Macau Business Daily, Mar 14, 2014

Closing Editor: Michael Grimes

MOP 6.00

Target 2017

business daily 1

Friday April 19, 2013

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Publisher: Paulo A. Azevedo

ecretary for the Economy and Finance Francis Tam Pak Yuen says that following a rise in the employed population in the next three years demand for workers should level off. Migrant workers continue to be a source of friction with groups like the Macau Federation of Trade Unions, with whom the Secretary met yesterday. He revealed that the government was currently conducting a study on the city’s population and that the government would soon meet companies engaged in mega projects in order to better safeguard the rights of locals.

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Year II

Number 496 Friday March 14, 2014

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Health Bureau prepares for virus W

hile an expert on infectious diseases claims that mass inoculation against the avian H7N9 virus in China is currently unnecessary, the Health Bureau of Macau has warned that spring and winter could see more cases of human infection from the mainland. This follows this week’s culling of 7,500 poultry in a wholesale market in Macau. The Live Poultry Vendors Association is pressing for compensation from the government following the cull and 3-week embargo on live chicken sales.

Pages

2&3

China growth concerns With mounting concerns that China may not hit its growth targets this year, Premier Li Keqiang has moved to quell fears of an economic slowdown. Although growth is slackening in many sectors, the leadership believes that a hard landing is not on the cards. Allowances should be made for economic growth, he said, as long as new jobs continue to be created. Some 13 million jobs were created in 2013, with 10 million new jobs predicted to be created this year across the whole economy.

8&9

Who dares wins

Yuan blues to pass

It’s confirmed: Macau wants more land and is striking a deal with Guangdong. Secretary for Economy and Finance Francis Tam believes that joint ventures are the way to go. But not the only way.

While the weakening of the yuan has raised market eyebrows, local economists are adamant that the Chinese policy to increase liquidity in the Chinese financial system will not harm Macau.

Page

HSI - Movers March 13

Name

%Day

Lenovo Group Ltd

5.01

Want Want China

4.60

Sands China Ltd

2.46

Galaxy Entert.

2.12

Belle International

2.09

Ping An Insurance

-0.73

COSCO Pacific Ltd

-0.94

Hengan Internat

-0.96

AIA Group Ltd

-1.22

China Resources Ent.

-1.23

Source: Bloomberg

I SSN 2226-8294

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22 business daily

March 14, 2014 Friday April 19, 2013

Macau

Poultry imports suspended for the first time ever Wholesalers and vendors of live cjickens will have to bear zero sales for three weeks as H7 is detected in local wholesale market Stephanie Lai

sw.lai@macaubusinessdaily.com

T

he government has announced a ban on live poultry imports from the mainland for 21 days after it confirmed an H7-type avian influenza virus in some of a batch of 1,000 live chickens imported from Zhuhai on Wednesday.

The origin of the live chicken imports found with the avian flu virus was a farm in the Doumen district of Zhuhai, the Civic and Municipal Affairs Bureau said in a written statement.

The bureau culled 7,500 birds in the Nam Yue wholesale market in Ilha Verde.

The live poultry floor in the wholesale market was immediately sealed off, and the market was sterilised.

“The bureau decided that, starting from March 13, all trade in live poultry in Macau should be suspended for 21 days,” the bureau said.

“All places used for wholesaling, butchering and retailing should be cleaned and sterilised,” it said.

Staff of the Nam Yue wholesale market that had been in contact with live poultry were sent to the Conde S. Januário Hospital for medical checks, Nam Yue Food Stuff and Aquatics Co Ltd, the city’s sole importer and wholesaler of live poultry, told Business Daily.

“Definitely, it’s impossible for us and the live poultry vendors here to operate for 21 days, at least,” said Nam Yue deputy general manager Mr Huang Jia Zhu. “Even if the supply returns to normal after 21 days, we expect the sales volume of live chickens here to

decline by 10 percent this year,” Mr Huang said.

Fear since April According to Nam Yue, 6,000 to 7,000 live birds had been imported each day before the ban was imposed.

Over 80 percent were chickens.

The average wholesale price of live chicken is 17 or 18 patacas per 0.605 kilogram.

Nam Yue imported over 2.69 million live chickens from the mainland last year, a year-on-year drop of 7.47 percent.

The company said weak consumer demand amid fear about the outbreak of the H7N9 avian flu in the mainland in April had been the main cause of the decline.

“After the supply returns to normal, we expect that we’ll be having weaker live chicken sales for one to two months,” the secretary-general the Live Poultry Vendors Association. Un Hon Sang, told Business Daily, “This is particularly due to the fact that we have no major festivities in the upcoming months, which means the lack of demand for food for feasting will mean much less robust sales.”

Mr Un’s association held an emergency meeting yesterday after the import ban was announced.

It decided that live poultry vendors would seek compensation from the government as they would have no sales for three weeks.

“We’ve not really decided the amount, and for that we’ll see what the authority would suggest,” Mr Un said.

KEY POINTS 21-day ban on imports of live poultry, starting from yesterday 7,500 live poultry culled in Nam Yue wholesale market after H7 virus detected Importer and wholesaler Nam Yue expects 10 pct sales volume drop Live poultry vendors seek compensation for halt in income Frozen meat wholesaler observes mild increase in sales

“Actually, the Civic and Municipal Affairs Bureau suggested this idea of compensation to us, and I think we’ll have a meeting scheduled soon to discuss the issue,” he said.

Red for danger He said the ban had affected about 70 live poultry stalls in wet markets and about 200 vendors and distributors of live poultry.

When Business Daily visited the Red Market wet market yesterday morning, all live poultry stalls had been closed for sanitisation.

Some of the frozen meat shops in the area of the Red Market had more customers than usual yesterday, shopkeepers said.

One customer Business Daily spoke to at a frozen meat stall at Rua do Rebanho, opposite the Red Market, said he had no fear of the H7N9 virus, but that his family would need to change their eating habits.

“Both my kids and I love fresh chicken” he said.

“But now it seems that we will have to opt for frozen meat instead.”

Fresh and frozen meat wholesaler Tak Sang Meat Industries Ltd’s owner, Lei Kit Heng, said his company had seen no sign yet that food safety concerns due to avian flu would greatly stimulate frozen chicken sales.

“Usually, in cases such as the import ban we see now, you’ll notice a sudden surge of frozen chicken sales by retailers,” said Mr Lei. “But we’re not yet sure how long this phenomenon is going to last.

For Cantonese cuisine in yum cha restaurants, for instance, their demand

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March 2014 Friday 14, April 19, 2013

Macau

for live chickens is always strong because it is a staple for feasts,” he said.

Chicken feed “Though it’s true that the growing number of food-safety-conscious buyers – mostly the younger generation – have contributed to the mild increase

in frozen chicken sales in the past two to three years,” Mr Lei said, “in our case, we’re talking about an annual sales increase of 1 percent to 3 percent.”

Mr Lei said the wholesale price of frozen chicken had fallen, so 1 kg of frozen chicken now cost 30 patacas, which is at least 20 patacas cheaper

February 19, 2013 First case of H7N9 human infection reported in Shanghai.

However, it took the Chinese National Health and Family Planning Commission a month to formally notify the World Health Organisation of the case on March 31 March 4, 2013 The first Shanghai patient infected with H7N9 avian flu, an 87-year-old man, died August 10, 2013 First confirmed case of H7N9 in Guangdong province December 2, 2013 Hong Kong confirmed its first case of human infection with H7N9 avian flu virus: an Indonesian domestic helper was infected following a visit to a wet market in Shenzhen January 27, 2014 The H7-type avian flu virus was first detected in a sample from Hong Kong’s import of live poultry from the mainland. Hong Kong’s government announced a 21-day suspension of imports, wholesale and retail, of poultry February 18, 2014 Hong Kong’s trade in locally bred live poultry resumed but its import from mainland remained suspended for another four months March 12, 2014 Macau government detected the H7 avian flu virus in imports of live poultry from mainland China March 13, 2014 Macau government announced a 21-day suspension of imported, wholesale and retail poultry (Source: South China Morning Post, Centre for Health Protection of the Department of Health in Hong Kong, Health Bureau of Macau, Civic and Municipal Affairs Bureau, World Health Organisation)

In recent news updates, the Health Bureau of Macau has noted that more cases of human infection from the avian H7N9 virus can be expected from mainland China in spring and winter, and it does not rule out the possibility that such cases will also emerge in Macau.

The World Health Organisation has noted that most cases of human infection from the avian H7N9 virus have reported recent exposure to live poultry or potentially contaminated environments, especially markets where live birds are sold.

The virus does not “appear to transmit easily from person to person”, and sustained human-to human transmission has not been reported.

In an interview with mainland media outlet Caixin.com an expert from Hong Kong University, Mr Yuen Kwok Yung, said it was not necessary for China to promote the H7N9 flu

than 1 kg of live chicken.

Macau’s largest supermarket chain, Royal Supermarket Co Ltd, said it had noticed little impact from the outbreak of the H7N9 avian flu in the mainland in April last year on the demand for frozen chicken here.

“So far, sales of frozen chicken here have been pretty stable,” said the marketing manager of Royal

vaccine on a large scale at this time.

Mr Yuen, chief of the State Key Laboratory for Emerging Infectious Diseases, remarked that so far H7N9 has been transmitted from a firstinfected person to a second but transmission from a second-infected to a third on has not occurred.

“Only when confirmed cases surge in a short period or when person-to-person transmission becomes worse should China promote the vaccine extensively across the country,” Mr Yuen said, adding that the H7N9 vaccine has been currently undergoing clinical trials, although its safety has not yet been validated.

Speaking at a press conference in Beijing on March 10, renowned Chinese pulmonologist and National People’s Congress delegate Zhong Nanshan stated that the key to controlling the outspread of H7N9 flu was to reinforce inspection at live poultry markets.

Supermarket, Irene Chung.

“We haven’t seen any particular surge in frozen chicken sales since the outbreak,” she said.

“But we’ll continue to keep a close watch on the avian flu outbreak, and whether we need to step up the supply of the frozen meat products to meet local demand,” she said.

With Pierre-François Métayer and Cynthia Wong

44 business daily

March 14, 2014 Friday April 19, 2013

Macau

Inflation hampers earnings rise of casino croupiers

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Average earnings of casino dealers grew 4.5 percent last year, lower than the 5.5 percent rise in annual consumer prices of 2013

HOSPITALITY

Tony Lai

tony.lai@macaubusinessdaily.com

Rising at the top By the end of 2013, Macau had 98 hotels in total. That figure was lower than in the previous year due to the closure of two hotels, one 5–star and the other 2-star.

If we leave aside the 33 guesthouses, which account for a small proportion of all available rooms, the 5-star hotel, of which there are 27, is the most patronised category. There are more 5-star hotels than 4- and 3-star hotels put together. Between 2009 and 2013, the total number of hotels and guesthouses had a net increase of 8.

But the most noticeable transformation was seen in the number of rooms, with 5-star hotels, on average, much bigger than the others. At the end of last year, their average size, in terms of rooms, was over 680 rooms per hotel. The figure in the case of 4-stars was noticeably lower, although with a still respectable 400 rooms. Both figures are well above the sector average, which stands at just over 280 rooms.

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oaring consumer prices have hampered the purchasing power of casino croupiers despite a 4.5 percent rise in salaries, official figures reveal.

The Statistics and Census Service announced yesterday that the average earnings of casino dealers, excluding bonuses and subsidies, amounted to 16,710 patacas (US$2,088.8) a month by last December vis-a-vis 15,990 patacas a year earlier.

The rise in earnings of 25,250 casino dealers in the past year was slower than the 5.5 percent increase in inflation, however, data shows.

In addition, croupiers have remained unhappy in the past few months: not because of their diminishing purchasing power but because of worries about losing their jobs to non-residents.

Gaming employees’ union Forefront of Macau Gaming organised a 1,000-strong protest on March 2 to express its anxiety about ‘relentless’ gaming expansion – namely, the number of gaming

tables it believes will pave the way for the casinos to ask for nonresidents to fill dealer positions.

Chief executive of gaming firm SJM Holdings Ltd, Ambrose So Shu Fai, asked the government last month to consider lifting the locals-only restriction for casino dealer positions due to the labour shortage.

Yesterday, figures indeed confirmed that the gaming sector still needed 1,064 people to fill dealer positions by the fourth quarter of last year.

Including all vacancies in the gaming sector, the number reached 1,986, while its vacancy rate one of the lowest among different industries here – declined 0.4 percentage points to 3.4 percent in the October-December period.

As at December, the gaming industry employed 56,608 people, a rise of 3.2 percent from last year, whereas their overall average earnings, excluding bonuses and subsidies, rose 6 percent year-on-year to 19,120 patacas a month.

While gaming executives say they

are enduring a labour shortage, an even tighter pinch is apparent in the retail and security industries.

The vacancy rate of the retail industry stood at 10.2 percent by the fourth quarter, down 3.2 percentage points from the previous year, while the rate in the sector for security guards remained flat at 15.1 percent.

The statistics bureau commented in a note that both figures ‘remained high’, though.

Yesterday’s data also revealed that over 29,000 people worked in the retail industry by December, rising 17.4 percent from a year earlier. Their average monthly earnings surged 9.7 percent in the same period to 12,140 patacas.

The monthly average salaries for the 13,600 employees in the wholesale sector only picked up slightly by 1.3 percent year-on-year to 10,700 patacas.

The earnings of drivers for buses and trucks reached 21,100 patacas by December on average, rising slightly by 1.7 percent from a year earlier.

Govt surplus reaches MOP22.44 bln In terms of rooms, the growth has been even more dramatic, especially if we bear in mind that it was limited to the two top categories. The number of rooms in the lower categories has not changed since 2009. There were some upgrades, but not net increases in supply. So, the additional 8,600 rooms recorded in the period results from 7,300 new rooms in the top category, the remainder coming from 4-star hotels.

The changes in the number of bed places were even more strikingly concentrated.

With 22,400 additional rooms, 5-star hotels accounted for almost 85 percent of the total increase in the number of rooms in the period observed.

J.I.D.

65.8%

growth in the number of hotel rooms, 2009-13

The surplus in the first two months is over one-third of the

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he government has already made over one-third the surplus it expects for this year – with only two months of the year gone.

Official data show it has spent none of its capital budget.

The Financial Services Bureau announced this week that the government surplus was 22.44 billion patacas (US$2.8 billion) in the first two months of this year, 14.8 percent more than a year earlier.

The government expects a surplus of 64.16 billion patacas for the whole year.

If the finances of autonomous public bodies such as the Macau Foundation are included, the government projects a surplus of 76 billion patacas.

The surplus so far this year was swollen by a surge in revenue from property.

The government had 1.24 billion

patacas in revenue from property, having had 328.3 million patacas a year earlier.

Revenue from property has reached nearly half the amount the government expected to make this year.

The surplus so far this year was also inflated by more revenue from casino taxes.

Such taxes made up 83.1 percent of all revenue.

Revenue from direct taxes on gaming amounted to 22.3 billion patacas, 12.6 percent more than a year earlier.

The government can expect even greater revenue from casino taxes as the year goes by.

Citi Research says in a note it issued this week that gross gaming revenue could expand by 22 percent this year.

Gaming Inspection and Coordination Bureau data show

gaming revenue amounted to 66.75 billion patacas in the first two months of this year, 23.7 percent more than a year earlier.

The Financial Services Bureau data show government revenue in the first two months was 26.94 billion patacas, 16.2 percent more than a year earlier.

Government expenditure was 4.5 billion patacas, 23.4 percent more than a year earlier.

But that was only 5.8 percent of what the government has budgeted to spend.

The government usually spends more slowly at the beginning of a year that at the end as it starts paying for contracts awarded under its capital expenditure plan only later in the year.

The government has spent none of its capital expenditure budget so far.

T.L.

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March 2014 Friday 14, April 19, 2013

Macau

Joint venture to develop Cuiheng, Nansha Secretary Francis Tam points out that there are other ways to cooperate Tony Lai

tony.lai@macaubusinessdaily.com

T

he authorities in Macau and neighbouring Guangdong may form a joint venture to develop land in Nansha in Guangzhou or Cuiheng in Zhongshan as part of the effort to diversify Macau’s economy, Secretary for the Economy and Finance Francis Tam Pak Yuen said yesterday.

Mr Tam did not elaborate.

The Macau government has said it is looking into acquiring more land from the province of Guangdong.

Mr Tam said: “Cooperation between Macau and Guangdong is not limited to Hengqin Island, but also covers Qianhai, Nansha and Cuiheng in Zhongshan.”

He remarked that Macau and Guangdong had formed a joint venture to own and develop the Chinese traditional medicine park on Hengqin.

“This is one of the models we can copy in our cooperation in Nansha and in Cuiheng in Zhongshan,” he said.

Macau and Guangdong set up the joint venture, GuangdongMacau Traditional Chinese Medicine Technology Industrial Park Development Co Ltd, in 2011.

The park, covering 0.5 square km of Hengqin, is due to be completed by 2020.

But Mr Tam said there were also other ways to cooperate.

Tam: There are short and long term cooperation plans

The mainland has also given Macau 1 square km of land on the island for the University of Macau’s new campus, and has reserved another 4.5 square km there for Macau investors.

But Macau wants more. Chief Executive Fernando Chui Sai On said on Saturday: “We have an arrangement for cooperation with

Guangdong province and Zhuhai in exploring several possibilities of obtaining more land for Macau’s economic diversification.”

The director of the Central People’s Government Liaison Office in Macau, Li Gang, said on Tuesday that officials from each side of the border were discussing letting Macau have land

in Nansha and Cuiheng.

Mr Tam said nothing about how much land Macau would like to have in Nansha and Cuiheng or what industries it would develop there.

He said the details were being discussed.

He did not say when agreement might be reached.

“Everyone should understand that we are trying not to rush things,” Mr Tam said.

“There should be various plans for regional cooperation, ranging from short-term plans to long-term plans.”

But the central government and Macau businesses may have less patience.

The chairman of the Standing Committee of the National People’s Congress, Zhang Dejiang, was quoted last week as saying Macau should do more to diversify its economy.

Mr Zhang said the pace of economic diversification here was “quite slow”.

The vice-president of the Macau Chamber of Commerce, Vong Kok Seng, told Business Daily on Wednesday: “We need more details such as the land cost differences between Hengqin and Cuiheng, and what the target sectors that the latter would like to develop are.”

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March 14, 2014 Friday April 19, 2013

Macau

Three on top Wynn slows Sands China momentum in first third of month Sérgio Terra

G

aming results in the first nine days of March revealed three gaming operators head to head with just a 0.7 percent difference between them. An improvement

by Wynn influenced the three-leg

race between Sands China, SJM and Galaxy.

The results, according to a Hong Kong and Shanghai Bank (HKSB) report that JTM had access to, reveals gaming in Macau is on track to cash

in, once again, on huge revenues.

However, last month’s all-time record of MOP38,007 billion (US$4.75 billion) is not in ‘danger’.

Macau casinos earned MOP11,75 billion (US$1.46 billion) in the first

nine days of the month, giving a daily average of MOP1.3 billion (US$162.5 million).

Even if the gaming market is subject to daily fluctuations, that might change the force correlations at the end of the month; there already exist strong signs that the balance between the top three operators may be reinforced this month. That has been contributed to so far by the growth of Wynn Macau in terms of market share, increasing from 11 percent to 14 percent.

Analysts Charlene Liu, Erwan Rambourg and Scott Chan point out that Wynn’s improvement mostly affects Sands China. Sheldon Adelson’s operator fell to 20.8 percent having led the market in February with 25 percent. Just 0.4 percent behind is SJM, followed by Galaxy with 20.1 percent.

Good results that translate into an increase of almost 2 points are Melco Crown and MGM, with 14 percent and 10.7 percent, respectively.

Comparing the data year-onyear, these numbers represent a 17 percent improvement, basically driven by two weekends in the first nine days.

HSBC believes that the final results of the month will fall between MOP36,500 billion and MOP37,500 billion (US$4,562 billion and US$4,687 billion), which will represent an increase of between 16 and 20 percent.

However, these projections are based on a double presupposition: the maintenance of the daily average and the fact that March will have five weekends, which in principle means Macau will attract more tourists.

Exclusive JTM/Business Daily

Stable labour market after 2017 Rapid growth in employment will tail off eventually, expects Francis Tam Tony Lai

tony.lai@macaubusinessdaily.com

T

he strains in the labour market will ease after 2017, once the new casino-resorts in Cotai are operating, Secretary for the Economy and Finance Francis Tam Pak Yuen has said.

Mr Tam told reporters yesterday after a meeting behind closed doors with representatives of the Macau Federation of Trade Unions: “We need to have a comprehensive study of Macau’s economic development in the next few years to decide how many workers are needed, like in the construction sector.”

He said the government was conducting a study of the city’s population.

He said demand for labour until 2017 would be the same as in the past few years – enough for the market to meet.

“But after a rise in the employed population in the next three years, 2015 to 2017, there will be a long period of stability in human resources here,” Mr Tam said.

He expects no “rapid expansion” of the labour market after 2017.

Figures from the Statistics and Census Service show the employed population numbered 370,400 at the end of last year, 20,400 more than a year earlier.

Migrant workers numbered 98,800,

or 15,600 more than a year earlier.

According to the Human Resources Office, construction is the second-biggest employer of migrant workers, employing one-fifth of all imported labour.

Cheap labour grouse The trade unions have complained that construction companies working on big projects in Cotai have sacked Macau permanent residents to make room for migrant workers.

Legislative Assembly member Ella Lei Cheng I of the Macau Federation of Trade Unions has demanded closer supervision of the employment of migrant workers by the construction industry.

Ms Lei told reporters after the meeting with Mr Tam that contractors building a casino-resort in Cotai had sacked 60 residents after Lunar New Year “without any reason”.

She accused the contractors of opting to employ migrant workers cheaply at the cost of jobs for residents.

She called for the government to impose “stricter punishment” on companies that failed to give priority to residents in hiring.

The unemployment rate was 1.7 percent in the three months ended

January, the lowest on record.

Mr Tam said the government would soon have meetings with the companies building big projects such as those in Cotai to ask them “better to safeguard the rights of locals”.

He said the government would

“fully review” whether the construction industry was following the rule that contractors should employ one resident for every migrant worker they hired.

The government would stop contractors hiring migrant workers if they abused the privilege, he said.

Secretary Tam chairs meeting with representatives of Macau Federation of Trade Unions

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March 14, 2014 Friday April 19, 2013

Macau

Yuan jitters: Macau is safe The recent movements of the yuan should not harm Macau’s economy, economists say Óscar Guijarro

oscar.g@macaubusinessdaily.com

E

conomists expect the recent fluctuations of the yuan to leave Macau unscathed.

“Macau’s economy will not be affected,” economist José João Pãozinho told Business Daily.

Another economist, José Duarte, predicted no problems here in the short term.

“For Macau, this fluctuation will not be a bigger issue,” he said.

Mr Pãozinho and Mr Duarte both said the weakening of the yuan would make the mainland more competitive.

Mr Pãozinho said the mainland government would soon deal with the fluctuations and prevent them becoming a long-term problem.

Economists say the structure of Macau’s economy protects it from short-term movements in the yuan.

They say the next few days will show what direction the yuan is taking.

The People’s Bank of China’s statement that it will actively seek to strike a balance appears to have muted the alarm bells that were ringing in the markets this week.

The yuan has lost 0.4 percent of its value in the past four days, 1.3 percent of its value in the past month and 1.5 percent of its value since the beginning of this year.

It has performed more weakly than any other Asian currency.

The cause is intervention by the People’s Bank of China to increase liquidity in the mainland’s financial system.

Shadow lending The central bank has cut its daily reference rate for the yuan against the United States dollar by 0.03 percentage 6.1343 yuan, the least since December 3.

The Bloomberg news agency reported that the yuan slipped by 0.05 percent to 6.1390 yuan to the US dollar in Hong Kong offshore trading

Correction With reference to the article “High-end rentals 7th most expensive in Asia”, published yesterday by Business Daily, the title of Mr Alvin Mak quoted in the article should be “Associate Director for Research” at Jones Lang LaSalle (Macau) Ltd, not “senior manager, investment department”.

yesterday. It was the weakest rate since July.

Twelve-month non-deliverable forwards declined by 0.1 percent to 6.1915 yuan to the US dollar, the least since October.

Aggregate financing in the mainland dropped to 938.7 billion yuan last month as the authorities cracked down on shadow lending, the central government reported this week.

In January aggregate financing had been 2.58 trillion yuan, the most ever.

The mainland’s exports were 18.1 percent lower last month than a year earlier, the steepest fall since 2009.

China Central Television quoted the governor of the People’s Bank of China, Zhou Xiaochuan, as saying this week that the fluctuations in the yuan were “normal”, that mainland economic indicators in the first two months of this year had been within a “reasonable” range, and that the economy’s fundamentals were stable.

Separately, Mr Zhou told a press conference that mainland interest rates could be liberalised in one or two years.

Looser policies Bloomberg reported that the onemonth implied volatility in onshore yuan trading, a measure of expected movements in the exchange rate used to price options, jumped by 0.2 percentage point to 2.19 percent.

That is the highest percentage since September 2012.

The equivalent gauge of volatility in offshore yuan trading rose by 0.12 percentage point to 3.22 percent.

Mainland one-year interest-rate swaps fell to their lowest level in four months on speculation that the government will loosen its monetary and fiscal policies to counter the slowing of the growth of the economy.

An Australia & New Zealand Banking Group Ltd economist in Shanghai, Zhou Hao, said the People’s Bank of China’s efforts to spur twoway swings in the yuan had increased interbank cash supply and that the government had also released more funds into the market.

“Economic activities are quite weak, as suggested by exports,” Mr Zhou Hao said.

“The central bank hasn’t fully drained yuan liquidity released from the foreign-exchange market.

There are increased fiscal funds, and banks tightened credit for lower-rated companies, which has increased cash supply as well.”

With Bloomberg

business daily daily 88 business

March 14, 2014 Friday April 19, 2013

Greater China

Li Keqiang dissipates debt C

Taiwan Sees Higher GDP in 2014 Taiwan sees its GDP growth this year as high as 3 percent, compared with its 2013 growth rate of 2.11 percent and an earlier prediction of 2.82 percent, the chief of the island’s statistics agency said on Thursday. The agency also said it was under pressure to raise its 2014 consumer price index target from its current level of 1.07 percent, although it did not set a specific level, statistics agency chief Shih SuMei told parliament. The main reason cited was rising pork prices.

Ex-Hanlong executive claims asylum in HK The former managing director of a Sichuan Hanlong Group unit wanted in Australia on insider trading-related charges asked for asylum in Hong Kong. The asylum request from Xiao Hui, also known as Steven Xiao, was disclosed before Magistrate Bina Chainrai in Hong Kong’s magistrate’s court today at a hearing to consider Australia’s extradition request. The asylum claim was made last month to Hong Kong’s assessment centre and could take years to be resolved, he said. Chainrai denied Xiao’s request for bail and set another hearing for March 24.

China index proposal might lure US$4 bln MSCI Inc.’s proposal to include China’s mainland-traded shares in its emerging-market indexes may lure US$4.4 billion in funds, with China Merchants Bank Co. and Agricultural Bank of China Ltd. among the top beneficiaries.

The estimate of inflows into China’s so-called A shares by analysts at Goldman Sachs Group Inc. compares with the US$52 billion of approved quotas through China’s Qualified Foreign Institutional Investors programme.

China Merchants Bank, AgBank and Ping An Insurance Group Co. would probably receive the most inflows under MSCI’s proposal, Societe Generale SA wrote in a report dated yesterday.

Profit growth for China Overseas Land China Overseas Land & Investment Ltd., the country’s biggest developer by market value listed in Hong Kong, said 2013 profit climbed 23 percent on gains from property revaluations and sales. Net income rose to HK$23 billion (US$2.96 billion), or HK$2.81 a share, from HK$18.7 billion, or $HK2.29 a share, a year earlier, the company said in a Hong Kong stock exchange filing today. That compares with the HK$22 billion average estimate from 11 analysts surveyed by Bloomberg News. Sales rose 28 percent to HK$82.47 billion.

Chinese satellite searching for Malaysia aircraft A Chinese satellite hunting for Malaysian Airline System Bhd.’s missing wide-body jetliner found three floating objects at sea along the plane’s intended route, the government said.

Images from the Gaofen-1 showed the pieces were as large as 24 metres by 22 metres, the State Administration of Science, Technology and Industry for National Defense said on its website. The pictures were snapped on March 9, the day after Flight 370 vanished while flying to Beijing from Kuala Lumpur. China placed the location near the confluence of the South China Sea and Gulf of Thailand.

hinese Premier Li Keqiang signalled yesterday that his government will not ride to the rescue of every troubled investment by saying some loan defaults are “hard to avoid” in what he called a challenging economic environment.

But Li, speaking at a news conference on the final day of China’s annual parliament, hinted at some tolerance for slower economic expansion this year in order to push reforms aimed at providing longerterm and more sustainable growth.

“We are reluctant to see defaults of financial products, but some cases are hard to avoid,” Li said at the conference. “We must enhance oversight and solve problems in a timely way to ensure no systemic and regional risks.”

While acknowledging the economy faced difficulties, Li said those who are overly pessimistic about the country’s prospects have always been wrong in the past, including those who had previously predicted a hard landing.

“We believe we have the ability, and all the means, to ensure that economic growth will stay within a reasonable range this year,” he said.

China saw its first default of a domestic bond last week when a loss-making solar equipment firm in Shanghai missed an interest payment of 89 million yuan (US$14.6 million).

The default, however, was hailed by experts as a landmark event that will impose more market discipline in the world’s second-largest economy, a break from the past when bonds enjoyed an implicit guarantee because the government would bail out troubled firms to ensure stability.

China’s economy has had a soft start this year, fuelling concerns that the world’s most powerful growth engine is stumbling on the back of slackening growth across many sectors, from exports to consumption, investment and manufacturing.

Tolerance on growth That has raised worries among some investors that China will miss

the government’s economic growth target this year for the first time in years. It is aiming for economic growth of 7.5 percent in 2014.

Li skilfully dodged a question on how far Beijing would let economic

growth slip before it steps in with policy measures to support activity.

Still, he hinted at tolerance for belowtarget growth, as long as enough new jobs are created.

“The GDP growth target is around

Factory production data mismat misma

C

hina’s industrial output, investment and retail sales growth cooled more than estimated in January and February, signalling an economic slowdown that makes the government’s 2014 expansion target harder to reach.

Factory production rose 8.6 percent in the two-month period from a year earlier, the National Bureau of Statistics said today in Beijing, compared with the 9.5 percent median projection of analysts surveyed by Bloomberg News. Retail sales advanced 11.8 percent, while fixed-asset investment excluding rural households increased 17.9 percent.

8.6 pct FACTORY PRODUCTION GREW IN LAST TWO MONTHS

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Greater China

concerns

finance minister Lou Jiwei last week that China can slightly miss the 7.5 percent growth target this year as long as enough jobs are created.

Beijing wants to create 10 million new jobs in 2014 and Li has said that the economy must grow 7.2 percent annually to do that. Some 13 million new jobs were created last year when the economy grew 7.7 percent.

Li said the government will take a differentiated approach in dealing with problems in the property market, rather than using one-size-fits-all policies used by his predecessors that have largely failed to cool down the market.

We have the ability, and all the means, to ensure that economic growth will stay within a reasonable range this year Li Keqiang, China Prime Minister

7.5 percent. ‘Around’ means there is some flexibility and we have some tolerance,” he said, adding that the lower limit on growth must ensure job creation.

Li’s remarks backed those by

“We need to apply differentiated property measures in different cities based on different types of demand and local conditions,” Li said.

“We will push forward the construction of affordable housing and make sure these are distributed fairly.”

But on government corruption, Li had an unequivocal answer: “We will show zero tolerance for corrupt behaviour and corrupt officials. No matter who it is, or how senior their position, everyone is equal before the law,” Li said, without mentioning any names.

Speculation has gathered around China’s former domestic security chief Zhou Yongkang, who sources say is at the centre of a corruption investigation reaching into the highest echelons of government, though Beijing has yet to formally confirm this.

tch estimations “The fairly dramatic slowdown is unusual in Chinese economic history of the last decade” and today’s figures are “shockingly weak,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, said in a note. “It points to a major deceleration of momentum in the beginning of 2014.”

Weaker Growth China combined data for industrial output, retail sales and fixed-asset investment for January and February, citing distortions from the week-long Lunar New Year holiday, whose timing differs each year.

Factory-production growth was the weakest for the first two months of the year since 2009 and compared with a 9.7 percent advance in December. Retail sales gained at the slowest pace for the first two months since 2004 and were projected to rise 13.5 percent, based on the median estimate in a survey of economists. Sales increased 13.6

percent in December.

The median projection for fixedasset investment growth was 19.4 percent, after a full-year 2013 pace of 19.6 percent and 21.2 percent in the first two months of last year.

The investment expansion was the weakest for a January-February period since 2001.

Previously released data for February showed exports unexpectedly plunged by the most since the global financial crisis, producer-price deflation deepened and credit growth trailed estimates.

Credit Agricole’s Kowalczyk said Li’s highlighting of the “soft nature” of the target “will give him some flexibility to absorb the current slowdown without automatically reaching for stimulus measures as he would have in the past.”

Li said earlier this month that pollution is a major concern, pledging to “declare war” on smog and close coal- fired furnaces. The country will reduce emissions and impose a ceiling on energy consumption, Li said in his work report to the NPC. Bloomberg News

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Greater China

The price of the health Anticancer medicine spurs Roche benefits in China

W

ith low and middle income nations carrying the greatest cancer burden, governments in developing countries are under increasing pressure to ensure more of their people benefit from lifesaving oncology drugs.

In 2012, China accounted for 22 percent of new cancer cases globally and 27 percent of cancer deaths, the International Agency for Research on Cancer in Lyon, France, said last month.

Of all drugs sold globally, those that fight tumours generate the highest sales: US$61.6 billion in 2012, according to researcher IMS Health. For many developing countries, the economic costs of cancer treatment threaten to overwhelm health systems and budgets, according to the World Health Organization.

World Trade Organization rules allow compulsory licenses to improve access in the case of national emergencies. The U.S., European Union and most of those regions’ drug makers don’t like them. They lose money because they can’t sell

the higher-priced versions of the drugs, which are protected by patents.

Roche, the world’s biggest maker of cancer medicines and diagnostic tests, is trying to avoid that. It introduced a lower-cost Herceptin (a successful anti cancer medicine) packaged by a local pharmaceutical firm for the Indian market in August 2012, heading off competition from a copycat version slated for release early this year. Roche declined to comment on whether it’s making money on the lower- cost version.

Roche Donations Since August 2011, Roche has donated eight vials of Herceptin to patients in China’s eastern province of Jiangsu once they have bought six vials of the drug. Last year, the Jiangsu government began subsidizing the price the patient pays, picking up three-quarters of the cost.

Herceptin, which targets a certain protein produced in about 20 percent of breast tumours, isn’t yet covered

nationally by public health insurance in China. Roche won’t disclose the drug’s cost in China, saying only that the list price is about the same as its wholesale price tag in the U.S., where seven months’ treatment for metastatic breast cancer, like Zhu’s, costs about US$36,200, and a year’s treatment for an early-stage tumour costs about US$62,500.

The Roche-led subsidies program is bolstering sales in China. One other province besides Jiangsu is subsidizing the cost of Herceptin, Daniel O’Day, Roche’s

head of pharmaceuticals, told investors on a Jan. 30 conference call.

The cost-sharing arrangement was partly responsible for a quadrupling in the number of patients on Herceptin in China in 2012, said Daniel Grotzky, a Roche spokesman. The company won’t quantify the number of beneficiaries. Herceptin sales surged about 40 percent in China last year, according to Roche. Worldwide, the medicine generated 6.08 billion Swiss francs (US$6.92 billion) in revenue in 2013.

Although patient access

programs such as Roche’s can lower the cost of certain treatments, investing in prevention may be more cost-effective for developing countries, said Christopher Wild, director of the International Agency for Research on Cancer.

“I would look at what I could spend on some of the easy prevention strategies, such as reducing smoking, early screening, access to vaccines,” he said. “These are all an order of magnitude less expensive than some of the latest anticancer drugs.”

Roche has sought to tap the Chinese market in partnership with reinsurer Swiss Re by offering private insurance for cancer. It had 20 million clients by the end of last year, far exceeding a target of 12 million enrolments.

Drug makers introduced a tiered or differential pricing system for low- and middleincome countries to extend access to antiretroviral medicines for HIV patients. A similar system may be more effective at broadening access to certain cancer medicines, said Felicia Knaul, director of the Harvard Global Equity Initiative, a Bostonbased research program aimed at understanding and promoting equitable development.

Bloomberg News

Greener China for a sustainable future The Communist Party for decades showcased growth that pulled millions out of poverty environment,” said Hou Liang, the mayor of Zhangjiakou, a city in Hebei province regularly shrouded in haze, as he came out of one regional session of the National People’s Congress this month in Beijing. “We no longer rely on gross domestic product as in the past -yet dealing with the environment is much tougher.”

C

hinese cadres at the first legislative meeting with Xi Jinping as President are grappling with new performance metrics that will determine how they get ahead in the Communist Party.

For decades, the solution for local officials was to promote economic growth rates that exceeded national targets, and to bring in revenue as land was sold to developers. Now, aspiring leaders are being judged on an array of issues including how they tackle the environment and improve people’s lives.

Eastern Shandong province is adding air quality to the criteria used to evaluate party cadres this year, and north-western Gansu province is revising its assessment system to reduce the focus on economic expansion. The changes under Xi are designed to ensure social stability isn’t threatened by surging criticism of smog-choked cities that are a byproduct of China’s ascent to become the world’s second-largest economy.

“Most important is the

Conflicting Goals Without an electoral mandate, the Communist Party for decades showcased growth that pulled millions out of poverty and provided jobs for a swelling urban population as a source of legitimacy. Seeking to meet middleclass demands for better quality of life, while retaining a national target for growth at 7.5 percent as announced by Premier Li Keqiang last week, risks sowing confusion in the party about its message.

“They seem to be in a bit of a conflict,” UBS AG chief China economist Wang Tao said in an interview. Almost 3,000 delegates gathered in the Great Hall of the People over the past week to tout their achievements of the previous 12 months and get their marching orders for the next. Accustomed to coming armed with reams of statistics showing rapid local economic growth, they must now set out how they are dealing with a diverse set of criteria.

Bloomberg News

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Asia

Japan and United States advance in free trade agreement Japan’s food safety rules a source of concern for trading partners

T

he United States and Japan made some progress on resolving a deadlock over tariffs on farm and industrial exports that is dragging on a wider Pacific trade deal, a senior Japanese official said on Wednesday.

Plans for a free trade agreement among 12 Pacific Rim nations, the Trans-Pacific Partnership (TPP), have been bogged down amid a stand-off between the United States and Japan over market access.

“I don’t say that there’s a breakthrough but that we had a bit of progress, little progress,” Japanese deputy chief negotiator Hiroshi Oe said after two days of talks, the third round of bilateral negotiations in less than a month.

Oe suggested Japan was in no hurry to compromise to get a deal before a planned visit to Japan by U.S. President Barack Obama’s in late April.

“It is a negotiation, so we would never start out by setting a deadline and then wrap it up no matter what,” he said.

The United States had hoped to complete the TPP, which includes Canada, Mexico, New Zealand, Malaysia and others, by the end of last year but many issues are still on the table.

Japan, which has tried to protect its rice, wheat, beef and pork, dairy and sugar from outside competition, is at

the centre of the debate as farmers in big agricultural exporting nations push for elimination of all tariffs.

U.S. Acting Deputy Trade Representative Wendy Cutler said last week the United States continued to seek “meaningful market access” from Japan for agricultural exports.

The United States is also nervously eyeing a trade deal close to conclusion between Japan and Australia, another TPP partner, which may give Australian exporters better access to Japan than their U.S. counterparts.

Japan’s entry to the TPP last year raised the stakes for all participants, given the size of its market and past reticence in signing up to free trade deals, but it also created controversy in the United States, where trade with Japan continues to be a hot political issue.

“We are not going to be supportive of an agreement with Japan in it unless there is certainly a clear opening of their markets for their sensitive products,” American Farm Bureau Federation President Bob Stallman said.

Food safety rules Japan’s food safety rules as well as tariffs and quotas are a source of concern for trading partners. Beef producers in Canada and the United States lost share in the Japanese market

Leaders of the Trans-Pacific Partnership

to Australia, and to a lesser extent New Zealand, after Japan banned beef imports after an outbreak of mad cow disease in North America.

Autos are also a source of contention.

U.S. automakers complain that Japan, where imported cars make up less than 10 percent of the market, sets up barriers to imports such as strict dealership limits, regulation and taxes, even though there are no tariffs.

But Japanese automakers argue that U.S. manufacturers are not producing and marketing enough of the small cars which are popular with domestic consumers. Japan wants the United States to set a timeline for scrapping tariffs of 2.5 percent on imports of passenger cars and 25 percent on light trucks.

U.S. opponents of the TPP said

since a free trade deal was signed with South Korea two years ago, imports of passenger vehicles from South Korea had risen more quickly than U.S. vehicle exports, setting a worrying precedent for future trade agreements.

A fall in the total value of U.S. exports to South Korea in the last two years showed why TPP talks should stop, said trade groups including consumer group Public Citizen and the United Steelworkers Union.

The U.S. Trade Representative’s office said an 80 percent rise in passenger vehicle exports and an increase in exports of agricultural products such as dairy and soybean oil were evidence the agreement was worthwhile.

Reuters

Shares shiver after China news Analysts demand China undertakes measures in order to sustain growth

A

sian markets were mostly higher yesterday but sentiment took a hit after China released another batch of disappointing data, adding to fears about growth in the economic giant.

The euro rose to a 29-month high against the dollar, while the Australian dollar also surged against its US counterpart after Sydney reported a jump in full-time employment.

Tokyo fell 0.10 percent, or 14.41 points, to finish at

14,815.98 and Hong Kong was 0.48 percent lower in the afternoon but Sydney rose 0.53 percent, or 28.4 points, to close at 5,412.6 and Seoul added 0.10 percent, or 1.84 points, to 1,934.38.

However, Shanghai jumped 1.07 percent, or 21.42 points, to 2019.11, with analysts suggesting Chinese policymakers should start looking at moves to boost economic growth.

China said industrial output, which measures production at factories, workshops

and mines, rose 8.6 percent year on year in January and February, the slowest rate since April 2009, at the height of the global financial crisis.

At the same time retail sales, a key indicator of consumer spending, were up 11.8 percent, which was also the worst performance for several years.

ANZ economist Liu Ligang told Dow Jones Newswires: “It is time for the government to consider some loosening, either fiscal or monetary, to sustain growth.”

However, the news adds to speculation the Chinese economy -a crucial driver of regional and global growth- is slowing and comes days after officials announced a surprise trade deficit in February, which sent world shares tumbling.

“The mood has gone more risk-off again as questions over both Chinese economic growth and credit quality have re-surfaced,” said Mutsumi Kagawa, senior global strategist at Tokai Tokyo Research Center.

“More and brighter data on how the US economy is performing would go a long way to mollifying such concerns, but for now the mood is sober,” he said.

In other forex deals, the New Zealand dollar jumped to 85.61 US cents, its highest level since October, after country’s central bank hiked interest rates and indicated further rises were likely And the Australian dollar jumped to to 90.51 US cents from 89.53 late Wednesday.

Corporate Starlight Awards shines on Mandarin The 9th China Hotel Starlight Awards has been announced. Mandarin Oriental, Macau was listed among the “Best Luxurious Hotels of China”, and the hotel’s general manager, Martin Schnider, was awarded as one of the “Best General Managers of China”.

Often dubbed the Oscars of the hospitality industry in China, the China Hotel Starlight Awards selects winners based on public votes, media evaluation and appraisal by a select committee. Mandarin Oriental, Macau has been listed among the Starlight Awards’ “Best Luxurious Hotels of China” for three consecutive years since 2012, and was honoured with “Top 10 Newly Opened Hotels in China” in 2011.

AFP

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Asia Australian job figures surpass predictions

Japan boosts base wages

Australian employers boosted payrolls in February by more than three times economists’ forecast, underscoring an improving economic outlook that prompted the central bank to adopt a neutral policy stance. The number of people employed rose by 47,300, the statistics bureau said in Sydney today.

That compares with the median estimate for a 15,000 increase in a Bloomberg News survey of 28 economists. The jobless rate held at 6 percent. The jobs data and a stronger housing market indicate businesses are beginning to invest in an economy that policy makers predict will accelerate.

Third largest economy in world will increase wages US$19 on average

Mitsubishi bank top 10 U.S. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, raised a record US$4 billion selling bonds to help fund its goal of becoming a top 10 U.S. lender. A unit of the Tokyo-based bank cut costs in the March 4 sale, issuing five-year debt at 80 basis points over Treasuries, versus 105 for similar-maturity debt sold in September, data compiled by Bloomberg show.

The spread for comparable U.S. corporates is 94, according to Bank of America Merrill Lynch data. The lender sold US$7 billion of dollar bonds in the past year to fund overseas growth.

Tokyo Police unveils Toshiba technology leaking Tokyo police will probe a suspected leak of Toshiba Corp technology to a South Korean company that relates to the top Japanese chipmaker’s flagship memory chips, the Yomiuri newspaper reported on Thursday. Sources also said police had obtained a warrant for the arrest of a former engineer at a Toshiba-affiliated chipmaker who was suspected of improperly providing technical data to SK Hynix Inc. A Toshiba spokesman said the company could not comment on the matter while it is the subject of a police investigation. Tokyo police declined to comment.

Drones to patrol borders contract Australia announced plans Thursday for a fleet of giant high-tech unmanned drones to help patrol the nation’s borders, monitoring energy infrastructure and attempts to enter the country illegally. Prime Minister Tony Abbott said the Triton Unmanned Aerial Vehicles, which can remain airborne for 33 hours, would be based in the southern city of Adelaide. A report in February said seven of the US-made drones would be purchased for Aus$3.0 billion (US$2.7 billion), but Abbott said the details of how many, when they will be bought and the costs had yet to be finalised.

New Zealand on way to remove stimulus New Zealand’s central bank raised its key interest rate, the first developed nation to exit record-low borrowing costs this year, and said it plans to remove stimulus faster than earlier forecast to contain prices. “It is necessary to raise interest rates toward a level at which they are no longer adding to demand,” Reserve Bank of New Zealand Governor Graeme Wheeler said in a statement in Wellington after increasing the official cash rate by a quarter percentage point to 2.75 percent, as forecast by all 15 economists in a Bloomberg News survey.

J

apanese labour unions said they clinched their biggest raises in years as Prime Minister Shinzo Abe calls for companies to boost wages to help put the world’s third-largest economy on a path to sustainable growth. Based on negotiations across 43 union groups, companies agreed to increase base wages by an average of 1,950 yen (US$19) a month in the coming year, the Japanese Trade Union Confederation, known as Rengo, said yesterday in Tokyo. The union group, the nation’s biggest, said the increment was significant enough to rank as the biggest raises won since at least the turn of the century.

The agreements come as Abe calls on companies that benefited from his policies -Toyota Motor Corp. to Nippon Paper Industries Co. are headed for record profitsto help reverse more than 15 years of deflation. Still, the pay bump is unlikely to keep up with projected inflation, much less a looming sales tax increase, meaning workers risk falling behind as Abe wants them to help drive economic growth.

“The raise is not enough to lift the country out of deflation,” said Taro Saito, director of economic research at NLI Research Institute in Tokyo.

“Considering price increases and the coming sales tax hike, base salaries in real term actually fall this year.”

Abe has said efforts to end deflation and put Japan on a sustainable growth path hinge on reconnecting a “long-missing link between corporate profitability and wages.” He has called for wages to outpace the 2 percent inflation targeted by the Bank of Japan, whose unprecedented easing has weakened the yen and boosted

earnings from exports.

Workers have been timid about asking for even that modest of an increase. Unions for about 1,000 auto-industry companies requested an average raise, excluding bonuses, of about 1.3 percent, or 3,048 yen a month, according to the Japan Confederation of Automobile Workers’

Shinzo Abe, Prime Minister of Japan

South Korea markets celebrates base rate decision Asia’s fourth-largest economy gradually on the mend

S

outh Korea’s central bank kept interest rates steady for a 10th straight month on Thursday, as expected, as it eyes offshore risks and a slow domestic economic recovery amid low inflationary pressures.

The Bank of Korea held its base rate steady at 2.50 percent, a media official said without elaborating.

Governor Kim Choong-soo held his final post-meeting news yesterday before his term ends this month.

All 24 analysts surveyed in a Reuters poll had predicted the central bank would hold rates on Thursday, while a majority viewed the central bank’s next policy move as a hike.

Investors will now shift their focus to next week’s confirmation hearings for Lee Ju-yeol, the nominee to succeed Kim, for clues on the central bank’s policy outlook.

“There is much optimism in the market, as private consumption is gradually picking up. Growth this year may not be huge, but it will be enough to bring some confidence back into the economy,” said Moon Hong-cheol, a fixed-income analyst at Dongbu

3.8%

ECONOMIC GROWTH FORECAST SOUTH KOREA CENTRAL BANK

Securities in Seoul.

Recent data shows that Asia’s fourth-largest economy has been gradually on the mend.

The central bank expects economic growth to pick up to 3.8 percent this

year and 4.0 percent in 2015, from 2.8 percent estimated for last year.

Other indicators, however, suggest the central bank may have to wait a while before starting to raise rates from their lowest level since early 2011.

Consumer inflation eased to a fourmonth low of 1.0 percent in January, well below the central bank’s target band of 2.5 to 3.5 percent, although it has forecast inflation will rise to 2.8 percent in the second half of the year.

Meanwhile, exports rose a weaker-than-expected 1.6 percent year-on-year in February after falling 0.2 percent in January, while manufacturing activity contracted last month for the first time in five months.

Markets largely shrugged off Thursday’s policy decision. The won was up 0.3 on the day at 1,067.1 per US dollar as of 0118 GMT, while lead March futures on 3-year treasury bonds were down 0.01 point at 105.95. The stock market’s KOSPI index was up 0.2 percent at 1,935.97 points.

Reuters

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Asia Unions. The modest proposals put wages at risk of failing to keep up with rising prices and the looming three percentage-point increase in the sales tax next month. “Japanese unions and workers have become so used to the static to slightly deflationary environment that they think a 2 percent rise in their nominal wage is a good result,” said Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo.

Hollowing Out Japan’s labour system hasn’t spared manufacturing from hollowing out ever since the asset bubble burst in the early 1990s, ushering in a banking

crisis and two decades of stagnation.

Employment in the manufacturing industry peaked in 1992 at 15.7 million. By last year, it slumped to 10.4 million. The lifetime employment structure also isn’t necessarily safe: companies including electronics maker Panasonic Corp. have said Japan’s labor system is too rigid. The country ranked 134th out of 148 nations in ease of hiring and firing, the World Economic Forum said in its 2013-2014 Global Competitiveness Report. Firing restrictions have prompted Japan Inc. to resort to hiring temporary workers or reducing workers’ pay. Average wages dropped by about 15 percent since 1997, labour ministry data show.

The raise is not enough to lift the country out of deflation Taro Saito, NLI Research Institute

“The unions are still very, very careful in terms of base wages and pushing the companies too far,” Martin Schulz, an economist at Fujitsu Research Institute in Tokyo, said by telephone. “It’s a challenge for Abe at face value because the government has made it a major piece of their overall political strategy” to increase wages along with prices.

Bloomberg News

India’s industry pushes economic growth Cooling prices will offer some relief to the government before election

I

ndia’s flagging economy delivered rare good news with a slight expansion of industrial production and further cooling in consumer prices, offering some respite to the ruling coalition before next month’s general election.

Improved consumer demand helped industrial output expand 0.1 percent on year in January, the first growth in four months, data from the federal statistics ministry showed on Wednesday.

Analysts polled by Reuters had forecast a contraction of 0.6 percent in output. The fall in December’s output was revised to 0.17 percent on year from 0.6 percent earlier.

Separately, retail inflation eased for the third straight month to a 25-month low of 8.10 percent in February from 8.79 percent in the previous month on moderating vegetable prices.

“Today’s data show India’s beleaguered economy moving in the right direction, but still far from healthy,” said Miguel Chanco, India Economist at Capital Economics in Singapore.

The data showed production of consumer goods, a proxy for consumer demand, contracted an annual 0.6 percent in January, an improvement

from a 4.7 percent drop a month ago.

Asia’s third-largest economy has been struggling to recover from a stagflationtype situation where economic growth has been stuck below 5 percent for the past seven quarters while prices continue to rise at a fast clip.

Cooling prices will offer some relief to the government headed by the Congress party, which is trailing in opinion polls ahead of the polls that begin on April 7. It is still widely expected to be defeated, in part for its failure to control inflation and revive the economy.

Hail and heavy rains in the past two weeks have damaged crops, which could see food prices spike again. An uncertain outlook for this summer’s monsoon rains due to the El Nino weather pattern is also worrying analysts.

“Food ... prices are going to go up again because of unseasonal rains and hail storms in some parts of the country,” warned D.H. Pai Panandiker, president of RPG Foundation.

Purchasing managers indexes are already pointing to underlying inflationary risks as rising input costs last month, thanks to higher raw material prices and wage increases, forcing firms to pass on them to their clients.

Reuters

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International

Suits with unknown owner Intellectual property accusers sometimes hide companies that want to stay in the shadows

G

oogle Inc. wanted to find out who was behind a company called Suffolk Technologies LLC that accused the world’s largest search engine’s owner of using its Internet-search technology without permission.

Turns out, the tangled ownership history included big names: Goldman Sachs Group Inc. and BT Group Plc.’s British Telecom.

Tired of fighting sometimes frivolous patent infringement suits that cost millions of dollars in legal fees, companies such as Google and Apple Inc. are using ownership questions to help their court cases.

Unveiling litigants can get a suit dismissed, disclose the real entity behind a case or identify a target for revenge. Even before Suffolk lost

its case, Google retaliated last year by filing a patent-infringement suit against British Telecom.

“You would think that determining who owns a patent is a pretty straightforward process,” said Stephen Korniczky, co-chairman of the intellectual property practice of Sheppard Mullin in Del Mar, California. “If a patent is assigned to a company, then it’s recorded with the patent office. The problem really lies in who owns the company or entity to which the patents have been assigned.”

Google, Cisco Systems Inc. and other technology companies have persuaded Congress to consider legislation requiring patent owners to disclose the “real party in interest.”

The U.S. Patent and Trademark Office

is considering rules to make public the “attributable ownership” of a patent. The challenge may be figuring out what those terms mean and what information must be disclosed.

Cloaked Control Revealing who controls a patent is becoming a key issue in more infringement lawsuits as the market to buy and sell patents grows and ownership issues get murkier.

Big companies hide behind littleknown firms to avoid countersuits.

Investment companies don’t want it to be known that they’re involved in patent litigation. And some patent owners keep portfolios separate to file multiple lawsuits against a company over different technology.

The problem really lies in who owns the company or entity to which the patents have been assigned Stephen Korniczky, intellectual property expert

Suffolk claimed Google’s AdSense programme used patented inventions related to how an Internet server responds to requests for files from web pages without paying it royalties.

According to court papers, Suffolk is owned by Corporate Research Partners, which is owned by IPValue, formed in 2001 by a joint venture of Goldman Sachs, General Atlantic Partners and Boston Consulting Group. British Telecom obtained the patents in 1997, then transferred them to IPValue in 2011 for licensing or suing infringers - with BT getting a cut of any proceeds.

Windowless Office Andrea Raphael, a spokeswoman for Goldman Sachs, said the company has a minority, non-controlling stake in iFormation Group, the parent of IPValue. Officials with British Telecom and Google had no immediate comment.

Fortinet Inc., a Sunnyvale, California-based network security company, didn’t find a large corporation when it sought to determine who was really behind a patent suit filed by Network Protection Services LLC. The owners were a couple of lawyers who rented a windowless office in Longview, Texas, for US$325 a month and filed patent suits against dozens of companies under the names of various shell corporations.

A judge in California said the company had engaged in litigation misconduct by not disclosing that information and ruled a jury should know it was just “a file closet;” a month later the case was dismissed.

Federal law requires corporate disclosure statements in all lawsuits, so publicly traded companies have to reveal when they own an entity that’s filed a lawsuit.

The disclosure rules don’t apply to private companies. Judges also want to know the right parties in a case.

Companies say learning that multiple shell companies all have a common owner could help defendants know to negotiate comprehensive agreements that would limit future suits.

Bloomberg News

Venezuela cries Chavez one year later Tens of thousands of red-clad ‘Chavistas’ gather for rallies in Caracas

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ollowers of the late Venezuelan leader Hugo Chavez took to the streets on Wednesday to mark the anniversary of his death, a sad but welcome distraction for his successor, who has faced a month of violent protests.

A year after Chavez succumbed to cancer, his selfproclaimed “son”, President Nicolas Maduro, faces the biggest challenge to his rule from an explosion of antigovernment demonstrations that have led to clashes with security forces and 18 deaths.

Wednesday’s military parade and other events to honour ‘El Comandante’ were a chance for Maduro, 51, to reclaim the streets and show opponents that he too can mobilize.

“This anniversary is enormously sad. There’s not a single day I don’t remember Hugo,” Chavez’s cousin,

Chavez passed into history as the man who revived Bolivar Nicolas Maduro, President of Venezuela

forever, and we cannot go back. Maduro also is a poor man, like us. He’s handling things fine. Perhaps he just needs a stronger hand,” he told Reuters.

Tens of thousands of red-clad ‘Chavistas’ were gathering for rallies in Caracas and elsewhere in honour of

the socialist whose 14-year rule won him the adoration of many of Venezuela’s poorest, whilst alienating the middle and upper classes.

Maduro will preside over a parade in the capital before going to the hilltop military museum where Chavez led a 1992 coup attempt that

launched his political career, and where his remains have been laid to rest in a marble sarcophagus.

“Chavez passed into history as the man who revived Bolivar,” said Maduro, who often hails Chavez as South America’s second “liberator” after independence hero Simon Bolivar.

Chavez’s own humble roots, anti-U.S. rhetoric, network of grassroots political organizations and lavish spending on slum projects made him a hero for many.

Yet his often tough line against opponents, some of whom ended up in exile or jail, his sweeping nationalizations, and his rigid economic policies such as price and currency controls angered many others.

One year after his death, though, debate in Venezuela is no longer about Chavez, but his would-be heir Maduro.

Guillermo Frias, 60, said from Los Rastrojos village in rural Barinas state, where the pair used to play baseball in the street as kids.

“He President changedofVenezuela Poland, Bronislaw Komorowski and NATO Secretary General Anders Fogh Rasmussen in 2010

Reuters

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March 2014 Friday 14, April 19, 2013

Opinion Business

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Yuan Dive?

Leading reports from Asia’s best business newspapers

INQUIRER Barry Eichengreen Hollywood socialite and fashion icon Paris Hilton has debuted into the Asian real estate scene with the launch of an urban beach club she had designed in collaboration with the Century Properties Group at the latter’s resort-themed residential community Azure in Parañaque City. The 32-year-old Hilton heiress, who signed a partnership deal with CPG in 2011 to lend her creative inputs for the design of a multiple level beach club, is back in town to inaugurate the completed Paris Beach Club.

Professor of economics and political science at the University of California, Berkeley

THE KOREA HERALD IKEA Korea’s marketing manager said Wednesday that the Swedish furniture brand would keep to its affordable pricing policy in Korea.

The comments are expected to relieve the anxiety that had been building over whether IKEA would inflate the prices of its products here, as many other foreign brands do.

IKEA Korea will open its first store in Gwangmyeong, just south of Seoul, in November. Its first Korean outlet, on a site about 10 times the size of a football field, will sell more than 10,000 items, including household goods and food.

The second outlet will open in Goyang, Gyeonggi Province, though the timing has yet to be fixed.

BANGKOK POST Thailand’s mutual fund business is forecast to grow 10% this year as yield-hungry investors flee low-interest bank deposits and pursue other investments offering higher returns.

Global equity and fixed-income funds will be the most active products in 2014, said Somjin Sornpaisarn, president of Asset Investment Management Co. Some large infrastructure and property funds are likely to gain as well. The local mutual fund market has continued to grow as investors have developed a better understanding of risk and return. The Bank of Thailand’s Monetary Policy Committee yesterday slashed the policy rate for the first time this year by 25 basis points to 2% in order to stimulate the country’s lacklustre economy.

THE NEW ZEALAND HARALD The New Zealand dollar jumped to a five-month high after the Reserve Bank raised the benchmark interest rate as expected and signalled further hikes are on the way.

The kiwi rose as high as 85.26 US cents, from 84.73 cents immediately before the Reserve Bank’s 9am statement. The local currency recently traded at 85.20 cents.

Reserve Bank governor Graeme Wheeler lifted the official cash rate a quarterpoint to 2.75 per cent in the first move of a tightening cycle, and signalled potential for a steeper track for future hikes as he tries to prevent inflation accelerating.

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ince December, when the US Federal Reserve began tapering its monthly purchases of longterm assets, emerging-market currencies have fallen across the board.

The main exception, until recently, was China’s indomitable renminbi. But now the renminbi, too, has been falling against the dollar.

So is this more evidence of the disruptive impact of the Fed’s policy?

The renminbi’s decline is not large, and whether it will continue is uncertain. But the movement is striking by the standards of what is still a heavily managed currency.

And it is in the opposite direction from what everyone has come to expect.

Certainly, the Fed’s tapering of its quantitative-easing policy has had some effect.

A standard money-making strategy for investors with access to Chinese financial markets has been to borrow dollars at low interest rates and buy high-yield Chinese assets. But tapering, by auguring higher US interest rates, makes it more expensive to borrow dollars and invest in Chinese assets.

As “the carry trade” falls out of fashion, demand for the renminbi declines and its exchange rate depreciates.

But, while the Fed has been tapering since December, the weakness of the renminbi materialized only in February.

Evidently, something else is going on.

The reality is that China’s tightly controlled currency falls only when the People’s

Bank of China wants it to fall.

The PBOC, not the Fed, calls the tune to which the renminbi dances.

So why has it been singing the depreciation song?

One possibility is that a w e a k e r renminbi is, paradoxically, part of the Chinese government’s strategy for encouraging its wider international use. China is committed to broadening t h e renminbi’s role for f o r e i g n trade and investmentr e l a t e d purposes.

Ultimately, it would like to see the renminbi a c h i e v e an international status comparable to that of the dollar.

To do that, China will have to develop its financial markets and open them to foreign investors. But opening those markets is feasible only if the authorities eliminate the perception that exchangerate movements are a oneway proposition. So long as investors believe that the renminbi can only appreciate, opening the country’s markets will cause it to be flooded by foreign money, with unpleasant financial

consequences, not the least of which is inflation.

Foreign investors therefore need to be reminded that the renminbi can fall as well as rise. Some observers regard the renminbi’s recent slide as an attempt to squeeze the speculators and signal the advent of a more flexible exchange rate. They believe that the PBOC is about to widen the currency’s trading band.

If so, the P B O C ’ s r e c e n t m a r k e t moves are a good thing. If there is one clear lesson from history, it is that the combination of open financial markets and a rigid exchange rate is a disaster waiting to happen.

China has already begun opening its financial markets.

Thus, greater exchange-rate flexibility is overdue.

A second, less positive interpretation is that the PBOC is weakening the renminbi in order to boost Chinese exports. Reacting against excesses in the country’s property markets and shadow banking system, the PBOC has moved, not unreasonably, to limit the availability of cheap credit. But this may have

China’s tightly controlled currency falls only when the People’s Bank of China wants it to fall

caused domestic demand growth to slow more rapidly than expected. And boosting exports is, of course, China’s customary response to weaker domestic demand.

This less encouraging interpretation of the renminbi’s recent weakening suggests that official efforts to clamp down on the shadow banking system are not going well, and that the effort to engineer a soft economic landing is not on course. If this view is correct, efforts to rebalance the Chinese economy could now be put on hold, which would not bode well for future economic and financial stability.

Moreover, if China is pushing down the renminbi in order to goose its exports, its policy will not sit well with its foreign competitors, be they the United States or Japan. Complaints about currency manipulation and the associated diplomatic tensions will quickly return.

China is sufficiently opaque that it is hard to know from the outside which interpretation is correct. Future renminbi movements will tell the tale. Mainly up-and-down fluctuations would be a sign that the policymakers’ goal is to eliminate one-way bets and advance the cause of renminbi internationalization. A secular decline, by contrast, would indicate that demand in China is weakening and rebalancing has been suspended.

For now, the only thing observers can do is to watch closely and hope for the best.

And it is the PBOC they should be watching, not the Fed.

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Closing Ferry accident injures three At 2:45pm yesterday, a Turbo Jet catamaran carrying 291 passengers and 10 crewmembers sailing from Hong Kong to Macau hit Number 4 berth due to mechanical issues. The vessel suffered a loss of power in its left engine during berthing, explained a Turbo Jet spokesperson.

The boat then drifted slowly towards the sea wall, with which it made contact, resulting in minor damage to the bow. Three passengers - two men from Hong Kong and one Australian woman received slight head injuries and were sent to Kiang Wu Hospital for treatment.

The company said to Business Daily is cooperating with authorities (the Marine and Water Bureau of Macau) in the ensuing investigation.

The last incident involving this company – in which 87 people were injured - occurred on 29th November 2013, due to an unidentified object in the sea.

Power struggle Hochtief ousts Leighton executives as stake build tightens grip David Fickling

Macau, Japan ink tax info exchange pact

Macau and Japan signed the Tax Information Exchange Agreement (TIEA) yesterday to “fulfill the Macau SAR government’s pledge on international cooperation on tax affairs”, the Financial Services Bureau said in a press statement. Following the signing of this agreement, the number of jurisdictions that have TIEA or Double Taxation Conventions (DTC) with Macau has increased to 17, the bureau said. The pact serves to conform to criteria compiled by international body tax evasion body the Organisation for Economic Cooperation and Development, it added. Macau passed the body’s second-phase review last year on transparency of tax information.

Hamish Tyrwhitt, Leighton’s CEO since 2011 was forced out

H Million Scam Last December, Ling, a 41-year-old male from Liao Ning province, met a local woman from Macau.

After calling himself a gambling genius, Mr Ling asked the woman to give him HKD100,000 and managed to win HKD20,000 back. In January, he asked her again for another ‘loan’ and the lady this time gave him HKD2,4 million (in three instalments). The man refused to allow her to accompany him to the casino, saying that he needed to be alone in order to win. Three days later, Mr Ling left Macau, telling the woman that he had lost everything but she did not believe his story and filed a claim with the police. Yesterday, he was arrested at the Gong Bei border. Upon investigation, Judiciary Police found that he had not lost all, ‘just’ HKD800,000 in the casinos. The Judiciary Police therefore concluded that Mr Ling had stolen HKD1.6 million from the victim, and was referred to the Public Prosecutor’s Office.

ochtief AG forced out the top two executives at Leighton Holdings Ltd. and put its Chief Executive Officer Marcelino Fernandez Verdes in charge, as it raised an offer to increase its stake in the Australian builder.

Hamish Tyrwhitt, Leighton’s CEO since 2011, and Chief Financial Officer Peter Gregg had their employment terminated and resigned from the board, the Sydney-based company said in a regulatory statement.

Hochtief, which is seeking to boost its majority holding in Australia’s biggest construction company to as much as 74 percent, said it would pay minority shareholders A$22.50 per share, up from A$22.15 three days ago.

The moves will increase Hochtief’s influence over a business that accounts for about 62 percent of its pretax profits, at a time when the German company’s group earnings are forecast to decline 18 percent this year. Fernandez Verdes, who’ll

be Leighton’s third chief executive since Wal King ended a 23-year term in December 2010, has already been named as the next chairman of Actividades de Construccion & Servicios SA or ACS, the Spanish builder that in turn controls Hochtief.

“It’s pretty clear who’s in control now,” Heath Andrews, an analyst at Royal Bank of Canada in Melbourne, said by phone. “If you’re a retail shareholder my advice would be to sell your entire holding on-market immediately.”

Leighton shares fell 1.5 percent to A$21.90 in Sydney, paring this year’s gains to 36 percent. The benchmark S&P/ASX 200 Index has risen 1.1 percent this year.

‘Massive Changes’ “Whenever you have massive board and management changes there is operational risk,” Stephen Mayne, a spokesman for the Australian Shareholders Association,

said by phone. “It is a question of whether Leighton’s formula will be destabilized.”

The Australian business, which mines coal for BHP Billiton Plc, is building a casino hotel in Macau for Wynn Resorts Ltd. and is constructing parts of a natural gas export terminal for a venture operated by ConocoPhillips and Origin Energy Ltd. ACS built Madrid’s second-tallest building, the Torre de Cristal, as well as extensions to the city’s Prado and Reina Sofia museums.

Since taking the helm of Hochtief in November 2012 after eight years heading up ACS’s Dragados SA unit, Fernandez Verdes has focused the German company on its main building business and reversed a decade-long shift into services.

His appointment was the culmination of an acrimonious takeover battle that claimed the jobs of two Hochtief chief executives and left ACS with about 56 percent of the German company.

China Southern to serve Birmingham

Ukraine billionaire arrested in Vienna

Euro reaches two-year high

Birmingham in central England will get its first flights to Beijing this summer as a runway- lengthening project prompts China Southern Airlines Co. to commence charter services.

China’s biggest carrier by passenger numbers will operate three return flights to the U.K.’s second-largest city between July 22 and Aug. 5 using a 248-seat Airbus Group NV A330-200 wide-body plane, Birmingham Airport said in a statement today.

Birmingham, which currently has no direct flights further east than India, according to its website, has spent 40 million pounds (US$67 million) on a runway extension that will open next month, removing range limits for bigger aircraft.

While the China Southern operation will focus on tour groups, a small number of flight-only and package tickets will also be available for travel from the U.K. to Beijing.

Dmitry Firtash, the Ukrainian billionaire who made his fortune on Russian natural-gas imports, was arrested in Vienna on a warrant issued by the U.S. Federal Bureau of Investigation.

Firtash was taken into custody by the organized-crime unit of the Austrian police, according to a statement by the country’s Interior Ministry yesterday. His lawyers and spokespeople didn’t immediately respond to phone calls.

Firtash, 48, is alleged to have engaged in bribery and forming a criminal organization, according to the warrant, issued after an FBI investigation dating to 2006, the ministry said.

Firtash is a co-owner of RosUkrEnergo AG, Ukraine’s previous sole importer of Russian natural gas. He controls his assets through Group DF, which employs 100,000 people in Ukraine.

The euro reached the highest level versus the dollar in more than two years as policy makers signal support for the region’s recovery. Australia’s dollar surged as employers added the most full-time jobs since 1991.

The greenback remained lower versus all of its 16 major peers as U.S. retail sales rose and jobless-benefit claims fell. The euro and the Aussie gained for a second day even as data showed Chinese retail sales and industrial production were weaker than economists forecast. New Zealand’s dollar climbed to a record on a trade-weighted basis as the nation became the first developed economy to raise interest rates since 2011. European Central Bank official Peter Praet said yesterday the euro-area economy has improved in the past two years.

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