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Year IV
Number 906 Tuesday October 27, 2015
Publisher: Paulo A. Azevedo
Closing editor: Joanne Kuai
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‘Could do better’ Macau Gov’t needs to take more “concrete action”. To support the economy, says Angela Leong, executive director of SJM. She expects a much better performance on the infrastructure and transportation
Year IV
Number 906 Tuesday October 27, 2015
Publisher: Paulo A. Azevedo
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Poor Sales Hard to Swallow
Local food souvenir chains Choi Heong Yuen and Koi Kei have sterling reputations. But both report declining sales. September visitor arrivals Citing, in particular, worsening consumption sentiment by Mainland Chinese visitors. Big spenders introduced up 0.4 pct by VIP gaming promoters have disappeared. And special promotion results are disappointing. Foreign markets Page 5 are being explored. While pushing online sales and an improved product mix returning better margins Non-resident workers up Page
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Smoke gets in your ‘ayes’ Legislators are setting up meetings with major labour unions and gaming operators. To discuss proposed changes to the tobacco control laws. Chan Chak Mo, president of the sub-committee in charge of the bill, said the committee “doesn’t have any particular ground” on the subject
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Planning ahead China’s leaders gathered in Beijing this week. To formulate the 13th five-year plan. This meeting will determine important guidelines. Steering the responses to the challenges of a changing economic structure
www.macaubusinessdaily.com
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10.97 pct in September
Page 8 Mainland stock markets welcome central bank rate cut
Page 9 Wang Jianlin doubles his fortune in one year to become richest Chinese
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Raising the bar
HSI - Movers October 26
Name
%Day
Sands China Ltd
+2.49
Belle International Ho
+2.25
China Resources Land l
+2.11
Lenovo Group Ltd
+1.98
China Resources Beer H
+1.47
CK Hutchison Holdings
-1.57
Tingyi Cayman Islands
-1.57
PetroChina Co Ltd
-2.06
BOC Hong Kong Holdin
-2.50
Legislative Assembly
China Resources Powe
-4.83
Property pirouette
Source: Bloomberg
All eyes are on Studio City. The US$3.2 b project which opens today to much fanfare on Cotai. Described as an “international must-see destination” in a press preview tour, it offers “so much more than gaming”. In addition to entertainment, the declared goal of the operator is for the Hollywood-inspired complex to become known for its restaurants and food courts. 1,600 hotel rooms are divided into Star Tower and Celebrity Tower
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Two bills passed on first reading. One regulating the operation of local property management firms. The other simplifying procedures of management committees in self-managed properties. The Legislative Assembly, however, denied a debate motion urging the gov’t to reclaim more idle plots of land
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4 | Business Daily
October 27, 2015
Macau
AL passes two bills on property management The two bills, targeting property management firms and management committees, passed their first reading yesterday. But a debate motion urging the government to build more public housing as soon as possible was denied Kam Leong
kamleong@macaubusinessdaily.com
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esterday, the Legislative Assembly (AL) unanimously passed the first readings of two bills regarding property management – which, respectively, regulate the operation of local property management firms and simplifies procedures of establishing management committees in selfmanaged property. The bill on the horizontal property regime, introducing the supervision of the Housing Bureau for private property management, was the first bill passed by the Assembly yesterday. It proposes that property owners need only inform the Bureau and post the meeting notice inside the building when they convene a meeting to establish a management committee. In addition, any meeting regarding the appointment of a property management committee member would need to be certified by the government department. Secretary for Administration and Justice Sonia Chan Hoi Fan told legislators that the bill seeks to minimise management disputes in the city’s self-managed properties, and to avoid more than one management organ in a property. Legislators primarily agreed with the overall direction of the bill. But legislators Ho Iong San and Mak Soi Kun expressed their concerns about share requirements for the management committee meeting to approve affairs of the building. According to the bill, a property with fewer than 50 units must get approval from homeowners whose shares account for at least 10 per
cent of the building to approve usual affairs, such as management budget. Meanwhile, such share requirement is increased to 20 per cent if the property has more than 50 units.
Licensing property management firms
On the other hand, another bill passed by the AL licensing the city’s property management firms regulates that a property management company must hold capital of at least MOP250,000 (US$31,318) to obtain a licence valid for three years, as well as requiring technical chiefs of property
management companies to be high school graduates. “I agree with the direction of the bill. But I found the requirements for property management companies to get a licence rather easy. For example, it only requires [technical chiefs] to be high school graduates,” legislator Ho Iong San said. In addition, the legislator queried whether the government should increase the minimum capital amount for bigger-scale property management companies who manage more private buildings. The Secretary for Transport and Public Works Raimundo Rosario,
meanwhile, told the legislator that the requirements can be discussed further as long as the bill passed its first reading. Executive Council spokesperson Leong Heng Teng said while introducing the bill two weeks ago that some 1,061 local property management companies had capital of less than MOP300,000 as at last year. Nevertheless, the bill proposes a transition period of three years following the implementation date of the law for the city’s current management companies, or technical chiefs, to meet the new requirements.
Motion for more land plots denied Meanwhile, yesterday’s plenary session denied the debate motion initiated by Antonio Ng Kuok Cheong urging the government to reclaim more idle plots of land as soon as possible to increase the supply of public housing, and to resume the scoring system for evaluating public housing applicants. “The housing problem is the hottest focus in society now. If such a problem can be resolved, the city can be peaceful even though the gaming industry is amid the adjustment period,” Mr. Ng’s democratic colleague Au Kam San said. But most of the other legislators perceive the debate motion is unnecessary as the government had promised to build more public housing when it gains more land. “The government has been putting its focus on providing more public housing. I think the government is striving to implement the idea as it had promised that all idle land plots, if successfully reclaimed, would be used for public housing. In addition, seeking more land resources to build more public housing is a consensus among
society. So, I don’t think we should spend time debating this in the Assembly,” indirectly-elected legislator Chan Chak Mo said. Chief Executive-appointed legislators Tsui Wai Kwan and Vong Hin Fai also held similar perspectives as Mr. Chan. Mr. Vong thought the government was making an effort to increase the city’s land resources. “The land resources here in Macau are very limited in order to meet the demands from the rapidly growing population… I don’t think the government is responsible for offering a house to every resident,” Mr. Tsui said. Meanwhile, directly-elected legislator Mak Soi Kun claimed that he agreed to debate whether the government should resume the scoring system for evaluating public housing applicants. “It is because I think the current drawing evaluation affects the fairness,” he said, yet opposing the motion. “I don’t think we should debate whether we should build more public housing at this time as the government has conducted consultations on the issue, the results of which have not yet been released.”
Business Daily | 5
October 27, 2015
Macau
Food souvenir chains Choi Heong Yuen, Koi Kei suffer sales drop Worsening consumption sentiment by Mainland Chinese visitors has not only directly impacted jewellery sales here but has been strongly felt in food souvenir outlets as well, store owners say Stephanie Lai
sw.lai@macaubusinessdaily.com
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enowned local food souvenir chains Choi Heong Yuen and Koi Kei both reported a sales decline this year amid worsening consumption sentiment by Mainland Chinese visitors to the city, a trend that they have tried to counter with more efforts in online sales and an improved product mix. “We actually started to see sales drop from the end of last year. And in the beginning of this year, sales in our stores have dropped some 10 per cent year-on-year; but later the drop widened – and now on a monthly average, we’ve seen some 20 per cent decline,” managing director of Choi Heong Yuen Bakery Alan Wong Yeuk Lai told Business Daily “This is really a year that’s very different from the past.” Choi Heong Yuen Bakery has a total of 13 stores on streets and in casinos in Macau, and is opening another new store in Studio City in Cotai today. The bakery’s main competitor, Koi Kei Bakery, runs 21 stores in Macau.
which expects to see sales turnover drop 20 per cent for the whole of 2015, Koi Kei’s owner Leong Chan Kuong told Hong Kong’s Chinese language newspaper Sing Tao Daily. The sales slump has been partly caused by the disappearance of big spenders brought by VIP gaming promoters to the Koi Kei shops in casinos, where their average transaction per head in the shops could reach MOP20,000 (US$2,505), Mr. Leong told the Hong Kong media outlet. “The average transaction at our shops by big spenders is not that much [as MOP20,000] but pretty much lies in the range of some MOP50 to MOP1,000,” said Choi Heong Yuen’s boss Alan Wong. “The bakery business has seen a slowdown as China’s anti-graft drive has effectively curbed shopping by the big spenders, and secondly, worse consumption sentiment against the backdrop of a slowing economy on the Mainland.”
Shared pain
Mr. Wong said Choi Heong Yuen had launched discount campaigns to push sales at
The sales slump has also been encountered by Koi Kei,
Alternative marketing
the beginning of this year but they had not had much effect. “What we have seen in the market now is some macro-economic factors that we cannot control,” he said. “But what we can do now is to get more actively engaged in online sales and exert more effort to promote
our products overseas despite the fact that Macau is still our core market.” Mr. Wong’s competitor, Koi Kei Bakery’s Leong Chan Kuong, said to boost turnover his stores have added the sales of preserved seafood, and items with a higher gross margin – such as chocolate.
Despite softened sales seen so far this year, Koi Kei Bakery is still optimistic about the city’s food souvenir retail prospects for next year, Leong said. Koi Kei will open more shops in Hong Kong’s airport and Macau’s casinos starting from the end of this year, the bakery chain owner said.
September visitor arrivals up 0.4 pct The first sign of recovery of the tourism industry emerges with visitor arrivals having dropped year-on-year for three consecutive months
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n September, visitor arrivals totalled 2,415,499, up marginally by 0.4 per cent year-on-year, according to the latest data from the Statistics and Census Service (DSEC) released yesterday. The number has been dropping on a year-on-year basis for three months previously. June visitor arrivals decreased 7.6 per cent, while in July and August, the number decreased 3.8 per cent and 1.7 per cent, respectively. In the first nine months of 2015, visitor arrivals totalled 22,853,973,
down 2.9 per cent year-on-year; same-day visitors (12,344,317) and overnight visitors (10,509,656) decreased by 1.7 per cent and 4.3 per cent, respectively.
September breakdown
In September alone, DSEC data shows that same-day visitors held stable at 1,242,519 as the same month of 2014 when overnight visitors rose slight by 0.8 per cent to 1,172,980. The average length of stay of visitor also increased by 0.2
days year-on-year to 1.2 days. The average stay of same-day visitors (0.2 days) remained unchanged while that of overnight visitors (2.2 days) rose by 0.3 days. Visitors from Mainland China decreased by 1.4 per cent yearon-year to 1,572,868, with those travelling on the Individual Visit Scheme rising 0.6 per cent to 657,621. Visitors from Mainland China came primarily from Guangdong Province (671,672), Fujian Province
(73,622) and Hunan Province (64,569). Visitors from Hong Kong (543,835), Taiwan (84,453) and Japan (31,864) increased by 6.8 per cent, 5.6 per cent and 16.6 per cent year-on-year, respectively, while those from the Republic of Korea (36,223) declined 22.6 per cent. Long-haul visitors from the United Kingdom (5,116) and Canada (5,108) registered a year-on-year increase, while visitors from the United States (13,721) and Australia (8,038) posted a marked decrease.
6 | Business Daily
October 27, 2015
Macau Government condemns illegal ‘on-call taxi’ app The Government Spokesperson’s Office has issued a statement reiterating the government’s stance that the mobile application for ride-sharing is illegal, citing the Regulations for Road Traffic. The Office says the SAR Government has instructed the Public Security Police Force (PSP), Transport Bureau (DSAT) and Tourist Office (MGTO) to pay close attention, investigate once such a case is found and proceed in accordance with the law. This follows Uber’s announcement of its launch of service in the SAR last week. The government added that the service would not compensate for the lack of taxis in town; rather, it would cause more difficulties for the law enforcement departments to tackle taxi violations of overcharging since the operation model is even harder to regulate.
136 apply for Mainland domestic worker quota In the space of one week, 136 applications have been received for domestic workers quota, since the authorities relaunched the scheme importing 189 such non-resident workers since October 19, the Human Resources Office of the government announced yesterday. The Office said it would inform employers approved for hiring Mainland domestic workers once the process of analysing each application was finished. For those who are deemed unqualified, objections can be raised within the legal time limit.
Self-service application for Visit Permit to HK introduced Following the introduction of self-service kiosks for the renewal of the Macao SAR Permanent Resident Identity Card and the application for Macao SAR Passport and Macao SAR Travel Permit, the Identification Services Bureau has introduced self-service kiosks for Macao residents to apply for the Visit Permit for Residents of Macao SAR to Hong Kong SAR. The self-service kiosks came into official use in October 2015, providing more convenience for Macau citizens. Eligible applicants do not need to obtain a number tag in advance of using the self-service; they can submit their application on their own with the abovementioned kiosks during the office hours of the Identification Services Bureau.
Wynn Macau’s exemption of complementary tax extended The government has approved Wynn Macau SA’s application for an additional 5-year exemption from the city’s complementary tax on casino gaming profits through December 31, 2020, the Official Gazette announced yesterday. The operator’s current exemption expires on December 31 this year. But the company’s non-gaming profits and casino winnings remain subject to the complementary tax and special gaming tax, respectively. An August filing by Wynn Macau indicated it had saved some US$23.9 million (MOP191.2 million) from the exemption for the first half of this year. The rate of complementary tax is 12 per cent.
AL to meet casino reps, labour unions on tobacco bill Ahead of the delivery of the Policy Address, the Legislative Assembly will meet with major labour unions and gaming companies regarding the proposed changes to the tobacco control laws Stephanie Lai
sw.lai@macaubusinessdaily.com
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sub-committee head of the city's Legislative Assembly, Chan Chak Mo, said the Assembly so far held “no particular ground” on the amendment to the tobacco control regime that proposes a full smoking ban in casinos, and is going to meet labour unions and casino operators to discuss the bill in mid-November. Mr. Chan, who heads the Assembly’s second standing committee, said they have scheduled to meet the city’s major labour unions and the casino operators’ representatives on November 12 or 13 to talk over their opinions on the amendment to the tobacco control regime, known as law No.5/2011. The amendment spells out a full smoking ban on gaming floors including VIP rooms, the elimination of smoking lounges on mass gaming floors as well as a ban on the sale of electronic cigarettes. The draft bill for the amendment went through its first reading in July this year. “Our committee member Si Ka Lon did support the idea that the smoking lounges should be retained in casinos and that there should be more consideration about the impact of a smoking ban on gaming revenue...” Mr. Chan told reporters yesterday following a closeddoor meeting amongst committee members. “Now we [the committee] don’t really have any particular ground on the subject. And with the opinions we have at hand, we’ll conclude them and communicate them to the government,” Mr. Chan added. The second standing committee president said casino operators will make a presentation to his team regarding the survey they have done on smoking during the scheduled meeting in mid-November.
“The legislators would like to ask them how the opinions are gathered for the survey and how the samples are collected. We hope that we can get more technical data from them [the casino operators],” said Mr. Chan. Since the Assembly passed the first reading on the tobacco control amendment bill it has received over 30 written opinions from the city’s labour associations, trade chambers, casino companies and individuals over the proposed legal changes, Mr. Chan told reporters.
Supporting smoking lounges
Only three of these 30-odd opinions, all filed by individuals, are supportive of a full smoking ban in casinos, according to Mr. Chan; most others, filed by individuals and trade chambers, support the keeping of smoking lounges in casinos, the legislator said.
The setting up of the smoking lounges in casinos complies with a new smoking ban rule that came into force on October 6 last year stipulating that smoking is only allowed on casino main floors in enclosed smoking lounges that do not contain any gaming facilities. But smoking is still allowed in VIP rooms. Mr. Chan said that aside from meeting with the labour unions and gaming companies, the Assembly will also meet with the tobacco trade chambers, duty free shop representatives and small and medium enterprises associations to gauge their opinions on the proposed changes to the tobacco control regime. When asked about the timeframe for a final approval of the bill, the sub-committee head said he was still hopeful that it could be passed before the Assembly ends the legislative year in August 2016.
No new smoking area applications approved since October 6, 2014 In a statement released on Sunday, the city’s Health Bureau said that it has not granted any applications for establishing smoking areas in casinos since the authorities imposed a ban on smoking on mass gaming floors on October 6, 2014. Under the ban, smoking is only allowed in VIP areas and smoking lounges free of gaming facilities located inside casinos. The statement - jointly issued by the Health Bureau, the Labour Affairs Bureua and Gaming Inspection and Co-ordination Bureau - announced that the authorities intend to punish Wynn
Macau casino for converting part of its mass gaming area into a VIP gaming area, where smoking is allowed. The conversion has caused the dissatisfaction of some Wynn Macau casino employees, who went on strike on Sunday. Following the employees’ actions, authorities issued the statement noting that they had begun the process of punishing the casino. But the statement also cited representatives from Wynn Macau saying that it had misunderstood the law, and that it had since reversed the conversion.
Business Daily | 7
October 27, 2015
Macau Bulgarians arrested for suspected card info theft
Studio City opens today; Melco Crown “raising the non-gaming entertainment bar” The goal of the US3.2billion integrated resort is to create an “international must-see destination” João Santos Filipe
jsfilipe@macaubusinessdaily.com
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he US$3.2 billion (MOP25.54 billion) Studio City project celebrates its Grand Opening today and at Melco Crown Entertainment the expectation is that the new integrated resort will make Macau an international must-see entertainment destination, according to the Property President of Studio City, Jay Dee Clayton, in a preview tour held for the press. “The US$3.2 billion we spent on this property was all invested to make this place a must-see attraction,” he said. “Studio City is so much more than gaming. We are raising the bar to all of our competitors in making Macau an international must-see entertainment destination”. Beside the Golden Reel, which can be seen on the building’s façade, the Batman Dark Flight 4D motion ride and family-oriented entertainment Warner Bros. Fun Zone, the primary goal of Melco Crown is for the property to become
known for its restaurants and food courts. “One of the things that is very important for our industry is that we have a lineup of all-star chefs in Studio City. With the talent that we bring onboard, we want to position ourselves as a must-visit destination in Macau”, Mr. Clayton reiterated, in a press conference attended by Michelin-star chefs Alain Ducasse and Tam Kwok Fung.
House of Magic
While Business Daily had the opportunity to experiment all the facilities beforehand, there was also the chance to listen to the illusionist Franz Harary, the designer of the House of Magic show, who explained the concept behind the project. The show is steampunk-themed, a subgenre of science fiction and fantasy incorporating technology and aesthetic designs inspired by 19th Century industrial steam-powered machinery.
“I wanted to create a place in the world where magicians of all different styles and magic could come together and have the absolute perfect environment for them to shine”, Mr. Harary said. He also explained the big challenge of designing magic in a place where most of the audience comes from Mainland China. “There is so much technology [appearing] every day that people take everything for granted. If I show them a mobile phone floating in the air, they will say: ´That’s cool. What app is that?´ They will never believe it is magic. There is so much technology that people have lost their sense of wonder”, he said. “My work here is to show them than there is something more. Tell them not to assume that they have seen everything in magic”. Studio City has a total of 1,600 hotel rooms divided into two towers called Star Tower and Celebrity Tower.
Over a thousand local residents and tourists’ bank card information are suspected of having been stolen from 24-hour ATM machines on San Ma Lo (Avandia de Almerida Ribeiro) and the Grand Canal shopping area inside The Venetian according to Judiciary Police. The police say they had received reports from five banks that a total of 26 clients reported withdrawal attempts made with their card in Vietnam and Malaysia. Upon investigation, police said the card information was stolen by an East European criminal group. Two Bulgarian men were arrested at the scene after re-entering Macau and checking into a hotel in Taipa. They were uploading such information to the cloud on the Internet for compliances in the overseas download. Police say the ATMs in question were installed with card readers and hidden cameras that are hard to detect and asked residents to be on the alert by covering passwords which should not be too simple.
Resident injured by ferry collision discharged A female Macau resident injured in the high-speed ferry sailing from Macau to Hong Kong on Sunday has already been discharged from hospital, Macau’s Marine and Water Bureau said yesterday. The hydrofoil, which carried 163 passengers and 11 crew, hit an ‘unidentified object’ off a small island in Hong Kong’s western waters and then lost power, according to media reports. The collision caused injuries to more than 120 people, the Hospital Authority of Hong Kong said. A similar accident occurred in November 2013 injuring 87 people.
CE meets new Commissioner from Beijing Chief Executive, Mr Chui Sai On, has met with the newly-inaugurated Commissioner of the Office of the Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in the Macau SAR, Mr. Ye Dabo. Chui Sai On briefed him on the current status of Macau, saying the SAR’s economy has entered an adjustment period and that the SAR Government would use the opportunity to comply with the central government’s instructions to promote the diversification of Macau and push forward regional diversification, as well as improving people’s livelihood to assure Macau’s stable development. Ye Dabo also talked about his agenda with regard to helping the SAR enhance its international reputation and competitiveness.
8 | Business Daily
October 27, 2015
Macau
Angela Leong: Gov’t needs to do more and act faster While nobody could have foreseen Macau’s economy dropping so quickly, the SJM Executive Director pledged the government would have concrete measures to help the recovery
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acau’s government needs to take more “concrete actions” to support the economy amid a 16-month casino downturn, including speedier decision-making and better planned infrastructure, said Angela Leong, executive director of SJM Holdings Ltd. “Macau is such a small place and the government wants to diversify the economy. But they only talk when they should say how they would support" the city, Leong, who’s also mother to the youngest children of SJM’s founder Stanley Ho, said in an interview in Macau. SJM operates the largest number of casino tables in the city. Macau’s GDP tumbled 26.4 per cent in the second quarter amid China’s economic slowdown and a corruption crackdown that caused VIP gamblers to avoid the city.
Macau hasn’t made its planning very well. When the economy reaches its low, you should do better on the infrastructure, transportation Angela Leong On Kei, Executive Director of SJM Holdings Ltd
Corporate GEG promotes responsible gaming Sheng Kung Hui (S.K.H.) Gambling Counselling and Family Wellness Centre held ‘The way out of Problem Gambling’ micro movie premiere sponsored by the Social Welfare Bureau of the MSAR Government and Galaxy Entertainment Group (‘GEG’) at UA Galaxy Cinemas last Saturday. The
premiere seeks to enhance the understanding of problem gambling and promote responsible gaming to the public. Produced by a local movie production team using a cast of local actors, around 100 audience members attended the event, showing their appreciation with a round of applause.
Beijing will introduce more policies this year to support the former Portuguese colony amid an economic adjustment, said Li Gang, director of the Chinese government’s local liaison office. SJM, founded by billionaire Ho who held a gambling monopoly in Macau for decades, owns 20 of the 35 casinos in the world’s largest gambling hub and operates about a third of its more than 5,800 legal casino tables. It has been trying to diversify its operations by adding more non-gaming features.
‘Should Do Better’
While the Macau government has done a good job building up its reserves over the years of strong economic growth, "nobody expected the economy would drop so quickly," said Leong in Macau.
Macau "hasn’t made its planning very well. When the economy reaches its low, you should do better on the infrastructure, transportation,” she said, citing as an example delays in completing a bridge that will connect Macau with Hong Kong and the city of Zhuhai in mainland China. "Do you know how long we have been talking about the bridge? Ten, 20 years. That’s a long time,” she said. Leong’s comments follows those of Las Vegas tycoon Steve Wynn earlier this month, when he criticized the government’s policy of limiting gambling tables, and delays in informing operators of the number of tables casinos will receive. Macau fired back days later saying casinos must fully comply with its rules. Casino operators such as Melco Crown Entertainment Ltd., Wynn Macau Ltd., and Sands China Ltd. are opening multi-billion dollar resorts aimed more at tourists than hardcore bettors, amid a call by Chinese President Xi Jinping for Macau to diversify its economy away from gambling. Melco’s US$3.2 billion Studio City, which opens today, was authorized by the government to operate 250 gambling tables, far fewer than the 400 that Chairman Lawrence Ho said he was expecting. The Hong Kong-based company’s joint venture that controls Studio City is asking banks to waive financial conditions for a year on its HK$10.85 billion (US$1.4 billion) loan for the construction, people with knowledge of the matter said Friday. Bloomberg
Non-resident workers up 10.97 pct in September
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he number of non-resident workers in the SAR, commonly known as blue card holders, rose 10.97 per cent year-on-year to 180,751 as at the end of September, the latest data from the Public Security Police Force (PSP) shows. In addition, according to the latest data of the Human Resources Office, it received 17,880 applications for nonresident workers and granted 10,399 permits in September. All in all, of the 180,751 nonresident workers, Mainland China occupies the biggest share with
116,667 people working in the SAR, while the Philippines comes second with 23,808 nationals. The third placed nationals are from Vietnam, with 14,467 people working here. In terms of industry, the majority of non-resident workers are in the hospitality industry, with 47,192 people. This is followed by the construction industry with 45,509 workers, losing the first place since June due to the completion or near completion of some major construction projects in Cotai. The category of domestic helpers took third place with 23,086 people.
Business Daily | 9
October 27, 2015
Greater China
Rate cut takes stocks to two-month high
Mining cooperation with Mongolia
Goldman Sachs estimated the easing will release 600 billion yuan to 700 billion yuan into the financial system
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hina’s stocks rose to a twomonth high and bonds advanced after the central bank cut interest rates for a sixth time in a year as the nation’s leaders gather this week to map out a fiveyear plan for the world’s secondlargest economy. The Shanghai Composite Index increased 0.5 percent to 3,429.58 at the close, the highest level since August 21. Technology companies led gains, with Wangsu Science & Technology Co. surging 3.5 percent. The 10-year bond yield dropped to the lowest level since 2009 and interestrate swaps declined by the most in two months. The Shanghai gauge has rebounded 17 percent from this year’s low on August 26 as the government took measures to stabilize the stock market after a US$5 trillion rout and policy makers introduced more measures to boost growth amid the slowest economic expansion in a quarter of a century. The People’s Bank of China on Friday announced a 25 basis-point cut in the benchmark lending rate, while reserve-requirement ratios for lenders were reduced by 50 basis points. The Communist Party meets for its fifth plenary session from today. Hong Kong’s Hang Seng China Enterprises Index added 0.1 percent
at the close, while the Hang Seng Index slipped 0.2 percent. The CSI 300 Index rose 0.5 percent. Trading volumes in Shanghai were 29 percent above the 30-day average.
More easing
The one-year lending rate will be cut to 4.35 percent from 4.60 percent effective Saturday the PBOC said on its website, while the one-year deposit rate will fall to 1.50 percent from 1.75 percent. The PBOC also scrapped a deposit-rate ceiling that limited the rate banks could pay savers. Removing such controls boosts the role of markets in the economy, part of efforts by Premier Li Keqiang to find new engines of growth and to bolster competition in banking. A gauge of technology shares in the CSI 300 increased 1.1 percent for the steepest gain among 10 industry groups. Tsinghua Tongfang Co., a computer maker, advanced 10 percent. Financial shares also rose after the rate cut, led by brokerages. Haitong Securities Co. climbed 1.5 percent, while Huatai Securities Co. surged 3.1 percent.
Bond yields
The yield on sovereign bonds due July 2025 fell three basis points to 3.04 percent, the lowest level for
Richest mainlander ‘doubled fortune in 12 months’ Wang Jianlin unseated Jack Ma, founder of tech giant Alibaba, who dropped to second place on US$21.8 billion as his firm’s share price slumped in New York
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hina’s richest man saw his fortune balloon by nearly US$17 billion -- a sum larger than the GDP of Iceland -- in the past year, business magazine Forbes said yesterday. Wang Jianlin (pictured), founder of real estate and entertainment conglomerate Wanda Group, saw his wealth rocket from US$13.2 billion to US$30 billion in the publisher’s
China and Mongolia inked eight cooperation agreements on mineral-resource exploration last week during a weeklong cultural expo, which opened in Hohhot, capital of north China’s Inner Mongolia Autonomous Region, on Friday. The agreements, which are worth over 30 billion yuan (US$4.73 billion), were signed by government and enterprise representatives from the two sides during the first China-Mongolia Expo. The projects include the exploration of nonferrous metals and unconventional gas, mining, smelting and the processing of other mineral resources. A joint declaration was signed by President Xi Jinping and Mongolian President Tsakhiagiin Elbegdorj in August 2014.
2015 China Rich List. The windfall, which came despite sluggish growth in the world’s secondlargest economy, was driven by the flotations of two of his company’s subsidiaries. Market forces and creative abilities were crucial to building major businesses in China, Wang said, rather than personal connections.
a benchmark 10-year note since January 2009. The cost of oneyear interest-rate swaps, the fixed payment to receive the floating sevenday repurchase rate, sank nine basis points to 2.31 percent. The seven-day repo rate declined three basis points to 2.35 percent. Goldman Sachs Group Inc. estimated the easing will release 600 billion yuan to 700 billion yuan (US$94 billion to US$110 billion) into the financial system, helping keep borrowing costs down at a time of record capital outflows. The U.S. bank predicts reserve-requirement ratios will be lowered by another 50 basis points by year-end, though policy makers will seek to prevent the yuan from weakening. Bloomberg News
“It’s good to have money,” he said in a brief appearance at the announcement of the ranking. “The majority of people with money, especially extraordinarily rich people, are good people.” At his average rate of accumulation last year he would have become more than US$200,000 wealthier during his seven minutes on the stage. Wang Jianlin is known outside China for a string of overseas acquisitions including the organiser of Ironman extreme endurance contests, Swiss sports marketing group Infront, and a stake in Spanish football club Atletico de Madrid. He burst into the spotlight in 2012 by buying US cinema chain AMC Entertainment for US$2.6 billion. Wang leapt from fourth to first in the Forbes list, one of several charting China’s most affluent people. He unseated Jack Ma, founder of tech giant Alibaba, who dropped to second place on US$21.8 billion as his firm’s share price slumped in New York. The 100 richest people in China were worth US$450 billion, Forbes said, up nearly 20 percent in a year -- far faster than current GDP growth of 6.9 percent and despite a rout on Chinese stock markets. Six out of ten of China’s richest were in the technology sector, including Ma Huateng of Internet titan Tencent (third), Lei Jun of Xiaomi (fourth), and Robin Li of Chinese search engine Baidu, who slipped four spots this year from second to sixth. “China’s economy is going through a period of structural change,” said Forbes senior editor and list compiler Russell Flannery, adding that the richest had found “new opportunities tied to that transition”. AFP
Building materials sector remains sluggish China’s building materials sector remained weak as the property market showed little signs of improvements, latest statistics from the country’s top economic planner indicated. Cement output fell 4.7 percent year on year to 1.7 billion tonnes in the first three quarters, in contrast to the 3-percent gain seen during the same period last year, the National Development and Reform Commission (NDRC) said on its website. Output of flat glass dropped 7.5 percent, compared with the 3.8-percent rise in the same period last year.
Re shares make modest debut in Hong Kong Shares in China Reinsurance (Group) gained as much as 3 percent in their Hong Kong stock market debut yesterday after a US$2 billion initial public offering that was the second-largest in the city this year. China Re’s stock rose as high as HK$2.78, before paring gains to stand at HK$2.74 in early morning trade. It had priced its IPO at HK$2.70, the top of the marketing range. The benchmark Hang Seng index was up 0.6 percent. The IPO cornerstone investors snap up nearly 56 percent of the deal.
Beijing innovation week turns into deals Investments worth more than two billion yuan (about US$315 million) were made in Beijing during China’s first mass entrepreneurship and innovation week which concluded on Sunday. The week kicked off on October19 in the main venue, Zhongguancun, a major hightech zone in Beijing. Competitions and forums for “makers”, those do-it-yourself inventors and craftsmen, as well as entrepreneurs and investors were held in cities including Beijing, Shanghai, Shenzhen, Wuhan, Xi’an, Chengdu, Hefei and Shenyang. Exhibitors from Beijing took 46 percent of the country’s total participating projects during the week.
Priceline increases stakes in Ctrip U.S. travel booking service Priceline has increased stakes in its Chinese equivalent Ctrip to 12.63 percent in a bid to gain greater exposure to China’s booming travel market, Ctrip said over the weekend. Priceline bought up to 129,200 American Depository Shares of Ctrip each day between September 15 to October 16 at a price range between US$61.8 to US$69.6, Ctrip said, citing filings to the Securities and Exchange Commission.
10 | Business Daily
October 27, 2015
Greater China
IMF set for green light on yuan joining currency basket Experts said the political winds were blowing in Beijing’s favour Paul Taylor and Krista Hughes
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nternational Monetary Fund staff are set to give the all-clear for China’s yuan to be included in the lender’s benchmark currency basket, laying the groundwork for a favourable decision by policymakers, people familiar with the discussions said on Sunday. The IMF’s executive board is scheduled to decide in November on putting the yuan on a par with the dollar, yen, euro and pound sterling and a key factor will be its performance against a checklist of technical criteria, as assessed by IMF staff. Three people briefed on the IMF discussions, who asked not to be named because of the sensitivity of the issue, said a draft report from staff reached a favourable conclusion on including the yuan, also known as the renminbi (RMB). “Everything is on course technically and there is no obvious political obstacle. The report leans clearly towards including the RMB in the (basket) but leaves the decision for the board,” one of the officials said, adding that a pencilled-in early November date for staff to circulate their report to
to join the Special Drawing Rights (SDR) basket as part of its long-term strategic goal of reducing dependence on the dollar and to mark the country’s coming of age as an economic power. An IMF spokesman said staff were finalizing a report to be considered at a formal board meeting planned for November, although no date had yet been set. “The decision on the possible inclusion of the RMB in the SDR basket will ultimately be made by the IMF’s Executive Board when the meeting is held,” he said. The second official said that may be postponed until early 2016. Any change to the basket will take effect in October 2016.
Political winds favourable
board members has been pushed back by several weeks. Two other officials said staff would recommend the yuan join the basket, which determines the mix of currencies that countries like Greece
receive as part of disbursements from the IMF. “There is no real discussion, no obstacles, all seems on course,” a second official said. Beijing is pushing for the yuan
China has rolled out a flurry of reforms recently to liberalize its markets and also help the yuan meet the SDR criterion of being “freely usable”, or widely used to make international payments and traded on foreign exchange markets. A positive staff review will cement a lower hurdle for board approval: a 70 percent voting majority rather than the 85 percent which is normally reserved for the IMF’s toughest decisions. Experts said the political winds were blowing in Beijing’s favour. France and the United Kingdom have backed the yuan’s inclusion and countries including Germany and Italy have said they are open to the move, depending on the technical criteria. Eswar Prasad, a professor at Cornell University and former head of the IMF’s China Division, said he could not see the United States or Japan bucking a positive staff recommendation. Reuters
Why are malls closing if consumption is rising? Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores Pete Sweeney and Jessica Macy Yu
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he Di Mei shopping centre in downtown Shanghai is a surprisingly depressing place to shop. The underground mall is located in one of the most shopping-mad cities in China, and yet it is run down and starved of customers. “Sometimes I cannot sell even one dress in a day,” said dress shop owner Ms Xu, who rents a space in Di Mei. Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world’s secondlargest economy beat expectations in the third quarter. The answer to that apparent contradiction lies in the rising competition from online shopping and government purchases possibly boosting retail statistics. Add poorly managed properties into the equation and the empty malls aren’t much of a surprise. More importantly, the struggles of Chinese brick-and-mortar retailers amplify a policy conundrum; these
malls, built to reap gains from rising consumption, are instead adding to China’s corporate debt problem, currently at 160 percent of GDP twice as high as the United States. Less foot traffic means cash flow of mall owners and developers are getting squeezed - a potential hazard for an economy growing at its slowest pace in decades. Di Mei’s owners are trying to refurbish, but it’s unclear whether it will pay off, and others are just closing down. The Sunlight Store in Beijing, for example, is located in another prime pedestrian hub, but it closed its blinds this month, with manager Ni Guifang telling Reuters they are seeking greener pastures online. “The sales were just OK, but the overall sales were on the downward trend,” Ni said.
Trimming down
Major listed mall operators are also feeling the pain. Dalian Wanda, a big property developer, said in January it would close or restructure 30 of its retail venues and in August said more adjustments were underway.
If you build it and they’re not coming, that’s a non-performing loan… That’s the banks’ problem Tim Condon, economist, ING
Malaysia-based Parkson, which operates more than 70 department stores in China, closed several of its stores in northern China last year following a 58 percent drop in China net profit in 2013. “As growth in retail sales slows because of the country’s lower GDP
growth, and in cities where mall space is abundant, vacancy rates have risen substantially,” said Moody’s analyst Marie Lam in a research note. Tim Condon, an economist at ING in Singapore warned that investors should not read China’s official retail figures as exclusively reflective of rising household consumption, noting that the data also capture some government purchases. On the other hand, e-commerce sites continue to post doubledigit growth rates, even as some
Business Daily | 11
October 27, 2015
Greater China Alibaba results likely to dim outlook for consumer spending
Steel output falls
In the April to June quarter, revenue and gross merchandise volume both eased to their slowest rates in more than three years John Ruwitch
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hinese e-commerce giant Alibaba Group Holding Ltd’s secondquarter revenue growth is likely to have slumped to half the year-earlier rate, undermining hopes consumer spending will temper a slowdown in the world’s second-biggest economy. Beijing is hoping that private consumption will pick up the slack as exports fall and it tries to rebalance the economy - now heading for its slowest full-year growth in 25 years - away from a reliance on trade and government spending. But Alibaba’s second-quarter results due today are expected to cloud the increasingly grim outlook for consumer spending, which accounted for 60 percent of China’s economic growth in the first half of 2015. “Much focus will be paid to the deceleration in volume growth Alibaba guided to mid-quarter. Investors will be looking to see if Alibaba can improve take rates to make up for this slowdown,” Wedbush Securities analyst Gil Luria said. Mediocre data from the firm behind China’s biggest and mostsuccessful e-commerce platforms
could provide fresh fodder for bears predicting China is heading for a much harder economic landing than the official figures would suggest. Having warned in September of slower-than-expected sales, Alibaba’s revenue in the three months through September is expected to be 21.3 billion yuan (US$3.35 billion), according to Thomson Reuters data analysing forecasts from 28 analysts. That would represent an increase of 26.7 percent from the same quarter last year, when year-on-year growth was a sizzling 53.7 percent. In the April to June quarter, revenue and gross merchandise volume (GMV) - the total value of goods transacted across Alibaba’s platforms - both eased to their slowest rates in more than three years. To be sure, government data shows retail sales have continued to grow above 10 percent so far this year, even as GDP growth has slowed to 6.9 percent in the third quarter. But a China consumer confidence index produced by ANZ Bank and polling company Roy Morgan fell to a record low in August, and research
KEY POINTS Analysts expect Q2 revenue growth of 26.7 pct y/y Rate would be half what it was in Q2 last year firm Gartner says smartphone sales recorded their first fall in China during the second quarter. Even so, Alibaba founder Jack Ma told shareholders in a letter earlier this month that high savings rates and lower prices online would continue to drive e-commerce spending regardless of the economic environment. Alibaba celebrated the one-year anniversary of its record US$25 billion initial public offering in September by watching its share price dip to an all-time low of US$57.20 that month. Since then it has rebounded back above the IPO price of US$68. Reuters
Prices of steel products retreated in September despite falling output, underlining continued difficulties to digest supplies in the bloated sector, according to data from the National Development and Reform Commission (NDRC). Last month, the steel price index came in at 61.73, down 2.58 percentage points from the previous month, the NDRC said in an online report. In the first three quarters, crude steel production dropped 2.1 percent year on year to 608.94 million tonnes, according to the NDRC. Notably, exports jumped 27.2 percent year on year.
Registered capital of entities triples in Tianjin FTZ The number of newly registered market entities in north China’s Tianjin Pilot Free Trade Zone grew 138 percent and the registered capital went up 243 percent year-on-year in half a year, official statistics showed. Between April 21 and October 20, the Tianjin FTZ saw 7,958 new entities with a total registered capital of 212 billion yuan (US$33 billion). The new entities included 343 foreign-invested enterprises, with a combined capital of 66 billion yuan, up 209 percent and 184 percent respectively year-on-year. The Tianjin FTZ was official launched on April.
First green bond A-rated by Fitch The Chinese mainland’s first green bond, issued by Agricultural Bank of China (ABC) and listed on the London Stock Exchange, was assigned a long-term A ratings by Fitch, the rating agency on Friday. The US$1 billion equivalent climate bond is the first green bond issued by a Chinese mainland financial institution and the first green bond denominated in renminbi (RMB) issued by an Asian issuer. A green bond is an innovative financing method used around the world, directing financial resources to environmental protection.
Cross-border tourism boosted with Russia, Mongolia China, Russia and Mongolia have signed a string of cross-border tourism cooperation agreements as part of the efforts to push the construction of the economic corridor among the three countries. The ten cooperation projects, worth 1.4 billion yuan (US$220 million), were signed by government authorities and enterprises during the first China-Mongolia Expo which opened in Hohhot, capital of north China’s Inner Mongolia Autonomous Region, on Friday.
Listed first delivery firm moderation is evident. E-commerce leader Alibaba is expected to report that sales growth slowed sharply in the second quarter - albeit to around 27 percent on-year, still a ripping pace. And as more Chinese graduate to the ranks of the middle class, places offering entertainment are thriving. Movie ticket sales hit a new record of nearly US$300 million during a single holiday week in October, up 60 percent year-on-year. But this is little consolation for the likes of Di Mei. And the risk
is that the frenetic pace of mall construction cascades into a baddebt problem for banks if shoppers fail to match the zeal of property developers.
Shopping overcapacity
China is currently the site of more than half the world’s shopping mall construction, according to CBRE, a real estate firm, even though it appears that many of these malls will not produce good returns for their investors.
A joint report by the China Chain Store Association and Deloitte showed that by the end of this year, the total number of China’s new malls is projected to reach 4,000, a jump of over 40 percent from 2011. Real estate analysts note that much of the surge in retail space construction came at the behest of local governments, who were rushing to push real estate development as part of attempts to stimulate the economy. The result has been malls built in haste and managed poorly. Reuters
China will soon have its first listed express delivery company as STO Express Co. Ltd is seeking a backdoor listing, media reports said on Saturday. Shanghai-based STO Express aims to list on the Shenzhen stock exchange through a reverse merger with a shell entity, China Daily and China Business Journal reported. Reverse merger, also called backdoor listing, helps a private company float shares by injecting its assets into a publicly traded firm. After nearly two months of trading suspension, Shenzhen-listed IDC Fluid Control Co. Ltd. said it had reached agreement with STO Express on restructuring.
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October 27, 2015
Asia In September, exports to China fell 1.7 percent while ones to Japan dropped 6.9 percent. Shipments to Europe slipped 9.5 percent and those to the United States rose 1.1 percent. Imports plunged 26.2 percent, the biggest fall since August 2009 and worse than the poll’s forecasted 19.1 percent drop. The ministry said the big decline in imports stemmed from major declines in oil, gold and aircraft.
Some encouragement
Thai exports fall less than expected Machinery imports fell 19 percent and consumer goods 7.9 percent showing continued weakness Orathai Sriring and Kitiphong Thaichareon
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hailand’s exports in September fell less than expected, but had their ninth straight monthly drop while imports plummeted, showing that the trade-reliant economy continues to struggle to grow. Long after a military coup in May 2014 ended months of political unrest, Southeast Asia’s secondlargest economy has been unable to
regain momentum, as pivotal exports and domestic consumption remain weak. Exports in September fell 5.51 percent from a year earlier, the Commerce Ministry said yesterday. A Reuters poll predicted a 7.65 percent decline. “For the third quarter, Thailand’s exports look alright,” said Santitarn Sathirathai, economist at Credit
Suisse in Singapore. “We can’t be too confident, however, because it’s highly probable that it will be weaker in the next quarter.” In July-September, exports totalled US$54.71 billion, about 5.2 percent below the same period of 2014. Santitarn said he’s worried “the effects of China’s economic slowdown will really come to the fore” in the fourth quarter.
Ministry official Somkiat Triratpan said “we are not concerned about imports as they are usually up and down.” Many of Thai imports are assembled into completed goods and shipped out again. On the encouraging side, September imports of auto parts rose 19.5 percent from a year earlier. Thailand is a major regional hub for global auto companies, and exports of cars and parts rose 20.6 percent in September. But in September, machinery imports fell 19 percent and consumer goods 7.9 percent, showing continued weakness. Thai exports contracted in 2013 and 2014 and will do so this year despite a weak baht. The central bank last month forecast exports would decline 5 percent, the biggest fall since 2009. The Bank of Thailand’s next policy meeting is November 4. Santitarn said there might be ways for the BOT to lower interest rates and weaken the baht to support growth. “If there’s no intervention, the baht will be too strong. There needs to be compromise, by either adjusting the currency or lowering interest rates, or both.” Reuters
Bank of Japan faces key test to rosy forecast Data will show factory output fell for the third straight month in September Leika Kihara
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ank of Japan (BOJ) policymakers meet for a crucial rate review on Friday as growing signs of recession and slumping oil prices challenge their scenario that the world’s third-largest economy is on track to hit an ambitious 2 percent inflation target. While the central bank is set to cut its rosy price forecasts in a semi-annual report due out Friday, many BOJ officials prefer to hold off on expanding an already massive stimulus programme that has had limited success in accelerating inflation since being deployed two-and-half years ago. They are clinging to hopes that Japan’s economy will emerge from the doldrums
next year as global demand for its exports pick up and accelerate inflation toward the BOJ’s target. BOJ Governor Haruhiko Kuroda has signalled that no immediate easing was forthcoming as a tightening labour market is seen pushing up wages and boosting consumption. “The BOJ is likely to maintain its forecast of a moderate economic recovery,” said Mari Iwashita, chief market economist at SMBC Friend Securities. “If so, the bank will stand pat on policy even if it cuts its economic and price forecasts,” she said. Some analysts, however, bet that growing signs of weak-
ness in the economy may nudge the central bank into action. A host of indicators due out this week, including September output data, may swing the debate in favour of action if they heighten concern over Japan’s recovery prospects, they say. Economists are divided on whether the BOJ will act on Friday with six of the 13 predicting it will add to its stimulus. With Japan flirting with recession due to weak exports, the BOJ’s twice-yearly report will likely cut its growth and price forecasts for the fiscal year that began in April. But it is seen making only minor cuts to its inflation forecast of 1.9 percent for next fiscal year, sources say, possibly
taming market expectations of additional stimulus. A lack of government pressure for more monetary stimulus may also mean the BOJ will save its limited policy tools for now. “There’s a limit to what monetary policy can do to boost prices,” Finance Minister Taro Aso said on Friday, signalling that no additional monetary easing was needed for now. With inflation having ground to a halt, the BOJ is likely to acknowledge that the timing for hitting its price goal will be delayed by several months from the current projection of around September next year. But any such delay won’t
immediately trigger monetary easing because it is mostly due to renewed declines in oil prices, not weakness in the economy, BOJ officials say. A series of data due this week may hold the key to the BOJ’s policy decision. Japan’s economy contracted in April-June and may shrink again in July-September on weak exports. Many analysts say growth may not rebound much in the current quarter if the pain from China’s slowdown persists. Friday’s inflation and consumption data will underscore the fragile state of Japan’s recovery, according to analysts polled by Reuters. Reuters
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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Business Daily | 13
October 27, 2015
Asia
Singapore’s manufacturing output down 4.8 pct The general manufacturing industries cluster’s output fell 4.7 pct
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anufacturing output declined 4.8 percent year-on-year in September, according to the Economic Development Board (EDB) yesterday. Excluding biomedical manufacturing, the country’s manufacturing output fell 10.2 percent year-on-year, said EDB in the press release. On a three-month moving average basis, manufacturing output contracted 6.2 percent in September compared with the same period last year. On a seasonally adjusted monthon-month basis, manufacturing output increased 0.5 percent in September. While excluding biomedical manufacturing, output grew 0.3 percent. The biomedical manufacturing cluster’s output increased 26.3 percent year-on-year, with both the pharmaceuticals and medical technology segment recording output growth. The chemicals cluster’s output increased 4.4 percent on a yearon-year basis, led by the growth of specialties segment, which increased 8.8 percent on the back of expanded production capacities. The petroleum and petrochemicals segments also posted gains of 4.9 percent and 2.5 percent, respectively.
The machinery and systems segment declined 8.3 percent
Output of transport engineering cluster encountered the biggest hit, falling 24 percent in September year-on-year, with all segments registering declines. The marine and offshore engineering segment led the decline, as a result of lower levels of rig building and ship building activities. The general manufacturing industries cluster’s output fell 4.7 percent compared with the same period a year ago, weighed down by contractions in the miscellaneous industries, printing and food, beverages and tobacco segments.
The proposed changes could expand the scope of eligible transactions, and widen the panel of submitting banks as well as the timing of transactions
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Global regulators have been reforming ratesetting practices after Barclays Plc, UBS AG, RBS and others were fined billions of dollars for rigging the London Interbank Offered Rate
Japan Post Holdings Co set the price for its initial public offering of shares at the top of an indicative range, following the pattern set in concurrent IPOs for its banking and insurance arms and reflecting strong demand from retail investors in Japan’s biggest privatisation in three decades. In a regulatory filing on Monday, the holding firm for the state-owned mail and financial giant priced shares at 1,400 yen apiece in the IPO, the top of a book-building range set at 1,100-1,400 yen, raising 693 billion yen (US$5.7 billion).
Philippines seeks arrangers for global bond - IFR
Australian regulators consider benchmark rate fixing reforms
egulators are set to overhaul the way that benchmark interbank interest rates are set, in response to worries about the
Japan Post Holdings prices IPO at top of range
impact of global banking reforms and a growing perception of regulatory risk. The Council of Financial Regulators (CFR) is seeking views on a new methodology for calculating the bank bill swap rate (BBSW) benchmark, it said on its website. Revisions could include a complete change in how BBSW is calculated or small tweaks such as requiring banks
The precision engineering cluster also saw a decline of 8.7 percent on a year-on-year basis. The machinery and systems segment declined 8.3 percent, while the precision modules and components segment contracted 9.3 percent. The electronics cluster’s output also contracted 8.6 percent in September. Nearly all segments recorded declines except the other electronics modules and components segment, which saw growth on the back of expanded capacities and higher demand for components used in communication devices. Xinhua
to directly negotiate interest rates on certificates of deposits with third parties. The proposed changes could expand the scope of eligible transactions, widen the panel of submitting banks as well as the timing of transactions, according to a CFR consultation paper. The CFR is seeking formal submissions and comments in response to its consultation paper by December 3. Global regulators have been reforming rate-setting practices after Barclays Plc, UBS AG, RBS and others were fined billions of dollars for rigging the London Interbank Offered Rate, known as Libor. Australia, in 2013, scrapped its BBSW rate-setting mechanism after an exodus of banks from the panel, the first major market to dismantle the tarnished structure. It replaced the panel of 14 banks with an automated rate mechanism that examines live and executable prices from trading venues for bank accepted bills (BABs) and negotiable certificates of deposit (NCDs). Last year, Australia and New Zealand Banking Group suspended seven staff involved in a regulatory investigation into BBSW rate fixing. Reuters
The Philippine government has invited underwriters to pitch for a sovereign bond offering, paving the way for a return to the global market before the end of the year, IFR reported yesterday. National Treasurer Roberto Tan told IFR and Reuters in August that the Philippines was considering issuing a US$750 million sovereign bond this year to fund its 2016 needs. The government plans to borrow 674.8 billion pesos from domestic and foreign creditors next year to help finance its record 3 trillion peso (US$64.41 billion) budget next year.
Singapore to liberalize gas market Singapore plans to establish a domestic natural gas trading market to help support plans to become a centre for trading liquefied natural gas (LNG) and take advantage of the growing importance of the fuel in Asia’s energy markets. Singapore, already a global oil trading hub, is aiming to take advantage of rising LNG supplies in the region, particularly from Australia, and an increasing numbers of buyers especially in China, but also India and other parts of Asia. The city-state produces more than 90 percent of its electricity from imported natural gas.
Low costs keep IndiGo flying high Indian budget airline IndiGo is likely to reap the rewards of its frugal business strategy when it launches today an up to US$465 million initial public offer in one of the world’s fastest growing - and most competitive - aviation markets. IndiGo, India’s largest airline by passenger numbers, is the only consistently profitable local carrier for the past seven years, according to consultancy Centre for Aviation (CAPA). For investors, this success in dodging the high operating costs and taxes that have over the past three years grounded debt-ridden Kingfisher Airlines.
Sumitomo wins US$300 mln order for gas-fired plant Trading house Sumitomo Corp said yesterday it had won a US$300 million order for a 400-megawatt gas-fired power plant in Turkmenistan, part of a package of deals announced on a visit to the Central Asian nation by Japanese Prime Minister Shinzo Abe. Japan and Turkmenistan on Friday signed deals worth over US$18 billion in the energy-rich nation, which has become an important supplier of natural gas to China. Sumitomo said it aimed to complete the construction of the simple-cycle gas-fired plant in 2018.
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October 27, 2015
International German business morale falls modestly Business morale fell modestly in October, suggesting Europe’s largest economy remains resilient in the face of a slowdown in China and emissions scandal at carmaker Volkswagen. The Munich-based Ifo economic institute’s business climate index, based on a monthly survey of some 7,000 firms, dipped to 108.2 in October from 108.5 in September. This was stronger than the 107.8 reading that was forecast by economists in a Reuters poll.
Argentine presidential vote heads to runoff The race draws a curtain on 12 years under Kirchner and her late husband and predecessor Nestor Under Argentine electoral law, in order to win outright, a candidate must claim more than 45 percent of the vote, or at least 40 percent with a margin of 10 points over the runner-up. Earlier, Scioli acknowledged the race was headed for a runoff as both sides awaited the official results. “I call on all undecided and independent voters to bring a victory for all Argentines,” he said in a speech to thousands of supporters at his campaign headquarters. Third-place candidate Sergio Massa won 21 percent of the vote. A former Kirchner ally, Massa fell out with the president and launched a rival party, the Renewal Front, two years ago.
WPP’s sales growth accelerates in third quarter The world’s biggest advertising company, said it would hit its challenging full-year forecasts after solid trading in Europe helped its sales to accelerate in the third quarter. WPP, which handles the advertising needs of brands such as Ford and Unilever, reported third-quarter like-for-like net sales growth of 3.3 percent, compared with the 2.3 percent in the first half. The update from WPP, run by Martin Sorrell, is more upbeat than third-quarter sales from rival Publicis last week, where the French company cut its full-year outlook.
Galp Energia beats forecast with 49 pct rise Portugal’s Galp Energia posted a stronger-than-expected 49 percent rise in adjusted quarterly net profit yesterday, boosted by higher refining margins and a steep increase in oil output in Brazil. Galp said that after pumping a record 45,700 barrels of oil equivalent per day in the third quarter, production has increased further lately to surpass the 50 kboepd milestone as the giant Lula/ Iracema oilfield off Brazil was pumping more crude than initially expected. The third Lula/Iracema oil platform off Brazil’s coast should reach a plateau during this quarter, ahead of schedule, the company said.
U.S. union, GM reach tentative agreement Negotiators for the United Auto Workers and General Motors Co reached a tentative agreement on undisclosed terms for a new four-year labour contract, averting a threatened strike, the union said late on Sunday night. The proposed deal will now go to a council of several hundred UAW leaders from GM’s U.S. plants meeting on Wednesday, who are expected to approve it. The contract then goes to a ratification vote of the UAW’s 52,700 workers at GM. Last week, the union’s new contract with Fiat Chrysler Automobiles NV was overwhelmingly ratified by worker vote.
Euro zone inflation could stay low for months Europe’s economy needs more monetary stimulus to prop up the rate of inflation, which could stay low for some time, the deputy head of the Bank of Italy said in an interview. Fabio Panetta’s comments came after European Central Bank chief Mario Draghi said on Thursday the ECB was studying new stimulus measures in a bid to spur economic growth and shore up inflation. “Inflation has been well below our target for the euro zone for some time and it could continue to be too low for several quarters,” Panetta told the Corriere della Sera newspaper.
Argentinian presidential candidate Mauricio Macri (C) of the centre-right political coalition Cambiemos (Let’s change) celebrates in front of supporters in Buenos Aires
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rgentina’s presidential election is headed for a November 22 runoff between incumbent Cristina Kirchner’s chosen successor Daniel Scioli and conservative rival Mauricio Macri, results indicated yesterday. The two candidates led a close final race, with Scioli taking nearly 37 percent of the vote to almost 34.5 percent for Macri, with 96 percent of polling stations reporting. Scioli, a 58-year-old power boating fanatic who lost his right arm in a 1989 racing accident, was considered the front-runner heading into the vote. However, when results put the candidates at near equal footing,
Macri sounded a triumphant note. “What happened today changed the country’s politics,” Macri, the 56-year-old mayor of Buenos Aires, said in a euphoric speech to supporters before busting out his cumbia dance moves on stage. “The challenges aren’t easy, but I have faith in myself,” he said. Opinion polls had indicated Scioli was on the cusp of winning outright, but the race proved to be far closer than predicted. The runoff will be the first ever in the South American country, which adopted a two-round presidential election system in 1973 but has never had a race go all the way to the second round.
Unwanted diesel, jet fuel could sink oil prices Meteoric demand growth earlier this year for products such as gasoline masked the surplus Libby George and Ron Bousso
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nwanted diesel and jet fuel cargoes are backing up outside Europe’s ports and taking longer, slower routes around the southern tip of Africa, traders say. A symptom of the world’s excess of oil, it also paints a gloomy picture of the chance of an oil price rebound. The abundance of crude that roiled commodity markets and turned the balance sheets of oil majors on their head also encouraged under-pressure European oil refineries to run at full clip. Refineries from Rotterdam to India to Louisiana, drunk on cheap crude, ran regardless of whether the world wanted what they were making. But the armada of distillate ships en route to Europe has created delays at ports and is starting to drive up the costs of moving all oil products around the world.
The parade of vessels with no homes has cast a doubt on the chance of battered crude prices can recover in the near term. “The ceiling may be nearing, with reports of discharge delays and the potential for forced products storage,” shipping company Gibson said. There are now vessels carrying at least half a million tonnes of distillates sailing around Africa’s Cape of Good Hope, rather than via the faster, more efficient Suez Canal. Others, such as the Captain Paris, the Ocean Tiara and the Portman Square, are parked off Gibraltar while they wait to find a home, rather than sailing directly to Europe’s increasingly crowded Amsterdam-Rotterdam-Antwerp storage hub. Traders of other products, including gasoline, said the immense
Divisive legacy of ‘kirchnerism’
The race draws a curtain on 12 years under Kirchner and her late husband and predecessor Nestor. Their legacy of trade protectionism, social welfare and defence of the working class -- as well as a highly combative political style -- is deeply divisive in Argentina. Scioli, a self-described centrist, has vowed to uphold the core of “kirchnerism.” But he has also promised a change in style to attract more investment and increase productivity. Macri, a former football executive who rose to prominence with a trophyencrusted reign at Argentina’s most popular club, Boca Juniors, has vowed to put an immediate and decisive end to the Kirchners’ hallmark policies. AFP
amount of diesel arriving is also amplifying the fight for on land storage tanks. With deepening contango, a structure under which future prices for oil products are higher than current levels, some traders can make money with these types of slower voyages, while others have already taken positions with proper floating storage vessels. But with close to record highs of 6 million tonnes of gasoil stocks in the Amsterdam-Rotterdam-Antwerp hub, according to industry monitor Genscape, others are simply running out of options. The combined tanks are filled to more than 76 percent of capacity, with some at more than 90 percent. Additionally, ultra-low water levels on the Rhine river are keeping these products from sailing out of storage and into Europe’s industrial heartland. “Unless it starts raining, I do not know where it can go but stay on the water,” a distillates trader said of any pending cargoes. Despite this, refineries have not yet shown any signs of cutting back their output. Rather, falling Brent crude prices are encouraging them to keep the taps flowing unchecked - a development likely to put even more pressure on storage, ships and oil prices. “Margins have improved as the dated Brent market continued to slump,” one trader said. “I don’t think we will have run cuts for a while.” Reuters
Business Daily | 15
October 27, 2015
Opinion Business
wires
Job-saving technologies
Leading reports from Asia’s best business newspapers
THE JAPAN NEWS Combined net profit at the nation’s three megabank groups are expected to have totalled about ¥1.3 trillion in the April-September fiscal first half. Their profits totalled ¥1.41 trillion a year before. Mitsubishi UFJ Financial Group Inc.’s group net profit is projected at about ¥500 billion. Sumitomo Mitsui Financial Group Inc.’s net profit is forecast at about ¥400 billion. Mizuho Financial Group Inc.’s net profit is projected at ¥350 billion. According to market sources, combined core banking profit at the three groups is estimated to have totalled around ¥1.3 trillion.
JAKARTA GLOBE Malaysia is hoping new incentives for “ethical” Islamic bonds and home loans will strengthen the country’s shariah-compliant investment market and lure more private players to one of the world’s largest Islamic financial sectors. The government announced the new incentives in the 2016 budget which was delivered in parliament on Friday, as Prime Minister Najib Razak doled out populist incentives to shore up support. The government originally introduced the concept of “ethical” sukuk to finance “sustainable and responsible investment” (SRI) in projects such as wind and solar power generation or affordable housing, in 2013.
THE AGE Communications Minister Mitch Fifield wants to deliver government services over the internet and ramp up technology education to make Australia the world’s best digital economy. Speaking at Telstra’s 2015 Australian Digital Summit in Sydney yesterday, Senator Fifield said that slashing the time spent interacting physically or verbally with government staff also greatly increased satisfaction. A service transacted over the phone costs about 16 times the digital equivalent. Mr Fifield gave no indications that the rise of digital services would impact of staffing levels but was adamant that rising levels of technology in government was inevitable.
VIETNAM NEWS Thirteen years after it opened, the Sai Gon Hi-tech Park (SHTP) has achieved total sales of US$13.6 billion, including exports of US$13.5 billion. Since the first company was licensed at the SHTP in September 2005, HCM City has issued licences to 101 additional companies with a combined investment of US$4.9 billion, of which FDI accounted for over US$4 billion. SHTP’s products now account for 94 per cent of HCM City’s hi-tech products, according to Le Hoai Quoc, head of SHTP Management Board. As of September, 82 investment projects in the park remained valid.
Michael Spence
Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business
James Manyika
San Francisco-based director of the McKinsey Global Institute
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his is an age of anxiety about the job-killing effects of automation, with dire headlines warning that the rise of robots will render entire occupational categories obsolete. But this fatalism assumes that we are powerless to harness what we create to improve our lives – and, indeed, our jobs. Evidence of technology’s potential to help resolve our job concerns can be found in online talent platforms. Digital platforms already have transformed many parts of the economy. The online marketplaces built by Amazon and Alibaba, for example, have reshaped the retail landscape, partly by changing the local nature of retail markets. Online talent platforms apply a similar approach to the world of work – with a similar impact. By creating regional, national, and even global job markets, they allow employers to tap into broader talent pools and connect job seekers with a wider universe of opportunities. In this way, they have transformed the typical job search, and are now approaching the critical mass needed to move employment numbers. Such platforms take various forms. Websites like LinkedIn, Monster.com, and Indeed. com – which match individuals with employers seeking to fill traditional jobs – have already engaged hundreds of millions of individual users and many of the world’s leading companies, and are generating the bulk of the economic impact. But there are also the digital marketplaces of the “gig economy,” which connect freelancers with work assignments, from web development to chauffeuring passengers, thereby reducing underused labour and capital. Digital platforms make markets more transparent and efficient, which is exactly the kind of disruption that today’s labour markets need. In many countries, 30-45% of the working-age population is unemployed, inactive, or working only part-time. Meanwhile, companies are complaining that they cannot fill open positions in sectors ranging from technology to health care. And those who are employed are often stuck in roles that do not take full advantage of their skills. These issues represent a staggering waste of human and economic potential.
The problems stem from the fact that today’s labour markets provide crude, incomplete, and geographically restricted signals about the skills that actually are in demand. As a result, mapping out an education, training, and career path entails quite a lot of guesswork. That does not only hurt workers; it also means that companies’ needs can be left unmet. Online talent platforms can boost labour-market efficiency by aggregating data on candidates and job openings in a broader geographic area, thereby illuminating for workers which positions are open today, as well as the actions they can take to gain more fulfilling work. This dynamic could be especially important in Europe, where employment prospects differ radically across countries (and across regions within countries), and many feel trapped in stagnant local economies. It is not likely that someone will move from Spain to Swaziland, even for a dream job; but that person might accept a better position a few hundred miles away. Moreover, by facilitating faster matches, online talent platforms shorten the duration of unemployment, while the creation of flexible part-time opportunities can draw more inactive workers into the labour force and help part-time workers add hours. At the same time, by connecting the right person with the right role, such platforms can boost productivity. In short, while online talent platforms cannot boost weak demand in advanced economies, solve complex development issues in the emerging world, or create better jobs across the board, they can have a major impact on seemingly intractable issues like unemployment, underemployment, and low job satisfaction. According to a recent McKinsey Global Institute research study, they could increase global GDP by US$2.7 trillion annually by 2025; that is equivalent to adding another United Kingdom to the world economy.
Much of the impact of online talent platforms stems from the use of technology to bridge information asymmetries that impair labour-market performance. In the past, these gaps were only partly bridged by signals carrying useful information. But online talent platforms aggregate much larger amounts of information efficiently, increasing the “signal density.” With expanded data, companies can use predictive analytics to identify the best candidate for a given role. Job seekers can augment their educational credentials and employment histories with samples of their work and endorsements from
The biggest winners from this shift have been educated and skilled professionals in the advanced economies
co-workers and customers, thereby conveying their potential value to employers more effectively. Furthermore, platforms that aggregate anonymous reviews from current and former employees give individuals a better idea of what it is like to work for a given company, as well as the salary they can and should expect. As employee satisfaction becomes more widely reported, companies are facing pressure to ensure good working conditions in order to recruit the talent they need. So far, the biggest winners from this shift have been educated and skilled professionals in the advanced economies. In fact, the most sought-after engineers and software developers may not need to apply for jobs at all; companies are now increasingly recruiting “passive” candidates, sometimes forcing employers to increase the salaries of workers they want to retain. But it is not all good news. Now that employers have new tools for recruitment and assessment, they may find lowskilled workers easier to replace, potentially worsening income inequality in the short run. In the longer term, however, a better overall system for skills upgrading could be designed – one that could be integral to facilitating upward mobility. And there is another benefit in this regard. As the career outcomes associated with specific institutions and degree programs become more transparent, education and training providers will become more accountable for preparing their students for prosperous and productive lives. With global smartphone subscriptions set to reach eight billion by 2025, online talent platforms have enormous room to expand into new regions and sectors. As these technologies continue to evolve, they may change the world of work in ways we cannot even imagine today. It seems that there is room in the labour market for a little optimism, after all. Project Syndicate
16 | Business Daily
October 27, 2015
Closing PBOC says regulation of interest rates to continue
Mainland banks’ assets and liabilities grow
The liberalisation of China’s interest rates was needed to develop monetary policy and diversify financial products, but regulation would also be seen in future, a vice governor of the country’s central bank said yesterday. The comments by Yi Gang, deputy governor of the People’s Bank of China (PBOC), came after the central bank cut interest rates on Friday for the sixth time in less than a year, and again lowered the reserve requirement ratio (RRR) for banks in a bid to jump start growth in China’s stuttering economy.
Total assets and liabilities of Chinese banking institutions increased in September, according to data released yesterday by the country’s top banking regulator. As of the end of September, onshore assets of China’s banking institutions, including commercial banks, policy banks and rural credit cooperatives, climbed by 15 percent from one year earlier to 188 trillion yuan (US$29.6 trillion), according to the China Banking Regulatory Commission (CBRC). Total liabilities of these institutions reached 174 trillion yuan at the end of last month.
Key meeting on nation’s next five-year plan kicks off China is aiming to double its 2010 GDP and people’s income by 2020
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eaders of the Communist Party of China (CPC) met in Beijing yesterday to discuss an economic blueprint that will set the direction and the pace for the world’s second largest economy over the next five years. The fifth plenary session of the 18th CPC Central Committee will review proposals for a new fiveyear plan of the country’s national economic and social development from 2016-2020. After taking into accounts the proposals, a final plan
will be ratified by the annual session of China’s top legislature in March next year. The CPC Central Committee Political Bureau will also report its work to the Central Committee during this week’s meeting. With China in a period of transformation, the new fiveyear plan, the 13th, has been garnering increased attention from observers both home and abroad. So far, few details of the new program, the first of its kind under the leadership of
Growth targets in the five-year plan can only provide guidance, but should not become a shackle to economic and reform measures Ma Guangyuan, economist
Chinese President Xi Jinping, has been made available to the general public, although authorities said they have previously solicited public opinions on the new plan in a limited scope. In a trip to south China’s Guangxi Zhuang Autonomous Region last month, vice premier Zhang Gaoli said China will seek to maintain “medium-high speed growth” and improve its economic growth quality. Like in previous five-year plans, a GDP growth target is likely to be included. Market estimates that the growth target for 2016-2020 will be put between 6.5 and 7 percent. Xin Ming, a professor from Party School of the CPC Central Committee, said setting a growth range rather than a definitive number will give the leadership more leeway to steer the economy towards structural reform. Previously, the 12th fiveyear-plan (2011-2015) set an average annual growth target of around 7 percent.
The National Bureau of Statistics estimated earlier this month that China’s annual economic growth will be just a little less than 8 percent during the 12th five-year plan period. Between 2011 and 2014, the economy expanded by an annual rate of 8 percent, the bureau said. The country’s growth during this period contributed to more than 25 percent of total world economic growth. In an earlier statement issued this month, the Political Bureau said the Chinese people made “major progress” in development during the 12th five-year plan period. It said the new economic program for 2016-2020 is “crucial to China’s goal of building a moderately prosperous society in all respects by the centennial anniversary of the founding of the CPC.” Analysts say the 13th Five-Year Plan, in the face of the new normal, must underpin development as top priority and continue to carry out the “Four Comprehensives” strategy: comprehensively building a moderately prosperous society, comprehensively deepening reform, comprehensively implementing rule of law, and comprehensively strengthening Party discipline. Xinhua
Premier Li to attend China-Japan-ROK summit
WTO sees boost to trade from deal to cut red tape
Volkswagen loses global sales lead to Toyota
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hinese Premier Li Keqiang will pay an official visit to the Republic of Korea (ROK) to attend the sixth trilateral summit between China, Japan and the ROK. His visit to the ROK from Oct. 31 to Nov. 2 is at the invitation of ROK President Park Geunhye, Chinese Foreign Ministry spokesperson Hua Chunying announced yesterday in Beijing. It will be Li’s first visit to the ROK as premier, and the first ROK visit by a Chinese premier in five years, said Hua, noting that Li’s visit will be good for relations with the ROK as well as regional peace, development and prosperity. Li will hold talks with President Park, meet with other leaders and attend activities on economic cooperation and people-to-people ties. As for the summit meeting, Hua said China hopes the first meeting in three years will determine the direction of China-Japan-ROK cooperation. China hopes the meeting will enhance China-Japan-ROK cooperation in both traditional and new fields, Hua said. Hua called on relevant sides to properly handle history issue and other sensitive issues on the basis of the spirit of “face up to history, look to the future” so as to guarantee healthy and stable development of China-Japan-ROK cooperation. Xinhua
he benefits of a treaty that will cut red tape at borders and standardise customs procedures are much larger than previously thought and could add US$3.6 trillion to annual global exports, the World Trade Organization (WTO) said in a report yesterday. The WTO’s trade facilitation agreement (TFA), struck at a ministerial conference in Bali in December 2013, will do more to boost trade than if all the world’s import tariffs were removed, cutting costs 9.6 to 23.1 percent, the WTO calculated. “You could say that it’s global trade’s equivalent of the shift from dial-up internet to broadband,” said WTO Director-General Roberto Azevedo. Once the new rules come into effect, which Azevedo hoped would happen by the end of 2016, it will cut waiting times at customs, lessen the potential for corruption and hasten foreign direct investment into weaker economies. The TFA had previously been expected to add US$400 billion to US$1 trillion to trade, according to various economic studies. Many trade experts had shied from using the upper end of those forecasts, but the WTO’s own research found they were on the low side. Reuters
o lkswagen AG lost the lead in global auto sales to Toyota Motor Corp. after claiming the No. 1 spot three months ago, as the German carmaker braces for consumer blowback from a widening emissions-cheating scandal. Toyota said yesterday it sold 7.49 million vehicles this year through September, topping the 7.43 million that Volkswagen reported earlier this month. Deliveries declined 1.5 percent for both Toyota and Volkswagen. The results include less than two weeks of sales reporting by Volkswagen after its admission to rigging diesel engines with software that deceived regulators about pollution levels. While the German automaker led Toyota in global sales through the first six months, it’s now readying repairs to 11 million vehicles worldwide and has stopped sales of diesel models in several markets as it brings engines into compliance. The company is also facing a slowdown in demand in China, its largest market, with its namesake brand declining 7.4 percent in the first nine months. “VW may be facing sales difficulties due to the scandal toward next year in Europe and the U.S.,” Koji Endo, an auto analyst at Advanced Research Japan, said by phone. Bloomberg News