Number 569 Thursday June 26, 2014
Publisher: Paulo A. Azevedo
Closing editor: Alex Lee
MOP 6.00
All for sale
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Year III
he government says it’s preparing a public tender for all of the city’s bus routes. No decision when just yet. But a date in 2017 is the likeliest, when the New Era concession ends. As at June, Reolian attracted the highest number of complaints, at 235. The travelling public also berated the other operators
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Patriotic plane plan The growing economy has produced a boom in air traffic. Sector growth forecasts are massive. So much so that China’s president has urged the creation of a national airplane. Page 11
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Business as usual
HSI - Movers
UnionPay terminals will continue to operate inside casino jewellery and pawnshops after July 1. The much-hyped ban only applies to new terminals, said Secretary for Economy and Finance Francis Tam. Otherwise, it’s business as usual
June 25
Name
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ATM security breached
Essential Macau
The city’s ATM machines are at risk. According to a technical expert, ‘exposed’ machines may fall prey to fraud. It’s happening already because of inappropriate anti-virus software. Hon Chi Tin, Head of the Research and Technology Administration Office, says beware
China Construction Bank’s president considers Macau an ‘essential’ market. Not only for the company but Asia. CCB started operating as a branch here yesterday
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%Day
China Resources Powe
2.18
Henderson Land DeV
1.55
Lenovo Group Ltd
1.36
China Resources Ent
1.18
Hutchison Whampoa Lt
1.15
Belle International
-0.71
Bank of Communicat
-0.75
China Merchants H
-1.03
China Overseas Land
-1.46
Ping An Insurance Gr
-1.65
Source: Bloomberg
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I SSN 2226-8294
Heavy fuel Flag carrier Air Macau profits stagnated last year. But it made 281.5 million patacas despite rising fuel and operation costs. Expansion of services in 2014 is very much on the agenda PAGE 5
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June 26, 2014
Macau
All bus routes to be subject to tender The Transport Bureau says it has already set in motion preparations for the public tender for all of the city’s bus routes, although the launch date has yet to be decided. The likeliest possibility is 2017, when the New Era concession ends Stephanie Lai
sw.lai@macaubusinessdaily.com
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he government is preparing to launch a public tender to invite operators to run all the bus routes in Macau, but the time frame for when it will happen remains uncertain, Transport Bureau director Mr. Wong Wan announced yesterday. The bus operator set to replace the bankrupted Reolian Public Transport Co Ltd - Macau new Era Public Bus Company Ltd - signed a public concession contract with the government on June 10 to run the 27 Reolian bus routes. The contract term under which Macau New Era is operating from July 1 expires on June 30, 2017. Once Macau New Era’s concession term expires, however, the government will not only launch a public tender solely for the bus company’s routes, Transport Bureau director Wong Wan told Business Daily yesterday. “Our future goal is definitely to launch a public tender for all bus routes, but the [existing] contract period signed with the bus operators are due on different dates,” he said, speaking to media on the sidelines of a site check for the new bus operator Macau New Era in preparation for its upcoming operation. Starting in August 2011, the 7-year service provider contract signed between the government and the three bus operators – Reolian, Sociedade de Transportes Colectivos de Macau SARL (TCM) and Transportes Urbanos de Macau SARL (Transmac) – entered into effect, under which bus companies do not keep the bus fare but get a regular service charge from the government. But t his s ervice p u rc h ase format was severely criticised by a Commission Against Corruption report in November, calling it ‘illegal’ and ‘poor use of public money’. The Commission’s report also prompted the government to seek switching the service provider contract signed with Transmac and TCM into a public concession contract, as with Macau New Era.
“The detailed arrangement [for public tender on the bus routes] we can only disclose later,” the Bureau director added. “In fact, now we have to prepare for this public tender, including the design of the bus routes, the operation conditions, and other terms for the tender; like, for instance, the conditions for appeal.” Macau New Era, whose major shareholder is fellow bus operator TCM with a 50 percent stake, previously acquired the bankrupted Reolian Public Transport Co Ltd and took over its assets, including its 245 buses. As stipulated in the public concession contract, Macau New Era will follow a new payment plan for the bus operator where it will receive subsidies from the government for their operation as well as keeping fares that passengers pay.
The subsidies, which will approximate 17 million patacas to Macau New Era each month once it starts operating, is calculated from the deduction of the estimated operation cost from the fares’ revenue. The government has the authority to cap the subsidies that it hands out to the bus operators: whenever the revenue generated from fares and other assets exceed the bus operator’s expenses by 3 percent, the operator has to return the subsidies it receives in excess to the government. Also, the adjustment of the subsidies is subject to a half-yearly bus service quality assessment. Mr. Wong said the government had yet to negotiate with Transmac and TCM on the public concession contract terms, including the new payment rules. Transmac currently runs 23 bus routes and TCM 17 routes.
New Era By July 1, the current fleet of Reolian green buses will have their ‘Reolian’ logo removed, while its signature green colour remains, Mr. Fang said. The buses and bus station signage would be gradually reprinted with the new star-shaped Macau New Era logos, the bus company told media yesterday. As at June 24, Macau New Era has secured 349 Reolian drivers to work for the new company – still some distance away from the company’s 400-driver target, but sufficient for a “normal operation” through an additional shifts arrangement.
Reolian tops bus complaints
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eolian received 235 complaints from January to May, Radio Macau reported yesterday. This number is the largest of the three bus companies operating in the Special Administrative Region of Macau, overtaking Transmac (128 complaints) and TCM (91). Passengers complained mainly about the service in general but also about the drivers’ conduct, the frequency of buses and the adjustment of routes. Reolian topped the ranking of complaints last year, as well. The company that is going to
be replaced by New Era on July 1, filed for bankruptcy in October, and had 979 complaints. Transmac was second with 614 complaints, while TCM attracted ‘only’ 433 complaints. After Reolian filled for bankruptcy the government took it over. At the beginning of the month, however, it was announced that a new company, named New Era, would assume control of the buses and routes previously owned by Reolian. The biggest shareholder of Macau New Era is fellow bus operator Sociedade de Transportes Colectivos de Macau (TCM).
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June 26, 2014
Macau
Nam Kwong loses The city’s ATM machines are likely to fall prey to fraud without MOP14 mln appropriate anti-virus software installed against virus infection A Macau’s ATMs remain vulnerable, says expert Aries Un
Newsdesk@macaubusinessdaily.com
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he latest automatic teller machine (ATM) scam involves a hefty loss of HK$490,000 (US$63211.61) and happened late last month, revealing that ATM machines in the city lack sufficient anti-virus software to protect against computer viruses. Hon Chi Tin, Head of the Research and Technology Administration Office, said on the sidelines of a talk on technological anti-burglary that it was unlikely that most ATM machines in the territory would switch from running on the Window XP operating system to any other operating system due to the former operating system’s prevalence across the city despite no more security updates from Microsoft Windows for the old operating system since April this year. Mr. Hon suggested that more appropriate anti-virus software be installed in the city’s vulnerable ATM machines to reduce the risks of computer virus infection. “If possible, those ATM machines situated in crowded streets should be moved indoors under surveillance cameras,” he added.
The technology expert also noted that ATM machine users should exercise caution with the card slot and key pad, noting if any “unusual” cameras are installed around the machine, which is the potential risk these days.
He also urged citizens still using magnetic strip cards to exchange them for chip-based ones for improved security. All debit cards with magnetic strip will be replaced from next month, according to the Monetary Authority of Macao.
loss of almost 14 million patacas (US1.8million) was registered last year by Nam Kwong Natural Gas Co., LTD, according to the annual report released by its board yesterday. The report reveals that as at 31 December 2013, the company had invested some 197.2 million patacas in constructions-in-progress and fixed assets. The utility sold 357,852 cubic metres of natural gas with revenues reaching 2.2 million patacas . The company declared that it had finished the construction of the decompression station in Coloane. Main natural gas pipelines were built at some points in Cotai and Taipa. It also executed last year’s plan to supply natural gas to the public housing in Seac Pai Van and the new campus of the University of Macau in Hengqin Island. Offering compressed natural gas to public buses commenced, as well. Nam Kwong Natural Gas Co. Ltd is a public natural gas operator in Macau. In addition to primarily constructing gas pipelines, it sells, distributes and supplies natural gas. In 2012, the company registered an accumulated loss of around 11.8 million without any profit from sales or any expense on cost of sales. Kam Leong
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June 26, 2014
Macau Brands
Trends
Vintage Vamping Raquel Dias newsdesk@macaubusinessdaily.com
UnionPay terminals may operate in casinos despite July 1 ban The Secretary for Economy and Finance Francis Tam clarified yesterday that the ban on card-swiping devices will only apply to new machines Alex Lee
I
ntroduced in the late 50’s and popularised in the 70’s, chic, comfortable Palazzo Pants are making a comeback. The Palazzo pants flare out evenly from the waist to the ankle, differing from bellbottoms, which cling snugly to the thighs. These wide-leg, high-waist trousers are a perfect choice for warm summer days, as they’re usually made of light fabrics like silk and chiffon. They were first introduced by ladies who wanted to have a good time but were forbidden to wear trousers to some high-end establishments in Manhattan. In the 50’s, the skirt was still de rigeur and so the Palazzo Pants were their way of making a stand. Contrary to long skirts, these look good on shorter ladies due to the elongated waist. They did make some appearances last year, but this summer we saw them in the runway shows of brands like Chloe and Celine. If your pocket does extend to such, just find them at your nearest Zara. This piece works wonderfully with another big trend this season, the crop top. Add a great pair of wedges for that extra vintage look and big sunglasses. They work wonders for the beach as you can wear them as bottoms and make your swimsuit shimmer. If you’re the type who has trouble mixing and matching, why not get a jumpsuit? Hot since last season, they’re versatile - and very chic.
Alex.lee@macaubusinessdaily.com
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nionPay terminals will be authorised to operate inside casinos in jewellery and pawnshops after July 1, the Secretary for Economy and Finance of the Government of Macau, Francis Tam, said yesterday. According to Mr. Tam, the ban on card-swiping terminals will only be applied to new devices. “We have to clarify that we’ve never required any jewellery and pawnshops inside casinos, or anywhere else, to stop operating such devices. But as we believe that financial activities that involve bigger cash flow in the gaming industry always require strict monitoring we have [made] this decision that starting from July
there should be no more addition of contracts that are engaged in cardswiping activities inside casinos. This means that all these jewellery or watch shops inside casinos cannot have more card-swiping terminals,” Mr. Tam said. A ban on UnionPay devices inside casinos, however, is not yet out of the question. The matter will be studied over the next three or four months. “Now, in the first stage, they [shops] should not have more [card-swiping] terminals, and after some time, we’ll not rule out the possibility that we’ll impose further restrictions on these [card-swiping] activities,” he said. “After three or
four months, which we think is an appropriate period, we’ll review the new measure. We do not rule out that after that period we’ll fully restrict the activities,” he added. Mr. Tam also explained to journalists the goal of the UnionPay tightening and how the government is implementing it in cooperation with banks operating in Macau. “We’ve only required banks to strengthen monitoring, fulfilling the legal requirement that they have to keep a cautious eye on these big transactions in shops that happen around casinos,” he said. The Secretary for Economy and Finance also said that the fact that jewellery and pawnshops are operating inside casinos is not perceived by officials as a problem. “For these shops, as long as they abide by the financial regulations, they can still operate. We’ve never asked these jewellery and pawnshops to close or move somewhere else,” he said. When asked about the impact of such measures on the gaming industry, the official said that the main priority for the government of Macau was to combat illegal transactions. “The most important thing is that the shops are operating [according] to the law. We have the responsibility to fully combat money laundering risks or illegal financing as a forefront task. Some might have their own opinions about the impact of such measures on the gaming industry. But it’s not our priority,” he said.
Macau ‘essential’ market for China Construction Bank
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t the opening ceremony of the Macau Branch of China Construction Bank the president of the bank stressed that the former Portuguese enclave is one of the most important markets in Asia. “Macau [has become] one of the most important markets in Asia in recent years. The opening of a Branch in Macau will contribute to closer commercial ties between Macau and China,” Zhang Jianguo said. Until June 7, China Construction Bank was operating in Macau as a subsidiary. Now its status has changed to a branch as part of the strategy of the Bank to internationalise. “China Construction Bank is also developing in Europe and South America, and expanding its activities in Australia. We believe that the process to go global will be [complete] by next year,” the president of China Construction Bank stated in the ceremony, attended by the Secretary for Economy and Finance of the Government of Macau, Francis Tam, and the Chairman of the Monetary Authority of Macau,
Anselmo Teng. Addressing the assembly of 200 people, Mr. Teng stated that the banking sector is one of the best examples of how the Macau economy can diversify.
“The banking sector has been performing extremely well. Banks are living their best age in the history of Macau. The establishment of this branch is a sign of confidence in Macau,” Anselmo Teng said.
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June 26, 2014
Macau
Expert advocates engagement for higher performance
Air Macau’s 2013 profits dented by rising costs
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acau’s flag carrier Air Macau Co Ltd has registered a mild growth in its annual profits for last year at about 281.5 million patacas (US$35 million), despite its operation being adversely affected by rising fuel and operation costs, the company said in its annual results gazetted yesterday. For 2013, Air Macau’s profits increased by about 0.6 percent more than the
279.8 million patacas of the previous year; the carrier, a subsidiary of Air China Ltd, saw a revenue of nearly 3.56 billion patacas, up 7.5 percent compared to 2012. The airline’s overall business was adversely impacted by rising fuel and operation costs in the last financial year, but it managed to improve its service and product as well as conduct cost control to maintain ‘stable growth’ in its earnings,
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Air Macau’s supervisory board noted in the annual results. The airline has seen a 8.3 percent rise in overall expense, which reached 3.24 billion patacas for 2013. Air Macau is also handing out a dividend of 7.5 million patacas, or about 2.5 percent of the annual profit, to its shareholders with preference stocks for the financial year, the airline noted in its annual results.
mployees who are actively engaged with their jobs are more productive and will stay for a longer period of time in the company, Mark Cosgrove, the director of Training at Dale Carnegie, said yesterday. Speaking at a breakfast meeting organised by France Macau Business Association and The American Chamber of Commerce, Mr. Cosgrove underlined that companies with an engagement culture reap the rewards of improved performance. As a major speaker, Cosgrove shared his perspectives on how employee engagement can benefit an enterprise. A corporate trainer with more than13 years’ experience, his talk ‘Why Engagement Matters’ rammed home the message
that actively engaged employees bring home the bacon. They would also stay for a longer period of time in the company. As a result, the company benefits from superior performance. He also noted that the clincher for making employees commit to their companies is to win their hearts and minds. Employers or senior management staff should maintain a good relationship with their employees and make them feel confident in what they are doing. “Mistakes should never be punished,” Cosgrove said. Dale Carnegie Training was founded in 1912 and is represented in more than 80 countries, in which it offers training and consultant services to businesses. Kam Leong
Corporate
Galaxy ‘Stars of the Year’ shine on big night Galaxy Entertainment Group held its annual award presentation ceremony of ‘Stars of the Year’ in Banyan Tree Macau this Tuesday to recognise 15 team members who had turned in outstanding performances and made contributions to the company. The ceremony was attended by the senior executives of GEG including Vice Chairman Mr. Francis Lui, President and Chief Operating Officer Mr. Michael Mecca and Director of Human Resources & Administration Ms. Eileen Lui. During the ceremony, Mr. Francis Lui said, “The winners today represent the top talent of the company with a wholehearted commitment to the ‘World Class, Asian Heart’ service philosophy”. He added that “with the unprecedented opportunities that lay ahead, our future will undoubtedly be more challenging than ever. Therefore, your continued support and dedication are of utmost importance to us. By working closely and embracing each other in all aspects, we will stride towards a brighter future for both GEG and ourselves.” The winners of ‘Stars of the Year 2013’ are: Fung Siu Wai, Chong Mei Leng, Cheang Ka Kit, Cheong Weng Keong, Lam Kuan Leng, Leong Tim Choi, Nino David Songco, Choi Cheng Choi, Wong Sio U, Kou Ian Song, Macalintal Marites Ramirez, Pan Yi-Fang, Zhu Zicong, Leong Janraem and Cheong Ma Lei. The award recipients were all very delighted that their hard work had been recognised and they thanked GEG for providing them with the opportunities to maximise their potential. Each winner of the ‘Stars of the Year’ will be entitled to 2 sets of round-trip air tickets to Singapore with 3-night hotel accommodation, as well as a cash prize of MOP5,000. GEG has also designed a training programme for the winners to enhance their personal and professional development that will prepare them for future career advancement.
Macao Gaming Show reaches out to the world
The team behind Macao Gaming Show (18-20 November) is investing in a multi-media marketing campaign to take it’s ‘By Asia for the world’ campaign to an international audience of gaming decision-makers. As part of the dual Chinese and English language drive, more than 100 MGS print and online ads will be appearing across 25 gaming media channels from now until November. This is being supplemented by MGS Macau taxi advertising, MGS TV ad slots, and visits by the senior marketing team to major international gaming exhibitions such as GTi Taiwan Expo and conferences including Japan Gaming Congress (JGC) in Tokyo. Discussing the campaign, Marina Wong, General Manager and Event Director at MGS said: “The marketing campaign, which is significantly bigger than in 2013, plus the appointment of world class partner organizations represents another sign of our commitment to establishing Macao Gaming Show as the most important exhibition in Asia. We are supporting the Macao Gaming Show with an unprecedented level of investment in marketing and advertising in order to build on the success achieved in our debut year. Our aim is to ensure that every buyer who has an interest in the Asian gaming sector knows about the show, and has all the necessary tools and information to be able to attend.” She added: “The registration data that we have processed since registration opened confirms a very high proportion of repeat visitors. Our aim is to grow attendance by adding new first-time visitors to this very healthy base while maintaining a similar if not higher level of seniority as in 2013 when 83 percent of visitors were either decision-makers or had direct input to purchasing decisions.”
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June 26, 2014
Macau
Reality bites for Bitcoin Just last weekend, the first ‘vending kiosk’, installed in Macau. A dozen Chinese Bitcoin
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eijing has been fairly successful in restricting financial activity outside the official banking system. Hong Kong newspaper South China Morning Post reported yesterday that as many as a dozen Chinese Bitcoin exchanges went bankrupt in the past year. “The [People’s Bank of China] wants to suppress and control Bitcoin so it doesn’t go crazy or wild,” Bobby Lee, the chief executive of BTC China is quoted as saying by the newspaper. He also said that failures in the virtual currency business, especially in mainland China, have damaged the industry and “prevented wider adoption of the currency,” according to the report. “This is actually a sad story, as in each case people lose their money because they’ve left their money in one of these exchanges,” Lee is quoted as saying. However, he warned “ordinary people” not to buy Bitcoin as the virtual currency attempts to stabilise in the next 10 years. On Tuesday, the neighbouring SAR held its first Bitcoin conference. According to South China Morning Post, around 500 people participated in the ‘Inside Bitcoins’ trade show. Exchange companies such as BTC China, OKCoin and Huobi have been able to circumvent restrictions by the People’s Bank of China on virtual currencies, the report added. Last weekend, Hong Kong-based Bitcoin vending machine distributor
Bitcoinnect – formerly known as Coinnect – installed its first ‘Bitcoin vending kiosk’ in a Sands Macao casino but soon moved the machine elsewhere. The Bitcoin vending kiosk, which may not promote itself as ‘ATM’ or ‘Bitcoin ATM’ as required by the Monetary Authority of Macau, was installed in a pawnshop on the ground floor of Sands Macao casino over the weekend. But by noontime Monday, the Bitcoin vending kiosk had already
Shenzhen to build ‘Mini Hong Kong’ It has yet to be seen whether Macau will follow suit, given the tougher transit rules on mainland Chinese visitors
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henzhen is looking at setting up a shopping mall complex resembling those Macau’s neighbouring SAR, dubbing it ‘Mini Hong Kong’, with the express intention of attracting mainland Chinese tourists and dissuading them from entering the territory. The announcement of the plan follows reports that the neighbouring SAR is looking at restricting the number of mainland Chinese tourists who can visit Hong Kong under the individual visit scheme (IVS). The increasing number of such visitors is stretching Hong Kong’s rail network and community facilities. Hong Kong newspaper The Standard quotes the Qianhai Management Authority as saying that the shopping complex can ease pressure on the flood of visitors. Just last week, Macau took a similar approach in lowering the number of days mainland Chinese visitors are allowed to transit in Macau. In a press statement dated June 16, police here announced that this seven-day maximum stay for transiting mainland visitors would be shortened to five days. In 2013, the Cabinet of the Secretary for Security recorded a total of nearly 2.64 million Chinese visitors entering
Macau from the mainland using visas for an overseas journey. According to the report, the Qianhai shopping mall is to be located 15 kilometres west of Shenzhen and is slated open by the end of the year. This area, the newspaper says, is intended to be a test zone for financial reforms. And authorities in Qianhai are in negotiations with Hong Kong merchants. “The concept of setting up a shopping centre in Qianhai to provide another choice for mainlanders is purely exploratory at this stage,” Qianhai authority spokesman Wang Jinxia was quoted by The Standard as saying. Experts played down the impact the new ‘Mini Hong Kong’ shopping complex will have on the neighbouring territory, saying it will be hard for Qianhai to replace high-quality products available in Hong Kong. Mainland Chinese tourists seeking to purchase branded products will still prefer to go to Hong Kong, another expert is quoted as saying by The Standard. In addition, mainland Chinese tourists do more than just shop when visiting Hong Kong. Some go there for the theme parks.
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June 26, 2014
Macau
in mainland China commonly known as a Bitcoin ATM, was exchanges went bankrupt last year been relocated elsewhere. With the Bitcoin vending kiosks – commonly referred to as Bitcoin ATM machines - users can actually sell Bitcoins or other altcoins by activating their personal e-wallet installed in their smartphone applications, and obtain fiat money in front of the machine. The Bitcoinnect machines enable users to top up their Bitcoin balance by using cash or vice versa, the company explained.
Bitcoin not subject to Monetary Authority regulation: chairman The Monetary Authority of Macau will remain vigilant on the use of Bitcoin in the city, although it exercises no regulation regarding virtual currencies – including where a Bitcoin vending machine should be placed - as Bitcoin is not recognised as legal tender here, Authority chairman Anselmo Teng Lin Seng told media yesterday. “In fact, we hope that the public can, as suggested in a press release issued last week, pay attention to the risks of Bitcoin . . . which may involve the risk of money laundering, terrorist financing and other cyber crimes,” Mr. Teng remarked. “We’ll continue to keep a close eye on the subject.” “Bitcoin is definitely not legal tender. It is a virtual currency and not [what] we use daily like cash or other payment mediums, and thus not subject to our regulation,” Mr. Teng said.
Macau Foundation subsidies reach MOP1.06 bln in 2013 The biggest share of subsidies went towards education, according to the group’s annual report
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he total sum of subsidies handed out by the Macau Foundation in 2013 amounted to 1.06 billion patacas. According to its annual report, the biggest beneficiary was the education sector, accounting for as much as 35.95 percent of the grants approved, totalling 382 million patacas. The social sector came in second at 28.5 percent, taking as much as 303 million patacas in subsidies, followed by the scientific sector, which benefited by 128 million patacas, corresponding to 11.7 percent of the total grants handed out. Culture, philanthropism and the promotion of Macau came in next, followed by areas of academia and the economy – the latter accounting for only 0.06 percent. Subsidies over 500,000 patacas are granted with the approval of the curators’ council and administrative council, both of which also approve the annual business plan. In 2013, the curators’ council met four times and assessed a total of 114 applications. Of these, 75 were approved with the total amount reaching 629 million patacas. The Macau Foundation’s
administrative council, on the other hand, assessed 805 applications during the 52 meetings held. During these, 689 applications were approved with grants totalling 65.2 million patacas. With regard to its business plan, 37 submitted applications were approved with total funds reaching 368.6 million patacas. According to the Macau Foundation’s 2013 annual report, a total of 1.09 billion patacas were granted in subsidies. However, 41.2 million were returned. In addition, the Foundation made a 14 millionpataca donation to the management fund committee of the Taiwan Straits, the report says. Also, the Foundation conducted follow-up works and met 154 times with grant applicants, and worked ‘in-loco’ on the execution of 345 projects. The Foundation met another 61 times to follow up on projects for which grants had been approved, and assess amendments to the subsidy plan. It also discussed extension deadlines for the report on subsidised activities. exclusive JTM/Business Daily
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June 26, 2014
Macau
Japanese Casino Legislation to pass in Autumn, says Abe
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apanese Prime Minister Shinzo Abe said his ruling party will seek to pass a law in the next session of parliament to legalise casinos as part of a plan to boost tourism prior to the Tokyo Olympics in 2020. “Integrated resorts are expected to provide a great contribution to tourism, regional economies and industry, I think, and can be one of the key elements of Japan’s growth strategy,” Abe, 59, announced in an interview yesterday at his official residence in Tokyo. Now 18 months into his term of office, Abe has fired two of what he calls the ‘three arrows’ of Abenomics - fiscal stimulus and unprecedented monetary easing - in a bid to banish deflation from the world’s thirdlargest economy. The early euphoria that saw stocks surge 51 percent as the yen plummeted last year has been tempered by a sales tax increase in April that is forecast to result in an economic contraction this quarter. Allowing casinos to operate in Japan within integrated resorts is a key part of Abe’s updated growth strategy - the third arrow - approved yesterday by the cabinet. The plan includes starting to cut the corporate tax rate in the fiscal year beginning in April. Las Vegas Sands Corp. and MGM Resorts International are among those considering investing billions of dollars in what could
become Asia’s second largest casino market after Macau.
Olympics Boost Tokyo’s selection to host the Olympic Games has boosted expectations that gaming resorts, under discussion for a decade, will finally be permitted. Japan’s parliament opened debate last week on a bill to legalise casinos, paving the way for its passage before the end of the year. “The likelihood of passing the bill in the next session is extremely high,” Eiji Kinouchi, a senior strategist at Daiwa Securities Co., said by phone. Casinos “will have a great impact on tourism and Japan’s economy as a whole.” Debate will resume in the next parliamentary session in the Autumn on the bill that was submitted last December by a cross-party group of lawmakers that included members of the ruling Liberal Democratic Party. “I hope, in my capacity as leader of the LDP, that we can aim to pass it in the next extraordinary session of the Diet,” Abe said in the interview.
Tourism Rising The casino initiative is designed to bolster momentum for a tourism industry that’s already an increasing source of growth for Japan. Japan
is poised for a record number of foreign visitors in 2014, attracted by a weaker yen and the easing of visa rules. Spending by incoming tourists exceeded outlays by Japanese going abroad in April, the first time in 44 years. While the casino measure may aid the nation’s tourist receipts, economists have refrained from boosting growth estimates on the basis of the step. The International Monetary Fund projects less than 1 percent GDP gains each year from 2015 through 2017, with an estimate of 1.125 percent for 2019 - an expansion of less than the pace it recorded in the half-decade prior to the 2008 global credit meltdown. Casino-related stocks such as Sega Sammy Holdings Inc., Konami Corp., and Japan Cash Machine Co. stand to benefit from the potential legalisation. Sega Sammy and Konami have expressed interest in operating casinos in Japan while Japan Cash Machine manufactures coin-counting terminals used in casinos and arcades.
Casino Rally Sega Sammy, a maker of gaming machines, jumped 2.6 percent on June 17 when lawmakers said they’d begin discussing the bill. The Tokyobased company fell 0.2 percent as at 9:24 a.m. in Tokyo trading and has rebounded about 15 percent since
falling to its lowest level in nearly 15 months on May 19 amid concerns the legislation had stalled. Konami Corp. rose 0.7 percent, while Japan Cash Machine, which surged 8.4 percent on June 17, fell 0.3 percent. The benchmark Topix index dropped 0.3 percent. Abe’s coalition has a majority in both houses of the Diet, although its junior partner New Komeito is divided on the issue. Economy Minister Akira Amari said last week that allaying concerns about the potential effects of casinos on society would be an important part of the debate. Abe visited Singapore’s gaming venues last month, where he saw that gaming has achieved great success, he said. Japan would have to consider policies to prevent crime and gambling dependency, as Singapore has done, he said. Lotteries and pachinko, which is similar to pinball, are legal in Japan, as is betting on the horses, boats and bicycle races. Japan’s gaming resort market could be worth as much as $40 billion a year as early as 2025, making it Asia’s largest after Macau, according to estimates from CLSA Ltd, a Hong Kong-based brokerage. International casino operators including MGM Resorts and Wynn Resorts Ltd. have said that they would spend billions of dollars to build casinos in Japan.
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June 26, 2014
Greater China
Tin Fu Court, a public housing estate of the Home Ownership Scheme in Tin Shui Wai, Hong Kong
China property primed for shake-up A downturn in property prices, pressure to pay for last year’s record land purchases, and a tighter credit market have combined to put severe strains on developers’ liquidity Umesh Desai and Clare Jim
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n oversupply of residential property and a market slowdown have left Chinese developers with their worst cash crunch in more than two years, revealing the extent of China’s real estate downturn and paving the way for further consolidation in the sector. A Reuters study of more than 80 China-listed developers that have declared March quarterly earnings showed cash to short-term-debt ratios at two-year lows amid a steady decline in margins since 2011. That was the year the government moved to rein in the overheating housing market through measures including higher mortgage rates and limits on how many homes each family can buy. But the government crackdown is only part of the story. A downturn in property prices, pressure to pay for last year’s record land purchases, and a tighter credit market have combined to put severe strains on developers’ liquidity. The mounting pressure could lead to sales of assets such as land banks and completed projects as the government presses for consolidation in the highly fragmented sector, analysts and investors said. Even without further government curbs this year, developers’ financials will feel the pinch of subdued house prices, which fell for the first time in two years in May. “The situation is quite severe now. Mid-sized developers are facing pressure as interest rates for trust loans are high, the impact will emerge eventually. The size of developers affected are getting larger,” Hong
Kong-based property agent Midland Realty COO Samuel Wong said. “H2 will be worse than H1 when problems surface, unless there is more easing in policy or liquidity.” Caught between having to cut prices or raise capital, some developers are holding off for the moment, either using stop-gap measures or waiting for a bank rescue, according to industry insiders. “The market isn’t favourable. We haven’t decided whether to cut prices,” said an official at unlisted Shenzhenbased developer Guang Group, one of China’s top 100 developers. “We’re in restructuring (mode) now, such as introducing financial partners and consolidating projects.” Last month, the company said it had failed to deliver some properties to homebuyers on time because of financial pressures.
Margins hurt, liquidity drying The deterioration in developers’ financials has been felt on two levels. Firstly, competition both for land banks and apartment sales has squeezed margins. Margins on earnings before interest, taxes, depreciation, and amortisation are now in the low teens compared with nearly 20 percent at one point in 2011. Meanwhile, the median cash to short-term debt ratio of the companies studied by Reuters has fallen to 0.77 from 1.11 at the end of 2012. A ratio below 1.0 is a red flag meaning cash is insufficient to cover debt coming due in a year. Winsan Shanghai Industrial Corp
KEY POINTS Developers’ short-term-debt ratios at two-year lows EBITDA margins thinnest since 2011 Consolidation tipped as prices fall, credit dries up
Ltd saw its cash to short-term debt ratio decline to 0.07 in the March quarter from 0.83 in end-2011. In that same period the company saw its EBITDA margin turn negative from 18.8 percent. The company did not respond to emailed questions. London-based fund manager Yerlan Syzdykov at Pioneer Investments, which owns bonds in China property, said the deterioration in developers’ financial positions was likely to trigger a long-overdue shakeup in the industry. “We see more consolidation in the sector. They are leveraged and have lower cash balances because of land acquisitions - they need banks to step in and provide more liquidity,” he said. I n a r ecen t s i g n o f s u c h consolidation, Sunac China Holdings
Ltd last month bought a 24 percent stake in peer Greentown China Holdings Ltd for HK$6.3 billion ($807 million). Moody’s said at a conference last month it expected to see more such moves as developers tried to scale up to win cheaper loans from banks.
Don’t panic Volatile as the sector may be, few expect China’s property market to suffer a collapse like the subprime mortgage crisis that hit the United States. “People are watching carefully but we’re not worried yet,” Pioneer Investments’ Syzdykov said. High downpayments, low household debt and expectations of continuing government support are commonly cited by experts forecasting the downturn will be short-lived, with prices expected to recover as economic growth steadies in the second half of the year. Furthermore, a repeat of events that brought Zhejiang Xingrun Real Estate Co to the brink of bankruptcy is unlikely. The developer is estimated to owe 15 domestic banks 2.4 billion yuan and individual investors another 1.1 billion, with only 3 billion yuan of assets on hand. “Full-blown defaults in this sector are rare as developers own assets which are worth something,” said Thomas Kwan, head of fixed income at Harvest Global Investments Ltd in Hong Kong. “The smaller developers can sell their projects or land in times of difficulty.” Reuters
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June 26, 2014
Greater China
Vanke to attract strategic investors Firm’s president Yu Liang recently said the slowdown in China’s property market heralded the end of the golden era of Chinese real estate
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hinese largest residential property developer, said yesterday it was in talks with global investors, including funds and real estate peers, to sell a strategic stake as the company seeks to expand overseas and tap offshore capital markets. The stake sale could be accomplished by issuing new shares or via the purchase of shares from the secondary market, Vanke Chairman Wang Shi told reporters at the company’s Hong Kong-listing ceremony yesterday. “By moving to Hong Kong, it will help our international brand...help to attract strategic investors. It will be more healthy for Vanke to leverage on this international platform,” Wang said. Vanke converted its B-shares in Shenzhen into H-shares and listed in Hong Kong by way of introduction without raising any new capital. The Hong Kong shares traded at HK$13.24 at 0312GMT, higher than its B-shares’ last closing price of HK$12.41 on June 3. Speaking at the ceremony, Wang also said it is necessary for the mainland property market to correct now and it may take two to four years for such a correction. “I am worried that if the market doesn’t correct, the bubble will burst
KEY POINTS In talks with funds and developers Shares traded at HK$13.24 in Hong Kong debut Correction needed for mainland property market-chairman
The firm celebrated yesterday moving from Shenzhen Stock Exchange to HKSE (logo pictured)
like we saw in the case of Japan. That would be trouble, so a correction is necessary. It may take two to four years (and) the market will be more healthy,” Wang said. Vanke president Yu Liang recently said the slowdown in China’s property market heralded the end of the golden era for Chinese real estate, but said the outlook for the property sector remained healthy. The comments came at a time
Local debt growth slows China has been trying to rein in local government borrowings that surged to 17.9 trillion yuan
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hina’s chief auditor said growth in local government debt slowed, a sign that tighter scrutiny on borrowing and an economic slowdown is curbing credit. Outstanding debt for nine provinces and nine cities grew 3.79 percent from the end of June last year through March, 7 percentage points slower than the pace in the first half of 2013, according to a report delivered by Liu Jiayi, head of the National Audit Office, at a National People’s Congress meeting on Tuesday. The report was posted on the office’s website.
China has been trying to rein in local government borrowings that surged to 17.9 trillion yuan (US$2.9 trillion) as of June 2013 from 10.7 trillion yuan at the end of 2010, data from the audit office show. That debt accumulation poses risks to central government finances, Moody’s Investors Service said in a January report. “The slowdown in the pace of debt accumulation is a major success of policy makers,” Dariusz Kowalczyk, a senior economist at Credit Agricole SA in Hong Kong, wrote in an e-mail. “On the other side of the coin, it
The report on local debt was released at National People’s Congress session held last Tuesday at the Great Hall of the People in Beijing
when China’s average home prices fell for the first time in two years in May and price weakness spread to more major cities, according to official data last week. That added to signs of a cooling in the property market that poses a risk to the broader economy. The company announced in January last year it would move its foreign-currency B-shares to Hong Kong, becoming the third company to leave the mainland’s moribund
explains strong downward pressure on growth, given that local government debt finances much of infrastructure investment.” The Ministry of Finance will closely monitor risks in local government debt and halt any illegal borrowing by local authorities “decisively,” Finance Minister Lou Jiwei told legislators at the NPC meeting, according to a statement on the ministry’s website. The nine audited provinces still had 821 million yuan in overdue liabilities as of March 31, even after borrowing 57.9 billion yuan during the nine preceding months to repay maturing debt, according to Liu’s report. Four cities raised a combined 15.7 billion yuan by using government guarantees or collateral that weren’t allowed, Liu said. China will focus on local government debt, shadow banking and real estate in monitoring financial risk, People’s Bank of China Deputy Governor Liu Shiyu told lawmakers. Bloomberg News
B-share market in Shenzhen. The debut price outperformed its A-shares listed onshore, which were up 0.3 percent at 8.11 yuan, an equivalent to HK$10.15 each. B-share shareholders, including China Resources Corp, Singapore state investment arm GIC and Asian asset manager Value Partners, were offered a conversion price of HK$12.39. Vanke’s H-shares account for 11.9 percent of total outstanding shares. Reuters
The slowdown in the pace of debt accumulation is a major success of policy makers. On the other side of the coin, it explains strong downward pressure on growth, given that local government debt finances much of infrastructure investment Dariusz Kowalczyk senior economist Credit Agricole SA
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June 26, 2014
Greater China ‘National’ plane now a priority President Xi said last month that there was no room for failure in developing home-grown aircraft
The development of China’s Alibaba takes control home-grown big passenger of HK media firm plane is the dream of Chinese e-commerce firm Alibaba has invested heavily in Hong Kong-listed China several generations Vision Media Group Ltd. (CVMG), becoming Xu Xiaofei Commercial Aircraft Corp. of China
(Pictured) Beijing airport handled 78 million passengers a year. Second in the world just after Atlanta
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lready Asia’s biggest aircraft buyer, China is developing its own passenger planes and building scores of airports but its aviation expansion faces turbulence from slowing growth and inadequate infrastructure. As the country’s carriers spend billions on jets to serve a growing middle class taking to the skies in ever-increasing numbers, passengers face constant delays and longer flight times owing to military limits on airspace and poor management. Three of the mainland’s airports are among the world’s 20 busiest, with Beijing in global second place on 78 million passengers a year, behind only Atlanta in the United States. The country’s airlines carried 350 million passengers last year, up nearly 11 percent from 2012, official figures show, and the country’s civil aviation authority said it will have more than 230 airports by 2015, up from 193 last year. China Eastern agreed to buy 80 of US aircraft maker Boeing’s 737 jets, valued at more than US$8 billion, earlier this month after Europe’s Airbus won a similar-sized order
Bright Food in search of acquisitions B
right Food Group Co., the Chinese owner of British cereal maker Weetabix Ltd., said it is seeking acquisitions and has the ability to pay as much as 10 billion yuan (US$1.60 billion) for a target. Bright Food is open to buying domestic and overseas companies and it isn’t interested in deals that are “too small” and prefers to work on one acquisition at a time, Chairman Lv Yongjie said in an interview on June 18, without providing further details. The company is also preparing an initial public offering for its Australian unit Manassen Foods, he said. Bright Food has joined Chinese companies including WH Group Ltd., Fosun International Ltd. and Alibaba Group Holding Ltd. in pursuing
from China Southern. Regional outfit Shandong Airlines and yet-to-belaunched budget operator 9 Air took 50 Boeing 737s each. “We see Chinese urbanisation at record levels. Chinese GDP (gross domestic product), it’s still at very good levels. Domestic consumption is growing,” said Jose Eduardo Costas, senior vice president for market intelligence at Brazil aircraft maker Embraer. But he added that “infrastructure and air space authorisation in China may (still) continue to be a bottleneck”. On shorter journeys, airlines face so much competition from China’s huge and growing high-speed rail network that some routes have been terminated.
Home-grown jets Boeing forecasts Chinese carriers will need nearly 6,000 new planes valued at US$780 billion over the next 20 years, accounting for around 16 percent of world demand and nearly half of Asia’s. China already takes 20 percent of the worldwide production of Airbus. But the country also wants to
assets overseas. The Shanghai-based company, which has interests that span food and beverages, farming and retailing, bought Israel’s Tnuva Food Industries Ltd. last month following Weetabix, as rising incomes in China spur demand for consumer goods. “Chinese food firms seek overseas deals to acquire product research capabilities and better resources,” said Todd Yang, Shenzhen-based analyst at Guosen Securities Co. “Imported foods are also growing in popularity in China and they may also be seeking foreign food brands to address the trend.” Bright Food, which controls Shanghai-listed Bright Dairy & Food Co., reached a preliminary agreement last month with private-equity firm Apax Partners LLP to buy its 56 percent in Tnuva for about US$960 million, according to a person with knowledge of the matter. The Israeli company is the country’s largest food manufacturer and distributor. Mivtach Shamir Holdings Ltd., Tnuva’s second-largest shareholder with 21 percent, has said it is in talks to sell its holding to the Chinese company.
challenge the global dominance of Boeing and Airbus by ensuring part of its vast aircraft market goes to a home-grown large passenger plane and smaller regional jet, but both projects are years late. “The development of China’s home-grown big passenger plane is the dream of several generations,” said Xu Xiaofei of the Commercial Aircraft Corp. of China (COMAC), which is building them both. The 168-seat C919 is scheduled to make its first flight in 2015, a year behind schedule, with deliveries planned for 2018 - two years late. COMAC claims 400 orders, most from domestic customers. The delays are even worse for the ARJ21 regional jet. One made a successful test flight this month, state media said, and the customers are expected to start receiving them early next year. But the original delivery deadline was way back in 2009. The pressures are mounting. President Xi said last month that there was no room for failure in developing home-grown aircraft. “In the past, someone said the best choice for us is to rent from others and then to buy, and that the last option is to make our own,” he said. “But we have reversed this notion.” AFP
Bright Food, which aims to develop into an international company, would consider acquisition targets with goods that can be sold in China and which would allow it to expand its products in their home market, Lv said. Bloomberg News
Chinese food firms seek overseas deals to acquire product research capabilities and better resources Todd Yang analyst at Guosen Securities
the media company’s biggest shareholder, CVMG announced in a statement yesterday. Alibaba paid HK$6.24 billion for 59.32 percent of CVMG’s shares, the statement said. Liu Chunning, Alibaba Group vice president, will serve as president of CVMG, while Dong Ping, the media group’s former president, will become adviser to the company. Chinese action movie star Jet Li will act as CVMG’s independent nonexecutive director, according to the statement. The company will be renamed “Alibaba Film Group Co., Ltd.” accordingly, a previous statement said.
Xi highlights China-Malaysia ties Chinese President Xi Jinping met with Malaysian Speaker of the House of Representatives Pandikar Amin Mulia on Tuesday, saying that China attaches great importance to its friendly relationship with Malaysia. “The Chinese government regards the development of China-Malaysia ties as an important part of China’s neighborhood diplomacy,” Xi said during the meeting with Pandikar at the Great Hall of the People. Xi proposed the two sides take the 40th anniversary of diplomatic relations as an opportunity to do a “top-down design” of the bilateral ties and blueprint reciprocal cooperation in various areas to boost the countries’ partnership.
China, Russia highlight regional cooperation Sino-Russian relations have shown dynamic potential for positive growth as comprehensive strategic partnership of coordination between the two countries enters a new stage, said Chinese State Councilor Yang Jiechi said. Yang made the statement when he met with Chairwoman of the Federation Council of Russian Federation Valentina Matviyenko on Tuesday in Moscow, Russia. He also said the cooperation between noncontiguous regions of the two countries should be strengthened for a win-win deal.
International borrowing revealed China had used US$86.369 billion in loans from international financial institutions by the end of last year, the Ministry of Finance said on Tuesday. Some US$66.77 billion had been withdrawn by then, and China had repaid US$33.169 billion of principal, the ministry said in a statement. The lending has been used for 618 projects, 367 of which were supported by the World Bank and 204 by the Asian Development Bank, according to the statement.
CPPCC hears member suggestions Members of the 12th National Committee of the Chinese People’s Political Consultative Conference (CPPCC) on Tuesday offered suggestions on allowing market forces to play a decisive role in allocating resources. China should improve market supervision in order to achieve both effective governance and market efficiency,” Peng Xiaofeng, on behalf of the economic commission, said at the conference of the CPPCC’s Standing Committee. Pan Gongsheng, vice governor of China’s central bank, said China should establish a normative, transparent and binding local government financing mechanism.
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June 26, 2014
Asia
Singapore unveils new framework for banks The new framework will strengthen bank’s liquidity management
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ingapore’s Trade and Industry Minister Lim Hng Kiang on Tuesday unveiled a new framework for banks to strengthen their liquidity management and new regulatory rules for banks that are considered “domestically important.” Speaking at a dinner organized by the Association of Banks in Singapore, Lim said that strong capital positions alone are no guarantee against financial instability, citing the near melt-down of financial systems in some advanced economies a few years ago. “A comprehensive regulatory approach to banking resilience must therefore include frameworks to address liquidity risk and the challenges posed by systemically important banks,” he said. Lim said that Singapore regulators plan to follow principles proposed by the Basel Committee for national regulators to finalize its own framework for domestic systemically important banks (D-SIBs), which will be clearly defined. For example, a bank will be regarded as having a significant retail presence if its market share of resident non-bank deposits is three percent or more, and if it has 150,000 or more depositors with accounts less than or equal to 250,000 Singapore dollars (US$200,000). Such banks will be required to locally incorporate their retail operations. The locally-incorporated D-SIBs will have to hold two percentage points of capital above the international Basel III regulatory minimum. “An explicit D-SIB framework will allow MAS (the Monetary Authority of Singapore) to set targeted and appropriate policy measures for systemically important banks,” Lim said. Lim also highlighted liquidity management as a key aspect of the new
Xinhua
The Monetary Authority of Singapore building
regulatory framework for the system. The new approach of the Monetary Authority, based on the new international regulatory standard of liquidity coverage ratio (LCR) under the Basel III reforms, will be aimed to “ensure that banks hold sufficient high-quality and liquid assets to match their total net cash outflows over a 30-day period,” he said.
Economists see Kuroda easing policy again
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he Bank of Japan will ramp up asset purchases this year although confidence that inflation will move towards the central bank’s target prompted some analysts to push back expectations as to when it will do so, a Reuters poll found. The central bank embarked on an intense burst of monetary stimulus in April last year to try and drive inflation up to 2 percent within a time frame of about two years. Twenty of 29 economists, surveyed
UOB, will be required to meet a Singapore-dollar LCR of 100 percent by January 2015; and an all-currency LCR of 60 percent by January 2015, increasing by 10 percent each year to 100 percent by 2019. This is consistent with the Basel III implementation timeline for all internationally active banks, Lim said. All banks assessed by the Monetary Authority to be domestic systematically important banks will have to meet liquidity coverage ratio requirements. Foreign banks on the LCR framework will be required to meet a Singapore dollar LCR of 100 percent and an all-currency LCR of 50 percent starting January 2016. Banks that are not assessed to be domestic systematically important banks may elect to comply with the LCR or choose to remain under the minimum liquid assets (MLA) requirement of the Monetary Authority. Under the MLA framework, banks must maintain eligible assets to cover a specified proportion of their qualifying liabilities.
from June 16 to 23, said the bank would increase its purse this year, with a majority saying it would happen at the October 31 meeting. Nine forecast no more action from the BOJ in 2014. “The BOJ expects the pace of rise in core CPI would accelerate in the latter half of this fiscal year. So it is key whether that happens,” said Yoshimasa Maruyama, chief economist at Itochu Economic Research Institute. Prime Minister Shinzo Abe unveiled
Under the new framework, foreign banks in Singapore will continue to be subject to the liquidity requirements of the Monetary Authority. The new framework will apply to all currencies, compared with the previous framework that covers mainly the Singapore dollar liabilities of banks. The three home-grown banking groups, such as DBS, OCBC and
a package of measures on Tuesday aimed at boosting Japan’s long-term economic growth, from phased-in corporate tax cuts to a bigger role for women and foreign workers. The poll also estimated the central bank would expand the outstanding amount of long-term Japanese government bonds (JGBs) to an annual 60 trillion yen from 50 trillion yen now, if it decides to ease further, similar to last month’s poll. And the central bank is likely to double the outstanding amount of exchange-traded funds (ETFs) to an annual 2 trillion yen. Although there are signs Japan is pulling out from nearly two decades of deflation, economists predict the central bank will miss its inflation target of 2 percent by April next year. Consumer inflation, excluding the
A comprehensive regulatory approach to banking resilience must therefore include frameworks to address liquidity risk and the challenges posed by systemically important banks Lim Hng Kiang Singapore’s Trade and Industry Minister
effects of a sales tax increase, will only be 1.1 percent this and next fiscal year, according to the poll. Reuters
KEY POINTS Majority of economists expect BOJ to ease policy by December BOJ likely to increase bond and exchange-traded fund purchases Core inflation rate unlikely to rise as fast as BOJ hopes
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk Alex Lee, Luciana Leitão, Michael Armstrong, Sara Farr, Stephanie Lai International editor Óscar Guijarro GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari intern Aries Un 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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June 26, 2014
Asia Australia cuts 2015 iron price forecasts
Gangnam district in Seoul, one of the consumption cores in the capital
Australia revised down its 2015 iron ore and metallurgical coal price forecasts as rising output of two of the country’s biggest export earners outstrips demand, raising concerns for mining companies already struggling with shrinking profit margins. Robust growth in export tonnages meant Australia would still post an 11 percent rise in total export earnings for mineral and energy commodities in 2013-14, the Bureau of Resource and Energy Economics (BREE) said in a quarterly update.
Icon Offshore jumps in debut Malaysia’s Icon Offshore Bhd, whose ships offer support services for oil platforms, rose 12 percent in its market debut, with investors keen on its growth outlook given heavy capital spending plans by state oil firm Petronas. Icon, 88 percent held by Ekuiti Nasional (Ekuinas), a government-owned private equity fund, is the country’s largest pure-play offshore service vessel provider, with 32 ships and 14 percent of the domestic market. Icon plans to use the US$295 million raised in its IPO to expand its number of ships to 39 and to repay debt.
S.Korean consumer sentiment improves
Japan bets big on fuel-cell cars
The index slipped in May after staying at 108 for three straight months
Government and top carmakers, including Toyota Motor Corp, are joining forces to bet big that they can speed up the arrival of the fuel cell era: a still costly and complex technology that uses hydrogen as fuel and could virtually end the problem of automotive pollution. Prime Minister Shinzo Abe’s growth strategy included a call for subsidies and tax breaks for buyers of fuel cell vehicles, relaxed curbs on hydrogen fuel stations and other steps under a road map to promote hydrogen energy. That will bolster plans by Toyota and Honda to start selling fuel cell vehicles in 2015.
S.Korea exports seen rising Exports are expected to rise an annual 5.1 percent in 2014, the biggest gain in three years, a report from the Korea International Trade Association (KITA) showed yesterday, but still short of the central bank’s latest forecast. Exports in the second half of the year are forecast to rise an annual 6.8 percent, compared to a 3.3 percent growth forecast for the first six months of 2014, KITA said. That would put shipments 5.1 percent ahead year-on-year for 2014, which would be the biggest gain since a 19.0 percent jump in 2011. In 2013, exports rose 2.1 percent on-year.
Singapore kilobar gold contract to be offered The world’s first exchange- traded, wholesale kilobar gold contract will be offered globally in September in Singapore, Minister for Trade and Industry Lim Hng Kiang announced yesterday. Speaking at the annual London Bullion Market Association (LBMA) Bullion Market Forum in Singapore, Lim said the contract “will introduce centralized trading and clearing of a physicallydelivered gold contract in Singapore.” Comprising a series of six daily contracts, the contract will give physical users access to competitively-priced kilobars. Asia’s strong demand for physical gold is the key driver for the implementation of the contract.
Christine Kim
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outh Korea’s key measure of consumer sentiment rose in June after a modest fall the previous month, a central bank survey showed yesterday, increasing hopes that recovery in domestic consumption is back on track. The Bank of Korea said its composite consumer sentiment index rose to 107 in June from 105 in May. The index had slipped in May after staying at 108 for three straight months. The decline in May was blamed mainly on the ferry sinking that killed more than 300 people. After the tragedy, retail and travel sales softened. The index’s 2.3 point improvement in June, however, fell short of making up May’s 3.6 point fall. A reading above 100 shows that
consumers who expect economic and living conditions to improve in the coming month outnumber those who expect them to deteriorate. The index was last below 100 in December 2012. At 79 the sub index for sentiment towards the current economy, which asks respondents’ to compare current economic situations from six months before, was a little better than May’s 76, but still way off the 91 recorded in April. Sentiment towards the economy six months from June fared better however, rising to 98 this month from 94 in May. The sub index had hit a 3-1/2 year high in March with a reading of 102. The Bank of Korea also said that South Koreans’ median inflation
expectation for the next 12 months remained unchanged at 2.8 percent in June from the previous month. A majority of survey respondents said public utility prices were expected to pressure pressures the most over the next 12 months, followed by industrial goods and housing. The survey results precedes June inflation data, which is expected to accelerate from a 19-month high of an annual 1.7 percent seen in May. The central bank surveyed roughly 2,000 households nationwide from June 11 to 18. Reuters
KEY POINTS June results short of recovering May fall Sentiment over current economy still sour
Fuel turns on Philippine’s imports Country’s purchases of imported fuel expanded by 11.5 percent
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hilippine import bill in April rose by 3 percent on year to US$5.3 billion due to higher payments for fuel, the local statistics agency said yesterday. The Philippine Statistics Authority (PSA) said the country’s purchases of imported fuel expanded by 11.5 percent on year to US$1.43 billion in April. Mineral fuels and lubricants were the top imported commodity of the Philippines during the period, accounting for 27 percent of total import bill. PSA said imports of electronic products ranked second in April, accounting for 19.5 percent of total bill. Payments for electronic products declined by 3.1 percent on year to US$1.03 billion. Among the top 10 imports of the Philippines, the PSA said plastic products recorded the highest year on year increase at 50.7 percent. Payments for plastics in primary and non-primary forms amounted
US$5.3 billion Philippines year imports value
to US$175.79 million. PSA said total bill for purchases of raw materials and intermediate goods grew by 17.6 percent on year to US$2.05 billion in April.
Meanwhile, payments for inward shipments of capital goods, which accounted for 22.2 percent of total imports, declined by 19.9 percent on year to US$1.17 billion during the period. The country posted a trade deficit of US$743 million in April, higher than the US$647 million registered in the same period last year. Major sources of imports for the Philippines during the period were China, Saudi Arabia, South Korea, Japan, and the United States. Imports in January to April summed up to US$21.53 billion, 9.9 percent higher than the US$19.59 billion posted in the same period last year. The country’s import bill registered faster annual increases in January at 24.7 percent and in March at 10.6 percent. The Philippines is targeting to increase imports by 9 percent this year. Xinhua
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June 26, 2014
International Merkel says flexibility in EU stability pact should be used
East African nations start oil pipeline research Uganda and Kenya have discovered commercial quantities of oil and plan to start production in the next three years
K German Chancellor Angela Merkel said on Wednesday that her coalition government agreed that countries should use the flexibility built into Europe’s Stability and Growth Pact to promote growth, competitiveness and create jobs. “The German government agrees that the Stability and Growth Pact offers excellent conditions for that, with clear guard rails and limits on the one hand and a lot of instruments allowing flexibility on the other,” she told Germany’s Bundestag lower house of parliament. “We must use both just as they have been used in the past.”
enya, Uganda and Rwanda have invited bids for a single consultant to oversee a feasibility study and initial design for the construction of a 1,300-kilometre oil pipeline to transport crude to the Kenyan coast. Uganda and Kenya have discovered commercial quantities of oil and plan to start production in the next three years. Kenya’s Ministry of Energy and Petroleum said in addition to the pipeline, the consultant would be required to oversee the construction of a fibre optic cable from Hoima in Uganda through the Lokichar basin in northwest Kenya to Lamu, and tank terminals in Hoima, Lokichar and Lamu. It said in an advertisement published in Kenya’s Daily Nation newspaper that will also involve the construction of a 9-km pipeline from the Lamu tank terminal to an offshore
mooring buoys. “The pipeline is to be developed as a single project but split into two lots namely Hoima to the Uganda/ Kenya border and from the border to Lamu,” the ministry said, adding that interested companies and consortia had until July 25 to submit proposals. The ministry’s principal secretary, Joseph Njoroge, said this month the aim of having a single consultant for the whole project was to ensure consistency in the quality of the whole pipeline. East Africa has become potentially lucrative for international oil firms after Kenya and Uganda’s commercial oil finds and discoveries of gas off the coast of Tanzania and Mozambique. Tullow Oil and Africa Oil, which control blocks in Kenya, have estimated discoveries in the South Lokichar basin at 600 million barrels, a level experts say is enough to make a pipeline viable even without Uganda.
Etihad to buy 49 pct of Alitalia Abu Dhabi’s state-owned Etihad Airways said yesterday that it had agreed principal terms and conditions to buy a 49 percent equity stake in Italy’s Alitalia. The two airlines will now finalise the deal after regulatory approvals, Etihad added in a brief statement. It did not elaborate on the terms of the deal. The board of troubled Alitalia voted on June 13 to accept an offer by Etihad to invest in the company, but did not give details. Italy’s transport minister has said Etihad is prepared to invest up to US$1.70 billion over the next four years.
UK payday lender Wonga to pay compensation Britain’s financial watchdog said payday lender Wonga has agreed to pay 2.6 million pounds (US$4.4 million) to about 45,000 customers for unfair debt collection practices, including sending bogus letters from non-existent law firms. The Financial Conduct Authority said the failings took place between October 2008 and November 2010 and said the unfair and misleading debt collection practices put customers under great pressure to make loan repayments that many could not afford. Wonga is the biggest short-term lender in Britain and has come under fire, along with the industry as a whole, for the high level of interest rates.
Ghana needs faster transformation The government recognized the need for a more aggressive transformation of the economy for Ghana to graduate into a fully-fledged middle-income country; Trade and Industry Minister Haruna Iddrisu said on Tuesday. He said this could only take place if the country had a well-coordinated multi-sectoral strategy in place. The minister was addressing the launch ceremony of the 2014 World Investment Report, released by the United Nations’ Conference on Trade and Development (UNCTAD). He said Ghana’s economy required a wellfunctioning public sector to sustain the growth trend.
The two companies said on Tuesday they had found additional oil and gas reserves at their northwest Kenya blocks. Uganda estimates it has oil reserves of 3.5 billion barrels. The plan for a single consultant and transaction adviser was approved by the governments of Kenya, Uganda, Rwanda, South Sudan, Tanzania and Burundi in early May. Those countries make up the East African Community, although South Sudan is still only an applicant to join the group. Kenya’s plans for oil production have moved fast since Tullow and Africa Oil’s first discoveries were announced in March 2012. In contrast, neighbouring Uganda struck oil in the Albertine rift basin in 2006 but commercial production has been delayed by wrangling with oil firms over Uganda’s plans for a refinery and other factors and is not expected until 2016 at the earliest. Reuters
Lamu pipeline branch will have mooring buoys similar to those pictured
3.5 billion
barrels Uganda estimated oil reserves
France issues tax ultimatum to banks Switzerland will intensify cooperation with France and release more names and bank account details to French tax authorities
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BS AG, BNP Paribas SA, Credit Suisse Group AG and other banks providing wealthy French people a home for their money in Switzerland are being told: No more tax evasion. Ahead of French Finance Minister Michel Sapin’s visit yesterday to the Swiss capital Bern, he briefed bankers on an updated set of guidelines for a tougher Franco-Swiss tax accord. Switzerland will intensify cooperation with France and release more names and bank accounts details to French tax authorities. “It is not acceptable that a bank -and this may have happened in the past- instigates fiscal fraud,” Sapin said in an interview with Switzerland’s
French-speaking television channel RTS. “I would say ‘continue to do what you are doing today: encourage your clients, without drama, quietly, to regularize their situation.’ They will sleep better.” The push to tighten the rules comes a year after Socialist President Francois Hollande set up an office for French fiscal exiles to put their books in order. The state collected about 1 billion euros (US$1.36 billion) in revenue from such tax evaders and expects more in 2014, with 80 percent coming from funds stashed away in Switzerland. Switzerland said it would comply with a French request for details of a UBS account of retired Senegalese-born French soccer player
Patrick Vieira. Taxes have increased by 70 billion euros in the past three years, and Hollande has promised to stop raising them further. Under a revised 2014 budget law voted by the French Parliament on June 23, the levies collected will be used to fund tax cuts for 3.7 million households. Still, Switzerland’s role as a secret and safe place to stash money is eroding. Bruised by battles with U.S. authorities, Swiss bankers are pressing French clients to “regularize” their accounts, or come clean on undeclared funds. Failure to do that will result in account closings, clients have been told. Bloomberg News
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June 26, 2014
Opinion Business
wires
Leading reports from Asia’s best business newspapers
Emerging-market target practice Jeffrey Frankel
Professor at Harvard University’s Kennedy School of Government
THE STAR Just six months after the nation saw a tariff hike in electricity rates, consumers may see another rate rise. But the agency given the mandate to restructure and reform the country’s power sector has proposed that the Government utilise some RM500mil in savings derived from the renegotiations of the power purchase agreements (PPAs) with independent power producers (IPPs) to mitigate the potential impact on the people. The first adjustment is scheduled for next month, which could result in a tariff hike, as domestic gas prices are lower than international prices.
THE NEW ZEALAND HERALD Foley Family Wines, which is majority owned by American businessman and vineyard owner Bill Foley, plans to step up to the main board of the New Zealand stock exchange following its takeover of Martinborough Vineyards and the sale of US$10 million of shares to institutional investors. The company, which has two wineries in Marlborough and two in Martinborough, as well as links to wine distributor Eurovintage, restaurateur Nourish Group and luxury lodge Wharekauhau though Foley’s private company, has a market capitalisation of about US$63 million on the stock exchange’s AX market for smaller companies.
THE PHNOM PENH POST Publicly listed Japanese conglomerate Resona Holdings signed an agreement yesterday with Cambodia Public Bank (Campu) aimed at increasing its customer base in the Kingdom’s banking sector. Resona Holdings subsidiary firms Resona Bank, Saitama Bank and Kinki Osaka Bank are all part of the agreement, which allows the foreign companies to leverage Campu’s local standing to generate new business, according company officials. “The number of Japanese companies and [amount of] foreign direct investment here in Cambodia has been increasing, especially in the past few years,” Phan Ying Tong, regional head of Indochina operations at Cambodia Public Bank, said.
PHILSTAR The Bangko Sentral ng Pilipinas may adopt a two- to four-percent target for inflation in 2017, Deputy Governor Diwa Guinigundo said on Tuesday. Guinigundo told reporters that by October or November this year, the policy horizon that the central bank will be looking at will already include the inflationary path until 2017. The two- to four-percent range for 2017, which has yet to be officially adopted by the central bank, is the same target that the BSP has for next year and into 2016.
A hyperinflationed bill. The nightmare of every central banker.
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STANBUL – Central bankers want only a few things. To achieve any of them they usually seek to nudge inflation expectations, demonstrate the transparency of monetary policy, and establish their institutions’ credibility. To communicate their intentions simply and clearly, they may set an explicit target range in terms of a particular economic variable, or announce a forecast for the variable, or offer forward guidance by specifying a threshold value for it that must be met before changing interest rates. But what should that one economic variable be? In the 1980s, major advanced countries tried the money supply. After the monetarist approach failed, some switched to targeting the inflation rate. But they repeatedly missed their targets. Until the currency crashes of the 1990s, emerging and developing countries tended to target their exchange rates. Many then also switched to inflation targets; but they tend to miss these targets even more often than the advanced countries do. The problem with these approaches to monetary-policy targeting is that even though a particular numerical target may be reasonable when it is set, subsequent unexpected developments often make the target hard to live with. The monetary authorities are then confronted with a harsh choice between violating their announced target, and thus undermining the credibility that was the point of the exercise, or setting policy too tight or too loose, thus doing unnecessary damage to the economy. Major central banks can generally withstand failure to achieve targets without a fatal loss of credibility. The Bundesbank routinely missed its money-supply targets, and yet remained a credible, admired institution. More recently, inflation expectations in the United States and the United Kingdom remained well anchored even when the Federal Reserve and the Bank of England had to walk
away from the unemployment thresholds they had announced. The situation is different in emerging and developing economies. These countries’ need to establish policy credibility tends to be more acute, whether as a result of histories of high inflation, an absence of credible institutions, or political pressure to monetize budget deficits. They need targets with which they can really live. Nothing seems to work. When the International Monetary Fund comes a r o u n d asking what their nominal anchor is, many declare themselves to be inflation targeters. But they have trouble abiding by their targets. If they are hit by an adverse supply shock or termsof-trade shock in the meantime, the right step would be to loosen monetary p o l i c y sufficiently that the currency depreciates. But targeting the consumer price index precludes this, because depreciation would raise the price of imported oil, food, and other tradable commodities. Indeed, if the shock is an increase in the dollar price of oil, an inflation target in theory dictates tightening monetary policy enough that the currency appreciates. But such a policy would mean that the adverse shock is reflected in a sharp fall in output.
In practice, an inflationtargeting central bank usually abandons the target for price stability in such a case. It tries to explain the failure to the public in terms of “core inflation”: what has happened is only an increase in the cost of filling their gas tank or buying groceries. But this defeats the very purposes –transparency, credibility, and predictability– for which a target was announced in the first place. Emerging-market countries ought to consider targeting nominal GDP. Relative to inflation targeting, the great virtue of NGDP targeting is that it is robust with r e s p e c t to supply shocks and terms-oftrade shocks, meaning that the central bank is not faced with a choice between abandoning the target and hurting the economy. Proposals to target NGDP are familiar in major industrialized countries, first arising in the 1980s. In the wake of sharp price increases in the 1970s, central banks wanted to c o m m i t credibly to monetary discipline in order to facilitate disinflation. The proposal was never adopted. Yet the idea was suddenly revived two or three years ago. The context this time was a desire to achieve expectations of greater monetary stimulus, in order to facilitate recovery from the great recession of 2008-2009. There are good reasons to
Until the currency crashes of the 1990s, emerging and developing countries tended to target their exchange rates. Many then also switched to inflation targets; but they tend to miss these targets even more often than the advanced countries do
think that NGDP targeting is better suited to emerging and developing economies than to industrialized countries. These economies are more frequently subject to adverse terms-oftrade shocks, such as increases in world oil prices or declines in prices for their commodity exports. Their economies also tend to suffer larger supply shocks from natural disasters, other weather events, social unrest, and unexpected productivity changes. The advantage of a nominal GDP target is that adverse shocks of these sorts are reflected equally in output and inflation, rather than imposing the entire burden in the form of a loss in output. This provides the sort of response that one would want anyway, while still retaining the advantages of a rule (communicating the central bank’s plans in such a way that it can live with what it has promised to do). Many emerging and developing countries need to bring inflation down, much as advanced countries needed to do 30 years ago. One example is India, which is currently considering adopting inflation targeting to enhance monetary discipline. But the country is regularly hit by supply shocks such as good or bad monsoons. Statistical estimates suggest that an attempt to set the path of inflation in the face of such shocks would lead to undesirably large swings in real GDP, compared to anchoring policy to the path of NGDP. The target path for nominal GDP can be set at whatever level of monetary discipline is desired. The robustness of NGDP targeting to unknown future shocks is similar whether the objective is to ease money, tighten money, or stay the course, and whether the central bank wants to announce a forecast, a target range, or a threshold for forward guidance. If it is worth communicating a plan, it is worth choosing a plan that one can live with. NGDP targeting is that plan. The Project Syndicate 2014
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June 26, 2014
Closing Aquila accepts Baosteel, Aurizon takeover bid
More bankers think economy cooled in second quarter
Aquila Resources co-founder Charles Bass said yesterday he intends to accept a A$1.4 billion (US$1.31 billion) takeover offer from China’s Baosteel and Aurizon Holdings, Australian media reported. Bass holds about 10.7 percent of Aquila’s shares. Aquila Chairman Tony Poli, who holds about 28.92 percent of the company shares, has also said he intends to accept the offer. When Bass and Poli accept the offer, Baosteel and Aurizon Holdings will gain 50 percent of the company’s share. The two companies are keen to take control of Aquila so they can restart the stalled US$10 billion West Pilbara (pictured) Iron Ore Project in Western Australia.
More Chinese bankers believe the economy is cooling in the second quarter than earlier in the year and demand for loans has weakened, according to a central bank survey published yesterday. The survey also showed that in the second quarter the number of bankers who believed monetary policy was appropriate increased from the first three months of the year. The survey also showed fewer Chinese residents believed property prices are at unacceptable levels, as home prices show signs of cooling.
Grafted red wine An annual National Audit Office (NAO) report reveals graft evolution in China
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hinese government funds have been misused to buy French vineyards, pay for a trip to Las Vegas and more, the state auditor said in a document revealing more than 300 serious corruption cases. President Xi Jinping launched a much-publicised anti-graft campaign after taking over as Communist Party chief in late 2012, but critics say no systemic reforms have been brought in to prevent corruption. Two companies in the north-eastern port city of Dalian were granted 268 million yuan (US$43 million) by local authorities last year to buy overseas technology, but instead purchased 14 vineyards in France, the National Audit Office (NAO)
said in its annual report. Haichang Group, one of the firms it named, is currently the biggest Chinese owner of Bordeaux vineyards with more than 10 estates including Chateau ChenuLafitte, according to French media reports. Executives with Haichang Group, a trading and shipping company that also has interests in property, tourism and agriculture, were not immediately available for comment when contacted by AFP. The company is one of the two investors in a seaside theme park in Dalian that was passionately promoted by disgraced former political high-flyer Bo Xilai, who was once mayor of the city. AFP was unable to locate
Taiwan: the longest awaited trip
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he Chinese mainland’s chief of Taiwan affairs Zhang Zhijun yesterday underscored his long-waited trip to Taiwan, and called for continuous efforts to boost cross-Strait ties. “My flight from Beijing to Taipei took me less than three hours. But it took us 65 years to make that flight possible,” Zhang said when meeting with Wang Yu-chi, director of Taiwan’s Mainland Affairs Council, at a hotel near the airport. He added that mutual visits made by himself and Wang within six months and the setting up of a communication mechanism between crossStrait affairs authorities on both sides of the Taiwan Strait had been deemed “unimaginable” in earlier years. Zhang is the first director of the State Council Taiwan Affairs Office to visit the island. Wang Yuchi visited the mainland in February. While extending his welcome to Zhang, Wang Yu-chi said cross-Strait relations had witnessed “twists and turns”, and even the smallest progress had not come easily. Xinhua
a website or any publicised contact telephone numbers for the other Dalian firm, Ruiyang Investment Management Co. Ltd. Chinese investors have been among the biggest buyers of French wineries in recent years. The purchases have raised concerns highlighted by a report last year by Paris’s money laundering investigators Tracfin, calling for “increased vigilance” of such deals. The NAO said a total of 314 cases where “major violation of laws and disciplines” was suspected, involving more than 1,100 people, had been “uncovered and transferred” to investigators. The 2012 report had 175 such cases, it added in the document submitted Tuesday to the National People’s
Congress, China’s Communistcontrolled legislature. China Geological Survey officials spent three days in Las Vegas during a trip to North America meant to study shale gas technology, and later claimed they were working in Canada at the time, the NAO said. A tour by high-ranking officials organised by the State Oceanic Administration in 2012 to a Chinese research station in Antarctica spent half the travel time in France and Chile, it added. Mismanagement of state assets was rife, the NAO said. An investigation into China National Cotton Reserves Corporation found that the company leased out some of its storage space while over two million tonnes of cotton
were left in the open air. Some executives of stateowned China National Petroleum Corporation, the country’s top oil producer, “colluded with private companies or individuals to pursue personal gains” in deals such as asset acquisitions and sales, causing “grave losses to state interests”, it said. Bribe-taking methods have become more covert, it added, with offenders appointing brokers to receive kickbacks or exchanging favours for benefits such as shares and not cashing them in until they retire. “Some invested part of their illegal gains in public welfare undertakings to build a virtuous image or pursue political status,” the NAO said. AFP
Thai police arrest Zimbabwe switches Macanese for World Cup power contractor illegal betting Thai police said yesterday they have arrested more than 1,000 people, including four foreigners, in a crackdown on illegal betting during the World Cup. Three of the suspects -one from Macau national and two from Hong Kong- were believed to be bookmakers. The arrests come amid a wider blitz on gambling by the new junta in a bid to “uphold social order” in Thailand, where betting is largely banned with locals restricted to gambling only on the state lottery or at a handful of horse racing meetings. “Since the World Cup began we have arrested 1,023 people for illegal gambling on matches, the majority of whom are punters,” said Police Major General Chantavit Ramsut. Police also seized betting slips worth US$525,000 during raids since the World Cup kicked off in Brazil on June 12, he added. If convicted of illegal gambling the suspects, all in their fifties, face a US$60 fine and two years in prison.
The Zimbabwe government has awarded a US$1.3 billion thermal power generation project to China’s Sino Hydro after another Chinese company failed to conclude the contract, a minister said yesterday. Energy minister Dzikamai Mavhaire said the tender for the expansion of the Hwange power station had been awarded initially to China Machinery and Engineering Company (CMEC). “CMEC however failed to conclude the contract within the stipulated time frame that they had agreed upon with the Zimbabwe Power Company and the government of Zimbabwe,hence,the tender was cancelled in May 2014,” he said. Sino Hydro’s bid for the project was the next best, Mavhaire said. He described the Hwange power station project, which is set to add two generating units of 300 megawatts each, as “one of our major priorities.” Zimbabwe experiences power shortages owing to low electricity production resulting in regular outages in households and industries. The Zimbabwe Electricity Supply Authority (ZESA) generates 1,300 megawatts against a demand of 2,100 megawatts.
AFP
AFP