Macau Business Daily March 28, 2016

Japan looks to kickstart ‘fintech’ revolution Fintech Page 12

Monday, March 28 2016 Year IV Nr. 1010 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai

www.macaubusinessdaily.com Aviation

Business

Page 4

Page 5

Local bookstore turns a new online leaf

Delayed Palau flight triggers protests at local airport

Infrastructure

New wholesale market ready early 2017 Page 2

Green Light for Travel Alert System

Tourism A travel alert system, with legal effect. Macao Government Tourism Office says the studies have been done. And the system is to be introduced this year. Serving as a reference for insurance companies to design new products. MGTO Director Helena de Senna Fernandes said 74 countries are to be included in the travel alert system in the initial stage.

Including all Portuguese-speaking countries; plus those frequently visited

by MSAR residents. Page 3

Cyber betting shows its hand Exciting projects revolving around e-Gaming. Land-based casinos, however, are safe for the foreseeable future for lots of good reasons. Peter Greenhill, head of eBusiness for Equiom Group, talked to Business Daily about the importance of gaming regulation. Plus innovative developments on the horizon. And the risks inherent in social gaming.

Shanghai tightens non‑local homebuyer rules as prices surge

Interview Pages 6&7

14° 18° 17° 20° 18° 22° 20° 22° 19° 23° Today

Wed

20,345.61 -269.62 (1.31%)

Tingyi Cayman Islands

+1.83%

Hong Kong & China Gas Co

+0.28%

Li & Fung Ltd

0.00%

China Merchants Holdings

MTR Corp Ltd

+0.67%

Hengan International Group

+0.32%

Power Assets Holdings Ltd

+0.19%

China Resources Power

0.00%

China Life Insurance Co Ltd

-3.93%

Cheung Kong Infrastructure

+0.07%

New World Development

-3.18%

PetroChina Co Ltd

-4.28%

-3.68%

Source: Bloomberg

HK Hang Seng Index March 24, 2016

Tue

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Property Pages 8-9

2 Business Daily Monday, March 28 2016

Macau Infrastructure

New wholesale market ready early 2017 The Infrastructure Development Office has confirmed that the new wholesale market will be completed within the first three months of 2017, despite construction workers still digging the ground for the project.

Kam Leong kamleong@macaubusinessdaily.com

I

t is expected that the city’s new wholesale market will be completed during the first quarter of next year, said the Chief of the Infrastructure Development Office (GDI), Chau Vai Man, in response to legislator Chan Meng Kam’s written enquiry.

The legislator suggested in his interpellation that the construction of the new market would be delayed as work on its foundations was

still underway, as stated in the recent Policy Address.

He also queried whether the current wholesale market could be relocated to the new one on schedule.

The GDI head said earlier this month that the whole construction of the new wholesale market would be completed during the first three months of 2017 as planned. According to the official, construction is now in the final stage of basement excavation, whilst local authorities would start construction of the market buildings soon.

“The Civic and Municipal Affairs Bureau (IACM) will start arranging the relocation of the current wholesale market as well as the related management procedures in order to prepare the site [of the current wholesale market] for the next phase of infrastructure,” the Office chief wrote.

In fact, the completion of the new wholesale market will affect the infrastructure of the new passageway between Macau and Guangdong, as the cross-border link is to include the site of the current wholesale market.

IACM’s previous president, Alex Wong Iao Lek, told reporters last October that the new wholesale market may become operational this year.

The MOP860 million project, contracted to Mainland company Guangdong Nam Yue Group Co. Ltdn, was first expected to be ready in 2015 then 2016.

No works started for Macau‑Guangdong link

On the other hand, Mr. Chau claimed in his reply to the legislator that neither the Special Administrative

Region nor the Mainland authority has started any construction works for the new passageway between the city and the Guangdong Province.

“The construction works for the infrastructure will be built simultaneously by Macau and Guangdong. The whole project will involve the co-ordination of authorities of the two cities, whilst required managing techniques will be complicated… The working groups of the two governments are still exchanging opinions on the designs of the project,’ the GDI head indicated.

He added that the two governments will strive to complete the project in 2019, while the MSAR Government would carefully supervise the construction of the cross-border project. “If there is any delay in construction, the government can hold the contractor accountable in accordance with our contracts,’ the official noted.

Politics Negotiations on the Mong-Ha construction-contract termination closing soon

Putting Mong-Ha disputes to rest The government’s negotiations regarding terminating the construction contract for Mong Ha Social Housing Phase II and the reconstruction of Mong Ha Sports Pavilion’s basement with the contractor is coming to a close, according to the chief of the Infrastructure Development Office (GDI), Chau Vai Man. In response to legislator Chan Hong’s written enquiry, Mr. Chau said negotiations to end the construction contract are ‘almost at the final stage’.

He claimed that his Office would soon take back the construction site, whilst the bids for the contract would be re-opened this year.

‘The new contract opened for bids will include both construction of the social housing and the sports pavilion,’ the GDI official confirmed.

According to Mr. Chau, the foundation works and basement excavation for the sports pavilion have already been partly finished while the foundation works for the social housing have been fully completed.

Asked by the indirectly elected legislator whether the Office had determined if the reconstruction of the projects would overrun the budget, the Office head said: ‘As to re-inviting tenders for the [construction contract] it is not

appropriate to predict whether the projects would have an over-budget issue at the current stage. However, the MSAR Government would be cautious about managing the finances of the construction of the projects,’ the official wrote.

The original bids for the Mong-Ha construction contract were opened in July 2011, whilst local enterprise Hobbs Construction Company Limited eventually won the tender for MOP685 million over 15 rivals.

The awarded contract mandated that the whole construction should be completed within 840 days, which meant in 2014, while

the basement of the sports pavilion was to be finished within the first 270 days.

Mr. Chau claimed in his written reply that the delay in the construction of the projects were due to the alteration of the construction proposals as well as due to financial disputes between the contractor and its sub-contractors.

All construction work on the site was put on hold following a lawsuit between the government and the contractor, the Secretary for Social Affairs and Culture Alexis Tam Chon Weng said in his Policy Address last year. K.L.

Business Daily Monday, March 28 2016 3

Macau Travel Alert

MGTO: Travel alert system to be launched this year

T

he MSAR’s travel alert system is to be launched within this year, said Director of the Macao Government Tourism Office (MGTO), Helena de Senna Fernandes, according to local public broadcaster TDM. Ms. Senna Fernandes says that currently the government can only issue a travel alert as a warning or reminder since there is no legislation with legal effect on, for example, insurance policies.

The system was originally announced last year but Helena de Senna Fernandes said it would be officially launched in 2016. She added that such a travel alert system would not include a compensation clause.

The MGTO director says that her Office had completed the study of launching the travel alert system by the end of last year. Secretary for Social Affairs and Culture Alexis Tam Chon Weng has already authorised the establishment of a system. The relevant legal framework is being drafted and is expected to be put

into effect as an official dispatch.

“We are in talks with the insurance industry. They need time to design new products or revise existing compensation clauses in accordance with the new travel alert system to be launched,” said Ms. Senna Fernandes. “We’re also in contact with the Monetary Authority to see what the best timing is to launch the system. Certainly, it will be within this year.”

She added that 74 countries will be included in the travel alert system in the initial stage, including all Portuguese-speaking countries as well as places where Macau residents frequently visit or do business in.

Terror threat level system

In addition, the city’s regulation on setting up a terror threat level system is expected to take effect before the peak Summer season Wong Fai, the vice president of the Travel Industry Council of Macau, told local broadcaster TDM. Wong told the local

broadcaster that the tourism industry had been in talks with MGTO with regard to the progress in establishing the city’s terror threat level system and that the initiative is making progress.

Wong added that although it was not compulsory to have the terror threat level it is a reference for the tourism industry and tourists. Insurance corporations are also believed to benefit from it as they can design related insurance products in a more effective way. He revealed that no big impact on the local tourism industry has been observed following the recent attacks in Europe.

Legislator Zheng Anting told the local broadcaster that visitors need to pass through many security checks before their arrival in the SAR. He believed that security measures in Macau are in place and that the city is ‘relatively safe’.

In addition to Macau’s security check, he pointed out that visitors are also being checked at the Hong Kong gate as if they were coming to Macau through the neighbouring SAR.

TM

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5th Ad - Conference outlined.indd 1

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4 Business Daily Monday, March 28 2016

Macau RESORTS

Parisian Macao hires about 600 workers opening day is September but a partial More than 600 new employees have been hired

by Sands China Ltd. for its new Parisian Macao casino resort, for which more than 95 per cent of the jobs available are non-gaming positions Sands China announced on Thursday. As the number of locals attending the three-day recruitment fair was greater than expected it was extended a day. Sands China plans to host another recruitment fair in June. The planned

opening might be possible in the Summer “if the opportunity arises”, according to chairman and chief executive of Sands China Sheldon Adelson. US$2.7billion has been invested in Parisian Macao’s 3,000 hotel rooms, one casino, meeting space, retail, theatre and water themed park, in addition to a half-sized replica of the Eiffel Tower featuring a restaurant and observation decks.

Aviation Three-quarters of passengers refuse to board following two-day delay

Delayed Palau flight triggers protests at local airport A delayed charter flight bound for Palau on Thursday drove passengers to demand compensation for the following two days.

Kam Leong kamleong@macaubusinessdaily.com

A

delayed charter flight to Palau from the local airport operated by Mega Maldives Airlines last Thursday ended in dispute between the airline and its stranded passengers over the weekend, affecting 244 passengers in total.

Last Thursday, a charter flight of the Maldives-registered airline bound for Palau was delayed due to a technical problem, despite its passengers having already boarded. The delay caused passengers to protest at the city’s international airport and demand compensation.

The airline said on Friday that the airplane problem had already been repaired and was ready for take-off.

However, most of the passengers, concerned about the safety of the airplane, refused to board and insisted the company refund them and

pay appropriate compensation for the delay.

The aircraft eventually departed for Palau at 3:30 pm on Saturday, a delay of two days from its scheduled departure time. Airport operator Macau International Airport Co. Ltd. told local broadcaster TDM Radio that only 68 of 244 passengers it was supposed to carry boarded in the end.

Hence, the Tourism Crisis Management Office did not intervene in the issue,’ the Office wrote in the press release. ‘Nevertheless, MGTO will provide immediate follow-up on the issue if it receives any complaints filed by local travel agencies. The Office will keep paying close attention to the incident.’

Most Mainland tourists

According to TDM Radio, the airline explained in a statement that the delay is due to the parts needed for repairing the aircraft only arriving at the city’s airport on Friday, claiming it fixed the problem four hours after it had received the parts.

On the other hand, the city’s Civil Aviation Authority (AACM) told the broadcaster on Saturday that it did not

Meanwhile, Macao Government Tourism Office (MGTO) said in a press release on Saturday night that most of the affected passengers of the involved flight were from Mainland China, while around a dozen were local residents.

According to MGTO, the affected passengers had already accepted compensation provided by Mega.

Some 170 passengers, who skipped the flight in the end, left Macau on Saturday and Sunday, respectively.

The tourist office also stated that it did not have the power to manage this incident, which it described as a ‘supplier-consumer dispute’, as most of the affected passengers had purchased their flight tickets outside of the Special Administrative Region.

‘The delay of this charter flight is a dispute between the consumers and the service provider. It does not relate to the safety of any passengers.

Not serious fault

receive any reports on serious faults of the involved airplane from Mega.

AACM explained that foreign airlines only need to report to the local authority if they find serious faults in their aircraft or when they need to stay at the local airport to fix their planes for a long period.

Hence, the aviation authority perceives the two-day delay of the Mega flight is due to the delivery of the required parts from overseas, indicating that the repair should be simple as it was not mandatory to report to AACM. But the Authority added this is not the first time that the Maldivian airline has postponed flights due to technical problems and has left passengers stranded at the local airport.

Consumer Council: One enquiry received for Mega delay

The city’s Consumer Council claimed it has paid close attention to the delay of the Mega flight to Palau, indicating it received one enquiry related to the incident yesterday. ‘Following the delay of the Mega charter flight to Palau, the Council has kept close contact with the Macao Government Tourism Office and The Civil Aviation Authority for providing appropriate and immediate assistance to affected consumers,’ the Council wrote in a press release yesterday. The Council said that it would follow up on the enquiry received yesterday in addition to providing relevant assistance to consumers in need, such as transferring complaints from Mainland consumers to their consumer councils or committees in China.

Business Daily Monday, March 28 2016 5

Macau Online Starlight Bookstore online products primarily target Mainland market

Local bookstore turns a new online leaf A new business model has been adopted by Starlight Bookstore following the changing of reading habits in the market.

Bami Lio bami.lio@macaubusinessdaily.com

L

ocal bookstore Starlight, also known as Livraria Seng Kwong, says that the rise of e-books (electronic books) has impacted the physical bookstore business but they were ‘not severely harmed’. At the 10th Speing Book Fair hosted by Macao Polytechnic Institute (IPM) and Starlight Bookstore at Tap Seac Pavilion last weekend bookstore representatives told Business Daily that they’ve adopted a new business model with new online products to cope with the ever-changing market.

“The impact of online shopping on physical bookstores was not as great

as we imagined. Reading online happens in a virtual world, while physical books are easier for readers to read seriously or for longer. It is the same for those who want to quickly turn the pages, or search specific chapters or paragraphs in the books,” said Ieong Tou Ian, executive director of Starlight Bookstore.

Ieong added that online books are good for readers looking for leisure or not really doing research, and that half of residents preferring physical books and mobile phones is also a tool for leisure e-books.

“Online shops selling books still have a very immature market in Macau. Although some of the Mainland or overseas online shops sell books to Macau, the volume is not big. Physical books still have advantages. We suffer a little from online shopping.” Ieong added that they have been observing the trends of online shopping ever since it appeared in the market. ‘’The Macau market is so small that customers order from our website first and pick the books up in the physical bookstores. It is a kind of online ordering. Macau is a small city.

Lower service charges for delivery are our advantage compared to other online ordering shops”. Ieong stated that they are working on the online scope, saying, ‘’Some of the customers may find the delivery charges of MOP12 (US$1.5) by some online ordering shops not favourable’’.

on April 23. He said that any market of one province in the Mainland is bigger than that of Macau. Starlight Bookstore, ‘Cathay Bookshop’from the Mainland and ‘l-little’ from Taiwan developed the product and there are original images drawn by Taiwanese.

500 applications for online product

Starlight Bookstore’s first online product titled ‘Chinese Teenage and Children’s Digital Learning Hall’ was also demonstrated at the book fair. Daniel Sio, director and general manager of Starlight Bookstore, told Business Daily that 500 applications were filed applying for access to the hundreds of books, lessons and games targeting children.

Sio said the market for children’s books is small as the birth rate remains low in this city and it would be more favourable for the bookstore to have procurement by the government and launch the product in the city’s kindergartens or families.

Sio also added that the product will start to be sold online in the Mainland

Ieong added that they preferred the book fair to be located in places more convenient for local residents than some places with larger area but far away from citizens because the bookstore found the visit rate more satisfying in Tap Seac Pavilion.

Professor Im Sio Kei, Acting President of Macao Polytechnic Institute, stated in the opening ceromony of the 10th Spring Book Fair that the purpose of the event continued to be “boosting the local publication industry, promoting reading culture in society”. A special Macau Section with seminars and conferences for books issued in the city were included in the fair. Books and audio-visual products of nearly 2,000 publishers from Macau, Hong Kong, Taiwan and the Mainland were available.

explained: “It enhances the exchange between Macau and Hong Kong. On the other hand, it can bring in a lot of different products for Macau citizens to know and buy”. Some Hong Kong food agencies believe that the market in Macau is small and competitive

whereas in fact it is fairly similar to Hong Kong; consequently, good quality products will find a market in Macau. Some local citizens expect to spend about MOP2,000 at the Expo on mainly buying discounted products. A.L.

Local reading culture

Cepa

Macau and Hong Kong CEPA in discussions Industry: Bringing in good quality products from Hong Kong to Macau creates a buying market.

The three-day 2016 Hong Kong Brands and Products Expo in Macau kicked off on Friday at Macau Fisherman’s Wharf Convention and Exhibition Centre, according to local media TDM Chinese Radio’s report. Hong

Kong and Macau can work closely together in tourism under the Closer Economic Partnership Agreement (CEPA) between two regions, said the Permanent Secretary for Hong Kong Commerce and Economic Development Bureau Yung Wai Hung Philip at the opening ceremony on Friday.

He said that he expects the economy between the two regions and Mainland China to have a promising future under the agreement.

Diversifying product options

The Expo helps to enrich the elements of Macau’s tourism, and as such can better serve local citizens and tourists, helping promote brands and letting local citizens have diverse choices, whilst attracting different types of tourist. As Director of Macao Government Tourism Office (MGTO) Maria Helena de Senna Fernandes

6 Business Daily Monday, March 28 2016

Macau Gaming Interview

Proper regulation the way forward

Peter Greenhill, head of eBusiness for Equiom Group – an international wealth protection company with offices in the Isle of Man, Guernsey, Jersey, Malta and Hong Kong – talked to Business Daily about regulation, eGaming, two decades in the gaming industry, and exciting projects in the pipeline.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

Strong control regulations are important for the gaming industry.

What models have you been involved with?

My original base in this was the Isle of Man; I was working for the government there and we were extremely strong in the way we set things up […] The way that the Isle of Man was actually different was to make sure that all players’ funds were protected, so when they’re held on deposit they have to be segregated from the company’s own funds, and that’s very important. So, for example, the Isle of Man Government can then, if there was any problem at any time with the operator – they had access to those funds and they could repay those players. And I think that’s very important.

They have to, first of all, have a very good business plan, they have to understand what they’re trying to achieve. They have to understand the pitfalls of doing something and not being able to do it properly – and that’s where we would help them and discuss [issues] with them. They have to have the right controls in place.

The world is now moving forward very correctly in terms of making sure that anti-money laundering and combating terrorism rules are in place that people have to follow every single day to make sure that that’s correct. They have to know their customers very well. So we want to make sure that they have those procedures in place and we help them to understand what those are.

making sure that these things are under proper control, then around the world governments are getting together, they’re understanding that they have to put in very high levels of control and absolutely that’s correct, they need to do that. So they’re insisting that the people in these industries have to teach their staff all these things about knowing your customer, anti-money laundering and reporting anything that they see as suspicious all of the time. And those governments will also put people in place to check that each company is doing those checks properly. And that’s absolutely right. So that’s been growing a lot over the last couple of years and I see that growing in the future as well.

How big does a company have to be to procure a gaming licence?

Size isn’t necessarily the important factor.

These measures can be beneficial to the whole system – transparency seems like it can only help.

The issue that the companies might be having, though, and I understand this, is this is adding to their costs and – wouldn’t it be better if they didn’t have things to add to their costs? – yes, it would, but in fact it has to be there. So these things will grow over time. Yes, it will reduce their profitability but deep down they realise that it’s much better if these things are controlled. And it’s not just gaming that’s going through this, it’s all financial products as well. The same level of controls are being put in on both these areas at least. So it’s important.

Which factors are?

An understanding of what is required.

For example; a number of people who start companies these days have worked in very big organisations before. Now they’ve got an idea about something which is very different and they only need a few people to make that come to market. So it isn’t the size that matters, they obviously need the right budget because they have to put the right controls in place, they have to get the right software there, they have to get the right licences and they have to be strong about that position – that’s important. But there don’t have to be thousands of people to do that. It goes a different way.

Do you see that as being applicable in Macau; would it be possible to have the same separation model here?

I think it’s something certainly for the regulators here to look at and how they manage things, how they protect players and how they make sure that games are correct as well.

Because they need obviously to look at some form of checking the random number generator, for example, doing the right job and also, if it’s sports betting, making sure that the regulations are there to check out that there is no fixing of matches and that sort of thing. So all of that is very important.

Wi l l s m a rt p h o n e-bas e d a n d Internet-based gaming eliminate the necessity for land-based casinos?

I don’t think it’s ever going to remove that because there are people who like to go for the experience of a land-based casino […] You look around the floor, you see things, lights are flashing, people are doing things in front of somebody else. I think that will always remain; but there will be youngsters who are finding a different way they might want to do things with virtual reality instead of moving, every day, to a casino […]they’ll want to play some games themselves and they’ll try and replicate that with what’s coming in the market in terms of virtual reality.

As part of its business, Equiom helps companies procure gaming licences.

What would be some of the difficulties for a company in doing something like that?

What’s the current global status on gaming compliance?

If we look at where governments are looking at things like anti-money laundering, knowing your customer,

Would you say that compliance leads to more reliability on the part of bettors?

Absolutely. It protects everyone who’s placing a bet much more

‘I think some of the new companies coming in have got such really good ideas and they are patented and in specific areas; as long as they have the investment behind them to reach the correct player base they will do very well’

because they know that the government and the regulators are looking at it to make sure, first of all, that the game is correct. That they had the right chance of winning – say that was a slot game – what is the percentage there, is the RNG (random number generator) giving you the right result; and also – if that were a sports betting game – has that game been rigged, how many people were betting on that outcome, making sure that’s correct.

Those features are all possible when that’s online.

Are smaller companies related to gaming eventually going to do away with the necessity for large gaming groups?

I think some of the new companies coming in have got such really good ideas and they are patented and in specific areas; as long as they have the investment behind them to reach the correct player base they will do very well. Some of those I know are happening now: I just can’t give you any more details on those. What they shouldn’t be doing is just sharing exactly the same games that others are using – that’s not going to be useful.

Is eGaming enabling more diversity in betting?

Business Daily Monday, March 28 2016 7

Macau Peter Greenhill, head of eBusiness for Equiom Group

The area that’s really helped is sports betting because you have what’s called ‘betting in running’. So, for example, now, from a social basis when people can bet in running on a football match and they’re sitting there with their friends and they think something’s going to happen next and they bet on that quickly that’s an enjoyable function. It’s not saying you have to put lots of money behind that but it just improves your enjoyment of the game. And that’s what’s developed and it can now happen very quickly. And that can happen not just in soccer but other games of sport as well. So that’s where it’s really grown. There are some options now with some of the concepts of that because once you are betting in running the operator can say to you ‘O.K, you’ve now won this amount, but you might lose that later on, do you want to cash out from that now and we’ll pay you this amount or do you want to let that ride until the end?’ So it’s additional checks.

That sort of thing can also happen when people are playing casino-style games and there are versions of slot machines now which are becoming very interesting where again you can take that through and say ‘Do you want to cash out now or do you want to continue going?’ So, that’s

developed into other forms of gaming and we’ll see that develop over time.

To many people slots are seen as a traditional Vegas-style form. How are they staying relevant?

I think it depends very much upon the individual […] the age groups that are playing slot games are probably the older age group. And certainly in Vegas, for example, there were very different games that happened mid-week in the afternoon to what happened on the Friday, Saturday evening when people were flying into Vegas[…] I’ve done a lot of work there in my previous jobs in what we called ‘server-based downloadable gaming’ whereby you could have a smaller number of slots on the floor but at a particular time you could set the games that are on those machines and that’s a very interesting concept.

For example, in Macau the number of slot machines out there has always been a lot smaller, the mentality here was always less, and much more into table games like baccarat and sic bo but what I also saw – and hopefully this is changing now - is when people tried to deliver slot machines to Macau they were not people who understood the mentality of the people and the ethnic basis of that. So, you would see the colours shown

‘You have to be careful with social gaming’ [that were] incredibly bad for people who were here, also you would see something strange like a dragon in the slot game, but the number of claws on that dragon was wrong then local people would look at that and walk away[…] So you’ve got to get those things right.

Are there any disadvantages to social gaming?

You have to be careful with social gaming, and I actually saw someone presenting a few years ago calling it social gambling. I think there are some issues there. If that game is a social game – what actual type of game is it? The visuals that are put out - should those be rated for age groups? If you’ve got games that are showing problems and steaming cars […] should that be allowed for younger people who are playing a social game? If there’s money being paid into those games to get past a certain level – who controls the payment system there? Those things are important.

Sometimes I’ve seen in the past a copy of, let’s say, poker that’s put out there as a social game. They’re not charging people to play; they might be doing advertising and this sort of thing but what happens if the RNG (random number generator) behind there actually convinces that person that they’ve won – because they’ve favoured them with the odds by making it more in their favour.

And then you offer to turn them into a real gaming environment – when they think they’re an expert now.

That’s not very clever; that’s very poor and has to be looked at by regulators to make sure that there aren’t any things happening like that which could ruin people.

What major upcoming projects are you most excited about?

I have a number of people we’re talking to who are bringing wonderful new product ideas and turning products around a little bit. I can’t go into too much detail because these are patents that have been applied for and they’re going through this environment but there’re some very interesting ideas that we’re trying to help people to grow. I think these will make a really good concept with a few really good games that we’re talking to at the moment.

8 Business Daily Monday, March 28 2016

Greater China Property

Shanghai tightens non-local homebuyer rules as prices su New home prices soared 21 pct in February from a year earlier in Shanghai.

It becomes the first large city to tighten residencebuying requirements.

S

hanghai unveiled a package of measures designed to stem a surge in property prices in the metropolis, underscoring how regulators in top-tier cities are shifting gears in an economy where housing has been a brake on growth in recent years.

The local government will tighten approval criteria for non-resident homebuyers, raise down-payment requirements for some second homes and ban unregulated lending, Gu Jinshan, chief of the city housing management commission, said at a press conference Friday.

Shanghai, where new home prices soared 21 per cent in February from a year earlier, becomes the first large city to tighten residence-buying requirements. It is taking advantage of greater freedom from the central government for local authorities to deal with divergent property markets across the country. In first-tier cities, stimulus intended to boost sluggish real-estate investment led to a home-buying frenzy.

Finance-center Shanghai has seen “panic buying” and phony divorces that can double a couple’s buying power, Gu said. The local market has also been affected by a inflow of funds from other regions, and from the stock market, which plummeted in mid-2015.

Shanghai will limit homebuying eligibility to those who have paid income taxes and social insurance for at least five years consecutively, up from two years now, Gu said. It also will require a down payment of at least 70 per cent for second homes larger than 140 square meters or more than 4.5 million yuan (US$691,000) in value, and require at least 50 per cent down payments for other second homes, Gu said. That compares with a 40 per cent nationwide threshold set by the central bank in March, when it loosened the requirement.

“Liquidity is relatively abundant and real estate in firsttier cities has become the main destination for ’floating capital’” Gu Jinshan, Chief of Shanghai Housing Management Commission

The rules, which take effect Friday, are likely to become a “turning point” for property policies in big cities, Zhou Hao, an economist at Commerzbank AG in Singapore, wrote in a note Friday.

China has shifted to a more dynamic policy approach rather than a “onesize-fits-all” strategy, he said.

Shanghai officials also said they will ban home developers and real-estate agencies from offering down-payment loans, bridge loans and other unofficial lending, a practice that People’s Bank of China Governor Zhou Xiaochuan recently cited as a risk. Gu said Shanghai is examining developers and realtors and may suspend their licenses if they have violated rules.

‘Floating capital’

“Liquidity is relatively abundant and real estate in first-tier cities has become the main destination for ’floating capital,’” Gu said of the reasons for home-price gains that are “too fast.”

“Since last year, capital from the credit market, stock market and funds in other cities have flowed to real estate.”

Even after the news, the Shanghai Stock Exchange Property Index, which tracks real estate-related stocks listed on the mainland exchange, halted three days of losses to close 0.9 per cent higher Friday and pare this year’s decline to 16 per cent.

Shanghai, in the Yangtze River delta on the East China Sea, is one of the world’s largest cities, with a population,

at 24 million, that’s almost a third larger than it was a decade ago, according to National Bureau of Statistics data. Along with Beijing, Tianjin and Chongqing, it’s one of four direct- controlled municipalities, giving its government the same status as a province.

Nationwide investment

The value of Chinese property sales in the first two months of this year surged 43.6 per cent from a year earlier, while doubling in some larger cities.

Investment in real-estate development gained 3 per cent in the first two months from a year earlier, compared with a 1 per cent increase throughout 2015.

Speaking at a press conference during the National People’s Congress in Beijing this month, Zhou warned banks about increased credit risk amid rising real-estate prices in the biggest cities that have begun to diverge severely from values in less-populated areas.

China also faces “relatively big” downward pressure from efforts to eliminate excess housing inventory, which may suppress prices nationwide, he said.

’Rigid manner’

The PBOC said late Friday it asked commercial banks in Shanghai to strengthen monitoring on credit risks from mortgage loans. Lenders should decide down-payment ratio and mortgage rates “in a rigid manner” for customers who appear to be making speculative purchases, the Shanghai branch of

Business Daily Monday, March 28 2016 9

Greater China In Brief

People's Bank of China headquarters in Beijing

Retail

Apple opens 2nd store in Tianjin

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Apple on Saturday opened a second store in north China’s Tianjin Municipality as it speeds up expansion in the country. So far this year, Apple has opened seven new stores in China. The new store in Tianjin is the 35th in the Greater China region.

China is very important to Apple and stores here are the busiest in the world, said an Apple manager. More than 500 Apple fans queued in front of the new store at the Tianjin Hang Lung Plaza before the store opened on Saturday morning. Apple’s first store in Tianjin has hosted more than 2 million customers since its opening in February last year.

the central bank said in an e-mailed statement.

After the Shanghai news, China International Capital Corp. analysts said Shenzhen, where new-home prices have jumped 57 per cent from a year earlier, may announce measures in the near future to curb speculative homebuying. The rules will target speculators chasing profit, not buyers who want to live in the home, the analysts led

by Beijing-based Ning Jingbian wrote.

Commercial banks in Shenzhen, which borders Hong Kong, were asked this week by a research unit of the central bank’s local branch to “appropriately control” the total size of home loans and set mortgage rates in a prudent manner, according to a statement obtained by Bloomberg News.

The single-city measures in Shanghai won’t have a big impact on the nationwide property market, Ken Chen, an analyst at KGI Securities Co. in Shanghai, said Friday.

For Shanghai, however, the steps are seen hurting both home sales and prices.

Sales in Shanghai will weaken in the next three months, according to the CICC analysts, who anticipate that prices in firsttier cities may peak in the short term.

Shanghai sales volume may fall 28 per cent under the rules, according to a report from Centaline Group, China’s biggest property agency. Non-locals accounted for 48 per cent of homebuyers in Shanghai last year, while second apartments made up 24 per cent of purchases. Bloomberg News

Aviation

Direct flight to link central Chinese city and Dubai

Finance

China’s money-market operations inject most cash in seven weeks The People’s Bank of China injected a net 180 bln yuan in one week.

interest rate unchanged at 2.25 per cent. Reverse repos totaled 380 billion yuan for the week, while 200 billion yuan of such contracts matured, data compiled by Bloomberg show.

hina’s central bank added the most money to the financial system through open-market operations last week since before last month’s Lunar New Year holiday as a convertible bond sale and lenders’ quarter-end deposit needs spurred demand for funds.

The People’s Bank of China injected a net 180 billion yuan (US$27.6 billion), the most since the period ended Feb. 5, data compiled by Bloomberg show. A March 18 bond sale by Jiangsu Jiangnan Water Co. locked up an estimated 200 billion yuan, according to Huachuang Securities Co. Commercial lenders need deposits at the end of each quarter to meet regulatory checks, while interbank borrowing costs tend to rise in the March-April period as banks lodge tax payments with the PBOC. The benchmark seven-day money rate climbed to a six-week high on March 23 before retreating.

“The market was a bit tight earlier this week, when the money was frozen due to convertible bond sales - it then eased since Thursday on accumulative PBOC injections,” said Lin Yijian, an analyst at Guangzhou Rural Commercial Bank Co. “The market will face the challenge for quarter-end demand next week, but the central bank will step up injections if necessary.”

The PBOC auctioned 30 billion yuan of seven-day reverse- repurchase agreements on Friday, the smallest daily offering this week, and kept the

Borrowing costs

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The seven-day repo rate, a gauge of interbank funding availability, fell two basis points to 2.29 per cent as of 4:30 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. The central bank has restricted the one-week interbank borrowing cost to between 2.25 per cent and 2.5 per cent over the past five months, using the measure to indicate to the market where it wants interest rates to be. The PBOC has been conducting open-market operations daily since Jan. 29 in an effort to strengthen its influence on interest rates.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, rose two basis points from a week earlier to 2.30 percent on Friday. Bloomberg News

“The market will face the challenge for quarter-end demand next week, but the central bank will step up injections if necessary” Lin Yijian, Analyst at Guangzhou Rural Commercial Bank Co.

A direct air route linking Zhengzhou City in central China’s Henan Province, and Dubai, will launch in May, Henan Airport Group announced Saturday. The first flight to connect the two places will fly four times a week -every Tuesday, Wednesday, Friday and Saturday, according to the airport. Since the start of this year, seven more airlines have joined Zhengzhou airport, including three international airlines, which are Emirates Airlines, Thai Smile, and Tiger Airlines. Thai Smile plans to launch a new weekly flight to links Zhengzhou and Phuket, Thailand, and a flight between Zhengzhou and Singapore is expected to fly three times a week by Tiger Airlines soon, the airport said.

Cairo

Co-operation between China, Egypt Chinese Vice Premier Liu Yandong on Saturday asked for further cultural cooperation between her country and Egypt.

Liu attended a forum of Chinese and Egyptian university chiefs in Cairo and hailed the event as a chance for further bilateral cultural cooperation. “This conference is considered as a new platform to boost cooperation between the two countries in the field of education and to enhance the Chinese-Egyptian friendship,” Liu told the forum.

She noted that this year marks the 60th anniversary of the establishment of diplomatic relations between China and Egypt.

Taiwan

Xi congratulates Hung’s election as KMT leader Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, on Saturday congratulated Hung Hsiu-chu for being elected the chairperson of Kuomintang (KMT). Xi said in his message to Hung that he hoped the two parties shall keep the overall national interest and the well-being of the compatriots in mind, and continue to adhere to the 1992 Consensus and oppose “Taiwan independence.” The CPC and KMT should consolidate the foundation of mutual trust, strengthen communication and interaction, jointly safeguard the peaceful development of cross-Strait relations and peace and stability across the Taiwan Strait and, with one heart, strive to achieve the great rejuvenation of the Chinese nation, Xi said.

10 Business Daily Monday, March 28 2016

Greater China Innovation

China can’t dictate on innovation, Nobel laureate Phelps says

Economist Edmund Phelps at the Boao Forum.

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hina’s mandate that the government will direct innovation rather than grassroots efforts isn’t likely to be fruitful, said Nobel Prize-winning economist Edmund Phelps.

“I can’t imagine having much success in planning the direction of innovation,”

Phelps told reporters Friday at the Boao Forum for Asia on the southern island of Hainan, where top officials gathered this week to discuss economic issues. “It’s hard enough these days to get high innovation in the aggregate without regard to direction.

At the same time trying to get innovation to behave itself, to

go into some desired direction is doubly hard.”

Plans unveiled this month at the National People’s Congress in Beijing, including the government’s new five-year plan, made several endorsements of innovation, which will be key to the goal of moving toward a consumption-led expansion and away from old drivers such as manufacturing. The five-year plan, a remnant of the old Soviet influences, said China should promote innovation to provide a long-lasting driving force for economic and social development.

Phelps, 82, said that while the world’s second-largest economy is beginning to do some significant and exciting innovation, he’s “mystified” that it doesn’t seem to be emphasized sufficiently in the five-year plan.

Not prominent

“There’s certainly some discussion about innovation but I would have thought this fiveyear plan would be 90 per cent about innovation, and making every effort to broaden innovation so the entire population is involved at the grassroots,” Phelps said. “That doesn’t seem to be very prominent.”

Premier Li Keqiang said in his annual press conference at the close of the ceremonial legislature that innovation will help curb downward pressures on the economy.

His work report submitted to lawmakers mentioned innovation 41 times.

“But now productivity has slowed down, so that could be a problem if workers continue to push up wages” Edmund Phelps, Nobel Prize-winning economist

“We should ensure that innovation better drives and energizes development,” Li, who holds a Ph.D in economics, said in the report. “Innovation is the primary driving force for development and must occupy a central

place in China’s development strategy.”

Science, technology

China should establish new science and technology programs, build national science centers and innovation hubs, and develop globally competitive “high-innovation enterprises,” Li’s report said.

The country also should encourage people to start businesses and promote big data, cloud computing, and the Internet of things, it said.

Phelps, winner of the 2006 economics prize, said China needs innovation to sustain fast wage growth, and rising pay is compatible with sustaining growth.

“For a large number of years, productivity was growing faster than the pay, thus higher wages,” Phelps told reporters at the conference. “But now productivity has slowed down, so that could be a problem if workers continue to push up wages.”

M e a n w h i l e, C h i n a’ s sweeping effort to curb over-investment in some sectors as it restructures bloated and unprofitable state-owned industries won’t cause mass unemployment, he said. Bloomberg News

Business Daily Monday, March 28 2016 11

Asia In Brief Poll result

Japanese oppose further sales tax hike The latest poll released Sunday showed that 64.6 per cent of the Japanese public oppose the government’s plan to further hike sales tax from current 8 per cent to 10 per cent in April next year, according to local reports.

The telephone survey, which was conducted by Japan’s Kyodo News through the weekend, also showed that 44.3 per cent of the respondents approve a possible “double election” in which the National Diet’s lower house may be dissolved for a general election together with the planned upper house race in this summer.

Independence Day

Bangladesh marks 46th Independence Day Bangladesh celebrated its 46th independence day on Saturday, paying tributes to the war heroes. A 31-gun salute at dawn heralded the day, which is also the national day of Bangladesh. On March 26, 1971, Bangladesh declared independence from Pakistan.

Bangladesh President Abdul Hamid, Prime Minister Sheikh Hasina and ex-Prime Minister Khaleda Zia, among others, placed wreaths at the National Monument at Savar, some 30 km north of capital Dhaka, at sunrise on Saturday. Tens of thousands of people from all walks of life gathered in front of the national monument to pay respect to the war heroes.

Natural resources

Indian PM calls for water conservation Indian Prime Minister Narendra Modi Sunday urged people across India to conserve and save water.

Modi made the appeal in his monthly radio address program broadcast by the staterun All India Radio. Modi said conserving water from various sources especially rains would help the farmers to irrigate their land in view of deficit monsoon. His appeal has come at a time when reports of water scarcity are pouring in from many parts in Indian. In Maharastra’s drought-hit Marathwada region, officials say dams in the region are left with just five percent of water ahead of the summer season.

Runway

Fashion show returns to Singapore Singapore’s outdoor fashion runway on Saturday returned to its iconic commercial street Orchard Road with over 130 models strutting down the 550-meter-long street. This open-air fashion show is part of the “Fashion Steps Out 2016”, an annual fun-filled six-week extravaganza that shows off the latest fashion trends from around the globe, in the heart of Orchard Road. Since its debut in 2010, this annual highlight has attracted tourists and fashion lovers’ attention.

Taiwan singer Jay Chou’s own brand PHANTACi and Singapore’s famous singer JJ Lin also joined the show, attracting thousands of visitors.

This year’s Fashion Steps Out will last until May 8.

Trade

Tiny fruit fly sours Australia’s big ambitions in agriculture Negotiations are underway with potential buyers to overcome the problem, with talks centring on ways to transport fruit that ensures any flies will be killed but the produce remains fresh.

Colin Packham

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tiny fruit fly is undermining Australia’s efforts to grow its US$3 billion fruit and vegetable exports, despite the country reaching a series of free trade agreements with its largest trading partners in Asia.

Australia sealed trade agreements with China, Japan and Korea last year - deals that guaranteed a significant reduction in tariffs for agriculture produce - and were heralded as a catalyst for rapid expansion in exports.

The tariff cuts have pushed sales of agriculture produce to all-time highs, but difficulty obtaining biosecurity permits - so called phytosanitary protocol agreements - means many fruits in particular cannot be sold into markets like China, making free trade agreements often meaningless, industry executives say.

“Phytosanitary protocol agreements are the biggest hurdle we have to overcome to get our products into markets like China,” said Annie Farrow, Industry services manager at the industry body, Apple and Pear Australia.

Australia’s fruit and vegetable exports make up about 10 per cent of the country’s US$30 billion in agriculture exports, but are being targeted for rapid growth as the country tries to transition its economy away from a slowing mining sector.

While biosecurity hazards pose problems for all agricultural produce in accessing major markets like China, horticulture is seeing the greatest obstacles due to the Queensland fruit

fly, known scientifically as Bactrocera tryoni and found across Australia’s mainland.

Only a handful of products - including citrus and table grapes - can be sold into China. Sales of other fruit such as apples, cherries and oranges to markets such as Japan and Korea is heavily restricted because of concerns about the possible transfer of the pest, whose larvae feed on ripening fruit and cause it to rot.

Growing market

While mainland Australia has struggled, the southern island state of Tasmania is free from the fruit fly and has sealed a raft of agreements to sell to Asia’s largest economies - demonstrating the cost of the pest.

Tasmania’s fruit and vegetable exports jumped 44 per cent in 2016 to nearly A$100 million (US$75 million)

“Phytosanitary protocol agreements are the biggest hurdle we have to overcome to get our products into markets like China” Annie Farrow, Industry services manager at the industry body, Apple and Pear Australia

and are expected to grow rapidly again this year, outpacing national growth of 32 per cent, according to data from the Australian Bureau of Statistics.

Australia’s Plant Biosecurity Cooperative Research Centre last year estimated the cost of fruit fly at A$300 million a year in control and due to lost markets, but that does not include the potential of growing the industry.

“The lack of required phytosanitary agreements are a huge constraint for higher growth,” said Phin Ziebell, agribusiness economist with the National Australia Bank. “These agreements can take many years to obtain.”

Negotiations are underway with potential buyers to overcome the problem, with talks centring on ways to transport fruit that ensures any flies will be killed but the produce remains fresh.

Some methods include irradiation, which can work for fruits such as cherries, or keeping produce such as apples at near freezing temperatures.

Securing an agreement, however, can be a long-drawn out process.

Australia and China last year sealed a deal for the export of live cattle to China, but only after 10 years of talks, and horticulture growers are pessimistic.

“I think it is extremely unlikely that we are going to see a breakthrough to see mainland cherries into China this year. It is intensely frustrating,” said Tom Eastlake, farmer and chair of the industry body, Cherry Growers Australia. Reuters

12 Business Daily Monday, March 28 2016

Asia

Fintech

Japan looks to kickstart ‘fintech’ revolution The county’s financial industry regulator relaxes rules on investing in financial ventures.

Thomas Wilson

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laggard in embracing the ‘fintech’, or financial technology, revolution, Japan is set to ease investment restrictions that could free up the flow of capital in an economy sitting on an estimated US$9 trillion in individuals’ cash deposits.

Strict regulation, easy access to credit due to rock-bottom interest rates, and weak demand for innovative financial services from a riskaverse population that still prefers cash to credit cards, have strangled fintech’s advance in Japan.

Fintech ventures - usually start-ups leveraging technology from cloud data storage to smartphones to provide loans, insurance and payment services - raised $US2.7 billion in China last year, and over US$1.5 billion in India, according to CB Insights data. Ventures in the United States attracted investment of around US$7.4 billion.

In comparison, investment in Japanese ventures reached only around US$44 million in the first nine months of 2015.

Now, Japan’s financial industry regulator hopes relaxed rules on

investing in financial ventures, and a new system for regulating virtual currency exchanges will pass through parliament by May - a first step in kickstarting the fintech revolution in the world’s third-biggest economy.

“The law changes aren’t a goal, but a first step,” Norio Sato, a senior official at the Financial Services Authority (FSA), told Reuters. “Fintech will have a big impact on financial services.”

“The law changes aren’t a goal, but a first step” Norio Sato, Senior official at the Financial Services Authority

The changes, which will allow banks to buy stakes of up to 100 per cent in non-finance-related firms, will free up Japan’s three megabanks to enter into tie-ups with fintech ventures developing services including robotic investment advisory and blockchain, the decentralised ledger technology behind the bitcoin digital currency.

Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group have said they are eyeing such investments, having previously been restricted to holding stakes of only 5-15 percent in start-ups.

Under pressure from weak loan demand, the megabanks see an opportunity to earn money through fintech, but are also aware of its potential to disrupt traditional business models.

Game changer

The unpromising fintech environment in Japan - which was blindsided by the high-profile collapse of the Mt. Gox bitcoin exchange in 2014 when hackers stole an estimated US$650 million worth of the digital currency - has seen some entrepreneurs go overseas for funding.

Junichi Horiguchi, co-founder and CEO of bitcoin service provider Zerobillbank Ltd, established his start-up in Tel Aviv last year to take advantage of Israel’s advanced technology industry.

Investment in fintech start-ups by global banks and tech giants including Barclays, Google and Facebook is far more common in Israel than in Japan, he said.

“It’s completely different over there,” Horiguchi told Reuters. “Every month there are open innovation contests and (start-up) accelerator programmes.”

Sales at Japan’s fintech start-ups could jump to over half a billion dollars by 2020 as the use of technology such as blockchain increases, Yano Research Institute said in a report.

The new rules the FSA is promoting on virtual currency exchanges could make Japan one of the first countries to regulate bitcoin at a national level.

“Japan hasn’t previously been enthusiastic about fintech,” said Sato.

“But creating these rules this fast could gain the world’s attention.”

Bitcoin entrepreneurs, often reliant on investment for growth, have called for clearer regulation and will welcome the latest changes, said Yuzo Kano, founder and CEO of bitcoin exchange bitFlyer Inc, and head of the Japan Authority for Digital Assets, a lobbying group.

“The establishment of the law is extremely surprising,” Kano said, referring to how quickly the FSA had drafted the law. “It’s set to be very successful.” Reuters

Crude Oil

Vietnam’s GDP growth slows in Q1 on crude curbs Gross domestic product rose 5.46 pct in the first three months from a year earlier.

V

i et nam ’ s ec o n o m i c growth slowed in the first quarter as the country’s income from crude and agriculture production

dropped.

Gross domestic product rose 5.46 per cent in the first three months from a year earlier, according to data released by the General Statistics Office in Hanoi today. That compares with the previously reported 7.01 per cent pace in the last quarter of 2015 and a median 6.1 per cent estimate in a Bloomberg survey for this quarter.

The economy “faces challenges

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including drops in international prices of crude oil. Any further price declines will negatively affect the state budget this year,” according to Nguyen Bich Lam, head of the General Statistics Office. Vietnam typically releases growth estimates before the end of the quarter, weeks ahead of its peers, and the numbers are often revised later.

State income from crude oil dropped 53 per cent in the first quarter, according to a statement from the General Statistics Office.

Vietnam reduced its crude oil production by 3.7 per cent to 4 million

metric tons in the first quarter from a year earlier as global oil prices dropped, according to Lam. Crude oil this week extended its retreat below $40 a barrel on global markets amid a revival in the U.S. dollar.

Rice production from the Mekong Delta, the country’s largest rice-growing area, dropped 6.2 per cent in the first quarter, dragging down total agricultural production by 2.7 per cent, according to Lam. “Unfavorable weather with the ongoing severe drought has hurt agricultural production this year,” Lam said. Bloomberg News

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Business Daily Monday, March 28 2016 13

Asia Yangon Stock Exchange

Stock trading comes to Myanmar with first company listing First Myanmar Investment Co., a conglomerate controlled by businessman Serge Pun, made its stock debut in Yangon.

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fter a delay of more than 20 years, Myanmar’s stock exchange opened for its first day of business, with the trading of a single

company.

First Myanmar Investment Co., a conglomerate controlled by businessman Serge Pun, made its stock debut in Yangon on Friday, ending a long wait caused by the Asian financial crisis, a wary military government and an underdeveloped financial system. The move comes as the country’s development accelerates with a democratic government being formed after an election victory in November, part of a political and economic transformation that’s bringing an end to more than five decades of isolation.

“The debut is an important milestone because a stock market is a vital ingredient for economic development,” Karine Hirn, a Hong Kong-based partner of East Capital Asset Management, which invests in emerging and frontier markets, said by e-mail. “However, whether it will be successful or not depends

on the willingness of the government to prioritize it.”

The listing debut was attended by First Myanmar’s Pun and officials including Maung Maung Thein, the country’s deputy finance minister and chairman of the Securities and Exchange Commission, who called it “an historic day in the development of the capital markets.”

First Myanmar climbed 19 per cent to a daily limit of 31,000 kyat with 112,845 shares changing hands on Friday, according to the stock exchange’s website. The bourse set the stock’s base price at 26,000 kyat, according to its statement.

First Myanmar, Myanmar Citizens Bank and Myanmar Thilawa SEZ are among the initial batch of six companies approved for listing, Maung said in December.

Myanmar’s equity-market journey began in the early 1990s, when executives from Daiwa Institute of Research Holdings, a unit of Japan’s second-largest brokerage, met with the nation’s military rulers in Yangon. Their initial target was to start a bourse by 2000. The region’s financial crisis soon derailed those ambitions and it wasn’t until 2011, after the quasi- civilian government began opening up Myanmar’s economy, that the exchange plan was revived.

As Myanmar emerges from economic isolation, it will need US$80 billion of power, transport, and technology projects through 2030 to modernize its economy, according to the

Asian Development Bank. Buoyed by a flood of foreign direct investment, the ADB estimates the economy expanded about 8.3 per cent last year and will grow nearly the same pace in 2016.

New cabinet

On Thursday, Myanmar’s parliament approved Aung San Suu Kyi and 17 other nominees to take positions in the incoming government’s cabinet, following her National League for Democracy party’s landslide victory in November’s election.

Foreign investors will be able to trade on the exchange once Myanmar’s new government, which takes office next week, passes revisions to the country’s companies law, the Myanmar Times reported in December, citing SEC head Maung. The SEC

Key Points First Myanmar Investment shares climb 19 pct on Yangon debut Five more stocks to be added to the bourse later this year hasn’t said whether foreign investors will face any investment restrictions.

“There are a lot of international investors looking at Myanmar right now but they were so far frustrated not to have the ability to invest in Myanmar equities with the exception of some stocks listed somewhere else,” said Thomas Hugger, chief executive officer at Hong Kong-based Asia Frontier Capital Ltd., which oversees about US$40 million of assets. “This is changing now finally.” Bloomberg News

14 Business Daily Monday, March 28 2016

International In Brief Stocks

Dubai stocks extend losses Dubai equities were poised to extend the longest losing streak in more than two months after oil languished near US$40 a barrel. Stocks in the six-nation Gulf Cooperation Council also fell. The DFM General Index lost 0.9 per cent to 3,288 as of 11:43 a.m. local time. Emaar Properties PJSC was the biggest contributor to the declines with a 1.5 per cent drop. Shuaa Capital PSC bucked the trend and advanced 2.4 per cent as traders exchanged 21 million shares, about 15-times the six-month intraday average.

“There are worries of some technical exhaustion given the strong market rally in recent weeks, and softer oil last week isn’t helping either,” said Akber Khan, who manages US$850 million as senior director of asset management at Al Rayan Investment in Doha.

Agriculture

Ethiopia to miss 11 pct growth target Ethiopia’s economy will expand by between 7 per cent and 10 per cent this fiscal year, missing the government’s target, as a severe drought hurts agriculture.

“The economy will continue to register growth, if not a double-digit fast economic growth,” Prime Minister Hailemariam Desalegn said in a newsletter e-mailed by the Foreign Ministry. The government had a target of 11 per cent growth for the fiscal year ending on July 7. Ethiopia, Africa’s second-most populous country after Nigeria, with almost 100 million people, said average growth has been more than 10 per cent a year for the past decade, including 10.2 per cent last year.

Before the effects of the drought were known, the International Monetary Fund expected the economy to expand 8.1 per cent this year and said the increase for the previous 12 months was 8.7 per cent.

Politics

Moscow sees progress in Russia-U.S. relations Russia has seen positive progress in its relations with the United States and a desire to communicate from both sides, Kremlin spokesman Dmitry Peskov said Saturday.

“I think it is possible to say that there have been positive advances ... If we compare the atmosphere with what it was a year ago, then of course there is an evident desire to communicate,” Peskov was quoted by the RIA Novosti news agency as saying.

However, Peskov noted that there are “no illusions” that Washington would change its attitude toward Moscow in the short term. U.S. Secretary of State John Kerry paid a two-day visit to Moscow this week. During his talks with Russian President Vladimir Putin and Russian Foreign Minister Sergei Lavrov, the two sides reached some consensus on the Syria crisis, but bilateral relations are far from thawing so long as sanctions against Russia are not lifted.

GDP

U.S. economy grew 1.4 pct in Q4, supported by consumers The revised increase in gross domestic product compares with the Commerce Department’s previous estimate of 1 pct.

Michelle Jamrisko

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he U.S. economy grew in the fourth quarter at a faster pace than previously estimated, supported by stronger household spending that’s helping cushion the expansion from weakness overseas.

The revised 1.4 per cent increase in gross domestic product, the value of all goods and services produced, compares with the Commerce Department’s previous estimate of 1 per cent, according to figures issued Friday. The economy grew 2 per cent in the third quarter. The report also showed that corporate profits dropped in 2015 by the most in seven years.

The earnings slump illustrates the limits of an economy struggling to gather steam at the start of this year.

Some companies, encumbered by low commodities prices and sluggish foreign markets, are cutting back on investment while a firm labor market and low inflation encourage households to keep shopping.

“It’s really U.S. consumers who are powering the global economy forward at this point,” said Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh. At

the same time, “there are pressures on businesses in terms of the stronger dollar, rising labor costs and slowing productivity growth” even as a rise in energy prices will help ease that drag for oil producers.

The median forecast of 73 economists surveyed by Bloomberg called for fourth-quarter growth of 1 per cent, with projections ranging from no change to a 1.4 per cent gain. This is the last of three estimates for the quarter before annual revisions in July.

2015 Economy

The figure marks a slowdown from the 2.2 per cent average pace in the first three quarters of 2015. For all of last year, the U.S. economy grew 2.4 per cent, matching the advance in 2014.

Today’s fourth-quarter growth figure reflected more spending on services, particularly on recreation and transportation. Exports also declined less than previously estimated.

Household purchases, which account for almost 70 per cent of the economy, rose at a 2.4 per cent annual pace, compared with a previously estimated 2 per cent rate. Personal consumption added 1.66 percentage points to growth.

Weak overseas demand has weighed on net exports, with trade subtracting 0.14 percentage point from overall growth after a previously reported 0.25 percentage point. The gap in goods and services trade may stay wide as the U.S. economy plods ahead and foreign markets, including China, struggle to improve.

Inventories subtracted 0.22

percentage point from growth compared with a previous estimate of a 0.14 percentage-point drag. American companies are still trying to get stockpiles more in line with demand.

Final sales

Stripping out inventories and trade, the two most volatile components of GDP, so-called final sales to domestic purchasers increased at a 1.7 per cent rate, compared with a previously estimated 1.4 per cent pace.

Friday’s report also offered a first look at corporate profits for the period. Pre-tax earnings declined 7.8 per cent, the most since the first quarter of 2011, after a 1.6 per cent decrease in the previous three months. The estimate of nonfinancial corporate profits was reduced by a US$20.8 billion settlement, considered a transfer to the government, between BP and the U.S. after the 2010 oil spill in the Gulf of Mexico.

Profits in the U.S. dropped 3.1 per cent in 2015, the most since 2008.

Earnings are being weighed down by weak productivity, rising labour costs and the plunge in energy prices.

“If profits remain depressed, the prospects for capex and hiring will come under greater pressure,” Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, wrote in a research note.

Corporate outlays for equipment declined at a 2.1 per cent annualized pace, subtracting 0.12 percentage point, the Commerce Department said.

A strengthening labor market is supporting steady U.S. household demand even as factories continue to struggle amid the global slowdown.

Employers added 242,000 workers to payrolls in February and the unemployment rate held at an eight-year low of 4.9 per cent. Firings linger near four-decade lows.

Consumers have also been buoyed by gasoline prices. The cost of an average gallon of regular gasoline was US$2.01 as of March 23, compared with $2.40 on average for all of 2015, according to motoring group AAA. Bloomberg News

Business Daily Monday, March 28 2016 15

Opinion Business Wires

The Japan News Hokkaido Railway Co., or JR Hokkaido, opened its Shinkansen high-speed railway line for services on Saturday, with Shinkansen bullet trains connecting Honshu and Hokkaido underneath the Tsugaru Strait for the first time ever. This opened a new chapter in the Shinkansen history since the Tokaido Shinkansen Line between Tokyo and Osaka, the first bullet train service in the nation, was launched in October 1964. Shinkansen services are now available in three of the four main islands — Honshu, Hokkaido and Kyushu. The 149-kilometer new railway between Shin-Aomori Station in Aomori Prefecture and Shin-HakodateHokuto Station in the city of Hokuto in the southern part of Hokkaido, passes through the 54-kilometer Seikan Tunnel.

China’s next stimulus Taipei Times Sharp Corp’s banks are ready to push back the deadline for most of the company’s 510 billion yuan (US$4.51 billion) in loans and credit lines beyond Thursday, people with knowledge of the matter said, giving the electronics maker more time to reach a renegotiated deal to be acquired by Hon Hai Precision Industry Co, known as Foxconn Technology Group outside Taiwan. The extension might be as long as one month, said the people, who asked not to be identified as the decision has not been publicly announced.

Hon Hai chairman Terry Gou last month agreed to buy Sharp for more than 600 billion yuan, but has held off on signing a final agreement while his advisers scrutinize the company’s finances.

The Korea Herald For a global tire-maker supplying its high-end products to global luxury carmakers, including Mercedes-Benz and BMW, for sure, the next target will be performance-driven super car brands like Ferrari. Seoul-based Hankook Tire, the world’s seventh largest tire manufacturer in terms of sales follows the growth formula in the industry by supplying its ultra-high performance tires and winter tires to BMW’s new 7-series sedans from this year. The Korean tire-maker has also supplied its premium products to other two German luxury carmakers-Mercedes-Benz and Audi--since 2013.

The Phnom Penh Post Cambodia’s central bank has raised the minimum capital requirement of banking institutions operating in the Kingdom, doubling the capital threshold for commercial and specialised banks, and increasing it more than ten-fold for microfinance institutions – a move some analysts predict will likely lead to more consolidation in the sector. A prakas by the National Bank of Cambodia (NBC) published last week requires all commercial banks, including subsidiaries of foreign banks, to increase their minimum capital to the equivalent of US$75 million. Previously, commercial banks were required to hold a minimum capital of US$37.5 million, while subsidiaries of foreign banks with an investment-grade ranking required just US$12.5 million capital. Specialised banks are required to raise their minimum capital to US$15 million, from US$7.5 million.

S

ince last November, economists and the media alike have been hailing supply-side structural reform as a groundbreaking solution to China’s economic woes. After all, the logic in China goes, demand-side policies, in the form of Keynesian stimulus measures, are useful only for resolving short-term and aggregate problems. Because China’s problems are long term and structural, the country should be focused on supply-side structural reform, even if it means accepting slower GDP growth. Is this the right approach?

GDP growth is generated via the interaction between the supply side and the demand side of the economy. For example, investment in human capital enables innovation, the products of which create demand and, in turn, economic growth.

Demand-side policy and structural adjustment are not mutually exclusive. In aggregate terms, growth of supply determines growth potential, and growth of demand determines the use of that potential. To change the economic structure and growth pattern, first the structure of demand must be changed.

For China, the supply side should be driven more by innovation and creation, rather than by increasing inputs. On the demand side, it should be driven more by domestic consumption, rather than investment (especially in real estate) and exports. But this shift is proving difficult, as structural factors cause China’s long-term potential growth rate to fall; the economy now seems set to fall below even that lower rate this year.

All of this suggests that continued structural adjustment is needed in China. But the reality is that China has been engaged in such adjustment for a long time, with unsatisfactory results, indicating that complementary demand-side policies may be needed. Moreover, while slower growth is unavoidable because of adjustment, there is a limit to how low a growth rate China can accept. With China’s growth having already reached a 25-year low in 2015, that threshold may not be far off.

To be sure, many believe that China’s growth rate will stabilize in the second half of 2016. If it does, China’s leaders could probably concentrate on structural adjustment, without considering additional stimulus. But there is good reason to believe that China’s growth rate will continue to decline this year.

The fact is that China remains gripped by deflation, with prices and output in a downward spiral.

Despite a slightly positive consumer price index (CPI), the producer price index (PPI) has been falling for 47 months in a row. Moreover, the GDP deflator has been negative since the beginning of 2015.

Two types of deflation spirals are currently at work in China. There is the overcapacity-deflation spiral, in which overcapacity pushes down PPI, leading to falling corporate profitability. Then there is the debt-deflation spiral, in which falling PPI causes real debt to rise, again weakening corporate profitability. In both cases, firms are driven to deleverage and reduce investment, a response that leads to more overcapacity and further declines in PPI. Furthermore, given that China’s corporate debt is already very high, the increase in real debt may have devastating consequences for financial stability.

Yu Yongding Former president of the China Society of World Economics and director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

Compounding the challenge confronting China is the fact that the economy’s major demand-side driver, real-estate investment, is declining more rapidly than the alternative source of demand, domestic consumption, is rising. In 2015, the unsold residential floor space for China as a whole was 700 million square meters (7.5 billion square feet), while the average annual sale of floor space in normal times was 1.3 billion square meters.

Faced with double-digit growth in inventory, real-estate developers slashed investment. By the end of 2015, real-estate investment growth dropped almost to zero. This year, though investment increased somewhat in January and February, that rate is almost certain to fall significantly further.

Because real-estate investment accounts for more than 10 per cent of China’s GDP, the impact of this trend on overall economic growth will be considerable.

In this context, China is not facing a choice between Keynesian stimulus or supply-side reform, but rather a challenge in balancing the two. In order to avoid a hard landing that would make structural adjustment extremely difficult to implement – not, it should be noted, to prop up growth – another stimulus package that increases aggregate demand through infrastructure investment is needed. Given that China’s fiscal position remains relatively strong, such a policy is entirely feasible.

The new stimulus package should be designed and implemented with much more care than the 4 trillion yuan (US$586 billion) package that China introduced in 2008. With the right investments, China can improve its economic structure, while helping to eliminate overcapacity.

The key will be to finance projects mainly with government bonds, instead of bank credit. That way, China can avoid the kinds of asset bubbles that swelled in the last several years, when rapid credit growth failed to support the real economy.

To accommodate this approach, the People’s Bank of China should adjust monetary policy to lower government-bond yields. Specifically, it should shift the intermediate target of monetary policy from expanding the money supply to lowering the benchmark interest rate. Needless to say, in order to uphold monetary-policy independence, China has to remove the shackles from the renminbi exchange rate.

Structural adjustment remains absolutely critical to China’s future, and the country should be prepared to bear the pain of that process. But, under current circumstances, a one-dimensional policy approach will not work. Expansionary fiscal policy and accommodative monetary policy also have an important role to play in placing China on a more stable and sustainable growth path. Project Syndicate

“The fact is that China remains gripped by deflation, with prices and output in a downward spiral.”

16 Business Daily Monday, March 28 2016

Closing Terrorism

Belgium charges man in connection with France plot Federal prosecutors in Brussels charged a suspect identified as Abderamane A. with participating in activities of a terrorist group, according to Belga news agency. The charges are in connection with the investigation of a plot in France

that led to the arrest this week of Reda Kriket in Argenteuil, France, Belga said. The man was shot and apprehended on Friday at a tram stop in the Schaerbeek district of Brussels. Belgian media reported that he was convicted in 2005 for complicity in the murder of Northern Alliance commander Ahmad Shah Massoud.

Online Retail

China sets new online import tax rules Online purchases from overseas will be charged in the same way as any other imported goods, the Ministry of Finance announced.

C

hina will change the tax rules on online retail goods from April 8 to level the playing field for e-commerce platforms and traditional retailers and importers.

Retail goods purchased online will no longer be classified as “parcels,” which enjoy a “parcel tax” rate, lower

than that on other imported goods.

Instead, online purchases from overseas will be charged in the same way as any other imported goods, the Ministry of Finance (MOF) announced on Thursday.

“Parcel tax is not for trade purposes, which is exactly what online retailing is. It is unfair to conventional

importers and domestic producers,” said Zhang Bin of the Chinese Academy of Social Sciences.

China levies parcel tax on imported goods worth less than 1,000 yuan (US$150), and the rates is mostly 10 per cent. Taxes under 50 yuan are waived. As demand for overseas goods grows, online purchasing agents have taken advantage of parcel tax and used new methods such as repackaging and mailing products separately to avoid tax.

The new policy only allows a maximum of 2,000 yuan per single

cross-border transaction and a maximum of 20,000 yuan per person per year. Goods that exceed these limits will be levied the full tax for general trade, the MOF said.

According to a 2015 survey by Amazon China on online imports, most buyers are under 35 and around 90 per cent have a college education.

More than half earn more than 5,000 yuan per month.

The new policy will speed up customs clearance so consumers will receive most orders from overseas within two weeks, instead of the current two months.

Cross-border e-commerce has been booming in China. The country plans to set up more cross-border e-commerce pilot zones to attract businesses, create jobs and nurture new business models that will boost foreign trade and stimulate the economy, the State Council announced in January.

The expansion of the pilot zones came at a time when the country is facing sluggish foreign trade. Total export and import value for 2015 decreased 7 per cent year on year, falling for the first time in six years.

The Ministry of Commerce predicted the volume of cross-border e-commerce in 2016 will reach 6.5 trillion yuan and will soon account for 20 per cent of China’s foreign trade. Xinhua

“Parcel tax is not for trade purposes, which is exactly what online retailing is. It is unfair to conventional importers and domestic producers” Zhang Bin, Scholar at Chinese Academy of Social Sciences

Industry

Nuclear

Security

China’s industrial profits return to growth

EDF to take on part of risks on Hinkley Point

U.K. plans cuts to border force budget

Profits of China’s major industrial firms rose 4.8 per cent year on year in the first two months of 2016, reversing the downward trend of last year, official data showed Sunday. Profits at industrial companies with annual revenues of more than 20 million yuan (about US$3.1 million) totaled 780.7 billion yuan in the January to February. period, the National Bureau of Statistics (NBS) said. The profits registered a 4.7 per cent year-on-year fall in December and a 2.3 per cent annual decrease in 2015. He Ping, an official with the NBS Department of Industry, attributed the latest profit growth to increased sales and a milder decline in factory product prices. In the first two months, revenues from the firms’ primary business climbed 1 per cent year on year, improving from a 0.6 per cent drop in December 2015 and a 0.8 per cent increase for last year. Compared with the same period of 2014, the industrial profits of this year only inched up 0.4 per cent, said He. Xinhua

French utility EDF has agreed to shoulder part of Chinese partner CGN’s financial risks should there be delays or cost overruns in the Hinkley Point nuclear project in Britain, weekly Le Journal du Dimanche reported. The newspaper cites a note by former chief financial officer Thomas Piquemal to the EDF board’s audit committee regarding the 18 billion pound (US$25.44 billion) project. The notes says in the case of five-billion-euro cost overrun, EDF would have to finance 80 per cent of it, despite having a 66.5 per cent stake in the project. In case of a six-month delay, state-controlled EDF would have to refund several hundred million euros of CGN’s initial investment. If the Austrian government is successful in its complaint to the European Commission over what it regards as illegal state aid for the project, EDF would have to pay CGN 1.6 billion euros. The newspaper also reported that CGN has a bigger say in the governance of the Hinkley Point project, including veto rights on any dividend payments, accounting, budget and board member pay. Reuters

Britain’s opposition Labour party said the government is planning to cut its border force budget by 6 percent in each of the next two years, citing “whistleblowers” within the agency that it didn’t identify.

The reduction would result in 88 million pounds (US$124 million) of cuts during that span, Labour said on its website Saturday. Border Force staff say they were told in internal meetings to expect two years of 6 percent cuts, the party said. The “Border Force’s planned budget for 2016/17 and 2017/2018 is still being agreed,” a Home Office spokesman said in response. “This government has demonstrated that we will take all the necessary measures to maintain the security of our borders.” Labour’s claims follow March 22 suicide bombings in Brussels that left more than 30 people dead, and the U.K. budget a week earlier that saw the government criticized for spending cuts, both by the opposition parties and some Conservative lawmakers. Counter-terrorism investigations in several European countries are advancing amid fears of further assaults. Bloomberg