MOP 6.00 Closing editor: Oscar Guijarro
Lost in translation
Year IV
Number 933 Thursday December 3, 2015
Publisher: Paulo A. Azevedo
The University of Macau denies it. News revealing that 2018 would be the last year that the institution would include Portuguese as a subject. Waning interest has prompted changes, though. With the University searching to improve the current curriculum
Polytex calls Pearl Horizon owners’ behaviour “uncivilised” Page 5
Gaming-related crime on the rise
The territory is considered a relatively safe spot. But crimes related to gambling activities increased by 34 pct y-o-y for the first nine months of 2015. Loan-sharking crimes were up almost 40 pct. While illegal confinement soared 112.5 pct. Most victims and perpetrators were non-residents, according to Secretary for Security Wong Sio Chak. Overall crimes for the period decreased 2.2 pct Page
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Tweaking tourism in Taipa
www.macaubusinessdaily.com
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China’s National Development and Reform Commission have removed a cap. On the number of onshore bonds Mainland firms can issue per year. The move is part of a series of actions aimed to reduce bureaucracy in the corporate bond market
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HSI - Movers December 2
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Fewer aircraft movements. Macau Civil Aviation Authority, however, remains optimistic. The Authority head expressed confidence in the future of helicopter sightseeing. For which a service licence has been approved; while new facilities for private jets are in the offing
Bond market shake-up
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Alexis Tam continues to innovate. Today, the Secretary for Social Affairs and Culture will explain his 2016 policies to local lawmakers. The health revamp continues apace. While the Institute for Tourism Studies and Casa de Portugal will be involved in the management of the Taipa Houses and new tourist facilities
Hovering in the wings
Yuan’s reform a work in progress despite internationalisation Page 10
Smoking Law
No ifs, no butts
%Day
Cheung Kong Property
+2.51
Ping An Insurance Gro
+2.19
AIA Group Ltd
+1.57
China Resources Land L
+1.56
Li & Fung Ltd
+1.33
China Resources Powe
-0.39
Belle International Ho
-0.42
CLP Holdings Ltd
-1.21
Hengan International
-1.58
Want Want China Hold
-1.93
Source: Bloomberg
The tobacco control law. It’s choking the cigarettes and cigars business here, says the industry. Proposed new measures would ban tobacco products and price tags. Affecting display windows at sales points, including both shops and stands
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December 3, 2015
Macau
Cigarettes, cigar trade reps oppose proposed smoking control bill The proposed ban on displaying tobacco products will only further threaten the survival of tobacco product retailers here, they tell the Legislative Assembly Stephanie Lai
sw.lai@macaubusinessdaily.com
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he proposed amendment of the city’s tobacco control law suggests a ban on displaying tobacco products in shops, a move that will further threaten the business of cigarettes and cigar sales. The government increased tobacco tax threefold in July, trade representatives reminded the Legislative Assembly. “Cigars, [like] other tobacco products, ought to be displayed and presented to clients. The tasting room as we call it is a very important facility for the sales process. So this aspect is really key for the operators to continue their business,” Kenith Wong, regional director of the Pacific Cigar Company Ltd., told media after meeting the second permanent committee of the Legislative Assembly yesterday. The committee, which is currently deliberating upon the amendment of the tobacco control regime (law No.5/2011), has met Macau’s Trade Chamber of Tobacco Companies and several cigar company representatives
for discussion on the bill. Following deliberation by the committee, the bill will undergo a second reading by the general assembly. The proposed legal amendment spells out that tobacco products and price tags cannot be showcased in the display windows of sales points, including both shops and stands.
With this legal amendment, the government also proposes a ban on the setting up of tasting rooms for cigars at sales points. The suggested removal of the tasting rooms is going to harm the promotion of new products, the second permanent committee’s president, Chan Chak Mo, told media citing the trade representatives.
The proposed legal changes have incited strong opposition from tobacco and cigar trading companies. Andrew Chan Hou Lam, deputy director of Macau’s Trade Chamber of Tobacco Companies, remarked that the proposed ban against the display of smoking products was also unfavourable for consumers to understand the information of tobacco products. The tax on each cigarette was increased 200 per cent to MOP1.50 from the previous MOP0.5. With the tax hike, the tobacco tax occupies around 70 per cent of the retail price of a packet of 20 cigarettes from the previous 33 per cent. A ban would only further threaten the survival of the tobacco trade, as tobacco retailers have already suffered a 70 per cent fall in sales turnover since the tobacco tax hike came into effect on July 14. Citing peers’ sales performance, Mr. Kenith Wong also told media that cigar retailers suffered a 20 to 30 per cent drop in turnover after the tobacco tax was increased.
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December 3, 2015
Macau
Institute for Tourism Studies involved in new Taipa-Houses project IFT and Casa de Portugal will combine their efforts in running a Portuguese restaurant in the Carmo area of Taipa. The details of the project will be presented by the Secretary for Social Affairs and Culture in his Policy Address
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he Institute for Tourism Studies (IFT) is going to co-operate with Casa de Portugal (House of Portugal) in the management of the restaurant and terraces to be created in the Taipa Houses Museum, Business Daily has learned. Today, Alexis Tam (pictured), Secretary for Social Affairs and Culture, will explain to the Legislative Assembly the policies for 2016 of his Secretariat, including the plan to revamp Taipa’s Carmo area into an entertainment hub. This will be achieved by hosting live shows in the existing amphitheatre and revamping the space by creating restaurants and esplanades. IFT and Casa de Portugal will manage one of the restaurants to be created in the area, which will offer Portuguese food. The remaining restaurants will be available for the consulates of the different countries in Macau for temporary exhibitions, with food offerings from their countries.
The Secretary for Social Affairs and Culture is also planning to install esplanades and bars in the area opposite the government headquarters in front of Nam Van Lake
Alexis Tam to run Macau International Marathon This year the Secretary for Social Affairs and Culture, Alexis Tam, is planning to run the Macau International Marathon. The Macau official will be accompanied by the Executive Director of Galaxy Entertainment Group, Francis Lui Yiu Tung, whose company is the main sponsor of the event. This year’s marathon has signed up a record-breaking 8,000 participants set to start at 6:00 a.m. on 6th December.
Business Daily understands that Alexis Tam has already met with various consuls and has explained the concept to them. The Secretary is hopeful that the consulates will bring chefs from different countries to cook in these temporary ‘exhibitions’ and present their food to residents and tourists. As the goal of the Secretary for Social Affairs and Culture is to have this project fully developed by next year, the contacts with the Civic and Municipal Affairs Bureau (IACM) have already started to ensure the required licences are approved in a timely manner. The Secretary is also planning to install esplanades and bars in the area opposite the government headquarters in front of Nam Van Lake, which are also set to
increase tourism offers in the territory.
Medical services to work longer hours
The policies to be presented tomorrow also include news regarding Hospital Conde S. Januário. Starting from next year, some of the services provided by the hospital will have extended working hours to serve more patients and offer training to medical staff. While the government is waiting for the Island Hospital to be constructed, the medical staff is already being hired. This staff will be added to Hospital Conde S. Januário to go through training whilst already serving the Macau population. This way, people will have to wait less time to be received and the transition to the new hospital, set to happen in 2017, will be smoother.
As of now the government has already hired 591 healthcare professionals but the goal is to have 2,000 hired for the new hospital. Of these, 500 will be doctors and 1,500 nurses and technical and administrative people. Other changes to be announced include the expansion of the Grand Prix Museum to occupy the area that is now occupied by the Wine Museum. This means that the area dedicated to the museum will be expanded by 850 square metres, which will be added to the existing 2,465 square metres. The total area of the Grand Prix Museum will increase to 3,315 square metres. At the same time, there will be more ‘interactive’ exhibits. The goal is to make the museum more interactive by installing simulators and similar machinery. This plan seeks to develop space more oriented to families. Macau Wine Museum will be relocated to a different venue.
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December 3, 2015
Macau Education Development Fund disburses MOP24.83 mln in subsidies The Education Development Fund (FDE) disbursed MOP24.83 million in subsidies to private schools during the third quarter of the year, it was announced yesterday in Macau’s Official Gazette. The largest subsidy was given to The Workers’ Children High School and amounted to MOP2.72 million to replace the air condition system. The second largest subsidy of MOP1.91 million was paid to Hou Kong High School for the three-year development plan of the institution regarding information technologies. Last month, a report by the Commission of Audit revealed that the government was unable to verify the usage of some MOP32.46 million in subsidies awarded by the Education Development Fund during the school year of 2013/2013.
Security stable despite rapid rise of gaming-related crimes Loan-sharking and illegal confinement cases related to gaming rapidly increased in the first nine months of this year but the city’s top security official stresses that Macau remains largely safe Stephanie Lai
sw.lai@macaubusinessdaily.com
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he city’s gamingrelated crimes increased 34 per cent year-on-year for the first nine months of 2015 as the industry entered its ‘adjustment’ phase but Secretary for Security Wong Sio Chak stressed that Macau’s security remains largely stable. A total of 1,118 cases related to gaming were registered for the first nine months of this year, representing a year-onyear rise of 34 per cent, the Secretary told public broadcaster TDM Portuguese Radio. The Secretary, who attended the Policy Address 2016 debate in the Legislative Assembly earlier this week, delivered the crime statistics to media at a briefing yesterday.
According to information provided by the Secretary, 153 of these gaming-related crimes involved loan-sharking activities, representing a rise of nearly 40 per cent compared to a year ago. Illegal confinement, another major type of gaming-related crime, totalled 170 cases for the January-September period, which is 112.5 per cent more than the same period last year. Loan-sharking and illegal confinement cases related to gaming have seen an uptrend since March this year, Mr. Wong told media. Most of the victims and suspects of these two types of crimes were nonresidents, while most of these crimes occurred in casinos, he added.
University of Macau committed to Portuguese Language Education The Dean of the Faculty of Arts and Humanities, Jin Hong Gang, says UM’s Elective Portuguese Classes will not be terminated in 2017/18, contrary to reports in the press
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he University of Macau (UM) is still committed to offering Portuguese elective classes despite news surfacing yesterday that
the institute would terminate these lessons by 2017. The clarification came yesterday night from the Dean of the Faculty of Arts and
Humanities, Jin Hong Gang. “The University of Macau is committed to strengthening Portuguese language education. But we are analysing a new scheme for the students to engage for longer and continuously with Portuguese classes”, Jin Hong Gang told Business Daily. “We’re studying alternatives because students study Portuguese for one semester but then in the next semester they stop. We want them to study Portuguese for longer”. Yesterday morning, the Portugueselanguage version of TDM Radio reported that Portuguese elective classes would finish in 2017/2018. The process would start during the spring semester as the sessions would decline from 18 in the first semester to 10 in the second. Then, in 2016/2017, the number of sessions would be cut
Despite gaming-related crimes rapidly increasing, the Secretary said it has yet to affect security outside casinos. There are also no signs indicating that the adjustment in the gaming industry has imposed a negative influence on Macau’s security, Mr. Wong stressed. The Secretary for Security also remarked on the theft of capital from local VIP gaming operator Dore Entertainment Co. Ltd. at the press briefing. Dore, which runs VIP operations in Wynn Macau casino, said in September that a former cage manager had allegedly used her authority to pool deposit capital offering high interest rates without the company’s knowledge. The reported capital theft from Dore in September is due to the “loopholes” of the accountancy and financial management of the VIP operator itself, the Secretary believes. He added that there is no “causal” or “direct” relationship between the gaming industry adjustment seen currently and the Dore case. While gaming-related crimes increased in the January-September period, the overall number of crimes in the period, some 10,347 in total, had decreased 2.2 per cent when compared to a year ago, according to the security official.
to 8, until finally in 2017/2018 the elective classes would finish. The justification for stopping investment in Portuguese classes was the need of the institution to avoid “wasting resources”, according to TDM Radio. The article contained declarations from the Head of the Portuguese Department of the University of Macau, Fernanda Gil Costa, stressing she was completely against this decision and that this was a consequence of the budget cuts in UM for 2016. “The decision to end these classes by 2017/18 was never taken. As for the reduction in the second semester of this year to 10 sessions of elective Portuguese courses, it was proposed by the Portuguese department. It was based on the trend of the previous years, when during the second semester there were always fewer students studying Portuguese”, Jin Hong Gang explained. The Dean of the Faculty of Arts and Humanities also said that UM will consider increasing Portuguese classes, offering it as a general education course and as a Master’s degree. “We’ve been investing in the Portuguese department; in fact they are one of the departments with a larger headcount as they have 28 full-time teachers plus part-time teachers”, Jin Hong Gang said. J.S.F.
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December 3, 2015
Macau
Polytex condemns protest by Pearl Horizon owners Describing the protest over the weekend as ‘uncivilised’, the developer perceives the company and unit owners of the residences should not be opposing each other Kam Leong
kamleong@macaubusinessdaily.com
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he developer of the Pearl Horizon project, Polytex Corporation Ltd., has denounced the protest staged by unit owners of the housing project over the weekend as ‘uncivilised’, claiming the off-plan buyers should be in the same boat with the company in order to resolve the project’s land-use term dispute. ‘The company condemns the uncivilised protest challenging the city’s rule of law, as well as the irrational acts of some individuals. Regarding some of the protestors entering the company and illegally sabotaging [property], the company has reported [the incident] to the police and will not tolerate [such behaviour],’ Polytex wrote in a statement in the Chinese language newspaper Macao Daily yesterday. On Saturday, several hundred Pearl Horizon unit owners and residents took to the streets to demand a meeting with Or Wai Sheun, president of Polytex’ s parent company Polytec Asset Holdings Ltd,. During the demonstration, some
protestors entered the company’s office, while some hundreds gathered in the podium garden of another of the Group’s housing projects, Villa de Mer in Areia Preta. The company also complained that the assembly in Villa de Mer was ‘unreasonable’ and ‘unscrupulous’, claiming the protest had led the residence to suffer at least MOP30,000 in losses as water in the swimming pool was polluted by the protestors. ‘We are in the same boat as the buyers. Hence, we should cooperate with each other to come up with proposals to resolve the issue instead of opposing each other and triggering conflicts,’ Polytex said in the statement, claiming it has offered enough channels for the unit owners to express their demands. The land-use term dispute for the construction site of the project erupted in September this year when the developer announced that its land-use term on the plot expires
We should co-operate with each other to come up with proposals to resolve the issue instead of opposing each other and triggering conflicts Polytex statement
on December 26 this year. But the city’s new Land Law, effective March 2014, does not allow an extension in land concession if developers fail
to finish their development on their granted plot. Estimating the project could only be completed as soon as 2018, the developer blamed the delayed works on the government, saying it is due to the authorities only issuing a construction permit for the project last year after the company submitted an environmental assessment report in 2011. Last month, Polytec Asset said in a filing with Hong Kong Stock Exchange that the company has applied for an extension of the expiry date of five years to December 25, 2020, adding it will ‘take necessary and appropriate action to protect the interests of Polytec Asset’ regarding the project. The government, which has established a cross-departmental working group on the issue, will release its legal analysis report and its stance by December 10, Chief Executive Fernando Chui Sai On told reporters in mid-November.
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December 3, 2015
Macau Nam Kwong Group to restructure Macau-based state-run conglomerate Nam Kwong (Group) Co. Ltd. is to conduct a restructure, according to the State-owned Assets Supervision and Administration Commission of the State Council of China. The Chinese authority released a statement on its official website on Tuesday stating that the State Council had approved the restructure of the local company although it did not reveal the details of the restructuring plan. The company is the city’s largest supplier of petroleum products, as well as a main supplier of fresh and frozen food. Having a total of 12 subsidiaries, it also engages in the hotel and management businesses, tourism and travel agency and logistic services. In the same statement, the Chinese authority announced that state-owned crude oil supplier Zhuhai Zhen Rong Company had also been approved for restructuring. The company was founded in 1994.
Business aircraft movements down 14 pct as at October
terms of aircraft movements, was in 2009. Business aircraft movements dropped 9.6 per cent year-on-year to 806 in that year.
Sky Shuttle offers helicopter sightseeing tours
Nevertheless, the city’s aviation authority director is still optimistic about the development of business aviation. The official also revealed that helicopter sightseeing tours have already been approved over the territory Kam Leong
kamleong@macaubusinessdaily.com
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otal business aircraft movements in the local airport, including those of private jets, registered a year-onyear decrease of 14.3 per cent for the first ten months of the year, according to official data from Macau
Civil Aviation Authority provided to Business Daily. As at the end of October, total business aircraft and private jet movements have totalled 1,516 this year, lagging some 690 movements behind last year’s 2,206. The number also represents the
first downturn that the sector has experienced since 2010, when it started to enjoy the following five years of consecutive increases. In a reply to legislator Chan Meng Kam’s enquiry into local aviation services, aviation authority president
Corporate Rotary Club celebrates day to remember with home-alone grannies The Rotary Club of Macau, together with its service-in-partners - Rotaract Club of Macau and Rotaract Club of University of Macau’s Students Union - hosted the 1st ‘Rotary Day with Grannies’ on Saturday 28th November. Over 80 home-alone grannies between the ages of 65 and 80 years old joined the event. They came from four different elderly centres; namely, Federação das Associações dos Operários de Macau, Associação Geral das Mulheres de Macau, União Geral das Associações dos Moradores de Macau and Caritas
Macau. Rotarian volunteers and Rotaractor volunteers gathered the grannies at their respective centres and headed to Coloane Village, where they had a walking tour in the old village. Then they attended the Lusofonia Festival before heading to Rua Cuhna street in Taipa Village. The last stop was the Panda restaurant where they had a taste of Portuguese and Macanese cuisine. Before heading back, Rotarian and Rotaractor volunteers played games and distributed goody bags containing essentials to the grannies.
Simon Chan Weng Hong also mentioned the downward trend of the city’s business aviation sector. However, he is still bullish on the development of the sector. “[We] believe that the future development of business aviation is still optimistic following the external economy improving, with high-end customers resuming coming to Macau,” the government official wrote. He added that airport operator Macau International Airport Company Ltd. (CAM) is constructing a new base for business jets in order to develop the market, as the current facilities for business aviation are full. The last decrease recorded for the business jet sector, in
Meanwhile, Mr. Chan revealed that the aivation authority had accepted a local helicopter operator’s application to provde sightseeing services over Macau for the current helicopter routes connecting Hong Kong and Shenzhen. The city’s current helicopter service is provided by Sky Shuttle of East Asia Airlines Ltd. The company, in an e-mail reply to Business Daily’s enquiry, said its aerial sightseeing tour of Macau is already available on charter services operated on the company’s two helicopter routes. According to the aviation authority head, the government department permits the helicopter operator to provide sightseeing services to passengers after its flights from Hong Kong or Shenzhen enter local territory. “In order to boost the development of local aerial sightseeing business, we hold an open attitude [to the sector],” Mr. Chan claimed. The official added that the development of low-altitude flying businesses with nearby cities will involve the management and use of airspace in the Pearl Delta Region.
Open bid deadline for on-call taxi service postponed
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he deadline for the casting of the bid for the ‘special taxi licence’ – referring to a licensed service in which taxis are summoned by only calls or mobile phone application – has been postponed to January 12 as the government has introduced changes to the requirement providing taxis that are accessible to the disabled. The postponement of the deadline was announced yesterday by the Transport Bureau via a notice in the Official Gazette. The Bureau will issue no more than 100 special taxi licences, for which the deadline for the open bid of the licence was originally set for December 14. The postponement was made as the government has introduced changes to the bidding rules, including the requirement that the bidding operator should provide no less than five larger taxis accessible for the disabled. The change in rules is based on the consideration of alleviating
the operation cost for the bidding operators in providing taxi services for the disabled, the Bureau explains. Initially the Bureau required bidding operators to provide no less than 10 larger taxis accessible for the disabled. The open bid for the special taxi licences, which was launched on October 14, has attracted little interest. So far, no bid has been cast for the special taxi licence, public broadcaster TDM has reported. S.L.
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December 3, 2015
Macau Macau ranked 24th in global index of ICT access
Kiang Wu Hospital Charitable Association’s funeral parlour reconstruction plan approved
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iang Wu Hospital Charitable Association has received approval to reconstruct its funeral parlour, a project that has to be completed within three years, a dispatch published in the Official Gazette announced yesterday. The reconstruction, which is to take place on a site occupying 4,932 square metres, will include a car park and two 5-storey buildings. One building is for the placing of cremated ashes and exhumed human remains, while another will house a
funeral services parlour, according to the dispatch. The land grantee of the site, Kiang Wu Hospital Charitable Association, has already paid the government a premium of nearly MOP3.13 million (US$392,097) for the reconstruction of the funeral parlour. The construction plan for the funeral parlour revamp was first submitted by the Association headed by legislator and constructor Fong Chi Keong – in December 2012.
The Kiang Wu funeral parlour, situated opposite the Canidrome on Macau Peninsula, is currently operated by ENZE Funeral Services Ltd. as authorised by the charity association. The company told media in May that the reconstruction of the parlour would begin by the end of this year and involve a cost of MOP200 million. Funeral services in the parlour will remain uninterrupted during reconstruction, the company said before. S.L.
Macau is ranked 24 of 167 countries in the ICT Development Index by the International Telecommunication Union this year. The index measures the level of access, use and skills of information, communication and technology of a country or region. The Special Administrative Region scored 7.73 this year vis-a-vis 7.38 in its 2010 ranking, despite dropping from 14th. Meanwhile, Hong Kong occupies 9thplace in the index, scoring 8.52, while Mainland China is ranked 82nd. South Korea is ranked first, followed by Denmark and Iceland.
18 infrastructures to cost at least MOP31 bln The government told the second standing committee of the Legislative Assembly yesterday that budgets for the city’s 18 infrastructure projects between 2016 and 2027 total some MOP31 billion (US$ 3.9 billion). Of the total, the budget for the light rapid transit (LRT) reaches MOP3.5 billion. However, the amount is only for all design works and construction of tenders opened, but does not include construction costs for works that bids have not yet been opened for. Meanwhile, the budget for the Islands District Medical Complex between 2016 and 2020 is MOP7.4 billion, while that of the new prison is MOP1.9 billion to 2019.
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December 3, 2015
Greater China
Past investments offer what-not-to-do gui
With use of China’s freshly endorsed reserve currency on the rise, preventing additional s
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s a globally focused China embarks on plans to spend US$1 trillion abroad in the next five years, reviews show the nation racked up about a quarter of that amount in soured foreign investments in the past decade. Overseas direct investments (ODI) that ran into trouble from 2005 to 2014 totalled US$246 billion, with energy and mining making up more than 60 percent by value, according to government officials familiar with the matter. Obstacles included foreign government objections, natural disasters, inability to generate profit and other factors, said the officials, who asked not to be identified because the information isn’t public. A separate private tally of 161 “troubled projects” amounts to US$260.8 billion since 2005. Either measure suggests more than one in every three dollars China invested or planned to invest abroad over the past decade turned sour. The nation spent US$631 billion on overseas deals from 2005 through 2014, National Bureau of Statistics data show. Premier Li Keqiang said last week China expects to invest US$1 trillion over the next five years. With use of China’s freshly endorsed reserve currency on the rise, preventing additional setbacks will require discipline not shown in the past as government and private companies focused on adding strategically important commodity and energy assets.
“China has spent a lot of money over the past decade and not gotten very much for it,” said Derek Scissors, an economic policy fellow at the American Enterprise Institute in Washington who studies China’s overseas investments. “In that respect, China’s ODI can be considered a failure. But you have to walk before you can run.” China’s ODI rose to a record US$123 billion in 2014, exceeding the US$120 billion of foreign direct investments in the country for the first time, NBS data show.
Global focus
China’s international investment and trade might is swelling along with its economy’s size. The yuan on Monday won International Monetary Fund backing for reserve-currency status, the US$100 billion Asian Infrastructure Investment Bank is taking shape in Beijing, and President Xi Jinping’s “One Belt, One Road” initiative aims to weave Asia together with new and improved ports and rails from Jakarta to Nairobi to Rotterdam. The National Development and Reform Commission, the government planning agency, didn’t respond to a faxed request for comment on the soured investments. China is still relatively inexperienced with overseas transactions, which began in earnest about a decade ago. Many foreign projects so far were
Premier Li Keqiang said last week China expects to invest US$1 trillion over the next five years
made less as vehicles for financial returns and more as a way to secure supplies of essential commodities such as oil and gas or to help transfer
Vice Finance Minister says reform to go on despite yuan blessing IMF staff pointed to gaps between onshore and offshore exchange rates and warned future deviations could pose challenges for IMF members
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hina will not stop financial sector reforms after an International Monetary Fund decision to add the yuan currency to the fund's benchmark currency basket, a senior Chinese policymaker said. "The yuan joining SDR does not mean (the) end of reform of the financial sector in China," China's Vice Finance Minister Zhu Guangyao (pictured) said at the Peterson Institute for International Economics.
But he made it clear Beijing was in no rush to allow the yuan to float freely, as China tried to change from an investment-driven model of economic growth to one linked more closely to innovation. Zhu also said that he hoped the currency would one day fully reflect market values. IMF policymakers stressed at Monday's SDR discussion the need for China to continue and deepen reforms, and to tackle any operational issues
which might inhibit IMF members from exchanging renminbi for other currencies, the IMF said. IMF staff pointed to gaps between onshore and offshore exchange rates and warned future deviations could pose challenges for IMF members, who may receive some disbursements in RMB once the decision takes effect. The staff outlined increasing use of the yuan, which had to meet the test of being widely used to make international payments and traded broadly in foreign exchange markets. A survey showed members of the IMF reported holding US$70 billion in renminbi-denominated assets in 2014, or 1.1 percent of official foreign asset holdings. Data suggested that daily average RMB turnover was roughly US$250 billion in six regional trading centres, behind the four other SDR currencies as well as the Australian dollar, Canadian dollar and Swiss franc, the report said. Data through April showed turnover in London rose 80 percent over two years, while turnover in Canada - home to one of only two RMB clearing and settlement centres in the Americas - was up more than 400 percent at 0.2 billion. Reuters
new technologies into the domestic economy. Scissors, who has maintained a database of China’s overseas
Business Daily | 9
December 3, 2015
Greater China
ide for new push
Harsher punishment for patent violations
setbacks will require discipline not shown in the past
KEY POINTS China’s yuan to join Special Drawing Rights basket Yuan to enter in October 2016 with 10.92 pct share Review cuts euro share, adds weight to financial flows IMF’s Lagarde, China central bank say reforms to continue
delaying the start of work on a US$50 billion canal across Nicaragua until late next year. The company gave no reason for the delay, according to an Associated Press report. A smaller area of investment with a high failure rate is technology, largely reflecting acquisitions blocked by the U.S. on national security grounds, according to Scissors. Only 30 percent of China’s overseas investments are successful or profitable and 70 percent don’t make money, Jin Liqun, then-chairman of China International Capital Corp., said in a 2013 speech, according to state media. Jin is now president-designate of the AIIB.
Digestion problems failed in whole or in part because of serious mistakes or because they hit non-commercial barriers. By value, energy-related investments have run into the most turbulence while metals deals performed the worst.
Boom, bust
investments since 2005, lists 161 “troubled projects” that involve total investment of US$260.8 billion. He says his definition includes those that
“A lot of it is related to the cycle and the boom and bust in those different sectors,” said Dali Yang, a University of Chicago professor of political science and author of “Remaking the Chinese Leviathan: Market Transition and the Politics of Governance in China.” In the latest sign of China’s troubles with overseas investment, China’s HKND Co. said last week it’s
Because the bulk of China’s outbound investment has taken place over the past three to five years, it’s still too early to evaluate performance, says Daniel Rosen, a partner at Rhodium Group LLC, a New Yorkbased economic-research firm that specializes in China. “The first several years after a major new investment are generally spent digesting it, and should not be expected to show long-term average returns yet,” Rosen said. In the wake of the IMF’s decision to include the renminbi in its Special Drawing Right basket, HSBC Holdings Plc economists expect China will further liberalize access to its asset markets and for two-way capital flows to increase. Bloomberg News
Patent infringement may soon lead to fines of up to 5 million yuan (US$781,760), according to a draft amendment released yesterday. The draft revision of the Patent Law was published by the Legislative Affairs Office of the State Council to seek public opinion. The current law stipulates that compensation amounts must be decided based on actual losses by the obligee or gains by the infringer. The new draft allows for compensation of up to three times the losses or gains. Under the current law, a plaintiff can claim compensation ranging from 10,000 to 1 million yuan if losses of the oblige cannot be confirmed. The draft raises the amounts to 5 million yuan.
Orient Securities adds Goldman, Nomura as sponsors Chinese brokerage Orient Securities Co, which has an investment banking joint venture with a unit of Citigroup Inc in China, has added two banks as sponsors of a planned listing in Hong Kong in 2016, IFR reported yesterday, citing people familiar with the plans. Goldman Sachs and Nomura were added to help manage the offering, estimated at more than US$3 billion, added IFR, a Thomson Reuters publication. IFR reported in August Citigroup had already been picked as a sponsor. The Chinese brokerage went public in Shanghai in March, raising about US$1.6 billion in its initial public offering. The stock has more than doubled since the IPO.
10 | Business Daily
December 3, 2015
Greater China
Beijing removes bond issuance limits for some companies The new reforms come as Chinese authorities seek to cut bureaucratic processes Lu Jianxin and Pete Sweeney
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hina’s top economic planning agency has removed limits on the number of onshore bonds local companies can issue per year as part of wider moves to cut red tape in the country’s corporate bond market. The National Development and Reform Commission’s (NDRC) new streamlined regulations announced Wednesday will apply to
issuers of corporate debt rated AA and above. Previously, the NDRC set annual limits on the number of bonds corporates in specific regions and industries can issue. Some analysts believe the steps are designed to improve declining asset quality as a more liquid and longer-dated bond market will help corporates better manage borrowings and
banks better manage nonperforming loans. “Companies will issue bonds with a maturity far down the road and use the proceeds to repay bank debts due and past due,” said Ted D.E. Osborn, Hong Kong-based partner at PricewaterhouseCoopers. “The key will be the take up of the bond issuances and whether they are re-financed down the road.”
Also announced yesterday were new rules that allow up to 40 percent of bond issue proceeds to be used to pay off bank loans and supplement operating capital. However, under new rules announced by the NDRC earlier this week, issuers will not be able to reinvest proceeds from bonds into “high-risk areas” such as stocks. Additionally, the new guidelines encourage insurers and reinsurers to develop protection products, such as default swaps and credit insurance, to divert risk. The agency did not elaborate on any proposals however, historically, the development of innovative credit protection products has been subject to restrictions, including complicated riskcontrol procedures.
Agency turf battles
The new reforms come as Chinese authorities seek to cut bureaucratic processes in the country’s highly fragmented bond market. In China, issuers are governed by three different regulators depending on their ownership structure and on where the bonds are traded. “The guidelines are issued to promote the reform and
transition from a bond issue approval system to registration mechanisms,” the NDRC said in a statement posted on its website. Under existing frameworks, the NDRC approves applications from non-listed and non-financial firms to issue “enterprise bonds” of one year and above. The China Securities Regulatory Commission (CSRC) retains authority to approve or deny plans by listed firms to issue “company bonds.” And the People’s Bank of China manages the “financing bills” market, a platform used by prequalified institutions that can freely issue instruments with tenors mostly between one- and seven-years without further approval. The NDRC and CSRC have repeatedly said they are moving towards free floatation platforms in which firms only need to register with the exchanges to issue bonds without going through prolonged approval processes. However, while Beijing intends to streamline rules, bureaucratic turf battles have delayed the process and there have few signs of an imminent agency merger. Reuters
Finance Minister to broaden local debt swap program limit When the finance ministry unveiled the debt-swap program in March, it said local governments would be allowed to swap as much as 1 trillion yuan of debt
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hina plans to expand the size of its program for addressing high-cost local government debt to about 15 trillion yuan, Finance Minister Lou Jiwei told a closed-door meeting last month, according to a person who attended the gathering. The initiative to swap high-yielding local debt into cheaper municipal bonds is set to run through the end of 2017, Lou said, according to the person, who asked not to be identified because the remarks weren’t public. Officials were previously reported to have approved about 4 trillion yuan for this year. Expanding the effort would help buttress the finances of
local governments that are key to implementing infrastructure projects needed to fulfil the leadership’s goals for economic growth. The total cited through 2017 would cover more than half of the 24 trillion yuan of debt local authorities had accumulated as of the end of 2014, according to state news agency Xinhua. “This is another effort to stabilize economic expansion,” said Zheng Lingyi, a Beijing-based bond analyst at China Securities Co. The plan would indicate that local government finances are “under heavy pressure,” Zheng also said. Caixin magazine reported Tuesday that Lou’s finance ministry plans to
exchange 14.7 trillion yuan of local government debt over three years. The finance ministry didn’t immediately respond yesterday to a faxed request for comment. When the finance ministry unveiled the debt-swap program in March, it said local governments would be allowed to swap as much as 1 trillion yuan of debt. That quota has since been expanded several times, and the government planned to raise it to as much as 4 trillion yuan for 2015 alone, people familiar with the matter said last month. In August, Lou said the debt- swap program would take about three years to complete.
“While the increased supply of local government bonds will add pressure on bond yields, this would also help alleviate the debt burden for the local governments,” Zhou Hao, a senior economist at Commerzbank AG in Singapore, wrote of the Caixin report. “For local governments, the fiscal revenue will be still under pressure in the coming year.” Of local governments’ 24 trillion yuan in debt, 15.4 trillion yuan is debt they have to repay, while the other 8.6 trillion yuan represents contingent liabilities, according to Xinhua. Bloomberg News
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Asia
Australia’s economy gathers pace on export boost While the biggest drag is from mining investment which is in full retreat Wayne Cole
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ustralia’s economy gathered pace last quarter as a surge in exports and solid consumer spending offset a heavy drag from slumping business investment, adding to the case against another cut in interest rates. The local dollar edged higher after gross domestic product (GDP) expanded by 0.9 percent in the third quarter, from the previous quarter when it rose just 0.3 percent. The value of all goods and services was up 2.5 percent from a year earlier, topping forecasts of 2.4 percent and ahead of that poster child of economic recovery - the United States. “This is not a bad outcome,” said Reserve Bank of Australia (RBA) Governor Glenn Stevens, who happened to be speaking in Perth when the data was released. “It’s a little above our own forecasts.” The central bank again left rates at 2 percent at its December policy meeting this week, citing signs activity was picking up, helped by past cuts and a low local currency. Stevens reiterated that there was room to ease more if needed, but emphasised that monetary policy could only do so much. Interbank futures currently show only a onein-five chance of a cut when the RBA next meets in early February. “The latest result will certainly help to boost confidence among
KEY POINTS Q3 GDP rises 0.9 pct q/q, 2.5 pct y/y to pip forecasts Net exports, consumer spending lead the recovery Business and public investment the major drags
households and the business sector,” said Craig James, chief economist at CommSec. “Inflation is under control; interest rates are at historic lows; household spending is lifting; and home construction and exports are leading the way forward.”
Slower speed limit
Overall, the Australian Bureau of Statistics reported the value of goods and services produced was worth A$1.6 trillion (US$1.25 trillion) in current dollars, or around A$68,000 for each of its 23.8 million residents. While Australia has not suffered a full-blown recession since 1991, it has been running below potential for some years.
The Australian Bureau of Statistics reported the value of goods and services produced was worth A$1.6 trillion
The Liberal National government recently acknowledged the economy’s speed limit might now be nearer 2.75 percent than the 3.0-3.25 percent previously considered normal. The biggest drag is from mining investment which is in full retreat after a decade of madcap expansion. Business spending took 0.6 percentage points out of GDP growth, the fifth straight quarter of falls. Neither was the government any help, as a pullback in its investment shaved 0.4 percentage points from growth. Yet the hundreds of billions showered on mining is producing a massive increase in resource exports, much of it to China despite all the talk of slowdown there.
As a result, net exports added a huge 1.5 percentage points to growth in the quarter for the biggest gain since early 2009. Consumer spending added another 0.4 percentage points led by purchases of cars, clothing and telecoms. Households are still saving a high 9 percent of their disposable income, giving them the means to keep spending even in the face of subdued wages growth. There was scant sign of inflation in the report and a key measure of productivity rose strongly in the quarter to be up a healthy 2.0 percent for the year, a sign corporate Australia was becoming more efficient. Reuters
Thai PM orders improvements in aviation standards South Korea, Japan and China had previously stopped Thai-based airlines from flying charters and new routes over safety worries Pracha Hariraksapitak
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hai Prime Minister Prayuth Chan-ocha yesterday ordered officials to improve aviation safety standards after the U.S. Federal Aviation Administration (FAA) downgraded Thailand’s safety ratings. Shares in Thai airlines fell yesterday after the FAA said Thailand had failed to tackle shortcomings found in an audit this year in commercial aviation standards. The lower safety rating blocks the airlines from launching or expanding in the United States and may tarnish the image of the country’s thriving tourist sector. “I have ordered them (officials) to resolve the issue,” Prayuth told reporters, without elaborating on what would be done. The FAA cut Thailand’s Department of Civil Aviation (DCA) to category 2 from 1
for failing to comply with FAA standards. It did not detail the failures but said the rating meant the DCA was “deficient in one or more areas, such as technical expertise, trained personnel, record-keeping or inspection procedures”. None of the kingdom’s airlines currently fly directly to the United States so the lower rating will have little immediate impact on their operations. “The financial impact of the FAA downgrade is small,” Deputy Prime Minister Somkid Jatusripitak said. “But there is an impact in terms of sentiment. We do need to meet international standards.” Thai Airways and Bangkok Airways said their businesses would not be affected by the FAA downgrade because they did not fly to the United States.
Patee Sarasin, chairman of low-cost carrier Nok Airlines, said on Tuesday the FAA decision would hurt the industry’s reputation and may lead to other countries limiting flights by Thai operators. Nok shares were flat on Wednesday. South Korea, Japan and China had previously stopped
Bangkok International Airport
Thai-based airlines from flying charters and new routes over safety worries raised in another international audit. Those restrictions have since been relaxed. The Montreal-based International Civil Aviation Authority, a division of the United Nations, downgraded
Thailand in June after finding a shortage of technical officers and certification problems in transporting hazardous goods. The European Aviation Safety Agency is due to announce the results later in December of its own audit. Reuters
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Asia
Thai central bank governor says economy needs “overhaul” Public spending expected to fuel growth next year Kitiphong Thaichareon and Pairat Temphairojana
KEY POINTS Sees inflation positive early 2016, no price stability problem Most economists expect policy rate to stay at 1.50 pct for now Says economy needs “overhaul” to enhance competitiveness Finmin says GDP growth could reach 3 pct this year
Exports and domestic demand still soft
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hai consumer prices are expected to turn positive early next year but inflationary pressure will still be subdued, providing leeway for monetary policy to stay accommodative, the central bank governor said yesterday. Southeast Asia’s second-largest economy has yet to regain momentum after the army seized power to end months of political unrest on May
22, 2014, with exports and domestic demand still soft. Growth last year was just 0.9 percent. The Bank of Thailand (BOT) will ensure that “cost of funds” is accommodative to the on-going recovery, Governor Veerathai Santiprabhob told delegates at a financial conference. He said the country had no problem with price stability at the moment
“Although inflation will be positive early next year, overall inflationary pressure is still low,” he told reporters on the side-lines of the conference. Thailand’s annual headline consumer prices slipped for an 11th consecutive month in November, driven by lower oil prices.
The BOT expects annual headline consumer prices to rise 1.2 percent for full-year 2016 after a forecast 0.9 percent fall this year. The central bank has left its policy rate steady at 1.50 percent - near a record low of 1.25 percent - since two surprise cuts in March and April. It next reviews policy on December 16, and most economists expect no change for now to support growth. The BOT forecast economic growth of 2.7 percent this year and 3.7 percent next year. But Deputy Governor Paiboon Kittisrikangwan recently said those estimates might be cut again due to higher risks. It will give new forecasts on December 25. Finance Minister Apisak Tantivorawong, however, said yesterday the economy could still grow 3 percent this year, adding the junta’s recent stimulus measures were bearing fruit. Stronger growth was expected next year with the help of public spending, investment and tourism, but structural problems still weigh on long-term growth, Veerathai said. “The recovery of the export sector will continue to be impeded by a shift in the global trade structure,” he said, citing some products were facing a decline in competitiveness and others were not keeping up with technology trends. The private sector needs to invest in new production technology, and improve product quality in response to changes in global demand and consumer preferences, he said. “The Thai economy is like a car whose engine is in need of an overhaul. We need structural adjustments in growth drivers to enhance our competitiveness and sustainable economic growth.” Reuters
Japanese central banker says ready to ease if slowdown hurts inflation Leika Kihara
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he Bank of Japan (BOJ) is prepared to ease monetary policy again if further deterioration in emerging economies hurts a broad uptrend in Japanese inflation, Deputy Governor Kikuo Iwata said yesterday. Iwata voiced confidence that Japan’s economy is on track to achieve the central bank’s 2 percent inflation target and blamed recent declines in consumer prices largely on slumping energy costs. A tightening job market will push up wages and underpin household spending, while companies are seen using their record
corporate profits on capital expenditure, he said. But the former academic warned that there were “strong downside risks” on the outlook for exports and output, given slowing growth and excess slack among emerging economies. “The most significant risk at the moment is the possibility that a further slowdown in emerging economies ... will exert negative effects on Japan’s economy and weigh on the underlying trend in inflation,” Iwata said in a speech to business leaders in Okayama, western Japan. “If such risks materialise and threaten the underlying
trend in inflation, the BOJ will adjust policy without hesitation.” Iwata said the BOJ can keep policy unchanged for now since the chance of such risks heightening sharply was low in the near future. While oil price declines will weigh on inflation in the short-term, they will help accelerate inflation in the long run by boosting economic growth for a country such as Japan that relies heavily on energy imports, he said. “It’s a shared understanding among major central banks to accept a delay in achieving their price targets if it is due to oil price fluctuations,” Iwata
told a news conference later in the day. The BOJ has kept monetary policy steady since expanding its massive stimulus programme in October last year, even as the economy relapsed into recession and slumping energy costs push inflation further away from its 2 percent target. Iwata, an architect of the current stimulus programme targeting base money, has been among those in the board who share Governor Haruhiko Kuroda’s optimism on the prospects for hitting 2 percent inflation. “I expect to see clearer signs of a positive cycle - in
which increases in capital expenditure and consumer spending narrow the output gap and gradually push up inflation - emerge ahead,” Iwata said. The BOJ has pushed back the timing for hitting its price target and now expects inflation to hit 2 percent by around early 2017. Many analysts believe inflation won’t accelerate so quickly given tame wage growth. Some see the possibility of further monetary easing as early as January, when the BOJ next reviews its quarterly growth and price forecasts. Reuters
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Asia Philippine inflation seen picking up Philippine inflation likely quickened for the first time in nine months in November, a Reuters poll showed, due to increases in the prices of fuel and select food items and as base effects waned. Annual inflation may have risen 0.7 percent in November from a year earlier, based on the median forecast of 11 economists in the poll, suggesting inflation may have bottomed out the previous month. The forecast falls within the central bank’s 0.4-1.2 percent forecast for the month. Inflation in October was at a record low of 0.4 percent.
Indonesia raises US$3.5 bln in global bonds Government raises US$3.5 billion in its second issuance of global bonds this year which it will use as pre-funding for the 2016 State Budget, the finance ministry said yesterday. The yields were at 4.750 percent and 5.950 percent for the 10-year notes and 30-year notes, respectively. Those are higher than the yields for January’s issuance, when the government raised US$4 billion, priced at 4.200 percent for 10-year notes and 5.200 percent for 30-year notes.
India trails Beijing in race for reserve currency status However, China’s economy is more than four-and-a-half times larger than India’s
South Korea’s current account surplus narrows
Clara Ferreira-Marques
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hina’s accession to the International Monetary Fund’s elite has left behind India, whose cautious approach to liberalisation means the rupee is unlikely to be a viable candidate for reserve currency status for at least a decade. China has campaigned hard for inclusion in the benchmark currency basket, and the IMF’s announcement on Monday that the yuan had been added was recognition of its global power status. Beijing has introduced a flurry reforms to ensure the yuan was considered “freely usable” in IMF parlance, meaning widely used in international transactions and commonly traded. India’s nationalist government also harbours ambitions to increase the country’s clout on the international stage and to extend the reach of its currency, freeing up investment and trade. After all, in 1980, India was an economy roughly the same size as China. Now China is more than fourand-a-half times larger. But concerns over broader economic stability in India mean there is little appetite for “big bang” currency reforms, even among top central bank officials who have argued for full convertibility over time, like governor Raghuram Rajan. That means India could, by some estimates, be over a decade away from following China. “Our estimates suggest that India’s GDP will still only be around $6 trillion in 2027, i.e. still not as big as China today, and by then world GDP will be still larger,” said Charles Robertson, global chief economist at Renaissance Capital.
“So unless politics plays a role, we doubt India’s rupee will be a global reserve currency before 2030.”
No “big bang”
Rajan, answering questions on the IMF’s yuan move, said on Tuesday that India was moving in the right direction. “We are steadily moving towards being a much more open economy, while keeping some of the concerns about stability, making sure we have things broadly under control,” he said. He detailed steps taken by the Reserve Bank of India towards a freer rupee: allowing companies to more easily raise rupee debt offshore, with “masala bonds”, and allowing foreign investors to invest more in rupee debt onshore, for example. “All these (steps) are in the direction to broaden and open up a little more, but at the same time it is not a big bang, where we lose control,” he said. “It is a steady process.” By contrast, he observed that it was unclear whether China would continue to open up at the current pace. “Post getting in, pressure may not be as much as before going in,” he said in an interview with CNBC-TV18. Since India began opening up its economy in 1991, it has gone from a largely non-convertible, pegged currency to a regime that is effectively a managed float, meaning there is a currency market, but the RBI intervenes to contain volatility.
Slow and steady
Under Rajan, a former chief economist at the IMF, the central bank has steadily acted to open up Indian markets. On Monday, it eased rules for offshore borrowing, allowing foreign insurers, pension funds and sovereign wealth funds to lend to Indian corporates more easily, and for longer.
KEY POINTS Indian central bank takes gradual approach to liberalisation Rupee’s international usage is tiny China’s accession to IMF basket highlights its progress Indian economy less than a quarter the size of China’s “That is basically capital account liberalisation, which is being done in a prudent and pragmatic manner and becoming more rules-based,” said Rahul Bajoria, regional economist at Barclays. “That is a very good signal.” But with major structural reforms to push through to make India competitive on a global scale, analysts and economists said there was little expectation India could catch up quickly with over a decade of reform in China. “China started liberalising since 2005, so it has taken them about 1213 years,” said Bajoria, pointing to major market and currency reforms. “From that perspective we still have a long way to go.” According to payment services provider Swift, in September the yuan was fifth in the ranking of currencies used for international payments. The rupee is not ranked in the top 20, a list that ends with Hungary’s forint, the currency of a country with a population 1/125th the size of India’s. Reuters
South Korea’s current account surplus fell to a seasonally adjusted US$7.19 billion in October from a revised US$9.76 billion surplus in September as imports grew faster than exports, central bank data showed yesterday. Exports in October rose 1.6 percent from September to US$45.98 billion on a seasonally adjusted basis, while imports jumped 6.1 percent to US$35.92 billion, Bank of Korea data showed. October’s surplus was the smallest since May of this year, but South Korea’s current account has been in surplus every month since June 2011.
Heavy flooding causes chaos in southern India state The heaviest rainfall in over a century caused widespread flooding across the southern Indian state of Tamil Nadu, driving thousands of people from their homes, shutting down factories and paralysing the airport in the state capital Chennai. India’s fourth-largest city is a major auto manufacturing and IT outsourcing hub for companies including Ford Motor, BMW AG, Infosys, Tata Consultancy Services and Cognizant Technology Solutions Corp. Thousands of factories on the outskirts of the city were forced to close due to the deluge, which disrupted power supplies and swamped at least one runway at the international airport.
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International U.S. small businesses cut borrowing Small businesses cut borrowing in October, a sign that economic growth may weaken in coming months just as the Federal Reserve looks set to raise borrowing costs for the first time in nearly a decade. The Thomson Reuters/PayNet Small Business Lending Index dropped in October to 131.7 from a downwardly revised reading of 137.9 reading in September. October’s decline of 0.2 percent from a year earlier was the first yearon-year drop since March 2013. Small businesses “are pulling in their horns and they are hunkering down a little bit,” said Bill Phelan, President of PayNet.
World’s richest 10 percent produce 50% of CO2: report The report said that an average person among the richest one percent emits 175 times more carbon than his or her counterpart
Russia keeps oil production at record high Russia continued extracting oil at a post-Soviet record high of 10.78 million barrels per day (bpd) in November despite low oil prices, Energy Ministry data showed yesterday. The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to hold a policy-setting meeting on Friday amid a market glut that has seen crude prices fall to around US$45 per barrel from US$115 in June 2014. Non-member Russia has refused to send a delegation for usual consultations before the meeting as it is been sceptical about OPEC’s willingness to cut oil output in order to bolster prices.
Small euro zone firms fear lack of customers Small euro zone companies feel they have access to more credit than they need for the first time since 2009 as they struggle to find customers, a survey by the European Central Bank showed yesterday. Small-to-medium enterprises (SMEs) form the backbone of the euro zone’s economy and mainly rely on bank lending, which the ECB is trying to revive through a large scale asset-purchase programme and low interest rates. The bank is expected to ease its policy further today.
Imperial Bank customers to start getting money back Kenya’s central bank said on Wednesday almost 90 percent of depositors in Imperial Bank (IBL), which was taken into receivership in October because of fraud, would get their money back in full, with payments starting in a few weeks. The depositors will access their cash via KCB Group and Diamond Trust Bank after the state-owned receiver reached a deal with them. “This follows the failure of IBL’s shareholders to provide adequate assurances to implement a proposal that would enable the prompt reopening of IBL and resumption of normal activities for its customers,” central bank governor said.
VW, banks agree terms of bridging loan Volkswagen has reached an agreement with banks on the terms of a planned 20 billion-euro (US$21.22 billion) bridge loan to help it shoulder the costs of its emissions scandal, three people familiar with the matter said. Thirteen banks are offering credit portions of either 1.5 billion euros or 2.5 billion euros each, or a total of 29 billion euros, two of the people told Reuters, declining to be named because the matter is confidential. One of the people said credit portions will be assigned to banks on Friday.
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he richest 10 percent of people produce half of Earth’s climate-harming fossil-fuel emissions, while the poorest half contribute a mere 10 percent, British charity Oxfam said in a study released yesterday. Oxfam published the numbers as negotiators from 195 countries met in Paris to wrangle over a climate rescue pact. Disputes over how to share responsibility for curbing greenhousegas emissions and aiding climatevulnerable countries are among the thorniest and longest-running issues in the 25-year-old UN climate process.
“Rich, high emitters should be held accountable for their emissions, no matter where they live,” Oxfam climate policy head Tim Gore said in a statement. “But it’s easy to forget that rapidly developing economies are also home to the majority of the world’s very poorest people and while they have to do their fair share, it is rich countries that should still lead the way.” The report said that an average person among the richest one percent emits 175 times more carbon than his or her counterpart among the bottom 10 percent. Rich and developing nations remain deeply divided on the issue of
“differentiation” -- how to share out responsibility for curbing greenhouse gas emissions, which derive mainly from burning coal, oil and gas. Developing countries say the West has polluted for much longer and should shoulder a bigger obligation for cutting back. They also demand assurances of finance to help them shift to lesspolluting renewable energy, shore up defences against climate impacts such as sea level rise, droughts and super-storms, and to cover damage that cannot be avoided. “We hope advanced nations will assume ambitious targets and pursue them sincerely. It’s not just a question of historical responsibility -- they also have the most room to make the cuts and make the strongest impact,” Indian Prime Minister Narendra Modi told Monday’s opening of the summit by world leaders. Yet many rich nations, led by the United States, reject the idea of a “bifurcated” approach with obligations placed on one group of countries, and not the other. They point to the risk of carbon emissions -- as measured by volume, rather than per capita -- from emerging giants such as China and India. Oxfam said its analysis “helps dispel the myth that citizens in rapidly developing countries are somehow most to blame for climate change.” AFP
Euro zone core inflation fall bolsters ECB case for easing The ECB is widely expected to ease policy today with markets only guessing what measures it would take from a wide range of options on the table Francesco Guarascio and Balazs Koranyi
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uro zone core inflation unexpectedly slowed in November, offering yet another argument for the European Central Bank to ease policy today as price growth looks set to stay below its target for years to come. Headline inflation across the 19-member euro area held steady at an annualised 0.1 percent in November, below expectations for 0.2 percent and well short of the bank’s target of a rate just below 2 percent. Core inflation, which has come under closer scrutiny because it strips out the impact of the sharp oil fall in oil prices, meanwhile eased to 0.9 percent from an upwardly revised 1.0 percent, missing analyst expectations for 1.0 percent, data from Eurostat showed. “November’s weaker-thanexpected euro-zone consumer prices figures give a final green light for the ECB to both increase the pace of its
asset purchases and cut its deposit rate at tomorrow’s policy meeting,” Capital Economics economist Jonathan Loynes said. “The ECB is likely to remain nervous that a further prolonged period of below-target inflation will lead to a bigger drop in inflation expectations,” Loynes added. The euro weakened a third of a percent against the dollar on the fresh data, indicating renewed bets on easing. The weaker core figure provides important ammunition for proponents of easing after the ECB’s top hawks, including Bundesbank chief Jens Weidmann, argued the central bank should hold fire as headline data is distorted by oil prices while the underlying trend is healthier. “This time, it was not energy prices that kept inflation low but service prices,” Nordea analysts said. “As wages are the most important driver for service prices and energy costs
play a smaller role, these numbers will most likely strengthen worries in the ECB about too low inflation in the euro area.” Analysts expect the ECB to cut its deposit rate to -0.3 percent from -0.2 percent, extend its asset purchase programme and lift monthly purchases of mainly government bonds to 75 billion euros a month from 60 billion euros. But it could also opt for more unusual measures, like imposing a punitive deposit rate on banks parking too much cash with the ECB or expanding the asset purchases into new asset classes like corporate bonds and equities. The main factor that capped price increases was rising was energy costs, which were 7.3 percent lower this month than a year ago. Unprocessed food, which is also excluded from the core reading, was 2.6 percent more expensive. Reuters
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Opinion Business
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Leading reports from Asia’s best business newspapers
Swiss example may give ECB pause on negative rates James Saft
Reuters columnist
VIEtNAM NEWS Vietnamese retail revenue continued to rise during the first 11 months of this year, reaching VND2.95 quadrillion (US$134 billion), a year-on-year increase of 9.4 per cent. With price increases excluded, the rise was in fact only 8.3 per cent, according to the General Statistics Office (GSO). In the last 11 months, all four retail goods and services saw an increase over the same period last year. The retail sector taking the lead accounted for 76.2 per cent of the total retail sales, bringing in revenue of US$102 billion, or an increase of 10.7 per cent. It was followed by retail sales in accommodation, restaurant and catering services.
THE PHNOM PENH POST The government is reviewing a draft sub-decree that would see the creation of a onestop shop to handle smalland medium-enterprise (SME) registration aimed at encouraging more of them to join the formal sector and improving the quality of state support, an official said yesterday. “Sometimes SMEs don’t know where to register as there are 18 institutions involved,” said Heng Sokong, a spokesman for the Ministry of Industry and Handicraft. “When we have clear data [provided by their registration], we know their ability and capital, and then we can provide financial and technical assistance.”
BANGKOK POST The cabinet approved action plans for 20 big-ticket infrastructure projects worth a combined 1.79 trillion baht, part of the government’s urgent strategy to kick-start an ambitious development plan from 2015-22. The government hopes to start construction of the projects next year, helping to raise Thailand’s economic growth by 1% in 2016. The accelerated development plan will divide the 20 projects into two parts, with six projects already approved by the cabinet.
THE KOREA HERALD South Korea ranked last among members of the Organization for Economic Cooperation and Development in the use of renewable energy to power its economy in 2014, a report by an international energy agency showed yesterday. Asia’s fourth-largest economy got just 1.1 percent of its energy from renewable sources like solar, wind, geothermal, tidal and hydropower generation, according to the report by the International Energy Agency. The number placed the country last among the 34 developed market economies with high income, and it is way below the OECD average of 9.2 percent.
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witzerland’s experience of negative interest rates should give the European Central Bank pause. The ECB is widely expected to cut rates when it meets today, taking rates, already at -0.20 percent, another 10 or 20 basis points further into the negative and expanding or extending its campaign of asset purchases. While the threat of deflation in the euro zone is real, negative rates impose hard-to-mitigate costs, especially on the banking system. Like much medicine, low rates have perverse effects at extreme levels. Switzerland in January took rates to -0.75 percent, and on the evidence, there has been only partial pass-through of lower rates, particularly to mortgage borrowers. The thinking behind negative interest rates is based on the belief that as official rates fall, so will those in the market, making it cheaper and easier to buy, consume, build and invest. Yet negative interest rates punish the banking system, a particularly crucial and vulnerable part of the euro zone economy, and potentially undermine the expected impact of cheaper official money and create unwanted side-effects. “This is a case of basing policy on models which assume what they need to prove,” writes Eric Lonergan, a macro hedge fund manager and economist. “The initial findings suggest that we should indeed be very careful about expecting our models to work as assumed.” The interest rates on government bonds in Switzerland have plunged in reaction to official policy, with 10-year
Europe may eventually have a capital-driven economy over which ECB measures can exert more control. But its economy and banks are not there yet
bonds yielding a record low -0.41 percent. But there is a disconnect between securities markets, over which central banks have much control, and private lending, which still requires that banks can turn an acceptable profit in order to function. Andréa Maechler, a member of the governing board at the Swiss National Bank, noted in a Nov. 19 speech that long-term mortgage rates in Switzerland are actually higher than they were at the beginning of the year, before rates were cut. “This is because banks’ refinancing costs have not fallen to the same extent as money market interest rates,” Maechler said. “As a result, banks’ interest margins have come under pressure, and to partially offset this effect, banks have raised their mortgage interest rates.”
Who benefits? Negative rates do not, at least to judge by the markets’ reaction, make banks a better credit to those who provide them with capital. Or, at least we can say that the market view of the risk of lending to banks has not in Switzerland moved lower as briskly as have money markets. As it happens, higher mortgage interest rates were welcomed by the Swiss National Bank, which might reasonably have feared that negative rates might possibly inflate real estate prices in a dangerous or destabilizing way. Swiss corporate bonds also failed to keep pace with the move to lower yields seen in government bonds, perhaps because holders of corporate
debt have more choices, unlike so many holders of government bonds. This argues, if anything, for the potential of destabilizing market movement in negative interest rate regimes, as holders of debt rush toward anything with a positive yield, taking less care in the process. Reuters reported last week that the ECB is considering a two-tiered approach intended to mitigate the impact of a cut in rates on banks, effectively making it more expensive to hold larger amounts of cash on deposit with the central bank. That, the ECB may hope, will encourage banks to lend instead. Yet despite a lesser penalty rate already being in place, euro zone bank lending can hardly be called booming. Lending to households and companies are both at four-year highs, but we should remember that four years ago, things were not particularly great. The ECB could simply buy bank loans, particularly doubtful ones, as a means to get them off banks’ books and free up funds for further lending. Yet the signs are mixed that there would be strong take-up on lending, were it more available. Europe may eventually have a capital-driven economy over which ECB measures can exert more control. But its economy and banks are not there yet. None of this is to say that the ECB should sit on its hands, a former practice it has thankfully abandoned. As rates move further into negative territory, it is fair to expect volatile and unpredictable outcomes. Reuters
16 | Business Daily
December 3, 2015
Closing Mainland targets music industry output of US$47 bln by 2020
Peninsula Internacional junket company declared bankrupt
China aims to build up its music industry, targeting output of 300 billion yuan ($47 billion) by 2020, the state-owned Xinhua news agency reported yesterday. The goal is part of China’s latest Five-Year Plan, a blueprint for economic and social development between 2016 and 2020. The plan would include cultivating large scale music companies, establishing standards for the industry and encouraging the industry to expand abroad, the State Administration of Press, Publication, Radio, Film and Television told a forum in Beijing, according to the Xinhua report. The report did not give a figure for the current value of music industry output.
Junket company Peninsula Internacional Promotor de Jogo Sociedade Unipessoal Limitada has been declared bankrupt by the Primary Court of Macau, according to the territory’s Official Gazette. According to the announcement, the junket company was declared bankrupt following a complaint filed by Venetian Macau S.A., a Sands China company. During the first eleven months of the year, gaming revenues have declined 35.2 per cent year-on-year to MOP212.50 billion from MOP328.24 billion. Regarding VIP baccarat, revenues plunged 41 per cent year-on-year during the first nine months of the year to MOP98.23 billion from 166.47 billion.
President Xi in South Africa ahead of regional summit China became Africa’s largest trading partner in 2009, with volumes expected to exceed US$300 billion this year Xi said in a statement that the summit, which starts on Friday, would be “a milestone in advancing China-Africa relations across the board”. But Africa is already feeling the pinch, with Chinese investment falling by more than 40 percent in the first half of 2015, according to official data.
Exports squeezed
The President of the People’s Republic of China arrives at Waterkloof Air Force Base
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hinese President Xi Jinping arrived in South Africa yesterday ahead of a two-day summit with regional leaders as Africa seeks further massive investment despite the Asian giant’s economic slowdown.
A slew of deals are expected to be announced for power plants, infrastructure and agriculture projects, but analysts say Chinese largess across the continent has already been reined in this year.
U.S. third-quarter productivity revised higher, but trend weak
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China drove the commodity boom as it bought up oil, iron ore, uranium and copper around the world over the past decade, but its growth has dipped this year, triggering a sharp slump in prices.
China became Africa’s largest trading partner in 2009, with volumes expected to exceed US$300 billion this year. China emphasised it had delivered more than US$117 million of aid to affected areas during the Ebola crisis in West Africa, and also sent hundreds of medical workers to help. Among many African countries hit by the Chinese slowdown, Zambia exemplifies the impact of falling commodity prices. Its economy relies on exports of copper, which has fallen in price by 30 percent this year.
“We have to find other export products to China,” said Commerce Minister Margaret Mwanakatwe, who will attend the summit. “The price of copper going down has led to job losses in the mines and the kwacha (local currency) to depreciate (by 45 percent).” Zambian President Edgar Lungu last week ordered no new road projects to be started to save on spending. Nigeria, the continent’s largest economy, has been another major player in China’s recent involvement in Africa. At least 40 official development projects have been financed there by Beijing since 2004, including a US$2.5 billion loan for rail, power, and telecommunications projects. The Chinese have also provided military aid and equipment, and are building a new terminal at Abuja airport. “They’re not going to let up on their very well-flagged goal of being on the front foot across the continent,” said Ryan Wibberley, an emerging market equity dealer at Investec in Cape Town. Xi -- accompanied by his wife Peng Liyuan -- landed in South Africa after a brief visit to Zimbabwe, where Chinese projects have helped prop up an economy plunged into crisis under President Robert Mugabe’s rule. AFP
Beijing to cut power sector emissions by 60 pct by 2020
Hong Kong yuan interest rate at two-month high
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onfarm productivity grew at a faster pace than previously thought in the third quarter, but the underlying trend remained very
weak. The Labour Department said yesterday that productivity, which measures hourly output per worker, increased at a 2.2 percent annual rate and not the 1.6 percent pace it had reported last month. Productivity expanded at a 3.5 percent rate in the second quarter. The revision to third-quarter productivity was in line with economists’ expectations and reflected upward adjustments to the third-quarter gross domestic product estimate published last week. Productivity increased only 0.6 percent compared to the third quarter of 2014, underscoring the weakness in the trend. While that was marginally up from the 0.4 percent reported in November, it was the slowest rise in nearly a year. Economists blame softer productivity on lack of investment, which they say has led to an unprecedented decline in capital intensity. Economists say persistently tepid productivity could continue to limit wage growth even as the labour market approaches full employment.
hina will reduce emissions of major pollutants in the power sector by 60 percent by 2020, the cabinet announced yesterday, after world leaders met in Paris to address climate change. China will also reduce annual carbon dioxide emissions from coal-fired power generation by 180 million tonnes by 2020, the official People’s Daily website said. It did not give comparison figures or elaborate how it would achieve the result. China’s capital Beijing suffered choking pollution this week, triggering an “orange” alert, the second-highest level, closing highways, halting or suspending construction and prompting a warning to residents to stay indoors. The smog was caused by “unfavourable” weather, the Ministry of Environmental Protection said. Emissions in northern China soar over winter as urban heating systems are switched on and low wind speeds meant that polluted air does not get dispersed. The hazardous air, which cleared yesterday, underscores the challenge facing the government as it battles pollution caused by the coal-burning power industry and raises questions about its ability to clean up its economy.
Reuters
Reuters
he cost of borrowing yuan in Hong Kong rose to a two-month high as a suspension of cross-border financing and a Dim Sum sovereign bond sale reduced the availability of funds. The Hong Kong Interbank Offered Rate for overnight loans jumped 203 basis points to 7.10 percent, the highest level since Sept. 29, according to a Treasury Markets Association fixing. It rose 173 basis points last month. The People’s Bank of China was said to have asked some onshore banks to stop offering crossborder financing to offshore lenders last month and it also ordered a suspension of borrowing from the mainland via bond repurchases. The Ministry of Finance auctioned 14 billion yuan (US$2.2 billion) of government notes last week in Hong Kong. “The suspension of offshore borrowing from onshore and the government debt issuance last week are the main causes for the tightening market,” said Becky Liu, a Hong Kong-based senior rates strategist at Standard Chartered Plc. “Lenders in Hong Kong have been closing deals in the past couple of weeks and the impact of the bond auction is fading, so the liquidity stress will ease soon.” Bloomberg News