Mainland gov’t orders SOEs to smash the ‘iron rice bowl Welfare Page 10
Monday, December 19 2016 Year V Nr. 1197 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Politics
AL electoral law passes final reading, imposing stricter rules for scrutiny of candidates’ political views Page 3
Society
Owners of locally-licensed cars can purchase Mainland car insurance through local companies Page 6
www.macaubusinessdaily.com
Politcs
Real estate
Chief Executive to visit Beijing to present 2017 Policy Address Page 3
Mainland must do more to deflate property bubble by ‘strictly’ controlling speculation: official Page 8
Housing market stabilising Real estate
Housing transactions fell m-o-m in November, with a 62 pct drop in sales in Coloane on the tail of new luxury residential sales the previous month. Housing prices stabilised, with a 1 pct m-o-m increase and a 20 pct y-o-y increase in average home prices. Total home transactions surged 122 pct y-o-y for the month. Page 6
Case continues
Shopping online
The potential for e-commerce development in the city is high, despite competition with giants such as Taobao, the director of local online shopping platform MineYeah Company Limited tells Business Daily. Future plans for participating in the budding industry include focusing on promoting locally made products and B2C sales in the MSAR and Hong Kong and China.
Corruption As the trial of former Prosecutor-general Ho Chio Meng continues, the focus fell on 120 cleaning contracts authorised over a 10-year period representing nearly MOP30 mln. The former official denied any wrongdoing, and said that despite health concerns leading to a curtailed session of the previous trial, he has no intention of self-harm while in custody. Page 2
Further curbs
Interview | E-commerce Pages 4 & 5
HK Hang Seng Index December 16, 2016
22,020.75 -38.65 (-0.18%) Worst Performers
AIA Group Ltd
+1.49%
Cathay Pacific Airways Ltd
+0.59%
China Mengniu Dairy Co Ltd
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China Unicom Hong Kong
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China Resources Power
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Kunlun Energy Co Ltd
+0.51%
Cheung Kong Infrastructure
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Power Assets Holdings Ltd
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Galaxy Entertainment Group
+1.19%
AAC Technologies Holdings
+0.44%
Sino Land Co Ltd
-1.72%
Ping An Insurance Group Co
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CITIC Ltd
+0.88%
Lenovo Group Ltd
+0.42%
Wharf Holdings Ltd/The
-1.60%
China Overseas Land &
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CNOOC Ltd
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19° 23° 20° 23° 19° 23° 16° 23° 17° 21° Today
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Insurance Residents in the Mainland will no longer be able to swipe credit cards multiple times to avoid curbs intended to slow sales in the insurance market. Caps on insurance purchases in Hong Kong with credit cards issued by MasterCard and Visa, issued in China, are now capped at US$5,000 per insurance product. Page 9
2 Business Daily Monday, December 19 2016
Macau Crime Former Prosecutor denies having read all the information on awarded contracts before signing them
Cleaning out
After concerns former Prosecutor-general Ho Chio Meng was suffering from medical issues, the trial resumed on Friday, focusing mainly on 120 cleaning contracts authorised by the former top official over a ten-year period and worth a total of MOP29.6 million Nelson Moura nelson.moura@macaubusinessdaily.com
F
ormer Prosecutor-general Ho Chio Meng again denied having read the names or the amounts of the signed and authorised contracts allegedly awarded to front companies created by his associates, stating he trusted that his subordinates followed all legal proceedings before presenting the contracts to him. The bribery trial of the former official continued on Friday at the Court of Final Appeal, after health issues led to the session’s suspension on December 14. The trial focused mainly on cleaning and disinfection contracts awarded by the Prosecutor General's Office between 2004 and 2014. According to the accusation, Mr. Ho’s alleged criminal association absconded around MOP15 million (US$1.8 million) from a total amount of MOP29.6 million, in 120 cleaning contracts. Despite some responses, the prosecution, Mr. Ho and his defense lawyers had no remarks to make, with the session acting as a reading marathon of the first of 24 sets of contracts presented in the official charges, and only one-tenth of all 1,300 adjudicated contracts mentioned in the accusations. At the beginning of the session, Mr. Ho stated that despite his health, he would do everything in his power to cooperate with the court, and that he wouldn’t do any “self-harm” while in jail. After a medical check-up on December 15, concerns were raised regarding the former prosecutor’s health on Friday, with Mr. Ho and his lawyer stating to the press he was suffering from “heart and head” health related issues. Friday’s session was also interrupted for one hour after Mr. Ho’s lawyer, Leong Weng Pun, claimed some information was missing from the accusation documents provided by the court to the defense, an omission Justice Sam Hou Fai, President of the top court, verified. However the presiding judge
considered the defense had enough time to realize the omission of some of the data from the initial accusation documents, and suggested this could be a delaying tactic. Nevertheless, Sam Hou Fai conceded one hour for the defense to confide with its client.
Well-oiled machine
With most of the session focusing on the cleaning and disinfection contracts allegedly awarded to the criminal association the accusation says Mr. Ho founded, more information was provided on how the supposed system of illegally awarded contracts worked. The contracts referred mainly to cleaning services provided in diverse locations such as at the Prosecutor General's Office, and in buildings connected to the Prosecutor General's Office, like the Hotline Building resting area, Dynasty Plaza building, the Chun Fuc Industrial Building and the Judiciary Council of Macau. According to the accusation, with the help of associates Lai Kin Ian and Chan Ka Fai and through his employees, the former prosecutor created proposals for the contracts in order to allow the direct adjudication to some of the 10 front companies created in the name of Mr. Ho’s associates and their spouses. The alleged criminal association would then award contracts with an equal or inferior value for a halfyear period. Also, in order to avoid legal procedures for public tenders, it would divide contracts above MOP500,000 into separate contracts and proposals, so as to avoid a written consultation of the proposal. All cleaning contracts were awarded to two alleged front companies, Hoi Chin (Macau) Servico and Chun Hang (Macau) Servico, both registered in the name of one Iou Sio Chan, the wife of one of Mr. Ho’s alleged associates, and businessman Mak Im Tai. The front company, which didn’t possess any human or technical resources, would then hire another company as a sub-contractor, without informing the Prosecutor’s Office, with the hired company
providing any actual services for an amount inferior to the one the front company presented to the Prosecutor’s Office. In the case of the mentioned cleaning and disinfection services, the sub-concessions were all awarded to Companhia de Seguranca de Administracao de Popriedades Chong Hap, Limitada/Companhia de Grupo Chong Hap, Limitada. The front company would then present the Prosecutor’s Office with a price 10 per cent to 30 per cent higher than the amount paid to the sub-contracted company, or an amount 8 per cent to 50 per cent higher than market price, with Mr. Ho’s alleged criminal association keeping the difference. The difference between the original contract amounts and the sub-contracted amounts was sometimes as high as MOP700,000 for monthly payments over a period of almost 10 years.
Signed and delivered
The trial prosecutors presented contract documents, which the former top official approved, changing
cleaning services to Chun Hang company, enquiring that if the company was deemed fit for the service, then why the need to sub-contract to a second company. In his defense, the former prosecutor stated during his role he had “hundreds of contracts” to oversee, sometimes only signing the first page of the presented contract and the remaining pages with a quick simple signature. “As Prosecutor general I will not check by detail every cleaning contract presented to me. The price amount, if their equipment was modern and if the cleaning really happened (…) I trusted that my subordinates had made all legal proceedings to evaluate the companies,” stated Mr. Ho. The former top official also stated he had chosen to divulge the contract adjudications through internal notice instead of through the Official Gazette. The trial will continue today, with sessions then stopping for judicial break over Christmas and restarting on January 6.
Housing
No application fees for economic housing Local residents are not required to pay fees to apply for economic housing, according to a press release
published by the Housing Bureau on Saturday. The statement was released to prevent criminal acts related to loss of money from happening again. The Bureau reiterated that applicants are not required to pay any fees during the whole application process for economic housing. After the applicants submit their application forms to the Bureau, the Bureau assures it will examine and process the applications from eligible families. Once they are selected, the Bureau will then inform them by sending out a confirmation letter and invite them to inspect the economic housing units for purchasing within a specified time period. In addition, the Bureau encourages the public to report to the police if they encounter illegal circumstances when applying for the city’s economic housing units. A.L.
Society
First Public Notary Office relocated The First Public Notary Office located at the Holy House of Mercy (Santa Casa da Misericordia) building in Senado Square has now been relocated to the Northern District Integrated Services Center Building in Areia Preta. With its relocation, the Office is still providing existing notarization services as it did in its previous location. Meanwhile, the original contact numbers and e-mail address of the Office remain unchanged. The move was due to the expired
lease contract of the Senado Square building set for the end of this year, with a monthly rental of MOP1.2 million (US$150,140) as Business Daily reported previously. According to António José de Freitas, President of the Holy House of Mercy, the area occupied by the First Public Notary Office at the Holy House of Mercy building could become a bank, and the new venue in the Northern District is private property with a lease contract for a period of one year. A.L.
Business Daily Monday, December 19 2016 3
Macau Policy Address
CE visits Beijing
Chief Executive Fernando Chui Sai On will visit Beijing on Wednesday to introduce the city’s 2017 Policy Address to the Central Government. The Chief Executive will meet with Central Government leaders to brief them on the current works of Macau and next year’s planned developments.
In the delegation accompanying the CE to Beijing are the Chiefof-Office of the Chief Executive’s Office, O Lam; the Director of Government Information Bureau, Victor Chan Chi Ping; and the Director of the Protocol, Public Relations and External Affairs Office, Fung Sio Weng, among others. A.L.
Legislation
AL electoral law amendments pass final reading The new law imposes stricter scrutiny on candidates’ political stances Kam Leong kamleong@macaubusinessdaily.com
T
o be qualified to run for a seat in next year’s Legislative Assembly election, candidates will have to declare their loyalty to the MSAR and that they will uphold the city’s Basic Law, apart from paying a guarantee deposit of MOP25,000 (US$3,125). These amendments to the city’s current Legislative Assembly electoral law passed their final reading at the legislature last Friday. Pan-democratic legislators Antonio Ng Kuok Cheong and Au Kam San both queried whether the addition of the declaration of loyalty to the MSAR and the Basic Law is necessary, criticising that there is no point for the MSAR government to add the means used by Hong Kong for resolving its political fights to the city’s own law. “These amendments are now introduced to Macau following their use in other places for their political conflicts, which are totally unnecessary,” said Ng. Au Kam San opined similarly: “it is known that one must be loyal to the MSAR and uphold the Basic Law. Adding these to a law is the same as holding a candle to the sun.” But the arguments of the two pan-democrats did not gain support at the Assembly. Directly-elected legislator Kwan Tsui Hang perceives these additions to the law will prevent the city from having similar political disputes as those in Hong Kong. “It is not necessary for us to follow Hong Kong. And we don’t want to follow Hong Kong,” said the unionist legislator. “But that’s also the exact reason why we should learn from what happened in Hong Kong. One Country Two Systems is a long journey. No one can predict what will happen in the future,” she added. A few other members also expressed
their support for the addition of the loyalty declaration, including the Chief–executive appointed legislators Dominic Sio Chi Wai, Tommy Lau Veng Seng, and Ma Chi Seng, in addition to directly-elected member Mak Soi Kun. Meanwhile, Secretary for Administration Sonia Chan Hoi Fan denied that the MSAR is blindly copying Hong Kong’s political means. These “political conflicts” in Hong Kong refer to two pro-independence legislators, Yau Wai Ching and Sixtus Baggio Leung, who were kicked out of the Legislative Council after their oaths were challenged by the Hong Kong government and were deemed invalid by the top court of the neighbouring SAR. The incident also triggered the National People’s Congress Standing Committee to issue an interpretation of the Hong Kong Basic Law in October. On the other hand, the amendments to the law also regulate an individual from being allowed to run for election if there are facts proving their disloyalty to the MSAR. Legislator Au and Legislator José Perriera Coutinho both expressed their concerns about this new article of the electoral law, asking whether incumbent legislators’ votes against a government bill related to the issue would later be used as an evidence of their “disloyalty”. But the Secretary claimed legislators vetoing a bill would not be deemed as a fact proving their disloyalty to the city, indicating that legislators have the power given by the law to cast a vote in favour or against decisions, based on their own will. The newly passed bill also stipulates that if a legislator quits their position, they will be banned from running any re-election campaign for the legislature for 180 days following their resignation. Despite Legislator Ng’s request to put these two articles to a separate
vote, the articles were passed with only three votes cast against - from Antonio Ng Kuok Cheong, Au Kam San and José Perreira Coutinho.
Deposit
Another article put forward for a separate vote was the addition of a guarantee deposit system, which mandates election candidates submit a MOP25,000 deposit when they join the election. The amount will be retained by the government if the candidate does not get a certain number of votes. Legislator Au pointed out this new scheme would restrict grassroots or poor groups from running in elections. This view was reiterated by Coutinho, who noted that: “the Basic Law mandates every citizen has the right to elect and be elected. As I raised during the discussion for the first reading, I don’t understand the reason why the government is adding this article to the law,” he said. Secretary Chan explained the establishment of the deposit system aims to enhance the credibility and the seriousness of the election. “This is because the whole society would need to put a huge amount of resources into each election,” said the official. But this triggered “a strong objection” from legislator Au, saying that: “I can’t accept [this explanation]. I
2017 budget plan passed
Last week’s plenary session also unanimously gave final approval to the city’s budget plan for next fiscal year. The budget plan projects a total fiscal surplus for the MSAR Government of MOP7.2 billion, a plunge of 60.4 per cent compared to the budgeted MOP18.2 billion for this fiscal year. Total revenue is expected to reach MOP102.9 billion, a decrease from the MOP103.3 billion budgeted for 2016, whilst total expenses for the year are projected to be MOP95.7
can’t agree that a candidate group is deemed not credible when they cannot afford to pay this amount of deposit.” Mr. Coutinho again echoed Au’s comments, saying: “how can we judge one’s seriousness [in the election] by the amount of MOP25,000?” He added the reason explained by the government official for the new regulation is humiliating to the poor. Nevertheless, lawyer and CE-appointed legislator Vong Hin Fai noted that this deposit system has also been implemented in Hong Kong for its Legislative Council elections. Another member of the assembly, with a legal background, Gabriel Tong Hio Cheng, added that this deposit system has also been implemented in many other places. “I believe this regulation will make interested parties evaluate their situation before joining the election […] This will allow candidates to analyse whether they can gain support from voters,” the law professor said. The amendments to the electoral law, passed on its first reading in August this year, hinge on four key components being altered: regulating electoral campaign activities; reinforcing the combat of electoral offences; improving the work of the electoral body; and improving the requirements for candidacy and the provisions for the incompatibility of legislators.
billion, an increase of 12.6 per cent from this year’s MOP85 billion. In particular, revenue derived from direct taxes – of which the majority is generated by gaming taxes – is projected to reach MOP80.1 billion, a slight growth of 1.6 per cent year-on-year, whilst expenses allocated for the public investment plan, known as PIDDA, will increase 37.8 per cent year-on-year to MOP15.3 billion for next year. No legislator spoke on the budget plan during the session.
4 Business Daily Monday, December 19 2016
Macau
Mio Keng Seng director and founder of MineYeah Company Limited
E-commerce Local e-commerce company also aims to promote Macau products in other regions
Macau is online
co-operation with companies. These people are freelancers, who we ask to help in tasks such as programming and designing.
The director of local online shopping platform MineYeah Company Limited, Mio Keng Seng sees the potential of e-commerce, in particular for business-toconsumer (B2C) transactions in the city. His ambition however is not merely to provide a platform for local residents to enjoy the conveniences of online shopping, but also introduce and promote Macau-branded products in markets outside the SAR. Mio tells Business Daily that given the government’s intent to diversify the city’s economy, the e-commerce market is growing and Macau has the potential to go further in the industry.
What is your customer base? Our customer base is mainly composed of local residents who are between 25 to 35 years old, in which female customers are more prominent. We examine our statistics data by using Google Analytics, and we pay for the service every month. We know where these people come from, their browsing habits, and whether they are male or female customers.
Cecilia U cecilia.u@macaubusinessdaily.com
H
ow does your company work? Our company provides an online platform or a website, and the platform has its own payment gateway, which means a way of payment. The website we are providing enables customers to buy products from firms online. At the same time, we’ve gathered a group of people, for the past two years, a group of business firms, to put their products and goods on our website. What I’m referring to is Macau-branded goods, to be promoted outside the city, such as in Mainland China or Hong Kong. In fact these two regions will be our main focus. Moreover, I am a member of the Youth Industrial Association of Macau. The association has products or goods that are made in Macau. As a member of the association I have the responsibility to promote out city’s products to other places and regions, as to let more people to get to know products that are made in Macau. Our website is one of the many channels to promote our products. H o w di d y o u g et sta rt e d i n e-commerce? Before I wasn’t engaged in anything that is related to websites, basically I worked in trading businesses. In the past two years, very often, I would participate in operating exhibitions that relate to buying and selling, such
as the shopping festival. If there were ten exhibitions being held in a year, I would attend all of them. After attending many of these exhibitions, I can see that the outcome of these exhibitions is moderately satisfactory, not making a huge profit or loss. I got to know a group of people from those exhibitions, people who were selling products. I asked them about their sales because some of the firms were selling products that were not commonly interesting to the general public, such as Ginseng or bird’s nest soup… these sort of goods are not affordable for all, although they have a market. So, some of these firms answered that they didn’t aim to make profit by participating in these exhibitions, but to promote their products. They said they spent more than MOP10,000 just to promote and advertise their businesses. After talking to them, I was informed that many of these firms didn’t have a channel or way to sell and at the same time to promote their products. Some of these firms have physical shops and others don’t, with quite a few of them operating by simply attending exhibitions. As such, I thought, there was no platform like Taobao (a Chinese website for online shopping similar to eBay, Amazon and Rakuten that is operated in China by Alibaba Group) in Macau, and HKTVmall in Hong Kong, not to mention in Taiwan. Macau had none. I didn’t think Macau was that far behind these cities, of course the gaming revenue helps,
and Macau should catch up with the current trend. Therefore, if no one was doing it then why don’t I start it myself, so I started the business.
“Our customer base is mainly composed of local residents who are between 25 to 35 years old, in which female customers are more prominent” After two years, what is the current scale of your company? How many staff do you employ? Actually we have two delivery teams so as to meet different customers’ needs. We have a group of part-time delivery staff and we also co-operate with other delivery companies. Some of the companies might not be available to make deliveries at certain time slots because they have finished the work of the day, such as during night hours, so we will ask the parttime team to do the job. Therefore, in total, we have around 12 to 13 staff. The number also includes other areas such as administration. Apart from the head office here, we also have
Why are there more female customers? Because we have many travelling products and services. We also have skin care products. For the past two years we have been changing and adjusting, including the types of products and services that we offer, programmes, as well as our operational system. Can you disclose your company’s recent business performance? On Singles’ Day this year (on November 11, an online shopping day widespread among the Chinese community), we recorded around MOP800,000 (US$100,014) revenue in one single day. The revenue includes the amount made from Mainland China, Hong Kong and Macau. Apart from the products sold on our website, the revenue that we gained also includes the rent of firms using our platform. This year’s performance has definitely improved compared to last year’s. After two years operating in the e-commerce industry, how do you find the market in Macau compared to more mature neighbouring regions? Recently, I can see that the Macau government is very supportive, as the Secretary for Economy and Finance proclaims the need to diversify the city’s economy, and one of his plans is to support e-commerce. Therefore, I believe the industry has a very
Business Daily Monday, December 19 2016 5
Macau positive future. Also, the government has created schemes to support local firms to sell their products on authorised websites. Although the government’s support schemes could help a lot, we cannot wholly depend on the government’s help, because doing business is about how to make the best on your own in order to attract people to trade with you.
“If no one is doing it [online shopping platform] then why don’t I start it myself?” Although online shopping is getting more common in Macau, in general, people in Macau don’t often buy products through websites. How do you plan to develop this trend in the city? Maybe I’ll analyse it the other way round; we do in fact hope that Macau residents will change their purchasing habits, but we are more willing to introduce and promote products that are made in Macau to other places. These are two different things. For us, we will work on how to balance these two goals, because if we can make our city’s products go further outside Macau, our market will consequently grow bigger. Our city’s products are not bad at all and they should be known. I think letting people outside know about our products would help a lot.
problem, because, as a platform, we can react by allowing customers to return their purchased products. The risk of unsuccessful transactions is borne by the third party, for instance Macau Pass. So if a customer is claiming that he has paid but the firm doesn’t receive it, then it has to be the problem of the payment gateway. We do actually have signed contracts with the payment gateway companies, therefore we are protected by the law if a problem arises. Moreover, the Macao Monetary Authority vets the companies before approving any licenses to payment gateway c o m p a n i es . Th e g o v e r n m e n t definitely monitors these companies, and many people use WeChat payment and Alipay because they think it is safe. Basically people put their payment details online, and the payment gateway will gather this information in a temporary storage area where no one can access it. Through this storage area, the payment gateway obtains the amount that the customer paid, and the amount will be stored in that payment company. And since these companies co-operate with us, we will close the account every month. It is actually exactly the same as making card payments. As such, this does not cause big problems.
is absolutely unrealistic to simply work on the local market. How to you find firms to co-operate with your company? The task of finding firms to co-operate with us falls on our service manager. He basically uses every way to find firms to work with us. Facebook, phone calls and approaching them in person. There are also firms that approach us - that is better. How do you co-operate with these firms? We have different co-operation schemes. We have the rental scheme for using our website - basically a firm can pay the rent and it can post their products without limits. Another scheme is commission on profits made by firms. We consider applying a suitable scheme according to the firm itself. For instance, if a firm sells food products where the profit made is not significant, in that case we will choose the best and most suitable scheme for the firm to promote, or paying the rental would be enough. Because if we get 5 per cent commission on that firm, it will not make any profit. We consider what firms are selling.
“Promotions can be mutual through co-operation”
Are there any challenges that your company is encountering? There is no significant challenge, but we are working on how to perfect every detail. And we are trying to listen more to our customers’ and firms’ demands. I think that by perfecting every detail of our services we will outperform others.
If they shop online, Macau residents tend to use the more well known online platforms such as Taobao. How do you compete? Our products. We have a lot of local firms and we are currently approaching buffet restaurants and hotels to sell their services through our platform. Apart from attracting Macau residents, we are also intending to attract tourists and foreigners to browse our website. In the future, we have plans to work on new pages, and these new pages will allow interactions between customers. We are still planning it so we cannot reveal further information yet.
Do you have any firms that your company is particularly in favour of co-operating with? Products that are distinctively made in Macau. We want to find more of these firms producing these products. On the other hand, we also want to have more products or services that relate to tourism as well as daily goods.
Since transactions made online can be risky, how do you handle situations where transactions are not successful? If that happens it won’t be our
In that case, your company is aiming to open up other markets? Yes, definitely. Frankly speaking, operating an e-commerce platform, with consideration of the capital, it
What is the threshold for firms to use your services? We require all firms to be licensed w i th th e M 1 ( E stab l i sh m e n t Registration form) and M8 (Tax
Return). For firms without physical shops, we required them to at least have the M1. We won’t approve any anonymous firms. Meanwhile, we also require firms to sign a detailed contract including terms that prohibit them from selling unapproved goods, the details explaining how to make the transaction and how to use our website services. Any future plans for your company? Again, to perfect every detail of our operation and services. We will think of other new ideas after we have done well in improving our current works. I think it would create a mess if we added new things when we are not doing well in the things that we are doing now. We will create when we are stable enough. How do you promote your business? We mainly use Facebook, but later we will have a page allowing interactions between customers. I think it is a great way to naturally promote and advertise our website by our own customers. S o m e o p i n i o n s ex p r e s s t h e inadequacy of legal support for e-commerce in the city. What is your own opinion about these concerns? I think if there are too many regulations or restrictions, it will eliminate the incentive for those who are interested in entering the field. Since previously you have attended business sessions with local gaming operators, what is your intention of co-operating with local gaming operators? In Macau, it is very natural to cooperate with casinos. It is beyond a doubt that the local gaming operators have rich experience in doing business. It would be a good way to promote ourselves if we co-operate with the operators. There is no firm that cannot be cooperated with. It is not only firms that sell products, gaming operators and hotels can offer vouchers or discounts through our website which will attract customers to browse our platform. Promotions can be mutual through co-operation.
6 Business Daily Monday, December 19 2016
Macau Opinion
Sheyla Zandonai* Rising sun The birthday of Japanese Emperor Akihito on December 23 was marked by a discreet celebration in Macau at the Okura Hotel on December 16. Located within the Galaxy complex in Cotai, the hotel is one of the few tangible results of Japanese investment in Macau. Its common areas are sober and sophisticated. The ceramic artwork hanging above the reception counter is a delightful example of Japanese imagery and imagination: a seascape mosaic that reflects the nation’s seclusion and density. The Consul-General of Japan in Hong Kong, Mr Kuninori Matsuda, was present along with several members of the Japanese consular delegation, who came all the way across the Delta to honour their emperor in Macau. Note that it was Secretary Lionel Leong Vai Tac, and not Secretary Alexis Tam Chong Veng, who attended the event as the representative of Macau’s government. For centuries, China and Japan have been at odds politically. Commercial bans enacted against Japan during the modern history of China, war, occupation by the Japanese, the exchange of political discourtesies since then, and recent territorial disputes have soured political relations. Yet these two countries, which have the world’s second and third richest economies, exchange an enormous volume of bilateral trade. Japan is China’s second largest commercial partner, following the United States. China is Japan’s largest trading partner. Political differences aside, they mutually benefit from economic ties in many sectors, from cars and computers to oil and iron ore. Following the enactment of a bill on the liberalization of casino gambling in Japan on 14 December, it seems Japan and China, via Macau, will soon be competing for markets in a sector that is this city’s raison d’être. Analysts estimate that the market in Japan is huge – millions of pachinko-lovers offer but a glimpse of its potential – and that it may attract high-rollers from Mainland China less keen to come to Macau under the current political conjuncture. Yet seeing Secretary Leong side-by-side with the Japanese consul sent another message. Investors in and from Macau have long been interested in gaining further access to the Japanese market. Commercial ventures and partnerships in gambling, entertainment, and the manufacturing and distribution of slot machines, for instance, already exist between companies in Macau and Japan, and may gain further momentum with the coming liberalization. One might even think this is the beginning of a beautiful friendship. *scholar and contributor to this newspaper.
Real estate
Housing market stabilises Home prices in November increased marginally by 1.1 per cent from one month ago, while total transactions went down slightly by 1.55 per cent in the period Kam Leong kamleong@macaubusinessdaily.com
A
verage housing prices in the city amounted to MOP90,428 (US$11,304) per square metre for the month of November, up slightly by 1.1 per cent from one month ago, according to official data released by the Financial Services Bureau (DSF) last week. For the month, the total number of home transactions in the city amounted to 1,144, which was a slight drop of 1.55 per cent compared to one month ago, due to the 62.3 per cent decrease in home transactions in Coloane, which amounted to only 87 compared to October’s 231 transactions. But this significant drop in home transactions on the island was due
to the high base in October, when the new luxury residence Sky Oasis commenced sales, with the developer claiming that its first batch of sales of 128 units were sold out in one weekend. Despite the drop in home transactions, average home prices on the island only decreased marginally by 0.03 per cent month-on-month for November, which amounted to MOP125,237 per square metre. Home prices on the Peninsula also remained stable from October, up marginally by 0.14 per cent monthon-month to MOP81,507 per square metre, while total transactions rose by 12.8 per cent month-on-month to 239. Meanwhile, total transactions for residential units in Taipa jumped by 16.1 per cent year-on-year to 239. Home prices there also increased
by 15.6 per cent to MOP100,572 per square metre, compared to MOP87,025 one month ago.
Rebounding from one year ago
On a year-on-year comparison, average home prices for November represented an increase of 20.9 per cent compared to MOP74,771 one year ago. In particular, home prices in Taipa surged by 32 per cent yearon-year, up from MOP76,189 per square meter, while those on the Peninsula and Coloane also grew by 20 per cent and 14.9 per cent yearon-year, up from MOP67,898 and MOP108,999 per square metre for November 2015. Compared to the same month last year, total home transactions surged by 122.1 per cent year-on-year, up from 515 transactions. Transactions of Taipa units tripled from the 79 recorded one year ago, while those in Macau also doubled from 381 one year ago; and home transactions in Coloane also recorded an increase of 58.2 per cent year-on-year.
Unit types
In terms of unit type, home transactions on completed units for November totalled 950, up by 11.6 per cent month-on-month, or 114.4 per cent year-on-year. This type of home cost MOP81,739 per square metre on average in the month, representing a slight increase of 2.7 per cent month-on-month, or 19.1 per cent year-on-year. Meanwhile, total transactions of units that were still under construction dropped by 37.6 per cent year-onyear to 194 in the month. Compared to 55 transactions one year ago, the number represents a significant increase of 169.4 per cent. The average cost of uncompleted units amounted to MOP126,687 per square meter on average, up by 4.3 per cent month-on-month, or 18.5 per cent year-on-year.
Hengqin
Macau-licensed cars need to have Mainland car insurance Owners of Macau-licensed cars wanting to enter Hengqin can buy Mainland car insurance through local companies Annie Lao annie.lao@macaubusinessdaily.com
The owners of Macau-licensed cars entering Hengqin are responsible for purchasing compulsory insurance for the liability of any traffic accidents that occur in the Mainland, according to a press release published by the Monetary Authority of Macau (AMCM) on Friday. The regulations in Mainland China require any crossborder vehicles going to Hengqin be insured with ‘motor vehicle traffic accident liability insurance’. According to a co-operation agreement signed between Guangdong and Macau, Macau agencies can provide vehicle insurance services for the use of Macau-licensed cars on the island. At the moment, two local insurance companies have signed the agreement with the Mainland insurers: China Taiping Insurance (Macau) Co., Ltd. and Asia Insurance Company Ltd. The scheme is scheduled to kick off tomorrow as previously announced.
Requirements
The first phase of the scheme will allow owners of Macau-licensed cars who have companies operating in
Hengqin to obtain car entry permits. The requirement states that at least one independent legal entity has to be established in Hengqin. That entity has to pay company taxes within five years, and also needs to be one of the first 100 registered companies in Hengqin, according to the Government Spokesperson’s Office. Macau companies or legal entities
that have obtained land in Hengqin can also apply for a maximum of three non-operating vehicles with no more than nine seats to enter Hengqin. The temporary entry permits given to certain Macau-licensed vehicles are valid for three months. In this period, the permitted vehicles can enter the island multiple times. For now, the owners of Macaulicensed cars are also required to obtain a Mainland driving license. But the Director of the Administrative Committee of Hengqin New Area, Niu Jing, said that more convenient ways will be arranged soon to allow more Macau cars to travel to Hengqin in the next stage of the scheme. Currently, more than ten vehicles are in the process of applying for entry permits, according to Director Jing.
Business Daily Monday, December 19 2016 7
Macau M&A
Packer’s Crown reaps A$1.9 bln after casino stake cut
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illionaire James Packer’s Crown Resorts Ltd. reaped A$1.9 billion ($1.4 billion) by slashing its stake in a Macau casino venture, cutting exposure to the volatile gaming market and refocusing its operations on Australia. Crown agreed to sell 40.9 million shares in Melco Crown Entertainment Ltd., or about 2.8 per cent of outstanding stock, the Melbourne-based company said Friday in a statement. It also agreed so-called cash-settled equity swaps on about 81.9 million shares, or a holding of more than 5.5 per cent. The sale came after Crown abandoned a proposed spinoff of international assets and announced it was selling half of its stake in the Macau venture to partner Melco International Development Ltd. Proceeds from the sales will be used to cut Crown’s net debt by about A$800 million and return A$1.1 billion to shareholders, according to the statement. The changes, which limit the company’s exposure to a volatile Macau gaming market, are a “good outcome for shareholders,” Ravi Reddy, an analyst for Morningstar Inc. said in a note to clients. “Crown will emerge as a domestic pure play with relatively defensive earnings and growth options from Crown Sydney, positioning the company to continue leveraging the Chinese market from the safety of Australia.” The share sales, and an announcement that Crown is considering selling an undeveloped plot in Las Vegas, signal that Packer is reining in plans for a gambling empire spanning the world’s largest gaming markets. Even so, his retreat to Australia isn’t without danger. More than a third of Crown’s revenue at its Melbourne
and Perth resorts comes from international visitors, predominantly mainland Chinese, and they will be the mainstay of the planned A$2 billion Sydney casino. The roundup of 18 Crown staff in China in October for alleged gambling crimes has raised questions about the company’s ability to draw in Chinese high rollers.
“Crown will emerge as a domestic pure play with relatively defensive earnings and growth options from Crown Sydney, positioning the company to continue leveraging the Chinese market from the safety of Australia” Ravi Reddy, analyst for Morningstar Inc.
Amid the detentions, turnover from Crown’s program for high-wagering, top-priority customers at its Australian resorts slumped 45 per cent from a year earlier in the most recent 23-week period, Crown said Thursday. Th e sa l e a n d e q u i t y -s w a p
Economy
Economist: Local casino industry has a competitive edge over Japan Despite the recently passed bill legalizing integrated resorts in Japan increasing regional competition for the gaming industry in the MSAR, Joey Lao Chi Ngai, director of the Macau Economic Association, believes that Macau’s gaming industry still has a competitive edge over Japan, according to local Chinese broadcaster TDM Radio. In response to questions regarding whether the recent changes in the legislation would have any material impact on the local gaming industry, Mr. Lao responded that he is not worried that the changes will bring about any difference in the city’s economic situation.
“Although Japan has passed its casino regulation law, it will not bring a direct negative impact to Macau in the short term and medium term. Macau’s gaming industry still has a certain competitive edge over Japan. If Japan wants to compete with us, it will take a long time for Japan to exceed us,” Mr. Lao said to reporters. In addition, regarding his prediction for the local economy for next year, Lao noted that he maintained a cautious outlook and believes that the city's new policy address and the continuous support from the central government will help sustain development of the city next year. A.L.
transaction announced Friday were priced at US$5.33 per Melco Crown share, or equivalent to US$16 for the company’s U.S.-listed depository receipts, Crown said. The swap provides the Australian company with a “price hedge” in respect to the Melco Crown shares.
Packer, Ho
The returns to Crown shareholders will comprise a special distribution of about A$600 million and a buybuck of about A$500 million, the company said. Subject to the completion of the sale to Melco International, the special distribution and buyback will
take place in the second quarter of 2017, Crown said. Melco Crown listed in 2006 in New York as a joint venture between Packer and fellow gaming billionaire Lawrence Ho and raised more than originally planned at US$19 per share. The stock price peaked in 2014, rising to US$45.16 that March and has since tumbled to below its debut price. Crown is continuing to study an initial public offering of 49 per cent of a property trust that would hold some of its Australian hotels, it said Thursday. Packer owns about 48 per cent of Crown Resorts, according to data compiled by Bloomberg. Bloomberg
8 Business Daily Monday, December 19 2016
Greater China In Brief Overcapacity
China’s top economic planner highlights cutting excess capacity next year Cutting excess capacity will be a priority for the work of China’s top economic planner in 2017, a senior official said Saturday. The National Development and Reform Commission (NDRC) will use market and legal tools to balance overcapacity cut and stable supply, structure optimization and industrial upgrading, said Xu Shaoshi, head with the NDRC at the government organ’s year-end work meeting. The NDRC will also try to arrest the growing leverage ratio of non-financial corporate sector, and further cut taxation and reduce fares for enterprises. More central government budget will be used to invest in poverty reduction, agriculture, post-disaster water conservancy, infrastructure and innovation, according to Xu. The NDRC also decided to generally open price control over competitive sectors and links in 2017. The top economic planner also mulls establishing a project tracking mechanism to follow major projects in key countries and regions. Finance
China, Japan more vulnerable to financial shocks, BOE study says Asian economies including China, Hong Kong and Japan have become more vulnerable to financial shocks since the 2008 global crisis and are now among the most at risk, according to a Bank of England research paper. “The sluggish global recovery took its toll particularly on the Asian economies, with vulnerabilities rising to elevated levels over the past few years,” Jack Fisher and Lukasz Rachel wrote in the paper, published on Friday. While vulnerabilities were high in the U.S. in the run-up to the financial crisis and relatively low for some large Asian economies, “it is now emerging markets and Asia in particular that appear to be the most vulnerable,” they said. BOE Governor Mark Carney last month highlighted the increasing risks from China, the world’s second-largest economy, and the central bank’s annual stress tests this year featured a sharp economic slide in the nation.
Property
Mainland must curb speculation amid bubble, top official says Policy makers are shifting their focus to risk management after economic growth this year proved resilient
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hina must do more to deflate a property bubble that expanded this year by “strictly” controlling speculation while also stepping up the fight to rein in excessive corporate borrowing, a top economic official said a day after leaders announced plans for next year. “We need to give a higher priority to preventing and controlling financial risks,” Yang Weimin, deputy director of the Office of the Central Leading Group on Finance and Economic Affairs, said Saturday at a forum in Beijing. “We need to defuse a flurry of risks, contain asset bubbles, and improve oversight to ensure there won’t be a systemic financial risk.” Yang spoke a day after China’s top policy makers said they plan prudent and neutral monetary policy next year to sustain a steady expansion with breathing room for reforms. Preventing and controlling financial risk to avoid asset bubbles will be a priority, officials said in a statement Friday after the three-day Central Economic Work Conference. “Houses are built to be inhabited, not for speculation,” the post-meeting statement said. It proposed using
finance, land, taxation, investment and other instruments “to establish a fundamental and long-term system to curb real-estate bubbles and market volatilities,” according to a report Saturday from the official Xinhua News Agency. Policy makers are shifting their focus to risk management after economic growth this year proved resilient, with President Xi Jinping saying they are on track to meet objectives. Threats to maintaining rapid expansion still loom ahead of a crucial party congress late next year, including potential trade tensions with U.S. President-elect Donald Trump and the Federal Reserve projecting a steeper path for interest rates that may add pressure on the yuan.
Easing
The easing cycle by the People’s Bank of China since late 2014 has been accompanied by a build-up in borrowing. Outstanding credit at year-end is on pace to be about 265 per cent of gross domestic product, up from 247 per cent at the end of 2015, according to a recent report by Tom Orlik, chief Asia economist for Bloomberg Intelligence in Beijing.
Credit taps are still flowing freely. The broadest measure of new lending jumped last month by the most since March, boosted by borrowing for home loans and a resurgence of shadow-banking activity. The main categories of shadow finance -- bankers’ acceptances, entrusted loans and trust loans -- all increased significantly while longer-term household loans accounted for more than twothirds of total new yuan loans. Yang, who helped draft Friday’s statement, sits on the Communist Party’s elite financial and economic panel led by Xi that is shaping policies to help support growth. The director of the panel’s general office is Liu He, one of Xi’s top advisers. Maintaining stability doesn’t mean inaction, Yang said at an event sponsored by the China Center for International Economic Exchanges. He said the economy’s structure is improving and that cutting overcapacity will extend to more industries in addition to steel and coal. Ning Jizhe, chief of the National Bureau of Statistics, told the forum that this year’s targets for reducing excess steel and coal capacity have been met. In coastal regions, new industries and business models make up a big share of the economy, said Ning, who’s also deputy chairman of the National Development and Reform Commission, China’s top economic planning body. Bloomberg News
Economy
China should propel opening up, reforms amid uncertainties: report China should step up economic reforms and improve opening-up policies to face rising uncertainties in the global economy for the next year, a report said on Saturday. “Global risks and challenges are likely to overshadow opportunities for the world economy in 2017,” said the report jointly released by the China Center for International Economic Exchanges (CCIEE) and the State Think Tank of Xinhua News Agency. The report cited a rising wave of anti-globalization, falling labor productivity, piling debts, uncoordinated macroeconomic policies, lingering financial risks, and slowing emerging economies. The report forecast the global economy will grow 3.1 per cent year on year in 2016, lower than the average annual level since 1990, and international goods trade, a traditional economic driver, will dawdle at 1.7 per cent. “The world is experiencing the weakest recovery after an economic crisis,” said Zhang Yansheng, the CCIEE’s head researcher.
Trade
China’s Belt and Road Initiative delivers promising initial results After a little more than three years, China’s Belt and Road Initiative, envisioned as an infrastructure and trade network connecting Asia with Europe and Africa along ancient trade routes, is delivering promising early results on trade and investment. It’s a win-win scenario given that China and countries along the routes have signed more than 40 cooperative agreements so far, covering more than 10 key industries including steel, electronics, automobiles and equipment-making, the Ministry of Commerce (MOC) said. “The Belt and Road Initiative strengthened our confidence in going global when we felt at a loss and pointed out a new way for us integrating industrial chains,” said Sun Weijun, deputy head of Tianjin Julong Group, a leader in China’s palm oil industry.
Julong Group’s continuous efforts paid off when China-Indonesia JuLong Agricultural Industry Cooperation Zone was promoted to
a state level overseas economic and trade cooperation zone in August 2016. So far, a total of 52 overseas economic and trade cooperation zones have been established between China and countries along the routes, while more than 1,400 major projects are in the pipeline, according to the MOC. Xinhua
Business Daily Monday, December 19 2016 9
Greater China
Credit card
Chinese buying insurance in Hong Kong said to face further curbs
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hinese residents buying insurance in Hong Kong will no longer be able to swipe their credit cards multiple times to get around previously imposed curbs intended to slow sales, according to people with knowledge of the matter. Purchases of insurance in Hong Kong using MasterCard Inc. and Visa Inc. credit cards issued in China have been capped at US$5,000 per insurance product, according to the people, who asked not to be identified because the changes haven’t been made public. Hong Kong insurers were notified by the card companies about the change, which took effect Saturday, the people said. The new limit means Chinese
residents won’t be able to skirt previously imposed restrictions by swiping their credit cards multiple times, a tactic that’s become popular this year, underpinning surging sales in Hong Kong. Chinese authorities began curbing insurance buying in the city early in 2016, fearful that capital is leaving the country too quickly. Rising U.S. interest rates and weakness in the yuan have added urgency to the effort recently. A representative for MasterCard declined to comment. Officials at Visa and the State Administration of Foreign Exchange weren’t immediately reachable on Saturday.
UnionPay curbs
The authorities this year have already
rolled out a series of curbs to control insurance-related outflows. In the past, Hong Kong insurance sellers’ creative responses to limits such as caps on transactions using China UnionPay Co. cards have included swiping customers’ cards hundreds of times. Since late October, mainland residents have been blocked from using China UnionPay cards to buy life and investment-related polices in Hong Kong. Those restrictions caused purchases using UnionPay cards to dry up as buyers switched to Visa and MasterCard, according to insurance agents. Mainland buyers won’t be able to exceed the new limit by simultaneously purchasing multiple products
from the same insurer, because the credit-card companies will regard it as one overall transaction subject to a US$5,000 cap, one of the people said. The most popular insurance policies for Chinese buyers, Hong Kong agents have said, are those that combine a life-insurance element and an investment component. These can be cashed out after a few years and the money used for property investment or other purposes, raising fewer questions about how the money left the Chinese mainland. Hong Kong’s sales of insurance and related investment policies to Chinese residents surged to a record HK$18.9 billion (US$2.4 billion) in the third quarter, according to numbers derived from figures reported by the Office of the Commissioner of Insurance. Chinese citizens are allowed to convert up to US$50,000 worth of yuan a year into other currencies, and they can move that money abroad for investing purposes regulated under the country’s capital-account policies. Bloomberg News
10 Business Daily Monday, December 19 2016
Greater China
Welfare
Heralding social, financial change, Mainland aims blow at iron rice bowl Beijing has given SOEs until 2020 to ditch their “social functions”. David Stanway
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hina has ordered state firms to smash the decades-old system of providing cradleto-grave welfare support, known as the country’s “iron rice bowl”. But the order, part of a plan to reduce financial pressure on bloated and heavily indebted state-owned enterprises (SOEs), is likely to be easier said than done as cities navigate the social and financial wrenches the changes will cause. At the heart of soot-covered Pingdingshan in central China is the Pingmei Shenma Group, a state coal conglomerate that dominates the economy, society and air of the heavily polluted city in Henan province. Apart from coal, it has chemicals and construction businesses. But it also has a startling number of other responsibilities. It operates 41 hospitals and 18 schools and provides pensions, subsidised housing for workers, water, heating and power. It even runs a plush retirement home, complete with golf course, for its senior managers. The fate of these facilities, landmarks for the city’s residents, is now unclear. If they are not closed down, much of the infrastructure will need to be renovated, which State Council researchers estimate will cost more than RMB1 trillion (US$115 billion) nation-wide. Some of Pingdingshan’s hospitals already had fewer miners to treat after capacity cuts in coal production. “We can only try to provide better services,” a doctor, who only wanted to be identified by his surname Li, said at a small outpatient clinic near Pingmei Shenma’s defunct Number Seven coal mine. “Though this is a big place, we are far away from the city centre, there is no good transportation and it isn’t
convenient for ordinary people to come,” Li said. Beijing has given SOEs until 2020 to ditch their “social functions”. For Pingdingshan, the deadline is more imminent because Henan wants to complete the process by the end of 2017 under a pilot project, putting it in the spotlight not only of Beijing but also other provinces facing similar challenges. While state firms in wealthier regions of the country moved away from paying for social welfare services some years ago, poorer provinces and especially one-company towns like Pingdingshan struggled to make the switch given the central role their SOE played.
Key Points China orders state firms to break from providing social welfare Many state firms still provide array of social functions Wrenching change seen for some towns, cities that rely on SOEs Smashing the iron rice bowl could be costly “Removing social functions and resolving the problems left behind by history is an important condition for SOEs to become market entities,” Xiao Yaping, head of the StateOwned Assets Supervision and Administration Commission, said on the institution’s website. China’s SOEs accumulated total debts of RMB85.3 trillion by the end of September, in a credit splurge encouraged by Beijing following the global financial crisis. Executives have repeatedly called on Beijing to help reduce their costs. China’s central governmentadministered SOEs run around 8,000 units providing community services, and the efforts to ditch them could also increase a firm’s redundancy and labour redeployment costs, especially as authorities try to limit unrest in regions already hit by an economic downturn.
They spend RMB850 billion a year on schools, pensions and other “social functions”. Local government-run firms pay even more, a delegate to China’s parliament said in March. In Henan, state firms spend RMB800 million a year just to supply residents with heating, water and electricity.
Cutting the cord
While the economic slowdown and a fall in commodity prices have done the most damage to China’s lumbering SOEs, expensive “social functions” have also contributed to punishing losses in recent years. “Today, when we are creating world class energy enterprises and competing against global firms, continuing to bear these heavy burdens is obviously outmoded and hard to sustain,” said Halidan Abdulla Kader, a legislator from the northwestern frontier region of Xinjiang. China’s “iron rice bowl” system was launched in 1951. Many state-owned firms began life as government bureaus and frequently acted as microstates responsible for the entire social infrastructure of a region. The first cracks appeared in 1986 when a rapidly modernising China introduced new pension schemes and put an end to permanent tenure at state firms. By 1995 it was calling for the systematic transfer of “social functions” in preparation for radical SOE reforms that closed thousands of bankrupt firms and led to more than 20 million layoffs. Poorer provinces struggled to make the switch, especially in remote mining regions where the SOE was the only source of political authority. Neither the Pingdingshan government nor the provincial authorities would respond to requests for comment. In a document sent to Pingmei Shenma and other state firms in Henan, local regulators warned that some health and education facilities would be shut down if they were not economically viable. “Where there is duplication they will close them down,” said a doctor surnamed Liu at an independent clinic near one of Pingmei Shenma’s
mines. “There are a lot of small pits that need to be closed and after they close, their medical institutions will go too.” Pointing to the challenges ahead, State Council researchers said the cost of transferring social functions to a local authority was as much as RMB4.3 billion for the Longmay Group, a struggling state coal producer in northeast China’s Heilongjiang province. That compared with annual running costs of RMB300 million. The Kailuan Group, a coal producer in Hebei province, needs around RMB4.6 billion to upgrade heating, water and power facilities to acceptable standards before transferring them, one estimate showed.
Insecurity
In Pingdingshan, teacher Zhang Ka i i s a l r ea d y ex p e r i e n c i n g change. Operational rights for the kindergarten where she works have shifted from the local coal mine to the staff of the school. It must now stand on its own feet as a commercial business, Zhang said. “Every mine has a kindergarten and every situation is different,” she said. “We don’t really know what’s going to happen next.” At its peak, Pingmei Shenma’s Number Seven Mine employed 8,000 workers. Now, around 500 miners turn up at the pit on a reduced wage of just RMB410 (US$60.52) a month while the company tries to find jobs for them at other state mines. In the meantime, they while away the time playing cards. “We worry the most about whether we have jobs or not,” said one of them, a 51-year old miner who gave his name as Chen. Sitting in the gatehouse of the mine, Chen lifted his shirt to show the scars from a kidney operation, paid for by his company insurance that he assumes is no longer provided. “When the company’s performance gets worse, it doesn’t pay health insurance. We haven’t been getting it for several years,” he said. “After the closure of the mine, a lot of the old welfare we get just isn’t going to exist.” Reuters
Business Daily Monday, December 19 2016 11
Asia Dispute
Putin seeks end to ‘Ping Pong’ with Japan over disputed islands The deals made on Friday included a US$1 billion joint fund to invest in Russian projects including energy and infrastructure over the next three to five years
to Russia, Kremlin foreign policy aide Yuri Ushakov told reporters after the talks Thursday. The deals made on Friday included a US$1 billion joint fund to invest in Russian projects including energy and infrastructure over the next three to five years. Another 12 state-level agreements and 68 private deals were made during the summit. The deals involved companies include Novatek PJSC, Rosneft PJSC, Gazprom PJSC on the Russian side, and Mitsui & Co., Marubeni Corp. and Tokyo Electric Power Co. Holdings Inc. in Japan.
Emi Nobuhiro, Ilya Arkhipov and Isabel Reynolds
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ussian President Vladimir Putin said Friday that his nation’s tussle with Japan over the sovereignty of disputed islands must come to an end, and agreed with Prime Minister Shinzo Abe to start talks on a special system for economic cooperation in the area. “This historical ping pong over these territories should stop,” Putin said at a joint news conference in Tokyo after a working lunch with Abe. “There is a need to understand, finally, that fundamental interests of Japan and Russia demand a conclusive and long-term settlement.” Abe said that the pair’s five hours of talks the previous day at a hotspring resort near his ancestral home in southwest Japan enabled them to
show their determination to solve the dispute, which has prevented the two countries from signing an official peace treaty for seven decades. “We’ve been able to take a big step forward,” Abe said. “The path to resolution is still a difficult one. It is a problem that has not been solved in 70 years and for much of that time there wasn’t even any negotiation on it.” Putin said that Russia’s stance on the islands remained firm because of concerns over Japan’s security alliance with the U.S. While President-elect Donald Trump is seen as friendlier to Russia, relations
Politics
New Zealand PM shakes up cabinet after key’s shock resignation Chris Bourke
New Zealand’s new Prime Minister Bill English has overhauled the government’s ministerial team in the wake of John Key’s shock resignation. English confirmed that Steven Joyce would be promoted to finance minister and Deputy Prime Minister Paula Bennett would add three portfolios to her existing two, when announcing his first Cabinet in Wellington Sunday. The ruling National Party overwhelmingly endorsed English as new leader on Dec. 12. “This new Ministry is focused on providing prosperity, opportunity and securityfor all Kiwis, including the most vulnerable in our communities,” English said. Joyce, who was previously Economic and Development Minister,
will also be minister for infrastructure. Bennett remains responsible for state services and climate change issues and will also pick up the police, women and tourism portfolios. With economic growth of 3.6 per cent in the year through June, New Zealand is among the fastest-growing nations in the developed world, leaving National well placed to fight next year’s election on its promise of tax cuts. However, the South Pacific nation of 4.7 million people is also in the grip of a housing boom that’s seen prices in largest city Auckland almost double over the past nine years, locking many first-home buyers out of the market and forcing others to take on huge amounts of debt. English, 54, was previously Key’s deputy and finance minister. Bloomberg
between Moscow and Washington remain frayed over conflicts in Ukraine and Syria. “Our ocean zone ships sail out to the Pacific and we must understand what will happen in this sphere,” Putin said, noting that Russia has two major naval bases in the area. “When we talk about flexibility we want our Japanese colleagues and friends to take all these details and concerns into account.” The 16th summit between the pair came at a crucial time for both countries. Russia has ben starved for investment and trade amid low oil prices, and international sanctions over its actions in Ukraine. Japan is on a quest to diversify energy sources, with its nuclear power industry hobbled by the aftermath of the 2011 Fukushima disaster. Ministers from both nations earlier exchanged a raft of business agreements. The joint plans for economic cooperation on the islands, in areas such as include medicine, tourism and fisheries, will be implemented on the basis of Russian legislation because the islands belong
Hot Springs
Japanese investment in Russia rose by 51 per cent in 2015, even as total foreign investment fell by more than 70 per cent. At the beginning of their discussions Thursday, Abe said he hoped Putin could relieve his fatigue by taking a soak in the hot spring. Putin thanked Abe, and said he hoped their meetings will contribute to the development of relations. Japan and Russia have sparred over the sovereignty of the four islands that the Soviet Union invaded at the end of World War II, expelling all 17,000 Japanese residents. Japan’s official position is that the islands -home to rich fishing grounds -- are an inherent part of its territory and are under illegal occupation. “We talked about freedom for the former islanders to visit their former homes,” Abe said, adding that he’d handed Putin letters from some of them, including one written in Russian. “Joint economic activity on the four islands will not prejudice our country’s stance on the peace treaty problem.” Bloomberg
Exports
Bangladesh expects record tea output in 2016 – minister Bangladesh’s tea output in 2016 is expected to hit a record 80 million kg from 66 million a year earlier, the commerce minister said on Sunday, a volume that may be big enough to make imports unnecessary. The country became a net importer of tea after ranking as the world’s fifth-largest exporter in 1990s, due to a big increase in domestic consumption. “Tea production this year is likely to hit all-time high of 80 million kg,” Tofail Ahmed, the minister, told reporters when announcing a tea
exposition on Jan. 12-14. Domestic consumption has been rising by more than 3 per cent annually, in line with economic growth. Bangladesh has imported tea mostly from India and Thailand, market sources said. Tea is sold at the country’s sole auction centre, in the port city of Chittagong, where most of it is picked up by domestic buyers. Bangladesh also exports a small quantity, mainly to United Arab Emirates and Saudi Arabia, where many Bangladeshis work. Reuters
12 Business Daily Monday, December 19 2016
Asia In Brief Automotive
Nissan, Renault, Mitsubishi to share electric car platform –Nikkei Nissan Motor Co, Renault SA and Mitsubishi Motors Corp will combine their electric vehicle platforms in an effort to slash prices down to levels comparable to conventional gasoline cars, the Nikkei newspaper said. The strategy comes as auto giants Volkswagen AG and Toyota Motor Corp are also aiming to mass-produce battery electric vehicles amid tightening emissions and fuel-economy regulations around the world. Franco-Japanese alliance partners Renault and Nissan have been among the most vocal proponents of the zero-emission technology but have struggled to lower costs enough as they developed their electric cars separately. The Nikkei said Renault and Japan’s Mitsubishi Motors Corp , which recently came under Nissan’s control, will use the same vehicle platform as Nissan’s remodelled Leaf electric car expected to go on sale around 2018. Trade
EU sees Japan free-trade deal in early 2017 The European Union said on Saturday it is close to an agreement with Japan on a free-trade deal that has taken on greater significance after President-elect Donald Trump announced U.S. plans to withdraw from a separate pact with Pacific nations. In a statement, the EU’s chief trade negotiator with Tokyo said a deal was possible by early next year if Japan opens up to EU farm goods and Europe can agree to granting unfettered access to Japanese cars. “These negotiations are very close to a conclusion,” Mauro Petriccione said, noting “significant progress” in the past two weeks of trade negotiations, although Japan had suggested last week a deal could come by the end of December. Petriccione appeared to push that goal into 2017. “We will need to continue working in the next few weeks ... and reach an agreement in principle ... at the beginning of next year,” he said. Politics
Lawyers for South Korea’s Park say impeachment vote is groundless Lawyers for embattled South Korean President Park Geun-hye struck a defiant note on Friday, saying a parliamentary vote to impeach her had no legal basis and should be overturned by the Constitutional Court. Park was indicted in a Dec. 9 vote by a wider-than-expected margin of 234 to 56, setting the stage for her to become the country’s first democratically elected leader to be ejected from office. “We see no grounds for impeachment and it should be struck down,” Lee Joong-hwan, a former prosecutor who is part of the team representing Park, told reporters at the court building where her fate will be decided. In their first comments since the impeachment vote, Park’s lawyers also said it was unlikely she would appear before the court when it begins hearing the case. The court has up to 180 days from last Friday’s impeachment vote to reach a decision.
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Overtime
Economy pays tab for Japan Inc’s free lunch on overtime Stanley White and Izumi Nakagawa
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apanese workers put up with long hours and unpaid overtime under pressure from cost-saving companies, and figures from government, which wants more money in workers’ pockets to boost consumer spending, appear to underestimate the problem. Prime Minister Shinzo Abe is trying to enact labour reforms as part of his “Abenomics” plan to end decades of stagnant growth and deflation. His proposals include measures to cut working hours and limit overtime, raise wages for temporary workers and make things easier for employees with children. By law, both management and rank-and-file employees should get paid for extra work, but companies have been discouraging overtime claims for so long that employees accept it as normal. Government data shows that Japanese work an average of 14.2 hours of overtime a month, but 2,000 respondents in a recent survey by the Japanese Trade Union Confederation said they worked an average of 40.3 hours of overtime a month, and get paid for just 22.7. “Workers often face pressure from their superiors, sometimes in subtle, unspoken ways, to claim less overtime hours than actually worked,” said Toshiaki Matsumoto, chief executive of HR Strategy, a human resources consultancy. A deferential work culture means few speak up. “Often I don’t bother claiming overtime because my projects would run over budget, and that would hurt my chances for promotion,” said one 38-year-old IT engineer who asked not to be named for fear of upsetting
his boss. He estimates that he works an average of 50 unpaid overtime hours a month, often leaving the office at 8 p.m., spending some time with his wife and 3-year-old son before bed, then getting up at 3 a.m. to tackle unfinished work. A 26-year-old Tokyo man who works in sales at a steel trading company said his employer regularly pressured workers into reducing hours on their overtime forms. In busy times he works from 7 a.m. to midnight, plus Saturdays.
Key Points Long hours, low overtime pay have become standard practice Union survey shows workers not paid for 44 pct of overtime In a deferential culture, staff typically don’t speak out Wages up just 2.1 pct since late 2012, consumption up 1.2 pct PM Abe trying to change work culture, progress limited
“The amount of overtime has left me exhausted,” he said. At times, the punishingly long hours can have tragic consequences. The suicide of a 24-year-old ad agency worker who clocked up 105 hours of overtime in the month before she fell into depression was last month ruled “karoshi”, or death by overwork.
Deaf ears
Abe’s pleas for businesses to put up wages to kickstart the economy have largely fallen on deaf ears. But if the
results for the union survey are extrapolated nationwide, just paying employees for the hours they work could push up consumer spending by 13.4 per cent, according to Reuters calculations based on monthly wage data and the propensity to consume. “It’s a problem if you’re working long hours and not getting the compensation you’re entitled to,” said Norio Miyagawa, senior economist at Mizuho Securities, adding that working long hours also meant people didn’t have time to go out and spend. In an era of weak global demand and uncertainty about economic prospects, Japanese companies have been hoarding cash rather than sharing it with the workforce. Since Abe took office in late 2012, recurring profits have gone up 62.3 per cent, but staff compensation has grown a miserly 2.1 per cent. Household spending has risen just 1.6 per cent during the same period. “Companies are without a doubt robbing workers of their wages and free time,” said Toko Shirakawa, a visiting professor at Sagami Women’s University and a member of the government’s work culture panel. But cultural and workplace expectations are difficult to change overnight, and civil servants say the government also needs to get its own house in order. One 26-year-old at a government agency in downtown Tokyo said he was paid for about 70 per cent of the overtime hours he worked. “I request pay for all the overtime hours I work, but we operate on a fixed budget, which means you don’t automatically receive the full amount,” said the man, who declined to be named. “I feel like I’m working for free.” 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 Monday, December 19 2016 13
Asia Prices
Goldman sees oil lower for longer after getting a bump from cuts Oil prices boosted by global output reductions will be capped because of new supply before long, according to Goldman Sachs Group Inc. Sharon Cho
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he cuts by OPEC members and nations outside the group, as well as strong demand growth, will probably help curb inventories by next summer, analysts including Damien Courvalin said in a note dated Dec. 16. While the bank raised its oilprice forecasts for the second quarter of 2017, it decreased its crude estimates for 2018 on concern that new production will enter the market. Brent crude, the benchmark for more than half of the world’s oil, has surged since the Organization of Petroleum Exporting Countries agreed Nov. 30 to trim output for the first time in eight years. A broader deal reached later in Vienna between the group and 11 non-OPEC producers including Russia encompasses countries that produce about 60 per cent of the world’s crude. Still, the increase in prices could prompt a revival in production in other areas, including U.S. shale fields. “The low-cost producer response to drill for more oil will likely limit the rebound in costs for the rest of
the industry, as activity will rise in the most productive areas with the largest oil reserves, extending the oil service spare capacity,” the Goldman analysts wrote in the report.
Gains for now
For now, though, Goldman sees chances of crude extending its gains. The bank raised its price forecast for West Texas Intermediate, the U.S. benchmark, to US$57.50 a barrel from US$55 for the second quarter of 2017. The estimate for Brent was increased to US$59 a barrel from US$56.50 for the same period. WTI crude traded at US$51 a barrel on the New York Mercantile Exchange by 5:06 p.m. Singapore time, yesterday. Brent in London was at US$54.22 a barrel. The potential ramp-up of Libyan oil production and poor compliance to the output
deal may limit price gains, according to Goldman. A stronger U.S. dollar is another risk, the bank said. There will be “little evidence” of production cuts until mid-to-late January, which is likely to be the catalyst for the next large move in prices, according to Goldman. Oil will rise higher to US$55 a barrel in that scenario, it said. The bank expects 84 per cent compliance to the 1.6 million barrels a day in announced reductions from the October production levels released by the International Energy Agency. Goldman estimates OPEC members, excluding Indonesia, will reduce supplies by 974,000 barrels a day in 2017. For non-OPEC producers, 388,000 barrels a day of reductions are expected, according to the report. Average demand growth is forecast to reach 1.55 million barrels a day this year, while it is predicted to increase
by 1.5 million barrels a day in 2017, Goldman said.
Balanced Market
Beyond the first half of 2017, Goldman said it expects that “the global market will remain balanced, with Brent prices between US$55 a barrel and US$60 a barrel, on higher production from low-cost producers, a greater shale supply response and the continued ramp up in legacy projects.” It reduced its 2018 average price forecast for Brent to US$58 a barrel from US$63. U.S. producers will be able to achieve 800,000 barrels a day of annual output growth as WTI crude stabilizes at US$55 a barrel, Goldman said. New projects are also estimated to come online in 2017 and 2018, it said, reducing its WTI average price forecast for 2018 to US$55 from US$60. Bloomberg
14 Business Daily Monday, December 19 2016
International
Cinema
Disney’s ‘Rogue One’ reaps US$71.1 mln in two days It will debut in South Korea on Dec. 28 and China on Jan. 6 Anousha Sakoui
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icket sales of “Rogue One: A Star Wars Story” through Friday put it on track to top the box office and post one of the biggest opening weekends of the year, validating Walt Disney Co.’s strategy of spinning new stories and characters off of the sci-fi classic. The feature, a prequel to the original 1977 “Star Wars,” collected an estimated US$71.1 million in theaters in the U.S. and Canada through Friday, Disney said in an e-mail Saturday. It generated US$33 million from international ticket sales through Thursday from countries including the U.K., Australia and Germany that account for about 60 per cent of the total international box office. It will debut in South Korea on Dec. 28 and China on Jan. 6. Ticket sales from Thursday night’s preview drew US$29 million domestically. “Star Wars: The Force Awakens” holds the Thursday night preview record with US$57 million. Only a handful of films have topped US$30 million from preview screenings, including “Harry Potter and the Deathly Hallows Part 2,” “The Dark Knight Rises,” and some of the “Twilight” films. Before “Rogue One,” the biggest preview this year had been Warner Bros.’ “Batman v Superman: Dawn of Justice,” with US$27.7 million. Disney estimated that the film’s full opening weekend will generate between US$140 million and US$150 million domestically. The studio also sees the film bringing in US$130 million to US$150 million outside North America.
Some box office analysts had more aggressive forecasts. Box Office Mojo put the domestic debut at US$166 million, Hollywood Stock Exchange put it at US$166 million, and BoxOfficePro.com forecast an opening weekend for the sci-fi feature at US$155 million. “Star Wars: The Force Awakens” holds the record for the largest opening weekend in North America, with US$248 million.
Expanding Universe
With “Rogue One,” Disney is testing its ability to expand the “Star Wars” franchise beyond the trilogies created by George Lucas, following its US$4 billion takeover of Lucasfilm Ltd. in 2012. Like the strategy Disney applied successfully with its Marvel Entertainment superheroes, the studio is creating a universe of characters and storylines that can be interwoven to create new movies. The pressure on Disney will be to keep fans coming back to theaters for at least four more Star Wars installments. Disney has scheduled “Star Wars: Episode VIII” for December 2017 and another stand-alone movie, about a young Han Solo, for May 2018. Episode IX and another stand-alone film are expected. “Rogue One” cost US$200 million to produce, not including marketing costs, according to Box Office Mojo.
Death Star
In 1977, the first “Star Wars” movie depicts a rebel alliance led by Princess Leia that attempts to destroy the Galactic Empire’s space station, the Death Star, by using stolen plans. “Rogue One” is the story of how they get those plans. Felicity Jones plays
reluctant rebel Jyn Erso, whom the rebel alliance drafts to help find out about a weapon of destruction the Empire is building and how to destroy it to save the galaxy. The movie scored highly with many critics, with 85 per cent giving positive reviews, according to aggregator Rottentomatoes.com. The movie is “a tense, well-made spacefaring war movie about a desperate and demoralized band of insurgents standing up
against a rising authoritarian regime,” according to NPR critic Chris Kilmek. The weekend’s only other new wide release is Warner Bros.’ “Collateral Beauty,” featuring Will Smith and Helen Mirren in a critically panned tale about a New York advertising executive trying to recover from the death of his daughter. It was forecast to generate US$10.9 million, according to Hollywood Stock Exchange. Bloomberg
Business Daily Monday, December 19 2016 15
Opinion Business Wires
Times of India As economic and political headwinds slow global trade in commodities and manufactured goods, opportunities linked to services will be more and are expected to form 25 per cent of global trade in a sustained manner by 2030, a report by HSBC has said. Whilst the US$ value of global merchandise exports has probably contracted by about 3 per cent this year, cross-border sales of services, such as tourism, banking, construction and software development, has risen by 1 per cent in nominal terms, according to HSBC’s Global Trade Forecast. It opined that if governments refrain from introducing new impediments to trade, the value of global goods exports is expected to recover gradually to expand by 3 per cent in 2017 and then 6 per cent a year to 2030.
Trump’s Chinese scapegoat Bangkok Post The business community has welcomed Friday’s cabinet reshuffle but does not expect any substantial changes in the economic outlook, saying the shake-up is more about accommodating policy implementation. The reshuffle, which has taken immediate effect, involves mostly economic ministers and sees several rotations including former science and technology minister Pichet Durongkaveroj being named the digital economy minister. Of five newcomers, four are in charge of economic affairs: Chutima Bunyapraphasra as deputy agriculture and cooperatives minister; Pichit Akrathit as deputy transport minister; Sonthirat Sonthijirawong as deputy commerce minister; and Uttama Savanayana as industry minister. Another newcomer is Virasakdi Futrakul as deputy foreign minister. Chen Namchaisiri, chairman of the Federation of Thai Industries (FTI), said the reshuffle would accommodate more work in the wake of the Thailand 4.0 policy. He said the newcomers are unlikely to lead to any significant changes in the economic outlook because the policy has been set.
Korea Herald Half of small businesses working with delivery apps have experienced unfair trade, a report showed Sunday. The Korea Federation of SMEs said that it has surveyed 200 small-sized restaurant companies that serve chickens, Chinese and other fast food to hear of their business difficulties. The result showed that 48 per cent had experienced one or more incidents of unfair trade after joining the delivery app services. Food delivery apps such as Baedal Minjok and Yogiyo have expanded significantly over the recent years, with over 40 million South Koreans having downloaded the mobile phone applications. Some 5 million people order food through the apps monthly, according to the report. The organization said that the ratio of unfair transactions is high compared to those reported against department stores at 29.8 per cent and large retailers at 15.1 per cent. Most, or 27.5 per cent, said that they were “forced to pay excessive advertisement fees” in return for higher exposure of their restaurants on the apps.
U
.S. President-elect Donald Trump has once again managed to turn facts on their head. As part of a broader effort to take China to task for supposedly “raping” the United States economy through unfair trade policy, he has now renewed his accusation that the country manipulates its currency in order to gain an advantage for its exports. Such statements are as dangerous as they are unmoored from reality. Make no mistake: Trump’s accusation of Chinese currency manipulation is not supported by the facts. On the contrary, for the last two and a half years, the People’s Bank of China (PBOC) has been intervening in currency markets for the opposite purpose: to prevent the renminbi’s value from falling too sharply against the dollar. China has lately faced a surge in capital outflows, which has created substantial downward pressure on the renminbi’s exchange rate. Those outflows are partly a result of the Chinese government’s easing of capital-account restrictions – an effort that should allow households, corporations, and institutional investors to diversify their portfolios by increasing their foreign holdings. The outflows also reflect concerns about China’s economic prospects, including mounting financial risks, as well as fears among some wealthy Chinese that they may be targeted by President Xi Jinping’s anti-corruption drive. Rather than allow the renminbi’s value to decline as fast as markets would dictate, the PBOC has stepped in to limit capital outflows and offset depreciation pressure. And China has incurred substantial costs: the PBOC’s efforts to keep the value of the renminbi relatively stable against the dollar has contributed to a nearly US$900 billion decline in China’s foreign-exchange reserves from its June 2014 peak of about US$4 trillion. (The falling value of currencies like the euro and the yen – which account for a share of China’s reserves – relative to the U.S. dollar has also contributed to the decline.) The U.S. benefits from China’s approach. Indeed, if Trump demanded, as his predecessors have, that China allow markets to dictate its currency’s value, the renminbi would depreciate even faster, boosting China’s trade competitiveness vis-àvis the U.S. In demanding that China stop the renminbi’s market-driven depreciation, however, Trump is effectively calling on the country to do exactly what the U.S. has always condemned: intervene directly in currency markets. Those are the facts. But Trump does not deal in facts. And now that he is no longer just a presidential candidate, his accusations can no longer be dismissed as bluster. With Trump in the White House, what was once viewed in the U.S. as the “nuclear” option – officially charging China with currency manipulation and imposing high across-the-board tariffs on Chinese imports – has become a strong possibility.
“
Eswar Prasad Professor of Trade Policy at the Dyson School of Applied Economics and Management, Cornell University
Trump knows that fulfilling his promise to revive U.S. manufacturing with domestic policy changes that boost American companies’ international competitiveness would be difficult to implement and take a long time to pay off. To him, “getting tough” on China – through both words and action – probably seems like a convenient workaround. But, far from advancing Trump’s goals, such moves would probably elicit an immediate and aggressive Chinese counterstrike. The likely result would be a downward spiral of retaliatory restrictions on bilateral trade and investment flows, which would hurt both economies. A charitable interpretation is that, as a tough and pragmatic businessman, Trump is simply using threats to stake out a strong bargaining position, and that sense and reason will ultimately prevail. But the longer Trump’s incendiary rhetoric continues, the higher the risk that it will produce realworld consequences. Even the prospect of a trade war with China could be enough to damage the U.S. economy. Already, Trump’s post-election policy pronouncements – and the uncertainty he has unleashed – have pushed up the dollar’s value; after all, the U.S. has long been a relatively safe haven in times of uncertainty (even when it is the cause of it). While the threat of a trade war with China and the notion of the U.S. abrogating existing trade deals hurts other countries’ short-term growth prospects more than those of the U.S., a rising dollar is bad news for Trump. His promises to increase U.S. exports and bring back manufacturing jobs from countries with cheaper labor would be difficult to fulfill in the best of times. With a stronger dollar undermining U.S. manufacturing’s international competitiveness, it would be even more difficult, at least in the short run. Trump may try to spin these failures, especially as the capital inflows that are helping to push up the dollar’s value lower the federal government’s financing costs, thereby creating more room for Trump to pursue his fiscal policy goals. But the fact remains that, if Trump’s heated protectionist rhetoric continues, the U.S. will face a strong dollar, severely weakened exporters, and a much larger trade deficit – not to mention heightened tensions with a formidable China. Talking tough may play well at victory rallies, but it doesn’t change the facts. If Trump continues down his current path, the U.S. economy will suffer – and so will his standing among the American voters who still, for whatever reason, believe in him. Project Syndicate
If Trump demanded, as his predecessors have, that China allow markets to dictate its currency’s value, the renminbi would depreciate even faster, boosting China’s trade competitiveness vis-à-vis the U.S.
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16 Business Daily Monday, December 19 2016
Closing Economy
Official stresses supply-side reform for China’s economic work in 2017
economy. Authorities have pressed ahead with five tasks: cutting industrial capacity, bringing down housing inventory, China’s economic work in 2017 will focus on supply-side reducing leverage levels, lowering corporate costs and structural reform, an economic official said on Saturday, improving weak economic links. as the economy urgently needs to address entrenched “The reform will remain a main theme of the economic work problems and find long-term growth momentum. “The major economic task can be summarized as deepening in the 13th Five-Year Plan period (2016-2020),” Yang said, reform,” said Yang Weimin, deputy head of the Office of the adding more areas will be covered by reform measures. While the five tasks will remain in 2017, policymakers also Central Leading Group on Finance and Economic Affairs, a plan to overhaul the supply side of agriculture, revive the high-level economic policy-making institution. real economy and stabilize the property sector, according to The reform, initiated in 2016, has witnessed some progress, the tone-setting Central Economic Work Conference ending but more efforts are needed in the next year, Yang said, Friday. while addressing an economic forum jointly held by the China Center for International Economic Exchanges and the Meeting attendees agreed that “seeking progress while maintaining stability” will be the main theme of next year’s State Think Tank of Xinhua News Agency. China’s policymakers proposed supply-side structural reform economic planning, with proactive fiscal and prudent monetary policies. Xinhua at the end of 2015 to resolve structural imbalance in the
Tax
Foreign banks in Britain pay fraction of tax rate Seven of the biggest international banks operating in London have published profit and tax data ahead of a year-end deadline stipulated by EU law
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ome of the biggest foreign investment and commercial banks operating in Britain paid an average tax rate of just 6 per cent on the billions of dollars of profits they made in the country last year, a Reuters analysis of regulatory filings shows. That is less than a third of Britain’s corporate rate of 20 per cent. There is however nothing illegal about how they managed to reduce their taxes, and includes using losses built up during the financial crisis to offset current bills. Seven of the biggest international banks operating in London - Europe’s main investment banking centre - have published profit and tax data ahead of a year-end deadline stipulated by EU law. Five of them, all U.S. banks, reported a profit - a combined US$7.5 billion and paid corporation tax, or corporate income tax, of US$452 million. Bank of America’s two main UK investment banking subsidiaries paid no corporation tax on combined profits of US$875 million. JPMorgan paid US$160 million in tax on US$3.3 billion in UK profits. Goldman Sachs paid US$256 million tax on US$2.8 billion profit, while Morgan Stanley’s main UK unit paid US$33 million tax and earned
US$530 million. All the banks declined to comment on the data except San Franciscobased Wells Fargo, which reported US$2.7 million tax on US$34 million profit. It said its objective was to comply with all of its tax compliance requirements.
M&A
The British Bankers’ Association (BBA) said the data did not reflect the sector’s full contribution and that, including other taxes and payments, foreign banks contributed about US$20 billion to the UK treasury last year. The British tax authority, Her Majesty’s Revenue and Customs, said the Government had taken steps to ensure banks paid the correct amount of tax. “Many complex factors contribute to the effective rate of tax paid by
Dispute
corporate businesses,” a spokesman added in a emailed statement. The finance ministry was not available to comment. The 6 per cent rate is still higher than the average rate of 1 per cent paid for 2014 by the 10 biggest foreign investment and commercial banks that reported UK profits and taxes. British banks also disclose profit and tax amounts but these are largely related to domestic retail activities, so it is not possible to calculate the effective UK tax rate on their commercial and investment banking activities. Analysts say many other companies pay tax at below the headline rate but only banks are required to disclose tax and profit figures by country, so it is not possible to calculate the rates paid by manufacturers, builders or services companies. Reuters
Tag
Saudi Telecom to invest USUS$100 China to return seized U.S. drone, Luxury Goods Feature in UK Accord mln in Uber’s Middle East rival says Washington ‘hyping up’ incident for South Korea Trade Talks Government controlled Saudi Telecom Co. will acquire a 10 per cent stake in Middle East-based ride-hailing app Careem Networks FZ for US$100 million, months after the country’s sovereign wealth fund invested in Uber Technologies Inc. The board of STC, as the Saudi company is known, approved the investment in Dubai-based Careem on Dec. 15, according to a statement on the Saudi Stock Exchange Sunday. STC will fund the deal from internal resources. The company is already an investor in Careem through its venture capital arm, STC Ventures, according to Careem’s website. Careem has been working with Credit Suisse Group AG to raise as much as US$500 million, people familiar with the matter said in September, adding that the company could be valued at more than US$1 billion after the funding. Careem raised US$60 million last year from investors including buyout firm Abraaj Group to expand in the Middle East, Africa and Asia. The investment is “in line with the company strategy to invest in the innovative digital world,” STC said in the statement. Saudi Arabia’s Public Investment Fund, which also holds a 70 per cent stake in STC, invested US$3.5 billion in San Francisco-based Uber in June. Investors in Careem’s earlier funding rounds include Dubai-based Wamda Capital and Saudi Arabia’s Al Tayyar Travel Group. Bloomberg
China will return an underwater U.S. drone seized by a naval vessel this week in the South China Sea, both countries said on Saturday, but Beijing complained that Washington had been “hyping up” the incident. U.S. President-elect Donald Trump, who has vowed to take an aggressive approach in dealing with China over its economic and military policies, jumped on the unusual drone seizure with a pair of provocative tweets, accusing Beijing of stealing the equipment. The drone, known as an unmanned underwater vehicle (UUV), was taken on Thursday, the first seizure of its kind in recent memory. The Pentagon went public with its complaint after the action and said on Saturday it had secured a deal to get the drone back. “Through direct engagement with Chinese authorities, we have secured an understanding that the Chinese will return the UUV to the United States,” Pentagon spokesman Peter Cook said in a statement. The drone, which the Pentagon said was operating lawfully was collecting data about the salinity, temperature and clarity of the water about 50 nautical miles northwest of Subic Bay, off the Philippines. It was seized just as the USNS Bowditch was about to retrieve it, U.S. officials said. Reuters
The UK and South Korea are set to begin regular trade talks, with luxury brands a particularly promising topic, as Britain prepares to expand its commercial reach once it has left the European Union. A formal working group of ministers from the two countries will meet as many as four times a year to discuss removing barriers to commerce and prospects for “future, ambitious trade opportunities” after the UK exits the EU, the British government said in an statement on Sunday. Prime Minister Theresa May has promised to make the UK a leader in liberalizing trade around the world after Brexit. Yet Britain is unable to strike its own free-trade deals -- or even being formal negotiations -- while still a member of the EU. “ W e w a n t t o ta k e a dva n tag e o f a l l th e opportunities available to us to ensure that Britain becomes a global leader in free trade,” UK In tern ation al Trade Secretary Liam Fox said in an e-mailed statement. “The agreement of this latest trade dialogue shows that government is preparing for Brexit, not prevaricating.” Bloomberg