European Chamber of Commerce in China today issued the results of its annual confidence survey of members firms and reported that European businesses in China are concerned about rising labour costs and competition with domestic rivals is increasing.

A slowdown in China’s and the global economy continues to be the biggest worry for European business, according the survey of 514 respondents issued today at a briefing in Beijing. Concern about an economic slowdown is easing as compared with last year, according to the survey. China may also be losing “some of its lustre” as an investment location for European companies, the chamber said. The survey found that 30% of respondents identified China as currently the world’s top investment destination. When asked how China may rank in five years, only 21% said it would be the top investment destination, according to the survey.

Worries were also expressed about the fairness of certain Chinese government policies, such as those aimed at supporting "indigenous innovation," which favour local companies and technology, have rising in the past year even as China has emerged from the global financial crisis faster and in better shape than other economies.

The chamber called on the Chinese government to foster conditions that encourage European companies to continue to support China's development "even when (economic) growth inevitably dips as the economy matures."

Google and China: David Drummond, Google's Corporate Development and Chief Legal Officer commented overnight that ever since Google launched Google.cn, the search engine for mainland Chinese users, it has done its best to increase access to information while abiding by Chinese law. "This has not always been an easy balance to strike, especially since our January announcement that we were no longer willing to censor results on Google.cn.

We currently automatically redirect everyone using Google.cn to Google.com.hk, our Hong Kong search engine. This redirect, which offers unfiltered search in simplified Chinese, has been working well for our users and for Google. However, it’s clear from conversations we have had with Chinese government officials that they find the redirect unacceptable - - and that if we continue redirecting users our Internet Content Provider license will not be renewed (it’s up for renewal on June 30). Without an ICP license, we can’t operate a commercial website like Google.cn -- so Google would effectively go dark in China."

Google said that’s a prospect dreaded by many of its Chinese users, who have been vocal about their desire to keep Google.cn alive.

"We have therefore been looking at possible alternatives, and instead of automatically redirecting all our users, we have started taking a small percentage of them to a landing page on Google.cn that links to Google.com.hk - - where users can conduct web search or continue to use Google.cn services like music and text translate, which we can provide locally without filtering. This approach ensures we stay true to our commitment not to censor our results on Google.cn and gives users access to all of our services from one page.

Over the next few days we’ll end the redirect entirely, taking all our Chinese users to our new landing page - -and today we re-submitted our ICP license renewal application based on this approach," Drummond said.

Google said as a company it aspires to make information available to users everywhere, including China. "It’s why we have worked so hard to keep Google.cn alive, as well as to continue our research and development work in China. This new approach is consistent with our commitment not to self censor and, we believe, with local law. We are therefore hopeful that our license will be renewed on this basis so we can continue to offer our Chinese users services via Google.cn," he concluded.

Incredible rally in US bonds continues: Davy chief economist, Rossa White, comments   - -"The US and German bond markets have been flashing warning signals about riskier assets for many weeks. Yesterday, the huge rally in US treasuries continued: overnight the 10-year yield dipped below 3% for the first time in 14 months. It is back at levels seen in the very initial stages of financial market recovery in early 2009. Fears that the global outlook will lead to a deflationary trend, cemented by fiscal retrenchment in many countries, are driving flows into the safe haven, as it is still perceived, of US treasuries. It may take at least two of the three key US economic releases beating expectations to change the dynamic.

On the day before the last non-farm payroll report less than a month ago, US 10-year treasuries were yielding 3.36%. This morning, the yield is 2.98%. That disappointing payroll report sparked the initial sharp rally. But a number of data misses, renewed worries about Greece (despite the bailout), sliding Chinese leading indicators and the trend towards fiscal retrenchment have seen heavy buying of US (and German) government bonds. It is remarkable that the rise in the 'core' PCE deflator exceeded expectations at +0.2% versus +0.1% yesterday, yet treasuries were unfazed.

US inflation expectations have receded dramatically. Five-year and 20-year expectations, derived from the gap between nominal yields and TIPS, have dropped to their lowest point since last October. In that context, it will be important to see how quickly spare capacity is being eroded in the labour market in Friday's payroll report. Interestingly, the implication of the recent rally in treasuries is that investors have few question marks about the US fiscal hole or how it plans to get out of it. That is complacent and those worries will surely resurface in 2011."

The Supreme Court handed down several key rulings that will have a big impact for investors. Harvey Goldschmid, former SEC commissioner, and Richard Breeden, of Richard Breeden & Co., share their reaction:

Economic View: Bank for International Settlements calls for removal of Exceptional Measures; Goodbody economist Juliet Tennent comments  -- "In its annual report released yesterday, the Bank for International Settlements (BIS) called on governments to reduce deficits and central banks to consider removing the exceptional measures introduced worldwide over the past 2 years to prevent a meltdown of the financial system. However, the report recognised that the global recovery was far from self-sustained and said banks are still fragile. In a statement accompanying the release of the annual report Jaime Caruana, the General Manager of BIS, recognised that the while the task of deleveraging and repairing balance sheets was not yet finished some of the exceptional measures were now delaying necessary changes and it was time to phase some of these measures out.

He echoed the tone of the annual report which stated that central banks could create the next crisis if they waited too long before raising rates. Expectations for increases in US and Eurozone interest rates have been pushed back to 2011 following the European debt crisis. Mr. Caruana also called for a reduction in fiscal deficits, a further strengthening of the balance sheets of the financial sector and international agreement on the reform of financial regulation. He warned that some emerging market economies are at risk of overheating and said they should rely on more flexible exchange rates which would both relieve inflation pressures and help correct global imbalances.

US

On Monday, the Dow Jones slipped 5 points or 0.05% to 10, 139.

The S&P 500 slid 0.20% and the Nasdaq declined 0.13%.

Preliminary bids submitted for BZWBK: Goodbody's Ken Darmody commented: "Preliminary bids for AIB's Polish unit were due to be submitted yesterday. After much speculation around the potential for a domestic bank to get involved, press reports suggest that PKO have in fact submitted a bid."