Macau Business Daily, Sept 11, 2014 by Business Daily

MOP 6.00 Closing editor: Luis Gonçalves Year III

Number 623 Thursday September 11, 2014

Publisher: Paulo A. Azevedo

Macau’s MICE market marginalised

t’s more a trend than an isolated case. Despite government efforts to diversify Macau’s economy the MICE sector suffered another blow yesterday. IFX Expo Asia, a big retail finance event, moves to Hong Kong next year, following two editions in Macau. The reason? Organisers believe HK’s accessibility and financial street cred will mean more attendees and greater exposure. MICE events in Macau have dropped by a third since 2010 PAGE

www.macaubusinessdaily.com

Alibaba’s bankers Jack Ma and his colleagues have designed an IPO plan. It splits responsibilities and tasks between several banks. The idea is that it will force them to collaborate. While Alibaba gets better financing Page

HSI - Movers

‘Rocky’ IV

September 10

Name

Luck be a lady tonight. But not in September. Macau’s gaming revenue will likely decrease for the fourth straight month, pundits predict. The drop is estimated at about 10 percent this time. The ‘rocky summer’ scenario punished gaming stocks yesterday. Putting HK Stock Exchange on the ropes with its biggest fall in seven months PAGE

%Day

BOC Hong Kong Holdi

0.00

Cathay Pacific Airwa

0.00

Hang Seng Bank Ltd

-0.23

CITIC Ltd

-0.27

Power Assets Holdin

-0.28

China Unicom Hong K

-3.31

CNOOC Ltd

-3.34

PetroChina Co Ltd

-3.49

Sino Land Co Ltd

-3.88

China Resources Lan

-4.79

Source: Bloomberg

Pouring oil on troubled waters The ‘gutter oil’ scandal is serious and farreaching. Local food products importer Tai Heng Foods, however, believes the jury’s still out on long-term Taiwanese partner Chang Guann. The renowned food oil manufacturer is facing lawsuits at home. And Taiwanese store shelves have been cleared of its products by authorities. Chemical tests are inconclusive; but authorities say the lard oil used ‘unqualified’ ingredients PAGE 2

Exports to HK and Mainland set to rise

MPO gets an extra US$33 million

The omens look promising. Macau’s export companies believe Hong Kong and Mainland China of f e r t he be st prospe c t s f or business in the coming months. A new survey puts everything into perspective

Macau Property Opportunities, an investment fund run by Sniper Capital, has just wrapped up a series of debt negotiations with banks and cashed US$33 million

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September 11, 2014

Macau

Tai Heng not considering severing supply links with Chang Guann Despite the fact that the Taiwan oil manufacturer is already facing a legal challenge from a domestic customer for inducing “serious loss” Stephanie Lai

sw.lai@macaubusinessdaily.com

ocal food products importer Tai Heng Foods Company Ltd said that it is not considering terminating its supply relationship with its long-term Taiwan partner Chang Guann Co Ltd despite the fact that the renowned food oil manufacturer already faces a lawsuit filed by a fellow food oil distributor on the island amid a large-scale tainted lard oil scandal that has enveloped both Hong Kong and Macau. Kenne Chou, director and general manager of Tai Heng Foods Company Ltd (Companhia de Alimentos Tai Heng Lda), told Business Daily yesterday that his company has imported the Chuang Tung Special Refined Lard Oil brand from Kaohsiung-based Chang Guann for three years. Mr. Chou stressed that the quality of oil of its Taiwan partner has always passed the quarantine requirements of both Taiwanese and local authorities. However, an investigation has been launched after oil from the Taiwanese manufacturer was believed to comprise illegally recycled products

– including fat collected from grease traps. The product sold in the island and also exported to Hong Kong and Macau. According to the Civic and Municipal Affairs Bureau, at least 21 local bakeries and food processing companies have been identified as purchasers of Chang Guann’s lard oil in the past four months. “Much of the information regarding the quality of Chang Guann’s lard oil has yet to be fully clarified”, Mr. Chou told Business Daily in an interview. “We’re not considering filing any lawsuits against the firm.” Mr. Chou added that Tai Heng has enjoyed a satisfactory supply relationship with Chang Guann, which has sold a dozen types of food oil product to his company. However, the importer admitted that the food safety incident has already affected its clients’ orders for food oil products from Tai Heng. The importer currently still has about 3,000 cans of various food oil from Chang Guann in stock, valued at 1 million patacas (US$125,270) at least.

Visitor arrivals up 2pct during Mid-Autumn Festival

he number of visitor arrivals during the Mid-Autumn Festival weekend, from September 6 to September 9, increased by 1.93 percent to 470,072. Official figures released yesterday by the Public Security Police show that a total of 1.59 million border crossings were recorded during the three-day holiday. Of these, 780,081 were arrivals, while 806,520 were departures. The Border Gate

remained the most popular border crossing for both arrivals and departures, accounting for 583,075 arrivals and 609,471 departures. The outer harbour ferry terminal was the second busiest checkpoint recording 96,109 arrivals and 94,196 departures, while the temporary ferry terminal in Taipa was the third busiest border checkpoint, registering 45,990 arrivals and 41,145 departures.

On Tuesday, major Taiwan food manufacturer and distributor Gassho filed a complaint against Chang Guann in Kaohsiung District Prosecutor’s Office, claiming that Gassho had suffered a “serious loss” due to its outsourcing for the manufacture of the brand Ho Chiang Fragrant Lard Oil to Chang Guann, which was supplied to over 400 user companies in Taiwan. Accusing Chang Guann of fraud, Gassho said the company was considering the amount of compensation it was seeking from the food oil manufacturer. Ho Chiang Fragrant Lard Oil and Chuang Tung Fragrant Lard Oil brands produced by Chang Guann are under the inspection microscope of Taiwanese quarantine authorities for fear of product contamination. Kenn Chou stressed to Business Daily that Tai Heng had imported Chuang Tung Fragrant Lard Oil for the first time on July 29. The firm had been supplied with 150 cans of the lard oil – 25 cans of which have been sold, while the remaining 125 cans were all recalled and sealed as requested by the Food Safety Centre of Macau. Chuang Tung Fragrant Lard Oil has been supplied to local bakeries here; namely, Simly Cake Shop in Ilha Verde and Fong Kei, a renowned traditional Chinese cake shop in the tourist attraction area of Rua do Cunha in Taipa. Over the past four months, Tai Heng has imported some 2,300 cans of lard oil from Chang Guann under the brand names of Chuang Tung Special Refined Oil and Chuang Tung Fragrant Lard Oil, with each can containing 15kg, Civic and Municipal Affairs Bureau announced on Saturday. About 1,600 of these cans remain in stock, the Bureau said. Lard oil is an essential ingredient in making the crust of traditional Chinese pastries. Taiwan is a major exporter of the product to Macau: of the 259,855 kg of lard oil imported here in the first seven months of this

year, imports from Taiwan occupied about 86 percent at 222,330 kg, a proportion much larger than Holland, Canada and Australia, data from the Statistics and Census Bureau shows.

Legal action Chuang Tung Special Refined Lard Oi has been the major lard oil product that Tai Heng has supplied to 19 local bakeries and food processing firms. Mr. Chou stressed that the quality met “European Union standards”. However, the Food Safety Centre of Macau said that it has ordered the recall of all Chang Guann’s lard oil as a “preventive measure”, as the authority assumes that both Chuang Tung Special Refined Lard Oil and Chuang Tung Fragrant Lard Oil could have been affected by the tainted lard oil. In Taiwan, the lard products sold under both brands were recalled at the weekend. Kenn Chou told us that Tai Heng would consider pursuing “legal action” against the local Food Safety Centre for demanding the recall of lard oil although he declined to describe further what form of legal action his firm might pursue against the government. The quarantine authorities in Taiwan and Hong Kong have warned that ongoing official chemical tests could fail to identify “gutter oil”, as there is no established scientific means to distinguish the contaminated lard oil, or “gutter oil”, by international standards. The result of an inspection conducted by Taiwan’s Food and Drug Administration on a batch of Chuang Tung Fragrant Lard Oil showed no abnormal content found in terms of acid value, total polar material (TPM) or benzo(a)pyreme. Taiwan authorities, nevertheless, stressed that as Chang Guann’s lard oil was discovered to have been produced using unqualified ingredients all of the products had to be taken off shelves, recalled and destroyed.

September 11, 2014

Macau IFX EXPO Asia quits Macau for HK The organisers have decided to move the MICE event to Hong Kong in pursuit of a larger number of attendees and greater exposure. The fact that the neighbouring city is a financial centre was an essential component in the final decision João Santos Filipe

jsfilipe@macaubusinessdaily.com

FX Expo Asia will move to Hong Kong next year, following two previous editions held in Macau. The two organisers - Forex Magnates, a news publication, and ConversionPros, a specialist online marketing consultancy - took the decision in order to secure more attendees and attract greater exposure. “Although our exhibitors and attendees enjoyed having Macau as our host city for two years we decided to move to Hong Kong in order to accommodate more attendees and exposure as well as to provide a new atmosphere for the event”, the Director of ConversionPros, Moshe Wasserman, told Business Daily yesterday. IFX EXPO Asia is a retail finance business-to-business expo focused on the banking and financial market sectors. For 2015, the goal of the organisation is to surpass 1,500 attendees and attract more than 60 exhibitors to make it the largest event of its kind. Last year, some 1,200 attendees and 50 exhibitors participated in Macau. “We feel that Hong Kong is more convenient for both our visitors from

abroad as well as local attendees”, Mr. Wasserman said when asked if the organisers felt that Macau would not be able to attract as many visitors as the former British colony. The organiser also stressed the importance of Hong Kong as a financial centre bringing extra exposure to the event. “Hong Kong is more of a financial hub and we

Macau Property Opportunities cashes extra US$33 million

acau Property Opportunities (MPO) has an increase of US$33 million (263 million patacas) free cash due to three new deals involving loan agreements and restructuring of existing debt. The first deal that was revealed is the agreement with Hang Seng Bank following a revaluation of the company’s assets located in One Central Residences (Macau). A new credit line gives an extra US$13 million (104 million patacas) to the company and will mature in September 2020 The second deal also involves One Central Residences. The company will save US$17 million (135 million patacas) as it was able to achieve the removal of an early prepayment requirement that released all sales proceeds from the individual units of the building. Lastly, the company generated US$3million (24 million patacas) with a new loan contract for the luxury private house investment The Green House (Macau), with Banco Tai Fung. The company defined the

new terms as “improved” and the loan’s value increased from US$6 million (48 million patacas) to US$9 million (72 million patacas). In a statement, the chairman of MPO, David Hinde, said he was satisfied with the new deals, as the company’s total cash balance now stands at US$55 million (439 million patacas). “This successful conclusion of our debt negotiations demonstrates MPO’s continuing ability to source funds at attractive rates, thanks to our strong relationships with financial institutions in the region. The company’s enhanced financial flexibility leaves it well placed for the future.” Macau Property Opportunities Fund Limited is an investment fund registered in Guernsey that was launched in 2006 to invest in Macau and Mainland China’s Western Pearl River Delta. Its portfolio is worth US$517 million (4.1 billion patacas). The fund is managed by Sniper Capital, which has offices in Macau, Hong Kong and Singapore. J.S.F.

felt that the event will have more exposure in the new location.” In spite of being one of the areas that has been more promoted by the Macau Government, according to official data from 2010 to 2014 the number of MICE events decreased from 1,399 to 1,030 (around 26 percent). However, from 2012 to 2013 it increased by 8 events from

1,022 to 1,030, reversing the most recent trend. Where this policy seems to be successful is in the number of participants/attendees in the events. While in 2010 there were 806,135 participants in MICE events, that number more than doubled reaching 2,033,908 attendees and exhibitors last year. As the IFX Expo Asia organisers were confident that they would increase the size of the event and its exposure in Hong Kong, they made this decision without any negotiation or conversation with the Macau Government. “The decision to move the event to Hong Kong was made irrespective of any discussions with the Macau Government”, Wasserman told Business Daily. IFX EXPO Asia 2015 will be held from January 27-29 and hosted by the Hong Kong Convention and Exhibition Centre. Some 547 attendees registered for the event yesterday. Following IFX EXPO International, the Asia edition was created to address the emerging local industry.

September 11, 2014

Macau Brought to you by

HOSPITALITY Summer Packs Visitors arriving in Macau on packaged tours come mainly from three sources: mainland China, Hong Kong and Taiwan. Their combined share has stood above 80 percent since 2010 and has, in fact, been growing over the years. Last year the figure reached 87.5 percent and, on current trends, is likely to grow further in the current year. On their side, all non-Asian countries taken together have seen their share decline. They were always marginal in this type of visitor. Even in the best year shown here, 2010, their total share stood below 1.5 percent for the full year, and their monthly reading topped 2 percent only in September and October 2010. Figures have declined since and currently stand at levels below 1 percent. The remainder share corresponds, naturally, to all the Asian countries outside Greater China. Their share has also declined noticeably, from over 18 percent in 2010 to less than 12 percent last year. However, in absolute terms, the trends are less straightforward. Numbers rose until 2012 and declined last year. Data for the current year, up to July - the month that ‘opens’ the crucial summer peak period - suggest an overall recovery; but the July figures also suggest we could still go both ways, as these numbers are sensitive to small oscillations.

Facebook Liked The biggest protest on record since Macau’s handover to mainland China was primarily influenced by social network Facebook

The leaders in this group of Asian countries are South Korea, Japan, Thailand and India. Comparing their July performances, we find quite different features. South Korea figures have essentially stabilised, following their fast rise in 2011. The general trend for Japan is still one of decline although it may be bouncing back. The same can be said of India, after 2011, while Thailand seems to be losing some of its recent steam. J.I.D.

22%

decline in package tours from Thailand, July, y-o-y

acebook had an “enormous influence” and was a “battlefield ground” for the May protests in Macau that saw as many as 20,000 people take to the streets against the generous compensation package bill proposed for outgoing top officials. The findings were announced in a recently published study by ERS e-Research Lab, a company dedicated to the survey and study of public opinion in greater China, and which was cited by Portuguese news agency Lusa. According to the study, Facebook, as a social network, played a significant role in the May demonstrations, having had an “enormous influence” on the size of the movement, which is considered the biggest of its kind Macau has seen since the handover to China in 1999. In all, 12 events created on the social network between April 20 and May 31 were studied. This involved 36 Facebook groups and as many as 181,106 people. The authors of the study - Wenny Cao, Angus Cheong and Zizi Li said that there are several “protest patterns” on Facebook with thousands of profile pictures being changed and ironic phrases about the Chief Executive shared.

The social network was also used to urge demonstrators to wear white t-shirts, which became the chosen colour by those taking to the streets to protest. Videos in which protestors sing songs traditionally associated with social movements and pro-democracy in China were also shared on Facebook. Not only did the social network help spread discontent in Macau but it transcended borders too, with several Macau students in Taiwan universities organising their own protests, images and videos, which were then shared online. In fact, youths marched to Taipei 101, where the official representation of Macau is sited, and handed in petition letters collected via the social network. “This factor shows that the social network was a battlefield ground for everyone worried about the issue at hand, whether they were in Macau or not,” Lusa news agency quotes the study as saying. “Facebook had an enormous influence on the movement,” the report concluded. Mobile phones were the primary source of communication through social media, allowing for an “open and convenient means of communication.” This is verified by the fact that there were several complaints, according to the authors

of the study, of a brief blackout as demonstrators gathered outside the Legislative Assembly. The spread of information was the strongest and most efficient means of gathering support, which proved to have a ripple effect. “The comments and posts on Facebook persuaded [the social network’s] users to believe in the movement and made them take part in it. As more people got involved, the opposition voice [to the government’s proposed bill] became stronger, allowing for greater hope in achieving the desired aim,” the study is quoted as saying. The protests of May 25 and May 27 were triggered by public discontent about the so-called compensation package bill for Macau’s outgoing top officials. The bill was presented just three months before the Chief Executive elections last month and, if approved, would have allowed for generous packages for top government officials once their term in office was over. It also granted immunity to the Chief Executive. The extent of the protests led the government to back down on the draft bill passed, with the promise that it would first consult the public before drafting similar legislation. Lusa

September 11, 2014

Macau

Macau braces for fourth straight negative month

Brighter outlook for HK, mainland China markets

Wells Fargo forecasts that Macau’s gross gaming revenue will remain ‘rocky’ for at least another month. September revenues are predicted to drop around 10 percent

Sara Farr

sarafarr@macaubusinessdaily.com

acau could expect to see negative growth in gross gaming revenues for this month. Analysts at Wells Fargo Securities, LLC are putting gaming revenue growth between negative highsingle and low-double digits. “Based on checks, we estimate that the weekly average daily rate of between MOP850 million and MOP900 million was up 4 percent at the midpoint from last week’s MOP841 million but down 6 percent from August’s MOP932 million average,” the latest client note by senior analyst Cameron McKnight reads. Overall, and based on numbers from the start of the third quarter through Monday, analysts at Wells Fargo say mass market and company estimates will likely remain “intact” implying a 15 percent market growth. “However, there is downside risk to our lower margin VIP estimates (implying a -9 percent market growth),” Mr. McKnight said in the note to clients. For this month, assuming an average daily rate of between MOP850 million and MOP900 million, “this is equivalent to a -3 percent to -8

percent month-on-month decline versus historical sequential growth of -8 percent and last year’s -6 percent sequential decline,” the note reads. Currently, a -9 percent growth could imply a -20 percent or more yearon-year VIP growth and 15 percent mass market growth. While a more precise estimate will only be available later in the week to take into account the Mid-Autumn Festival that ended on Tuesday analysts at the American investment bank firm say they “remain positive on the long-term Macau secular growth story as Macau is still significantly underpenetrated.” However, the year of 2014 that started off as “choppy” has turned “rocky” due to a number of factors – Beijing’s crackdown on corruption, the restriction on mainland Chinese transit visas while here, the month-long World Cup, slowdown in the VIP segment and the implementation of the full smoking ban to come into effect October 6. These have led analysts throughout the different investment banks and brokerage firms to revise down their

estimates on a monthly basis and even on a quarterly basis. Last month, analysts at Wells Fargo also said that chances are that uncertainty will persist into the fourth quarter of the year. “We believe Transit Visa changes are weighing on premium mass, and the continued (and very real) Chinese anticorruption campaign could impact player sentiment and spending,’ the note reads. “Moreover, the [October 6] smoking ban has not yet come into investor or sell-side focus and remains an unknown.” Smoking will still be allowed in VIP rooms and smoking-designated areas throughout the mass floor, according to both the Health Bureau and Gaming Inspection and Coordination Bureau (DICJ). Nonetheless, analysts are wary that “if smoking in premium mass areas is not possible, this could lead to a shift from premium mass back to VIP on the margin,” a note to clients from August reads. “Given the lack of clarity regarding the ban, we believe most have avoided estimating the impact on gross gaming revenue, leaving open the possibility of further downside estimate risk,” the investment bank added in its midAugust note to clients. “Our revised estimates have not made allowance for the smoking ban.” In this week’s note to clients, Mr. McKnight emphasised the uncertainty that the full smoking ban that comes into effect on October 6 will have. “Beyond that, catalysts should start turning positive as we cycle through the comps, estimates are likely to be rebased, and we could see dividend increases and a Japan update in the fourth quarter,” McKnight added.

he markets of Hong Kong, mainland China and other Asia Pacific countries offer the best prospects for exporters here. According to the latest industrial exports survey for the second quarter of the year released yesterday, Macau exporters surveyed said they were optimistic about the markets in Hong Kong and mainland China, while Japan has worsened because of weaker export demands. Although exporters maintain a positive outlook on Hong Kong and mainland Chinese markets, their overall positive outlook lowered to 20.6 percent in the second quarter of the year, a drop of 2.7 percentage points compared to that of the previous quarter (23.3 percent) and a 7.5 percentage point decrease from that of the same period a year ago (28.1 percent). Of the surveyed companies, 0.7 percent said they expected a strong demand for exports, while 19.9 percent said they expected demand to increase only slightly. In addition, the number of workers in this industry dropped by 0.3 percent quarter-on-quarter and 5.9 percent over that of the second quarter of 2013. Overall, 66.6 percent of companies surveyed said they lack enough human resources compared to 61.8 percent who said the same in the first quarter of the year. Pharmaceutical exporters complained of the biggest labour shortage at 86 percent.

September 11, 2014

Gaming

HK stocks head for biggest drop since February

ong Kong stocks fell a fourth day, with the benchmark index headed for its biggest drop in seven months, amid concern the Federal Reserve may raise interest rates sooner than anticipated. Tencent Holdings Ltd. was the biggest drag on the market. China Resources Land Ltd., the second biggest mainland developer listed in Hong Kong, led declines after China home sales slid. Sands China Ltd. slipped 2.3 percent as casino shares retreated after Nomura Holdings Inc. said it expects Macau gaming revenue to fall this month. Tencent, Asia’s largest Internet company, fell 2.3 percent. AAC Technologies Holdings Inc., which supplies speakers to Apple Inc., lost 3.1 percent after the U.S. technology company unveiled new devices. The Hang Seng Index slid 1.9 percent to 24,705.36 at the close in Hong Kong, with all but two shares declining on the 50-member bourse. Volume on the measure was 15 percent higher than the 30-day trading average. The Hang

Seng China Enterprises Index, also known as the H-share index, sank 2.6 percent to 11,175.66. The city’s markets were shut yesterday for a holiday. “We’re approaching the end of Fed tapering so investor sentiment has turned a bit cautious, and focus may shift back to interest rates in the absence of fresh incentives,” said Ben Kwong, a director at KGI Asia Ltd. “The Hong Kong market is taking a breather after the strong rally of the past few months.” The H-share gauge advanced 10 percent this quarter through Sept. 8 on bets China will add stimulus amid signs of economic weakness. The index traded at 7.9 times estimated earnings at the last close, compared with multiples of 11.6 for the Hang Seng Index and 16.6 for the Standard & Poor’s 500 Index.

China economy Mainland money supply growth unexpectedly eased to the slowest in five months, comments by Premier

Li Keqiang indicated, a sign of credit constraints as a property slump weighs on the economy. China may report as early as today new credit data for the month of August. Figures on inflation, retail sales and industrial output are also due this week. China Resources Land fell 4.6 percent to HK$17.94. China Overseas Land & Investment Ltd., the largest mainland developer listed in Hong Kong, retreated 2.9 percent to HK$22.10. The nation’s volume of new home sales dropped 35 percent last week from a week earlier, Credit Suisse Group AG said. Tencent, which in June agreed to buy a stake in 58.com to bolster its online content to compete with Alibaba Group Holding Ltd., fell 2.8 percent to HK$122.60. Alibaba, China’s biggest e-commerce operator, is meeting this week with potential investors for an initial public offering that could set a U.S. record at US$21.1 billion. Futures on the S&P 500 fell 0.2 percent. The equity benchmark

dropped 0.7 percent yesterday as concerns grew that the Federal Reserve may raise interest rates sooner than anticipated and a rally in Apple’s shares sputtered.

U.S. rates The Fed is gauging the strength of the economy as it winds down its bond-buying programme and considers the timing of raising rates. Policymakers next meet September 16-17. U.S. gross domestic product expanded more than previously forecast in the second quarter, and a report on September 5 showed the economy added fewer jobs than anticipated in August. Apple fell 0.4 percent in New York yesterday. The company announced a smartwatch, mobilepayments system, health applications and bigger-screen iPhones in the biggest new line-up so far under Chief Executive Officer Tim Cook. The shares have typically fallen after other events where it debuted products. Apple is up 22 percent this year, outpacing the S&P 500’s 7.6 percent gain. Sands China slid 2.7 percent to HK$46.55, and SJM Holdings Ltd. dropped 3.2 percent to HK$18.16. Gaming revenue in the city may fall as much as 10 percent this month from a year earlier, Nomura said in a report. Bloomberg

MGM courting Japanese banks to fund casinos

GM Resorts International, which could invest as much as US$10 billion (MOP80 billion) in Japanese casinos once legalised, plans to borrow from Japan’s cashrich banks to tap their low rates and local knowledge. “We like low interest rate money, it’s important,” Bill Hornbuckle, president of the Las Vegas-based gaming resorts operator, said in an interview in Tokyo. “If you’re going to be borrowing between US$3 billion and US$7 billion, you’d want to be able to make sure you get through the day.” MGM is seeking Japanese consortium partners ranging from financial institutions to real estate developers, the executive said, as Japan’s ruling party seeks to legalise casinos by as soon as the next parliamentary session starting in the fall. Operators including MGM and Las Vegas Sands Corp. have expressed interest, pledging to invest billions of dollars in the resorts. Casino projects are traditionally financed at a ratio of 60 percent debt and 40 percent equity, Hornbuckle said in the interview last week. It’s still too early to say how much MGM will need to borrow as regulations and the business environment are still unclear, he said, declining to name specific financial institutions MGM has held talks with. “They understand the vibe of the market place,

they understand the vibe of real estate,” Hornbuckle said on working with Japanese banks. “They will understand the development side of this equation fairly well because they’ve been engaged in several of the projects. We will look to that knowledge.”

Billion-dollar investment Japan’s benchmark 10year government bond yield has held below 0.6 percent since mid-June, the lowest globally after Switzerland. The Bank of Japan

maintained record stimuli to stoke inflation and boost economic momentum that’s been sapped by a higher sales tax, as Governor Haruhiko Kuroda said on September 4 that a moderate recovery would continue. MGM has said it’s ready to spend US$5 billion to US$10 billion in Japan, according to chief executive officer James Murren in February, the same month Las Vegas Sands said it planned a similar investment in the country. The company would want at least a 51 percent stake

in partnership with Japanese companies for the projects, Murren said. “We have engaged with a series of potential stakeholders that once this thing is further defined for everybody, potentially it could just be that stakeholders will make things come to life,” said Hornbuckle, who was promoted to his current role in 2012 with responsibility for gaming development. MGM, which runs the Bellagio and Mandalay Bay in Las Vegas and has a 51-percent stake in Macau’s

MGM China Holdings Ltd., has met with representatives including Japanese equity funds, banks, developers and technology companies, Hornbuckle said. The company would also consider borrowing from financial institutions outside of Japan, he said. USJ Co., the operator of Osaka city’s Universal Studios Japan, said last month it has been in talks with operators including MGM for a possible partnership to run a casino resort in Japan. Bloomberg

September 11, 2014

Gaming

Caesars’ Loveman: Worst over for Atlantic City

aesars Entertainment’s Chief Executive Officer Gary Loveman said the worst may be over for Atlantic City after five of the New Jersey town’s 12 casinos closed or said they may shut this year. The beach resort that once monopolised East Coast gambling has taken a beating in recent years from expanded competition in neighbouring states. Trump Entertainment Resorts Inc., the casino company founded by Donald Trump, filed for bankruptcy court protection yesterday, saying it may have to close its Trump Taj Mahal in November. “Atlantic City has taken its worst blows,” Loveman said yesterday at a hearing in Albany, the New York capital. “I’m cautiously optimistic that a turn is coming.” Loveman was pitching New York regulators on a casino he’s proposing in Woodbury. The Caesars project is one of 16 bids the state is considering after voters last year approved as many as four casinos upstate. New York’s Gaming Facility Location Board is expected to pick the winners by yearend. The casino Caesars is proposing about 55 miles (88 kilometers) north of Manhattan won’t damage Atlantic City’s business because New York City gamblers seeking a day trip are already diverted by casinos in Connecticut and Pennsylvania, Loveman said. Atlantic City needs more casino alternatives, such as the convention centre the company is building, nightclubs, greater use of the beach and a “significant” effort to clean up the city and its finances, Loveman said. Caesars is the largest operator in Atlantic City, with three casinos, even after closing its Showboat property there on Aug. 31. “There will be a few more blows but none of them will be as severe as what we’ve had thus far,” Loveman said. Bloomberg

Atlantic City’s crumbling casinos Current status of Atlantic City’s casinos:

CASINO

PARENT

STATUS

Atlantic Club Casino Hotel

Resorts International Holdings

Shut

Bally’s Atlantic City

Caesars Entertainment Inc

Open

Borgata Hotel Casino & Spa

Boyd Gaming Corp Divestiture Trust for MGM Resorts International

Open

Caesars Atlantic City

Caesars Entertainment Inc

Open

Golden Nugget Hotel Casino

Landry’s Inc

Open

Harrah’s Resort Atlantic City

Caesars Entertainment Inc

Open

Resorts Casino Hotel

DGMB Casino LLC

Open

Revel

Revel AC LLC and Revel AC Inc

Shut

Showboat Atlantic City

Caesars Entertainment Inc

Shut

Tropicana Casino and Resort

Tropicana Entertainment Inc

Open

Trump Plaza Hotel Casino

Trump Entertainment Inc

To close Sept. 16

Trump Taj Mahal Casino Resort

Trump Entertainment Inc

Open #

Source: Reuters

# Expected to close on or after Nov. 13, if the company fails to cut costs and negotiate a deal with its largest union.

September 11, 2014

Greater China Cross-Strait investment surging Investment between the Chinese mainland and Taiwan has surged this year, a spokesman said yesterday. In the first seven months of 2014, mainland authorities approved 1,284 projects featuring investment by Taiwanese businesses, a 10.2-percent increase from the same period last year, while US$1.47 billion of Taiwanese investment has been put into use, said Ma Xiaoguang of the State Council Taiwan Affairs Office. The authorities have also approved 34 investment projects or mainland enterprises to operate in Taiwan, with the investment reaching US$195 million, which exceeds the annual total of US$177 million last year, Ma said at a press conference.

Partnership with Albania China vowed closer cooperation with Albania as Chinese Premier Li Keqiang discussed plans to construct a highway linking Albania and Macedonia with Albanian Prime Minister Edi Rama yesterday. Li made the pledge during a meeting with Rama on the side-lines of the Summer Davos in north China’s Tianjin city. Hailing the traditional friendship with Albania, Li said the two countries should use the 65th anniversary of their diplomatic relations as an opportunity to improve high-level exchanges and promote practical cooperation in all fields.

Gov’t moves ahead with management reforms The Chinese government has pressed ahead with management reforms by scrapping or decentralizing administrative approval rights in an effort to improve efficiency and stem corruption. Li Zhangze, spokesman for the group spearheading the reforms under the State Council, said a total of 632 administrative approval items were either dismissed or relegated to governments at lower levels in the past year. Li said the cancellation of unreasonable approval rights, which could be abused for improper gains by officials, have helped boost the market.

Individual mainland tourists flock to Taiwan The number of individual tourists from the Chinese mainland to Taiwan more than doubled to 615,000 in the first seven months of this year, a spokesman said yesterday. Individual tourists, those not with travel agencies, rose more than 147 percent, making up a third of the 1.88 million tourists to visit between January and July. Overall, tourism to Taiwan rose by 45 percent. Packaged tour group visitors reached 1.26 million, up 21 percent, said Ma Xiaoguang of the State Council Taiwan Affairs Office at a press conference.

Chinese, Serbian PMs meet Chinese Premier Li Keqiang and Serbian Prime Minister Aleksandar Vucic met here on Wednesday on the sidelines of the annual meeting of the Summer Davos forum. Li spoke highly of the China-Serbia strategic partnership, which was the first to be established between China and Central and Eastern European countries. China is ready to consolidate political mutual trust with Serbia, expand cooperation and increase cultural and personnel exchanges, he said. Li also vowed to work with Serbia to ensure successful completion of the Belgrade-Budapest railway the two countries are jointly constructing along with Hungary.

EU Chamber urges opening car The group says restrictions on parts makers to sell to the independent the choice for consumers

he European Union Chamber of Commerce in China urged the nation’s government to allow more competition for vehicle aftermarket service, as current regulations are the “key driver” of the monopoly situation. China’s policies, while playing a positive role in regulating market order, have led to parts supply being purely controlled by auto makers as a result of the obligations set for them. The parts are distributed only to the auto makers’ authorized dealer shops resulting in “an excessively high repair part price,” the chamber’s working group on auto components said in a report released on Tuesday. Chinese antitrust regulators have probed the auto industry for overpriced spare parts, as an April report by the Insurance Association of China and China Auto Maintenance & Repair Association found replacing all the components of a Mercedes C-class sedan can cost 12 times the price of a new car. The investigations, which led at least seven automakers to cut spare part prices, prompted the European chamber to say last month that foreign companies were being picked on.

limit the choice for consumers, the group said. The curbs force buyers to choose between stores controlled by vehicle manufacturers and which often charge a significant premium, or the fake products market, according to the report.

The chamber urged China to revise current regulations to ensure “free and balanced” competition in the after-market. Original-parts makers should be allowed to sell components to independent repair shops at lower prices, it said.

Limited choice Restrictions on parts makers to sell to the independent after-market

Insurance Association of China and China Auto Maintenance & Repair Association found replacing sedan can cost 12 times the price of a new car

High cost for Tianhe after critical report Morgan Stanley’s private equity arm still holds an estimated US$300 million stake in Tianhe Pete Sweeney

he cost of borrowing shares in China’s Tianhe Chemicals has risen since an equities research house alleged last week that the company cooked its books, suggesting the report was gaining traction with investors. Trading in Tianhe shares is halted at the firm’s request as it prepares a statement denying the allegations, but those who own shares can still loan them to short sellers betting the price will fall. Data from trading platform Interactive Brokers shows the cost of borrowing Tianhe shares stood at

Hong Kong Stock Exchange trading floor

14.5 percent on Tuesday, up from 11.35 percent on September 2 when the report by Anonymous Analytics went public and dragged the stock down 5 percent in a few hours. The average cost of borrowing shares in Chinese companies trading in Hong Kong stands at around 1 percent. Some traders and bankers said Tianhe’s shares were targeted as soon as they were eligible to be shorted in August, at a rate of 7 percent. The Anonymous Analytics report said Tianhe had inflated its revenues, misrepresented its customers and

misstated its taxes. Tianhe has said the “malicious” report contained errors and misleading statements. It has yet to issue further details. Morgan Stanley, UBS and Bank of America led Tianhe’s Hong Kong IPO in June, and Morgan Stanley’s private equity arm still holds an estimated US$300 million stake in Tianhe. Shorters note that such investors have deep financial resources to buy up shares themselves to resist a short trend and defend the value of their investments.

September 11, 2014

Greater China

service

Commission, which began three years ago. China should also lift the cap on foreign ownership in the auto industry, the European chamber’s working group on the auto industry said. Foreign automakers should be allowed to hold more than the current 50 percent of joint ventures in China.

after-market limits

Since July, Toyota Motor Corp.’s Lexus, Daimler AG’s Mercedes-Benz and Bayerische Motoren Werke AG are among carmakers that have announced price cuts for spare parts following the investigations by National Development and Reform

all the components of a Mercedes C-class (pictured)

‘An anomaly’ “Mandatory 50/50 partnerships are counterproductive from a management point of view,” the group said. “Moreover, in a market economy, they are an anomaly.” Chinese brands will be “killed in the cradle” if the government lets foreign automakers to become more independent from domestic partners in the world’s biggest car market, the country’s main auto-industry group, the China Association of Automobile Manufacturers, said in February. A Chinese Ministry of Commerce official had said in October that automakers should prepare for the day when the foreign stake limit is relaxed. The chamber also called for a dialogue to remove hurdles “slowing down, rather than facilitating” the Chinese government’s efforts to promote new energy vehicles. The possibility of fiscal incentives to electric cars made at joint ventures and imported models should be included in the dialogue. The U.S. Chamber of Commerce has warned that China is losing its appeal as the top investment destination for American companies as the business environment becomes tougher. Bloomberg News

Free deposit rates in 3 years Many economists, including policymakers, believe that China has to open up its capital account if it wishes to increase international usage of the yuan

hina plans to free its deposit rates and ensure its capital account is liberalised on a basic level within three years, an adviser to China’s parliament said yesterday. Li Daokui said China aims to inject a basic level of freedom into its tightlycontrolled capital account within three years, but said it was unclear when capital would be allowed to flow uninhibited across Chinese borders. Freeing deposit rates and the capital account are two vital financial reforms that China is expected to tackle to remake its economy in what is the most ambitious overhaul in 30 years. China has never disclosed a clear timetable for both reforms. A former monetary policy adviser to China’s central bank, Li is now a delegate at the Chinese People’s Political Consultative Conference, a ceremonial advisory body to China’s parliament. The group wields no power, but is in the upper echelon of government and privy to the thinking of authorities. “My understanding is that for the capital account opening, the aim is to have it ‘basically’ opened within three years,” Li told a forum in the northern city of Tianjin. “It is still uncertain when it will be fully opened.”

Li Daokui

China currently caps the deposit rates that banks pay, partly to protect lenders’ margins. But the rule has been criticised by some as distorting the cost of credit by holding down deposit rates and encouraging wasteful investment. Central Bank Governor Zhou Xiaochuan said in March that China would free its deposit rates in one to two years, but one month later Deputy Governor Yi Gang was quoted by Chinese media as saying Beijing was not ready to let markets set rates. This is because regional governments can use their political power to force banks to lend to them at discounted rates, and a free rate market would also inevitably raise borrowing cost at a time when China’s economy is already faltering, Yi said. Reuters

Li Ka-shing in talks for aircraft leasing

KEY POINTS Costs of borrowing shares up sharply since report released Anonymous Analytics accused Tianhe Chemicals of false accounting Tianhe says Anonymous report contains errors, is misleading

The three banks have all declined to comment on the report. Traders and bankers say that short-sellers can end up losing money even if allegations prove to be correct. Stock markets in Hong Kong and in mainland China have been rallying. That can lift even weak stocks and prompt stock lenders to demand shorters return their shares at a loss. In Hong Kong, firms can halt trade in their stock for years, preventing shorters from closing out their positions. “I’ve had to pay interest of over 100 percent annualized,” said Jon Carnes, founder of short-selling research house Alfred Little. “If the rate was 100 percent and if the halt lasted three years, you’d lose a massive amount of money on the short, so me personally, I’m not attracted to shortselling in Hong Kong.” Carnes said the borrowing cost for Tianhe shares, though high, did not imply investors expected certain catastrophe for Tianhe. In 2011, at the height of successful short-selling attacks on some U.S.-listed Chinese firms Reuters

Li is targeting a slice of the US$200 billion global aircraft portfolios held by lessors as part of a strategic move to diversify his investments Anshuman Daga

sia’s richest man, Li Ka-shing, aims to become a force in the global aircraft leasing business as his flagship investment firm holds talks with a number of lessors on building up a portfolio of planes, people with direct knowledge of the matter said. In what could be part of a series of deals, the Hong Kong tycoon’s Cheung Kong (Holdings) Ltd is in discussions to form a joint venture with Mitsubishi Corp’s leasing arm MC Aviation Partners, one of the executives said. Li is targeting a slice of the US$200 billion global aircraft portfolios held by lessors as part of a strategic move to diversify his investments and earn stable returns in a fast-growing industry. The executive said the venture with MC Aviation, which owns and manages about 100 mostly-narrow body jets, will give Cheung Kong access to a pool of about 20 aircraft. It will help the Hong Kong firm tap into the management expertise of Mitsubishi’s fully-owned Tokyo subsidiary, which was set up in 2008 with over 20 years of experience in aircraft leasing. Details of the venture are still being

Li Ka-Shing

worked out and an announcement is expected in a couple of weeks, one executive said. The executives did not provide any financial terms and declined to be identified as the information is not public. Mitsubishi Corp and MC Aviation declined to comment. Cheung Kong did not immediately respond to requests for comment from Reuters. Last month, Cheung Kong

confirmed its interest in a US$5 billion fleet of 100 planes being sold by private equity firm Terra Firma-owned lessor AWAS Aviation Capital Ltd. For Mitsubishi, the transaction will bring some returns on its investment in MC Aviation, which could also strike other deals with Cheung Kong as the Hong Kong group grows its leasing business, one executive said. Reuters

September 11, 2014

Greater China

Alibaba’s bankers learn to co-operate The company’s six book runners have paired up and divided tasks among them Liana B. Baker, Elzio Barreto and Olivia Oran

libaba Group Holding Ltd.’s desire to keep tight control over its US$21.1 billion share sale has left a vacuum at the helm of its banking syndicate, leading underwriters to take unusual steps to manage the offering, according to sources familiar with the situation. Typically, initial public offerings have a “lead left” bank that controls the process, sometimes as a first among equals in the syndicate. Facebook Inc., for example, had Morgan Stanley in that role, while Twitter Inc. used Goldman Sachs Group Inc. for the job. Alibaba, however, decided to do without one bank in charge of its IPO, and instead is seeking advice from all its major book runners. The move gives Alibaba control of the process as no one bank has a complete picture of what is going on. It also helps avoid potential pitfalls of relying too much on one institution. Facebook’s botched 2012 IPO was also one of the reasons for this choice, sources have previously said. But it has led to a complicated arrangement and left some bankers complaining that it has created additional layers of work, the sources said. Alibaba declined to comment. To make sure that the process goes smoothly, Alibaba’s six book runners have paired up and divided tasks among them, the sources said. The teams include: Credit Suisse Group AG and Citigroup Inc., Goldman Sachs Group Inc. and Deutsche Bank AG, and Morgan Stanley and JPMorgan Chase & Co, the sources said.

Banks have been drawn to the deal both by the prestige of working on such a large IPO and by the chance to participate in Alibaba’s future deals

All the banks declined to comment. The entire syndicate has been divided into three tiers, with the six joint book runners on top, followed by eight banks that have been invited to analyst meetings and have prepared analysis to help value Alibaba. A third tier of banks will help sell the deal, according to one of the sources. While bankers working on the deal said the process was working smoothly, some sources said the system was not very efficient. Since firms were working on individual tasks, there was not one bank that had an overall view of how the process

Jack Ma during a World Economic Forum session

was going, they said. Also, because they all had to report to the rest of the group, it made the process longer and more repetitive, they said. Rothschild, which does not have any underwriting operations, is also advising Alibaba on the offering as an independent equity adviser, serving as a middleman between the company and the underwriters. Alibaba has also negotiated lower underwriting fees. The company will pay underwriting fees of about 1 percent, which would yield some US$211 million for all the banks on the deal, the sources said. That is far less than the 7 percent that smaller deals typically generate, or the 2 to 3 percent for larger offerings. Facebook, which raised US$16 billion in its IPO, paid 1.1 percent in fees, while a much smaller listing by Twitter last year paid 3.25 percent. Alibaba’s main Chinese rival, JD.com Inc., agreed to pay banks 4 percent when it went public in New York in May. The low fees for Alibaba have been partly credited to work by Joe Tsai, Alibaba’s executive vice chairman,

US$163 billion

Alibaba possible top value when public and Michael Yao, a former Rothschild banker who heads Alibaba’s corporate finance division. One source described both Tsai and Yao as “tough negotiators,” but they also had more leverage than most other executives. Alibaba could be valued at up to US$163 billion in one of the biggest IPOs of all time. The company accounts for about 80 percent of all online retail sales in China, where rising Internet usage and an expanding middle class helped the company generate gross merchandise volume of US$296 billion in the 12

months ended June 30. Banks have been drawn to the deal both by the prestige of working on such a large IPO and by the chance to participate in Alibaba’s future deals. It is unlikely any other company will hold such heft. The bulk of the fees, about 80 percent of the total, will go to the six main underwriters of the IPO. Of those, five are expected to take 15 percent each of the fee pool, or around US$32 million apiece. Citigroup, the sixth book runner, will receive only about half that amount because its role in the offering is smaller than others, the sources said. Rothschild will earn US$9 million for its role, according to Alibaba’s securities fillings. Alibaba expects to price the IPO at US$60 to US$66 per American Depositary Share and list on the New York Stock Exchange later this month. The company is currently in the midst of a multi-city marketing blitz to drum up demand for its shares, which are expected to price on September 18. Reuters

September 11, 2014

Asia

Philippine ore export ban worries disminished The main proponent of the proposed Philippines law said it could take two years to enact and a five-year grace period before taking effect “We’ve started the ball rolling so I’m very hopeful with the timeline,” he said in an interview with Reuters in his office in Congress, adding that he hoped the bill would become law within two years. The bill, which has government support, does not contain a timeframe for a ban on mineral exports, but Amante said he believed miners should be given a five-year grace period that would be implemented by regulation. “I think five years will be fair enough for investors to put up processing plants,” he said. Indonesia passed similar legislation in 2009 but many miners did not prepare for the ban in the belief that the government would back down. “If we’re talking about seven years until it is actually implemented, this will certainly take some of the upward pressure out of the nickel price,” said Stephen Briggs, metals analyst with BNP Paribas in London.

Government support

Philippine President Benigno Aquino III

Philippine proposal to ban exports of unprocessed metal ores could take seven years to implement, its main backer said in comments that eased concerns about a supply squeeze on China and sent nickel prices skidding. Metals markets were caught out late last year with plans by Indonesia to ban ore exports in a strategy to generate higher-value exports by processing metal within the country. They were rattled further last week with news that the Philippines might follow suit. The Philippines supplies virtually all of China’s nickel ore, which the economic giant uses to make nickel pig iron, a raw material for stainless steel. But Congressman Erlpe John Amante, the main proponent of the proposed Philippines law, said it

could take two years to enact and that miners deserved a five-year grace period before mandatory domestic processing took effect. His comments eased market concerns of a supply squeeze. Nickel, which had jumped 7 percent in four sessions to Monday’s close, fell more than 5 percent but it is still up about 37 percent this year. China imported 5.1 million tonnes of nickel ore and concentrate from the Philippines in July, which accounted for more than 98 percent of total imports. Amante said the Philippines could triple its revenue from mineral exports if his bill, which was filed in July and has been approved at the committee stage in the lower chamber of Congress, becomes law. A matching bill was filed in the upper house Senate in late August.

KEY POINTS Proponent hopes bills become law in 2 years Suggests additonal 5 years to implement Government to support identical bills Comments ease concern of supply squeeze Nickel prices cut back some of this year’s rally

Environment and Natural Resources Secretary Ramon Paje, in a separate interview, said the government would support the identical bills filed in both chambers of Congress. “Our proposal is to go for the banning of ore exports on the condition that in the draft bills there will be a support system for the establishment of processing plants,” Paje told Reuters. The country’s high power costs were the “number one disincentive” for miners, he added. The Philippines, which has vast but largely untapped mineral resources, has been looking at ways to raise the contribution of mining to its economy. The government has also been seeking a bigger share of mining revenues, a proposal rejected by miners who say they are already paying too much taxes. Reuters

India factory output growth likely slowed Wholesale price inflation is also expected to have decelerated to 4.50 percent in August

ndian factory output probably slowed further in July as core industries like mining and cement manufacturing were hampered by the monsoon rains, but more encouragingly inflation was seen easing in August, a Reuters poll found. Industrial production was seen growing 1.8 percent from a year earlier in July, slower than June’s 3.4 percent increase, according to the median consensus in a poll of 31 economists. “This is the time when mining remains weak because of monsoons, so it will not deliver a good number. Manufacturing is also expected to lag,” said Upasna Bhardwaj, economist

at ING Vysya Bank. Data released on Sept. 1 showed infrastructure output growth , which accounts for almost two-fifths of total factory activity, slowed to a three-month low of 2.7 percent in July, dragged down by falling natural gas, steel and fertiliser production. The July industrial output numbers offer the first glimpse of economic growth in the third quarter. Between AprilJune, the Indian economy grew 5.7 percent, the fastest in 2-1/2 years. That provided some good news for Prime Minister Narendra Modi, whose government is expected to unleash major reforms after sweeping to power in

Indian Prime Minister Narendra Modi is facing latest bad figures without the help of his Finance Minister, who is receiving diabetes treatment in hospital

a landslide election victory in May. While the monsoon rains likely affected production they also helped tame price rises, notably for food items,

according to economists in the poll. India’s consumer price inflation, closely tracked by the Reserve Bank of India, likely edged down to 7.80

percent in August from July’s 7.96 percent. Wholesale price inflation is also expected to have decelerated to 4.50 percent in August from July’s 5.19 percent after a drop in crude oil prices and a rising rupee. If confirmed, that would be the lowest reading in nearly five years. “Commodity prices and crude oil have remained quite benign which should result in some kind of easing in wholesale prices,” Bhardwaj said. Reserve Bank of India Governor Raghuram Rajan has repeatedly stressed his determination to curb. Reuters

September 11, 2014

Asia Singapore GDP forecast cut Economists have lowered their Singapore 2014 economic growth forecasts compared with three months ago, following a slowdown in the city-state’s growth in the second quarter, a central bank survey released yesterday showed. The median forecast of 22 economists surveyed by the Monetary Authority of Singapore (MAS) was for gross domestic product to expand 3.3 percent this year, down from expectations for 3.8 percent growth in a survey published in June. The lowering of economists’ growth forecasts came after data last month showed that Singapore’s economy just narrowly avoided shrinking in April-June.

Japan nuclear regulator gives OK Japan’s nuclear regulator gave final safety approval to restart two reactors at Kyushu Electric Power Co Inc.’s Sendai plant yesterday, the regulator’s first major ruling since it was formed in the aftermath of the 2011 Fukushima disaster. All 48 of Japan’s nuclear reactors have been gradually idled since a massive earthquake and tsunami set off a devastating nuclear disaster at Fukushima and sparked public opposition to atomic power. The government of Prime Minister Shinzo Abe has been pressing to restart reactors that receive safety approval from the Nuclear Regulation Authority to reduce Japan’s reliance on expensive imported fuel.

Nissan hires BMW exec Nissan Motor Co is hiring BMW executive Roland Krueger to head its luxury Infiniti brand, the Japanese automaker said yesterday, as it struggles to establish the second-tier brand in the global premium market. Nissan had been searching for a new Infiniti chief since July after Johan de Nysschen, a former Audi executive, left the brand to lead General Motors’ Cadillac division. Earlier this month, the brand was dealt another blow when Infiniti’s chairman, Andy Palmer, who was also Nissan’s senior executive, left the automaker to head Aston Martin.

Less international guests in NZ The trend for foreign visitors staying in commercial accommodation in New Zealand is levelling off, the government statistics agency announced yesterday. International guest nights edged up by 1.3 percent in July, following a fall in June, while short-term international visitor arrivals fell by 0.5 percent over the same period, according to Statistics New Zealand. The trend for international guest nights had flattened after rising since late last year, according to a commentary on the agency’s accommodation survey. However, domestic guest nights were up 3.9 percent in July.

Japan takes a break after machinery orders rise That followed an 8.8 percent rise in June and a 19.5 percent drop in May Tetsushi Kajimoto

apan’s core machinery orders rose for a second straight month in July, a tentative sign of a pickup in business investment that is needed to propel Japan out of the slump caused by April’s sales tax hike. The 3.5 percent rise in core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, was less than the median estimate of a 4.0 percent increase in a Reuters poll of economists, but still enough to show investment rising. That followed an 8.8 percent rise in June and a 19.5 percent drop in May, which was the biggest drop in data going back to 2005. The data followed a recent run of weak economic indicators that suggest a rebound expected this quarter from April’s slump may not prove as strong as originally thought. Weak readings cloud the prospects of a planned increase in the sales tax in October 2015, while keeping

On 08 September the government said the Japanese economy contracted at an annualized rate of 7.1 percent in the three months to June

South Korea to fund development institute in Myanmar The Institute will assist the evidence-based policy making process

outh Korea will fund US$20 million to Myanmar for the establishment of a national institute for economic and social development in Nay Pyi Taw, according to a press statement of the Korea International Cooperation Agency (KOICA) available yesterday. Under a memorandum of understanding signed in the Myanmar capital, the national-level Myanmar Development Institute (MDI) project will assist the evidence-based policy making process through comprehensive research and advice and conduct related capacity-building to facilitate economic development, said the statement. Once the MDI project is formulated, it will be officially launched lasting until 2019, it said. The MDI project includes capacity development programs, scholarship programs, short-term training courses in South Korea and in-country training courses in Myanmar and S.Korea-Myanmar joint policy research programs.

The President of Myanmar, Thein Sein

According to the statement, the “MDI will play the key role of locomotive which pulls the trains of Myanmar economic development”, South Korea Ambassador to Myanmar Lee Back-Soon was quoted as saying. Myanmar Deputy Minister of National Planning and Economic Development Daw Lei Lei Thein disclosed that South Korea would

extend a grant aid to Myanmar for the year 2014 during the upcoming visit to the country of KOICA President Kim Young-Mok later this month. KOICA has extended a grant aid for 2013 to help Myanmar with the development of road network, implementing national statistical system, capacity building strategy for conferences, land reform program for mechanized farming and forest greening, according to earlier report. Statistics show that South Korea’s investment in Myanmar amounted to US$3.072 billion in 96 projects as of June 2014, accounting for 6.58 percent of the total foreign input and standing the sixth in Myanmar’s foreign investment line-up since Myanmar opened door in late 1988. Bilateral trade between Myanmar and South Korea reached US$1.569 billion in the fiscal year 2013-14, of which Myanmar’s export to S. Korea accounted for US$352.92 million while its import from the East Asian country stood at 1.217 billion USD. Xinhua

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September 11, 2014

Asia policymakers under pressure to provide fresh stimulus to prop up the economy. “This is a little weaker than forecast but still enough growth to suggest a mild recovery from the large decline in May,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. “I say mild because some companies are still cautious about demand. I expect the second sales tax hike to happen, but keep an eye out for more stimulus from the government.” The core orders were boosted by one big order from a chemicals producer, a government official said, adding that excluding the one-off factor overall growth in July was moderate. The Cabinet Office data showed orders from manufacturers for new machinery rose 20.3 percent in July, while those from non-manufacturers fell 4.3 percent.

KEY POINTS July core orders +3.5 pct m/m vs +4.0 pct forecast Capex holds the key to sustainable economic growth July-Sept data crucial for planned tax hike in 2015

The Cabinet Office stuck to its assessment of machinery orders, saying they are “seesawing”. Capital spending holds the key to the success of Prime Minister Shinzo Abe’s reflationary policies dubbed Abenomics, which policymakers are counting on to generate a virtuous cycle of growing business output, household income and spending. Companies held off spending in April-June after boosting investment earlier this year on factors such as upgrading of Windows operating systems. As the temporary factors run their course, analysts expect capital spending will resume picking up due to steady corporate earnings, a well as the need to upgrade ageing equipment and manage a labour shortage. Compared with a year earlier, core orders, which exclude ships and power utilities, rose 1.1 percent in July, versus the expected 0.6 percent rise, the Cabinet Office data showed. Revised data showed on Monday that Japan’s economy shrank an annualised 7.1 percent in AprilJune as capital spending slid and private consumption took a hit from the sales tax hike. Analysts in a Reuters poll forecast a 3.8 percent bounce this quarter. The strength of an expected rebound in the current quarter will be crucial to Abe’s decision, expected by year-end, on whether to proceed with the scheduled second increase in the sales tax to 10 percent in October 2015. Reuters

Australian consumer sentiment suffers setback The budget and taxation are the top concerns for consumers

measure of Australian consumer sentiment suffered a sharp reversal in September as households became more concerned about the outlook for the economy and employment. The survey of 1,200 people by the Melbourne Institute and Westpac Bank showed the index of consumer sentiment fell a seasonally adjusted 4.6 percent in September, from August when it jumped 3.8 percent. The index reading of 94.0 was down 15.1 percent on the same month last year, with pessimists exceeding optimists. “This is a surprising and disappointing result,” said Westpac chief economist Bill Evans. The survey suggested the Coalition government’s unpopular budget of welfare reforms, cutbacks and increased charges for services was still weighing on people’s minds. When asked what news they most recalled, respondents cited the budget and taxation ahead of all other subjects. Economic conditions and unemployment followed, with the bulk of the news being considered “unfavourable”.

That might in part reflect data out last month showing unemployment hit a 12 year peak of 6.4 percent in July. The August jobs report is due on Thursday and analysts generally expect a small pullback to 6.3 percent. Politics also remains a major factor. The survey’s measure of sentiment among supporters of the Labor opposition is down 27 percent on a year ago at 83.4. In contrast, the index for supporters of the Liberal National government is steady at 109.5. Economic worries were clearly at the forefront with the index for economic conditions over the next 12 months down 8.4 percent, while that for conditions over the next five years dropped 9.2 percent. The measure of family finances compared to a year ago fell 4.9 percent, though that on the outlook for the next 12 months edged up by 0.1 percent. A measure on whether it was a good time to buy a major household item dipped 1.9 percent, while the index tracking assessments of ‘time to buy a dwelling’ fell 8.2 percent after jumping in August. Reuters

BoJ’s Iwata upbeat on economy However, given the soft GDP data, it is likely BoJ will cut its projections in late October Leika Kihara

ank of Japan Deputy Governor Kikuo Iwata yesterday reiterated policymakers’ conviction that the economy can recover from a deep slump, saying that households and companies will boost spending as the pain from an April sales tax hike eases. Iwata acknowledged that weak exports and the rising burden on households from the tax hike were among risks to the outlook, but said a pick-up in global demand and wages will keep the world’s third-largest economy on track for a moderate recovery. “Our quantitative and qualitative easing (QQE) has been exerting the intended effects on the economy. As the positive cycle of output, income and expenditure is sustained, the effect of our monetary easing will strengthen,” he said in a speech to business leaders in Kanazawa, a city in Ishikawa prefecture in central Japan. Japan’s economy shrank an annualised 7.1 percent in April-June from the previous quarter, the biggest contraction since the global financial crisis in 2009, due to the hit from the sales tax hike in April. That has heightened doubts in markets that the BOJ can accelerate consumer

Japanese finance minister Taro Aso showed on 09 September his concern about recent sharp currency moves of the US dollar, which is hitting the highest level in six years against the Japanese yen

inflation, now around 1.3 percent, toward its 2 percent target next year. However, Iwata countered the view that wage rises have been slow despite the BOJ’s massive monetary stimulus, saying that it takes time for companies -long used to deflation and hesitant to increase wages- to consider raising base salary. He also disagreed with many private-sector analysts

that consumer inflation will slow as the boost from the weak yen begins to fade, saying that there was no strong historical co-relation between the yen and price moves. “The biggest factor behind underlying price gains is an increase in demand in the economy due partly to the effect of our monetary policy,” he said. A former academic, Iwata

has been a vocal advocate of using monetary policy to target base money. The BOJ has stood pat since deploying an intense burst of monetary stimulus in April last year, when it pledged to double base money via aggressive asset purchases to achieve its 2 percent inflation target in roughly two years. Private-sector analysts expect only a modest

economic rebound in the current quarter as the taxhike impact persists, and some of them see the economy barely growing in the current fiscal year ending in March 2015. The BOJ is much more optimistic on the outlook, however, forecasting in July that the economy will expand 1.0 percent in the current fiscal year. Reuters

September 11, 2014

International Marchionne becomes new Ferrari chairman Luca Cordero di Montezemolo will step down as chairman of Ferrari as of October 13 and will be replaced by Sergio Marchionne, who also serves as the chief executive of parent group Fiat. The Oct. 13 resignation date coincides with the day when Fiat, which owns 90 percent of Ferrari, plans to list Fiat Chrysler Automobiles in New York after completing a merger with its U.S. business and cementing a shift of the Italian group from its home for the past 115 years.

Conflicts weighing on German economy The German economy remains on track for expansion but geopolitical conflicts and weakness elsewhere in the euro zone are weighing on growth, the economy ministry said in its monthly report yesterday. “Alongside structural challenges in many areas, geopolitical conflicts are preventing a better performance. They are increasing uncertainty and influencing corporate decisions.” The ministry said growth impulses were coming from the United States and some Asian emerging markets. But a faltering euro zone recovery, weakness in Japan, Russia and Latin America, as well as uneven growth in China were weighing on Germany.

Russian minister sees hard-to-recover oil output Russian Natural Resources Minister Sergei Donskoy said yesterday that Western sanctions have already had an impact on the production of hard-torecover oil, seen as a next key source of oil output in the country, Interfax news agency reported. “Sanctions ... have already had an impact on production of hard-to-recover reserves. As a rule, our oilmen use foreign technologies and try to adapt them to our conditions,” Donskoy was quoted as saying yesterday.

Merkel threatens in spite of stagnation

U.N. to negotiate sovereign debt framework U.N. General Assembly resolutions are non-binding but carry a symbolic international political weight

he 193-member United Nations General Assembly agreed to negotiate and adopt a multilateral legal framework for sovereign debt restructuring processes to improve the global financial system, spurred by Argentina’s debt crisis. A resolution, drafted by Bolivia on behalf of the Group of 77 developing nations and China, was adopted with 124 in favour and 11 against. The United States voted against the measure, saying it would create uncertainty in financial markets, and there were 41 abstentions. U.N. General Assembly resolutions are non-binding but carry a symbolic international political weight. “The peoples of the world have spoken and we have decided that the time has come to embark on an ethical, political and legal path together that can put an end to this unbridled speculation,” Argentine Foreign Minister Hector Timerman told the U.N. General Assembly after the vote. “The time has come to give a legal framework to the financial system for restructuring sovereign debt that respects the majority of creditors and which allows countries to come out of crises in a sustainable manner,” he said. The U.N. resolution “decides to elaborate and adopt through a process of intergovernmental negotiations, as a matter of priority during its sixty-ninth session, a multilateral legal framework for sovereign debt restructuring processes.” The purpose of this would be to

The U.N. General Assembly hall

increase “the efficiency, stability and predictability of the international financial system and achieving sustained, inclusive and equitable economic growth and sustainable development, in accordance with national circumstances and priorities.” The 69th session of the U.N. General Assembly is due to convene next week. The resolution decided to define the modalities for the intergovernmental negotiations on a multilateral legal framework before the end of 2014. In voting against the resolution, the United States said a statutory mechanism for debt restructurings would sow uncertainty in financial markets, and several states said the

International Monetary Fund was the more appropriate venue for discussing the issue than the United Nations. “If lenders face higher uncertainty regarding repayment they may be less likely to provide financing and will likely charge higher risk premiums, potentially stifling financing to developing countries,” said U.S. Deputy Representative to the U.N. Economic and Social Council Terri Robl. “Access to functioning debt markets enables developing countries to make the infrastructure investments essential to diversify economies and expand productive capacity,” she said. Reuters

Rocket joins IPO gold rush The announcement comes just a week after Zalando, Europe’s biggest online fashion player that Rocket helped launch, also announced its intention to float Emma Thomasson

Backsliding on fiscal reforms poses the biggest threat to the economic recovery in Europe, Chancellor Angela Merkel said yesterday, pointing to Germany’s 2015 budget plan as an example of how to get away from debt-financed growth. “We have to take it very seriously when the (European) Commission rightly warns that backsliding on reforms is the biggest risk for further recovery,” she told Germany’s lower house of parliament in a debate on next year’s budget.

Santander chairman dies Emilio Botin, one of Spain’s most powerful men who transformed Santander from a small domestic lender into the euro zone’s biggest bank, has died of a heart attack, aged 79. The bank said yesterday it would hold a board meeting later in the day to nominate a successor as chairman. Analysts and investors have long expected this would be Botin’s eldest daughter Ana Botin, who heads Santander’s British business.

erman venture capital group Rocket Internet, which has launched dozens of online start-ups in recent years, announced plans to raise about 750 million euros (US$970 million) by listing a stake as it rides a wave of e-commerce flotation. The announcement comes just a week after Zalando, Europe’s biggest online fashion player that Rocket helped launch, also announced its intention to float, meaning the two companies will be competing for investors at the same time. The Berlin-based group said in a statement the offer would consist solely of new shares, proceeds of which it would use to finance growth through launching new businesses and providing more capital to its existing companies. Rocket Internet is bidding to create the largest Internet empire outside the United States and China. It wants to replicate the success of Amazon.

com Inc. and Alibaba in markets the U.S. and Chinese e-commerce groups have yet to dominate, such as Africa, Latin America, Russia and other parts of Asia. Founded in 2007 by brothers Oliver, Alexander and Marc Samwer, Rocket is active in more than 100 countries, making revenue of US$1 billion in 2013 via e-commerce and online marketplaces for everything from taxis to meal deliveries.

Biggest in Europe The Rocket and Zalando listings are the biggest technology offerings in Germany since the bursting of the dotcom bubble more than a decade ago and the Rocket flotation would be the biggest in Europe since Russia’s Yandex in 2011. Rocket Internet is expected to appeal more to technology or emerging market funds, and Zalando to those looking for exposure to booming

e-commerce in Europe. Zalando hopes to raise more than 500 million euros by listing a stake of between 10 and 11 percent. Rocket said it planned to apply for its shares to be listed on the Frankfurt Stock Exchange via the “entry standard” - which requires less detailed financial information of listed companies than the “general” or “prime” standard that Rocket said it hoped to move to within the next 18 to 24 months. Rocket has only released limited financial details so far. Its top 10 e-commerce ventures - including fashion sites like Lamoda in Russia and Dafiti in Brazil, plus online furniture stores Home24 and Westwing - together made sales of 743 million euros in 2013 and had an operating loss of 431.6 million, according to figures from major Swedish investor AB Kinnevik. Reuters

September 11, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Abenomics, European-Style Nouriel Roubini

Professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics

THE JAKARTA POST Indonesian lenders will soon increase the interbank transaction rate, saying the existing rate can no longer cover their operational expenses. Under the new rate scheme, every interbank transaction will cost Rp 7,500 (64 US cents), which is higher than the current rate of Rp 5,000. Aside from transactions through ATMs, the same rate will also apply on interbank transactions using mobile banking platforms. State lender Bank Mandiri is planning to apply the new rate on October 1, according to Rico Usthavia Frans, Mandiri’s senior executive vice president for transaction banking.

THE STRAITS TIMES VT Mobile Aerospace Engineering, an aerospace unit of Singapore Technologies Engineering (ST Engineering), has agreed to set up aircraft maintenance, repair and overhaul (MRO) facility in Pensacola, Florida. The company signed an agreement with the City of Pensacola to set up the MRO facility at the Pensacola International Airport, ST Engineering said in a statement yesterday. This follows a memorandum of understanding the two parties inked in December last year. The City of Pensacola will construct an aircraft hangar complex on 18.66 acres of greenfield land and lease it to VT Mobile Aerospace Engineering for 30 years.

MYANMAR TIMES A ground-breaking scheme is being launched that will enable Myanmar citizens to take out insurance covering health, insurance and the effects of bad weather in the next few months. says U Maung Maung Thein, deputy minister for Finance and Revenue. Speaking to the media at Mya Nan Daw Hotel in Nay Pyi Taw on August 28, the deputy minister said the comprehensive “Policy Insurance” be a major step forward for the industry. “This is the kind of insurance that Myanmar and its people need,” he said.

THE PHNOM PENH POST Malaysian company PMTI Energy (Cambodia) Co has signed a 10-year deal to supply Electricite du Cambodge with 48,000 megawatts of energy derived from rice husks every year. Phou Puy, president of PMTI, told the Post yesterday that about 70 per cent of the power generated from his biomass plant would be supplied to his own rice-milling company, Baitang Plc, as well as several other rice millers in Battambang province. The remaining power, Puy said, would be sold to EdC. Puy said that his biomass plant could generate 10 megawatts of power per hour.

wo years ago, Shinzo Abe’s election as Japan’s prime minister led to the advent of “Abenomics,” a three-part plan to rescue the economy from a treadmill of stagnation and deflation. Abenomics’ three components – or “arrows” – comprise massive monetary stimulus in the form of quantitative and qualitative easing (QQE), including more credit for the private sector; a short-term fiscal stimulus, followed by consolidation to reduce deficits and make public debt sustainable; and structural reforms to strengthen the supply side and potential growth. It now appears –based on European Central Bank President Mario Draghi’s recent Jackson Hole speech– that the ECB has a similar plan in store for the eurozone. The first element of “Draghinomics” is an acceleration of the structural reforms needed to boost the eurozone’s potential output growth. Progress on such vital reforms has been disappointing, with more effort made in some countries (Spain and Ireland, for example) and less in others (Italy and France, to cite just two). But Draghi now recognizes that the eurozone’s slow, uneven, and anaemic recovery reflects not only structural problems, but also cyclical factors that depend more on aggregate demand than on aggregate supply constraints. Thus, measures to increase demand are also necessary. Here, then, is Draghinomics’ second arrow: to reduce the drag on growth from fiscal consolidation while maintaining lower deficits and greater debt sustainability. There is some flexibility in how fast the fiscal target can be

achieved, especially now that a lot of front-loaded austerity has occurred and markets are less nervous about the sustainability of public debt. Moreover, while the eurozone periphery may need more consolidation, parts of the core –say, Germany– could pursue a temporary fiscal expansion (lower taxes and more public investment) to stimulate domestic demand and growth. And a eurozone-wide infrastructureinvestment program could boost demand while reducing supplyside bottlenecks. The third element of Draghinomics –similar to the QQE of Abenomics– will be quantitative and credit easing in the form of purchases of public bonds and measures to boost private-sector credit growth. Credit easing will start soon with targeted long-term refinancing operations (which provide subsidized liquidity to eurozone banks in exchange for faster growth in lending to the private sector). When regulatory constraints are overcome, the ECB will also begin purchasing private assets (essentially securitized bundles of banks’ new loans). Now Draghi has signalled that, with the eurozone one or two shocks away from deflation, the inflation outlook may soon justify quantitative easing (QE) like that conducted by the US Federal Reserve, the Bank of Japan, and the Bank of England: outright large-scale purchases of eurozone members’ sovereign bonds. Indeed, it is likely that QE will begin by early 2015. Quantitative and credit easing could affect the outlook for eurozone inflation and growth through several transmission channels. Shorter- and longer-

Draghi has signalled that, with the eurozone one or two shocks away from deflation, the inflation outlook may soon justify quantitative easing

term bond yields in core and periphery countries – and spreads in the periphery – may decline further, lowering the cost of capital for the public and private sectors. The value of the euro may fall, boosting competitiveness and net exports. Eurozone stock markets could rise, leading to positive wealth effects. Indeed, as the likelihood of QE has increased over this year, asset prices have already moved upward, as predicted. These changes in asset prices – together with measures that increase private-sector credit growth – can boost aggregate demand and increase inflation expectations. One should also not discount the effect on “animal spirits” – consumer, business, and investor confidence – that a credible commitment by the

ECB to deal with slow growth and low inflation may trigger. Some more hawkish ECB officials worry that QE will lead to moral hazard by weakening governments’ commitment to austerity and structural reforms. But in a situation of near-deflation and near-recession, the ECB should do whatever is necessary, regardless of these risks. Moreover, QE may actually reduce moral hazard. If QE and looser short-term fiscal policies boost demand, growth, and employment, governments may be more likely to implement politically painful structural reforms and long-term fiscal consolidation. Indeed, the social and political backlash against austerity and reform is stronger when there is no income or job growth. Draghi correctly points out that QE would be ineffective unless governments implement faster supply side structural reforms and the right balance of short-term fiscal flexibility and medium-term austerity. In Japan, though QQE and short-term fiscal stimulus boosted growth and inflation in the short run, slow progress on the third arrow of structural reforms, along with the effects of the current fiscal consolidation, are now taking a toll on growth. As in Japan, all three arrows of Draghinomics must be launched to ensure that the eurozone gradually returns to competitiveness, growth, job creation, and medium-term debt sustainability in the private and public sectors. By the end of this year, it is to be hoped, the ECB will start to do its part by implementing quantitative and credit easing. Project Syndicate 2014

September 11, 2014

Closing Taiwan, China reopen free trade talks

HK approves help to Yunnan earthquake victims

Taiwan (capital Taipei pictured) and China resumed talks yesterday at an undisclosed locationonagoodsfreetradeagreement,sparking a protest against secrecy by demonstrators suspicious of closer ties with Beijing. Economic affairs minister Woody Duh told reporters before the talks opened in the afternoon that Taiwan would focus on flat panels, petrochemicals, machine tools and automobiles where its industries are competitive. But his ministry has declined to say where the three-day talks are being held, prompting suspicions from the political opposition and activists opposed to the pact.

The government of China’s Hong Kong (main offices pictured) yesterday approved from the Disaster Relief Fund grants totalling HK$13.286 million to earthquake victims in Yunnan Province. A government spokesman said that the Disaster Relief Fund Advisory Committee hoped the grants dedicated for providing relief to the earthquake victims in Yunnan, would facilitate the provision of timely relief to the victims and help them return to normal life. The grants, together with those approved earlier, will take the cumulative value of grants for earthquake victims in Yunnan to HK$22.673 million.

Premier Li opens Summer Davos in Tianjin Li announced that China’s power consumption slowed again in July

Panorama of Tianjin West Railway Station

hinese Premier Li Keqiang yesterday said the government was not distracted by the slight short-term fluctuations of individual indicators of China’s economy given its new normal state. “We focused more on structural readjustment and other long-term problems, and refrained from being distracted by the slight short-term fluctuations of individual indicators,” Premier Li said in his keynote speech at the Annual Meeting of the New Champions 2014, which opened yesterday in north China’s port city of Tianjin. The premier’s remarks at the forum, also known as the Summer Davos, came after electricity consumption, freight volume and other indicators showed signs of slowdown in July and August. “That was inevitable and within our expectation,” Li said, “because the domestic and international economic situation was still complex and volatile and year-on-year growth was also affected by base figures.”

China’s power consumption slowed again in July, expanding only 3 percent year on year, which was sharply lower than the 5.9-percent recorded in June, according to the National Energy Administration (NEA). The NEA was yet to release its latest figure later this month. The premier urged the world not to just focus on the Chinese economy’s short-term performance or the performance of a particular sector when observing the Chinese economy. “Rather, one should look at the overall trend, the bigger picture and the total score,” he said. China’s GDP expanded 7.4 percent from a year ago in the first half of this year, compared with an annual growth target of around 7.5 percent for the full year. “Judging by the principle of rangebased macro-control, we believe the actual economic growth rate is within the proper range, even if it is slightly higher or lower than the 7.5 percent target,” Li noted.

China, Cuba discuss party’s role

Judging by the principle of range-based macrocontrol, we believe the actual economic growth rate is within the proper range, even if it is slightly higher or lower than the 7.5 percent target Li Keqiang China’s Prime Minister

Xinhua

More brands for car dealers

fficials from China and Cuba’s ruling communist parties held a theory seminar yesterday to discuss the communist party’s role in China’s reform and Cuba’s “update” of its economic model. Hailing the role of the Communist Party of China (CPC) in China’s reform and opening-up, Guo Jinlong, a member of the Political Bureau of the CPC Central Committee, said socialist countries should explore their socialist road in line with their national conditions. There is no hard and fast mode for socialism, said Guo, stressing the importance of innovation in socialist development. He said as China is comprehensively deepening reforms, the CPC is willing to learn from Cuba’s experience in socialism development. Hailing bilateral party-to-party and country-tocountry relations, Mercedes Lopez Acea, a member of the Political Bureau of the Cuban Communist Party (CCP) Central Committee, said the Cuban side is committed to pushing forward relations with the Chinese side in all fields. Xinhua

He reiterated that the government’s important goal of maintaining stable growth is to ensure employment, and the floor of the proper range is to ensure relatively adequate employment. As the economic aggregate continues to expand, Li said, growth will mean more jobs and there will be greater tolerance to fluctuations. The Chinese economy is in the new normal state and the country’s policymakers have remained levelheaded and taken steps to tackle deep-seated challenges, he said. Li stressed China’s economy is highly resilient and has much potential and ample space to grow, with a full range of tools of macrocontrol at the government’s disposal. “The measures we have taken are good both for now and for longer-term interests, and will therefore enable us to prevent major fluctuations and make a ‘hard landing’ even less possible,” he added.

France delays meeting EU deficit rules

hinese authorities are considering relaxing restrictions on car dealers so they would be able to sell vehicles from multiple brands in the same store, people familiar with the matter said. The Ministry of Commerce, responsible for regulation governing auto sales, met with dealers and carmakers last week to discuss changes to the rules, three people said, asking not to be identified as the talks were private. The government is also considering allowing parallel imports -the practice of shipping cars without the authorization of the brand owner- into China, one of the people said. The proposed changes may tilt the balance of power away from automakers, which can prevent dealers from selling products made by rivals and dictate which cars are sold where. The move could also be a boon for China Grand Automotive Services Co. and other dealers in the country by giving them greater flexibility in choosing the cars they sell. Bloomberg New

risis-wracked France yesterday pushed back its target to hit EU deficit rules by two years, potentially putting the eurozone’s secondbiggest economy on a collision course with Brussels. Finance Minister Michel Sapin said Paris would not get its ballooning budget deficit down to the EU limit of three percent of gross domestic product (GDP) until 2017, the expected date of the next presidential election in France. France had promised Brussels that it would return to three percent next year, but Sapin said the deficit in 2015 would come in at 4.3 percent - a far cry from the maximum permitted. For this year, Sapin said the deficit would be 4.4 percent of GDP. France has already twice asked for more time to get its deficit below the three percent maximum. Sapin blamed an “exceptional situation” in the eurozone which he said was “marked by a very weak economy combined with a slowdown in inflation that no one predicted.” AFP