Macau Business Daily October 20, 2015 by Business Daily

MOP 6.00

Vino Veritas

Closing editor: Joanne Kuai

During the first eight months of the year, Macau imported MOP809.23 million-worth of wines and champagne. Portuguese wines topped the volume market with 1.37 million litres. But took third place in terms of value at MOP43.15 million. France accounted for MOP639.76 million-worth of imported products. Occupying 79.1 pct of the total market

Year IV

Number 902 Tuesday October 20, 2015

Publisher: Paulo A. Azevedo

Page 4

ePrix Electrifies Competition Next year, Hong Kong will host ePrix. The world’s first fully electric racing series. MGTO Director Maria Macau-Portugal trade Helena de Senna Fernandes says the Macau Grand Prix has its own fan base. And a long established up 13 pct Jan-Aug history. Which will continue to attract a wide spectrum of spectators. A leading motorsports industry Page 2 insider concurs. Citing a host of differences in the events that fans will gravitate towards Pages 6&7

Invention patents fizzle The Economic Services Bureau (DSE) received some 3,417 applications for industrial property registration in Q3. Representing 0.73 pct drop y-o-y. On a y-o-y basis, applications for invention patents plunged 46.1 pct

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Gaming

Code of ethics

Security Fund secure

The gov’t promised an extra injection of MOP13.5 billion (US$1.69 billion). This for the city’s Social Security Fund (FSS) for 2016. However, the gov’t has yet to resolve one outstanding issue. Lack of consensus on the contribution ratio by employers and employees supporting the Fund

www.macaubusinessdaily.com

Page 2

Close to target China’s economy expanded quicker than economists forecast in Q3. With the services sector propping up the world’s second-largest economy. Keeping Premier Li Keqiang’s 2015 expansion target within reach

Page 10

Macau’s junket operators will meet with the gov’t. Regarding a code of ethics to improve the sector’s image. Damaged by alleged capital flight from junket operator Dore Entertainment. DICJ will meet representatives of VIP gaming promoters this week. To discuss accounting practice and financial reporting

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Salary complaints levelled against Beijing Imperial Palace Hotel Page 4 A more stable yuan provides room for monetary stimuli Page 8 Real estate investment cools to slowest rate since 2008 Page 10

HSI - Movers October 19

Name

%Day

China Merchants Holdi

+3.01

China Resources Powe

+2.08

China Mobile Ltd

+1.86

China Petroleum & Che

+1.57

Kunlun Energy Co Ltd

+1.37

Belle International Ho

-2.33

Lenovo Group Ltd

-2.49

China Mengniu Dairy C

-2.67

China Resources Powe

-2.83

Galaxy Entertainment

-3.44

Source: Bloomberg

I SSN 2226-8294

2015-10-20

2015-10-21

2015-10-22

21˚ 28˚

22˚ 29˚

2 | Business Daily

October 20, 2015

Macau CEM subsidises 5 cents for Tariff A customers CEM says according to the calculation under the concession contract, Tariff Clause Adjustment (TCA) will be 42 cents per kWh in the fourth quarter. CEM vows to continue offering subsidies to Tariff A customers, which include residential customers and small & medium enterprises supplied with low voltage, covering over 99 per cent of the total customer base. The contractual calculated value of 42 cents per kWh will be lowered to 37 cents, meaning a reduction of 5 cents per kWh. For Tariff B, C and D customers, in accordance with the contractual calculated value, the TCA in the 4th quarter will be 42 cents per kWh, 1 cent per kWh lower than in the last quarter.

Government’s injection into FSS unaffected by gaming slump But the government has yet to resolve the deadlock over the lack of consensus on the contribution ratio by employers and employees supporting the Fund Stephanie Lai

sw.lai@macaubusinessdaily.com

he government’s promised extra injection of MOP13.5 billion (US$1.69 billion) into the city’s Social Security Fund (FSS) for 2016 remains unaffected by the continuous slump in gaming income. Nevertheless, a lack of consensus by employers and employees related to the contribution ratio to the fund remains a challenge to sustaining the Fund.

Speaking to media on the sidelines of an event on Sunday, the Social Security Fund’s president, Ip Peng Kin, said the reduced government income from gaming has not impacted the government’s special programme to inject MOP37 billion into the Fund from 2013 to 2016. For next year, an amount of MOP13.5 billion will have to be injected into

the fund to support the city’s pension and several allowances, according to Mr. Ip. “The government will have a regular review of the Fund’s expenses and income, and will decide if we’ll have other channels to support it,” he briefly told media without further elaborating upon what these channels were.

The special injection programme into the Fund is a move that Mr. Ip referred to in early 2013 in order to prevent the Fund from going bankrupt in 50 years – given that the contributions by employers and employees is still too low. Currently, the obligatory monthly contribution amount from both the employer and employee totals MOP45, with the employer required to pay two-thirds. The government intends to increase the monthly contribution to MOP90 but previous talks with the Standing Committee for the Co-ordination of Social Affairs are still deadlocked over the contribution ratio as the employee party’s representatives were insistent upon maintaining the current ratio, with which the employer’s party disagrees. At this point in time, employer and employee parties have still failed to reach a consensus related to the contribution ratio to the Fund, Mr. Ip said. “We will study the affordability of the employer and the employee’s side [to support the Fund] and then we’ll take their opinions [into consideration] before making a decision,” he remarked regarding the intended enhancement of contributions to the Social Security Fund.

Macau-Portugal trade up 13 pct Jan-Aug

ilateral trade between the Special Administrative Region and Portugal surged nearly 13 per cent year-on-year for the first eight months of the year, the Executive Director of Macau Trade and Investment Promotion Institute (IPIM), Glória Batalha Ung, revealed during a trip in the European country. According to Ms. Ung, the value of bilateral merchandise trade between the city and Portugal jumped 12.9 per cent year-on-year to US$22 million between January and August this year. Meanwhile, in 2014, trade value exceeded US$31 million. The government official visited the European country

last week to promote the advantages of the Special Administrative Region as a trade and commercial co-operational service platform between China and Portuguese-speaking countries. Ms. Ung said in a presentation held by Portuguese postal savings authority Caixa Geral de Depósitos that Macau is effectively playing its role as the platform for China and Portuguese-speaking countries by co-ordinating the central government’s strategic policies, such as ‘One Belt, One Road’, ‘Internet Plus’ and the establishments of free trade zones. Meanwhile, the local branch of Bank of China

(BOC Macau) and its branch in Lisbon also promoted their yuan-clearing service for Portuguese-speaking countries in Portugal’s northern economic centre Oporto last week, attracting attendance by more than 70 banks and enterprises from Portuguese– speaking countries. In August, BOC Macau was given the green light by China’s central bank, People’s Bank of China (PBOC), to operate renminbi clearing services for Portuguesespeaking countries. Prior to the approval, the bank’s renminbi clearing service scope covered only Macau, Hong Kong and the Association of Southeast Asian Nations. K.L.

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October 20, 2015

Macau Xiao Nan Guo same-store sales dip Shanghai-based caterer Xiao Nan Guo Restaurants Holdings Ltd. said its aggregate same store sales during the third quarter of the year had dipped 0.2 per cent compared to the same period last year, according to its filing with the Hong Kong Stock Exchange last week. Nevertheless, the caterer did not disclose details of its operational results for the quarter. Currently, the company has three establishments in the Special Administrative Region. For the first half of the year, its net profit totalled 14.9 million yuan (MOP18.7 million/US$2.36 million) to soar 2,477 per cent year-on-year.

DSE receives 3,417 intellectual property rights applications

he Economic Services Bureau (DSE) received some 3,417 applications for industrial property registration during the third quarter of the year, according to the latest official data released by the government department last week. The number, compared to 3,442 applications received during the same period of last year, represents a slight drop of 0.73 per cent. In addition, it means a decrease of 1.21 per cent from 3,459 during the second quarter of the year. However, the official data did not reveal how many applications it had approved for the quarter. The data reveals that most of the applications, nearly 95 per cent of the total, were for registering trademarks

in the Special Administrative Region, amounting to 3,230. Compared to the previous quarter, the number is a decline of 2.09 per cent, or 0.95 per cent year-on-year. Nevertheless, applications for registering other types of intellectual property rights registered a notable increase in the three months. According to DSE, the number of applications for invention patent and extension posted a quarter-onquarter increase of 31.3 per cent and 21.5 per cent, accounting for 21 and 96 of the total applications, respectively. On a year-on-year comparison, however, the number of applications for invention patents plunged 46.1 per cent, while that for extending patents increased 11.6 per cent.

In addition, more enterprises applied for the rights of industrial design or model between July and September. The number of applications totalled 60, up 9.09 per cent quarter-on-quarter, or 30.4 per cent year-on-year. Meanwhile, applications for utility patents, and those for registering the name and emblem of an establishment remained at 4 and 6 as per the previous quarter, respectively.

Cumulatively, the economic bureau received some 10,655 applications for registering intellectual rights during the first nine months of the year, of which 10,099 were for registering trademarks, while some 268 and 190 were for applying to register an extension of invention patent, and industrial design or model, respectively. K.L.

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October 20, 2015

Macau José Manuel Barroso receives honorary professorship from IPM Former President of the European Commission José Manuel Durão Barroso will today receive an honorary professorship from Macau Polytechnic Institute (IPM). The ceremony will be held this morning and Mr. Barroso will also host a conference on the challenges and advantages of globalisation in the 21st Century. Before being elected as President of the European Commission, José Manuel Barroso was Prime Minister of Portugal, Minister of Foreign Affairs and Secretary of State for Foreign Affairs and Co-operation in 1987. As Portuguese Foreign Minister, he visited Macau three times, in 1993, 1994 and 1995.

Territory imports MOP810 mln-worth of wine and champagne While the French products occupy the largest share of the market in terms of cost of imports, Portuguese wines are the most consumed with 1.37 million litres João Santos Filipe

jsfilipe@macaubusinessdaily.com

uring the first eight months of the year, Macau imported MOP809.23 million-worth of wines and champagne, according to data compiled by Business Daily based on figures from the Statistics and Census Service (DSEC). Considering the amount imported,

French products alone accounted for MOP639.76 million-worth of imported products, occupying a share of 79.1 per cent of the total market. While data for all the categories of common wines are not made available by DSEC, for confidential reasons, from what it is possible to access

imports of red wine in containers of less than 2 litres account for MOP722.25 million-worth of the market. In this category alone, French wine imports account for MOP591.75 million-worth. The other drink where French imports skyrocket in comparison with products from other countries is champagne. In a MOP24.90 million market, French products account for MOP23.78 million. In terms of the value of imports, Australian wines take second position with MOP49.79 million. Most of the imports of Australian products are red wines in containers less than 2 litres, generating MOP47.85 million. The top three wine and champagne import positions are occupied by Portuguese products. Imported products from this country total MOP43.15 million, and also mainly driven by red wines. The remaining positions in the top five imported wines are occupied by the United States, valued for the first eight months of the year at MOP22.33

million, and Germany, at MOP13.79 million.

Market in litres

Considering imports by the number of litres imported, the first position is taken by Portugal, which delivered some 1.37 million litres of wine and champagne to the territory. This is an indicator showing that on average Portuguese products are cheaper than Australian and French. France has always been famous for its wines, especially from the region of Bordeaux. During the first eight months of the year, France exported 1.33 million litres to Macau. In this respect, American wines are the third most consumed in the market, at 0.34 million litres, while Australian and Spanish wines exported roughly the same amount of litres (0.28 million), taking fourth and fifth position, respectively. According to data published by DSEC for the first eight months of the year, some 4 million litres of wine and champagne were imported.

Salary complaints levelled against Beijing Imperial Palace Hotel

he city’s Labour Affairs Bureau (DSAL) says it has received complaints from 281 employees working for Beijing Imperial Palace Hotel claiming unpaid salaries. About 30 staged a demonstration outside the hotel in Taipa yesterday morning in protest. The protesting employees claimed that around 200-300 hotel staff, including both resident and nonresident workers, have been owed pay for [several] months this year, public broadcaster TDM reported. The workers that claimed owed pay are employed on the casino floors and in the food and beverage department of the hotel. In a reply to Business Daily, the Labour Affairs Bureau said it has received complaints over owed pay from 281 staff from Beijing Imperial Palace Hotel. Aside from monthly salaries, the workers’ claims included

owed compensation for working on mandatory holidays, overtime work and layoff compensation, the Bureau confirmed. Beijing Imperial Palace Hotel, formerly known as New Century Hotel, hosts Casino Greek Mythology, which is operated by Greek Mythology Entertainment Group under the gaming licence of Sociedade de Jogos de Macau S.A.. Hong Kong-listed junket investor Amax International Holdings Ltd. owns 24.8 per cent of equity interest in Greek Mythology Entertainment, according to the company’s 2015 annual report filed in late July. The hotel was embroiled in disputes filed by employees over claims of unpaid salaries last year and in 2013, although these cases have already been resolved and filed, according to DSAL. SL. with K.L.

MIF to kick off on Thursday

he 20th Macao International Trade and Investment Fair will be held at The Venetian from 22 to 25 October 2015. Organizer Macau Trade and Investment Promotion Institute (IPIM) said since its inception in 1996, this 20-year development journey has gradually made MIF a widely-recognised and highly influential international exhibition throughout the region. The theme of this year’s edition is ‘Co-operation – Key to Business Opportunities’. By strengthening regional co-operation, MMIF hopes to demonstrate to the world Macau’s advantages as a world tourism and leisure centre as well

as a premium business and trade service platform between China and Portuguese-speaking countries. In addition, some of the highlights of the 20th MIF for European countries are the new business opportunities created by the “’One Belt, One Road’ initiative, developing the ‘Three Centres’ to Promote the Platform between China and PSCs and expand co-operation between Guangdong and Macao by Promoting Business Opportunities in the Free Trade Zone. This year’s MIF expects to have 1,900 booths covering a floor space of about 37,000 square metres.

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October 20, 2015

Macau Starwood appoints new managing director Starwood Hotels & Resorts has announced the appointment of Ms. Janet McNab as Managing Director of Sheraton Macao Hotel, Cotai Central and The St. Regis Macao, Cotai Central. She reports directly to Mr. Josef Dolp, who has been promoted to Vice President of Operations for Hong Kong, Taiwan, Macau and Korea. Ms. McNab now oversees all of the hotel operations at the 4,000-room Sheraton Macao Hotel – Starwood’s largest Sheraton worldwide – as well as the 400-room St. Regis Macao set to open in December. Australian-born, but of Italian descent, Ms. McNab began her career with Starwood Hotels & Resorts 25 years ago in Brisbane. She has spent more than 13 of those years in Asia, working at properties throughout Thailand, China, Indonesia, and now Macau.

Junket operators meeting government to discuss accounting rules The head of a junket association here believes that the meeting is part of the government’s effort to help the sector build a more positive image following the alleged capital flight from junket operator Dore Entertainment Stephanie Lai

sw.lai@macaubusinessdaily.com

acau’s junket operators are meeting the government soon to discuss a “better” accounting practice for the sector, as they are still struggling to improve their image following previous negative impressions related to the alleged capital flight of VIP gaming operator Dore Entertainment Co. Ltd., Business Daily has learned. Kwok Chi Chung, the president of the Association of Gaming and Entertainment Promoters of Macau, told Business Daily that the city’s casino regulator, the Gaming Inspection and Coordination Bureau (DICJ), will meet representatives of VIP gaming promoters this week to talk about the accounting practice of these junket companies’ financial reporting. DICJ has confirmed to us that the meeting will focus on the existing accounting rules for junket companies and the addressing of their queries regarding such rules. “In this coming meeting, the main issue is about how the [junket] industry can do better in their accounting

practices for the companies’ operation,” Mr. Kwok said. “This talk is part of the government’s intended introduction of a set of internal guidelines aimed at monitoring the junkets here, as well as to raise the transparency of the disclosure of these junkets’ shareholders and staff,” the president of

the Association of Gaming and Entertainment Promoters of Macau added. But Mr. Kwok said he “had no information” about a code of ethics that the city’s government would like to introduce to improve the junket industry’s image, as reported by South China Morning Post, citing an

anonymous source familiar with the matter. Secretary for Economy and Finance Lionel Leong Vai Tac said late last month that the government was considering implementing a set of internal guidelines regarding a more stringent monitoring of the city’s VIP gaming promoters and

enhanced transparency in disclosing the sharesholders’ background of these promoters. The government said it would observe the effect before introducing any changes in local gaming laws regulating the licensing of VIP gaming promoters. Mr. Leong announced the intention following reports of an alleged capital theft from junket operator Dore Entertainment Co. Ltd. last month. Dore, which runs VIP operations at Wynn Macau casino, said that a former cage manager allegedly used her authority to pool deposit capital offering high interest rates without the company’s knowledge. The loss was estimated to involve at least HK$520 million, Chinese language newspaper Macao Daily News reported last week citing Judiciary Police. “The [reason] for this accounting rule, as well as the internal guidelines, is that the government is trying to help make an effort for the sector to build a better image, especially after the [Dore] incident,” Mr. Kwok told us.

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October 20, 2015

Macau

Formula E race in Hong Kong to benefit Grand Prix Hong Kong is one of the main markets targeted by the Macau Grand Prix but next year the region will hold its own race. Government and motorsport experts say local competition will benefit the territory event João Santos Filipe

jsfilipe@macaubusinessdaily.com

he motorsport industry has been booming in Southeast Asia in the last decade, with the competition for the Macau Grand Prix heating up. Two weeks ago, things were pushed a step further as Hong Kong – one of the main markets targeted by the Macau races – announced it will host a round of the electric engine competition Formula E next year, on 9 October. However, for the Government of Macau the fact that the Hong Kong electric race, titled ePrix, will be hosted on a date close to the local Grand Prix is not a threat that will drive away visitors, competitors or sponsors. “I’m glad to know that Hong Kong is set to host

the 2016 season of Formula E and truly wish that all organisers can come together for a successful ePrix. The event will certainly attract much attention and car racing enthusiasts to the region, which in the end is good, not only for Hong Kong but for Macau and the Macau Grand Prix as well”, the Director of Macau Government Tourist Office (MGTO), Maria Helena de Senna Fernandes, told Business Daily. While our publication understands that the announcement was unexpected by the Macau Grand Prix Committee, the view among experts in the area is that the territory has more to gain from the race in Hong Kong, even if the events are scheduled for consecutive months.

“The activity of motorsport between Hong Kong and Macau will simply capture the global imagination of potential visitors to the area and benefit both”, the Chief Executive of the Motorsports Industry Association, Chris Aylett, explained to Business

Daily, when asked if the Hong Kong race would drive visitors away from Macau. The Motorsports Industry Association is based in the United Kingdom and promotes the motorsport, performance engineering, services and tuning sectors.

Sponsors attracted by freshness This year, Macau Grand Prix is going to have a budget of MOP200 million (US$25 million), while the revenue, including income from tickets and sponsors, is expected to be at MOP53 million, representing an increase in relation to the previous edition. “Something new can always appeal to certain types of sponsor, and therefore the Formula E

event may have the benefit of being new, but it offers a very different motorsport experience to that offered by Macau and it will attract a very different (probably far younger) audience than Macau”, Chris Aylett said. “Both events will attract sponsors from different areas of business as they reach out to the different audience options that are attracted to the event”

Asian stocks retreat from two-month high as Chinese growth slows Macau casinos stocks fall as analysts cut rating

sian stocks slipped from an almost two- month high as raw-material producers led declines after China reported its slowest quarterly economic growth since 2009. BHP Billiton Ltd., the world’s largest mining company, slipped 1.2 per cent in Sydney. Sands China Ltd. slumped 6.4 per cent in Hong Kong, following a two-week rally, after Daiwa Securities Group Inc. cut the Macau casino operator’s rating, saying it may be unable to pay dividends

Formula E Operations Limited, organiser of the Formula E championship, is among its members. “It takes many years to build up the reputation for a top class event such as the Macau Grand Prix, and this will continue to attract an

this year on liquidity constraints. Asahi Kasei Corp. dropped 8.5 per cent in Tokyo, extending last week’s decline, after a report the company and partner Sumitomo Mitsui Construction Co. may be penalized for violating building laws. The MSCI Asia Pacific Index retreated 0.3 per cent to 134.17 as of 4:41 p.m. in Hong Kong after closing on Friday at the highest since Aug. 19. China reported gross domestic product rose 6.9 per cent in the three months through September from a

year earlier, beating economists’ estimates for 6.8 per cent growth while falling short of the government’s goal of about 7 per cent. A worldwide stock rally in October restored more than $4 trillion to the value of the global equity market amid optimism Chinese policy makers will boost measures to support the economy, and growing expectations the Federal Reserve will put off raising U.S. interest rates until next year. “The Chinese economy has been slowing but it’s unlikely to have a hard

landing as the services sector is still growing,” Khiem Do, Hong Kongbased head of multi-asset strategy at Baring Asset Management, which oversees about $41 billion, said by phone. “The market is consolidating after this month’s rally. Shares aren’t as cheap as they were a month ago.”

China Resilience

The Shanghai Composite Index slipped 0.1 per cent, erasing earlier gains of as much as 1 per cent. The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong climbed 0.5 per cent, while the city’s benchmark Hang Seng Index closed little changed. China’s economic resilience comes as a stronger services sector and robust consumption help offset weakness in manufacturing and exports. Other reports Monday showed the nation’s industrial output in September rose 5.7 per cent from a year earlier, compared with economists’ median estimate of 6 per cent. Retail sales increased 10.9 per cent, versus a 10.8 per cent gain forecast for the month. The government has cut interest rates five times since November and boosted infrastructure spending in recent months to keep growth from sliding too far below this year’s target. Japan’s Topix index dropped 0.7 per cent. Singapore’s Straits Times Index slipped 0.1 per cent. South Korea’s Kospi index and Australia’s S&P/ASX 200 Index both closed little changed. New Zealand’s S&P/NZX 50 Index added 0.3 per cent, as did Taiwan’s Taiex index. E-mini futures on the Standard & Poor’s 500 Index were little changed today. The underlying gauge advanced 0.5 per cent on Friday as General Electric Co. rose to a sevenyear high amid better-than-estimated quarterly profits. Bloomberg

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October 20, 2015

Macau a very different audience than those who enjoy the noise and thrills of engines of motorsport”, the Chief Executive of the Motorsports Industry Association stressed.

Opportunity to raise the bar

audience who enjoy seeing fast and close street racing”, he said.

Different competitions

Among the reasons named for the territory not to feel threatened by the race in Hong Kong is the different nature of the competitions. While Macau has a long established name, offering different high-speed races, including motorcycles, Hong Kong is focusing its attentions on an electric series, where speeds are not expected to top 225kph (140mph).

“The Macau Grand Prix is a legendary event, in its 62nd edition this year with Formula 3, GT, touring cars and motorcycle races, while Formula E, launched in 2014, is a new and futuristic championship, featuring the world's first fully electric racing series”, Maria Helena de Senna Fernandes stressed. “Macau has its own fan base; there’s a 60-year tradition and a race circuit with characteristics very difficult to match. The Formula E is a brand new

concept. The nature of the races and participants of Macau GP are very different. Macau GP is also a four-day event, not a single day of track action like Formula E”, the team manager of Art Motorsports, Philippe Descombes, whose team frequently races in Macau, told Business Daily. On the other hand, the fact that the Macau Grand Prix has a lot of races on its programme is an advantage with relation to Hong Kong, which is limited to one competition.

“Formula E race is not open to teams not entered in the series at full time. As Formula E events have no support races, this Formula E Hong Kong race has less to offer for teams not involved in the series”, Mr. Descombes said in explaining that the competition in Hong Kong will not impact the number of teams in Macau. “Formula E is a very special type of event. Only one type of car race and will be very slow compared to the average speed at Macau, and very quiet. This attracts

Even though the Macau Grand Prix has seen the World Touring Car Championship (WTCC) move away, the event has not been scratched by the increasing competition. “This [increasing competition] will challenge Macau’s organisational team to market their event with great skill and professionalism; to not only keep their established audience but attract new ones. The menu on offer in the restaurant of motorsport can offer many different dishes and prove popular with different clients – I’m sure this is going to be the case in Macau”, Mr. Ayllet said. “The more competition, the better competition. Macau is still the circuit and event that everyone wants to race. It would be unfair to say that Macau is losing its appeal. The World Touring Car Championship has gone but Macau will host the TCR International and Asia Series season finale. TCR is going to be the future of touring car racing in the world and the races are as interesting or even more than the WTCC ones”, the Team Manager of Art concluded.

8 | Business Daily

October 20, 2015

Greater China

Goldman says retreat of bears gives room for rate They expect a 25-basis-point rate reduction and one or two RRR cuts totalling 100 basis points by the year-end

he yuan bears are beginning to get fenced in, giving China’s central bank the chance to add ammunition in the battle for economic growth. Authorities have managed to curb yuan depreciation pressures after a two-month fight that saw the sale of dollar reserves, stronger daily reference rates and a barrage of verbal support. The discount of three-month yuan forwards over the spot price, a reflection of the outlook for the currency as well as interest rates, narrowed this month to the least since an August 11 yuan devaluation. “The message was that we are done and that’s it -- don’t fight against us,” said Song Yu, a Beijing-based economist at Goldman Sachs Group Inc. and the top forecaster for the Chinese economy. "Now policy makers are feeling less pressure and have more room to do what they want, with the exception of depreciating the currency." JPMorgan Chase & Co.

said last week a trigger for action could be a report on Monday that showed China’s economic growth slowed further last quarter, while exceeding estimates. The central bank had to wait for currency stability or risk eroding the yuan’s yield advantage and adding to capital outflow pressures, Goldman economists said in September. The nation’s foreignexchange reserves fell US$43.3 billion in September, after plunging a record US$93.9 billion in August as the People’s Bank of China sold dollars to prop up the currency. Yuan positions at Chinese financial institutions accumulated from foreignexchange purchases fell a record 761.3 billion yuan, according to the PBOC, suggesting capital outflows were more severe than the reserves data indicated. Apart from intervention, the government’s efforts to deter investors betting on further declines in the yuan include new reserve

Yuan bears seem to be tamed for the time being

requirements for forwards and special checks of foreignexchange trading. Like other emerging-market currencies, the yuan has been boosted as disappointing U.S. economic data reduced the chances of a Federal Reserve interest-rate increase this year. Premier Li Keqiang’s triple task of lowering borrowing costs to counter the slowdown, preventing further currency depreciation and opening up the capital account challenges Nobel-

winning economist Robert Mundell’s “impossible trinity” principle. That theory says that a country can’t maintain independent monetary policy, a fixed exchange rate and free capital borders all at the same time. While yuan depreciation pressures may have constrained easing a few weeks ago, "the situation now is that market expectations for a Fed rate hike have been pushed further down the line," said Gu Ying, an

emerging Asia currency and rates strategist at JPMorgan in Hong Kong.

Bond yields

China’s 10-year sovereign bond yield has declined 11 basis points this month to 3.12 percent on Friday, after reaching a six-year low of 3.04 percent on October 14, signalling expectations for easing. Data last week showed credit growth exceeded estimates, suggesting that earlier stimulus measures are beginning to take effect. Goldman expects a 25-basis-point rate reduction and one or two RRR cuts totalling 100 basis points by the year-end. A lower RRR will help replenish liquidity that has shrunk due to the PBOC’s yuan purchases. Some disagree that the yuan’s outlook affects monetary policy. With a large current-account surplus and relatively high rates luring capital, China doesn’t have to worry about excessive depreciation or outflows, according to Andy Seaman, chief investment officer at Stratton Street Capital LLP For Jian Chang, an economist at Barclays and the sole analyst to predict the PBOC’s first rate cut since 2012 last November, a steadier yuan has opened a window for easing this month or next. Ultimately, the currency will fall as China loosens both monetary conditions and capital controls, she said. Bloomberg News

Asset-backed security tool under ex

The structure could allow lenders to move troubled credit off their books, but wouldn’

hina is facing calls to bring back an instrument to fight bad loans it had deemed too dangerous after the global financial crisis: debt tied to failed assets. China Construction Bank Corp. said in August it’s exploring baddebt securitization, in which lenders package soured loans into notes sold to investors. While a central bank official said in May such products are under study, regulators this month declined to comment on the plans. Only three Chinese firms have issued such bonds before a 2009 halt to all asset-backed securities (ABS) that ended in 2012 with products tied only to performing assets. President Xi Jinping faces pressure to help banks cut the biggest pile of bad loans since 2008 as sliding corporate profits, rising defaults and a stock rout worsen credit strains. Structures that allow lenders to move troubled credit off their books won’t encourage prudence among banks and Chinese raters are unlikely to be better than their U.S. counterparts that failed to anticipate the 2008 global turmoil, according to R&R Consulting. "Although China has some genuine strengths in ABS market building, risk measurement is its Achilles heel," said Ann Rutledge, founding principal at the firm that assesses structured products and has its main offices in New York and Hong Kong. "The U.S. rating agencies that are active in China would probably be relied upon

China Construction Bank Corp. said in August it’s exploring bad-debt securitization

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October 20, 2015

Greater China Mainland mounts gold liquidity grab as London market reforms As prices of commodities tumble and profits shrink, banks and brokers have retreated from the London gold market Clara Denina

s the London gold market enters its next phase of reform, a sense of urgency is key because competitors, including commodity consuming giant China, are poised with new products to grab liquidity and global influence. Global liquidity is shrinking due to persistently low gold prices as the market still struggles to shake off the impact of a seismic crash two years ago. Bruised investors have largely stayed away, while dealing desks have also become smaller. London, currently the global market nucleus, is re-examining the way bullion is traded after sweeping reform of its price benchmarks. At the same time, China, the metal's largest consumer and producer, is aiming to become a price setter with its yuan-denominated gold benchmark by the end of 2015, a move that could beat any rivals' effort to increase market share. "There are too many vested interests and China is likely to win the main prize, because it wants to

influence the prices of the commodities it is the biggest user of," one senior London trader said at the opening of the gold industry's annual conference, this year in Vienna. The London Metal Exchange (LME)'s CEO Garry Jones said last month it was in talks with those in the gold industry over the launch of a precious metals derivatives. The Chicago Mercantile Exchange (CME) is also developing a European gold futures contract to serve customers in London, sources told Reuters in May, in what would be a direct challenge to London's traditional cash market. The need to make the US$5 trillion a year over-the-counter market more transparent, profitable and liquid led the London Bullion Market Association (LBMA) to formally ask exchanges and technology firms to bid for services such as a gold exchange or a clearing platform. Greater regulatory scrutiny, which has already forced changes in how precious metals prices are set, has

not mandated central clearing but the industry accepts that larger changes lie ahead. "Central clearing is the way forward, because brokers are finding more difficult to have credit lines open with the few counterparties left, given that many are withdrawing," the head of gold trading at a European bank said.

As prices of commodities tumble and profits shrink, banks and brokers, including Deutsche Bank and Mitsui, have retreated from the London gold market. "Some players don't wish to play anymore. This trend is not good news," said Adrian Ash, head of research at BullionVault. "Markets need market makers -- willing to quote firm prices to buy and to sell -- and the more the better. Fewer participants risks less competition, wider spreads, and lower trading volumes." In the meantime, European traders see that China's plan to launch its yuan-based price via the Shanghai Gold Exchange will work, if yuan convertibility into a global currency takes off. "China is already taking liquidity from the London market and will make its best effort to continue to do so," another trader said. The SGE has already launched an international platform of the bourse last year, allowing foreign players to trade yuan-denominated gold contracts for the first time. Reuters

xamination

’t encourage prudence among banks by investors, and it is well to bear in mind, they did not do a stellar job rating NPL securitizations in 199798, not to mention their role in nonperforming securities production in the 2000s."

Lenders studying

The People’s Bank of China declined to comment when asked about its position on securitized products backed by bad loans. China Banking Regulatory Commission didn’t immediately respond to a fax seeking comment. CCB declined to comment. Calls to Bank of China Ltd., Industrial & Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. went unanswered. China Orient Asset Management Co., one of the nation’s four bad-loan managers, sold China’s first notes backed by non-performing loans in 2006. CCB and China Cinda Asset Management Co. also sold similar products before offerings were halted in 2009. Total issuance amounted to 13.4 billion yuan (US$2.1 billion). “A handful of banks, including the big four lenders, are looking into the option of securitizing bad loans quite seriously,” said Hou Wei, a banking analyst at Sanford C. Bernstein & Co. “For Chinese banks, everyone is facing asset quality pressure.”

Stress mounting

While China’s bad loans of 1.5 percent commercial bank advances in the latest data are low compared with

4.6 percent in India, the rate is up from 1.25 percent in the previous period, China Banking Regulatory Commission data show. New soured debt in the first six months was 249.3 billion yuan, almost the amount for the whole of last year. So far Chinese banks have been offloading bad debts to asset management companies, the so-called “bad banks,” at a deep discount of

The push for renewal of non-performing asset securitization is more driven by banks themselves than by the regulators Zuo Fei, executive director, structured finance China Merchants Securities

30 to 35 percent of the face value of the loans, according to Hou of Sanford Bernstein. “NPL securitization would help banks to manage their existing balance sheet better and extend more loans to support economic growth,” said Hu Jian, a managing director for structured finance at Moody’s Investors Service. As China steps up efforts to deepen its securitization market, issuance not tied to NPLs climbed to 235.3 billion yuan this year, up 18.5 percent from the same period last year, Bloomberg-compiled data show. The nation overtook South Korea as the biggest ABS market in Asia last year, according to Asia Securities Industry & Financial Markets Association. China’s ABS market faces the risk of "not enough experience," said Vijay Chander, executive director of fixed income at the independent regional trade association. The number of upgrades handed out by three of the largest rankers in the domestic market was four times that of downgrades this year, even as the economy grows at the slowest pace since 1990. “Investors will need a lot of data to make a reasonable prediction on the recovery rate" for bad loans in ABS, said Kevin Duignan, New Yorkbased managing director for global structured finance at Fitch Ratings. "I suspect the data may not be easily available in China." Bloomberg News

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October 20, 2015

Greater China

Services hold economy growth Some economists suspect government statistics may actually be underestimating strong consumption and service sector growth

he world’s second-largest economy grew 6.9 percent in the July-September quarter from a year ago, slightly better than analysts’ estimate of 6.8 percent, but down from 7 percent in the second quarter. That is the weakest reading since the first quarter of 2009, when growth tumbled to 6.2 percent. However, analysts still mostly believe China’s slowdown will be gradual rather than more calamitous. “Continued downward pressures from real estate and exports caused gross domestic product (GDP) growth to drop to 6.9 percent,” said Louis Kuijs from Oxford Economics in Hong Kong. “We think overall growth will soften more into 2016,” he said.

“In such a setting we expect more incremental monetary and fiscal measures.” Other September figures also released yesterday pointed to stubborn weakness in the Chinese economy. Factory output rose 5.7 percent in September from a year ago, missing forecasts for a 6 percent rise, and fixed-asset investment (FAI), a key driver of the economy, climbed 10.3 percent in the first nine months of the year, below estimates of 10.8 percent. Retail spending alone bucked the trend, growing at an annual rate of 10.9 percent, slightly better than forecasts for 10.8 percent growth. “The GDP beat is surprising, given that the monthly FAI and

industrial production figures slowed considerably, and much faster than expected,” said Oliver Barron, a China policy researcher at NSBO in Beijing. “The data would suggest that retail sales is holding up the data and there are other areas that the government is factoring in consumption and services data that are not picked up in the monthly figures.” Despite weak exports and imports, factory overcapacity and a cooling property market, Beijing reported annual economic growth of 7.0 percent in the first two quarters, in line with its full-year target. Indeed, some economists suspect government statistics may actually be underestimating strong consumption

KEY POINTS GDP grew 6.9 pct in July-Sept, vs estimate of 6.8 pct Sept factory output up 5.7 pct on yr, vs forecast 6 pct 9-month FAI up 10.3 pct, vs estimates of 10.8 pct Sept retail spending up 10.9 pct, vs 10.8 pct forecast

Retail spending grew at an annual rate of 10.9 percent

and service sector growth, leaving investors to focus on the undeniable cyclical and structural weaknesses in manufacturing.

Policy support

Many analysts say the third quarter could mark the low point for 2015, predicting a flurry of stimulus measures announced over the past year will gradually take effect. But few expect a significant rebound. China’s policymakers in turn think they can stem a rapid rundown of the country’s foreign exchange reserves and ease pressure on the currency by pump-priming the economy to meet this year’s growth target, sources involved in policy discussions say. The latest Reuters quarterly poll showed economists expect the central bank will cut interest rates by another 25 basis points (bps) and lower the amount of cash that banks must hold as reserves by 50 bps by year-end. The same poll predicted economic growth may hold steady at 6.8 percent in the fourth quarter before easing to 6.7 percent in the first quarter of 2016. China’s consumer inflation cooled more than expected in September, while producer prices extended their slide to a 43rd straight month, highlighting the urgency for the central bank to tackle deflationary pressures. Reuters

Property investment growth slows to six-year low Still, the recent rebound in home sales could suggest the housing market is at least bottoming out

rowth in China’s real estate investment over the first nine months of the year cooled to its slowest rate since the global financial crisis, although sales improved, underlining a mixed recovery in one of the most critical sectors of the economy. Property investment, a main driver of the economy, grew 2.6 percent in the first nine months of 2015 from a year earlier, marking the slowest rate since the January to February period of 2009, data from the National Bureau of Statistics (NBS) showed on Monday. “The fact that real estate investment is weak will hinder Q4 economic recovery,” said Oliver Barron, a China policy researcher at NSBO in Beijing. While home sales and prices have improved in bigger Chinese cities over recent months after a barrage of government support measures, conditions remain weak in smaller cities and a huge overhang of unsold homes is discouraging new investment and construction.

New construction fell 12.6 percent during the January to September period from a year earlier though it slowed from a 16.8 percent annual drop in the first eight months, the NBS data showed. Reflecting the sharp drop in housing starts, sales of earth excavating machines in China fell 35 percent in September from a year earlier, the China Construction Machinery Association (CCMA) said. The property malaise has weighed on the world’s second-largest economy, which is expected to post its slowest growth in a 25 years in this year. Still, the recent rebound in home sales could suggest the housing market is at least bottoming out. The floor area of property sold grew 7.5 percent during the January-September period, up from a 7.2 percent increase in January to August, according to the NBS data. Regulators cut downpayment requirements again late last month for first-time home buyers as they look to reduce the property market’s drag on the broader economy. China’s average new home prices rose 0.3 percent in August from July, the fourth straight month of gains, though they were still down 2.3 percent from a year earlier, according to official data out last month. Reuters

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October 20, 2015

Greater China September implied oil demand down The National Bureau of Statistics will provide a breakdown of output by refined products later this week Adam Rose

hina’s implied oil demand fell slightly in September from the same period last year even as passenger car sales rose for the first time in six months. China consumed roughly 10.13 million barrels per day (bpd) of oil in September, down 0.1 percent from a year ago, and down 1.3 percent from August, according to calculations based on preliminary government data. The fall came as Chinese auto sales climbed 2.1 percent in September from a year earlier, according to an industry association last week. Daily implied oil demand is the sum of domestic refinery throughput and net imports of refined products, not counting adjustments for inventory changes. The latest throughput and net import figures put China’s implied oil demand in the first nine months of 2015 at 10.35 mln bpd, up 3.9 percent from the same period last year. The year-to-date growth is running behind the International Energy Agency’s most recent forecast for Chinese demand in 2015, which was revised higher to 4.9 percent earlier this month.

In September, Chinese refineries processed 0.5 percent more crude oil than a year ago at 10.32 million bpd. That was down 1.1 percent from August on a daily basis. Refinery runs in the first nine months of the year were at 10.38 million bpd. The National Bureau of Statistics will provide a breakdown of output by refined products later this week. China’s domestic crude output rose 2.7 percent to 4.32 million bpd in September and recorded the same percentage growth in the first nine months of the year, the statistics bureau data showed.

China’s Sinosteel Co. has extended the deadline for investors to redeem its bonds to November 16 from the previous deadline of October 16, in order to allow investors to have more time to review the matter, the company said. The company made the announcement yesterday. The move comes after parent Sinosteel Corp. sent a letter to note holders pleading with them to not sell the bonds back as Sinosteel would be unable to repay, and the National Development and Reform Commission planned to meet investors.

KEY POINTS Implied demand at 10.13 mln bpd in Sept Sept consumption down 1.3 pct from Aug Refinery runs up 0.5 pct y/y in Sept to 10.32 mln bpd

Reuters

The predominantly coal-fired generators produced 314.6 billion kWh of power in September, down 3.6 percent on the year

China’s fiscal revenue grew faster in September but the country’s exchequer faces great pressure in the fourth quarter of this year, the Ministry of Finance (MOF) said yesterday. Fiscal revenue rose 9.4 percent year on year to 1.09 trillion yuan in September, compared with a 6.2-percent increase in August, the MOF announced. Revenue in the first nine months reached 11.4 trillion yuan, up 7.6 percent year on year. Revenue from value-added taxes dropped 3.5 percent year on year in September, improving slightly from a 4.7-percent decrease in August. Revenue from taxes on business turnover rose 18.8 percent, slower than 21.1 percent in August.

Sinosteel extends bond redemption date

Power output falls helping to cut coal dependency

hina generated 454.8 billion kilowatt-hours (kWh) of power in September, down 3.1 percent from the same month last year, the country’s statistics bureau said yesterday, with industrial demand still under pressure as the economy slows. Power generation growth has been falling this year as a result of declining consumption levels in downstream industries like steel, which are struggling with crippling rates of overcapacity and weak prices. With China trying to ease its fossil fuel dependence, the slowdown in electricity demand has had a pronounced impact on China’s thermal power plants, usually responsible for about three-quarters of the country’s total electricity.

Fiscal revenue rises

KEY POINTS Power output hit by declining downstream demand Hydro levels also drop with reservoir storage down Utilisation rates at thermal plants continues decline

The predominantly coal-fired generators produced 314.6 billion kWh of power in September, down 3.6 percent on the year and accounting for 69 percent of the total. Thermal power production over the first three quarters has fallen 2.2 percent, compared to a 0.1-percent increase in overall generation. The drop in thermal power in September could have been more severe had it not been for a decline in hydropower volumes over the period. Hydro generation fell 6.7 percent on the year to 107.5 billion kWh, with reservoir storage levels still lower than the same period of 2014. With the power market in surplus, grid companies have been able to take on cleaner sources of electricity without disrupting supplies, and utilisation rates at China’s coal-fired power plants have been dropping. Average utilisation rates at China’s thermal power plants fell by 265 hours in the first three quarters of the year, the National Energy Administration said in a separate release yesterday. Falling demand from thermal power plants has helped drag Chinese coal production down by 2.2 percent in September and 4.3 percent in the first three quarters as a whole. The NEA said total power consumption in September reached 456.3 billion kWh, down 0.2 percent compared to the same month last year, with industrial consumption dropping 2.9 percent over the period. Total generation capacity, measuring generating units of 6,000 kilowatts or more, reached 1,385 gigawatts by the end of September, up 9.4 percent compared to the same period of last year. Thermal power stood at 947.22 GW, up 6.8 percent. Reuters

Premier Li calls for ongoing financial reform China’s Premier Li Keqiang has called for continued reform of the country’s financial system, while admitting the government faces significant obstacles to achieving its economic targets. Li said the government should maintain prudent monetary and stable macro-economic policies, as the economy continued to face “downward pressure”. He was speaking to officials and financial professionals at a meeting to promote financial reform on Friday. Li’s comments, which were only released on Sunday, come a day before the Chinese government is due to release third-quarter gross domestic product (GDP) growth figures.

Tourism administration blacklists 10 travel agencies China has named and shamed 10 travel agencies as the country attempts to create a sound environment for tourists, the National Tourism Administration (NTA) said Sunday. The tourist companies, which are based in Yunnan Province, Hainan Province and Shandong Province, have been blacklisted, effective for two years, due to “irregularities.” Five agencies’ licenses have been revoked and the remaining heavily fined, according to an NTA statement. Seven tourist guides were also blacklisted and punished. The NTA introduced the blacklist in July. The agencies and guides were the first group on the list.

Huawei to invest US$1 bln to support developers China’s Huawei Technologies Co Ltd yesterday said it will spend US$1 billion to support information and communication technology developers over the next five years. “The aim is to help developers create innovative services and rapidly respond to customers’ business needs,” Huawei executive director and president of products and solutions Ryan Ding said in a statement.

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October 20, 2015

Asia

Japan’s Q3 growth seen slowing sharply Despite sputtering economic growth and persistently low inflation, BoJ Governor Haruhiko Kuroda has repeatedly downplayed the need for fresh policy stimulus Kaori Kaneko

The poll predicted core consumer price inflation - including oil products but excluding volatile fresh food prices - will rise to only 0.1 percent in the fiscal year to March 2016

apan’s economy is expected to have slowed sharply in the third quarter as demand across Asia ebbed, keeping the Bank of Japan and policymakers under pressure to inject more stimulus to revitalise growth, a Reuters poll found. The poll of 21 economists predicted the economy grew at an annualised rate of 0.4 percent in the third quarter, a significant downgrade from last

month’s 1.3 percent forecast. The world’s thirdbiggest economy shrank an annualised 1.2 percent in the April-June quarter due to weak capital spending and as Asia’s locomotive China continued to lose momentum. Some analysts fear the economy may have slipped into recession. To support growth, Prime Minister Shinzo Abe unveiled his new “three arrows” last

month - a target to boost gross domestic product (GDP) to 600 trillion yen (US$5 trillion), lifting the fertility rate and pursuing social welfare reforms. Economists were largely sceptical of the impact of the new arrows on growth, with eight of the 14 analysts who responded to the question saying it won’t support the economy while six took a positive view.

“In addition to weak economic data such as factory output, inflation expectations data like the BOJ’s tankan survey on firms’ price projections weakened in recent months,” said Yuichiro Nagai, economist at Barclays Securities Japan. Despite sputtering economic growth and persistently low inflation, Bank of Japan Governor Haruhiko Kuroda has repeatedly downplayed the need for fresh policy stimulus, remaining optimistic that d o m est i c d e m a n d a n d consumer spending will recover. Most analysts, however, doubt the BOJ can achieve its 2 percent inflation goal by the middle of fiscal 2016, and expect the central bank to offer more stimulus as global growth slows and China’s economy remains in low gear. Six of 13 analysts said the central bank would ease further at the Oct. 30 meeting. Of the rest, six expect fresh

easing to occur next year, while one said the BOJ would ease again in December. “We expect the BOJ will accept the delay in achieving its 2 percent price target because of oil price falls and we forecast the BOJ will not ease policy this month,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. “Also, the yen is stable around 120 yen per dollar, which we think is another factor for the BOJ to refrain from easing.” The poll predicted core consumer price inflation including oil products but excluding volatile fresh food prices - will rise to only 0.1 percent in the fiscal year to March 2016 and to 1.0 percent next fiscal year, unchanged from last month’s medians. Earlier this month, the BOJ held off from expanding stimulus, even as slumping exports and falling oil prices threaten its rosy projection. Reuters

Australian PM Turnbull leads gov’t popularity surge Poll indicates the coalition would likely retain government if an election was called

ustralian voters are swinging drastically back in favour of the government, after a new poll revealed that Prime Minister Malcolm Turnbull was three times as popular as Opposition Leader Bill Shorten as the nation’s preferred Prime Minister. The Fairfax-Ipsos poll, published in Fairfax newspapers yesterday, revealed Turnbull’s decision to challenge for the nation’s leadership last month had been vindicated, with the Prime Minister now holding a 67 per cent approval rating to Bill Shorten’s 21 per cent. Shorten has fallen 24 points since August, when he led the race as preferred Prime Minister against former PM Tony Abbott.

Since overthrowing Abbott as Prime Minister back in September, Turnbull has also led a drastic party turnaround; the coalition is now ahead of Labour in the two-party preferred poll for the first time since March 2014, leading 53 per cent to 47 per cent. Following the poll’s results, Immigration Minister Peter Dutton said that last week’s “shabby” attempt by Labour to lower the Prime Minister’s popularity had backfired. On Friday, Labour Senator Sam Dastyari led an attack which focused on Turnbull’s offshore holding accounts in the Cayman Islands, with Dastyari labelling the legality of his investments as “questionable”.

Australia’s Prime Minister Malcolm Turnbull

But speaking to Sky News yesterday, Education Minister Simon Birmingham said the Australian people have put their faith in Malcolm Turnbull, the leader and not a man that “has too much money “.

“I don’t think people want to hear ... a suggestion that they shouldn’t have faith in this man because he has too much money,” Birmingham said. “I think they want to put faith in him because he’s been successful

and because they hope he can translate that success to the nation.” The results of the poll indicate the coalition would likely retain government if an election was called. Xinhua

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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October 20, 2015

Asia Black Friday campaign provides shopping catalyst for South Korea Some shoppers were disappointed that the discounts weren’t deeper - especially as they had been heavily promoted

outh Korea is trying to stem a drop in retail spending by replicating an American shopping tradition -- Black Friday. More than 34,000 stores, including three-quarters of the country’s department stores, slashed prices by as much as 80 percent in the Korean version of bargain-oriented Black Friday through October 14. The two-week campaign was launched by the Korean government in an effort to offset sales lost to online commerce and to attract shoppers from neighbouring China and elsewhere back into stores. In Korea, stores already hurt by online shopping were dealt another blow by the Middle East Respiratory Syndrome, or MERS, this year, which led to an 12 percent drop in revenue at department stores in June and another 6.5 percent decline in August. In July, sales were up very slightly, at 0.7 percent, from a year earlier as Koreans shopped ahead of the summer holiday season. For department stores, that has created a bleak situation, as Chinese tourists in particular are important for strong sales. So the government stepped in, figuring a western-style Black Friday campaign would help stimulate interest in going back into stores in Korea. Sales jumped. For the two weeks

through October 14 at three major department stores -- Lotte, Hyundai and Shinsegae -- sales rose 24 percent from a year earlier, according to the finance ministry. Korean discount stores including E-mart, Home Plus and Lotte Mart reported a 3.6 percent revenue increase in the same period. The ministry estimates the overall upswing in retail sales to add about 0.1 percentage point to this year’s growth, forecast at 2.7 percent by the Bank of Korea. South Korean policymakers have been trying to expand the economy with temporary consumption tax cuts on cars and home appliances. Meanwhile, exports -- which account for about half of the nation’s economic output -- fell every month this year. Seoul’s plan is to host similar retail campaigns in the future. If successful, this could redirect local consumers back to Korean malls, which lose about 800 billion won (US$707 million) every year during the peak shopping period of November and December to U.S. retailers such as Amazon.com Inc., said Lee Hyoung Ryoul, the finance ministry director in charge of organizing the event. In South Korea, the jicgoojok-literally, a tribe of direct buyers -increasingly buy goods from overseas online retailers at much better prices

than offered at local stores. The trend is a challenge to Korea’s retailers, which have enjoyed agreements with manufacturers that allow them to charge a premium for foreign and domestic products with little concern for competition. A report by the Korea Customs Office last year showed that some import goods sold through exclusive dealerships including wine, lipstick, cheese and car tires were as much as 9.2 times more expensive in Korea than they were overseas. Unlike the U.S., where retailers control prices and offer discounts to clear out inventories ahead of the Christmas shopping season, Korean department stores often lease space to vendors without control over inventories. To stem the retail decline, the government would have to include more manufacturers and not just retailers in future Black Friday events, Lee at HRI said. While early results show the shopping event was successful, the discounts were limited. Most foreign brands in the highend category, such as cosmetics and jewellery, didn’t participate, unless they were featured at select shops. Homeappliance stores directly controlled by Samsung Electronics and LG Electronics also weren’t part of the sales, according to the finance ministry.

Suvashree Choudhury

Cambodia’s construction sector growing steadily Cambodia granted licenses to 1,532 construction projects with a total investment of US$1.75 billion in the first nine months of 2015, a 13.7 percent rise from a year earlier, an official said yesterday. Pen Sophal, secretary of state of the Ministry of Land Management, Urban Planning and Construction, unveiled the figures at an urban and rural development seminar here. “Construction has seen steady growth every year thanks to investors’ confidence in the country’s political stability and business opportunities,” he said. Those projects include condominiums, residential units, commercial buildings, shopping malls, hotels and factories, among others.

High interest in Kuala Lumpur-Singapore rail project

He aims at central banks that adopted so-called quantitative easing policies

without consideration for the negative impact they have on the global economy. “Extreme” measures had steered volatile capital flows to emerging markets, while exchange rate intervention risked spurring competitive devaluations, he said in a speech ahead of a G20 summit in Turkey next month.

South Korea’s finance minister said yesterday he expects exports to decline this year due to sluggish global demand, and asked government officials to strengthen efforts to boost domestic consumption to fill the void. “In the past, exports contributed greatly to our GDP growth but this year, we expect them to decline due to the slowdown of global demand,” Finance Minister Choi Kyung-hwan said in closing remarks at a meeting, which the ministry distributed. Choi added recent nationwide discount sales had helped in offsetting the loss from exports but stressed the importance of future efforts to increase exports.

Bloomberg News

India central banker head urges IMF to act against ‘extreme’ policies

ndia’s central bank governor urged the International Monetary Fund yesterday to stop “sitting on the side-lines” and instead play an active role in questioning the easy money policies adopted by developed economies. Raghuram Rajan, a former chief economist of the IMF, said countries were putting these policies in place

S.Korea’s finance minister expects exports to decline

“The IMF has been sitting on the side-lines and applauding these kinds of policies right from when they have been initiated, and hasn’t really questioned the value of these kinds of policies,” he told a G20 consultation meeting. “We can do better,” he said, calling on emerging markets to push back against such policies. Rajan didn’t single out any single country for criticism, but he has emerged as a leading critic of easy money policies. Some central banks, including those in the United States and the euro zone, adopted so-called quantitative easing policies to counter the global financial crisis. After cutting rates to zero, they pumped cash into their economies to try to revive economic activity. Indian media has speculated that Rajan could be a contender to head the IMF. The current head, Christine Lagarde, was appointed in July 2011 for a five-year term. Rajan denies having any interest in the position and his three-year tenure at the RBI doesn’t end until September 2016. Reuters

Around 150 companies and consortia have expressed interest in the joint Request for Information (RFI) exercise on the Kuala Lumpur-Singapore High Speed Rail (HSR) project, Singapore’s Land Transport Authority (LTA) said yesterday. These companies and consortia come from across the HSR value chain and include entities based in Malaysia, Singapore, Asia-Pacific, Europe, Middle East and North America. All responses to the RFI must be received no later than 12:00 p.m. on Nov. 18, LTA noted. The RFI exercise is expected to be concluded by the end of the year.

Draft plans for Sydney’s second international airport revealed

Australia’s Deputy Prime Minister Warren Truss revealed draft plans for Sydney’s second international airport yesterday, along with a draft Environmental Impact Statement (EIS) that is open to public consideration. The site of the new airport, which has been subject to years of debate and controversy, is to be the western Sydney suburb of Badgerys Creek. It will share the international and domestic load with the over-capacity Kingsford Smith airport which currently serves the city and has witnessed a growth in passenger numbers from 9.5 million in 1985-86 to 36 million in 2011-12.

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October 20, 2015

International Deutsche Bank restructures business The bank is splitting its investment bank in two and parting ways with some of its top bankers as the new chief executive sets out its most “fundamental” overhaul. Chief Executive John Cryan has come under mounting pressure to reform the bank, as costly litigation from a series of scandals and the fallout from the Asian market rout pushed its valuation well below rivals such UBS and Credit Suisse, who had already embarked on their restructuring. As part of the overhaul, out goes Colin Fan, the Chinese-born co-head responsible for securities trading.

English house prices edge up Asking prices for houses in England and Wales saw their smallest October rise since 2010 but competition for properties between first-time-buyers and buy-to-let-investors has fired up the market for smaller homes, property website Rightmove said. Asking prices for homes across the market rose by 0.6 percent in the month to mid-October, according to a survey published by Rightmove yesterday. That was slower than a 0.9 percent rise in the month to mid-September. But asking prices for typical first-time-buyer properties, with two bedrooms or fewer, jumped by 4.9 percent.

Argentina’s Scioli would win election in first round Argentine ruling party candidate Daniel Scioli would win the October 25 presidential election in the first round, according to a poll by Ipsos-Mora y Araujo published in Buenos Aires-based newspaper Perfil. Scioli, who seeks to replace incumbent president Cristina Fernandez de Kirchner, would get 42 percent of the votes against Cambiemos alliance’s candidate and current Buenos Aires Mayor Mauricio Macri, who has 28 percent support, according to the poll. Unidos por una Nueva Argentina alliance’s Sergio Massa has 23 percent. Scioli is a former Argentine vice president and since 2007 has been governor of Buenos Aires.

Hollande says Air France turbulence doesn’t reflect country French President Francois Hollande said yesterday the social turbulence currently gripping Air France was not a reflection of the state of the country. The struggling airline’s restructuring plan made headlines around the world earlier this month when executives were manhandled by furious workers, sparking concerns that the violence was just one of the symptoms of France’s overall economic and social malaise. Speaking just hours before the launch of a muchwatched annual gathering of unions, employers and government members, a defensive Hollande said the Air France case must not be generalised.

Swiss parliament shifts to right in vote dominated by migrant fears A recent survey showed that nearly 50 percent of voters considered migration the most important issue facing the country

wiss voters swung to the right in parliamentary elections yesterday dominated by concerns over Europe’s migrant crisis, with the country’s largest party winning a record number of seats. The populist Swiss People’s Party (SVP), known for its virulent campaigns against immigration, the European Union and Islam, won 65 of the 200 seats in the lower house, up from the current 54, and saw its support rise to its highest-ever level. The SVP was seen raking in 29.5 percent of the vote, compared to the 26.6 percent won in 2011 and beating its previous record score of 28.9 in 2007, the national broadcaster RTS projected. Along with advances made by the centre-right Liberal Party, Switzerland’s third-largest party, which took three additional seats on top of its current 30, SVP’s gains should tip the scale in parliament from the centre-left towards a centreright majority. Pascal Sciarini, a political scientist at Geneva University, told AFP, that the 11 additional seats for SVP marked “a huge shift in Swiss politics,” adding that “the centre of gravity has clearly shifted to the right”. “SVP did not even need to run a campaign. The migrant crisis ran the campaign for them,” Sciarini said. The Socialists, the country’s second-largest party, meanwhile lost three of their 46 seats and the Greens and Green Liberal Party lost a total of nine seats. Overall voter turnout was set at 48 percent.

The shift to the right comes as surging numbers of migrants and refugees moving through Europe have heightened the focus on the issue in Switzerland, even though the wealthy Alpine nation is yet to be significantly affected by the crisis. Parties to the centre and left meanwhile lamented that the preelection campaign had been so dominated by the migrant issue. About a quarter of Switzerland’s eight million inhabitants are foreign nationals, and immigration and asylum policies tend to figure among voters’ top concerns.

Opposition to EU ties

Among the SVP parliamentarians already sure to take a new seat was Magdalena Martullo-Blocher in Graubunden. She is the daughter of controversial politician Christoph Blocher, an SVP vice president who served in government from 2004-2007 before being pushed out over his extreme positions and confrontational style. SVP members also credited the party’s opposition to closer ties with the EU for its advance. Relations with the bloc, Switzerland’s top trading partner, have been badly hit by a narrow Swiss popular vote in February 2014, championed by the SVP, in favour of restricting immigration from the 28-member EU. The centre-right Liberals are expected to cooperate with SVP on economic and energy issues but take a very different stance on other subjects, including immigration. It remains unclear, however, what

Toni Brunner, leader of Switzerland’s elections winner party, the right wing SVP

impact the shift in the lower house will have. The makeup of the upper house, which counts 46 seats and has an equal legislative say, remains unclear, with a second round of voting required in many cantons. In any case, power-sharing and consensus rule are the norm in Switzerland and the power balance in parliament is not directly reflected in government. Once the new parliament is in place, it will in December elect the government, with the seven posts traditionally shared among the major parties from right to left under a tacit decades-old agreement dubbed “the magic formula”, aimed at ensuring political stability. AFP

German prosecutors ‘looking into’ 2006 World Cup graft claims Germany won the right to host the 2006 World Cup by beating South Africa with 12 votes to 11 after New Zealand’s Charles Dempsey abstained in the final ballot

erman prosecutors said yesterday they were looking into, but not yet formally investigating, claims that Germany bribed football officials to win the right to host the 2006 World Cup. “This could be about corruption, fraud or breach of trust,” Frankfurt chief prosecutor Nadja Niesen told SID sports news agency, an AFP subsidiary. “We will examine the available documents. But we are still at the very beginning and have not yet launched an investigation. This could happen if we can confirm there is initial cause for suspicion.” On Friday, Der Spiegel weekly published a report claiming that the German Football Association

(DFB) had a slush fund to buy votes. The magazine claims the DFB borrowed 10.3 million Swiss francs in 2000 from the now-deceased former CEO of German sportswear giant Adidas, Robert Louis-Dreyfus, in order to buy the votes of four Asian members of FIFA’s 24-strong executive committee. Spiegel claimed the DFB then transferred 6.7 million euros -- the equivalent of the borrowed Swiss francs at the time -- to a FIFA account in 2005 to repay Louis-Dreyfus. The DFB pre-empted Spiegel’s claims by issuing its own statement admitting they had made that last payment to FIFA but denying it had any connection to the 2006 World Cup.

“There was no slush fund,” DFB president Wolfgang Niersbach insisted. “The World Cup was not bought.” Niersbach added that the internal investigation had not been completed but said: “I can definitively exclude that this payment was linked to the World Cup.” On Sunday, Franz Beckenbauer, who led Germany’s successful bid to host the 2006 World Cup, came out to deny the allegations. “I have not sent anyone money to acquire votes for the awarding of the 2006 World Cup to Germany,” said the 70-year-old football legend in a statement. “And I’m sure that no other member of the bidding committee did either.” AFP

Business Daily | 15

October 20, 2015

Opinion Business

wires

The end of German hegemony

Leading reports from Asia’s best business newspapers

Daniel Gros

Director of the Centre for European Policy Studies

THE AGE House price growth (in Australia) is set to ease to its slowest pace since 2012, according to a report yesterday by property specialist SQM Re s e a r c h , w i t h S ydney cooling quickly and rental markets across the country squeezed by deflationary pressures and the end of the mining boom. In its latest “Housing Boom and Bust Report”, SQM says dwelling prices in Australia’s biggest city will grow at between 4 per cent and 9 per cent next calendar year, compared with 18.9 per cent over the 12 months to the end of June this year.

THE PHNOM PENH POST Cambodian tourism authorities are formulating strategies to carve a larger share out of the Chinese outbound tourism market and have set a target of drawing over 700,000 Chinese visitors this year, and up to 2 million a year by 2020. Rising incomes have transformed China into the world’s largest outbound tourism market, with more than 135 million Chinese expected to travel this year, according to Billy Ng, head of Asia gaming, lodging and leisure at Bank of America Merrill Lynch. Chinese tourists spent around US$164 billion last year.

THE ASAHI SHIMBUN Japan’s banking industry, including the three megabanks, will start talks on resuming political donations for the first time since 1997, when public sentiment was quite hostile toward financial institutions. The talks will come about a year after Keidanren (Japan Business Federation), the nation’s largest business lobby, decided to lift its five-year suspension on donations to political parties. Mizuho Financial Group President Yasuhiro Sato, who also serves as chairman of the Japanese Bankers Association, said October 15 that corporate donations to political parties will not, in principle, be provided in return for specific political favours.

BANGKOK POST The government’s property stimulus aimed at homes selling for 3 million baht or less is expected to boost demand in the fourth quarter, but most commercial banks have yet to jump on the price-cutting bandwagon with their mortgages. They say mortgages for homes valued at 3 million baht or less are not their main target and that current housing loan campaigns are considered attractive enough. Other measures include cuts in housing transfer and mortgage fees to 0.01% for homes with a price tag not exceeding 3 million baht until next April.

ithout anyone quite noticing, Europe’s internal balance of power has been shifting. Germany’s dominant position, which has seemed absolute since the 2008 financial crisis, is gradually weakening – with far-reaching implications for the European Union. Of course, from a soft-power perspective, the mere fact that people believe Germany is strong bolsters the country’s status and strategic position. But it will not be long before people begin to notice that the main driver of that perception – that Germany’s economy continued to grow, while most other eurozone economies experienced a prolonged recession – represents an exceptional circumstance, one that will soon disappear. In 12 of the last 20 years, Germany’s growth rate been lower than the average of the other three large eurozone countries (France, Italy, and Spain). Although German growth surged ahead during the post-crisis period, as the graph shows, the International Monetary Fund predicts that it will fall back below that threecountry average – and far below the eurozone average, which includes the smaller highgrowth countries of Central and Eastern Europe – within five years. To be sure, Germany still has some apparent advantages. But a closer examination shows that they are not quite as positive as they seem. For starters, Germany is close to full employment – in sharp contrast to the double-digit unemployment rates that prevail in much of the eurozone. But the combination of full employment and low growth rates actually points to an underlying problem: very slow productivity growth. Add to that a shrinking pool of workers capable of meeting the needs of Germany’s labour market – the country’s population is aging, and the arriving refugees lack the needed skills – and the German economy seems set for a protracted period of sluggish performance. Another apparent advantage is Germany’s large financial reserves, which not only cushioned it from the crisis, but also conferred upon it considerable political sway. Indeed, because German funds were indispensable in bailing out the eurozone’s deeply stressed periphery, the country became central to all efforts to address the crisis. Germany’s consent was needed to create Europe’s “banking union,” which entailed the transfer of supervisory powers to the European Central Bank and the creation of a common fund to resolve failing banks. And German resistance contributed to a delay in the ECB’s intervention in bond markets; when the

Germany is now, for the first time, in the position of having to ask its EU partners for solidarity, as it cannot absorb all the newcomers alone

ECB finally did launch its bondbuying program, it did so with Germany’s tacit approval. But now that interest rates are at zero, Germany’s large savings are no longer doing it much good. And with the financial storm having largely abated, Germany lacks new opportunities to demonstrate its political clout, both within and outside the eurozone.

Indeed, whereas Germany, owing to its deep involvement in Central and Eastern European economies, was a key player in the Minsk agreements that were meant to end the conflict in Ukraine, it has little influence in the Middle Eastern countries that are occupying the world’s attention today. While many have highlighted Germany’s political leadership in the refugee crisis, the reality is that being thrust into the front line of that crisis, without having much influence over the factors that are driving it, is placing considerable strain on the country. Germany is now, for the first time, in the position of having to ask its EU partners for solidarity, as it cannot absorb all the newcomers alone. As usual, however, perceptions are lagging behind reality, which means that Germany is still widely viewed as the eurozone’s most powerful force. But, as the global business cycle accelerates Germany’s return to the “old normal,” the power shift within Europe will become increasingly difficult to ignore. Germany, which exports a large volume of investment goods, benefited more than other eurozone member countries from the investment boom in China and other emerging economies. But emerging-

economy growth is now slowing considerably, including in China, where demand is shifting from investment toward consumption. This tends to undermine German growth and benefit southern European countries, which export more consumer goods. The on-going shift in Europe’s economic and political power dynamics is likely to have a major impact on the EU’s functioning – and especially that of the eurozone. For example, without a strong Germany to enforce the eurozone’s fiscal strictures and urge the implementation of difficult but necessary structural reforms, countries may lose their motivation to do what is needed to ensure fairness and stability in the long term. If inflation remains low, the ECB might feel freer to pursue further rounds of monetary stimulus, undermining fiscal objectives further. In short, we may be headed toward a less “Germanic” economic policy in the eurozone. While that might enhance the EU’s popularity in the periphery, it could increase resistance to EU membership in Germany – a country that, despite its waning economic strength, remains an important piece of the integration puzzle. Project Syndicate

16 | Business Daily

October 20, 2015

Closing Second-hand smoke causes 100,000 deaths in China annually Japan Post prices bank, insurer IPOs at top of range The World Health Organization (WHO) called on China to enact a national tobacco control law in a report yesterday that said second-hand smoke causes more than 100,000 deaths in the country annually. According to the report, jointly released by the WTO, International Tobacco Control (ITC) Policy Evaluation Project and Chinese Centre for Disease Control and Prevention, around 1 million people die from tobacco-related illnesses in China annually and if uncurbed the number could rise to some 3 million by 2050. It said 740 million non-smokers in China are exposed to second-hand smoke at least once a day in a typical week.

State-owned Japan Post yesterday set prices for separate initial public offerings of its bank and insurance arms at the top of their ranges, indicating strong demand from retail investors for businesses valued at a combined US$65 billion. In what will be Japan’s biggest privatisation in three decades, the two companies and their parent, Japan Post Holdings Co, are seeking to raise a combined 1.4 trillion yen (US$11.8 billion) in a triple IPO set for on November 4. Japan Post Holdings will set its listing IPO price on October 26. Regulatory filings yesterday showed Japan Post Bank priced shares in its listing at 1,450 yen apiece.

HSBC chairman lauds yuan evolution He stressed that it would take some time to reach the full internationalization of the RMB, though

hina’s renminbi (RMB) is to become the world’s third great currency, after the U.S. dollars and euro, said Douglas Flint, group chairman of HSBC

Holdings, in an interview with Xinhua. However, Flint also pointed out that it will probably take a few decades for the RMB to gain the share

Douglas Flint, group chairman of HSBC Holdings

as a world reserve currency as the dollar and euro currently have. Flint said he is excited to see the rapid growth of RMB business globally, saying the inclusion of the RMB into SDR’s basket currencies would be symbol of maturity of the Chinese currency. “The SDR is usually a symbol of maturity of the currency. I think more importantly as growing share of China’s trade that is being denominated and settled in RMB, that the comfort of the world is beginning to have in the RMB as the investment currency,” Flint said. He also noted that more central banks have swap lines the People’s Bank of China -- the Chinese central bank, and more reserve managers include RMB in their reserve management plans. “And all of that shows the maturity and confidence in the currency, so I think it is terribly important that the RMB progresses toward full internationalization, and essentially become the

world’s third great currency, after the dollar and euro,” he said. He believed that London is playing a pivotal role in promoting RMB’s internationalization process, as it is one of the most important markets for RMB outside of Asia as well as the world’s largest foreign exchange market, because of history, because of expertise, expertise and liquidity.

From strength to strength

In the interview, the group chairman conveys his

Our view on the Chinese economy is it remains one of the most important countries in the world, because of its contribution to incremental growth and it is the largest going forward Douglas Flint, group chairman, HSBC Holdings

expectation on Chinese President Xi Jinping’s visit in Britain from Monday to Friday. Flint said:” I think the relationship between China and UK has been going from strength to strength. The evident warmth and degree of cooperation between both countries in terms of shared vision of opportunities available is quite impressive, and both sides and both countries are talking about the golden year, which is certainly a situation that we would welcome and indeed can see it being formed.” “The aspiration of connection between London Stock Exchange and Shanghai Stock Exchange is the evidence of willingness to explore what the future of stock trading can be globally. And a number of Chinese companies come from Chinese mainland investing overseas again is an area where the global financial system, the banking system like HSBC are very capable of helping that expansion and wanting part of China’s going up policy,” said Flint. In the context of closer relationship between China and Britain, the HSBC announced its plan to expand its operations in the Pearl River Delta, one of most economically dynamic regions in China, earlier this year. Xinhua

Melco-Crown’s Packer wants to U.S. probe finds Wal-Mart build Melbourne’s biggest tower bribed officials in India

PBOC hire banks for its dim sum debut in London

hina’s central bank has hired banks to arrange its debut offshore yuan bond issuance in London, according to a term sheet seen by Reuters yesterday. Sources have told Reuters the People’s Bank of China (PBOC) plans to issue up to 5 billion yuan (US$787 million) of one-year bills in London. Industrial and Commercial Bank of China (ICBC) and HSBC are joint global coordinators of the deal, the term sheet showed. The two banks, together with Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank and Standard Chartered are joint book runners and lead managers. The purpose of the bond sale is to increase supply of high quality bonds in the offshore yuan market to meet the yuan investment, trading and liquidity management needs of international investors. China is stepping up efforts to have its currency included in the International Monetary Fund’s Special Drawing Rights basket by selling a slew of offshore yuan bonds beyond Hong Kong. Two state-owned banks - China Construction Bank and Agricultural Bank of China - completed bond issuances in London last week.

ustralia’s fourth richest person, casino mogul James Packer, has resurrected a plan to build the tallest skyscraper in Melbourne. Packer, who owns the majority stake in Crown Casino, has resubmitted a plan to build an apartment complex said to be 317.3 meters tall that would cost in excess of US$1.10 billion dollars to construct. The 90-storey complex includes a 41-meter-long “sky bridge” linking the new building with its two six-star hotels, allowing guests to cross between the structures without returning to ground level. The tower’s original plan, which was submitted two weeks before the Victorian election last year, was six storeys shorter. But with the election of Andrews’government, Packer -- a rumoured backer of the party -- has had the plans redesigned by British architects Wilkinson Eyre. Packer, who Forbes estimated is worth US$3.41 billion earlier this year, said the proposed tower was “a beautiful and elegant building that is destined to be an important addition to the Melbourne skyline”.

three-year long investigation by the U.S. government found evidence Wal-Mart Stores Inc. paid bribes to local officials in India, the Wall Street Journal reported. The same probe found less-than-expected signs of corruption in Wal-Mart’s Mexico business, it said. The bribing in India comprised thousands of small payments to low-level officials to help move goods through customs or obtain real estate permits, the newspaper reported, citing persons it didn’t identify. The vast majority of the payments were below US$200, and some were as low as US$5, with the total amounting to millions of dollars, the report said. Wal-Mart is likely to face charges of violating the U.S. Foreign Corrupt Practices Act due to these payments, the paper said. The retailer is “cooperating fully” with the U.S. government on the matter and can’t comment further, Wal-Mart India spokesman Rajneesh Kumar said when contacted yesterday. Wal-Mart, which last week suffered its worst stock decline in more than 27 years after predicting a drop in annual profit, has seen its Indian operations plagued by botched ventures and sluggish growth.

Reuters

Xinhua

Bloomberg News