right now.

The world's most used Internet search company is celebrating its fifth anniversary as a publicly listed company. Its success has been golden, indeed.

Jim Boulden now takes a look at the scenes at Google's London offices. Google is one of those companies people are fascinated by and what makes it tick.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: This is the -- this is the Google London canteen...

JIM BOULDEN, CNN CORRESPONDENT: Um-hmm.

UNIDENTIFIED MALE: ...where everybody comes up for their -- their lunch (INAUDIBLE). Breakfast, as well, here.

BOULDEN: Breakfast as well?

UNIDENTIFIED MALE: Yes. The breakfast here is probably one of the best parts, you know, coming in at 8:30 and you get a full English breakfast or you can have bagels or -- it's just great.

BOULDEN: Why is lunch free?

A fundamental question.

What is it about Google that the management decided lunch should be free?

BOULDEN: I think it's a -- it's a great place that everybody can come together, different departments, the -- I -- I sometimes sit here with business, engineering. And we can all just sort of relax and have a conversation about a project we're working on or just completely relax altogether. And they have a couple of different things each day.

BOULDEN: Yes.

UNIDENTIFIED MALE: And everything is locally sourced, as well, so it's (INAUDIBLE) online with our environmental (INAUDIBLE).

BOULDEN: Do you mind if I start?

UNIDENTIFIED MALE: Sure. Go ahead.

Generally, if -- if you're -- if you're just having a day with no meetings, everybody meets here, pretty much. And it's -- we've had a, you know, a couple of people come in and review it as a restaurant.

BOULDEN: Do you bring prospective employees in here, as well?

UNIDENTIFIED MALE: Yes.

BOULDEN: Is this one of the selling points?

UNIDENTIFIED MALE: If -- if we're doing -- if we're doing an interview with anybody, then we'll -- while somebody's making lunch...

BOULDEN: Yes...

UNIDENTIFIED MALE: ...lunch things, as well. And it's also -- we bring in a lot of clients of Google as well, they come in here. Break -- the breakfast meeting is a particularly good way to talk to your customers...

BOULDEN: Sure.

UNIDENTIFIED MALE: ...and get to know them a bit better. And it's always great to have -- have people come into the office.

BOULDEN: So you've been here four-and-a-half years.

What has surprised you the most about the culture?

UNIDENTIFIED MALE: What I was really surprised by was -- was how interesting it could actually be to work. And every project that you do here is just -- it's so exciting and a challenge and an opportunity. And everybody is super smart and willing to, you know, chip in and work together.

So it's a -- it's a really interesting working environment.

BOULDEN: And one of the things I read about was this idea of the collaboration. And you can get -- you can come up with an idea and literally within days see it on the Web. Well, that seems unrealistic to me, that you don't have to go through layers. I mean there must be layers you have to go through.

UNIDENTIFIED MALE: I mean there's always -- we've always got sort of adhering to the -- the concepts of the company -- you know, what is Google trying to do?

It's trying to organize the world information and make it universally accessible, you know...

BOULDEN: Yes.

UNIDENTIFIED MALE: Kind of thinking along those lines, if your project is -- you know, started as a 20 percent project, you're allowed to spend, effectively, 20 percent of your time coming up with something that's related to Google. And three of my projects have turned into my job at Google.

UNIDENTIFIED MALE: Whoa, good show.

UNIDENTIFIED FEMALE: Good show.

UNIDENTIFIED FEMALE: (INAUDIBLE).

UNIDENTIFIED MALE: This is a table test competition table there and then the pool -- the pool competition.

(CROSSTALK)

UNIDENTIFIED MALE: Game over. We've got wipe boards everywhere. It's a - - it's a great way of just being able to think up something, write it down, rub it -- rub it off.

BOULDEN: And do you feel like it's still a small company, even though it's not, obviously, a small company?

UNIDENTIFIED MALE: Yes. I mean it's -- it's amazing how we've maintained that feeling of you can still get things done, people still have got great ideas and, you know, you don't -- you don't get stuck in, you know, anything that can close you down, like some of the big companies can do.

BOULDEN: So we've just gone from the lunch room to another floor where we saw a place for free coffee and a place for people to gather and we have another one.

UNIDENTIFIED MALE: Yes. It's that -- it's that startup feeling. This is our atrium. This is a...

BOULDEN: Oh, OK. This is not what I expected, (INAUDIBLE) trees.

UNIDENTIFIED MALE: This is for our meetings.

BOULDEN: Let's show this to everybody. When he says meeting room, this is the idea of a meeting room. This is a -- this is a deck chair.

So that's a look at the Google office here in London with its 600 employees, with everything from deck chairs to hammocks and, of course, the free food.

I have to say, the lunch wasn't bad. And I'm a bit stuffed.

Jim Boulden, CNN, London.

(END VIDEO TAPE)

QUEST: And, Jim, there is no such thing as a free lunch.

Tonight's Profitable Moment -- which would you like first, the good news or the bad?

Well, you're going to get both of it, whether you like it or not. The IMF says recovery is underway, but it is going to want -- it won't be normal recovery for some time to come.

How you view this depends on whether you are one of those people that believes the glass is half empty or is it half full.

Even here in Asia, where growth has returned, it is sub par. And today's falls in Shanghai call into question what's happening in China and bank lending and the future of monetary policy.

Growth in Asia will be low and miserable until the U.S. and Europe decides to join in, which again, here in Hong Kong, it raises the question, is the -- is the cup half full or half empty?

Is it better to have a bit of growth and muddle along or go full speed ahead and take what comes next?

And that's QUEST MEANS BUSINESS for this Wednesday evening here in Hong Kong.

I'm Richard Quest.

Wherever you may be and whatever you're up to in the hours ahead, I hope it's profitable.

I'll see you tomorrow.

END

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