Hotels fully booked and retail up at start of three-day weekend Mid-Autumn Page 2
Monday, September 19 2016 Year V Nr. 1133 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm
www.macaubusinessdaily.com
Court
Technology
Official visit
Social media
Local tax authorities appeal court decision on AIA building case Page 2
Samsung releases temporary fix for Note 7 battery problems Page 6
Premier Li starts trip to America including stops in Cuba, Canada, U.S. and at the United Nations Page 8
Chinese Internet celebrity boom highlights the rise of the industry Page 9
Becoming sustainable Index
The MSAR was ranked 4th in Asia and 41st in the world, according to the Sustainable Cities Index 2016 report. Tying with Singapore for the top spot in Tourism, the city also benefits from a high ranking in the Profit sub-index of the report. However, it lags in other categories including Environmental and Social Sustainability, much like neighbouring Hong Kong. Page 6
Finding their own direction
Pin-to: Farewell to Senado
As Pin-to bookstore says farewell to its home in Senado Square and prepares to move to its new location, owner Anson Ng sits down with Business Daily to discuss the independent bookstore’s history, customers and future. Analysing the book market here and abroad, Ng talks about how to face down challenges and stick to your values.
Non-gaming The DICJ director says gaming operators are free to decide what they will do with their non-gaming offerings and that the government will only offer general guidelines. Non-gaming will help attract mass market clients and decisions should be based on the market, he says. Experts also note that each operator has to find its own positioning to match their needs, and those of the city. Page 7
Beware the assets bubble
Interview | Local business Pages 4 & 5
HK Hang Seng Index September 15, 2016
23,335.59 +144.95 (-0.63%) Worst Performers
Galaxy Entertainment Group
5.42%
Wharf Holdings Ltd/The
China Merchants Port Hold-
-2.46%
China Resources Land Ltd
-0.91%
Sands China Ltd
5.27%
Hong Kong Exchanges and
2.16%
China Overseas Land &
-1.92%
CNOOC Ltd
-0.75%
Li & Fung Ltd
3.27%
Hong Kong & China Gas Co
1.95%
Belle International Holdings
-1.86%
PetroChina Co Ltd
-0.60%
AAC Technologies Holdings
2.98%
HSBC Holdings PLC
1.66%
Hengan International Group
China Petroleum & Chemical
-0.56%
China Life Insurance Co Ltd
2.74%
Bank of East Asia Ltd/The
1.54%
China Mobile Ltd
China Shenhua Energy Co
-0.56%
2.20%
-1.17% -1.05%
26° 31° 25° 30° 26° 29° 26° 28° 26° 30° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
BIS Bank for International Settlements issued its Quarterly Review noting potential risks looming in financial markets. The Bank analysed stock and bond market valuations and foundations leaving a murky impression. BIS also praised the behaviour of markets after the unexpected Brexit vote. Page 16
2 Business Daily Monday, September 19 2016
Macau Law Court of Final Appeal to have last say
Starting gun Former Prosecutor-General Ho Chio Meng has been formally charged for his alleged involvement in a corruption scheme. Nelson Moura nelson.moura@macaubusinessdaily.com
A
fter seven months in preventive custody, former Prosecutor-General Ho Chio Meng has been formally indicted for his alleged involvement in a corruption scheme, TDM Radio has reported. The accusation was put forward at the end of August and now a judge of the Court of Final Appeal (TUI) will have to make a decision within the next two months, whether or not to take the case to trial or not. The case in the hands of the court accuses Ho of allegedly committing
crimes while he was serving as Prosecutor-General. However the former top prosecutor will await the decision in prison, after the TUI suspended his status as magistrate, which would have allowed him the right to remain free until official charges were put forward. The court decided that since Ho was appointed by the Chief Executive to coordinate the Commission of Studies of the Legal Criminal System while he was being investigated, his status as magistrate should be suspended.
Shady deals
The former top prosecutor was arrested last February by local anti-graft
agents and detained by order of the top court for alleged nepotism extending to a period as long as 10 of the 15 years Ho was in office, including allegedly colluding with local businessmen for public works contracts. Ho has been accused by the Public Prosecutor’s Office of awarding some 2,000 public contracts to several local businessmen by illicit means from 2004 to 2014, with the suspects in the cases having allegedly gained at least MOP44 million (US$5.5 million) through the illegal deals, the Commission Against Corruption (CCAC) stated, as reported by Business Daily. The two businessmen arrested by the CCAC in relation to the case have also been accused of possible involvement in witness tampering and obstruction of justice, TDM Radio reported. Last March, Ho saw his plea for habeas corpus - a legal action by means of which detainees can seek relief from unlawful imprisonment - rejected by the Court of Final Appeal, which justified the decision on
“strong” evidence of the crimes allegedly committed and the existence of significant flight risk.
when Terra Capital - at the time named Speymill Macau Property - sold the building to American insurance company AIA for HK$1.2 billion (US$162.4 million/MOP12.9 billion) as per company sales information at the time. Terra Capital won a court appeal regarding the amount of taxes to be paid after the sale, reducing its taxes owed to the Macau Tax Authorities by about US$1.9 million (MOP151.8 million).
“The Government authority has, on September 15, exercised its right to appeal this case further and we are advised by local counsel that a decision will take between 6-9 months from this date,” Terra Capital stated in the release. The company also mentioned that the value in discussion and the reported fund’s net asset value (NAV) won’t be affected until there is a final court decision on the government’s appeal. N.M.
Business
Not so fast Government appeals AIA Tower sale tax dispute. The Macau Tax Authorities have appealed a court decision, made in favour of real estate investment fund Terra Capital Plc (Terra Capital), in regards to a tax dispute over the sale of AIA Tower, according to a company release sent to Business Daily. The court case dates back to 2012
Tourism
Increased Visitors at Mid-Autumn Festival Hotels were fully booked and retail sales increased in the city on the first day of the long weekend. Annie Lao annie.lao@macaubusinessdaily.com
The three-day long weekend holiday for Mid-Autumn Festival starting on Friday, attracted more visitor arrivals to the city, with hotel rooms fully booked and an increase in retail sales, according to a report published in local Chinese-language newspaper Macao Daily last Friday. On Friday, more than 416,000 people had entered or departed the MSAR, the Public Security Police Force (PSP) revealed. Of these, 72 per cent - or about 300,000 people - entered or departed through the Border Gate and 146,000 of these were entering the city, notes a report by TDM Chinese Radio. The three-day holiday mostly attracted tourists from Mainland China, Hong Kong, Taiwan and South Korea, local media reported. The opening of the two new resorts on Cotai contributed to fully-booked hotel rooms over the holiday period. Tourists’ reasons for coming to the city included it being a good place to relax on holiday due to a relatively slow pace of lifestyle, and its strong cultural atmosphere, noted local reports. However, some tourists complained that there were less entertainment facilities for young travellers in the city and that food and accommodation was expensive - with an average price of MOP600 (US$75) for a hotel room per day. Travellers indicated that they hoped the city could offer more affordable hotels or bed and breakfast options for them to choose from, notes Macao Daily. Nevertheless, hotel reservations were full at the new resort hotels. The lowest price for a hotel room was around MOP2,200, or about MOP2,700 for a hotel room with
breakfast and an entertainment admission ticket included, according to the publication.
Retail sales up
In the wake of the new integrated resort openings, retailers at both new casino resorts recorded their highest number of visitors on Friday, according to Macao Daily. In general, retail shops in Taipa had a 10 per cent increase in sales on Friday, compared to during the summer holidays, indicating a 20 per cent increase in sales compared to non-holiday days, the publication notes. The majority of visitors were families from Mainland China, however retail sales recorded were unchanged when compared to the same period last year, mainly due to a slowdown in the Chinese economy leading to weaker visitor spending. In addition, the consumption fair entitled ‘Community Consumption Unlimited Fun 2016’ in the Islands district also helped stimulate visitor consumption during the holiday period, the publication said. The program is organized by Macau Economic Services (DSE) and the Industry and Commerce Federation of Islands of Macao, and will run until October 16.
Business Daily Monday, September 19 2016 3
Macau Construction Central Library estimated to be completed in 2018 and fully operational in five years
That new library smell Public tender for the architectural plans of the new Central Library to start at the end of this year or beginning of 2017. Nelson Moura nelson.moura@macaubusinessdaily.com
T
he public tender for the architectural design of the new Central Library will possibly start at the end of the year or the beginning of 2017, according to statements by the Cultural Affairs Bureau’s (IC) Director, Guilherme Ung Vai Meng, news agency Lusa reported. A previous public tender for the library, in 2008, was subject to a Commission Against Corruption (CCAC) investigation and ended up being suspended, with the IC taking charge of the project afterwards, in cooperation with the Land, Public Works and Transport Bureau (DSSOPT). Now the two departments have chosen not to use the previously proposed projects and to start a new public tender process. “We, the IC and the DSSOPT, will work together on this public tender. ( ... ) We will not use the last one, we will make a new one,” the IC Director stated in a clarification session regarding plans for the new central library, according to the agency. The new library is expected to occupy the former headquarters of the Judiciary Police (PJ) and the old court building on Praia Grande on the Peninsula, comprising 11 floors and an area of 3 3,000 square metres. The IC Director also stated previously that tenders for the new library
Mei Lin stated that while in other parts of the world there is a tendency for new libraries to be away from the
city centre, in Asia the urban heart is normally a preferred location, Lusa reported.
project should attract “local talents” and would be open to international candidates, Lusa reported. “The public tender [for the planning of the new central library] will start around the end of the year (…) and construction should finish around 2018,” the head of the public library management department Tang Mei Lin stated, adding the library would be finished in five years.
Cost doubts
Reports last month stated that the new library construction costs could amount to MOP900 million (US$112.5 million). The estimated budget for the project was reached by considering the average cost of large scale construction works in 2015 and an inflation rate of five per cent, estimating that construction work in 2018 will be around MOP28,000 per square metre. In August, the IC Director stated that the amount was proposed by the DSSOPT and that the amount could decrease to MOP700 million if inflation during the years of construction is lower than in 2015. During the clarification session, local architects and students enquired about the budget value calculation and the location of the new central library, with the IC Director answering that it was based on calculations of material costs and price per square metre until 2019. In response to location doubts, Tang
Guilherme Ung Vai Meng, Director of the Cultural Affairs Bureau
4 Business Daily Monday, September 19 2016
Macau “My very first intention of opening a bookstore was the hope of having an impact on society or to make new friends through books.”
Interview
Pin-to Livros & Musica: Farewell to Senado Square Located in the tourist centre of the city, the second-storey independent bookstore and music shop, Pin-to Livros & Musica, has overlooked Senado Square for over a decade. However, in July the music store suspended its business and this month the bookstore has to say goodbye to its home, moving on to a new chapter. Opened in 2003 by four booklovers, Anson Ng is now the sole owner in charge of the bookstore. Anson sat down with Business Daily to talk about the experience of opening an independent bookstore in the busiest area of the city and to analyse the book market in Macau when compared to other book markets such as Taiwan and Mainland China. Cecilia U cecilia.u@macaubusinessdaily.com Photos by Pin-to Livros, Ao Ieong Weng Fong and 店員B
Taiwan, Hong Kong and Mainland China, but we also pick some books by local authors.
W
Since Senado Square has become one of the most attractive tourist areas in the city, how is your customer base for the store? Are most of the customers tourists? Our customer base has been
hy did you want to open an independent bookstore in the city? One of our very first reasons for opening a bookstore was to provide books that were hardly found in the city at that time. We simply wanted to share the books we liked. But also, another reason for opening the bookstore was to create a platform for people who shared the same passion for reading books to get together. In the very beginning, we did not make any market survey to see whether people would like to read the books we recommended, but very soon we found that there was a group of people out there who were interested in the books we chose for the shop. In fact readers had wished to have books like the ones that we were selling in Pinto for a long time. Where do most of the books that you pick come from? Most of our books are imported from
accumulating in the past decade, and thus reflecting that we are serving within a niche market. We don’t want to sell books to attract as many readers as possible, but to attract people who might prefer the books that we choose to sell. Aside from the books we sell, the most distinctive feature about the store is its location. Many readers appreciate the peaceful
and quiet environment provided by this hidden space, contrasting with the bustling and noisy outside world. The store has also allowed visitors to observe the changes of the square over the past years. Also, because of this location, at a certain level we attracted some tourists to visit the store, but we don’t aim to serve tourists. I know very well that adjusting the business for the general tourist would help improve our sales, but too many tourists visiting the store would damage the atmosphere that the store already possesses. It is all about making choices, and we chose to stick with the aim that we had at the very beginning. How has business been since you opened? Since the store is not a big one, the risk was not significant during the first few years. But challenges appeared eventually, especially when more people preferred to go online to buy books. We’ve got seven to eight thousand members but not all of them buy books regularly at our store. Therefore, this does not reflect anything of the business condition of the store. How do you attract more readers to visit or buy books from your store? How does the store compete against online bookstores? Although we don’t aim to attract tourists, we do care about selling books for the sake of survival. Before, we sold other things aside from books, but for me, myself, I love reading. And the reason that I opened this bookstore was to have an impact on society and get to know more people who share the passion as I do, so I prefer to focus on selling books. A
Business Daily Monday, September 19 2016 5
Macau bookstore does not only sell books, it is a cultural space where people can communicate through books. The experience of buying books online and buying books from a bookstore is different, but bookstores have to create more value for readers, to convince them the worth of buying books from a bookstore, even if the price is a bit higher than online stores. The things that online bookstores cannot provide are services between people, and the atmosphere. Also, when people do not have an idea of what books to buy, visiting a bookstore is a preferable option. Meanwhile, I will also continue to consider holding more events in our new store.
“Opening a bookstore still means something to this city.” How do you create the environment of the bookstore? How do you distinguish it from other bookstores? We wish to provide a cosy environment, with a personalised style to suit the books that we are selling, but there are numerous bookstores that have a similar atmosphere. As such, we stand out by holding events instead of only providing a place for readers to read or buy books. As an independent bookstore, we have a setting for the store, but all we try to do is to
Pin-to Livros will close after September 30 and will reopen in January 2017. The new location
follow our hearts, because we cannot control how visitors feel or think about their experience of visiting the bookstore. Did the Macau government offer any help for the store? The Macau government didn’t take the initiative to approach us, but they consider us as part of the cultural and creative industry. They did ask us if they could add the bookstore to one of the cultural and creative maps of the city, as well as the official map by the Macao Tourism Office. Unlike in Taiwan, the Macau government does not have specific subsidies for local independent bookstores to hold events. How do you think the reading
will be at Rua De Coelho Do Amaral No.41, near Kiang Wu Hospital.
e n vi r o n m e n t o f M aca u i s i n comparison to places like Hong K o n g, Tai w a n a n d M ai n l a n d China? When compared to Hong Kong and Taiwan, there are obviously very few numbers of people who really enjoy reading. But as a small town, in reference to the rest of the world, Macau’s reading environment is in fact not as pessimistic as many would have thought. How is the book and publishing market in the city when compared to those markets? Since most of our books are imported, the prices of the books from our stores are higher when compared to places where the books originate. Some readers also reflected that they discovered a change in the genre of books in our store, but it is actually the publishers who have controlled what books to sell in the market, based on the type of books that are more popular; this happens in particular
with publishers from Taiwan. For example, books about lifestyle have been quite ubiquitous in recent years due to increased demand from the reading population. In Taiwan, the ranking board in Eslite Bookstore (one of the largest retail bookstore chains in Taiwan) also indicates that the reading taste of the population has switched in the past decade. Nevertheless, there are also many small publishers cooperating with small independent bookstores in Taiwan, since many of them cannot enter the bookstore chains. The cooperation between small publishers and independent bookstores thus created the ecosystem, providing more book options. Unfortunately, there is basically no independent publisher in Macau, with only the Macao Foundation publishing books by local authors. Books by local authors have very limited business value, therefore there are not many people willing to buy these books. What is the main reason for moving the bookstore? Many have misunderstood that our leaving is because of the growing rental price of the store, but we are not the only ones to leave. Around us there were a lot of chain stores such as Starbucks and McDonalds that left. Our original landlord sold the store to another company two years ago and we were simply informed by the new landlord to end the contract without any chance of negotiation. But I myself personally, also wish to leave the tourist area. Do you have any concerns that the change of location will impact on the bookstore? Not at all, I am very much looking forward to moving to the new location. I wish for the bookstore to blend in with the surrounding community.
6 Business Daily Monday, September 19 2016
Macau Sustainability
Sustainable Cities Index 2016 Macau is ranked fourth in Asia on the Sustainable Cities Index this year. Annie Lao annie.lao@macaubusinessdaily.com
T
he MSAR has ranked 4th in Asia and 41st in the world in the Overall Index Rankings of the Sustainable Cities Index 2016 report, published by Arcadis - a global design, engineering and management consultancy company based in Amsterdam, The Netherlands. The ranking evaluates urban sustainability through the social, environmental and economic health of the cities, according to the media platform ‘people, planet and profit’. In the report’s Profit Sub-Index Ranking, the MSAR is 15th out of 100 cities in the world. The list is led by Singapore in first place, followed by neighbouring Hong Kong and London. Similar to the MSAR, the report notes the challenges faced within
Hong Kong’s future evolution. ‘Hong Kong faces significant challenges in work-life balance and the wealth gap. It has to find solutions to housing and social infrastructure
issues affecting both its young and its increasingly aging population,’ notes the report.
Factors
Macau is tied with Singapore for the top spot for Tourism, which the company notes as influencing its high ranking in the Profit sub-index.
The indicator for Tourism is based on the number of international visitors per year, with the ranking determined based on data from Euromonitor International, a London based research firm. The report ranks 100 global cities based on three dimensions of sustainability, including profit, planet and people. These represent economic, environmental and social sustainability. In other categories, Macau ranked 51st in the Planet Index and 69th in the People Index, according to information from Arcadis. These two categories were led by Zurich and Seoul, respectively. Based upon the median age of inhabitants, which evaluates how economies are placed demographically for future development, Macau is ranked 53rd. ‘The research shows that cities around the world are not effectively balancing these three pillars of sustainability,’ notes the report. ‘Instead, many demonstrate split personalities. While taking the lead in some areas, cities often underperform in one element of sustainability which negatively impacts their overall performance.’
Crime
Foreign investment fraud Mainland Chinese government officials in Jiangsu province created fake foreign investment inflow levels with shell companies created with MSAR resident cards. Government officials in Huaian, Jiangsu province in Mainland China have faked foreign investment inflow levels in order to reach gross domestic product (GDP) goals set by the Chinese central government, newspaper South China Morning Post (SCMP) has reported. Officials in 31 local governments in Huaian were found to have used taxpayer money to bribe fake foreign investors and middlemen to inflate foreign direct investment inflows, the Hong Kong newspaper
foreign investment bank accounts, only to be returned one to three days after being registered as outside investment, the newspaper reported. According to the SCMP, Huaian had the third-lowest gross domestic product of Jiangsu’s 13 prefecture-level cities, yet saw some of the largest growth in foreign investment in the province in the three years
reported, citing Thepaper.cn and the Southern Metropolis News. Local government officials used RMB85 million (MOP101.7 million/US$12.7 million) to pay intermediaries in order to reach a target set in 2010 by the city authorities to attain US$1 billion (US$7.9 billion) in foreign investment. Shell companies funded by fake foreign investments were allegedly created with the identification cards of Hong Kong or Macau residents, and their funds were transferred to fake
PJ
Telecommunications
Fake banknotes found in casinos
Sure-fire fix
PJ warns the public to be aware of counterfeit money. The Judiciary Police (PJ) received reports from six local casinos last week warning that they had detected 20 counterfeit HK$1,000 (MOP1,030/ US$129) banknotes
Authorities urge the public to pay attention to security features on notes
from 2009. Levels of foreign investment growth are considered crucial in evaluating government officials’ performance by the Chinese central government, with foreign investment growth in Mainland China having decreased three per cent year-on-year in the first six months of 2016, the publication reports. N.M.
on their premises, according to a report by TDM Chinese Radio on Friday. The PJ said the counterfeit banknotes all have the same serial number (CQ256474) and indicate that they were issued in 2012 by HSBC bank. The case is still under investigation by the authorities, but the police note that they have not yet found any counterfeit money in the city’s markets. The confiscated fake banknotes are easily distinguishable from real notes as the fake notes do not have a highly transparent watermark or dynamic color ink, the PJ explained. Th e a u th o r i t i es a r e u rg i n g businesses and the public to pay attention to identifying the security features on banknotes, especially when receiving large amounts of cash, recommending that people test each banknote to avoid unnecessary losses. If any member of the public receives any counterfeit money in the city, they should immediately contact the police and the issuing bank. They should not use the notes as it is a violation of the law, the authorities added. A.L.
Samsung releases a temporary fix for Galaxy Note 7 models affected by faulty batteries. Nelson Moura nelson.moura@macaubusinessdaily.com
Samsung released a temporary fix yesterday for Samsung Galaxy Note 7 phone models sold in Hong Kong and Macau with defective batteries, according to a company release. ‘A mandatory software update will be issued on 18 September 2016 to the remaining 159 Galaxy Note 7 devices – purchased in Hong Kong and Macau between 26 August and 1 September 2016 – which may be affected by the battery issue,’ the release by the South Korean smartphone manufacturer stated. A previous announcement by Samsung’s Hong Kong branch
announced that ‘less than 500 units of Galaxy Note 7 sold in Hong Kong and Macau between 26 August and 1 September may be affected by the battery issue’. The mandatory software update will limit maximum battery capacity to 60 per cent as a safety precaution to avoid overheating. OnSeptember2,Samsungannounced in a global statement that it had found ‘a battery cell issue’ in its recently launched Galaxy Note 7 models, and that 35 reports had surfaced of the devices’ lithium batteries exploding during or after charging. A replacement program was put forward with around 2.5 million models being recalled after the smartphone was launched in over 10 countries. Two local telecommunications c o m p a n i es, C o m p a n hi a d e T e l ec o m u n i ca ç õ es d e M aca u (CTM) and SmarTone Mobile Communications (Macau) Lt, told Business Daily previously that Galaxy Note 7’s sold in the territory after September 2 were not affected by the battery problem.
Business Daily Monday, September 19 2016 7
Macau Opinion
Sheyla Zandonai
Planning sustainability
Gaming Scholar: regional competition not a concern over the next five years
Non-gaming: the new playground DICJ director says the government will only indicate the main direction and give general guidelines for developing the non-gaming industry. Gaming operators are free to decide exactly what they will do and developments should be market-oriented. Joanne Kuai joannekuai@macaubusinessdaily.com
G
aming and non-gaming have synergetic effects, and the authorities will closely watch and promote the development of nongaming elements in town, said Paulo Martins Chan, Director of Gaming Inspection and Co-ordination Bureau (DICJ), as reported by local media. Chan said that in regards to how gaming operators are going to develop their non-gaming elements, these should be business decisions and based on the market. The DICJ head made the comments at the “Responsible Gaming Forum – Non-gaming Elements’ Impact on Macau Economic Development in New Normal”, organized by the Macau Responsible Gaming Association on Saturday. Chan said that non-gaming elements would help a great deal in attracting mass market clients, stressing that the mass market and VIP market do not conflict with each other, but rather can develop hand in hand. He said the government will supervise and watch out for unhealthy competition or irregular behaviour in the market, but would not intervene too much. The bureau head added that the government would provide general policy and directions regarding the development of non-gaming elements, and that it would be a factor in considering allocation of new gaming tables, but the gaming operators would have the liberty to choose what non-gaming elements to develop and how to develop them. As long as such projects help the MSAR to become a World Tourism and Leisure Hub, the government would be happy to see it, he added.
Human resource challenges
Koo Leung Chee, Administration Manager for Sociedade de Jogos de Macau, S.A. (SJM), acknowledges the government’s stance as reasonable, but points out that some policies could be made clearer in order to help the gaming operators to develop their non-gaming elements. “One of the challenges to develop non-gaming elements is human resources,” said Mr. Koo. “Human resources are a problem. No matter the operator’s casino business, tourism, hospitality or food and beverage,
they are labour-concentrated industries. Despite the developing technology in the gaming industry substituting some demand in terms of human resources, the hotel and transportation areas still need large quantities of human resources, as in other areas as well.” “In a place where human resources are very limited, for gaming operators to comply with the region’s or the country’s policy to develop, the government could have provided better guidelines, especially clearer policies,” he says. Mr. Koo adds that the gaming operators need to consider their own characteristics, and develop their own non-gaming elements accordingly, in order to avoid vicious competition.
Various non-gaming
Davis Fong Ka Chio, Director of the Institute for the Study of Commercial Gaming of Macau, points out that since 2007, developing non-gaming elements has become a trend. He says that, so far, the six gaming operators in town have entered different stages, with some benefitting from an early start and others just now taking off. He adds that non-gaming elements are various: some are for the public to view while others are complementary services. Fong says that gaming operators have to find their own positioning in terms of developing non-gaming elements so that gaming and nongaming can work together in order to maximize revenue. He adds that though the gaming operators have been trying, there is still a long way to go to match the society’s demands and to position Macau as a World Tourism and Leisure Hub. Davis Fong says that non-gaming consumer behaviour differs from market to market. He gives the example of Las Vegas, where the MICE [Meetings, Incentives, Conventions and Exhibitions] and F&B [Food and Beverage] industries have taken higher percentages of non-gaming revenue. Fong says that Macau is still in an experimental stage and the government shouldn’t intervene too much or it could hurt the creativity of gaming operators, adding that the target for gaming operators to achieve - nine per cent of revenue has to be attributed to non-gaming by 2020 is a pretty clear goal for the gaming operators.
Regional competition
Davis Fong notes that with the establishment of some new casinoresorts in recent years, and the increase in non-gaming elements, signs of healthy development are showing, such as the backflow of mass market clients. He adds that regional competition is not much of a concern, as the scale of investment made in Macau is yet to be matched anywhere else. “In previous years, comparing to neighbouring regions, only Macau has the capacity and has made such a big investment - which accumulatively adds up to more than MOP300 billion. I believe in the past 10 years, nowhere in Asia could have matched what Macau could offer in this aspect,” says Mr. Fong. “ H o w e v e r, f i g h t i n g t h e competition is like rafting against the current. You either progress or you will be pushed away. Many new projects have established a foothold in Macau, but the other regions have never stopped trying to catch up with Macau. In this dynamic, ever-changing situation, we have to be constantly paying attention,” he adds. Mr. Fong opines that in order for Macau to develop a healthy and sustainable gaming industry, the gaming operators need to finetune their offerings and the city needs to improve its infrastructure. Nevertheless, Fong adds that he thinks there is little chance for other places in Asia to compete with Macau in the coming four to five years.
Table numbers
In regards to the concerns that the government’s control over the increase in the number of gaming tables could affect the recovery of the gaming industry, Fong suggests that more tables don’t necessarily mean more revenue. The MSAR government has mandated a table cap with a policy to limit the increase in the number of live dealer tables to three per cent compound annual expansion until the end of 2022. He says that one should also pay attention to the percentage of the gaming tables in use, and whether the development of certain projects has stimulated demand. He observes that some newly opened casinos only have 20 per cent to 30 per cent of gaming tables in use, which means the demand is not enough. He adds that more tables sometimes mean more maintenance expenses, cautioning to focus more on hotel occupancy rates. Fong notes that with large numbers of hotel rooms, if the occupancy rate is high, it could reflect a healthy mass market.
Busy, busy, busy. Since resuming activity after the summer break, the Macau SAR government’s agenda is again packed with urban issues. Several national and international meetings, the signing of protocols, and platform summits are filled with the usual set of urban controversies that confer a sense of urgency to the schedules of executive and secretaries alike. Where there is a will, there is a plan. But nothing is to be rushed. Official announcements for a series of urban projects – public library, hospital, LRT, housing facilities – sometimes appear to be more of a strategy for mollifying jaded residents than a clear roadmap for action. In fact, tentative completion dates are being unveiled and public consultations are on the list of governmental programmes. But these projects are subject to the development and implementation of Macau’s Master Plan. This once-forsaken subject has recently made a somewhat unassuming re-entry into the public debate, reinvigorated in purpose, though not in principle, under the rubric of Macau as a “global centre of tourism and leisure". Two main questions seem to be at the core of public concerns: urban rescaling and tourism upgrading. As Macau expands, demand soars for consequential infrastructure capable of accommodating people and goods, as well as decongesting the city streets and public spaces. Reclaimed land zones will certainly help but, then again, they take time to materialize. It also seems Macau will continue to be inundated with visitors. Perhaps it is time to seriously consider the spectrum of possibilities opened by granting the SAR territorial water rights as a way to keep some of these people offshore. But above all, reconciling mass tourism and ambitious urban development entails planning. Architects and urban planners have been diligently calling attention to this point, while heritage and neighbourhood associations have mentioned the negative impacts due to the lack thereof. Indeed, planning is what ties promising proposals to liveable realities, thereby providing an urban framework able to accommodate economic fluctuations, demographic pressures, and the inevitability of change. The key word here is sustainability. A century ago, Robert E. Park, one of the founders of urban studies in Chicago – the then-epitome of American urbanism and modernity - argued that cities are all about “growth.” Nowhere is this more relevant than in China today. Let us hope Macau’s government will persevere with vision and collective purpose. Sheyla Zandonai is a scholar and contributor to this newspaper.
8 Business Daily Monday, September 19 2016
Greater China Official trip
Premier Li to present homemade solutions during America tour The Chinese premier will meet with representatives from the finance sector, think tanks, and media organizations in the United States.
C
hinese Premier Li Keqiang will attend the 71st session of the United Nations General Assembly and pay official visits to Canada and Cuba, during a trip on September 18-28. The visit will mark several “firsts,” namely Li’s first appearance at the UN General Assembly, the initial trip under the annual dialogue mechanism between Chinese premier and Canadian prime minister, and the first official visit to Cuba by a Chinese premier in 56 years since the two countries established diplomatic ties. It is expected that Li will present Chinese solutions to various global challenges, and bolster ties with both Canada and Cuba during the upcoming trip.
UN appearance: Chinese solutions in spotlight
The 71st session of the UN General Assembly was kicked off on September 13, involving representatives from 193 UN members, to discuss a wide range of global issues including sustainable development, the implementation of the Paris Climate Pact, terrorism and the anti-globalization trend, among others. Against such a backdrop and in a year which marks the 45th anniversary of
transferring China’s seat in the UN to the government of the People’s Republic of China, Li’s first appearance at the General Assembly has drawn intensive global attention. His packed itinerary in the UN includes addressing the general debate of the UN General Assembly session, attending a symposium on 2030 sustainable development agenda, two meetings on refugee issues and several bilateral meetings. “ P r esi d e n t Xi Ji n p i n g, w hi l e attending activities commemorating the 70th anniversary of the UN last year, presented a raft of measures and promises in support of the multilateral organization, and Premier Li is expected to give an update on the implementation of these measures and promises,” said Yang Xiyu, a researcher from the China Institute of International Studies. Apart from being a follow-up on Xi’s UN pledges last year, Li’s UN tour is also expected to shed light on China’s diplomatic policies and its stance on various issues, said Yang, adding that this part will allow the world to know China better. The Chinese premier will also meet with representatives from the finance sector, think tanks, and media organizations in the United States.
Debut of China-Canada PM dialogue: New era for bilateral ties
Li’s tour is the first visit by a Chinese premier to “the country of maple leaf” in 13 years. Moreover, it is the one to start an annual PM dialogue between the two countries. The annual dialogue is a mechanism established in the end of August when Li met with his Canadian counterpart Justin Trudeau in Beijing. Their exchange of visits in less than a month is a sign of “fast warming” bilateral relations, according to a number of analysts. The dialogue to be unveiled, from its topics to results, is drawing an intensive attention as what Li’s Canada trip is about. Li is scheduled to attend more than 20 events during his stay in cities from Ottawa to Montreal, ranging from political talks, economic and trade forums to people-to-people or cultural exchanges, which are expected to enhance China-Canada political mutual trust and practical cooperation. Pa r t i c i p a t i o n i n t h e A s i a n Infrastructure Investment Bank is “clearly Canada’s best choice,” Canadian Finance Minister Bill Morneau has commented. In fact, it is in the best interests of both countries to jointly make bigger the cake of win-win cooperation between them. China is Canada’s second largest trading partner, source of imports and market of exports. Their economies are highly complemented, with huge potential to be tapped in sectors particularly of hightech, agriculture, energy resources as well as third party cooperation. Trudeau has expressed the belief that a strengthened bilateral relationship will bring new opportunities for Canadian enterprises and for Chinese companies to expand business in Canada.
Cuba-China friendship deepened
Premier Li’s trip to Cuba is the first official visit by a Chinese premier since the two countries established diplomatic relations 56 years ago. Ruben Zardoya, a professor at the
University of Havana, described the visit as a “major event” in the relationship between Cuba and China. He also expressed his hopes that Li’s visit could bring “new investment, technology and closer ties with the outside world” to Cuba. China and Cuba are “good friends, brothers and comrades,” and their relationship has become sound and mature after having been developing for over half a century. Bilateral relationship is now facing new development opportunities at a time when Cuba, which is striving to update its economic growth mode and seeking a diversified diplomatic strategy, places more value on its ties with China. During his visit, Li is expected to attend the welcome ceremony held by President of the Cuban Council of State and Council of Ministers Raul Castro Ruz and exchange views with
Energy industry
Westinghouse to start first mainland In India, Westinghouse is in talks with state-owned Nuclear Power Corporation of India (NPCIL) about a contract to build six AP1000s. Geert De Clercq
Toshiba-owned nuclear reactor manufacturer Westinghouse expects to connect its first 1,000 megawatt medium-sized nuclear reactor to the grid in China early in 2017 and sees the country building a fleet of them in coming years. Four AP1000s are under construction in China, and when the first goes online, three years behind schedule, it will be a world first for a third-generation reactor. With better safety features than the current 400 or so second-generation reactors operating worldwide, they are more complex to build and both Westinghouse and its French competitor Areva have faced years of construction delays. José Gutiérrez, interim chief executive of Westinghouse, told Reuters at the World Nuclear Association conference that following final-stage hot-testing of the Sanmen 1 reactor in China’s Zhejiang province, fuel will be loaded end-2016, with start-up and grid connection due early 2017. He said timing would depend on Chinese authorities. Zheng Minghuang, vice president of China’s State Nuclear Power
Technology Corporation (SNPTC), told Reuters at the conference that he expects grid connection at Sanmen in January, with commercial operation starting by May. The second AP1000 at Haiyang, in Shandong province, should follow about one month later, Zheng added. “The commercial date in the contract was November 2013 start. That is a delay of more than three years ... We are doing our best,” he said. Gutiérrez said that in 2017/18 Westinghouse will have four AP1000 reactors operating in China, adding that the firm’s Chinese partners plan to build several more AP1000s. “We expect to see a fleet of AP1000 reactors in China ... We don’t know how many China wants to build, but it could be tens,” he said.
Other markets
Gutiérrez said that the first two of four AP1000s under construction in the United States would come online in 2019, with the next two in 2020. Westinghouse placed the reactor vessel in its first U.S. AP1000 reactor at V.C. Summer, South Carolina, in August and expects to place the one in the reactor at Vogtle, Georgia, in October. Each of
Business Daily Monday, September 19 2016 9
Greater China Social media economy
In Brief
Mainland’s Internet celebrity economy bigger than cinema Like many of their counterparts on western social media, a huge number of Chinese Internet celebrities use their platform to promote products.
him on issues of common concern. The two countries are also expected to sign more than 30 cooperation documents in such fields as economy, technology, financing, industrial ca p ac i t y , q u a l i t y c o n t r o l a n d environmental protection. China is Cuba’s second largest trading partner, while Cuba is China’s largest trading partner in the Caribbean region. Xu Shicheng, a researcher with the Latin America Institute of the Chinese Academy of Social Sciences, said that trade and economic ties between China and Cuba have been growing rapidly, but the total volume of bilateral trade is not very large. Cuba’s manufacturing sector and infrastructure, which are relatively under-developed, are in need of China’s machines, equipment and technical staff, the researcher said. “Industrial capacity cooperation between the two countries enjoys big potential.” Xinhua
d reactor in 2017 the sites will have two AP1000s. In India, Westinghouse is in talks with state-owned Nuclear Power Corporation of India (NPCIL) about a contract to build six AP1000s. During a visit to Washington in June, Indian Prime Minister Narendra Modi said the intention was to have a contract in place by June 2017. Gutiérrez said he was not yet sure whether the contract for the site in Andra Pradesh would be only for reactors or would also include fuel and services. Unlike Areva and Russia’s Rosatom,
The nascent “online influencer” industry is expected to embrace a boom, as self-made Internet celebrities, brokers and investors gather for new business opportunities at the on-going World Influencer Forum in Beijing. While venture capitalists seem to have less passion for technology startups amid a sluggish global economy, they are acting fast in the new battlefield of Internet celebrity chasing. “Internet celebrities have attracted most of the Internet users’ attention, which can translate into cash through online advertising and e-commerce,” said Ding Chenling, founder of Redbang, an Internet celebrity consulting firm and sponsor of the summit. The spread of social media platforms, including Twitter, Facebook, Instagram and Sina Weibo, as well as short-video sharing and live streaming platforms, have all contributed to the mass production of Internet celebrities, said Ding. The World Influencer Forum, which kicked off on Friday, provides a sounding platform for Internet celebrities, investors and brokers from both home and abroad to communicate and learn from each other, he said. Internet celebrities, or Wang Hong in Chinese, are usually regular people who go on to attract millions of fans by creating original content on the web and social media, often becoming key opinion formers and online broadcasters. Internet celebrities are divided into three categories: eye-catching celebrities, typically with good looks, who appear on live broadcasting platforms; e-commerce Internet celebrities who recommend and sell goods; and those who create original content, said Cai Xiang of SAIF Partners, a private equity firm operating in China. Papi Jiang, an Internet celebrity who became famous by posting satirical videos on social media sites, received RMB12 million (US$1.8 million) in
venture capital this March for a 12 per cent stake in her team. Investors sold the first ad on Papi Jiang’s videos at an auction on April 21 for RMB22 million, which was deemed a milestone for the Chinese Internet celebrities industry. The best earning Internet celebrity in the world is probably Felix Kjellberg, a 27-year-old Swedish game player better known by his online alias PewDiePie. He earned US$12 million last year by playing games and sharing ad revenue on his YouTube channel. Like many of their counterparts on western social media, a huge number of Chinese Internet celebrities use their platform to promote skincare and makeup products, behaviour they are likely getting paid for. Hundreds of Internet celebrities, mostly females, sell clothes and cosmetics on Taobao, the world’s largest online shopping platform. If large enough numbers of followers are gained, business can be lucrative. According to CBN Data, a commercial data company affiliated with Alibaba, the Internet celebrities economy is set to be worth RMB58 billion in 2016, more than China’s cinema box office in 2015. The enormous earning potential has led to the rise of Internet celebrities incubators. Treasure Hunter, the largest Internet celebrities agent in the Republic of Korea, has signed contracts with 100 Internet celebrities popular on online video platforms, including one that teaches people how to make late-night snacks and one that makes funny comparisons between Korean and Vietnamese culture. Brent Morgan, an Internet celebrity at American music streaming service YouNow, makes more than US$10,000 every month from tips and gifts from his fans, and told Xinhua that he is optimistic about business opportunities in China. Xinhua
Westinghouse has no mines or enrichment facilities but provides fuel to its customers via contracts with uranium miners and enrichment companies. Westinghouse - 87 per cent owned by Japan’s Toshiba, 10 per cent by Kazakhstan’s Kazatomprom and 3 per cent by Japanese nuclear equipment maker IHI - is one of the few private operators, along with GE Hitachi, in a nuclear industry dominated by stateowned players. Westinghouse is also in talks with Bulgaria about building an AP1000 there, following the signature of a contract in 2014 for the construction of a reactor at the Kozloduy site. The Balkan country, which operates two Soviet-made reactors, is keen to
reduce its energy dependence on Russia but progress has been slow. “Frankly speaking, we are not progressing as fast as we would like to, but we will see,” Gutiérrez said. In Britain, the NuGen consortium, owned by Toshiba and Engie, plans to
Debt
Nation’s U.S. Treasuries holdings hit record low China’s holdings of U.S. Treasuries fell in July to their lowest since early 2013 as official ownership of U.S. government debt declined for a fourth straight month, data from the U.S. Treasury Department showed on Friday. China, which remained the bigger U.S. creditor, owned US$1.219 trillion of U.S. government debt in July. This was the lowest level since US$1.214 trillion in January 2013. The relatively steep monthly drop in China’s Treasuries holdings may raise questions about how much the world’s No. 2 economy may be spending from its currency reserves to support the yuan. Biz ranking
Alibaba leads Asian listed firms in market value Alibaba’s market value surpassed all other Asian listed firms, according to the e-commerce giant on Saturday. The world’s largest e-commerce platform closed at US$104.64 per share on the New York Stock Exchange Friday, totalling over 266 billion U.S. dollars, the highest market capitalization of any Asian listed firm. Rallying share prices due to booming business and outstanding financial performance have seen Internet companies catching up with traditional sectors. Another Chinese internet company, Tencent, topped the Asian listed-firms market capitalization earlier this month. Dairy products
Export protocol signed with Bulgaria
Westinghouse expects to build tens more in China
Chinese and Bulgarian officials have signed a deal on export of Bulgarian dairy products to China. The Bulgarian Ministry of Agriculture and Food, and China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) signed the protocol on Friday, officials confirmed Saturday. “The protocol on veterinary and health requirements for dairy products creates conditions for the export of Bulgarian dairy products,” the Bulgarian ministry said in a statement on its website. Desislava Taneva, Bulgarian Minister of Agriculture and Food, said that currently Bulgaria has 28 approval procedures for the export of certain types of food and feed to China, the statement said.
In talks to build six AP1000 reactors in India
Mid-Autumn Festival
Key Points First Westinghouse AP1000 reactor to start early 2017
Expects UK licence for AP1000 reactor in Q1 2017 build three AP1000 reactors in Cumbria. Westinghouse expects to finalise the Generic Design Assessment in the first quarter of 2017. “We are progressing extremely well with the British regulator,” Gutiérrez said. Although the AP1000 is licensed in the United States and China, all new reactors need to be licensed in every new country they enter - a process that takes years. Gutiérrez said that Westinghouse is also pursuing new reactor sales in other countries, including in the Czech Republic, Poland and South Africa. He added that the United Arab Emirates is also thinking about buying more reactors, while Vietnam and Saudi Arabia are also possibilities. Reuters
Beijing consumers spend big on holiday Beijing consumers forked out billions during the MidAutumn Festival holiday, which ran from Thursday to Saturday, retail figures show. Retail sales of 60 major commercial companies, in foodstuff, dining and tourism sectors, exceeded RMB2 billion (about US$300 million), up 6.6 per cent year on year, according to the Beijing municipal commission of commerce. Moon cakes, the seasonal delicacy for the festival, were in less lavish packaging and came in more creative flavours this year. Daoxiangcun, a Beijing bakery chain, sold more than 27 million moon cakes by Saturday.
10 Business Daily Monday, September 19 2016
Asia
Singapore port
Trade
Singapore exports stall Weak outlook keeps pressure for stimulus. Jongwoo Cheon
S
ingapore’s exports in August stalled and though sales to the United States picked up, underlying weakness in overseas demand is expected to maintain pressure for further stimulus to shore up the stuttering trade-dependent economy. Non-oil domestic exports (NODX) registered flat growth last month from a year earlier, the trade agency International Enterprise Singapore said in a statement on Friday. While that was better than the median forecast of a 4.1 per cent slump
in a Reuters poll and a 10.6 per cent loss in July, the overall picture was one of slack offshore demand. On a month-on-month, seasonally adjusted basis, exports declined 1.9 per cent in August, beating a forecast of a 2.9 per cent fall in the survey. “It’s flat year-on-year for August but whether we actually get the pick up going into the fourth quarter, which is traditionally the peak season, not quite sure whether that’s going to materialise in a very strong way yet,” said Selena Ling, head of treasury research and strategy for OCBC Bank. The city-state’s economy has been hit by weak global demand, while domestic challenges such as a labour shortage have dragged on growth. In August, Singapore cut its 2016 economic growth forecast to 1-2 per
cent from the previous forecast of 1-3 per cent expansion, leaving the door open for additional policy stimulus. Exports to the United States grew 4.8 per cent in August on-year, compared to a 19.1 per cent decrease in July. The recovery came on a surge in sales of non-electric engines and motors, disk media products and telecommunication equipment. Shipments to China, Singapore’s top overseas market, fell 5.4 per cent in August from a year earlier, much less than a 16.6 per cent decline in July. That came as the world’s second-largest economy showed tentative signs of stabilisation. China’s factory output and retail sales grew faster than expected last month, while imports unexpectedly rose for the
first time in nearly two years. Sales to the European Union contracted 15.6 per cent last month from a year earlier after a 3.0 per cent growth in July.
Key Points Aug NODX 0.0 pct y/y vs -4.1 pct forecast Aug NODX -1.9 pct m/m sadj vs -2.9 pct forecast NODX to U.S. turns to expansion; China NODX fall less Electronics exports in August shrank 6.0 per cent from a year earlier after falling 12.9 per cent in July. Volatile pharmaceutical shipments decreased 17.9 per cent, compared to a 12.7 per cent growth in the previous month. Reuters
Fiscal drive
Indonesia tells Singapore not to hinder tax amnesty scheme The Monetary Authority of Singapore has confirmed it advised banks in Singapore to encourage clients to use tax amnesty programmes. Hidayat Setiaji and Gayatri Suroyo
Indonesia’s finance minister said on Friday she had asked neighbour Singap or e not t o hin d e r h e r government’s tax amnesty scheme, and won assurances that Indonesians with assets in the city-state would not come under suspicion for participating. Sri Mulyani Indrawati said she got the promise from Deputy Prime Minister Tharman Shanmugaratnam, who she called after Reuters reported on Thursday that private banks in Singapore were passing the names of clients joining the amnesty to a local police unit dealing with financial crime. Launched in July, the tax amnesty is a top priority for President Joko Widodo, who wants the repatriated funds to help pay for Indonesia’s large budget deficit and broaden the country’s tax base. A large majority of the offshore assets declared so far were from Singapore.
“I have stressed to the Singapore government that the Tax Amnesty Law clearly mentions that Indonesian taxpayers have the right to join the amnesty programme and be pardoned for all their tax crimes and administrative sanctions,” Finance Minister Sri Mulyani Indrawati told reporters. “I will monitor this and all Indonesians that feel they have been hindered, we will follow up,” said the former World Bank managing director. The Monetary Authority of Singapore has confirmed it advised banks in Singapore to encourage clients to use tax amnesty programmes and that banks have to file a suspicious transaction report (STR) when handling tax amnesty cases. MAS said participation in an amnesty in and of itself would not attract criminal investigation in Singapore. Indrawati late Thursday told
Indonesian media that the news on names being shared “could potentially disturb our taxpayers.”
‘Protected by law’
She said many in Indonesia asked her about Singapore’s reporting requirement as some taxpayers became worried that when they join the amnesty to clear up their tax records, it could be seen as money laundering activity by Singapore authorities. “There is no reason to be afraid. Joining the tax amnesty is a good action, it is legal and protected by law,” Indrawati said on Friday. Indonesians hold an estimated
US$200 billion in private banking assets in Singapore. As of Friday, the government has collected 22.7 trillion rupiah (US$1.73 billion) of tax amnesty revenue or almost 14 per cent of its ambitious target of 165 trillion rupiah. Around 552.7 trillion rupiah of assets have been declared by more than 60,000 taxpayers. As of September 6 - the last b r e a k d o w n ava i l a b l e f r o m Indonesia’s finance ministry Singapore accounted for 85.4 per cent of assets declared outside Indonesia, followed by Australia with 6.7 per cent, the United State 2.5 per cent and Switzerland 1.8 per cent. Reuters
Business Daily Monday, September 19 2016 11
Asia Finance minister
In Brief
Funding to shore up Indian banks constrained by budgets Ratings agency Fitch estimates that US$90 billion in capital will be needed for Indian banks to meet Basel III banking rules. Manoj Kumar
Indian Finance Minister Arun Jaitley pushed back on Friday against calls to increase the allocation of funds to recapitalise state banks saddled with the bulk of the banking sector’s US$120 billion in sour loans. Instead, he held out the prospect that a revival in the fortunes of borrowers would enable banks to “deprovision” some of the non-performing assets (NPAs) weighing on their balance sheets and make it possible for them to expand lending. “Obviously banks would prefer more funds for recapitalisation but there are budgetary constraints,” Jaitley told a news conference after meeting senior state bankers in New Delhi.
Jaitley has earmarked 700 billion rupees (US$10.5 billion) in bank capital injections from budgets covering a four-year period ending March 2019. As part of that plan, New Delhi injected 250 billion rupees into the banks in the last fiscal year, and has announced another 229 billion rupees in the current year. However, ratings agency Fitch estimates that US$90 billion in capital will be needed for Indian banks to meet Basel III banking rules due to be fully implemented by March 2019. Fitch says 11 Indian banks may fail to meet those norms. “The NPA situation is certainly not either static or permanent, because a very large bulk of it is provisioning,” Jaitley said. “Therefore, the moment that you
see the revival of a sector, a lot of the provisioning itself would get deprovisioned, and the account itself would get upgraded.” Jaitley had earlier said that the government stands “solidly” behind the banks. A senior government official, who declined to be named, said after the briefing that the government disagreed with Fitch’s analysis and estimated that the banks would need far less support over time.
Key Points Banks may be able to ‘deprovision’ as borrowers recover India earmarks US$10.5 bln over 4 years to strengthen state banks Official disagrees with Fitch estimate that banks need $90 bln Jaitley also said steps had been taken in two industrial sectors with the worst bad loan problems - infrastructure and steel - and added that “at some stage this problem could start to see a reversal”. Reuters
Official figures
Japan gov't cuts assessment on capex Japan’s government gave a weaker assessment of capital expenditure in September for the first time in 10 months, while giving an improved view on private consumption, reflecting the fragility of the world’s third largest economy. The government stuck to its overall economic assessment in its monthly economic report issued on Friday, which described the economy as being in moderate recovery while still showing weakness. The assessment comes as the Bank of Japan holds a monetary policy meeting next week. It follows a recent batch of data showing weakness in exports, factory output and household spending, and a surprise gain in core machinery orders. Price stability
S.Korea to buy 390,000 tonnes South Korea said yesterday it will buy a total of 390,000 tonnes of domestic rice in a bid to keep the price stable in a bumper year. The Ministry of Agriculture, Food and Rural Affairs said in a statement it planned to purchase 360,000 tonnes of rice for the country’s rice inventories and the remaining for an ASEAN Plus Three Emergency Rice Reserve (APTERR). The ministry will carry out the rice purchase from September 23 through December 31, according to the statement. Public spending
Indonesia 2016 budget deficit may increase Monetary policy
Japan’s finance industry lobbies against deeper negative rates The finance industry’s criticism on negative rates is in contrast to a growing acceptance over the policy among politicians. Leika Kihara and Taiga Uranaka
Japan’s finance industry continued to lobby against any deepening of negative interest rates by the central bank ahead of a closely-watched rate review next week, with the head of the life insurance lobby warning on Friday that rate cuts would do more harm than good to the economy. Sources have told Reuters the Bank of Japan (BOJ) will make negative rates a centrepiece of future monetary easing at next week’s rate review by shifting its prime policy target to interest rates from the pace of money printing. Akio Negishi, chairman of the Life Insurance Association of Japan, said he did not see the need for the BOJ to ease again any time soon with the economy on a steady recovery track. “Negative rates squeeze financial institutions’ profits. Sharp declines in long- and super-long bond yields have more demerits for the economy as it hurts public sentiment” by fuelling uncertainty over future pension payments, he told a news conference. “Given the current state of the economy, I don’t think the BOJ needs to deepen negative rates,” Negishi said, adding that his comments on BOJ policy were his views as president of Meiji Yasuda Life Insurance Co.
The head of Japan’s banking lobby also voiced opposition to deeper negative rates on Thursday, saying that negative rates have had little positive effects on the economy. “We haven’t heard from companies that (negative rates) are spurring positive activity,” Takeshi Kunibe, chairman of the Japanese Bankers Association, told a news conference. He added that the industry may need to consider charging fees for deposits if the BOJ were to deepen negative rates. The finance industry’s criticism on negative rates is in contrast to a growing acceptance over the
policy among politicians. Japan’s top government spokesman said negative rates have had some merits for the economy. An adviser to Prime Minister Shinzo Abe said on Friday the benefits of the negative rate policy are “very big” as it encourages corporate debt issuance and lowers mortgage rates. In January, the BOJ decided to add negative rates to its massive assetbuying programme in a renewed effort to accelerate inflation to its 2 per cent target. But the move has drawn criticism from financial institutions for squeezing their already-thin margins. Some academics warn that negative rates may dampen consumer sentiment by making households wary that their pension and insurance payments may be eroded by ultralow rates. Reuters
Japan’s central bank governor explains negative interest rate policy to journalists at a press conference earlier this year. Lusa
Indonesia’s budget deficit for this year may increase to 2.7 per cent of gross domestic product (GDP) from a previous estimate of 2.5 per cent, Askolani, the finance ministry’s director general of budgeting, told Reuters on Saturday. The government may have to pay higher cost recovery for oil and gas contractors than the US$8 billion it originally planned in the first half of the year, as those companies had charged the government US$6.5 billion up to July, Finance Minister Sri Mulyani Indrawati said late on Friday. Technology
Samsung says sold shares in four companies Tech giant Samsung Electronics Co Ltd said on Sunday it sold shares in four companies including ASML Holding NV and Seagate Technology Plc to free up money for additional investments for its core businesses. Samsung said in a statement it sold about half of its shares in ASML while selling its entire 4.2 per cent stake in Seagate. The company also sold its 0.7 per cent stake in Sharp Corp and its 4.5 per cent stake in Rambus Inc. A Samsung spokeswoman told Reuters the total proceeds from the sales exceeded 1 trillion won (US$888.85 million) but declined to give further details.
12 Business Daily Monday, September 19 2016
Asia In Brief Development
Myanmar’s economic zone to open in 2018 The Muse Central Economic Zone of Myanmar on Myanmar-China border in north-eastern Myanmar, will be opened in 2018, official media reported on Saturday. The zone, being set up on about 119.38 hectares of land near Muse township in north-eastern Shan State, is being implemented in cooperation with the Shan State government and New Starlight Company with 80 per cent of the project having been completed at present. The project, undertaken with a fund of over US$51 million, comprises six zones, including commercial zones and residential zones. Tourism
Indonesia seeks ways to attract more Chinese Indonesia is taking steps to attract more Chinese tourists during the upcoming year-end holiday season by embarking a team to promote national tourism sector in Chinese cities of Shanghai and Zhengzhou this month. The team would organize various promotion activities from September 22 to 26 in the two cities aimed at grabbing more holiday traveling package sales from Chinese customers, improve awareness on Indonesia’s tour destinations and promote new tour events in the country. In Shanghai, the Indonesian team would initiate a meeting between Indonesian travel agents and their Chinese counterparts on September 22.
Real estate
New Zealand extends anti-money laundering rules to capture property agents Existing rules only cover financial institutions and casinos. Charlotte Greenfield and Nathan Lynch
N
ew Zealand will extend its anti-money laundering laws to cover real estate agents and other professions amid fears the country has become a soft target for illegal fund flows that have also helped inflate the property market. Soaring property prices have become a hot issue among the New Zealand public and there are concerns that laundered money has fuelled the boom. The opposition Labour Party has also raised concerns about the amount of money coming from Chinese investors.
Political pressure was placed on the government this year to combat money laundering after the release of the Panama Papers in April, which showed how offshore companies often tout New Zealand trusts as a way to create a secretive un-taxed vehicle in the South Pacific nation. New Zealand’s existing anti-money laundering rules only cover financial institutions and casinos, but the new rules due to be implemented in the mid-2017 will be extended to include lawyers, accountants and property agents. The government’s consultation period with those professions closed on Friday. The change will bring New Zealand into line with standards already in force in countries such as Canada and the United Kingdom. Gary Hughes, a New Zealand barrister with extensive experience in
Liquidation
Hanjin plan would see sale of most of its ships South Korea’s Hanjin Shipping Co Ltd, whose collapse has disrupted global trade, is considering a restructuring plan to sell more than half its ships, the Wall Street Journal reported on Friday, citing people familiar with the matter. However, liquidation remained the most likely outcome for Hanjin Shipping, the newspaper cited the sources as saying. Hanjin Shipping, the world’s seventh-largest container carrier, filed for receivership late last month in a South Korean court and must submit a rehabilitation plan in December.
Commerce
India loses WTO appeal in U.S. solar dispute The appeal ruling came just days after India launched a WTO complaint against subsidies for the solar industry in eight U.S. states.
Tax payment
Apple Japan unit ordered to pay for underreporting income An Apple Inc iTunes unit in Japan was ordered to pay some 12 billion yen (US$118 million) in tax by local authorities after underreporting income, media reported Friday. The unit has since paid the amount, the reports said. The Tokyo Regional Taxation Bureau determined that the unit, which sends part of its profits earned from fees paid by Japan subscribers to another Apple unit in Ireland to pay for software licensing, had not been paying a withholding tax on those earnings in Japan, according to broadcaster NHK.
Tom Miles
India lost its appeal at the World Trade Organization in a dispute over solar power on Friday, failing to overturn a U.S. complaint that New Delhi had discriminated against importers in the Indian solar power sector. The WTO’s appeals judges upheld an earlier ruling that found India had broken WTO rules by requiring solar power developers to use Indian-made cells and modules. The appeal ruling is final and India will be expected to bring its laws into compliance with the WTO rules. “This report is a clear victory for American solar manufacturers and workers, and another step forward in the fight against climate change,” U.S. Trade Representative Michael Froman said in a statement.
Indian officials made no immediate comment on the appeal outcome. U.S. solar exports to India have fallen by more than 90 per cent since India brought in the rules, the statement said. As in the earlier ruling, which was issued in February this year, the judges said India could not claim exemptions on the basis of that its national solar power sector was included in government procurement, nor on the basis that solar goods were in short supply. There was also no justification on the grounds of ensuring ecologically sustainable growth or combatting climate change. The dispute, which the United States first launched in February 2013, involved an increasingly common target of trade disputes
- solar power, with an increasingly common complaint - local content requirements. The appeal ruling came just days after India launched a WTO complaint against subsidies for the solar industry in eight U.S. states. Under WTO rules, countries are not allowed to discriminate against imports and favour local producers, but in the past five years countries keen to support their own manufacturers have frequently resorted to local content requirements, while keeping a sharp eye out for their use by others. “We strongly support the rapid d e p l o y m e n t o f s o l a r e n e rg y worldwide, including in India,” Froman said. “But local content requirements are not only contrary to WTO rules, but actually undermine our efforts to promote clean energy by requiring the use of more expensive and less efficient equipment, making it more difficult for clean energy sources to be cost-competitive. Reuters
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
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anti-money laundering regulation, said the rules needed to be extended to cover all professions able to set up secretive trusts. “They were excluded from the (anti-money laundering) regime but could provide very similar services,” Hughes said. The Financial Action Task Force (FATF), the Paris-based global standard setter, raised concerns in a 2013 assessment of New Zealand, describing the lack of coverage of non-financial professional services as a “serious scope issue” and a “deficiency that is not yet addressed.” The FATF has raised similar concerns about Australia, which will consult on new anti-money laundering laws later this year. Existing anti-money laundering rules are overseen by teams in three different New Zealand government agencies. Creating a dedicated anti-money laundering agency as exists in Australia would avoid, “duplication of effort and fragmentation of knowledge between supervisors,” said money laundering expert Ron Pol who runs compliance firm AML Assurance. Pol said it was difficult for banks, police and regulators in New Zealand to determine the source of funds in China, meaning they struggled to distinguish between “capital flight” and criminal laundering. And while laundering techniques can be used to move money out of China to circumvent government-imposed limits on money outflows, this is not an offence under New Zealand laws. The new laws will not restrict the ability of overseas investors to purchase property with funds obtained legitimately in China. Last month, the Canadian province of British Columbia, which includes Vancouver, imposed a 15 per cent property transfer tax on foreign real estate buyers, cooling some parts of what remains Canada’s most expensive housing market. The move led to speculation that foreign buyers, mostly from mainland China, will shift to other markets. Reuters
Business Daily Monday, September 19 2016 13
Asia
Trade
Japan exports seen falling on weak foreign demand A poll showed analysts were divided over whether the BOJ would cut its minus 0.1 per cent interest rates even deeper this week. Kaori Kaneko
Japan’s exports were expected to post an 11th consecutive fall in August, a Reuters poll found on Friday, as weak foreign demand and a persistently strong yen took their toll. Exports were seen likely to fall 4.8 per cent in August from a year earlier, compounding July’s 14.0 per cent drop, which was the most rapid decline since the global financial crisis in 2009. The poll found imports were expected to drop 17.8 per cent from a year ago to produce a trade surplus
of 202.3 billion yen (US$2 billion) - a third straight monthly trade surplus. “Advanced countries’ economies continue to grow moderately but China’s economy is slowing down, so the global economy has not regained its momentum,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “In addition to that, the strong yen lowered both import and export prices.” The finance ministry will issue the trade data at 8:50 a.m. on Wednesday September 21 (2350 GMT Sept. 20). The Bank of Japan (BOJ) will
Trade pact
Blow for Obama’s TPP as Vietnam parliament defers ratification The delay means that at the earliest, ratification by Vietnam would be several months after November’s U.S. presidential election. Ho Binh Minh
Vietnam will not include ratification of the Trans-Pacific Partnership (TPP) on its agenda for its next parliament session, an official said on Friday, adding to uncertainty over the future of U.S. President Barack Obama’s signature trade deal. As arguably the biggest beneficiary of the deal covering 40 per cent of the global economy, Vietnam was expected to be among the first to ratify the TPP, the prospect of which helped spur record foreign investment last year in its booming manufacturing sector. “TPP will not be on the assembly’s agenda because the government’s proposal is not completed,” a parliament source familiar with the matter told Reuters. He did not elaborate. Vietnamese ratification was widely considered a formality having already been approved in January by the top brass of the ruling Communist Party. The National Assembly is 96 per cent comprised of party members and domestic opposition to the TPP is unheard of. Its next session begins on October 20. The delay means that at the earliest, ratification by Vietnam would be several months after November’s U.S. presidential election, the run-up to which has seen its trade policy come under heavy domestic scrutiny. Negotiations were completed last year for the TPP, dubbed a “mega-regional accord”, to create a trading
zone of 12 members with a combined US$27 trillion gross domestic product (GDP). It seeks to raise standards and challenge China’s economic influence and debate in the United States has caused jitters among some of its members, which include Japan, Malaysia, Singapore, Brunei, Peru, Chile, Australia, New Zealand, Canada and Mexico. Obama has expressed confidence of winning congressional approval for TPP before he leaves office, warning that failure to do so would undermine U.S. leadership in the region and allow China to set the rules of regional commerce. With Vietnam’s strengths in electronics, textiles, seafood and commodities, the TPP is seen as a game-changer for its export-dominated economy, and a means of boosting U.S. influence in China’s backyard. Friday’s Thanh Nien (Young People) daily newspaper cited Nguyen Thi Kim Ngan, the parliament chairwoman, as saying Vietnam’s ratification would depend on the Communist Party, the global situation and the outcome of the U.S. election. The prospects for U.S. legislative approval of the TPP have looked increasingly dim, with both presidential candidates - Democrat Hillary Clinton and Republican Donald Trump - stating their opposition to the pact, in its present form at least. Reuters
conduct a “comprehensive review” of the effect of its monetary policy at its meeting September 20-21.
Key Points Aug exports f’cast -4.8 pct yr/yr, down 11th straight mth Imports f’cast -17.8 pct yr/yr, trade surplus Y202.3 bln Trade data due at 2350 GMT on Tuesday The central bank will consider making negative interest rates the centrepiece of future monetary easing by shifting its prime policy target to interest rates from base money at
the review, sources familiar with its thinking said. The poll showed analysts were divided over whether the BOJ would cut its minus 0.1 per cent interest rates even deeper this week. Six of 11 analysts predicted the BOJ would keep its negative interest rates unchanged, while three expected the bank would cut its rates to minus 0.2 per cent. Two said the rates would be lowered to minus 0.3 per cent. Despite the BOJ’s efforts under Governor Haruhiko Kuroda, who took the post in 2013, few Japanese companies see the central bank’s aggressive monetary stimulus achieving its stated goal of spurring 2 per cent inflation, a separate Reuters’ survey found. Reuters
14 Business Daily Monday, September 19 2016
International In Brief Heist protection
Central banks seek global standards The world’s major central banks, stung by this year’s US$81-million heist in Bangladesh, have launched a task force to consider setting broad rules to protect the vast network of cross-border banking from cyber attacks, according to two sources with knowledge of the matter. The committee of central banks, part of the Bank for International Settlements (BIS) in Basel, Switzerland, set up the task force this summer. It has begun gathering information from members on their protections against fraud, said the sources, who requested anonymity because work had just begun.
Monetary policy
Russian central bank signals rate cut pause Next year the central bank expects Russian gross domestic product growth to be weak at below 1 per cent. Alexander Winning and Lidia Kelly
R
ussia’s central bank will probably leave interest rates on hold for the rest of the year after cutting them on Friday, its governor said, stressing cautious monetary policy was the best way to achieve consistently low inflation. The hawkish comments by Elvira Nabiullina (pictured) will add to the
view the bank is determined to meet its 4 per cent inflation target next year even if that means the economy will stay weak. The central bank cut its key rate by 50 basis points to 10 per cent on Friday in only the second easing step this year, even though inflation has slowed to 6.6 per cent in mid-September from 9.8 per cent in January. “The trajectory for cutting rates is tailored specifically to the goal of
Key Points Russian key rate cut by 50 bps on Friday
Trade talks
German Economy Minister to visit Russia
Central bank says rate probably on hold till year-end
German Vice Chancellor and Economic Affairs Minister Sigmar Gabriel will visit Russia this week to hold talks with Russian government officials about the state of bilateral trade relations, his ministry said in a statement on Friday. Gabriel will be in Russia on Wednesday and Thursday and will take a business delegation with him, the ministry said. Russian officials were working to set up a meeting between President Vladimir Putin and Gabriel, the Kremlin said. Russia is likely to be keen to discuss the impact that European Union sanctions imposed on Moscow over its role in the Ukraine crisis are having and to ask what the prospects are for them being lifted.
Says striving to meet inflation target Says rate cuts next year could be small Analysts said the central bank’s rhetoric was tougher than expected and speculated the bank could be concerned about inflation risks linked to fiscal policy or the possibility the Federal Reserve will soon raise U.S. interest rates. Nabiullina said that in order for inflation expectations to become anchored around 4 per cent, the central bank would need to keep interest rates above inflation even after the 4 per cent target was met. She said the economy was not yet recovering in a balanced manner, though quarterly gross domestic product could turn positive in the second half of this year. Next year the central bank expects Russian gross domestic product growth to be weak at below 1 per cent, given sluggish growth in the global economy and an average price of around US$40 per barrel for oil, the country’s main export. Reuters
Speculation
Nigeria moves to curb abuse of currencies The Nigerian government will embark on nationwide sensitization campaign to curb the abuse of Nigeria’s currencies, an official said Saturday. Abubakar Danchadi, a director with the National Orientation Agency told reporters in northwest state of Sokoto that the organization is partnering with the Central Bank of Nigeria to carry out the campaign. He said the nation’s currencies are grossly abused in a myriad of obnoxious ways. Danchadi told reporters that the currencies should be patriotically respected by both Nigerians and non-Nigerians alike. Private poll
Economy tops list of U.S. problems With the first U.S. presidential debate coming up soon, the economy leads the long list of top concerns for Americans, found a Gallup poll released Friday. Economy continues to lead the list at 14 per cent, followed by dissatisfaction with government, at 11 per cent, and jobs and unemployment, also at 11 per cent, the September 7-11 Gallup poll found. There are a number of other major problems cited by Americans, including the election (8 per cent), race relations (7 per cent), immigration (6 per cent), terrorism (5 per cent), and national security (5 per cent), the poll found.
lowering inflation to 4 per cent,” Nabiullina told a news conference after the rate decision, which was in line with economists’ expectations. “As regards lowering rates this year, according to our base forecasts it is a very unlikely scenario.” Nabiullina has won plaudits for steering Russia through a deep economic crisis precipitated by slumping oil prices and Western sanctions over the Ukraine conflict. She has resisted pressure to cut rates quickly to rekindle economic growth. The central bank’s board agreed unanimously to lower borrowing costs on Friday, Nabiullina said, adding the bank believed market expectations for policy easing were overdone. Next year the central bank could cut rates in smaller 25 basis point increments, she said.
Prices evolution
U.S. inflation stirring as healthcare, housing costs surge The core CPI increased 2.3 per cent in the 12 months through August after rising 2.2 per cent in the year through July. U.S. consumer prices rose more than expected in August as healthcare costs recorded their biggest gain in 32-1/2 years, pointing to a steady build-up of inflation that could allow the Federal Reserve to raise interest rates this year. The cost of living last month was also pushed up by sustained increases in rents. The uptick in inflation is likely to be welcomed by Fed officials when they gather this week to deliberate on monetary policy, though a rate hike is not expected at that meeting. The Labour Department said on Friday its Consumer Price Index increased 0.2 per cent last month after being unchanged in July. In the 12 months through August, the CPI increased 1.1 per cent after advancing 0.8 per cent in the year through July. The so-called core CPI, which strips out food and energy costs, rose 0.3 per cent last month, the biggest increase since February, after gaining 0.1 per cent in July. Economists had forecast the CPI
nudging up 0.1 per cent last month and the core CPI gaining 0.2 per cent. The core CPI increased 2.3 per cent in the 12 months through August after rising 2.2 per cent in the year through July.
Key Points Consumer price index rises 0.2 per cent in August Core CPI increases 0.3 per cent Core CPI up 2.3 per cent year-on-year A separate report on Friday, however, showed consumer sentiment was steady in early September, suggesting retail sales could rebound in the coming months. Medical care costs jumped 1.0 per cent last month, the largest increase since February 1984, after advancing 0.5 per cent in July. The cost of hospital services jumped 1.7 per cent, the biggest gain since October 2015.
Prices for prescription medicine soared 1.3 per cent. Economists linked the surges to the expansion of healthcare coverage under President Barack Obama’s signature 2010 healthcare restructuring law. Given the strong increases in healthcare costs, economists are forecasting the Fed’s preferred measure - the core personal consumption expenditures (PCE) price index - to rise 0.2 per cent in August after increasing 0.1 per cent in both June and July. That would take the year-on-year gain to 1.7 per cent, which would be the biggest increase since February. The CPI and PCE price index diverge in part due to differences in coverage and weights assigned to healthcare and housing costs. Last month, owners’ equivalent rent of primary residence rose 0.3 per cent in August. It has risen by the same margin every month since April. Americans also paid more for motor vehicle insurance and apparel. Prices for tobacco also rose. But households got some relief from gasoline prices, which fell 0.9 per cent last month. Food prices were unchanged, with the cost of food consumed at home declining for a fourth straight month. Reuters
Business Daily Monday, September 19 2016 15
Opinion Business Wires
Taipei Times Premier Lin Chuan issued a directive to investigate former Financial Supervisory Commission (FSC) high-ranking officials for alleged negligence in overseeing Mega International Commercial Bank, after it was fined by the New York State Department of Financial Services (DFS). The Executive Yuan said in a statement that a list of punitive measures announced on Wednesday against officials of Mega Bank and its parent company, Mega Financial Holding Co, was the result of preliminary administrative investigations, adding that the political responsibility of officials from the FSC and the Ministry of Finance would be examined.
k0a1a.net via Foter.com / CC BY-SA
On the cusp of an AI revolution
O Bangkok Post Bridging digital network links between the public and private sectors will be a focal task for the new minister of digital economy and society (DE), says Prime Minister Prayut Chan-o-cha. Implementing the digital economy roadmap through innovative digital technology will be another area of focus for the DE minister, General Prayut said on Friday in Phuket after a seminar on the digital economy in Thailand. The premier said the government is embracing multiple innovative digital technologies to turn Thailand into a “smart” country. The state is also providing tax incentives and easing regulatory processes to boost tech start-ups, improve the country’s competitiveness and embrace the digital age.
Philstar DBS Bank Ltd of Singapore and the Australia New Zealand Banking Group Ltd expect the Bangko Sentral ng Pilipinas (BSP) to likely leave interest rates unchanged on Thursday. Gundy Cahyadi, an economist at DBS, said the Philippine central bank is set to keep policy rates steady amid the benign inflation environment as the consumer price index eased to 1.8 per cent in August from 1.9 per cent in July. “No reason why the BSP should act for now,” he said. According to him, core inflation picked up to its highest year-to-date level of two per cent in August after bottoming out in the second quarter.
The Korea Herald South Korea is losing export competitiveness in the major industrial sectors as China is catching up fast in the technology and manufacturing industries, a report showed yesterday. The market share of Korea’s top 13 export items accounted for 5.3 per cent in the global market in 2015, shedding 0.4 percentage point from 2011, the Korea International Trade Association said in a report. The key export items include semiconductors, autos, ships, steel, flat panel displays, wireless communications equipment, computers and auto parts. Industry watchers say Korean companies should innovate to deal with toughening competition with China and foster new growth drivers.
ver the last 30 years, consumers have reaped the benefits of dramatic technological advances. In many countries, most people now have in their pockets a personal computer more powerful than the mainframes of the 1980s. The Atari 800XL computer that I developed games on when I was in high school was powered by a microprocessor with 3,500 transistors; the computer running on my iPhone today has two billion transistors. Back then, a gigabyte of storage cost US$100,000 and was the size of a refrigerator; today it’s basically free and is measured in millimetres. Even with these massive gains, we can expect still faster progress as the entire planet – people and things – becomes connected. Already, five billion people have access to a mobile device, and more than three billion people can access the Internet. In the coming years, 50 billion things – from light bulbs to refrigerators, roads, clothing, and more – will be connected to the Internet as well. Every generation or so, emerging technologies converge, and something revolutionary occurs. For example, a maturing Internet, affordable bandwidth and file-compression, and Apple’s iconic iPhone enabled companies such as Uber, Airbnb, YouTube, Facebook, and Twitter to redefine the mobile-customer experience. Now we are on the cusp of another major convergence: big data, machine learning, and increased computing power will soon make artificial intelligence, or AI, ubiquitous. AI follows Albert Einstein’s dictum that genius renders simplicity from complexity. So, as the world itself becomes more complex, AI will become the defining technology of the twenty-first century, just as the microprocessor was in the twentieth century. Consumers already encounter AI on a daily basis. Google uses machine learning to autocomplete s ea rc h q u e r i e s a n d o f t e n accurately predicts what someone is looking for. Facebook and Amazon use predictive algorithms to make recommendations based on a user’s reading or purchasing history. AI is the central component in self-driving cars – which can now avoid collisions and traffic congestion – and in game-playing systems like Google DeepMind’s AlphaGo, a computer that beat South Korean Go master Lee Sedol in a five-game match earlier this year. Given AI’s wide applications, all companies today face an imperative to integrate it into their products and services; otherwise, they will not be able to compete with companies that are using data-collection networks to improve customer experiences and inform business decisions. The next generation of consumers will have grown up with digital technologies and will expect companies to anticipate their needs and provide instant, personalized responses to any query. So far, AI has been too costly or complex for many businesses to make optimal use of it. It can be difficult to integrate into a business’s existing operations, and historically it has required highly skilled data scientists. As a result, many businesses still make important decisions based on instinct instead of information. This will change in the next few years, as AI becomes more pervasive, potentially making every company and every employee smarter,
“
Marc Benioff CEO of Salesforce, a cloud computing company
faster, and more productive. Machine learning algorithms can analyse billions of signals to route customer service calls automatically to the most appropriate agent or determine which customers are most likely to purchase a particular product. And AI’s applications extend beyond online retail: Brick-and-mortar stores still account for 90 per cent of retail sales, according to the consultancy A.T. Kearney. Soon, when customers enter a physical store, they will be greeted by interactive chat-bots that can recommend products based on shopping history, offer special discounts, and handle customer-service issues. Advances in so-called “deep learning,” a branch of AI modelled after the brain’s neural network, could enable intelligent digital assistants to help plan vacations with the acumen of a human assistant, or determine consumer sentiments toward a particular brand, based on millions of signals from social networks and other data sources. In health care, deep-learning algorithms could help doctors identify cancer-cell types or intracranial abnormalities from anywhere in the world in real time. T o d e p l o y A I eff ecti v e l y , companies will need to keep privacy and security in mind. Because AI is fuelled by data, the more data the machine gains about an individual, the better it can predict their needs and act on their behalf. But, of course, that massive flow of personal data could be appropriated in ways that breach trust. Companies will have to be transparent about how they use people’s personal data. AI can also detect and defend against digital security breaches, and will play a critical role in protecting user privacy and building trust. As in past periods of economic transformation, AI will unleash new levels of productivity, augment our personal and professional lives, and pose existential questions about the age-old relationship between man and machine. It will disrupt industries and dislocate workers as it automates more tasks. But just as the Internet did 20 years ago, AI will also improve existing jobs and spawn new ones. We should expect this and adapt accordingly by providing training for the jobs of tomorrow, as well as safety nets for those who fall behind. AI is still a long way from surpassing human intelligence. It has been 60 years since John McCarthy, a computer scientist and nominal father of AI, first introduced the term during a conference at Dartmouth College, and computers have only recently been able to detect cats in YouTube videos or determine the best route to the airport. We can count on technological innovation to continue at an even more rapid pace than in previous generations. AI will become like electrical current – invisible and augmenting almost every part of our lives. Thirty years from now, we will wonder how we ever got along without our seemingly telepathic digital assistants, just as today it’s already hard to imagine going more than a few minutes without checking the 1980s mainframe in one’s pocket. Project Syndicate
The next generation of consumers will have grown up with digital technologies and will expect companies to anticipate their needs and provide instant, personalized responses to any query.
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16 Business Daily Monday, September 19 2016
Closing Survey
More Mainlanders concerned about rising home prices
Home prices remain a major issue of public concern in China, with 53.7 per cent of those surveyed by the central bank describing prices in the third quarter as “high and hard to accept.” The ratio was up 0.3 percentage points from the previous quarter, the People’s Bank of China (PBOC) said in a report, citing a survey of over 20,000 savers. Looking ahead at the price trend in the fourth quarter, 23.1 per cent expected
prices to rise, while 52.2 per cent expected them to be unchanged. Against the backdrop of the government destocking campaign and easing monetary policies, home prices in major Chinese cities such as Beijing and Shanghai have hit record highs, but smaller cities have struggled to shift the glut. New home prices in 100 surveyed cities rose for the 16th-consecutive month in August on a month-on-month basis, according to data compiled by the ChinaIndex Academy. Xinhua
Financial bubble
Bank for International Settlements warns about growing global risks On top of potential asset bubbles, risks include the increased reliance on electronic trading platforms and proliferation of trading algorithms, the BIS said.
F
inancial markets have coped well with Brexit and other potentially disruptive political developments recently but asset prices may be running too high and the potential risks to market stability are growing, a report warned yesterday. In its Quarterly Review, the usually guarded Bank for International Settlements (BIS) didn’t explicitly say that stock and bond markets are bubbles waiting to burst. But valuations are high, especially given that the foundations they are built on may not be so solid. BIS reports aren’t known for their stark language and blunt warnings, but they offer an insight into what’s occupying the thoughts of the world’s most powerful and important central bankers. “There has been a distinctly mixed feel to the recent rally - more stick than carrot, more push than pull, more frustration than joy. This explains the nagging question of whether market prices fully reflect the risks ahead,” said Claudio Borio, Head of the BIS Monetary and Economic Department. “The apparent dissonance between record low bond yields, and sharply higher stock prices with subdued volatility cast a pall over such valuations. Banks’ depressed equity prices and budding signs of tension in bank funding markets added another sobering note,” the Switzerland-based BIS added.
Central bank pledges after Brexit to provide liquidity and ensure smooth market functioning if needed, and the perceived shift towards a more accommodative global monetary policy framework soothed market jitters after Brexit, the BIS said. This helped ensure markets functioned smoothly, especially in fixed
income markets, even though the UK referendum outcome took markets by surprise. The perception of “lower for longer” global monetary policy drove bond yields to record low levels, compressed corporate bond spreads, and pumped up stock markets and emerging market bonds. “As Brexit receded in the financial markets’ rear-view mirror, exuberance resumed in full force,” said the Switzerland-based BIS, often seen as the central banks’ central bank, in its review headed “Dissonant Markets”. Borio repeated the BIS’s view that
“There has been a distinctly mixed feel to the recent rally - more stick than carrot, more push than pull, more frustration than joy” Claudio Borio, Head of the BIS Monetary and Economic Department central banks should scale back their extreme policy accommodation, and that a more “balanced policy mix is needed to bring the global economy into a more robust, balanced and sustainable expansion.” Bank for International Settlements headquarters
Bank strains
Stock prices are buoyant despite weak earnings, while comparisons
between bond yields and economic growth rates across the world’s major economies suggest government bond markets are extremely overvalued. Defining overvaluation for bonds is an inexact science, but over the past 65 years 10-year U.S., Japanese, German and UK yields have broadly tracked nominal growth rates in these countries. Bond yields have been well below growth rates in all four for some time, the BIS said. On top of potential asset bubbles, risks include the increased reliance on electronic trading platforms and proliferation of trading algorithms, the BIS said. Both reduce the human element in trading, help lower trading costs and boost liquidity in normal circumstances, the BIS said. “(But) the spread of complex and often opaque trading strategies has raised concerns about potential implications for market stability in times of stress,” the BIS said. Pressures in the banking system are building too. Low and even negative interest rates, notably in the euro zone and Japan, have hurt banks’ profit margins and depressed the value of their shares. “Recent strains in money markets added to this overall adverse landscape,” the BIS said, noting that U.S. money market regulatory reform has led to heavy outflows of around US$250 billion from the sector and pushed up Libor rates and spreads. This week, the spread between three-month dollar Libor and the federal funds U.S. interest rate widened to its highest since 2009. Widening spreads are often seen as signs of underlying tension in the banking system, although this time around it appears to be more a result of the regulatory reforms. Reuters
Central bank survey
Mainland GDP
Disaster recovery
Chinese business confidence index increases
Potential economic growth rate estimated at 6.5-6.6 pct
Xiamen steps up restoration after Typhoon Meranti passes
Business confidence among entrepreneurs in China has picked up for the second quarter in a row in 2016, according to surveys by the People’s Bank of China published yesterday. The entrepreneurs’ confidence index rose to 51.2 per cent in the third quarter, 2.2 percentage points higher than in the second quarter, a central bank survey showed. China’s factory output and retail sales grew faster than expected in August as a strong housing market and a government infrastructure spending spree underpinned growth in the world’s second-largest economy. A separate central bank survey published yesterday showed that a bankers’ confidence index rose to 46.5 per cent in the third quarter, 2.8 percentage points higher than in April-June. The survey showed 19.7 per cent of banke rs b e l i ev e d m o n e ta r y p o l i c y w o u l d b e relatively loose in the fourth quarter of this year. Another survey by the central bank showed that 53.7 per cent of households rated housing prices as “unacceptably high”, up 0.3 percentage points from the second quarter. Reuters
China’s potential economic growth rate in the next five years is expected to be in the range of 6.5-6.6 per cent as long as China continues to advance structural reform to unleash growth impetus, according to a leading university research paper. Besides reshaping the relationship between the market and the government, structural reform should focus on the financial sector and factor market, strengthening product standards, market supervision and establishing a national innovation system, said Liu Fengliang, professor with the Economic School of Renmin University of China, the major compiler of the report. Innovation-driven development should be the core of China’s new growth impetus, said Liu, adding that private investment in equipment, modern agriculture, upgraded manufacturing and high-quality opening-up will all be major sources of new growth impetus. China’s economic growth held steady at 6.7 per cent in the second quarter, the lowest level since the 2009 global financial crisis but still within the government’s target range of 6.5-7 per cent for 2016. Amid downward economic pressure, China has resisted the temptation of temporary fixes like aggressive monetary easing. Xinhua
Xiamen city in the east coastal province o f F u j i a n i s p i c k i n g u p th e p i e c e s a f t e r Typhoon Meranti passed through Thursday, leaving 28 people dead and 15 others still missing. The city government yesterday announced p r i m a r y s c h o o l s a n d k i n d e rg a r t e n s a s w e l l as p r i vat e sch o o l s w o u l d b e c l o s e d f o r t w o t o th r e e d a y s, a s p o w e r s u p p l y a n d th e t ra n s p o rtati o n n et w o r k a r e b o th p atch y . The world’s strongest typhoon this year is the strongest to hit Fujian since records began in 1949. It brought heavy rain and gales of up to 48 metres per second when it made landfall early Thursday, which was the first day of China’s three-day holiday marking the MidAutumn Festival. Th e ci t y ’ s p o w e r g ri d sai d th e t y p h o o n disrupted power supply to 620,000 households. So far, 70 per cent of the grid is back to normal. The typhoon damaged more than 90 per cent of the city’s urban green areas. More than 10,000 workers will clear the roads of debris and plants. Xinhua