State to open trade/investment office in China

Gov. Jerry Brown announced today he’s opening a new trade and investment office in China, aimed at increasing direct investment in California and giving the state’s businesses more advantages over there.

“The Pacific Rim has become the center of the world economy, presenting California with countless opportunities to grow alongside our neighbors across the ocean,” Brown said in a news release issued Friday, after he met with Chinese Vice President Xi Jinping in Los Angeles. “The office will encourage direct investment and further strengthen the existing ties between the world’s second- and ninth-largest economies.”

The California-China Trade and Investment Office will give California more access to Chinese business contacts and provide Chinese investors with access to California projects that will benefit from increased investment. The office will be paid for by private-sector partners coordinated by the Governor’s Office of Business and Economic Development, which will also work with the Chinese government to get the office open.

California hasn’t had a formal presence in China since the previous foreign trade offices were closed in 2003.

The governor’s office notes China is the world’s largest exporter of goods and third largest importer, ranking closely behind the United States and the European Union. The vast majority of China’s exports to the U.S. go through California ports, while California exported $12.4 billion in goods and services to China in 2010. In addition, China invested $1.5 billion in California projects in 2011, or 10 percent of all Chinese investment in the U.S.

Vice President Xi visited California on the last stop of a four-day U.S. tour to discuss trade and investment opportunities with Brown and Vice President Joe Biden.

UPDATE @ 11:19 A.M.: State Sen. Tom Harman, R-Huntington Beach, said Brown should hold China’s feet to the fire.

“Today the Governor announced he is opening a trade and investment office in China. While I am the first to welcome free trade with other countries, it must really be free,” Harman said in a news release. “China’s unfair trade practices and manipulation of currency are hurting California’s economy. To me this is an issue of parity and fairness. Which means, both sides must play by the same rules. Clearly that is not the case with China.”

Harman also noted many California companies have intellectual property issues with China. According to one copyright industry association, China’s piracy rate remains one of the highest in the world (over 90 percent). On average, 20 percent of all consumer products in the Chinese market are counterfeit. By some estimates U.S. companies lose up to a billion dollars in legitimate business each year to piracy.

“Piracy of intellectual property particularly impacts the electronics industry and, as we know, that is an industry with many ties to California,” said Harman. “Piracy is about jobs and frankly, California can’t afford to be on the short end of that stick.”


Garamendi touts Obama’s American Jobs Act

Rep. John Garamendi was on the phone with reporters just now to tout President Obama’s American Jobs Act, which he called “an extremely important, and very good and timely, proposal.”

Garamendi, D-Walnut Grove, said he’s increasingly excited about “the potential this has to employ people, get them back to work and get the economy moving again” and about the fact that that this “a major jobs program that is totally paid for.”

He said he was talking earlier today with Columbia University economist Joseph Stiglitz about the concept of growing the economy by putting people to work and simultaneously raising taxes where appropriate. The President’s plan, he said, has significant tax reductions in places likeliest to boost employment and the economy as well as tax increases where they have best chance to raise money from those who can afford it with least impact on consumer demand.

Specifically, the plan calls for $400 billion in new tax revenue by limiting itemized deductions and certain other exemptions for individuals with adjusted gross incomes of $200,000 or more, or $250,000 and up for married couples. Another $40 billion would come from closing tax loopholes for the enormously profitable oil and gas sector; $18 billion would come from ending hedge fund managers’ ability to count their earnings at the capital gains rate rather than as earned income; and $3 billion on reforming the corporate jet depreciation schedule.

And what would it pay for, particularly here in California? Details, after the jump…
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Biden: DOE money seeded Bay Area investments

Five institutions that got Energy Department seed money in 2009-2010 – including two in the Bay Area – since have attracted more than $100 million in outside private capital investment, Vice President Joe Biden said today.

The money came from the Energy Department’s Advanced Research Projects Agency-Energy (ARPA-E).

“America is at its best when we innovate – and ARPA-E supports the very best of American innovation,” said Biden, who spoke today at the National Clean Energy Summit 4.0 in Las Vegas.

“These five companies are swinging for the fences, pioneering new technologies that could help answer the energy challenge and create jobs,” he said. “They illustrate how a small but strategic investment by the federal government can pay big dividends down the road and bring into the market groundbreaking new technologies.”

Primus Power of Hayward received $2 million in ARPA-E seed funding in July 2010, and in May 2011 raised $11M in a round of financing. DBL Investors and I2BF Global Ventures joined existing investors Chrysalix Energy Venture Capital and Kleiner Perkins Caufield & Byers. It’s developing a “flow battery” using high energy fluids pumped throughout the unit, capable of storing renewable energy such as wind and solar power and then releasing that energy into the grid during peak load times.

Stanford University received $1.5 million in ARPA-E seed funding million and since has secured $25 million in private investments to support Professor Fritz Prinz’s work on commercializing a new type of energy storage device that will perform many of the same jobs as a normal battery, but deliver greater energy and power and withstand thousands of charges without showing a significant drop in performance.

ARPA-E will be making its next round of awards in September, including some to projects to keep America’s manufacturers competitive by reducing the need for expensive “rare earth” materials from China. Rare earths are naturally-occurring minerals with unique magnetic properties, used for modern necessities such as laptops and lasers as well as in clean-energy technologies such as electric vehicles and wind turbines. Up to $30 million will be made available for this area, in addition to funding for projects in advanced biofuels, thermal storage, grid control technologies and solar power.


Whitman would save millions from her tax cut

Continuing a meme that Democratic gubernatorial nominee Jerry Brown started during the debate last week, his supporters released a memo today estimating that Republican nominee Meg Whitman would see personal savings of between $8.2 million and $41.2 million over a four-year gubernatorial term if she keeps her promise to eliminate the state’s capital gains tax.

Brown had asked Whitman – the billionaire former eBay CEO – during their Oct. 12 debate at Dominican University of California in San Rafael how much her tax plan would benefit her own finances; she didn’t answer, and hasn’t released an estimate since. Today’s memo was prepared and released by California Tax Reform Association Executive Director Lenny Goldberg.

Whitman says eliminating the tax will stimulate investment, leading to job creation. Democrats say it would blow an even bigger hole in the already-shredded state budget while mostly benefiting the very rich, with no guarantee of an economic benefit.

“Meg Whitman has millions to gain, but we have everything else to lose,” California Labor Federation Executive Secretary-Treasurer Art Pulaski told reporters on a conference call.

He said eliminating the capital gains tax would reduce state revenues by $4.5 billion per year, with each dollar lost bringing “a decrease in the quality of life for Californians:” failing schools, reduced college admissions, shortages of police and firefighters, crumbling infrastructure, struggling seniors and disabled, and reduced or no child care, all without creating jobs.

Pulaski and Goldberg repeated their calls for Whitman to release her tax records so estimates such as theirs wouldn’t be necessary.

State Sen. Leland Yee, D-San Francisco, agreed the memo underscores Democrats’ contention that Whitman offers “a one-sided solution to our budget problem – it is to enrich the rich and cut from children and the poor.”

California saw faster economic growth than the rest of the nation from 2000 through 2007 even with the capital gains tax in place, said University of California, Berkeley Economics Professor Michael Reich, while other states such as Texas have outperformed California in recovering from this recession because they weren’t as hard hit by foreclosures.

Whitman’s campaign issued a statement saying leading economists are on her side.

“Having closely studied the issue, Meg Whitman’s proposal to eliminate the capital gains tax in California will spur investment and create jobs. As a whole, Meg’s economic policies of streamlining regulation and implementing targeted tax cuts are crucial in getting our economy moving again and getting Californians back to work,” Hoover Institute Senior Fellow John Taylor – an economic advisor to governors Arnold Schwarzenegger and Pete Wilson, as well as to presidents Gerald Ford and George H.W. Bush – said in the campaign’s statement.

But Reich said California investors have diversified national and international portfolios, and so their reinvestment wouldn’t benefit the Golden State’s economy all that much. He also said millionaires haven’t been leaving California in any measurable way due to taxes, and so it’s unlikely any would return if the tax was eliminated.


Israel divestiture measure cleared to circulate

Secretary of State Debra Bowen today cleared a Sacramento man to take a second crack at putting before California voters an initiative that would bar the state’s gigantic public employee pension funds from investing in companies engaged in certain business activities in Israel.

The Attorney General’s official title and summary for the measure is as follows:

PROHIBITS STATE RETIREMENT FUNDS FROM INVESTING IN COMPANIES ENGAGED IN CERTAIN BUSINESS ACTIVITIES IN ISRAEL. INITIATIVE STATUTE. Requires the Public Employees’ Retirement System and State Teachers’ Retirement System to identify investments in companies that do business related to the construction or maintenance of Israeli settlements, including those in the West Bank and East Jerusalem, or that provide military supplies and services to Israel. Requires retirement funds to urge these companies to stop these business activities, and, subject to fund fiduciary responsibilities, to divest from companies still engaged in these activities. Prohibits retirement funds from making new investments in these companies. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Potential increase in state and local government pension contributions, the amount of which would vary from negligible to more significant based on how this measure’s divestiture requirements are interpreted and implemented. (10-0020.)

Proponent Chris Yatooma has until Jan. 31 to collect 433,971 valid petition signatures from registered voters in order to place the divestiture measure on the 2012 presidential primary ballot.

According to this Examiner article from earlier this year, Yatooma had tried earlier this year to gather enough signatures to put the measure on this November’s ballot, apparently to no avail.

“We believe the ballot measure is needed so Californians may express their displeasure with Israel’s illegal settlements and Israel’s occupation of Palestine,” says Yatooma’s Israel Divestiture Campaign website. “We hope California will be the first state to apply a comprehensive divestment strategy that other states will follow. This divestment approach looks to mirror the divestment strategy embodied by the worldwide anti-apartheid movement that toppled white rule in South Africa.”

The California Public Employees’ Retirement System (CalPERS) manages retirement benefits for more than 1.6 million California public employees, retirees, and their families; its investment portfolio’s market value was $200 billion as of June 30. The California State Teachers’ Retirement System (CalSTRS) had 847,833 total members and beneficiaries and investments with a market value of about $118.9 billion as of mid-2009.


Miller will probe pension agency’s ex-chief

House Education and Labor Committee Chairman George Miller, D-Martinez, is opening a committee investigation into “very serious questions” of whether a Bush Administration pension agency chief got too cozy with the Wall Street contractors from which he was taking bids on lucrative contracts.

Pension Benefit Guaranty Corp. – a federal corporation created by the Employee Retirement Income Security Act of 1974, with the secretaries of Labor, Commerce and Treasury as its board of directors – protects the pensions of nearly 44 million American workers and retirees in more than 29,000 private single-employer and multiemployer defined benefit pension plans. Charles E.F. Millard – earlier, a managing director at Lehman Brothers and Prudential Securities as well as a Republican New York City Councilman and a member of Mayor Rudy Giuliani’s administration – served as PBGC’s director from December 2007 through Jan. 20 of this year.

According to a PBGC Inspector General report issued earlier this week, PBGC executives in February 2008 gave the board a proposal to revise the corporation’s investment policy, moving billions of dollars out of fixed-income treasury securities and into marketable equities, real estate and private equity – basically, from investing in the government to investing in Wall Street.

The board unanimously approved the policy, and PBGC set about reinvesting its $48.4 billion portfolio, seeking bids from “strategic partners” on Wall Street who could manage parts of the fortune. Contracts awarded in October called for the purchase of nearly $2.5 billion in real estate and private equity; total fees for the three strategic partnership contracts, over a ten-year period, could top $100 million.

But Millard interposed himself in the bidding process, the report says:

“Phone records and emails show that the former Director was communicating directly with some bidders at the same time that he was actively evaluating their Strategic Partnership proposals, a clear violation of the prohibition of contact with potential offerors. Further, the former Director took an unprecedented role in the procurement process, to include serving on Technical Evaluation Panels (TEP) to formally assess some of the same Wall Street firms with whom he was in frequent contact; at a minimum, this violated the principle of separation of duties. However, it should be noted that our audit did not identify evidence of criminal activity on the part of any bidders.”

“The former Director was advised that his actions could cast doubt on the intergrity of the procurement process, but he did not heed these warnings.”

Millard denies he was manipulating the contracts in order to land a job with one of the contractors, the report says – but e-mails show a senior official at Goldman Sachs, which won a contract to invest $700 million of PBGC’s money, was actively helping Millard find a job.

Should be quite an investigation.