Macau Business Daily June 9, 2016 by Business Daily

Jackpot of over 5 billion to residents. Cash handouts to be continued Money Page 3

Thursday, June 9 2016 Year V Nr. 1061 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor ALEX LEE

www.macaubusinessdaily.com

Delayed park

TRANSPORTATION Macau has a little over 500 public parking spaces for heavy vehicles but more than 7,600 on the roads. Illegal parking is a common solution. One massive underground park in Cotai could represent a 50 per cent increase in spaces and alleviate the problem, at least a bit. But, as the Business Daily reportage found out, the area was closed three years ago because of the LRT works near the Lotus border. The government told this newspaper it would return it for public use in the first quarter of next year. The reports on pages 6 & 7

Dangerous liaisons

Business Chinese millionaire Zheng Yonggang went to Portugal last month to announce investment plans of over US$10 billion. Now, the central bank has alerted all Portuguese banks against Level Constellation, a company in which the chairman of China’s Shanshan Group is a major shareholder. Bank of Portugal suspects Level of money laundering. Page 5

Not confident

TRADE Local exporters have low levels of confidence regarding exports. According to a survey, labour shortages, rises in material costs and price competition with other regions are obstacles difficult to overcome. Page 2

Featuring protests

Finance

Cosmetics giant Lancôme and L’Oreal closed their outlets in Hong Kong yesterday as protesters gathered at a major mall after the company cancelled a concert featuring a local singer critical of China. Carrying cardboard cut-outs of the singer, they entered the mall and stuck posters all over the Lancôme counter.

Law for provident fund proposed by government. Kind but not enough says legislator

21,297.88 -30.36 (-0.14%)

China Petroleum & Chemical

+2.54%

Hengan International Group

+1.20%

BOC Hong Kong Holdings

-3.25%

Sun Hung Kai Properties Ltd

-0.95%

PetroChina Co Ltd

+2.33%

China Resources Power

+1.09%

China Merchants Holdings

-2.07%

Hang Seng Bank Ltd

-0.92%

CLP Holdings Ltd

+1.66%

Bank of China Ltd

+0.91%

Cheung Kong Property

-1.88%

China Mobile Ltd

-0.82%

China Mengniu Dairy Co Ltd

+1.31%

China Overseas Land &

+0.82%

Sino Land Co Ltd

-1.61%

China Shenhua Energy Co

-0.76%

Lenovo Group Ltd

+1.27%

Link REIT

+0.81%

Hong Kong Exchanges and

-1.24%

Li & Fung Ltd

-0.73%

27° 30° 27° 31° 28° 30° 28° 30° 27° 31° Today

Source: Bloomberg

HK Hang Seng Index June 8, 2016

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Source: AccuWeather

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POLITICS Page 16

2 Business Daily Thursday, June 9 2016

Macau Trade

Confidence levels in exports not that high Mainland China was seen as a relatively better market for Macau’s exports in the first quarter. Labour shortages the biggest problem. Annie Lao annie.lao@macaubusinessdaily.com

ost local exporters have a ‘cautious’ outlook for the prospects of the export market for the near future, citing a lack of personnel as a major concern. Other difficulties revealed by the Industrial Export Survey for the first quarter, conducted by Macao Economic Services (DSE), were price competition with other regions, and increases in wage and material costs. Only 10.1 per cent of the respondent companies surveyed in the first quarter indicated that they were optimistic about the export business for the coming six months, a decrease

of 7.9 percentage points from the same quarter last year, according to the survey. Meanwhile, the majority of export enterprises, 83.6 per cent, perceive that the prospects for the city’s export industry remain more or less the same, representing an increase of 18.7 percent from the previous quarter. This indicates that current global economic trends remain uncertain, according to the report. As such, local manufacturers seem cautious about the future of the export industry.

Demand for more workers

About half of the interviewed companies said that they face personnel shortages. Most of the companies demanding more workers, 72.6 per cent,

belong to the pharmacy industry. In the first quarter, half of the surveyed companies cited ‘price competition with other regions’ and ‘rise in material costs’ as their biggest challenges. ‘Shortage of workers’ and ‘rise in wages’ were cited by 29.9 per cent of the companies, and 20.2 per cent, respectively. According to ‘Market Quarter

Orders Index’ in the survey, Macau manufacturers generally believe in the relatively better performance of the Mainland China market, showing an index of 23.4, while Japan was the worst. Electronics and electrical appliances, tobacco and pharmacy products were the main items for export during this quarter.

asked the legislator whether the current number of taxis is enough to meet the strong demands of tourists and local residents in the city. An amount of 1,500 to 1,700 taxis is considered to be a “reasonable number of taxis in the city”, replied Mr. Lam, saying the figures are based on research done regarding the situation and operating conditions of Macau. Research into the feasibility of introducing an intelligent management system for taxis is still ongoing, Mr. Lam said. A new management

system for dispatching taxis will be introduced to optimize the overall quality of taxi services in Macau, he revealed. A total of 229 cases were filed against taxi drivers overcharging and rejecting passengers, accounting for 75.8 per cent of the total prosecution cases filed, according to official data released by the Public Security Police (CPSP) yesterday. And a total of 91 illegal taxi driver cases were filed last month, an increase of 1.6 per cent from the previous month, according to the latest data from CPSP.

Transport

City taxis increasing to 1,500 More taxis will be added this year to meet the demands of tourists and local residents. Annie Lao annie.lao@macaubusinessdaily.com

The number of taxis in the city will increase to 1,500 by the end of this year and, by next year, it will increase further to 1,600, the director of the

Transport Bureau (DSAT), Lam Hin San, replied to legislator Chan Meng Kam’s written enquiry. More taxis will meet the demands of the city, he explained. As of the end of March, there were about 1,300 taxis in Macau. Mr. Chan

Movies

Now You See Me 2 set in Macau now in cinemas The sequel to the 2013 magic heist movie, Now You See Me 2, set in Macau will have its global release tomorrow. Following on from the international success of the first movie, Now You See Me 2 features a star-studded cast including Daniel Radcliffe, Mark Ruffalo, Jesse Eisenberg and Woody Harrelson. Directed by Jon M. Chu, the sequel had a budget of US$90 million

(MOP719.7 million) and is counting on a repeat of the box office success of the first installment. The movie was filmed last year in London and Macau, with on-location filming at The Venetian Macao and Sands Macao casinos, and at the Macao Science Centre. The movie is currently showing at UA Galaxy Cinemas but general release date is set for June 10. N.M.

Business Daily Thursday, June 9 2016 3

Macau Money

Cash scheme again this year

The government will again distribute this year’s cash handout cheques to all permanent and non-permanent residents. The amounts of MOP9,000 (US$1,125) to permanent residents and MOP5,400 (US$675) to nonpermanent residents will cost public coffers 5.946 billion patacas (US$743.25 million). A total of 685,582 individuals are entitled to receive the handout. The decision was

made public yesterday. According to the government, after assessing the last year’s financial position, it was decided to continue to share with residents the “fruits of Macau’s economic development” through the pecuniary scheme. The cash gift will start to be given out next month, by bank transfer or crossed cheque sent by post. Not included in the scheme are 181,436 individuals living in Macau on blue cards. A.L.

Finance

Balancing the pension scales The government has proposed a non-mandatory minimum 10 per cent pension contribution by employers and workers, which will become mandatory after three years. Commenting to Business Daily, one legislator and an expert see it as a necessary pension system adjustment, but still falls short. Nelson Moura nelson.moura@macaubusinessdaily.com

he MSAR Government has proposed the introduction of a law for a non-mandatory provident fund, in which employers will be awarded fiscal benefits if they accept to contribute, in cooperation with their employer, a minimum of 10 per cent of their salary to an individual retirement fund, the Executive Council announced yesterday. “We took in to account provident models in other countries and the public consultation and we believe the system is fair for both parties,” said Administrative Committee of the Social Security Fund (FSS), Iong Kong Io, adding that the new model wouldn’t replace the current Provident Fund but complement it. Currently, contributions to FSS are measured at a 2:1 ratio, with employers and workers paying MOP30 and MOP15 monthly, and a proposed increase this year to MOP60 and MOP30 respectively. In October 2012, the government introduced a Provident Individual Account for permanent residents, where an Incentive basic fund single payment of MOP10,000 is added together with a special allocation from the budget surplus, currently MOP7000, for withdrawal after the age of 65, according to the FSS. In March, a report by financial advisory company Willis Towers Watson for the Social Security Fund, suggested the fund should consider ‘a gradual increase in the amount of contributions up to a set goal, maybe creating a plan for the next years,’ since government funds and gaming revenue comprise 92 per cent of the old age pension funds, while employers and workers’ contributions total only 8 per cent, predicting that future falling gaming revenue and

active population decrease would cause strains on the social system in Macau.

Reshuffling the board

The proposed non-mandatory provident fund expects that the contributions would be negotiated between the employer and worker, with a minimum contribution of 5 per cent each, for a fund that is ‘portable, and without possibility for liquidation and cancelation in case of contract termination’. If positive results were observed by a FSS report in three years, it could become mandatory, according to the Executive Council spokesperson Leong Heng Teng. The proposed law divides the individual contribution account into three accounts: the Government management account; the contribution account; and the conservation account, with the latter receiving an amount agreed to by the employer and worker, taking into account salary levels. In cases where an employee’s salary amount is less than MOP6240, after the worker pays their 5 per cent amount, they would be exempt from making further contributions, but the employer would have to continue contributing. Also, in cases of contract termination, if the employee completed three years of contributions, they would be entitled to 30 per cent of the employer’s contributions, receiving an added 10 per cent until a 10-year period is completed, at which time they would receive the whole amount of the employer’s contributions. “We want to provide guarantees for workers’ retirements, but this amount won’t be used to pay contract termination indemnities, the FSS director stated. Ion also mentioned that currently “40 per cent of companies in Macau already have private pension plans,” and these agreements wouldn’t be changed if they are more

favourable to the workers when compared to the proposed contributions, stating “the employer can’t reduce the contribution. If it’s 8 per cent of the salary it stays at 8 per cent.” Residents with no work contracts would also be able to contribute to the account with a minimum monthly payment of MOP500.

Kind but not enough

Mr. Iong added he believes the fiscal benefits and social responsibility reputation of companies, will be enough to convince employers to adopt this measure. He noted that the proposed law will only be allowed as long as employers don’t reduce their contributions and employees don’t see their part increased. “We believe it is a guarantee of benefits for the worker in their employment situation, and we want to create better work conditions. When an employer joins the non-mandatory regime it shows that they respect the measures and can attract employees” he stated to the press. The FSS explained that companies who accept the non-mandatory contributions scheme would be able to declare their contributions as exploration or activity costs, with this value doubling if the employer maintains their contributions for three years. “According to World Bank’s multi-pillar pension system, income saving accounts (either compulsory

Changes in the hiring process The Executive Council has also announced a new optimised and specialised public recruitment process. The Head of the Public Administration and Civil Service Bureau (SAFP) Kou Peng Kuan, announced four major alterations would be made to the hiring process. The central recruitment process will be divided in to two levels: a first one every six months where the SAFP evaluates the general competencies and skills of the candidates; and a second level where approved candidates will be put on a list valid for three years, during which time they can apply for job openings in the respective services and departments, being evaluated

or voluntary) and public pensions play different roles in the multi-pillar pension system. The Macao SAR government wants to increase the contribution of employers and employees to ensure the sustainability of the public pension. “On the other hand, income saving accounts can be counted as additional benefits on top of the basic pension benefits for older adults. Therefore, we can see that the arrangements will lead to the benefit amount related to their income, rather than the basic living standard,” said Chan Kin Sun, Assistant Professor at the Department of Government and Public Administration. Legislator José Pereira Coutinho believes employers’ contributions should be increased, since the economic contraction will diminish the amount of money awarded by the government to the FSS. “We have elderly people receiving a misery of MOP2,000 and MOP3,000 in pension, and this situation will have to change, since the golden times won’t last forever and when the gambling revenues go down, the FSS will end up bankrupt. It’s time to increase the contributions by the employers, and for that, more popular representation through direct elections is needed,” said the President of the pro-democratic New Hope party and a directly-elected legislator.

by those departments in collaboration with the SAFP. An electronic application platform will also be provided and applicants will be able to complement their formation hours, of which 60 or 100 per cent have to be directly related to the functions they are applying for, with secondary formation, less related to the employment position. Management and director positions will be exempt from public applications, and will be nominated by a service commission. This exemption is applicable to members of the Chief Executive cabinet and other government administrative services. It was proposed that the current regulations be applied 30 days after the ruling publication.

4 Business Daily Thursday, June 9 2016

Macau Gaming

Recovery target: maybe later The government keeps forecast of 13.3 per cent decline in gaming revenues.

he Macau government is maintaining its forecast for a 13.35 per cent drop in gaming revenue this year, the secretary who oversees the economy in the executive, Lionel Leong said yesterday. According to the secretary, quoted in an official statement, the decrease in revenues in the first five months of the year corresponds to government forecasts. “Lionel Leong added that the Government of Macau (SAR) provides for 2016 a set revenue of about 200 billion patacas, 13.35 per cent less compared to the previous year, and that the data of the last months correspond to the forecast of the government” reads the note issued by the media office of the executive. The head of the government, Fernando Chui Sai On, when presenting the 2016 budget for the SAR last November, took a cautious stance, estimating that the casinos would

close the year with revenues of 200 billion patacas (US$25 billion), 13.3 per cent less than in 2015. According to this year’s budget, the government expects to close 2016

Property

Land parcel in Taipa reclaimed A parcel of land which is located on Rua de Choi Long, Taipa, has been reclaimed by the government, according to a dispatch signed by Secretary for Transport and Public Works Raimundo do Rosário, published in the Official Gazette yesterday. It was

with a surplus of 18.21 billion patacas (US$2.27 billion), despite the decrease in revenues from casinos. Casinos in Macau pay direct taxes of 35 per cent. Analysts are divided as to whether June will come to mark the first month of growth in casino revenues, after two years of consecutive monthly

declines. This comes after the results in May - when casino revenues fell 9.6 per cent - were more negative than expected by investors. Lionel Leong said that "the Government is aware of the current month's data. According to experience, even during the period of growth, the gambling revenue in June was always less than in May by more than a billion”, he said. Last year, Gross Gaming Revenue in May was MOP20.35 billion and MOP17.35 billion in June.

Conference

originally to be used for the construction of an 11,650 square-metre villa complex with 21 independent villas of two and three floors. However, the 25-year contract of the project expired in 2012. In 1991, only 14 villas of three floors were built. The remaining part of land, which occupies 7,590 square meters, has not been developed and will now revert back to the government. A.L.

Forum of Chinese culture A new philosophy of equality, tolerance, communication and learning from each other shows the fundamental trends of human civilization, a Chinese senior political advisor said at the fourth conference of the Taihu World Cultural Forum, that started yesterday in Macau. Du Qinglin, vice chairman of the National Committee of the Chinese People’s Political Consultative Conference, told the conference that building a community of common destiny for all mankind is a global cause, which should be supported by

all cultures across the world. This year’s annual conference will see over 1,000 delegates from more than 40 countries and regions discuss topics ranging from international relations to ecology and culture. The forum is a non-governmental organization founded in China to promote the development of Chinese culture and cross-cultural communications between China and other countries. The previous three conferences were held in Suzhou in 2011, Hangzhou in 2013 and Shanghai in 2014. Xinhua

Business Daily Thursday, June 9 2016 5

Macau Business

Red alert Bank of Portugal warns banks against millionaire Zheng Yonggang João Paulo Meneses in Portugal putaoya@hotmail.com

ust a few days after announcing in Lisbon, that he had MOP87 billion (over US$10 billion) to invest in Portuguese assets, in what seemed like an effort to buy Novo Banco, the chairman of China’s Shanshan Group, Zheng Yonggang, has been named in a notification issued to all banks operating in Portugal by Bank of Portugal (BoP). The note directly states that the

group Level Constellation, of which Zheng Yonggang is a major shareholder, is suspected of money laundering. Level Constellation, is reported to be one of the largest Asian producers of lithium batteries. During a recent trip to Lisbon, representing Shanghai’s Association of New Entrepreneurs, and with no reference to Level Constellation, Zheng mentioned the possibility of investments of up to 10 billion euros (MOP87 billion) in several sectors of the economy including professional football, real estate, antiques, tourism, high technology and finance. At a meeting in Lisbon with Portuguese press last month, Zheng Yonggang also revealed that he would meet with the Prime Minister in the coming

days, but that did not happen. The true objective of Zheng Yonggang was, according to a previous report by Business Daily, the chance to buy Novo Banco, created in 2014, in order to take over the ongoing commercial business of Banco Espírito Santo (BES), which went bankrupt after announcing massive losses. But the notification by the Portuguese central bank has apparently destroyed Zheng’s dreams, and not only his intention to purchase Novo Banco. According to the Express Portuguese newspaper, the warning states that any operations or movement of capital made by this company through financial institutions operating in Portugal, should be reported immediately to the public prosecutor and police. If banks do not comply with this instruction, they risk being held liable in any future BoP audits. Coincidence or not, the latest list of candidates with a publicly stated

Zheng Yonggang

interest in purchasing Novo Banco does not include any Chinese investors. Zheng Yonggang and his partner Wen Yingjie created the Level Constellation group in Shanghai in 2014 to invest in Portuguese real estate. Both are candidates for “golden visas” as a result of their investments. Between 2015 and 2016, news outlets in the Portuguese media reported their interest in negotiating the purchase of several properties, involving plans to invest up to 150 million euros in Lisbon (MOP1.3 billion). With the recent BoP notification, all the real estate investments have been frozen. Business Daily contacted BoP for comment, but no further information was provided. Nevertheless it is understood that the warning was only announced to the Portuguese market because Level Constellation only exists and operates in Portugal. We also sent a letter requesting to contact the Portuguese general manager of Level Constellation, Pedro Vicente, but had not received any response at the time we went to press.

6 Business Daily Thursday, June 9 2016

Macau Transport

Bringing the truck park back It’s a massive underground parking space for 240 heavy vehicles on Cotai, and it’s been sitting completely empty for three years while buses and trucks continue to park illegally on the roads, with no place to go. The government explains why to Business Daily reportage: The LRT works. They claim the venue will be handed back to the Transport Bureau by the first quarter of next year. Kam Leong kamleong@macaubusinessdaily.com

Less space, the solution is illegal parking

he only large-scale public car park designated for heavy automobiles in Cotai may return to service as soon as the first quarter of next year, Business Daily has been informed. Nevertheless, the re-opening of the car park may not solve the city’s transport industry problem of having to look for parking spaces every day. In March 2013, the Transport Bureau (DSAT) halted the services of the public car park for heavy vehicles in Estrada Flor de Lotus of Cotai due to the foundation works of the viaduct for the Light Rail Transit System (LRT), which occupies certain spaces of the parking lot.

511 Public parking lots for heavy vehicles

The underground area, occupying 30,728 square metres of two basement levels, could provide a total of 240 heavy-vehicle parking spaces. It had been open for five-years since October 2009, when it was closed for the LRT works due to safety concerns. Questioned by Business Daily, the Transportation Infrastructure Office (GIT) said yesterday that the foundation works of the LRT viaduct in the

area have already been completed. “After the completion of the erection works by the end of this year, GIT will start the recovery works for the public car park. We expect that we could return the car park to [the Transport Bureau] for follow-ups during the first quarter of next year,” the Office told Business Daily in an e-mail.

7,642 Heavy automobiles at the end of 2015

The newspaper also contacted DSAT yesterday regarding its plan to reopen the car park for public use, and was informed that no timetable has been drafted for the reopening due to the fact that “the inner structure of the car park may have changed [as a result of the LRT works]”. According to a site inspection conducted by Business Daily, the underground car park is currently serving as a warehouse for the construction materials of the onsite LRT works. Workers were also seen doing construction work at the site, in addition to the foundation piles of the LRT viaduct. Nevertheless, most of the space was vacant. Previous dispatches from the Official Gazette show the cost of the design and the construction of this truck parking space amounted to MOP185.2 million (US$23.2 million),

Business Daily Thursday, June 9 2016 7

Macau plus some MOP3.4 million in total payments to two bodies supervising the construction and the quality.

Too few parking spaces for heavy vehicles

Excluding this currently suspended car park, the city has only three public parking lots providing some 511 parking spaces for heavy vehicles. All are located on the Peninsula, including the car park under Tap Seac Square, Pak Kong car park in the Inner Harbour, as well as one at the Sewage Plant in the northern district. In addition, following the closure of the Cotai underground heavy-vehicle parking lot, DSAT set up a temporary parking area for heavy vehicles in Rua de Ténis and Rua da Patinagem – as well as two other areas around Concordia Industrial Park in Coloane and in Avenida do Aeroporto. DSAT told Business Daily yesterday that the total available parking spaces for heavy automobiles amounts to only some 900 at the present.

“We hope Hengqin will allow Macauplate vehicles to enter its territory as soon as possible. This may be the final alternative for resolving the city’s lack of parking spaces for heavy automobiles”

from 2,101 in 2014. In addition, the number of passenger cars registered a year-on-year increase of 4.7 per cent year-on-year, to 3,634 as at the end of 2015. “Most of the land on the Peninsula has been developed, so the areas that could be used for parking areas for trucks and coach buses are limited. But the government is actively working on new projects to provide a certain number of new parking spaces for buses and coach buses, such as the Public Transport Interchange in Barra,” the Transport Bureau noted in yesterday’s e-mail reply.

Chamber: gov’t lacks planning for heavy vehicles

Nevertheless, the vice director of local transport-industry chamber Associação dos Comerciantes e Operários de Automóveis de Macau, Leng Sai Vai, believes that the serious lack of parking spaces for heavy-vehicles shows the government’s lack of planning for the transport industry. “The difficulty of parking occurs across the whole Macau. But we should note that the issue for light vehicles can still be resolved privately – such as by buying or renting private parking spaces. However, heavy vehicle owners or drivers are limited as they cannot park in normal car parks, while parking spaces provided by the government are totally not enough,” Mr. Leng told Business Daily in a phone interview.

185.2 Million MOP Cost of design and construction

Leng Sai Vai However, the number of available parking spaces for heavy vehicles, even including the soon-to-be-reopened Cotai parking lot, is still far too few, considering the surging numbers of trucks and coach buses in the territory. According to official data from the Statics and Census Service (DSEC), the total number of heavy automobiles totalled 7,642 as at the end of 2015, which represents a year-onyear increase of 6 per cent compared to 7,210 in 2014. This annual growth rate is higher than the 4 per cent figure recorded for both 2013 and 2014. In particular, of the total number of licensed heavy vehicles in 2015, 2,337 or 30.5 per cent were trucks, a jump of 11.2 per cent year-on-year

“How can the government grant new licenses for new heavy automobiles but without thinking about whether the city has enough parking spaces to keep these vehicles,” the association deputy head queried, indicating the industry needs to park their trucks or coach buses illegally, even though they know they will be fined most of the time. Mr. Leng added that the industry used to consider legal parking spaces in Cotai and Coloane too far way, but they would be fine with anywhere at the present due to the serious lack of spaces anywhere else. “We hope Hengqin will allow Macau-plate vehicles to enter its territory as soon as possible. This may be the final alternative for resolving the city’s lack of parking spaces for heavy automobiles,” he suggested.

Back into operation Q1 of next year says the government

8 Business Daily Thursday, June 9 2016

Greater China Trade figures

May imports boost view economy is steadying The improvement likely reflected higher commodities prices but also a pick-up in domestic demand. Elias Glenn

hina’s exports fell more than expected in May as global demand remained stubbornly weak, but imports beat forecasts, pointing to improving domestic demand and adding to hopes that the world’s second-largest economy may be slowly stabilising. Exports fell 4.1 percent from a year earlier, the General Administration of Customs reported, saying the foreign trade environment remains a challenge. Imports dropped 0.4 percent from a year earlier, the 19th straight month of declines but the smallest since they turned negative in November 2014. The improvement likely reflected higher commodities prices but also a pick-up in domestic demand as Beijing hikes spending on big infrastructure projects to support growth. China’s May crude oil imports jumped the most in over six years, with iron ore imports the highest since December and purchases of copper up more than 19 percent. “Imports were better, due to a rebound in commodities prices and signs of restocking by firms,” said Liu Yaxin, an economist at Merchants Securities

in Beijing. But Liu said: “We are not optimistic about the economy in the second half due to limited policy support, and the government’s push to cut (industrial) overcapacity could weigh on growth. We expect the economy to grow 6.8 percent in the second quarter.” Indeed, the outlook remains grim for China’s exporters. Shipments have now fallen for 10 of the last 12 months and there are few signs that a prolonged global trade slump is abating. China’s shipments to the United States - its top export market - fell 12 percent in May, while shipments to the European Union - its second biggest customer - fell 2.1 percent.

Key Points Data may add to views economy stabilising but no quick recovery Higher commodity prices, domestic demand spur imports-analysts Exports continue slump, in-line with other major Asian exporters Exports down 4.1 pct y/y, missing forecasts for -3.6 pct Imports fall 0.4 pct y/y, beating expectations for -6.0 pct

“We do not expect any substantial rebounds in coming months,” said Chester Liaw at Forecast PTE in Singapore. China’s trade surplus was US$49.98 billion in May, versus forecasts of US$58

billion and April’s US$45.6 billion. Economists polled by Reuters had expected May exports to fall 3.6 percent, twice the pace seen in April, and expected imports to fall 6 percent, following April’s 10.9 percent drop. Some analysts had speculated that upbeat March economic data was largely due to a jump in steel industry activity but thought it would taper off as domestic steel prices fell. But data showed China’s steel exports rose 3.7 percent in May from April, as cash-hungry mills shipped more abroad despite growing tensions with major trading partners which are accusing Chinese firms of dumping product on glutted world markets.

Will imports turn positive?

Analysts said import performance could improve further later in the year as Beijing’s more than one-year-long stimulus campaign finally seems to be paying bigger dividends. “The bigger-than-expected improvement suggests that import volumes, which have held up relatively well recently and are a better gauge of

underlying demand, may also have picked up,” Julian Evans-Pritchard, China economist at Capital Economics, said in a note. “Import growth is likely to edge up further for the remainder of this year as the fall in commodity prices during the second half of 2015 enters the base for comparison and the feed-through from earlier policy easing helps prop up domestic demand. We expect it to return to positive before long.” There was little indication that May’s trade performance would pressure China into any near-term change in its currency policy. “We don’t expect the trade figure will change the PBOC’s attitude towards the RMB exchange rate. They still prefer stability,” ANZ analysts said in a note. Chinese officials repeatedly pledged in two days of talks with their U.S. counterparts this week that they saw no need for a sustained weakening of the yuan currency, which many investors fear could shock the already sluggish U.S. and global economies and roil financial markets as happened in January. Reuters

GDP outlook

Central bank holds line on growth forecast The PBOC also said it expected consumer price inflation to pick up to 2.4 percent this year. China’s central bank slashed its forecast for exports yesterday, predicting a second straight annual fall in shipments, but said the economy will still grow 6.8 percent this year. The People’s Bank of China (PBOC) also warned in its mid-year work report that the government’s push to reduce debt levels and overcapacity could increase bond default risks and make it more difficult for companies to raise funds. And ahead of a meeting of the U.S. Federal Reserve’s policymaking board next week, it said the pace of U.S interest rate rises would affect global capital flows and emerging market currencies, but it did not mention the yuan. “Since the beginning of this year, the global and domestic economic environment has experienced a number of changes,” the PBOC said in the report. “Reflecting these recent developments, we revised our China macroeconomic forecasts for 2016. Compared with our published forecasts in December last year, we maintain our baseline projection of 2016 real GDP growth at 6.8 percent.” “We don’t expect the trade figure will change the PBOC’s attitude towards the (yuan) exchange rate. They still prefer stability,” wrote ANZ economists in a research note. The yuan has fallen this week after disappointing U.S. jobs data saw markets pare back expectations of a U.S. rate rise. U.S. officials have been in China this

week pressing China to reduce trade barriers for foreign businesses, and also expressing concern that Chinese firms in glutted sectors like steel are dumping under-priced goods in offshore markets. Those concerns are unlikely to be relieved by the May trade data, as steel and rare earth exports continued to rise.

More growth

Despite cutting its forecast for exports to minus 1 percent from growth of 3.1 percent, the PBOC saw a domestic recovery remaining on track. It upgraded its forecast for fixed-asset investment growth to 11 percent, an increase of 0.2 percentage points from estimates it made late last year. A government spending spree on major infrastructure projects and a continuing recovery in the housing market have boosted demand for materials from cement to steel. The PBOC also said it expected consumer price inflation to pick up to 2.4 percent this year, 0.7 percentage points higher than its earlier forecast and signalling that worrying deflationary pressures seen in 2015 were easing. Indicators from the consumer, investment and factory sectors have suggested the prolonged slowdown in the world’s second-largest economy may be bottoming out, and many analysts no longer expect much in the way of aggressive policy easing going forward, given concerns about rising levels of bad debt. Reuters

Business Daily Thursday, June 9 2016 9

Greater China Investment quota

In Brief

U.S. investors sceptical about Beijing move to widen markets They worry about regulatory issues including when the government would reintroduce a circuit breaker mechanism to stabilize the country’s stock markets. Jennifer Ablan and Ross Kerber

U.S. asset managers and hedge funds are wary about pouring more money into China until the government addresses its stock market crash last year and wild swings in the yuan, they said on Tuesday, as China unveiled measures to attract U.S. buyers of its assets. China will give the United States a 250 billion yuan (US$38 billion) investment quota for the first time to buy Chinese stocks, bonds and other assets, officials said, deepening financial ties and interdependence between the world’s two largest economies. China’s regulators have been pushing to expand foreign investors’ access to domestic financial markets to make its markets broader and attract more capital inflows. But foreign interest has waned after a near meltdown in Chinese stock markets last year and heavy-handed official intervention to shore them up. “I would imagine that investors would look for certain financial reforms in order to dive in,” said Gregory Peters, a senior investment officer at Prudential Fixed Income with more than US$621 billion of assets. “A consistent application of the rule of law is paramount. ... Not sure China is quite there yet.”

Carson Block, the head of Muddy Waters Capital LLC who gained prominence for short-selling shares of Chinese companies, was more sceptical. “China increased the quota in an effort to support the country’s equity, credit and fixed asset bubbles,” he said in an email. U.S. investors are cautious about investing in China, saying they worry about regulatory issues including when the government would reintroduce a circuit breaker mechanism to stabilize the country’s stock markets. William Kirby, a Harvard Business School professor with ties to several funds that invest in China, said “the fundamental governance and political issues that destabilized

the Shanghai exchange last summer remain unaddressed. Caveat emptor.” Michel Del Buono, managing director at Makena Capital Management, which oversees US$20 billion of assets, noted that China was dealing with an investment outflow.

“I would imagine that investors would look for certain financial reforms in order to dive in” Gregory Peters, a senior investment officer at Prudential Fixed Income “There are questions about regulatory snafus and there are questions about valuations. It is a stock picker’s

market there,” he said. “What they really want is to make their markets more credible. They want more foreign investors to come in and they see it as patient money, you see it as patient money.” “For an institutional investor this announcement doesn’t change much, though to the extent it makes their markets deeper and more liquid, it represents an improvement,” Del Buono said. Vanguard, the largest U.S. mutual fund manager, said in a statement that it was premature to discuss its plans in the wake of China’s announcement. “China is one of the world’s key emerging economies and the second-largest stock market in the world by market cap,” Vanguard spokeswoman Linda Wolohan said. “With the world’s second-largest GDP, China accounts for 11 percent of global trade and 8 percent of global consumption. As a result, China can offer significant long-term benefits for investors.” Vanguard’s Australian affiliate was granted a RQFII quota earlier this year. Reuters

Fund to invest in advanced manufacturing An advanced manufacturing fund was launched in Beijing yesterday to facilitate the modernization of manufacturing. The fund, which was authorized by the State Council and initiated by the National Development and Reform Commission; Ministry of Finance; and Ministry of Industry and Information Technology; is a limited partnership and market-oriented institution, officials said at the founding ceremony. The initial funding was 20 billion yuan (US$3.05 billion), including 6 billion yuan from the central treasury. The rest came from investors including the State Development & Investment Corp. and the Industrial and Commercial Bank of China. Food prices

Farm produce prices continue to retreat Farm produce prices in 36 major Chinese cities dropped last week, as average prices of fruit and vegetables shed more than 2 percent from a week earlier, official data showed. The Ministry of Commerce (MOC) said in an online statement that the prices of 30 vegetables and six fruits dropped last week, with eggplant, bitter gourd and cauliflower down 9.4 percent, 9.2 percent and 7 percent, respectively. Grain slightly retreated, with rice prices down 0.2 percent from the previous week, while flour remained unchanged from a week earlier. Overproduction

Commitment to curbing steel capacity

Payment systems

Government opens its markets to foreign bank card companies The rules issued by the central bank and the China Banking Regulatory Commission require that applicants hold 1 billion yuan in registered capital in a local company. China will allow foreign payment card companies to operate in the country under rules issued on Tuesday, potentially giving groups like Visa Inc and MasterCard access to its 55-trillion-yuan (US$8.4 trillion) card payment market. Visa and MasterCard, the world’s two largest credit and debit card companies, have been lobbying for more than a decade for direct access to China’s cards market, which is projected to become the world’s biggest by 2020. Bank card consumer transactions reached 55 trillion yuan in 2015, accounting for 48 percent of total social consumption, the People’s Bank of China said in a statement. The market is dominated by state-run China UnionPay Co Ltd. The rules issued by the central bank and the China Banking Regulatory Commission require that applicants hold 1 billion yuan (US$152.2 million) in registered capital in a local company. The foreign bank card companies must also meet China’s national security and cyber security standards and be locally based. The rules came more than a year after the State Council, China’s cabinet, said China would allow foreign firms to

Industry modernization

operate bank card clearing businesses. This aimed to address a 2012 ruling by the World Trade Organisation that found China was discriminating against U.S. credit card companies. “In the future there will be more diverse participants in the domestic bank card market, with many bank card brands competing on a level field,” the central bank said in a Q&A published after it released the rules.

“We are reviewing the new regulations and look forward to the opportunity to formally submit our license application for early consideration.” Visa statement Qualified foreign companies can apply to set up bank card businesses

by meeting the same standards and processes required by domestic companies, the central bank said. Foreign investors are also allowed to acquire domestic card clearing firms after passing a security review, it said. Once companies have submitted their applications, the central bank will have 90 days to decide whether to grant an approval. Companies that get a green light will have a year to set up their operations. Visa said in a statement: “We are reviewing the new regulations and look forward to the opportunity to formally submit our license application for early consideration.” MasterCard spokesman Seth Eisen, in an email, called the decision an important step in a vital market for the company. “We’re ready to build on our partnerships with local banks, consumers, businesses and government,” he said. A Shanghai-based UnionPay spokesman said the company supported the rules and would compete with other firms fairly and by law under the same supervision. Reuters

China has committed to curbing its steel capacity and winding down weak state enterprises, U.S. Treasury Secretary Jack Lew said on Tuesday at the end of high-level talks between U.S. and Chinese officials in Beijing. “China has committed to ensure that its central government policies and support do not target the net expansion of steel capacity; and to actively and appropriately wind down ‘zombie enterprises’ through a range of efforts, including restructuring and bankruptcy,” Lew said. The commitment includes some new actions, including letting market forces determine which plants are excess, he said. Bribes in mainland

Akamai, Nortek avoid U.S. charges Akamai Technologies Inc and Nortek Inc, which voluntarily disclosed to U.S. prosecutors that their units in China had paid bribes, will not be charged because the U.S. companies turned themselves in, U.S. officials said on Tuesday. These were the first cases in which the U.S. Department of Justice publicly acknowledged deciding not to prosecute since the agency launched a yearlong pilot program in April to show leniency to companies that share information about bribes by employees. Akamai’s foreign subsidiary arranged US$40,000 in payments to Chinese officials while Nortek’s China unit made US$290,000 in improper payments and gifts.

10 Business Daily Thursday, June 9 2016

Greater China

Strategy

Club Med back on expansion path with Fosun China’s largest private conglomerate took control of Club Med in January 2015. Dominique Vidalon and Pascale Denis

year and a half after being bought by Chinese group Fosun, holiday company Club Med is expanding again and plans to open three to five resorts a year from 2018, its chief executive said on Tuesday. At a time when French rival AccorHotels is trying to limit Chinese shareholder Jin Jiang’s push to raise its stake, Club Med CEO Henri Giscard d’Estaing said it was happy to have a “stable and powerful shareholder”. “It is us who wanted to have a Chinese partner because we were anticipating that China would become the number one tourism market and it would not have been wise to go at it alone,” he said on the side-line of a news conference. Fosun Group, China’s largest private conglomerate, took control of Club Med in January 2015 after a fierce battle lasting nearly two years with

Italian tycoon Andrea Bonomi, the longest takeover fight in French corporate history. “The takeover battle slowed us down. The good news is that we are catching up. Our goal is to open between three and five villages per year from 2018,” Giscard said.

“The takeover battle slowed us down. The good news is that we are catching up. Our goal is to open between three and five villages per year from 2018” Henri Giscard d’Estaing, Club Med CEO

Fosun, owned by billionaire Guo Guangchang, paid 939 million euros (US$1.1 billion) for Club Med, the pioneer of all-inclusive resorts which started on the Mediterranean island of Mallorca in 1950. It was a hefty price for a loss-making company, which last paid a dividend in 2000 and whose customer base was shrinking. Club Med was too dependent on Europe, home to 70 percent of its revenue and slow economic growth, while Fosun offered it a chance to accelerate a strategy focused moving more upmarket and expanding abroad, notably in the booming Chinese market.

More customers

Today, Club Med operates 67 holiday villages worldwide, with some 75 percent of its resorts labelled premium or luxury compared with 72 percent in 2014 and 62 percent in 2012. Last year, China became its second largest market after France with more than 120,000 Chinese clients, or double the 59,000 when Fosun bought an initial 7 percent stake in 2010.

Club Med now has four resorts in China, in Yabuli, Guilin, Zhuhai Dong’ao Island and Sanya, and expects to open a fifth there by the end of 2016, Giscard said. France, however, remains Club Med’s biggest market with 24 villages and 330,000 visitors a year. During the takeover battle the Bonomi camp criticised Club Med for focusing too much on China but Giscard said: “Our ambition is to invest in France and to continue adding value to France as a destination.” Club Med plans to invest more than 300 million euros in France, together with property partners, over the next five years, including to open three new mountain villages. The company had close to 1.25 million clients in its 2015 financial year which ended in October, up from 1.23 million in 2014, while its revenue rose 4 percent to 1.4 billion euros. In the first half of its 2016 financial year, Club Med had more than 600,000 customers, a year-on-year rise of 6 percent, while earnings before interest, tax, depreciation and amortisation climbed 36 percent to 100 million euros. Reuters

Pollution

New study throws doubt on mainland’s car emissions data Vehicles emissions have previously been far more difficult to measure than fixed sources of pollution such as factories and power plants. Jake Spring

Carbon emissions from cars in the Chinese city of Chengdu could be underestimated by more than half under conventional testing methods, according to the preliminary results of a study released yesterday. The findings from the study in the central city were supported by a research arm of China’s top planning body using data from Uber and taxi firms. It found that standard laboratory estimates of carbon emissions from cars were off by about 6,500 metric tonnes per day, or about 59 percent. The study aims to pave the way for more targeted carbon emissions policies in China. “In the (the Chinese government’s most recent) 13th five-year plan, every region and city has the target, but the question is how you meet

those targets and how do you verify the target has been met?” said An Feng, head of the Innovation Centre for Energy and Transportation, a think-tank that led the study.

“You cannot manage if you can’t measure it.” Vehicles emissions have previously been far more difficult to measure than fixed sources of pollution such as factories and power plants. Using data from ride-hailing services and taxis would be better than current laboratory testing arrangements in preventing manipulation by local governments and automakers,

An told Reuters in an interview prior to the summit.

“You cannot manage if you can’t measure it” An Feng, head of the Innovation Centre for Energy and Transportation

To expand from ride hailing and taxis to all cars, the Chinese government would need to find an arrangement with automakers to gather data from private cars, although while also addressing privacy and security concerns, he said. An said he envisions the study expanding around China so that cities, and eventually even companies, can be ranked by carbon emissions. Systems and policies could then be tailored to this data, such as taxing companies or even products based on the amount of carbon they create. Reuters

Business Daily Thursday, June 9 2016 11

Asia Growth pace

Japan Q1 GDP revised up Economy expanded at an annualised 1.9 percent rate in the first quarter of this year. Stanley White

apan’s economy grew faster than initially estimated in the first quarter as capital spending fell less than was first reported, but worries remain over slow consumer spending and weak exports. “The upward revision is very slight, and when you exclude the impact of the leap year growth is not that strong,” said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. “We expect growth to slow in the current quarter. The government should focus on steps to help low-income earners, but consumption may not rise much if consumer sentiment worsens.”

Prime Minister Shinzo Abe said he will announce additional economic measures this autumn, but economists worry his piecemeal approach to policy means that not enough money will be allocated to reversing population decline and speeding up growth. Japan’s economy expanded at an annualised 1.9 percent rate in the

first quarter of this year, revised up from a preliminary reading of 1.7 percent growth, the Cabinet Office data showed. The revised January-March GDP matched the median estimate in a Reuters poll of economists. Compared to the previous quarter, GDP rose 0.5 percent, which was more than the preliminary reading of 0.4 percent growth and the same as the median estimate. Excluding the impact of the leap year, which added an extra day to

February, GDP probably expanded around 0.2 percent, Tonouchi said. Capital expenditure, a major component of GDP, fell 0.7 percent, less than a preliminary decline of 1.4 percent. That compared with the median estimate for a 0.3 percent decline. Private consumption rose 0.6 percent, slightly above the preliminary 0.5 percent increase recorded. Abe announced last week a widely expected two-and-a-half year delay in hiking sales tax because of weak consumer spending, although economists worry that postponement signals the government is losing control of fiscal discipline. Reuters

Key Points Q1 GDP revised to annualised +1.9 pct vs prelim +1.7 pct Capex -0.7 pct vs prelim -1.4 pct Private consumption +0.6 pct vs prelim +0.5 pct Worries remain over expected slowdown in consumption Further gains in the yen could lower export profits and discourage companies from increasing investment and wages.

Reform drive

South Korea to create fund for banks exposed to shipping restructure South Korea expects a 20 percent drop in major shipbuilders’ capacity. Christine Kim and Joyce Lee

South Korea said yesterday the government and the Bank of Korea will create an 11 trillion won (US$9.50 billion) fund to support two state-run banks most exposed to shipping and shipbuilding firms currently being restructured. “Our key industries like shipping and shipbuilding are being aggressively caught up by countries like China and management conditions have worsened due to weak global trade,” Finance Minister Yoo Il-ho said in a speech announcing the corporate restructuring plans. South Korea expects a 20 percent drop in major shipbuilders’ capacity and 30 percent drop in their workforce by 2018 versus 2015 after the restructuring process. The two state-run banks to be capitalised are Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM).

The Bank of Korea will lend a maximum 10 trillion won for the state-bank fund via a conduit bank, the Industrial Bank of Korea (IBK), and that fund will later purchase contingent convertible bonds (CoCos) from the two state-banks. Contingent convertible

bonds are hybrid assets that can be switched by the borrower from bonds into shares if a pre-set trigger is reached. The rest of the capital for the state-bank fund will be provided by loans from Korea Asset Management Corporation (KAMCO), which will also be in charge of setting up the actual fund. The fund will be in operation by end-2017, although this date may change during

year-end reviews. Separately, the government plans to transfer 1 trillion won worth of assets to the Export-Import Bank by September this year and this will be reflected in next year’s government budget. The central bank will also consider direct capital injection into the Export-Import Bank in future if needed. South Korean markets were unmoved by the announcement as the funding measures were widely expected.

Shippers, shipbuilders’ efforts

Yoo added that South Korea’s top three shipbuilders have also come up with a plan to weather the difficult market conditions, which they see lasting for two to three years ahead. The world’s three largest shipbuilders, Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, have submitted additional plans to sell up to 4.8 trillion won in combined assets and find 3.6 trillion won through cost cuts, the government said in a statement. Daewoo Shipbuilding plans to sell up to 1.6 trillion

won in assets including 14 subsidiaries and raise 1.9 trillion won in cost cuts, the government said, while Samsung Heavy said in a separate statement it plans to sell shares to raise funds, without elaborating.

Key Points Govt, c.bank to create 11 trln fund Bank of Korea to provide max 10 trln won for fund Top 3 shipbuilders plan to raise 8.4 trln won in restructuring efforts Shipbuilding industry to see 30 pct drop in workers by 2018 vs 2015 Hyundai Heavy said in a statement it will sell shares in Hyundai Motor and construction materials maker KCC Corp among other assets and spin-off businesses. The government will also support South Korea’s second-largest shipper, Hyundai Merchant Marine, in its attempt to enter into a shipping alliance, while a creditor bank-led restructuring is ongoing at the country’s largest shipper Hanjin Shipping Co Ltd. Reuters

12 Business Daily Thursday, June 9 2016

Asia In Brief GDP

World Bank maintains Vietnam’s growth forecast The World Bank (WB) yesterday maintained its forecast for Vietnam’s average economic growth of 6. 3 percent during the 2016-2018 period, unchanged compared to its earlier forecast in January 2016. In the latest update of WB’s Global Economic Prospects, Vietnam's economic growth during 2016-2018 period is based on all categories of demand buoyed by strong foreign direct investment, growing exports of manufactures, and solid labour markets. Among the large developing ASEAN economies, Vietnam and the Philippines have the strongest growth prospects, said a press release by WB Vietnam yesterday. Sentiment poll

Indonesian consumer confidence rises Indonesian consumer confidence increased in May from April as consumers perceived the economy to be in better shape and the outlook for the next six months was also improved, a central bank survey showed yesterday. The central bank’s consumer confidence index rose to 112.1 in May from 109.0 in April. A reading above 100 indicates respondents are still optimistic. According to the survey, of about 4,600 respondents in 18 major cities in Indonesia, consumers foresaw inflationary pressures easing in August when demands after the Eid-al Fitr holidays will return to normal.

Consumers mood

Japan’s service sector sentiment weakens in May It was the lowest index reading since November 2014. Minami Funakoshi

entiment in Japan’s service sector hit a fresh low in May due to worries about oversupply in the housing market and a return to deflation, giving another worrying signal that Prime Minister Shinzo Abe’s strategy to reflate the economy is sputtering. After returning to power in late 2012, Abe embarked on a threepronged strategy - dubbed “Abenomics” - of massive monetary easing, fiscal stimulus and structural reforms to break the economy free of years of deflation, but it continues to flit in and out of recession. The survey of workers such as taxi drivers, hotel workers and restaurant

staff - dubbed “economy watchers” for their proximity to consumer and retail trends - showed their confidence dipped 0.5 points to 43.0 from the previous month. It was the lowest index reading since November 2014, the data, released by the Cabinet Office showed yesterday, showed. One of the biggest reasons for the poorer sentiment was weakness in the housing market, suggesting the Bank of Japan’s negative interest rate policy may be distorting some areas of the economy and failing in its mission to raise inflation expectations. “As a consequence of the negative rate policy, the number of people buying income-generating properties is increasing and land prices are rising, which makes it seem that the real-estate industry is doing well. But the actual economy is not good. Rent isn’t rising and the proportion of rooms that are empty remains high - I cannot say the economy is

Expansion

Bezos says Amazon to up India investment Amazon Inc Chief Executive Jeff Bezos said on Tuesday the company would invest an additional US$3 billion in India, boosting its committed investment in the country to over US$5 billion. Bezos told an event in Washington attended by Indian Prime Minister Narendra Modi that India was Amazon’s fastest growing region. “I can assure you it’s only the beginning and as we say in Amazon, it’s only day one,” Bezos said, adding that the investments would help start-ups in India and accelerate the country’s role as a hub for innovation and digital entrepreneurship. Bonds transactions

Singapore says no local bank received 1MDB proceeds Singapore’s central bank said yesterday no bank in Singapore received a US$3 billion wire transfer from Goldman Sachs which had arranged a bond issuance for Malaysian state fund 1Malaysia Development Berhad (1MDB). The Wall Street Journal reported this week that proceeds from the 1MDB US$3 billion bonds ended up in the Singapore branch of a Swiss bank. It is rare for the Singapore’s central bank, the Monetary Authority of Singapore (MAS), to issue statements about specific banking transactions, and it said it was doing so in response to media queries.

Workers’ confidence dipped

0.5 43.0 point to

from the previous month

“Consumers are shopping at stores that offer products that are as cheap as possible, which shows deflationary trends are strong. Consumer mindset remains low and will worsen somewhat in the future,” said a respondent from the convenience store industry. Weak service-sector sentiment is bad news for the BOJ, which has struggled to lift inflation despite its controversial decision in January to lower interest rates into negative territory. The data also raises the pressure on Abe’s government before upper house elections next month and the announcement of an economic stimulus package this autumn. T h e o u t l o o k i n d ex, w h i c h indicates the level of confidence in future conditions, rose 1.8 points to 47.3 in May, helped by expectations that conditions will improve as recovery from the earthquakes that devastated southern Japan in April continues, and that households will spend more to cope with a hot summer. Reuters

Banks probe

Australian corporate watchdog takes action against NAB The regulator recently hauled two other major Australian lenders, Westpac and ANZ, to court. Australia’s Prime Minister Malcolm Turnbull defended the corporate regulator yesterday, saying it was “sinking its fangs” into suspected wrongdoers after it sued National Australia Bank over allegations of rate-rigging. The Australian Securities and Investment Commission (ASIC) has been criticised over its policing of the nation’s banks, which have faced allegations of financial planning fraud and claims of manipulating reference rate benchmarks. The prime minister, who has rejected calls for a national inquiry into the banks, stressed yesterday that ASIC was “doing its job”. “The watchdog is sinking its fangs into a few suspected culprits and doing his

job,” he told reporters in Ulladulla, south of Sydney. ASIC on Tuesday began legal proceedings against the National Australia Bank - one of the country’s “big four” banks, which regularly rake in multi-billion-dollar profits.

The proceedings relate to NAB’s alleged manipulation of the bank bill swap reference rate, a benchmark used to set the price of Australian financial products such as bonds and loans.

“The watchdog is sinking its fangs into a few suspected culprits and doing his job” Malcolm Turnbull, Australia’s Prime Minister “It is alleged that NAB traded in a manner that was unconscionable and intended to create an artificial price for bank bills on 50 occasions during the

period of 8 June 2010 and 24 December 2012,” ASIC said. NAB chief risk officer David Gall said the lender took the allegations seriously and was fully cooperating, but the bank did not agree with ASIC’s claims. ASIC, like its counterparts in the United States and Britain, has been probing multinational banks over benchmark interest rate-rigging. The regulator recently hauled two other major Australian lenders, Westpac and ANZ, to court over allegations they manipulated the interbank lending rate. Leading Australian financial institutions have hit the headlines in recent years over allegations of dodgy financial advice, life insurance and mortgage fraud. Turnbull’s conservative government has responded to public anger by boosting funding to ASIC and appointing a special prosecutor to investigate financial crime. But it has refused to back calls from the Labour opposition for a royal commission into banking misconduct. AFP

Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani 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. 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 E-mail newsdesk@macaubusinessdaily. com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com Founder & Publisher

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looking up,” said a respondent from the real-estate industry. Sentiment also worsened due to concerns that shoppers’ frustration with low wage growth is forcing them to focus spending on bargains.

Business Daily Thursday, June 9 2016 13

Asia Monetary advise

IMF urges Thailand rate cuts that central bank says not needed The Bank of Thailand has kept its benchmark interest rate unchanged for eight consecutive meetings. Chris Blake

The International Monetary Fund called on policy makers in Thailand to cut interest rates in the face of a sluggish economy and low inflation, an approach that the central bank says isn’t necessary. Thailand needs expansionary fiscal and monetary policies to help spur an economy that’s set to grow at a slower pace than most other nations in Southeast Asia, the

Washington-based lender said in an e-mailed report yesterday. “There is scope for further monetary easing,” the IMF said. A negative output gap, falling consumer prices and downside risks “warrant additional monetary accommodation,” it said. The Bank of Thailand has kept its benchmark interest rate unchanged for eight consecutive meetings as it bets rising government spending will spur an economic recovery. Policy makers said at last month’s meeting that easing would provide limited support to the economy because the slowdown was partly due to “global and domestic structural problems.” Consumer prices rose in April for the first time in more than a year. Low inflation is mainly due to the decline in oil costs, but sluggish demand is

also putting downward pressure on prices, the IMF said. The inflation rate, which was 0.5 percent in May, will probably undershoot the central bank’s target of 1 percent to 4 percent, the lender said. “Without further easing, inflation is expected to remain below target for several years,” the IMF said. “Tighter macro-prudential policies can safeguard financial stability in a low interest-rate environment.” Prime Minister Prayuth ChanOcha, who took power in a May 2014 military coup, has issued a series of economic stimulus measures valued at more than 645 billion baht (US$18 billion) since September last year to help shore up local demand. The Thai economy has been hit by falling exports - which contracted 1.4 percent in the first quarter - while

tourism has been a bright spot, with arrivals climbing 15.5 percent in the first quarter. The economy is forecast by the IMF to expand 3 percent in 2016 and 3.2 percent next year.

“Political uncertainty has undermined policy planning and implementation, while polarization casts a shadow over the transition to civilian rule” IMF’s report

While Thailand remains resilient to shocks - helped by its flexible currency and high international reserves - the political environment and structural factors may undermine its prospects, the IMF said. “Political uncertainty has undermined policy planning and implementation, while polarization casts a shadow over the transition to civilian rule,” it said. “Long-term prospects are also weighed down by structural bottlenecks, including rapid population aging, relatively low education quality and skill sets, and overdue structural transformation.” Bloomberg News

14 Business Daily Thursday, June 9 2016

International In Brief Manufacturing boost

UK industrial output in surprise jump Industrial production across Britain jumped unexpectedly in April thanks to the largest rise in manufacturing output for almost four years, official data showed yesterday. The data boosted the pound, which has come under pressure in volatile trading ahead of the June 23 referendum on Britain’s membership of the European Union. Industrial output, which looks at various sectors including mining and energy, rose by 2.0 percent month-on-month, the Office for National Statistics said in a statement. Manufacturing, the key driver of the growth, was boosted by the pharmaceutical industry, the ONS added. Portugal

Companies receive €200m in EU regional funds Portuguese companies have received or are due to receive more than €200 million from the European Union under the current regional funding plan for the period to 2020, the secretary of state for trade, Paulo Alexandre Ferreira, said on Tuesday. According to Ferreira, by 31 May more than 16,500 applications had been submitted for EU funds under the Portugal 2020 programme. Of these 5,000 had been approved, corresponding to some €10.5 billion. Some 4,350 projects have signed contracts and 2,380 promoters have received a total of €202 million, the secretary of state said in Lisbon.

Growth trend

South African economy contracts in first quarter GDP will probably expand at the slowest pace since the 2009 recession this year Arabile Gumede and Amogelang Mbatha

outh Africa’s economy contracted in the first three months of the year. Gross domestic product declined an annualized 1.2 per cent in the first quarter, compared with the previous three months, when it expanded by 0.4 per cent, the statistics office said in a report released yesterday in the capital, Pretoria. The median of 21 economist estimates compiled by Bloomberg was for a 0.1 per cent contraction. Low commodity prices, a drought, weak export demand and policy uncertainty exacerbated by reports that Finance Minister Pravin Gordhan may be prosecuted and court rulings against President Jacob Zuma have weighed on output. Business

confidence in Africa’s most industrialized economy fell to the lowest in almost 23 years last month and GDP will probably expand at the slowest pace since the 2009 recession this year, according to forecasts from the government, central bank and the International Monetary Fund.

‘South Africa needs annual economic growth of 7.2 per cent from 2018 to achieve the government’s unemployment targets’ Without policy reforms and more regulatory certainty to stimulate investment, “we see little scope for a turnaround in the country’s growth” over the medium-term, Jeffrey

Schultz, an economist at BNP Paribas SA’s securities unit in Johannesburg, said in an e-mailed note to clients before the release. S&P Global Ratings affirmed the nation’s credit rating at BBB-, the lowest investment-grade level, with a negative outlook, on June 3 and warned it could cut South Africa’s debt to junk if the economy doesn’t improve or if institutions are weakened by political interference. The rating company cut its 2016 growth forecast to 0.6 per cent from 0.8 per cent and said it doesn’t expect the economy to fall into recession this year. South Africa needs annual economic growth of 7.2 per cent from 2018 to achieve the government’s targets of reducing the jobless rate to 6 per cent by 2030, the World Bank said in February. The unemployment rate was 26.7 per cent in the first quarter, the highest in at least eight years. The statistics office took over the publication of expenditure-side GDP data from the central bank this year. Bloomberg News

Oil production

Cameroon output up 20 percent Cameroon’s crude oil production rose 19.4 percent between January and April, compared with a year earlier, to 12.3 million barrels, the state oil company SNH said yesterday, without giving a reason for the higher production. The Central African country has been pumping oil since 1977, hitting a peak of 185,000 barrels per day (bpd) 10 years later before slipping. National Hydrocarbons Corporation (SNH) said in a statement that gas production, however, fell 5.8 percent to 4286,6 million cubic feet compared with the same period last year, due to a decline in demand for gas from its Kribi gas plant. Natural gas

IEA sees slower global demand growth Growth in natural gas demand will slow to an average 1.5 percent a year globally through 2021, as stagnation in Europe and uncertainty about Chinese consumption offsets robust growth in India, the International Energy Agency (IEA) said yesterday. After growth of 2.5 percent over the last six years, gas is facing competition from renewable energy and cheap coal, meaning the global gas market will remain over supplied. In Europe, Russian gas export monopoly Gazprom will be challenged by the prospect of a glut of liquefied natural gas (LNG) as export capacity rises 45 percent by 2021, even as demand drops in key markets in Japan and Korea.

Court rulings against President Jacob Zuma have weighed on output

Economy outlook

World Bank cuts global growth forecast on weak demand The euro area saw a slight downgrade of its 2016 forecast to 1.6 percent David Lawder

The World Bank slashed its 2016 global growth forecast yesterday to 2.4 percent from the 2.9 percent estimated in January due to stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows. Commodity-exporting emerging market countries have struggled to adapt to lower prices for oil, metals, and other commodities, accounting for half of the downward revision, the multilateral lender said in its latest Global Economic Prospects report. It expects these economies to grow at a meagre 0.4 percent pace this year, a downward revision of 1.2 percentage points from the January outlook. Commodity-importing emerging market countries are faring better, but the benefits of lower energy and other goods have been slow to materialize, the World Bank said. It now expects growth in these countries will reach 5.8 percent, down a tenth of a percentage point from the January forecasts. In the United States, a steep decline in energy sector investment and weaker exports will also shave eight

tenths of a percentage point from the World Bank’s 2016 forecast, bringing growth to 1.9 percent. The euro area saw a slight downgrade of its 2016 forecast to 1.6 percent, despite extraordinary monetary policy support and a boost from lower energy and commodity prices. “As advanced economies struggle to gain traction, most economies in South and East Asia are growing solidly, as are commodity-importing emerging economies around the world,” said World Bank Chief Economist Kaushik Basu said in a statement. However, he cautioned that the rapid rise of private debt in several emerging and developing economies posed a risk to growth should non-performing bank loans rise. The downgraded World Bank forecast follows a similar move by the International Monetary Fund, which cut its growth forecasts two months ago. Among major emerging market economies, the World Bank kept China’s growth forecast unchanged at 6.7 percent this year after 2015 growth of 6.9 percent. It expects China’s growth to slow further to 6.3 percent by 2018 as the world’s

second-largest economy rebalances away from exports to a more consumer-driven growth model. India’s robust economic expansion also is expected to hold steady at 7.6 percent, while Brazil and Russia are projected to remain in deeper recessions than forecast in January.

“As advanced economies struggle to gain traction, most economies in South and East Asia are growing solidly, as are commodityimporting emerging economies around the world” Kaushik Basu, World Bank Chief Economist

South Africa is forecast to grow at a 0.6 percent rate in 2016, 0.8 of a percentage point more slowly than the January forecast. Reuters

Business Daily Thursday, June 9 2016 15

Opinion Business Wires

The Korea Herald The South Korean economy has remained in the doldrums due to weak exports and production stemming from waning global demand, despite a slight recovery in domestic consumption, a government report showed yesterday. “Amid a delayed recovery of the world economy, faltering exports and production have dragged down the South Korean economy,” the finance ministry said in its monthly economy assessment report called “Green Book.” “But domestic demand, including private consumption, has been in a favourable mode.” The report is based on the latest economic indicators of such key factors as output, exports, consumption and corporate investment.

In Chile, President Michelle Bachelet was re-elected, but her government is signalling a move to the right on economic policy

Latin America’s rising right Viet Nam News Viet Nam will continue running a trade deficit in 2016 that will be under 5 per cent of total export revenue, the Ministry of Industry and Trade (MoIT) has forecast. Director General of the MoIT’s Planning Department Vũ Bá Phú said at the teleconference held in Hà Noi yesterday that the country recorded a trade deficit of about US$400 million in May. Although there was a trade surplus equivalent to 2 per cent of total export value in the first five months, demand for imported machinery and materials for infrastructure building is still high.

The Jakarta Post Indonesia’s business competition watchdog has signaled that cartels may be behind the sky-high prices of staple foods at markets across the country. Business Competition Supervisory Commission (KPPU) head Syarkawi Rauf said on Tuesday that the body had found a huge margin between prices set by farmers for distributors, and prices that were then set for market vendors. “This indicates that the problem lies in the process between the producer and the end user,” Syarkawi told reporters at the House of Representatives building, adding that the end user referred to the distributor.

The Straits Times All computers used officially by public servants in Singapore will be cut off from the Internet from May next year, in an unprecedented move to tighten security. A memo is going out to all government agencies, ministries and statutory boards here about the Internet blockade a year from now, The Straits Times has learnt. There are some 100,000 computers in use by the public service and all of them will be affected. “The Singapore Government regularly reviews our IT measures to make our network more secure,” a spokesman for the Infocomm Development Authority (IDA) said when contacted.

rom changes in government in Argentina and Brazil to mid-course policy corrections in Chile, Latin American politics appears to be undergoing a rightward shift. But rather than being “pulled” by the attractiveness of the economic policies that the right is advocating, this complex phenomenon is predominantly a reflection of the “push” implied by anaemic growth and the disappointing provision of public goods, especially social services. Indeed, we can think of the shift as a Latin American variant of the West’s blossoming romance with anti-establishment movements. And that means that the region’s governments must be seen to deliver to their citizens. Otherwise, the shift will prove to be only a stop on an uncertain path – politically more complicated and economically harder to navigate – toward an even less stable destination. The evidence of the on-going political change comes in many forms. After years of fiscally irresponsible populist rule by the Kirchner family, Argentina has opted for Mauricio Macri, a former businessman running on a right-wing platform. In Brazil, and pending final consideration by the Senate, President Dilma Rousseff has been side-lined by a “temporary impeachment,” with her replacement signalling a shift away from the policies of the leftist Workers’ Party. Even incumbent governments in the region are altering their course. In Chile, President Michelle Bachelet was re-elected, but her government is signalling a move to the right on economic policy. Cuba, under President Raúl Castro, is enlarging the legal scope for private businesses. And in Venezuela, a country tragically flirting with “failed state” status, President Nicolás Maduro’s government confronts mounting economic and financial challenges stemming from fiscally unanchored policies begun under his predecessor, Hugo Chávez. Facing widespread shortages of goods and malfunctioning markets, including for foreign exchange, his government has already lost control of the National Assembly, and the opposition is now seeking to shorten his term by constitutional means. Several key factors are driving the region’s political dynamics. The sharp drop in international prices for commodities, such as oil and copper, together with a slowing Chinese economy, has reduced the region’s export earnings and accentuated domestic economic challenges. This has been aggravated by a more volatile environment for financial flows to emerging countries, more tentative foreign direct investment, and concern about the potential fallout for international trade from rising anti-globalization rhetoric in the unusual presidential race in the United States. The resulting deterioration in economic performance,

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Mohamed A. El-Erian Chief Economic Adviser at Allianz, is Chairman of US President Barack Obama’s Global Development Council.

including deep recessions in Brazil and Venezuela, has accentuated popular dissatisfaction with public services and amplified long-standing worries about inequality and misappropriation of public funds. Popular dissatisfaction is evident even in traditionally well-managed countries, such as Chile, where lower-income groups have done relatively well in recent years and where the scale of official fraud – documented and alleged – pales in comparison to neighbouring countries. For now, rightist parties and policy agendas are the main beneficiaries of the region’s economic and social disillusion. The hope for many in the region is that political change can catalyze faster growth, by revamping existing policies and pursuing more effective anti-corruption campaigns. But, again, unless today’s political winners deliver notably higher and significantly more inclusive growth, their electorates are likely to move on. Viewed from a global perspective, the shift in Latin America is part of a broader rise in discontent with the “establishment.” And it is not limited to governments. It also extends to private-sector elites, particularly banks and multinational companies. In the US, the result has been a significant shift away from establishment politics, including the unanticipated emergence of Donald Trump as the presumptive Republican candidate and Bernie Sanders’s unexpectedly powerful challenge to Hillary Clinton on the Democratic side. In Europe, anti-establishment parties have been gaining ground in local, regional, and national elections, complicating government formation (for example, in Spain) and influencing major policy decisions (such as the UK Conservative Party’s decision to hold the upcoming “Brexit” referendum). With the exception of countries like the Philippines, where voters opted in last month’s presidential election for a blatantly anti-establishment candidate in Rodrigo Duterte, the tendency in the emerging world has been for adaptations within the confines of existing political elites. That may well be the best way to characterize what is happening in much of Latin America. Now it is up to these elites to respond effectively to the causes of popular anger, or risk facing the eventual emergence of anti-establishment movements, like their American and European counterparts. That outcome, by seriously complicating the region’s political landscape, would further reduce governments’ scope for timely economic-policy adaptation. Project Syndicate

Popular dissatisfaction is evident even in traditionally well-managed countries, such as Chile, where lower-income groups have done relatively well in recent years

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16 Business Daily Thursday, June 9 2016

Closing Public workers

Rebelo grudgingly approves return to state 35-hour week

parties which were in the coalition government that introduced the 40-hour week. In a note justifying his The president of Portugal, Marcelo Rebelo de Sousa, decision to approve the new law, Marcelo Rebelo de approved a law on Tuesday re-establishing a 35-hour Sousa (pictured) referred to a possible “violation of the principle of equality” as the law does not cover week, one of the shortest in Europe, for the state the private sector too and there are many in the sector workers, which was approved in parliament country who do not agree that two people doing the last Thursday. The law that brings back a 35-hour week, after the previous government put it up to 40 same job for the same wages can have two different working weeks just because one works for the state hours on troika suggestion, was passed by all the left-wing parties and rejected by the two centre-right and the other for a private company. Lusa

Demonstrations

L’Oreal shuts Hong Kong shops amid protests over cancelled concert About 200 demonstrators holding signs urging L’Oreal not to “kowtow to Beijing” and protesting self-censorship gathered outside firm’s local headquarters.

’Oreal SA closed shops throughout Hong Kong as hundreds of demonstrators protested the French cosmetic maker’s decision to cancel a concert by a pro-democracy singer after Chinese consumers called for a product boycott. The company’s Lancôme brand on Sunday called off a June 19 promotional concert featuring Denise Ho Wan-see, a singer known for her support of Hong Kong’s Occupy Central protest movement in 2014. The state-run Global Times newspaper had earlier criticized Lancome for hiring Ho to do its publicity, sparking an internet campaign against the brand in China.

“There has been varying political pressure exerted by the Chinese government on corporations to self censor, but this isn’t even an event inside China,” said Avery Ng, chairman of the League of Social Democrats, a pro-democracy political party and one of the protest organizers. “This case shows that the Chinese government will use its power to threaten other multinationals.” About 200 demonstrators holding signs urging L’Oreal not to “kowtow to Beijing” and protesting self-censorship gathered outside L’Oreal’s local headquarters at the Times Square mall in Hong Kong’s Causeway Bay retail area. L’Oreal locations closed yesterday included all Lancome

shops across the city and those of outlets of other brands located in Causeway Bay, according to a customer service representative. Stores were scheduled to reopen today.

China’s interests

The cross-border criticism provides a cautionary tale for companies doing business in China of the risk that any action - marketing or otherwise - that could offend the government could complicate sales in one of the world’s biggest and fastest-growing markets. Lancome said in a statement on its Facebook page that it cancelled the concert for “possible safety reasons.” Calls to L’Oreal’s Hong Kong office went straight to voicemail as did calls to L’Oreal’s local spokeswoman. Representatives for the company’s French headquarters also couldn’t immediately be reached for comment when called outside of normal business hours.

Protesters outside a department store which sells L’Oreal products in Causeway Bay yesterday

“If companies wish to participate in the Chinese market and profit from it, they must not do anything that threatens the interests of China, this applies to both inside and outside of the country’s borders,” Global Times said in an editorial Tuesday. “This is a universally accepted idea.”

Localist movement

Lancome’s Weibo page was peppered with comments from users. “Lancome, get out of China,” said one, with the handle FredLu52193. “Stupid Lancome, you are losing the market from your China Daddy,” said BingbingBingbing.

Lancôme said in a statement on its Facebook page that it cancelled the concert for “possible safety reasons.” The case is reminiscent of the 2012 protests after luxury goods retailer Dolce & Gabbana banned pedestrians from photographing its Hong Kong storefronts, suggesting the policy was intended to protect rich mainland Chinese shopping inside. The incident was a seminal moment for some Hong Kong people worried about China’s encroachment and helped fuel a “localist” political movement, some of whose members have called for independence from the mainland. China’s colour cosmetics markets was worth about 25.1 billion yuan (US$3.8 billion) last year, and L’Oreal was ranked No. 1, with a 30 percent share, according to Euromonitor data. LVMH Moet Hennessy Louis Vuitton SE was No. 2 in the market with 6 percent. Bloomberg News

Real estate

Gas price

Corporate reshuffle

Mainland home prices seen up 6.3 per cent

Chinese government raises retail oil

Suzuki plans resignations over faulty mileage testing

China’s home prices are expected to rise modestly this year and next, with property controls likely to be extended to more cities as major markets heat up, a Reuters poll showed. A recovery in the housing market, which accounts for 15 percent of gross domestic product, has helped stabilise economic growth this year and has provided a boost to the construction industry while also lifting prices of many commodities. However, with home values surging in major cities - Shenzhen home prices rose 62 percent year-on-year in April - and secondary markets also heating up, many cities are starting to impose curbs to keep prices in check. All but one analyst surveyed expect tightening measures to be expanded to more cities this year, possibly through requirements on higher down payments or restrictions on the number of homes that can be purchased. China’s average nationwide home prices are seen rising 6.3 percent in 2016 from a year ago, according to the median of forecasts from 12 analysts. Reuters

China will raise retail oil prices from today to adapt to warming global markets, the top economic planner announced yesterday. The prices of gasoline and diesel will both rise by 110 yuan (US$16.7) per tonne, according to the National Development and Reform Commission (NDRC). This is the fourth-straight rise this year due to a mild recovery in international crude prices. With the latest adjustment, gasoline and diesel prices have gone up by 465 yuan and 450 yuan since the beginning of this year. Under the current mechanism, China adjusts domestic prices of refined oil products when crude prices translate into a change of more than 50 yuan per tonne for gasoline and diesel over a period of 10 working days, except when international prices go below US$40 or above US$130 a barrel. The NDRC urged major oil companies to ensure stable market supply, noting that it will closely monitor the effects of the pricing mechanism and improve the method in response to changes in the global markets. Xinhua

Suzuki Motor Corp. Chairman Osamu Suzuki ceded the role of chief executive officer and one of his top deputies will resign after the automaker admitted to using unapproved fuel-economy testing methods in Japan. The 86-year-old Suzuki will decline the position of CEO and Executive Vice President Osamu Honda, 66, will step down as of the company’s June 29 shareholders’ meeting, according to a statement. Directors will fully waive their bonuses for 2015, while senior managing officers and managing officers will see theirs cut in half. Suzuki Motor emerged last month as the second Japanese automaker to use unapproved fuel-economy test methods, after similar disclosures by Mitsubishi Motors Corp. prompted greater scrutiny by the nation’s transport ministry. Suzuki Motor cited the 2008 global financial crisis and increasing workload as reasons it didn’t invest enough in infrastructure or allocate a sufficient number of employees to conduct proper testing of 14 Suzuki models and 12 vehicles supplied to other manufacturers. Bloomberg News