MOP 6.00 Closing editor: Joanne Kuai Year III
Number 729 Friday February 13, 2015
Publisher: Paulo A. Azevedo
Petroleum importers fear leaks
Monday is D-Day. Companies importing petroleum products will be required to apply for a licence. Some are concerned about confidential information being leaked. And urge the government to improve data protection. The Administration expects the new licensing system to make the industry’s pricing policy more transparent PAGE
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BEA wins big in Macau
Vodatel anticipates positive results in 2014 PAGE 4
BEA has reason to be optimistic. The Bank of East Asia Group Macau branch registered a 38.6 pct increase in net profit for 2014. The company’s Hong Kong Stock Exchange filing attributes its success to ‘the bank’s strategy of increased cross-border business’. Plus its’ higher penetration of the corporate and retail sectors
US-listed Macau junket denied HK dual listing PAGE 7
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Non-residents rally to real estate Macau property retains its allure. More than five times more mortgage loans were approved for non-residents from December 2013 to December 2014. Macau banks granted new residential mortgage loans to non-residents to the value of MOP175.8 million in December 2014. Meanwhile, gross commercial real estate loans outstanding in December totalled MOP122 billion, up 43.1 pct from a year earlier
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HSI - Movers February 12
Name
%Day
China Merchants Hold
4.84
China Mobile Ltd
4.22
China Unicom Hong Ko
4.18
Lenovo Group Ltd
2.34
Bank of Communicatio
2.20
Hang Seng Bank Ltd
-1.69
Hutchison Whampoa L
-1.72
Cathay Pacific Airwa
-1.95
BOC Hong Kong Holdin
-1.99
Galaxy Entertainment
-2.34
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Source: Bloomberg
Sparkling opportunity Chow Tai Fook Enterprises Ltd. is chasing Lady Luck. South Korean authorities say the Hong Kong company has casinos on its corporate mind. With plans to sink US$2.6 billion into building a casino resort near the country’s largest airport. Several casino operators are mulling investment in the Hermit Kingdom with an eye on the main chance. The punters just a short plane ride from northeastern China. This, despite Beijing’s fresh drive to crack down on countries seeking to lure Chinese gamblers
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Who ya gonna call? Graft-busters! The anti-corruption juggernaut has moved up a gear. 26 mammoth state firms are in the cross-hairs. China Telecom, PetroChina, China National Offshore Oil and China National Nuclear are representative candidates. Telecoms to energy to manufacturing conglomerates will receive official inspections this year. Visits begin after Lunar New Year
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February 13, 2015
Macau Visitors to be diverted from San Ma Lou during CNY Macau Government Tourist Office said it would deploy “tourism ambassadors” at ten points in the hectic San Ma Lou district during the Chinese New Year vacation next week in order to divert visitors away from the main road in the event of overcrowding in this popular shopping zone, as the government expects the city to receive more tourists travelling here during that time. A partial or full closure could also be applied to San Ma Lou and Leal Senado Square if the area becomes overcrowded with visitor traffic during the ‘Golden Week’ of the holiday from February 18 to February 24, police said.
Non-residents taking out biggest loans Sara Farr
sarafarr@macaubusinessdaily.com
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acau banks granted new residential mortgage loans to non-residents to the value of MOP175.8 million in December 2014, representing a 551.6 per cent increase compared to that of the same period a year earlier. The latest statistics released yesterday by the Monetary Authority of Macau (AMCM) show that Macau residents still took out bigger loans, totalling MOP3.54 billion in the last month of 2014, up only by 19 per cent from that of the previous year. Overall, new residential mortgage loans approved by banks here grew by 23.8 per cent to MOP3.72 billion in December year-on-year. This figure also increased by 9.7 per cent from MOP3.39 billion in November 2014. While the majority of credit granted went towards Macau ID cardholders, it was the non-resident segment that marked the biggest increases. Of the MOP3.72 billion recorded in new residential mortgage loans approved, the majority at MOP789.3 million was equitable mortgage
collaterised by uncompleted units. This figure represents a 93 per cent increase compared to that of the month of November 2014, of MOP408.9 million, and a 456.6 per cent increase compared to that of December the previous year. In addition, the value of gross outstanding residential mortgage loans increased by 29.3 per cent to MOP152.9 billion in December 2014,
of which the majority at MOP143.9 billion related to residents, up 28.3 per cent year-on-year, while that of nonresidents was MOP9 billion, up 46.4 per cent from that of a year earlier. In the commercial segment of real estate loans, Macau banks granted credit to a total value of MOP6.3 billion in December last year, a 172.7 per cent increase compared to that of December 2013. Of these, it was
non-residents who marked the biggest increase, up by 1,841.5 per cent yearon-year to MOP781.6 million. This was also a 374.5 per cent increase compared to that of the month of November the same year, when new commercial real estate loans approved by banks to non-residents totalled MOP174.7 million. At the same time, gross commercial real estate loans outstanding in December totalled MOP122 billion, up 43.1 per cent from that of a year earlier. Of these, those of residents increased by a yearly 38.6 per cent to MOP110.1 million, accounting for the great majority of outstanding commercial loans, while that of nonresidents totalled MOP11.9 billion, up 104.2 per cent from December 2013. At the end of December 2014, the delinquency ratio for residential mortgage loans remained virtually unchanged from a month earlier at 0.07 per cent, while the ratio for commercial real estate loans was 0.05 per cent, up slightly from that of the end of December 2013.
UM, Indian Institute of Technology sign MOU
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he University of Macau (UM) and the Indian Institute of Technology Guwahati (IITG) have signed a memorandum of understanding to ‘encourage contact and co-operation between faculty members, departments, and research institutions,’ a statement from the University of Macau reads. In addition, the agreement is also aimed at pursuing ‘various forms of co-operation, including visits of academic staff to deliver lectures, hold seminars and discussions, teach courses, conduct research and supervise student studies; visits of students to attend courses and conducting studies.’ Under this agreement, both the University of Macau
and the Indian Institute of Technology Guwahati are expected to organise the joint development of teaching programmes and collaboration of faculty and students on research projects. “Ever since the worldrenowned TV programme 60 Minutes, produced by CBS of the United States, showed the intellectual prowess of the early seven Indian Institutes of Technology, one being Guwahati, the world has become aware of the importance of these institutions,” said UM Rector Wei Zhao. This is the first top institution in India to sign such a document with the University of Macau, the statement added.
Business Daily | 3
February 13, 2015
Macau
Petroleum importers worried about sharing confidential information The companies importing petroleum products support the new licensing system but they’ve told the government that the information that they would be required to share with the authorities has to be protected João Santos Filipe
jsfilipe@macaubusinessdaily.com
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he importers of petroleum products are concerned that the information they will have to provide to the government, starting on Monday, in order to have a permit may be published or leaked. This concern was shared yesterday at a meeting at the Macau Economic Services for further clarification on the reintroduction of the licensing system. As the new system comes into effect on Monday companies will be required to apply for a permit to import petroleum products. In the application process they are expected to inform the government about the costs related to the importing process, such as the price of the product and transportation costs. “The information concerning the prices is very important for the companies and it is confidential. We hope that this information will not be shared. There are seven different associations importing such products at different costs and it is important that the government does not reveal such information,” said Lai Weng Wa, the Director of the Macau Fuel Industry Association, yesterday.
However, the head of the Foreign Trade Management Department of the Macau Economic Services, Fong Ion Leong, told the companies that they would not “publish such information”. Another topic that was broached was the concern about the time that it would take for the new system to be implemented and understood by the companies. There were fears that it may end up by interrupting the supply of petroleum products.
The licences have to be renewed every month and they usually take three working days to be granted. In special circumstances, however, the process may be speeded up to one working day, it was explained. “We have already been receiving applications for import licences and we hope that with this clarification session everybody will be able to do it without problems, so there will be no interruptions or shortages during the
Chinese New Year”, Fong Ion Leong added. The licence system to import petroleum products was used in Macau until 2008, when it was scrapped. Currently, importers only have to declare the prices of the products. From Monday on, however, they will have to report all costs related to the import, such as transportation and operation costs. The reintroduction of the system was decided upon on Saturday in a meeting
between the MSAR Chief Executive Fernando Chui Sai On and the Secretary for Economy and Finance, Lionel Leong Vai Tac. “This is a measure designed to protect consumers by bringing more transparency to the market about the price of these products. We want to obtain more information on how prices are fixed”, Fong Ion Leong explained. “Before, we only knew if prices would go up or down but we did not know what the reasons were behind it. With this system we will be able to understand it better. This is a better mechanism for the regulation of the market”, he added. In spite of the concerns of the associations related to the process of applying for the licences, the representatives of the sector attending the meeting welcomed this new measure. “We had a meeting with the Secretary for Economy and Finance, and we support this measure”, the Director of the Macau Fuel Industry Association stressed. “However, it must be said that in the sector our prices have always reflected the trends of the market”, he added.
Lionel Leong: Gov’t to help casino workers in changing times The city’s Secretary for Economy and Finance confirmed that the government has received cases of workers asking for help due to VIP gaming room business ‘adjustment’ and pledged to help them in times of change
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he Secretary for Economy and Finance, Lionel Leong Vai Tac, has confirmed that according to the latest data from the Labour Affairs Bureau the government has received four cases asking for help due to VIP room closure or adjustment of businesses, with 52 employees involved. The Secretary was speaking to media after meeting with legislators of the first standing committee of the Legislative Assembly. The city’s gaming sector supervisor said that the government and the industry have been keeping a close eye on the adjustments that the industry is currently experiencing. Lionel Leong added that it is normal for junkets to
apply for cancellation of licences, and has happened before. He said that the cancelling of licences may have something to do with the VIP room business adjustments but the two matters do not necessarily correlate. Lionel Leong reiterated that government departments, such as the Gaming Inspection and Coordination Bureau and the Labour Affairs Bureau, are prepared for the situation and would continue monitoring the negative impact on employment of VIP room business adjustment, saying the authorities would strengthen contingency measures in order to help affected employees such as providing them
with training and helping them find new jobs. Mr. Leong further pointed out that the government’s fiscal budget would be managed in a more cautious manner. He reiterated that the government is adopting a careful attitude to the economic turbulence in the short term and is still ‘prepared for danger in times of safety’, as well as pushing forward industry diversification and the development of the non-gaming sector. He said that in terms of promoting non-gaming elements, quantity is important but more effort should be invested in guaranteeing quality, which would benefit Macau in its goal of building
a world tourism and leisure hub. The Secretary for Economy and Finance said that the continuous slump in gross gaming revenue is due to the economic climate change of the outside world, shortage of funds, and the overall adjustment of the general social economy. He said the adjustments in currency policies by Mainland China and other countries or regions has affected the number of tourists and their willingness to consume. Macau, as a city whose pivotal industry is gaming, would inevitably be affected to a certain extent. He said the government’s priority is to make sure the employment environment would not be affected.
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February 13, 2015
Macau Alexis Tam:
A decision soon on issues raised by UM audit report
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he Secretary for Social Affairs and Culture, Alexis Tam Chon Wend, said his office is studying the audit report on the University of Macau (UM) to determine whether the institution has committed any violation. He believes that in one to two weeks he would be better placed in deciding how to handle the matter. The Secretary said that currently he is waiting for the University’s report
in response to the Audit Commission’s accusations. Until an investigation report has been received, he does not want to draw conclusions and urges the public to give them more time. The report issued by the Commission of Audit on Monday lambasted the University of Macau for lack of supervision of its funds among other issues. It revealed that the university was organising the University
of Macau Foundation as a form of private entity and establishing an institution in Zhuhai in an individual’s name. Alexis Tam was speaking to reporters after introducing a bill on tertiary education at the Legislative Assembly. The bill is expected to give the institutions more autonomy and help the tertiary education sector with a more stable and healthy development, cultivating more local talent.
Vodatel announces profit alert
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odatel Networks Holdings Ltd. expects to report a consolidated profit for the whole year of 2014 compared to that of the previous year, the company announced in a filing with the Hong Kong Stock Exchange. For the twelve months ended December 31, 2013 Vodatel said it had reported a loss. However, the figures are expected to be positive
for the year ended [December 31] 2014. ‘The board [of directors of the company] believes that the improvement was primarily attributable to, among others, the increase in value of sub-contract works performed, which included the design, supply, installation testing and commissioning and maintenance of certain surveillance systems at the Galaxy Resort and Casino,’ the
company’s filing reads. In addition, Vodatel undertook an ‘increased number of projects for the government of Macau,’ which helped boost its 2014 numbers, in addition to a ‘further penetration of the construction data centres for regional telecommunications service providers and higher profit generated by the disposal of available-for-sale financial assets at higher selling prices
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for the year [2014],’ according to the filing. Vodatel Networks is headquartered in Macau and according to the company’s website engages in the provision of network and systems infrastructure and applications, customer network management systems – known as CNMS – and customised software solutions. In Macau, the company is also a provider of solutions in structured cabling, surveillance, trunking radio and networking solutions for different gaming and hotel operators, governmental authorities and enterprises. S.F.
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Business Daily | 5
February 13, 2015
Macau
Macau restaurant industry top of the world The Special Administrative Region’s restaurant industry has outperformed all others worldwide. Of 10 new additions to the Five-Star restaurants list of Forbes Travel Guide, four are to be found in Macau João Santos Filipe
jsfilipe@macaubusinessdaily.com
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he number of Five-Star restaurants in Macau has increased from five to nine from 2014 to 2015, according to the Forbes Travel Guide. In terms of the restaurant industry, the territory performed better than any other location in the world. Over the course of the year, the Guide, compiled by the American magazine, has added 10 new
restaurants to their Five-Star category. Of these ten restaurants, four can be found in Macau, three in the United States, two in Hong Kong and one in Singapore. The new Macau additions are Belon at Galaxy Macau, Il Teatro at Wynn, Tenmasa at Altira and Vida Rica at Mandarin Oriental. The total number of Five-
Star restaurants In the Special Administrative Region has now jumped to nine. Aurora, at Altira; Jade Dragon and The Tasting Room, at Crown Towers; Wing Lei at Wynn Macau; and Golden Flower at Encore Macau are the other restaurants already in this Guide. In all, some 55 establishments around the world meet Forbes’ FiveStar restaurants criteria.
Chow Tai Fook to invest US$2.6bln in S.Korean casino resort
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ong Kong’s Chow Tai Fook Enterprises Ltd plans to invest US$2.6 billion to build a casino resort near South Korea’s largest airport, local authorities said, the latest big bet on the country’s potential as a gambling destination for Chinese tourists.
Chinese visitors make up more than half the business in South Korea’s casino, all but one of which is open only to foreigners. South Korea, enjoying a surge of tourists from China, has said it will approve about two new casino resorts and hopes to select operators this year.
An official in Incheon, the city west of Seoul where the resort is planned, said Chow Tai Fook will need approval for a casino licence by the central government, which the city expects some time this year. Casino operators are looking to invest in South Korea, a short plane
In relation to the other additions to the Guide based in Macau, Zi Yat Heen, at Four Seasons, was added to the Four-Star restaurants list, while Bodhi Spa, at Conrad Macao, was added to the Four-Star Spas category. According to this year’s list Macau has 8 Five-Star hotels, 6 Four-Star hotels, 9 Five-Star restaurants, 5 FourStar restaurants, 6 Five-Star spas and 3 Four-Star spas. In total, the travel guide has 115 Five-Star hotels, 55 Five-Star restaurants and 48 FiveStar spas. With regard to Four-Star services, there are a total of 336 hotels, 192 restaurants and 163 spas. “We are delighted to recognise the 2015 Star Rating recipients, an incredible group of hotels, restaurants and spas,” said Gerard J. Inzerillo, Chief Executive Officer of Forbes Travel Guide. “These properties set a new standard of excellence for hospitality worldwide at an exciting moment in the global growth of luxury hospitality”, he added. The Forbes Travel Guide was first established in 1958 and at that time was named Mobil Travel Guide. The Guide uses the Star ranking system to assess the best hotels, restaurants and spas worldwide.
ride from northeastern China, despite Beijing’s fresh drive to crack down on casinos in other countries seeking to lure Chinese gamblers. Last month, Philippines’ Bloomberry Resorts Corp said it was planning a casino and entertainment complex in Incheon, its maiden overseas venture. A spokeswoman for Chow Tai Fook could not be immediately reached. Chow Tai Fook Enterprises, an affiliate of Chow Tai Fook Jewellery Group, had previously committed to work with a partner for a casino in Brisbane, Australia, but no decision has been announced. Its resort in South Korea is expected to include a foreigner-only casino, hotel, shopping, entertainment and convention facilities and will be built in two stages between 2015-2019 and 2019-2022, respectively, the Incheon Free Economic Zone agency said in a statement. The site is near where a consortium of U.S.-based Caesars Entertainment Corp and Lippo Ltd as well as a joint venture of local player Paradise Co Ltd and Japan’s Sega Sammy Holdings Inc plan their respective casino resorts. South Korea bans locals from entering 16 of its 17 casinos, and has so far said new licences would only be approved for foreigner-only casinos. The number of Chinese tourists to South Korea grew by 42 percent in 2014. Paradise, South Korea’s largest casino operator, said in a filing that around 63.4 percent of betting volume at its casinos are from Chinese VIP punters. Reuters
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February 13, 2015
Macau
BEA posts HK$6.7bln profit
David Li, chairman and chief executive officer of Bank of East Asia Ltd.
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he Bank of East Asia Group (BEA) has posted a record profit of HK$6.7 billion, representing an increase of HK$48 million or 0.7 per cent compared with the HK$6.6 billion reported for 2013. In a filing with the Hong Kong Stock Exchange yesterday the bank also declared a second interim dividend of HK$0.68 per share for the twelve months ended December 31, 2014. The bank’s Macau branch
registered a 38.6 per cent rise in net profit for 2014, its strongest performance since its establishment in 2001. ‘The success of BEA’s efforts in Macau lies in the bank’s strategy of increased cross-border business co-operation with BEA China, and a higher penetration into the corporate and retail sectors of the local market,’ the filing reads. David Li Kwok-po, the bank’s chairman and chief executive, said that
Hang Seng partially disposes of Industrial Bank shares
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ang Seng Bank Limited has announced that the bank had entered into a placing agreement with Goldman Sachs Gao Hua Securities Company Ltd. to sell its 5 per.cent of ordinary shares of Industrial Bank Co. Ltd. to institutional investors. In a filing with the Hong Kong Stock Exchange dated February 10, the bank said the transaction would involve a transfer of up to 952.6 million ordinary shares of Industrial Bank. ‘The shares will be sold to the places for a purchase price of RMB13.36 per share (approximately HK$16.58 per share) in cash,’ the filing reads. The transaction will raise a maximum of around HK$15.79 billion for Hang Seng. According to the filing, the bank ‘considers that the transaction represents an opportunity to realise part of its investment in Industrial Bank, taking into account the current market conditions in the A share market and the bank’s long-term strategic objectives, and to strengthen the bank’s regulatory capital position and ability to meet future regulatory
requirements,’ the filing reads. Proceeds of the net sale of the transaction will go towards the support of future business expansion and ‘for other purposes as deemed appropriate by the board [of directors of the bank]’, according to the filing. The bank initially acquired shares in Industrial Bank for 1.7 billion yuan (approximately HK$1.6 billion) in 2004 and at that time Hang Seng held a 15.98 per cent stake in Industrial Bank’s enlarged capital, which was then diluted upon Industrial Bank’s listing on SSE. Hang Seng subsequently acquired further shares in Industrial Bank for 2.3 billion yuan (approximately HK$2.6 billion) in 2010 by subscribing to its rights issue. The bank’s holding was diluted as a result of a private placement by Industrial Bank in early 2013. ‘Immediately prior to entering into the placing agreement, the bank held approximately 10.87 per cent of the ordinary shares of Industrial Bank,’ the filing said, adding that the total gross cash dividends received from Industrial Bank since Hang Seng’s investment amount to HK$4.4 billion.
slower growth in China led to decreased spending by mainland tourists in Hong Kong. “As a result, domestic retail sales were weak while the unemployment rate edged slightly higher during the year. Property prices continued to increase, although overall market activity remained subdued due to the government’s cooling measures,” he said, adding that the overall operating environment is expected to remain “challenging” in 2015.
China operations will remain the bank’s key driver of business growth and a source of new customers, according to the filing. “While the Central Government’s economic restructuring programme should continue to adversely affect asset quality and net interest margins in the mainland’s banking industry, we will explore new opportunities as we continue to invest in BEA China,” Mr. Li said.
Corporate Mazarine Asia Pacific receives Outstanding Public Relations Firm Award Mazarine Asia Pacific, an integrated communications agency in Asia Pacific, received the prestigious award of the Outstanding Public Relations Firm 2014 at the 6th Quamnet Outstanding Enterprise Awards Ceremony, as a recognition of its accomplishments in the PR & communications industry. Organised by Quamnet Financial Service Group since 2009, the Outstanding Enterprises Awards is widely acclaimed in the industry. The award is dedicated to recognising outstanding enterprises for their continuous improvement and exceptional performance in their respective industry sectors. Mazarine Asia Pacific is the first communications agency in Hong Kong to be honoured with this accolade over the years. It acknowledges the company’s remarkable achievements and contributions accomplished in the areas of advertising, digital, events, PR, marketing and M.I.C.E.
Business Daily | 7
February 13, 2015
Macau
Iao Kun denied HK dual listing
U
.S.-listed Macau junket operator Iao Kun Group Holding Co Ltd yesterday said its application for a Hong Kong dual listing had been rejected due to its declining performance and uncertain outlook. Mid-sized Iao Kun, which runs VIP baccarat tables in the world’s gaming capital, said the Hong Kong stock exchange blocked the plan citing “overall market conditions and the near-term industrial outlook in Macau”, among other factors. The setback for Iao Kun comes as Beijing’s crackdown on corruption continues to play havoc with gaming revenues in the southern territory, the only place in China where casinos operate legally. In mid-January, Iao Kun Group, which is already listed on Nasdaq in New York, had re-submitted its application proof to get a dual listing on the Hong Kong Stock Exchange, following its lapsed attempt to do so last year. While the listing timetable was redacted on the application proof document, Iao Kun noted that it was applying again to get listed by introduction to the main board of Hong Kong Stock Exchange. The document was made publicly available following an update on January 9. Many major junket operators, which extend credit to wealthy punters and facilitate their transport and accommodation, have been forced to close rooms due to lacklustre demand and escalating bad debts, according to junket company records.
Gambling revenue in Macau has slumped for eight months in a row and February revenues are expected to plunge 40 percent year on year, as the crackdown keeps wealthy gamblers away and curbs lavish spending. Analysts are mostly negative on the short-term outlook for Macau, with revenue growth from highrollers expected to deteriorate further, putting more pressure for companies to squeeze profit from the mass market of lower-spending players. “With the larger junkets now facing increasing sector pressures,
we believe it is increasingly likely that ancillary non-gaming services will be scaled back or terminated,” Daiwa Securities analyst Jamie Soo said in Hong Kong. That could hurt events like film festivals, concerts and sports tournaments, which junkets have previously sponsored as a way of attracting a broader spectrum of visitors besides VIP gamblers. Iao Kun, which operates VIP rooms through its subsidiaries, said the company was committed to exploring further opportunities including strategic investments and finding VIP rooms in new locations.
Earlier this month, Iao Kun Group announced a 37 per cent drop in its January revenues in Macau as VIP gamblers continue to sidestep the city as a destination or spend much less on baccarat bets. Last month, the junket operator posted a rolling chip turnover of US$810 million in its VIP rooms in Macau, Iao Kun announced in a filing sent to Hong Kong Stock Exchange. That’s a drop of 37 per cent compared to January 2014 when the company made US$1.29 billion. The win rate for last month was 3.76 per cent. S.F. with Reuters
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February 13, 2015
Greater China ZTE to invest US$560 million Chinese smartphone maker ZTE Corp plans to invest 1.5 billion yuan ($240.16 million) in wireless charging technology for vehicles in 2015 and more than 2 billion yuan next year, a senior executive told Reuters on Thursday. ZTE’s director of corporate strategy, George Sun, also said the company had signed agreements with more than 20 cities in China to provide wireless charging technology for public transportation. The Shenzhen-based company said last month its 2014 profit was likely to rise 94 percent thanks to its high-speed 4G network division and smartphone business.
New direct flight links China’s Nanning and Seoul Korean Air, the national flag carrier of South Korea, will launch direct flights between Seoul and Nanning, capital of south China’s Guangxi Zhuang Autonomous Region, from May 11, the Guangxi Airport Group said Thursday. Flights will run every Monday and Friday, departing from Incheon International Airport in Seoul at 6:55 p.m. and arriving at Nanning Wuxu International Airport at 10:50 p.m. Flights will departs from Nanning at 11:50 p.m. and land in Seoul at 4:50 a.m. the next day. One of the largest foreign airlines flying in China, Korean Air connects Incheon with 23 Chinese mainland cities.
Lithuania and China enlarge cooperation Lithuania’s vice minister of education told Xinhua here on Wednesday that the future of cooperation between the Baltic country and China is bright, echoing the remarks by China’s foreign ministry spokesperson on China-Lithuania relations on Tuesday. “The statement (by China’s foreign ministry) was very important and I’m really happy that it came. And I think our friendship is very important for further cooperation,” said Rimantas Vaitkus, the vice minister.
Bulgaria-China Forum celebrates CNY Chinese and Bulgarian officials here on Wednesday evening said 2014 had special significance for the development of bilateral relations, and the two states would deepen ties during the Year of the Goat. “The just past 2014 has special significance for the development of relations between China and Bulgaria,” Chinese Ambassador to Bulgaria Wei Jinghua said, addressing a Spring Festival reception organized by Bulgaria-China Forum (BCF).
Finnish President says “lucky” to trade with China Finnish President Sauli Niinisto has praised bilateral trade relations between his country and China, saying Finland’s economic ties with China have served as a balance during times of recession in Europe. “Just like Europe has economic difficulties, Finland too has such difficulties, but we have been very lucky to have this key connection, trading with China,” Niinisto said in a recent interview with four Chinese media, which was arranged to mark the 65th anniversary of establishing diplomatic relations between the two countries.
Top graft-buster targets 26 big state firms China Telecom, PetroChina, China National Offshore Oil or China National Nuclear are among some of the biggest state-owned firms from telecoms, energy to manufacturing conglomerates that will receive inspections this year. Visits start after lunar new year
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hina’s top anti-corruption watchdog has targeted 26 of the biggest state-owned firms, including telecoms, energy, and manufacturing conglomerates, for inaugural inspections this year. The visits will kick off immediately after lunar new year
We need to sharpen the ‘Sword of Damocles’ hanging above those in power and use inspections to keep them in awe Wang Qishan, Central Commission for Discipline Inspection (CCDI)
holidays, the Central Commission for Discipline Inspection (CCDI) said in a notice. The lunar new year begins next week. Designated conglomerates include China Telecom Group Co. , China National Petroleum Corp, or PetroChina, China National Offshore Oil Corp, and China National Nuclear Corp. “We need to sharpen the ‘Sword of Damocles’ hanging above those in power and use inspections to keep them in awe,” the statement quoted watchdog head Wang Qishan as saying. Other firms to be visited by antigraft investigation teams are Sinochem Group, China Ocean Shipping (Group) Co., or Cosco, China Mobile Communications Corp and Baoshan Iron & Steel Group Co. As part of President Xi Jinping’s vigorous crackdown on corruption, the anti-graft body will inspect “all important backbone state-owned firms and financial institutions” this year, it said on its website. The watchdog has brought down more than 70 senior officials at state firms in 2014, the official Xinhua
70
Number of senior officials at state firms brought down in 2014
News Agency said on Thursday. Last week, it accused officials at top coal producer China Shenhua Group of taking bribes and manipulating coal prices for personal benefit, according to its website. The anti-graft watchdog also found serious violations by executives of power group China Huadian Corporation during takeovers of coal mines and in official appointments, activities that led to large losses. Lu Haijun, a director of Bank of Beijing Co, has also been put under investigation this year as the Commission widens inquiries in the finance sector.
Anbang Insurance Group snaps up Waldorf Astoria
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he closing of the sale on Wednesday of New York’s famed Waldorf Astoria hotel to China’s Anbang Insurance Group Co Ltd for US$1.95 billion marks the tip of an unprecedented wave of Chinese investment pouring into U.S. hotels. The closing comes on the heels of Monday’s announcement that another insurer from Beijing, the Sunshine Insurance Group, will purchase the luxurious Baccarat Hotel New York for US$230 million. Investment from mainland China into U.S. hotels is expected to be about $5.1 billion this year, or triple the amount over the previous four years, according to JLL, a global real estate broker and advisory services company based in Chicago. Chinese investment into hotels has been growing since 2011 and 2012, when just US$160 million and US$130 million were invested, JLL data shows. The forecast represents 7.5 percent of the US$68 billion expected for 2015 in cross-border hotel investments. “We’ve never seen Chinese activity at this level in hotel real estate,” said Gilda Perez-Alvarado, head
of Americas for JLL’s global hotels desk, which facilitates cross-border transactions. “It’s unprecedented in terms of the amount of money coming from China specifically into the U.S.” The purchase announced in October of the Waldorf Astoria from Hilton Worldwide Holdings Inc caught the industry by surprise, even in the midst of large Chinese investment into gateway U.S. cities such as San Francisco, Los Angeles and Seattle, and global markets like London, Paris and Sydney. Slowing urbanization and a weakening economy in China have pushed Chinese companies to diversify abroad. The United States is the prime candidate for Chinese investment abroad because of a growing economy and the perception the country is safe, said Li Chen, a vice president with HVS, a hotel and leisure consultant. “Chinese insurance and real estate companies are looking at the gateway cities and they will continue to invest in the United States, Chen said. While the overall purchase price for the Waldorf Astoria is a headline grabber, the price-per-room - the figure the industry watches - was
relatively low at $1.38 million a room, according to STR Analytics. The Baccarat, the first of several hotels to be branded with the name of the famous French crystal, sold for more than US$2 million a room. Private equity firm Starwood Capital Group sold the hotel, which is expected to open the first week of March. When the family of Hong Kong billionaire Cheng Yu-tung bought five luxury hotels, including the Carlyle Hotel, for about US$570 million in 2011, the price per room for the famed Manhattan hotel was US$1.68 million, STR said. Perez-Alvarado also said that while many talk about China because of the big push from the Chinese insurers, “the reality is that we are seeing a very deep pool of wealth coming from Asia in general, not just China, into the U.S,” she said. Dalian Wanda Group, China’s biggest commercial real estate conglomerate, in August beat out more than 10 bidders from Asia and North America for a plot of land in Beverly Hills it plans to develop for US$1.2 billion. Reuters
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February 13, 2015
Greater China
PetroChina
The Commission’s anti-graft efforts at state firms coincide with the imminent roll-out of ambitious new guidelines to overhaul China’s inefficient state sector. One key measure, expected within weeks, will focus on controlling company insiders and avoiding losses
during reforms. Other firms targeted in the first round of inspections are China Power Investment Corp, State Nuclear Power Technology Corp, China Huaneng Group, State Grid Corp of China, China Southern Power Grid Co. Also named are China Nuclear
Engineering Group Co, State Development & Investment Corp, Dongfang Electric Corp, China Electronics Technology Group Corp, China Electronics Corp , and China Minmetals Corp China State Construction Engineering Corp, China Shipbuilding
Industry Corp, China National Machinery Industry Corp., China General Technology (Group) Holding Ltd., China Datang Corp., China Guodian Corp, and Wuhan Iron and Steel (Group) Co are among the others identified. Reuters
Baidu profit penalized by spending to lure more users Baidu’s costs are climbing as billionaire founder Robin Li adds services that help shoppers find retail stores and retrieve product information on their smartphones and tablet computers
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aidu Inc. posted profit that missed analysts’ estimates as the owner of China’s largest search engine boosted spending to attract users to mobile applications. Net income increased to 3.23 billion yuan (US$517 million) in the quarter ended December, the Beijing-based company said in a statement. That compares with the 3.52 billion-yuan average of nine analysts’ estimates compiled by Bloomberg. Revenue of 14.1 billion yuan was in line with analyst estimates. Baidu’s costs are climbing as billionaire founder Robin Li adds services that help shoppers find retail stores and retrieve product information on their smartphones and tablet computers. Mobile promotions caused marketing and administration expenses to surge 89 percent from a year earlier as the number of Chinese accessing the
Baidu is truly seizing the mobile opportunity as mobile continues its inexorable rise Robin Li, Baidu founder Robin Li
Internet on handheld devices jumped to 557 million. “It seems that costs are a bit higher than they had been looking for and that they are being conservative on their revenue outlook,” David Riedel, president of Riedel Research Group Inc., said in an e-mail after the results. “Given the very low level of consumer sentiment in China today,
it is not surprising to see some conservatism in the outlook.” China, the world’s largest Internet market, had 649 million Internet users at the end of December, with about 86 percent using mobile devices for access, the China Internet Network Information Center reported this month. “Baidu is truly seizing the mobile opportunity
as mobile continues its inexorable rise,” Li said Thursday on a conference call. “We have unassailable dominance in mobile search. We are the clear market leader in mobile maps.”
Sales Increase Revenue surged to 14.1 billion yuan from 9.52 billion yuan a year earlier. That
matches the average of 14 analysts’ estimates compiled by Bloomberg. Baidu shares closed at US$214.67 in New York before the results were announced. They have fallen 5.8 percent this year. The company forecast firstquarter sales of between 12.6 billion yuan and 13.1 billion yuan. That compares with the 13.5 billion-yuan average of seven analysts’ estimates. “The weak guidance is surprising,” Ella Ji, a New York- based analyst at Oppenheimer & Co., said in an e-mail. The quarter’s profit miss was partly due to spending on mobile user growth, Ji said. The forecast reflects an impact from the Lunar New Year holiday that begins next week and the rising contribution by mobile search, which generates less revenue than personal- computer search, Chief Financial Officer Jennifer Li said. Bloomberg
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February 13, 2015
Greater China
China loses biggest buyer of gold crown to India Purchases of bars and coins for investment dropped by 50 percent in China and jewelry buying retreated from a record
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old demand fell for a third year on a slump in purchases from China, costing the country its place as the world’s biggest buyer. Global demand slid 4 percent to a five-year low of 3,923.7 metric tons in 2014, the World Gold Council said in a report Thursday. In China, purchases of bars and coins for investment dropped by 50 percent and jewelry buying retreated from a record, according to the London-based group. The strengthening dollar and prospects for higher U.S. interest rates have curbed gold’s appeal as a protection of wealth, leading to two years of falling prices. While the metal
has rebounded over the past three months, it’s still within 10 percent of a four-year low. “2014 was a year of stabilization,” Alistair Hewitt, head of market intelligence at the council, said in a phone interview from London on Wednesday. “We saw bar and coin demand decline substantially both in India and China.” Gold rose 3.1 percent to US$1,220.64 an ounce in London this year. India took China’s spot as biggest buyer of the metal, reclaiming the position it last held in 2012, after jewelry demand jumped to the highest
level since at least 1995. India’s total demand in 2014 was 842.7 tons, 14 percent lower on year, while China’s sank 38 percent to 813.6 tons, the report showed. Purchases of necklaces, bracelets and earrings by Indian shoppers rose 8 percent even amid import restrictions, while Chinese consumers bought 33 percent less. Combined bar and coin investment was down 50 percent in both countries.
China, India
with annual demand in both countries forecast at 900 to 1,000 tons, Hewitt said. For the fourth quarter, global demand totaled 987.5 tons, up about 6 percent from a year earlier. Investors in exchange-traded products backed by gold continued to reduce their holdings. Sales totaled 164.4 tons in 2014 as ETF assets approached a five-year low, data compiled by Bloomberg show. The drop in holdings was 869.1 tons in 2013.
It’s too close to call which country will be the biggest buyer this year,
The strengthening dollar and prospects for higher U.S. interest rates have curbed gold’s appeal as a protection of wealth
Central banks added the metal to reserves for a fifth straight year, buying 477.2 tons, 17 percent more than in 2013 and the second-highest amount in the past 50 years. Demand from the technology industry fell almost 5 percent to 389 tons last year, the lowest level since 2003. Recycling contracted 11 percent to a seven-year low of 1,121.7 tons, according to the gold council. Mine production rose 2 percent to a record 3,114.4 tons. Bloomberg
Chinese mobile data to make great leap forward
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ata traffic on Chinese mobile devices jumped almost 50 percent last year but overall usage was modest by global standards, reflecting low consumption in rural areas that hasn’t gone unnoticed by telecoms firms. Average monthly data usage on all types of mobile devices, including smartphones, topped 200 megabytes (MB) per user for the first time in 2014, the Ministry of Industry and Information Technology said last week. That’s equivalent to downloading 50 songs from the Internet and compares with a global monthly average of 819 MB per smartphone
last year, Cisco figures show. China Mobile, the country’s biggest wireless carrier, is looking to expand its fourth-generation (4G) high-speed coverage in rural China after increasing its 4G subscribers to more than 90 million last year from zero a year earlier. Domestic smartphone makers, such as Coolpad, Lenovo and ZOPO, have rolled out sub-US$100 4G handsets while Apple and Samsung Electronics fight for dominance in the premium segment. China’s three carriers, which includes China Telecom and China Unicom, are expected to market their
services aggressively to rural China as online content and services rise and technology becomes more affordable. Immediate obstacles would be coverage and signal reliability. By 2017, sales of 4G-capable devices in China are set to more than treble to 405.9 million units compared with last year, Hong Kongbased market research firm Counterpoint estimates. China’s 4G rollout has widened its divide with other Asian countries, such as Indonesia and India, where 4G has yet to catch on. Cheaper handsets may be key to igniting demand in India. Lenovo has launched a budget 4G smartphone, the A6000, priced at 6,999 rupees (US$112). That’s cheaper than Xiaomi’s Redmi Note 4G. But those prices are still a premium to many 3G phones, easily available for under US$100. Reuters
China weighs on French wine and spirits exports
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decline in French wines and spirits exports worsened last year as China’s clampdown on extravagant spending capped demand for pricy cognacs and Bordeaux wines. Shipments of French wines and spirits abroad fell 2.8 percent to 10.8 billion euros in 2014, hurt by a 17.4 percent fall in sales to China, the sector’s federation FEVS said on Wednesday. “The year 2014 reflects the anti-ostentatious spending policy that started in 2013 in China, and whose impact was fully felt (in 2014),” FEVS said in a statement. The sector had already recorded signs of weakness in 2013 when total export revenue fell 0.4 percent, also pressured by a fall in sales of cognac and Bordeaux
wines to China. Total cognac exports, which account for two third of French spirits shipments abroad, fell 7.6 percent in value last year, while Bordeaux wine exports slumped 17.1 percent. Slower economic growth in China, the world’s secondlargest economy, along with a crackdown on corporate giftgiving, has hurt the profits of big cognac makers such as Hennessy, part of LVMH, Remy Cointreau and Pernod Ricard . They however expect Chinese demand to pick up this year. Last month Remy Cointreau said cognac shipments to China increased in the third quarter but it cautioned that local demand did not show clear recovery signs ahead of next month’s Chinese New Year. Reuters
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February 13, 2015
Asia
Malaysian economy defies oil price slide Gross domestic product for the fourth quarter grew 5.8 percent, exceeding the median forecast of 5 percent in a Reuters poll, and picking up from 5.6 percent in the third quarter
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alaysia’s economy defied sliding oil and commodities prices to grow at its fastest pace in four years in 2014, underpinned by strong construction and manufacturing activity. The net energy exporter, however, may start to feel the full brunt of weaker global oil and gas prices on its income in the months ahead, analysts say, and the authorities have few options to stimulate demand either with fiscal or monetary policy. Strong economic growth could help dampen dissent over the imprisonment of opposition leader Anwar Ibrahim, who was jailed this week on a sodomy charge that many people believe was politically motivated. But the government also faces pressures over a heavily-indebted investment fund 1MDB and the risk that its weak fiscal position could trigger a sovereign downgrade.
Gross domestic product for the fourth quarter grew 5.8 percent, exceeding the median forecast of 5 percent in a Reuters poll, and picking up from 5.6 percent in the third quarter. “The reason why Malaysia has been able to ride out this challenging period is because we have a diversified economy,” Bank Negara Malaysia’s governor Zeti Akhtar Aziz told a news conference on Thursday. The stronger-than-expected momentum lifted full-year growth in 2014 to 6.0 percent, the fastest pace since 2010, and beat economists’ forecast of 5.8 percent. However, economists said that Malaysia’s strong economic performance might not last as it confronts sluggish global demand for its exports and weak energy and commodity prices. “This acceleration will likely prove
short-lived as lower oil prices will be a major headwind for the economy this year,” Krystal Tan at Capital Economics said in a note. The consultancy noted that private consumption will likely weaken after the government raises the rate of the goods and services tax (GST) in April, and it will have to cut spending to achieve its deficit-reduction targets amid declining resource revenues. Along with the spike in inflation that will come with higher GST, the central bank’s scope for interestrate cuts is limited because of capital flight risk, a weakening currency and weighty household debt. The ringgit is the worst performer in Asia this year, down 3.3 percent against the dollar, after a slide of more than 6 percent in 2014. The currency’s sharp depreciation helped boost electronics exports at the end of 2014, but Governor Zeti said
KEY POINTS Q4 GDP +5.8 pct y/y vs Reuters poll +5 pct Full-year GDP +6 pct vs forecast +5.8 pct Growth spurt seen shortlived as lower oil prices bite
there was not a deliberate policy to weaken the ringgit. “I want to emphasise that the central bank of Malaysia does not rely on the exchange rate to conduct monetary policy.” Reuters
US airlines lose ground to Gulf carriers in SE Asia The report says the Gulf carriers could drive ticket prices down to a point where U.S. airlines could not afford to stay in certain markets, costing hundreds of jobs
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loomberry Resorts Corp. headed for the steepest gain in two months, leading a rally by Philippine casino operators, after the nation’s gaming regulator said the industry’s growth will accelerate this year. Bloomberry, operator of Solaire Resort & Casino, surged 5.1 percent yesterday, the most since December 15. Melco Crown (Philippines) Resorts Corp., operator of City of Dreams Manila, advanced 1 percent. Both stocks are still down at least 11 percent in February after China’s decision to crack down on foreign casinos from luring its citizens to
gamble overseas sparked a selloff in gaming companies. Philippine gaming revenue may rise 20 percent this year to US$3 billion after expanding to US$2.5 billion last year from US$2.2 billion in 2013, Philippine Amusement & Gaming Corp. Chairman Cristino
Naguiat said on Wednesday. “Investors’ fears over the impact of China’s crackdown on Philippine casinos are overdone,” Rommel Rodrigo, analyst at Maybank ATR Kim Eng, said by phone. “Chinese players tend to be low margin VIP players.” China’s crackdown will have little impact on casinos here, Naguiat said in an interview. The Philippines gets less than 1 percent of China’s outbound tourists and the southeast Asian nation is a more attractive destination for travelers because it has more non-gaming attractions unlike Macau, he said.
South Korea, Taiwan and Malaysia are the nation’s biggest markets for foreign gamers, while China is just among the top five, he said. Premium Leisure Corp., one of Melco Crown’s partners, jumped 6.1 percent, while Belle Corp. advanced 1.7 percent. China’s Ministry of Public Security said on Friday it will clamp down on foreign casinos wooing Chinese citizens to gamble overseas. The move extends a government campaign against corruption that has already prompted high-stakes gamblers to avoid Macau. Bloomberg
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February 13, 2015
Asia
One-year jail sentence for “Nut Rage” case Heather Cho, the daughter of Korean Air Lines Co. Chairman Cho Yang Ho, sentenced to one year in prison after she was found guilty of usurping a pilot’s authority President Park Geun Hye addressed the issue of meting out justice to business owners in a press conference in January. “We shouldn’t give them special treatment because they are executives, but we shouldn’t discriminate against them in reverse because they are executives,” she said.
Chaebol Crackdown
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eather Cho, the daughter of Korean Air Lines Co. Chairman Cho Yang Ho, was sentenced to one year in prison after she was found guilty of usurping a pilot’s authority when she ordered a crew member to deplane during a row over in-flight service. Her actions were “extremely dangerous and lacking in common sense,” Judge Oh Sung Woo said
Thursday in a ruling at Seoul Western District Court. The crew member’s dignity “collapsed under money and hierarchy” after Cho treated him “like a slave,” he said. Cho, who was standing with hands clasped and wearing a green prison uniform as the ruling was read out, was also found guilty of altering the plane’s flight route. Her lawyer Suh Chang Hee declined to
comment on whether Cho will appeal. The former Korean Air executive’s arrest in December followed a public outcry in South Korea after the incident re- ignited a long-running debate over whether the country’s vaunted chaebol, or family-run conglomerates, hold too much power and influence. Cho’s actions were an example of the “sense of privilege” felt by chaebol families, the Dong-A
Ilbo newspaper said in a Dec. 9 editorial. “The executive needs to apologize and reflect on the fact that she had considered the employee a ‘slave’ while physically assaulting him as well,” the JoongAng Ilbo newspaper said in an editorial last week. “Cho’s and Korean Air’s attitude during the court hearing shows that they fail to see the core issue of this problem.”
Her government has introduced tighter controls on chaebol including a ban on the creation of new cross-shareholdings between affiliates, and fair-trade laws aimed at limiting profits gained by chaebol family members from transactions between group companies. The Korean Air aircraft had already left the gate at John F. Kennedy International Airport for takeoff when the incident occurred. The airline initially downplayed its impact, pointing out that it took no more than two minutes to return to the gate to deplane the crew member. The flight was 11 minutes late when it arrived in Seoul on Dec. 6. South Korean and overseas media dubbed it ‘nut-rage’ and Cho, who was a passenger in first class on the flight, resigned from all of her positions at Korean Air and other affiliates during the public backlash. Her father apologized to the public for his daughter’s behavior.
Demand for iPhone6 boosts Japanese display profits
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creen supplier Japan Display reported a stronger-thanexpected rise in quarterly profit amid higher demand from Apple Inc and Chinese smartphone makers, in stark contrast with peer Sharp Corp’s shrinking panel business. Japan Display said on Thursday operating profit for October-December climbed 80 percent from a year earlier to 14.7 billion yen (US$122 million). Analysts on average had expected a profit of 14 billion yen, according to Thomson Reuters data. Plagued by the intense competition from Asian rivals that has also hit Sharp, Japan Display had reported steep losses in the previous two quarters, before sales to Apple for the iPhone 6 kicked in. As a result, the Japanese firm still expects an
operating loss of 6.5 billion yen for the year through March. “During the third quarter, sales to a major Western customer grew 2.5
times the year-ago quarter,” Japan Display said in a statement, without naming Apple. While the Japanese firm doesn’t identify clients without
their prior approval, Reuters and other media have reported Apple is a buyer of Japan Display screens, and Apple’s official list of its top 200 global suppliers for 2014 includes Japan Display. Investors initially believed Japan Display was falling behind rival Sharp in building relationships with fastgrowing Asian smartphone makers like Xiaomi. But Japan Display also began doing business with Xiaomi in the second quarter, and Sharp last week warned that it will slip into its third annual net loss in four years due to fierce pricing competition and slower sales. Industry sources have said Japan Display has been cutting prices in an aggressive push to bolster sales. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, 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 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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Business Daily | 13
February 13, 2015
Asia
SAB Miller eyes stake in Myanmar’s biggest brewer Global companies including Coca-Cola, Yum Brands , Nestle and Unilever have all invested in Myanmar recently, seeking to take advantage of its population of 50 million people
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ABMiller is exploring the possibility of snapping up a stake in Myanmar’s biggest brewer, a deal that would make it the partner of a conglomerate with ties to the former ruling military, sources familiar with the matter say. Any such deal involving Myanmar Brewery would likely be seen as a vote of confidence in the country’s nascent consumer sector, which is emerging after decades of military dictatorship. The conglomerate, Myanmar Economic Holdings Limited (MEHL), was cleared to buy the stake, thought
to be worth around US$500 million, in October when it won an arbitration case against Singapore’s Fraser and Neave. A Singaporean tribunal ruled that MEHL was entitled to buy out F&N’s 55 percent stake in Myanmar Brewery, taking full control of the brewer, because F&N had defaulted on a term in their joint venture agreement. F&N said at the time it was disappointed at the ruling and was reviewing its options. The sources familiar with the matter said MEHL was looking for a partner in taking over F&N’s
stake. The sources, who declined to be identified because the matter is private, said SABMiller was interested. It is not clear whether SABMiller would buy the entire stake or part of it. One of the sources said other parties including Japan’s Kirin Holdings and Thailand’s Boon Rawd Brewery, maker of Singha beer, could also be interested. SABMiller and F&N declined to comment. Reuters attempted to contact Myint Aung, MEHL’s deputy managing director but he was unavailable for comment. Kirin and Boon Rawd Brewery were not immediately available for comment.
Deals footprint SABMiller has done many deals on its journey from a small South African player to the world’s No 2 brewery, including the 2005 purchase of Colombia’s Bavaria, the 2007 purchase of Grolsch, the 2008 combination of Miller Brewing Co with the U.S. business of Molson Coors and the 2011 purchase of Foster’s Group. Like other brewers, SABMiller is struggling to grow in Europe and North America. New revenues from emerging middle classes in developing markets have been dented by weak currencies in many of those countries. Unlike some of its biggest rivals, SABMiller does not have one global beer brand such as Heineken, but instead has used acquisitions to penetrate markets with local brands. Whilst it has a strong presence in emerging markets in Latin America and Africa, its footprint in Asia is confined to a joint venture in China, CR Snow, and smaller tie-ups in India and Vietnam. Global companies including Coca-Cola, Yum Brands , Nestle and Unilever have all invested in Myanmar recently, seeking to take advantage of its population of 50 million people, with a growing middle class with disposable income. Reuters
SK antitrust body investigating Qualcomm
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outh Korea’s Fair Trade Commission is investigating Qualcomm Inc, a person familiar with the matter told Reuters yesterday, adding to antitrust woes for the U.S. chipmaker following a record fine it agreed to pay in China. The person, who asked not to be identified due to the sensitivity of the matter, declined to elaborate further. South Korea’s Maeil Business newspaper, without citing direct sources, reported that the commission will look into whether Qualcomm is abusing its dominant market position. As part of its investigation, the commission plans to send inquiries to domestic smartphone makers such as Samsung Electronics Co Ltd as well as Qualcomm competitors like Intel Corp, the newspaper said.
KEY POINTS Probe follows record fine against Qualcomm in China South Korea fined Qualcomm more than $200 million in 2009
Qualcomm, the Fair Trade Commission and Samsung Electronics declined to comment. Intel did not immediately respond to a request for comment.
Qualcomm is also dealing with antitrust probes in Europe and the United States. In their investigation of Qualcomm, Chinese antitrust officials had met with their South Korean counterparts, Reuters reported in August. In 2009, South Korea’s Fair Trade Commission fined Qualcomm more than US$200 million for abusing its dominant market position. On Monday, chipmaker agreed to a US$975 million fine in China to end a 14-month government investigation into anti-competitive practices. As part of the China deal, the company will also be required to cut royalty rates on patents used in China, which could help smartphone makers such as Xiaomi Inc and Huawei Technologies Co Ltd. Reuters
Indonesia tin region head targets US$20,000 The governor of Indonesia’s largest tinproducing region said that he’s seeking to arrange a meeting of smelters next week to propose an initial two-month export moratorium aimed at reversing a slump in prices. The target of the shipment suspension is for a rebound to US$20,000 a metric ton and, if that’s not achieved, the moratorium on exports could be extended, Bangka Belitung Governor Rustam Effendi said in Pangkalpinang on Thursday. The metal used in packaging and electronics slumped on Wednesday to US$17,445, the lowest level since August 2012.
Catfish king ready to net sales Hung Vuong Corp., which supplies frozen catfish to Wal-Mart Stores Inc. and Spain’s Mercadona SA, will sell a company stake and spend at least US$100 million this year to expand production as Vietnam prepares to sign trade deals. Vietnam’s largest catfish exporter will build a US$30 million Alaskan pollock processing plant in Russia in April and seek an Indonesian partner to expand catfish-feed production overseas, Chairman Duong Ngoc Minh said. He also plans to sell as much as a fifth of the company to a foreign strategic partner.
Premiere Eastern lists on Australian Stock Exchange Chinese petrochemical company Premiere Eastern Energy listed on the Australian stock exchange yesterday.The Guangzhou-based firm raised the minimum share prescription of just three million Australian dollars in an initial public offering (IPO). The company issued 15 million shares at 20 Australian cents each, attracting more than 500 investors and the business will have a market capitalisation of 183 million Australian dollars. Foreign companies must have two Australian directors if they want to list on the local market, and Premiere has appointed David Wheeler as director and deputy chairman.
ASEAN will emerge as new economic power Malaysian Prime Minister Najib Razak said yesterday that further integration in the Association of Southeast Asian Nations (ASEAN) will result in the emergence of a new economic power in the region. Although our economies have been trade and commercial hubs for centuries, we are today creating an economic union unlike anything since the days of empire,” the prime minister told an ASEAN CEO summit. Najib said ASEAN’s priority must be to ensure that integration leads to equitable wealth creation and distribution as well as deepening financial integration and inclusion.
Japan’s core machinery orders soar Japan’s core machinery orders in December last year soared 8.3 percent on yearly basis to 853.6 billion yen (US$7.10 billion), government data showed Thursday. The orders, widely regarded as a leading indicator of capital spending, rose following a seasonally adjusted 1.3 percent gain in November and a 6.4 percent drop in October, the Cabinet office said, suggesting companies have become eager to boost investment with economic recovery hopes growing. The government also upgraded its basic assessment of core machinery orders for the first
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February 13, 2015
International
Ukraine cease-fire sealed after all-night Minsk peace summit The deal envisages a truce starting at midnight next Sunday and reaffirms some commitments from a failed September bid to end the conflict Microsoft buys Israeli digital pen maker N-trig Microsoft is buying N-trig, an Israeli provider of digital pens and chips for touch screens, for at least US$200 million, the Calcalist financial news website said on Thursday. Most of N-trig’s 190 workers will be integrated into Microsoft Israel and will be part of a new research and development centre, Calcalist said, without citing sources. Officials at N-trig and Microsoft in Israel could not be reached for comment. N-trig was valued at US$75 million when it raised money privately last February.
Liberal Democrats align with Tea Party A coalition of liberal Democrats and Tea Party Republicans is fighting against U.S. President Barack Obama’s ambitious trade agenda that he hopes to secure before he leaves office, U.S. media reported. The extreme left and right align in pushing back on trade just as Obama and Republican leaders have joined together to secure the so-called trade promotion authority (TPA) before the Obama administration concludes major trade agreements with 11 other Asia-Pacific countries, New York Times reported. The TPA empowers the president to negotiate trade deals and then present them to Congress for votes, with no amendments allowed. Without such authority, many trade analysts say, Obama’s hopes to enact trade deals before he leaves office will be doomed.
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he leaders of Russia, Ukraine, Germany and France agreed on a cease-fire to stem the conflict that’s devastated eastern Ukraine and triggered the worst crisis in more than 20 years between Russia and its former Cold War foes. “We agreed on the main things” Russian President Vladimir Putin told reporters in the Belarusian capital of Minsk. “We expect all sides to show restraint until a full cease-fire.” The accord was struck early Thursday after all-night talks between Ukrainian President Petro Poroshenko, Putin, German Chancellor Angela Merkel and French President Francois Hollande. The deal envisages a truce starting at midnight at the start of Feb. 15 and reaffirms some commitments from a failed September bid to end the conflict. The collapse of previous ceasefires has stoked skepticism as to whether this one will hold. Ten months of fighting have killed more than 5,000 people, ravaged Ukraine’s economy and propelled Russia toward recession through U.S. and European sanctions. Raising pressure to deliver a settlement, the run-up to the summit was accompanied by escalating violence and calls for the U.S. to
supplying weapons to Ukraine’s struggling army. “The conflict will continue, even with this agreement,” Joerg Forbrig, a senior program director at the German Marshall Fund in Berlin, said by phone. “Eastern Ukraine is now basically lost to central government control.”
‘Great Hope’ Ukrainian bonds due 2015 jumped 3.6 cents to 62.6 cents on the dollar after the accord was announced, data compiled by Bloomberg show. The hryvnia, the worst-performing currency in the world in the past year with a 67 percent plunge against the dollar, was little changed. Ukraine’s shrinking economy got a boost earlier Thursday as the International Monetary Fund announced a $40 billion bailout package to stave off a default. The ruble gained 0.6 percent to 64.8710 against the dollar, erasing a drop of as much as 3.3 percent. Merkel told reporters that Thursday’s agreement “gives us great hope” and provides a “real chance” to ease the conflict. Even so, she said there’s “still a big effort to make” in future talks over Ukraine. Poroshenko said control of
Zimbabwe not experiencing deflation Zimbabwe is not experiencing deflation but disinflation, with the sustained reduction in inflation due to price correction in the market, the Reserve Bank of Zimbabwe (RBZ) said Wednesday. RBZ governor John Mangudya said in his 2015 monetary policy statement that the declining inflation was not a reflection of low aggregate demand in the economy but correction of high prices prevailing in the market after the country adopted multiple currencies in 2009.
IMF loan The International Monetary Fund has agreed an extended fund facility of US$17.5 billion as part of an funding package worth US$40 billion dollars in total for conflict-torn Ukraine, IMF Managing Director Christine Lagarde said yesterday. Lagarde told a news conference in Brussels that the IMF team working in Kiev has concluded a staff-level agreement with the Ukrainian
We expect all sides to show restraint until a full cease-fire Vladimir Putin, Russian President
Venezuelan rules out single exchange rate Venezuelan Central Bank President Nelson Merentes on Wednesday ruled out the possibility of implementing a single foreign currency exchange rate, citing the current hostile economic climate. “We are submerged in an (economic) war ... a war against the ( economic) system we are developing, that’s why we have to be prudent to achieve the social and economic objectives we have established,” Merentes said in a televised interview. The remarks came one day after the government announced a more flexible three-tiered exchange system designed to protect key sectors of the economy, while easing some currency restrictions, a move to revive the country’s economy struggling with plunging oil prices.
Ukraine’s border with Russia would revert back to his government by yearend, contingent on a constitutional overhaul. While he also pledged to decentralize some powers away from Kiev, he rejected autonomy for the two breakaway eastern regions and refused to switch to a federal system of governance. Other commitments in Thursday’s accord include a removal of heavy weapons to start not later than the second day after the truce and end within two weeks. The withdrawal should be overseen by the Organization for Security and Cooperation in Europe.
President Petro Poroshenko
government on a new economic reform program that would be supported by an extended fund facility of about US$17.5 billion dollars from the IMF. Lagarde said Ukraine would receive around 40 billion dollars over the next four years, nearly half of which will come from the IMF. Bloomberg/Xinhua
UBS bond probe said to look at whether bank breached tax deal
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.S. investigators scrutinizing whether UBS Group AG illegally used unregistered securities to help Americans dodge taxes want to know whether such conduct occurred while the bank was under Justice Department supervision in an earlier tax-evasion case, a person familiar with the probe said. UBS, the largest Swiss bank, avoided prosecution in February 2009 when it admitted to helping Americans evade taxes, paid US$780 million and handed over 250 secret accounts. In
a deferred-prosecution agreement with the Justice Department, the firm promised to follow the law and cooperate with the U.S. Investigators are looking into UBS’s use of so-called bearer securities, which can be redeemed by anyone holding the paper, making them a potential tool for hiding assets. Authorities are focusing on whether UBS issued the securities to clients or invested in them on their behalf, according to the person. Investigators suspect the conduct may have
occurred when the bank was still bound by the deferred-prosecution agreement, which expired in October 2010, the person said, asking not to be identified because the inquiries aren’t public. If that’s true, the Justice Department could take the unusual step of reopening the accord and prosecuting the bank on the original conspiracy charge, according to lawyers including Michael Perino, a law professor at St. John’s University in New York. Bloomberg
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February 13, 2015
Opinion Business
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Leading reports from Asia’s best business newspapers
An accidental currency war?
Mohamed A. El-Erian
Chief Economic Adviser at Allianz and a member of its International Executive Committee, is Chairman of President Barack Obama’s Global Development Council
The Phnom Pehn Post Cambodia is one of the top 10 fastest-growing tourism destinations for British travelers, according to a report released yesterday by UK-based travel company Kuoni. The report said visitors view the Kingdom “as a natural next step from Vietnam”, with Cambodia moving up five places from 27th position to 22nd in the top 30 destinations for British tourists. Malaysia, on the other hand, fell from 9th to 16th place on the index, largely due to the crashes of two Malaysia Airlines planes in 2014.
China Daily Chinese Premier Li Keqiang on Tuesday pledged to encourage mass innovation to counter the economic downturn and breed robust economic growth. “China will step up efforts to simplify administrative procedures and delegate power to lower levels, carry out administration in accordance with law, and build a mechanism and ecosystem that encourages innovation,” Li said in a seminar with over 60 foreign experts working in China. Dragged down by a cooling property sector and lackluster exports, China’s economy grew 7.4 percent in 2014, the weakest annual expansion in 24 years.
The Asahi Shimbun Japanese mobile carrier Softbank said Feb. 10 it will incorporate artificial intelligence technology from IBM into its empathetic robot Pepper that will be available to Japanese consumers around midyear.The AI engine “Watson” is already used in health care, travel and insurance services in English, but an adaptation was needed to make it work and think in Japanese, said Steve Gold, Vice President, IBM Watson Group. Unlike other cognitive technology that responds rather mechanically, Watson can learn over time like a human brain, and understands the concept of probability, which makes it sophisticated and more human-like for applications, according to IBM.
The New Zealand Herald New Zealand Post will decrease deliveries of post to every second day in urban areas from July. A change to the standard mail delivery was announced today by NZ Post’s Mail and Communications Chief Operating Officer Ashley Smout. Mr Smout said the decrease to every second day would be rolled out in smaller centres over the next two years. “The way we plan to roll out these changes means we will continue to meet our delivery targets for standard letters. We’re confident customers will see very little, if any, difference in the services they receive from New Zealand Post as a result of these delivery changes. This is a priority for us,” Mr Smout said.
Some of G20 Finance ministers and central governors
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ix and a half years after the global financial crisis, central banks in emerging and developed economies alike are continuing to pursue unprecedentedly activist – and unpredictable – monetary policy. How much road remains in this extraordinary journey? In the last month alone, Australia, India, Mexico, and others have cut interest rates. China has reduced reserve requirements on banks. Denmark has taken its official deposit rate into negative territory. Even the most stability-obsessed countries have made unexpected moves. Beyond cutting interest rates, Switzerland suddenly abandoned its policy of partly pegging the franc’s value to that of the euro. A few days later, Singapore unexpectedly altered its exchange-rate regime, too. More consequential, the European Central Bank has committed to a large and relatively open-ended program of large-scale asset purchases. The ECB acted despite a growing chorus of warnings that monetary stimulus is not sufficient to promote durable growth, and that it encourages excessive risk-taking in financial markets, which could ultimately threaten economic stability and prosperity (as it did in 2008). Even the US Federal Reserve, which is presiding over an economy that is performing far better than its developed-world counterparts, has reiterated the need for “patience” when it comes to raising interest rates. This stance will be difficult to maintain, if continued robust job creation is accompanied by much-needed wage growth. This new round of central-bank activism reflects persistent concerns about economic growth. Despite a once-unthinkable amount of monetary stimulus, global output remains well below
potential, with the potential itself at risk of being suppressed. Making matters worse, weak demand and debt overhangs are fueling concerns about deflation in the eurozone and Japan. Anticipating falling prices, households could postpone their consumption decisions, and companies could defer investment, pushing the economy into a downward spiral from which it would be very difficult to escape. If weak demand and high debt were the only factors in play, the latest round of monetary stimulus would be analytically straightforward. But they are not. Key barriers to economic growth remain largely unaddressed – and central banks cannot tackle them alone. For starters, central banks cannot deliver the structural components – for example, infrastructure investments, better-functioning labor markets, and pro-growth budget reforms – needed to drive robust and sustained recovery. Nor can they resolve the aggregate-demand imbalance – that is, the disparity between the ability and the willingness of households, companies, and governments to spend. And they cannot eliminate pockets of excessive indebtedness that inhibit new investment and growth. It is little wonder, then, that monetary-policy instruments have become increasingly unreliable in generating economic growth, steady inflation, and financial stability. Central banks have been forced onto a policy path that is far from ideal – not least because they increasingly risk inciting some of the zero-sum elements of an undeclared currency war. With the notable exception of the Fed, central banks fear the impact of an appreciating currency on domestic
If weak demand and high debt were the only factors in play, the latest round of monetary stimulus would be analytically straightforward. But they are not
companies’ competitiveness too much not to intervene; indeed, an increasing number of them are working actively to weaken their currencies. The “divergence” of economic performance and monetary policy among three of the world’s most systemically important economies – the eurozone, Japan, and the United States – has added another layer of confusion for the rest of the world, with particularly significant implications for small, open economies. Indeed, the surprising actions taken by Singapore and Switzerland were a direct response to this divergence, as was Denmark’s decision to halt all sales of government securities, in order to push interest rates lower and counter upward pressure on the krone. Of course, not all currencies can depreciate against one another
at the same time. But the current wave of efforts, despite being far from optimal, can persist for a while, so long as at least two conditions are met. The first condition is America’s continued willingness to tolerate a sharp appreciation of the dollar’s exchange rate. Given warnings from US companies about the impact of a stronger dollar on their earnings – not to mention signs of declining inward tourism and a deteriorating trade balance – this is not guaranteed. Still, as long as the US maintains its pace of overall growth and job creation – a feasible outcome, given the relatively small contribution of foreign economic activity to the country’s GDP – these developments are unlikely to trigger a political response for quite a while. Indeed, America’s intricate trade relations with the rest of the world – which place households and companies on both sides of the production and consumption equation – make it particularly difficult to stimulate significant political support for protectionism there. The second condition for broadbased currency depreciation is financial markets’ willingness to assume and maintain risk postures that are not yet validated by the economy’s fundamentals. With central banks – the de facto best friend of financial markets these days – pushing for increasingly large financial risk-taking (as a means of stimulating productive economic risk-taking), this is no easy feat. But, given the danger that this poses, one hopes that they succeed. In any case, central banks will have to back off eventually. The question is how hard the global economy’s addiction to partial monetary-policy fixes will be to break – and whether a slide into a currency war could accelerate the timetable.
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February 13, 2015
Closing Taiwan’s former chief prosecutor jailed for 15 months
Beijing Must Abide by Sea Ruling
Taiwan’s former chief prosecutor Huang Shyh-ming was sentenced to 15 months in prison yesterday for leaking classified information related to prosecutors’ investigations.Huang was convicted of violating communication security and surveillance law by disclosing to Taiwan leader Ma Ying-jeou and then chief administrator Jiang Yi-huah details of the investigations involving legislative chief Wang Jinpyng and opposition Democratic Progressive Party lawmaker Ker Chien-ming. The court ruling against Huang is final, although the sentence can be commuted into a fine. The Taipei district court sentenced Huang last year to 14 months in prison. Huang resigned as prosecutor chief after the district court ruling.
China must comply with any ruling on competing territorial claims with the Philippines in the South China Sea even if it refuses to participate in international arbitration over the dispute, Philippines Supreme Court Justice Antonio Carpio said. “It doesn’t matter if China doesn’t appear, if the tribunal finds that there is jurisdiction, the tribunal will proceed,” Carpio told Bloomberg Television in Singapore yesterday. “We don’t want anyone, any state to resort to armed force in settling this dispute.”China has refused to participate in the case before the Permanent Court of Arbitration in The Hague that the Philippines brought in January 2013. China rejects international mediation and has said the dispute can only be resolved through bilateral negotiations.
HK prepares for cash tightness ahead of CNY Fears of a potential credit crunch have forced Hong Kong banks to offer attractive deposit rates to retain existing clients and attract new funds
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egulators and banks in Hong Kong are acting to meet increasing demand for the yuan currency and to deal with elevated interbank lending rates ahead of China’s Lunar New Year holiday starting next week. Seasonal demand for the Chinese currency has compounded already tight liquidity in the offshore yuan market. This tightness is mainly caused by the repatriation of yuan back to China under schemes such as Shanghai-Hong Kong
stock connect. Fears of a potential credit crunch have forced Hong Kong banks to offer attractive deposit rates to retain existing clients and attract new funds. China Citic Bank International started to offer its existing depositors a return of 4.1 percent for three-month yuan deposits on Wednesday, after it provided preferential rates for new clients last week. India’s ICICI bank also hiked its one-year yuan deposit rate to 4.25 percent
U.S. challenges Chinese export subsidies
last week, according to local media. By comparison, the benchmark interest rate for one-year yuan deposits in mainland China is now 2.75 percent after the central bank cut it in November, the first cut in more than two years. “After we offered preferential rates to our private bank and new clients last week, inquires have increased a lot and there are more new accounts being opened,” said Rebecca Chan, head of assets &
liabilities at China Citic Bank International. Overnight lending rates for offshore yuan surged to a record high of 8.6 percent last Friday as banks readied yuan funds for the new year holiday in China from Feb. 19 to 25. A Hong Kong Monetary Authority (HKMA) spokesperson told Reuters by email that the HKMA had noticed recent tightness in the offshore yuan market and would adjust liquidity facilities if needed. The city’s de-facto central bank launched a 10 billion yuan ($1.60 billion) intraday repurchase facility and assigned seven banks as primary liquidity providers (PLP) for offshore yuan market in November. “Many banks have tapped this intra-day facility since it was launched,” the HKMA said. The offshore market needs more convenient intra-day liquidity support with larger
PBOC opens up in Shanghai Zone
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scale to avoid volatility caused by short-term factors because yuan trading volumes have increased rapidly, said Ba Qing, an analyst at Bank of China Hong Kong. In the onshore market, the People’s Bank of China said on Wednesday that all of its province-level branches will be allowed to extend credit to financial institutions. Previously, only 10 major provincial-level PBOC branches were able to do so. Sufficient onshore liquidity helps relieve cash shortages in the offshore market as many financial institutions which operate both on the mainland and in Hong Kong can transfer funds across borders. “Liquidity in the offshore market is still tight. As to how long it will last depends on trading activities such as squaring FX positions as well as the inflow and outflow of yuan funds,” said China Citic Bank International’s Rebecca Chan. Reuters
Li Keqiang invites Tsipras to visit China
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he United States on Wednesday launched a legal challenge to Chinese subsidies supporting billions of dollars of exports across a wide swathe of industries from steel to shrimp. U.S. Trade Representative Michael Froman said Chinese companies in designated export hubs benefited from free or subsidized services, cash grants and other incentives which gave their products an unfair advantage. The request for consultations, lodged on Wednesday, is the first step in a World Trade Organization dispute. The administration has also been trying to convince lawmakers, in particular Democrats, to support a new 12-nation Asia-Pacific trade deal and a bill to streamline Congressional passage of trade deals. China USTR estimates suppliers of subsidized services to Chinese export hub companies received more than US$1 billion from China over three years and said some companies received at least US$635,000 in support annually. expressed “regret” at the move by Washington.
hina opened its capital account for companies and banks in the Shanghai free-trade zone, giving them unprecedented freedom to raise funds offshore. There will no longer be a need to gain approval to raise yuan or foreign currency outside of the mainland, Zhang Xin, head of the central bank’s Shanghai branch, said Thursday at a press briefing in the city. Borrowers in the free-trade zone will be allowed to get funding equivalent to up to two times their capital, double the previous limit, he said. “This effectively opens the corporate capital account in the area,” Zhang said. The zone was set up in 2013 as a testing ground for free- market policies as China loosens control of interest rates and its currency. Hong Kong’s interbank offered rate for three-month yuan loans was 4.60 percent, compared with 4.90 percent in Shanghai, the latest daily fixings show.
remier Li Keqiang told Greek Prime Minister Alexis Tsipras that China is prepared to boost investment in the debt-ridden country after conflicting messages about the sale of the country’s biggest port. Li telephoned Tsipras yesterday to congratulate him on his election victory last month and invite him to visit China, a Greek government official said on condition of anonymity as the talks were private. Li’s offer of more investment came as talks stalled with the European Union on further funding for Greece. Tsipras came to power on pledges to throw out EU-imposed economic austerity measures and his government has sent mixed signals about whether it will go ahead with sales of state assets, including a 67 percent stake in Piraeus Port near Athens that China Cosco Holding Co. wants to buy. The port would become a key link in the “Silk Road” trading route to Europe that China is developing.
Reuters
Bloomberg
Bloomberg