China: High-Speed Rail Network To Be Doubled

By Mark Stone, China Correspondent, in Beijing

China has announced it will spend £60bn this year in an effort to almost double the size of its high-speed rail network.

The investment forms part of a project which represents the largest and fastest rail expansion programme in the world.

Since 2008, and in the time Britain has taken only to debate the merits of one line - HS2 - which would be just over 100 miles long, China has built 6,000 miles of track, much of it elevated, and invested in 1,000 high-speed trains.

The network is currently almost double the combined length of Europe and Japan's railway networks.

The programme, the government says, forms a key part of the country's drive to modernise, urbanise and pull the Chinese people out of poverty.

Sky News took a ride on the 10am from Shanghai to Beijing. Bang on time, the shiny new bullet train pulled out of the city's Hongqiao station.

The train, 16 carriages long, has three classes: standard, first and business, which resembles the interior of an aeroplane.

China has built 6,000 miles of track since 2008

Sitting in a fully reclining airline-style seat is businessman Paul Zhou.

He said: "Our country is building an entire high-speed rail system and it has made our travel easier.

"It has shortened the journey between cities. It helps a lot on our work and life.

"On the airlines, there are always delays. They are very unreliable.

"I used to travel by plane, but now I almost always use our high-speed trains to go everywhere. They are comfortable, environmentally friendly, and always on time."

Out of the window the Chinese countryside is a blur as the train reaches its cruising speed of 190mph.

China now boasts the world's fastest conventional train. The CRH380A, manufactured by the Qingdao Sifang Company, has a top speed of 237mph, but in test runs it reached 302mph.

The trains run on a network of new lines, many of which are elevated. Together they knit together more than 100 cities across the country.

The country has the world's fastest train with a top speed of 237mph

Each of the cities has a vast new station. Most look more like airport terminals and they are packed - proof that this railway revolution has got China moving.

Another passenger, Zhao Changhua, is an office worker from the city of Jinan. She has just started commuting to Shanghai for work - a distance of 535 miles, but a journey time of just four hours.

She told Sky News: "It's very comfortable. It's convenient and fast. I'm very proud of it.

"It's the result of the fast development of our country's technology. It has given great benefits to our lives.

"This is my second time on a high-speed train, I think it's much easier than taking a plane.

"Airports are far away from the city centre while train stations are closer. So I choose high-speed trains."

The journey from Shanghai, west, then north, to Beijing is 800 miles - the length of the UK. It is completed in four hours, 48 minutes.

In second class, it costs the equivalent of £55, in first it is just under £100 and in business it costs £175.

Outside we see glimpses of rural China carved up by the new lines, but we also spot new cities springing up. It is evidence that the new rail network is stimulating the local economy at every stop.

Designer Roland Boal says the China network is a huge opportunity

Of all the passengers we spoke to, none had a bad word about the service. Most hoped that China could help the UK with its high-speed train development.

Mr Zhou said: "I hope the British government will use Chinese technology, let China help you to build your high-speed railway."

What none of the passengers realise is that the train they are on is actually designed, in part, with the help of a UK firm.

Priestmangoode is a design consultancy based in the UK but with a growing footprint in China. The company has combined the UK's flair for quality design with China's willingness to pay for it.

Roland Boal, head of Priestmangoode's China division, explained that China's "can do" attitude and seemingly bottomless pockets are a huge opportunity.

He told Sky News: "There is a hunger for new and exciting things. China is moving really fast and moving forward.

"There is a certain sense of excitement among people here and I think they want products that reflect that, whether it's a train or a plane.

"If it's a high-speed train, then make it look really fast. Not pared back; make it look fast.

"Western companies need to pay a lot more attention to what's happening here.

The country's high speed network runs on elevated lines

"I get very upset when I hear things like 'of course it broke, it was made in China' or 'I don't buy that company's products because they're made in China'. I think there is such an out-of-date attitude towards the obvious capability of manufacturing in China."

This railway revolution is not without significant controversy, though.

In 2011, two high-speed trains collided. Forty people were killed and 172 others injured.

Had the trains been travelling at full speed, the number of dead would have been significantly higher.

A signalling failure was blamed; the whole project was questioned and almost cancelled.

A further controversy stems from the fact that the technology behind the network is not Chinese.

In the early stages of the project, China bought high-speed train sets and technology from Canada's Bombardier, Japan's Kawasaki, Germany's Siemens and France's Alstom.

Chinese engineers then combined these technologies and produced their own trains.

Corruption has also plagued the project. In July last year, the country's railways minister, Liu Zhijun, was jailed for corruption, bribery and abuse of power. His demise brought the financial cost into focus.

At the last count, the existing project had cost £24bn through Chinese government loans, according to figures published in the Chinese state media.

The government hopes to recoup some of those costs by selling its success abroad.

China is in talks with countries including Romania, Georgia, Thailand, Burma and several in South America.

There is also a desire to help the US and the UK with their own projects.

The Chinese government, which runs the network through its Ministry of Transportation, declined our request for an interview for this report and refused Sky News all official access to their trains and stations. No reason was given.

The report was compiled without their agreement.

However, speaking to the Chinese media, and addressing the safety concerns, Deng Xiaojun, deputy chief engineer of Qingdao Sifang, one of the state-owned locomotive manufacturers, said that the trains are designed according to international standards and in some areas even stricter.

He told China's Xinhua news agency: "We have a rounded mechanism to ensure the train's safety operation."

Back on the train, and on time - almost to the second - the 10am from Shanghai pulls into Beijing South station. 

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Miliband: 'We Must Tackle Middle Class Crisis'

By Sophy Ridge, Political Correspondent

A crisis of confidence for the middle classes is the "greatest challenge for our generation," according to Ed Miliband.

The Labour leader argues families believe their chances of getting good quality jobs, secure pensions and affordable housing have been "undermined".

And he claims middle class parents are worried their children do not have the same opportunities as the older generations.

In an article for The Daily Telegraph Mr Miliband writes: "Our country cannot succeed and become collectively better off unless Britain has a strong and vibrant middle class.

"Indeed, the greatest challenge for our generation is how to tackle a crisis in living standards that has now become a crisis of confidence for middle class families."

The article will be seen as an attempt to reach out to the middle class households seen as the political centre ground. Labour has already tried to toughen its position on welfare in order to grow the party's appeal outside of its traditional support base.

He adds: "The cost of living crisis is not just about people on tax credits, zero hours contracts and the minimum age. It is about millions of middle class families who never dreamt that life would be such a struggle."

Britain's improving economic performance poses new challenges for Mr Miliband.

Labour's Tristram Hunt, centre, and Emma Reynolds, right, part of drive

As faith in the recovery grows, Labour's initial argument of "too far, too fast" has already been replaced by a renewed focus is on the cost of living.

However, there is concern that if wages begin to rise at a faster pace than prices this argument could also lose its resonance.

A Guardian/ICM poll shows Mr Miliband's party has dropped two points to stand at 35% - just three points ahead of the Conservatives.

Labour hopes to tackle this challenge with a series of speeches by key Shadow Cabinet ministers including Tristram Hunt on education, Rachel Reeves on welfare, Emma Reynolds on housing and Ed Balls on the economy.

Mr Miliband will be giving a speech on Friday setting out his own policy ideas.

Conservative party chairman Grant Shapps said: "Ed Miliband has no plan. He has opposed every difficult decision we have taken to start turning our economy around.

"All he offers is more of the same old Labour policy that got us into a mess in the first place – more spending, more borrowing and more taxes. That would mean a less secure future for hardworking people and their families."

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Virgin Active Raids Birds Eye For New Chief

By Mark Kleinman, City Editor

Sir Richard Branson's health and fitness chain is raiding a frozen food company to complete its senior management line-up as it gets fit for a stock market debut.

Sky News understands that Virgin Active is close to appointing Mark Burrows, deputy finance director of Iglo, the owner of Birds Eye, to become its new finance chief.

His arrival is expected to be announced shortly, and will herald an acceleration of the company's planning for an initial public offering as it fashions a global expansion.

Virgin Active, which is jointly-owned by the private equity firm CVC Capital Partners, is considering whether to float in London, Singapore or South Africa, where it has a significant presence in the health and fitness market.

Mr Burrows' hiring will follow a reshuffle of Virgin Active's management, which saw Paul Woolf, himself a former Iglo finance director, elevated to the chief executive's job last autumn.

A former executive at BSkyB, the owner of Sky News, and Virgin Mobile, Mr Burrows is understood to have been attractive to Virgin Active because of his experience working for private equity-backed companies.

Virgin Active is one of the biggest gym chains in Britain, and internationally now has more than 260 clubs with well over 1m members.

Last week it announced plans to invest £100m in upgrading facilities at its UK sites.

The Sunday Times reported two days ago that its shareholders are in talks to appoint STJ Advisors, a City firm which specialises in helping companies list on the stock market.

Virgin Active counts among its ambassadors Laura Robson, the British tennis player who on Monday was knocked out of the Australian Open in the first round.

A Virgin Active spokesman declined to comment.

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Microsoft: Windows 9 'Will Launch In 2015'

Microsoft is reportedly on course to ditch its troubled Windows 8 operating system in 2015.

According to tech blogger Paul Thurrott, the world's biggest software maker will confirm at its Build conference in April that a project titled "Threshold" will deliver a new operating system, Windows 9.

It was scheduled, he said, to launch in April 2015 following an update to Windows 8.1 this year which would also include phone software improvements.

Microsoft released Windows 8.1 in October 2013 after being met by a flurry of complaints about the original Windows 8.

The software ditched the familiar look of previous desktop versions of Windows in favour of a new tiled layout optimised to work with touchscreen devices, such as its Surface tablet.

However, many of those who chose to use the software with a traditional mouse and keyboard found it confusing and difficult to navigate.

Windows 8 was optimised for touchscreen devices

Microsoft said it had sold more than 100 million licences for Windows 8, but the update was planned after listening to customers.

The newer version aimed to make things easier for the millions of people still spending significant time on a PC or laptop, as well as tweaking performance and visual elements.

Changes included the return of the Start button and new gesture controls for those using touch screens.

But the modifications were seen as largely failing to address many core gripes of users, who significantly lag behind the numbers using older Microsoft OS versions.

The firm - which is attempting to refocus efforts on the tablet and mobile world - is still searching for a new boss after Steve Ballmer announced his retirement.

Ford CEO Alan Mulally ruled himself out of the running last week.

Speculation surrounding possible candidates includes Microsoft's head of cloud computing Satya Nadella and former Nokia boss Stephen Elop.

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Asos Among Winners As Online 'Hurts High St'

The acceleration in the shift in consumer spending from the high street to online has been reflected in results from Asos, whose sales have leapt by 38%.

The web-based fashion retailer said sales hit £335.7m in the four months to December 31 - with its active customer base topping 7.9 million - a rise of 41% on a year earlier.

Asos, which was founded in 2000 by former advertising executive Nick Robertson, has been the big success story in British retailing in recent years, with its fast-changing fashions snapped up by internet-savvy twentysomethings and attracting fans including US First Lady Michelle Obama and singer Rita Ora.

Its shares have soared 164% over the last year, giving it a market value of £5.8bn - only £2bn less than Marks & Spencer's which is Britain's biggest clothing retailer.

High street Christmas shopper numbers were down in 2013

Asos said its UK sales rose 37% in the period to £133.7m.

Tighter stock control was credited for an increase in its retail gross margin.

Mr Robertson said: "These results were driven by significant improvements to our customer proposition, including better delivery options, additional payment methods and the roll out of our premier service in key international markets."

The phenomenal growth reflects poorly on the high street - which was visited by fewer shoppers in the run up to Christmas according to industry body, the British Retail Consortium (BRC).

It measured footfall down 3.7% in December compared with the same month in 2012.

High streets suffered more than out-of-town locations, which were down 0.6%, and shopping centres which were off by 1.5%.

Separate data showed almost one in five non-food purchases were made online in December, as overall retail sales grew 0.4% on a like-for-like basis.

BRC director-general Helen Dickinson said: "These figures highlight how the rapid evolution of multichannel is changing the face of shopping, particularly at Christmas.

"Rather than making multiple trips to the shops over the festive period, many of us planned ahead for our gift-buying and took advantage of retailers' investment in services like click-and-collect," she said.

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Resurgent Game Pushes Button On £300m Float

By Mark Kleinman, City Editor

The retailer Game Group will this week emerge as one of the high street's festive winners when it cements plans for a £300m flotation just a year after being bought out of administration.

Sky News has learnt that the chain, which is owned by private equity backers, is close to appointing HSBC, Canaccord Genuity and Liberum Securities to co-ordinate an initial public offering that will take place later this year.

The plans for a stock market listing cap a remarkable transformation for Game, which fell into administration in March 2012, resulting in the closure of nearly 300 stores.

It was acquired last February by a consortium of investors understood to have been led by the US-based fund Elliott Advisers and which included Henry Jackson, the controversial financier who faced criticism over the collapse of both Comet and MFI, the kitchens retailer.

Game will release a trading update on Wednesday which is understood to demonstrate the chain's recent resurgence, having shed many of its poorly-performing shops.

Analysts believe that Game enjoyed a positive Christmas after the November launch of gaming consoles including the Sony Playstation 4 and Microsoft's Xbox1. It was also buoyed by the unveiling last year of Grand Theft Auto 5, which quickly became the fastest-selling video game in history.

"The chain really outperformed the market, which should provide a solid platform for it to go public," a person close to the company said on Tuesday.

The trio of investment banks have not yet been formally hired but are expected to be in the coming days.

Game's most recent earnings figures disclosed that it made £15m in pre-tax profit in the 2012 financial year, a figure that analysts say may have more than doubled in the following 12 months.

Game is now run by Martyn Gibbs, a former HMV executive, who told The Times last month that the investors who backed the chain's buyout did not deserve much of the criticism levelled at them.

"There was a significant risk when the business was pulled out of administration. I think we get caught up in the percentages of a business that was being saved," he told the newspaper.

"But it wasn't a business that was guaranteed a future at that moment in time. So we are comfortable the business can work with those payments and continue to build the business."

Game is one of many retailers examining stock market listings as the UK economy continues its recovery, although the mixed fortunes of high street chains at Christmas suggests that executives will be cautious about going public.

DFS, House of Fraser, B&M Retail and Pets At Home are among those exploring flotations.

A spokesman for Game declined to comment.

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Paul Flowers At Police Station To Answer Bail

Former Co-op Bank boss the Reverend Paul Flowers has appeared at a police station in Leeds to answer bail.

The Methodist minister's appearance comes after he was arrested in November in connection with allegations that he bought and used Class-A drugs.

He was filmed handing over £300, apparently for crystal meth and cocaine, and is said to have boasted about taking ketamine.

He was suspended by the church for three weeks with a spokesman saying: "We expect high standards of our ministers and we have procedures in place for when ministers fail to meet those standards."

The former Co-op chairman said in a statement after the film was revealed in The Mail On Sunday that he had done things that were "stupid and wrong".

In a statement, he said: "This year (2013) has been incredibly difficult, with a death in the family and the pressures of my role with the Co-operative Bank.

"At the lowest point in this terrible period, I did things that were stupid and wrong.

"I am sorry for this and I am seeking professional help, and apologise to all I have hurt or failed by my actions."

Last week, senior City regulator Clive Adamson - director of supervision at the Financial Conduct Authority - defended his decision to back the appointment of Rev Flowers to control the board of the Co-Op Bank, arguing it was "correct at the time".

Mr Adamson told MPs Mr Flowers was "not the same individual" as he seemed at a later meeting before the Treasury Select Committee, when he appeared unable to give basic facts and figures relating to the bank.

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Supermarket Discounters In Christmas Victory

Discount supermarket chains Aldi and Lidl, along with Waitrose, were the big winners in the battle for market share over Christmas.

The latest grocery share figures from Kantar Worldpanel, published for the 12 weeks ending January 5, suggested the three brands were the only ones to record strong growth.

Among the big four, only Sainsbury's held its share over the period - catching Asda - with year-on-year growth of 3.1%.

Waitrose grew its market share to 4.8% from 4.7% following a 3.1% rise in like for like sales over its festive season - the upmarket chain's food offering joining that of M&S in attracting customers with cash to spend, amid the wider squeeze on household incomes.

Of the big four chains only Sainsbury's grew its market share

Morrisons suffered the most among the major supermarkets, with its share dropping from 12.0% last year to 11.5% now and a decline in overall sales of 1.0%.

Kantar said its lack of an online food offering - launched on Friday last week - hurt its business.

Total internet grocery sales over the Christmas/New Year period grew at 22% with 15% of British households placing orders. 

Local convenience shopping also grew with both Tesco Express and Sainsbury's Local enjoying double-digit growth.

Tesco blamed "further weakness" in the UK grocery market for its fall in UK sales over Christmas.

The country's biggest supermarket chain said sales at British stores open over a year, excluding fuel and VAT, fell 2.4% in the six weeks to January 4.

Tesco, which saw its share fall to 29.6% in the latest 12-week period from 30.4% a year earlier, has committed £1bn of resources to a revamp of its major stores amid efforts to improve the shopping experience.

Morrisons endured a 5.6% decline in like-for-like sales during the six weeks to January 5 while Sainsbury's saw its own like-for-like sales rise by only 0.2% over a similar period.

Walmart-owned Asda - along with Aldi and Lidl - are yet to provide trading figures for the festive season.

But Ronan Hegarty, the news editor of The Grocer, said it was clear Asda's traditional price dominance among the big four was waning as competition intensified across the supermarket sector.

He told Sky News: "With the advent of all these comparison schemes, the brand matches, the price promises and stuff like that, shoppers can mix and match between the retailers and get better value by going to a number of different retailers."

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Inflation Hits Bank Of England Target Of 2%

Lower food prices helped inflation fall back to the Bank of England's target rate of 2% for the first time in over four years in December.

The CPI measure eased by 0.1% month-on-month, according to the Office for National Statistics (ONS), with lower meat and fruit costs the biggest contributor.

The ONS said that the collection of the data happened too early in the month to capture reported discounting by retailers in the days before Christmas.

However, there was likely to be a greater contribution to inflation from rising energy bills in the months ahead after only a minimal impact in December. 

A slight rise in fuel costs was among upward contributors to inflation

When housing costs were included, the RPI measure of inflation rose to 2.7% in December from 2.6% the previous month.

Annual inflation has exceeded the Bank's 2% target every month since December 2009, eroding the spending power of households who have seen wage growth either largely remaining stagnant or rise at a substantially lower rate.

But the sixth successive monthly drop in inflation eases pressure on the Bank of England - which would have to reconsider its flagship low interest rate policies should inflation look likely to spiral out of control.

As things stand, the Bank will only consider the possibility of raising borrowing costs when the jobless rate falls to 7%.

Air fares rose at a weaker pace in December compared with December 2012

However, with the jobless rate now tipped to reach that milestone this year, the easing of inflation makes it less likely the Bank would even contemplate a rate rise in 2014.

The return to the 2% inflation target was welcomed by Prime Minister David Cameron who tweeted: "It's welcome news that inflation is down and on target. As the economy grows and jobs are created this means more security for hard-working people."

Labour Treasury spokeswoman Catherine McKinnell said: "This small fall in the inflation rate is welcome, but with prices still rising more than twice as fast as wages the cost-of-living crisis continues.

"After three damaging years of flat-lining, working people are on average £1,600 a year worse off under the Tories."

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Immigration Cap Bad For Economy, Govt Warned

A cap on immigration will make it harder for Britain to drive down the deficit, the Government's economic forecasters have warned.

The chairman of the Office for Budget Responsibility said immigration had been good for the country and boosted the nation's income.

Robert Chote told MPs on the House of Commons Treasury Committee that immigrants were less likely to claim benefits and state pensions or use healthcare.

He estimated there would be a significant impact on the economy if annual net migration were reduced to the "tens of thousands" goal set out by David Cameron.

Mr Chote said that if immigration was restricted to the level desired by the Prime Minister then over 50 years it would add around £300bn (20%) to Britain's debt.

He said: "Essentially speaking, inward migrants are more likely to be of working age than the population in general. They arrive after some other country has picked up the expense of educating them and in some cases - though not all cases - they leave the country again before you get to the point at which they are most expensive, in terms of pensions, healthcare and long-term care.

Nick Clegg has warned Theresa May on immigration cap

"In terms of the fiscal position, that is what drives the fact that higher net inward migration over this time horizon does tend to produce a more beneficial picture."

Mr Chote told the committee that were there a cap on the number of immigrants: "The direction would be clear enough, because obviously you would have  fewer net inward migrants, the fiscal position would be somewhat worse on those grounds."

He added that even if the extra spending demands on schools, hospitals and housing was taken into account, immigration was still boosting the economy.

Mr Cameron has repeatedly stated the Conservatives' ambition to reduce net migration - the number of people coming into the UK minus the number leaving each year - to less than 100,000.

However, the cap is fiercely opposed by Liberal Democrats and last month Deputy Prime Minister Nick Clegg warned the Home Secretary, Theresa May, that a cap on European Union migrants would be illegal.

Immigration continues to be a key issue for the Conservatives, with Mr Cameron introducing a number of measures designed to clamp down on migrants claiming benefits and using health care.

Viviane Reding has accused David Cameron of peddling immigration 'myths'

These included preventing EU migrants from claiming benefits for three months, only allowing them to claim benefits for six months, charging foreigners for emergency health treatment and deporting migrants caught sleeping rough.

It has sparked significant criticism from Europe, with the vice president of the European Commission, Viviane Reding, last week accusing the Prime Minister of peddling "myths" about a "foreign invasion" sparked by the relaxation of the rules allowing Bulgarians and Romanians to work and claim benefits in the UK.

In November, the European employment commissioner Laszlo Andor warned Mr Cameron that Britain risked becoming the "nasty country" of Europe.

A report by University College London last year found that immigrants had contributed £25bn to the country in taxes in that last 10 years.

It also found those who moved to the UK since 2000 were less likely to claim benefits or live in social housing than British people.

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