Macau Business Daily September 29, 2016

Mong Hang Social Housing needs five years to complete Public projects Page 2

Thursday, September 29 2016 Year V Nr. 1141 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Influencers on China

Asian stock exchanges gurus analyse Mainland’s risks and challenges Page 9

www.macaubusinessdaily.com

Gaming

Demographic risks

Melco Int’l confirms final bid for Cyprus casino Page 7

Aging population in Asia might mean savings flying offshore Page 11

Macau to Host Insurance Congress Insurance

The 28th East Asian Insurance Congress is to be held in the MSAR in October. For the second time since 1998. But president of Macau Insurers’ Association Jiang Yidao says the local insurance market is too small. Restricted by both the territory’s size and population.

Even though most participants have made a success of the sector. Page 5

Electrons rule

Tourism Local travel agencies’ receipts are down. By some 10.6 pct y-o-y to MOP6.5 bln in 2015, DSEC says. Receipts from package tours are up 7.6 pct but those from transport ticketing and room reservations plunged. The culprit is online booking. Page 3

Courting Shanghai

Finance The Monetary Authority of Macau has teamed up with Shanghai. To promote financial opportunities in Lisbon.

Local business academic Jacky So Yuk Chow says co-operation with the Chinese city will benefit the MSAR. Page 6

30 Rollers for The 13 The opening date of local luxury hotel The 13 has receded. To ‘early 2017’ from Q4 2016.

Meanwhile, the company’s 30 bespoke Rolls-Royce limousines have arrived in Macau, according to the enterprise’s press release.

Good old bad old days

Hospitality Page 7

HK Hang Seng Index September 28, 2016

23,619.65 +47.75 (-0.20%) Worst Performers

Galaxy Entertainment Group

1.38%

Sands China Ltd

0.75%

Wharf Holdings Ltd/The

-1.56%

Kunlun Energy Co Ltd

-0.84%

AAC Technologies Holdings

1.27%

Belle International Holdings

0.56%

Hang Lung Properties Ltd

-1.46%

China Resources Power

-0.58%

China Unicom Hong Kong

1.06%

Bank of China Ltd

0.56%

Want Want China Holdings

-1.23%

PetroChina Co Ltd

-0.40%

China Mobile Ltd

0.89%

Tencent Holdings Ltd

0.37%

Ping An Insurance Group Co

-1.09%

China Petroleum & Chemical

-0.36%

Cheung Kong Property

0.79%

China Overseas Land &

0.37%

BOC Hong Kong Holdings

-0.95%

MTR Corp Ltd

-0.23%

21° 27° 22° 25° 24° 28° 25° 30° 24° 30° Today

Source: Bloomberg

Best Performers

Fri

Sat

I SSN 2226-8294

Sun

Mon

Source: AccuWeather

China’s reform A quarterly survey of more than 3,100 firms by China Beige Book International reveals China’s economy was less healthy in Q3. With growth generated exclusively by manufacturing and property. While services and retail faltered. Page 8

2 Business Daily Thursday, September 29 2016

Macau Transportation

400 complain about overcharging taxis in eight months

The Transport Bureau (DSAT) said that in the first eight months of the year it had received around 400 complaints about taxis overcharging, according to local broadcaster TDM Radio. In addition to overcharging, complaints were levelled at drivers’ refusal to pick up passengers as well as drivers taking longer routes.

Public projects

The Bureau remarked that the authorities have increased the number of officers inspecting taxi operations. Nevertheless, it said the difficulties were that taxi drivers refused to cooperates, noting inspections would be more meaningful if its officers could inspect taxis with local police. The Public Security Police Force (PSP) has expressed its willingness to help combat illegal taxi activities. C.U.

LRT depot works resumed

GDI: Mong Ha social housing construction to take 5 years The government has declined to announce how much it has paid to terminate the contract with the original contractor of the Mong Ha project.

Kam Leong kamleong@macaubusinessdaily.com

T

he construction of Mong Ha Social Housing Phase II is expected to take around four to five years, the chief of the Infrastructure Development Office (GDI), Chau Vai Man, said yesterday.

Speaking to reporters, the GDI head said social facilities including the reconstruction of the Mong Ha Sports Pavilion would be completed at the same time as the social housing units.

He added that the construction of the project would be resumed once the government finishes its evaluation of the bids it has received for the project.

The construction of the housing project, granted to Hobbs Construction Company Limited in 2011 for MOP685 million (US$85.6 million), was expected to be completed in 2014.

But the works were halted for some four years due to a legal dispute between the government and the original contractor.

Having reached consensus with Hobbs Construction to terminate the contract, the government has reinvited bids for the project, attracting six bidders proposing a total cost of between MOP1.59 billion and MOP1.83 billion.

Nevertheless, the Secretary for Transport and Public Works, Raimundo do Rosario, declined yesterday to reveal the compensation

that the government will pay to the previous contractor to terminate the contract.

GDI explained that it was because the government had reached an agreement with the contractor that the amount should not be released.

LRT depot works resumed

On the other hand, Secretary Rosario told reporters yesterday that the

superstructure works of the LRT depot in Taipa have been resumed.

The government has granted a contract worth MOP1.07 billion to China Construction Engineering (Macau) Co. Ltd. to resume work on the city’s LRT. The Secretary said that he is confident that the construction of the Taipa route and other civil engineering works would be completed in 2019.

The government has agreed to pay MOP85 million to terminate its contract with the original contractor of the project – a consortium of Mei Cheong and Top Builder - following

major delays in construction.

But Mr. Rosario stressed yesterday that the amount to be paid to the original contractor should not be deemed “compensation” but rather to make up the expenses for the departure of the construction companies from the site, as well as other expenses relating to lawsuits and construction materials.

Meanwhile, the head of the Transportation Infrastructure Office (GIT), Ho Cheong Kei, said the government would announce partial arrangements for the LRT stations in Barra on the Peninsula later this year.

Property

Pearl Horizon homeowners express “No confidence in government” Homebuyers of the residential project urge the government to monitor the developer’s financial activities in order to protect the money they have invested.

Cecilia U cecilia.u@macaubusinessdaily.com

Homebuyers of residential project Pearl Horizon have urged the government to shoulder greater responsibility for solving its disputes with developer Polytex Corporation Ltd, posting a Chinese language statement in local newspaper Macao Daily yesterday.

In the statement, the homeowners expressed their disappointment at the government defining the Pearl Horizon case as a private benefit dispute, noting the statement was made as the homeowners have lost all confidence in the government.

Pearl Horizon - occupying a site known as lot-P of Areia Preta on the Macau Peninsula - is designed to house 18 towers for a total of

5,000-plus residential units. The government announced it would take back the plot last year-end as the developer’s temporary concession for the site had expired despite over 3,000 of these units having already been sold off-plan.

The homeowners indicated in the statement that the authorities play an important role in deciding the success of the housing transactions of incomplete properties.

In addition, they criticised the government’s stamp duty, complaining that the home units were not able to be completed due to the government’s decision to take back the plot. The homeowners thus perceive they should not pay the tax to the government.

The buyers also expressed their concerns that the developer may

intentionally transfer the capital it has collected from the sales of Pearl Horizon to another residential project. ‘Homeowners are worried that the developer will delay [returning their money] and later use bankruptcy as an excuse to evade its responsibilities to the homeowners,’ they wrote.

The property owners urged the

government to supervise the financial activities of the developer in order to prevent the illegal transfer of owners’ funds and assets.

Earlier this year, the Court of Second Instance rejected a request filed by Polytex Corporation Ltd to overturn the government’s decision to reclaim the plot on which the Pearl Horizon was to be built.

Business Daily Thursday, September 29 2016 3

Macau Tourism Receipts of travel agencies down by 10.6 pct y-o-y to MOP6.50 bln in 2015

Online booking – The travel agent’s nemesis The growing popularity of online booking for hotel rooms, air tickets, etc., has resulted in a year-on-year decline in receipts for the travel agency industry.

Joanne Kuai joannekuai@macaubusinessdaily.com

R

eceipts of travel agencies amounted to MOP6.50 billion (US$813.82 million) last year, down 10.6 per cent year-on-year, according to the Travel Agencies Survey 2015 released yesterday by the Statistics and Census Service (DSEC).

While receipts from Package Tours increased by 7.6 per cent to MOP1.96 billion, receipts from Passenger Transport Ticketing and Room Reservations decreased 17.9 per cent to MOP1.90 billion and 31.6 per cent to MOP1.09 billion, respectively DSEC indicates this is due to the growing popularity of online booking for hotel rooms, air tickets, etc., thus resulting in a year-on-year decline in receipts for the industry.

The official data also indicates that for the whole year of 2015 there were a total of 250 travel agencies operating in 2015, an increase of 13 compared to 2014. The number of persons engaged in the sector rose by 343 year-on-year to 4,545, of whom drivers accounted for 30.9 per cent, at 1,404.

In general, Gross Value Added measuring the sector’s contribution to the economy - amounted to MOP1 billion, down 4.8 per cent year-on-year. The Gross Surplus of travel agencies decreased by 28.5 per cent year-on-year to MOP297

million, while the Gross Surplus Ratio dropped by 1.1 percentage points to 4.6 per cent. Meanwhile, Gross Fixed Capital Formation decreased by 35.1 per cent to MOP157 million owing to a decrease in the acquisition of shops.

Booking business down

In terms of different scales of travel

agencies defined by the number of persons engaged, the receipts of large travel agencies with 50 or more persons primarily derived from Package Tours and Rental of Coaches with Driver, up by 20.1 per cent year-onyear to MOP723 million and 8.6 per cent to MOP645 million, respectively.

However, as receipts from Room Reservations and Passenger Transport Ticketing dropped significantly by 30.2 per cent to MOP425 million) and 21.7 per cent to MOP211 million, receipts of this type of travel agency shrank by 4.9 per cent year-on-year to MOP2.42 billion.

By contrast, receipts of small travel agencies with less than 10 persons were generated primarily from Passenger Transport Ticketing of MOP692 million, up 26.5 per cent year-on-year.

Receipts of these travel agencies dropped slightly by 0.9 per cent to MOP1.25 billion due to the declines in receipts from Package Tours which amounted to MOP242 million and Room Reservations for an amount of MOP208 million.

Less expenditure

With regard to expenditure, local travel agencies spent MOP6.21 billion, down 9.5 per cent year-on-year.

Cost in Purchase of Goods & Services and Commission Paid decreased by 13.9 per cent to MOP4.76 billion. This number also accounts for 76.7 per cent of total expenditure.

Nevertheless, Operating Expenses that amounted to MOP749 million and Compensation of Employees, which totalled MOP699 million, increased by 7.1 per cent and 10.8 per cent, respectively.

Expenditure of the large travel agencies employing 50 or more persons dropped 6.2 per cent yearon-year to MOP2.13 billion, of which Purchase of Goods & Services and Commission Paid, that accounted for 62.1 per cent of the total, shrank 14.9 per cent to MOP1.32 billion.

Expenditure of the small travel agencies - those with less than 10 persons - grew by 2.5 per cent year-on-year to MOP1.27 billion, with Purchase of Goods & Services and Commission Paid, accounting for 88.8 per cent of the total, increasing 2.7 per cent to MOP1.13 billion.

4 Business Daily Thursday, September 29 2016

Macau Opinion

Ashley Sutherland-Winch The Great Debate On Tuesday morning, over 100 million people watched the first United States Presidential debate worldwide. For the next seven weeks, the coverage of this election will be hard to ignore, with each candidate’s international policies being scrutinised with a fine tooth comb. This election holds many firsts for the country.

Will America see the first female President; will it see the first ‘non-politician’ businessman assume the top political role in the US? For the millions of Americans that live internationally and reside in other countries as guests, the hope is that the winning Presidential candidate will be respectful of international diplomacy and work to improve and maintain relations.

It is estimated that about 4,000 Americans currently live in Macau and several organisations in town are urging them to register for absentee voting. The process is very simple and absentee ballots are sent by email, if requested, within a few days. Technology has made it convenient for those living abroad to vote, simply by visiting FVAP.org and completing a ballot request for the state in which the voter is registered.

The only caveat to electronic voting is that you are not guaranteed privacy but a voter can still use traditional mail to keep their vote secret. The average time for mail to go from Macau to America ranges from two to three weeks so it is important to factor this time into the process.

As an American living in Macau, I urge all American citizens to participate in the upcoming general election. While I generally offer an opinion in this weekly column, I will not make a personal suggestion on voting preference, but I will plea that all Americans living abroad do choose to vote.

Americans living in Macau, Hong Kong and Mainland China have a unique opportunity to experience how the United States is viewed abroad and view ChineseAmerican relations firsthand.

It is our duty to participate in the American democratic process and we only have the opportunity to vote for President every four years.

Most states require that absentee ballot requests be made by early October. Now is the time to apply for a ballot, so truly become a part of voting history and take the opportunity to have your voice heard from abroad. The best way to share an opinion on the great debates of the coming weeks will be to vote, and I look forward to seeing the American vote from Macau in great numbers.

Ashley Sutherland-Winch is a Marketing and Public Relations Consultant and frequent contributor to this newspaper.

Compensation La Scala project continues troubling Hong Kong businessman

Multi-billion dollar compensation bill hanging over Joseph Lau Hong Kong billionaire Joseph Lau Luen Hung will need to pay HK$12.5 billion in compensation to Chinese Estates if he loses his court battle with the MSAR Government.

Nelson Moura nelson.moura@macaubusinessdaily.com

Hong Kong businessman Joseph Lau Luen Hung will have to pay compensation amounting to HK$12.5 billion (US$1.6 billion) to Chinese Estates Holdings Ltd. if local courts adhere to their decision that his company, Moon Ocean Ltd., has to return the land plots for the La Scala residential project to the MSAR Government.

According to the annual report of Chinese Estates released this week, the shareholders of Chinese Estates

perceive the amount of compensation to be made by Moon Ocean to be ‘fair and reasonable’ should the company lose its court battle with the SAR Government.

In 2006, Moon Ocean was approved by the SAR Government to acquire the five plots opposite Macau International Airport for MOP1.37 billion for the La Scala project. But the acquisition was invalidated by the authorities in 2012 once linked to the corruption case of ex-Secretary Ao Man Long.

Moon Ocean filed an appeal against

the government’s decision but was turned down by the Court of Final Appeal in June this year.

According to Chinese Estates, local courts are still hearing another appeal filed by Moon Ocean against a notice from the Land, Public Works and Transport Bureau that the CE had declared the previous act of approval of the increase of residential gross floor area of the related plots as well as an exchange of land in March 2011 to be invalid.

As the controlling shareholder of Chinese Estates, Mr. Lau stepped down from the chairman’s position in the company after he was found guilty in 2005 of corruption and money laundering involving the bribery of the former Secretary in exchange for successfully bidding for the parcels for the residential project.

Expo

‘12-5’ Technological expo starts on October 7 The National ‘12-5’ Technological Innovation Achievements Exhibition will kick off on October 7 at The Venetian Macao for six days, the Science and Technology Committee announced in a press conference held yesterday.

According to the committee, the exhibition will comprise aerospace,

aviation, marine, e-commerce, health, power resource, interactive zone, and Macau’s innovations in the area of talks and film screenings.

The exhibition will display some 60 elements of the latest technology, including the launch vehicle for the Long March 5 Series rockets and Chang’e 1 Moon-Globe plus

models and virtual experiences demonstrating the current technological achievements of Mainland China.

Ma Chi Ngai - Chairman of the Macau Science and Technology Fund (FDCT) - said in the press conference that the exhibition seeks to encourage education on technology and innovation - in particular, for the young population – in addition to strengthening the national confidence of the general public. As such, student tours are in particular welcome to visit the exhibition.

Th e t ech n o l o g y exhi bi ti o n , organised by the Science and Technology Committee, is also supported by the Chinese Ministry of Science and Technology and FDCT. The exhibition has already been held in Beijing last June.

The Technology Committee noted that entry to the exhibition is free and that a shuttle bus between the venue and the Peninsula will be provided. C.U.

Telecom

DSRT: Telecom operators encouraged to build own networks The city’s telecom regulator does not think CTM’s management of telecom concession assets would create unfairness in the market.

The MSAR Government encourages the city’s telecommunications operators to build their own telecom networks, said Wendy Tam Van Iu, acting director of the Bureau of Telecommunications Regulation (DSRT).

The DSRT deputy head indicated that telecom operators connecting and using public telecom concession

assets are deemed as special measures when they build their own networks.

The official was responding to legislator Kwan Tsui Hang’s written enquiry. The unionist legislator questioned why Companhia de Telecomunicacoes de Macau (CTM) was the only telecom operator in the city enjoying the use of such concession assets, urging the

government to review to current regulations to ensure fairness in the market.

But Ms. Tam indicated that the Bureau had only received enquiries from other telecom operators on the use of public circuits, noting there is no report filed with the authority that the operators could not connect to the concession assets.

Currently, CTM is managing the city’s telecommunications public concession assets. It also provides rented circuit services to other players in the market.

This circuit is used to transmit communication information and is essential for the operators to function.

According to the DSRT official, CTM, as manager of these assets, has to cover the expenses for all necessary replacements and maintenance. A.L.

Business Daily Thursday, September 29 2016 5

Macau

Insurance

Macau to host 28th East Asian Insurance Congress Local insurance companies admit the industry is constrained by the size and population of the city - but eyes Mainland China as a potential market.

Joanne Kuai joannekuai@macaubusinessdaily.com

T

he local insurance market is confined by the size of the city and its population, but benign competition brings a healthy industry, said Jiang Yidao, President of Macau Insurers’ Association, and Managing Director of China Taiping Insurance (Macau) Co., Ltd. “Unlike in Mainland China and Hong Kong, where there is excessive competition that leads to losses to companies and even closures, Macau insurance companies have a good relationship with each other, which makes the market healthy and grow steadily despite the constraints of market size. You hardly hear of anyone losing money here,” said Mr. Jiang at a press conference announcing the 28th East Asian Insurance Congress. “In addition, the government’s supervision plays a positive and significant role in the wellbeing of the industry, as well as the efforts of the local companies.”

The president of the Macau Insurers’ Association said it was founded in 1987.

He said that all insurer companies in town are their members, including 21 companies, with 10 conducting solely life business while the remaining 11 transact non-life insurance business.

Characteristic finance industry

The president also indicated that the local insurance industry supports the SAR Government’s initiatives to develop Macau’s finance industry with its special characteristics.

“The Macau Government should enhance its efforts to develop the finance industry. For the longt erm, it could be Macau’s way out. This initiative is in line with Macau’s goal to diversify its economy and the insurance sector fully supports it,” said Mr. Jiang. “Development of the finance industry would be a key task for Macau in the next few years and it would be complementary to

2016 East Asian Insurance Congress

The 28th East Asian Insurance Congress (EAIC) is to be held from October 11 to October 15 at The Venetian Macao. It will be the second time Macau has hosted the event, the last being in 1998.

The theme of the 28th EAIC is ‘The Future of Insurance – Customer Centricity’.

Chris Ma, Chairman of the Organizing Committee of EAIC 2016, and Chief Executive Officer of AIA International Limited (Macau), said 1,200 participants from some 29 countries and regions are expected to join this year’s edition. The invitees are all high managerial personnel from the insurance sector.

“Every two years EAIC offers excellent opportunities for delegates to meet up with one another to share their views on how we may make our industry better to better satisfy the needs of our customers,” said Mr. Ma. “The healthy development of

many other sectors.”

Promoting Macau’s characteristic finance industry was an initiative mentioned by Secretary for Economy and Finance Lionel Leong Vai Tac in his Policy Address last year and is incorporated in Macau’s master development Five-Year Plan for 2016 to 2020. It seeks to play to Macau’s advantage of enjoying the national policy of ‘One Country, Two Systems’ and the SAR’s status as a free port to build the city into a financial services platform.

Mainland market potential

The head of the Association that represents authorised insurance

the industry depends largely upon whether we’re able to anticipate what customer needs will be,” he added. “We’ll have a full programme to help us gain a better insight into who our customers are, how we can serve them better, what role technology plays, what impact the ageing population may have, and what the ultimate operating model is in an ever-changing marketplace”.

The EAIC was founded in 1962 with the objective of furthering and developing international collaboration in the field of insurance of every sort. All 12 member cities include Macau, Hong Kong, Bangkok, Jakarta, Kuala Lumpur, Manila, Phnom Penh, Seoul, Singapore, Taipei and Tokyo.

Mr. Andrew Rear, Chief Executive of Digital Partners of Munich Re Group will deliver the keynote speech on ‘How digital innovation can improve customer centricity’ following the opening ceremony of the Congress on October 12.

companies, both life and non-life, added that Mainland China could be a possible market for local insurers to target.

“Official data from Hong Kong shows that its insurance market made more than half of the premiums from the Mainland Chinese market in 2015.

We estimate the number to be lower than 10 per cent here in Macau,” said Mr. Jiang.

“The Macau Government should enhance its efforts to develop the finance industry” Jiang Yidao, President of Macau Insurers’ Association The latest figures from Hong Kong’s Office of the Commissioner of Insurance shows that income from Mainland Chinese accounted for nearly 37 per cent of the HK$81.5 billion (US$10.5 billion) in total new premiums brought in during the first half of 2016, a marked increase from 20.2 per cent of a year earlier.

The data is not made available by the Monetary Authority of Macau (AMCM).

The reasons for the increased appetite for Hong Kong insurance products by Mainland customers are usually interpreted as moving money abroad in light of a slowdown in the Chinese economy and offsetting the further weakening of the Chinese yuan by purchasing US and Hong Kong dollar policies.

6 Business Daily Thursday, September 29 2016

Macau Finance

AMCM, Shanghai jointly hold financial cooperation seminar in Lisbon

Academics: MSAR-China-Luso financial co-operation important Academics perceive that the co-operation of the city with Shanghai and Portuguese-speaking countries would help boost the development of the local financial markets.

Annie Lao annie.lao@macaubusinessdaily.com

T

he Monetary Authority of Macao (AMCM) and the Shanghai Financial Services Office ( S FS O ) j o i n t l y h e l d a seminar on financial co-operation with Portuguese –speaking countries in Lisbon, Portugal on Tuesday. Academics told Business Daily that this type of co-operation with the Mainland Chinese city will help the MSAR diversify its financial markets.

According to a press release by AMCM, the joint seminar highlighted the two cities’ economic and financial situations to the financial institutions and business enterprises of the Luso countries in order to further promote financial partnerships between the three parties.

development. “If Macau was to develop IT finance, it would be promising for the city,” he said.

Middleman

Meanwhile, Rita Santos, President of the General Assembly of the Macau Civil Servant’s Association (ATFPM), also agreed with the importance of Macau cooperating with Shanghai and Luso countries, given the fact that

Macau banks enjoy close relationships with Portuguese banks.

She indicated that Macau banks’ strategies would be crucial to the co-operation of the parties.

“The banking system plays an important role in the development of financial co-operation between Macau, Shanghai and Portuguesespeaking countries, such as providing stable interest rates and currency exchange rates,” Ms. Santos said.

By co-operating with Shanghai, Ms. Santos perceives that local SMEs would gain the opportunities to work with large-scale corporations in Mainland China.

“Macau SMEs could develop further

even in the international market in the future by undertaking business projects in the Portuguese-speaking countries,” she enthused.

Meanwhile, the ATFPM president noted the importance of Macau ba n ks’ r o l es i n th e ba n k i n g transactions between the Mainland and Portuguese-speaking countries, as the number of Chinese investors investing in the Lusophone world is increasing.

“A few Macau banks have already been offering these financial services, such as the Bank of China, Banco Nacional Ultramarino (BNU) and Banco Comercial de Macau BCM,” Ms. Santos said.

But they urged the government to provide a detailed plan on the revamping project, including a list of all construction costs, for the public to review.

One of the supporting members was local architect Carlos dos Santos Marreiros. He perceives that the government has had taken too long to start the construction of the new central library – the plan for which has been discussed and researched since 2006.

He commented that the old court

building is no longer appropriate for the use of the city’s judiciary.

In addition, the architect perceives the allocated budget of MOP900 million (US$112.7 million) for building the new central library to be appropriate, given the old court building occupies some 33,000 square metres.

Nevertheless, Marrerios noted the government should provide more transparent information on the total renovation costs of the project in addition to explaining the rationale for the budget to the public.

Shanghai the right choice

The Dean of the Faculty of Business Administration at the University of Macau, Jacky So Yuk Chow, told Business Daily yesterday that it is very important for Macau to develop financial co-operation with Shanghai – which is an international financial centre of Mainland China.

He indicated that Mainland China would need to set up more Renminbi offshore centres in the future in order to outflow its capital to the international markets.

“Macau could be an RMB offshore centre for Mainland China in the future,” said Professor So. Nevertheless, he noted that the city needs to first diversify its financial markets in order to quicken related

Culture

New Central Library in the works The Cultural Advisory Committee is urging the government to start work on the library.

Annie Lao annie.lao@macaubusinessdaily.com

The majority of the Cultural Advisory Committee agree that the government should kick off construction of the city’s new central library as

soon as possible.

The Committee held a general meeting yesterday afternoon at the Tourism Activities Centre where most of its members said they support the new library being located inside the old court building.

Getting there

In addition, the committee member suggested the government also consider solutions in order to provide more parking spaces in the building so that more visitors could be accommodated in the future.

But Ung Vai Meng, president of the Cultural Affairs Bureau, said: “Given the new central library is located in the central area of the city, which means that most of the people in Macau can have easy access to public transportation, the issue of a lack of car parking spaces is not the major concern here”.

Fellow member Ambrose So Shu Fai, CEO of gaming operator Sociedade de Jogos de Macau (SJM), agreed in the meeting that renovation works for the old court building should be started as soon as possible.

In addition, he said the government should clearly explain to society the reason why the old court building was chosen to be the site for the new central library.

Business Daily Thursday, September 29 2016 7

Macau Hotel 30 bespoke Rolls-Royce limousines delivered to MSAR

The 13 pushes back opening to next year

T

he 13 Holdings Ltd. has pushed back further the opening of its luxury hotel project The 13 in Coloane to ‘early 2017’.

A press release from the company announcing the delivery of its RollsRoyce limousines yesterday reads that ‘The 13 hotel in Macau, planned to open in early 2017’.

The hotel operator said in its

annual report released in July that it ‘expects the hotel will be opened in the fourth quarter of 2016,’ adding the company was devoted to completing the interior finishes of the luxury hotel.

This is not the first time that the company has postponed the opening date of its hotel project. In February of this year, the company was expecting the project to open ‘in late Summer

2016 at a cost of over US$7 million (MOP56 million) per room’.

M e a n w h i l e, a c c o r d i n g t o yesterday’s announcement, British luxury automobile manufacturer Rolls-Royce has already delivered i t s 3 0 b e s p o k e R o l l s- R o y c e Phantoms fleet to the Special Administrative Region for the company from its headquarters in Goodwood, England. K.L.

Gaming

Game on for Cyprus Melco International Development confirms it will proceed to the final stage of the Cyprus gaming concession bid.

Nelson Moura nelson.moura@macaubusinessdaily.com

Melco International Development Limited, controlled by local gaming entrepreneur Lawrence Ho Yau Lung, has confirmed to Business Daily that it and its partners are ready to submit their final bid for a single gaming concession in Cyprus.

‘The multinational consortium ‘Melco International Development Limited, Hard Rock International and Cyprus Phasouri Ltd.’ is ready to submit its final bid as per the official schedule (i.e.) October 5, 2016,’ the company said in an email.

‘The Consortium is looking forward to collaborating with the Cypriot government on this exciting project’.

The winning bidder of the tender will be granted a gaming concession valid for 30 years, including the right to a monopoly in Cyprus for the first 15 years. In addition, the terms allow the successful bidder to build a luxury 500-room hotel, and install 1,000 gaming machines and 100 gaming tables.

The two other groups competing for the concession are Cambodian casino operator NagaCorp Ltd. and the Philippines’ Bloomberry Resorts Corp. A recent report by the Mediterranean country news outlet Philenews, however, indicated that the two companies might give up on their bids after not being able to secure suitable plots for their proposed projects.

The Melco-Hard Rock consortium is planning to develop the casinoresort project in Limassol, the second largest city on the southern coast of Cyprus. Meanwhile, NagaCorp plans to build its project in the city of Larnaca, whilst Bloomberry Resorts Corp. is eyeing Paphos.

I n f a c t , t h e t w o r i va l s o f Melco-Hard Rock consortium requested an extension of the bid deadline in June due to the problems of looking for suitable land for their projects. The Cypriot Government extended the deadline to October 5.

8 Business Daily Thursday, September 29 2016

Greater China Private report

Beige Book sees rebalancing reversal on old economy bounce The new report said retail spending was one of the weakest in the history of the quarterly survey.

C

hina’s economic rebalancing to consumer-led growth is reversing, according to the China Beige Book, which said third-quarter growth engines are exclusively in the “old economy.”

Manufacturing, property and commodities strengthened while retail, services and transportation - crucial parts of the “new economy” - all saw weaker results, the private survey by CBB International shows. Employment

held up while profits and cash flow deteriorated, said the New Yorkbased research group, which collects anecdotal accounts like those in the Federal Reserve Beige Book.

“Deteriorating corporate finances and a rebalancing reversal seem a high price to pay for a quarter’s worth of stability,” CBB president Leland Miller and chief economist Derek Scissors said in a report. “To be sure, there is good news. Hiring was again strong and it is fair to say this is the single most important issue for the central government.”

Rebalancing has been a key goal for China’s policy makers, who are seeking more sustainable growth centred around consumers instead of factories and other old drivers. Services accounted for more than half of output last year for the first time, and growth in those industries this year has been faster than manufacturing and agriculture.

Growth support

Recent official data have been more upbeat as industrial profits rose the most in three years while new credit, industrial output, fixed investment and retail sales all picked up and beat estimates. Private indicators also show more positive sentiment, with business confidence and increased factory activity continuing. Economists have boosted 2016 growth projections to 6.6 per cent from 6.5 per cent and expect less stimulus, according to Bloomberg surveys.

The latest report is a departure from the prior Beige Book, which

said services have a chance to hold up over the longer term as a source of sustainable growth that helps continue the economic transition away from old drivers. In December, CBB reported economic conditions had deteriorated across the board in the fourth quarter.

As it turned out, most major indicators stabilized in the first half of 2016.

The new report said retail spending was one of the weakest in the history of CBB’s quarterly survey, which tracks more than 3,100 firms and 160 bankers across China. Retailers with stores and online did better than their store-­only competitors, which saw no growth at all, according to CBB’s surveys, which were conducted in late August and early September.

Services, manufacturing

Good news elsewhere in the report included hiring growth, which increased to its best performance in more than four years with 38 per cent of companies expanding workforces while 11 per cent said that they cut. Real estate and construction revenue growth was steady, led by commercial real estate and commercial construction.

Property improved with “residential realty strengthening while commercial realty and construction each notched multi-year highs, with only residential construction slowing,” Miller and Scissors said. “But here the questions start. Reversin g last quarter’s improvement in cash flow, every property sub-sector in Q3 turned red, spurring heavier borrowing.” Bloomberg News

Markets

Mainland bank bond leveraged bets lure investors with high yield China’s money-market rates are forecast to remain elevated in the coming quarter as the central bank seeks to rein in leverage.

Lianting Tu, Viren Vaghela and Carrie Hong

China’s wealthy are flocking to investment products that buy bank capital securities and soup up returns by using borrowed funds.

Elm BV, a special purpose vehicle used

by UBS Group AG, has sold 3.7 billion yuan (US$555 million) of structured notes in 18 offerings since 2015 with yields as high as 15 per cent, data compiled by Bloomberg show. Goldman Sachs Group Inc., Societe Generale SA and Guotai Junan Securities Hong Kong

Ltd. have also designed such products, which often use leverage to invest in U.S. currency capital securities. Chinese banks sold at least US$27.7 billion of Basel III notes offshore since the first issuance in 2014.

“I expect demand for such structured notes to continue growing as the Chinese are still looking for better yields given the current low returns on Asian bonds,” said Richard Zhang, assistant chief executive officer at Huarong Investment Stock Corp., an international unit of one of four state-owned asset

managers. He warned that in a crisis, structured notes using leverage will suffer greater losses.

China Citic Bank International Ltd. and China Cinda Asset Management Co. are among Chinese finance companies tapping the market for capital securities following a lull, just as anaemic economic growth erodes their profitability. The Basel-based Bank for International Settlements said earlier this month that a warning indicator for the nation’s banking stress has risen to a record, while CLSA Ltd. estimated shadow banking activities may be hiding potential losses of US$375 billion.

China’s money-market rates are forecast to remain elevated in the coming quarter as the central bank seeks to rein in leverage.

UBS helped Elm issue 332 million yuan of three-year notes in January linked to lenders’ contingent convertible notes, or CoCos, paying a 15.1 per cent coupon. Yields on CoCos from Industrial & Commercial Bank of China Ltd. dropped to a record low 3.7 per cent last month as global interest rates slumped. The average yield on wealth management products sold by China’s domestic banks declined 71 basis points in the first half to 3.98 per cent.

The rally in China’s CoCos has faded in recent weeks as the largest five lenders reported the smallest increase in trailing 12-month profits in at least a dozen years. The yield premium for ICBC’s 6 per cent Additional Tier 1 securities widened 36 basis points to 312 basis points from the year’s low on Aug. 16.

Chinese demand

Investors in structured notes can’t afford major market corrections because the securities have deleverage triggers, forcing the sale of underlying CoCos should their prices fall too far.

In a typical note a 15 per cent decline in the initial price of the underlying CoCo forces such unwinding. Using

three times leverage, that would mean about a 45 per cent loss.

Societe Generale estimates that about 90 per cent of interest comes from Chinese buyers, who view the securities as quasi-sovereign risk due to state support.

“In recent weeks investors have been inquiring about leveraged CoCos again due to the upcoming issuance from the big Chinese financial institutions,” said Ryan Chan, co-head of business development in Hong Kong at the French bank’s cross-structuring group for Asia ex-Japan. “Greater China investors are very bullish on China’s top-tier banks.”

Many mainland investors have witnessed government bailouts. In the last major debt clean-up in 1999, taxpayers protected creditors from losses by funding asset-management firms to buy soured debt at face value.

Some investors are using the structured notes as a hedge after the yuan slid 2.6 per cent against the greenback this year.

“Investors like dollar CoCos to protect against yuan depreciation,” said Fan Wang, director in equity derivatives at Guotai Junan. “They are safer than the common equity of Chinese banks and generate yield. One potential risk in a stressed market is that selling the underlying CoCo triggers other products, which will create a downward spiral.” Bloomberg News

Business Daily Thursday, September 29 2016 9

Greater China In Brief Index

Shanghai top pick to become next major financial hub

Markets influencers conference

Bank of America sees crisis in the Mainland, BlackRock only bumps The global head of currency strategy at HSBC Holdings also said he was tired of hearing predictions that there would be a sudden fall in the yuan.

Paul Panckhurst and Kana Nishizawa

A financial crisis may happen in China at any time because of the nation’s debt woes, according to Bank of America Corp., while BlackRock Inc.’s head of Chinese equities said the government has room to move and cautioned only of financial “bumps along the way.”

David Cui, Bank of America Merrill Lynch’s head of China equity strategy, and Helen Zhu of BlackRock were among speakers at the Bloomberg Markets Most Influential conference in Hong Kong yesterday. The session gave a snapshot of views on the risks posed

by China’s explosive debt growth since the global financial crisis.

While Cui didn’t argue that a crisis was imminent, he said that it could happen at “any time” and seemed to be inevitable, because it was almost

impossible for China to grow out of its debt problem. While the government has the resources to support the yuan for the next year or so, a “huge” oneoff devaluation may follow a decline in the nation’s foreign-exchange reserves, he said. The yuan has stabilized since sinking to a five-year low in July, ahead of its addition to the International Monetary Fund’s reserves basket on October 1.

Zhu said she was a bull and that China wouldn’t have the imminent hard landing that “so many people have been waiting so many years for.”

The pace of a build-up in leverage had slowed in recent years and “perhaps in three to five years time, we can then think about a stable leverage and eventually a deleveraging,” Zhu said. In another promising sign, the nation had also started the long and painful process

of shifting credit away from the likes of “zombie” state-owned enterprises to more productive enterprises, she said.

China’s debt-to-gross domestic product ratio may blow out to 321 per cent in 2020 from 261 per cent in the first half of this year, according to CLSA Ltd. The Basel-based Bank for International Settlements said earlier this month that a warning indicator for the nation’s banking stress has risen to a record.

While the government needs to move urgently in areas including the restructuring and refinancing of debt, it hasn’t run out of time yet, Zhu argued. The “bumps along the way” could include trust and corporate-bond defaults as implicit guarantees disappear, leading to increased funding costs for some companies, she said.

At the same conference, David Bloom, the global head of currency strategy at HSBC Holdings Plc, said he was tired of hearing predictions that there would be a sudden fall in the yuan. The currency “is going to sell off very slowly,” he said. “You want a painful slow trade, go for it.” Bloomberg News

Energy sector

Experts say the calls for output increases reflect growing panic about the unintended consequences of Beijing’s efforts to cut excess coal mining.

“The amount is raised again as the increase was not enough to catch up with the demand from the power generators” Zhang Min, a coal analyst with the Sublime China Information Group In the fourth meeting with coal mining executives this month, the National Development and Reform Commission (NDRC) called on 74 major miners to increase output, unleashing another 15 million tonnes of new supply each month onto the market, two people who were briefed on the gathering said.

The latest change doubles the output increases the government has approved in recent days to 30 million tonnes, equivalent to 1-1/2 times China’s average monthly imports of coal this year.

Last Friday, the government partially reversed sweeping capacity cuts enforced earlier this year. Those

Think tank

Economy seen growing 6.6 pct in Q4 China’s economy is expected to grow at an annual 6.6 per cent in the fourth quarter and post overall growth of 6.7 per cent for the full year, the China Academy of Social Sciences (CASS) said. The predictions

by CASS, a top think-tank that advises the government, were published by the official Shanghai Securities Journal newspaper on Wednesday, and were line with the government’s own full-year forecasts of 6.5-7 per cent growth.

“Economic growth in the fourth quarter is likely to fall slightly but within a normal and stable range,” the newspaper quoted Wang Hongju, a senior researcher at CASS, as saying.

Restructure

Government tells mines to raise thermal coal output again

China has ordered major coal mines to raise thermal coal output by another 500,000 tonnes per day, the latest concerted effort by the government to boost supplies to its electric utilities ahead of the winter, sources said on Tuesday.

Shanghai ranks as the top pick among the world’s cities expected to become significant global financial centres in the next few years, according to a survey of finance professionals. Qingdao, Shenzhen, Dalian and Beijing are the other mainland Chinese cities that are going to rise as financial centres, according to the Global Financial Centres Index which measures cities based on their attractiveness to financial services professionals. The index is based on two inputs: statistical data and a poll of finance professionals.

Eight of the top 15 cities that are expected to gain in significance are from the AsiaPacific region.

reductions in production capacity triggered a frenzied price rally and depleted domestic stockpiles this year.

“The amount is raised again as the increase was not enough to catch up with the demand from the power generators,” said Zhang Min, a coal analyst with the Sublime China Information Group and one of the sources who had spoken to the companies participating in the meeting.

Experts say the frequency of the meetings and the rapid-fire calls for output increases reflect growing panic about the unintended consequences of Beijing’s efforts to cut excess coal mining and shift the country, the world’s second-largest energy market, towards using cleaner, renewable sources.

Australian physical coal prices, a benchmark for Asia, have risen by more

than 40 per cent this year, largely following China’s domestic capacity cuts.

The NDRC is also considering raising the number of mines that are allowed to increase their output, although there were no details on which companies would be given permission, the sources said.

The NDRC did not immediately respond to requests for comment.

Stockpiles in the country’s major sea-borne coal transportation hub at Qinghuangdao were at 3.3 million tonnes yesterday, according to a daily operations report for the port seen by Reuters. The port’s stockpiles typically are between 4.5 to 5 million tonnes for this time of year said, Zhang Xiaojin, an analyst with the brokerage firm Everbright Futures Power companies in the north east, where temperatures can drop as low as minus 40 Celsius over the winter, have started stocking up earlier than usual, said Zhou Xinyu, a salesperson based in Qinghuangdao with the Tangshan Port Group. Reuters

Evergrande to sell non-core assets China Evergrande Group, the nation’s No.2 real estate developer, said it was selling noncore assets including interests in grain, oil and dairy products for 2.7 billion yuan (US$405 million), to enable it to focus on its property business.

Evergrande did not specify further how it plans to use the funds. The move comes after Evergrande, which has China’s second-biggest corporate debt pile, has invested US$2.2 billion in the larger rival Vanke, putting Evergrande in the middle of a high profile corporate battle for control. This has triggered speculation among analysts that it could be considering a costly play for all of Vanke.

Corruption case

Senior Hebei Iron & Steel executive probed The deputy general manager of Hebei Iron and Steel, China’s largest steel company by output, is being investigated by the ruling Communist Party for suspected corruption, the party’s anti-graft watchdog said on Wednesday.

Wang Hongren is suspected of “serious discipline breaches”, the Central Commission for Discipline Inspection said in a brief statement, using its usual euphemism for graft but providing no other details.

Dozens of senior officials and executives have been caught up in a sweeping campaign against corruption launched

by President Xi Jinping since he assumed power almost four years ago.

10 Business Daily Thursday, September 29 2016

Greater China

Modern structures relentlessly replace impoverished buildings.

Megalopolis development

Village left out in cold shows why Xi wants to spread Beijing riches Hebei province is part of China’s biggest regional integration plan, a flagship project that will link the province with Beijing and Tianjin.

W

ang Shouming points at his dilapidated ceiling, fuming over the lack of repair help from village officials when about 200 meters away houses in a neighbouring village have insulated walls paid for by the government.

“We live under the same sky and yet we are treated so differently,” says Wang, 57, his voice shaking with anger. “If I lived over there I would feel so different.”

Wang’s home is in Qujiamo, in a relatively poor province about 90 minutes drive from central Beijing.

His neighbours across a field in Zhengjiamo village live under the jurisdiction of the capital. The two could hardly be closer physically, yet remain far apart in wealth and income - with basic pensions on the Beijing side five times those on the other side.

Now, hope is emerging for a brighter future for Wang and Qujiamo. Hebei province is part of China’s biggest regional integration plan, a flagship project of President Xi Jinping that will link the province with Beijing and nearby Tianjin city into one giant megalopolis. It’s a gigantic infrastructure development plan intended to squeeze greater efficiencies from urbanization and help the three places move into higher-valued added industries.

“The integration plan will grant enormous infrastructure investment opportunities as the three regions seek to integrate their transportation systems,” says Tong Yiling, Asia analyst at BMI Research in Singapore.

“An acceleration in the pace of urbanization in Hebei could also lead to a booming property market and boost consumption.”

The plan, backed by Xi in 2014, is a test case for whether China can build more efficient cities, curb air pollution and squeeze greater productivity from higher densities. It

aims to ease population pressure on Beijing, link key cities via high-speed railways and highways, and shift lower value-added industries from Beijing and Tianjin to Hebei. Beijing and Tianjin are two of China’s four direct-controlled municipalities, or cities with provincial-level status.

Successful implementation is crucial to demonstrate the capability of the central government and to provide a national template for urbanization, says BMI, a unit of Fitch Ratings Ltd.

“The integration plan will grant enormous infrastructure investment opportunities as the three regions (Beijing, Tianjin and Hebei) seek to integrate their transportation systems” Tong Yiling, Asia analyst at BMI Research in Singapore.

For Qujiamo there already are positive signs. About four kilometres away, the Beijing-Laishui New City in Hebei is under construction - a 175-square kilometre area aiming to attract entrepreneurs. It’ll include a logistics park, an electronic and information park and innovation centre. Linked to Beijing last year by a new highway, it will include apartments, an international school, and an upmarket shopping mall.

“This will help drive the local economy,” says Qujiamo party secretary

Huang Changshun, 52. “Things will be better and better when the new city is built. Provincial and city leaders are very much focused on this project and require that we develop it with all our force.”

China has never in recent decades had a problem building infrastructure. The challenge is doing so without worsening the nation’s excess industrial and housing capacity. For an illustration, look no further than Tianjin’s efforts to build an equivalent to New York’s Manhattan, which is still struggling to find tenants years after its first building was finished.

Beijing, Tianjin and Hebei - known as Jing-Jin-Ji - account for about 10 per cent of China’s gross domestic product and have a combined population of about 130 million people, according to the Paulson Institute, the Chicago-based research group founded by former U.S. Treasury Secretary Henry M. Paulson. That makes it about triple the size of Tokyo-Yokohama and almost as big as the combined populations of the world’s top five urban areas - Tokyo-Yokohama, Jakarta, Delhi, Seoul and Manila according to Demographia.

While opportunity beckons, for now inequality is stoking social tensions.

The Jing-Jin-Ji region has a Gini coefficient of 0.698, according to the Survey and Research Centre for China Household Finance at South-western University of Finance and Economics in Chengdu in Sichuan province.

The measure of income differences is above the 0.4 level that the United Nations has said is a predictor of social unrest.

Haves, have-nots

The disparity rankles with retired Qujiamo school teacher Cheng Jiaxiang, 60, who receives about half the 6,000 yuan (US$900) monthly pension paid to teachers in Zhengjiamo, she said.

“I wish I was born on the Beijing side,” she says. “It wouldn’t hurt so much if we didn’t live so close.”

Wang, who works on Beijing construction sites mixing concrete for about 100 yuan a day when jobs are available, envies the way the

neighbouring Zhengjiamo government looks after its residents, saying they provide support for a good life from cradle to grave.

There’s no dispute about that among Zhengjiamo residents, who receive a minimum pension of 420 yuan per month. Sitting on a doorstop chatting with neighbours, Mu Junting and her friends chuckle in disbelief at the minimum 80 yuan a month pension paid across the vegetable patch in Qujiamo.

“Even if you spent all that money on salt, your food still wouldn’t be too salty,” says Mu, 55.

The locals say Qujiamo women often marry wealthier men, but it’s unusual for a Zhengjiamo woman to marry a man from Qujiamo.

“I haven’t heard of any Beijing girl marrying here recently,” said party secretary Huang. “People want to go to wherever conditions are better.”

Closing gap

He says the village has been striving to close the gap with its wealthy neighbour.

Back in 2012, it was selected out of 28 township villages to be a pilot for poverty alleviation. The county government offered about 120,000 yuan to paint the walls of all the households this year, pensions have increased to 80 yuan a month from 50 yuan a month two years ago and the salaries of local officials were doubled last year to almost 800 yuan a month, he said. The government also increased critical illness benefits last year.

“There are definitely differences between benefits and pensions in the two villages and people are definitely unhappy about that,” Huang says.

“You would expect some differences in the development between regions with different circumstances.”

As for Wang, he remains apoplectic over the lack of government support for his ceiling, which he says leaks when it rains and should qualify for financial aid from a fund for repairing dangerous houses.

“So far the average village has seen no change from the Jing-Jin-Ji integration project,” says Wang. “But when you look at the future, there are some good prospects.” Bloomberg News

Business Daily Thursday, September 29 2016 11

Asia Demographics impact

As Asians age faster, more of their savings may head offshore Aging populations are already contributing to pressure for capital to move out of China, Taiwan, South Korea and Thailand.

David Roman

A

sian emerging markets won’t just need to worry about “taper tantrums” in future when it comes to the risk of capital outflows. And the hidden danger has nothing to do with the U.S. Federal Reserve’s appetite for monetary tightening.

investments abroad, according to Goldman research published this month.

Aging demographic profiles are already contributing to pressure for capital to move out of China, Taiwan, South Korea and Thailand, the banks’ analysts wrote. Goldman tallied a net US$2 trillion exodus is poised

to leave those countries in the next five years.

“Outbound investment of domestic savings would weaken local currencies, softening financial conditions and reducing the need to cut interest rates at the margin, in our view,” the Goldman analysts, including Andrew Tilton, the chief economist for the Asia Pacific region in Hong Kong, wrote in the September 22 report.

If Goldman’s estimates are correct, an aging Chinese society means pressures are bound to strengthen in an economy already hit by outflows. Of

the US$2 trillion that the investment bank estimates will flow out of the four emerging markets facing the most severe aging risks, 70 per cent will come from China.

The Philippines, with its youthful workforce, stands out as an exception, with “virtually non-existent” aging-induced outflow pressures on the horizon, Goldman says. In Indonesia and India, outflows due to an aging population will represent less than 1 per cent of gross domestic product over the next decade, it said.

Bloomberg News

‘Goldman tallied a net US$2 trillion exodus is poised to leave aging countries in the next five years.’

It has everything to do with demographics. For the first time since 1950, the Asian emerging markets - a group that includes China, Thailand and South Korea - will see their populations age faster than those in the developed world in the coming two decades, according to Goldman Sachs Group Inc. When workers hit their 50s and 60s, those are peak savings ages - and times when households probably will want to put a portion of their

New Zealand

Economists urge central bank to declare war on painfully strong currency While some call for more action, the Reserve Bank of New Zealand remains reluctant to oblige.

Rebecca Howard

New Zealand’s central bank governor did manage to talk the country’s high-flying currency a little lower last Thursday, despite keeping interest rates on hold, but some economists are demanding more.

The kiwi, as the New Zealand dollar is known, is down around 1.4 per cent to 0.7275 since central bank governor Graeme Wheeler held rates at 2.0 per cent, although he left the door wide open for a rate cut later this year.

The high kiwi dollar has long been a thorn in the central bank’s side, curbing inflation and eroding export revenues.

On last Thursday Wheeler reiterated that “a decline in the exchange rate is needed” but then came under fire for not doing enough to make it happen.

“Words are meaningless unless backed by a credible assault plan,” said Jarrod Kerr, senior interest rate strategist at Commonwealth Bank of Australia.

New Zealand Manufacturers and Exporters Association Chief Executive Dieter Adam was equally

unimpressed by the lack of action on the rates front.

“The current exchange rate means that the competitive position of New Zealand manufacturers and primary exporters is seriously affected,” he said.

The dollar is shored up by strong economic growth with the New

Governor Wheeler told a parliamentary commission in August the economy would be “totally overheating” if the RBNZ were to slash interest rates.

Zealand economy currently expanding at its fastest pace in two years, an improvement in commodity prices, and high interest rates in a world awash in negative or near zero rates.

Paul Dales, chief Australia and New Zealand economist for Capital Economics, said the only way the kiwi was going to fall to around US$0.65 was if the central bank cut rates to 1.5 per cent or less from the current 2 per cent.

He noted, however, the New Zealand central bank is in a “very tricky position,” in particular given the U.S. Federal Reserve’s power and influence over global interest rates.

While financial markets now widely expect the Fed to lift rates in December, the U.S. dollar came under pressure last week when the Fed trimmed its long-term rate expectations.

Some of the kiwi’s recent strength is also tied to dairy prices reaching one year highs this month as a global supply gut showed signs of easing.

While some economists call for more action, the Reserve Bank of New Zealand remains reluctant to oblige.

Governor Wheeler told a parliamentary commission in August the economy would be “totally overheating” if the RBNZ were to slash interest rates.

He also noted he cut rates six times over the past 15 months and the kiwi is higher than it was when he started.

The bank’s ability to make an interest rate decision and assume portfolio flows are going to give it the outcome it wants “is not necessarily guaranteed,” said Wheeler.

The central bank has also been reluctant to stoke an already hot housing market. Last Thursday Wheeler reiterated that house price inflation remains excessive and created concerns about financial stability.

While currency market intervention is another option, it does not appear to be prominent on the bank’s radar as it hasn’t characterised the exchange rate as “exceptionally high” and “unjustified,” two of the main criteria for intervention.

Commonwealth Bank’s Kerr, however, vehemently disagreed that the Reserve Bank of New Zealand had no influence.

He called on the RBNZ to slash rates to 1.0 per cent over two meetings and said it could intervene in currency markets. The central bank could also resolve to inflate the New Zealand economy with “freshly minted currency,” if all else failed.

“Guerrilla warfare is the RBNZ’s best tactic in fighting the currency trader,” said Kerr. Reuters

12 Business Daily Thursday, September 29 2016

Asia Monetary meeting

Sri Lanka holds rates as past hikes curb credit boom The central bank has estimated this year’s economic growth at around 5 per cent.

Shihar Aneez and Ranga Sirilal

S

ri Lanka’s central bank held its key policy interest rates steady yesterday, a widely expected decision that analysts say suggested policy makers were keen to support a slowing economy even as they kept a tight leash on rampant credit growth.

The Central Bank of Sri Lanka, left the standing deposit facility rate (SDFR) and the standing lending facility rate (SLFR) at 7.00 per cent and 8.50 per cent, respectively. The bank has tightened policy three times since December.

“Market interest rates, which increased in response to monetary tightening measures of the central bank, are expected to slow down credit expansion in the months ahead,” the central bank said in a statement, and underscored that it has sufficient measures in place to support economic activity.

Private sector credit growth was at 28.5 per cent year on year in July, its highest since August 2012, but Central bank chief Indrajith Coomaraswamy said last month that he expected the credit expansion rate to slow to 18 per cent by the end of 2016.

The on-hold decision, which was in line with a Reuters poll, comes after data last month showed the

economy grew 2.6 per cent on-year in the second quarter, slowing from 5.2 per cent in the first quarter.

“They are very much focused on the growth after the release of the second quarter numbers. There isn’t much emphasis on inflation and credit. I

think still they are willing to wait,” Shiran Fernando, an analyst at Colombo-based Frontier Research.

The central bank has estimated this year’s economic growth at around 5 per cent, edging up from last year’s 4.8 per cent.

The previous rate increases were aimed at curb stubbornly high private sector credit growth that has driven up inflation, while policy makers were also keen to fend off pressure on a fragile rupee.

Inflation slowed in August to 4.0 per cent on-year from the previous month’s 5.5 per cent.

Key Points C.bank keeps SDFR and SLFR unchanged for 2nd straight month Private sector credit growth high, but to slow by year-end Past policy tightening will slow credit growth - c.bank The central bank has raised both the SDFR and the SLFR by 50 bps each in February and July. That followed an increase of 150 bps in commercial banks’ statutory reserve ratio (SRR) in December.

The rupee has come under pressure due to lower interest rates, higher imports, and foreign outflows from government securities last year. But the currency steadied after the central bank raised US$1.5 billion from a sovereign bond sale in July. Reuters

Trade forecast

S. Korean exports falling on fewer working days, strikes Policymakers have been confident so far that the collapse of Hanjin Shipping will not shock the trade.

South Korean exports likely fell in September, a Reuters poll showed on Wednesday, thanks to slightly fewer working days due to a major holiday and strikes hurting several industries.

The median forecast from a survey of 14 analysts was for September exports to drop 4.1 percent from a year earlier. Responses ranged from a 2.6

Key Points

of 19 straight months of falls.

Stephen Lee, economist at Samsung Securities, said recent problems in the South Korean shipping industry “may have hobbled exports, but the impact was likely limited as only roughly 10 percent of exporters were using local shippers”.

All the economists who offered detailed explanations for their forecasts

said 0.5 fewer working days in September this year from the Chuseok holiday, which can fall in September or October, weighed on exports.

Finance Minister Yoo Il-ho said earlier yesterday September exports were expected to fall again due to continuing strikes at companies including Hyundai Motor Co. Policymakers have been confident so far the collapse of the country’s biggest shipper, Hanjin Shipping Co Ltd, will not shock trade.

The Reuters poll also showed industrial output likely fell 0.5 percent on-month in August in

seasonally-adjusted terms, after rising 1.4 percent in July.

Most economists blamed strikes at Hyundai that have occurred from July for the weakness.

September’s inflation rate was seen increasing to an annual 0.8 percent, from 0.4 percent, due to a rise in fresh produce prices and as the effect from a temporary, summertime cut in electricity tariffs dissipates.

Industrial output data will be released on September 30. Trade data will be released on October 1 while inflation numbers will be announced on October 5. Reuters

Aug industrial output seen -0.5 pct s/adj m/m Sept exports seen -4.1 pct y/y, imports -2.3 pct y/y Sept CPI seen +0.8 pct y/y

percent rise to a 17.9 percent plunge.

Imports were projected to slip 2.3 percent this month in annual terms, the poll showed.

Exports and imports rose 2.6 percent and 0.7 percent from a year earlier in August, respectively. The increase in exports snapped a streak Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi N. Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com Founder & Publisher

Business Daily is a product of De Ficção – Multimedia Projects

Business Daily Thursday, September 29 2016 13

Asia Central bank criticism

In Brief

Abe clashes with new opposition leader over inflation policy Her stance mirrors that of some economists who said new policy was a tacit admission that it has reached the limits of its Japanese government bond purchases.

Isabel Reynolds and Takashi Hirokawa

Japanese Prime Minister Shinzo Abe locked horns with new opposition leader Renho over Bank of Japan (BOJ) policy and his economic program yesterday, in their first parliamentary standoff since she won a party election two weeks ago.

Renho, the leader of the main opposition Democratic Party, described the new framework from the central

bank on September 21 as an admission that the limits of monetary policy were being reached. She criticized Abe’s “three arrow” program of monetary, fiscal and reform policies.

“The goal of reaching two per cent inflation in two years has been abandoned,” Renho, who goes by a single name, told lawmakers. “This is nothing other than an acknowledgment of failure for the first arrow.”

Abe said he would continue to work

Democratic Party leader Renho

closely with the central bank, and that its policy was aimed at reaching the price target as soon as possible.

In response to Renho’s call for a review of the government’s economic program, Abe said: “We have been able to create a situation that is not deflation. In particular, employment has improved markedly and this is extremely important for the lives of the people.”

‘Distorting the markets’

The BOJ this month shifted the focus of its monetary stimulus from expanding the money supply to controlling interest rates. The move was aimed at helping manage the impact of its asset purchases and negative interest rates on Japanese banks, which have seen profits hurt by a narrowing of short-term and long-term yields.

Renho was previously best known for her efforts to cut wasteful spending while her party’s predecessor, the Democratic Party of Japan, was in government from 2009 to 2012. Her criticism of the BOJ mirrors that of some economists who said the shift in policy was a tacit admission that it has reached the limits of its Japanese government bond purchases.

Renho added that the massive Government Pension Investment Fund, known as GPIF, was “distorting the markets” through its investments and urged the government to switch to less risky assets to assuage public concern. Abe said GPIF had secured sufficient profits and that allegations of market distortion were untrue.

With new leadership, the Democrats are seeking to eat into Abe’s support, which held at a relatively strong 58 per cent in a poll published by the Nikkei newspaper this week.

Fifty-one per cent of respondents said they had positive expectations for Renho. Bloomberg News

Favours granting culture

South Korea launches anti-corruption law The proposed bill was passed through the National Assembly in March 2015 as part of efforts to eradicate the so-called bureaucratic mafia, or Gwanfia in Korean.

South Korea’s new anti-corruption act, called as Kim Young-ran Law named after the act’s original proposer, took effect to alter a society in which granting illicit favours in return for money or excessive treatment has run rampant.

The act on banning illegal requests and bribery came into force on yesterday. The anti-graft act is aimed at prohibiting public servants, journalists and teachers from using their positions to grant favours in exchange for money or excessive treatment.

Subject to the act would be about 4 million people working at 40,919 public and private organizations, including administrative, judiciary and parliamentary bodies, media outlets and schools, according to local media reports.

The act will ban those in question from being treated to a meal worth more than 30,000 won (US$27).

Receiving a present worth over 50,000 won will be made illegal, while cash gift given to weddings and funerals worth over 100,000 won will be punishable.

Those in charge of 14 tasks, including business project permission, personnel affairs, school entrance and military recruitment, will be severely punished for accepting illicit requests in return for kickbacks.

Receiving more than 1 million won at a time from the same person will be criminally punishable regardless of whether those cash or gifts are relevant to their tasks or not. Those who receive more than 3 million won

in a year from the same person will also be penalized.

The act is forecast to help change a deep-rooted culture of the country, where lower-ranking people in socio-political hierarchy are required to provide excessive treatment for others in higher ranks in the name of customary practices. The antigraft act will help those in lower ranks be freed from those forcible requirements.

Presidential spokesman Jung Youn-kuk told reporters that the act is anticipated to become a turning point to create a clean society where everyone can compete fairly and exponentially raise the degree of integrity.

Most of ordinary people here expressed positive response to the act through social media, saying it would

help South Korea go a step forward to a clean society and establish a “Go Dutch” culture in the bureaucratic, educational and media societies.

The anti-corruption act was first proposed in June 2011 by Kim Youngran, former Supreme Court justice and then chief of the Anti-Corruption and Civil Rights Commission. The proposal was based on perception that most of corruptions may start with a cup of coffee or a meal between parties concerned.

The proposed bill was passed through the National Assembly in March 2015 as part of efforts to eradicate the so-called bureaucratic mafia, or Gwanfia in Korean, which is believed to have been one of the main reasons that triggered the Sewol ferry disaster.

Widespread irregularities and collusive links between maritime bureaucrats and businessmen helped cause the catastrophic maritime incident that killed more than 300 passengers, about two thirds of them high school students, on April 16, 2014. Xinhua

Real estate

Sydney housing market fourth on global bubble index Australia’s Sydney has the fourth riskiest housing market in the world following a sharp jump in prices in recent years, says a report by investment bank UBS released yesterday. Sydney’s real housing prices peaked in the second half of 2015 after jumping 45 per cent since mid-2012, the UBS Global Real Estate Bubble Index has found. Other drivers for the price rises for the cities most at risk are low interest rates and bullish expectations, the report said. Rising housing supply and further tax measures to cut foreign housing investments could end the price boom rather “abruptly”, UBS has warned.

Oil industry

PetroVietnam likely to see dropping revenue Vietnam’s National Oil and Gas Group (PetroVietnam) is likely to see drops in revenue and profit in four straight years in 2016, if the world crude oil price remains low, said the group yesterday. According to a report by PetroVietnam on its production, business results in the first nine months of 2016, as of September, the group has exploited 12.93 million tons of oil. During January-September period, the group’s total revenue hit 318 trillion Vietnamese dong (US$14.26 billion), accounting for 85 per cent of ninemonth estimate.

Infrastructure

ADB grants Bangladesh loan for railway line Asian Development Bank (ADB) said yesterday it had granted a US$1.5 billion loan to Bangladesh to build a railway line that will bring trade and tourism to southern parts of the country, and improve access to Myanmar and elsewhere in Southeast Asia. The development loan, to be disbursed in four tranches till 2022, is the largest ADB has ever granted Bangladesh and the biggest it has committed to a railway project. “The planned 102-kilometre (63-mile) stretch of railway will connect the tourist town of Cox’s Bazaar with the existing Bangladesh railway network,” said Markus Roesner.

Neighbours friction

India to boycott summit in Pakistan India has decided to boycott the upcoming regional meeting South Asian Association for Regional Co-operation (SAARC) summit in Pakistan, officials said. The summit is scheduled to be held in Pakistan in November this year and Indian Prime Minister Narendra Modi was supposed to travel to Islamabad to attend the regional summit. India’s foreign ministry said it has conveyed the SAARC chair its decision regarding not attending the summit. Tensions between India and Pakistan escalated due to the on-going civilian protests in Indian-controlled Kashmir and a deadly attack last week.

14 Business Daily Thursday, September 29 2016

International In Brief Military spending

EU eyes budget for defence research “revolution” A modest proposed investment of 90 million euros (US$100 million) in EU defence research could mark a turning point after years of cuts that have put the continent’s future military capabilities at risk, the head of the European Defence Agency said. The plan put forward by the European Commission has taken on added significance since Britain voted to quit the EU in June. France and Germany now see an opportunity to push ahead with European defence cooperation that London blocked - but for that, they need money.

Polemic appointment

World Bank unanimously reappoints Jim Yong Kim The board of the World Bank has unanimously agreed to name Jim Yong Kim to a second term as president, the global lender announced Tuesday. Kim had been the only candidate in a process criticized by World Bank staff and campaigners as lacking in transparency and dominated by the United States. In a statement announcing the decision, the Bank’s board offered a strong endorsement of Kim’s record, including setting the goal of eliminating extreme global poverty by 2030 and an internal reorganization to promote better coordination which provoked staff dissent.

World Economic Forum ranking

Switzerland notches up eighth straight win for global competitiveness While China remained at the front of the BRICS pack at place 28, India made the biggest gain, rising 16 places to 39th.

Brenna Hughes Neghaiwi

S

witzerland has set a record in global economic competitiveness even as mounting political tension and uncertainty is contributing to sluggish growth worldwide, the World Economic Forum’s (WEF) annual rankings showed yesterday.

Unrivalled innovation, a sophisticated business landscape and the world’s most efficient workforce helped Switzerland to its eighth straight win, the Geneva-based WEF said.

There were no newcomers to its 2016-2017 top 10, though the order of some of the leading countries shifted in its Global Competitiveness Report.

Singapore and the United States stayed in second and third place.

The Netherlands overtook Germany for fourth place, while Sweden in sixth spot and Britain in seventh leap-frogged Japan, Hong Kong and Finland.

The Forum bases its assessment on a dozen drivers of competitiveness, including institutions, infrastructure, health and education, market size and the macroeconomic environment.

The report also factors in a survey among business leaders assessing governments’ efficiency and transparency.

A jump in tech savviness - making it the most technologically prepared country - meant Switzerland achieved the highest competitiveness

Aviation industry

Morocco signs deal for major Boeing hub Morocco signed an agreement with Boeing on Tuesday to build a new hub for the US aerospace giant that officials hope will create thousands of skilled jobs. King Mohammed VI oversaw the signing of a memorandum of understanding in the northern port city of Tangiers to establish an industrial zone where up to 120 Boeing suppliers and sub-contractors could operate. “This is a very important strategic project as we move into a new aeronautical era in Morocco,” Industry Minister Moulay Hafi Elalamy told AFP. M&A

SABMiller shareholders back takeover offer SABMiller shareholders backed the brewer’s US$100-billion-plus takeover by rival Anheuser-Busch InBev by a large majority yesterday, paving the way for one of the biggest corporate mergers in history. The 79 billion pound deal was comfortably passed by the SAB shareholders who voted.

It had required approval from a majority in number of shareholders and by at least 75 per cent in share value.

For the latter, it secured 95.5 per cent support. SABMiller’s two largest shareholders, cigarette maker Altria Group and the Santo Domingo family of Colombia, who together control about 40 per cent of the shares, had already pledged their support for the deal.

Klaus Schwab, WEF Executive Chairman

score since WEF introduced a new ranking system in 2007.

“Switzerland arguably possesses one of the world’s most fertile innovation ecosystems, combining a very conducive policy environment and infrastructure, academic excellence, an unmatched capacity to attract the best talent, and large multinationals that are often leaders in their sector as well as a dense network of smalland medium-sized enterprises,” WEF said in its report.

Britain moved up three places to its highest ranking in the past decade, led by improvements in its macroeconomic environment. But results were based on data predating Britain’s June 23 vote to quit the EU, which posed considerable risks to its competitiveness, the study found.

While China remained at the front of the BRICS pack at place 28, India made the biggest gain, rising 16 places to 39th.

WEF warned that rising trade barriers - which in the past decade had led to business leaders’ perception of falling trade openness across high-income countries - posed a risk to countries’ ability to grow and innovate.

“Declining openness in the global economy is harming competitiveness and making it harder for leaders to drive sustainable, inclusive growth,” WEF Executive Chairman Klaus Schwab said in a statement.

The report also warned that quantitative easing and other monetary policy measures were proving insufficient to kickstart long-term growth in developed economies.

Especially in countries with low competitiveness rankings, monetary intervention had failed to deliver as effective results as those undertaken in their more competitive counterparts. Reuters

Restructuring debt

Caesars strikes deal to end main unit’s costly bankruptcy The settlement needs to be formalized and approved by the U.S. Bankruptcy Court in Chicago.

Tracy Rucinski

Caesars Entertainment Corp said on Tuesday it has struck a crucial US$5 billion deal with most of its casino operating unit’s creditors, resolving billions of dollars in legal claims and paving the subsidiary’s way out of a costly bankruptcy.

The Las Vegas-based company’s main operating unit, Caesars Entertainment Operating Co Inc, filed in January 2015 one of the most complex U.S. bankruptcies with US$18 billion of debt.

The restructuring has been embroiled in a sprawling web of litigation between some of Wall Street’s most aggressive investors.

Junior creditors led by hedge fund Appaloosa Management accused the Caesars parent and its private equity owners Apollo Global Management and TPG Capital Management of looting the operating unit of its best assets and leaving it bankrupt.

Under the agreement announced after a week of intense telephone negotiations from New York to Los Angeles, junior creditors will receive about 66 cents on the dollar, up from 27 cents under a previous plan.

“It’s important to recognize that a lot of work needs to be done in the next few weeks. Will there be bumps

along the road? Yes. Is this a durable deal? Yes,” said Bruce Bennett, a lawyer for Jones Day representing junior creditors.

Apollo and TPG, which formed Caesars in 2008 through a US$30 billion leveraged buyout of Harrah’s just before a U.S. economic downturn, will relinquish their stake in Caesars as part of the agreement.

The settlement came after the judge overseeing the bankruptcy pressed Caesars directors such as billionaire investors Marc Rowan of Apollo and David Bonderman of TPG to contribute to the reorganization in exchange for releases from fraud allegations.

Caesars said the funds’ contribution to the reorganization plan is worth about US$950 million but did not specify whether any directors were personally pitching in.

An independent examination led by a former Watergate prosecutor found in March that Caesars and its private equity owners could be on the hook for roughly US$5 billion.

Junior creditors said they had claims worth up to US$12.6 billion.

First-lien bank lenders will recover roughly 115 cents on the dollar, about 1 cent less than previously agreed upon, while first-lien noteholders will still recover about 109 cents on the dollar.

As part of the sweetened deal, junior and unsecured creditors will own a larger equity holding in the new group to be formed through the parent company’s merger with another affiliate, Caesars Acquisition Co. Apollo and TPG will own about 16 per cent of the group to be called “New CEC”, according to regulatory filings.

“The agreement reflects the private equity sponsors’ attempt to thread the needle between managing their fiduciary duties (...), reducing litigation risk and maintaining relationships with the creditor community” Nathan Flanders, a managing director at Fitch Sha r es o f Ca esa rs c l o s e d 19 per cent lower at US$7.67. The stock had risen about 45 per cent since the company unveiled its settlement offer on Wednesday.

Reuters

Business Daily Thursday, September 29 2016 15

Opinion Business Wires

The Times of India Lauding the progress achieved so far on GST implementation, finance minister Arun Jaitley (pictured) on Tuesday exuded confidence that it is “reasonably possible” to meet the April 1 deadline to roll out the new indirect tax regime.

“There has hardly been an opportunity, in fact there has been none, where I’ve seen state finance ministers dividing themselves on party lines (as on GST).

If this trend goes on, I am quite certain, it may be reasonably possible for us to meet the deadline (April 1, 2017), however difficult it may be,” Jaitley told SBI Economic Conclave here on Tuesday evening.

China’s government wants GMOs. The people don’t.

The Star The Canadian government on Tuesday approved a proposed Petronas-led liquefied natural gas plant in northern British Columbia, ending a threeyear wait for a decision. Environment Minister Catherine McKenna made the announcement in a statement on the banks of the Fraser river. The Liberal government of Prime Minister Justin Trudeau acted after receiving an environmental assessment that said the project would have significant adverse effects requiring major remedial work.

Malaysian oil and gas company Petronas and its partners had been waiting for a permit for the C$11 billion (US$8.3 billion) plant.

Bangkok Post After August’s surprising export rebound, the central bank chief has rushed to tamp down optimism, saying careful monitoring of shipments is still needed amid the fragile global recovery. “It’s good news that exports in August turned around to grow at a fast clip, but we need to keep an eye on which factors gave them a boost, and continuous monitoring is warranted,” said Bank of Thailand governor Veerathai Santiprabhob. “We can’t consider a one-month figure only.”

On Monday, the Commerce Ministry announced that exports in August grew by 6.5 per cent year-on-year to US$18.82 billion.

Inquirer.net President Rodrigo Duterte’s (pictured) foul mouth is wrecking the Philippine economy, scaring away investors who were quickly selling stocks and pulling out investments in the country, lawmakers from the “legitimate” minority bloc in Congress said. In a press briefing at the House of Representatives, Albay Rep. Edcel Lagman said the President’s reckless utterances against world leaders are destroying the economy, amid a pull-out of stocks and investments by investors worried about the President’s temperament. The lawmaker added that the President’s temperament also affects the opportunity of the country to maintain its good credit rating.

T

he latest food safety scandal in China might be its most damaging. Earlier this week, a former doctoral student at one of the country’s national testing centres for genetically modified organisms went public with allegations of scientific fraud, including claims that records were doctored extensively, that unqualified personnel were employed under illegal contracts and - most seriously - that authorities refused to take action when his concerns were aired privately.

On Wednesday, China’s Ministry of Agriculture responded to a social media storm by suspending operations at the centre.

That might take care of the current scandal, but the Chinese public’s hostility toward GMOs won’t go away so easily. Those concerns have only grown over the past decade as the government has increased its support of GMOs, including approval of the state-owned ChinaChem Group’s US$43 billion takeover offer for the Swiss seed giant Syngenta.

These efforts have galvanized a very public opposition that transcends China’s typical political fault lines, and created one of the government’s most intractable headaches.

F e e d i n g C h i n a’ s h u g e population has never been easy. But over the last three decades, the challenges have become considerably greater as urbanization devoured farmland, and pollution made even more of it unusable.

Today, the government is faced with the task of feeding 21 per cent of the world’s population with 9 per cent of its arable land. Its reliance on foreign goods has made China the world leader in imports since 2011. Officials now fear the country could become dependent on foreigners for its food supply and the government remains committed to maintaining self-sufficiency in rice, wheat, and other key grains. As a result, the political pressure to increase yields is considerable.

In fact, this pressure is centuries-old. Domesticated rice first appeared in the Yangtze River Valley at least 8,000 years ago, and Chinese farmers and scientists have been innovating ever since. In 1992, China became the first country to introduce a GMO crop into commercial production, when it sowed a virus-resistant tobacco plant on 100 acres. Since then, the government has issued safety certificates for a wide range of GMO crops, ranging from chili peppers to petunias. Yet, so far at least, only cotton has gone into wide cultivation. Other GMOs - especially rice, a staple of the Chinese diet - are still awaiting approval to be domestically cultivated.

Safety concerns have long been the favoured excuse for the lack of approvals. But that’s not credible when the scientific consensus within and outside of China is that GMOs are safe, and the Chinese government itself has long allowed importation of GMO soybeans and corn for use in animal feed and cooking oil. Instead, the government is clearly worried about widespread public opposition to

“

Adam Minter a Bloomberg View columnist

GMOs, which is showing up on social media and among the urban middle class.

The first source of that opposition is a widespread belief that GMOs are a foreign conspiracy against Chinese health. This isn’t merely a fringe idea on social media. In 2013, a major general in the People’s Liberation Army wrote an op-ed for China’s hyper-nationalist Global Times newspaper that compared GMOs to biological weapons.

“The consequences will be far worse than what the Opium Wars wrought,” he wrote. “Shall China develop a biological weapons program?”

As nationalism has become amplified under President Xi Jinping, that sentiment has become more prevalent. In 2014, Guangzhou military officials requested a ban on GMO food for their troops (the request was later censored).

But the far more damaging source of anti-GMO sentiment is the broadly held certainty that the government is incapable of ensuring a safe food supply - GMO, or otherwise. It’s a legitimate concern. For three decades, China has suffered through a string of food safety scandals, including dead pigs floating in the Yangtze River and rats masquerading as hotpot mutton.

In response, China has enacted new food safety laws, but they appear to have made little difference. Two weeks ago, for example, police seized 1,000 tons of substandard frozen meat, much of which was soaked in bleach. Meanwhile, a few weeks earlier a farmer in far western China found himself the target of a national social media storm when local authorities revealed he’d been raising GMO corn on his land (the farmer claimed he’d been duped by a company that had hired him to cultivate its crop).

Yet these failures and suspicions haven’t dented official confidence in China’s GMO program. Xi recently encouraged further GMO research, the government’s current five-year economic plan calls for the commercialization of domesticallygrown GMO corn and soybeans, and Syngenta is expected to catalyse a new era of Chinese domination in the field.

Nonetheless, until the Chinese government addresses the lack of confidence in its food safety programs, in particular, it’s likely to face considerable and growing opposition to a GMO program that has a very small constituency outside of elite circles. That’s not just a commercial problem, either. Like China’s notorious air pollution woes, widespread public frustration has the potential to mutate into widespread political opposition.

As the Chinese government seeks to solve the country’s food problems on its own terms, that’s a particularly unappetizing development. Bloomberg View

The far more damaging source of anti-GMO sentiment is the broadly held certainty that the government is incapable of ensuring a safe food supply - GMO, or otherwise.

”

16 Business Daily Thursday, September 29 2016

Closing Budget carrier

Spring Airlines extends wing to Cambodia flights between Guangzhou and northChina’s largest low cost carrier Spring Airlines will begin direct flights between Cambodia’s capital Phnom Penh and southern China’s Guangzhou City, commencing from September 30 onwards, the airlines said in a statement.

“The new Phnom Penh-Guangzhou service will be operated three times weekly Tuesday, Friday and Sunday, using an Airbus A320 aircraft,” the statement said.

In addition to the Phnom Penh-Guangzhou service, Spring Airlines has launched new

western Cambodia’s Siem Reap City since September 9, it said, adding that the airlines will also operate direct flights between Shenzhen City and Siem Reap City from September 30.

Both Guangzhou and Shenzhen are in southern China’s Guangdong province.

“The rapid expansion of services to Cambodia

by Spring Airlines indicates not only growing outbound leisure traffic from China to Cambodia, but also strong demand from business passengers,” the statement said. Xinhua

Asian markets

SGX sees Baltic buy helping to boost freight derivatives Singapore’s Stock Exchange has built up a suite of commodity and financial derivatives in recent years.

Anshuman Daga

S

ingapore Exchange Ltd (SGX) sees the potential to develop new freight derivatives centred on active Asian shipping routes and expand the use of freight derivatives with its acquisition of London’s Baltic Exchange, a senior SGX official told Reuters.

“We believe there are a number of opportunities that the Baltic Exchange and SGX can realise together, including the creation

and adoption of new benchmarks of Asian shipping routes,” Michael Syn, head of derivatives at SGX told Reuters.

The Baltic’s daily benchmark rates and indices are used to trade and settle freight contracts as well as for settling freight derivatives, or FFAs, that allow investors to take positions on freight rates in the future.

On Monday, Baltic Exchange shareholders approved an 87 million pounds (US$113 million) takeover by SGX, bringing together the companies from two global maritime hubs.

The acquisition of the Baltic Exchange, which owns a trading platform for the multi-billion dollar freight derivatives market, comes amid a severe downturn in the shipping sector.

“The participation of the Asian shipping community - China, Japan and Korea - in FFAs is among the lowest. We are able to leverage our presence and resources in this region to educate on price risk management,” Syn said in an email response to Reuters queries.

“This extends to our ability to talk freight with existing commodities clients in the iron ore and coal space,” he said. SGX already offers pricing benchmarks for iron ore and coking coal, which make up a big portion of the dry bulk commodities primarily

transported by sea.

SGX, which has a market value of US$5.8 billion, is seeking regulatory approval for the deal.

Singapore is the world’s secondbusiest container port and there are about 130 international shipping companies based in the city-state.

“We are able to leverage our presence and resources in this region to educate on price risk management” Michael Syn, head of derivatives at SGX SGX has built up a suite of commodity and financial derivatives in recent years, with the business accounting for about 40 per cent of its revenue. This has helped the exchange diversify from sluggish securities trading and a weak market for IPOs. SGX says it has a 40 per cent market share of the global dry bulk freight derivatives clearing business, up from 4 per cent at the end of 2014. It competes with the likes of NASDAQ OMX Commodities and LCH.Clearnet, majority owned by the LSE. “We believe there are good growth opportunities in the FFA market. FFAs currently represent only 30 per cent of the underlying physical market,” Syn said. Reuters

Hang Seng Index

Macau Airport

Accuracy doubts

Hong Kong stocks erase losses as casinos advance

Alipay to offer payment services in overseas airports

Japan seeks improvements to macro data

Hong Kong stocks erased the day’s losses in late trading, with gambling companies and a supplier to Apple Inc. leading the advance.

The Hang Seng Index closed 0.2 per cent higher, after falling as much as 0.9 per cent. Galaxy Entertainment Group Ltd. was the biggest gainer, while phone-components maker AAC Technologies Holdings Inc. rose 1.3 per cent.

Postal Savings Bank of China Co. added 0.2 per cent after a US$7.4 billion initial public offering that was the world’s biggest since 2014. The Hang Seng China Enterprises Index and the Shanghai Composite Index slipped 0.3 per cent each.

Hong Kong stocks have rallied this quarter, buoyed by mainland inflows via an exchange link with Shanghai and as traders scaled back bets for higher U.S. borrowing costs. A net 58.7 billion yuan (US$8.8 billion) has flowed into Hong Kong equities through the connect this month, compared with 1.75 billion yuan in the other direction.

Galaxy rose 1.4 per cent, while SJM Holdings Ltd. gained 3 per cent. AAC Technologies, which sank 4.7 per cent on Monday, rebounded for a second day. Bloomberg News

In some overseas airports, Chinese travellers will now be able to pay their bills via Apps on their smart phones instead of using foreign money, said payment platform Alipay.

Alipay said that it had struck deals with ten high-profile airports across the world in its “Airport of the Future” program.

The international airports are in Germany, Singapore, Japan, the Republic of Korea, New Zealand, Thailand as well as China’s Hong Kong, Taiwan and Macau.

Nine of the airports will start accepting Alipay from the beginning of October, the start of “Golden Week” when most Chinese have a week-long national holiday. The Singaporean airport will start the business at the end of this year.

Travellers will not only be able to pay for their purchases using Alipay, but can also find local shopping and dining information about merchants partnered with Alipay.

Services such as indoor navigation, Wi-Fi connection, hotel reservation and flight reminders via the Alipay app will also be provided.

Macau Airport couldn’t confirm yesterday to Macau Business Daily when the service will be available. Xinhua

Japan is accelerating its search for ways to improve some of its most important macroeconomic indicators to address long-standing concerns that some data are inaccurate or too volatile.

The review, which is expected to be compiled by the end of the year, could improve sample sizes and modernise collection methods for data on economic growth and consumer spending, which could give policymakers a better sense of whether their policies are gaining traction.

“One of the big goals of this exercise is to improve gross domestic product data and some of the primary data used to calculate GDP,” said Hideyuki Ibaragi, director of macroeconomic analysis at the Cabinet Office, a government agency that coordinates economic policy.

Many economists have expressed concern about GDP because revised data is often very different from preliminary data due to big swings in capital expenditure.

Government officials have also said previously that household spending data makes consumer spending look weaker than it actually is because it relies on a small sample size skewed towards older people who tend to spend less. Reuters