Macau Business Daily December 28, 2015

MOP 6.00 Closing editor: Joanne Kuai

Chinese property market to perform weakly in 2016 Page 9

Year IV

Number 948 Monday December 28, 2015

Publisher: Paulo A. Azevedo

Mainland’s industrial profit decline narrows Page 8

MTel fibre broadband subscribers surpass a thousand Page 7

CCAC slams govt’s ‘inaction’

Commission Against Corruption accuses the government of “inaction” for failing to declare the land concession invalid in time for three out of 16 plots of land in the city that the landholders were allowed to keep even though they have failed to develop the plots as intended. The graftbuster points out that such legal loopholes would hurt public interest Page

2

Drug bust

Chinese lawmakers yesterday approved a State Council proposal for stock listing reform at the end of a bimonthly legislative session which began last Monday in Beijing. The decision by the National People’s Congress Standing Committee will take effect from March 1

Page 16

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9.3 kilogrammes of cocaine, worth MOP25 million.

Macau Police busted the second largest drug crime since the handover. One Turkish and two Hong Kongers were arrested.

Local police said it’s teaming up with Hong Kong counterparts for further investigation

HSI - Movers December 23

Name

Page 7

Land www.macaubusinessdaily.com

Green light to IPO reform

Pearl Horizon

%Day

CNOOC Ltd

+3.06

Want Want China Hold

+2.68

Sino Land Co Ltd

+2.28

PetroChina Co Ltd

+2.28

China Petroleum & Che

+2.27

Sun Hung Kai Propertie

-0.89

MTR Corp Ltd

-0.93

China Merchants Holdi

-1.00

China Resources Land L

-1.35

New World Developme

-2.19

Source: Bloomberg

I SSN 2226-8294

About 50 claimed buyers of the unfinished flats of residential project Pearl Horizon, gathered to protest at the site on last Friday, the very day the land concession for the site expired

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2 | Business Daily

December 28, 2015

Macau

Graftbuster slams govt’s “inaction” in failing to disclose invalid land grant In an investigation report, the Commission Against Corruption has identified that the government has failed to announce the invalidity of the land grants for three plots of land, all with land use not completed before their concession expired in 2013 and 2014 Stephanie Lai

sw.lai@macaubusinessdaily.com

was still in the process of declaring the land granted to Transmac and Macau – Obras de Aterro, Lda invalid.

Since 2010, the public works departments have identified a total of 113 cases of land plots with failure of development, of which the landholder were the liable party for 48 of these cases, the government has explained their initial analysis at the time.

In May this year, the government has announced the land grant of 22 out of these 48 plots invalid. At the time, these 22 cases announced did not include the plots granted to Transmac and Macau – Obras de Aterro, Lda.

Legal readings

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he city’s graftbuster Commission Against Corruption (CCAC) has released an investigation report slamming the government of “inaction” for failing to declare the land concession invalid in time for three out of 16 plots of land in the city that the landholders were allowed to keep even though they have failed to develop the plots as intended.

The investigation, which the Chief Executive Fernando Chui Sai On has requested CCAC to undertake in June, was a response towards public outcry over the government’s announcement of a total of 16 plots of land that it has allowed the landholders to keep even though they have failed to complete the land use in time. The decision to have the landholders keeping these 16 plots, as the government has mentioned before, was based on the reason that the landholders were not “completely liable” for the delay of land use.

In the report released on Thursday, the commission concluded that the government has not violated any laws for its decision to let the landholders keep their plots; but the commission has at the same time slammed the government of inaction for failing to have immediately announced the temporary concession invalid for three of the said 16 plots as their concession period has already expired.

“Inaction”

Two of these three plots, located in Ilha Verde in Macau peninsula and Pac On reclaimed zone in Taipa respectively, were granted to public transport company Transmac – Transportes Urbanos de Macau, S.A.R.L. for building complexes of bus terminals and parking space.

The temporary land concession for these two plots, first granted by the local government in the late 1980s, have already expired on December 19, 2013 and December 28, 2014 respectively, according to the report’s findings.

Another of these three plots, a 6,480 square metre site across Cultural Centre in NAPE district first granted to a company called Macau – Obras de Aterro, Limitada in 1990, has seen its temporary concession expired on July 27, 2015. The plot was designed to house a complex with mixed residential, commercial and hotel elements.

“It is the inaction of the government for failing to declare the temporary concession invalid in time,” the commission remarked in the report, “Not only would it result in a loophole in MSAR’s land resource management and hurt the territory’s public interest by delaying the effective land use, but it would also create a potential risk for any bona fide purchasers due to the uncertainty of the legal status of the land plot.”

New Land Law

By Macau’s Land Law, a temporary or conditional land concession, which carries a validity of 25 years, can only turn effective when the property project of a site is completed and carries the issuance of an occupation permit. For a site with the conditional land concession not turned effective and expires, the site will have to be taken back by the government.

In the case of Transmac, its two granted sites are now only parked with buses but with no construction going on; and with the granted site of Macau – Obras de Aterro, Lda.,

It is the inaction of the government for failing to declare the temporary concession invalid in time Commission Against Corruption

there is only construction machinery and materials placed at the plot.

“Under the Land Law, the government is obliged to call the land grant invalid if the land use of the site is not completed before the expiry of the temporary land concession,” the commission noted in the report.

“There is no room for the government to have a discretionary power to choose to declare or not the expiry of the land grant, and this government action does not have to do with the fact of whether the land grantee is the liable party for the uncompleted land use,” the graftbuster stated, noting in the report that they understood the government

While criticizing the government for not making a timely announcement of land grant expiry, the Commission Against Corruption has also suggested the government makes a clearer standard to define the liabilities of the landholder for the delay of land use, and the penalties involved.

The level of fines charged for delay of land use, as stipulated in the Land Law, is still too low and failed to reflect market condition, the commission said in the report.

Citing the example of a theme park project located next to the Macau Dome on Cotai, the graftbuster noted that the highest fine the landholder is to pay for the land use delay is only MOP34.65 million, an amount not “proportional” to this mega-project that spans over 100,000 square metres of land. The parcel, granted in 2006, is held by Macau Theme Park and Resort Ltd – a firm controlled by executive director of SJM Holdings Ltd Angela Leong On Kei. According to the Article 104 of the Land Law, the landholder has to pay a fine at 0.1 per cent of the land premium or land concession cost per day of the land use delay. The penalty is capped at 150 days of paying the fines at maximum.

The commission has further suggested the government should gazette any extension of land use granted to landholder, which is currently not required by the Land Law. The graftbuster has urged higher transparency from the government in disclosing information related to the city’s land grants and the failures of the land uses, criticizing that the Land, Public Works and Transport Bureau has been inactive in updating public about the idle lands in the city since it started to handle the issue in 2010.

There was also no effective intercommunication inside the bureau for handling land resources management, and a Lack of computerized system to efficiently handle the related documents, the commission said in the report.

The public works department hasn’t made any public response towards CCAC’s report by the time this story went to press.

Business Daily | 3

December 28, 2015

Macau

Pearl Horizon – buyers protest About 50 claimed buyers of the unfinished flats of residential project Pearl Horizon, gathered to protest at the site on last Friday, the very day the land concession for the site expired

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he government has announced the decision to take back the 68,000 square metre site in the beginning of this month, saying that the developer Polytex Corporation Ltd has failed to complete the land use before the land concession expiry date. At the sideline of his duty visit to the state leaders in Beijing last week, Chief Executive Fernando Chui Sai On also reiterated on the government’s ground of upholding this decision.

The protesters expressed their discontent against the government decision on Friday, and at the same time demanded Polytex to compensate them their homes.

Polytex said they have already filed lawsuit against the government and sued it over delays in issuing the requisite approvals for the construction of the residential project. The developer still eyed a completion date for Pearl Horizon in 2018 if it won the lawsuit.

Pearl Horizon, sitting on a site known as lot-P of Areia Preta in Macau peninsula, is designed to house 18 towers of a total of 5,000-plus residential units. Over 3,000 of these units have already been sold via off-plans before any

brick was laid on the ground, according to the government’s earlier disclosure.

Polytex is a member of the Hong Kong-based developer Polytec Group. The group owns 80 percent of interest in Pearl Horizon; it also owns 80

percent of interest in another residential project located near the Pearl Horizon site, known as lot-T and T1 in Areia Preta.

This residential project, sitting on an aggregate site of 17,900 square metres, is

to be developed into upscale residential blocks and shopping area, according to the group’s interim report.

The 25-year temporary concession for the property project on lot-T and T1 is expiring in mid-2017.

4 | Business Daily

December 28, 2015

Macau

“Demand for luxury art glass needs time to grow” Launching Asia’s first authenticated Italian Murano art glass store inside the Galaxy Macau, the CEO of the Italian-founded Ma.re gallery, Tommaso Manzoni, told Business Daily in an interview that local demands for luxury art glass products may still need some time to grow as the city’s Chinese tourists may not have fully realized the values behind it. Nevertheless, he believes Macau is a good platform for his business to develop this and other Asian markets Kam Leong

kamleong@macaubusinessdaily.com

Why would you choose Macau as the first stop to expand your business in Asia?

When we were in Italy, we sold a very nice piece of art glass to a client from Macau. We talked with this client, we asked the client whether there was something about Murano glass being sold in Macau at that time and he told us no. Hence, we thought that coming here to open a store would be a good idea. In fact, before that, we had been thinking to expand our business to the Asian market for several years. And we think Macau will be a very good opportunity for us.

What does Macau bring to your business compared to other big Asian cities, like Hong Kong?

Macau does not only attract us by its casinos and hotels. We think that Macau is actually a very good platform for us to step into other Asian markets, as it is easy to reach other nearby cities via Macau. Meanwhile, it also provides other advantages for our business, for example, Macau is a free port, which brings us advantages in terms of taxes.

When we ship our products, we don’t encounter customs problems that we may face in the Mainland China, where taxes are very high too.

How was the process of the brand here? How long did it take?

It took about one year and a half before we officially launched the store. For that year, I came to Macau just for couple of weeks, staying in an hotel and then went back in Italy. I did some examination during that period to test the feedback in the local market by showing our products to local customers. Meanwhile, I officially moved to Macau last October... Before the launch of our store, we also participated in MIF (Macau International Trade and Investment Fair), MGS (the Macao Gaming Show) as well as some other exhibitions in the Venetian Macau to see local reactions. We met Galaxy [representatives] during the MIF. Some managers of the company saw our products for the exhibition, which has led us to open a store in Galaxy.

Why do you think Galaxy is suitable for launching your business, compared to other casinos or street shops?

First of all, we think that the potential in big-scale shopping malls is much higher than street shops. Meanwhile, the shopping mall of the phase II of Galaxy is like a luxury street providing different kinds of high-end

products, and we think this totally matches our products.

want something, which of course, will be more expensive.

How about the rent in Galaxy?

Which kinds of your products are the most popular for the Asian market?

Of course, in big property like this, the rent is quiet expensive.

However, on the other hand, they can help us a lot in terms of promotion and advertising with different campaigns. In fact, for us, this is more like an investment, as you know, we are not a very famous fashion brand, like Louis Vuitton that has stores all around the world. Through such investment, we hope to gain our influence in the future.

What are the other difficulties of introducing the Italian art glass to the city?

One of the major problems we face is to teach our staff here how to manage our glass. It is because this kind of art glass is not that popular in the local market, we have to teach our staff how to move, how to touch, how to clean, and how to wrap when clients want to take them away.

Meanwhile, in terms of shipping, there is no problem at all as we are very used to shipping our products worldwide. We have a team in charge of this. We usually ship our products by sea which takes around 35 days, but we can also ship by air if clients urgently

Well, they all love [glass] about animals, like birds, jellyfish, turtles and etc. In fact, we have also

The Ma.re gallery The Ma.re gallery, located in the heart of Venice in Italy, was founded in 1987 by the Manzoni family. The gallery, providing a selection of varied pieces of art glass, gave itself another title this year – the first authenticated Muranoglass gallery in Asia.

According to Tommaso Manzoni, the CEO of the gallery in Macau, his family started to engage in Murano glass business since his grandfather’s generation, meaning around 60 years ago. The Italian family also owns a glass factory in Murano – the origin of Murano glass.

The Italian-based gallery was also the only gallery of art glass mentioned in the Louis Vuitton City Guide 2013 dedicated to Venice.

Business Daily | 5

December 28, 2015

Macau started to design some dragonrelated products for the Asian market.

What’s the price range for your products?

We have a very wide range of products with different prices. The store we have here is a bit small that we cannot show all our products. On the Macau [Peninsula], we have a very big warehouse that stores bigger sizes of products. Our products range from MOP200 for a rose, MOP600 for maybe a drinking glass to some masterpiece that costs MOP1 million.

Is the warehouse on the Peninsula side opened to public as well?

We only open the warehouse for appointments and for private clients.

The warehouse in Macau runs like this , for example, if clients see a chandelier here in the Galaxy store and they want to see more, we will bring them to the warehouse.

Demands primarily from SARs How are the demands to such kind of art products in the local market?

From what I’ve observed, most of our local Macau clients and those from Hong Kong have already known about Murano glass as they may have been to Italy and they know about these glass art products. They appreciate the products much more than most of the Mainland Chinese tourists at this moment. We can see that people from the Mainland may not understand these products. From how they touch them, you can see that they have no idea about where these are from.

As such, your major clients are from Macau and Hong Kong?

Yes, people from Macau and Hong Kong are our major customers at the moment, as well as other tourists from Asia, such as Singaporean and Malaysian. We have some Mainland Chinese clients sometimes, of course. But that proportion is not that big.

I think it will take us more time to teach them to understand the values of the Murano glass.

Mainland Chinese are not your major customers despite the fact that they are the city’s major source of tourists…

Yes, for these few months. Hong Kong and Macau clients are more familiar with such kinds of art pieces so it is easier for them to see a piece and then buy it for decorating their houses. But Chinese tourists may not care about [such art pieces] as much as the Hong Kong or Macau clients do. They may prefer spending the same amount of money on a fashion bag or a watch. Hence, as I said, it will really take some period of time to see growth in the demands from the Mainland Chinese.

The high-end retail market of Macau and Hong Kong are experiencing downturn due to Chinese tourists spending less in general. Does it affect your business when your major customers are not Mainland Chinese?

Murano Art Glass Murano is an island lies about 1.5 kilometres from the famous Italian city Venice. It is well-known for its glass making industry as glass products there are historically and artistically valuable.

The Veneto Region of Italy, in order to protect and promote the origin of artistic glassworks created on the Murano Island, registered the trademark Vetro Artistico® Murano”at the European Office for Harmonisation.

The trademark serves as a certificate for glass products that are really manufactured in Murano. In addition, only companies that obtained the “Vetro Artistico® Murano” certification can apply to put the trademark with its logo on the glass they manufacture. The sticker, to prevent counterfeit, cannot be removed or it would break. It also carries the identification code of the manufacturer.

Still yes, of course. Frankly, I agree that we did not open our store during the best time of Macau in the history. It is a bit quiet [in the shopping mall] as there are fewer Chinese tourists. We hope the situation would improve and get better next year.

It’s been some six months after your store was launched. Have the demands met your initial expectation and have they increased?

To be honest, we were expecting a bit more. And we actually saw the opposite [that the demands have decreased.] During the opening of Galaxy Phase II, there were more people and [the shopping mall] was busier. Probably affected by the situation in Mainland China and the economy there, it is quieter than the beginning. However, I don’t think this only happens in Galaxy. I have some friends doing businesses in other local casinos and they told me the situation is the same.

What are your current marketing strategies to attract more clients?

We are now eyeing on the Hong Kong market more as it is a very huge one. In my opinion, if we can achieve good performance for the Hong Kong segment, the products will be more easily adopted by Mainland Chinese clients…

Meanwhile, we will also try to attract more Chinese clients, to educate them more about the values

of these art pieces. For that, we are thinking to bring some artists here to do some demonstrations, hoping to let more people know the values and the history about such kinds of art products. These pieces are not for souvenirs, they are more like investment, as the values can well go up.

Do you have a timetable for the expansion plan?

Are you planning to open more stores in the city?

Are you confident in the prospect of your business in Macau?

Macau is quite small thus we think one store is enough for the local market for this moment. In fact, I would like to expand our business to Hong Kong but the rent there is also not so easy. Singapore will also be a nice destination for our products. There are different places in Asia which are very nice for us to open our business.

We don’t have the timetable at this moment. We need to see how the business will be for the next year here in Macau. We are planning to open for franchising to other local stores, or for stores in other cities.

Yes, I am. After all, the advantage of our business is that our products are unique in the local market.

There is no other shop selling the same things as we do. We are the only one. If we can make a very good marketing, especially if we are able to attract more Mainland Chinese clients, we will for sure achieve success.

Business Daily | 7

December 28, 2015

Macau MTel fibre broadband subscribers surpass a thousand

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PJ drug bust – 9.3 kg cocaine confiscated

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he Judiciary Police (PJ) has busted the second largest drug trafficking case in terms of the value of the goods since the handover.

9.3 kilogrammes of cocaine worth around MOP25 million in the black market were confiscated. One Turkish male, two Hong Kongers, one male, one female were arrested on Sunday.

The police said the Turkish suspect wrapped the drug in sheets and brought them into the SAR using a handbag.

“He made quite a circuitous route. He departed from Brazil and went through Dubai and Taipei then arrived in Macau last night (Saturday night) and checked in this hotel in Praca de Ponte e Horta,” said the PJ spokesperson. “We made relevant deployment and this morning when two people from Hong Kong, one man, one woman came to deal the goods, we intercepted the three of them all at once.”

The Police said the Turkish man admitted that he was employed by a foreign criminal group and received US$5,000 to deliver the drug to Macau. The suspects from Hong Kong also admitted that they’ve been paid over HK$10,000 to take these drugs back to Hong Kong. Local Police vowed to cooperate with their counterparts from Hong Kong to further investigate the case.

Cotai Border shuttle Government to suspend fare increase to MOP5 subsidization scheme for green appliances

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he Transport Bureau (DSAT) announced that it has authorized the bus operators providing shuttle buses connecting Cotai in Macau and Hengqin in Zhuhai through the Lotus Bridge to increase the one way bus fare to MOP/RMB5 from the current MOP/ RMB3. The new fare is expected to be in place in the beginning of next year.

DSAT says that the fare raise will be the first since the route came into operation in 1999. The main reasons lie in the increasing operating cost in human resources, oil prices, inflation, and the expenditure since the Cotai border has been open for 24 hours at the end of 2014.

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he SAR government has decided to suspend the subsidization scheme for companies or institutions to purchase appliances that are environmentallyfriendly or energy-saving by the end of this year. The Environment Protection Bureau announced that scheme will not prolong after it expires on 31 December 2015 while all applications filed before that date will be processed accordingly.

The authorities said that the scheme has fulfilled its purpose since its first launch in 2011. Until the end of September this year, around 4,000 companies and associations had been granted subsidies worth almost MOP350 million. The bureau added that other subsidization schemes might be launched in the future to facilitate environmental policies.

ocal fixed-line telecommunication service provider MTel Telecommunication Company saw its number of fibre broadband services subscribers reach over one thousand as at last Friday, according to the company’s chairman and CEO, Michael Choi Tak Meng.

Mr. Choi told local Chineselanguage newspaper that customer demands to his company’s service have been increasing since the company officially launched its service last December. Nevertheless, he revealed that the network installation work of the company is still behind the schedule due to government department lacking internal coordination.

According to the MTel chairman, the telecommunication company’s network covers around 50 per cent of the city’s territory. In terms of districts, it covers 44 per cent of the Macau Peninsula, 38 per cent of Taipa and 43 per cent of Coloane.

In fact, its contract with the government regulates that the company should cover at least 70 per cent of the city’s territory next year, while such coverage should reach 99 per cent by the end of 2018.

Mr. Choi slammed that the government’s lack of internal coordination has affected the company’s road construction for building the network. Perceiving that the government does not understand his company’s situation, the businessman indicated that the company could only try to catch up with the regulated schedule next year.

In 2013, MTel was granted a fixedline licence which also covers Internet services by the government, leading Companhia de Telecomunicações de Macau SARL (CTM) to lose its monopoly in the fixed-line sector. The licences of both of the telecommunication companies will expire by the end of 2021 if there is no extension.

ICBC: local card swipe consumption up 10 pct yearly

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hile Macau’s economy has entered an adjustment period, local bank card business has experienced steady growth for the last five years, according to Ieong Ka Wai, Card Business Department Head at Industrial and Commercial Bank of China (Macau) Limited (“ICBC Macau”). According to local Chinese media Macao Daily’s report, Mr. Ieong said while tourists’ expenditure has decreased, locals’ consumption through card swiping has been growing at a rate of around 10 per cent every year for the last five years. He indicated such growth can be witnessed in the sector of restaurants, shopping malls and even conventions and exhibitions.

8 | Business Daily

December 28, 2015

Greater China

Industrial profits fall for 6th straight month The jump in the auto manufacturing and electricity sectors helped narrow overall declines Winni Zhou and Norihiko Shirouzu

KEY POINTS Nov profits of industrial firms fall 1.4 pct y/y Jan-Nov industrial profits down 1.9 pct y/r November profit decline narrows

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rofits earned by Chinese industrial companies in November fell 1.4 percent from a year earlier, marking a sixth consecutive month of decline, statistics bureau data showed yesterday.

Industrial profits - which cover large enterprises with annual revenue of more than 20 million yuan (US$3.1

million) from their main operations fell 1.9 percent in the first 11 months of the year compared with the same period a year earlier, the National Bureau of Statistics (NBS) said on its website.

The November profits of industrial firms have seen some improvement from the previous month. In October,

profits fell 4.6 percent from a year earlier.

“The November industrial profit data matched earlier output data and they showed some signs of stabilising, which are in line with recent data from other Asian countries,” said Zhou Hao, China economist at Commerzbank in Singapore, adding the figures were slightly better than market expectations.

The NBS said investment returns for industrial companies in November increased from a year earlier by 9.25

Beijing targets agricultural supply-side reforms President Xi Jinping said that China’s agricultural and rural development still faces many challenges

A

n annual rural work conference concluded on Friday, agreeing to push forward supply-side reform in agriculture to speed up modernization.

China will ensure abundant and quality farm produce to satisfy market demand, according to the Central Rural Work Conference that mapped out rural work for 2016 and the 13th Five-year Plan period (2016-2020).

Priority should be given to reduction of inventories and production costs and overcoming weaknesses in the sector, according to a statement released after the conference.

China will step up grain processing to cut stock; promote large-scale production, curb overuse of pesticides

and fertilizers and introduce social services to slash costs; reinforce rural infrastructure and boost shortlysupplied farm produce to overcome weak links.

After years of good harvests, China has grown out of a food shortage period, but structural problems remain unsolved, including the contradiction of falling prices and rising costs: some produce is over-supplied and some in extreme shortage.

Total grain output increased 2.4 percent year on year to 621 million tonnes in 2015, the 12th straight year of growth. However, inventories are piling up. It is estimated that China has accumulated billions of tonnes of grain stock. Corn alone has reached

400 million tonnes: a bottleneck and needs reforms on the supply side.

President Xi Jinping said in his instruction that China’s agricultural and rural development still faces many challenges, and that greater efforts should be made to support rural development and advance rural reforms.

In a written instruction, Premier Li Keqiang told the conference that to address new problems, China should optimize the agricultural structure and promote large-scale production in multiple forms to improve quality and competitiveness of agriculture.

Total grain output increased 2.4 percent year on year to 621 million tonnes in 2015, the 12th straight year of growth

billion yuan (US$1.43 billion).

The jump in November profits from the auto manufacturing and electricity sectors, up 35 percent and 51 percent from a year earlier, respectively, helped narrow overall declines, the statistics bureau said.

“Declines in industrial profits narrowed in November, but uncertainties still exist,” said He Ping, an official of the Industry Department at NBS. He added that inventory of finished goods grew at a faster pace last month.

Profits of state-owned enterprises (SOEs) among major industrial firms saw a 23 percent slump in the first 11 months this year from the same period in 2014. Mining remained the laggard sector, with profits falling 56.5 percent in the same period.

Aluminium producer China Hongqiao Group said in early December it would cut annual capacity by 250,000 tonnes immediately to curb supplies.

Eight Chinese nickel producers including state-owned Jinchuan Group Co Ltd, said they would cut production by 15,000 tonnes of metal in December and reduce output next year by at least 20 percent from this year, in a bid to lift prices from their worst slump in over a decade.

China’s producer prices have been in negative territory for nearly four years due to weak domestic demand and overcapacity.

The country’s top leader last week outlined main economic targets for next year after they held the annual Central Economic Work Conference, where it said the government will push forward “supply-side reform” to help generate new growth engines in the world’s second-largest economy while tackling factory overcapacity and property inventories.

Reuters

Li said China should accelerate construction of rural infrastructure, improves facilities and services in villages and urban areas favoured by rural migrants, and promote coordinated urban and rural development.

The meeting agreed that China should follow the concept of innovative, coordinated, green, open and shared development in its rural work for the next five years.

“Food security is the bottom line of agricultural structural reform,” said the statement, adding that the government will secure the supply of staples, protect farmland and maintain production capacity.

The government will offer preferential policies to large-scale grain farms while making sure that farmers benefit from agricultural development. It will also improve the price formation mechanism and government purchase measures for important farm produces.

Priority for fiscal support

China also pledged to make rural areas and agriculture a priority for government fiscal support to develop rural economy and lift the remaining poor out of poverty.

The government will channel more money to rural areas and encourage private investment into rural and agriculture projects, according to the statement.

There have been calls to further tap into the potential in the countryside and promote an integrated development of the agricultural, industrial and service sectors, to increase farmer’s incomes, the statement said.

In the statement, the government reiterated its aim of lifting all poor people out of poverty through precise poverty relief measures.

Xinhua

Business Daily | 9

December 28, 2015

Greater China AIIB formally established in Beijing

Banks required to open Is expected to offer loans to the first batch of projects in mid-2016 real-name accounts Chinese commercial bank must verify the identify of clients when they open personal bank accounts to make sure they are using their real names, a circular showed Friday. PBOC released a circular saying that banks must check an applicant’s ID and his/her willingness to open the account. “If the applicant’s real identity cannot be verified with ID, the bank can ask for additional evidence,” the circular said. The PBOC said in a statement that despite real name requirements being in place since 2000, implementation was lax, and anonymous or fake bank accounts appeared from time to time.

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he China-initiated Asian Infrastructure Investment Bank (AIIB) was formally established Friday in Beijing and expected to start operation early next year.

“The AIIB is legally established as the Articles of Agreement take effect today,” said China’s Minister of Finance Lou Jiwei.

The Articles of Agreement outlines the financial share of each founding member as well as rules for policymaking, governance structure, and business and operational systems for the bank. It became effective once the legislatures of 17 members, who hold a combined 50.1 percent stake in the bank, ratified the agreement.

As long as at least 10 signatories, and no less than 50 percent of the capital contribution, obtain legislative approval, the agreement will become effective.

The establishment of the AIIB marks a milestone in the reform of global economic governance system, Lou said.

The AIIB will be operational after board of directors and executive council meet for the first time. The meetings are slated to run from January 16 to 18 in Beijing, according to Lou. The bank’s president will be officially appointed and the management team will be in place at the meetings.

The bank will start recruiting new members, Jin Liqun, the bank’s president-designate, said in an interview with Xinhua, adding that members of the International Bank for Reconstruction and Development and

AIIB will offer an innovative financing platform tailored to Asia’s infrastructure financing needs today, and those of future generations Jin Liqun, presidentdesignate, Asian Infrastructure Investment Bank

the Asian Development Bank (ADB) could apply to join the AIIB. The bank will always be open to new membership, Jin said.

“We aspire to excellence and will adhere to the highest standards in governance,” he said, promising that he will be firmly committed to fostering a principles-based corporate culture.

“Our Management will be fully accountable for rigorous implementation of policies and standards. We are ready to make a positive difference,” said Jin. The bank, headquartered in Beijing, now has 57 members.

China, India and Russia are the

Jin Liqun, president-designate of the Asian Infrastructure Investment Bank

three largest shareholders, taking a 30.34 percent, 8.52 percent, 6.66 percent stake, respectively. Their voting shares are calculated at 26.06 percent, 7.5 percent and 5.92 percent.

“China is not deliberately seeking a veto power,” Vice Finance Minister Shi Yaobin said in an interview with Xinhua.

He said China’s stake and voting share in the initial stage are the “natural outcome” of current rules, and may be diluted as more members join the bank.

As its name suggests, the AIIB will finance infrastructure -- airports, mobile phone towers, railways and roads -- in Asia.

The International Monetary Fund, World Bank and ADB have all welcomed the AIIB initiative and see room for collaboration.

Xinhua

Property sector to see mild growth, divergence in 2016 The housing sector showed signs of recovery in summer and autumn with improving home prices

Eliminating industrial overcapacity will be a painful process for China, but will not cause huge unemployment, an official said on Saturday. “Structural reform, especially cutting overcapacity, will inevitably affect the employment status and income of some people, but that’s a step we have to take,” said Yang Weimin, deputy director of the Office of the Central Leading Group on Finance and Economic Affairs. A mature support mechanism must be in place to ensure social stability, and by doing that, there won’t be mass unemployment, Yang said.

Regulator studying Vanke-Baoneng deal China’s securities regulator said on Friday that it was studying Baoneng Group’s acquisition of a major stake in developer China Vanke Co with other financial watchdogs to see if any rules were violated. It is the first time the stock regulator has said it is looking into the deal, which has triggered a high-profile battle between Vanke Chairman Wang Shi and Baoneng. Vanke issued a statement on the Shenzhen stock exchange late on Friday to say that it hoped the management would not change the company’s operating style.

Alibaba to invest in online food delivery service Alibaba Group Holding Ltd has agreed to invest US$1.25 billion in Chinese online food delivery service Ele.me, leading business weekly Caixin reported on Friday. The report, citing unidentified sources, said Alibaba will obtain a 27.7 percent stake in Ele.me, becoming its biggest shareholder.

Alibaba and Ele.me both declined to comment. Ele.me, which roughly translates as ‘Hungry Now?’, is part of a trend in China for what is known as online-to-offline (O2O) services. These include taxi hailing and restaurant review apps that link smartphone users with offline businesses.

H

ousing prices in China are expected to grow steadily in 2016, while divergence between bigger and smaller cities will continue, according to a property research organization.

Government policy has perhaps helped to ease the housing glut to some extent this year, leading to improved prices and demand in major cities, China Index Academy said in its latest report.

Authorities will continue to focus on destocking the property inventory in 2016, with the national average housing price expected to rise 4 percent to 7 percent, it said.

So far this year, the average residential housing price in 100 major cities has increased 3.39 percent year on year, according to the report. While top-tier cities recorded a price rise of 15.1 percent this year, second- and third-tier cities saw prices fall.

The market divergence will become more apparent in 2016, as population inflow and economic prosperity drive house prices higher in big cities while oversupply takes prices in smaller cities to the opposite direction, the report said.

China’s property market took

Overcapacity cut will not cost a lot of jobs: Official

Mainland ranks first for outbound tourists

a downturn in 2014 due to weak demand and a supply glut. This cooling continued into 2015, with sales and prices falling, and investment slowing.

To combat the market weakness and a broader economic slowdown, China’s central bank cut benchmark interest rates five times and lowered banks’ reserve requirement.

The country also lowered down payment requirements for secondhome purchases and some local

governments have rolled back restrictions.

The housing sector showed signs of recovery in summer and autumn with improving home prices.

Destocking the property inventory will be a major task in 2016, according to a statement released last week after the Central Economic Work Conference, which mapped out economic work for next year.

Xinhua

China had the world’s largest number of outbound tourists in 2015, according to data from the China National Tourism Administration (CNTA). About 120 million Chinese travelled overseas in 2015, up from 109 million the previous year, according to the CNTA. This was an increase of 19.5 percent year on year and nearly 13 times the level in 1998, CNTA data showed. The increase in outbound tourists is attributed to more relaxed visa policies and rising disposable incomes, according to the CNTA. Meanwhile, China’s booming domestic tourism market saw over 4 billion journeys in 2015.

10 | Business Daily

December 28, 2015

Greater China

Wanted: world class Mainland bond market to match SDR currency Traders say it’s difficult for most foreign investors to directly short Chinese government bonds, and that liquidity in trading China’s government bonds offshore is thin Enda Curran

W

hat if you had a reserve currency but nobody wanted -- or even could -- hold much of it?

That’s somewhat the situation for China as it prepares to join the reserve currency club next year. Compared with U.S. Treasuries, the typical asset held as reserves in dollars, buyers face a thicket of rules and a limited array of counter parties. For one thing, besides central banks and sovereign funds, not many other foreign investors can currently buy Chinese government bonds.

Officials recognize the scale of their task -- People’s Bank of China Deputy Governor Yi Gang said December 1 that there was a lot of work to do on building the nation’s capital markets.

Gradually letting more investors buy government bonds, establishing the market infrastructure for borrowing and lending them, and providing assurance that there would be no punishment for selling the securities short, are among the to-do list items.

One reward for having a liquid government bond market that investors round the world feel comfortable buying into would be having a stronger benchmark for the trading of other debt, like corporate bonds. That would help Premier Li Keqiang as he encourages companies to tap debt markets for more funds and wean themselves from bank loans and shadow lending.

While China would have to surrender to the markets some control over its borrowing costs, that’s the price for increasing the nation’s sway in a global financial system currently dominated by the dollar.

"It will take time, but there is no doubt that the Chinese government bond market will become a fulcrum global asset class," said Luke Spajic, portfolio manager for emerging markets at Pacific Investment Management Co. "It’s importance cannot be understated."

But getting to that point won’t be easy.

Analysts say authorities in Beijing will first need to complete a laundry list of reforms, similar to the process that won the yuan inclusion in the International Monetary Fund’s basket of reserve currencies.

On the agenda: further opening capital borders, lifting caps on foreign investment, getting inclusion into key bond indexes, improving transparency around pricing and market making, fully opening up the market to retail and institutional investors and allowing derivative instruments to be developed.

Some changes are already underway. The Communist Party has pledged to increase the yuan’s convertibility by 2020 and to gradually dismantle capital controls.

Sovereign wealth funds, central banks and approved institutional investors are being granted gradual access to the bond market.

China’s outstanding government bonds, stood at 14.6 trillion yuan (US$2.25 billion) as of November, up 41.7 percent from end of last year, ChinaBond website data show.

Long road

"There is still a long way to go before ’Chinese Treasuries’ trade like U.S. Treasuries," said James Yip, a fund manager at Shenwan Hongyuan Asset Management (Asia) Ltd. in Hong Kong.

Overseas investors’ holdings of Chinese government and corporate bonds rose 14 percent in the first three quarters to 764.6 billion yuan, compared with a 68 percent gain in 2014.

Foreign ownership will rise 10 percent next year to 900 billion yuan, Gu Ying, an emerging Asia currency and rates strategist at JPMorgan & Chase Co., predicted in a December 9 report.

That would be the weakest expansion since the onshore bond market was opened to overseas funds in 2009.

More debt is likely. The government signalled they will take further steps to support growth, including widening the fiscal deficit and stimulating the housing market, to put a floor under the economy’s slowdown. A bigger and betterfunctioning bond market may help underpin those policies.

"Authorities should encourage both Chinese corporates and local government to tap into the bond market for funding with ease so as to use the capital market to better facilitate the deleveraging process in the corporate and local government sectors," Australia & New Zealand Banking Group Ltd. economists led

by Liu Ligang wrote in a report this week.

Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong, estimates that net issuance of general government bonds will reach around 5 trillion yuan in 2016.

Credibility issue

Apart from reforms, there’s the issue of credibility. A wide scale government intervention into the nation’s stock markets after a US$5 trillion rout this year spooked foreign investors.

Measures taken included a ban on large shareholders from selling and a crackdown on short sellers -- a reminder of the role still played by the state.

"Foreign investors in the Chinese bond market should remain cautious," said Victor Shih, author of the book "Factions and Finance in China: Elite Conflict and Inflation."

"The authorities will need to clearly signal to foreign creditors that their rights are equal to those of domestic creditors either by decree or through precedents."

The central government in Beijing already plays a leading role in the domestic bond market. For example, a multi-trillion yuan initiative launched

The Chinese government is still very reluctant to allow the market to operate on its own Victor Shih, author of the book “Factions and Finance in China: Elite Conflict and Inflation”

by the government this year to swap high-yielding local debt into cheaper municipal bonds includes inducements for state banks to buy the new, longer-maturity, lower yielding bonds.

Overseas issuers account for only 0.04 percent of onshore government and corporate bonds and foreign investors hold only 1.8 percent of the market, according to data compiled

by Bloomberg.

Wild card

Then there’s the wild card. China’s currency has been on a weakening trend since the IMF on November 30 approved the yuan’s admission to the reserve currency club, followed by a signal this month that authorities want to loosen its managed peg to the dollar. A significant downward move in the yuan could jolt investors and drain liquidity from the market.

A sudden devaluation in August sent money out of the country at a record pace.

Bloomberg News

Business Daily | 11

December 28, 2015

Asia

Vietnam says 2015 economic growth hits 5-year high

The GSO said growth has been supported by 9.4 annual percent growth in manufacturing and expansion of 10.8 percent, the highest in five years, for construction.

As of December 15, actual foreign direct investment (FDI) this year was US$14.5 billion, or 17.4 percent above the year-earlier figure.

With projected economic growth of 6.7 percent for next year Mai Nguyen

A missed target

V

ietnam reported that its economy grew 6.68 percent in 2015, the fastest pace in five years, helped by an expanding industrial sector and record foreign direct investment.

The annual growth rate exceeds a 6.55 percent forecast

by Prime Minister Nguyen Tan Dung early this month and the official target of 6.2 percent, the government said on Saturday.

In the fourth quarter, gross domestic product (GDP) increased 7.01 percent from a year earlier, accelerating

from 6.87 percent in JulySeptember to be the year’s best quarter, the General Statistics Office (GSO) said in a report.

The Southeast Asian nation’s growth rate has been rising every year since 2012 as the country made reforms after being on the brink of a crisis

after a property bubble burst and bad debts soared to reach 17.5 percent of total loans.

The 2015 rate “is an achievement of a five-year period but not a result of efforts of a single year,” Nguyen Bich Lam, GSO head, told a media conference.

Thai central bank cuts 2016 GDP forecast The economy grew 2.9 percent year-on-year in July-September and 1.0 percent on the quarter, beating forecasts Orathai Sriring and Kitiphong Thaichareon

T

hailand’s central bank trimmed its 2016 economic growth forecast on Friday, reflecting expectations of zero export growth and suggesting the military government will continue to struggle with a sluggish economy.

The Bank of Thailand (BOT) at the same time nudged its growth estimate for this year up to 2.8 percent from a 2.7 percent forecast three months ago, citing likely better-than-expected government investment and private consumption.

But the new forecast is still about half the rate it projected in its initial 2015 forecast issued in June last year.

It lowered its 2016 forecast to 3.5 percent from 3.7 percent, due mainly to poor exports as trade partners have been slow to recover.

Exports, a key economic driver, are expected to fall 5.5 percent this year and remain flat next year, compared with the previous 2016 forecast of a 1.2 percent rise. Shipments shrank in both 2013 and 2014.

“Our economy relies quite a lot on exports,” BOT Assistant Governor Jaturong Jantarangs told a news conference. “It’s difficult for private consumption and public spending to offset that in the short term. We need

private investment to speed up.”

Sarun Sunansathaporn, senior economist at Bank of Ayudhaya, added: “Growth momentum will be stronger in the second half as infrastructure projects start to materialise.”

The military seized power in May 2014 to end political unrest but has struggled to turn around Southeast Asia’s second-largest economy, with exports and domestic demand still weak. Growth last year was just 0.9 percent.

The junta recently introduced various stimulus measures, including

One weakness in 2015 was exports, which failed to hit the target for 10 percent growth on falling global commodities prices including crude oil and coffee.

Shipments have increased 8.1 percent, to US$162.4 billion, while imports increased 12 percent from last year to US$165.6 billion, the GSO report showed.

That left Vietnam with its first annual trade deficit since 2011, estimated at US$3.17 billion.

“Our economy is very exposed and based much on exports, so the government will have to focus on making suitable policies for the coming time,” GSO’s Lam said, referring to rising global competition Vietnam faces for exports.

The communist nation is seen as one of the biggest winners from the TransPacific Partnership (TPP) covering 40 percent of global GDP, but experts have warned that its growth could be unstable if domestic businesses fail to catch up.

The country has completed negotiations for 12 free trade deals, including ones with the European Union, South Korea and the Russian-led Eurasian Economic Union.

Reuters

grants and soft loans for rural areas as well as credits for smaller firms.

It will also allow shoppers a tax deduction of up to 15,000 baht (US$416) on taxable goods and services purchased from December 25-31. Finance Minister Apisak Tantivorawong said this could lift 2015 growth by 0.1 to 0.2 percentage point.

The central bank said it expected growth in the final quarter of 2015 of 2.7 percent year-on-year and 0.8 percent quarter-on-quarter. Official GDP data is due to be released in February.

The economy grew 2.9 percent year-on-year in July-September and 1.0 percent on the quarter, beating forecasts.

The central bank has left its benchmark rate steady at 1.50 percent after two surprise cuts earlier this year. It next reviews policy on Feb. 3 and most economists expect no change for now amid benign inflation.

The BOT expects annual headline consumer prices to rise 0.8 percent next year after falling 0.9 percent this year.

Reuters

12 | Business Daily

December 28, 2015

Asia

Japan inflation edges up but weak spending keeps central bank pressured Cabinet approved draft budget featuring record welfare spending last week

J

apan’s core consumer prices rose for the first time in five months in November but household spending tumbled, casting doubt on the central bank’s view that robust consumption will help accelerate inflation to its 2 percent target.

The mixed batch of data will keep alive expectations that Bank of Japan (BOJ) Governor Haruhiko Kuroda, who has said he will do whatever it takes to achieve his ambitious price goal, may nudge the central bank into expanding stimulus as early as next month.

“The downward pressure from falling oil prices seems to have run its course, which helped core CPI rise,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

“But consumer prices likely won’t rise as fast as the BOJ projects. We expect the central bank to ease next year.”

The core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, rose 0.1 percent in November from a year earlier, against a median market forecast for a flat reading, data showed on Friday.

The rise followed a 0.1 percent drop in October and came as higher food prices moderated the pressure from slumping energy costs.

A separate BOJ index that excludes oil and fresh food - but includes

processed food prices - showed consumer prices rose 1.2 percent in the year to November, as companies passed on to consumers the higher import costs from a weak yen.

But household spending suffered the biggest annual fall in eight months, down 2.9 percent in November from a year earlier and exceeding a median forecast for a 2.4 percent decline.

The government downgraded its assessment to say spending was weak, underscoring the fragile state of the economy which narrowly dodged recession in July-September.

Economics Minister Akira Amari was upbeat on the outlook, pointing to rising real wages and blaming weak November spending on unusually warm weather that hurt sales of winter clothing.

“Factors that will support consumer spending are falling into place,” he told reporters.

Record budget

Wary of soft growth, the government approved US$800 billion in record spending in next fiscal year’s budget.

Total spending for the fiscal year starting April 1 will be 96.72 trillion yen (US$799.93 billion), up a tad from this year’s initial plan to spend 96.3 trillion yen.

The draft budget - the fourth since Abe returned to power in late 2012 -

KEY POINTS Nov core CPI +0.1 pct vs forecast of flat growth Household spending -2.9 pct yr/yr, down for 3 months Govt revises down view on household spending BOJ’s CPI stripping out oil rises 1.2 pct yr/yr Economics Minister Amari upbeat on outlook Draft budget approved with record spending features record welfare spending to cope with a fast-ageing population and a military outlay that topped 5 trillion yen for the first time ever.

Finance Minister Taro Aso said this budget was in line with Japan’s aim of achieving a primary budget surplus - excluding new bond sales and debt servicing - in fiscal 2020.

“This budget is appropriate for marking the first step towards our fiscal

plan, while managing both economic revival and fiscal consolidation,” he told reporters.

Tax revenue is estimated at a 25year high of 57.6 trillion yen on the back of rising corporate profits, allowing Tokyo to cut fresh borrowing to an eight-year low of 34.43 trillion yen.

This would bring Japan’s fiscal dependence, the ratio of bond issuance to budget revenue, to 35.6 percent - the lowest since fiscal 2008, just before the global financial crisis hit the world’s third largest economy.

But fiscal improvement depends largely on tax revenue windfalls from corporate profits due to a weak yen, and on low interest rates that limit rises in debt-servicing costs.

Social security spending, the budget’s biggest item, will rise 441 billion yen to a record 31.97 trillion yen.

Defence spending hit a record 5.05 trillion yen, rising for a fourth year in a row, reflecting U.S. base realignment and China’s rising military might.

Assumed interest rates will be cut from this year’s 1.8 percent to a record low of 1.6 percent thanks to massive debt buying by the central bank, limiting gains in interest payments. Still, the snowballing pile of outstanding debt will push up debt-servicing costs by 161 billion yen to a record 23.61 trillion yen.

Indian manufacturers target orders from revived nuclear power push Prime Minister Narendra Modi’s government has made nuclear energy a priority and says it is tackling that hitch with an insurance pool Tommy Wilkes

I

ndian manufacturers supplying parts to nuclear reactors say they are preparing for a jump in orders and revenues as New Delhi pushes ahead with a plan to build new plants across the country over the next few years.

Larsen & Toubro, Walchandnagar Industries , state-run Bharat Heavy Electricals and Godrej Group are among those who make parts for nuclear plants. They have suffered from years of

stop-start orders, as India’s nuclear programme stalled.

But there are now signs India’s US$150 billion dollar nuclear power programme is finally getting off the ground: the government expects to seal a contract with Westinghouse Electric Co LLC to build six nuclear reactors in the first half of next year, a senior government official told Reuters.

“We are very hopeful that before the end of the financial year, that the enquiries will

start to come in,” G.K. Pillai, chief executive officer of Walchandnagar said.

Like many smaller firms, Walchandnagar, which makes parts for reactors, is expected to feel the boost more than larger, more diversified rivals. It is already in talks with American, Russian and French nuclear power firms, Pillai said.

He aims to get 25 percent of its revenues from nuclear energy within three years, up from 15-18 percent today - if

construction on new plants starts next year.

Godrej Group, which supplies mechanical equipment for nuclear fuel handling and positioning systems, is already expanding the manufacturing capacity of its nuclear business to target new tenders, billionaire chairman Adi Godrej said. He did not disclose the size of its investments.

Uncertainty around India’s rules covering liability faced by suppliers and builders in

Reuters

the event of an accident have cooled interest in nuclear, particularly for foreign players.

Prime Minister Narendra Modi’s government, however, has made nuclear energy a priority and says it is tackling that hitch with an insurance pool. The final hurdle, ratification of the International Atomic Energy Agency’s Convention on Supplementary Compensation for Nuclear Damage (CSC), is expected within weeks.

Analysts say they do see a boon - if one or two years away at least - with big players eventually seeing nuclear make up a larger portion of orders. But some also caution past efforts to build a nuclear business in India have struggled.

Industrial conglomerate Larsen, which has agreed to work with Westingouse on supplying parts, has a forging facility in the western state of Gujarat designed for nuclear plants. However, the facility has turned to other industries as nuclear orders dried up.

Reuters

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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Business Daily | 13

December 28, 2015

International Samsung SDI to sell 5 mln Samsung C&T shares after ruling The ruling could weigh on Samsung C&T’s share price but will not endanger the founder Lee family’s hold over the firm or the larger electronics‑to-fashion conglomerate Se Young Lee

S

outh Korean conglomerate Samsung Group said yesterday its battery-making arm Samsung SDI Co Ltd will sell US$622 million worth of shares in sister firm

Samsung C&T Corp to comply with regulatory requirements.

South Korea’s Fair Trade Commission (FTC) had said earlier in the day that Samsung Group must

weaken or break three of its circular shareholding chains that it deemed had been strengthened by the allstock merger in September.

The ruling concerns Samsung SDI’s stake in Samsung C&T Corp, which was formerly known as Cheil Industries Inc before it took the name of a sister construction firm it merged with. SDI held stakes in both firms prior to the deal, and the FTC said the deal added shares held by SDI in three chains - two involving SDI and Cheil and another involving SDI and the construction arm. This is against South Korean laws.

Samsung Group has until March 1, 2016 to either have Samsung SDI sell a 2.6 percent stake in Samsung C&T, worth 727.5 billion won (US$621.8 million) based on Thursday’s closing price, or break the three chains completely. SDI currently holds a 4.7 percent stake in C&T. The ruling could weigh on Samsung C&T’s share price but will not endanger the founder Lee family’s hold over the firm or the larger electronics-to-fashion conglomerate.

De facto leader Jay Y. Lee and his siblings control nearly 40 percent of the firm through direct stakes and shares held by other related parties, including affiliates.

Samsung C&T is considered a key vehicle through which the Lees control top affiliates such as Samsung Electronics Co Ltd and Samsung Life Insurance Co Ltd. A Samsung Group spokeswoman said SDI would comply by disposing the 5 million Samsung C&T shares and consider options to minimise the potential market impact from selling the shares. She did not elaborate on when or how the shares would be sold.

Reuters

Nepal seeks China’s support to escape energy crisis

N

ways with Nepal to help resolve its energy problems.

Nepal had been almost totally dependent on India for overland supplies following earthquakes this year that killed nearly 9,000 people and blocked crossings from China.

China reopened a border crossing with Nepal in October and said it was using it to send in the supplies.

Old rivals India and China have used aid and investment to court Nepal for years.

Chinese Foreign Minister Wang Yi

Sluggish private investment, declining growth in revenue collection, and under performance in external sector set inertia on the growth in Bangladesh’s gross domestic product (GDP), said a local think tank Saturday. Unnayan Onneshan (UO), a local think tank, in its half yearly assessment of the Bangladeshi economy for 2015-16 (July 2015-June 2016) stated that in addition to unsatisfactory trends in these major macroeconomic indicators, improvement in three basic dimensions of development has not moved upward compared to those of other developing nations, as reflected in the Human Development Report 2015.

India close to ink defence deal with France

India may sign a major defence pact with France during French President Francois Hollande’s visit in January next year, sources said yesterday. “A defence deal between the two countries could be inked for 36 Rafale fighter jets,” the sources said, adding though the Defence Ministry is yet to spell out the nitty gritty. India has already expressed its intention to buy the jets from France during Prime Minister Narendra Modi’s visit to Paris in April this year. Indian Air Force head Arup Raha said in October he was optimistic that the deal would be finalized by this yearend.

Dozens feared dead after new landslide in Myanmar mine

For the last three months, protesters have blocked trucks coming in from India, leading to acute shortages of fuel and medicine epal’s foreign minister asked China on Friday for help in dealing with an energy crisis that crippled the landlocked country over the past three months and China said it would look at the request favourably.

The Himalayan nation, which serves as a natural buffer between China and India, adopted its first postmonarchy constitution in September hoping this would usher in peace and stability after years of conflict.

But for the last three months, protesters have blocked trucks coming in from India, leading to acute shortages of fuel and medicine. Nepal has blamed New Delhi for siding with the protesters, a charge India denies.

Speaking in Beijing after meeting Chinese Foreign Minister Wang Yi, Nepali Deputy Prime Minister and Foreign Minister Kamal Thapa said he had asked China to consider the longterm trade in petroleum products.

“I’m very happy to note the government of China has instructed the concerned petroleum export authority to be in touch and discuss issues related with the long-term trade of petroleum products with Nepal,” he told reporters.

Wang, standing next to Thapa, said China was willing to look at

Think tank sees inertial Bangladesh GDP growth

“For Nepal, there is no need to play each other. We have our own type of relations with India. Similarly, we have our special relations with China. So, I think we are very happy with that and will continue in future with that, strengthening relations with both countries,” Thapa said.

Wang said Nepal could become a place for win-win cooperation between China and India, rather than “a sports field for competitive games”.

Reuters

Dozens of people were feared dead in Myanmar after a landslide hit a jade mining region, workers at a local mining firm said, the second such incident in just over a month. The landslide took place on Friday in Hpakant in the country’s northern Kachin State, a rugged region sandwiched between China and India and the heart of Myanmar’s multi-billion dollar jade industry controlled by its powerful military. Police in Hpakant, in Mohnyin district, said the landslide took place on Friday afternoon but that they could not confirm casualties.

Cambodian, Vietnamese PMs inaugurate border markers Cambodian Prime Minister Hun Sen and his Vietnamese counterpart Nguyen Tan Dung inaugurated two border pillars on Saturday, announcing that 83.2 percent of the shared border has been demarcated. The two leaders jointly unveiled the border marker of northeastern Cambodia’s Rattanakiri province and Vietnam’s Gia Lai province, as well as the border pillar of southern Cambodia’s Takeo province and Vietnam’s An Giang province. Speaking at an inauguration ceremony, Hun Sen said the clear border pillars would help build the border into an area of peace, friendship, cooperation and development.

14 | Business Daily

December 28, 2015

International Guinea names mining executive as prime minister Guinea’s President Alpha Conde on Saturday appointed mining executive Mamady Youla as the country’s prime minister, citing the need to boost the country’s economy by creating more jobs, and said a new government will be named within days. Youla, 54, an economist, had been serving as general manager of Guinea Alumina Corp Ltd., a bauxite and alumina development company. “The appointment of Mamady Youla, … , confirms the new impulse given by President Conde to support job creation and the training, and to strengthen Guinean companies,” the office of the presidency said.

Inflation casts long shadow as Argentina’s Macri tries to fix economy Macri’s opponents claim his measures favour big business and will hit the poor but also those used lower down the production chain like auto parts.

Businesses have been quick to hike prices in anticipation of increased costs and some are accused of moving too quickly, using the devaluation as an excuse to increase profits.

Scarred

BNDES to pay US$1.2 bln in dividends to Brazil’s treasury Brazil’s state development bank BNDES will pay 4.8 billion reais (US$1.22 billion) in dividends to the Treasury, supporting efforts by the government to balance its 2015 accounts, a local newspaper reported. The Estado de S.Paulo, citing sources with knowledge of the decision, said the bank’s board approved the payment on Wednesday after it came under strong pressure from the government’s economic team. The bank has not paid dividends to the Treasury, its only shareholder, since September 2014. The 2015 payment was approved after the government paid 15.1 billion reais of its debt with the BNDES from 2014, the paper said.

Ukraine parliament approves 2016 state budget Ukraine’s parliament approved a budget for 2016 on Friday, a key condition to secure the next tranche of financial aid under a US$17.5 billion International Monetary Fund loan package. Lawmakers had approved a series of laws before the budget vote, including an amendment to tax laws, reducing the tax on employers and unifying the tax rate on personal income. They also increased excise duties on tobacco, fuel and alcohol with the aim of balancing the budget.

Commerzbank sues BNY Mellon, Wells Fargo, HSBC Commerzbank AG has sued four banks in the United States, claiming that they failed to properly monitor billions of dollars in toxic mortgage-backed securities acquired by the German lender before the 2008 financial crisis. Bank of New York Mellon Corp and units of Deutsche Bank AG, Wells Fargo & Co and HSBC Holdings Plc were named in the lawsuits filed on Wednesday and Thursday. BNY Mellon was the trustee for over US$1 billion in mortgage-backed securities bought by Commerzbank and US$1.3 billion of investments tied to a collateralized debt obligation.

President of Argentina, Mauricio Macri attends the Mercosur Summit in Asuncion, Paraguay

D

ays into his presidency, Mauricio Macri faces his first big threats as he seeks to fix Argentina’s ailing economy: inflation and recession.

In his first policy moves since taking office on December 10, the free markets advocate made good on his promises to eliminate capital controls and cut hefty export taxes.

But floating the peso triggered an immediate 26.5 percent devaluation and by making imported goods more expensive it will put further pressure on inflation, which already stands at well above 20 percent.

Economists expect inflation to accelerate to 35 percent in 2016, eating into Argentines purchasing power and dampening spending. They predict the economy will contract in the first months of the year, although it could then pick up again if new investment kicks in and a cheaper peso helps exporters.

Argentines knew the peso was being held artificially strong and many believe the measures are needed,

but even Macri’s own supporters are worried.

As Macri dismantles those policies, he risks tipping the economy into recession and stirring unrest from labour unions linked to the Peronist party he has just turfed out of power.

Macri believes a mix of probusiness policies and government austerity will bring inflation under control and encourage the investment that Argentina needs to grow rapidly and create jobs.

But in the short-term he has a problem, and little space to manoeuvre.

Interest rates are already high, discouraging investment. And austerity means reducing utility subsidies and restraining public sector wage hikes, both of which are unpopular.

Macri will be helped if exports start to grow quickly, and some businesses are already hopeful.

The devaluation pushed up the price of imported wares, including consumer goods like televisions and refrigerators

Argentina is scarred by episodes of hyperinflation that have periodically destroyed the value of the peso, resulting in an obsession with saving in U.S. dollars.

Seeking to end that and lock in currency stability, Fernandez propped up the peso with central bank reserves while restricting access to dollars.

But her controls spawned multiple exchange rates that distorted the economy and made business tricky.

The strong peso made Argentine exports expensive and discouraged investment.

Argentina’s business leaders have broadly welcomed Macri’s early measures but noted that his overall plan hinges on whether he can contain inflation and keep the exchange rate from falling much further.

To mitigate the impact, particularly on the poor, and also stave off possible unrest, Macri’s government will keep the Fernandez government’s “agreed prices” program which ensures certain basic goods are available for reasonable prices.

Still, his government will struggle to keep Congress and Argentine society at large on board with its plans if the economy does not pick up next year. Macri’s already fractious alliance does not have a majority in Congress and Fernandez’s party, the Front for Victory, remains a powerful force.

Reuters

German business leaders fear nationalism, refugee crisis will destroy EU In addition to the refugee crisis, European officials are grappling with Britain’s demands for EU reform ahead of a referendum on its membership of the bloc

G

erman business leaders fear that deep divisions over how to handle the refugee crisis and growing nationalism among member states could break up the European Union, according to five of the country’s biggest industry bodies.

The arrival of hundreds of thousands of people fleeing war and poverty in countries such as Syria and Iraq in Europe this year has frayed ties between European nations that were already strained by the euro zone financial crisis.

Added to that, rising nationalism could endanger Europe’s wealth, economic success and security, the presidents of Germany’s most prominent business groups told Reuters.

“Next year will be a crucial year for Europe,” BDI industry association leader, Ulrich Grillo, said. “I’m very worried about the future of the European Union.”

Lack of solidarity within the bloc meant Europe was risking all the achievements of the previous decades, Association of Skilled Trades president, Hans Peter Wollseifer, said.

“I would like to see a strong symbol for the unity of Europe,” he said.

Germany’s BGA wholesalers and exporters body leader, Anton Boerner, said Europe pulling further apart was one of the biggest risks for next year.

Germany is looking to EU partners to help manage the refugee crisis but is running up against resistance

from some countries, particularly in eastern Europe.

The influx has raised security concerns and boosted support for Eurosceptic parties across Europe, from Germany’s AfD party to France’s National Front, the Law and Justice government in Poland and Britain’s anti-EU UK Independence Party.

National answers for international problems were no longer enough, he said, and Europe only had weight in the world when its member states acted together.

The head of Germany’s BDA employers association, Ingo Kramer, called on the EU to take Britain’s demand for change seriously in order to keep the country in the union.

Reuters

Business Daily | 15

December 28, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The political consequences of financial crises Howard Davies

Chairman of the Royal Bank of Scotland

PHILSTAR Money sent home by overseas Filipino workers are forecast to reach US$29.7 billion this year, making the Philippines the world’s third largest recipient of remittances, according to the World Bank. Based on the World Bank’s Migration and Remittances Factbook 2016, India would be the top recipient of remittances which are seen to hit about US$72.2 billion, followed by China with US$63.9 billion and the Philippines. Trailing behind are Mexico (US$25.7 billion), France (US$24.6 billion), Nigeria (US$20.8 billion), Egypt (US$20.4 billion), Pakistan (US$20.1 billion), Germany (US$17.5 billion), Bangladesh (US$15.8 billion) and Vietnam (US$12.3 billion).

THE TIMES OF INDIA World Bank chief economist Kaushik Basu indicated that the bank may revise its GDP growth projection for India after it goes for a stock-taking in a few months. “There could be some changes in the January review of India’s growth forecast,” Basu said. “Decision-making and reforms can have an impact in terms of growth rate and the fact that a couple of important decisions did not go through could have an impact. But India is dominating for a couple of reasons,” Basu said.

TAIPEI TIMES Faced with a possible Control Yuan investigation over the Taipei City Government’s improper use of its public housing budget, Taipei Mayor Ko Wen-je yesterday said that he would not worry too much about being investigated, and that being probed by the agency during his time as a physician actually helped him become Taipei mayor. KMT Taipei City Councilor Chen Yung-te said that the KMT Taipei City Council caucus would file a report with the Control Yuan concerning the city government’s inappropriate use of funds, which it said totalled NT$15 million (US$454,476).

THE KOREA HERALDS Foreign investors have remained net sellers of South Korean stocks for 17 sessions in a row in December, weighing heavily on the local market alongside falling oil prices and a U.S. rate hike, data showed yesterday. Offshore investors extended their selling streak to 17 sessions from December 2 to December 24, marking the seventh-longest foreign sell-off in history, according to the Korea Exchange, the bourse operator. They sold a net 3.2 trillion won (US$2.7 billion) worth of local stocks over the cited period, dragging down the benchmark KOSPI by 0.93 percent.

I

may not be the only finance professor who, when setting essay topics for his or her students, has resorted to a question along the following lines: “In your view, was the global financial crisis caused primarily by too much government intervention in financial markets, or by too little?” When confronted with this either/or question, my most recent class split three ways.

Roughly a third, mesmerized by the meretricious appeal of the Efficient Market Hypothesis, argued that governments were the original sinners. Their ill-conceived interventions – notably the USbacked mortgage underwriters Fannie Mae and Freddie Mac, as well as the Community Reinvestment Act – distorted market incentives. Some even embraced the argument of the US libertarian Ron Paul, blaming the very existence of the Federal Reserve as a lender of last resort.

Another third, at the opposite end of the political spectrum, saw former Fed Chairman Alan Greenspan as the villain.

It was Greenspan’s notorious reluctance to intervene in financial markets, even when leverage was growing dramatically and asset prices seemed to have lost touch with reality, that created the problem. More broadly, Western governments, with their light-touch approach to regulation, allowed markets to career out of control in the early years of this century.

The remaining third tried to have it both ways, arguing that governments intervened too much in some areas, and too little in others. Avoiding the question as put is not a sound test-taking strategy; but the

A surge of extraparliamentary mobilization occurs: more and longer strikes and more and larger demonstrations

students may have been onto something.

Now that the crisis is seven years behind us, how have governments and voters in Europe and North America answered this important question? Have they shown, by their actions, that they think financial markets need tighter controls or that, on the contrary, the state should repudiate bailouts and leave financial firms to face the full consequences of their own mistakes?

From their rhetoric and regulatory policies, it would appear that most governments have ended up in the third, fence-sitting camp. Yes, they have implemented a plethora of detailed controls,

scrutinizing banks’ books with unprecedented intensity and insisting on approving cash distributions, the appointment of key directors, and even job descriptions for board members.

But they have ruled out any future government or centralbank support for ailing financial institutions. Banks must now produce “living wills” showing how they can be wound down without the authorities’ support.

The government will wash its hands of them if they run into trouble: the era of “too big to fail” is over.

Perhaps this two-track approach was inevitable, though it would be good to know the desired end-point. Is it a system in which market discipline again dominates, or will regulators sit on the shoulders of management for the foreseeable future?

But what have voters concluded? In the first wave of post-crisis elections, the message was clear in one sense, and clouded in another.

Whichever government was in power when the crisis hit, whether left or right, was booted out and replaced by a government of the opposite political persuasion.

That was not universally true – see Germany’s Angela Merkel – but it certainly was true in the United States, the United Kingdom, France, and elsewhere. France moved from right to left, and the UK went from left to right. But voters’ verdict on their governments was more or less identical: things went wrong on your watch, so out you go.

But now we can see a more consistent trend developing.

Three German economists, Manuel Funke, Moritz Schularik, and Christoph Trebesch, have

just produced a fascinating assessment based on more than 800 elections in Western countries over the last 150 years, the results of which they mapped against 100 financial crises. Their headline conclusion is stark: “politics takes a hard right turn following financial crises. On average, far-right votes increase by about a third in the five years following systemic banking distress.”

The Great Depression of the 1930s, which followed the Wall Street crash of 1929, is the most obvious and worrying example that comes to mind, but the trend can be observed even in the Scandinavian countries, following banking crises there in the early 1990s. So seeking to explain, say, the rise of the National Front in France in terms of President François Hollande’s personal and political unpopularity is not sensible.

There are greater forces at work than his exotic private life and inability to connect with voters.

The second major conclusion that Funke, Schularik, and Trebesch draw is that governing becomes harder after financial crises, for two reasons. The rise of the far right lies alongside a political landscape that is typically fragmented, with more parties, and a lower share of the vote going to the governing party, whether of the left or the right. So decisive legislative action becomes more challenging.

At the same time, a surge of extra-parliamentary mobilization occurs: more and longer strikes and more and larger demonstrations. Control of the streets by government is not as secure. The average number of anti-government demonstrations triples, the frequency of violent riots doubles, and general strikes increase by at least a third.

Greece has boosted those numbers recently.

The only comforting conclusion that the three economists reach is that these effects gradually peter out. The data tell us that after five years, the worst is over. That does not seem to be the way things are moving now in Europe, if we look at France’s recent election scare, not to mention Finland and Poland, where right-wing populists have now come to power. Maybe the answer is that the clock starts ticking on the five years when the crisis is fully over, which is not yet true in Europe.

So politics seems set to remain a difficult trade for some time.

And the bankers and financiers who are widely blamed for the crisis will remain in the sin bin for a while yet, until voters’ expectations of economic and financial stability are more consistently satisfied.

Project Syndicate

16 | Business Daily

December 28, 2015

Closing Legislators approve China’s first law against domestic violence

Forex moves to increase yuan volatility, trading volume

Chinese top legislature yesterday adopted the country’s first bill against domestic violence in a landmark move to bring traditionally silent abuse victims under legal protection. The legislation was approved yesterday afternoon with landslide majority at the end of a week-long bimonthly session of the National People’s Congress (NPC) Standing Committee. “The country prohibits any form of domestic violence,” reads the new law, which formally defined domestic violence and streamlined the process for obtaining restraining orders - measures long advocated by anti-domestic abuse groups.

The latest changes to China’s forex market management will increase yuan volatility and boost trading volumes, according to a leading Chinese investment firm. From January 4, closing time for China’s interbank foreign exchange market will be extended from 4:30 p.m. to 11:30 p.m. Beijing time, the People’s Bank of China announced last week, adding foreign institutions’ access to the market will also be expanded. The yuan exchange rate may become slightly more volatile, China International Capital said in an analysis note. By overlapping the trading hours with those of London the spread between onshore and offshore yuan exchange rates will be narrowed.

China approves IPO reform proposal The State Council said earlier this month it expects the new system to be implemented within two years

The next step for the State Council is to come up with specific details of the new IPO system

The National People's Congress takes place in Great Hall of the People in Beijing

C

hina’s top legislature yesterday approved a proposal to revamp the country’s initial public offering (IPO) system, authorising the government to implement changes to the system that could be in place as early as March, the official Xinhua news agency said.

The State Council, or cabinet, had been awaiting approval on its plans to shift to a U.S.-style registration system for stock market flotations.

In the latest reform aimed at developing China’s financial market, the changes are expected

to help companies raise money more efficiently and reduce the involvement of regulators in the capital market.

The widely expected approval by the National People’s Congress, announced yesterday, paves the way for regulators to

draft detailed rules that will be implemented after seeking public feedback. Xinhua reported the approval on its official microblog.

The next step for the State Council is to come up with specific details of the new IPO system. The cabinet could do so and implement a new IPO mechanism as early as on March 1 next year, Xinhua reported. However, the state council has two years from March to do so.

China Telecom chairman probed Mainland one child policy officially ended for alleged violations

C

The State Council said earlier this month it expects the new system to be implemented within two years.

The China Securities Regulatory Commission (CSRC) began speaking of moving away from its current approval-based system - seen as distorting the IPO market and encouraging official corruption - to a registration system, where the market decides who gets to list and for how much, in early 2014.

But the stock market crash that began in mid-June, blamed in part on an IPO glut hitting the market, put that process on hold as the CSRC froze new listings to stabilise a market that lost as much as 40 percent in just a few weeks.

After a pause of more than three months beginning in July, IPOs were finally allowed to resume over the past several weeks.

Although most market observers welcome the reforms as a needed step towards a fairer and more transparent listing process, investors have also raised concerns that a more streamlined process could result in a flood of new listings, pushing down stocks once again.

Reuters

UAE, China agree to set up RMB clearing hub

C

hina’s top anti-graft authority announced an investigation into the chairman of China Telecom Corp., the latest high-ranking official to be taken down in President Xi Jinping’s campaign to weed out corruption in the Communist Party.

Chang Xiaobing is under probe for suspected severe discipline violations, according to a statement from Central Commission for Discipline Inspection yesterday. Chang has only been chairman and chief executive officer of China Telecom, the country’s third-largest wireless carrier, since September, when he moved over from China Unicom (Hong Kong) Ltd. as part of a leadership reshuffle that coincided with government plans for sweeping reforms to a US$16 trillion government-owned sector.

President Xi’s campaign has pursued graft in state-owned enterprises along with the finance industry following a US$5 trillion stocks rout earlier this year. In October, the former chairman of China’s biggest oil producer was sentenced to 16 years in prison for taking bribes and abuse of power.

Chang had been chairman of China Unicom, the nation’s second-largest wireless carrier, for 11 years, according to an annual report.

hina officially ended its one child policy yesterday with the signing into law of a bill allowing all married couples to have a second child as it attempts to cope with an ageing population and shrinking workforce.

The change, which was announced in October by the ruling Communist Party, takes effect from January 1, the Xinhua news agency reported.

All married couples will be allowed to have a second child but the legislation maintains limits on additional births.

The “one child policy”, instituted in the late 1970s, restricted most couples to only a single offspring and for years authorities argued that it was a key contributor to China’s economic boom and had prevented 400 million births.

It has been enforced by a dedicated national commission with a system of fines for violators and often forced abortions, leading to heartrending tales of loss for would-be parents.

Rural families were already allowed two children if the first was a girl, while ethnic minorities were allowed an extra offspring, leading some to dub it a “one-and-a-half child” policy.

Bloomberg News

AFP

T

he United Arab Emirates (UAE) has signed an agreement with China to set up a clearing hub for the Chinese currency Yuan or Renminbi (People’s money), local UAE media reported yesterday.

The UAE clearing hub for the Chinese currency, which will satisfy growing needs among UAE-based firms and banks alike, will be the second in the Middle East after the Gulf state Qatar set up the region’s first Renminbi clearing hub this April.

According to report, the UAE’s central bank said that the agreement was signed while Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al-Nahyan was in China for an official visit earlier this month.

No specific date was revealed when the hub will open for trading. The UAE, a major oil supplier, and China also renewed a 35-billion RMB (US$5.42 billion) currency swap deal during the visit.

The UAE was also included in RMB Qualified Foreign Institutional Investor scheme. Known as RQFI, the Gulf state was given a quota of 55 billion RMB (US$8.53 billion or 31.3 billion UAE dirham).

Xinhua