Macau business daily, Mar, 5, 2015

MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 742 Thursday March 5, 2015 Year III

Of MICE and Chui

M

ICE. The main axis of the MSAR’s diversification strategy. 2014 revenues from the sector Meetings, Incentives, Conferences, and Exhibitions - more than doubled to MOP278.4 million.

But the gov’t picked up more than half the bill. Subsidising organisers to the tune of MOP165 million.

And public help is growing. In 4Q, 75 pct of revenues were generated by administration funds.

MICE is booming but increasingly dependent upon public largesse PAGE

2

CTM blames Huawei for ‘Porngate’ at GIT

Macau: 82 new residents per day

PAGE 5

Macau exporters express cautious outlook

It’s not growing as fast as tourists.

But almost. Like visitors, Macau’s population continues to rapidly expand. In 2014, 30,000 new residents appeared here, a 5 pct increase Y-o-Y and 20 pct up on five years ago. After a cap on tourists, a cap on residents?

PAGE 6

Genting to buy Crystal Cruises PAGE 6

PAGE 3

Melco Crown delisting set for July 3

Lowered expectations

PAGE 6

HSI - Movers

Below expectations. Sa Sa’s pronouncement on CNY sales.

The cosmetics retailer says revenues from Macau and Hong Kong recorded a 10 pct decline over the holiday period. A drop attributable to fewer Mainland customers

March 4

Name

PAGE 4

Missing delegates

www.macaubusinessdaily.com

All eyes are on who’s not there.

President Xi Jinping’s anti-graft campaign will be more visible today. At the National People’s Congress starting session. Some of the delegates expected to attend have been set aside

Page 16

Abnormally normal ‘New normal’ has slipped into the lexicon. Some casino operators and the gov’t say it defines the ‘new’ gaming industry reality. Yesterday, the CE said he’s adjusting economic policy and goals. To reflect a monthly GGR of MOP20 billion rather than the MOP25-30 billion average of recent years. Operators have mixed feelings. With SJM pronouncing it is a natural development. While others, like Melco Crown, just don’t buy it

%Day

Tingyi Cayman Island

2.01

AIA Group Ltd

1.03

China Mengniu Dairy

1.00

Lenovo Group Ltd

0.34

Hong Kong & China Ga

0.34

Bank of China Ltd

-2.05

China Shenhua Energy

-2.18

Galaxy Entertainment

-2.88

China Resources Land

-3.92

China Resources Ente

-5.11

Source: Bloomberg

I SSN 2226-8294

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2 | Business Daily

March 5, 2015

Macau Sou Chio Fai to head GAES two more years Sou Chio Fai has had his appointment as director of the Tertiary Education Services Office renewed for another two years. The new two-year term begins on Monday next week, March 9, according to a dispatch published in Macau’s Official Gazette yesterday. The dispatch was signed by the Secretary for Social Affairs and Culture, Alexis Tam Chon Weng.

According to the Official Gazette, the decision to renew Sou Chio Fai’s term is due to his ‘management skills and professional experience suitable for his job duties.’

MICE events receipts double in 2014 due to government subsidies The total number of MICE events dropped slightly by 34 events in 2014.

However, the receipts of these events doubled, with nearly 60 per cent attributable to government subsidies Kam Leong

kamleong@macaubusinessdaily.com

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eceipts for MICE events in Macau soared by more than double in 2014, reaching MOP278.4 million (US$34.8 million), representing a year-on-year increase of 52.7 per cent, with subsidies by the government or other organisations jumping 42.3 per cent year-on-year.

The latest data released by the Statistics and Census Bureau (DSEC) yesterday showed a total of 1,055 MICE events were held last year, which represents a slight drop of 2.42 per cent year-on-year.

In fact, the sharp increase in the receipts of MICE events last year should be credited to the subsidies that the organisers gained.

According to DSEC, MICE events received subsidies totalling MOP165 million, which accounts for 59.3 per cent of total receipts.

In addition, during the fourth quarter of last year, 74.2 per cent of the receipts that the MICE events

accumulated were also from subsidies, which amounted to MOP120 million of the total receipts of MOP161.5 million in the quarter.

Although the organisers received much more in terms of subsidy than the year before in 2014, exhibitors still had to pay more for rent, with 858 exhibitors telling DSEC that 60.9 per cent of their expenditure was incurred on the rental of exhibition booths.

The rental of the booths, according to DSEC, had soared 77.4 per cent year-on-year, reaching MOP108 million in 2014, compared to MOP61.4 million in 2013.

Nevertheless, in general, the total expenditure of MICE events still exceeded receipts.

The data showed that the expenditure of MICE events rose by 15 per cent year-on-year in 2014, reaching MOP344 million, compared to the MOP299.2 million during the same period of last year.

In addition, venue rental for the events increased to MOP37.3 million, up 19.9 per cent year-on-year.

Growing participation On the other hand, the city’s MICE events attracted more participants and attendances, which rose by 28.6 per cent year-on-year, amounting to 2.61 million, of which exhibition attendees totalled 2.49 million.

Meanwhile, 968 of the 1,055 MICE events held last year were meetings and conferences, with only 87 exhibitions. These events were held by 80 organisers, increasing 27 from 2013.

Of all the events held last year, corporate meetings accounted for the biggest proportion, amounting to 607 events, followed by association meetings and government meetings, which accounted for 191 and 82 of the total, respectively.

In terms of event purpose, 476 of the total events held last year were related to commerce, trade and management, up 25 year-on-year.

Meanwhile, some 136 events were related to IT & Other Technology and some 120 promoted Medical & Health, jumping 17 and 18 events year-on-year, respectively.

However, MICE events for Travel & Tourism decreased by 25 events, amounting to only 50 of the total.

Exhibitors who participated in the events were primarily from Macau, Mainland China and Hong Kong, accounting for 27 per cent, 25.1 per cent and 24.6 per cent of the total. In addition, the city welcomed 68,696 professional visitors last year, the data said, mainly from Macau and Mainland China.

According to DSEC, MICE events occupied an average floor area of 410,000 square metres, for an average duration of 3.3 days.

Business Daily | 3

March 5, 2015

Macau

An ever-growing population: 30,000 more last year Macau supported a population of 636,200 at the end of 2014. That’s an almost five per cent increase compared to a year earlier Sara Farr

sarafarr@macaubusinessdaily.com

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ome 28,700 more people lived and worked in Macau at the end of last year, bringing the total population to 636,200 for the whole of 2014.

Official numbers released yesterday by the Statistics and Census Service (DSEC) show that the latest figures represent a 4.7 per cent increase in the population here.

Only five years ago, the total Macau population was 540,600. Today’s population represents a 17.7 per cent increase since 2010. In the last quarter of 2014, the number of non-resident workers totalled 170,346, an increase of 4.6 per cent compared to the previous quarter, and representing 26.8 per cent of the overall Macau population.

In addition, some 2,278 individuals were granted the right of abode in 2014. This

figure was up 11 per cent in the fourth quarter of last year.

The number of individuals whose right of abode was annulled dropped 34.4 per cent from the third to fourth quarters of 2014 to 1,273.

There were also fewer Chinese immigrants living and working in Macau at the end of 2014. Data from the Statistics and Census Service

show that number totalled 5,889, dropping 38.1 per cent quarter-on-quarter.

Live births increased by 5.8 per cent in the fourth quarter to total 7,360 for the whole of 2014, with girls topping the growth chart with a 6.9 per cent increase to 3,510, while the number of baby boys increased by 4.9 per cent to 3,850.

Macau’s mortality rate rose by 14.6 per cent to 1,939 at the end of 2014. While the majority of deaths recorded were male, accounting for 1,086, up 13.5 per cent, but it was the females who registered the biggest percentage increase of 16.1 per cent, totalling 853.

The majority of reported deaths were caused by neoplasms, accounting for 679

of the total and up by 15.1 per cent from the previous quarter, followed by diseases related to the circulatory system, which accounted for 467 of total deaths and increased the most by 40.7 per cent. The number of deaths caused by diseases of the respiratory system, however, increased by 9.2 per cent from a quarter earlier to 325 for the whole of last year.

Meanwhile, a total of 4,085 people tied the knot between January and December 2014, down by 68 marriages from a year earlier. Of these, men embarking upon their first marriage increased by 12.7 per cent from the third quarter to a total of 3,510, while the number of women who married for the first time totalled 3,621, up 10 per cent in the same period. The number of divorces, however, rose by 136 to a total of 1,308 by the end of last year.

KATHARINA HAS A GREAT HANDICAP* AND THAT'S WHAT MAKES HER AMAZING. To organise the biggest Special Olympics golf tournament in the world is something that fills us with pride. More importantly, knowing that Macau gives to these athletes a unique cultural, social and sporting ethos is truly inspirational.

Proving that more unites us than ever separates us. * Katharina Swanson, from Austria, plays at level 5

4 | Business Daily

March 5, 2015

Macau Brands

Trends

Luxury in Jeans Raquel Dias newsdesk@macaubusinessdaily.com

T

he luxury world is getting younger. No longer are millionaires mature men and women who appreciate the finer things in life. Young, rebellious, and with a lot of money to spend, the new generation of rich folk think outside the box. If you follow fashion and jewellery trends you’ll see that most houses are doing their best to follow the new demographics of luxury.

A good example of this is the new Hublot Big Bang Used Jeans Baguette, the most recent item of the brand’s Jeans collection. The feminine version is as unique as the others in combining haute horology with everyday denim.

How very rock ‘n roll.

Made entirely from polished and satin-finished stainless steel, the elegantly perfect 41 mmdiameter watch features a bezel set with 48 refined baguette-cut sapphires, using genuine used light blue denim as a covering on the dial. The material had to undergo a complex process to harden the denim and make it easier to work. It is completed by a strap, also in used light blue denim, sewn onto blue rubber for comfort, flexibility and strength.

Equipped with an HUB4300 self-winding chronograph movement with 278 components (28,800 vib/h, which connoisseurs are sure to appreciate, it bears the simple yet prestigious legend: ‘Limited Edition - Hublot Boutique Exclusive’. A power reserve of 42 hours and water resistant to 100 metres, this watch is available in a limited edition of just 100, exclusively available at the 70 Hublot boutiques across the world.

CNY sales in Macau fall short of Sa Sa expectations The Hong Kong-listed cosmetics retailer said it recorded a 10 per cent decline in sales in both cities, where average sales of transactions attributable to Mainland customers dropped Stephanie Lai

sw.lai@macaubusinessdaily.com

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osmetics retailer Sa Sa International Holdings Ltd. said retail sales in Hong Kong and Macau dropped during the 7-day Lunar Chinese New Year holiday starting on February 19, when the number of Mainland Chinese visitor arrivals in both cities registered a decline during the festive period.

Sa Sa’s retail sales in Hong Kong and Macau during the 7-day holiday declined 10 per cent when compared to the same Chinese New Year period last year, a performance that the company said fell short of expectations.

The unaudited operation data was submitted to the Hong Kong Stock Exchange on Tuesday, although it

does not contain any detailed revenue figures.

Sa Sa says it has registered a 5 per cent rise in the number of transactions attributable to Mainland tourists, despite authorities in both Hong Kong and Macau recording a decline in Mainland visitor arrivals during Chinese New Year.

In Macau’s case, the Macau Government Tourist Office said that visitor arrivals to Macau reached nearly 1.03 million (including non-resident labour and students) during what it defined as Chinese New Year Golden Week - a period spanning February 18 – 24. Of these 1.03 million visitors, over 760,000 were Mainland visitors, an arrival figure that has dropped by

nearly 2 per cent when compared to the corresponding period last year.

Despite the rise in the number of transactions attributable to Mainland tourists during the holiday, Sa Sa said that was offset by a 15 per cent decrease in average sales of transactions attributable to them.

The resulting performance is an 11 per cent drop in sales to Mainland customers during the Chinese New Year holiday, according to the filing.

The Hong Kong-listed cosmetics retailer added that same-store sales growth declined by a year-on-year 7 per cent in Hong Kong and Macau, noting that ‘the effect of the Chinese New Year and Golden Week holidays has faded’.

Beijing voices missions, hopes for MSAR

Z

hang Dejiang, the Chairman of the National People’s Congress Standing Committee (CPPCC), presented at a joint meeting of Macau and Hong Kong members of the national committee of the Chinese People’s Political Consultative Conference yesterday.

Following the closed-door meeting, Ho Teng Iat of the Macau delegation revealed to reporters that the Chinese leader recognised Macau’s economic and social developments and expressed the missions and hopes for the SAR’s committee members.

Zhang Dejiang said that the prioritised missions of Macau are

to diversify its economy, as well as enhance the education of teenagers and harness the power of ‘love the country, love Macau’.

The hopes include comprehensively and accurately putting ‘one country, two systems’ and the Basic Law into practice, developing the economy, and improving people’s livelihood.

Zhang Dejiang also appealed to the delegation for the members to project positive energy, to insist on ‘one country, two systems’ and discuss and negotiate in the face of issues.

Vice Chairman of the CPPCC National Committee, and also the former Chief Executive (CE) of Macau, Edmund Ho Hua Wah, plus

the former CE of Hong Kong, now also serving as vice chairman of the CPPCC National Committee, Tung Chee-hwa, also presented as the meeting.

Dubbed the two sessions, the Chinese People’s Political Consultative Conference (CPPCC), which is the country’s top national advisory body, opened on Tuesday, while the meeting of the National People’s Congress (NPC), the top legislative body, begins today.

The sessions, attended by thousands of officials and business leaders, will discuss various issues including the economic reforms process and this year’s targets.

Business Daily | 5

March 5, 2015

Macau

Macau exporters cautious on H1 outlook Labour shortages and associated rising costs, and price competition with industry players remain the greatest challenges for local exporters, an official survey finds Stephanie Lai

sw.lai@macaubusinessdaily.com

T

elecommunications company CTM has blamed Huawei for the software fault that resulted in a pornographic movie being shown on the Transportation Infrastructure Office (GIT) website. In its first attempt to clarify the issue, CTM did not name the company but this week decided to name the Chinese company fearing that the problem had not been sufficiently clarified.

‘In order to dissipate any doubts, CTM hereby clarifies that there was no outage or fault of whatever nature in any of CTMs systems [with] the incident caused exclusively by a

flawed logic design in the software of the cache system (iCache) supplied to CTM by Huawei Tech. Investment Co., Limited (Huawei)’, it was explained in a press release.

CTM also revealed a letter from Huawei in which the company admits its fault for the wrong link on the telecommunications webpage, saying: ‘We deeply apologise for any inconvenience to CTM users and for damaging the reputation of CTM’.

Despite this problem, CTM and Huawei announced that they are working together to avoid such problems in the future. ‘CTM has

CTM blames Huawei for porn infecting GIT website Fearing being wrongly blamed for the inappropriate video shown on the Transportation Infrastructure Office (GIT) website, CTM has decided to name Huawei as the ‘third party’ provider of faulty software João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

elecommunications company CTM has blamed Huawei for the software fault that resulted in a pornographic movie being shown on the Transportation Infrastructure Office (GIT) website.

In its first attempt to clarify the issue, CTM did not name the company but this week decided to name the Chinese company fearing that the problem had not been sufficiently clarified.

‘In order to dissipate any doubts, CTM hereby clarifies that there was no outage or fault of whatever nature in any of CTMs systems [with] the incident caused exclusively by a flawed logic design in the software of the cache system (iCache) supplied to CTM by Huawei Tech. Investment Co., Limited (Huawei)’, it was explained in a press release.

CTM also revealed a letter from Huawei in which the company admits its fault for the wrong link on the telecommunications webpage, saying: ‘We deeply apologise for any inconvenience to CTM users and for

damaging the reputation of CTM’.

Despite this problem, CTM and Huawei announced that they are working together to avoid such problems in the future. ‘CTM has been working in close co-operation with Huawei to minimise the risk

of similar problems occurring, and assure that Macau users can browse the Internet safely’.

On 12 February instead of a video about Macau transportation the GIT website played a pornographic movie to users. Once the problem

was reported, CTM denied that it was the result of any cyber-attack or malicious activity but rather ‘a logic design fault in the cache system supplied to CTM, which diverted the user’s requests to access certain web content to a wrong URL’.

6 | Business Daily

March 5, 2015

Macau

Melco Crown delisting set for July 3 The Macau gaming operator has also said that an extraordinary general meeting is scheduled for March 25 for the withdrawal from the Hong Kong Stock Exchange to be approved by shareholders and to amend and restate the memorandum and articles of the company Sara Farr

sarafarr@macaubusinessdaily.com

M

elco Crown Entertainment Ltd. has announced that its delisting from the Hong Kong Stock Exchange will take place on July 3.

In a filing with the Hong Kong Stock Exchange, the gaming operator also said that an extraordinary general meeting is scheduled for March 25, while March 23 is the deadline for shareholders wishing to lodge proxy forms as well as all transfer forms and attending the extraordinary general meeting.

The meeting seeks to pass two resolutions: that the withdrawal from the stock exchange be approved by shareholders, and that the memorandum and articles of the company be amended and restated.

While Melco Crown will fully de-list from the Hong Kong Stock Exchange on July 3, the last dealing date is June

29, according to a separate filing by the company.

The company was first listed on the NASDAQ Global Market in December 2006, and in December 2011 completed a dual primary listing in Hong Kong. In January this year, however,

the company announced that it had submitted an application to the Hong Kong Stock Exchange for the voluntary withdrawal of the listing of its shares.

‘We intend to retain the primary listing of [American Depositary Shares] ADSs

on NASDAQ following the proposed delisting [in Hong Kong],’ a company filing reads.

The reasons for delisting are that ‘appropriate opportunities to raise additional equity in Hong Kong have not arisen,’ and

Melco Crown did ‘not have the appropriate opportunity to take advantage of the stock exchange platform for any equity fund raising activities,’ according to the filing.

On January 12, company co-chairman Lawrence Ho Yau Lung said the reason for the delisting was purely made for administrative reasons and had no connection to the Chinese government’s crackdown on corruption.

“I always thought the Hong Kong delisting plan would be a non-event. I honestly do not know why it has been this big deal…

The delisting has nothing to do with the anti-corruption campaign in China and it is not connected at all to the slump in Macau gaming revenue”, he said at the time.

“This change will not have an impact on our ongoing projects as they have already been fully financed”, Mr. Ho added.

Genting Hong Kong eager to buy Crystal Cruises The Hong Kong-based company is willing to pay US$550 million to Japanese company Nippon Yusen Kabushiki Kaisha in order to enter the high-end cruise market

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enting Hong Kong has agreed to pay US$550 million (MOP4.4 billion) to Nippon Yusen Kabushiki Kaisha (NYK) for the acquisition of Crystal Cruises. The deal was announced in a filing with the Hong Kong Stock Exchange and will allow the company to expand into the high-end cruise market.

‘The acquisition will enable the Group to take advantage of the growing global demand in the luxury brand market and maximise its revenue and profitability

potential through the proposed addition of a third new vessel for the Crystal Cruise brand’, the Board of Genting explained with regard to the decision to proceed with the deal. ‘The acquisition presents an excellent opportunity for the Group to expand its cruise business worldwide’, they added.

Genting is part of the Malaysian travel and resorts conglomerate Genting Group and is expecting to complete the deal by the second quarter of the year.

“After 25 successful years with NYK, we are excited to have Genting Hong Kong as the new owner of Crystal Cruises,” said Edie Rodriguez, President and COO of Crystal Cruises.

“The proposed expansion of our fleet will present our loyal Crystal Society members and new luxury cruise guests with more itinerary options, accommodation choices and exceptional vacation experiences”.

Currently, Crystal Cruises operates two ships: Crystal Symphony and

Crystal Serenity, which are valued at US$300 million (MOP2.4 billion) together. Genting is planning to invest in a third ship for the company although no other details have been revealed.

According to the Genting filing, Crystal Cruises generated US$8.9 million (MOP71 million) in net income in 2014. In 2013, the company registered a US$45 million (MOP359 million) net loss.

J.S.F.

Corporate CEM and Zhuhai Power Supply Bureau organize visit for Macau elderly and underprivileged The CEM Ambassadors Team has partnered for the fourth consecutive year with Peng On Tung Tele-assistance Services to organise a visit to the elderly who live alone as well as some underprivileged families, together with nine volunteers from Zhuhai Power Supply Bureau.

On the afternoon of 3 March, over 20 CEM Ambassadors Team members and nine volunteers from Zhuhai Power Supply Bureau, as well as Peng On Tung volunteers, were divided into eight groups to visit 24 elders and underprivileged families living in the Iao Hon area. During their visit, they spoke to the elders, listened to their needs and expressed care and love to them, putting a big smile on their faces. Before bidding farewell, CEM Ambassadors distributed gift packs to each family, wishing them health. During the visit, CEM staff also checked the safety conditions of household electrical installations.

Wine & Dine Festival underway The Macau Wine and Dine Festival 2015 returns for its third edition at The Venetian Macao’s outdoor lagoon area until Sunday, March 8, featuring wines and food from around the world, turning the outdoor lagoon of the integrated resort into a fun-filled festival once again. This year will bring together over 38 booths of globally recognised products – offering wine and spirits from over 16 countries – including France, Portugal, Italy and the United States – and food to accompany them.

“The festival will be a five-day extravaganza of entertainment, appreciation courses, tastings and more,” organisers said in a statement. Workshops at the Wine School are available for amateurs as well as skilled wine enthusiasts, and will cover areas such as pairings, appreciation and vinification techniques. The smash hit Korean show Cookin’ Nanta will also be part of the event, with one performance each day featuring a segment of the popular live show.

Business Daily | 7

March 5, 2015

Macau Ung Vai Meng reappointed President of Cultural Affairs Bureau Guilherme Ung Vai Meng will continue to serve as President of the Cultural Affairs Bureau for another three years. The decision was published yesterday in the Official Gazette in a dispatch signed by the Secretary for Social Affairs and Culture, Alexis Tam Chon Weng. According to the dispatch, the decision was made after taking into account ‘the management capacity and professional experience’ of Ung Vai Meng, which is considered appropriate for the position. Ung Vai Meng was initially appointed to the post in 2010.

Gaming revenue crisis: Gov’t & SJM positive, Chui announces new normal A drop of 50 per cent in gaming revenues. SJM CEO Ambrose So calls it “healthy adjustment”, while Melco Crown CEO Lawrence Ho calls it “worrying”. Chui Sai On said monthly targets for revenues may be adjusted to MOP20 billion Kam Leong

kamleong@macaubusinessdaily.com

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o miracle will appear for the city’s gaming revenues in these two months, the Secretary for Economy and Finance, Lionel Leong Vai Tac, declared on Tuesday, claiming that the record-breaking drop in gaming revenues last month was within expectations.

“It is not possible to analyse when the decrease [in revenues] will stop. The public should not think that revenues will soar back next month, as it is not realistic,” the Secretary told reporters on Tuesday night attending the National People’s Congress (NPC) in Beijing, Chineselanguage newspaper Macao Daily reported.

In February, the city registered its biggest ever decline in gaming revenue - down 48.6 per cent yearon-year - reaching only some MOP19.5 billion and representing nine straight months of slump in casino revenues, according to official figures by the Gaming Inspection and Co-ordination Bureau.

Yesterday, Macau’s Chief Executive, Fernando Chui Sai On, also said that such a drop was expected, claiming he will adjust the monthly target for gaming revenues to MOP20 billion in the coming Policy Address, based on the latest GGR that the city posted last month.

He indicated that the plunging gaming revenues will not affect the current expenditure of the government.

In addition, Secretary Leong claimed that it is understandable that the city’s GGR posted such a mammoth drop in gaming revenues as February 2013’s amounted to MOP30.8 billion, a record high.

He added that the MOP43.3 billion that the city generated from the gaming industry during the first two months of the year was the median of the revenues in the same period of 2012 and 2011, despite representing a decrease of 35.1 per cent compared to the first two months of 2013.

In 2012, the city received MOP49.2 billion in the two months while some MOP38.4 billion was posted in January and February 2011.

“Although the fiscal surplus of dozens of billions may not be posted this year, [it] will still meet the budgeted amount. It is only that we had a great amount of money left [over] in the past, and this year we won’t have as much as we had,” the Chinese newspaper quoted Mr. Leong as saying.

SJM positive, Melco Crown worried Meanwhile, the CEO of gaming operator SJM Holdings Ltd., Ambrose So Shu Fai, also told reporters in the capital city on Tuesday that there will not be any surprises with regard to gaming revenues during the first half of the year, hoping

the drop will stop in the second half.

He predicted that casino revenues will certainly keep declining on a year-on-year comparison. However, he noted that it is possible that GGR may increase month by month.

Noting that the slowdown is a positive adjustment following years of increasing gaming revenues, Mr. So said that SJM will focus more on promoting the diversification of the gaming industry.

By contrast, gaming entrepreneur Lawrence Ho Yau Lung, co-chairman of Melco Crown Entertainment Ltd., told reporters in Beijing that the situation is worrying, saying “[GGR] has never dropped this much”.

He said that this year would be a tough one for the gaming industry, as although the number of tourists had increased their spending had decreased.

In addition, he claimed that the drop of nearly 50 per cent last month was beyond his expectations, foreseeing that the year-onyear decrease in GGR will narrow in the second half as the market started turning south in the second half of last year.

On the other hand, deputy chairman of Galaxy Entertainment Group, Francis Lui Yiu Tun, told the Beijing newspaper that it is an appropriate time to develop non-gaming business.

CE assigns two Secretaries to prepare CNY tourism report

C

hief Executive Fernando Chui Sai On said yesterday in Beijing that he had officially delegated Secretary for Security Wong Sio Chak and Secretary for Social Affairs and Culture Alexis Tam Chong Weng to complete a report on the tourism capacity during the Chinese New Year.

The report will include the overall tourism and management of borders, according to the CE, who claims that he will submit the report to the central government once the two Secretaries complete their work.

In addition, he revealed that Chinese officials had invited the Special Administrative

Region to discuss the future improvements or adjustments to the Individual Visit Scheme (IVS).

Last month, Secretary Tam announced that Macau and the central government will review the IVS following the Chinese New Year holidays.

The Secretary later said that the tourist numbers will not

be capped even though he said there is no draft plan yet.

In fact, the gaming operators say they do not think that tourist numbers should be controlled.

Mr. Ambrose So perceives that Macau as a tourism city should not follow Hong Kong by tightening the number of tourists visiting, claiming that

rerouting tourists to different areas of the city should be the correct direction.

Meanwhile, Mr. Lawrence Ho reckons that tightening IVS will affect the businesses of local SMEs, in addition to the gaming corporations, even though claiming he supports the government improving the IVS programme.

8 | Business Daily

March 5, 2015

Macau

Analyst who called stock drop says worst yet to come As well as the revenue decline, wage inflation will boost expenses and the cost of opening new venues will drain cash, according to the analyst

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he worst is yet to come for Macau casinos after February gaming revenue plunged the most on record, according to one of the few analysts who correctly predicted that stocks would fall this year.

Gaming revenue will keep sliding through mid-year and dividends will get cut as the cost of new capacity eats into free-cash flow, leaving share valuations too expensive, said Jamie Zhou, an analyst at Macquarie Securities in Hong Kong. Zhou was one of just two analysts tracked by Bloomberg with sell ratings on Sands China Ltd. and Galaxy Entertainment Group Ltd. when he started covering the shares in December.

The two largest casino operators by market value in the former Portuguese colony have since tumbled at least 19 per cent as China’s economic growth slowed to the weakest pace since 1990 and President Xi Jinping’s anti-graft

We don’t think the street has fully grasped the negative operating leverage in their earnings forecasts Jamie Zhou, Macquarie Securities Hong Kong analyst

campaign deterred VIP gamblers.

While a gauge of Macau casinos rallied the most in two weeks on Tuesday as the revenue drop was smaller than some analysts predicted, Zhou is keeping his sell recommendation on the industry.

“Macau is in a tough spot,” Zhou said in an e-mailed response to questions from Bloomberg News.

“We believe dividends will be slashed across the board.”

The six main casino operators – Sands, Galaxy, Wynn Macau Ltd., SJM Holdings Ltd., MGM China Holdings Ltd. and Melco Crown Entertainment Ltd. – lost US$89 billion in market value over the past year, according to data compiled by Bloomberg. An index of the stocks added 1.7 per cent Tuesday, paring its 12-month slump to 46 per cent.

Revenue drops Gross gaming revenue in the world’s biggest gambling hub fell 49 per cent to MOP19.5 billion (US$2.4 billion) last month, Macau’s Gaming Inspection and Co-ordination Bureau (DICJ) said. That compared with expectations of a 54 per cent decline, according to the median of eight estimates compiled by Bloomberg News.

Macau last year posted its first annual decline in gaming revenue.

The industry may face another 8 per cent drop this year, a Bloomberg survey showed, after last year’s 2.6 per cent fall. Wynn Macau dropped 2.4 per cent to HK$20.65 to lead declines among the casino stocks.

SJM Holdings slipped 2.3 per cent, MGM China sank 2 per cent, Galaxy fell 1.1 per cent and Sands China lost 0.4 per cent. Melco Crown added 1.1 per cent.

Most analysts have remained bullish, with Zhou’s sell ratings putting him at odds with peers. The average consensus on the six operators is 3.8 on a scale where 5 equates to a unanimous buy recommendation.

That’s in line with the score for the members of the Hang Seng Index, data compiled by Bloomberg shows.

Strategists are most bearish on Wynn Macau, with eight sell calls out of 28 recommendations. Zhou is now the only analyst advising investors to offload Galaxy shares.

Lower dividends Analysts are too optimistic about the outlook for shareholder payouts by casinos, he said. As well as the revenue decline, wage inflation will boost expenses and the cost of opening new venues will drain cash, said Zhou.

“We don’t think the street has fully grasped the negative operating leverage in their earnings forecasts,” said Zhou, referring to other analysts.

“While consensus has 5-7 per cent forward dividend yields, we see only 2-4 per cent at best.”

Macau casino operators were some of Hong Kong’s best stocks to own in the five years up to 2013, with Galaxy rallying more than 6,400 per cent, as more than eightfold growth in gaming spending over the decade up to 2013 transformed Macau into a gambling centre larger than the Las Vegas Strip.

Finding bottom In December, President Xi urged Macau to wean itself off its reliance on casinos and turn the city into a tourism and leisure centre. His campaign against corruption has snared more than 100,000 “flies and

tigers,” or low and high-level officials, according to official data.

“Macau gaming will take some time to recover. They’re still struggling to find the bottom,” said Sandy Mehta, the Hong Kong-based chief executive officer of Value Investment Principals Ltd. “The crackdown on conspicuous consumption is the biggest headwind.

It is great that the Chinese leadership is improving transparency and governance but Macau will continue to feel the brunt of these measures.”

Representatives for Sands China and Galaxy declined to comment on the companies’ dividend plans. The four other casino operators didn’t immediately respond to requests for comment from Bloomberg News made after regular office hours on Tuesday.

The slump in gaming stocks has made shares cheaper. The BI Macau China Gaming Market Competitive Peers Index traded yesterday at 16 times earnings, compared with its five-year average multiple of 20.3.

Casinos slid last month to the lowest valuation relative to the Hang Seng Index since the middle of 2012.

No bargain For Macquarie’s Zhou, they’re still not a bargain. He has a 12-month target price of HK$31 for Sands, 14 per cent below Tuesday’s close. He sees a 15 per cent decline to HK$18 for Wynn Macau, and a 17 per cent drop to HK$33.20 for Galaxy Entertainment.

The addition of more hotel rooms in Macau and capital spending commitments mean “industry level free-cash flow will be negative for years to come,” he said. Shares remain expensive, “particularly with further downside possible.”

Bloomberg

Business Daily | 9

March 5, 2015

Greater China FDI for financial institutions higher China’s financial institutions received 51.85 billion yuan (US$8.44 billion) in net foreign direct investment (FDI) in 2014, the country’s foreign exchange regulator said yesterday. The figure is higher than the 26.49 billion yuan in net FDI received in 2013, according to the State Administration of Foreign Exchange (SAFE). Net overseas direct investment from China’s financial institutions, including banks, insurers and securities firms, totalled 38.26 billion yuan in 2014, lower than the 71.62 billion yuan in the previous year. During the fourth quarter of 2014, net FDI in China’s financial institutions climbed to 14.72 billion yuan.

Shift to services trend firm Activity in China’s services sector grew modestly in February as new orders rose at their quickest pace in three months, a private survey showed just a few days after the central bank cut interest rates to stimulate the world’s second-largest economy. The HSBC/Markit Services Purchasing Managers’ Index (PMI) picked up to 52.0 last month from January’s 51.8 and remained above the 50-point level that separates contraction from growth in activity on a monthly basis. A sub-index for new orders rose to 52.2 in February from 51.2 in January and the sub-index measuring new business also rose.

Short-term lending facility sees rate cut China’s central bank has cut the interest rate on its short-term lending facility (SLF) for its local branches and nearly tripled the funds available under the programme, in its latest bid to bring down financing costs, sources told Reuters yesterday.

Overnight rates will be reduced to 4.5 percent from 5 percent, while seven-day rates will fall to 5.5 percent from 7 percent, three sources with direct knowledge of the matter said. In contrast to 2014, no new 14-day facilities will be extended in 2015, they said. The overall SLF quota will be increased by US$35.08 billion.

Forex chief says yuan to stay stable The yuan’s exchange rate will remain stable in the long run, and two-way trade will be maintained in the currency market, the head of foreign exchange strategy at China’s central bank said on Tuesday, sounding a reassuring note in the face of a recent slide in the yuan’s value due to increasing outflows from the world’s second-largest economy.

The yuan has fallen to around 6.27 per dollar in 2015, its weakest since 2012, and capital outflows have increased in part as a result.

Alibaba buys stake in TV producer Chinese e-commerce titan Alibaba Group Holding Ltd has invested 2.4 billion yuan (US$382.67 million) in TV programme producer Beijing Enlight Media Co Ltd, Beijing Enlight said in a regulatory filing yesterday. The move follows investments

by Alibaba worth more than US$3.1 billion in the entertainment industry last year as the company aggressively expands into film and entertainment content. Alibaba executives have laid out a vision of selling not only physical products to Chinese consumers, but also digital content and entertainment, including film, television and video games.

Government soothes companies about cyber security law

China’s cyber security policies enacted in the wake of Edward Snowden’s disclosures of U.S. spying programmes

Gerry Shih and Paul Carsten

C

hina’s proposed anti-terrorism law will not affect the legitimate interests of technology firms, a top Chinese spokeswoman said yesterday after U.S. President Barack Obama warned of its impact and demanded amendments.

China’s proposals, which would require tech firms to provide encryption keys and install backdoors granting law enforcement access for counterterrorism investigations, drew criticism from Obama, who told Reuters in an interview this week China would have to change the draft law if it were “to do business with the United States”.

Fu Ying, China’s parliamentary spokeswoman, said many Western governments, including Washington, had made similar requests for encryption keys while Chinese companies operating in the United States have long been subject to intense security checks.

China’s proposals were “in accordance with China’s administrative inspection and approval procedures, and also general practices internationally, and won’t affect Internet firms’ reasonable interests”, Fu said.

Fu made the remarks during a news conference carried live on state television a day before the start of the National People’s Congress, the largely rubber-stamp parliamentary session held every spring in Beijing.

China’s increasingly restrictive cyber security policies enacted in the wake of Edward Snowden’s disclosures of U.S. spying programmes have become a source of considerable friction in bilateral relations.

Germany’s ambassador to Beijing

We will definitely continue to listen to extensive concerns and all parties’ views, so we can make the law’s formulation more rigorous Fu Ying, China’s parliamentary spokeswoman

also weighed in yesterday, saying he was also worried about the new cybersecurity policy, which “could make market access for foreign companies in China much more difficult”.

Foreign business lobbies say the rules are unfairly sweeping names like Cisco and Microsoft out of the world’s second-largest economy, while Chinese officials point to the treatment of Huawei and ZTE Corp, two Chinese telecoms equipment makers that have been effectively locked out of the U.S. market on cybersecurity grounds.

Fu said China hoped foreign companies would continue to “support, participate and continue to walk forward” with China’s reform efforts.

The remarks were more measured than a commentary published by the official Xinhua news agency, which said Obama’s warning to China was evidence of “arrogance and hypocrisy”.

“With transparent procedures,

China’s anti-terrorism campaign will be different from what the United States has done: letting the surveillance authorities run amok and turn counterterrorism into paranoid espionage and peeping on its civilians and allies,” Xinhua said.

U.S. business lobbies have said the proposed regulation would render secure communications unfeasible in China and handing over such commercially sensitive information would seriously harm their credibility.

Fu said China would continue to amend the law but would not compromise its national security priorities.

“We will definitely continue to listen to extensive concerns and all parties’ views, so we can make the law’s formulation more rigorous,” she said. “On the other hand, fundamentally speaking, (the law) will reflect our country’s counterterrorism interests.”

Reuters

Rural land reform trial in the pipeline A total of 33 county-level areas including Beijing’s Daxing district will suspend some regulations that ban the free trading of some non-farming land

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hina will carry out a groundbreaking trial programme that may allow farmers to sell land, a senior official said yesterday, a step towards liberalising rural real estate transactions currently monopolised by the government.

The ability to sell land is expected to accelerate China’s urbanisation, a key driver of its decades-long economic boom, by enabling farmers to realise value from their assets, facilitating their move to the cities.

Under current Chinese law, all land in the country is ultimately owned by the state or by rural collectives, while farmers can retain usage rights in the countryside.

Only the government has the power to appropriate land, often with little or no compensation, and can then sell it to property developers at a huge profit, leading to widespread social resentment and frequently triggering

unrest.

A total of 33 county-level areas including Beijing’s Daxing district -the site of the capital’s new airportwill suspend some regulations that ban the free trading of some nonfarming land, according to Fu Ying, a spokeswoman for the National People’s Congress (NPC), China’s legislature.

The programme will allow “rural land for business purposes” usually real estate used for industry or commerce- to be traded on the market, meaning farmers are no long restricted to selling it to the government, according to a report posted earlier on the NPC’s website.

“This reform is to support the development of agriculture modernisation and urbanisation, and it intends to better protect farmers’ rights and interests during the process of reforms,” Fu told reporters at a

news conference.

The Communist Party pledged at its Third Plenum in 2013 to grant farmers the same rights as urban dwellers by creating a legal basis for them to transfer or rent out their “land use rights”.

The trial is an implementation of that promise and may increase rural incomes while reducing clashes between local governments and farmers, Wang Cailiang, director of Beijing Cailiang Law Firm, told AFP. “But it is an open question whether this will be a good or bad thing for the future,” he added.

“The key of this issue is... who will be the decision maker of the land. If it is still to be decided by the county-level governments, property developers or village officials instead of farmers, I think the trial programme will be a step backwards.”

AFP

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March 5, 2015

Greater China

Defence budget rise to defy slowing economy Megha Rajagopalan

C

hina’s defence budget this year will rise about 10 percent compared with 2014, a top government official said yesterday, outpacing the slowing economy as the country ramps up investment in high-tech equipment such as submarines and stealth jets.

Parliament spokeswoman Fu Ying told a news conference that the actual figure would be released today, when the annual session of the largely rubberstamp National People’s Congress opens. Last year, defence spending rose 12.2 percent to US$130 billion, second only to the United States.

China has logged a nearly unbroken two-decade run of double-digit budget increases, though many experts think the country’s real defence outlays are much larger.

The military build-up has jangled nerves around the region, particularly as China has taken an increasingly robust line on its territorial disputes in the East and South China Seas.

“Compared with great powers, the road of China’s defence modernisation is more difficult. We have to rely on ourselves for most of our military equipment and research and development,” Fu said.

“In addition, we must strengthen the protection of our officers and soldiers. But fundamentally speaking, China’s defence policy is defensive in nature. This is clearly defined in the constitution. We will not easily change this direction and principle.”

While Beijing keeps the details of its military spending secret, experts have said additional funding would likely go towards beefing up the navy with anti-submarine ships and developing more aircraft carriers beyond the sole vessel in operation.

Naval shopping list “Carriers have definitely got to be on the list,” said John Blaxland, Senior Fellow at the Strategic and Defence Studies Centre at the Australian National University in Canberra.

“But also we’ve seen a massive surge in the number of submarines, and of course everybody loves submarines.

The intimidatory effect of a submarine is hard to be beat.”

Money would also likely go into cyber capabilities and satellites, Blaxland added.

China’s leaders have routinely

We must strengthen the protection of our officers and soldiers. But fundamentally speaking, China’s defence policy is defensive in nature Fu Ying China’s Parliament spokeswoman

Foreign business lobbies have expressed concern over the monopolistic activities investigations

U

the series began and compared with 53 percent a year earlier. Those who were “slightly optimistic” rose to 42 percent from 33 percent.

TAmCham’s survey, conducted from late October to early December, made no mention of China’s plans to introduce a counter-terrorism law that would require technology firms to hand over encryption keys and install security “backdoors”.

In an interview with Reuters on Monday, U.S. President Barack Obama sharply criticized the new

sought to justify the country’s military modernisation by linking defence spending to rapid GDP growth. But growth of 7.4 percent last year was the slowest in 24 years, and a further slowdown to around 7 percent is expected in 2015.

“We have achieved so much success with reform and opening up, we have not relied on gunboats to develop roads, but instead we have relied on complete and mutual beneficial cooperation,” Fu said.

“We have been successful on this road, the road of peaceful development.

We will adhere to the path of peaceful development.”

The U.S. military and diplomatic “rebalancing” towards Asia and President Xi Jinping’s crackdown on corruption in the People’s Liberation Army, which has caused some disquiet in the ranks, are among the other factors that have kept military spending high, experts have said.

Beijing also says it faces a threat from Islamist militants in the far western region of Xinjiang, and is drafting a new anti-terror law that will create a legal framework for sending troops abroad on counter-terrorism missions.

Reuters

U.S. firms in China expect less rosy times .S. companies in China have a less rosy outlook for business conditions over the next five years due to a slowing economy, an “opaque” regulatory environment and rising domestic competition, a U.S. business lobby survey showed yesterday.

The annual report by the American Chamber of Commerce in Shanghai - the self-dubbed voice of American business in China - said 43 percent of respondents in a survey of its members were “optimistic” about prospects.

The reading was the lowest since

China’s leaders have routinely sought to justify the country’s military modernisation by linking defence spending to rapid GDP growth

43 pct U.S. business in China feel “optimistic” about prospects

law, urging China to change the policy if it wants to do business with the United States.

Over half of companies surveyed felt there was an increased chance of being targeted by a government antimonopoly drive which in recent years has enveloped industries as diverse as milk powder makers, electronics firms and car manufacturers.

Nearly a third of respondents said such investigations pose great risk to their businesses, up from 13 percent in 2014, with companies in healthcare, technology, telecommunications and autos most concerned, the survey showed.

Foreign business lobbies have expressed concern over the investigations, with worries ranging from the perceived unfair targeting of foreign firms to the apparent use of strong-arm tactics by regulators.

Reuters

Business Daily | 11

March 5, 2015

Asia

India’s central bank cuts rates in unscheduled move Central bank governor had left rates unchanged at a February 3 review after a surprising reduction in January

I

ndia’s central bank lowered interest rates in an unscheduled move for the second time this year, a sign of approval for Prime Minister Narendra Modi’s first fullyear budget.

Governor Raghuram Rajan cut the benchmark repurchase rate to 7.5 percent from 7.75 percent, the Reserve Bank of India said in a statement yesterday. The central bank acted due to weakness in the economy and after it agreed upon a formal inflation target with the government, Rajan said.

“This makes explicit what was implicit before – that the government and the Reserve Bank have common objectives and that fiscal and monetary policy will work in a complementary way,” Rajan said in the statement, referring to the monetary policy framework agreement. “In sum,

then, the government intends to compensate for the delay in fiscal consolidation with a commitment to an improvement in the quality of adjustment.”

The decision came four days after Modi pushed back deficit targets to spur economic growth through corporate tax cuts and increased spending on infrastructure. More than a dozen central banks from Turkey to China have eased policy in 2015 as a slide in oil prices damps inflation.

The move comes as a surprise to economists at BNP Paribas SA and Standard Chartered, who said a rate cut before the next scheduled policy review on April 7 would be unlikely.

Twelve of 15 economists surveyed by Bloomberg News after the February 28 budget predict Rajan will reduce the benchmark repurchase rate only

in April. Three saw the possibility of a cut this month.

The RBI will seek to bring the inflation rate “to the mid- point” of the inflation target of 4 percent plus or minus 2 percent by the end of a two-year period starting in the fiscal year through March 2017, Rajan said.

Deficit target “Further monetary actions will be conditioned by incoming data, especially on the easing of supply constraints, improved availability of key inputs such as power, land, minerals and infrastructure, continuing progress on high-quality fiscal consolidation, the pass through of past rate cuts into lending rates, the monsoon outturn and developments in the international environment,” Rajan said.

Interest-rate swaps show that investors are betting that India will cut interest rates by about 75 basis points by the end of 2015, the steepest decrease after Turkey among 14 emerging markets tracked by HSBC Holdings Plc. Rajan’s move follows an agreement with the finance ministry to amend the RBI Act to form a monetary policy committee that will aim to keep inflation below 6 percent. Before the budget, Rajan said he would look for the government to rechanneling “mistargeted” spending toward supply-enhancing infrastructure.

“The fiscal consolidation program, while delayed, may compensate in quality, especially if state governments are cooperative,” Rajan said in the statement. “Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilize available space for monetary accommodation.”

Finance Minister Arun Jaitley aims to narrow the budget deficit to 3.9 percent of gross domestic product in the year starting April 1, the smallest gap since 2008 though higher than a previous goal of 3.6 percent. The space will be used to fund infrastructure, he told lawmakers on February 28.

Bloomberg News

This is a very welcome move from the perspective of the government and from the perspective of achieving strong growth this year Dariusz Kowalczyk economist, Credit Agricole CIB Hong Kong

Indian Finance Minister Arun Jaitley (C) holds his briefcase with Union Budget documents. Jaitley aims to narrow the budget deficit to 3.9 percent of gross domestic product in the year starting April 1

Abe’s desired wages rise still stuck Many companies are looking for signs of sustained economic growth before committing to a decision to raise salaries

M

illions of Japanese workers are taking home their smallest share of corporate income in two decades as companies build record cash hoards and abstain from substantial wage raises seen by Prime Minister Shinzo Abe as critical to a durable economic recovery.

A seasonally adjusted estimate by the independent NLI Research Institute shows worker compensation fell as a percentage of corporate income in 2014 to the lowest level since 1991. By contrast, companies piled up 332 trillion yen (US$2.75 trillion) in internal reserves as of the end of last year on

the back of record profits while increasing the number of low-paid, non-regular jobs to curb fixed personnel costs.

Take-home pay as a share of company income has declined since Abe took office in late 2012 as profits grow while risk-averse employers resist his call to boost wages and end two long decades of deflation.

Japan ranked below the United States, Britain, France and Germany in payroll expenses as a ratio of gross domestic product as of April-June last year, according to calculations

by Japan’s Cabinet Office

based on OECD statistics.

Although Japan’s economy emerged from recession in the last quarter of 2014, many companies are looking for signs of sustained economic growth before committing to a decision to raise salaries.

Labour unionists are seeking much higher salary increases this year as they meet with their employers during the so-called “shunto”, or annual wage negotiations, this month. Analysts warn that caution about raising wages could create a vicious cycle of shrinking domestic demand and diminished economic growth prospects.

“Unless wages are raised in a sustainable way, domestic demand and consumption will continue to languish, preventing companies from finding profit opportunities at home,” said Taro Saito, director of economic research at NLI Research Institute.

Reuters

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Asia

Australian economy finds spark of life in consumer spending Household outlay power has found support from falling petrol prices Wayne Cole

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ustralia’s economy grew moderately last quarter as a strong trade performance and the largest rise in consumer spending in almost three years helped offset softness elsewhere.

Yesterday’s data showed gross domestic product (GDP) expanded by 0.5 percent in the fourth quarter, compared to the previous quarter when it rose by 0.4 percent.

“The good news is we’ve now completed 23 years of continuous growth,” said Michael Blythe, chief economist at Commonwealth Bank.

“The bad news is we’re still running below trend, which will keep upward pressure on the unemployment rate and the RBA (Reserve Bank of Australia) on rate-cut watch.”

The result matched market forecasts, which was a relief to many analysts who had feared the risks were for a weaker outcome and lifted the local dollar a quarter of a cent.

The economy grew 2.5 percent for all of 2014, a result that actually topped the United States but remained well short of the 3.25 percent that is considered its ideal running pace.

After trimming interest rates to a record low of 2.25 percent in

KEY POINTS Q4 GDP grows 0.5 pct q/q, 2.5 pct y/y as expected Household consumption rises most since early 2012 Low resource prices remains a big drag on incomes

February, the RBA skipped a further move this week but left the door wide open for an easing in coming months.

Interbank futures imply a better than 50 percent chance of a cut in

Reserve Bank of Australia is still under pressure for a rate cut

April and are fully priced for a move in May. There were some hopeful signs that low rates were feeding through to consumption with household

Global uncertainties worry S.Korea fin min In a speech finance minister Choi continued to highlight the headwinds facing South Korea

S

outh Korea’s economic recovery remains weak despite a pick up in momentum, and uncertainties from sluggishness in the euro zone, China and Japan pose downside risks, Finance Minister Choi Kyung-hwan said yesterday.

Choi underscored the importance of maintaining the government’s fiscal expansionary stance, but also noted that structural reform is critical to bolstering the recovery.

“It will be difficult to achieve economic activity if we do not engage in aggressive structural reform,” the minister said in a speech to a forum in Seoul.

Choi was guardedly optimistic about the outlook for Asia’s fourthlargest economy, however, pointing to the recent strength in the housing market as a positive indication for consumption growth.

And despite some concerns of a stretched government balance sheet,

Finance Minister Choi Kyung-hwan with Bank of England Governor Mark Carney

spending adding 0.5 percentage points to GDP in the fourth quarter, the best outcome since early 2012.

Household spending power has found support from falling petrol

“we will keep our expansionary policies until the recovery is tangible,” he said.

South Korea’s growth halved from the previous quarter to 0.4 percent in the fourth quarter last year, the central bank estimated in January, on weak government spending and overseas demand.

“Our economy has shown partial improvement and the flame of hope has been lit, but there are uncertainties abroad. There are hopes that the situation in the U.S. will improve, but the euro zone, Japan and China remain as downside risks.”

The Bank of Korea cut interest rates twice last year in 25 basis point steps in August and October, taking the policy rate to a record-matching low of 2.00 percent. Some economists expect the central bank will cut once more at the March 12 meeting or April.

Commenting on the recent oil plunge, Choi said it remains the biggest positive factor for the local economy for now, although it has resulted in persistently low inflation in South Korea.

“I don’t know whether to laugh or cry over inflation. There have been concerns over deflation due to this prolonged situation of low inflation,” he said, but reiterated that deflation fears were overstated.

Reuters

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Business Daily | 13

March 5, 2015

Asia prices, rising home values and a large stock of savings, which is helping offset sluggish growth in wages.

The income deficit A decade-long expansion in mining investment is also fuelling a sustained increase in the volume of resources shipped, with China still a huge buyer.

As a result, net exports accounted for no less than four fifths of all the growth seen last year.

Overall, the Australian Bureau of Statistics reported the value of goods and services produced in Australia was worth A$1.6 trillion (US$1.25 trillion) in current dollars, or about A$68,000 for each of Australia’s 23.5 million people.

Weighing on growth has been steep falls in prices for many of Australia’s major export commodities. What had been a river of money has dried up, hurting company profits, wages and tax receipts.

The baleful effect was all too apparent in measures of national income and nominal GDP, which attempt to gauge the amount of spending in the economy.

One of the most closely watched is real net national disposable income which rose by just 0.5 percent in the year, a level more usually associated with recessions.

Likewise, GDP measured in current prices grew an historically slim 1.7 percent for the year, a headache for the Liberal National government of Tony Abbott since it is nominal growth that drives the tax take.

Stuck with an intractable budget deficit, Abbott’s ambitious infrastructure plans have faltered with capital spending falling for four quarters in a row.

Reuters

Indian services growth at eight-month high A survey showed staff levels fell slightly, while some firms reported a shortage of skilled workers

A

ctivity in India’s services industry expanded at its fastest pace in eight months in February as improving domestic demand drove a surge in new orders, a business survey showed yesterday.

Increased activity at service firms, which make up over half the economy, is good news for policymakers especially after last week’s first annual budget from Prime Minister Narendra Modi’s government failed to deliver big-bang reforms.

The HSBC Services Purchasing Managers’ Index, which surveys around 350 private companies and is compiled

The latest improvement in economic prospects across the sector is yet to feed through to the labour market,” said Pollyanna De Lima, an economist at Markit Pollyanna De Lima economist, Markit

by Markit, rose to 53.9 in February from 52.4, its highest since June 2014.

A reading above 50 indicates growth.

The new business sub-index, which measures demand, jumped to an eight-month high of 54.1 from 52.1, and while optimism moderated it remained fairly high.

“Boosted by a solid rise in new work, service sector output in India expanded at a robust rate in February ... Nonetheless, the latest improvement in economic prospects across the sector is yet to feed through to the labour market,” said Pollyanna De Lima, an economist at Markit.

The survey showed staff levels fell slightly, while some firms reported a shortage of skilled workers.

Both input and output prices rose at a slower pace last month, indicating inflation is likely to remain subdued.

“Reflecting lower fuel prices, overall costs faced by services firms rose at a softer rate. However, with demand gaining strength, the RBI is likely to remain cautious when deciding on interest rates,” added De Lima.

The Reserve Bank of India and the government agreed last month to overhaul monetary policy and set an inflation target of 4 percent by March 2017.

That target is unlikely to prove challenging as consumer inflation, at 5.11 percent in January, has already halved since late-2013.

Reuters

Regulator probes unusual Aussie dollar spike The currency jumped nearly half a U.S. cent before the Reserve Bank of Australia rate announcement Ian Chua

A

ustralia’s market watchdog will look into a curious spike in the local dollar moments before the central bank announced its rate decision the previous day, the Reserve Bank of Australia said yesterday.

The Australian dollar started to rally in the minute before 0330 GMT on Tuesday, when the RBA announced it was not cutting its cash rate, wrong footing those investors who had positioned for an easing.

The currency jumped nearly half a U.S. cent to around US$0.7823 before the rate announcement and went on to hit a session high of US$0.7845 after the decision was published. The Aussie has since pulled back slightly and was last at US$0.7819.

The early move happened at a time when the market was particularly thin.

Traders were mostly side-lined given the high uncertainty surrounding the outcome of this policy meeting, so the sudden spike just moments before the decision has raised eyebrows.

Unsurprisingly, it brought back memories of a recent case when an employee of the Australian Bureau of Statistics leaked sensitive data to a National Australia Bank employee who then used that information to predict fluctuations in the Australian

S.Korean companies increase cash dividend South Korean companies raised cash dividend payment to shareholders by 29 percent in 2014 from a year earlier, bourse operator data showed yesterday. Cash dividend payment by listed companies amounted to 14.14 trillion won (US$12.9 billion) in 2014, up 29.3 percent from a year earlier, according to Korea Exchange. The number of listed firms, which reported cash dividend payment to the bourse operator, was 714 in 2014, up 9.8 percent from a year ago. The increase in cash dividend payment came as the government pushed companies to pay more in cash dividend to stimulate the fragile domestic demand.

Singapore to build larger airport terminal Changi Airport plans to build a new mega passenger terminal, which will be bigger than three current terminals combined, said the Strait Times yesterday. The current plan for Terminal Five calls for an initial capacity of up to 50 million passengers a year, but with a provision to increase the capacity to 70 million if needed, which will make T5 bigger than T1, T2 and T3 combined. Planned to open in 2025, Terminal Five will be built on reclaimed land currently separated from the existing airport by Changi Coast Road.

NZ’s Xero pushes back U.S. listing plan New Zealand online accounting software developer Xero has pushed back plans for a U.S. stock listing to the start of 2016 at the earliest, as fresh capital funding buys transition time for the fast-growing company’s new U.S. leadership team. Xero, which makes cloud-based accounting software for small businesses, said its priority for 2015 was to grow the number of its UK subscribers, while also getting its U.S. expansion plan back on track after growth momentum slowed last year.

Asiana settles jet crash claims dollar.

Both were arrested by the Australian Federal Police over insider trading offences that authorities said netted them A$7 million (US$5.5 million) on the foreign exchange derivatives market.

The RBA, however, said it has verified that the rate decision was published “exactly” at the scheduled

I’m satisfied that that investigation will be properly undertaken Joe Hockey Australia’s Treasurer

time of 0330 GMT on Tuesday and according to “appropriate procedures”.

The RBA announces its rate decision on its website and through agencies such as Thomson Reuters, which have provided the central bank with direct publication control to certain parts of their platforms.

The Australian Securities & Investments Commission (ASIC), the country’s corporate, markets and financial services regulator, has been made aware of the matter and is looking into it, an RBA spokesperson told Reuters.

“In this day and age of electronic trading, there could be footprints and information which presumably would allow ASIC to investigate. In the olden days when it was word of mouth, it might have been harder,” said a foreign exchange trader, who declined to be identified due to the sensitivity of the matter Treasurer Joe Hockey said he had spoken to RBA Governor Glenn Stevens about the matter.

“Obviously I was, like he was, concerned about reports that there have been extraordinary trades before the release of the Reserve Bank decision,” Hockey told reporters.

Reuters

South Korea’s Asiana Airlines Inc has settled compensation claims filed in U.S. courts by 72 people who were passengers on a flight that crashed at San Francisco’s main airport in 2013, without disclosing financial terms. A spokesman for the carrier yesterday confirmed the settlement, disclosed in a court document. The plane’s manufacturer, Boeing Co, and Air Cruisers Co, which made the evacuation slides, also settled claims, according to the document, filed by attorneys in U.S. District Court for the Northern District of California.

Trade pact or currency rules in Japan Any effort to add rules against manipulation of currencies in a 12-nation Pacific trade pact would mean the end of negotiations, a senior Japanese negotiator said on Tuesday. Some U.S. lawmakers are pushing for a currency chapter in the Trans-Pacific Partnership, which officials say is nearly completed, partly due to concerns about a weak Japanese yen. But Japan’s deputy chief trade negotiator, Hiroshi Oe, told reporters there were no discussions about currency manipulation, and if the issue was brought to the table it would derail any agreement.

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International RBS to cut 14,000 jobs Britain’s state-rescued Royal Bank of Scotland will axe up to 14,000 jobs by 2019 in a retreat from investment banking, the Financial Times reported yesterday. The daily business newspaper, which cited people familiar with the matter, said the lender could shed as much as 80 percent of its investment banking division, which employs a total of 18,000 people. A spokeswoman for RBS, which is about 80-percent stateowned, declined to comment on the press report. The Edinburgh-based bank had already announced last week that it would end investment banking in the Middle East and Africa.

U.S. shadow banking competition grows The U.S. shadow-banking system could take at least US$11 billion of annual profit away from traditional lenders as competition intensifies over the next five years, according to analysts at Goldman Sachs Group Inc. The emergence of non-bank lenders like asset managers and companies such as LendingClub Corp. and CommonBond Inc. is creating more competition for large banks, analysts Ryan M. Nash and Eric Beardsley said in a report. Tougher regulation, including capital rules and technological advances are driving the rise in shadow banking, they said.

Egypt passes investment law Cabinet approved a long-awaited draft law on investment yesterday, the prime minister said, aimed at making deals less vulnerable to legal disputes or changes in government, and reducing stifling bureaucracy. The government is seeking to address foreign investors’ concerns before an investment conference Egypt is due to hold in mid-March, when it hopes to secure domestic and foreign investment of up to US$12 billion. The investment law aims to create a “one-stop shop” to make Egypt more attractive to foreign investors.

Mexico preparing for low oil prices Falling oil production remains the most important risk to Mexico’s economy this year and may force the government to tighten spending further into 2016, Mexican Finance Minister Luis Videgaray said. Speaking to reporters at the London Stock Exchange, Videgaray said the risk was that oil production could fall further, following January’s output decline which sent production to the lowest since mid-1990s. “Certainly oil production remains the most important risk to (gross domestic product) output this year,” Videgaray said. Oil accounts for 13 percent of Mexico’s exports and a third of budget revenues.

British services growth eases Growth in Britain’s dominant services sector eased back in February but firms hired staff at the second-fastest rate on record, wages rose and new orders increased, a further sign that the economy has got off to a strong start in 2015. The Markit/CIPS UK Services Purchasing Managers’ Index (PMI) slipped more than expected to 56.7, from 57.2 in January. But survey compiler Markit said wages -a crucial issue for the Bank of England as it tries to decide when interest rates should rise- were a “primary driver” behind an increase in costs in the sector.

Shipping industry faces shake up Industry sources expect M&A to drive more consolidation in one of the world’s most fragmented industries

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s global shipping grapples with its worst downturn in 30 years, private equity firms are unwinding massive bets made on the sector in a move set to accelerate a restructuring of the shipping industry.

Private equity invested tens of billions in global shipping after the 2008 financial crisis, but weaker Chinese demand and an oversupply of ships has driven down freight rates and caused firms to idle vessels and in some cases file for bankruptcy.

At least five private-equity backed shipping firms are seeking share listings, though it’s unclear whether they will be able to price them to make a profit.

According to shipping services firm Clarkson, 70 percent of the sector’s thousands of firms own fewer than 51 vessels.

Private equity invested US$32 billion in shipping from January 2012 to January 2014, maritime fund management firm Tufton Oceanic estimates. This is equivalent to 22 percent of the total value of the world merchant fleet, including ships on order.

Harold Malone, managing director of maritime investment banking at investment bank Jefferies, said private equity exits were likely to “accelerate into 2015 and 2016” after it appeared

a number of “potentially terrible” investments had been made, though he said crude tanker investments may turn out better due to a revival in rates last year.

Principal Maritime Tankers Corp, backed by Apollo Global Management, is seeking to raise up to US$100 million and containership operator Costamare Partners LP, supported

by York Capital Management, is also hoping to raise US$100 million.

ICON Capital, another private equity house, said it was planning to list one of its shipping funds in coming months.

New York, as well as Oslo and Singapore, both important shipping centres, would be among the favoured listing locations, financiers said.

Mergers Underlining the pressure the global industry is under, China’s Winland Ocean Shipping Corp filed for Chapter 11 bankruptcy protection in the United States on February 12, the third known bulk shipper bankruptcy this month.

Recent mergers have included Excel Maritime Carriers selling a fleet of 34 ships to Star Bulk Carriers.

Oaktree Capital Management was the major shareholder in both companies.

Supertanker owner DHT Holdings, whose major shareholders are private equity funds, also acquired Singapore tanker owner Samco Shipholding last September.

Ship ordering spree Ship owners embarked on a massive ordering spree, partly fuelled by private equity, from 2008 which created a glut of tanker, container ship and dry bulk shipping capacity.

A balance between the fleet and cargo demand growth in the dry bulk sector expected last year failed to materialise, amid an uncertain global economic outlook and slower growth in China, the world’s biggest dry bulk market.

This has put more pressure on cargo and ship prices.

The Baltic dry index - the industry benchmark for freight rates - has plunged to an all-time low.

The value of a new tanker or dry cargo vessel is 13 percent lower than 10 years ago, said Ralph Leszczynski, head of research at ship broker Banchero Costa.

Five-year old second-hand ships are around 35 percent cheaper, and average daily freight rates for tankers and dry cargo ships are also below 2010 levels, he said.

Reuters

ECB policy on clearing houses repealed Britain says ECB policy clashes with EU single market concept

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he European Union’s secondhighest court has ruled the European Central Bank (ECB) was wrong to insist that euro clearing houses should be based in the single currency area, a policy Britain had challenged.

The General Court said yesterday it annulled the policy published by the ECB, which required clearing houses to be located in the 19-country euro zone.

“The ECB does not have the competence necessary to impose such a requirement on central counterparties involved in the clearing of securities,” the Luxembourg-based General Court said in a statement.

The ECB and the UK finance ministry had no immediate comment.

Clearing houses stand between the two sides of stock and bond trades, ensuring smooth completion of transactions even if one side of the deal goes bust.

Britain, which is a member of the EU but not the euro zone, had

The ECB does not have the competence necessary to impose such a requirement on central counterparties involved in the clearing of securities” EU General Court statement

challenged the ECB’s policy, saying it went against the EU’s single market.

The ECB had said having clearing houses that handle more than 5 billion euros (US$5.6 billion) of euro-denominated securities inside the euro zone would make it easier to intervene if they got into trouble.

But the court said such a policy went beyond oversight to actually regulating market infrastructure companies, a power the ECB does not have under EU treaty.

If the ECB wanted to regulate securities clearing houses then it should request the EU to give it such powers, the court said.

Lawyers had said a failure of Britain’s legal challenge could force the London Stock Exchange’s LCH. Clearnet clearing house to shift large chunks of its euro-denominated operations to continental Europe.

Defeat could also have seen the City of London financial centre losing influence to the euro zone.

Reuters

Business Daily | 15

March 5, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

China rates going lower as tide of capital heads out

TAIPEI TIMES The production value of Taiwan’s machine tool industry is expected to increase by 10 percent to more than NT$1 trillion (US$31.7 billion) this year from last year on the back of growing demand from the US and steady demand in China, the Taiwan Association of Machinery Industry said.

The nation’s machine tool exports rose 5.8 percent annually to US$3.7 billion last year, Hsu said, adding that exports would continue to grow this year. Hiwin Technologies chairman Eric Chuo gave a more conservative outlook, saying machine tool exports would be flat or grow slightly from last year.

James Saft

Reuters columnist

PHILSTAR Inflation is expected to remain within the government’s two to four percent target this year, local businesses said in a survey. “Businesses expected that the rate of increase in commodity prices is likely to remain low and within the two to four percent target range in 2015,” the Bangko Sentral ng Pilipinas said. The latest Business Expectations Survey showed that respondents expect inflation to fall this quarter although firms see it picking up in the second quarter. The survey in January said economists have forecast the rate to average 3.6 percent this year.

THE PHNOM PENH POST Commerce Minister Sun Chanthol called on business owners to clean up their activities in the Kingdom, in order to remain competitive, especially in light of the ASEAN Economic Community integration due to be realised at the end of the year. Private sector companies have traditionally raised concerns on the difficulty of doing business in Cambodia, having to deal with red tape and corruption, the minister said. Chanthol said his ministry had initiated reforms to correct these practices, and now it was time for the private sector to reciprocate.

THE TIMES OF INDIA Ahead of the launch of 4G operations by Mukesh Ambani’s Reliance Jio Infocomm, Bharti Airtel stitched up a mega deal with China Mobile for strengthening its 4G ecosystem as well as network and device procurement. The deal, however, stopped short of an equity participation by the Chinese mobile major even as Bharti chairman Sunil Mittal said the last word on the partnership is yet to be written. “We work very closely with them. Overall we discuss a lot of things,” Mittal said.

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he tide of capital is going out in China and many boats, in Chinese ports or not, will settle lower in the water in consequence.

China, somewhat unexpectedly, cut monetary policy yet again over the weekend, the third time in recent months it has moved to ease conditions.

This makes reasonable sense given China’s rapidly slowing growth and the concurrent movement of capital out of China. Still, it looks as if the yuan, on a slow-moving peg against the dollar, may be headed lower in value.

That’s stimulative for China but will spread the pain, in the form of weak demand and very low inflation, elsewhere. To be fair, China is far from alone in playing this game, what with the ECB embarking on quantitative easing and Japan in the midst of a currency depreciation and asset-buying plan that can only be called heroic, if not necessarily wise.

China trimmed its key interest rate by 25 basis points to 5.35 percent, at the same time adjusting down a saving rate and lifting slightly a cap on deposit rates.

This follows closely a February reduction in the amount of reserves banks must hold, a move taken because a November rate cut had not sufficiently filtered through to lending.

China faces a series of interrelated challenges. It is trying to loosen its tight controls over its financial system while managing a very rapid slowing of its economy, to a nearly quarter-century slow rate of 7.4 percent last year. As a result, money, which once flowed hot into China, now wants out. China’s capital and

financial account had a deficit of more than US$90 billion in the fourth quarter, the largest such in at least 16 years. Exporters prefer, suddenly, to keep foreign currency earnings in foreign currency and overseas investors see less opportunity in China.

All of these forces are selfreinforcing, just as they were in the opposite direction for most of the past 25 years.

Given that it is in service to creating a more consumptionoriented, less manufacturingdependent economy, this is acceptable to Chinese authorities, but not without costs, there and elsewhere.

Only as good as your banking system Because the inbound tide of capital lubricated the economy, actually often bypassing the banking system into grey-market loans, its reverse means China will have to continue to loosen policy to soften the downturn.

Veteran economist George Magnus points out that real rates in China have drifted higher, due in large part to low and falling inflation. Also having an effect is the very effective restrictions Chinese authorities have placed on the shadow lending markets.

This has driven more would-be borrowers to traditional banks, allowing those banks to be both choosier about whom they lend to and to demand more by way of an interest rate on loans they do make. The weighted average bank lending rate is now approaching 9 percent in inflation-adjusted terms, according to UBS estimates,

up from below 7 percent in 2014 and as compared to less than 1 percent in 2011.

One issue too is that the shadow lending market existed for a set of reasons which haven’t gone away as it withered. Traditional Chinese banks aren’t always

Traditional Chinese banks aren’t always that keen to lend to small and mediumsized businesses, sometimes preferring lending to the kind of politically connected stateowned enterprises

that keen to lend to small and medium-sized businesses, sometimes preferring lending to the kind of politically connected state-owned enterprises which are notable more for size than efficiency and dynamism.

That means that the interest rate cuts that the PBOC is pushing through are having a bit of trouble reaching the real economy, if such a term can be used for China.

In the meantime, China has both a tremendous amount of debt, which implies a huge on-going need for refinancing, and is finding that debt is less and less effective at stimulating growth.

China’s total debt roughly quadrupled to US$28 trillion between 2007 and the middle of last year and is now larger, in comparison to its economy, than that of the U.S., according to McKinsey & Company. Since the financial crisis the incremental return, in economic growth, from additional debt has actually turned negative, according to calculations by hedge fund SLJ Macro Partners. In other words, more debt is now detracting from growth rather than hastening it, almost certainly because the quality of projects which the debt funds has become so poor in China, particularly in real estate.

The temptation will be to allow its currency to fall to spread the pain a bit and ease the transition.

That means a disinflationary impulse sent into an already disinflationary world.

Think of it as currency collateral damage.

Reuters

16 | Business Daily

March 5, 2015

Closing Singapore offers Asia’s best lifestyle

Masterpieces light up Hong Kong Jewellery Show

The city-state was ranked the best in Asia in terms of quality-of-living standards, according to the Mercer 2015 Quality of Living Rankings released yesterday. Mercer said that Singapore was also ranked the 26th worldwide. While in this ranking system, Vienna in Austria held the first place globally. Malaysia’s Kuala Lumpur was the second-highest ranking city in Southeast Asia. Tokyo of Japan came in tops for East Asian countries, and 44th overall. The rankings also identified Xi’an and Chongqing in west China both at 142nd.

The 32nd HKTDC Hong Kong International Jewellery Show opened yesterday at the Hong Kong Convention and Exhibition Centre, attracting nearly 9,000 potential buyers from 77 countries and regions to purchase their ideal products there. A variety of stunning finished pieces are on display at the Jewellery Show. Among yesterday’s highlights of the Jewellery Show is the launch of a new Natural Diamond Quality Assurance Mark by the Diamond Federation of Hong Kong. The initiative aims to maintain Hong Kong’s reputation as an international diamond trading hub.

NPC attendance to show anti-graft campaign results At least 27 delegates have resigned or been expelled from the Communist Party in the past year after being put under investigation

Great Hall of People in Beijing will host NPC sessions

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hen almost 3,000 lawmakers gather in Beijing from today for the annual session of China’s National People’s Congress (NPC), some of the business community delegates may be sitting a little uneasily in their seats.

President Xi Jinping’s antigraft campaign has taken down dozens of NPC delegates, with the focus now shifting to business leaders who are seen as hampering reform efforts aimed at sustaining growth in the world’s second-largest economy. Nine business leaders, who headed companies ranging from energy utilities to investment, will be absent from the meeting.

Xi has said that widespread corruption threatens the legitimacy of the Communist Party and the anti-graft campaign he launched in November 2012 has been a powerful tool in consolidating his position as the strongest leader since Deng Xiaoping. He started turning the heat up on stateowned enterprises in January, when he urged the party’s disciplinary watchdog to strengthen supervision of senior executives.

Officials felled The crusade initially focused on the government and spread to the military,

felling thousands of officials including the nation’s top security chief and an exdeputy commander-in-chief.

In February, 26 of the biggest state-owned firms were identified by Wang Qishan, head of the Central Commission for Discipline Inspection, and inspections started this month. The companies include China National Petroleum, China National Offshore Oil, China Mobile, State Grid of China, China Huaneng Group and National Nuclear.

The executives embody the so-called vested interests that are often cited as the obstacles to change. Xi is pushing to reduce dependence on heavy manufacturing and exports to achieve more sustainable growth by boosting services and domestic demand.

The risk from the antigraft campaign is that executives refrain from pursuing regular business, concerned about drawing attention from the corruption watchdog.

In the past two years, 39 deputies either resigned or have been stripped of their

NPC membership, Fu Ying, the NPC’s spokeswoman, said at a briefing yesterday.

The annual political gathering brings together businessmen and officials for about two weeks of policy discussions. NPC delegates are chosen in their home provinces and serve five-year terms.

Purifying corporations Lower-level inspections into 14 major state-owned enterprises in the past two years led to the fall of more than 70 executives in 2014, Xinhua reported February 6.

China’s state-owned firms retain near complete control of the country’s services, though the growth of private enterprise pushed their share of industrial output down to about a quarter in 2011 from three quarters in 1978, according to Nicholas Lardy’s 2014 book ‘‘Markets Over Mao.’’ Their inefficiency is a drag on growth, he wrote, citing statistics that show the returns on assets of stateowned firms are lower than

the returns for private-sector firms.

Missing names The missing at this year’s meeting include Liu Jianzhong, chairman of Shanxi Jinneng, who was dismissed from the NPC due to “suspected law violations,” Xinhua reported on November 1. Another, Feng Jun, general manager of Shanghai Municipal Electric Power, was probed in October on suspicion of taking bribes, according to a January 21 statement on the website of the Shanghai People’s Procuratorate.

Two other executives from state-owned enterprises will be absent: Yan Fulong, general manager of the State Grid Liaoning Electric Power Supply and Huang Shunfu, chairman of the Sichuan Provincial Investment Group.

With such a well-flagged turn in focus toward rooting out corporate wrongdoing, it’s little wonder that many of the NPC’s business delegates will be nervous.

Bloomberg News

Malaysia orders independent Greener industry in China review of 1MDB accounts in 2015

Taiwan to promote start-ups via crowdfunding

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alaysia’s Prime Minister Najib Razak said yesterday he had instructed the Auditor General to independently verify the accounts of state development company 1Malaysia Development Bhd (1MDB).

The subsequent Auditor General’s report will then undergo a transparent inspection by the Public Accounts Committee, a bipartisan unit, Najib said in a statement.

“If any wrongdoing is proven, the law will be enforced without exception,” he said.

The cabinet had been briefed by 1MDB and its auditors Deloitte after allegations about certain third-party transactions the fund had made.

1MDB said in a statement it welcomed its accounts being verified by the Auditor General as recent attacks on the fund were “politically motivated” and served to spread “unsubstantiated allegations and speculation”.

The state fund is undergoing a strategic review after years of controversy over its debt, late financial reports and late loan payments. Its US$11.6 billion debt has weighed on the ringgit and Malaysia’s sovereign credit rating.

hina will promote clean industrial production in 2015 by encouraging green technology and more economic use of resources to protect the environment, authorities said yesterday.

The central government will initiate a program that aims to reduce pollution, cleanse industries and prompt sustainable development this year, according to a statement published by the Ministry of Industry and Information Technology (MIIT).

Companies will consume four million fewer tonnes of coal by the end of 2015 after the ministry helps them with technological upgrades, it said.

Coal supplies the majority of China’s energy consumption, accounting for 66 percent in 2014.

But its significance is falling as the country has started to encourage the use of clean energy.

Emission cuts including 70,000 tonnes of sulphur dioxide, 60,000 tonnes of nitrogen oxides, 40,000 tonnes of industrial fumes and 20,000 volatile organic compounds will be realized in the year, according to the MIIT. The program is partly prompted by worsening smog in China in recent years, triggering appeals for stronger measures to clean the environment.

Reuters

Xinhua

aiwan will facilitate crowdfunding for entrepreneurs trying to start companies

by May, similar to what Kickstarter does for product inventors, said its economic planning minister.

“Start-ups are the fruits of innovation,” National Development Council Minister Duh Tyzz-jiun said in an interview yesterday in Taipei. “They benefit our economy and generate employment opportunities.”

Taiwan is seeking to revive industries battered by lower-cost production in China and attract more innovative projects. The island’s businesses must invest in research and development to compete, said Duh, who was appointed in January.

The platforms, which will allow the public to buy stakes in companies, will be operated by local brokerages and regulated by the Financial Supervisory Commission.

Crowdfunding, which allows companies and people to raise money via online pitches, is a small yet growing alternative to traditional finance.

Kickstarter is a New York-based website started in 2009 where individuals can ask the public for funding. According to its website, US$1.6 billion have been pledged toward 79,000 projects.

Bloomberg News