Macau Business Daily, July 31, 2014 by Business Daily

himelong Park is right next door. And it could eventually channel millions of visitors to Macau. A report suggests the theme park could be a ‘valuable’ aid in diversifying Macau’s tourism offering beyond gaming. Some 80 percent of Chimelong visitors surveyed intend to visit Macau at least three times next year. Improved infrastructure, promotion and a bigger-capacity Cotai will help drive visitation

MOP 6.00 Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

The Hengqin factor

Year III

Number 594 Thursday July 31, 2014

Page

www.macaubusinessdaily.com

Rolling along

Disappointing first half for Hutchison

907 new motorcycles were registered in Macau last month alone. That’s a 57 percent increase compared to a year ago. And 32 percent increase over the month of May. The high cost of car parking space is being blamed Page

Page 5

Arrested gaming kingpin’s diplomatic status cancelled

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Wynn’s winning ways All eyes are on Wynn Palace. Steve Wynn says the casino hotel will open on schedule, in Cotai, in 2016. The US$4 billion project is to have a ‘very positive expectation,’ according to Wynn executives. Meanwhile, the peninsula property has some surprises up its Chinese New Year sleeve Page

Class act In Q2 alone, Macau Foundation gifted subsidies worth half a billion patacas. Most went to four single educational institutions. Educational causes were favoured last year, as well

HSI - Movers July 30

Name

%Day

Wharf Holdings Ltd

3.38

Hang Lung Propertie

3.38

Sun Hung Kai Proper

3.21

China Merchants Ho

2.73

MTR Corp Ltd

2.66

Galaxy Entertainme

-1.14

Tencent Holdings Lt

-1.46

China Resources Po

-1.81

Hong Kong Exchang

-2.12

Lenovo Group Ltd

-2.23

Source: Bloomberg

I SSN 2226-8294

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OCBC rises most since April

Massive migration

Brought to you by

The Chinese Government has unveiled a big plan. It involves moving 100 million people. From the countryside to urban areas by 2020. The removal of the hukou policy will make for greater flexibility Page 8

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2014-8-1

2014-8-2

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July 31, 2014

Macau

Motorcycle sales up 57 percent in June Luís Gonçalves

ver 5.3 million people stayed in Macau hotels in the first half of the year, according to the Statistics and Census Service Bureau. Official figures released yesterday show that at the end of June there were some 99 hotels and guesthouses in operation providing more than 28,000 rooms, a marginal decrease of 1 percent compared to the same month in 2013. Of the rooms available, 18,000 were concentrated in 5-star hotels, says the report from the statistics bureau. Between January and June this year, the 5.3 million hotel guests in Macau represented an increase of 1 percent compared to the first six months of 2013. In June, a total of 863,000 guests checked into hotels and guesthouses, down 4 percent year-on-year, with 59 percent staying in 5-star hotels The occupancy rate stood at 86 percent, six percentage points higher than the same

luis.goncalves@macaubusinessdaily.com

otorcycles sales in Macau reached an eight-month record in June after almost a thousand units were sold, boosting half-year sales by 24 percent, the Statistics and Census Service Bureau said yesterday. Last month, there were 907 new motorcycle registrations here, an increase of 57 percent compared to a year ago and 32 percent more than in May. The huge success of motorcycles in Macau is going hand in hand with the increasingly high price of parking spaces in the territory, making cars an expensive alternative. More than 51 percent of the new licensed motor vehicle registrations in June were motorcycles, a record since February, the report revealed. In the first half of the year, motorcycle sales increased 24 percent year-on-year, while new car registrations only grew 9 percent in the same period, two times less. In total, new registration of motor vehicles (motorbikes and cars) increased 32.3 percent in June on a yearon-year basis, with 1,772 units sold last month. Since January, almost ten thousand motorbikes and cars (9,819) were registered in Macau, 4,819 of them between April and June. The statistics bureau said that there were 1,291 traffic accidents in June, 2.1 percent

Hotels welcome 5 million-plus guests in 1H O

more than a year ago. In the first half, 7,517 accidents occurred in Macau with 7 fatalities.

Trendy Vietnam The number of commercial flights here increased 5 percent last month to 3,830 and to 23,443 in the first half of the year. The new routes opened this year, doubling the number of flights between Macau and Vietnam, and surging by 163 percent in the first six months of the year compared to the same

period last year. As at June, more than 15.2 million people visited Macau, 8 percent more than in the same period in 2013. They were divided into two categories: visitors staying in Macau for a certain period but not overnight, and tourists spending at least one night in the territory. Visitor arrivals on package tours jumped15 percent in June year-on-year to 908,000, with the majority – 80 percent – coming from mainland China. Japanese visitors surged by 81 percent. In the first half of the year, visitor arrivals on package tours totalled 5.3 million, 16 percent more year-on-year. Outbound residents using travel agency services increased by 3 percent yearon-year to 124,000 and 46 percent travelled on package tours last month. In the first half-year, outbound residents totalled 707,000, a slight jump of 1 percent year-on-year. L.G.

period in 2013. The statistics office also revealed that mobile phone users increased 10.2 percent last month from a year ago, with Macau now having more than 1.68 million users. Internet subscribers also surged in June by 18.2 percent year-on-year to 285,000. Fixed broadband Internet accounted for 55 percent of the total, with the duration of Internet usage 76 million hours in June, while the cumulative duration of usage reached 462 million hours in the first half.

opinion IMF gives Macao SAR big thumbs up Murtaza Syed

IMF Mission Chief for Macao SAR

he International Monetary Fund (IMF) recently completed its first Article IV Consultation with the Macao SAR since the territory was handed back to China in 1999 (the full report can be downloaded from http:// www.imf.org/external/pubs/ft/scr/2014/cr14229. pdf ). The Article IV Consultation is a regular health-check by the IMF, whereby a team of IMF economists visits each of its member countries to assess economic and financial developments and discusses macroeconomic policies with government and central bank officials, as well as business representatives and civil society. The Macao SAR, of course, falls under Chinese membership and is not an independent member of the IMF, such that a stand-alone consultation is not obligatory. However, with the territory coming a long way in the last 15 years and its connections with the global economic and financial system growing significantly, the time was opportune for the IMF to conduct a separate consultation at the request of the Macao SAR and Mainland authorities, of the kind that it has already been conducting with the Hong Kong SAR for a number of years. From now on, the IMF intends to repeat this exercise with the Macao SAR every two years, which should provide the territory and the outside world with an independent assessment of its economic

performance and prospects. This year’s consultation concluded that the Macao SAR has made impressive strides since the handover. Prudent macroeconomic management has underpinned rapid development in the territory. A sleepy backwater at the turn of the century, the Macao SAR has been transformed into the world’s largest gaming centres , bringing in seven times more revenue than Las Vegas, and which now has one of the highest levels of per capita GDP in the world. The policy framework—anchored by the combination of a currency board pegged to the Hong Kong dollar, flexible markets, and a commitment to safeguarding fiscal discipline and financial stability—has served the Macao SAR extremely well, enabling it to successfully weather several external shocks, including the recent global crisis. At the same time, inflationary pressures have picked up during this period of high growth and inequality remains a concern. The outlook for the Macao SAR is very bright, and the IMF expects growth to remain close to 10 percent for the next few years as the global economic recovery strengthens and private investment remains strong. As a small, open and tourism-dependent economy, the Macao SAR is also benefiting from loose global monetary conditions and a Mainland-related

boom. However, the territory needs to prepare for future shifts in the global and domestic landscape, including implications from the unwinding of unconventional monetary policy by the United States and the Mainland engaging in major structural reforms to rebalance its growth. These shifts will bring both opportunities and challenges Given the economy’s openness and narrow base, external shocks to major economies like the United States and Mainland China could quickly spill over through reduced tourism inflows. Coping with such shocks will have to remain a top priority of the government in the coming years. In the next few years, we should begin to see the United States withdraw from unconventional monetary policy. At some point, this will translate into higher interest rates in the United States, which will be mirrored in the Macao SAR due to the currency board regime. If this happens quickly, it may complicate the global recovery as well as put pressure on borrowers that have benefited from rapid credit growth and low interest rates in the last few years, notably households in the Macao SAR that have borrowed for mortgages as well as borrowers in the Hong Kong SAR, Portugal, and the Mainland that have benefited from rapid credit extension by banks in the Macao SAR. If these pressures

are strong enough, they could lead to repayment difficulties that could have negative implications for the quality of bank lending and the property market in the Macao SAR. However, the Macao SAR Government’s strong track record of prudent macroeconomic management gives us confidence that they will remain alert to such pressures and use the tools at their disposal to monitor and address such risks. Over the longer term, two key issues will confront policymakers. First, how the Macao SAR can more fully benefit from the ongoing change in the growth model on the Mainland to diversify its economy from gaming toward other services demanded by Mainland residents. Second, how the government can best use its considerable fiscal savings to ensure sustainable and inclusive growth in the Macao SAR as the population ages and the gaming sector matures in the decades ahead. Options include investing more in social sectors and infrastructure, adopting a mediumterm budget framework, and allocating some part of the Macao SAR’s fiscal reserves to a sovereign wealth fund with a clear mandate to achieve better risk-adjusted returns over a long horizon. We had very good discussions with the government on all these topics, which underpin the IMF’s strong optimism about the Macao SAR’s prospects in the years ahead.

July 31, 2014

Macau

Chimelong: Answer to Macau’s diversification? A Union Gaming survey estimates that the Hengqin theme park will provide an extra half million tourists to Macau this year. When completed, it could be a source for several million more high-income visitors. Almost 80 percent of Chimelong customers plan to visit Macau at least three times in the next year Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

35 percent of Chimelong visitors say they will visit Macau at least seven times in the next year

himelong Park could be a new source for visitors to Macau and a valuable source for diversifying tourism and the type of tourists here beyond gaming, a Union Gaming study reveals. Despite the minimal impact this year, the brokerage firm believes the theme park in Hengquin is set to be a ‘material driver of visitation’ here. More marketing campaigns, new Macau-Chimelong joint package offers together with the next wave of casino resorts in Cotai are likely to be an irresistible lure for tourists. Mainlanders not only love to gamble. They are also drawn like a magnet to any kind of entertainment, namely theme parks, claims the brokerage. If mainlanders made Macau the world’s biggest gaming centre, they can do it again and Macau could become a global tourist destination, as Steve Wynn, Wynn Resorts CEO, repeatedly says.

On repeat In its Chimelong survey, Union Gaming analysts were surprised by two things: the physical quality of the venue and the ‘notable amount of repeated visitors.’ This, despite the fact that the theme park has been open for only six months and is far from completed. ‘This shows that China has a large appetite for any form of entertainment,’ wrote Union Gaming. Half of Chimelong’s visitors have also been to Disneyland or Ocean Park, in Hong Kong. These are frequent visitors who could make a valuable source of newcomers to Macau on their future trips. According to the brokerage survey, 18 percent of Chimelong visitors were on a trip that includes Macau. With estimates for the total of visitors this year ranging between 2.2 million to 2.9 million people, this means Macau will receive an extra

400,000 to 525,000 tourists through Chimelong. But more important is the fact that a third (35 percent) of Chimelong visitors who are not visiting Macau are willing to do it next time on a joint trip – a potential extra million tourists here in the coming months. The bottom line is that half of Chimelong clientele are visiting or will visit Macau soon. ‘In the out years, and as marketing efforts ramp up to include joint packages to Macau and Chimelong, we believe that the significant investments in Hengqin will become material drivers of visitation to Macau – especially to the existing and next wave of resorts being built on Cotai,’ says Union Gaming.

Tourist fountain If the theme park is set to have two million visitors this year with little or no advertising effort between the park and casino operators and with limited transport connections, when the additional phases of Chimelong are completed and with more than 300,000 people living in Hengqin residential districts, the park will be a ‘long term visitation’ for Macau. Chimelong plans to build nine more theme parks, 12 hotels and three golf courses in the next few years. The exponential growth of entertainment capacity will boost visitors by millions, with some of them being diverted to Macau. Union Gaming also says that it is not just the amount but the quality of tourists that make Chimelong so strategic to Macau’s tourism. The survey reveals that only 7 percent of visitors arrive on package tours (usually a sign of lower income tourists). The majority were independent travellers, a proxy for higher social status and higher income. The latter are the ‘ideal candidates to also visit Macau,’ the

brokerage noted.

‘Bix Six’ to profit Chimelong will also act as a source of clients for Macau’s integrated resort hotels, reducing dependence upon gaming clientele. First, visitors have a high brand awareness regarding Macau operators, with 89 percent of theme park visitors recognising at least one flagship property here. Lisboa from SJM and The Venetian from Sands China were the most recognized, with 80 percent of Chimelong customers referring to at least one of them. Lisboa is the

name associated with Macau since the 1970’s, while The Venetian has benefited by Sands’ marketing efforts in mainland China. With Chimelong Hengqin Bay Hotel charging more than some of the main properties in Macau, this will be an opportunity for the Big Six major operators here. Regarding the high frequency visitors to Chimelong, Union Gaming survey revealed how large this entertainment goldmine could be for Macau. Almost 80 percent of theme park visitors plan to visit Macau at least three times in the coming year and 35 percent more than seven times.

Macau resort awareness of all visitors

July 31, 2014

Macau

Wynn Palace focus of attention The American company achieved US$1.4 billion growth in the second quarter of the year but the attention is focused on 2016 and Wynn Palace, the new project that is going to open in Cotai and that will allow the group to grab more of Macau’s mass market João Santos Filipe

jsfilipe@macaubusinessdaily.com

ynn Resorts Ltd is focusing almost all of its attention on Wynn Palace, the resort that is going to open in Cotai in 2016. The new Macau project of the American company was one of the main topics during the presentation of the results of the second quarter of the year and so far everything is going according to plan. “With regard to the most important thing in this company, the progress of our construction and our US$4 billion Wynn Palace Hotel in Cotai, I am happy to say we are on budget, we are proceeding on schedule. We are about 18 months out, and still feeling we will make Chinese New Year of 2016,” Steve Wynn, chairman of the board and CEO of Wynn Resorts, said. The US$4 billion investment in new resort and casino is creating great expectations for the company. Wynn Palace will permit the group to double its tables in Macau and increase its number of rooms by 170 percent. “When you ask what will happen to us [after the opening of Wynn Palace] we tend to have a very positive expectation about a project like that. That allows us safely to spend US$4 billion on a facility in Cotai,” he said. Concerning the opening of the resort, company executives were asked about two potential problems that may have to be faced in 2016. The first was related to the staffing of the resort and the inflation of the labour market in the Special Administrative Region, as the territory has an unemployment rate of 1.7

percent and during the period from April to June of this year the gaming industry lost 1,500 employees. “What Mr. Wynn has done in February by having an increased bonus and offering shares [to employees] has made this property and this company far more popular than any of our competition,” the president for Wynn Macau, Gamal Aziz, said. “We have seen a drop in the turnover in the number of employees that leave the company. So I think we will be in pretty good shape when it comes to that.” The other challenge concerns the fact that from 2015 on more resorts are expected to open in Cotai. This means that some of the projects by competitors may open in the same quarter as Wynn Palace. “Because we have no control over it [other casinos’ opening dates] we don’t give any thought to it,” Mr. Wynn said. “The most important thing, first impressions matter, is to get the place off on the right foot.” It was also explained in the conference call that before the Palace is officially opened there will be a time trial of approximately two weeks to prepare for clients. During that time, staff will occupy the rooms, restaurants and gaming areas. “Hopefully, we have the proper time, in which to turn it into a campus for two weeks or more where we run it just for ourselves. So when the doors are open to the public, we are ready for them; and we can deliver a service level that isn’t scratchy and

erratic, and we’re not apologising because this doesn’t work or that didn’t work,” he said.

Now for the mass market During the second quarter of this year, the net revenues of Wynn Resorts hit US$1.4 billion, while in the second quarter of last year they were US$1.3 billion. The growth was explained by the 12.5 percent increase in net results from Las Vegas operations and the increase of 3.2 percent in Macau. Mr. Wynn said that he was “very happy” with the numbers from the past quarter but that the figures were shorter than gaming analysts had estimated. The company is expecting better figures for the month of July. “However choppy it was in June we’re doing better in July. We’re having the best July ever in the history of Las Vegas and probably the best July in the history of Macau,” said Mr. Wynn. Wynn Resorts is aiming for more and the increase in the premium mass market in Macau is one of the main objectives for the future. “Our culture is simple and that’s how we will get more of the mass market. And damn it, we will get more of the mass market, as sure as my name is Steve,” the American said after being queried. “In order to get the premium mass market we build a better product. The way you build a better product is to make every single minute detail that goes into the whole, better from scratch,” he added.

US$60 million investment in Wynn Macau Although the company’s attention is focused on the Palace, Wynn Macau is also undergoing some works. Yesterday, Steve Wynn said that US$60 million is being spent on the resort to add two gaming spaces in time for Chinese New Year 2015. “We’re in construction on the whole south end of the original Wynn casino, and we’re adding two really spectacular spaces that we decided we wanted to introduce into the market for Chinese New Year, one year ahead of Cotai,” he said. “In order to make sure that Wynn Macau could hold its head up against even Wynn Palace, we decided to do this really gorgeous thing, which we’re going to show everybody for Chinese New Year in January, one year before the Wynn Palace opens up. We’re making sure that we do not cannibalise the Peninsula,” he added.

July 31, 2014

Macau

Macau Foundation gifts half bln in Q2 Kam Leong

kamleong@macaubusinessdaily.com

acau Foundation handed out subsidies totalling 510 million patacas (US$63 million) during the second quarter of this year, the majority of which went towards four educational institutions, all of which received a total sum of 264.4 million patacas, according to the Official Gazette published yesterday. Macau University of Science and Technology Foundation was the biggest beneficiary in the list, receiving 144 million patacas. The other three educational institutions are the Macau Hou Kong Middle School Association, City University of Macau Foundation, and Catholic Higher Education University Foundation, which received 33.6 million patacas, 37 million patacas and 50 million patacas of the total subsidies, respectively. The four educational institutions are to use the subsidies primarily for construction of new campuses or scholarships, the Gazette noted. Besides these four educational institutions, four other entities received subsidies of over 10 million patacas, three of which are local traditional associations. Kiang Wu

Hospital Charitable Association received 25 million patacas to purchase medical instruments among other equipment. Local traditional associations - namely the General Association of the Macau Kaifong and the Macao Federation of Trade Unions - received 14 million patacas and 20.5 million patacas, respectively, for their subordinates unions’ 2014 plans. Meanwhile, the Women’s General Association of Macau was allocated 25 million patacas to build a new campus for its subordinate school. The Official Gazette also shows that Macau Foundation has subsided 91 students, including non-local students, in amounts ranging from 4,320 patacas to 125,000 patacas, depending on where they are studying. According to its 2013 annual report released earlier this year, the Macau Foundation gifted a total sum of 1.06 billion patacas in subsidies last year. The biggest beneficiary then was also the education sector, which accounted for around 36 percent of the grants approved, totalling 382 million patacas.

Disappointing first half for Hutchison T he results for Hutchison Telecommunications Hong Kong Holdings Ltd in the first half of this year show an overall decrease although turnover registered a year-on-year increase of 1 percent, according to the company’s annual report released yesterday. The group’s turnover for the first half reached HK$6.23 billion; however, EBIDA decreased by 20 percent to HK$1.18 billion while profit attributable to shareholders also dropped by 44 percent to HK$323 million. The results, compared to the second half of 2013, show a decline in turnover of 6 percent. The group believes that the disappointing performance in the first half of the year was influenced by the continuing intense price competition between the mobile business entities as well as the weakened market response to smart mobile devices. The group’s revenue from the mobile business in Hong Kong and Macau for the first half also dropped some 11 percent year-on year to HK$2.3 billion. The EBITDA and EBIT of the mobile business in the two cities also registered decreases of 35 percent and 53 percent to HK$614 million and HK$308 million, respectively. An increased proportion of lowertier service plans subscription and a decrease in demand for mobile voice

services are believed to be the cause behind the declines, according to the report. However, mobile hardware revenue increased by 15 percent at some HK$2 million compared to the same period in 2013. The group said its performance would improve gradually in the second half of 2014, in tandem with the launch of new smart devices in the fourth quarter. The report reveals that there are 3.6 million mobile phone subscribers with the group in Hong Kong and Macau, a slight decrease from the previous 3.8 million at the end of 2013. The decline is thought to be due to a higher churn of lower-tier customers, the group said. K.L

July 31, 2014

Macau Brands

Trends

May the force be with you Raquel Dias newsdesk@macaubusinessdaily.com

ot so long ago in this very galaxy, a car was made. Readers will forgive the literary latitude but when speaking of Star Wars one has little choice. Yes, Star Wars and cars. Male readers will be happy to know that their boyish dreams have come to life. Better than any Batmobile and ready to break many hearts, this is a vehicle designed specifically for Darth Vader by the fine folks at Hot Wheels. Sure, Luke’s father did not need a car to travel the universe, but here on this Earth we sure do need it. According to Mattel, if Vader had used one, it would definitely look like this. The vehicle shaped like the Dark Lord’s helmet is packed with serious power. Under the hood, the Darth Vader car is equipped with a 526-horsepower Chevy LS3 V8 engine, thus the force will surely never leave you again. In addition to the distinctive burbling V8 audible through the twin-tip, centre-exiting exhaust out back, this vehicle makes Darth-like sounds as well. Unfortunately, this was made for the American Comic Con event and there’s no plan to ever make it available to the mass market. We can, however, always dream . . .

OCBC rises most since April This comes after the bank’s bid to take over Wing Hang succeeded

versea-Chinese Banking Corp (OCBC) shares climbed the most in three months as it prepares to take Hong Kong’s Wing Hang Bank Ltd private after shareholders accepted its US$5 billion (40 billion patacas) takeover offer. OCBC will delist Wing Hang after raising its ownership to 97.52 percent, the two lenders said in statements to the Singapore and Hong Kong exchanges on the last day of the offer. Hong Kong’s takeover rules required OCBC, Southeast Asia’s second-largest lender, to own at least 90 percent of Wing Hang’s shares before the target could be delisted. OCBC is buying Wing Hang as it seeks more access to the Greater China region, allowing it to offer banking services to Chinese companies expanding in Southeast Asia. Samuel Tsien, the acquirer’s CEO, said earlier this month his bank intends to tap the owners of Wing Hang’s corporate clients, mainly small and mediumsized companies, for the Singaporean lender’s private-banking business. “The urgent need will be to determine a sustainable strategy in such a competitive market, including being clear quickly on what business segments and areas to focus on,” Kevin Kwek, a Sanford C. Bernstein & Co. analyst based in Singapore, wrote in a note to clients yesterday. “There is pressure for management to show the deal is worth it.” Shares of OCBC rose 1.6 percent to S$9.92 yesterday morning in Singapore, the biggest intraday gain since April 30. Wing Hang was suspended yesterday in Hong Kong, where the stock closed at HK$121.80 the day before.

Bid pressure Acceptances for the bid dragged earlier this month as hedge fund Elliott Capital Advisors LP boosted its stake in Wing Hang to 7.8 percent, which Mizuho Securities Asia Ltd

Integrating the operations and businesses of Wing Hang Bank with OCBC will now pick up speed Samuel Tsien, OCBC CEO

said at the time could put pressure on OCBC to raise its HK$125 (US$16) per-share bid price. OCBC said through its deal advisers on July 15 it wouldn’t raise its offer. Its stake in Wing Hang climbed in the past week as Aberdeen Asset Management Plc, the Hong Kong lender’s third-biggest shareholder, joined Bank of New York Mellon Corp and the family of Wing Hang chairman Patrick Fung in accepting the bid. The buyer’s current ownership level indicates Elliott Capital tendered at least a part of the shares it held. Richard Barton, managing partner at Newgate Communications in Hong Kong, declined to comment on behalf of Elliott. Wing Hang will become an OCBC subsidiary after the compulsory acquisition of the Hong Kong bank’s remaining shares, the lenders said Tuesday. Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China.

Equity Funding “Integrating the operations and businesses of Wing Hang Bank with

OCBC will now pick up speed,” OCBC’s CEO Tsien said in a separate statement. The takeover will be funded with equity and debt, Tsien said in a July 10 interview, without indicating the proportion of each as the bank wasn’t sure of the stake it would obtain. OCBC can partly fund the purchase through a S$3 billion (US$2.4 billion) rights issue, Anand Swaminathan, a Singapore-based analyst at Credit Suisse Group AG, wrote in a note yesterday. That can dilute earnings per share by 1 percent to 3 percent, he said. Takeover speculation helped drive Wing Hang shares up by 69 percent in the past year. The Hong Kong bank’s shares traded as high as HK$127 on July 7 after Elliott Capital said in a July 3 filing it had paid HK$125 a share – the same as OCBC’s offer price – to increase its stake.

Yuan business Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China. Hong Kong lenders are luring foreign buyers seeking to tap Chinarelated business in a city that is the biggest center for offshore yuan trading. Outstanding loans in Hong Kong made in China’s currency surged 46 percent last year to 115.6 billion yuan (US$18.7 billion), Hong Kong Monetary Authority data show. The Wing Hang 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. Yue Xiu Group, controlled by the Guangzhou city government in southern China, completed in February a US$1.5 billion purchase of a majority stake in Chong Hing Bank Ltd. Bloomberg

July 31, 2014

Macau

Arrested gaming kingpin’s diplomatic status cancelled Paul Phua has had his San Marino diplomatic status revoked after being arrested in Macau and Las Vegas Kam Leong

kamleong@macaubusinessdaily.com

acau gambling kingpin Paul Phua Wei Seng who was arrested earlier this month in Las Vegas for illegal betting has had his diplomatic status issued by San Marino revoked. Nevertheless, the 50-year old Malaysian businessman has used this status to apply for bail in Las Vegas. Mr. Phua, whom the American FBI believe is a ‘high ranking’ member of the 14K triad gang in Hong Kong, was accused of running an illegal betting operation at Caesars Palace in Las

Vegas. In addition, he was also an ambassador to Montenegro for more than three years before the revocation, according to Hong Kong newspaper South China Morning Post. In addition, the SCMP quoted foreign ministries from both Montenegro and San Marino as saying that Phua was never formally recognised as the Republic’s envoy as he had never submitted his credentials to the Montenegrin authorities to formalise his ambassadorship. Mr. Phua’s lawyer, on the other

hand, stated that Mr. Phua held a diplomatic passport during his bail application in Las Vegas. The diplomatic passport was issued to Mr. Phua after acquiring the nomination to be the European microstate’s ambassador in 2011. San Marino cancelled Mr. Phua’s diplomatic status shortly after his arrest and rescinded his nomination in addition to requesting him to return his passport although he denies the allegations, the SCMP reported. Prior to his arrest in Las Vegas, Mr.

Phua had been arrested and detained in Macau for illegal bookmaking during the FIFA World Cup. Soon after his release on bail, Phua departed Macau in his private jet on June 23 to Las Vegas, where he was accused of conducting illegal online betting on the FIFA World Cup there. It is still uncertain if he had violated his bail conditions by flying to Las Vegas in his private jet soon after his release. Business Daily contacted the Public Security Police Force regarding this issue but no reply from the PSP was forthcoming before the story went to press. Local newspaper Macau Daily Times quoted a local lawyer as saying that there are two possible options explaining Mr. Phua’s departure: that he had informed the relevant authorities that he would be changing his place of residency and leaving Macau; or that he did not request any authorisation, which would then have violated the terms of bail. Mr. Phua, a former gambling junket promoter, is also known to be a high-stakes poker player. He is estimated to own some US$4 million in assets.

Macau Chamber of Commerce, Banyan Tree anticipates Beijing discuss business diversity Vietnam casino licence

he research into Traditional Chinese Medicine in Hengqin Island could represent a breakthrough and spark an increase in business cooperation between Macau and mainland China, Zhang Dejiang, a member of the National People’s Congress Standing Committee, said yesterday in Beijing in a meeting with the Macau Chamber of Commerce. He emphasised the importance of helping the retail business and maintaining a good relationship with Portuguese-speaking countries, which he maintained could augment investment in Macau. Ma Iao Lai, president of the Macau Chamber of Commerce said: “Mr. Zhang’s speech illustrates the importance of the Chamber,” especially in regard to what has been done and continues to be done in the ‘one country, two systems’ policy. The central government will support Macau’s upcoming Chief Executive election and “enhance the implementation of local laws,” Mr. Zhang said, adding that Beijing would also help the administration

here “unite different entities and individuals in the industrial and commercial sectors.” He also praised the work of the Macau Chamber of Commerce in promoting business opportunities for both sides, and added that he looks forward to future cooperation. China’s central government will continue supporting the Macau Chamber of Commerce to serve the commercial sectors and safeguard their legitimate rights and interests, promote commercial links with other countries and regions, and strive for the social stability and economic prosperity of the territory, Mr. Zhang said. The gross value of retail sales is HK$66.1 billion so far this year, a 15 percent increase on that of last year, according to an annual retail business report survey. Mr. Ma added that he thinks it is a good idea to diversify business in Macau in order to maintain its steady growth, whilst paying attention to small retail companies. L.L.

ingapore-listed hotel and resort developer Banyan Tree Holdings Ltd expects to be granted a casino licence for Laguna Lang Co beach resort on the central coast of Vietnam. Nguyen Ngoc Thien, chairman of the committee of the provincial People’s Committee, confirmed in an announcement the province’s support of Banyan Tree’s casino proposal. The developer does not have the official go-ahead to begin preparations for its casino proposal because the National Assembly has yet to ratify the decree. Banyan Tree will begin establishing the framework of its proposal at the 280-hectare Laguna Lang Co resort, which opened in March last year, once the company receives its licence. Apart from the casino, the development will give rise to a series of Angsana-branded hotels and spas, convention facilities, private villas, and other amenities, including an 18-hole championship golf course designed by Nick Faldo. Macau and Vietnam are now linked by two daily flights via Jetstar

Pacific Airlines providing 21 flights every week since March 28 between Da Nang and Hanoi, in Vietnam, and Macau. Vietnam has become increasingly aggressive in licensing casinos in the country in a bid to make the city more attractive to tourists from Asia. The expected approval of Banyan Tree’s proposal will be the latest in a series of them in the coming years. Banyan Tree also has a hotel in Macau at Galaxy in Cotai.

July 31, 2014

Greater China HK-mainland trade slumps in H1 The Chinese mainland’s trade with Hong Kong totalled US$160.35 billion in the first half of 2014, down 22.4 percent year on year, the Ministry of Commerce announced yesterday. The figure accounted for 7.9 percent of the mainland’s total overseas trade in the first half, the ministry’s figures show. The mainland’s exports to Hong Kong hit US$154.76 billion, a sharp decrease of 22.1 percent year on year, while the mainland’s imports from the region dropped 29.5 percent to US$5.59 billion. In June, trade between the mainland and Hong Kong stood at US$28.3 billion, down 0.9 percent from May.

Cross-Strait trade down The Chinese mainland and Taiwan did US$92.82 billion’ worth of trade in the first half of this year, down 8.2 percent from the same period in 2013, the Ministry of Commerce said yesterday. The mainland’s exports to Taiwan dropped 0.2 percent year on year to US$20.97 billion during the period. Imports from Taiwan totalled US$71.85 billion, down 10.2 percent year on year, according to the ministry. Cross-Strait trade in June decreased 4.6 percent from the previous month to reach US$16.53 billion, the data showed.

Crowdfunding sector expands China’s crowdfunding sector saw rapid growth in the first half of 2014, with cash raised via equity-based crowdfunding skyrocketing in June to surpass the January-May total, data from a Chinese independent research team showed yesterday. Crowdfunding refers to funding a project or a company by pooling money from many people, usually via the Internet. From January to June, a total of 188 million yuan (US$30.5 million) was raised for 1,423 crowdfunding campaigns, according to a report by ZERO2IPO Research.

Microsoft says complies with law Microsoft said yesterday it seeks to comply with Chinese law, after Beijing announced an anti-monopoly investigation of the US technology giant over its business practices. “Microsoft complies with the laws and regulations of every market in which we operate around the world and we have industry leading monitoring and enforcement mechanisms in place to ensure this,” it said in a brief statement. Authorities said they had received complaints from companies about Microsoft bundling its products for sale and failing to disclose information about software, causing problems with compatibility.

China Southern links central China with Moscow A direct air route linking the central Chinese hub city of Wuhan with Moscow was launched by China Southern Airlines yesterday. The flight between Wuhan Tianhe Airport and Sheremetyevo International Airport takes about nine hours, cutting at least five hours from the time needed to make the journey with a transfer in another city. The air route is served every Wednesday, Friday and Sunday, with outbound and inbound flights numbered CZ355 and CZ356.

Don’t fight the People’s Bank of China That’s the advice to investors from Adrian Mowat, the Hong Kong-based chief Asia and emerging-market strategist at JPMorgan Chase & Co. who raised his rating on Chinese stocks to neutral from underweight

e said shares will rally through October after the Hang Seng China Enterprises Index entered a bull market on July 28. China’s central bank presided over a bigger-than-estimated surge in new credit in June and has cut reserve requirements for some lenders, while local media reported the PBOC set up a 1 trillion yuan (US$162 billion) lending facility with the China Development Bank to fund housing projects. The signs of monetary easing, along with accelerated government spending and gains in manufacturing industries, have spurred mutual fund managers to boost Chinese stock holdings to record highs, according to a July 28 report from HSBC Holdings Plc. “The scale of monetary stimulus since June is a surprise,” Mowat wrote. “All these changes indicate a more aggressive approach to driving growth.” Mowat is joining bulls, including Standard Chartered Plc’s Erwin Sanft and Templeton Emerging Markets Group’s Mark Mobius, who predict the rally will extend as low valuations lure investors and the government

Jardin House hosts JPMorgan Chase headquarters in Hong Kong

100 million people to move to cities China will ensure “orderly” migration of some 100 million rural workers into cities by 2020, supported by expanded social welfare and more job opportunities

hinese leaders have pledged to loosen their grip on residence registration, or hukou, to try to remove obstacles to the urbanisation drive. Such registrations prevent migrant workers and their families from getting access to education and social welfare outside of their home villages.

China’s leaders aim for 60 percent of the population of almost 1.4 billion to be living in cities by 2020, turning millions of rural dwellers into consumers who could be a driving force for the world’s second-largest the economy. The government will ensure “an orderly transfer of rural population

into urban areas”, loosening household registration restrictions in smaller cities more quickly, according to a detailed guidance on the reform issued by Cabinet. The government will “strive to achieve the transfer of around 100 million agricultural population and other resident population into cities

July 31, 2014

Greater China The scale of monetary stimulus since June is a surprise. All these changes indicate a more aggressive approach to driving growth Adrian Mowat, JPMorgan Chase

Premier Li Keqiang said in June that authorities will “ensure” a minimum annual economic growth rate of 7.5 percent. China’s manufacturing industries expanded at the fastest pace in 18 months in July, according to a preliminary purchasing managers’ index from HSBC Holdings Plc and Markit Economics. Industrial companies reported a 17.9 percent gain in earnings in June from a year earlier, the fastest pace since September. Investors’ sentiment on Chinese stocks has improved over the past few days amid speculation the economy will stabilize in coming quarters, Jason Sun and Minggao Shen, analysts at Citigroup Inc., said in a report yesterday.

Zhou probe supports growth. Bears such as Bank of America Corp.’s David Cui say stimulus is delaying the economy’s shift toward a more sustainable model driven by consumption and services.

Winning streak The Hang Seng China Enterprises index fell less than 0.1 percent to 11,119.32 at the close in Hong Kong, snapping a sixth straight day of gains. China’s Shanghai Composite Index of mainland shares slipped 0.1 percent, paring the biggest monthly advance since 2012. Aggregate financing was 1.97 trillion yuan in June, the PBOC said on July 15, compared with the median estimate of analysts for 1.425 trillion yuan. New local-currency loans were 1.08 trillion yuan and M2 money supply grew 14.7 percent from a year earlier.

and towns” by 2020, the guidance said. China’s 269 million rural migrant workers include some 166 million who have already entered cities. Local governments will set differentiated household registration policies based on their ability to absorb migrants and provide public services, according to the guidance. Migrants can settle in small cities freely as the hukou restrictions will be abolished, but curbs in medium-sized cities will be loosened “in an orderly way”, the cabinet said. The number of migrants moving into big cities with populations of between 3 million and 5 million will be “appropriately” controlled. Movements into mega cities with more than 5 million people will be “strictly” controlled. Policies will favour rural migrants who have worked in cities for a long time and skilled workers who are more competitive in the labour market, according to the guidance. Beijing has also pledged to push land reforms that would allow farmers to lease or sell land when they leave villages. The government will expand the coverage of pensions, medical care for migrant workers entering cities and ensure equal access to education for their children, the cabinet said. It will also coordinate the development of urbanisation and industrialization, it said, signalling concerns about the lack of jobs that could hamper the migration process. The government is struggling to balance goals such as encouraging the migration of millions of former farmers into cities, while avoiding the slums and unemployment problems that have occurred in other countries experiencing similar migration. Reuters

The ruling Communist Party’s investigation into former security czar Zhou Yongkang could also provide a boost to equities, Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, wrote in a report yesterday. “With some high-profile arrests under its belt, we believe the focus of the new government can start to shift from the anti-graft campaign to real institutional reforms, which are badly needed for China’s long-term economic health,” Lu said. JPMorgan’s Mowat, who cut Chinese stocks to underweight in October, recommends buying “high beta” stocks including brokerages and property companies with low valuations, along with construction and railroad companies. “Our China model portfolio is structured for a bull market”, he wrote. Bloomberg News

Investors go on global property buying spree China’s institutional investment in property overseas rose 17 percent in the first six months of this year, with residential investment surging 84 percent, real estate services firm Jones Lang LaSalle (JLL) said yesterday

he gains come as Chinese investors pursue opportunities outside their home turf, where the outlook for the real estate sector is overshadowed by issues such as tight financing and high inventories which are weighing on prices. London was the most popular destination for Chinese institutional investors, with a total of US$2.3 billion, as efforts by the city to draw Chinese capital into major infrastructure projects spilled into residential and commercial markets, JLL said. San Francisco and Chicago followed with US$548 million and US$365 million, respectively. Sydney was fourth, followed by Madrid, after China’s largest commercial developer Dalian Wanda bought a historic skyscraper in Spain’s capital city from the nation’s largest bank, Santander, US$361 million. “For first-time overseas investors it makes sense to target the most liquid cities, but for the more experienced, looking at smaller less liquid markets like Spain where yields are higher but so are the risks, it is a natural

progression,” David Green-Morgan, JLL’s global capital markets research director said in a statement. Chinese real estate outbound investment totalled US$5.4 billion during the period, with commercial investment contributing US$4 billion. JLL noted that developers and insurance companies remained the most active investors, and while the interests mainly focused in core office and mixed use development projects in global gateway cities, there was an increasing interest for hotel and hospitality products in popular Chinese tourist destinations. The introduction of the Golden Visa in many southern European counties has also raised the profile of these locations among Chinese mainland investors, it added. Separately, on retail investments, the United States was the country most favoured by Chinese homebuyers, according to Juwai.com, the largest real estate portal that targets Chinese buyers looking abroad, based on inquiry data from the first half of 2014. Reuters

Pork giant WH Group IPO succeeds The IPO was the Chinese company’s second attempt this year to raise funds after investors shunned an earlier offer Hong Kong Stock Exchange

US$2.1 billion

raised at the IPO

H Group Ltd, the world’s biggest pork producer, has raised the US$2.1 billion it sought in a Hong Kong initial public offering, a person with direct knowledge of the deal said yesterday. The IPO, which closed to the public on Tuesday, was the Chinese company’s second attempt this year to raise funds after investors shunned an earlier offer that aimed to raise up to US$5.3 billion due to high valuations.

WH Group, which counts private equity firm CDH Investments, Goldman Sachs and Singapore state investor Temasek Holdings among its shareholders, offered 2.57 billion new shares at a fixed price of HK$6.20 each. The deal could grow by 385.1 million shares and total as much as US$2.36 billion if underwriters exercise an option to meet additional demand for the IPO, according to the prospectus.

WH Group did not respond to Reuters emails seeking comment. The source declined to be named as the deal remained confidential. WH Group, which bought U.S. firm Smithfield Foods for US$4.9 billion in 2013, initially planned to raise up to US$5.3 billion to pay down debt taken on for the acquisition. But it was forced to pull the IPO in late April. In addition to high valuations sought, investors were also were turned off by mismanaged marketing after a record 29 banks were hired for the offering and skyhigh executive compensation that raised corporate governance concerns. For its second attempt, just two banks - BOC International and Morgan Stanley - were hired as joint sponsors and joint global coordinators of the IPO. The banks stand to earn a combined US$41 million, equivalent to a 1.5 percent underwriting commission and an incentive fee of up to 0.5 percent, according to the IPO prospectus. Reuters

July 31, 2014

Greater China

Local GDP data points to rebalancing China’s regional economies enjoyed a revival in growth in the second quarter, data from provincial governments showed, suggesting a burst of government stimulus measures is re-invigorating activity

f the 30 regions and provinces that released their local gross domestic product (GDP) data, 23 reported first-half economic growth accelerated from the first quarter. About three-quarters posted growth that was higher than the national average of 7.4 percent in the first six months. Growth also diverged sharply between eastern and western China. The coastal and north-eastern regions fared the worst, while activity was most buoyant in the central and western areas, where double-digit growth rates were concentrated. Analysts said this suggested China’s bid to rebalance its economy is paying off. From redefining job targets to shifting investment to inland areas and cutting obsolete capacity in energyguzzling sectors in the north, China wants to overhaul the world’s second-largest economy and encourage more sustainable and higherquality growth. “The growth gap is an expected result of Beijing’s efforts to rebalance regional economies and let the fruits of growth be more evenly shared by the poorer inland regions,” said Nie Wen, an analyst at Hwabao Trust in Shanghai. In Hebei -China’s top steel producer- for instance, GDP growth stayed sluggish in the first six months, even though activity picked up slightly to 5.8 percent compared with 4.2 percent in the first quarter. Hebei’s drowsy performance is in part due to its efforts to remake itself. Hebei wants to slash total

The growth gap is an expected result of Beijing’s efforts to rebalance regional economies and let the fruits of growth be more evenly shared by the poorer inland regions Nie Wen, analyst, Hwabao Trust

Harbin, capital of Heilongjiang province, considered the worst performer in China throughout this year

steel capacity by 60 million tonnes by 2017 and to shut more out of date steel mills this year to cut air pollution in northern China. Similarly in the northeastern Heilongjiang province, the only province that has not released its GDP data, a local statistician who declined to be identified said first-half GDP growth was likely to be the lowest in China at under 5 percent. A hub for China’s heavy industry and a major coal

producer, Heilongjiang was also the weakest performer in the first quarter, when its GDP growth fell to 4.1 percent.

Inland regions outpacing In contrast, economies in the west such as Chongqing, Guizhou and Qinghai all posted double-digit GDP growth between January and June, helped by policy support. Just last month, Premier Li Keqiang had

vowed to sink more cash into the industries and infrastructure in western China. “Most of Beijing’s recent piecemeal pro-growth measures have targeted the central and western provinces,” Nie said. Meanwhile, the biggest export-oriented provinces of Guangdong and Zhejiang saw GDP growth slacken in the first-half of 2014 to between 7 percent and 7.5 percent. Cooling growth along

VW corners Toyota thanks to China Volkswagen is closing in on Toyota Motor Corp as the global leader in vehicle sales, with a rapid expansion drive in China

oyota, reigning at the top spot in the auto industry for two years in a row, announced relatively robust global sales growth of 3.8 percent for the first six months of the year to 5.097 million vehicles yesterday, a record first-half result. But Volkswagen is growing faster and its half-year total could pull even with or even surpass the Japanese auto giant. The Volkswagen group sold 4.97 million vehicles in January-June, up 5.9 percent from the same period a year ago, excluding figures from truck makers Scania and MAN that will be released on July 31. IHS Automotive forecast Volkswagen’s total first-half sales at 5.07 million vehicles including the truck makers. The Toyota result,

China’s eastern coast is in line with Beijing’s goal of cutting its economic reliance on exports in favour of a more sustainable expansion in domestic consumption. Data earlier this month showed China’s economic growth quickened to 7.5 percent in the second quarter, as a raft of stimulus measures helped lift the pace from an 18-month low of 7.4 percent between January and March. In eastern Shandong province, growth edged up to 8.8 percent in the first half from 8.7 percent in the first quarter, but strains are evident from the earlier slowdown in growth, government efforts to reduce excess capacity and a cooling property market. Reuters

which the carmaker said reflected strong sales in the United States, China and Europe, exceeded the IHS forecast of 4.83 million. Even if Toyota manages to retain its crown for the first half, its position looks less secure for the full year. “China is the driving force of the global market, and the degree to which a company is focused on that region is linked to the global sales performance,” said Yoshiaki Kawano, a Tokyo-based analyst at IHS Automotive. General Motors Co, which Toyota overtook two years ago, said it sold 4.92 million vehicles in January-June. Volkswagen, which sold 3.27 million vehicles in China last year, is planning to invest 18.2 billion euros (US$24.4 billion) between 2014 and 2018 in new plants and products there together with its Chinese joint venture partners. Toyota’s China presence is much smaller with annual sales of 1 million vehicles, and while it plans eventually to double that it has given no time frame. Reuters

July 31, 2014

Asia

Japan Airlines Co. planes sitting on the tarmac at Tokyo International Airport at Haneda in Tokyo, Japan, 29 July 2014

Asia tourist boom fuels airport binge Asian nations are rushing to build hundreds of new airports to cope with surging demand for air travel in the region

rom China and India to the Philippines and Indonesia, the fast-growing middle classes are looking to spend their cash by spreading their wings, leading to a boom in the Asia-Pacific region’s tourism sector. Airlines have responded by setting up several new budget carriers and flying new routes -but many airports are unable to cope, forcing governments to either expand or simply build new airports. “Through the next 10 years, we see more than 350 new airports in the Asia-Pacific and the investment cost will be well over US$100 billion,” said Chris De Lavigne, a global vice president at business consultancy Frost & Sullivan Asia Pacific. “China is building over 100 airports, India is building over 60 airports and Indonesia will also have to follow suit with investments in its infrastructure,” said De Lavigne, who closely tracks Asia’s aviation industry. Upgrades of existing airports could cost an additional US$25 billion, he told AFP by telephone from his office in Jakarta. International tourist arrivals in Asia-Pacific grew an annual 6.0 percent to 248 million last year, the strongest of any region worldwide, according to the UN World Tourism Organization. To cope with this, construction is being ramped up. The Canada-based Airports Council International (ACI) said in a report that Indonesia plans to build 62 new airports in the next five years, in addition to its existing 237.

Soekarno-Hatta in Jakarta is improving capacity after handling 60 million passengers last year, nearly three times what it was designed for, ACI said. And Kuala Lumpur aims to double capacity to 100 million a year by 2020, while Hong Kong wants to handle 97 million annually by 2030, up from 60 million in 2013. In Beijing -which already has a hub servicing 80 million people- a second, US$11 billion airport is being built to open in 2018 and handle 40 million passengers, Sydney-based consultancy Centre for Aviation said. There are also plans for a full replacement of Manila’s Ninoy Aquino International Airport, one of Asia’s most notorious for overcrowding and backward facilities. Its Terminal 1, which is undergoing a major makeover, was built in 1981 to handle six million passengers a year. Together with two extension terminals, the airport handled around 30 million passengers in 2013.

Bursting at the seams Even Singapore’s Changi -regarded by many as one of the world’s bestis expanding, with a US$1.0 billion Terminal 4 opening in 2017 that will raise capacity to 82 million passengers from the current 54 million. Plans are already being made for a Terminal 5. Shukor Yusof, an analyst with Malaysia-based Endau Analytics, said airport infrastructure in many countries has lagged well behind travel growth.

Through the next 10 years, we see more than 350 new airports in the Asia-Pacific and the investment cost will be well over $100 billion Chris De Lavigne, global vice president, Frost & Sullivan

“Many governments have paid scant attention to developing new terminals and new tarmacs, that’s why you find that many of the airports are bursting at the seams,” he told AFP. The focus is not just on capitals. The need for more space means much of the new construction is taking place in secondary cities, with some facilities potentially becoming hubs. De Lavigne cited the Kualanamu International Airport in Indonesia’s Medan, which opened last July and could become a hub for flights to Malaysia, Thailand, Myanmar, India and China. It was designed to handle eight million passengers a year but is already at capacity, he said.

“By 2025, they’re forecasting 24 million passengers out of Medan, or a three-fold increase in just over 10 years,” De Lavigne said, adding that Indonesia’s aviation sector alone is growing 14-15 percent a year. Even less developed tourist destinations are pressing ahead with building. Myanmar -returning to the global fold after decades of junta-led isolation- is looking to upgrade 39 airports as tourist and domestic air passenger figures are seen surging to 30 million in 2030 from 4.2 million in 2013, the ACI said. The government is also building a new US$1.5 billion Hanthawaddy International Airport to serve as Yangon’s second airport, it added. Bangladesh is constructing a new airport costing up to US$7.2 billion about 60 kilometres from Dhaka, ACI said. Funding from governments and the private sector does not appear to be a problem. “There’s a lot of liquidity out there. There’s a lot of money in project financing,” Shukor said. Airports are now even targeting non-travellers, with the current trend for “aeroparks and aerotropolises” integrating lifestyle amenities, attracting diners and shoppers who won’t even board flights. “You get people who don’t fly to come into the airports for food, shopping and other lifestyle activities. That trend which started in the West is increasingly finding its way into Asia,” De Lavigne said. AFP

July 31, 2014

Asia Thailand puts high‑speed trains back on agenda Thai military junta, or the National Council for Peace and Order (NCPO), has approved two high- speed train projects intended to link Thailand and southern China, local media reported yesterday. A 737-km route from northeastern Nong Khai province to Map Ta Phut in eastern Rayong province and a 655-km one from Chiang Khong in northern Chiang Rai province to Ban Phachi in central Ayutthaya province will be constructed, Bangkok Post quoted permanent secretary for transport Soithip Traisuth as saying. The construction of the new routes is scheduled to begin next year and last till 2021, the official said.

Factory output cuts S.Korea a break June industrial output grew at its fastest clip in nearly five years, but analysts say sluggish exports and weak domestic demand will likely force the central bank to cut rates

he positive industrial production data was joined by other data released yesterday showing growth in retail

sales and construction spending, calming fears about a deepening slump in the economy. However, much still depends

on the strength of global demand as shipments from Asia’s fourthlargest economy have remained tepid for much of the year, reflecting

IMF cautions Sri Lanka on forex The International Monetary Fund urged Sri Lanka yesterday to keep key interest rates on hold for the near term and limit its intervention in the foreign exchange market. Sri Lanka’s central bank cut the repurchase rate by a total of 125 basis points (bps) and the reverse repurchase rate by 175 bps between December 2012 and January 2014 to stimulate economic growth. It has also absorbed more than US$750 million from the foreign exchange market this year through mid-July to keep the rupee currency steady.

Tofu for nuggets in Japan McDonald’s restaurants in Japan are turning to time-honoured Asian soul food -tofu- as the chain scrambles to minimise the damage from an embarrassing tainted meat scandal in China. The fast-food giant’s more than 3,000 restaurants in Japan yesterday started selling “Tofu Shinjo” nuggets modelled on a traditional side dish that meshes tofu, vegetables and fish. For 249 yen (US$2.40), customers can sink their teeth into four pieces of the chicken-free creation. The rollout comes days after the firm said that its Japanese restaurants had stopped sourcing poultry products from a nugget supplier in Shanghai.

Piramal and APG tie up for investment India’s Piramal Enterprises Ltd has tied up with Dutch pension fund APG Asset Management to invest US$1 billion in Indian infrastructure companies over three years, in a move that would help indebted firms access funds to complete projects. A sluggish economy and stalled bureaucratic decision-making for the past two years thwarted capital investment and dented earnings, making it tough for infrastructure companies to raise funds and launch or complete road and power projects.

US seeks India deal on WTO rift India has threatened to scuttle the so-called Trade Framework Agreement

he United States hopes to reach an understanding with India to prevent the collapse of a key WTO deal, an official said yesterday as Secretary of State John Kerry headed to New Delhi. India has threatened to scuttle the so-called Trade Framework Agreement -which would streamline global customs procedures and must be ratified by WTO members by today, Thursday- unless the world body gives the green light to the developing power’s stockpiling of food. A senior US official said Washington was in talks with New Delhi on the row ahead of the visit by Kerry, who arrived late yesterday for an annual strategic dialogue between the two countries. “We are hopeful that as we engage in those further conservations over the next few days that some agreement will emerge that will allow the TFA to move forward,” the official told reporters on Kerry’s plane, which made a refuelling stop at Ramstein Air Base in Germany. “We think that that is in India’s

John Kerry

interests, and we hope that that’s going to be the right outcome,” the official said, speaking under condition of anonymity in line with State Department custom. India, which has sought since independence to eradicate hunger, buys grain at above-market prices from farmers and sells the food at subsidised prices to some of the hundreds of millions of poor people. The stockpiling is popular with poor voters in the world’s largest democracy, but wealthy nations

say that the policy distorts global markets. On Tuesday in Washington, US Trade Representative Michael Froman warned that blocking the customs pact would put at risk “the credibility of the WTO as an institution.” Kerry will be the highest ranking official to visit India since the election victory in May of Prime Minister Narendra Modi, a Hindu nationalist who has billed himself as a freemarket reformer.

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, 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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AFP

July 31, 2014

Asia an uneven global recovery and a slowdown in China. With risks to the economy increasing amid weak domestic demand, the government moved into action last week, offering stimulus measures including US$11 billion in public spending and easing of mortgage borrowing restrictions. Most analysts are now forecasting the central bank to cut its benchmark rate by a quarter percentage point to 2.25 percent next month, in solidarity with the government’s stimulus steps - which would be the first easing since May last year. “The Bank of Korea will cut interest rates at least in the context of policy coordination with the government,” said Moon Junghui, economist at KB Investment & Securities. “I think it will be a one-off cut.” Policymakers will take some comfort from South Korea’s factory output in June, which blew past expectations to rise by seasonally adjusted 2.9 percent on the month, recouping a revised 2.8 percent fall in May. Statistics Korea data showed it was the sharpest gain since a 3.7 percent rise in September 2009 and beat even the highest forecast for 2.0 percent growth in a Reuters survey of 16 analysts. The median forecast was for 0.7 percent expansion. Data on domestic demand released at the same time also showed the economy improved across the board in June, though a separate central bank survey pointed to stillsoft business confidence.

The main focus remains on an underperforming export sector, and data later this week on July exports and inflation are likely show the economic recovery remains fragile. South Korea’s economy expanded by a slower-than-expected 0.6 percent in the second quarter from the previous quarter as private consumption shrank due to ripple effects from April’s ferry accident, central bank data showed last week. South Korean exports this month are forecast to grow 4.7 percent from a year ago, accelerating from a 2.5 percent gain in June, a Reuters survey of analysts showed. But the pace would still be too slow to ensure a sustained recovery: For much of the years between 2003 and 2011, Korean exports grew at a double-digit rate. South Korea sends one-quarter of total exports to China but the recent slowing in the world’s second-largest economy and an uneven recovery globally have hurt overseas sales. Inflation staying low for an unexpectedly long period was underscored by depressed consumer sentiment. Analysts in the Reuters survey expect South Korea’s July inflation to ease to 1.6 percent on an annual basis from 1.7 percent in June. The central bank has a target of keeping inflation at between 2.5 percent and 3.5 percent. The low inflation environment and government stimulus both support the market’s view a rate cut from the Bank of Korea is imminent. Reuters

Thailand data shows signs of weakness Factory output fell more than expected in June, showing the economy continues to struggle to regain traction

n June, factory output dropped 6.6 percent from a year earlier, the Industry Ministry said yesterday. That is worse than the 3.5 percent drop forecast in a Reuters poll and more than revised the 4.0 percent decline in May. June was the 15th straight month of lower factory activity. Thailand is a regional hub and export base for global automakers and a major producer of hard disk drives. Industrial goods account for about 65 percent of total exports. This year, Thai exports have remained sluggish, even though the political crisis has not affected factories or ports, and the world economy has somewhat improved. On Monday, the Commerce Ministry reported mixed trade data, with exports up more than expected 3.9 percent in June from a year earlier. But imports fell a much bigger-thanexpected 14 percent due to soft domestic demand and exports. Many imported materials will be assembled into completed products and shipped out again, so a sharp drop in imports bodes ill for exports

and manufacturing production. The central bank expects the economy to contract in the first half on a yearly basis. Some economists believe Thailand can still have a technical recession in April-June commonly defined as two consecutive quarters of shrinkage. Thailand will report second quarter gross domestic product (GDP) data on August 18 Domestic demand has remained subdued, although industry executives expect some improvement in the second half. “It’s a psychological impact that hurts the purchasing decision. For the second half, with a positive political direction and a recovery of the domestic economy, the purchasing decision should improve,” Kyoichi Tanada, president of Toyota’s Thai unit said on Tuesday. Auto sales in Thailand are expected to fall 31 percent in 2014 but sales could recover in 2015 as the domestic economy and consumption improves, he said. Reuters

Figures foreshadow thorny road for Abenomics The economy may struggle to rebound in the current quarter following an expected contraction in the second quarter from the sales tax hike

apan’s June industrial output fell at the fastest rate since the earthquake and tsunami of March 2011 as companies slowed production to offset a buildup in inventories, clouding the outlook for the economy. The 3.3 percent monthon-month drop far exceeded the median 1.2 percent fall forecast in a Reuters poll of economists, and followed a 0.7 percent increase in May, data from the Ministry of Economy, Trade and Industry (METI) showed yesterday. In unusually frank language, a METI spokesman said the data showed shipments of goods fell for five consecutive months - a pattern similar to the last time Japan was in recession in the middle quarters of 2012. The data and the METI official’s comments suggest the economy may struggle to rebound in the current quarter following an expected contraction in the second quarter from the sales tax hike, with a Reuters poll conducted in July projecting a 1.4 percent quarterly drop. The ministry cut its assessment of output, saying it had “weakened.” The decline in output could deepen policymakers’ fears for the economic outlook and the government’s “Abenomics” plan to defeat 15 years of deflation and

KEY POINTS June output falls 3.3 pct vs f’cast -1.2 Manufacturers expect output to rise in July, Aug Govt cuts view on output, says it has weakened Decline in shipments similar to last recession Analysts say weak exports may weigh on output ahead

A photo dated 16 January 2013 shows smoke emitted by a plant in Tokyo bay, Japan

restore growth. Manufacturers surveyed by the ministry expected output to rise 2.5 percent in July and increase 1.1 percent in August as the pain from a sales tax hike in April faded. But the METI official told reporters these forecasts were overly optimistic because the high level of inventories, especially of durable consumer goods, meant manufacturers needed to curb output further.

Analysts expect the economy grow 0.6 percent in the current quarter, however, as household spending recovers from the tax hike and government stimulus measures support domestic consumption. “The pent-up demand ahead of the sales tax hike was bigger than expected so the consequent downturn is pretty steep, which is probably why output fell so much in June,” said Junko Nishioka,

chief Japan economist at RBS Securities. Some economists have said they may need to lower their forecasts as exports have disappointed for the past few months, and the worse-than-expected industrial production data could increase uncertainty about the economy. Exports fell 2.0 percent in June from a year earlier, despite the yen falling by about 20 percent, while

imports increased 8.4 percent. Japanese companies have been shifting production capacity overseas for better access to faster-growing markets, so the weak yen is not helping to increase exports. Many economists worry that export weakness will continue as it will be difficult to encourage companies to bring that production capacity back to Japan. Reuters

July 31, 2014

International U.S. economy seen regaining muscle Economic growth likely regained steam in the second quarter as activity picked up broadly, which would bolster expectations for a stronger performance in the last six months of the year. Gross domestic product likely grew at a 3.0 percent annual rate after shrinking at a 2.9 percent pace in the first quarter, according to a Reuters survey of economists. The anticipated growth pace will, however, leave output in the first half of the year flat. Growth for 2014 as a whole could average below 2 percent.

Barclays first-half net profit soars Britain’s scandal-hit Barclays bank posted a 68-percent jump in first-half net profits yesterday, as it pushed ahead with a major restructuring that will shrink its investment bank division. Earnings after taxation surged to £1.13 billion (US$1.9 billion) in the six months to June, from £671 million a year earlier, Barclays said in a results statement. The group also bounced back into profit in the second quarter with a net figure of £161 million, after a loss of £168 million last time around.

AstraZeneca buys Almirall lung drugs The firm took a major step to build up its respiratory medicine business yesterday by striking a deal worth up to US$2.1 billion to acquire the rights to lung drugs developed by Spain’s Almirall. The British drug maker, which resisted a US$118 billion takeover attempt by Pfizer in May, said it would pay an initial US$875 million and up to US$1.22 billion in development, launch and sales-related milestones. The tie-up boosts a key therapeutic area for AstraZeneca, whose Chief Executive Pascal Soriot is determined to show his company has a strong independent future.

Russia’s Central Bank ready for sanctions Central Bank said yesterday it was ready to support domestic banks that were hit in the latest round of Western sanctions. The United States imposed sanctions on more Russian banks on Tuesday, targeting the country’s secondlargest lender VTB, its subsidiary the Bank of Moscow, and the Russian Agriculture Bank. The European Union also announced measures limiting access to capital for Moscow. “If necessary, appropriate measures will be taken to support these organisations in order to protect the interests of their customers, depositors and creditors,” the Central Bank said in a statement.

Antofagasta posts higher quarterly copper output Chilean miner Antofagasta posted a 5 percent quarter-on-quarter increase in its second-quarter copper output, slightly ahead of forecast, as it ramped up production after maintenance dented its first-quarter output. The London-listed miner, which like others in the copper sector is battling declining ore grades, rising costs and weak metal prices, produced 178,800 tonnes of copper in the second quarter, up 5.5 percent from the previous quarter, when output was hit by plant maintenance at its Los Pelambres and Esperanza operations and declining copper grades.

With BRICS rising, IMF mulls change To reflect the growing and underrepresented influence of the emerging economies, the IMF quota reform calls for a 6-percent shift in quota share to emerging economies Liu Jie

hen Christine Lagarde, head of the International Monetary Fund (IMF), said in June that she would not be surprised if the lender’s headquarters may one day move to Beijing from Washington, the remarks were largely read as her approval of the Chinese economy, and the frustration with the U.S. failure to ratify the IMF quota reform which aims to give emerging economies a bigger say they deserve. On July 15, Brazil, Russia, India, China and South Africa, together known as BRICS countries, agreed to set up a development bank and a contingency reserve arrangement, ushering in a long-awaited alternative to the Western-dominated institutions in global finance. At a media roundtable on Tuesday, Lagarde underlined that there is no link between the BRICS move with the stalled IMF quota reform. But she also said that with the shifting balance of power, there is a need for different layers in global financial safety nets, adding that she is happy to see cooperation and coordination moving forward among pillars of the nets. To reflect the growing and underrepresented influence of the emerging economies, the IMF quota reform calls for a 6-percent shift in quota share to emerging economies. It will lift China, which still has less voting power than the Benelux countries (Belgium, the Netherlands and Luxembourg), to the third-largest shareholder. Shares for Russia, India and Brazil will also grow.

IMF head, Christine Lagarde, feels that U.S. reforms freezing is undermining the institution

The reform, however, has been delayed for four years as it is blocked by the U.S. Congress, which retains a veto. “The U.S. Congress’ failure to ratify the quota reform undermines the credibility of the institution,” Lagarde said Tuesday. She was tormented by this issue since the beginning of the year. At the IMF’s spring meeting in April, she even hinted a “Plan B” if the United States fails to endorse the reform by the end of the year. Despite the frustration, Lagarde has been working hard to keep the 188-member organization away from the negative impacts of the stalled reform. But the emerging economies would not give up their pursuit for a more equitable global financial order for that reason. Lagarde said the IMF should cooperate with the new BRICS development bank. “The balance of power has been

changing. There are confrontations, economic powers emerging and consolidating and cooperating ... The world is becoming both global and interdependent and needs probably different layers in that safety nets,” she told reporters at the roundtable. “But I don’t see anything that is inconsistent with the mission of the IMF. Cooperation and coordination among those pillars of the international safety nets of which the IMF is a central piece is critically going forward. IMF might devote further, and I find that terribly exciting for the future,” she added. This July marks Lagarde’s third anniversary as the IMF head. She has led the institution to cool the financial flames in the European countries and reposition IMF’s work to climate change, income inequality and gender participation in the workforce - issues that had not been IMF’s focus of research. Xinhua

Mercosur leaders seek to boost economic integration, development The leaders of the member states of the Southern Common Market (Mercosur) agreed to promote regional integration and economic development

t the plenary session of the 46th Mercosur summit, Nicolás Maduro, president of Venezuela -currently holding the bloc’s rotating presidency- said participants have adopted several key documents for the future development of Mercosur. Starting next semester, the member states decided to fully activate the Bank of the South, an initiative of Argentina, Bolivia, Brazil, Ecuador, Uruguay and Venezuela, to promote the integration of Latin American countries. Some countries have approved the initial capital contribution to form the bank and Venezuela will contribute US$80 million. Another agreement concerned the creation of a complementary economic zone between the member

states of the Bolivarian Alliance for the Peoples of Our America, the Caribbean Community, Mercosur and energy alliance Petrocaribe. The economic zone, which will comprise 24 countries in South America, the Caribbean and Central America, is a plan to share investments, experiences and actions that promote development in the region, according to Maduro. Proposals under the plan include an increase in trade between the member countries, the promotion of productive investment to strengthen key aspects of industrial, agricultural and scientific development, as well as new monetary exchanges methods using local currencies and other systems such as the regional SUCRE currency.

Maduro also highlighted the bloc’s support for Argentina in fighting vulture funds that try to economically cripple the country. Meanwhile, Argentine President Cristina Fernández called for “smart integration” and cited China as an example. “The key behind China’s economic success is that it strikes a balance between its development and the welfare of its citizens. That’s an example to follow and we have a historic opportunity to work together in the wake of the recent visit by (Chinese) President Xi Jinping to the region,” she said. Brazilian President Dilma Rousseff said the summit marked a new phase in the history of the bloc. Xinhua

July 31, 2014

Opinion

The Internet’s next act wires Business

Leading reports from Asia’s best business newspapers

THE KOREA HERALD

J. Bradford DeLong

Professor of Economics at the University of California at Berkeley Research associate at the National Bureau of Economic Research

Overseas travel spending soared to a record high in June as South Koreans continued to flock to foreign destinations despite a prolonged slump in domestic demand, central bank data showed yesterday. Overseas travel spending totalled US$1.7 billion in June, growing 23.3 percent from the previous month, according to the Bank of Korea. The figure does not cover traveling for study purposes. The latest data, which is part of the current account, comes only two months after overseas travel spending set a record of US$1.7 billion in April.

THE NEW ZEALAND HERALD A judge has ordered Internet mogul Kim Dotcom to reveal his assets after fears he is asset-dumping by bankrolling his Internet Party. Major movie studios and records labels are suing Dotcom and his associates. 20th Century Fox, Disney, Paramount, Universal, Columbia Pictures and Warner Bros claim Dotcom-founded Megaupload and its key operators “facilitated, encouraged, and profited from massive copyright infringement of movies and television shows” before it was shut down in 2012. They have filed a civil lawsuit in the US against Dotcom, Megaupload, majority shareholder Vester Ltd, chief technical officer Mathias Ortmann, and programmer Bram van der Kolk.

THE STAR Sales of commercial vehicles are expected to improve in the second half of 2014 despite a minor slowdown in the first six months of the year. Industry observers believed that sales would be sustained by steady construction jobs for the rest of 2014. Sales of commercial vehicles slipped 3% to 36,363 units in the first half of 2014 from 37,497 units in the previous corresponding period. A total of 79,136 commercial vehicles were sold in 2013. Analysts are optimistic that steady construction jobs will spur commercial vehicles for the rest of the year.

THE AGE The fifth biggest iron ore business in Australia is in limbo today, after an apparent boardroom coup saw a hedge fund take control of American company Cliffs Natural Resources this morning. Cliffs has been struggling to remain profitable in recent times as prices for its two main products, iron ore and coal, have slumped, and the austere conditions. That has prompted some shareholders to campaign for a change of control and a break-up of the assets. Activist hedge fund Casablanca Capital has led that campaign, and claimed overnight that it had taken control of the Cliffs.

ERKELEY – Ten years ago, the world emerged from the dot-com bust and started to look more soberly at the Internet’s potential. While speculative greed and fear of missing out might have overplayed the short-term outlook, the Internet’s immense longerterm prospects were never in doubt. I, and other optimistic economists, assumed that free information and communication would herald an era of rapid productivity growth and improved wellbeing – to a greater or lesser extent – for everyone, regardless of their skills, wealth, or social background. Were we right? In many respects, the revolution in information and communications technology (ICT) has delivered more than it promised – and often in unpredictable ways. For many, the true marvel of the digital age is its creation of a parallel universe. Anyone with a laptop and an Internet connection can gossip with (or about) virtual friends; witness extraordinary events that may or may not have happened; or play games in a mock world of incomparable complexity. The Internet has created a dreamscape that is accessible to all and that can inspire us to still greater heights of imagination. Indeed, those who scoff at the value of this should remember that ever since Homer sang around the hearth fire about the wrath of Achilles, dreams have been our greatest source of pleasure and inspiration. But the benefits of the Internet

Is everyone really benefiting in the new economy? Only a fortunate few, especially those who combine innovative thinking with financial acumen, have fully captured the monetary profits of the ICT revolution

have come not just to those who work or play online. Everyone has gained to some degree. Go to a WalMart, Costco, Tesco, or Lidl superstore anywhere in the world, and compare the price, quality, and range of today’s goods with those of a generation or two ago. This dramatic change for the better largely reflects the rapid development of global supply chains, with real-time monitoring of customer preferences enabling manufacturers located on the other side of the world to know instantly what, when, and how much to produce. There is much more to come. Companies are using the Internet to “crowdsource” new ideas, and even let customers codesign their own products. New Web-based platforms allow ordinary people – without money or special skills – to share their cars, spare bedrooms, or even do-it-yourself tools, thus challenging the dominance of global corporations. The “Internet of Things” is connecting simple household items – like a thermostat – to the Web, helping owners to save money and even reduce their carbon emissions. And yet we must still ask: Is everyone really benefiting in the new economy? Only a fortunate few, especially those who combine innovative thinking with financial acumen, have fully captured the monetary profits of the ICT revolution, becoming its poster children in the process. Lower down the economic scale, most people, though enjoying

easy access to technology and low prices, have lost ground, with real wages falling for many years. This is not a temporary decline: labour in advanced Western economies can no longer command a large wage premium, and workers’ situation may worsen further. Moreover, white-collar managers and employees – the brainpower that keeps the intricate global corporate machinery whirring, and once the backbone of the middle class – are no longer in such high demand. Many of their skills, which long underpinned their status, careers, and livelihoods, are becoming redundant. For today’s ordinary middle-class family, a medical mishap can become a financial catastrophe. Owning a home involves a life of indebtedness. Providing a decent education to one’s children requires struggle and sacrifice. The assumptions that defined middle-class households – and many working-class households – for at least two generations are disappearing before our eyes. Who is speaking out for them? Most households stand to gain from the continuation of the ICT revolution. But middle-class and working-class families would benefit more if the hyper-cheap products and services, free information, and virtual leisure experiences augmented, rather than eroded, their marketable skills. The politician who can figure out how to steer the revolution accordingly might never lose another election. The Project Syndicate 2014

July 31, 2014

Closing Amazon to invest US$2 bln more in India

Xbox One to launch in China September 23

Amazon.com Inc. yesterday said it will invest a further US$2 billion in India just a day after the country’s largest e-tailer Flipkart attracted US$1 billion of fresh funds, raising the stakes in a nascent but fast-growing e-commerce sector. Amazon, which opened its Indian website in June last year, has drawn up the battle lines by slashing prices, launching same-day delivery, adding new product categories and embarking on a high-voltage advertisement campaign. Amazon and Flipkart are joined in India’s US$13 billion e-commerce sector by marketplace Snapdeal.

Microsoft Corp will launch its Xbox One gaming console in China on September 23, Yusuf Mehdi, head of marketing and strategy for Microsoft’s Xbox group said at an event in Shanghai yesterday. The Xbox One will be the first foreign-made console to be launched in China in 14 years after the government this year lifted a 2000 ban on gaming consoles. Microsoft is forging ahead with the console launch despite Tuesday’s government announcement that the U.S. software giant is the subject of an anti-monopoly investigation.

July PMI seen reaching highest yearly record

The expected improvement in manufacturing is in line with signs of a pick-up in broader economic growth

ctivity in China’s vast factory sector likely expanded at the fastest pace in eight months in July, a Reuters poll showed yesterday, adding to evidence that the economy is regaining momentum after a burst of government stimulus measures. China’s official manufacturing purchasing managers’ index (PMI) is expected to rise to 51.4 in

July, up from June’s 51, according to the median forecast of 24 economists in a poll. A reading above 50 indicates an expansion in activity while one below that level points to a contraction. The expected improvement in manufacturing is in line with signs of a pick-up in broader economic growth, which quickened to 7.5 percent in the second quarter

Stronger ties with Canada

hinese Vice President Li Yuanchao said yesterday that China is ready to strengthen practical cooperation with Canada. Li made the remark as he met with Canadian Foreign Minister John Baird in the Great Hall of the People. Li said the two countries should realize mutual benefits. Baird said Canada is ready to expand mutually beneficial cooperation with China in areas of energy, resources, finance, insurance and agriculture. Li said in recent years, China and Canada have maintained a sound relationship. He said China had always adopted a strategic and long-term view on its relations with Canada. He expressed readiness to further deepen strategic trust with Canada by respecting and taking care of each other’s interests and concerns. Li also said China is ready to lift the strategic partnership with Canada to a new level. Baird said the Canadian government places great importance on developing relations with China. Baird is on a visit to China, Mongolia and Japan from July 23-30. During his trip to Beijing, China invited Canadian Prime Minister Stephen Harper to attend a leaders meeting of APEC economies to be held in Beijing in autumn. Xinhua

from a 18-month low of 7.4 percent between January and March. “With the effect of ministimulus measures gradually filtering through, the PMI data could pick up further in the coming months, supported by reviving domestic production and improving exports,” said Wen Bin, economist at Minsheng Bank in Beijing. A preliminary PMI survey released last week by HSBC

and Markit showed that rising new orders have lifted the growth of factory sector activity to a 18-month high in July. Some economists say the economic recovery still hinges on the magnitude of Beijing’s pro-growth steps and whether the government can successfully curb the downside risks stemming from the cooling property sector.

The real estate industry is undergoing a downward correction after rising for nearly two years, with home prices, property sales and new construction all dipping, in what analysts describe as the biggest risk to the world’s second-largest economy. Local governments have recently scrambled to relax home purchase restrictions in hopes of reviving the struggling sector, which contributes a hefty amount of their revenues. So far, at least 20 regional governments in small to midsized cities have openly or quietly lifted bans on the number of homes that people are allowed to buy. China’s top leadership pledged on Tuesday that it would focus more on targeted measures to help shore up the economy, while keeping macro economic policies stable and consistent. “To maintain the growth momentum, the government may have to launch more mini-stimulus steps in the third quarter and the existing measures must also be intensified to guarantee a sustained effect,” Wen said. As one of the leading indicators that help gauge the economic momentum, the official PMI data is closely watched by the market and an improvement in the reading could bode well for other July indicators. The official PMI figure will be released on Friday at 9 a.m. Beijing time. Reuters

EU/China solar deal reached Special needs education spending surges T he European Union’s deal to end a trade dispute over solar panels with China risks creating a downward spiral of prices, further damaging the EU producers it is designed to protect, their association said yesterday. The EU agreed a year ago to allow up to 7 gigawatts per year of Chinese solar panels imports free of duties at a fixed minimum price of 0.56 euros (US$0.75) per watt. However, that undertaking includes a potential change to the minimum price each quarter, based on a solar module price index compiled by Bloomberg. The price was cut to 0.53 euros in April. China’s Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) wrote last week to the European Commission seeking to clarify certain aspects of the undertaking, according to a document seen by Reuters. EUProSun, which represents about 40 percent of EU producers including Germany’s SolarWorld, said CCCME’s clarification was in fact a rewriting of the deal and would result in a continuous decrease of prices in Europe. Reuters

ubsidies worth 410 million yuan (US$66.4 million) will be available for special needs education this year, about 650 percent more than in 2013, the Ministry of Education (MOE) announced yesterday. The money will be used to build classrooms, update teaching equipment and provide medical services for special needs schools and ordinary schools that have enrolled disabled students, both at the stage of nine-year compulsory education. Last year, total subsidies were worth 55 million yuan. Subsidies for each student in special needs schools should be 4,000 yuan this year and rise to 6,000 yuan by the end of 2016, according to the ministry. The MOE also encourages local education authorities to promote free education for disabled high school students. Total spending on special needs education reached 9.2 billion yuan in 2013, from 1.7 billion yuan a decade ago, said an official with the finance department of the MOE. A proper special needs education system is of great significance to equality of disabled people, said Chinese Premier Li Keqiang. Xinhua