Macau Business Daily, Nov 4, 2014 by Business Daily

MOP 6.00

Hitting the ground running

Year III

Number 659 Tuesday November 4, 2014

Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

Samsonite net sales increase in Q3 Page 2 | Gaming braces for worst revenue drop Page 6

he Hengqin 33. Approved Macau investors will occupy 4.5 square kilometres of land known as the Guangdong-Macau Cooperation Industrial Park. Designated for tourism and leisure, cultural and creative, IT and trade services. But will not be subject to rising land costs. Well placed sources tell Business Daily it’s a special policy to promote the development of Macau enterprises on the island Page

Gold rush effect hangover for Tse Sui Luen Page 2

AMCM to further diversify investment portfolio Page 5

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Straight from the hip

HSI - Movers November 3

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Not everyone is doing a terrific job in the media. And the government doesn’t owe them a living. Nonetheless, the government provides ‘minimum support’ and ensures press freedom. Hard-hitting Victor Chan, director of the Government Information Bureau, says we live in a capitalist society. And should act accordingly

Black future for yellow cabs

Page

%Day

Galaxy Entertainment

1.79

China Resources Land

1.63

COSCO Pacific Ltd

1.57

China Merchants Hold

1.22

China Overseas Land

1.11

China Unicom Hong Ko

-1.72

Kunlun Energy Co Ltd

-1.75

China Resources Powe

-2.44

China Shenhua Energy

-2.52

Want Want China Hol

-2.65

Source: Bloomberg

I SSN 2226-8294

Growing pains

Remuneration issues. Another industry has been hit by employee demands. This time it’s the yellow taxis, who shut down on Thursday. Management says the government hasn’t come to the table on basic issues. While a consumer group lambasts the government for essentially giving the public 4 days’ notice of cessation of service

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The Manufacturing Purchasing Managers’ Index. The survey all economists consult. A better than expected outcome has emerged. But it still can’t hide the fact that services sector growth has had a bumpy ride this year

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8&9

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November 4, 2014

Macau

Dwindling income driving yellow taxi operators away The yellow taxis are saying goodbye. Relying on radio cab services, the group’s executive director said they could not increase their income, or the salaries of drivers, who may now find black taxis more lucrative Kam Leong

kamleong@macaubusinessdaily.com

ilbert Cheang, executive director of yellow taxi operator Vang Iek Group, phoned in to a TDM radio show, Macau Forum, to explain the group’s decision to cease its taxi services once its contract expires on November 6, claiming that the decision was made because of the remuneration issue which affected their workforce. Mr. Cheang told the radio show that the group was seeking ways to increase their income as the current salary of yellow taxi drivers is lower than those of black taxis, which affected the interests and intentions of drivers to work for yellow taxis.

He claimed that Vang Iek told the government in February, when the parties were renewing a short contract for nine months, that the yellow taxis would not be able to continue their services if they were only allowed to run solely on-call services once the contract ended in November “In the time being, we had reported to the Transportation Bureau our [operating] conditions and the problems we had encountered… we tried to seek a resolution for us to survive, to resolve the problems, based on residents’ expectations and the government’s arrangement… However, without the support of the government, nor [receiving] a positive

or direct response to the problems we met from the government, it was very difficult for us to continue the operation,” Mr. Cheang said on the show. According to Mr. Cheang, the Group had proposed two measures to the government that might have saved their operation, such as allowing yellow taxis drivers to pick up customers at certain spots as well as charging additional fees for oncall services, instead of running the business relying on the solely radio cab services. However, without gaining consensus with the government on the additional fee the group eventually

chose to exit the market from midnight this Thursday. Describing the government’s cancellation of the licences of yellow taxis as “absolutely crazy”, Andrew Scott, president of the Macau Taxi Passengers Association, said: “We need more competition in Macau’s taxi industry, not less”. In addition, he thinks that the government should open public consultations on the issue. “We hear this announcement late on November 2 and the yellow taxis will be off the road on November 6. Just four days’ notice; it’s madness. The government has had nine months to sort this out,” Mr. Scott fumed.

Gold rush effect hangover for Tse Sui Luen The waning appetite for gold has shrunk the profits of the jewellery group by 45.7 percent year-on-year during the first half of the year. In Macau and Hong Kong, sales dropped 24 percent João Santos Filipe

jsfilipe@macaubusinessdaily.com

he end of the ‘gold rush effect’ in the first half of this year has reduced the profit of Tse Sui Luen (TSL) Jewellery by 45.7 percent year-on-year, from HK$47.6 million to HK$25.8 million. In a filing with the Hong Kong Stock Exchange, the company announced that the end of ‘gold fever’ had caused the year-on-year drop in 24-karat product sales in Hong Kong. The gold rush effect was said to have ‘substantially boosted’ the group’s sales in the first half of last year. As such, there was a 14.6 percent year-on-year decline in turnover from HK$2.1 billion to HK$1.8 billion.

Samsonite net sales increase 17pct in Q3

merican luggage manufacturer and retailer Samsonite International S.A. posted an increase of 18.6 percent year-onyear in net sales, excluding foreign currency effect, during the third quarter of the year. Overall, the net

“Against a challenging operating environment, we have strengthened our store network in Hong Kong and Mainland China to enhance market presence. In particular, following the successful implementation of the franchising model last year, we have further expanded our franchise operations to increase our market penetration in Mainland China”, the group’s chairman and CEO, Annie Yau Tse, said. “We have also been exploring more business platforms such as e-business channels to complement our increasing investment in the brand”. During the first half of the year,

sales in Macau and Hong Kong, which account for 61.8 percent of group turnover, fell 24 percent. According to the company, this happened ‘due to a high base of comparison caused by a spike in gold-related sales a year ago’. At the same time, the growth of sales for self-consumption has gradually compensated the reduced demand for higher-priced gifting items. While Macau and Hong Kong results were unenthusiastic by comparison with the first half of last year, sales on Mainland China increased 6.7 percent year-on-year. The mainland market now accounts for 36.9 percent of the group’s turnover.

Commenting on the results and future prospects for the Group, the Chairman stressed the challenges imposed by political tensios in Hong Kong. “The ongoing slowdown of economic growth in China and other parts of the world, and the political reform debate in Hong Kong will continue to pose uncertainties for the business environment going forward”, she said. “However, we believe that these are cyclical and transient fluctuations, respectively, and that the demand for high quality jewellery is strongly supported by the growing affluence of Mainland China consumers”.

sales of the company for the first nine months of this year also registered a growth of 15.5 percent, compared to the same period last year. The net sales of the Hong Konglisted company reached US$627.4 million (MOP5.01 billion) during the third quarter, an increase of US98.1 million compared to the US$592. million in the same period last year, according to the company’s filing with the Hong Kong Stock Exchange yesterday morning. With stores all around the world, the multinational retailer’s stores in Asia, North America, Europe and Latin America all posted increases in their net sales during the third

quarter; particularly in the Asia market, where net sales of the retailer, excluding foreign currency effect, grew by 20.1 percent year-on-year. According to the filing, Japan and China are the two markets in Asia which experienced the most increases in net sales, with jumps of 35.4 percent and 32.9 percent yearon-year, respectively. In addition, the company’s net sales in South Korea and India were up by 9.4 percent and 12.1 percent, respectively, compared to the third quarter of last year. Net sales in the group’s North American, European and Latin American markets increased by 22.5 percent, 10.9 percent and

25.1 percent, respectively, during the quarter. Meanwhile, the company’s cumulative net sales in the first nine months of the year reached more than US$1.73 billion vis-àvis US$1.51 billion during the same period last year. In addition, the China market registered increased net sales of 17.1 percent, following the significant growth in the net sales of the retailer’s Japanese and Indian markets, which went up, respectively, by 27.6 percent and 20.7 percent year-on-year. The South Korean market grew by some 12.7 percent year-on-year. K.L.

November 4, 2014

Macau

Hengqin land costs stabilised for 33 local investors For those not on the recommended list held by Hengqin authorities, the investment threshold could be a struggle for smaller firms Stephanie Lai

sw.lai@macaubusinessdaily.com

nder a preferential policy, the 33 Macau investment projects recently recommended by the local government to Hengqin vis-a-vis settling in the island have been exempted from escalating land auction prices. Nevertheless, the land cost issue still poses a concern to local small and medium enterprises interested in expanding on the island. Business Daily understands from an official Hengin source and a local investor in Hengqin that with regard to the 33 local projects recommended by the Macau Government to the island, the Hengqin authorities have not increased the standard land auction cost. These projects will occupy some 4.5 square kilometres of land known as the GuangdongMacau Cooperation Industrial Park. The industrial park is a patchwork of zones scattered across the island designated for tourism and leisure, cultural and creative, information

technology and other trade services. “It is a special policy meant to promote the development of Macau enterprises, so the Hengqin authorities have not [increased] the land price for these projects settling in the industrial park,” said the Hengqin official, who declined to be named. “I don’t think the administration here would do this adjustment of the land price in the coming year. But for investors that are engaged in projects outside the park, they’ll have to follow the market price for the land sales.” Last year, Hengqin authorities introduced a set of standard land prices for Macau projects seeking to settle in the Guangdong-Macau Cooperation Industrial Park. The most expensive goes to the land reserved for commercial and financial services, for which the mainland authorities rstablished a base bidding price of 5,821 yuan (US$951) to 9,558 yuan per square

metre; while the cheapest are the lands reserved for the cultural and creative businesses, as well as information technology businesses, for which the bidding price was set at 1,200 yuan per square metre. “It’s true that since last year, the Hengqin authorities have not made any adjustment to the land price for Macau investors settling in the industrial park so far,” said Leo Ge, a representative in charge of the ‘i CITY Hong Kong-Macao’ project. Mr. Ge’s project, one of the 33 recommended Macau projects set in the centre of the island, calls for the establishment of a media production centre and an education base following a land auction process in mid-November. “As our project is a mixed cultural and commercial one, for some parts of our land the authorities are counting it at a land cost of 1,200 yuan per square metre,” said Mr. Ge. “Initially, the Hengqin authorities

also [required] capital [proof] and some special taxation requirement re. local investors settling in the industrial park but eventually these requirements were cancelled.” For small businesses here - not on the recommended list of 33 - the investment threshold is challenging to overcome, said Mr. Lei Kit Heng, owner of local raw and frozen meat wholesaler Tak Sang Meat Industries Ltd. “We’re really interested to set foot in Hengqin, as the cost of land and human resources here is so expensive now,” said Mr Lei, who also runs DCH Food Mart. “We are now preparing to see if we can make a bid to run a food warehousing and retail spot there on the island.” The average land cost transacts at about 3,000 yuan per square metre on the island at current levels. The requirement to pay a guarantee amount of 30 percent of the land transaction cost against project failure is a challenge for small businesses to meet here, Mr. Lei said. “The land cost is really not cheap there [Hengqin], and we’re not big corporations – we have to really carefully assess our financing capacity before operating on the island,” he said. “We’re also waiting for more detailed explanation of the Immigration rules for cars and visitors travelling here and to the island.” Last month, the Land and Resources Bureau of Zhuhai auctioned off three parcels of land in Hengqin New Area, with the cost per square metre ranging between 4,500 yuan for a 13,898 square metre plot, and 2,150 yuan per square metre for 40,000 square metres.

November 4, 2014

Macau

The medium is the message The Government Information Bureau director says that media as a business has to cater to the market. What the government does, on the other hand, is provide ‘minimum support’ and ensure press freedom. This is how it works in a capitalist world, says Victor Chan Chi Ping Joanne Kuai

joannekuai@macaubusinessdaily.com

he Government Information Bureau (GCS) is responsible for coordinating, researching and providing technical support to the government in matters relating to the media. In his eyes, Bureau director Victor Chan Chi Ping sees media as a business. “In a free market in capitalism, what we [the government] have to do is make sure we don’t set up any obstacle. We have total press freedom [in Macau]. The Basic Law has mandated that the government do not hinder the free flow of information. The government gives you [the media] the minimum support but it doesn’t guarantee you make a profit. What we are only doing is that we will not hinder the competition.” As middleman between government and media, Victor Chan said the relationship between the two has been progessively improving despite some government officials being “camera shy”. “If you’re talking about individual performance, this is another issue. I wouldn’t say everybody is doing a terrific job. Some are doing fine. Some are not doing that fine. We encourage government officials. We set up internal training. That’s the area that we need to improve,” said Chan. A government spokesperson system was established and introduced in 2010, a move that Victor Chan claims has made the government more transparent by establishing a direct channel to reach government officials. “But you cannot expect to pick up the call and five minutes later have the answer you would like to have. In real life, it just doesn’t happen that way.” Also, in March that same year the government decided to revise the law on publishing and broadcasting that has been in place for well over 20 years. The draft bill was submitted to the Legislative Assembly and the Government Information Bureau conducted consultation sessions. The possible clauses regulating online media drew a lot of criticism and were consequently deleted from

Chinese Estates sells Moon Ocean for HK$4.87 billion

hinese Estates has sold its subsidiary Moon Ocean for HK$4.87 billion to its former chairman Joseph Lau, the company announced in a filing with the Hong Kong Stock Exchange. Moon Ocean includes the total investment cost of the La Scala project and interest that incurred

You cannot expect to pick up the call and five minutes later have the answer you would like to have. In real life, it just doesn’t happen that way

the draft. Chan acknowledged that the industry and general public found that “it’s not the right time” to launch regulations on that particular platform but pointed out it’s not much of a concern since criminal activities are still subject to the Civil Code. “The government should work harder and spend more effort in putting the information on this online platform, on the Internet or WeChat or whatever, so that the public can have access to the information through the new platform,” he added. He also said it would be benefitial for traditional media to embrace change, considering the “great challenges” faced due to the development of new media. “We still cooperate with traditional media. But the media themselves should think about how to attract media users. This is what we call media divergence or media convergence. The world is rapidly changing. There may be no newspaper one day. You have to adapt or you won’t survive.”

Fierce competion “Whether a medium can survive or can make a profit depends on the media themselves,” Victor Chan said, adding that Macau is a very small market with diverse media users, and local media face fierce competition from the outside. He insisted that the government stance is “not to

at HK$4.83 billion. The proposed sale of the subsidiary came following the local Court of First Instance’s ruling in March that Joseph Lau and fellow Hong Kong businessman Lo Kit Sing be sentenced to jail for five years and three months for offering former public works secretary Ao Man Long HK$20 million in 2005 in exchange for successfully bidding for five plots of land near Macau Airport. This was the site where the high-end residence project La Scala was to be built. Joseph Lau stepped down from the chairman’s position of Chinese Estates following the court ruling, to be replaced by his son Lau Ming Wai.

interfere”. “In a small place like Macau, these things happen. We invited media representatives and went to Luxemburg three years ago. It’s a very small place surrounded by big countries. People there speak four or five languages. The best-selling newspaper is from France, ” he said. “How can TDM compare with CCTV? How can TDM compare with TVB? But in Macau, you’re free to watch anything. In Luxemburg, it’s the same. The government supports the local media and gives them a certain kind of subsidy. It’s just like what we are doing here. It’s exactly the same.” Local media also faces human resource shortages, and high turnover is a common occurance here. It’s also known that some veteran journalists quit their job and join the public service, quite often GCS, where most of the frontline workers have a journalism background. This is how the capitalist system works, he said. “This is an open market. Everybody is free to choose his or her job. Do you think the government should impose something

that journalists should have a basic minimum salary or something like this? No, we’re not going to do that.” When asked whether there is any plan by authorities to provide more support for English-language media since there are now more Englishlanguage speakers residing in Macau and the territory promotes itself as an international city, Victor Chan said no. “Do you think we need to support Filipino [Tagalog] newspapers? No. According to the Basic Law, the official languages are Chinese and Portuguese. And according to the law, we need to support media in these two languages. Other languages depend on the market. In local schools, there are no compulsory English lessons, either.” For the Government Information Bureau director, media is a business in which the “strong and bright” survive. “If you are not bright enough, if your article is not good, if the content of the media is lousy, even with our subsidy, you will be finished… How you attract media users to your media is your problem, not my problem.”

China establishing new anti-corruption agency

forward by the Party committee of the Supreme People’s Procurator (SPP) and approved by the central authority. At vice-ministerial level, a fulltime member of the procurator’s committee will hold a concurrent post as head of the new anti-graft agency, Qiu said. The new agency will be better organised and further help the SPP handle major cases, circumventing institutional obstacles, he said. China established the anticorruption bureau under the SPP in 1995. Mr. Qiu said that after almost 20 years of development, it was struggling to meet the demands of anti-corruption work under the new circumstances due to the poor effectiveness of handling corruption cases.

hina will establish a new antigraft body to further pressure corrupt officials, deputy Procurator-General Qiu Xueqiang has said. Mr. Qiu is quoted by Xinhua News Agency as saying that the plan for a new anti-graft agency was put

November 4, 2014

Macau MPI grants MOP2 million in 3Q Macau Polytechnic Institute disbursed more than MOP2 million in financial support in the third quarter of the year, with its student association receiving the largest slice of the budget. According to the Official Gazette, MPI awarded a total of MOP2.16 million between July and September. Its student association received MOP268,400 to finance its activities from September to December. The Institute also disbursed several grants to students from Mainland China, around MOP9,000 each. Portuguese students in exchange programmes here also received subsidies of around MOP4,600 for food, water and electricity.

A premium problem for Sands China Since the beginning of the year, Sands China has increased the number of its premium mass tables by 25 percent but saw the revenue from these plunge 32 percent. Increased competition means more problems ahead for the mass segment leader in Macau, investors say Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

eutsche Bank says it ‘flew a bit under the radar’ during the current earning season: Sands China has a problem with its mass premium segment in Macau.The operator continues to increase the number of tables for its highend mass players but revenues keep falling. Investors are starting to take notice. According to a recent Morgan Stanley report on Sands China’s third quarter results, the casino operator increased the number of mass premium tables in Macau from 248 in the first quarter to 314 in the third quarter of

this year. That’s a 25 percent jump in only nine months. The big bet on the upper side of mass market is below investors’ expectations, however. The premium mass win per table in Sands casinos here reached US$17,600 in the third quarter of the year, below the win rate recorded in the second quarter (US$20,700) and first quarter (US$26,000), Morgan Stanley says. Since the beginning of the year, Sands China has made 25 percent more mass premium tables available but revenue

per table has decreased 32 percent.

Under pressure Morgan Stanley said in its report that Sands China’s premium mass is ‘under pressure’, while Deutsche Bank said that it ‘is difficult to ignore the materiality of the mass table margin changes’. In fact, the figures from the third quarter are clear of the troublesome trend affecting the operator who runs casinos here for Las Vegas Sands. Morgan Stanley recalls that in the third quarter the company’s revenue growth

in the high-end mass sector slowed to 13 percent yearon-year, falling behind for the first time the grind mass, whose revenues climbed by 16 percent. Compared to the second quarter, mass premium revenues fell 7 percent in the period between July and September, while the contribution to overall revenues diminished from 44 percent (2Q) to 42 percent (3Q). The problem for Sands China is that mass premium has been a big bet to drive up revenues and profits in Macau. Since the third quarter of 2013, the company has moved 100 tables from VIP rooms to mass floors. Around 60 of these have been allocated to mass premium spaces, Deutsche Bank reported. Today, the mass premium segment represents 27.3 percent of all Las Vegas Sands tables in Macau, an all-time record. In the first quarter, premium tables accounted for only 22 percent. As the market leader for mass segment in Macau, Deutsche Bank analysts says the slowdown of premium mass ‘is not a surprise’ given the increased competition for this type of customer in the territory but Morgan Stanley also reminds that the fact Dragon Palace ‘has not been a success’ is also affecting mass

premium performance here.

Red zone According to Deutsche Bank data, the slowdown of premium mass in Sands China has been even more severe than grind mass. The premium mass segment went to the red zone in the third quarter, with revenues contracting 8.5 percent compared to a year ago and a sharp contrast to the previous quarters. In 2Q, revenues from the segment increased 22.2 percent (yearon-year) and in 1Q went up 68.6 percent. The profit premium of a premium mass table compared to a base mass table is also diminishing. In the third quarter, premium tables accounted for 34 percent of total profits coming from mass players compared to 40 percent in 2Q and 39 percent in 1Q. For Sands China, premium mass outlook is not bright until mid-2015. ‘The conclusions are somewhat obvious’, says Deutsche Bank: premium mass is likely to see a negative year through the first half of 2015 from a profit margin perspective. The opening of Galaxy Phase 2 next year will be an additional factor affecting the mass segment of Sands China.

AMCM to further diversify investment portfolio

acau’s fiscal reserves equities investment has primarily been managed through external fund managers now and are getting good results, said Anselmo Teng Lin Seng, President of the Administrative Committee of the Monetary Authority of Macau (AMCM). Mr. Teng said that with a substantial increase in excess reserve, AMCM can adopt a comparatively more progressive investment strategy. The total amount of the city’s fiscal reserves was MOP244.57 billion as at September 30, comprising MOP116.46 billion as basic reserve,

MOP125.20 billion as excess reserve and an accumulated investment profit of MOP2.91 billion. Mr. Teng added that the joint release of zodiac notes for two different years would not necessarily become routine and depended on the year’s situation as well as that at the China banknote printing factory.

Gaming revenue keeps dropping The Secretary for Economy and Finance, Francis Tam, said October’s gaming revenue would suffer a more

than 20 percent decrease compared to the same period last year, but within market expectations. He said that in the event that gaming revenue dropped five consecutive months, it [still] complies with the government’s anticipation of the sector slowing down and he expected the situation to last for a relatively lengthy period. Mr. Tam stressed that the government’s fiscal situation wouldn’t be affected due to the abundant fiscal reserves. In addition, the administrative budget for next year is almost finished. The government

will adopt a more cautious strategy towards expected income and expenditure. Both Mr. Tam and Mr. Teng were speaking to reporters on the sidelines of the 40th anniversary celebrations of the Luso International Bank (LIB). The General Manager of the bank, Jiao Yun Di, said LIB has rapidly grown to be one of the major commercial banks in Macau with 11 branches since the handover. At the ceremony, the bank also made a donation of MOP400,000 to Tung Sin Tong Charitable Society and Kiang Wu Hospital Charitable Association. J.K.

November 4, 2014

Macau Brands

Trends

Is Gin in? Raquel Dias newsdesk@macaubusinessdaily.com

n Macau it’s safe to say that the biggest trends in bars and restaurants when it comes to drinks is either brandy or wine. Cocktails, enjoyed mostly by ladies, are quietly gaining momentum. Elsewhere in the world, however, the public is rediscovering certain drinks, a trend that is also quietly growing on this side of the globe. Vodka certainly had its glory years but the market is now falling in love with another spirit: Gin. The European nectar is easily distinguished by its spicefilled aroma. The rich flavour from this spirit actually comes from juniper berries (a spice, not a real berry). For a long time the drink, which originated in Holland, was consumed as a remedy until its usage became popularised by the ‘gin houses’ of Great Britain. These days, you can find different types of gin in the market. Although sold at different prices, this rarely reflects on the quality of the drink. Instead, you should trust your palate and go with what feels right. See below for a quick guide. London Dry Gin – Probably the most common type of gin. The spirit is blended with botanicals, with juniper the main ingredient. Popular brands include Beefeater, Boodles, Gordon’s, and Tanqueray. New Western / International Style Gin – often known as craft gin, these new types of gin use the same type of distilling process of traditional gin but are infused with other flavours apart from juniper berries. This style of gin offers flavour profiles unlike those you might expect. Some brands to try are Hendrick’s Gin, Aviation Gin and Dry Fly Gin. Genever - the original gin. Old Genever tends to be sweet and aromatic, while young Genever has a lighter body and drier palate.

Gaming industry braces for worst revenue drop on record October’s revenues are likely to drop 20 to 23 percent, according to analysts. Operators are getting cautious in their remarks about Macau’s future, while casino shares have already lost 11.2 percent since January

ctober is set to be the worst month on record for casino revenues in the world’s biggest gambling hub of Macau as China’s pervasive war on corruption and slowing economic growth dampen the appetite to wager. Gambling revenues for the month are expected to have fallen some 2023 percent year-on-year, analysts say, the sharpest drop since the territory started keeping records. October would also be the fifth consecutive month of decline following two years of rapid growth which has seen Macau surpass Las Vegas in terms of revenue sevenfold. The Special Administrative Region is the only place where casino gambling is legal in China, and the Macau Government is due to report the October revenue figures today.

Rainy season “It is worse in October than it was before October,” Steve Wynn, chief executive of Wynn Macau Ltd, told a recent earnings call. The casino operator is building a US$4 billion integrated resort, complete with lake and air-conditioned gondolas, in the territory. “I don’t know if it’s a squall or if we are in the rainy season, or how long it will last but we are still very bullish on Macau,” the gaming magnate added. In a note to clients yesterday, Wells Fargo Securities, LLC, said that despite Wynn showing results last week that were 2 percent above what the market was expecting, the management’s tone was cautious. ‘Specifically, there is limited visibility on how long current conditions in Macau will persist with October trending below prior months’, wrote the US bank.

Casino operators in Macau are also feeling the pressure on profit margins and the trend is likely to remain for the upcoming months. This was underlined by Steve Wynn and a few weeks ago by Sheldon Adelson, owner of Las Vegas Sands. With revenues likely to register declines or single digit-growth until at least mid2015, the uncertainty here will likely persist. For October, the consensus among investors is that mass revenues will go up 10 percent although Wells Fargo forecasts that growth could be less than that.

Behind competition Gaming shares also continue to underperform the rest of the market. Last week, casino stocks went up 1.8 percent, below the 2.4 percent gain recorded by S&P500, the index where the world’s largest corporations are listed. Since the beginning of the year, gaming shares have already lost 11.2 percent of their value and underperformed the rest of the market (S&P500) by 20.1 percent, showing the growing pessimism of investors in Macau. Casino revenues comprise about 80 percent of Macau’s income. Beijing’s two-year anti-corruption campaign has taken its toll on the gaming sector, keeping big-spending, wealthy gamblers away - data from Macau’s gaming and inspection bureau shows that VIP revenue accounted for a record low 56 percent of total revenues in the third quarter. A slew of factors over the past six months have also cut the number of so-called ‘mass market’ gamers from the mainland. Many small-time gamblers combine visits to Macau with Hong Kong, which is an hour away by

high-speed ferry. Tourist numbers have fallen after China restricted access to Hong Kong due to prodemocracy protests in the city. Tighter visa regulations by the Macau Government have also shortened the number of days visitors can stay.

Cyclical Macau Government curbs on the popular UnionPay credit card, which gamers widely used to circumvent China’s strict currency regulations, have also curtailed gambling spend, as have the tight credit conditions and falling housing prices on the mainland, where economic growth is slowing. Casino operators are also waiting to gauge the impact of a ban on smoking on mass casino floors, which began in October. Hong Kong listed gaming shares have fallen between 20-38 percent since the start of the year, substantially underperforming the benchmark Hang Seng Index, which is up 2 percent in the same period, highlighting investors concerns about Macau’s gambling prospects. Casino operators, however, are more optimistic about the future: Macau remains on track to become home to eight new casino resorts in the coming three years. Sheldon Adelson, chief executive of Las Vegas Sands Corp and Sands China Ltd, has also described Macau casino operators’ current woes as cyclical. “It’s only a matter of time before the cycle reverses itself,” he said at a recent post-earnings briefing. “No-one has ever suggested that the behaviour of Chinese and Asian people, which has been established over a 3,000-year history, is going to change.” L.G. with Reuters

November 4, 2014

Gaming

Trump opposes plan for his namesake casinos: bankruptcy

onald Trump and a New Jersey law firm objected to approval of disclosure material explaining the Chapter 11 plan submitted for Trump Entertainment Resorts Inc., the owner of two Atlantic City, New Jersey, casinos. The plan calls for senior lenders to infuse US$100 million of new capital and become owners in exchange for debt. First-lien lenders include Icahn Partners LP and affiliated funds. The acquisition is contingent on obtaining tax relief and concessions from the state and city. Donald Trump said he’s had “virtually no involvement in operation and management” of the company since a prior bankruptcy. He faulted the disclosure statement for remaining “deliberately coy” about whether the company intends to sell assets “unbranded” or with continued use of his name. He also criticized the disclosure statement for not explaining the risks if his name can no longer be used. In litigation in state court and bankruptcy court, Donald Trump has said the company’s casinos – the Trump Taj Mahal and the now-closed Trump Plaza Hotel & Casino – are in violation of trademark license agreements allowing use of his name. Law firm Levine Sklar Chan & Brown PA claimed to have a US$1.25 million secured claim resulting from victories in reducing the casinos’ tax assessments. The firm said the disclosure statement doesn’t properly address how that claim will be paid. Yesterday, Trump Entertainment got court permission to engage Sills Cummis & Gross PC as “government affairs/regulatory” counsel. The casino operator scored a victory this month when the bankruptcy judge permitted cuts in benefits and wages for workers at the 2,000-room Taj Mahal. The union is appealing the reductions and work rule changes that mean employees will take home less. The Trump Entertainment casinos confirmed a reorganization plan in 2010 when the existing first-lien debt was issued. Second-lien creditors became the primary shareholders. The new bankruptcy began on September 9.

Election Day Ahead of today’s Election Day, voters will decide. With Atlantic City,

New Jersey, struggling as casinos proliferate along the East Coast, Massachusetts may put an end to its gambling industry before it begins. Massachusetts Governor Deval Patrick in 2011 signed legislation to allow casino gambling to bring tax money and jobs to a state still sputtering from the recession. Since then, Penn National Gaming Inc., Wynn Resorts Ltd. and MGM Resorts

International have been awarded licenses to set up shop. A citizen-backed initiative is now asking residents to reject the law, saying betting parlours will bring crime and little economic gain. Massachusetts would be the first state to rescind casino gaming, according to Chris Moyer, spokesman for the American Gaming Association, a Washington-based trade group.

MGM, Penn and Wynn have given more than $7 million to keep that from happening, blanketing the state with ads trumpeting the jobs to be had. Polls have found lagging support for repeal. Separately, other measures would expand gambling at venues in South Dakota, Colorado and Rhode Island. Bloomberg

GT Advanced’s Apple settlement threatened by lack of secrecy

he settlement between GT Advanced Technologies Inc. and Apple Inc. may blow up because the bankruptcy judge in Manchester, New Hampshire, refused to keep a court paper under seal that explained the commercial relationship between the two companies. Apple had provided Merrimack, New Hampshirebased GT Advanced with funding to build more than 2,000 furnaces to make synthetic sapphire. GT Advanced filed for Chapter 11 protection on October

6, weeks after Cupertino, California-based Apple, said it wasn’t using the product in its new iPhone 6. The bankruptcy filing sent GT Advanced stock plummeting 93 percent to 80 cents in one day. Bonds plunged to 39 cents on the dollar from 157.5, a 75 percent contraction. A few days after bankruptcy, GT Advanced filed an affidavit under seal explaining the reasons for bankruptcy. When the two companies settled, the agreement required that the affidavit be removed from

the court docket, with all physical and electronic copies destroyed. At Friday’s hearing, U.S. Bankruptcy Judge Henry Boroff said he would unseal the affidavit. The judge said he would probably sign a formal order next week. If it’s not cancelled in the meantime, the settlement itself would come to Boroff for approval on November 25. The settlement promises numerous benefits for GT Advanced. It gives Apple a US$439 million claim secured only by the furnaces. GT Advanced would have four

years to sell the furnaces and pay off Apple. If the aggregate sale prices exceed Apple’s claim, there will be something for creditors. The settlement also gives GT Advanced the right to have US$150 million in new financing with a lien ahead of Apple. The agreement allows GT Advanced to retain ownership of intellectual property, with Apple having licenses to use some technology. Boroff said at a prior hearing that he didn’t see much commercially sensitive information in the sealed

documents. The company listed assets of about US$1.5 billion and liabilities of US$1.3 billion as of June 28. Debt includes US$434 million in two issues of 3 percent convertible notes and US$145 million owning to trade creditors. Revenue for six months ended June 28 was about US$80.5 million, resulting in a US$139 million operating loss and $127.8 million net loss. Last year, the net loss was US$82.8 million on US$299 million in revenue. The year’s operating loss was US$91.1 million.

November 4, 2014

Greater China

HSBC PMI hits 3-month high The level of output in factories fell to a five-month low of 50.7

rowth in China’s vast factory sector rose to a three-month high in October as smaller firms saw more orders, a private survey showed yesterday, easing fears of a sharp slowdown but still pointing to a sluggish economy that is losing momentum. The final HSBC/Markit Manufacturing Purchasing Managers’ Index(PMI) edged up to 50.4 in October, up from the September’s reading of 50.2, but unchanged from a preliminary reading. However, while the headline number looked slightly better, growth rates slowed in several key areas heading into the fourth quarter, putting the government’s full-year growth target of 7.5 percent further in doubt. Growth in new orders and new export orders - proxies for domestic and foreign demand, respectively - fell to their lowest in four to five months, but managed to hold above the 50-point level that separates growth from contraction on a monthly basis. “Overall, the manufacturing sector continued to stabilise in October, however the sequential momentum likely weakened,” said Hongbin Qu, chief economist for China at HSBC. Lacklustre final demand also weighed on the labour market, which shrank for 12th consecutive month in October, though the rate of job-cutting stayed at the slowest since July.

We still see uncertainties, given the property downturn as well as the slow pace of global recovery, and expect further monetary and fiscal easing measures in the months ahead Hongbin Qu, chief economist for China, HSBC

A similar survey by China’s National Bureau of Statistic(NBS) released on Saturday showed factory activity unexpectedly fell to a five-month low last month as firms struggled with slowing orders and rising borrowing costs. The official Purchasing Managers’ Index (PMI) eased to 50.8 in October from September’s 51.1, the National Bureau of Statistics said on Saturday. Analysts polled by Reuters had forecast a reading of 51.2.

The official PMI is focused on larger, state-owned factories, as opposed to the HSBC/Markit PMI which focuses more on smaller manufacturers in the private sector. An official reading on the services industry earlier on Monday showed growth in that sector hit a nine-month low in October as the cooling property sector weighed on demand. The official nonmanufacturing Purchasing Managers’ Index (PMI) fell to 53.8 in October from

September’s 54.0, the National Bureau of Statistics said. But the reading was still comfortably in expansion territory. The services sector has been more resilient than the manufacturing sector and is creating more jobs, which partly explains why the government has so far refrained from more aggressive policy easing to support the slowing economy. Hurt by unsteady exports, a housing downturn and cooling investment growth, the Chinese economy is in danger

of missing the government’s growth target this year for the first time in 15 years. Third-quarter growth of 7.3 percent was the weakest since the global financial crisis. Most analysts believe authorities will continue to roll out modest support measures in coming months to lift activity, but they are divided over whether it would act more aggressively, such as by cutting interest rates, unless there is a risk of a sharper slowdown. Reuters

PBOC to free up bank cash after intervent

The world’s largest currency pool is shrinking as the yuan heads for its first annual loss i

educed currency market intervention by China’s central bank is fuelling speculation it will cut lenders’ reserve requirements for the first time in two years to boost the supply of yuan. The nation’s foreign-exchange reserves slid by a record US$105.5 billion in the third quarter to US$3.89 trillion as the People’s Bank of China scaled back dollar purchases that add yuan to the financial system. Major lenders will need to set aside 19.5 percent of deposits in reserve by June 30 and 19 percent by the end of 2015, down from 20 percent now, based on the median forecast in a Bloomberg survey published October 29. The PBOC has already cut reserveratio requirements for some lenders and is pumping cash into money markets to lower borrowing costs. The yuan fell 3.3 percent against the dollar in the first four months of this year before rising 2.4 percent over the next six months.

Decreased intervention Nomura estimated the central bank bought a net US$21 billion in

the currency market in the six months through September to limit yuan gains, down from US$106 billion in the first quarter when it was seeking to encourage two-way moves in the currency. The central bank often takes steps to mop the yuan sold in so- called sterilization. The yuan is close to a reasonable, equilibrium level, Guan Tao, head of the balance of payments department at the State Administration of Foreign Exchange, wrote in an article in the Shanghai Securities News on October 30. As China promotes a marketoriented exchange-rate mechanism and the central bank refrains from regular intervention, the yuan’s exchange rate will swing and “we need to stay composed,” he wrote.

Liquidity injection The central bank provided about 200 billion yuan (US$32.7 billion) of funds to some national and regional lenders in October, after injecting 500 billion yuan into China’s five biggest banks in September, according to people familiar with the matter. The monetary authority also lowered the reserve ratio twice for selected banks

in the second quarter. The PBOC last announced a system-wide cut in 2012. The net foreign-exchange rise on the PBOC’s balance sheet was 774.8 billion yuan in the first nine months of this year, according to Bloomberg calculations based on central bank data. That’s almost 1 trillion yuan less than that of a year earlier.

Money rates The seven-day repo rate, a gauge of interbank funding availability, declined 235 basis points in the first three quarters of this year, the biggest nine-month slide since the 2008 world financial crisis. The benchmark seven-day repo rate will move between 2.5 and 3 percent in the next three months, according to about 63 percent of 107 respondents to a survey conducted last week by Haitong Securities Co., the nation’s second-largest brokerage. That’s up from 18 percent of those surveyed in a similar poll a month earlier, when 76 percent of the people predicted a range between 3 and 3.5 percent. China is opening its interbank bond market to non-financial firms.

Qualifying participants will require minimum net assets of 30 million yuan and use a separate trading platform to banks, brokerages and

November 4, 2014

Greater China Services sector growth slows as property weighs on demand

New anti-corruption agency China will establish a new anti-graft body to further strengthen pressure on corrupt officials, deputy Procurator-General Qiu Xueqiang has said. Qiu told Xinhua in an exclusive interview that the plan for a new anti-graft agency was put forward by the Party committee of the Supreme People’s Procuratorate (SPP) and was approved by the central authority. A vice-ministerial level, full-time member of the procuratorial committee will hold a concurrent post as head of the new anti-graft agency, Qiu added.

China’s annual economic growth slowed to 7.3 percent in the third quarter

hina’s services sector grew at its slowest pace in nine months in October as a cooling property sector weighed on demand, a survey showed yesterday, adding to signs of fragility in the world’s second-largest economy. The services sector has been more resilient than the manufacturing sector and is creating more jobs, which partly explains why the government has so far refrained from more aggressive policy easing in supporting the slowing economy. The official non-manufacturing Purchasing Managers’ Index (PMI) fell to 53.8 in October from September’s 54.0, which was the weakest reading since January, the National Bureau of Statistics said. But it was still comfortably above the 50-point mark that separates growth from contraction on a monthly basis. The sub-index of new orders inched up to 51.0 in October from September’s 49.5, which was the lowest since December 2008. “Sub-indices for sectors such as railway transport and real estate remained below the 50 point and market demand weakened,” the bureau said. The sub-index measuring employment fell to 48.9 in October - the fourth straight month when it was below 50, and was down from September’s 49.5. An official survey published on Saturday showed China’s factory activity unexpectedly fell to a fivemonth low in October as firms fought slowing orders and rising costs in the cooling economy, reinforcing views that the country’s growth outlook is hazy at best.

Global quantum network in 2030

KEY POINTS Oct official services PMI at 53.8 vs 54.0 in Sept New orders inch up but property weakness persists Cooling services sector adds to slowdown fears China’s annual economic growth slowed to 7.3 percent in the third quarter, the weakest pace since the global financial crisis, even as the government rolled out more stimulus measures to avert a sharper slowdown. The two surveys suggest a further loss of economic momentum heading into the fourth quarter. Analysts had

already expected full-year economic growth to miss the government’s fullyear target of around 7.5 percent, even after it rolled out a series of support measures. Still, top policymakers have issued a steady stream of reassurances about the economy in recent weeks, citing among other things a strong services sector and a still resilient labour market. Policy measures so far this year include accelerated construction of railway and public housing projects, cuts in reserve requirements (RRR) for some banks and loosening of restrictions on property purchases to support the cooling housing market. The services sector made up 46.1 percent of gross domestic product in 2013, surpassing the secondary sector - manufacturing and construction - for the first time, as the government aims to create more jobs and boost domestic consumption. Reuters

tion

in five years

China will build a global quantum communication network by 2030, said a leading Chinese quantum physicist on Sunday. “China’s quantum information science and technology is developing very fast and China leads in some areas in this field,” said Pan Jianwei, a Chinese quantum scientist and professor at the University of Science and Technology of China. The field of quantum communication, the science of transmitting quantum states from one place to another, grabbed global attention in recent years after the discovery of quantum cryptography, which is described as a way of creating “unbreakable” messages.

Defaulters information revealed Chinese courts and banks will establish an information sharing system to punish court order defaulters and facilitate enforcement, the Supreme People’s Court (SPC) announced on Sunday. The SPC and the China Banking Regulatory Commission have jointly issued a circular on sharing such information online, and according to the circular, Chinese banks will take measures such as restrictions on loans and issuing credit cards to people who have defaulted on court orders. The banks will also help the courts in information inquiry, fund freezing and seizing regarding such defaulters’ cases, the circular said.

Xi welcomes more Taiwan business The very high RRR is no longer necessary. If growth is weak, in order to give the market a moderately strong signal, an RRR cut is appropriate Changchun Hua, economist, Nomura

insurers, according to an October 17 statement posted yesterday on the website of the National Association of Financial Market Institutional

Investors. China’s inflation-adjusted threemonth repo rate is 2.6 percent, the highest among major economies.

Similar-tenor real interest rates in the U.S., Europe and Japan showed negative yields of 1.47 percent, 0.22 percent and 0.82 percent, respectively, David Goldman, a Hong Kong-based strategist at Reorient Financial, wrote in an October 27 report. Bloomberg News

Chinese President Xi Jinping visited the pilot development zone in Pingtan in southeast China’s Fujian Province championing the flow of Taiwan’s products to the mainland. The pilot zone was established in 2009 to improve crossStrait business cooperation. During his visit Xi urged local officials to continue to be innovative and to preserve the healthy cross-Strait business and industrial cooperation environment. Xi visited a local factory affiliated to TPK, a touch solution provider from Taiwan, where a meeting with Taiwanese entrepreneurs was held.

November 4, 2014

Greater China Capital account opening push China will advance the liberalisation of its capital account by encouraging funds to enter or leave its borders and allowing foreign investors to participate in domestic mergers and acquisitions, the deputy chief of the central bank said. Deputy Central Bank Governor Yi Gang said China will also relax the restrictions for Chinese investing overseas so that individuals and companies can play a leading role in foreign investment. Opening the capital account is one of the hardest financial reforms that China is pursuing as it requires authorities to cede control in parts of the economy, and the fear is that the change may destabilise markets if it happens prematurely.

HKE Fund investment income drops

Investment income earned by Hong Kong’s Exchange Fund dropped 25 percent year on year over the first nine months of 2014, the Hong Kong Monetary Authority (HKMA) said yesterday. The fund, which is used to back the Hong Kong dollar, posted investment income of HK$37.7 billion (US$4.86 billion) for January to September, compared with HK$50.5 billion during the same period a year earlier. The Exchange Fund recorded investment losses of HK$18.7 billion in the third quarter after second-quarter investment income was adjusted to HK$43.3 billion. The HKMA expects more market volatility in the fourth quarter, given the United States has stopped buying bonds and is moving towards a cycle of gradually increasing interest rates.

Watchdog hunts flawed oil pipelines China’s work safety watchdog will spend three years to find and tackle flaws in oil pipelines, according to the State Administration of Work Safety. The work safety committee of the State Council has recently issued a notice urging more efforts to crack down on damage on oil pipelines, including unauthorized construction nearby, said the administration on Saturday. A campaign to pinpoint risks of oil pipelines started at the end of last year, with about 30,000 flaws already found, the notice said. The efforts to address these problems have been moving slowly due to various difficulties, including a lack of funds, but the State Council has set up a task force to facilitate the processes, it said.

Xi stresses CPC work style improvement Chinese President Xi Jinping has called for continued and solid efforts in the Communist Party of China’s drive to tighten Party discipline. Xi made the remarks during an inspection tour at the weekend to southeast China’s Fujian Province where he worked from 1985 to 2002 and served as the governor of the province in the late 1990s. “Party organizations at all levels must fulfil their promises and correct their work style with no discount,” said Xi, adding those who are attempting to wait out the discipline drive before relapsing into old behaviour must discard such disillusions.

Sydney set to become yuan hub The agreement would reduce the costs for Australian dollar-renminbi transactions Cecile Lefort

ydney, Australia’s largest city, is set to become the latest hub for trading China’s yuan currency, with the Chinese and Australian authorities expected to ink the agreement this month. The deal would see Sydney join Seoul, Paris, Luxembourg, London, Frankfurt, Singapore and Hong Long as one of the global centres for trading the yuan, or renminbi, and bolsters China’s efforts to promote the use of its currency in international trade. China is Australia’s single biggest export market with two-way trade flows of around A$150 billion (US$131 billion) in 2013. However, only about 1 percent is conducted in renminbi. “It will take time to change that but maybe within five years, we could see the ratio double,” said Anthony Issa, deputy treasurer at Industrial and Commercial Bank of China (ICBC). The People’s Bank of China is highly likely to appoint a clearing bank later in November, said Issa, a key step towards. Sources familiar with the situation said five Chinese banks, namely Bank of China, ICBC, China Construction Bank Corp and Bank of Communications and Agricultural

KEY POINTS China’s central bank to appoint clearing bank Nov 17 BoC, ICBC, CCB & BoCom, AgBank vying for role Deal would include bonds, FX and equities Bank of China were vying for the role. The appointment would make it easier for investors to complete financial transactions, while lowering the cost of doing business for importers and exporters. Instead of paying foreign exchange fees in Australian dollarU.S dollar-renminbi, the agreement would reduce the costs to Australian dollar-renminbi. Issa said the agreement would help expand the range of financial products including bonds, foreign exchange and equities. Australia still lags its global competitors in adopting the “redback”, despite an early start in 2013 when a private sector-led

initiative kicked off with the aim of expanding yuan business in the country. Australian borrowers have recently started to issue yuan-denominated bonds with securities listed on the Australian stock exchange but cleared in Europe or Asia. Earlier this year, a portion of the massive US$7.8 billion loan for Australia’s Roy Hill iron ore project was funded in yuan. China’s thirst for minerals has fuelled more than 20 years of unbroken economic growth in Australia. The two countries are aiming to sign a bilateral free trade agreement by the end of the year. Reuters

Wanted: 500,000 pilots for The civil aviation authority’s own training unit can only handle up Fang Yan and Matthew Miller

hina’s national civil aviation authority says the country will need to train about half a million civilian pilots by 2035, up from just a few thousand now, as wannabe flyers chase dreams of landing lucrative jobs at new air service operators. The aviation boom comes as China allows private planes to fly below 1,000 metres from next year without military approval, seeking to boost its transport infrastructure. Commercial airlines aren’t affected, but more than 200 new firms have applied for general aviation operating licences, while China’s high-rollers are also eager for permits to fly their own planes. The civil aviation authority’s own training unit can only handle up to 100 students a year. With the rest of China’s 12 or so existing pilot schools bursting at the seams, foreign players are joining local firms in laying the groundwork for new courses that can run to hundreds of thousands of dollars per trainee. “The first batch of students we enrolled in 2010 were mostly business owners interested in getting a private license,” said Sun Fengwei, deputy chief of the Civil Aviation Administration of China’s (CAAC) pilot school. “But now more and more young people also want to learn flying so that they can get a job at general

aviation companies.” While uncertainties remain for what will be a brand new industry, firms are betting they can make money and trainee pilots are convinced they can land dream jobs. Among them is Zong Rui, a 28-year-old former soldier in the People’s Liberation Army from Shandong province in east China, attending a pilot school in Tianjin, an hour’s drive from Beijing. “The salary is good for a general aviation pilot,” Zong told Reuters by telephone, preparing for a training session. Even without a job lined up, Zong is certain money he borrowed to learn how to fly will pay off: “I can easily pay back the 500,000 yuan (US$81,750) tuition in two years, once I get a job.”

Open skies By the end of the year, industry executives expect Beijing to issue detailed guidelines on how it will implement plans unveiled in 2010 to open up airspace below 1,000 metres in 2015, expanding the open skies to airspace below 3,000 metres by 2020. Global makers of small planes, like Cessna Aircraft Company, Pilatus Aircraft Ltd or Piaggio Aero Industries SpA, have long had their sights on China’s burgeoning general aviation market. Now they’re being joined by air

service providers like Tasmania-based Rotor-Lift Aviation, which has helped train pilots in Hong Kong, Malaysia and other Asian countries. “I came here for opportunities,” said Peter McKenzie, Rotor-Lift

November 4, 2014

Greater China Daimler to tune Mercedes-Benz to Chinese tastes A R&D centre caps a series of moves China’s head of the company has made since 2012, including reforming marketing and sales and raising dealer numbers Norihiko Shirouzu

aimler AG has opened a research and development (R&D) centre in Beijing tasked with further tuning its Mercedes-Benz brand to wealthy Chinese tastes and closing the sales gap with Audi AG and BMW AG . The German automaker’s move demonstrates a desire to “embed us more deeply in China, to make cars best suited to China,” Hubertus Troska, Daimler’s China head, told Reuters. Daimler is expanding its MercedesBenz brand in China at a time when an investigation into anti-competitive practices in the auto industry is prompting car makers to lower prices. Mercedes-Benz itself has previously said it was co-operating with an investigation into unspecified matters. The new R&D centre nevertheless signals commitment to a market Troska said would become MercedesBenz’s largest in as early as one or two years. With that in mind, the automaker plans to raise the number of Mercedes-Benz engineers and other specialists in Beijing to 500 by the end of next year from 350. The R&D centre caps a series of moves Troska has made since becoming China head in 2012, including reforming marketing and

sales and raising dealer numbers. Its focus on Chinese tastes should help Mercedes-Benz catch up in the local luxury car segment with Volkswagen AG’s Audi and BMW, he said. Researcher LMC Automotive projects Mercedes-Benz to sell 291,000 vehicles in China this year, compared with 581,000 for luxury market-leader Audi and 448,000 for second-placed BMW. Troska said new models such as the GLA compact SUV should help Mercedes-Benz sell “significantly more than 300,000 units next year.” LMC Automotive puts MercedesBenz’s 2015 sales at 386,000 vehicles.

Younger drivers Daimler has invested about 110 million euros (US$138.30 million) over recent months in the new R&D centre and in another centre it recently opened in Beijing with local partner BAIC Motor Corp. Such investments are more than appropriate, Troska said, given the “growth potential in China is unique.” Automobile sales growth in China has slowed in recent months in tandem with a slowdown in the overall economy. But automakers estimate overall annual demand will

be as many as 35 million vehicles by 2020, from 22 million vehicles last year. Among the R&D centre’s more immediate tasks is better tuning Mercedes-Benz in with its Chinese customer base. The average age of the brand’s customers in China is 38 compared with Germany where the age is about 20 years older, a company spokesman said. High on the wish list of these younger buyers is in-car Internet access, Troska said. Other features popular with wealthy Chinese include spacious back seats, advanced entertainment

systems and climate control, because many customers have chauffeurs and drive themselves only at weekends. Also as part of the China focus, Troska said Mercedes-Benz is considering a new super premium car built particularly with the Chinese consumer in mind. “The (flagship) S-class is uniquely positioned and has a tradition also in China as being a top-of-the-line boss’ car. Is there an opportunity to position even the S-class slightly higher? I think there is,” Troska said. “You will very soon hear about it,” he added, declining to elaborate. Reuters

China aviation gold rush to 100 students a year

training manager. McKenzie has been in talks to establish a training programme for Chinese general aviation pilots in Australia as well as a joint venture. Taking training outside China is

an option also favoured by China’s biggest aircraft maker, Aviation Industry Corporation of China, which has invested in a flying school in South Africa. Other foreign players include

Spain’s Indra Sistemas, the first foreign company certified by CAAC to implement a full flight simulator for helicopters in China. Canada’s CAE Inc also operates a partly-owned flight training centre in south China.

KEY POINTS Beijing moving to open up low-level airspace More than 200 firms seek new general aviation licences New wealthy also learning how to fly own planes

While the majority of new trainee pilots set their sights on a license as a means to a career, for some among China’s more affluent classes it’s a key to a flamboyant new hobby. For Li Zheng, 33-year-old owner of an advertising company, driving a fancy car isn’t that exciting anymore: He has set his sights on flying his own plane. “I love sports, especially those with a challenge, like flying,” said Li, a former hot air balloon racer, speaking just before a training flight. Li’s ultimate goal: buying an airplane to fly with his wife, who recently joined Abu Dhabi-based Etihad Airways as a flight attendant. Reuters

November 4, 2014

Asia S.K. monitoring market volatility

Australian inflation gauge picks Sydney again led homes’ annual price growth of 13.1 percent in

South Korea’s central bank said it will work towards preventing herd behaviour in financial markets with regards to the yen-won exchange rate, and watch market movements very closely following an emergency meeting yesterday. The meeting was held in response to the Bank of Japan’s decision to expand its massive stimulus spending last week, which weakened its currency further against the won. The Bank of Korea also said it would keep a close eye on the effects of a weakening yen on local exports, the real economy and financial market stability.

Aussies revise jobs data Australia’s official statistician on Monday said it would issue revised figures on seasonally adjusted employment on November 4, after problems with its jobs survey led it to take the highly unusual step of suspending its adjustment process. The Australian Bureau of Statistics said it would issue revised seasonally adjusted estimates for total employed persons, total unemployed persons and the unemployment rate for the period December 2013 to September 2014.

IFSB issues draft guidance

Sidney’s skyline

private gauge of Australian price pressures picked up slightly last month particularly in the tradable sector, suggesting a recent depreciation in the local currency may have put a floor on overall inflation. The TD Securities-Melbourne Institute’s monthly measure of consumer prices edged up 0.2 percent in October, following a 0.1 percent rise in September. The annual pace of inflation quickened to 2.3 percent from 2.2 percent, but was still near the floor

of the Reserve Bank of Australia’s (RBA) long-term target band of 2-3 percent. Notably, prices for tradable goods and services sped up to an annual pace of 2.2 percent, up from 1.7 percent and 1.9 percent in the past two months. This could be “a sign of things to come with the sustained depreciation of the exchange rate from the peak of US$0.95 in early July,” said Annette Beacher, head of Asia-Pacific Research at TD Securities.

The trimmed mean rose 0.1 percent in October, following a 0.1 percent rise in September. The annual pace sped up to 2.5 percent from 2.3 percent, but was still well down from April’s 3.1 percent. Inflation excluding fuel, fruit and vegetables increased by 0.1 percent in the month, and ran at just 2.0 percent for the year. The slowdown in prices for the non-tradables sector continued into October with annual inflation now at 2.4 percent, well off a high of 3.4 percent earlier in the year.

Asian factory growth ebbing The Kuala Lumpur-based Islamic Financial Services Board (IFSB) has released draft guidance on liquidity risk management for Islamic banks and a new standard for regulatory supervision, as the industry body tightens oversight of banking practices. IFSB guidelines allow national financial regulators to have the final say on how they apply standards, but its prescriptive approach is gradually helping to harmonise practices across the industry’s core centres in the Middle East and southeast Asia. Islamic banks face uncertainty over how regulators will treat their deposits, compounded by a lack of well-developed Islamic securities markets.

India-Pakistan border trade on hold India has suspended land border trade with Pakistan in the wake of Sunday’s suicide bomb attack at Wagah border near Lahore in that country, a senior Indian government official said yesterday. “Land border trade between India and Pakistan has been put on hold for three days, following a request from Pakistan,” he said, on condition of anonymity. Hundreds of trucks from both countries carry various items, including fruits and vegetables, passing through the land border at Wagah in the northern Indian state of Punjab daily.

A raft of regional manufacturing surveys yesterday were littered with unwelcome landmarks

sia’s factories are reporting a generalised loss of momentum that speak volumes about the need for more policy stimulus, on top of Japan’s latest efforts to ignite growth. A raft of regional manufacturing surveys yesterday were littered with unwelcome landmarks, including a five-month low for activity in China, a four-month trough for South Korea and a 14-month low for Indonesia. Readings on Japanese activity were delayed by a holiday but will likely be overshadowed by the central bank’s decision on Friday to expand its already massive asset buying programme in a sudden change of tack that stunned financial markets. The bold move has raised expectations the European Central Bank will eventually have to bite the bullet on quantitative easing, even if not at its meeting on Thursday. “In this environment of subdued growth and long-term low-flation, we expect the ECB to announce the purchase of government bonds of euro area member states by early next year

at the latest,” said Apolline Menut, an analyst at Barclays. The relative outperformance of the U.S. economy should be evident in the ISM survey of manufacturing out later on Monday which is expected to hold at a healthy 56.2 in October. The same trend was evident in South Korea, where new export orders were down for a third straight month and at the lowest in 14 months. The overall HSBC/Markit PMI for South Korea fell to a seasonally

adjusted 48.7 in October, from 48.8 in September, the lowest since June. Even Taiwan’s privileged position as a major supplier of Apple products could not prevent some slowing as its PMI slipped to the lowest in 13 months at 52.0. A rare bright spot was India, where the HSBC PMI rose to 51.6 in October, from 51.0 in September, extending its run above 50 to a full year. Reuters

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November 4, 2014

Asia Thailand to set up mega-billion fund

up modestly October

This should give the Reserve Bank of Australia (RBA) plenty of room to leave interest rates unchanged at a record low 2.5 percent, where they have been since it last cut in August 2013.

Climbing homes Home prices across Australia’s capital cities picked up pace in October led by strong demand in Sydney and Melbourne, a red flag to authorities who are considering tightening lending standards to take

some froth out of the market. Figures from property consultant RPData CoreLogic showed dwelling prices over all of Australia’s major cities climbed 1 percent in October, from September when they had inched up only 0.1 percent. For the three months to October, prices climbed 2.2 percent. The pick up would likely not be welcomed by the Reserve Bank of Australia (RBA) which has become concerned that a surge in borrowing to buy investment properties could lift prices to unsustainable levels. Regulators are considering whether banks should face tougher lending standards on some types of mortgages in an attempt to restrain investors, with steps likely to be announced before year end. Yet the annual pace of home price growth did slow again in October to stand at 8.9 percent, down from 9.3 percent in September and a steamy 10.9 percent in August. And all the gains in October came in just three cities, with prices falling in five others. The median price of a home in Sydney was A$680,000 (US$595,000), compared to A$555,000 in Melbourne and A$545,000 across all the major cities. Reuters

The fund is primarily designed to give SME entrepreneurs easy access to funding in addition to the existing SME Bank

hailand plans to set up a megabillion fund for small and medium enterprises(SMEs) in the near future, Finance Minister Sommai Pasee said yesterday. The military-led government is currently formulating plans to set up the Venture Capital Fund which will begin to lend money to varied Thai SME businesses early next year, according to the finance minister. The Venture Capital Fund will have an initial sum of about US$1.6 billion in loans for the cash-strapped SMEs with the government contributing 10 percent of that total, Sommai said. The balance of the Fund will be provided by Thai and international private sectors so that it will be readily sufficient for the fledging SMEs throughout the country. The fund, which will be registered in the Securities Exchange of Thailand, is primarily designed to give SME entrepreneurs easy access to funding in addition to the existing SME Bank, which, he said, has not adequately covered the SME sector so far. The government-endorsed fund

will lend money to those which may not fare very profitably or make as little as 8 percent in gross profit in a year, according to Sommai. The SMEs with such low investment returns would have slim chances of being loaned by the SME Bank, which could not effectually help out the cash-strapped, low profitable SME businesses, particularly those in remote areas of the country, according to the finance minister. High-calibre executive officials will be employed to run the Fund for optimum interests of the Thai SMEs, which will certainly be promoted alongside relatively largescale businesses, he added. Without elaborating, Sommai commented that the government under Premier Gen Prayuth Chanocha is currently running the national economy at “half capacity” and that it is yet to run at “full capacity.” He assured that the government will push for varied, new investment projects to which the private sector will be encouraged to contribute. Xinhua

Indonesia’s trade deficit narrows as exports surprise The improvement occurred more because of contraction of imports

ndonesia’s trade deficit narrowed slightly in September as merchandise exports posted the fastest month-on-month growth so far this year, despite weak commodity prices. The trade deficit stood at US$270 million, compared with August’s shortfall of US$318 million, the statistics office said yesterday. Indonesia, Southeast Asia’s biggest economy, faces strong economic headwinds from fiscal and current account deficits, ballooning fuel subsidy costs, and the slowest GDP growth in five years. President Joko Widodo, who was sworn in late last month, will find it hard to boost exports while commodity prices remain low and China, Indonesia’s biggest trading partner, remains locked in an economic slowdown. Encouragingly, exports rose in September by 3.9 percent year on year to US$15.28 billion. On a month-on-month basis exports were up by 5.5 percent - the fastest growth since December 2013. Exports of coal and other mineral fuels rose by 5.7 percent month on month to US$1.7 billion in September. Palm oil shipments rose by 4.3 percent to US$1.67 billion. And rubber exports were up by 6.4 percent to US$596.6 million.

The improvement in manufactured goods exports continued into September, while the partial resumption in mineral exports was also sustained - suggesting Indonesia’s external adjustment, though gradual, remains on track Barclays’ research note

President Joko Widodo (pictured during oath speech last month) will find it hard to boost exports while commodity prices remain low

Meanwhile, imports totalled US$15.55 billion in September, a rise of 0.2 percent year on year. Imports were up by 5.1 percent on a month-on-month basis. Indonesia’s trade

performance in the first nine months of this year shows marked a improvement compared to last year with deficit shrinking to US$1.7 billion from US$6.4 billion. Imports shrank 4.26

percent compared to the first nine months of last year, while exports were 0.93 percent smaller compared to the same period last year. Exports of coals and rubbers were down 12.97

percent and 21.51 percent respectively in the first nine months of the year from last year. But exports of palm crude palm oils and chemical products rose 12.29 percent and 20.40 percent during the period. Indonesia imported less machinery, steel, cars and spare parts during the first nine months. That reflected a slowdown in investment growth that the country experienced since the beginning of the year. Oil imports should fall further if Widodo follows through on proposals to increase subsidised fuel prices before the end of year. Refined oil imports accounted for 15 percent of total imports in January to September. Finance Minister Bambang Brodjonegoro said a fuel price hike is in the pipeline but the decision was put on hold as the government was still struggling to make sure it can give social assistance to the poor. Data released yesterday showed annual inflation running at 4.83 percent in October, slightly higher than September’s 4.53 percent. Bank Indonesia’s target for inflation is 3.5 to 5.5 percent for this year and 3 to 5 percent next year - though those targets were set before Widodo hinted he would raise fuel prices. Reuters

November 4, 2014

International HSBC profit misses estimates

Hedge funds cut bullish oil bets WTI fell 12 percent in October for a fourth consecutive drop, echoing the collapse in prices during the global financial crisis cut their official selling prices last month, a sign that their primary aim is to preserve market share. U.S. crude output rose 0.4 percent to 8.97 million barrels a day in the seven days ended October 24, the highest in weekly Energy Information Administration data that began in January 1983. The Paris-based IEA reduced its estimate of consumption gains this year for the fourth month in a row. Net-longs for WTI declined by 4,288 to 182,486 futures and options combined during the week ended October 28. Long positions dropped to 249,841, the least since May 2013, while short positions slipped 2.5 percent to 67,355. In other markets, bullish bets on gasoline increased 0.3 percent to 31,086 futures and options, the highest level since August. Futures advanced 1.5 percent to US$2.2134 a gallon on Nymex in the reporting period.

Europe’s largest bank by market value, posted lower-than-expected third-quarter profit as it set aside more than US$1 billion for customer redress and an investigation into rigging currency markets. Reported pretax profit rose to US$4.61 billion from US$4.53 billion in the year-earlier period, the London-based lender said in a statement today. That compares with the US$5.47 billion average estimate of seven analysts compiled by Bloomberg. The bank set aside US$760 million for bad loans and other credit provisions from US$1.59 billion a year earlier.

Publicis buys Sapient for US$3.7 bln The world’s third-largest advertising agency, has agreed to buy digital ad specialist Sapient for US$3.7 billion in cash as it seeks to accelerate growth after a botched merger earlier this year. Publicis said yesterday the deal values U.S.-based Sapient at US$25.00 per share, which represented a 44 percent premium to Friday’s close. It will be financed through existing cash and new debt and will not affect Publicis’ credit rating. For Publicis Chief Executive Maurice Levy, the deal is part of a push to revitalise the group.

IHS raises US$2.6 bln Nigerian phone tower group IHS has raised US$2 billion in equity and US$600 million in debt in what it says is the biggest equity fund raising by an African company this decade. IHS, the continent’s largest tower company, will use the money to finance infrastructure spending and recently agreed acquisitions, according to a company statement yesterday. The loan facility is split into two parts: a seven-year tranche of US$500 million denominated in U.S. dollars and an eight-year tranche of US$100 million in Nigerian naira.

Ryanair hikes profit forecast Ryanair hiked its profit forecast by 18 percent yesterday on better-than-expected winter bookings and said it would cut fares by up to 10 percent in the spring to boost its share of the European shorthaul market. The Irish airline said it would carry 2.2 million passengers more than previously forecast in the six months to March. That should allow it to boost its profit after tax for the 12 months to March to between 750 and 770 million euros, up from to a previous forecast of 620 to 650 million euros, it said in a statement.

Diageo finally wins Don Julio Diageo said yesterday it had agreed a deal with Jose Cuervo to take full control of its Don Julio tequila brand in exchange for the British drinks group’s Bushmills whiskey label. Under the deal Diageo will take control of the 50 percent of Don Julio that it does not already own as well as a US$408 million payment. It will also gain the right to distribute Don Julio and its Smirnoff vodka in Mexico, boosting its position in the country. The deal is expected to close in early 2015.

Pump price

edge funds cut bullish holdings in crude as record U.S. output added to a global supply glut, spurring the longest losing streak in prices in six years. Money managers reduced net-long positions in West Texas Intermediate by 2.3 percent in the week ended October 28, U.S. Commodity Futures Trading Commission data show. Long positions retreated to the lowest level in 17 months. Production by OPEC rose to the highest in more than a year last month, a Bloomberg survey showed, and U.S. output is running at the fastest pace since at least 1983. The gains came as the International Energy Agency reduced its estimate for demand growth this year and in 2015.

WTI fell 1.7 percent to US$81.42 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report.

October gains The Organization of Petroleum Exporting Countries pumped 30.974 million barrels a day in October, the most since August 2013, led by gains in Iraq, Saudi Arabia and Libya, a Bloomberg survey of oil companies, producers and analysts showed. OPEC, which supplies about 40 percent of the world’s oil, is scheduled to meet November 27 in Vienna to discuss output targets. The group’s biggest producers, Saudi Arabia, Iraq, Iran and Kuwait,

Regular gasoline at the pump, averaged nationwide, slid to US$2.987 a gallon November 1, the lowest since December 20, 2010, according to Heathrow, Florida-based AAA, the largest U.S. motoring group. Bearish wagers on U.S. ultra low sulphur diesel increased 13 percent to 35,704 contracts. The fuel fell 0.8 percent to US$2.4931 a gallon in the report week. Net-long wagers on U.S. natural gas dropped 41 percent to 19,686 contracts, the lowest since March 2012. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Nymex natural gas fell 10.5 cents to US$3.711 per million British thermal units during the report week. Bloomberg News

Euro zone factory growth sluggish in Oct Economic growth stalled in the second quarter, with inflation at just 0.4 percent in October, the ECB is facing pressure to introduce more stimulus Jonathan Cable

uro zone manufacturing activity expanded slightly slower than first thought last month as further discounts at the factory gate failed to drive up new orders, a business survey showed yesterday. A second month of price cutting, alongside only tepid expansion in Germany - the euro zone’s growth engine - and contractions in France and Italy, will be disconcerting for the European Central Bank as it battles to prevent deflation. Markit’s final October manufacturing Purchasing Managers’ Index was 50.6, beating September’s 50.3 but shy of an

earlier flash estimate of 50.7. October marked the 16th month the index has been above the 50 line that separates growth from contraction. An index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good indicator of growth, rose to 51.5 from September’s 51.0, although that too was lower than the flash reading, which came in at 51.9. “The performance of euro zone manufacturing remained broadly flat at the start of the final quarter,” said Rob Dobson, senior economist at Markit. “Manufacturing is

therefore unlikely to provide any meaningful boost to the currency union’s anaemic GDP growth.” The latest PMI survey suggested this month will probably not be much better as orders fell, backlogs were run down and stocks of finished goods built up. The new orders sub index was 49.5, barely above the flash and September reading of 49.3. “Perhaps most worrying is the trend in new orders, a key bellwether of future output growth, which declined for the second month running,” Dobson said. “It is hard to see any significant near-term boost to performance.” Reuters

November 4, 2014

Opinion Business

Growth in the new climate economy

Leading reports from Asia’s best business newspapers

Michael Spence

wires

Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business and Senior Fellow at the Hoover Institution

THANH NIEN NEWS Growth in Vietnam’s factory sector improved slightly in October as output and new orders increased and the rate of job creation reached a nine-month high, a private survey showed yesterday. The HSBC/Markit Manufacturing Purchasing Managers’ Index (PMI) posted 51.0 in October, down slightly from the September’s reading of 51.7, but still signalling an overall improvement in operating conditions in the sector, Markit Economics said in a statement. A reading above 50 indicates expansion, while one below 50 indicates the activity shrank during the month.

PHILSTAR Local and foreign businessmen are weighing their legal options over what they claim as overly bureaucratic process of securing value-added tax (VAT) refunds or tax credit claims. Rina Manuel, president of the Tax Management Association of the Philippines (TMAP), said several foreign chambers and Filipino industry groups are mulling taking their issue to the courts to protect their fundamental right to an administrative appeals process. Investors are up in arms over a Bureau of Internal Revenue ruling that makes it difficult for taxpayers to exercise their right to refund excess input VAT credits.

THE TIMES OF INDIA Amazon feels India’s laws and regulations are a risk for the company. The online retailer thinks the laws and regulations may be interpreted in a way that will make business in India more difficult than it is and, in a recent filing to the US Securities and Exchange Commission (SEC), even present the possibility that it could be forced to shut down its operations. India as a risk factor is emerging for the first time in Amazon’s mandatory quarterly reports to the SEC. The report in June mentioned only China.

THE NEW ZEALAND HERALD Countdown, the New Zealand supermarket chain owned by Australian retailer Woolworths, increased revenue 1.1 per cent in the first quarter of its financial year as it benefited from sales at new stores. Sales at New Zealand supermarkets rose to NZ$1.5 billion in the 14 weeks ended October 5, from NZ$1.48 billion in the year earlier period, Sydney-based Woolworths said in a statement. Comparable sales for the quarter, which excludes the impact of store openings and closures, fell 0.1 per cent, impacted by flat inflation and continued subdued grocery industry market conditions, the company said.

ction to reduce carbon-dioxide emissions and mitigate climate change has long been viewed as fundamentally opposed to economic growth. Indeed, the fragility of the global economic recovery is often cited as a justification to delay such action. But a recent report, “The New Climate Economy: Better Growth, Better Climate” released by the Global Commission on the Economy and Climate, refutes this reasoning. Far from being a detriment to economic growth, the report concludes that efforts to combat climate change could boost growth considerably – and relatively soon. Anyone who has studied economic performance since the onset of the financial crisis in 2008, understands that damage to balance sheets – such as excess debt and unfunded non-debt liabilities – can cause growth slowdowns, sudden stops, or even reversals. And those familiar with growth in developing countries know that underinvestment in human capital, infrastructure, and the economy’s knowledge and technology base eventually produces balance sheets that cannot support continued growth. Climate change is not very different from these unsustainable or defective growth patterns. It, too, is essentially a balance-sheet problem, based on the stock of CO2 in the atmosphere On its current trajectory, the world has only 3-4 decades (or less) before atmospheric CO2 reaches levels that disrupt climate patterns, with catastrophic consequences for the environment and, in turn, economic and social systems. Allowing the world’s “natural capital” – the resources and ecosystems that underpin these systems – to be depleted is essentially

The economic costs of action to mitigate climate change rise nonlinearly as action is delayed. If those costs are deferred for 15 years or more, mitigation targets will be impossible to achieve, at any cost

another form of destructive underinvestment. The massive amount of scientific evidence supporting current climate projections makes it unlikely that the world will forego adjustment entirely. But solving the complex coordination and distributional problems that such adjustments will generate will not be easy, and, convinced that we cannot afford an aggressive mitigation strategy at a time when we are faced with so many other pressing challenges, policymakers could be tempted to defer action on the ground. “The New Climate Economy” argues that this would be a very bad idea. The report’s thorough assessment of recent research,

experience, and innovation led to the unambiguous conclusion that acting now would be far less costly than waiting. In fact, acting now is barely costly at all. Low-carbon paths of economic growth do not look all that different from high-carbon paths – until the latter veers sharply to the precipice of catastrophic failure. Put another way, the net costs of reducing CO2 emissions – in terms of growth, income, and other measures of economic and social performance – are not all that high in the short and medium term. Given what we know now about the consequences of the high-carbon path for the natural environment and, in turn, health outcomes and quality of life, those costs could actually be negative. But there is an important proviso: action must be taken urgently. The economic costs of action to mitigate climate change rise non-linearly as action is delayed. If those costs are deferred for 15 years or more, mitigation targets will be impossible to achieve, at any cost. So how do we move onto the low-carbon path? The report points out the benefits of constructing the energy-efficient buildings and infrastructure needed to underpin the low-carbon global economy of 2050, incorporating low-carbon strategies into municipal-planning processes, and tapping the efficiency-enhancing potential of the Internet. Add to that the declining costs of alternative energy sources and relentless technological advancement, and the world’s carbon-reduction goals do not seem so distant – or costly. After evaluating the technologies, policy options, and analysis included in the report, one might conclude that low-carbon growth paths may be slightly flatter in the short term than their high-carbon counterparts,

with higher investment and lower consumption. Nonetheless, it would be difficult to deem them inferior, given their medium-to-long-term advantages. The report also sheds light on another important question in the climate debate: Is global cooperation critical to mitigate climate change? For a given economy, does acting alone yield distinctly inferior growth paths – say, by damaging the competitiveness of its tradable sector? If the answer is yes, international policy coordination would seem to be a necessary precondition for progress. This does not appear to be the case. A substantial portion of a national policy agenda that supports an individual country’s shift to a low-carbon growth path (boosting energy efficiency, for example) will not produce an economic slowdown; such an effort might even lead to higher growth rates than remaining on a high-carbon path would have delivered. On a first approximation, low-carbon paths are the dominant strategies, implying a completely different and far more favourable view of the incentive structures at work. This means that, though international coordination will be an important factor in the long-term success of action to mitigate climate change, its complications need not – and should not – hold progress hostage. Given the difficulty of developing and implementing a global strategy, that is good news. Scientific evidence has eliminated legitimate doubts about the scale of the risks that climate change poses. Now, the Global Commission’s analysis has largely refuted the economic arguments for inaction. Add to that growing public concern about climate change, and the conditions for decisive action may have arrived. Project Syndicate

November 4, 2014

Closing U.S. president to visit China, attend APEC summit

Taiwan export growth seen easing, inflation to pick up

U.S. President Barack Obama will pay a state visit to China and attend the 22nd Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting in Beijing from November 10 to 12, Foreign Ministry spokesman Qin Gang announced Monday. Obama is visiting at the invitation of Chinese President Xi Jinping, said Qin in a press release. Qin said the leaders of the two countries will exchange views on Sino-U.S. relations as well as major international and regional issues of common concern. A series of APEC meetings will be held from November 5 to 11 in Beijing.

Taiwan’s exports in October probably grew 4.6 percent from a year earlier, a shade slower than in September, according to the median forecasts of 11 analysts polled by Reuters. Taiwan is one of Asia’s major exporters, especially of technology goods, and its export trend is a key gauge of global demand for technology gadgets worldwide. Inflation in October is likely to pick up to 1.2 percent from 0.72 percent the previous month. October’s imports median forecast is expected to grow 4.9 percent.

Chinese e-commerce carnival going global The November 11 holiday is so popular for online shopping it has earned the nickname “going broke day”

ith China’s “November 11” online shopping frenzy around the corner, foreign brands are expected to play a bigger role as competition heats up for this year’s digital shopping dash. Widely recognized as “Singles’ Day”, a holiday celebrating the antithesis of Valentine’s Day, November 11 has become the country’s biggest annual commercial holiday, breaking thousands of online sales records each year. Last year, more than 500 million Chinese online shoppers logged onto e-commerce websites to snag the heavy discounts on offer, leaving delivery companies overwhelmed in the process. Alibaba, the country’s largest e-commerce company and the original promoter of Singles’ Day, recorded an 83 percent year-on-year increase on its two online platforms, Tmall.com and Taobao.com, last year, with sales registering at 35 billion yuan (US$5.69 billion). This year’s “November 11” holiday is expected to see even bigger sales figures with easier access to foreign brands for online shoppers. Alipay, a third-party

payment platform recently derived from Alibaba, is launching its “EPass” service for U.S. retailers such as Gilt. com, Gap and H&M. EPass will be available to any U.S. retailer interested in reaching the Chinese consumer, giving access to a multi-billion U.S. dollar market, according to Alipay. EPass aims to ease the “friction” of international purchases by eliminating the need to use credit cards, which typically increases the price of foreign products, Alipay’s president Li Jingming said. Meanwhile, the New Zealand Post Office has

added a Chinese branch to its YouShop service, a week after launching a New Zealand store on Alibaba’s Tmall Global website. The YouShop service allows New Zealand shoppers to buy from offshore online stores that do not deliver to New Zealand or have high shipping charges. Shoppers can ask for the goods to be delivered to a standardized offshore address from which New Zealand Post forwards them to New Zealand. As a rival of Alibaba, Amazon announced on October 30 that Chinese

S.K., China to hold 14th FTA talks

HKMA says protests could hurt stability

outh Korea and China are set to hold the 14th round of talks for the bilateral free trade agreement (FTA) this week to discuss and conclude the remaining issues, Seoul ‘s trade ministry said yesterday. The supposedly last round of negotiations will be held on Thursday in Beijing, where South Korean Trade Minister Yoon Sang- jick and Chinese Minister of Commerce Gao Hucheng will meet and intensively discuss the remaining issues, according to the Ministry of Trade, Industry and Energy. The two countries had already completed negotiations on eight out of the total 22 chapters, including trade remedy, sanitary and phytosanitary (SPS), technical barriers to trade (TBT), competition, environment and e-commerce. Another eight chapters included customs clearance, investment, transparency, communications, rules and intellectual property rights. Goods liberalization, the core part of the FTA negotiations, was involved in the remaining six issues that the two trade ministers will intensively discuss this week to reach the FTA deal. Xinhua

shoppers can buy over 80 million kinds of foreign commodities from the United State, Germany, Spain, France, the Great Britain and Italy with Amazon’s direct mail services. Lu Zhenwang, CEO of a leading e-commerce consulting company, said while the crossborder business moves will help phase out smuggling, at the same time, they pose huge challenges for faster logistics and lower prices. Chinese Premier Li Keqiang, who was speaking at a State Council meeting on October 29, stressed that supporting new industries and

e-commerce was paramount to growth. In fact, market competition for 2014’s Singles’ Day has already begun. Media reported several Chinese e-commerce giants have received a notice that Alibaba had registered the trademark of “November 11”, meaning it can only be used in Alibaba’s Tmall.com. Rivals of Alibaba like JD.com quickly changed the logo to “11.11” and responded, along with Chinese home appliance giant Suning, that Alibaba’s move impaired market fairness. Xinhua

Singapore requires visa for Ebola-hit states

orman Chan, the head of the Hong Kong Monetary Authority, said a continuation of the pro-democracy protests may dent the city’s financial stability, as demonstrations entered a sixth week. A peaceful end to the protests will be key for foreign investors, Chan told reporters today before joining a delegation to the Chinese capital of Beijing to meet regulators. While the economy has so far shrugged off the protests, Chan joins other public officials in warning about the impact of a prolonged standoff that has seen roads blockaded in parts of the city. Charles Li, the chief executive officer of Hong Kong Exchanges and Clearing Ltd., said October 26 that he wouldn’t be surprised if the protests were among factors behind the wait for the regulatory approval of a stock market trading link with Shanghai. Chan said Hong Kong officials will discuss the market link, which was expected to start last month, and the easing of a daily yuan conversion limit during his visit.

itizens of Guinea, Liberia and Sierra Leone will need a visa to enter Singapore as part of measures against the spread of Ebola, the city-state’s health ministry said yesterday. The three West African countries are the worsthit by the Ebola epidemic that has killed more than 4,900 people. Singapore’s health ministry said the visa requirement for citizens of the three countries, who don’t currently need a visa to travel to the city-state, will take effect from Wednesday. “The visa requirement will allow for better oversight of the entry of nationals from these countries, as well as facilitate possible contact tracing,” the ministry said in a statement. “In addition, it will allow Singapore to inform the nationals of these countries during the visa application process of our Ebola health advisory and actions they should take, should they develop symptoms while en route or during their stay in Singapore.” Those found to have fever will be taken by ambulance to a hospital for further assessment.

Bloomberg News

AFP