Macau Business Daily, Nov 13, 2014

MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 666 Thursday November 13, 2014 Year III

Clampdown on employment agencies

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ong overdue, some might say. The government is tightening up on local employment agencies.

Regulating a market that has for years lacked professional guidance and skated on thin legal ice.

Legislation is at last in the works. So, no more services to tourists or help for non-resident workers to change jobs. At least one trained, certified employment service instructor will be mandatory.

With fines possibly doubling to MOP100,000 for shady operators PAGE

5

AMCM seeks to increase RMB limit PAGE 3

Tragedy discounts in HK real estate PAGE 7

Investors stand neutral on Galaxy PAGE 6

Pennypinchers

Brought to you by

They’re definitely not spendthrifts.

Legislator Chan Chak Mo wants to meet with the DSSOPT and Macau Prison to understand why the two departments’ execution rate for the public investment plan (PIDDA) is so low. At 39.6 percent and 17 percent, respectively.

HSI - Movers November 12

Name

PAGE 4

Own goal He is accused of bribing his way out of Macau. But Macau gambling kingpin Paul Phua Wei Seng’s counsel vehemently denies it.

The tycoon was arrested in Las Vegas in July accused of illegal World Cup betting, the Las Vegas Review-Journal says. The case continues amid claim and counterclaim

www.macaubusinessdaily.com

PAGE 3

Hot air?

Barack Obama and Xi Jinping have agreed. To reduce greenhouse gas emissions in two decades.

Environmental experts say don’t get excited. Apparently, the measure will have little effect on global warming as targets have short range

Page 8

Inner Harbour renovation buzz

BOC Hong Kong Holdin

3.80

AIA Group Ltd

1.48

Hong Kong Exchanges

1.26

Tencent Holdings Ltd

1.25

China Mobile Ltd

1.16

Want Want China Hol

-0.97

China Merchants Hold

-0.98

Ping An Insurance Gr

-1.41

Kunlun Energy Co Ltd

-1.55

China Mengniu Dairy

-1.78

Source: Bloomberg

The jackhammers continue. The govt has given the go-ahead for more construction in the Inner Harbour district. A mixed residential and commercial complex will be built near Ponte 16 and San Ma Lou. This latest joins another 20-odd such gentrification projects over the last two years in the area, agents tell Business Daily

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2 | Business Daily

November 13, 2014

Macau

Govt approves change of land use for Inner Harbour plot The once-silent back lanes of the Inner Harbour near Ponte 16 and San Ma Lou have already resounded to the noise of around 20 renovations and reconstruction projects over the last two years, agents say Stephanie Lai

sw.lai@macaubusinessdaily.com

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government dispatch released yesterday publicised the approval for the construction of a mixed residential and commercial complex in a plot a block away from

casino Ponte 16 in the Inner Harbour zone. This project joins the plethora of renovations and reconstructions of old low-storey buildings in the district already under way.

Three buildings located on a plot sitting on Rua do Bispo Enes and Rua do Guimarães – only a few minutes walk from the tourist spot of San Ma Lou and Ponte 16 – are to be demolished, followed by the construction of an 8-storey mixed commercial and residential complex on this 186 square metre plot, according to the dispatch.

The residential part will occupy a gross floor area of 1,106 square metres, while that of the commercial part will take up 309 square metres.

The dispatch discloses that the land grantee of the plot is a company called Future Sun Resources Ltd, which shared the same address with the local coffee roasting brand Tan Heong San Enterprise Ltd. Future Sun has to pay a contract premium of MOP2.64 million to the government for the change of land use, and must complete the project in 36 months.

Business Daily asked the company for more information about the project they are planning to build but had received no reply by the time the story went to press.

Local property agency Kou Fu Real Estate, however, which specialises in purchasing old residences and redeveloping them, told us that the off-plan sales of the project was finished two years ago, before a new law came into effect in June last year that allowed the sale of unfinished flats only once the foundations of the building that will contain them were completed, and each flat is registered with the government.

Low-Storey The project is designed to provide 26 flats of 20 to 40 square metres each, namely one-bedroom and twobedroom residences, said Mr. Leong Hou Weng, general manager of Kou Fu’s sales department.

“These two years we’ve already seen around 20 renovation or reconstruction projects of the old low-storey buildings in these back lanes near the Inner Harbour and San Ma Lou, or those near St Paul’s Ruins,” Mr. Leong said.

“Of these 20 projects, those with bigger gross floor area were designed for residential purpose; the smaller ones were mainly used for commercial projects like shops,” the agent added.

“Among these projects were also a few budget hotel plans.”

Chong Siu Kin, president of the Real Estate Association of Macau, said that purchases of the old low-storey buildings in the lanes near Ponte 16 and San Ma Lou for redevelopment had already begun five or six years ago.

The height limit imposed on the said zones have prevented the old neighbourhoods from experiencing speedier redevelopment, Mr. Chong remarked.

“For these lanes behind the main road of San Ma Lou, the height restriction is set at 20.5 metres, which means the buildings there are bound to be the low-storey ones,” he said.

“For that [reason] not many people are so eager about reconstruction projects in that area.”

“It’s true that the cultural heritage protection requirement for the San Ma Lou area and the height restriction, where some of the buildings are restricted to a limit of only 13 to 14 metres, can make the reconstruction procedure long and complex,” said the Kou Fu Real Estate agent. “The [approval for] the reconstruction process can take as long as a year.”

However, Mr. Leong believes that more renovations and reconstruction projects will happen in the district of San Ma Lou and the lanes near St Paul’s Ruins for shops, as Macau’s tourism and related retail market will continue to prosper in the coming years.

Fiscal reserves 244.57 billion ptcs end-September

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acau’s fiscal reserves as at the end of September amounted to MOP244.57 billion (US$31 billion), down 0.02 percent compared to the 244.61 billion patacas of a month prior but 46 percent more than a year before, says the Official Gazette.

Of the September fiscal reserve figure, the government saw less assets held in bonds and discretionary management funds when compared to the previous month: fiscal reserves held in bonds totalled MOP108.7 billion as at end-September, nearly 8 percent down from a month ago;

the portion held in discretionary investment funds was MOP5.6 billion, 7.13 percent less than at the end of August.

The reserves held in bank deposits as at end-September was MOP121.9 billion, up 3.7 percent compared to a month before.

The city’s Monetary Authority said yesterday that the yuan deposits in Macau had reached 118.7 billion yuan (US$19.3 billion) by the end of September, with cross-border trade settlement cumulatively amounting to 465 billion yuan.

Business Daily | 3

November 13, 2014

Macau

US prosecutors: Gaming kingpin ‘bribed’ his way out of Macau Las Vegas Review-Journal quotes a US federal prosecutor as saying that Paul Phua Wei Seng bribed his way out of custody while in Macau prior to his arrest in Las Vegas in July for illegal World Cup betting

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acau gambling kingpin Paul Phua Wei Seng is believed to have bribed his way out of custody while here prior to his arrest in Las Vegas in July for illegal World Cup betting, a report in the Las Vegas Review-Journal quotes a US federal prosecutor as saying.

Citing court documents, the report quotes US federal prosecutors as saying that Mr. Phua’s son Darren’s cell phone had text messages dated July 9 that show the alleged ringleader of a massive World Cup betting scheme paid between HK$4 million and HK$5 million ‘under the table’ to get released from custody here.

According to court documents, which included copies of the text messages, a June 19 message reads: “They are negotiating now.

Hopefully, they want only money”, referring to officers who arrested Paul Phua.

Mr. Phua’s lawyer, David Chesnoff, is quoted by the Las Vegas newspaper as saying that the bribe allegations are not true.

“We vehemently deny these allegations, which interestingly were unknown to law enforcement but for their illegal search and were only cited to unfairly prejudice Mr. Phua,” Chesnoff is quoted as saying. “We challenge the government to bring any real evidence of Mr. Phua’s involvement with any socalled triad.”

According to the FBI, the regular at the Poker King

Club in Macau where sevenfigure pots are common, is a high-ranking member of the 14k Hong Kong-based triad group.

His lawyers are trying to have the judge dismiss evidence seized during a search, which they claim was ‘warrantless’ after agents had the Internet service of the Caesar villas they were in shut down in order to pose as technicians and observe the extent of the illegal operation.

While Mr. Phua’s defence lawyers claimed that the search was ‘unconstitutional’ and the ruling would cause ‘innocent Americans to live their daily lives burdened with the palpable fear that their government is regularly scheming to spy on them in their homes,’ prosecutors

AMCM seeks lifting of limit on RMB conversion

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he Monetary Authority of Macau (AMCM) is going to discuss with the People’s Bank of China (PBOC) the relaxation of restrictions on renminbi conversion.

Currently in Macau, the limit on the value of renminbi exchange in cash each time is the equivalent of RMB20,000 (MOP26,075) and renminbi exchange through accounts for each individual is the equivalent of RMB20,000 per day.

AMCM said in a statement released yesterday that in order to enhance the RMB business in Macau, it would seek he lifting of the limitation on reminibi business.

AMCM added that as of the end of September this year, RMB deposits in Macau had reached RMB118.7 billion (MOP154 billion) while cross-border trade settlement cumulatively amounted to RMB465 billion (MOP606 billion).

This initiative follows Hong Kong’s de facto central bank’s announcement on Wednesday that it would lift a daily cap for converting the local currency to Chinese yuan to facilitate a trading link between the city’s bourse and Shanghai’s stock exchange.

said the agents had acted properly and without violating constitutional rights.

Prior to his arrest in Las Vegas, Mr. Phua had been arrested and detained in Macau for illegal bookmaking

during the FIFA World Cup. Soon after his release on bail, he departed Macau in his private jet on June 23 to Las Vegas, where he was accused of conducting illegal online betting on the FIFA World Cup there.

At the time it was uncertain whether Mr. Phua had violated his bail conditions by flying to Las Vegas in his private jet soon after his release. A lawyer, at the time, said there could have been two possibilities: one is that he had informed the relevant authorities that he would be changing his place of residency and leaving Macau; another is that he did not request any authorisation, which would then have violated the terms of bail.

Mr. Phua had his San Marino diplomatic status revoked after being arrested in Macau and Las Vegas.

4 | Business Daily

November 13, 2014

Macau

AL awaiting explanations from DSSOPT and Prison Service

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he second standing committee of the Legislative Assembly (AL) has been discussing the report on the executive situation of the 2013 budget, which was presented to the AL at the end of October. The president of the committee, legislator Chan Chak Mo, said the committee still has to meet with the Land, Public Works and Transport Bureau (DSSOPT) and Macau Prison to understand why the two

departments’ execution rate for the public investment plan (PIDDA) are the lowest – at 39.6 percent and some 17 percent, respectively.

According to Mr. Chan, although the legislators are waiting for explanations from the two departments they expressed their doubts during the meeting regarding the low budget execution rate of Macau Prison. They wanted to know if this was due to prison overcrowding,

and questioned when the new jail will be completed.

In addition, the legislator said that the committee may only be able to finish its report to the AL on time, November 24, if they can successfully meet with the departments next week, urging the Financial Service Bureau to submit the performance of the annual budget earlier from the following year.

In fact, according to the Secretary for Economy and

‘Post-19,000 units’ public housing projects – T2 flats mainly

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he acting president of the Housing Bureau, Ieong Kam Wa, says that the ‘post-19,000 units’ public housing projects will primarily be T2 flats, when replying to legislator Si Ka Lon’s interpellation.

Mr. Si queried whether the government department had allocated proportions for different types of flat, T1/T2/T3, for the projects, referring to the 4,400 public flats that the government announced it would build in Fai Chi Kei, Areia Preta and Taipa in May, as well as the 28,000 flats that may be built in Zone A of the new urban area. The foregoing are based on the statistics of resident applications.

Mr. Ieong claimed that the government had adjusted direction so that the flats would mainly be T2,

Finance Francis Tam Pak Yuen, who reported the 2013 budget performance to the AL in October, the low rate of PIDDA for the DSSOPT is due the delays in five major infrastructure projects, including the rolling stones and system for the Light Rail Transit (LRT), the filling-in of Zone A for the new urban reclamation for the Fai Chi Kei public housing, the Taipa route of LRT and the MongHa social housing project,

involving some 4.2 billion patacas that the government was supposed to pay but has not.

In 2013, the fiscal surplus of the government reached 124.6 billion patacas, of which some 96.3 billion patacas were allocated to the no-excess reserves of the public treasury while the remaing surplus of 28.3 billion patacas was managed by autonomous bodies.

K.L.

Amax warns of loss in interim results

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following feedback from residents after the ‘19,000 units’ public housing project, as well as after some local associations said that T2 and T3 types are more suitable for family applicants.

As such, phases E and F of public housing in Fai Chi Kei will offer 336 T2 flats and 100 T3 flats. In addition, the L4 and L5 public housing projects in Bacia Norte do Patane will offer a total of 378 T2 flats.

Meanwhile, for the planning of the 28,000 public flats in Zone A, Ieong said they may have to depend on public opinion during the third stage of public consultation on the project, as well as taking into consideration the benefits to different groups of society in order to reach consensus among the public.

K.L.

acau junket investor Amax International Holdings Ltd has issued a profit warning saying that for the six months ended 30 September 2014 the company is expected to record a moderate increase in loss compared to a net loss of approximately HK$16.09 million (US$ 2.06 million) in the corresponding period in 2013.

In a filing with the Hong Kong Stock Exchange, the company also said a net profit of approximately HK$65 million was recorded for the year ended 31 March 2014, mainly attributable to the recognition of a one-off gain on the disposal of a subsidiary amounting to HKD$102 million.

The filing also reads that the expected loss is mainly attributable to the increase in general plus administrative expenses and finance costs.

And again, the company blamed the lack of access to the financial information of Greek Mythology (Macau) Entertainment Group Corporation Limited, a gaming venue in the New Century, currently the Imperial Palace Hotel, in Taipa.

“The company expects the financial information of the associate will not be available to the company before the release of the 2014 interim results…Hence, the 2014 interim results will not reflect the actual performances of the associate and the group,” said Amax in the profit warning.

Amax International, chaired by veteran junket operator Ng Man Sun, has continuously attempted to chase down the financial information of its associate. According to the filing, the company is seeking further advice from a Macau lawyer vis-a-vis further action.

Business Daily | 5

November 13, 2014

Macau

Labour Affairs Bureau working on job agencies The draft on employment agency regulations recommends that job agencies cannot provide services to tourists or help non-resident workers change job. It also requires a certified employment service instructor to be in every job agency.

Joanne Kuai

joannekuai@macaubusinessdaily.com

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very employment agency will have to include one trained and certified employment service instructor, suggests a draft regulating employment agencies.

“The employment service instructor is something newly added to the draft.

In addition, there would be no limit to the amount of fee that the agencies could charge employers. And the agency can charge non-resident workers a fee of up to one month’s salary,” said Wong Chi Hong, director of the Labour Affairs Bureau.

The draft also suggests increasing the penalty for violations - from

MOP50,000 to MOP100,000 – for job agencies that operate without a licence.

The Social Affairs Coordination Standing Committee held a meeting yesterday to discuss revising the regulations on licensing and operation of employment agencies.

The coordinator of the committee, also the director of the Labour Affairs Bureau, Wong Chi Hong, said the revision of the regulation is urgent and that a consensus had been reached to pass the proposal to the executive committee of the Social Affairs Coordination Standing Committee before January 30 next year. Mr. Wong

said he hoped legislation could start as soon as possible.

A representative of the labour sector, Lei Chan U, said that introducing an employment service instructor would help enhance the services of job agencies and increase the transparency of their operation. Mr. Lei added that the draft also included that job agencies cannot offer their services to tourists in Macau or help non-resident workers switch jobs.

He said such rules would help protect the rights of local residents and suggested enforcement of the law have be harsher and relevant fine be increased.

HR pressure Currently, there are 156 employment agencies in Macau. Seven provide services for free, including some employment service agencies affiliated to major associations such as the Federation of Trade Unions, Kai Fong and Women’s Association, as well as tailored services for the mentally disabled provided by Macau Special Olympics.

The other fee-charging employment

agencies focus on different areas, such as recruiting overseas workers, outsourcing hires in China, work permit and quota application services.

TalentGroup Asia, a local human resources management consulting, outsourcing and business service company told Business Daily that the shortage of manpower is no more than a platitude in Macau, creating a lot of pressure on company operators.

The job agency that provides services helping local companies recruit from overseas said it understands the government is under pressure to cautiously authorise non-resident work quotas in order to protect Macau residents but the low unemployment rate signals the need for talent from outside especially in professional fields such as construction, engineering, communication and senior retail service.

The company said the number of local jobseekers is limited but the demand for talent is rapidly increasing. It said it hoped the application process for blue cards (non-resident working permits) could be simplified.

6 | Business Daily

November 13, 2014

Macau Brands

Trends

Analysts rate Galaxy neutral

Sara Farr

sarafarr@macaubusinessdaily.com

Foodie Heaven Raquel Dias newsdesk@macaubusinessdaily.com

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e’re entering the season where food is the biggest star.

There’s no better excuse to enjoy a proper fancy meal than celebrating Christmas or New Year’s with loved ones. Macau has seen a boom in the industry in recent years. Anyone who’s someone now enjoys a gourmet meal every now and again.

Michelin-starred restaurants are therefore somewhat of an institution and definitely a trend. First, you need only choose what nationality you’re having for dinner. The new Restaurant Guide for 2015 names a number of options.

From Cantonese to Italian, you can have all types of food with the Michelin seal of approval just take a look below:

In the near term, efforts should continue to focus on table efficiency

(do bear in mind there’s only 100 such restaurants in the world) Robuchon au Dôme French contemporary The Eight - Chinese

Golden Flower - Chinese Zi Yat Heen - Cantonese

Jade Dragon - Cantonese The Golden Peacock - Indian The Kitchen - Steakhouse The Tasting Room - French contemporary Tim’s Kitchen - Cantonese Wing Lei - Cantonese

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nalysts at Credit Suisse are maintaining their neutral rating for Galaxy Entertainment Group, with an unchanged target price of HK$50. This means that the stock’s total return is expected to be in line with the relevant benchmark over the next 12 months.

Over the past three years, the brokerage firm also twice rated Galaxy neutral – October 16, 2013 and September 17, 2014. On both occasions, the closing price was an average of 13.6 percent lower than the target price at an average HK$52.5. “[Galaxy] management’s tone remains optimistic about Macau’s medium to long-term outlook,” the analysts wrote in their latest note to clients. “We reiterate our neutral rating on Galaxy with an unchanged target price of HK$50.”

Galaxy posted a 6 percent revenue increase to HK$17.3 billion in the three months ended September 30 over that of the same period a year ago.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 1 percent to HK$3.3 billion for the company, while that of Galaxy Macau alone increased by 4 percent to HK$2.4 billion. And in the 12 months to the

end of September, adjusted EBITDA rose 22 percent to HK$14.1 billion.

“In the near term, efforts should continue to focus on table efficiency,” Credit Suisse analysts say. “Despite its strength in the VIP business, Galaxy also faces similar challenges in the mass market like its competitors, in our view.”

The company’s overall mass market revenue increased 12 percent to HK$4.8 billion year-on-year. But for the month of October alone, this figure dropped by 13 percent from that of a year ago. “With [a] weaker mass market trend and [the] impact of smoking ban continuing to linger, we believe the share price performance of Galaxy and the [Macau] gaming sector may be capped in the near term,” analysts added.

On time, on budget

The closing of four VIP junket rooms during the third quarter of the year at the company’s StarWorld casino represented 15 percent of VIP capacity. “Galaxy is in the process of re-allocating the tables for the more profitable segment,” analysts wrote, adding that “the closure of smaller junket rooms highlights the on-going

junket consolidation in this different environment.”

“We remain very optimistic about Macau’s medium to longer prospects and [are] excited that Galaxy Macau Phase 2 is on schedule to complete on time and on budget by mid-2015,” Galaxy chairman Lui Che Woo said when announcing his company results on Tuesday.

The budget for Galaxy Macau Phase 2 is HK$19.6 billion and so far the company has spent HK$9 billion, of which HK$1.7 billion was spent in the third quarter of the year.

In addition, the shopping mall for premises is already fully leased.

Also on schedule is the company’s redevelopment works of Grand Waldo, the conceptual plans for which are slated to be announced in January.

“The emphasis will be familyfriendly leisure and entertainment for the middle class supported by many local Macau businesses,” he added. Site investigation works for Galaxy’s Cotai Phases 3 and 4 will “commence shortly” and the resort is expected to cost between HK$50 million and HK$60 million.

Analysts at Credit Suisse also added that the near-term industry outlook remains uncertain.

Business Daily | 7

November 13, 2014

Hong Kong

Ghostbusters In Hong Kong, apartments where murders or suicides have occurred can go on the market at a 50 percent discount. The creepier the misdemeanor, the bigger the discount

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here’s a grim phenomenon in Hong Kong’s real estate market: discounts of as much as 50 percent for homeseekers willing to live in an apartment where a murder has been committed.

Unnatural deaths typically result in rental discounts of 10 to 20 percent and can be more than double that for sinister killings, according to Sammy Po, head of the residential department of realtor Midland Holdings.

The Chinese believe that such places, known as “hung jaak,” the Cantonese term for “haunted apartments,” are unlucky, he said.

“The Chinese really do care” about living in these places, Po said.

The rent for a Wan Chai district apartment where police found two women’s bodies on November 1 was HK$29,000 (US$3,740) a month at the time of the murders but will probably drop by half when it’s released from being a crime scene, cleaned and rented again, according to a director of the company that owns the unit, who didn’t want his name or firm identified because he isn’t permitted to speak

The city is the world’s most expensive after London for multinational companies to base staff because of its real estate, according to property brokerage Savills Plc. First-time homebuyers are also drawn to these cheaper properties, Midland’s Po said.

Feng Shui

publicly. The sales value of the unit in the luxury J Residence would drop from HK$9 million to HK$6 million if it were sold immediately, the person said.

Hong Kong had almost 190 sites where an unnatural death took place, including murders and suicides, this year, according to a database compiled by Squarefoot.

Suicide Listings Squarefoot lists the date of the incident, the address, the district and a brief description of the death. Among recent

listings are an apartment where an 18-year-old male student slipped a plastic bag over his head last month and jumped to his death; one where a middle-aged couple, plagued by financial troubles, committed suicide by inhaling burning charcoal; and another where a mother was hacked to death by a mentally unstable neighbour while protecting her two daughters.

Hong Kong property agents aren’t required by law to disclose if a death occurred in a unit but they should provide information when

asked under the industry’s code of ethics, according to the Estate Agents Authority, a government agency. Hong Kong is otherwise Asia’s priciest real estate market.

Private residential rents hit a record high in August, reaching almost HK$25 a square foot, or HK$12,500 for a 500-square-foot apartment, according to Midland. Residential sales prices, which have more than doubled since the start of 2009, hit a record last month despite government measures to curb demand.

Superstition and geomancy beliefs run deep. Hong Kong people also shun sites close to cemeteries, hospitals and churches, which can be considered unlucky. Buildings typically omit the fourth floor because the number is a homonym for the Chinese word for death. Property developers rely on feng shui, which translates as “wind and water,” the Chinese practice of arranging the physical environment in harmony according to beliefs about energy and design.

Expatriates tend to be less concerned with living in “haunted apartments,” said Asif Ghafoor, founder of propertylisting website Spacious.

For them, “location is by far the most important thing,” he said.

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8 | Business Daily

November 13, 2014

Greater China ITA talks to be resumed China and United States has reached consensus on resuming negotiations on updating the World Trade Organization’s (WTO) Information Technology Agreement (ITA) by including more products, the Ministry of Commerce said yesterday. The two sides will work with other participants of the ITA to put an end to negotiations as soon as possible, the ministry said in a statement on its website. ITA expansion has a significant commercial value, as consensus had been made on tariff exemptions for about 200 items before the U.S. dropped out of the negotiations a year ago.

Train makers merger “model” for other sectors Chinese state-owned train makers China CNR and CSR Corp may merge their overseas units to create a single company focused on winning deals abroad, the official Shanghai Securities News reported yesterday. Citing unnamed people familiar with the matter, the newspaper said the proposed merger could become a model for other state-owned firms at a time when regulators want to eliminate vicious competition between these companies for overseas deals. Officials from CSR Corp and CNR Corp declined to comment on the report.

Chinese, Venezuelan local gov’ts bolster ties China’s Shandong Province and Venezuela’s northern state of Aragua worked to boost economic and trade cooperation between the two sides. Government and private-sector representatives from both countries gathered in the state capital of Maracay for the opening of a business and trade forum, the Expo Aragua Potencia Internacional. “These measures seek to strengthen trade and promote the export of agricultural products from Aragua ... to Shandong province, through the contacts that will be made today,” Venezuela’s Minister of Industries Jose David Cabello said via Twitter.

China-US reach major environ While experts say the targets still did not go far enough to tackle the problem of climate change David Stanway

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hina will aim to cap greenhouse gas emissions by 2030, while the United States will cut total emissions by more than a quarter by 2025, the world’s two biggest carbon polluters said in an unprecedented joint pledge at a summit in Beijing yesterday.

Although many questions remain about enforcement and implementation, the announcement throws the political weight of the world’s two biggest economies behind a new global climate pact to be negotiated in Paris next year. It also represents the first time China has set a date for peak CO2 emissions.

President Barack Obama and President Xi Jinping said China would aim for peak CO2 emissions by “around 2030” but strive to get there sooner, while the United States will slash emissions by 26 to 28 percent from its 2005 level.

U.S. officials said the commitments, the result of months of dialogue between the two countries, would spur other nations to make pledges and deliver “a shot of momentum” into negotiations for a new agreement set to take effect in 2020.

“Today’s announcement is the political breakthrough we’ve been waiting for,” said Timothy E. Wirth, former U.S. Undersecretary of State for Global Affairs and the vice chairman of the United Nations Foundation.

“If the two biggest players on climate are able to get together, from two very different perspectives, the rest of the world can see that it’s possible to make real progress,” he said in a statement.

However, beyond their political

significance, the targets still did not go far enough to tackle the problem of climate change, environmental experts said.

“It is a very good sign for both countries and injects strong momentum (into negotiations), but the targets are not ambitious enough,” said Tao Wang, climate scholar at the Tsinghua-Carnegie Centre for Global Policy in Beijing.

China’s targets should serve as “the floor and not the ceiling”, said Li

H

GOME to buy stake in Huishang Bank GOME Electrical Appliances Holding Ltd said it would buy more than 5 percent of Huishang Bank for HK$2.4 billion (US$309.5 million), as the Chinese electronics retailer aims to upgrade its financial services platform. GOME, backed by private equity firm Bain Capital, said it would buy 632.5 million new H shares, or 5.4 percent of the enlarged share capital, of the Hefei-based commerical bank at HK$3.8 per share. The issue price represented a 12.4 percent premium to the bank’s previous close, GOME said in a filing.

Top legislator meets Peruvian president China’s top legislator Zhang Dejiang met visiting Peruvian President Ollanta Humala Tasso here yesterday. Zhang, chairman of the Standing Committee of the National People’s Congress (NPC), told Humala that China has always cherished its relations with Peru and expects to deepen cooperation with it in all areas. The NPC would like to work with the Peruvian parliament to jointly create a favourable legal environment for cooperation between the two countries, Zhang said.

Shuo, a campaigner of environmental group Greenpeace in Beijing.

China also pledged to boost the share of non-fossil fuels in its energy mix to around 20 percent by 2030, from less than 10 percent in 2013, a move that could require 1,000 gigawatts of new nuclear and renewable capacity, but Wang said the figure took China little further than “business as usual”.

In the United States, midterm elections have given the Republican

HK Q3 growth stung by weak spending The government cut its full-year growth target to 2 to 3 percent from 3 to 4 percent at the start of the year

ong Kong’s economy may narrowly avoid shrinking in the third quarter even as business activity remains depressed by weak domestic demand and an entrenched slowdown in tourist spending.

The impact of pro-democracy protests may not be fully reflected in third quarter GDP data, but economists say the unrest that began in late September will offset a recent pick-up in trade and retail sales in the US$260 billion economy.

Gross domestic product is expected to have expanded 1.8 percent in the September quarter from a year ago, the same pace as the June quarter, a median estimate of five economists polled by Reuters showed. Three economists with quarterly forecasts estimated GDP will expand 0.4 percent from the second quarter.

Fourth quarter growth is at risk of slowing further if protests drag on. Domestic consumption has already been hit by a decline in tourist spending largely aggravated

by China’s anti-graft campaign.

Those concerns are showing up in high-frequency data such as PMI surveys, indicating full-year growth in the former British colony may come in at the lower end of official estimates even as September quarter numbers benefitted from recovering global demand and the launch of

Business Daily | 9

November 13, 2014

Greater China

ment pact Hong Kong scraps yuan-conversion limit Investors will still be subject to China’s daily repatriation limit of 80,000 yuan per person

H

KEY POINTS China also looking to raise clean energy to 20 pct of total Targets part of US, China’s pledges in new global climate deal

Party control over Congress, casting doubt on the Obama administration’s ability to deliver on tough climate pledges.

In a statement after the announcement, Senate Republican Leader Mitch McConnell branded the emission cuts as part of Obama’s “ideological war on coal”, adding that his priority in the new Congress was “easing the burden” of environmental regulations.

Reuters

KEY POINTS Q3 GDP may post only modest growth versus Q2 Political protests drag on business activity, tourism Economists have downgraded growth, may cut estimates again

Apple’s iPhone 6.

“Hong Kong’s growth outlook is set to head south as mainland tourists have cut their spending and local retail sales have contracted while the real estate market has only seen a lukewarm recovery,” said Raymond Leung, an economist at ANZ in Hong Kong.

The economy expanded 2.9 percent in 2013. Third-quarter data is due on Friday.

On the bright side, the launch of a share scheme between Hong Kong and China could be a fillip to the services industry, already boosting stocks and trade volumes.

Reuters

ong Kong is scrapping a daily limit on the amount of yuan residents can buy, helping reinforce its dominance as an offshore trading centre for Chinese assets as Shanghai’s stock market opens to the city’s investors.

The 20,000-yuan (US$3,260) conversion cap has existed since 2004, when Hong Kong became the first city outside of China to allow banks to accept yuan deposits. The end of the restriction puts locals on a par with non-residents, who have been able to buy unlimited amounts of China’s currency in the offshore market since August 2012. The change will take effect on November 17, the same day the Shanghai stock link begins, according to Hong Kong Monetary Authority Chief Executive Norman Chan.

The restriction has been a hindrance for Hong Kong as cities including Singapore and London seek to become rival yuan centres.

China, the world’s second-largest economy, is encouraging greater use of its currency in global commerce and investment and the yuan ranked seventh for cross-border payments in September. Outside of China, Hong Kong has the largest pool of yuan savings and is where most yuandenominated bonds are traded.

China’s daily repatriation limit of 80,000 yuan per person, according to Chan. He said he didn’t see a need to amend the clearing agreement with the People’s Bank of China unless residents and the banking industry call for a change.

With the repatriation limit remaining, there won’t be a significant impact on cross-border capital flows, DBS’s Chow said. The onshore yuan’s exchange rate will still be largely determined by China’s macro-economic factors and policies, Australia & New Zealand Banking Group Ltd. wrote in a note today.

Yuan declines The conversion-limit removal was widely expected, including by Hang Seng Bank Ltd. and DBS, after China unveiled the plan to connect the Hong Kong and Shanghai stock exchanges and allow 23.5 billion yuan of daily cross-border trading.

Hong Kong’s yuan deposits grew to a record 959.9 billion yuan in April, from less than 1 billion yuan in

February 2004, according to HKMA data. The holdings were 944.47 billion yuan at the end of September, still the world’s largest offshore pool of savings in the currency.

Acceleration of yuan convertibility and liberalization of interest rates were among key reform proposals decided on at a meeting of the ruling Communist Party in November 2013.

The party said at the time that it aimed to achieve these targets by 2020.

China appointed clearing banks in London, Seoul, Frankfurt, Paris, Luxembourg and Canada in the past 11 months and expanded the Renminbi Qualified Foreign Institutional Investor program to places beyond Hong Kong, allowing yuan raised offshore to buy securities in China’s domestic market.

Hong Kong banks can provide a “full range” of yuan services including financing to personal customers with the scrapping of the conversion limit, the HKMA said in a letter to banks published on its website yesterday.

Bloomberg News

Repatriation limit The change will cement Hong Kong’s status as an offshore yuan centre, Hong Kong Chief Executive Leung Chun-ying said in a statement posted on a government website.

Hong Kong’s banks will execute residents’ yuan trades in the offshore market and transfers of the currency to onshore accounts will still be subject to

Hong Kong Stock Exchange will face extra busy times

Modern Dairy probed after tuberculosis found in cows It won’t lead to a massive product recall

C

hinese authorities are probing reports a unit of China Modern Dairy Holdings Ltd. sold milk cows that tested positive for tuberculosis, the latest food scandal

to hit the country, sending shares of the raw-milk producer to the lowest in more than a year.

The reports alleged several of 94 dairy cows sold by the subsidiary in an

China’s dairy industry has struggled to regain consumer confidence since a melaminetainted milk scandal that killed six infants and sickened 300,000 others in 2008

auction tested positive for bovine TB, while some tested positive to a brucellosis antibody serum test, Maanshan, Anhui province-based Modern Dairy said in a statement to the Hong Kong Stock Exchange. Humans can contract TB by drinking unpasteurized raw milk from infected cows.

Chinese consumers have been hit by abuses that included fox DNA found in donkey meat sold by WalMart Stores Inc. and a McDonald’s Corp. food supplier repackaging expired meat.

“This is an isolated incident and not an epidemic by any stretch of the imagination,” Jeremy Yeo, an analyst at Mizuho Securities, wrote in a note to clients, citing a conference call with Modern Dairy today. It won’t lead to a massive product recall as milk pasteurized under high heat kills such germs and bacteria, making it safe for drinking, Yeo wrote.

Sick cows aren’t allowed to produce milk for commercial use, he said, citing the company.

Humans can be infected by bovine TB both by drinking raw milk from infected cattle or by inhaling infective droplets, according to the World Organization for Animal Health, or OIE. It’s estimated that in some countries as much as 10 percent of human tuberculosis is due to the bacteria, according to OIE. Bloomberg News

10 | Business Daily

November 13, 2014

Greater China

Retail investors finally buy blue chips, but for how long?

Far from a change in retail sentiment towards blue chips, analysts said small investors were just front running the foreign money that will flow into Shanghai equities Lu Jianxin and Pete Sweeney

C

hinese retail investors are finally buying domestic bluechip stocks, but not in the way Chinese authorities have long hoped.

Regulators have for years failed to convince retail investors who dominate the domestic stock markets to stop speculating on small caps and buy undervalued blue chips.

Now, however, the introduction of the Shanghai-Hong Kong stock connector pilot programme, set to launch next week, has persuaded ordinary Chinese investors to move money out of small caps and into blue chips, particularly financials.

This has helped fuel a rally that has pushed the Shanghai Composite Index up nearly 17 percent year-todate, outperforming the Dow Jones Industrial Average and the S&P 500, after spending years in the basement.

Far from a change in retail sentiment towards blue chips, analysts said small investors were just front running the foreign money that will flow into Shanghai equities. They will then flip the shares to the foreigners for a quick profit.

“The funds which have recently

poured into the market are mostly short-term hot money chasing quick profits,” said Chen Huiqin, senior analyst at Huatai Securities in Nanjing.

“Shares in blue-chip firms have changed hands very rapidly, suggesting a lack of interest by longterm institutional investors and a lack of confidence in broader market prospects.”

Indeed, major Chinese indexes saw record trading volumes on Tuesday as traders adjusted their portfolios to get in front of the foreign money expected to start flooding in on Monday.

Small is beautiful Small investors remain wary of blue chips, believing both economic and business fundamentals to be poor.

They are particularly wary of state-owned financial stocks and the government’s exhortations for investors to buy them, believing Beijing wants them to pour money into these firms so it won’t have to bail them out.

Retail investors prefer small-cap

tickers that are mostly listed on the ChiNext growth board in Shenzhen.

This board has risen 141 percent in the last two years, versus the blue-chip heavy CSI300 index’s 14 percent gain.

Even some foreign investors have said they wish they could buy Shenzhen-listed shares because

KEY POINTS SH-HK stock connect has Chinese locals buying blue chips at last Mainland speculators positioning to profit from foreign flows Analysts warn retail buying of blue chips will not last Retail investors especially wary of financial stocks

First onshore bond ETF launches in U.S. A spokesman for the company said the Global X Fund, which will track an S&P index, is expected to launch next week Ashley Lau

they are often companies in sectors expected to grow in the long term such as technology, consumer goods and pharmaceutical start-ups.

No fundamentals However, foreign investors will only be allowed to buy Shanghai shares, and specifically dual-listed state-owned giants and other large companies.

That has caused the ChiNext index to slide even as the Shanghai financial index has gained.

Xiao Shijun, stock analyst at Guodu Securities in Beijing, said the rally had little to do with China’s economic fundamentals, which show weak domestic demand and deflationary pressures, both of which are bad for stock prices.

“Except a small bounce in the second quarter, the economy has mostly staged a weak performance this year,” he said. “It’s government policy support, such as the connect, that has sparked the market rebound, based on low valuations.”

Reuters

The introduction of these early funds could likely pave the way for more ETFs to enter the space, said Dennis Hudachek, a senior analyst with research and analytics firm ETF.com.

“I think it will be the start of a whole wave of RQFII fixed-income funds that are going to launch over the next few years,” Hudachek said, referring to the way the new bond ETFs will need to have access to a Renminbi Qualified Foreign Institutional Investor (RQFII) in order to gain access to China’s onshore market.

To access the onshore market, Van Eck has partnered with ChinaAMC, an asset manager with RQFII quota that will serve as the sub-adviser to the fund, and has access to the Chinese government-run quota of its local bonds.

While the onshore Chinese bond market carries the currency, default and regulatory risks that might be expected in a fledgling market, their relatively high yields and low correlation to U.S. Reuters

U

.S. investors can now gain direct access to China’s onshore bond market through a new exchange-traded fund that invests in a broad swath of the country’s swelling fixed-income market, which has largely been closed off to foreigners.

Van Eck Global said on Tuesday that it is launching its Market Vectors

ChinaAMC China Bond ETF on the NYSE Arca exchange. The fund invests in a broad basket of Chinese bonds, which are denominated in the local currency and issued in mainland China. It will track the ChinaBond China High Quality Bond Index, which includes debt issued by policy banks, sovereigns, and corporate issuers.

It is the first of a handful of U.S.listed ETFs that U.S. fund managers are readying to launch that will directly access China’s nearly US$5 trillion onshore bond market. Among other issuers with planned ETFs are Deutsche Bank AG, Global X Funds, and KraneShares, according to company filings with the U.S. Securities and Exchange Commission.

I think it will be the start of a whole wave of RQFII fixed-income funds that are going to launch over the next few years Dennis Hudachek senior analyst ETF.com

Business Daily | 11

November 13, 2014

Asia We are very satisfied that ASEAN is making progress in various areas in line with this year’s theme of ‘Moving Forward in Unity, to a Peaceful and Prosperous Community Thein Sein President of Myanmar

ASEAN leaders (L-R) Philippines President Benigno Aquino III, Singapore Prime Minister Lee Hsien Loong, Thailand Prime Minister Prayut Chan-o-cha, Vietnam Prime Minister Nguyen Tan Dung, Myanmar President Thein Sein, Malaysia Prime Minister Najib Razak, Brunei Sultan Hassanal Bolkiah, Cambodia Prime Minister Hun Sen, Indonesia President Joko Widodo and Laos Prime Minister Thongsing Thammavong

ASEAN opens with blueprints achieving satisfaction The importance of maintaining ASEAN’s central role as a regional cooperation platform has been highlighted

T

he Association of Southeast Asian Nations (ASEAN) has achieved close to 80 percent of the overall measures under the three ASEAN Community blueprints, Myanmar President U Thein Sein said at a the opening of a summit meeting of regional leaders yesterday.

However, “challenges remains in implementing the remaining 20 percent of the targets and addressing the issues that will emerge in the Post 2015 ASEAN Community,” he said.

Speaking at the opening of the 25th ASEAN Summit in Nay Pyi Taw, capital of Myanmar, Thein Sein said

that that the current ASEAN Summit and related summits involving leaders of partners countries “take place at an important juncture for ASEAN as the ASEAN Community will emerge at the end of next year.”

Thein Sein said that two main tasks were undertaken during this year, including consideration for strengthening the ASEAN Institutions and efforts to develop the ASEAN Community’s Post 2015 Vision.

Separately, the ASEAN Secretariat said Wednesday that the summit is expected to adopt the Nay Pyi Taw Declaration for the ASEAN

Community’s Post-2015 Vision.

ASEAN has set the target of realizing an ASEAN Community by the end of 2015. It comprises three pillars such as the ASEAN Economic Community (AEC), the ASEAN Political-Security Community and the ASEAN Socio-Cultural Community.

The ASEAN Economic Community, which is obviously the most important pillar, is envisaged to be a single market and production base, a competitive economic region, a region with equitable economic development and a region integrated into the global economy. ASEAN has also introduced

a scorecard to gauge its progress in the implementation of the goals under the ASEAN Economic Community.

Some scholars said that connectivity, consensus and ASEAN centrality may be among the core issues that ASEAN leaders will have to tackle beyond 2015, with non-traditional security challenges as another key area of cooperation.

ASEAN leaders, in developing the vision for the next stage of community building, would also need to take into account the challenges arising from the changing global economic landscape, as the demand from the developed economies is expected to remain weak and the East Asian region is set to have an ever more closely integrated production network.

The ASEAN Secretariat said that the summit is expected to adopt a Declaration on Strengthening the ASEAN Secretariat and Reviewing the ASEAN Organs.

The Myanmar president also said that ASEAN will continue to expand external relations that will bring benefit to the ASEAN Community.

“It is time for us to consider strategically in expanding our external relations with potential trading and investment partners. We should also look into ways to engage more with G-20 and emerging global economies, namely BRICS and markets in other regions,” he said.

Xinhua

Australian renewable energy target talks break down Labour’s decision to walk away from negotiations means businesses considering investing in renewable energy face uncertainty about government support Byron Kaye

A

ustralia’s opposition party said yesterday it quit talks with the government aimed at agreeing a renewable energy target, ending hopes of long-term certainty for potential investors in the burgeoning sector.

Australia is one of the world’s biggest carbon emitters on a per capita basis, but rising electricity bills and cheaper rooftop solar have driven down electricity use since a centre-left government first set the target in 2009.

That has prompted a new conservative government to say it wants to reset a target for 20 percent of electricity to come from renewable sources by 2020 in line with the decline

in actual energy use. The opposition says this would amount to a 40 percent reduction in the original target.

Both parties wanted to agree to new terms for the target - which determines how state subsidies are distributed - to give businesses certainty beyond the three-year electoral cycle.

Just two days earlier, a report blamed uncertainty for a 70 percent fall in investment in Australian renewable energy in the past five years.

The thwarted negotiations also create a potential embarrassment for a government under pressure domestically from environment groups for failing to include climate change on the agenda as it hosts a Group of

You can’t have negotiations with people who don’t want to negotiate Bill Shorten opposition Labour leader

Twenty summit in the next few days.

Labour’s environment spokesman Mark Butler told Australian Broadcasting Corp. that “after several meetings we’ve reached the clear view there’s not a prospect of agreement between the two parties, our positions are too far apart”.

In a statement, environment minister Greg Hunt and industry minister Ian Macfarlane said the opposition’s walkout was “disappointing” and put “politics ahead of policy”.

“The (target) is not operating as intended and as many in the renewable sector privately acknowledge, the target is neither sustainable nor achievable,” they said.

Reuters

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November 13, 2014

Asia NZ central bank trusts current rates Reserve Bank of New Zealand Governor Graeme Wheeler yesterday said that interest rates were still accommodative despite a series of rate rises earlier this year, and added that neutral rates remained around 4.5 percent. “We still see the cash rate at 3.5 percent as an expansionary stimulus to the economy,” Wheeler told a parliamentary select committee. “We see the neutral level for the cash rate around 4.5 percent.”

Wheeler was speaking after the RBNZ’s announcement earlier in the day that it would keep intact limits on low-deposit home mortgages introduced a year ago.

Volatility in FX rates extended

Recent increased volatility in currency exchange rates is not unique to the won, a South Korean finance ministry official said yesterday. The comments were made to reporters by director general of the International Financial Cooperation Bureau Song In-chang on the side-lines of a briefing at the finance ministry in Sejong, implying the government would not engage in dollar-selling intervention to stem the won’s fall.

Indonesia to sell global bonds Indonesian government plans to issue global bonds, samurai bonds and global sukuks early next year before the U.S. Federal Reserve starts increasing interest rate. “First quarter is a relatively stable period to issue bond. We want to do it as soon as possible,” Scenaider Siahaan, a director at Indonesia’s Debt Office Management, told Reuters yesterday. He did not disclose the amount of bonds that will be issued in the first quarter.

S.Korea’s import prices fall for 8 months Prices of farm goods and industrial products imported from overseas to South Korea fell for eight months in a row as Dubai crude, South Korea’ benchmark, tumbled more than 10 percent last month, central bank data showed yesterday. The import prices, which influence consumer prices with a certain time gap, declined 0.9 percent in October from a month earlier, according to the Bank of Korea (BOK). It was the eighth straight month of decline, marking the longest falling trend since 2001 when the import prices fell from May to December.

Japanese QE to last until second half of 2015 But there is speculation the BOJ will have to ease again if inflation fails to pick up Stanley White

B

ank of Japan board member Ryuzo Miyao said on yesterday there is a high chance it can begin discussing an exit to its quantitative easing in the second half of fiscal 2015, the most specific comments to date about when that debate will start.

Miyao did not elaborate on when he thought the BOJ would actually start to wind down its massive purchases of government debt and risk assets, but cited the Federal Reserve’s slowing of its asset purchases as one example of how it might proceed.

Miyao played down the risk that the BOJ’s surprise October 31 decision to expand its stimulus had made it more difficult to exit and would cause asset bubbles.

“I think there is a high chance the BOJ can begin specific debate on its exit strategy in the second half of fiscal 2015, which is when we see a high chance of meeting our price target,” Miyao told business leaders in Nagasaki, in southern Japan.

Miyao was among four board members who supported BOJ Governor Haruhiko Kuroda’s proposal to expand monetary stimulus at the October 31 meeting in response to slowing inflation and weak growth.

The BOJ shocked global financial markets by increasing its annual government debt purchases by 30 trillion yen (US$260 billion) to 80 trillion yen, in an admission that its goal of reaching 2 percent inflation

Bank of Japan headquarters in Tokyo

around fiscal 2015, which ends in March 2016, was under threat.

Miyao acknowledged that some economists thought the extra easing would make it more difficult to unwind its debt purchases, but he dismissed that notion.

The additional easing will make it more likely that inflation rises to 2 percent in a balanced manner because corporate earnings, employment and wages will improve, he said.

Speaking to reporters later, Miyao said some exit strategies available to the BOJ are allowing bonds on its balance sheet to expire, conducting

money market operations to mop up liquidity and raising the interest it pays on commercial banks’ reserves.

The risk of an asset bubble is contained, he said, because measures are being taken to improve competitiveness. If asset prices rise in line with economic fundamentals, this will limit any distortions caused by monetary policy, Miyao said.

Kuroda, speaking in parliament, sidestepped questions on exit strategies and insisted that the ramping up its government debt purchases will not hamper an exit from its monetary policy.

Reuters

Australian wages stuck in the slow lane With consumer prices up 2.3 percent in the same period, real wages hardly grew at all over the year to September

A

ustralian wage growth stayed stuck in slow gear last quarter, a helpful restraint on inflation but also a halter on household incomes and spending power.

Wages rose 0.6 percent in the third quarter, data from the Australian Bureau of Statistics showed yesterday, matching the gain made in the previous quarter. Annual growth remained at 2.6 percent, equal to the slowest pace in at least two decades.

Concerns about family incomes loomed large in the latest survey of consumer sentiment from the Melbourne Institute and Westpac Bank out yesterday.

While the overall index of confidence did edge up 1.9 percent,

pessimists outnumbered optimists for the ninth month running in the worse streak since the global financial crisis.

Yet, the subdued pace of wages is also a key reason the Reserve Bank of Australia (RBA) is confident inflation will remain consistent with its target of 2 to 3 percent, even as a lower currency lifts prices for imports.

With inflation contained, the

central bank has been able to keep interest rates at a record low of 2.5 percent for 14 months now which has helped boost household wealth, both from higher home prices and a pick-up in the share market.

Recent ABS data showed household net worth had climbed to a record A$7.6 trillion (US$6.60 trillion) at the end of June, equal to around A$321,635 for every Australian.

And it looks certain to have grown even further, with home prices rising 1.5 percent in the three months to September. The total value of Australia’s homes was estimated to have grown by almost A$100 billion in the quarter to stand at A$5.3 trillion.

Reuters

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Business Daily | 13

November 13, 2014

Asia

S. Korean lending to households at record high

Bank lending to companies also jumped by a net 7.2 trillion won in October But the rapid rise in lending to households could weaken expectations for an additional interest rate cut in the near future as policymakers have cited already heavy household debt as a key risk to Asia’s fourth-largest economy.

The Bank of Korea is widely expected to hold its benchmark interest rate unchanged at 2.0 percent on Thursday, matching a record low, after two cuts in August and October, a Reuters survey found.

Meanwhile, separate data released at the same time by the central bank showed South Korea’s broadest L-money supply measure in September rose 7.9 percent from the year before, unchanged from a 7.9 percent annual gain in August.

Reuters

A South Korean bank

S

outh Korea’s bank lending to households in October rose by the biggest monthly amount in nearly seven years, led by mortgage borrowings, central bank data showed yesterday, a day before its monthly policy meeting.

Bank lending to households rose by a net 6.4 trillion won (US$5.82 billion) during October, the biggest monthly

gain on record since data was compiled in January 2008 and far more than a 4.3 trillion won gain in September.

Mortgage lending grew by a net 5.5 trillion won in October, also the biggest rise on record and compared with a 4.1 trillion won gain in September, Bank of Korea data showed.

Bank lending to companies also jumped by a net 7.2 trillion won in

October, the most since April this year and more than double a 3.5 trillion won gain in September, the data showed.

The data indicates stimulus measures by the government and the central bank, including plans to boost public spending and two interest rate cuts over the past three months, succeeded in encouraging consumers and companies to lift spending.

Won5.5 trillion

October’s South Korea mortgage lending

14 | Business Daily

November 13, 2014

International Bank of England fires chief FX dealer The Bank of England has fired its chief foreign exchange dealer after it found information about serious misconduct, but said the dismissal was unrelated to a foreign exchange scandal. The BoE suspended its chief dealer in March as it looked into what Bank officials might have known about alleged manipulation of key currency rates by foreign exchange traders. He was fired on Tuesday. The BoE said earlier yesterday that a review commissioned by the BoE’s oversight committee found no evidence that any Bank official had been involved in unlawful or improper behaviour in relation to the FX trading scandal.

Gazprom Neft 9-month net profit up The oil arm of gas producer Gazprom, said yesterday net profit rose 3.2 percent in the nine months of 2014, yearon-year, but its growth had been capped by weaker rouble. Profit for the period reached 139.5 billion roubles (US$3 billion) and 51.9 billion roubles in the third quarter, down from 57.5 billion roubles in the same period last year, the company said in a statement. Gazprom Neft, Russia’s fourth biggest by oil production, said that losses from foreign exchange for the nine-month period stood at 14.6 billion roubles.

Sainsbury’s cuts back spending The company threw down the gauntlet to larger rival Tesco yesterday, taking a hit on profits and the dividend to fund lower prices for customers in the latest escalation of the British supermarket battle. Sainsbury’s, which had outperformed the sector for years until a recent slowdown, plans to cut spending hard, rein in its property expansion and find more efficiencies in the business to pay for lower prices. The strategy was the first big announcement from new boss Mike Coupe who took over in July.

Shell focused on oil projects in Mexico Royal Dutch Shell, one of the world’s largest oil companies, is most interested in new oil and gas projects in the deep waters of the Gulf of Mexico following a major sector opening finalized earlier this year, a top executive said. In the near term, Shell is eying potential deep water tie-ups with Mexican oil company Pemex in the Trion and Exploratus fields located within the Perdido Fold Belt, which straddles the U.S.-Mexico maritime border in the Gulf. The energy reform signed into law in August promises to stem a decade-long slide in crude output in Mexico.

U.S. IT industry cheers trade deal progress U.S. software and technology trade groups on Tuesday cheered a breakthrough in talks to eliminate duties on information technology products, saying a global IT trade deal would create jobs, boost U.S. exports and help consumers. China and the United States agreed to seek ways to cut global tariffs on medical equipment, GPS devices, video game consoles and other products, which U.S. officials said should pave the way for a swift conclusion of the Information Technology Agreement (ITA) later this year.

Regulators fine global banks in forex probe Evidence showed that traders had colluded to try and manipulate benchmark foreign exchange rates by sharing confidential information

G

lobal regulators imposed penalties totalling US$3.4 billion on five major banks, including UBS, HSBC and Citigroup, yesterday for failing to stop their traders from trying to manipulate foreign exchange markets.

Royal Bank of Scotland and JP Morgan were also fined over attempts to rig currency benchmarks in a yearlong probe that has put the largely unregulated US$5 trillion-a-day market on a tighter leash, with dozens of dealers suspended or fired.

Switzerland’s UBS swallowed the biggest penalty, despite being the first bank to come forward with evidence of possible misconduct, paying US$661 million to Britain’s Financial Services Authority (FCA) and the U.S. Commodity Futures Trading Commission (CFTC).

UBS was ordered by Swiss regulator FINMA, which also said it had found serious misconduct of the bank’s employees in precious metals trading, to hand over 134 million Swiss francs.

FINMA also instructed Switzerland’s largest bank to automate at least 95 percent of its global foreign exchange trading and limit bonuses for traders of foreign exchange and precious metals, where it said it had also found evidence of serious misconduct, to 200 percent of their base salary for two years.

Other UBS high earners will have to get approval for their bonuses to go above that.

Regulators found evidence that traders had colluded to try and manipulate benchmark foreign exchange rates by sharing confidential information about client orders with one another right up until October 2013.

The traders used code names to identify clients without naming them and created online chat rooms with

Today’s record fines mark the gravity of the failings we found and firms need to take responsibility for putting it right Martin Wheatley, FCA’s Chief Executive

FCA’s Chief Executive Martin Wheatley

monikers such as “the players”, “the 3 musketeers” and “1 team, 1 dream” in which to swap information.

The financial regulator in London, the global hub for foreign exchange (FX) trading, said it had launched a review of the spot FX industry that will require firms to scrutinise their systems and may involve them looking at how they do things in other markets such as derivatives and precious metals.

The FCA’s first group settlement, worth more than US$1.7 billion, is the biggest in British history and eclipses the 460 million pounds fines for alleged interest rate manipulation, reflecting increasing political and public demands that banks -- blamed for sparking the 2008 credit crisis -- are held accountable.

The five banks earned a 30 percent discount for agreeing to settle early.

Barclays had been expected to be part of the settlement but the FCA

said its investigation into the UK bank was continuing.

Investors had been braced for a speedy conclusion to the investigation after an earlier, sprawling inquiry into alleged rigging of interest rate benchmarks such as Libor gave regulators experience in how to cooperate globally.

In its settlement with HSBC, the FCA said that after attempts to manipulate one sterling/dollar currency fix that netted a US$162,000 profit, traders congratulated one another, saying “nice work gents... I don my hat” and “Hooray nice team work”.

Under instruction from increasingly intrusive regulators, banks did much of the groundwork themselves, handing over reams of online transcripts, clamping down on chat room use and either suspending or firing more than 30 foreign exchange traders.

Reuters

OPEC starts whispering about potential oil cut Oil traders and analysts are split over whether the group will act to shore up prices

A

subtle shift may be taking place within OPEC as it heads into its most important meeting in years, according to delegates with the producer group, as the discussion over whether it needs to cut output to defend oil revenues quietly intensifies.

OPEC’s Secretary General Abudulla al-Badri this week urged markets not to panic over the drop in prices to a 4-year low near US$81 a barrel, while Kuwait’s oil minister said OPEC was unlikely to cut output when it meets on November 27 in Vienna.

But privately, more delegates within the Organization of the Petroleum Exporting Countries are starting to talk of the need for the group to take some action, although they warn that reaching an agreement will not be easy.

“It will be a serious meeting, a difficult meeting,” an OPEC delegate

said. There might be an agreement to “bring production back to quota” if there is no consensus for a cut in OPEC’s output target, the delegate said.

That could involve reducing output by around 500,000 barrels per day (bpd), the amount OPEC is currently producing above its output target of 30 million bpd, according to its own figures. That could serve as a facesaving compromise between those willing and opposing a formal cut.

International oil prices have fallen by around 30 percent since June, as fast-rising U.S. shale production has contributed to growing supplies. But so far only a Libyan OPEC official, Venezuela and Ecuador have called for OPEC to cut output.

Kuwait and Iran have said a reduction is unlikely, while Saudi Arabia, the most influential member, has yet to comment publicly.

KEY POINTS OPEC delegate says informal output cut a possibility Message remains “don’t panic”, but not all members onboard OPEC meets on Nov. 27

While many members of the group such as Ecuador, Iran, and Venezuela will face large budget shortfalls if prices stay at or below current levels, some believe the group is largely powerless in the face of rising U.S. production.

Reuters

Business Daily | 15

November 13, 2014

On first impression, it’s the cars and the indescribable decibel-busting sound. Behind the hooplah, however, are many talented drivers powering their way to the most important category in motorsport - Formula 1. In this arena of choreographed metallic mayhem a victory in Macau can boost the chances of making the Ultimate Dream come true João Santos Filipe jsfilipe@macaubusinessdaily.com

16 | Business Daily

November 13, 2014

Edoardo Mortara: “I love Macau’s fast corners” The Italian has won six times in Macau and returns to extend his golden record. The only driver to win back-to-back victories in Formula 3 competes in the Macau GT Cup

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wo victories in Formula 3 (2009/2010), three victories in Macau Cup (2011/2012/2013) and another victory in the Audi R8 LMS Cup (2013) - this is the golden record that makes of Edoardo Mortara one of the most successful drivers in the history of the Macau Grand Prix.

However, it is not easy for the Italian to explain why he is so successful in the Chinese Special Administrative Region. “To be perfectly honest, I don’t really know.

I think the Guia Circuit suits me very well and that my driving style fits particularly well here. I’ve never struggled to be competitive in Macau”, he said in an interview with Business Daily.

The Guia Circuit is one of the favourites of the driver and that also helps to explain his success. Unlike modern street circuits, the Macau track is very fast, which is very impressive for drivers.

“What I love about Macau is that you have many fast corners where drivers can push their cars to the limit.

Going through a fast corner between two walls knowing that a mistake can cost you a lot gives you a rush of

BD: What is your best memory of the City of Macau?

EM: My first win in F3 (2009). I was coming from a difficult season in GP2 and that win definitely put me back on track.

BD: What do you like most about Macau?

EM: Macau is very unique.

I like to shop and go for a drink at night with friends.

BD: Macau is known for its gaming. Do you find time to visit casinos while you’re here?

EM: Yes - and without going crazy! I like going there to gamble a little bit.

adrenaline”, he admitted.

“The Guia Circuit is one of the most challenging tracks in the world. Usually, street circuits are slow in order to make them safer but here the track is really fast”.

Not surprisingly, Mortara set the track record in 2009 taking 2m10s732 to complete the 6.2 km Guia Circuit.

This year, the 27-year old is back to compete in the

Macau GT Cup, driving an Audi R8 LMS Ultra. “I’ve won in Macau six times.

My goal can only be to win once more. And for Audi, the R8LMS car suits Macau very well”, he said.

But the task of securing another victory is not going to be easy, as the competition is tougher than ever, starting with his teammate, Laurens Vanthoor. “He’ll have the

same car and he’s coming from a successful full season with the R8. This will be more significant as I’ve been racing in the DTM Series the whole year and the Macau GT Cup race will be my first time this year with the R8”, he explained.

That notwithstanding, there are more names to add to the favourite list. In fact, he praised the effort of the

Grand Prix Committee in attracting so many quality drivers. “When I saw the entry list I have to tell that the organisation got quite some drivers that can win it. Besides Vanthoor, [Earl] Bamber, [Marco] Wittmann, [Augusto] Farfus, [Danny] Watts, [Jean-Karl] Vernay, [Maro] Engel, [Renger] Van der Zande and [André] Couto they can all win”.

I feel really happy because all my family and friends are supporting me. It’s racing at home”, the Macanese driver told Business Daily.

“The Guia Circuit is the most complicated and challenging in the world. One mistake and you hit the walls, there’s really no room to fail”.

This year, Filipe de Souza managed to secure the WTCC Asia Trophy. In Macau, he aims to be the best Asian driver again for the Trophy, which excludes cars in the

TC1 category, where Chinese driver Ma Qing Hua (Citroen) competes.

“Our BMW has no chance of fighting for the overall classification because it’s a TC2 category. I will race to be the first in the Asia Trophy.

Everything else will be a plus”, he said.

Not surprisingly the largest number of Macau drivers will be racing in the Macau Touring Car Cup (22), Macau Road Sport Challenge (18) and Chinese Racing Cup (6).

Racing with the flag of Macau This year, the number of drivers racing under Macanese colours is 52. The Chinese Special Administrative Region is represented in all competitions except the Motorcycle Grand Prix

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ifty-two drivers will race during the weekend flying the colours of the flag of Macau.

The drivers of the Special Administrative Region are in all categories but the Motorcycle Grand Prix.

Eighteen-year old Andy Chang Wing Chung will represent Macau in the headlining Formula 3. The driver will try to repeat local driver André Couto’s seminal victory in 2000.

“It was the best moment of my career. I had always dreamt about winning the race in Macau and in that year I achieved it”, André

Couto, who will compete in the Macau GT Cup, told Business Daily about that moment. “I have grown up watching the races and going after autographs and in that year I was the one winning it. Sometimes I don’t even believe that I did it”.

This year, Couto will compete in the Macau GT Cup in a Ferrari 458 Italia GT3 for Director Racing. “It’s my favourite race of the whole year. There’s nothing like racing in your hometown in front of friends, family and countrymen”, he said.

Couto’s aspirations for this year, however, are somewhat

moderated. “I did not have time to drive the car before coming to Macau so I’ll have to adapt to it during the practice sessions. I will try my best but it won’t be easy.

The competition is tough”, he explained.

Rodolfo Ávila (Porsche/ ART Motorsports) and Vong Keng Fai (Porsche) are the other drivers from Macau competing in the Macau Cup. As for the World Touring Car Championship, Filipe de Souza (BMW) and Mak Ka Lok (BMW) are the Macanese drivers racing.

“It’s so special to race in Macau. Every time I race here

Business Daily | 17

November 13, 2014

Michael ‘The Blade’ Rutter chases 9th victory in Macau The British rider competes on the Guia Circuit for the 20th time and is pursuing his 9th victory here. To achieve that, he is going to have to beat last year’s winner, Ian Hutchinson

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ichael Rutter holds the record for most victories in the Macau Motorcycle Grand Prix but when it comes to talking about the past the rider is the first to admit that behind his results is a lot of teamwork.

“There’s no secret to winning in Macau. In order to win here there must be a combination of different factors. It’s not only about the rider, you also need a very good bike and a very good team. If one does not have all these conditions, it will be very difficult to achieve a good result”, he said in an interview with Business Daily.

“Oh yes, and you definitely need a bit of luck to win”.

The ambition of the 42-year old rider is, understandably, to win again, but his task is not easy at all, starting with last year’s winner Ian Hutchinson (Kawasaki). “I’m going to try to win the race for the ninth time. But, of course, I know it’s going to be difficult. And looking at the entry list it’s not going to be easy at all, as there’s a lot of quality”.

Besides Hutchinson,

John McGuinness (Honda), Stuart Easton (Kawasaki) and Michael Dunlop (BMW) are fancied to win in Macau’s biggest event of the year.

Macau is special to Rutter, not only because of the track that he considers one of the most unique but because of the atmosphere surrounding the races.

“There are a lot of spectators every year, a very good atmosphere. The noise is amazing”, he stressed before

talking about the Guia track.

“The one thing about the circuit is its variety. There’s a bit of everything in this track from fast corners to hard braking zones. It’s really a place where you can enjoy riding”, he said. “The start and finish corners because they’re very fast. When you can get them right the sensation of speed is really amazing. I really enjoy riding that part of the track”.

However, the Yamaha

rider says that it is not easy to overtake on the streets of the city, where competitors are always at risk of hitting the walls. “There are only two or three zones on the track when you have the opportunity to do it. This means that a place in the first two rows of the starting grid is very important”, he explained. “There’s no room for mistakes on this track.

The slightest mistake and you may hit the wall”.

BD: What is your best memory of Macau?

MR: Every victory in Macau is a good memory so I can say that I have at least eight nice memories of the city. But, of course, the first victory is a bit more special than the others.

BD: What do you like most about Macau? And what do you dislike?

MR: It’s an amazing place that can organise an event like there is no other and it’s very unique.

What I dislike about Macau is the wet, which is terrible for riding. Makes everything much more complicated.

BD: In the time you’ve spend in Macau have you been able to visit the city?

MR: Yes I have found time to visit the city and in my opinion there are many interesting places in Macau to visit.

BD: Macau is known for its gaming. Do you find time to visit casinos while you’re here?

MR: Definitely. I enjoy gaming while in Macau and now and again I have been a bit lucky.

“Men don’t like to be beaten by a girl” For the first time since 1983 a woman will compete in Formula 3 in Macau. Colombian Tatiana Calderón will represent those ‘holding up half the sky’

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t’s been 30 years since the last woman competed in Formula 3 on the Guia Circuit. Cathy Muller, sister of the WTCC driver Yvan, was the last to do it, back in 1983, when Ayrton Senna was the winner. However, this year Colombian driver Tatiana Calderón is determined to make an impression.

“I can’t believe it’s been so long since a woman competed in Macau so I hope I represent them well and am an inspiration for upcoming female talent”, she told Business Daily. “I’m very excited about this challenge; Macau is a special place with lots of history, so taking part in this event means a lot to me”.

The dream of Tatiana is to get to Formula 1 in the

next year and she knows that a victory in Macau, where iconic F1 champions Ayrton Senna and Michael Schumacher won, could boost her possibilities of securing the promotion.

“I believe that winning in Macau can change your life. It is such a prestigious race and such a difficult track that if you win here you’re prepared to win anywhere. The world is going to be watching and I will do my best to be one of the elite winners”, she stressed.

Nevertheless, she is cautious about her prospects in Macau as it is the first time she is racing on the Guia track. “Being my first time around, it’s not going to be easy but I had a very good end of season in the FIA F3 European Championship so

my aim is to finish in the top 10. But I don´t give up on winning; I’ve been preparing my self for this challenge and I’m ready to race”.

The fact that Tatiana is a girl sometimes makes her job harder on the track when the friendships of the paddock are forgotten. “It can be hard sometimes because men don’t like to be beaten by a girl and they make my job more complicated. But I like it, is part of the challenge”, she said. “Off the track, the relationship with the other drivers is good, I’ve been racing against some of them for many years now and we know we’re friends”.

Tatiana also revealed to Business Daily that she was always a sports girl, which explains her passion for

motorsport. “It all started when I was nine years old. I went to a rental go-kart track with my sister and I really

loved the experience so we started going every weekend and then every night until my dad bought us a kart”.

BD: Have you ever been to Macau?

TC: No, this will be my first time BD: What do you know about Macau besides the Grand Prix?

TC: I’ve been to Las Vegas and people have told me Macau is pretty similar, so I know I’ll find lots of casinos around.

BD: Besides racing, do you plan to visit the city and go sightseeing?

TC: Yes, I’d love to get to know the city. It’s a long trip and I want to be able to enjoy a little bit getting to know about the surroundings and culture.

BD: Macau is known for its gaming industry.

Do you plan to go to casinos and try your luck?

TC: Well, my plan is to get to know the city but perhaps I might give it a try. I might win my ticket to F1 (laughs)!

18 | Business Daily

November 13, 2014

Dream comes true for Andy Chang Andy Chang Wing Chung is the Macau representative in Formula 3 and aiming for a place in the top ten. The 18-year old racer told Business Daily that his ambition is to get into Formula 1

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ndy Chang Wing Chung (Team WestTec F3) is 18 years old but has been involved with the Macau Grand Prix since very young. The Formula 3 driver was born in the Special Administrative Region and brought up watching the races on the famous Guia Circuit.

“When I was young I really wanted to drive a Formula 3 car in Macau. I have been watching the race for 14 years now, and ever since I’ve been thinking that I want to race here one day.

Now I’m very happy that’s going to happen”, Chang told Macau Business.

Last year, the Macau driver had his first opportunity to race on the Guia Circuit, in the Formula Masters China and finished in seventh place.

However, the car was very different to the Mercedespowered Dallara.

“I raced last year in Formula Masters on the circuit. But it’s a totally different car to the Formula

3”, he commented. “I’d like to win the race but most drivers are more experienced.

So the most important thing will be to finish the race. Then I want a position within the first ten places”.

Due to the physical constraints of the territory it is not easy to be a driver in Macau. The go-kart circuit is the only place where one can actually race.

“It’s not easy to start a career in Macau. The decision for someone who wants to build a proper career is to go abroad. At the moment I’m in England because you can work with a racing simulator and practise on the track.

I live in Oxford so I can practise in Silverstone”, he explained.

Nevertheless, the driver has found a lot of support in the SAR. “Not only the people in Macau but the Government has been supporting me since I started racing karts. Now I also have the support of the Suncity Group. I’m really happy for that and I hope I

can get the sponsor with me next year so I can do more races”, he revealed.

The biggest dream for Andy Chang, however, is to jump to Formula 1.

“My ultimate dream is to race Formula 1. But we’re talking about the most difficult category to reach, as everybody wants to be there”, he said. “But before

that moment arrives I have to focus on building a good career in Formula 3 and other competitions such as GP2, and in securing good sponsors”.

Facts about the Grand Prix 96,000... MOP is the prize money for the Formula Three race winner.

35,000... HK$ is the prize money for the Motorcycle race winner.

33 million... MOP is the sponsorship revenue expected for this year’s Grand Prix, 7 million less than last year.

91.755... km is the mileage the Formula Three racers have to complete to finish the Macau Grand Prix.

30,000... was the number of spectators on-site on the last day of the 60th Macau Grand Prix. A record to be beaten.

6,000... MOP is the entry fee for the Macau GT Cup. 2,000... personnel make this event possible.

1,000... estimated number of accredited reporters covering the event.

200... competitors - or more - participating in this year’s edition of the event.

32... consecutive years that Yokohama has supplied the official tyre for the Formula 3 race.

7... giant TV screens around Macau broadcasting the event live.

Business Daily | 19

November 13, 2014

Opinion Business

wires

A plutocrats summit?

Leading reports from Asia’s best business newspapers Wayne Swan

Former deputy prime minister and treasurer of Australia, was a regular participant in the G-20 Finance Ministers Meetings

VIETNAM NEWS The Ministry of Finance is proposing the cutting of the export duty on gold jewellery from 25 to 30 per cent to 0 to 2 per cent. Under the ministry’s draft circular, gold jewellery that is below 95 per cent in purity will be exempted from the tax while those with more than 95 per cent purity will be assessed a two-per cent tax. Other Asian countries such as Thailand, India and China have trimmed down their tax on gold jewellery exports to zero, so their gold jewellery industry always has a high export value.

THE STRAITS TIMES Nearly 270 unionised companies across 12 clusters have implemented wage ladders and career progression plans so far, the labour movement said yesterday. This is up from the 20 who were on board when the National Trades Union Congress (NTUC) introduced the progressive wage model - which links pay increases to training - in 2012, said NTUC assistant secretary-general Cham Hui Fong. “The earlier you start on this journey, the stronger your competitive edge over others,” she said at a seminar attended by some 600 employers and unionists.

BANGKOK POST The land and buildings tax, one of the government’s measures to reduce income disparity and make better use of land, is expected to increase state revenue derived from existing local development tax and by sevenfold. Finance Minister Sommai Phasee told a seminar entitled “Overcoming Inequality in Thailand’s Economy” hosted

by Thammasat University’s Economics Association that the new land and buildings tax, also known as property tax, would generate greater revenue to the government compared with existing taxes, which have delivered little revenue of about 10 billion baht.

TAIPEI TIMES Lite-On Technology yesterday posted a 24 percent sequential decline in net profit for last quarter as the electronic component maker grapples with a wider inventory write-off and losses from subsidiaries.

However, Lite-On gave an above-seasonal outlook for the its core businesses for the current quarter. Revenue is likely to hold steady this quarter, against last quarter’s NT$60.61 billion (US$1.98 billion) — a two-year high.

“The fourth quarter is usually a soft season,” Lite-On chief executive Warren Chen told investors in a conference call.

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t an official dinner in Washington, DC, ahead of November’s G-20 Summit in Brisbane, Australiaborn media mogul Rupert Murdoch lectured ministers on the dangers of socialism and big government. A fervent opponent of Australia’s carbon price, and a battle-hardened opponent of US President Barack Obama, Murdoch lauded the virtues of austerity and minimal regulation, and railed against the corrosive effects of social safety nets.

The ministers were in Washington to attend the Annual Meetings of the International Monetary Fund and the World Bank, where they attempted to thrash out differences and establish common ground before the upcoming summit. The tone set

by Murdoch, however, suggests that a consensus on sustainable, inclusive growth will be hard to achieve.

Murdoch’s comments are in keeping with views expressed by his friend, Australian Prime Minister Tony Abbott, and Abbott’s current administration. In January, for example, Abbott informed a startled Davos conference that the global financial crisis was caused not by unregulated global markets, but rather by too much governance. This was certainly news to the finance ministers who had spent the past few years struggling with the toxic fallout from financial-sector excess.

Viewed in the context of such comments, one can better understand Australia’s refusal to put issues of climate change and inclusive prosperity on the Brisbane agenda. Of course, stimulating global growth is a big enough challenge in itself, even without considering inclusiveness or environmental sustainability. The IMF’s gloomy growth forecasts attest to that.

And many policymakers view Australia’s G-20 chairmanship as an opportunity to re-energize and refine the group’s mission to boost global growth, create jobs, and raise living standards. G-20 finance ministers have already decided on a 2% target for annual growth through 2018, and are sifting through more than 900 proposals for structural reforms in order to achieve this.

What reforms G-20 members propose in Brisbane, and how serious they will be about implementing them, remains to be seen. The bigger challenge, though, is hitting those growth targets in a sustainable and inclusive way. If structural reforms are not done right, the Brisbane Summit will come to be regarded as a failure.

Structural reforms, in which certain interests are sacrificed for the greater good, will always be controversial and difficult to execute. But when such reforms involve sacrifices by ordinary citizens and benefit society’s

With just days to go until the Brisbane meeting, the G-20 is ignoring the main long-term threats to the global economy

most privileged groups, political gridlock and instability invariably follow.

Over the past two years, academics,regulators, economists, and financial institutions have all linked the secular stagnation in demand with greater income inequality.

It is ironic that, at a time when many in the developing world are entering, or aspire to enter, the emerging middle class, wealth in much of the developed world is becoming more concentrated at the top.

Indeed, inequality of outcomes both in emerging and advanced economies has increased within

and across generations. Australia’s refusal to discuss inclusive growth in Brisbane may please plutocrats like Murdoch, but talk of unregulated markets, lower taxes, and the removal of social safety nets strongly indicates that the summit will offer no substantive policies aimed at reducing inequality.

With just days to go until the Brisbane meeting, the G-20 is ignoring the main long-term threats to the global economy. As the Bank of England’s Governor Mark Carney (who I assume also heard Murdoch’s lecture) remarked earlier this year, “[U]nchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself.” IMF Managing Director Christine Lagarde recently put it more starkly, noting that the world’s 85 richest people control more wealth than the world’s 3.5 billion poorest people, and that this degree of inequality is casting a dark shadow over the global economy.

Inequality is not a fringe issue.

Combating its rise is essential to achieving sustainable economic growth and political stability. The G-20’s real power is to highlight such challenges and generate informed debate on the issues as a prelude to action. The question now is which leader in Brisbane, if any, will grab the global megaphone and speak out.

Project Syndicate

20 | Business Daily

November 13, 2014

Closing Hebei returns to normality after APEC

China marks six priorities for relations with US

Hebei Province in north China yesterday terminated its emission-reduction measures brought in for the duration of the Asia Pacific Economic Cooperation (APEC) meeting, including a traffic ban based on an odd-and-even number plate rule. Bordering the capital of Beijing, Hebei has launched a series of measures to ensure air quality since November 4.

More than 2,000 enterprises halted production, over 1,900 companies had their production reduced and about 1,700 construction sites were shut down in the province. A traffic ban was also put in place, allowing cars to drive on alternating days based on their license plate numbers.

President Xi Jinping yesterday outlined six priorities in building a new type of major-country relationship with the United States. “China would like to work with the U.S. to implement the principle of no conflict, no confrontation, mutual respect, cooperation and common prosperity and make the new type of major-country relations between the two countries produce more benefits to people in the two countries and the world,” Xi told his U.S. counterpart Barack Obama. The priorities include the communication between high-level officials, mutual respect, cooperation in all aspects, management of disputes, collaboration in the Asia-Pacific and joint actions on global challenges.

Lagarde calls for fighting the “New Mediocre” She highlighted that to address the risk, the IMF’s advice is that all available policy tools and levers must be mobilized

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ll policy tools and coordinated efforts, from infrastructure development to the promotion of free trade, should be mobilized to boost demand and to address the sluggish economic growth affecting many countries, International Monetary Fund (IMF) Managing Director Christine Lagarde said in Beijing.

Many parts of the world are confronted with a “new mediocre,” a period of prolonged tepid growth and high unemployment, “with additional risks from geopolitical concerns and asynchronous monetary policies,” Lagarde told Xinhua during an exclusive interview in Beijing.

“Policy makers have a hard time dealing with the legacies of the financial crisis, such as high debt and high unemployment,” she said on the side-lines of the AsiaPacific Economic Cooperation (APEC) meetings.

The “new mediocre” affects a large part of the world including the Euro area and Japan, and it has spill over effects for other economies, as all economies are strongly

interconnected through trade and finance channels.

“Monetary policy in China is clearly geared toward the long term, and China has the benefit of large reserves and a growing economy, with a vigilant central bank. I think all the ingredients are there to address the potential market volatility,” she said.

More broadly, on the topic of overall economic reform in China, Lagarde said that steps identified last year are “very comprehensive, and have the objective of strengthening the economy, improving governance, and making the economy more competitive.

These are all very positive factors.”

Despite the sluggish growth facing many countries, “we can still expect the largest and strongest growth contribution to global gross domestic product (GDP) to come from Asia,” said Lagarde.

On potential pathways to realize the Free Trade Area of the Asia-Pacific (FTAAP), Lagarde said various trade mechanisms are flourishing at the moment, “and we are generally supportive of anything that improves and

develops free trade between countries, between companies, and between regions, with one caveat -- those trade arrangements, whether bilateral or regional, should not impede or run counter to global multilateral trade efforts.”

When asked about the newly-initiated Asian Infrastructure Investment Bank (AIIB), she said: “We are generally positive about these developments because they can help to spur growth and jobs. We see the multiplicity of actors, agencies and purposes as positive -- but again, as long

Xiaomi to buy stake in Youku Tudou

Anbang Insurance plans to go public

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he company will acquire a stake in Chinese video streaming firm Youku Tudou Inc, cementing ties between China’s leading smartphone maker and one of the most popular content providers in the video-hungry country.

In a joint statement yesterday, the companies said the transaction would take place on the open market but did not specify how large the smartphone maker’s stake would be or how much would be invested.

Word of the stake acquisition, coming a week after Xiaomi pledged to invest a total of US$1 billion to expand its Internet TV content, adds to the frenzy in China’s fast-growing online video market. E-commerce giant Alibaba Group Holding Ltd already owns nearly a quarter of Youku Tudou.

Online video sites include those run by Sohu.

Com Inc , Baidu Inc’s iQiyi and Tencent Holdings Ltd have been jockeying for position in a market estimated to be worth US$3 billion in 2014.

Youku Tudou and Xiaomi will jointly invest in the production and distribution of online video content and films, while Xiaomi will license Youku Tudou’s video content, the companies said.

Reuters

as they are efficient and well coordinated.”

She admitted completing the quota and governance reform package that the IMF’s Board of Governors approved in December 2010 was still an uphill battle.

The package includes a doubling of IMF quotas; a shift in quotas to dynamic emerging markets and underrepresented countries; and a proposed amendment to reform the Executive Board that would facilitate a move to a more representative and all-elected executive board. The Congress of the United States, the IMF’s largest shareholder, has become

the major stumbling block for the reform.

“I have said before that I would even belly dance if that’s what it might take to get the United States to ratify,” she said.

“I understand that it is a key objective for the U.S. authorities. I hope that in the near term every effort can be made to achieve the ratification of the governance and quota reform, so that there is a better representation of the emerging economies including China,” she explained.

“Until then, I will work on preparing my belly dance!” she said.

Xinhua

ASEAN leaders adopt declaration on post-2015 vision

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he group, the Chinese insurer buying New York’s Waldorf Astoria hotel, is planning an initial public offering that could raise about US$2 billion, people with knowledge of the matter said.

The Beijing-based company aims to start the share sale as early as next year and prefers Hong Kong as a listing destination, the people said.

The plans are still at an early stage and could change, according to the people, who asked not to be identified because the information is private.

Anbang, with about 700 billion yuan (US$114 billion) of assets according to its website, is branching out into new areas in a push resembling that of Warren Buffett’s Berkshire Hathaway Inc. The company, which agreed to buy Belgian insurer Fidea NV last month, said October 30 it’s seeking further acquisitions globally and will hire several thousand people to support its expansion.

The insurer, founded in 2004, has more than 3,000 outlets across China and more than 20 million customers, its website shows. Anbang’s shareholders include state-owned Shanghai Automotive Industry.

eaders from the Association of Southeast Asian Nations (ASEAN) countries adopted a declaration yesterday on the ASEAN Community’s Post-2015 Vision after a plenary meeting of the 25th ASEAN summit. The Nay Pyi Taw Declaration will serve as the basis for a comprehensive roadmap for the regional bloc beyond 2015.

The ASEAN Community, which is to be established by the end of 2015, will cover some 600 million people with a combined GDP of 2 trillion U.S. dollars. The ASEAN leaders also approved a declaration on strengthening the ASEAN Secretariat and a joint statement on climate change.

At the summit chaired by Myanmar President U Thein Sein, the ASEAN leaders deliberated topics on ASEAN community building, future of ASEAN Community beyond 2015 and strengthening of ASEAN institutions. It is the first time that Myanmar takes the rotating ASEAN chairmanship since it joined the 10-member bloc in 1997. Established in 1967, ASEAN groups include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Bloomberg News

Xinhua