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 Yuan clearing amount reaches 1.57 trillion yuan in 2015
Beijing bars certain financial firms from overthe-counter board
Page 8
Page 9
Year IV
Number 966 Thursday January 21, 2016
Publisher: Paulo A. Azevedo
Page 2
Chinese central bank deploys alternatives to RRR cut
Residential Property Woes Continue Unabated
Structural changes in the gaming business are blamed. Leading to casino-related businessmen investing less in property. While professional foreign tenants are in retreat. Coupled with the supply factor, with completion of units hitting a record high last year. Capital values for high-end homes tanked 22.1 pct y-o-y in 2015, with rental values plummeting 30.3 pct according to Jones Lang LaSalle (Macau) Ltd. The realtor expects the index to dip a further 10 pct in 2016 Page
5
Harsher penalties Amendments to the drug laws. Approved at their first reading in the Legislative Assembly. A 3-month jail term is set to become the minimum for drug-takers. Whilst collecting evidence and conviction procedures will be easier for authorities to fight crime
Economic temperature rising The Chinese growth figure. Revealed as a thermometer pointing to general economic malaise across the international front. In its global 2016 forecast highlighting the sluggish trend, the IMF says it’s not just a matter of emerging economies
Pages 8&9
Brought to you by
Page 4
CEPA services
HSI - Movers
A new agreement liberalising trade in services. Via the 2016 Mainland and Macau Closer Economic Partnership Arrangement (CEPA) Forum. Seeking to promote its principal policies. Following implementation, the Mainland will open up 62 new sectors to Macau’s service providers. For a grand total of 153 sectors
Name
Page 2
January 20
Trade union bill shot down again Not approved. For the sixth time. The trade union law has suffered numerous setbacks in the Legislative Assembly. Legislators opposing the bill argue its approval may lead to less foreign investments. While some asked the gov’t to step in, saying legislators are putting their own interests first. In defiance of the Basic Law
Page 4
Want Want China Hold
-0.20
CLP Holdings Ltd
-1.26
Swire Pacific Ltd
-1.48
China Resources Beer H
-1.62
Sands China Ltd
-6.26
Kunlun Energy Co Ltd
-6.51
Henderson Land Devel
-6.52
China Petroleum & Che
-6.95
Cheung Kong Property
-7.05
Galaxy Entertainment
-7.61
Source: Bloomberg
Economy www.macaubusinessdaily.com
%Day
Requiem for readjustment
I SSN 2226-8294
The gaming industry is losing steam. Reflected by its share of the city’s industrial structure. In 2014, Gross Value Added (GVA) generated by gaming dropped to 59.1 pct. Down 4.9 pct. Consequently dragging down the whole tertiary sector from 96.3 pct in 2013 to 94.8 pct of total GVA in 2014. Ending its continuous uptrend since 2006
Page 3
2016-1-21
2016-1-22
2016-1-23
14˚ 17˚
10˚ 15˚
8˚ 10˚
2 | Business Daily
January 21, 2016
Macau
DSE: CEPA deepening Macau-China economic co-operation In addition, the bureau plans to hold more CEPA-related events in the future to enhance local business’ understanding of CEPA opportunities Kam Leong
kamleong@macaubusinessdaily.com
D
irector of Macau Economic Services (DSE) Sou Tim Peng said the government would continue nurturing its economic co-operation with the Mainland based on the parties’ Closer Economic Partnership Arrangement (CEPA), adding that the bureau’s further task is to encourage the local business sector to grab the opportunities offered by the CEPA agreements. Yesterday, the SAR Government and the Chinese Ministry of Commerce jointly held the 2016 Mainland and Macau Closer Economic Partnership Arrangement (CEPA) Forum, focusing on introducing the new agreement liberalising trade
in services signed by the two parties last November. Speaking to reporters on the sidelines of the forum, the DSE director did not comment on whether there would be more CEPA agreements on their way for the Special Administrative Region. “We hope to continue boosting [our economic cooperation] with the Mainland based on the current CEPA agreements. This would be a continuous task and [the co-operation] would depend upon the economic development of Macau,” he said.
Service trade agreement
The new CEPA service trade agreement, signed by the two
governments on November 28 last year and effective this June, will expand the scope for local firms to provide services on the Mainland. Following implementation, the Mainland will open up 62 new sectors to the city’s service providers, making a total of 153 sectors. The new opened-up sectors include veterinary services, passenger transportation, supporting services to the road transport network, and services to the sports sector. In addition, the agreement will extend the Chinese commerce ministry’s current measures for the Administration of Record Filing of Hong Kong and Macau Service Suppliers Investment, implemented last
March 1, from being only applicable in Guangdong to the whole of the Mainland. The Director of Foreign Investment Administration of the Chinese Ministry of Commerce, Zhu Bing, said yesterday in his Forum speech that the total recordfiling investment by Macau companies in Guangdong Province reached 846 million yuan (MOP1.03 billion/ US$129.3 million) as at the end of last year.
Promoting CEPA to local firms
“Following the new CEPA agreement, we need to think what we can do for our business sector so that local businesses can seize the opportunities brought by
the agreements. After all, the ultimate goal of CEPA is for the local economy, as well as providing more space for local firms to develop their business,” the economic bureau director said. “We hope to provide more specific breakout sessions in the future, so the business community would enhance their understanding of the CEPA agreements and the prospects for them to develop their business in the Mainland,” Mr. Sou added. The two regions’ CEPA agreement was initiated in 2004, with the aim of promoting the mutual economic prosperity and development of the two places. Last year, the local export value of CEPA goods to the Mainland totalled MOP101.4 million (US$12.7 million), jumping 7.6 per cent from 2014’s MOP94.2 million, according to the official DSE data. Meanwhile, as at last yearend, a total of 592 ‘Macau Service Supplier’ certificates were issued to local firms. The certificates allow local enterprises to operate their businesses on the Mainland under the CEPA agreements. Yesterday’s forum also included two breakout sessions, one of which was for financial and accounting services, while the other was for legal, construction and related engineering, audio-visual, culture, tourism, technical testing, analysis and product testing, telecommunications, computer and related services.
Yuan clearing amount reaches 1.57 trillion yuan
T
he total renminbi clearing amount in the territory jumped 22.8 per cent year-on-year to 1.57 trillion yuan (MOP1.92 trillion/ US$138.6 billion) in 2015, which ranks it 9th in the world, said Yao Jian, Deputy Director of the Central People’s Government’s Liaison Office in Macau SAR, according to local Chinese broadcaster TDM radio. Of the renminbi clearing business, 7.6 billion yuan was made for banks of Portuguese-speaking countries, a 15 per cent increase year-on-year. Mr. Yao praised Macau’s ability and potential in operating the renminbi clearing business as well as its trade and commercial co-operational service platform between China and Portuguese-speaking countries. Mr. Yao made the remarks at an interlocution session of reminbi business to luso countries held by
Bank of China Macau Branch (BOC Macau) and International Lusophone Markets Business Association. Vice director of BOC Macau, Wang Jun, said that the bank will
continue to facilitate the building of the service platform of trade and commerce co-operation between China and the Portuguese-speaking countries and actively play its role
as the platform for co-ordinating the central government’s strategic policies, such as ‘One Belt, One Road’. Mr. Wang added that it will further enhance the promotion and usage of renminibi in luso countries in order to promote the internationalisation of the reminbi and provide more convenience for financial and trade exchanges between China and luso countries. BOC Macau is the city’s only bank authorised by China’s central bank - the People’s Bank of China (PBOC) - to operate renminbi clearing services. In August last year, the central bank allowed the local BOC branch to expand the scope of the company’s yuan clearing business to Portuguesespeaking countries from Macau, Hong Kong and the Association of Southeast Asian Nations.
Business Daily | 3
January 21, 2016
Macau
Gaming industry’s share in industrial structure drops to 59 pct in 2014 The Gross Value Added that the industry produced in 2014 decreased 8.4 pct y-o-y Kam Leong
kamleong@macaubusinessdaily.com
T
he city saw the gaming industry’s contribution to the total Gross Value Added (GVA) of the Special Administrative Region plunge 4.9 percentage points in 2014, accounting for 59.1 per cent of the total, according to the 2014 Industrial Structure report released yesterday by the Statistics and Census Service (DSEC). In 2014, the GVA of all economic activities at producers’ prices dropped 2.8 per cent year-on-year in real terms following that of Gaming & Junket activities registering a year-on-year decline of 8.4 per cent due to decreased gross gaming receipts. The drop in the GVA of the gaming industry led the GVA of the whole tertiary sector, also known as the service sector, to decrease by 4.2 per cent in real terms compared to 2013. The relative importance of the sector thus declined from 96.3 per cent in 2013 to 94.8 per cent of the total GVA in 2014, ending its continuous uptrend since 2006. Nevertheless, some service
industries remained buoyant, according to DSEC. In 2014, the GVA of Transport, Storage & Communications went up 19.4 per cent year-on-year in real terms, Education was up 15 per cent, and Renting & Business Activities was up 12.9 per cent, while Hotels & Other Provision of Short-Stay Accommodation also increased 12 per cent. Meanwhile, Wholesale & Retail saw its contribution to the total Gross
Value Added stay virtually at 5.3 per cent compared with 2013.
Secondary sector’s share up
As the contribution of the service sector to the total GVA decreased, the proportion of the secondary sector, which is related to production and construction, rose by 1.5 percentage point year-on-year to 5.2 per cent in 2014. The hike in the relative importance of the secondary sector was contributed
to by the outstanding growth in the construction sector’s GVA, up 40.6 per cent year-on-year in real terms, causing the whole secondary sector’s GVA to jump 34.7 per cent in real terms. DSEC indicated that the surge in the construction sector’s GVA was attributable to the construction of major tourism and entertainment facilities as well as increased investment in building construction. The government department noted it has used producers’ prices for calculating and analysing the data in yesterday’s report, rather than basic prices used for the previous reports. ‘The difference between basic prices and producers’ prices is that the former does not include taxes on products. As the gaming sector assumes a leading role in the economy of Macao and gaming tax is enormous, valuation of gross output and gross value added of the industry at producers’ prices can provide a more accurate measure of the contribution of the industry to the economy,’ it explained.
4 | Business Daily
January 21, 2016
Macau MSAR Gov’t: No timetable for Macau cars entering Hengqin Regulations regarding single-licence plate Macau vehicles entering Hengqin hasn’t been decided yet and there is no timetable for when the measure will come into practice, according to a statement issued by the SAR Government Spokesperson’s Office. This comes after Chinese media reports saying Zhuhai authorities have said that such a measure will hopefully become effective this June. Hengqin authorities reportedly denied hearsay of prerequisites such as investing in Hengqin, buying property or paying deposits. However, the MSAR Government indicated in its statement that no regulation has been approved by the Guangdong provincial government. It added that Macau and Zhuhai are in negotiations with relevant arrangements to be officially announced in due course.
Legislative Assembly rejects trade union law for 6th time The consequences of approving a trade union law during the current economic slowdown was the most used argument against the bill, with some legislators calling upon the government to approve a bill required by the Basic Law Joao Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he Legislative Assembly (AL) has rejected a trade union law proposed by legislators Ella Lei Cheng I, Lam Heong Sang and Kwan Tsui Hang. The vote took place yesterday with 18 votes against, 12 for, and one abstention. This makes the sixth time that the draft of a trade union law has been rejected by the Legislative Assembly, in spite of being one of the requirements of the Macau Basic Law. Yesterday, one of the most used arguments against the bill was that it would drive investors away from the territory, which would aggravate existing economic problems. “This law will break the existing balance in negotiations between
performing poorly and this law will only bring problems and drive away foreign investment. It will not help create jobs and the priority is to bring investment. As such, I am against it at this moment”, Tsui Wai Kwan stressed.
Deadlock
employers and employees. This will increase the financial pressure on SMEs, who are already struggling and have other issues to take care, as the economy is not
performing well”, legislator Ma Chi Seng said. “Different proposals on a trade union law have been rejected many times in the past. Now the economy is
On the other hand, the legislators who introduced the bill to the AL argued that there is a need to fill the existing gap because of the lack of a law on trade unions. Ella Lei went as far as to say that the bill would not have an impact on the economy because it has gone through expansion and recession periods even without it. This viewpoint was also shared by Au Kam San.
“Before we said there was an expansion of the economy and people argued it was not the time to approve it. Now there is a slowdown and some legislators are saying it is not the time. So when is the time to approve it?” he asked. In the past, Jose Pereira Coutinho was involved in five different proposals for a trade union law, which were all rejected by the house. Yesterday, he demonstrated his support for the bill once more. “I believe this bill is a step forward, even if it is very different from the law on trade unions I suggested in the past. As such, I vote for it”, he said. The fact that a solution for such legislation has not been reached in almost 16 years, since the handover in 1999, has led legislator Vitor Cheung Lup Kwan to ask the government to step in and offer a solution to the problem, as he perceives the Legislative Assembly is not able to do it. “It’s better if the legislation on trade unions is proposed by the government. Otherwise, the legislators will not be able to reach an agreement because everyone here will be more interested in protecting their own interests”, he said. “The government has failed to do its job because it has not offered a solution for this problem”, legislator Antonio Ng Kuok Cheong declared.
Legislators approve tougher penalties for drug crimes The crime of drug-taking will now be punished by a penalty of at least 3 months in jail, previously the maximum punishment
Y
esterday, the Legislative Assembly approved, in its first reading, changes to the law on drug production, smuggling and consumption vis-à-vis the implementation of harsher penalties. The amendments to the bill were approved with 29 votes in favour and one abstention by legislator Gabriel Tong. The changes approved increased the minimum jail sentence for drug trafficking from 3 to 5 years, while the maximum penalty remains unchanged at 15 years. “The penalties most commonly decided by the courts are relatively soft, which makes it difficult for the penalties to work as a dissuasive factor”, the Secretary for Administration and Justice Sonia Chan Hoi Fan said in justifying the need to amend the law. Regarding drug-taking, the penalty was increased from a maximum of 3 months in jail to a minimum of 3
months and a maximum of one year. The authorities say they hope that the harsher penalty would lead to drug abusers appealing for probation and rehabilitation programmes rather than choosing to serve time in jail. “Our option is to increase the jail sentences because we want drug users to suspend their time in jail and go for rehab. Nowadays, because the maximum sentence is only three months, they prefer to spend the time in jail instead of looking for the cure of their addiction”, Ms. Chan explained, before adding that on average drug users found guilty were sentenced to only 1.9 months in jail in 2014. In addition, the changes approved yesterday by the Legislative Assembly also better facilitate the collection of evidence as well as [addressing the] relatively larger quantities of drugs seized with the intention of trading. “Un ti l n o w, p r o v i n g th a t apprehended drugs were for selling
and not for consumption was not very easy for the authorities. But these changes will make it easier for the police to relate large quantities of drugs to smuggling and not consumption”, the Secretary said. At the conclusion of the vote,
legislator Gabriel Tong justified his abstention by saying that the solution offered by the new law for the crime of drugs use “was only to increase lightly the jail penalty for this type of crime”. J.S.F.
Business Daily | 5
January 21, 2016
Macau
Jones Lang LaSalle: High-end homes fall to persist this year The estate agency forecasts that the capital value and rental value of high-end homes may fall by 10 per cent this year Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he city will see the rental and capital value for high-end homes continue to shrink this year given last year’s plunge following the contraction of the casino business and slower growth in the number of professional foreign tenants, Jones Lang LaSalle (Macau) Ltd. has concluded in its year-end property review. For 2015, the estate agency said it has seen the capital value for high-end homes in Macau drop 22.1 per cent year-on-year; this index could drop another 10 per cent this year with lower investment demand expected courtesy of ongoing structural changes in the gaming business. “In the past decade, the average number of home completions was around 2,200 units a year. But in 2014 and 2015, we actually saw this number hitting a historical high,” said Jeff Wong, Head of Residential at Jones Lang LaSalle (Macau) Ltd. in yesterday’s property review briefing. By November of last year the number of new residential completions amounted to some 3,321 units – a number that included some notable projects like One Oasis, Paragon and Nova Park, the estate broker said. “Coupled with the supply factor, we have seen the adjustment phase of the gaming industry,” Mr. Wong explained regarding the fall in highend homes transactions last year, “In the past, many property investors, especially for the high-end, were from casino-related businesses. But as their capital fell short they no longer wanted to invest, or it is now more difficult for them to invest in property.” Meanwhile, the estate agency’s rental value for high-end homes plummeted 30.3 per cent year-on-year for last year following slower growth in blue-card renewals, especially those for senior expatriate executives, as well as the fact that more VIP gaming promoters have moved out of the luxury housing market.
In the past, many property investors, especially for the highend, were from casinorelated businesses. But as their capital fell short they no longer wanted to invest, or it is now more difficult for them to invest in property Jeff Wong, Head of Residential at Jones Lang LaSalle (Macau) Ltd
“In [the beginning of] 2011, the growth of professional foreign labour was 7 per cent,” said Mr. Wong citing official figures. “But as of November, this growth has already dropped to 3.68 per cent, which is significantly slower. With more units available now in the leasing market, that would spell a big adjustment to high-end home rentals.” Jones Lang LaSalle Macau forecasts that the rental value for high-end homes will see a drop of 10 per cent for this year, a bigger correction compared to the expected 5 per cent drop in rentals for mass and medium residential units. The estate agency predicts that over 2,600 residential units will be completed this year, of which about 65 per cent have been sold off-plan. From this year to 2020, the total number of new residential
completions will be about 16,287 units, the agency said.
Cautious expansion
The estate agency also expects a fall in the retail property market, which has already seen a nearly 15 per cent year-on-year decrease in rental cost for high street shops and a 16 per cent fall in their capital value last year. For this year, the agency expects a 10 per cent to 20 per cent fall in the rental index for High Street shops, and another 10 per cent to 15 per cent drop in capital value in the segment, according to Associate Director, Retail at Jones Lang LaSalle Macau Oliver Tong. “On the one hand, retailers don’t have an optimistic outlook for this year,” Mr. Tong said. “Meanwhile, they’re generally very cautious about their expansion plans here on the
consideration that they don’t want cannibalisation in their existing shop network, or that they still want to rent a shop space at a fair price.” The agency expects the sales of Grade A offices will experience a downturn this year with capital values falling 10 per cent to 15 per cent. The capital value of Grade A offices already dropped 20.7 per cent last year. Managing Director Gregory Ku explained that the estimate was based on the forecast that companies here would be less keen on expansion or would even reduce their budget and size down their office area. Mr. Ku also said of the estimate that the rental value of Grade A offices may drop 10 per cent to 15 per cent this year, having shrunk nearly 6 per cent in 2015, induced by significantly reduced demand from offshore, gaming-related and Chinese-based investment companies.
Corporate Special charity cookies gift by Macau Design Centre
34 organisations recruiting IFT students The Institute for Tourism Studies ‘Career Day 2016’ is currently being held on IFT’s Taipa Campus. The event seeks to provide more information on the employment trends and prospects in the tourism and hospitality industry for graduating students, thus increasing their chances of success in job hunting. Some 34 organisations with over 1,700 job vacancies in the tourism and services industry have joined
the event. Representatives from the participating organisations are introducing career prospects and positions available in their companies as well as arranging onsite interviews for graduating students and participants. Graduates-to-be and participants are enthusiastic about the event. Questions regarding employment trends and employers’ expectation are being raised and discussed at the fair.
For the first time Macau Design Centre (MDC) has collaborated with a local designer, a Le Cordon Bleu pastry chef, and beneficiary Orbis, to release charity cookies with specially designed packaging to raise funds, themed ‘Blessing’. MDC invited Shidu Art Consultants to design two New Year festive collection gift boxes combined with three types of French butter flavoured cookies baked by Le Cordon Bleu graduate and pastry chef Betty. MDC organised this charity bazaar with the final objective of donating all proceeds to Orbis for its sight-saving work in developing countries. The event was inspired by the emotional awareness of ‘Vision, taste, feeling’, bringing best wishes at New Year and inspiring others to help the needy through design.
6 | Business Daily
January 21, 2016
Macau
SARs brace for tourism ‘winter’ as Mainland visitors stay away Analysts forecast trips by Mainland Chinese to Hong Kong and Macau to average 3 per cent growth over the next five years, compared with 16 per cent growth for all other markets
T
our groups to Hong Kong could shrink by as much as two-thirds in the first half of this year, an industry executive said, dealing another blow to retailers and an economy facing pressure from slowing growth in China. China accounts for almost three-quarters of all visitors to Hong Kong, which relies on tourism for about 5 percent of its GDP. Tourism numbers, however, fell last year for the first time in more than a decade and Ricky Tse, chairman of the Hong Kong Inbound Tour Operators Association, told Reuters he expects a further decline this year as the strong Hong Kong dollar continues to drive mainland Chinese to comparatively cheaper destinations such as Japan and South Korea. “The drop will continue for sure. The winter has just
begun,” Tse said, adding that he expected the number of tours by Chinese visitors to fall by as much as 60 percent in the first half of this year after halving in 2015. Government data shows tourist arrivals to Hong Kong fell 2.5 per cent year-on-year in 2015 to 59.32 million, the first decline since 2003 when the city was hit by an outbreak of Severe Acute Respiratory Syndrome (SARS). This decline has hit luxury retailers including Chow Tai Fook Jewellery, Cartier owner Richemont and Burberry Group PLC, with the latest available data showing overall retail sales falling for the ninth consecutive month in November, the longest period of decline in 13 years. Chow Tai Fook, China’s largest jewellery retailer by market value, said this month it will close 5-6 stores this fiscal year as tourism remains weak. Brokerage CLSA report, forecast trips by mainland Chinese to Hong Kong and the neighbouring gambling hub of Macau to average 3 per cent growth over the next five years, compared with 16 per cent growth for all other markets. “The move away from pure shopping trips is one of the main reasons that led to the slowdown in Hong Kong,” CLSA said in a recent report. “Looking into 2016, we believe the trend will continue.” Reuters
Business Daily | 7
January 21, 2016
Hong Kong
Swiss watch brands mull future of Hong Kong show as demand wilts Demand for pricey timepieces in the SAR has suffered from China’s crackdown on extravagant spending and currency fluctuations that make watches less expensive in other markets
T
he Swiss organizer of an annual Hong K ong watc h fair and some of the exhibiting brands are considering holding the event every other year amid declining sales in the industry’s largest market. The Fondation de la Haute Horlogerie in 2013 started Watches & Wonders, as the exhibition is known, branching out from the two biggest trade shows in Switzerland, the SIHH and Baselworld. While this year’s fair will take place, the group is in
talks with exhibitors on the future format of the show, according to Richard Mille, Chief Executive Officer of the namesake independent watchmaker. The event mainly showcases Richemont-owned brands like Montblanc, Cartier and Vacheron Constantin. “Some brands have been fighting to get out, completely out, to stop the Watches & Wonders,” Mille said in an interview at the Geneva watch salon on Tuesday, declining to name the brands. “Some of the brands want to do it every
two years, some say every year. It’s a negotiation.” A Richemont representative declined to comment, and the Geneva-based Fondation didn’t immediately respond to a request for comment. Demand for pricey timepieces in Hong Kong has suffered from China’s crackdown on extravagant spending and currency fluctuations that make watches less expensive in other markets. Swiss watch exports to the island city plunged 23 per cent in the first 11 months of 2015, and are facing the first annual decline
Xiao Nan Guo to close up to ten restaurants
H
ong Kong-listed Xiao Nan Guo Restaurants Holdings Ltd., which also operates restaurants in Macau, told the Hong Kong bourse yesterday that it is closing eight to ten loss-making restaurants. While not specifying which restaurants the company is closing, it explained that the decision is to maintain the ‘positive development of the group’s overall business’. Xiao Nan Guo currently operates two restaurants in Macau: a Chinese restaurant under the brand of ‘The Dining Room’ in casino-hotel Altira Macau and the ‘Shanghai Min’
Chinese restaurant in City of Dreams. The restaurant operator also owns interests in the POKKA Cafe brand in Hong Kong and Macau. Although Xiao Nan Guo said it has seen same-store sales increase in the year ended December 2015, the company said it expected to record a loss in net profit for the year ended December 2015. The expected loss is mainly attributable to one-off asset writeoffs caused by closure or disposal of certain loss-making restaurants, the company said in the filing citing a preliminary review of operational data. S.L.
since 2009. The industry is already pulling back, with TAG Heuer shuttering a store there in August. Mille, who said the main reason for brands reconsidering the show is the time and investment it requires, would still prefer the exhibit to go on every year. Richard Mille’s watches start at about 70,000 Swiss francs (US$70,000) and can reach 1.8 million francs.
‘Not cheap’
“The objective of going there was to make contact with clients who maybe couldn’t or
wouldn’t go to the boutiques, and we could enlarge our client data base easily,” Mille said. “It’s not cheap, but it’s worthwhile.” Montblanc Chief Executive Officer Jerome Lambert said, “it’s too early to say where it goes and how it goes and what will be done. Whatever happens, we’ll remain very active in Hong Kong with major exhibitions.” Hong Kong also plays host to the annual Hong Kong Watch & Clock Fair, which had almost 800 exhibitors last year. Bloomberg
8 | Business Daily
January 21, 2016
Greater China
Slowdown in growth risks global collatera
Prices for raw materials plunge have hammered nations which rely heavily on their prod Antonio Rodriguez
Wang Baoan, Director of the National Bureau of Statistics speaks to reporters during a press conference announcing China's GDP and economic data in Beijing on Tuesday
PBOC’s Ma says new tools substitute for bank reserves cuts The central bank may be preferring market-based ways of adding funds as it retools its monetary policy framework
C
hina’s central bank is substituting new tools to step up cash injections with open-market operations instead of cutting the required reserve ratio for big lenders, according to the monetary authority’s chief economist. The People’s Bank of China has added liquidity support through three different channels as an
alternative to cutting the reserve requirement ratio for major lenders, Ma Jun, chief economist at the monetary authority’s research bureau, said in an interview yesterday with China Central Television. Ma is not in a policy making role. The PBOC’s recent liquidity support is acting as a “substitute for a reserve-ratio requirement cut,” Ma told
the state-run broadcasting network. The cash injections come as slower economic growth spurs capital outflows and amid a seasonal rise in demand for cash ahead of the week-long Chinese New Year holiday, which starts next month.
Retooled framework
The liquidity injections reduce the likelihood of a
required reserve ratio cut in the short to medium term as the coming liquidity supply is equivalent to a RRR reduction, Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong, wrote in a report. The PBOC may be preferring market-based ways of adding funds as it retools its monetary policy framework and seeks to avoid further yuan depreciation expectations. Money market conditions remained tight yesterday despite the PBOC injections. China’s 14-day moneymarket rate jumped the most since June as capital outflows and cash hoarding in the runup to the Lunar New Year holidays outweighed central bank injections. The cash injections will play a positive role in helping to stabilize market expectations and interest rates, Ma said in an interview with CCTV. He cited three of the central bank’s liquidity tools: the Medium-Term Lending Facility, Standing Lending Facility and Pledged
Supplementary Lending tools. The PBOC may want to avoid using a broad policy tool such as RRR because it may add downward pressure on the yuan, said Ming Ming, head of fixed income research at Citic Securities Co. in Beijing who formerly worked in the PBOC’s monetary policy division. The yuan fell to a five-year low last week and is down almost 6 percent over the past year. The PBOC has announced almost 900 billion yuan (US$137 billion) worth of injections via the avenues Ma noted and reverse repurchase agreements since Thursday, with almost half of that concentrated in a 410 billion yuan MLF operation announced late Tuesday, according to Bloomberg calculations. “This clearly points to further easing bias in China’s monetary policy, especially after the weak GDP figures,” Zhou Hao, an economist at Commerzbank AG in Singapore, wrote in a report Tuesday. “The size of this round of liquidity injection is almost equivalent to a 50 basis-point cut to the reserve requirement ratio.” The last RRR cut was in October, when the PBOC lowered the ratio for major banks to 17.5 percent. The central bank at the same time cut the main lending rate to a record low 4.35 percent, the sixth-straight reduction since late 2014. Bloomberg News
Business Daily | 9
January 21, 2016
Greater China
al damage
duction and export
S
lowing growth in the Chinese economy carries major risks for emerging markets, and a drop in global trade could harm Europe and the United States as well, analysts warn. Hours after Chinese authorities reported Tuesday that the economy grew by 6.9 percent in 2015, the International Monetary Fund (IMF) warned of “spillover effects” from a sharper-than-expected slowdown in Chinese trade as it trimmed its global growth forecasts for 2016. China grew last year at the slowest rate in a quarter century, according to the official figures, yet that pace was in fact a bit higher than what many analysts had been expecting. It also lies within Beijing’s target range as it looks to recalibrate the economy to a more sustainable model. That helped calm markets, which have plunged in recent weeks on fears about the ability of Chinese authorities to manage the economy after poor handling of a meltdown on its stock exchanges. “Meeting the economic growth target for 2015 goes some way to offset concerns that Chinese authorities’ mismanagement of the stock market would spill over into their management of the economy in 2016,” said analyst Jasper Lawler at CMC Markets UK.
But overall the outlook for the Chinese economy is for further slowdown. The IMF did not cut its forecast for China, which sees it slowing to 6.3 percent growth this year. The slowdown in the world’s second-largest economy, and the largest consumer of commodities, has caused the prices for raw materials to plunge, hammering nations which rely heavily on their production and export. “Raw-material producing nations are already paying a high price” for the Chinese slowdown and the plunge in commodities prices this has caused, said Christine Rifflart, author of a study on emerging markets at the French Economic Observatory. “The marked slowdown in China has caused collateral damage, resulting in very sharp recessions in raw-material exporting countries,” she said. “We are much more concerned about the perspective of emerging markets besides China, in particular the countries which produce raw materials” than China itself, said Jean-Michel Six, chief economist for Europe, the Middle East and Africa for Standard and Poor’s rating agency. Spillovers and repercussions The IMF’s chief economist, Maurice Obstfeld, also warned of the “large spillover effects” caused by the plunge in commodity prices. His colleague Gian Maria MilesiFerretti, the deputy director of the IMF’s research department, called for more attention to the “repercussions” of China’s slowdown. “And of course for the emerging world we have to watch very carefully what is happening in countries facing difficult economic situations, Brazil and Russia come to mind.”
The French Economic Observatory’s Rifflart pointed out that many commodity-exporting nations and companies have “very little margin for manoeuvre”. Many loaded up with debt in recent years when credit was cheap, often to meet higher Chinese demand. Now with US interest rates rising credit has become more expensive and the dollar has strengthened against emerging market currencies, making it costlier to service dollardenominated debt, just as the drop in commodities prices has hit revenues. “The Chinese slowdown comes at a moment when emerging markets are already in a difficult situation,” said Rifflart. “I don’t see sources for a mediumterm rebound in growth for oil and raw material exporters,” she said. As global trade slows, other nations will be hit as well. “There will be a domino effect via real effects such as slowing demand and a consequent drop in trade,” said Rifflart. In Europe, Germany is in the most exposed position as seven percent of its exports go to China. But problems there could quickly ricochet to its neighbours. Moreover, Chinese companies may react to their slowing home market by dumping unsold inventory abroad -- “a deflationary risk for the rest of the world,” said Olivier Garnier, chief economist at French bank Societe Generale. That prospect will not cheer the European Central Bank (ECB), which has been pumping 60 billion euros (US$65.5 billion) of stimulus into the eurozone economy per month to ward off deflation. AFP
Beijing bars some financial firms from listing on OTC exchange The latest measures come less than a month after the New Third Board suspended listings by private equity firms
C
hina’s biggest over-the-counter (OTC) equity exchange has suspended listings by certain kinds of financial firms, people told Reuters, its latest restriction aimed at reducing market risks in the fastgrowing alternative listing venue. The three sources said they had received notices from the exchange telling them of the new policy on listings on China’s New Third Board, including a source in a company that had been planning to list. The latest ban includes a halt on listings of certain kinds of financial firms, such as peer-to-peer lending companies and pawnshops. The suspension would not include traditional financial firms such as banks, trust firms and brokerages. “We’ve just received notice to suspend listings of all financial firms, regardless of which stage they’re at,” an underwriter, who declined to be named, told Reuters late on Tuesday. The operator of New Third Board declined to comment. The Beijing-based exchange was set up three years ago by the government with the mandate of funding China’s small companies who could not access China’s stock market. The OTC board has expanded rapidly on government support, with the number of companies traded there surging to 5,499, almost double the
number of Chinese firms listed on the stock exchanges. However, trading on the exchange has been extremely volatile, with the New Third Board index doubling in the first four months of 2015, before slumping 40 percent in the following three months. The recent volatility has prompted regulators to step up supervision. The latest measures come less than a month after the New Third Board suspended listings by private equity firms, signalling an expansion of restrictions on financial firms’ fundraising on the board. Analysts said that fundraising by newly-barred financial institutions on the New Third Board has been huge, squeezing out funding by other types of companies, and raising concerns that their proceeds are not being used properly. Private equity firms including China Science & Merchants Investment Management Group and Beijing Tongchuang Jiuding Investment Management Co have been raising tens of billions of yuan in the OTC market. Their rival CITIC Capital has also said that it plans to list a subsidiary on the New Third Board to build an exclusive platform for its yuandenominated private equity business. Reuters
KEY POINTS New Third Board bars pawnshop, lending firm listings-sources Private equity firms already barred from listing on the board Regulators tighten supervision over rapidexpanding OTC board
Service outsourcing grows in 2015 China’s service outsourcing industry continued to grow in 2015 despite subdued economic growth, with both onshore and offshore contracts posting remarkable increases in value, official data showed yesterday. Chinese companies inked service outsourcing contracts worth US$130.9 billion, up 22.1 percent year on year, Shen Danyang, spokesperson for the Ministry of Commerce, told a press conference. Of the total, offshore service outsourcing contracts reached US$87.29 billion, rising 21.5 percent from a year earlier.
Venezuela to investigate Mainland loans Venezuela’s new opposition-led Congress plans to investigate state-run oil company PDVSA’s financial health and hefty Chinese loans, a lawmaker said on Tuesday. The OPEC member country depends on oil for nearly all of its export revenue. With the political opposition in control of the National Assembly since this month, rivals of leftist President Nicolas Maduro want to use their new perch to push for greater transparency and accountability at PDVSA. “We want to know the real state of PDVSA’s books,” Elias Matta, an opposition said. “The country wants to know how the money from the Chinese funds were spent.”
ODI growth slows in December China’s non-financial outbound direct investment (ODI) rose 6.1 percent year on year in December, slowing from a 12.6-percent increase in November, data from the Ministry of Commerce (MOC) showed yesterday. China brought in 86.5 billion yuan (US$13.89 billion) of ODI in December, MOC spokesperson Shen Danyang said at a press conference. ODI for 2015 hit an all time high of US$118 billion, with investment in ASEAN member countries and the United States soaring more than 60 percent year on year, Shen said.
EU steel afraid of national economy status Granting China market economy status this year would threaten nearly all the 330,000 jobs in Europe’s steel sector despite any safeguards the EU might impose, the head of steel industry body Eurofer said. The warning came a day after Europe’s second largest steelmaker Tata Steel announced another 1,050 job cuts in Britain. Its chief executive warned the entire EU steel sector is at risk without fast action against unfairly traded imports. But EU trade policy looks to be heading in the opposite direction.
Xinjiang to boost textile workforce over next five years Northwest China’s Xinjiang Uygur Autonomous Region aims to create 200,000 jobs in the textile sector for low-income residents over the next five years, the regional economic and information technology commission said. The region created 130,000 jobs in the textile industry over the past five years. Twenty-two enterprises have recently opened in Aksu Textile Park in southern Xinjiang, producing 10 million meters of cotton cloth with 800,000 spindles every year. Ninety-five percent of the 1,500 workforce for one of the 22 businesses in the park identify as ethnic minorities.
10 | Business Daily
January 21, 2016
Greater China
Bank of China targeted by U.S. over money-laundering controls Last month, the lender’s U.S. division agreed to fix policies for finding and reporting suspicious behaviour among its customers Jesse Hamilton
Any enforcement action is a strong message to an institution Robert Serino, partner, BuckleySandler
B
ank of China Ltd. must boost its money-laundering protections in the U.S. in response to a regulator’s enforcement action that cited deficiencies involving one of the world’s biggest lenders. The yet-to-be-disclosed case was brought by the U.S. Office the Comptroller of the Currency (OCC), according to a copy of the regulator’s order obtained by Bloomberg News. The OCC routinely leaves a bank’s specific transgressions out of enforcement actions, so the agreement doesn’t detail what Bank of China’s U.S. operations did wrong. The regulator hasn’t imposed a fine.
Still, the action adds to troubles for the Beijing-based lender. Last year, prosecutors in Italy began pursuing Bank of China officials on accusations they helped move billions of dollars for clients involved in counterfeiting and prostitution. In the OCC action, which was signed last month by Chen Xu, head of the bank’s New York branch, the lender’s U.S. division agreed to fix policies for finding and reporting suspicious behaviour among its customers, keep better track of currency transactions and limit its vulnerability to financial crimes.
Bryan Hubbard, an OCC spokesman, confirmed the enforcement action but declined to comment on what the agency found wrong at the bank or whether any further consequences could result. Requests for comment to Bank of China about the OCC agreement and the other allegations the lender is facing were directed to Brett Philbin, an outside spokesman at Edelman for the bank. Philbin didn’t respond to requests for comment.
‘Strong message’
“Any enforcement action is a strong message to an institution,” said Robert
Serino, a partner at BuckleySandler LLP in Washington, who formerly ran the OCC’s enforcement and compliance division. It means the OCC either couldn’t get the bank to fix its controls internally, or whatever the agency discovered was so serious it needed a swift, higher-level response, he said. Formal agreements like this aren’t the most stringent action the agency can take, but they sometimes develop into tougher punishments -- even financial penalties -- if the firm’s response doesn’t satisfy the regulator, according to Serino. Separately, the Chinese bank is battling a judge’s contempt finding in a civil case in New York. U.S. District Judge Richard J. Sullivan in Manhattan said last year the bank must produce information on its clients accused in a legal fight over counterfeiting luxury goods. The bank argued that could violate China’s customer-secrecy practices, according to court documents. Sullivan’s order in November cited the bank’s “refusal to comply with U.S. law, while it continues to receive the benefits attendant to its banking activity in the United States,” and he said the bank is “flouting” the court’s orders. Failing to meeting Sullivan’s order, which had a deadline last week, means a fine of US$50,000 a day, but it’s unclear what the bank is doing about it.
Air pollution abates, but winter a problem Shanghai was among the cities where air quality worsened in 2015 John Ruwitch
A
ir pollution levels fell in most cities in China last year, environmental group Greenpeace said yesterday, but a humid and windless winter shrouded swaths of the country in choking smog, slowing improvement in the second half. Beijing hoisted its first ever
“red alerts” on air pollution in December, when a blanket of humid, still air trapped haze over the capital. The episode followed heavy criticism of the government for inaction during a prior bout of hazardous smog. “Despite Beijing’s choking winter of red alerts, data from 2015 clearly shows
a continued positive trend in Beijing and across the country,” said Greenpeace climate and energy campaigner Dong Liansai. “However, air quality across China is still a major health hazard.” Annual average levels of PM2.5 - particulate matter of 2.5 micrometres in diameter that can penetrate deep into the lungs - dropped by 10.3 percent last year compared with 2014, Greenpeace said in a report published yesterday, citing official data from 189 cities. In the first half of the year, PM2.5 concentrations were down 16 percent from the corresponding 2014 period, the group had reported. Decades of growth-at-allcosts economic development in China has spawned massive problems of air, water and
soil pollution that the ruling Communist Party has only in recent years begun to tackle. The challenge is large and the topic sensitive, with thousands of protests sparked every year by concerns about environmental degradation. Uncontrollable environmental factors, such as wind, can also play a role. Beijing’s fourth-quarter pollution woes were mirrored elsewhere in northern China, where concentrations of PM2.5 were significantly higher than in 2013 and 2014, Greenpeace said. Even so, Beijing was among roughly 90 percent of the cities Greenpeace analysed where air pollution improved overall last year. That was a sign the capital’s “serious efforts” to curb pollution were paying off, Dong said.
Bloomberg News
China has worked to toughen environmental protection laws in recent years. Amended legislation took effect this month giving authorities more power to punish firms and officials responsible for violations. Some local authorities, including Beijing, have been trying to limit emissions and forcing polluting factories to close or move. Still, 80 percent of the 366 cities whose data Greenpeace analysed fell short of China’s ambient air quality standards last year, it said. The national average concentration of PM2.5 was 50.2 parts per cubic metre, exceeding the World Health Organisation’s guideline of an annual average of less than 10 micrograms. China’s financial hub, Shanghai, was among the cities where air quality worsened in 2015. Its average PM2.5 concentration increased 3.14 percent over the 2014 data, Greenpeace said. “Greenpeace recommends Shanghai to implement a solid coal consumption cap target and aggressive measures to solve the air pollution problem,” Dong said. Reuters
Business Daily | 11
January 21, 2016
Asia
New Zealand inflation lowest in 16 years Excluding petrol, prices showed a 0.5 percent increase for the year to December
N
ew Zealand was hovering just above deflation according to official figures released yesterday, which showed a lower-than-expected inflation rate of 0.1 percent for the past year. The surprisingly low figure -- the smallest annual movement since a 0.5 percent fall in the year to September 1999 -- raised the prospect that the central bank, which had forecast 0.4 percent annual inflation, would further reduce interest rates.
Inflation for the December quarter fell 0.5 percent while market expectations were for a 0.2 percent decline. The Reserve Bank of New Zealand, which has a target inflation band of 1.0-3.0 percent, cut the official cash rate four times last year to a record low of 2.5 percent, and further cuts are now expected. The fresh inflation data “leaves New Zealand on the cusp of outright deflation”, Capital Economics’ chief
economist for Australia and New Zealand Paul Dales said in a note. “It may not quite be enough to prompt the (central) bank to cut rates at next Thursday’s policy meeting, but it certainly supports our non-consensus view that rates will be cut from 2.5 percent to 2.0 percent this year.” Inflation has been below the Reserve Bank’s target for a year and Westpac Bank’s senior economist Michael Gordon told Radio New
Zealand he doubted it would return to the expected zone in 2016. “It’s certainly going to be causing some headaches for the (central) bank over the next few reviews, and raises the chances of a rate cut as soon as March,” he said. New Zealand’s inflation rate usually falls in the December quarter with seasonally lower vegetable prices but it was accelerated in the latest figures by falling petrol prices.
Excluding petrol, the inflation rate showed a 0.5 percent increase for the year to December. “Lower prices for petrol and vegetables were partly countered by higher prices for housing-related costs and airfares,” Statistics New Zealand consumer prices manager Matt Haigh said. Petrol prices were down 7.0 percent for the quarter while vegetable prices showed a seasonal fall of 17 percent. AFP
It’s certainly going to be causing some headaches for the (central) bank over the next few reviews, and raises the chances of a rate cut as soon as March Michael Gordon, senior economist, Westpac Bank
Japan manufacturers’ mood down amid worry on China The loss of confidence could dash policymakers’ hope for a virtuous growth cycle of higher incomes and active spending by the private sector Tetsushi Kajimoto and Izumi Nakagawa
J
apanese manufacturers’ morale slipped in January and is expected to stay subdued over the coming three months, a Reuters poll found, in a sign that fears of a deepening China-led global slowdown and market turmoil are taking their toll on exporter confidence. The monthly Reuters Tankan, which closely tracks the Bank of Japan’s tankan quarterly survey, showed service-sector sentiment improved but was seen falling back again - highlighting the fragility of domestic demand. “China’s slowdown and recent yen gains dampened the processing industries’ sentiment. Domestic demand is weak as well, and the economy may have contracted in the last quarter,” said Yuichiro Nagai, economist at Barclays Securities. The poll of 514 big and mid-sized Japanese companies between Jan 5-15, of which 272 responded, was taken as the new year got off to a nervous start due to the collapse of oil and commodity prices, reflecting the slowdown in China and financial
market turmoil there. The loss of confidence could dash policymakers’ hope for a virtuous growth cycle of higher incomes and active spending by the private sector, which is needed to pull the economy out of two decades of deflation and stagnation. “Although shipments to domestic clients slightly rose and U.S.-bound shipments held firm, shipping to Asia remains low and those to China in particular are falling a lot,” a manager at a rubber maker said in the survey, which firms answer anonymously. “Large-scale capital expenditures are declining within and outside Japan. Manufacturers as a whole appear to take a gloomy view of the future,” a manager at an electronics maker said. The Reuters Tankan sentiment index for manufacturers fell to 6 in January from 9 in December, weighed on by exporting industries such as steel, electric machinery and precision machinery. The index is seen unchanged in April. The service sector index rose to
27 from 18 in December, the first improvement in three months, led by retailers, real estate/construction and information/communications firms. The index is, however, seen falling to 23 in the next three months. The BOJ (Bank of Japan) tankan, one of the major indicators the central bank scrutinises in guiding monetary policy, showed in December that business mood held steady but it
was seen deteriorating three months ahead - reflecting the slowdown in emerging economies. Japan’s economy narrowly dodged a recession in July-September, but analysts have slashed their growth projections for the final quarter, while flagging the risk of a contraction due to weak private consumption and slack capital spending. Reuters
12 | Business Daily
January 21, 2016
Asia
Bank of Japan likely to cut CPI forecast below 1 pct Inflation forecasts won’t be finalised until the BOJ compiles a median of each board member’s estimates on January 29 Leika Kihara
KEY POINTS BOJ to roughly maintain FY2017 CPI f’cast-sources Some BOJ officials fret of oil impact on wages BOJ meets for rate review January 28-29, decision out Jan 29
Bank of Japan Governor Haruhiko Kuroda
T
he Bank of Japan (BOJ) is likely to cut its core consumer inflation forecast for the coming fiscal year to possibly below 1 percent at a policy review next week, say three sources familiar with its thinking. A lower forecast to reflect a fresh slide in oil prices would be a sharp
downgrade from the central bank’s current forecast of 1.4 percent for the year beginning in April, and push it further away from its 2 percent target. Market expectations that the BOJ would cut its inflation forecast have been growing, but few analysts anticipate a reduction to below 1 pct.
However, the BOJ is seen largely maintaining its inflation forecast of 1.8 percent for fiscal 2017, the sources said, allowing it to argue that Japan is still on track to achieve the target - albeit at a disappointingly slow pace. While the revision may heighten pressure on the BOJ to expand its already massive monetary stimulus
programme, it is uncertain whether the bank will ease policy at its rate review on January 28-29, analysts say. The BOJ has said it will look through the impact of oil in gauging the broad price trend, which it sees as improving with consumers becoming more accepting of price hikes. “The BOJ will probably say that when looking at various price indicators, underlying trend inflation is improving. If so, I don’t think it will ease next week,” said Izuru Kato, chief economist at Totan Research Institute. But some BOJ policymakers are becoming increasingly worried that plunging oil costs and the subsequent slowdown in consumer prices may hurt already waning inflation expectations, and discourage companies from raising wages. If they see such second-round effects as threatening Japan’s path toward achieving 2 percent inflation, an expansion of stimulus next week becomes a real possibility, the sources said. The BOJ’s current price forecasts, made in October, are based on the assumption that oil price falls will push down next fiscal year’s core consumer inflation by 0.2 percentage point. A draft estimate may boost that negative contribution by up to 0.8 point and argue that when stripping away the effect of oil, inflation will stay around 1.5 percent, the sources said. Core consumer prices, which excludes fresh food but includes energy costs, rose 0.1 percent in the year to November. Analysts polled by Reuters expect core consumer inflation to hit 0.9 percent in next fiscal year and 1.3 percent the following year. Reuters
Australia consumer sentiment slips in January A survey’s measure of economic conditions for the next 12 months fell 5.0 percent
A
measure of Australian consumer sentiment slipped in January as sharp losses on financial markets and anxiety over China’s outlook dominated headlines and darkened the
public mood. The survey of 1,200 people by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment slipped a seasonally adjusted 3.5 percent in January, from
December when it eased 0.8 percent. The index reading of 97.3 was still 4.3 percent higher than a year ago, though pessimists now slightly outnumbered optimists.
“With limited domestic news during the holiday season consumers appear to have been mainly impacted by the spate of negative news on the international front and the spillover effect on financial markets,” said Westpac Chief Economist Bill Evans. Over the two weeks to the end of the survey, oil prices fell by 20 percent and the Australian share market by 7.6 percent. The biggest impact was on the index of family finances compared to a year ago, which slid 9.4 percent. The outlook for finances over the next 12 months eased 2.3 percent. The survey’s measure of economic conditions for
the next 12 months fell 5.0 percent, though confidence in the economy over the next 5 years actually edged up 0.3 percent, and was almost 12 percent higher on a year ago. The index of whether it was a good time to buy a major household item dipped 1.7 percent in the month. Yet there was also a hefty 13.9 percent increase in the ‘time to buy a dwelling’ index to 113.0 in January, the highest reading since May last year. The Reserve Bank of Australia (RBA) cited improving indicators of business and consumer confidence when it skipped a chance to cut interest rates last month. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com
Business Daily | 13
January 21, 2016
Asia Thai central bank governor says no need for rate cuts
Malaysian inflation picks up
The Bank of Thailand has left the benchmark interest rate at 1.50 percent since April Simon Webb and Orathai Sriring
T
hailand has no need to cut interest rates to counter the impact of China’s slowdown on the Thai economy as fiscal stimulus is driving slow but steady growth, the country’s central bank governor said on Tuesday. Southeast Asia’s second-largest economy has been hit hard as exports contract and domestic demand weakens at a time when household debt levels are high. China is one Thailand’s top trade partners and any deterioration in its growth rate could curb the exports on which the Thai economy depends. “We don’t see any need to change the current monetary policy framework that we have,” Bank of Thailand Governor Veerathai Santiprabhob, who began a five-year term in October, told Reuters in an interview. “We see growth picking up although slowly and gradually.” Policy would remain accommodative and there was room to cut if needed as headline inflation would be below the central bank’s target range, he said. Headline inflation is forecast at 0.8 percent for 2016, below the 1.0-4.0 percent target range. The Bank of Thailand (BOT) has
left the benchmark interest rate at 1.50 percent since April after two cuts that took it close to the record low of 1.25 percent reached during the global financial crisis. Veerathai stuck to the central bank’s forecast of 3.5 percent economic growth for this year, although he said any further fall in global oil prices might lead to a revision. He described the World Bank’s 2.0 percent forecast as an “outlier” that did not take into account government stimulus. On February 15, Thailand’s state planning agency will report full-year 2015 growth. The BOT has forecast 2.8 percent, compared with 0.9 percent in 2014.
More resilience
Thailand has been more resilient to volatility than many emerging markets this year as foreigners hold a relatively small amount of bonds and stocks so markets are less susceptible to capital flight, Veerathai said. Weak external demand has exacerbated the challenges faced by a ruling junta trying to revive the economy after seizing power in May 2014 to end months of street protests that brought the country close to recession
Indian start-ups at risk as investors close taps Prime Minister’s plan for newly launched companies includes tax breaks on their first three years of profits, as well as on those of their investors Himank Sharma
A
fter pumping billions of dollars into Indian Internet start-ups in the last 24 months, global investors are cutting that flood back to a trickle as dreams of huge online sales are clouded by soaring valuations and still-distant profits. Even as Prime Minister Narendra Modi lines up a four-year, US$1.5 billion government fund to help startups create jobs, entrepreneurs fear that may prove a drop in the ocean. Venture capitalists have already tightened purse strings as ripples from China’s economic slowdown lap around the world. According to a new report by CB Insights and KPMG, venture capital investments in India’s start-ups nearly halved to US$1.5 billion in fourthquarter 2015 from July-September. Faltering start-ups could mean India missing out on huge potential: Bank
of America Merrill Lynch has forecast Indian e-commerce will surge to US$220 billion by 2025 from about US$11 billion last year. “While the first phase of funding was about investing in big markets... now investors want to look at how entrepreneurs manage their business and compete while investing,” said Niren Shah, India head of Norwest Venture Partners, said. Modi’s plan for newly launched companies includes tax breaks on their first three years of profits, as well as their investors. But most of India’s tech start-ups make losses, not profits. They follow a discount-driven business model aimed at generating revenue from customers that buy and sell goods and services, touting growth in ‘gross merchandise value’ on their platforms as a metric to attract funding.
Exports, worth over 60 percent of GDP, have shrunk for three straight years and the central bank has forecast zero growth in 2016. Declining prices for farm exports and an increasingly out of date electronic and manufacturing sector have contributed to the fall. Falling commodity prices and drought were challenges for the rural economy on which the majority of Thais depend, said the 46-yearold economics Ph.D. from Harvard University. Growth would be uneven and fiscal stimulus would need to be targeted at the rural economy to balance that out, he said. To improve competitiveness, the economy needs structural reforms, he said. State-owned enterprises needed restructuring and government investment needed to accelerate further to compensate for slow spending during years of political turmoil, he added. Joining trade pacts such as the Trans-Pacific Partnership would also help sharpen Thailand’s competitiveness, he said. At present, Thailand is not a TPP member, but the government has said it is considering seeking to join. Reuters
Two of the country’s best known e-commerce retailers - Flipkart and Snapdeal - have attracted big-name backers like Accel Partners, Singapore state investor Temasek Holdings and Japan’s SoftBank Group Corp, enthused by growth potential in a country where only 252 million of a population of 1.3 billion people have Internet access. Yet the pair have notched up huge losses as they compete for increasing sales through deep discounts, according to banking and industry sources. Flipkart and Snapdeal did not immediately respond to Reuters’ emails seeking comment. “In the last few years, people were looking at gross merchandise value (when considering investment),” said Radhika Aggarwal, co-founder and chief business officer of online marketplace Shopclues.com. “I think that changed very quickly in the second half of last year.” Shopclues.com raised funds last week from investors including Singapore sovereign wealth fund GIC and Tiger Global that valued the firm at more than US$1.1 billion - helped by detailing plans to hit profitability by the first half of next year, Aggarwal said. In early warning signs for the country’s start-up industry, firms from food delivery companies TinyOwl and Foodpanda to SoftBank-backed property firm Housing.com have either cut jobs or shrunk their services. At TinyOwl, last November around 20 employees even held their boss hostage for two days after it announced job cuts. Reuters
Malaysia’s consumer price index in December rose to 2.7 percent from a year earlier due to a rise in prices for alcohol and tobacco products, government data showed yesterday. The inflation rate was bang in line with the median forecast of 2.7 percent in a Reuters poll, and up from 2.6 percent in November. Fuel prices fell in December but a 40 percent tax hike on tobacco products imposed by the government the previous month have continued to drive inflation, economists said.
Indonesia to be more open to tourism FDI Indonesia will allow foreign investors to own a bigger proportion in the tourism sector in the latest revision of the “negative investment list”, the chief of its investment board said yesterday. Franky Sibarani told reporters that foreigners may be allowed to run big travel bureaus although they may still be required to partner with local businesses. Foreigners will not be allowed to run small travel agencies or be guides, he added. Indonesia’s government is currently in the process of revising the negative list - a list of sectors restricted to foreign funds.
Aeroports de Paris bids for Vietnam airports firm France’s Aeroports de Paris SA has bid for a 20 percent stake offered by Airports Corporation of Vietnam (ACV) and Singapore’s Changi Airport International had also expressed interest, Vietnamese media said yesterday. The Dau Tu newspaper quoted ACV’s chairman Nguyen Nguyen Hung as saying the French firm had submitted a bid to become a strategic partner. The article later said Changi had formally expressed interest in the same stake. It was unclear if the information on the Singaporean firm was attributable to Hung.
BHP pessimistic on iron ore, coal prices BHP Billiton flagged yesterday that it sees no recovery in iron ore or coal prices in the next few years, while holding out hope for a rebound in copper and oil as it fights slumping earnings set to hit its long-protected dividend. The top global miner reinforced the bleak outlook for most commodities in the near term, with markets slammed by oversupply as the economy slows in China, the world’s biggest metals consumer. In a sign the company may cut its dividend, BHP Chief Executive said that it was focused on defending its investment grade credit rating.
Apple seeks Indian approval to set up retail stores Apple Inc has filed an application with the Indian government to set up its retail outlets in one of the fastest-growing smartphone markets, a spokesman for the Cupertino-based company said yesterday. Apple’s retail expansion plans in India come at a time when concerns about slowing growth in the United States and China, the world’s most important market for smartphones, have weighed on the company’s stock in the last few months. The company currently sells its iPhones, iPads and Macs in India through third-party resellers.
14 | Business Daily
January 21, 2016
International U.K. unemployment falls to decade low U.K. unemployment unexpectedly fell to the lowest in almost a decade and wage growth slowed less than forecast as the labour market continued to strengthen. Pay excluding bonuses rose 1.9 percent in the three months through November from a year earlier compared with 2 percent in the quarter through October, the Office for National Statistics said in London yesterday. Economists in a Bloomberg survey had predicted 1.8 percent. Unemployment fell to 5.1 percent, the lowest since the three months through January 2006.
U.S. business survey impacted by China China’s economic slowdown is hitting profits at more foreign companies, a survey by an American business lobby showed, while the vast majority of respondents believed China’s growth in 2016 would fall short of the central bank’s forecast. The number of foreign companies rating their business profitable dropped to a five-year low in 2015, while 45 percent of about 500 respondents in the American Chamber of Commerce in China’s annual survey reported that revenues in 2015 were down or remained flat from a year earlier. The American Chamber survey results, published yesterday, underscore the growing unease and challenges faced by some overseas companies in the world’s second-biggest economy.
Buhari says telcos should put security before profits Telecom firms operating in Nigeria should not put their desire to make profits above security concerns, President Muhammadu Buhari said on Tuesday. Nigeria has been pushing telecom companies to verify the identity of their subscribers amid fears that unregistered SIM cards were being used by criminal gangs in a country facing an insurgency by Islamic militant group Boko Haram. MTN, Africa’s largest mobile operator, has been fined US$3.9 billion in Nigeria - its biggest market by sales - for failing to disconnect users of unregistered SIM cards.
Schaeuble doesn’t want tighter borders Tightening border controls between European Union countries would jeopardise EU integration and member states must address the influx of refugees into Europe by controlling the bloc’s external borders, Germany’s Finance Minister said on Tuesday. “We don’t want to fall back into a time when borders were hindering the political and economic integration,” Finance Minister Wolfgang Schaueble told a news conference in Berlin after meeting the finance ministers of France and Poland. French Finance Minister Michel Sapin said Europe needed to act quickly to counter terror financing.
IBM revenue falls for 15th straight quarter International Business Machines Corp reported a 8.5 percent fall in quarterly revenue as a strong dollar and tepid IT spending weighed on the Big Blue’s results. Revenue dropped to US$22.06 billion in the quarter ended December 31, from US$24.11 billion. Revenue adjusted for currency fell 2 percent. Net income fell to US$4.46 billion, or US$4.59 per share, from US$5.48 billion, or US$5.51 per share a year earlier.
Global unemployment set to rise through 2017: ILO In 2016, the figure is expected to rise by a further 2.3 million, with another 1.1 million people added to the jobless roster in 2017, the report said Ben Simon
G
lobal unemployment rose in 2015 and is expected to worsen further over the next two years, the International Labour Organization said Tuesday, citing downturns in key emerging economies. In a new report, the ILO estimated that 197.1 million working-age people were unemployed in 2015, an uptick of 0.7 percent compared to 2014 figures. In 2016, the figure is expected to rise by a further 2.3 million, with another 1.1 million people added to the jobless roster in 2017, the report said. The figures also made clear that employment rates have not recovered from the financial crash of 2008, as 27 million more people were out of work last year as compared to the pre-crisis level. “The global economy is not generating enough jobs,” ILO chief Guy Ryder told journalists. He pointed to “the significant slowdown in emerging markets coupled with a sharp decline in commodity prices”, as the culprits fuelling a grim outlook for the global job market. The report said that much of the trouble in the developing world stems from struggling Brazil and especially China, which last year saw its slowest GDP growth in a quarter century. Once key drivers of global job growth, major emerging economies
ILO chief Guy Ryder
in Asia and Latin America will likely see unemployment rise this year, as will Arab and African nations heavily reliant on commodity sales, according to the report. Unemployment is expected to fall slightly in advanced economies, but not by enough to fully offset the losses in the developing world, the ILO said. The report forecasts that in the United States and some other advanced economies, “unemployment will decline to pre-crisis rates.”
‘Vulnerable employment’
The ILO sounded specific alarm on the ever-rising numbers of people worldwide who have “vulnerable
employment”, a term referring to low quality, unstable work, without formal contracts or benefits and with huge volatility in compensation. In addition to jobless figures, the ILO has typically used the vulnerable employment rate to assess the true health of an economy. In emerging markets, the number of people with vulnerable work is expected to grow by 25 million over the next three years, the report said. “Poor job quality remains a pressing issue worldwide,” it added. Already, 74 percent of workers in Southern Asia and 70 percent in sub-Saharan Africa have vulnerable work, with the global figure at 46 percent, or 1.5 billion people. Ryder noted that opinion was previously divided on the merits of informal labour, with some suggesting that, despite the lack of contracts and stability, an abundance of informal workers was reflective of economic dynamism and associated with an emerging market on the rise. But from the ILO’s perspective, the debate has been settled, Ryder told reporters, insisting that formalisation of the labour market “is the right path to take.” “The lack of decent jobs leads people to turn to informal employment, which is typically characterised by low productivity, low pay and no social protection,” Ryder said in a statement. “This needs to change.” AFP
Saudi Arabia warns banks against riyal speculation Even as pressure on the riyal in the forwards market has eased in the last few days, the interest rate swaps market, also used to bet on depreciation, shows traders remain nervous
T
he Saudi Arabian central bank has warned commercial banks against betting on depreciation of the riyal as tumbling oil prices put pressure on the Saudi currency, several bankers operating in the market said. The action by the Saudi Arabian Monetary Agency (SAMA) suggests authorities want to prevent investors’ unease over the impact of cheap oil on the Saudi economy from triggering capital flight or destabilising local markets. The riyal, pegged in the spot market at 3.75 to the U.S. dollar since 1986, hit a record low against the dollar in the one-year forwards market last week as some banks and funds hedged against the risk that low oil prices might eventually prompt Riyadh to scrap the peg. In order to pay the government’s
bills as its oil revenues shrink, SAMA has been drawing down its overseas assets at an annual rate of more than US$100 billion, although it still has enough to support the riyal for several years.
Speculation
Saudi Arabia faced two previous bouts of speculation against its currency after 1986, according to a 2013 paper by former SAMA vice-governor Abdulrahman al-Hamidy and Ahmed Banafe, published on the Bank for International Settlements website. In both cases, cheap oil fuelled concern about budget and external deficits. Both times, SAMA quashed speculation fairly easily by gathering information about speculative positions through its contacts with local banks, then pushing the riyal back up in the forwards market with
steps such as placing deposits with domestic banks, the paper found. Bankers noted that after falling slightly below 3.7500 to the dollar in the spot market earlier this month, the riyal had in recent days rebounded very close to that level, suggesting SAMA was providing an ample supply of dollars to the market. Current forward market prices only imply riyal depreciation of about 1.8 percent in the next 12 months, and many Gulf bankers think Riyadh remains very unlikely to depreciate its currency. That is because any benefit to state finances from higher oil revenue, after converting dollars to riyals, would be more than outweighed by a surge in import costs - politically uncomfortable for the government and a market panic. Reuters
Business Daily | 15
January 21, 2016
Opinion Business
wires
The IMF needs more Lagarde
Leading reports from Asia’s best business newspapers
Ian Bremmer
President of Eurasia Group and the author of Every Nation for Itself: Winners and Losers in a G-Zero World
TAIPEI TIMES Industry leaders urged the government to resume talks with Beijing over a trade-ingoods agreement as soon as possible amid government transition. “It is anticipated that there would be a personnel reshuffle during the transition period, but the progress of any trade agreements, including the trade-ingoods agreement with China, should not be suspended because of it,” Taiwan Machine Tool & Accessory Builders’ Association president and secretary-general Carl Huang said by telephone. Huang’s remarks came after Minister of Economic Affairs John Deng said the ministry was putting trade negotiations with Beijing on hold.
THE KOREA HERALD President Park Geun-hye yesterday renewed her calls for job creation as she pressed labour and management to reach a compromise for labour reform. The government has set aside 2.12 trillion won of this year’s budget meant to create jobs for young people, up 20.3 percent from a year earlier. Park said job creation through labour reform is the most urgent task… The parliament showed no signs of passing the set of bills which Park said would help reform South Korea’s labour markets and revitalize the economy.
BANGKOK POST The Customs Department is considering whether to allow new players to enter the duty-free market now monopolised by King Power. The department may permit new players to operate duty-free service at airports whose terms of reference for duty-free business allow multiple operators to run the service such as Phuket airport, director-general Kulit Sombatsiri said. He said the plan also depended on government policy. Offering licences for duty-free pickup centres to other players would create opportunities to compete with King Power, but this could violate the contracts between Airports of Thailand and the company.
THE STRAITS TIMES Apartment prices (in Singapore) are starting to be cut as the spectre of the Additional Buyer’s Stamp Duty (ABSD) looms over developers. The possibility of buyers picking up some bargains now all comes down to the date the ABSD was introduced - December 8, 2011. It stipulated that developers had five years to complete a residential project and sell all the units. If not, they must pay ABSD. The rate was initially set at 10 per cent of the purchase price of the site, and was raised to 15 per cent on January 12, 2013.
C
hristine Lagarde has said she is open to serving another five-year term as Managing Director of the International Monetary Fund. She should get it. The IMF has never had better leadership, and its board of directors should give her the chance to finish the work she has begun. When Lagarde took the helm in July 2011, she inherited an institution in crisis. The global financial meltdown in 2008 and its economic aftershocks had discredited Western-led multilateral lenders and the free-market “Washington Consensus.” Lagarde’s leadership has helped to restore the Fund’s reputation. Much attention is paid to her personal qualities – and rightly so. She is frank, forceful, warm, and engaging. In country after country, officials with whom she has met, often under delicate circumstances, describe her as both a teller of difficult truths and a sensitive listener. These are important qualities for the leader of an institution that must negotiate, rather than dictate, terms of agreement. The Europeans did not like it much when Lagarde told them their banks needed to be restructured or that they needed to build a firewall to protect against financial contagion – but they did it. Likewise, she made tough calls on providing IMF support to countries – for example, Greece, Pakistan, Tunisia, and Ukraine – that are crucial to global stability. And there’s much more. The Fund is not often associated with creativity and compassion. Lagarde has begun to change that. In the process, she has provided a human face for an institution often associated with the prescription of bitter medicine. Helping to manage the Middle East’s refugee crisis, for example, is not an expected part of the IMF’s mandate. Yet, under her leadership, the Fund adjusted a program so that Jordan’s government
could spend more to help those displaced by conflict in Syria and Iraq (more than a million of whom are housed in camps within its borders). Similarly, when Ebola struck West Africa in 2014, Lagarde directed the IMF to use its available cash to buy debt relief for countries in crisis, which enabled them to pay more doctors and nurses – the firstever such use of IMF capital. In addition, Lagarde has identified, and acted on, three of the most important challenges facing today’s world. First, she has been both a forceful voice for the introduction of more women into the workforce and an exemplar of the value of having women in leadership positions. In countries as different as Saudi Arabia and Japan, she has urged leaders to stop wasting so much human talent – and thereby realize their economies’ potential. Second, under her leadership, the IMF has also addressed the broader question of income inequality. This is not simply a question of basic fairness. The Fund’s research has highlighted the direct link between narrowing the gap between rich and poor and higher economic growth. The IMF is not the first to make this case, but its stature gives the issue greater prominence and urgency. Lagarde’s personal commitment to driving home this point has been essential to advancing the argument. Third, Lagarde has done important work in helping the world begin to understand the full implications – some of them frighteningly destabilizing – of technological change. For example, automation will continue to make manufacturing more efficient and less costly, but it will also ensure that economic growth generates fewer jobs than in the past. The political, economic, and social consequences of this emerging reality deserve recognition and serious study. Lagarde has brought the IMF into the centre of that work.
The leadership of a European managing director probably facilitated the IMF’s decision late last year to add China’s renminbi to the basket of currencies underpinning its Special Drawing Rights
Critics will say that it’s time for an IMF head who represents the developing world. Lagarde is, after all, the 11th consecutive European to hold the post, a privilege that has become hard to justify in today’s world. Others will say that the failure to recognize the full effects of IMF-endorsed austerity on Greek citizens proves that she is out of touch with ordinary people. Still others will argue that the charges she faces in connection with a financial scandal in France will distract her from IMF business. After the ugly scandal surrounding Dominique Strauss-Kahn, her predecessor at the Fund, the Fund, critics will insist, can’t afford such a distraction. Let’s take these objections one at a time. The IMF (and the
World Bank) should welcome leadership from beyond Europe and the United States. But the purpose of ending this Western privilege is to make the leadership selection process one that is based on merit, not political considerations. Lagarde is the best candidate for the job, and emerging powers like the BRIC countries (Brazil, Russia, India, and China) have not united behind an alternative. The leadership of a European managing director probably facilitated the IMF’s decision late last year to add China’s renminbi to the basket of currencies underpinning its Special Drawing Rights. In addition, Lagarde displayed impressive political dexterity in finally persuading Republicans and Democrats in the US Congress to pass governance reforms that not only bolster the IMF’s firepower to fight financial crises, but also more accurately reflect changing global economic dynamics. The BRIC countries, for example, are now among the IMF’s top ten shareholders. On Greece, Lagarde made some characteristically blunt – some would say clumsy – comments last year. But she is not near the top of the list of those responsible for the economic pain endured by Greeks, and her tenure at the IMF makes abundantly clear that no managing director in history has done more to lead the Fund in efforts to alleviate the suffering of people in crisis. Finally, the French charges against Lagarde were filed over the objection of the country’s prosecutor-general, and her involvement in the case appears tangential at best. The world badly needs a leader dedicated to making the world a safer and more prosperous place. Lagarde has shown that she is such a leader, committed to making the IMF fit for the twenty-first century. She deserves the chance to finish what she started. Project Syndicate
16 | Business Daily
January 21, 2016
Closing PBOC injects liquidity in Lunar New Year-preparation move
Foreign firms optimistic about investment in Mainland
China’s central bank injected 150 billion yuan (US$22.80 billion) into banks yesterday through its short-term liquidity operations (SLO) tool, according to a statement on its website. The interest rate on the 6-day lines of credit will be 2.25 percent, the People’s Bank of China (PBOC) said. No details were provided. The PBOC injected 55 billion yuan via a 3-day SLO on Monday. It also injected 410 billion yuan into the nation’s banking system via its medium-term lending facility and lowered rates for three-month and one-year tenors on Tuesday. The central bank said on Tuesday that it would inject over 600 billion yuan to help ease a liquidity squeeze expected before the Lunar New Year in early February.
Foreign companies still consider China one of the top investment destinations despite the country’s economic slowdown, survey results showed yesterday. Sixty percent of the 496 polled companies listed China as one of the top three investment destinations, while a quarter considered China the No.1 priority, according to the Business Climate Survey released by the American Chamber of Commerce in China. Forty percent of the surveyed companies reported that more than half of their China revenues came from products tailored to Chinese requirements. While companies remain concerned over uncertainty in the regulatory environment, they reported better protection of intellectual property rights and less threats on data.
Taiwan’s 2015 export orders in worst slide in 6 years Orders from China fell 8.8 percent in December and were down 8.1 percent from the United States Faith Hung and Roger Tung
KEY POINTS Export orders in 2015 post worst annual slide since 2009 December orders fall for 9th month, worst decline since Feb 2013 China December orders -8.8 pct y/y; U.S. -8.1 pct
T
aiwan’s export orders fell the most in six years in 2015 on weak global tech demand and a slowdown in China, raising the chances of more policy support to support economic growth. The deeper-than-expected slump in the final month of 2015 could mean growth
will contract again in the December quarter. The central bank cut interest rates in September and December as global demand remained fragile and consumption was weak at home. December export orders fell 12.3 percent on year, its ninth straight decline and the biggest percentage slide
since February 2013. That brought orders for the whole of 2015 down 4.4 percent, the ministry of economic affairs said yesterday. The monthly fall was worse than the 8 percent drop forecast in a Reuters poll and deteriorated from November’s 6.3 percent decline. The full-year slump was
Mainland records first FDI drop in months
China, Gulf to speed up free trade talks
F
C
oreign direct investment (FDI) into the Chinese mainland slipped 5.8 percent year on year in December of 2015, its first yearly drop since August 2014, data from the Ministry of Commerce (MOC) showed yesterday. FDI in December reached 77.02 billion yuan (US$12.23 billion), MOC spokesperson Shen Danyang told a press conference. He attributed the decline to a higher base in the same month of 2014 as well as changing currency trends and market conditions. Despite the FDI decline in December, Shen said the total FDI for the whole year of 2015 rose 6.4 percent from 2014 to US$126.27 billion. China’s FDI growth saw ups and downs in the first 11 months of 2015. It accelerated to 22 percent in August before winding down to 1.9 percent in November. In December, more than 2,000 foreign-funded enterprises were newly established in the mainland, up 17.9 percent year on year, according to Shen. Last year, FDI from the ASEAN, European Union, nations along the Belt and Road route, Hong Kong and Macao increased, while that from Japan, the United States and Taiwan fell, he said. Xinhua
the worst annual decline since an 8.33 percent slide in 2009. Total orders totalled US$451.8 billion last year. In 2014, orders reached US$472.8 billion due to a boost from Apple Inc’s iPhone. “2015 orders fell 4.4 percent, marking the first negative growth in six years,” the ministry said in a
statement. “Global economic momentum remained soft. Handheld device demand has weakened...oil prices continued to plunge.” Taiwan’s export orders typically lead actual exports by two to three months. A lot of orders are sent to factories in China that are run by Taiwan companies, and from there are exported to end markets such as the United States and Europe. Orders for information and communication products in December fell 12 percent on year, while orders for electronics products dropped 10.1 percent during the same period, the ministry said. Orders from China fell 8.8 percent in December and were down 8.1 percent from the United States. Those from Europe and Japan also slumped 23.4 percent and 27.4 percent, respectively. “The momentum remains weak this year, with less than 5 percent of year-on-year growth in 2016,” said Hsu Kuo-An, an analyst at Capital Securities, Taipei, ahead of the data. “The global economic outlook is still sluggish, and Taiwan is losing out to Chinese rivals. A wild card is how strong the demand will be for the new iPhones Apple is set to launch in March.” Taiwan’s government had lowered its 2015 economic growth to a fresh six-year low. Fourth-quarter gross domestic product (GDP) data will be announced on January 29. Reuters
Emerging markets set for US$448 bln outflows this year
A
hina and the oil-dependent Gulf monarchies said yesterday they would accelerate talks on a free trade deal which has been under negotiation for more than a decade. The announcement, in a joint statement, came during a visit to Saudi Arabia by Chinese President Xi Jinping. “China and the GCC (Gulf Cooperation Council) have decided to accelerate the pace of negotiations, review the progress made and hold the next round of negotiations in the second half of February 2016,” the statement said. “China and (the) GCC also commit themselves to work closely to conclude a comprehensive Free Trade Agreement within the year of 2016.” China and the six-nation GCC announced in July 2004 the start of free trade talks. Four years ago, then-Chinese premier Wen Jiabao called on both sides to “show political will to sign the agreement as soon as possible.” The GCC comprises Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates and Saudi Arabia.
fter a thorny few years, emerging market bonds and equities are on track for another year of outflows driven by slowing global growth and corporate indebtedness, according to the Institute of International Finance. Emerging markets had net capital outflows of US$735 billion in 2015, up from US$111 billion in 2014 and more than previously forecast, and are expected to see US$448 billion of outflows including errors and omissions in 2016, a report released yesterday by the IIF said. The Washington-based group, an authoritative source of data on investment flows to and from the developing world, said heavy outflows from China, which reflect currency and growth worries, were the driving factor behind the losses in 2015. China had US$676 billion in outflows in 2015, according to IIF. The organization said Turkey, Brazil and South Africa are some of the countries most vulnerable to continued retrenchment in emerging markets because of weakness in macro policy, high levels of foreign exchange corporate indebtedness and significant current account deficits. There are some bright spots such as India and Mexico.
AFP
Reuters