MOP 6.00 Closing editor: Joanne Kuai
Police busted gambling house busted in Hubei Page 2
Taiwan’s economic data to impact on elections Pages 9&16
Year IV
Number 958 Monday January 11, 2016
Publisher: Paulo A. Azevedo
Chinese central bank faces pressure for further RMB depreciation Page 10
Hotel Lisboa alleged sex ring on trial
The first session of the trial relating to the alleged prostitution ring at Hotel Lisboa, held at the Court of First Instance on Friday, has heard two defendants testify in detail of the sexual services that were managed at the establishment. Alan Ho, nephew of gaming tycoon Stanley Ho, remained silent during the very first session of the trial on the alleged prostituting ring that was alleged to operate at Hotel Lisboa, one which police claimed was the biggest busted since handover Page
Restoring confidence Perception is all. Consumers are showing slightly restored confidence in the local economy, according to the Consumer Confidence Index. The Macau University of Science and Technology (MUST) says there is good news in housing purchase confidence as the scores increased. Residents also give the thumbs up to employment conditions and living standards, while being concerned about price levels and losing interest in stock investment
Security alarm
China’s consumer price index rose 1.6 per cent in December from a year earlier, matching economist forecasts. Producer price index fell 5.9 per cent for the fifth straight month, extending declines to a record 46 months.
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The chairman of gaming operator Sociedade de Jogos de Macau (SJM), Ambrose So Shu Fai, said the alleged embezzlement case from L’Arc Macau would not affect the operator’s business. However, he declined to compare the case with the junket Dore cage theft case. He did admit though that security control over satellite casinos could be improved
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Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jewellery chain, said same-store sales in Hong Kong and Macau plunged 23 percent in the final three months of 2015 as fewer mainland Chinese tourists visited the two cities
Sabrina Ho, the daughter of gaming tycoon Stanley Ho and SJM executive director Angela Leong, is now acting as the director and CEO of Poly Auction Macau Ltd, a joint-venture of Poly Auction Hong Kong and her company Chiu Yeng Culture Ltd. She told Business Daily in an interview that she believes the government’s intention of developing cultural creative industry should give space for art auctions and hotel art fairs to grow in the territory
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January 11, 2016
Macau
Confidence in local economy restored slightly In the fourth quarter of last year, the consumer confidence index increased from the previous quarter but still suffered a drop from a year ago
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acau consumers’ confidence in the local economy has been slow in restoring amid a 19-month consecutive gaming revenue drop which contributes over 80 per cent of the city’s income, according to the latest Consumer Confidence Index
conducted by the Macau University of Science and Technology (MUST). In the fourth quarter of 2015, however, consumer confidence in local economy was 91.03 from a possible 200 points, a 9.88 per cent increase on the previous quarter after
four consecutive quarters of decline. However, the number still represents a 16.19 per cent decrease from the same period of a year ago when it was scored at 108.61. Index scores below 100 suggest a lack of confidence while scores over 100 imply a degree of positive outlook.
Ambrose So: L’Arc fraud case not affecting SJM
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he chairman of gaming operator Sociedade de Jogos de Macau (SJM), Ambrose So Shu Fai, said the alleged embezzlement case from L’Arc Macau would not affect
the operator’s business. However, he declined to compare the case with the junket Dore cage theft case. “This time, the employee took away their commission and fled.
Ambrose So
Of the six sub-indices, four of them – the local economy, employment, living standards, and housing purchase, all registered growth from the previous quarter; two others - price levels and stock investment experienced drops.
It’s different from Dore’s incident in which collective investor funds were deposited in the VIP room. This incident will not influence SJM”, the SJM chairman told TDM on Saturday. Last week, the city’s Judiciary Police (PJ) announced that Casino L’Arc Macau had reported of a “senior staff” working at the junket operations of the casino having allegedly embezzled HK$99.7 million (US$12.9 million). The police are now pursuing the case as fraud. “I think they need to review the control system and how to improve the system so as to avoid any further similar cases that might occur”, Mr. So told the broadcaster, and assured that efforts will be made to recover the lost sum. L’Arc Macau, opened in September 2009, is one of the fifteen satellite (third-party managed) casinos that is operated under a service agreement with SJM. Talking on SJM’s new casino project in Cotai, the SJM chairman said the construction of the Lisboa Palace will hopefully be completed by the end of next year. In addition, he reveals that the gaming company is planning to apply for gaming tables for its newly renovated Jai Alai casino on the Peninsula.
Employment remained the index scoring the highest points at 97.89. It represents a change after three quarters of continuous slumping, and improved 1.06 per cent from the previous quarter, although still a decrease of 21.61 per cent against the same period a year ago. A similar picture applies to living standards. It scored 95.54, 1.73 per cent better than the third quarter of last year, but 0.39 per cent lower than the fourth quarter of 2014. Housing purchase remained the lowest as the previous quarter was 64.39. however, it represents a 2.14 increase from the previous quarter and even a 40.62 per cent increase compared to a year ago. Surveyors say it indicates that negativism in regards of buying a house has continued to ease. Inflation remains a concern as confidence in price levels dropped 4.52 per cent from the previous quarter to 71.29 but represents a 19.50 per cent increase from a year ago. Also, the stock market doesn’t have much appeal to locals as confidence in stock investment dropped 3.05 per cent from the previous quarter to 75.69, and a 15.21 per cent fall from a year ago. The survey was conducted over a week from 4 December, and it interviewed 1,003 Macau residents aged over 18 via telephone calls. The Institute for Sustainable Development of MUST has released the index every quarter since 2009.
China police bust "poker club" gambling house
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olice in central China's Hubei Province have busted a gambling house disguised as a poker club, which targeted welleducated gamblers. The gambling den made 300 million yuan (US$45.5 million) in the first half of 2015 alone, the provincial public security bureau said on Sunday. According to police investigation, the gambling house was named Wuhan PK365 Club, which hosts games of Texas Hold'em Poker. It has 17 gaming tables and two VIP rooms. Police said gambling was highlyorganized in management and service. More than 90 per cent of gamblers to the house had college degrees. In a police raid of the house, 140 gamblers and clerks in the gambling house were caught. Police have detained 21 members with the gang. The case is still under investigation. Xinhua
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January 11, 2016
Macau
Jeweller Chow Tai Fook expects to close some Hong Kong stores retail sales value of Chow Tai Fook’s shops in Hong Kong and Macau has declined by 20 per cent in the three months ended December
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how Tai Fook Jewellery Group Ltd, China’s largest jewellery retailer by market value, expects to close 5-6 Hong Kong stores in the fiscal year ending in March, as tourists are put off visiting the city by a strong local currency. Managing Director Kent Wong said on Friday the company would negotiate for lower rents when it renews leases and would see more store closures unless rents were cut in the city’s key tourist areas including in Causeway Bay and Tsimshatsui. “Hong Kong remains challenging because of the strong Hong Kong dollar,” he said on a telephone conference. “Same-store sales for the current quarter and on the coming Chinese new year (in Hong Kong) can be a decline as we see no sign of recovery yet.” Chow Tai Fook said its overall retail sales fell 11 per cent in value terms in the three months ended December, compared with a 10 per cent drop a year earlier, due to a fall in the number of mainland tourists and weak local consumer spending.
KEY POINTS Sees 5-6 store closures in Hong Kong in year ending March Says Hong Kong remains challenging on strong local currency Sees weak same stores sales in upcoming Chinese new year
Its retail sales in Hong Kong and Macau dropped 20 per cent in the quarter, while in China they were down 6 per cent. Same-store sales fell 15 per cent as a whole during the quarter, with Hong Kong and Macau down 23 per cent and the Mainland sliding 6 perc ent. The data came days after Hong Kong posted a 7.8 per cent fall in retail
sales in November, its ninth consecutive month of decline. Sales of jewellery and watches plunged 20.6 per cent after a 17 per cent fall in October. Luxury retailers are feeling the heat from fewer mainland visitors. In August, Coach Inc closed its flagship store in Hong Kong and last month Italy’s Prada SpA reported a 38 per cent fall in August-October profit.
Hong Kong is bracing for greater economic challenges as the prospect of a cycle of interest rate rises drives fears of capital outflows that could pressure the Asian financial hub, while a strong Hong Kong dollar has made the city an expensive destination for China’s cash-rich tourists. Reuters
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January 11, 2016
Macau
Local MICE company expands to HK and Zhuhai
Bauhaus saw weakened sales in HK, Macau in Oct – Dec
João Paulo Meneses
lothing retailer Bauhaus International (Holdings) Ltd saw same store sales in the core market of Hong Kong and Macau decline by 10 per cent year-on-year in the three months ended December 2015, a fall which dragged down the same store sales of the whole group by 5 per cent in the period. The figures were disclosed to the Hong Kong stock exchange on Friday, but the filing did not include the exact figure of the sales revenue. For the nine months ended December 2015, the same store sales of Bauhaus dropped by 8 per cent in Hong Kong and Macau, while a decline in sales was also seen in its shops in Taiwan and Mainland China. As at the end of last year, Bauhaus managed 226 shops in greater China: 92 of the shops were located in Hong Kong and Macau; 99 of the shops were in Taiwan and 35 in Mainland China. Bauhaus' sales are derived from its in-house apparels and accessories labels “SALAD”, “TOUGH” and “80/20”. The group also sells some licenced brands including “SUPERDRY”. For the interim period for the six months ended in September last year, Bauhaus has already recorded negative same store sales in Hong Kong and Macau. In the period, the group's retail turnover declined by about 7.6 per cent to HK$427.2 million (US$55 million) in the two cities – a segment that accounted for 73 per cent of the group wide turnover.
newsdesk@macaubusinessdaily.com
Bruno Simões, partner at SmallWORLD
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mallWORLD, a Macau company dedicated exclusively to the MICE (Meetings, Incentives, Conventions and Exhibitions) sector, has established offices in the neighbouring Special A d m inis t r at ive Region Hong Kong and in Mainland China city Zhuhai across the border, one of
the partners Bruno Simões told Business Daily. Mr. Simões said that the expansion is a sign of growth for Smallworld: “The strategy was to expand the activity first to Hong Kong and then to Mainland China. We already have established businesses and a team in Hong Kong and Zhuhai. “
“Our clients are 90 per cent out of Macau. Most of them are from Hong Kong and other nearby regions - Mainland China, Southeast Asia, Japan, Korea and finally the more distant countries - India, Europe and US. Most customers are event agencies and then end customers - companies directly,” explained the partner. Smallworld began to hold MICE activities in Macau in 2006 but the company was fully established since 2008 and “works exclusively” for this industry. Smallworld is active in three key sectors: Event management for conferences, product launches, awards ceremonies, and theme dinners; Team building, an area in which they position themselves as “the biggest company in Macau”; and Entertainment, for MICE events. According to Bruno Simões, “every year we have been growing in double figures, despite some cooling periods that are more connected to the business situation and events in general in Asia - and not so much to the local environment. “ The company became known for Sky Drumming at the Macau Tower.
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January 11, 2016
Macau
Alan Ho mute over alleged running of prostitution ring at Hotel Lisboa Alan Ho, nephew of gaming tycoon Stanley Ho, remained silent during the very first session of the trial on the alleged prostituting ring that was alleged to operate at Hotel Lisboa, one which police claimed was the biggest busted since handover Stephanie Lai
sw.lai@macaubusinessdaily.com
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he first session of the trial relating to the alleged prostitution ring at Hotel Lisboa, held at the Court of First Instance on Friday, has heard two defendants testify in detail of the sexual services that were managed at the establishment. But the first defendant of the case Alan Ho Yau Lun, a senior executive of the hotel and nephew of gaming tycoon Stanley Ho Hung Sun, remained silent during the session. Bruce Mak, a former security chief of Hotel Lisboa and one of the defendants, has denied involvement in the system used by the hotel to manage the entry and exit of women who provided sexual services. The system was known to the staff by the acronym “YSL” - “Young Single Ladies”. Mak, a Hong Konger who worked as the security chief of the hotel since the beginning of 2014, said in the session that he was convinced the presence of the girls that provided sexual services was legal, and that their practice in the hotel has already been known amongst the public here for several years. During the session, Mak has acknowledged the existence of a special counter for the “checkin” of prostitutes that exclusively occupied the fifth and sixth floors of the hotel, and there were security officers assigned to station in these areas.
Biggest bust
Mak was amongst the six suspects arrested by the Judiciary Police (PJ) in January last year over the alleged
running of a prostitution ring at Hotel Lisboa, an operation that the police described at the time as the largest prostitution ring busted since the handover year 1999. At least 96 sex workers, mostly from Mainland China, were found at the hotel when the six suspects were arrested. The police estimated at the time that the ones that were suspected of involvement in the alleged prostitution ring have made more than MOP400 million (US$50 million) over a period of two years, collected from around 2,400 sex workers. They were allegedly each forced to pay the ring an “entrance fee” of 150,000 yuan a year for working in the hotel. Another defendant of the case, Qiao Yan Yan, a former deputy general manager at the hotel, testified that part of her duties was to ensure the prostitutes complied with the rules of the hotel, such as not taking the initiative to approach clients or circulating continuously in the hallways. Qiao has cited the case of deciding a three-month ban against the accessing of the hotel rooms for the sex workers that have violated the hotel rules, saying that she reported such a decision to her superior, the then senior manager Kelly Wang. Wang is also one of the defendants of the alleged prostitution ring case, which also includes former operations manager of the hotel Peter Lun and executive director Alan Ho. During the Friday session, Qiao has also acknowledged that Kelly Wang, Peter Lun and Alan Ho had taken part in the “checking-in” of the prostitutes at the special counter. Wang, Lun and Ho would also ban the use of the hotel
rooms for prostitutes that repeatedly violated the hotel’s rules.
Closed-door session denied
But during the trial on Friday, Alan Ho, Kelly Wang and Peter Lun have all refused to testify. Lawyer Jorge Neto Valente, who represented Alan Ho, has asked for the trial to be held closed-door claiming that such is necessary to protect the identity of the sex workers and to prevent public pressure that could influence the judicial decision. But Valente’s request was turned down by the three-judge panel at the
court. One of the judges at the panel, Rui Carlos dos Santos Pereira Ribeiro, explained that closed-door hearing would only be considered when sex crimes involve individuals aged below 16 years old. Prostitution is not illegal in Macau as long as the individual selling the sexual services does so in a private place. But soliciting for clients and organised prostitution are illegal. During the Friday session, Valente rejected that his client Alan Ho had been involved in any plans to explore prostitution services. The trial on the alleged prostitution ring case will resume on January 15.
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January 11, 2016
Macau
‘Macau has the potential to develop art auctions and hotel art fairs’ Sabrina Ho, the daughter of gaming tycoon Stanley Ho and SJM executive director Angela Leong, told Business Daily in an interview that she believes the government’s intention of developing cultural creative industry should give space for art auctions and hotel art fairs to grow in the territory. As the director and CEO of Poly Auction Macau Ltd, she launched an art auction and the city’s first hotel art fair at Regency Hotel last week Kam Leong
kamleong@macaubusinessdaily.com Photos: Cheong Kam Ka
Macau a very special city. So I think we should add more artistic elements into it. The art industry in the city has been developed quite a lot in recent years. But there are not many experts here. Our fair this time will actually allow artists and residents to see and learn more in order to cultivate their interests in auction.
In addition to professional collectors, in your expectation, who would be the major buyers of the artworks shown in the fair and the auction? Many people in Macau actually like artworks, but they just don’t have the opportunities to know more about the art pieces. As such, they may only buy artworks by mainstream artists. In this event, we would inform people about some new artists, such as those from the Mainland China or other upcoming artists. [Buying an artwork] can be seen as investment, besides for private collection. I see that some hotels and companies would buy our pieces as an investment as the values of artworks have high potential to grow.
What are the differences for the local art auction market from other places, such as Hong Kong? Poly Auction Macau was co‑founded by Poly Auction Hong Kong and your company Chiu Yeng Culture Ltd last year. Why would the parties like to develop art auctions in Macau?
First of all, many of our family businesses are in Macau. Meanwhile, I studied art in university and I have been helping my family on hotel rebranding. We already had some ties with Poly Auction. For example, my father bought the bronze pig head [that was looted from the Summer Palace in Beijing] and donated the piece to a museum. Basing on all these factors, I believe Macau has the potential to develop art and culture elements. After all, as mentioned in the recent Policy Address, the government is focusing on promoting the city’s tourism industry, followed by the cultural creative industry. As such, I perceive that we need to do more in order to develop the sector. I’ve worked in Poly Auction for a while and understand their business. I’m glad that we have reached the cooperation on founding Poly Macau. On the other hand, I notice that most of the pieces that Poly opens for bidding may not be able to be afforded by general public, so Chui Yeng Culture Ltd organised the 6075 Poly Macau Hotel Art
Our fair this time will actually allow artists and residents to see and learn more in order to cultivate their interests in auction
Fair, apart from launching Poly Macau with Poly Hong Kong.
What are the aims for the 6075 Art Fair?
This is the first event held by Chiu Yeng Culture. Hotel art fairs have been very popular in Japan, Korea and even in Hong Kong but I believe not such an event in Macau before. I was wondering why there are so many hotels in Macau but there is never an idea of holding an art fair inside a hotel room. Art fairs are not necessarily held inside museums
or other exhibitions. Hence, I want to be more innovative. For the art fair, we have invited a total of 60 artists. These artists are primarily from Hong Kong, Taiwan and Mainland China and Macau. They are selected through careful evaluations as we would distribute scholarships to them through the Dr. Stanley Ho Foundation, in order to encourage more young artists to join our art fair. I hope we would continue holding this event next year. The event is totally non-profitable. Meanwhile, there is no entrance fee charged for the fair as we want to let the general public of Macau enjoy our fair and know more about the young artists.
Art auction may still sound new to the Special Administrative Region. How do you see the market demands here?
I think art auction could really be viable here. In my opinions, art auctions can not only work in prosperous cities, but also those full of cultural and tourist elements. I think that Macau can be a Las Vegas for its gaming business, but it also can be a capital of art at the same time. After all, the city has its own advantages in developing art as our architecture here is full of Portuguese elements, which makes
First of all, Macau is not as prosperous as Hong Kong. But this is the advantage for Macau to develop the sector as we have many auxiliary facilities which allow people coming here for vacation and for family tours. So it won’t bring people the idea that viewing artworks must be inside museum or galleries. Macau has many relaxing elements. For example, many of our clients, in addition to visiting our fair, they would see around the city and be eating around.
I see that some hotels and companies would buy our pieces as an investment as the values of artworks have high potential to grow
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January 11, 2016
Macau Are there any difficulties in developing art auction in Macau?
In fact, it is quite hard to gather them all. I flew to different galleries in different places, asking the galleries whether they could recommend some artists from their places. But I found that many of the artists are very curious about Macau. Meanwhile, our Poly Auction actually guarantees the number and sources of clients to the fair, which also attracted the artists as they want to meet more art collectors as well. Hence, by launching the art auction and the hotel art fair at the same time, they can mutually help each other.
Is the government’s promotion on non-gaming elements amid the current economic adjustment phase an opportunity for art auction?
In addition to Regency Hotel, are you planning to launch art fairs in other hotel properties in the city?
There are, as the idea is quite new after all. Many clients may not have accepted the idea and found that it is troublesome for coming to Macau. But I think there is another group of clients who find the idea of art auction in Macau is interesting. Art auction has been developed in Hong Kong, Shanghai and Beijing for many years. I think it is time for the segment to explore new places for art auction, while Macau may be one of the good choices.
Yes, we think so. As I mentioned, the government said in the Policy Address to develop first tourism industry then culture creative industry. That’s why we launched our 6075 Art Fair and we are non-profit. We just want to help local artists by giving them a platform to get more publicity in media, as well as for them to be known by galleries from other countries, such as Japan and Taiwan. By doing that, they would have opportunities to showcase their works overseas. After all, this is a platform for them to develop themselves and let people know more about them.
How is the process of gathering all these artists for the fair?
Our temporary focus is on Regency Hotel. We have just acquired this hotel and I have just taken it over. I’m in charge of rebranding this hotel. My aim is to turn this hotel into an art hotel. As such, I want to pour anything related to art into this hotel for the time being.
What are the future plans?
For me, I will focus on hotel business which I have been doing in Hong Kong. But the things I do will be related to art. For Chiu Yeng Culture, we hope to continue holding art auction every six months. Moreover, I don’t think an artwork must be a drawing, as it can be performing art, a threedigital work or in other digital forms, so I would develop more in this sector, hoping to bring more different elements to Macau.
The Art Auction & The Hotel Art Fair The Poly Macau Inaugural Art Auction is the first event held by Poly Auction Macau Ltd in the city. Poly Auction Macau is a joint-venture of Poly Auction Hong Kong and Chiu Yeng Culture Ltd, which was established last year. Art pieces for the auction were opened for pre-viewing at Regency Hotel Macau between last Thursday and Saturday, while the Auction was conducted yesterday. The Auction features an array of masterpieces, ranging from Chinese and Asian Modern & Contemporary Art, Chinese Paintings and Calligraphy, Chinese Ceramics and Works of Art,
Jewellery, as well as other noble collections. The Auction also includes works by legendary artists, namely, Chu Teh-chun, Wu Guangzhou, Lin Fengmian and Zhang Daqian etc. Meanwhile, the Hotel Art Fair, coorganized by Poly Auction Macau and Chiu Yeng Culture, named the 6075 Poly Macau Hotel Art Fair as it has brought together 60 young artists born after 1975 from Mainland China, Hong Kong, Macau and Taiwan. Meanwhile, their works have also been showcased in 60 guestrooms of the Regency Hotel between last Thursday and yesterday.
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January 11, 2016
Greater China
Inflation edges up as expected, producer prices still in deflation Given how stubborn deflationary pressure has proven in China, regulators appear to be bringing the exchange rate to bear on the problem Xiaoyi Shao and Pete Sweeney
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hina’s consumer inflation barely edged up in December while companies’ factory-gate prices continued to fall, adding to concerns about growing deflation risks in the world’s second-largest economy. In line with sluggish activity, China’s consumer inflation quickened slightly to 1.6 percent year-on-year in December, as expected, compared with 1.5 percent the previous month. The producer price index was unchanged at minus 5.9 percent in December, the National Bureau of Statistics said on Saturday, slightly above forecasts but marking a 46th straight month of declines and highlighting the deeply entrenched pressures facing China’s manufacturers as the economy cools. “The inflation profile remains soft and the continuous PPI deflation suggests that Chinese companies will have to reduce their debt as further expansion in many industries will only lead to more loss,” wrote Zhou Hao, economist at Commerzbank in Singapore. An official survey last week
showed China’s manufacturing sector contracted for a fifth straight month in December and factories continued to shed jobs, dampening hopes that the economy will enter 2016 on steadier footing. China Beige Book International (CBB) said in its latest private survey that growth in input prices and sales prices for Chinese firms slipped to record lows in the fourth quarter. “For the first time, it looked like firms were encountering genuinely harmful deflation,” the private survey said. That opinion was echoed by other economists. The risk of entrenched deflation is a nightmare for China, which desperately wants to avoid becoming stuck in a trap where falling prices sap economic vitality. Deflationary cycles encourage consumers to hold off from buying and businesses to hold off from investing indefinitely, on expectations that prices will continue falling. Such cycles can prove extremely difficult to escape, and Chinese policy makers have kept a worried eye on the example of Japan, where
a strong currency, distorted banking sector and muddled monetary policy combined to suppress growth for decades.
Fighting deflation with currencies
Given how stubborn deflationary pressure has proven in China, regulators appear to be bringing the exchange rate to bear on the problem. After spending most of 2014 holding the yuan steady while other currencies dropped against the dollar, Beijing since August has let its currency fall more than 6 percent against the dollar, to its weakest level since 2011. A weaker yuan could help to fight deflation imported via sliding commodity prices, while providing some support to the struggling export sector and allowing the central bank to stop drawing down its foreign exchange reserves to hold the yuan firm against the dollar. That would also indirectly support efforts to lower onshore borrowing rates for debt-laden Chinese firms, although it would make the cost of servicing their offshore debt far more
Yuan derivatives subdued amid Mainland FX turbulence Traders said there was now less than US$5 billion outstanding of such products in the market
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uan forward derivatives have shown surprising calm amid sharp falls in the Chinese currency over the past month, signalling that the yuan’s sell-off may have run its course for now. Derivatives were at the epicentre of the yuan’s sharp declines following its shock devaluation in August last year
and after the trading band was widened in March 2014. Forward markets were blamed for fanning volatility and exaggerating currency swings. This time, however, a loss of 5 percent in the value of the offshore yuan against the U.S. dollar since early December has barely caused any ripples in the derivative market.
The moves over the last few days indicate that China’s desire to allow greater flexibility in its currency markets is gaining momentum and investors are more prepared for it than they were before last August Paul Mackel, head of global emerging market FX research, HSBC, Hong Kong
expensive. In response, it appears that Chinese corporations with dollardenominated debt are hurrying to pay it down before the yuan weakens further. A rising chorus of policy advisers and industrial constituencies is lobbying for an even deeper devaluation to the currency, by as much as 10 to 15 percent, despite the risk of a potential currency war of competing devaluations in Asia. China’s consumer price index is likely to climb 1.7 percent in 2016 from last year while its producer price index is forecast to fall 1.8 percent year-on-year, the central bank said in a working paper last month. Reuters
Bankers said a notable absence in leveraged bets on the value of the Chinese currency, especially in a popular structured product target-redemption forwards - has reduced pressure substantially on financial institutions and companies to hedge risks from a falling currency in derivatives. At the height of their popularity in early 2014, more than US$350 billion to US$400 billion in such products were sold, estimates from banks show. Since then, demand for these products has dwindled due to more volatility in the offshore market and reduced bets on steady currency appreciation. Traders said there was now less than US$5 billion outstanding of such products in the market. One-month risk reversals in the options market for the Chinese currency offshore remain at 1.15, far below levels of more than 4.3 seen in August. Even trading in non-deliverable forwards have been subdued, indicating little selling pressure on the Chinese currency in derivative markets. Activity has also been light with this week’s volumes under one-month averages, according to Thomson Reuters data. Bid-ask spreads remain tight, indicating relatively calm trading. Still, a flare up last week in implied volatility - a gauge of the expected swings in the Chinese currency measured over a month - suggests the yuan may remain volatile in the coming days. And while structured plays on the direction of the renminbi have fallen, some traders have taken to betting on more currency weakness via dollar call spreads in options markets. Reuters
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January 11, 2016
Greater China Taiwan economy seen staying in recession
Forex regulator Exports suffered the biggest annual drop since a 20.3 percent to ramp up risk control efforts contraction in 2009 China’s foreign exchange regulator said on Saturday it will ramp up risk control efforts, push ahead with regulatory reforms and look to accelerate the development of the country’s foreign exchange market in 2016. The State Administration of Foreign Exchange (SAFE) made the comments in a statement on its website after concluding an internal meeting. It will also continue to promote the orderly opening of China’s capital account and improve its management of foreign exchange reserves, it said. China’s financial regulators have come under heavy scrutiny after a surprise devaluation of the yuan on August 11 sharply accelerated capital outflows.
Faith Hung and Roger Tung
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aiwan’s exports plunged by more than expected in December, which might keep the tradereliant economy in recession in the fourth quarter and could mean the central bank cuts interest rates again. December exports were down 13.9 percent from a year earlier, an 11th straight decline, the finance ministry on Friday. A Reuters poll forecast a 13.15 percent fall and November had a 16.9 percent slide. Exports for 2015 fell 10.6 percent, the biggest annual drop since a 20.3 percent contraction in 2009, due to sluggish demand from China and other global markets. In 2014, exports jumped 2.7 percent, thanks to Apple Inc’s iPhone. Trends in Taiwan’s exports are a gauge for global technology product demand. Taiwan’s economy slipped into recession in the third quarter. The central bank cut interest rates in September and December. “There is still no sign Taiwan’s economy will pick up into the first half of 2016,” Andrew Tsai, an economist of KGI Securities, Taipei, said before the data was released. “With the global economy in such a tough situation, there is room for the
central bank to slash the rate by 12.5 basis point each in Q1 and Q2.” Fourth-quarter gross domestic product (GDP) data will be announced on January 29.
Demand weakening
Taiwan is home to many suppliers that make components or assemble gadgets for global brands such as Apple. Foxconn, which assembles most of the latest iPhones, will cut working hours over the week-long Lunar New Year holiday, a person familiar with the matter said on Wednesday, a rare move analysts interpreted as a sign of softening demand. Taiwan Semiconductor Manufacturing Co (TSMC), the world’s biggest contract chip maker, said its December sales fell both on-month and on-year. The annual growth in sales for 2015 more than halved from the
Beijing must cut corn prices to clear stockpile Chairman of the National Development and Reform Commission said China should “actively and steadily push forward” the reform of China’s corn storage system
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hina must lower corn prices to reduce its massive corn stockpile and curb imports of corn substitutes including barley, sorghum and distillers’ grain, state media quoted a senior agricultural official as saying. Chen Xiwen, deputy director of the Central Rural Work Leading Group, said China needed to modify its reserve-based crop price support mechanism to curb the mounting grain stockpile, state-run China Daily newspaper reported on Saturday. The Central Rural Work Leading Group is the China’s top decision maker on rural policy. China could still lower the corn support price this year to reduce the reserve, but measures must be taken to protect farmers’ interests so that the country will not suffer a major drop in grain production, the paper reported Chen telling a forum on rural affairs in Beijing. “There are no policies that can remain unchanged for more than 10 years,” China Daily quoted Chen as saying. “If we do not reform the mechanism, there will be more
problems on the way.” Chen’s remarks come as China, the world’s second-largest corn consumer, adds to already bulging state reserves of the grain. Industry sources told Reuters previously that Beijing plans to cut local corn prices for a second year as it works to rekindle stalled demand
rapid pace of 2014, when new iPhone 6 models were launched. December exports to China fell 16.4 percent, compared with a 19.6 percent slump in November. Exports to the U.S. fell 7.3 percent, after contracting 10.9 percent in November. For all of 2015, exports to China were down 12.3 percent, and to the U.S. by 1.7 percent. Imports fell 15.6 percent in December against the forecast 13.2 percent drop and the 13.7 percent fall in November. “Electronics export momentum is expected to pick up gradually,” the finance ministry said. “However, outlook of Taiwan’s exports will be dented by the slowdown of global economic growth, growing international competition, falling raw material prices and China’s expanding capacity.” Reuters
from its crisis-hit grain processors and whittle down the world’s biggest corn stockpile. Chen said China should also take measures to ensure that the country’s corn stockpile will not increase any further, as part of measures to clear the stockpile. “We must also change the situation in the Northeastern provinces where the state-owned warehouses are absorbing all the corn stockpile,” he was quoted as saying. Chen said China must have a variety of market entities to compete in the storage of corn in the northeastern provinces, the country’s major corn producing area. Separately, Xu Shaoshi, chairman of the National Development and Reform Commission (NDRC), the top planning agency, said China should “actively and steadily push forward” the reform of China’s corn storage system, according to a statement on the State Administration of Grain’s website. Reuters
Authorities to further liberalise interest rates China’s central bank said it would further liberalise interest rates, according to a statement posted on the People’s Bank of China website on Friday. The central bank also said it would make the yuan more international, keep the currency basically stable, further improve the currency formation mechanism and deepen reforms of the foreign exchange management system and financial institutions. The central bank will use medium-term loans, and pledged supplementary loans and credit policies to support key areas of the economy.
Ford, Honda sales tell diverging tales Honda Motor Co’s line-up of small sports utility vehicles gave it the edge over Ford Motor Co in the world’s biggest auto market last year, according to China sales figures released by the Japanese and U.S. automakers on Friday. Ford’s sales in China rose 3 percent year-on-year in 2015, while Honda’s recorded a 32.5 percent sales increase for the year, the automakers said. The diverging paths largely come down to Honda’s fresher line up of in-demand SUVs, having launched two in late 2014, helping it to post big sales gains despite China’s slowest economic expansion in 25 years.
Commodities funds see weaker metals Chinese commodity funds see further falls in metal prices in 2016, but are eyeing potential buying opportunities in agricultural products and oil as beaten-down prices near the bottom of the cycle, fund sources said. As turmoil around China’s falling yuan hits world share markets, many fund managers expect further weakness in the currency, and plan to increase their hedging or start taking out currency protection for the first time. At least three large funds involved in commodities trading are betting on further weakness in base metals due to a continued slowdown in domestic economic growth.
Infrastructure investment approved China has approved about 152.4 billion yuan (US$23.13 billion) investment for nine infrastructure projects ranging from bridges to highways, the country’s state planner said on Friday. The government has ramped up spending on infrastructure to reinvigorate the world’s second-largest economy that is headed for its slowest growth in more than a decade.
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January 11, 2016
Greater China
Pressure on central bank for bigger yuan depreciation But the central bank has so far publicly resisted calls for sharp RMB falls
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hina’s central bank is under increasing pressure from policy advisers to let the yuan currency fall quickly and sharply, by as much as 10-15 percent, as its recent gradual softening is thought to be doing more harm than good. The People’s Bank of China (PBOC) has spent billions of dollars buying yuan over recent months to defend the exchange rate, but has failed to stabilise market sentiment. The currency has steadily lost another 2.6 percent against the U.S. dollar even after the bank sprung a surprise devaluation of nearly 2 percent in August. That gradual, managed depreciation makes the yuan a oneway bet for investors who see the currency weaken even as the central
bank intervenes to prop it up. Policy insiders are now calling for a quick and sharp yuan depreciation, backed by tighter capital controls to curb speculation and the flight of money out of the country. Letting the yuan fall sharply and quickly could help cushion many of China’s debt-laden companies as the government pursues far-reaching structural reforms. Beijing is keen to restructure industry through supply side reform, especially reducing industrial over-capacity, but fears the corporate sector is too weak to handle that.
Industry burden
To restructure without triggering mass bankruptcies and redundancies, sources said the PBOC is being
encouraged to let the yuan fall, keeping downward pressure on interest rates and relieving some of the debt servicing burden on businesses. While a weaker yuan would make Chinese exports cheaper overseas, and foreign products more expensive in China, it would be unlikely to
KEY POINTS PBOC policy of gradual depreciation under fire - insiders Yuan slide on Thursday blamed for stock market drop Reflects rising concern about weak economic fundamentals Some want a weak currency to cushion industry restructuring Risks include trade tensions, damaged confidence in yuan
go down well among the country’s trading partners. The United States, for one, regularly accuses Beijing of manipulating its exchange rate to dump under-priced goods on foreign markets. The cost of the PBOC’s intervention has been high. China’s foreign exchange reserves fell by more than half a trillion dollars last year as the central bank bought yuan to support the exchange rate, with reserves dropping by a record US$107.9 billion in December alone. And the yuan’s continued slide since August is impacting other Chinese financial markets. Policy advisers are worried the PBOC’s gradualist approach risks reinforcing expectations for more depreciation - a sort of self-fulfilling prophecy - and a thesis supported by a sharper fall in the offshore exchange rate, which is not regulated by the central bank, than in the onshore rate. Sources cautioned that the debate over whether and how to depreciate had not yet been settled, especially as depreciation has knock-on risks on other projects, such as increasing the international use of the yuan for trade and investment - which stronger capital controls would reverse. And there’s no guarantee it would work. The August move, which was also supposed to serve as a sort of floor for the market, ended up having the opposite effect. Indeed, the central bank has so far publicly resisted calls for sharp yuan falls. PBOC Vice Governor Yi Gang said on December 1 there was no basis for continued depreciation, and an editorial on the bank’s website on Thursday reiterated that the PBOC can keep the yuan “basically stable at a reasonable equilibrium level” despite “speculating forces.” Reuters
Market tsar in spotlight amid stock market turmoil Xiao, 57, became chairman of the CSRC in the leadership churn when President Xi Jinping came into power Matthew Miller and Shu Zhang
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iao Gang, China’s stock market tsar, once remarked that the only thing he’d done right in life was marry his wife. No doubt the self-effacing Xiao, chairman of China Securities Regulatory Commission (CSRC), has done many other things right. Managing the stock market, though, might not be a high point of his career. Xiao faced internal criticism from the ruling Communist Party for his handling of the stock market crash last year, sources with ties to the leadership said at the time. In another blow, a “circuit breaker” mechanism to limit stock market losses that was introduced on Monday was deactivated by Thursday after it was blamed for exacerbating a sharp selloff. Online media had nicknamed Xiao “Mr Circuit Breaker”. “There has to be responsibility. People are looking to the leader at the regulator. Xiao Gang is the public face,” said Fraser Howie, an independent China market analyst and co-author of the book “Red Capitalism”. “He was lucky to keep his job after the fiasco of July and August.”
The CSRC did not respond to a request for comment. Xiao, 57, became chairman of the CSRC in the leadership churn when President Xi Jinping came into power, taking the helm of the regulator in March 2013. At the time, Chinese markets had been among the world’s worst-performing for six years - indeed they had not recovered from their collapse during the global financial crisis. Unfortunately for Xiao, they still haven’t. The challenge Xiao faced upon taking up the post was enormous: to attract fresh investment into equities from speculative bubbles in sectors like real estate, while defending against endemic insider trading. To pull any of this off he needed to first convince China’s legions of small retail investors, who dominate transactions but are infamously fond of quick-hit speculative plays, that stocks are a safe place to park longterm capital. The urgency was heightened by the need to deal with China’s corporate debt overhang - Chinese firms had become almost entirely dependent
on bank loans for financing, which naturally prejudiced economic development toward collateralrich heavy industry and away from the innovative, nimble technology companies that tend to rely more on stock issuances to fund quick growth. Market sources have said it would be unfair to put the blame for China’s stock market crash on just Xiao or the CSRC. Other state agencies made missteps and the Beijing leadership backed measures imposed by the CSRC that was part of a coordinated effort.
Years of experience
The ruling Communist Party’s Organization Department, which oversees personnel appointments, described Xiao as: “Young, energetic, resolute, simple in style, familiar with macroeconomics and financial services, conscious about innovation in reforms, good at researching problems, with strong organisation and coordination abilities.” Before leading the CSRC, Xiao was chairman of Bank of China Ltd (BoC), China’s fourth-biggest lender, for a decade until 2013.
Xiao Gang, chairman of China Securities Regulatory C
During his tenure, BoC for the first time introduced foreign shareholders, including Royal Bank of Scotland Group PLC and UBS AG, and finished a US$13.7 billion dual-listing in Shanghai and Hong Kong in 2006, the first of China’s “Big Four” stateowned commercial banks to sell shares to the public. Xiao, who holds a BA in finance and an MA in law, was also one of the first top banking executives to voice the risks of shadow banking, a system
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January 11, 2016
Greater China Domestic firms step up dollar debt redemptions Chinese companies sold a total of US$60.3 billion worth of dollar-denominated bonds in 2015
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hinese companies that have borrowed heavily in global dollar debt markets are increasingly planning early repayments of their dollar-denominated loans and bonds as the Chinese yuan’s weakness extends into the new year. Bankers say the expected yuan depreciation over the next few years as U.S. interest rates head higher and China’s take the opposite track will push more companies to follow suit to reduce exposure to dollar debt. China SCE Property Holdings Limited said on Wednesday that it would redeem its US$350 million senior note due 2017, while another real estate company, SUNAC China Holdings Limited, said it had completed the redemption of its dollar note due next year. Under normal circumstances, non-investment-grade companies rarely redeem bonds early as they don’t always have easy access to refinancing, but that is changing as the yuan’s fall deepens and financing channels in China become available. Dollar bond issuances by Chinese companies started to pick up in 2013, and many of them carried call options
KEY POINTS Dollar debt becoming costly as yuan weakens, U.S. rates rise Bankers say more borrowers seek to exercise call options Dollar bond issuance picked up in 2013, with 3-yr calls Yuan posted record yearly loss against the dollar in 2015 Market consensus is for yuan to fall further this year
that usually allowed issuers to redeem bonds three years later, so there could soon be a flurry. Chinese companies sold a total of US$60.3 billion worth of dollardenominated bonds in 2015, more than six times the 2010 figure, Thomson Reuters data show. The yuan posted a record yearly loss against the dollar last year and bearish bets on the currency hit a near six-year high as China’s central bank allowed the currency to depreciate at a faster pace, a Reuters poll showed on Thursday. China Eastern Airlines said last Monday it had recently repaid US$1 billion worth of dollar debt to reduce its exposure to currency volatility. It would
adopt various measures in the short run to further optimise debt structure. The company’s dollar debt ratio is now just over 70 percent, down from 80 percent at the end of September last year, and the ratio would continue to fall, according to the board secretary Wang Jian. Smaller competitor Spring Airlines will also pay back some dollar debt this year before it’s due. “We started to do this from 2013 and got more aggressive after the currency reform in August,” said Chen Ke, its chief financial officer. The market consensus is for the yuan to fall further this year, though analysts are divided on how much. Kevin Lai, Daiwa’s Asia ex-Japan chief economist, expects it to hit 7.5 to the dollar by the end of the year.
CSRC head faced internal criticism from ruling party last year-sources Criticised circuit breaker latest blow to effort to stem selling Online media had dubbed Xiao as “Mr Circuit Breaker”
through which banks used wealth management products to conduct offbalance-sheet lending. Xiao warned that shadow banking was causing a growing liquidity risk in financial markets and was endangering the banking system. Before heading BoC, Xiao worked at the People’s Bank of China for 22 years, starting in 1981. He was named deputy governor of the central bank in 1998, where he was responsible for regulating the emerging trust
industry. He is also a member of the central bank’s monetary policy committee. In an interview with Hong Kong’s Phoenix Television in 2012, Xiao, then chairman of BOC, said “the only thing I have done right in my life is to marry my wife”. He said he had been bad at maths, and finance wasn’t his first choice of college major. He had dreamed of studying Chinese in college, but his score was not good enough.
The Shanghai bourse issued a circular to cap the share sell-off rate for large shareholders on Saturday, in an effort to subdue the market’s free fall. The Shanghai Stock Exchange forbids major share holders with stakes at 5 percent or above from selling more than 1 percent of a listed company’s share capital through the stock exchange’s centralist bidding system every three months. It ordered major shareholders must file their plans 15 trading days in advance of sales on Saturday.
Regulator orders to limit dollar buying China’s foreign exchange regulator has ordered banks in some of the country’s major import and export centres to limit purchases of U.S. dollars this month, three people with direct knowledge said on Friday, in the latest attempt to stem capital outflows. The move comes as China reported its biggest annual drop in foreign exchange reserves on record in 2015, while the central bank has allowed a sharp slide in the yuan currency to multi-year lows, raising fears of more capital flight and panicking global markets.
Ansteel funding doubts for Australian iron project
Reuters
KEY POINTS
Commission (CSRC)
Shanghai bourse caps share-holding reduction rate
But he amassed years of experience and became a leader in the finance industry. Still, the past year has been a massive challenge. China stock market started a dramatic roller-coaster ride, with the CSI300 index more than doubling between November 2014 and June 2015, before plummeting about 40 percent since then, mostly during a spectacular crash over the summer. In the first four days of trading in 2016, the CSI has dropped 12 percent. Some investors blamed Xiao and the CSRC for taking aggressive measures to crack down on margin trading as the cause of the rout since last year. Authorities have been trying to restore confidence in the stock market by cracking down on alleged market manipulation. A number of officials, securities executives, fund managers, journalists and social media commentators have been put under investigation. The ill-fated circuit breaker didn’t help. China’s stocks are still down 70 percent from the peak in 2007. Reuters
China’s Angang Steel Co (Ansteel) won’t be able to inject new funds to shore up the Karara iron ore mine in Australia, according to an email to Karara staff cited in a newspaper report on Friday. Ansteel’s minority partner in the A$3 billion Karara project, Gindalbie Metals Ltd, called a trading halt in its shares after the report, saying it would make an announcement on Karara by Tuesday, January 12. The mine, 52 percent owned by Ansteel, produces mainly magnetite that has to be processed heavily to produce high quality iron ore concentrate.
S&P cuts Noble Group rating to junk Standard & Poor’s cut its credit rating on Noble Group to junk, adding to concerns about financing costs for Asia’s biggest commodity trader a week after a similar downgrade by Moody’s Investors Service and sending its stocks and bonds sliding. Shares in Noble, which has been grappling with a rout in commodities and an attack on its accounting practices, fell as much as 10 percent on Friday to their lowest levels in seven years while its bonds tumbled 7-8 points. The downgrades will put more pressure on Noble to increase funding.
BYD boosts 2015 profit estimate Chinese automaker backed by Warren Buffett’s Berkshire Hathaway, said late on Thursday that it had revised up its 2015 profit estimate due to strong demand for its electric and plug-in hybrid vehicles. The Shenzhen-based automaker now expects net profit attributable to shareholders to climb between 518 percent and 557 percent, compared with an earlier forecast of 435 percent to 481 percent, according to a statement filed with the Hong Kong stock exchange. BYD said that even though it is producing vehicles at full capacity, it cannot meet demand.
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Asia
India set to re-open commercial coal mining to private firms India has an ambitious plan to double its coal production to 1.5 billion tonnes a year by 2020 Krishna N. Das
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ndia is getting ready to open up commercial coal mining to private companies for the first time in four decades, with the aim of shifting the world’s third-biggest coal importer towards energy selfsufficiency. Anil Swarup, the country’s top coal bureaucrat, told Reuters on Friday the government has identified mines it plans to auction, and is now finalising other terms such as eligibility criteria for companies to take part and whether and how to set up revenue sharing. He said a plan should be ready in the 2-3 months, setting a clear timeline on a plan that has previously only been vaguely marked out. India has an ambitious plan to double its coal production to 1.5 billion tonnes a year by 2020, as part of Prime Minister Narendra Modi’s push to bring power to 300 million people who live without electricity, and give a boost to manufacturing.
It would also support the government’s efforts to develop eastern parts of the country, which are resource-rich and hold most of India’s coal reserves but have lagged the western states in development. State-owned Coal India is on track to produce 1 billion tonnes a year by the end of this decade, and India is counting on private firms to produce the remaining 500 million tones - which may prove a tough target to achieve. As of now, only Coal India and a small government-owned company are allowed to mine and sell coal in India. “It’s imperative that India opens up the sector so that private companies can bring in new technologies and the efficiencies that we keep talking about,” said Dipesh Dipu at energy-focused Jenissi Management Consultants. “But I don’t think private companies will be able to produce more than
KEY POINTS India plans to double coal production by 2020 To help millions without power; develop eastern regions Govt has identified mines to auction to private companies With coal prices low, foreign miners may be less interested
100 million tonnes this decade as the process has yet to start.” The move is likely to attract coal block bids from Indian conglomerates such as the Adani Group and GVK, but the government may find it harder to lure big multinational miners such as Rio Tinto, BHP Billiton, Anglo American and Peabody Energy. Rio Tinto did not respond to requests for comment.
Australia’s jobs data roller coaster seen taking another loop
Economists forecast the country’s jobless rate rose to 5.9 percent in December from 5.8 percent, according to the survey.
Calculation review
Economists forecast the country’s jobless rate rose to 5.9 percent in December from 5.8 percent Iain McDonald and Kimberley Painter
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ustralia’s volatile labour force data is forecast to give financial markets another thrill, with economists predicting December figures will show a sharp turnaround after jobs surged the most in almost 28 years in the previous two months. Data due on Thursday will show seasonally adjusted employment fell 10,000 in December following a 71,400 rise in November, according to the median forecast from a Bloomberg survey of 23 economists. The estimates range from a fall of 45,000 to an increase of 15,000.
Economists have had difficulty forecasting the direction and size of monthly changes in employment. The November surge, which followed an unexpected 56,100 increase in October, triggered renewed scepticism about the accuracy of the figures, which the Australian Bureau of Statistics has acknowledged in the past. “It’s extraordinarily hard to forecast the monthly movements in the jobs survey for Australia and the major reason for that is that there are big measurement issues,” said Paul Bloxham, chief Australia economist at HSBC
Holdings Plc who estimates that employment fell 25,000 in December. “To a large degree you’re not necessarily forecasting what is happening
in the labour market but trying to forecast what is happening in the labour force survey and those two things are quite different animals.”
The bureau’s difficulties in providing reliable employment data peaked in the second half of 2014 when the chief statistician called for a review of the calculation method. The ABS also revised some previously published numbers at that time, leaving policy makers and economists unsure of the true state of the labour market. The ABS surveys about 26,000 households for its jobs data and replaces one eighth of the group each month. When November data was released on December 10, the Australian dollar gained against all of its 16 major peers and three-year bond yields rose to their highest level for 2015. Adam Boyton, chief economist in Australia at Deutsche Bank AG, says employment growth in 2015 was probably overstated by between 10,000 to 13,000 a month. Bloomberg News
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January 11, 2016
Asia Coal prices are at multi-year lows amid global oversupply, and foreign companies have faced obstacles to investing in India, such as problems in getting land and environmental approvals. Some private companies also worry that the best quality mines would be left for Coal India.
Finalising terms
Swarup was handpicked by Modi to lead a turnaround in the coal sector soon after the prime minister came to power in 2014. Under Swarup’s watch, Coal India has seen record production growth, and the government auctioned off a series of coal blocks successfully. Coal imports fell for a sixth straight month in December. Until last year, India spent around US$16 billion a year importing foreign coal, even though it sits on the world’s fifth-biggest reserves of more than 300 billion tonnes. Swarup said there were still some aspects of the plan to bring in private players that needed to be examined carefully. The government, for example, has to make sure that companies do not under-report sales if a revenuesharing model is adopted, he said. Companies can do that by selling coal to their units at discounted rates, and by calculating the government’s share based on that instead of the market price. Swarup declined to say where the identified mines were located. Most of India’s coal is in the eastern states of Jharkhand, Odisha and Chhattisgarh. Reuters
Japan machinery orders seen falling for 1st time in 3 months A poll also found Japan was expected to post a current account surplus for the 17th straight month in November
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apan’s leading indicator of capital spending was expected to fall in November, the first decline in three months after strong gains, a Reuters poll found on Friday. Core machinery orders, a highly volatile data series regarded as a useful leading indicator of capital spending in the coming six to nine months, were thought likely to fall 7.9 percent in November from the previous month, the Reuters poll of 20 economists found. The forecast fall would follow a 10.7 percent jump in October, the fastest rise since March 2014, and a 7.5 percent gain in September. The poll found core machinery orders were likely to rise 6.3 percent in November from a year earlier after a 10.3 percent annual increase in October. Takeshi Minami, chief economist at Norinchukin Research Institute, said it was a good time to invest in machinery, given positive factors such as the weak yen and solid corporate earnings, yet firms still remained wary of spending.
“It is difficult for companies to forecast when both domestic and external demand will pick up,” he said. “China’s economic turmoil is likely to continue and there are also worries that the Fed’s rate hikes may trigger capital flight from emerging nations...so firms tend to wait and see how the situation develops.” The Cabinet Office will announce the machinery orders data at 8:50 a.m. on January 14 (2350 GMT, January 13). The poll also found Japan was expected to post a current account surplus for the 17th straight month in November. The poll forecast a median surplus of 858.5 billion yen (US$7.26 billion), after a 1.458 trillion yen surplus in October. The finance ministry will release the data at 8:50 a.m. on January 12 (2350 GMT, January 11). On Thursday, the Bank of Japan will publish the December corporate goods price index (CGPI), which poll respondents expect will have fallen 3.5 percent from a year ago. Reuters
India to issue business visa for Myanmar entrepreneurs The Indian government has permitted Myanmar entrepreneur to visit its country with business visa from December 2015, official media reported Saturday, quoting Nanda Kumar, Indian Consul General in Mandalay. The permission to enter India with business visa is expected to promote economic relations between the two countries, according to sources with businessmen in Mandalay. The Myanmar entrepreneurs can extend the visa, which cost US$2 one person, depending on the business conditions of the visitor.
Bank Rakyat cancels insurance unit sale Indonesia’s PT Bank Rakyat Indonesia Tbk has cancelled a plan to sell its life insurance unit and would instead restructure and integrate the unit, its finance director said. “It will take a minimum two years, then we will consider if we need to have a partner or to stand alone,” Finance Director Haru Koesmahargyo told Reuters late on Saturday. Bank Rakyat last year invited several companies, including BNP Paribas Cardif, to bid for a 40 percent stake in its insurance unit, in a deal worth up to US$600 million, sources familiar with the matter said.
Asahi to submit bid for SABMiller’s Grolsch and Peroni Japanese beverage maker Asahi Group Holdings Ltd will submit a bid as early as this week to buy SABMiller PLC’s Grolsch and Peroni beer brands for as much as 400 billion yen (US$3.41 billion), the daily Yomiuri reported. If accepted, it would be the biggest overseas beverage acquisition ever by a Japanese company, topping Kirin Holdings Co Ltd’s US$3.3 billion takeover of Australia’s Lion Nathan in 2009, the paper said. Anheuser Busch InBev SA, which agreed to buy SABMiller for US$100 billion plus, has been seeking potential bidders to buy Grolsch and Peroni.
Head of India’s PACL arrested Takehiko Nakao (L), president of the Asian Development Bank with China’s Finance Minister, Lou Jiwei
ADB president dismisses fears of a possible currency war Nakao reaffirmed ADB’s 6.9 percent growth forecast for China in 2015, and 6.7 percent this year
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sia isn’t facing a currency war triggered by China, the president of the Asian Development Bank (ADB) said on Friday. Takehiko Nakao said the recent decline in the yuan reflected the market and was not due to “artificial intervention”. “They don’t intervene, that’s why there’s more depreciation,” he told
foreign correspondents in Manila. Nakao also ruled out a significant slowdown in China, saying the world’s second largest economy’s strong fiscal position and subdued inflation give it room to stimulate growth. A sustained depreciation in the yuan puts pressure on other Asian countries to weaken their currencies to stay competitive with China’s export machine.
“If there is very rapid depreciation, it might cause some volatility in the market and other countries might follow the case and already some countries have a depreciation of currencies. But I don’t think this is a currency war,” Nakao said. Nakao reaffirmed ADB’s 6.9 percent growth forecast for China in 2015, and 6.7 percent this year. “There is a room for stimulus if growth is coming down because fiscal position is strong and the inflation is subdued,” he said. Nakao reiterated the ADB would cooperate with Beijing-backed Asian Infrastructure Investment Bank (AIIB), which is seen as a rival to Japan-led ADB and U.S.-led World Bank. Nakao, a former Japanese vice finance minister for International affairs, said ADB and AIIB may announce by the middle of this year some projects they will co-finance in areas such as transport, roads, renewable energy and water. All major U.S. allies - Australia, Britain, Germany, Italy, the Philippines and South Korea - have joined the bank. Reuters
India’s federal investigator on Friday arrested the founder of PACL Ltd over allegations the property company cheated investors of US$6.8 billion, in what local media is calling the country’s biggest financial scandal. The arrest of Nirmal Singh Bhangoo comes 17 months after markets regulator the Securities and Exchange Board of India (SEBI) ordered PACL to return money to millions of investors, saying the company was running an illegal investment scheme. The scheme promised depositors returns on investments in agricultural land, the regulator said.
Nepal elected as UNICEF’s executive board member Nepal was elected as a member of the United Nations Children’s Fund (UNICEF) Executive Board on Saturday, representing the Group of Asia-Pacific States for the term 2016-2018, government officials said. Nepal’s Permanent Representative of to the United Nations Durga Prasad Bhattarai was also unanimously elected as vice-president to the Bureau of the Executive Board of the UNICEF for 2016, representing the Asia-Pacific region, according to officials of the Ministry of Foreign Affairs.
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International Egypt convenes parliament for first time since 2012 Egypt’s parliament convened yesterday for the first time in more than three years after a court disbanded a legislature dominated by Islamists, as authorities struggle to revive the nation’s economy and contain a surge in militant attacks. The 596-member legislature is set to debate laws signed by President Abdel-Fattah El-Sisi, the former general who led the ouster of President Mohamed Mursi in 2013, and who controlled executive and legislative powers in the absence of parliament. Critics say the assembly will be largely a rubber-stamp legislature moving in lockstep with El-Sisi, who was overwhelmingly elected as president in 2014.
World Bank sees economic stagnation for LatAm The World Bank expects economies in Latin America and the Caribbean to stagnate in 2016, after shrinking an average 0.9 percent in 2015 marking the worst overall performance of any emerging region. In its latest Global Economic Prospects released earlier this week, the bank said it does not see the region recovering economic growth until 2017, with most Latin American nations experiencing negative growth this year. Economic performance will differ among countries in the region, “with stronger growth in developing Central and North America,” the bank said.
Greek government to pass pension reform
U.S. House tax writer pushes 2016 tax reform on foreign earnings The United States government taxes corporate profits earned abroad only when they are brought into the country Susan Cornwell and David Lawder
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he U.S. House of Representatives’ top tax writer wants a vote this year on legislation moving the United States to a territorial-style tax system aimed at exempting the earnings of American companies abroad from U.S. taxation. International tax reform should be tackled as the first step toward a bigger rewrite of the U.S. tax code that would lower rates and eliminate many narrow tax breaks, House Ways and Means Committee Chairman Kevin Brady told Reuters in an interview on Friday. Brady, a Texas Republican who took over the committee’s gavel in November, said he favours a U.S. corporate tax rate of less than 20 percent, substantially lower than the current top rate of 35 percent. “My intention is to have a vote on an international tax proposal out of Ways and Means this year,” Brady said.
U.S. companies have been pushing for the United States to move to a territorial tax system to make them more competitive against foreign rivals that pay taxes only in local jurisdictions where they operate. The United States government taxes corporate profits earned abroad only when they are brought into the country. Some US$2 trillion in U.S. profits are sheltered overseas to avoid taxation, and Brady said he wants to find a way to “lower the barriers and allow companies to bring back their profits to be invested in the United States.” He said that an international reform proposal by former Ways and Means chairman Dave Camp for a one-time “holiday” taxing companies on foreign profits held overseas at a far lower rate is “an awfully good place to start.” Camp, who has retired from the House, favoured taxing repatriated cash profits at 8.75 percent and remaining earnings at 3.5 percent.
Greece’s leftist government will be able to push through a crucial pension reform in parliament, part of measures the country has agreed to under its international bailout, the deputy prime minister said in a newspaper interview released on Saturday. Greece has drafted a proposal to overhaul its ailing pension system, which envisages merging all six pension funds into one and a possible cut of future main pensions by up to 30 percent. It plans to submit the proposal to parliament by the end of the month and to hold a vote on it in early February.
Brazil’s ANP eyes royalty hike for heavier crude Brazilian oil regulator ANP has proposed an increase in royalties that could help to shore up state and federal finances at the expense of heavily indebted staterun oil company Petrobras, newspaper Folha de S.Paulo reported on Saturday. Folha said the measure, which is open to public consultation until March 10, could increase government revenue by about 1 billion reais (US$250 million) per year through higher taxes on oil fields producing heavier crude.
Campbell Soup to start GMO labelling Campbell Soup Co is to start disclosing the presence of genetically modified organisms (GMOs) in all its U.S. products, becoming the first major food company to respond to growing calls for more transparency about ingredients in food. The world’s largest soup maker broke ranks with peers and said late on Thursday it supported the establishment of federal legislation for a single mandatory labelling standard for GMO-derived foods and a national standard for non-GMO claims made on food packaging.
My intention is to have a vote on an international tax proposal out of Ways and Means this year Kevin Brady, Chairman, House Ways and Means Committee
Brady said that a broad “progrowth” tax reform plan would require a Republican president and was a project for 2017. He said a bipartisan consensus was building for reform, to prevent U.S. firms from moving headquarters overseas. Brady also said he was not yet ready to declare whether he supported the Trans-Pacific Partnership (TPP) trade deal because the pact reached in October needs more study. Although Senate Majority Leader Mitch McConnell has been quoted as saying he would prefer to delay voting on TPP until after the November 2016 elections, Brady declined to rule out a vote earlier in the year. The timing would largely depend on member support for the deal, he said. “Let’s not delay or hasten the timetable for a vote,” he said. Reuters
Top UK regulator denies “going soft” on banks Legislators from a parliament committee that monitors Britain’s regulators and bankers have summoned McDermott to appear before them on January 20
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he acting head of Britain’s main financial regulator has denied softening her stance, after her decision last month to drop a wide-ranging review into banks’ behaviour sparked concerns about political interference. Antipathy to banks has surged since some were bailed out with public money after the 2008 credit crisis. Since then global and local scandals including the rigging of currency rates and interest rate benchmarks have led to multi-million pound fines for banks including Barclays and HSBC.
Tracey McDermott, who has stood in as chief executive of the Financial Conduct Authority since regulatory hardliner Martin Wheatley quit prematurely in July, told the BBC that her decision to scrap a review into the banking industry’s culture was not a sign of weakness. “We’re not going soft on the banks, we’re not being told what to do by the government,” McDermott said in an interview broadcast by the BBC on Saturday. “If you look at what I’ve been doing in the last six months since I’ve been
in the role as chief executive, you’ll see that we have continued to take action against the industry,” she added, citing a 72 million pound (US$105 million) fine for Barclays in December. But legislators from a parliament committee that monitors Britain’s regulators and bankers have summoned McDermott to appear before them on January 20 to explain why the banking culture review was dropped, and address fears of government pressure. Declining to reappoint Wheatley, finance minister George Osborne called last year for a “new settlement” with banks as HSBC decides whether to move its head office from Britain. The BBC also reported that McDermott was considering reversing a 2013 ban on banks paying commission to staff who sell extra products to their retail customers. Many bank customers have won compensation after claiming they had been sold unnecessary insurance and other products. Osborne is expected to announce a permanent successor to Wheatley in the next few weeks, and on Thursday he said McDermott had decided she did not wish to take the role. Reuters
Business Daily | 15
January 11, 2016
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Leading reports from Asia’s best business newspapers
PHILSTAR The Bangko Sentral ng Pilipinas (BSP) trimmed its losses in the first 10 months of last year as it continued to book gains on foreign exchange fluctuations. According to official data on the BSP website, the central bank’s net losses amounted to P4.41 billion from January to October, 11.8 percent down from P5 billion the previous year. Revenues jumped 12.9 percent to P447.87 billion from P42.39 billion, while expenses rose 5.2 percent to P59.9 billion from P56.92 billion. The BSP booked gains on foreign exchange fluctuations amounting to P7.63 billion during the period.
TAIPEI TIMES A total of 213,598 new-born babies were registered last year, the second-highest number of births in Taiwan in the past decade, the Ministry of the Interior said yesterday. The figure was 3,215 more than in 2014, and in the past decade, was behind only the 229,481 births registered in 2012, the ministry said. In addition to an increase in new-born babies, Taiwan also saw more marriages last year, when the government registered 154,346 marriages, compared with 149,287 in 2014, the ministry said. The number of registered marriages last year was the third-highest in 10 years, it added.
THE KOREA HERALD South Korea’s automobile exports fell 2.8 percent in 2015 from a year earlier on weaker demand from emerging markets, the government said yesterday. Outbound shipments of vehicles came to 2.98 million units for 2015, down from 3.06 million units tallied a year earlier, according to the Ministry of Trade, Industry and Energy. The total value of overseas shipments also slid 6.4 percent on-year to US$45.8 billion last year, marking the first on-year drop in three years after peaking at US$48.9 billion in 2014.
Joseph E. Stiglitz
Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute
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ast year was a memorable one for the global economy. Not only was overall performance disappointing, but profound changes – both for better and for worse – occurred in the global economic system. Most notable was the Paris climate agreement reached last month. By itself, the agreement is far from enough to limit the increase in global warming to the target of 2º Celsius above the pre-industrial level. But it did put everyone on notice: The world is moving, inexorably, toward a green economy. One day not too far off, fossil fuels will be largely a thing of the past. So anyone who invests in coal now does so at his or her peril. With more green investments coming to the fore, those financing them will, we should hope, counterbalance powerful lobbying by the coal industry, which is willing to put the world at risk to advance its short-sighted interests. Indeed, the move away from a high-carbon economy, where coal, gas, and oil interests often dominate, is just one of several major changes in the global geo-economic order. Many others are inevitable, given China’s soaring share of global output and demand. The New Development Bank, established by the BRICS (Brazil, Russia, India, China, and South Africa), was launched during the year, becoming the first major international financial institution led by emerging countries. And, despite US President Barack Obama’s resistance, the China-led Asian Infrastructure Investment Bank was established as well, and is to start operation this month. The US did act with greater wisdom where China’s
currency was concerned. It did not obstruct the renminbi’s admission to the basket of currencies that constitute the International Monetary Fund’s reserve asset, Special Drawing Rights (SDRs). In addition, a half-decade after the Obama administration agreed to modest changes in the voting rights of China and other emerging markets at the IMF – a small nod to the new economic realities – the US Congress finally approved the reforms. The most controversial geoeconomic decisions last year concerned trade. Almost unnoticed after years of desultory talks, the World Trade Organization’s Doha Development Round – initiated to redress imbalances in previous trade agreements that favoured developed countries – was given a quiet burial. America’s hypocrisy – advocating free trade but refusing to abandon subsidies on cotton and other agricultural commodities – had posed an insurmountable obstacle to the Doha negotiations. In place of global trade talks, the US and Europe have mounted a divide-and-conquer strategy, based on overlapping trade blocs and agreements. As a result, what was intended to be a global free-trade regime has given way to a discordant managed-trade regime. Trade for much of the Pacific and Atlantic regions will be governed by agreements, thousands of pages in length and replete with complex rules of origin that contradict basic principles of efficiency and the free flow of goods. The US concluded secret negotiations on what may turn out to be the worst trade
agreement in decades, the socalled Trans-Pacific Partnership (TPP), and now faces an uphill battle for ratification, as all the leading Democratic presidential candidates and many of the Republicans have weighed in against it. The problem is not so much with the agreement’s trade provisions, but with the “investment” chapter, which severely constrains environmental, health, and safety regulation, and even financial regulations with significant macroeconomic impacts. In particular, the chapter gives foreign investors the right to sue governments in private international tribunals when they believe government regulations contravene the TPP’s terms (inscribed on more than 6,000 pages). In the past, such tribunals have interpreted the requirement that foreign investors receive “fair and equitable treatment” as grounds for striking down new government regulations – even if they are non-discriminatory and are adopted simply to protect citizens from newly discovered egregious harms. While the language is complex – inviting costly lawsuits pitting powerful corporations against poorly financed governments – even regulations protecting the planet from greenhouse-gas emissions are vulnerable. The only regulations that appear safe are those involving cigarettes (lawsuits filed against Uruguay and Australia for requiring modest labelling about health hazards had drawn too much negative attention). But there remain a host of questions about the possibility of lawsuits in myriad other areas. Furthermore, a “most favoured nation” provision ensures that
corporations can claim the best treatment offered in any of a host country’s treaties. That sets up a race to the bottom – exactly the opposite of what US President Barack Obama promised. Even the way Obama argued for the new trade agreement showed how out of touch with the emerging global economy his administration is. He repeatedly said that the TPP would determine who – America or China – would write the twenty-first century’s trade rules. The correct approach is to arrive at such rules collectively, with all voices heard, and in a transparent way. Obama has sought to perpetuate business as usual, whereby the rules governing global trade and investment are written by US corporations for US corporations. This should be unacceptable to anyone committed to democratic principles. Those seeking closer economic integration have a special responsibility to be strong advocates of global governance reforms: If authority over domestic policies is ceded to supranational bodies, then the drafting, implementation, and enforcement of the rules and regulations has to be particularly sensitive to democratic concerns. Unfortunately, that was not always the case in 2015. In 2016, we should hope for the TPP’s defeat and the beginning of a new era of trade agreements that don’t reward the powerful and punish the weak. The Paris climate agreement may be a harbinger of the spirit and mind-set needed to sustain genuine global cooperation. Project Syndicate
THE JAPAN NEWS Toyota Motor Corp. said Friday that its annual vehicle production in North America topped two million units for the first time last year. The Japanese automaker built 2,035,028 vehicles in the region in 2015, up 2.5 percent from a year before. The growth reflects increasing demand for trucks and sport-utility vehicles in the United States on the back of an economic recovery and low fuel prices. Production increased 9.1 percent for the Tacoma pickup and 6.8 percent for the RAV4 SUV. The growth also came as Mazda Motor Corp. launched the production of the Scion iA sedan in Mexico. U.S. Secretary of State John Kerry participates in a meeting with nations' leaders discussing the Trans-Pacific Partnership
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January 11, 2016
Closing Exports of China-made drones soar in 2015
LV brings Mainland online store to court for counterfeiting
Civilian drones have become another of China’s hot-selling tech products along with high-speed rails and cell phones, with exports soaring in the January-November period 2015. According to customs in the southern city of Shenzhen, where 99 percent of China’s civilian drones are exported from, exports amounted to 2.7 billion yuan (US$412 million) from January to November, which was 9.2 times of the same period in 2014. The Shenzhen-based technology firm DJI, a leading manufacturer of commercial and recreational drones, has gained control of almost 70 percent of the civilian drone market share worldwide.
French luxury firm Louis Vuitton Malletier (LV) has filed a civil lawsuit against a Chinese business for selling fakes of its products online, a Beijing court confirmed yesterday. The court in Beijing’s Haidian District said it received LV’s suit accusing three operators of the store for violating the company’s trademark rights by selling fake LV clothes, shoes and bags. The firm asked the court to stop the defendants from selling products under its registered trademark and claim a financial compensation of 250,000 yuan (about US$38,000). The three defendants were given criminal sentences in 2014 for selling counterfeits.
Taiwanese voters bank on new leader to spur economy Taiwan has trimmed its growth forecast for 2016 to 2.32 percent, from an earlier 2.7 percent
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aiwan’s voters, angry at low salaries and unaffordable housing, are set to elect a new president -- but the island’s flagging fortunes and a slowdown in China mean the winner will have a mountain to climb. Tsai Ing-wen of the main opposition Beijing-sceptic Democratic Progressive Party (DPP) is expected to win the presidential vote, polling well ahead of rival candidate Eric Chu from the embattled ruling Kuomintang (KMT). Chu is struggling to win public support as the KMT’s popularity has plummeted over its China-friendly policies and failure to deliver the prosperity promised by current President Ma Yingjeou. More than 20 deals with China have been signed since Ma took office in 2008 and Taiwan’s tourist industry has flourished under an eight-year rapprochement with Beijing as mainland visitors flock to the island. But many voters feel warmer ties have benefited
“Everyone who comes to our shop complains, saying they are suffering from the bad economy. Our business is falling too,” he added. “I think those who want a better future for Taiwan will want to change the ruling party.”
Tough hand
Tsai Ing-wen (R) of the Democratic Progressive Party shakes hand with rival candidate Eric Chu from Kuomintang
big business over ordinary people. “Most people around me are living harder lives,” said Kelly Chang, a 23-yearold former administrative assistant in Taipei who lost her job three months ago at a land development company that went bankrupt. “I think the new DPP government can do better. I hope it can improve the economy and raise salaries.
Cross-strait ties are important, but the benefits from better ties should be shared by all.” Student-led protesters occupied parliament in 2014 to oppose a China trade pact, forcing the government to shelve the deal. But it is not just the younger generation voicing frustration. “Enough is enough,” said one 60-year-old mechanic at a car repair shop in Taipei, who declined to give his name.
Analysts say Ma was dealt a tough hand, with the 2008 financial crisis, European debt problems and a China slowdown -- all of which have been bad news for Taiwan’s export-driven economy. The island’s key technology sector has suffered from weak demand, particularly as China seeks to create its own homegrown tech industry. There are rocketing housing prices, an ageing population and low birth-rate to deal with. But the KMT’s approach has also drawn criticism. “For the past four years, Taiwan’s GDP growth averaged around 2.3 percent annually, but people’s average income rose merely one
percent,” said Gordon Sun, head of the Macroeconomic Forecasting Centre at the Taiwan Institute of Economic Research. One factor is a restrictive approach to outside investment, according to Sun. “(The government) should give top priority to the lifting of restrictions on investments by foreign and mainland companies, which have deterred the development of innovation,” he said.
Business jitters
The DPP has promised to diversify an economy it says is too dependent on China. But KMT candidate Chu emphasises Taiwanese businesses can continue to benefit from their relations with China, despite an economic slowdown on the mainland. Both parties are also seeking to address the domestic issues riling voters, from pension schemes to income tax. Yet while the dominant public sentiment is that Taiwan needs a change to prosper, there are jitters in the business community that relations with China will deteriorate under the DPP. The traditionally proindependence party has no official channel of communication with Beijing. The tourism sector is particularly nervous -- China has reportedly restricted visits to Taiwan during past political turbulence. AFP
Mainland firms step up China says pushing for unified Xinjiang pilots cross-border overseas real estate investment property registration by year-end RMB borrowing biz
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onfronted with a downturn in the domestic property market, China’s deep-pocket investors are speeding up purchases of overseas assets to increase both profit and presence in the global arena. Although a bullish A-share market distracted some investment in the first half, Chinese investors continued investing into real estate around the world. In 2015, China’s Anbang Insurance finished acquisition of America’s most famous hotel Waldorf Astoria at the cost of US$1.95 billion; China Investment Corporation spent over US$1.7 billion to purchase Investa’s Australia office portfolio; Ping An Insurance bought landmark Tower Place in London for around 460 million. A report from Savills, a global real estate firm, showed the transaction of overseas assets completed by Chinese buyers is likely to surpass US$20 billion for the whole of 2015, jumping from 14 billion registered in 2014. The United States, Britain and Australia have become the most favourite destinations, the report said. Insurance companies have become major players in Britain’s property market.
hina will push for a unified real estate registration system in all cities and counties by the end of the year, state media said yesterday, seen as a major step in the fight against corruption. China’s plan for a nationwide property database, once hailed as an antidote to corruption, stalled in the face of resistance from local governments highlighting the difficulty Beijing faces in driving through reforms to tackle widespread graft. A unified real estate database is seen not only as vital for authorities to administer the housing market, but could also force corrupt local officials to disclose properties purchased with illicit funds, industry experts say. “Strive for all cities and counties to be able to implement unified registration as well as issuing new certificates by the end of the year,” Vice Minister of Land and Resources Wang Min, was quoted by his ministry’s official newspaper as saying on Friday. Officials have said that China needs about three years to fully establish a unified registration system for real estate, and about four years establish a unified registration information management platform, which would support fiscal and financial reforms.
he People’s Bank of China has approved two border areas in Xinjiang Uygur Autonomous Region to pilot cross-border renminbi (RMB) borrowing. According to the central bank’s interim measure, businesses in the economic development zones in Kashgar and Horgos will be able to borrow RMB loans from institutional and private lenders from abroad to finance projects in all four prefectures in southern Xinjiang including Kashgar, Hotan, Kizilsu and Aksu. The loans can only be used for production and construction projects rather than folk transaction activities, the bank said. With the boom of e-commerce, Xinjiang is becoming better connected with the international community after the implementation of the Silk Road Economic Belt initiative. The border areas have boosted infrastructure projects including roads, railways and energy corridors as well as the construction of cross-border logistics parks, import and export goods distribution centres and cross-border development zones to tap an unlimited trade potential with Central Asia, Russia and Europe as well as the Persian Gulf and countries around the Mediterranean Sea.
Xinhua
Reuters
Xinhua