Macau Business Daily August 11, 2015 by Business Daily

MOP 6.00

Explosive Issue

Closing editor: Joanne Kuai

Better safe than sorry. Secretary for Transport and Public Works Raimundo Rosário says it’s a case for the Commission Against Corruption. The tangled land swap related to Iec Long Firecracker Factory in Taipa and Shun Tak Holdings Ltd. is far from straightforward

Year IV

Number 854 Tuesday August 11, 2015

Publisher: Paulo A. Azevedo

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Secretary Leong Pushes e-Commerce

Online payments via third parties. A contentious issue which the Secretary for Economy and Finance DSE approves 504 wishes to resolve through legislation. Lionel Leong also revealed that Macau is in negotiations applications for Young Entrepreneurs Aid Scheme with neighbouring Guangdong Province to usher in the speedier development of e-commerce. Page 4 At yesterday’s Legislative Assembly, he also referred to the new budget framework law. Cross-border online Improving gov’t transparency through increased reporting to the AL Page

More solid bricks Up, down, stable. The roller coaster continues. The China property market is set to recover in the second half of the year. This, according to a statement released by the National Development and Reform Commission

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gambling gang busted in NE China

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Chinese health system reform still sluggish

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Premier Li shapes a quantitative easing policy with Chinese characteristics

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HSI - Movers August 10

Name

Imported labour increasing

Sands China Ltd

+3.98

China Merchants Hold

+3.37

China Unicom Hong Ko

+3.18

Hong Kong Exchanges

+2.83

It’s creeping up. Macau’s population stood at 642,900 as at June. The 2,200-person increase is attributed to more non-resident workers and fewer recorded mortalities. There were 3.2 pct more non-resident workers Q-on-Q, accounting for 180,523 people in all

China Shenhua Energy

+2.81

Hang Lung Properties

-1.65

Hang Seng Bank Ltd

-1.68

Wharf Holdings Ltd/Th

-2.07

Kunlun Energy Co Ltd

-2.37

Belle International Ho

-3.03

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www.macaubusinessdaily.com

%Day

Smoke Alarm It may be purely academic. But local scholars believe Las Vegas-themed casinos in Macau have the edge when it comes to smoking ban news. Finding that their resilience in the stock market trumps that of the other casinos. Meanwhile, 244 people were prosecuted for smoking in local casinos during the first seven months of the year

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Gaming

Austere Response

Source: Bloomberg

I SSN 2226-8294

Cost-cutting’s off the menu for now. So says SJM executive director Angela Leong On Kei. Although the company’s operational expenses will be closely monitored. The company’s Lisboa Palace project on Cotai is progressing as planned, she says

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August 11, 2015

Macau

Legislation for online payments via third parties in works The Secretary for Economy and Finance believes defining the legal status of third parties involved in online transactions payments will help the development of electronic commerce in the territory

Government to issue more taxi licences The Secretary for Transport and Public Works, Raimundo do Rosário, was also present yesterday at the Legislative Assembly, and said that the government will issue more taxi licences in order to resolve problems related to the traffic in Macau. However, he did not specify the number of licences to be introduced. The Secretary’s team also explained that it will add four new routes for public buses, which will go to Coloane, Hengqin, Hospital Centre S. Januario, and Seac Pai Van, among other stops. The goal of these routes is to reduce the time taken to travel between some of the destinations.

Joao Santos Filipe

jsfilipe@macaubusinessdaily.com

he Monetary Authority (AMCM) is to propose as soon as possible changes to the law on banking in order to clarify the rights and duties of payments through third parties, the Secretary for Economy and Finance, Lionel Leong Vai Tac, said yesterday in the Legislative Assembly (AL). One of the goals of the changes to be introduced is to usher in the further development of electronic commerce in Macau. “E-commerce has become very effective in developing business opportunities. We have been in contact with AMCM to produce the law to serve as the basis for the development of e-commerce technologies in the territory. We need to strengthen our work in this respect”, Mr. Leong said.

Underdevelopment

During the AL session yesterday the Secretary for Economy and Finance addressed the question of the underdevelopment of the e-commerce sector in Macau, which was raised by Legislative Assembly member Angela Leong On Kei. The

legislator stressed that at this moment only 28 per cent of the companies in the territory use electronic commerce. “Our departments have to make sure that the online clients and sellers have their rights protected by the law when they are making online transactions. This is what we need to do to promote electronic commerce and we hope to do it as soon as possible”, Mr. Leong responded. He also revealed that authorities are in negations with the neighbouring Mainland province of Guangdong to sign a co-operation protocol regarding e-commerce.

will have to present another report concerning the budget execution for the whole year”, the Secretary for Economy and Finance said. The revelation was made during a reply to legislator Antonio Ng Kuok Cheong,

who raised questions with the Secretary about the overbudget spending and delays on some of the biggest public works in Macau, such as the Light Rail Transit (LRT) and Ferry Terminal in Taipa. Lionel Leong also informed the Assembly that besides the reports on budget execution, the government will report every quarter on

the Public Investment Plan (PIDDA). “After every quarter the government will have to report on PIDDA costs to the Legislative Assembly. The purpose of this measure is to bring more transparency, so the Legislative Assembly can follow closer the works and costs associated with the plan”, he explained.

Budget execution reports

The government is currently working on a budget framework law and yesterday Lionel Leong revealed that the new document will oblige the government to present reports on budget execution to the AL every six months. “The new law defines that the government will have to send within a month a report to the Legislative Assembly on budget execution after 31 July. Then after the end of the calendar year, the government

Rosário: Land swap case handed to CCAC

he Office of Secretary for Transport and Public Works Raimundo Arrais do Rosário said that the land swap case related to the city’s Iec Long Firecracker Factory in Taipa has been handed to the graft watchdog Commission Against Corruption (CCAC) for further investigation; as such he is not at liberty to make further comment. The Secretary was responding to reporters yesterday afternoon at the Legislative Assembly after releasing a statement yesterday morning saying the case should be handed to CCAC. ‘The Secretary for Transport and

Public Works is concerned about the Iec Long Factory case,’ the statement reads. ‘After analysing the data at hand, the Secretary believes that this case should be forwarded to the Commission Against Corruption.’ The site of the now defunct Iec Long Firecracker Factory is what the MSAR Government agreed to acquire in January 2001 from its private owner in order to turn it into a theme park, official dispatch No.87/2006 reads. In return, the dispatch stated, the government was to compensate the owner with land occupying 152,073 square metres located next to Avenida da Praia,

near the Taipa Houses Museum park. The owner was a company called Sociedade de Desenvolvimento Predial Baía da Nossa Senhora da Esperança, S.A., controlled by local businessman and Chinese People’s Political Consultative Conference member Sio Tak Hong, who is also the chairman of Capital Estate Ltd. and owner of Hotel Fortuna, a casino-hotel on the Macau Peninsula. The land swap deal between the MSAR Government and Mr. Sio was later linked to Ms. Pansy Ho Chiu King’s Shun Tak Group, as in 2002 her company purchased from Mr. Sio the interest for a site of 99,000

square metres out of the 150,000 square metre-plus site that Sio could obtain from the government. But no development took place on the site near Avenida da Praia as the government had then decided to conserve the area as a nature park. Consequently, Shun Tak asked the government in 2005 to grant it an 18,363 square metre site on the ZAPE waterfront on the Macau Peninsula, an area that later housed the high-end residence and shopping complex One Central and Mandarin Oriental Hotel. That gave Shun Tak the interest for the remaining 80,637 square metres to be developed.

Business Daily | 3

August 11, 2015

Macau

Population standing at 642,900 as at June An increase of 2,200 from the first quarter has been mainly due to more non-resident workers and fewer recorded mortalities Kam Leong

kamleong@macaubusinessdaily.com

he city’s total population reached 642,900 as at the end of the second quarter of this year, up 0.3 per cent or an increase of 2,200 persons compared to the first quarter of this year, driven by the increase in non-resident workers, as well as the decrease in mortality, the latest official data by the Statistics and Census Service (DSEC) reveals. According to DSEC, the city’s female population accounted for 50.6 per cent of the total as at the end of the second quarter, at 325,400, while the male population accounted for 317,500 of the total. Meanwhile, the city saw fewer live births during the quarter, down by 2.9 per cent quarter-on-quarter to 1,662. Accumulatively, a total of 3,374 live births were recorded during the first half, up 71 year-on-year. The number of mortalities decreased 12.4 per cent

quarter-on-quarter to 1,662 from 1,712, while the top three underlying causes of death were neoplasm, diseases of the circulatory system, and those of the respiratory system.

More imported labour

The Special Administrative Region authorised 3.2 per

cent more non-resident workers during the three months, accounting for 180,523, as compared to the previous quarter. Mainland China continued to be the biggest source of the city’s nonresident workers, accounting for 65 per cent, or 117,332 of the total, during the

quarter, with those from Oceania posting the most notable growth of 5.4 per cent quarter-on-quarter to 354. Meanwhile, the second and third biggest source of imported labour to the city – nationals from the Philippines and Vietnam increased 3.3 and 3.1 per

cent, accounting for 23,152 and 14,203 of the total, respectively. The government granted the right of abode to a total of 385 foreigners during the second quarter, which is a drop of 35.8 per cent quarter-on-quarter from 600. Some 41.3 per cent of these individuals given the right of abode by the government were from Hong Kong, accounting for 159 of the total. However, compared to 259 in the previous quarter, it represents a drop of 38.6 per cent. Nevertheless, during the first half of the year, more Americans were granted the right of abode in the Special Administrative Region, reaching 67, a jump of 36.7 per cent year-onyear. The number of Chinese immigrants to the city posted a decline of 36.9 per cent to 1,666, compared to 2,639 in the first quarter of the year.

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August 11, 2015

Macau Management fee of public servant equity investment fund reduced The Pension Fund announced yesterday a reduction in the annual management fee of Schroder ISF – Global Equity Alpha C Acc from July this year. The fund is a kind of Active Global Equity Investment Fund under the city’s Provident Fund Scheme for public servants. The announcement did not indicate the details of reduction but said members can consult the related information of their annual management fee through the body’s official website. In March, the Fund also announced a reduction in the highest possible theoretical percentages of the bid-ask spread for another investment fund for public servants - the BlackRock Developed World Index Sub-Fund – Institutional Accumulating Class.

DSE approves 504 applications for Young Entrepreneurs Aid Scheme

Angela Leong: SJM not considering austerity as GGR dips

ngela Leong On Kei, executive director of Macau casino operator SJM Holdings Ltd., says the company has not considered more cost-cutting measures despite the city’s 14-month decline in gross gaming revenues. “For other gaming companies, I still cannot see it [more cost-cutting measures] being introduced,” Ms. Leong remarked yesterday on the sidelines of the signing ceremony of SJM and Macau Association of Composers, Authors and Publishers (MACA) regarding a public music performance licence agreement. “If SJM was cutting costs, I believe we wouldn’t be having this signing ceremony as we did today,” she told reporters. But the SJM boss briefly

added that the company would keep a close eye on visitor traffic that the casino operator has apropos considering whether any aspects of the costs of the company’s operations have to be sized down. “We’re continuously developing our business. And when you say whether there are any aspects that require cost-cutting it depends on the visitor traffic,” Ms. Leong remarked. “For instance, if we’re not getting that many visitors we want to have on our tourist coach, we’ll just reduce the frequencies of the ride.” The SJM’s executive director also noted that the company’s Cotai project, Lisboa Palace, is progressing as planned. Co-chairman and chief executive of SJM’s competitor Melco Crown Entertainment

Ltd., Lawrence Ho Yau Lung, said last month that the city’s casino operators might have to consider austerity measures as gross gaming revenue keeps shrinking, although at the time Mr. Ho did not specify what those cost-cutting measures could be. “If the government is looking at austerity measures maybe a lot of other businesses, including casino operators, will have to look at them as well,” Mr. Ho remarked last month. SJM is due to announce its first-half 2015 earnings on Wednesday. The company’s chief executive, Ambrose So Shu Fai, said last week that it would be a slower performance compared to the same period last year given the industrywide slowdown. Macau raked in MOP18.62 billion (US$2.33 billion) in gross gaming revenue in July, marking a 34.5 per cent yearon-year decrease and fourteen consecutive months of casino revenue slump. The July revenue numbers also meant that the accumulated gross gaming revenue for the first seven months this year stood at MOP146.26 billion, a fall of 36.7 per cent compared to the prior-year period. S.L.

he Deputy Director of the Economic Services Bureau (DSE), Chan Tze Wai, says the Bureau approved a total of 504 applications for The Young Entrepreneurs Aid Scheme as at July 31 this year, although four per cent of these young entrepreneurs have already closed their businesses. On a young business start-ups sharing session on Sunday, the DSE deputy head said the Bureau had received a total of 809 applications for the aid scheme as at the end of last month. Meanwhile, the approved 504 cases had created more than 1,000 job opportunities for the city, covering the cultural and creative industries, MICE, and Traditional Chinese Medicine. The Young Entrepreneurs Aid Scheme, implemented in August 2013, offers interest-free loans of up to MOP300,000 (US$37,500) for young people to start their own business. Entrepreneurs aged between 21 and 44 are eligible for a loan for eight years, with repayments starting after 18 months. Nevertheless, according to Ms. Chan, young people are not always successful when they set up their own businesses.

She claimed that around four per cent of the approved applicants of the scheme had closed their businesses after receiving the loans from the government. She urged young people to be prepared for the risks they may encounter when setting up their establishments. The DSE deputy director did not indicate the latest amount involved in aiding the young business start-ups bur according to the official website of DSE the city had accumulatively granted loans of MOP109.7 million for the scheme as at the end of the second quarter of this year, while nearly half of the money went to companies engaged in the retail business, the official data shows. K.L.

Corporate

Celebrate Mid-Autumn Festival with Wynn Macau’s classic mooncakes Celebrating the gift-giving tradition of the Mid-Autumn Festival, the Michelin-starred Wing Lei restaurant is presenting a series of exclusively-designed mooncake gift boxes, incorporating traditional Chinese and contemporary design elements that reflect the aura of understated luxury at Wing Lei. Inspired by the craftsmanship of mooncake moulds and the floral artistry of Wynn

Macau, the mooncake gift boxes burst with bright floral patterns. A tremendous amount of time and effort has gone into the creation of these gift boxes. These beautifully-packaged mooncakes and signature tea gift boxes will be available for sale between 11:30 am and 10:30 pm from 12 September to 26 September at the Wing Lei mooncake counter.

JW Marriott Hotel Macau celebrates Mid-Autumn Festival in Style There is no better way to celebrate the Mid-Autumn than to spend time with family and friends. Mooncakes have become an important symbol of the Festival and JW Marriott Hotel Macau has gone to great lengths to create a special and memorable offering for loved ones and friends during this important annual event in the calendar.

Presented in a dark brown, sleek patented leather chest emblazoned with the JW Marriott’s iconic Griffin, the JW Marriott Bless Selection box set is the perfect token to express gratitude ahead of this MidAutumn Festival. This beautiful mooncake set is now available at Man Ho Chinese Restaurant, JW Marriott Hotel Macau.

Business Daily | 5

August 11, 2015

Macau

American casinos more resilient to smoking ban announcements A working paper by the Business School of MUST found that the American operators’ stocks were less affected by government smoking ban announcements than their local competitors Joao Santos Filipe

jsfilipe@macaubusinessdaily.com

he Las Vegas Style-themed casinos of Wynn Macau and Sands China have been more effective in dealing with the announcements of the partial or total smoking bans in casinos. At the same time, the local casinos run by SJM, Galaxy and Melco Crown have been more severely hit by the announcements in terms of their stocks prices. While MGM Macau is not considered severely affected by the announcements, it also struggled. This is the conclusion of a working paper by researchers at the Business School of Macau University of Science and Technology (MUST) titled ‘Do smoking bans always hurt the gaming industry? Differentiated impacts on the market value of casino firms in Macau’ which analyses the impact on casino stock prices of the announcement of smoking bans in three different periods in the territory. The study analyses the partial and universal smoking ban

experienced cumulative abnormal returns of 1.4 per cent to 4.8 per cent’, the study written by Jing Hua Zhang and Kwo Ping Tam reads.

Dependence upon gaming

announcements of the government in 2011, 2014 and 2015.

Stock reaction

‘Upon the unexpected announcements of the smoking bans (partial or total bans) in Macau, the stock market had different reactions to the stocks

of the involved casinos. We find that the announcements of the bans were associated with differentiated abnormal returns of casino stocks. The stocks of the oldest casinos in Macau experienced cumulative abnormal losses of 1 to 6 per cent, while the Las Vegas-themed casinos in Macao

The authors also point out that the casino operators with poor facility quality and heavy dependence upon gaming revenue are more likely to be impacted by the announcement. ‘Dependence upon gaming revenue plays the most important role among the factors associated with the abnormal returns of casino stocks. The facility quality of the venues, which hence affects the air quality in venues, led to negative impacts in partial bans, but the implementation of a full ban helps to avoid this disadvantage’, they explained. The same study also assesses the importance of Corporate Social Responsibility, and in this aspect these initiatives are associated with positive abnormal returns for the casinos stocks.

244 illegal casino smokers prosecuted this year

he Health Bureau says it had prosecuted 244 persons smoking illegally in local casinos during the first seven months of the year, of whom more than 70 per cent were tourists. According to the Bureau, it conducted a total of 261 inspections in local casinos with the Gaming Inspection and Co-ordination Bureau (DICJ) between January and July this year, prosecuting some 190 tourists, 53 local residents and one nonresident worker inside the gaming venues, accounting for 77.9 per cent, 21.7 per cent and 0.4 per cent of the total, respectively. The city’s current tobacco control regime bans smoking on the mass

gaming floors of casinos, and most other indoor revenues such as restaurants, bars, karaoke parlous, discos and saunas. For other venues besides casinos, the Bureau said its enforcement officers had conducted a total of 166,417 inspections during the seven months, prosecuting a total of 4,159 persons for illegal smoking. Those prosecuted were primarily local residents, accounting for 62.9 per cent or 2,618, while the number of tourists prosecuted for illegally smoking amounted to 1,348 or 32.4 per cent of the total. The remaining 4.6 per cent of illegal-smoking prosecutions involved 193 imported labourers. K.L.

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August 11, 2015

Gaming Brands

Trends

Scent of opportunity

Caesars said courting creditors as optimism pushes up debt Barrett, a spokesman for TPG, and John Gallagher, a spokesman for Houlihan, declined to comment. Charles Zehren, a spokesman for Apollo at Rubenstein Associates, didn’t respond to telephone and e-mail requests for comment. The second-lien bonds have risen to their highest level since July 2014, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The US$3.6 billion of 10 per cent notes due December 2018 had fallen to a closing low of 12.3 cents in November.

Raquel Dias newsdesk@macaubusinessdaily.com

ne of the brands newly arrived in Macau with the recent opening of Galaxy Macau Phase II is Jo Malone London. Jo Malone is nothing if not chic. The simple white and black boxes with the clean perfume flasks remind us of a vintage perfumery. It also helps that the brand carries mostly house fragrances and unisex perfumes. Clients also have the chance of getting those ever-so-useful candles and soaps, all with the same scent. The company that was founded in London by Jo Malone was quickly acquired by Estée Lauder Perfumes in 1999, a mere five years after it was created. Jo stayed on as creative director and the brand continues true to her vision. Like any good story, Jo Malone faced all the controversies self-made people usually face. Severely dyslexic, Jo had to leave school at age 13 to take care of her sick mother. Her first business was doing facials but she would give her clients homemade essential oil bottles as a thank-you note. From there an empire was built and today we can visit her shop right at Galaxy’s Promenade. The feeling when you enter any Jo Malone shop is the same everywhere. A luxury sanctuary of great scents one usually visits to get a gift from. Sure, you can go in and get yourself one of those unique perfume bottles but the effort the staff puts into preparing any package will make you feel sorry to open it yourself.

Competing plan

aesars Entertainment Corp. junior bonds climbed to their highest level of the year as optimism builds that the casino operator will be able to strike a deal with creditors to get its biggest unit out of bankruptcy. The largest portion of that subsidiary’s second-lien notes have climbed to 32.25 cents on the dollar, the highest since Caesars first corralled creditors for restructuring talks last year. The casino operator is preparing to start a new round of negotiations with some of the staunchest opponents of its bankruptcy plan, said four people with knowledge of the matter. Caesars has been holding informal meetings with some members of a junior-creditor group represented by Houlihan Lokey Inc. as they put the finishing touches on a rebuttal proposal that will serve as the basis for their negotiations, said the people, who asked not to be identified because the discussions are private. During the same week that Caesars reported its best margins since before the financial crisis, the

casino giant also restarted its dialogue with some of the largest holders of the subsidiary’s US$5.35 billion of term loans, the people said. It held a Monday telephone meeting to discuss how a new reorganization plan signed by other first-lien creditors last week would affect restructuring negotiations with their group, they said.

Loans rise

The company has been seeking support for a plan to turn Caesars Entertainment Operating Co. into a real estate investment trust and cut its US$19.9 billion of debt in half. It put the unit into bankruptcy in January. Before that, first-lien bondholders said they would support its proposal, but the company faces lawsuits from lowerranking creditors who want to undo some pre-bankruptcy asset sales. The Caesar’s parent company is majorityowned by Apollo Global Management LLC and TPG Capital, which bought it for US$30.7 billion in 2008. Emily Wofford, a spokeswoman for Las Vegas-based Caesars, Luke

The junior creditors are circulating their draft plan among holders of the company’s second-lien bonds, the people said. The proposal seeks to give them a higher recovery than the 21 cents on the dollar that Houlihan calculated they and unsecured creditors would receive from a July version of Caesars’ restructuring proposal. Each of the bankrupt company’s four term loans have rocketed since Monday, with three of them rising to their highest levels in two months. They had dropped to their lowest levels since the Chapter 11 filing when Caesars lost a bid in late July to get a judge to halt creditor lawsuits against the parent company while the operating company goes through bankruptcy. An adviser to Caesars testified that liabilities connected to the lawsuits would force the parent to join the unit in bankruptcy. The operating unit’s biggest loan, US $2.3 billion of debt known as the B-6 term borrowing due March 2017, gained nearly 2.6 cents since last week to reach 90.7 cents on the dollar, according to quotes compiled by Bloomberg. Bloomberg

Cross-border online gambling gang busted in NE China

hinese police have apprehended 125 suspects allegedly involved in an online gambling network, the public security department of northeast China’s Heilongjiang Province said. About 230 million yuan (US$37 million) was frozen and about 80 million yuan has been confiscated by police so far, with dozens of gambling websites and payment platforms shut down.

The gambling mega-den caught the attention of police in Mudanjiang City in Feb. 2014. An investigation showed that gambling activities were manipulated by a group named “Dafa 888” in the Philippines. Established in 2002, “Dafa 888” has operated online gambling in several Asian countries. According to police, the group has attracted gamblers from more than 10

provinces in China. Some lost more than one million yuan, and one even forced his daughter into prostitution for gambling money. The principal criminal, whose surname is Wang, was escorted back to Harbin on Saturday night, an official with the department said. The case is under investigation. Gambling has been illegal on the Chinese mainland since 1949.

Correction: In yesterday’s edition of Business Daily we mistakenly reported that Banco Nacional Ultramarino (BNU) generated MOP28.5 million in profit for the first half of the year. In fact, BNU posted a profit of 28.5 million euros (MOP249.6 million) for the period. Business Daily apologies to BNU and to our readers for any inconvenience caused.

Xinhua

Business Daily | 7

August 11, 2015

Gaming

Legal U.S. sports betting could spread if New Jersey has its way A decision is expected any day from the U.S. Court of Appeals for the Third Circuit. Whichever side loses will almost certainly appeal

egalized U.S. sports betting, resisted by professional leagues since they won a federal ban nearly a quarter century ago, could begin spreading around the country if the state of New Jersey prevails in a pending federal court case. The state may have only one major league franchise bearing its name: the New Jersey Devils NHL hockey team. But with an eroded casino industry and sluggish state economy, New Jersey has been pushing for sports betting for several years and carrying the ball in the legal battle while other states wait and watch. "A New Jersey win will have immediate, far-reaching implications beyond its borders," said Daniel Wallach, a Florida sports and gambling attorney who has followed the case closely. "It will prompt swift action by other states." A decision is expected any day from the U.S. Court of Appeals for the Third Circuit. Whichever side loses will almost certainly appeal. The NCAA, NFL, NBA and other leagues sued after New Jersey lawmakers legalized sports betting in 2012. The leagues said that violated a 1992 federal law that banned the activity in all but four states - particularly Nevada - where it was already allowed. Betting also threatens the integrity of sports games by opening the door to price fixing, the leagues argued. New Jersey lost the case, but it tried again last year with new legislation

A New Jersey win will have immediate, farreaching implications beyond its borders, it will prompt swift action by other states Daniel Wallach, a Florida sports and gambling attorney

that attempts an end-run around the federal ban - which prohibits states from authorizing, sponsoring, operating or licensing the practice by essentially removing state control and deregulating sports wagering at casinos and racetracks. Those venues would then be free to oversee their own sportsbooks under the latest bill, which the sports leagues also tried to block in court. They won that case as well, and New Jersey appealed.

Other states - especially Pennsylvania and Delaware, which are also in the Third Circuit - might immediately follow New Jersey's lead if it won and begin pushing for broader sports betting, Wallach said. If legal sports betting spread, New Jersey could eventually grab about US$10 billion of a national market that could be as much as US$400 billion, said Dennis Drazin, an advisor to two parties involved in New Jersey's Monmouth Park Racetrack, where on Aug. 2 American Pharoah won his first race since taking the Triple Crown. "It would be a huge economic boost to Monmouth Park and New Jersey and Atlantic City casinos," Drazin said. The park has already spent US$1 million to outfit a sportsbook room through the largest North American sports betting operator, the U.S. subsidiary of Britain's William Hill PLC.

Long odds

But New Jersey faces long odds, according to some analysts. "It's going to go down in flames," said Chuck Humphrey, lawyer and author of the website gambling-lawus.com. Humphrey and others called the leagues "hypocrites" for blocking sports betting while actively investing in fantasy sports companies. The tide may be turning, however. In a November op-ed in The New York Times, NBA Commissioner Adam

Silver urged Congress to adopt a federal framework to allow betting on professional sports, arguing that a state-by-state spread of measures like New Jersey's would be bad public policy. "There is an obvious appetite among sports fans for a safe and legal way to wager on professional sporting events," he wrote. Globally, the market is at least US$1 trillion, 90 per cent of it conducted illegally, said Patrick Jay, who oversaw Asia's largest regulated sportsbook as director of trading at the Hong Kong Jockey Club. It could be as big as $3 trillion, nearly all of it illegal, he estimated. Americans bet US$3.8 billion illegally on this year's Super Bowl game, compared to approximately US$100 million of legal bets on the event annually, according to American Gaming Association estimates. So far, the NBA is the sole league calling for federal authorization. "Our long-standing position against the proliferation of gambling on NFL games remains," NFL spokesman Brian McCarthy said in an email. The NCAA said in a statement that "the spread of legalized sports wagering is a threat to student-athlete well-being and the integrity of athletic competition." Major League Baseball declined to comment. The NHL did not reply to a request for comment. Reuters

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August 11, 2015

Greater China

Beijing reshapes quantitative easing While there’s been no public unveiling of the strategy, China’s leaders are putting in place plans for the central bank to finance, indirectly, a fiscal stimulus program

hina’s leaders are increasingly relying on the central bank to help implement government programs aimed at shoring up growth, in an adaptation of the quantitative easing policies executed by counterparts abroad. Rather than bankroll projects directly, the People’s Bank of China is pumping funds into state lenders known as policy banks to finance government-backed programs. Instead of buying shares to prop up a faltering stock market, it’s aiding a government fund that’s seeking to stabilize prices. And instead of purchasing municipal bonds in the market, it’s accepting such notes as collateral and encouraging banks to buy the debt. QE -- a monetary policy tool first deployed in modern times by Japan a decade and a half ago and since adopted by the U.S. and Europe -- is being echoed in China as Premier Li Keqiang seeks to cushion a slowdown without full-blooded monetary easing that would risk spurring yet another debt surge. While the official line is a firm “no” to Federal Reserve-style QE, the PBOC is using its balance sheet as a backstop rather than a check book in efforts to target stimulus toward the real economy. “It’s Chinese-style quantitative easing,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “But it’s not a direct central bank asset-purchase plan. China’s easing is indirect and

more subtle compared with the U.S. or Japan.” The local government debt swap and recapitalization of policy lenders can help to address “clogged liquidity flows” to channel funds from the interbank system to economic activity on the ground, Macquarie Capital Securities Ltd. economists Larry Hu and Jerry Peng wrote in a note. While policy lenders can’t replace a properly functioning financial market, the moves can “help fund infrastructure investment to support growth” over the next three to six months to help drive “a U-shaped recovery,” they added.

It’s unclear whether by taking on bonds as collateral and delivering cash in return the PBOC’s official balance sheet will expand. In the U.S., the euro region and Japan, central banks have bought securities outright in secondary markets, making the quantitative easing transparent on their books.

Indirect financing

By contrast, China’s current leaders, who took power in 2012, are opting for indirect financing -- a strategy that also prevents the central government’s debt burden from rising. A record

Stimulus program

While there’s been no public unveiling of the strategy, China’s leaders are putting in place plans for the central bank to finance, indirectly, a fiscal stimulus program to put a floor under the nation’s slowdown. China will sell “special” financial bonds worth trillions of yuan to fund construction projects, and the PBOC will provide funds to state banks to buy the bonds, people familiar with the matter said this month. China Development Bank Corp. and the Agricultural Development Bank of China -- known as policy banks because they carry out government objectives -- will issue bonds, people told Bloomberg earlier. The Postal Savings Bank of China will buy the debt, aided by liquidity from the central bank, according to one of the people.

By definition, China has not started QE as the PBOC’s balance sheet isn’t expanding Li Wei, economist, Commonwealth Bank of Australia

Premier Li has repeatedly said it wouldn’t opt for a bi

Property market to continue recovering The National Development and Reform Commission said it expected consumer prices to stabilise soon and start to pick up in the second half of 2015

hina’s top economic planner said yesterday that the property market was likely to continue to improve in the second half of this year, a good sign for the struggling economy. A year-long slump in the housing market has dragged on the world’s second-largest economy, which is widely expected to clock its worst performance in a quarter of a century this year.

While home sales and prices have improved in bigger Chinese cities in recent months after a barrage of government support measures, conditions remain weak in smaller cities and a huge overhang of unsold houses is discouraging new investment and construction. “In the second half, the recovery trend in the property market is likely to be sustained, which will create better situation for consumer prices

and support factory-gate prices,” the National Development and Reform Commission (NDRC) said on a statement on its website. Inflation and trade data at the weekend showed domestic demand remained sluggish in July. Annual consumer inflation remained muted at 1.6 percent despite a surge in pork prices surging, in line with forecasts and slightly higher than June’s 1.4 percent.

Producer or factory-gate prices hit their lowest point since late 2009, during the aftermath of the global financial crisis, and have been sliding continuously for more than three years. The price data, along with weak export numbers released at the weekend, have reinforced market expectations that Beijing will have to roll out fresh economic support measures soon if leaders want to meet their 7 percent growth target for the year. However, the NDRC said it expected consumer prices to stabilise soon and start to pick up in the second half of 2015, while declines in producer prices were likely to ease partly due to rising agricultural products’ prices and stabilising commodities prices. Chinese leaders are also hoping that increased infrastructure spending will boost activity later this year. Reuters

KEY POINTS Property market recovery to continue in second half Consumer inflation to pick up in H2 Producer price decline to ease in H2

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August 11, 2015

Greater China credit expansion unleashed in 2008 during the global crisis is seen as having left the economy with excessive borrowing that’s now being restructured. A lot of the credit growth unleashed ended up being spent on already existing assets, meaning it didn’t directly add to gross domestic

product. After wrestling with that problem since about 2012, the central bank is stepping up ways to target credit so it’s steered toward newly produced goods and services, said Simon Cox, AsiaPacific investment strategist at BNY Mellon Investment Management in Hong Kong.

ig stimulus plan and would keep a “prudent” monetary policy stance

“China is trying to channel the lending towards something that will have more stimulative oomph,” Cox said. “If that happens to be a public good that is in short supply, then that’s great, but first and foremost, let’s get it into the real economy.”

Policy options

The PBOC still has more options that the Fed or Bank of Japan, which adopted unconventional easing when interest rates were close to zero. China’s one-year benchmark lending rate is 4.85 percent, and the required reserve ratio for the biggest banks remains at 18.5 percent, among the world’s highest even after a series of reductions. In its second quarter monetary policy report published Friday, the PBOC reiterated it would stick to a “prudent” policy stance and use “various monetary policy tools” to manage liquidity and credit. “China is not in a crisis mode, and it’s not necessary for the central bank to intervene too much,” said Li Wei, China economist for Commonwealth Bank of Australia in Sydney. China’s government under Li has repeatedly said it wouldn’t opt for a big stimulus plan and would keep a “prudent” monetary policy stance. Still, Li is seeking to shore up growth amid fresh signs the economy is lagging the official target of about 7 percent for this year. “It’s not an all-out QE as the Fed’s was, but there are increasing signs of a QE program,” said Chen Xingdong, chief China economist and head of macro-economics research at BNP Paribas SA in Beijing. Chen said the PBOC was now opening the door to borrowers, but hasn’t reached the stage of “forcefully flooding the market with money.” Bloomberg News

Yuan’s plans beyond usage plateauing A wide range of cross-border flow data and surveys point to a moderation in the yuan’s use

New 100-yuan bank note The People’s Bank of China (PBOC), the central bank, announced it would issue a new 100-yuan bank note from November 12 yesterday. The new bank note will be harder to counterfeit and easier for machines to read. Part of the fifth set of bank notes introduced by the PBOC in 1999, it was last changed in 2005. The design of the new bank note will stay largely the same as the the 2005 series but have enhanced security features, the PBOC said. The 100-yuan note is the largest denomination of the Chinese currency.

Software and IT product sales rise Software and IT services sales surged in the first five months this year, evidence that consumption pertaining to technology and Internet is increasing economic growth, said China’s top economic planner. The two sectors witnessed a 17.1 percent increase in sales revenue from a year earlier to 1.59 trillion yuan (US$260 billion) during the Jan-May period, the National Development and Reform Commission (NDRC) said yesterday. The growth rate outperformed the 10.4 percent growth for overall retail sales in the same period, official data showed. Products like smart TVs, smart cell phones and wearable devices are leading the sales increase.

Officials exchange for Xi’s visit to U.S.

The central bank (pictured) has adopted a vice-like grip on the yuan as China seeks to win reserve status at the IMF’s review later this year

hina signalled its determination to obtain reserve status for the yuan even as a report said the pace of the currency’s internationalization is slowing. The debate on the yuan’s potential inclusion in the International Monetary Fund’s basket of reserve currencies reflects global hopes for change, according to an article in the Communist Party-run People’s Daily. A wide range of cross-border flow data and surveys point to a plateauing in the yuan’s use, JPMorgan Chase & Co. wrote in a report Friday. Exports dropped in July as China kept the yuan steady at 6.2 against the dollar. “The People’s Daily report is an obvious signal that the government is hopeful for the yuan to obtain reserve

status,” said Kenix Lai, a foreignexchange analyst at Bank of East Asia Ltd. in Hong Kong. The People’s Bank of China raised the yuan’s daily reference rate by 0.02 percent to 6.1162 a dollar yesterday. The PBOC has adopted a vice-like grip on the yuan as China seeks to win reserve status at the IMF’s review later this year. The IMF’s staff members last week proposed delaying the currency basket’s expansion by nine months, to September 2016. Borrowings by local firms in foreign currency are waning and issuance of yuan-denominated bonds is little changed from last year, JPMorgan analysts led by London-based Nikolaos Panigirtzoglou wrote. The share of yuan in reserve holdings was about

While weak exports will put depreciation pressures on the yuan, China will keep the currency stable before the IMF review Kenix Lai, foreign-exchange analyst, Bank of East Asia

China and the United States will send senior officials to each other’s country in preparation for the state visit to the United States by Chinese President Xi Jinping in September. Several senior U.S. officials will visit China in August and September, based on a consensus reached by the two sides, Chinese Foreign Ministry spokesperson Lu Kang said yesterday. Meanwhile, some senior Chinese officials will visit the U.S. to pave the way for Xi’s upcoming visit, which is at the invitation of his counterpart Barack Obama.

Highway for Liberia as part of Ebola aid half that of the Australian dollar and only a third of the Japanese yen’s share at end-2014, according to the IMF. The offshore yuan, which trades freely in Hong Kong, was little changed at 6.2171 on Monday, according to data compiled by Bloomberg. The gap between the onshore spot rate and the fixing was 1.5 percent. Twelve-month non-deliverable forwards fell 0.04 percent, the first decline in three days, to 6.2827 a dollar, data compiled by Bloomberg show. Bloomberg News

China will build a new coastal highway for Liberia as part of its aid to the country recovering from an Ebola epidemic, Liberia’s foreign minister said on Sunday. He was speaking at a news conference with China’s Foreign Minister Wang Yi who is visiting Liberia, Guinea and Sierra Leone, the countries hardest hit by the epidemic. Liberia’s existing coastal route is vital for commerce as the country rebuilds after a civil war that ended in 2003. It connects the capital to the border with Ivory Coast via the port city of Buchanan.

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Greater China

Healthcare reform drive stuck in first gear Industry insiders say reforms are being held up partially because of in-fighting between regulators and push-back from the state-run firms who dominate the sector Adam Jourdan

i Tiantian, a Chinese doctor turned tech entrepreneur, is a leading light of the country’s much-trumpeted healthcare reform drive. His medical networking platform DXY.com links two million doctors across China and has attracted funding from tech giants like Tencent. DXY is exactly what Beijing has said it’s looking to support after it pinpointed remote healthcare, Internet and technology as drivers to solve its healthcare woes in a 5-year roadmap in March. The reality is rather different: DXY is curbing plans to work with public hospitals to help connect doctors and patients online because of a lack of support by Beijing and obstacles working with China’s huge, fragmented public healthcare sector. “We’ve heard a lot of good stories from the top - Internet +, driving force, policy changing - but see nothing happen at the bottom,” Li told Reuters. “It’s not about market, capital or even tech - these things are already developed very well ... rather it’s the regulations, laws and systems of support.” Li’s position reflects wider obstacles to healthcare reforms in technology, online drug sales, hospital privatisation and doctors’ pay, drivers that are a major lure for investors and firms betting billions of dollars on China opening up a market set to be worth around US$1.3 trillion by 2020. “I always ask: is there actually a macro tailwind, and is the government and regulatory environment - which is very important in China - supportive of this?” said Alexander Ng, associate principal at McKinsey & Co. “If there’s a lot of negative voices it might

Healthcare spending as a slice of China’s GDP also remains small at around 6 percent in 2013 compared to 17 percent in the United States

make investors back off or calculate a much higher risk premium.”

Reform rhetoric

China has ramped up its healthcare reform rhetoric, touting greater access for foreign investors to healthcare services, a bigger role for technology and pushing drug sales from mostly state-run hospitals towards the retail market. This has helped draw in close to US$30 billion worth of healthcare merger and acquisition investment so far this year, a fivefold leap from the same period in 2014, according to Reuters data. Healthcare M&A already leapt last year. But, despite the government’s longer-term ambitions, industry insiders say reforms are being held

up because of technical issues such as crumbling and fragmented IT systems to in-fighting between regulators and push-back from the state-run firms who dominate the sector - and don’t want change. “With so many vested interests - dealers, hospitals, insurance departments and others - reform is not very fast,” said Frank Zhao, chief financial officer at China Jo Jo Drugstores Inc. Privately, some health policy advisers admit reforms are falling behind, while the public line is that reform has “hit up against the Yangtze River”, a reference to the obstacle famously overcome by Mao Zedong’s Communist forces in 1949. The healthcare ministry did not respond to faxed queries seeking comment for this article. Zhao points to the expected approval for online prescription drug sales, which he and other industry insiders say has been delayed this year due to regulatory concerns and opposition from state-run hospitals and distributors. These hold-ups are a frustration for pharmacy chains like Jo Jo as it looks to increase its business online, but also for tech giants like Alibaba Group Holding Ltd, which wants to get into the online prescription drug space.

Open market?

One big draw for investors has been China’s privatisation drive of healthcare services - touted as key to revamping an unpopular healthcare system, blighted by crowded hospitals, corruption and simmering tension between patients and staff. But, despite the fast growth of

private investment in hospitals, the public sector still dominates around 90 percent of all patient visits, according to a Deutsche Bank 2015 healthcare report. Investors cite issues with insurance schemes, access to Chinese doctors and a still tightlycontrolled market. “With things still not market-led, organizations like ours are facing huge challenges and difficulties,” Hu Lan, President and Director of hospital investment firm AMCARE Corporation, said at a conference in Shanghai in June. Healthcare spending as a slice of China’s GDP also remains small at around 6 percent in 2013 compared to 17 percent in the United States, World Health Organization (WHO) data show. Reforms to reduce hospitals’ reliance on drug sales also faces a revolt from doctors who argue this will take away a key revenue stream at a time when medical staff are overworked, underpaid and often violently abused by angry patients. “Every few days you hear about a doctor being beaten or even killed. This situation is a huge mental burden for doctors,” said Wu Xiaobo a doctor at the Wangjing Hospital in Beijing in a recent viral video campaign for doctors’ rights. As for DXY’s Li, his firm now plans to change tack and set up an offline clinic in the eastern city of Hangzhou this year to pilot potential healthcare reforms - outside the state sector. “We were hoping we could leverage changing policy and do something on mobile and digital,” Li said. “We found it’s just too slow, so the only way to do it is out on our own.” Reuters

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Asia

Philippine central bank satisfied with monetary policy The BSP has not changed its policy rate since last September, when it raised it to 4.0 percent

he Philippine central bank’s current monetary policy stance remains appropriate, with the economy’s solid growth fundamentals still intact despite weakness in the first quarter and inflation expected to stay manageable, its governor said yesterday. Amando Tetangco also told a budget hearing in Congress that average inflation this year was expected to settle near the low end of the government’s 2-4 percent target, with the country having a solid foundation to weather global and domestic economic uncertainties. “The BSP (Bangko Sentral ng Pilipinas) is of the view that the current monetary policy stance remains appropriately calibrated,” Tetangco said. The central bank’s Monetary Board meets on Thursday to review its interest rate policy, days after annual inflation in July slowed to a record low 0.8 percent. The July inflation print brought the year-to-date average to 1.9 percent, slightly below the target this year. But inflation is likely to pick up pace in the coming months as the El Nino dry weather phenomenon is expected to intensify later this year to early next year,

Tetangco said in an email to reporters yesterday. Tetangco also said in his email he expects near-term domestic financial market volatility as investors shift portfolios away from emerging markets once central banks of advanced economies move to tighten their policy rates. But he noted such a policy normalisation in developed economies should benefit global trade, and impact

positively on the local economy. Philippine exports fell the most in over three years in May on declining demand from major trading partners China and the United States. Weaker exports contributed to slower than expected GDP growth in the first quarter.

Weak remittances

Furthermore, the Philippine peso, languishing at a five-

year low against the dollar, will lose more ground to the greenback in the coming months as remittances from millions of Filipinos overseas slow and foreign investors rotate out of the Manila stock market. The Philippines is one of the fastest-growing economy in the region thanks to strong private demand. The peso, unlike many emerging-market

currencies in Southeast Asia, has been relatively resilient in the face of volatile capital flows ahead of an eventual rise in U.S. interest rates. While it has weakened more than 2 percent against the greenback so far this year, the decline is less than the falls in the Thai baht, Indonesian rupiah and Malaysian ringgit. But the sputtering global economy may have at last dealt a blow to remittances a major economic engine for the Philippines. Remittances in the first five months of 2015 grew on average 5.4 percent, compared with 6 percent a year earlier. That compared with annual increases of 7 percent in the years after the 2008 global financial crisis. Net foreign selling of Philippine stocks has also surged, weighing on the peso. Reuters

Aussie government sinks after expenses scandal The Newspoll, which was conducted August 6-9, shows Abbott and Labour leader Bill Shorten are rated equally at 38 percent on the question of who would make the better prime minister Jason Scott

rime Minister Tony Abbott’s government recorded its worst poll result in five months after his parliamentary speaker was forced to resign amid a travel expenses scandal. As parliament resumes in Canberra after a six-week winter break, support for Abbott’s LiberalNational coalition fell 1 percentage point to 46 percent, while the main opposition Labour Party rose 1 point to 54 percent on a two-party preferred basis, according to a Newspoll published in the Australian newspaper. The eight-point gap is the worst since March. The poll comes six months after Abbott survived a challenge to his leadership from disgruntled Liberal lawmaker colleagues. His failure to quickly act to remove Bronwyn Bishop from her role as speaker has

renewed concerns about his judgment and his ability to lead the coalition to victory in the election due to be called next year. “This poll spells trouble for Tony Abbott because he’s running out of time to turn around his government’s performance,” said Norman Abjorensen, a Canberra-based political analyst at the Australian National University. “By allowing the Bishop scandal to roll on for so long, he’s allowed those questions about his judgment to re-emerge and you couldn’t rule out another move against him in the coming months.” Bishop, 72, resigned as lowerhouse speaker earlier this month after three weeks of pressure as revelations about her travel expenses dominated media headlines. The Department of Finance is probing her use of public funds for a A$5,000 (US$3,700)

This poll spells trouble for Tony Abbott because he’s running out of time to turn around his government’s performance Norman Abjorensen, political analyst, Australian National University

helicopter ride to attend a Liberal Party fund-raiser, while allegations also emerged she claimed travel allowances to attend weddings. Liberal lawmakers yesterday voted for Tony Smith to replace Bishop. Smith, 48, who has represented the rural Victorian state seat of Casey since 2001, said he won’t attend regular party room meetings -- restoring a tradition that the speaker isn’t partisan. The Newspoll, which was conducted August 6-9, shows Abbott and Labour leader Bill Shorten are rated equally at 38 percent on the question of who would make the better prime minister. The poll, based on 1,727 interviews among voters, has a margin of error of plus or minus 3 percentage points. Bloomberg News

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Asia

Japan makes biggest H1 current account surplus gain since 2010 But consumer mood worsens to 6-month low in July Tetsushi Kajimoto and Leika Kihara

apan posted 12 straight monthly balance of payments gains in June, taking the half-year surplus to its highest in five years as overseas income and tourism receipts prospered. June’s current account surplus was 558.6 billion yen (US$4.5 billion) Ministry of Finance data showed yesterday, compared with a median forecast for a 773.6 billion yen. The gain was driven by a rising primary income surplus, which measures profits from investment abroad, and a gain in the travel account due primarily to growth in tourist numbers on the back of the weak yen. “The current account is returning to levels seen around the 2007-2008 Lehman crisis,” said Yuichiro Nagai, economist at Barclays Securities Japan. “Drivers of growth in the current account have shifted from trade surplus to income gains and other areas such as a rise in the number of tourists.” In the first half of this year, the current account surplus stood at 8.18 trillion yen, the largest since JulyDecember in 2010, the ministry data showed. Hefty returns from business and portfolio investment overseas brought a record primary income surplus of 10.5 trillion yen in January-June this year, offsetting a trade deficit of 422 billion yen.

A record number of foreign tourists helped swing the travel account to a record surplus at 527 billion yen in the first half of 2015, the data showed. The trade deficit narrowed sharply in January-June from a year before due to sharp drops in oil prices, which eased the burden of fuel imports to make up for the shutdown of nuclear power plants after the 2011 Fukushima crisis. Slumping exports and tepid private consumption have led analysts to forecast an economic contraction in the second quarter, casting doubt on the Bank of Japan’s optimism over trends in growth and prices. In 2014, Japan’s current account surplus shrank for a fourth straight year to its smallest on record in a worrying sign the trade shortfall could deepen the balance of payments deficit - further complicating Tokyo’s efforts to rein in a huge public debt. The narrowing surplus raised concerns in some quarters that a persistent trade deficit may tip the current account into the red over the medium term, which could see Japan starting to chip away at its vast pool of domestic savings.

workers catering to consumers, such as taxi drivers and restaurant staff, saw they were upbeat on current business conditions but pessimistic on the outlook. The survey findings casts doubt on the Bank of Japan’s view that private consumption will emerge from the doldrums and help the economy rebound from an expected contraction in April-June.

Worse mood

Consumer sentiment index falls, govt cuts assessment

However, Japanese consumer confidence worsened sharply to hit a six-month low in July, a government survey showed, a sign households were feeling the pinch from rising food prices and tame wage growth. A separate survey on service

KEY POINTS June balance of payments +558.6 bln yen vs f’cast 773.6 bln Rising income gains, foreign tourists drive c/a surplus Falling oil prices help fix trade gap, widen c/a gains

More households expect prices to rise a year ahead BOJ sticks to upbeat view on consumer spending

But the central bank put on a brave face and held to its assessment that the economy is on track for a moderate recovery. “Private consumption will remain resilient as job and income conditions improve steadily,” the BOJ said in a monthly report for July published yesterday. An index gauging household sentiment, which includes views of incomes and jobs, fell 1.4 points from the previous month to stand at 40.3 in July, a Cabinet Office survey showed yesterday. It was the lowest reading since January. The Cabinet Office downgraded its assessment of consumer confidence to say it is “stalling.” The survey also found that 87.7 percent of the respondents expect consumer prices to rise a year ahead, up from 87.3 percent in June. A separate government poll on service sector workers, called the “economy watchers” survey for its proximity to retail trends, underlined the fragile state of recovery. The service-sector sentiment index rose to 51.6 in July, up for the first time in three months, but the outlook index that indicates confidence in future conditions dropped to 51.9 from 53.5 the previous month. “Household income isn’t rising much in regional Japan even as food prices continue to rise. Consumers are keen to buy goods on discounts,” a retailer in western Japan told the survey. Reuters

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Asia Indian housewives don’t feel benefits of restrained inflation

Malaysia’s June factory output up

Central bank Governor indicated they would closely study the pace of inflation expectations and the way it impacts consumer behaviour Suvashree Choudhury

ndia’s central bank governor Raghuram Rajan may have reshaped monetary policy and brought down consumer inflation to the lowest in years, but convincing people like housewife Shaila Pai that prices are under control is proving a tough challenge. Entrenched expectations of high inflation in India are feeding into higher wages and other prices, which could tie Rajan’s hands even as he faces growing pressure to cut interest rates for a fourth time this year to help a patchy economy. Pai, a mother of two in Mumbai, says she has yet to feel any benefit from official data showing inflation is easing. Her living costs are as high as they have ever been and the family is cutting down on travel, eating out and personal spending. “The biggest part of our household expenses goes towards education, food and medicines, and all of them are very expensive. We can’t cut corners much there,” she said. “I expect hospital, food, education costs will continue to rise in the double digits.” She is not alone. A survey by the

Reserve Bank of India (RBI) this week showed households expect consumer inflation to hit 10.1 percent within three months, almost double the current 5.4 percent and a level not seen since late 2013. At its latest policy review on last Tuesday, the central bank kept rates steady but held out the prospect of another easing after cutting the policy rate by three-quarters of a percentage point so far this year. “Price pressures are building up and these are sticky,” said a senior policymaker familiar with the RBI’s thinking. “We are cautious. We have to see whether core inflation will feed into headline numbers or not.”

Cost of living rising

Since becoming governor in September 2013, Rajan has refocused policy on consumer inflation instead of wholesale prices. Earlier this year, the government and RBI agreed on adopting a target to keep inflation between 2 to 6 percent. While that looks on track for now, core inflation, which excludes volatile fuel and food prices, has risen for the past six months, and reached around

5 percent in June. A 16.2 percent surge in urban wages in the January-March quarter, the biggest increase in 11 quarters, is a key driver of core inflation. “In everybody’s mind, inflation is hovering at 8 percent,” said Anandorup Ghose, a partner and head of rewards at Aon Hewitt, a global human resource solutions company. Other costs are also starting to rise, according to the RBI. Among the biggest increases have been in education, an expense few middle-class households in India are willing to cut. Education costs rose 7.23 percent in June, the biggest jump among the subsectors in the core CPI data, followed by clothing and then household goods and services. “If we really want to manage inflation, we have to look at the sum total of inflation, especially the inflation that confronts consumers because that is what determines things like household savings behaviour. It also determines the wage pressures that will come,” Rajan told reporters. Reuters

Indonesian alcohol market faces price headache after tariff hike Eveline Danubrata and Klara Virencia

140.5 percent and 154.4 percent, respectively, from 2009 to 2014, partly due to the weakening rupiah, according to market research firm Euromonitor International. Retail prices for imported wine and spirits will now rise further, in a range from 15 percent to more than 100 percent, the association’s Borman said. “Such high prices for imported brands might give incentive for some actors to fill in the gap by producing fake liquor at very cheap prices,” he said.

“Self-destructive”

Critics say that if the increase in tariffs on alcoholic drinks and a raft of other products was designed to protect the local industry, it makes little sense because Indonesian-made goods cannot directly compete with the higher-quality imports. “Addressing economic decline by limiting imports is self-destructive and will be detrimental for the future as exports depend on imports,” said

NAB outperforms peers

National Australia Bank yesterday said third-quarter unaudited cash profit rose 9 percent while bad debts dropped, outperforming its peers which are struggling with higher defaults and slowing earnings growth. Australia’s biggest lender by assets has long trailed its three main rivals on earnings growth and shareholder returns, but under new CEO Andrew Thorburn it has a clear plan to exit its troubled UK businesses and focus on its more profitable home market. NAB said growth in mortgages and business lending in Australia and New Zealand helped boost revenue by 4 percent for the quarter-ended June 30.

Increase in Cambodia’s insurance revenue

Two Islamic parties have also proposed legislation to ban consumption of alcohol in the country with the world’s largest Muslim population

steep increase in Indonesia’s import tariffs on wine and spirits could more than double prices that were sky-high already, denting demand and raising the risk of smuggling, drinks industry executives say. Under new tariffs that came into effect on July 23, importers have to pay 90 percent on the value of wine and 150 percent on spirits. Importers previously paid a fixed amount per litre. The new ruling is the latest blow to a US$300 million industry already reeling from an April ban on alcohol sales at minimarts. “It’s quite a shock to the industry,” Dendy Borman, a board member at the International Spirit and Wine Association, told Reuters in a phone interview. Foreign companies that sell wine and spirits in Indonesia include Diageo Plc, Pernod Ricard, Remy Cointreau and Bacardi & Co. Prices for wine and spirits in Indonesia had already surged by

June industrial production rose 4.3 percent from a year earlier, slightly short of market predictions due to lower electricity demand, data from the Statistics Department showed yesterday. A Reuters poll of economists had forecast annual factory output would expand 4.4 percent, compared with May’s 4.5 percent which surpassed expectations. Government data earlier indicated that June’s exports unexpectedly grew 5.0 percent from a year earlier, a sharp rise from May’s decline of 6.7 percent, as shipments to China surged to its highest level since January 2014.

Jakob Friis Sorensen, former chairman of the European Business Chamber of Commerce in Indonesia. “Right now what Indonesia needs are clear and simple rules around trade, not further restrictions.” Coordinating Minister of Economics Sofyan Djalil said the cost increases for alcohol would not be as much as the new tariffs suggested because the hike was accompanied by the removal of quotas. “We believe that excessive consumption of alcohol is not good for the country, for the society,” Djalil told Reuters on Friday. “But because we remove the quota, the rent that was captured by a quota holder is simply not there anymore.” Still, businesses will have no choice but to eventually pass on the increased costs to consumers, said Ramon Meijer, general manager at the Lan Na Thai bar and restaurant in Jakarta, where wine and spirits make up around 40 percent of monthly sales. Reuters

Cambodia’s fledgling insurance industry earned a total premium of US$32.2 million in the first six months of 2015, up 20 percent from US$26.8 million a year earlier, official data showed yesterday. The premium mainly came from fire, engineering, marine cargo, motor-vehicles, health and personal accident policies, according to the Insurance Association of Cambodia. “The remarkable rise in the insurance revenue is thanks to better economic situation and greater inflows of foreign direct investment into Cambodia,” President of the association Huy Vatharo said. The nation has eleven insurers, including eight general insurance firms and three life insurers.

Myanmar, Thailand vow to push Economic Zone Myanmar and Thailand have pledged to push forward the development of the Dawei Special Economic Zone (SEZ) in southern Myanmar’s Taninthayi region. Development of the over 200-square-kilometer Dawei SEZ will be carried out in two phases -- the Initial Phase Development and the long-term master plan, according to the recent fourth meeting of Myanmar-Thailand Joint High-Level Committee Meeting on comprehensive development of the Dawei SEZ held in Nay Pyi Taw. The initial phase development work, which is expected to be completed in eight years, is predicted to create about 300,000 jobs for local people by 2025.

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International Gazprom profit jumps on weak rouble Russia’s largest gas producer Gazprom beat expectations with a 71 percent jump in first-quarter net profit after weakness in the rouble more than compensated for a drop in sales volumes to Europe. Gazprom’s prices for gas sold to Europe are linked to the price of oil, but a time lag of several months means that its sales in the three months to March 31 were at prices pegged to oil at almost twice its January level of around US$50 a barrel. Though Western sanctions resulted in a 16 percent drop in Gazprom’s European sales volumes, export revenue was up 12 percent.

Tanzania to invest US$380 mln in agriculture Tanzania will invest 800 billion shillings (US$380 million) over the next eight years in a new state-run agriculture bank to boost growth in the sector, which has long been stifled by low productivity and a lack of financing. President Jakaya Kikwete launched the Tanzania Agricultural Development Bank (TADB) on Friday after the government provided 60 billion shillings in seed capital for its establishment. The bank will help to modernise the country’s agriculture sector and boost productivity by providing short, medium and long-term financing, the government said.

Scotland to ban GM crops Scotland is set to ban the cultivation of genetically modified (GM) crops, officials announced Sunday. It is set to implement the move under European Union rules introduced earlier this year which allow countries to opt out of growing the crops, a statement from the Scottish government said. “The Scottish government will shortly submit a request that Scotland is excluded from any European consents for the cultivation of GM crops, including the variety of genetically modified maize already approved and six other GM crops that are awaiting authorisation,” the statement said.

Greece hopes to conclude bailout talks today Greece hopes to conclude negotiations with international creditors by early today at the latest, a Greek official said as talks continued in Athens on a new multi-billion euro bailout designed to keep the country from financial ruin. Greece’s finance and economy ministers were locked in negotiations with representatives of creditors on Sunday, which stretched until the early hours of yesterday. Greek officials have previously said they expect the bailout accord to go to the country’s parliament for approval by August 18.

France’s labour minister to quit Labour minister said yesterday that he would step down next week to become mayor of Dijon, forcing President Francois Hollande to find someone else to tackle stubbornly high unemployment. Francois Rebsamen told Le Parisien daily that he would hand in his resignation on August 19, after the next cabinet meeting. “I never dreamed of combining the jobs of labour minister and mayor of Dijon ... I know very well that one cannot combine the two and I never envisaged that,” said Rebsamen.

Draghi savours synchronized summer for top euro economies Citing a slowdown in emerging and developing economies, the International Monetary Fund last month cut its global growth forecast for 2015 though Catherine Bosley

ario Draghi could be forgiven for lingering a little longer on the sun lounger this August. For the first summer since he took office as president of the European Central Bank, the region’s four biggest economies are posting growth, spurred by a weaker euro and lower oil prices that are boosting consumer spending. Fears about deflation have abated, and another year of ECB extraordinary stimulus means economic tailwinds are likely to persist. Reports on Friday will probably show output in the 19-nation bloc expanded for a ninth quarter, with Germany, France, Italy and Spain all growing. This relatively smooth sailing stands in contrast to the summer of 2012, when Draghi said he’d do “whatever it takes” to keep the union together. A year later, his home country Italy lumbered on in its longest recession since World War II, while August 2014 marked Draghi’s shift toward quantitative easing in Jackson Hole. “It fits in to the general picture of a gradual recovery taking shape,” said Anatoli Annenkov, a senior economist at Societe Generale in London. “Certainly for the ECB this is probably one of the first summers where they are not so actively engaged.” Euro-area gross domestic product expanded 0.4 percent in the three months through June from the previous quarter, according to the median forecast of economists in a Bloomberg survey. That would match the pace of the first quarter.

In Italy, where Prime Minister Matteo Renzi has promised tax cuts to support growth and make up for ground lost, the economy probably expanded 0.3 percent in the period. France may have grown for the fourth consecutive quarter. “It all points to us having relatively robust growth in the second quarter despite all the troubles in Greece,” said Jens Kramer, economist at Nord LB in Hanover, Germany. “Compared with the past, the heterogeneity among the economies may have diminished somewhat -- but it remains.”

Spanish boom

QE working

Spain, whose government had to seek aid for the banking sector in 2012, is now at the forefront of the euro area’s economy. It grew the most in eight years in the second quarter and is forecast to expand twice the pace of the bloc this year. Germany, Europe’s largest economy, is seeing consumer spending benefit from the lowest unemployment rates since the country’s reunification. The Bundesbank predicts “quite robust” growth this year and economists say it expanded 0.5 percent in second quarter.

A Grexit scenario could massively hit sentiment, and thus weigh on the euro-area economy… Another question is China. It’s a risk factor for Germany and its exports Johannes Gareis, economist, Natixis

Judging by a closely watched manufacturing and services index, the euro area maintained momentum at the start of the third quarter, weathering strains on confidence from the Greek debt crisis. While the inflation rate held steady in July, core inflation, which strips away volatile elements such as energy and food, accelerated to 1 percent -- the fastest in 15 months. A second reading of inflation data is due on Friday. For ECB Governing Council member Bostjan Jazbec, these data confirm the central bank’s QE policy.

“I don’t think that we need any tools and any additional instruments at this point,” Jazbec said in an Aug. 5 interview in Ljubljana. The stimulus is “obviously working,” he said. The ECB has committed to running its bond-buying program until at least September 2016 and minutes of its July 16 policy meeting -- due to be published in Frankfurt on Thursday -- will provide additional insight into the central bank’s thinking.

Grexit averted

Still, Draghi can’t relax completely. Just a month ago, the bloc faced the possibility of a breakup and ensuing financial market turmoil as Greece threatened to default on its debts. While the immediate crisis in Athens has dissipated, bank stocks collapsed almost 60 percent last week and some officials fret the country is still one accident away from leaving the euro. German industrial production unexpectedly fell in June, resulting in stagnation for the second quarter. In France and Italy, the gauge also declined in June. Then there’s oil: its 25 percent slump since the end of June could revive deflationary concerns. And joblessness, particularly in southern Europe, is still high, potentially constraining growth. Economic growth is cooling in the world’s second-largest economy and the stock market suffered a massive rout. That could weigh on thirdquarter momentum in the euro area, according to economists. Citing a slowdown in emerging and developing economies, the International Monetary Fund last month cut its global growth forecast for 2015. Yet it expects a pickup among advanced economies, with the euro area’s recovery “broadly on track.” Still, the currency region is set for a busy period over the rest of the year, which may feature elections in Greece in addition to scheduled ones in Spain. Annenkov recommends Draghi make the most of any vacation he may take. “It’s not going to be a long holiday for him,” he said. Bloomberg News

Business Daily | 15

August 11, 2015

Opinion Business

wires

The right time to reform fuel pricing

Leading reports from Asia’s best business newspapers

Jeffrey Frankel

Professor of Capital Formation and Growth at Harvard University

BANGKOK POST The weak global economy has led to declining orders from overseas importers, forcing Thai industries to cut their production capacity and overtime payments to employees, reports the Employers’ Confederation of Thai Trade and Industry (EconThai). The drop in worker income has put more pressure on already weak domestic purchasing power, it said. EconThai’s survey showed overtime payments in the first half of this year dropped by 21.1% because of lower production capacity, which fell to 55%. Production capacity for small and medium-sized enterprises fell to 48% in the first half.

THE JAPAN NEWS Global exports in 2014 inched up 0.8 percent from the previous year to an estimated US$18.75 trillion, hitting a record high for the fourth straight year, according to data released by the Japan External Trade Organization. Exports soared for mobile phones and other communication devices, and chip making equipment. By contrast, exports of iron ore and coal declined, reflecting a slump in global market prices, according to JETRO’s annual Global Trade and Investment Report. The growth in overall exports slowed from 2.7 percent in 2013.

THE TIMES OF INDIA Central Bank of India will be diluting stake in its housing finance subsidiary through an initial public offering. The bank, which is struggling with stressed assets that account for a fifth of its loans, is now growing home loans aggressively in its own balance sheet. Cent bank Home Finance, a registered housing finance company, started operations in 1991. Although it is a subsidiary of the bank, outside investors including Housing and Urban Development Corporation (HUDCO), Unit Trust of India and National Housing Bank together own 35% stake in it.

THE PHNOM PENH POST Having established itself with Japanese automotive parts manufacturers, Phnom Penh Special Economic Zone said on Friday that going forward it will target German companies with similar operations, to increase investments at its current and proposed Poipet economic zones. Hiroshi Uematsu, CEO of Phnom Penh Special Economic Zone (PPSEZ), said the weakening of the yen against the dollar could slow down new private Japanese investments, but the SEZ could capitalise on the presence of German, French and American companies in the region.

orld oil prices, which have been highly volatile during the last decade, have fallen more than 50% over the past year. The economic effects have been negative overall for oilexporting countries, and positive for oil-importing countries. But what about effects that are not directly economic? If we care about environmental and other externalities, should we want oil prices to go up, because that will discourage oil consumption, or down because that will discourage oil production? The answer is that countries should seek to do both: Lower the price paid to oil producers and raise the price paid by oil consumers, by cutting subsidies for oil and refined products or raising taxes on them. Many emerging-market countries have taken advantage of falling oil prices to implement such reforms. The United States, which is now surprisingly close to energy self-sufficiency, so that the macroeconomic effects roughly balance, should follow suit. Consider this: America’s roads and bridges are crumbling, and the national transportation infrastructure requires investment and maintenance. And yet the US Congress shamefully continues to evade its responsibility to fund the Federal Highway Trust Fund and put it on a sound long-term basis, owing to disagreement over how to pay for it. The obvious solution, which economists have long advocated, is an increase in America’s gasoline taxes. The federal gas tax has been stuck at 18.4 cents a gallon since 1993, the lowest among advanced countries. And yet, on July 30, Congress adopted only a three-month stopgap measure, kicking the gas can down the road for the 35th time since 2009.

Fossil-fuel pricing is a striking exception to the general rule that if the government has only one policy instrument, it can achieve only one policy objective. For starters, the money saved from a reduction in subsidies or an increase in taxes in the oil sector could be used either to reduce budget deficits or to fund desirable spending (such as US highway construction and maintenance). At the same time, lower oil consumption would reduce traffic congestion and accidents, limit local air pollution and its adverse health effects, and lower greenhouse-gas emissions, which lead to global climate change. Fuel taxes are a more efficient way to achieve these environmental goals than most of the alternatives. There is also a nationalsecurity rationale. If the retail price of fuel is low, domestic consumption will be high. High oil consumption leaves a country vulnerable to oilmarket disruptions arising, for example, from instability in the Middle East. If gas taxes are high and consumption is low, as in Europe, fluctuations in the world price of oil have a smaller effect domestically. Subsidies to US oil producers have often been sold on national-security grounds; in fact, a policy to “drain America first” reduces self-sufficiency in the longer run. Finally, although fuel subsidies are often misleadingly sold as a way to improve income distribution, the reality is more nearly the opposite. Worldwide, fossil-fuel subsidies are regressive: far less than 20% of the payments benefit the poorest 20% of the population. Poor people are not the ones who do most of the driving; rather, they tend to use public transportation (or walk). The conventional wisdom is that it is politically impossible

If we care about environmental and other externalities, should we want oil prices to go up, because that will discourage oil consumption, or down because that will discourage oil production?

in the US to increase the gas tax. But other countries have political constraints, too. Indeed, some developingcountry governments have faced civil unrest, even coups, over fuel taxes or subsidies. Yet Egypt, Ghana, India, Indonesia, Malaysia, Mexico, Morocco, and the United Arab Emirates have all reduced or abolished various fuel subsidies in the last year. Besides raising taxes on fuel consumption, the US should also stop some of its subsidies for oil production. Oil companies can immediately deduct a high

percentage of their drilling costs from their tax liability, which other industries cannot do with their investments. Likewise, the oil industry has often been able to drill on federal land and offshore without paying the full market rate for the leases. Most politicians know that sound economics would call for these benefits to be eliminated; but those who complain the loudest that the government must not pick corporate winners and losers seem to be the least able to summon the political will to act. A recent study by the International Monetary Fund estimated that global energy subsidies are running at more than US$5 trillion per year, while fossil-fuel subsidies in the US have been conservatively valued at US$37 billion per year (not including the cost of environmental externalities). As leaders in emerging-market countries have recognized, falling oil prices represent the best opportunity to implement reform. Governments that act now can reduce energy subsidies or increase taxes while sparing consumers an increase in the retail price from one year to the next. For the US and other advanced countries, it is also a good time for reform from a macroeconomic standpoint. In the past, countries had to worry that a rising fuel tax could become built into uncomfortably high inflation rates. Currently, however, central bankers are not worried about inflation, except in the sense that they want it to be a little higher. The US Congress will have to come back to highway funding in September. If other countries have found that what was politically impossible has suddenly turned out to be possible, why not the US? Project Syndicate

16 | Business Daily

August 11, 2015

Closing PwC says Noble Group’s accounting comply with rules

Chinese official urges technological cooperation

PricewaterhouseCoopers (PwC) said yesterday Noble Group acted within relevant rules in valuing contracts, and did not identify any major shortcomings in the accounting methods of Asia’s biggest commodities trader. In a report commissioned by Noble to examine its accounting practices, PwC, however, recommended that the company strengthen the role of compliance or internal audit in order to improve the way it values some of its commodity contracts. Noble’s investment grade credit rating is at stake after the company was first accused in February of poor accounting practices by Iceberg Research.

Vice President Li Yuanchao said yesterday the nation’s technological development can benefit from the cooperation with foreign scientists. Li made the remarks when delivering a speech at the opening ceremony of the 8th International Congress on Industrial and Applied Mathematics (ICIAM). Li said the Chinese government supports international exchanges and cooperation in science and technology, adding China will work with other nations to boost the development of industrial and applied mathematics. He urged Chinese scientists to conduct academic exchanges and cooperate with foreign counterparts in research as well as contribute to the progress of science.

HK to play super-connector role for China’s ‘Belt and Road’ HKSAR’s Chief Executive notes Hong Kong’s ‘super-connector’ function not limited to economic field but also works in scientific aspect

ong Kong should intensify its role as the “super-connector” linking the Chinese mainland and the rest of the world, and grasp the opportunity of the China’s “One Belt, One Road” initiative to boost its economy, said Leung Chunying, Chief Executive of Hong Kong Special Administrative Region (SAR). The SAR government should abandon out of date “positive nonintervention” mentality of economic development amid increasing competition with neighbouring economies, said Leung during a recent exclusive interview with Xinhua at Government House. Leung said he has proposed a new idea that the government should be appropriately active in promoting Hong Kong’s economy, and it has now been recognized by the Hong Kong society. But this has been a rather different idea since Hong Kong has been long considered a typical laissez-faire economy with “ positive nonintervention” policy carried on by previous governors in British colonial rule.

“One of the reasons why I propose this new idea is, the governments of Hong Kong’s rival economies have been quite active in dealing with economic and livelihood issues,” he added. If Hong Kong, as an economy, is to compete with rivals like Singapore and South Korea, the government has to reconsider what kind of roles that the SAR government should and could play, the chief executive said. After he took office in 2012, Leung has urged Hong Kong to play a role as “superconnector” between Chinese mainland and the rest of the world, as the region has its unique advantages created by the “One Country, Two Systems” principle. The “super-connector” should act in both ways, according to Leung. On one hand, Hong Kong should continue helping mainland companies with their overseas businesses. On the other hand, the SAR government should pay more attention to attract more foreign investment, talents and technologies to Hong Kong and the mainland.

Many economies, according to Leung, have shown great interests in having economic cooperation with the Chinese mainland through Hong Kong. Leung stressed that Hong Kong’s such function could not be noticed in its transhipment trade volumes chart. “Many commodities sold by the U.S., Canada or India were shipped directly to the mainland, but their contracts were signed with Hong Kong companies.” Leung also revealed that the SAR government is considering an appropriate way, including setting up an official organ, to participate in China’s “Belt and Road” initiative. He believed that Hong Kong’s enterprises home and abroad could provide their business experiences and contribute to the country’s ambitious program and Hong Kong’s role within it. “People from Singapore often told me that they envy Hong Kong has many successful businessmen, such as Mr. Li Ka-shing. I told them that Hong Kong also has many medium-

Leung Chun-ying

and-small companies which have achieved success in overseas. We should support them, promote their overseas businesses,” he said. Leung said Hong Kong should reinforce its position of a place for enterprises’ headquarters in promoting the “One Belt, One Road” initiative. According to Leung, the SAR government will open more overseas economic and trade offices to meet a growing demand to promote Hong Kong. So far, the SAR government has set up 11 economic and trade offices overseas.

Thailand to sell 1 million tonnes of rice to Mainland

Alibaba buys stake in Suning as retail network expands

hina will buy 1 million tonnes of rice from Thailand, the Thai commerce minister said yesterday, easing pressure on a military government struggling to shift stockpiles of the grain accumulated under a previous farm-subsidy programme. Thai Commerce Minister Chatchai Sirikalya, following a visit to China last week, said the country agreed to buy 1 million tonnes of rice to be delivered at year-end. Thailand, the world’s second-largest rice exporter, has about 14.5 million tonnes of rice in stockpiles built up under a generous rice subsidy scheme run by a government that was overthrown by the military in May 2014. The rice will be sold to China at market prices, said Chatchai, adding that the sale involved Hom Mali, or Thai jasmine rice, and Thai 5-percent broken white rice. “In the past week the commerce ministry travelled to China and agreed with the Chinese government to do a government-to- government sale and agreed to officially sell rice (to China),” Chatchai told reporters. Reuters

However, Leung noted that there are still some obstacles inside Hong Kong despite government efforts to boost economic development and improve people’s livelihood. Speaking of Hong Kong people’s livelihood, the chief executive agreed that housing problem is the biggest one among others, as many public polls showed that Hong Kong residents have repeatedly complained about unaffordable housing price and the long queuing time to acquire government’s public housing apartments. The chief executive noted that increasing land supply is for not only solving Hong Kong residents’ housing problem but also the region’s economic development needs, including the financial industry. “Statistics have shown that there are also strong demand for land, especially business buildings, in Hong Kong. So the government has an ambitious plan to develop Kowloon East, which will be another major business centre in the future,” said the executive. Xinhua

OECD indicator shows steady decline in China

he group will spend 28.3 billion yuan (US$4.6 billion) for a stake in Suning Commerce Group Ltd. to bolster its reach in electronics with a network of stores in China. Alibaba will buy a 19.9 percent stake in Suning, which will in turn spend 14 billion yuan for shares in the e-commerce operator, according to a Business Wire statement yesterday. The companies will partner in logistics and online sales to target deliveries as fast as two hours. “This new alliance brings forth a new commerce model that fully integrates online and offline,” Alibaba Executive Chairman Jack Ma said in the statement. Suning has more than 1,600 outlets spread across 289 cities in China selling appliances, books and baby products. Alibaba will become the secondlargest investor in the Nanjing-based retailer. The partnership helps Alibaba in its battle with second-ranked JD.com Inc., which specializes in selling branded electronics. The partnership with Alibaba’s Cainiao logistics affiliate will cover almost all of the 2,800 counties and districts in China, they said.

conomic growth is showing further signs of firming in France, Italy and the euro zone overall, while growth looks to be easing to around long-term trends in the United States and UK, the Organisation for Economic Co-operation and Development said. Trends are pointing more strongly to a loss in growth momentum in Brazil and China, meanwhile, according to the OECD’s monthly leading indicator, a measure designed to flag turning points in the international economy. Stable growth momentum is expected in Germany, Japan and India, while indications for Russia also point to stable growth momentum although below the long-term trend, the OECD said yesterday. The indicator, a synthetic index where 100 is the long-term average, remained at 100.7 in the euro zone for the fourth consecutive month in June but continued to ease to 99.4 in the U.S. from May’s 99.5, having fallen below 100 in February. China’s indicator continued its steady decline to 97.4 in June from 97.5 in May. Brazil slipped to 98.8 from 99.0. The reading for Germany, the euro zone’s biggest economy, was stable at 100.0.

Bloomberg News

Reuters