MOP 6.00 Closing editor: Luis Gonçålves Publisher: Paulo A. Azevedo Number 629 Friday September 19, 2014 Year III
China addressing travel congestion
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eijing is rethinking holiday schedules. It has just announced a reform of its tourism policy, clearing the way for paid annual leave. Forced mass holiday leave – and the crowding it generates – may be consigned to history. Academics and investors told Business Daily that the new law should benefit Macau. Smother visitation patterns will lessen congestion during Golden Weeks. Consultation and legislation, though, will not happen overnight
www.macaubusinessdaily.com
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United States pledges closer collaboration The U.S. is fully committed to Macau. So says U.S. Consul General to Macau Clifford Hart. Uncle Sam wishes to expand two-way trade and investment opportunities between the two economies. The US is the second biggest foreign investor here. The CG believes dialogue will solve the casino protests in Macau
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Hengqin steps into residential market
Chui utilised 85 pct of campaign budget
Property is hot in Hengqin. Real estate agency Jones Lang LaSalle told Business Daily that most of its 20,000 residential units will be completed by 2017. About 14,000 are saleable. The private residential properties will be marketed as mid and high-end homes. Prices are competitive but rising rapidly
Chinese appetite for HK stocks
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HSI - Movers September 18
Name
PAGE 6
%Day
Sands China Ltd
1.41
Smoke and mirrors
Galaxy Entertainmen
1.12
Sun Hung Kai Propert
0.34
Want Want China Ho
0.00
Cathay Pacific Airwa
0.00
China Overseas Land
-1.84
Kunlun Energy Co Ltd
-2.07
Gaming unions remain dissatisfied. They say casino operators are converting mass gaming areas into high limit zones and VIP space, where smoking is allowed. They say they are exploiting a loophole in the new law that will leave them more exposed to health riskd than ever
Sino Land Co Ltd
-2.11
China Resources Pow
-2.71
China Resources Lan
-2.80
Source: Bloomberg
I SSN 2226-8294
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Macau goes flat
Property price spiral New homes in China are cheaper. And cheaper. Since four months ago. Recent economic news from China reinforces the downward spiral of property prices
At least it’s not negative territory. Sterne, Agee & Leach has lowered Macau’s gross gaming revenue outlook for 2014 to 0 percent. VIP revenues will likely drop 20 percent. Mass market will grow less than 10 percent. “Those hoping for good news and stability over the next several months will be disappointed,” warned the brokerage. Long term prospects are brighter, they say
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September 19, 2014
Macau
China’s Golden Weeks reform to benefit Macau tourism Beijing has just announced a reform of tourism policy, possibly clearing the way for a more mature annual leave system. Paid annual leave will likely serve to smooth out visitation patterns and take the pressure off major holiday periods Stephanie Lai
sw.lai@macaubusinessdaily.com
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he latest announcement by the State Council of China to have an inter-ministerial joint conference take over the mainland’s holiday policy may indicate a step closer to an annual leave system to replace the current forced holiday system, which will not necessarily negatively impact the city’s tourism and gaming business, a research house and scholars suggest. On Monday, the State Council announced that the National Holiday Office – an organ responsible for scheduling national holidays - had been disbanded after 14 years, and will now be incorporated into a more inter-ministerial joint conference led by Vice Premier Wang Yang. The announcement signalled
that holiday related policy has been brought up before the State Council, which has designed the joint conference as a body comprising 28 ministeries to guide and reform the country’s tourism policy. “We believe the formation of the new conference indicates that the central government is moving one step closer towards implementing an annual leave system sooner rather than later,” wrote Union Gaming Research Macau in a note released yesterday.
Golden Week To promote domestic tourism for the mainland, a paid annual leave system should replace the current
forced holiday system for all workers by 2020, stated China National Tourism Administration in its Outline for National Tourism and Leisure for 2013 – 2020 released last year. “To date, we do not believe many organisations outside of certain major cities have implemented an annual leave programme,” the research house noted, adding that the concept of paid annual leave was only first introduced on the mainland via a state regulation in 2008 that applies to civil servants, and certain companies if the employees work for a consecutive period of less than one year. “We believe the introduction of paid annual leave will be beneficial to Macau’s visitation, as it would likely serve to smooth visitation patterns and take pressure off major holiday periods known as Golden Weeks, where border facilities are overloaded and enormous crowds strain Macau’s already-taxed infrastructure,” Union Gaming Research Macau noted. The concept of “Golden Week” first introduced as a policy to boost tourism demand in 1999 - translated into three week-long holidays; namely, Chinese New Year, Labour Day Golden Week in May and National Day Golden Week in October.
No impact on gamblers A reform came in 2008 when the Labour Day Golden Week was shortened to a three-day holiday while adding three traditional Chinese holidays - the Ching Ming Festival, Dragon Boat Festival and Mid-Autumn Festival. Golden Week holidays have been often criticised on the mainland as the peak time for congesting transport systems and results in too concentrated a tourist flow at the main attractions in the country.
Davis Fong Ka Chio, director of the Institute for the Study of Commercial Gaming at the University of Macau, reckons that even if a shortening of days for the Golden Weeks emerges from the newly-established joint conference it does not necessarily impose a big impact on the city’s gaming and tourism business. “Many mainland individual travellers come here for only one day or 1.5 days, or at most two to three nights,” said Fong. “Mainland gamblers don’t come here to stay as many as six or seven nights. And for high-end mainland travellers, their travel pattern has been to avoid big crowds on major holidays, and they have so many other travelling options apart from coming to Hong Kong and Macau.” The academic believed that the small and medium-scale retailers here could “lose some customers”, however, if a shortening of days of the Golden Weeks comes into effect.
Take time “If the shortening of Golden Week days does happen, fewer mainlanders may travel here under the ‘one-trip, multiple stops’ pattern - namely those that come to travel in Hong Kong, Macau and Southeast Asia in one go – as Golden Weeks are usually the time they travel that way,” said Mr. Fong. “Retailers that rely a lot on first-time travellers - for instance those that like St. Paul’s Ruins - could also lose some customers if the state axes days off the Golden Week,” he said. Both Mr Fong and Union Gaming Research Macau believe that the implementation of an annual leave system throughout the country may take a number of years.
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September 19, 2014
Macau
Disappointment for foreseeable future Anyone hoping for good news and for the Macau gaming market to stabilise over the next few months will be disappointed, analysts warn. Revenue growth this year is likely to be flat Sara Farr
sarafarr@macaubusinessdaily.com
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nalysts are wary about what’s in store for the gaming industry here over the next “several months.” Sterne, Agee & Leach, Inc analyst David Bain said in his latest note to clients that “those hoping for good news [and] stability over the next several months will be disappointed.” However, it’s not all bad news for investors in the long run. “Those investing with a longer-time horizon are presented with a foreword potential ‘look-back moment’, whereby one can look back a year from now having captured significant gains from current stock levels,” the note to clients reads. The brokerage firm had lowered Macau’s gross gaming revenue outlook for the full year of 2014 to 0 percent from the previous 3 percent amid anticipations of a mid to high singledigit mass revenue growth for this month. In addition, Mr. Bain said, a high single-digit mass growth for the fourth quarter of the year is expected. “We expect VIP revenue growth to decline more than 20 percent for the remainder of the year.” As other analysts have been saying for some months now, the primary reason for the lowering of mass revenue
projections is Beijing’s crackdown on corruption, which is “bleeding into the mass market.” Chinese president Xi Jinping’s anti-graft campaign “is not just impacting VIP,” Bain said, “but premium mass as well, which is a sizable controlling piece of the overall market (with an 80/20 rule).”
Controllable protests In the summer months alone, Macau and its gaming industry has experienced an unprecedented number of labour protests and threats of strikes from gaming and casino workers. This has given the majority of casino companies here bad press but despite companies announcing new bonuses and increased pay for staff workers have continued to express their dissatisfaction. However, these are “unlikely to boil-over”, the analyst at Sterne, Agee & Leach says. In addition, Mr. Bain suggests that the monetary authority here may come up with a “new anti-money laundering framework” in the next 30 days – a move which has been labelled “a new spirit of enforcement”. This comes after the monetary authority here had
We expect VIP revenue growth to decline more than 20 percent for the remainder of the year Sterne, Agee & Leach, Inc
the local banks ask its costumers fill out a questionnaire as part of its new “Know Your Customer (KYC) rule.” The outlook, however, remains a positive one. While China may further restrict visas in December due to the 15th anniversary of the establishment of the SAR, “a potential Macau visit from China’s President Xi will be important from a VIP/premium mass patron psychological standpoint,” Bain added in his note to clients.
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September 19, 2014
Macau Brought to you by
HOSPITALITY Trips Aplenty Macau residents have been travelling in increasing numbers in the last few years. Figures produced by travel agencies show they have organised, from January to July this year, a total of 886,500 trips for local residents. These trips include both packaged tours and individual trips. They do not provide information about the number of trips arranged independently but data from the travel agencies is expected to provide good indications about residents’ travel trends. The figure above corresponds to a 5.1 percent growth, when compared to the same period last year. That is a much lower rate than in the two previous years, when the number of trips arranged by travel agencies just exploded. The equivalent number for that two-year period stood at almost 69 percent.
More than half of the trips made by locals ended in China. The share of the mainland as a destination has broadly oscillated between 55 and 60 percent in the last eleven months. If we add Honk Kong and Taiwan, the next two biggest destinations, the combined share hovers around 85 percent. But that growth hides some diverging trends in the last year. Numbers for the mainland and Taiwan, in July, rose for both packaged tours and individual trips. The rise was comparatively more modest in the first case, with rates of 12.4 percent and 46.4 percent compared to the previous year. Much more robust figures were recorded for Taiwan, with 34.5 percent and 55.7 percent, respectively. The trend for Hong Kong pointed in the opposite direction. Packaged tours and individual trips declined, by 18 percent and 21 percent. That suggests an adjustment period after the very significant growth registered in the first half of the period observed here.
247,300
residents’ China-bound packaged tours, Jan-Jul 2014
More high limit areas to thwart smoking ban, labour union suspects The date prohibiting smoking on mass gaming floors is fast approaching. The suspicion lingers, however, that casinos are hurrying to transform some areas into high limit zones or VIP rooms in order to soften the impact of the new regulations Kam Leong
kamleong@macaubusinessdaily.com
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ith a full smoking ban to be introduced on mass gaming floors in casinos from October 6, several enterprises have been accused of converting such gaming areas into high limit zones, which allow smoking. Macau Gaming Enterprises Staff Association of Macao Federation of Trade Unions told media yesterday morning that it had been receiving complaints from their members on such constructions since the beginning of the month. The executive director of the union, Choi Kam Fu, believes that the casinos are rushing to finish construction before the new law comes into force in order to exploit a loophole in the law to make more smoking area available. “We made enquiries from the Gaming Inspection and Coordination Bureau, which told us that there is no significant increase in the numbers of casinos applying to build more VIP rooms,” Mr. Choi told Business Daily in a phone interview.
According to Mr. Choi, casinos in Venetian Macau, Sands Cotai Central and StarWorld Hotel in the Galaxy Entertainment Group, were discovered by the union to be undergoing such transformations. “Moreover, Wynn Macau posted a memo on the wall [at the renovation site] indicating that a high limit area was being built,” the executive director remarked. In fact, MGM gaming workers who met with the Labour Affairs Bureau on Monday had also complained that their employer had installed new glass walls around the new smoking areas on the mass gaming floors, claiming that gambling tables allowing smoking will number even more than those not allowing smoking. The new law states that all casinos should build smoking rooms on their mass gaming floors otherwise the whole area will be banned from smoking, effective October 6. The smoking rooms, according to the law, must be airtight, containing independent air venting and
no staff should work inside. However, high limit areas and VIP rooms in the casinos are excluded from the law. Stating that the union is striving for a full smoking ban in all areas of the casinos to protect the health of gaming workers, Mr. Choi reckons the government owes the public an explanation. “Why would the casinos be able to initiate such renovations if the Bureau claimed that there was no such increase [in VIP rooms]? Are the standards of government approval for high limit areas or VIP rooms too easy?” he asked. He also revealed that the union is to meet with the Health Bureau and The Office for Tobacco Prevention and Control. At the beginning of the month, the Health Bureau announced 39 of 41 casinos in the territory had submitted their plans on smoking rooms for approval. Currently, a casino cannot build smoking areas comprising more than 50 percent of its total floor area.
CE spent 85pct of budget on electoral campaign
Imported labour transportation under discussion
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hief Executive Fernando Chui Sai On, who was re-elected on August 31 to serve his second term in office, spent 85 percent of the CE election budget on his electoral campaign, a total of MOP4.92 million. A Portuguese news agency cites an ad published in Portuguese media, saying the Chief Executive spent the equivalent of 85.3 percent of the MOP5.76 million on his campaign. According to the report, the majority of the spending was on promotional campaigns and advertising, accounting for MOP3.4 million of the total. The government had set aside MOP32 million for this year’s Chief Executive election, which comprised two parts. One was the election of the Election Committee, while the other was the election of the Chief Executive per se. The latter was initially expected to cost MOP14.
million, a little less than half the total budgeted, and an 8 percent increase on the budget of the last Chief Executive election in 2009. Back then, when the thenSecretary for Social Affairs and Culture ran for Macau’s top job for the first time, Chui Sai On spent 1.67 million patacas, which represented around 0.02 percent of the SAR’s overall surplus for that year.
eputy Director of Transport Bureau (DSAT) Chiang Ngoc Vai revealed yesterday that the government is discussing with gaming corporations in the city the prospect of the corporations using their own shuttles to pick up their imported workers and construction workers to bus them to work. Mr. Chiang said on TDM Chinese radio show Macau Forum that the government had entered into discussions with the corporations on how to relieve the pressure on public transportation by altering the routes of their current shuttle buses, the locations for pick-up of guests as well as frequency. The idea of gaming companies taking care of their imported labour transportation and accommodation needs was first raised by Chief Executive Fernando Chui Sai On during his recent election bid.
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September 19, 2014
Macau
JLL Macau: 14,000 saleable units in Hengqin by 2017 The island that is meant to serve as Macau’s tourism complement may offer some 14,000 saleable residential units, mostly mid and high-end homes Stephanie Lai
sw.lai@macaubusinessdaily.com
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he city’s neighbouring island of Hengqin, which is currently constructing infrastructure works, will have most of its planned 20,000 residential units completed by 2017, of which some 14,000 will be saleable units, according to estate agency Jones Lang LaSalle (Macau) Ltd. There are currently less than ten residential projects under construction in Hengqin, occupying a gross floor area of 2.44 million square metres or 20,000 units, Business Daily learned from Alvin Mak, the associate director of strategic consulting at Jones Lang LaSalle Macau. “Of these 20,000 units, about 6,000 of them are dormitory units owned by enterprises to be reserved for their staff,” Mr. Mak told us, referring to the agency’s own statistics. “So from the residential projects that we see on the island, there are only about 14,000 saleable units in the pipeline.” The agency believes that most of these private residential units could be completed by 2017. The private residential projects, mostly to be marketed at a mainland China standard of mid and highend homes, are primarily located in the Shizhimen Business District and the Integrated Services District located adjacent to the HengqinMacau border; a few other residential projects are located in the south of the island, which is zoned by the Hengqin authority as a tourism and leisure area, Mak noted. The first of these private residential projects, which has been on sale since last year, is ‘Sea of Dreams’, a highend home project that located about 500 metres from the Hengqin-Macau border crossing. It is expected to be completed from 2015 to 2016 in phases. To the project’s southeast side is the University of Macau’s Hengqin campus and to its north the Shizhimen Business District. State-run developer Huarong Real Estate Co Ltd will be building a cluster of 16 residential towers as
well as a low-density zone of several two-storeyed residences for the ‘Sea of Dreams’ project. The presales of the 386 units from the first two phases of the project market flats ranging from 87 to 200 square metres in five residential towers, a sales agent for the project told Business Daily in an interview in November last year. “The average price quoted for the ‘Sea of Dreams’ project last year was still only around 25,000 yuan (US$4,110) per square metre but now it has already risen to 40,000 yuan per square metre,” said Mr. Mak, adding that the fast growth in the property price has been partly supported by affluent buyers from Macau. The presales of the other private residential projects are expected to start next year as soon as the developers attain the sales permit from the mainland authority, the agency’s researcher noted. While Hengqin has yet to complete its infrastructure and tourism facilities, the growth of the island’s property prices has already outpaced most of its peer districts in Zhuhai – a trend that is likely to continue in the coming years when more outside labour is housed on the island, Mr. Mak remarked.
Corporate Susana Foo guest chef at MGM’s Rossio Asian-American celebrity chef Susanna Foo is this month’s guest chef at Rossio in MGM Macau. Ms. Foo was born in Inner Mongolia and raised in Taiwan, where she completed her Bachelor’s degree in History before moving to the United States. She has also won a host of top accolades both internationally and in the US. She is key to revolutionize America’s idea of Chinese food. Over the last 30 years, she has modified the standards of Chinese cuisine, blending traditional Chinese ingredients with classic French techniques. Rossio will offer ‘special brunch and dinner buffets, which feature an array of her signature dishes, such as Auntie Wu’s braised red snapper with garlic and ginger, stir-fried Brussels sprouts with
chestnut and Chinese sausage, quickseared Sichuan beef tenderloin stew, and Mongolian lamb with leeks, Chinese eggplant and fennel,’ MGM said in a statement, adding that ‘these dishes combine traditional Chinese flavors with other Asian cuisines, all enhanced with classic French sauces.
“Some of the most expensive, high-end flats like Yanlord Marina Centre in Zhuhai were already priced at 50,000 yuan per square metre,” he said. “But if you’re referring to the cheaper ones in, for instance,
Jinwan district, the average price is 7,000 yuan per square metre; for another popular project like Huafa Riverside, the price is at around 7,000 yuan to 8,000 yuan per square metre.”
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September 19, 2014
Macau
U.S. to deepen economic ties with Macau The U.S. Consul General, Clifford A. Hart, said yesterday here that his country is “fully committed with the counterparts in Macau to expand two-way trade and investment opportunities” Kam Leong
kamleong@macuabusinessdaily.com
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he U.S. Consul General to Hong Kong and Macau, Clifford Hart, said yesterday during a speech that the Consulate General is “fully committed with the counterparts in Macau to expand twoway trade and investment opportunities”. Mr. Hart spoke about his perspectives on the cooperation between U.S. and Macau at a luncheon hosted by AmCham Macau at Grand Hyatt Hotel yesterday afternoon. The CG claimed that assigning appropriate time and resources to the United States’ relationship with Macau has been his personal priority. “I am the U.S. Consul General to Macau every bit as much as I am the U.S. Consul General to Hong Kong,”
Mr. Hart stated. In his opinion, the gaming industry had transformed the city’s economy to a prosperous one, in which investors from America had played a significant role. “Our joint achievements can be measured in the tremendous increase in U.S. investment over the past decade, which is estimated to exceed US$10 billion and ranks the United States second only to Hong Kong as a source of foreign direct investment into Macau,” he claimed. However, he said that whether Macau is capable of attracting more foreign investments will depend on its continuing success. Following the luncheon, Mr. Hart met with reporters and revealed that the U.S. had
a very strong commitment to and a high level of cooperation with the Macau Government in preventing money laundering. When asked by reporters if he thinks that the American gaming corporations will continue to dominate the l o ca l g a m i n g i n d u s tr y after the gaming licences are reviewed – the current licences expire from 2020 to 2022 - he replied that the renewal of licenses will depend on the interests of both sides, of government and the corporations, but believes the future decision will be made in a fair manner. In addition, Mr. Hart said dialogue between labour and management may resolve the recent problem of gaming workers complaining about the remuneration system
and working conditions not being as good as those in Las Vegas.
Meeting with Chui The CG also revealed that he had met with Chief Executive Fernando Chui Sai On yesterday, when he expressed the American Government’s congratulations to Mr. Chui for his second term. “We’ve enjoyed excellent cooperation in the past,
and I look forward to the continuation of a strong partnership,” he remarked. He believes that the city’s autonomy and unique freedoms guaranteed in the Basic Law have contributed to its rise as an economic success story. He also said that Macau had played an important role in the cooperation between America and China, citing Macau’s hosting of the APEC ministerial meeting last week.
CORRECTION: In Wednesday’s edition of Business Daily (September 17, 2014) we incorrectly said that there had been two fatal accidents at Sands China properties this year. Our Page 5 story Construction worker fatality in Sands Cotai Central should read “This follows an accident at the Parisian construction site that took place in June, which left two workers injured.” We apologise for any inconvenience caused.
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September 19, 2014
Gaming
Goldman sees surprising Chinese demand for Hong Kong Stocks
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hinese purchases of Hong Kong stocks through a planned exchange link may exceed estimates as individual investors buy casino and technology shares unavailable in Shanghai, according to Goldman Sachs Group. The link will give wealthy mainland investors access to 266 stocks traded in Hong Kong, including Galaxy Entertainment Group Ltd. and Tencent Holdings Ltd. China currently limits most overseas share investments to those made through asset managers. “We might be surprised by retail participation once the stock connect is launched, given mainland investors’ preference to invest and trade themselves instead of buying mutual funds,” Christina Ma, the head of Goldman’s cash trading, equities in Asia Pacific ex-Japan, said in an interview in Hong Kong on September 15. Goldman’s view follows a CLSA Ltd. survey last month showing 77 percent of mainland investors don’t plan to participate in the bourse link, turned off by rules on minimum account size and exclusion of small-cap stocks. China, the biggest emerging economy, is counting on a successful exchange link to help liberalise its financial system, increase the role of the yuan and give its citizens more investment channels
amid a slumping property market and increased risks from local wealthmanagement products.
Tencent, Galaxy Tencent, Asia’s biggest listed Internet company, and Galaxy Entertainment, the Macau casino operator founded by billionaire Lui Che-woo, have more than tripled in the past three years, making them the best performers on Hong Kong’s benchmark Hang Seng Index. The gauge rose 24 percent in the period through this week, compared with a 7.5 percent drop in the Shanghai Composite Index.
Under the link with Hong Kong announced on April 10 and scheduled to begin next month, mainland investors with at least 500,000 yuan ($81,350) in their stock accounts will gain access to stocks traded on the Hang Seng Composite large and mid-cap indexes. The connect will also include dual-listed companies, which traded at a premium of about 4 percent in Hong Kong over the mainland through yesterday, versus a 44 percent discount at the end of 2007, according to the Hang Seng China AH Premium index. Anhui Conch Cement Co., China’s biggest producer of the building material, was
25 percent more expensive in Hong Kong than Shanghai yesterday, while the premium for China Life Insurance Co., the largest insurer, was 17 percent.
Picking Stocks Overseas investments by Chinese citizens through the Qualified Domestic Institutional Investor programme have dwindled as the funds posted losses. Assets in QDII funds dropped to 53 billion yuan at the end of the second quarter, the lowest level since 2011, according to Shanghai-based research firm Z-Ben Advisors Ltd. The first four QDII funds
- Harvest Oversea Investment Fund, China AMC Global Equity Select Fund, China Southern International Selection Allocation Fund and CIFM Asia-Pacific Advantage Fund - lost between 10 and 30 percent from their inception in late 2007 through last week, according to data compiled by Bloomberg. That compares with a gain of about 7 percent for the MSCI World Index. “Over 80 percent of the stock market investors in China are retail,” Ma said. “They are used to trading themselves and would be excited about the ability to pick stocks and trade single names in Hong Kong.” Bloomberg
Caesars said to engage lenders in debt restructuring talks
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enior lenders to Caesars Entertainment Corp.’s biggest unit are joining negotiations to cut the casino operator’s $25 billion debt load, a sign the company’s engaging a larger group of creditors to explore options that may include a pre-arranged bankruptcy, according to four people with knowledge of the matter. Rothschild Inc. and law firm Stroock & Stroock & Lavan LLP, which are advising owners of the company’s bank loans, signed confidentiality agreements that allow them to enter the debt restructuring talks, the people said. At least some of their clients have either signed the same agreements or were in the process of doing so, said three of the people, who asked not to be identified because the discussions are private. Caesars said last week it was beginning talks with some first-lien bondholders in an effort to pare debt at its biggest unit, Caesars Entertainment Operating Co., which the company has struggled to service since its 2008 leveraged buyout by Leon Black’s Apollo Global Management LLC and TPG Capital. The restructuring will “create a path toward a sustainable capital structure,” Gary Loveman, chief executive office of Las Vegasbased Caesars said in a September 12 statement. Agreement from both the company’s bondholders and owners
of its bank loans, who have a higher ranking in a bankruptcy, would be necessary to back a more sweeping restructuring plan and avoid a prolonged reorganisation in court if other efforts fail, the people said. Without a buy-in from those creditors, the company would have trouble securing enough allies to quickly emerge from a bankruptcy. Gary Thompson, a spokesman for Caesars, declined to comment, as did Kelly Cummings, a spokeswoman at Stroock, Charles Zehren, a spokesman for Apollo at Rubenstein Associates Inc., and Lisa Baker, a TPG spokeswoman at Owen Blicksilver Public Relations Inc. Daniel Yunger, a spokesman for Rothschild at Kekst & Co., didn’t immediately comment. Debtwire reported last week that a group of bank-loan holders had hired Rothschild and Stroock to help spearhead talks with the company. At least six first-lien bondholders are in discussions with the company, including Pacific Investment Management Co. and Elliott Management Corp., people with knowledge of the matter said last week. Principals of Beach Point Capital Management LP, BlackRock Inc., Brigade Capital Management LLC, and JP Morgan Asset Management Inc. are also involved in the talks, the people said. Bloomberg
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September 19, 2014
Greater China iPhone 6 passes two approvals
Controlling reform and stimuli Apart from another injection of funds, the central bank could expand targeted reserve requirement cuts to bigger banks Kevin Yao
Apple Inc.’s latest smartphone iPhone 6 has won two major regulatory approvals in China, the Ministry of Industry and Information Technology said yesterday. The Ministry said in a statement that four models of iPhone 6 -A1586, A1589, A1524 and A1593have passed 3C (China Compulsory Certification) certification and won approval from the State Radio Regulation of China. China’s 3C certification, similar to the European CE system, is a mandatory certification system that inspects and approves various products to be sold in the Chinese mainland market. But iPhone 6 still needs to obtain a key network access license.
Gold market opened to foreigners
Foreigners are now have access to China’s gold market after the Shanghai Gold Exchange (SGE) launched its international board yesterday. The yuan-denominated board was launched in the China (Shanghai) Pilot Free Trade Zone, a move to encourage foreign participation in China’s tightly controlled gold market. “The international board has made China’s opening up of the gold market a reality,” said Xu Luode, the SGE chairman, adding that foreign participation and rising trading volume will make China a real international market.
Coal output falls China’s August coal production fell 0.98 pct from a year ago to 302 million tonnes, according to a trade website that cited data from the National Bureau of Statistics. Total output in the first eight months of 2014 stood at 2.55 billion tonnes, down 1.4 percent from a year ago, according to according to website Coalstudy.com.
ASEAN Cyberspace forum opens in Nanning The first China-ASEAN cyberspace forum kicked off in Nanning, capital city of south China’s Guangxi Zhuang Autonomous Region, on Thursday with the discussion focused on a proposal of building an “information harbour”. More than 200 people attended the event, including representatives of leading Chinese Internet companies like Baidu and Sohu and delegates of the Association of Southeast Asian Nations (ASEAN). The two-day forum seeks to create more cooperation between government, companies and scholars in the field of internet security and management.
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hen China’s top leaders gathered at the seaside resort town of Beidaihe last month, they agreed the economic focus for the rest of the year would be to put reform ahead of stimulus and accept growth could come in below their target of 7.5 percent. That means a major stimulus move, such as cutting key interest rates or bank reserve ratios is unlikely, but authorities are ready to step in if unemployment rises, according to policy insiders briefed on the secret discussions. The shift reflects President Xi Jinping’s talk of a “new normal”, that China should adapt to relatively slower growth after three decades of breakneck expansion, and is having a profound impact on the policymaking process, the sources said. “The priority level of reforms and anti-corruption is clearly higher than short-term policy adjustments,” said an economist at the National Development and Reform Commission, the nation’s top economic planning agency. “The leadership’s overall thinking on the economy has changed in line with the political cycle,” said the economist, who requested anonymity due to the sensitivity of the matter.
The government’s bottom line is stable employment and no widespread debt defaults. Under that scenario, growth of 7.3-7.4 percent this year is seen as acceptable, and the government may cut the growth target in 2015, the sources said. That stance has been tested over the past week. Data showed factory output grew at its weakest annual pace in nearly six years in August, home prices fell for a fourth month, and other figures added to the view of an economy struggling to gain momentum. The economy also suffered a capital outflow in August, with the central bank and commercial banks selling 31.1 billion yuan worth of foreign exchange on a net basis, according to a Reuters calculation based on central bank data. Media reports this week say the central bank will make available 500 billion yuan (US$81 billion) in shortterm funds through the five biggest banks. The money will help keep markets liquid ahead of the week-long national holidays in October, a run of stock offerings, and new rules on how banks have to manage month-end deposit levels.
“A cut in interest rates or bank reserve ratios across the board may not happen this year,” said Zhang Bin, senior economist at the Chinese Academy of Social Sciences (CASS), a top government think-tank in Beijing. “The poor data may not necessarily be a bad thing - it’s unavoidable if you want to push structural adjustments.”
Targeted policy The policy balance tilted from reform towards supporting the economy in April, after first-quarter growth slowed to an 18-month low of 7.4 percent. The stimulus lifted growth in the June quarter, but since then activity has weakened again. Still, policymakers feel more relaxed about the latest bout of poor data compared to April, taking comfort from a stable job market and a relatively resilient services sector, the sources said. One of the aims of the reform agenda is to make consumption and services bigger engines of growth. There were 9.7 million new jobs in the first eight months of 2014, a rise of over 100,000 from a year earlier and almost hitting the annual target.
Central bank adviser links stimuli to growth Some analysts believe annual economic growth may be sliding towards 7 percent in the third quarter, putting the government’s full-year target of around 7.5 percent in jeopardy unless it takes more aggressive action
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hina does not need strong policy stimulus as long as economic growth hovers within the government’s targeted range, a policy adviser to the People’s Bank of China said yesterday, an indication Beijing will continue with targeted steps to support growth. The remarks by Chen Yulu, a member of the central bank’s monetary policy committee, came a day after a reported liquidity injection into China’s major banks by the PBOC heightened speculation that Beijing was stepping up efforts to support a shaky economy. Chen, however, said the PBOC should continue to offer ‘ministimulus’ to keep the economy on an even keel. “The downward pressure (on the economy) cannot be ignored in the fourth quarter, so monetary policy mini-stimulus should continue. But, on the other hand, we should prevent such mini-stimulus from turning into strong stimulus,” Chen said. Traders have been speculating of more policy support from Beijing as the world’s second-largest economy has struggled to rebound from a weak start to the year, despite recent stimulus steps. Data at the start of the week showed factory output grew at its weakest pace in nearly six years
PBOC headquarters in Beijing
in August while weaker readings in investment, retail sales and imports suggested slack economic momentum. China’s central bank is injecting a combined 500 billion yuan (US$81.35 billion) of liquidity into the country’s top banks, according to media reports, a sign that authorities are stepping up efforts to shore up a faltering economy. But the PBOC has not confirmed these reports. Ma Jun, the chief economist
at the central bank’s research bureau, also cautioned against strong policy stimulus, saying that modestly slower economic growth is favourable for reforms. China’s leaders have repeatedly said they would use a period of anticipated slower growth to carry out structural shifts, including efforts to wean the economy off dependence on external demand and investment spending. Reuters
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September 19, 2014
Greater China “Employment is more important than economic growth. Employment holds up well, although growth data is not good,” said Lian Ping, chief economist at Bank of Communications in Shanghai. Apart from another injection of funds, the central bank could expand targeted reserve requirement cuts to bigger banks, or use its new Pledged Supplementary Lending tool to make loans to selected banks.
Lian Ping, chief economist at Bank of Communications in Shanghai, said employment is more important than economic growth
Reforms Beijing is under pressure to deliver results nearly a year after outlining a sweeping reform agenda. In recent weeks, it has released plans to overhaul the fiscal system and state-owned enterprises, which dominate many corporate sectors. Still, the government is treading cautiously in pushing major reforms to avoid hurting the economy. A long-expected step to free up bank interest rates has been pushed back for fear of higher borrowing costs for the real economy, one analyst said. President Xi has also launched a sweeping crackdown on corruption, warning the problem is a threat to the Communist Party’s very survival. The anti-corruption drive has hit sales of luxury goods and expensive dining and also cooled down a craze among local governments to launch new investment projects. “Radical reforms will not be adopted by the government. Every government in the world seeks to steer the economy towards a soft landing,” said Zhao Yayun, senior economist at Chongyang financial institute of Renmin University. Reuters
Modi-Xi look to boost India-China ties Indian and Chinese companies signed 24 agreements valued at US$3.43 billion in sectors including aircraft leasing and financing, telecom, chemicals, wind power components, textiles and seafood, said the Federation of Indian Chambers of Commerce and Industry
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ndian Prime Minister Narendra Modi tried to boost ties with China yesterday as he hosts President Xi Jinping while a fresh dispute simmers along their mountainous border. The world’s two most populous countries are looking to bolster economic ties and resolve a longrunning territorial conflict during Xi’s trip. Companies from both countries yesterday signed more than US$3.4 billion in agreements to coincide with the first visit to India by a Chinese president since 2006. While bilateral commerce exceeded US$68.5 billion last year, India posted a trade shortfall of US$34.4 billion on imports of Chinese-made heavy machinery, telecom equipment and home appliances, according to data compiled by Bloomberg. Industrial & Commercial Bank of China Ltd. yesterday signed a deal to provide US$2.6 billion in financing for IndiGo to buy and leaseback more than 30 Airbus A320 planes, Aditya Ghosh, the Indian carrier’s president, said in a statement. CSR Corp. won a 300 million yuan (US$49 million) contract to provide cars and maintenance for a metro line in Mumbai, according to a statement on the website of the National Railway Administration. In the 14 years through June, China was India’s 28th largest source
of foreign direct investment with inflows worth US$411 million, or 0.18 percent of the total, government data show. Japan was fourth and the U.S. was fifth.
Abe Tweet
Chinese President Xi Jinping (R) and Indian Prime Minister Narendra Modi sit down on a traditional swing at the Sabarmati Riverfront project
Xi’s visit follows Modi’s trip to Japan, which has its own territorial dispute with China. Abe pledged a sweeping upgrade of economic and security ties with India, offering 50 billion yen (US$480 million) in infrastructure loans and pledging 3.5 trillion yen of public and private investment and financing over five years. “Happy Birthday, Modi-san!” Abe wrote in a post on Twitter yesterday, which was Modi’s 64th birthday. “We had a great time together in Kyoto and Tokyo. See you next time!” The meeting between Modi and Xi is “unlikely to result in meaningful progress towards any bilateral strategic partnership,” Arvind Ramakrishnan, head of India at U.K.based risk adviser Maplecroft, said in an e-mail. “Modi is far more inclined to cultivate strategic ties with Japan and the U.S. in order to make India a counter-balance against Chinese influence in the Asian region.” Bloomberg News
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September 19, 2014
Greater China
House prices fall for fourth straight month Developers will face intensive competition in September and October with more new developments launched in the traditional peak season, analysts said Xiaoyi Shao and Koh Gui Qing
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hina’s new home prices fell in August for a fourth straight month and declines spread to a record number of cities, underlining a deepening downtrend in the property market that is increasingly weighing on the broader economy. News of the fall in prices coincided with reports that China’s central bank had injected 500 billion yuan (US$81 billion) into big state-owned banks to keep cash flowing in the system and bring down borrowing costs, adding to speculation over whether Beijing was stepping up its efforts to stimulate activity as the economy loses momentum. Average new home prices across China fell 1.1 percent last month, a faster decline than the 0.9 percent drop seen in July, according to the Reuters weighted home price index, which was calculated from data issued by the National Bureau of Statistics yesterday. The string of monthly price declines is now close to wiping out gains seen over the last year, which could further weaken buying interest and dampen consumer confidence. Compared to a year ago, new home prices were up just 0.5 percent in August, easing from the previous month’s 2.5 percent gain and the slowest annual growth in 20 months. The worst performance was in the eastern city of Hangzhou, where prices sagged 2 percent in August from July and dropped 5.4 percent from a year ago. “Home prices are likely to drop further in coming months as developers need to offer deeper price cuts to attract
KEY POINTS Aug home prices ease from July, fourth straight monthly fall Prices still up 0.5 pct on year but slowest gain in 20 months New home prices fell in record 68 cities Downward trend continues, prices likely to drop y/y late 2014-analysts
Moody’s Investors Service said on Wednesday that developers’ profit margins are expected to continue to be weak, as China’s property prices are likely to remain under pressure for the rest of the year with strong supply from new projects in secondhalf 2014. Real estate, which directly impacts around 40 other business sectors in China, was seen as a heavy brake on economic activity in official data out last weekend showing factory output growing at its slackest pace in six years in August. The slowdown in the housing market coincides with other August data which show China’s economic growth appearing to hit a soft patch after a bounce in June.
Prices drop in most cities home buyers to enter the market,” said Lin Bo, vice-head of research at China Real Estate Information Corp, a property data provider, in Shanghai. “Compared to a year ago, we expect prices to go negative by the end of this year or earlier next year.” In the last downturn in early 2012, China started to see yearon-year house price falls after five consecutive monthly drops. Some economists believe the current slump could last much longer given far higher inventories of unsold homes. Developers will face intensive competition in September and October with more new developments launched in the traditional peak season, analysts said.
The NBS data showed new home prices fell in 68 of the 70 major cites it monitors, up from 64 cities in July. “Home prices dropped on a monthly basis in most cities in August, but some of them saw easing price falls,” said Liu Jianwei, a senior statistician at the National Bureau of Statistics (NBS), said in a statement accompanying the data. Prices slipped 0.9 percent from July in Beijing, easing from a monthon-month drop of 1.0 percent in July, while Shanghai prices fell 1.1 percent from July, the fourth monthon-month fall in a row - though not as fast as a decline of 1.2 percent in July. Price declines deepened on a monthly basis in smaller cities,
including the eastern city of Jinhua, where home prices fell 1.7 percent, accelerating from a drop of 0.8 percent in July. Official transaction data showed sale numbers picking up slightly in August from July. Industry observers believe the downturn could persist in coming months because of high inventories and pessimistic market sentiment. NBS data last weekend showed the floor area of property sold rose 5 percent in August from July, though the floor area sold was still 12.4 percent down from a year ago. After a strong performance in 2013, China’s real estate market softened as sales slowed and banks have become increasingly cautious about lending to developers and home-buyers. In the face of sluggish sales, China Vanke , the country’s largest residential developer, has teamed up with Taobao, the Alibabaowned online shopping site, to offer discounts of as much as 2 million yuan (US$325,000) to customers who buy property on the eBay-like site. More than 30 local governments, which earn a large part of their revenues from selling state land, have acted to support the troubled property sector by easing restrictions on home purchases in recent months. Sources told Reuters earlier this month that authorities are relaxing financing rules, allowing approved listed property firms to sell medium-term notes in the interbank market. Reuters
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Asia
Japan’s economy straining under tax hike Exports have failed to pick up despite the yen’s decline to a six-year low, partly as many Japanese firms have shifted their production sites overseas which tempers the benefit of a softer currency Tetsushi Kajimoto and Stanley White
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onfidence at Japanese manufacturers fell the most in nearly two years in September as a tax increase hit the economy harder than expected, while exports slid in August in a further sign that conditions have deteriorated in the crucial third quarter. This frailty in the monthly Reuters Tankan business confidence, and the shaky outlook, could raise in coming months the pressure on the BOJ to ease policy further and complicate Prime Minister Shinzo Abe’s decision on whether to raise the national sales tax again. The first phase of the tax hike in April triggered a 7.1 percent slump in the economy in the second quarter the worst contraction since the global financial crisis.
KEY POINTS Manufacturers’ Sept sentiment index +10 vs +20 in Aug Service-sector index +22 in Sept vs +19 in Aug Manufacturers’ mood seen up in Dec, service-sector down Reuters Tankan strongly correlates with BOJ tankan Exports not strong enough to offset post-sales tax slump
Seaport of Chiba, the largest in Japan
The third quarter data will be crucial for Abe’s second-stage taxrise decision, due by year-end, but some analysts say the Reuters survey suggests that the expected recovery is not taking hold. “Both external and domestic demand are weak, and things in the summer are clearly undershooting forecasts by the government and the BOJ, eroding business confidence,” said Takeshi Minami, chief economist at Norinchukin Research Institute. In fact, the worsening sentiment in Reuters Tankan, with only a feeble improvement forecast for December, bodes ill for the Bank of Japan’s quarterly tankan survey, due Oct. 1, which had been forecast to rebound in the third quarter.
Hurdle for second tax hike ‘bit high’ “Even though Prime Minister Abe says he stands ‘neutral’ on the tax decision, I don’t think we are in a situation where the tax can be raised soon. The hurdle is getting a bit high,” Norinchukin Research Institutes’ Minami said. With the recovery sputtering and inflation appearing stalled well below the BOJ’s target of 2 percent, market speculation is growing that Abe may order a burst of government spending and the BOJ may oblige with further monetary stimulus to bolster the economy enough to allow the tax hike to go ahead. The Reuters Tankan, which is strongly correlated with the central bank’s closely watched poll, surveyed
486 big Japanese companies, of which 285 replied, between August 29-September 12. “The effects of the decline in demand have proved larger than expected” after the April tax hike, said an executive at a machinery maker. A transport equipment producer blamed the higher tax for cooling demand and worsening business conditions. The managers, who responded anonymously to the Reuters survey, also complained about weak external demand, notably in Asia and Europe, and uncertainty over geopolitical risks that weigh on the outlook. The sentiment index for manufacturers fell to 10 in September from 20 in August and down from 19 in June. It is forecast to rise to 16 in December. It was the first decline in four months and the biggest since October 2012. At that time, business sentiment was plunging amid Chinese boycotts of Japanese products and violent protests after Japan nationalized islets in the East China Sea that are also claimed by Beijing. Service-sector sentiment edged up but was forecast to decline again. This time, the loss of confidence comes after a slew of downbeat data, including soft factory output and falling household spending, and has cast doubt over the recovery of the world’s third-biggest economy. Ministry of Finance data showed yesterday Japan’s exports declined in August as U.S.-bound shipments contracted by the most in three
years, another sign the economy is struggling to rev up after the deep slump in April-June. Exports, a weak link in Japan’s economy, fell 1.3 percent in August from a year ago - less than the median estimate for a 2.6 percent annual decline. That followed a 3.9 percent annual gain in the previous month after having fallen in June and May. The last BOJ tankan found the mood among big manufacturers had worsened in the three months to June but was expected to improve in July-September. The survey indices subtract the percentage of companies saying conditions are improving from that of companies saying conditions are worsening. A positive number means optimists outnumber pessimists. Abe raised the sales tax to 8 percent from 5 percent in April in a bid to curb Japan’s runaway government debt, knocking the economy hard in the process. Around December he is to decide whether to proceed with a plan to raise the tax to 10 percent next year. Abe said on Sunday he remained “neutral” on whether to raise the tax, adding that decision would hinge on the strength of economic indicators, including for the July-September quarter. The yen has fallen to a six-year low against the dollar in recent days, but it has not yet given much of a boost to exporters, while importers, such as materials firms, are struggling to pass on rising import costs. Reuters
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Asia Japan and US arranging TPP talks
South Korea to sharply boost The cost of aggressive spending growth is bigger budget deficits
Japanese Economy Minister Akira Amari and U.S. Trade Representative Michael Froman are due to meet next week in Washington for talks on a bilateral deal that is crucial to clinching a broader multilateral Pacific rim trade pact. U.S. President Barack Obama has said participants in the Trans-Pacific Partnership (TPP) negotiations hoped to have a free trade agreement ready in time for his trip to Asia in mid-November. But with time running out, the outlook is murky. The White House had hoped to complete the TPP, part of Obama’s strategic shift toward Asia, last year.
Hyundai bids for Seoul plot Hyundai Motor Group bid 10.55 trillion won (US$10.14 billion) for a plot of land in Seoul’s high-end Gangnam district, far higher than expected, beating out Samsung Electronics Co Ltd for the trophy property. The site, which currently houses Korea Electric Power’s headquarters, had an appraised value of a little more than $3 billion and was offered in South Korea’s biggest single land auction by price. Shares in Hyundai Motor Co, part of the bid consortium along with sister companies Kia Motors and Hyundai Mobis Co, fell more than 4 percent.
Arrium share sale faces tepid demand Australian iron ore miner Arrium Ltd raised A$465 million (US$416 million) in a steeply discounted share sale that saw institutional investors take up only 79 percent of entitlements, sending its stock price plummeting. The miner and steel maker said yesterday the sale to institutions, part of an effort to raise A$754 million, was completed at A$0.48, the minimum price it was seeking, which was a 26 percent discount to its last trade. The fund raising through an entitlement offer to all shareholders and a placement to institutions, which together will more than double its share base.
GPIF and other pensions sell long-term JGBs Japan’s public pension funds, including the US$1.2 trillion Government Pension Investment Fund, sold a net 1.1 trillion yen (US$10.14 billion) in long-term Japanese government debt in April-June, central bank data showed yesterday. Public pension funds also bought a net 393 billion yen in stocks, flow of funds data from the Bank of Japan showed. Under pressure from the government of Prime Minister Shinzo Abe to shift money into higher-risk assets and out of low-yielding Japanese government bonds, GPIF plans to boost the weighting of domestic stocks to more than 20 percent.
President Park Geun-hye last year officially scrapped an earlier target of achieving a fiscal surplus during her term, which ends in early 2018
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outh Korea’s government will boost budget spending more than previously planned at least for the next three years to help the local economy better cope with a tepid global recovery and a continued slump in domestic demand. The annual government budget bill for next year and the mediumterm fiscal management plans for the future, unveiled by the finance ministry, showed fiscal spending set to grow by an average of 4.7 percent each year for the 2015-2017 period.
Next year, spending will increase 5.7 percent to 376.0 trillion won (US$363.46 billion), more than a 4.0 percent rise set for this year and a 3.5 percent gain marked under a previous medium-term fiscal management plan. The country is now set to suffer a fiscal deficit at 2.1 percent of the annual gross domestic product, worse than a 1.7 percent shortfall projected for this year. South Korea has no serious problem with its fiscal position as
it has long followed strict policies. Under the new medium-term fiscal management plan, South Korea is now scheduled to post a 1.3 percent fiscal deficit in 2017, the final full year of Park’s presidency, wider than a 0.4 percent deficit projected under the previous plan. The government assumed next year’s economic growth at 4 percent for the budget, compared with a projected 3.7 percent for this year and last year’s actual 3.0 percent expansion.
Indonesia ‘optimistic’ on 7% growth by 2017 Indonesia and other emerging markets have also been hit by huge outflows of foreign cash since May when the US Federal Reserve first signalled it may taper off its US$85 billion a month bond-buying programme
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ndonesia’s finance minister said yesterday he was “optimistic” the country could achieve 7.0 percent growth by 2017 but warned that incoming president Joko Widodo faces a major challenge in pushing muchneeded infrastructure development. Southeast Asia’s biggest economy expanded just 5.12 percent in the second quarter to June, its slowest rate in five years, highlighting the problems facing the reform-minded Widodo when he takes office next month. Widodo has pledged to raise GDP growth to seven percent a year within two years by attracting foreign investment, especially to the manufacturing sector and cutting red tape, but many economists consider the target ambitious. “I don’t think this will happen in 2015 because of the normalisation of the US policy, but if you’re talking about 2017, I’m quite optimistic,” Finance Minister Chatib Basri said
Incoming president Joko Widodo faces a major challenge in pushing much-needed infrastructure development
at a media briefing at the CLSA Investors’ Forum in Hong Kong. He said that the issue of land acquisition was one of the main obstacles holding back major infrastructure development. “If we can settle the issues of land clearing, then you know, the economy will fly,” the finance minister in the
outgoing government of President Susilo Bambang Yudhoyono said. “The reason why we decided to have 5.2 percent growth (this year) was because we needed to slow down the economy in order to curb the problem of the economic deficit,” Basri said, adding this policy could remain until the end of the year. The government introduced aggressive rate hikes last year along with other measures aimed at slowing imports. Indonesia has enjoyed a decade of relative peace and stability under Yudhoyono, helping to transform it into one of the world’s fastest-growing economies and a major investment destination. But foreign companies operating in Indonesia have long complained of nationalistic policies, particularly in the resources sector, rampant corruption, and creaking infrastructure.
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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AFP
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Asia India ships in 50 pct more Iranian oil
budget spending
We must take a proper response from the fiscal policy front to boost the economy Bang Moon-kyu, South Korean vice finance minister in charge of budget affairs
Since Choi Kyung-hwan was nominated as finance minister in June, he has repeatedly warned that South Korea’s economy, the fourth-largest in Asia, was in danger of entering a protracted slump similar to one afflicting Japan. After taking office in July, Choi introduced a series of aggressive stimulus measures, including an US$11 billion public spending package and easing of mortgage curbs. The central bank, under his push, lowered the policy interest rate in August.
Choi told a news conference on Tuesday that the government could keep its expansionary fiscal policy for several years, mindful that an anticipated pick-up in economic growth next year might only be tentative. Next year, the government plans to spend 115.5 trillion won - nearly one-third of its total planned budget expenditure - on health, jobs and welfare. This will be the most ever allocated to that category. Spending to spur job creation will increase by 7.6 percent. South Korea’s unemployment rate of around 3.5 percent is one of the lowest among medium- to high-income economies, but the number of full-time, quality jobs available has been declining. The finance ministry said the country’s sovereign debt would increase to 35.7 percent of the annual gross domestic product in 2015 from an estimated 35.1 percent for this year. Separately, a ministry official said the government would sell up to a net 43.2 trillion won worth of treasury bonds next year, mostly to fund the fiscal deficit, more than a net 27.7 trillion worth set for this year. The official said the government also plans to sell up to US$700 million in foreign-currency bonds in 2015, mainly to pay for an existing 500 million euros worth of debt due to mature next year. Reuters
Shipments in August were bolstered as Indian Oil Corp bought Iranian oil after a two-month gap, shipping in nearly 2 million barrels
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ndian imports of Iranian oil rose by nearly half to 271,000 barrels per day (bpd) in January-August from a year ago, when refineries cut purchases due to worries about insurance coverage for processing crude from Tehran, data from trade sources shows. World powers and Iran are working to resolve a decade-old dispute over the OPEC nation’s nuclear programme, with an interim deal that eases some sanctions on the country extended by four months to late November. India, the Islamic state’s top client after China, had boosted imports in the first quarter of this year to make up for the cuts in 2013 and to hit its target of importing 220,000 bpd from Iran in the fiscal year to March 31. India shipped in 273,500 bpd of Iranian oil in August, up 30 percent from the previous month and about 81-percent higher than a year ago, the data showed. Shipments in August were bolstered as Indian Oil Corp., the country’s biggest refiner, bought Iranian oil
after a two-month gap, shipping in nearly 2 million barrels. State-run IOC is not a regular buyer of Iranian oil as it has a deal to buy only 24,000-25,000 bpd, or about 9 million barrels, from the country in 2014/2015. In August, IOC also received its first cargo of Caspian Sea oil from Kazakhstan, the data showed, joining private refiners Essar Oil and Reliance Industries in buying the grade. Essar was Iran’s top Indian client in August, followed by Mangalore Refinery and Petrochemicals Ltd, the data showed. Essar and MRPL are the regular buyer of Iranian oil. Chennai Petroleum Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp have halted Iranian oil imports since 2013/14 due to worries over whether their insurance policies would cover refining the cargoes. But other refiners have stepped up purchases drawn to discounts offered by Tehran, risking possible disputes with insurers in the case of an accident. Reuters
NZ economy slows down Construction activity growth slowed to 2.2 percent after the previous quarter’s 12.5 percent
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ew Zealand’s economy grew more slowly in the second quarter, suggesting the near decadehigh annual rate is the peak of the current cycle, allowing the central bank to sit on the side-lines for an extended period. The economy grew a seasonally adjusted 0.7 percent in three months to June 30, taking the annual rate to 3.9 percent, the fastest since second quarter 2004, Statistics New Zealand figures showed yesterday. The South Pacific economy has been a leader among developed economies over the past year, but the drive from a booming dairy industry, and a surging construction sector, showed signs of easing. Analysts surveyed by Reuters expected a quarterly rise of 0.6 percent for an annual rate of 3.8 percent, while the Reserve Bank of New Zealand (RBNZ) forecast 0.8 percent. The New Zealand dollar inched up to around US$0.8090 from US$0.8083 before the data. The slowdown was not unexpected after three consecutive quarters of growth of 1 percent and more, on the back of strong exports and the earthquake rebuild in Canterbury. But the economy faces a NZ$5 billion (US$4.05 billion) income hit because
The latest data confirmed that the slide in commodity prices, notably for the key dairy sector, was beginning to be felt
KEY POINTS NZ Q2 GDP growth 0.7 pct NZ annual growth 3.9 pct, highest since June 2004 Service industries grow, offsetting agriculture fall
of the 50 percent fall in dairy prices from their peak in February, while the surge in construction eased to a more moderate level, and domestic activity is positive but modest.
Slower growth, lower rates The slower pace of growth will not be unwelcome for the RBNZ, which has forecast a more modest expansion over the next two years, along with benign inflation pressures.
The overall softer outlook prompted the bank last week to hold its benchmark rate steady and to say it expected to sit on the sidelines for some time to assess the impact of its four hikes between March and July, along with the state of the economy and exchange rate. It is now expected to hold its cash rate at 3.50 percent until March next year at the earliest according to a Reuters poll. Activity in agriculture industry fell 2.2 percent
because of reduced dairy production, while exports fell 3.4 percent on lower meat volumes. The mining sector also slowed on reduced exploration activity. However, growth was driven by service industries which make up about 70 percent of the economy, with business services, such as advertising, software development, wholesale trade, and retail activity all showing strong growth. Reuters
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International Mining law threatens Turkish workers A new law to tighten safety in Turkish mines after a disaster claimed 301 lives in May has cost more than 5,000 coal miners their jobs, union sources said yesterday. Since the law took effect last week in response to criticism of bad working conditions for Turkish miners, 37 coal mines say they have ceased activities because of the financial costs of the new regulations. The new law, which trades unions had long wanted, limits weekly working hours for miners to 30, reduced from 48 previously, and also imposes several new security measures.
Ericsson to shed hundreds of jobs Swedish telecom equipment company Ericsson said yesterday that it would stop developing modems, a decision affecting almost 1,600 employees worldwide which is expected to lead to hundreds of job cuts. The group said in a statement that it would “discontinue future development of modems” but that some of the 1,582 employees affected could be redeployed to new jobs in research and development for radio networks. The decision marks a strategic shift for Ericsson, following an evaluation of the global modem market.
New CEO for Russia’s biggest social network Russia’s biggest social network VKontakte appointed a new chief executive yesterday after the removal of its maverick founder Pavel Durov earlier this year. VKontakte (also known as VK) also declared a months-long shareholder conflict to be “ended” following the acquisition of 48 percent in the company by Mail. Ru Internet group earlier this week, a deal that made it the network’s sole owner. The new chief executive of the business is Boris Dobrodeyev, the company said in a statement. Dobrodeyev is the son of Oleg Dobrodeyev, the head of Russia’s biggest state-owned media holding VGTRK.
USDA grants approval to enlist GMO The U.S. Department of Agriculture gave final approval to new genetically modified corn and soybeans developed by Dow AgroSciences that, while heavily criticized by environmentalists and some farmers, are portrayed by Dow as an answer to weed resistance problems that limit crop production. Approval of the specialty corn and soybeans to be sold as part of a branded “Enlist Weed Control System” means the traits could be on the market for the 2015 U.S. planting season, according to Dow AgroSciences, a unit of Dow Chemical.
Brazil to build 350,000 low-cost houses Brazil’s government will extend its “Minha Casa, Minha Vida” low-income housing program into 2015 and build another 350,000 units to boost the building industry, Finance Minister Guido Mantega said. In moves that pleased the industry ahead of next month’s election, Mantega also announced a four-year extension to a tax break that reduces from 6 to 1 percent the levy on building houses valued at no more than 100,000 reais (US$42,400). The government will build 200,000 units by the end of this year to complete the housing program’s current target of 2.75 million homes, Mantega said.
As growth stalls, G20 seeks closure on regulations Much of the leg work on financial regulation is nearing completion after years of tortuous negotiations Lincoln Feast and Ian Chua
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20 host Australia is leading a push to draw a line under the global financial crisis, urging the group of top economies to swiftly finalise regulations aimed at preventing a repeat of the crash and focus on measures to revive sputtering global growth. But the efforts of the Group of 20 finance ministers and central bankers, meeting this weekend in the tropical tourist town of Cairns, risk being drowned out by growing alarm over geopolitical tensions and increased market volatility. “They will do so against a backdrop of downgraded OECD growth forecasts and a deteriorating global political climate,” said London-based Lena Komileva, chief economist at G+ Economics. Indeed, headlines from the G20 will vie with any fallout from Scotland’s independence vote on Thursday and on-going U.S. interest rate speculation that has driven the dollar to six-year highs against the yen. At home, a sweeping counter-terrorism operation across several major Australian cities yesterday has knocked everything else from the front page. Yet Treasurer Joe Hockey this week said he and his G20 colleagues are focused on delivering jobs and growth more than ever before. “The changes in the economy over the last few months have made the job harder but it has not diminished our collective resolve,” he said.
Treasurer Joe Hockey
He acknowledged the challenges in attaining the target of bettering the global growth trajectory by 2 percent by 2018, a goal set earlier this year at a similar meeting in Sydney. “Whether we reach the 2 percent or not - the G20 is committed to promoting further growth and to creating more jobs,” said Hockey, perhaps suggesting he had already conceded the target was too ambitious. Complicating the growth agenda, Western nations recently slapped sanctions on some of Russia’s biggest firms as punishment over Moscow’s role in the Ukraine crisis. Slowing growth in China is also fuelling anxiety.
Core mission Justin O’Brien, a professor at the University of New South Wales’ Centre for Law, Markets and Regulation, said
the G20 was losing sight of its core mission of ensuring there was no repeat of the financial crisis. While there was no shortage of consultation, regulatory initiatives or rhetoric on the progress being made, the reality was that much divergence remained between members. “All battles in regulation happen at the implementation stage and in terms of implementation, there is basically trench warfare taking place,” O’Brien said. Much of the leg work on financial regulation is nearing completion after years of tortuous negotiations. Officials have expressed confidence in concluding agreements on issues such as shadow banking, derivatives and global tax rules by the time of the G20 Leaders Summit in Brisbane in November. Last week, a draft plan on how much the world’s largest banks will have to set aside as safety buffers was circulated and will be discussed at the Cairns meeting. “It is clear that decisive reforms are needed across G20 economies to boost potential output and help ensure that growth is more balanced,” Hockey said. “This is why the importance of our efforts this year cannot be understated. Come the Brisbane Summit, every G20 member will present a comprehensive listing of their new policy actions to lift growth and create jobs.” Reuters
European airlines can charge extra for check-in luggage The ECJ said airlines could not charge for carry-on bags, as long as they met size limits, as they were a “necessary item”
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irlines are within their rights to charge passengers extra for checked-in luggage, Europe’s top court ruled yesterdayin a decision that will be welcomed by low-cost carriers. The European Court of Justice upheld a challenge by Spanish budget carrier Vueling Airlines against a Spanish law that prohibits airlines from making people pay for putting their suitcases in the aircraft’s hold. The case concerned a charge of 40 euros (US$51) that Vueling added to the tickets of a Spanish woman but which also applies to airlines across the continent, the EU’s most senior court said. The Luxembourg-based court said check-in baggage charges were “not an unavoidable and foreseeable item of the price of the air service” but could be an “optional price supplement in respect of a complementary service” under EU law. There was no immediate reaction from Vueling, which was acquired in 2013 by International Airlines Group,
EU law precludes legislation, such as the Spanish law, that requires air carriers to carry, in all circumstances, not only the passenger but also baggage checked in by him for the price of the plane ticket, without any price supplement European Court of Justices statement
the parent company which controls British Airways and Spain’s Iberia. The case was brought by a Spanish woman, Arias Villegas, who paid 241.48 euros for four return tickets between La Coruña, Spain and Amsterdam in 2010, but was then charged a further 40 euros when she checked in two bags online, the court said. A Spanish consumer watchdog fined Vueling 3,000 euros but a Spanish court then referred the case to Luxembourg to see if it complied with EU law on pricing freedom. The ECJ said it had noted that airlines were increasingly charging passengers for checked-in bags and that some passengers preferred to save money by travelling with only hand luggage. “Having regard to those considerations, the service of carriage of checked-in baggage cannot be considered to be compulsory or necessary for the carriage of passengers,” it said. AFP
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September 19, 2014
Opinion Business
wires
The economics of violence
Leading reports from Asia’s best business newspapers Bjørn Lomborg
Adjunct professor at the Copenhagen Business School, founded and directs the Copenhagen Consensus Centre
THE TIMES OF INDIA The Reserve Bank of India’s move to curb the number of free transactions in automated teller machines (ATMs) would result in a surge in cash in the economy and reduce viability of the 1.6-lakh-strong ATM network. Any drop in volumes would hit investments in ATM networks, which are seeing declining usage with growth in number of machines. A report by a professor at IIT-Bombay analysing ATM transactions has suggested increasing free transactions to 12, revising the fees that banks pay one another for ATM use and removing disincentives on use of debit cards as an alternative for payments.
VIETNAM NEWS Business executives held a direct dialogue with national and international experts on how their companies can win consumers’ trust and boost their credibility in the market at a forum held in Ha Noi. The issues they discussed at the CSR (Corporate Social Responsibility) Calendar Forum on Consumer Issues included making more Vietnamese select and trust local products, surviving the harsh competition in the retail market, and building a market where consumers trust producers. The CSR Calendar Forum is engaging with the Association of Viet Nam Retailers and Viet Nam Environmental Administration.
THE STRAITS TIMES A unit of Xpress Holdings, a Singapore-listed printing company, has partnered with United Parcel Service of Singapore (UPS) and S. F. Express to offer new services, the company said yesterday. Its subsidiary, Xpress New Media, will provide documentation services like completion of airway bills and shipment invoices, as well as tracking services right up to delivery. The collaborations with UPS and S. F. Express will not only provide Xpress New Media’s corporate customers with greater convenience for their logistical needs, but will allow it to extend its services to retail customers, the company said.
PHILSTAR The Philippine peso as a global currency like the US dollar? President Benigno Aquino III said a huge bank catering to the entire world suggested to him the idea of globalizing the Philippine peso. Aquino said he never expected to hear such idea. He said he has talked to Finance Secretary Cesar Purisima regarding the proposal since it needs to be studied. The President said the suggestion of the foreign bank shows the international community’s renewed trust and confidence in the Philippines and its economy.
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OPENHAGEN – What is the biggest source of violence in our world? With the brutal conflicts in Syria, Ukraine, and elsewhere constantly in the news, many people would probably say war. But that turns out to be spectacularly wrong. Getting it right matters if we are to find cost-effective solutions to this and other global problems. Obviously, everyone would like to stop wars and violence, just as we would like to end poverty, hunger, and global warming, while providing education to all. But, given limited resources, the international community can only do so much. We have to prioritize, which is what an economic analysis of costs and benefits can do. The international community is working on new development goals for the next 15 years, and the Copenhagen Consensus has asked some of the world’s leading economists to give their assessment of the smartest targets they can choose. Is reducing violence a goal worthy of resources that would otherwise be spent on, say, reducing hunger? And, if so, which forms of violence should be targeted? A study by James Fearon of Stanford University and Anke Hoeffler of Oxford University’s Centre for the Study of African Economies argues that societal violence – homicides and especially violence against women and children – is a much bigger problem than civil wars. Nine people are killed in interpersonal violence for every
battlefield death in a civil war, and one child is killed for every two combatants who die. In 2008, there were 418,000 homicides around the world, with far too many countries recording a murder rate of more than 10 per 100,000, which the World Health Organization regards as an epidemic. A single homicide in America costs the individual and society $9.1 million. If we scale this by national income across the world, this single category of violent crime costs 1.7% of global GDP. Of course, this is not a direct financial loss to the global economy, but a way of expressing the impact. If murders could be eliminated, societies around the world would be better off in ways that can be valued at 1.7% of GDP. Compare this to the much lower cost of civil wars, which are equivalent to about 0.2% of global GDP. But this is still much less than the biggest source of violence of all: violence against women in the home. Based on studies published in Science, 28% of all women in Sub-Saharan Africa reported experiencing violence in the past year at the hands of their partners or family. This includes women subjected to beatings, forced marriage at an early age, sexual assault, “honour” crimes, and female genital mutilation. A conservative estimate puts the welfare cost of intimate partner violence alone at US$4.4 trillion, or 5.2% of global GDP. The second-largest source of violence is the abuse of children,
Nine people are killed in interpersonal violence for every battlefield death in a civil war, and one child is killed for every two combatants who die
80% of which is inflicted by parents. The definition of what constitutes child abuse varies by culture; but about 15% of children suffer each month from what the UN calls severe physical punishment. This includes being slapped on the face, head, or ears, and a quarter of these children are beaten with some kind of implement repeatedly and as hard as possible. Every month, some 290 million children endure such suffering. The welfare cost is US$3.6 trillion, or 4.2% of global GDP.
A tiny fraction of international aid funding currently goes toward reducing societal violence and improving criminal justice systems. The enormous cost borne by society and individuals seems to cry out for action. Unfortunately, there is still little hard evidence about where resources should best be focused. All we can say is that the money spent to reduce violence might be better targeted. Considerable amounts of aid are directed toward “fragile states” to help stop or prevent civil war, but only 0.27% of international aid goes to projects with a “crime prevention” component. Other programs may help in indirect ways, but there obviously is much room for improvement. Some solutions, it is clear, do work very well. Stronger social services can reduce violence against children. Studies in Washington State show that home visits from trained staff can reduce child abuse, improve children’s quality of life and physical and mental health, and reduce child-welfare and litigation costs. A dollar spent on this program produces benefits of US$14, making it a highly cost-effective policy. In many cases, changes in social attitudes are needed. To reduce violence against women and girls, one program in Uganda, called SASA! (Kiswahili for “Now!”) promotes the view that partner violence is unacceptable, and has helped to halve the rate of it. This is a fantastic outcome, of course, though there has been no analysis of how costeffective it is. There are other examples of countries taking effective action. In 1993, Bogota suffered 80 murders per 100,000 people. By taking an integrated approach – limiting the hours during which alcohol can be sold, reclaiming public space, and improving the police and justice systems – the homicide rate was reduced to 21 per 100,000 in 2004. That is still high, but it is far below the rate of 55 per 100,000 in Detroit. Alcohol is a factor in many assaults, and controlling its availability could have a significant part to play, as the findings in Bogota suggest. In the United Kingdom, a pilot study on stronger enforcement of existing rules showed that assaults could be reduced in a very cost-effective way, with the benefits outweighing the costs by 17 to one. While we still don’t know enough, two points are certain. First, domestic violence against women and children imposes a social cost of US$8 trillion each year, making it a huge – and vastly underreported – global issue. Second, there are solutions that can help to tackle some of these problems very cost-effectively. That is why reducing domestic violence belongs on the shortlist for the world’s next set of development goals. Project Syndicate 2014
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September 19, 2014
Closing UBS to test French tax evasion crackdown
Malaysia holds rates steady, sees steady growth path
UBS has become the test case for French President Francois Hollande’s tax-evasion crackdown. The Swiss bank is set to learn from a Paris appeals court on September 22 if it must post a 1.1 billion-euro (US$1.4 billion) bond to cover a potential criminal penalty for alleged money laundering. Its French unit already paid a 10 million-euro fine for lax controls that may have enabled tax dodging. The bail corresponds to as much as half the estimated funds UBS allegedly laundered. French investigators are also looking into whether HSBC Holdings Plc units encouraged tax evasion.
Malaysia’s central bank kept its key interest rate unchanged at 3.25 percent yesterday, holding off from a second tightening in less than three months after recent signs of a slowdown in exports and credit growth. Malaysia’s economic growth has been underpinned by strong exports and robust consumer spending in the first half, with second-quarter gross domestic product growing a healthy 6.4 percent from a year earlier. But since then credit growth has slowed, with a rise of 8.6 percent in July compared with 9.3 percent in June, and economists expect the pace of loans to moderate further.
Cheap credit for European banks Banks are able to borrow up to 400 billion euros at tenders this week and in December, at a slight premium to the ECB’s regular price of funding
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he European Central Bank handed out the first of its new four-year loans to banks yesterday, the flagship tool in a new stimulus package it hopes will stave off price deflation and revive the ailing euro zone economy. Take-up of the 400 billion euro offer of cheap credit from the euro zone’s central bank was low but banks will get a second chance in December to apply for the cash, which is granted on condition that they lend to businesses. The launch of the scheme, a central plank of the ECB’s efforts to coax reluctant banks to lend more and fire up the bloc’s flagging economy, saw the ECB handing out 82.6 billion euros of such credit to 255 banks. The success of the project is important for the 18 countries in the euro zone, grappling with record-high unemployment and fading economic growth. But previous rounds of ultra-cheap ECB loans and borrowing costs close to zero have done little to boost lending to companies, with much of the money instead spent on government debt. Critics fear a similar fate for the new scheme. Many banks were
KEY POINTS ECB launches long-term TLTRO loan scheme for banks Banks take 82.6 billion euros of cheap credit from ECB Banks have second chance to bid for loans in December
European Central Bank head, Mario Draghi
reluctant to participate in yesterday’s round, possibly for fear that it could single them out as struggling just weeks before the results of ECB-led health checks on the sector are announced. Yesterday’s poor take-up was worse than predicted by a Reuters poll of 20 money market traders, who said banks would take just 133 billion euros this week but return to snap up a further 200 billion euros on December 11.
Banks are able to borrow up to 400 billion euros at tenders this week and in December, at a slight premium to the ECB’s regular price of funding. If they start lending more, they can take further cheap ECB loans running through to mid-2016. Another reason for banks holding fire is to find out more about a separate ECB programme to buy assetbacked securities and covered bonds. Details are expected in October.
They may also choose to hold on to existing crisis loans from an earlier ECB programme for longer. The ECB flooded the market with cheap threeyear loans at the height of the debt crisis in late 2011 and early 2012. They expire early next year and many banks are expected to use the new four-year loans to pay back such debt. Lannoo said he was sceptical that the new initiative would lead to
more lending to the smaller businesses that are the euro zone’s economic backbone as previous long-term loans to banks had failed to do so. Figures on Friday showing how much of those crisis loans banks will repay next week and the result of next week’s main refinancing operation may give an indication of how much will be rolled over into the new operations. Nomura, which forecasts total take-up this year of between 250 billion and 300 billion euros, said that Italian and Spanish banks would make full use of their fouryear loan allowances, which it puts at 75 billion and 54 billion euros, respectively. Reuters
India-China to talk on civil nuclear cooperation
U.S. women pay poverty toll
ASEAN push infrastructure teaming up
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ndia will open talks on civil nuclear energy cooperation with China, Prime Minister Narendra Modi said yesterday after summit talks with Chinese President Xi Jinping in New Delhi. The announcement, part of the new government’s push to broaden its nuclear energy sector, comes on the heels of a deal India struck this month to buy uranium from Australia to increase its fuel supplies. “We will begin the process of discussions on civil nuclear energy cooperation that will bolster our broader cooperation on energy security,” Modi said in a statement, with Xi beside him, at a news conference. Ahead of Xi’s visit, Chinese Assistant Foreign Minister Liu Jianchao told reporters that China had a “positive attitude” towards nuclear cooperation with India, but offered no details. Behind the scenes, China has been pressing India hard to begin talks on civil nuclear cooperation, said W.P.S. Sidhu, a senior fellow at Brookings India. Reuters
merica’s poverty rate fell in 2013 for the first time in this economic recovery. For women, though, it was hard to find much to cheer about. Gender inequality is a grim reality in the world’s largest economy. For starters, median earnings adjusted for inflation -see chart- came in at $50,033 for men last year compared with US$39,157 for women. Women earned 78 cents for every dollar that a man made, after 77 cents in 2012. By most measures, women are more likely to be impoverished than men. Impoverished women far outnumber their male counterparts. The gap between the genders has also widened: Last year, there were 5.1 million more women in poverty than men. Back in 2003, that difference was at 4.3 million. More men are still snagging the good jobs. Women were also worse off than men last year when comparing the poverty rate for working-age Americans. Bloomberg News
fficials from China and ASEAN proposed strengthening cooperation in infrastructure to boost regional growth during the 11th ChinaASEAN Expo, which ran September 16-19 in south China’s Nanning City. Pushpanathan Sundram, chairman of the China-ASEAN Business Association, said at a forum that infrastructure will serve as a “game changer” for countries of the Association of Southeast Asian Nations (ASEAN) and China to achieve strong and sustained economic growth. “The infrastructure financing need for ASEAN from 2010 to 2020 is about US$600 billion, or [an] annual expenditure of US$60 billion,” said Sundram. Chinese Vice Premier Zhang Gaoli proposed at the opening ceremony that both sides should prepare for the establishment of an Asian infrastructure investment bank to address the financing bottleneck in the region. Wang Yucheng, vice chairman of the China International Contractors Association, told Xinhua that ASEAN has been China’s largest market for infrastructure project contracts in Asia for four consecutive years. Xinhua