MOP 6.00
Supported by
Closing editor: Joanne Kuai
Macau ‘Australia Day’ Cocktail Fri, 29 January 2016 | 6pm - 8pm | Terrazza, Galaxy Macau More information at www.austcham.com.hk
Macau-Wuhan flights to increase frequency for CNY
China quarterly GDP growth slowing to 2009 pace Page 16
Year IV
Number 960 Wednesday January 13, 2016
Publisher: Paulo A. Azevedo
Page 2
Dalian Wanda buys majority stake in ‘Jurassic World’ studio Page 8
Year of the Bonus
A winter one-month bonus. This is guaranteed for Wynn Macau’s rank and file employees for Chinese New Year. But labour activists say that’s just the beginning. Expecting a 5 pct pay hike and a one-month summer bonus paid in July into the bargain. Despite the industry experiencing 19 consecutive months of revenue slump. For the full year of 2015, gross gaming revenue stood at MOP230.84 bln, down 34.3 pct compared to 2014, according to data from the Gaming Inspection and Co-ordination Bureau Page
5
Iconic interlude Burberry share price languishing at three-year lows. CEO and creative guru Christopher Bailey has yet to announce a defining strategy for the British brand. Amid a slowdown in the global luxury market. Hong Kong and China contribute a third of the company’s revenue
HSI - Movers January 12
Name
%Day
BOC Hong Kong Holdin
+1.83
China Mengniu Dairy C
+1.77
Galaxy Entertainment
+0.93
Li & Fung Ltd
+0.86
Belle International Ho
+0.76
China Overseas Land &
-2.43
China Unicom Hong Ko
-2.80
CNOOC Ltd
-3.28
Kunlun Energy Co Ltd
-3.71
China Resources Land L
-4.18
Source: Bloomberg
I SSN 2226-8294
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Wealth products squeezed The Mainland regulator has acted. To make high-yielding wealth management products less attractive. The institution has asked commercial banks to reduce rates on such products. Thus fostering financial alternatives
Page 9
www.macaubusinessdaily.com
Property
Dropping market Down on a monthly comparison. New approvals for both residential mortgage loans (RMLs) and commercial real estate loans (CRELs) continued to decline in November 2015. With regard to outstanding balance, RMLs and CRELs both witnessed increases
Page 3
Market forces favoured
The property management morass deepens. And industry representatives suggest the gov’t intervene. Legislating that management fees be adjusted according to inflation. Legislators have given the idea a lukewarm reception. Concerned that free market principles would be violated
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2 | Business Daily
January 13, 2016
Macau
Three companies bid for special licence taxis The tender for no more than 100 taxi licences will be valid for eight years
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s at the conclusion of the bidding period yesterday, the Transport Bureau (DSAT) had received three tenders for the ‘special taxi licence’ – referring to a licensed
service by which taxis are hailed by only calls or mobile phone application. The opentender session releasing bid information will be held today. According to a dispatch
signed by Chief Executive Fernando Chui Sai On on September 30 last year, the licences will be valid for eight years, effective from the operation date mandated in the contract to be signed. The
Transport Bureau (DSAT) explained before that bidders must be companies rather than individuals. The government launched a public tender for no more than 100 ‘special licence’ taxis on 14 October last year. Originally, the bidding period was slated to end on 14 December but was prolonged to yesterday. DSAT explained then that some clauses had to be revised, including future contractors being allowed to apply for government subsidy to finance half of the price of taxis accessible for the disabled and that the required minimum of these special taxis
had been reduced from 10 to 5. The change of rules was based on the consideration of alleviating the operation costs for the bidding operators in providing taxi services for the disabled, the Bureau explained. The city’s radio taxi service ceased in November 2014 after the city’s then only radio taxi service provider, Vang Iek Radio-taxi Co. Ltd., quit after operating the service for more than two decades because the company and the government had failed to reach a new agreement. Vang Iek ran 100 yellow cabs commonly known as ‘yellow taxis’.
AACM hosts aviation China Southern Airlines security instructors course to increase Wuhan The small-scale intensive class has flights frequency for CNY attracted local participants as well as participation by six different countries from around the region
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he Civil Aviation Authority of Macau SAR (AACM) is hosting a 7-day training event titled ‘ICAO (International Civil Aviation Organisation) Aviation Security Instructors Course’, which commenced yesterday and is intended for those who wish to become aviation security instructors. A total of 19 participants from both the local industry and foreign markets are attending the course, which comprises small-scale intensive classes aimed at training instructors. The participant must have had a minimum of five years experience in aviation with no less than two years operational experience in aviation security and be pending assignment as an instructor. The training comprises both theory lectures and a series of presentations. The theory lectures are given by the course instructors, which covers topics on the role of
an aviation security instructor, the organisation and preparation of course materials, the familiarisation with aviation security training programmes and so on. Upon completion of theory sessions, the participants will be required to give a number of presentations on what they have learned. Participants who have successfully completed the course will be awarded the course certificate. The training course taking place now covers the period 12-20 January 2016 in AACM’s office. Of the 19 participants, 11 come from the aeronautical authorities, the airlines and the airports of Bhutan, Maldives, Nepal, the Philippines, Sri Lanka and Thailand. Local participants include representatives from the Administration of Airports, Ltd., Air Macau Company Ltd., East Asia Airlines Ltd., Macau Catering Services Company Ltd., and SEMAC Security Company.
A promotional package will allow passengers to ride high-speed rail to other cities nearby for free
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hina Southern Airlines says in order to facilitate Macau residents travelling for tourism purposes or visiting family and friends in Hubei Province in Mainland China, they will increase the routes connecting to the capital city of Wuhan to one flight per day during Chinese New Year, the airline announced from its Guangzhou headquarters as reported by local Chinese newspaper Macao Daily. From 9 to 12 February (January 2nd to 12th on lunar calendar) the flights will be increased to one per day compared to three per week now. The flight coded CZ8427/8 will take off from Wuhan at 7:00p.m. and arrive in Macau at 8:55p.m. The return flight will leave the SAR at 9:55p.m. and arrive in Wuhan at 11:45 p.m. Tickets priced at MOP600 (US$75) are already on sale through the airline’s official website, mobile application, ticketing counters and
authorised agencies. An ‘air to rail’ promotional package targeting Macau residents will also enable passengers with purchased tickets of not less than half the price to take high speed trains in Wuhan to other nearby cities for free. China Southern Airlines commenced direct round-trip flights between Macau and the Chinese city of Wuhan on April 3 last year, with the occupancy rate satisfactory according to the airline. The Chinese airline currently provides three two-way flights between the two cities every week, on Tuesday, Friday and Sunday, respectively. The route was the first route that China Southern, the biggest airline in China, had launched in Macau. In addition, it was also the first route connecting the Special Administrative Region to Wuhan.
Business Daily | 3
January 13, 2016
Macau
Residential mortgage loans plunged 28 pct y-o-y in October However, new approvals of commercial real estate loans rose 14.9Â per cent on an annual comparison Joanne Kuai
joannekuai@macaubusinessdaily.com
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ewly approved residential mortgage loans by local banks plunged 28.1 per cent yearon-year in November, with granted equitable mortgage down 2.2 per cent from one year ago, the latest statistics released by the Monetary Authority of Macau (AMCM) reveal. In October, the local banking sector approved a total of MOP2.4 billionworth (US$300.3 million) of residential mortgage loans, of which 97.2 per cent were granted to local residents. The loan value, compared to MOP2.5 billion granted in October, represents a slight decrease of 1.2 per cent. In addition, residential loans to residents increased 2.4 per cent whilst those to non-residents increased 78.9 per cent month-to-month. Meanwhile, newly approved residential
mortgages collateralised by uncompleted flats posted a 2.2 per cent decrease compared to the same period of a year ago to MOP0.4 billion, but increased 27 per cent from October’s MOP0.3 billion. Some 89.9 per cent of total loans were extended to residents, with value increasing 19.6 per cent month-on-month. Compared with residential mortgage loans, newly approved commercial real estate loans registered a 14.9 per cent increase to MOP4.2 billion. However, the number presents a plunge of 54.7 per cent on a monthly comparison. Some 99.5 per cent was granted to residents. In terms of value, new CRELs to residents and non-residents decreased 52.4 per cent and 95.5 per cent, respectively.
Outstanding balances
As at the end of the month, the local banking sector
saw a total of MOP170.6 billion in outstanding value of residential mortgages, a jump of 13 per cent year-onyear, or 0.2 per cent monthon-month. Local residents accounted for 94.1 per cent of total outstanding value. In addition, the outstanding value of commercial real estate loans increased 37.9 per cent year-on-year, or 1.8 per cent month-on-month, amounting to MOP162.7 billion in November. Residents accounted for 88.3 per cent of the loans. Meanwhile, the delinquency ratio for residential loans reached 0.09 per cent, up 0.01 per cent from a month ago. On a year-on-year comparison, the ratio went up 0.02 percentage points. The ratio for commercial property loans went up 0.06 percentage points to 0.07 per cent from a month ago, and 0.01 per cent from one year ago.
4 | Business Daily
January 13, 2016
Macau opinion
Rightful engagement
José I. Duarte Economist
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egislative power, somehow, has moved to centre stage at this beginning of the year. Several references to new pieces of legislation, in various states of development, have appeared in the media. They range from the revisions of earlier proposed drafts – such as those concerning domestic violence and animal protection – to new proposals or suggestions on issues with a more direct impact upon economic structure and performance – such as those dealing with the organisation of trade unions or market competition. The first two subjects – domestic violence and animal protection – do not require much arguing at this point. No modern society with a scrap of ambition to be seen as open-minded can condone violence and aggression as ways to regulate people’s relations, just because they happen between relatives within the confines of a private dwelling. Similarly, acts of mistreatment, when not of plain savagery, against animals should have no place in our societies. The basics seem so obvious that an agreement on the specifics should not be too difficult to reach. If anything, what is difficult to understand is the convoluted, twisted process that has dragged on for so long. Now, the fact that three legislators came forward with a proposal for the regulation of trade unions and the exercise of workers rights must be underscored. The absence of such regulation clearly violates the letter and spirit of the Basic Law and persists as a dark spot in the legal system. Moreover, the submitted proposal would extend those rights to non-residents, which is a reason for further celebration. That is an essential step in the direction of removing or mitigating some of the most archaic features of the current labour market policies. Time alone will tell how exactly, if the law is finally approved, those rights will be defined and under which conditions they can be effectively exercised. And the fact that similar proposals were rejected in the past should not be ignored. But that a new group of legislators re-opened the process is certainly a motive for (moderate) optimism. The legislation concerning monopolies has yet to see the light. But the administration declared earlier that it was working on it and promised to put forward a proposal. That some legislators keep insisting on the subject and demanding a speedier development of such regulation must be emphasised and acknowledged. Whenever it comes, it will not come too early. Regardless of what one thinks about each specific piece of legislation or their proponents’ opinions on this or that matter, stronger legislators’ activism is a positive development. The interesting thing about this seemingly disparate bunch of legislative proposals is that each would represent, in its distinct way, a step in the direction of modernity. After so much (at times overdone) economic gloom, the year starts with a whiff of unexpected optimism. So be it!
Industry seeks regulated property management costs The city's property management companies' representatives suggest to legislators that inflation changes be referenced for adjustment of management fees Stephanie Lai
sw.lai@macaubusinessdaily.com
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roperty management companies’ representatives have suggested the government include in the condominium regime that property management fees can be adjusted according to changes in the rate of inflation, said the head of the second permanent committee of the Legislative Assembly, Chan Chak Mo, yesterday. Mr. Chan's committee has met with two local trade chambers of property management firms yesterday for its deliberation of a bill on the horizontal property regime – in other words, the condominium regime – to minimise disputes in self-managed buildings. One suggestion from the management firms' representatives for the bill is that property management fees be adjusted to inflation rate changes as reference for the renewal of property management contracts signed with condominium owners. Mr. Chan said, however, that legislators have doubts on whether the suggestion could be realised. “There were opinions that doubted whether the government should intervene in the increase of property management costs by legal regulation, which would affect the free market,” Mr. Chan told media following a closed-door discussion with trade representatives. The sub-committee head said there would be further discussions on the regulation of property management
cost in the ensuing deliberation of the bill. Property Management Business Association Macao president Paul Tse, who attended the meeting with the legislators, has highlighted the problem of the absence of an owners' committee or property management committee for the majority of residential buildings here. “The lack of these committees means that there is no platform for owners and property management companies to negotiate how to adjust their property management fees,” Mr. Tse told media. “This creates the problem that the property management fees of many of these buildings has not been adjusted in accordance with rising operation costs for years.” The condominium bill that is being deliberated now regulates the setting up of a property management committee. The bill spells out that any meetings concerning the appointment of a property management committee member has to be certified by the supervisory organ, the Housing Bureau. This suggested legal requirement has been welcomed by the Property Management Business Association, Mr. Tse said.
Minimum wage
Some of the property management companies here, which have not
adjusted their management fees for a long time, have been reliant upon the government's wage subsidy scheme to pay their workers in past years prior to the implementation of the minimum wage applied exclusively to property management staff on January 1, Mr. Tse said. The wage subsidy scheme, in practice since 2008, was a provisional measure meant to compensate the city's low-income group. But the scheme has already halted following the implementation of the minimum wage law which came into effect at the beginning of this year. “Some of the property management companies used to pay their staff [cleaning and security workers] only a monthly MOP2,000 to MOP3,000 when the government was practising the wage subsidy scheme because the government could subsidise another MOP2,000 of their pay,” Mr. Tse explained, noting that these companies have not adjusted their management costs for years. “But now as the work subsidy scheme is no longer in practice, the companies have to pay their staff at least MOP6,240 a month as the law requires,” he added. “As a result, they greatly enhance the management fees [since the beginning of this year] because of the minimum wage.”
Business Daily | 5
January 13, 2016
Macau
Wynn Macau to pay majority of employees one month’s bonus Labour activist group Forefront of Macao Gaming said it also expected a 5 per cent pay rise from the firm despite the industry downturn
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hile casino operator Wynn Macau Ltd. is issuing a onemonth bonus soon for its Wynn Macau and Wynn Palace employees ahead of the Chinese New Year holiday, labour activist group Forefront of Macao Gaming said it still expected a 5 per cent pay rise from the company this year in addition to the bonus despite the industry experiencing a lacklustre performance throughout the past year. In a statement to Business Daily, Wynn Macau confirmed that it is paying a one-month bonus to ‘98 per cent’ of their current 8,000 workforce, excluding senior management. An internal memorandum to employees quoted by Forefront of Macao Gaming - titled ‘Winter Bonus’ - states that the firm is paying a onemonth bonus to its full-time employees of the ‘third to eighth’ grade on January 15. Employees who have
served the firm for 90 days up to December 31, 2015 will be paid the bonus pro rata according to their time with the company. The said bonus does not cover the senior management team, which enjoys a separate reward scheme this month, the internal notice states.
Expected pay rise
“Grade three refers to the directors' position,” explained Cloee Chao, a member of the activist group who says she has worked in the casino operations at Wynn Macau since its opening in 2006. “We're also expecting a summer bonus paid in July,” Ms. Chao told Business Daily. “And in addition to this, a 5 per cent pay rise for this year.” Ms. Chao said she and her colleagues expect the pay rise from Wynn Macau despite the whole of the gaming industry in the city experiencing a very challenging time in the past year.
Casino gaming revenue in Macau has seen a consecutive monthly decline year-on-year since June 2014. For the full year of 2015, gross gaming revenue stood at MOP230.84 billion, down 34.3 per cent compared to 2014, according to data from the Gaming Inspection and Co-ordination Bureau. “Even though we see a downturn in the gaming revenue, we're still expecting
the pay rise [from Wynn Macau] by March,” said Ms. Chao. “Wynn has always managed to give a pay rise to the staff every year, even during the bad times of the financial crisis [in 2008].”
Bonus scheme
Wynn Macau has been paying its employees two bonuses a year starting from 2014, a practice that will last until 2017 with one paid in the
summer and one in winter, the firm announced in late March 2014. At the time Wynn Macau announced it would offer 1,000 shares of stock with certain conditions to each of its then 7,500 employees. Fellow casino operator SJM Holdings Ltd. is also offering an annual bonus that is equivalent to two months of salary for employees earning up to MOP20,000 a month, according to Ms. Chao's union per an internal notice published by SJM. SJM employees paid over MOP20,000 a month will be given bonuses equivalent to what they would earn in 1.5 months, the notice states. When asked by media about the pay rise scheme for this year, SJM chief executive Ambrose So Shu Fai said last week that the firm would further discuss the issue having taken into consideration the company's operation status. S.L.
6 | Business Daily
January 13, 2016
Hong Kong
Pressure builds on Bailey to tailor Burberry’s finances In October, Burberry reported a sharp sales slowdown in HK and China, markets whose shoppers account for between 30 and 40 per cent of Burberry’s global revenue
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hen Christopher Bailey stepped into the top job at Burberry there were many who questioned whether the golden boy of British fashion could cope with being chief creative and chief executive officer at the same time. Twenty months on and with the share price languishing at threeyear lows, the 44-year-old still has a point to prove and is now facing a slowdown in the global luxury market that could pose the biggest challenge to his executive career. Bailey has largely left his finance chief Carol Fairweather to discuss the finer technical details with investors, analysts and the press, in much the same way as his predecessor Angela Ahrendts did. He has also stuck closely to Ahrendts’ strategy. Analysts are now keen to hear how Bailey sees the future. “He has to step up and he has to say: That was the agenda, but this is my agenda - this is what I stand for,” said Luca Solca, Head of Luxury Goods at Exane BNP Paribas. Credited with helping transform the 160-year-old Burberry from an ailing heritage brand into a global luxury powerhouse, his dual role could come under renewed scrutiny when Burberry releases the key
KEY POINTS Company issues Christmas trading update on Thursday Sales in key Asian markets are slipping Bailey has yet to articulate distinctive strategy
Christmas quarterly trading update on Thursday. Burberry, whose trench coats and cashmere scarves took Asia by storm, reported a sharp sales slowdown in Hong Kong and China in October, leading the FTSE 100 company to miss sales growth forecasts and warn of an increasingly challenging environment for luxury goods. Although it said it had seen signs of recovery in November, its shares are trading at more than three-year lows, giving it a market value of 4.9 billion pounds, 43 per cent lower than its peak in February last year.
Turbulent Times
Other luxury groups that expanded rapidly in Mainland China such as Gucci and LVMH have also suffered from the economic uncertainty there, and violent stock market gyrations so far this year will not have helped. Hong Kong and Chinese shoppers account for between 30 and 40 per cent of Burberry’s global revenue. While some bigger companies may be able to raise prices on their luxury goods to help weather difficult markets, Burberry’s positioning as a more inclusive brand means it will have to carefully think through how to navigate the slowdown. Liberum Analyst Tom Gadsby said the bulk of Burberry’s revenue comes from regions which are seeing the biggest slowdown in growth - Asia Pacific and the Americas. “The main concern is what was a strength has become a weakness,” he said. “They have very good global coverage but that does mean that twothirds of their sales are in areas of the market that are going backwards.” According to market data, hedge funds are betting that things will get worse. The amount of shares being shorted - reflecting a belief that the stock price will fall - has risen sharply ahead of the trading update. That will give Bailey, who has
They have very good global coverage but that does mean that two-thirds of their sales are in areas of the market that are going backwards Tom Gadsby, Liberum Analyst
seen his designer peers exit from luxury fashion houses Christian Dior, Balenciaga and Lanvin in recent weeks, more work than most creative directors in the industry.
High regard
One of the best paid CEOs in Britain, Bailey remains a hugely popular figure in the fashion industry. He comes from Yorkshire, northern England, where his mother dressed the windows of Britain’s biggest retailer Marks & Spencer. Despite keeping a low profile, he attracts leading fashion editors and celebrities to Burberry’s fashion shows, while his most popular designs sell out in a matter of days. During his time at the company he has led Burberry’s digital push, becoming one of the first to launch a system where customers can buy collections straight from the catwalk. He also benefits from the fact he is still held in huge regard by investors
for his work alongside former CEOs Ahrendts and her predecessor Rose Marie Bravo in building the company. “He does defer to his CFO on detailed technical matters but that seems entirely appropriate to us. Building a great brand is much more important than managing the City, in our opinion,” one of the company’s largest long-term investors told Reuters, on the condition of anonymity. In the four and a half years that he solely held the chief creative officer role he won multiple industry awards and the share price rose almost 200 per cent. “If you go back a couple of decades, it was a tired old raincoat brand and they have turned it into something very different and an awful lot more attractive and profitable,” said Liberum’s Gadsby. Supporters within the firm say the success of its multi-coloured poncho shows how Bailey combines his creative abilities with a commercial outlook; relaunching an out-of-favour item to great effect. His latest menswear collection on Monday featured a younger, sportier feel, with models wearing oversized coats, tailored trousers and zipped tops. Burberry declined to comment for this article. Those who have worked with Bailey say he is known for his love of teamwork, choosing to encourage collaboration and discussion amongst his team members on strategic decisions. “He is a clear leader but never authoritative, he loves to listen and also to have a collegial decision,” said Floriane de Saint Pierre, who helped recruit Bailey and has known him for around 20 years. “However when he has a decision and a conviction he will make sure that his team agrees.” Reuters
Business Daily | 7
January 13, 2016
Gaming
Deal reached on referendum for northern New Jersey casinos The deal, a major step toward expanding gambling outside Atlantic City, requires the backing of three-fifths of lawmakers in both the Senate and Assembly
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ew Jersey Governor Chris Christie, a two- term Republican running for president, said he and Democratic legislative leaders reached agreement on a plan to get a casino expansion proposal on this November’s ballot. Leaders of the Senate and Assembly had been deadlocked over competing measures to allow casinos beyond Atlantic City. They had disagreed on who could own the gambling halls and how much tax revenue would flow back to the struggling seaside resort. Christie, who has been on the road campaigning, came home ahead of his State of the State speech on Tuesday. He said he met with Senate President Stephen Sweeney and Assembly Speaker Vincent Prieto Sunday night to hash out the details of one proposal they all could agree on. The governor, who has portrayed himself nationally as having a record of bipartisanship, said at a press conference Monday that the agreement was reached with a “great deal of compromise.” “The most important thing in my view was to bring resolution to this issue and to give voters their opportunity this November when there will presumably be a large turnout in New Jersey -- as there will be across the country -- for the presidential election,” Christie said. Lawmakers had hoped to pass one measure this session, setting up a second vote requiring a simple majority in the next. Without consensus in both houses by Monday, the final day of the legislative session, lawmakers will need to approve their compromise with a three-fifths majority -- 24 votes in the Senate and 48 in the Assembly -- to get it on the November 2016 ballot. Earlier Monday, the Senate approved a casino ballot measure with 33 yes votes. Leaders plan to reintroduce a resolution tomorrow that adds a stipulation that any new casino
New Jersey Governor Chris Christie
involves a US$1 billion investment, Christie said. The compromise also would give existing casino operators “right of first refusal” over the new licenses, Prieto said.
Corporate Pacha Macau at Studio City Set to kick off With 2015 now relegated to the history books, it’s time to start planning for the first big party of the New Year with the arrival of legendary Ibizan-style club, Pacha – located at Studio City in Macau. Set to make its mark as the first mega-club of its kind in the region and as the world’s largest global nightclub brand, Pacha Macau will kick start 2016
with a bang, by hosting an exclusive Grand Opening Special Event. Due to take place on Saturday, January 16 2016, the special event will feature world-renowned international DJ acts flown in from around the globe, as well as other special acts and an introduction to Pacha’s premium and stand-out service offering the best in nightlife, worldwide.
Getting a three-fifths vote in the Assembly “won’t be an easy lift, but that’s the reality,” Prieto said. The casino expansion, which would require an amendment to the state constitution, was designed to protect a state revenue stream that has withered in recent years as gamblers flock to casinos in New York, Pennsylvania and Connecticut. Christie, 53, has struggled to revive the coastal community of almost 40,000 people, about one-third of whom live in poverty. After years of refusing to consider a northern expansion, he said last year he would be open to the idea if some of the new revenue went to Atlantic City. Even so, constitutional amendments don’t need the governor’s approval. While Christie acknowledged that he plays no direct role in ballot questions, he said enabling legislation may reach his desk. He said he got involved because resolution was important for the state’s economy. “I’m pleased after a lot of effort and a lot of conversation among the three of us that we can announce that we have an agreement,” Christie said in a rare appearance before reporters in Trenton. A 1976 law gave Atlantic City a monopoly on gambling in New Jersey. The restriction helped turn the tourist spot near the state’s southern end into the top U.S. East Coast gambling destination, until competition in neighboring states led
to seven-straight years of declining revenue. Democrats, who control both legislative houses, agreed that allowing gambling in other towns was crucial to reclaim revenue that has left New Jersey. Details of the measure, though, pitted lawmakers in the northern part of the state, where the new casinos would be located, against those in the southern half, which includes Atlantic City. Both proposals would authorize two casinos at least 72 miles (116 kilometers) from Atlantic City -making the state’s northern section near New York City the most probable site. Sweeney, of West Deptford in the south, wanted only current holders of an Atlantic City casino license, or partnerships majority-owned by existing operators, to be eligible for the new businesses. Prieto, of Secaucus in the north, sought to set aside just one of the two licenses for an existing holder. The two lawmakers also disagree over how much of revenue to send to Atlantic City, and for how long. On Friday, Christie called on lawmakers to approve Sweeney’s measure. “Inaction should not be an option,” Christie said in a statement. “Delay puts the expansion of gaming in peril. That is not in the interests of anyone in New Jersey, North or South.” Bloomberg
8 | Business Daily
January 13, 2016
Greater China
Taiwan central bank readies US$170 mln in cash ahead of polls Market participants said the central bank has regularly imported additional U.S. dollars during election periods
Bank of Taiwan said in a statement that it had prepared sufficient cash to meet business needs
Taiwan central bank
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aiwan’s central bank has prepared around US$170 million in U.S. dollars in cash in the event election changes bring about an onslaught of demand for the U.S. currency from the island’s residents, three people familiar with the matter said. Taiwan votes for a new president and parliament on Saturday in which the main opposition independence-
leaning Democratic Progressive Party (DPP) that China detests is likely to take power. A few big state-backed commercial banks, including Mega International Commercial Bank, part of Mega Financial Holding Co, and Bank of Taiwan, were asked by the central bank in recent weeks to buy U.S. dollars in cash from designated foreign exchange banks under
“project import”, the people told Reuters. They spoke on condition of anonymity due to the sensitivity of the matter. “In response to the business environment and circumstances recently, we have prepared a bit more cash in U.S. dollars. ATMs will be covered and customers can withdraw (U.S. dollars) if there is a
Dalian Wanda buys Hollywood studio Legendary Entertainment
need in the ATM,” one of the people said. Another person said the central bank had told banks the preparations were being carried out due to “election factors.” Bank of Taiwan said in a statement that it had prepared sufficient cash to meet business needs. Market participants said the central bank has regularly imported additional U.S. dollars during election periods. People in Taiwan had rushed for U.S. dollars in 1996, when the island’s first direct presidential election prompted China to lob live fire test missiles in the Taiwan Strait - the body of water that separates the two sides - in an attempt to interfere in the vote. Taiwan’s central bank declined to comment on the matter when contacted by Reuters yesterday. Chiang Kai-shek’s Nationalists forces fled to Taiwan in 1949 after losing a civil war with Mao Zedong’s Communists. Taiwan has been selfruled since then, but Beijing regards the island as a renegade province to be taken back by force if necessary. On Saturday, the DPP’s Tsai Ingwen and presidential frontrunner is expected to win the presidency against two rivals. Reuters
KEY POINTS Plans IPO of ‘Jurassic World’ maker, existing film business Legendary CEO Thomas Tull to stay on at movie studio Extends Wanda’s diversification as property sector slows Drive helped lift Wanda 2015 revenue 19% to US$44 bln
Wang Jianlin (2-L), Chairman of China's Wanda Group, and Thomas Tull (3-L), CEO of US film company Legendary, witness a signing for a merger between their respective companies during a ceremony at the Sofitel Hotel in Beijing yesterday
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hinese conglomerate Dalian Wanda Group has bought U.S. film studio Legendary Entertainment for about US$3.5 billion, turning its chairman into a Hollywood movie mogul as China’s richest man steps up a drive to diversify his business empire overseas. Wanda confirmed the deal at a news conference in Beijing yesterday, where chairman Wang Jianlin said he plans to package Legendary, producer
of hits like “Jurassic World”, with his company’s existing movie production assets in China and sell shares in the merged operation in an initial public offering. The executive gave no further details on the IPO plan, but said was acquiring Legendary Entertainment for both intellectual property reasons and the studio’s movies. A person familiar with the matter told Reuters earlier this month a deal had been agreed.
The deal - what Wanda said was its “largest culture acquisition overseas” comes as Wang accelerates a drive to diversify a giant with 2015 revenue of US$44 billion away from its core, but slowing domestic property operations. With deals to buy into everything from financial services to Spanish soccer club Atlético Madrid, Wanda said on Monday revenue rose 19 percent last year. Wanda is already the world’s biggest movie theatre operator, having
bought AMC Entertainment Holdings Inc, North America’s second-largest cinema chain, for US$2.6 billion in 2012. It owns Australian movie theatre company Hoyt’s Group, and Wanda Cinema Line Corp, the group’s domestically listed firm, is the biggest theatre operator in China. Under the deal announced yesterday, Wanda said it will buy an unspecified majority stake in Legendary. As part of the transaction, Legendary’s founder and Chief Executive Officer Thomas Tull will continue to head up the movie maker. Founded in 2000, Legendary has made hits such as “The Dark Knight” and “Man of Steel”, as well as “The Hangover” film franchise. Legendary generally provides half the financing for movies whose budgets can run up to US$200 million or more. It also has an agreement with China Film Co, the largest and most influential film company in China, to co-produce movies. Reuters
Business Daily | 9
January 13, 2016
Greater China Vehicle sales to grow 6 pct in 2016 China vehicle sales are expected to grow 6 percent in 2016, compared to 4.7 percent growth last year, the China Association of Automobile Manufacturers said yesterday. The association’s chief said last month that sales would grow 5-7 percent in 2016, stressing that the range was his personal estimate and not the association’s official prediction.
Oil demand expected to rise 4.9 pct China’s apparent oil demand is expected to rise 4.9 percent this year to 570 million tonnes, or 11.37 million barrels per day, a domestic industry association said yesterday. The China Petroleum and Chemical Industry Federation also said that apparent natural gas demand is expected to rise 6.5 percent on year to 199 billion cubic metres.
Starbucks to open 500 new stores in Mainland
Regulator asks banks to cut wealth management yields New non-performing loans held by Chinese banks more than doubled in 2015 from the previous year Zheng Li and Nathaniel Taplin
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hina’s banking regulator and main bond clearinghouse have asked commercial banks to reduce rates they offer on high-yielding wealth management products (WMPs), five sources told Reuters, an apparent back-pedalling on commitments to let markets price credit. The move to suppress returns on WMPs would reduce the cost of capital for cash-strapped firms relying on the industry for costly credit to stay afloat, and reduce the appeal of such products to retail investors, which could boost alternative investments such as Chinese stocks, which have had a dreadful start to 2016. The high level of precarious indebtedness is of growing concern as Chinese policymakers try to bolster economic growth and financial stability at a time of high volatility in its currency and share markets. Reuters reported yesterday that new non-performing loans (NPL) held by Chinese banks more than doubled in 2015 from the previous year. “Given that CBRC (China Banking Regulatory Commission) has already said that the key task for 2016 will be risk control, it’s quite telling that they’re now telling banks to reduce these WMP yields,” said Oliver Barron, an analyst at the NSBO macro consultancy in Beijing. “Many trust loans, for instance, were issued two years ago when commodity prices were still sky high, and any products that sent funds to those parts of the industrial sector may have repayment difficulties at the old high rates.” The sources, who have direct knowledge of the matter, said the regulator and clearinghouse did not specify any particular class of WMP in its guidance but wanted to lower yields across the board to control
the scale of assets in this investment space. “I think some institutions are having trouble holding on, and so they will use this guidance as an excuse to lower yields,” said one source with knowledge of the matter. A source in one commercial bank’s wealth management division welcomed the intervention, as margin pressure was intense, so now the industry could afford to cut returns without hurting their competitive position. “No one dared to lower yields first; everyone was waiting to see who would admit defeat,” he said. A separate wealth management banking source said that after receiving the notice yesterday, new product offerings were already beginning to offer lower rates.
Retail risk
WMPs, marketed by banks but often backed by third-party loans or other risky assets, offer interest rates of up to 10 percent or higher on some products, even though domestic
KEY POINTS WMPs offer up to double-digit returns based on risky assets WMPs can offer high-cost loans to heavily indebted companies Lower yields would help desperate borrowers Could also reduce appeal of WMPs relative to equities
benchmark rates and bond yields have fallen sharply over the past year. But in such a weak domestic economic environment, analysts have raised concerns that many of the assets underlying such products may be of poor quality, shifting default risks onto retail investors and directing more credit to lowquality firms. Third-party data from CN Benefit, an independent research firm that tracks the wealth-management sector, found that WMPs were increasingly backed by bond and money market instruments in the second half of 2015, even as bond defaults have accelerated sharply over the past year. Moreover, a recent Reuters analysis of exchange data found that a disproportionate percentage of new bond listings on the Shanghai exchange were issued by local government investment or infrastructure firms, a major source of China’s existing nonperforming debt problem. Such entities often find it easier and cheaper to raise capital because of a perceived state guarantee, while private and more innovative firms struggle to get financing. With stocks tumbling, the real estate market still vulnerable and high-rated bond prices bid up to multi-year highs, WMPs are one of the few options left for domestic investors seeking high returns. Retail investors also often assume that banks will stand behind such products, even when marketing materials indicate that they are not guaranteed. The CBRC could not be reached for comment, while the Central Depository and Clearing Corporation declined to immediately comment. Reuters
Starbucks Corp, the world’s largest coffee chain, said yesterday it aims to open 500 stores in China this year, shrugging off a slowdown in the world’s second-largest economy that has hit global retailers. Starbucks executives have said they have not seen a systemic slowdown in China, even as the country’s cooling economy has been blamed for soft results by the likes of KFC and Pizza Hut parent Yum Brands. The company said in a statement it aims to create 10,000 jobs in China every year through 2019 as it continues to expand in its largest market outside the United States.
Yang Shaolin appointed as World Bank Group’s senior official Chinese Ministry of Finance (MOF) official Yang Shaolin has been appointed as Chief Administrative Officer (CAO) and Managing Director (MD) for the World Bank Group, a MOF statement said yesterday. CAO and MD is a new position in the World Bank Group, created to bring together organizational strategy, budgeting and planning, and information and technology, among other responsibilities, according to a press release from the World Bank Group. Yang’s appointment is effective from February 29, 2016, it said. Yang is currently the Director General of the Department of International Economic and Financial Cooperation at the MOF.
Fubon Asset Mgmt turns cautious The president of Taiwan’s biggest China investment fund said China’s last depreciation of its currency sparked a global market crisis and warned investors to be very cautious as more turbulence could be on the way. Henry Lin, President of Fubon Asset Management, which runs Taiwan’s biggest China fund, has since adopted a more risk-averse approach after perceived missteps by Chinese authorities to guide the yuan lower sent global markets reeling at the beginning of 2016. China’s equity markets, which have tumbled 15 percent since the year’s first trading day, remained volatile yesterday.
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January 13, 2016
Greater China
Officials push back against yuan devaluation concerns The yuan’s decline last week and the selloff in Chinese stocks have roiled global markets, helping send the Standard & Poor’s 500 Index to its worst-ever start to a year in data going back to 1928 Ye Xie
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hinese officials have pushed back against views the nation’s currency is on a one-way weakening path. Betting against the yuan will fail and calls for a large depreciation are “ridiculous” as policy makers are determined to ensure the currency’s stability, Han Jun, the deputy director of China’s office of the central leading group for financial and economic affairs, said at a briefing in New York on Monday. “It is pure imagination that the Chinese yuan will act like a wild horse without any rein,” said Han, adding that short selling the yuan “will not succeed.” Investors misunderstood the People’s Bank of China’s (PBOC) intentions in its recent moves on the yuan’s daily reference rate against the dollar, Ma Jun, chief economist at the PBOC’s research bureau, said
Oil firms offer online petrol trading to tap booming vehicle market At least two oil companies are pushing to create new opportunities by offering motor users the chance to speculate on changes in oil prices Roslan Khasawneh
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hinese oil firms are launching digital platforms for consumers such as taxi drivers, truck companies and private car owners to buy fuel speculatively for use at a later stage, stoking a growing trend in China’s fast-growing vehicle market. The country’s road transport sector has become the biggest in the world, with some 150 million cars in use and monthly growth of over 2 million new vehicles. With such a huge market, at least two oil companies are pushing to create new opportunities by offering motor users the chance to speculate on changes in oil prices. “Until now, personal users could only buy fuel at the gas station and if they thought that prices were at very low levels and wanted to secure or hedge their fuel at low levels, there was no way to do that,” said Stephen Qi Jun, chief operating officer at Hong Kong-based Brightoil Petroleum. “We are launching this new innovation to help millions of consumers hedge their own consumption of fuel,” he said. Cooperating with a regional bank that it did not name, Brightoil said on Tuesday it had officially launched a digital retail oil trading platform in China. The company is usually
We are launching this new innovation to help millions of consumers hedge their own consumption of fuel Stephen Qi Jun, chief operating officer, Brightoil Petroleum
more active in wholesale physical oil trading. “You can use a (smart) card at the gas station to buy gasoline, or if you think that the value will increase in the future, you can keep the volume and sell it in the future if prices rise,” Qi Jun said. “It’s exactly like an investment.” Dongming Petrochemical is also entering digital fuel retailing, according to a senior executive at China’s largest independent refiner. Reuters
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January 13, 2016
Greater China in comments posted Monday on the central bank’s website. The fixings are based on the previous day’s closing price and changes to the basket of currencies against which the yuan is valued, Ma said. The comments suggest policy makers are moving to damp expectations of a continued rapid deprecation in the yuan after the currency slumped to a five-year low against the dollar amid rampant capital outflows. Interbank yuan lending rates more than doubled in Hong Kong Monday to records and the exchange rate surged the most in four months overseas amid suspected intervention by China’s central bank. The yuan’s decline last week and the selloff in Chinese stocks have roiled global markets, helping send the Standard & Poor’s 500 Index to its worst-ever start to a year in data going back to 1928. Forecasts that the yuan will fall about 14 percent toward 7.6 a dollar as some analysts suggest are not realistic and a decline of that magnitude is “impossible,” Han said at the briefing at the Chinese consulate to the U.S. He confirmed that the central bank intervened in the overseas currency market over the last two days to bolster the yuan. The comments come as investors including Pacific Investment Management Co. bet the dollar will extend its rally against the yuan. “We believe the bullish trend of the U.S. dollar will remain intact and that the changes made to the Chinese currency regime portend additional scope for the yuan to weaken over the next six to 12 months,” Luke Spajic, a portfolio manager for Pimco, said in a report. “We are positioned for a
stronger U.S. dollar against the yuan and a basket of other Asian emergingmarket currencies.”
L-Shaped Recovery
It is pure imagination that the Chinese yuan will act like a wild horse without any rein Han Jun, deputy director of China’s office of the central leading group for financial and economic affairs
Stable currency
As China shifts its growth model away from exports, Han reiterated that policy makers will not intentionally weaken the yuan to “gain unfair competitive advantage.” The government intends to keep the yuan relatively stable against a basket of currencies, rather than pegging it against the dollar, he said. While twoway volatility in the exchange rate will become the new norm, the PBOC will step in when the fluctuations deviate
FX reserve sell-off to soon move beyond US Treasuries Last year’s record unwind brought China’s total FX reserves to a three-year low of US$3.33 trillion Jamie McGeever
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he unwinding of China’s foreign exchange reserves could soon extend beyond U.S. Treasuries, with U.S. corporate and euro zone sovereign bonds among the assets most vulnerable to selling from Beijing, Bank of America Merrill Lynch said on Monday. China sold a record US$510 billion of FX reserves last year to
China increased its U.S. corporate bond investments by US$44 billion last year to US$415 billion
In a discussion that ranged from the accuracy of Chinese statistics to the country’s reform agenda, Han warned that China’s growth hasn’t hit the bottom yet as the government focuses on reducing overcapacity and cutting corporate debt. Han, who was involved in drafting the government’s five-year economic planning, said the government will refrain from “strong” economic stimulus because its focus is on shifting the US$10 trillion economy to a more sustainable growth model. Investors should expect “a long period” with an L-shaped growth path, instead of a faster U- or V-shaped recovery, he said. While the government targets an average economic expansion rate of 6.5 percent by 2020, it is “acceptable” for growth to dip below that level in some quarters, he said. China’s potential is still promising because there’s a large need for consumption, investment in infrastructure and urbanization, he said.
counter the damaging impact on an already decelerating economy from the surge of capital fleeing the country. The lion’s share of that came from US$292 billion sales of U.S.
Treasury debt, followed by US$92 billion sales of U.S. stocks, US$3 billion of U.S. agency bonds and US$170 billion of non-U.S. assets, according to BAML estimates. China increased its U.S. corporate bond investments by US$44 billion last year to US$415 billion, BAML strategists estimated, adding that it won’t be long before investors turn their attention to other assets Beijing could potentially sell. “In the next two months I would still say Treasuries. But if the pressure continues beyond that, it’s non-U.S. assets, and in the U.S. space it’s definitely corporates and agencies,” said Shyam Rajan, rates strategist at BAML in New York. Rajan and his colleagues estimate that China’s US$3.33 trillion FX reserves comprise US$1.15 trillion non-U.S. assets (mostly short-dated euro-denominated bonds), US$415 billion U.S. corporate bonds, US$212 billion in agencies, US$266 billion stocks and US$1.29 trillion of Treasuries. Selling across these bonds may not automatically trigger a sharp
from China’s economic fundamentals. Speaking at the same event, Liu Peilin, a senior research fellow at Development Research Centre of the State Council, said China’s unemployment rate will rise because job losses in industries with excessive production outpace those created in the service sector. The government will focus on job training and strengthening the social welfare system to help the jobless, he said, while the decline in the working-age population also helps alleviate upward pressure on the jobless rate.
Yuan fixing
PBOC researcher Ma’s remarks suggest the central bank is trying to correct the impression that China intentionally weakened the yuan by setting the fixing lower last week. Instead, downward pressure on the yuan will ease after investors absorb a shift to valuing it versus a basket of currencies and away from linking it to the dollar, Ma said. “Some of the market participants recently tried to determine the PBOC’s intentions by looking at the change in the fixing rate versus the previous day,” Ma was quoted as saying. “This is a misunderstanding. The fixing is determined by factors including the closing price of the previous day and the changes of the currency basket. Market participants should look at the differences between fixing and the closing prices, and the changes of the currency basket.” The yuan shouldn’t be pegged to the U.S. currency and its rate will be more tied to a basket of currencies in the future, Ma said. At the same time, the PBOC will “appropriately limit” daily yuan-dollar volatility, he said. Bloomberg News
rise in their yields though, Rajan said, pointing to the experience of Treasuries in the latter part of last year when swap spreads moved below zero. “The way to trade the reserve flow story is through relative value trades, such as the swap spread tightening in Treasuries. I would imagine it plays out the same way in other markets too,” Rajan said. Last year’s record unwind brought China’s total FX reserves to a threeyear low of US$3.33 trillion. Most analysts expect that to be depleted further this year. JP Morgan estimates that capital flight from China since the second quarter of 2014 has totalled US$930 billion, while credit ratings agency Fitch on Monday put the figure at over US$1 trillion. U.S. investment bank Morgan Stanley on Monday joined Goldman Sachs in lowering its forecast for the Chinese yuan, citing the on-going flow of capital out of the country and need for a weaker currency to support the economy. Reuters
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January 13, 2016
Asia
Southeast Asian palm output rebounding as El Niño fades Expectations of higher consumption of palm oil-based biodiesel are also coming under scrutiny after steep falls in oil prices Naveen Thukral and Michael Taylor
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ecent rains across Southeast Asia are expected to boost palm oil production this year as fears of an on-going El Niño dry spell recede, threatening a reversal for one of the few commodities to record a price rise in 2015. Palm oil prices jumped by a third in the last four months of the year as the El Niño weather pattern gripped Indonesia and Malaysia, which account for about 85 percent of global output. Palm prices closed 2015 up nearly 10 percent, just beaten by cocoa among major commodities, as governments and private forecasters cut their production outlook for the oil, used mainly for cooking but also in products ranging from cosmetics to confectionary and biodiesel. However, December rains have led producers to forecast higher output in the second half of 2016, even though the lingering impact of the dry weather will hit production over the next few months. “We have seen a low impact of El
Niño on crude palm oil production, people are looking at higher yields than what was expected earlier,” said Marcello Cultrera at brokerage Oriental Pacific Futures in Kuala Lumpur. “El Niño should be declining in coming months, its expectation on supply mainly drove down prices.” Benchmark palm oil prices have started to react, posting their biggest weekly loss since early October last week and are down 2 percent for the year. Expectations of higher consumption
KEY POINTS INDONESIAN PALM OIL OUTPUT TO RISE AS WEATHER IMPROVES HIGHER OUTPUT SEEN PRESSURING PRICES AFTER 2015 RALLY
of palm oil-based biodiesel are also coming under scrutiny after steep falls in oil prices. “Palm oil should fall to 2,200 ringgit a tonne to compete with soyoil,” Cultrera said, down 10 percent from current levels around 2,440 ringit.
Indonesia leads gains
The biggest increase in production is expected to come from top producer Indonesia, where 2016 output is now forecast to rise by up to two million tonnes from a year ago to 33 million to 33.5 million tonnes. “Considering that the El Niño has stopped, it could be higher,” Fadhil Hasan, executive director at the Indonesian Palm Oil Association (GAPKI), told Reuters. GAPKI sees Indonesia’s 2016 output at 33.5 million tonnes, up from an estimated 32.5 million tonnes last year, while the Indonesian Palm Oil Board expects production at 33 million tonnes from 30.9 million tonnes in 2015.
Malaysia, which had been expected to record lower output in 2015, is now likely to see production almost flat at around 19.8 million tonnes, said M.R. Chandran, a veteran palm oil industry official who works as a consultant in Kuala Lumpur. “After April, palm oil production will start improving,” Chandran said. “We have had good rains all of December. We don’t see El Niño weather anymore.” Smaller palm oil producers such as Thailand and countries in Africa could also see higher production, industry officials said. A rise in palm oil output will also coincide with an expected fourth consecutive year of record global soybean production and slowing vegetable oil demand from top importers India and China. Palm oil accounts for around 40 pct of global supplies for edible oil, competing with soy oil. “There are huge stockpiles of vegetable oil stocks in China and India, we are expecting a tsunami of soybean from South America,” said Cultrera of Oriental Pacific Futures. Still, some planters said it is difficult to forecast output because of the dryness experienced by trees last year, while Malaysia is still forecasting warmer drier weather. “It is tricky to predict production due to the dry spell and [forest fire] haze in Indonesia, which is generally expected to negatively affect production,” said Roy Lim, Group Plantations Director of leading planter Kuala Lumpur Kepong Berhad.
Thailand approves investment applications worth US$22 bln in 2015 The government has accelerated approvals for investment projects and offered various incentives to help support Thailand’s fledgling economy Pairat Temphairojana
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hailand’s investment agency said yesterday it approved investment applications worth about 800 billion baht (US$22 billion) last year, missing its target of 1.4 trillion baht, but up from 724.7 billion baht in 2014. The agency did not meet its target in 2015 as some applications were submitted prematurely and others needed the input of several government agencies, Hirunya Suchinai, secretary general of the Board of
Since taking power in a May 2014 coup, the country's military rulers (pictured) have struggled to kick-start Southeast Asia's second-largest economy
Investment (BOI), told reporters. “We did not meet the target because sometimes these are large projects and require approval from committees,” Hirunya said, adding that the agency would try to clear its existing backlog in 2016. Since taking power in a May 2014 coup, the country’s military rulers have struggled to kick-start Southeast Asia’s second-largest economy. The economy grew 1.0 percent in the third quarter, up from
Reuters
0.6 percent in the same period last year. The government has accelerated approvals for investment projects and offered various incentives to help support Thailand’s fledging economy as exports and domestic demand remain sluggish. The central bank expects zero export growth this year partly due to a slowdown in China’s economy. Tourism, which accounts for about 10 percent of GDP, is expected to help prop up the economy. The investment agency replaced previous policies in 2014 by gearing its incentives to more valueadded sectors. The BOI said 1,038 project applications were recorded in 2015 versus 3,469 in 2014. Foreign direct investment from Japan in 2015 remained the highest in Thailand, with total investment approved from Japan valued at over 144 billion baht for 426 projects. Singapore came a distant second with 122 projects approved valued at 39.9 billion baht between January to November 2015. Reuters
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January 13, 2016
Asia
Bank of Korea seen holding rates for 7th month
Japan logs 1.14 trillion yen in surplus
The central bank has taken a firm line that inflation will keep moving towards its new three-year inflation target of 2.0 percent
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outh Korea’s central bank is expected to keep its policy rate on hold at this week’s monetary meeting, given the current turmoil in global markets, and while it evaluates the effects of the U.S. Federal Reserve’s December interest rate hike. Twenty-nine out of 30 analysts surveyed by Reuters forecast the Bank of Korea would hold the base rate steady at 1.50 percent for a seventh straight month at Thursday’s meeting, while one saw a 25 basis point cut. Of the 28 analysts who gave a forecast on the central bank’s future policy direction beyond January, a majority of 17 saw no change in the BOK’s favoured 7-day repurchase agreement rate for at least six months to over a year, or a hike late in the year. The remaining 11 respondents projected a cut, with most seeing it within the first quarter of the year. “Slow economic recovery and low inflation may support views for a rate cut but global financial unrest and rising household debt offset these reasons,” said You Sun-woong, a credit analyst at LIG Investment &
KEY POINTS 29 OF 30 ANALYSTS SEE BASE RATE UNCHANGED MOST SEE NO CHANGE FOR AT LEAST SIX MONTHS BANK OF KOREA REVIEWS POLICY ON JANUARY 14
Securities, who sees rates on hold until year-end. The January poll saw more analysts cautiously withdrawing their rate cut forecasts compared to December, when on-hold views had only a slim majority, as inflation paces the slow but steady recovery of domestic demand. Inflation in December accelerated above expectations to its highest in 16 months, standing at 1.3 percent and reflecting increased demand for services.
Australian tourism sets sights on China’s independent tourist The government forecasts the industry will rake in A$113 billion by June 2016, with foreign tourists accounting for one third
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Zealand, China is the fastest growing group with a total spending of A$7.7 billion last year. Australia’s marketing campaign, to be launched later this month, will be geared towards a new breed of young and independent traveller from China drawn to Australia’s natural beauty. “We are aiming for the young middle class who’s got the confidence but also financial means to be able to travel further and stay longer while managing their itineraries, rather than being led by the hand,” said
S.Korea constantly reviewing contingency plans South Korea’s financial regulator said it was constantly reviewing its contingency plans to ensure that they reflect changes in the global economy. The South Korean stock market has been jolted by a U.S. interest rate hike, yuan turbulence in China and North Korea. “Some details in our contingency plans are tailored to what we saw in the 1997-1998 Asian financial crisis and the global financial crisis in 2008,” Kim Yong-beom, secretary general at the Financial Services Commission (FSC), told reporters yesterday. Kim said South Korea’s economy will receive a “considerable” impact should China’s economy slow further.
Reuters
Union peace conference begins in Myanmar capital
KEY POINTS CHINA IS AUSTRALIA’S SECOND LARGEST SOURCE OF TOURISTS CHINESE SPENDING IN AUSTRALIA SEEN AT A$13.7 BLN BY 2025 TOURISM AMONG FASTEST GROWING SEGMENTS IN AUSTRALIA LOWER AUSSIE DOLLAR TO HELP DRAW OFFSHORE TRAVELLERS
Cecile Lefort
ustralia is planning a A$40 m illion g lob al tourism campaign to help fill the economic hole left by the commodities downturn, targeting a growing group of Chinese holidaymakers who favour independent itineraries over traditional large group packages. Government data released yesterday showed a record 1 million Chinese tourists flocked to Australia in the past 12 months, up from a mere 100,000 fifteen years ago. Beaten in absolute numbers only by New
The central bank has taken a firm line that inflation will keep moving towards its new three-year inflation target of 2.0 percent as the base effects of low global oil prices dissipate. Bank of Korea Governor Lee Juyeol also recently stressed the need to ensure financial stability in Asia’s fourth-largest economy, saying high debt levels and rising U.S. interest rates could present risks. Despite rising inflation and burgeoning household debt, risks for the central bank lie to the downside, including public concerns government efforts aimed at boosting consumption may run out of steam early in the year. President Park Geun-hye has ordered government officials to do the best they can to prevent consumption from faltering, but some analysts view the central bank will have no choice to cut if domestic demand collapses soon. Along with the policy review, the central bank will also release revised quarterly economic forecasts for 2015, 2016 and new projections for 2017.
Current account logged a surplus of 1.14 trillion yen (about US$9.72 billion) in November for the 17th straight month in the positive territory largely on poor crude oil prices, according to the Finance Ministry yesterday. Goods trade, one of the key components in the account, posted a deficit of 271.5 billion yen, with exports falling 6.3 percent on year and imports sliding 10.9 percent. The value of crude oil imports shed about 40.9 percent as average oil prices declined 47.7 percent to US$47.48 per barrel in the month.
Leo Seaton, Tourism Australia’s spokesman. While most western visitors participate in aquatic sports such as surfing or swimming, Seaton said Chinese tourists tend to prefer walking or whale-watching. A falling Australian dollar, which fell 14 percent over the past year, is certainly helping stave off competition from the United States, South Africa and Europe, all keen to be on the receiving end of China’s spending power. This is music to the ears of a government dealing with plunging prices for iron ore, the country’s top export earner. Tourism Research Australia forecasts Chinese spending to double to A$13.7 billion by 202425. Australia’s A$1.6 trillion economy is struggling with the demise of a once-in-a-lifetime mining investment boom with sub-par growth. Driven by Chinese arrivals, tourism is among the fastest growing sectors, employing half a million people. Reuters
Myanmar’s union peace conference kicked off yesterday, ahead of the first round of national-level formal political dialogue between the government and eight ethnic armed groups. The conference, which runs through Saturday, is the biggest gathering of political forces in the country since its independence in 1948, said President U Thein Sein. For more than six decades, armed conflicts has been prevalent in the country, and the current government , since it took office in 2011, has made various efforts to bring the conflict to an end.
ANA becomes Vietnam Airlines’ main partner Japan’s ANA Holdings said it plans to buy an 8.8 percent stake in state-controlled Vietnam Airlines, becoming its main strategic partner in a deal that values the Southeast Asian carrier at about US$1.2 billion. The deal helps satisfy ANA’s ambitions to expand in fast-growing regional markets after it backed out of a 2013 deal to buy a 49 percent stake in Myanmar’s Asian Wings Airways for US$25 million due to concerns over excessive competition in the country. Vietnam’s flagship carrier in turn gains a longsought partner and funds to help it boost operational and management know-how.
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International U.S. sets paper import dumping margins The U.S. Commerce Department on Monday announced anti-dumping duties of 2.05 percent to 222.46 percent on imports of uncoated paper sheets from Australia, Brazil, China, Indonesia and Portugal, determining that these products were sold at less than fair value. The action follows a nearly year-long investigation into the the pricing of imported uncoated sheets for copy paper, envelopes, book pages, utility bills and other uses. In 2014, the United States imported US$211 million of uncoated paper from Brazil, US$200 million from Indonesia, US$164 million from Portugal, US$61 million from Australia and US$54 million from China, the Commerce Department’s U.S. International Trade Commission said.
Italian consumer groups against McDonald’s Three Italian consumer organisations have accused U.S. fast food chain McDonald’s of operating an anti-competitive system in Europe, with restrictive clauses imposed on franchise operators that may breach the bloc’s antitrust rules. Codacons, Movimento Difesa del Cittadino and Cittadinanzattiva filed a complaint with the European Commission on Monday, urging the EU competition enforcer to step in. At issue are franchise contracts, which on average last 20 years and so are twice as long as most other franchises, a requirement on licensees to lease premises from McDonald’s at above-market rates and conditions hindering them from switching to competitors, the group says.
BBVA Compass signs pact with BlackRock’s robo-adviser BBVA Compass, a unit of Spain’s BBVA group, said it signed an agreement with BlackRock Inc’s “robo-adviser”, FutureAdvisor, to help expand its automated investment advisory services. Robo-advisers use computer algorithms to pick a portfolio of exchange-traded funds and charge much lower management fees than traditional brokers do. BlackRock, the world’s largest money manager with US$4.5 trillion under management, bought San Francisco-based FutureAdvisor last year to help it provide financial institutions with technology-enabled advice capabilities. BBVA Compass, the first big bank to sign on FutureAdvisor, said clients would be able to use FutureAdvisor’s automated investment services in 2016.
OPEC president anticipates emergency meeting in March Saudi-led Gulf exporters within OPEC have so far refused to cut production to curb sliding prices
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PEC president Emmanuel Ibe Kachikwu said yesterday that he expects an extraordinary meeting of the oil cartel in “early March” to address nose-diving crude prices. “We did say that if it (the price) hits the 35 (dollar per barrel), we will begin to look (at)... an extraordinary meeting,” said Kachikwu, who is Nigerian minister for petroleum resources. The prices have hit levels that necessitate a meeting, he told an energy forum in Abu Dhabi, but added that he not yet confirmed with fellow OPEC ministers if they would be willing to attend. The US crude oil price tumbled below US$31 a barrel yesterday, extending a sell-off that has pushed it to more than 12-year lows amid a global supply glut, a strong dollar and tepid demand.
OPEC president Emmanuel Ibe Kachikwu
One group feels there is a need to intervene. The other group feels even if we did, we are only 30 to 35 percent of the producers really Emmanuel Ibe Kachikwu, president, OPEC
Saudi-led Gulf exporters within OPEC have so far refused to cut production to curb sliding prices, seeking to protect their market share despite a heavy blow to their revenues. Kachikwu said that member states differ on the issue of intervention. “One group feels there is a need to intervene. The other group feels even if we did, we are only 30 to 35 percent of the producers really,” as 65 percent of supply comes from non-OPEC countries, he said at the Gulf Intelligence UAE Energy Forum. “Unless you have this 65 percent (of) producers coming back to the table you really won’t make any
Fed’s Kaplan: four hikes not a sure thing in 2016 Investors are now focused on when the next rate hike will be, with economists predicting March Ann Saphir
U.S., major automakers to announce safety accord Friday The U.S. government and a group of global automakers are set to unveil a voluntary agreement at the Detroit auto show on Friday aimed at improving auto industry safety and spurring culture changes, according to company and government officials. The accord could set the framework for further discussions on safety reforms and mark a new era of cooperation between automakers and regulators after a record-setting year of safety fines, recalls and investigations into malfunctioning vehicles made by General Motors Co, Fiat Chrysler Automobiles NV , Honda Motor Co and others.
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our U.S. interest-rate hikes are “not baked in the cake” for the Federal Reserve this year, particularly given global stock market volatility set off by fears over a cooling Chinese economy, a top Fed official said on Monday. The Fed raised rates in December, the first rate hike in almost a decade and ending a seven-year stretch in which rates were held at a near-zero level in response to the 2007-2009 financial crisis and recession. Investors are now focused on when the next rate hike will be, with economists predicting March. Fed officials overall expect four
rate hikes this year, according to the median of their forecasts from December. “This is an unusual start to the year, obviously,” Robert Kaplan, the Dallas Fed’s new president, told reporters after a talk here. Concern about slowing growth in China roiled world markets in August and forced the Fed to hold off raising interest rates in September. This year has started off with global markets again rocked by plunges in Chinese stock markets, a fall in the yuan and subsequent heavy intervention by the Chinese authorities to push the yuan back up.
dramatic difference,” he added. US benchmark West Texas Intermediate (WTI) for February delivery was down around 2.8 percent, at US$30.54 per barrel, in Asian trade yesterday. European benchmark Brent North Sea crude fell 3.1 percent, to US$30.57. The last time prices were so low for WTI was in December 2003 and in April 2004 for Brent. Prices plummeted 10 percent last week on fears about the global supply glut and weakness in China, the world’s biggest energy user. AFP
“We went through this in August and September, we paused, we watched, we let events unfold, which is the right way to handle it, and we saw ultimately that underlying economic conditions remained intact and solvent,” Kaplan said. “There’s no substitute for time in assessing economic data as it unfolds,” Kaplan told reporters. Kaplan said he is not sure there will be enough economic data before the Fed’s next policy meeting in late January to justify raising rates then, but “between now and March I think there will be.” Kaplan’s comments differ somewhat from those earlier in the day from Atlanta Fed President Dennis Lockhart, who said there may not be enough data even by March to make a call for raising rates. Still, Kaplan, who was a long-time banker for Goldman Sachs, said he was withholding judgment about the implications of China’s market swings for the U.S. economy. “We have to pay attention to underlying economic conditions and we certainly have to watch what’s going on with financial conditions,” he said, adding that markets can swing one way one week and another the next. “You got to give it some time to see how things unfold,” he said. Reuters
Business Daily | 15
January 13, 2016
Opinion Business
wires
The Chinese economy’s great wall
Leading reports from Asia’s best business newspapers
GLOBAL TIMES Chinese e-commerce giant Alibaba has opened a store in the north China port city of Tianjin to lure buyers craving for imported products. The company has set up its own brick-and mortar shop to bring overseas products, from snacks to cosmetics, closer to consumers at home. Alibaba and arch-rival JD.com both launched online marketplaces over the past two years selling only imported products to court savvy Chinese online shoppers who prize quality over price. The Alibaba store is part of a 20,000-square meter retail outlet, which consists of several shopping arcades.
THE AGE The Royal Bank of Scotland (RBS) has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that the major stock markets could fall by a fifth and oil may reach US$16 a barrel. The bank’s credit team said markets are flashing the same stress alerts as they did before the Lehman crisis in 2008. “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.
THE PHNOM PENH POST On the back of a 28 per cent increase in profits last year, the country’s (Cambodia) largest bank Acleda Bank said it would increase its focus on development of its electronic banking infrastructure in the ASEAN region, but had no plans of going public yet, according to the bank’s CEO In Channy. The bank’s unaudited financial results show that the bank increased profit after tax from US$82 million in 2014 to US$105 million last year. Bank deposits grew 18 per cent to US$2.6 billion in 2015, whereas outstanding loans saw a 23 per cent uptick.
VIETNAM NEWS The Vietnamese Ministry of Information and Communications and South Korea’s Korea Communications Commission (KCC) agreed to co-operate in-depth in the television field in Ha Noi last Friday. The two sides agreed to sign a Memorandum of Understanding (MoU) in the first six months of this year and set up teams to boost their co-operation. Viet Nam and South Korea have worked together in the past to produce programmes and dramas and buy copyrights for TV shows. Korea’s Educational Broadcasting System (EBS) helped Viet Nam Television (VTV) to develop VTV7, a new national education channel, which was officially launched last Friday.
Mohamed A. El-Erian
Chief Economic Adviser at Allianz, is Chairman of US President Barack Obama’s Global Development Council
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he recent decline in China’s currency, the renminbi, which has fuelled turmoil in Chinese stock markets and drove the government to suspend trading twice last week, highlights a major challenge facing the country: how to balance its domestic and international economic obligations. The approach the authorities take will have a major impact on the wellbeing of the global economy. The 2008 global financial crisis, coupled with the disappointing recovery in the advanced economies that followed, injected a new urgency into China’s efforts to shift its growth model from one based on investment and external demand to one underpinned by domestic consumption. Navigating such a structural transition without causing a sharp decline in economic growth would be difficult for any country. The challenge is even greater for a country as large and complex as China, especially given today’s environment of sluggish global growth. For years, China’s government sought to broaden equity ownership, thereby providing more Chinese citizens with a stake in a successful transition to a market economy. But, like the United States’ effort to expand home ownership in the years preceding the 2008 crisis, Chinese policies went too far, creating a financially unsustainable situation that implied the possibility of major price declines and dislocations. As a result, the adjustment
challenge has grown dramatically. With Chinese companies no longer able to sell a rapidly increasing volume of products abroad and support further expansion of productive capacity, the economy has lost some important growth, employment, and wage engines. The resulting economic slowdown has undermined the government’s capacity to maintain inflated asset prices and avoid pockets of credit distress. In an effort to limit the detrimental impact of all this on citizens’ wellbeing, Chinese officials have been guiding the currency lower. A surprise devaluation last August has been followed by a number of lower daily fixes in the onshore exchange rate, all intended to make Chinese goods more attractive abroad, while accelerating import substitution at home. The renminbi has depreciated even more in the offshore market. China’s currency devaluations are consistent with a broader trend among both emerging and advanced economies in recent years. Soon after the global financial crisis, the US relied heavily on expansionary monetary policy, characterized by near-zero interest rates and large-scale asset purchases, which weakened the dollar, thereby boosting exports. More recently, the European Central Bank has adopted a similar approach, guiding the euro downward in an effort to boost domestic activity. But in pursuing its domestic objectives, China risks
inadvertently amplifying global financial instability. Specifically, markets worry that renminbi devaluation could “steal” growth from other countries, including those that have far more foreign debt and far less robust financial cushions than China, which maintains ample international reserves. This concern speaks to the even more challenging balancing act that China must perform as it seeks to play the role in global economic governance that its economic weight warrants. After all, China is
In pursuing its domestic objectives, China risks inadvertently amplifying global financial instability
now the world’s second-largest economy (and, by some nonmarket measures, the largest). And, indeed, China has lately been showing greater interest in gradually internationalizing its financial system. Notably, it recently succeeded in persuading the International Monetary Fund to add the renminbi to the basket of currencies that determines the value of the Special Drawing Right, the unit the IMF uses in dealing with its 188 member countries. That step – which places the renminbi on par with the major global currencies (the US dollar, the euro, the British pound, and the Japanese yen) – will enhance public- and privatesector acceptance of China’s currency in the international monetary system. At the same time, it created the expectation – though not the obligation – that China will refrain from aggravating global financial instability. There will come a time when China’s domestic and international responsibilities will again be relatively well aligned. But that time is not now; and, given the country’s tricky ongoing structural transition, it probably will not come anytime soon. In the meantime, it seems likely that China will continue to feel compelled to place its domestic obligations first, but in a nuanced way aimed at avoiding large disruptive tipping points for the global economy. Whether that will be enough to avoid disorderly outcomes, however, is not totally assured. Project Syndicate
16 | Business Daily
January 13, 2016
Closing Mainland brokerages’ profits soar despite stocks slump
Beijing wants dialogue on Korean Peninsula’s nuclear issue
Some of China’s brokerages have reported that their preliminary net profit growth for 2015 more than doubled from the previous year, demonstrating they were able to successfully negotiate the months-long stock market turmoil that began in mid-June. Since the Chinese stock market tumbled more than 40 percent in summer last year, brokerages have faced a clampdown on margin financing, a temporary suspension of listings and regulator probes for allegedly illegal activities. But these have not weighed down broker profits, which have risen on new account openings and margin finance gains, according to the preliminary 2015 results.
All sides concerned should work together to bring the Korean Peninsula nuclear issue to the negotiation table, a Chinese Foreign Ministry spokesperson said yesterday. It is imperative that dialog and negotiations are resumed to promote denuclearization of the peninsula, and to safeguard peace and stability in northeast Asia, spokesperson Hong Lei told a routine press briefing. Hong’s remarks came in response to mounting calls for tougher sanctions on the Democratic People’s Republic of Korea (DPRK) following its announcement last week that it had carried out a successful hydrogen bomb test.
Q4 GDP growth seen slowing to weakest pace since 2009 Beijing’s growth target for 2015 was “around” 7 percent, with the government rejecting suggestions that the figures were being inflated to meet official forecasts
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hina is expected to post its weakest economic growth since the global financial crisis in the fourth quarter, adding pressure on policymakers to take more steps to ward off a sharper slowdown that could jolt global markets. A renewed plunge in China’s stock markets and the yuan have stoked concerns among global investors about the health of the world’s secondbiggest economy, although analysts see few signs of an abrupt drop-off in activity. Growth in fourth-quarter gross domestic product likely slowed to 6.8 percent from the same period last year, down from 6.9 percent in the third quarter, according to a Reuters poll of 50 economists. That would be the weakest pace of expansion since the first quarter of 2009, when growth tumbled to 6.2 percent. The highest forecast in the poll was 7.1 percent and the
Leaders pledged to push for "supply-side reform" to generate new growth engines, while tackling factory overcapacity and property inventories
lowest was 5.3 percent, though some investors fear current growth levels could already be much weaker than the official data will suggest. Economic growth for the full year is expected to have cooled to its slowest pace in 25 years of 6.9 percent in 2015 from 7.3 percent in 2014, a central bank work paper said recently.
Fiscal stimulus eyed
While the government is
Banks’ borrowing rate for yuan in Hong Kong hits record
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expected to lean more on fiscal policy to support growth this year, the central bank may still need to keep monetary policy accommodative to help cushion the impact of structural reforms on the economy. Top leaders also pledged to push forward “supply-side reform” to help generate new growth engines, while tackling factory overcapacity and property inventories. The government could
widen this year’s budget deficit to about 3 percent, the biggest in perhaps half a century, as leaders turn to tax cuts and increased spending to support growth, policy advisers say, after disappointing returns from a year of monetary policy easing. The government is expected to target economic growth of at least 6.5 percent in 2016 - in line with a new five-year plan to fulfil a previously announced goal of doubling GDP and per capita incomes by 2020 from 2010 levels, policy insiders say. Analysts at Barclays expect the central bank to deliver two cuts in interest rates totalling 50 basis points and two cuts in bank reserve ratios totalling 100 basis points in the first half of 2016. The central bank has already cut interest rates six times since November 2014, and reduced the amount of cash that banks must hold as reserves to spur activity.
Other support measures have included more government spending on infrastructure and easing down payment requirements and other curbs on the cooling property sector.
Monthly data
A raft of monthly indicators will be released with the GDP data on January 19, and analysts will be looking for signs as to whether momentum is still fading or if the economy may be slowly stabilising. Factory output likely grew 6.0 percent in December from a year earlier, slightly down from November, as firms struggle to cope with persistent deflationary pressures due to overcapacity and softening demand. Annual growth of fixed asset investment, a crucial driver of China’s economy, likely eased to 10.2 percent in 2015 - the weakest expansion in nearly 15 years. Annual retail sales growth was seen at 11.3 percent in December, rising slightly from the previous month’s growth of 11.2. The customs office is due to publish December trade figures today. Exports were expected to have dropped 8 percent in December after sliding 6.8 percent in November and imports may have declined 11.5 percent in December from a year earlier, according to analysts polled by Reuters. Reuters
State planner sees 2015 GDP growth around 7 pct
UN releases Development Assistance Framework for China
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he rate at which banks charge each other to borrow yuan in Hong Kong surged to a record high yesterday, with China’s central bank thought to be buying huge amounts of the unit to fend off speculators. The overnight Hong Kong Interbank Offered Rate (HIBOR) for the offshore yuan jumped 53 percentage points to almost 67 percent owing to tight liquidity. The one-week rate also surged to 33.8 percent from 11.2 percent. But analysts say the move could backfire and further damage confidence in the Chinese economy, a key driver of global growth. The surge comes as traders around the world grow increasingly worried about China’s economy as it suffers a painful slowdown that has convulsed markets. Beijing’s decision last week to lower the value of the yuan against the dollar to a five-year low added to concerns, with the leadership’s handling of the crisis being called into question. This in turn has caused heavy selling of the Chinese unit, leading the People’s Bank of China to step in to buy yuan and sell dollars, tightening liquidity. The rate rise lifted the yuan’s value in Hong Kong, where it is more freely traded than on the mainland.
hina economy likely grew by around 7 percent in 2015 and added 13 million new jobs, the top economic planning agency said yesterday as it announced the approval of more large infrastructure projects to avert the risks of a sharper slowdown. China achieved its main economic targets in 2015, Li Pumin, spokesman for the National Reform and Development Commission (NDRC) told a news conference yesterday, a week before official fourth-quarter and full-year 2015 figures will be released. Still, growth of 7 percent would be the slowest in a quarter of a century, and down from 7.3 percent in 2014 as weak demand at home and abroad, industrial overcapacity and faltering investment weigh on the world’s second-largest economy. China approved 280 fixed asset investment projects worth 2.52 trillion yuan (US$383.44 billion) in 2015, Li said. Thirty-two projects worth 515.1 billion yuan were approved in December alone. The government has flagged that it intends to spend more on infrastructure to shore up economic activity, but it has faced delays, partly due to slow loan distribution, poor initial planning and high local government debt levels.
AFP
Reuters
he United Nations (UN) unveiled the new United Nations Development Assistance Framework (UNDAF) for China 20162020 yesterday. According to the plan, the UN system in China will support the country in three priority areas in the next five years, including poverty reduction and equitable development, an improved and sustainable environment, and enhanced global engagement. The framework represents a renewed commitment to continue the strong partnership between China and the UN. It provides a strategic direction that will guide the UN’s contributions to China’s development priorities, said UN Resident Coordinator Alain Noudehou. “In each of the three priority areas, particular focus will be placed on key underlying challenges posed by inequality, rapid urbanization and demographic changes, and environmental degradation,” he said. Vice Minister of Commerce Wang Shouwen commended the fruitful cooperation between China and the UN over the past decades at the launch ceremony of the UNDAF. The UN system in China consists of 24 UN funds, programs and specialized agencies in the country. Xinhua