CEM ready to vacate power station Power Page 2
Tuesday, August 9 2016 Year V Nr. 1104 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Accident
Bus crash injures 30 Mainland tourists Page 3
www.macaubusinessdaily.com
Flights
Cooperation
Air Seoul to start daily SAR-Seoul route in October Page 4
Anti-money laundering memorandum inked with Israel Page 4
SJM H1 profits drop 39 pct Gaming
Net profit for SJM Holdings for the first six months was HK$1.1 billion, compared to HK$1.8 billion a year ago. Total revenue also fell 21 per cent to HK$21.1 billion. Analysts estimate the opening of SJM's new property on Cotai - the last to arrive on the strip - will be pushed back to 2018, due to rising operating costs caused by delays in the project. Page 7
Chinese central bank diversifies monetary tools to improve efficiency Page 9
Payment systems
Alibaba’s Alipay extends its services to Europe but not to Europeans Page 9
Another one bites the dust Capital Estate Ltd has had one of its land parcels in Coloane reclaimed. The reclaimed land covers 10,154 square meters and is located in Ka Ho. Originally meant to be a steelcasting factory, and later lowdensity luxury villas, the lease for the land expired in March, 2014. The company is not entitled to compensation, but is “disappointed” with the decision and is seeking legal advice.
Out of orbit
Gaming Junket operator Neptune Group Ltd expects that the company will remain in the red for the fiscal year ended June 30. The company fell into the red in its 2014/15 fiscal year, posting a net loss of HK$828 million (US$103 million), compared to a net profit of some HK$148.8 million for the year before. The junket operator expects a ‘significant loss’ for this fiscal year due to a ‘harsh’ environment for VIP rooms in the SAR. Page 6
AMN: no subsidies for candidates
Politics The New Macau Association (AMN) has proposed that entities that receive government subsidies should not be able to support candidates for the Legislative Assembly (AL). The new Electoral Law changes go to a vote at the AL today. AMN wants only individuals or associations without public funding to be allowed to support candidates for the AL. Page 3
Sluggish imports
China’s trade China’s exports climbed at a faster pace in July, while a decline in imports also accelerated, in a sign of continued weakness for the world’s second-largest economy. The trade surplus for the first seven months widened by 8.7 per cent from one year earlier to 1.99 trillion yuan. Foreign trade with the European Union, China’s biggest trade partner, climbed 1.8 per cent year-on-year in the first seven months, data showed. Page 8
Land Page 4
HK Hang Seng Index August 8, 2016
22,494.76 +348.67 (+1.57%) Worst Performers
Lenovo Group Ltd
+6.03%
China Merchants Holdings
+3.15%
China Petroleum & Chemical
Kunlun Energy Co Ltd
+0.51%
Tingyi Cayman Islands
+5.93%
Belle International Holdings
+2.87%
CNOOC Ltd
+0.22%
AIA Group Ltd
+0.71%
China Resources Land Ltd
+4.12%
Cathay Pacific Airways Ltd
+2.86%
MTR Corp Ltd
+0.34%
PetroChina Co Ltd
+0.76%
Li & Fung Ltd
+4.08%
Bank of East Asia Ltd/The
+2.66%
Link REIT
+0.35%
Sun Hung Kai Properties Ltd
+0.81%
Hang Lung Properties Ltd
+3.99%
New World Development
+2.63%
Cheung Kong Infrastructure
+0.50%
Swire Pacific Ltd
+0.83%
-0.18%
28° 33° 26° 32° 27° 31° 28° 32° 27° 32° Today
Source: Bloomberg
Best Performers
Wed
Thu
I SSN 2226-8294
Fri
Sat
Source: AccuWeather
PBOC policy
2 Business Daily Tuesday, August 9 2016
Macau Land
CEM: ready to leave Morais power station
L
ocal sole power distributor CEM – Companhia de Electricidade de Macau, said it is ready to start vacating the Macao Power Station located on Avenida de Venceslau de Morais, in the northern district of the Peninsula. “CEM is now to proceed [with] all preparation works [for the clearance]… We’re ready to cope [cooperate] with the government,” a CEM spokesperson told Business Daily yesterday. According to the spokesperson, the company’s environmental assessment report, primarily focused on the removal of the current station’s chimney and aged power generators, has already been green-lighted by the Environmental Protection Bureau. In November last year, the
electricity supplier filed a proposal with the authorities indicating its plan to return the land plot of the station to the government within this year. However, the CEM spokesperson said yesterday that there is no timetable for the clearance, as the process will be conducted gradually. Business Daily also contacted the Land, Public Works and Transport Bureau (DSSOPT) for a comment on the timeframe for the power-station clearance, but had received no reply from the Bureau before this story went to press. The government announced last month that the land plot where the power station is currently located will be used for public housing, social facilities and a government complex building. K.L.
otherwise it will be scrapped. Meanwhile, the chief of the office of the Secretary for Social Affairs and Culture, Ip Peng Kin told reporters after the meeting that the office will study how to improve the bill after it seeks opinions from the Social Security Fund. The bill passed the first reading at
the Legislative Assembly in June. The sub-committee president told reporters recently that legislators do not find the bill appealing to employers and employees who are contributing to private provident funds, anticipating that the execution and the operation of the new bill will be difficult.
Social security
AL: Gov’t should submit new provident fund text by year-end Kam Leong kamleong@macaubusinessdaily.com
The first standing committee of the Legislative Assembly (AL) hopes the government will submit a new text for the bill introducing the nonmandatory provident fund scheme by the end of this year, local broadcaster TDM Radio has reported. The chairman of the AL subcommittee, Kwan Tsui Hang said yesterday that her committee members are worried whether the
bill can be implemented by the end of 2017 - as originally scheduled - given that the government has stated that it will need a six-month preparation period for the bill after it has passed the final reading by the legislators. The directly elected legislator made the comments to reporters after a closed-door meeting with the government on the bill yesterday. Kwan noted that discussion on the bill needs to be completed before this term of the Assembly ends next year,
Business Daily Tuesday, August 9 2016 3
Macau
Politics Candidacy application deposit of MOP25,000 also criticised
Cut them all New Macau Association proposes that entities that receive government subsidies should also be excluded from supporting legislative candidates.
T
he New Macau Association (AMN) has proposed that entities that receive government subsidies should not be able to support candidates for the Legislative Assembly (AL), as the new Electoral Law changes go to a vote at the Legislative Assembly today. The current Electoral Law changes already exclude certain types of entities, such as companies with public capital, public service c o n c e s si o n a i r e s a n d ga m i n g operators, but the AMN wants only individuals or associations without public funding to be allowed support candidates for the AL. “Unfortunately, this bill will legalize the grey area of using public resources in election campaigns. Therefore, the
New Macau Association is proposing the inclusion of business associations and associations that receive public subsidies on the list of those who don’t have eligibility for the role of supporters of campaigns,“ said Jason Chao, Vice-President of the AMN at a press conference. Jason Chao admitted that the proposal by the AMN could be seen “to some extent as a restriction of the freedom of expression,” but argued that “we must take into account the circumstances” of the local reality, while noting that “Macau needs transparency”. “It is a question of whether this legislation will create fair conditions for all competing in the election,” he added. For the AMN Vice-President,
one of the problems is that “even though under the current law, all expenses incurred during the campaign period must be reported, it is not likely” that this will happen “and you can not draw a clear line between the resources invested in the election campaign, and those used in the normal operations of these organizations”.
Tightening up
With the revision of the law, the government plans to tighten the rules to prevent the recurrence of cases of electoral corruption that have been seen in the past. To achieve this, the government is looking to more closely define what is an election campaign and promotion, and what candidates are allowed to do. In early June, during the public consultation period for the proposal, the AMN had suggested that all promotional activities, even those not organized by the candidates, should be included in the budget of the electoral lists. Yesterday, Scott Chiang, president of the AMN, also criticised the audit practices, which he considers are
Construction
First phase of new prison costs MOP113.1 million The last payment instalment to Zhen Hwa Harbour Construction Co., for the MOP113.1 million (US$14.1 million) contract for the first phase of the construction of the new prison in Ka Ho, Coloane, has been authorised, according to a dispatch in the Official Gazette. Construction of the new prison has suffered several delays since the contract was first signed in 2010, missing its original completion date of 2014. The Land, Public Works and T ra n s p o r t B u r ea u ( D S S O P T ) previously stated to Business Daily that the amount granted for the first phase of the new prison was MOP130 million, including the cost of the original contract, and the amount for additional expenses for extra construction work that is on-going or has been subsequently authorised.
The prison construction was arranged in four phases, with the second phase of construction beginning in March of this year at an
New rules
Other criticisms by the AMN include the novelty of a deposit of MOP25,000 (US$3,129) being required for the submission of a candidate’s application, and the prohibition of a candidate who resigns from office during the term being able to reapply in the midterm elections. Today, the AMN will deliver a petition to the AL detailing the respective proposals and including a request for a meeting on the revision of the Electoral Law. The review comes after complaints during past elections of cases of free meals, gifts and travel being offered in exchange for support for certain candidates. The bill was submitted to the AL as an “urgent matter” at the end of July, with the goal being to complete the legislative revisions in time for the elections next year. In Macau, of 33 legislators’ seats, only 14 are directly elected by the population, with 12 being elected by indirect suffrage through associations, and seven being appointed by the Chief Executive (CE). The proposed revisions do not include any changes to the methodology for the composition of the AL. Lusa
Accident
At least 30 injured in tourist bus crash
Construction
Secretaries’ houses get a MOP54.1 million renewal A MOP54.1 million (US$6.7 million) contract with Companhia de Construção Vantagem, Limitada for the renovation and repair work on government residences located on Estrada de Santa Sancha, has been authorised by the government, according to a dispatch published in the Official Gazette. The contract, signed by the Chief Executive, involves renewal work on residences originally designed for use by government Secretaries,
estimated cost of MOP1.1 billion. The third phase of the project is still at the design stage and does not currently have a defined budget. N.M.
“not only not improving the system, but are opening another gap, and virtually validating those who cheat.” “Does the [electoral] commission have sufficient powers to detect the activities carried out by supporters of these organizations? Does it want to count all expenses and put them in the budget? I do not think so. Therefore, in practice, will this change increase the fairness of political participation in Macau or will it allow offenders to do so legally?” he asked.
located near the Macau Government Headquarters. The Land, Public Works and Transport Bureau (DSSOPT) stated previously that due to the old age of the residences, repair work and renewal on much of the structures and facilities in general were needed. The renewal work will take 240 days, with MOP15 million being paid this year and MOP39.1 million in 2017. N.M.
At least 30 Mainland Chinese tourists were injured yesterday, three seriously, when a tour bus crashed into a building, according to Xinhua quoting the SAR authorities. The fire department in charge of the rescue at the incident noted that among the 30 injured, 18 were women and 12 were men, and three were in a serious condition. They were immediately sent to local hospitals. According to the Public Security Police Force, the accident happened when the bus stopped at a slope. It is suspected that the handbrake of the bus didn’t function properly and bus rolled down the slope before crashing into a roadside clinic. The driver was not in the bus when the incident happened and the case and cause of the accident will be further investigated. The injured people were from a tourist group organized in Shenzhen, having come to Macau at nine in the morning with plans to leave in the afternoon.
4 Business Daily Tuesday, August 9 2016
Macau Land
Temporary land concession for Capital Estate Ltd. expires The SAR Government has reclaimed land from an unfinished development by Hong Kong developer Sun Fat. Annie Lao annie.lao@macaubusinessdaily.com
C
apital E s t a t e L t d . , through its 99 per cent owned subsidiary, Sun Fat Investment and Industry Company Ltd, has had one of its parcels of land located in Coloane reclaimed by the Macau Government, due to the expiry of a temporary lease before any completion of works on the project, according to the company’s filing with the Hong Kong Stock Exchange yesterday. The reclaimed land, covering an area of 10,154 square meters and located on Nossa Sra. de Ka Ho in Coloane, was supposed to have been the site for a steel-casting factory, however the lease expired in March, 2014, according to a dispatch published in the Official Gazette, signed by the Secretary for Transport and Public Works Raimundo Arrais do Rosário. Sun Fat applied for the land lease in May of 2007, further submitting a construction development plan for the project later that year, in November.
Disappointment
The land has been idle since 2007, pending approval from the Macau
Government to amend the leasehold of the land application, according to the filing. In 2012, Sun Fat submitted a revised development plan, changing its original project - for semi-detached houses occupying an area of 16,700 squares metres - to the development of low-density luxury villas covering an area of 4,400 square metres. However, the Macau Government did not approve the change. “The board of directors of the Company is disappointed with the notification and is seeking legal advice as to the possible steps that can be taken under the circumstances,” notes the filing. Sun Fat is not entitled to any compensation according to the dispatch, however the company can submit a judicial appeal to the Court of Second Instance in Macau within 30 days of receiving the notification. “In the eventuality that the Land is lost, [the loss] is not expected to cause a material negative impact to the daily operations or trading position of the Group,” notes the filing. According to the unaudited consolidated interim results of the group for the six months ended 31 January, 2016, the carrying value of the land was HK$60 million
(US$7.74million), representing less than five per cent of the total assets of the group. Other similar such cases have also occurred regarding expired land concessions being reclaimed from
Hong Kong developers by the Macau Government, including Kowloon Development Company and Moon Ocean Ltd., the developer of luxury residence La Scala, controlled by Joseph Lau Luen Hung.
The land lease expired before the completion of works on the project.
Banking
Prevention
Novo Banco to sell Macau unit
Anti-money laundering memorandum signed
Hong Kong firm Well Link Group Holdings Limited has made a purchase agreement to buy the Macau branch of Portuguese bank Novo Banco S.A. Portuguese banking group Novo Banco S.A (Novo Banco) has agreed on the sale of its Macau unit, Novo Banco Asia S.A. (Novo Banco Asia), to Hong Kong incorporated brokerage firm Well Link Group Holdings Limited, according to a group release on the Portuguese Securities Market Commission (CMVM). Novo Banco Asia - formerly known as Banco Espirito Santo do Oriente (BESOR) - is the Macau subsidiary of Novo Banco, which was created after the collapse of its parent company Banco Espirito Santo (BES) in 2015. The value of the purchase wasn’t revealed by the bank, and the deal is now pending approval by the Portugal Central Bank and the Monetary Authority of Macau (AMCM). In an interview with Portuguese newspaper Jornal de Negócios in July of this year, Novo Banco’s former Chief Executive Officer, Eduardo Stock da Cunha stated that the sale of the Macau unit would probably
reach higher values than the sale of the bank’s other units, since in Asia it is normal to “pay higher market multiples than those we can get in a small operation like Cape Verde or in a European unit”. The bank’s headquarters in Portugal sent out a release assuring its branch employees in Macau that the new management would probably maintain the same structure since “the bank has always had positive results,” a bank source told Portuguese-language newspaper Ponto Final. While its parent company in Portugal registered 981 million euros (MOP8.6 billion/US$1 billion) in losses in 2015, Novo Banco Asia generated MOP4.6 million (US$575,737) in profits last year. In the first quarter of 2016, Novo Banco Asia, registered MOP80,859 in profit, while accumulating total revenue of MOP13.71 million and MOP13.65 million in costs, Business Daily reported previously. N.M.
Chief Executive Fernando Chui Sai On has granted the Secretary for Economy and Finance, Lionel Leong Vai Tac permission to sign a memorandum with authorities from Israel for the prevention and combatting of money laundering and terrorist financing crimes, according to a dispatch published in the government’s official gazette
yesterday and signed by the Chief Executive. The memorandum, to be signed with Israel’s anti-money laundering and anti-terrorist financing organization, is to facilitate the exchange of financial intelligence. The Secretary can also delegate permission to the Financial Intelligence Office (GIF) of the MSAR, according to the dispatch. A.L.
Aviation
Air Seoul to launch Macau-Seoul flights from Oct 22 South Korean low-cost airline Air Seoul will commence a route between Macau and Seoul from October 22 this year, the operator of local airport Macau International Airport Co. Ltd. (CAM) confirmed to Business Daily yesterday. According to the operator, the budget carrier will provide one flight daily between
the Special Administrative Region and the South Korean capital city. Currently, there are three airlines providing Macau-Seoul flights, including local flag carrier Air Macau, T’Way Airline and Jin Air. Air Seoul, a subsidiary of Asiana Airlines, is based at Incheon International Airport in Seoul.
Air Seoul is a subsidiary of Asiana Airlines
Business Daily Tuesday, August 9 2016 5
Macau Law Committee discussing total smoking ban awaits government feedback
Smoke break Discussion on the proposed smoking bill changes will resume after the Legislative Assembly summerbreak according to legislator Chan Chak Mo. Nelson Moura nelson.moura@macaubusinessdaily.com
T
he debate on the proposed smoking bill changes will only resume after October 15 at the earliest, after a two-month summer recess of the Legislative Assembly (AL), according to statements made by legislator Chan Chak Mo to GGRAsia. Chan presides over the second standing committee in charge of analysing the smoking ban law. The issue
of a full smoking ban on mass market gaming floors has been one of the most contentious topics of the year. In May, the legislator stated that seven of the nine committee members supported the establishment of smoking lounges if it could be ensured that the smoke from these rooms would not spread to outside areas, while two members supported a total smoking ban. However, Chan stated that the committee members didn’t oppose the government’s proposal to ban the
selling of cigarettes in casinos, as reported by the publication.
Suggestions
The Secretary for Social Affairs and Culture, Alexis Tam Chon Weng previously stated in June that the government was still open to suggestions from legislators on the proposed revisions. According to Chan, the committee is now awaiting feedback from the government on the opinions and concerns expressed by its members, “namely whether it accepts our opinions on the bill.” “In terms of technicality, the bill is not hard to handle, it’s more the political will from the government that weighs on the progress of the legal revisions,” Chan told the publication. The committee head also added that until August 15, when the AL summer break starts, the committee members
would focus on different bills.
Profits up in smoke
One of the concerns permeating the discussion is the effect the smoking bill would have on the local economy, with Chan previously commenting that legislators were concerned that a full smoking ban would further lower the government’s tax revenues from the gaming sector. At present, smoking is prohibited on the mass gaming floors of local casinos, and is only permitted in smoking lounges and VIP rooms. The government-backed bill, meanwhile, proposes to ban smoking in all indoor areas of gaming venues, as well as eliminating the current smoking lounges. A study by the Macau University of Science and Technology (MUST) has shown that the current smoking ban restrictions in Macau casinos have impacted gaming operators’ share values, especially in ‘traditional casinos’ where ‘97 to 99 per cent of revenue’ comes from gaming, Business Daily reported previously. A total smoking ban could have an even bigger impact on profits than a partial ban, with a 2009 study by the research division of the Federal Bank of St. Louis on the effects of a smoking ban in the state of Illinois in the United States revealing a great impact on both casino revenue and attendance. The study results indicated that casinos in the state ‘suffered losses of more than 20 per cent, well over US$400 million (MOP3.19 billion) in total’ during the first year of a state-wide public space smoking ban. Public attendance also registered a downturn in attendance of between 9 to 13 per cent, with a decrease of US$200 million in tax revenue for the state, the study demonstrated.
6 Business Daily Tuesday, August 9 2016
Macau Gaming
Neptune expects to stay in the red
J
unket operator Neptune Group Ltd expects that the company will remain in the red for the fiscal year ended June 30, as its junket business in the Special Administrative Region is still under pressure. “The Group is expected to record a significant loss for the year ended 30 June 2016,” the company warned in a filing to the Hong Kong Stock Exchange yesterday. The company fell into the red in its 2014/15 fiscal year, posting a net loss of HK$828 million (US$103
million), compared to a net profit of some HK$148.8 million for the year before. The junket operator explained in yesterday’s filing that the ‘significant loss’ for the 2015/16 fiscal year is due to the fact that: ‘the gaming environment in Macau for VIP rooms is still harsh’. The company added other reasons including ‘receipt of monies from the Macau junket business continues to be slow and often delayed’ and ‘junkets in Macau are reluctant to issue credit to players as receipt of
gaming losses from players tends to be slow and protracted.’ For the first half of the fiscal year, the junket operator saw its revenue
from commissions on VIP rolling turnover plunge by 53 per cent yearon-year, falling from HK$283.9 million to HK$132.9 million. K.L.
Gaming
Lui Che-woo: new infrastructure will lead to non-gaming increase Galaxy Entertainment chairman notes that the group will increase non-gaming activities to deal with the changes expected in the wake of the Hong Kong-Zhuhai-Macau Bridge opening in 2020. Annie Lao annie.lao@macaubusinessdaily.com
Galaxy Entertainment Group chairman Lui Che-woo anticipates that the city’s gaming market and tourism industry will undergo further changes resulting in a more non-gaming focus after the opening of the Hong Kong-Zhuhai-Macau Bridge in 2020, according to an article in Hong Kong newspaper South China Morning Post.
The Galaxy chairman and billionaire predicts that the increasing number of tourists and business travellers coming to stay in the city for non-gaming will increase due to the infrastructure development. The expansion of non-gaming offerings will also result from the continual push by the government for diversification, since the Mainland government launched an anti-corruption campaign, causing the city’s VIP gaming revenue to drop and subsequent
tremors be felt throughout the local economy. “Macau’s hospitality market will see a new phase of development when the Bridge starts operating,” Lui told the publication. Galaxy said in the announcement of its second quarter results, released last month, that its Phase 3 development plans for Galaxy Macau are expected to include the
construction of meetings and conference facilities, focusing on the mass market and including family-oriented activities. Galaxy’s gaming concession is due for renewal in 2022, but the billionaire offered little comment saying only: “I cannot speak on behalf of the Macau government. We do our best to support Macau government policy,” the publication reported.
Gaming Declining gaming market could be behind the exit move
Abandoning ship Gaming consultant Howard J. Klein thinks that James Packer, Executive Chairman of Crown Resorts, might exit the local market completely. Nelson Moura nelson.moura@macaubusinessdaily.com
The Executive Chairman of Crown Resorts Ltd. (Crown), James Packer, might be taking his interests completely out of Macau, according to gaming consultant Howard J. Klein in comments made to Australian newspaper The Weekend Australian. Klein, who has worked as a senior executive in the U.S. gaming industry, stated that Packer is planning to step out of the Macau market and bet on ‘less volatile’ deals in Australia. Earlier this year, Packer already reduced his Macau position, when in May, Crown Asia Investment Pty. Ltd. - a wholly owned subsidiary of Crown Resorts Ltd. owned by Packer - reduced its stake in Melco Crown Entertainment (MCE) from 34 per cent to 27.4 per cent in an US$800 million (MOP6.39 billion) deal. At the time, David Green from Macau-based consulting firm Newpage, told Business Daily that he believed the Australian billionaire’s move was strategic, not because of the city’s market situation, but because he
was looking to “build a number of properties and I think as a means of finance he’s prepared to reduce his stake in Macau in order to throw up some capital.” Now Klein has presented a contrasting opinion from Green’s, stating to the Australian publication that in his view, Packer has ‘elected to take a step back now as something of a hedge bet’, adding that the Crown Resorts Executive Director is taking the ‘chips off the table until the cards turn favourable’. According to the gaming consultant, the move is due to the billionaire’s belief that the ‘gold rush days of Macau are over’, as gaming revenues in the city continue to fall. Gaming revenue for the month of July dropped by 4.5 per cent yearon-year to MOP17.8 billion, marking the 26th straight month of declines in gross gaming revenues for the SAR, according to the latest data from the Gaming Inspection and Coordination Bureau (DICJ).
Business Daily Tuesday, August 9 2016 7
Macau Gaming
Macau casino SJM reports 39 pct fall in first-half profit
L
ocal casino operator SJM Holdings posted a 39 per cent fall in its first-half net profit on Monday, hit by weak gambling sentiment and rising competition in the world’s biggest casino hub which has eaten into its market share. Net profit for the first six months ended June was HK$1.1 billion (US$141.81 million), compared with HK$1.8 billion in the year-ago period. Total revenue was HK$21.1 billion, 21 per cent lower than a year earlier.
Key Points SJM heavily reliant on gaming vs rivals Analysts say operator most at risk in gaming slowdown Cotai resort planned to open 2017, risk of delay to 2018 SJM, controlled by the family of former kingpin Stanley Ho, helped put the city on the map 40 years ago with the fluorescent Casino Lisboa and has presided over much of Macau’s development as a casino city. Revenues in the SAR have dropped to five-year lows over the past two years due to slowing economic growth and a pervasive anti-graft campaign, which has targeted officials and wealthy businessmen. SJM has been hit hard due to its greater reliance on gambling than rivals Sands China and Galaxy Entertainment, both of which have properties on the glitzy Las Vegas
style Cotai strip, which offers visitors non-gambling attractions.
Cotai plans
SJM, which has 17 casinos on the city’s original Peninsula, plans to open its US$4 billion Cotai flagship next year but analysts estimate it will be pushed back to 2018. “We expect SJM to be a substantial laggard in the next wave of Cotai-led growth,” said Richard Huang, analyst at Nomura in Hong Kong.
SJM is likely to be the last of the six licensed operators to open a new resort on Cotai, pressuring earnings as the company faces rising operating costs and risks of delays to the completion of the project analysts said. The company said in a statement on Monday that its performance would remain susceptible in the second half of the year to the overall economic climate in the region “government regulatory policies, and the level of visitation to Macau, as well as to the
competitive situation among the casino operators in Macau.” Wynn Macau, owned by Las Vegas mogul Steve Wynn, is due to open its US$4 billion resort in August on Cotai while U.S. billionaire Sheldon Adelson’s Sands is set to open his fifth resort on Cotai in September. Dubbed the Parisian, Adelson’s US$3 billion project features a replica of the Eiffel tower, one of its touted features to help expand its non-gambling base. The push for non-gaming comes as the central Chinese and local authorities have warned gaming companies to diversify due to the city’s acute reliance on casinos, which accounts for more than 80 per cent of government revenues. Reuters
8 Business Daily Tuesday, August 9 2016
Greater China Trade
Disappointing imports suggest cooling domestic demand For the January to July period, China’s exports fell 7.4 per cent, while imports fell 10.5 per cent, roughly on pace with last year’s 8 per cent decline. Elias Glenn and Yawen Chen
China’s exports and imports fell more than expected in July in a rocky start to the third quarter, pointing to further weakness in global demand in the aftermath of Britain’s decision to leave the European Union. Imports fell 12.5 per cent from a year earlier, the biggest decline since February and suggesting China’s domestic demand may be faltering despite a flurry of measures to stimulate economic growth. “I think (the drop in imports) is mainly from the demand side,” said Ma Xiaoping, an economist at HSBC in Beijing. Government efforts to cut overcapacity could produce an even bigger hit to demand in the next few quarters, Ma added. Exports fell 4.4 per cent on-year, the General Administration of Customs said yesterday, while adding that it expects pressure on shipments likely will start to ease in October. That resulted in a trade surplus of US$52.31 billion in July, the biggest since January, versus June’s US$48.11 billion.
China’s imports have now declined for 21 straight months, while exports have fallen for 12 of 13 months, helping to drag economic growth to its slowest in a quarter of a century. “Signs of stronger manufacturing activity among many of China’s key trading partners has so far failed to lift export growth,” Capital Economics’ China economist Julian Evans-Pritchard said in a note. “The country’s export
growth is likely to remain subdued for some time.” Economists polled by Reuters had expected trade to remain weak but show some signs of moderating as factories gear up for orders heading into the peak year-end shopping season. July exports had been expected to fall 3.0 per cent, compared with a 4.8 per cent decline in June, while imports were seen falling 7.0 per cent, following June’s drop of 8.4 per cent. China’s exports underwhelmed despite still-strong shipments of steel and oil products, with the latter hitting a record. China has come under fire from trading partners accusing it of
dumping its excess industrial capacity in global markets. Exports to the United States - China’s top market - fell 2.0 per cent in July, while shipments to the European Union - its second biggest market - fell 3.2 per cent. While the decline in shipments to the EU actually moderated slightly from June, economists at ANZ expect Brexit will weigh further on China’s exports to Europe in coming months. Meanwhile, China’s imports from the U.S. fell 23.2 per cent in July from a year ago, versus a 12.7 per cent decline in June. A more than 6 per cent slide in the yuan against the dollar over the past year appears to have done little to help China’s exporters in the face of stubbornly soft global demand and weak commodity prices. For the January to July period, China’s exports fell 7.4 per cent, while imports fell 10.5 per cent, roughly on pace with last year’s 8 per cent decline. Iron ore imports rose 8.1 per cent by volume in the first seven months of the year, but factory activity surveys last week showed domestic and export orders cooled in July, while heavy flooding in some areas disrupted business. While there have been mixed signals on whether China is ready to cut interest rates or banks’ reserve requirements again this year, most analysts agree the focus should be on structural reforms. “In the short term I think a lot of changes would depend on the government’s structural reform of state-owned companies,” said HSBC’s Ma. Reuters
Payment systems
Jack Ma is opening his wallet to Europe but not to Europeans Europe and the U.S. need Chinese customers more than the other way around. Marie Mawad
Jack Ma will set a bag aside for you at your favourite Paris store or hail you a ride in Rome - just as long as you’re not European. China’s biggest third-party payments platform Alipay, an affiliate of Ma’s Alibaba Group Holding Ltd., is signing deals with brick and mortar retailers in Europe to bulk up its offering for Chinese tourists and expats. It’s seeking to add extras to its mobile wallet app for Chinese travellers in France, the U.K., Germany and Italy, though it has no plans to offer its services to consumers who aren’t from China. “Europe is a popular destination for our Chinese customers, so it’s an
important market for us,” Rita Liu, head of Alipay Europe, Middle-East and Africa, said in an interview. “We’re actively looking for partners across Europe - merchants who want to cater to Chinese tourists or technical providers on the payments side. But we have no plans to target European customers.” Alipay held talks with retailers in the French capital including Printemps, one of the city’s biggest department stores; it unveiled a deal last week to sell travel insurance from Axa SA to its users; and it’s working with Germany’s Wirecard AG to support the mobile wallet service in as many as 69 stores at Munich Airport. Alipay is in talks with other technical, retail and payment partners in France and Germany,
as well as the U.K. and Italy, Liu said. The cross-border strategy mimics one Alipay - with 450 million users - has deployed with U.S. partners. It has cut deals with the likes of Uber Technologies Inc., Airbnb Inc. and Macy’s Inc. to let Chinese customers pay with the Alipay wallet, either by tapping their phone on a contactless register or having a cashier scan a bar code on the mobile screen to charge a registered account. It highlights how in payments, as with other tech sectors, Europe and the U.S. need Chinese customers more than the other way around, echoing Uber’s humbling lesson from selling its Chinese operations to local rival Didi Chuxing. About 120 million Chinese tourists travelled last year, and their most popular destinations outside Asia were France, Italy, Switzerland and Germany, data by the China Tourism Research Institute showed. They spent US$875 each on average while traveling.
Payments war
In the war to dominate how consumers around the world pay for purchases, China is miles ahead. Tencent Holdings Ltd has 700-million-plus users on its WeChat messaging platform, where it offers financial services including payments, dwarfing the few dozen million subscribers combined who’ve adopted mobile wallets by Apple Inc., Google or Samsung Electronics Co. It’s still early days for Facebook Inc., which
is hoping it can make its way into payments by investing in helpful robotic assistants that will let consumers send texts on its Messenger chat service to order hamburgers or office supplies. In a world where all roads lead to payments, Alipay’s latest initiatives show hand-holding customers through their purchases is a key function of the business. The end-game for these digital giants, regardless of which side of the globe they’re on, is to become an important driver of commerce and put themselves in a position to take a cut of transactions they help generate. To do that, all are seeking to grow the lists of retailers who’ll accept their payments service alongside a Visa or American Express card. Facebook, for instance, said it’s lined up more than 30 partners, including Bank of America, Burger King, and Staples, in its chatbots push. In China, Apple’s US$1 billion investment in the country’s biggest ride-hailing service was seen helping win powerful local allies to push services including Apple Pay. “The key battle for digital giants today is scale on the merchants side. That’s true for anyone from Alipay to Apple or Facebook,” said Michel Leger, head of innovation at Ingenico Group SA, which recently cut a deal to manage electronic cross-border purchases for Alipay. “They each have a relationship with millions of consumers, but they need the other side of the equation -- the address book of merchants.” Bloomberg News
Business Daily Tuesday, August 9 2016 9
Greater China In Brief Fitch report
Housing demand to stay resilient by 2030 China’s housing demand will remain relatively resilient up to 2030 while short-term market volatility will persist, global ratings agency Fitch said yesterday. China needs to build 800 million square meters of residential property space about the size of Singapore - every year between 2016 and 2030 to meet demand, according to a report released by Fitch. During this period, new housing supply is predicted to average around 750 million square meters per year, down 25 per cent from the agency’s previous estimates, while new home sales are seen to track similar levels.
People’s Bank of China headquarters Prudent policy
PBOC signals more use of ‘innovative’ monetary tools The central bank said frequent cuts in interest rates and banks’ required reserve ratio would add too much liquidity to the financial system. China’s central bank has given more signals about its evolving monetary policy stance, flagging continued use of liquidity tools rather than further cuts to interest rates or the percentage of deposits banks must hold as reserves. China should improve the effectiveness of monetary policy by using more “innovative monetary tools” such as its medium-term lending facility (MLF) and standing lending facility (SLF), and policy makers should give more forward-looking guidance to manage market expectations, according to a commentary published yesterday by a newspaper under the People’s Bank of China. The PBOC introduced the MLF in late 2014 to inject cash into areas such as agriculture and small and medium-sized
companies, while the SLF is considered the ceiling of an interest-rate corridor being formed by the central bank. The PBOC has been reticent to add to an easing cycle that started late in 2014 amid concern that companies have fallen into a “liquidity trap” as the effectiveness of cash injections on investment and growth wanes. In a report on Friday, the PBOC said frequent cuts in interest rates and banks’ required reserve ratio would add too much liquidity to the financial system and could lead to expectations that the yuan will depreciate. It said policy should remain “prudent.” The PBOC’s recent comments rule out an RRR or rate cut in the near term, Harrison Hu, Singapore-based chief greater China economist at Royal Bank of Scotland Group Plc, wrote in a note
yesterday. “Monetary easing may be carried out in a more low-key way, in order to limit its side-effects.”
“Monetary easing may be carried out in a more low-key way, in order to limit its side-effects.” Harrison Hu, Singapore-based chief greater China economist at Royal Bank of Scotland Group Hu said rates on pledged supplementary lending and MLF are more likely to be lowered, along with expanded volumes of liquidity. He continues to expect an easing bias will resume later in the year as earlier property and infrastructure stimulus runs its course. Bloomberg News
Graft crackdown
Authorities asks officials to turn down bribes in bribers’ face The cancellation of the “remorse” accounts marks an even harsher crackdown on corruption. Following the implementation in January of harsher rules regarding the acceptance of bribes and gifts, provincial governments are abolishing systems that have been misused by officials to hide their ill-gotten gains. Starting from August, Guizhou government joined at least three other provinces to cancel a special bank account for officials to deposit bribe payments that they had accepted, said Huang Wensheng, deputy secretary of the Guizhou provincial discipline inspection committee. The accounts have been misused, however, with many officials using the service to hide their wealth and only depositing their dirty money once they are under the radar of graft investigators. The first “Clean Governance Accounts,” were established in the 1990s as part of efforts to reduce corruption while protecting the privacy of officials. Over a dozen Chinese provincial-level governments have established such accounts. The provinces of Sichuan, Gansu and the Inner Mongolia region have recently eliminated such accounts. Usually, the accounts are managed by the local discipline inspection authorities and banks. The names of the depositor and the sum are not disclosed and the money is turned over to the local treasury. Zhuang Deshui, a professor at Peking
University, explained that the accounts were designed to be an outlet to express a desire to be clean and show remorse. “However, some officials have misused the service over the years,” said Huang.
‘Starting from January this year, a revised regulation issued by the Communist Party of China Central Committee banned officials from accepting gifts, money or gift cards’ “Many officials use the account as an umbrella or safe haven. For example, some corrupt officials only deposit bribe money when they face investigation,” he said. Hong Jinzhou, former mayor of Kaili City in Guizhou, stood trial for accepting bribes last year. He was found to have accepted bribes on more than
380 occasions and had attempted to cover up his misdeeds by periodically depositing funds, amounting to over 55 million yuan (US$8.3 million), in the clean governance fund. “Many people have used the accounts to obstruct investigations,” said Tang Yonghu, a discipline official in Tongren City, Guizhou. “These accounts have created more problems than they have solved,” he said. The cancellation of the accounts marks an even harsher crackdown on corruption and is in line with Party regulations. Starting from January this year, a revised regulation issued by the Communist Party of China (CPC) Central Committee has banned officials from accepting gifts, money or gift cards. According to the Guizhou regulation, officials must resolutely turn down any kind of money that may obstruct their line of duty. If accepting the bribe is unavoidable, then it must be returned as soon as possible and the deadline is one month, it said. If all means of returning are exhausted, the money must be deposited with the discipline inspection authority along with the real names of those involved, according to the regulation. Under strict requirement of Party governance from the CPC Central Committee, policies such as the accounts became too soft, vague and therefore need to be done with, said Huang. Xinhua
Stock markets
China-dependent S.K. firms lose value over THAAD South Korean companies, which depend heavily on Chinese consumers for revenue, have lost 11.2 trillion won (US$10 billion) in stock value since the decision between Seoul and Washington to deploy Terminal High Altitude Area Defense (THAAD) in South Korean soil. Local brokerage Samsung Securities said in a report yesterday that 10 major stocks relevant to Chinese consumers totalled 50.6 trillion won in market capitalization as of last Friday, down from 61.8 trillion won on July 7, a day before the THAAD deployment announcement. Commodities
Authorities to crack down on illegal rare earth mining China will continue to crack down on illegal mining, processing and sales of rare earth elements, experts said yesterday. In the 13th Five Year period, from 2016 to 2020, Chinese ministries and departments will enhance cooperation, increase inspections, and take a zerotolerance approach toward illegal mining of rare earth metals, said Zhou Changyi, head of the department of raw materials under the Ministry Of Industry and Information Technology. A tracking system will also be implemented to trace the source of rare earth elements to curb illegal mining, he said. Tech deal
Qualcomm signs up another big licensee Qualcomm Inc., which has struggled to get paid licensing revenue in China, said it signed up phonemaker Vivo Communication Technology Co., helping cement its position in the world’s largest phone market. Vivo, the third-biggest smartphone maker in China, agreed to pay Qualcomm for technology used in 3G and 4G phones, the U.S. chipmaker said. The deal with Vivo comes a week after Qualcomm secured a similar agreement with GuangDong OPPO Mobile Telecommunications Corp. The two companies account for about 30 per cent of phones shipped by the top ten Chinese phonemakers.
10 Business Daily Tuesday, August 9 2016
Greater China Development plan
Silk Road project is bigger than the Marshall Plan China may spend as much as 9 per cent of gross domestic product. Enda Curran
C
hina’s ambition to revive an ancient trading route stretching from Asia to Europe could leave an economic legacy bigger than the Marshall Plan or the European Union’s enlargement, according to a new analysis. Dubbed ‘One Belt, One Road,’ the plan to build rail, highways and ports will embolden China’s soft power status by spreading economic prosperity during a time of heightened political uncertainty in both the U.S. and EU, according to Stephen L. Jen, the chief executive officer at Eurizon
SLJ Capital Ltd., who estimates a value of US$1.4 trillion for the project. It will also boost trading links and help internationalize the yuan as banks open branches along the route, according to Jen. “This is a quintessential example of a geopolitical event that will likely be consequential for the global economy and the balance of political power in the long run,” said Jen, a former International Monetary Fund economist. Reaching from east to west, the Silk Road Economic Belt will extend to Europe through Central Asia and the Maritime Silk Road will link sea lanes to Southeast Asia, the Middle East and Africa.
While China’s authorities aren’t calling their Silk Road a new Marshall Plan, that’s not stopping comparisons with the U.S. effort to rebuild Western Europe after World War II. With the potential to touch on 64 countries, 4.4 billion people and around 40 per cent of the global economy, Jen estimates that the One Belt One Road project will be 12 times bigger in absolute dollar terms than the Marshall Plan. China may spend as much as 9 per cent of gross domestic product - about double the U.S.’s boost to post-war Europe in those terms. “The One Belt One Road Project, in terms of its size, could be multiple times larger and more ambitious than the Marshall Plan or the European enlargement,” said Jen.
It’s not all upside. Undertaking an expansive plan like this one will inevitably run the risk of corruption, project delays and local opposition. Chinese backed projects have frequently run into trouble before, especially in Africa, and there’s no guarantee that potential recipient nations will put their hand up for the aid.
“The fact that this is a 30-40 year plan is remarkable as China is the only country with any long-term development plan” Stephen L. Jen, the chief executive officer at Eurizon SLJ Capital Ltd. In addition, resurrecting the trading route will need funding during a time of slowing growth and rising bad loans in the nation’s banks. Sending money abroad when it’s needed at home may not have an enduring appeal. Still, at least China has a plan. “The fact that this is a 30-40 year plan is remarkable as China is the only country with any long-term development plan, and this underscores the policy long-termism in China, in contrast to the dominance of policy short-termism in much of the West,” said Jen. And that’s a win-win for soft power. “The One Belt One Road Project could be a huge PR exercise that could win over government and public support in these countries,” he said. Bloomberg News
Online gaming
Shorts pile on 500.Com as lottery sales remain in limbo China’s regulated lottery industry started in the late 1980s and has became one of the world’s largest lottery markets by sales volume. Elena Popina
It’s been a rough year and a half for 500.com Ltd., the Chinese online sports lottery operator whose revenue has been cut off during an industry crackdown. And short sellers see things getting even worse.
“It seems like the government is thinking about giving licenses to selective players in China” Henry Guo, an analyst at New York-based M Science LLC Bearish bets on the company’s U.S.-traded stock have surged to the highest levels ever before its second-quarter earnings report due Wednesday. Sentiment has been souring since April on speculation the company will be left out when Chinese regulators allow certain lottery services to be resumed after they were halted in March 2015. “It seems like the government is thinking about giving licenses to
selective players in China,” Henry Guo, an analyst at New York-based M Science LLC who has been covering Chinese ADRs for a decade, said by e-mail. “The short-interest rally reflects the probability that 500.com will miss the boat.” Growth came to a halt last year when the government banned online lottery sales as it investigates the state-run industry amid a broader crackdown on government corruption. While the shutdown has affected a range of companies - from Taobao, an online lottery platform operated by Alibaba Group Holding Ltd, to
Sina Corp. - it’s been particularly difficult for 500.com. The company has been losing money since last year. In March, it sold a 63 per cent stake in payment services provider Sumpay. cn, four months after buying it for about US$36 million. As many as 4.2 million of 500. com’s U.S.-traded shares were sold short last week, the most on record, according to data from Markit Ltd and Bloomberg. Linda Bergkamp, an external spokeswoman for 500. com, declined to comment. F o u n d e d i n 2001 , 500 . c o m lets customers buy tickets for government-authorized lotteries and bet on sports events through its website. Its customers are provincial sports lottery administration centres. China will conduct online lottery sales trial this year, Securities
Daily reported in April, citing an unidentified person. 500.com was one of the two entities the Ministry of Finance allowed to provide online lottery sales services on behalf of the China Sports Lottery Administration Centre in 2012. The lifting of the lottery sales ban will probably push the stock higher, said Brendan Ahern, the chief investment officer at KraneShares, which owns a stake in the company. “The government’s decision to lift the ban on lottery sales - or not - will be a turning point for the company,” Ahern said by phone last week. “A spike in short interest is traders saying, what if 500.com doesn’t receive a right to conduct lottery sales, what will happen to the stock.” Bloomberg News
Business Daily Tuesday, August 9 2016 11
Asia
Thai soldiers march to cast their ballots during a referendum on a new constitution at a polling station outside an army barrack in Bangkok Constitution poll
Thais affirm military-backed charter in step toward election Critics warn the constitution will ultimately mean more political turmoil for Southeast Asia’s second-largest economy. Chris Blake and Suttinee Yuvejwattana
T
hai voters approved a new military-backed constitution in the first ballot since a coup two years ago, putting the nation on a path toward an election even as a decade-long political divide persists. The Election Commission said late Sunday that with 94 per cent of votes counted, the draft had received 61.4 per cent yes votes to 38.6 per cent no votes, though official results aren’t expected for several days. Officials said turnout was around 55 per cent of the 50.2 million people eligible to vote, around the same as past such ballots. Prime Minister Prayuth ChanOcha, who led the 2014 coup as head of the army, cheered the result while lashing out at “inappropriate intervention by foreign elements.” The junta leader has come under criticism from rights groups and some foreign governments for a crackdown on freedom of speech and assembly that was stepped up ahead of the vote. “This process has come about based on our own initiative, requiring great toil over many years to reach this pinnacle, where we could decide by ourselves, the future of Thailand in a noble manner,” Prayuth said in a statement distributed by his office. “It’s disappointing, however, that there have been some inappropriate intervention by foreign elements during these delicate times of our political transition.”
The passage of the charter means the junta is more likely to stick to its current time line of holding elections late next year. But the new document, which officials have said is necessary to tackle graft in the political sphere, could also boost the military’s influence over any future elected governments. Critics warn the constitution like past military-backed charters - will ultimately mean more political turmoil for Southeast Asia’s second-largest economy. Thailand has seen 12 coups since the end of absolute rule by kings in 1932. This will be the nation’s 20th constitution in that time and the fifth in a decade. “This is a grand day for the resurrection of enshrined military power,” said Paul Chambers, director of research at the Institute of Southeast Asian Affairs in Chiang Mai. “They are using the very democratic process to increase authoritarianism across the country. It represents the nadir or abyss for Thai democracy.” The poll was held under restrictions that allowed for as long as 10 years in prison for those found campaigning before the charter vote. Dozens of people, almost all opponents of the draft, were arrested on accusations of violating the law, which gave the government a monopoly on disbursing information about the charter. “The environment in the last two to three months hasn’t felt like previous elections or referendums,” said Abhisit Vejjajiva, a former prime minister and head of the Democrat
Party, who opposed the draft constitution. Election Commission Chairman Supachai Somcharoen said he expected all parties to accept the result, which he said would “help steer our country forward.” Election Commissioner Somchai Srisutthiyakorn said some Thais may not have voted because they did not understand what the charter was about. “They don’t think it directly relates to them,” he told reporters. “It seems to be a remote subject. That’s why they don’t come out to exercise their rights.” With many voters unaware of the details, the referendum for many was an opportunity to express their support or opposition to the junta. The new charter will limit the power of politicians and possibly prevent the resurgence of Thaksin Shinawatra, the former prime minister whose allies have won every national election since 2001. Thaksin’s ouster in a 2006 coup set off a cycle of military interventions, controversial court rulings and protests and counter protests that have dogged every government since. The government of his sister Yingluck Shinawatra was removed in the 2014 coup.
Regional breakdown
Voting patterns in Sunday’s referendum show political divisions may be as wide as ever. In Thailand’s south, where voters have traditionally backed the establishment Democrat Party, almost 77 per cent voted yes. In the poorer rice-growing regions of the northeast, which benefited from agricultural subsidy policies under Thaksin-linked governments, less than 49 per cent of voters supported the charter.
Backers of the 279-section draft, which was written by a committee appointed by the government, say it is aimed at eradicating graft and bringing stability to the country.
Appointed body
Politicians, academics and rights groups say otherwise. They oppose sections that would permit a non-elected prime minister, turn the senate into an appointed body with sitting members of the military and give extra power to the courts. The draft would require future governments to adhere to the junta’s 20-year development plan.
‘This will be the nation’s 20th constitution since 1932 and the fifth in a decade’ “Far from being the key step toward the achievement of what the NCPO has termed ‘full and sustainable democracy,’ the draft charter creates undemocratic institutions, weakens the power of future elected governments, and is likely to fuel political instability,” the international rights consortium FIDH said in a report last week, referring to the junta’s official name, the National Council for Peace and Order. The charter “will allow the military and its proxies to tighten their grip on power and cement their influence in political affairs.” Bloomberg News
12 Business Daily Tuesday, August 9 2016
Asia Central Bank Governor
Tourism, infrastructure to support Thailand’s economy The central bank has predicted economic growth of 3.1 per cent this year. Orathai Sriring and Simon Webb
T
hailand’s record tourist arrivals and public works spending are expected to offset weak domestic demand and global economic drag, keeping Southeast Asia’s second-largest economy on course for 3.1 per cent growth this year, the central bank governor told Reuters in an interview. The trade-dependent economy has been hit hard by the deteriorating global economic environment and the slowdown in demand for exports, which the Bank of Thailand (BOT) expects to decline for the fourth consecutive year in 2016. Tourism has been one of the few bright spots in the Thai economy, and government spending on big ticket infrastructure should give a jolt to the sluggish economy later in the year, BOT Governor Veerathai Santiprabhob said. “We are on track,” Veerathai told Reuters in an interview on Friday. “We’ll have to monitor the secondary impacts of Brexit. Certain sectors of our economy have been hit by China’s transition. But we expect to see better government disbursement for large projects in the second half of the year.” The central bank has predicted economic growth of 3.1 per cent this year, with exports contracting 2.5 per cent. The economy expanded 2.8 per cent
last year, picking up from 0.8 per cent growth in 2014 when political turmoil brought the country to the verge of recession. In the first quarter, the Thai economy grew 0.9 per cent on the previous quarter and 3.2 per cent on the year. The military government has talked up plans for big infrastructure projects since seizing power in a May 2014 coup, but has spent little. That should change now big projects have
gone to auction, Veerathai said, adding spending would increase again in 2017. Veerathai said while the central bank can ease policy if conditions worsen considerably, there was no immediate need to cut interest rates to stimulate growth as liquidity remains ample. “There are limits on what monetary policy can do to help stimulate economic growth further,” he said. “It’s more of the supply-side policies that we need to tackle...and I think the government fully realises this. The fiscal engine is moving forward.”
The central bank is concerned about the impact of currency movements on the economy, Governor Veerathai said, with the Thai baht having risen 3.4 per cent against the dollar this year
The central bank has left the benchmark one-day repurchase rate at 1.50 per cent, where it has been since April 2015, just a quarter-point above the record low reached during the global financial crisis. It next reviews policy on September 14, and expectations for a cut are rising due to slow economic growth and upward pressure on the baht. Veerathai expects headline inflation to return to the bank’s target range of 1-4 per cent toward the end of the year. Headline inflation began picking up again this year after low energy prices caused prices to fall in 2015. He saw no immediate systemic risks relating to investment flows arising from Thailand’s low interest rate environment, though the central bank was monitoring pockets of risk as investors hunted yield. And while high household debt levels remain a concern, he expects debt to fall as consumers pay down loans on car purchases made when they were subsidised by the previous government. Household debt at over 80 per cent of GDP has constrained domestic demand. The bank is concerned about the impact of currency movements on the economy, Veerathai said, with the Thai baht having risen 3.4 per cent against the dollar this year, a headache for exporters. Veerathai declined to comment specifically on the impact of the outcome of the country’s referendum, but said currency, bond and equity markets had felt little impact in the run up to the referendum. More widely, though, political uncertainty has crimped investment into the country, he said in comments that were made ahead of the weekend referendum. Reuters
Standard & Poor’s
South Korea’s credit rating raised The country has a higher rating than neighbouring China and Japan from all three international rating companies. Jiyeun Lee
South Korea’s credit rating was increased one level by Standard & Poor’s, which cited the nation’s steady economic performance, sound fiscal position and flexible fiscal and monetary policies for the improvement.
S&P said yesterday it raised the long-term credit rating for South Korea to AA from AA- with a stable outlook, the agency’s third-highest rating. This follows an upgrade to Aa2 from Moody’s Investors Service in December 2015, which marked the first time that South Korea received a third-highest
ranking from a major ratings agency. Fitch Ratings ranks South Korea at AA-, the fourth-highest level. The decision may bolster investors’ confidence in South Korea’s prospects at a time when a global economic recovery remains uncertain and credit ratings or outlooks for major countries like Australia, the U.K. and Japan have been lowered. “Korea has exhibited stronger economic performance in recent years than most other high-income economies” S&P said in a statement. “The Korean economy remains welldiversified and is not dependent on a particular industry or export market.”
“Korea has exhibited stronger economic performance in recent years than most other high-income economies” S&P statement
External risks
S&P’s upgrade highlights the South Korean economy’s stability amid external risks including Brexit, the direction of U.S. interest rate policy and possible slowing in China’s economy, the finance ministry said in a statement on Monday. This will contribute to market stability, and lead to higher ratings for South Korea’s financial companies and public firms, helping lower funding costs, the ministry said. S&P also cited risks including geopolitical tension on the Korean peninsula. The agency said it could lower the ratings if tensions related to North Korea escalate to a point that affects South Korean sovereign credit metrics. North Korea recently launched a series of missiles, with the latest one landing for the first time in Japan’s exclusive economic zone. The communist regime has been threatening to retaliate over South Korea’s agreement to place a U.S.operated missile-defence system on the peninsula. Bloomberg News
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 N. 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
Business Daily is a product of De Ficção – Multimedia Projects
The Bank of Korea expects the economy - Asia’s fourth largest - to expand 2.7 per cent this year, after growing 2.6 per cent in 2015. Recent growth has been lower than what the central bank estimates as the nation’s potential rate - about 3 per cent to 3.2 per cent. To fend off risks from corporate restructuring, the BOK lowered its key interest rate to 1.25 per cent in June, and the government announced 11 trillion won (US$9.9 billion) of extra budget. The supplementary budget plan hasn’t yet been approved by parliament.
Business Daily Tuesday, August 9 2016 13
Asia Monetary debate
In Brief
Bank of Japan divided on monetary easing limits The summary of the July debate offered no clues to what specific policy steps could result from the central bank’s assessment of its existing stimulus programme. Leika Kihara
Stark divisions in the views of Bank of Japan board members were highlighted yesterday, with some defending unlimited easing of monetary policy and others arguing the BOJ had done enough - to the point of driving big market swings and sapping bond market liquidity. The debate underscores the challenges the central bank face as it attempts to address stagnant price growth and entrenched economic weakness with a dwindling set of policy tools. “The Bank should reject the idea that monetary easing has its limit and side effects. A limit to its purchase of Japanese government bonds (JGBs), if any, would be the total amount outstanding of JGBs issued,” one member
told the July meeting, a summary of opinions showed yesterday. “It is necessary for the Bank to conduct a comprehensive assessment from the perspective of what should be done to achieve the price stability target of 2 per cent at the earliest possible time,” another member was quoted as saying. The BOJ expanded stimulus at the July 28-29 meeting by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government and market for bolder action, but the move fell short of market expectations. The BOJ said it will assess at its September meeting the effects of its negative interest rates on some bank deposits and its massive asset-buying programme - suggesting an overhaul of its stimulus programme may be
in the works. Board members Takehiro Sato and Takahide Kiuchi, both of whom are economists, dissented to the decision to expand ETF purchases, arguing that it would distort market functions and expose the bank’s balance sheet to excessive risk.
Key Points BOJ should reject idea monetary easing has limits-one member BOJ should consider how best to hit price goal-summary Several members argued BOJ had done enough-summary “An increase in ETF purchases would make it clear that monetary easing is approaching its limit. Moreover, this action can be regarded as an incremental approach to monetary easing, and could trigger endless expectations for further easing,” one member - likely either Sato or Kiuchi - was quoted as saying. Reuters
Currencies
Vietnam’s forex reserve hits record high Vietnam’s foreign exchange reserve currently hit a record high of some US$38 billion, according to the State Bank of Vietnam (SBV), the country’s central bank, yesterday. The figure was equivalent to Vietnam’s import revenue in 12 weeks, local Tien Phong online newspaper quoted the SBV as saying. According to local experts, trade surplus in the first seven months of 2016 and rising foreign exchange reserves have offered remarkable support to the stability of foreign exchange rates in Vietnam. Official statistics by Vietnam’s General Statistics Office showed that in seven-month period, Vietnam enjoyed a trade surplus of some US$1.8 billion. Results
Singapore’s DBS posts drop in net profit Singapore’s biggest bank DBS Group Holdings posted a 6 percent drop in its net profit for the second quarter of 2016, the bank announced yesterday. DBS’s net profit for second quarter came in S$1.05 billion (US$779.1 million), which was 6 percent lower compared to a year ago due to the net allowance charge. While the total income rose 8 percent to a new quarterly high of 2.92 billion Singapore dollars (US$2.17 billion), exceeding cost growth of 6 percent. The bank revealed that the 10 percent increase in profit before allowances was more than offset by higher allowances in the second quarter. Employment
Australia job advertisements dip
Bank of Japan’s headquarters in Tokyo
Monetary policy
New Zealand central bank seen gradually cutting rates On another front, the central bank is also keen to see the currency lower. New Zealand’s central bank is expected to cut interest rates on Thursday and signal more easing to come as it continues to grapple with low inflation and a high New Zealand dollar. Twenty-four of 25 economists polled by Reuters expect the Reserve Bank of New Zealand to cut rates to a record low 2.00 per cent this week, with only one expecting it to remain on hold. “If the RBNZ remains fully committed to pushing consumer price index inflation higher then it has absolutely no option but to cut the cash rate this Thursday, pencil in at least one further reduction, and commit to on-going rate cuts if need be,” said BNZ Head of Research Stephen Toplis. New Zealand, like most of the Asian region is struggling to jump-start inflation as too many goods chase tepid demand.
Inflation has been below the central bank’s 1 per cent to 3 per cent target range since June 2014 and is currently running at 0.4 per cent. Unlike many central banks globally, however, New Zealand has been reluctant to cut rates given an overheated housing market.
Key Points Economists expect a 25 bps rate cut on Thursday Rate cut also fully priced in money markets Policy announcement August 11
In July, however, it paved the way for further rate cuts by announcing new curbs on mortgage lending
aimed at damping down the housing market. The kiwi, as the New Zealand dollar is known, is currently nearly 5 per cent higher on a tradeweighed index basis than the central bank expected it to be in the June quarter. Westpac Bank Senior FX Strategist Imre Speizer said, however, “it will take a quite strong easing bias” to get the kiwi to move significant lower given that Thursday’s rate cut is fully priced in. “The key question from the RBNZ’s OCR (official cash rate) review and monetary policy statement is not if it cuts, but how many more OCR cuts the RBNZ signals,” said ASB Chief Economist Nick Tuffley. Economists are expecting the central bank to cut at least once more after Thursday and then see rates remaining steady at 1.75 per cent, according to the median in the poll. Several, however, say that won’t be enough. Reuters
Australian job advertisements dipped in July to end two months of gains, pointing to more moderate growth in employment ahead, a survey showed yesterday. A monthly survey by Australia and New Zealand Banking Group showed total job advertisements fell 0.8 percent in July, from June when they rose 0.4 percent. That left the annual pace of job ads growth at 6.9 percent. The number of internet job ads fell 0.7 percent, while the more volatile newspaper component fell 12.6 percent. Korean markets
Samsung Biologics to apply for IPO approval Samsung Biologics Co Ltd, the biopharmaceutical contract manufacturing affiliate of Samsung Group, is expected to apply on August 11 for stock exchange approval of what is set to be South Korea’s biggest IPO this year, two bourse officials said. The initial public offering (IPO) is estimated by analysts to have a size of about 2-3 trillion won (US$1.8-US$2.7 billion). The officials from the Korea Exchange declined to be identified by name as they were not authorised to speak to media. Samsung Biologics plans to use the funds to increase its production capacity, a company spokesman previously told Reuters.
14 Business Daily Tuesday, August 9 2016
International In Brief Oil industry
OPEC calls informal September meeting OPEC said yesterday it has called an informal meeting of member countries for next month in Algeria to help stabilise the oil market. The Vienna-based Organisation of the Petroleum Exporting Countries said in a statement that the meeting would take place on the side-lines of the International Energy Forum in Algeria from September 26 to 28. “OPEC continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market,” it said. Currency
Egypt reserves drop amid IMF talks Egypt’s foreign-currency reserves dropped to the lowest level in 16 months in July after authorities repaid about US$2 billion in debt, highlighting the pressure the government is facing as it seeks a US$12 billion International Monetary Fund loan. Net international reserves dropped by more than 11 per cent, the most in 16 years, to US$15.5 billion, official data show. The central bank said it repaid US$1.02 billion for Qatar’s holding of Egypt’s sovereign Eurobonds, US$714.4 million to Paris Club creditors as well as the first instalment of a Libyan deposit with the regulator.
Industrial production
German output points to weak quarterly growth Looking to individual sectors, manufacturing saw production growth of 1.5 per cent while construction shrank by 0.5 per cent.
G
erman industrial production rebounded in June, official data showed yesterday, but analysts warned that the expansion won’t redeem a sluggish second quarter for Europe’s biggest economy. Industrial output posted growth of 0.8 per cent in June compared with the previous month, preliminary data adjusted for price, calendar and seasonal effects from the federal statistics office Destatis showed. It was a slightly weaker performance than expected ahead of Friday’s quarterly GDP growth announcement, as analysts surveyed by Factset had predicted 0.9 per cent growth. Growth in June meant a turnaround from May’s unexpected 0.9 per cent shrinkage, which Destatis yesterday revised down from the preliminary figure of 1.3 per cent. The latest release completes a picture of a 1.0 per cent decline in production over the second quarter, the economy ministry said in a statement.
June’s increase “comes too late to make a disappointing quarter for German industry a good one,” economist Carsten Brzeski at ING Diba bank wrote. But the figures “take away some fears of a hard landing of the German economy in the second quarter,” he went on.
‘June figures showed little impact from Britain’s vote to leave the European Union on 23 June’ “GDP will post only a small gain at best” based on the production figures and other key indicators, Ralph Solveen of Commerzbank predicted. Looking to individual sectors, manufacturing saw production growth of 1.5 per cent while
construction shrank by 0.5 per cent. Analysts noted that manufacturing growth in June was unsurprising, as May saw a large number of public holidays cut into output - especially in the automotive sector. Meanwhile, another weak showing for construction confirmed that slowing production over the second quarter was “largely traceable to delays due to bad weather in the construction sector,” the economy ministry said in a statement. Looking ahead, observers saw little prospect of a resurgent German economy over the second half of the year. June figures showed little impact from Britain’s vote to leave the European Union on 23 June. But Brexit-related uncertainty “should leave some marks on German industrial activity over the coming months,” ING’s Brzeski said. The economy ministry predicted that “given the restrained development of new industrial orders, a moderate upwards trend is to be expected in the coming months.” Rather, “we should expect a sideways movement in industrial production,” said Solveen at Commerzbank, “and therefore sluggish growth of the overall economy”. AFP
Transparency
UK to probe Airbus’s sales system Airbus Group faces potentially lengthy disruption to its business after Britain launched a criminal investigation into suspected irregularities in the use of third-party agents to win commercial jet sales. Europe’s largest aerospace company said late yesterday it had been notified that the UK’s Serious Fraud Office had opened a formal probe after being alerted by the country’s export credit agency to discrepancies relating to the disclosure of the work of local agents. The probe raises a sensitive issue for the industry because the agency, UK Export Finance, has for years locked horns with aerospace firms about the need for more transparency. Inflation eases
Uganda cuts interest rates again Uganda’s central bank cut its key lending rate by another 100 basis points yesterday to shore up the economy as its governor said foreign exchange stability had dampened inflationary pressures. The Bank of Uganda lowered its main lending rate to 14 per cent, its third rate cut since April, and after the Ugandan economy shrunk in January to March, after growing in the previous quarter, as agricultural output fell. Governor Emmanuel TumusiimeMutebile said the bank expected the economy to improve, forecasting economic growth would accelerate to 5.5 per cent in the fiscal year ending June 2017.
EU welfare bill
Denmark pursues Brexit concessions as politics trumps economics The drive comes even as new restrictions could cool the inflow of labour. Peter Levring
The concessions granted to the U.K. by the powers in Brussels ahead of its shocking vote to leave the European Union may now be moot, but they haven’t been forgotten in Denmark. Amid the chaos that the so-called Brexit vote has unleashed on the British economy, Danish Prime Minister Lars Loekke Rasmussen is dead-set on forcing an escape from having to foot the welfare bill for EU workers, a key feature of the bloc’s freedom of movement principle. Just like former U.K. premier David Cameron, Rasmussen is trying to placate his right-wing allies. The problem is that his push makes little economic sense and will provide a pay off that’s close to zero in savings. Ever since the Brexit vote, the Liberal Party leader has been reminding his supporters about the need to crack down on “benefit tourism” - a term used by politicians to denounce an alleged practice whereby people from the EU’s poorer member states move around the bloc in search of the best
welfare package, rather than to find a job. The drive comes even as new restrictions could cool the inflow of labour, exacerbating a shortage that analysts say is stunting economic growth. “Cameron’s deal no longer stands,” Rasmussen told lawmakers in Copenhagen on June 30, “but it contained a lot of good things championed by Denmark.”
“Cameron’s deal no longer stands... but it contained a lot of good things championed by Denmark” Lars Loekke Rasmussen, Danish Prime Minister “That’s why I’m very much hoping that chapters of Britain’s deal will once again be the subject of serious discussion,” he said. Critics question the wisdom of cracking down on people who are so well integrated into the Danish
workforce - the employment rate among EU migrants is in excess of 75 per cent and well above the bloc’s average. But with Rasmussen having to rely on the support of the nationalistic Danish People’s Party in parliament, it is not at all surprising that his minority government is paying close attention to welfare access. “It scores points with the domestic constituency,” said Marlene Wind, a professor of political science at the University of Copenhagen. One of the specific policies that the Rasmussen government will be hoping to discuss in the fall is a concession to Cameron that involves adjusting the amount of support paid out to the children of EU migrants to the cost of living in the country where they reside. The government concedes that the savings made from this form of indexation will be small - an estimate by the Copenhagen-based think tank Europa based on government data puts the figure at 50 million kroner (US$7.5 million) a year. For the premier, it’s the political gains that are far more significant. “The problem arises when the Danish people feel that there are too many privileges for migrant workers,” Rasmussen said at the EU’s June 29 summit in Brussels. Bloomberg News
Business Daily Tuesday, August 9 2016 15
Opinion Business Wires
Viet Nam News The local mining industry saw a decline in production growth in the first seven months of this year, which is likely to extend to the end of the year, said the General Statistics Office (GSO). Phạm Đình Thúy of the GSO’s Industrial Statistics Department said the local mining industry’s production growth is predicted to drop by 9 per cent in the second half of this year. The office said the mining industry’s production growth declined 2.9 per cent compared to the same period in 2015 because the price of ore, coal and crude oil on the world market had also dropped, while production costs remained high.
Xi Jinping is no Mao Zedong
Jakarta Globe Last week, the Indonesian economy surprised observers and policymakers alike with its strongest growth in the last ten quarters. But for Michael Hasenstab, the chief investment officer at global fund manager Franklin Templeton Investments, that may be just a small vindication for a long-held belief. Amid rising uncertainties haunting a fragile recovery of the global economy, Hassenstab has always viewed Indonesia among the few economies that still offer robust growth. Templeton’s proprietary Local Markets Resilience Index puts the largest economy in Southeast Asia ahead of Thailand, Malaysia and China.
New Zealand Herald A property developer and his co-accused allegedly stole or permitted the theft of capital from two now-failed finance companies, the High Court heard this morning. Paul Bublitz, Bruce McKay, Richard Blackwood and Lance Morrison on are trial in Auckland and have pleaded not guilty to charges they face. Bublitz, McKay and Blackwood have denied charges of theft by a person in a special relationship, making false statements in a prospectus and making false statements to a trustee. Morrison has denied charges of theft by a person in a special relationship and making false statements in a prospectus.
The Phnom Penh Post Tourism experts say the government’s decision to hike entrance fees to the Kingdom’s top tourist attraction could see visitor numbers dwindle, and have issued calls for greater transparency and accountability in how the ticket revenue will be used. The Angkor Institution, the ad hoc agency that manages ticketing for Angkor Wat Archaeological Park, announced on Friday that it would nearly double the entrance fee that foreigners must pay for one-day visits to the ancient temple complex near Siem Reap. Starting February 1, 2017, the cost of the one-day pass will increase to US$37, from the current US$20, it said.
M
uch of the world is watching Chinese President Xi Jinping with concern. Not only has he been re-concentrating power in the hands of the central government; many believe that his radical anti-corruption campaign is a fig leaf for a political purge. They worry that Xi is building a cult of personality, much like the one that surrounded Mao Zedong and fuelled the Cultural Revolution. The truth is far less sinister. While it is true that Xi is, to some extent, amassing power, his motivation is the need to strengthen China – both its government and its economy. To succeed, he must bring a bureaucracy that has spun somewhat out of control back in line. Over the last three decades, power in China has been decentralized considerably, with provincial and municipal governments receiving, in an incremental fashion, substantial autonomy to experiment and test reforms aimed at attracting foreign investment and spurring GDP growth. Moreover, they have been granted direct control over resources – such as land, finance, energy, and raw materials – and local infrastructure development. As a result, subnational governments accounted for an average of 71 per cent of total public expenditure in 2000-2014 – a far larger share than in the world’s largest federal countries (U.S. states’ share of public spending, for example, is 46 per cent.) The goal was to spur overall economic growth by encouraging competition among regions. Local party bosses knew that their career paths depended on their municipalities’ economic performance. And by working hard to spur growth, they have fuelled China’s rise to become the world’s second-largest economy (by some measures, the largest) and secured the ruling Communist Party’s legitimacy in the post-Mao era. But decentralization has had its downsides. It has led to substantial waste, exemplified in local governments’ massive debts. And it has spurred large-scale corruption, with local officials striking special deals with businesses to provide, say, tax breaks, cheap credit, or land at below-market prices. In a country with stringent regulations and underdeveloped financial markets, private entrepreneurs face high barriers to starting and operating businesses. If illicit deals are what it takes to gain access to the resources and markets they needed, private firms have been more than willing to strike them, offering cash or other payments to officials who bent or broke rules on their behalf. Such arrangements facilitated the entry of hundreds of thousands of growth-enhancing private firms into the market in the late 1990s. In an era when economic growth was the top priority, the corruption that fuelled it was tacitly accepted, and even blithely condoned.
“
Keyu Jin a professor of economics at the London School of Economics and a World Economic Forum Young Global Leader
But corruption has spun out of control, and now threatens both China’s stability and the Communist Party’s legitimacy. Over three decades of lax governance, some local authorities have formed political cliques that work together to protect their illicit gains and economic interests. Embezzlement and misappropriation of astronomical sums of public funds would have been impossible without accomplices to provide protection and help one another ascend the political ladder. These stealth political networks became virtually i m p e n e t rab l e, w i th m a n y officials, by default, becoming the central government’s rivals, fiercely defending their economic interests by safeguarding their official posts and perquisites. Unless it reined in the municipal satraps, the central government could essentially kiss its reform plans goodbye. So Xi stopped turning a blind eye to corruption. He put some localgovernment powers back into the hands of the central authorities. And he launched his far-reaching anti-corruption campaign. Over the last two years, officials from all China’s provinces – ranging from low-ranking department chiefs in ministries to senior provincial leaders – have been incarcerated. Geographical considerations have sometimes been taken into account, with the arrest of an official from a peripheral province followed by the arrest of one from a central municipality. Rounding up a large number of senior officials (and military officers) who are perceived to be political rivals may look like a purge. But the fact is that all those who have been prosecuted and sentenced to prison terms were found guilty, based on hard evidence. Present-day China, even with its imperfect judiciary, can no longer imprison officials purely on political grounds, as was the case under Mao. Xi’s efforts to rein in China’s bureaucracy continues unabated. In the short term, economic activity could suffer, as local authorities delay decisions, so as to avoid attracting too much attention to themselves. But once the system is cleaned up, China will be in a much stronger position to achieve sustainable and stable economic growth. Those who fear Cultural Revolution 2.0 need to understand that China is not the country it was 50 years ago. The soil for authoritarianism and a cult of personality has been ploughed under by three decades of increasing openness and economic growth. No one understands this better than Xi. Project Syndicate
Unless it reined in the municipal satraps, the central government could essentially kiss its reform plans goodbye
”
16 Business Daily Tuesday, August 9 2016
Closing Five-year plan
Beijing sets knowledge-based progress targets
The number of Chinese patent applications submitted under the Patent Cooperation Treaty in 2020 is expected to be double that of 2015, China expects knowledge-intensive services according to the plan. to contribute 20 per cent of its gross domestic Priorities of government efforts over the next five product (GDP) in 2020, up from 15.6 per cent years, include directing resources to key and longin 2015, according to the five-year plan for the term strategic areas, fostering domestic creativity, country’s scientific and technological progress by creating a favourable policy environment and 2020. The total factor productivity, of which technological removing barriers to innovation. The plan lists measures to improve legislation progress is a key sub-section, aims to account for regarding scientific research and technological 60 per cent of the country’s economic growth in 2020, up from 55.3 per cent last year, according to development, streamline fund raising systems and the plan published by the State Council yesterday. raise the efficiency of governance. Xinhua
Succession
Japan’s Emperor signals readiness to step down In a speech, he avoided using the term abdication or giving any indication on a potential time line. Isabel Reynolds
J
apan’s Emperor Akihito, head of the world’s oldest hereditary monarchy, said in a televised message he was concerned that it would become difficult for him to carry out his duties, weeks after reports that he had expressed a desire to abdicate. “I am now more than 80 years old and there are times when I feel various constraints such as in my physical fitness,” the 82-year-old said in his second such broadcast message to the nation. “I am worried that it may become difficult for me to carry out my duties as the symbol of the state with my whole being as I have done until now.” Akihito has had health problems. He underwent almost four hours of surgery for a successful heart bypass in 2012, and was hospitalized for pneumonia the previous year. If he were to step aside, the government would have to discuss how to accommodate his wishes, because the current Imperial House Law does not allow for abdication. In his speech, he avoided using the term abdication or giving any indication on a potential time line to step down. If he were to do so, he would be succeeded by his eldest son, Crown Prince Naruhito, 56. “When we think about the burden of the Emperor’s duties and his age, we are concerned about the strain
on him,” Prime Minister Shinzo Abe said in a brief statement after the broadcast. “We must think carefully about what we can do.”
‘Scrupulously apolitical’
“Under the current system the Emperor is supposed to be scrupulously apolitical,” said Colin Jones, a law professor at Doshisha University in Kyoto. “Abdication would require a change of law so if the Emperor is seen to be openly proposing such a course he would be seen to be advocating legislation, which some might find problematic.” One option, said Jones, is a regency whereby another member of the Imperial Family performs the imperial duties, without a formal change of emperor. The Crown Prince served as regent while his father was recovering from heart surgery.
Legal, political issues
Akihito indicated he would prefer not to reach the end of his life while still officially on the throne. A regency “does not change the fact that the Emperor continues to be the Emperor till the end of his life,” the Emperor said in his message. “When the Emperor has ill health and his condition becomes serious, I am concerned that, as we have seen in the past, society comes to a standstill and people’s lives are impacted in various ways,” he added, saying that he was wondering whether this could be prevented. Nearly 86 per cent of the public would accept an abdication, a Kyodo News poll showed last week. The yen, which has been the currency of Japan since 1871 when Akihito’s great-grandfather was on the Chrysanthemum Throne, weakened slightly after the broadcast.
Pedestrians watch a large screen broadcasting Japanese Emperor Akihito’s video message on his thoughts, in Tokyo. LUSA
Abe is unlikely to move quickly to make the necessary legal changes for abdication, according to Yohei Mori, an associate professor at Seijo University in Tokyo, who has written about the imperial household. A panel within the Cabinet Secretariat will probably be responsible for drafting a bill, he said, and an expert panel may then be nominated to review the draft. “They could opt to pass a special law just for the current Emperor, rather than changing the Imperial House Law,” said Mori. “This is what was done when Edward VIII abdicated in the U.K.” in 1936. Introducing abdication across the board “would be a very dangerous thing - it would allow the government of the time to force an Emperor to abdicate,” he said, adding that it could also prompt other members of the imperial household to seek to step down.
Mending ties
During his 28-year reign, Akihito has become known for striving to mend ties with countries hurt by Japanese wartime aggression perpetrated in his father’s name. The first of his line to marry a commoner, his reign began as the nation was at the zenith of its economic power and a year before its “bubble economy” burst, ushering in decades of stagnation. In visits across Asia and beyond, Akihito repeatedly addressed the issue of Japan’s militarist past. In 1990, he apologized for Japan’s colonization of Korea from 1910 to 1945. Two years later, during the first visit by a Japanese monarch to China, he acknowledged the country had “inflicted great suffering” on its neighbour. In 2001, he told reporters he felt affinity with Korea because one of his ancestors is said to have been married to a Korean princess. Bloomberg News
Trade
Climate index
M&A
Taiwan ends 17-month streak of falling exports
Mainland households upbeat about economic outlook
China’s Midea grabs 95 per cent stake in German firm Kuka
Taiwan’s exports increased for the first time in 18 months in July, a piece of good news that carries no assurances the island’s pivotal trade picture will keep improving. In July, exports rose 1.2 per cent from a year earlier, the first expansion since January 2015. The finance ministry credited the growth on stronger demand from China for electronics components and for information and telecommunication products. Exports to China rose 3.4 per cent from July 2015, compared with June’s 4.5 per cent drop. The ministry was cautious about export prospects, noting that China “has increased its local production. And the overhanging of supply glut, the Brexit and rising protectionism will raise global economic uncertainty, clouding our economic outlook.” For Taiwan, July shipments to the U.S. were down 7.3 per cent, compared with the previous month’s 3.1 per cent gain. Exports to Japan rose 10.2 per cent, from 0.8 per cent of growth in May, and those to Europe were up 4.5 per cent, compared with 0.1 per cent the prior month. Reuters
Chinese households in July had more confidence in their finances and the country’s economy, according to a wealth climate index released by the Bank of Communications (BOCOM) yesterday. The bimonthly Climate Index of China’s Wealth rose to 137 in July from 133 in May. Readings above 100 indicate growth in wealth, while readings below 100 represent deterioration. The survey solicits the opinions of well-off Chinese households on three indices: the economy, income and investment. BOCOM attributes the greater optimism to a steady economy and stability in job and financial markets. Among all regions, the wealth climate index for households in Beijing, Shanghai and Shenzhen posted the biggest increases, supported by growth in high-tech industries and the property market. The report surveyed nearly 1,850 families with annual after-tax incomes above 100,000 yuan (around US$15,750) in five major metropolises, including Beijing and Shanghai, as well those with incomes over 80,000 yuan in another 21 major cities. Xinhua
Chinese appliance giant Midea said yesterday it had secured almost 95 per cent of German robotics firm Kuka, in the face of European fears over losing control over the high-tech company. The company already held 13.51 per cent of Kuka - a world-leading manufacturer of industrial robots - before its June offer of 115 euros per share, which valued the firm at 4.6 billion euros (US$5.1 billion). Midea said in its yesterday statement that 81.04 per cent of shares were tendered by the end of an extended acceptance period at midnight on August 3, bringing its total to 94.55 per cent. The offer remains subject to regulatory approval. Officials in Brussels and Berlin - including German Economy Minister Sigmar Gabriel and European commissioner Guenther Oettinger - have expressed concerns over German high-end intellectual property, technology, and know-how departing for China as Midea’s offer progressed. A growing list of German companies, such as Kion, Putzmeister and KraussMaffei have come under Chinese ownership in recent years. AFP