Closing editor: Sara Farr
MOP 6.00
24-hour border crossing from midnight
Melco Crown: Anti-graft campaign worse than 2008 financial crisis
Year III
Number 690 Wednesday December 17, 2014
Publisher: Paulo A. Azevedo
Page 8
NY to pick first Vegas-style casino project this week Page 9
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t’s long been awaited. The 24-hour border crossing is operational tonight. With all relevant arrangements in place for the three checkpoints connecting Macau and Zhuhai. Additional e-channels have been installed in arrival and departure halls, enabling easier cross-border movement. Authorities say they will monitor usage closely; and transport schedules will be adjusted accordingly Page
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More mortgages It’s a bubble, says a prominent economist. New home mortgages increased 45 pct y-o-y in October. With Macau residents accounting for the great majority. “The fact that there are less real estate transactions this year than in 2013 but despite that the amount of loans has increased demonstrates the rise in property prices and the market bubble”, Albano Martins says
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From airline to courier
December 16
Name
%Day
Belle International
1.97
Hengan International
1.77
Ping An Insurance Gr
1.59
China Life Insurance
0.00
CLP Holdings Ltd
-0.15
China Mengniu Dairy
-2.87
CNOOC Ltd
-3.35
Tencent Holdings Ltd
-3.49
China Overseas Land
-3.56
Galaxy Entertainment
-3.58
Source: Bloomberg
I SSN 2226-8294
Brought to you by
AirAsia is diversifying its services. From low-cost carrier to low-cost courier. The budget airline told Business Daily it plans to introduce RedBox to Greater China in the next few months. Its express courier and parcel delivery service is currently available in 31 Asian cities
Page
www.macaubusinessdaily.com
HSI - Movers
2
Penny-pinching policy
Mid-metamorphosis
Just 2 pct. Just 2 pct of the overall gaming tax the government received has been invested in the first 11 months of the year. Macau’s fiscal surplus has dropped 4.3 pct. With MOP4 billion less dropping into public coffers than a year ago
China FDI data show the best trend in 7 months. But factory results are still behaving feebly. The service sector and small businesses prove that the Chinese economy is in the middle of a metamorphosis
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2014-12-17
2014-12-18
2014-12-19
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9˚ 15˚
9˚ 16˚
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December 17, 2014
Macau AirAsia to launch low-cost courier service Redbox in China Stephanie Lai
sw.lai@macaubusinessdaily.com
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ow-cost carrier AirAsia Berhad will launch its express courier service ‘Redbox by AirAsia’ in the China market, including Hong Kong and Macau, within the next few months following its launch in Taiwan on Monday, Business Daily has learnt. Taiwan is the eighth destination in which AirAsia has launched its low-cost express courier and parcel delivery service, which was first made available throughout 31 cities in Malaysia, Singapore, Indonesia, the Philippines, Vietnam and Nepal. The low-cost carrier’s flight network
covers 88 destinations in 22 countries. The move that AirAsia has made into the delivery service, which takes advantage of the cargo space on AirAsia planes, offers customers up to 50 per cent saving in cost compared to existing express courier services. The maximum weight allowed for an article to be delivered by the Redbox service is 50 kg. R Box Asia Pte Ltd, the Singaporeheadquartered company that runs the new express courier service for AirAsia, told Business Daily that this service would be ready in China,
New home mortgages increase 45pct year-on-year João Santos Filipe
Jsfilipe@macaubusinessdaily.com
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ew mortgage lending for housing jumped 45 per cent year-on-year from MOP3.2 billion to MOP4.6 billion, the Monetary Authority of Macau revealed yesterday. Macau residents accounted for 97.2 per cent of the New Residential Mortgage Loans (RMLs), while non-residents occupied a share of 2.8 per cent. New loans to residents for buying homes increased 42.2 per cent year-on-
year from MOP3.2 billion to MOP4.5 billion. While the amount lent to nonresidents continues to be tiny, it increased at a faster rate with a boost of 352.1 per cent year-on-year, from MOP29 million to roughly MOP100 million. In comparison to September, there was a general increase of 1.8 per cent in new mortgage lending for housing purchase, from MOP4.55 billion to MOP4.60 billion.
including Hong Kong and Macau, in the “next few months”. Following its entry into the China market, R Box Asia also wants to extend the service to South Korea and Japan. R Box Asia, which said that it was not directly competing with the current major market players in the express delivery service field, said the redbox service is primarily to boost the ancillary income of the low-cost airline. The Redbox express courier service, which customers can access
via its official website by requesting the service and tracking the delivery status of the parcels, accepts payment by credit cards or the online payment platform Paypal. While R Box and AirAsia now provide a door-to-door courier service to individual and corporate clients in the Asian market, it is also eyeing further excursions into cross-border e-commerce business – although R Box did not reveal more information about its plans at the moment.
In relation to the ninth month of this year, loans to non-residents decreased from MOP163 million to MOP 131 million, which means a month-on-month drop of 19.5 per cent. However, the money lent to residents increased 2.6 per cent from MOP4.3 billion to 4.5 billion. “The trend for the market to be almost totally dominated by Macau residents has continued in October. As for non-residents, they continue the trend of leaving the market. In spite of the increase of 352.1 per cent their share is still insignificant”, economist Albano Martins told Business Daily. As for Commercial Real Estate Loans (CRELs) they are following a different path dropping 28.2 per cent year-on-year from MOP5.4 billion to MOP3.8 billion. In relation to such loans the amount lent to residents fell by 30.9 per cent from 5.2 billion to MOP3.6 billion. Loans to nonresidents increased 107.8 per cent year-on-year from MOP105 million
to MOP219 million. In month-on-month, CRELs dropped at a slower rate, which means 20.4 per cent from MOP4.8 billion to MOP3.8 billion. Loans to non-residents decreased 54.3 per cent from 480 million to 219 million. Loans for commercial activities fell by 16.7 per cent from MOP4.4 billion to MOP3.6 billion. “The fact that there are less real estate transactions this year than in 2013 despite the amount of loans increasing demonstrates the rise in property prices and the market bubble”, Martins said. According to Statistics and Census information in October 2013 there were 3,350 transactions in Macau, while in October 2014 there were 753, which is a decrease of 36.3 per cent. “Looking at the data and the importance of Macau residents to the mortgage market, it is possible to see that much of the speculation in the real estate market has been carried out by residents”, the economist said.
Dissatisfaction simmering, says survey Kam Leong
kamleong@macaubusinessdaily.com
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nly 9 per cent of Macau’s gaming workers ranked their employer ‘satisfactory’. Meanwhile, remuneration, working environment and conditions are still workers’ biggest cause for dissatisfaction, a recent survey on the working and living conditions of local gaming workers conducted by Macau Federation of Trade Unions (AGOM) showed. AGOM announced the result of the survey yesterday. The labour union claims it successfully interviewed 1,042 gaming workers between September and November this year. These gaming workers are from the six major gaming operators – of whom 29.6 per cent work for SJM Holdings Ltd, 23.5 per cent for Venetian Macao and 23.4 per cent for Galaxy Entertainment Group. The other 22 per cent work in Melco Crown Entertainment Ltd, MGM China Holdings Ltd and Wynn Macau
Ltd. Of the 1,000 interviewees, only 93 expressed satisfaction with the general performance of their companies, says the survey. The majority, at 60 per cent, perceive their employers as ‘soso’, while 293 or 28 per cent reckon their companies are ‘unsatisfactory’. These gaming workers are primarily dealers, who accounted for nearly 42 per cent of the total, followed by supervisors, security guards, cleaners and waiters. Nearly 70 per cent of those interviewed said they are most unhappy with their salary. According to the survey, more than 60 per cent earn more than MOP15,000 per month. Some 10 per cent receive more than MOP23,000 per month, while around 19 per cent claimed that their salaries are MOP11,000 or below. The top three demands of the
workers of their bosses are to raise their salaries, bonuses distributed and adjustment of benefits, such as holidays, provident fund and other subsidies. In addition, some 54 per cent of the surveyed workers said that they are not confident about job prospects despite the fact that more than 60 per cent have worked in the industry for five years or more. Dissatisfaction with remuneration and benefit packages triggered a wave of gaming protests by workers from all six operators between June and early October, leading some companies to announce wage rises and the distribution of bonuses.
Unhappy with smoking ban execution Meanwhile, following the implementation of the full smoking
ban on mass gaming floors on October 6, almost half of the workers expressed dissatisfaction with their employers’ execution of the law. Seventy-one per cent of these casino workers hope the government implements a full smoking ban in the gaming industry as soon as possible. Meanwhile, 78 per cent of the interviewees said they would prefer not to work in smoking areas even if their employers are willing to provide subsidies. In addition to smoking ban issues, these workers are also expecting the government to prohibit foreign labour from working as dealers through legislation. Seventy-five per cent perceive that once the gaming industry hires non-resident workers it will cost locals their jobs as well as promotion opportunities. Only 2.7 per cent believe that imported labour would not have any detrimental effect on local workers.
Business Daily | 3
December 17, 2014
Macau
Gov’t invests only 2pct of gaming tax revenue In the first eleven months of the year, the fiscal surplus dropped 4.3 per cent with public coffers receiving MOP4 billion less than in 2013. This year, the government has invested only 2 per cent of all revenue from gaming taxes Luís Gonçalves
luis.goncalves@macaubusinessdaily.com
I
t grew by double digits in the first quarter, stayed flat in October, dropped in November and will probably plunge this month. The record gaming revenue drop in the second half of this year is fast shrinking the fiscal surplus of the government. According to data from the Financial Services Bureau (DSF), the fiscal surplus accumulated between January and November topped MOP92.7 billion, a 4.3 per cent decrease from the same period last year (MOP96.9 billion). The fiscal surplus is the difference between the money government earns (from taxing casinos, for example) and spends (on civil servants’ wages or investing in the city’s infrastructure), being basically its ‘profit’. This is the first decrease of accumulated fiscal surplus this year, after October registered a flat performance (a drop of 0.04 per cent). It’s also a world away from the first half of the year, when the surplus
was increasing at a double-digit rate. The government reached its fiscal surplus target for 2014 in a mere six months, in June. Despite November’s drop, the reality is that authorities continue to make tons of money from the gaming industry, which is responsible for 80 per cent of its revenues. The fiscal surplus in the first 11 months of the year was still 26 per cent higher than the same period in 2012 and 45 per cent above what the government budgeted for the full year (MOP63 billion). Compared to last year, however, the fiscal surplus is MOP4.2 billion less.
Deadly combination The surplus slowdown is due to the combination of decreasing gaming revenues and the hike in government expenses, on current spending in particular. The direct taxes from gaming (a 35 per cent tax applied to the gross gaming revenue) went
MOP4.2 billion
less fiscal surplus up 3.6 per cent to MOP120 billion until November from that of a year ago. In 2013, revenue from gaming taxes increased at a rate of 18 per cent from 2012, five times more than this year, DSF data reveals. The total revenue also increased in the January to November period by 1.9 per cent to MOP145 billion. On the other hand, government expenses show no signs of slowing despite the low level of investment. Total expenditure accelerated 16.9 per cent in the first eleven months of this year to MOP53 billion,
with current expenses (the money government spent on running the central administration) going up faster at 16.1 per cent year-on-year. If revenue is growing at a rate that is only a fifth of last year, expenses are increasing two times faster than in 2013 (16 per cent versus 8.9 per cent), according to the Financial Services Bureau report. If authorities are seeing its fixed costs rising, investment continues to register a weak performance. As at November, the government had spent only MOP2.6 billion in investment. That’s 5.5 per cent less than last year and a mere 20 per cent of the sum budgeted for this year. Worse, it’s also only 2 per cent of the total amount the government has already received this year from gaming taxes. With gaming revenues set to drop by 30 per cent this month, it is likely that the fiscal surplus for the whole year will suffer an even bigger decrease than the accumulated figures in November.
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December 17, 2014
Macau Harbourview Hotel opening by CNY 2015 With government approvals and permits for interior furnishings and restaurant checks still pending, the first of three new hotels in Macau Fisherman’s Wharf - the Harbourview Hotel - may not be able to open by year-end, executive vice-president and head of casino operations at Macau Legend Development Ltd Frederick Yip Wing Fat has told Business Daily. Mr. Yip said that the more likely opening date for the Harbourview Hotel would be prior to Chinese New Year. The 4-star hotel, comprising 444 rooms, does not house any gaming facilities but has a skywalk that connects it to the Babylon Casino in the waterfront theme park.
Pearl Horizon owners demand property completion date Joanne Kuai
joannekuai@macaubusinessdaily.com
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ome property owners of Pearl Horizon said the project was slated to be completed in the third quarter of next year but so far the foundations have not been finished. They held a press conference yesterday, criticising the slow progress of construction and urged the developer to give them a finish date. Some homeowners that bought the units during the presale stage said they are paying HKD20,000 monthly mortgage just to ‘feed grass’. Some said they had contacted the developer before and had received
a reply saying that the government had new requirements, and that the developer only acquired the licence to start construction in August of this year after they finished the assessment report on the environmental impact. Legislator Ella Lei Cheng I, who is helping the property owners, also urged the developer to issue detailed written papers giving the property owners an explanation. Business Daily phoned Pearl Horizon’s developer Polytec Asset Holdings Ltd Macau and spoke to Ms. Lei, a representative of the sales units, who said the company has already
arranged a meeting with the property owners for December 23 and would arrange professionals to give them a more detailed answer. She said the project is under construction and is expected to be completed in four to five years. She also confirmed that of the 5,000 units to be built more than 2,000 were presold. The developer, Polytec, announced when they first won approval for the development that the Pearl Horizon plot was expected to be developed in phases. Several residential towers, a large shopping mall and a clubhouse, with a combined floor area of 669,700
Shun Tak: Softer performance of luxury shopping apparent Stephanie Lai
sw.lai@macaubusinessdaily.com
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mid the city’s half-year slowdown in gaming revenue growth, luxury shopping businesses here have been experiencing a notable pinch in sales. This is evident, for example, in the high-end fashion shopping complex at One Central, which will only likely post a better performance after the first half of next year. Vincent Tung, director of the
group marketing department of Shun Tak Holdings Ltd, made the remark yesterday on the sidelines of an event. The days of clients spending millions of patacas on shopping in one trip are no longer. The luxury fashion shopping mall at One Central has seen a drop in the average spending of clients this year so far, Mr. Tung told media on the sidelines of a 15th
MSAR handover celebratory anniversary event at Macau Tower yesterday. One Central, a joint venture between shipping and property development conglomerate Shun Tak and Hongkong Land Holdings Ltd, comprises a luxury shopping complex, highend residential towers and Mandarin Oriental Hotel. The waterfront property is also
The high-end residential project in Areia Preta, Pearl Horizon, has been delayed, with some homeowners urging the developer to explain the reason and give them a finish date
square metres, will be built on a site occupying 68,000 square metres. The smaller project will be on a site occupying 17,900 square metres. It will have housing blocks and a few shops, with a combined floor area of 195,600 square metres. Polytec’s major shareholder, Kowloon Development Company Limited, said in its 2014 interim report to the Hong Kong Stock Exchange that ‘foundation work for the whole project [is] to commence soon’ for Pearl Horizon and that ‘foundation work [is] in progress’ for Lotes T+T1, with the expected date of completion being 2017/2018. “In Macau, the presale of the group’s two luxury residential and commercial development projects in the Orient Pearl District held through Polytec Asset, namely Pearl Horizon and Lotes T+T1, have been put on hold since the new laws on property sale activities became effective on 1 June 2013. However, the presale of the two projects is expected to be re-launched after two years of their respective construction when all relevant requirements for presale can possibly be fulfilled,’ the report reads. The company also said, ‘in Macau, the restrictive measures together with the limited supply of new residential projects continued to weigh on the performance of the residential property market resulting in low transaction volumes throughout the first half of 2014’.
joined to the MGM Macau casino-resort. “We can still maintain [customer] traffic as compared to last year,” Mr. Tung remarked. “But as reflected by our tenants, per customer spending has definitely dropped... some of them [tenants] are experiencing a double-digit drop in business.” Mr. Tung, who also organises the Macau Shopping Festival, believes that the retail performance in the city will look better by the second half of next year following the new casinoresort projects of Galaxy Entertainment Group and Melco Crown Entertainment Ltd coming online, where more new shopping facilities will open. According to official data
from the Statistics and Census Service, the volume of retail sales here has decreased by 2 per cent for the third quarter after removing the effect of price changes, where doubledigit decrease were previously seen in the sale of watches and jewellery as well as leather goods. “For the past 10, 15 years, the objective has been to make visitors stay longer. And that objective is still valid at this moment,” Mr. Tung said. “Our challenge is to actually add more attractions for visitors, so eventually they will stay for two nights and move around Macau – on the Peninsula or Cotai. If shopping can be fully developed as another attraction supporting gaming, I think everybody can benefit.”
Business Daily | 5
December 17, 2014
Macau
Immigration, customs, transport ready for extended border operating hours Joanne Kuai
joannekuai@macaubusinessdaily.com
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elevant arrangements are in place for the extended operating hours of all three land borders connecting Macau and Zhuhai, local authorities have announced. At the main border gate that connects to Gongbei area in Zhuhai, the opening hours of the border have been extended from 7:00ammidnight to 6:00am-1:00am. Twenty e-channels have been added to the west side of the departure lobby, and 14 more have been added to the west side of the arrival lobby as well. Immigration officer Wong Kin Hong said that the new e-channels in the departure hall will be dedicated to Macau residents while the other 40 existing ones will be allocated to non-resident workers and registered tourists. The new e-channels in the arrival hall will mainly open during the morning for non-resident workers in order to cope with the high amount of traffic during rush hour. He believes that the measure will help channel people and lower the pressure of the peak border crossing time. Some separators have also been added in front of the escalators to prevent people carrying large suitcases or baby carriages from using them
Ilha Verde border crossing
for safety reasons. At the Cotai Border, where one spends MOP3 or RMB3 to take the shuttle bus and cross the Lotus Bridge to reach Hengqin Island in Zhuhai, operating hours will be extended to 24 hours. All Macau residents, nonresident workers and tourists can cross the border at anytime. Cargo inspection lanes, however, retain the same opening hours, which is from 8:00am-8:00pm. Ku King Hin, vice police affairs chief of the immigration department
of the Public Security Force says 40 additional officers have been deployed at this border, with the expected number of people using this border increased from the current 20,000odd to between 50-60,000. Mr. Ku also said with regard to infrastructure and facilities that the authorities expect the existing ones will be able to cope with future conditions, hence no additional facilities have been added and they are already planning to build a new border checkpoint building at Cotai. No details have been decided yet, including the location. With regard to the Cross-Border Industrial Park border checkpoint, located in the northwest end of Macau Peninsula in Ilha Verde, some specific groups of people can use the border after midnight until 7:00am. These people include Macau residents, non-resident workers from the Mainland, and Mainland students studying in Macau. The border is exclusively for the use of people working in the crossborder industrial park, and they can continue to cross the border at any time using their special pass. Immigration officer Kei Wa Nao said that six e-channels have been added to each side of the border both
in the departure and arrival halls. Separators have been set up on the arrival side in case large numbers of people want use the border to enter Macau after midnight. Ku King Hin said that they do not expect a drastic change in the number of people crossing the border and that the extended operating hours are for the convenience of the people using the borders to choose freely and cross at times of their own convenience. The officer added that they will keep a close eye on the border crossing situation and maintain close contact with the Zhuhai authorities, adjusting the facilities and personnel in a timely manner to cope with the change. Customs officers said staff have been deployed to report to duty when the border is open and any changes needed would be made in a timely fashion. The Transport Bureau will also adjust public transportation accordingly. Buses that travel to these borders will have their operating hours and frequency of shifts changed, while the shuttle bus crossing the Lotus Bridge connecting Cotai and Hengqin will run around the clock as well.
6 | Business Daily
December 17, 2014
Macau Brought to you by
HOSPITALITY Themes aplenty MICE events (Meetings, Incentives, Conferences and Exhibitions) cover a wide span of subjects. Grouping events into thematic areas may at times be trickier than it seems: some will be obvious, others less so. In many cases the topics and focus of meetings will transcend subject frontiers, in others multiple topics will be involved. That said, any classification bears in itself a bit of arbitrariness; and that should be borne in mind when reading the statistics concerning the thematic areas associated with all kinds of events taking place in Macau. Local events appear in the statistics classified in 8 major thematic areas, plus a residual one. Some can be extremely broad, such as ‘commerce, trade and management’ or ‘IT and other technology’. Others are more straightforward, such as ‘Medical and Health’.
The chart shows the number of events organised in various thematic areas, since specific figures started to be published in 2009. More than half fall into just two categories. Given the broad scope, it is not surprising that ‘commerce, trade and management’ lead by a country mile. This category alone accounts for 41 per cent of all events. It is followed by ‘IT and other technology’, representing 12.7 per cent of the total. Just below, but close to 10 per cent, three types of event are clustered: banking, health and tourism. Overall, the events show some seasonality. The fourth quarter is usually a peak, strongly associated with the typical rises we see in that period for both top categories. However, there was an exception to that feature in 2011. The behaviour in other quarters has been less regular. Seasonal behaviour is less visible in the other categories and their smaller size lessens their impact on the overall trends.
280
average number of events since 2009Q1
Cabbies ‘gone fishing’ Residents and tourists continue to complain about the quality of Macau’s public transportation
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omplaints are abundant about Macau’s public transport system, particularly that of taxis ‘fishing’ for specific passengers and leaving the regular customer out on the sidewalk. Older cabbies are said to be ‘better’ than younger ones who seem to only want to drive tourists to and from hotels and casinos, according to several complaints. Currently, there are 1,080 taxis in service ferrying around a population of 631,000 plus about 30 million tourists a year. On November 6, the specially licensed cabs known as Companhia de Rádio Táxi Vang Iek - also known as yellow taxis – ceased operations. The Transport Bureau said that
the Vang Iek group ‘could not obtain enough human resources to progressively have all of its 100 taxis provide a call-only service’ and that between February and October the taxi company only achieved a success rate of around 40 per cent in terms of calls answered and transport service provided to callers, which dropped during rush hour to 20 per cent. The government failed to reach an agreement with the company after Vang Iek requested adding a surcharge for call-in customers, which was to be negotiated with the licence renewal. Following the termination of the Vang Iek group licence, the government recently announced an increase in flagfall from MOP15 to MOP17, a move
Gold visa rusting Potential property investors are likely to exercise greater caution after a corruption scandal broke out in Portugal involving the country’s golden visa scheme
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eal estate agents in Macau aren’t too worried about a scandal in Portugal that saw 11 government officials detained for alleged involvement in a corruption conspiracy related to the golden visa investment scheme. The golden visa programme was launched by the Portuguese authorities in October 2012 and offers foreign investors from nonEuropean countries the opportunity of securing a fully valid residency permit in Portugal, enabling them to travel freely within the continent. Under this scheme, citizens have to
acquire property in the amount of at least EUR500,000 (about MOP5 million), transfer funds in excess of EUR1 million (about MOP 10 million) or create at least 10 jobs in Portugal. With Mainland China buyers unfamiliar with Portugal the news might have come as a surprise to them. In future, they will not be so surprised. “Potential buyers will probably now spend more time studying and selecting reputable immigration agents and property developers to ensure that their interests are well protected,” a real estate agent said, adding that he
which has been heavily criticised. Macau Taxi Passengers Association (MTPA) president Andrew Scott says it didn’t make sense to terminate the licence of Vang Iek. The Macau Taxi Passengers Association (MTPA) was created following the success of a Facebook page called Macau Taxi Driver Shame. With expatriates and locals, Chinese and non-Chinese speaking members among the group, Mr. Scott says he realised there was a unifying topic: taxis in Macau. “Everybody in Macau has a taxi horror story; it was a huge success straight away”. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com.
believes the visa scheme will continue to be attractive to buyers. Entertainment conglomerate STDM has been using the golden visa scheme to entice mainlanders to buy homes in high-end housing that the company is building in Lisbon. Last year, it started promoting a housing project in Lisbon called Casas do Parque in Macau and Hong Kong. According to several media reports published at the time, STDM was offering flats of between one and four bedrooms at a starting price of EUR180,000 (about MOP1.8 million). “Based on our understanding, in Macau the golden visa business is done through the STDM development; they align with local agents to sell this particular project through them. Other than that, I don’t think other real estate agents are involved in the golden visa in Macau.” As a result, considering the size of the developer in the territory, Mr. Wong, the real estate agent, does not believe the corruption scandal will affect the territory. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com.
Business Daily | 7
December 17, 2014
Macau
2013 Macau-China trade increases fourfold since handover Trade jumped from US$730 million before 1999 to US$3.57 billion in 2013
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he Chinese Ministry of Commerce has concluded a survey on Macau-China trade since the handover, claiming that the amount of trade between the two jumped nearly fourfold by 2013 compared to before the handover. The Ministry credited its role in establishing closer trade relationships between Macau and Mainland China. According to Ministry spokesman Shen Danyan, who presented the trade figures of the regions
yesterday in a regular press briefing by the Ministry, the total amount of MacauChina trade jumped from US$730 million before 1999 to US$3.57 billion in 2013. The actual capital employed from Macau also surged by some 48.4 per cent, reaching US$460 million in 2013, compared to the US$310 million before the handover 15 years ago. In addition, the sales that Mainland contractors made on projects in Macau totalled US$420 million in 2013,
up some 2.6 times over the US$118 million before the handover. Apart from the conclusion, the Ministry released the latest data between the two parties in 2014. At the end of October of this year, the accumulative duty-free goods that the Mainland exported to Macau totalled some US$81 million, while preferential duties reached 44 billion yuan. On the other hand, nearly 440 Macau enterprises had invested in Mainland China
via the arrangements of the Ministry, while 1,018 individual commercial or industrial merchants from Macau had registered their businesses in China by the end of October 2014. Meanwhile, the Ministry remarked that the function that Macau provides as a platform for trade between China and Portuguesespeaking countries is becoming more apparent following the Forum on Economic and Trade Cooperation between China
and Portuguese-speaking countries first held in the Special Administrative Region in 2003. Mr. Shen indicated that the trade between the parties via Macau had soared more than twelvefold last year vis-a-vis 2003. In addition, China’s nonfinancial investment had also reached US$2.45 billion while investment in China by Portuguese-speaking countries totalled US$747 million in 2013. K.L.
Macau democracy leader says he’s being watched prior to Xi visit Jason Chao says he is routinely trailed by two men on a motorbike
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Macau pro-democracy leader said he is being ‘watched’ by authorities before a visit by Chinese President Xi Jinping, amid reports that Hong Kong students had been blocked from entering the territory. Xi arrives in the Asian gambling hub Friday for the 15th anniversary of its handover from Portugal to China, and a pro-democracy march will take place Saturday afternoon. His two-day visit comes as support grows for a burgeoning movement demanding free leadership elections in Macau. The movement has been spurred on by pro-democracy protests in Hong Kong which paralysed parts of the city for more than two months until the last rally camp was cleared Monday. The protests in Hong Kong erupted after China declared that candidates for the first public elections for the city’s chief executive in 2017 would be vetted by a loyalist committee. Ahead of Xi’s visit, one of the Macau movement’s leaders said he was being closely watched by unidentified men. ‘They follow me from quite a distance, but of course I notice their presence,’ said Jason Chao. Chao said he has been routinely trailed by two men on a motorbike since the beginning of last week. ‘One watches while the other drives,’ he said. ‘I have a meeting with another guy, and after following me they follow the other person.’ Chao, founder of Macau Conscience, said it would be ‘useless’ to report the incidents to police and he had not confronted the men. ‘I see it as a form of intimidation. I guess they want to send me a warning not to have a protest against Xi Jinping,’ he said. Chao’s allegations come as two Hong Kong students were denied entry into Macau, according to local media. One of them was wearing a yellow ribbon – a symbol of the Hong Kong democracy movement – on her bag, according to the Apple
a threat to security. In addition, anyone may be bared from entering a territory when they are not there as a legitimate visitor regardless of their occupation, according to authorities that also refused to comment on individual cases. Some Hong Kong protesters have said they are considering going to Macau for Xi’s visit. Macau activists said they would hold a rally to fight for ‘true universal suffrage’ on Saturday afternoon.
I see it as a form of intimidation. I guess they want to send me a warning not to have a protest against Xi Jinping Jason Chao
Jason Chao
Daily newspaper. The pair had their belongings searched and were denied entry for ‘posing a threat to stability of internal security’ Monday morning after being told they were on a blacklist, the report said. An Apple Daily journalist was
also denied entry, it added. Macau authorities yesterday said they were just following procedure and added that immigration departments around the world had the authority to deny entry to anyone who has a fake ID or their document is incomplete, and anyone who poses
In May the city of 624,000 people saw its biggest protest with around 20,000 marching against a bill to allow government ministers generous retirement packages. Many youngsters took part in hopes of greater accountability from their government. Chinese officials have recently praised Macau for its adherence to its Basic Law constitution, in what has been interpreted as a veiled warning against any civil disobedience. AFP
8 | Business Daily
December 17, 2014
Macau
Straight flush for Poker King Club in Venetian The poker club has been operating in StarWorld Hotel since 2009 but with the expiry of its contract has moved to a Sands China casino. The general manager of Kings told Business Daily that the club is looking forward to the new opportunities at the Venetian João Santos Filipe
jsfilipe@macaubusinessdaily.com
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oker King Club moved from StarWorld Hotel to Venetian Macao in late September. For now, the poker club is operating in a temporary location but by the first quarter of next year it is expected to move to its permanent room, where it will run six and seven cash tables and approximately 26 tournament tables. “We were happy with our relationship with StarWorld and the support they consistently showed us. Unfortunately, our contract
expired and coincidentally the opportunity with Venetian appeared around that time, and this led to the change”, the general manager of Kings Consulting Limited, Anson Wong, explained to Business Daily. The club, which has as its business partner Macaubased gaming promoter SunCity, started to operate in the territory in 2009 and until last September had always operated in StarWorld. “We had a five year partnership with StarWorld
Hotel that worked very well. They made a great contribution to the development of poker in Asia, and mostly in the high stakes cash games. But at the same time, we’re looking ahead to new opportunities at the Venetian. They’re always very careful when it comes to choosing their partners”, Mr. Wong explained without going into further details about the contract signed by the two parties. “Both parties are entering into this with a long term frame of mind”,
he said. The move to the Venetian is seen by the Poker King Club management team as a possibility to increase the number of people that will play poker. “While StarWorld Hotel focuses more on VIP players, the Venetian targets the mass market. Additionally, the Venetian is a large mass gaming are and we hope to utilise these features to our advantage”, the general manager of Kings Consulting said.
This move will increase the table capacity for the poker club, which is set to be the first full-service poker room in Macau. “In the Venetian we will offer the complete package. Not only cash tables but tournament tables, which are best for people to learn and familiarise [themselves] with poker rules. Tournaments are a very good marketing strategy to increase the number of poker players not only in Macau but in Asia”, Anson Wong concluded.
Melco Crown: Anti-graft campaign worse than 2008 financial crisis for VIPs Luís Gonçalves
luis.goncalves@macaubusinessdaily.com
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awrence Ho, the CEO of Melco Crown Entertainment, believes that the current anti-corruption campaign waged by Beijing is taking a bigger toll on VIP gamblers here than the 2008 financial crisis, as high rollers take a low profile attitude and spend much less. Macau Studio City, the company’s upcoming property in Macau, is set to open in the third quarter of
2015 with 400 tables. In a meeting last week with Mr. Ho and Melco CFO Geoffrey Davis, Sterne Agee learned that the company’s management believes China’s anti-graft campaign is having a ‘deep psychological impact’ on VIP customers in Macau. ‘With the financial crisis, China was able to fuel the market with liquidity to establish a relatively speedy consumer recovery. With the
anti-corruption campaign, high-end Macau patrons are taking a low profile approach to spending, and their state of mind is unlikely to change from any one lever’. Mr. Ho and Mr. Davis admitted to the brokerage firm that the current situation in Macau is ‘in some ways’ worse than the financial crisis five years ago as high rollers have almost no positive catalyst in the near term. However, the
gaming operator’s financial health is today much better than in 2009 when the effects of the financial crisis hit Macau. ‘Balance sheets are in far superior condition than during the financial crisis’, the report said. Melco Crown’s management says that with the new openings in Cotai next year gaming revenues will grow, as Macau is a supply driven market, Sterne
Agee wrote in a note to clients. Long-term sentiment is still bullish. The improvement of the Chinese economy is also a factor, with the company citing some mainland policy moves like the recent interest rate cut (to stimulate credit and investment) and loosening property curbs indicating that Beijing is turning the economy ‘back to business’. With a bettershaped economy, more gamblers will come to Macau and spend more. Melco Crown is on the front line of the new openings in Cotai as its Studio City is confirmed to open its doors in the third quarter of next year, the senior officers told Sterne Agee. The property will start with 400 tables and is positioned to attract costumers “slightly below” City of Dreams’ premium mass gamblers, although Mr. Ho believes that Studio City is upscale enough to attract all customer types. The 24hour opening of the Lotus Bridge border, close to Studio City, is also seen as a positive catalyst for the success of the property, according to Melco Crown. The new wave of casinos in Cotai will put 10 mega-projects into play that will double Macau’s gaming capacity up to 2017.
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December 17, 2014
Gaming
NY to pick first Vegas-style casino project this week Winners are scheduled to be selected today (late tonight, Macau time)
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ew York state plans to select sites for its first full-scale casinos this week as Caesars Entertainment Corp. and Genting Bhd. vie to build a gambling palace within an hour’s drive of the Big Apple’s 8.4 million residents. Four other publicly traded companies – Empire Resorts Inc, Penn National Gaming Inc., Churchill Downs Inc. and Full House Resorts Inc – are among 16 bids for as many as four licenses. Winners are scheduled to be selected by the Gaming Facility Location Board today (tomorrow, Macau time). The biggest prize among three regions approved for casinos is the Catskill Mountains-Orange County area, parts of which are 50 miles from New York City. In that region, state officials are seeking to balance the goal of economic growth in the Catskills, a faded resort destination, against the potential for reaping more tax revenue in Orange County, which is closer to the city. “New York City is the Holy Grail,” said Srihari Rajagopalan, an analyst at UBS Securities LLC. “The casino customer prefers convenience over amenities.” The awards represent the last major prize in a round of expansion that has seen Ohio, Maryland, Kansas and Massachusetts approve Las Vegas-style gambling parlours during the past five years. The winners will get to open potentially lucrative casinos in the third-mostpopulous U.S. state. The losing companies, most of which already operate on
to residents of this state as the entire gaming industry is going through some type of retrenching.”
Asian customers
the East Coast, will face new competition in an already saturated market.
Voter approval New York became the largest U.S. state to allow nonIndian casinos when voters approved a constitutional amendment last year. Governor Andrew Cuomo, who backed the amendment, says the casinos may add as much as US$430 million to state and local coffers. Last week, he said he didn’t have an opinion on who gets a license. “We set up the process that has a separate board making the decision,” Cuomo said at a Dec. 11 press briefing in Albany. “They should just do their job and go through the law and pick the best operators.” The expansion comes as growth in the US$38 billion U.S. gambling industry slowed to 1.2 percent last year, from 4.8 percent in
2012, Fitch Ratings said last month in a report. In Atlantic City, New Jersey, about 130 miles south of Manhattan, four of 12 casinos closed this year. A bid to close a fifth, the Trump Taj Mahal Casino Resort, is in bankruptcy court. New casinos have been taking business from established markets in Delaware, Missouri and West Virginia. That trend may continue with the New York openings, according to the Fitch.
No jackpot “Taxes on gaming are not the jackpot they once were for many states,” Marcy Block, a Fitch senior director, said in the November 24 report. “Outside of Las Vegas, gaming supply has largely met demand, so we don’t expect overall revenues to increase dramatically.” New York is already home to nine video-slot parlours at
racetracks and five full-scale casinos operated by Indian tribes under federal law. At hearings in September, the five-member location board quizzed bidders on their ability to overcome competition from other states. In addition to the Catskills-Orange County zone, casinos were approved for the capital region around Albany and a third area along the Pennsylvania border. Those selected today will still need final approval from the state gaming commission, which has said it will follow the siting board’s decision, and undergo background checks and an environmental review. “Our primary focus is on picking the best locations,” Kevin Law, the panel’s chairman and president of the Long Island Association, a business organization, said in an interview at the hearings in Albany. “We have to look at economics as well, because we don’t want to do a disservice
To overcome the saturation, Genting, the largest casino operator in Malaysia, said it would tap a database of Asian customers for both of the resorts it has proposed in Orange County. It would also build off clients who already go to Resorts World Casino at the Aqueduct Racetrack in New York City’s Queens borough. “Genting is focused on delivering the greatest economic benefit for the state of New York by recapturing gaming dollars currently spent out of state,” said Michael Levoff, a spokesman for Genting in New York. Las Vegas-based Caesars, which has proposed a casino in Orange County near the Woodbury Common outlet mall, is the largest operator in Atlantic City. The company said it would draw on its list of 45 million gamblers, and celebrity chefs including Gordon Ramsay and Bobby Flay, to get attention for its US$880 million project. The Caesars project wouldn’t preclude a license for a casino in the Catskills, said Jan Jones Blackhurst, head of government relations. “You can have one in Orange County and one in the Catskills, depending on how you design them,” Blackhurst said by e-mail. “New York state would be leaving way too much on the table to exclude Orange County.” Bloomberg
Caesars said planning bond payment skip amid creditor talks
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aesars Entertainment Corp plans to skip a US$225 million interest payment to junior creditors of its biggest unit as the gaming company looks to wrap up a debt restructuring agreement with senior bondholders, according to two people with knowledge of the company’s strategy. The most indebted U.S. casino operator will enter a 30-day grace period to make the coupon payment to owners of US$4.5 billion of 10 percent of second-lien notes due December 2018, said the people, who asked not to be identified because the decision hasn’t been made public. Las Vegas-based Caesars won’t make the payment while it’s seeking to resolve a plan to cut borrowings of the unit, Caesars Entertainment Operating Co, with its most-senior bondholders, the people said. “All eyes will await the US$225 million coupon payment due on Monday,” JPMorgan Chase & Co analysts led by Susan Berliner wrote in a December 12 research note that
reiterated an earlier prediction that the coupon won’t be paid. “If not made, the clock starts ticking to see if the company and creditors can come to terms and agree on a restructuring.” Gary Thompson, a spokesman for Caesars, didn’t immediately respond to messages left for comment. Caesars and a group of firstlien bondholders are nearing the conclusion of negotiations to put the operating company into a Delaware bankruptcy court by January 15, the people said. The new company would emerge from Chapter 11 proceedings as a real estate investment trust.
BlackRock Departure The company has been discussing the plan with the bondholders for three months as it seeks to reorganize its debt load after losing money every year since 2009. Apollo Global Management LLC and TPG Capital took Caesars private in a US$30.7 billion leveraged buyout in 2008 that
saddled the gambling company with more obligations than it could handle. The first-lien bond group slimmed down by at least one member last week when BlackRock Inc, the world’s biggest asset manager, dropped out of the talks on the heels of a Caesars lender group which also broke off negotiations. The company said in a December 12 regulatory filing that some bondholders extended nondisclosure agreements to continue the talks. Those firms include Elliott Management Corp, Pacific Investment Management Co, Brigade Capital Management LLC and JPMorgan Asset Management Inc, two people with knowledge of the talks said.
Principal payment Paul Scarpetta, a spokesman for Brigade at Sard Verbinnen & Co, and Kristen Chambers, a spokeswoman for JPMorgan Asset, declined to comment. Stephen Spruiell, a spokesman for Elliott, and Daniel
Tarman, a spokesman for Pimco, didn’t return e-mail and telephone messages seeking comment. Caesars made a special US$16.3 million payment today to holders of the smaller of two parts of the secondlien notes, according to clearinghouse data compiled by Bloomberg. The payment, called an applicable highyield discount obligation redemption, is treated like a principal obligation rather than interest. Missed principal payments aren’t allowed a grace period. The larger portion of the second lien notes, comprising US$3.61 billion, last changed hands at 17 cents on the dollar on December 12, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bond climbed from a record low of 12.3 cents on November 26, when Elliott was said to back a trustee lawsuit against Caesars. The smaller piece traded at 12.8 cents on the dollar on December 5, according to Trace. Bloomberg
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December 17, 2014
Greater China China to revise 2013 GDP by about 3 pct China’s statistics authority will revise its gross domestic product (GDP) figure for 2013 by about 3 percent after a latest national economic census. Ma Jiantang, chief of the National Bureau of Statistics (NBS), told a press conference yesterday that the revision is made as more detailed data became available after the third economic census conducted this year. The adjustment will be around 3 percent, lower than that for the previous two censuses, Ma said, adding that the revised figures will be released on Friday.
Small businesses take up 95.6 pct China had 7.85 million small and micro-sized enterprises as of the end of 2013 in the industrial and tertiary sectors, accounting for 95.6 percent of the total, official data showed yesterday. Employees at small businesses took up 50.4 percent of the total, according to results of a latest national economic census published by the National Bureau of Statistics (NBS). Such firms owned 29.6 percent of Chinese companies’ total assets, said the NBS.
Lower goods import taxes China will adjust its import and export taxes from January 1 as part of bigger efforts to re-order its trade sector and foster economic growth, the Finance Ministry said yesterday. To refine the mix of Chinese imports, China will levy provisional taxes lower than that reserved for countries under the Most Favoured Nation category, a status given to some nations to ensure that they enjoy lower tariffs. Imports for which taxes will be lowered include optical communication devices, advanced manufacturing equipment and electric car parts.
Dalian Wanda to set IPO price Chinese real estate developer Dalian Wanda Commercial Properties Co Ltd is set to raise about US$3.7 billion after pricing its Hong Kong initial public offering near the top of expectations, IFR reported yesterday citing sources familiar with the plans. Underwriters to the IPO have recommended the company to price the 600 million new shares at HK$48 each, but a final decision needs to be approved by Dalian Wanda, added IFR, a Thomson Reuters publication. The shares were marketed in an indicative range of HK$41.80 to HK$49.60 each.
StanChart to sell HK consumer business Standard Chartered has agreed to sell its Hong Kong-based consumer finance business to a consortium that includes Pepper Australia Pty Ltd and a Chinese group, in a deal estimated between US$600 million to US$700 million, two people with knowledge of the deal said. The deal, which is expected to be announced later on Tuesday, comes after the UK-listed bank had entered into advanced talks with Pepper in September, Reuters had reported earlier. The people declined to be identified because the deal is not public.
November’s FDI stop the falling trend China’s non-financial direct outbound investment has continued to approach equivalency with inbound flows
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hina’s foreign direct investment (FDI) rose on a cumulative basis in November, breaking four months of consecutive declines as foreign investors moved money into China’s services sector at the expense of manufacturing. The Chinese services sector attracted US$58.6 billion of FDI in the first 11 months of the year, up 7.9 percent from the same period a year ago and significantly outperforming manufacturing which saw a 13.3 percent decline as the balance tipped amid a broad economic slowdown. China drew US$106.2 billion in foreign direct investment (FDI) in the first 11 months of 2014, the Ministry of Commerce said on Tuesday, up just 0.7 percent from a year earlier. Although in November alone, China attracted US$10.4 billion in FDI, up 22.2 percent from a year earlier, the ministry said. Among the 10 countries that were the biggest investors in China, investment from South Korea leapt 22.9 percent on an annual basis while Britain invested 28 percent more. Investment from Japan continued to sink, dropping 39.7 percent from a year earlier, while FDI from the United States fell 22.2 percent and the European Union dropped 9.8 percent. As China’s maturing economy slows, more and more Chinese companies are
looking abroad in search of lower costs and better returns. China’s non-financial direct outbound investment has continued to approach equivalency with inbound flows, rising 11.9 percent from the same period last year to US$89.8 billion but declining on a monthly basis by 26.1 percent to US$7.9 billion. Despite moderating FDI growth, China has repeatedly said it expects FDI to hit a record high of US$120 billion this year, barring no sharp changes in global capital flows, which would require China to attract another US$13.8 billion in FDI in December. FDI is still a small contributor to China’s overall capital flows compared to exports, which were worth about US$2 trillion in 2013.
KEY POINTS China’s Jan-Nov FDI +0.7 pct from year earlier Nov FDI +22.2 pct, led by investment in services Outbound non-fin investment at US$89.8 bln Jan-Nov FDI from Korea, UK jumps, Japan, US, EU investment down
Reuters
Canada, China to sign deal on return of fugitives’ seized assets China and Canada announced the deal in July 2013, but both countries are still in the course of ratifying it. Megha Rajagopalan and David Ljunggren
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anada is set to finalize a deal with China to return ill-gotten assets seized from those suspected of economic crimes, the official China Daily reported, as Beijing works to track down corrupt officials who have fled overseas. China has vowed to pursue a search, dubbed Operation “Fox Hunt,” beyond its borders for corrupt officials and business executives, and their assets. But Western countries have balked at signing extradition deals with China, partly out of concern about the integrity of its judicial system and treatment of prisoners. Rights groups say Chinese authorities use torture and that the death penalty is common in corruption cases. With the deal, Canada, one of the top two destinations for suspected economic fugitives from China, would become the third country to agree to help Beijing deal with such offenses, following offers this year from France and Australia. The agreement will cover “the return of property related to people who would have fled to Canada
No country should become a haven for the corrupt to seek refuge from the law Qin Gang, Chinese Foreign Ministry spokesman
and would have been involved in corrupt activities,” the China Daily reported Guy Saint-Jacques, Canada’s ambassador to the country, as saying in an interview. Canada’s Public Safety Ministry, which oversees the agency that handles deportation cases, said authorities had
expelled 1,766 Chinese nationals from January 1, 2011 to November 7, 2014. Although the vast majority were sent back for minor offenses such as overstaying a visa, 70 had committed serious crimes and a further seven had engaged in organized crime. The ministry did not give more details. Canada has a policy of not sending people to countries where they might face execution. Chinese President Xi Jinping has vowed to go after high-ranking “tigers” as well as lowly “flies” in his campaign against corruption. China this month asked the United States to help it track down more than 100 people suspected of corruption. At least 428 Chinese suspects had been captured abroad by the end of October under the “Fox Hunt” campaign, state media reported. Some observers suggest the campaign could be linked to infighting in the Chinese Communist Party. Former Canadian diplomat Charles Burton, who served two tours in China, said the deal on assets was problematic.
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December 17, 2014
Greater China December flash factory activity contracts
Service sector growth marks economic evolution
It is the first decrease in 7 months and prepares ground for more stimulus
Enterprises in the tertiary industry took up 74.7 percent
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ctivity in China’s factory sector contracted as new orders declined, a preliminary private survey showed yesterday. The flash HSBC/Markit manufacturing purchasing managers’ index(PMI) fell to 49.5 in December from November’s final reading of 50.0 and below the 50.0 reading forecast by analysts. A reading below 50 indicates contraction, while one above 50 points to expansion on a monthly basis. The gloomy report will reinforce investors’ fears that the world’s second-largest economy is losing momentum, and add to bets that more strong stimulus measures are on the cards after the central bank unexpectedly cut interest rates last month. “The manufacturing slowdown continues in December and points to a weak ending for 2014,” said Hongbin Qu, chief economist for China at HSBC. “The rising disinflationary pressures, which fundamentally reflect weak demand, warrant further monetary easing in the coming months.” Underscoring the pressures facing China’s economy, the new
orders sub-index fell to 49.6, the first contraction since April. The level of output in factories also stayed below the 50 line for the second consecutive month in December, though it shrank at a slower rate compared to November’s reading. The PMI report followed data last week that showed further signs of economic fatigue, with factory growth and investment expansion slowing in November. China’s top leaders said last week that they will try to sustain reasonable growth in 2015 even though the economy faces “relatively big downward pressure”. The economy is expected to grow 7.4 percent this year, its slowest pace in nearly a quarter of a century, and cool further to 7.1 percent in 2015, according to a Reuters poll. To re-energise activity and keep growth from slumping too sharply, the government has unveiled a series of stimulus measures since April, with mixed results. The ailing property market, for example, is showing some tentative signs of possibly bottoming out, though it is expected to remain weak well into 2015, dragging on broader economic activity. Reuters
hina has more enterprises in the service sector, marking improvement in its economic structure under the “new normal”, the latest official data showed yesterday. The number of companies in the service sector was nearly triple that of the secondary industry by the end of 2013, according to results of the latest national economic census published by the National Bureau of Statistics (NBS). China is striving to adjust its economic structure to ensure sustainable growth after years of rapid advance as a continuing slowdown has prompted the world’s second largest economy to shift into an economic “new normal” focused more on quality. The economic census revealed that there were 10.86 million enterprises engaged in the two industries by the end of last year, up 52.9 percent from 2008. Enterprises in the tertiary industry took up 74.7 percent, up 5.7 percent from five years ago, while the proportion of companies in the secondary sector shrank to 25.3 percent. Total assets of companies in the two sectors amounted to 466.8 trillion yuan (US$76.3 trillion) in the last year, rising markedly by 124.6
percent from 2008. The service sector accounted for 73.9 percent. The NBS director Ma Jiantang said the census results showed the improvement in economic structure and people’s well-being in the recent five years, despite lingering impacts from the global financial crisis. By sectors, the wholesale and retail sector saw the most companies, making 25.9 percent of the total, followed by manufacturing of 20.7 percent and public management, social security and social organizations of 14 percent. The economic census also showed some 166,000 firms had business concerning strategic emerging sector, representing 2 percent of the total. In addition, more than half of the companies were located in China’s prosperous eastern regions, while those from less-developed middle and western areas accounted for no more than 20 percent each. The north-eastern region, China’s old industrial base, took up merely less than 7 percent in terms of company number. China launched the third national economic census in 2013, covering the secondary and tertiary industries. The first two economic censuses were conducted in 2004 and 2008 respectively. Xinhua
Corrupt officials affecting all layers of politics and business are being arrested under the ‘Fox Hunt’ campaign, reaching even high levels of the Communist Party
“These requests to Canada to strip the assets of Chinese people in Canada and repatriate them to China may be more informed by political factors related to factional struggle(s) within the Chinese Communist Party than purely legal claims,” said Burton, who
is now a Brock University professor. China has extradition agreements with 39 countries but not the United States or Canada, the two places suspected economic fugitives are most likely to go, China’s Foreign Ministry said.
“No country should become a haven for the corrupt to seek refuge from the law,” Chinese Foreign Ministry spokesman Qin Gang told a daily news briefing but gave no details of the pact with Canada. The Foreign Ministry has said it
may sue people suspected of financial crimes who have fled abroad. The Washington-based Global Financial Integrity Group estimates that US$1.08 trillion flowed out of China illegally from 2002 to 2011. Reuters
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December 17, 2014
Asia C.Bank says A$ needs to fall further Australia’s central bank felt a further decline in the local dollar was needed to help cushion the economy from falling resource prices when deciding to hold rates at record lows earlier this month. In minutes of its December policy meeting, the Reserve Bank of Australia (RBA) said its board had noted that financial markets were wagering on another cut in interest rates during 2015 and “discussed the factors that might be producing such an expectation.” The board at its December 2 meeting decided to keep rates unchanged.
Yoma to get loan for Myanmar projects
The Asian Development Bank has approved a loan of up to US$100 million to Singapore-listed Yoma Strategic Holdings, which the company said it plans to use to invest in infrastructure and logistics projects in Myanmar. Yoma said US$50 million would be earmarked to build telecom towers, develop cold storage logistics and vehicle fleet leasing. The second half of the loan will fund other projects in transportation, distribution, logistics and other sectors. Yoma, chaired by tycoon Serge Pun, is trying to expand beyond real estate by partnering with international companies trying to enter the Myanmar market.
Japan manufacturing PMI rises Growth in Japanese manufacturing activity picked up slightly in December and output grew at the fastest pace since September, a survey showed yesterday, suggesting the economy is recovering from a recession in the third quarter. The Markit/JMMA flash Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 52.1 in December from a final 52.0 in November. The index remained above the 50 threshold that separates contraction from expansion for the seventh consecutive month.
Indonesia ready to buy back bonds Indonesia’s government said yesterday it is prepared to buy back government bonds from the secondary market if needed, after outflow pressures pushed the yield on its 10-year benchmark bonds to 8.514 percent, the highest since October 1. “For policy response, we always monitor bond market and we are prepared to buy back bonds if bond market is under pressure,” Finance Minister Bambang Brodjonegoro said. Bank Indonesia senior deputy governor Mirza Adityaswara said the central bank is in the bond and the rupiah foreign exchange markets to smooth out volatility.
Indonesia, Singapore agree to share taxes information The mechanism should start as early as 2017
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ndonesia and Singapore have agreed to step up efforts to share tax-related information to tighten loopholes on tax evasion in each other’s countries, Indonesia’s finance ministry said. The commitment came after a meeting between Indonesian Finance Minister Bambang Brodjonegoro and his counterpart Tharman Shanmugaratnam in Singapore on Monday, the ministry said in a statement. Indonesia and Singapore have had an agreement to exchange tax-related information upon request, including data from financial institution and individuals, since 1992. “Exchanging information by request is not enough to reveal all assets hidden by citizens of both countries,” the Indonesian ministry said. “Therefore, to accelerate information flows, Indonesia and Singapore have committed to exchange information automatically to complement the mechanism for information exchange by request.” The mechanism should start as early as 2017, or at the latest, by end of 2018, the statement said. Both countries have also agreed to amend local legislation to support
Indonesia’s new president Joko Widodo has made improving tax collection a priority
the exchange of information. Singapore’s finance ministry said the city-state and Indonesia have both endorsed the automatic exchange of information as a global standard, but Singapore’s implementation is guided by several principles. “Singapore will be able to implement AEOI (automatic exchange of information) if it is adopted in all key financial centres in Europe and Asia, to avoid regulatory arbitrage,”
Singapore’s finance ministry said in an email yesterday. The automatic information exchange must also be done “within a robust framework of law to protect taxpayer confidentiality and ensure that the information is used properly”, the Singapore ministry said, adding that there must be reciprocity with any future partners in terms of information exchanged. In a bid to tackle cross-border tax evasion, countries across the world are signing up to new standards drawn up in 2013 by the Organisation for Economic Co-operation and Development (OECD) for “automatic exchange of information”. Under these standards, countries can sign reciprocal agreements that they will automatically share certain pieces of financial information about each others’ taxpayers. Indonesia’s new president Joko Widodo has made improving tax collection a priority. During his campaign, he pledged to increase Indonesia’s tax ratio to 16 percent of gross domestic product from around 12 percent at present. Many wealthy Indonesians are known to have assets in Singapore. Reuters
SpiceJet seeks government support To save costs, SpiceJet had been cutting the size of its fleet, which is down by a third since September Tommy Wilkes
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ndian airline SpiceJet Ltd has asked the government and aviation regulators for concessions that would allow the cash-strapped carrier to keep flying, the minister of state for civil aviation said. Problems at SpiceJet, which has racked up losses for five consecutive quarters amid fierce competition and high costs, have deepened in recent weeks and officials of the Directorate General of Civil Aviation (DGCA) have said it must set out a plan for how it will pay dues to various airline authorities. “They (SpiceJet) have given their problem to us and they have said that in case they have to shut down their operation then the sufferer will be the passenger,” Mahesh Sharma told local television channel ET Now, as executives of India’s second biggest low-cost carrier met officials in New Delhi. “They have requested certain relaxations and we will discuss it
with our officers, we will discuss it with the senior minister and of course the government also about what best can be done,” Sharma said, without elaborating. DGCA officials did not respond to requests for comment on Monday. Shares in the airline, which is controlled by billionaire Kalanithi Maran, closed down 7.8 percent on Monday and have lost about a third of their value since the start of December. SpiceJet Chief Operating Officer Sanjiv Kapoor said the airline had met with officials to talk about the financial impact of a restriction imposed by the DGCA earlier this month that has prevented the carrier from taking any booking more than 30 days in advance. The objective of the meeting was to discuss the financial impact of the 30-day limit on the airline, Kapoor said on Twitter. To save costs, SpiceJet had been cutting the size of its fleet, which is
US$300-US$350 million SpiceJet funding needs CAPA estimation at least
down by a third since September, forcing it to cancel around 70 flights a day for the rest of the year, further reducing its revenue. The airline said in late November it needed more capital if it was to return to profitability. Aviation consultancy CAPA estimates SpiceJet needs at least US$300 to US$350 million of investment if it is to be able to recover, up from US$250 million in March. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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December 17, 2014
Asia NZ sees budget deficit on weak commodity prices The updated forecasts in the half-year economic and fiscal update showed the economy growing more strongly Gyles Beckford
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sharp fall in commodity prices will hit New Zealand’s government revenue and drive the budget into the red this year, the Finance Minister said yesterday. Finance Minister Bill English said a deficit of NZ$572 million (US$442.56 million) was now forecast for the year to June 2015 compared with an expected surplus of NZ$297 million projected in the pre-election fiscal update in August. The return to a modest budget surplus was pushed out until the 2015/16 fiscal year, and forecasts for later years were increased because growth was expected to stay stronger for longer. An analyst said the failure to post a surplus this year was of no real consequence. “It doesn’t matter, a couple of hundred million deficit or surplus is inconsequential...ratings agencies won’t be worried by this at all,” said Bank of New Zealand head of research Stephen Toplis. English said the government tax take would be hit this year by the large
KEY POINTS NZ mid-year update forecasts deficit instead of surplus Lower export returns, inflation dent tax take NZ growth forecasts ease near term, firmer in later years NZ growth to be driven increasing domestic activity NZ govt to keep lid on new spending, but no slash and burn cuts fall in dairy prices and low inflation, but a surplus was still possible this year. “The government believes that a strong economy and constrained spending means a surplus is
Finance Minister Bill English said the government is committed to reducing net debt
achievable,” English told reporters. The government had made a return to budget surplus and tight controls on spending a priority to reduce the pressure on interest rates and allow a reduction in borrowing and repayment of debt. The updated forecasts in the halfyear economic and fiscal update (HYEFU) showed the economy growing more strongly for longer because of strong business investment,
earthquake reconstruction, and migration gains. The tax take has been hit by a near 50-percent fall in dairy prices this year and annual inflation at 1 percent, meaning lower prices translate into reduced sales tax returns. Net debt was forecast to peak in the current fiscal year at 26.5 percent of GDP, and English said the government committed to reducing that to below 20 percent of GDP by 2020. He said the government would not engage in “slash and burn” spending cuts to reach a surplus this year, and NZ$1 billion would still be available for new spending in each of the next two years. English said government aimed to have about NZ$2.5 billion available for new spending or income tax cuts in 2017, the year of the next general election. The NZ Debt Management Office reaffirmed its budget borrowing programme of NZ$8 billion in the year to June 2015. Reuters
Bank of Japan firm as PM offers hope in deflation fight Under pressure from Japan’s Prime Minister, business leaders have pledged to do their utmost to increase wages Leika Kihara
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rime Minister Shinzo Abe’s landslide victory in Sunday’s vote may be a double-edged sword for the Bank of Japan, which is looking to work with Abe to push for wage growth but may also face pressure to expand stimulus to bolster the fragile economy. At the two-day meeting ending on Friday, which is the last review for the year, the central bank is widely expected to keep monetary settings unchanged and offer a slightly brighter view of the economy on tentative signs of recovery from recession, sources say. While recent market volatility and gloomy consumer mood keep BOJ officials on guard against risks, they feel a rebound in exports and solid capital spending justify standing pat for now. With Abe’s huge election win solidifying his grip on power, the BOJ hopes to work with the premier to encourage companies to spend their huge pile of cash more on investment and wages. Governor Haruhiko Kuroda may repeat his calls
KEY POINTS Board meets Dec 18-19, decision seen Dec 19 0330-0500 GMT BOJ widely expected to keep policy steady, eyes on risks BOJ seen offering slightly more upbeat view on economy
Bank of Japan headquarters
for companies to increase wages at his post-meeting news conference, as well as urge Abe to proceed with fiscal and structural reforms. “The BOJ has taken action and will continue to do so. I hope you take action too, with an eye on what the economy looks like after it overcomes deflation,” Kuroda told business leaders in Nagoya, central Japan, last month. Under pressure from Abe, business leaders have pledged to do their utmost to increase wages, a welcome move for the
BOJ which sees wage growth as key to the success of its stimulus programme aimed at accelerating inflation to 2 percent next year. Some analysts, however, say Abe may also lean on the BOJ to do more next year if the economy falters, as he pledged to raise the sales tax in 2017 after having delayed it by 18 months. The planned tax hike in seen as a test case of Abe’s commitment to lower the nation’s debt burden, the highest in the developed world,
and fund welfare spending. “If Abe shows his willingness to push through reforms and calls for help in supporting the economy, the BOJ may respond by easing again next year,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. Despite expanding stimulus in a move that caught markets off-guard in October, speculation of near-term easing continues to simmer, as core consumer inflation hit 0.9 percent and is seen slowing further on oil price falls.
Kuroda may repeat call for wage hikes, reforms The BOJ looks increasingly likely to cut its inflation forecasts next month, sources say, making its 2 percent target look ever more ambitious. BOJ officials argue that they won’t act again just in response to short-term price moves, and hope a rebound in exports and output underpin a fragile recovery. Reuters
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International IHG agrees Kimpton Hotels acquisition InterContinental Hotels Group , one of the world’s largest hoteliers, has agreed to buy U.S.-focused Kimpton Hotels & Restaurants for US$430 million to boost its exposure to the faster-growing boutique hotel sector. IHG, home to the Crowne Plaza, Holiday Inn and InterContinenal brands, said yesterday that the cash acquisition would be earnings enhancing in its first full-year, with Kimpton’s core earnings set to double by the end of 2017. The deal also reduces IHG’s tax bill by US$160 million.
Repsol to buy Talisman Energy Spanish oil company Repsol said yesterday it had reached a deal to buy Talisman Energy, Canada’s fifthlargest independent oil producer, for US$13 billion. The proposed acquisition will boost Repsol’s exploration and production arm and fill a funding gap after the seizure of its Argentine business in 2012. It will also help to reduce the firm’s reliance on high-risk oil producing areas such as Libya. The oil price drop has lowered price tags on producers like Talisman, spurring interest from Repsol which has been on the search for oil and gas targets.
Greek poll lead narrows Greece’s anti-bailout Syriza party is more popular than Prime Minister Antonis Samaras’ New Democracy but its lead has narrowed, an opinion poll showed early yesterday, a day ahead of the first round of a crucial presidential vote. The survey conducted by GPO pollsters for MEGA TV showed support for Alexis Tsipras’ Syriza at 28 percent versus New Democracy, which would get 23.1 percent, if elections were held now. The co-ruling Pasok party would get 5.1 percent. About 15 percent of those polled said they were undecided.
Ex-Madoff employee sentenced to six years A former manager at Bernard Madoff’s firm was sentenced to six years in prison for helping her now imprisoned boss carry out his multibillion dollar Ponzi scheme. JoAnn Crupi was the last of five former Madoff employees to be sentenced after a Manhattan federal jury found them guilty in March in the first criminal trial over Madoff’s decades-long fraud. U.S. District Judge Laura Taylor Swain also ordered Crupi, who worked in Madoff’s investment advisory business for 25 years, to forfeit a symbolic US$33.9 billion jointly with other defendants who worked at Bernard L. Madoff Investment Securities LLC.
Argentina meets data targets Argentina has taken all the required steps so far to revamp its economic data but must still meet one more deadline as it seeks to bring the quality of its statistics in line with global standards, the International Monetary Fund’s board said. The IMF, which requires accurate data to analyse the world’s economies, censured Argentina last year over failing to improve its inflation and GDP growth figures, putting the country at risk of official sanctions that could have barred it from voting on IMF policies and accessing financing.
Nigeria’s oil unions continue strike that may reduce exports Domestic supply won’t be affected, with about 17 fuel tankers waiting to unload at the port of Lagos Elisha Bala-Gbogbo
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igeria’s two oil unions entered the second day of an indefinite strike that they say will curb exports from the West African nation responsible for pumping more than a quarter of the continent’s crude. “You will soon begin to see shutdowns of our oil flow,” Emmanuel Ojugbana, a spokesman for the Petroleum and Natural Gas Senior Staff Association of Nigeria, said by phone. Ohi Alegbe, an Abuja-based spokesman for the Nigerian National Petroleum Corp. and the Oil Ministry, declined to comment on exports. While talks between union leaders and authorities have been agreed, “the time and date is not yet fixed,” the union official said. “As soon as we confirm the time for talks, we will engage them. But as I speak the strike is continuing.” Any reduction in pumping would coincide with a collapse in the price of Nigeria’s biggest source of revenue. Brent crude oil plunged about 46 percent this year. Nigeria needs about twice that to balance its budget, according to estimates in October from Deutsche Bank AG. “We do not expect the strike to have a material impact on Nigeria’s oil production, certainly not in the early days,” Philippe de Pontet, New York-based Eurasia Group’s Africa director, said in an e-mailed statement. The action involves both
prices in line with the slump in crude, and also to press for the passage of a new oil law, according to an e-mailed statement from Pengassan.
‘Strong commitment’
Pengassan, as the managerial union is known, and the Nigerian Union of Petroleum and Natural Gas Workers, or Nupeng, its affiliate for manual workers. Nigeria’s crude oil output declined 3.2 percent when they last went on strike in September, data compiled by Bloomberg show. Nigeria pumped 2.3 million barrels of crude oil a day last year, 26 percent of Africa’s total output, according to BP Plc. estimates.
Refinery fix “If the strike is allowed for another few days, I can assure you that there will be complete shutdown because this is an indefinite strike,” Ojugbana said from Warri, a southern oil hub. The action is to protest government failure to fix refineries, cut gasoline
The strike “will not dislocate the robust distribution and sale of fuel to members of the public,” Alegbe said. The nation has about a month’s supply of oil products in stockpiles, he said. Workers at oil fields and those operating flow stations that pump crude to export terminals are joining the strike, meaning a protracted action could disrupt exports, Ojugbana said. Domestic gasoline supplies may also be curtailed, Pengassan said. The two unions want the authorities to expedite passage of the petroleum industry bill, curtail crude theft and pipeline sabotage, and address what they say are unfair labour practices by some energy producers, according to its statement. The West African nation relies on crude for about 70 percent of government revenue and 95 percent of foreign exchange income. “The strike will not be suspended until there is strong commitment from the government and affected operators to resolve the issues,” Ojugbana said. Bloomberg News
Euro zone private sector ends 2014 with weak growth A PMI covering the service industry rose to 51.9 from 51.1, beating expectations for 51.5 Jonathan Cable
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uro zone businesses are ending 2014 in slightly better shape than thought but growth remains weak and firms are still cutting prices to encourage trade, surveys showed yesterday. Markit’s Composite Flash Purchasing Managers’ Index, based on surveys of thousands of companies and seen as a good growth indicator, rose to 51.7 from a 16-month low of 51.1. That beat the forecast in a Reuters poll for a rise to 51.5 but was the second-lowest reading in over a year. “Overall, it’s a very disappointing picture of a weak euro area. It’s not any cause for celebration. If it is stabilising, it is at a very weak rate of growth,” said Chris Williamson, chief economist at Markit. December marks the 18th month the index has been above the 50 level that separates growth from
contraction. But the expansion has come at a cost: an output price reading of 48.0 showed firms cut prices for the 33rd month. Weak growth and deepening concern that plunging oil prices may send the euro zone into a deflationary
KEY POINTS Euro zone composite PMI 51.7, slightly above forecast PMI points to 0.1 percent fourth-quarter GDP growth Firms cut prices for 33rd month running
spiral will push the ECB to buy sovereign debt early next year, a Reuters poll found last week. A PMI covering the service industry rose to 51.9 from 51.1, beating expectations for 51.5, while the factory PMI posted a similar jump, coming in at 50.8. The Reuters poll had forecast 50.5. An index measuring factory output that feeds into the composite PMI held steady at 51.2. Taken as a whole, Williamson said the PMIs pointed to fourth-quarter GDP growth of 0.1 percent, weaker than the 0.2 percent predicted in a Reuters poll last week. Also suggesting the bloc may not have a good start to 2015, services firms, who have become less optimistic about the future, were forced to run down old orders for a seventh month. Factories have done so since May. Reuters
Business Daily | 15
December 17, 2014
Opinion Business
wires
The real Lima deal
Leading reports from Asia’s best business newspapers Michael Jacobs
Visiting Professor in the Grantham Research Institute on Climate Change and the Environment at the London School of Economics
VIETNAM NEWS Viet Nam and the Customs Union of Russia, Belarus and Kazakhstan signed a joint declaration announcing the end of negotiations on their free trade agreement. Viet Nam’s Minister of Industry and Trade Vu Huy Hoang and Andrey Slepnev, Minister for Trade of the Eurasian Economic Commission, signed the declaration in the southern province of Kien Giang, with Prime Minister Nguyen Tan Dung acting as a witness. The two sides kicked off their FTA talks in March 2013. After eight rounds of negotiation Viet Nam and the Customs Union have decided on the contents of the agreement.
THE TIMES OF INDIA Hundreds of road, power, steel and other large projects that are stuck because of their inability to generate cash flows required to repay loans are likely to go on-stream with the Reserve Bank of India (RBI) allowing lenders to extend the repayment period for these projects. With the RBI allowing restructuring of even those loans that have been declared in default, there is hope that a large chunk of bad loans will be eventually upgraded. The new guidelines give banks the incentive to work in a constructive way with the borrower.
THE KOREA HERALD South Korean lenders are expected to lower their household loan targets for next year as growing household debt is feared to heighten credit risks, industry sources said yesterday. Demand for household loans has been climbing in Asia’s fourth-largest economy following relaxed ceilings on mortgage loans. The central bank’s two rate cuts earlier this year have also prompted more households to borrow. “Demand for mortgage loans seems to have increased briefly due to eased property market rules but the trend is unlikely to continue into next year,” said an official at the lender.
BANGKOK POST Thailand’s e-commerce market is forecast to top 1 trillion baht in 2016, driven by the rise of smart devices, the entry of foreign vendors and the government’s commitment to the digital economy, says the Commerce Ministry. Based on figures from the National Statistical Office, Thailand’s e-commerce market is worth 744 billion baht, consisting of business-to-business (79.8%), business-to-customer (19.3%) and business-to-government (1%) sectors. Small businesses (up to five people) account for 66.8% of e-commerce, with medium-sized firms (six to 50 people) making up 26.6% and large enterprises (more than 50 people) comprising 6.6%.
Former US Vice-President Al Gore speaks during a plenary session at the 20th UN Climate Change Conference COP20 held in the city of Lima, Peru, 10 December 2014
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t was the agreement that everyone wanted, yet that no one much likes. This year’s annual United Nations climate-change conference in Lima, Peru, finally concluded in the early hours of Sunday morning, more than 24 hours after the scheduled close, after fierce argument in the final days. Negotiators from 196 countries patched together a compromise that keeps the world on course to a new global climate agreement in Paris next year; but almost everyone was left unhappy with some provision or another. Many critics of the deal, however, have missed the point. The Lima deal is weak in many respects. But it also represents a fundamental breakthrough for shaping a comprehensive global climate regime. The Lima conference had two goals. The first was to adopt an outline of the text of the 2015 Paris agreement. This goal was achieved – but only by creating a huge 37-page document containing every possible option that countries may want to see in next year’s deal. Delegates did not attempt to negotiate between the various options, taking to heart the old maxim “Why do today what you can put off until tomorrow?” That negotiation has been left to the five sessions of talks scheduled for 2015, starting in February. Given the divergence among the positions included in the Lima text, arriving at a draft fit for signing in Paris next December will be a huge task. The second goal was to agree on the terms under which countries will devise their national commitments – officially, their “intended nationally determined contributions” (INDCs) – in 2015. Here, the compromises were sharply felt.
The key elements were agreed on, but only in the form of guidance, not as requirements
Developing countries wanted the INDCs to include plans for adaptation to climate change as well as emissions cuts, and they wanted developed countries to include financial support for poorer countries. Instead, no commitments to new money were made, and the inclusion of adaptation plans will be optional, not compulsory. Meanwhile, developed countries wanted all countries to provide standardized information on their emissions targets and plans, to ensure transparency and comparability. The key elements were agreed on, but only in the form of guidance, not as requirements. Likewise, the proposal by the European
Union and the United States that countries’ plans be subject to some kind of assessment was dropped from the final text. But the aggregate effect of all countries’ plans will be calculated, allowing evaluation next year of whether the world has done enough to limit average global warming to the agreed ceiling of 2º Celsius. It almost certainly will have not. For many of the agreement’s critics, particularly those in the environmental movement, these compromises made the Lima deal an excessively “bottomup” agreement. Countries have too much latitude to make whatever commitments they want, relatively unconstrained by a common set of “top-down” rules imposed by the agreement. Such critics worry that this will make it harder to persuade countries to cut emissions further when it becomes clear that their collective efforts are not enough, and that it may even allow some countries to use irregular accounting methods. But this overlooks the Lima agreement’s greatest accomplishment: It ends the longstanding division of the world into only two kinds of countries, developed and developing. Ever since the original UN Framework Convention on Climate Change was signed in 1992, countries’ obligations have been defined according to their level of development in that year. The rich so-called “Annex 1” countries have had compulsory obligations, while poorer “non-Annex 1” countries merely have been required to make voluntary efforts. Over the last 22 years, that binary distinction has looked increasingly obsolete, as the larger developing countries, such as China and Brazil, have emerged
as economic superpowers and major greenhouse-gas emitters. For this reason, the developed world has long wanted to replace the “firewall” between the two historic groupings with a form of differentiation that better reflects the contemporary world. But the developing countries – including major powers like China – have insisted that it remain. No longer. The Lima agreement creates obligations for countries without regard for the distinction between Annex 1 and nonAnnex 1. Rather, it uses a new phrase drawn from the recent agreement between the US and China: countries’ responsibilities will be based on “common but differentiated responsibilities and respective capabilities in light of different national circumstances.” The firewall has been breached. In theory, the Lima agreement on INDCs does not determine the shape of the long-term Paris agreement. So another fierce battle on this issue can be expected next year. But the vast majority of developing countries – including China and Brazil – are happy with the new regime. So it is impossible to imagine the binary model being restored – and those countries that opposed the change know it, which is why the final two days in Lima were so fiercely fought. The Lima conference has shown just how hard the negotiations in Paris next year will be, despite recent optimism about global progress. But one highly significant decision has now effectively been made. Abandoning the rigid distinction between developed and developing countries paves the way toward an agreement that all countries, including the US and China, can sign. Project Syndicate
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Closing S.K. trade US$290 mln stocks since SHG-HK link launch China’s iron ore output falls 7.5 per cent Retail investors in South Korea traded US$290 million of China stocks since the launch of the Shanghai-Hong Kong stock connect last month, financial watchdog data showed yesterday. From November 17, stock trading between Shanghai and Hong Kong (HK stock exchange pictured) was linked, allowing South Korean retail investors to buy China shares directly. In the past month, South Korea’s retail investors traded 312.6 billion won (US$290 million) of China shares via the stock connect program, according to the Financial Supervisory Service (FSS). Daily average trade was 14.9 billion won.
China’s iron ore output plunged in November from a year ago to 128.18 million tonnes, data from the statistics bureau showed yesterday, largely as a result of mandatory industry closures in northern China during the month. China ordered hundreds of steel mills and mining operations across northern China to suspend operations in early November in order to cut air pollution during the Asia-Pacific Economic Cooperation summit in Beijing. China’s biggest steelmaking and iron ore producing province of Hebei saw its iron ore output fall 17.6 percent.
Chinese state support for bonds not guaranteed Finance ministry has said local governments must detail all outstanding borrowings by January 5
Investors surprised
Stephen Tan, Helen Sun and Xize Kang
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or the second time in less than a week a local government financing vehicle (LGFV) in China looks set to not complete a bond sale as scheduled after investors discovered the notes won’t receive state backing. A 1 billion yuan (US$161 million) offering of securities scheduled to be sold yesterday by a financing unit in Urumqi, the capital city of China’s north-western Xinjiang province, may not proceed after investors refused to hand over the money, Caixin reported yesterday, citing people it didn’t identify. China’s top economic planning agency, the National Development and Reform Commission, will have the final say on whether the bond sale will be cancelled or not, Caixin said. The news comes just days after another LGFV -Changzhou Tianning Construction Development Co.- pulled a 1.2 billion yuan issue planned for December 15. On December 11, the finance bureau of Tianning district in Changzhou city said the bonds wouldn’t be categorized as government debt and the local authority wouldn’t be
responsible for repayment, reversing a previous statement. “Investors are wondering which local governments will issue similar statements,” said Liu Dongliang, a
UK’s top four lenders pass stress tests
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China’s finance ministry has said local governments must detail all outstanding borrowings by January 5 as it determines which of the thousands of financial entities set up by cities and provinces will be supported. The step is one of several that authorities are taking to reduce leverage and limit risk without toppling economic growth.
senior analyst at China Merchants Bank Co. in Shanghai. “Losing government support means losing the guarantee that there will be no default.”
Last week, the nation’s clearing agency for exchange-traded debt said local bonds rated lower than AAA aren’t to be used as collateral for short-term loans because they’re too risky. Regulators are also considering restricting individual investors from buying corporate bonds rated below the top grade. In China, credit scores of AAor below are equivalent to noninvestment grades globally, and many LGFV bonds fall into that basket, according to Haitong Securities Co. Investors were surprised by the fact Urumqi State-Owned Asset Investment Co.’s notes weren’t going to be categorized as government debt, according to Caixin’s report. The issuer and Cinda Securities Co., the bonds’ main underwriter, agreed the sale should be cancelled, it said. Yields on five-year AA rated corporate debt in China averaged 6.29 percent on December 15. The rate touched 6.37 percent on December 10, the highest since August. Local governments had some 17.9 trillion yuan of regional liabilities as of June 2013, up 67 percent from the end of 2010, state audit figures show. LGFVs sold 125.8 billion yuan of bonds in November, the least since January, according to data compiled by Bloomberg. Bloomberg News
China jails businesswoman in railway graft case
China to continue inspections on state enterprises
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ritain’s four biggest lenders have passed the Bank of England’s stress tests, which are designed to show their ability to withstand a new economic crisis, the central bank said yesterday. Barclays, HSBC, Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG), are strong enough to cope with a painful downturn that would see house prices plunge by 35 percent, inflation surge and unemployment soar, it said in a statement. However, troubled smaller lender Cooperative Bank failed the tests, while the BoE also raised concerns about state-backed pair Lloyds and RBS -- both of which narrowly passed the assessment. “The results show that the core of the banking system is significantly more resilient, that it has the strength to continue to serve the real economy even in a severe stress, and that the growing confidence in the system is merited,” said BoE governor Mark Carney. The BoE’s stress tests come after a similar Europe-wide assessment in October was passed by a large majority of the region’s leading banks.
court in China sentenced a well-known businesswoman to 20 years in jail for corruption yesterday, saying the woman with ties to a disgraced former railways minister was guilty of bribery and illegally running a business. Ding Yuxin, also known as Ding Shumiao, helped 23 businesses win railway construction contracts and funnelled 49 million yuan (US$8 million) worth of kickbacks to former railways minister Liu Zhijun. She also “offered sexual favours to Liu by arranging an unidentified number of women for him”, the official China Daily reported. A Beijing court said the evidence in the case against her was clear, ordering she also pay a fine of 2.5 billion yuan and have assets worth 20 million yuan confiscated. Ding had humble beginnings but over three decades built a business empire with interests in the coal business as well as China’s high-speed rail system. Officials began an inquiry into her when an auditing authority found a state-owned enterprise paid nearly 100 million yuan to her company, state media has said.
AFP
Reuters
nti-graft authorities yesterday pledged to step up regular internal inspections on state-owned enterprises (SOEs). Hao Mingjin, vice minister of supervision, told an online press conference, to expect more internal inspections at SOEs.The press conference was streamed on the CPC Central Commission for Discipline Inspection’s (CCDI) website. Since 2013, the Communist Party of China’s (CPC) central authorities have dispatched inspectors to ministries, provincial governments, SOEs and public institutions. Six SOEs have so far undergone inspections and, in the latest round, another three -- China State Shipbuilding Corporation, China Unicom and Sinopec -- will come under scrutiny. Serious corruption issues remain in SOEs, including abuse of power and bribery, Hao said. Chief executives at state-owned enterprises have been identified as “high-risk” positions and, should it be proved they are embroiled in graft, it is highly likely their subordinates are also involved, creating a graft gang, he said.Corruption has become much more subtle, with those involved using “legal covers” to hide any untoward activity, he said. Xinhua