Hengqin Hub costs to reach MOP20 billion Transport centre Page 4
Wednesday, December 7 2016 Year V Nr. 1189 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro One Belt, One Road
China’s infrastructure drive reaches Southeast Asian neighbours Page 10
SIGGRAPH Asia 2016
Local firms mull futuristic technologies Page 4
Gaming
Japan passes casino law in lower house Page 7
www.macaubusinessdaily.com
LRT
South Korean crisis
Government appoints new team to research passenger flow Page 2
President Park vows to fight impeachment in courts Page 12
Road Works Ahead Legislative Assembly
Yesterday’s Legislative Assembly said it: worsening traffic next year. Secretary for Transport and Public Works Raimundo do Rosário confirmed road works will increase in 2017. He also elaborated upon pressing housing issues and the supply of materials. Page 3
Shadow of the past
Property China Star has acquired a stake in a plot of land in Nam Vam. The Lan Kwai Fong Hotel and Casino operator reached a deal to buy up to 50 pct in land granted as a swap during the tenure of disgraced former Secretary Ao Man Long. The administrative situation, however, remains cloudy regarding future development. Page 5
Lam on his own
Philippines judiciary Nothing to do with us. Jimei International Entertainment Group has issued a statement distancing itself from controlling shareholder Jack Lam. Its Executive Director is accused of ‘economic sabotage in the Philippines and bribery’. Page 6
Exports up, manpower down
Local exports to China and the U.S. have perked up. MSAR exporters’ optimism has increased y-o-y regarding Q4 expectations. Meanwhile, a Macao Economic Services survey indicates almost half of companies have difficulties finding manpower.
Trade deal rush
Trade Page 2
HK Hang Seng Index December 6, 2016
22,675.15 +169.60 (+0.75%) Worst Performers
Galaxy Entertainment Group
+3.68%
Bank of East Asia Ltd/The
+1.88%
Cathay Pacific Airways Ltd
-0.77%
New World Development
-0.35%
China Life Insurance Co Ltd
+3.48%
Hang Lung Properties Ltd
+1.77%
AIA Group Ltd
-0.66%
Swire Pacific Ltd
-0.20%
HSBC Holdings PLC
+3.43%
MTR Corp Ltd
+1.45%
Cheung Kong Property
-0.59%
AAC Technologies Holdings
-0.14%
Sino Land Co Ltd
+2.39%
China Resources Power
+1.43%
Hong Kong Exchanges &
-0.51%
Tencent Holdings Ltd
-0.05%
Belle International Holdings
+2.02%
China Mengniu Dairy Co Ltd
+1.41%
China Overseas Land &
-0.45%
China Shenhua Energy Co
+0.00%
16° 21° 16° 21° 17° 21° 17° 22° 17° 21° Today
Source: Bloomberg
Best Performers
THU
FRI
I SSN 2226-8294
SAT
SUN
Source: AccuWeather
Globalization China should fill the void left by the U.S. in global trade if protectionism gains traction. So says the Asian Development Bank. The China-led RCEP held a meeting in Indonesia this week, mulling a great opportunity to replace the almost failed TPP. Page 8
2 Business Daily Wednesday, December 7 2016
Macau DSE
Industrial orders for exports up 18.5 pct The city’s export industry posts increased orders but continues to lack enough personnel
I
ndustrial orders by companies in the MSAR saw an increase in their waiting time, posting an 18.5 per cent increase in wait for products year-onyear during the third quarter, according to enquiries conducted by the Macao Economic Services (DSE). The average waiting time for the orders increased from 2.5 months to 2.16 months in the third quarter of 2015. However, waiting times varied greatly amongst the surveyed sectors, with that of Pharmaceutical Products registering the longest, of 4.92 months - representing an increase of 48.2 per cent year-on-year. The shortest waiting period was seen in the Electronic Equipment and Electronics sector, which took only 1.55 months.
better performance, with indexes of 32.3 and 18.2, respectively, while Australia posted the poorest performance regarding the low volume of orders. Exporters in the territory, interviewed for the study exporessed mixed optimism regarding the fourth quarter, with 18.5 per cent having an optimistic approach, a 7.3 per cent increase year-on-year. Meanwhile, 10.2 per cent of the companies interviewed anticipate a less favourable
evolution, also a year-on-year drop of 24.4 per cent, compared to the 34.6 per cent registered in the third quarter of 2015, translating into a ‘prudent and optimistic attitude in general regarding future exports,’ notes the report.
Lack of personnel
According to the results, 49.2 per cent of the companies interviewed confirmed a lack of manpower, a lower number than that registered in the third quarter of 2015 (59.6 per cent). Meanwhile in the Pharmaceutical Products sector 77.9 per cent of
respondents noted that they had a substantial procurement of workers. Of all the factors affecting exports in the third quarter, the results indicated that 21.9 per cent of the companies consider insufficient labour to be their biggest problem, while 10.4 per cent consider more competitive foreign pricing to be their main issue; just 5 per cent of respondents considered an insufficient amount of orders as their main issue. Other problems such as competition of foreign prices, lack of orders, and raw material prices accounted for 10.4 per cent, 5 per cent and 0.3 per cent, respectively.
Cautiously optimistic outlook
According to the views of the interviewed companies and the analysis of their orders, the respondents generally believe that the Mainland and the United States have relatively better performance in the export market. Electronic or electrical appliances, tobacco, and pharmaceuticals were the main exported goods during the quarter three of this year. The respondents hold a cautiously optimistic outlook about the future of the export industry for the next six months, even though the export outlook in the optimistic index increased by 6.2 per cent compared to the same period last year. On the other hand, respondents who express pessimistic prospects show a decline of 34.6 per cent year-on-year. With respondents anticipating ‘more or less the same’ prospects about the export industry showed a reduction of 7.3 percentage points year-on-year.
‘49.2 per cent of the companies interviewed confirmed a lack of manpower’ The garment manufacturing industry had the second largest number of orders-on-hand, amounting to 3.22 months, indicating an increase of 14.6 per cent year-on-year.
Exports
Regarding exports from the MSAR, the markets of China and the United States are regarded as having
Transportation
Public Projects
Getting back on track with new data
IC explains different estimated costs on public projects
GIT: The government has appointed a new research team to collect the latest data about the LRT’s passenger flow Cecilia U cecilia.u@macaubusinessdaily.com
Given that the data so far collected is already outdated, the government has appointed a research team to conduct another study to analyse the flow of passengers for the city’s Light Rail Transit (LRT) system, according to the latest information released by the Transportation Infrastructure Office (GIT). The GIT information comes in response to an enquiry by legislator Si Ka Lon regarding the likelihood of the LRT servicing the Peninsula. In response, the Co-ordinator of the GIT, Ho Cheong Kei, commented that the decision to build the LRT on the Macau Peninsula will be made following evaluation of the
latest research results, expressing his hope that the decision will be made within this year. Co-ordinator Ho also indicated that the related company is currently preparing for the operation of the LRT system, claiming that the government will make a public announcement once significant progress has been achieved. However, the Co-ordinator added that tasks including the route scheme and design will commence in sequential order once a general decision is made about LRT construction on the Peninsula. Legislator Si Ka Lon criticised the slow progress of the LRT construction, requesting that the government provide more details about the construction schedule and budget.
Estimated costs for the new Central Library and the Grand Prix Museum vary greatly due to the difference in their price per square metre, according to the president of the city’s Cultural Affairs Bureau (IC), Ung Vai Meng. The estimated per square metre cost for the Central Library is MOP28,000, whilst the estimated cost for the Grand Prix Museum is MOP19,000 per square metre, president Ung points out. The clarification comes in response to Legislator Chan Meng Kam’s written enquiry regarding the difference in the estimated cost of these two projects. President Ung explains that the estimated cost for the new Central Library is based on the average cost of large-scale public construction projects in 2015. It also takes into account an inflation rate of about 5 per cent each year, leading to a predicted cost of MOP28,000 per
square metre. On the other hand, the estimated cost per square metre for the Grand Prix Museum is MOP19,000 as the new Grand Prix Museum will occupy the whole of the former Centro de Actividades Turísticas (CAT) building, expanding sixfold, said Ung. The two projects vary greatly g i v e n that th e CAT b u i l d i n g construction and renovation will involve reconstruction works which will ‘utilize and preserve existing resources’ as well as undergoing systems installations. The basis for calculation of the two different buildings’ pricing per square metre ‘varies depending on the dimension, o b j ec t i v es, i n sta l l at i o n s a n d demands, etc.,’ notes the president’s statement. The estimated cost is based on the market price calculated by engineers and architects from the Macao Government Tourism Office (MGTO), Mr. Ung added. A.L.
Business Daily Wednesday, December 7 2016 3
Macau In Brief Environment
CAM: Professional assessment necessary In the wake of comments by Secretary for Transport and Public Works Raimundo do Rosário expressing his concern about the gradual increase in the height of the waste landfill located near the Macau International Airport, made during Monday’s Legislative Assembly Plenary session, Macau International Airport Company Limited (CAM) says it needs to evaluate the problem further. A CAM spokesperson told Business Daily that the company is “seeking professional assessment” regarding the seriousness of the problem, adding that the comment is not in response to comments made by Secretary Rosário in the Legislative Assembly. The Secretary revealed that the construction waste fill located near the city’s international airport has reached 2.5 metres in height, observing that the growing height of the fill might pose a threat to the nearby airport. C.U. Currency
Clearing and payment machine
AL
More issues, more time needed Rosário: Macau needs more time to fix its environment, housing and transport issues Annie Lao annie.lao@macaubusinessdaily.com
T
he Secretary for Transport and Public Works, Raimundo do Rosário, said that the city’s environmental protection, housing and transport are very important for the city but the three issues cannot be resolved within a short period of time. It was his response to questions raised by legislators at the Legislative Assembly meeting held yesterday for the Secretary’s 2017 Policy Address for the Transport and Public Works segment of the action plan for the upcoming year. Yesterday was the last day for the debate at AL. Roadworks will affect the city’s traffic even more next year, Mr. Rosário conceded. “The Transport Bureau (DSAT) will hold a press conference together with the public utility companies to explain the roadworks for next year, especially with the local power distributor CEM - Companhia de Electricidade de Macau as most of the roadwork projects relate to CEM,” Mr. Rosário said. Currently, there are 35 public work projects worth more than MOP100 million (US$12.5 million) and 21 design projects worth MOP100 million, Mr. Rosário pointed out.
Affordable housing
H e p l e d g e d t h a t t h e M SA R Government will seek out more land
to be available for public tender next year and a study will be conducted on how to build cheaper housing in the city. This was in response to legislator Ho Ion Sang’s questions regarding the city’s housing policy. “I hope the MSAR Government will [make] more land [available] for public tender next year to build more housing that the general public can afford to buy,” legislator Ho stressed. Meanwhile, legislator Tsui Wai Kwan raised the issue of the misuse of public housing by some local residents. In addition, legislator Tsui asked how the MSAR Government could ensure that all public housing in the city is properly utilised. In response, Arnaldo Ernesto dos Santos, president of the Housing Bureau, said that the Bureau had inspected 2,700 public housing units this year, of which three were found to be used for other purposes, with punishment to be meted out accordingly. Another 40 units were found to have absent residents and they are now in the hearings process.
Sand supply
The sand supply for the city’s reclamation area of Zone A is subject to Hong Kong-Zhuhai-Macau Bridge demand. Due to this ongoing problem, a hold has been put on the supply of sand. “This issue of sand supply,
however, is under the control of the Central Government,” Mr. Rosário explained. Sand supply for Zone A will resume this Friday, Mr. Rosário revealed. “A lot of problems happening on the project were beyond my control,” Mr. Rosário added. “ G o v e r n m e n t p r o j ects w i th over-expenditure of 5 per cent to 15 per cent are not a big problem here. However, the overtime on the unfinished projects are even bigger problems,” Mr. Rosário stressed.
A total RMB13.89 billion (US$2 billion/MOP16.1 billion) in payments has been settled in the last year in Macau for Lusophone countries’ banks, according to the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (Forum Macao). Bank of China is the only bank in the MSAR authorised to enact RMB clearing and to wire it to Lusophone countries, according to Forum Macao. The Deputy General Manager Bank of China Macau Branch told a seminar that the bank’s branch has been involved in businesses between Mainland China and Portuguese-speaking countries for the last two years, according to Chinese language newspaper Macao Daily News quoted by Forum Macao. During the 5th Ministerial Conference one of the 19 measures Chinese Premier Li Keqiang announced to diversify the MSAR’s economic development was to set up an RMB clearing centre for Portuguesespeaking countries, with the city’s academics considering it could provide considerable benefits to the local banking industry. N.M.
4 Business Daily Wednesday, December 7 2016
Macau Transport hub
Hengqin Tansport Hub costing over MOP20 billion
T
he Border and the integrated transport hub project at Hengqin had its start-ofconstruction ceremony at the beginning of this week, kicking off a construction project set to occupy 1.2 million square metres once completed, and currently occupying 345,100 square metres. Estimated costs for the construction project are about RMB20.6 billion (MOP22.2 billion). The hub will comprise an inspection zone, transport zone and zone for integrated development and auxiliary facilities. The hub will also connect with the Macau’s Light Rail Transit (LRT) system, as well as the link with the Guangzhou-Zhuhai Intercity Railway. For the construction of the inspection building, 14 lanes will be arranged for manual inspection and 16 lanes for self-help inspection. Some 11 lanes for light vehicles and
six lanes for heavy vehicles will also be provided. Once the construction is complete the hub will facilitate the transit of 222,000 travellers per day and 80 million per year. In terms of vehicle capacity, the hub
will be able to inspect 7,259 vehicles per day and 2.6 million per year. The inspection centre will operate a co-operative inspection system between Hengqin City and the MSAR authorities, enabling travellers to only have to cross one, instead of
two, borders. According to Hengqin authorities, the works for the inspection segment are slated to be completed by 2020, while completion of the entire construction project is pencilled in for 2022. The construction project is primarily financed by Zhuhai Da Hengqin Investment Co. Limited, while construction, operation and management of the project will be the responsibility of the company. C.U.
Technology VR technology useful for architecture and prop-
erty rental businesses, states Google VR engineer
Locals struggling with technology One of the only local representatives at the SIGGRAPH Asia 2016 Macao technology conference believes that despite local government providing considerable support for technological education and research startups fail to receive the same help The Macau Government provides considerable support for education and research on new technologies such as 3D printing and Virtual Reality (VR) but private businesses fail to receive the same level of support, Nelson Wong, a Technical Advisor at iCentre, told Business Daily. “Tech startups are small and don’t have many people. The government normally looks at the number of people in the company to hire services or support financially, so it’s hard for small local companies to compete with large overseas companies,” Mr. Wong said. Founded in 2005 with the support of the Macao Foundation, iCentre provides multimedia courses and research on animation, 3D printing,
short movie productions and Virtual Reality. With a large presence by Hong Kong and Shenzhen companies and universities, The Venetian hosted the second day of the SIGGRAPH Asia 2016 Macau computer graphics and interactive technics conference, with iCentre was the only local representative in the event. With a booth in the conference costing MOP26,000 (US$3,254) for the full event taking place until November 8, the iCentre Technical Advisor still considered the event a good way to know more about companies or technical associations for future co-operation. In terms of business applications in Macau and worldwide for the
Paul Debevec, Senior Staff Engineer of Google VR Aivi Remulla
Angola
Violating the law An Angolan activist has submitted an official complaint to the country’s state prosecutor against an Angolan general for managing a private company registered in Macau, according to news agency Lusa. The complaint, filed by Angolan journalist and activist Rafael Marques, to the country’s General Prosecutor, states that the opening of a consultancy firm, named Baía Consulting Limited, in Macau by
minister and chief of the President of Angola’s Security House, General Manuel Hélder Vieira Dias Júnior also known as ‘Kopelipa’ - ‘clearly violates the Constitution and the law’. Documents obtained by Business Daily confirmed previously the registration of the firm in Macau with capital of MOP25,000 (US$3,129) divided between the general’s name and Luísa de Fátima Giovetty. The activist says the general should have his public functions “removed” with a suspension of five years holding public functions enforced. N.M.
showcased technologies, the multimedia expert considered 3D printing had big potential as a technique to produce company product mock-ups and prototypes. “Previously this technique was very expensive but nowadays it’s very cheap as 3D printing machines can go from a few hundreds to US$100,000. It depends on the function and materials but it’s a very accessible technology to the public right now,” Mr. Wong said.
Virtual design
Paul Debevec, Senior Staff Engineer of Google VR, told Business Daily that technologies such as VR had great potential for architecture, interior designing and property renting.
“I think we’ll get better architects as a result, since they won’t just use models or guess if it will be a wonderful space. Augmented reality can also show you a room you’re thinking of renting, it gets rid of the other person’s furniture and puts yours in it. In terms of furniture sales or being able to experience a property you’re thinking of staying at or buying is very valuable,” Mr. Debevec said. The Google engineer said that with developers being more interested in creating “interesting” innovations more than business applications, sometimes it’s up to entrepreneurs to research academic papers for new technologies that could be valuable for business ventures.
Language
Co-operating with the EU Increasing the number of Portuguese and Mandarin translation professionals and the level of co-operation in environmental and investment issues were some of the main topics of the 21st meeting of the European Union-Macau Joint Committee The European Union-Macau Joint Committee has underlined its promise to reinforce the education of Portuguese and Mandarin translators and interpreters, especially for matters relating to the justice sector. According to a release by the joint committee, the two sides highlighted the necessity to continue training activities for Mandarin and Portuguese translation, in order to respond to the current demand for qualified interpreters of both languages. The meeting was presided over by the Secretary for Economy and Finance Lionel Leong Vai Tac and by the European External Action Service’s (EEAS) Managing Director
for Asia-Pacific, Gunnar Wiegrand. Both representatives praised the “progress made by the third programme for co-operation in the legal sector”, which focuses on promoting the modernisation of the MSAR’s legal system. One of the topics in the spotlight was the importance of a mechanism for co-financing for investors interested in going to Macau and participating in the Horizon 2020 investigation and innovation programme created by the European Commission. Both sides agreed to reinforce c o - o p e rati o n w i th r ega r d t o environmental issues and green technologies, especially under the Macao International Environmental Co-operation Forum & Exhibition (MIECF). The European Union and the MSAR agreed that due to the increasing role of companies from the EU in Macau, direct exchange between European companies and the city’s government should be reinforced through regular dialogue. This was the 21st meeting of the European Union-Macau Joint Committee and the 15th annual meeting since the handover of Macau to China. Lusa
Business Daily Wednesday, December 7 2016 5
Macau Land
Now Nam Van tinged by land swap debacle China Star purchases stake in 4,669 square metre plot of land in Nam Van originally granted in land swap deal under former Secretary of Transport and Public Works Ao Man Long Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
T
he operator of the Lan Kwai Fong Hotel and Casino in Macau, China Star Entertainment Limited, has entered into an agreement to purchase up to a 50 per cent stake in a land plot in Nam Van granted as a land swap in August 2001 through the auspices of disgraced former Secretary of Transport and Public Works Ao Man Long. The announcement was made in a filing with the Hong Kong Stock Exchange by China Star, a group also involved in property development, film production and distribution, artist management services, health products and more. ‘The recent overall performance of the hotel and gaming operations in Hotel Lan Kwai Fong is susceptible to the surrounding region, government regulatory policies and the level of visitation to Macau, as well as the competitive situation among hotels in Macau. Property development and investment is considered a more
stable investment for maintaining stable future revenue,’ says the group in the filing.
Circular story
The land plot in question is ‘being developed into a luxury residential and commercial complex of two towers, with a total gross floor area of 455,989 square metres,’ notes the filing, commenting that the development is ‘expected to commence’ at the beginning of 2017 and be completed in 2019. However, according to the original land grant, the property in question had been leased to Macau Co for a term of 25 years, commencing on
22 August 2001, which ‘subject to the completion of the development’ could be renewed automatically in 10-year periods until December 2049. The problem being that: ‘the development of the Property should have been completed within a term of 60 months commencing on 22 August 2001, i.e. until 21 August 2006,’ the filing notes. The development was not completed, justified by the group as being due to the ‘pending of the finalization by the Macau Government of the master plan for the development of the Nam Van District, of which the Property comprises a portion’.
Given that the Land, Public Works and Transportation Bureau (DSSOPT) ‘has not granted a permit for the development of the Property,’ as noted in the release, ‘the Development Period has expired’. However, given that the original lease term of the property has yet to expire, ‘the Company’s Macanese lawyers are of the opinion that […] they do not foresee any legal impediment […] to apply for an extension of the Development Period or obtaining the New Development Period within the lease term of the property’. The group’s total consideration for the stake in the property amounts to HK$1 billion.
6 Business Daily Wednesday, December 7 2016
Macau
Arrest
Jimei says Lam unrelated to operations Kelsey Wilhelm Kelsey.wilhelm@macaubuesiln
F
ollowing r e p o r t s by publications in the Philippines that the nation’s President Rodrigo Duterte (pictured) had ordered the arrest of Jimei International Entertainment Group Limited’s Executive Director and controlling shareholder Jack Lam, the company has issued a statement confirming that the reports relate to the alleged involvement of’ Jack Lam, as issued on the Hong Kong Stock Exchange yesterday. The statement notes that ‘the Board confirms that the incident mentioned in the Articles relate to Dr. Lam is his own personal matter and in no way materially affects or involves
the Company and its subsidiaries’. The incident in question regards a raid on Lam’s Fontana Casino and Leisure Parks, located in Clark, Pampanga, in which over 1,300 illegal workers of Chinese nationality were apprehended and detained by the PNP Special Action Force together with the country’s Bureau of Immigration. Jimei’s filing notes that the ‘gaming operations [Fontana Casino] cited in the Articles do not form part of the Group’s business’.
Not overt
It subsequently came to light Lam might allegedly be involved in ‘economic sabotage in the Philippines and bribery,’ according to the filing, which, according to local media reports relates to sums offered to
the Philippine’s Justice Secretary Vitaliano Aguirre II, who was behind the arrest. Aguirre shared with the country’s Department of Justice that he had been approached and offered bribes to the tune of PHP100 million (MOP16.1 million) per month to protect the casino; however. Aguirre noted that Lam did not commit an ‘overt act of bribery’, leading the Justice Secretary to not pursue charges against Lam. According to the filing by Jimei: ‘at the date of this announcement, so far as the Company is aware, Dr. Lam has not been held by the Philippine Authorities.’ However, according to local media
Jimei Entertainment also announced in their filing that it has ‘ceased to continue the negotiations with Wynn Macau’ in order to set up a ‘gaming promotion arrangement’ given that Jimei was ‘still unable to finalise the terms
reports, not only had Philippine President Rodrigo Duterte ordered his arrest, but Lam’s investor visa has been cancelled ‘pending resolution of deportation and criminal investigation,’ according to the Inquirer, which notes that the Bureau of Immigration has ordered all personnel at ports nationwide to ‘strictly monitor Lam’s return to the country’. It is presumed that Lam left the country on November 29. Jimei operates casino operations in Macau as well as junket operations through Crown Perth, NagaWorld and Star as well as working on developing an integrated resort in Cambodia, according to the group’s interim report.
of co-operation’ with the concessionaire. Jimei has since ‘obtained confirmation of another concessionaire regarding the intention to carry out business with them’ although no specific name was given.
Retail
Luxury Mainland revival The depreciating RMB and a narrowing price gap is driving Mainland luxury shoppers back home, further adding to the MSAR’s luxury retail slump Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
Cruises
Luxury cruise line extends sales to Macau, Hong Kong and China Italian luxury cruise liner group Silversea is forging an exclusive partnership with former budget turned luxury hotel operator Plateno to expand its presence throughout China, Hong Kong and Macau. The partnership forged between the cruise line and the company which launched the 7 Days Inn brand throughout the Mainland aims to tap the Chinese market, with Plateno providing access to commercial avenues through marketing and sales. “We have long identified China as a key source market and destination for the development of the Silversea brand,” noted the executive chairman of the cruise line, Manfredi Lefebvre d’Ovidio, as quoted by publication Seatrade Cruise. Plateno currently manages over 3,700 hotels throughout the Mainland, and is expanding throughout Southeast Asia, Europe, Africa and further abroad.
Plateno Group is a subsidiary of Keystone Lodging Holdings, which late last year entered into a RMB8.3 billion deal with Shanghai Jinjiang Hotels Development Co., selling it an 81 per cent stake in Keystone. Midway through last year, Plateno joined up with other Chinese buyers, led by travel site Ctrip.com, which as a group purchased the majority stake in travel site eLong Inc, earning the group strategic partnerships with China’s two top online travel agencies. Plateno’s agreement with Silversea encompasses advertising and sales of Silversea cruises throughout the territory. “This partnership agreement with Silversea will provide an exclusive opportunity for us to showcase the leading luxury hospitality experience at sea,” Zheng Nanyan, chairman and founder of Plateno, was quoted by Seatrade Cruise as saying. K.W.
Retailers in the Mainland are seeing an uptick in retail sales pre-Christmas, particularly in the luxury segment, as the depreciation of the RMB diminishes purchasing power abroad, and luxury brands move to narrow the price gap between the local and overseas market. “Some brands in China are expecting 2016 to go back to their peak in 2012, although the mix is different. I expect some brands will beat that record,” says Bruno Lannes, a partner in Shanghai-based consulting firm Bain, as quoted by Hellenic Shipping. “Everyone is benefitting from more traffic at the Chinese (luxury shops),” Lannes told the publication, noting an estimated 4 per cent uptick in luxury sales in the Mainland after three years of decline. “Some brands price their models in China closer to the overseas market, such as Chanel,” Emma Yu, a Shanghai shopper, told the publication. Given the MSAR’s proximity to the Mainland, the depreciation, and subsequent return to, and purchases made by Mainlanders in their home country would negatively impact the luxury retail sales in the MSAR, which, according to the most recent data from the Statistics and Census
Services (DSEC) show that retail sales of Watches, Clocks and Jewellery fell 21.2 per cent year-on-year ‘on account of slowdown in demand’, while the overall volume of retail sales in the third quarter dropped 5.9 per cent year-on-year. Over 45 per cent of interviewed retailers expect their sales volume in the fourth quarter to decrease. Meanwhile, visitor numbers from the Mainland increased 0.4 per cent year-on-year in October, whilst over the first ten months of the year they fell 0.4 per cent, for nearly 17 million visitors during the period.
Business Daily Wednesday, December 7 2016 7
Macau Legislation
Japan’s lower house passes long-awaited casino bill
J
apan’ s l o w e r h o u s e o f parliament passed a longawaited bill yesterday to legalise casinos, in a major step toward opening up a market seen as a potential global gaming powerhouse. Some opposition members walked out of the chamber before the vote to protest the bill, which comes after years of delays over worries about gambling addiction and organised crime getting involved in the casino market. “The bill passed through the chamber and will be sent to the upper house by today,” a parliamentary spokeswoman said. The proposed legislation is all but assured to get through the upper house, which is also controlled by the ruling Liberal Democratic Party (LDP). The LDP is expected to try get to the bill passed quickly before the current parliamentary session ends on December 14. Prime Minister Shinzo Abe and his LDP are betting that casinos can help support tourism after Tokyo hosts the 2020 Olympics - and pump some life into their faltering bid to boost the world’s number three economy. Backers have said green lighting casinos could bring billions of dollarsworth of investment, in a challenge to Asian gaming titan Macau. The MSAR has struggled to recover since a corruption crackdown by Chinese President Xi Jinping and an
Japan’s lower house
economic slowdown since mid-2014 has driven away many Mainland high-rollers.
Macau effect
Analyst Grant Govertsen of Union Gaming predicts that the passing of the bill represents a ‘shot in the arm for sentiment in gaming names,’ despite a five-year waiting period before the first integrated resort could open if the bill passes through the upper house. Govertsen notes that this boost would further help local concessionaires that are ‘already enjoying a tailwind on Macau’s
recovery’. Analysts at Telsey Advisory Group comment that ‘stocks would react positively’, regarding local listed concessionaires, noting that Wynn, Las Vegas Sands and MGM are their presumed ‘reasonably viable candidates’ who’ve expressed interest in pursuing gaming interests in the country. The analysts note that Melco Crown had also expressed interest in gaming operations in Japan.
Mixed bag
Japan has long been viewed as a massive gaming market due to its wealthy population, close proximity
to China, and appetite for other forms of legal gambling, including horse and boat racing. Pachinko, a slot machine-style game played in thousands of smoky parlours in every corner of Japan, is a huge revenue generator. Winnings can be exchanged off-site for cash, skirting gaming laws. O s a k a, T o k y o a n d n e a r b y Yokohama have all been cited as possible locations for major resorts that would host casinos, hotels, convention centres and entertainment venues. But casino gambling does not have wide public support largely due to concerns about social and crime issues seen as being linked to gaming. The arrest of several professional baseball players for betting on their sport made headlines last year, while an Olympic badminton hopeful crashed out after admitting he gambled in an underground casino. Japan’s main opposition Democratic Party as well as some members of Komeito, the ruling party’s junior coalition partner, have long opposed casinos. The top-selling, centre-right Yomiuri newspaper cautioned against rolling the dice on casinos. “Gamblers’ losses are what makes the casinos money,” it said in an editorial last week. “It’s truly unhealthy to build a growth strategy on exploiting other people’s misfortune and bad luck.” AFP and analysts
8 Business Daily Wednesday, December 7 2016
Greater china Trade agreement
Asian Development Bank: RCEP deal should be wrapped up fast Trump’s protectionism potentially creates a window for China Karlis Salna and Eko Listiyorini
T
he death knell sounding for a U.S.-led Pacific trade pact creates a vacuum that a separate Asia deal being championed by China should quickly fill, according to the Asian Development Bank. Negotiators at the Regional Comprehensive Economic Partnership (RCEP) meeting this week in Indonesia would normally hold talks without much public scrutiny. But the latest round comes after U.S. President-elect Donald Trump pledged he won’t revive the alternative known as the TransPacific Partnership, once vaunted as the centrepiece of U.S. economic engagement in Asia. That has shifted focus to the RCEP, which would cover 30 percent of the global economy and includes China and India among its 16 country members. Trump’s protectionism potentially creates a window for China, which has been vocal on the global stage in recent weeks in advocating for free trade, to push along the timetable for the RCEP and build its influence in the region. Arjun Goswami, a technical adviser with the ADB’s Economic Research and Regional Cooperation
Department, said the timeline for the conclusion of the pact was up to the countries involved. “But with the prospects of ratifying TPP now receding, there is a vacuum which RCEP should try to fill by concluding negotiations expeditiously,” Goswami said in an e-mailed response to questions. “Expectations are for the deal to be concluded in 2017.” I n d o n e si a n T ra d e M i n i st e r Enggartiasto Lukita told delegates at the RCEP meeting that recent developments with the TPP and the U.S.-European Transatlantic Trade and Investment Partnership had “cast a shadow” over world trade. “Countries and businesses around the world are wondering what will be the U.S. trade posture in the next
few years,” he said, urging nations to wrap up the RCEP talks next year. Brexit and forthcoming elections in some European countries also created uncertainty, he said. “Such developments will have detrimental impacts on global trade.” While the RCEP is much more a straight up and down trade deal compared to the TPP, which would extend to subjects including intellectual property and stateowned enterprises, it does have its own sticking points. Some countries may favour greater trade and investment liberalization than others based on different levels of development, and “there may be differing views on the extent of coverage of RCEP trade and investment liberalization in terms
of goods and services, with the latter posing greater challenges,” Goswami said. “There is a slowdown in global and regional trade growth that is partly cyclical and partly structural. In addition, there is a risk of rising protectionism fuelled by economic insecurity and inequality which makes it more critical to have inclusive trade and investment flows with their effective utilization by small and medium enterprises.” The RCEP aims to level tariffs and rules on the region’s supply chains, liberalize investment and introduce dispute-resolution mechanisms. Unlike the TPP, it would not require members to take steps to protect labour rights or improve environmental standards. Bloomberg News
Business Daily Wednesday, December 7 2016 9
Greater China Debt
In Brief
U.S. Treasury official says Beijing must step up reforms to curb leverage Corporate China sits on US$18 trillion in debt, equivalent to about 169 per cent of GDP China’s rising corporate leverage underscored the urgent need to accelerate market-oriented reforms, a U.S. Treasury official said, adding the removal of distortions in the state sector is crucial to rebalancing the world’s second-largest economy. Nathan Sheets, the Under Secretary of the Treasury for International Affairs, said that China’s non-financial corporate sector debt - at about 145 per cent of gross domestic product (GDP)- is among the highest for major economies, citing data from the International Monetary Fund (IMF). “Rising corporate leverage reflects the still incomplete nature of China’s economic rebalancing, and underscores the urgency of China accelerating its market-oriented reforms,” Sheets said at the China Finance 40 Forum in Beijing late on Monday. He said adopting policies to remove distortions particularly in the state sector was also critical given State-owned enterprises’ (SOEs) disproportionate share of credit.
“The elements of such reform must include removing the state guarantees and financial sector support that SOEs receive at the expense of private sector firms.” Corporate China sits on US$18 trillion in debt, equivalent to about 169 per cent of GDP. International institutions have urged Beijing to stop financing weak firms, especially inefficient stateowned enterprises, which tend to crowd out the private sector. Earlier in the year, the International Monetary Fund warned China’s corporate debt risks sparking a bigger crisis if the authorities fail to tackle it. Over the past few years, China has remained focused on efforts to rebalance the economy from its dependence on exports to one more driven by consumption and services, though efforts to push through reforms have proven particularly challenging. Sheets said it was important to remove the “pervasive barriers” that
Financial crimes
Hedge fund manager admits to manipulation
restrict private firms, both domestic and foreign, from participating in China’s services sector, as China looks to reduce its reliance on manufacturing in favour of services.
“The elements of such reform must include removing the state guarantees and financial sector support that SOEs receive at the expense of private sector firms” Nathan Sheets, the Under Secretary of the Treasury for International Affairs He said China also needs to continue to develop its capital markets, and further foster conditions to allow an orderly transition to a marketdetermined exchange rate. Commenting on stimulus, Sheets said Chinese authorities had shown “some willingness” to accept a larger fiscal deficit this year to support domestic demand, but further fiscal measures that target household consumption were needed. Reuters
M&A
Lawmakers ask U.S. to block takeover of Lattice Semiconductor Congressmen write letter stating deal could disrupt U.S. military supply chain Greg Roumeliotis
More than 20 U.S. Congress members wrote to U.S. Treasury Secretary Jack Lew on Monday asking for the acquisition of U.S. chip maker Lattice Semiconductor Corp by a fund with ties to China’s government to be blocked over security concerns. The letter follows a Reuters report last week that revealed that Canyon Bridge Capital Partners, the buyout fund that agreed to acquire Lattice for US$1.3 billion, is funded partly by cash originating from China’s central government and has indirect links to its space program. In their letter, the 22 lawmakers wrote that the deal could disrupt the U.S. military supply chain and possibly lead to a reliance on foreign-sourced technologies for many critical U.S. Defence Department programs. They also pointed to a warning last month by U.S. Secretary of Commerce Penny Pritzker that the United Stated will not accept China’s “US$150 billion industrial policy designed to appropriate this industry.” “Anything other than a rejection of the acquisition of Lattice by this People’s Republic of China-front entity would seem to undermine Secretary Pritzker’s public commitment,” the lawmakers’ letter stated. The members of Congress, Republican and Democrat, wrote to Lew in his capacity as chairman of the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes the acquisitions of companies by foreign firms on national security grounds. Representatives for CFIUS and
Canyon Bridge did not immediately respond to requests for comment. Lattice declined to comment. Portland, Oregon-based Lattice makes programmable chips known as “field programmable gate arrays” that allow companies to put their own software on silicon chips for different uses. It does not sell chips to the U.S. military, but its two biggest rivals - Xilinx Inc and Intel Corp’s Altera - make chips that are used in military technology. China has been working to develop its space program for military,
commercial and scientific purposes. As a result, the United States has been wary of China’s motives in semiconductor deals, and this scepticism is expected to grow after U.S. President-elect Donald Trump, which has already taunted China on issues ranging from trade to relations with Taiwan, is inaugurated next month. In their letter, the lawmakers called on CFIUS to act as decisively as it did in the case of German semiconductor equipment maker Aixtron SE. Last week, U.S. President Barack Obama upheld a recommendation by CFIUS to block Aixtron’s 670 million euro (US$717 million) sale to Fujian Grand Chip Investment Fund over national security concerns. Reuters
A well-known Chinese hedge fund manager detained last year in a crackdown on financial crimes in the wake of a stock market crash has pleaded guilty to manipulating the market, according to the court where he is standing trial. Xu Xiang, general manager of Shanghai-based Zexi Investment, who earned nicknames like “Hedge Fund Brother No.1” and “China’s Carl Icahn” in local media, was detained in November 2015. Xu and two others standing trial pleaded guilty to manipulating the stock market and asked the court for leniency in sentencing, the Qingdao Intermediate People’s Court, in the eastern province of Shandong, said in a statement. Corporate debt
Government pushes preferential tax policies China’s finance ministry said yesterday that preferential tax policies would be implemented in efforts to cut the country’s mounting corporate debt, including deferring tax for firms that are restructuring their debt through M&A activities. The ministry specified eight preferential tax policies in a notice posted on its website, and urged all government departments to take these policies “very seriously” to help firms deleverage. The move followed guidelines released in October by the State Cabinet which said China would provide preferential tax treatment to help firms cut debt levels. Liquidity
C.bank lends US$49.29 bln via MLF China’s central bank said it lent RMB339 billion (US$49.29 billion) to 24 financial institutions via its medium-term lending facility (MLF) yesterday. Interest rates on the MLF loans were unchanged at 2.85 per cent for six-month loans and 3.0 per cent for one-year loans, the People’s Bank of China (PBOC) said on its official weibo account. The central bank lent RMB151 billion for six months and RMB188 billion for one year. The PBOC uses the MLF and the standing lending facility as tools for managing shortand medium-term liquidity in the banking system. Auto industry
Daimler may make electric cars in Mainland Daimler may make batteries and Mercedes-Benz electric cars in China as part of a drive to manufacture more products locally and to try to boost sales, according to board member Hubertus Troska. Sales of the German company’s luxury cars in China have grown 28 per cent so far this year after Mercedes spruced up its designs to give its cars a more sporty and upmarket feel, gaining traction with drivers in the world’s largest car market. “I am confident that Mercedes in China will show a decent performance next year,” Troska, Daimler’s board member responsible for Greater China, told reporters.
10 Business Daily Wednesday, December 7 2016
Greater China
Investment
One Belt, One Road project transforms frontier neighbours Cambodia has gained particular appeal for Chinese manufacturers seeking to relocate David Roman
C
hina’s investment is transforming its smaller Southeast Asian neighbours like never before while helping turn Cambodia, Laos and Myanmar into bigger destinations for its exports. That’s driving some of the world’s fastest economic growth rates and providing Chinese companies with low-cost alternatives as they seek to move capacity out of the country. It’s also helping Asia’s largest economy and nations in its orbit adapt to what looks more and more like a new era of waning U.S. commitment to the region from a more inward-looking administration of President-elect Donald Trump. “China’s definitely looking at these countries in general as an area where it can sell products and get good return for its investments,” said Edward Lee, an economist with Standard Chartered Plc in Singapore. “China itself is getting more expensive for its companies, and that’s reinforcing this trend.” China is investing in everything from railroads to real estate in Cambodia, Laos and Myanmar - the frontiermarket economies of the Association of Southeast Asian Nations. China Minsheng Investment Group and LYP Group, headed by Senator Ly Yong Phat, signed a US$1.5 billion deal last week to build a 2,000-hectare city near Cambodia’s capital, Phnom Penh, with a convention centre, hotels, golf course, and amusement parks, the official Xinhua News Agency reported. The spending equals roughly one-tenth of the country’s US$15.9 billion gross domestic product.
Belt, road
In landlocked Laos, work started last year on the China-Laos railway, which will stretch 414 kilometres from the border to the capital, Vientiane. The project, part of Chinese President Xi Jinping’s One Belt, One Road initiative, will cost US$5.4 billion, according to Xinhua. Xi met last week with Lao Prime Minister Thongloun Sisoulith in Beijing, where he pledged stronger ties. Myanmar, which is liberalizing its economy and adopting market reforms after a transition to democracy, is forecast by the International Monetary Fund to
expand 8.1 per cent this year, the fastest in the world after Iraq. De-facto leader Aung San Suu Kyi has been quick to engage China since taking office this year, including visiting Xi in Beijing. China is its largest trading partner, accounting for about 40 per cent of Myanmar’s total last year, and is building a special economic zone, power plant and deep-water seaport on the west coast. Cambodia’s economy is projected
“China’s definitely looking at these countries in general as an area where it can sell products and get good return for its investments” Edward Lee, an economist with Standard Chartered Plc in Singapore to grow 7 per cent this year, while Laos is set for 7.5 per cent expansion. Myanmar’s currency, the kyat, was Asia’s top performer in the first five months of the year, but has weakened about 10 per cent against the dollar since June as the U.S. currency strengthened
As Sino-Cambodian relations have flourished, so has trade, with twoway commerce climbing to US$4.8 billion last year. That’s more than double from 2012, the year Cambodia warmed up to Beijing by opposing mention of China’s assertiveness in the South China Sea during a regional summit in Phnom Penh. Most Chinese money flowing in to Cambodia, Laos, and Myanmar is lending on highly concessionary terms to finance construction projects run by Chinese firms, especially in Laos, said Derek Scissors, Washingtonbased chief economist at China Beige Book International, who specializes in studying the country’s foreign investment. Chinese construction and investment since 2005 equal about 15 per cent of Lao GDP, which it couldn’t have financed from other nations, he said. “The power sector is basically Chinese-built, bringing electricity to the majority of the population,” while China built several hydroelectric plants to increase electrification, Scissors said. “There were grand plans for Myanmar, but investment and construction actually realized is more conventional, in the energy and mining sectors.”
Garments, shoes
Cambodia, Laos and Myanmar are becoming more incorporated with China’s supply chains, buying intermediate goods from its factories and selling consumer items such as garments and shoes that are often made by companies owned or funded by China. Its imports from the three Southeast Asian economies more than doubled in the past five years, IMF data show.
Such dependence on China isn’t without risks. Beijing accounts for the largest chunk of foreign investment in Cambodia and also about 43 per cent of the country’s total debt stock, mostly in loans from Chinese development banks to Cambodia’s government, according to the IMF. Similarly, China’s railroad in Laos equals about half of its US$10.5 billion 2015 GDP. “This reliance on a narrow production and export base has many downsides,” the IMF said in a recent report. “A majority of Cambodian garment factories concentrate on cut-make-trim processes, which are at the bottom of value chain and also small part of the overall production. As a result, firms in Cambodia have limited leverage and autonomy.” Cambodia has gained particular appeal for Chinese manufacturers seeking to relocate, which aligns with China’s strategy to export industrial capacity through initiatives such as One Belt, One Road. Cambodia’s US$121 average monthly wage is just a fifth of China’s US$613 average, according to the International Labour Organization in Geneva. The biggest risk for frontier Asean economies is that Chinese inflows create “extractive” elites who entrench themselves in power, said Song Seng Wun, an economist at CIMB Private Banking in Singapore. “These economies are getting a lot of money and opportunity from China,” he said. “If wealth is concentrated in the hands of a few, that may lead to problems and instability. The key here is developing a middle income group that Chinese companies will be targeting as a consumer.” Bloomberg News
Business Daily Wednesday, December 7 2016 11
Asia Monetary policy
Australia’s central bank holds rates even as growth slows Underlying inflation is stuck at 1.5 per cent and seems likely to remain below the RBA’s 2 to 3 per cent target band for another year or more Swati Pandey
A
ustralia’s central bank held rates steady at its last policy meeting of the year yesterday, but sounded a note of caution on economic growth after a run of soft data pointed to a possible contraction in the third quarter. The Reserve Bank of Australia (RBA) kept rates at a record low of 1.5
per cent for a fourth straight month, following easings in August and May. Yet Governor Philip Lowe also dropped a reference to the economy expanding at potential in his statement, conceding annual growth would slow before picking up next year. Policymakers have been sounding more optimistic on the economic outlook amid higher prices for key commodity exports, even though underlying inflation is stuck at
record lows and job creation has disappointed. “The RBA is certainly on watch at this stage,” said JP Morgan analyst Tom Kennedy. “I do think, though, that for the next meeting in two months...the burden is on the data to improve a little bit or stabilise. And if that doesn’t happen then the RBA could consider lowering the cash rate early in 2017.” The RBA holds its first meeting in the New Year on Feb. 7. A weak inflation reading next month would open the door for a possible easing in February. Interbank futures still suggest the market sees scant chance of another
cut in rates for the next few months, though any thought of a hike has also been priced out. “Some slowing in the year-ended growth rate is likely, before it picks up again. The outlook for business investment remains subdued, although measures of business sentiment remain above average,” Governor Lowe wrote. Underlying inflation is stuck at 1.5 per cent and seems likely to remain below the RBA’s 2 to 3 per cent target band for another year or more. Employment growth has also disappointed in recent months, while being heavily skewed toward parttime jobs.
Key Points RBA holds rates at 1.5 pct for fourth month Concedes economy slowing, predicts an eventual pick up Risk of negative Q3 GDP on Wednesday after soft data A much-needed boom in home building also looks to have peaked after approvals for new projects collapsed in October. However, a chief argument against further stimulus is a recent acceleration in house prices in Australia’s two largest cities, Sydney and Melbourne. Lowe highlighted the trend by noting that prices in some markets “have been rising briskly” while housing credit has picked up. Home prices rose for the 11th straight month in November with annual growth in prices accelerating to 9.3 per cent, from 7.5 per cent in October, data from property consultant CoreLogic showed last week. Reuters
Politics
Contenders line up after New Zealand’s prime minister resigns National elections are not expected until late 2017 Swati Pandey and Charlotte Greenfield
At least three senior ministers joined the race to replace New Zealand Prime Minister John Key yesterday, a day after Key stunned the nation by resigning to spend more time with his family, with his deputy Bill English seen as the front-runner. English, the finance minister and deputy leader of the ruling centre-right National Party, announced his candidacy, as did Health Minister Jonathan Coleman and Police Minister Judith Collins. Other contenders may yet still emerge before the party holds a caucus meeting on Monday to vote for a new leader. English, who has been endorsed by Key, is seen as best-placed to win but some analysts felt Coleman stood a chance. “It’s Bill English’s to lose in the sense that there’s such a strong endorsement and essentially direction from Key that it’s very difficult for the caucus to outright repudiate the prime minister’s preference,” said Jon Johansson, a political scientist at Wellington’s Victoria University. Several Cabinet members, including Immigration Minister Michael
Woodhouse and Primary Industry Minister Nathan Guy, have declared their support for English. Other potential candidates include senior Cabinet minister Steven Joyce, fellow Cabinet minister Paula Bennett and Energy Minister Simon Bridges.
Key Points Finance minister English announces plan to run for leadership
Key on 21 per cent, followed by Joyce on 16 per cent, Bennett on 11 per cent and Collins on 6 per cent. Coleman was not ranked in the survey, which was conducted in early October, but said he had youth and energy on his side. Johansson said some backbenchers felt senior party positions were all held by old hands and there was room for new blood. “I think there could be a little bit more turbulence going on in that caucus than surface appearances,” he said.
Key has been New Zealand’s leader since 2008 and the National Party is part-way through a third, threeyear term that has been marked by political stability and economic reform. He remains one of the world’s most popular leaders, praised for his stewardship of New Zealand’s US$170 billion economy in the aftermath of the global financial crisis and two devastating earthquakes in Christchurch, the largest city on New Zealand’s South Island. Reuters
Contenders line up after PM Key’s shock resignation English the front-runner in a growing field
“I can see fantastic opportunities for stronger economic performance, for spreading the benefits of growth for more New Zealanders ... I am a candidate for leadership,” English told reporters after a caucus meeting in New Zealand’s distinctive “Beehive” parliament building in the capital, Wellington. A recent UMR survey of voters pegged English as favourite to replace
Bill English (pictured), who has been endorsed by current Prime Minister Key, is seen as best-placed to win
12 Business Daily Wednesday, December 7 2016
Asia In Brief Salaries
Japanese real wages turn flat Japan’s real wages were unchanged in October from the same period a year earlier, ending eight consecutive months of annual gains and raising concerns that sluggish consumer spending may weaken further. Real wages, which are adjusted for moves in consumer prices, were flat in October from a year earlier, following a revised 0.8 per cent year-onyear increase in September. Wage earners’ nominal cash earnings rose 0.1 per cent year-on-year in October. Revised data showed that in the previous month nominal wages were unchanged from a year earlier. Lending
Big Australian banks hike interest rates Three of Australia’s “Big Four” banks have raised their lending interest rates in less than a week after citing squeezed margins, risking a political backlash by hiking outside the central bank’s rate-setting cycle. “The amount of (margin) they’re making on lending is the tightest it’s been ever,” Steven Munchenberg, chief executive of the Australian Bankers Association, told Reuters by phone. “In that context I think the banks are trying to adjust some of the pricing to reflect the realities of the costs in the market.” Bird flu
S.Korea expands poultry cull South Korea plans to cull more chickens and ducks as it tries to contain an outbreak of bird flu, with a total of around 8 per cent of the nation’s poultry population expected to be slaughtered. The government said yesterday that 28 cases of the H5N6 strain of bird flu had been confirmed since mid-November, with another 10 possible cases being investigated. It added that if the virus continued to spread, the government could issue a so-called ‘standstill order’ to prevent workers from the poultry industry moving around the country. Environment
Japan’s CO2 emissions drop Japan’s greenhouse gas emissions fell 3 per cent to a five-year low in the financial year through March due to lower power demand, growing renewable energy and the restart of nuclear power plants, government figures showed yesterday. Emissions fell for a second straight year to 1.321 billion metric tonnes of CO2 equivalent, hitting the lowest since fiscal 2010, according to Ministry of Environment preliminary data. Japan’s emissions rose after the March 2011 Fukushima disaster that led to the closure of nuclear power plants and an increased reliance on coal.
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(L-R) Sohn Kyung-shik, chairman of CJ Group, Koo Bon-moo, chairman of LG Group, Kim Seung-yeon, CEO of Hanhwa Group, Chey Tae-won, chairman of SK Corporation, Lee Jae-yong, vice chairman of Samsung, Shin Dong-bin, chairman of Lotte Group, Cho Yang-ho, chairman of Hanjin Group and Chung Mong-koo, chairman of Hyundai Motor Group, take oath during a parliamentary hearing on the Choi Soon-sil gate probe at the National Assembly in Seoul, yesterday. Lusa Political scandal
South Korea’s Park digs in, as tycoons deny seeking favours The family-controlled chaebol have long dominated Asia’s fourth-largest economy Ju-min Park and Se Young Lee
S
outh Korean President Park Geun-hye, engulfed in an influence peddling scandal, said if she was impeached she would wait for a court to uphold the decision, a party official said yesterday, a sign a political crisis could drag on for months. Park’s embattled presidency faces a critical juncture, with parliament expected to hold an impeachment vote on Friday. Even if the motion is passed, it must be upheld by the Constitutional Court, a process that could take at least months. Separately, South Korea’s most prominent corporate chiefs told a parliamentary panel they had not sought favours when they made contributions to two foundations at the heart of the scandal, even as one of them acknowledged it was hard to say “no” to the government. “It’s a South Korean reality that if there is a government request, it is difficult for companies to decline,” said Huh Chang-soo, who heads the energy-to-retail GS Group and is also chairman of the Federation of Korean Industries, the main lobby group for the conglomerates known as chaebol. Park, 64, is under intense pressure to resign immediately, with big crowds taking to the streets every Saturday calling for her ouster. Her approval rating is at a record low of 4 per cent. She would be the first democratically elected South Korean president not to serve a full five-year term. She is accused of colluding with a friend and a former aide to pressure big business owners to pay into two foundations set up to back policy initiatives. She has denied wrongdoing but apologised for carelessness in her ties with the friend, Choi Soon-sil. Park met leaders of her Saenuri
party and top official Chung Jin-suk later said the president was willing to accept her party’s proposal that she step down in April - which has been rejected by the opposition - but gave no indication that she was willing to quit immediately. “Unless she says she is resigning immediately, whatever she says won’t satisfy the public and won’t make the opposition drop their impeachment motion,” said Kim Man-heum, head of the Korea Academy of Politics and Leadership. Opposition parties need at least 28 members from Park’s Saenuri Party for the impeachment bill to pass with a two-thirds majority. At least 29 of them are believed to be planning to vote for the bill, members of a breakaway faction said.
Key Points Park says would wait for court to rule on impeachment motion President willing to accept suggestion she resign in April Corporate chiefs deny seeking favours Parliamentary impeachment vote set for Friday Last week, Park offered to step down and asked parliament to decide how and when she should resign, a move opposition parties rejected as a ploy to buy time and avoid impeachment. Rhee Jong-hoon, a political commentator at iGM Consulting, said Park would fight in the Constitutional Court to overturn an impeachment hearing. “And if the motion is overturned? She will remain in office until her term is finished. Nothing matters after the Constitutional Court rules against the impeachment bill.”
The heads of conglomerates controlling revenue equivalent to more than half the country’s economy were questioned over whether they were pressured by Park or Choi to give money to non-profit foundations, which backed initiatives put forth by Park, in exchange for special treatment.
‘Heavy heart’
Samsung Group leader Jay Y. Lee, who sat at the centre of the witness table, said Park had asked him during one-on-one meetings for support for boosting cultural and sports-related developments but did not specifically request money. “There are often requests from various parts of society including for culture and sports. We have never contributed seeking quid pro quo. This case was the same,” Lee said. The 48-year-old Lee, the thirdgeneration leader of the country’s biggest conglomerate who received the lion’s share of the panel’s oftenhectoring questioning, said he was embarrassed by the situation and was appearing with a “heavy heart”. Samsung donated 20.4 billion won (US$17.46 million) to the two foundations, the most of any group, and prosecutors raided its offices last month. The corporate titans ran a gauntlet of media and protesters as they entered the National Assembly for the first such parliamentary hearing featuring such a large group of chaebol bosses. The family-controlled chaebol have long dominated Asia’s fourth-largest economy, working closely with the government in a system that helped the country rebuild from the ravages of the 1950-53 Korean War. But the system, critics say, is due for reform, including improved corporate governance and transparency. None of the chaebol has been accused of any wrongdoing in the case, but a protester outside the assembly held a sign saying: “Arrest the chaebol chiefs”. Reuters
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 Wednesday, December 7 2016 13
Asia Monetary policy
As Indian rate cut hopes grow, some warn of going too far That pushed the rupee to a record low against the dollar, which could also add pressure on inflation, even though it eased to 4.2 per cent in October, below the RBI’s target of 5 per cent by March 2017. And while the economy grew an annual 7.3 per cent between July and September - the fastest rate for a large economy in the world - analysts warn the impact from demonetisation may well last through 2018.
The central bank decision comes as India faces a tougher environment at home and abroad Suvashree Choudhury and Sujata Rao
The Reserve Bank of India is widely expected to cut interest rates today as the economy reels from an unexpected clampdown on cash, but foreign investors will be looking for some assurance that new Reserve Bank Governor Urjit Patel has firm control over monetary policy. Most economists believe the RBI will cut the repo rate by 25 basis points (bps) to a six-year low of 6.00 per cent at a policy review, and follow that with at least one easing next year after the scrapping of high-value bank notes severely curbed consumer demand. Prime Minister Narendra Modi stunned the country on Nov. 8 by banning banknotes that accounted for 86 per cent of currency in circulation to draw down on the shadow economy. But the new rate outlook is a concern to some foreign analysts and investors who had been comforted by the high-profile drive to tame inflation under previous Governor Raghuram Rajan. “Patel has a very strong academic background and he was leading proponent of the inflation targeting regime, so we should give him the benefit of doubt,” said Manik Narain, emerging markets strategist at UBS
“But if they cut rates again it could give markets a reason to believe there is political pressure on him” in London. Monetary policy is no longer the sole purview of the RBI governor. Instead, it rests with a six-member panel, but Patel still gets the tie-breaking vote and steers discussions. The committee - three officials from the central bank, including Patel, and three independent members appointed by a government panel voted 6-0 to cut rates at its inaugural meeting in October. Patel has given only one speech and two media interviews since the last policy meeting in October, in sharp contrast to Rajan who took an active role in times of economic and market pressure. The lack of public communication, including since the demonetisation,
Financing
Japan to issue extra deficit-covering bonds The plan will be included in a third supplementary budget expected to be approved by cabinet this month, sources said Takaya Yamaguchi and Tetsushi Kajimoto
Japan is considering issuing additional deficit-covering bonds worth around 1.9 trillion yen (US$17 billion) to offset an expected tax revenue shortfall in the current fiscal year to March, government sources told Reuters yesterday. A rise in deficit-covering bonds would further strain Japan’s public finances and mark a setback for Prime Minister Shinzo Abe’s efforts to curb the developed world’s heaviest debt burden. The government expects tax revenues to undershoot its initial forecast of 57.6 trillion yen by around 1.9 trillion yen, which would mark the first downward revision since fiscal
year 2009 when the global financial crisis dented tax receipts. The plan will be included in a third supplementary budget expected to be approved by cabinet this month, the sources said. The government will also compile later this month an annual budget draft for the next fiscal year from April.
Key Points More bond issuance to offset expected tax revenue shortfall Marks 1st downward revision to tax income in seven years Govt to craft 3rd extra budget for FY2016 to issue extra bonds Finance Minister Taro Aso blamed the yen’s gains in the first half of this fiscal year for a decline in tax revenue as a stronger currency squeezed profits at exporters. “A major reason for the decline in tax revenues was the currency,” Aso told reporters after a cabinet meeting. “Given a weakening of the yen beyond 110 yen since November from just above 100 yen, tax revenue could be totally different in the latter half,” he added, referring to the recent reversal of the yen’s strength as the dollar rebounded. Abe came to power in 2012 promising to revive the economy with a fiscal and monetary expansionary policies, which sharply weakened the yen and supported demand. Reuters
puts Patel at risk of two things, said David Cornell, Chief Investment Officer at Ocean Dial in London which runs India-focused funds. “First, if the market does not hear from him, they may think he is not on top of things. Second, by not coming out and talking about this he may give people the impression he is in Mr. Narendra Modi’s pocket and not as independent as his predecessor was.”
Benefit of doubt
The RBI decision comes as India faces a tougher environment at home and abroad. As part of the broad move out of emerging markets after Donald Trump’s election victory, foreign investors sold a net US$2.1 billion in Indian debt in November.
Manik Narain, emerging markets strategist at UBS in London So any signal of an aggressive easing bias may raise concerns about the commitment to the inflation target. Still, India largely remains an appealing story among emerging markets given its low current account deficit and on-going reforms - and some investors say they are willing to give the RBI the benefit of the doubt. “So far we are not there, so let’s give him the benefit of doubt. He does have big shoes to fill as Rajan was so credible,” said Salman Ahmed, chief global strategist at Lombard Odier Investment Asset Management in London. Reuters
14 Business Daily Wednesday, December 7 2016
International In Brief Aero industry
Airbus reaches 600 orders landmark Airbus sold 600 aircraft in the first 11 months of the year - or a total of 410 after adjusting for cancellations and conversions between models - the European plane maker said yesterday. It also delivered 577 aircraft including 34 A350s and 43 A320neo jets, after stepping up the pace in November on two models that have been hit by delays. Year-to-date deliveries also included 21 A380 superjumbos. The world’s second largest plane maker behind Boeing is targeting at least 670 total deliveries in 2016 including at least 50 A350s. Eurogroup head
UK’s stance incompatible with smooth Brexit The British government’s attitude towards impending talks to leave the European Union suggests that Britain’s exit will not be smooth and orderly, the head of the group of euro zone finance ministers said yesterday. Businesses, investors and opposition lawmakers in Britain say the government should clarify its negotiating position. “It can be smooth and it can be orderly but I think it requires a different attitude on the part of the British government because the things that I’ve been hearing so far are incompatible with smooth, incompatible with orderly,” Eurogroup chairman Jeroen Dijsselbloem told reporters.
Central banker
Russian economic recovery encouraging The nation has benefited this year from oil’s price stabilisation and a recent deal between major crude producers Sujata Rao and Karin Strohecker
R
ussia’ s e c o n o m y i s displaying “encouraging signs” of recovery and should return to growth in the first quarter of 2017, though it will take years for inflation expectations to be anchored, the central bank’s first deputy governor said yesterday. Growth was flat to slightly positive in the third quarter and fourth quarter data will likely show the same, Ksenia Yudayeva told Reuters in an interview on the side-lines of an investment conference organised by the Moscow Exchange in London. “We see recently encouraging signs in the economy, recent PMI data was very strong, Rosstat has just published its indicator of business sentiment, which was also very strong,” Yudayeva said. “I think there will be positive growth in Q1.” The central bank, which has won praise from investors for holding the line on its inflation target, has pledged to keep its key rate unchanged at 10
percent till year-end. It next meets on Dec 16. A Reuters poll forecasts a 50 bps cut in the first quarter of 2017. Yudayeva also said she was confident the bank’s inflation target of 4 percent by end-2017 would be met, adding the central bank had “all the tools” required. However there are risks to this target, she noted, citing the possibility of higher budget spending ahead of 2018 presidential elections and faster consumer credit expansion. “Inflation expectations are high and not anchored, definitely not anchored at 4 percent...and this is what we need, to not only hit the inflation target but also anchor expectations... and that will take several years,” Yudayeva added. Russia has also benefited this year from oil’s price stabilisation and a recent deal between major crude producers to curb output has raised expectations of higher prices next year. The central bank has a mediumterm oil price forecast of $40 a barrel. Yudayeva said policymakers were due to discuss that forecast in the
Oil industry
OPEC output hits record high OPEC’s oil output set another record high in November ahead of a deal to cut production, a Reuters survey found on Monday, helped by higher Iraqi exports and extra barrels from two nations exempted from cutting supply - Nigeria and Libya. The latest rise in supply means the Organization of the Petroleum Exporting Countries will have a bigger task in complying with a plan to cut supply starting in 2017 - its first production-reduction deal since 2008. Supply from OPEC increased to 34.19 million barrels per day (bpd) in November from 33.82 million bpd in October, according to the survey. Climate policy
Trump, ex-Vice President Gore meet Former Vice President Al Gore, a leading voice in the fight against climate change, and Donald Trump, who at one point called it a hoax, met on Monday in what Gore called a “productive” session. Gore, a Democrat, spent about 90 minutes in meetings at the president-elect’s Trump Tower apartment and office building in Manhattan. In addition to seeing Trump, he also met briefly with the Republican’s daughter, Ivanka, who attended a series of high-level meetings since her father won the Nov. 8 election.
next two weeks alongside its second possible scenario that oil prices could average up to US$55 a barrel. “The probability of the second scenario has increased somewhat,” she said in response to a question on whether the bank could raise its medium-term forecast. The rouble has firmed around 14 percent this year against the dollar after sharp falls in 2014 and 2015, though it could suffer a setback if emerging markets continue to see an investor exodus.
Key Points First deputy governor sees positive growth in Q1 Confident that 4 pct inflation target met by end-2017 But says inflation expectations not yet anchored Says rouble less vulnerable to a strengthening dollar Some also fear volatility from state oil firm Rosneft’s 600 billion rouble (US$9.4 billion) bond, placed this week. A similar end-2014 bond caused a currency selloff due to expectations the company would convert the bond proceeds into dollars. Rosneft is widely expected to buy its own 19.5 percent stake from its parent company Rosneftegaz and has said bond proceeds will not be used for the purchase. Yudayeva noted those fears around Rosneft had proved unfounded last time. “It looks quite calm, there is much more confidence on markets than two years ago,” she said. She also saw the rouble as less vulnerable to a strengthening dollar than before, thanks to stable oil prices and greater confidence in policy. “Two years ago was vice-versa,” she added. Asked about the timing of a planned yuan-denominated OFZ bond to be issued on Russian domestic markets, Yudayeva said the issue would happen but the probability of a deal before year-end “was not that high”. Reuters
GDP
South Africa’s economic growth slows Africa’s most-industrialized economy avoided a downgrade to junk last week Arabile Gumede and Thembisile Dzonzi
South Africa’s economic growth slowed in the third quarter as factory output and trade contracted, complicating the government’s task of boosting output to avoid a possible credit-rating downgrade to junk next year. Gross domestic product expanded an annualized 0.2 per cent in the three months through Sept. 30 compared with upwardly revised growth of 3.5 per cent in the preceding quarter, the statistics office said in a report released on Tuesday in Cape Town. The median of 19 economist estimates compiled by Bloomberg was for 0.6 per cent growth. The economy expanded 0.7 per cent from a year earlier. Africa’s most-industrialized economy avoided a downgrade to junk last week as S&P Global Ratings affirmed the nation’s BBB- assessment,
the lowest investment-grade level, while warning that political turmoil have distracted from reforms to boost growth. GDP will probably expand at the slowest pace this year since a 2009 recession. That will make it more difficult for Finance Minister Pravin Gordhan to meet his pledge to narrow the budget deficit to 2.5 per cent of GDP by 2020, from a projected 3.4 per cent this year, and to limit government debt. Factory output, which makes up about 13 per cent of GDP, contracted by an annualized 3.2 per cent and trade shrank by an annualized 2.1 per cent, the statistics office said. Mining production rose an annualized 5.1 per cent and the finance industry expanded by an annualized 1.2 per cent. Gordhan, 67, has been leading efforts to avoid a cut to junk while wrangling with President Jacob Zuma over control of the Treasury and
state-owned companies. That and delays in passing new mining and anti-money laundering laws and a failed attempt by senior African National Congress officials last week to oust Zuma have fueled perceptions of political turmoil and policy uncertainty.
3.2 per cent South Africa’s factory output contraction
Low commodity prices, the worst drought in more than a century and weak export demand have weighed on output and the economy will probably expand 0.4 per cent this year and 1.2 per cent in 2017, according to the central bank. That’s not enough to create the jobs required to reduce the nation’s 27 per cent unemployment rate, Governor Lesetja Kganyago said on Nov. 30. Bloomberg News
Business Daily Wednesday, December 7 2016 15
Opinion China’s capital won’t stop fleeing overseas Christopher Balding a Bloomberg View columnist
H
ow China manages its currency is likely to be the global economic story of 2017. Despite the government’s best efforts, capital continues to leave the country at a brisk pace, with a balance-of-payments deficit through the third quarter of US$469 billion. Attempts to arrest this flow probably won’t work. But they may well create new risks. Capital outflows began gathering steam in 2012, when the government liberalized current-account payment transactions in goods and services. Enterprising Chinese figured out that while they couldn’t officially move money abroad to buy a house via the capital account - individuals are barred from moving more than US$50,000 out of the country each year - they could create false trade invoices that would allow them to deposit money where they needed it. The result was a huge discrepancy between payments recorded for imports and the declared value of goods passing through customs, amounting to US$526 billion in hidden outflows last year. The problem has only worsened in 2016. French investment bank Natixis SA estimates that outflows will total more than US$900 billion this year, despite new restrictions on yuan movements, including prohibitions on using credit and debit cards to pay for insurance products in Hong Kong. Last week, the government added yet another restriction. It announced that all international capital-account transactions of more than US$5 million will need to be approved by the State Administration of Foreign Exchange. This has businesses deeply concerned, given that the administration likely doesn’t have the manpower for the sheer number of transactions it will need to review. And if such restrictions can be placed on the capital account, it seems only a matter of time until they’re imposed on goods and services transactions. All of which raises a simple question: Why is Beijing working so hard to prop up the yuan and crack down on outward capital flows? The common answer is that it fears the trade consequences of a declining yuan. But that’s not it. Since the government devalued the yuan on Aug. 11, the combined value of imports and exports has fallen by only 8 per cent, even as the value of the yuan has fallen 8 per cent against the U.S. dollar. Any coming decline in the currency won’t make much difference, given the weak global economy and the product mix China is buying and selling. The real reason is that the government is concerned about the implications of further liberalizing. China’s rickety banks, with delinquency rates of 30 per cent, are receiving regular liquidity injections from the People’s Bank of China. Money market rates have been rising, from under 2 per cent this summer to above 2.3 per cent in Shanghai yesterday. Allowing international capital mobility could easily trigger larger withdrawals - and hence liquidity crunches for banks already feeling the pinch of bad loans. In other words, China is caught between trying to prop up a currency facing long-term decline and letting capital leave at will, risking a bank crisis. This is an unenviable position. But the government needs to accept that the days when it could micromanage its currency to run massive trade surpluses while accumulating large foreignexchange reserves are history. All evidence points to the probability of long-term net capital outflows. Chinese buying homes in Vancouver and Sydney aren’t going to bring capital back home anytime soon. The government also needs to tackle some longstanding problems. It has been talking about deleveraging for more than a year, yet total social financing has grown by 15 per cent year-to-date, about twice the rate of gross domestic product. If the financial system wasn’t in such bad shape, the risk of a falling yuan would be significantly lower, yet the government has shown little appetite for addressing the underlying problems facing banks. All this might simply amount to a setback for a country with aspirations of a globally competitive capital market. But the longer real reform is put off the larger the ultimate price tag becomes. Financial crises or hard landings never happen for one reason, but rather a confluence of events. If China doesn’t begin tackling these problems now, the probability of such a crisis will grow. Bloomberg View
China’s civilizational diplomacy
C
hina is quickly becoming a world power, capable of exercising considerable influence over other countries. And it is advancing to the centre of the geopolitical stage just as – if not because – American and European leadership seems to be retreating into the wings. China certainly has a receptive audience. One reason is that the “darker nations,” as the international-studies scholar Vijay Prashad calls global-South countries, feel greater kinship with China than with the United States and Europe. They identify with China’s history of anti-imperialist struggle, and even with Chinese people’s physical appearance. If you are an emerging superpower, there is a distinct advantage to having the majority of the world’s population hold such sentiments. The way China plays its global role also differs notably from that of the West, because it emphasizes its similarities with the “rest,” to use the historian Niall Ferguson’s expression for the non-Western world. With this strategy, China has expanded its sphere of influence far beyond its immediate region. Sub-Saharan Africa is often cited as an example of a region where China’s influence has superseded that of Europe’s former colonial powers. And, more recently, the Chinese government has stressed its long-standing interest in the Middle East and North Africa (MENA), and in Egypt in particular. Earlier this year, Chinese President Xi Jinping visited Cairo as part of a regional tour to promote China’s “one belt, one road” initiative, a latter-day revival of the legendary Silk Road – the ancient network of trade routes connecting the Far East to the Mediterranean. An important feature of China’s complex regional strategy is its attempt to address partners on a more equal footing. In the case of Egypt, it has done so by appealing to a shared history – a tactic that resonates in both countries. When the Chinese travel site Kooniao recently showcased the geochemist Sun Weidong’s assertion that Chinese civilization may have originated in ancient Egypt, Chinese readers responded with excitement; they were happy to be considered on par with Egypt. This episode suggests a revival of earlier discussions among Chinese officials in the post-World War II era, which also situated the origins of Chinese civilization in the West. It is tempting to ask if China implicitly uses civilizational theories to endear itself to particular regions at particular times. What we do know is that China has had an interest in the Arab world at least since the start of the postcolonial era, when new countries were established across the MENA region. That interest was embodied in the relationship between the first premier of the People’s Republic
“
Zaynab El Bernoussi Professor of International Relations at the School of Humanities and Social Sciences, Al Akhawayn University
of China, Zhou Enlai, and Egypt’s independence hero and second president, Gamal Abdel Nasser. Zhou and Nasser were both key leaders in the global South’s struggle for independence and ideological autonomy. But the Cold War, the SinoSoviet split, and Western international institutions’ development programs soon disrupted cooperation among global-South countries, and ties between China and Egypt weakened. That changed this year with the highly publicized meeting between Xi and Egyptian President Abdel Fattah el-Sisi in January. In 2012, former Egyptian President Mohamed Morsi – who had won Egypt’s first presidential election after former President Hosni Mubarak’s regime was toppled in 2011 – laid the groundwork. China was Morsi’s first official destination outside the region. When Egypt’s military removed M o rsi a n d e l -Si si b eca m e president, he continued to move his country closer to China. Xi returned the favour, and used his trip to Cairo to commemorate 60 years of bilateral diplomatic relations. Xi had visited Egypt 16 years earlier, and on his second official trip he praised Egyptian civilization: “If you drink from the Nile, you will return.” Egypt and China have agreed to a number of massive bilateral deals. One that stands out is a US$45 billion Chinese-funded project to build a new Egyptian capital in the desert outside of Cairo. The project’s symbolic importance is obvious: China wants to cement its role as the region’s biggest ally, in place of the US. Indeed, the renewed Sino-Egyptian relationship is a cornerstone of China’s effort to attract new allies in regions once dominated by US and European interests. And it is here where China’s reliance on a civilizational discourse of mutual respect and shared history stands in stark contrast to the West’s colonial, post-colonial, and neo-colonial discourse, which tends to frame local cultures as backwards or inferior. By lavishing praise on Egypt’s local culture, and by alluding to shared origins, China is strengthening its diplomatic relations and chances for future economic cooperation. In exchange, Egypt – a gateway to the Arab world – will become a crucial strategic ally for China. By deepening its relationship with Egypt, China stands to increase its influence in other MENA countries, too. Project Syndicate
An important feature of China’s complex regional strategy is its attempt to address partners on a more equal footing
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16 Business Daily Wednesday, December 7 2016
Closing Currencies
China signs currency swap deal with Egypt
sides, the PBOC said in an online statement. The currency swap deal allows China’s central bank yesterday signed a currency swap agreement the two institutions to exchange payments in one currency for with its Egyptian counterpart equivalent amounts in the worth RMB18 billion (about other, to facilitate bilateral trade US$2.62 billion) to strengthen settlements and provide liquidity trade and financial cooperation. support to financial markets. The deal, signed between the The deal aims to maintain financial People’s Bank of China (PBOC) stability in the two countries and the Central Bank of Egypt, will last for three years and can be and facilitate bilateral trade and extended upon agreement of both investment, the PBOC said. Xinhua
Investment
McDonald’s to keep up to 25 pct stake in China, HK stores The stores attracted bids from a variety of parties Elzio Barreto
M
cDonald’s Corp is looking to raise US$1 billion to US$2 billion with the sale of its China and Hong Kong stores after the U.S. fast-food chain decided to keep “a significant minority stake in the business,” a person with direct knowledge of the plans said yesterday.
person said. The company will also keep for now its stores in South Korea, which it previously also wanted to sell, the person added. A McDonald’s spokeswoman in Shanghai declined to comment. Carlyle declined to comment and CITIC did not immediately respond to a Reuters request for comment. McDonald’s in March said it was reorganizing operations in the region, looking for strategic partners in China, Hong Kong and South Korea as it switches to a less capital-intensive
franchise model. McDonald’s owns most of its more than 2,800 restaurants in the three markets. It is offering a 20-year franchise to buyers with a 10-year extension option. The Chinese and Hong Kong stores attracted bids from a variety of parties, including TPG Capital Management LP - which teamed up with mini-market operator Wumart Stores Inc - and real estate firm Sanpower Group Co Ltd, which owns British department store House of Fraser
Ltd, Reuters previously reported. The sale comes at time when fastfood operators including McDonald’s and Yum Brands Inc are recovering from a series of food-supply scandals in China that have undermined their performance. Yum, best known for the KFC, Pizza Hut and Taco Bell brands, agreed to sell a US$460 million stake in its China unit to investment firm Primavera Capital and an affiliate of Alibaba Group Holding Ltd ahead of a planned spin-off of the business. Reuters
Key Points Up to 25 pct stake gives McDonald’s exposure to China growth Decision on stake means U.S. company to raise US$1 bln-US$2 bln McDonald’s puts sale of S.Korean stores on hold for now The company has picked a consortium led by private-equity firm Carlyle Group LP and Chinese conglomerate CITIC Group Corp to buy the stores and its decision to retain a stake of up to 25 per cent lowered the price tag for the business from up to US$3 billion expected previously, said the person, who declined to be identified because details of the deal are not public. McDonald’s wants exposure to future growth in the world’s second-largest economy which is why it decided to maintain the stake, the
Regional meeting
Diplomacy
Consumer watchdog
Vietnam to hold first event for APEC 2017
Beijing urges U.S. to block Mainland’s users complain transit by Taiwan President of combustible iPhones
The first event of the Asia-Pacific Economic Cooperation (APEC) Year 2017 is expected to be held in Vietnam’s capital Hanoi on Thursday and Friday. Three main activities are to be hosted on the occasion, including a conference on priorities of APEC Year 2017, a dialogue between APEC and enterprises as well as an Informal Senior Officials’ Meeting (ISOM), reported Vietnam’s state-run news agency VNA yesterday. Specifically, the conference, drawing participation of some 350 delegates, will collect ideas of APEC members, APEC Secretariat, APEC observers, representatives of the International Monetary Fund, World Bank, Food and Agriculture Organization among others on international and regional cooperation trends as well as priorities that Vietnam has proposed. Meanwhile, the dialogue of APEC and enterprises under the theme “Creating new dynamism, fostering a shared future” will be attended by some 100 representatives from domestic and foreign commerce chambers, associations and enterprises. It aims to help Vietnamese and APEC firms to get more information about the forum and opportunities they may grasp in 2017. Xinhua
China called on the United States yesterday not to let Taiwan President Tsai Ing-wen transit there when she visits Guatemala next month, days after President-elect Donald Trump irked Beijing by speaking to Tsai in a break with decades of precedent. China is deeply suspicious of Tsai, whom it thinks wants to push for the formal independence of Taiwan. Her call with Trump on Friday was the first by a U.S. president-elect or president with a Taiwanese leader since President Jimmy Carter switched diplomatic recognition to China from Taiwan in 1979. Tsai is due to visit Guatemala, one of its small band of diplomatic allies, on Jan. 11-12, its Foreign Minister Carlos Raul Morales told Reuters. He gave no details on what President Jimmy Morales and Tsai would discuss. Taiwan’s Liberty Times, considered close to Tsai’s ruling Democratic Progressive Party, reported on Monday that she was planning to transit in New York early next month on her way to visit Central American allies Nicaragua, Guatemala and El Salvador. Taiwan has not formally confirmed Tsai’s trip, but visits to its allies in the region are normally combined with transit stops in the United States and meetings with Taiwan-friendly officials. Reuters
Several Chinese iPhone users have claimed that their handsets caught fire or exploded, according to a Shanghai consumer watchdog which called on tech giant Apple to address the complaints. Fresh on the heels of Samsung’s worldwide Galaxy Note 7 safety fiasco, the state-run Shanghai Consumer Council said it had received eight reports in recent months of iPhones that spontaneously combusted while being used or charged. The report, seen on the council’s website, was posted Friday. It quoted one woman as saying her iPhone 6s Plus exploded in August, shattering the screen and leaving the battery and back of the phone blackened. Apple provided the woman with a new iPhone but did not address the cause of the incident, the report said. “Apple should be responsible for consumers” and deal with complaints in a timely manner, the council said. “A large amount of consumer complaints are not solved effectively.” The council said it has received a six fold surge in total complaints against Apple in the past two months, including sudden shutdowns of the iPhone 6 and 6s even though batteries still have enough power. AFP