Chinese Banks Back $10 Billion Bid to Build Solar in Europe

Two Chinese banks are providing as much as $10 billion in funding to a group of three Chinese makers of solar equipment to build sun-powered energy projects in Europe.

China Merchants Bank Co. and the state-owned China Development Bank Corp. are backing the efforts of Goldpoly New Energy Holdings Ltd., TBEA SunOasis Co. and China Technology Development Group Corp. (CTDC) to expand in Europe, CTDC said in a statement.

The solar companies say their goals align with the Chinese government’s policies on promoting renewable energy, and that the German government’s plans to abandon nuclear power by 2022 will drive up demand for solar energy in the region.

“We feel confident that we will be leading the next golden decade of solar energy development,” Tim Yiu, executive director and general manager of the solar energy business of Goldpoly, a solar cell maker based in Jinjiang in China’s Fujian Province, said in the statement.

The three companies plan to use modules produced with their own components, including polysilicon, wafers, cells and inverters, according to the statement. They expect to initially develop small projects and then move on to larger ones.

“Our PV investment consortium has strong financial support from China Development Bank and China Merchants Bank,” said Jianxin Zhang, chief executive officer of TBEA SunOasis, based in Urumqi. “Given their backing of $10 billion credit facilities, we will be able to grow steadily and advance our investment and construction of solar plants in Europe.”

State Support

An exact timeline and breakdown of the financing wasn’t disclosed. Lending by China Development Bank for clean energy projects exceeded $35.5 billion last year, according to a February report by Bloomberg New Energy Finance.

China Development Bank has loaned to other Chinese solar power equipment makers, including more than $26 billion to LDK Solar Co., Trina Solar Ltd. (TSL), Yingli Green Energy Holding Co., Suntech Power Holdings Co. and JA Solar Holdings Co., according to data compiled by the London-based researcher.

The three solar makers said this is the first time three listed Chinese companies have formed such a group, and the funding will provide a new avenue to sell their own products.

Other solar companies have purchased development companies to ensure demand for their products. SunPower Corp. (SPWRA), a U.S. maker of solar panels, bought Malta-based SunRay Renewable Energy in February 2010 to increase its sales in Europe. LDK Solar bought in January a 70 percent stake in Solar Power Inc. www.bloomberg.com

Top White House Economist Goolsbee Steps Down

Top White House economist Austan Goolsbee said on Monday he was stepping down, marking the exit of one of President Barack Obama's closest aides at a time when new signs of weakness have emerged in the U.S. economy.

AP

Less than a year after he was named chairman of the White House Council of Economic Advisers, Goolsbee plans to return to his teaching job at the University of Chicago, the Obama administration said in a statement.

Goolsbee's departure leaves Treasury Secretary Timothy Geithner as the sole remaining senior member of the original economic team.

Goolsbee and Obama got to know each other at the University of Chicago, where the president had been a lecturer in constitutional law. Goolsbee advised Obama's campaign for the U.S. Senate in 2004 and his 2008 presidential campaign.

Goolsbee has been one of the administration's more visible spokesmen on the economy and lately has emphasized his view that the recovery remains solidly on track, despite a report on Friday showing tepid jobs growth and a rise in the unemployment rate in May to 9.1 percent from 9 percent in April.

"He has helped steer our country out of the worst economic crisis since the Great Depression, and although there is still much work ahead, his insights and counsel have helped lead us toward an economy that is growing and creating millions of jobs," Obama said in a statement.

In addition to the jobs report, other data including reports on housing and manufacturing have suggested the recovery was losing momentum.

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At the beginning of this year, Goolsbee warned that a failure by the U.S. Congress to raise the nation's borrowing limit could be "catastrophic" for the economy, a line the White House has repeated in the months since then as it negotiates with Republicans over legislation to lift the debt ceiling.

Prior to being promoted to CEA chairman last September, Goolsbee served as one of the three members of the Council of Economic Advisers, whose main function is to provide economic forecasts for the president.

He also was a staff economist to the President's Economic Recovery Advisory Board, an outside panel of economic advisers led by former Federal Reserve Chairman Paul Volcker.

Larry Summers, former director of the White House National Economic Council, stepped down at the end of last year to return to his teaching job at Harvard University.

Christina Romer, his predecessor as CEA chair, left last August, also to return to academia, and Peter Orszag resigned as White House budget director last July.

From Chicago, where he will teach at the Graduate School of Business, Goolsbee will also serve as an outside adviser to Obama's 2012 re-election campaign, according to an administration official.

Weidmann May Follow in Weber’s Bundesbank Footsteps as ECB Changes Guard

New Bundesbank President Jens Weidmann signaled he may be as much of an inflation hawk as his predecessor Axel Weber, using his first speech to call for more policy tightening by theEuropean Central Bank.

One of the ECB’s key challenges is to “formulate a return to monetary policy normality,” Weidmann said in Frankfurt yesterday after replacing Weber at the helm of Germany’s central bank. “Short-term crisis measures can, when administered as a long-term medication, be associated with considerable side effects,” he said, echoing Weber, one of the most ardent inflation fighters at the ECB.

“Weidmann will certainly follow in Weber’s footsteps,” saidCarsten Brzeski, an economist at ING Group in Brussels. “But initially it will be a challenge for him to establish his position among the old boys at the ECB.”

Weidmann is one of up to seven changes on the ECB’s 23- member Governing Council in a year marked by the retirement of President Jean-Claude Trichet. The new generation of central bankers under the likely leadership of Italy’s Mario Draghi will reinforce the ECB’s resolve to stamp out inflation, say economists at Citigroup Inc. and Societe Generale SA.

“In the short-term, the ECB may turn more hawkish,” saidKlaus Baader, co-chief euro-area economist at Societe Generale in London. “Draghi will want to show he’s not lax about inflation risks and the new members will keep their voices down, strengthening the influence of established hawks like chief economist Juergen Stark.”

Chicago

Germany, the only one of the four biggest euro countries yet to endorse Draghi, lost its favored candidate for the job when Weber in February unexpectedly announced his decision to step down. Weber, an economics professor, will join the University of Chicago to teach a course on central banking.

Weidmann, previously Chancellor Angela Merkel’s chief economic adviser, is likely to support further ECB rate increases to curb mounting inflation pressures, said Juergen Michels, chief euro-area economist at Citigroup in London.

“Weidmann won’t rank behind Weber in terms of hawkishness,” said Michels. “It also doesn’t seem that the successors of outgoing council members will be less focused on inflation fighting.”

ECB Exodus

In April, Luc Coene replaced Guy Quaden at the head of Belgium’s central bank. Next month Peter Praet, another Belgian, will succeed Gertrude Tumpel-Gugerell on the ECB’s Executive Board, whose six members together with the central bankers of the 17 euro nations comprise the Governing Council.

In July, Malta’s central bank governor Michael Bonello will be replaced by Josef Bonnici, and Nout Wellink will step down as head of the Dutch central bank. Lex Hoogduin, 54, has been tipped by academics and bank officials as his likely replacement.

The selection of Draghi to succeed Trichet, whose term ends on Oct. 31, may force two further changes.

Italy would need to appoint a new governor to join the ECB’s council in Draghi’s stead, and Lorenzo Bini Smaghi would probably have to make way for a new French policy maker on the Executive Board to avoid Italy dominating the ECB’s top decision-making body.

Estonia’s adoption of the euro on Jan. 1 saw Andres Lipstok join the ECB council this year, bringing the potential number of new faces to eight.

‘Too Accommodative’

ECB policy makers, who raised the benchmark rate by a quarter point to 1.25 percent last month, next convene on May 5 in Helsinki. Some economists expect them to signal that another move will come as soon as June.

Monetary policy is “still too accommodative,” Coene said in an interview on April 18, striking a tougher tone than his predecessor Quaden, who on March 31 endorsed a “cautious” rate increase.

Draghi has also sharpened his language. While Trichet said last month’s rate step wasn’t necessarily the start of a series, Draghi signaled more to come. “Monetary policy must take into account the emergence of inflationary tensions, pushed by rising food and energy prices,” he said on April 13.

Most economists and investors predict two more quarter- point increases in the ECB’s benchmark rate this year, taking it to 1.75 percent.

“We believe the ECB has to raise interest rates higher than markets expect,” Andrew Bosomworth, a fund manager at Pacific Investment Management Co., wrote in a guest commentary for Germany’s Boersen-Zeitung on April 28. “The ECB’s benchmark rate is still too low in light of economic growth and inflation expectations.”

Faster Inflation

Inflation, which the ECB aims to keep just below 2 percent, accelerated to 2.8 percent last month. Incoming policy makers will have to weigh that against the risk of inflaming the sovereign debt crisis that’s afflicting peripheral nations such as Ireland, Greece and Portugal.

As the representative of Europe’s largest economy, Weidmann will be central to those deliberations. At 43, he is the youngest president in the Bundesbank’s 54-year history and the youngest ECB council member.

Fluent in English and French in addition to his native German, Weidmann is a former student and protégé of Weber. Yesterday, he indicated he shares many of Weber’s views.

Weidmann lauded the ECB’s focus on monetary aggregates as an indicator of future inflation, and said the bank must keep price stability as its primary goal. The Bundesbank’s “culture of stability” will be maintained under his leadership, he added. www.bloomberg.com