Page 2 |
Seeking the new Silk Road
Page 4
Sitting pretty
Publisher: Paulo A. Azevedo
Closing editor: Sara Farr
MOP 6.00
Nam Kwong boss elected CEM chairman
U
Number 582 Tuesday July 15, 2014
p to 63 billion patacas are already sitting comfortably in the public coffers. That figure is the government’s 2014 fiscal surplus target. Achieved in just six months of the full year. At this rate, the government could look at another 60 billion patacas by year-end 3
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Year III
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www.macaubusinessdaily.com
LRT Roadshow No need for public safety concerns about the LTR. Secretary for Transport and Public Works Lau Si Io said communication is key. Public complaints about planned routes will be listened to. Three route proposals can be evaluated by the public
No mandatory central provident fund system for now Page 4
Court rules in favour of Paradise Entertainment Page 7
Realtors seek premises
HSI - Movers July 14
Legislators should approve the amendment by next month. Macau’s real estate agents law will now be more flexible. Realtors not operating out of accredited commercial premises can obtain a temporary 5-year licence Page
Name
2
Page
5
%Day
China Unicom Hong K
4.72
China Mengniu Dairy
4.05
China Mobile Ltd
2.55
China Resources Pow
2.05
Tencent Holdings Ltd
0.99
Cheung Kong Holding
-0.78
Li & Fung Ltd
-0.79
Sands China Ltd
-0.87
Sun Hung Kai Propert
-0.94
Galaxy Entertainmen
-1.12
Source: Bloomberg
I SSN 2226-8294
A game of two halves
Off target
The World Cup has ended. It’s also helped end the SAR’s winning streak on gross gaming revenues. Punters deserted the tables in droves to follow – and bet on – the matches. Analysts say this could affect casino takings, with operators raking in 30 percent less revenue than average for a first half
The Chinese GDP release date nears. Economists gaze in the forecast tarot. Unfortunately, every result forecast lurches from bad to worse
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2014-7-15
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2014-7-16
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2014-7-17
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2
July 15, 2014
Macau
Top CEM management reshuffle
T
he current chairman of the state-owned conglomerate Nam Kwong (Group) Company Ltd, Mr. Xu Kai Cheng, has been elected chairman of the city’s sole power supplier Companhia de Electricidade de Macau (CEM), in a top management reshuffle following Nam Kwong’s decision to purchase the majority stake in the company in late May. At an extraordinary general meeting of shareholders convened yesterday at CEM, Mr. Xu, who held senior management positions at Sinopec Shanghai Petrochemical Company Ltd before, was elected as the power supplier’s chairman. In assuming this post, Mr. Xu replaces Mr. João Marques da Cruz, who was elected as the vice-chairman of CEM’s board of directors. In tandem with the board members reshuffle came a change in the executive committee of CEM: Mr. Bernie Leong was elected yesterday as the new chairman of the committee, replacing his predecessor Franklin Willemyns. Following the top management reshuffle, Mr. Willemyns does not hold any position at CEM, the company
THERE ARE THINGS WE DON’T DO
confirmed to Business Daily. The top management personnel changes have taken place after Hong Kong-listed NWS Holdings Ltd said in late May that its joint venture with
Suez Environment would sell its shares in CEM to Nam Kwong Group for US$612 million (4.9 billion patacas). Nam Kwong, a Chinese stateowned firm with a presence here in
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Macau, Guangdong to discuss framework agreement C
Realtor law changes by August B
y early next month, the Legislative Assembly will approve a transitional term to be introduced to the real estate agents law that allows realtors whose offices are not commercial establishments to operate under a temporary licence, a sub-committee of the Assembly told media yesterday. The estate agent law, which has been in effect for about a year, stipulates that the government will only license estate agents whose working venues are registered as commercial establishments, such as offices or spaces with the registered use of providing commercial services. But this rule will see an adjustment soon: the government is about to introduce to the estate agent law a transitional term allowing agents whose working venues are not commercial establishments to apply for a 5-year temporary licence, a period that should serve as ‘sufficient time’ for agents to relocate their business premises or switch their registration to a commercial one, the president of the first permanent committee of the Assembly, Kwan Tsui Hang, told media following a closed-door meeting with the
property, travel, bus services and fresh food supplies, would then have a 90 percent stake in a company that held 42 percent of the shares of CEM.
government yesterday. “Of the over 2,000 estate agencies that applied for an operation licence, more than 190 agencies could not obtain any licence because they had been working in a non-commercial establishment since the estate agent law came into effect,” Ms. Kwan said, citing official figures. “But I have to stress that the transitional term to be introduced will only allow those working for a non-commercial establishment on the ground floor of a building to apply for a temporary licence,”
the legislator added. “Those that are working upstairs cannot apply for this licence at all because the government would not like a business unit affecting other households living in a residential building.” The intended changes will undergo sub-committee approval by the end of this month, then the General Assembly will give a final reading of the transitional term in early August before gazetting this change in the form of an administrative regulation, Ms. Kwan noted. SL.
hief Executive Fernando Chiu Sai On and the governor of Guangdong Province, Zhu Xiaodan, will attend a meeting on the cooperation framework agreement between Guangdong and Macau scheduled for tomorrow morning at the Four Seasons Hotel Macau. Several major tasks of this agreement will be discussed by the two parties, which primarily promotes the execution of Guangdong-Macau service trade liberalisation, Hengqin as a major platform to develop Macau’s multiple economies, enhanced cooperation in the development and construction of Cuiheng New District, and the speeding up of the infrastructure of the new passageway between Macau and Guangdong. The meeting will also focus on social issues, food security, the environment, medical issues, cultural issues and yachting tourism.
3
July 15, 2014
Macau
Loaded: Government’s 2014 fiscal surplus target in sight From here on in, it’s all extra money. In June, the government achieved this year’s fiscal surplus target of MOP63 billion. With six months still to go, public coffers could get a bonus of MOP60billion in 2014. Pocketing most of the gaming taxes and spending the minimum has become an old Macau’s story Alex Lee
Alex.lee@macaubusinessdaily.com
In six months, the government has managed to spend only 5 percent of 2014’s investment budget
W
ith only half a year under its belt, the Macau Government has already achieved the fiscal surplus budgeted for 2014, as expenditure continues to lag far behind the solid growth of revenues flooding in from gaming. Between January and June, the government amassed four times more money than it spent. The investment in infrastructure, for example, has been residual. The scenario of an all-time record fiscal surplus in Macau continues to gather credence as the year rolls on. According to the Financial Services Bureau, the fiscal surplus totalled 60.4 billion patacas in the first six months of 2014. That’s 95 percent of the sum budgeted for the whole year (63.6 billion patacas). With an execution rate of almost 100 percent last moth, every surplus generated during the second half is set to be a plus for Macau’s public finances. And a huge one. If the January-June period trend persists through the second half, the Macau Government could achieve a fiscal surplus of almost 125 billion patacas, an all-time high. But also, 20 percent more than last year’s and twice the amount projected by Francis Tam’s office for this year.
Gap problem In the next six months, Macau could receive an extra budget of 60 billion patacas in ‘profits’, enough money to build five Light Rapid Transit (LRT) systems. The fiscal performance here has been quite unique anywhere in the globe: a report by the World Bank a month ago revealed that last year Macau registered the world’s second highest fiscal surplus, behind Kuwait. The huge gap between revenues
and expenditure shows that the government is underestimating the money it earns, namely the huge financial flow from gaming taxes, and making overly optimistic assumptions about how much it plans to spend on investments like bridges and public housing, or on wages and stationery for public services. In the first half of 2014, the execution rate of public revenues was already nearly two-thirds of the whole year’s total (59 percent), while expenditure execution had not reached a third (29.6 percent). This means that the government will probably close 2014, with more revenues and less costs than anticipated and, of course, a fatter exchequer. Even with expenditure growing 35 percent in the first six months of 2014 compared to the same period last year, this performance was not enough to catch what the government had budgeted. With 23 billion patacas spent between January and June, the
government would need to invest 55 billion patacas more in the second half, at a rate of almost 10 billion patacas per month, in order to reach the goal promised to Macau’s population (77 billion patacas). The 23 billion patacas already spent as at June were applied exclusively to current expenditure, public services like wages, stationary, computers and so on.
No investment Data from the Financial Services Bureau also reveals that the government has carried out almost zero investment this year. From the 15 billion patacas budgeted for 2014, Macau has invested only 832 million patacas in six months. That’s 5.5 percent of the total projected for the year. If being residual is not enough, the investment this year is dropping 9.2 percent compared to a year ago. Even after gaming revenues in
Macau suffered their first drop in five years last month (less 3.7 percent year-on-year) the amount of taxes charged to the casino industry here still grew 16 percent in the first half (year-on-year). In June, public coffers amassed 10 billion patacas in gaming taxes alone, a component that represents 85 percent of all revenues. The government’s total revenues reached MOP86.5 billion as at June, four times more than expenditure (23 billion patacas) the Financial Services Bureau revealed. With the fiscal surplus expected to stay above 120 billion patacas this year, Macau will increase its fiscal reserves up to 350 billion patacas (in 2013, fiscal reserves here were 237 billion patacas), around 90 percent of GDP. If this becomes a reality, by the end of December the government here will have enough money to run Macau for a year without doing or producing anything and still not go bankrupt.
Central Account Variation JanJun (14/13) (%)
Execution 2014 Budget
Budget 2014
Jan-Jun 2014
Patacas
Patacas
%
%
Revenue Taxes Taxes from gaming
141,248 123,524 117,846
86,447 72,484 71,034
13 16.2 16
59.1 58.7 60.3
Expenditure Current Expenditure Investment
77,639 61,768 15,018
22,982 21,827 832
34.6 37.6 -9.2
29.6 35.3 5.5
Surplus
63,610
60,464
6.5
95.1
Source: Financial Services Bureau Values in millions of patacas
4
July 15, 2014
Macau
Seeking the new Silk Road The third edition of the Global Tourism Forum will be hosted by Macau in late October to help the territory transform itself into the ‘World Centre of Tourism’ akin to a new Silk Road in Asia
T
he Director of the Macau Government Tourist Office (MGTO), Maria Helena de Senna Fernandes, announced yesterday that the government is launching an international public tender to select a group of experts to prepare a report on the future of Macau’s tourism. It is anticipated that the research will last one and a half years and be published in 2016. “We’re going to launch an international public tender this year for a deep report on Macau’s tourism. The study will be complemented with two other reports that are already in progress: one about the history of the tourism industry in Macau and another regarding other destinations that can be compared to Macau,” the MGTO director said. “The outcome of this study is very important in defining the future of tourism in Macau.” During the presentation of the third edition of the Global Tourism Economy Forum yesterday, scheduled to take place at The Venetian Macao from October 27-29, Ms. Senna Fernandes was questioned about tourists’ perception that the quality of the services provided by Macau is declining. “We all have the responsibility to improve the quality of tourism in Macau,” she said. “All Macau citizens are part of the sector . . . In terms of improving quality we are running an awareness campaign and also investing in training courses for the industry.”
This year’s edition theme is ‘Maritime Silk Road – From Macau we Begin’. Pansy Ho, vice chairman and secretary general of the Global Tourism Economy Forum, said that the theme will be in line with the intention of Beijing to rebuild the Silk Road. “The theme of the Global Tourism Economy Forum is in line with the 21st Century Silk Road that has been advocated by President Xi Jinping,” she said. “In
this year’s edition the event will be more concentrated and there will be more face-to-face meetings between ministerial officers and businessmen from the private sector.” The event is expected to attract a global audience and several experts in the field. Last year, the event drew more than 1,100 delegates from 29 regions and 41 speakers from all over of the world. “We’ve been organising the event for two years. It’s an important event
for Macau as the global tourism has been developing at a fast pace, mainly in the Asia Pacific region,” Cecília Cheung So Mui, chief of Office of the Secretary for Social Affairs and Culture, said during yesterday’s press conference. “We hope that this platform will help the tourism of Macau develop. We hope that this forum will help Macau [become] a World Centre of Tourism and Leisure.”
No mandatory central provident fund system for now Why a non-mandatory Central Provident Fund, not a mandatory Central Provident Fund, legislators ask Kam Leong
newsdesk@macaubusinessdaily.com
T
here is still no timeframe set for the launch of the mandatory Central Provident Fund (CPF) system while the current non-mandatory CPF system will only be reviewed three years after the policy’s implementation, president of the Social Security Fund Ip Peng Kun said yesterday at the plenary session of the Legislative Assembly. Legislators questioned the government’s direction in carrying out the non-
mandatory CPF system and perceive that such a system should be made mandatory. Legislator Ella Lei Cheng I said there are only around 90,000 local labourers under the guarantee of a private provident fund while the total number of Macau’s labour force is between 260,000 and 270,000 people. She said she thinks the ratio is very low. Mr. Ip said that the CPF system proposed in a nonmandatory way is based on the consideration of the
CORRECTION In yesterday’s edition of the Business Daily, we incorrectly printed the opening date slated for Wynn Palace as 2015. In our story ‘Wynn Macau COO: Macau about starting from basics’ on page 5, it should read ‘Wynn prepares to open Wynn Palace, the new casino-resort of the company, in the first half of 2016.’ We apologise for any inconvenience caused.
current social situation, as well as the situation that the private provident fund has been running for many years here. The government intends to propose [the CPF system] in a gradual way and “to deal with the easier one before the more difficult one,” when answering legislator António Ng Kuok Cheong’s questions about when the government will propose a full coverage mandatory CPF system. The government plans to evaluate the effect on the nonmandatory CPF system as well as the feasibility of the mandatory one only three years after the execution of the non-mandatory CPF, according to Mr. Ip. The government announced the Social Security and Old-age Pension System Reform Programme in 2008, of which the major objective is to build a doubletier social security system. Under the first-tier social
security system all Macau residents are entitled to basic social protection, particularly old-age protection, while the second-tier non-mandatory Central Provident Fund is to support a more ample protection for retirement life, according to the official website of the Social Security Fund.
Old age, disability pensions With regard to discrepancies due to the government increasing old age pensions, Mr. Ip said that the government has authorised an actuary company to study and analyse the situation. Currently, the actuary work is in the stage of analysis and review. Relating the results will only be announced once the final results are known and decision made. He said that the system of getting pensions in advance
has been running for many years. Hence, such a problem is difficult to resolve because other problems may arise, such as taking care of those who can only get their pensions when they reach the age of 65. Moreover, the government has started giving temporary allowances to the congenitally disabled, which came into effect on July 1, according to Mr. Ip. This policy is to supplement that of the current Social Security System which does not approve disability pensions to the congenitally disabled. According to law No. 4/2010 ‘Social Security System,’ applicants may only apply for disability pensions if they lose their ability to work after becoming a beneficiary; in addition, they must have lived in Macau for at least 7 years and have contributed to the system for at least 36 months.
5
July 15, 2014
Macau
Lau: LRT construction ‘zero impact’ on public safety The public works secretary says the government will try its best to allay public doubts about the design of the metro route for Macau Peninsula-north Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he Secretary for Transport and Public Works, Lau Si Io, has sought to reassure residents, saying that the light rapid transit (LRT) route design for the northern Macau Peninsula will have “zero impact” on public safety, as complaints from the Peninsula-north neighbourhood were raised during and after a public consultation session over the weekend on the route design. Starting from last week, the government has installed street exhibitions and held weekend forums featuring three proposals for the metro route of the northern Macau Peninsula, which would connect the biggest in-land border post, the Border Gate, with the Outer Ferry Harbour Terminal and Golden Lotus Square opposite Fishermen’s Wharf. “We stress that for some issues related to the LRT construction, such as fire safety or property safety, the government will [act] in strict compliance with local laws and international standards to ensure that the construction will have ‘zero impact’ on the public,” Mr. Lau said yesterday on the sidelines of a sub-committee discussion at the Legislative Assembly. This was in response to complaints voiced at a forum on Saturday whereby some residents opposed a proposal suggesting the elevated metro run along Jardim Areia Preta (Areia Preta Park). “The LRT project is a core part of our public transport policy; it doesn’t only serve [one] community, but the whole of society here,” the secretary added. “No matter how many times we have to do it, we’ll go into the community to communicate with residents and resolve their doubts
No matter how many times we have to do it, we’ll . . . communicate with residents and resolve their doubts Lau Si Io Secretary for Transport and Public Works
[about the LRT route].” The three proposals for the metro route for Peninsula-north, all to be elevated, run through Avenida Leste do Hipódromo, Avenida 1º de Maio and along the shore, respectively. The metro route cutting through Avenida 1º de Maio, or where the government intends to establish two stations at Areia Preta Park, is what officials describe in their introduction to the route plan as having the “best coverage” of the residential districts in the north-eastern neighbourhoood of the Peninsula compared to the other two proposals. However, this route plan has also stirred up some complaints, primarily due to its
impact on the public’s use of the Areia Preta Park, a major leisure facility in the densely populated neighbourhood. The public forums and the street expositions of the LRT route design for the northern Macau Peninsula will end mid-August. Recently released official information suggests a budget of a minimum of 1.75 billion patacas (US$219 million) on the northern segment of the LRT alone. The biggest public dispute that the administration has encountered on the LRT route design is the elevated railway cutting through the heart of the NAPE district, following Rua de Londres and Rua do Porto and
connecting it to Nam Van in Macau Peninsula south – a proposal that the Transportation Infrastructure Office made in 2009. The Commission Against Corruption released a report in September 2012, however, that sided with a NAPE neighbourhood association, saying that the railway should be moved away from their homes. The dispute finally resulted in rounds of readjustment of the Macau Peninsula south route for the LRT. The Office has now routed the railway from Golden Lotus Square to Avenida 24 de Junho, Jardim das Artes, Nam Van, Sai Van, Barra and then on to Taipa.
6
July 15, 2014
Macau Brands
Trends
A Magic Potion by Dior
Logistical nightmare It’s up to the government to offer more support, but should it fail to do so, the local logistics industry here could face another crisis
Raquel Dias newsdesk@macaubusinessdaily.com
L
ike most products we buy, perfumes have to be designed, too. That’s why Dior has launched its most famous fragrances reinterpreted – Extraits de Parfum. The five little boxes are full of surprises created by house parfumier François Demachy. If you were a fan of J’adore, Miss Dior Original, Miss Dior, Diorissimo or Poison, you are sure to find these new versions very tempting. The Extrait de Parfum develops fully on the skin, unfurling a deep trail of scent. Centuries ago that was how ladies and gentlemen used fragrances; just a drop of a very strong essence would last longer than today’s Eau de Toilette. It is, however, a luxury to be able to find your favourite scents in this form, as the Extrait is the heart and soul of any perfume. But the fragrance is hardly the only luxurious thing about this new line of perfumes. Apart from using precious ingredients like Rose de Mai, the bottles that contain the perfume - handmade and fashioned from exquisite materials and decoration are truly artistic. The secret to their finishings lies in the skilled craftsmanship of the ladies in the Dior workshop. Even the way in which the bottle is closed belongs to a long tradition in perfumery. The ‘Art of Baudruchage’ is a traditional technique that consists of sealing the neck of the bottle with a natural membrane called a baudruche. The baudruche is held in place by thin gold or silver thread, and tightly bound to ensure the bottles are perfectly air and watertight. Because what you’re holding is nothing less than a magic potion, use it wisely. One drop behind each ear, and one on the inner wrist, just like a lady.
W
hile the logistics industry has a more important role than ever with Macau’s economic diversification and MICE industry, the sector also remains in crisis. In 2012, the government set up the Logistics Development Committee in order to support and promote the industry. But this hasn’t been enough and insiders want the government to act in order to help develop the industry. Lei Kuok Fai is the president of the International Logistics and Forwarding Association of Macau and a member of the Logistics Development Committee. He says that as the government has concentrated its resources on developing the
The suburbs More residents are opting to move to Zhuhai as rents in Macau drastically increase
M
ore Macau residents are choosing to live in Zhuhai whilst working in Macau. The reason for this is primarily the high rental prices demanded by landlords and real estate agents here. Manuel Silva and Clara Brito, a
gaming and tourism sectors, the local logistics industry has almost been “marginalised,” and has gone through a hard time. Si Ka Lon, a directly-elected Legislative Assembly member and president of the Macau Air Cargo Express Association, is concerned about the gradual decline of the local logistics industry over the past years. He says that many air freight forwarders have been forced out of business or switched to another line of business due to operational difficulties. In addition, the Zhuhai-Macau Cross-border Industrial Zone has not been transformed to provide
much needed warehousing facilities for the industry, according to Mr. Lei. Moreover, the transportation of goods from Macau to the Zhuhai Park for storage was supposed to be managed by a registration system, but it is actually handled by a declaration system identical to the Customs procedure, with formalities that should have been skipped. Mr. Lei says the industry has repeatedly asked the government to streamline the Customs procedure, but this issue still remains unresolved. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com.
Portuguese couple, recently moved to Zhuhai because of the real estate market. “Here in Macau the market forces you to become hostage to the landlord and the rentals, but also the type of offering in Macau is worse than in Zhuhai,” Manuel da Silva says. The move isn’t always a negative thing when taking into account the quality of life there versus here. “We now live in a spacious house, with gardens in the middle,” he says. For a three-bedroom house, with two ensuites, the couple pay less than the equivalent of 6,000 patacas a month. Some worry that Macau could soon become Monaco and have its residents working here but living outside the territory. For economist José Duarte, Macau’s situation is a bit more “complex,” considering the territory’s special status and legaladministrative differences from
mainland China. “The laws that apply in Macau are not the same as in mainland China and to reside in mainland China means that you will suffer a loss of your legal protections,” he says. In addition, by residing across the border certain “ambiguities” are created in what concerns the legal and taxation regimes that are applied to Macau residents. With rents continuing to increase, Mr. Duarte says that people are left with little other option, and this is mainly due to government policy. “There’s this fantasy that we’re living in a free market, from the real estate point of view, and that nothing can be done to fight this, but that isn’t true,” he adds. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com.
7
July 15, 2014
Macau
July gaming revenues 30pct behind H1 average July and August mass market performance is now the key focal point for investors deciding the fate of the 2014 gaming year. Revamped revenues are expected for August and in October, while the smoking ban promises to be another challenge for operators Alex Lee
Alex.lee@macaubusinessdaily.com
A
s July progresses, it’s almost confirmed that this month will be another red card for gaming revenues in Macau, as the impact of the World Cup impact has been much greater than anticipated at the beginning of the year. The success of the football tournament held in Brazil for the last 30 days drew thousands of gamblers away from the baccarat tables and slot machines here. In the first week of July, the average daily revenue in Macau’s casinos was running 30 percent behind the first-half of the year’s median. Until July 6, gaming revenues totalled 783 million patacas per day versus a daily 1.1 billion recorded in the first six months. Wells Fargo is expecting the daily performance to improve in the next two weeks, given that the World Cup ended on Sunday. However, this will not be enough to lift July revenues out of the red. The US bank predicts that casino industry
gains can drop by 10 percent this month with the most probable scenario being a 5 percent decrease. Investors think July and August performances will be a key focal point in deciding the fate of the 2014 gaming year. With July expected to be flat in the best case scenario, gaming revenue growth is due to resume in August “given an easier VIP comparison and the end of the World Cup,” says Wells Fargo. In August, revenues could jump in a 5 to 10 percent interval year-on-year, assuming a drop of 2 percent in the VIP segment and a 26 percent increase in the mass market.
From Brazil to Macau Even with the mixed investor sentiment, a research team from Wells Fargo believes that the World Cup clearly made an impact on Macau’s casinos. First, June revenues went down 16 percent, almost double the 9 percent
historical decline of June. In the previous World Cup in 2010, revenues dropped 20 percent. Other proof, says Wells Fargo, was the softer than expected June mass revenues at The Venetian and Sands Cotai Central. “We believe Las Vegas Sands Cotai properties are a good indicator of excess demand given their size, and their abrupt weakness indicates to us that extraneous factors had an impact in June,” says Wells Fargo. Finally, the mass revenue win per day was down 7 percent compared to May, a considerable drop when compared to historical flat performances in the last two years. If in the near term mass market revenues during Summer is the key factor for investors, in the medium term the main challenge will be the impact of the smoking ban due to start on October 6. While Wells Fargo admits these events can create some turbulence in gaming stocks and revenues, their impact will not be “permanent or thesis changing”.
Court rules in favour of Paradise Entertainment S
HFL Entertainment (Asia) Ltd had an appeal rejected after the Court of Second Instance here ruled against an injunction filed against Paradise Entertainment Ltd. SHFL – formerly known as Shuffle Master – has been in a long and at times bitter trade dispute with a Macaubased company called LT Game Ltd and its Hong Kong-listed parent company Paradise Entertainment Ltd. It concerns a patent claimed in Macau by L T Game for technology in a multi-game electronic table game product featuring a live dealer. Bally Technologies Inc last year acquired SHFL Asia’s parent company SHFL Entertainment Inc. In October 2012, a counter litigation by Shuffle Master Asia Ltd, a unit of SHFL, sought to prevent Paradise and its units from claiming a monopoly in Macau on the relevant technology. A month after the injunction, Macau’s lower court dismissed the case, and SHFL filed an appeal with the Court of Second Instance. Now the Court of Second Instance has also dismissed SHFL’s appeal. In a January 2013 filing, Paradise stated: ‘The company and the directors further believe that the [Shuffle Master’s] Macau injunction was initiated as one more phase of a litigation tactic to pressurise the Group, as a result of the infringement proceedings originally filed by Mr Jay Chun, LT Game and Natural Noble, against, inter alia, Shuffle Master, for infringements of Macau Patent I/380 and Macau Patent I/150.’
S. Korea’s Paradise offers treasury shares in 286 bln won deal-term sheet
S
outh Korean casino operator Paradise Co Ltd has offered 7.5 million treasury shares in a 285.8 billion won (US$281.2 million, 2.2 billion patacas) block sale, according to Reuters citing a term sheet seen by the news agency. The shares, offered at 38,100 won each, were at a 4 percent discount to last week’s closing price of 39,700, near its record intra-day high in late June. Paradise said in a separate regulatory filing that the funds raised would be used for operations but could also be partly used to fund acquisition. Goldman Sachs was the sole bookrunner of the block sale.
8
July 15, 2014
Greater China Taiwan to permit purchase of yuan financial products
Downward pressure breaks Green measures are impacting heavily on industry
Taiwan financial regulators are planning to allow Chinese tourists to buy yuan financial products when they travel to the island, a newspaper reported yesterday, in the latest sign of warming ties across the Taiwan Straits. Mainland tourists will be allowed to trade derivatives, mutual funds and insurance products linked to the Chinese currency, boding well for the Taiwan financial sector’s ambitions to compete with that of Hong Kong and Singapore, the Commercial Times said, citing unidentified sources. Officials of Taiwan’s Financial Supervisory Commission (FSC) could not be reached for comments.
More bank loans to help redevelop China Development Bank (CDB) granted loans totalling 219.5 billion yuan (US$35.70 billion) to redevelop rundown urban areas in the first half of 2014, benefiting 2.13 million families, it said on yesterday. Of the total, 195 billion yuan was lent after an early-April State Council meeting laid special stress on accelerating renovation projects. CDB Chairman Hu Huaibang said the loans will exceed 400 billion yuan this year and the bank will do its best to improve efficiency in the use of the money.
Summer grain output at record high China’s summer grain output hit a record high of 136.60 million tonnes in 2014, up 3.6 percent from last year, said the National Bureau of Statistics (NBS) yesterday. The total planting area for summer grain crops expanded 0.1 percent from the previous year to 27.6 million hectares, the NBS data showed. China’s summer grain crops, mainly wheat and early-season rice, usually account for about 20 percent of its annual grain output. Autumn grain crops, which include corn and middle- and late-season rice, account for the remaining 80 percent.
IBM launches Chinese smart city R&D base IBM and its Chinese partner will launch a base in southwest China’s Sichuan Province to research and develop “smart cities,” futuristic urban centres where computing technology will improve infrastructure and public services, they announced on Sunday. The joint project with Chinese firm Sichuan Huaxun Zhongxing Technologies Co. Ltd follows their announcement on May 18 that they will build a service centre dedicated to the big data and cloud computing that is necessary for smart cities. Their Global Smart Cities R&D Centre, a supporting industrial park and other accompanying projects will involve a total investment of US$4.88 billion.
Benxi Steel Industries in Liaoning, one of the provinces inspected
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lthough Chinese leaders have stressed the flexibility of the GDP growth target, an inspection group dispatched by the State Council found that attaining “reasonable” growth remains a struggle. The group inspected government work in Hebei, Liaoning, Heilongjiang and Beijing from June 25 to July 5. It noted that slowed economic growth, particularly in Hebei and Heilongjiang, needs to be addressed. Hebei Province’s GDP growth fell
by 4 percentage points to 4.2 percent in the first quarter, marking the worst performance in the past 20 years. Hebei, which borders Beijing, is making painstaking efforts to cut cement, steel and glass facilities as the province is partly blamed for the smog in the Chinese capital. These polluting facilities, however, are the major powerhouse driving Hebei’s economy. The economy in northeast China’s Heilongjiang Province also suffered a heavy blow in the first three months
with GDP expansion decelerating to 4.1 percent from 9 percent in the first quarter of 2013. Its growth was the lowest of China’s provincial-level regions. Oil exploitation, coal mining and lumber, the three pillars of Heilongjiang’s economy, shrank quickly due to low energy prices and strict felling bans. The inspection group found that although the economy in Liaoning Province was generally stable, it suffered from weak exports and low
Samsung stops biz after child
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he firm said it halted business with a supplier in China over suspected use of child workers, the first time it has taken such a step, after criticism that its monitoring of labour practices at suppliers was inadequate. The decision, announced yesterday, comes less than a week after U.S.-based China Labour Watch said it found “at least five child workers” without contracts at the supplier and called Samsung’s monitoring process to halt such practices “ineffective.” Samsung, the world’s biggest smartphone maker, said it conducted three audits since 2013 of the supplier, a wholly owned subsidiary of South Korea’s Shinyang Engineering Co Ltd , the latest of which ended on June 25. But another investigation prompted by the watchdog’s report led to evidence of what
S. Korea: Chinese tourists’ largest destination The Republic of Korea (ROK) will overtake Thailand to be the largest outbound destination for Chinese tourists in this year, said a report from China’s leading online travel agency Ctrip. The firm predicts the number of Chinese visitors to the ROK will jump 40 percent from a year ago in 2014, thanks to visa-free policy for Chinese visitors to Jeju Island, the most popular tourist attraction in the ROK. In 2013, nearly 4 million trips to the ROK were made by Chinese tourists, the largest among foreign visitors, according to Ctrip.
KEY POINTS Samsung says found evidence of suspected child labour Yesterday’s step first by Samsung on allegations of illegal labour practice U.S. activist group says China supplier uses child labour
Samsung called suspected child labour, pointing to holes in the tech giant’s ability to enforce its labour guidelines for Chinese suppliers. “The Chinese authorities are also
looking into the case,” Samsung said in its statement yesterday. It said it would permanently cut all ties with the supplier if the allegations were true, in line with
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July 15, 2014
Greater China
flexibility
The downward pressure is still considerable. We should not ignore the challenges and risks Li Keqiang, Chinese Premier
investment enthusiasm, especially in the property market. The group said in a report that secondary industry plays a decisive role in the economy in these provinces. An unbalanced economic structure leaves them vulnerable to macroeconomic fluctuation. Like Hebei, Heilongjiang and Liaoning, China’s other provinces are confronted with downward pressure as the country adapts to an economic slowdown and reshuffles the economic structure.
For the first time, China set a flexible GDP target of around 7.5 percent for this year and came up with the term “reasonable range,” giving GDP growth more room to fall. Although there is no specific lower limit to the range, an abruptly stalled economy could lead to rising unemployment, less government spending on improving livelihood, and even social unrest. Yang Chuantang, head of the inspection group, said he thought the growth rate in Heilongjiang and Hebei fell out of the reasonable range in the first quarter. “If pro-growth measures do not kick in immediately, it will be very hard for them to secure the yearly target,” he added.
State council inspection To make sure that the central government polices are taking effect, the State Council sent a total of eight inspection groups to 27 ministerial departments and 16 provinces and municipalities. The inspection was the first of its kind since the incumbent central government took office last year. Whether local governments did well in stabilizing growth is high on the inspection list. Before the inspection, Premier Li Keqiang convened eight governors and mayors in Beijing last month to discuss the current economic situation. “The downward pressure is still considerable. We should not ignore the challenges and risks,” said Li at the meeting. “I took his remarks as criticism,” said Heilongjiang Governor Lu Hao. Xinhua
labour suspicions
Passenger-vehicle sales climbed 11 percent to 9.6 million units in the first six months of this year Ma Jie and Alexandra Ho
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hina’s state-backed auto association forecast that vehicle sales will slow more than it previously projected, as the economy showed little signs of improvement and more cities consider purchase restrictions. Total industry vehicle deliveries will probably rise 8.3 percent to 23.83 million units, compared with its January prediction for 10 percent growth, the China Association of Automobile Manufacturers said in a statement yesterday. Last year, sales increased 14 percent, making China the first country in which more than 20 million vehicles were sold in any given year. Demand for commercial vehicles slumped in the first half of this year as analysts forecast the world’s secondlargest economy to expand at the slowest annual pace since 1990. More local governments are considering limiting the number of new vehicles to cut emissions in support of Premier Li Keqiang’s “war” on pollution. “We believe the economy hasn’t shown obvious signs of improvement in the second half,” Xu Haidong, director of the auto association’s trade coordination department, said in a
telephone interview. “It’s hard to say whether more local governments will issue restrictions this year but this is definitely one of the risks we have to take into account.” Passenger-vehicle sales climbed 11 percent to 9.6 million units in the first six months of this year, led by demand for multipurpose and sport utility vehicles, according to data from the association. Demand for commercial vehicles slid 3.2 percent to 2.04 million vehicles in the same period. China’s gross domestic product expanded 7.4 percent in the first quarter from a year earlier, the slowest pace since 2012 and down from 7.7 percent in the previous three months. GDP is forecast by analysts to grow 7.4 percent this year. “Commercial vehicles are more closely related to the economic situation,” Yale Zhang, Shanghaibased managing director of researcher Autoforesight Shanghai Co., said by telephone. “Usually, if there are not a lot of investments, the truck demand will be affected. If there’s no construction projects, truck demand will be lower.” Bloomberg News
Barclays names new heads in Asia
multiple attempts to contact them by phone yesterday.
Labour problems persist
its zero-tolerance policy on child workers. Dongguan Shinyang Electronics and Shinyang Engineering could not be reached for comment despite
Truck sales lead to lower forecasts
Labour practices at Samsung suppliers have come under scrutiny since 2012, when China Labour Watch said seven children younger than 16 were working for one of the electronics giant’s China-based suppliers. Chinese labour law forbids hiring workers under 16. The South Korean firm later said it found no evidence of child labour following those accusations, although acknowledging other problems including overtime hours in excess of regulations. In November 2012, Samsung established a code of conduct for suppliers in line with standards set by the Electronic Industry Citizenship Coalition. It also asked suppliers to sign a compliance agreement to prevent child labour. Samsung also demands that suppliers adopt a strict hiring process that includes face-to-face interviews and the use of scanners to detect fake IDs to ensure no child labourers are employed. In its annual sustainability report, published on June 30, the firm said a third-party audit of 100 Chinese suppliers found no instances of child labour. The report cited other problems, however, with minors of legal working age but 18 or younger found working with chemical handling processes at 48 suppliers and a majority of suppliers not complying with China’s laws on overtime. Reuters
The company has changed most of its top Asia Pacific banking management this year amid a global drive to shrink its investment bank
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arclays PLC has named Patrick Kwan and Reid Marsh as coheads of Asia Pacific investment banking, according to an internal memo, taking over a unit hit by a string of senior departures earlier this year as the British lender scales back its global investment banking operations. Andrew Jones, interim head of investment banking in Asia Pacific, will step down from that position to focus on his other role as co-chief executive of Barclays’ business in the region, according to the internal memo seen by Reuters on Monday. David Campbell will take over from Kwan as interim head of distribution for the Asia Pacific region, the British bank said in a separate memo. That role involves sales of financial products, including stocks and bonds, to the bank’s clients in the region. Samson Yip has been named head of North Asia distribution, the bank said, reporting to Campbell. Meanwhile Jeffrey Juan will take on a new role that involves overseeing sales of all the bank’s equity derivatives products in the region excluding Japan. A spokesman for Barclays confirmed the contents of both memos. Reuters reported Marsh’s appointment as Asia Pacific investment banking co-head last week. He is based in London and will relocate to Hong Kong to take up his new post.
Barclays’ headquarters in London
Kwan, currently head of global finance and risk solutions for AsiaPacific, and head of distribution in the region, joined Barclays in 2001. Previous Asia Pacific investment banking head Matthew Ginsburg left in May, following the retirement of regional chairman and chief executive Robert Morrice earlier that month. Asia Pacific head of corporate finance Johan Leven and Asia Pacific head of financial institutions group Helge Weiner-Trapness left at the end of May. Barclays’ top mergers and acquisitions banker in the region, Jason Rynbeck, also left the bank for a role at HSBC that month. Reuters
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Greater China
AFP survey suggests growth stalling Growth of 7.4 percent would match the result for the January-March period
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hinese growth will fail to accelerate in the second quarter despite government stimulus measures, an AFP survey predicts, with the world’s second-largest economy forecast to record its worst annual performance in 24 years. China’s gross domestic product (GDP) expanded 7.4 percent in the three months to June from the same period last year, according to the median forecast in AFP’s survey of 17 economists. The National Bureau of Statistics is scheduled to release the GDP data on Wednesday. Growth of 7.4 percent would match the result for the January-March period, which was a slowdown from October-December’s 7.7 percent and the worst since another 7.4 percent expansion in the third quarter of 2012. Beijing introduced a series of policies in April in response to concerns over slowing growth, including tax breaks for small enterprises, targeted infrastructure spending and the encouragement of lending in rural areas and to small companies. Recent indicators -including growth in exports, retail sales and improvements in private and official manufacturing surveys- have helped allay worries over a possible destabilising dropoff in expansion. “We’ve seen the introduction of some proactive fiscal policies and signs of
Whether these mini-stimulus policies can be effective will depend on whether China will further relax its monetary policy Liu Li-Gang, economist, ANZ Bank
targeted easing in monetary policy,” Liu Li-Gang, Hong Kong based economist with ANZ Bank, told AFP. But he added: “Whether these mini-stimulus policies can be effective will depend on whether China will further relax its monetary policy.” Economists use the term “mini-stimulus” to highlight differences with the massive pump-priming that took place in the aftermath of the 20082009 global financial crisis, measures authorities say they are not contemplating now. China’s economy grew 7.7 percent in 2013, the same as 2012, which was the worst pace since 7.6 percent in 1999.
Premier Li walking with Germany Chancellor Angela Merkel last week. Li called achieving it the “inescapable responsibility” of local governments and urged “no delay” in action, an indication of concern
For full-year 2014, the median forecast in the AFP survey is for an expansion of 7.3 percent -down from 7.4 percent in the last quarterly poll three months ago. If realised, 7.3 percent growth would be the weakest annual performance since the 3.8 percent of 1990. China in March set its annual growth target for this year at about 7.5 percent, the same as last year. The objective is usually set conservatively so as to ensure being met. The last time China missed the target was in 1998 during the turmoil of the Asian
financial crisis. Officials including Premier Li Keqiang earlier this year emphasised that the goal was flexible - widely seen as a hint it may not be realised. But last month, Li called achieving it the “inescapable responsibility” of local governments and urged “no delay” in action, an indication of concern.
‘Dark cloud’ China’s leaders consistently say that slower growth is good for the country as they try to wean it off decades of over-
reliance on the huge yet often inefficient investment projects that have underpinned expansion. The ultimate payoff would be a model where the country’s increasingly affluent consumers drive activity, generating more sustainable growth in the long run. Shen Minggao, a Hong Kong-based economist with Citigroup, said the “ministimulus” seen this year shows “to some extent the government’s unwillingness to take the old approach seen in the past”. AFP
GSK case gets tangled up The Xinhua report said that GSK investigators had paid people in Beijing and Shanghai to purchase personal information
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rosecutors in China have filed charges against British investigator Peter Humphrey and his American wife, the official Xinhua news agency said yesterday, after the couple were detained last year following work they did for British drug maker GlaxoSmithKline Plc. The case against Humphrey and his wife Yu Yingzeng has become a key
piece in a long-running investigation into GSK, whose China executives have been charged with orchestrating a widespread network of bribery to promote sales. The case against the couple, who have been accused of illegally obtaining private information, has been formally lodged with the
KEY POINTS China case against GSK‑linked investigator couple lodged with court Couple alleged to have illegally obtained private information Trial to be held behind closed doors on Aug 7 family friends
GSK headquarters in London
Shanghai Number One Intermediate People’s Court for trial, the Xinhua report said. Two family friends with knowledge of the matter told Reuters this month that the couple’s trial is set for August 7 and will be closed to the public. The secrecy surrounding the trial has raised concern from British and
U.S. officials. China’s foreign ministry said last week that the trial will be handled in accordance with the law. ChinaWhys, the risk consultancy run by the couple, was employed by GSK in April 2013 to investigate an ex-employee suspected of sending anonymous emails, including the circulation of an intimate video of former GSK China head Mark Reilly with his girlfriend, as well as emails containing allegations of widespread bribery at the British drug maker. The Xinhua report said that Humphrey and Yu had paid people in Beijing and Shanghai to purchase personal information. Citing the prosecutor on the case, the report added that the couple had been fully aware of the illegality of their actions. Between 2009 and 2013 the couple illegally obtained private information during investigations into close to a thousand firms and a large number of private individuals, including household registration data, real estate and vehicle documents, as well as phone records, it added. Reuters
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Asia
Singapore surprisingly shrinks City-state’s economy contracted in April-June for the first time in seven quarters, hit by a sharp drop in manufacturing activity
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ingapore’s GDP shrank by 0.8 percent in the second quarter on a seasonally adjusted and annualised basis, the Ministry of Trade and Industry’s advance estimates showed yesterday, a much weaker outcome than the median forecast of 2.5 percent growth seen in a Reuters survey. The Singapore dollar briefly eased versus the U.S. dollar, reflecting the weaker GDP numbers. The U.S. dollar was last steady on the day at 1.2412 versus the Singapore dollar, having risen to 1.2421 at one point. Manufacturing fell 19.4 percent in the second quarter on a quarteron-quarter, seasonally adjusted and annualised basis, down sharply from 12.2 percent growth in the first quarter, the data showed. Michael Wan, an economist at Credit Suisse, said the plunge in manufacturing was due in part to a major electronics factory moving a substantial part of its manufacturing operations offshore in April. The Singapore Economic Development Board has said that a one-off, firm-specific factor had dented semiconductor production in April, causing a 9.4 percent yearon-year drop that month. Such shifts in production away from Singapore could persist, given the tightening of restrictions on foreign workers, and the position of Singapore manufacturers on the low end of the value-added chain, from where they have struggled to take advantage of demand for sophisticated smartphones and tablets. The last time Singapore’s GDP contracted in the seasonally adjusted annualised quarter-on-quarter advance estimates was in the third quarter of 2012, when GDP shrank 3.6 percent. The government expects Singapore’s economy to grow 2-4 percent in 2014 after expanding by 3.9 percent last year, and economists have generally tipped full-year 2014
The Jurong Industrial Estate (pictured) in Singapore was developed in the 1960s to industrialise the economy
KEY POINTS Q2 GDP in surprise contraction; -0.8 pct q/q s/adj annualised Manufacturing -19.4 pct q/q annualised Q2 vs +12.2 pct Q1 May prompt slight cut in fullyear growth expectations Economists say MAS likely to keep tight monetary stance
growth to come in near the upper end of the official forecast. A survey by the Monetary Authority of Singapore published in June showed that the median forecast of 23 economists surveyed by MAS was for the city-state’s GDP to expand 3.8 percent in 2014. “Chances are people are going to lower growth estimates for the year,” said Song Seng Wun, an economist for CIMB, adding that market expectations for full-year 2014 growth may be trimmed to around 3 percent to 3.5 percent. Still, the MAS will probably stick to its current policy settings at its next policy review in October “unless obviously we have a significant down-shift in the global growth environment,” Song said. Domestic policies and restructuring
are likely to put upward pressure on domestic inflation, and keeping inflation expectations at bay will likely remain the priority, he added. At its last policy decision in April, the MAS maintained its tight monetary policy stance of allowing a “modest and gradual” appreciation of the Singapore dollar. It said core inflation will be “elevated” as a recovery in advanced economies spurs a rebound in the city-state, and due to wage pressures from a tight labour market. Despite the plunge in manufacturing activity in the second quarter, economists said Singapore’s economy was likely to be supported in the second half by an expected improvement in growth among major overseas economies. Reuters
Mega bank merger rattles rating firms Malaysian bank panorama is set to impact all South Asia if merger finally succeeds
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atings agency Fitch warned yesterday that a merger plan by Malaysia’s second largest bank CIMB Group with RHB Capital and Malaysia Building Society to create the country’s biggest lender was fraught with risk. “The proposed merger of CIMB, RHB and Malaysia Building Society (MBSB) is ambitious, and will bring inherent challenges and risks for the new banking group amid a complex integration process,” Fitch Ratings said in a statement. Last week, CIMB, RHB Capital, which is Malaysia’s fourth largest bank, and MBSB said they had entered into a 90-day exclusivity agreement to negotiate the proposed merger of the three
entities and “the creation of a mega Islamic bank”. Malaysia, Southeast Asia’s third-largest economy after Indonesia and Thailand, hopes to become an important gateway into booming regional markets, while in Islamic finance it is determined to position itself as the leading international centre. This is the second attempt at a merger between CIMB and RHB in three years, and is in line with the central bank’s aspiration for further consolidation in the banking sector. Fitch, however, cautioned that it would not be an easy process saying the merger could weaken capital buffers for CIMB if not funded by sufficient new equity, adding
that any move to rationalise branches and staff could be “politically unpalatable”. “Furthermore, weakening credit growth and assetquality pressures in the overall banking system will not make the process any easier. Combining entities as large as CIMB and RHB will be lengthy, and the addition of MBSB is likely to make the integration even more complex,” it said. The new proposed group would stand out as the largest bank in Malaysia and the fourth-largest lender in Southeast Asia, with total assets of US$194 billion and a 23 percent market share of domestic loans versus current Malaysia top bank Maybank’s 18 percent. AFP
Malaysia’s Maybank headquarters
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Asia S. Korea sees record plant orders Overseas plant orders won by South Korean companies hit a new high in the first half of this year on the back of growing demand from Africa, a government report showed yesterday. South Korean builders received US$33.7 billion of industrial plant orders during the January-June period, up 20.2 percent from the same period of last year, according to the Ministry of Trade, Industry and Energy. The figure was larger than any other first-half orders received as strong demand from Africa, a rising plant-order market, helped domestic builders win great orders.
Singapore to subsidize healthier cooking oil The Health Promotion Board is spending millions of dollars a year in subsidies to promote the use of healthier cooking oil, local daily Straits Times reported yesterday. Starting this month, the board will absorb the difference in cost between palm oil, which is generally used by food outlets, and a healthier mix of palm and canola oil that costs 20 percent to 30 percent more. The aim is to get 20 percent of food outlets to switch from palm oil to the canola mix by 2020.
N. Zealand services sector accelerates The growth in New Zealand’s services sector rebounded slightly in June after slowing in the previous month, according to the latest performance of services index (PSI) out yesterday. The BNZ-Business New Zealand PSI for June was 54.7, up 0.6 points from May, but still below the year-to-date average of 56.1, on a scale on which above 50 indicates expansion and below 50 contraction. Business New Zealand chief executive Phil O’Reilly said businesses were mostly positive on market growth. All five main subindices were in expansion during June.
Sydney skyline set to rise
Urban planners are looking to raising Sydney’s skyline after concerns the city’s existing 235- meter height limit cannot accommodate future growth, local media reported yesterday. The height limit has not changed in 40 years, and experts say Sydney could run out of office space within 10 years, the Daily Telegraph reported. New South Wales Planning Minister Pru Goward said the government would look at changing height restrictions in order for the city to cope with future demand. City of Sydney Council is now reviewing its zoning, building height and floor space.
Stimulate won to win Seoul’s central bank operate quietly on the currency to shake up
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outh Korea’s foreign exchange authorities have been engaged in a quiet war in recent months to hold down the won, throwing more firepower at it than for years in a bid to support exports and help keep the economy on its fragile recovery track. The dollar-buying accelerated as the won hit six-year highs and crept towards 1,000 to the dollar, a psychologically symbolic level that policymakers appear reluctant to see broken quickly. It stood at around 1,019 per dollar late on Friday. The authorities have said they intervene only to smooth volatility, blaming “herd” behaviour for pushing up the won. Yet for now, even though the government wants to rebalance the economy towards consumption and away from exports, growth still relies on trade and a strong won hurts, hence the stepped-up intervention. Some dealers estimated the authorities’ net dollar buying at around US$12 billion in May. HSBC economist Ronald Man said in a report on Thursday that intervention that month may have been the largest since November 2009. While President Park Geun-hye has been keen to stimulate domestic consumption, demand has been crimped by the April ferry accident that killed more than 300 passengers.
That darkened the public mood and hurt activity in a number of sectors, including retail and travel. Exports, meanwhile, have suffered from slow growth in China, South Korea’s biggest market. On Thursday the Bank of Korea cut its economic growth forecast for this year to 3.8 percent from 4 percent. Despite a stance in favour of free markets, South Korean authorities have long intervened in currency
markets, which have caused friction with the United States and the International Monetary Fund. “The government has no choice but to support exports as there is a limit to what it can do to boost domestic consumption,” said Jeon Seung-ji, a foreign exchange analyst at Samsung Futures. Even if a stronger won brings down import prices, household incomes aren’t rising much, so neither will spending, she said.
South Korea central bank headquarters
Power to the (young) people Myanmar has launched its first ever multi-sectoral policy on early childhood care and development
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yanmar is putting emphasis on investment in young people in wake of challenges the country’s youths are facing. The challenges poses threats to the future of the nation, Myanmar leadership has warned. To overcome the challenges, investment in young people is required, Vice President Sai Mauk Kham stressed recently. He said as almost 30 percent of Myanmar’s population is youths, helping overcome their challenges is a sound investment for the future. The vice president also urged the country’s people to cooperate with the government for providing safe and secure lives, knowledge, skill and job opportunities for children. Over the past three days, Myanmar has launched its first ever multi-sectoral policy on early childhood care and development (ECCD), calling for increased government investment in the services for young children to enable them to have a better start in life and for the hopeful future of the state. President U Thein Sein said that the future of children depends on the
Launching the ECCD policy is the first concrete step toward mobilizing more resources across ministries for the support to early childhood development and a crucial measure in tackling child poverty and reducing inequalities Sai Mauk Kham, Myanmar Vice President
implementation of ECCD activities that are not just about the quantity but also the quality of services. The Myanmar Ministry of Social Welfare, Relief and Resettlement also stressed the need to cooperate with development partners for achieving the vision, mission and objectives collectively agreed upon for children. The ministry pledged to inject 28 percent of its budget in ECCD services instead of only 10 percent while the Education Ministry is committed to spending 12 percent of its budget in early pre-school and kindergarten education in place of low-level investment. “Launching the ECCD policy is the first concrete step toward mobilizing more resources across ministries for the support to early childhood development and a crucial measure in tackling child poverty and reducing inequalities,” it said, highlighting the importance of collaborative efforts of parties concerned including the private sector. Xinhua
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Asia the economy “The authorities are caught in a situation where they just can’t sit and watch the won strengthen.” South Korea’s long positions in foreign currency forwards against the won stood at US$54.647 billion in May, IMF data released on June 26 showed, the highest in three years. That indicates the authorities bought spot dollars and later swapped them, which prevents dollar-buying intervention from showing up in headline foreign reserves data.
The government has no choice but to support exports as there is a limit to what it can do to boost domestic consumption Jeon Seung-ji, foreign exchange analyst, Samsung Futures
IMF data on the country’s aggregate long positions in forwards in foreign currencies has shown the positions rise in line with the won’s acceleration, as the authorities try to hold the currency back. South Korean authorities disputed the IMF’s methodology during its consultation last year with the agency. “The IMF estimates with their own means and calculations but this is a very dangerous thing. Publishing that kind of information can bring confusion upon many people,” said an official at the Bank of Korea, declining to be identified given the sensitivity of the matter. The IMF advised against excessive intervention in its annual staff report on the country’s economic developments and policies released in April. Reuters
David Jones goes for Woolworths with US$2bln 96.8 percent of shareholders vote in favour of the deal
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hareholders of David Jones Ltd , Australia’s No. 2 department store by sales, yesterday backed a US$2 billion bid by South Africa’s Woolworths Holdings Ltd, ending weeks of uncertainty over the intentions of top shareholder Solomon Lew. The vote cements Woolworth’s largest ever deal and marks a new era for the 176-year-old Sydney-based firm, which has languished for half a decade as online retail ravaged its traditional store-based model. David Jones said 96.8 percent of shareholders had voted in favour of the deal at a special meeting yesterday. The takeover has already been endorsed by Woolworths shareholders and the David Jones board, which has watched profits fall while the A$18.7 billion (US$17.6 billion) department store sector shrinks and online shopping grows up to 30 percent annually. “The combination of David Jones, an iconic Australian business, with Wooolworths, one of the leading retailers in the southern hemisphere, will provide scale, an improved
product range, an enhanced value proposition and acceleration of our core strategies,” David Jones chairman Gordon Cairns said ahead of the vote. Prior to the Woolworths bid -which killed off two earlier approaches from Australian rival Myer Holdings LtdDavid Jones shares last traded over the A$4.00 offer price on July 11, 2011. David Jones shares, which were halted on Monday, closed flat at A$3.93 on Friday. The vote completes a key step in Woolworths’ transformation from a South African company with offshore interests into an aggressive global player with the muscle to compete with the likes of Industria Textil Piura SA’s Zara, H & M Hennes & Mauritz AB and Top Shop. It also ends a lengthy stand-off between Woolworths and reclusive Melbourne billionaire Lew, the biggest David Jones shareholder. Lew, who built his fortune investing in clothes retail, has prevented Woolworths from taking full ownership of another Australian clothes company.
Nippon siege Eurozone with French bonds Japanese investors may have bought the equivalent of three‑fourths of the French new issuance
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apanese investors have been buying most of France’s government debt recently in a record surge spurred by expectations that Europe faces the kind of deflation and growth that Japan suffered for decades. Since the European Central Bank (ECB) signalled in May it would take radical steps to ease monetary conditions, banks and other big investors in Japan have piled into French
bonds, convinced from their own experience that the debt of a country where the central bank is battling deflation represents a winning bet, market participants say. Japanese investors bought a net 1.9 trillion yen (14 billion euros) of French bonds in May, equal to more than 60 percent of the government’s new issuance that month, Japanese Finance Ministry data shows. Data is not available for
June, but market participants say Japanese buying of French bonds has picked up from May amid a broader increase in buying of eurozone debt. One suggested Japanese investors may have bought the equivalent of three-fourths of the French new issuance. French bonds represents a Goldilocks trade for Japanese investors keen for euro-zone exposure: they yield more than German bonds, while
lower credit ratings on Italy’s bonds - the region’s thirdmost-liquid market - deter active Japanese buying. On a gross basis, Japanese investors bought 6.60 trillion yen (US$65.2 billion) of French government debt in May, dwarfing last year’s 1 trillion yen average and by far the most since the ministry began compiling such data in 2005.
Japan deja-vu While the euro zone’s financial crisis has seen spikes in market interest rates as bond prices plunged, Japanese investors have strong memories of
Reuters
a completely different dynamic. As Japan suffered years of falling prices and tepid growth, the government’s bond market proved one of the world’s great long-term bull markets. Having slashed interest rates to zero during this period, the Bank of Japan invented the now globally recognised idea of “quantitative easing” - mass purchases of bonds and other debt to inject cash into the economy. Helped by heavy Japanese buying, the French 10-year bond yield fell to a record low 1.5 percent last week. But that is still nearly triple the yield that Japanese investors can get at home, where the BOJ’s massive purchases - the central bank gobbles up the bulk of domestic JGBs - has crushed the 10-year yield to a 15-month low of 0.54 percent . Reuters
KEY POINTS Japanese investors bought 60 pct or more of French debt in May-June Buying up six-fold from last year Eurozone a déjà vu for Japanese investors seared by long deflation French debt yields more than Germany’s, rated higher than Italy’s
French bourse has seen the number ofJapanese investors increased
ECB easing seen as “biggest event of the year” for Japanese investors, broker says
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International 33% of economists forecast UK rate increase Expectations the Bank of England will begin increasing interest rates in 2014 surged over the past month after Governor Mark Carney cautioned that investors were underestimating the risk, according to a Bloomberg survey. Thirty-four percent of economists say the BOE will raise the benchmark rate from a record-low 0.5 percent by December, up from 12 percent in early June, the survey of 50 economists shows. The poll also finds half predict the first increase will come in the first quarter of 2015, compared with 43 percent.
YouTube progress in paying shift YouTube has embarked on a new round of discussions with Hollywood and independent producers to fund premium content, two sources with knowledge of the talks told Reuters, a move that could bolster a three-year-old multimillion-dollar effort that has had mixed success so far. Executives did not lay out exactly how a program would be structured. One of the two people said the site may offer between US$1 million and US$3 million to produce a series of programs, and might contribute marketing funds as well.
Epirito Santo owners to loosen grip Portugal’s financially troubled Espirito Santo family loosened its grip on the country’s largest listed bank, announcing a stake sale and hastening management change after prompting from the central bank which is trying to calm investors. Recent disclosures about financial irregularities at a web of family-held holding companies behind Banco Espirito Santo have raised questions about potentially destabilizing losses at the bank and other companies in the family’s orbit. Those worries roiled markets in Europe and beyond last week and have also knocked Portugal Telecom.
Yanukovych sues EU Former Ukraine president Viktor Yanukovych, ousted by pro-Western protests, has filed a suit with EU’s top court against sanctions Brussels has imposed on him and two sons. The European Court of Justice lists the Yanukovych suit along with cases made by several other prominent figures in the crisis, which was sparked when the former president ditched an EU Association Accord under intense pressure from Russia in November and eventually led to his ouster and the instalment of a pro-Western team in Kiev.
Survey finds US$1 trillion going to EU banks The ECB has identified lending to companies and households as a key weakness in the euro area’s fragile recovery
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ario Draghi’s newest stimulus tool will hand banks more than 700 billion euros (US$950 billion) of cheap funding, economists say. The European Central Bank president’s targeted lending program for banks will boost credit for the real economy as planned, and at the same time help keep the financial system flush with cash, according to the Bloomberg Monthly Survey of 45 economists. Draghi may address the topic when he testifies at the European Parliament in Strasbourg for the first time since elections in May. The ECB has identified lending to companies and households as a key weakness in the euro area’s fragile recovery. The so- called TLTRO program, part of a wider package of measures announced in June, offers as much as four years of lowcost funding tied to bank lending that Draghi said this month could ultimately provide as much as 1 trillion euros. “The take-up should be large - the money is cheap and banks should feel no stigma about accepting a free lunch,” said Alan McQuaid, chief economist at Merrion Capital in Dublin, who predicts banks will take the maximum available. “With any luck, Draghi’s next problem will not come until 2018, when 1 trillion euros needs refinancing.” Lenders probably won’t take the full amount, the survey shows. They’ll borrow 305 billion euros in the first TLTRO rounds this year, compared with an ECB cap of about 400 billion euros, according to the median estimate of economists. That’ll rise to 710 billion euros after quarterly operations in 2015 and 2016 tied to new loans, the survey shows. Three-quarters of respondents said the measure will increase credit provision to companies and households in the euro-area periphery. The loans are charged just above the ECB’s benchmark interest rate, currently at a recordlow 0.15 percent.
With any luck, Draghi’s next problem will not come until 2018, when 1 trillion euros needs refinancing Alan McQuaid chief economist, Merrion Capital
European Central Bank headquarters in Frankfurt
“On the one hand, the program provides a strong incentive to expand lending, especially for banks with higher funding costs,” said Kristian Toedtmann, senior economist at Dekabank in Frankfurt. “On the other hand, there are other impediments to lending, such as a lack of capital or macroeconomic risks. But in total, the program should contribute to a pickup.” The TLTRO will run alongside the unprecedented stimulus measures that the ECB announced after its June 5 policy meeting, including a negative deposit rate and an extension of unlimited short-term liquidity until at least 2016. After the July gathering, Draghi reiterated his pledge that
rates will stay at present levels for an extended period. In the survey, 86 percent of economists said Draghi’s comments strengthened his forward guidance on rates. The proportion forecasting the ECB will start increasing official rates next year dropped to 13 percent from 31 percent in last month’s survey. The share saying rates will rise in 2017 or later more than doubled to 42 percent. “We believe that the ECB has been increasingly successful in cementing expectations that rates will stay low well into 2016,” said Elwin de Groot, an economist at Rabobank in Utrecht, the Netherlands. Bloomberg News
Goldman stays gold bear despite bulling Jeffrey Currie from Goldman Sachs isn’t backing down from his bearish call on gold
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s bullion’s 10 percent rally this year beats gains for equities, commodities and Treasuries, he’s sticking with the view that the metal will be lower by the end of December as the economy improves. Currie, who last year got ahead of the biggest gold collapse since 1980, is an undeterred bear even as hedge funds add to their bullish holdings for a fifth straight week and assets in exchange-traded products advance. Currie isn’t alone in predicting the end to a rebound that drove the best first-half performance for gold since 2010. Societe Generale SA’s Michael Haigh, who also correctly forecast 2013’s slump, said in a July 11 report
that he expects the metal will drop about 6 percent by the fourth quarter. Defying the analysts, money mangers are now holding the biggest bet on a bullion rally since 2012 as prices posted the longest streak of weekly gains in three years. “Some people are moving into inflationary hedge assets,” Currie, the bank’s global commodities research head with a Ph.D in economics from the University of Chicago, said in a July 11 telephone interview. “Gold will start moving lower once there is more confidence in the recovery, without significant inflationary concerns.” Prices will “likely end lower this year,” he said.
Futures gained 1.3 percent last week to US$1,337.40 an ounce on the Comex in New York, a sixth straight advance and the longest streak since August 2011. The Bloomberg Commodity Index of 22 raw materials climbed 3.3 percent this year, while the MSCI AllCountry World Index of equities rose 4.9 percent. The Bloomberg Treasury Bond Index increased 3.3 percent. Gold futures were at US$1,323.20 in New York today. The net-long position in gold rose 5.4 percent to 144,272 futures and options contracts in the week to July 8, according to U.S. Commodity Futures Trading Commission data. Bloomberg News
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July 15, 2014
Opinion Business
wires
Modi’s hypocrisy
Leading reports from Asia’s best business newspapers
THE TIMES OF INDIA
Shashi Tharoor
MP for the Indian National Congress
Just when Air India was finally showing some signs of stabilization, the airline is yet again staring at uncertainty. The three-year-term of its chairman and managing director Rohit Nandan ends on August 11 -exactly a month after the airline joined Star Alliance. The aviation ministry is yet to decide on the succession plan in the airline as the search for a full-time CMD has not begun. The second half of UPA-II’s term set an example of running important aviation agencies by giving additional charge to joint secretaries.
THE KOREA HERALD The financial watchdog will reprimand the main creditor bank of cash-strained STX Group and Dongbu Group for negligence in monitoring the financial conditions of the conglomerates, officials said yesterday, pressuring the bank to take stronger measures to normalize the ailing firms. STX Group, the 13th-biggest conglomerate with 10 affiliates under its wing, has been struggling with a liquidity shortage and mounting debts due to the downturn in the shipbuilding and shipping sectors. The Financial Supervisory Service discovered that Korea Development Bank had extended some US$979.4 million worth of loans to the ailing affiliates of the conglomerate.
THE AGE Former Commonwealth Bank chief executive Ralph Norris’ attempt to dismiss the bank’s financial planning scandal as nothing more than a few “rogue people” is public relations trick 101. The scandal occurred when Norris was running CBA between 2005 and 2011. Norris was there when whistleblower Jeff Morris contacted ASIC in October 2008 and then contacted the bank, including group security and Grahame Petersen on June 4, 2009, to inform it of misconduct and a cover-up. He was there when ASIC launched an inquiry into the financial planning division in March 2010.
THE PHNOM PENH POST More than a year after it was established, the National Commercial Arbitration Centre (NCAC), Cambodia’s first thirdparty dispute resolution body, is finally ready to take on its first case. During its first annual assembly in Phnom Penh on Friday, the NCAC confirmed that it had finalised its governing framework, code of ethics and budget, and that it is now open to provide out-of-court arbitration services to the country’s rapidly growing commercial industries. The assembly comes four years after the government passed a sub-decree calling for the establishment of a national commercial arbitration body.
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EW DELHI – According to Prime Minister Narendra Modi’s supporters, his overwhelming victory in India’s general elections was a sweeping repudiation of everything for which the previous United Progressive Alliance (UPA) government, led by the Indian National Congress, stood. Will Modi live up to voters’ expectations? There has certainly been a lot of hype. Modi, it was claimed during the election campaign, would reverse the UPA’s “poor governance” and “policy paralysis,” introducing a radically new approach, based on his corporatist “Gujarat development model.” In doing so, he would transform India, liberating it from the UPA’s exhausted and ineffective policies and thus improving the lives of millions. “Achhe din aane wale hain” – “the good days are coming” – his supporters declared upon his victory. In particular, the Modi public-relations machine proclaimed an end to the sops and compromises that supposedly characterized the UPA coalition. Modi pledged to make the tough decisions that the UPA could not, weaning Indians from the statist culture of “doles” and subsidies, while pursuing bold policies aimed at spurring economic growth and job creation. Indians today, he averred, want jobs, not hand-outs. It took just a few weeks for the hollowness of these claims to become apparent. A commonly cited example of the outgoing government’s alleged economic mismanagement was its sugar-price policy. Powerful sugarcane cooperatives, led by major UPA supporters, supposedly drove the government to fix extravagant prices and write off sugar farmers’ bad debts, leading to over-production. Instead of eliminating this
This hypocrisy has characterized virtually every policy decision that the BJP government has taken so far
system, as expected, Modi’s government has augmented subsidies for sugar exports to support higher output, raised import duties on sugar to discourage foreign competition, and increased the percentage of sugar-based ethanol that must be blended with petrol. His motivation is not difficult to discern: his Bharatiya Janata Party (BJP) hopes that such concessions will help it to wrest control of Maharashtra, India’s main sugar-producing state, from the UPA in the upcoming state assembly election. This goal explains another policy reversal as well. The UPA’s critics long claimed that unsustainably low, statedictated passenger fares and freight charges for rail services –which could not cover the cost of maintenance to ensure the safety of trains and tracks, much less enable expansion and improvement of service– reflected the government’s inability to make tough decisions. It is true that coalition politics prevented decisive action, with a railway minister being summarily dismissed by his own party leader –whom the UPA was politically unable to confront– after attempting to
raise fares. But, in the preelection interim budget, the UPA government finally bit the bullet, proposing a 14.2% increase in rail fares and a 6.5% hike in freight rates. Per India’s code of political conduct, the budget changes were deferred until after the election. Soon after taking office, the Modi government announced its intention to implement the price increases, though officials made sure to emphasize that they were merely following through on an existing mandate. Then, faced with public resistance, they moderated the planned hikes, particularly of the significantly discounted monthly pass currently available to suburban commuters – an important segment of the electorate in Mumbai, Maharashtra’s capital. Modi had previously derided the UPA’s populist railway ministers for distorted policies that punished businesses, declaring during his election campaign that India’s railways should be run more like China’s, with increased government investment, including for bullet trains. Yet, no sooner had he been sworn in than he acquiesced in precisely the kind of political compromise to which he and the BJP –which won a parliamentary majority, and thus does not depend on coalition partners for its government’s survival– was supposed to be immune. Modi’s government has adopted an even weaker stance on another unpopular but necessary decision: fuelprice increases. In order to align Indian fuel prices more closely with world market prices, thereby enabling domestic oil and gas producers to finance exploration and extraction, the UPA government had announced that natural-gas prices would be doubled from April 1. But, as with railway fares, the final
decision was left up to Modi. And, instead of doing what was needed –even while blaming his predecessors– Modi postponed the decision until September. This hypocrisy has characterized virtually every policy decision that the BJP government has taken so far. Despite the BJP’s strident criticism of the United States-India Civil Nuclear Cooperation deal – the UPA administration’s signature foreign-policy triumph – Modi’s government has just ratified an India-specific “additional protocol,” granting the International Atomic Energy Agency access to India’s civilian nuclear sites. Moreover, the BJP had opposed interaction with Pakistani Prime Minister Nawaz Sharif, pending satisfactory progress on the prosecution and punishment of the perpetrators of the 2008 Mumbai attacks, which killed 164 people and injured more than 300. Yet Sharif was an honoured guest at Modi’s inauguration, exchanging gifts with India’s newly affable leader. The Modi government has also adopted the UPA-proposed Goods and Services Tax, which had been stalled by opposition from BJP-ruled states (including Modi’s Gujarat). And it will strengthen the national anti-terrorism effort, which Modi previously denounced as an assault on Indian federalism. Many Modi supporters in the media have already begun to decry the series of policy abdications Modi has conducted since his campaign. Indian citizens who thought that they voted for change are beginning to wonder if the BJP has simply reprised the UPA government’s policies. As a member of the previous government, I must say that that may not be such a bad thing. The Project Syndicate 2014
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July 15, 2014
Closing US$9.6 million seized on illegal World Cup
Chinese smartphones enjoying booming sales
Beijing police have seized around US$9.6 million on illegal soccer betting during the 2014 FIFA World Cup. In a crackdown on soccer gambling during the World Cup, 47 people were arrested in eight cases, according to the Beijing Municipal Public Security Bureau. Infamous Internet celebrity Guo Meimei was among those arrested when police busted a gambling ring on Wednesday. Guo was known in 2011 as she claimed on social media she managed an organization under the Red Cross Society of China (RCSC) and openly flaunted her wealth and extravagant lifestyle.
Demand for Chinese smartphones has boomed in the past few years domestically and abroad, a report has revealed. Sales of smartphones made in China rocketed to 33.8 percent of the world’s total in the past year from almost zero in 2010, according to the report published at the 2014 National Electronic Information Industry Symposium in Ji’an City, east China’s Jiangxi Province yesterday. Home-grown smartphones dominated the domestic market in 2013, accounting for 72 percent of the all the handsets sold in the country, from a mere 16 percent in 2010.
The disturbing fiscal data The 6.2-percent fiscal revenue growth was slower than a budgeted increase of 7 percent set during the annual legislative meeting in March
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hina’s fiscal revenue grew by a modest 8.8 percent in the first half of 2014 while its expenditure surged upon accelerated spending on key projects, the Ministry of Finance (MOF) said yesterday. Fiscal revenue rose 8.8 percent year on year to 7.46 trillion yuan (US$1.21 trillion) from January to June, with 3.43 trillion yuan collected by the central government, up 6.2 percent from a year ago. The 6.2-percent growth was slower than a budgeted increase of 7 percent set during the annual legislative meeting in March. In June alone, central government revenue stood at 547.7 billion yuan, up 5.8 percent year on year, while local government revenue amounted to 798.4 billion yuan, up 10.9 percent from the same period last year. June’s total fiscal revenue increased 8.8 percent year on year to 1.35 trillion yuan, accelerating from a 7.2-percent rise in May, according to the ministry. It explained that revenue received by the central government last month continued a trend of slow growth due to a decline in value-added
downward pressures. China’s economy grew 7.4 percent year on year in the first quarter, the highest of all major economies but below the fullyear target of 7.5 percent. Data for the first half is expected to come out on Wednesday. As part of the grand reform plan, China has vowed to build a comprehensive, transparent and efficient fiscal and tax system, pointing to fiscal revenue and spending of higher quality, as indicated in a statement released after a central leadership meeting in late June. One of the highlights of the reform is a program to replace business tax with VAT in some service sectors, which analysts said may reduce tax revenue to some degree in the short term. China aims to fulfil key tasks in the new round of fiscal and tax reforms by 2016, and establish a “modern fiscal system” by 2020. Xinhua
Colder economic performance reflects on fiscal revenue
tax (VAT) and increasing tax rebates for exports. Revenue from the transfer of land use rights for state-owned land, a source of revenue for local governments other than taxation, rose 26.3 percent from a year ago to 2.11 trillion yuan in the first half, but logged a meager 7.3-percent growth in June, the ministry added. However, fiscal expenditure maintained double-digit
growth. In the first six months, total national fiscal spending expanded 15.8 percent from a year ago to 6.92 trillion yuan. For June alone, the figure surged 26.1 percent to 1.65 trillion yuan. Local governments spent 1.45 trillion yuan in June, drastically up 28.3 percent year on year, while the central government spent 201.7 billion yuan, up 12.3 percent.
Spending on key projects in housing security, transportation, urban and rural development, and grain and oil reserves reached as high as 20 percent or more, the MOF said. The combination of a modest growth in fiscal revenue and fast fiscal spending posed a challenge for governments at various levels, especially as the country tries to push forward across-the-board reform amid
yuan3.43 trillion collected by the central government from January to June 2014
Singapore launches job bank China eases forex rules
Civil drones business gets China
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ingapore’s Workforce Development Agency officially launched a Jobs Bank yesterday to help employers find local talent to fill vacancies at their firms. The Manpower Ministry first announced the initiative last year in support of the Fair Consideration Framework, a move that the government said is aimed to ensure fair job opportunities for local residents. Under the Fair Consideration Framework, companies seeking to employ foreigners holding an Employment Pass are required to post job vacancies on the Jobs Bank for at least 14 calendar days before submitting an EP application to the ministry. Manpower Minister Tan Chuan-Jin said the Jobs Banks will complement existing government efforts and provide another avenue for Singaporeans to explore and apply for job opportunities, as well as allow employers to access a larger pool of local candidates. Singapore has tightened its foreign labor policies in recent years since around the general election in 2011, when the immigration policies became an topic of heated discussions. Xinhua
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overnment has loosened currency controls to make it easier for domestic companies and individuals to set up special purpose vehicles (SPVs) overseas, according to revised rules published by the nation’s foreign exchange regulator yesterday. Under revised rules by the State Administration of Foreign Exchange (SAFE) that took effect on July 4, domestic investors in SPVs are allowed to keep profits and dividends made from such entities overseas. Previously, they must repatriate such funds within 180 days. The regulator had lifted a ban on loans made by domestic firms to their overseas SPVs - entities created for a specific, limited and normally temporary purpose - and simplified rules on the establishment of such entities, it said. The revision of rules was aimed at supporting outbound investment by domestic firms and individuals and “improving (yuan) convertibility in cross-border capital and financial transaction in an orderly manner”, it said. But the regulator will monitor investment in SPVs and fund repatriation to crack down on fake transactions, it said. Reuters
ith drones for civil use gaining popularity in China, domestic enterprises are making inroads in the billion-dollar business. Nearly 60 unmanned aerial vehicle (UAV) makers and research institutes presented 70 drones and components at the fifth UAV China Conference & Exhibition that took place here over the weekend. Non-military drones are usually used for land surveys, oceanographic observation, disaster relief and agriculture purposes. It is estimated that the drone market in China may be worth up to 46 billion yuan (US$7.4 billion) in the coming years. Globally, the United States has the most advanced UAV technology. Amazon is reportedly preparing to test drones as a means of delivering packages in 30 minutes or less. China is a latecomer to the UAV industry but is advancing quickly in development of the technology. In the latest breakthrough, a Chinese firm announced the launch last week of a remote-sensing drone that can stay in the air for as long as 30 hours at a time. Xinhua