Macau Business Daily, April 21, 2014 by Business Daily

MOP 6.00 Publisher: Paulo A. Azevedo Year III

Number 522 Monday April 21, 2014

Middle class momentum

China’s slowdown will not threaten the two-digit growth estimated for the Macau economy this year. Mainland’s middle class families are getting richer and boosting the undersupplied mass market

gaming segment, economists say. Macau would only be affected if Chinese family incomes suffer a severe drop of more than 5 percent, Economist José João Pãozinho tells Business Daily Page

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HSI - Movers April 18

Name

Car production on track

DFS takes flight

The long delays in the construction of the Light Rail Transit (LRT) tracks in Macau has not stopped the train supplier from building the two-car trains in Japan

DFS Group is not interested in bidding for Macau International Airport’s duty free concession. A small infrastructure and 5-million passenger traffic does not provide sufficient payback, it claims

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Artful dodgers around Last year, the number of thefts on flights between Macau and other destinations more than doubled. All the suspects hail from the mainland, say police Page 3

%Day

Sino Land Co Ltd

2.22

CNOOC Ltd

1.42

Cheung Kong Holdin

1.26

Hutchison Whampo

1.22

China Petroleum & C

1.16

Cathay Pacific Airwa

-0.79

Hengan Internation

-0.84

Belle International

-1.05

Want Want China H

-1.90

CITIC Pacific Ltd

-3.08

Source: Bloomberg

I SSN 2226-8294

INTERVIEW

Chinese say ‘Oui’ to French

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French wine will continue to be unbeatable in Macau, says the head of the Wine Society. In an interview with Business Daily, Filipe Santos explains why infrastructure and imported labour continue to be the problems to tackle in Macau Pages 6 & 7

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April 21, 2014

Macau

Neto Valente

Raising the bar Macau lawyers want legal profession admission rules for lawyers from Portugal

main differences between the legal system here and in Portugal. At the conclusion of the training programme, lawyers will have to sit an exam. The admission rules also propose a limit on the number of lawyers from Portugal allowed to be hired every year. This limit is to be set at no more than 50 percent of the total number of local legal professionals who become lawyers that year or the year prior. The numbers can vary somewhat, Mr Valente is quoted as saying. Last year, there were 18 new lawyers in

Macau. This year may be different because currently there are up to 61 interns who will sit their final exams. That theoretically means that as many as 30 lawyers from Portugal can apply to come here. However, only about half of those who sit their final exam pass, so that could mean 15 new Portuguese lawyers rather than 30. Meanwhile, the Macau Lawyers Association is also requesting information from the bar in Portugal as to what the conditions are for a lawyer here seeking a job placement as a legal professional there.

awyers here will submit legal profession admission rules to the bar in Portugal in order to resume the hiring of Portuguese attorneys, which was suspended last year. Following the suspension of the protocol, which permitted the hiring of Portuguese lawyers, legal professionals here reached a consensus on the conditions that should be met in order to hire Portuguese lawyers. The president of the Macau Lawyers Association, Jorge Neto Valente, is quoted by Portuguese news agency

Lusa, as saying that the decision to suspend the protocol was due to there being more newly-arrived lawyers than the demand for them in Macau. He said there were as many as six or seven people arriving in Macau every month without a job offer looking for employment here. “That wasn’t possible,” Mr Valente is quoted as saying. Under the new proposed protocol and legal profession admission rules, lawyers will have to undergo a three-month training programme in order to learn and adapt to the

Climate change affecting Macau’s raw water

Cotai stores require 20,000 workers: report

limate change has led to some changes in the quality of raw water here, with Macao Water having received as many as nine complaints about a foul odour and an “earthy or musty” taste. Complaints were being received up to the end of last week. The company said in a statement that it has reported the incident to the Marine and Water Bureau, and has also taken steps to mitigate the impact. Laboratory technicians have been sent to investigate the problem and collect samples of raw water. An adjustment has also been made to the raw water treatment process “by adding more active carbon to remove the unpleasant odour,” the statement said. Testing conducted by the water company shows that the quality of water supply to Macau has not been affected and continues to meet the hygiene and safety standards of local water quality guidelines, as well as those of the European Drinking Directives.

etail spaces in the new mega casino resorts opening in Cotai from 2015-17 will require as many as 20,000 workers to man the operation, says prominent local businesswoman Terry Sio Yuen Yee. Ms Sio, founder and chief executive of a Macau-based distributor and agency of luxury branded products, told Chinese language newspaper Macao Daily News that the new resorts have already started inviting retailers to their premises since last year. Proposed monthly rents, however, have already increased to about 300450 patacas (US$37.5-56.3) a square foot, compared to 100-150 patacas when the first slew of resorts opened in 2007, said Ms Sio. Nevertheless, her company still aims to invest some 500 million patacas in opening 30 new stores in the new resorts within the next five years, she told the newspaper. Rainbow’s proposal to build a high-end outlet mall on a zone reserved for Macau investors in Hengqin Island was also included on a recommendation list passed to Hengqin authorities last week by the Macau government. T.L.

Terry Sio Yuen Yee

April 21, 2014

Macau

No China headwinds for Macau Macau will only be affected by China’s slowdown if the mainland economy suffers a severe hard landing and middle class families’ income drops more than 5 percent. No reason for alarm yet Alex Lee

alex.lee@macaubusinessdaily.com

the mass market will carry the burden and chalk up another record year for the territory.

Troubled China ready for stimulus The sound of alarm bells rang this month in Beijing after official figures revealed that the mainland’s economy grew in the first quarter at the slowest pace in one and a half years with predictions that it could still bottom in the second quarter. The 7.4 percent GDP increase reading was below the 7.5 percent annual mark set by Beijing for 2014 and compares with a 7.7 percent jump in the previous quarter. The fear of a deeper slowdown in China is starting to galvanise its leaders into

he recent signs of China’s slowdown will not threaten this year’s estimated two-digit growth for the Macau economy. Even with VIP revenues decelerating, the undersupplied casino mass market of Macau and the burgeoning disposable income of the Chinese urban population are protecting the territory against a worse than expected year for the mainland, economists say. “I don’t think the recent slowdown in China will affect Macau in the near future”, José João Pãozinho told Business Daily. “Only in a scenario where the disposable income of Chinese families drops more than 5 percent could we talk about an impact on the territory’s economy”, said the economist.

The mainland’s middle class clients are vital for casino operators given the much bigger profit margin they generate compared to VIP clients and for the government, given that more than 90 percent of public revenues come from gamblers. Official figures from the first quarter of 2014 also show that gains from the mass market are growing at a much faster rate than those from high rollers. While the mass market is secure, Macau and its economy are safe. Nomura underlines this point. In a recent note to clients regarding Macau gaming, the bank’s economists highlighted that the mass market gaming segment in Macau is “still undersupplied and like all undersupplied markets it should grow through good

and bad times”. Like João Pãozinho, Nomura is “confident in Macau’s fundamentals” and brushes aside the temporary concerns about Macau’s long term potential following signs of a slowdown in China: “We’re short of an economic cataclysm in China”. The Japanese bank decided to maintain its original forecasts predicting a 24 per cent jump in profits before taxes for gambling companies this year. U.S. based Wells Fargo also remains positive on “Macau’s secular growth story”. Despite modest growth of only 3 percent expected for VIP casino revenues for the second half of this year - four times less than what it registered in the first quarter (12.5 per cent) - Wells Fargo hopes that

Only in a scenario where the disposable income of Chinese families drops more than 5 percent could we talk about an impact on the territory’s economy José João Pãozinho, Economist

action, namely with a new round of stimulus to heat the economy. Beijing has already announced plans to build more railways and cut taxes, and Goldman Sachs economists expect a wider range of measures like easy access to credit, urban renewal, new energy projects and a devaluation of the yuan to help struggling exporters. Despite worrying JanuaryMarch figures - housing sales dropped 7.7 percent, construction starts fell 25 percent and retail sales trailed estimates (12.5 percent increase) - the backbone of China’s economic peace, the growing middle class, is still intact. Urban per capita income rose 7.2 percent in the first quarter and 3.44 million jobs were created in this period, 40,000 more than compared to a year ago, Beijing’s statistic’s bureau reveals. Even with less growth, the economy is still generating more jobs than anticipated and family income is rising. And this is good news for Macau. With more money in mainland families’ pockets, more tourists and more gamblers are ready to come to the territory. Macau’s GDP will probably continue to grow in the two-digit range this year and next, at 10 and 6 percent, according to the last estimate published by the Economist Intelligence Unit. A slightly worse performance than in 2013, when the economy jumped 11.9 percent. Even with China’s slowdown, Macau’s economy should remain robust. “There’s no reason for alarm”, reiterated Mr Pãozinho.

Double trouble

he number of thefts occurring on flights between Macau and other places more than doubled last year with all suspects being mainlanders, the Public Security Police Force confirm. The police said over the weekend that they probed 165 in-flight thefts last year, a surge of 126 percent from 2012 when only 73 cases were recorded. Losses in the 165 cases

totalled about 8.97 million patacas (US$1.12 million), the police added. All the suspects arrested last year were mainlanders, totalling 128 people, nearly tripling from 46 arrestees a year earlier, police figures show. The police gave no particular reasons for the upsurge in the figures nor did they identify any gangs behind the cases, only noting that they “are closely following the latest change [in

the trend] and strengthening efforts to curb [the thefts].” The number of in-flight thefts reported in the first quarter of this year, however, dropped by 42.9 percent to 20 cases, against 35 cases in the January-March period of 2013, police said. Thefts occurring on Macau flights, however, seem more severe than neighbouring Hong Kong, whose

airport received 12 times more visitors than Macau International Airport. Hong Kong media reported earlier this month that 37 in-flight thefts were reported in Hong Kong last year. The Macau police said over the weekend that they would increase awareness promotion to passengers in the airport to caution them about the security of personal belongings. T.L.

April 21, 2014

Macau

LRT train construction chugging along

IGT to launch new game in 2015 I

nternational Game Technology (IGT) is expected to launch a new slot machine game at selected casino properties in Macau and Singapore by 2015. The company said in a statement that it already had the licence to develop the new Tokidoki-themed games. Available in additional casino markets throughout the world, they will debut here and in Singapore. “With our strong focus on developing games that appeal to international audiences, based on themes and game dynamics that resonate regionally, we’re very pleased to launch Tokidoki for players in Asia, particularly in Macau and Singapore,” said Joe Sigrist, IGT VP game development and global product management. Asia is an important market, Mr Sigrist said, as it provides IGT a market growth opportunity. “With the licensing of the incredibly popular Tokidoki lifestyle brand, we will develop a compelling series of marketattuned games,” he added.

he trains for the Light Rail Transit (LRT) system are already being built in Japan, a statement released over the weekend by the Transportation Infrastructure Office says. According to the statement, “several rigorous tests on two-car trains have been carried out, which have undergone a trial run to check their performance.” The structure of the LRT train for Macau comprises three parts, primarily the train, the bogie and the equipment to be fitted to each train. Currently, 60 of the 110 train

cars commissioned have been built by the supplier, Mitsubishi Heavy Industries Ltd, in Japan. Before leaving the factory assembly line, each train undergoes thorough inspection of its general characteristics and assembly parts. The manufacturer also ensures that each train performs well, according to the statement. “In addition to requesting that the supplier submit periodical reports on the assembly of the trains, we also send staff to the factory to oversee and assure the quality of trains being built for Macau,” the Office added in its statement.

The initial project was budgeted at 4.2 billion patacas (US$525 million) but the figure soon ballooned to MOP7.5 billion (US$937 million) in 2009. Two years later, the budget was revised up to 11 billion patacas (US$1.37 billion). Today, there is still no updated figure on how much the LRT is estimated to cost. Taipa will be the first section of the route completed, and is scheduled to be operational by 2016. This is already about six-to-eight months behind the government’s initial schedule. Only then will it be linked to the Macau end of the project.

U.S. galleries to exhibit Macau-inspired art Around 50 works featuring Macau will be on display in NYC from Wednesday Sara Farr

sarafarr@macaubusinessdaily.com

acau is the inspiration behind some 50 works of art to be featured in New York City and Los Angeles as part of an exhibition titled “Classic Macau: Artwork Inspired by Macau.” The Macau Government Tourist Office (MGTO)organised event comes in the sequence of a four-day visit last December by 10 US-based artists. During their visit here, artists got to explore the territory on their own. Once back in the United States, they were invited to transform their inspirations into art using the medium of their choice. The group of artists comprised painters, illustrators, videographers and photographers. On the name list provided to Business Daily, five of the featured artists are based in New York; notably Steve Forster, whose paintings are exhibited in the U.S.

and internationally, and Guno Park, who lives in Brooklyn and whose work is collected by many private collectors. Michael Wayne Smith’s paintings have received numerous awards, including one from the Forbes Foundation, while Sean Mattison’s work varies widely by medium, with some of his projects seeking to raise awareness about social justice and active change. Wendy Connett is both a photographer and journalist regularly featured in newspapers and magazines. The other five artists featured in the exhibit are Andy Richard, whose photographic work has been published in National Geographic Traveller, Discovery, UNICEF and USAID. Selma Fernandez Richter is a photographer interested in themes related to identity via connections with place, adaptation and religion. Ken Carl, a Chicago-based

photographer, has worked with the Kenyan Tourism Board in addition to a number of Chicago publications. Mary Beth Kratsas has over 25 years of experience behind the lens, while Los Angelesbased videographer Devin Galaudet is editor-in-chief of online travel magazine In The Know Traveller. The exhibit will feature a number of different media, including videos, paintings, drawings and photographs. “This multi-media exhibit will enable attendees to experience Macau’s extraordinary architecture, heritage and culture through a variety of mediums,” MGTO said in a statement. In New York, the works will be on display in the Wilkinson Gallery at New York Academy of Art from April 23 to May 6, while in Los Angeles the exhibition will be held in the Samuel Freeman Gallery from May 16 to May 18.

April 21, 2014

Macau

More subsidies follow second poultry ban Poultry traders demand 30 percent more subsidies from govt after bird sales banned again in less than two months over H7 virus probe Tony Lai

tony.lai@macaubusinessdaily.com

ocal poultry traders are demanding that the government increase their daily allowances by 30 percent, as live bird sales are banned again following the sampling of an H7-type virus detected in a local market. The Civic and Municipal Affairs Bureau announced on Friday that they found an H7-type avian influenza virus in a sample collected from the Patane Provisional Market on Wednesday. The government immediately culled over 8,000 birds in the Nam Yue wholesale market,

and imposed a 21-day ban on the sale of live poultry here starting Saturday. It is the second time this year that the city has prohibited the sale of live birds, following a threeweek ban imposed on March 13 when the H7 virus was detected in a sample from the Nam Yue wholesale market. “This is the second time in a row, bringing great loss to the industry,” said Leong Meng Lap, president of the Macau Poultry Dealers Association, in a press conference on Saturday.

“The subsidy should be raised by 30 percent this time [compared with the first ban] to cover our losses,” demanded Mr Leong. The municipal affairs bureau responded that they would further negotiate with the traders on the subsidy for the second ban. But the government and the traders had reached “consensus” on the amount of daily allowance for subsidising the latter’s livelihoods during the first 21-day ban, said Mr Leong, adding that they had yet to receive the money.

“We’re not very happy with the amount [for the first time],” the president said. But both Mr Leong and the municipal affairs bureau declined to reveal the amount at the moment. It is known the amount for the first ban was less than 400 patacas (US$50) a day for each dealer. Local Chinese-language media have reported individual poultry dealers criticising the government making a rash decision to cull the poultry. Some lamented that their business has already

dropped by up to 40 percent since sales had resumed on April 4 following the first ban. The Health Bureau said in a press statement this weekend that a 70-year old worker in the Patane Provisional Market had tested negative for the H7N9 bird flu, and that no-one from the market has so far presented symptoms. According to state-backed media Global Times, China has reported more than 120 cases of humans being infected with H7N9 this year, including at least 39 fatalities.

Food prices up 8 pct

rices for food products and groceries have inflated by up to 8 percent this year due to rising operating costs, says a supplier from a local business chamber. Ip Sio Man, president of the Macau Union of Suppliers Associations, said that the wholesale prices of such products this year have risen accompanied by increasing costs for logistics and storage. “There is no room for retailers

to adjust the price down in this situation,” said Mr Ip on Friday on the sidelines of the opening of a food products convention. He expects that the retailers have increased or will increase their prices for food products and groceries by between 5 percent and 8 percent this year, compared with last year. Official figures show that the consumer price index rose by 6 percent from the previous year in

the first two months of this year. Prices for food and non-alcoholic beverages, accounting for one-third of the index, particularly escalated faster at 6.74 percent in the JanuaryFebruary period. Mr Ip also said that the sales of food products and groceries have been stagnating since the Lunar New Year holidays at the end of January. But he believes that sales will start to pick up on the Labour Day holiday in

May because of the influx of mainland tourists. Suppliers and retailers have already increased their stocks of food products and groceries by 20-30 percent from the norm in preparation for the holiday, he noted. Macau received over 383,400 tourists for the holiday in the period April 29-May 1 last year, up 9.4 percent from a year earlier. T.L.

April 21, 2014

Macau Brought to you by

HOSPITALITY Steadying prices The Tourist Price Index is compiled quarterly based on a survey from a sample of visitors. It is sensitive to sample bias and relies on the truthfulness and quality of the information provided by those who are questioned. These limitations notwithstanding, if applied consistently it should provide a reasonable indication of the evolution of prices for the types of goods most commonly consumed by visitors. Some of those goods are mostly tourist-only expenses. But some other goods are also part of the local consumers’ consumption basket. Their prices are sensitive to changes to both internal and external demand. TPI has consistently moved upwards over the years. Since the beginning of 2010, the index has risen on average at almost 10 percent per year. The growth of prices was, however, bigger in 2010 and 2011. Annual growth, measured for the first quarter, dropped from a figure close to 15 percent in 2011 to less than 8 percent in the last two years.

The growth trend is obvious from figures plotted here but it is subject to neat seasonal variation. The first and fourth quarters display usually steep rises on prices. The growth in prices then slows down or even retreats in the second and third quarters. After the first quarter of 2012, the quarterly homologous growth rates dropped below 10 percent and have stayed most of the time within the 6 to 8 percent band. In fact, the last five readings of the indicator suggest a slow decrease in the overall rate of price growth and a stabilisation, with less seasonal variation, during the year. The net decrease in the middle of the year was less sharp than in previous years.

7.4%

TPI rises in the first quarter, on previous year

“French wine will continue to dominate” The head of the Wine Society says the French tipple dominates the wine market in Macau and in Mainland China, and that won’t change in the near future. Filipe Cunha Santos says the Chinese are enjoying more and more French wines, in particular Bordeaux, largely due to its reputation. In a far-ranging interview with Business Daily embracing a wide range of topics, Santos - also head of the Portuguese-Chinese Chamber of Commerce and Industry – said that their lobbying role within the government now mostly addresses the thorny issue of imported labour. Companies are increasingly concerned about the government’s policy regarding the importation of workers and if Portuguese companies once enjoyed historical advantages that is now a thing of the past. Luciana Leitão Photos by Manuel Cardoso

What was the outcome of the second edition of the Macau Wine and Dine Festival in Macau? For the last two or three years, Macau visitors have been increasing and there’s a lot of interest in food and wine in Macau, so we looked at the event in Hong Kong, which is basically a big event organised by the Hong Kong Trade Development Council - the Wine and Dine Festival. We looked at that model and tried to see if we could also do something here. Last year, we did the first one with the support of The Venetian and, of course, there were a lot of subsidies from the government. We had good support from Macau Economic Services, MGTO and IPIM, and last year we did it within the Carnival events. It was our first year, and it was fine. We made a few mistakes that should be corrected, so this year we had more experience. The timing was actually better this year - we were lucky with the weather and also we had more experience in terms of visitors and all the support we had. The only problem was that we were a bit too late agreeing the dates with The Venetian because we wanted to become an independent festival. Actually, we detached ourselves from the Carnival. We also enjoyed a lot of support from the distributors, in terms of wine and food. What we want to do for the third edition is to start agreeing the dates with The Venetian well in advance, so that we can talk with the big institutions like the French, Italians and Spanish wines, besides the Macau Portuguese, in order that they have a bit more support as we do in Hong Kong. This year was actually good because we doubled the number of visitors to more than 20,000. We also had an increase in exhibitors - we had 36 exhibitors. And

What we want to do for the third edition is to start agreeing the dates with The Venetian well in advance, so that we can talk with the big institutions like the French, Italians and Spanish wines, besides the Macau Portuguese, in order that they have a bit more support as we do in Hong Kong

Saturday was a fantastic day - all the exhibitors were very happy because they sold a lot of wine, there was a lot of interest in food and wine . . . and this year we achieved our objectives. Is the cooperation with The Venetian to be continued? Yes, although we need to agree the dates at an early stage, in order to have an even better promotion near the big institutions, not only the local wine distributors but larger country institutions and some of the Hong Kong distributors as well.

Is the fact that you’re now associated with a big gaming operator responsible for the increase in the number of visitors? Yes. The space is good - one of the best in Macau because there’re a lot of tourists and pedestrians passing by that area. It attracts a lot of attention. Do gaming operators now have a big role in promoting the wine business in Macau? Sure. Of course the casinos, as in Las Vegas, started by focusing on gaming but more and more they’re starting to have better entertainment elements like food and wine. More and more visitors from the Mainland are actually experts. If in the beginning they were not experts in wine, nowadays they are actually demanding better quality. Of course, as we all know, visitors from Mainland China love French wine. There is a role in promoting the wine so in the Macau Wine and Dine Festival we actually had the South African Consulate represented, and we want to have more of these government institutions. There’s always an interest by all these institutions to promote in Macau because they want to penetrate the Chinese market.

Bordeaux wines “increased almost 140 percent” Is the wine market growing as a whole in Macau or do you see only specific wines, like the French ones, growing? I was actually looking at a document yesterday regarding the price of 2009 and 2010 Bordeaux wines, the latest vintage. Prices increased almost 140 percent from 2009 to 2010 - almost entirely due to the Chinese market. It’s interesting because before Bordeaux wines were bought by

April 21, 2014

Macau Filipe Santos

More and more visitors from the Mainland w ware actually experts. If in the beginning they were not experts in wine, nowadays they are actually asking for better quality

projects. We also have individuals, like lawyers and architects. But the role of the Chamber is not to promote trade - it’s more to lobby the Macau government to support the interests of the associates.

the US and now the US is probably not buying anymore; only the Chinese are. What’s changed? The Chinese are increasingly interested in French wines and in particular they think it’s also a status, a good investment. In some interviews about this, Bordeaux producers said they were happy but they were also a bit nervous because you never know if there will be a directive from the government to cancel the importation of French wines. There’s a marketing job to be done and the Australians are doing a good job; Portugal is limited in resources so it will be difficult to grab the whole Chinese market but we can target niche markets like Shenzhen, Guangzhou and Shanghai. Due to Macau’s historical legacy, Portuguese wines should be on the front shelf in this penetration of the Chinese market. Is it just due to bad marketing strategy? The first reason arises from marketing resources, which are quite scarce. Producers from Portugal are looking more at China but their traditional markets are Brazil, Angola, the U.S., Northern Europe, so they invest less here and they trust their partner distributors here to do most of the job. Of course, the distributors here, except for some multinationals, don’t have resources to go into big markets like China, and only some Macanese trading companies import Portuguese wines. A few multinational companies focus only on wines and they’re doing well but they have a very small portfolio of Portuguese wines. Do gaming operators’ fine dining restaurants offer a good selection of wines from different countries other than France, like Portugal? There are exceptions. MGM are particularly Portuguese wine-

friendly and they have a very nice selection. The Four Seasons also has a very good selection of Portuguese wines. Sometimes, it’s also a question of management. If they have some sort of partnership with the Portuguese, through their management and F&B department, then they follow the trend, which is historical here. The VIP operators are all French. For example, big companies like Galaxy have a very limited portfolio of Portuguese wines, maybe because there’s not enough salesforce, not enough penetration marketing to promote Portuguese wines in the big casinos. Of course, there are a few casinos that have Portuguese wines, while others are more focused on market demand, which probably includes the Chilean, Australian, New Zealand whites, etc.

“No trend to buy Spanish, Italian or Australian wines” As the Chinese acquire more knowledge about wine, do you believe that French wines might lose some of their cachet? No, I don’t think so. What we’ll probably see is that because Bordeaux wines are so expensive the Chinese will probably start to buy Burgundy wines. But I haven’t spotted any trend to buy Spanish, Italian or even Australian wines, despite their marketing efforts. You’re also the head of the Portuguese-Chinese Chamber of Commerce and Industry. What do you believe is the role of this organisation in promoting trade? The role here is not so much on trade. We have Portuguese companies that have been doing business here for a long time companies with Portuguese roots but almost Macau companies. We have big companies like banks - BCM, BES, BCP - that are our members, and we have many engineering companies, not so much on the construction side as on engineering supervision

Have you been successful in this goal? Relatively. We can see there are now some difficulties importing qualified labour from Portugal. Some of the companies basically say they were working in big projects for the government but are still refused permission to import engineers and qualified staff to Macau. So there’s a contradiction here . . . Most of the associates complain about this and we’re trying to lobby government about this. Of course, we cannot say it’s only the Portuguese that are being discriminated against. The associates cannot understand the criteria of the Macau government. Do you see any will from the government to become more flexible in its importation of labour policy? We’ve discussed that and it’s a little bit difficult. The higher authorities say there’s no problem but when, in fact, it comes to approval then somehow there are rejections. We’re not sure if this is a policy at a high level or if it’s some criteria in middle government management. We don’t understand what the major problem is. Despite the labour problems common to Portuguese and foreign companies, do you see Portuguese companies increasing or decreasing their presence/strength in Macau? I can see that the Central Government is supporting Macau as a Portuguese-based platform for the Portuguese Speaking Countries and in theory that should help and we’re trying to do some connection with Portuguese companies. There are a lot of requests to do business here but it’s not easy to support them; they have to invest, it’s not our role to do the trading. It’s difficult to see if the Portuguese companies are doing more here. Of course, our economy is not doing well, so companies in Portugal would like to diversify and they’ll be more interested in the China and Macau market but again the resources are not very well supported by the Portuguese government. It’s going to be tough for them to come here. The Portuguese companies that are here already continue to grow.

Do you see potentially good areas for Portuguese business? Technology and engineering areas have a good scope here, provided there are good conditions from the Macau government. We have our associates in the engineering field that want to grow but the Macau government has to give them the right conditions in terms of labour. You’re also one of the founders of the Macau European Chamber of Commerce. Why the creation of this organism? The Portuguese Chamber is one of the oldest in Macau, and we’re always in touch with the other European chambers. The Portuguese Chamber is the only one that has in the past belonged to the Hong Kong European Chamber of Commerce. Also, there was a trend by Hong Kong companies to come to Macau because Macau is becoming an important trading city, although internally the status of the Hong Kong European Chamber of Commerce has been very difficult and there has been some debate about its expansion into Macau. There was pressure from the chambers here, smaller than the ones created in Hong Kong, to associate and have more visibility.

Labour and infrastructure, always the biggest problems European companies compete among themselves. Is it easy to gather them in one Chamber? That’s why the Hong Kong European Chamber of Commerce did not expand to Macau. There were contradictions - not for Portugal, but other countries were competing in several areas. Anyway, when we joined the Hong Kong European Chamber of Commerce there was not too much activity there, and then the Europeans launched EUBIP [European Union Business Information Programme], which was quite successful. The Hong Kong Chamber of Commerce assigned staff to start organising some fairs and exhibitions and they gathered strength and unity. Thus, most of the European countries are now gathered under the Hong Kong European Chamber of Commerce. Are the concerns of most European companies in Macau the same, like the import of labour? Yes, for most of them. In Hong Kong, they were very worried about education, it’s very expensive and troublesome. Here, it’s not education but labour and infrastructure, so I’d say 80 percent of concerns are the same. The role of this organism in Macau is to lobby on behalf of European companies in Macau? Yes. The Europeans have the big brands in retail and F&B, it’s a different aspect, but no doubt the Europeans can grow a bit more here. There’s a rebalancing between Macau and Europeans that could be done. We’re talking about infrastructure for transportation, environment and some other sectors where Macau could expand in the future. In which sectors are there more possibilities of cooperation between the EU and Macau? Not only in terms of the trading profession but academic training. There’s a lot of experience we have in Europe that could help a lot; in particular, the middle levels of the Macau government.

April 21, 2014

Macau CEM maintains power tariff subsidy for households, SMEs The city’s sole power supplier - Companhia de Electricidade de Macau SA - announced on Friday that starting from the second quarter of this year, the company has raised the power tariff by 0.01 patacas to 0.45 patacas per kWh, in accordance with the tariff adjustment clause of the concession contract. The adjustment will apply to industrial and commercial units that have heavier power consumption; household users and small and medium companies, which the firm classifies as “tariff group A”, however, will have their tariff unchanged at 0.36 patacas per kWh, with the firm subsidising 0.09 patacas per kWh for these users.

Sizing up the competition DFS exits duty free tender saying Macau’s airport scale of only five million passengers is too small to justify investment in half the shopping area

he DFS Group is quitting the race for Macau International Airport’s duty free concession, a move it rationalises by the lack of size of the infrastructure and its average of 5 million passengers per year plus imposed model by the government that seeks two operators to manage the 2,000 square metre-plus commercial space. According to the Moodie Report, the Hong-Kong based company thinks that the investment of some 4.5 million patacas for half the duty free area, in line with the government’s tender rules, is too expensive for an airport that receives only 5 million passengers annually. The dual model is also seen as an obstacle to DFS replicating the success of its two current stores in Macau, one in the Four Seasons, the other in City of Dreams.

DFS is owned by the world’s largest luxury conglomerate - Moët Hennessy Louis Vuitton – and operates more than three dozen stores all over the world, 18 of which service major airports like Hong Kong, New York,

Abu Dhabi, Singapore, Los Angeles, Hawaii and Vietnam. With the exclusive duty free concession given to King Power in 1995 set to expire on November 6 this year, Macau International Airport

(CAM) launched a public tender this month to choose two companies to manage its duty free area, currently with two 2,000 square metre areas supporting 8 shops and 8 kiosks. CAM intends to pick up two winners to provide world-class duty free services that will split shopping the area in half. As at now, no contenders have officially entered the race. King Power is a very likely contender but other major players could also join the tender. Names like China Duty Free Group, Lotte Duty Free, Sunrise Duty Free, The Shilla Duty Free, NuanceWatson and Sky Connection with others such as Dufry, Heinemann Asia, LS travel retail, Aer Rianta International and World Duty Free Group are all possible contenders, claims the Moodie Report. A.L.

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April 21, 2014

Greater China

Banks’ preferred shares rules detailed China’s bad loan ratio hit a two-year high at the end of 2013

hina published detailed rules on commercial bank issuance of preferred shares on Friday, paving the way for lenders to begin fundraising designed to enable them to withstand an expected rise in bad loans. Chinese banks are facing pressure to raise funds after the banking regulator began phasing in stricter capital adequacy requirements last year in line with global rules on bank capital known as Basel III. Preferred shares are a form of hybrid security with characteristics of debt and equity. They enjoy seniority over common stockholders in the event of bankruptcy, but in other respects they have limited impact on common shareholders. Such shares typically don’t trade on the open market, carry no voting rights, and do not dilute net profits attributable to shareholders. Stock market investors have been eagerly anticipating their introduction, hoping they will allow listed companies to raise necessary funds from stock markets with minimal dilution on equity valuations. The need for capital among banks is especially acute. Regulators are implementing Basel III aggressively in order to fortify banks against losses on bad loans as the economy slows. China’s bad loan ratio hit a two-year high at the end of 2013. Data released this week showed the economy growing at its slowest pace in 18 months. China’s largest banks must meet a Tier-1 capital adequacy ratio of 7.9 percent by end-2014 and 9.5 percent by end-2018. Preferred shares will count as additional Tier-1 capital. In order to protect the interests of ordinary investors, preferred shares

issued to the public must not contain provisions that allow preferred shares to be converted to common equity, under the guidelines published on the China Securities Regulatory Commission’s (CSRC) Twitter-like micro-blog. In private placements, however, preferred shares must include such provisions, which force conversion of preferred shares when the bank’s financial condition deteriorates, the guidelines said. Commercial banks applying to sell preferred shares must already have a core capital adequacy ratio above the minimum standard, according to the guidelines published jointly by the banking and stock regulators. China’s State Council, the country’s cabinet, gave the green light for issuance of preferred shares in China for the first time last November. The CSRC followed through by issuing rules for the pilot programme in March, paving the way for the long-awaited scheme to be launched. While the CSRC’s previous rules also applied to non-financial companies, the latest ones are specific to banks. Friday’s guidelines are issued to “help banks to expand their channels to supplement their capital,” a CSRC spokesman said in a separate statement also published on the regulator’s micro-blog. Preferred shares will also help relieve the pressure on the Chinese stock market from large-scale rights issues by allowing banks to issue shares that will not be publicly traded, the spokesman said. The guidelines also clarified procedures for banks to apply to issue preferred shares. Banks must first apply to the China Banking

Banks listing on Shanghai Stock Exchange will have to comply with the new rules

Regulatory Commission (CBRC), then the CSRC. Banks will also be subject to strict information disclosure requirements. They will have to disclose any changes in the scale of their preferred share issuance plans, as well as changes to the fixed dividend. In addition to preferred shares,

regulators are also encouraging banks to raise regulatory capital through the sale of special subordinate bonds -- known as “Basel bonds” -- that contain provisions allowing them to be written off or converted to common equity if a bank is in financial distress.

Government reduces public relations budget In 2012 CPC Central Committee issued the “eight-point rules” requiring government officials to strictly practice frugality

hina’s central government will spend less on overseas visits, vehicles and receptions, popularly known as the “three public consumptions,” this year amid the country’s frugality campaign, said the Ministry of Finance (MOF) on Friday. The central government will use 7.151 billion yuan (about US$1.15 billion) on such items in 2014, slightly down from last year’s actual spending of 7.154 billion yuan, the ministry said. Compared to that of last year, the budget went down by 818 million yuan, or 10.3 percent, said the MOF. According to the 2014 budget, the central government will spend 161 million yuan less on official receptions, and 126 million yuan less on purchase and maintenance of government vehicles. Spending on overseas visits will increase by 284 million yuan from what was

Government austerity measures target receptions and trips

actually spent on this area in 2013. This year’s budget includes 1.976 billion yuan for traveling overseas, 4.127 billion yuan for the purchase and maintenance

of government vehicles and 1.048 billion yuan for official receptions, according to the MOF. For 2013, the central government spent 815 million yuan, or 10.2 percent, less

than its original budget on the “three public consumptions.” A senior official of the MOF’s budget department attributed the cut-backs mainly to the implementation by central government

Reuters

departments of austerity rules put forward by the Central Committee of the Communist Party of China (CPC). In December 2012, the newly elected CPC Central Committee issued the “eightpoint rules,” requiring government officials to strictly practice frugality and clean up undesirable work styles, including formalism and extravagance. Taking overseas visits as an example, officials from government departments, institutions and state-owned enterprises who go away have to specify the number of trips, schedules and allowances in detail, according to new central government regulations. In 2013, all central government departments cut their “general spending” by 5 percent, according to the official. MOF will strictly control the scale of the “three public consumptions” budget to make sure the central government’s spending on the items keep declining, the official added. Most provincial-level governments have also slashed their budgets on official vehicles, banquets and overseas trips amid the frugality campaign. Xinhua

April 21, 2014

Greater China Household registrations to increase China will ease household registration limitations and try to realize 100 million urban household registers by 2020, Xu Shaoshi, inister in charge of the National Development and Reform Commission, has said. While addressing a forum on China’s urbanization held in Shanghai Saturday, Xu said that the reform on the country’s household registration system will eye more on former farmers in urban areas with better basic services. He said that the urban residents without household registers will be provided with improved social welfare and public services.

Motor sector on the start China has become the main market for most part of the world top

he 13th Beijing International Automobile Exhibition (AKA Auto China 2014) kicked off yesterday releasing many important news. German company Volkswagen AG forecast its sales in China will increase 10 percent or more in 2014, signalling they will outsell General Motors Co. in the world’s biggest auto market for a second-straight year. VW expects “double-digit” growth in China from last year’s record,

pushing deliveries to more than 3.5 million vehicles, Chief Executive Officer Martin Winterkorn said in a statement yesterday. Though he didn’t specifically refer to GM, which sold about 110,000 fewer vehicles than VW in China last year, the Detroit-based company said in February it would keep up with a market that’s poised to grow 8 percent to 10 percent. For China’s two-biggest foreign automakers, the competition is intensifying in the country and the

battle-lines are shifting toward smaller cities as the economy slows and antipollution measures spread. That’s prompting companies from VW to GM to customize more car features catered to Chinese tastes and speed up the introduction of new models into the country.

Fully local flavour Anticipating the Show, Geely Automobile Holdings Ltd., whose

Advertisement business grows The number of advertisement companies in China increased 17.9 percent in 2013 from the previous year to 445,000, according to the State Administration for Industry & Commerce (SAIC). Employees working in the advertisement sector rose 20.4 percent in 2013 year on year to 2.62 million, said Gan Lin, deputy head of the SAIC. China’s advertisement industry registered a relatively fast expansion in 2013, but the growth rates of advertisement companies and employees both decelerated from 2012, Gan said at an industry conference last week. Online advertisement companies’ business revenue soared 46.1 percent in 2013 year on year.

Corruption investigation reaches China Resources A Chinese executive under investigation for suspected corruption has been sacked as chairman of powerful stateowned conglomerate China Resources Holdings Co. Ltd., the official Xinhua news agency said on Saturday. Citing an official with the Organization Department of the ruling Communist Party’s Central Committee, Xinhua said Song Lin was fired because he was suspected of “serious discipline and law violations” - party shorthand for corruption. Song appears to be the latest official to fall in President Xi Jinping’s campaign against corruption.

Top restaurants revenue slows China’s 100 largest restaurant chains saw their business revenue and profitability growth decelerate in 2013, as the nation is clamping down on government-funded receptions and their operation costs are on the rise. Combined business revenue of China’s 100 largest restaurant chains grew by 5.7 percent in 2013 from the previous year to 191.1 billion yuan (US$31 billion). The growth rate was 10.8 percentage points lower than that in 2012, the China Cuisine Association (CCA) said on Saturday. Meanwhile, their average net profit margin narrowed to 4.1 percent last year, 3.62 percentage points lower than that in 2012.

Unicom Q1 profits up The net profits of China Unicom, the country’s second-largest telecom operator, rose 73.7 percent in the first quarter from a year of 2014 earlier to 1.1 billion yuan (US$180.33 million), new financial results have showed. Its business revenues rose 8.4 percent year on year to 78.82 billion yuan in the first quarter. Earnings per share stood at 0.0518 yuan, up 73.7 percent year on year. The major mobile businesses under China Unicom rose 15.6 percent year on year to 42 billion yuan in the first quarter.

Denza NEV. The NEV stands for New Energy Vehicle.

Ends first trials of tycoon-led The lawyer for Hanlong Group pleaded guilty of the company’s

he first trials of 36 members of an alleged mafia-style gang led by former mining tycoon Liu Han ended Saturday in central China’s Hubei Province. Liu Han, his brother Liu Wei and 34 other defendants were accused of crimes including organizing and leading a gang, intentional homicide and assault, illegal detention, blackmailing, illegal possession of guns and ammunition, and defrauding banks of loans, prosecutors said. The presiding judge announced the conclusion of the first trials of Liu Han and another nine defendants after they made final statements. Trials of the other 26 defendants ended on April 1, 2 and 14. Trials of the ring members began on March 31. According to the Xianning Intermediate People’s Court, the 36 defendants were prosecuted in seven cases to make clear facts and protect the legal interests of the accused as they allegedly committed more than 50 crimes in 20 years. Most of the defendants, including Liu Wei, confessed to and repented for their crimes and apologized to victims and their families, while Liu Han denied the charges, according to the court. The verdict will be announced at a date yet to be decided.

Mafia charges Liu Han was board chairman of the Hanlong Group, the biggest

Mianyang, one of the cities where the network achieved great influence

private enterprise in Sichuan. He owned tens of subsidiary companies involved in electricity, energy, finance, mining, real estate and securities. Prosecutors said the group led by Liu Han was massive in number of members with clear organizers, leaders and backbones. The group accumulate wealth by illegal means to support its activities and possessed

a lot of guns and ammunition for violent illegal confrontation. Through illegal activities and under the cover-up and connivance of officials at state organs, the ring illegally gained control over and had a huge influence on Mianyang, Guanghan and Shifang cities and various local industries, severely damaging economic and social order, prosecutors said.

April 21, 2014

Greater China

line

PBOC’s official request less intervention

brands parent company owns Swedish carmaker Volvo, announced on Friday a plan to phase out its three brands and consolidate them under the Geely name as part of a restructuring effort to shore up sales and cut costs. Geely, controlled by Li Shufu, the Chinese billionaire who acquired Volvo in 2010 through Geely’s parent company, currently sells cars in China under the Emgrand, Gleagle and Englon brands through three different sales channels. China is set to surpass the United States to become Volvo Car Group’s biggest market in 2014 with sales of at least 80,000 cars in the world’s largest auto market. Its car sales target for 2014 is around a third higher than the 61,146 cars sold in 2013, while sales in the United States in 2014 are expected to increase only in line with the broader market, it said in a statement yesterday. In the first quarter of this year, it sold 17,286 cars in China, up 25.4 percent from a year earlier.

Electrified Daimler Daimler said its Denza electric car will be eligible for local subsidies in China when it goes on sale there in September priced at 369,000 renminbi (US$60,000). Denza, a local Chinese brand jointly developed with Chinese partner BYD, forms part of the German auto maker’s push to

gang financial frauds

But Liu Han said he was “unaware (of the cases),” “irrelevant (to the activities” and “not organizing or leading criminal organizations.” Lawyers for another nine defendants argued on whether they committed crimes of participating the gang and whether leniency mitigation should be handed down. The lawyer for Hanlong Group pleaded guilty of the company’s

expand its footprint in the world’s largest car market, and to boost economies of scale for electric cars. Speaking at Auto China yesterday, Thomas Weber, Daimler’s head of research and development, said: “Denza is the first complete vehicle that Daimler has developed together with BYD outside of Germany.” The 5-seater car will be produced by Shenzen BYD Daimler New Technology Co. Ltd, and will have an operating range of 300 km, Daimler said. It said the average daily driving distance in China is 50 to 80 km a day, so customers will only have to charge the car twice a week.

Ford Everest The fastest-growing major foreign automaker in China, will unveil a prototype of a seven-seater off-road SUV that will preview a model sold for the first time with Jiangling Motors Co. The midsize Ford Everest concept, which is shown a the Beijing auto show and was created by the automaker’s design team in Australia, will be produced for the Chinese market by Ford’s JMC joint venture and distributed through JMC’s Ford-brand network of dealers, according to a statement by the Dearborn, Michigan-based automaker. Ford currently makes its SUVs in China with Chongqing Changan Automobile Co. Bloomberg News and Reuters

financial frauds. The court fully heard opinions of both sides.

Confessions Prosecutors provided lots of evidence during the trials, witness’s testimonies, written records, autopsy reports and bank accounts, accounting statements which were fully cross examined at the court. Prosecutors also showed evidence that they did not force Liu Wei to confess through torture. Most defendants confessed to their crimes and pleaded leniency. “For the crimes I have committed, I will accept any judgement according to the law to make the dead rest in peace,” said Liu Wei in his final statement. Sun Changbing bowed deeply to the court and said he willingly confessed and repented crimes. “I lost myself, made mistakes and now I have waken up to reality. I hope that while handing down punishment to me, the court could save, educate and help me and give a lenient penalty according to the law,” he said. The accused Min Jie submitted his written statement of repentance. Other defendants including Liu Xuejun, Liu Zhongwei and Lyu Bin also admitted crimes. About 6,200 persons including defendants’ families, legislators, political advisors, journalists and representatives of the public observed the trials that lasted for 17 days. Prior to the trials, prosecutors, defendants and defence lawyers exchanged opinions and reached consensus on some issues concerning the jurisdictions of the cases, withdrawal of parties of interests and the exclusion of illegally obtained evidence. Xinhua

The yuan strengthened 37 percent versus the dollar from July 2005 to the end of last year

hina should rein in yuan intervention and let the currency advance to curb growth in its US$3.95 trillion foreign-exchange reserves, according to a former central bank adviser and the nation’s biggest investment bank. Markets forces should determine the exchange rate so long as there are “controls on speculative, shortterm capital flows,” Yu Yongding, the former adviser, told Bloomberg News in an interview on the sidelines of a conference in Shanghai. “China can no longer bear the cost of forex reserves, so just let the yuan appreciate,” Liang Hong, vice chairman of the capital markets committee of China International Capital Corp., said at the conference. The comments echo the view of the U.S. Treasury Department, which two days ago released a semiannual report that called on China to intervene less and let markets play a greater role in determining the yuan’s value. Dollar purchases to weaken the yuan are contributing to the build-up of China’s foreign reserves, which surged by US$128.7 billion in the first quarter after a record annual jump of US$509.7 billion in 2013. The holdings lose

value in yuan terms as China’s currency advances. The yuan strengthened 37 percent versus the dollar from when a dollar peg was scrapped in July 2005 to the end of last year, the best performance among 24 emerging-market currencies tracked by Bloomberg. So far in 2014 it has weakened 2.7 percent, the biggest loss among Asia’s 11 most-used currencies. China is pushing forward on exchange-rate reforms in a “bold” fashion, while adopting a more gradual approach toward loosening controls over interest rates and capital markets, PBOC Deputy Governor Yi Gang said on April 10. Efforts to hold down the value of the yuan against the dollar give Chinese exporters an edge over U.S. competitors. “The yuan is under pressure to weaken amid concern about the Chinese growth,” said Tsutomu Soma, manager of the fixed- income business unit at Rakuten Securities Inc. in Tokyo. “Monetary authorities are also making sure that investors will see two-way moves in preparation for the internationalization of the currency.” Bloomberg News

Five-year plan drafting starts The global economic growth pattern, division of labour in different industries internationally, global investment and trade rules, and geopolitical environment are undergoing fundamental shifts

hina’s top economic planning body said that it has started to formulate the 13th Five-Year Plan covering 2016 to 2020, with deepening reforms and shifting the country’s economic growth model at the forefront. “China’s development has entered a new phase and is facing both unprecedented opportunities as well as risks and challenges,” said Xu Shaoshi, head of National Development and Reform Commission (NDRC), at a work conference, marking the start of the drafting of the plan. The global economic growth pattern, division of labour in different industries internationally, global investment and trade rules, and geopolitical environment are undergoing fundamental shifts, Xu said at the conference attended by officials from other departments of the State Council, China’s cabinet, and local provinces. In the 13th Five-Year Plan period, China must achieve the lofty goal of building a moderately prosperous society and substantial progress of deepening its reform in a comprehensive manner and shifting its economic development model, said Xu.

Tiananmen square in Beijing hosts National People’s Congress that will vote the five-year plan

Drafting a long-term development plan is an important tool to improve the government’s macro-management and governance capabilities, and the plan should advance with the times and reflect people’s wishes, Xu added. Xu did not specify when the draft of the plan will be completed. China’s five-year plan sets out a broad economic and social policy framework for the country, and needs to be approved by the National People’s Congress, China’s top legislature. The country’s 12th Five-Year Plan period covers 2011 to 2015. Xinhua

April 21, 2014

Asia Myanmar border trade to expand Myanmar’s border trade hit US$4.585 billion in the fiscal year 2013-14, up over US$830 million compared with that of the same period of 2012-13 fiscal year, local media reported Saturday. Of the total, the export stood 2.757 billion dollars while the import was 1.827 billion dollars, said the Daily Eleven. Myanmar’s border trade is conducted through 14 points with four neighbouring countries, namely China, Thailand, Bangladesh and India. Of them, China is leading in Myanmar’s border trade. In a bid to promote border trade with neighbouring countries, more border trade points will be opened to China and Thailand.

Russia writes off N.Korea debt Russia’s parliament has agreed to write off almost US$10 billion of North Korea’s Soviet-era debt, in a deal expected to facilitate the building of a gas pipeline to South Korea across the reclusive state. Russia has written off debts to a number of impoverished Soviet-era allies, including Cuba. North Korea’s struggling communist economy is just 2 percent of the size of neighbouring South Korea’s. The State Duma lower house on Friday ratified a 2012 agreement to write off the bulk of North Korea’s debt. It said the total debt stood at US$10.96 billion as of September 17, 2012.

The difficult Abe-Obama The White House does not have authority to fast track agreements

ext week’s meeting between U.S. President Barack Obama and Japanese Prime Minister Shinzo Abe is a good opportunity to give impetus to Pacific trade negotiations but will not seal a deal, a senior U.S. administration official said on Friday. Talks between the United States and Japan seen as vital to a broader regional trade pact had narrowed to a few critical areas and will resume again on Monday, officials of both countries said, as negotiators hustle to prepare for Thursday’s summit. Breaking a U.S.-Japan deadlock over access to Japan’s farm and auto markets is seen as key to finalising the Trans-Pacific Partnership (TPP), a 12-nation trade bloc that would stretch from Asia to Latin America. The TPP is central to Obama’s policy of expanding America’s presence in Asia and Abe, for his part, has touted the TPP as a main element of his strategy to reform the world’s third-largest economy and generate sustainable growth. When the leaders meet, they are likely to review progress so far on the trade talks and give some impetus to negotiators to move on to the next stage, the senior official said. But they would not get into the details of tariffs on sensitive products such as beef, pork, rice and sugar, and

Japanese Economy Minister Akira Amari sees negotiation gap getting smaller

would not conclude an agreement, he said, adding the talks were part of an on-going effort to agree an ambitious, comprehensive deal. U.S. Trade Representative Michael Froman and Japanese Economy Minister Akira Amari wound up a 20-hour negotiating session earlier on Friday with major gaps still on display. “We still have big differences,” Amari told reporters in Washington before he left for Tokyo, according to Kyodo news agency, although he

said “the gaps are getting smaller.” The USTR said in a statement: “We continue to make progress, and we are now faced with a reasonable number of outstanding issues. These issues are important to both sides and considerable differences remain.”

Sticking points Sticking points from the U.S. perspective revolve in equal measure around access to Japan’s markets for agricultural products as well as

Cambodian PM on commerce tour Prime Minister Hun Sen left Sunday morning on a five-day visit to Azerbaijan and Belarus in order to promote bilateral ties and cooperation between Cambodia and the two countries, a senior official said. “It is the first time that the prime minister makes visits to former Soviet Union countries,” Sry Thamarong, minister attached to Prime Minister Hun Sen, told reporters at Phnom Penh International Airport ahead of the premier’s departure. “The visits will enhance bilateral relations and cooperation between Cambodia and the two countries.”

Philippines’ oldest artworks in danger On a small rock wall a short drive from the Philippine capital, enigmatic carvings that are believed to date back 5,000 years are in danger of disappearing before their mysteries can be solved. The 127 engravings of people, animals and geometric shapes are the Southeast Asian nation’s oldest known artworks, but encroaching urbanisation, vandals and the ravages of nature are growing threats. The artworks have been declared a national treasure, regarded as the best proof that relatively sophisticated societies existed in the Philippines in the Stone Age.

Sharp prepares bond market return The firm is considering various options to increase capital

he company’s bond risk, the highest among Japanese credit-default swaps, is falling as the supplier of displays for iPhones takes steps that may allow a return to the bond market for the first time since 2009. The company may raise about 200 billion yen (US$2 billion) through a public share sale in the year to March 2015, doubling its capital-to-asset ratio to as much as 20 percent, the Asahi newspaper reported on April 13. The cost to insure Sharp’s debt against non-payment dropped 45 basis points to 330 after the report, matching the lowest level since April 2012, CMA prices show. An index for Japanese companies’ bond risk was unchanged at 87 on the day and a gauge the U.S. fell 1 to 68. Sharp is forecasting a return to annual profit in the year ended March 31 after it cut costs, focused on panels for smartphones and benefited from demand for solar panels. The company still has a way to go to meet the 30 percent capital adequacy

Inc. in Tokyo. “This fiscal year Sharp gets another chance to show the world it is a viable company.”

New plan

This fiscal year Sharp gets another chance to show the world it is a viable company Toshihiro Uomoto, chief credit analyst, Nomura Holdings

ratio needed for a ratings upgrade and to match the levels of Panasonic Corp. and Sony Corp., Mitsubishi UFJ Morgan Stanley Securities Co. said. “Getting past the 20 percent mark would bring a rating upgrade in sight,” said Toshihiro Uomoto, chief credit analyst at Nomura Holdings

The maker of Aquos TVs plans to unveil a new restructuring plan to help convince potential investors among financial institutions, Asahi said in the report. The strategy will focus on cutting production costs at its Kameyama flat-panel factory in central Japan to expand into the market for lower-priced smartphones, it said. Sharp said in a statement to the Tokyo Stock Exchange on April 13 that it’s considering various options to increase capital and hasn’t decided on a method. Spokesman Yoshifumi Seki declined to comment on credit-default swaps when reached by telephone. The Osaka-based company in February forecast net income will reach 5 billion yen in the 12 months to March 31. Bloomberg News

editorial council Paulo A. Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Michael Armstrong, Pierre-François Metayer, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee International editor Óscar Guijarro Brands & Trends Raquel Dias Creative Director José Manuel Cardoso WEB & IT Janne Louhikari interns Cynthia Wong, Yvonne Wong Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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April 21, 2014

Asia

agreement

FPT plans takeovers The company wants to increase operations in Japan, the U.S. and Europe to tap demand outside Vietnam

through Congress

KEY POINTS Japan, U.S. say big differences remain on key issues Negotiators meet again on Monday before U.S.-Japan summit U.S. willing to let Japan keep some farm tariffs-media

peeling away at layers of Japanese regulations that serve to block automotive imports, the official told reporters, speaking on condition of anonymity. Discussions will continue in the days and weeks ahead, but there is no particular deadline for concluding the talks, the official added. Momentum behind the talks need not stall because negotiators have not struck a deal ahead of Obama’s visit to Japan, the official said. Some experts say U.S. negotiators

are at a disadvantage because the White House does not have authority to fast track agreements through Congress, given opposition by senior Democrats to a bill laying the groundwork for a yes-or-no vote by lawmakers ahead of elections in November. TPP negotiators are due to reconvene in Vietnam in mid-May and trade ministers will meet at an Asia-Pacific Economic Cooperation event in China that same month. The senior U.S. official said that even when a final agreement is reached, it would still take several months of work to translate that into a legal document that could be submitted to lawmakers for approval. USTR confirmed bilateral talks would resume between U.S. Acting Deputy United States Trade Representative Wendy Cutler and Japanese Deputy Chief Negotiator Hiroshi Oe in Tokyo on Monday. Froman will travel to Tokyo with Obama later in the week. The United States wants Japan to open its rice, beef and pork, dairy, and sugar markets - politically powerful sectors that Abe has vowed to defend. Japan wants a timetable on U.S. promises to drop tariffs of 2.5 percent on imports of passenger cars and 25 percent on light trucks. Reuters

ietnam’s largest publicly traded telecommunications and software company, aims to complete two takeovers this year as it seeks to boost international sales, Chairman Truong Gia Binh said. FPT expects the deals to be completed in the second half “if everything goes smoothly,” Binh said in an interview in Hanoi, where the company is based. One target is in Singapore and the second will be in Europe, said Binh, declining to be more specific. “I would just say the value is not small,” he said. FPT, whose clients include Microsoft Corp. and Panasonic Corp., is among Vietnamese companies that want to grow abroad as opportunities to boost domestic sales become more limited. Vietnam Dairy Products Joint-Stock Co., or Vinamilk, the nation’s largest dairy producer, plans a global expansion to more than double revenue to US$3 billion by 2017. “We have to boost M&A activity for our global strategy,” Binh said. The company has almost 4 trillion dong (US$189.6 million) of surplus cash and plans to spend about US$50 million a year for acquisitions in the next three years, Binh said. FPT Chief Executive Officer Bui

Quang Ngoc said in February that the company will spend as much as US$20 million on the Singapore acquisition. FPT probably exceeded firstquarter earnings estimates, Binh also said, declining to be more specific. The company will release results in the coming week, he said. The company’s shares have climbed 48 percent this year, outperforming the 14 percent gain in the benchmark VN Index. FPT, which had sales of 28.6 trillion dong (US$1.4 billion) in 2013, wants to more than triple revenue from overseas to US$400 million by the end of 2016, Ngoc said when he became CEO in July 2013. Ngoc and Binh are the co-founders of 25-year-old FPT, which develops software and provides technology services for its clients. Binh was born in 1956. The company wants to increase operations in Japan, the U.S. and Europe to tap demand outside Vietnam, where growth is constrained, Ngoc said in February. FPT also plans to expand in developing countries such as Myanmar, Cambodia and the Philippines, he said. Bloomberg News

Rupee raises Reliance The company operates two refineries with a combined capacity of 1.24 million barrels a day

eliance Industries Ltd., operator of the world’s biggest oil refinery complex, reported its highest quarterly profit in more than two years as a decline in the value of the rupee boosted export earnings. Net income in the quarter to March 31 for the company controlled by billionaire Mukesh Ambani, India’s richest, matched analyst estimates as refinery margins recovered from the previous three months, and it starts projects that will add to revenue. Higher profit is making analysts the most bullish on the company’s stock in more than two years, while its shares have increased to the highest since May 2011. Profit increased to 56.3 billion rupees (US$933 million), or 17.4 rupees a share, in the quarter from 55.9 billion rupees, or 17.3 rupees, a year earlier, the Mumbai-based company said in a stock exchange filing. Sales rose 13 percent to 951.9 billion rupees, missing the median estimate of 1 trillion rupees of 24 analysts surveyed by Bloomberg. “Sales during the quarter could have been better but for the declining gas production and lower refinery production due to a shutdown in February,” said R.K. Gupta,

managing director of New Delhi-based Taurus Asset Management Co. The company’s stock, which has gained 20 percent since Feb. 28, compared with a 15 percent increase in the 10-member S&P BSE Oil Index, rose 1.9 percent to 959.10 rupees on April 17.

Rupee weakness The company operates two refineries with a combined capacity of 1.24 million barrels a day located next to each other at Jamnagar in the western state of Gujarat. They have the ability to process cheaper, lower grades of crude into high- value products for use in Europe and the U.S. A majority of the fuels and chemicals Reliance makes are exported and paid for in dollars. A lower value of the rupee against the greenback increases export earnings when converted to the local currency. The rupee averaged 61.80 per dollar in the quarter ended March 31, compared with 54.20 a year earlier. The currency has gained 2.5 percent this year, touching an eight-month high on March 28. Reliance earned US$9.3 for every barrel of crude it turned to fuels in the quarter, compared with US$10.1 a

Two of the richest Indian businessmen accompany Secretary Clinton. Left Ratan Tata, chairman of the Tata Group and right Mukesh Ambani, chairman and Managing Director of Reliance Industries.

barrel a year earlier and US$7.60 a barrel in the preceding three months, the company said.

Net debt The company had 881.9 billion rupees of cash and equivalents as of March 31, deposited in banks, mutual funds and government securities, versus debt of 899.7 billion rupees. Reliance is building a plant that will turn petroleum coke, a by-product from the refinery, to gas that will be

used to produce power for its factories. Once operational, this will widen refining margin by as much as US$2 a barrel. Out of the planned capital expenditure of US$12 billion to US$13 billion for the petrochemical and refinery businesses, the company has already spent 30 percent and the rest will be deployed over the next 18 to 24 months, Alok Agarwal, chief financial officer, told reporters in Mumbai. The price difference between light grades of crude

and heavier varieties widened to an average US$5.10 per barrel in the quarter from US$4.50 a year earlier, Nisha Sharma, a Mumbai-based analyst with KR Choksey Shares & Securities Ltd., wrote in an April 9 report. A bigger gap benefits Reliance because it can process heavier grades of crude. Brent crude, a lighter variety, averaged US$107.87 a barrel in the quarter in London trading, compared with US$112.64 a barrel a year earlier. Bloomberg News

April 21, 2014

International

South Africa feels bite of big retailers

Vivendi’s SFR to partner with Vodafone

The survival of spazas is critical to the fabric of the townships

Spaza shop in Cape Town

n this corner of South Africa’s black township of Soweto, the biggest building used to be the Catholic church. Now it’s been overshadowed by a shopping centre and business has only gotten worse for Grace, a 68-year-old shop owner. Like many proprietors of “spaza” shops - the informal stores that dot township corners - Grace barely manages to keep afloat as more of her neighbours head to the mall. “Once people get paid, they buy their groceries at the malls,” she said, sitting among dusty shelves of teabags, small packets of biscuits, loose cigarettes and butter. “They used to buy their groceries from us. Now they only come for daily items,” she said, declining to give her last name. Grace has been running the shop with her husband since 1993, the year before South Africa’s first all-race elections. They used to earn around 1,500 rand (US$140) a day, but are down to a third of that now. During apartheid, blacks were crammed together in squalid townships miles away from cities.

Some residents began to sell staples such as maize meal and cooking oil out of their own homes. The informal stores became known as tuck shops or “spazas,” a slang word that connotes “just getting by”. While recent data on the informal economy is hard to come by, a 2002 study by the University of South Africa’s Bureau of Market Research (BMR) estimated that spaza shops brought in around US$705 million a year, employing up to 290,000 people. Those numbers will have come under pressure over the last decade as real estate developers and big grocers such as Shoprite and Pick N Pay push into black areas, targeting rising consumer spending.

Getting the cake “The emerging consumer market has been very, very good for construction of retail outlets in non-traditional locations,” said Mike Upton, chief executive of South African building company Group Five.

Shares of Shoprite, Africa’s top retailer, have more than trebled over the last five years. The Cape Townbased company’s no-frills Usave discount outlets pose a major threat to spaza shops. The warehouse-like stores appear tailor-made for low-income customers: most of the laundry soap is for hand washing, not machines. Some dispense with large parking areas as customers come on foot. The only milk available is full cream -no skim, organic or soywhile bags of frozen “walkie talkies” -chicken heads and feet- are plentiful and cost just 10 rand. While recent data is not available, Rose Nkosi, the head of the South African Spaza and Tuckshop Association, reckons that the sprawling black township alone may have lost around 30 percent of its spaza shops since 2005. That’s bad news for the elderly or those who live far from a shopping centre, Nkosi said. The big retailers are able to use economies of scale to undercut spazas, which usually buy in small volumes and from wholesalers, driving up costs. Nkosi has teamed up Songi Pama, an entrepreneur and consultant, to bring spaza shop owners together to buy direct from suppliers such as South Africa’s Tiger Brands and the local units of Unilever and Nestle. The survival of spazas is critical to the fabric of the townships because so many of the owners are women, Pama said. Too few owners are real businesspeople, said Noel Ndhlovu, who publishes industry newsletter Spaza News. Most are just looking to make enough get by, he said. In one workshop he ran, Ndhlovu said it took him several sessions to get some of the owners to understand how to work out their gross and net profit. Reuters

U.S. to probe Mexican sugar imports The tightly controlled U.S. sugar industry has strict caps on imports except for those from Mexico

he U.S. government launched on Friday a probe into allegations that cheap imports of Mexican sugar are causing nearly US$1 billion in damages in the local market, even as the Mexican representatives made a formal rebuttal of the accusations. The news came as the U.S. trade regulators held their first preliminary conference on charges by U.S. sugar producers that Mexican mills have “dumped” subsidized sugar across the border in a complaint that could lead to duties on Mexican imports and spark retaliation against U.S. exports. The Commerce Department said it will investigate a complaint filed last month that Mexican suppliers have been dumping the sugar -selling it below cost- or are benefiting from government subsidies. In a separate public meeting

held at the U.S. International Trade Commission, Mexican producers made their first formal response to the surprise charges, saying sugar imports are no threat to the profitable, “well-heeled” and protected U.S. sugar industry. Industry and government representatives said the country should not be blamed for a collapse in prices. “Prices have simply returned to historical levels. This has happened the world over, a reality that sugar producers have to grapple with,” said Juan Cortina, president of the National Mexican Sugar Chamber. Indeed, Mexico had deliberately diverted sugar exports away from the United States to relieve over-supply, in coordination with U.S. authorities, he said. Lawyer Irwin Altschuler, from

Greenberg Traurig, said the U.S. sugar industry had just had its most profitable three years ever and a price floor backed by cheap loans and limits on supply gave it the “Rolls Royce of safety nets.” “You can’t blame a well-heeled industry, used to getting its way, for pushing yet again. But the Commission shouldn’t indulge them,” Altschuler, representing opponents to the charge, told the ITC. The tightly controlled U.S. sugar industry has strict caps on imports -except for those from Mexico, which has unlimited, duty-free access under the North American Free Trade Agreement. The ITC is due to vote on May 9 on whether Mexican imports harm, or threaten to harm, the U.S. sugar industry. Reuters

The head of Vivendi’s French telecom unit SFR, won by cable company Numericable in a fierce bidding war, said in comments published on Saturday it planned to partner with Britain’s Vodafone in a network-sharing project. “In coming days, we will unveil an extended partnership with Vodafone ... (in which) our professional clients will have access to the Vodafone network everywhere in the world,” SFR Chief Executive Jean-Yves Charlier told Le Figaro daily. Earlier this month, Vivendi said it had accepted Numericable’s bid for SFR.

Comcast in talks over divestitures Comcast Corp is in talks with Charter Communications over selling or spinning off roughly 3 million subscribers worth approximately US$18 billion to US$20 billion as part of the divestitures related to its US$45.3 billion takeover of Time Warner Cable, according to a source familiar with the matter. The talks centre around either a straight sale of 3 million or so subscribers, or the potential creation of a spinoff in which Charter would buy a substantial minority stake, the source added.

Brazilian tycoon investigated Brazil’s federal police have opened an investigation into former billionaire Eike Batista for financial crimes, including insider trading, manipulation of markets and money laundering, Brazilian media reported on Friday. If the police probe leads to criminal charges against Batista, it would be yet another major blow for a businessman once hailed as Brazil’s model entrepreneur and symbol of its economic success. Batista’s EBX oil, mining and logistics empire, which two years ago was valued at US$60 billion, collapsed last year in a mountain of debt and massive filings for bankruptcy protection.

Portugal gets IMF tranche The International Monetary Fund (IMF) had completed Portugal’s 11th evaluation and would release a new tranche of 851 million euros (US$1.18 billion) in loan funds, local newspaper Daily News reported on Friday. The IMF board met on Thursday to review whether Portugal was on track in implementing its adjustment program and approved austerity measures to cut its deficit to 2.5 percent of GDP in 2015, according to the report.

Rajaratnam’s brother loses bid to dismiss Rengan Rajaratnam, the younger brother of imprisoned hedge fund manager Raj Rajaratnam, on Friday lost a bid to dismiss some of the insider trading charges levelled against him last year. U.S. District Judge Naomi Reice Buchwald in Manhattan ruled that the indictment adequately alleged the essential elements of the crimes charged. Buchwald agreed that four securities fraud counts were “internally inconsistent” with a conspiracy charge contained in the indictment. But she withheld ruling on whether to dismiss them in order to allow the government to decide whether to proceed on those charges.

April 21, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THE AGE International and Australian investors are circling the A$650 million sale of Ingham Enterprises’ property portfolio after the first round of bids closed during the week. Private equity firm TPG put the two portfolios on the market last month, in what was described as a ‘’once in a generation’’ sale and leaseback. The assets comprise 53 industrial and agricultural properties across Australia and New Zealand, with the cash to be reinvested in the business, one of the country’s largest poultry companies.

The High-Tech, High-Touch Economy Adair Turner Former Chairman of the United Kingdom’s Financial Services Authority. Member of the UK’s Financial Policy Committee and the House of Lords.

THE PHNOM PENH POST The Ministry of Economy and Finance (MoEF) will scrap customs fees for rice exporters from May 1 in an effort to reduce production costs and boost Cambodia’s competitiveness in the sector, according to a letter obtained by the Post. “[The ministry] has agreed to eliminate charges relating to customs processing fees for exporters of rice in order to boost the rice export industry,” said the letter, signed by Department of Customs and Excise officials. The letter goes on to say that the fee changes will become effective on May 1, in less than two weeks time.

JAKARTA GLOBE Taipei-based ASUSTeK Computer, one of the biggest producers of notebooks and motherboards, has released its Intel-based ZenFone smartphones to Indonesia, betting that consumers will seek alternatives to popular brands such as Samsung and Sony. “We are pleased to bring this device into Southeast Asia. We believe the best technology is the one used by the masses. When we began our journey ‘in search of incredible’ [products] we came up with this handset with the hopes it can be enjoyed by many,” company chairman Jonney Shih said in a press gathering.

THE NEW ZEALAND HERALD Auckland’s sizzling property market could bring New Zealand’s economy crashing down, a global economic expert warns. Jesse Colombo, one of the few experts to warn of the Global Financial Crisis last decade, warns New Zealand’s economic bubble is about to burst in an article on the respected Forbes website. He says our so-called “rock star” economy is actually in dire trouble. He says New Zealand residential property and the Kiwi dollar are significantly over-valued — and will inevitably implode. Colombo says interest rates had been at all-time lows for almost five years, and property prices had doubled since 2004.

Nursing and other professions that cannot be automated hold great promise

ONDON – A recent report revealed that the five richest families in Britain are worth more than the country’s poorest 20% combined. Some of the wealth comes from new business ventures; but two of the five are a duke and an earl whose ancestors owned the fields across which London expanded in the nineteenth century. Urban land wealth is not just a London phenomenon. As Thomas Piketty’s recent book Capital in the Twenty-First Century shows, accumulated wealth has grown rapidly relative to income across the advanced economies over the last 40 years. In many countries, the majority of that wealth – and the lion’s share of the increase – is accounted for by housing and commercial real estate, and most of that wealth resides not in the value of the buildings, but in the value of the urban land on which it sits. That might seem odd. Though we live in the hi-tech virtual world of the Internet, the value of the most physical thing – land – is rising relentlessly. But there is no contradiction: The price

of land is rising because of rapid technological progress. In an age of information and communication technology (ICT), it is inevitable that we value what an ICT-intensive economy cannot create. ICT has already delivered remarkable new products and services; but, as MIT’s Erik Brynjolfsson and Andrew McAfee argue persuasively in their recent book The Second Machine Age, the really dramatic changes are yet to come, with robots and software bound to automate out of existence a huge number of jobs. One consequence is the striking phenomenon of huge wealth creation with very little labour input. Facebook has an equity valuation of US$170 billion but employs only around 6,000 people. The investment that went into building the software that runs it entailed no more than around 5,000 software engineer man-years. This remarkable technology has helped to deliver increasing average incomes and will continue to do so. But the distribution of that bounty has been very unequal. The lion’s share of the growth has gone to the top half, the top

10%, or even the top 1% of the population. As the better off become richer, however, much of their rising income will not be spent on ICT-intensive goods and services. There is a limit to how many iPads and smart phones one can need, and their price continues to plummet. Instead, an increasing share of consumer expenditure is devoted to buying goods and services that are rich in fashion, design, and subjective brand values, and to competing for ownership of location-specific real estate. But if the land on which the desired houses and apartments sit is in limited supply, the inevitable consequence is raising prices. Urban land is therefore rising in value – in London, New York, Shanghai, and many other cities – partly because of consumer demand. But its rising value also makes it an attractive asset class for investors, because further price increases are expected. Moreover, returns on real estate have been swollen by the dramatic fall in interest rates over the last 25 years, a decline that was far advanced even before the 2008 financial crisis.

The cause of those low interest rates is debated; but one probable factor is the reduced cost of business investment in hardware and software-based “machines.” If you can build a US$170 billion company with just 5,000 software engineer man-years, you don’t need to borrow much money. The fact that technology is so powerful not only makes physical land more valuable; it also means that future employment growth will be concentrated among the jobs that cannot be automated, particularly in services, which have to be delivered physically. The US Bureau of Labor Statistics estimates that among the most rapidly growing occupational categories over the next ten years will be “healthcare support occupations” (nursing aides, orderlies, and attendants) and “food preparation and serving workers” – that is, overwhelmingly low-wage jobs. In short, ICT creates an economy that is both “hitech” and “hi-touch” – a world of robots and apps, but also of fashion, design, land, and face-to-face services. This economy is the result of our remarkable ability to solve the problem of production and automate away the need for continual labour. But it is an economy that is likely to suffer two adverse side effects. First, it may be inherently unstable, because the more that wealth resides in real estate, the more the financial system will provide leverage to support realestate speculation, which has been at the heart of all of the world’s worst financial crises. Major changes in financial and monetary policy, going far beyond those introduced in response to the 2008 crisis, are required to contain this danger. Second, unless we deliberately design policies that encourage and sustain inclusive growth, a highly unequal society is virtually inevitable, with rising land values and wealth magnifying the effects of the unequal income distribution that ICT produces directly. Indeed, the modern economy may resemble that of the eighteenth century, when the land owned by the Duke of Westminster and the Earl of Cadogan was still just fields to the west of London, more than the middle-class societies in which most developed countries’ citizens’ grew up. © Project Syndicate 2014

April 21, 2014

Closing China will be Volvo’s biggest market

Chinese Red Flag Limousine

China is set to surpass the United States to become Volvo Car Group’s biggest market in 2014 with sales of at least 80,000 cars in the world’s largest auto market. Its car sales target for 2014 is around a third higher than the 61,146 cars sold in 2013, while sales in the United States in 2014 are expected to increase only in line with the broader market, it said in a statement yesterday.

Forget Ferraris. Someone paid at least 5 million yuan (US$803,300) to buy a Chinese car. China FAW Group Corp. began taking orders for the tailor- made Red Flag L5, the nation’s most expensive vehicle, with the first one sold to a customer in Nanjing, the automaker said in a statement yesterday at the Beijing auto show. FAW produces the Red Flag luxury vehicles used by government officials and also makes Volkswagen AG’s Audi cars in China as its local manufacturing partner.

When hope fades away Divers find bodies as probe focuses on Korean ferry’s sharp turn Heesu Lee, Sam Kim and Jungah Lee

ivers retrieved more bodies from a South Korean ferryboat that sank earlier this week, as the team investigating the incident focused on why the vessel made a sharp turn prior to listing. The ship’s female third mate, surnamed Park, was arrested on Saturday along with its captain and a helmsman as the search for the hundreds of missing, mostly high school students, yielded no survivors off the nation’s southwestern coast. Park hasn’t given a clear answer as to why the ship veered so sharply, prosecutor Yang Joong Jin told reporters in Mokpo yesterday. Park was attempting to steer the ship through a waterway known for rough currents called Maeng Gol Soo Ro for the first time, investigators have said. As divers continue their search for survivors, medical staff on Jindo island, where parents of missing passengers assembled, were collecting DNA samples. More guide lines into the ferry are aiding the search, coast

guard official Ko Myung Suk said at a televised briefing. Rescuers have ruled out cutting parts of the ship to gain access because it would be too dangerous for possible survivors trapped inside, maritime ministry official Park Seung Gee said. Of the 476 people on board, 56 are known to have died and 174 were rescued,

leaving 246 missing. The largest group of passengers were the 339 Danwon High School students and their teachers on an excursion to Jeju island. Captain Lee Joon Seok, 69, wasn’t on the bridge at the time of the incident, and faces five charges including negligence of duty and accidental homicide. Park

and Cho, a helmsman who was on the bridge with Park, face three charges, including accidental homicide and violation of maritime laws.

‘More carefully’ The captain and two crew members “didn’t do what they were supposed to do,” a second prosecutor, Lee

Bong Chang, said. “They should have also sailed more carefully without making sharp turns.” Park has fainted during questioning, while the investigation is being extended to 10 other crew members on board, some of whom have reported not receiving safety training, prosecutor Yang said yesterday. Investigators have so far focused on the crew members’ actions up to the incident, with less attention so far given to what they did afterward, Yang said. The joint coast guard and prosecution team is also analyzing phone messages sent by people on the vessel and will request access from Kakao Corp. to messages sent on its KakaoTalk application, he said. The coast guard raided the office of the ferry’s owner Chonghaejin Marine Co. in Incheon on April 17, said Yang. No company officials have been summoned for questioning yet, he said. The company didn’t answer two phone calls seeking comment. Bloomberg

The value of China’s secondhand market

Submarine has covered Ukraine tensions half of search area continue to grow

Strong demand for new automobiles in China has laid the foundations for the next leg of business for carmakers BMW, Audi and Mercedes-Benz: the second-hand premium car market. China’s auto market is the world’s biggest and is set to grow between 8 percent and 10 percent this year, fuelled by increasingly affluent buyers, who use them for the daily commute, with some opting for luxury brands as a status symbol. The amount of business clinched by some Chinese dealers points to substantial future growth, auto executives said. Audi, which expects China to contribute 40 percent of its sales by 2020, plans to train 40,000 to 50,000 new sales staff a year by 2017 to meet growing demand for brand-new and used cars, he said. Rival German carmaker BMW AG plans to train 25,000 people this year to work on dealerships in China, partly due to the rising potential of used cars.

An unmanned submarine hunting for a missing Malaysian aircraft has covered half of a targeted underwater search area as it starts its eighth mission in the Indian Ocean yesterday. The Bluefin-21 is diving within a 10-kilometer (6-mile) radius of an area where signals were detected on April 8 that may have been emitted by one of Flight 370’s black boxes, said the Joint Agency Coordination Centre, the Australian agency set up to oversee the operation from Perth. The Australian Maritime Safety Authority has also planned a visual search of about 48,507 square kilometers, it said on its website. At 44 days, the hunt for the Malaysian Airline System Bhd. jet, which disappeared March 8 with 239 people on board, is the longest for a missing passenger plane in modern aviation history. The Bluefin-21’s side-scan sonar is pivotal to the search for wreckage because the batteries in the aircraft’s black boxes have probably expired.

Pro-Russian protesters in eastern Ukraine defied pleas to disarm as officials in Kiev pledged to honour an accord reached in Geneva. Prime Minister Arseniy Yatsenyuk’s government suspended anti-terrorist operations in eastern Ukraine and said it was ready to pursue constitutional revisions. A protest leader in Donetsk refused to disarm and vacate seized property until Yatsenyuk’s administration steps down. Russia’s foreign ministry blamed the Ukrainian nationalist group Pravyi Sektor for an overnight clash in the eastern region of Slovyansk that left one person dead -- a charge that Pravyi Sektor quickly denied in a statement. Viktoria Syumar, first deputy head of the National Security and Defense Council in Kiev, said on her Facebook account Russia’s accusation and statements show it is preparing grounds to invade Ukraine. The discord adds to skepticism about whether Ukraine, the U.S., and the European Union will be able to use the Geneva accord to hold Vladimir Putin accountable for easing tensions.

Reuters

Bloomberg