MOP 6.00 Closing editor: Luís Gonçalves Number 588 Wednesday July 23, 2014
Publisher: Paulo A. Azevedo
Lights, camera, Hengqin!
I
Year III
t could become the cultural and creative epicentre of Asia. More firms from Macau, Hong Kong and mainland China are queuing to invest in Hengqin Island. Lai Sun Group led the way with its 18 billion yuan Creative Culture City. Now, NPC delegate Lao Ngai Leong is to invest 2.5 billion yuan. A multimedia production centre is in the frame. As is education training base ‘i CITY Hong Kong-Macao’, Business Daily has learned. A dozen more industries from advertising to cinema to design to gaming and music will follow PAGE
www.macaubusinessdaily.com
August invasion World Tourism Barometer says expect more tourists. Some five percent more are travelling the world year-onyear. August figures for Macau may register the largest number of visitor arrivals ever
Return of the whales
HSI - Movers July 22
It’s been a tough slog. But the pundits say the Macau VIP market will rebound in the second half. A more positive outlook on China, the end of the World Cup and growing junket liquidity is fuelling optimism. Morgan Stanley expects Galaxy and Wynn to be the main beneficiaries
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Money laundering memorandum
Name China Overseas Land
4.38
China Petroleum & Ch
3.60
AIA Group Ltd
3.27
China Resources Lan
3.16
PetroChina Co Ltd
3.15
China Merchants Hol
0.16
Cathay Pacific Airwa
0.00
Galaxy Entertainmen
0.00
Hutchison Whampoa Lt
-0.48
Lenovo Group Ltd
-1.47
I SSN 2226-8294
Brought to you by
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Philanthropic Packer
2014-7-23
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Ageing population pressure
The scandal is spreading throughout China and beyond. McDonalds, KFC, Starbucks, Burger King and other fast food brands sourced meat from Husi. But it had expired. The food chains have all apologized to the public. What price credibility now?
Social welfare cost the government around 2.2 billion patacas in 2013. That’s 70 percent more than the previous year. The reason is the ageing population and greater demand for better social benefits. Old age pensioners picked up 780 million patacas
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Leaving a bad taste
%Day
Source: Bloomberg
Macau and Mainland China have reached a consensus. They will sign a Memorandum of Cooperation on anti-money laundering. The deputy governor of The People’s Bank of China and the chairman of the Monetary Authority of Macau sketched out details. At the 17th Annual Meeting of the Asia Pacific Group in Macau
Australian billionaire James Packer is a major investor in Macau casino developer Melco Crown Entertainment Ltd. He is also one of the richest individuals in Australia. He has just announced the setting up of a philanthropic foundation to disperse 1.5 billion patacas
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2014-7-24
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2014-7-25
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July 23, 2014
Macau
Hengqin attracting mega cultural projects More firms from Macau and mainland China are expressing interest in building a media production base in the gaming hub’s neighbour, Hengqin Stephanie Lai
sw.lai@macaubusinessdaily.com
F
ollowing in the footsteps of Hong Kong-based property conglomerate Lai Sun Group’s 18 billion yuan (US$2.9 billion) cultural-cum-commercial project Creative Culture City announced for Hengqin, a local company led by businessman and National People’s Congress delegate Lao Ngai Leong is also launching a project to build a multi-media production centre as well as an education base that will abut Lai Sun’s project on the island, Business Daily has learned. Cang Shi Com. Enterprise (Group) Co Ltd, a local company primarily involved in the property business and chaired by Mr. Lao, signed a contract with the Hengqin authorities last Wednesday to settle its ‘cultural’ project in the middle of the island. The project comprises a media production centre and an education and training base, a representative in charge of the project, Mr. Leo Ge, told Business Daily. The project, which involves an investment of 2-2.5 billion yuan, is titled ‘i CITY Hong Kong-Macao’. “Our project title contains ‘Hong Kong’ and ‘Macau’ because our shareholders are basically from these
two cities,” Mr. Ge said. “The majority shareholder in this project is Mr. Lao Ngai Leong.” Ge declined to elaborate upon the stake structure but said that one of the shareholders of the project is Hong Kong-headquartered BWC Capital Markets, which also operates financial training institutions in mainland China. “BWC Capital Markets is also a shareholder in the project, and they can provide the experience of running finance-related education as part of this project,” the project representative said. “We’ll be providing non-academic programmes on hotel management and corporate management; meanwhile, for the project we’ll also try to launch MBA and EMBA courses in cooperation with universities abroad.” “We’re also in talks with a local university to provide a diploma course on aviation management there as part of the i CITY project,” Mr. Ge added, without identifying the university. Alongside the education project, another major component of the ‘i CITY Hong Kong-Macao’ project is a multi-media production centre, in which investors are eyeing production
space for television programmes, advertising and animation, Ge said. “We’ll have the space for animation production, as well as for the production and distribution of television programmes and advertising,” Mr. Ge explained. “A Hong Kong shareholder of ours is actually [arranging] the Hong Kong radio station Metro Broadcast Corporation Ltd as our strategic partner in the media production part.” The project will occupy an estimated gross floor area of 140,000 square metres, although that is still subject to the approval of the Hengqin authorities and involves a public land auction to accommodate the project.
Media interest Hengqin authorities have earmarked some 3 square kilometres of land in the central part of Hengqin Island to accommodate ‘cultural and creative’ projects from mainland China, Hong Kong and Macau. Hong Kong-listed Lai Sun Group is the first to announce a cultural-cumcommercial project in the zone. The gross floor space for the group’s mega
project occupies 1.46 million square metres. The project - known as Creative Culture City and involving a total investment of 18 billion yuan - is divided into four phases, featuring an e-sports gaming arena, as well as areas for film and television entertainment, music, creative design, cultural art workshops, live performances, cultural art product exhibition and trade fairs, according to the previous filings of the group. Another major media and entertainment corporation of mainland China, Enlight Media Co Ltd, has also expressed interest in building a film shooting base on Hengqin, noting that the island enjoys the advantage of the neighbouring gaming hub of Macau, the company’s president Wang Chang Tian told a seminar held by the mainland authorities in Hengqin on Monday. “I’m very optimistic about Hengqin’s future, where it can attract more film and TV production companies to settle. The key is to attract some iconic projects to settle in Hengqin here,” Mr. Wang was quoted by the Guangdong Chinese-language newspaper Southern Daily as saying in the Monday seminar.
Stay in the finest hotels in Macau and read Business Daily news where it matters
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July 23, 2014
Macau
Tourists increase by 14 million worldwide The number of tourists is increasing in the world at a fiver percent rate year‑on‑year, the World Tourism Barometer reveals. Macau is following the trend and August may register the largest number of visitor arrivals ever in the former Portuguese enclave João Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he number of international tourist arrivals worldwide grew by five percent during the first four months of the year, according to the World Tourism Barometer of the United Nations Word Tourism Organization (UNWTO). The United Nations body revealed that from January to April 2014 there were 317 million international tourists, an increase of 14 million compared to the previous year. The UNWTO prediction is more optimistic for the period perceived as the peak season that spans May to August. According to the Organization, these four months account for 41 percent of overnight tourists registered in one year. During this time, more than 460 million tourists are expected to travel all over the world. “The encouraging start to 2014 and the overall positive sentiment in the sector raise high expectations for the current peak tourism season, benefiting destinations from both advanced and emerging economies,”
said UNWTO Secretary-General Taleb Rifai. “The 5 percent growth in the number of international tourists crossing borders in the first months of 2014 further reflects the impact of the increase in public support for the sector as well as the immense capacity of tourism companies to adapt to changing markets,” he added. As for the whole year, UNWTO says that international tourist arrivals are expected to increase between 4 and 4.5 percent, a rate above the long-term forecast of 3.8 percent set by the UN body for the period covering 2010 to 2020.
Asia and Pacific lead Although Europe was the most visited region in the world, totalling 563.8 million visitors during the first four months of the year, it only registered an increase of 4.7 percent. In a comparison of the different regions, the number of international visitors in Asia Pacific posted the biggest increase, at 6 percent,
totalling 248.7 million visitors. Americas ranked second (5.8 percent; 168.2 million visitors), followed by Africa (5.1 percent; 55.9 million visitors). The only region the number of visitors declined was in the Middle East, where there was a drop of 3.8 percent to 50.8 million visitors.
Macau close to new record In Macau, from January to April the number of tourist arrivals increased 9 percent to 10.3 million, according to the Statistics and Census Bureau. Although the data is not comparable, as the numbers for the territory include same-day visitors, which were the majority of visitors last year (51.3 percent), there is also good news for the SAR industry in the peak season. Since 2009, August has always been the month registering the largest number of visitor arrivals. The record for the highest number of arrivals was set in August last year with almost 2.87 million visitors
entering Macau. If this trend is maintained then this year will set a new record. “The number of tourists in Macau will continue to grow”, Glenn McCartney, Assistant Professor of Hospitality and Gaming Management at the University of Macau, told Business Daily. “There are many reasons but as Macau is improving its accessibility more people will visit the territory”, he explained. However, for the tourism expert the growth in Macau is also backedup by the diversification of the offer in Macau. “Macau is perceived as an attractive destination for the gaming industry, of course. But there are more reasons behind it. It all goes back to what the region has to offer and in the last years the non-gaming offer to tourists, such as shopping, has been developing at a fast pace”, he said. Today the Statistics and Census Bureau is expected to reveal the visitor arrivals data for the month of June.
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July 23, 2014
Macau Brought to you by
Social welfare spending increases 68pct in 2013 Old age pension accounted for 780 million patacas of the Social Security Fund’s overall spending last year
HOSPITALITY
Sara Farr
sarafarr@macaubusinessdaily.com
The fast, the slow, and the outsider The Tourist Price Index (TPI) is estimated based on the collection of information about tourist expenditure in eight broad areas, which are then assigned different weights in the construction of the Index. The most significant, as might be guessed, is the expense of accommodation and restaurant services. Together, they account for more than four-tenths of the Index. They are also among the ones for which price increases have been most pronounced in the last four and a half years. In fact, the various categories may be grouped into two sets. In the first set, in addition to those two categories, we can include Food, Alcohol and Tobacco, and Clothing and Footwear. In the period observed, they rose by figures varying between 33 percent and 44 percent. As they together account for almost seven-tenths of the Index, they set the main TPI trend. In the period, TPI rose by 35.5 percent.
S Three of the other four categories, representing the remaining (slightly more than) 30 percent of the Index, went up by noticeably lower figures. They are Transport and Communications, up by 14 percent; Medicine and Personal Goods, up by 16.8 percent; and Entertainment and Culture, up by 27.8 percent. They drag down a little the overall Index, so to speak. Combined, their weight is just about one-sixth of the total. That leaves us with the last category of expenses, defined as Miscellaneous Goods. Its growth follows TPI closely, and its weight in the Index is far from trivial. At 14.5 percent of the total it alone represents almost as much as the latest three combined. But it is a residual category and, as such, its meaning and impact are not easy to characterise.
43.9%
rise in the prices of restaurant services for tourists since 2010Q1
ocial welfare cost the government around 2.2 billion patacas (US$275 million) in 2013, an increase of 890 million patacas or 68.3 percent more than the previous year. The Social Security Fund continued to face challenges in 2013 mainly due to the ageing population and greater demand from society for improved social welfare. Inflation was also one of the biggest factors to impact the Social Security Fund, the Bureau’s 2013 annual report says. The Fund, which supports the city’s retirement pension and several social benefits, posted revenues of 12.7 billion patacas, an annual increase of 118.6 percent, primarily due to the hike in percentage casino taxes contribute to the kitty. About 89 percent of that money came from the government, which must reserve 1 percent of its budget for the fund, in addition to transferring part of the gaming tax revenue. The Social Security Fund is relying ever more heavily on casino revenues. Direct gaming tax that has gone towards Macau’s social welfare system has increased to 75 percent last year from 60 percent in 2012. Last year, the government injected 5 billion patacas into the Social Security Fund’s total budget of 37 billion patacas. During 2013, the Social Security Fund received 27,036 applications from Macau residents requesting welfare assistance. This is an increase of 3.1 percent over that of the previous year, when 26,234
applications were submitted. The majority of these, the annual report says, were early retirement pensions, followed by subsidies for birth. The number of social welfare beneficiaries increased 8.8 percent to 88,621 last year compared to 81,421 the previous year. The majority of these were elderly at 78.9 percent. Old-age pensions accounted for 780 million patacas of the Social Security Fund’s overall 2013 spending. Fund representatives participated in a 10-year elderly and ageing population protection plan that the government is looking at putting in place. In June last year, the Social Security Fund conducted a feasibility study on the cooperation with the human resources and social welfare office in Guangdong province to improve care for the elderly and ageing population here. Monthly and annual subsidies and allowances were increased by an average of 70 percent in June last year. According to its annual report, the Social Security Fund is still studying the best way to manage the non-mandatory Central Provident Fund scheme. A public consultation will be launched after preparatory works are completed, the report added.
Problems inevitable ‘We’re aware that it is inevitable that we will face a string of problems, possibly brought about by the reform
and improvement of the social security system, the development of which is linked to the wellbeing of various generations,’ Ip Peng King, president of the Social Welfare Bureau, said in the annual report. He added that he hopes that the different sectors can implement the two-tier social security system. In 2008, the government first announced the Social Security and Old Age Pension System Reform Programme. This involved setting up a two-tier social security system. Under the one-tier social security system, all Macau residents are entitled to basic social welfare, particularly old-age protection, while the two-tier non-mandatory Central Provident Fund supports a more ample protection for retirement. On Monday, the government announced it will raise the subsidy for the elderly and disability living allowance. Under the new dispatch gazetted earlier in the week, the subsidy for the elderly will increase to an annual 7,000 patacas (US$875). That’s an increase of 400 patacas from last year’s amount. The disability living allowance also increased to 7,000 patacas per year. In addition, a ‘special’ disability living allowance will be increased to an annual14,000 patacas. Other subsidies were also increased last month. These include subsidies for unemployment, now120 patacas per day. Government subsidies for newborn babies and marriages are now1,700 patacas, an increase of 70 percent from that of 2012.
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July 23, 2014
Macau
OTO breaches listing rules of HK Stock Exchange Sara Farr
sarafarr@macaubusinessdaily.com
T Macau and China cooperating on anti‑money laundering M
acau and Mainland China reached a consensus to sign a Memorandum of Cooperation on anti-money laundering during the 17th Annual Meeting of the Asia Pacific Group (APG) held last week in Macau. According to Xinhua, the deputy governor of The People’s Bank of China, Li Dongrong, discussed the subject of the two districts’ cooperation on anti-money laundering with Anselmo, Teng Lin Seng, chairman of
the Monetary Authority of Macau. During the meeting, Mr. Li also had a discussion with the president of the Financial Action Task Force, Roger Wilkins, on deepening the cooperation between China and Australia. Meanwhile, the annual meeting approved new mutual evaluation procedures, agreement for a new business plan for the upcoming year, agreement on other governance arrangements including a revised APG
communications policy as well as approving the admission of the Democratic People’s Republic of Korea as an APG observer. China’s two-year term as APG rotating co-chair ended with the meeting; New Zealand will be the rotating co-chair for the next two years, represented by the Deputy Secretary for Justice at the New Zealand Ministry of Justice, Frank McLaughlin. The next APG annual meeting will be held in Auckland in July 2015.
he Hong Kong Stock Exchange (HKSE) has censured OTO Holdings Ltd for breaching listing rules. In a filing, the listing committee of the Hong Kong Stock Exchange said OTO Holdings had failed twice to disclose ‘as soon as reasonably practicable’ the deterioration of its financial performance in the second half of the year ended March 31, 2012, and then again in the first half of the year ended March 31, 2013. In 2012, OTO Holdings’ annual net profit was HK$15.3 million, a 59 percent drop from that of the previous year. Last year, the company’s net profit dropped 62 percent year-on-year to HK$4.8 million. In addition, the Hong Kong Stock Exchange said that OTO Holdings executive directors had failed to follow listing rules. As a
result, four of the company’s directors have been censured. They include the company’s chairman Yip Chee Seng and CEO Charlie Yip Chee Lai. The other two were David Yip Chee Way and Yep Gee Kuarn, according to the HKSE filing. The listing committee also requires the company to ‘appoint an independent compliance advisor… for the next two years… [that] shall be accountable to the company’s audit committee.’ OTO Holdings is a Hong Kong developer and retailer of health and wellness products, which are divided into four categories: relaxation products, fitness products, therapeutic products and diagnostic products. The company has retail outlets in Hong Kong, mainland China and Macau. OTO Holdings also sells products to corporate customers and overseas markets.
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July 23, 2014
Macau
Macau VIP market to rebound in 2H A more positive outlook in China, the end of the World Cup and growing liquidity among junkets are likely to drive the biggest revenue segment in Macau to an upturn in the second half, Morgan Stanley says. Galaxy and Wynn are the main beneficiaries Luis Gonçalves
Luis.goncalves@macaubusinessdaily.com
average (MOP1 billion) after a month of running at 30 percent below average due to the World Cup (played between mid-June and mid July) that diverted gamblers from gaming tables. Chinese sports lottery turnover rocketed 83 percent in June, a massive gain that is now set to be redirected to Macau in the coming months, says Morgan Stanley. The report also states that the VIP rebound is important for all of Macau’s market, especially gaming stocks listed in Hong Kong. First, the segment contributes 60 percent of total revenues here. Second, it’s a driving force for casino shares as VIP growth periods coincide with stock outperformance. In 2012, when VIP revenues dropped 8 percent in July, gaming stocks dived 10 percent. In the next month, August 2012, gaming revenues recovered to a decline of 1 percent enabling gaming stocks a more than 20 percent gain in the next three months.
T
he VIP market in Macau will likely rebound in the second half of the year, after a punishing first half in which the segment that generates the majority of revenues here suffered losses with UnionPay and junket crackdowns, tables shifted to mass floors and gamblers being diverted by the World Cup. According to a Morgan Stanley report released this week, the dark clouds hovering above the VIP sector are finally vanishing. The gaming analysts from the US bank expect growth to improve in the VIP market in the second half of the year. Three main drivers
Although VIP recovery is likely, helping overall gaming revenues, we remain concerned about mass growth Morgan Stanley
Corporate
are listed: better macro indicators coming from China, the end of the World Cup and an improving liquidity within junkets in Macau. With more gamblers at the tables, more credit available and rising confidence, high rollers are set to fuel casino revenues for the rest of the year. In the second quarter, VIP revenues suffered a severe blow, dropping 6 percent year-on-year, dragging June revenues in Macau to their first decrease since 2009. Revenues from high rollers dropped 2 percent in May and 17 percent in June year-on-year, three times more than the market average here and the first decline in the segment since 2012. Morgan Stanley believes that the VIP segment could go down only 2 percent this month, as the first data coming from casinos points to a fresh recovery with the end of the World Cup and positive macro indicators coming from the mainland.
Beijing’s hand
TurboJet shortens sea-air connection time The number of passengers using the TurboJet airport routes for Hong Kong International Airport has been increasing over the years. As a result, the company is working to shorten the sea-to-air ‘minimum connection time’, according to a TurboJet statement. This means that passengers using the ‘Upstream check-in services’ in Macau will be subject to around 80 minutes of connection time if they have checked bags, and 65 minutes without checked bags. In addition, the number of airport route check-in counters has been increased to 10 from the previous 6. “Since TurboJet pioneered the airport routes in 2003, we have serviced over 5 million passengers in the past 10 years, of which close to 90 percent are international and mainland [Chinese] visitors,” Anna Hong, deputy general manager of TurboJet, said, adding that the number of partner airlines has increased to 82.
The VIP market is highly positively correlated to macro and credit indicators from the mainland: the better the economy, the better the high rollers. In the second quarter of this year, China’s economy grew 7.5 percent year-on-year, a performance above consensus (7.4 percent) and the first quarter (7.4 percent). The loosening monetary policy from Beijing means that banks are allowed to grant more credit. The money in circulation in China increased 14.7 percent in June against 13.4 percent in May. The residential property sales value, another indicator of the health of the economy, narrowed the drop from 11 percent in May to 5 percent in June. Morgan Stanley is now expecting a rebound in July revenues in Macau, predicting a 5 percent hike year-onyear, following a 4 percent decline in June. Daily table revenues have already recovered to the first-half
A Galaxy of profits If the VIP upturn for the second half is confirmed, Galaxy and Wynn Macau are likely to be the winners as the operators are most exposed to the VIP sector in terms of profits, emphasises Morgan Stanley.
5 pct Amount Morgan Stanley expects revenues to climb in July
Galaxy was the best performer in 2012, when the last big drop and upturn in the VIP sector happened in Macau. The operator, according to Morgan Stanley data, makes half of its profits from high rollers, followed by Wynn Macau at 46 percent and SJM with 37 percent. Sands China is the least dependent upon VIP fortunes, as only 21 percent of the gaming operator’s profits derive from the sector. Even with a more optimistic outlook than other brokerages and banks (the majority anticipate a drop in revenues in July) Morgan Stanley says that the deceleration of the mass market here is the main risk to its forecasts. ‘Although VIP recovery is likely, helping overall gaming revenues, we remain concerned about mass growth’, wrote the US bank. Labour shortages and increasing staff costs staff could hurt the operating leverage of operators for the rest of the year, while the revenues from mass floors are also likely to decelerate in the next 12 months, warned Morgan Stanley.
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July 23, 2014
Macau
James Packer setting up MOP1.5 bln foundation
A
James Packer
ustralian billionaire James Packer – an investor in Macau casino developer Melco Crown Entertainment Ltd – announced yesterday that he is setting up a philanthropic foundation to disperse AUD200 million (US$188 million; 1.5 billion patacas). The casino tycoon, who runs worldwide gambling empire Crown, said the cash would go to charities promoting the arts and those supporting the broader community, particularly for Australian indigenous education. Half of the money, to be donated in AUD20 million instalments for the
next 10 years, will come from Crown Resorts, with the rest from the Packer family. “This exciting collaboration between Crown Resorts and our family creates a platform from which to contribute towards strengthening communities in Australia and developing our artistic future,” said his sister Gretel, who will administer the fund. Philanthropy Australia chief executive Louise Walsh said she hoped it would encourage more of the country’s corporate boards and wealthy to do the same. “We are starting to see some serious mega gifts happening now in Australia and this is fantastic,” she told reporters. The son of late media baron Kerry Packer, James Packer is one of Australia’s wealthiest individuals, with a personal fortune estimated at AUD7.2 billion.
Saipan casino faces labour shortage Montserrat waives visa for Macau passport holders S hortage of labour could become a factor in the construction of Saipan’s casino, media outlet Variety reports, quoting a casino consultant at Strategic Gaming Solutions. “You also need at least 1,000 to 1,500 people to run that kind of resort,” Ben
Lee is quoted as saying, who added that it will be “very difficult” to find labour on the Northern Mariana Island for the construction of the 2,000room casino-hotel. According to the report, it is estimated that between 2,000 and 3,000 workers will be needed ahead of the opening.
Best Sunshine International Ltd, a subsidiary of Hong Kong-listed Imperial Pacific International Holdings Ltd, was awarded a conditional licence to run the casino on the island. Imperial Pacific is also an investor in seven Macau VIP rooms and earlier this year bid for the exclusive licence of the Pacific Ocean island with an investment of no less than US$2 billion (16 billion patacas). Last week, the company was awarded the licence. In May, the then-named First Natural Foods Holdings Ltd said it aimed to build ‘four luxury hotels and villas in four stages’ on the island, which is a commonwealth territory of the United States. Imperial Pacific International Holdings Ltd was formerly First Natural Foods Holdings Ltd but changed its name to better reflect the new business focus of the firm. S.F.
M
acau Special Administrative Region passport holders will be exempt from visa requirements when visiting Montserrat in the Caribbean. According to a statement from the Identification Department of Macau, SAR passport holders will also be able to stay in Montserrat for up to six consecutive months.
Montserrat is a British Overseas Territory in the Caribbean. Currently, a total of 110 countries and territories have agreed to grant visa-free or visa-on-arrival access to Macau passport holders. In addition, another 10 countries have agreed to grant visa-free access to holders of Macau SAR travel permits, the Identification Department said in the statement.
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July 23, 2014
Greater China
The reform or foster dilemma The government usually solicits views and proposals from top think-tanks before making key policy decisions
P
olicy insiders are concerned that China’s ambitious reform agenda is being side-lined by a focus on stimulus to meet the government’s growth target, delaying the planned overhaul of the world’s second-largest economy. The government unveiled plans for some of the most comprehensive reforms in nearly 30 years last November, but since then has only made incremental changes as a rapid slowdown in the economy dominated policymaking in the first half of 2014. Sources at government thinktanks involved in policy discussions said enough had been done to support growth, and now expected to see some progress on economic reforms. “On policy, we don’t need to prescribe a strong medicine,” said Xu Hongcai, senior economist at China Centre for International Economic Exchanges, a well-connected think-tank in Beijing. “It’s time to push reforms.” Potential measures in coming months include reforming the fiscal system to deal with massive local government debts, a long-awaited
On policy, we don’t need to prescribe a strong medicine. It’s time to push reforms Xu Hongcai senior economist China Centre for International Economic Exchanges
Shanghai success is a product of previous reform campaigns
deposit insurance system to pave the way for freeing up bank deposit rates, and overhauling state giants. “Reforms are likely to quicken in the second half,” said an influential economist at the cabinet’s think-tank, Development Research Centre. “The possibility of rolling out reforms will be bigger as detailed plans are being finalised,” said the economist, who spoke on condition of anonymity. President Xi Jinping is heading a leadership team that oversees drafting of detailed reform plans by different agencies, sources said. The government usually solicits views and proposals from top think-tanks before making key policy decisions. Data last week showed the world’s second-largest economy grew an annual 7.5 percent in the second
quarter, recovering from an 18-month low of 7.4 percent in the first quarter to deliver a dividend on three months of government stimulus. “It seems highly likely that GDP growth will pick up further. However, the concern is that, in the absence of market-determined prices and amid an overleveraged economy with weakening productivity, policy easing will again misallocate resources,” Rob Subbaraman, chief Asia economist at Nomura, said in a note. Stimulus measures have included reducing the amount of cash some banks have to hold as reserves, quicker spending by local governments and accelerating the construction of railways and public housing. Though officials describe such measures as fine-tuning, Beijing has steadily broadened the scope and depth of its assistance, as indicated
PBOC refrains from selling repos amid IPOs pull Eleven companies will start offering new shares this week, which may freeze subscription funds
People Bank of China headquarters in Beijing
C
hina’s central bank refrained from draining funds using repurchase agreements for the second time in a month
as cash demand tightened before share sales. Benchmark money-market rates climbed by the most in at least a
week. The seven-day repurchase rate, a gauge of funding availability between banks, increased 16 basis points, or 0.16 percentage point, to 3.83 percent in Shanghai, according to a daily fixing by the National Interbank Funding Centre. The overnight rate rose nine basis points to 3.40 percent. “China’s central bank didn’t conduct any open-market operations this morning, which is a bit surprising as yesterday’s maturing bonds are 18 billion renminbi,” Hao Zhou, a Shanghaibased economist at Australia & New Zealand Banking Group Ltd., wrote in an e-mail yesterday, using the official name of the yuan. “Monetary policy stance remains accommodative and the central bank attempts to smooth out market volatilities amid initial public offerings and the tax payment due
by a surge in bank lending. “The pace of reforms this year has been slow. We should be vigilant about the risk of reforms being delayed,” said another government economist who declined to be named. The fallout of the 4 trillion yuan (US$645 billion) stimulus during the 2008-09 global financial crisis shows the risk of putting off reform. While China got through the crisis largely unscathed, the stimulus created conditions for local governments to build massive debts and sent property prices rocketing. The piecemeal changes this year include red-tape cuts, administrative deregulation, tax and fee cuts for businesses, opening up some sheltered sectors to private firms, and a pilot financial reform scheme in Shanghai. Reuters
this month.” Eleven companies will start offering new shares this week, which may freeze subscription funds of as much as 766.5 billion yuan (US$124 billion), according to the Securities Daily. Chinese firms need to withdraw funds from banks this month to pay firsthalf taxes. A decision by China Development Bank to cut the size of its bond auction yesterday reflects the strain on liquidity, Wee-Khoon Chong, head of Asia ex-Japan rate strategy at Nomura Holdings Inc. in Singapore, said in an interview yesterday. Rates on repo contracts using government bonds listed on exchanges have been rising because of funding pressure from a pipeline of equity IPOs, Yang Feng, Beijing-based fixed-income analyst at Citic Securities, said in an interview yesterday. The three-day repurchase rate for loans secured using exchangelisted government bonds doubled to 8.00 percent yesterday from 4.01 percent yesterday. The rate touched 9 percent yesterday, the highest this month. Bloomberg New
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July 23, 2014
Greater China US$4 billion for Venezuela’s oil The money will go into the Joint Chinese-Venezuela Fund, which focuses on infrastructure and economic development in the South American country
C
hina will provide Venezuela with a new US$4 billion credit line under an agreement signed on Monday, with the money to be repaid by oil shipments from OPEC member Venezuela. The deal was inked during a 24hour visit to Venezuela by Chinese President Xi Jinping, who is on a tour of Latin America. The money will go into the Joint Chinese-Venezuela Fund, which focuses on infrastructure and economic development in the South American country. President Nicolás Maduro said the Venezuelan government would also put US$1 billion into the fund, though officials later said that amount was in fact US$2 billion. The government said this weekend the fund has about US$40 billion in it, though it was not clear if that included the amounts covered by Monday’s agreement. Officials said the credit would be repaid by shipments of about
100,000 barrels per day of crude oil and products. No other terms were given. Under the leadership of late socialist President Hugo Chávez, Venezuela vastly expanded its use of loan-for-oil agreements with China, which helped ease stretched state finances while also improving the cash flow of state oil company PDVSA. President Maduro, who won election last year after Chávez died from cancer, has continued that policy. “It’s a virtuous (financing) formula which does not create onerous debts,” Maduro said. “We’ve reached the point of no return in a deep relationship with China.” PDVSA said Venezuela is now sending about 524,000 bpd to China, a figure expected to rise to 1 million bpd by 2016. Bilateral trade between Venezuela and China has soared to US$19.2 billion annually, compared with just US$183 million in 1998, the year
Chávez came to power, officials said. Chinese entities participate in transport, housing, education, electricity, communication and vehicle-assembly projects in Venezuela. “The Chinese economy continues along solid development lines and is in fine condition to keep growing,” said Jinping, who was flying on to Cuba later on Monday. “China will be a cooperation partner for all countries of the world like Venezuela.” Among 38 accords signed on Monday was also a memorandum of understanding for China’s EximBank to lend US$1 billion to PDVSA, an agreement for mineral exploration, the purchase of 1,500 Chinese buses and the creation of a new cement factory. Venezuelan opposition politicians say much of China’s loans in the last 15 years have been wasted amid corruption, inefficiency and lack of transparency in public funds. Reuters
Monopoly concerns over Mercedes-Benz activities China’s price regulator has expressed monopoly concerns over Mercedes activities in the country but the firm is not under investigation, one of the company’s top China executives said yesterday. Nicholas Speeks, China sales head at Daimler AG’s Mercedes-Benz, told reporters the firm was also currently cutting service charges and prices of its spare parts by 20 percent. Bloomberg reported last week citing sources the National Development and Reform Commission was probing practices at Daimler AG’s Mercedes-Benz as well as other foreign automakers to see whether prices of spare parts are being artificially boosted.
China-ASEAN trade up Trade between China and the Association of Southeast Asian Nations (ASEAN) grew 4.8 percent year on year to US$220.69 billion in the first half of the year, according to the Ministry of Commerce (MOC) yesterday. Investment between China and ASEAN hit US$120 billion at the end of June this year, with US$80 billion from ASEAN and US$40 billion from China, said Chen Zhou, an official of the MOC, at a press conference. Among ASEAN members, Singapore has continued to lead in investing in China with 7.2 billion U.S. dollars in investment last year, Chen said.
Argentina puts Chinese-made trains into operation Argentine President Cristina Fernandez de Kirchner on Monday put seven new Chinese-made trains in operation in the capital city of Buenos Aires. The nine-car trains are the first batch of 25 Chinese trains bought by the Argentine government to modernize and expand the Sarmiento Line, a commuter rail network serving the city and its suburban areas. “This investment represents an unprecedented qualitative leap” in the city’s transportation system, Fernandez was quoted as saying by state-run news agency Telam.
Venezuela’s president Nicolás Maduro (R) and his Chinese counterpart Xi Jinping (L) arrive for a press conference in Caracas, Venezuela, 21 July 2014. Xi Jinping is in Venezuela for a two-day official visit
Cuba hopes for more investment with Xi visit China has rescheduled Cuba’s government and commercial debt
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hinese President Xi Jinping is in a two day visit to Cuba, stirring hopes on the island that China will finally invest in the country after a number of important deals never materialized. Communist-run China and Cuba are close political allies. Generous trade credits have made China the island’s largest creditor and second biggest trade partner after Venezuela at US$1.4 billion last year. China has rescheduled Cuba’s government and commercial debt, believed to top US$6 billion. But large investment agreements for the nickel industry, signed in 2000, another in hotels, and a deal to expand an oil refinery agreed five years ago, have not materialized.
Chinese-made cars, buses, locomotives, ships and household appliances are increasingly prevalent in Cuba. China’s flag flies from leased oil rigs along the northwest coast and a modern container port boasts Chinese equipment, but direct investments are limited to a communications venture established 15 years ago and an onshore oil block in Pinar del Rio province. Chinese diplomats and businessmen have told Reuters over the years that they had little confidence in Cuba’s ability to work efficiently with them, complained about the high cost of doing business, and said Cuba has balked at bringing construction crews in from China to build projects. Little of the US$80 billion China
has invested in Latin America and the Caribbean in recent years has been in Cuba. That, along with a review of debt and trade, will top this week’s agenda. Raul Castro began instituting market-oriented reforms after taking over from ailing brother Fidel Castro in 2006, much as China did in the 1980s. This year, Cuba established its first Chinese-style special development zone and passed a more attractive foreign investment law with a particular eye to friendly nations such as Russia, China and Brazil. It includes a clause aimed at China that for the first time would allow investors to bring in their nationals for construction.
Apple orders 80 million devices Apple Inc has asked suppliers to manufacture between 70 million and 80 million of its two forthcoming large-screen iPhones by the end of the year, its largest initial production run of iPhones, the Wall Street Journal reported, citing people familiar with the matter. Foxconn and Pegatron Corp plan to start mass producing the 4.7-inch iPhone model next month, and Hon Hai Precision Industry Co Ltd, whose parent is Foxconn, will begin making the 5.5-inch version exclusively in September, the people said.
Taiwan airline boosts NZ service Taiwan-based China Airlines is to add an extra 15,000 seats on its services between Taipei and Auckland during the peak New Zealand summer route, the airline announced yesterday. The service, which stops at Brisbane, Australia, would increase from three to four times a week from December through to March, and the aircraft would be “upgauged” from an Airbus A330-300 to a Boeing 747-400. “The decision to add capacity on the New Zealand market is a reflection of the growing demand from Taiwan,” China Airlines New Zealand general manager Joseph Wu said in a statement.
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July 23, 2014
Greater China
Fast food scandal mushrooms The incident highlights the difficulty in ensuring quality and safety along the supply chain in China Adam Jourdan
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toxic food scandal in China is spreading fast, dragging in U.S. coffee chain Starbucks, Burger King Worldwide Inc. and others, as well as McDonald’s products as far away as Japan. McDonald’s Corp and KFC’s parent Yum Brands Inc. apologised to Chinese customers on Monday after it emerged that Shanghai Husi Food Co Ltd, a unit of U.S.-based OSI Group LLC, had supplied expired meat to the two chains. Yesterday, Starbucks said some of its cafes previously sold products containing chicken originally sourced from Shanghai Husi, a firm that was shut down on Sunday by local regulators after a TV report showed staff using expired meat and picking up meat from the floor to add to the mix. A Tokyo-based spokesman at McDonald’s Holdings Co (Japan) Ltd said the company had sourced about a fifth of its Chicken McNuggets from Shanghai Husi and had halted sales of the product on Monday. Alternative supplies of chicken have been found in Thailand and China, he added. China’s food watchdog said it ordered regional offices to carry out spot checks on all firms which had used Shanghai Husi products, and would inspect all of parent OSI’s sites around China to see if enough has been done to ensure food safety. It said the case could be handed over to the police. The regulator’s Shanghai branch
Macau McDonald’s branch in Senado Square
said in a statement on Tuesday it had demanded production, quality control and sales records from OSI. It added it already ordered McDonald’s to seal over 4,500 boxes of suspected meat products and Yum’s Pizza Hut to seal over 500 boxes of beef. Fast-food chain Burger King and Dicos, China’s third-ranked fast food chain owned by Ting Hsin International, said they would remove Shanghai Husi food products from their outlets. Pizza chain Papa John’s International Inc. said on its Weibo blog that it had taken down all meat products supplied by Shanghai Husi and cut ties with the supplier.
difficulty in ensuring quality and safety along the supply chain in China. Wal-Mart Stores Inc. came under the spotlight early this year after a supplier’s donkey meat product was found to contain fox meat. It also came under fire for selling expired duck meat in 2011. Starbucks said on its Chinese microblog site that it had no direct business relationship with Shanghai Husi, but that some of its chicken acquired from another supplier had originally come from Husi for its “Chicken Apple Sauce Panini”
Toxic spread Food safety is one of the top issues for Chinese consumers after a scandal in 2008 where dairy products tainted with the industrial chemical melamine led to the deaths of six infants and made many thousands sick. Other food scandals have hit the meat and dairy industries in recent years, and many Chinese look to foreign brands as offering higher safety standards. China is McDonald’s third-biggest market by number of restaurants and Yum’s top market by revenue. The scare has stirred local consumers and become one of the most discussed topics online among the country’s influential ‘netizens’, with some users spreading long lists of firms thought to be tarnished. The incident highlights the
KEY POINTS Starbucks says has pulled chicken products from Shanghai Husi McDonald’s says some tainted meat used in McNuggets in Japan Burger King, Dicos say remove Shanghai Husi products Pizza chain Papa John’s cuts ties with Shanghai Husi
products. This had been sold in 13 different provinces and major cities. The company added that all the products had already been removed from its shelves. Burger King said in a Weibo statement posted late on Monday that it had taken off its shelves all meat products supplied by Shanghai Husi Food and had launched an investigation. Dicos said it pulled all ham products supplied by Shanghai Husi, and would stop serving its ham sandwich product for breakfast. “We will continue to carry out a probe into Shanghai Husi Food and its related firms, to understand whether or not it followed national regulations,” Dicos said in a statement. Swedish furniture firm IKEA, which has in-store food outlets, said on Weibo that Shanghai Husi had previously been a supplier, but had not provided the firm with products since September last year. Domino’s Pizza Inc. and Doctor’s Associates Inc.’s Subway brand, which were named in online reports as being supplied meat from Shanghai Husi, said their outlets in China did not use meat products from the firm. Yoshinoya-parent Hop Hing Group Holdings Ltd, Japanese convenience store FamilyMart Co Ltd and Chinese chain Wallace urged diners not to worry, and said they did not currently use any products from Shanghai Husi. Reuters
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July 23, 2014
Asia
Japan trims economic growth Saudi Arabia The convergence of views suggests the BOJ is unlikely to open bourse to face pressure from the government to ease monetary policy to foreigners Tetsushi Kajimoto and Stanley White
Currently, foreigners are limited to buying Saudi stocks via swaps involving international banks and through a small number of exchange-traded funds
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abinet has given permission to the country’s financial regulator to open the stock market to direct investment by foreign financial institutions, the government said. “The cabinet authorised the Capital Market Authority - at a time it sees as appropriate - to allow foreign financial institutions to buy and sell stocks on the Saudi stock market, according to rules to be laid down by the CMA,” the cabinet said in a onesentence statement seen yesterday. Saudi Arabia plans to open the stock market to direct investment by foreign financial institutions in the first half of 2015, the regulator said. The opening of the Saudi market, the Arab world’s biggest with a capitalisation of about US$530 billion, would be one of the most keenly awaited economic reforms in the world’s top oil exporter. Saudi authorities, which want to use the market to create jobs, diversify the economy beyond oil and expose local firms to more market discipline, have been preparing for the opening for years, and have completed most technical preparations.
Bank of Japan Governor Haruhiko Kuroda
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apan’s government slightly lowered its growth forecast for the current fiscal year due to sluggish exports and a drop in demand after the April sales-tax hike, but the forecasts were largely in line with the Bank of Japan’s projections. Members of the government’s top advisory panel did not object to the BOJ’s view that consumer prices will continue to rise under its quantitative easing programme, showing there is little difference between the government’s and the BOJ’s assessment of the economy. The convergence of views suggests the BOJ is unlikely to face pressure from the government to ease monetary policy further as the government turns its attention to compiling next fiscal year’s budget. “Private sector members agreed that consumer prices can continue to rise as the output gap moves into positive territory,” Economics Minister Akira Amari told reporters after a meeting of the Council on Economic and Fiscal Policy (CEFP), the government’s top advisory panel. The government now sees real gross domestic product growth at 1.2 percent in fiscal 2014/15, versus 1.4 percent forecast earlier this year. Growth is expected to accelerate to 1.4 percent in the following year, according to Cabinet Office estimates. The estimates are broadly in line with projections made by the Bank of Japan, which last week cut its economic growth forecast for the
current fiscal year to 1.0 percent. The BOJ expects growth to pick up to 1.5 percent the following fiscal year. “I think the biggest factor was the decline in external demand due to a delay in emerging market recovery and less-than-expected export growth,” Finance Minister Taro Aso told reporters. “I still expect that the exports will grow in accordance with a moderate recovery (in the global economy).” The Cabinet Office estimates also
KEY POINTS Gov’t forecasts in line with BOJ’s outlook Little gap between govt, BOJ on economic outlook Some ministers worried about labour shortages in Japan
US$530 billion
show that overall consumer prices, including those of fresh food and energy, are seen rising 1.2 percent year-on-year in fiscal 2014/15 and increasing 1.8 percent in the following year. The consumer price estimates exclude the effect of the sales tax hike. That is little changed from the BOJ’s CPI estimates, which are 1.3 percent this fiscal year and 1.9 percent in fiscal 2015/16. The Cabinet Office presented its updated forecasts at a CEFP meeting that focused on monetary policy and consumer prices. BOJ Governor Haruhiko Kuroda reiterated at the meeting that the central bank’s quantitative easing is working well so far and that the BOJ will continue its efforts to meet its 2 percent inflation target in the coming fiscal year. The BOJ has kept monetary policy steady since April last year, when it pledged to double base money via aggressive asset purchases to accelerate consumer inflation to 2 percent in two years, ending 15 years of mild deflation. During the meeting, some CEFP members expressed concerns about recent labour shortages in the construction industry and how that could hamper growth. They also discussed the need to balance fiscal discipline with stimulating the economy when the government compiles the budget for next fiscal year.
But the government has delayed implementing the reform, apparently concerned about causing volatility in the market as well as the political sensitivity of allowing foreigners to build large stakes in top Saudi companies. Currently, foreigners are limited to buying Saudi stocks via swaps involving international banks and through a small number of exchangetraded funds, which are relatively expensive and inconvenient options. Foreigners are at present believed to own no more than about 5 percent of the Saudi market, and to account for a smaller fraction of stock trading turnover. Proposals circulated by Saudi authorities to the financial industry have indicated that Saudi Arabia will follow a model similar to China, Taiwan and some other major emerging markets in opening its bourse. Qualified foreign investors, awarded licences based on factors such as the amount of their assets under management, would be given quotas for their investment in the market.
Reuters
Reuters
Saudi Arabian market capitalisation
12
July 23, 2014
Asia
S. Korea ready for deeper fostering
Asia’s fourth-largest economy has been losing momentum since posting quarterly growth in the third quarter
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outh Korea’s economic growth likely cooled to its slowest in more than a year in the second quarter, but expected government stimulus and recovering global demand should help it regain momentum, a Reuters poll shows. The economy probably grew 0.7 percent in the April-June period from the previous quarter on a seasonally adjusted basis, the slowest since a 0.6 percent rise in the first quarter of 2013, the median forecast from the survey of 27 analysts showed. It grew 0.9 percent each in the final quarter of 2013 and in the first quarter of this year, both on a sequential basis. On an annual basis, the tradereliant economy was expected to have expanded 3.6 percent during the April-June period, down from a 3.9 percent gain in the first quarter and the slowest since a 3.4 percent rise in the third quarter of 2013. The Bank of Korea will release advance estimates of gross domestic product for the April-June period on Thursday. It cut this year’s growth forecast to 3.8 percent early this month from the previous 4.0 percent. Forecasts from the 27 analysts surveyed by Reuters ranged from 0.1 to 0.8 percent on a quarter-on-quarter basis, while forecasts for annual growth ranged from 2.0 percent to 3.8 percent. New Finance Minister Choi Kyung-
hwan, who took office last week, has promised to announce stimulus measures on Thursday.
Rising FDI Foreign direct investment (FDI) plans registered in South Korea during the April-June period rose 14.5 percent from a year earlier, up for a second consecutive quarter although slowing from the first quarter, the industry ministry said yesterday. The value of FDI plans registered rose to US$5.27 billion from US$4.60 billion a year earlier, following a 49.1 percent annual gain to US$5.06 billion for the first quarter, the industry ministry’s data showed. U.S. investors topped the list with registrations totalling US$1.69 billion during the April-March period, followed by US$999 million worth by European Union investors and US$549 million worth by Chinese investors. For the first six months of the year, foreign direct investment plans registered in South Korea totalled US$10.33 billion, up 29.2 percent over the same period of 2013 versus a 10.7 percent drop for the whole of last year. The ministry data showed US$4.17 billion went into service industries, far eclipsing the US$994 million directed to manufacturing, and US$113 million went to unlisted areas. Reuters
South Korean President Park Geun-hye speaks to a meeting of the presidential advisory group of science and technology, at the Korea Institute of Science and Technology in Seoul
Kiwi hyperactivity needs a break The static New Zealand dollar should stay on a very short leash as investors wait to see if the RBNZ will signal a pause to its tightening cycle on Thursday Gyles Beckford and Ian Chua
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he New Zealand dollar struggled to make any headway yesterday with no one willing to take the reins in the run-up to an interest rate decision later in the week. Its Australian counterpart faired a little better, edging slightly firmer after the country’s central bank chief made no attempt to jawbone the currency lower in a speech. The kiwi was static at US$0.8678, and should stay on a very short leash as investors wait to see if the Reserve Bank of New Zealand (RBNZ) will signal a pause to its tightening cycle on Thursday. The RBNZ is considered almost certain to lift its cash rate by another 25 basis points to 3.5 percent for a fourth consecutive review. However, with the currency high, inflation restrained and dairy prices
Reserve Bank of New Zealand
falling, analysts suspect the central bank might switch to a wait-and-see stance. “If we get a strong signal of being on hold for the rest of the year, then we should see a test of the decent support it has had at US$0.8650 and it could easily open up a fall to US$0.8600,” said BNZ currency strategist Raiko Shareef. RBNZ Deputy Governor Grant Spencer did not address monetary policy issues in a speech yesterday. The Reserve Bank of Australia (RBA), on the other hand, has kept interest rates on hold since the last cut in August and Governor Glenn Stevens on Tuesday again said he was content with the current policy setting. He said he would consider further action only if it could “reasonably” be expected to do more for the economy. His balanced view on rates was no
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk Alex Lee, Luciana Leitão, Michael Armstrong, Sara Farr, Stephanie Lai International editor Óscar Guijarro GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari interns Aries Un, Kam Leong Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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July 23, 2014
Asia
measures Quantitative easing is good… but with clouds
Japanese FM willing to talk with S.Korean counterpart
h of 1.1 percent
RBA Governor Glenn Stevens said quantitative easing had clearly worked to lower borrowing costs across the globe, but it was not clear that this had led to much higher business investment
KEY POINTS Advance estimate due at 8 a.m., July 24 Reuters poll: Q2 GDP +0.7 pct q/q, +3.6 pct y/y Demand softens both at home and for exports Government promises stimulus, global demand also seen up FDI during April-June rose 14.5 percent
doubt frustrating for investors looking for cues to buy or sell the currency, although some found an excuse to dip their toes in when Stevens chose not to talk down the dollar. The Aussie drifted up 0.2 percent to US$0.9390, pulling off a session low of US$0.9361. Still, it remained well within a US$0.9320/9505 range seen in the past month. “We expect the RBA to be tested by the deterioration in growth momentum through this year, but to remain on hold, given the already low level of rates and relative strength of housing,” said Ben Jarman, economist at JPMorgan in Sydney. The near-term risk for the Aussie is domestic inflation data due on Wednesday. An upside surprise is likely to trigger a bigger market reaction given futures markets have priced in a 44 percent chance of a cut by year-end. New Zealand government bonds were firmer, sending yields as much as 3.5 basis points lower. Australian bond futures were mixed with the three-year contract 1 tick lower at 97.420, while the 10year contract edged up 2.5 ticks to 96.640. Both contracts scaled multimonth peaks recently. Reuters
KEY POINTS Kiwi steady ahead of RBNZ rate call on Thursday AUD edges up after RBA chief chooses not to talk down currency Australia CPI on Wednesday next focus
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he jury is out on whether the exceptional monetary polices pursued worldwide have worked to stimulate activity in the real economy, rather than just encouraging risk-taking in financial markets, Australia’s central bank chief yesterday. Reserve Bank of Australia (RBA) Governor Glenn Stevens said quantitative easing had clearly worked to lower borrowing costs across the globe, but it was not clear that this had led to much higher business investment. “Some would take that to indicate that the unconventional monetary policy has not been all that effective, and too risky; others would see it as a sign that policy did not try hard enough,” Stevens told an economists’ lunch. “Still others, myself among them, remembering that it always takes time for an economy to heal after a financial crisis, and that as usual we don’t know the counterfactual, might simply feel that it is impossible to draw strong conclusions.” Stevens added that the sluggish
recoveries seen in many major countries could in part be due to a simple lack of business confidence, which interest rates alone could do nothing about. “If people think, for whatever reason, that returns for future possible investments will be low, or subject to high risk, then they will be reluctant to invest even if past and current returns are quite satisfactory,” he said. But Stevens argued that it was too pessimistic to think that this state would last forever, or that people had lost all ambition to innovate and invest. “Unless we think the tendency for human optimism has been completely drummed out of us, animal spirits in the ‘real economy’ will surely improve at some point,” he said. In this regard, the growth agenda currently being pushed by the Group of 20 nations (G20) could help restore confidence, said Stevens. This included supply side reforms, increased investment in infrastructure, ensuring a safer financial sector, and progress on free trade agreements. Reuters
How cars help can help reach space without being a Transformer Bharat Forge Ltd., India’s second biggest auto parts maker, is seeking approvals from agencies in Europe and North America to sell components for the aerospace industry
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he company, controlled by billionaire Baba Kalyani, has applied for technical permits, Chief Financial Officer Sanjeev Joglekar said. It expects to start manufacturing the parts “two to three years down the line,” he said. “We are in the process of getting various accreditations which are required as a supplier,” Joglekar said in a telephone interview from his office in Pune near Mumbai, where Bharat Forge is based. “This is a substantially lengthy process.” Bharat Forge, which supplies crankshafts, axles and steering knuckles to Daimler AG and Toyota Motor Corp., is seeking to make parts such as landing gear for Airbus Group NV and Boeing Co. after passenger vehicle sales in India fell for the first time in a decade. Signs of a recovery in vehicle demand in the U.S. and Europe have helped its shares more than double this year, making it the best performer among 83 global metal casting and fabricators in a Bloomberg index. “The non-automotive sector takes you into defence and engineering which are strong performing sectors,”
said Mitul Shah, an analyst at Karvy Stock Broking Ltd. in Mumbai, who recommends buying the stock. “The U.S. and Europe have been growing for the last one and a half quarters and we expect a recovery in domestic commercial vehicle sales next year. ”The company will focus more on exporting aerospace components, though it will also make some parts for the domestic industry, Joglekar said. Among the key target sectors for Bharat Forge in the non- automotive segment are the aerospace and oil & gas industries, according to a research report published by Credit Suisse Group AG on July 7. The company plans to generate US$100 million each from energy, transportation and construction, and expects to more than double the revenue from these non-automotive segments to US$500 million in four years, Credit Suisse analysts Jatin Chawla and Akshay Saxena wrote in the report. “There are opportunities,” Joglekar said, referring to the projections in the report. “We are capable of generating it, but we can’t say it is our target.” Bloomberg News
Japanese Foreign Minister Fumio Kishida said here yesterday that he is willing to hold talks with his South Korean counterpart Yun Byung-se on the side-lines of a series of regional talks early next month in Myanmar. Although Kishida had talked with Yun twice in the past, he said he would like to continue their “frank exchange” as the two countries’ relations are at odds over territorial dispute and Japan’s recent moves regarding its wartime history.
Australia content with rates Australia’s top central banker on Tuesday said record low rates were working as intended and he was content with the current state of policy, though further action would be considered if it could “reasonably” be expected to do more. Answering questions after a speech on the global outlook, Reserve Bank of Australia (RBA) Governor Glenn Stevens also said financial markets had been remarkably sanguine in the face of geopolitical and policy risks, though it was unclear how long that would last.
S.Korean President urges re-energising of economy South Korea’s President Park Geun-hye told her cabinet members on Tuesday the country’s most urgent task is to recover economic vitality and urged them to focus on job creation and normalising the housing market. “We cannot create a situation where we will lose the next 10, 20 years,” said Park in a regular cabinet meeting at the Blue House. The comments come before the finance ministry’s release of its revised forecasts and policy measures to boost the economy on Thursday.
Vietnam’s footwear exports in top five Vietnam ranked among the top five footwear exporters worldwide in terms of export revenue, said Vietnam Leather, Footwear and Handbag Association yesterday. The association said on its website that in the first six months of 2014, Vietnam posted some US$4.85 billion in footwear export revenue, up 21.54 percent over the same period in 2013. Vietnam remained the second after China in footwear exports to the United States, the European Union and Japan during the period, said the association. The United States is the biggest market of Vietnamese footwear.
Third day of ASEAN meeting in Yangon Senior economic officials of the Association of Southeast Asian Nations (ASEAN) continued its third day meeting in Myanmar’s Yangon Monday, topping the discussions with Asian Development Bank (ADB), ASEAN Business Advisory Council (ABAC) and ASEAN Food Beverage Alliance (AFBA), state media reported yesterday. The ASEAN senior economic officials exchanged views with ADB on how they could assist ASEAN in its ongoing efforts to further deepen economic integration in the region. The ASEAN officials also held talks with ABAC over activities pertaining to the establishment of ASEAN Economic Community (AEC).
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July 23, 2014
International Mexico approves oil and gas reform
Positive feelings reign over jobs prospects By region, consumers in the Asia Pacific were most confident about job prospects Susan Fenton
Senate has approved legislation to implement historic constitutional reform that would open the country’s oil and gas industry to foreign investment for the first time since 1938. In an 85-26 vote, lawmakers passed the last of four packages of laws Monday to end the monopoly held by state oil company Pemex for 75 years in the exploration and exploitation of energy resources. The Chamber of Deputies must now vote on the measures, which the leftist opposition had tried to modify.
EU consider arms embargo against Russia Several EU foreign ministers said yesterday the bloc needs to consider an arms embargo against Russia following the downing of a plane over eastern Ukraine, allegedly by pro-Moscow rebels. British Foreign Secretary Philip Hammond said the tragedy “happened in the first place because of Russian support for the rebels” and that foreign ministers meeting in Brussels yesterday had to address that issue. An EU leaders’ summit could produce an arms embargo.
British state borrowing declines British state borrowing fell only slightly last month, official data showed yesterday. Public sector net borrowing, the government’s preferred measure of the deficit, dipped to US$19.5 billion in June. The figure, which excludes financial sector intervention measures and transfers from the Bank of England’s cash stimulus scheme, compared with £11.5 billion in the same month of 2013. “The public finances were essentially only stable year-on-year in June after stripping out all distorting effects,” said economist Howard Archer at research consultancy IHS Global Insight.
Publicis posts profit slump, shares fall French advertising giant Publicis reported a big profit fall yesterday and was cautious about its outlook this year, causing its shares to fall sharply. Net profit for the first half of the year fell by 16.9 percent to 260 million euros (US$351 million), weighed down by the strength of the euro. Sales were about steady compared with the equivalent figure last year, showing a gain of 0.2 percent to 3.365 billion euros, but performance slowed sharply in the second quarter.
IQE’s H1 revenue falls British semiconductor materials maker IQE Plc said its revenue slid about 17 percent in the first-half of the year, hurt by destocking by customers due to softness in the handset market and a strong pound. The company’s shares fell as much as 10.8 percent to 20.25 pence, making the stock the top percentage loser in early trading on the London Stock Exchange yesterday. IQE, whose products are used in microchips found in smartphones, tablets and GPS equipment, said revenue fell to about US$88 million.
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ore than half of consumers globally expect job prospects to be good to excellent in the year ahead, a survey showed yesterday. That helped push global consumer confidence up in the second quarter to its highest since the first quarter of 2007, according to the survey by global information and insights company Nielsen. India overtook Indonesia as the most optimistic consumer market, while Portugal and Slovenia were the most pessimistic. Japan and Hong Kong saw the biggest declines in confidence from the previous quarter. The Nielsen Global Consumer Confidence Index rose 1 point in the second quarter to 97, according to the survey, conducted between May 12 and 30. The reading headed closer to the 100 mark that signals optimism among consumers. U.S. consumers were the eighth most upbeat globally as optimism about job prospects surged. “Payroll growth is visible across a range of (U.S.) sectors, which is also positive,” said Venkatesh Bala, chief economist at the Cambridge Group, a part of Nielsen. “However, realwage growth of workers has been anaemic so far, and needs to pick up substantially, along with other improvements in the labour market, in order for consumer spending to increase in a broad-based way.” By region, consumers in the Asia
Pacific were most confident about job prospects with 65 percent seeing favourable job opportunities for the year ahead, up from 64 percent in the first quarter. Globally, 56 percent of respondents to the survey viewed their personal finances positively, up from 55 percent over the past three consecutive quarters. North America reported the biggest increase, with 63 percent of respondents feeling secure in money matters over the next 12 months, up from 59 percent in the first quarter. While consumer confidence in debt-laden euro zone economies remained weak it improved sharply in Italy, which Nielsen attributed to confidence in Prime Minister Matteo Renzi’s new government, formed in February. Confidence also continued to slowly improve in Greece, France and Spain. Outside the euro zone, consumer sentiment in Britain rose to its highest level since 2007 as the country’s economy continued to outperform euro zone peers. Ukraine, meanwhile, saw a rebound in consumer sentiment after a sharp fall in the first quarter following a political crisis and tensions with Russia after Moscow annexed the Crimea region. The Nielsen survey covered more than 30,000 online consumers across 60 markets.
Top 10 index readings India Indonesia Philippines China UAE Denmark Thailand United States Hong Kong Saudi Arabia Canada
128 (+7) 123 (-1) 120 (+4) 111 (0) 109 (-5) 106 (+6) 105 (-3) 104 (+4) 103 (-8) 102 (0,+3) 102 (0,+3)
Source: Nielsen
Bottom 10 index readings Spain Ukraine France Hungary Greece S. Korea Italy Serbia Croatia Slovenia Portugal
62 (+1) 61 (+5) 60 (+1) 56 (+2) 55 (+2) 53 (+2) 51 (+6,-1) 51 (+6,-1) 50 (+5) 49 (+1) 48 (-3)
Source: Nielsen
Reuters
U.S. fine causes Credit Suisse to post big loss Credit Suisse’s fixed income unit outshone both its wealthy client unit and its U.S. rivals with a 4 percent rise in sales and trading
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redit Suisse Group AG reported its biggest quarterly loss since the peak of the financial crisis in 2008, the result of a 1.6 billion Swiss franc (US$1.78 billion) settlement with U.S. authorities over helping its clients evade taxes. The Swiss bank also said it would quit commodities trading, reversing a statement of just two months ago, as it continues to overhaul its investment bank to get back to double-digit capital returns from its remaining activities. Credit Suisse’s fixed income unit outshone both its wealthy client unit and its U.S. rivals with a 4 percent rise in sales and trading. That compares to drops of at least 10 percent at American banks including Goldman Sachs and JPMorgan last week. Credit Suisse said the investment bank cuts would allow resources and funds to be reassigned to its private bank, which disappointed investors with a 39 percent drop in revenue
and swung to a loss due to the fine. “I want to reiterate that we deeply regret the past misconduct that led to this settlement and that we take full responsibility for it,” Brady Dougan, chief executive of the Zurich-based lender, said on yesterday. “The continued trust and support of our clients helped us mitigate the impact of the settlement on our business. Credit Suisse’s private bank has been under scrutiny since the bank’s guilty plea to the U.S. criminal charge, with investors worried about clients pulling money out of its wealth management business as a result. Dougan said the bank’s capabilities to offer services to clients were not hampered as a result of the settlement. The private bank won 10.1 billion francs of net new money in the quarter - a key indicator of future revenue - which was slightly above analysts’ consensus for 9.27 billion francs. Reuters
KEY POINTS Q2 net loss 700 mln Sfr vs 581 mln Sfr in poll Private bank wins 10.1 bln Sfr in net new money Investment bank pretax profit steady at 752 mln Sfr Credit Suisse to exit commodities trading Says stowed funds for cash dividend in 2014 Shares steady in pre-market indications
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July 23, 2014
Opinion Business
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Leading reports from Asia’s best business newspapers
THE KOREA HERALD South Korea’s domestic credit card spending by individuals dropped in May for the second consecutive month due to April’s deadly ferry sinking that hurt consumer sentiment, central bank data showed Tuesday. Credit card spending by individuals fell 1.6 percent to 30.5 trillion won (US$29.7 billion) in May, from 31 trillion won a year earlier, according to the Bank of Korea. The data does not include cash services and overseas spending. It is the first time that the amount contracted year-on-year for the second consecutive month since the central bank began compiling the data in December 2009.
TAIPEI TIMES Export orders grew at the fastest rate in 17 months to US$38.82 billion last month, due largely to a low comparison base and stronger demand for mobile devices ahead of Apple Inc’s new product launch, the Ministry of Economic Affairs said yesterday. Last month’s orders rose 10.6 percent year-on-year, according to the ministry’s latest report. They were also up 2.1 percent from a month earlier. Growth was mainly driven by orders for electronics, primarily components used to manufacture handsets, which rose 17 percent to US$9.79 billion from a year ago, the ministry said.
THE STRAITS TIMES A unit of Keppel Corp is embarking on a seabed exploration for minerals. In a statement today, Keppel said its unit, Ocean Mineral Singapore (OMS), had received approval from the International Seabed Authority (ISA) for its first seabed exploration licence. Over the next few months, OMS will work with ISA to finalise the terms of contract for the licence, which will allow exploration for polymetallic nodules at a site within the Clarion-Clipperton Fracture Zone of the Pacific Ocean. OMS is a Singaporeincorporated company majority owned by Keppel, with UK Seabed Resources.
THE AGE The Group of 20 nations’ growth pledge could “considerably help” revive activity, Reserve Bank of Australia governor Glenn Stevens said in a speech that didn’t directly address the nation’s economy or currency. “Unless we think the tendency for human optimism has been completely drummed out of us, animal spirits in the ‘real economy’ will surely improve at some point,” Mr Stevens said today in the text of a speech to be delivered in Sydney “Reforms on the supply side of the G-20 economies can impart a sense of dynamism and opportunity.”
The transatlantic growth gap Daniel Gros
Director of the Brussels-based Center for European Policy Studies
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RUSSELS – The global financial crisis that erupted in full force in 2008 affected Europe and the United States in a very similar way – at least at the start. On both sides of the Atlantic, economic performance tanked in 2009 and started to recover in 2010. But, as the financial crisis mutated into the euro crisis, an economic gulf opened between the US and the eurozone. Over the last three years (2011-2013), the US economy grew by about six percentage points more. Even taking into account the increasing demographic differential, which now amounts to about half a percentage point per year, the US economy has grown by about 4.5 percentage points more over these three years on a per capita basis. The main reason for the gap is the difference in private consumption, which grew in the US, but fell in the eurozone, especially in its periphery. A retrenchment of public consumption actually subtracted more demand in the US (0.8 percentage points) than in the European Union (0.1 points). This might appear to be somewhat surprising in light of all of the talk about Brussels imposed austerity. In fact, public consumption in the eurozone has de facto remained fairly constant over the last three years, whereas it has declined substantially in the US. (The same is true of public investment, though this constitutes such a small proportion of GDP that transatlantic differences could not have had a large impact on growth over a threeyear horizon.) The contraction of private investment in Europe accounts for only a small part (one-third) of the growth gap. Though the financial-market tensions that accompanied the euro crisis
had a strong negative impact on investment in the eurozone periphery, investment demand has also remained weak in the US, minimizing the overall difference. The resilience of private consumption in the US, the key to the growth gap, is not surprising, given that American households have reduced their debt burden considerably from the peak of more than 90% of GDP reached just before the crisis. The lower debt burden is also a key reason why consumption is expected to continue to grow much faster in the US than in the eurozone this year and next. But the crucial question –and one that is rarely asked– is how US households were able to reduce their debt burden during a period of high unemployment and almost no wage gains while sustaining consumption growth. The answer lies in a combination of “no recourse” mortgages and fast bankruptcy procedures. Millions of American homes that were purchased with
subprime mortgages have been foreclosed in recent years, forcing their owners, unable to service their debt, to leave. But, as a result of norecourse mortgages in many US states, the entire mortgage debt was then extinguished, even if the value of the home was too low to cover the balance still due. Moreover, even in those states where there is full recourse, so that the homeowner remains liable for the full amount of the mortgage loan (that is, the difference between the balance due and the value recovered by selling the home), America’s procedures for personal bankruptcy offer a relatively quick solution. Millions of Americans have filed for personal bankruptcy since 2008, thereby extinguishing their personal debt. The same applies to hundreds of thousands of small businesses. Of course, there has also been a surge of bankruptcies in the eurozone’s periphery. But
Millions of American homes that were purchased with subprime mortgages have been foreclosed in recent years, forcing their owners, unable to service their debt, to leave. But, as a result of no-recourse mortgages in many US states, the entire mortgage debt was then extinguished, even if the value of the home was too low to cover the balance still due
in countries like Italy, Spain, and Greece, the length of a bankruptcy proceeding is measured in years, not months or weeks, as in the US. Moreover, in most of continental Europe a person can be discharged of his or her debt only after a lengthy period, often 5-7 years, during which almost all income must be devoted to debt service. In the US, by contrast, the corresponding period lasts less than one year in most cases. Moreover, the terms of discharge tend to be much stricter in Europe. An extreme case is Spain, where mortgage debt is never extinguished, not even after a personal bankruptcy. This key difference between the US and (continental) Europe explains the resilience of the US economy to the collapse of its credit boom. The excessive debt accumulated by households has been worked off much more rapidly; and, once losses have been recognized, people can start again. The cause of the transatlantic growth gap thus should not be sought in excessive eurozone austerity or the excessive prudence of the European Central Bank. There are structural reasons for the eurozone economy’s slow recovery from the financial meltdown in its periphery. Most important, compared to the US, the excess debt created during the boom years has been much more difficult to work off. European officials are right to promote structural reforms of EU countries’ labour and product markets. But they should also focus on overhauling and accelerating bankruptcy procedures, so that losses can be recognized more quickly and over-indebted households can start afresh, rather than being shackled for years. The Project Syndicate 2014
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July 23, 2014
Closing Rheinmetall, HASCO in automotive joint venture Indian water reservoirs need more monsoon rains Rheinmetall, a German maker of defence technology (pictured) and car parts, said yesterday it is will set up a joint venture in aluminium castings with Huayu Automotive Systems (HASCO) of China. Rheinmetall said in a statement that both its automotive subsidiary KSPG and HASCO will each own 50 percent of the new company, which will be based in Neckarsulm, south west Germany. HASCO is majority-owned by the Chinese SAIC or Shanghai Automotive Group. The deal is subject to approval by the respective antitrust and cartel authorities, Rheinmetall said.
India’s reservoirs are depleting fast and monsoon rains need to pick up now if they are to have enough water to prevent a drop in output of major winter crops such as wheat and rapeseed that are sown from October, a senior government official said. Rains in India, the world’s second-biggest rice, wheat and sugar producer, were 15 percent below average in the week to July 16, an improvement from the previous week’s shortfall of 41 percent but still 29 percent deficient since the start of the season in June.
ADB lowers economic forecast The ADB said that growth in Southeast Asia softened in the first half of 2014 largely because of country-specific factors in Indonesia, Thailand, and Vietnam
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he Manila-based Asian Development Bank (ADB) was the latest among multilateral financial institutions to lower its growth forecast for the Philippines and other Asian countries in 2014 with the fallout from the super-typhoon Haiyan still being felt this year. In a supplement report to its Asian Development Outlook for 2014 released over the weekend, the ADB said that the Association of Southeast Asian Nations (Asean)’s region composed of Indonesia, Malaysia, the Philippines, Singapore and Thailand, would grow by 4.8 percent in 2014. This was slower than the ADB’s previous forecast of a 4.9 percent expansion this year. Earlier, the ADB said that economic growth in the region would pick up to 5.2 percent in 2014. “Southeast Asia’s growth forecast is tempered. Typhoon damage will moderate rapid growth in the Philippines before major reconstruction gets under way,” the ADB said. The ADB did not release the updated forecasts for individual countries in its
Asian Development Bank headquarters
supplement report. But early this year, it said that the Philippines was expected to grow by 6.4 percent to 6.7 percent this year and 6.7 percent in 2015. The overall slowdown in regional growth could pull down growth in the Philippines. The ADB said that growth in Southeast Asia softened in the first half of 2014 largely because of countryspecific factors in Indonesia, Thailand, and Vietnam. The multilateral lending institution has said that
the revised outlook for the sub-region’s five largest economies, which is 4.8 percent in 2014, would drag the sub-regional forecast to 4.7 percent, but should rebound in 2015 to 5.6 percent across Southeast Asia. The ADB supplement report also maintained its earlier growth forecast for China. It said that China, the world’s second largest economy, is set to post gross domestic product (GDP) growth of 7.5 percent in 2014, and 7.4 percent in
2015. China’s economy expanded by 7.7 percent in 2013, the same rate in 2012. Earlier, the World Bank also slightly lowered its 2014 economic growth forecast for the Philippines, as the effects of super typhoon “Yolanda” are expected to continue dampening growth. The World Bank said the Philippines’ GDP will grow by 6.6 percent, slightly lower than its pre-Yolanda forecast of 6.7 percent. This is at the lower end of the government’s target of 6. 5 percent to 7.5 percent this year.
But the World Bank also raised its 2015 GDP forecast for the Philippines to 6.9 percent, from an earlier forecast of 6.8 percent. “(Growth) depend on the speed and scope of the reconstruction program. The key challenge of the reconstruction process is to develop and enforce explicit standards for ‘building back better’ -- for safe and resilient buildings and infrastructure... An actionoriented, coalition-supported program on generating more and better jobs is needed,” the World Bank said. The Zurich-based financial group Credit Suisse has also tempered its 2014 economic growth forecast for the Philippines on expectations of a “subdued” second quarter performance as suggested by disappointing export receipts in April. In a research note dated June 10, Singapore-based CS economist Michael Wan said his company had cut its full-year GDP forecast for the Philippines this year to 6.2 percent from 7 percent, reflecting the likely weakness in exports.
Subianto withdraws to reject election results
Japan, Mongolia sign free trade deal
Shanghai consumer goods imports on the rise
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ndonesia’s election commission moved to count the final provinces in a presidential vote forecast to show Joko Widodo as the winner, as his opponent Prabowo Subianto rejected the ballot as undemocratic. Jakarta Governor Widodois leading the count against former general Prabowo after polls showed them neck-and-neck before the July 9 vote. Prabowo today withdrew his witness team from the General Elections Commission, known as the KPU, after making repeated calls for a delay in the results announcement. “The process of the 2014 presidential election done by the KPU was problematic, undemocratic and against the constitution of 1945,” Prabowo told supporters in Jakarta. The KPU had not been transparent in the vote count, which caused the “loss of Indonesian citizens’ right of democracy.” Stocks declined and the rupiah fell after Prabowo spoke. Prabowo, 62, has three days to contest the results in the constitutional court once they are announced. Bloomberg News
apan and Mongolia signed a free-trade deal yesterday, as Tokyo looks to tap the fastgrowing economy and its vast supply of natural resources. Japanese Prime Minister Shinzo Abe and Mongolian President Tsakhiagiin Elbegdorj announced the deal in a joint statement. Under the deal that covers a range of products including beef and cars, all Mongolian exports to Japan and 96 percent of Japanese products sent to Mongolia will be exempt from tariffs within the next decade, officials said. The agreement could help foster stability in the region, a foreign ministry official added, as Japan works to resolve the case of Japanese citizens abducted during the Cold War by North Korean agents. Mongolia is one of the few countries that has formal diplomatic relations with Pyongyang, which is regularly criticised for stoking regional tensions. The trade deal includes a so-called investor-state dispute settlement (ISDS) clause, which allows firms to pursue compensation claims if they think government policy has damaged their investment. AFP
Xinhua
hina’s financial hub of Shanghai has witnessed brisk demand for imported consumer goods, with a sustainable growth in value, said customs authorities yesterday. In the first half of this year, the value of goods imported to Shanghai reached 133.96 billion yuan (about US$21.44 billion), a 26.7-percent yearon-year increase, according to Shanghai customs. Shanghai has consistently been China’s top importer of consumer goods. Returning confidence among consumers, the expansion of government policies on imports and exports, as well as cross-border electronic commerce all contributed to Shanghai’s vigorous growth in this sector. The European Union (EU) was the largest source of Shanghai’s imports of consumer goods in the first half, shipping in products with a value of 71.51 billion yuan. The Association of the Southeast Asian Nations (ASEAN) was the second-largest and the United States the third. In the period, Shanghai’s top three import commodities in value were passenger vehicles, medical and healthcare products, as well as garments. Xinhua