Macau Business Daily, July 25, 2014 by Business Daily

MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 590 Friday July 25, 2014

New routes to Mainland and Taiwan

Year III

acau International Airport (CAM) is eyeing new routes. Specifically, to Xian and Shijiazhuang in the coming months. There’s also talk of more budget airlines flying to the mainland and Taiwan in the second half. Construction is well along for the new private jet hangar, slated for completion by year-end. And airport expansion is in the air PAGE

Hengqin on a plate

www.macaubusinessdaily.com

Shopping addicts UnionPay is on a roll. Overseas consumption by Hong Kong and Macau card-holders increased by 49 percent Y-o-Y in Q1. The number of cards issued in the two SARs has doubled in one year, says the company

Atlantic ‘Junk’ City: Moody’s downgrades US gaming centre

Future Bright has been given the thumbs up. It will invest HK$1 billion in a large-scale international food plaza in Hengqin. Fifty restaurants and food souvenir shops, exhibition hall and car parks are on the drawing board. Patrons are expected to come from all over the region PAGE 2

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Francis Tam says Sands will not act “tricky” PAGE 3

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Macau boosts Vitasoy The Vitasoy tea and soy milk operation is doing well. It’s reported gross profits of HK$2.1 billion for the year ended March 31. An increase of 13 percent. Macau and Hong Kong jointly racked up 42 percent of group sales PAGE 4

Bank battle Oversea-Chinese Banking Corp has moved closer to a full takeover of Wing Hang Bank. It raised its stake in the Hong Kong lender by 11 percentage points in five days. Wing Hang gives OCBC a network of about 70 branches, taking in Greater China and the hinterland

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Florida International University may send students to Macau. Academic and professional programmes could start next year. City University of Macau and FIU believe graduates can be part of the solution for the shortage of qualified workers in the territory

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HSBC’s PMI index shows Chinese measures to reactivate the economy are working. The results point to the stabilization the authorities planned Page 10

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July 25, 2014

Macau

Hengqin gives Future Bright green light Company to invest HK$1 billion to build 50 restaurants and food souvenir shops, an exhibition hall and car parks Kam Leong

Newsdesk@macaubusinessdaily.com

uture Bright Holdings Limited announced yesterday that the company had successfully bid for land in the Guangdong-Macao Cooperation Industrial Park in Hengqin New Area, on which it will build a large-scale international food plaza. According to the company, it purchased the land for HK$260 million, which is equal to the base bidding price set for the online public auction, while HK$1 billion is to be invested in the project. The land, occupying a gross floor area of some 49,849 square metres, will be used for a building complex

housing up to 50 restaurants and food souvenir shops, an exhibition hall and car parks. According to the contract, the group will lease the land for 40 years for commercial and office (convention and exhibition) facilities from the date of grant. The group expects the food plaza will become a key tourist attraction for visitors to Macau, Hengqin and Zhuhai City by capturing all “strong growth potential of the F&B business” in the three districts. The group’s subsidiary company Bright Success Property Agency Company Limited had submitted the

bid earlier while the Zhuhai Public Resources Trading Centre said the day before that the bid was successful and legally binding. Meanwhile, the Group will sign an Acquisition Confirmation Agreement with Zhuhai Land Bureau on or about 28 July, 2014. In the first quarter of this year, the turnover of Future Bright reached some HK$217.3 million (US$28 million), a year-on-year increase of 23.7 percent, while the company's gross operating profit also climbed 37.4 percent to HK$84.9 million. Hengqin New Area is one of the major development focuses of the China government who aim to develop the area into a ‘laboratory’ exploring new modes of cooperation between Macau, Hong Kong and Guangdong Province. The area, connected to Macau by the Lotus Bridge, was established in 2009 to build Hengqin Island into an open area connecting Hong Kong and Macau. It is also the third national-level new area, complementing Shanghai Pudong New Area and Tianjin Binhai New Area.

Francis Tam: Sands will not “act in a tricky way”

ecretary for Economy and Finance Francis Tam Pak Yuen said yesterday that he had noted the demonstration organised by gaming workers to improve their wages and benefits the day before. He said that he believes that the gaming corporations will maintain or improve their benefits for staff, given the competition for human resources. He thinks that the company will not “act in a tricky way” since once the competitive ability of one gaming enterprise declines, its human resources will also decline, which will affect the business itself. Hence, all of the six corporations should have known how to improve their benefits systems to develop their business. He also said that the Labour Affairs Bureau is currently dealing with complaints by gaming staff. The government, if necessary, will play a role in coordinating the issue.

July 25, 2014

Macau

MIA: More cheap flights to Mainland, Taiwan on horizon The operator also notes that it is satisfied with the current proportion of passengers travelling by budget airlines here Stephanie Lai

sw.lai@macaubusinessdaily.com

ocal airport operator Macau International Airport Co Ltd (CAM) is considering launching new routes to the northern cities of Xian and Shijiazhuang in the coming months, while it also said that it was in talks to cooperate with more budget airlines to run mainland and Taiwan routes here. During a work plan briefing yesterday, CAM announced it was confident about launching new routes connecting Macau to Xian in Shaanxi province and Shijiazhuang in Hebei province within the second half of this year, noting that there are interested parties including flagship carrier Air Macau - currently involved in the scenario. Within the second half of this year, the airport would also see a new direct route connecting to Tianjin in mainland China, CAM’s chief of corporate communications & policy research office Vicki Mou said. Mainland-based carrier Xiamen Airlines is the one interested in launching a direct flight to Tianjin, Business Daily understood. The carrier has already been flying to Tianjin City via a stop in Xiamen at the moment with a satisfactory passenger load factor. “We’re in talks with two to three budget carriers, which run flights to mainland China and Taiwan,” said Ms. Mou. The budget carriers’ flight plans connecting here and Greater China, if realised in the second half of this year, will be a breakaway from the past where the

local budget flights mostly focused on Southeast Asian destinations. The CAM representative noted that of the 5.02 million passengers that the local airport received, around 40 percent travelled on budget airlines. “The proportion of travellers travelling by budget carrier here has been rising in the past few years; the latest proportion is 40 percent,” said Ms. Mou. “We’ll try to maintain this [40 percent] proportion. For a healthy development of the aviation market, we’ll also work on introducing operators other than the budget carriers,” she added. Nine of the twenty-two airlines currently flying here

are budget carriers, of which only two are mainlandbased. These two carriers Spring Airlines and Juneyao Airlines - are currently flying here and to Shanghai on a daily basis. Also, starting July and August, the airport is seeing more frequent flights between here and the eastern destinations of China, such as Shanghai, CAM said.

New private jet hangar The airport is also expecting that the new private jet hangar, the construction of which started in October, will enter into use by the end of this year, Ms. Mou said. There is no delay in

construction of the hangar, she added. The whole building process may take two to three months to complete. “While we’ll continue to [introduce] new routes for the general traffic, we’ll also focus on developing the market for business aviation,” Ms. Mou remarked, adding that the client profile generated by the casino and hotel business in the city is a powerful driving force for the private jet segment. The airport operator targets accomplishing 2,269 business aircraft movements this year, which would be a 42 percent rise compared to last year. The airport has already seen double-digit growth in

private jet movements in 2012 and 2013: in 2012, some 1,210 private jet movements were recorded; the number further grew to 1,598 in 2013, according to figures provided by the Civil Aviation Authority. CAM noted to media that the bidding process for inviting MRO (maintenance, repair and overhaul) operators to take care of the heavy maintenance for private jets has not yet concluded; meanwhile, the airport operator said it would like to see more newcomers undertake the FBO (fixedbase operator) service for private jets – known as ground handling works although long-time partner Macau Business Aviation Centre has already won the bid to continue the service. The airport will also start the expansion of the north side of the passenger terminal before the end of this year. The government has approved the expansion, which will add a floor area of 90 metres by 40 metres, and will accommodate a handling capacity of 1.5 million passengers more for the existing space in the terminal. The maximum capacity that the airport can currently handle is 6 million passengers. “We’re also looking into how the south side of the terminal can be expanded,” said Ms. Mou, “We expect that next year we can launch a public tender for that. The added space could accommodate another 1.5 million passengers.”

Authorities launch enquiry into TransAsia Airways crash

aiwan authorities launched an investigation on Thursday into the fatal crash of a TransAsia Airways turboprop plane in which 48 people were killed with weather expected to be a factor in the enquiry. There were no MSAR residents among the passengers, the airline said. The plane, a 70-seat ATR 72, crashed on Wednesday evening near the runway while trying to land on the small island of Penghu, west of Taiwan Island, after a typhoon had passed earlier in the day. The aircraft had 54 passengers and four crew on board. Two of the dead were French, the French foreign ministry said, and 10 people were injured and taken to hospital. The remaining 52 passengers were all Taiwan nationals, TransAsia Airways

said in a press statement. Yesterday, Chief Executive Fernando Chui Sai On offered his condolences over the deaths via the Taipei Economic and Cultural Office in Macau, the government spokesperson’s office noted in a press statement. Both black boxes had been found, which officials said would be examined later in the day, director of Civil Aeronauticals Administration Jean Sean said. Taiwan’s civil aviation authorities said the weather had been suitable for flying but it also noted that it would not rule anything out. The aircraft took off from the southern Taiwan city of Kaoshiung, heading for Makong Airport in the Penghu islands but it crashed just short

of the runway on its second attempt to land during a thunderstorm. No one on the ground was hurt. TransAsia Airways had another

fatal accident in 2002 when a cargo plane, carrying two pilots and heading for Macau, crashed into the sea. With Reuters

July 25, 2014

Macau Brought to you by

HOSPITALITY

Florida International University explores opportunities in Macau The dean of the school of Hospitality and Tourism Management believes that students from the American institution may be part of the solution for the shortage of qualified workers in Macau João Santos Filipe jsfilipe@macaubusinessdaily.com

Mid-year trends June figures for Macau visitors are out and allow us to carry out a mid-year appraisal of the trends that are developing. Compared with last year, the overall number of visitors increased by 8.1 percent. This is a neatly higher growth than in previous years. The same rate stood at 4.1 percent in 2013, and 2.5 percent in 2012. That is, the acceleration in the growth rate registered last year seems to be consolidating. The strongest contributors to that growth, as it has been generally the case, were visitors from China. Their growth rate, in the period, was more than 6 percentage points higher than the overall rate. The growing reliance on the Chinese market is even more pronounced if we look into the full period observed here. Compared to 2010, total growth in the first semester stood at 25 percent, while that figure reached 57 percent for China alone. Conversely, the number of visitors from the two other major sources of visitors, Hong Kong and Taiwan, declined in the same period by about 12 percent and 29 percent, respectively. Note, however, that in the first semester of the current year, the number of visitors from Taiwan showed a slight recovery, rising by about 1.6 percent.

lorida International University (FIU) is preparing to send during the next year trainees to begin academic or professional programmes in Macau, as part of a partnership with City University of Macau. According to the FIU Chaplin School of Hospitality & Tourism Management dean, the Special Administrative Region of Macau offers a unique and dynamic development for such industries. “Macau is a good location for FIU students to experience the unique and dynamic growth of an exceptionally popular global destination, where tourism is driven by a broad range of factors,” Mike Hampton told US newspaper Miami Today. The partnership between City University of Macau and the American

institution began in December 2011, when a memorandum was signed as Dr. Hampton had visited Macau. Dr. Hampton believes that trainees arriving from Florida could help in the long-term to fulfil Macau needs for qualified individuals in the gambling and tourism industries. “The hospitality and tourism infrastructure in Macau is unmatched in terms of spectacular facilities and scope of operations,” he told the newspaper. However, before a final approval of the programme is made, a professor of the American university is going to spend six months in Macau to assess potential programmes and teaching opportunities in the City University of Macau Hospitality Management programme. “During that time, Dr. Zhao

will teach strategic management and will assess the areas for which the greatest fit lies for academic and professional and/or continuing education initiatives,” Dr. Hampton said. “He will be working towards identifying the industry management talent requirements that are not currently being served by academic institutions and gaining insight on the management talent that will progressively need to be met in the coming years.” In the summer of 2013, eight FIU undergraduates registered for internships through the City University of Macau and spent time in the Macau Sheraton hotel. As a result of the internships, two students received placement offers from a hotel in the former Portuguese enclave.

Vitasoy posts HK$2.1 bln profit Macau and Hong Kong account for 42 percent of the group’s total sales, followed by mainland China

V Inevitably, these figures imply a rising share of mainlanders in the tourism flows. In the full period observed here, the share of mainland visitors has risen by 13.6 percentage points to 66.8 percent. That is, currently 2 in 3 visitors are from China. The shares of Hong Kong and Taiwan both decreased. In the first case, by almost 9 percentage points to 20.7 percent; and, in the second case, by 2.3 percentage points to just over 3 percent of the total.

14.7%

mainland visitors increase, first half of 2014

itasoy International Holdings Ltd reported a gross profit of HK$2.1 billion for the 12 months ended March 31, up by 13 percent from that of a year ago. In its 2013/14 annual report filed with the Hong Kong Stock Exchange, the company announced total assets of HK$3.2 billion, up by 10 percent from HK$2.9 billion last year. Vitasoy’s total turnover was HK$4.5 billion, an 11 percent increase over that of 2012/13. Macau and Hong Kong – the sales by location of which are consolidated – account for 42 percent of the group’s total, followed by mainland China at 34 percent. Australia and New Zealand accounted for 11 percent of Vitasoy’s total sales, as did North America also with 11 percent. Singapore accounted for 2 percent of total sales. Executive chairman Winston Lo Yau-lai said in the annual report that Vitasoy maintained its market leadership in soy and tea segments in Hong Kong and Macau. “We saw strong growth in mainland China stemming from consistent execution of our ‘go deep, go wide’ strategy,” he added.

Revenues from external customers, mainly Macau and Hong Kong, totalled HK$1.98 billion in the full year ended in March, an increase of 5 percent over that of the previous year. “We’re determined to keep strengthening our leadership positions of our core brands across channels and packaging formats,” Mr Lo said in the annual report. For the full year 2014/15, the company plans to bring

in “new meaningful innovations” to both soy and tea. Soymilk will see new packaging, while milk tea will be introduced to expand Vitasoy’s tea offerings. The maker of soy and plant milk, tea, dairy milk and tofu products distributes goods in North America, Singapore, Australia, New Zealand, and mainland China as well as Hong Kong and Macau. S.F.

July 25, 2014

Macau

UnionPay: HK, Macau overseas consumption jumps 49 pct Number of cards issued in the two regions doubled in one year

nionPay International recently announced that overseas consumption by Hong Kong and Macau UnionPay card-holders increased by 49 percent year-onyear in the first quarter of this year. Meanwhile, a total of some 15 million UnionPay cards have been issued in the two Special Administrative Regions. Assistant manager of China UnionPay (Hong Kong), Li Penglin, said that the compound annual growth rate of UnionPay transactions rose by more than 64 percent, while that of the local card issuing business jumped by almost 100 percent, doubling the number of cards issued to clients, according to Chinese-language newspaper Macau Daily. Mr. Li remarked that the business in Hong Kong and Macau has been developing as the fastest districts outside mainland China since the company launched its business in the two Special Administrative Regions in 2004. The number of the company’s cooperating merchants in the two regions has increased 7.6-fold over that of 10 years ago. According to Mr. Li, a total of 110,000 merchants and 4,000 automated teller machines (ATM) accepted UnionPay in Hong Kong and Macau by the first quarter

of this year. In addition, 1.1 million ATMs and over 12 million merchants accept the cards in some140 districts outside mainland China. Mr. Li also said that UnionPay International has cooperation terms with almost all major banks in the two SARs. He believes that the business of UnionPay in the two regions will

continue increasing, in tandem with the improving global network.

Pay your way Earlier this week, UnionPay International launched a new promotion campaign called ‘UnionPay Your Way’ to celebrate the company’s

10th anniversary in the two regions. The campaign aims to show the convenience of using UnionPay for global tourism, shopping and food and beverage. In May, Macau’s secretary for economy and finance Francis Tam Pak Yuen dismissed the suggestion that there would be new reins on the use of China UnionPay cards here in July, stressing that the government would step up the rules if needed though. This came in response to a Reuters report that the Monetary Authority of Macau had said in a meeting with local banks on May 9 that it would lay out guidelines to restrict UnionPay card usage at shops selling luxury items like jewellery on casino floors. In addition, the report said UnionPay transactions from shops inside or near casinos here last year totalled 180 billion patacas (US$22.5 billion) or half of the 360.75 billion of the Macau gross gaming revenue last year. In a letter to banks dated May 14, the Monetary Authority ordered the removal of all UnionPay China terminals from jewellery shops inside casinos, and also for these shops to cancel means of withdrawing cash from there. The date set to cancel such services was July 1.

July 25, 2014

Macau

Atlantic City’s credit rating junked by Moody’s

Sands China regrets workers march The company rejects the claims that benefits have not been improved since the financial crisis of 2008, and says that it is implementing a plan to enhance the promotion system that was conceived after taking into account the opinion of the workers João Santos Filipe jsfilipe@macaubusinessdaily.com

ands China has criticised the demonstration staged by workers of the labour union Forefront of Macau Gaming, saying it has various communication channels by which members can provide feedback directly to the human resources department. ‘Sands China regrets that an association has decided to stage a demonstration outside The Venetian Macao to voice the concerns and opinions of some of Macao’s gaming employees’, a company press release said. ‘Sands China has in place various communication channels to encourage direct feedback from our team members, including via the company Intranet, opinion boxes, team member concierge, direct communication with human resources, and regular

communication sessions’. Last Wednesday, around 2,000 gaming staff marched outside The Venetian Macao to protest the promotion system that they considered unfair. According to police data the number of protesters numbered some 900 people. The demonstrators also sought to air their dissatisfaction with the fact that during the financial crisis of 2008 their benefits were reduced and have not been increased since. However, Sands China denied the claims, stating that there is an ongoing master plan to improve the promotion system and benefits scheme. This plan conceived taking into account the opinions of members of the corporation. ‘Since last year, in view of the

Wynn cooperating with CCAC

ynn Resorts Ltd said it has been contacted by Macau’s anti-corruption agency regarding the company’s land purchase for its new resort-casino on the Cotai Strip. ‘We are working cooperatively

with’ the city’s Commission Against Corruption, the Las Vegas-based company said in an e- mailed reply to questions. The agency is investigating why Wynn Resorts was made to pay 400 million patacas (US$50 million) for

company’s business development, labour supply and business operation, Sands China has had in place a master plan’, it stated. According to Sands China, the plan that is being implemented includes the anticipation of January pay as a special arrangement in light of the Chinese New Year holiday, the payment of a bonus in February to eligible full-time members, a five percent increase in wages, and a special award of one-month’s additional salary for all manager grade and below team members in July, to be paid annually through 2017. As for the promotion system, the corporation chaired by the American Sheldon Adelson revealed that since the beginning of the year close to 10,000 workers had received additional wage increments or promotions.

the land rights, citing Commission chief Fong Man Chon. According to Steve Wynn’s explanation to Macau Business, in May 2012, in order to build Wynn Palace, the American company had to pay around 400 million patacas to obtain development rights in Cotai, as the land had already been committed to individuals from Beijing, for a Taiwan House. Wynn Resorts had to buy the rights from certain mainlanders, although the Land Public Works and Transport Bureau said it wasn’t aware of their involvement. The anti-graft body has declined to comment on the report as the case is under investigation. Earlier this month, the International Union of Operating Engineers (IUOE) submitted a public request to the Chief Executive of Macau, Chui Sai On, and to the Secretary of Transport and Public Works, Lau Si Io, requesting information regarding the commitment of land rights in Cotai to individuals from Beijing. The American trade union also said that their request seeks to introduce more transparency to the Cotai land deal and to the Macau Government’s land grant process in general.

tlantic City, New Jersey, the gambling hub that’s been pummelled by regional competition in the U.S. Northeast, had its credit rating cut two levels to speculative grade by Moody’s Investors Service. The reduction to Ba1 from Baa2 for the city’s $245 million of generalobligation debt reflects a weakened tax base resulting from anticipated casino closings, the New York-based ratings company said today in a statement. The outlook remains negative. “The downgrade to Ba1 reflects the city’s significantly weakened tax base, revenue-raising ability and broader economic outlook,” analysts Vito Galluccio and Julie Beglin said in the statement. “These result from ongoing casino revenue declines, expected near-term casino closures, and the impact of sizable casino tax appeals, all of which has stemmed from increased competition from casinos in neighbouring states.” Atlantic City lost its regional monopoly as states including Pennsylvania, Maryland and New York legalised casinos or expanded betting to increase tax revenue. Casino revenue in the city has dropped for seven straight years, falling to $2.86 billion last year from a high of $5.07 billion in 2006, according to Bloomberg Industries. The city’s 11 gambling houses account for almost half of its jobs: 5,883 positions in a workforce of 13,500. The Atlantic Club closed in January, putting 1,600 people out of work. The closing of Caesars Entertainment Corp.’s Showboat on Aug. 31 will wipe out 2,133 jobs. Trump Plaza Hotel & Casino said it plans to close Sept. 16, taking away another 1,009 positions. Revel, the $2.4 billion complex that employs 3,106 people, is seeking a buyer in bankruptcy. “Their reasoning for the new rating is exactly what we’ve said over and over again – regional competition for casino gaming is directly weakening Atlantic City’s casino revenues,” Mayor Don Guardian said in a statement. The Republican said his city “is taking the lead in transitioning from a strictly gaming-centric tourism destination to a non-gaming tourism destination with gaming as a supplement.” Governor Chris Christie, a 51-yearold Republican in his second term, gave Atlantic City a five-year deadline to reverse the decline in 2010. “This administration is committed to our partnership with Mayor Guardian and the people of Atlantic City,” Kevin Roberts, a spokesman for Christie, said by e-mail. “We will continue to work closely with the city to address its financial challenges as well as those of the gaming industry and to help secure their future.” Bloomberg

July 25, 2014

Macau

OCBC takeover gains traction Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China

versea-Chinese Banking Corp moved closer to a full takeover of Wing Hang Bank Ltd after it raised its stake in the Hong Kong lender by 11 percentage points in five days. OCBC, based in Singapore, bought 346,870 Wing Hang shares at HK$124.8 each on Tuesday, taking its holding to 67.8 percent, a filing with Hong Kong’s Securities and Futures Commission shows. OCBC had 56.9 percent on July 17, up just 6.5 percentage points since July 4, filings show. Acceptances for the US$5 billion bid dragged earlier this month as Elliott Capital Advisors LP boosted its stake in Wing Hang, which Mizuho Securities Asia Ltd said at the time could put pressure on OCBC to raise its HK$125 per share bid price. The offer, made in April, has been accepted by shareholders including the family of Wing Hang’s Chairman Patrick Fung. “It’s nice to see this moving in the right direction,” Jim Antos, a Mizuho analyst based in Hong Kong, said by phone. For minority shareholders, “HK$125 is a more than fair price for Wing Hang Bank. Looking at the history of bank mergers in Hong Kong, it’s a fair deal.” Hong Kong regulations allow OCBC to de-list Wing Hang once it owns 90 percent of the shares. Should it fall short, OCBC must ensure that at least 25 percent of Wing Hang stock remains in public hands, meaning it

may have to sell stock to cut its stake. The offer closes Tuesday next week. Koh Ching Ching, a Singaporebased spokeswoman for OCBC, declined to comment on the bank’s increased stake.

No distraction Shares of the Hong Kong bank traded as high as HK$127 on July 7 after Elliott Capital said in a July 3 filing it had increased its stake to 7.8

percent. The shares were bought at HK$125, the same as OCBC’s offer. “We know that they’re there, but in terms of would it distract us or change us from what we’re currently doing, it will not,” chief executive officer Samuel Tsien said in a July 10 interview. “We’ll just proceed according to the general offer document and if we cannot get 90 percent, we’ll keep the company listed.” The acquisition will give OCBC more access in the Greater China region and enable both banks to

offer services to Chinese companies expanding in Southeast Asia, where it has a larger presence, Tsien said. Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China. The bid is the largest takeover of a Hong Kong bank since DBS Group Holdings Ltd. OCBC’s biggest competitor in Singapore, offered US$5.4 billion for Dao Heng Bank Group Ltd in April 2001. Bloomberg

July 25, 2014

Greater China

Australia gets anxious about yuan clearing The two countries are determined to sign a bilateral free trade agreement by the end of the year

pportunities for Australian companies to participate in the burgeoning yuan market are expected to increase as the country is close to signing a deal with China to facilitate trade and investment settled in the Chinese currency. Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe said that the central bank was working with the People’s Bank of China (PBOC) on a memorandum of understanding that would allow a clearing bank to be selected over the coming months. Such a deal would create the world’s tenth offshore yuan hub with its own yuan payment and clearing system, after Beijing announced earlier this month it would assign yuan clearing banks to Paris and Luxembourg. Yuan clearing banks not only make cross-border yuan payments more timely and convenient, but increase the awareness of yuan usage among local companies and help yuan deposits to accumulate in a country. Australia still lags behind its global competitors in adopting the “redback”, despite an early start in 2013 when a private sector-led initiative kicked off with the aim of expanding yuan business in the country. China is Australia’s single biggest export market with twoway trade flows of around A$150 billion (US$141 billion) in 2013.

in energy purchases following Japan. Still, the commodity sector remains a bottleneck for the quick expansion of yuan usage worldwide. Most of the trade transactions switched from dollars to the yuan so far have little to do with commodities, where the dollar has retained a dominant position in invoices, transactions and trade finance. If the Chinese currency can be adopted in Australia’s commodity exports, yuan trade settlement will no doubt see a significant increase and the internationalisation expedition will also enter into a new stage. China’s thirst for minerals has fuelled more than 20 years of unbroken economic growth in Australia. The two countries are determined to sign a bilateral free trade agreement by the end of the year. Reuters

But at present less than 1 percent of Australia’s merchandise trade with China is invoiced in the yuan, also known as the renminbi (RMB). A survey by HSBC which interviewed 1,304 international companies during April and May revealed that 9 percent of the Australian companies trade in the yuan, much lower than the 22 percent global average. It also found that 66 percent of non-yuan users in Australia don’t see a clear benefit from using it, while half don’t believe their Chinese counterparts are willing to use the yuan, compared with 44 percent and

The creation of a BRICS development bank and a reserve fund is a historic step toward creating a multipolar world Nicolás Maduro Venezuela President

42 percent globally. “Australian businesses risk falling behind global rivals in trade competitiveness by failing to recognise the potential business development opportunities linked to RMB,” said James Hogan, head of commercial banking for HSBC in Australia. This lack of awareness and receptiveness among Australian companies to adopt the yuan as part of their broader China strategy is alarming, Hogen added. The potential is huge, though, as China is already the top buyer of resources in Australia with a dominant share of 52 percent, and the second

James Hogan HSBC Australia

Maduro trusts in China’s financial support The president said that China offers the financing out of a deep respect for Venezuela and it is not conditional as the old systems were

Venezuelan president Nicolas Maduro (R) and his Chinese counterpart Xi Jinping (L) during a press conference in Caracas, Venezuela, 21 July 2014

Australian businesses risk falling behind global rivals in trade competitiveness by failing to recognise the potential business development opportunities linked to RMB

enezuelan President Nicolás Maduro said his country’s relationship with China is mutually beneficial and China’s financial support has brought great strength to the South American economy. “The constant financing provided by the Chinese government has been used for the social and economic development in Venezuela,” Maduro told a press conference. Official statistics show that bilateral financing mechanisms, worth more than US50 billion, have provided financial support for more than 250 projects in such areas as technology, transportation, medical facilities and housing in Venezuela. China offers the financing out of a deep respect for Venezuela and it is not conditional as the old systems were, noted the Venezuelan president. Commenting on Chinese President Xi Jinping’s just concluded state visit to Venezuela, he said he expects Venezuela-China relations to advance to a new level thanks to Xi’s “extraordinary” visit. During his stay in Caracas, Xi

and Maduro agreed to upgrade their countries’ relations to a comprehensive strategic partnership. Venezuela was the third leg of Xi’s four-nation Latin America tour, which also took him to Brazil, Argentina and Cuba. Maduro said Xi’s Latin America trip was very positive for the region, which can cooperate as a bloc with China to establish a strong partnership on the basis of respect, mutual benefit and economic complementarity. He also spoke highly of the BRICS summit held last week in Brazil, saying it shows that a new world order is forming rapidly, which allows developing countries to implement their development strategies. “The creation of a BRICS development bank and a reserve fund is a historic step toward creating a multipolar world,” he said. Venezuela, he added, will put forward at the next meeting of the Union of South American Nations a new proposal for economic cooperation between the regional bloc and BRICS. Xinhua

July 25, 2014

Greater China

Causeway Bay’s glitter paling China’s economic slowdown and a high-profile anti-corruption drive has taken a lot of the fun out of the kind of conspicuous consumption mainland tourists come to Hong Kong to enjoy

ong Kong’s frenetic shopping district is at risk of losing its crown as the world’s most expensive retail space as a slowdown in mainland tourists hits store sales, paving the way for the first drop in retail rents in a decade. Hong Kong shop store rents stood at around HK$4,331 (US$560) per square foot in the first quarter - about 25 percent higher than those in New York and almost triple similar rents in Paris, the world’s second and third most expensive cities for retailers respectively, according to property services firm CBRE. But China’s economic slowdown and a high-profile anti-corruption drive has taken a lot of the fun out of the kind of conspicuous consumption mainland tourists come to Hong Kong to enjoy. That means luxury retailers in glittering Causeway Bay are finding it a little tougher to sell big-ticket items like jewellery, reducing their ability to afford the area’s high rents and threatening to knock Hong Kong off its perch as the most sought-after retail space in the world.

“China was the only girl in the dance. Now as China’s growth has started to moderate ... brands are seeing there are other markets around,” said Sebastian Skiff, executive director of Asia retail services at property consultancy CBRE. “I probably do see New York regaining the No.1 spot in the not too distant future - within 2014 or into 2015.” Official figures show growth in

KEY POINTS Hong Kong shop rents overtook New York’s in 2012 Slowing China growth hitting tourists’ hip pockets Hong Kong rents facing first fall in a decade - CBRE

mainland tourist arrivals slowing this year, while growth in spending by overnight visitors including mainland Chinese dropped to 3.9 percent in 2013 from 11 percent two years earlier. The city posted a revised 9.9 percent fall in April retail sales from a year earlier, its worst monthly record since 2009. May showed a 4.1 percent drop, the fourth straight month of decline. Hong Kong’s Retail Management Association has revised down 2014 retail sales growth forecasts. Property consultancies are also slashing their forecasts for 2014, with CBRE saying rents could fall for the first time in a decade. Knight Frank and Savills now says prime street rents could drop 5 percent to 10 percent, down from its earlier forecast of a possible 5 percent gain. That drop will not be enough to keep some of the area’s oldest remaining tenants - soaring rents have already seen noodle shops and tea restaurants replaced with highend stores such as Tiffany & Co, Burberry and Rolex. Reuters

200 mln smartphones sold in 1H Consumption of information products and services in China surged 20 percent in the first half of 2014 compared to the same period in 2013, according to a Chinese official. Information consumption topped 1.35 trillion yuan (US$218 billion) in the January-June period, up 20 percent from a year earlier, Zhang Feng, chief engineer at the Ministry of Industry and Information Technology, told a press conference yesterday. Nearly 200 million smartphones were shipped between the start of January and the end of June, accounting for 87 percent of total mobile phone output, Zhang said.

581 firms and restaurants probed China’s food regulator has visited close to 600 restaurants, businesses and food distributors as it investigates a fastspreading food safety scare that has dragged in a number of global brands and hit food outlets as far away as Japan. The Shanghai Municipal Food and Drug Administration said in a statement that it visited 581 food-related facilities suspected of using expired meat from Shanghai Husi Food, and sent 875 personnel to carry out inspections. Chinese police, local government and prosecutors are now also involved in the case.

Regulator determines Qualcomm has monopoly China’s antitrust regulator has confirmed that Qualcomm Inc, one of the world’s biggest mobile chipmakers, has a monopoly, the state-run Securities Times newspaper reported yesterday, as Qualcomm’s chief executive held talks in China. The regulator, the National Development and Reform Commission (NDRC), is investigating Qualcomm’s local subsidiary after it said in February the U.S. chipmaker was suspected of overcharging and abusing its market position in wireless communication standards, allegations which could see it hit with record fines of more than US$1 billion.

Causeway Bay panoramic view

Jiangsu sells municipal bonds

Bittersweet gold data Gold demand from January to June stood at 569.45 tonnes, compared with 706.36 tonnes in the same period last year

hina’s gold demand slumped 19.4 percent in the first six months of 2014 from year ago, the China Gold Association said in a statement yesterday, but production rose strongly in the same period as miners ramped up output to protect profit margins. Gold demand from China, the world’s largest consumer, has slackened this year as a 28 percent tumble in 2013 prices, which was the first annual decline in 13 years, dented consumer confidence in the metal as an investment tool. Lower demand this year is also partly due to huge purchases last year. The drop in prices prompted many to bring forward their purchases, eating into 2014 demand. Gold demand from January to June

stood at 569.45 tonnes, compared with 706.36 tonnes in the same period last year, the association said in a statement on its website. Total output in the first six months of 2014 reached 211.1 tonnes, up 9.47 percent from a year ago. In a sign that Chinese consumers were seeking other investments as an inflation hedge, sales of gold bars and coins fell 62.1 percent and 44.3 percent respectively. Jewellery sales in the first half rose 11 percent from a year ago to 426.17 tonnes, while industrial consumption rose 11.3 percent. While global gold prices have climbed nearly 8 percent this year on the back of geopolitical risks in Ukraine and the Middle East, Chinese miners remain under pressure to protect their

profit margins as costs increase. While China is considered a lowcost producer compared with its global peers, costs have steadily risen on the back of higher wages, increased environmental requirements and tougher safety standards. To cope with weaker bullion prices, some large miners such as China Gold International Resources Corp Ltd, have ramped up output as a way to reduce per-unit production costs. Zijin Mining Group Co Ltd 2899. HK 601899.SS, China’s largest listed gold producer, said it partly offset falling product margins by bolstering sales.

China’s Jiangsu provincial government auctioned a total of 17.4 billion yuan (US$2.81 billion) of five-, seven- and 10-year bonds at yields of 4.06, 4.21 and 4.29 percent, respectively, traders said yesterday. Jiangsu province is the third province that has issued bonds directly this year, without the finance ministry acting as a proxy. China announced in May that it would allow local governments to issue U.S.-style municipal bonds for the first time in an experiment to straighten out its messy state budget.

Shandong bad loans surge

Reuters

11 pct increase in jewellery sales year-to-year

The amount of bad bank loans in China’s eastern Shandong province surged 25.8 percent between January and June this year, the official Financial News reported yesterday. Financial institutions in the province had outstanding non-performing loans (NPLs) of 81.5 billion yuan (US$13.2 billion) at the end of June, up by 16.7 billion yuan from the start of 2014, the newspaper said. The NPL ratio hit 1.57 percent at the end of June, up 0.22 percentage points for the beginning of the year, according to the paper, which is run by the central bank.

July 25, 2014

Asia

Chinese Premier Li Keqiang said last week that economic growth of slightly more or less than 7.5 percent this year would be acceptable as long it still led to new jobs and higher wages

PMI shows great stimuli impact China’s factory activity expanded at its fastest pace in 18 months in July as new orders surged

preliminary HSBC survey yesterday showed the latest indication that the economy is picking up as government stimulus measures kick in. The HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index rose to 52 in July from June’s final reading of 50.7, beating a forecast of 51 in a Reuters poll. It was the highest reading since January 2013, and above the 50-point level that separates growth in activity from contraction for the second consecutive month. “Economic activity continues to improve in July, suggesting that the cumulative impact of mini-stimulus measures introduced earlier is still filtering through,” said Qu Hongbin, chief economist for China at HSBC. “We expect policy makers to maintain their accommodative stance over the next few months to consolidate the recovery.” Mainland China stocks jumped after the PMI report while shares in the rest of Asia edged higher. The Australian dollar hit a three-week high on prospects of stronger exports to China. Still, some analysts say the recovery appears patchy, and more stimulus may be needed to offset the downdraft from the cooling property market on the broader economy and increasing risks in the financial system, such as deteriorating credit quality. The official Financial News reported on yesterday that the amount

of bad bank loans in China’s eastern Shandong province surged nearly 26 percent in the first half of the year due to slower economic growth and government efforts to deal with industries that have large amounts of excess capacity. “The economy is showing initial signs of a recovery. There is no reason the government will stop taking action,” said Shen Jianguang, an economist at Mizuho in Hong Kong. “We believe favourable fiscal and monetary policy need to be expanded further.” China’s cabinet pledged on Wednesday to boost its support for small companies and the farming sector by getting commercial banks and the central bank to disburse more loans to them.

Policy support A breakdown of the factory activity numbers showed most of 11 sub-indices that measure output, domestic and foreign demand improved substantially from June, underlining improving performance for the smaller manufacturers tracked by the HSBC/Markit survey. “With the effects of government measures gradually filtering through and more positive factors coming up, we expect the industry sector to maintain steady growth in the second half and the growth momentum to strengthen further,” Zheng Lixin, a spokesman for the Ministry of Industry

and Information Technology, told a news conference yesterday. Since April, China has steadily loosened policy by reducing the amount of cash that some banks have to hold as reserves, instructing regional governments to quicken their spending, and hastening the construction of railways and public housing. A sub-index measuring new orders, a gauge of demand at home and abroad, hit a 18-month high of 53.7, while the sub-index for output also rose to a 16-month high in June.

KEY POINTS China July factory activity hits 18-month high New orders and output surge Adds to signs of pick up in the economy after stimulus measures More steps may be needed as recovery still patchyanalysts

The employment index also improved from May, though it was still a shade under 50, which implies that jobs are still being lost in the manufacturing sector. Any marked weakening in the labour market would raise alarm bells for China’s government, which regards healthy employment levels as a top policy priority and an important condition for social stability. Premier Li Keqiang said last week that economic growth of slightly more or less than 7.5 percent this year would be acceptable as long it still led to new jobs and higher wages. However, the industry ministry also noted yesterday that the economy still faces downward pressures as some firms struggle with operating difficulties. A troubled Chinese construction company avoided a landmark bond default at the last minute on Wednesday after it raised enough funds. The move let Huatong Road & Bridge Group Co Ltd steer away from what would have been the first public default in China’s massive interbank bond market - where 94 percent of all Chinese bonds are issued. China’s economy grew slightly faster than expected in the second quarter, expanding by 7.5 percent, as the burst of official stimulus paid dividends, but some analysts say the recovery appears largely dependent on government assistance. Reuters

July 25, 2014

Asia

Indonesia mining deal closer Arizona-based Freeport said on July 8 it had agreed on a draft memorandum of understanding with the Indonesian government but had not signed it

ndonesia’s top two copper miners signalled they are nearing a breakthrough to allow a restart of concentrate exports, which have been halted for more than six months due to a dispute with the Southeast Asian country over new mining rules. The comments come as Indonesian president-elect Joko Widodo prepares to assume power in October, and will take pressure off the new government to resolve the dispute, which has halted about US$200 million a month in copper exports. Freeport-McMoRan Inc said on Wednesday it expects to “imminently” sign an agreement with Indonesia that would enable it to immediately resume copper concentrate exports. In a further sign that the deadlock could be nearing an end, Newmont Mining Corp also said it was negotiating a memorandum of understanding that could restart stalled shipments. Arizona-based Freeport said on July 8 it had agreed on a draft memorandum of understanding with the Indonesian government but had not signed it. At the time, it gave no time frame on when it would resume exports. Indonesia introduced a mineral ore export ban and a steep export tax in January. “It is a compromise to create a bridge for us so that we can return to normal operations,” Freeport Chief Executive Richard Adkerson said of the MoU on an earnings call with analysts and investors. Under the agreement, Freeport would pay a “significantly reduced” export duty in 2014, 2015 and 2016 but higher royalties on copper and gold sales. It would also pay a US$115 million “assurance bond” against development of a smelter, Adkerson said. Freeport, which owns and operates the massive Grasberg mine, wants financial incentives from the government to build a new smelter. Indonesia imposed the new rules partly to spur construction of smelters in the country, but miners have said building new capacity does not make economic sense. Adkerson said the negotiations also

President-elect Joko Widodo from the Indonesia Democratic Party for Struggle raises his fingers as he greets his supporters in Jakarta, Indonesia, 23 July 2014. Widodo pledged to settle mining conflict

involve agreeing on terms to extend Freeport’s operations beyond 2021, when its current contract with the government expires.

Cabinet to meet An Indonesian cabinet meeting with outgoing President Susilo Bambang Yudhoyono is about to discuss the issue. News of a potential breakthrough caused little immediate market reaction. Copper on the London Metal Exchange (LME) was trading flat at US$7,043.75 a tonne in early Asian trade. A North America-based concentrates trader said any resumption in exports from Indonesia would not be enough to dramatically increase supply, but would renew expectations of an oversupply in the market. “A lot of pepole expected the market to be oversupplied,” he said, adding that recent delays to mine output expansions had led to tighter conditions.

The two U.S. mining giants account for 97 percent of Indonesia’s copper production. While Freeport had engaged in behind-the-scenes talks, Newmont suspended operation at its Batu Hijau mine and filed for international arbitration, drawing a rebuke from the Indonesian government. “We hope to reach an agreement with the government of Indonesia on an MoU or memorandum of understanding, which we would expect would lead to issuance of an export permit,” Newmont spokesman Omar Jabara said on Wednesday. He did not give details on terms or when exports could resume. Officials from Newmont’s Indonesian unit have been in ongoing meetings with the government, he added. Indonesia’s president-elect Widodo said on Tuesday he planned to sit down with Freeport and other miners to resolve a minerals row, which has halted US$500 million of exports a month in Southeast Asia’s biggest economy.

We hope to reach an agreement with the government of Indonesia on an MoU or memorandum of understanding, which we would expect would lead to issuance of an export permit Omar Jabara Newmont spokesman

Reuters

Modi meets World Bank president Prime Minister suggested that cleaning the Ganga river would be a very inspiring project for the World Bank

ndian Prime Minister Narendra Modi has met World Bank President Jim Yong Kim here and discussed with the latter future cooperation in development programs. Modi described meeting as “very fruitful.” “We discussed several ways of working together in the times to come,” he said. “We talked about the importance of scale and the need to work on a scale that inspires people and positively transforms their lives,” the prime minister said on

Twitter. “We live in a world where speed matters. Quick execution is essential. Speeding up World Bank projects will surely increase the impact.” Modi told Kim that India needs ideas, knowledge and expertise “ rather than dollars” as there is a need to focus on developing a base of skilled people keeping the future in mind. He also suggested that the cleaning of the Ganga would be a very inspiring project for the World Bank.

For his part, Kim said the meeting with Modi was among the “ most inspiring ones” he has had in his two years in the job. “The prime minister reiterated his three most important goals - skill, scale and speed. India is trying to do some really aspirational things and it is trying to do at huge scale very quickly.” “I was inspired by his extremely ambitious vision for India and we hope to play some role in achieving that goal,” he added. Xinhua

World Bank President Jim Young Kim (L) and India’s Prime Minister Narendra Modi shake hands before their meeting in New Delhi July 23, 2014

July 25, 2014

Asia

S. Korea decides to inject stimuli The Bank of Korea separately unveiled a plan to create a 3 trillion won lending facility Christine Kim and Choonsik Yoo

South Korean President Park Geun-hye (C) views a robot puppy at Pangyo Techno Valley in Seongnam City. Tech sector is key to South Korean recovery.

outh Korea offered billions of dollars in stimulus spending on yesterday to shore up domestic demand after Asia’s fourth-largest economy grew at its weakest in more than a year in the second quarter. The finance ministry’s plans included additional spending of 11.7 trillion won (US$11.4 billion) from the fiscal and quasi-fiscal accounts, 26 trillion won of loans or other financial support and easing in mortgage borrowing restrictions. The central bank separately unveiled a plan to create a 3 trillion won lending facility, based on which banks can lend up to 12 trillion won with low interest rates to support corporate investment in production facilities within the country. President Park Geun-hye has called for all-out efforts to boost the economy and Finance Minister Choi Kyung-hwan promised to take massive action, which investors believe will pressure the central bank to cut interest rates as soon as next month. “The government’s will to improve the economy is quite strong and there is a social understanding right now that the economy has to be supported. I feel that the measures will work,” said Kim Jong-su, economist at Taurus Investment & Securities. “In the past, the government would focus its strength on one policy or another, but right now it is pulling in everything from all

possible points.” South Korea, which relies heavily on exports, has been dragged down by a slower-than-expected recovery in global demand, while domestic consumption has been fragile, partly as a result of the ferry sinking that hurt tourism and services. South Korea’s economy grew 0.6 percent in the April-June period over the prior quarter, data showed earlier yesterday, the weakest since the first quarter of 2013 and slightly below market expectations for 0.7 percent growth.

Rate cut looms The Bank of Korea data showed private consumption fell a seasonally adjusted 0.3 percent in the second quarter after edging up 0.2 percent in the January-March period. Capital investment rose 1.3 percent after a 1.9 percent decline. It was the worst fall in private consumption since the third quarter of 2011 and only the second quarterly loss since then. The Sewol ferry sank on April 16, killing more than 300 people in the country’s worst maritime accident in two decades. That led to massive cancellations of tour contracts across the country, badly affecting all businesses serving tourists. “In the domestic tourism industry, how the public-sector entities are doing is very important,” said Nickey

Joo, who runs Air Tours Co. “All public-sector travelling was cancelled immediately after the accident and that quickly stopped activity in the private sector as well.” Private consumption generates about half of South Korea’s gross domestic product but the economy still relies heavily on exporters as their performance has a strong influence on jobs and investment within the country. The won has also emerged as an important factor for the Bank of Korea’s policy as a firmer won cuts profits at exporters and lowers inflation. The won was up 12.9 percent against the dollar by the

KEY POINTS Q2 GDP +0.6 pct q/q (+0.7 pct forecast, +0.9 pct in Q1) Private consumption in worst fall in nearly 3 years Government, c.bank unveil multi-billion-dollar stimulus Analysts expect interest rate cut as soon as Aug. 14

end of June from a year earlier. South Korea’s SK Hynix Inc, the world’s second-largest memory chip maker, reported yesterday a 2.7 percent drop in its second-quarter operating profit over a year before as the firmer won ate into profits earned on overseas sales. Unusually low inflation also underscores the currency effects and depressed consumer demand. Annual inflation averaged 1.4 percent for the first six months, below the lower end of the central bank’s target band of 2.5 percent to 3.5 percent. Low inflation and the government’s call for policy coordination will likely lead to the Bank of Korea’s interest rate cut as soon as at its Aug. 14 meeting. It would mark the first rate cut since May last year, when the central bank also lowered interest rates to support the government’s stimulus efforts. From a year earlier, South Korea’s gross domestic product rose 3.6 percent for the June quarter, matching a median 3.6 percent gain forecast in the Reuters survey but slowing from a 3.9 percent rise in the first quarter. The Bank of Korea downgraded its economic growth forecast for the whole of this year to 3.8 percent from the previous 4.0 percent, with many analysts seeing the projection as still too optimistic. The economy expanded 3.0 percent in 2013. Reuters

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 25, 2014

Asia

Japan’s numbers persist in clouding economic policies

Australian growth warmed by exports

Exports unexpectedly fell in June for a second straight month, weighed down by a drop in shipments to Asia and the United States, signalling that weak external demand may require bolder domestic policies to sustain the recovery

xports fell 2.0 percent in June from a year earlier, compared with a 1.0 percent increase expected by economists in a Reuters poll, data from the Ministry of Finance showed yesterday. That followed a 2.7 percent decline in the prior month, which was the first annual drop in 15 months. Sluggish exports, a weak spot in the world’s third largest economy, have been a concern for policymakers who hoped that a recovery in external demand would help offset the pain from the April sales tax hike to 8 percent from 5 percent. Analysts say weak exports alone may not trigger the Bank of Japan to act, but if domestic demand falters, it could raise expectations for additional monetary easing, which have subsided in the face of the BOJ’s confidence it will meet the inflation goal. “This raises more concern about how the economy will do after the sales tax hike and makes the government less likely to proceed with the next tax hike scheduled for next year,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute. “Weak exports alone will not prompt the Bank of Japan to ease policy, but if consumer spending also weakened, then expectations for a policy change would increase.” Exports to the United States, a key market, fell 2.2 percent in June from a year ago as more Japanese companies produce goods in other countries, such as Mexico, for U.S. consumers. Car shipments to the United States fell 6.8 percent, weighing on US-bound exports. Exports to China, another important market for Japan, rose 1.5 percent year-on-year in June, but exports to Asia, which accounts for more than half of Japan’s total

Canon profit climbs

(Pictured) BOJ Governor Haruhiko Kuroda said last week exports would increase eventually as overseas markets, mainly in advanced economies, recovers

exports, fell 3.8 percent in June from a year earlier, hit by sluggish shipments of electronics parts. Some respite for policymakers came in the form of July’s Markit/ JMMA flash Japan Manufacturing Purchasing Managers Index (PMI) which saw the new export orders index rising to 51.6 in July from a final 49.5 in June, a return to growth for the first time in four months. (A level above 50 indicates expansion.) Japan’s imports grew 8.4 percent in the year to June, matching the median estimate, due to hefty fuel imports, bringing the trade balance to a deficit of 822.2 billion yen (US$8.10 billion), the MOF data showed, marking two full years of trade shortfalls, the longest run on record. On a half-year basis, Japan logged a

record trade deficit of 7.5984 trillion yen in the first half of 2014, the data showed. BOJ Governor Haruhiko Kuroda said last week exports would increase eventually as overseas markets, mainly in advanced economies, recover, while Finance Minister Taro Aso has also blamed weakness in emerging market economies for Japan’s lacklustre export performance. Policymakers and analysts also cite the on-going shift of Japanese production abroad. The BOJ’s aggressive monetary stimulus helped weaken the yen by roughly 20 percent in 2013, boosting exporters’ profits and share prices. However, the yen has moved sideways this year versus the dollar, limiting gains in export proceeds. Reuters

Singapore central bank beats profit marks

currency holdings. The net profit in 2013/14 came as the MAS made investment gains and foreign exchange valuation gains on its official foreign reserves (OFR), which totalled S$343 billion at the end of March and make up more than 90 percent of the assets on the central bank’s balance sheet. The MAS said its official foreign

S$16.5 bln 2013/14 official foreign reserves total gains

Japan’s Canon Inc said second-quarter operating profit jumped 12 percent to its highest for any quarter in nearly three years, as strong earnings in overseas office equipment offset continuing weakness in its camera business. Canon said yesterday that operating profit for April to June grew to 110.6 billion yen (US$1.09 billion) from 98.3 billion yen in the same period a year earlier. That was in line with a 110 billion yen profit estimate reported in the Nikkei business daily two weeks ago, which had exceeded analyst expectations.

Indonesia’s FDI growth rises Growth in foreign direct investment in Indonesia started to pick up in the second quarter this year led by the transport, warehouse and telecommunication sectors, after slumping in the first quarter, data showed yesterday. The Investment Coordinating Board (KPM) said that foreign investment commitments rose 16.9 percent in April-June compared w i t h the same period of 2013, reaching 78 trillion rupiah (US$6.77 billion). The rate used by the board is 10,500 rupiah per dollar which compares with the current actual rate of around 11,500.

Economists trim Indian GDP forecast

The Monetary Authority of Singapore also reiterated that the economy is projected to grow 2-4 percent this year entral bank posted a S$15.84 billion (US$12.80 billion net profit in its last financial year, helped by a drop in the local currency that led to valuation gains on its foreign currency holdings. The Monetary Authority of Singapore (MAS), in its annual report issued yesterday, also reiterated that the economy is projected to grow 2-4 percent this year and kept its core inflation forecast unchanged at 2-3 percent for 2014. But MAS Managing Director Ravi Menon told a news conference that it had lowered its forecast range for headline consumer inflation to 1.5-2.0 percent from the previous 1.5-2.5 percent. The central bank’s net profit for the last financial year ended in March marked a turn around from a S$10.61 billion net loss incurred the previous year, when the Singapore dollar’s rise diminished the value of its foreign

Australia’s economy is expected to grow at a solid pace over the next couple of years as strength in housing and exports offsets the prolonged drag from an ageing mining boom. The latest Reuters poll of analysts expect Australia’s A$1.6 trillion (US$1.51 trillion) of gross domestic product (GDP) to expand by 3.1 percent in 2014, topping last year’s pace of 2.9 percent which was already among the fastest in the developed world. That was also up from previous forecasts, largely thanks to an exceptional burst of growth in the first quarter as resource exports beat all records.

reserves (OFR) made total gains of S$16.5 billion in 2013/14, reflecting investment gains of S$10.6 billion and foreign exchange valuation gains of S$5.9 billion. In 2012/13, the OFR made investment gains of S$9.4 billion, but had incurred foreign exchange valuation losses of S$19.5 billion. “With regard to currency composition, about three-quarters of the OFR are denominated in the major G4 currencies i.e. US Dollar, Euro, British Pound and Japanese Yen, with no single currency allocation making up more than one-third of the composition,” the central bank said. In 2013/14, the euro rose 9.1 percent against the Singapore dollar, while the U.S. dollar rose 1.4 percent and sterling gained 11.3 percent versus the local currency, leading to foreign exchange gains, the MAS said. Reuters

India’s economic growth will accelerate this fiscal year but economists in a Reuters poll trimmed their forecasts, tempering their optimism the first majority government in three decades would quickly bring in reforms and spur business investment. While the latest consensus still suggests growth will beat the rate of less than 5 percent seen in the past two years, it does not reflect the stock market euphoria since Prime Minister Narendra Modi’s historic election win two months ago. Asia’s second-largest economy grew 4.7 percent in the fiscal year to March 2014.

July 25, 2014

International British manufacturing emerges New business is coming from unexpected places to help power the whirring, high-tech lathes on the factory floor of Future Advanced Manufacture, one of the companies spearheading Britain’s manufacturing revival. “Even the Germans are starting to deal with us, which is unheard of,” said Future AM’s managing director Craig Peterson. Manufacturing accounts for only a tenth of Britain’s economy, compared with more than a fifth in Germany that is Europe’s leader in the sector. But British factories are in the midst of resurgence.

French PM says euro too strong France’s prime minister yesterday called for the European Union to do more to help those member states carrying out reforms and reiterated France’s views that the euro is overvalued. “You know I consider that the euro today is too expensive, too strong. To implement the stability pact we need more flexibility ... Europe must do more to accompany the policies carried out by governments,” Manuel Valls told RTL radio. Valls referred in particular to the European Commission’s President-elect Jean-Claude Juncker’s pledge to present within the first three months of his mandate “a Jobs, Growth and Investment Package”.

EasyJet sees annual profit rise Low-cost airline said it would grow annual profit by at least 14 percent assuming no further significant disruption over the next two months, putting it on track to meet analyst expectations. The company forecast that pretax profits for the 12 months to the end of September would be in the range of 545 million pounds (US$928 million) to 570 million pounds and the range included the impact from situations in Israel, Egypt and Moscow. Analyst forecasts expect easyJet to report pretax profit of 569 million pounds for the current financial year according to Thomson Reuters data.

Retailer Kingfisher perplexed by poor results Kingfisher, Europe’s largest home improvements retailer, suffered a sharp slowdown in trading in June, particularly in France and Poland, and said yesterday it did not know why. The firm, which runs the B&Q and Screwfix chains in Britain and Castorama and Brico Depot in France and other markets, had forecast a slowdown in its second quarter from the first, which was boosted by warm weather, and a strong year-ago period. “However, our markets in Q2, notably in June, have been slower than anticipated particularly in France and Poland,” Chief Executive Ian Cheshire said.

Ghana’s union to strike over economy Ghana’s biggest labour group plans to strike to demand President John Dramani Mahama do more to stem a slide in the cedi that’s fuelling inflation and curbing economic growth. More than 5,000 members of the Trades Union Congress will march in Ghana’s largest cities, including the capital, Accra, TUC Secretary-General Kofi Asamoah said. The union represents 18 national unions with workers ranging from miners to healthcare workers and maritime personnel.

UN highlights growing gap in inequality About 1.2 billion people survive on the equivalent of US$1.25 or less per day Harumi Ozawa

ore than 2.2 billion people are “poor or near-poor”, with financial crises, natural disasters, soaring food prices and violent conflicts threatening to exacerbate the problem, a United Nations report said Thursday. While poverty is in decline worldwide, growing inequality and “structural vulnerabilities” remain a serious threat, said the report by the United Nations Development Programme (UNDP), released in Tokyo. Nearly 1.5 billion people in 91 developing states live in poverty while another 800 million are teetering on the edge, it found. “Eliminating extreme poverty is not just about ‘getting to zero’; it is also about staying there,” said the agency’s 2014 Human Development Report. “Those most vulnerable to natural disasters, climate change and financial setbacks must be specifically empowered and protected. “Making vulnerability reduction central in future development agendas is the only way to ensure that progress is resilient and sustainable,” it added. UNDP chief Helen Clark said this was the first time that the annual study looked at vulnerability and resilience jointly “through a human development lens”. “If life-cycle and structural vulnerability are addressed, and conscious efforts are made to lift resilience to crisis and disaster, then I have no doubt that many of the kind of setbacks we see today to human development can be averted in future,” Clark said at an event for the report’s release. The study, entitled “Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience”, called for making basic social services available to all and putting full employment at the top of the development agenda. “Providing basic social security benefits to the world’s poor would cost

United Nations Development Programme (UNDP) Administrator Helen Clark (R) speaks to Japan’s Prime Minister Shinzo Abe during their meeting ahead of the Global Launch of Human Development Report 2014 at the United Nations University Headquarters in Tokyo

less than two percent of global GDP (gross domestic product),” it said. “A basic social protection package is affordable so long as low-income countries reallocate funds and raise domestic resources, coupled with support by the international donor community.”

‘Deep inequalities, widespread poverty’ About 1.2 billion people survive on the equivalent of US$1.25 or less per day, the UNDP said. “If you are poor, you are less able to handle several shocks; you may also be disabled, you may also be older. So you have more layers of things against you,” Khalid Malik, the report’s lead author, told reporters ahead of its release yesterday. Key to dealing with the problem was focusing government policy on jobs and social safety nets, the study said. “Structural vulnerabilities are

often manifested through deep inequalities and widespread poverty,” it said. “The poor, women, minorities (ethnic, linguistic, religious, migrant, or sexual), indigenous peoples, people in rural or remote areas or living with disabilities, and countries landlocked or with limited natural resources tend to face higher barriers. “Unemployment tends to be associated with an increase in crime, suicide, violence, drug abuse and other social problems. Therefore, the social benefits of a job far exceed the private benefit -- the wage.” Japanese Prime Minister Shinzo Abe, who attended the report’s launch, pointed to a fast-approaching deadline for Millenium Development Goals - global targets aimed at cutting poverty, millions of avoidable deaths and improving equality by 2015. “The targets’ deadline is approaching quickly,” Abe said. AFP

Eurozone business dependent upon price cutsw Services business expanded at its fastest pace since May 2011

he euro zone’s private sector expanded at the fastest rate in three months in July, although faster growth in new business was driven mainly by companies cutting prices again, surveys showed yesterday. Markit’s Composite Purchasing Managers’ Index (PMI), based on surveys of thousands of companies across the region and a good early indicator of overall growth, rose to 54.0 in July from 52.8, its highest since April. Any number above 50 indicates expansion. The services sector across the 18-member bloc performed better than any of the 39 economists polled by Reuters had forecast,

while manufacturers also reported a stronger month than suggested by the median Reuters forecast. Markit said the data suggest quarterly economic growth of 0.4 percent if a similar pace is maintained in August and September. “There is a very encouraging expansion in the services sector, with Germany growing at its fastest pace in three years and even French companies returning to modest growth,” said Chris Williamson, Markit’s chief economist. The rest of the euro zone performed even better, with the largest monthly increase in business activity recorded since August 2007 accompanied by a similar surge in new orders growth.

Yet while euro zone services business expanded at its fastest pace since May 2011 - the PMI rose to 54.4 - firms have now cut prices for 31 months in a row. The sub-index measuring service sector output prices fell to 48.3, despite high raw material costs. With inflation stuck at 0.5 percent in June, well below the European Central Bank’s danger level of 1 percent, that suggests policymakers still face a tough task to thwart the threat of deflation. “There’s so much spare capacity that deflation remains a bigger risk at the moment,” Williamson said. “Companies simply cannot push through cost increases to consumers at this point.” Reuters

July 25, 2014

Opinion Business

wires

Containing the resource crisis

Leading reports from Asia’s best business newspapers

THE JAKARTA POST Alejandro Litovsky Publicly listed Bank Central Asia (BCA), the nation’s thirdlargest lender, booked higher profit growth in the first half of this year than in the same period a year ago thanks to strong interest income and margins, despite slower loan growth. BCA’s net profits jumped 24.2 percent yearon-year to Rp 7.85 trillion (US$682.1 million) in the first half, whereas a year before, the growth rate only stood at 19.3 percent. The bank’s outstanding loans grew by 14.6 percent to Rp 321.28 trillion, compared with 24.1 percent growth recorded a year ago.

Founder and CEO of the Earth Security Initiative

The world needs to invest in sustainable agriculture, renewable energy, and green infrastructure. To be sure, the most promising efforts by leading multinationals today must confront entrenched subsidies and vested political interests

THE STAR The Mass Rapid Transit (MRT) line between Sungai Buloh and Kajang, which is the biggest infrastructure project undertaken by the Government, has so far absorbed RM8.02bil. Three years into the project, which entails a 51-km MRT line, the overall progress rate of the job is 47.63%, with a variation order of RM184.16mil of the value of the contracts awarded so far. MRT Corp chief executive Datuk Wira Azhar Abdul Hamid said yesterday that 83%, or RM6.65bil, of the amount paid out was for the work package contractors for the construction work of the line.

TAIPEI TIMES The industrial production index rose 8.63 percent last month from the same period last year, as robust market demand and better macroeconomic conditions drove the production of electronics, machinery and motor vehicles, the Ministry of Economic Affairs said. Industrial production during the April-to-June quarter hit the highest level in the nation’s history, rising 6.43 percent year-on-year and 10.19 percent quarter-on-quarter, the ministry said in a report. That boosted cumulative industrial production during the first half of the year by 4.48 percent from the same period last year, the ministry said.

PHILSTAR A petition has been filed with the Supreme Court (SC) seeking to void the concession agreements of the state-owned water regulator Metropolitan Waterworks and Sewerage System (MWSS) with Manila Water Co. Inc. and Maynilad Water Systems Inc. In a 56page petition for certiorari and prohibition, the Abakada partylist asked the High Court to nullify the resolution issued by the MWSS Regulatory Office extending the two separate concession agreements to another 15 years or until 2037. It noted that the extensions made are new contracts that need to undergo public bidding.

Satellite image of crops growing in Kansas, USA. Healthy, growing crops are green.

ONDON – The proclamation of a new Cold War, following Russia’s annexation of Crimea, turned out to be alarmist and premature. However, it reflected the anxiety of today’s decision-makers in the face of a crumbling global order. With emerging economies far from committed to established norms in international relations, many governments and multinational companies are feeling vulnerable about relying on others for vital resources – the European Union’s dependence on Russian gas being a case in point. Competition for scarce resources is sorely testing our assumptions about global governance and cooperation, at a time when collective leadership is becoming ever more necessary. But even in the absence of overarching global legal frameworks, it is possible to maintain a sense of common security if the terms of resource investments are founded on long-term political understanding and commercial relationships, rather than short-term competition. The stakes are high. Resource scarcity is closely linked to political risks. Consider, for example, the drought that decimated Russia’s 2010 wheat harvest. In response, Russia imposed export restrictions to shore up its domestic supplies, sending food prices soaring in its main export markets, especially Egypt. This in turn helped spark the political uprisings that spread rapidly across

North Africa and the Middle East. Climate change is expected to trigger many more such chains of events. One test case for such cooperation is the potentially explosive issue of the Nile Delta’s water resources. Britain’s colonial-era treaty has, since 1929, given Egypt a veto over any upstream river project that might affect the country’s water supply. Several Nile Basin countries, including Sudan and Ethiopia, have now ratified a new, Nile River Basin Cooperative Framework agreement, which Egypt has yet to sign. Given Egypt’s concerns about potential water shortages arising from Ethiopia’s new upstream hydropower plants, its assent is far from assured. Indeed, in Egypt’s febrile political atmosphere, its newly elected president, General Abdul Fattah el-Sisi, may be tempted to escalate the threat of military action in response to Ethiopia’s hydropower projects. Such a move would send shockwaves through a region already reeling from conflict in South Sudan, Syria, Iraq, and Lebanon. To avoid another dangerous political-environmental chain reaction, nudging all sides toward agreement will require achieving mutual recognition of resource concerns. Ethiopia must credibly guarantee the supply of water downstream, for example, by establishing a water-replenishment rate at its dam reservoirs that does not threaten the onward flow of water to Egypt. At the same

time, Egypt, while retaining the fundamental right to protect its water supply, must recognize the interests of its upstream neighbors and be ready to negotiate in good faith a new Nile Basin treaty. Multinational companies and sovereign investors like China, which have financed hydropower projects upstream, will come under increasing pressure to adopt a position. They, too, can play a positive role by considering the cross-border investments that will address critical interdependencies, like Egypt’s wasteful agricultural irrigation practices. Similar resource-related tensions are surfacing in other parts of the world. Water stress and food security threaten to constrain India’s economic promise, as increasing coal-powered electricity generation diverts water resources away from agriculture. The political risks of investing in Nigeria’s agriculture sector are also rising as a result of the country’s demographic explosion, high inflation, weak rule of law, and insecure land rights, with wider political consequences. These resource strains are aggravated by foreign investments that seek to meet developed-country consumers’ voracious demand for resources without attention to their impact on sustainability in the host countries. This virtual outsourcing of the industrialized world’s environmental impacts, apart

from being hypocritical, is no basis for building a strategy for global environmental sustainability. Instead, the world needs to invest in sustainable agriculture, renewable energy, and green infrastructure. To be sure, the most promising efforts by leading multinationals today must confront entrenched subsidies and vested political interests. Unless the necessary policy frameworks are put in place green investment initiatives will continue to struggle to achieve a meaningful scale. Moreover, developed and developing countries seem unable even to agree on a fair division of environmental responsibilities, even though they have become increasingly interdependent in trade, investment, and the supply of natural resources. These difficulties should not stop us from trying. The Earth Security Initiative is working with the BMW Foundation to develop global roundtables on resource security over a two-year period, starting in Hangzhou, China, on July 17- 20. These highlevel, informal meetings will bring together leaders from politics, business, and civil society in Europe and emerging economies in an effort to bridge just such differences. We know what needs to be done, why it is important, and who must be involved to secure our planet’s long-term future. We must now address the equally vital question of how this will be achieved. The Project Syndicate 2014

July 25, 2014

Closing Hong Kong’s exports up in June

GSK seeks approval for first malaria vaccine

The value of total exports of goods in Hong Kong rose 11.4 percent from a year earlier to HK$309.2 billion (about US$39.8 billion) in June, after a year-on-year increase of 4.9 percent in May, Hong Kong’s statistics department said yesterday. The value of re-exports climbed 11.4 percent to HK$304.4 billion, while the value of domestic exports rose 7.3 percent to HK$4.8 billion, according to the data. Concurrently, the value of imports of goods increased 7.6 percent from a year earlier to HK$352.3 billion in June. A visible trade deficit of HK$43.1 billion was recorded in June.

GlaxoSmithKline is applying for regulatory approval for the world’s first vaccine against malaria, designed for use in children in Africa. The British drug maker said the shot, called RTS,S, is intended exclusively for use outside the European Union but will be evaluated by the European Medicines Agency (EMA) in collaboration with the World Health Organisation (WHO). Malaria, a mosquitoborne parasitic disease, kills more than 600,000 people a year, mainly babies in the poorest parts of sub-Saharan Africa. The WHO has previously indicated it may recommend use of RTS,S from as early as 2015.

Singapore port. An important hub for Asian-Western commerce

Feeble Western exports stall Asian growth Economists in a Reuter’s poll cut 2014 growth forecasts for China, India, Indonesia, the Philippines, South Korea and Thailand

he outlook for emerging Asia has dimmed further this year on weak demand for exports, although growth in India is expected to accelerate into 2015 even as China is held back in part by a slowing property market, Reuters polls showed. China and India have been stung by the West’s slow recovery from the Great Recession and, adding to the problem, both countries have struggled to implement reforms at home to boost productivity and consumer spending. But signs of stabilisation have emerged in China, the world’s second-largest economy, which grew by a slightly-faster-thanexpected annual 7.5 percent

in April-June, thanks to a raft of government stimulus measures. However, economists in the Reuters survey conducted from July 17-23 were wary about pushing growth forecasts much higher. They now expect the Chinese economy to grow 7.4 percent in 2014, a modest increase from the 7.3 percent predicted in April, according to 44 respondents. They expect growth to slow to 7.2 percent next year. That underlines the limited effect that government stimulus measures have had so far and reflects worries that a property market slump could worsen and hurt the broader economy. “The mini-stimulus

measures have helped to support growth in the second quarter but we see some downside risks stemming from a property market correction due to oversupply and uncertain external demand,” said Jian Chang, an economist at Barclays in Hong Kong. Economists in the poll also cut 2014 growth forecasts for India, Indonesia, the Philippines, South Korea and Thailand while Australia and Malaysia were predicted to expand at a slightly faster pace. The forecast for Thailand was cut the most after months of political turmoil that led to a military coup in May, as well as the continuing weakness of exports. Its

economy is expected to grow by just 1.8 percent in 2014, down from the 2.6 percent forecast in April. The Thai economy is then seen expanding 4.0 percent next year. Most other economies are also expected to perform slightly better in 2015. For India, economists pencilled in 5.3 percent growth for the current fiscal year, down from the 5.5 percent seen in April. For now, they fail to share the enthusiasm of investors for the new government of Prime Minister Narendra Modi. His landslide election win two months ago has helped send Mumbai’s Sensex index up more than 24 percent this year.

Most Asian countries have begun increasing exports to the United States as its economy has rebounded following a dismal start to 2014 but orders to the euro zone, China and regional trade partners have stagnated or slipped. High inflation in the region has limited the scope for any easing in monetary policy and almost all major central banks in the region are likely to hold interest rates steady until the end of next year, resisting pressure to stimulate demand. Only the Bank of Korea is expected to cut its base rate, by 25 basis points to 2.25 percent sometime in the third quarter.

European Central Bank blackmailed

Water rights market to open in 7 provinces

Sinopec to seek US$16 billion

he European Central Bank has received a blackmail letter after its public website was hacked and contact data stolen, the bank said yesterday in a statement. The central bank insisted that no internal systems or market sensitive data were compromised. “The database serves parts of the ECB website that gather registrations for events such as ECB conferences and visits. It is physically separate from any internal ECB systems,” the statement said. The theft came to light after an anonymous email was sent to the ECB “seeking financial compensation for the data,” it said. “While most of the data were encrypted, parts of the database included email addresses, some street addresses and phone numbers that were not encrypted,” the statement said. The database also contains data on downloads from the ECB website in encrypted form. The ECB said it was contacting people whose email addresses or other data might have been compromised and that all passwords had been changed on the system as a precaution. AFP

hina has picked seven provinces to host pilot markets for trade in water rights, as the government battles a spreading water crisis that threatens to curtail economic growth and hurt food production. The move is the latest sign that China aims to use market-based mechanisms to handle growing environmental problems. It has already launched seven pilot markets to cut emissions of climatechanging greenhouse gases, and plans to roll out a national scheme later in the decade. The provinces of Gansu, Guangdong, Henan, Hubei, Inner Mongolia, Jiangxi and Ningxia will draw up rules for their water markets and have them approved by October, the Ministry of Water Resources said on its website. “We will attempt to make progress in ... policy framework building in the next two to three years, and use the experiences to model a national trading system,” the ministry said. The provincial governments will issue water rights under the scheme, and recipients who use less than they receive can sell the surplus in the market. Reuters

Reuters

hina Petroleum & Chemical Corp., owner of more than 30,000 gas stations in the country, is seeking to raise 100 billion yuan (US$16 billion) selling about a one-third stake in its retail unit, people familiar with the matter said. The sale would pave the way for an eventual listing of the unit, the two people said, asking not to be named because the information hasn’t been made public. China Petroleum, or Sinopec, said in February it was looking to sell as much as 30 percent of the business as the government encourages more private investment in state-owned industries. About 20 companies are bidding for the stake in the unit, Sinopec Sales, which Asia’s biggest refiner values at 300 billion yuan, the people said. Sinopec disclosed rules on how it was screening investors on June 30. Sinopec’s Beijing-based spokesman didn’t answer two calls to his office seeking comment. Sinopec Sales had net income of 25.1 billion yuan in 2013 on revenue of 1.5 trillion yuan, according to the company. Bloomberg News