Macau Business Daily December 29, 2015

MOP 6.00 Closing editor: Joanne Kuai Year IV

Number 949 Tuesday December 29, 2015

Publisher: Paulo A. Azevedo

Fund for protection on wages in effect on Jan 1 Page 6

China food safety: Expired burgers trial starts in Beijing Page 9

November visitor arrivals down 7.6 pct

The city saw its number of tourists drop by 7.6 per cent year-on-year in November, driven by the notable decrease in the number of Mainland Chinese visitors travelling under the Individual Visit Scheme (IVS), which plunged by 17.6 per cent. Nevertheless, the number of visitors from other major markets actually posted an increase, such as from Taiwan, South Korea, Japan and Hong Kong Page

2

Gaming taxes plunged by 34.7 pct at November-end

S.Korea, Japan reach agreement on wartime sex slavery Page 16

Ageing Tiger Considered a powerful reference for regional economy not so long ago, Taiwan faces today demographic problems that put in risk the sustainability of its economic model

Page 8

Brought to you by

HSI - Movers December 28

Name

As at the end of November, compared to the same period of last year, the government’s revenues registered a year-on-year decrease of 29.9 per cent for the first eleven months of the year, amounting to MOP102.2 billion. Of the total, revenues from the city’s gaming industry – gaming taxes – plunged by 34.7 per cent year-on-year to MOP78.5 billion.

Fiscal surplus shrank by nearly 57 per cent to MOP39.97 billion

Page 4

%Day

Kunlun Energy Co Ltd

+1.37

Hong Kong & China Gas

+0.93

MTR Corp Ltd

+0.81

New World Developme

+0.26

China Resources Land L

+0.23

Belle International Ho

-2.04

PetroChina Co Ltd

-2.04

China Shenhua Energy

-2.08

China Life Insurance Co

-2.70

China Petroleum & Che

-3.43

www.macaubusinessdaily.com

Source: Bloomberg

Ready to connect The nearly 40-kilometer extension of Guanzhou-Zhuhai Intercity Railway, a connection between Gongbei Port and Zhuhai airport that passes Hengqin island, is expected to be ready for commissioning by the middle of 2018. The railway has the possibility to link Macau’s Light Rail Transit via Cotai/Hengqin border

Page 2

Hotel Industry

Gloomy days

I SSN 2226-8294

Average occupancy rate for local three-star to five-star hotels decreased by 7.6 percentage points year-on-year in November, even though their rooms were 17.8 per cent cheaper than one year ago

Page 3

2015-12-29

2015-12-30

2015-12-31

14˚ 19˚

13˚ 17˚

13˚ 18˚

2 | Business Daily

December 29, 2015

Macau

Visitor arrivals down 7.6 pct in November Last month, the city saw fewer Mainland Chinese visitors, but more tourists from other places, such as Taiwan, South Korea, Japan and Hong Kong Kam Leong

kamleong@macaubusinessdaily.com

T

he city saw its number of tourists drop by 7.6 per cent year-onyear in November, driven by the notable decrease in the number of Mainland Chinese visitors travelling under the Individual Visit Scheme (IVS), according to the latest data released yesterday by the Statistic and Census Service (DSEC).

Last month, a total of 2.59 million visitor arrivals were recorded in the Special Administrative Region.

Compared to October, the number represents a decline of 1.8 per cent. Same-day

visitors, which accounted for 51.9 per cent of the total, dropped by 14 per cent yearon-year to 1.34 million despite overnight visitors increasing marginally by 0.4 per cent to 1.25 million.

Visitors from Mainland China totalled 1.73 million in the month, continuing to be the city’s biggest source of tourists by accounting for 66.7 per cent of total.

Nevertheless, compared to the same month last year, the total number dropped by 12.6 per cent, due to those travelling under the IVS scheme plunging by

17.6 per cent year-on-year to 774,661.

Most of these Mainland Chinese visitors, 772,547 of the total, were from Guangdong Province, while the others came primarily from Hunan Province and Fujian Province, accounting for 70,797 and 67,911 of the total, respectively.

Visitors from other markets up

Despite the city receiving fewer Mainland Chinese tourists last month, the number of visitors from other major markets actually

posted an increase compared to the same period last year.

Particularly, those from Taiwan registered a yearon-year increase of 21.6 per cent, totalling 84,697 of the total.

In addition, visitors from the Republic of Korea and Japan had increased by 10.8 per cent and 8.8 per cent year-on-year, amounting to 46,071 and 27,217 of total, respectively. Meanwhile, tourists from Hong Kong grew slightly by 0.9 per cent year-on-year to 512,537 in the month, accounting for 19.8 per cent of the total.

Guangzhou-Zhuhai rail extension ready for commissioning in mid-2018

T

he nearly 40-kilometer extension of GuanzhouZhuhai Intercity Railway, a connection between Gongbei Port and Zhuhai airport that passes Hengqin island, is expected to be ready for commissioning by the middle of 2018, according to Chinese-language media reports published yesterday.

The reports cited information provided by a contractor responsible for part of the Hengqin section for the extension project, CCCC Fourth Harbor Engineering Co Ltd. The company has invited press coverage on Sunday for the inauguration of a tunnel boring machine for its excavation works of the Hengqin section.

The first phase of the extension project, which connects Gongbei Port in Zhuhai to Chimelong resort and theme park in the south of Hengqin island, is a 17-kilometer stretch covering seven stations.

The second phase of the project, which will connect the Chimelong theme park on Hengqin to Zhuhai airport, is a 22-kilometer stretch. But an open tender for the second phase of the intercity railway extension project

is yet to be launched, according to Chinese-language newspaper Macao Daily News.

With the extension project completed, the time needed for people to travel from Gongbei Port

The city also welcomed more long-haul visitors from the United States (18,619), Australia (8,519) and Canada (7,683) last month, which are up by 5.5 per cent, 3 per cent and 6.4 per cent year-on-year, respectively.

Yet, visitors from the United Kingdom dropped by 3 per cent year-on-year to 6,210.

The tourists visiting the Special Administrative Region last month spent 1.1 days in the territory on average, an increase of 0.2 day year-on-year. The average length of stay of overnight visitors also rose by 0.2 day year-on-year to 2.1 days while the average day of same-day visitors remained unchanged at 0.2 day.

For the first eleven months of the year, the total number of visitor arrivals reached 28.08 million, which is a year-on-year decrease of 3.1 per cent. Visitors from Mainland China dropped by 4.4 per cent to 18.8 million for the eleven months, while those from South Korea and Japan also declined by 1.6 per cent and 7.2 per cent year-onyear to 499,297 and 255,203, respectively.

Nevertheless, visitors from Hong Kong and Taiwan rose by 1.1 per cent and 3.1 per cent year-on-year, amounting to 5.9 million and 902,930 for the eleven months. Meanwhile, longhaul visitors from the United States, Australia, Canada and the United Kingdom recorded year-on-year decrease.

to the airport will only take about 30 minutes, according to reports.

By the time the extension project is ready for commissioning in mid2018, this intercity railway section in mainland can be linked to Macau’s Light Rail Transit (LRT) system via the Lotus Port in Cotai. Lotus Port is the border connecting Cotai of Macau and Hengqin island.

Upon Business Daily’s enquiry, Transportation Infrastructure Office (GIT) of Macau did not give an expected date as to when the city’s LRT can be linked to the intercity railway system in Hengqin.

“Aside from technical issues related to the construction of the railway system, both Macau and Chinese governments have to have deeper discussions over the route planning and the operation of the system,” the office replied, “The [Macau] government will duly announce any latest progress of the LRT extension to be connected to Hengqin in future.”

But Secretary for Transport and Public Works Raimundo Arrais do Rosário has revealed to Legislative Assembly in early December that the Taipa section of the LRT, which covers Cotai area, is only operational in 2019.

S.L.

Business Daily | 3

December 29, 2015

Macau

Hotel occupancy drops to 85.9 pct in November Rooms are cheaper but local hotels still saw lower occupancy rate last month Kam Leong

kamleong@macaubusinessdaily.com

A

verage occupancy rate for local threestar to five-star hotels decreased by 7.6 percentage points year-on-year in November, even though their rooms were 17.8 per cent cheaper than one year ago, the latest data released by the Macau Government Tourist Office (MGTO) reveals.

The data, based on information provided by Macau Hotel Association, showed that occupancy rate

at local three-star to fivestar hotels reached 85.9 per cent last month. Despite such occupancy rate this means a year-on-year decrease, although it represents a month-on-month increase of 2.2 percentage points from 83.7 per cent in October.

In terms of hotel types, local five-star hotels registered the most notable decrease in their occupancy, down by 9.4 percentage points yearon-year to 83.9 per cent.

However, the rate, on a monthon-month comparison, rose by 2 percentage points from October.

Four-star and three star hotels also saw their rooms less occupied last month, of which the occupancy rate was down by 4.2 and 6.4 percentage points year-onyear to 88.9 per cent and 89.3 per cent, respectively.

For the first eleven months of the year, the occupancy rate of local three-star to

five star hotels plunged by 7.1 percentage points on average to 83.6 per cent.

That of five-star hotels posted year-on-year decrease of 8.4 percentage points to 82.8 per cent, while those of the four stars and the three stars also dropped to 84.9 per cent and 86.6 per cent, respectively.

Room rate down by double-digit

In addition to the occupancy rate, room rate for local

three-star and five star hotels continued their downward trend as well. The average room rate for these types of hotels registered a year-onyear decrease of 17.8 per cent to MOP1,356 (US$169.5) per night, compared to MOP1,645 one year ago.

Five-star hotels posted a second year-on-year doubledigit decrease in room rate after October, down by 14.9 per cent to MOP1,675 per night from MOP1,967 one year ago.

Meanwhile, a fourstar hotel room cost some MOP849.5 per night last month, which is 23.3 per cent cheaper than the same period of last year. In addition, room rate at threestar hotels fell to MOP972.9 from MOP1,259.5 last month, which is down by 22.8 per cent.

Between January and November, average room rate for three-star to fivestar hotels in the territory amounted to MOP1,484 per night, which declined by 8.1 per cent year-on-year. The most significant decrease in room prices is seen in threestar hotels, which plunged by 16.8 per cent to MOP1,036 per night.

Four star hotel room rate also dived by some 14 per cent year-on-year to MOP919, while room rate at five-star hotels dropped by 5.1 per cent year-on-year to MOP1,823 for the first eleven months of the year.

4 | Business Daily

December 29, 2015

Macau

Fiscal surplus halved to MOP40 bln as at November-end However, it is more than two times higher than the budgeted target of MOP18.8 bln Kam Leong

kamleong@macaubusinessdaily.com

T

he city’s fiscal surplus shrank by nearly 57 per cent year-onyear as at the end of November, following the continuous drop in the government’s revenues and its rising expenditure in the month.

According to the latest updated central account by the Financial Services Bureau (DSF),the city’s fiscal surplus totalled MOP39.97 billion (US$4.99 billion) as at the end of November, which is a sharp decrease of some MOP52.78 billion

from MOP92.7 billion one year ago.

Nevertheless, the government only expected to generate some MOP18.8 billion of fiscal surplus at the beginning of the year, according to the 2015 budget. This suggests that the government’s initial target has already been fulfilled more than two-fold.

Compared to the same period of last year, the government’s revenues registered a year-on-year decrease of 29.9 per cent for the first eleven

months of the year, amounting to MOP102.2 billion. Of the total, revenues from the city’s gaming industry – gaming taxes – plunged by 34.7 per cent year-on-year to MOP78.5 billion.

The decline in gaming taxes led the government’s revenues earned from direct taxes to fall by 31.5 per cent year-on-year to MOP87 billion.

In addition, the government also saw revenues from indirect taxes decrease by 29.4 per cent. Despite the drop,

it also accounted for MOP3.7 billion of the total.

Capital revenues, on the contrary, increased by 54.7 per cent year-onyear to MOP998 million during the eleven months. Such revenues are primarily generated from sales of capital assets and financial assets.

In fact, the government expected to receive a total of MOP106.73 billion for this whole year in the 2015 budget.

This suggests that it needs to generate at least MOP4.56 billion more this month in order to achieve such a target.

On the other hand, during the eleven months, the government spent a total of MOP62.2 billion, an increase of 17.3 per cent compared to MOP53 billion during the same period of last year. However, such amount is only some 70.7 per cent of the total budget that it has granted for expenses.

For the eleven months, current expenditure accounted for 93 per cent of the total, amounting to MOP57.9 billion. Meanwhile, the government also spent MOP3.47 billion of MOP14.7 billion of expenditure allocated for investment plan (PIDDA), which is up by 37.3 per cent year-on-year.

Meanwhile, the DSF data also indicated that a total of MOP15.73 million of expenditure was transferred to the city’s Social Security Fund during the eleven months, compared to MOP10.07 million for the same period of last year.

Corporate

MOME TV launches new reality show “Mission MOME”, the first noncommercial MOME TV programme, will be broadcasted on MOME TV, including Transmac buses, taxis, Royal Supermarket outlets and other online channels, from today. “Mission MOME” is a brand new reality show produced

by MOME TV. The major idea of the

programme is to pass on hope and encouragement to the target of each episode by showing support and fulfilling his/her dream. MOME also aims to spread out positive attitude and offers an opportunity for the general public to get to know the real life of the local disadvantaged community.

“Responsible Gaming Awareness Week” from GEG Galaxy Entertainment Group (“GEG”) has been undertaking its commitment to promote the knowledge of responsible gaming in order to enhance the awareness among its team members. GEG launched the third “Responsible Gaming Awareness Week” under the theme of “How Much You Know About Responsible Gaming” attracting more than 1,200 team members

to participate. This year’s campaign featured a series of activities including mini quiz game, word game, workshop and also invited volunteers from Associação de Juventude Voluntária de Macau (“AJVM”) to provide team members the relevant information of responsible gaming by setting up booths at the back of the house.

Business Daily | 5

December 29, 2015

Macau

Wells Fargo: Macro improvements in China “necessary” for Macau gaming’s recovery

T

he outlook that China’s economic condition is to remain challenged next year is a reason that analysts from Wells Fargo Securities, LLC said they “have not become more constructive” on Macau’s gaming business, according to their note released last week.

The note has cited a China Securities Journal article last week that contained the remark from Chairman of China’s National Development and Reform Commission (NDRC) Xu Shaoshi, saying that he expects a “severe and complicated” economic situation for China in 2016.

“We believe Xu’s comments are likely rooted in the belief that China’s macro story continues to be bleak. This is one of the reasons we have not become more constructive on Macau, as we believe signs of a macro rebound in China are necessary for Macau stocks to break out materially,” wrote the Wells Fargo analysts Cameron McKnight, Daniel Adam and Robert J. Shore.

In the note, the Wells Fargo team has highlighted

that China’s policymakers have likely signalled a more supportive fiscal policy stance, citing discussions at China’s annual Central Economic Work Conference that took place last week saying China would “gradually expand” fiscal deficit ratio.

“However as our macro contacts point out, it’s

unlikely we see another massive Chinese fiscal stimulus package like the massive US$600 billion package from 2008,” the Wells Fargo team wrote.

The stimulus package from 2008 referred to was the central government’s boost in domestic infrastructure spending, plus other income

and consumption support measures in the wake of the hit of the global financial crisis.

“This is very much consistent with our view as we believe any easing measures would be relatively minor when compared with the 2008-2009 stimulus, or the US$150 billion monetary stimulus package in 2012,” said the analysts, “We

believe the government’s aim is to stabilise China’s economy, not light a fire underneath it.

This is one of the reasons we remain on the sidelines on the Macau names (LVS, MPEL, WYNN) and why we firmly believe we won’t see another V-shaped recovery like we saw in 2010 or 2013.”

S.L.

6 | Business Daily

December 29, 2015

Macau opinion 1,100 pct return shows consumption in Asia is now a thing: gadfly

Andy Mukherjee Bloomberg

M

ovies, malls, meals and medicines. If the best-performing stocks from each of Asia’s 10 main markets outside Japan are any guide, then 2015 belonged to companies that catered to consumption. Not conspicuous, over-the-top gambling binges in Macau or splurging on expensive cars in Shanghai or Singapore, but small-ticket, largely middle-class spending: Think of the winners’ club as 10 separate tea leaves, each of which carries a little flavor of a single Asian market.

When taken together though, the leaves make for an interesting pattern. Start, for instance, with Wanda Cinema Line. After all the nervous gyrations in Chinese equities, the movie-theater operator, which sold shares in January, is set to finish 2015 with an almost 1,100 per cent gain.

The Shenzhen-listed company, controlled by Asia’s richest person, Wang Jianlin, is benefiting from a 41 per cent increase in box-office receipts in the first nine months of the year. At an estimated forward price-to- earnings multiple of 115, the stock may be overpriced. Nevertheless, Wanda Cinema’s spectacular climb does add to evidence that China’s shift away from exports and investment and toward more domestic consumption isn’t a pipe dream, at least not entirely.

Besides, the consumption boost in Asia is giving an added fillip to corporate profitability, thanks to falling commodity and energy prices. Take SATS, 2015’s best-performing stock in Singapore’s Straits Times Index. The airline caterer produced almost 14 million in-flight meals between April and September this year, and ended up saving 15 per cent on raw material costs from a year earlier.

Shopping has been a rewarding theme for shareholders, more than Asian real estate.

SM Prime Holdings, the star of the Philippine Stock Exchange Index, saw 11 per cent growth in retail and commercial rentals in the first nine months and a 30 per cent jump in revenue from subsidiary attractions like rides, bowling and ice staking, according to iTrade. Property sales grew 4 per cent. And despite the hype surrounding Asia’s emerging e- commerce and digital champions, 2015 very clearly belonged to low-tech, old-economy equities. The one big exception was the Hong Kong-traded shares of Tencent, which returned a handsome 35 percent.

The Asia top-10 list is also almost entirely divorced from finance, which isn’t surprising considering the region has seen a massive increase in leverage, and companies and households are now looking to pare debt. None of the publicly traded banks, which feature prominently in benchmark national indexes, made the cut. Indeed, the only financial company was Indonesia’s Kresna Graha Investama, which has zoomed 332 per cent this year, more than any other stock in the Jakarta Composite Index.

Optimism over U.S. economic growth notably failed to translate into gains for shareholders in Asian electronics companies. It’s illustrative perhaps that this year’s best- performing stock in Taiwan’s Taiex index isn’t the contract chipmaking behemoth TSMC or iPhone assembler Hon Hai, both whose shares have done nothing much, but tiny Li Cheng Enterprise, a maker of knitted fabrics that has of late chalked up returns on assets in excess of 20 per cent. And the best- performing stock on India’s benchmark Nifty Index isn’t a software vendor like Tata Consultancy or Infosys, but Bharat Petroleum, a state-owned oil refiner that’s benefited from slumping crude prices. Leading gains on South Korea’s Kospi index isn’t Samsung Electronics, but Hanmi Science, the holding company for a drugmaker specializing in the treatment of diabetes.

Maybe global trade will limp back to normalcy in 2016, and shipbuilders, commodity exporters and auto and electronics parts suppliers will outshine companies focused on domestic consumption.

In that case, the 3 to 19 per cent drop in the region’s currencies against the greenback should be making investors cautiously optimistic. Yet, there is more enthusiasm even now for Asia’s consumption potential than its production prowess. If 2016 proves to be another year of gains for Asia’s growing middle class, then reading the tea leaves 12 months from now might once again show movies and malls at the fore.

New Year – new protection on wages from Jan 1

T

he working of the city’s first credit guarantee fund for protection on wages, a fund that is meant to help employees that are unable to chase the owed salary from their employers, will start on January 1 next year, according to the latest government dispatch.

The fund, managed by a threeman committee that is headed by the Labour Affairs Bureau head, is to advance salary payment and other claims to employees that are unable to chase the owed sum from their employers through court.

The government has allotted

an initial MOP160 million (US$20 million) to support the working of the fund, an amount that also includes a 5 percent take on the employment fee charged for non-resident workers.

Most employers, except those that are hiring non-resident domestic workers, have to pay the government an employment fee of MOP200 for each non-resident worker employed per month.

Secretary for Economy and Finance Lionel Leong Vai Tac has mentioned in August that the taking on the nonresident employment fees can generate about MOP10 million a year.

Employees can seek to have the fund to advance a maximum of six months of owed pay in cases that they have failed to pursue the owed pay from their employers through the court, according to the law on the credit guarantee fund. But upon a payback by the employer over owed pay or other claims, the employee will have to return the government’s advanced payment to the fund.

The fund covers both resident and outside employees working here.

S.L.

Signage offers QR Codes on walking tour routes

M

acau Government Tourist Office (MGTO) cooperates with Civic and Municipal Affairs Bureau (IACM) to add QR codes on classical direction signs along the “Step Out, Experience Macau's Communities” walking tour routes, in line with the Office’s promotion of smart tourism and the optimization of the tourism environment in Macau.

MGTO seeks to improve the supporting facilities along the routes and enable visitors to obtain more tourism information conveniently, enriching their tour experience.

Starting yesterday, after downloading MGTO’s mobile app “Step Out, Macau” in advance, visitors can scan the code on direction signs during a stroll along the themed routes and

obtain tourism information about adjacent locations while offline.

MGTO unveiled four walking tour routes themed as "Step Out, Experience Macau's Communities" back on 27 September 2013 and launched a total of eight refined routes this February.

The project aims not only to encourage visitors to explore different neighborhoods in town and divert visitors off the beaten path but also foster community tourism development. After the routes were launched, the Office has rolled out different activities and measures to make the tour routes more attractive, while continuously optimizing the routes through inter-departmental projects on upgrading tourism signage and environment.

Business Daily | 7

December 29, 2015

Gaming Philippine panel backs casino fee, lottery tax, Inquirer says The government’s tax research unit said it supports pending bills in Congress to charge entrance fees in casinos and tax lottery winnings because horse racing, another form of gambling, is taxed, the Philippine Daily Inquirer reported on its website. The Department of Finance’s National Tax Research Center backs a 3,500 pesos (US$74) entrance fee for casinos, the newspaper said, citing the center’s “Profile and Taxation of Selected Gambling and Betting Activities in the Philippines.”

Caesars wins new chance to stop suits that threaten parent

would also hurt the chances that the operating unit could reorganize. Normally, only a bankrupt company is entitled to such protection, not non- bankrupt affiliates.

C

The appeals court sent the case back to the lower court, saying U.S. Bankruptcy Judge A. Benjamin Goldgar should first determine whether the lawsuits could have a negative impact on the bankruptcy.

Stephen Cohen, a spokesman for Las Vegas-based Caesars, and Bruce Bennett, a lawyer for a committee of creditors that opposed halting the lawsuits, didn’t immediately respond to e- mails requesting comment on the ruling.

The appeal is Caesars Entertainment Operating Co. v.

BOKF NA, 15-3259, U.S. Court of Appeals for the Seventh Circuit (Chicago). The bankruptcy is In re Caesars Entertainment Operating Co., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).

aesars Entertainment Operating Co. won another chance to halt a series of New York lawsuits that threaten to put the casino company’s parent into bankruptcy.

An appeals court in Chicago ruled that two lower-court judges used faulty reasoning to deny Caesars’ request to temporarily halt the lawsuits. The appeals court sent the issue back to the bankruptcy judge to reconsider his decision to let the New York cases proceed.

Creditors sued parent Caesars Entertainment Corp., claiming it violated federal law when, without unanimous bondholder approval, it abandoned a pledge to help the operating unit repay US$7 billion in debts. The operating unit filed

for bankruptcy about five months later. Should Caesars lose the suits, which are all before the same New York judge, it could be forced into bankruptcy, too.

The operating unit asked the Chicago judge overseeing its bankruptcy to halt the lawsuits, arguing a suspension was justified because the threat to the parent

Sent Back

Bloomberg

8 | Business Daily

December 29, 2015

Greater China

Beijing fines shipping firms for price collusion The China investigation focused on Mitsui OSK, Kawasaki Kisen and Nippon Yusen because they controlled the bulk of the Chinese market

C

hina fined eight shipping lines 407 million yuan (US$63 million) in total after finding them responsible for price collusion in the transportation of vehicles and heavy machinery.

Japan’s Nippon Yusen KK, Mitsui OSK lines, Kawasaki Kisen Kaisha and Eastern Car Liner Ltd., Korea’s Eukor Car Carriers Inc., Norway’s Wallenius Wilhelmsen Logistics AS, Chile’s Cia. Sud Americana de Vapores SA and its shipping line were the eight indicted after a year-long investigation, the National Development and Reform

Commission said in a statement on its website yesterday. The companies acknowledge wrongdoing, the top Chinese economic planning agency said.

The probe follows similar investigations by the European Union in 2013 and Japan’s Fair Trade Commission. Japanese regulators raided the offices of five shipping lines in 2013 over allegations they discussed raising rates together for transporting cars, and imposed fines on Nippon Yusen and Kawasaki Kisen in January 2014. AP Moeller-

Nippon Yusen has fully cooperated with the investigation by the Chinese agency and consequently received an immunity from the fine

Maersk A/S, CMA CGM SA and MSC Mediterranean Shipping Co. were among companies in the European Union probe.

Companies’ actions

Eukor will accept the Chinese decision and pay a fine of 284.7 million yuan, the company said in a statement

on its website. The company also has implemented a competition law compliance program and corrective measures including antitrust compliance training, it said.

Eastern Car Liner “will execute what was directed immediately,” said Yoshihisa Inmasu, the general manager of its general affairs department. The company will undertake stricter and more detailed legal compliance measures. Kawasaki Kisen is restructuring to carry out compliance, said spokesman Masaya Futakuchi.

Nippon Yusen has fully cooperated with the investigation by the Chinese agency and consequently received an immunity from the fine, the Japanese company said in a statement. A Mitsui OSK spokesman declined to comment.

Calls to the Shanghai and Hong Kong offices of CSAV group and Wallenius’s Asia Pacific media representative Bianca Himmelsbach weren’t immediately answered. Rainer Horne, a spokesman for Hapag-Lloyd AG, didn’t immediately respond to an e-mail sent outside regular German business hours. Hapag-Lloyd agreed last year to buy most of CSAV’s assets and become the fourth-largest container shipping company in the world.

The China investigation focused on Mitsui OSK, Kawasaki Kisen and Nippon Yusen because they controlled the bulk of the Chinese market, Bloomberg News reported in July, citing a person familiar with the matter. The person asked not to be identified because the investigation hadn’t been made public then.

In the European investigation, the EU drafted a possible deal with the companies that would spare them any immediate fines, people familiar with the case said.

Bloomberg News

Taiwan economy: an ageing tiger in need of cubs Pension costs are set to rise to an all-time high of 7.37 percent Faith Hung

J

ason Tsai is among the few in Taiwan with excellent English, but two years after graduating from university the highly sought language skill has failed to secure him a wellpaying job.

Tsai has been pulling in an average monthly pay of T$15,000 (US$455) through part-time work, below the minimum wage of T$22,000 for college graduates and one-fourth of the retirement-pension received by state employees.

“I cannot afford a place of my own with my low income... All I have been able to find were part-time jobs,” the 25-year-old said.

The plight of young workers such as Tsai highlights a serious problem for Taiwan which has gone from a young and vibrant Tiger economy to ageing and unsteady in just two generations: the working-age population is not growing fast enough, nor earning nearly enough to pay for their parents’ retirement.

As Tsai struggles to find a better paying job in a recession-hit economy, a wave of barely middle-aged mostly government employees are racing to retire on generous taxpayer-funded pensions before these are watered down.

To make matters worse, a government policy designed to protect young workers during the 2008-2009

global financial crisis has created a perverse incentive for employers to lock young workers into a minimum wage.

The dissatisfaction among the youth has boiled over into student protests and has become a hot-button issue for voters as Taiwan goes to the polls next month.

Tsai isn’t waiting for politicians to come to the rescue, and is instead looking to move to Japan to secure a better job.

A flight of young people in search of greener pastures is the last thing Taiwan needs, especially as its rapidly greying population is diminishing the number of skilled workers required to propel the economy on its next growth phase.

Demographic costs

In fact, the alarming drop in Taiwan’s fertility rate to less than 1 per woman - among the lowest in the world from around 1.7 in 2000, has created a major demographic challenge for policymakers.

As more of today’s youth transfer the burden of caring for their parents to the state, government resources are getting stretched to breaking point amid spiralling health-insurance and pension costs.

“Reforms need to be carried out soon or state employee pensions will

KEY POINTS Young Taiwanese struggle to find well-paying jobs Rapidly ageing population shows need to reform pension system Significant demographic shift depletes labour market pool collapse. The government cannot sustain it for long,” Wu Chung-cheng, deputy minister of the civil service ministry, told Reuters.

But fears of a political backlash have discouraged lawmakers from watering down a taxpayer-funded generous average monthly retirement pension of T$60,000, even though a flagging economy can no longer sustain these costs.

A look at some of the numbers makes for glum reading.

Public debt burden is now at a record US$550 billion, while pension costs are set to rise to an all-time high of 7.37 percent, or T$147.2 billion in 2016, of the total government budget.

Taipei mayor Ko Wen-je has warned

that 10 percent of the city’s budget will go into paying city employee pensions in 2016.

And the pressure on finances continues to grow as state employees rush to lock-in the generous pension.

Between 2010 and 2013, the number of retired state employees jumped more than 50 percent to 32,000.

The lopsided pension plan is causing resentment among those like Tsai.

“What the state employees have is like a dream that would never come true for our generation,” he said.

Youth burden

Still, the dramatic ageing of the population means the government will be forced to act sooner rather than later.

Official statistics show those 65 and older are growing faster than in most Asian countries, making up 12 percent of the total population of 23 million in 2014.

By some estimates, one in five Taiwanese will be 65 or older by 2025, an unenviable future for an ageing Tiger economy and its younger people.

“As Taiwan’s population is ageing at a fast rate, it is putting a burden on young people who are already pressured by their low wages,” said Wu of the civil service ministry.

“Everybody knows that these are big problems facing Taiwan.”

Reuters

Business Daily | 9

December 29, 2015

Greater China OSI food-safety trial opens in Shanghai A large fine against OSI could threaten the firm’s business in the country and would signal an aggressive approach

by China towards food-safety regulation

China’s online retail volume is expected to outperform the rest of the world by reaching four trillion yuan (US$618 billion) this year, Commerce Minister Gao Hucheng said. China has attained key targets outlined by the 12th Five-Year Plan by the end of 2015 to become a genuine giant trader, Gao said at a national meeting on commerce work. China is now home to over 80,000 trade markets and total retail sales of consumer goods would reach 30 trillion yuan this year with consumption contributing to about 60 percent of total GDP growth, Gao said.

T

he long-awaited China trial of U.S. food supplier OSI Group opened in Shanghai yesterday, kicking off the final act of a scandal that dragged in fast-food giants McDonald’s Corp and Yum Brands Inc. In July, 2014, a Chinese TV report alleged to show workers at a Shanghai unit of OSI using out-of-date meat and doctoring production dates, a scandal which rippled as far afield as Japan and prompted apologies from OSI clients McDonald’s and Yum. The criminal trial opened at the Shanghai Jiading People’s Court, a court official and lawyers told Reuters.

Shanghai prosecutors charged two OSI China units and 10 employees for producing and selling sub-standard products in September.

A large fine against OSI could threaten the firm’s business in the country and would signal an aggressive approach by China towards foodsafety regulation, long a major risk for restaurant chains and retailers in the world’s second-largest economy.

Under China’s criminal law, firms and individuals can face large fines and jail sentences if found guilty of knowingly producing and selling substandard products.

OSI did not offer an immediate comment.

A spokesman for MWE China Law Offices, which is representing OSI, declined to give details about the case.

Shanghai unit of OSI using out-of-date meat and doctoring production dates

Operations at OSI unit Shanghai Husi Food Co Ltd were suspended following the 2014 report, some executives were detained, local authorities launched an investigation and OSI’s chief executive said he was appalled over missteps at the plant.

OSI, however, criticised the handling of the case by the local food regulator earlier this year, a rare act in China where firms are usually careful not to openly challenge the authorities.

The trial is expected to last two to three days, although the verdict is likely to be handed down following a period of deliberation by a panel of judges after the trial.

Food safety is one of the top issues for Chinese consumers after scandals from smuggled “zombie meat” to a

tragedy in 2008 where dairy products tainted with industrial chemical melamine led to the deaths of six infants and made many thousands sick.

China has vowed to crack down on food safety violations, with the country’s top court calling for “heavy penalties” in August after new food safety laws earlier in the year set out tougher punishments and tighter regulation.

Food-safety scares, including at OSI, have had a major impact on some international firms in China, hitting reputations and sales at firms from McDonald’s and KFC-parent Yum to France’s Danone SA and Wal Mart Stores Inc. Reuters

The disaster is the latest deadly accident to raise questions about China’s industrial safety standards and lack of oversight over years of rapid economic growth

A

when the dump overflowed and engulfed 33 buildings in an industrial park, but on Saturday it blamed breaches of construction safety rules.

Two people have been confirmed dead while more than 70 are missing.

The former director of the Guangming New District Urban Management Bureau, a man surnamed Xu, had committed suicide, district

An aerial view shows rescuers searching for missing people in the collapsed factory buildings which were brought down by the 19 December landslide in Shenzhen

Beijing limits natural gas supply due to shortage Beijing has limited the amount of natural gas for heating public buildings and halted the supply to industrial enterprises for production since Saturday due to temporary scarcity. According to a statement from the Beijing Municipal Commission of City Administration and Environment, a shipment of imported liquefied natural gas by China National Petroleum Corporation was hindered by heavy fog, causing a shortage in north China. The ship failed to unload the gas after arriving at port, said the statement.

The affected areas include workplaces, department stores and entertainment venues.

Beijingers buy one sixth of nation’s masks

Former top official commits suicide after Shenzhen landslide

former senior official in China who was in charge of an agency responsible for regulating a waste heap that collapsed last week with the loss of more than 70 people has committed suicide, police said yesterday.

The government has not blamed anyone for the disaster in the southern city of Shenzhen on December 20,

Domestic online retail volume to top other countries

police said in a microblog post, adding that police had received a report that a person had fallen from a building late on Sunday.

Police made no link between Xu’s death and the disaster. The government had warned earlier that those held responsible would be “seriously punished in accordance with the law”.

The Southern Metropolis Daily newspaper identified Xu as Xu Yuanan.

It is unclear when Xu stepped down as director of the Guangming New District Urban Management Bureau but the district government reported on its web site that another person has been appointed head of the agency in July.

The disaster is the latest deadly accident to raise questions about China’s industrial safety standards and lack of oversight over years of rapid economic growth.

Last week, an executive with a government-appointed monitoring agency said it had urged Shenzhen Yixianglong, the firm managing the dump, to stop work four days before the disaster, citing safety concerns.

Reuters

Beijing residents bought more than one sixth of masks sold on Alibaba’s online shopping platforms in 2014, a report by AliResearch and AliHealth said on Sunday. Beijing, Jiangsu Province in eastern China and Shanghai were the top three regions in mask consumption. The northeastern province of Heilongjiang, which ranked the ninth, registered the largest year-onyear increase of 200 percent in 2014, according to the report. Consumers from Guangdong, Fujian and Hainan, where air quality is relatively good, showed higher per capita consumption amounts.

QFII quota rises in December The outstanding amount of China’s dollar-denominated Qualified Foreign Institutional Investor (QFII) programme rose to US$81.07 billion as of December 25, from US$79.10 billion at the end of November, the country’s foreign exchange regulator said yesterday. The QFII scheme was created by China to allow foreigners to invest in Chinese capital markets.

Rail freight down China’s rail freight volume in November fell 15.6 percent from a year earlier to 270 million tonnes, the nation’s top economic planner said yesterday. The volume of goods carried by China’s railways in the first 11 months was down 12.3 percent from a year ago to 3.07 billion tonnes, the National Development and Reform Commission (NDRC) said on its website. The amount of cargo moved by railways around China is seen as an indicator of domestic economic activity.

10 | Business Daily

December 29, 2015

Greater China

Top Asia junk bond funds all bought Mainland builders after default China’s leaders signalled last week they will take steps to support growth, including widening the fiscal deficit and stimulating housing Lianting Tu, David Yong and Chanyaporn Chanjaroen

T

he best-performing emerging Asia junk bond funds this year all navigated a landmark default to profit from China’s property debt. They see more opportunities as the nation prevents rising delinquencies from sparking a crisis.

Allianz Global Investors led with a 7.3 percent return through December 24 this year, followed by Aviva Investors Global Services Ltd. with 5.8 percent and Value Partners Group Ltd. with 5.7 percent, according to data compiled by Bloomberg. All three held a higher proportion of notes from Chinese property firms than benchmark indexes, even after Kaisa Group Holdings Ltd. became the first Chinese builder to default on dollar notes in April.

Premier Li Keqiang reacted to the slump in the property market, which accounts for about one third of the economy, by relaxing rules on mortgages and allowing builders access to the domestic bond market for financing. A rally in Chinese developers led yields on Chinese dollar high-yield bonds to as low as 7.8 percent in October from over 12 percent in January, according to a Bank of America Merrill Lynch index. While all three funds expect credit fundamentals to worsen next year amid slower economic growth, they don’t see an alarming rise in default rates.

“Given the slower economic outlook, we naturally expect credit metrics of some issuers to deteriorate,” said Mark Tay, the manager of Allianz’s US$26.3 million Dynamic Asian High Yield Bond fund. “However, we do not foresee a material rise in the default rate of Asian high-yield issuers, and a widening in credit spreads due to macro risk aversion thus presents us with a good opportunity to pick up bonds at much better value.”

China’s leaders signalled last week they will take steps to support growth, including widening the fiscal deficit and stimulating housing. A housing recovery spread in November, with new-home prices rising in 33 of 70 cities tracked by the government.

“The property sector was beaten down at the beginning of the year,” said Gordon Ip, who manages Value Partners’ Greater China High Yield Income Fund, which had US$2.3 billion in assets as of December 24. It increased China real estate holdings to 54 percent of holdings in the fund from 47 percent before the first quarter rout. “We saw a turnaround of the sector after rounds of targeted easing.”

Chinese developers and other Asian high-yield bonds have generated a total return of 4.2 percent this year, according to a Bank of America Merrill Lynch index. That compares with a 5.1 percent loss for U.S. junk notes.

Easing boost

Allianz’s Dynamic Asian High Yield Bond fund allocated 51.6 percent of assets to the real estate sector as of August 31.

Aviva Investors’ Asian High Yield Bond Fund had 41.3 percent of assets invested in the property sector as of November 30. Tim Jagger, the manager of the US$123.4 million fund, thinks China is still a good story because of policy easing.

“Within China, the homebuilding sector seems the most obvious place to be,” he said. Jagger prefers developers that have a diversified portfolio.

Shanghai-based Shimao Property Holdings Ltd., Beijing-based Longfor Properties Co. and Guangdongbased Country Garden Holdings Co. are worth holding because of their potential to be upgraded to investment grade in the next few years, he said. All three are rated BB+

by Standard & Poor’s, the highest score for speculative-grade bonds.

Mounting failures

Within China, the homebuilding sector seems the most obvious place to be Tim Jagger, manager, Aviva Investors’ Asian High Yield Bond Fund

More firms in China are struggling to repay debt amid the worst economic slowdown in a quarter century. Earlier this month, pig iron producer Sichuan Shengda Group Ltd. became at least the seventh Chinese firm to renege on local debt obligations this year.

In addition to Kaisa, two Chinese coal firms also reneged on their offshore obligations. Winsway Enterprises Holdings Ltd., the Chinese cokingcoal importer, missed interest payment for the second time in October on a debenture due 2016. Hidili Industry International Development Ltd. didn’t repay dollar bonds due November 4.

Value Partners’ fund generated much of its return by buying notes rated “single B” because they are less followed and require more credit analysis, Ip said. Jiangsubased Future land Development Holdings’s 10.25 percent 2019 notes, rated B+ by Fitch Ratings and BBby Standard & Poor’s, was the top holding, accounting for 2.2 percent of assets as of November 30. The bonds rallied from 96 cents to 107.7 cents this year.

Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong, said a shortage of dollars after the Federal Reserve rate hike could lead to some sort of crisis somewhere in the world. The yuan has dropped 4.2 percent against the dollar this year.

“Key risks for next year for our fund will be worse-than- expected slowdown in China and a deepened concern over weakness of the yuan,” Ip of Value Partners said. “However, volatility will provide ample opportunities for the fund to take advantage of indiscriminate selling in a nervous market.”

Bloomberg News

Business Daily | 11

December 29, 2015

Asia

Japan output, retail sales slump, dampen recovery prospects The central bank has signalled readiness to expand stimulus if risks threaten Japan’s recovery prospects Leika Kihara

J

apan's factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world's third-largest economy will be delayed until early in 2016.

While manufacturers expect to increase output in coming months, the weak data casts doubt on the Bank of Japan's (BOJ) view that an expected pick-up in exports and consumption will help jump-start growth and accelerate inflation toward its 2 percent target.

Industrial output fell 1.0 percent in November from the previous month, more than a median market forecast for a 0.6 percent decline, data by the trade ministry showed yesterday.

Separate data showed that retail sales fell 1.0 percent in November from a year earlier, more than a median forecast for a 0.6 percent drop, as warm weather hurt sales of winter clothing.

"We're finally seeing signs of pickup in exports, but the economy has yet to make a clear turnaround," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"There's a risk consumption will

remain sluggish and prevent economic growth from picking up," he said.

Japan's economy narrowly dodged recession in July-September and analysts expect only modest growth in the current quarter, as consumption and exports lack steam.

Some analysts warn the economy may suffer a contraction in OctoberDecember if household spending remains weak. Taro Saito, senior economist at NLI Research Institute, expects consumption in the current quarter to have risen less than a 0.4 percent quarter-on-quarter increase in July-September.

BOJ

Wary of soft growth, the government plans nearly US$800 billion in record spending in the budget for the fiscal year that will begin on April 1.

The BOJ has signalled readiness to expand stimulus if risks threaten Japan's recovery prospects. The central bank fine-tuned its stimulus programme on December 18 to ensure it can keep up or even accelerate its money-printing.

While sluggish emerging market demand dims the export outlook, analysts expect output to gradually

Shibuya crossing, the heart of an iconic shopping district in Tokyo

increase early in 2016 as automakers ramp up production of new models.

Manufacturers surveyed by the trade ministry expect to increase production by 0.9 percent in December and raise it by 6.0 percent in January.

Many analysts share the BOJ's view that output is bottoming out, though some doubt manufacturers

will boost production as much as they now project.

"There may be expectations that factory output will improve early next year. But it's uncertain whether the forecasts can be realized," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

Reuters

Thai exports fall for 11th straight month in November Shipments to Europe declined 6.7 percent and those to the United States by 6.3 pct Orathai Sriring and Kitiphong Thaichareon

T

hailand’s exports fell for an 11th straight month in November and by more than expected, while imports fell again, showing the trade-dependent economy is still sputtering 19 months after the army took power.

Although the May, 2014 coup ended months of political unrest, Southeast Asia’s second-largest economy has yet to get out of a rut, with pivotal exports and domestic consumption stubbornly weak.

For the third year in a row, exports will shrink in 2015, and the central bank on Friday said it expects zero growth in 2016.

In November, exports contracted 7.4 percent from a year earlier, the Commerce Ministry said yesterday, worse than the 5.1 percent drop predicted by economists in a Reuters poll though less than October’s 8.11 percent slump.

“These numbers shows that we can’t rely on exports to prop up Thailand’s economy

next year,” said Thammarat Kittisiripat, economist at KT Zmico Securities.

Somkiat Triratpan, a ministry official, said Thai exports “have still fared better than other countries”.

In November, exports to China were 6.1 percent below

a year earlier, while those to Japan were off 4.7 percent.

Shipments to Europe declined 6.7 percent and those to the United States by 6.3 percent.

Smaller import fall

Imports were off 9.5 percent, but were somewhat

Imports of auto parts jumped 23.5 percent from a year earlier

encouraging as that fall has half of the October tumble and significantly less than the poll’s projection for a 14.5 percent decline.

November imports of capital goods fell 1.7 percent and raw materials slipped 10.15 percent while those

of consumer goods rose 3.3 percent.

Imports of auto parts jumped 23.5 percent from a year earlier. Thailand is a major regional hub for global auto firms, and exports of cars and parts rose 13.7 percent.

Despite an 8.8 percent fall in the baht this year, the Bank of Thailand (BOT) on Friday said it expected exports to fall 5.5 percent this year.

Yesterday, the commerce ministry agreed with that number.

The BOT has cut its 2016 economic growth projection to 3.5 percent from 3.7 percent though nudged this year’s estimate to 2.8 percent from 2.7 percent. Growth last year was 0.9 percent.

Since two surprise cuts in March and April, the central bank has left its policy rate steady at 1.50 percent.

It next reviews policy on February 3, and most economists expect no change for now amid tame inflation.

Reuters

12 | Business Daily

December 29, 2015

Asia

Japan business lobby head won’t commit to higher wages Labour unions tend to make very modest requests for higher pay and do not pressure management as much as labour unions in other countries Stanley White and Izumi Nakagawa

T

he head of an influential Japanese business lobby won’t pass on the government’s requests to its members to raise salaries next year, a worrying sign that real wages may not increase fast enough to boost consumption in the country.

Higher wages are crucial to policymakers’ efforts to break a decades-long cycle of weak growth and deflation. Prime Minister Shinzo Abe has won modest wage gains from the largest firms, but this has been slow to filter through the economy.

Renewed concern about a slowdown in emerging markets and weak overseas demand could make more companies reluctant to raise wages. This could in turn scupper the government’s efforts to increase consumption and put the Bank of Japan’s (BOJ) 2 percent inflation target out of reach.

“The government is hoping for higher wages, but the Keizai Doyukai, as an organization that corporate executives personally belong to, is not going to tell its members what to do,” said Yoshimitsu Kobayashi, chairman

KEY POINTS Big business reluctant to commit to govt wage plan Policymakers want higher wages to boost consumption Worries about overseas economies could curb wage growth Wages rise seem further from Japan’s average worker

of the Keizai Doyukai, which regularly participates in the government’s corporate policy panels and is one of Japan’s top three business lobbies.

“Companies that don’t have money obviously won’t raise wages.”

Since taking office in late 2012, Abe has repeatedly asked big business lobbies to encourage their members to raise wages at annual spring salary negotiations with unions.

Abe will also raise the minimum wage by about 3 percent from next fiscal year to encourage salaries to rise more broadly throughout the economy.

Many companies have enjoyed record profits recently, so there is room for these companies to offer their workers higher pay, Kobayashi said.

Japanese companies also have the funds needed to increase domestic

investment in plants, research and develop their workers’ skills, he said.

However, around 65 percent of people work at small and mediumsized enterprises, many of which are losing money and are therefore unlikely to raise salaries or spend extra money on training employees.

Another problem is Japanese labour unions tend to make very modest requests for higher pay and do not pressure management as much as labour unions in other countries.

Adding to these concerns was data for industrial output released yesterday, which fell in November for the first time in three months in a sign that weak overseas demand could hurt Japan’s economy.

Government officials and members of the BOJ have said they want to see how much companies increase salaries by in the spring negotiations with labour unions next year.

A disappointing result could cast doubt over the government’s economic policies and feed into pessimism that consumer spending will not accelerate much next year.

Reuters

India deal unlikely to secure Toshiba’s lofty nuclear plans Moody’s also recently downgraded the company’s debt rating to junk status

J

apan’s Toshiba Corp may need to curb its ambitions in nuclear power even as it looks set to win a deal in India, battling both competition from emerging market rivals and the impact of its own deteriorating finances, industry experts said.

A senior Indian government official told Reuters earlier this month that the country expects to seal a contract with Toshiba’s U.S. nuclear unit Westinghouse to build six nuclear reactors in the first half of next year.

The deal, estimated to be worth as much as US$2 billion per reactor, is a blessing for Toshiba as the laptopto-nuclear conglomerate

overhauls its loss-making consumer electronics division in the wake of a US$1.3 billion book-keeping scandal.

Yet industry experts say it is far from securing its goal of building 64 reactors over the next 15 years - an ambitious plan announced in November and even more bullish than its outlook before the 2011 Fukushima disaster that spurred a nuclear phase-out among developed nations such as Germany.

Moreover, they say Russia and China are beefing up efforts to export their own reactors with lower prices.

In 2013, Toshiba lost to Russia’s Rosatom in supplying

Finland’s Fennovoima power plant project, and analysts say there’s little assurance Toshiba will beat out cheaper manufacturers vying for contracts in emerging countries such as China, India and Turkey.

“I expect Russia and China to eventually dominate the nuclear market,” Hideo Kubota, nuclear expert at Japan’s Tepia Research Institute, said.

“Their reactors are significantly price competitive,” he noted.

Toshiba’s deteriorating capital base, laid bare in recent financial reports after years of exaggerated profits, also means

the company lacks the financial flexibility often required of nuclear reactor suppliers.

Reuters reported earlier this month that Toshiba was asking Japanese financial institutions to help fund the NuGen UK nuclear project in northwest England.

The scandal has made it more difficult for Toshiba to take on its planned share of the building costs by itself, the sources said.

Moody’s also recently downgraded the company’s debt rating to junk status, and the Tokyo Stock Exchange has placed Toshiba stocks in a special “watch” category to see

whether it can improve internal controls. Both moves make it difficult for the company to raise funding through debt or new shares.

Yet Toshiba insiders are upbeat, saying they expect it to take time for rivals such as Chinese manufacturers to catch up with Westinghouse’s quality standards.

Toshiba Chief Executive Masashi Muromachi has so far refused to back down on the company’s ambitious plans in the nuclear industry, saying a push for cleaner energy gave the business plenty of room to grow.

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.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

Business Daily | 13

December 29, 2015

International

South Korea exports seen falling for 12th month

India’s coal sector waits for key reforms next year

It will be the first major trading country in the world to publish December export figures

KEY POINTS Nov industrial output seen -0.5 pct s/adj m/m

S

outh Korea’s exports likely fell for a 12th straight month in December, a Reuters survey found, as demand from emerging market economies and China remained poor and global oil prices stayed low.

The median forecast from 15 economists is for South Korean exports to fall 10.9 percent in December in dollar terms from a year earlier, slumping from a 4.8 percent decline in November.

Such a decline, however, would not be as severe as the 16.0 percent fall reported in October, the sharpest contraction in six years.

“South Korea will keep managing a trade surplus on suffering imports, indicating sustained weakness in the economy,” said Lee Sang-jae, chief economist at Eugene Investment & Securities in Seoul.

“Also, when considering global oil prices fell more in December, it’s

Dec exports seen -10.9 pct y/y, imports -18.6 pct y/y unlikely that exports will become sharply better in early 2016.”

The economists’ forecast also projected a 18.6 percent drop for imports in December, worse than the 17.6 percent fall reported in November.

South Korea will be the first major trading country in the world to publish December export figures on January 1 and the results may show the global economy remaining sluggish in the new year.

The same survey showed industrial output likely lagged for a second straight month in November, falling 0.5 percent from a month prior in seasonally adjusted terms, as poor export demand offset the recovery in local consumption.

Industrial output fell a preliminary 1.4 percent in October in monthly terms as weak external demand curbed manufacturing activity.

Indonesia sets new capital norms for financial conglomerates Previously, financial conglomerates did not have aggregate capital requirements

F

inancial regulator has changed requirements around how the country’s banking and financial services conglomerates report their capital buffers in an effort to make capital risks more transparent.

Under the new rules, a conglomerate’s aggregate net equity must be at least as much as the total required regulatory capital of each of its business units, Indonesia’s Financial Services Authority (OJK) said in a document posted on its website last week.

Most of Indonesia’s financial assets are managed by conglomerates and OJK has previously said they need to tighten regulation for those firms as they have a systemic impact to the sector. Previously, financial conglomerates did not have aggregate capital requirements.

As part of capital calculations, the OJK will require conglomerates to measure net equity as the total capital of the parent company and its units, minus the injection or fund

Dec CPI seen +1.1 pct y/y vs +1.0 in Nov

Meanwhile, annual inflation likely accelerated for a third month in December, climbing to 1.1 percent from a year earlier, the Reuters survey showed. This would be the fastest pace of consumer price increase seen since October 2014.

Inflation stood at 1.0 percent in November and is expected to continue rising in 2016 as base effects from low global oil prices fade, analysts said.

However, analysts expect inflation to be gradual next year, in line with the Bank of Korea’s projections.

Industrial output data will be published December 30 and inflation data will be published December 31.

Reuters

placement from parent companies to the units.

The regulatory capital requirements for each type of business were not changed - banks still have to maintain a capital adequacy ratio of at least at 8 percent of risk-weighted assets, while insurance firms must maintain a solvency ratio of at least 120 percent.

However, because OJK subtracts capital injections from a conglomerate’s aggregate net equity, the parent company may be forced to raise its capital to make sure the holding meets the new requirements.

“In line with the complexity and the risks faced by financial conglomerates, they must manage a sufficient capital,” the OJK said in the document.

The new rules take effect in December, however, penalties for not meeting the requirements, which include fines of up to 100 million rupiah (US$7,327.62), blacklisting the company’s management or revoking licences, won’t apply until 2018.

Reuters

India’s coal sector is awaiting major reforms and more output next year, a top official has said. “The year 2016 will be important in terms of rolling out of three things -- one is with regard to crushing of coal, the second is the preparatory work regarding washing and putting in a new regime for quality (checks),” Indian Coal Secretary Anil Swarup was quoted by the media as saying. India is the third largest coal producer in the world.

Resale prices of Singapore’s private homes down Resale prices of Singapore’s private homes fell 0.6 percent in November month-on-month, according to the flash estimates released by National University of Singapore’s Institute of Real Estate Studies (IRES) yesterday. Singapore Residential Price Index (SRPI) showed overall prices declined 0.6 percent in November compared with the previous month. In October, resale prices fell 0.1 percent from a month earlier. Prices of homes in the downtown area, excluding small units, declined 0.8 percent compared with the previous month. In the non- central region, prices of homes, excluding small units, fell 0.4 percent.

Cambodia expects 4.8 mln foreign tourists in 2015 Cambodia is expected to receive 4.8 million foreign visitors in 2015, an increase of about 6 percent year-on-year, Tourism Minister Thong Khon said yesterday. “In the first ten months of 2015, Cambodia attracted more than 3.7 million international tourists, up 4.6 percent compared to the same period last year,” he said during a tourism seminar here. “Based on this figure, Cambodia is projected to welcome 4.8 million foreigners this year.” Vietnam, China and South Korea are still the largest sources of tourists to the Southeast Asian country.

S.Korea sees gas demand falling South Korea expects its demand for natural gas to fall by 5 percent over the next 15 years, as increased use of liquefied natural gas (LNG) by households and industry only partly offsets a steep fall in its demand for power generation. The world’s second-largest LNG importer will also seek to diversify its suppliers, and plans to work with other big Asian buyers Japan and China to co-operate over supplies, the Ministry of Trade, Industry and Energy said yesterday.

Still, South Korea will invest 7.1 trillion Korean won (US$6.1 billion) to expand domestic gas supply facilities.

Tokyo Olympics to boost Japan GDP The Olympic Games to be held in Tokyo in 2020 are likely to boost Japan’s gross domestic product (GDP) by an average 0.2-0.3 percent each year from 2015 to 2018, the Bank of Japan said yesterday. The estimate is based on the assumption that construction investment related to the Olympic Games will reach a cumulative 10 trillion yen (US$83 billion) by 2020, the central bank said in a report assessing the economic impact of the Games.

14 | Business Daily

December 29, 2015

International Israel may hold off on rate rise until mid-2016 The Bank of Israel won’t mirror Federal Reserve rate moves and probably will wait until mid-2016 to raise borrowing costs for the first time in five years, the chief economist of Israel’s second-largest bank in assets said. The monetary policy committee, led by Governor Karnit Flug, will try to open up an interest rate differential with the U.S. to try to depreciate the shekel, Gil Bufman of Bank Leumi Le-Israel Ltd. said in an interview in his Tel Aviv office.

Hedge funds abandon bearish treasury market bets Hedge-fund managers and other large speculators spent December 2014 setting the biggest bets against Treasuries in four years. Fast forward 12 months and they’ve abandoned those positions.

Economists’ forecasts show a similar picture. While the Bloomberg surveys project yields will rise in 2016, they also show analysts have spent the past six months cutting their forecasts. The figures reflect investor confidence that low inflation will support Treasuries while the Federal Reserve raises interest rates. “As long as U.S. inflation is stable, there’s some value in buying U.S. Treasuries,” said Kazuaki Oh’E, the head of fixed income at CIBC World Markets Japan Inc. in Tokyo.

Spending to rise 12 pct in Dubai’s 2016 budget Dubai plans to raise state spending by 12 percent in 2016 as it invests in infrastructure to sustain economic growth, but an equal rise in revenues will allow the emirate to balance its budget, the government said on Sunday. The ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum, approved spending next year of 46.1 billion dirhams (US$12.6 billion), up from 41.2 billion dirhams in the 2015 budget plan.

The 2015 budget featured a 9 percent rise in spending.

Morocco postpones opening of solar plant Morocco postponed without explanation the inauguration of Noor-1, a solar power plant due to open Sunday in Ouarzazate, part of what will eventually be the world’s largest solar power production facility. When asked by AFP, the communications agency that organised the inauguration on behalf of Moroccan solar energy agency Masen gave no reasons for the last-minute delay. With an electricity production capacity of 160 megawatts, Noor-1 is supposed to allow Morocco to significantly reduce emissions of greenhouse gases. The complex should allow Morocco to cut carbon dioxide emissions by 240,000 tons per year.

‘Star Wars’ crosses US$1 billion globally at record pace “Star Wars: The Force Awakens” showed few signs of flagging over Christmas weekend, barrelling past the US$1 billion mark globally at a faster clip than any film in history. It’s becoming old hat to recount the various ways that the seventh film in the science-fiction fantasy is vaporizing records, but, familiar or not, “The Force Awakens” once again ground down high-water marks over the holidays, racking up US$153.5 million domestically. That represents both the biggest Christmas holiday result and the best second weekend for a film in history.

Shale’s running out of survival tricks as OPEC ramps up pressure Venezuelan Oil Minister Eulogio Del Pino said the industry is “at the door of a catastrophe” if crude production outstrips storage capacity Dan Murtaugh

I

n 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at US$50a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well.

Those efforts, to the surprise of many observers, largely succeeded.

As of this month, U.S. oil output remained within 4 percent of a 43year high.

The problem? Oil’s no longer at US$50. It now trades near $35.

For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow. These drillers are “not set up to survive oil in the US$30s,” said R.T. Dukes, a senior upstream analyst for Wood Mackenzie Ltd. in Houston.

The Energy Information Administration now predicts that companies operating in U.S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s high-cost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great.

Drillers including Samson Resources Corp. and Magnum Hunter Resources Corp. have already filed for bankruptcy. About US$99 billion in face value of high-yield energy bonds are trading at distressed prices, according to Bloomberg Intelligence analyst Spencer Cutter. The BofA Merrill Lynch U.S. High Yield Energy Index has given up almost all of its outperformance since 2001, with the yield reaching its highest level relative to the broader market in at least 10 years.

“You are going to see a pickup in bankruptcy filings, a pickup in distressed asset sales and a pickup in distressed debt exchanges,” said Jeff Jones, managing director at Blackhill Partners, a Dallas-based investment banking firm. “And US$35 oil will clearly accelerate the distress.”

Shale rock

To understand why production is about to collapse, we have to go back to how it came about. Geologists have long known about shale. It’s what they called the source rock: Oil and gas leached out of the shale into the porous dirt around it that drillers could easily pump from. The shale itself was so impermeable that wells would go dry almost immediately.

A wildcatter named George Mitchell solved the problem by using directional bores to carve a long horizontal hole through the shale

OPEC headquarters

layer, and then blasting that tunnel with high-pressure bursts of water, chemicals and sand to create millions of tiny fissures through which oil and gas could escape. It worked, but was too expensive to implement on a wide scale.

Oil prices rose as rapid global economic growth in the early 2000s boosted energy demand, making shale profitable to drill. Output leaped more than 60 percent from the end of 2010.

The production burst came just as growth slowed from its breakneck pace. As supply overwhelmed demand, prices fell from the US$100s to the US$70s and then, after the Organization of Petroleum Exporting Countries decided to keep pumping at near- record levels, into the US$30s.

Spending cuts

A return to cheaper oil was thought to be disastrous for shale, but companies figured out how to increase productivity and lower costs.

Producers slashed spending, idling more than 60 percent of the rigs in the

U.S. They drilled and fracked faster, meaning fewer rigs and workers could make the same number of wells. They focused on their best areas and used more sand and water in the fracking process so each well gushed with more crude. By April, when the rig count had fallen in half, output was still rising.

All that effort did was push prices lower and expectations for a price recovery further out into the future.

Now shale companies face a grim future, having played most of their best cards.

“There is limited scope for further production cost reductions,” Mike Wittner, head of oil-market research for Societe Generale, said in a note to clients. “While technological and efficiency improvements may continue gradually, oil company renegotiations with contractors are essentially done, and so is the rapid shift to focus only on core areas.”

Shale drillers aren’t the only ones hurting. OPEC’s strategy is causing pain for its members. Saudi Arabia is said to be considering selling stakes in state-owned companies to help stem a budget deficit that reached 20 percent of its economy.

Supply glut

Shale is disruptive…

It brought on big volumes in a short period and eclipsed demand growth, and the oil market began to look worse and worse R.T. Dukes, senior upstream analyst, Wood Mackenzie

Even a plunge in U.S. output may not be enough to drain a global supply glut that has almost 3 billion barrels of oil and products like gasoline in developed countries’ storage tanks, according to the International Energy Agency. The world will likely be oversupplied by about 1 million barrels a day through the first half of next year before balancing, Jefferies LLC analysts including Jason Gammel said in a December 18 research note.

“Most companies have gone into shrinkage mode, saying their goal is to stay flat and make it through this market,” Raoul LeBlanc, an analyst with IHS Inc. in Houston, said.

“The current price is unsustainable.

Unfortunately, we have to sustain it for a while longer.”

Bloomberg News

Business Daily | 15

December 29, 2015

Opinion Business

wires

Why big oil should kill itself

Leading reports from Asia’s best business newspapers

Anatole Kaletsky

Chief Economist and Co-Chairman of Gavekal Dragonomics and the author of Capitalism 4.0, The Birth of a New Economy

PHILSTAR The Philippines is poised to become a major automotive market in Southeast Asia by 2020 as domestic sales are expected to continue posting stellar growth while local production is seen ramping up with the government’s Comprehensive Automotive Resurgence Strategy program.

Local industry players see the Philippine automotive market pumping in sales, accounting for eight to 10 percent of the total vehicle sales in the region by 2020. By 2020, sales of the automotive market within member economies of the Association of South East Asian Nations are projected to reach five to six million units.

TAIPEI TIMES There is unlikely to be a breakthrough in the negotiation on a cross-strait trade in goods agreement before the end of the year, as the two sides have differences on tariff reductions, a source said. “We previously thought we could hold the 13th round of formal talks on the pact in the middle or before the end of this month, but the closer we got to the scheduled dates, the more we found out that both Taiwan and China still could not make a concession on core issues in a short period of time,” a source in the Bureau of Foreign Trade said.

THE PHNOM PENH POST Special economic zones (SEZs), billed as a one-stop shop for potential investors, have had a slow start in the Kingdom – only 13 out of 30 registered zones are operational – with many failing to get off the ground given the difficulty in providing the requisite infrastructure and facilities investors expect.

However, despite the limited number of SEZs in play, exports from these zones are expected to reach US$1.2 billion by the end of the year, with Commerce Ministry records released this month showing that US$964 million worth of shipments were achieved as of November.

THE AGE Boxing Day shoppers will be more likely to spend the biggest retail event of the year at home, bagging bargains online in clearance sales that will increasingly start before December 26, retailers and analysts say. Australians spent a record-breaking A$2.5 billion at Boxing Day sales this year, according to the Retail Council, which predicts A$21 billion in trade between December 26 and January 15.

While foot traffic in bricks and mortar stores was reportedly up, so too was the portion of people shopping online.

N

ow that oil prices have settled into a long-term range of US$30-50 per barrel (as described here a year ago), energy users everywhere are enjoying an annual income boost worth more than US$2 trillion. The net result will almost certainly accelerate global growth, because the beneficiaries of this enormous income redistribution are mostly lower- and middle-income households that spend all they earn.

Of course, there will be some big losers – mainly governments in oil-producing countries, which will run down reserves and borrow in financial markets for as long as possible, rather than cut public spending.

That, after all, is politicians’ preferred approach, especially when they are fighting wars, defying geopolitical pressures, or confronting popular revolts.

But not all producers will lose equally. One group really is cutting back sharply: Western oil companies, which have announced investment reductions worth about US$200 billion this year. That has contributed to the weakness of stock markets worldwide; yet, paradoxically, oil companies’ shareholders could end up benefiting handsomely from the new era of cheap oil.

Just one condition must be met. The managements of leading energy companies must face economic reality and abandon their wasteful obsession with finding new oil.

The 75 biggest oil companies are still investing more than US$650 billion annually to find and extract fossil fuels in ever more challenging environments.

This has been one of the greatest misallocations of capital in history – economically feasible only because of artificial monopoly prices.

But the monopoly has fallen on hard times. Assuming that a combination of shale

Oil company managements still believe, with quasireligious fervour, in perpetually rising demand and prices

development, environmental pressure, and advances in clean energy keep the OPEC cartel paralyzed, oil will now trade like any other commodity in a normal competitive market, as it did from 1986 to 2005.

As investors appreciate this new reality, they will focus on a basic principle of economics: “marginal cost pricing.”

In a normal competitive market, prices will be set by the cost of producing an extra barrel from the cheapest oilfields with spare capacity. This means that all the reserves in Saudi Arabia, Iran, Iraq, Russia, and Central Asia would have to be fully developed and exhausted before anyone even bothered exploring under the Arctic ice cap or deep in the Gulf of Mexico or hundreds of miles off the Brazilian coast.

Of course, the real world is never as simple as an economics textbook. Geopolitical tensions, transport costs, and infrastructure bottlenecks mean that oil-consuming countries are willing to pay a premium for energy security, including

the accumulation of strategic supplies on their own territory.

Nonetheless, with OPEC on the ropes, the broad principle applies: ExxonMobil, Shell, and BP can no longer hope to compete with Saudi, Iranian, or Russian companies, which now have exclusive access to reserves that can be extracted with nothing more sophisticated than nineteenth-century “nodding donkeys.” Iran, for example, claims to produce oil for only US$1 a barrel. Its readily accessible reserves – second only in the Middle East to Saudi Arabia’s –will be rapidly developed once international economic sanctions are lifted.

For Western oil companies, the rational strategy will be to stop oil exploration and seek profits by providing equipment, geological knowhow, and new technologies such as hydraulic fracturing (“fracking”) to oilproducing countries. But their ultimate goal should be to sell their existing oil reserves as quickly as possible and distribute the resulting tsunami of cash to their shareholders until all of their low-cost oilfields run dry.

That is precisely the strategy of self-liquidation that tobacco companies used, to the benefit of their shareholders. If oil managements refuse to put themselves out of business in the same way, activist shareholders or corporate raiders could do it for them.

If a consortium of privateequity investors raised the US$118 billion needed to buy BP at its current share price, it could immediately start to liquidate 10.5 billion barrels of proven reserves worth over US$360 billion, even at today’s “depressed” price of US$36 a barrel.

There are two reasons why this has not happened – yet.

Oil company managements still believe, with quasi-religious fervour, in perpetually rising

demand and prices. So they prefer to waste money seeking new reserves instead of maximizing shareholders’ cash pay-outs. And they contemptuously dismiss the only other plausible strategy: an investment shift from oil exploration to new energy technologies that will eventually replace fossil fuels.

Redirecting just half the US$50 billion that oil companies are likely to spend this year on exploring for new reserves would more than double the US$10 billion for clean-energy research announced this month by 20 governments at the Paris climate-change conference.

The financial returns from such investment would almost certainly be far higher than from oil exploration. Yet, as one BP director replied when I asked why his company continued to risk deep-water drilling, instead of investing in alternative energy: “We are a drilling business, and that is our expertise. Why should we spend our time and money competing in new technology with General Electric or Toshiba?”

As long as OPEC’s output restrictions and expansion of cheap Middle Eastern oilfields sheltered Western oil companies from marginal-cost pricing, such complacency was understandable. But the Saudis and other OPEC governments now seem to recognize that output restrictions merely cede market share to American frackers and other higher-cost producers, while environmental pressures and advances in clean energy transform much of their oil into a worthless “stranded asset” that can never be used or sold.

Mark Carney, Governor of the Bank of England, has warned that the stranded-asset problem could threaten global financial stability if the “carbon budgets” implied by global and regional climate deals render worthless fossil-fuel reserves that oil companies’ balance sheets currently value at trillions of dollars. This environmental pressure is now interacting with technological progress, reducing prices for solar energy to near-parity with fossil fuels.

As technology continues to improve and environmental restrictions tighten, it seems inevitable that much of the world’s proven oil reserves will be left where they are, like most of the world’s coal. Sheikh Zaki Yamani, the long-time Saudi oil minister, knew this back in the 1980s. “The Stone Age did not end,” he warned his compatriots, “because the cavemen ran out of stone.”

OPEC seems finally to have absorbed this message and realized that the Oil Age is ending. Western oil companies need to wake up to the same reality, stop exploring, and either innovate or liquidate.

Project Syndicate

16 | Business Daily

December 29, 2015

Closing China agencies to jointly punish firms who break the law

Beijing to “reasonably” set limit on new local debt in 2016

Twenty-two Chinese government bodies agreed yesterday to jointly mete out punishment to listed companies identified by the securities regulator to have broken the law. Listed companies and relevant individuals penalised by the China Securities Regulatory Commission (CSRC, headquarters pictured) would face punishment or business restrictions from other government agencies as well, CSRC told a news conference in Beijing. The punishments included being restricted in participating in bond sales and stock incentives schemes. No specific companies were named at the conference or in the accompanying statement provided to reporters.

China will “reasonably” set limits on new local government debt in 2016 and in the coming years, the country’s Finance Minister Lou Jiwei (pictured) said at a work conference in Beijing yesterday. China will adopt a more flexible fiscal policy including gradually increasing fiscal deficit ratio and expanding its budget deficit, Lou was quoted as saying in a statement published on its website. He added that the government would cut taxes to help companies reduce their burdens. The conference reiterated policy priorities and main economic targets that were discussed at the recent annual Central Economic Work Conference.

Japan, South Korea reach landmark accord over wartime sex slaves The war anniversary and the fact that many of the surviving few dozen Korean comfort women are in their nineties, lent urgency to an agreement

J

apanese Prime Minister Shinzo Abe made a landmark apology to South Korean “comfort women” coerced into Japanese military brothels before and during World War II, with his government agreeing to provide 1 billion yen (US$8.3 million) to a fund for compensating victims.

The governments of Japan and South Korea agreed that this would be a final “irreversible” solution to an issue that has dogged bilateral ties for decades.

Abe’s message was delivered

by Japanese Foreign Minister Fumio Kishida at a press conference in Seoul after a meeting with South Korean counterpart Yun Byung Se. “Prime Minister Abe expresses anew his most sincere apologies and remorse to all the women who underwent immeasurable and painful experiences and suffered incurable physical and psychological wounds as comfort women,” Kishida said. “The issue of comfort women, with an involvement of the Japanese military authorities at that time, was a grave affront to the honour and dignity of

up by activists outside the Japanese embassy in Seoul.

Closing book

Surrounded by reporters, elderly comfort women victims watch news reports about an agreement between South Korea and Japan to resolve the issues concerning them

large numbers of women, and the government of Japan is painfully aware of responsibilities from this perspective.”

Resolving the issue -- the biggest source of tension between the two U.S. allies -- might give both leaders a political bounce as they prepare for legislative elections next year, as well as

help reinvigorate trade that has declined in recent years.

Improved ties would also be welcomed by the U.S., which has more than 75,000 troops in the two countries as they deal with a rising China and a nuclear-armed North Korea.

South Korean President Park Geun Hye told Kishida later yesterday that the

Beijing to raise budget deficit ratio in 2016

Second-hand smoking drops in Mainland

C

T

hina’s proactive fiscal policy will persist and become more forceful in 2016, an official statement said yesterday.

China will increase its budget deficit next year, gradually raise its fiscal deficit ratio, increase government debt issuance and set a limit for newly increased local government debt, according to a statement issued after a national fiscal work conference.

China will continue to cut taxes and avoid overcharging enterprises so they have more money at their disposal, and the government will spend the money more wisely, the statement said.

China raised its fiscal-deficit-to-GDP ratio to 2.3 percent for 2015, compared with 2014’s target of 2.1 percent. Experts believe that China is expected to raise the number to 3 percent or higher in 2016 in an effort to shore up growth.

A 3-percent deficit ratio is normally considered a red line not to be crossed, but opinions favour a higher ratio as it enables the government to cut taxes, encouraging more production.

Xinhua

agreement could be a new starting point for relations with Japan, according to the website of her office.

The two governments also agreed to avoid criticism of one another on the international stage over the issue. South Korea’s Yun also said that his country would address the question of a comfort woman statue set

he second-hand smoke exposure has dropped in China despite an increase of 15 million smokers in the past five years, said a domestic smoking report.

Compared with 2010, the second-hand smoking exposure rate fell from 34.6 percent to 17.2 percent in primary and middle schools and from 54.9 percent to 38.1 percent in government buildings, said the report released by the Chinese Centre for Disease Control and Prevention yesterday.

Chinese smoking population has increased to 316 million, or 27.7 percent of the total targeted population, it said. The smoking rate was 52.1 percent for males and 2.7 percent for females.

Each smoker consumes an average of 15.2 cigarettes per day, or an increase of one cigarette compared with five years ago, according to the report, which surveyed 15,095 people aged 15 years or more in urban and rural areas. Despite the rise of tobacco prices, the purchasing power of urban and rural residents has also grown.

Last month, South Korean President Park Geun Hye and Japanese Prime Minister Shinzo Abe held the first bilateral summit between the countries in more than three years, agreeing to expedite a resolution of the issue.

While Abe acknowledged the “immeasurable damage and suffering” inflicted

by Japan in an August statement marking the 70th anniversary of the end of World War II, he said his nation shouldn’t be expected to keep apologizing for the conflict.

South Korea and Japanese diplomats have met about a dozen times to discuss the comfort women since April 2014, and yesterday’s meeting fits in with a growing mood of reconciliation since Abe’s 70th anniversary speech. On December 17 a Seoul court, following a petition by South Korea’s Foreign Ministry for leniency, acquitted a Japanese journalist of a defamation charge stemming from an article about Park.

Bloomberg News

Facebook founder urges free Internet in India

F

acebook founder Mark Zuckerberg urged India yesterday to approve a controversial plan that would provide a free Internet service to the poor, his latest bid amid an escalating row with authorities.

The head of the social network tried to drum up support for the Free Basics service that offers people without the Internet free access to a handful of websites through mobile phones, in a column in the largest-selling English daily The Times of India.

“If we accept that everyone deserves access to the Internet, then we must surely support free basic Internet services,” the chief executive wrote, comparing the Internet to a library, public health care and education.

Zuckerberg’s personal appeal comes amid fierce criticism from net neutrality activists who say his plan violates the principle that the whole Internet should be available to all and unrestricted by any one company.

AFP