Business Daily #1188 December 6, 2016

Paradise Entertainment issues profit warning Gaming Page 8

Tuesday, December 6 2016 Year V Nr. 1188 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm SURVEY

Technology

Average monthly spend on gaming by residents up 110 pct since 2013 Page 7

Virtual reality businesses could encompass tourism, interior design and more Page 6

Gaming

Imperial Pacific celebrates first anniversary of VIP gaming on Saipan with US$1.7 bln rolling chips in November Page 8

www.macaubusinessdaily.com REFERENDUM

PMI

Italian Prime Minister resigns triggering collapse of euro Page 14

China services sector maintains good performance Page 16

Secretary Rosario Reassures Infrastructure

The Secretary for Transport and Public Works faced down the Legislative Assembly on the city’s main issues yesterday.

Nitpicking of his Policy Address continues today. With public housing, LRT and Pearl Horizon centre stage. The Secretary affirmed new housing will be built, while the LRT will continue as planned . . . although potentially not 100 pct operational. Page 4

Pataca power

More millions disbursed

Economic aid programmes for the city’s young entrepreneurs and SMEs. Distributing some MOP31.2 mln in November. With gross commerce and retail sectors continuing to lead the pack in funding. Over MOP62.6 mln went to the Young Entrepreneur Scheme alone in the first 11 months of the year.

Monetary The city’s money supply continued to grow in October. With currency in circulation increasing 0.5 pct and deposit demands increasing 9.5 pct m-o-m in October. Deposits made by residents increased 2.1 pct m-o-m. Those by foreigners decreased 4.2 pct m-o-m for the same period. Page 5

New link established

Entrepreneurship Page 2

HK Hang Seng Index December 5, 2016

22,505.55 -59.27 (-0.26%) Worst Performers

Galaxy Entertainment Group

+2.52%

AAC Technologies Holdings

+0.58%

Hong Kong Exchanges &

-2.66%

China Resources Land Ltd

-1.37%

Sands China Ltd

+2.05%

Cathay Pacific Airways Ltd

+0.58%

CNOOC Ltd

-1.93%

Cheung Kong Property

-1.26%

China Mengniu Dairy Co Ltd

+1.96%

AIA Group Ltd

+0.55%

China Resources Power

-1.72%

Ping An Insurance Group Co

-1.19%

CLP Holdings Ltd

+0.82%

MTR Corp Ltd

+0.53%

China Shenhua Energy Co

-1.62%

China Merchants Port Hold-

Belle International Holdings

+0.68%

Sino Land Co Ltd

+0.52%

Hengan International Group

-1.54%

Lenovo Group Ltd

-1.14% -1.04%

16° 21° 16° 21° 16° 21° 17° 22° 17° 21° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

HK-Shenzhen connect A subdued opening.But the Shenzhen-Hong Kong Stock Connect became operational yesterday. Offering 881 stocks listed on the tech-heavy Shenzhen Stock Market to global investors via the Hong Kong bourse. Pages 9 & 16

2 Business Daily Tuesday, December 6 2016

Macau Entrepreneurialism Young Entrepreneurs Aid Scheme awarded MOP62.6 mln in the first eleven months of 2016

Planting seeds Support of young entrepreneurs and SME’s via the government’s four main support schemes reached MOP31.2 million in November Nelson Moura nelson.moura@macaubusinessdaily.com

The government’s lending to local young start-ups and small and medium-sized enterprises (SMEs) reached MOP31.2 million (US$3.9 million) in November, the latest data released yesterday by the Macao Economic Services (DSE) reveals.

L a s t m o n t h, t h e e c o n o m y department approved MOP26.4 million in loans to the city’s SMEs via its two financial aid schemes namely, the SME Aid Scheme and the SME Credit Guarantee Scheme.

The SME Credit Guarantee Scheme - which provides each beneficiary with a credit guarantee equal to 70 per cent of the loan approved by

the participating banks - awarded MOP13.98 million to seven applicants in November, an increase of 17 per cent compared to the MOP11.97 million approved in October.

Of the city’s small and mediumsized enterprises, the bulk commerce and retail commerce segments were the largest beneficiaries of the aid scheme for this year so far, with both areas of the industry allocated some MOP45.7 million in loans from January to November, amounting to 37.7 per cent of the total.

The SME Aid Scheme, which offers interest-free loans of up to MOP600,000 per applicant for different finance purposes, awarded some MOP12.4 million to 35 applicants in November.

C o m p a n i es f r o m th e r e tai l commerce sector received the largest percentage of subsidies distributed so far this year until November – at MOP50 million - representing 25.7 per cent of the total financial support provided under the aid scheme.

Meanwhile, the SME Credit Guarantee Scheme for Specific Projects did not provide any loans in November. The scheme has awarded financial support amounting to MOP3 million to three applicants so far this year.

Unchanged support

The DSE data also indicates that some MOP4.7 million in loans was provided to local young businesspeople to start their own businesses via the Young Entrepreneur Aid Scheme last month, a similar amount to that provided in October.

The scheme received 26 applications in November of which the economy department granted the green light to 20, an approval rate for the month of almost 77 per cent.

The young start-up aid scheme offers interest-free loans of up to MOP300,000 to entrepreneurs aged 21 to 44 who are eligible for a loan of up to eight years in duration, with repayments starting after 18 months.

For the first eleven months of this year, some MOP62.6 million in loans has been approved for these young entrepreneurs under the scheme, with support provided mainly to young start-ups engaged in the retail and F&B sectors.

Public Works

Further MOP48.2 mln contract for Islands Healthcare Complex granted A service contract has been granted to Rider Levett Bucknall Macau Limitada to provide measurement services for work and materials for construction of the Islands Healthcare Complex, according to a dispatch published in the Official Gazette yesterday.

The contract is worth MOP48.2 million (US$6 million) with total payment divided over six years, with the majority of the funding to be provided next year, in the amount of MOP16.75 million. This year, MOP1.81 will be attributed, with a further MOP7.23 million in 2018 and MOP8.68 million to be distributed in both 2019 and 2010. MOP5.06 will

make up the final payment, to be attributed in 2021.

Another contract was awarded to the Civil Engineering Laboratory of Macau to provide quality control for pile foundation engineering for the Central Laboratory Building in the Islands Healthcare Complex. The contract is valued at MOP2.23 million.

The total payment is divided into two installments. The first payment, of MOP405,625, is to be paid this year while the bulk of the contract, MOP1.82 million, will be attributed next year as a final payment.

Both expenses are classified under the category of investment plan in the MSAR’s financial budget. A.L.

Public Works

Commission of audit

Water supply contract inked for Ilha Verde public housing

CA endeavours to improve auditors’ skills

A water supply contract has been granted to the Macao Water Supply Company Ltd for the construction project of public housing lots 1 and 2 in Ilha Verde, according to a dispatch published in Macau’s Official Gazette yesterday. According to the Infrastructure Development Office (GDI) the project includes

five residential buildings, public car parks, bus interchanges, commercial and social facilities, occupying some 15,000 square metres, for which the company will provide water services. The total amount of the contract reaches MOP4.28million (US$536,137) and falls within next year’s budget. A.L.

In order to strengthen skills and reinforce local auditors’ use of international regulations and requirements, the city’s Commission of Audit (CA) has invited Mr. Charles Fung Chi Wai, a former partner of Lowe, Bingham and Matthews - PricewaterhouseCoopers, now retired, to provide courses on international financial reporting standards. Mr. Fung is a registered local auditor and provided

two sessions for specialists in November as well as a course at the beginning of this month, with around 100 participants. Given the constant changing environment of the city’s economy and the demand for auditing skills, the CA will hold various training courses and session every year to strengthen professional skills and provide diversifyied learning for auditors. C.U.

Public Contract

Blood transfusion equipment contract worth MOP6.3 mln A service contract has been awarded to Four Star Companhia Limitada to supply laboratory equipment and reagents to the Blood Transfusion Centre of the Health Bureau, according to a dispatch published in Macau’s Official Gazette yesterday.

The contract is valued at MOP6.32 million (US$790,674) and divided into

four tranches, with the first payment of MOP701,750 to be made this year, while MOP2.11 million will be paid both in 2017 and 2018. The final payment of MOP1.4 million will be made in 2019. The expenses are classified under the economic category of raw and supplementary materials in the Health Bureau’s financial budget. A.L.

Business Daily Tuesday, December 6 2016 3

Macau

4 Business Daily Tuesday, December 6 2016

Macau Opinion

Policy Address

Albano Martins*

New public housing bill submitted to AL

A complicated city

Rosário: 3,400 public housing units will be built, more land available for public tender next year

This world goes backwards.

And backward it will continue to go as the USA has managed to elect a President out of our time!

Europe is dragging itself along with economic policies against its economy and its people.

And as there, men of form are like diamonds, each one will feel its smallness, in a complicated and divided market of a world stupidly dangerous and with no North!

While the world around us is getting complicated, we, in Macau, live in constant complication.

Here we will continue to entertain ourselves with the new miracle of the multiplication of the crimes of a former prosecutor, drawing the most courageous decisions to the Greek calends and the execution of those that are taken, for the next five-year plan, as the quantification of this does not arrive on time!

And as we do not think in the long term, like the Great China, we are inventing more problems, as if those we have and we are not capable of solving are not enough already.

A commission of super patriots to say who is patriotic enough to be elected, is to give projection to those who do not have it.

It is counterproductive. The pragmatism of our people would never call into question the sovereignty of China.

Macau, like Hong Kong, is perfectly dependent on China!

China knows what it does and what it did!

In Macau, however, the days are passing and the level of our expenses, both public and private, which drag on, increase.

We must fight the inefficiency! Of the expenditure, the decisions and the processes of their preparation.

Secretaries are decision-makers, not preparers of the decision.

We need capable people, only for half a dozen years, capable of teaching our people what is not learned in the schools, and able to execute our projects fast.

But we are afraid to go get them!

The simple things thus become complicated, and the difficult ones are not supposed to be solved, that this will only give annoyances!

The culprit of all this was the gaming industry and the multiplication of the wealth that it generated.

If it had not exploded, today half of the population would have emigrated, as there was not even money to put a cock to sing, but a simple Land Reserve Fund of MOP10 billion, equivalent to a month of revenue of the Macau Administration in the good days of 2014! * an economist and contributor to this newspaper

Annie Lao annie.lao@macaubusinessdaily.com

I

ssues regarding the city’s public housing, the management of reclaimed land - such as that related to the Pearl Horizon case and the construction project of the Light Rail Transit (LRT) took centre stage during the Secretary’s 2017 Policy Address for the Transport and Public Works segment of the action plan for the upcoming year, with the MSAR’s Secretary for Transport and Public Works, Raimundo do Rosário, coming under fire from legislators at the Legislative Assembly meeting held yesterday.

Housing

A m e n d m e n ts t o th e c u r r e n t public housing law have already been submitted in the Legislative Assembly for processing, Secretary Rosário pointed out, following enquiries about the city’s housing.

The amendments hope to address the establishment of a mechanism for handling the city’s social housing applications, The MSAR Government will complete the final report confirming the demand for public housing in the city at the end of this year, the Secretary confirmed to legislators and those in attendance for the Secretary’s Address, which continues today, it’s final day.

“The report can help formulate a long-term public housing policy, which will be adjusted accordingly in order to meet the actual demand of public housing in the city,” the Secretary explained.

In addition, the Secretary revealed that a number of land plots will be opened up for public tender at the end of next year although specific locations have yet to be disclosed, the Secretary added.

“By the end of next year, the government will have a number of land [plots] for public tender. It is based upon the new Land Law to open a public tender for the usage of land in the city,” said Secretary Rosário.

Encompassing both purchase procedures and construction projects, a new information divulgence system will be implemented starting next year. Under this new system any government department which procures the purchase of services worth more than MOP1 million (US$125,189), or undertakes a

construction project worth more than MOP10 million, is required to upload the amount and reason to its official website for public review, the Secretary said.

Public housing

Some 3,400 public housing units will be built next year, together with 11,000 private units to be built by developers, the Secretary revealed in the Address.

The information came in response to questions raised by legislator Sio Chi Wai regarding the anticipated increasing need of public housing in the city for local residents.

Regarding ongoing works of public housing the Secretary sought to reassure legislators that ongoing issues for public housing construction projects at Mong Ha and Toi San have been resolved and the construction projects now reinitiated.

“The development of public housing units located on Avenida Wai Long in Taipa and the old power station, located on Avenida de Venceslau de Morais on the Macau Peninsula, are undergoing work at the moment,” he affirmed.

Secretary Rosário revealed that the former power station will be converted into about 100 public housing units, the construction of which will commence upon demolition of the former buildings on the lot.

However, no timetable has yet been confirmed as there are still problems with the dismantling process of oil storage facilities and chimneys, the Secretary added.

Pearl Horizon

Legislator Au Kam San demanded the Secretary reveal whether certain conditions should be set regarding the case of the government allowing for the reclaimed residential project Pearl Horizon to be auctioned off to homebuyers.

In response, the Secretary agreed that specific conditions could be added to the construction project in terms of its height limit. However, whether to add conditions to the list of buyers allowed to purchase [was a] question that would need to be considered further, the Secretary said.

LRT

The construction work on the Taipa section of the city’s LRT system is the

priority for next year, the Secretary stressed saying: “After modifying the draft plan of building an LRT depot, the current work is still on track as planned. It is expected that the Taipa section of LRT be completed in 2019 as scheduled.” However, despite expressing confidence that the construction work would be completed, the Secretary noted his “doubts” as to whether the LRT would be fully functional the same year.

“The MSAR Government promised to complete the Macau section of the LRT; however, the Taipa section is the main priority now,” the Secretary said.

According to Mr. Rosário, the Taipa section will, as previously planned, connect Macau’s Barra terminal section to the Seac Pai Van section in Coloane.

The construction works of the Taipa LRT viaduct pier foundation and the 11 LRT stations will be mostly completed by the end of this year, Mr. Rosário confirmed.

However, the Transportation Infrastructure Office (GIT) will withdraw from the LRT project next year and will be replaced by a company handling the management and operation of the LRT, the Secretary said.

“The Bureau does not have any experience in operating the LRT system. Therefore, the Bureau is now working on setting up a franchised operating company to operate the city’s LRT. This is our priority work for the LRT next year,” Mr. Rosário added.

5G technology

In addition to physical construction the Secretary mentioned that regarding the technological side the MSAR Government is now considering the introduction of 5G technology to the city.

“The Bureau is paying close attention to the development of 5G technology. The earliest date for launching 5G technology in Mainland China will be in 2020 as 5G technology has not yet been established with international standards. However, the Bureau continues to monitor the development of 5G technology in the market and will provide licensing in due course,” the deputy director of the Bureau of Telecommunications Regulation (DSRT), Tam Van Iu, said during the Legislative Assembly meeting.

Secretary Rosãrio will continue his secretariat’s presentation and question and answer session tomorrow.

Business Daily Tuesday, December 6 2016 5

Macau

Economy

Continued growth in October money supply An increase in the total amount of loans and a decline in the total deposits Cecilia U cecilia.u@macaubusinessdaily.com

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he city’s money supply continued to grow in the month of October, according to the latest data released by the Monetary Authority of Macau (AMCM).

In October, official data revealed that the currency in circulation and demand deposits had increased 0.5 per cent and 9.5 per cent month-onmonth, respectively.

The money supply (M1) and

quasi-monetary liabilities both increased 7.7 per cent and 1.2 per cent, respectively, compared to the figures recorded in September. M2, which is the sum of the aforementioned two items, also saw an increase of 2 per cent to MOP516.2 billion (US$64.6 billion) month-on-month.

On a year-on-year comparison, M1 and M2 went up 15.7 per cent and 8 per cent, respectively.

In October, the shares of Pataca (MOP), Hong Kong Dollar (HKD), Chinese Yuan (RMB) and United States Dollar (US$) in M2 were 30.9

per cent, 52.9 per cent, 5 per cent and 8.7 per cent, respectively.

Meanwhile, deposits made by residents underwent a month-onmonth increase of 2.1 per cent to MOP502.8 billion whilst deposits made by foreigners saw a decline of 4.2 per cent to MOP264.9 billion compared to the amount registered in September.

Public sector deposits with the banking sector, on the other hand, declined 2 per cent, to MOP157 billion.

The shares of MOP, HKD, RMB and US$ in total deposits reached 21.3 per cent, 47.5 per cent, 5.7 per cent and 22.8 per cent in October, respectively.

According to AMCM data, domestic loans received by the private sector

registered a month-on-month decrease of 0.3 per cent to MOP413.9 billion in October. Of the total, MOP122.3 billion was denominated in Macau Patacas, while MOP268.5 billion was denominated in Hong Kong dollars, accounting for 29.6 per cent and 64.9 per cent, respectively.

For external loans, the amount in October reached a total of MOP373 billion, up 1.5 per cent month-onmonth. Within the total amount of external loans in October, loans denominated in MOP, HKD, RMB and US$ occupied 1.8 per cent (MOP6.6 billion), 28.8 per cent (MOP107.5 billion), 10.6 per cent (MOP39.6 billion) and 52.8 per cent (MOP196.8 billion), respectively.

In the month of October, the loan-to-deposit ratio for the residential sector saw a decrease of 0.5 percentage points month-onmonth to 62.7 per cent. Both resident and non-residential sectors’ ratio increased 1.2 percentage points to 85.1 per cent.

6 Business Daily Tuesday, December 6 2016

Macau

Technology Technology conference SIGGRAPH Asia 2016 Macau started yesterday

More than fun and games Virtual Reality experts believe technology has more business applications than just gaming, with potential applications for property development, tourism and interior decoration Nelson Moura nelson.moura@macaubusinessdaily.com

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irtual Reality technology has made possible the exploration of more business applications in the property development, tourism and interior decoration sectors, experts have told Business Daily.

The statements were made during the first day of the SIGGRAPH Asia 2016 Macau computer graphics and interactive technics conference, taking place at The Venetian and running until December 8.

“Even now the HTC Hive or the Oculus Rift (virtual reality headsets), the latest hardware on the market, are still focused on games.

There’re many more possible applications” Sai-Kit Yeung, Computer graphics expert and Assistant Professor at the Singapore University of Technology and Design Themed ‘Key to the Future,’ this year the expo is showcasing innovative projects and emerging technologies for computer graphics and interactive techniques, with more than 6,000 delegates from over 50 countries expected to attend.

“This year in Macau, delegates will be inspired by top-notch research innovations, learning opportunities [and] amazing digital artwork, creative animations, and emerging technologies. The newly introduced VR showcase aims to take delegates into unbelievable, immersive virtual worlds,” stated Hongbo Fu, SIGGRAPH Asia’s Conference Chair.

Decorating a house virtually

One of the organisers and speakers at the conference’s first day of VR talks, computer graphics expert and

Assistant Professor at the Singapore University of Technology and Design, Sai-Kit Yeung, believes that the current VR market is focused too much on gaming, leaving plenty of other business opportunities unexplored.

According to a report by Statista, the virtual reality hardware market is estimated to reach a value of US$7.3 billion (MOP58.3 million) in 2018 while the software market is estimated to reach a value of US$4.8 billion; Mr. Sai-Kit points out that many new technology applications are right around the corner.

“Even now the HTC Hive or the Oculus Rift (virtual reality headsets), the latest hardware on the market, are still focused on games. There’re many more possible applications, such as for medical purposes - by providing visualisation of interior organs - or educational purposes [like] helping students study. The most important [thing] in VR is still content, so besides discussions on hardware improvement there should be more innovation on new interactions,” SaiKit told Business Daily.

One of the new interactions being explored, he says, is in interior design, an application the researcher developed through SKY Optimum Technology Pte. Ltd, a start-up he founded in Singapore that focuses on developing augmented and virtual reality technology.

S KY O p t i m u m T e c h n o l o g y developed MagixHome, an automatic furniture arrangement technology that enables users to perform interior design modelling, allowing them

to virtually “use the app to move furniture” and arrange their future house layout. “[The application] will then provide suggestions on decoration, with professional interior designers also providing input. After that the file will be shareable with other people,” Mr. Sai-Kit told Business Daily.

Wish I were there

The researcher considers China to be one of the “hottest” markets for VR technology, with intense levels of investment activity and interest in new developments, with projects in Shanghai and Hangzhou delving into virtual reality as applied to tourism and for project developers using the technology to enable possible buyers to explore property on show.

He also mentioned how Singapore has made considerable bets in exploring new VR possibilities, such as the launch in 2014 of the Virtual Singapore initiative, a US$73 million 3D planning tool simulating the city’s growth scenarios.

The project is being developed

by Singapore’s National Research Foundation, (NRF) in collaboration with French multinational software company Dassault Systèmes, with the final simulation planned for 2017.

Pierre-Yves Laffont, a postdoctoral researcher in Computer Science also based in Singapore, believes that the concept of “tele-presence” through virtual and augmented reality could even have applications in business conference calls or tourism.

“This is the idea that you can be remotely somewhere else or bring remote participants into your environment,” Mr Laffont told Business Daily.

This concept application for tourism purposes has also been presented in Macau by Virtualmente, a VR Goggle company based between Macau

and Portugal, which is currently developing an immersive VR tourist guide for Macau, a concept promoted by the Macao Government Tourism Office (MGTO).

“VR certainly has the potential as a tourism or culture tool to allow people to explore cultural heritage and experience buildings that have been destroyed for a long time,” Mr. Laffont told Business Daily.

The computer science expert is currently trying to commercialise an optical application that allows people suffering from myopia (nearsightedness) to adjust VR goggles sets to their eyesight, although he considers that it is still hard to predict how the market will evolve.

“VR certainly has the potential as a tourism or culture tool that will allow people to explore cultural heritage and experience buildings that have been destroyed for a long time” Pierre-Yves Laffont, Postdoctoral Researcher in Computer Science “It will be a fragmented market, and I don’t think anyone can know what will happen in the next two years. VR is not new - it has been around for many years but only this year have we seen some commercial VR goggles coming out. The [coming] years will reveal if VR really takes off and stays, or if it disappears,” Mr. Laffont concluded.

Business Daily Tuesday, December 6 2016 7

Macau

Gaming Lottery betting considered the preferred gaming activity of local residents

Increasing temptation A study conducted by the University of Macau finds that since 2013 the average monthly amount spent by local residents on casino gaming has increased by 110 per cent to reach MOP1,000 Nelson Moura nelson.moura@macaubusinessdaily.com

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he av e r a g e m o n t h l y amount spent on gaming in casinos by Macau residents has increased 110 per cent since 2013, reaching MOP1,000 (US$125), with the average monthly amount spent on general gaming activities also increasing 60 per cent to MOP880, according to a study conducted by a University of Macau (UM) researcher, as reported by

Portuguese-language broadcaster TDM television.

The study on gaming habits in Macau was requested by the Social Welfare Bureau (IAS) and gathered information via 2,000 residents by phone interview.

The study reveals that although the number of residents admitting to participating in gaming activities has decreased from 67.9 per cent since the liberalisation of the sector in 2002 to 49.5 per cent in 2013 the last three years have registered a small increase.

Of those residents participating

in the most recent study 51.5 per cent stated they enjoyed gambling, a 2 per cent increase since the last study, conducted in 2013 with males between 25 to 34 years of age representing the largest percentage of gambling residents, TDM reports.

The primary purpose for gaming activities according to the interviewed residents was the opportunity to win money, while entertainment and leisure were cited as some of the other reasons.

Some 81.9 per cent of respondents said they enjoy betting on the lotto.

While for casino gaming only 60.1 per cent noted their enjoyment in the activity, and only 50 per cent of respondents said they enjoyed betting on horseracing.

Males aged between 55 and 64 years working in shifts and whose

education level is secondary education or below represented the largest share of respondents who enjoy gambling in casinos. The study also reveals that professionals working in the gaming industry between 25 and 34 years of age stated their preference for betting on slot machines or sport betting.

Of the respondents, only 51 or 2.5 per cent of the total, were considered to have met the criteria of problem gamblers, with 10 respondents showing signs of possibly having a ‘serious gambling problem’, and gambling mostly in casinos.

Fewer than 40 per cent of respondents knew what problematic ga m b l i n g w as, a l th o u g h th e majority of respondents noted that they recognise the existence of rehabilitation centres. The IAS notes that there is a need to increase education related to gaming addiction and promotional activities in order to reduce its impact upon society.

8 Business Daily Tuesday, December 6 2016

Macau

Workers rights

Flexible restrictions Local gaming activists reveal that the DICJ will consider a more flexible restriction to prevent gaming workers from gambling during non-working hours. Activists voiced absolute disagreement regarding the establishment of smoking lounges in casinos Cecilia U cecilia.u@macaubusinessdaily.com

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he Gaming Inspection and Co-ordination Bureau (DICJ) is currently c o n d u cti n g r es ea rch regarding the potential prohibition of gaming workers from entering casinos after working hours although the prohibition

might not be as strict as the ones imposed upon civil servants, according to local gaming activist and director of the New Macau Gaming Professionals Association (NMGPA) Cloee Chao.

“The direction of the prohibition, according to the DICJ, would only be confined to gaming areas,” said Ms. Chao following the group’s meeting yesterday with the DICJ.

Results

Paradise Entertainment issues profit warning Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

Paradise Entertainment, which operates slots and live multi game (LMG) machines throughout casino properties in the MSAR, has announced a profit warning for its 2016 results, according to a filing with the Hong Kong Stock Exchange.

The filing mentions that the ‘Group will record a substantial loss’ for the year, when compared to the previous year’s results. This is the second such warning this year, as a previously issued statements warned of decreased profits year-on-year for the group’s results for the first half year.

Results for Paradise Entertainment’s 2015 operations produced a loss of HK$149 million, which the company also classified as ‘substantial’. The loss resulting from this year’s operations is mainly attributable to the ‘preliminary estimated loss relating to the grant of exclusive right to make, market and distribute electronic gaming systems involving assignment and licence of certain

patens and associated technology’ amounting to about HK$335 million.

According to the group’s most recently announced financial results, its third quarter operations saw a 38.6 per cent increase in total revenue, year-on-year, amounting to approximately HK$352 million.

Consolidated results for the first three quarters of the year amounted to HK$872 million, a 5.7 per cent increase compared to the same period in the previous year. The increases were ‘mainly attributable to the increase in sales of LMG terminals.

Revenue derived by the group’s provision of casino services amounted to roughly 72 per cent of the group’s total revenue for the nine-month period.

Although no exact estimate of the group’s loss was provided in the most recent statement, the HK$335 million loss relating to the grant of exclusive rights amounts to HK$23 million less than the group’s cash and bank balances, as of 30 September. As of the same date, the group also held HK$85 million in debt.

“Because inside the casinos there are also corridors and restaurants, unlike restrictions to civil servants who are prohibited from entering casinos entirely.”

Ms. Chao also revealed that the restrictions would not only be imposed upon dealers but also on employees working in a casino, such as accountants working in offices located in a casino.

Smoking issues

Meanwhile, Ms. Chao revealed that the NMGPA has appealed to the DICJ to inform the Health Bureau regarding which junket rooms have been closed and whether junket operators have moved out of the premises, as certain former junket rooms are currently being used as smoking lounges.

“The Health Bureau is not informed about the closing of some VIP rooms and smoking is allowed in these areas which is illegal,” she indicated.

Regarding the recent statement about setting up smoking lounges in casinos made by the Secretary for Social Affairs and Culture, Alexis Tam, during last week’s Legislative

Assembly plenary, the NMGPA director proclaimed that the majority of Association members disagree with the proposal.

“The World Health Organization has already announced that there is no advanced smoking lounge that can completely prevent the dispersal of harmful substances into the air,” she said. “So we doubt whether this ‘high-tech’ smoking lounge would be effective enough to safeguard workers’ health.”

Ms. Chao added that the three newly opened casinos, including The Parisian, have set up outdoor smoking areas, saying that the new arrangement does not affect the business of their casinos.

Wage increase and insurance

The meeting between the group and the DICJ also brought up discussion on a potential increase in wages for gaming workers in order to ensure wage alignment with the current inflation rate.

The NMGPA also spoke up about insurance for workers when traffic accidents occur on employees’ way to work. The Association revealed that two of the six major gaming operators in the city - Wynn and MGM - have yet to implement the related insurance system.

Results

Imperial Pacific posts 4.6 pct y-o-y increase in VIP rolling chip Imperial Pacific - former food company turned casino underdog - has announced that its VIP rolling chip for the month of November had reached US$1.7 billion (HK$13.2 billion) according to the company’s filing with the Hong Kong Stock Exchange. This is the first month that year-on-year comparisons are possible, given that VIP operation in the group’s Saipan temporary casino facility only began on November 1, 2015.

The results indicate a 4.6 per cent year-on-year increase in the rolling chip values generated by the group’s operations and the November amounts are the lowest rolling chip values seen since August of this year, when they reached US$1.55 billion.

The highest point so far in the group’s

operational results was September, when results reached US$3.95 billion, as filed with the Stock Exchange at the time.

Judging by the rolling chip results so far announced the group’s operations were most active during April and May, when figures reached US$3.18 billion and US$2.52 billion, respectively. This is followed by a slight slowdown during June, July and August, when values reached US$1.65 billion, US$1.74 billion and US$1.55 billion, respectively.

This, historically, has been followed by a number of months of restrained gaming results during the months of November until March, when values ranged from a low of US$1.44 billion to US$1.95 billion. K.W.

Business Daily Tuesday, December 6 2016 9

Greater China Markets

HKEX chief sees potential for IPO, bond connexion He said that a priority for next year will be to work on a system for buying and selling exchange-traded funds between exchanges Benjamin Robertson and Stephen Engle

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ong Kong’s second stock-trading connect with the mainland may be followed by links for initial public offerings, bonds and commodities, said Charles Li, chief executive officer of the city’s bourse.

Hong Kong Exchanges & Clearing Ltd. yesterday unveiled a link with Shenzhen two years after the start

of the first with Shanghai. Li said that the two could be followed by a series of programs that would open up different parts of the financial market.

“The next step is to see whether that secondary market connect can be extended potentially to primary connect,” Li said in an interview with Bloomberg Television. “Beyond equity, we are building a bond connect and a commodity connect.”

Other links between Hong Kong

Hong Kong’s Chief Executive Leung Chung-ying (R), speaks during the Hong Kong Shenzhen Stock Connect launching ceremony at the Hong Kong Exchanges and Clearing headquarters in Hong Kong, yesterday. Lusa

and the mainland may not look exactly like the stock programs, according to Li. “The word ‘connect’ in different asset classes can mean slightly different things,” he said. “Some of them can mean cross-listings, some mean developing benchmarks, others mean mutual recognition.”

MSCI boost

Li said the second link should boost China’s case for inclusion in MSCI Inc.’s global benchmarks. The index compiler declined to add mainlandlisted shares in June.

“The fact you have a huge market like Shenzhen that is not available until today, now you remove one more big block of the few blocks that are still in the way,” he said.

The Shenzhen link comes more than two years after the launch of a similar program between Shanghai and Hong Kong. Foreign investors have access to about 880 Shenzhen stocks via the link while Chinese investors can for the first time buy some smaller companies listed in Hong Kong.

Li said at an earlier media event that a priority for next year will be to work on a system for buying and selling exchange-traded funds between exchanges. ETFs will give Chinese investors more breadth to invest internationally and in different asset classes, he said, and will help Hong Kong establish its goal as a wealth management centre for outbound Chinese wealth. Bloomberg News

High yields

Foreign holdings of govt bonds rise for 13th month Traders attributed the rise to China’s official inclusion in the International Monetary Fund’s reserve basket in October Foreign investors bought Chinese government bonds for the 13th straight month in November on higher yields and easing restrictions on foreign access to the market, despite a sharp slide in the yuan currency.

Foreign investors raised holdings of Chinese government bonds by RMB18.7 billion (US$2.71 billion) last month, bringing the total to RMB416.7 billion, according to Reuters calculations based on data from the official bond clearing house.

“The renminbi could strengthen on the back of increased inflows as investors are drawn to the high yields on Chinese debt, particularly for sovereign debt” NSBO Research note In October, overseas investors p u rc h a s e d RM B 1 2 b i l l i o n o f government bonds.

Traders attributed the rise to China’s official inclusion in the International Monetary Fund’s reserve basket in October, and Beijing’s opening up of its interbank

bond market to more types of foreign investors in February, as well as a relaxation of foreign exchange repatriation rules in May. Rising capital inflows are welcome news for Chinese policymakers as fresh falls in the yuan fuel worries about capital flight.

“The renminbi could strengthen on the back of increased inflows as investors are drawn to the high yields on Chinese debt, particularly for sovereign debt. This would intensify a trend seen since China opened up access to its bond markets in February,” NSBO Research said in a note in November.

Yields on Chinese benchmark 10-year government bonds ended November at 2.94 per cent, significantly more attractive than similar U.S. bonds, which influence borrowing costs globally and booked largest one-month increases since December 2009.

In the same month, the yuan lost around 1.6 per cent of its value to the dollar, its worst month since August 2015, when the central bank led a one-off sharp devaluation in the Chinese currency that roiled global markets.

Most major currencies depreciated against the dollar in November and most U.S. and European government b o n ds s o l d o ff aft e r D o n a l d Trump’s surprise victory in the U.S. presidential election. The greenback has firmed on expectations Trump will ramp up fiscal spending, spurring inflation and interest rates higher.

Foreigners held 3.9 per cent of China’s total treasury bonds as of end-November.

Overall, foreign institutions raised their holdings of all types of Chinese debt by RMB13.8 billion in November to RMB756.99 billion, data from the Central Depository and Clearing Co, down from a increase of 16.8 billion yuan a month earlier.

The pace of increases reached a record in September, when foreign holdings of onshore bonds rose the most in two years by 50.7 billion yuan. Reuters

In Brief Chinese New Year

Spring Festival travel frenzy to see 3 billion trips Transport ministry said yesterday it expects travellers to make nearly 3 billion trips during the upcoming Spring Festival, putting road, rail and air links through their hardest test during the country’s most important holiday. The ministry predicted that 2.98 billion trips would be made during the 40-day period, which includes the Lunar New Year, up 2.2 per cent compared with last year. The holiday is set to begin on Jan. 13. The railway network is likely to see a 9.7 per cent jump in trips against 2015, while airlines will accommodate about 58.3 million trips, up 10 per cent, the ministry said in a statement on its website.

Northeast Asia forum

Regional integration demanded Former high-ranking officials and prominent figures from China, Japan and South Korea yesterday called for promoting trilateral cooperation to push for regional economic integration. The proposal was made at the 11th session of the Northeast Asia Trilateral Forum, a regional platform gathering 30 political, business and academic experts from the three countries. The forum was attended by former Chinese Vice Premier Zeng Peiyan, former Japanese Prime Minister Yasuo Fukuda and former South Korean Prime Minister Lee Hong-koo.

Environment deal

EU blames Beijing for WTO trade talks collapse Europe’s trade negotiator blamed China on Sunday for scuppering a global environmental trade deal by submitting impossible late demands at World Trade Organization talks aimed at scrapping import tariffs on exports worth more than US$1 trillion. “China came in with their list, bringing in totally new elements of perspective, which was very late in the process,” European Trade Commissioner Cecilia Malmstrom told Reuters.

The change of U.S. president also puts a big question mark over the future prospects for a deal.

Gas-oil

Hong Kong tops Myanmar’s investment line-up in energy China’s Hong Kong topped the foreign investment line-up of Myanmar in oil and gas sector with US$4.796 billion as of October since late 1988, official media reported yesterday. Total foreign investment in the sector reached US$22.41 billion as of October, according to media reports. Myanmar Investment Commission said the country will reduce the dependence on this sector and instead enhance the manufacturing and infrastructure development sector for more foreign investment. The total foreign direct investment of the country since 1988 reached US$66.996 billion as of October.

10 Business Daily Tuesday, December 6 2016

Greater China

Currencies

Market bears smell blood as Government scrambles to plug capital outflows Wall Street bank Goldman Sachs says buying the dollar against the yuan is its number two recommended trade for 2017 Vidya Ranganathan and Jennifer Ablan

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hina’s increasingly aggressive measures to clampdown on capital outflows will not have gone unnoticed by U.S. hedge-fund manager Kyle Bass.

Bass is famed for his successful bet against the U.S. housing market in the global financial crisis, so markets monitor his comments closely. He has long argued the yuan, or renminbi (RMB), is set to fall 30 per cent against the dollar and he sees capital outflows as backing his view.

“China’s capital outflows are worse than they appear, which is why the government has allowed the RMB to depreciate over the last two months,” Bass told Reuters.

“We believe this pressure will continue with the prospect for higher interest rates in the U.S.” China is trying to tighten its grip on capital outflows after a slide in the yuan this year of almost 6 per cent, which has pushed the currency down to levels last seen more than eight years ago and revived memories of a wave of capital flight late last year and in January.

China’s Vice Finance Minister Zhu Guangyao was quoted on Saturday as saying policymakers were watching capital outflows closely.

Bank of China, the country’s biggest currency trading bank, has begun to sharply limit corporate customers’ ability to purchase foreign exchange in Shanghai, sources said on Friday.

Customers who insist on buying foreign currency are being restricted to US$1 million, compared with no caps previously.

Among other moves, the State Administration of Foreign Exchange (SAFE) is vetting transfers abroad of US$5 million or more, down from US$50 million previously, and is stepping up scrutiny of major outbound deals, sources said.

The yuan slumped to more than 6.92 per dollar in late November before suspected state-directed intervention gave the currency a lift.

The slide has sparked a flurry of bets against the currency. A Reuters poll shows those bets increased to their most since January - the tail end of China’s 2015 financial crisis.

Key Points Concerns grow falling yuan will encourage capital outflows Yuan dropped to lowest in more than eight years against dollar Has edged up since on suspected state-led intervention China moves aggressively to plug capital outflows Fund managers see continued slide in yuan against dollar Wall Street bank Goldman Sachs says buying the dollar against the yuan is its number two recommended trade for 2017, after bets against sterling and the euro. Since the yuan is closely controlled onshore, it suggests buying the dollar against the yuan in 12-month forward contracts offshore.

The one-year non-deliverable forward contract currently prices the yuan at 7.1 per dollar.

Hong Kong-based Luke Spajic, head of portfolio management for emerging Asia at bond fund PIMCO, sees a steady fall in the yuan.

“It’s reasonable to expect a depreciation of between 5 to 7 per cent per year as a rough guide,” Spajic said.

Most speculative trade in the yuan takes place offshore given China’s capital controls. Aside from derivatives markets and ETFs, speculators invest in assets of economies with heavy trade exposure to the country, like the Australian or Taiwan dollars and Hong Kong listings of Chinese mainland companies.

Risky cycle

Illicit capital outflows have increased as a concern for the government this year as it attempted to put the economy back on track and keep the currency stable without unduly draining its massive currency reserves of more than US$3 trillion.

Chinese regulations grant individuals an annual foreign exchange quota of US$50,000 a year, a factor on the radar of markets as 2017 looms. A survey by the Hurun report, a monthly magazine best known for its “China’s Rich List”, showed 60 per cent of wealthy Chinese planned to buy property overseas in the next three years.

Many individuals move larger sums offshore by tapping relatives’ quotas and companies also sneak huge amounts of cash offshore through fake invoicing.

In October, foreign exchange reserves slumped more than US$45 billion - the most since January or the tail end of China’s stock market crisis. November data is due on Wednesday.

Although the fall in reserves in October was mainly seen as reflective of the yuan’s declining value, a researcher at China’s central bank warned the slide and capital flight

could feed off of one another.

“Depreciation triggers capital flight, and capital flight exerts even bigger pressure on the yuan,” Wang Zhenying, head of the Statistics and Research Department of the People’s Bank of China’s (PBOC) Shanghai Head Office, said in an interview.

“Therefore, it’s necessary to break this feedback loop,” he said.

Analysts say there are fundamental reasons suggesting the yuan should fall. While economic growth has steadied this year at around 6.7 per cent, it is seen sliding next year. The International Monetary Fund forecasts growth of 6.2 per cent in 2017.

Still, the yuan is falling alongside other emerging market currencies in the face of a dollar that is surging on expectations of higher interest rates as Trump tries to lift the U.S. economy.

But China’s relationship with the United States is highly uncertain.

Trump has promised to name China a currency manipulator on his first day in office in January and to slap 45 per cent import tariffs on Chinese goods.

He prompted protests from China this weekend by speaking by phone on Friday with Taiwan’s president, something no previous U.S. president had done since the United States switched its diplomatic recognition to China from Taiwan in 1979.

Sceptical Chinese

Investors said the pressure on the yuan is nowhere near as extensive as it was late last year when a stock market slump and surprise devaluation of the yuan raised fears that the economy was in worse health than Beijing had let on.

Concerns about China’s debt mountain have also eased this year and the government has underpinned economic growth with a massive stimulus effort.

It has also kept the yuan largely stable in trade-weighted terms, although analysts said that may be lost on many Chinese who tend to focus more on the dollar rate.

“When you know your currency is going to be weaker, there is going to be a desire to try to take advantage of that or to try to hedge, so the desire to get dollars will still be there. It is natural to see these kinds of capital outflows,” PIMCO’s Spajic said. Reuters

Business Daily Tuesday, December 6 2016 11

Asia Equality

Asia’s progress in closing the gender gap is slow, uneven The Philippines and New Zealand are the only AsiaPacific countries ranked in the top 10 of the Global Gender Gap Index David Roman

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he Philippines and New Zealand are leading the pack in Asia-Pacific on having the best gender equality, but the rest of the region still has some way to go to improving its status.

India is struggling to improve its rates of female health, despite gains on wage equality and educational attainment, while China’s gender gap has flat-lined over the past

decade largely due to a decline in the percentage of women joining the workforce, said Samantha Amerasinghe, an economist with Standard Chartered Plc, in a recent report based on earlier findings by the Switzerland-based World Economic Forum.

The Philippines and New Zealand are the only Asia-Pacific countries ranked in the top 10 of the Global Gender Gap Index of 144 countries compiled by the World Economic Forum. Even so, both nations

scored lower than they did a decade ago, while Singapore, India and Bangladesh were the only Asian nations to rise in the ranks over that period.

To be sure, the number of countries included in the report has risen from 115 in 2006. But some Asian declines remain significant all the same, with Sri Lanka down 87 positions, China down 36 positions, Malaysia down 34 and Japan down 32.

As in 2006, Philippines remains nearest to closing the gender gap among Asian countries, with notable gains in economic participation and opportunity and in political empowerment, said Amerasinghe, who is London-based. The Philippines has also achieved gender

parity on two indicators: educational attainment and health and survival.

The nation has made gains by moving women into professional and skillsbased jobs as well as having more representation of females in positions of power in the government and private sector, said Amerasinghe.

Overall, however, “the results from the 2016 report are disheartening,” she added. “The slow rate of progress on the economic opportunity index for women increases the urgency for women to enter higher-growth areas that require science, technology, engineering and mathematics.”

In fact, Asia is largely to blame for a global decline in the female participation rate, the percentage of working-age women who are actually part of the workforce. The rate fell between 1990 and 2014 in both India and China according to World Bank estimates, so that Asia as a whole saw a decline in this metric, even though the overall level remains high by international standards.

Progress toward economic equality also remains elusive, Amerasinghe said, noting that it’s slowed to the worst level since 2008, after a peak in 2013. In Asia, no country ranks in the top-10 in the economic participation sub-category in 2016, even though both Singapore and Philippines are in the top-20.

At the current rate, women will win global pay equality in 170 years, with the overall economic gender gap to be closed by 2196, according to WEF estimates. Bloomberg News

Political crisis

Korean opposition sees just enough votes to impeach Park The anti-Park rally on Saturday drew 320,000 protesters in Seoul Sam Kim

South Korea’s opposition may have secured just enough votes from President Park Geun-hye’s ruling party to impeach her this week, getting a boost from the biggest candlelight protests yet over her influence-peddling scandal.

A faction in Park’s ruling party agreed Sunday to support an impeachment motion set for vote on Friday, Chang Je-won, a Saenuri Party lawmaker, said on Facebook. Votes from the 29 lawmakers, when added to the 171 opposition and independent politicians already supporting impeachment, would be just enough to reach the threshold of 200 required to pass the motion in the 300-seat National Assembly.

The faction led by former floor leader Yoo Seong-min said last week they would oppose impeaching Park if she agreed to step down at the end of April. That condition no longer applies, Chang said, calling the decision by his faction a “tough” one.

“Joining the impeachment vote is the only way to humbly accept the wishes of the people reflected in

the candles and put the government affairs back on track,” he said.

The anti-Park rally on Saturday the sixth since she apologized to the nation in October for allowing her friend, Choi Soon-sil, to meddle in government affairs - drew 320,000 protesters in Seoul, according to police. Organizers put the number at 1.7

million. Moon Jae-in, the front-runner in presidential polls, plans to lead another candlelight rally at the National Assembly on Monday to keep the pressure on the Saenuri party, said Lee Ji-soo, a spokesman for the main opposition Democratic Party of Korea.

Park may give her fourth national address over the scandal on Tuesday or Wednesday, and she may say she will resign by the end of April, Yonhap News reported Monday, citing

unidentified people in the ruling bloc.

Her office didn’t immediately reply to an inquiry on whether she plans to speak this week.

Park’s single, five-year term is scheduled to end in early 2018. Her impeachment, if approved by the parliament, has to be reviewed by the Constitutional Court, which can take as long as 180 days. A presidential election would follow in 60 days if the court agrees to removing her from power. Bloomberg News

12 Business Daily Tuesday, December 6 2016

Asia

A file picture dated 19 February 2016 shows New Zealand Prime Minister John Key (L) speaking as Australian Prime Minister Malcolm Turnbull looks on at a media conference during the Australia-New Zealand Leaders Meeting in Sydney, Australia. Lusa Political shift

New Zealand’s John Key to step down as prime minister He said his regrets were not seeing the Trans Pacific Partnership achieved Matthew Brockett

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ew Zealand Prime Minister John Key said he will step down next week and backed his deputy, Bill English, to succeed him.

In a surprise announcement yesterday in Wellington, Key said that for family reasons he couldn’t commit to serving a full fourth term as prime minister if his governing National Party wins the next election, due in late 2017. The party will vote on a new leader on Dec. 12, he said, adding he will also resign from parliament next year.

“I absolutely believe we can win the next election, but I do not believe that if you asked me if I was committed to serving out a fourth term, that I could look the public in the eye and say yes,” Key, 55, told reporters.

Since becoming prime minister in 2008, the former global head of foreign exchange for Merrill Lynch & Co. has enjoyed strong popular support as he steered the country through a number of tragedies, including an earthquake that levelled inner-city Christchurch in 2011 and killed 185 people. In close partnership with Finance Minister English, Key oversaw New Zealand’s economic recovery from the global financial crisis and returned the government’s budget to surplus.

‘Say it ain’t so bro’

“It has been an enormous privilege to be prime minister of New Zealand, and these last eight years have been an incredible experience,” Key said.

However, too often political leaders stayed too long and he believed it was time for “a refresh,” he said.

Australian Prime Minister Malcolm Turnbull told reporters he had sent

Business Daily is a product of De Ficção – Multimedia Projects

Key a short note reading: “Say it ain’t so bro.”

“New Zealand has never been better situated than it is today,” Turnbull told reporters. “That is due to the outstanding leadership that John has shown.”

“I’ve given everything I could to this job, a job that I cherish in the country that I love.

All of this has come at quite some sacrifice from the people who are dearest to me, my family” John Key, New Zealand’s Prime Minister “There is now greater uncertainty over economic policy for the next parliamentary term, mainly through greater uncertainty over which parties will form government,” said Nick Tuffley, chief economist at ASB Bank in Auckland. “Whether the probability of a change in government is increased or reduced will depend on the incoming prime minister.”

Key Backs English

Key backed English to succeed him, saying: “I have witnessed first-hand his leadership style, his capacity for work, his grasp of the economy, his commitment to change and most of

all his decency as a husband, as a father, a colleague and as a politician.”

As National’s leader in opposition from 2001 to 2003, English led to the party to its worst election defeat in 2002 and was replaced. However, since becoming Key’s deputy in 2006 and finance minister in 2008, English, a father of six and a former farmer, has developed a reputation as a safe pair of hands.

English, 54, paid tribute to Key today, saying he leaves New Zealand “a more confident, more assured and more resilient country.” He told reporters he will decide on whether to seek the leadership after speaking to family and caucus colleagues, but that a quick and smooth transition will be important for stability.

Another potential contender is Justice Minister Judith Collins, who told Newshub today that she is “thinking about it.”

National’s Support

While the latest opinion poll put National at 50 per cent support, no party has won an outright majority since New Zealand introduced a Mixed-Member-Proportional electoral system in 1996. National currently governs with the support of three small parties.

With economic growth of 3.6 per cent in the year through June, New Zealand is among the fastest-growing nations in the developed world, leaving National well placed to fight next year’s election on its promise of tax cuts.

However, the South Pacific nation of 4.7 million people is also in the grip of a housing boom that’s seen prices in largest city Auckland almost double over the past nine years, locking many first-home buyers out of the market and forcing others to take on huge amounts of debt.

“The truth is there are some real challenges for New Zealand,” Andrew Little, leader of the main opposition

Labour Party, told Sky News. “We are at an interesting phase in politics generally, and I think next year’s general election is going to be bloody interesting.”

Key was elected in late 2008 with the country in the midst of a recession, and the global financial crisis damaging business and investor sentiment.

His government cut costs and borrowed to maintain welfare payments and social services, restoring growth, only for the nation to be shocked by a tragic mine accident at Pike River in 2010 then the earthquake in early 2011 that devastated Christchurch. A magnitude 7.8 quake on Nov. 14 left two dead and crippled the tourist town of Kaikoura on the South Island.

Achievements, regrets

Key today listed support for Christchurch, his home town, as one of his government’s major achievements. He said his government has also positioned the economy to take advantage of growing demand from Asia, developing trade relationships and making its voice heard globally.

It reformed tax, labour and welfare laws, and sold shares in four stateowned companies.

He said his regrets were not seeing the Trans Pacific Partnership achieved, and a national referendum defeat for a new flag that he championed. His wife, Bronagh, and two children had made significant sacrifices during his 14-year political career and it was time to spend more time at home, he said.

“Making the decision to resign has not been easy, and I have no plans as to what comes next in my professional life,” Key said. “But for me this feels the right time to go. It leaves the cabinet and caucus plenty of time to settle in with a new prime minister before heading into election year with a proud record of strong economic management.” Bloomberg News

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

Business Daily Tuesday, December 6 2016 13

Asia Bank of Japan Governor

In Brief

“Fintech” poses challenges for banking-sector stability Fintech, which involves new technologies to make financial services more efficient, has been under the global spotlight because of its promise - or threat - to “disrupt” traditional financial activity

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ew financial technology, or “fintech,” poses fresh challenges for central banks in maintaining banking-sector stability, Bank of Japan Governor Haruhiko Kuroda said yesterday.

Financial authorities regulate the banking sector by imposing constraints on the balance sheets of commercial banks, including setting capital requirements and liquidity standards.

But Kuroda told a seminar that such regulatory tools may not be very effective for regulating fintech firms that specialise in settlement services, or match supply of and demand for funds without using their own assets.

“Thus, financial authorities are facing new challenges in terms of obtaining information and maintaining financial stability,” he said.

New information technologies also made financial networks more open and cyber-attacks more sophisticated, increasing the need for authorities to boost security measures, he said.

Given incidents that suggest new types of financial transactions such as high-frequency and algorithm trading tended to increase market volatility, policymakers needed to

develop a deeper understanding of their impact on financial markets, Kuroda said.

European Central Bank policymaker Francois Villeroy de Galhau, who was present at the same seminar, also warned of “sensitivities” in dealing with the evolution of fintech.

“We don’t have to sacrifice consumer confidence and security

because if they go down...it would hamper the long-term development of fintech,” he said.

Policymakers should regulate fintech and financial actors, not based on who they are but what they do, Villeroy added.

Fintech, which involves new technologies to make financial services more efficient, has been under the global spotlight because of its promise - or threat - to “disrupt” traditional financial activity.

It gained prominence in the United States partly on public distrust over traditional banking after the collapse of Lehman Brothers in 2008 led to the mass bailing-out of “too big to fail” banks by the U.S. government. Reuters

Australia’s new vehicle sales up Sales of new vehicles in Australia edged higher in November from the same month last year and looked set to clinch another year of records, thanks in part to stellar demand for pick up trucks.

The Australian Federal Chamber of Automotive Industries’ VFACTS report on Monday showed 98,937 new vehicles were sold in November, up 0.3 per cent on the same month last year. Adjusted for selling days, sales dipped in the month. The running total for 2016 rose to 1.08 million, 2.2 per cent ahead of the same period last year and set to surpass the 2015 total of 1.16 million units.

M&A

Panasonic in talks to buy ZKW

Bank of Japan Governor Haruhiko Kuroda

Internventions

Australian government to reclaim billions of dollars in ‘overpaid’ welfare The crackdown is part of the broader overhaul of the nation’s welfare system The Australian government is attempting to reclaim more than US$3 billion’s worth of incorrectly paid welfare hand-outs, local media reported yesterday.

The government is reportedly handing out around 20,000 “compliance interventions” on a weekly basis in order to reclaim the funds, which it says were incorrectly paid.

Recipients who failed to update their income details can expect to be hit with the notice, while the government is also cracking down on deliberate fraud.

More than 1.7 million “compliance

Auto indusrty

interventions” will be handed out to welfare recipients as the government continues to attempt to lower its debt bill, according to Human Services Minister Alan Tudge.

He told News Corp that a number of overpayments were made between 2010 and 2013, and while some might be honest mistakes, there are a number of cases in which the government has been the victim of welfare fraud.

“Our aim is to ensure that people get what they are entitled to - no more and no less - and to crack down hard when people deliberately defraud the system,” Tudge said yesterday.

The latest federal budget estimated that more than US$3 billion would be overpaid between 2010 and 2018 unless something was done, while under the debt recovery scheme, the government is expected to save more than US$1.2 billion over the next five years.

“Our aim is to ensure that people get what they are entitled to - no more and no less and to crack down hard when people deliberately defraud the system” Alan Tudge, Australia’s Human Services Minister Since July alone, the government has identified and handed out notices worth almost US$1.5 billion, while US$3.4 million’s worth of notices are sent in the mail every day.

The crackdown is part of the broader overhaul of the nation’s welfare system; earlier this year, Social Services Minister Christian Porter warned that Australia’s welfare bill would explode unless those on welfare can be helped out of the ‘never-ending’ welfare cycle. Xinhua

Japan’s Panasonic Corp is in the final stages of talks to buy European automotive light maker ZKW Group for up to US$1 billion, accelerating its push into the automotive electronics market, the Nikkei business daily reported yesterday. The two companies could reach a basic agreement as early as this month, the Nikkei said. Privately held ZKW supplies light-emitting diode headlights and lighting modules to U.S. and European automakers such as General Motors Co and BMW. It forecasts sales of about 900 million euros in 2016.

Forex

South Korea reserves fall again South Korea’s foreign exchange reserves fell for a second straight month in November, as the dollar’s strength reduced the value of assets in other currencies, the central bank said yesterday. Foreign reserves held by the Bank of Korea totalled US$371.99 billion as of end-November, down from US$375.17 billion in October. Securities fell by US$5.41 billion to US$336.88 billion, and made up 90.6 per cent of the BOK’s reserves. South Korea had the world’s eighth-largest foreign exchange reserves as of October this year.

Energy

India prioritising shift to become natural gas-based India is giving priority to moving towards a natural gas-based economy and efforts must be made to raise local production of the fuel while also creating infrastructure to import it, Prime Minister Narendra Modi told an energy conference yesterday. “Natural gas is the next-generation fossil fuel, cheaper and less polluting,” Modi said in an address at India’s flagship energy event, Petrotech.

“Efforts must be made to increase natural gas production whole also creating import infrastructure to meet the growing domestic demand,” Modi said.

14 Business Daily Tuesday, December 6 2016

International In Brief Monetary policy

Turkey’s inflation dip gives little solace to central bank A surprise slowdown in Turkey’s consumer prices in November is unlikely to ease investor pressure on the central bank to raise interest rates after the lira plunged to a record. The annual inflation rate dropped to 7 per cent, mainly due to low food prices, according to official data released yesterday.

The median estimate in a Bloomberg survey of economists was an acceleration to 7.4 per cent. The central bank unexpectedly raised borrowing costs last month, a decision that failed to stem a rapid depreciation of the lira.

Survey

UK manufacturers enjoy post-Brexit bounceback A slump in British manufacturing is showing signs of lifting thanks to higher new orders at home and the prospect of more demand from abroad spurred by the fall in the value of the pound after June’s Brexit vote, a survey showed yesterday. A stabilisation in oil prices helped to improve the outlook for the sector, the survey showed.

But increasing inflation pressures and a squeeze on profits meant manufacturing was still likely to contract in 2017. Output for manufacturers picked up significantly with the balance of firms reporting growth jumping from -7 per cent in the third quarter to +13 per cent.

Eurozone

Euro reaches 20-month low as Renzi concedes referendum defeat While the referendum has raised concerns over Italy’s future in the euro region, the nation’s political and legal system mean a “no” vote is unlikely to trigger a quick exit Chiara Albanese and Anooja Debnath

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he euro fell to the weakest level since March 2015 and Italy’s bonds declined as the nation’s Prime Minister Matteo Renzi said he would resign after conceding defeat in the constitutional referendum.

The single currency dropped against most of its 16 major counterparts as the referendum on Renzi’s plans to rein in the power of the Senate was defeated by 59.1 per cent to 40.9 per cent, according to the final tally. The euro pared losses following the premier’s speech, while the yen erased an earlier advance against the dollar.

Italy’s 10-year bond yield climbed the most in three weeks, paring last week’s decline.

The result is the latest in a series of votes that have roiled financial markets in 2016, following Britain’s vote to leave the European Union in June and Donald Trump’s victory in last month’s U.S. presidential election. Still, with a “no” vote largely expected, the initial currency-market reaction is relatively muted compared to those events - the pound fell by more than 10 per cent as it became clear the U.K. had voted for Brexit, while the dollar swung wildly in the hours following Trump’s win.

“The moves were contained because everybody expected a ‘no’ today,” said Jens Peter Sorensen, chief analyst at Danske Bank A/S in Copenhagen. “I am not optimistic on this one. There is no need to be

brave here and start buying BTPs. I don’t see this as a very positive sign for the euro, because now one of the biggest countries in the euro zone is in a political mess.”

The euro dropped 0.2 per cent to US$1.0646 as of 8:37 a.m. in London, after falling earlier 1.5 per cent to US$1.0506, the lowest since March 16, 2015.

Italy’s 10-year yield climbed 10 basis points to 2.01 per cent, having dropped 19 basis points last week.

While the referendum has raised concerns over Italy’s future in the euro region, the nation’s political and legal system mean a “no” vote is unlikely to trigger a quick exit.

“Markets tend to react much faster to changes of environment now,” said Yannick Naud, head of fixed income at Banque Audi (Suisse) SA in Geneva. “There is now a possibility of the euro reaching parity to the dollar. Maybe not right away, but it is a possibility if there is certainty regarding new elections.” Bloomberg News

Oil summit

OPEC says to meet non-OPEC on Dec. 10 OPEC will meet non-OPEC countries to finalise a global oil output-limiting pact on Dec. 10 in Vienna, the first such meeting since 2002, OPEC’s secretary general said yesterday. Mohammed Barkindo announced the meeting plan at a conference in New Delhi, according to a copy of his speech.

The meeting had earlier been due to take place in Moscow. The Organization of the Petroleum Exporting Countries agreed last week to reduce oil output by around 1.2 million barrels per day (bpd) beginning in January in a bid to reduce global oversupply and prop up prices.

Fundraising case

RBS agrees US$1 billion pay-out Royal Bank of Scotland has reached a settlement with the majority of shareholder groups over allegations it misled them during a fundraising at the height of the financial crisis, but still has to strike a deal with thousands of smaller retail investors.

The state-controlled British bank said yesterday it had agreed a deal with three of the five investor groups involved in the lawsuit to pay out 800 million pounds (US$1 billion) to be split across all five of the groups.

RBS is now trying to reach an agreement with the other two groups in order to avoid the case coming to trial in March 2017.

Italian Prime Minister Matteo Renzi during a press conference in Rome after the referendum on constitutional reform. Lusa

Private index

Eurozone gears for growth as companies look past political woes The euro-area services PMI was 53.8 in November, below a flash reading of 54.1 but up from 52.8 in October Carolynn Look

The euro-area economy expanded at the fastest pace this year in November as companies took on workers and kept political concerns at bay.

A Purchasing Managers’ Index for manufacturing and services rose to 53.9 from 53.3 a month earlier, IHS Markit said yesterday. While that’s slightly below a previous estimate of 54.1, it still marks the highest level in 11 months. Italian business activity grew at the fastest rate in nine months, even amid concern over a Dec. 4 referendum that could hit political stability.

“Rather than fretting about political risk, companies appear to be gearing up for further expansion.

Employment is rising at one of the fastest rates seen over the past five years,” said Chris Williamson, chief business economist at IHS Markit.

“The weaker euro appears to be feeding through to faster exportled manufacturing growth, though

service-sector companies are also enjoying stronger expansion, suggesting that domestic demand is also improving.”

“The signs of steady fourthquarter growth and indications that inflationary pressures are rising will be unlikely to deter the ECB from extending its QE program” Chris Williamson, chief business economist at IHS Markit The upbeat report may reassure the European Central Bank when

it meets this week to discuss the euro-area outlook and the fate of its 1.7 trillion-euro (US$1.8 trillion) asset-purchase program.

Still, ECB President Mario Draghi has repeatedly said the recovery remains reliant on continued monetary support and IHS Markit said it expects quantitative easing will be prolonged.

“The signs of steady fourthquarter growth and indications that inflationary pressures are rising will be unlikely to deter the ECB from extending its QE program,” Williamson said. “But the extent to which the euro zone is benefitting from the weaker euro in particular, if sustained, will raise the likelihood of stimulus being tapered earlier than previously anticipated.”

The euro-area services PMI was 53.8 in November, below a flash reading of 54.1 but up from 52.8 in October.

Overall euro-area growth was led

by Ireland, Spain and Germany, Markit said. The gauge for France was the weakest since July as its manufacturing sector slowed.

Bloomberg News

Business Daily Tuesday, December 6 2016 15

Opinion

Alibaba’s Ma needs Modi more than bad social circles

Preventing the next eurozone crisis starts now

Tim Culpan a Bloomberg Gadfly columnist

L

ast month’s Circles drama highlights the struggle Jack Ma’s empire faces in expanding its financial services business.

To recap, Alibaba Group Holding Ltd. and its affiliate Zhejiang Ant Small & Micro Financial Services Group Co. added social features to Alipay’s smartphone app to help promote engagement. In theory, more engagement should lead to greater use of its marquee function, which is sending money from user to user. Results weren’t as expected and Ant was forced to issue an apology.

If you look at Ant’s underlying goal - growth - there would seem an opportunity far more ripe for the taking, and that’s in India.

Prime Minister Narendra Modi brought on a black swan moment in November when he announced that 500 rupee (US$7.30) and 1,000 rupee banknotes would have to be exchanged for new currency. Those denominations accounted for 86 per cent of all cash in circulation.

As Bloomberg’s Saritha Rai reported, the ban was the best thing that could have happened to Indian digital payments. Paytm is one of the biggest beneficiaries, and the House That Jack Built is an investor.

More than 90 per billion US$ Indian digital cent of Indian payments market, 2020 transactions are in cash and many citizens don’t have a bank account, let alone ATM or credit cards.

The simplest way for Alibaba and Ant (both investors in Paytm) to tap this sudden boom is to just sit back and watch Paytm grow.

An entrepreneurial outfit like Alibaba isn’t likely to be satisfied with sitting on its hands, however. Alibaba can bring a lot to the table, and there’s every indication Paytm could benefit.

For starters, Ant has years of experience building infrastructure that includes networks, software and authentication.

That kind of experience could help Paytm get over some of its growing pains. For example: Paytm in late November introduced a feature that let shopkeepers turn their smartphones into point-of-sale terminals, allowing customers to use their debit or credit card to make a purchase. Just one day later, it put the function on hold amid security concerns.

With a decade in the business - including navigating regulatory minefields - Alipay is the type of partner well-suited to help find a solution.

Then there’s the future of Paytm. Not content with simply being a payments provider, Ant Financial branched out in areas including loans, money-market funds and credit profiling. Those are all products an expanding, wealthier India is going to be clamouring for in coming decades.

With Ant on hand to provide both the financial and technical resources to scale quickly, it shouldn’t be hard for Paytm to up-sell these additional products once it gets to a critical mass of customers. India’s cash crisis has done the perfect job of herding clients to digital payments and priming them for the next wave of financial services.

While Alibaba’s attempts at going social are understandable, the Indian experience shows that to really expand business, Ma doesn’t need Circles when he has Modi. Bloomberg Gadfly

500

E

uropean leaders have devoted scant attention to the future of the eurozone since July 2012, when Mario Draghi, the European Central Bank’s (ECB) president, famously committed to do “whatever it takes” to save the common currency. For more than four years, they have essentially subcontracted the eurozone’s stability and integrity to the central bankers. But, while the ECB has performed the job skilfully, this quiet, convenient arrangement is coming to an end, because no central bank can solve political or constitutional conundrums. Europe’s heads of state and government would be wise to start over and consider options for the eurozone’s future, rather than letting circumstances decide for them.

So far, Europe’s leaders have had little appetite for such a discussion. In June 2015, they only paid lip service to a report on the euro’s future by the presidents of the various European institutions.

A few weeks later, the issue briefly returned to the agenda when eurozone leaders spent a long late-July night arguing about whether to kick out Greece; but their stated intention to follow up and address underlying problems was short-lived.

Finally, plans to respond to the Brexit shock by strengthening the eurozone were quickly ditched, owing to fear that reform would prove too divisive.

The issue, however, has not gone away. Although the monetary anaesthetics administered by the ECB have reduced market tensions, nervousness has re-emerged in the run-up to the Italian constitutional referendum on December 4. By end-November spreads between Italian and German ten-year bunds reached 200 basis points, a level not seen since 2014.

The worrying state of several Italian banks is one reason for the mounting concern. Brexit, and the election of a US president who advocates Americanism instead of globalism and dismisses the EU, adds the risk that voters, rather than markets, will call into question European monetary integration. Anti-euro political parties are on the rise in all major eurozone countries except Spain. In Italy, they may well command a majority.

On the economic front, the eurozone has much unfinished business. The banking union, launched in June 2012 to sever the interdependence of banks and states, has made good progress but is not yet complete. Competitiveness gaps between eurozone members have diminished, and external imbalances within it have abated, but largely thanks to the compression of domestic demand in Southern Europe; saving flows from North to South have not resumed. Unemployment gaps remain wide.

The eurozone still lacks a common fiscal mechanism as well, and Germany has flatly rejected the European Commission’s recent attempt to promote a “positive stance” in countries with room to boost spending. Of course, when the next recession hits, fiscal stability is likely to be in dangerously short supply.

Finally, the governance of the eurozone remains excessively cumbersome and technocratic. Most ministers, not to mention legislators, appear to have become lost in a procedural morass.

This unsatisfactory equilibrium may or may not

“

Jean Pisani-Ferry a professor at the Hertie School of Governance in Berlin, and currently serves as Commissioner-General of France Stratégie, a policy advisory institution in Paris

last, depending on political or financial risks – or, most likely, the interaction between them.

So the question now is how to hold a fruitful discussion to map out possible responses. The obstacles are twofold: First, there is no longer any momentum toward “more Europe”; on the contrary, a combination of scepticism about Europe and reluctance concerning potential transfers constitutes a major stumbling block. And, second, views about the nature and root causes of the euro crisis differ across countries. Given the dearth of political capital to spend on European responses, and disagreement on what the problem is and how to solve it, governments’ excess of caution is hardly surprising.

Both obstacles can be overcome. For starters, discussion of the eurozone’s future should not be framed as necessarily leading to further integration.

The goal should be to make the eurozone work, which may imply giving more powers to the centre in some fields, but also less in others.

Fiscal responsibility, for example, should not be reduced to centralized enforcement of a common regime. It is possible to design a policy framework that embodies a more decentralized approach, empowering national institutions to monitor budgetary behaviour and overall fiscal sustainability.

In fact, some steps in this direction have already been taken. Going further would imply making g o v e r n m e n ts i n di vi d u a l l y responsible for their misconduct – in other words, making partial debt restructuring possible within the eurozone. Such an approach would raise significant difficulties, if only because transiting to such a regime would be a hazardous journey; but options of this sort should be part of the discussion.

To overcome the second obstacle, the discussion should not start by addressing the legacy problems. Distributing a burden between creditors and debtors is inevitably acrimonious, because it is a purely zero-sum game. The history of international financial relations demonstrates that such discussions are inevitably delayed and necessarily adversarial when they take place. So the issue should not be addressed first.

The seemingly realistic option of starting with immediate problems before addressing longerterm issues is only superficially attractive. In reality, discussions should start with the features of the permanent regime to be established in the longer run. Participants should explore logically coherent options until they determine if they can agree on a blueprint. It is only when agreement on a blueprint for the future has been reached that the path toward realizing it should be discussed.

There are no quick fixes to the eurozone’s problems. But one thing is clear: the lack of genuine discussion on possible futures is a serious cause for concern. Silence is not always golden; for the sake of Europe’s future, the hush surrounding the common currency should be broken as soon as possible. Project Syndicate

The goal should be to make the eurozone work, which may imply giving more powers to the centre in some fields, but also less in others

”

16 Business Daily Tuesday, December 6 2016

Closing Black money estimates

India said to validate 82 per cent of cash

Indians have validated 82 per cent of bank notes rendered worthless by Prime Minister Narendra Modi’s surprise move last month, according to people with knowledge of the matter, undermining the government’s estimate of unaccounted wealth in the economy.

About 12.6 trillion rupees (US$185 billion) had been deposited into bank accounts as of Dec. 3, the people said, asking not to be identified citing rules for speaking with the media. The

government had estimated that about 5 trillion rupees of the 15.3 trillion rupees sucked out by Modi’s move would stay undeclared, implying that this was cash stashed away to evade taxes, known locally as black money.

Lack of a meaningful cancellation could be a double blow for Modi as the measure was being used as a political and economic gauge of the success of his Nov. 8 move. One of Modi’s biggest campaign pledges was to expose black money in Asia’s No. 3 economy, and economists were viewing the cash as a potential windfall for the government. Bloomberg News

PMI

Services sector index rises to 16-month high in November The survey also saw a further marginal increase in prices charged for Chinese services in November

C

hina’s services sector expanded at its quickest rate in 16 months in November, a private survey showed yesterday.

The Caixin China General Services PMI (Purchasing Managers’ Index) hit 53.1 in November, up from 52.4 in October, according to a survey conducted by financial information service provider Markit sponsored

by Caixin Media Co. Ltd. A reading above 50 indicates expansion, while a reading below 50 represents contraction.

The surveyed companies said the expansion was due to increased new projects and orders, with job creation posting the fastest rate in one-and a-half years, the survey showed.

The trend corresponds with official indicators released by the National Bureau of Statistics, which showed China’s non-manufacturing activity expanded to 54.7 in November from 54 in October.

Confronted with a prolonged slowdown, China has channelled energy into the services sector to offset flagging manufacturing and lacklustre exports. In the first three quarters, services made up 58.5 per cent of GDP growth, up 3.4 percentage points from a year ago.

Meanwhile, optimism over future growth prospects moderated to a 13-month low at service companies largely due to relatively subdued market conditions.

The Caixin China General Services PMI is based on data compiled from

monthly replies to questionnaires sent to purchasing executives at more than 400 service companies.

The Caixin China Composite Output Index, which measures both service and manufacturing activity, was unchanged from October’s 43-month record high of 52.9 in November, according to the survey.

A solid increase in the business activity of service companies in November offset a slight slowdown

Markets

in the rate of output expansion across the manufacturing sector, it said.

“The economy may remain stable in the fourth quarter, but it will still face significant downward pressure next year,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.

Zhang Liqun, a researcher with the Development Research Center under the State Council, was upbeat about the overall economic stability.

The continued expansion of manufacturing shows that the economy has stabilized after a protracted slowdown, Zhang said.

Tax

China’s manufacturing PMI came in at 51.7 in November, up from 51.2 in October and remaining above the 50-point boombust line for the fourth straight m o n th, o ffi ci a l data sh o w e d Thursday.

“It is highly probable that the economy will continue steady growth in the future,” Zhang said.

The country’s GDP grew 6.7 per cent in the first three quarters of 2016, steady with the first half and within the government’s target range of between 6.5 and 7 per cent for 2016. Xinhua

Shanghai outflow

Hong Kong-Shenzhen trading China pledges to simplify tax Bank of China says still conducting link off to negative start scheme after switch to VAT “reasonable” forex sales A long-delayed trading link between the exchanges of Hong Kong and Shenzhen in China made a disappointing debut yesterday, with markets on both sides of the border ending lower.

The link opens another door to the mainland’s cloistered markets, allowing foreigners to buy shares in more than 800 Chinese firms for the first time, while also giving mainlanders further access to Hong Kong-listed companies.

The scheme is being touted as China’s latest effort to prove its capital markets are gradually opening.

Hong Kong’s city leader Leung Chun-ying hailed it as “yet another milestone in deepening mutual access” between the capital markets in Hong Kong and mainland China.

However, by the close Hong Kong was down 0.26 per cent and Shenzhen’s composite index had given up 0.78 per cent.

And only 21 per cent of the northbound trade permitted under the scheme was taken up, while a little more than eight per cent of the southbound quota was used up.

That was mainly due to the weak yuan and concern that China would not open up capital flows in the short-term, said Jackson Wong, a securities analyst at Huarong International. AFP

China will reduce the number of different rates in its newly-rolled out value-added tax (VAT) scheme and look to iron out other shortcomings in a system that it said will reduce companies’ tax burden by 500 billion yuan (US$72.62 billion) this year.

“We will further standardize and improve the VAT system in accordance with the requirements for the modern taxation system. We will simplify VAT rates appropriately,” the finance ministry said in an update last Friday.

The ministry said having multiple VAT rates would “inevitably” result in the problem of different VAT rates being applied to similar business, impeding competition and hindering VAT from playing a neutral role.

KPMG China’s head of indirect tax Lachlan Wolfers expects the government to work on reducing the number of rates from the current four (which range from 6 per cent to 17 per cent) next year, as most countries only have one or two, and speed up the switch to electronic invoices.

The VAT was applied to service sectors including finance and property on May 1 to complete the switch from a flat business tax. Reuters

Bank of China, one of the country’s “Big Four” state-owned banks, said yesterday it is still conducting foreign exchange sales for clients in Shanghai with “reasonable” demand, adding that a report that it was limiting forex sales was not factual.

Citing two sources with knowledge of the matter, Reuters reported on Friday that Bank of China’s Shanghai branch had begun to limit corporate customers’ ability to purchase foreign currency, as authorities look to shore up the weakening yuan currency.

The Shanghai branch of BoC “strictly adheres to the management requirements of the regulators” and “foreign exchange sales are being processed normally (for clients) with real trade background and reasonable demand,” it said in a statement emailed to Reuters yesterday.

Sources told Reuters that bankers at BoC Shanghai branch began last week to discourage companies wishing to change yuan into dollars.

Those firms which insisted on doing so were told they would be restricted to exchanging a maximum of US$1 million. Previously, there had been no restrictions. Reuters