Macau Business Daily November 16, 2015 by Business Daily

MOP 6.00 Closing editor: Joanne Kuai

Decreasing tourism impacts Hong Kong’s Q3 growth figures

Page 9

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Year IV

Number 920 Monday November 16, 2015

Publisher: Paulo A. Azevedo

Luk Fook expects 40 pct profit drop in H1 Page 5

Chinese stock regulators raise margin finance requirements

A Dimming of the ‘City of Light’

The Tourism Crisis Management Office (GGCT) said no local tour group had been affected by Saturday’s terrorist attacks in Paris. But has issued a travel security alert for France. Up to 30 local residents will travel to the popular European country this week as scheduled. French President Francois Hollande has blamed Islamic State militants for the outrage. Co-ordinated strikes in Paris have left 127 dead and hundreds injured. One of the worst acts of violence on French soil since WWII Page

Clearing platform Big strides in ten months. Bank of China Macau Branch says Macau’s renminbi clearing amount reached 1.3 tln yuan in the period. An increase of 27 pct y-o-y. The bank says it has already provided such services for more than 30 banks in Portuguese-speaking countries. In the amount of 62.95 bln yuan for Jan-Oct

HSI - Movers November 13

Name

Interview

www.macaubusinessdaily.com

In vino veritas

Pages 6&7

China’s currency is poised to enter the basket of global currencies. This, according to the International Monetary Fund. IMF experts recommend the yuan be included in the Fund’s Special Drawing Rights reserve-currency basket. Alongside the U.S. dollar, euro, pound and yen.

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New casino-resorts are scheduled to open. And lots of investment is being made in Macau. Positive signs for the Portuguese wine industry here, say the Douro Boys. A group comprising five elite Portuguese vineyards. In an interview with Business Daily, the winemakers say superior quality is the way forward. They see potential in Macau’s ‘super highend market’. And say branding Portugal, and particularly the Douro area, is a major part of their strategy to lift image and prices

Thumbs up for yuan

%Day

Lenovo Group Ltd

+7.53

China Merchants Holdi

+0.97

China Resources Beer H

-0.14

Cathay Pacific Airways

-0.53

Belle International Ho

-4.31

China Resources Powe

-4.33

China Shenhua Energy

-4.75

China Petroleum & Che

-4.84

Source: Bloomberg

Paulo Martins Chan to head DICJ Assistant Public Prosecutor-General Paulo Martins Chan has been appointed to the critical job. Serving as the new director of the Gaming Inspection and Co-ordination Bureau (DICJ) effective December 1. Mr. Chan is expected to strengthen DICJ’s law enforcement capability. In addition to optimising gaming regulations

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November 16, 2015

Macau

Paulo Martins Chan confirmed as new DICJ head

ssistant Public Prosecutor-General Paulo Martins Chan will be the new director of the Gaming Inspection and Coordination Bureau (DICJ) from

December 1, the Secretary for Economy and Finance, Lionel Leong Vai Tac (pictured), announced on Friday. Mr. Chan had been tipped to take up the position as

DICJ’s new head following the Bureau’s incumbent director, 56-year old Manuel Joaquim das Neves, announcing last month his intention to step down on November 25.

“After approval by Chief Executive Fernando Chui Sai On this morning and the consent of Prosecutor-General Ip Son Sang, the Office of Secretary for Economy and

Finance will appoint Mr. Paulo Martins Chan as the new director of the Gaming Inspection and Co-ordination Bureau,” the Secretary told reporters on the sidelines of a public event on Friday. According to the Secretary, the Vice Prosecutor-General was selected for the new position due to his experience in the Public Prosecutor’s Office, his legal knowledge, and his language proficiency. On October 28, Mr. Neves announced his retirement for personal reasons. The incumbent DICJ director started to serve the department in 1985, and has headed the Bureau since 1997. Mr. Leong believes Mr. Chan would further strengthen DICJ’s law enforcement capability and its efforts to continue optimising gaming regulation, in order to fulfill society’s expectations regarding monitoring the city’s gaming industry. “As the public’s interest in DICJ’s supervisory work grows, the Bureau will need to study how to enhance its supervision of the local gaming industry and lead the industry to develop healthily by studying the current legislation and regulation,” the Secretary remarked. Mr. Chan has been a prosecutor since the establishment of the Prosecutor’s Office in 1999. He was promoted to vice-head of the department in 2009. K.L.

MGTO promotes city in Kunming, Yunnan

acau Government Tourist Office (MGTO) and the local travel industry promoted the city at the China International Travel Mart in Kunming, Yunnan Province in China on Friday. According to MGTO, the parties seek to build stronger connections with members of the travel trade from the Mainland and overseas via the annual event held in the Chinese city last Friday to Sunday. The city’s tourist office manned a

100-square metre booth at the event, themed ‘Touching Moments, Experience Macau’. The Office said it sought to familiarise travel trade delegates from different places and Mainland residents with the destination’s latest developments, as well as exhibiting the city’s glamour and aspiration to become a World Centre of Tourism and Leisure. Meanwhile, local trade delegates discussed business opportunities with their counterparts from the Mainland and foreign countries during the event.

Yuan clearing amount reaches 1.3 trillion yuan

he total renminbi clearing amount in the territory jumped 27 per cent year-on-year to 1.3 trillion yuan (MOP1.63 trillion/ US$203.8 billion) for the first ten months of the year, according to the vice director of the Bank of China Macau Branch (BOC Macau), Wang Jun. The bank’s vice director claimed the amount is higher than the total value for the whole of 2014. He made the remark during a seminar on Macau’s renminbi clearing business in Hengqin last Friday, according to Chinese language newspaper Macao Daily. In addition, according to Mr. Wang, BOC Macau has already provided yuan clearing services for more than

30 Portuguese-speaking banks, in the amount of 62.95 billion yuan for the first ten months of the year. The BOC Macau vice director claimed that this is a double-digital growth compared to the same period of last year. BOC Macau is the city’s only bank authorised by China’s central bank the People’s Bank of China (PBOC) to operate renminbi clearing services. In August this year, the central bank allowed the local BOC branch to expand the scope of the company’s yuan clearing business to Portuguesespeaking countries from Macau, Hong Kong and the Association of Southeast Asian Nations. K.L.

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November 16, 2015

Macau CE to deliver 2016 Policy Address tomorrow Chief Executive Fernando Chui Sai On will deliver the Policy Address for fiscal year 2016 in the Legislative Assembly at 3:00pm tomorrow. A press conference will follow at Government Headquarters at 5:00pm. Meanwhile, the CE will answer legislators’ enquiries on his policy programme on Wednesday afternoon. The five Secretaries will present their 2016 policy guidelines to the AL between November 23 and December 10. Local broadcaster TDM will transmit all of the above events live on its television and radio services.

GGCT: No local tours affected by Paris terrorist attacks

he Tourism Crisis Management Office (GGCT) said no local tour group had been affected by the terrorist attacks in Paris on Saturday

morning local time, based on information provided by the city’s travel industry. Meanwhile, up to 30 local residents will travel to France this week as scheduled.

As at yesterday, the Office had received four enquires about the terrorist assaults in Paris. In addition, it delivered security alert messages to a total of 78 local mobile phone numbers using roaming services in the European country. Meanwhile, the local travel industry information indicated that some 20 to 30 local residents would travel to France via Hong Kong package tours this week. They would arrive in the country either tomorrow or on Wednesday, according to local broadcaster TDM Radio. On Saturday morning, the Office issued a travel security alert for France following terrorist attacks at seven

locations in Paris, in which at least 127 were killed. French President Francois Hollande described the attacks as an “act of war” by extreme terrorist group Islamic State. ‘The Tourism Crisis Management Office alerts Macau residents who intend to travel to France to closely follow the situation, critically assess the security risks and cautiously consider their travel plans,’ the office wrote, claiming it would monitor the latest developments in the city.

SAR Government: “Shocked and sympathetic”

Meanwhile, the Office of the Secretary for Security said in a statement on Saturday that it is shocked by the attacks in Paris.

‘The Government expresses sympathy for the wounded and extends its deepest condolences to the families of the victims,’ it stated. In the statement, the Office claimed that the terrorist threat level in the Special Administrative Region ‘has always remained low’. ‘As an international tourism destination, Macau has well-established protocols for responding to largescale crisis and emergency situations. These include staging regular simulation exercises to test and strengthen Macau’s inter-departmental co-ordination and rescue capacity,’ the Office said, claiming the local security forces are ready to deal with ‘potential heightened security concerns’. According to GGCT, Macau residents can call the Office’s 24-hour tourism hotline at (853) 2833 3000 when necessary, or +86 10 12308 for assistance from the Chinese Embassy. K.L.

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November 16, 2015

Macau

Narrowing gap between tenured and contracted workers A new law, effective this month, is the first step towards overhauling the regimes of civil servants to bring some practices in line with the private sector and changes in society

Salary hikes dispute A potential salary hike for civil servants next year has raised eyebrows throughout society, as the government has publicly tightened its belt amid the economic downturn. Several prominent civil servants’ groups have petitioned the authorities in the past few months demanding an increase in pay of up to 5 per cent, or a rise from MOP79 (US$9.875) to MOP83 a point in the civil servants’ salary index. “Civil servants are like other workers wishing a salary hike; in particular, the cost of living pressures for grass-root civil servants are still enormous,” said Kun Sai Hoi, president of the Professional Civil Servants Association of Macau.

n Macau, the 32,000 civil servants are divided into two major categories: tenured employees, or in Portuguese personnel in quadro; and contracted workers, or in Portuguese employees outside of quadro. One of the key differences between the two

“The government has the final say in the matter but I hope it makes a decision in consideration of all factors including the morale of civil servants.” It is known a government-appointed committee on remuneration of civil servants has completed the salary review for next year, taking into account inflation, public finances and the situation in the private sector, and has submitted the report to the authorities. Secretary for Administration and Justice Sonia Chan Hoi said in early October that the government has yet to make any final decision, stressing it won’t shelve a salary hike for civil servants despite the austerity measures imposed earlier.

types is that tenured workers have a permanent position in the government from which they cannot be laid off unless disciplinary procedures are initiated, whilst contracted employees are subject to contract renewal every one or two years when authorities

could end the employment without any reason. But the Regime of Labour Conracts in Public Service, effective since November 1, has overhauled the system of contracted civil servants whereby they could sign an indefinite contract of no time duration with the authorities, after working for at least five years and achieving grades of ‘very satisfactory’ in their performance assessments. “This law shows the government has paid attention to the calls of civil servants and society, simplifying the complex regimes of the civil service,” said Lei Kong Weng, secretarygeneral of the Macau Chinese Civil Servants’ Association. “The original draft of the bill mandated that contracted workers were still subject to regular renewals, which doesn’t make sense when nowadays tenured and contracted employees basically do the same job.”

Fundamental requirements

Submitted to the Legislative Assembly for deliberation last

year, the first draft of the Regime of Labour Contracts in Public Service states that the contracts of civil servants may only last for at most five years. Such terms failed to persuade most civil servants’ groups and legislators; consequently, the authorities dumped these terms in the final draft. “In the Labour Relations Law, if the workers’ contracts last longer than two years or are up for renewal for the third consecutive time they should be deemed long-term workers [in companies],” said legislator Ella Lei Cheng I. “Although the government has stressed many times the Labour Relations Law and the rules of civil servants are two different regimes, it should not set up a standard lower than the Labour Law, which represents the fundamental requirements of labour relations in society.” The full story can be read in this month's issue of Macau Business magazine, available at newsstands or online at www.magzter.com

Corporate First ‘Taiwan Music Series’ kicks off at Studio City The dazzling three-concert Taiwan Music Series presented by Studio City kicked off with performances by heartthrob Show Lo, together with rising star Calvin Chen and Taiwanese sweetheart Amber An. The ‘Taiwan Music Series’ is slated for three consecutive weekends from 14 to

28 November 2015 at the newest and most innovative live venue in Macau. JJ Lin and A-Lin will take the stage jointly for the second performance of the series on November 21, 2015 while the finale on November 28, 2015 will spotlight “Supernova Diva”, Hebe Tien.

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November 16, 2015

Macau

Luk Fook expects 40 pct profit drop in H1

ong Kong-listed jewellery company Luk Fook Holdings (International) Ltd. has estimated that it will post a year-on-year drop in profits of 40 per cent for the first half of its fiscal year ended September 30 due to decreased demand for gem-set jewellery and gold products. According to the retailer’s filing with the Hong Kong Stock Exchange last week, the possible decline in profit was driven by lower revenues recorded for gemset jewellery products as well as a decline in overall gross margin, resulting from ‘increased sales mix of gold products driven by smallscale ‘gold rushes’. In addition, the company said it saw an increase in the general rental expenses to

revenue ratio, and increase of losses in its investments. For the same period of last year, the jewellery company’s net profit totalled HK$987.9 million (US$123.4 million) for a year-on-year drop of some 16.3 per cent. A filing by the company in October indicated that its same store sales growth of gem-set products had plunged 26 per cent for the three months ended September 30, although that of gold products registered a slight increase of 5 per cent year-on-year. As at the end of September, the Hong Konglisted retailer had a total of 148 self-operated shops, with 48 in Hong Kong, 10 in Macau, and 85 in Mainland China. K.L.

Joseph Lau sets two records in 24 hours The Hong Kong businessman has been convicted in Macau for bribery and money laundering. As Hong Kong and Macau do not have an extradition treaty, he remains free

ure coincidence or impeccable timing? Either way, Hong Kong billionaire Joseph Lau has just pulled off a twofer for the history books. On Wednesday night he paid 48.6 million Swiss francs (US$48.4 million) at Sotheby’s in Geneva for a 12.03-carat blue diamond, the most ever spent on a gem at auction. Then, less than 24 hours later, his company Chinese Estates Holdings Ltd. sold an office tower in Hong Kong for HK$12.5 billion (US$1.6 billion), more than twice the previous record for a commercial sale. Lau, 64, who made his fortune in real estate, has been on a buying spree, collecting paintings from bluechip artists as well as jewelry. He also generated headlines last year when he was convicted in Macau for bribery and money laundering in a trial he didn’t attend. He’s appealing the conviction. Lau’s company sold the 26-story Mass Mutual Tower in Hong Kong’s Wan Chai district to Chinese developer Evergrande Real Estate Group Ltd. Chinese Estates paid HK$460 million for the tower when it bought part

of it in 1987 and the rest in 1991, yielding a 27-fold return. Hours after the deal was announced, China Life Insurance Co. said in a press statement it was buying an office tower and retail space from Wheelock & Co. for HK$5.85 billion, making it the second-most expensive building purchase in Hong Kong. It was the third property sale to Evergrande by Chinese Estates this year, Chinese Estates spokeswoman Eunice Yeung said. In July, it sold a residential, commercial and hotel complex in the western Chinese city of Chengdu for HK$6.5 billion. The company sold another property in nearby Chongqing for HK$1.75 billion. The previous most-expensive transaction for an office tower in Hong Kong was the HK$5.4 billion paid by Citigroup Inc. to a unit of Wheelock in 2014.

Lichtenstein painting

Lau has also been busy on the auction circuit this year. On May 12 he picked up Roy Lichtenstein’s painting “The Ring (Engagement)”

at Sotheby’s New York auction for US$41.7 million, just a day after purchasing Pablo Picasso’s “Buste de femme” across town at Christie’s for US$67.4 million. Unlike Liu Yiqian, a Chinese billionaire collector who this week bought an Amedeo Modigliani nude for US$170.4 million and pays for his purchases using his AMEX card, Lau wired the money to the two auction houses in New York, according to copies of receipts obtained by Bloomberg. Lau’s blue diamond purchase on Nov. 11 came a day after he paid 28.7 million Swiss francs for a 16.08-carat pink diamond at a sale by Christie’s in Geneva. Both purchases were made for his seven-year-old daughter Josephine, his office said. Known as the “Blue Moon,” the record-breaking gem had a pre-sale estimate of 34.2 million francs to 53.7 million francs, according to Sotheby’s website, and has the highest possible color grade of fancy vivid blue. Lau renamed it “The Blue Moon of Josephine” and christened the pink diamond “Sweet Josephine.” Bribery conviction Last year he bought pieces of jewelry for another daughter, 13-year-old Zoe: the 9.75-carat “Zoe Diamond” for US$32.6 million at Sotheby’s New York, and the “Zoe Red” ruby for HK$65 million at Christie’s Hong Kong. Not all headline news about Lau has been good. In March 2014 he stepped down as chairman of Chinese Estates after he was convicted in Macau for bribery and money laundering in connection with land secured for a luxury housing project. Lau, who did not attend the trial, was sentenced to five years and three months in prison. As Hong Kong and Macau do not have an extradition treaty, he remains free. Bloomberg

Moiselle to record loss for first half

lothing retailer Moiselle International Holdings expects the company to post a loss for the six months ended September 30 as compared to the same period of last year, it told the Hong Kong Stock Exchange last Friday. According to its filing, the loss was caused by a ‘significant decrease’ in sales turnover driven by a year-onyear decline in revenue due to ‘weak consumer sentiment and sluggish retailer consumption in Hong Kong’. The retailer also indicated that the decline in recorded sales by Mainland Chinese tourists also dragged down its sales turnover during the period. The previous annual report of the company indicated a total of five stores in Macau. For its last fiscal year ended March 30, its net profit plunged nearly 60 per cent year-on-year to HK$11.3 million (US$1.41 million). Meanwhile, its five stores in the Special Administrative Region generated a total of HK$53.6 million. The company said then it was confident in the consistent growth in the local market following the opening of more 5-star hotels and big-scale shopping centres and casinos. K.L.

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November 16, 2015

Macau

Douro Boys: We’re showing we have world-class wines in Portugal Promoting the image of the Portuguese wines as a luxury product through high-end quality and prices. This is the future for the sector forecast by Douro Boys, a group comprising five elite Portuguese wine estates, in an interview with Business Daily João Santos Filipe

jsfilipe@macaubusinessdaily.com Photos by: Cheong Kam Ka

From left to right: Francisco Olazabal, Dirk Niepoort, João Alvares Ribeiro, Francisca Van Zeller, and Miguel Roquette

The slowdown of gaming in Macau is expected to a greater or lesser extent to affect all sectors of the city. As exporters of wine to the territory, what do you expect to happen to the local wine market? João Alvares Ribeiro: The

contraction of the economy has to be put into perspective. The comparison with the previous years has a very high basis. However, there are many hotels scheduled to open and a lot of investment being made. The consumption is really large in Macau and I’m not seeing this contraction as a big threat to the local economy… Dirk Niepoort: My view is a bit different. In recent years, the importance of the Macau market has increased for our company, mainly driven by the casino industry. However, Macau is different from our traditional markets; it is more aggressive, unstable and I fear for its future. The same way it went through such a steep growth, I believe it will also drop abruptly. The fact that there is so much investment when the market dropped almost 40 per cent is puzzling. I feel that the optimism that existed in many people until last year has gone. Investors are more nervous these days. In my mind, I’m preparing for sales in Macau to decline because I think that’s what’s going to happen. To be honest, I always

Creating a product associated with high quality that people are willing to pay more for is the way we want to develop the Portuguese wine industry

thought the Macau economy would slow down after such fast growth, but I never expected it to happen so soon. Francisca Van Zeller: For the past years we have always increased our sales in the territory. This year, we are recording a slight decline. But until the end of the year this can change. In the coming years, we’re hoping to increase our sales because many hotels are opening. There will be more venues inside hotels and, as such, there will be more people consuming Portuguese

wines. It may be true that people are more cautious these days because of the slowdown but it will not be a surprise if the region will continue to expand in the coming years.

Portuguese wines are the most imported in Macau considering the number of litres. French wines, however, top imports in terms of value imported, meaning that on average the price of a French wine per litre is well above the price of Portuguese wine. Is this a reality you are trying to change? JAR: Creating a product associated

with high quality that people are willing to pay more for is the way we want to develop the Portuguese wine industry. We are not the normal Portuguese winemakers because all of us involved in Douro Boys have the highest prices in the Portuguese industry. We already have a good product but to have the capacity to target the super high-end markets we need to build a famous and strong brand for the Portuguese and Douro wines. In order for consumers to be willing to pay more, it depends not only on the quality of the product but also on the image associated with the product, which is the aspect we are working on as Douro Boys. Miguel Roquette: We have the quality and our prices are cheaper than the French chateaux.

There is room for our prices to be improved. However, some Portuguese produce wines very cheaply and without much quality and that damages the name of the country’s wines. We’re trying to promote Portuguese wines as a different product with more quality and more expensive. We’re showing we have world-class wines. For example, our wines are outperforming some Bordeaux

Elite Portuguese vineyards: Who’s who? The Douro Boys is a group of five Portuguese wine estates that joined forces in 2003 to promote the country’s wines as well as the Douro region, which has been famous for many years because of the Port wines. All of the wine estates involved in the promotion project number among the largest exporters of high-end Portuguese wines to Macau. The wine estates comprise the following: Quinta do Vallado, represented by João Alvares Ribeiro; Niepoort, co-owned by Dirk Niepoort; Quinta do Castro, represented by Miguel Roquette; Quinta Vale D. Maria, Francisca Van Zeller; and Quinta do Vale Meão, Francisco Olazabal.

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November 16, 2015

Macau wines in terms of quality, according to Wine Spectator magazine, but while they are able to sell a bottle for US$500 we can only sell our bottle for US$50. This new image will take time to build.

Who are your main competitors in Macau? JAR: Oh, these four wine producers

sitting next to me [laughs]… We are all competitors in this market, but at the same time we promote our wines together. The other countries competing with us here are the countries from the Old World such as Italy, France and more recently Spain.

Why are Portuguese wines so popular and consumed in Macau? Are we to expect this trend to be replicated in other Asian regions, such as the Mainland, Hong Kong or Japan? FVZ: People come to Macau and want to try the Portuguese wines because our culture is very much associated with Macau. Also, the Ho family played a major role in maintaining the cultural connections between Portugal and Macau. In Hong Kong, for example, we are this lucky. There you have the Chinese and British communities and a huge expat community. They are mature consumers who have a good knowledge of existing wines. There we have to compete with Australian wines, which doesn’t happen in Macau. Outside of Macau it’s more difficult to replicate this model because of differences in the cultural connections with the regions and because our castes are not easily known or remembered. The lack of knowledge about our wines is often a problem because it drives the more conservative consumers away. They will prefer to have a wine they know already.

But Hong Kong and Macau are very frequently considered complementary markets. Is this not the case for the wine industry? DN: I thought that in the

beginning. But my conclusion is that we’re talking about two different markets. The Macau wine market has been developing well

because of the casino industry. If it wasn’t for the hotel and casino industry, we would be talking about a little market where the Portuguese wines do well because of cultural influences. Hong Kong is a much more mature market and cosmopolitan where there is a very large competition war, much more aggressive than in Macau. Here there aren’t many more ways to expand. It’s pretty much related to the casino industry. In my view, at this point I believe the Hong Kong wine market has a better future ahead for the coming years.

Macau is often said to be a platform between the Portuguese-speaking countries and Mainland China. Do you feel that the presence of your wines in Macau creates opportunities to enter Mainland China? Francisco Olazabal: I think it

helped but not to a great extent to promote our wines because of the differences between the Asian markets. For example, the Japanese market has no connection with Macau. Singapore and Taiwan also don’t have much in common with Macau, as well. But for sure it’s a platform to go to Mainland China. However, the Macau market alone is very significant for us in terms of sales. It is worth being in this market because of its value. MR: Macau is a door to Mainland China because most tourists in the territory come from the Mainland. We can consider it a good platform in terms of the promotion of our wines. But on the business side and for opportunities, Hong Kong works better as a door to export wines to the Mainland. FVZ: Macau as a platform is not opening many doors in terms of exporting wine to other countries. Now the very interesting door Macau is able to open is for the niche of exclusive and very highend wines, not only in Mainland China, but all over Asia. Wine is a luxury product and is not consumed alone. Drinking wine is also a way for people to show their status and achievement. In Macau, wine consumption is very influenced by this social side, to the point that some consumers are often tired of buying luxury products and have started asking

It may be true that people are more cautious these days because of the slowdown but it will not be a surprise if the region will continue to expand in the coming years

us for personalised products. I’ve personally signed a few bottles for some special clients. Then these bottles are shown in casinos or restaurants. This is an interesting niche that can be reached in Macau.

You said that all of you are competitors in many markets. If this is the case, why did you decide to join forces and promote your products together through Douro Boys? MR: Douro Boys is our effort to

promote the best wines of Portugal and create a new brand. We believe that promoting a better image for Portuguese wines and the region of the Douro will end up benefiting everybody, which is very important. DN: This group started mainly due to Cristiano Van Zeller – the father of Francisca – and me. Excluding the wine estate I belong to, all the others present here have family ties or have in one way or another worked together in the past. Before the creation of Douro Boys, whenever I used to meet a journalist I would invite the other producers to join us and bring some wines to promote. One day, however, Cristiano and I talked about doing this promotion more professionally and it all started

in 2003. For this, my former wife was also essential as she is a brilliant and talented professional when it comes to networking and promotion. What is very interesting about our group is that as wine producers we are really very different and this makes us more special. The fact that we’re stronger together than alone also made it essential for us to join forces.

Since 2003, how much do you feel you have achieved in terms of promoting Douro wines? DN: We’ve achieved success in not

only promoting Douro wines but also Portugal, the Douro region and of course wine estates. In my view, we end up doing more for the region than actually for our wines, which is not a bad thing. But in terms of promoting Portugal and the Douro we’ve been doing well, to the point that some government officials have told us that we alone have done more for the Douro region than the promotion of the government in ten years. Of course, this is not exactly true - but we have achieved nice results!

The Douro region is very famous for its Port wines, rather than for the table wines you are promoting. Is it possible to associate the image of Douro also with this kind of wine? MR: Port wine has always been in

Douro and it will continue there for many years. However, the port business is very cyclical, with ups and downs. But the reality is changing to the point that the main producers of Port wine are also starting to develop table wines, which in my view is the future of the region. We still have a lot of work to do to promote the Douro and these wines because the production of red wines in the region only started 25 years ago, which is very recent. The good thing is that the Douro is becoming more and more popular and the tourism industry is getting a boost. At the same time, the fact that the region is a UNESCO World Heritage Site controls the development of tourism, which will guarantee that this development does not threaten the region and its authenticity.

8 | Business Daily

November 16, 2015

Greater China

Yuan takes l joining IMF

Countries including Fran support for the change Krista Hughes

Staff had found the yuan met the criteria of being “freely usable,” or widely used for international transactions and widely traded in major foreign exchange markets, IMF’s chief Christine Lagarde said

hina’s yuan moved closer to joining other top global currencies in the International Monetary Fund’s benchmark foreign exchange basket on Friday after Fund staff and IMF chief Christine Lagarde gave the move the thumbs up. The recommendation paves the way for the Fund’s executive board, which has the final say, to place the yuan on a par with the U.S. dollar, Japanese yen, British pound and euro at a meeting scheduled for November 30. Joining the Special Drawing Rights (SDR) basket would be a victory for Beijing, which has campaigned hard for the move, and could increase demand for the yuan among reserve managers as well as marking a symbolic coming of age for the world’s second-largest economy. Staff had found the yuan met the criteria of being “freely usable,” or widely used for international transactions and widely traded in major foreign exchange markets, Lagarde said. “I support the staff’s findings,” she said in a statement immediately

Bond defaults signal moment of truth for national ratings agencies Their ratings certainly paint a rosier picture of local firms than their foreign counterparts’ Pete Sweeney and Umesh Desai

hina looks set to allow more bond defaults as part of its market reform agenda, but domestic ratings agencies and bond investors are still betting Beijing will lose its nerve, for fear of hammering its banks. Critics say the US$4 trillion Chinese bond market, the world’s third largest, has misallocated its vast sums to some of China’s most inefficient companies, such as state-owned dinosaurs in sunset industries or opaque local government financing vehicles. The market’s assumption that such issuers have an unwritten state guarantee has kept bond yields low, while demand among investors is high, especially after a summer stock market crash sent many fleeing to relative safety. “China is still experiencing an onshore debt boom,” said Mervyn Teo, credit analyst

with Lucror Analytics, but he believes recent defaults argue for more caution. As recently as Thursday, China Shanshui Cement defaulted on a 2 billion yuan (US$300 million) onshore debt payment, and in April Baoding Tianwei Baobian Electric became the first state-owned firm (SOE) to default, while another, metals trader Sinosteel, deferred interest payments last month. All of which suggests Chinese authorities, which used to work feverishly to prevent defaults, are growing more willing to let weak firms fail. Despite such defaults, the spread between benchmark yields on safe AAA-rated bonds and riskier AA-rated bonds has fallen sharply in recent months, indicating that people see them as less, not more, risky. Indeed, it has been declining gradually all year,

as investors have instead assumed that government concern about slowing growth will make them less willing to let market discipline run its course, especially in the state sector. “In the past there were no defaults, because almost all issuers were SOEs or government backed,” said Phillip Li, managing director

at China Chengxin Asia Pacific Credit Ratings. “This cannot continue. In order for the debt market to be normal, unhealthy debt should be identified.”

Agents of boom

Domestic debt rating agencies ought to perform that function, but industry insiders say they are instead

Letting more of its industrial dinosaurs go extinct, prompting local agencies to downgrade the bonds of companies like them, which in turn could trigger a crisis for China’s banks, by far the biggest bondholders

engaging in a price war for clients, in many cases offering optimistic ratings in exchange for the contract. Their ratings certainly paint a rosier picture of local firms than their foreign counterparts’. The local agencies say their ratings take into account the fact of regular government intervention, an unwritten assumption that foreign rivals are less likely to rely upon. But at the bottom of the heap, distressed debts all smell equally bad, says Kalai Pillay, Fitch Ratings director in Singapore, so their domestic and foreign ratings ought to converge but don’t. Policymakers in Beijing are faced with a sticky dilemma. Let more of its industrial dinosaurs go extinct, prompting the local agencies to downgrade the bonds of companies like them, which in turn could trigger a crisis for China’s banks, by far the biggest bondholders. Or let an unreformed bond market continue to set artificially low yields and throw good money after bad, which exacerbates China’s industrial overcapacity and increases the likelihood of falling prices and economic stagnation. “Avoiding a crisis and the spread of systemic risk is always the number one priority of the government,” said Oliver Barron, policy research analyst at China-focused investment bank NSBO. Reuters

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November 16, 2015

Greater China

leap towards F currency basket

nce and Britain have already pledged their

welcomed by China’s central bank, which said it hoped the international community would also back the yuan’s inclusion. Staff also gave the green light to Beijing’s efforts to address operational issues identified in a report in July, Lagarde said. The executive board, which represents the Fund’s 188 members, is seen as unlikely to go against a staff recommendation and countries including France and Britain have already pledged their support for the change. This would take effect in October 2016, during China’s leadership of the Group of 20 bloc of advanced and emerging economies. China has rolled out a flurry of reforms recently to liberalize its markets and also help the yuan meet the IMF’s checklist, including scrapping a ceiling on deposit rates, issuing three-month Treasury bills weekly and improving the transparency of Chinese data. Economists said with the yuan’s inclusion in the IMF basket as a reserve currency now looking like a formality, China should step up efforts to build trust between global

investors and its policy makers. China’s heavy-handed intervention to stem a stock market rout over the summer, and an unexpected devaluation of the yuan in August, had raised some doubts about Beijing’s commitment to reforms. Singapore-based Commerzbank economist Zhou Hao said China needs to further accelerate domestic reforms and improve policy transparency. “The PBOC should reduce the frequency of market intervention, allowing market forces to really play a critical role.” The United States, the Fund’s biggest shareholder, has said it would back the yuan’s inclusion if it met the IMF’s criteria, a U.S. Treasury spokesperson said, adding: “We will review the IMF’s paper in that light.” If the yuan’s addition wins 70 percent or more of IMF board votes, it will be the first time the number of currencies in the SDR basket which determines the composition of loans made to countries such as Greece - has been expanded.

“I would say that the likelihood of China’s yuan joining the IMF currency basket this year is very high,” said Hong Kong-based Shen Jianguang, chief economist at Mizuho Securities Asia. “The only thing that could deter this is if the U.S. led a group rejecting the yuan’s inclusion, which could complicate things. But the United States’ current official stance doesn’t reflect such an attitude,” he said. Some currency analysts say making the yuan the fifth currency in the basket could eventually lead to global demand for the currency worth more than US$500 billion. But China’s extensive capital controls mean it would take a while before the yuan rivals the dollar’s dominant role in international trade and finance, analysts say. Its closed capital account still limits foreigners from buying yuandenominated assets and places caps on how much cash residents can take out of the country. These restrictions, along with concerns that the yuan is set to come under steady depreciation pressure, may cause corporates to back off from holding yuan. Nonetheless, the People’s Bank of China said the IMF statement was an acknowledgment of the progress China had made in reforms and opening up its economy. “The inclusion of the RMB in the SDR basket would increase the representativeness and attractiveness of the SDR, and help improve the current international monetary system, which would benefit both China and the rest of the world,” the PBOC said in a statement. China would respect the board’s decision and continue to deepen economic reforms, the PBOC said. Reuters

Beijing tightens margin finance rules The CSRC said it would remove the cash escrow requirement for IPOS when they resume Pete Sweeney and Nathaniel Taplin

China will start conducting random checks across the securities and futures sectors in 2016, a top regulator announced Friday. The China Securities Regulatory Commission (CSRC) has developed a work plan to enhance the regulation of securities and futures trading. The CSRC also decided to punish parties in five cases of securities manipulation with administrative penalties. Financial market regulators are asked to enhance supervision on market players to protect the rights of consumers, according to a guideline released by the State Council, China’s cabinet, on Friday.

Foreign capital increasingly flowing to service industry Foreign capital is flowing into China’s service industry from the manufacturing industry, a new report has suggested. China’s service industry attracted about US$66.3 billion in 2014, a year-on-year increase of 7.8 percent and accounting for 56 percent of the total foreign capital into China last year, according to the 2015 China Purchasing Development Report, released at the on-going Global Public Procurement Forum in central China’s Hubei Province. By contrast, foreign capital into the manufacturing industry plummeted 12.3 percent to about 40 billion dollars last year, the report said.

Authorities to modernize financial market system China will modernize its financial market system in the next five years, said a senior official of the central bank. Pan Gongsheng, deputy head of the People’s Bank of China, said at a forum on Saturday that more financial business will be carried out to make the market more elastic. Internet financing, venture investment funds, industrial investment funds, private equity investment funds and asset management will be guided for healthy development. Pan stressed that the country will continue to boost the liberalization of the exchange and interest rates and optimize resource distribution.

Energy Engineering wins approval for IPO

hinese stock regulators raised margin finance requirements on Friday in the name of preventing systemic risk, but kept widely criticised limits on how much companies price IPOS in place. The amount of collateral required for margin loans would double from 50 percent to 100 percent of the amount borrowed, the Shanghai and Shenzhen stock exchanges and China Securities Regulatory Commission (CSRC) said in separate statements. At the same time the CSRC said listing companies should keep their IPO pricing relatively low, in accordance with prior guidelines that companies price themselves within industry average valuations. A spokesman for the CSRC said that changes to margin finance would reduce systemic risk and had been prompted by the recent rapid recovery in margin financing activity. Chinese stock indexes tentatively resumed a bull run in November, helped by a steady rise in margin trading; the daily outstanding margin reached 1.15 trillion yuan (US$180.43 billion) on Wednesday, the highest since August 26. After a brutal 40 percent decline in late summer, prompted in part by a panic sale among margin borrowers,

Random checks across securities, futures sectors

China Energy Engineering Corp Ltd (CEEC) has won approval from Hong Kong’s stock exchange for its initial public offering, expected to total up to US$2 billion, IFR reported on Friday, citing people familiar with the deal. CEEC got the go-ahead from the listing committee of the exchange and will start pitching the deal to investors on Monday, added IFR, a Thomson Reuters publication. The company is slated to start taking orders for the IPO on November 25. CEEC provides engineering, procurement and construction services to energy companies in China.

China’s main stock indices have recovered around 20 percent since late September, but it is unclear whether it will sustain given gloom in the real economy.

IPO overdose

In the past investors have often sold shares in advance of anticipated listings, worried that they will cannibalise capital from the rest of the market. But that cannibalisation was aggravated by CSRC’s pricing guidelines; companies desperate to list often priced their IPO cheaply in order to ensure they would get

approval, but they would then almost invariably rise by the regulatory limit of 44 percent the first day, making them one-way, quick get-rich schemes for subscribers. In fact, IPOs were so popular that many retail investors would borrow heavily in case they qualified to participate via the official lottery. Regulatory pressure on margin finance has also depressed interest in trading by institutional investors and tightening of margin trade were also widely blamed for contributing to a sharp 30 percent collapse in major indexes in June and July. Reuters

Railway cooperation with Laos The Chinese and Laotian governments signed an agreement here Friday on the construction of a cross-border railway to boost economic cooperation and regional growth. The railroad will stretch 418 km to link the two country’s border area, Mohan and Boten ports, and Lao’s capital Vientiane, with joint investment totalling 40 billion yuan (US$6.28 billion), 70 percent from China and 30 percent from Laos, according to the agreement. As over 60 percent of the railway runs through bridges and tunnels, the operating speed is designed at 160 km per hour.

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Greater China

Officials cowed by graft crackdown stall stimulus push State media reported in September that nearly 250 officials had been punished for failing to spend government funds Kevin Yao

ocal officials in China are dithering over project approvals and business deals, some to avoid the spotlight of an anti-corruption campaign, impeding Beijing’s plans to use infrastructure spending to arrest slowing economic growth. Though the National Development and Reform Commission (NDRC) approved 1.9 trillion yuan (US$300 billion) of investment projects in the first 10 months of 2015, the country’s top auditor estimates US$45 billion of projects are behind schedule, including a railway line in Yunnan delayed five years by official sloth. Provincial and city officials were once in the vanguard of China’s breakneck expansion, and they didn’t always play by the rules for procurement or when awarding contracts or rights for land use. Now, when central government is trying to lift growth from 25-year lows, they fear drawing attention to themselves in case their past comes back to bite them. China has stepped up inspection and auditing of big projects to curb

graft since late 2012, when President Xi Jinping declared war on corruption, vowing to go after powerful “tigers” and lowly “flies”.

KEY POINTS Beijing trying to revive growth with infrastructure spending Local officials keep low profile during anti-graft campaign Planning agency approved US$300 bln of projects Jan-Oct Country’s top auditor says about US$45 bln of projects delayed Premier Li Keqiang castigates officials for inaction

“Many people fear that the more they do, the more likely they will get into trouble,” said an official in southern Jiangxi province, who requested anonymity. “Local officials are not fully implementing the central government’s policy measures,” said the official. Prosecutors investigated 4,040 civil servants at the county level or above in 2014, an average of 11 a day, parliament was told in March. But keeping their heads down is also getting them into trouble. State media reported in September that nearly 250 officials had been punished for failing to spend government funds, delaying projects or sitting on land earmarked for development. Premier Li Keqiang has repeatedly scolded procrastinating officials for laziness. Local media said he pounded the table as he blasted officials for inertia at a meeting last year.

Carrot and stick

Li has since been trying a little carrot to go with the stick, promising to

promote “upright” officials while sacking crooked ones, and give them a bit more rope to do the right thing. “We should give local authorities more autonomy in making decisions and give more support for local officials who are willing and capable of doing things,” Li told provincial officials during a meeting in October. In the first 10 months of the year, local reticence has contributed to a slowing of annual growth in fixedasset investment to 10.2 percent, the weakest pace since 2000, despite the NDRC’s quickening of project approvals. Low returns and the lack of legal protection have hampered Beijing’s efforts to lure private investment into infrastructure projects, adding pressure on the government to spend more. “It will be very difficult to stabilise economic growth without local support,” said a researcher with the NDRC. “The ordinary people welcome the fight on corruption, but this brings about side effects as some officials are not doing anything.”

Hong Kong posts modest third quarter growth The government said the outlook for merchandise exports was ‘bleak’, while inbound tourist numbers would remain weak Donny Kwok

ong Kong’s economy proved more resilient than expected in the third quarter, despite China’s slowdown and weaker retail sales as fewer tourists streamed across the border on shopping sprees. As an open economy on China’s doorstep, Hong Kong is vulnerable to headwinds that now include a slowdown in the world’s second-largest economy and broader uncertainty over U.S. monetary policy, due to the city’s currency peg to the dollar. The financial hub’s economy grew a seasonally adjusted 0.9 percent quarter-on-quarter in the three months to September, government data showed on Friday, picking up from a 0.4 percent pace in the second quarter and 0.7 percent in the first quarter. From a year earlier, the economy expanded 2.3 percent in the third quarter. Four economists surveyed by Reuters estimated the economy would grow 0.4 percent in the third quarter

from the second, and 1.8 percent from a year earlier. The government said the outlook for merchandise exports was “bleak”, while inbound tourist number would remain weak, putting pressure on retailers with possible job losses. “I can’t be overly optimistic,” said Helen Chan,

a government economist, when asked about economic growth next year. “Going forward, there are many uncertain factors.” Despite these pressures, Chan said robust domestic demand for goods and services, had helped buttress the economy, with the government seeing economic

growth of 2.4 percent for the full year, still within its previous 2-3 percent range.

Tourism under pressure

Going forward, Beijing’s anticorruption campaign and a weaker yuan has curbed Chinese spending while a volatile stock market has hurt retailers.

The financial hub’s economy grew a seasonally adjusted 0.9 pct q-o-q in the three months to September

Hong Kong’s comparatively high rents and wages have also hurt companies as fewer Chinese tourists, who make up about three quarters of overall visitors, come to snap up handbags, watches and designer clothing. “Given the slowdown in inbound tourism, the possible spillovers on the job market remains a source of concern,” Chan said. An interest rate hike by the U.S. Federal Reserve could trigger capital outflows, but the local currency’s dollar peg means that Hong Kong authorities tend to follow U.S. rate moves. That could pile more pressure on the strong Hong Kong dollar. “A (potential) rate hike in the U.S. will further impact Hong Kong,” said Thomson Cheng, head of the Hong Kong Retail Management Association. “With the strength of the local currency, neighbouring countries will appear to be more attractive to tourists than Hong Kong. It will be painful.” Reuters

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November 16, 2015

Greater China Chinese Prime Minsiter Li Keqiang

MSCI adds Alibaba to indexes MSCI will add Alibaba Group, Baidu.com and a dozen other Chinese companies listed overseas to its emerging market index from December 1, a move reflective of the changing economic landscape that is likely to draw investments of US$70 billion. Alibaba, the world’s biggest e-commerce company, is the largest of the 14 U.S.-listed Chinese stocks to be added to MSCI indexes. Along with internet firm Baidu Inc, it will increase the presence of technology companies in the investment benchmarks. The changes were part of quarterly adjustments MSCI makes to its indexes.

Yum’s same-restaurant sales rise Many growth-obsessed officials have been caught in the campaign. Liu Zhijun, the former railway minister nicknamed “Great Leap Liu” for pushing construction of the world’s largest high-speed network, received a suspended death sentence in 2013 for corruption and abuse of power. Local media said a wellknown businesswoman, sentenced to 20 years, had helped Liu secure 49 million yuan in kickbacks for railway construction contracts. Xi looks determined to sustain the anti-graft drive, promising institutional reforms and system building so officials “will not dare and cannot afford to be corrupt”. The anti-corruption campaign

is not the only reason officials are dragging their feet. Provinces and cities are groaning under 24 trillion yuan in debt, equivalent to almost twofifths of GDP, after responding to Beijing’s last big stimulus push during the global financial crisis in 2008-09. Economic growth slowed to an annual 6.9 percent in the third quarter, and many analysts expect it to slow further. “The economy still needs policy support, and it will depend on whether policy measures can be implemented at local levels,” said an influential economist at a top government thinktank.

Xi said last week that annual growth of at least 6.5 percent was needed over the next five years to realise a goal of doubling GDP and per capita income between 2010 and 2020. But policy insiders say weakness may persist if local government continue to thwart Beijing’s policy. “The anti-corruption campaign will continue, but corruption cannot be resolved overnight, and they need to boost local confidence,” said an official in the eastern Zhejiang province who requested anonymity. “The central authorities may have to make some adjustments. If you cannot boost the economy, everything else could be just empty talk.” Reuters

Chinese banks are reaching out to a broader client base by providing loans in U.S. dollars, not just in yuan Prakash Chakravarti and Denny Thomas

but in recent months the lenders have started to single-handedly underwriting entire loans of private enterprises, which offer twice the fees typically earned from Chinese state-owned enterprises. In August, BOC sealed a US$1.9 billion loan for Asian private equity firm GO Scale Capital’s purchase of an 80.1 percent stake in the Lumileds business of Dutch firm Philips. Although the acquisition remains uncertain because of U.S. government concerns, the bank has sold some of the risk to other Chinese and foreign lenders after initially displacing Morgan Stanley as sole book runner on the financing, bankers said. The same month, Ping An Bank and Shanghai Pudong Development Bank debuted in the Asian LBO business, underwriting a US$1.1 billion loan to help finance the US$3.3 billion purchase of New York-listed WuXi PharmaTech. Mainland lenders are also more generous with their loan terms than foreign rivals, their transaction history shows.

99% of Ultraman mobile games in mainland pirated Iconic Japanese comic and anime superhero Ultraman is facing an intellectual property battle in China, as an agent complains that 99 percent of all mobile games featuring the character in China are pirated. Scores of Ultraman-related mobile games started appearing in the Chinese market in the second quarter of 2015, but only three were found to be authorized, according to Shanghai-based company SCLA, the exclusive agent for the distribution of the Ultraman franchise in China. The mobile game market is booming in China, with an estimated value of 45 billion yuan (US$7 billion) in 2015.

Mainland lenders eat into foreign banks’ Asian buyout loan business

aced with slower economic growth and rising bad debts at home, Chinese banks are muscling in on the US$9 billion private equity buyout loans business in Asia, using generous terms to grab market share from European and U.S. rivals. The lenders’ aggressive pursuit of these specialised loans has so far this year boosted their share of the Asia LBO loan market to 32 percent, five times a year ago, Thomson Reuters LPC data shows. Bank of China Ltd (BOC), for example, is increasingly emerging as sole underwriter for private equity firms seeking to finance buyouts, as a way to help offset declining loan growth, bankers said. Bankers say LBO loan demand in China is expected to rise further following a wave of privatisations of U.S.-listed mainland companies, with a record US$40 billion in buyouts launched this year, according to Thomson Reuters data. Chinese banks have traditionally focused on financing state-backed acquisitions of foreign assets,

Yum Brands Inc, which is spinning off its dominant China business, said October sales at established restaurants in the country rose 5 percent and backed its same-store sales forecast for the fourth quarter. The company said the results included an estimated 10 percent growth in same-store sales at KFC and a 9 percent drop at Pizza Hut. Yum’s 6,900-restaurant China division is the core driver of its business, contributing 54 percent of overall operating profit in the latest third quarter. Same-store sales remain difficult to forecast in China, the company added.

Co-operation with Argentina regardless of election outcome

KEY POINTS Asia LBO loan market worth $9 bln China banks boost market share five times from a yr ago LBO loan market seen as source of revenue amid slowing economy

Most global banks are comfortable underwriting loans with a leverage multiple of around five times or less for no longer than five years, but Chinese banks can go as long as seven years: for instance, the Lumileds acquisition loan is for seven years, while the leverage on the WuXi Pharmatech buyout loan is slightly over seven times. Reuters

China and Argentina pledged to continue friendly cooperation regardless of the outcome of the upcoming presidential runoff in the Latin American country. The ties between the two nations have developed rapidly over recent years and are “in the best period in history,” Argentine Foreign Minister Hector Timerman said in talks with his Chinese counterpart Wang Yi. Both ministers are accompanying their presidents for the Group of 20 (G20)summit scheduled for November 15-16. Wang echoed his remarks, saying: “No matter how the domestic situation in Argentina changes, China won’t change its policy that supports Argentina’s economic and social development.”

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Asia

Malaysia posts weak performance for third quarter growth On the upside, exports jumped in September, rising more than twice the forecast

KEY POINTS Q3 GDP 4.7 pct y/y vs 4.9 pct in Q2, lowest since Q2 2013 Q3 current account surplus narrows to $1.17 bln Central bank governor says pressing 1MDB for answers Malaysian central bank headquarters

alaysia posted its slowest economic growth and smallest current account surplus in over two years on Friday, with third quarter data offering little relief for a country whose currency has lost 20 percent of its value this year. The ringgit is Asia’s worst performer, having been hit hard by weak global prices for Malaysia’s gas and commodity exports, subdued demand from China, and a scandal at an indebted state fund that has raised questions over Prime Minister Najib Razak’s leadership and weakened investor sentiment. Bank Negara Malaysia Governor Zeti Akhtar Aziz told a news conference that the central bank was still pressing

1Malaysia Development Berhad for answers on some transactions, while refusing to be drawn into the political fray. “Although the economy is facing a considerable number of shocks, it has remained resilient as reflected by the steady growth performance of our economy,” Zeti said after the the release of the data. “The current situation warrants however, a high degree of alert but not alarm.” The economy grew at 4.7 percent in the third quarter, the slowest rate since the second quarter of 2013, though in line with forecasts from a Reuters poll of economists. It continued a downtrend seen this

year, as the GDP expanded by 5.6 percent in the first quarter and 4.9 percent in the second quarter. The current account surplus narrowed to 5.1 billion ringgit (US$1.17 billion) in the third quarter from 7.6 billion ringgit in the previous three months, to also post its lowest level since the second quarter of 2013. Some analysts saw the rapidly diminishing surplus posing a risk for the ringgit. Still, Zeti said the ringgit, which showed little reaction to the data trading around 4.3700, is significantly undervalued at the current levels. On the upside, exports jumped in September, rising more than twice the forecast on the back of a weaker ringgit and demand for electrical

Japan’s top banks to accelerate cutting client equity holdings Taiga Uranaka

apan’s top banks are accelerating a planned cutback in their holdings of shares of corporate clients, a practice that has been criticized for making the lenders vulnerable to market swings and for impeding good governance in companies. Mizuho Financial Group, Japan’s second-largest lender by assets, said on Friday it will cut 40 percent of its equity holdings and aims to dispose at least 70 percent of them by the end of March 2019. “Stock holdings are exposed to market risks. We will constantly reduce them by

and electronic products from the U.S and Europe. Malaysia’s exports and imports were up 3.2 percent in quarter, the data showed. Inflation was running at 3 percent in the third quarter, and is expected to peak in the first quarter of next year before moderating, the central bank said.

1MDB pressed for answers

Malaysia, like many other emerging market economies, has lost favour among investors as expectations of an increase in U.S. interest rates mounted over the course of the year. But the 1MDB scandal has also played a part in net portfolio investment outflows of 24.4 billion ringgit during the third quarter, which took the total outflow for the first nine months of the year to 44.0 billion. The central bank had urged criminal prosecution of 1MDB after completing its investigation into the state fund, but attorney general rejected that recommendation. Bank Negara has also demanded the state fund repatriate funds totalling US$1.83 billion back to Malaysia, but 1MDB says the funds have been utilised. Zeti said the bank will continue to request for information from 1MDB and if not given, the fund’s subsequent requests for approval can be rejected.

gaining understanding from issuer companies,” Mizuho CEO Yasuhiro Sato told an earnings briefing. Mizuho said the book value of its domestic equity holdings stood at about 1.96 trillion yen (US$16 billion) as of March. Mizuho posted a 13 percent net profit increase in its financial second quarter ended in September, helped by gains from selling some of its equity holdings. Japanese banks hold billions of dollars worth of corporate clients’ stocks to cement business ties. The practice has been widely criticised for hindering rigorous corporate governance, as banks play the role of friendly shareholders to management. The banks are also under regulatory pressure to reduce such equity holdings since they could hurt lenders’ financial health in times of market turmoil. Sumitomo Mitsui Financial Group also said it has set a goal of reducing its domestic equity holdings by half as a percentage of its core capital in five years. The third-largest bank

Reuters

said the book value of its domestic equity holdings stood at about 1.8 trillion yen as of September, which is about 28 percent of its common equity Tier 1 capital. The lender’s secondquarter net profit fell more than half from the year-earlier period to 120.3 billion yen after it booked impairment losses on its minority stake in Indonesian lender PT Bank Tabungan Pensiunan Nasional Tbk (BTPN). Japan’s largest lender, Mitsubishi UFJ Financial Group , also announced a similar goal of cutting the equity shareholdings, saying it aims to bring down the percentage of such holdings against Tier 1 capital to around 10 percent in five years, from about 19 percent now. The 10 percent goal is “the level, at which we are not likely to post losses even at times like the Lehman shock”, MUFG CEO Nobuyuki Hirano said at an earnings briefings. Its second-quarter net profit fell 5 percent to 321.6 billion yen, hurt by bigger credit costs. Reuters

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November 16, 2015

Asia

Bangladesh to seek assistance for infrastructure

Indonesia aims to promote reform of IMF at G20 meeting

Government wants to boost investment in infrastructure development by up to six times from current figures

Indonesia said it wants a meeting of the world’s 20 major economies that opened yesterday to push for reform of the International Monetary Fund to give emerging nations more say in the organisation. Finance Minister Bambang Brodjonegoro said on Friday that IMF reform was on Indonesia’s agenda for the two-day meeting of the Group of 20 in Turkey. Indonesian President Joko Widodo is scheduled to attend the G20 summit. On Tuesday, China said it was working with other emerging countries to urge the U.S. to ratify the IMF reforms.

Serajul Quadir

angladesh will seek up to US$12 billion in assistance for infrastructure development during a two-day meeting with funding partners that began yesterday, a senior finance ministry official said. Bangladesh now spends only two to three percent of GDP on such investment, but needs to invest up to 12 percent to achieve the target of becoming a middle-income country, senior finance ministry official Mohammad Mejbahuddin said. “We will place our requirements to them to ensure infrastructure development to become a middleincome country by 2021,” he told reporters on Saturday. Major development partners include the World Bank, the Asian Development Bank (ADB), the International Monetary Fund, the U.S. Agency for International Development (USAID), the Department for International Development, the European Union and the Japan International Cooperation Agency. Bangladesh wants to boost investment in infrastructure

development by up to six times from current figures in its quest for annual economic growth of 8.0 percent, said Matlub Ahmed, president of the Federation of Bangladesh Chambers of Commerce and Industry. Jin Liqun, president-designate of the China-backed, newly-formed Asian Infrastructure Investment Bank, will attend the meeting’s infrastructure session to be told about the country’s requirements. But the development partners want the government’s commitment to good governance, so as to assure the most effective outcome of the assistance they provide. “We believe good governance improves the cost-effective delivery of public goods and services and broadens inclusiveness,” said Kazuhiko Higuchi, the ADB country director. The ADB is a long-standing development partner, providing Bangladesh assistance of more than US$17.5 billion since 1973, he told Reuters. Good governance is essential for Bangladesh to maintain an

Lotte loses major Seoul duty free store licence

Jin Liqun, president-designate of the China-backed, newly-formed Asian Infrastructure Investment Bank, will attend the meeting’s infrastructure session to be told about the country’s requirements

environment for informed policy debate and ensure inclusive social and economic progress, USAID mission director Janina Jaruzelski told Reuters. Through USAID, the U.S. government has provided more than US$6 billion in development assistance to Bangladesh since 1971. Bangladesh is moving to improve governance standards, finance ministry official Mejbahuddin said. Reuters

Seoul gripped by large-scale anti-government rally Saturday’s rally was the largest South Korea has seen since 2008 when the country was hit by waves of protest against the import of US beef

ens of thousands of people took to the streets of central Seoul Saturday in a massive protest against the conservative government’s drive for labour reform and state-issued history textbooks. Police sprayed water on the crowd, estimated to number about 50,000, as some protesters attempted to push through barricades at the rally outside City Hall in central Seoul. Ahead of the rally, labour unionists scuffled with scores of plainclothes policemen to prevent the arrest of the head of the militant Korean Confederation of Trade Unions (KCTU), who showed up for a press conference near the protest site. Labour activists successfully blocked police from arresting KCTU President Han Sang-Kyun, who has been sought for leading outlawed labour strikes last year and May Day protests this year. “Down with (President) Park GeunHye”, the unionists chanted following the scuffles, calling her conservative government “fascist”, an AFP journalist on the scene said. Authorities said they had mobilised 20,000 riot police for fear that the protest might turn violent. Organisers of the protest said there would be a march toward the presidential Blue House, a move which

is likely to spark a clash with police. Participants, many of whom were bussed in from across the country, chanted slogans demanding the withdrawal of a government labour policy which KCTU says benefits businesses by keeping wages low and making it easier for companies to fire activists. They also condemned the opening of protected markets for some agricultural goods and a plan to impose government-issued textbooks on schools starting in 2017. The textbooks have become a bitter ideological battleground between left and right in South Korea, with critics

Lotte Duty Free, world’s third largest duty free store operator, lost a duty free store licence in downtown Seoul to a rival bidder on Saturday. Doosan Co Ltd and Shinsegae Co Ltd won the license previously held by Lotte and another license previously operated by SK Networks, South Korea’s customs agency Korea Customs Service said in a statement. The store reported some 482 billion won (US$412.06 million) in sales in 2014, as the third-largest duty free store in downtown Seoul. Lotte Duty Free reported about 4.2 trillion won in sales in 2014, according to a spokesman.

Thailand’s AIS in network lease deal with state run TOT Advanced Info Service Pcl (AIS), Thailand’s largest mobile operator, has been selected by Thai state telecoms firm TOT to be a partner in its mobile business, the state firm said on Friday. The partnership is part of TOT’s strategies to strengthen its operations as the state firm is one of several major state enterprises undergoing restructuring since the military seized power in 2014. AIS, part owned by Singapore Telecommunications Ltd, will lease 15MHz bandwidth on TOT’s 2100MHz spectrum for 10 years, TOT acting president Monchai Noosong told a news conference after its board approved the plan.

Indonesia’s c/a deficit shrinks

accusing Park’s administration of seeking to deliberately manipulate and distort the narrative of how the South Korean state was created. Conservative critics argue that currently the authors are too leftwing, but liberal opponents accuse the government of reverting to a policy used by past authoritarian regimes in South Korea including that of late president Park Chung-Hee, father of the current president. Saturday’s rally was the largest South Korea has seen since 2008 when the country was hit by waves of protest against the import of US beef. AFP

South Korean police uses water cannons against protesters marching towards the presidential house during a rally against the government's policy in Seoul

Indonesia’s current account deficit shrank in the third quarter, but portfolio outflows resulted in the country’s balance of payments showing a second consecutive quarterly deficit, the central bank said on Friday. The current account deficit fell to US$4.0 billion from US$4.2 billion in the second quarter, while as a percentage of gross domestic product it dropped to 1.86 percent from 1.95 percent in the second quarter, and from 3.02 percent for the same quarter a year ago. The improvement in the current account is a consequence of slowing economic growth and falling demand for imports.

Top Japan bank MUFG’s H1 profit up Mitsubishi UFJ Financial Group Inc (MUFG) said on Friday net profit rose 3.6 percent for the six months ended in September, driven by gains from its overseas operations and brokerage business. Japan’s largest lender by assets said net profit came in at 599.3 billion yen (US$4.88 billion) for the April-September period, up from 578.7 billion yen a year earlier and above its own forecast of 450 billion yen. MUFG has the most internationally diversified business portfolio among Japan’s top three banks, offsetting the prolonged weakness in its domestic lending business.

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November 16, 2015

International Argentine opposition leads presidential vote-polls Argentina’s opposition candidate Mauricio Macri headed into the final week of the presidential campaign with a comfortable lead over the ruling party’s pick for the Nov. 22 run-off election, according to two polls released on Saturday. Potential investors in Latin America’s No. 3 economy are watching to see if front-runner Macri, the business-friendly mayor of Buenos Aires, can keep the momentum he gained in the Oct. 25 first round election and win the presidency. He promises to open Argentina’s economy after years of protectionist policies under outgoing leader, Cristina Fernandez.

France to go ahead with climate summit France plans to go ahead with a global climate change summit in Paris at the end of the month, the prime minister said on Saturday, despite a wave of deadly attacks on Friday night that killed 127 people in the capital. The conference “will be held because it’s an essential meeting for humanity,” Prime Minister Manuel Valls told. He said the summit would also be an opportunity for world leaders to show their solidarity with France after the attacks. About 118 world leaders are expected to attend the opening day of the Nov. 30-Dec. 11 conference.

Hold-out regional unions to continue Brazil oil strike Key regional oil worker unions in Brazil’s Campos Basin and at the Reduc refinery outside of Rio de Janeiro voted on Saturday to ignore calls by the country’s largest oil workers’ union to end a strike which started 14 days ago. Leaders of the largest oil workers’ union on Friday proposed ending the strike. Sindipetro Norte Fluminense, the union for oil workers that run most of the platforms in the Campos Basin voted early on Saturday to continue their strike despite FUP’s call to end it. The Campos Basin accounts for more than 60 percent of Brazil’s oil output.

Clinton plays defence at U.S. Democratic debate U.S. Democratic presidential front-runner Hillary Clinton played defence over her 2003 vote backing the U.S. invasion of Iraq and inched away from President Barack Obama on Syria and the rise of Islamic State militants during a contentious debate on Saturday. Clinton’s rivals for the White House, Bernie Sanders and Martin O’Malley, took a more aggressive tone than in their first debate last month. They accused Clinton of being too cozy with Wall Street and taking campaign donations that made her unwilling to stand up to corporate interests.

Euro zone’s slower growth prompts action in December The euro zone’s two largest economies, Germany and France, both grew by 0.3 percent in the third quarter

conomic growth in the euro zone slowed unexpectedly in the third quarter as weaker foreign trade held back leaders Germany and France, and with much of the rest of the bloc underperforming. The 19-member euro zone grew by 0.3 percent in the third quarter, the European Union’s statistics office Eurostat said on Friday, reinforcing expectations that the European Central Bank will expand its monetary stimulus next month. In the second quarter, it had grown by 0.4 percent. On Thursday, ECB President Mario Draghi underlined the bank’s readiness to extend money printing, warning that a key measure of economic health - price inflation was flagging. ECB policymakers’ next key meeting is on December 3. Highlighting the weak price pressures in much of the euro zone, figures from Spain showed inflation there fell 0.7 percent year-on-year in October. Spain’s economic growth is otherwise a rare euro-zone bright spot, expanding by 0.8 percent according to preliminary data issued earlier. Its recovery, however, is failing to bridge a growing gulf between rich and poor, storing up problems for an already-strained social security system.

Trade drag

The euro zone’s two largest economies, Germany and France, both grew by 0.3 percent in the third quarter but the expansion in both countries was held back by foreign trade as export sectors suffered from a slowdown in

less on average this Christmas, with austerity-hit Greece and Russia showing the steepest declines. French, British, German and Spanish consumers are among those expected to spend more, the survey showed. The overall decline would also be at a much slower pace than last year, signalling some improvement in sentiment.

Finnish funk

ECB President Mario Draghi underlined the bank’s readiness to extend money printing

emerging markets. French exports fell 0.6 percent after growing 1.9 percent in the prior quarter, statistics office INSEE said. Growth in both France and Germany was buoyed by domestic demand, with gains in consumer spending supporting the expansion. However, economists said that relying on consumer spending alone to drive growth is risky, especially if domestic investment does not pick up to help offset soft exports. Underlining the risks to relying on consumer spending for growth, a survey by market research group Deloitte showed families across Europe look set to spend slightly

Obama urges Congress to approve Pacific trade pact early in 2016 Congress must approve the pact before it can take effect, but U.S. lawmakers have been lukewarm toward the deal

Canada needs to keep an eye on low oil prices Canada needs to keep a close eye on low oil prices, which the ruling Liberal Party took into consideration when drawing up an election platform that called for extra stimulus, new Finance Minister Bill Morneau said on Saturday. Morneau, speaking to reporters on the sidelines of a Group of 20 summit, also said U.S. Treasury Secretary Jack Lew was encouraged by the Liberals’ plans for new infrastructure spending. The Liberals won the October 19 election, in part on a promise to run three years of budget deficits to boost the economy.

resident Barack Obama on Friday urged the U.S. Congress to quickly approve a 12-nation Pacific trade pact early in 2016, telling reporters the Trans-Pacific Partnership (TPP) was essential to the American economy as well as national security. Obama last week gave Congress 90 days’ notice that he would sign the TPP deal, which seeks to remove trade barriers and set common standards in 40 percent of the world economy. “We strongly believe that on

a bipartisan basis, we should get this done,” Obama told reporters after meeting with a group of senior diplomats and defence experts. “As soon as the 90-day review period is completed and the new session of Congress begins after the Christmas break, I am hoping that leaders in both parties and both chambers move promptly to get it done,” Obama said. Obama is due to embark on Saturday on a nine-day trip that will take him to Asia where the TPP will

On the northern rim of the euro zone, Finland’s economy contracted 0.6 percent in the third quarter, putting the economy on track for its fourth consecutive year of contraction in 2015. Labelled “the sick man of Europe” by its own finance minister, Finland’s output is yet to reach 2008 levels because of a string of internal and external setbacks, including the decline of Nokia’s phone business and a recession in neighbouring Russia. Aggregated euro zone growth was lower than expected mainly because growth in Italy, the Netherlands, Portugal and Finland all underperformed market expectations. Italy, the euro zone’s third biggest economy, grew 0.2 percent on the quarter -- short of expectations for a 0.3 percent expansion. The Netherlands grew only 0.1 percent against expectations of 0.3 percent. Portugal did not grow at all. Battered Greece’s economy contracted again, albeit it at a milder than expected pace. Gross domestic product shrank 0.5 percent in the period as capitol controls hot activity. Reuters

be a focus. Obama will also attend the Asia-Pacific Economic Cooperation (APEC) summit in Manila on Nov. 18-19. He gathered a who’s who of Republican and Democratic national security luminaries at the White House on Friday to bolster his case, including former secretaries of state Henry Kissinger, James Baker, Madeleine Albright and Colin Powell; former defence secretary Bill Cohen; and retired military brass Mike Mullen and James Jones. They were in agreement that a failed deal would leave a “void” that would be filled by China and other competitors. “They will make the rules, and those rules will not be to our advantage,” Obama said. Missing from the group was Hillary Clinton, Obama’s former secretary of state, who is the front-runner in the Democratic race for the November 2016 presidential election. Clinton has said she opposes the TPP. The deal has also been criticized by Donald Trump and others in the Republican presidential primary race. The White House said the meeting was “not in any way” meant to contrast Clinton’s opposition to the TPP with the support seen from other former top diplomats. Reuters

Business Daily | 15

November 16, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The Eurozone’s Minsky conundrum Daniel Gros

Director of the Centre for European Policy Studies

THE STRAITS TIMES Singapore and Turkey signed a free trade agreement that will reduce barriers to trade and investment between the two sides as well as strengthen bilateral ties and economic cooperation. Finance Minister Heng Swee Keat and Turkish Minister of Economy Nihat Zeybekci inked the deal on the side-lines of the G-20 Leaders’ Summit in Antalya. The agreement, which is expected to be ratified by 2017, will enhance access for Singapore and Turkish companies to each other’s services sectors and procurement markets, and promote greater connectivity between businesses and people, Singapore’s Ministry of Trade and Industry said.

THE KOREA HERALD South Korea posted a trade surplus for the 45th month in a row in October as imports dropped at a faster pace than exports, customs data showed yesterday. According to the data by the Korea Customs Service, the country’s trade surplus reached US$6.65 billion last month, down from US$7.53 billion a year earlier. The total was also down from US$8.89 billion reported for September. Exports dropped 15.9 percent on-year to US$43.42 billion last month, while imports fell a sharp 16.6 percent to US$36.77 billion. In October 2014, exports hit US$51.63 billion, with imports standing at US$44.09 billion.

PHILSTAR The Asia-Pacific Economic Cooperation Business Advisory Council (ABAC) has finalized recommendations to be presented this week to economic leaders attending the APEC Leader’s Meeting in Manila. The recommendations laid out by Asia-Pacific’s business leaders are seen to address business sector priorities and concerns across APEC member economies. “During this meeting, we reviewed the progress we’ve had as far as the recommendations for policies that we hope to present to leaders on Wednesday. We also established the agenda for next year,” ABAC chair Doris Magasaysay Ho said in an interview following a closeddoor meeting.

TAIPEI TIMES Democratic Progressive Party (DPP) presidential candidate Tsai Ing-wen criticized President Ma Ying-jeou and Chinese Nationalist Party (KMT) presidential candidate Eric Chu over their criticisms of her. Ma during a news conference on Friday about his recent meeting with Chinese President Xi Jinping accused the DPP legislative caucus of dodging its responsibility to keep the executive branch checked since it objected the KMT motion to invite Ma to brief the legislature about his meeting with Xi. Tsai said there is not an established mechanism on what a president should do before meeting with their Chinese counterpart.

tubbornly low inflation has the European Central Bank worried. But its response – essentially just more quantitative easing – could backfire, exacerbating imbalances and generating serious financial instability. As it stands, the headline consumer price index in the eurozone hovers around zero, and even core inflation remains below 1% – too far for comfort from the ECB’s target of around 2%. While a new round of weakness in global commodity prices earlier this year contributed to these figures, it does not explain the weakness in longer-term inflation expectations, which have improved little since March, when the ECB started its massive €60 billion (US$66.3 billion) per month bond-buying program. But instead of rethinking its strategy, the ECB is considering doubling down: buying even more bonds and lowering its benchmark interest rate even further into negative territory. This would be a serious mistake. Easier credit conditions and lower interest rates are supposed to boost growth by stimulating investment and consumption demand. But in the core of the eurozone – countries like Germany and the Netherlands – credit has been plentiful, and interest rates have been close to zero for some time, so there was never much chance that bond purchases would have a significant impact there. And, indeed, the European Commission’s most recent economic forecast shows that spending in the core countries has not increased as a result of

the ECB’s policies; Germany’s external surplus is actually increasing. Of course, in the highly indebted peripheral countries, there was room for interest rates to fall and for credit supply to grow – and they have, leading governments and households to increase their spending. While the asymmetrical impact of the ECB’s policy is appropriate in principle (because unemployment is much higher in the periphery), the reality is that a recovery supported by the least solvent economies is not sustainable. Back in 1986, Hyman Minsky warned about the longer-term dangers to financial stability if “Ponzi” borrowers – those who can service their debt only with new debt – become the main pillar of the economy. A zero-interest-rate environment is of course ideal for such borrowers, because there is nothing to provide an indication of solvency; borrowers can just roll over their debt. But it is bad for those with a strong asset position; by reducing their spending power, it spurs them to save even more. The standard response to Minsky’s concern – that the spenders can’t afford it and the savers aren’t spending – is that monetary policy should focus on ensuring price stability, while macroprudential policy aims to safeguard financial stability by limiting borrowing by highly indebted agents. But this approach does not work. If macroprudential policy limited additional credit to marginal borrowers effectively, monetary policy would have no impact

A recovery has already begun in the eurozone. It should be left to run its course

on demand (as long as the most solvent agents refuse to spend more). This problem arose in the United States after the 2001 recession. Although the Federal Reserve kept interest rates low for a protracted period, the corporate sector did not increase its investment. The recovery was ultimately fuelled by socalled “subprime” mortgages: home-purchase loans extended to borrowers with lower credit ratings. The result, as we know, was a mega-bubble that triggered the 2008 financial crisis. In the eurozone’s case, the risk is compounded by the ineffectiveness of its key macroprudential instrument, the Stability and Growth Pact, in limiting countries’ spending, as lower interest rates give debtor countries leeway to spend more. Public debt as a share

of GDP is on the rise in Italy and Spain, even though both countries, with their eurozone partners, have committed to reducing the debt ratio. In fact, even without lower interest rates, the deficit limits that the Pact imposes have proved to be non-binding, exemplified by France’s flouting of them since 2009. In short, monetary policy is perpetuating the disequilibrium between creditor and debtor economies in the eurozone, and macroprudential policy is doing nothing to stop it. When interest rates normalize, this could generate serious financial instability. But – and this is the conundrum – the ECB has few options for stimulating demand among the eurozone’s more solvent agents, and thus supporting a sustainable recovery. In deciding its next move – whether to initiate more bond purchases, lower interest rates even further, or do both – the ECB must recognize that any positive impact on demand probably will be limited to the eurozone’s weaker economies – that is, the economies that can least afford it. This is a high-risk move, one that is probably not justified by the effort to bring price increases a few dozen basis points closer to the ECB’s target. A recovery has already begun in the eurozone. It should be left to run its course. An even more expansionary monetary-policy stance might strengthen the recovery marginally, but at the cost of increasing the eurozone’s already-dangerous imbalances. Project Syndicate

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November 16, 2015

Closing Survey shows alarming health problems among elderly

Myanmar’s President Thein Sein pledges ‘smooth transition’ Myanmar’s transition of power to the new government will be “carried out smoothly,” President Thein Sein said yesterday. “As promised, the government has held free elections,” the president said in Yangon at a meeting with representatives of the National League for Democracy, winner of last week’s election. Power will be transferred “systematically to the new government and there should be no worries regarding with this. I will do it to be smoothly and calmly,” he said. NLD spokesman Nyan Win said his party would maintain its policy of national reconciliation.

A survey of 3,885 elderly people across six provinces showed high rates of seniors who are overweight and malnourished, the China Development Research Foundation (CDRF) said yesterday. According to the survey, 31.8 percent of the respondents are overweight and 11.4 percent qualified as obese. Meanwhile, the rate of malnutrition is still high among low-income households, the single and widowed, and those of advanced age. About 12.5 percent of the respondents suffer from anaemia. Senior males in rural areas report a higher rate of malnutrition at 16 percent.

Two-child policy puts pressure on fertility systems Experts said measures are needed to meet the high demand

hina’s sperm banks are already facing a dearth of donors, and a government proposal to end the country’s decades-old onechild policy may put more pressure on the institutions. The Communist Party of China Central Committee announced the scrapping of the current one-child policy in a proposal in late October in order to balance population growth and offset the burden of an aging population. According to a report carried this week by the Jiangxi Daily, a growing number of couples with fertility problems have visited local hospitals and sperm banks for consultations since the policy announcement. Xue Jie, a head nurse with the reproductive centre of the Hospital affiliated with the Nanchang Research Institute of Medical Sciences in Nanchang, capital of east China’s Jiangxi Province, said a number of couples have come to talk to her about having a second baby with the help of sperm banks. China introduced its family planning policy in

the late 1970s to rein in population growth by limiting most urban couples to one child and most rural couples to two, allowing the birth of a second child if the first child was a girl. A major policy change at the end of 2013 allowed couples nationwide to have a second child if either parent is an only child. Since then,

APEC launches trade repository for helping small enterprises

about 1.45 million Chinese couples, or 13 percent of those eligible, have submitted applications for a second child as of the end of May, according to the National Health and Family Planning Commission. But the infertility rate is high in China, with statistics released by the China Population Association at

the end of 2012 showing 40 million people have fertility issues, accounting for 12.5 percent of the population aged between 20 and 49. Many couples have turned to sperm banks for help. Meanwhile, sperm banks are dealing with a worsening shortage of healthy sperm, despite repeated efforts to recruit more donors.

Syrian transition plan reached by U.S., Russia in Vienna

In Jiangxi, the sole sperm bank in the province launched in 2013 has only received about 1,400 qualified sperm donors out of more than 6,000 volunteers so far. The current policy limits donors to men between the ages of 22 and 45, and their health records and sperm quality must meet strict requirements before they can be used for artificial insemination. With the imminent twochild policy, which will be ratified at the annual session of China’s top legislature in March, there could be more pressure on the institutions. Sperm banks in China have tried a variety of tactics to solicit donors. In September, a sperm bank in Shanghai launched a campaign using the iPhone 6s to attract donors. An ad promised up to 6,000 yuan (US$941) for 17 ml of semen from qualified donors -- just enough to buy the latest Apple model, which cost around 5,288 yuan when it hit stores on the Chinese mainland. A sperm bank in central China’s Hubei Province posted a similar ad online featuring a picture of the new rose gold iPhone 6s, hoping to overcome a shortage in donors. Tougher measures are also needed to crack down on the underground sperm market, which has profited from the scarcity of donor sperm, experts said. Xinhua

As G20 summit opens, pro-growth measures high on agenda

he Asia-Pacific Economic Cooperation (APEC) yesterday launched an online database especially for micro, small and medium enterprises in its member economies to better access cross-border trade in the region. The APEC Trade Repository (APECTR), according to Ceferino Rodolfo, assistant secretary of the Industry Development Group of the Department of Trade and Industry, served as a single online reference point on APEC economies’ trade and tariff mechanisms with the objective of further promoting APEC’s work on transparency, connectivity and trade facilitation. The APECTR was built on the existing APEC Web Trade Repository and information including most-favoured-nation tariff rates, preferential tariff rates, rules of origin on existing free trade agreements, best practices in trade facilitation, domestic trade and customs laws and regulation and procedures and documentary requirements for imports and exports will be available in the newly launched database. The proposal of the APECTR was first presented by the Philippines in February 2015.

eventeen nations, spurred on by Friday’s deadly attacks in Paris, overcame their differences on how to end Syria’s civil war and adopted a timeline that will let opposition groups help draft a constitution and elect a new government by 2017. As a first step, the United Nations agreed to convene Syria’s government with opposition representatives by January 1, U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov said Saturday at a joint press conference in Vienna. A cease-fire between the government in Damascus and recognized opposition groups should be in place within six months, according to their statement. The terrorist attacks in Paris galvanized the diplomats, who at previous talks had been unable to resolve the discord within their ranks. While Russia and Iran had sided with Syrian President Bashar al-Assad, the U.S. and its regional allies had insisted upon his removal. With diplomats bogged down over the question of Assad, terrorist groups like Islamic State, also known as ISIS or ISIL, grew and become more powerful inside Syria.

s the Group of 20 (G20) summit opens in the Turkish Mediterranean resort of Antalya, the international community is looking up to the leaders of the world’ s most influential economies to come up with strong agreements to fulfil G20’s mandate of promoting strong, balanced and sustainable growth across the globe. Seven years after the global financial meltdown, there is still little sign that the world economy is on the right track back to strong recovery. Growth is not picking up, trade is weak, and investment is slowing down. Some experts cautioned that a recession is imminent. Earlier, the Organization for Economic Cooperation and Development, trimmed in its twiceyearly outlook the forecast for global economic growth to 2.9 percent this year and 3.3 percent in 2016, down from the previous predictions of 3.0 percent and 3.6 percent, respectively. The G20 leaders are expected to discuss these key economic topics, including inclusive growth, employment and investment, as well as financial regulation.

Xinhua

Bloomberg News

Xinhua