MOP 6.00 Closing editor: Joanne Kuai Year IV
Number 939 Friday December 11, 2015
Publisher: Paulo A. Azevedo
Union Gaming: Recovery not envisaged in near term Page 6
Central authorities plan to adopt U.S.style registration system for stocks Page 9
Secretary Rosario Lays Down The Law
No other options. In dealing with the Pearl Horizon land concession expiry. Secretary for Transport and Public Works Raimundo Arrais do Rosário insists his hands are tied by the new Land Law. Hence, the land in question must be taken back. Several legislators, however, have suggested reviewing and amending the law to better protect homeowners’ rights. The developer says it will sue the government, whom it blames for multiple delays. The validity of the concession expires on December 25 Page
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Expat expenses exploding
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Skyscraper debt Mainland real estate firms’ debt has jumped. Despite borrowing costs hitting historical lows. Regulators have changed their stance this year. From a tight regulation regime to an easier environment for developers to raise funds
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HSI - Movers December 10
Macau saw the largest ranking increase. On a list of the 20 most expensive cities for expats in Asia Pacific. Moving up to 13th place from 34th last year. China dominates the list, with Shanghai placed 1st, Beijing 2nd and Shenzhen 7th
Name
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What goes up must come down
Aviation
www.macaubusinessdaily.com
Chinese retail investors start to pay attention to foreign markets
Cross-Strait boom Macau and Taiwan have inked an agreement. To avoid double taxation on the regions’ aviation business. MacauTaiwan routes posted an 8 pct increase y-o-y in passenger volume. While airlines are planning to expand the market and increase flight frequency
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Macau ranks as second most expensive city in Asia for construction. And fifth in the world. High-end casino resorts are piling up costs. Which are expected to reduce significantly in 2017 upon completion. This, according to the International Construction Costs Index published this week by design and consultancy firm Arcadis
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%Day
Galaxy Entertainment
+1.53
CLP Holdings Ltd
+0.70
Power Assets Holdings
+0.57
Sands China Ltd
+0.38
China Mobile Ltd
+0.34
Tingyi Cayman Islands
-2.17
China Merchants Holdi
-2.43
CNOOC Ltd
-2.97
Lenovo Group Ltd
-3.37
China Overseas Land &
-3.70
Source: Bloomberg
I SSN 2226-8294
2015-12-11
2015-12-12
2015-12-13
15˚ 22˚
17˚ 22˚
18˚ 22˚
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December 11, 2015
Macau
Rosário: “No other options” for handling Pearl Horizon case The public works Secretary is adamant that the Pearl Horizon plot must be taken back but legislators disagree and even propose changes to the Land Law Stephanie Lai
sw.lai@macaubusinessdaily.com
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ecretary for Transport and Public Works Raimundo Arrais do Rosário said the government had no other recourse but to declare the land concession for the residential project Pearl Horizon invalid as the developer will have failed to complete land use stipulations before the deadline. “The biggest difference between the old version of the Land Law and the amended version [effective March 1, 2014] is that the new law applies to the old land concessions,” Mr Rosário said in the debate on the Policy Address yesterday, during which several legislators raised concerns about the Pearl Horizon case. The old land concessions that the Secretary referred to were those that were granted by the government prior to the implementation date of the amended Land Law. “There is only one way to do it: I’m following what the law requires. And I have no other choice,” Mr Rosário said of the Pearl Horizon case. “Legislator Angela Leong has asked whether there could be any flexibility in dealing with this case, to which I think the answer is no.”
Legal battle
The Macau Government is declaring the land concession for the Pearl Horizon site invalid on December 25 as the land use would have missed the deadline, Secretary for Administration and Justice Sonia Chan Hoi Fan announced on Monday. The plot was granted to the developer on temporary concession terms, with its validity expiring on December 25 this year; a temporary concession is not renewable, the Land Law states. Pearl Horizon, occupying 68,001 square metres, is designed to house 18
towers of 5,000-plus residential units. The government said on Monday that over 3,000 units of the project had been sold off-plan. The developer of the residential project - Polytex Corporation Ltd. now faced with the imminent expiry of the land concession, hasa expressed regret over the government’s action of declaring the concession invalid and said it would sue the government for its alleged delay in issuing the requisite permits for the development of the project. In a meeting with several Pearl Horizon buyers on Tuesday, Polytex said that they would handle the compensation issues for buyers in accordance with the pre-sales contract if the company loses its lawsuit against the government.
Call for changes in law
Having only obtained the approval for the construction plan of the project in August 2014, the developer has requested an extension of the land use period of five years to December 25, 2020; the request has been rejected by the government. “Article 48 [of the Land Law] states that temporary concessions cannot be renewed. And when I read it, I cannot see there could be any other way to interpret this law,” Mr. Rosário told legislators, “Even with the Pearl Horizon case, when its 25 years of concession term is over, it is over.” Several legislators, including government appointed ones and former legislator Ung Choi Kun, have questioned the government’s stance in dealing with the Pearl Horizon land concession. Some legislators have even suggested reviewing and amending the Land Law.
“Article 48 is now hurting the rights of the [Pearl Horizon] property owners, which is what I hadn’t thought of when we were deliberating upon the Land Law,” said indirectly elected legislator and lawyer Leonel Alberto Alves. Mr. Alves remarked that the Land Law as practised now has “closed the door” to resolving the dilemma of the government having to take
Zhuhai to manage most of artificial island for Bridge Zhuhai will manage 107 hectares of the Zhuhai-Macau frontier port artificial island where the superbridge project will land, while Macau will manage 72 hectares of the island, the Secretary told the Assembly. The Secretary complained that the artificial island project, on which Macau is building its own checkpoint and car park, is another “headache” for his team with little progress made. Nevertheless, the Secretary pledged that the checkpoint facilities and car park would be ready once the bridge construction is completed. Construction budget for Pac On Terminal on leash The construction budget for the new Pac On Terminal in Taipa is to be controlled at below MOP3.8 billion, the head of the Infrastructure Development Office, Mr. Chau Vai Man, told the Assembly. This updated price tag quoted by the Office has ballooned compared to the total construction budget of MOP3.28 billion estimated in 2013. Mr Chau said the increase was due to the expansion of the
back the land plot whose concession term is about to end, even though the development is nearing completion. “I eventually voted yes to the bill [the Land Law] because of the principle that it would not mean we will see any properties confiscated,” Mr. Alves said. “As Mr. Vong Hin Fai [an appointed legislator] said, we cannot only look at the [Pearl Horizon] issue with only Article No.48.”
checkpoint building and changes made to the illumination and fire protection system for the helicopter pad in the terminal. Construction of the terminal, located near the airport, has been seriously delayed for over five years and is now expected to be operational by mid-2016. No plots available for swap The government is not handling any clearing of the debts related to land swap deals at the moment, as there are no land plots available, the Secretary told the Assembly. The Land, Public Works and Transport Bureau said in July that it had yet to conduct land swaps for six land parcels that the government had acquired from land grantees for public projects as well as private projects, including the plots granted to Wynn Macau and MGM China on the Macau Peninsula and Galaxy Macau in Cotai. Speaking to legislators yesterday, the Secretary said the government has not granted any land plots from the new urban zones being reclaimed as the source for paying the land swap debt.
Business Daily | 3
December 11, 2015
Macau
SAR signs double aviation taxation avoidance agreement with Taiwan The aviation market of the two regions has grown by 8 per cent this year in terms of passenger volume. TransAsia Airways told Business Daily that it has also benefited from the growth of the Macau-Taiwan route
“From 2013 to 2015, we also saw our passenger volume for the MacauTaiwan market increase by some 20 per cent,” the general manager of the local branch of TransAsia Airways, Kelvin Chen, told Business Daily at the event yesterday. “Long term, the [Macau-Taiwan aviation] market certainly has room to grow. After all, the consumer price index of Taiwan remains lower than that of Macau. Macau people thus like going to Taiwan for shopping and eating. Taiwanese, meanwhile, also like bringing their families to enjoy the luxury hotels in Macau. As such, the market will continue to climb,” Mr. Chen believes.
Increasing demand
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he local government signed an agreement with Taiwan yesterday to avoid double taxation on the cities’ aviation business. Representatives of the two governments believe the agreement will boost market growth for the Macau-Taiwan flight routes. The agreement - signed yesterday in Macau Cultural Centre - was inked by Nadia Leong Kit Chi, head of the Macau Economic and Cultural Office in Taiwan, and Lu Changshui, director general of the Taipei Economic and Cultural Office. “The new agreement, in principle, is effective in perpetuity. We believe the agreement will benefit the tourism industry, aviation businesses and overall economies of Macau and Taiwan,” Ding Pi Lien, the deputy director-general of the department of International Fiscal Affairs of the Taiwanese Ministry of Finance, remarked to
reporters on the sidelines of the signing ceremony. Meanwhile, the city’s Financial Services Bureau (DSF) director, Iong Kong Leong, told reporters yesterday that he agrees that the new agreement would boost the growth of aviation in the two markets.
Now permanent
In fact, the aviation business of the two regions had been guaranteed by a memorandum of the two governments on double aviation taxation avoidance in recent years. The newly signed agreement will replace the MOU of the two regions, which will be permanent and doesn’t need to be renewed. Last year, the two parties signed an ‘open skies’ agreement lifting all restrictions on flights between Macau and Taiwanese destinations, namely Taipei and Kaohsiung. In addition, it enables operators to provide charter flights for the two regions.
According to Yeh Kai-ping, the director general of the Department of Hong Kong & Macau Affairs of Taiwan, the flights connecting Taiwan and Macau have increased to 93 flights per week from 75 following the open skies agreement. Currently, four airlines connect the two regions; namely, Eva Air, TigerAir, Air Macau and TransAsia Airways.
Market expanding
For the first eleven months of this year, the total passenger volume of Macau-Taiwan flights reached 1.44 million, which is up 8.1 per cent year-on-year, according to the official information provided by local airport operator Macau International Airport Co. Ltd. (CAM). Particularly, in November alone, the passenger number for the Taiwan market posted a year-on-year growth of 35 per cent at the local airport.
According to the general manager, the airline is planning to resume its frequency for Macau-Taipei routes to three daily flights next year. But its Macau-Kaohsiung route will be reduced to two from three flights per day, while frequency for the Macau-Taichung route will remain unchanged. Another representative of an airline operating in the market, which preferred to remain anonymous, told Business Daily yesterday that the supply and demand for the MacauTaiwan aviation market are balanced. “Although we keep seeing new competitors entering the market, we target different customers…So we are fulfilling different demands in the market. In addition, competition is good. The increased supply in the market is dragging up demand, which I see benefiting the overall growth of the whole market,” the airline officer claimed. K.L.
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December 11, 2015
Macau opinion
Thank you, Mr. Grand Prix
Pedro Cortés
Lawyer* cortes@macau.ctm.net
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ith all the great news we had with the Policy Address, with plenty of good measures for the Macau population that are completely different from the past, it occurred to me that I had forgotten to pay some words of appreciation to Engineer Costa Antunes, who was the head of the Macau Grand Prix Committee since long before I arrived in Macau and right up to last month’s GP. Some of you may know that I attended a military school for a period of eight years, since I was 10 until going to university. That fact gave me the privilege to know the sons of military men that had Macau in their lives. This was my first contact with Macau up to 2002; together, of course, with the Macau Grand Prix, the true ambassador of Macau to the world and the testing ground of my idol and great all-time champion Ayrton Senna da Silva, former champion Michael Schumacher, and our great homegrown champion André Couto. Such success could only be possible with the co-ordination of a discreet and competent person such as Mr. Antunes, whose personality enabled him to serve as Director of Macau Government Tourist Office for a lengthy period of time following the handover, among other relevant official capacities on which he left his mark. Personally, and I’m sure many will agree, the days of the Grand Prix can be a burden, especially in recent years where the normal tourist and the GP tourist join together to load up the city with people and yet more people. Nonetheless, and despite Senna’s passing, I don’t follow racing with quite the same enthusiasm, and must admit that it is perhaps the price to be paid in hosting the most iconic racing competition in Asia. Well, we have Singapore and its F1, but Macau will always be Macau. But for those who, unfortunately, work my suggestion is that the government designate the four days of the GP an official holiday. It would be good for the economy and also for our friends who work or live along the race circuit. We all hope that the great success that the Macau Grand Prix has enjoyed up to 2015 can continue now under the umbrella of the Macao Sport Development Board, which may need to assign more people to cope with the demands of the highly professional organisation the GP has spawned. One thing is for sure: if we have this event at the level it has reached, we must thank Mr. Antunes and his team. This type of event is what Macau needs. Hopefully, we can have a major ATP tournament or a football pre-season tournament that will put Macau even more on the non-gaming activities map. Not that gaming activities are unimportant - but I guess they don’t need any advertisement! * Lecturer at the Chinese University of Hong Kong
Macau raking surges, 13th most expensive city for expats in Asia China dominates cost of living survey list
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hinese cities dominate a list of the 20 most expensive in the Asia-Pacific region for expatriates, as the yuan strengthens against rival currencies, a cost of living survey by ECA International shows. Chinese cities including Hong Kong account for 11 of the 20 most expensive Asian cities, the Londonbased consultancy said. Shanghai jumped from third place in 2014 to become the most expensive city in Asia this year.
“In spite of the minor depreciation in the renminbi (yuan) against the dollar over the summer, it has strengthened against most other currencies leading to Shanghai becoming the most expensive Asian city for international assignees,” said ECA’s Asia regional director, Lee Quane. “It is likely that major Chinese cities will remain expensive destinations for mobile executives for the foreseeable future.”
Chinese cities also make up the biggest share of a list of the 30 most expensive worldwide for expatriates, with six of them beating cities in Switzerland and Japan. Chinese cities listed in the study jumped across the board in Asia. Beijing (2nd), Guangzhou (6th) and Shenzhen (7th) rose from fourth, 13th and 22nd. Macau saw the largest rank increase, moving up to 13th place from 34th last year. Reuters
Inditex nine-month earnings rise as Spanish consumption rebounds The clothing retailer has also been increasingly relying upon e-commerce for growth, opening Zara.com in Hong Kong, Macau and Taiwan
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nditex SA, the world’s largest clothing retailer, reported a 20 per cent gain in nine-month profit boost as Spanish consumption recovered after years of austerity. Net income rose to 2.02 billion euros (US$2.2 billion) in the period through October, Arteixo, Spainbased owner of the Zara and Stradivarius brands said Thursday in a regulatory filing. That matched the average of estimates compiled by Bloomberg. Revenue gained 15 per cent in the start of this quarter, excluding currency shifts. The company is benefiting from growing demand in Spain, where
the country’s October clothing retail sales were the strongest in at least six years, according to Barclays Plc. Inditex has opened about 400 stores on average over the past 5 years spread out among eight brands, and it has also been increasingly relying on e-commerce for growth, opening Zara.com in Hong Kong, Macau and Taiwan. Inditex shares have gained 37 per cent this year, boosting the company’s market value to more than 100 billion euros. Founder Amancio Ortega is the world’s second-richest person, with a net worth of about US$75 billion. Bloomberg
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December 11, 2015
Macau AMCM: City’s bank profits up nearly 20 pct for Jan-Oct Macau banks have seen a nearly 20 per cent year-on-year growth in their total assets and after-tax profit for the first ten months of this year, Chairman of Monetary Authority of Macao (AMCM) Anselmo Teng Lin Seng said in a speech at a gathering held by local financial institutions on Wednesday night. According to Mr. Teng, the after-tax profit of the banks here for the January-October period reached MOP10.1 billion, while total assets reached nearly MOP1,400 billion – both figures hitting an historic high. The bad loan ratio for the period was 0.1 per cent, while the capital adequacy ratio was 14.6 per cent, Mr. Teng said.
Macau ranks as second most expensive city in Asia for construction However, local industry predicts the cost will shrink significantly in 2017 as many construction projects of the major part of the sector – casino resorts – are expected to be wrapped up next year Joanne Kuai
joannekuai@gmail.com
M
acau is the second most expensive Asian city to build in, according to the latest International Construction Costs Index published this week by Arcadis, a global Design & Consultancy firm for natural and built assets. The ranking also placed Macau in fifth spot in the global market, moving up from 11th last year. Neighbouring Hong Kong ranked as most expensive in Asia, and third in the globe, trailing New York and London, the top two most expensive cities. The firm assessed some 45 locations in terms of the construction cost of 13 building types. However, the firm pointed out that across Asia growth rates have generally eased significantly over the past 18 months as commercial and residential development rates have peaked. Maintenance of investor confidence in the private sector in
the face of potential turbulence from China will be vital for the health of Asian construction markets. Nevertheless, the researchers said that given significant investment backlogs associated with infrastructure and affordable housing in many countries, construction markets are less likely to be affected than other parts of these economies.
Private sector
A local construction sector representative reckons the sector will experience a sharp downturn in 2017 as casino resorts being built in town are mostly expected to be completed in the second half of next year. “It’s natural that currently construction costs are high in Macau, as most of the work going on is for high-end casino resorts which are expensive to build,” Mr. Lo Chi
FSE Engineering bullish on local construction market
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ong Kong-based FSE Engineering Holdings Ltd. was officially listed on the Hong Kong Stock Exchange yesterday. Its chief executive officer and executive director, Rocky Poon Lock Kee, believes Macau’s gaming market will continue creating opportunities for the company. Talking to Hong Kong reporters yesterday, he said he is optimistic about the construction industry of Macau as he believes the new batch of casino resorts will boost the city’s demands for infrastructure.
The company - operating in Macau and Hong Kong under the trade names of Far East Engineering, Young’s Engineering and Majestic Engineering - was contracted by The Venetian Macao for engineering works on its Hotel Tower 5 and serviced apartments, according to the company’s official website. FSE Engineering is also a subsidiary of Hong Kong-listed investment holding and property investment company New World Development Co. Ltd. chaired by businessman Henry Cheng Kar-shun. K.L.
Hou, Secretary General of Macau Construction Association, told Business Daily yesterday via a phone interview. “Last year, in terms of gross capital formation in construction, the private sector took up more than 80 per cent, which are mainly casinos. When they are complete, costs will decline significantly as remaining housing and infrastructure are relatively cheaper.” According to the Statistics and Census Service (DSEC) Construction Sector Survey 2014, the value of private construction projects amounted to MOP66.88 billion, accounting for 89.17 per cent of the total value of construction. Private construction value also increased 76.4 per cent compared to 2013, of which the value of construction of hotels and entertainment facilities (MOP53.34 billion) rose some 122.3 per cent, while that of private residential
buildings (MOP10.66 billion) dropped 9.6 per cent. Public Construction value totalled MOP8.12 billion, up 11.6 per cent year-on-year.
Labour cost
The consultancy firm also pointed out that neighbouring SAR Hong Kong has seen buoyant market conditions as a result of strong growth in both the private and public sector. Output in 2014 reached record highs. High levels of public sector investment in the metro system and high speed rail, for example, have created something of a labour shortage. Not only are these labour shortages pushing costs higher but they are resulting in project delays. The firm indicated that Hong Kong’s twin challenges are the constraints of an ageing and shrinking workforce, with 30 per cent aged 55 or over, and risks associated with a slowdown in Mainland China. The Macau Construction Association head told Business Daily that in fact the lack of manpower is also an important factor driving Macau to post high building costs. Mr. Lo Chi Hou said that regular construction workers are well paid in Macau, with a slight gap compared to workers in Hong Kong, citing the example that local carpenters enjoy an average daily wage of more than MOP1,400. Mr. Lo added that managerial level staff in the construction sector enjoy an even better salary than their peers working in Hong Kong, without disclosing a number. According to the latest data from DSEC, in the third quarter of 2015 the average daily wage of construction workers reached MOP771, an increase of 9.5 per cent quarter-on-quarter and 14.7 per cent growth year-on-year.
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December 11, 2015
Macau
Union Gaming: Recovery not envisaged in near term
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recovery of the city’s gaming industry is not on the horizon for the near term as the sector continues to be pressured by the softening Chinese economy and the downturn of junket business that are affecting the rebound of customer spending and visitation, research house Union Gaming posits. “There is little evidence to support that Chinese customers are going to start spending more per visit. Given the economic challenges facing China today, it would seem unlikely that customers will start spending more per visit in Macau,” analysts Christopher Jones and John DeCree wrote. For them, the velocity of operators generating revenues from the mass gaming floor is also affecting the recovery. Claiming the current
baccarat win rate of the mass market at 1.25 per cent, they suggest gaming operators should “either increase average bet size or increase the number of wagers or the number of people making wagers over the same period”. “This is Macau’s problem in the near term and where we struggle with seeing a broader recovery in 2016”, they stated. For the junket business, Union Gaming expects the sector to get even worse before it begins to rebound, predicting junket volumes will continue to contract next year. “Junket liquidity and the overall number of junket operations in the market continue to contract and consolidate. Adding to these existing challenges, we believe heavier
Corporate GEG invites underprivileged associations’ members to Cyril Magic Show The Broadway Theatre at Broadway Macau™ has presented a wide range of cultural and entertainment performances to local citizens and overseas tourists since its grand opening in May this year. Last weekend, Galaxy Entertainment Group (‘GEG’) invited world-renowned illusionist Cyril to have his first-ever public performance in the Broadway
Theatre. The audience included citizens and tourists as well as members from Macau Deaf Association and Macau Association for the Mentally Handicapped who were offered an opportunity to meet the illusionist up close and personal. In addition, GEG donated MOP100,000 to the two associations to support their daily operations.
oversight on junket operations will take hold in Macau in early 2016,” it reports. The research house estimates that the city’s gaming revenues would post a year-on-year decrease of some three per cent for next year, forecasting that
VIP revenues may drop by around 12 per cent year-on-year. However, it expects that the mass market and electronic gaming machines will increase by some 6 to 7 per cent and 9 per cent year-on-year, respectively. K.L.
Wynn Resorts surges after founder buys 1 million shares Chairman and CEO Steve Wynn’s personal holdings in the stock now amount to 11.07 million shares, or almost 11 per cent of the total Wynn Resorts Ltd., the owner of casinos in Macau and Las Vegas, rose 13 per cent to lead the S&P 500 after founder Steve Wynn purchased 1 million shares of the company. Wynn, based in Las Vegas, soared to US$69.91 at the close in New York, making it the top performer Wednesday in the Standard & Poor’s 500 Index. The company’s chief executive officer purchased the shares on the open market between December 4 and December 8, according to a statement Tuesday, suggesting he paid a maximum of US$66.5 million based on the intraday high over that period. “Anytime a CEO buys a meaningful stake it sends a favourable message,” Deutsche Bank AG analyst Carlo Santarelli said in a research note Tuesday. The purchase is the first sizable, open market buy by Wynn in some time, the analyst wrote. The purchase boosted Wynn’s personal holdings in the stock to 11.07
million shares, or almost 11 per cent of the total, according to data compiled by Bloomberg. Wynn’s ability to sell shares is limited under the terms of an agreement with his ex- wife Elaine Wynn, his spokesman Michael Weaver said in an e-mail. The stock is down 53 per cent this year. Wynn’s personal commitment is a possible sign that the worst may be over in Macau, the world’s largest casino market, where gambling revenue has plunged 36 per cent this year. Fitch Ratings on December 7 predicted a drop of about 5 per cent for all of 2016. Wynn Resorts generated 59 per cent of its revenue there last quarter and has a new property scheduled to open there in June. The new US$4.1 billion resort is one of several the region’s casino owners plan to open next year. The Chinese territory has suffered a steep decline in betting amid a crackdown on corruption in the country. Bloomberg
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December 11, 2015
Greater China
Beijing to grant residence rights to 13 million unregistered citizens Hukou permits are needed if a person wishes to marry, open a bank account, take out medical insurance and get access to basic education
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hina will give household registration permits to its unregistered citizens and make medical insurance coverage more equal, the government said on Wednesday, as it looks to overhaul systems often under fire for failing those people most in need.
The move on household registration - or “hukou” - will open access to basic rights such as schooling and healthcare for about 13 million people. Hukou are needed if a person wishes to marry, open a bank account, take out medical insurance and get access to basic education.
But many have been locked out of the system because their births flouted China’s strict one-child policy, or they were orphans or homeless. The Xinhua state news agency also said China had approved plans to merge its two medical insurance
schemes for urban and rural residents, aiming to give more equal access to healthcare. Rural primary care currently lags far behind levels in major cities. China says it offers health insurance to almost all of its near 1.4 billion people, but the schemes
still often require patients to pay large amounts out of pocket, a major pressure on families, especially with major diseases such as cancer. The ruling Chinese Communist Party announced in October it was reforming the family planning policy to allow couples to have two children after decades of the one-child policy, a move aimed at alleviating demographic strains on the economy. Xinhua put the number of unregistered people at around 13 million. “It is a basic legal right for Chinese citizens to lawfully register for hukou. It’s also a premise for citizens to participate in social affairs, enjoy rights and fulfil duties,” state television CCTV reported, citing a statement released after a government meeting on reform. Registration should take place irrespective of family planning and other policy limits, the statement said. Reuters
Property firms’ debt issuance jumps The property sector drives about 15 percent of gross domestic product Clare Jim and Umesh Desai
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hina’s real estate companies have sharply increased the amount of funds raised from debt so far this year compared with 2014 as borrowing costs hit historical lows, and they are planning to borrow more. Property developers have raised 495 billion yuan (US$77 billion) from domestic Chinese bonds, almost double 2014 levels, Barclays Capital estimates. Goldman Sachs suggests property companies have issued more than 400 billion yuan (US$62.5 billion) in domestic bonds, over seven times total issuance in 2014. It uses a different set of companies as the basis of its estimate. After tightening regulations in recent years to dampen a hot property market, regulators have moved this year to make it easier for developers to raise debt in the hope a lift for the real estate market will boost the wider economy. The property sector drives about 15 percent of gross domestic product and could help support an economy that many analysts predict will grow this year at its slowest pace in more than two decades. Historically low interest rates are helping to fuel the rush. The central bank has cut its benchmark interest
Conditions are great for these developers who should take this opportunity to strengthen their balance sheets and deleverage in a disciplined manner, rather than leverage up Dhiraj Bajaj, fund manager, Lombard Odier Singapore
rates six times since November by 1.65 percentage points and reduced banks’ reserve requirements three times this year. The average coupon of the domestic bond of rated developers was around 5.14 percent, almost 3 percentage
points lower than comparable offshore senior notes. About a dozen Hong Konglisted Chinese developers, including Evergrande Real Estate Group, Country Garden , Dalian Wanda Commercial Properties and Shimao Property Holdings have added fuel to the fund raising. Since late May, they have sold bonds worth around 150 billion yuan (US$23 billion), thanks to the re-opening of the medium-term note market to Hong Kong real estate issuers. Under Chinese regulations, domestic developers can issue bonds equivalent to 80 percent of the company’s book value. Major developers including Evergrande, Sunac China Holdings , Greentown China Holdings and Country Garden
have almost used up their quotas for this year. Evergrande, which has raised more than US$7 billion this year, is expected to come to the market again soon to support an aggressive land acquisition strategy, analysts said. Evergrande declined to comment. An offshore unit of Country Garden might issue a so-called panda bond - a yuan-denominated bond issued by a non-Chinese entity - the company said. The companies that use up their domestic quotas for issuing bonds may well move their fund raising efforts offshore next year where borrowing rates are relatively low as well. Equally, Chinese banks are likely to be more relaxed about lending to property firms as restrictions on the sector relax, analysts said. Improved funding conditions are expected to speed up the pace of construction and limit refinancing risks that had resulted in distressed sales for many companies. “They have been allowing property developers and local governments to refinance their debt. That provides a cushion to the economy and prevents a hard landing. That’s the reason they are allowing bond issuances to surge,” said Francis Cheung, CLSA China strategist. Reuters
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December 11, 2015
Greater China Markets to change to a registration-based flotations system The CSRC said in a statement it would take steps to improve market transparency and crack down on illegal activities to support the IPO reform
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hina plans to shift to a U.S.style registration system for stock market flotations on the Shanghai and Shenzhen exchanges within two years, the cabinet said on Wednesday. The State Council is awaiting approval from the National People’s Congress, or parliament, on its proposal to launch the longplanned reforms, the cabinet said in a statement after a regular meeting chaired by Premier Li Keqiang. Relevant government agencies will draft detailed rules that will be implemented after seeking pubic feedback, according to the statement posted on the central government website. The authorities will also step up supervision on listed companies and protect investors’ legitimate rights and interests, it added. Sources told Reuters earlier this month that China is ready to announce plans for a migration to a registrationbased system for flotations, or initial public offerings (IPOs), in the near term.
The China Securities Regulatory Commission (CSRC) watchdog began speaking of moving away from its current approval-based system, seen
as distorting the IPO market and encouraging official corruption, to a registration system, where the market decides who gets to list and for how much, since early in 2014. But the stock market crash this summer, blamed in part on an IPO glut, put that process on hold, as the CSRC froze listings to stabilise a market that lost as much as 40 percent in just a few weeks. The CSRC said in a statement it would take steps to improve market transparency and crack down on illegal activities to support the IPO reform, adding it would implement the reforms in a gradual and steady manner to prevent a sharp expansion in new share listings. The cabinet also pledged to take steps to tackle excess factory capacity and deal with so-called zombie firms, while allowing banks to write off more bad loans, state radio said. Reuters
Vice Chairman of securities watchdog removed from post
Regulator tolerates modest falls in FX China’s foreign exchange regulator said yesterday it sees no reason for sharp falls in the yuan given the country’s strong balance of payments position and that there is some latitude for modest declines in its FX reserves. Wang Yungui, head of the policy and regulation department, made the comments at a news conference held by the State Administration of Foreign Exchange (SAFE). China’s foreign exchange reserves, the world’s largest, fell by $87.2 billion in November to US$3.44 trillion, central bank data showed on Monday, the lowest level since February 2013 and the third-largest monthly drop on record.
Energy specialists said the latest plan had the hallmarks of being part of Beijing’s broader programme for the sector
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The People’s Bank of China drained funds via open-market operations for the first time since October as cash locked up for new share sales moved back into the financial system. The central bank withdrew a net 50 billion yuan (US$7.8 billion) through open-market operations this week, with maturing contracts outstripping injections. Initial public offerings by 10 companies between November 30 and December 2 locked up an estimated 1 trillion yuan, according to a Bloomberg survey.
Yao Gang, vice chairman of the China Securities Regulatory Commission, was removed from his post following an inquiry into “serious breaches of discipline,” first announced in November, the state news agency Xinhua reported Wednesday. The Central Commission for Discipline Inspection, the ruling Communist Party’s anti-graft watchdog, initially announced the investigation in mid November. China’s financial regulators have been under heavy pressure since stock markets collapsed in mid-June following a long bull run. A wide crackdown on suspected stock manipulation has involved a number of senior officials at Chinese brokerages and the financial regulator since June.
PetroChina plans big gas grid stake sale under reform push etroChina is discussing selling a stake in domestic gas pipelines worth an estimated US$47 billion in total, sources told Reuters, in a move seen as a prelude to Beijing’s plans to break the state giant’s near monopoly and boost spending on energy infrastructure. The sale could attract domestic interest from Chinese institutions, asset managers and private equity investors, sources familiar with the matter said. PetroChina produces twothirds of China’s natural gas and controls nearly 80 percent of the country’s patchy 90,000-kilometre gas pipelines, a bottlenecked grid that has prevented greater use of a fuel with half the greenhouse gas emissions of China’s biggest energy source, coal. Beijing is expected to unveil a sweeping reform package within weeks that targets its vast energy sector, part of a broader restructuring drive to boost efficiency and bring in private investment. A senior source with knowledge of the plan said PetroChina, which transports mostly its own gas in its pipes, is preparing to sell part of its premium domestic gas pipeline assets, worth around 300 billion yuan (US$47 billion), which
PBOC drains cash for first time since October
includes three trunk lines running from the country’s far west to its eastern and southern shores. “This is a good avenue for them to raise funds for capex and cutting debt,” said a Hong Kong-based investment banker who has advised PetroChina on past transactions. He added that PetroChina had been debating such a plan for a while but had not yet formally hired an investment bank to manage the sale process. Any deal, which would follow the US$17.5 billion sale by domestic rival Sinopec Corp this year of its fuel marketing business, could be a step toward Beijing’s goal to establish one or more independent pipeline companies that would enable greater access for non-state suppliers. For PetroChina, battered by depressed oil prices and a recent plunge in gas prices, a sale would bring badly needed cash. The three lines are about 20,500 kilometres long and transport a combined 80 billion cubic metres a year, or 45 percent of China’s total gas consumption. A high-level project team is working on the deal, said the source, adding it would target mostly domestic investors and proceed at
Auto sales to grow 5-7 percent in 2016
KEY POINTS PetroChina controls nearly 80 pct of China’s gas grid Discussing stake sale in 3 lines carrying 45% of domestic use PetroChina needs funds for capex and cutting debt Experts see the plan as part of Beijing’s sector reform aims
“an accelerating pace”, without giving a timeline for the sale or how big a stake PetroChina will part with. Last year PetroChina tried and failed to auction off regional segments of its pipelines, and just last month sold its centralAsian pipelines outside China for US$2.4 billion to a government asset management firm. Reuters
Vehicle sales in China are expected to grow 5-7 percent year-on-year in 2016, the head of China’s auto manufacturers association told reporters in Beijing yesterday. Dong Yang, secretary general of the China Association of Automobile Manufacturers, said that auto sales would rise around 3 percent year-onyear in 2015, meeting the association’s forecast.
Shandong refineries awarded with import quotas China awarded four refineries in Shandong province quotas to import crude oil, the country’s state planner said yesterday. The four firms are Shandong Huifeng Petrochemical Group, Tianhong Chemical, Shandong Shouguang Luqing Petrochemical and Shandong Jingbo Petrochemical, according to statements on the National Development and Reform Commission’s website. The four plants were granted quotas to collectively import 14.45 million tonnes of crude a year
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Greater China
Mainland’s investors warm to foreign stocks to shelter from local chill The Qualified Domestic Institutional Investor (QDII) scheme had failed for years to attract much interest from Chinese until this year, when institutions started bidding up the price of the scheme’s investment quotas traded between them Pete Sweeney and Samuel Shen
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t has taken a slump in the property market, a white-knuckle ride on local shares and a currency devaluation, but China’s retail investors are finally taking a serious look at overseas stocks and bonds. That is music to the ears of foreign brokers and wealth managers and to local entrepreneurs who can make a profit on their coat tails, for the sums involved could be vast. Investment bank CICC says China’s high net-worth individuals control US$4.4 trillion in assets, but allocate only 5 percent of their wealth overseas, compared with a global average of 24 percent, and ordinary middle-class savers hold further trillions on deposit in Chinese banks. If both groups reallocate their assets in line with global norms, some fund managers say as much as US$6 trillion of Chinese money could find its way into overseas stock and bonds. Money is already leaving China, especially after a summer stock market crash and August’s devaluation of the yuan. In November China’s foreign exchange reserves drained by their third-sharpest rate ever to their lowest level since early 2013. Official figures don’t distinguish between retail and institutional investment, but Chinese purchases of offshore debt and equities rose a hefty 11 percent in the second quarter.
KEY POINTS China investors look overseas after stock crash, yuan slide Some estimate up to US$6 tln could flow to overseas stocks, bonds China already experiencing sharp capital outflows Chinese purchases of offshore debt, equities up 11 pct in Q2
And they don’t capture reallocations from existing offshore portfolios including real estate, home to many billions of dollars of Chinese money. Domestic fund managers say growing interest in a scheme that lets local mutual funds invest in offshore assets is revealing. The Qualified Domestic Institutional Investor (QDII) scheme had failed for years to attract much interest from Chinese until this year, when institutions started bidding up
the price of the scheme’s investment quotas traded between them. “QDII quota suddenly became very expensive this year,” said Shen Weizheng, fund manager at Shanghaibased Ivy Capital, who plans to launch a Hong Kong bond fund to meet rising demand for overseas assets from mainland clients. “Domestic capital is rushing out as the yuan is no longer firm,” he added. David Friedland, manager of Asia Pacific operations for trading platform Interactive Brokers, which has offices in Hong Kong and China, said increasingly sophisticated Chinese investors were looking overseas. “We’re seeing a good chunk of interest. People can’t just put all their money into apartments,” he said.
Bubble risk
Brian Qian, a 33-year-old risk controller at a Chinese bank, fits the profile of this new breed of investors. He said he had invested several million yuan, half his investable wealth, into overseas stocks and bonds this year. “Investment returns in China are much lower than previously,” he said, and he no longer trusted the local stock markets after the summer crash, nor China’s risky high-yield wealth management products (WMP).
“From my perspective, there’s a relatively big bubble in China’s real economy,” he added. A middle-class Shanghai investor who gave her surname as Zhang said she, too, was looking at dollar assets. “A financial crisis is coming to China, and the currency is going to depreciate. It is not safe to give my money to Chinese banks or asset management products any more.” This growing distaste for local assets, beset with bubbles, market distortions and shadowy underground banking products, is balanced by steadier returns from overseas markets. The S&P 500 index of big U.S. shares is up 35 percent from its peak before the global financial crisis, while the Shanghai Composite Index is still down over 40 percent. Chinese businesses are gearing up to help those looking to make the switch in what Dacheng Fund Management Co calls the “trend of the next decade”. It is building a dedicated investment team to help Chinese invest overseas. Former Wall Street trader Liu Zhen is now CEO of Clipper Advisors, a software start-up whose Blue Sea Wealth cell phone app is specifically tailored to help Chinese investors navigate offshore exchange-traded funds, reallocating according to risk tolerance and goals. “For every Chinese person there are two pockets, one with dollars, one with renminbi,” he said. The problem for many such investors is not working out what to invest in but how. Officially, there is a US$50,000 annual limit on individuals’ moving money out of China, though many have found ways round that to invest in overseas property. Wary of the economic impact of outflows when growth is slowing, Beijing has been making it harder to get money out, freezing further QDII quota approvals since March and suspending applications for a yuan-denominated version of the scheme as recently as Wednesday. That’s a headache for people like Liu Haiying, Chairman of Haiying (Shanghai) Investment Consulting Co. “I have a plan to launch a global macro hedge fund to invest in global financial assets,” said Liu. “There’s huge demand for such products. The biggest obstacle now is how to move the money out.” Reuters
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December 11, 2015
Asia
Bank of Korea holds rates ahead of Fed call, as expected The Bank of Korea has said that even if the Fed raises interest rates next week, South Korea’s vast foreign reserves and current account surplus will shield the economy from immediate shocks Christine Kim and Choonsik Yoo
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outh Korea’s central bank held its main interest rate steady at a record low yesterday as expected, just days before the U.S. Federal Reserve decides whether to pull the trigger on a much-anticipated policy tightening. The Bank of Korea’s monetary policy committee held its base rate steady at 1.50 percent for a sixth straight month, as all 31 analysts surveyed in a Reuters poll had expected. Governor Lee Ju-yeol declined to publicly take a view on domestic interest rates at a scheduled news conference, and instead focused on downside risks facing the economy, among them falling oil prices and overall global sluggishness - offering no major change from previous statements. “There was nothing surprising from Lee’s press conference. He didn’t mention anything about
Central bank headquarters
lower rates, and his comments were viewed as neutral,” said Kathleen Oh, economist at Standard Chartered Bank in Seoul. Oh forecast that rates would be kept on hold through 2017. “I think Lee was just cementing his previous stance ahead of the Fed,” she said. A slim majority in the same Reuters poll saw no change in South Korea’s
policy interest rates for an extended period of time, while just over a third saw a rate cut early next year. The Bank of Korea has said that even if the Fed raises interest rates next week, South Korea’s vast foreign reserves and current account surplus will shield the economy from immediate shocks. Policymakers are wary, however, of possible risks that
may emerge from vulnerable economies after any Fed rate hike is implemented. Lee said yesterday the BOK will watch warily for any possible ripples from emerging economies after the Fed rate hike. Governor Lee has proven hesitant to cut rates further as household debt continues to snowball, while headline inflation is expected to
continue rising albeit at a very slow pace, according to the central bank. “Household debt has been rising quickly, and ever since regulations were eased, borrowing has been outpacing wage growth. There is a need to quickly implement measures to rein in household debt,” Lee said. The governor added that new measures to slow growth in borrowing, developed jointly by other government agencies, would be announced soon. Meanwhile, the formation of the central bank’s new three-year inflation target band is in the final stages, Lee said, and will be announced next week. The current inflation target band is 2.5 to 3.5 percent, although actual headline inflation has stayed well below the bottom band for nearly as long as the target has been in force. Reuters
Japanese central bank survey tankan seen likely to show subdued business mood Latest data showed core machinery orders unexpectedly jumped in October by the most since March 2014 Kaori Kaneko
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usiness confidence measured by the Bank of Japan’s tankan survey was expected to recede slightly in three months to December and stay subdued in the coming quarter, a Reuters poll found, reflecting China’s slowdown and lacklustre domestic demand. Big firms are expected to reduce their capital spending plan for this fiscal year slightly, but it will probably remain solid - underpinned by good corporate earnings. “The economy remained at a standstill. Although the GDP data was revised up to plus (in the third quarter), the pace of growth has not picked up. The tankan data will probably reflect that,” said Tatsushi Shikano, deputy chief economist at Mitsubishi UFJ Morgan Stanley Securities. “Economic slowdown in China and emerging nations kept a lid on business sentiment but the level of deterioration is expected to be small due to solid corporate earnings.” The Bank of Japan’s quarterly tankan business sentiment survey was
expected to show the headline index for big manufacturers’ sentiment slipping by 1 point from three months ago to plus 11, the poll of 18 economists found. This would be a second straight quarterly deterioration and the lowest level since the survey done in June 2013. The sentiment index for big nonmanufacturers was forecast to decline to plus 23, down 2 points from plus 25 three months ago - a two-decade high. Strong spending by foreign visitors was expected to continue supporting service-sector sentiment, but slow recovery in domestic demand may have hurt its confidence slightly. The poll found big manufacturers expect conditions to stay constant for the three months ahead, while big non-manufacturers forecast the index will worsen slightly to plus 21. Big firms were forecast to raise their capital spending plan by 10.2 percent in the current fiscal year, the
KEY POINTS Tankan big manuf sentiment f’cast at +11 vs +12 in Sept Big non-manuf mood seen at +23 vs +25 in Sept China’s slowdown and tepid domestic demand hurt mood Big firms’ capex plan for FY2015 seen to remaining solid BOJ Tankan sentiment survey due Dec 13 at 2350 GMT
poll showed, but this would be down from their previous plan to increase capex by 10.9 percent. Latest data showed core machinery orders unexpectedly jumped in October by the most since March 2014. “Generally, firms’ capital expenditure plan likely stayed solid,” said Yuichiro Nagai, economist at Barclays Securities. “Corporate profits are high helped by a weak yen and lower oil prices. But both foreign and domestic demand are weak and sales have not picked up as much as profits. So sales growth is needed for them to increase capital investment within Japan.” The BOJ will publish its tankan survey at 8:50 a.m. on Dec. 14 (2350 GMT Dec.13). The Reuters Tankan, which closely tracks the BOJ’s tankan survey, found this week that Japanese manufacturers’ confidence held steady from three months ago, but the service sector index fell. Reuters
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Asia
New Zealand central bank cuts rates RBNZ’s Wheeler highlighted several risks to the economy including high net immigration Charlotte Greenfield and Rebecca Howard
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ew Zealand’s central bank cut its benchmark interest rate yesterday to match a record low of 2.50 percent and virtually shut the door on further easing, saying it expected to achieve its inflation target without more monetary stimulus. The kiwi dollar jumped on the less dovish statement by Reserve Bank of New Zealand Governor Graeme Wheeler, who trimmed the Official Cash Rate by 25 basis points as expected, having left rates on hold at the previous meeting after three cuts. The RBNZ is projecting annual inflation will rise back into its 1 to 3 percent range in the first quarter of 2016 and “we expect to achieve this at current interest rate settings, although the bank will reduce rates if circumstances warrant,” Wheeler said. “We thought 2.5 percent would be the bottom for rates and that’s what the RBNZ is saying - which is why the kiwi jumped afterwards,” said Michael Turner, Strategist, RBC Capital Markets. Wheeler’s comments were supported by the central bank’s relatively flat 90day bank bill forecasts. The majority of economists see rates holding steady at 2.5 percent until the first quarter of 2017. First NZ Capital Economist Chris Green said Wheeler’s statement places a high hurdle for more rate cuts.
KEY POINTS Cuts rates to 2.50 pct, as expected by most analysts Says expects to achieve inflation targets at current rates Ready to cut more if needed NZ dollar rises on expectations easing cycle ended Reserve Bank of New Zealand Governor Graeme Wheeler
Still, “the risks distribution around this forecast is very much skewed towards an additional easing, particularly if the global or domestic environment were to deteriorate sharply from here,” said Green.
More easing possible
Some economists, including ASB Bank Senior Economist Jane Turner, believe the RBNZ’s current economic forecasts will not eventuate, in particular on the inflation front. “Our view is the circumstances will warrant further OCR cuts in June and August next year to 2 percent. We are
firmly of the view inflation pressures will not prove to be as strong as the RBNZ currently estimates,” said Turner. New Zealand’s economy has been struggling this year with falling global dairy prices and volatility in China, its largest trading partner. This prompted the bank to start unwinding interest rates in June, after raising them to 3.50 percent the previous year at a time when New Zealand was dubbed the world’s “rock-star” economy. Even amidst recent threats to exports, New Zealand has seen strong gains in tourism and immigration, which have strengthened its service sector.
An auction earlier this month showed dairy prices were beginning to stabilise, though analysts warned that they were still volatile and any recovery was likely to be slow. . RBNZ’s Wheeler highlighted several risks to the economy including high net immigration, a possible drought associated with El Niño and further falls in export prices. “We have interest rates at 2.5 percent, which compared to the U.S. and Europe, is still a buffer. We have room to cut if we need to.” Reuters
Australian jobs surge by most in 15 years Service sector employment has been expanding by almost 250,000 a year Wayne Cole
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ustralian employment surged by the most in over 15 years in November and nudged the unemployment rate to a 19-month low, but so stunning was the result that it revived doubts about the reliability of the data. The local dollar surged after the Australian Bureau of Statistics reported a staggering 71,400 net new jobs were created in November, confounding forecasts for a drop of 10,000. It was the second straight month of huge gains with October enjoying a rise of 56,100. Taken together that was the strongest two-month total in 28 years.
The surprises kept coming as the jobless rate dipped to 5.8 percent, when analysts had looked for a rise to 6.0 percent, and the participation rate jumped to its highest since 2012 at 65.3. The Australian economy grew 2.5 percent in the year to September, short of the 3.0 to 3.25 percent pace that used to be considered “normal”. The ABS has had trouble with its jobs survey in the past that resulted in large revisions in both directions. The agency noted that the new entrants in its survey sample in both October and November had higher employment and participation rates than the
average, which may wash out in the December sample.
It’s a service economy
The surprising resilience of employment was already a major reason the Reserve Bank of Australia (RBA) had resisted pressure for an easing in the 2 percent cash rate. According to the November data annual growth in employment accelerated to a blistering 3.0 percent. That compares to 1.9 percent in the United States, where the strength of the labour market will likely lead to the Federal Reserve hiking interest rates for the first time in almost a decade next week.
Leading indicators of labour demand including vacancies and business surveys, have been pointing to a pick up, just not as exuberant as the jobs report suggests. While miners have been retrenching, the sector at its peak only ever accounted for around 2 percent of all jobs. Instead, service sector employment has been expanding by almost 250,000 a year, led by healthcare, professional and technology services, accommodation, recreation, and transport. An aging population is steadily increasing demand
for healthcare, with the sector now the single biggest employer. A lower local dollar and the rise of the Asian middle class is proving a bonanza for tourism. Visitors from China rose by a fifth in the year to October and are estimated to have spent over A$7.7 billion while in Australia. Growth in architectural, engineering and technical services has been concentrated in the two most populous states of New South Wales and Victoria and owe much to booming home building and a bevy of large infrastructure projects. Reuters
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December 11, 2015
Asia Japan’s ruling party approves corporate tax cuts
South Korea’s ICT exports decline South Korea’s exports of information and communications technology (ICT) products reduced last month due to weak demand for semiconductors and display panels, a government report showed yesterday. The ICT exports declined 7 percent from a year earlier to US$14.34 billion in November after reducing 1.6 percent in the previous month, according to the Ministry of Trade, Industry and Energy. Imports in the ICT sector increased 7.2 percent to US48.04 billion, sending the November trade surplus in the industry to US$6.3 billion.
The cabinet will need to approve the revision before sending it to parliament in January
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apan’s ruling party approved a plan yesterday to slash the corporate tax rate to below 30 percent from April and trim it again two years later, while pressing companies to boost investment and raise wages to spur economic growth. The plan, to be included in the annual tax code revision, will bring the effective corporate tax to 29.97 percent - in line with that of Germany in fiscal year 2016 that begins in April. It will be reduced further to 29.74 percent in fiscal 2018. Japan’s corporate tax is now 32.11 percent, well above the average 25 percent among OECD economies, putting its firms at disadvantage against overseas rivals. Prime Minister Shinzo Abe brought forward the plan to cut the tax below 30 percent by one year, hoping that it will help Japanese firms become more competitive and encourage them to spend some of their cash piles for investment as capital spending has been slow to grow. The cabinet will need to approve the revision before sending it to parliament in January. Big firms have been reluctant to ramp up capital expenditures even though corporate internal reserves exceed 350 trillion yen (US$2.88 trillion). Workers’ share of corporate income has declined,
Some of Australia’s coal exports halted by protests
KEY POINTS Corporate tax to fall below 30 pct from April 2016 Abe hopes tax cuts to spur capex; analysts sceptical Tax revision plan needs cabinet, parliament approval
though companies are moving to raise wages, the LDP said. Some analysts doubted whether the tax cuts and growing pressure from Abe will reverse the trend. Data this week showed Japan barely dodged a recession in the third quarter, but policymakers will remain under pressure to speed up growth with additional stimulus measures. Japan’s biggest business lobby told Abe last month capital expenditure could surge over the next three years on condition that the government quickly cuts the corporate tax rate and implements other sweeping reforms. Reuters
Malaysia’s electronics-makers cautious despite solid overseas sales A recent survey showed consumer confidence to be the worst on record
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alaysia’s key electronics sector has been winning more overseas orders, but there’s no sign of a sustained surge that would lift an economy growing at its slowest pace in more than two years. Like other commodity producers, Malaysia is suffering from sliding oil and gas prices, and its best hope for recovery may rest with its manufacturing sector, especially electronics firms clustered on the tech-island of Penang. Shipments of electrical and electronic goods in October jumped 22.7 percent from a year earlier, lifting export growth to 16.7 percent in ringgit terms. Factories that make these goods are doing better than the rest, with production in October up 13.9 percent from a year earlier, more than triple the increase of overall industrial output. Still, manufacturers are not convinced the momentum can be maintained. “Overall companies are still cautious,” said Wong Siew Hai, chairman of the Malaysian American Electronics Industry (MAEI), which counts Intel, Dell and Motorola among its members.
The increase in electronics exports - which account for about one-third of the total - partly reflects the ringgit’s nearly 18 percent tumble against the dollar this year. When presented in dollars, shipments seem weaker. Until recently, Malaysia was one of Southeast Asia’s fastest-growing economies. But the annual growth rate dropped from 6.5 percent in 2014’s fourth quarter to 4.7 percent in the July-September. Tumbles in the prices of commodities and the demand for
We need more evidence to show there’s a positive outlook for 2016 Wong Siew Hai, chairman, Malaysian American Electronics Industry
them, plus weak domestic demand, cloud the country’s growth outlook.
Help needed
“Malaysia definitely needs all the help it can get from the electronics products side,” said Wellian Wiranto, an economist at OCBC in Singapore. A recent survey showed consumer confidence to be the worst on record, with nearly half of respondents reporting lower incomes. Many were squeezed after a consumption tax was imposed in April. Drooping domestic demand is affecting local electronics retailers such as Yap Hong Yew, who owns a Kuala Lumpur mobile-phone shop. “Of course sales have gone down,” Yap said. “We’ve had to reduce some profit margins.” Conditions are somewhat better for electronics firms plugged into global supply chains, said the MAEI’s Wong, adding that orders are getting a preChristmas lift, from automotive and mobile-device components especially. The relative strength of electronics provides some support as weak commodity exports weigh on growth, said Wiranto. “It’s not that things are going great, it’s just that things are less bad in Malaysia in terms of the trade cycle, at least on the electronics side.” Reuters
The export of coal from Australia’s largest coal terminals was disrupted yesterday after protesters chained themselves to equipment, causing a temporary halt to some operations. Activists, demanding that Australia commit to reducing its reliance on the coal industry, caused a disruption to the operations of Newcastle Port, the world’s biggest thermal coal export terminal, and the Port of Brisbane and Port Kembla. Australia’s biggest coal companies, including BHP Billiton Ltd , Glencore Plc, Rio Tinto and Peabody Energy Corp, and China’s Yancoal Australia Ltd, rely on the port.
South Korean labour boss turns himself in The head of one of South Korea’s two main labour groups turned himself over to police yesterday after holing up inside a Buddhist temple for nearly four weeks to evade arrest for organising a violent anti-government protest last month. Han Sang-gyun, the head of the Korean Confederation of Trade Unions (KCTU), the more strident of the country’s umbrella labour groups, had sought sanctuary at the downtown Seoul temple after speaking at the rally on November 14, where he urged members to protest against the government’s labour reform policy.
India clears Japan’s bid for bullet train India’s cabinet has cleared a US$14.7 billion Japanese proposal to build its first bullet train line, an Indian government minister and official said yesterday, one of India’s biggest foreign investments in its infrastructure sector. The decision ahead of Japanese Prime Minister Shinzo Abe’s visit beginning on Friday gives Japan an early lead over China, which is also bidding to build high-speed rail lines across large parts of India’s congested and largely British-era system. Japan had offered to finance 80 percent of the cost of the train linking financial capital Mumbai with Ahmedabad.
Indonesia c.bank sees room for rate cut Central bank sees room for a cut in its benchmark interest rate even if the U.S. Federal Reserve raises rates at its meeting this month, Bank Indonesia senior deputy governor Mirza Adityaswara told reporters yesterday. “Yes, we can, but it depends on stability because we need to guard that stability in order to support growth,” Adityaswara said, when asked if Bank Indonesia had room to cut rates even if the Fed raises rates. The Fed is scheduled to meet on Dec. 15-16, at which U.S. interest rates may be raised for the first time in nearly a decade.
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International Argentine cenbank chief quits Argentine central bank chief Alejandro Vanoli resigned on Wednesday, opening the way for President-elect Mauricio Macri to press ahead with plans to unwind capital controls and unify the exchange rate. Macri’s promise to liberalize Latin America’s third biggest economy set him on a collision course with Vanoli, a trusted ally of the South American country’s outgoing leftist leader, Cristina Fernandez, who believes in heavy state controls. Macri urged Vanoli to quit immediately after he won the November 22 run-off election, saying he would install respected economist and congressman Federico Sturzenegger once Vanoli vacated the seat.
Rabobank to cut 9,000 jobs and shed assets Dutch cooperative bank Rabobank plans to lay off nearly a fifth of its workforce to boost profit and prepare for tougher European banking guidelines, it said on Wednesday. The bank said it would shed 9,000 of its 47,000 staff by 2018 and would cut 150 billion euros (US$164.7 billion) worth of assets from its balance sheet by 2020, to comply with a rulebook known as Basel IV intended to help make banks more resilient to economic and market shocks. The moves are part of a strategic plan in the works since Chief Executive Wiebe Draijer was appointed in October 2014.
World-first dengue fever vaccine cleared for use in Mexico The first-ever vaccine against dengue fever, which affects up to 400 million people per year, will be publicly available for the first time after being cleared for use in Mexico, French manufacturer Sanofi said Wednesday. “It’s a very important moment in the history of public health,” Olivier Charmeil, head of the company’s vaccines division, told AFP, describing Dengvaxia as the “innovation of the decade”. This vaccine could potentially become “a blockbuster” and generate more than a billion dollars in revenue for the French pharmaceutical company, Charmeil added.
TUI Group CEO says sale of Hotelbeds unit likely Travel giant TUI Group is likely to sell its Hotelbeds unit but is not considering a sale of its specialist holiday brands, Peter Long, joint-chief executive of the company told reporters on a call yesterday. TUI said in May that Hotelbeds, the biggest business-to-business accommodation wholesaler, was the subject of a strategic review. It reported core earnings (EBITA) of 117 million euros for the year ended September 30. “Whilst we haven’t made a final decision at this point the likely outcome is that we will enter a sale process,” Long said.
Germany sees 2016 budget close to balanced National budget is on track to be close to balanced next year but an influx of refugees makes it harder to assess the outlook for the public finances, top finance officials said on Wednesday. Roughly a million refugees and migrants fleeing war and deprivation in the Middle East, Africa and Asia are expected to arrive in Germany this year alone - the majority of those reaching Europe - and local authorities are struggling to cope. The Stability Council said it expected a “close to balanced national budget” in 2016 despite the refugee influx.
Zuma takes S. African economy to brink as credit risks rise The president’s power stems from his dominance of the African National Congress, which has governed South Africa since the first multiracial elections in 1994
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outh African President Jacob Zuma took the economy closer to the brink of a junk credit rating after firing his finance minister in a move investors say may undermine fiscal credibility. Zuma removed Nhlanhla Nene from his post after 19 months without giving any reasons except to say that he would be moved to another key role. His replacement is David van Rooyen, a lawmaker who is little known to South Africans or investors. The shock move came less than a week after credit-rating companies pushed the nation closer to junk status, citing concerns over a sluggish economy and rising debt. Nene’s departure, and uncertainty relating to his successor, raises questions about whether the National Treasury can stick to its spending targets. The rand dropped as much as 5.4 percent against the dollar after Zuma’s announcement, the biggest decline since September 2011, hitting a new record low of 15.3857. Yields on benchmark government bonds due December 2026 soared 65 basis points to 9.46 percent, the highest since the 2008 global financial crisis.
Strained economy
On December 4, Fitch Ratings Ltd. cut the country’s debt to BBB-, the lowest investment-grade level, while Standard and Poor’s lowered the outlook on its equivalent rating to negative. Fitch said looser fiscal policy, such as upward revisions to expenditure ceilings, may lead to more negative actions. The economy is under strain because of plunging metal prices and power constraints. The central bank is forecasting growth of 1.4 percent this year, which would be the slowest pace since the 2009 recession.
Investors are concerned that “worsening macro performance will lead to a more politicized approach to fiscal policy and structural reform,” Arnab Das, head of EM Macro at Invesco in London, said by e-mail. “There is also a threat
The sudden removal of the high profile and respected Nene, and his replacement with a relative unknown, is likely to be seen as a worrying signal about the government’s commitment to fiscal discipline and generate further market volatility Peter Worthington, economist, Barclays Plc’s Africa unit
Bloomberg News
Brazil’s top court suspends impeachment of Rousseff The injunction request at the Supreme Court was filed by the Communist Party of Brazil, a small but staunch Rousseff ally
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razil’s Supreme Court suspended impeachment proceedings against President Dilma Rousseff until it rules on the validity of a secret ballot that stacked a congressional committee with opponents seeking to oust the leftist leader. The ruling provided respite for Rousseff as she struggles to survive splits in her ruling coalition and fend off the effort to unseat her. She is also dealing with a severe recession and a widening corruption investigation at state-run oil company Petrobras that has implicated many of her allies.
that further ratings downgrades may well lead to South Africa’s exclusion from global government bond indices in the next one to two years.” Van Rooyen is the third finance minister since Zuma came to power in 2009. In that period, gross debt has surged from about 26 percent of gross domestic product to almost 50 percent. While Nene has sought to contain spending in a bid to rein in a widening budget deficit, his efforts have been frustrated by the government awarding above-inflation wage increases to workers over three years. Nene said in the mid-term budget in October the fiscal deficit will reach 3.3 percent in the fiscal year through March 2017, from 3.8 percent this year, and will narrow to 3 percent in the year through March 2019. The economy has floundered under Zuma’s leadership. The government has introduced a series of laws that companies say foster uncertainty and discourage investment, while spending decisions, such as the capping of university fees, were taken without proper budgeting. Key state-owned companies, such as the electricity utility Eskom Holdings SOC Ltd., have been dogged by leadership problems and funding shortages. A former intelligence operative with no formal education, Zuma took control of Africa’s second-largest economy just weeks after prosecutors dropped graft charges against him. He’s continued to be dogged by scandals, including squandering taxpayers’ money in a 215 millionrand (US$18 million) upgrade of his private home. He denies any wrongdoing.
Rousseff is not under investigation in the kickback scandal. But her former point man in the Senate, Delcidio Amaral, who is in jail awaiting trial on charges of obstructing the Petrobras probe, has agreed to cooperate with prosecutors. That could lead to new disclosures involving her ruling Workers’ Party (PT). The decision by a Supreme Court judge late on Tuesday stopped the creation of the impeachment committee until the country’s top court rules on December 16 whether the secret ballot was valid. Justice Luiz Edson Fachin, who was appointed by Rousseff, said
the impeachment process had to be suspended to avoid actions that might later be invalidated by the Supreme Court. The ruling could favour Rousseff by curbing the power of her political foe, lower house Speaker Eduardo Cunha, who called a secret ballot to allow wavering members of Rousseff’s coalition to back a pro-impeachment committee without public record. Cunha, who himself faces allegations of corruption, launched the impeachment proceedings last week based on an opposition accusation that the president violated budget laws with accounting tricks employed by her government to allow ramped up spending during her re-election campaign last year. Rousseff, in office since 2011, has denied wrongdoing. She reiterated that on Wednesday at an event in Boa Vista, a northern town near the border with Venezuela where she handed out low-cost houses. “I did nothing wrong. There was no graft,” Rousseff said, adding she was being impeached for spending too much on social programs. Reuters
Business Daily | 15
December 11, 2015
Opinion Business
wires
The renewable energy revolution
Leading reports from Asia’s best business newspapers
John A. Mathews
Professor of Strategy at Macquarie Graduate School of Management in Sydney and the author of Greening of Capitalism
TAIPEI TIMES The Fair Trade Commission levied fines totalling NT$5.8 billion (US$175.5 million) on 10 aluminium and tantalum capacitor manufactures for colluding with rivals to fix prices. It is the biggest penalty the commission has handed down on international companies since it was established in 1992. Taiwan is the first among authorities in Europe, Singapore, South Korea, China and the US — who have been collaborating on investigations into the case — to take regulatory action against the offending companies, the commission said. The commission launched joint investigations with its international counterparts in March last year.
THE PHNOM PENH POST As the number of boutique hotels rises rapidly in Phnom Penh, hoteliers say they have seen their occupancy rates drop this year due to the increased offerings – as well as the economic downturn in Europe and terrorism scares in the region. Nicole Rachle, manager of The 252 hotel in the capital’s Daun Penh commune, said the mid-range hotel’s average occupancy throughout the year has been down 40 per cent, as compared with last year. She attributed the decline to the rapid growth in the capital’s total available hotel rooms, coupled with economic troubles in Europe.
THE KOREA HERALD Foreign investors have been in a selling binge of local stocks as they reduced risky bets ahead of a looming U.S. rate hike, market watchers said yesterday. Offshore investors offloaded 243 billion won (US$207 million) worth of shares traded on the main KOSPI market on Wednesday, extending their selling spree to a sixth consecutive day, according to the Korea Exchange. Since the beginning of this month, they have sold a total of 1.38 trillion won of local stocks. Together with the shares listed on the tech-heavy KOSDAQ market, the foreign ownership of local stocks came to 29.33 percent of the total market capitalization as of yesterday.
THE STRAITS TIMES There will not be a major correction next year but factors from oversupply to lending curbs will keep prices of private homes and executive condominiums (EC) depressed, say analysts. They also warn that any let up on cooling measures seems unlikely in the near term as the price falls have not affected most owners. Mr Desmond Sim, CBRE research head for South-east Asia, told The Straits Times yesterday: “Most developers are still propped up by holding power as well as land prices, which continued to be quite high over the past year.
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n the United States and Europe, the benefits of renewable energy are predominantly seen as environmental. Energy from the wind and sun can offset the need to burn fossil fuels, helping to mitigate climate change. In China and India, however, renewable energy is viewed in a remarkably different fashion. The relatively rapid transition away from fossil fuels in both countries is driven not so much by concerns about climate change as by the economic benefits renewable energy sources are perceived as conveying. Indeed, while the economic benefits of renewables can be attractive to advanced economies such as Germany or Japan (both of which are rapidly moving away from fossil fuels), the advantages for emerging industrial giants are overwhelming. For India and China, an economic trajectory based on fossil fuels could spell catastrophe, as efforts to secure enough for their immense populations ratchet up geopolitical tensions. Aside from increased energy security, a low-carbon economy would promote domestic manufacturing and improve local environmental quality by, for example, reducing urban smog. To be sure, fossil fuels conferred enormous benefits on the Western world as it industrialized over the past 200 years. The transition to a carbon-based economy liberated economies from age-old Malthusian constraints. For a group of select countries representing a small slice of the global population, burning fossil fuels enabled an era of explosive growth, ushering in dramatic improvements
in productivity, income, wealth, and standards of living. For much of the past 20 years, China and India led the charge in claiming the benefits of fossil fuels for the rest of the world. Recently, however, they have begun to moderate their approach. As their use of fossil fuels brushes up against geopolitical and environmental limits, they have been forced to invest seriously in alternatives – most notably, renewables. In doing so, they have put themselves in the vanguard of a planetary transition that in a few short decades could eliminate the use of fossil fuels altogether. The economic arguments advanced against renewable sources of energy – that they can be expensive, intermittent, or not sufficiently concentrated – are easily rebutted. And while renewables’ opponents are legion, they are motivated more by interest in preserving the status quo of fossil fuels and nuclear energy than by worries that wind turbines or solar farms will blot the landscape. In any case, those wishing to halt the expansion of renewables are unlikely to triumph over simple economics. The renewable energy revolution is not being driven by a tax on carbon emissions or subsidies for clean energy; it is the result of reductions in the cost of manufacturing that will soon make it more cost-effective to generate power from water, wind, and the sun than from burning coal. Countries can build their way to energy security by investing in the industrial capacity needed to produce wind turbines, solar cells, and other sources of renewable energy at scale.
For much of the past 20 years, China and India led the charge in claiming the benefits of fossil fuels for the rest of the world. Recently, however, they have begun to moderate their approach
As China and India throw their economic weight into the renewables industrial revolution, they are triggering a global chain reaction known as “circular and cumulative causation.” Unlike, mining, drilling, or extraction, manufacturers benefit from learning curves that make production increasingly efficient – and cheaper. Investments in renewable energy drive down the cost of their production, expanding the market for their adoption and making further investment more attractive. From 2009 to 2014, these mechanisms drove down the cost of solar photovoltaic energy by 80% and reduced the cost of land-based wind power by 60%, according to Lazard’s Power, Energy & Infrastructure Group. The impact of the rapid uptake in renewable energy could have consequences as profound as those unleashed by the Industrial Revolution. In the eighteenth century, the economies of Europe and the United States initiated the transition to an energy system based on fossil fuels without fully understanding what was happening. This time, we can see the way things are changing and prepare for the implications. For the moment, the outlook appears promising. Efforts to reduce carbon dioxide emissions may not be the prime driver of the renewable energy revolution; but it is very possible that without the revolution, efforts to minimize the impact of climate change would never succeed. If we are able to avoid the worst dangers of a warming planet, we may have India and China to thank for it. Reuters
16 | Business Daily
December 11, 2015
Closing Zara owner reaps benefits of expansion as profit jumps 20%
Beijing subsidiary administration centre ready in 2017
Spanish global clothing giant Inditex, owner of the Zara brand, posted yesterday a 20-percent surge in nine-month net profits as its investments and expansion began to pay off. The group said in a statement that net profit rose to 2.0 billion euros (US$2.2 billion) between February and October in its non-standard fiscal year. Expansion efforts had weighed down last year’s results, but profits rose this year by a greater margin than the healthy 16.6-percent rise in sales to 14.7 billion euros. Inditex continued its expansion by opening 230 stores and 13,079 jobs in the first nine months of its 2015 fiscal year.
A subsidiary administrative centre due to be built in suburban Tongzhou as part of plans to ease overcrowding in Beijing (pictured from Tongzhou view) will be completed in 2017, the city’s vice mayor said yesterday. “Construction will start this year,” said Li Shixiang at a press conference. Building the centre in Tongzhou, about 40 minutes’ drive from the centre of the Chinese capital, is one of several moves to cure “urban ills” including overpopulation, traffic congestion and smog. It forms part of the broader plan to integrate Beijing with neighbouring Tianjin Municipality and Hebei Province. Tongzhou has 870,000 registered residents.
Crunch time after all-night climate talks in Paris One of the key battle lines is what cap on global warming to enshrine in the accord, set to take effect in 2020
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eary envoys from 195 nations battling to forge an accord to save mankind from disastrous global warming emerged yesterday from allnight talks facing an imminent deadline with deal-breaking rows still unresolved. More than two decades of bruising international diplomacy have failed to produce such a pact, which would require the world’s energy system to cut back on burning coal, oil and gas that releases planet-warming gases. The 195-nation UN talks in the French capital have been billed as the last chance to avert worst-case-scenario climate change impacts: increasingly severe drought, floods and storms, as well as island-engulfing rising seas. After nine days of tense negotiations, French Foreign Minister and conference host Laurent Fabius (pictured) released a draft Wednesday of the final accord to be used as the basis for final negotiations.
Fabius has set an ambitious deadline of Friday for the deal to be reached, and negotiators met through the night to debate the text at a sprawling conference venue in Le Bourget on the northern outskirts of Paris. But Fabius announced no breakthroughs in any of the biggest arguments -primarily between developing and developed nations -- that have derailed previous UN efforts to forge an accord. They include over how to pay for the costly shift to renewable energy, and how to compensate the developing nations who are feeling the biggest impacts of
climate change but have emitted the least greenhouse gases.
Red lines
Embarking on a final session of the marathon talks on Wednesday night, a host of nations from all sides of the disputes voiced their entrenched positions. One of the key battle lines is what cap on global warming to enshrine in the accord, set to take effect in 2020. Many nations most vulnerable to climate change want to limit warming to no more than 1.5 degrees Celsius over pre-Industrial Revolution levels.
However several big polluters, such as the United States, China and India, prefer a ceiling of 2C, which would allow them to burn fossil fuels for a while longer. Barbados’s Environment Minister, Denis Lowe, representing a bloc of Caribbean nations among the most vulnerable to rising sea levels, told the latenight session 1.5C was nonnegotiable. Many other ministers echoed their nations’ longheld positions. Still, most also said the draft was an acceptable blueprint to work from, and they were prepared to continue negotiating.
Billion-dollar deal-busters
One of the biggest potential deal-busters remains money. Rich countries promised six years ago in Copenhagen to muster US$100 billion a year from 2020 to help developing nations make the costly shift to clean energy, and to cope with the impact of global warming.
But how the pledged funds will be raised still remains unclear -- and developing countries are pushing for a promise that the amount will be ramped up in future. Meanwhile, rich nations are insisting that developing giants work harder to tackle their greenhouse gases, noting that much of the world’s emissions come from their fast-growing economies. Most nations submitted to the UN before Paris their voluntary plans to curb greenhouse gas emissions from 2020, a process that was widely hailed as an important platform for success. But scientists say that even if the cuts were fulfilled, they would still put Earth on track for warming of at least 2.7C. One of the remaining battle fronts in Paris is a debate over when and how often to review those national plans, so that they could be “scaled up” with pledges for deeper emissions cuts. But some developing nations insist they should not be pressured into deeper cuts. Despite the hurdles, longtime observers said a deal could be reached in Paris. Previous UN climate conferences have extended well past their scheduled finishing times, meaning talks could extend into the weekend. However Fabius has said he is determined for the Paris talks to end on Friday.
China Hongqiao Group cuts Yuan closes at four-year low aluminium output as prices tumble on signs PBOC allowing drop
CPC vows more consultation with other parties
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luminium producer said yesterday it will cut annual capacity by 250,000 tonnes immediately, the latest smelter to pledge to curb supplies as the loss making industry combats low local prices. The output cut, representing 6 percent of the company’s total capacity, mirrors similar moves over the past month by the copper, zinc and nickel industries and followed a meeting of 14 major Chinese aluminium smelters in Kunming in Yunnan province. “We will not consider resuming production of the (250,000 tonnes) capacity,” a China Hongqiao official told Reuters. Aluminium futures in Shanghai closed slightly higher on the news, although the reaction was largely muted as the latest cut in the world’s top producing country was considered too small to make a dent in a global stockpile glut estimated at 14 million tonnes. Still, the move reflects the deepening pain across the industry with Shanghai prices down more than 20 percent in 2015 and on course to fall for a sixth straight year. Wan Ling, an analyst at research consultancy CRU, said there is likely to be “more production cuts at plants with high cost and big losses, especially those using grid power.”
hina’s yuan closed at the weakest level in more than four years on signs the central bank is allowing depreciation to boost exports in the run-up to the Federal Reserve’s interest-rate decision. The People’s Bank of China cut the yuan’s reference rate, which restricts the onshore spot rate’s moves to a maximum 2 percent on either side, by 0.15 percent to a four-year low of 6.4236 a dollar. The monetary authority has cut the fixing on six of the eight trading days since winning reserve status at the International Monetary Fund on Nov. 30. There’s a 78 percent chance the Fed will raise borrowing costs at its Dec. 15-16 meeting, futures contracts show. The yuan dropped 0.15 percent to 6.4378 a dollar, the weakest close since August 2011, China Foreign Exchange Trade System prices show. The currency fell for a fifth day and has lost 0.6 percent this month. In Hong Kong’s offshore market, the yuan slipped 0.03 percent to 6.5221, according to data compiled by Bloomberg, taking its decline in December to 1.4 percent. “All it takes for the renminbi to go down is for the PBOC to stop propping it up,” said David Woo, Bank of America Corp.’s head of global rates and foreign-exchange research.
Reuters
Bloomberg News
AFP
he Communist Party of China (CPC) has promised to give other democratic parties more say in making big decisions. “Party consultation is a key part of the system of multi-party cooperation and political consultation under the CPC leadership... a crucial channel for the CPC to boost its governing capacity,” according to a document made public by the general office of the CPC Central Committee yesterday. It echoed comments made in June by the CPC Central Committee. Party consultation refers to discussions between the CPC and democratic parties on major Party and national policies and affairs. “Strengthened party consultation means expanded channels for people from democratic parties or without party affiliation to participate in political affairs and express their opinions smoothly,” the document said. The general office said it would consult on key documents drafted by the CPC Central Committee, national economic and social development plans, prominent issues in reform and stability, revision to the Constitution, amendments to key laws, and candidates for state leaders. Xinhua