Macau Business Daily November 29, 2016

Japan gaming law should not take MSAR as example say experts Gaming Page 7

Tuesday, November 29 2016 Year V Nr. 1183 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Politics

Legislative Assembly candidates will have their positions evaluated for pro-independence views Page 4

International investors must be puzzled with the way governance in Macau is conducted. Lawyer Manuela António is correct and is one of the latest to criticize what so many others, including some local media, have been doing for years on end. But to no avail.

The lack of accountability for political and administrative decisions is causing the public coffers to lose billions every year. There’s no idea how much, we can only guess.

The number of bad decisions is frightening. Their impact is mesmerizing, and yet, nothing seems to happen.

Some court decisions reveal the absolute lack of control, to say the least. Recently, courts have been recognizing that private investors have not been able to develop some pieces of land that the local government leased to them, because of the government’s malfunctions, mistakes, delays in licensing and ultimately lack of answers, as the administration apparently went on holiday years ago to an uncertain location, lost in action. Still, the court supports the government’s decision to have the land returned to its possession.

It would be completely defendable to get the land back if the fault lay entirely on the investor's side.

But the opposite is outrageous.

Especially when the government is one of the entities that did not even develop on time, the parcels of land that it gave to itself. Two weights, two measures.

It is time to make decision makers accountable for their actions. High ranking officials cannot just come up with the old excuse of “family matters” to withdraw from office while their backs are protected by their peers, leaving the people of Macau under a curtain of silence while the public coffers are looted as a consequence of strings of bad decisions.

PS – In front of two main hotels in Macau there’s a piece of land that is supposed to be the site of some government buildings. We have been waiting for years and still nothing. Worse than that, the view from these hotels, that should be one of the best in the city – and guests are paying for – is of an abandoned parcel of land with wild vegetation and plenty of garbage. A huge openair trash deposit (see photo). For a government that continues to try to market the town as an international tourism centre, this is quite revealing of what’s going on. Correction: what is NOT going on.

Gaming

Labour group files a petition with DSAL over dismissed worker ‘blacklisted Page 7

Business

Corporate Governance Institute aims to organise conference and create report for gov’t based on HK situation Page 6

Keeping us safe Security

The city’s security forces are struggling to compete with the private sector in hiring new staff.

Challenges are to come in the next three years as the completion of infrastructure projects demands increased security personnel for borders.

Other issues covered by the Secretary for Security’s address included privacy concerns regarding the new CCTV installation, threats of terrorism and the fact that cars with local license plates will be able to enter Hengqin from December 20. Page 3

M&A

Mainland regulator curbs Inc shopping spree Page 8

Global outlook

OECD shows optimism on economic forecast Page 16

Private pension fund assets expand in Q3

Unemployment unchanged for 14 months Employment The MSAR’s unemployment rate has remained at 1.9 pct for 14 months, with a labour force participation rate of 72.3 pct. A total of 397,000 individuals made up the city’s labour force at the end of October, with only 7,500 unemployed. Page 2

President and six board members resign from CGD

A total of MOP16.5 blnworth in pension fund assets were managed by nine local private fund managers at the end of September, a 17.6 pct y-o-y increase. Registered pension plans totalled 1,006, of which 35 pct were managed by AIA International Ltd., a 23 pct surge from last year.

Resignation President of the Administrative Council of Portuguese bank Caixa Geral de Depósitos as well as six other members of the council have resigned. The President had spent less than three months in the position, resigning due to his refusal to divulge declarations of the bank’s administrators’ assets, including his own. Page 6

Opening commitment

China strategy China reinforced yesterday that it will stick to its opening up policy and “going out” strategies, facilitating investment abroad while guarding against risks, according to a government statement. The commitment was jointly released by the National Development and Reform Commission, Ministry of Commerce, the People’s Bank of China and the State Administration of Foreign Exchange (SAFE) yesterday. Page 8

Pension Page 5

HK Hang Seng Index November 28, 2016

22,830.57 +107.12 (+0.47%) Worst Performers

Hengan International Group

+4.00%

China Overseas Land &

+1.58%

China Unicom Hong Kong

-1.68%

Hang Seng Bank Ltd

-0.68%

China Shenhua Energy Co

+2.83%

Galaxy Entertainment Group

+1.35%

China Life Insurance Co Ltd

-1.32%

CK Hutchison Holdings Ltd

-0.53%

Want Want China Holdings

+2.78%

China Resources Power

+1.26%

Wharf Holdings Ltd/The

-1.25%

AIA Group Ltd

-0.42%

China Merchants Port Hold-

+2.29%

China Construction Bank

+1.22%

Bank of East Asia Ltd/The

-1.07%

CNOOC Ltd

-0.40%

Industrial & Commercial

+1.93%

Li & Fung Ltd

+1.20%

AAC Technologies Holdings

-0.85%

Cathay Pacific Airways Ltd

-0.19%

17° 20° 15° 20° 15° 21° 17° 21° 18° 22° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

Banana Republic

www.macaubusinessdaily.com

2 Business Daily Tuesday, November 29 2016

Macau Labour

Stable unemployment From August to October this year, the city’s unemployment remained unchanged, at 1.9 pct Annie Lao annie.lao@macaubusinessdaily.com

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he city’s unemployment rate has remained unchanged at 1.9 per cent for a period of 14 months, according to the latest data released by the Statistics and Census Services (DSEC) yesterday.

The labour force participation rate amounted to 72.3 per cent, down

by 0.6 percentage points from 72.9 per cent recorded in the previous period, from July to September.

During the same period, the city’s underemployment rate was at 0.7 per cent, up by 0.2 percentage points from 0.5 per cent in the previous period.

The total labour force in the city was 397,000 for the period of August to October, indicating a decrease of 1.2 per cent from the previous period.

The employed population of the total labour force amounted to 389,500, a fall of 1.2 per cent or 4,700 compared to the previous period.

In addition, of the city’s labour force about 7,500 people were unemployed, indicating a decrease of 1.6 per cent or 100 unemployed people compared to previous period, in which 7,600 were unemployed.

Of these 7,600 about 19.2 per cent were fresh labour force entrants looking for their first job in the city. This figure however shows a

decrease of 4.5 percentage points compared to the previous quarter.

Employment by industry

Examining the total employment by industry in the city, the recreational, cultural, gaming and other services sectors hired the most number of people, accounting for 22.9 per cent of the total employed population.

Hotels, restaurants and similar activities hired about 15.1 per cent of the total employed workforce, while the wholesale and retail trade, and construction segments hired about 11.7 per cent and 11 per cent respectively.

Of all the industry categories, only the hotels and similar activities segment showed an increase in employment, with a 2.5 per cent increase from the previous period, or 800 more hired, up to 32,000 compared to the previous period’s 31,200.

On the other hand, the construction industry presented the largest decrease in employment by 5.1 per cent, down 2,300 to 42,800 from the previous period, which saw employment in the sector hit 45,100. Gaming and junket activities also showed a drop in employment by 4.3 per cent to 77,000 down from the previous period’s 80,500. In addition, restaurants and similar activities showed a decrease of 1.6 per cent, down 400 to 26,800.

However, the wholesale and retail trade remained stable, with employee numbers at 45,600.

Industry

Industrial production index grows 4.5 pct in Q3 However the overall production of energy decreased compared to one year ago The city’s index of industrial production (IIP) rose by 4.5 per cent year-on-year to 98.2 for the third quarter of the year, despite the production of electricity, gas and water supply falling by 4 per cent year-on-year, according to official data from the Statistics and Census Service (DSEC).

During the three months, the production index of electricity, gas and water supply dropped to 85.9, down from 92.6 one year ago. In particular, the production index of electricity narrowed by 5.7 per cent, while that of water supply increased by 2 per cent, compared to the same period last year.

The overall production index of the manufacturing industry posted an increase of 14.4 per cent year-on-year to 114.9, compared to 100.4 one year ago, due to the manufacture of food products and beverages expanding by 17.7 per cent year-on-year.

The production index of the manufacture of tobacco also registered a growth of 6 per cent year-on-year, while that of the manufacture of textiles rose by 5 per cent year-on-year. However, the index of the manufacture of wearing apparel plunged by 55.6 per cent year-on-year.

O n a q u a r t e r- t o - q u a r t e r comparison, the quarter’s industrial production index represents a growth of 4.9 per cent. The production index of electricity, gas and water supply jumped by 9.3 per cent, driven by a 9.9 per cent increase in the production

Customs

Car park

Simplifying immigration clearance The city’s Commissioner of Public Security Police Force (CPSP), Leong Man Cheong said that the authority will continue to review and optimize the border immigration processes to increase convenience.

Speaking during TDM’s radio p r o g ra m m e ‘M aca u F o r u m ’ yesterday, Leong said that the review

of electricity as well as a 6.3 per cent growth in water supply.

M e a n w h i l e, t h e g e n e ra l production index of local manufacturing industries rose slightly by 0.9 per cent compared to the previous quarter, but that of the manufacture of tobacco went down by 14.9 per cent quarter-toquarter. K.L.

aims to improve strategies for peak season border crossings, with the authority studying the feasibility of a new customs clearance system to speed up the immigration process for travellers.

Deputy Commissioner of Public Security Police Force (CPSP), Ng Kam Wa, also speaking on ‘Macau Forum’,

pointed out that from January to October this year, a total of 130 million people had crossed Macau’s borders.

Ac c o r d i n g t o t h e D e p u t y Commissioner, on average 440,000 people have crossed the borders into Macau every day this year, a 2 per cent increase year-on-year.

Ng said that CPSP would continue to explore new possible ways of integrating technology into procedures to extend the border’s operating hours.

“Since the introduction of the self-service immigration clearance system in 2006, it has expanded its use to non-resident workers and holders of electronic passports,” Ng also pointed out.

Ng revealed that up until now about 1.6 million non-resident workers have registered to use the self-service immigration clearance system and the use of the self-service system now accounts for more than 50 per cent of the total border crossings in the city. Ng explained this has further helped reduce the workload pressure on the police. A.L.

New public car park launched A new car park goes into operation today, according to a dispatch released yesterday in the Official Gazette. Located near the Taipa fire station, the Chun Su Mei Car Park will provide a total of 394 parking spaces divided over four floors, of which 197 spaces are for cars and 197 for both heavy and light motorcycle vehicles.

Charges vary depending on usage type, day and night, with car charges amounting to MOP6 (US$0.75) per hour during the daytime and MOP3 after 8pm. Motorcycles cost MOP2 per hour during the day and MOP1 at night. C.U

Business Daily Tuesday, November 29 2016 3

Macau

Policy Debate

Recruitment under pressure The Secretary for Security revealed that the new border crossings will increase the demand for personnel, but young local workers are more attracted to work in the private sector Cecilia U cecilia.u@macaubusinessdaily.com

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he city’s Secretary for Security, Wong Sio Chak admitted that current recruitment for the city’s security forces continues to face great challenges, with several lawmakers voicing their concerns regarding the shortage of personnel for the secretariat for security.

During the plenary session of the Legislative Assembly on the security forces as part of the 2017 Policy Address, Secretary Wong explained that the upcoming launch of several major public infrastructure projects, in particular the borders connecting Mainland China and Macau, would create significant pressure on the work load of the police force.

“With the launch of the Pac On Ferry Terminal next year in February, the Zhuhai-Hong Kong-Macau Bridge launching the end of next year, the Guangdong-Macao New Route, as well as the expansion of the Cotai Frontier Port, with all of the borders operating 24 hours a day, it will for sure add significant pressure to our work load,” stated Secretary Chan.

The Secretary added that for the full operation of the soon-to-be launched public infrastructure projects, some

1,121 personnel would be needed in the coming three years.

One of the great challenges during recruiting, as stated by Secretary Wong, is to ensure that candidates who apply will remain in the job.

“This year, 519 candidates have applied [the examination] and some 200 of them have given up [during their training],” revealed the Secretary. “Thus [this year] we recruited only 350 of them.”

With more attractive offers from private companies, Secretary Wong indicated that the secretariat is competing with the private sector to hire new blood, adding that applicants who want to work in security sectors require at least 18 months training, followed by two to three years of experience before they can become an independent police officer.

The Secretary revealed that a 50 per cent ratio of successful recruits for the Correctional Services Bureau is considered as positive.

CCTV will not violate privacy

Legislator Ng Kuok Cheong expressed concerns about violating the privacy of citizens with the continued instalment of closed circuit television (CCTV) cameras throughout the city. Commissioner General of the Unitary Police Service Ma Io Kun

Macau-license car entry to Hengqin may launch next month

Secretary commented that the Standing Committee of Zhuhai Municipal Committee would visit Macau to discuss final decisions, adding that confirmation will be announced when the decisions are made.

Internet security law

to the internet security law will be submitted to the Legislative Assembly in the first half of next year, despite the amendments not being included in the legislative plans for next year. He said that the bill would be handed in if the proposal meets demands.

Vehicles with Macau-license plates will be able to gain entry to Hengqin, starting from December 20 this year. The

Owing to the continuous advancement of technology, with continual increases in the number of internet users, during his 2017 policy address, Secretary for Security Wong Sio Chak expressed his wish that the amendment

confirmed that citizens’ privacy was a priority consideration prior to the establishment of the surveillance operations. He added that detailed advice was being obtained from the Office for Personal Data Protection and that all departments involved in the CCTV operations are to strictly follow the guidelines and regulations of proper practices.

Meanwhile, Legislator Ho Ion Sang expressed his calculation that the installed cameras for the first phase cost MOP280,000 per camera, adding that the three different phases are using three different companies.

Secretary Wong replied that the CCTV instalment would be effective in combating crimes such as theft and assault.

Terrorism is on the agenda

In response to some concerns about

Co-operative inspection

During the plenary session, the Secretary for Security indicated that a co-operative inspection system will first be adopted for the launch of the Zhuhai-Hong Kong-Macau Bridge, instead of the Guangdong-Macau New

the MSAR potentially becoming a target of terrorist activities, the Secretary agreed that the city should never underestimate the possibility of terrorism, adding that evaluations were made in particular towards supervision of the city’s borders.

“Although terrorist attacks feel like they only take place far from us, they can in fact be quite near,” said the Secretary.

One of the lawmakers suggested following the methodology adopted

by Singapore, by providing antiterrorism manuals to the public.

The Secretary voiced his concern that providing such manuals would lead to unnecessary fear among the public, however related research will be carried out. He indicated that the Judiciary Police is to set up an investigation office to deal with terrorism crimes.

Route. He emphasised that the new clearance system will not have one inspection for each of the two regions, but inspections will be carried out co-operatively between the two regions, allowing travellers to only have to cross one, instead of two, borders.

4 Business Daily Tuesday, November 29 2016

Macau Notary

Opinion

Updated notary law comes into effect

The amended notary law comes into effect as of today, a dispatch released by the MSAR Chief Executive and published in the Official Gazette yesterday states. The revision includes mandating that law practitioners must have at least five years of notary experience in the city in order to become a private or public notary.

In addition, the number of training classes for private notaries has increased from 50 to 75.

Albano Martins*

Hallelujah, Macau’s GDP has finally grown!

The author of this event was the implicit GDP deflator, an index that shows the relationship between nominal and real GDP, obtained by dividing the nominal value by the real value, multiplied by one hundred.

What has happened?

When the deflators rise (translating the idea that the nominal value moves further from the real value, due to the increase of the various prices), the difference between the nominal and real growth of the economy is greater.

Conversely, when they grow less or even decrease, this translates into a smaller difference between nominal and real growth.

In the fourth quarter of 2016, nominal growth was 4.2 per cent and real growth 4 per cent, minus just 0.2 percent!

In the fourth quarter of 2013, for example, the nominal value of GDP had grown 22.6 per cent but the real was only 13.3 percent.

In practice there was a difference of 9.3 percentage points.

If we had a 2013-type deflator, we would have probably fallen more than 4 per cent, instead of growing by 4 percentage points!

That which was largely responsible, therefore, for the real growth in the fourth quarter was the deflator.

There has been a clear decrease in the ratio of gaming services / exports of other services! Diversification?

Please think!

This ratio, which has always been more than three points in periods of economic growth, fell below three points in 2015 and in 2016, and with the exception of the second quarter, was always below three points.

In the third quarter of 2016, the approximate ratio was 2.76 points.

But the truth is that in the last quarter of 2015, it was even lower than this value, reaching 2.6 points! Are we going to say that at that time we also saw a diversification judging by the dynamics of the economy itself?

Conclusion, this diversification was made, to be honest, when the game was not allowed to grow naturally.

Admitting that we would have a deflator as nice as the third quarter, for the economy not to decline in 2016 or, if you want, to stay at zero, real fourth quarter growth should be approximately 16.3 percentage points!

So, in 2016 the economy will still falling.

However, if the gaming industry has the same behavior as this November, we can then have a positive growth in 2017!

Maybe! * an economist and contributor to this newspaper

Democracy Candidates for the Legislative Assembly expressing

pro-independence views will be asked to renounce their views

Evaluating loyalty The Electoral Committee will evaluate the opinions of legislative assembly member candidates, and the sincerity of their loyalty pledge to the MSAR and its Basic Law

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he M a c a u E l e c t o r a l Committee will assess the loyalty of candidates wishing to become legislators, by analysing their expressed “opinions”, especially regarding China’s sovereignty, and will propose that they renounce any ‘pro-independence’ convictions, the government revealed yesterday.

“If anyone has previous proindependence views, the committee will evaluate and ask if [the candidate] is willing to give up these ideas,” said Secretary for Administration and Justice Sonia Chan, stressing that the electoral committee will only evaluate opinions expressed after the enforcement of the Electoral Law revision for the Legislative Assembly (AL).

Loyalty points

Last week, an amendment was announced to the law revision currently under consideration in the AL, with the introduction of a pledge of allegiance to the Macau Special Administrative Region and its Basic Law by the candidates for legislators, with the Electoral Committee set to evaluate the sincerity of the declarations.

The addition came after the legal interpretation made by the Standing Committee of the National People’s Congress (NPC) of Mainland China

prevented two Hong Kong legislators from taking office.

“The committee will evaluate these situations and there will be a mechanism to review the decision and to see if the candidate wants to maintain the position or not. If the candidate says ‘from this moment on I want to resign’ I think the commission will accept it,” said Secretary Sonia Chan, after a meeting with the AL sub-committee that is examining the Electoral Law revision.

Questioned if the defence of Macau’s independence is the only issue that could call into question the loyalty of a candidate for office, the Secretary replied that although “the most important is the sovereignty of the country,” views expressed which go against the fundamental law of Macau and “the entire content of the Basic Law” will also be evaluated.

S e c r e ta r y S ó n i a Ch a n a l s o admitted that there is no known “situation” of advocating for Macau’s independence, but recalled that “there are unexpected situations” giving the example of “a legislator who wanted to apply to the legislative assembly of another country,” referring to the case of legislator José Pereira Coutinho, who in 2015 applied for a seat in the Portuguese parliament.

“If we look at the Hong Kong case, there were clear guidelines by the

NPC. I think that if [the candidates in Macau] make a sincere statement, there won’t be a problem,” she said, noting that this addition to the Electoral Law was not required by the Mainland China central government.

Chan Chak Mo, chairman of the sub-committee in charge of analysing the Electoral Law revision, said that the issue of loyalty is not viewed as problematic by the sub-committee members.

“Our situation is different from that of Hong Kong. There is no problem with the pledge, so we will not discuss it any more,” said Mr Chan.

The legislator also stated that the committee intends to finish its revision on December 9, with a final vote to then be held in the AL plenary.

Starting a fire

On October 12, Hong Kong legislators Sixtus “Baggio” Leung Chung-hang and Regine Yau Wai-ching, elected in the September 4 legislative elections, took their pledge, but pronounced the word ‘China’ offensively and added their own words, committing themselves to serving the “Hong Kong nation”.

The pledges were deemed invalid and this month the NPC Standing Committee considered that the two pro-independence legislators could not repeat the pledge of office and take office.

The AL of the MSAR is composed of 33 seats, 14 elected by universal suffrage, with 12 by indirect suffrage, that is, by associations, and seven through appointment by the Chief Executive. Elections for the Macau AL will be held in 2017. Lusa

Business Daily Tuesday, November 29 2016 5

Macau

Fund

Private pension fund assets expand 17.6 pct as at Q3-end Total scheme members amounted to 138,691 at the end of the quarter Kam Leong kamleong@macaubusinessdaily.com

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total of MOP16.5 billion (US$2.1 billion)-worth in pension fund assets were under the management of nine local private fund managers as at the end of September, growing by 17.6 per cent compared to MOP13.6 billion for the same period last year.

According to the latest official data

of the Monetary Authority of Macau (AMCM), there were a total of 58 registered pension funds in the city, of which 54 were open funds while the other four were closed.

M ea n w hi l e, th e n u m b e r o f registered pension plans totalled 1,006 as at the end of September, an increase of 4.4 per cent year-on-year, of which 998 were defined-benefit plans while only eight were definedcontribution plans.

Of the total pension fund assets under management, 35.3 per cent, or MOP5.8 billion, were managed

by AIA international Ltd, a surge of 22.8 per cent from MOP4.7 billion one year ago.

Meanwhile, Luen Fung Hang Life

Ltd also saw the value of pension fund assets under its management grow by 22.1 per cent year-on-year, from MOP3.4 billion to MOP4.2 billion, accounting for 25.3 per cent of the total.

The other major fund managers were ICBC (Macau) Pension Fund Management Co. Ltd. and Macau Life Insurance Company, who were managing pension fund assets worth MOP1.8 billion and MOP1.3 billion as at the end of quarter, accounting for 12.5 per cent and 10.9 per cent of the total, respectively.

Increased scheme members

The total number of pension scheme members reached 138,691 as at the

end of September, rising by 3.8 per cent year-on-year, and covering around 41 per cent of the city’s total work force.

Of the total, 64,549 scheme members were working for the local gaming industry, suggesting 80.2 per cent of the city’s 80,500 gaming workers were contributing to private pension plans – the highest ratio among the major industries.

Meanwhile, some 11,530 pension scheme members were working for the wholesale and retail trade sector, while some other 23,952 were employed in the hotels, restaurants and similar activities sector.

In terms of coverage, following the gaming industry, the electricity, gas and water supply sector saw 73.5 per cent of its workers contributing to retirement plans, while the education field saw 60 per cent of its labour force doing so.

6 Business Daily Tuesday, November 29 2016

Macau Business Unites States, United Kingdom and Hong Kong seen as examples

to follow for adequate corporate governance practices

Leading by example The first objective of the Macau Corporate Governance Institute will be to organise a conference in the MSAR focused on corporate governance practices in place in Hong Kong, and prepare a general proposal to the government on how to improve local corporate governance Nelson Moura nelson.moura@macaubusinessdaily.com

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he recently created Macau Corporate Governance Institute’s (MCGI) first objective will be to organise a conference in Macau focused on corporate governance practices in Hong Kong, and to prepare a general proposal for the government on how to improve local corporate governance, the institute’s Chairman of the Board, Manuela António, told Business Daily.

“We want to strengthen the ties with Hong Kong to organise a conference on the progress and situation of corporate governance in that city, then prepare a proposal for the local government. I believe we can bring good practices of corporate governance from Hong Kong, Europe and

especially the United States,” said Ms. António, namesake of law firm Manuela António Lawyers and Notaries.

The lawyer and founder of the MCGI considers that the United States and the United Kingdom are examples of adequate corporate governance practices, due to the changes implemented after international crises, such as that in 2008.

The statements were made at the MCGI’s first official board meeting yesterday, with the non-profit organisation planning to expand its current membership of five businesses to 20 in the next months. Currently membership of the institute is made up of local and international corporations including: Companhia de Telecomunicações de Macau (CTM), CESL Asia, Banco Nacional Ultramarino (BNU), Golden Crown Development Ltd and MGM China Holdings Ltd.

Banking CGD to receive 2.7 bln euros from Portuguese government in 2017

Polite refusal The President of the Administrative Council of Portuguese bank Caixa Geral de Depósitos resigns three months after accepting the position, due to his refusal to divulge declarations of the bank’s administrators’ assets The President of the Administrative Council as well as six other members of Portuguese bank Caixa Geral de Depósitos (CGD) resigned from the bank after weeks of uproar regarding legislation passed in the Portuguese parliament mandating that administrators of the state-owned bank would have to present an asset declaration to the country’s Constitutional Court (TC).

The former president, António Domingues, has spent less than three months in the position, and considered the new legislation damaging to the administrative autonomy of CGD. The Portuguese Finance Ministry has already accepted his resignation, to take place in December.

Domingues is joined by three executive administrators and three non-executive administrators of the bank.

The executive accepted his position at CGD - the parent company of BNU Macau - on August 31, just days after the European Commission announced an agreement with the Portuguese government for the recapitalisation of the bank, news agency Lusa reported.

The Portuguese government has announced it will add 2.7 billion euros to CGD’s capital in 2017, bringing the total expected amount to 5 billion euros.

CGD registered considerable losses of 205.2 million euros (MOP1.8 billion/US$229.2 million) for the first half of 2016, with Mr. Domingues stating that a capital increase would be his main focus after taking the position.

However, the banker was involved in a series of controversies shortly after taking the helm of CGD, and was criticised for bringing many former administrators from private bank Banco Português de Investimento (BPI), where he previously worked as Vice-President, to the state-owned bank.

A new controversy also arose after the country’s Finance Minister, Mário Centeno revealed that Mr. Rodrigues would receive an annual remuneration of 423,000 euros, with the remaining CGD administrators receiving an annual salary of 337,000 euros, Lusa reported.

This generated some criticism from the country’s media and political representatives.

Despite Mr. Rodrigues’ resignation, the legislation passed by the Portuguese parliament will mandate CGD administrators fully disclose their assets, with refusal to do so leading to the prohibition of holding a position at the bank for a period of one to five years.

MCGI members

“We’ve had many companies calling us and stating their interest to collaborate and be part of the institute, which shows how dynamic the initiative will be,” stated Ms. António.

According to CTM’s CEO, Vandy Poon Fuk Hei, the MCGI acts as a group effort from businesses in different industries to provide some “benchmarking” for adequate corporate governance in the MSAR.

Crisis breed good lessons

The event also saw the signing of a memorandum of cooperation between the MCGI and the Corporate Governance Institute of Portugal, whose President Pedro Rebelo de Sousa, held a lecture on corporate governance for the MCGI board members.

“The Corporate Governance Institute of Portugal already has 15 years of experience in debating the issues that led to the recent international financial crisis and, of course, the Portugal case, which was created by an effective lack of procedure of correct corporate governance principles,”

Mr. Sousa told Business Daily.

According to Mr. Sousa, Macau can only benefit from developing corporate governance practices that promote efficient control mechanisms and more transparent and responsible management, such as in issues of administrators’ remunerations.

“Remuneration has been a popular debate topic currently, since remuneration can’t be influenced by the manipulation of corporate accounts, something that led to many cases internationally of former administrators leaving bankrupted companies with considerable compensations,” Mr. Sousa told Business Daily.

During his presentation, the president of the Corporate Governance Institute of Portugal explained how the UK Corporate Governance Code 2014 enforced corporate governance guidelines, such as the separation of the CEO and chairman roles, and included criteria that requires first and second board members to justify maintaining their positions after a maximum of six and nine years, respectively.

Tourism

Report: Asian outbound trend posts double-digit growth Global tourism research firm IPK Int’l expects the trend will continue in 2017 The trend of Asian outbound tourism is expected to remain strong for next year, following it reaching a record high so far for the first eight months of the year, says the 24th World Travel Monitor Forum that took place in Pisa, Italy earlier this month.

According to a press release by the Forum’s organiser, ITB Berlin, the figures of World Travel Monitor - conducted by tourism research firm IPK International – show total outbound travel by Asians increased by 11 per cent for the first eight months of the year, with China taking the lead, jumping by 18 per cent year-on-year.

In addition, the data notes South Korea also registered strong growth in the number of outbound trips, up by 11 per cent compared to the same period last year.

The firms, however, did not release the related number of outbound trend for the first eight months of the year, noting a full report on the world’s travel trends would be published

early next month.

Of the total outbound trips by Asians for the first eight months, holiday trips accounted for 81 per cent of the total, an increase of 11 per cent year-on-year, while the number of international business trips and family or friend visits also went up by 7 per cent and 12 per cent, respectively.

“This year’s boom in Asian outbound travel, especially by the Chinese, is remarkable,” said the Senior Vice President Travel & Logistics of Messe Berlin, Martin Buck. “Moreover, we can observe an important long-term trend. Asians are starting to go on fewer sightseeing trips taking in several countries.

Instead, many of them dream of relaxing on sun & beach holidays.

In other words, they are gradually becoming ‘typical holidaymakers’ like in Western countries.”

IPK predicts total Asian outbound trips will post a growth of 6 per cent for 2016.

Business Daily Tuesday, November 29 2016 7

Macau Labour Union

Gaming worker dismissal complaint New Macau Gaming Workers Rights complained to DSAL about alleged unfair dismissal of local dealers Annie Lao annie.lao@macaubusinessdaily.com

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ocal gaming labour group U n i o n o f N e w M aca u Gaming Workers Rights, together with a dismissed dealer previously employed by the Galaxy Entertainment Group, submitted a petition letter to the Labour Affairs Bureau (DSAL) yesterday afternoon.

Yesterday’s group was headed by gaming labour activist and director of the Union of New Macau Gaming Workers’ Rights Cloee Chao. Chao told reporters that the dismissed dealer, also surnamed Chao, was employed

by Galaxy Entertainment Group for four years and was fired in September last year without reasonable reasons given by the gaming operator for her dismissal.

“Right after the dismissal from my previous company, I filed a complaint to the DSAL. Since then, I have been unemployed for more than one year. The issue has not been settled

and I have still heard nothing from the Bureau yet,” the former dealer explained.

Difficult to find work

Since the dismissal from her previous company, Ms Chao has found it difficult to work in a similar field in the gaming industry and believes she has been blacklisted by her previous company, and potentially by other

gaming operators.

“It is very hard for me to find a new job because I was fired by my previous company. Other gaming companies won’t hire me when they find out I was fired before,” Chao said.

“The reason I was fired was because I increased the betting limits for gamblers from MOP500 (USD63) to MOP1,000, but this does not fit into the category [as a reason] for being fired,” Chao explained.

Chao revealed that some of her previous colleagues had been fired in July this year due to taking increased

sick leave from work.

“Two other gaming operators that I know, fired their employees once they found out their employees were receiving benefits from their clients,” Chao said.

The director of the gaming workers union told reporters that they have received many similar cases involving local dealers who have been fired and are having difficulties in finding a similar job position in another casino.

She even said it is hard for them to be hired to work at a restaurant inside the casino resort.

No response yet

“We hope the DSAL can communicate with the gaming operators about this unfair treatment,” Director Chao said.

“We don’t understand why it takes so much time for the DSAL to process this case to find out the reason behind this unfair dismissal, and it usually takes about six months for DSAL to deal with work dismissal cases,” Director Chao explained.

Business Daily contacted Galaxy Entertainment Group for comment yesterday but had not received a response by the time this went to press.

Gaming Singapore seen as best integrated resort model in Asia Pacific

Not leading by example A survey considers that the possible legalisation of gaming in integrated resorts in Japan, could explore an Asian integrated resort market still under development in terms of diversification of leisure offerings, such as the Macau situation If Japan passes its Integrated Resort Promotion Bill, it will have an opportunity to enter an integrated resort market in Asia Pacific that has yet to reach its ‘mature phase’ in terms of diversified leisure offerings, according to a study published in the Journal of Gambling and Commercial Gaming Research.

Key Points Report suggestions for the Japanese government when approving integrated resorts in order to create a diversified market: Integrated resorts should promote tourism and conventions and be limited in number and geography Enforcing gaming privilege tax rates should encourage maximum capital investment and periodic refreshment No temporary casinos should be accepted, with capital investment promised when bids are submitted having to be expended in total within three years Licenses should only be provided to companies that have demonstrated fiscal probity and financial capability and stability The report looks to propose a model for integrated resort development in Japan, using Singapore as an example, due to its sustainable gaming development so far when compared to the Macau model. The report also notes that if Japan does legalise gaming in integrated resorts, the MSAR could suffer, due to its market being dependant on narrower consumer offerings such as baccarat.

Konnichiwa gaming

International gaming operators are regaining confidence in the idea that an Integrated Resort Promotion Bill

could be about to be passed by the Japanese government, as Japan’s Prime Minister Shinzo Abe secured a majority in the Japanese legislature for his ruling Liberal Democratic Party, in theory being able to push through legislation that previously faced opposition from the Buddhist Komeito party since it was first proposed in 2014.

According to Business Insider, investment banking provider CLSA estimated that if the legalisation is pushed through, the Japanese gaming market could be valued at US$40 billion (MOP319.5 million).

The report states that legalising gaming could stimulate tourism and Japan’s economy, adding that although large integrated resorts are considered ‘risky investments for both the owners and the government’, Japan’s market size would help support the benefits and risks of integrated resorts, with the success or failure of casinos in the country depending on the approved law.

An integrated resort history

After studying the development of gaming markets in Las Vegas, Atlantic City, Macau and Singapore, the study’s researchers - Eugene Martin Christiansen, Anthony N. Cabot and Beverly Zou - looked to assess the best model for the development of a sustainable gaming market in Japan.

‘Las Vegas’ enduring success as a magnet for global tourism demonstrates that legalized gaming can, if appropriate government policies are adopted, motivate license holders to invest substantial amounts of capital in non-gaming amenities, to stimulate tourism, promote sustainable economic development, or for other public-policy purposes,’ state the authors.

According to the research, after legalisation, gaming markets tend to report increasing gross gaming revenues in the early stages when the market is ‘grossly undersupplied’,

growing at a faster rate than the general economy.

‘For [integrated resorts], the initial phase of gaming market development (…) is the stage of greatest opportunity. This initial phase is when above-average returns justify above-average capital investment, and when investment in a sustainable, diversified leisure economic engine is feasible. Eventually, gaming markets mature, and their growth phase ends,’ the report states.

Wrong models

Macau and Atlantic City were cited as examples of negative models for sustainable gaming development, as the cities wasted this initial phase of opportunity for rapid growth and investment in ‘diversified non-gaming amenities’, similar to the Las Vegas model.

‘The casino hotels in Macau resemble casino hotels in Atlantic City more closely than they do the diversified resorts along the Las Vegas Strip. Macau has made comparatively little capital investment in leisure offerings beyond baccarat, hotel rooms, and retail,’ states the report.

The study also reports that the considerable investments to create more diversified integrated resorts prior to 2007, such as Galaxy Macau’s Phase II ‘may have come too late’ considering the downturn in the gaming market.

‘As a result, Macau may find itself

in Atlantic City’s predicament: dependent on the narrow consumer offering of baccarat and other casino games in a world where consumers increasingly allocate their leisure time to non-gambling activities on mobile phones, tablets, and interactive social media,’ states the report.

Right models

On the other hand, Singapore is presented as a more successful and sustainable gaming development model, with the city having legalised gaming in 2006, and focused capital investment into destination resorts designed for long-distance tourists instead of a ‘day-trip or locals’ casino market’, and providing gaming licences that limit the percentage of gaming property revenue.

Measures such as a 5 per cent tax on gross gaming revenue derived from premium players, and 15 per cent of gross gaming revenue derived from mass market players, had the objective of creating an advantage for the city when compared to Macau, which has a gaming privilege tax rate of nearly 40 per cent.

Afterwards, Singapore’s two integrated casino resorts - which opened in 2010 with a combined capital investment of approximately US$7.1 billion - proved ‘highly successful’ according to the report, with the city’s gross gaming revenues fluctuating ‘in a seasonal pattern’ instead of accentuated fall.

8 Business Daily Tuesday, November 29 2016

Greater China

Outflow concerns

Government will stick to “going out” strategy Pressure on the yuan and other emerging market currencies has intensified in recent weeks

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hina said yesterday it will stick to its opening up policy and “going out” strategy on investment even while a slide in the yuan to 8-1/2-year lows revives worries about capital fleeing the country.

Officials from the National Development and Reform Commission, the Ministry of Commerce, the People’s Bank of China and the State Administration of Foreign Exchange said the country will continue to encourage healthy development of outbound investment, the official Xinhua news agency reported.

The Wall Street Journal reported on Friday that China plans to tighten controls on companies looking to invest abroad in an effort to slow surging outflows.

While Beijing has been busily damming up official channels for money to leave China, more funds than

ever are leaking out through shady means as investors flee the country’s slowing economy and weakening currency, financial industry executives say.

The yuan has fallen more than 6 per cent versus the dollar this year, but has been relatively stable against a basket of currencies.

The surge in overseas investment heightens foreign exchange risks but also poses potential threats to China’s financial system if these deals start to go bad, analysts at China International Capital Corporation said in a note yesterday.

“Emerging markets’ experience has repeatedly shown that one-way currency bets, on appreciation or depreciation, tend to be followed by substantial losses to local financial institutions,” CICC analysts wrote.

“In other words, reckless overseas investment could threaten financial

stability.”

Though still the world’s largest, China’s foreign currency reserves have fallen to their lowest since March 2011, with the PBOC widely believed to have sold dollars to cushion the yuan’s decline.

Key Points China confirms “going out” strategy unchanged Encourages healthy development of outbound investment Falling yuan sparks concerns of capital flight One-way FX bets usually followed by “substantial losses”-analyst Pressure on the yuan and other emerging market currencies has intensified in recent weeks as the dollar surged on expectations that U.S. President-elect Donald Trump will ramp up fiscal spending to boost the economy.

China’s central bank has urged commercial banks in Shanghai to guard against money outflows via the Shanghai Free Trade Zone (FTZ) disguised as foreign investment, two sources with knowledge of the instructions said on Friday.

The central bank said it was unable to comment on reports of tighter controls on overseas investments.

Financial news outlet Caixin reported on Saturday the PBOC is also considering including cross-border yuan business into risk assessments for banks, quoting an unidentified banker as saying the move would force banks to “do more incoming yuan business, and less yuan outflow activities”.

In comments on Sunday, PBOC Vice Governor Yi Gang predicted that capital outflows seen after August 2015’s surprise devaluation of the currency would start to reverse.

“As China’s economy recovers and institutional reform improves the business environment, the money that has left will come back,” Yi said.

Reuters

Mainland markets

Domestic bears beware: Bank stocks seen staging a comeback in 2017 China International Capital expects the listed banks to post combined profit growth of 7 pct next year Chinese banks are poised to rally next year as bad loans stabilize and they see renewed profit growth after years of declines, according to China Merchants Securities Co. and China International Capital Corp (CICC).

Shares of 16 large lenders listed on the mainland may climb at least 25 per cent next year, with the priceto-book value ratio exceeding 1 times from the current 0.8, said Ma Kunpeng, a Shanghai-based analyst at Merchants Securities. Shares of Hong Kong-listed Chinese banks have room for a 45 per cent gain, according to CICC analysts led by Anson Huang.

China’s banks have underperformed the benchmark Hang Seng Index in Hong Kong for five of the past six years as global investors grew concerned that souring loans from

an almost decade-long credit binge could trigger a financial crisis. The analysis from CICC and Merchants suggests banks may be on a stronger footing than many have feared.

In an extreme scenario, the badloan ratio at Chinese banks could climb to 21 per cent, leading to a capital shortfall of RMB13.6 trillion (US$2 trillion), Fitch Ratings said in July. U.S. hedge fund manager Kyle Bass in January flagged US$3.5 trillion of bank losses.

Most preferred

Credit Suisse Group AG analysts said yesterday that they prefer China banks among Asia-Pacific peers for the next six to nine months as the government ensures economic growth stays around the current pace and lending margins remain largely

CICC’s most-recommended banks: Bank of Jiangsu Co. BOC Hong Kong Holdings Ltd.

Merchants Bank’s most-recommended banks: Bank of Guiyang Co. Bank of Nanjing Co. Bank of Ningbo Co. China Citic Bank Corp.

stable. Investors should hold Chinese banks at least until June, when they’re expected to pay a 5.5 per cent dividend yield, the analysts including Sanjay Jain wrote in a note.

CICC expects the listed banks to post combined profit growth of 7 per cent in 2017, up from 3 per cent this year, as the economic outlook improves, corporate earnings recover and a contraction of net interest margins eases. The implied nonperforming loan ratio at China banks has dropped to 10.7 per cent from 11.9 per cent in the first half, the analysts said.

Merchants Bank’s Ma cited a slower bad-loan formation rate, a commodity rally and progress in

“supply-side” economic reforms as drivers for improvements in lenders’ asset quality. He expects profit before provisions at the 16 mainland-listed banks will rise 10 per cent to 2.72 trillion yuan in 2017. Smaller city banks that listed this year may trade at 2.5 to 3 times estimated book value, with an ability to report annual profit growth of about 20 per cent for the next 10 years.

Industrial & Commercial Bank of China Ltd., the world’s largest bank by assets, has gained 1.9 per cent in Hong Kong this year, underperforming the Hang Seng’s 4.3 per cent advance. In Shanghai, the shares have lost about 1 per cent. Bloomberg News

Business Daily Tuesday, November 29 2016 9

Greater China M&A spree

In Brief

Beijing said to prepare overseas deal making curbs Regulators will pay extra attention to deals by highly leveraged firms and companies with poor return on assets China plans to implement sweeping curbs on overseas deal making by the nation’s companies, people with knowledge of the matter said, as a record outbound acquisition spree puts pressure on its currency to weaken.

Regulators will generally bar overseas investments of US$10 billion and above, while leaving room for some strategic deals to be executed, the people said. That will also apply to foreign property investments of at least US$1 billion by state-owned enterprises, as well as take-privates of overseas-listed Chinese companies using onshore capital, according to the people, who asked not to be

identified because the information is private.

The curbs will last until the end of September 2017, the people said, adding that the rationale for the measures wasn’t explained in detail. Regulators will pay extra attention to deals by highly leveraged firms and companies with poor return on assets, according to the people.

China will also restrict overseas investments of at least US$1 billion in industries outside a buyer’s core business, according to the people. Stake purchases of less than 10 per cent in an overseas-listed company, as well as Chinese companies’ subsidiaries

doing overseas acquisitions valued at more than their parent company, also will be curbed, the people said.

The State Council will issue guidelines on the curbs, at which point it will ask government agencies to draft more detailed rules on implementation, according to the people. China’s top economic-planning body, the National Development and Reform Commission, didn’t immediately reply to faxed questions. The Wall Street Journal reported the measures Friday, citing unidentified people and documents reviewed by the newspaper.

‘Government will also restrict overseas investments of at least US$1 billion in industries outside a buyer’s core business’ The government will review some companies’ outbound investment projects in accordance with related rules, according to a report yesterday from the official Xinhua News Agency posted on the NDRC’s website.

China will stick to its “go global” strategy and the current management policy, which mainly relies on a registration system for outbound investments, the Xinhua report said, citing a joint comment from the NDRC and three other government bodies. Bloomberg News

Green energy

Mainland risks wasting US$490 billion on coal plants Beijing has repeatedly pledged to cut overcapacity in several sectors as it seeks to reform the economy to make it more efficient China could waste as much as half a trillion dollars on unnecessary new coal-fired power stations, a climate campaign group said yesterday, arguing the world’s top carbon polluter already has more than enough such facilities.

The Asian giant’s rise to become the world’s second largest economy was largely powered by cheap, dirty coal.

But as growth slows, the country has had a difficult time weaning itself off the fuel, even as the pollution it causes wreaks havoc on the environment and public health.

“This misallocation of capital is a microcosm of wider structural woes within the Chinese economy” Carbon Tracker Initiative report

Many of China’s giant state-owned coal mining firms are unviable and plagued by overcapacity, but the ruling Communist Party is reluctant to turn off the financial taps and risk widespread unemployment, with its potential for anger and unrest.

As of July, China already had 895 GW in coal-fired power stations - representing more than half its electricity generation - said the

London-based Carbon Tracker Initiative, which argues for limiting carbon emissions using financial data.

The country was operating the coal units at less than half their capacity, it said, but “perversely” had another 205 GW already under construction and plans for an additional 405 GW. At an estimated US$800 million per kW, that could cost US$490 billion in total, CTI said.

“This misallocation of capital is a microcosm of wider structural woes within the Chinese economy,” it said in a report.

Power demand growth had slowed from 10 per cent to three per cent or less per year, it added.

Even if power consumption grew at five per cent a year until 2020 and coal-fired stations were run at 45 per cent capacity, it said, existing plants and those currently under construction would be more than enough.

“China no longer needs to build any additional coal plants and therefore should act with conviction to contain its coal overcapacity crisis,” the report said.

Beijing has repeatedly pledged to cut overcapacity in several sectors as it seeks to reform the economy to make it more efficient.

It set a target of reducing coal production capacity by 250 million tonnes this year, which Premier Li Keqiang announced last week had been met by the end of October.

But even though capacity cuts do not necessarily lead to reductions in production, they have been blamed for rising coal prices, giving stricken producers a new lease of financial life.

CTI’s comments echo statements by environmental campaign group Greenpeace, which estimated in July that China has up to 300 GW of excess coal-fired capacity.

Two new coal power plant projects were being begun each week across 10 different provinces, it stated.

China’s current five-year plan - a blueprint for economic and social development in 2016-2020 - was “disappointing” and “far from ambitious enough” in tackling coal power overcapacity, Greenpeace has said.

Public discontent about the environment has grown in China, leading the government to declare a “war on pollution” and vow to reduce the proportion of energy derived from fossil fuels, but critics say efforts have fallen short of expectations. AFP

Moody’s

Residential property market outlook stable The outlook for China’s residential property market in 2017 is stable, Moody’s Investors Service said in a report yesterday. A sharp decline in home prices is “unlikely” in the next six to 12 months, given relative low inventory levels in first- and second-tier cities, the report said. In fact, home prices are projected to rise modestly in 2017 against an already high base, said Kaven Tsang, a Moody’s vice president and senior credit officer. In 2016, total sales value will have risen 25 per cent by the end of the year from a year earlier, Tsang said.

Lou Jiwei

Structural reform proceeds fast China’s structural reform has made rapid progress as a whole thanks to a string of government reforms, Lou Jiwei, newly-appointed chairman of the National Council for Social Security Fund, said on Sunday. Global issues like sluggish demand and high debt ratio are rooted in medium-long term structural problems of global economy, Lou said at an annual meeting on Chinese economy and international cooperation.

China’s structural reform has achieved remarkable results under the government’s efforts to streamline administration, lower market access, remove barriers, and push forward reforms of price, household registration and finance, according to Lou. Insurers challenges

Regulator warns increasing risks on credit assets China’s insurance regulator said yesterday that risks are rising for insurers’ credit assets, according to a post on the official website of the regulator. The China Insurance Regulatory Commission (CIRC) has adopted a slew of measures this year to reduce risks from insurers, from reining in aggressive acquisitions to investing in long-term assets using short-term funds. Chen Wenhui, the vice chairman of the CIRC, said 80 per cent of insurance assets were invested in credit-related assets and credit risks were rising, even as insurance firms chase higher yields.

Workers safety

Nine detained over power plant collapse Nine people are facing criminal charges in connection with a deadly construction site accident in east China’s Jiangxi Province, police said yesterday. The platform for a cooling tower of a power plant under construction collapsed in Fengcheng City on Nov. 24, leaving 74 people dead and two injured. Local police detained nine people suspected of major liability in the accident early yesterday. Construction on the cooling tower is part of an expansion of the Fengcheng Power Plant owned by Jiangxi Ganneng Co. Ltd. The tower is being built by Hebei Yineng Tower Engineering Co. Ltd.

10 Business Daily Tuesday, November 29 2016

Greater China

People’s Bank of China headquarters

PBOC operations

Mainland quietly hiked borrowing costs Without the kind of policy announcements of counterparts elsewhere, analysts are stuck divining officials’ intentions through market moves Lianting Tu

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ithout a policy announcement, China’s central bank has effectively tightened monetary conditions in recent weeks, an analysis of its transactions shows.

The People’s Bank of China has cut back on seven-day open-market operations and is instead injecting more funds through 14-day and 28day contracts. That’s had the effect of raising short-term borrowing costs and pressing up bond yields. It’s another sign of selective tightening by the PBOC that’s reinforced the views of many economists that China has turned the corner away from monetary stimulus.

With economic growth stable, policy makers are trying to rein in leverage in the world’s No. 2 economy. The impact is being felt in the debt market, where the government yield curve has reached the steepest since April and the yield premium on three-year AAA corporate bonds is set for the biggest jump in seven months.

“China’s central bank has essentially raised rates by 25 basis points through money market operations,” said Deng Haiqing, chief economist at JZ Securities Co. in Beijing.

PBOC Governor Zhou Xiaochuan has increasingly relied on market rates to guide policy, shifting away from the old benchmarks - the oneyear lending rate and the required reserve ratio for banks. The PBOC didn’t immediately respond to a faxed request for comment.

Interbank rates have “basically gone up 20 to 30 basis points,” said Ming Ming, the head of fixed-income research at Citic Securities Co. and an ex-PBOC official.

Bond returns are being hurt by a PBOC effort to squeeze financial-market leverage. While the central bank injects money with seven-day reverse repurchase operations at 2.25 per cent, it has started offering 14-day and 28-day contracts at rates as much as 30 basis points higher. The end result is secondary market one-week funding costs of around 2.5 per cent.

Liquidity is likely to stay tight through the Lunar New Year at the end

of January, before improving, according to Meng Xiangjuan, head of fixed income research at SWS Research Co. “We don’t expect monetary policy to be eased further,” said Jing Lei, Beijing-based chief investment officer of fixed income at Harvest Fund Management Co., which manages 315 billion yuan (US$46 billion). “All the regulators are trying to control the leverage in financial markets.”

Harvest is less bullish for 2017 after corporate notes returned 4.1 per cent so far this year, down from 11 per cent in 2015 and 12 per cent in 2014, Bank of Merrill Lynch indexes show.

The AAA yield premium widened 15 basis points so far this month to 79.

Stress in the corporate bond market was heightened by two Chinese companies that failed to make payments on local bonds this month, though they made good on the obligations a day late. At least 23 onshore bonds have seen defaults this year, still a small figure but up from just seven in 2015.

Investors have been turning more cautious with leverage in the interbank market falling. Outstanding repurchase agreements reached 8.9 trillion yuan in October, down from a record 9.7 trillion yuan in December, the latest National Interbank Funding Centre data show.

China’s sovereign yields have risen, along with those of counterparts around the world in reaction to U.S.

President-elect Donald Trump’s stimulus policies, steepening the yield curve as seen below:

“The bond market adjustment is only beginning.

We expect the yield curve steepening to be the main feature of the market in 2017, driven by mild PBOC tightening” Deng Haiqing, chief economist at JZ Securities Co. “You can see a little more steepening of the curve,” said Neeraj Seth, head of Asian credit at BlackRock Inc. in Singapore, which is waiting for buying opportunities in long-end notes.For his part, Seth sees neither tightening nor loosening from the PBOC going forward. “It will be a neutral monetary policy.” Bloomberg News

New Economy Index

‘Data king’ tracks new economy with index Premier Li likes It’s one of many alternative indicators tracking brokers, law firms, software companies, pharmaceutical labs and new energy car plants As China shifts away from the old smokestack industries that powered its economic rise, the new pillars of consumers and services are more important than ever.

They’re also trickier to measure than the straightforward old drivers like railroad volumes or steel production, but data miners are decoding them with new tools.

One solution is the New Economy Index, which is compiled from online sources such as air traffic, employment ads and venture capital investments to give better and earlier reads on some of the more vibrant parts of the world’s second-largest economy. Premier Li Keqiang, whose musings on proxies for growth live on as an index of their own, called the new gauge “entrepreneurial” during an April visit to Peking University.

It’s one of many alternative indicators tracking brokers, law firms, software companies, pharmaceutical labs and new energy car plants that are filling out the picture of activity beyond the older and more established official statistics from the government.

The team behind the gauge is Chengdu-based data miner Business

Big Data (BBD), Peking University, and Shanghai-based investment adviser CEBM Group Ltd., a unit of business magazine publisher Caixin Media Co. BBD Chief Economist Chen Qin explains his ambition by way of a Song Dynasty poem: “The duck knows first when the river becomes warm in spring,” he said. “We catch the ducks and see where the entire economy is going.”

Chen’s New Economy Index, which expresses the amount of that

activity as a ratio compared with the broader economy, decreased to 29.2 in October from 30.1 in the previous month.

Chen said China’s economy is transitioning toward companies with highly skilled employees and big investments in technology. Those are among the criteria he uses to select 111 industries that are more sensitive to changes in momentum, from equipment manufacturing to financial and legal services, to express how the new drivers are doing.

Chen’s work has attracted attention beyond the premier. He racked up more than 100,000 followers at Q&A site Zhihu.com by answering questions about economics and demographics during his days as lecturer at Fudan

University in Shanghai. Fans on the site have dubbed him Shuju Di, the “Data King.”

Chen’s transition from academia to big data guru followed a bout of boredom during an especially tedious paper review and editing process. A friend he knew from Zhihu mentioned the opportunity at BBD, he started part time last year, and soon was working full time. Now he’s leading a team of analysts he recently hired into uncharted territory.

“More and more businesses are showing their behaviour online” Chen Qin, Business Big Data Chief Economist

“There are still too many leading indicators to be mined from the web,” Chen said, citing the number of new marketing and sales job listings that express corporate confidence in expansion as well as how he sees airline and rail travel as leading indicators for big city property prices. “More and more businesses are showing their behaviour online.” Bloomberg News

Business Daily Tuesday, November 29 2016 11

Asia Job market

Aussie “backpacker tax” to be halved Without backpackers, many Australian farmers would not be able to secure sufficient help to pick enough fruit before it begins to rot

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n a last-ditch effort to ensure Australia’s farmers have sufficient help ahead of the fruit picking season, Australia’s coalition government has agreed on a compromise which will set the nation’s “backpacker tax” at 15 per cent.

After a weekend of negotiations with the Senate crossbench, Treasurer Scott Morrison announced the government had accepted a 15 per cent compromise, down from the current 32.5 per cent tax rate.

“In time we hope that lessons are learned so that the farm sector is never compromised in this way ever again”

many have argued the current rate has discouraged working holidaymakers from choosing Australia as their working holiday destination.

Yesterday, the government’s compromise was backed by the National Farmers’ Federation (NFF) with CEO Tony Mahar urging the Senate to “expedite” the passage of the bill ahead of the fruit picking season.

“It has been a painful process but we wholeheartedly welcome the announcement that a compromise rate of 15 per cent has been reached,” Mahar said in a statement released yesterday.

“The NFF back to the Colbeck Review said that a rate between 15

per cent and 19 per cent was a fair one that would attract backpackers to the sector and be comparable with rates paid to Australian workers.”

“We now ask that the Senate expedite passage of the relevant legislation to provide the long needed certainty to the sector and allow businesses to start rebuilding backpacker interest in on-farm jobs.

Despite the government’s decision to come to the table on negotiations, both the Labour opposition and the Greens have said they will maintain their hard-line position of striving for a 10.5 per cent tax rate.

“The Labour party will maintain its position on the 10.5 per cent,” deputy Labour leader Anthony Albanese said.

Meanwhile, Greens Senator Peter Whish-Wilson said his party would be more likely to support a 15 per cent tax rate if the government scraps the associated 95 per cent claw back on superannuation earned by the

backpackers.

“The Senate really should not be supporting this proposal on a 15 per cent backpacker rate,” Whish-Wilson said yesterday.

“With the 95 per cent claw back on superannuation of backpackers then the effective tax rate is closer to 24 per cent which is... roughly double the tax rate for backpackers in New Zealand.”

“We are seeking advice on whether we can move an amendment to this new bill to cancel the superannuation claw backs.”

However, with both the government vote and the expected crossbench support, the bill is likely to pass in its 15 per cent form.

Usually employed on a casual basis, backpackers help farmers pick seasonal harvests of grapes, cherries, blueberries, oranges, melons, apples and bananas, mainly in Australia’s eastern states. Xinhua

Tony Mahar, CEO of National Farmers’ Federation It’s expected the compromise will satisfy the crossbench, meaning the bill will pass the Senate before Parliament takes its Christmas break from Thursday.

Earlier this month, the nation’s Senate committee urged parliament to pass the bill as soon as possible in order to maintain Australia’s attractiveness to working holidaymakers and to secure extra harvest labour for farmers ahead of the summer season.

Australia’s agriculture sector relies on the labour of backpackers, and

Backpackers help farmers pick seasonal harvests of grapes, cherries, blueberries, oranges, melons, apples and bananas, mainly in Australia’s eastern states

Private poll

South Korea exports seen likely to rebound Inflation rate is expected to pick up for a third straight month South Korea’s exports are expected to rise in November for the first time since August as the shock from Samsung Electronics’ Galaxy Note 7 cancellation and strikes at Hyundai Motor Co dissipates and global trade shows signs of improvement.

Exports are expected to rise 1.2 per cent this month from a year ago, bouncing from a 3.2 per cent decline in October, a Reuters poll found on Monday. Imports are expected to gain 2.9 per cent over the same period versus a 4.8 per cent drop in October, the same poll showed.

Shipments have fallen every month of the past two years with the exception of August when they rose.

“It’s positive global trade conditions have improved compared to the first half of the year,” said Na Jung-hyuk, an economist at Hyundai Securities in Seoul.

“Whether this will be sustained is yet to be seen as we’re facing a number of global factors that will spark uncertainty, like Donald Trump taking office in the U.S., which will aggravate concerns over protectionism.”

As the world’s sixth biggest exporter with key shipments ranging from smartphones to cars, South Korea has been seen as one of the most vulnerable economies should the incoming Trump administration adopt protectionist policies.

South Korea’s inflation rate is expected to pick up for a third straight month to 1.5 per cent in November from 1.3 per cent in October, the Reuters poll showed, with prices of several global commodities on the rise.

Key Points Oct industrial output seen -0.1 pct s/adj m/m Nov exports seen +1.2 pct y/y, imports +2.9 pct y/y Nov CPI seen +1.5 pct y/y, vs +1.3 pct in Oct Fresh produce prices are expected to continue adding inflationary pressure, in addition to the city gas price hike that took effect Nov. 1.

Meanwhile, the same poll saw industrial output likely to slip 0.1 per cent on-month in October, down from a 0.3 per cent gain seen in September.

October industrial output data will be published on Nov. 30, with November trade and inflation data out on Dec. 1. Reuters

12 Business Daily Tuesday, November 29 2016

Asia Trade

Unexpected fall in Thailand’s exports adds to gloom Thai exports to the United States, the country’s biggest market, dropped 4.7 per cent from a year earlier Kitiphong Thaichareon and Orathai Sriring

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hailand ’ s c u s toms-cleared exports unexpectedly dropped in October after two months of gains, adding to pressure on the struggling, trade-reliant economy in the face of tepid global demand.

Exports, worth about two-thirds of the Thai economy, have contracted the past three years, placing a big

drag on the military government’s attempts to revive Southeast Asia’s second-largest economy.

Domestic consumption also remains sluggish, despite the junta’s efforts to boost demand since it seized power in May 2014 to end months of political turmoil.

Exports fell 4.2 per cent from a year earlier, commerce ministry data showed yesterday, compared with the median forecast for a rise of 2.15 per cent in a Reuters poll and a 3.4

per cent increase in September.

“This suggests a fragile recovery in exports and it’s difficult to see positive exports this year,” said Sarun Sunansathaporn, an economist at Bank of Ayudhaya.

“But exports should improve next year as commodity prices stabilise and export quantity increases,” he said. “Higher imports will also benefit future exports.”

Imports in October rose a better-than-expected 6.5 per cent from a year earlier. Economists had expected a rise of 3.6 per cent after an increase of 5.6 per cent in September.

Imports of raw materials rose 17.46

per cent in October on-year, led by electronics parts, chemical products, while consumer goods rose about 2.6 per cent.

Many of Thailand’s imports are assembled into finished goods and shipped out again.

Last week, the state planning agency predicted exports would be flat this year, rather than fall 1.9 per cent as previously projected. It expected the economy go grow 3.2 per cent this year, up from 2.8 per cent last year.

Key Points Oct exports -4.2 pct y/y vs +2.15 pct in Reuters poll Oct imports +6.5 pct y/y vs +3.6 pct in poll Oct trade surplus US$0.25 bln vs poll’s US$1.90 bln surplus Jan-Oct exports -1.0 pct y/y, imports -5.9 pct y/y Difficult to see export rise this year - economist

The export decline in October was due to slow global trade, weaker shipments of gold and oil products, and the fall was magnified by comparison with last year’s high base, senior ministry official Pimchanok Vonkhorporn told a briefing.

In January-October, exports dropped 1.0 per cent on-year but the ministry hopes for a small rise in shipments this year.

“We are still confident that exports will show good growth in the last two months, as many factors are on the upside, such as farm product prices and oil prices,” Pimchanok said.

Last month, Thai exports to the United States, Thailand’s biggest market, dropped 4.7 per cent from a year earlier, while those to Europe slumped 9.2 per cent.

But shipments to Japan rose 8.9 per cent on-year and ones to China increased 4.4 per cent. Reuters

Nuclear disaster

Fukushima compensation costs to almost double The part of the cost increase will be passed on in electricity fees Japan’s trade ministry has almost doubled the estimated cost of compensation for the 2011 Fukushima nuclear disaster and decommissioning of the damaged Fukushima-Daiichi nuclear plant to more than 20 trillion yen (US$177.51 billion), the Nikkei business daily reported on Sunday.

The new estimate raised the cost of compensation to 8 trillion yen and decontamination to 4-5 trillion yen, the cost for an interim storage facility remained steady, and decommissioning will rise by several trillion yen, it added.

The part of the cost increase will be passed on in electricity fees, it added, citing multiple unnamed sources familiar with the matter.

The ministry could not provide immediate comment.

On March 11, 2011, a massive 9 magnitude earthquake, the strongest quake ever recorded in Japan, created three tsunamis that knocked out the Fukushima-Daiichi plant, causing the worst nuclear crisis since Chernobyl a quarter of a century earlier.

The Ministry of Economy, Trade and Industry will discuss with the Ministry of Finance a possible expansion of the interest-free loan programme from 9 trillion yen, to help support the finances

of the Fukushima plant operator Tokyo Electric Power Co’s, the report said.

The cost of cleaning up Tokyo Electric Power’s wrecked FukushimaDaiichi nuclear plant may rise to several billion dollars a year, from less than US$800 million per year now, the Japanese government said last month.

The Mainichi newspaper reported in October that Japan’s utilities lobby expects clean-up and compensation costs from the Fukushima disaster to overshoot previous estimates by 8.1 trillion yen. Reuters

‘Trade ministry at the end of 2013 calculated the cost at 11 trillion yen’ The trade ministry at the end of 2013 calculated the cost at 11 trillion yen, which was comprised of 5.4 trillion yen for compensation, 2.5 trillion yen for decontamination, 1.1 trillion yen for an interim storage facility for contaminated soil, and 2 trillion yen for decommissioning, the report said.

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Business Daily Tuesday, November 29 2016 13

Asia In Brief Tax avoidance fight

New Zealand gov’t backs OECD move The New Zealand government yesterday welcomed the release of a new multilateral instrument to help stop tax avoidance by multinational firms. The OECD (Organization for Economic Co-operation and Development) instrument was the latest step in the global fight against base erosion and profit shifting (BEPS) by multinationals, said Revenue Minister Michael Woodhouse. “Many BEPS techniques rely on abuse of tax treaties, and the OECD/G20 BEPS Project has recommended a number of changes to further strengthen tax treaties multilaterally,” Woodhouse said in a statement.

Skilled immigration

Fearing tighter U.S. regime, Indian IT firms rush to hire, acquire A more restrictive programme would likely mean Indian IT firms sending fewer developers and engineers to the United States Sankalp Phartiyal and Euan Rocha

Anticipating a more protectionist U.S. technology visa programme under a Donald Trump administration, India’s US$150 billion IT services sector will speed up acquisitions in the United States and recruit more heavily from college campuses there.

Indian companies including Tata Consultancy Services (TCS), Infosys and Wipro have long used H1-B skilled worker visas to fly computer engineers to the U.S., their largest overseas market, temporarily to service clients.

Staff from those three companies accounted for around 86,000 new H1-B workers in 2005-14. The U.S. currently issues close to that number of H1-B visas each year.

President-elect Trump’s campaign rhetoric, and his pick for Attorney General of Senator Jeff Sessions, a long-time critic of the visa programme, have many expecting a tighter regime.

“The world over, there’s a lot of protectionism coming in and push back on immigration. Unfortunately, people are confusing immigration with a high-skilled temporary workforce, because we are really a temporary workforce,” said Pravin Rao, chief operating officer at Infosys, India’s second-largest information

technology firm.

While few expect a complete shutdown of skilled worker visas as Indian engineers are an established part of the fabric of Silicon Valley, and U.S. businesses depend on their cheaper IT and software solutions, any changes are likely to push up costs.

And a more restrictive programme would likely mean Indian IT firms sending fewer developers and engineers to the United States, and increasing campus recruitment there.

“We have to accelerate hiring of locals if they are available, and start recruiting freshers from universities there,” said Infosys’ Rao, noting a shift from the traditional model of recruiting mainly experienced people in the U.S. “Now we have to get into a model where we will recruit freshers, train them and gradually deploy them, and this will increase our costs,” he said, noting Infosys typically recruits 500-700 people each quarter in the U.S. and Europe, around 80 percent of whom are locals.

Acquisitions

Trump’s election win and Britain’s referendum vote to leave the European Union are headwinds for India’s IT sector, as clients such as big U.S. and British banks and insurers hold off on spending while the dust settles.

In India’s IT hub of Bengaluru and the financial capital Mumbai, executives expect a Trump administration to raise the minimum wage for foreign workers, pressuring already squeezed margins.

Buying U.S. companies would help Indian IT firms build their local headcount, increase their on-the-ground presence in key markets and help counter any protectionist regulations.

Indian software services companies have invested more than US$2 billion in the United States in the past five years. North America accounts for more than half of the sector’s revenue.

“We have to accelerate acquisitions,” said Rao at Infosys, which in the past two years has bought companies including U.S.-based Noah Consulting and Kallidus Technologies.

Key Points Indian IT firms fear tougher U.S. visa regime under Trump Indian firms to accelerate U.S. acquisitions, hiring More focus on automation, cloud computing, AI Jatin Dalal, Wipro’s chief financial officer, said his growth strategy is to buy companies that offer something beyond what Wipro already does, or new, disruptive firms - such as Appirio, a U.S. cloud services firm.

The chief executive of Tech Mahindra, C.P. Gurnani, said his firm, which two years ago bought network services management firm Lightbridge Communications Corp, is on the look-out for more U.S. acquisitions, particularly in healthcare and fintech - financial technology firms that are disrupting traditional banking services.

Offshoring & automation

In a broader shift from labour intensive onsite projects, Indian IT firms are also turning to higher-tech services such as automation, cloud computing and artificial intelligence (AI) platforms.

With better technology and faster networks, IT firms are encouraging Western clients to adopt more virtual services.

Infosys CEO Vishal Sikka says he has focused on automation and AI as growth drivers since 2014. “The AI platform is 5-6 percent of our revenues,” he told Reuters. “Three years ago, it was zero.”

More automation would mean fewer onshore developers.

“The ‘Plan B’ would be to accelerate the trend ... to reduce their reliance on people and increase their focus on delivering automation, leveraging the cloud for their clients,” said Partha Iyengar, Gartner’s head of research in India. Reuters

Vietnam

Overseas tourists surpass yearly target More than 9 million visits of foreign tourists are expected in Vietnam in the first 11 months of 2016, up 25.5 per cent year-on-year and above the initial target of 8.5 million foreign arrivals for the whole year 2016, according to the General Statistics Office of Vietnam yesterday.

Growth was seen in most markets, particularly China, Hong Kong, the Republic of Korea, New Zealand, Russia, Thailand, Italy, Spain, the Netherlands and Britain. Vietnam’s tourism sector grossed 368.6 trillion Vietnamese dong (US$16.2 billion) in 11-month period, a yearly increase of 18.6 per cent.

Central bank

Philippine forecasts inflation at 1.6-2.4 pct y/y The Philippine central bank expects annual inflation to be in the range of 1.6 per cent to 2.4 per cent in November, its governor said yesterday, taking into account lower petroleum prices and a slight decline in rice and power costs. “Looking ahead, the central bank will continue to monitor evolving price trends and output conditions to ensure price stability (is) conducive to balanced and sustained economic growth,” Bangko Sentral ng Pilipinas Governor Amando Tetangco said in a mobile phone message. Annual inflation was 2.3 per cent in October, unchanged from the previous month.

Results

Bank of Japan suffers net loss in 1st-half earnings The Bank of Japan (BOJ) said yesterday it incurred a net loss in its half-year earnings for the first time in four years, as the yen’s ascent eroded the value of its foreign asset holdings.

Profits from the central bank’s government bond holdings in the AprilSeptember also fell from a year ago, reflecting falling bond yields from its massive stimulus programme.

The BOJ suffered a net loss of 200.2 billion yen (US$1.8 billion) in the first half of fiscal 2016, suffering red ink on a half-year basis for the first time in four years.

14 Business Daily Tuesday, November 29 2016

International In Brief Biz morale

UK services businesses report weaker profits Firms in Britain’s large services sector reported a sharp fall in profits over the past three months due to higher costs and weak sales, the Confederation of British Industry said yesterday.

“Optimism among firms in the UK service sector has fallen ... as rising costs and sluggish volumes of business have led to a drop in profitability,” CBI chief economist Rain Newton-Smith said. The CBI said overall morale among firms was falling less steeply than when it last polled businesses three months ago, and businesses such as hotels, bars and restaurants were benefiting from buoyant spending by consumers.

Subsidies

WTO set to sanction Boeing over tax breaks The World Trade Organization is set to rule this week that Boeing Co received illegal tax breaks from Washington state, according to reports in The Telegraph and The Wall Street Journal. The Journal said the trade organization will argue that the Washington state tax break is a prohibited subsidy and will have to be withdrawn, citing people familiar with the matter. The paper said the WTO is not likely to say what the value of the prohibited tax break is, but the European Union has argued that Boeing has received more than US$8 billion in forbidden subsidies.

Political pressure

Three South African ministers call for Zuma to resign President’s term ends in 2019, but his party is due to elect a new leader at the end of next year and could decide to replace him as head of state Susan Njanji

A

t least three South African ministers have called for President Jacob Zuma to resign, local media reported yesterday, in the most serious challenge to his leadership since he took power in 2009.

The News24 news agency, citing sources in the ruling ANC party, said that Tourism Minister Derek Hanekom, Health Minister Aaron Motsoaledi and Public Works Minister Thulas Nxesi had called on Zuma to step down.

The clash came at a weekend meeting of the African National Congress (ANC) party, which was extended into yesterday amid heated debate over Zuma’s fate.

The president, who has faced mounting criticism of his leadership, came under further pressure this month when a corruption probe unearthed fresh allegations of misconduct.

The probe by the country’s top watchdog investigated possible criminal activity in Zuma’s relationship with the Guptas, a business family accused of wielding undue political influence.

“There is no doubt that Zuma is fighting for his political life” Ranjeni Munusamy, political analyst But Zuma, 74, retains strong loyalty among many rank-and-file ANC party members, as well as its lawmakers - easily surviving a vote of no confidence in parliament on November 10.

Infrastructure

Jordan picks firms for ambitious canal project Jordan said yesterday it had chosen five international consortiums to build the first phase of a multi-million-dollar canal linking the Red Sea to the shrinking Dead Sea. The ambitious US$1.1 billion project has been in the works for more than a decade and aims to provide much-needed water to Jordan, Israel and the Palestinian territories. It moved closer to reality in December 2013 when Israel, Jordan and the Palestinian Authority signed a water-sharing deal. Jordan’s water and irrigation ministry in a statement yesterday said the consortiums were made up of 20 engineering firms from Asia, Europe and North America.

President of South Africa Jacob Zuma

Hard-line reformist Francois Fillon scored a resounding win in France’s conservative primaries on Sunday, making him favourite to win a presidential election five months from now against the popular far-right and a deeply divided left. Fillon, a former prime minister who wants to raise the retirement age, cut back social security and scrap the 35-hour working week, would easily beat National Front leader Marine Le Pen in a run-off second round, a flash opinion poll said right after his primaries victory. The former prime minister faces the challenge of bringing voters behind a programme that promises radical change.

ANC losing public support

The ANC, which has ruled since Nelson Mandela won the first post-apartheid elections in 1994, has seen its popularity dive, with local polls in August delivering the party’s worst-ever result.

Zuma’s term in office ends in 2019, but the ANC is due to elect a new party leader at the end of next year and could decide to replace him as head of state.

South Africa’s highest court this year found him guilty of violating the constitution after he refused to repay taxpayers’ money used to refurbish his private rural house.

He is also fighting a court order that could reinstate almost 800 corruption charges against him over a multi-billion dollar arms deal in the 1990s.

International credit rating firm Fitch on Friday dropped its outlook for South Africa from stable to negative, pointing to the country’s recent political turmoil.

Zuma has also been engulfed by a power struggle with Finance Minister Pravin Gordhan, while economic growth has fallen to 0.5 per cent and unemployment hit a 13-year high.

Zuma’s loyalists have been at loggerheads with Gordhan, a reformist who is widely respected among international investors.

When Zuma leaves office, the three leading possible successors are his exwife African Union chief Nkosazana Dlamini-Zuma, Deputy President Cyril Ramaphosa and ANC treasurer-general Zweli Mkhize.

ANC spokesmen were not immediately available to comment yesterday. AFP

Retailing

U.S. consumers spend slightly less this Thanksgiving weekend More Americans were expected to show yesterday, just after the Thanksgiving weekend, known as Cyber Monday

France election

Fillon wins conservative presidential ticket

Increasing numbers of anti-apartheid veterans, ANC activists, trade unions, civil groups and business leaders have called for Zuma to resign in recent months.

“There is no doubt that Zuma is fighting for his political life,” analyst Ranjeni Munusamy wrote on the Daily Maverick website yesterday.

“He is hanging on while it is clear that large sections of the ANC and alliance no longer want him as president... The countdown to Zuma’s exit has begun.”

U.S. consumers spent about US$44.5 billion during Thanksgiving weekend, slightly below a year ago, the largest U.S. retail trade association said.

More than 154 million consumers s h o p p e d o v e r T h a n ksg i v i n g weekend, from Thursday to Sunday, 2 per cent above the 151 million shoppers in 2015, attracted by strong deals and promotions, said the National Retail Federation (NRF) based on its survey.

“It was a strong weekend for retailers, but an even better weekend for consumers, who took advantage of some really incredible deals,” NRF President and CEO Matthew Shay said. “In fact, over one third of shoppers said 100 per cent of their purchases were on sale.”

Average spending per person over Thanksgiving weekend totalled US$289.19, about 3.5 per cent lower than US$299.6 dollars last year, making the total spending 1.56 per

cent lower than the level in 2015, said the NRF. Most of total purchases, 74 per cent, went toward gifts with an average of 214.13 dollars per person, it added.

Stronger sales were expected in the rest holiday season as less people have finished their holiday shopping compared with last year.

The survey found that only nine per cent of consumers have finished their holiday shopping, down from 11 per cent last year. While 23 per cent have yet to make any dents to their lists, up from 19 per cent last year, said the NRF. “With mid-season shopping behind us, it’s not too late for retailers to tweak their online and in-store strategies to help increase traffic and see a big payoff during the last few weeks of the holiday season,” Shay said.

More Americans were expected to shop yesterday just behind the

Thanksgiving weekend, or known as Cyber Monday, the largest U.S. online shopping festival, in which retailers will offer large discounts and promotions for online products.

The number of Americans who plan to shop on Cyber Monday this year will increase from the 121 million to 122 million, as shopping online becomes more convenient than ever before, said the NRF.

‘A survey found that only nine per cent of consumers have finished their holiday shopping’ The total retail sales excluding autos, gas and restaurant sales in this year’s holiday season from November to December were expected to reach 655.8 billion dollars, 3.6 per cent higher than the level in 2015, better than the average level of 3.4 per cent since 2009, because stronger U.S. economic fundamentals have driven income gains, according to a NRF forecast released in October. Xinhua

Business Daily Tuesday, November 29 2016 15

Opinion

China’s bad banks are good for zombies, not investors Nisha Gopalan a Bloomberg Gadfly columnist

C

hina’s zombie companies can rest easy. It’s a shame the same can’t be said for investors in the nation’s

banks.

The big five lenders, starting with Agricultural Bank of China Ltd., plan to set up bad banks that will convert soured debt to equity.

Agricultural Bank, Industrial & Commercial Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp. and Bank of Communications Co. will fork out RMB10 billion (US$1.5 billion) each to establish the asset-management companies, Caixin magazine reported.

That banks are forging ahead with debtto-equity swap plans, albeit via assetmanagement firms they happen to own, is great news for all those struggling steel and construction companies facing potential closure.

State Council guidelines issued last month indicate that zombie corporations - those ailing state firms plagued by overcapacity - can’t count on bailouts, but it’s difficult to determine which ones are actually destined for the scrapheap.

The nation’s top lenders, also all backed by Beijing, are unlikely to want to be seen as responsible for mass unemployment by refusing to rescue c o m p a n i es, n o billion RMB matter how dire their Banks’ capital situation. In fact, contribution to assetthose companies management units may have an even better chance of getting capital infusions, considering financial institutions will probably be keen to use their investment-banking units to help monetize equity assets.

On the face of it, bank investors might also feel relieved that lenders are farming out bad debt to distinct vehicles.

Using an asset-management company should ensure that the equity resulting from the bad-debt switch doesn’t sit on a bank’s balance sheet. That will help lenders conserve precious capital: Had the equity been on their books, they would have had to apply a risk weighting of 400 per cent, and get special approval from the State Council.

Structuring it this way will also allow banks to maintain their much-coveted dividends.

But dig a bit deeper and you realize this isn’t a scenario that will necessarily play out well, and not just because equity stakes, even those held at arm’s length, are inherently riskier than loans.

For one, how will these asset-management firms be funded long term? The answer is probably by the banks themselves.

According to the State Council, the debtto-equity swaps can be financed by “social capital,” a catch-all phrase that generally includes high-yielding wealth-management products. Those investment structures come with an implicit guarantee from the banks that issue them, as lenders have found in the past when they’ve had to rescue funds in trouble. It’s ironic that just as authorities have been trying to rein in shadow banking, the debt-to-equity swap plan provides an added reason to gorge.

Whichever way you cut it, Chinese lenders and their shareholders - will remain on the hook. Investors have already begun shying away from the big banks. Creating a whole host of asset-management companies may hasten the retreat. Bloomberg Gadfly

10

The politics of job polarization

A

core problem in the United States today – reflected in Donald Trump’s victory in the presidential election earlier this month – is that too many Americans feel helpless and insecure in the face of the job polarization that has resulted from globalization and new technology. While highly educated people at the top of the income distribution are doing better than ever, people with only a high school education face declining incomes, living standards, and prospects for themselves and their children.

The middle class is being torn apart.

Trump won largely because he persuaded voters in Pennsylvania, Michigan, Wisconsin, and elsewhere that his policies will yield better outcomes in communities where manufacturing is declining.

In fact, his administration, backed by Republican majorities in both houses of the U.S. Congress, will likely only make things worse for hard-pressed Americans.

The underlying problem is new technology, specifically information technology, and the way it has transformed the nature of work. As David Autor and David Dorn have shown, many middle-skill, middleincome, middle-class jobs have disappeared. The new jobs that have emerged are well paid for highly educated people and poorly paid for people who have only a high school education. A leading symptom – but only a symptom – is the disappearance of well-paid factory jobs. Employment in manufacturing fell by more than two million from 2004 to 2014, and now accounts for just over 8 per cent of total employment – continuing a long decline since the 1950s.

This technology-driven trend has been compounded by the effects of decreased transportation and communication costs, making it cheaper to move goods over long distances. Growing networks of sophisticated suppliers make it easier to move manufacturing activity overseas to lower-wage locations. Many U.S. companies have made this a significant part of their business strategy, with the resulting decline of U.S. manufacturing going hand in hand with a decline in unionization. When people lose a relatively high-wage and high-benefit union job, they often are reemployed at a lower wage and without the same level of benefits.

The 2008 financial crisis exacerbated income inequality and economic insecurity in part by accelerating the loss of manufacturing jobs.

Arguments that it was necessary, or even “optimal,” to skew financial support from the government toward banks and their executives are not persuasive (at least, not outside Wall Street).

Yes, well-off Americans experienced a big plunge in wealth when asset prices tanked. But they have since benefited from robust recovery in stock prices and high-end real estate.

In this environment, with so many people insecure about their economic prospects, the

“

Simon Johnson a professor at MIT’s Sloan School of Management

push by President Barack Obama’s administration for the Trans-Pacific Partnership (TPP) was a tone-deaf approach, at best. The administration argued that TPP would create some good jobs – and that people who lost jobs as a result could be “compensated.” But such compensation always proves to be minimal and is widely viewed as meaningless. That’s why Trump racked up large majorities in so many working-class bastions that had previously supported Obama.

Unfortunately, life is about to get worse for these voters. With control of the presidency and Congress, the Republicans are likely to pursue three main economic policies. Lowering personal and corporate taxes will primarily help richer Americans. Repeal of Obama’s signature healthcare reform will have a severe impact on many lower-income people as they lose affordable insurance coverage. And financial deregulation will mostly favour large global banks, encourage reckless risk-taking, and set the stage for another large-scale crisis.

In addition, the confrontational trade measures that Trump has proposed are likely to make the employment situation worse.

At the same time, the extent of any effective stimulus to the economy is likely to be very small. Overheating the economy – leading to higher inflation and higher interest rates – does not typically help lower-income people (remember the 1970s).

Trump’s main substantive promise has been to bring back middle-class jobs, particularly in manufacturing. But nothing in his policies or the broader Republican program will address the underlying issue of technological change. And the next wave of technology, including driverless vehicles, will have a major negative impact on the incomes and opportunities of everyone who currently delivers goods or transports passengers by car.

Moreover, the rapid advance of artificial intelligence and robotics means that even if manufacturing output in the U.S. stabilizes or ticks upwards, it will not involve anywhere near the number of middle-skill jobs that it did in the past. Likewise, automation will erode the number of currently well-paid jobs in the service sector.

Given the role of technology in displacing workers, protectionism – tearing up trade agreements and imposing tariffs on Chinese and Mexican goods – won’t bring back high-paying manufacturing jobs, and Trump has no plan B. That means the polarization of America that brought Trump to power will only become far more severe. Project Syndicate

The 2008 financial crisis exacerbated income inequality and economic insecurity in part by accelerating the loss of manufacturing jobs

”

16 Business Daily Tuesday, November 29 2016

Closing Going public

Meitu said to draw Ports, Kingkey Group to IPO

Kong-listed fashion company Portico International Holdings Ltd., and Chinese property developer Kingkey Group have agreed to buy stock in the Chinese mobile developer Meitu Inc. plans to offering as cornerstone investors, the people said. seek as much as US$710 million after setting the Meitu’s apps, with about 450 million monthly terms for its Hong Kong (stock market pictured) active users, help people appear more attractive in initial public offering, potentially the city’s largest photos by slimming faces, lengthening limbs and technology listing in nearly a decade, people with even applying make-up. The company, which gets knowledge of the matter said.

95 percent of its revenue from mobile-phone sales, The maker of selfie apps aims to offer 574 million is convinced its community of app users can be shares at HK$8.50 to HK$9.60 apiece, according turned into a lucrative base for e-commerce and to the people, who asked not to be identified advertising, people with knowledge of the matter as the information is private. Ports International Enterprises Ltd., the controlling shareholder of Hong said this month. Bloomberg News

Worldwide outlook

OECD sees resurgent U.S. growth boosting global economy China, which is not a member of the 35-country OECD, was seen slowing from growth this year of 6.7 per cent to 6.4 per cent in 2017

G

lobal growth will pick up faster than previously expected in the coming months as the Trump administration’s planned tax cuts and public spending fire up the U.S. economy, the OECD said yesterday, revising up its forecasts.

In its twice-yearly Economic Outlook, the Organisation for Economic Cooperation and Development estimated global growth would accelerate from 2.9 per cent this year to 3.3 per cent in 2017 and reach 3.6 per cent in 2018.

The Paris-based organisation was slightly more optimistic about the U.S. outlook, with a forecast for growth next year of 2.3 per cent, up from 2.1 per cent in its last set of estimates dating from September.

U.S. growth would pick up further in 2018 to reach 3.0 per cent, the highest rate since 2005, as the incoming Trump administration cut taxes on business and households and embarked on an infrastructure investment programme.

That would in turn drive the unemployment rate in the world’s biggest economy down from 4.9 per cent this year to 4.5 per cent in 2018, the OECD estimated.

As the U.S. labour market becomes increasing tight and wages rise, the OECD forecast inflation would increase from 1.2 per cent in 2016 to 2.2 per cent in 2018, prompting the Federal Reserve to raise interest rates

gradually to 2.0 per cent by end-2018.

A resurgent U.S. economy would help offset softness elsewhere in the world.

The OECD was slightly less pessimistic about Britain’s outlook than it was in September, as the central bank has helped ease the economic impact of the country’s decision to leave the European Union.

Britain’s economy was seen

growing 2.0 per cent this year, revised up from 1.8 per cent previously, although the rate would be halved by 2018.

China, which is not a member of the 35-country OECD, was seen slowing from growth this year of 6.7 per cent to 6.4 per cent in 2017, both slightly better than previously expected.

Stronger U.S. import demand was seen offsetting weak Asian trade for Japan, where growth was revised up to 0.8 per cent for this year from 0.6 per cent previously and lifted to 1.0 per cent in 2017 from a 0.7 per cent estimate in September.

The euro area’s outlook was also

slightly brighter despite uncertainties about Britain’s future relationship with the continent.

‘The euro area’s outlook was also slightly brighter’ Boosted by loose monetary policy, euro area growth was seen at 1.7 per cent this year and 1.6 per cent in 2017 with both years revised slightly higher from the OECD’s September estimates. Reuters

New Zealand report

Film industry

Cutting costs

Non-tariff measures clogging APEC engine

Mainland’s 2016 box office to exceed 2015 level

StanChart to cut corporate, institutional banking staff

Non-tariff measures (NTMs) in Asia-Pacific economies are costing the region’s exporters US$790 billion a year, said a report from a New Zealand economic think-tank out yesterday.

The amount was triple the total costs associated with simple border tariffs, said the report by the New Zealand Institute of Economic Research (NZIER).

The study, commissioned by the Ministry of Foreign Affairs and Trade, focused on the Asia-Pacific Economic Cooperation (APEC) group of economies.

Because APEC economies were looking to develop global value chains, the NTMs had the effect of driving down living standards and limiting business competitiveness, said the report.

Non-tariff measures were policies aside from border tariffs put in place by governments to limit imports or increase their price, NZIER deputy chief executive John Ballingall said in a statement.

“Common examples are quotas, technical standards and animal welfare measures. Some are for legitimate public policy purposes, such as protecting consumers from dangerous products or protecting animal or plant safety,” said Ballingall.

NTMs were costing New Zealand exporters about US$5.9 billion a year. Xinhua

China’s 2016 box office sales are expected to exceed the 2015 total of RMB44 billion (US$6.38 billion), the country’s film watchdog said.

By the end of October, box office takings had exceeded RMB38 billion.

Box office sales in the world’s second largest film market have posted average growth of 35 per cent year on year since 2003, said Tong Gang, deputy head of the State Administration of Press, Publication, Radio, Film and Television (SARFT). In 2015 alone, it grew a whopping 48.7 per cent, according to the SARFT. Tong said that although this year’s growth will be slightly lower than 35 per cent due to the Chinese currency’s depreciation, the film market will still see growth.

The country’s film output ranks third in the global market and is expected to exceed 700 by the end of 2016. Sales of film rights to online video sites have raked in RMB4 billion (US$560 million) so far this year.

China’s box office sales have increased from RMB1 billion to RMB40 billion in the past decade as the industry has adopted more market-oriented reform measures. By 2020, annual box office sales are expected to reach RMB100 billion, according to industry estimates. Xinhua

Standard Chartered is set to cut about a tenth of its global corporate and institutional banking headcount, sources with direct knowledge of the matter said yesterday, as the bank steps up an aggressive drive to cut costs.

Standard Chartered Chief Executive Bill Winters this month branded the bank’s income and profit unacceptable, as below-forecast third-quarter results underlined the challenges facing his overhaul.

The job cuts will be rolled out beginning this week across all the bank’s major business centres including in Singapore and Hong Kong, one of the sources told Reuters. All the sources declined to be named as they were not authorised to speak to the media.

“We are making our corporate and institutional banking division more efficient,” a Standard Chartered spokesman said, without revealing how many jobs are to be axed.

“Removing duplication in roles and managing our costs to protect planned investments in technology and people means that a small number of existing roles will be impacted.”

Corporate and institutional banking accounts for the bulk of revenues at Standard Chartered, which had 84,477 employees in total at the end of June. Reuters