Macau Business Daily December 15, 2015

MOP 6.00 Closing editor: Oscar Guijarro

Casino operators mull salary hike Page 5

Publisher: Paulo A. Azevedo Number 941 Tuesday December 15, 2015 Year IV

Alibaba closes SCMP acquisition deal Page 9

Cardsharps Under Increased Surveillance Cash withdrawals disguised as luxury purchases. Deutsche Bank says the authorities are turning up the heat. On perpetrators and colluding merchants. With suspicious jewellery and pawnshop transactions near casinos the first to come under the spotlight. A likely consequence, according to the bank, is that premium mass and VIP gaming will take the deepest hit as tighter control is exerted on UnionPay cards in the first instance. According to DB research ‘disguised’ cash withdrawals represent from 10 to 15 pct of cash accessed by Mainland players in the MSAR Page

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Making waves

More alleged bribe-taking.

The city’s graft buster has investigated three officials from the Marine and Water Bureau this year. The latest case involves a Bureau officer purportedly accepting multiple advantages from a shipping company

www.macaubusinessdaily.com

A sweeping restructure. Affecting the Civic and Municipal Affairs Bureau, the Cultural Affairs Bureau and the Sport Development Board.

Effective January 1.

And in accordance with the government’s streamlining plan

Page 5

Reversal of fortunes Just a year ago. Citic Securities was hailed as the new Goldman Sachs. The national stock market hike helped them reap record benefits. Now they face censure. By Chinese graft authorities investigating their activities following the exchanges rout

Pages 10 & 11

Brought to you by

HSI - Movers December 14

Name

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China Life Insurance Co

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Ping An Insurance Gro

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Hong Kong Exchanges

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CITIC Ltd

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Hang Seng Bank Ltd

+0.42

Sands China Ltd

-1.55

China Mengniu Dairy C

-1.72

China Resources Land L

-2.13

Society

Galaxy Entertainment

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City sings the blues

Belle International Ho

-6.77

Page 4

Major portfolio reshuffle

Fosun tycoon reappears in Shanghai Page 8

Source: Bloomberg

The Happiness Index survey is out.

Revealing that Macau residents’ mood has worsened this year. Expressing growing dissatisfaction with income, employment environment, transportation and the govt’s overall administration of the city. For a total of 6.89 out of 10 points

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December 15, 2015

Macau

Residents less happy amid economic downturn The Macau Economic Association claimed in a survey that the economic downturn has caused local residents to feel the least happy in six years Kam Leong

kamleong@macaubusinessdaily.com

The rapid growth of GDP may not effectively enhance people’s happiness, but the downturn of the economy always affects people’s happiness Lao Chi Ngai, president, Macau Economic Association

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mid the current economic downturn, local residents are less happy than in the previous five years citing less satisfaction with their work, the economic situation and the whole employment environment, reveals the city’s Happiness Index survey, released yesterday.

The study, jointly conducted by the Macau Economic Association and the Macau Polytechnic Institute’s Gaming Teaching and Research Centre, marks local residents’ general happiness at 6.89 out of 10 points, down 1.4 per cent from the 6.99 points of last year, and the lowest since the study started in 2010.

Having interviewed 1,017 local residents over 18 years old in November, the researcher claims that

26.5 per cent of the interviewees perceive their economic income worsening this year. The percentage is the highest in six years.

In addition, some 26 per cent of interviewees claim they are less happy compared to the previous year, of which the proportion is also the highest since 2010.

Less satisfied with employment environment

In terms of elements, the study finds that local residents’ satisfaction of the local employment environment has dropped the most significantly - by 5.7 per cent to 6.62 points this year.

Transportation, at 4.21 points, continues to be the most unsatisfactory element for the city’s residents for the

fourth consecutive year, followed by living environment and the consumer price index, which scored 5.59 and 4.84 points, respectively.

In particular, a notable decline of 3.3 per cent was also observed in residents’ satisfaction with the government’s overall administration.

The president of the association, Lao Chi Ngai, urged in the report that the city’s different sectors should implement the Chief Executive’s policies of boosting the local economy, warning the city should request the central government to introduce measures to support the city’s economic development when it is necessary.

“The rapid growth of GDP may not effectively enhance people’s

Government prolongs payment period for HK-Zhuhai-Macau Bridge

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he delay in progress of the boundary crossing facilities of the Hong Kong-Zhuhai-Macau Bridge has forced the government to prolong the instalments to be paid for the project. The payments will now be extended to 2017, when originally they were supposed to be completed by the end of next year,

according to the Official Gazette.

However, the general amount to be paid to the consortium comprising PC Consultadoria de Arquitectura, BLA Consultores de Arquitectura e Engenharia and P&T Architects and Engineers will not be increased from the original MOP71 million (US8.89 million).

happiness, but the downturn of the economy always affects people’s happiness,” the academic noted. He also indicated that improving the living environment and resolving housing problems would help increase the city’s general happiness.

“Despite the macro-economy entering a deep adjustment phase with housing prices dropping, such prices are still way beyond the purchase ability of local residents…It will be [useless] to increase residents’ happiness as they are not able to fulfil their housing dream,” he wrote.

Nevertheless, compared with the happiness index conducted by the Organization for Economic Cooperation and Development (OECD) which evaluates 34 countries, the happiness level of local residents exceeds the global average of 6.66 points - although the city’s general happiness is lower than Hong Kong’s 7 points.

Business Daily | 3

December 15, 2015

Macau Hengqin Border to apply tax refund policies to overseas visitors Zhuhai’s Hengqin Border will offer tax refunds to overseas visitors, including Macau and Hong Kong residents.

According to the Guangdong Provincial Office of the State Administration of Taxation, Guangzhou and Zhuhai will implement tax refund policies for overseas visitors purchasing tax-free goods. In addition to the Hengqin Border, the checkpoints at Guangzhou Baiyun International Airport and Nansha Port will implement the new tax-free policies. However, the authority did not reveal when the policy will be implemented.

Deutsche Bank: New UnionPay rules to damage premium and VIP segments Cash withdrawals disguised as luxury purchases are said by the bank to represent between 10 and 15 per cent of the cash access by gamblers in Macau João Santos Filipe*

jsfilipe@macaubusinessdaily.com

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he new UnionPay rules designed to tackle cash withdrawals disguised as luxury purchases are expected to further hurt the premium mass and VIP gaming segments, Deutsche Bank says. According to research notes published yesterday, these disguised cash withdrawals account for between 10 to 15 per cent of the cash accessed

by Mainland players in the MSAR. “We believe, unlike previous attempts, that Macau is now more serious in tackling the much more common practice where jewellery and pawnshops use UnionPay on the official Macau banking network to disguise cash withdrawals as purchases. We estimate these transactions fund 10-15 per cent of cash accessed by gamblers”, the research note signed by analyst Karen Tang says.

According to the report, such transactions account for around 30 per cent of the cash accessed by premium mass players and 10 per cent of the VIP segment. On the premium mass side, the investment bank expects Melco Crown Entertainment and MGM China to struggle more with this measure due to their high exposure.

The premium mass segment generates around 45 per cent of the EBIDTA [Earnings Before Interest, Taxes, Depreciation and Amortization] of Melco Crown and 42 per cent of MGM China’s, the report says.

Regarding the VIP segment, Galaxy Entertainment Group and Wynn Macau are expected to be the most affected gaming operators.

Deutsche Bank calculates that 26 per cent of Wynn’s EBITDA derives from the VIP segment, while in Galaxy the VIP segment generates 24 per cent.

Gaming operators supportive of policy

However, quoted yesterday by local Chinese language Macao Daily News, the gaming operators shared a different view on the subject. The

We estimate these transactions fund 10‑15 per cent of cash accessed by gamblers Karen Tang’s research note, Deutsche Bank

CEO of SJM Holdings, Ambrose So Shu Fai, President and COO of Sands China Wilfred Wong, and CEO of MGM China Grant Bowie, all said they were in support of this policy and that they were not expecting the business to be affected by it.

In Macau, some players use local watch and jewellery and pawnshops to access their accounts on the Mainland, by swiping their UnionPay debit cards issued by Chinese banks. The record of these transactions will show that the UnionPay cardholder has bought luxury products, while in reality leaving the shops with the cash equivalent of the purchase.

On December 8, however, representatives from UnionPay and

China’s central bank held a meeting to discuss how to strengthen regulations involving the use of the payment device and clamp down on ‘fake commercial trades,’ the company said in an e-mailed statement.

Last Friday, after the meeting was reported by South China Morning Post, the Monetary Authority of Macau (AMCM) announced that it will implement a real-time monitoring of UnionPay cards involving high-risk merchants. Initially, this will cover high-risk merchants near casinos, mostly jewellery and watch retailers.

However, contacted by Business Daily, AMCM declined to reveal when this measure will be implemented. *With Stephanie Lai

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December 15, 2015

Macau

Graft Buster: Another Marine and Water Bureau officer investigated While a Marine and Water Bureau ‘chief’ has allegedly accepted bribes from a shipping company, yet another graft case revolves around its vice-director and a department chief having been investigated for alleged bribery earlier this year Stephanie Lai

sw.lai@macaubusinessdaily.com

Customs inspector allegedly accepted bribes from gambler The Commission Against Corruption said a Customs inspector allegedly accepted bribes for letting a gambler go after he had brought excessive cash into Macau when crossing the Lotus Border in Cotai.

The inspector was asked to do the favour of releasing the gambler by a “gaming businessman” and a prison chief in the case, but the amount of bribe was not specified, according to the graft buster.

Mainland Chinese visitors are only permitted to take a daily maximum of 20,000 yuan (US$3,109) out of China in cash.

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he city’s Commission Against Corruption (CCAC) said it found that a Marine and Water Bureau officer had allegedly abused his position by accepting bribes from a shipping company from 2012 to 2015. This new case follows on the heels of the graft buster’s previous investigation into two highranking officials from the Bureau earlier this year.

In a statement issued yesterday, the Commission said it has finalised its investigation into a Marine

and Water Bureau ‘chief’ who had allegedly abused his position by accepting bribes from the staff of a shipping company in the form of ferry tickets, hotel accommodation, and restaurant services from 2012 to 2015. The chief had also requested the shipping company to arrange for a job for his family or friend, and had asked for the reservation of a shop space in the Outer Harbour Ferry Terminal for his family or friend to operate.

The Commission has

refused to identify to Business Daily who this Bureau chief was. In a brief statement issued yesterday, the Marine and Water Bureau said this official has already been suspended from his post.

According to the Commission’s statement, the Bureau chief aided the shipping company in getting exemption from a penalty for not complying with the Bureau’s ‘guidelines and instructions’. But the graft buster did not elaborate on what guidelines it was referring to.

In late March of this year, Secretary for Transport and Public Works Raimundo Arrais do Rosário confirmed to media that a vice-director and a department chief from the Marine and Water Bureau were both allegedly involved in a bribery case

In late March of this year, Secretary for Transport and Public Works Raimundo Arrais do Rosário confirmed to media that a vice-director and a department chief from the Marine and Water Bureau were both allegedly involved in a bribery case. Both of the Bureau officials were suspended from their posts and barred from leaving Macau.

The government, however, has not disclosed details relating to the bribery case of the Marine and Water Bureau vice-director and department chief.

The Commission Against Corruption has also declined to comment further to Business Daily on the relationship between its investigation into the Marine and Water Bureau vicedirector and the Bureau chief that has allegedly involved accepting bribes from a shipping company which the Commission declined to identify.

Government pays MOP23.31 mln MGTO hires consultant firm for pedestrian overpass to target Taiwanese market

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acau’s Official Gazette has announced that the government will pay MOP23.31 million (US2.92 million) for the construction of the pedestrian overpass on Doutor Mário Soares Avenue. The construction will be developed by the Macau Branch of

Shanghai Construction Group (SCG) and the project is expected to be completed during 2016. According to the dispatch signed by Chief Executive Fernando Chui Sai On the government will pay MOP5 million this year and another MOP18.31 million next year.

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acau Government Tourist Office (MGTO) has hired the services of consultant firm Compass Public Relations to target the Taiwanese market, it was announced in the Official Gazette. The contract signed by Chief Executive Fernando Chui Sai On with the Taiwanese based company will

cost the Macau Government MOP1.73 million (US216,722), which will be covered next year by the Tourism Fund.

From January to October of this year, the territory received a total of 818,233 visitors from Taiwan. In 2014, the total number of Taiwanese visitors to Macau amounted to 953,753.

Business Daily | 5

December 15, 2015

Macau

Gaming operators to study salary hike In March of this year, SJM, Sands China, Melco Crown Entertainment Ltd. and Wynn Macau Ltd. all granted five per cent pay rise to their staff, while MGM China announced a salary increase of between 6 and 8 per cent

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ocal gaming operators MGM China Holdings Ltd. and Sands China Ltd. will study whether to increase workers’ salaries next year, their chief officers have told Chinese language newspaper Macao Daily.

CEO and executive director of MGM China, Grant Bowie, told the news outlet that the company had not yet made any decision about a salary hike. He remarked that this year is a challenging year for the gaming company, and thus he does not want to raise employees’ expectations just to disappoint them.

According to Mr. Bowie, the company will announce the decision following internal meetings.

Meanwhile, Sands China president Wilfred Wong hopes to adjust workers’ wages by a reasonable level.

The Sands China president claimed that his company would analyse the general social environment, inflation and the company’s performance pursuant to any salary rises.

In fact, the Chief Executive Officer of SJM Holdings Ltd., Ambrose So Shu Fai, also told reporters last week that the company’s management will

Meanwhile, Sands China president Wilfred Wong hopes to adjust workers’ wages to a reasonable level

meet to discuss whether to increase employees’ wages in 2016. He claimed then that SJM would make the decision based on the current economy, the company’s performance and the city’s living index.

In March of this year, SJM, Sands China, Melco Crown Entertainment Ltd. and Wynn Macau Ltd. all granted five per cent pay rise to their staff, while MGM China announced a salary increase of between 6 and 8 per cent.

IACM, Culture Affairs Bureau & Sport Development Board restructure The total number of staff will be increased to 234 from the current 216

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he government will officially restructure functions of the Civic and Municipal Affairs Bureau (IACM), the Cultural Affairs Bureau and the Sport Development Board from January 1 next year, the Official Gazette announced yesterday.

From next year, IACM will be stripped of its functions in the fields of culture, leisure and sport.

These functions will be distributed respectively to the Culture Affairs Bureau and the Sport Development Board, according to the official dispatch by the Chief Executive Fernando Chui Sai On. The government will assign IACM the new power to co-ordinate and develop cross-department public services. The Bureau will be able to provide services for other public departments after signing agreements with them from next year.

Meanwhile, the Cultural Affairs Bureau, continuing to be headed by one director and two deputy heads, will be expanded to oversee eight departments and sixteen divisions rather than the current seven departments, five divisions, five sectors and three sections. The total number of staff will be increased to 234 from the current 216.

The government is also expanding the structure of the Sport Development Board, increasing its total subordinates to five departments and eleven divisions, while the number of staff will jump to 153 from the current

The government will assign IACM the new power to co‑ordinate and develop cross-department public services

83. In addition to the new function transferred from IACM, the Board will manage the city’s Grand Prix from next year. The government will also amend the Chinese title of the Sport Development Board to, literally, the Sports Bureau.

The drafts of the restructuring of the three bureaus were proposed by the Executive Council last Friday.

The restructuring is to meet the government’s objective of streamlining the city’s administrative structure.

K.L.

CEO and executive director of MGM China, Grant Bowie

6 | Business Daily

December 15, 2015

Macau

Li: Chinese gov’t establishes body to support SAR economy Mr. Li told reporters that he believes the Special Administrative Region would eventually overcome its economic difficulties

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he director of the Chinese Liaison Office in Macau, Li Gang, said on Sunday that the Chinese central government had established a functional body to support the city’s economic development.

The Beijing official claimed that the department would gradually introduce policies that benefit the economy of the Special Administrative Region. However, he declined to reveal the details of the body and possible policies for the city.

In October, the local Liaison Office head mentioned that the central government would implement more policies to support the city’s economy, several of which were be related to the gaming industry.

“Good news” would be announced in these few days and that society would know more details at that time

Remarking upon the city’s gaming revenues having dropped for 17 consecutive months, Mr. Li told reporters that he believes the Special Administrative Region would eventually overcome such economic difficulties.

Jurisdiction over local waters approved In addition, he suggested that the central government would announce the approval of the city’s request for jurisdiction over local waters “in these few days”.

The Beijing official told reporters on Sunday that the progress of the central government’s evaluation of the city’s application was going “very smoothly”, claiming “good news” would be announced in these few days and that society would know more details at that time.

According to Mr. Li, the central government has also decided whether the waters of the Canal dos Patos, a short canal separating Zhuhai and Macau, will be managed by the Special Administrative Region or the Chinese city. The official described the decision as “reasonably distributed”.

In September, the local government officially submitted its request for administrative rights over the city’s customary waters to the central government, after Chinese President Xi Jinping gave the city the go-ahead to conduct a study on the jurisdiction of its own waters during his visit to the territory for the 15th anniversary of Macau’s handover last December.

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Corporate Clean Energy Forum ready to kick off The Fourth International Forum for Clean Energy (IFCE), under the guidance of China Economic and Social Council and with the support of the Macao SAR Government, will be held in Macau from 16th to 17th December 2015.

This year’s theme is ‘Clean and Efficient Utilisation of Coal, Conserve Energy and Reduce Emissions to Develop a LowCarbon Environment’. The Forum will focus on the latest trends of the global energy market as well as new policies related to the energy industry and its market development, with the goal of building a sustainable and ecological society. The Forum also seeks to promote the clean and efficient utilisation of coal by means of applying high technology, and exploits co-operative programmes.

The 2-day Forum will also include the launch of the 2015 Blue Book of Clean Energy, the ‘2015 Chinese Photovoltaic Top

Runner Programme’ Excellent Enterprises Award Ceremony, the 2015 Forestry Carbon Sink and Forestry Industry Development Sub-Forum, and the 2015 Coal Chemical Industry Sub-Forum.

The Forum is jointly organised by IFCE (Macao), China Quality Certification Centre, the Committee of Coal Chemical Industry of China Energy Society, and Hong Kong Emission Exchange.

Other supporting organisations include the Macao Foundation, the Environmental Protection Bureau of the Macao SAR Government, the Office for the Development of the Energy Sector of the Macao SAR Government, Global Forum on Energy Security, Energy Saving and Emission Reduction Centre of the China Energy Research Society, International Institute for Sustainable Development, SJM Holdings Limited, and China Three Gorges Corporation.

Gov’t extends Wing Hing’s Chinese lottery contract to end-2016

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he government is to extend the licence contract with Chinese lottery company Sociedade de Lotarias Wing Hing Limitada to December 31, 2016, the Official Gazette announced yesterday.

Secretary for Economy and Finance Lionel Leong Vai Tac will oversee the amendment of the contract. Wing Hing has monopolised the city’s sale of Chinese lotteries since 1990. During the first three quarters of this year, it generated some MOP5 million (US$625 million) in gross revenues, according to the official data of the Gaming Inspection and Co-ordination Bureau (DICJ).

Business Daily | 7

December 15, 2015

Gaming

Old lawsuits never die.

They don’t even fade away, tribe learns Friction between local California communities and Indian tribes over the casino industry are on the rise Edvard Pettersson

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alifornia’s latest water war is being waged at the edge of wine country against an Indian tribe planning a massive casino expansion as a group of landowners tries to stop them with a lawsuit from 1897.

It gets better: The Santa Ynez Band of Chumash Indians is spending US$170 million to build out its resort, featuring a 12- story tower on a bucolic landscape where only the mountains are higher. The tribe has also snapped up 1,400 more acres to house cramped residents of its reservation.

The landowners say the Chumash are spoiling the Santa Ynez Valley, the only wine-tasting day trip from Hollywood and the backdrop for the 2004 film “Sideways,” and that the casino site isn’t part of the tribe’s federally recognized reservation. The landowners went to court, saying the judgment from the 1897 suit means the Chumash can’t tap the local creek for the resort.

In other words, they’re threatening to choke off the Indians’ water supply, and doing so when water is more precious than ever after a four-year drought has left California parched.

The fight is also brewing as frictions between local communities and Indian tribes over the casino industry are on the rise.

Tribal exemptions

The casinos raked in US$28.5 billion in gross gambling revenue in 2014, the difference between wins and losses before deducting costs, the National Indian Gaming Commission says.

About a quarter of that comes from California and Northern Nevada. The Las Vegas Strip took in US$6.37 billion, data from the University of Nevada, Las Vegas, show.

“Local communities might be excited about the employment opportunities at a tribal casino but, on the other hand, might not like it that the casino is exempt from local wage and hours laws,” said Kevin Rosenberg, a lawyer with Lowenstein & Weatherwax LLP in Los Angeles who works on gambling cases but isn’t involved in this one.

In the Santa Ynez Valley, the Chumash say, it’s all the work of a small group who’ve tried to block them at every turn and would like the tribe out of the valley altogether.

“As far as Santa Ynez being a nice place, we’re aware of that,” Vincent Armenta, the tribe’s chairman, said in an interview at the Chumash Casino Resort. “We’ve been here well before the town was even being developed, and before the movie stars came.”

‘Lawless chaos’

By 11 a.m. on a recent Tuesday, the slot machines were flooded with retirees and others. A steady stream of gamblers pulled up at valet parking amid the deafening construction.

Armenta, who had a welding business in Los Angeles before becoming chairman in 1999, declined to discuss the financial details of the business, which has 2,000 slots and more than 40 table games.

The casinos raked in US$28.5 billion in gross gambling revenue in 2014, the difference between wins and losses before deducting costs, the National Indian Gaming Commission says. About a quarter of that comes from California and Northern Nevada. The Las Vegas Strip took in US$6.37 billion

“We’ve been successful,” he said.

“In the last 14 years, we’ve built the business from what would be considered a very small business to a multibillion-dollar enterprise, including other properties off-site, hotels, restaurants, gas stations, commercial property, rentals in different states.”

Some of the locals aren’t impressed.

“You’re being asked to approve of the wholesale destruction of lives and livelihoods,” Nancy CrawfordHall, a horse breeder who owns the 10,000-acre San Lucas Ranch and has lived in the valley for 60 years, said in October at a public meeting of county officials and Chumash representatives.

She called the hotel tower the “height of arrogance” and said the tribe was likelier to build casinos than houses on the new land, bringing “lawless chaos” to the valley.

Local communities might be excited about the employment opportunities at a tribal casino but, on the other hand, might not like it that the casino is exempt from local wage and hours laws Kevin Rosenberg, lawyer, Lowenstein & Weatherwax

Water, water

The Indian property isn’t subject to local environmental and safety regulations, so the community has no recourse to address any violations, said Steve Pappas, the executive director of Save the Valley LLC, the group that has taken the tribe to court.

California officials last year sent Armenta a letter expressing concern over the casino’s projected increase in water use -- an extra 36,000 gallons a day -- among other things. In the Santa Ynez Valley, as in so much of California, the green rolling hills are now brown rolling hills. In August, the Chumash agreed to address local environmental concerns as part of their renewed gaming compact with the state.

That isn’t good enough for Pappas.

He said the tribe has been using

federal Indian policy as a lever to acquire land, wealth and power.

Ancient history

“Every time we’ve raised one of those issues, the answer is ‘Yes, we’re violating, we understand that, we know that’s the law. But the land is in trust for the Santa Ynez Band of Mission Indians, so therefore we don’t have to follow the law,’” Pappas said. Save the Valley has been stymied in previous attempts to sue the Chumash because the tribe, which is its own nation legally speaking, enjoys sovereign immunity.

So the group went to the history books and discovered the judgment, from 1906, that followed the 19thcentury suit, originally filed by the

bishop of Monterey against Indians living on the Catholic Church’s land.

He wanted to establish the terms by which they could live there, restricting water use to domestic purposes.

The key to the suit predates statehood. The Church got the land from the Mexican governor of California in 1844. Part of it went to San Francisco’s diocese and the rest to Monterey’s, with a creek dividing the property. According to Save the Valley, the land extending 25 acres west of the creek is the only parcel that was ultimately designated as a reservation.

Local rules

The casino is on the 75 acres east of the creek, which were later transferred to the U.S. but never formally made part of the federal reservation, Save the Valley argues, meaning that parcel must comply with local land use rules.

The judgment limits the use of water by the Indians living on the east side of the creek to irrigation and domestic purposes. Save the Valley says that prohibits the Chumash from using it for the casino.

The U.S., which holds reservation land in trust for tribes, has moved the matter to federal court in Los Angeles, arguing that it involves the federal question of sovereign immunity.

The judge is considering whether to allow Save the Valley to resurrect the lawsuit.

Not all of the Chumash’s neighbours are worried about the tribe’s plans.

“It’s only a small group that has been bitching and moaning,” said Mark Burnett of the Maverick Saloon, near the Chumash casino. “Nobody else talks about it. And everybody else here gets along.”

Bloomberg News

8 | Business Daily

December 15, 2015

Greater China

Fosun’s chairman makes first public appearance after assisting probe Guo’s alleged disappearance late last week had sparked investors concern about its impact on Fosun Engen Tham

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osun International Chairman Guo Guangchang attended a company meeting in Shanghai yesterday, two people at the event told Reuters, his first public appearance since a report he had gone missing last week sparked speculation the firm was being drawn into Beijing’s corruption crackdown.

Guo, a self-styled student of investor Warren Buffett, did not say where he had been, or make any reference to a Fosun statement on Sunday that said he had been assisting the Chinese authorities in an investigation, an executive who declined to be named said on the side-lines of the meeting.

Instead, Guo discussed Fosun’s strategy and performance, receiving a standing ovation from the people gathered at a Shanghai hotel for the meeting, the sources said.

Both sources declined to be named as they were not authorised to speak to the media. A Fosun spokeswoman declined to give any details about the meeting.

Guo’s alleged disappearance late last week had sparked investors concern about its impact on Fosun, one of China’s most aggressive global dealmakers with stakes French resort chain Club Med, Britain’s Thomas Cook Group and iconic U.S. building One Chase Manhattan Plaza.

A string of senior Chinese executives have gone missing temporarily this year, amid a widespread government crackdown on corporate graft, especially in China’s financial sector.

Negative impact

Fosun International’s Hong Kong-listed shares were suspended on Friday after reports of Guo’s disappearance late on Thursday triggered a sell-off in the firm’s overseas

depository receipts in New York.

Shanghai Fosun Pharmaceutical Group Co Ltd, also suspended on Friday, dropped over 10 percent yesterday.

Ratings agency Standard

& Poor’s said Guo’s involvement in the probe had yet to impact Fosun’s credit ratings and outlook, but an “extended investigation” could negatively impact the firm’s access to funding and pending acquisitions.

Guo, 48, has built an empire stretching from insurance and banking to healthcare and leisure, amassing a personal net worth of US$5.7 billion, according to Forbes.

Reuters

Shipping groups merger plan erases US$900 million in v The companies’ shares remain suspended from trading in Shanghai pending a review of

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hina’s biggest shipping reform failed to enthuse investors as two major companies lost about US$900 million in total market value after the government proposed combining its two key ocean liner groups.

China Shipping Container Lines Co. and China Cosco Holdings Co. led the declines with drops of as much as 30 percent, the most on an intraday basis in more than 10 years. The shares had been halted from trading since August pending an announcement by their parent companies.

The State-owned Assets Supervision and Administration Commission announced approval Friday for the reorganization of China Ocean Shipping Group and China Shipping Group, extending efforts to shrink industries plagued by overcapacity while creating globally competitive businesses. The plan comes as other shipping companies explore mergers and acquisitions amid a slump in global freight rates.

“China shipping stocks have been suspended for more than four months so part of today’s slide has to be the shares catching up with the broader market” decline, said Castor Pang, head of research at Core Pacific Yamaichi International Hong Kong Ltd.

Market declines

Hong Kong’s benchmark Hang Seng Index fell 13 percent during the four months when shares of China Ocean

Shipping Group and China Shipping Group companies were halted in the city. The Shanghai Composite index dropped 8.3 percent in the period.

The companies’ shares remain suspended from trading in Shanghai pending a review of the restructuring by the stock exchange there.

The entire reorganization plan, while intended to help consolidate operations, is very complicated and unwieldy. It won’t be a year or two before effects are fully seen and understood Castor Pang, head of research, Core Pacific Yamaichi International

Cosco Corp. Singapore Ltd. as much as 19 percent to S$0.305, the lowest intraday price since February 2004, after resuming trading Monday.

The company expects a significant loss in the fourth quarter as some offshore contracts are deferred or potentially canceled, Cosco Singapore said last

Business Daily | 9

December 15, 2015

Greater China Alibaba agrees South China Morning Post acquisition terms Executive Vice Chairman of Alibaba dismissed suggestions Alibaba would compromise the newspaper’s editorial independence

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libaba Group Holding Ltd has agreed on a US$266 million deal to acquire the South China Morning Post and other media assets of SCMP Group Ltd, a deal that has raised a question over the outlook for its editorial independence.

In a filing to the Hong Kong stock exchange on Monday, SCMP Group Ltd cited an “uncertain” future for traditional publishing as a key reason behind the sale, adding Alibaba would likely be able to “unlock greater value” from the business.

The all-cash purchase transfers control of the 112-year-old English language newspaper from Malaysian tycoon Robert Kuok to Chinese billionaire Jack Ma at a time of increasing concern over Beijing’s control over China’s most free-wheeling city.

As Hong Kong’s leading Englishlanguage newspaper, the South China Morning Post reports on issues and topics that are considered sensitive in mainland China, where the websites of several international media are blocked.

“I think it will be interesting to see if the existing reporters and editorial staff would like to continue to stay. It’s worth watching,” said James Sung, a political analyst at City University of Hong Kong.

While Ma is known to be politically well-connected, others said the shift in ownership was not as drastic as some people were making out. Kuok has owned the broadsheet since 1993.

“It was not like the SCMP was totally independent from political

value the restructuring by the stock exchange there week. Its shares also had been halted since August.

Greater share

The proposed combination of the two Chinese groups comes days after CMA CGM SA, the world’s third-biggest container shipping company, offered

to buy Singapore’s Neptune Orient Lines Ltd. for S$3.38 billion (US$2.4 billion). The Chinese combination would have a 7.7 percent share of the container market, overtaking Hapag-Lloyd AG for fourth place, behind CMA CGM, according to Alphaliner.

The Chinese government’s plan would lead to four listed entities, each focusing on one aspect of the shipping business: containers, financing, terminals, and oil and gas, the official Xinhua News Agency said.

When the businesses are reshaped, China Cosco will operate container ships, while China Shipping Container will be a leasing and financing company for vessels and boxes, the companies said in exchange filings late Friday.

Not inspiring

For China Shipping Container, “letting go of the container liner operation is a welcoming move but taking on container leasing, manufacturing and banking does not inspire,” analysts including Johnson Leung at Jefferies Hong Kong Ltd. wrote in a note yesterday. “We are not sure whether the deal will go through.”

Cosco Pacific Ltd. will acquire wharf assets held by China Shipping Container to operate the combined company’s terminals globally, the statements showed. China Shipping Development Co. will be the focal point for oil- and gas-transportation business.

influence beforehand... Before, it was already owned by a business tycoon with close ties to the Chinese government,” said Professor Francis Lee, who teaches at Chinese University of Hong Kong’s School of Journalism and Communication.

Alibaba’s Executive Vice Chairman Joe Tsai dismissed suggestions Alibaba would compromise the newspaper’s editorial independence in a letter to readers, but added the world needed “a plurality of views when it comes to China coverage”.

SCMP Group said it expected to record a gain of around HK$1.4 billion from the asset sale. It plans to use the proceeds for the payment of a special cash dividend.

Shares of SCMP Group have been suspended since February 2013 because it did not meet the minimum required percentage of total issued share capital available on the public market.

Alibaba has acquired or invested in a growing portfolio of media and content companies in recent years.

In June, the company agreed to pay US$194 million for an undisclosed stake in domestic financial media firm China Business News.

Reuters

State companies’ “reform is a good thing, broadly speaking. China’s state sector is inefficiently run and change is needed,” said Jackson Wong, associate director at Huarong International Financial Holdings Ltd. in Hong Kong. However “the parent bodies are not taking back the parts of the businesses that are unprofitable in this reorganization, as we have seen in most other state-owned enterprises reform,” he said.

Train merger

In May, CSR Corp. and China CNR Corp. combined to create CRRC Corp., a train equipment maker that challenges Europe’s Siemens AG and Alstom SA. China Minmetals Corp., the country’s biggest metals trader, last week agreed to buy China Metallurgical Group Corp., a government-owned engineering and mining group.

Combining operations could help the shipping companies enlarge their presence and improve bargaining power, but the overcapacity plaguing the industry will remain. Ships with a total capacity of about 2.9 million 20-foot containers are expected to be delivered this year and next, according to Drewry Shipping Consultants Ltd. Shipping lines are attempting to charge more, lifting spot rates for hauling a 20-foot container to Europe from Asia to US$703 for the week ended Dec. 11, from $275 from a week earlier, according to the Shanghai Shipping Exchange. Levies to the U.S. West Coast dropped to US$816 per 40-foot box.

China Shipping Group had revenue of 82.8 billion yuan (US$13 billion) in 2014, according to data compiled by Bloomberg. Cosco Group had revenue of 169.3 billion yuan last year, according to its website.

Bloomberg News

Xi, Obama promise to work together on climate deal President Xi Jinping and his U.S. counterpart Barack Obama said yesterday they are ready to work with each other and other relevant parties to make sure that the historic climate accord reached in Paris will be effectively implemented.

In a telephone conversation, Xi noted that the Paris deal, which resulted from concerted efforts of the international community, charts a clear course for global cooperation on fighting climate change from 2020. China, the United States and other relevant parties maintained close coordination and jointly contributed to the success of the UN climate conference in Paris, Xi said.

UAE renew yuan currency swap deal China and the United Arab Emirates have renewed their local currency swap agreement for a further three years, with a swap line of 35 billion yuan (US$5.42 billion), the People’s Bank of China (PBOC) said yesterday. The United Arab Emirates also will be included in the RMB Qualified Foreign Institutional Investor (RQFII) scheme, with a quota of 50 billion yuan, aimed at promoting bilateral trade and investment. The RQFII programme is a yuan-denominated version of the Qualified Foreign Institutional Investor (QFII) scheme, which was created by China to allow foreigners to invest in Chinese capital markets.

Baidu to develop self-driving buses within 3 years China’s top online search firm Baidu Inc said it aims to put self-driving buses on the road in three years and mass produce them within five years, after it set up a business unit to oversee all its efforts related to automobiles. The unit will also include its initiative in partnership with BMW AG to develop an autonomous passenger vehicle, which may also be put into mass production within five years, a spokesman told Reuters yesterday.

Self-driving cars have emerged as a new battlefront for tech majors globally.

PBOC comments on currencies’ fluctuations China’s central bank said the market should not solely focus on the yuan’s fluctuations against the U.S. dollar and should instead take into account a basket of other currencies. The People’s Bank of China (PBOC) also said the yuan has the “conditions” to basically remain stable in the medium to long term, according to a statement posted on its website, citing the China Foreign Exchange Trade System (CFETS), a unit of the central bank. CFETS announced after the market close on Friday that it had launched a new trade-weighted yuan exchange rate index, in a move that some traders said may suggest Beijing will allow the yuan to weaken further.

10 | Business Daily

December 15, 2015

Greater China

Citic short-selling offer to funds led police to its door After the police probe began, Citic set up its own internal inquiry into what happened, according to the people familiar with the investigation

T

he fall from grace for China’s biggest brokerage and investment bank, Citic Securities Co., has been fast and steep.

The firm -- sometimes referred to as the Goldman Sachs of China -- began the year on its way to eclipsing UBS Group AG in the ranks of the top four securities firms in the world.

Now it’s embroiled in a police investigation and a probe by the stock-market regulator. Its chairman is being replaced and its top leadership reorganized. At least nine Citic executives have been investigated for alleged insider trading or haven’t shown up to work and can’t be reached.

The origins of its turmoil lie in its role as the highest flier in China’s developing finance field, caught up in the fallout from a stock market crash starting in June that erased $5 trillion in value. Encouraged by multiple pronouncements from policy makers that they wanted Chinese firms to develop the finance tools used in the rest of the world, Citic became a leader. Short selling, stockindex futures, cross-border return swaps -- all were on the table, all permitted with qualified nods by China’s regulators, until the rules changed and suddenly they weren’t.

Shifting regulation

“The sands of regulation in China are always shifting, and the rules are never quite as solid as you would expect in a more advanced economy,” said Arthur Kroeber, Beijing-based managing director of Gavekal Dragonomics, an economic research firm. “They come up with a product at a time when the markets are fairly quiet, and the regulators say fine.

Then when there’s a problem, the

reflex of the authorities is volatility is bad and this psychology of ‘If markets go down, then someone must be at fault.’”

The initial police probe of Citic Securities focused on whether the firm was giving foreigners a way to short stocks on the so-called A-shares market in China at the same time that it was engaged in government-sponsored plans to prop up the market, according to a person familiar with the events of the past few months who asked not to be identified because of the sensitivity of the investigation.

Investor presentation

A presentation to foreign investors seen by Bloomberg News, and people in the finance industry pitched on the products, indicate that Citic Securities was marketing such structures to hedge funds as late as June, after the market began its slide. In July, the Ministry of Public Security said it was investigating “malicious” short selling blamed for the stock rout. Chinese officials embarked on a series of rule changes aimed at halting the market’s decline, including restricting short selling, in which investors borrow securities and then sell them as a bet that their value will fall.

Citic Securities’ privileged position as a unit of China’s first state-owned investment group with an international footprint allowed it to experiment in ways few other brokerages could attempt, testing the limits of China’s push to open to foreign investors in its bid to win a larger overseas clientele.

Citic had been on an extraordinary run since November 2014. That month Citic Securities predicted its annual revenue could climb to 120 billion yuan (US$18.6 billion) by

2020, a six-fold increase. The next month, it surpassed Credit Suisse Group AG in market size, putting it at No. 4 among global securities firms. In mid-June, Citic Securities raised US$3.5 billion selling shares in Hong Kong, attracting sovereign wealth funds from Kuwait, Singapore and Malaysia, just as the Shanghai Composite Index began its retreat from a seven-year peak.

Orchestrated buying

By early July, with the Shanghai gauge off 29 percent, the government ordered Citic and other Chinese brokerages to pour billions of yuan into orchestrated buying -- as much as 900 billion yuan in June and July, Goldman Sachs Group Inc. estimated.

Yet the Shanghai index continued its slide, bottoming out on August 26 after a 43 percent fall from its June high.

The police began to focus on cross-border products that Citic offered, called total return swaps, according to people familiar with the investigation. Only after the probe began did police widen their focus, the people said. At least seven Citic executives are being investigated for alleged insider trading, including President Cheng Boming, China’s official Xinhua News Agency has reported. Citic has been unable to reach two other top company officials, according a company exchange filing on December 6.

A Citic Securities’ spokeswoman said that, beyond the filings made to the Hong Kong Stock Exchange, the firm had no additional comment except that it “has and will continue to fully cooperate with the regulators in the relevant investigation and strictly fulfill its disclosure obligations

in accordance with the relevant requirements.”

Crackdown’s sweep

The crackdown has also swept up fund managers and regulators, including Zexi Investment’s Xu Xiang and Yao Gang, a vice chairman at China Securities Regulatory Commission who supervised initial public offerings until earlier this year. None of those targeted has been reachable for comment. Late last month Citic disclosed that the CSRC is investigating it over alleged breaches of rules regarding short selling and margin contracts.

The CSRC and China’s Ministry of Public Security didn’t respond to questions via fax seeking comment.

“The Chinese market has been plagued by corruption and insider trading since its early days, and the securities companies have repeatedly been implicated in improper behavior,” said Barry Naughton, a professor of Chinese economy at the University of California in San Diego. “So a well-targeted and fair anti-corruption probe there would be welcomed by many people. But this process looks from the outside like an unfair and arbitrary search for someone to blame for the summer market meltdown, and it is making everybody in the industry extremely nervous.”

Pilot basis

The swaps that the authorities began investigating were legal, tuned to China’s push for financial innovation in the nation’s 12th five-year plan, and even lauded -- until the market started to tank. Citic got the go-ahead to offer cross- border swaps, which can also be used for long positions, on a pilot

Business Daily | 11

December 15, 2015

Greater China basis in early 2013, according to the person familiar with the matter. Wang Dongming, Citic Securities’ outgoing chairman, discussed the swaps in an interview with the China Securities Journal in May 2013, calling them an innovation that brokerages could use to serve foreign institutional clients and high net- worth individuals. The city government of Shenzhen named the swaps among the top financial innovations of 2014.

No secret

The firm made no secret of this strategy in the foreign investment community, as the pitch presentation from unit Citic Securities International Ltd. shows. The document, dated June 2014, was still being circulated to investors in June this year, according to a lawyer who saw it at the time and asked not to be identified because of the crackdown. The target audience of the pitch was hedge funds “still shut off” from China’s “aggressively growing capital markets,” according to a preface in the second slide of the presentation.

Citic Securities “is standing out as the leader in the regard of market access and product innovation,” ran the rest of the preface. “Rendering greater market opportunities to foreign financial institutions will be a vital prerequisite for the firm’s global strategy and sustainable development.”

Swaps allow investors to gain exposure to assets -- shares, stock indexes, bonds -- without owning them. In this case, Citic Securities owned the asset, trading a fixed payment from the foreign investor for the returns from the asset. In the swap structure outlined in the document, Citic Securities proposed to open a sub-account under its proprietary trading operation in mainland China, but have it controlled by “infrastructure/algorithms” provided by the foreign investors or funds.

A diagram in the presentation showed how profits or losses from the onshore trading would be paid or billed to the foreign company outside of China, via Hong Kong-based Citic Securities International. In exchange, Citic International would receive international collateral as well as a

fixed fee from the foreign investor. In theory, no money crossed the border, because Citic Securities and Citic Securities International could transfer funds within their own structure.

Citic was effectively allowing foreign firms to trade in China’s onshore markets by issuing instructions to the managed account. There is no indication in the presentation of limits on how the structure might be used -- the diagram lists “investment” going into “Futures, Equities, Fixed Income, etc.”

China limits how, and how much, foreign institutions invest in China’s domestic securities market through the Qualified Foreign Institutional

The Chinese market has been plagued by corruption and insider trading since its early days, and the securities companies have repeatedly been implicated in improper behaviour Barry Naughton, professor of Chinese economy, University of California

Investor program and others.

The biggest foreign firms have their own QFII allocation, a money limit that they can use themselves or chop up and rent to smaller institutions.

China expanded the program in 2012, but it remains a highly controlled and cumbersome procedure that’s slow and expensive.

Quick setup

China’s newer stock connect program, which allows those outside China to trade Shanghai-listed stocks through a link with the Hong Kong market, has opened up another limited avenue. A swap, on the other hand, could theoretically be set up in a day, if both sides agreed on the terms of the contract. Though cross-border swaps are common in many markets, few institutions in China besides Citic have the domestic and international operations to make them work.

An investment banker who saw the swaps pitched on multiple occasions said Citic marketed them as giving access to any market, from stocks to index futures to commodity futures.

A hedge fund adviser who sat in on a pitch for the swaps said Citic touted the swaps as a shorting tool as well.

He said he discussed swaps, including shorting index futures, in a meeting with Citic in June. Both asked not to be identified because of the Chinese regulatory scrutiny. Foreign investors, even QFII holders, had very limited means of short selling in the Chinese market. In August, as part of a rescue package for the market, regulators further limited short selling for domestic investors as well.

Shell‑BG deal clears last regulatory hurdle The deal could also result in job cuts where BG's 5,000 jobs overlap with Shell's nearly 100,000-strong work force Ron Bousso

R

Last month, the Securities Association of China ordered the country’s brokerages to suspend issuing new swaps that involve borrowing, saying they had been misused as a way to create leverage for stock trading rather than as a risk management tool. If clients want to use leverage for share purchases, they should use margin finance, where the equity holdings are used as collateral for borrowing, the association said.

After the police probe began, Citic set up its own internal inquiry into what happened, according to the people familiar with the investigation.

That investigation found that the firm began betting against stocks at the same time as it was participating in the government-sponsored market rescue, they said. Regarding the swap business, the internal investigators concluded that the volume was too small to be held responsible for the wider market drop, the people said.

They also found investors may have taken advantage of the swap product but that it was not Citic’s intention to short Chinese markets, one of the people said.

The future of Citic is uncertain.

It could be acquired by a rival in a regulator-driven transaction if its woes deepen beyond existing management “turmoil,” according to analysis from Daiwa Securities Group Inc. Chairman Wang, 64, who hasn’t been implicated in the government investigations, is officially retiring due to his age, according to a company statement in November.

“They weren’t cracking down on people when prices were going up, then when they went down and they wanted people to cooperate, out came the club,” said Patrick Chovanec, chief strategist at Silvercrest Asset Management Group in New York.

“It’s like the government has call options on everybody. They’re like, ‘Go do what you want, and I’m going to pretend it’s not happening, but the moment that I want to, I can just call it.’”

oyal Dutch Shell cleared the final regulatory hurdle for its takeover of BG Group after receiving the green light from China yesterday, leaving the deal on track for completion by early 2016 following shareholder votes.

The combination will transform Shell into the world's top liquefied natural gas (LNG) trader and a major offshore oil producer focused on Brazil's rapidly-developing sub-salt oil basin that would rival Exxon Mobil's position as the world's biggest international oil company.

The acquisition, worth about US$70 billion when it was announced and the biggest in the sector in a decade, had already received mandatory and unconditional approvals from Australia, Brazil and the European Union.

Last month, sources told Reuters that the Chinese Ministry of Commerce (MOFCOM) had pressed Shell to sweeten long-term LNG supply contracts as the world's top energy consumer faces a large surfeit over the next five years.

Since its announcement on April 8, when oil was at around US$55 a barrel, Shell has had to battle a slump in oil prices and investor concerns over the financial merits of the deal in the face of an extended period of weak energy prices.

Heralding a "more resilient and competitive" business, the Anglo-Dutch company slashed the combined group's planned investment programme, highlighted cost savings of $3.5 billion and announced plans for US$30 billion in asset disposals to pay for the acquisition while maintaining the cherished dividend.

With the regulatory approvals out of the way, Shell and BG turn their focus to shareholders and will publish within weeks a prospectus containing information on the deal and the change in the share structure and also announce dates for general meetings where the transaction will be put to vote.

"We will now seek approval from both sets of shareholders as we move towards deal completion in early 2016," Shell CEO Ben van Beurden said, according to the company statement.

The integration of the two companies has been planned by a joint committee in recent months but could encounter some difficulties as BG's small and relatively nimble operations are merged with Shell's much larger structure.

The deal could also result in job cuts where BG's 5,000 jobs overlap with Shell's nearly 100,000-strong work force.

Bloomberg News

Reuters

Internal inquiry

12 | Business Daily

December 15, 2015

Asia

Japanese stocks to post modest gains in 2016 Having gained around 10 percent so far this year, analysts expect the benchmark to end 2015 at 20,000 Ayai Tomisawa

KEY POINTS Japan stocks likely to stay resilient throughout 2016 Negative risks include falling prices of oil and commodities

J

apan’s Nikkei stock index is set for modest gains next year as steady earnings growth, expectations for more monetary stimulus and the U.S. economic recovery will likely offset a slowdown in China, a Reuters poll found.

The Nikkei benchmark is expected

to rise to 21,500 by the end of 2016, according to the median forecast of over 30 analysts polled by Reuters in the past week, up nearly 12 percent from Friday’s close of 19,230.48.

In mid-2016, the Nikkei is seen trading at 20,900.

But the forecasts for the end of

2016 were spread across a wide range, suggesting market uncertainty.

Having gained around 10 percent so far this year, analysts expect the benchmark to end 2015 at 20,000, around 5 percent lower than this year’s high of 20,952.71 achieved in June, the highest level since 1996.

Analysts were cautiously optimistic about the market’s performance, expecting higher corporate profits for the fiscal years ending March 2016 and 2017.

Expectations for companies to boost shareholder returns via higher dividends and share buybacks are also set to underpin the Nikkei.

Another positive catalyst for the market may come from a renewed push by Prime Minister Shinzo Abe to improve Japan’s flagging economy ahead of an upper house election next summer, they said.

A majority of economists in a separate Reuters poll expect more stimulus from the Bank of Japan in the first half of next year.

“Steady corporate earnings and the central bank’s exchange-traded funds buying will likely support the market,” said Isao Kubo, strategist at Nissay Asset Management.

“The impact of the weak yen on earnings will be smaller than this year, but we still expect about a 10 percent rise in profits next fiscal year.”

Kubo predicts the Nikkei will trade at 23,000 at the end of next year.

A steady recovery in the U.S. economy will support Japan, as will an expected interest rate increase by the Federal Reserve at this week’s meeting, which will help boost dollaryen rates to the benefit of Japanese exporters, analysts said.

Risks include potential ripple effects from tumbling oil prices after the Organization of the Petroleum Exporting Countries decided to keep production at near-record levels in an oversupplied market. That has spooked investors grappling with reduced demand from China, the world’s biggest energy consumer.

Global equities have been hit hard this month on China growth concerns, stoking uncertainty about the outlook for all asset markets.

“The answer hinges on whether the global economy can withstand the potential further slowdown of the Chinese economy,” said Michiro Naito, executive director of equity derivatives and quantitative strategies at JPMorgan.

Japanese firms bullish on capex plans The data adds to growing signs companies will finally direct some of their record profits to wages and capital expenditure Leika Kihara and Tetsushi Kajimoto

J

apanese business confidence held steady and companies maintained their bullish spending plans, a quarterly central bank survey showed yesterday, offering some relief to policymakers worried that global headwinds could upset a fragile economic recovery.

But despite favourable investment plans, companies were gloomy about conditions three months ahead as sluggish emerging market demand weighs on exports, the Bank of Japan’s (BOJ) “tankan” survey found, casting some doubt on whether firms would in fact boost their spending by as

much as planned.

“Declines in oil prices and upbeat capital spending plans are among a few positive factors. Other than that there seems to be little in the way of bright spots in this data,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

The headline index gauging big manufacturers’ sentiment was unchanged from three months ago at plus 12, the tankan showed, contrary to market expectations of a slight deterioration.

Big non-manufacturers’ sentiment was also steady at a 24-year high of plus 25, as hotels and retailers benefited

from a surge in overseas tourists shopping for goods made cheap by a weak yen.

Despite overseas headwinds, big companies expect to increase capital expenditure by 10.8 percent in the current fiscal year, the survey found, largely unchanged from the previous survey and roughly in line with market forecasts.

The data adds to growing signs companies will finally direct some of their record profits to wages and capital expenditure, which are key to the success of premier Shinzo Abe’s stimulus policies aimed at ending nearly two decades of economic stagnation.

The data also heightens the chance the BOJ will hold off on expanding its massive stimulus programme when it meets for a two-day rate review ending on Friday, analysts say.

The survey highlighted concerns many firms had on the economic outlook, with current strong profits driven more by temporary windfalls such as the weak yen and low oil costs, rather than growing real demand.

Both big manufacturers and non-manufacturers expect business conditions to worsen in the coming three months, the survey showed, highlighting fears that

Reuters

China’s slowdown and the moderating pace of the yen’s decline could hurt exports.

Many firms also expect profit margins to shrink, complaining of a supply glut at home and abroad, keeping policymakers under pressure to reignite flagging growth.

“Deterioration in firms’ outlook is the focus of today’s data,” said Junko Nishioka, chief economist at Sumitomo Mitsui Banking.

“The economy lacks recovery momentum,” she said, noting the weak outlook would keep alive market expectations of further BOJ easing.

The BOJ has said it will stand pat unless a severe slowdown in emerging markets hurts corporate profits, and in so doing discourages big businesses from raising wages and capital expenditure.

The government plans to compile a supplementary budget of around 3.5 trillion yen (US$28.7 billion), which will modestly boost growth but not until around April, analysts say.

Reuters

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Business Daily | 13

December 15, 2015

Asia South Korean banks to strengthen guidelines on loans

Bangladesh inflation eases to 10-mth low

There will be increased scrutiny on debt applicants who live outside Seoul

S

outh Korean banks will tighten guidelines next year when screening applicants for loans, the country’s top financial regulator said yesterday, stepping up efforts by policymakers to rein in snowballing household debt in Asia’s fourth-largest economy.

The Financial Services Commission’s (FSC) guidelines will require banks to more closely assess households’ ability to repay loans fully, moving away from the current focus on whether borrowers can pay back interest.

Banks nationwide will start calculating borrowing limits for applicants by assuming higher rates ahead to reflect U.S. Federal Reserve’s pending rate hike, the guidelines said.

Nomura economist Young Sun Kwon said the move is prudent but will hurt property markets.

“We expect Korea’s mortgage loan growth to slow sharply next year, paving the way for further monetary easing, given the increasing downside risks to the economy,” he wrote in a note.

The new guidelines will be enforced starting February 1 next year for banks located in the Seoul and metropolitan areas around it and May 2 for the rest.

There will be increased scrutiny on debt applicants who live outside Seoul and the surrounding metropolitan area currently not subject to debt-to-income

We expect Korea’s mortgage loan growth to slow sharply next year, paving the way for further monetary easing, given the increasing downside risks to the economy Young Sun Kwon, economist, Nomura

ratio when borrowing money. They will be asked to provide more data on their regular income and spending.

Banks will also aim to have borrowers amortise their loans at fixed-rates, in line with regulations enforced from last year to help borrowers steer away from non-amortised loans with floating rates.

The guidelines were formed by a joint taskforce with officials from a number of institutions including the Bank of Korea, the finance ministry as well as the country’s federation of banks.

Policymakers worry higher rates in the United States could eventually filter into higher borrowing costs at home and hurt households, especially as household debt has been rising at a swift pace compared to previous years due to record-low interest rates.

Credit owed by households rose 10.4 percent this year as of endSeptember compared to last year, much higher than 6.5 percent last year and 5.7 percent in 2013.

South Korean households’ debtto-disposable-income ratio was 163.8 percent at end-2012, well above the Organisation for Economic Cooperation and Development (OECD) average of 134.8 percent.

All of the roughly 7,300 banks belonging to 16 chains in South Korea will be required to update their screening process although banks can be flexible in the implementation of the rules, according to a FSC official.

The FSC said it will maintain the current loan-to-value and debt-toincome ratios.

Reuters

India’s bond markets turn vulnerable ahead of Fed decision A retreat has wiped out most of the gains for the year Neha Dasgupta

I

ndian traders fear that an interest rate rise from the U.S. Federal Reserve this week could cause a destabilising spike in bond yields, and are calling on the Reserve Bank of India (RBI) to intervene by buying bonds via open market operations (OMO).

Banks are the main buyers of government bonds but are already holding large amounts of them to meet reserve requirements, so their purchases are waning.

At the same time, foreign investors are pulling out of many emerging markets at the moment, so there is less demand from them.

Foreign investors have pulled US$1.7 billion out of India in November, the highest withdrawals since August.

Indian government bond yields have been stubbornly high and remain close to where they were a year ago, despite the RBI having cut interest rates four times this year. This means its loosening of monetary policy is not producing lower rates.

“The RBI needs to conduct OMOs to provide markets with confidence that the mismatch in

demand and supply in government bond markets will be addressed,” said Vijay Sharma, senior executive vice-president at primary dealer PNB Gilts Ltd in New Delhi.

Benchmark 10-year bonds have tumbled over the past two months.

Since hitting a nearly 2-1/2 year low in early October, the yield has surged 27 basis points (bps) to 7.78 percent, even after the RBI eased its key repo rate by a largerthan-expected 50 bps at its policy review on September 29.

The retreat has wiped out most of the gains for the year, and 10year bond yields are down only 8 bps, even as the RBI has cut the repo rate by a total of 125 bps.

The R B I h a s a h i s to r y o f intervening in OMOs. In 2013 when Fed taper fears sent the rupee to a record low of 68.85 to the dollar, the RBI bought bonds worth 350 billion rupees (US$5.22 billion) from June to August, during the worst months of the market turmoil.

The purchases were intended to ease the rupee shortages caused by frequent interventions.

But that move was under the old management.

New Governor Raghuram Rajan is reluctant to be seen as propping up markets, so the RBI tends to step in only at times of big cash shortages.

Traders said higher U.S. rates could create such a shortage.

Last week, the RBI bought 100 billion rupees in its first large OMO bond purchases since January 2014, and traders hope that is just the start.

The RBI will need to inject a median of 350 billion rupees (US$5.24 billion) by March to improve cash conditions and support bond markets, according to a Reuters poll of 11 traders.

Rajan on Friday left the door open for more open market bond purchases, but said the RBI would only do so after considering longterm liquidity needs.

“As and when we get the sense that more long-term liquidity is needed appropriately, we will perhaps do an open market purchase of securities.

But all instruments are available to us and we continue to keep the market plentifully supplied with appropriate amount of liquidity.”

Reuters

Bangladesh’s annual inflation in November eased to its lowest since January as prices of food and non-food items rose at a slower pace due to a drop in global commodities prices. Consumer prices last month rose 6.05 percent from a year earlier, slowing from 6.19 percent in October, the Bangladesh Bureau of Statistics said yesterday.

Annual food inflation in November eased to 5.72 percent from 5.89 percent the previous month while non-food inflation edged down to 6.56 percent from 6.67 percent.

Indonesia to maintain presence in FX market Indonesia’s central bank will maintain a presence in the foreign exchange market to guard against volatility in the rupiah ahead of the Federal Reserve’s policy decision this week, its governor said yesterday. “We are monitoring things ahead of (the Fed) meeting and there has been a lot of pressures in the rupiah, not only because of that but also because of demand for maturing offshore loans,” Governor Agus Martowardojo told reporters. “BI (central bank) will always be in the market to guard against (rupiah) volatility.”

Firm convicted of nuclear money transfer to DPRK A Singapore-registered shipping company has been convicted of transferring money which may be used for nuclear-related programs or activities of Democratic People’s Republic Of Korea (DPRK), local media reported yesterday. Chinpo Shipping Company sent US$72,017 from its Bank of China account to a shipping agent, which is under the management of a DPRK company in Panama in July 2013. The money was believed to be a necessary payment for the transportation of the arms and related material from Cuba to DPRK, according to the Strait Times.

Australia hires Macquarie to decide railway asset The Australian government said it has hired investment bank Macquarie Group to help decide the future ownership of an interstate rail network valued at A$3.6 billion (US$2.6 billion), advancing its plan to raise cash by selling infrastructure. The move suggests the Federal government stands by a A$100 billion privatisation program which has drawn criticism from opposition politicians following sales to offshore interests. For Macquarie, the move suggests the government remains satisfied with the investment bank which a year ago helped it raise A$5.7 billion in a listing of state-owned health insurer Medibank Private Ltd.

Bangladesh blocks Twitter and Skype Days after the Bangladesh authorities unblocked Facebook, they have blocked three more online voice and messaging services, Twitter, Skype, and imo. A Bangladesh Telecommunication and Regulatory Commission (BTRC) official who preferred to be unnamed confirmed the government decision to Xinhua yesterday.

He said BTRC on Sunday night asked cell phone operators and telecom service providers to suspend the three popular services immediately. On December 10, Bangladesh lifted its ban on Facebook, the country’ s most popular social networking platform, after getting green signal from the Ministry of Home Affiars.

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December 15, 2015

International U.S. investigates broadcasters in widening FIFA case A sports marketing company that was described in a sweeping indictment this month as retaining contracts because of the “support” of corrupt soccer officials has longstanding ties to the U.S. entertainment company 21st Century Fox, according to securities filings and other government documents. The description of T&T Sports Marketing Ltd in the indictment signals that U.S. prosecutors have intensified their focus on media companies and what they might have known about any bribes, people familiar with the matter said. 21st Century Fox listed T&T as a subsidiary last year in a filing with the U.S. Securities and Exchange Commission.

U.K. consider nationalising Rolls‑Royce’s submarine business Britain would consider nationalising Rolls-Royce’s business which makes the power systems used in the country’s nuclear submarines, if the company’s difficulties worsen, the Financial Times reported. The government could also decide to merge some or all of Rolls-Royce’s businesses with Britain’s biggest defence company BAE Systems, the FT said. Rolls-Royce has been subject to takeover speculation after its share price fell 30 percent over the last year following a series of profit warnings related to a slow-down in its marine engine division and problems in the part of its aero-engine business which services older planes.

ArcelorMittal South Africa CEO to step down The chief executive of ArcelorMittal’s South African unit said yesterday he was stepping down, after less than two years at the helm, to pursue other interests. The company, a unit of the world’s largest steel maker, is facing tough times due to sinking steel prices, rising costs and cheap imports, did not name a successor. Its shares fell more than 5 percent on news of Paul O’Flaherty’s departure. In a statement, the company said O’Flaherty will join the company’s board as a non-executive director, after he officially resigns as CEO on February 12, to ensure continuity and roll out strategy.

Saudi Telecom sets offer price for Kuwait Viva takeover Saudi Telecom Co (STC) will offer 1 dinar (US$3.30) per share to buy out other shareholders in its Kuwaiti affiliate Viva, the former monopoly said on Monday, amounting to a 9 percent discount to Viva’s last closing price. STC, owner 26 percent of Viva, is seeking full control of its unit, which rapidly won market share after launching services in 2008 and turned profitable four years later. Viva’s shares plunged after STC announced its offer price in a statement to Riyadh’s bourse, although the bid document says the offer represents a 14 percent premium to Viva’s three-month volume weighted average price.

European integration going into reverse, warns Standard & Poor’s The agency referred to issues such as a British vote on whether or not to remain in the EU as well as strained relations between economically powerful Germany and neighbouring France Marc Jones and John O’Donnell

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uropean Union countries’ reluctance to integrate in the face of an influx of refugees and with the possible departure of Britain from the bloc could ultimately hurt creditworthiness, Standard & Poor’s said yesterday.

“Indications are mounting that the long process of integration may have come to a halt,” the credit rating agency said in a report, outlining the risk of a ‘disjointed’ European Union.

“In fact, signals are that it might be going into reverse,” it said, citing the narrowly averted departure of Greece from the euro currency area, a refugee crisis and a weakened FrancoGerman partnership.

The European Union, which spans 28 states from Britain to Malta, has

been credited with dismantling borders, making it easier for workers and money to move between countries.

But the arrival of hundreds of thousands of migrants is threatening such passport-free travel as frontier controls are reintroduced.

While Standard & Poor’s said the influx of refugees, in itself, would not hurt the creditworthiness of countries, it questioned the political unity in Europe, a factor that it said did pose a future credit risk.

“The refugee crisis has exposed how diverging national interests can overshadow common responses,” the agency wrote.

The agency referred to issues such as a British vote on whether or not to remain in the EU as well as strained

Hedge funds burned by commodities lose US$40 billion since ’08 The Bloomberg Commodity Index, which tracks investor returns from 22 natural resources, has plunged two‑thirds from its peak to the lowest level since 1999 Agnieszka de Sousa

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he biggest commodities meltdown in a generation has cost hedge funds more than US$40 billion in seven years.

Losses due to poor performance and investor withdrawals have left assets at the top 10 commodities hedge funds at less than US$10 billion, compared with more than US$50 billion in 2008, according to estimates from Trafigura Pte Ltd.’s annual report. The trader and asset manager said the perception of commodities as an investable asset has been replaced by a “generalized aversion.”

“Commodities as an asset class are not as attractive as before and we are seeing the consequences on our asset management division,” Trafigura Chief Financial Officer Christophe Salmon said in a phone interview. “It is probably one of

the consequences of the end of the commodities supercycle.”

Trafigura last month joined other traders by shutting down its flagship Galena Metals Fund during the worst year for raw material prices since the global financial crisis of 2008.

Duncan Letchford, the chief executive officer of the company’s Galena Asset Management, stepped down.

“We have seen a sea-change in investor attitudes,” Trafigura said in the annual report. “Such was the negative sentiment towards the sector, that a number of our investors drew down their accounts and exited the commodities segment, with the result that our assets under management fell year-on- year.”

The Bloomberg Commodity Index, which tracks investor returns from 22 natural resources, has plunged two-thirds from its peak to the lowest level since 1999.

relations between economically powerful Germany and neighbouring France.

“In the past, the so-called FrancoGerman axis has often been forceful enough to overcome those spells of disunity,” it said.

“More recently, it appears ... that the axis does not work as effectively together,” it said, referring to diverging economic trends in the two states. Both states have traditionally been at the heart of the European Union.

It said that the refugee crisis and the recent Islamist attacks in Paris in themselves are unlikely to have a direct negative impact on European country credit ratings.

Reuters

Overall 2015 was “a difficult year” for commodity-related hedge funds, Trafigura said. The market became less liquid and more difficult to trade as hedge fund withdrawals led to closures, the trader said. Since 2012, at least 12 asset managers in commodities, including high-profile names such as Clive Capital LLP and Centaurus Energy LP, and start-ups like Higgs Capital Management and Mastic Investment have closed.

Hedge funds betting on raw materials are heading for their worst performance in seven years after losing 4.6 percent in the first 10 months of 2015, according to the Newedge Commodity Trading Index.

Annual loss

The US$230 million Galena Metal Fund dropped 8.6 percent this year, heading for its first annual loss since 2012, according to data compiled

by Bloomberg. The fund, which was more than twice its current size five years ago, had made money in nine out of 10 years since it was started in 2004.

Galena “strictly” limited the use of leverage in its long- short Metals Fund and confining its Commodity Trade Finance Fund to top-quality borrowers, Trafigura said. While the Private Equity Resources Fund has raised US$415 million to invest in the equity and debt of metals and mining companies, it has so far invested only US$150 million and made no transactions in the year through September, the company said.

Trafigura yesterday reported earnings from oil trading surged to a record in the 12 months through September 30, countering a difficult year for its metals business and a number of asset write-downs.

Bloomberg News

Business Daily | 15

December 15, 2015

Opinion Business

wires

Today’s productivity paradox

Leading reports from Asia’s best business newspapers

THE KOREA HERALD In a meeting with reporters last week, Finance Minister Choi Kyung-hwan dismissed warnings that the Korean economy may be facing its worst ever conditions as exaggerated. “Some have said our economy is heading toward a grave crisis, but all data are showing Korea is doing better than most of its peer countries under difficult situations,” he said.

Choi, who concurrently serves as deputy prime minister for economic affairs, argued that if exports had not fallen, Asia’s fourthlargest economy could have expanded by nearly 4 percent this year.

THE JAKARTA POST President (of Indonesia) Joko “Jokowi” Widodo will soon be presenting the 2016 budget implementation entry lists (DIPA) and give awards to the local governments that have managed to disburse their budgets on target. The President had pledged to give the awards, including regional incentive funds, last year as part of an effort to speed up government spending nationally. Jokowi is to present the 2016 DIPA to all ministers, heads of state institutions and governors in Indonesia, as well as to the finance minister.

THE PHNOM PHENH POST As ASEAN member states race to get ready for the ASEAN Economic Community integration later this month, one of the pillars of the new economic bloc is the free flow of skilled labour across borders, with Cambodian industry experts unperturbed by the possibility of this leading to a skilled labour exodus from the Kingdom. The new economic community outlines the facilitation of labour migration across ASEAN, thereby increasing the mobility of workers to fill labour shortages in the region, though only in eight selected sectors – engineering, nursing, architecture, dentistry, medicine, tourism, land surveying and accounting.

THE TIMES OF INDIA Arundhati Bhattacharya, chairman of the country’s largest lender, State Bank of India, has said that her bank is taking all steps to ensure that there is adequate liquidity in the aftermath of expected hike in interest rates by the US Federal Reserve. “It is well expected that in all probability the Fed is going to lift off,” said Bhattacharya, adding that a few days of volatility are expected after the Fed action.

“We have seen yields tighten even when the rollback of the quantitative easing (QE) was announced in the US.”

Barry Eichengreen

Professor at the University of California, Berkeley, and the University of Cambridge

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ecent trends in productivity growth make it hard to be optimistic about the future. In 2014, the global growth of total factor productivity, or TFP, which measures the combined productivity of capital and labour, was essentially zero for the third consecutive year. This was down from 1% in 1996-2006 and 0.5% in the crisis years of 2007-2012. And, by every indication, 2015 has been no less dismal. In the US, revised data released at the beginning of December show productivity up only 0.6% year on year in the third quarter.

If the underlying rate of TFP growth has in fact fallen from its historical norm of 1.5% per year to near zero in countries like the United States, then the living standards of today’s young adults will rise much more slowly than those of their parents. Any increase will depend entirely on improvements in education and training, which are absent from the data, and from investment in equipment and structures, which is depressed relative to historical levels.

Economists such as Robert Gordon of Northwestern University argue that this slump in productivity growth reflects the stagnation of technology.

Gordon argues that all of the epochal advances, from running water and electricity to the internal combustion and jet engines, have been made.

The positive effect of instant messaging and video gaming on productivity and living standards pales in comparison.

This conclusion will strike many people – especially those of

us who live on the fringes of Silicon Valley – as implausible.

We see radical technological advances in robotics, artificial intelligence, biotechnology, and materials design going on all around us.

One view, popular among economic historians, is that it takes time for the productivity-enhancing effects of new technologies to show up. Indeed, when radical innovations are first rolled out, their immediate effect is to reduce, not raise, productivity.

Electricity, the new technology studied by the eminent Stanford University economic historian Paul David, is a classic case in point.

As David explains, before electric motors were installed in factories, machines were arranged around centralized steam engines, to which they were connected by belts and pulleys. Self-standing electrical motors allowed machines, the workers operating them, and their activities all to be reorganized in more efficient ways.

But this reorganization took time. Meanwhile, established modes of production were “disrupted,” in twenty-first-century business-school parlance, causing productivity to fall.

But this slump in productivity was actually a harbinger of better times.

Another prominent economist, Harvard’s Lawrence Summers, has objected that this story is incompatible with a second recent trend, namely declining employment of men aged 2554. If productivity has fallen temporarily because everyone is hard at work at the twenty-first-century equivalent of

reorganizing the factory floor, then the employment rate should be going up, not down, as firms continue to operate their old “steam-powered machinery” at the same time they are adding new “electrical capacity.” Employment of prime-age males should be rising, not falling.

But this will be true only if new twenty-first-century technologies require significant amounts of labour to develop and install, compared to the jobs they disrupt and eliminate. This is not obviously the case.

My favourite example is electronic medical records (my wife is a doctor), which

Indeed, when radical innovations are first rolled out, their immediate effect is to reduce, not raise, productivity

have tremendous potential to enhance the efficiency of health-care delivery in the US. Even today, most information on patient care is transmitted between clinics and hospitals, and between generalists and specialists, by fax and telephone. A less efficient system is hard to imagine – other, that is, than attempting to coordinate patient care in the traditional way while undertaking the transition to electronic record keeping. New systems are being adopted and serially abandoned as their deficiencies are discovered. Different medical clinics and hospitals are installing systems that are incompatible and unable to communicate with one another.

In the long run, doctors will look back on all of this as healthy experimentation. For the moment, however, they are tearing their hair out. They are delivering less patient care as they spend more time hunched over their laptops, inputting data that add nothing, currently, to their productivity.

Moreover, the number of people working at developing electronic medical systems is small relative to the number of medical professionals suffering the effects of this imperfect transitional technology. Indeed, the number of such people may be even smaller than that of medical professionals who have dropped out of the field in frustration over being unable to deliver care at the standard they were trained to provide.

I am happy to refer those seeking further particulars to one such former practicing physician: my wife.

Project Syndicate

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December 15, 2015

Closing Consulasia awarded contract to revise Taipa depot project

Taiwan bans school canteens from using GM food

Consulasia has been awarded the contract to revise and adjust the plan for the development of the Tapia route depot, it was announced yesterday in Macau’s Official Gazette. The com‑ pany previously worked on viability studies for the project, in 2003, and will be paid MOP34.90 million for the new task. A review of the project will be conducted before the new open tender for the construction of the depot, which will take place during the second quarter of next year. Previously the consortium comprising Mei Cheong and Top Builders was handling the construction of the depot but the government decided to scrap the contract because of the serious delays in the project. The depot is now expected to be completed by 2019.

Taiwan’s legislature yesterday banned school canteens from using genetically modified (GM) food, such as vegetables or tofu. The ban is part of a revision to a decree on school sanitation that covers canteens. In addition, an inspection will be led by the education, agriculture and health authorities every ac‑ ademic year to ensure schools and colleges adhere to the ruling, according to a state‑ ment issued by the legislature. The decree comes in light of increasing public concern about possible health risks of GM foods, said Lu Hsiu-yen, a legislator from the Kuomintang, the island’s ruling party. “For parents who are concerned about GM foods, the decree will set their minds at ease,” Lu said.

China’s polluters face wrath of data-wielding citizens A phone map and a pollution-checking device are the latest levers in prying control over information on air quality from the hands of the few to the many

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esides facing hefty fines, criminal punishments and the possibility of closing, the worst emitters in China risk additional public anger as new smartphone applications and lower-cost monitoring devices widen access to data on pollution sources.

The Blue Map app, developed by the Institute of Public & Environmental Affairs with support from the SEE Foundation and the Alibaba Foundation, provides pollution data from more than 3,000 large coalpower, steel, cement and petrochemical production plants. Origins Technology Ltd. in July began sale of the Laser Egg, a palm-sized air quality monitor used to track indoor and outdoor air quality by measuring fine particulate matter in the air.

“Letting people know the sources of regional pollution will help the push for control over emissions of every chimney,” said Ma Jun, the founder and director of the Beijing-based IPE. The phone map and Laser Egg are the latest

levers in prying control over information on air quality from the hands of the few to the many, and they’re beginning to weigh on how officials respond to the issue. Numerous smartphone applications, including those developed

by SINA Corp. and Moji Fengyun (Beijing) Software Technology Development Co., now provide people in China with real-time access to air quality readings, essentially democratizing what was once an information pipeline available only to the government.

Even the government is getting in on the act. The Ministry of Environmental Protection rolled out a smartphone application called “Nationwide Air Quality” with the help of Wuhan Juzheng Environmental Science & Technology Co. at the end of 2013.

Laser Egg

Sources of air quality data come from the China National Environment Monitoring Centre, local environmental protection bureaus and non-

Chinese sources such as the U.S. Embassy’s website in Beijing, Xu said.

Air quality is a controversial subject in China. Since 2012, the public has pushed the government to move more quickly than planned to begin releasing data measuring pollution levels -- especially of PM2.5, the particulates most harmful to human health.

The reading was 267 m i cr o g r a m s p er cu b i c

meter at 10 a.m. yesterday near Tiananmen Square, according to the Beijing Municipal Environmental Monitoring Centre. The World Health Organization cautions against 24-hour exposure to concentrations higher than 25.

The availability of data appears to be filling a need, especially with the arrival of colder temperatures and the associated smog that blanketed

Beijing and northern China recently. The 499 yuan (US$77) Laser Egg has been sold out since the night of December 8, according to Origins’ founder Liam Bates.

Beijing’s first ever red alert was imposed between December 8 and noon on December 10, making “everyone realize the environment wasn’t as good as imagined,” said Bates, a 27-year-old Swiss national and a former Chinese television anchor.

“With more disclosure of the data, everyone becomes more sensitive, hoping the government can do something,” Li Yajuan, a 27-year-old office secretary, said in an interview in Beijing’s Fuchengmen area. “It’s our own living environment after all.”

Efforts to make products linked to air data continue.

IBM has been developing artificial intelligence to help fight Beijing’s toxic air pollution, and plans to work with other municipalities in China and India on similar projects to manage air quality.

Bloomberg News

E.U. to allow US-style derivatives option

CPC solicits opinions on economic work

U.S. calls for overhaul of deadlocked world trade talks

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uropean Union regulators have proposed U.S.-style flexibility in how rules making derivatives safer are applied in a bid to reach a long-delayed transatlantic deal on supervising the US$552 trillion sector.

The 28-country bloc and the United States are locked in negotiations over recognising each other’s rules for trading derivatives such as interest rate swaps.

The rules are being introduced after the 2007-09 financial crisis highlighted how the hitherto opaque markets accentuated uncertainties for markets.

The E.U.’s European Securities and Markets Authority (ESMA) said yesterday it was proposing to broaden the bloc’s rules for third party agencies, known as clearing houses, that stand between two sides of a trade to ensure its smooth completion.

A transatlantic deal has stumbled over a key difference whereby the United States requires only a one-day “liquidation period” for margin or cash to back trades.

The E.U. requires a two-day period, a difference critics say ties up far more capital.

Reuters

he Communist Party of China (CPC) Central Committee has held a meeting to solicit opinions from non-communist persons on the country’s economic work, according to a statement released yesterday.

While presiding over the meeting, which was held on December 10, President Xi Jinping, also general secretary of the CPC Central Committee, said the country’s economic and social development, especially structural reform, would be arduous next year.

For the year ahead, China should focus on the development ideas featuring innovation, coordination, green development, opening up and sharing, and the economy would continue to adapt to the new normal for growth.

The country should continue to reform and open up, stick to the general guideline of seeking progress while maintaining stability and promoting the improvement of productivity, Xi said.

Xi made the remarks after Premier Li Keqiang briefed attendees on China’s economic situation and plans for next year’s economic work, according to the statement.

Xinhua

he United States called yesterday for a fresh start to break a 14-year deadlock in negotiations to free up world trade in good and services worth some US$23 trillion (21 trillion euros).

On the eve of a World Trade Organization conference in Nairobi, US Trade Representative Michael Froman said talks to lower barriers to trade that began in Doha in 2001 have drifted ever since and have little prospect of success.

“Getting it unstuck begins with acknowledging that Doha was designed in a different era, for a different era, and much has changed since,” he wrote in an opinion piece published in the Financial Times. “It is time for the world to free itself from the strictures of Doha.”

The trade talks that began in Doha have been riven by a rich-poor split.

They never recovered from a collapse in negotiations in Geneva in 2008, notably because of a dispute over a provision that allows developing countries to erect protective import tariffs on farm goods.

AFP