Business Daily #1369 August 25, 2017

Macau Water fighting against adversity Utilities Page 4

Friday, August 25 2017 Year VI Nr. 1369 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Inc.

Foreign companies operating in Mainland talk on party unit relations Page 12

Future development

Revolutionary model for Greater Bay Area in the pipeline Page 7

Typhoon

Foreigners give thumbs down to gov’t disaster management Page 6

www.macaubusiness.com Environment

Consigliere

Mainland reaffirms fight against pollution Page 16

Leaving on a (private) jet plane – hitting the right note as a CEO Pages 8 & 9

Sending a strong signal Typhoon

Widespread criticism of the local weather bureau has taken its toll.

Leading to the resignation of its much maligned head.

Politicians and the community at large have expressed deep unease with the management of the signals that took the city to the edge. Pages 2 & 3

It’s an ill wind

Macao Foundation is swinging into action.

Disbursing MOP1.35 bln to residents affected by the super typhoon. Measures include compensation for bereaved families, damaged private residences, and those in need of medical attention.

Coloane Village pummelled by typhoon

Hato tainted Coloane Village took a direct hit. With Typhoon Hato wrecking residences and businesses in the little community. An historic shipyard collapsed, with two in imminent danger of the same.

Stagnant water and vermin corpses are ringing alarm bells with locals about health. Page 4

Crackdown continues

Illegal fundraising Beijing progressed in its fight against illegal fundraising yesterday. With the release of draft legislation. Calling for participants engaged in illegal fundraising to cover subsequent losses. Page 10

Location, location, location

HK Hang Seng Index August 24, 2017

27,518.60 +116.93 (+0.43%) Worst Performers

Hengan International Group

+5.34%

Bank of Communications

+1.59%

Kunlun Energy Co Ltd

-6.90%

CITIC Ltd

-0.85%

China Overseas Land &

+5.10%

Tencent Holdings Ltd

+1.05%

China Unicom Hong Kong

-2.99%

Cathay Pacific Airways Ltd

-0.85%

China Mengniu Dairy Co Ltd

+2.72%

Bank of China Ltd

+1.02%

Hang Lung Properties Ltd

-1.45%

Geely Automobile Holdings

-0.84%

Industrial & Commercial

+2.49%

AIA Group Ltd

+0.94%

CK Hutchison Holdings Ltd

-1.17%

PetroChina Co Ltd

-0.82%

China Construction Bank

+1.81%

CK Infrastructure Holdings

+0.92%

Sands China Ltd

-1.13%

Wharf Holdings Ltd/The

-0.64%

27° 31° 27° 32° 27° 31° 27° 30° 26° 31° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Gaming Adhering to their business model, casinos kept their doors open yesterday. Those on the Peninsula, however, could pay the price of location. With power cuts leading to almost zero activity. Pages 5 & 6

Compensation Page 3

2 Business Daily Friday, August 25 2017

Macau

Source: Lusa Typhoon

Warning signals Local authorities failed to properly warn residents of the intensity of Typhoon Hato leading people to inadequately prepare for water and food supplies, local politicians and opinion makers told Business Daily.

Nelson Moura nelson.moura@macaubusinessdaily.com

L

ocal politicians and opinion makers criticised the slow response by the government in changing to the higher levels of Typhoon Hato signals and the lack of warning to residents, who found themselves already working or on their way to work when the typhoon reached its highest intensity.

According to Legislator Lionel Alves, the speed with which the signals were changed caught many people unawares.

In Hong Kong on August 23, Signal 8 was raised at 5:00 am, with Signal 9 hoisted at 8.10 am and T10 at 9.10 am. In Macau, the Meteorological and Geophysical Bureau (SMG) hoisted Signal 8 at 9:00 am, Signal 9 at 10.45 am and T10 at 11.30 am.

“evolve in unexpected ways” thus warnings have to be provided with enough anticipation.

“When I was a kid, if Hong Kong raised a signal, shortly afterwards Macau would raise the same. I can’t understand how in such a short geographical distance there would be such a different time period between raising the signals,” he added.

Previously, the head of the SMG, Fong Soi Kun, stated that there had been a sudden change in the Hato trajectory with the storm strengthening more than anticipated.

“The typhoon has changed its route (…) from one moment to the next; in a short space of time it became much stronger than anticipated early in the morning,” explained the SMG director.

The increased criticisms by several sectors of society led to the SMG head filing its resignation yesterday.

the Inner Harbour was one of the most seriously damaged area in the MSAR, with both Mr. Alves and Ms. Lam pronouncing the area prone to flooding for a long period, without government intervention to prevent it.

“Something has to be done immediately in co-operation with Zhuhai authorities in order to develop a protection levee to prevent similar issues or avoid such a level of flooding. Since I was a kid I would hear that during a typhoon the Inner Harbour would flood. It’s always a tragedy,” said Mr. Alves.

The legislator added that around three years ago even the Chinese People’s Political Consultative

Conference (CPPCC) made a proposal to resolve the issue, with no results, while Ms. Lam remembers a proposal eight years ago that stopped abruptly after passing the public consultation period.

For Ms. Lam another serious issue to take into consideration is the two deaths caused in the car parks of modern buildings, which unlike buildings in the Inner Harbour have been developed recently.

“How can all those new buildings have this kind of flooding? What is the design of our city? Those buildings are all newly built; there is something systemically wrong in Macau and it’s very serious,” she told Business Daily.

Informing is not warning

“How can all those new buildings have this kind of flooding? What is the design of our city?

Those buildings are all newly built; there is something systemically wrong in Macau and it’s very serious” Agnes Lam, candidate for the Legislative Assembly (AL) “I don’t think the signals should be raised only according to the distance the typhoon is from Macau but taking into account its level of danger to residents. The signals should be to allow people to prepare for eventual damage to their possessions and themselves,” said the legislator and lawyer.

For Mr. Alves a typhoon cannot be considered something “mathematical” but as something that can

According to Agnes Lam - Assistant Dean of the Faculty of Social Sciences University of Macau (UM) and legislator candidate - the modus operandi of the SMG has remained the same “for many years”.

“The weather department doesn’t understand the difference between what is an alert and what is inform.

I was really mad seeing their press conference (…) A weather forecast can’t be 100 per cent sure but when you kind of foresee it might be a strong typhoon you need to alert people in advance that they need to prepare food, protect their windows (…) they can’t just tell people in a casual way that we might have a Signal 8. We’ll decide later!” she added.

According to Ms. Lam the lack of awareness led to residents not storing enough food or water or protecting their windows against the typhoon, with her own house in Coloane damaged so severely she will not be able to stay there at the moment.

“A lot of my colleagues and students were stuck at UM with no water or food, no bus to go out. Some people tried to drive out and there was flooding (…) In Macau, most food and water comes from Mainland China and they were also fighting the typhoon, with supplies being cut down,” she added.

Old issue

The Macau Peninsula Barra area near

Source: Lusa

Business Daily Friday, August 25 2017 3

Macau Resignation

Gone with the wind CE announces “retirement resignation” of DSMG head Cecilia U cecilia.u@macaubusinessdaily.com

T

he city’s Chief Executive (CE) Fernando Chui Sai On has accepted th e r esi g n ati o n of the head of the Meteorological and Geophysical Bureau (DSMG), Fong Soi Kun, claiming that Fong had quit the position for “private reasons”.

The Secretary for Administration and Justice Sonia Chan Hoi Fan added that Fong had intended to retire, having served the city for over three decades.

In the aftermath of the great damage visited by the super typhoon, which led to eight fatalities, many voiced out on the Internet that the DSMG head should step down because of mistakes made in informing the public.

The media questioned officials during the press conference at the Government Headquarters whether the resignation was an attempt

to dodge responsibility, with one pointing out that a retirement resignation would ensure the official received an attractive pension.

The CE replied that they were two different procedures when approaching the matter, meaning resignation for one and investigation for another.

“We will have to wait for Secretary Rosario to come back to discuss [the investigation] with him,” said the CE. He also recalled his position as Secretary for Social Affairs and Culture, claiming he never interfered with any decision made by DSMG. “I never interfere with any scientific decisions made by DSMG,” said the CE. “Also, Secretary Rosario (Secretary for Transport and Public Works) will oversee the [situation].”

On the other hand, reporters asked the CE for the reason of inspecting Flower City in Taipa Island instead of the more severely damaged

zones such as the Inner Harbour Area.

“I had been participating in the works at the Civil

Defence Centre when Signal 8 was hoisted,” replied the CE, adding that there is no more attention paid to

particular areas, with related co-workers leading him to first inspect the area near the centre.

The Chief Executive, Mr Chui Sai On, and Government officials brief the press about the measures taken in response to aftermath of Typhoon Hato. Source: GCS

In memoriam

The Government Information Bureau yesterday expressed its ‘condolences for the victims of the typhoon. Regional flags of the Macao Special Administrative Region

displayed at all agencies of the Government, border-crossing checkpoints, ferry terminals and airport, as well as representative offices stationed outside Macao, will be flown at half-mast today.’

Monetary support

Money the great panacea Certain civil servants could receive financial aid from the government Cecilia U cecilia.u@macaubusinessdaily.com

The Macao Foundation is disbursing MOP1.35 billion (US$167.49 million) from the public coffers to support residents impacted by Typhoon Hato on Wednesday.

Au Weng Chi, member of the administrative committee of the Macau Foundation, reported yesterday during the press conference at Government Headquarters with the Chief Executive and other officials that a series of compensatory measures would be introduced, including offering MOP30,000 to those who lost family members to the typhoon.

Local residents injured on Wednesday when the typhoon struck and the day after could receive maximum MOP30,000 in medical support funds.

The Foundation further offers funding of up to MOP30,000 to residents

who had their residential properties impacted by flooding or suffered from broken windows.

Residents applying for the aforementioned funding - medical support and affected residential properties - have a deadline of August 31 to register for the aid.

With the severe impact created by

Insurance sector estimates city loss at MOP1 billion-plus

Some 40 bank branches were still shut yesterday owing to the impact of Typhoon Hato, said Ip Sio Kai, Chairman of the Macau Association of Banks, local broadcaster TDM reported.

Sio revealed during the meeting with a member of Macao Monetary Authority, Chan Sau San, that over 100 ATMs were also affected but the supply of cash is

the suspension of electricity and water supply, Au also announced that MOP2,000 will be offered to affected households by way of subsidy, with MOP1,000 each for electricity and water fee, respectively.

Given the great shortage of water supply in the city, the Foundation has had some 100,000 waterbottles

not affected.

Jiang Yidao, President of the Macau Insurers Association and Managing Director of China Taiping Insurance (Macau) Company Ltd., estimated that the city has lost over MOP1 billion due to the typhoon, saying that the insurance industry will face a great challenge ahead, in particular the number of personnel required to handle claims.

delivered to service points and buildings in support of residents in need of potable water.

“We will continue to collect more water until the supply in the city resumes normal service,” said Au.

Financial support for low wage civil servants

Secretary for Administrative and Justice Sonia Chan Hoi Fan said civil servants on lower wages affected by the typhoon could apply for one-time financial support.

She further reported that civil servants will resume work according to the conditions of their department, in particular with regard to the supply of electricity and water.

She replied to press enquiries that ensuring fundamental public services is necessary, observing that the quality of service could be affected if basic operations cannot be achieved in departments. advertisement

4 Business Daily Friday, August 25 2017

Macau Opinion

Pedro Cortés*

Grief In a tragedy like the one which has just devastated our city, the first words go to the families and friends of those who lost their lives. Our thoughts must be with them, who lost loved ones, some of whom are still not yet accounted for.

Secondly, the tragedy could have been prevented – at least the size of its impact – if we had competent people governing us. It is amazing to record that the city with one of the highest GDPs in the world should be in such a position.

I am not an expert in the field, but it seems that not everything is well with the weather observatory bureau. Not because of this super typhoon: we’ve experienced plenty in the past and, please, no trajectory changes.

Thirdly, this is the corollary of years of incompetence in diverse departments. Years without planning in a city which has money enough to be one of the best in the world. Also, the result of years during which the population has always been put in a supporting role, with the focus diverted to other fields and other areas.

The poor quality of building construction is something that is immediately evident upon arrival here. It is not new. What has been new is that we need a tragedy to probably – or not – wake up and understand that something is not in good shape.

Infrastructure is badly planned.

Back up plans are non-existent. And, with all due respect, governors who cannot protect their people are, in most cases, incompetent.

There are reports of hoarding of resources, such as water.

Panic seems to be endemic. To those shops which have put the price up, I really feel for them, as they are irrational beings and not human. But worse than that, I feel for those who cannot afford to buy water or basic resources. And I also feel for those who cannot inspect and impose a huge penalty on this money-grabbing behaviour. It is the (in)human being at his/her worst.

Fourthly, some words to those who have worked hard to minimise the impact, such as the firemen, police and civil protection officials. They have executed their jobs well to the extent possible and maybe without guidance whatsoever.

The last words go to our governors: communication is needed.

It is amazing how only by the end of the day, after the South China Morning Post had already mentioned the death of Macau residents, that we had a declaration from the CE. My dear Sirs, the population needs you when things are unfolding, not afterwards. A warning and comforting word from a governor should sometimes be enough to prevent people from going out of their homes into the path of possible danger - and pacify our souls.

Macau deserves much better. *lawyer and frequent contributor to this newspaper.

Typhoon Hato

Shipyards are history Coloane Village was struck hard by Typhoon Hato on Wednesday, with one of the shipyards completely destroyed. With lack of sanitation, problems are just about to become deadly serious, says a source involved with the village Sheyla Zandonai sheyla.zandonai@macaubusiness.com

O

ne shipyard in Coloane “collapsed”, while two others are “in danger of falling anytime” [pictured] the President of the Lai Chi Wun Villagers Association, David Pinto Marques, told Business Daily yesterday.

According to previous reports, the Macau SAR Government had started the fencing work of the shipyards to protect the structures and the safety of villagers from the typhoon season in early June.

But little else has been done beyond that.

“Nothing special was done for [securing] them. Just the emergency reinforcement they did a while back,” Marques explained.

As for the current situation of the site and surrounding area in Coloane Village, he said that it is “bad.”

“Roads are blocked, fallen trees, walls with holes that can fit a car, multiple houses destroyed, warehouse roofs ripped apart” [pictured], he added.

In what regards casualties, the

Shipyards destroyed after Iyphoon Hato.

Courtesy of David Pinto Marques

Association’s president said nothing had been reported yet, but that at “street level” people were angry and distressed.

“I’m seeing despair is some of their faces. Young ones are better. The older they are, the more despair on their faces,” he told us.

Business Daily contacted the Cultural Heritage Department to enquire about their intervention in the

shipyards and the overall assessment of damage to heritage property in the city [see box] but no official statement on the shipyards has yet been released.

Marques informed us that the cultural bureau had paid a visit to the shipyards site yesterday morning and that they informed the people there that “other departments would be coming to visit,” such as the Housing Bureau.

Social services were also in the area yesterday, according to our source.

“They took a look and made a brief census, and took photos of damage, asking the village to file reports for the damage,” he continued.

Water and power supply are still intermittent in the village, with the government reacting “slowly,” according to Marques, who cautioned that “the main problem at this stage is sanitation. With dead rodents and stagnant water, disease will start to spread in 24 hours”.

collapse of trees or the lack of water and electricity supply’.

The Bureau confirmed that the 22 buildings belonging to the Historic Centre of Macau ‘are basically in good condition although some were damaged,’ such as the walls of Guia Fortress, the false ceiling of the portico of Dom Pedro V Theatre, which

collapsed, while some trees in Lilau Square were also blown down.

The Bureau claimed that major temples and churches had not suffered severe damage, and that it will continue to proceed with inspections of classified immovable properties in the days to come.

Havoc in Coloane village.

Courtesy of David Pinto Marques

Heritage property

In a written statement, the Cultural Affairs Bureau said it had ‘immediately sent staff to conduct an urgent inspection of various heritage buildings’ yesterday, claiming that most of them ‘do not show immediate structural danger,’ although some have been damaged, ‘affected by the

Water shortage

Macao Water: Illha Verde suffers serious damage The city’s water supplier - Macao Water – has informed the public that they would seek to restore the water supply of Ilha Verde Water Treatment Plant by midnight yesterday.

During the press conference held yesterday noon, the supplier reported that the MSAR water treatment plant and Coloane have resumed water supply but that the serious damage of Ilha water plant pump room and coagulation system had affected restoration.

Macao Water said that they are facing the worst situation since the company’s establishment, leading to the suspension of three water treatment plants on Wednesday.

As such, the supplier set up six temporary water supply points for the public to provide immediate water supply; namely, Beco do Padre António Roliz, Rotunda de Carlos da Maia; Rua de Manuel de Arriaga, Travessa da Barca, Edifício Mong Sin, Avenida de Venceslau de Morais and McDonald’s at Fai Chi Kei.

Meanwhile, two temporary water supply vehicles will provide immediate water supply to the public in circular routes in the following locations: Toi San,Iao Hon, Areia Preta, Complexo Municipal Do Mercado de S. Lourenço, Avenida de Almeida Ribeiro,Mercado Municipal

Almirante Lacerda.

The water supplier also pointed out that negative effects would be created apropos water pressure if the public used firefighting systems and fire hoses to obtain water - and as such it would be difficult to ensure the safety of water quality.

Business Daily Friday, August 25 2017 5

Macau Casinos

Losing Peninsula, winning Cotai Typhoon Hato will have a greater impact upon gross gaming revenues from gaming enterprises solely operating on the heavily damaged Macau Peninsula; namely, SJM Holdings and MGM China, gaming analysts predict Nelson Moura nelson.moura@macaubusinessdaily.com

G

aming analysts believe Typhoon Hato had a larger impact upon gaming operators with more properties on the Macau Peninsula than the casinos located in Cotai, with Union Gaming analyst Grant Govertsen predicting a “dramatic share shift towards Cotai as it could take a few days for the Macau Peninsula to get back on its feet”.

Meanwhile, brokerage firm Sanford C. Bernstein has reduced its predictions for August gross gaming revenues from a yearly rise of 24 per cent to 26 per cent, to 18 per cent to 21 per cent around MOP22.2 billion to MOP22.8 billion (US$2.82 billion).

According to Mr. Govertsen, several flagship casinos on the Peninsula were “either closed or barely operating” while Cotai mass foot traffic was almost the same as on a “normal midweek afternoon”.

‘We think the companies with the most short-term exposure to the typhoon - SJM Holdings (with Grand Lisboa

and Lisboa closed) and MGM China (with MGM Macau only partially operational) -would have the most exposure,’ a note from Union Gaming read.

As for MGM Cotai - still under construction - the firm’s analysts do not believe it has suffered ‘any worse damage than any other property in the market’ but that a sudden demand in construction labour could cause a delay for the property scheduled to open in the last months of this year.

In yesterday’s release, MGM China Holdings Limited announced it had ‘sustained some damage to’ to its MGM Macau property, with ‘recovery to take some time’.

‘While this was an exceptional situation, we have been working closely with the combined support of the Macau Government and the utilities companies including our power, water and telephone services to restore operations and protect our employees and guests,’ said the release.

Meanwhile, Business Daily was informed by Grand Lisboa that the typhoon had caused a power supply failure at CEM (Companhia de

Electricidade de Macau), with two properties still waiting for CEM to resume full power to the hotels as at yesterday afternoon.

Meanwhile, Union Gaming believes Wynn Macau will be less impacted by the typhoon since it ‘seemed to have a lot more gaming space operating than the other Peninsula operators’.

Highly mobile VIPs

According to Bernstein, many casino properties shut down casino operations and were not checking in new guests yesterday, with ‘most guests

who were slated to depart’ allowed to stay overnight.

Meanwhile, Union Gaming stated it registered ‘many full casino shuttle buses arriving at Cotai properties’ - something it eplained as mass market customers unable to reschedule a planned holiday.

However, the Union Gaming note said premium mass and VIP customers have a higher ability to easily change their plans, a characteristic created for their own convenience or arising in more politically sensible periods.

Union Gaming therefore considers that the difference of mobility between mass and VIP market will also heavily impact the Macau Peninsula casinos due to its higher reliance upon premium players.

Despite all the issues, Mr. Govertsen believes that disaster recovery insurance ‘kick in’ profits will eventually recover ‘mitigating the negative short-term’ impact upon gross gaming revenues, as happened to casinos on the United States Gulf Coast hit by Hurricane Katrina in 2005. advertisement

6 Business Daily Friday, August 25 2017

Macau Typhoon

Typhoon Overtime During the highest levels of Typhoon Hato, and after the gaming authorities ordered casinos with power failures to suspend activities, several gaming properties in Cotai were seen with their lights on and employees stuck in the properties Nelson Moura nelson.moura@macaubusinessdaily.com

Some reports have stated some casinos in Cotai maintained gaming operations during Signal 9 and 10 levels of Typhoon Hato on August 23, with lights kept on by generators even during the blackout caused by a failure of CEM’s energy supply.

During the typhoon, the Gaming Inspection and Co-ordination Bureau (DICJ) ordered casinos affected by the electricity supply problem to suspend gaming activities and offer necessary assistance to people inside.

The gaming authority told Business Daily that according to MSAR law ‘casinos in Macau are to be operated continuously’ but that in order to assure casino games are conducted fairly and the safety

of people inside the casinos, the DICJ would order or allow casinos to suspend gaming activities or temporarily close the properties.

‘DICJ always has inspectors stationed in all casinos to monitor and supervise the compliance of laws and instructions issued,’ the response informed.

According to an employee at Sands China property The Venetian, before he started his shift at 7:00 am he was warned by the company of the possibility of a Signal 8 typhoon alert being hoisted, which eventually happened at 9:00 am.

“After Signal 10 the casino gaming areas were operating normally (…) We couldn’t go back home during the typhoon so workers just continued working overtime (…) Usually, dealers get paid

around double the normal wage,” the source informed.

Damage to the casino was limited to some “broken glass” and a blackout that lasted nine hours, with gaming areas continuing operating with generators.

The Labour Affairs Bureau

(DSAL) told Business Daily that in order for businesses to demand employees work during a typhoon they needed to follow the relevant legal provisions under the Legal System of Damage Caused

by Work Accident and Occupational Illness, such as

purchasing labour insurance for their employees.

The DSAL also said employers should make appropriate arrangements for the work schedule, to ensure that employees work in a safe situation, and should agree with staff about the work arrangements during a typhoon.

The source told Business Daily when workers went to The Venetian it was still Signal 3 and when the signal was increased they were not able to leave the property.

“Normally, I would be off at the beginning of the afternoon but [on August 23] I stayed on the property until late night because I couldn’t go out of the casino,” the employee, who chose to remain anonymous, told Business Daily.

Disaster

Unready, unsafe Foreign visitors caught up on the typhoon which hit the city on August 23 spoke to Business Daily about their experiences and perception of the handling of the disaster by the local government Sheyla Zandonai sheyla.zandonai@macaubusiness.com

In the aftermath of Typhoon Hato, destruction was evident throughout the city, with opinions about the government’s response to the disaster less than flattering from the perspective of foreign visitors, although some acknowledged its impact was somewhat unexpected.

Speaking to Business Daily, Catherine Chan, a doctoral student from the University of Bristol who came to Macau this week to conduct research on the local archives, said she was struck by how “unready Macau is for this” kind of event.

“The government seems too slow. I heard that Hong Kong had cleared up almost all the mess, but here nothing has been cleared at all,” claimed Chan at noontime yesterday, when she spoke to us.

At that time of the day, several roads were still blocked by fallen trees and branches, forcing several bus routes to be suspended.

People were seen walking to their destinations by the

hundred.

Many parts of the city were out of water and power supply had not been completely restored.

Although some households and businesses got electricity back by the end of the day of the typhoon, other parts of the city were being shut down again yesterday evening.

Another foreign visitor who spoke to us, Frédéric Bordey, a musical producer based in France who was born and grew up in Martinique, in the Caribbean region, said

he was “shocked by the lack of prevention on the part of the government.”

Bordey explained that a similar situation in the Caribbean, which is also a hazardous zone for hurricanes and earthquakes, would prompt “firefighters, the police, and the government itself to put safety measures in place 24 hours before the arrival of the typhoon, since today we have meteorological prevention tools for that.”

Mikael Kraemer, another visitor who has a long-term intermittent relationship

with Macau, and who is currently the curator of an art exhibition in one of the casinos in town, said yesterday that “Hato has probably been the mostly destructive since 1946” and that “everyone has been taken by surprise.”

“We all want to help and volunteer for the city but we don’t know how we can help yet. We would need a central service to offer our time adapted to our skills to help the city recover in each area,” suggested Kraemer.

Bordey further claimed that in such cases of natural calamity in the Caribbean, people are “forbidden” to step outside, with the government further guaranteeing the necessary food and water provisions.

“The main problem here with the Hato was the government’s negligence,” he lamented, claiming that we should be “grateful” for not having found ourselves in a worse situation.

“I truly hope that this message will be heard to avoid an even bigger drama next time,” he said.

Kraemer and Bordey informed us later yesterday

that they managed to collaborate with a local association by providing food supplies to be distributed to people in need.

Communication

Communication about the different stages and problems linked to the passage of Hato seems to have been one of the main problems, according to our sources.

“There were no government announcements whatsoever about the power cut, and no-one knew what was going on,” Chan claimed, adding that “the weather [services] webpage was always down and we could not check the weather [conditions].”

As for Bordey, he said the information about the whole situation was “mediocre.”

Chan, who has lived for many years in a city with a history of typhoons, Hong Kong, finally opined that the Macau SAR Government “needs more measures and backup plans for events like this, especially when Macau is so open and requires the bridge and or ferry to travel around.”

Ferry

Aviation

Typhoon damages local terminals

More than 100 flights cancelled or delayed

Macau Outer Harbour Ferry Terminal and Taipa Ferry Terminal both sustained damage during the rampage of Typhoon Hato, the Marine and Water Bureau (DSAMA) informed Business Daily.

‘Mooring facilities, pontoons, as well as mechanical and electrical equipment have been damaged,’ said DSAMA, according to whom ferry services were suspended from 4.15 am on

23 August to 7:00 am on August 24.

Ferry operator Turbo Jet informed Business Daily the Taipa Ferry Berths were ‘seriously damaged’ and that the company’s ferry services weren’t yet resumed.

The company added that yesterday afternoon its services to Hong Kong Airport and Shenzhen were still suspended, with only two berths at the Outer Harbour

terminal available.

Some of the company ferries were also damaged but without affecting the ‘resumption of service’.

When questioned about the estimated cost of the damage and possible time for repairs to be completed, DSAMA said it was ‘still working on the repair of facilities and equipment’ and expected to have them fixed as soon as possible. N.M.

Over 100 flights from and to Macau International Airport were cancelled or delayed yesterday due to the typhoon, Macau International Airport Co. Ltd. (CAM) told Business Daily.

‘Luckily, we resumed normal operation from [7:00 pm on August 23] and now gradually resume

to normal. Some glasses and fences were broken,’ responded CAM. I n r ega r d t o p o ssi b l e expenses caused by the typhoon due to damage or suspension of operation, CAM only stated it was ‘still being estimated’ and that the airport would ‘try to start repairs as soon as all conditions allow’. N.M.

Business Daily Friday, August 25 2017 7

Macau

The HZM Bridge will slash travel time between Hong Kong and Zhuhai from three hours to 30 minutes. Source: Lusa

Greater Bay Area

Mainland’s own bay area is a property mega-market in the making The nation’s top economic planners said last week they’ll release a Guangdong-Hong Kong-Macau Greater Bay Area master plan by year-end

C

hina wants its Pearl River Delta megalopolis, a global manufacturing engine with more people than France, to be even more dominant.

Policy makers plan to boost economic output of the region beyond that of greater Tokyo, New York and San Francisco by 2030 with factory upgrades and hubs for innovation, finance, shipping and trade, state media report.

The region of nine cities in Guangdong Province, including Guangzhou and Shenzhen, plus Hong Kong and Macau will grow from the current population of 68 million to 86 million people within 14 years, according to Morgan Stanley.

“Cities naturally expand outward as their populations grow,” analysts including Robin Xing and Jenny Zheng in Hong Kong wrote in a recent report. “But whether this expansion evolves haphazardly or is carefully planned makes a crucial difference to future economic growth. China’s central government is leaving little to chance in the Greater Bay Area.”

They project the highest population and property market growth over

that period will be in seven smaller satellite cities, such as Huizhou, Jiangmen and Zhaoqing, potentially creating there a real estate market worth RMB9.6 trillion (US$1.44 trillion) with some 640 million square meters of living space. The delta-area population rose by 1.24 million last year alone—about the size of Brussels or Dallas. Morgan Stanley’s stock analysts recommend shares of companies with high exposure to the region, citing Country Garden Holdings Co., China Overseas Grand Oceans Group, Yuexiu Property Co., Agile Group Holdings Ltd. and CIFI Holdings Group.

The nation’s top economic planners said last week they’ll release a Guangdong-Hong Kong-Macau Greater Bay Area master plan by year-end. Local and central government officials signed a development framework agreement on July 1, the 20th anniversary of Hong Kong’s return to China following British rule.

The former territory is increasingly integrated with mainland China, from connected stock and bond exchanges to a nearly complete

high-speed rail link. Also under construction is a cross-bay bridge that will slash travel time between Hong Kong and Guangdong’s Zhuhai from three hours to 30 minutes.

“China’s central government is leaving little to chance in the Greater Bay Area” Morgan Stanley report

China’s development model will “change from supercities to city clusters,” the analysts wrote. “It enhances the competitiveness of the region if the hub and satellite cities are positioned well. “That approach will reduce overpopulation in hub cities, and urban railways will become a key means of transportation, saving energy, reducing pollution and easing traffic congestion, they wrote, citing initiatives such

as Guangdong’s plan to quadruple its intercity urban rail network by 2030.

Gross domestic product in the region is estimated to more than triple from US$1.38 trillion last year to US$4.62 trillion by 2030, surpassing the Tokyo, New York and San Francisco metropolitan areas, the official Xinhua News Agency reported last month.

History shows that rising populations in those three regions came mainly from inflows to satellite cities, driven by better infrastructure connecting hub cities with satellites, as well as government policy, according to Morgan Stanley.

Key risks to that outlook include coordination problems between local governments, further property policy tightening, and delays to the central government’s development plan, the analysts said.

Among the lessons from the U.S. and Japan: smaller satellite cities get the biggest boost from better transportation networks, high property prices pushing residents out of hub cities, and government intervention to move industries. Bloomberg News advertisement

8 Business Daily Friday, August 25 2017

Consigliere

A revealing look at CEO travel habits Nikki Ekstein

I

n the era of the humble brag, it’s harder than ever to know how your boss travels. Assuming he or she is the type that likes to share, you might see a suggestion of a private jet or a swanky beach resort on Instagram—or hear one unassuming story about the sea turtles that swam under the paddleboard in St. Barthelemy.

Unfortunately for your water cooler conversations, no chief executive officer is ever going to spill the beans on his favourite private island, the extent of his security detail, or the lengths his assistant went to procure Coke Zero in Madagascar.

For that, we turned to Jaclyn Sienna India, president and founder of the decade-old travel consultancy Sienna Charles. Almost immediately after hanging a shingle on West Palm Beach’s ritzy Worth Avenue in 2008, India got her lucky break: An unexpectedly productive, US$25 ad with the Explorer’s Club turned out her first billionaire client, and word of mouth turned one into many.

Now India is a go-to for the finance world’s jet set, regularly organizing trips for at least two dozen CEOs, along with other titans of industry and a handful of former U.S. presidents. Her clients range from Morgan Stanley higher ups and former top-level executives at American Express, to billionaires and real estate tycoons. Of the hundreds of trips she plans each year, 90 per cent are for high-ranking finance types— some with budgets that climb into the millions. Chatting

about restaurants, she says, is the best way to let these power brokers know she’s playing on their level.

“People can be all over the map,” she said, explaining that often clients are looking for a vibe or set of experiences rather than an exact destination. To help them wade through their options, she prefers face-to-face lunch meetings (typically at such power spots as Le Bernardin) over cursory phone calls. “A lot of agents can B.S. over the phone or have notes all prepared, but I could never do that. That’s not how you build up trust with the world’s wealthiest people,” she told Bloomberg.

Here’s what she had to say about her C-suite customers—the good, the bad, and the hyper-demanding.

A private jet is a business expense

Private jets for execs and their families are almost always reimbursable corporate expenses. Why? Transportation is considered a matter of security, and most CEOs plan travel in tandem with work trips, taking their family with them to Dubai for a few days before jetting off to the Maldives.

“Safety” is a card more legitimately played by former presidents, says India, who has organized trips to Africa for George W. Bush and his 30 secret service agents.

But CEOs are productive on planes—she joked that “if you can be offline for 10 hours, then you aren’t really that important.” (In the era of laptop bans, private planes are a good way to ensure that work gets done.)

Privacy also important.

“CEOs like to stay under the radar and want to focus on their family rather than who they are,” India said. Speaking of family time: They often travel with their pets, “just because they can.”

Little else gets expensed.

“CEOs can splurge big time on hotels, yachts, and experiences when they’re saving a minimum of US$75,000 to transport a family of four,” India observed, noting the rough cost of a private jet.

It takes a village

For every VIP itinerary, there are “layers of experts” coordinating the logistics, says India. “They have us, an air department [or a team dedicated to booking air travel], and an executive assistant working in unison to make

sure everything is exactly they way they like to travel every step of the way.”

But having too many cooks in the kitchen isn’t something she worries about. A CEO’s personal assistants prove extra-valuable: One client drinks only O’Douls and has frequent hankerings for crunchy peanut butter; others might like their entire minibar stocked with a particular beverage (think: Coke Zero).

Preferences for air travel can be among the most important to consider. India says some of her regulars might want a particular make and model for their airport transfer (for vanity), some want to be picked up right next to the aircraft (for speed), and others are particular about having two pilots even on a tiny helicopter (for paranoia).

But not every minute is planned. India says her CEOs “like a mix of organized activities and room for spontaneity” on their itineraries, so they have a structured schedule and time to relax.

Loyalty isn’t everything

Don’t brag to your boss about your Platinum Elite Marriott Rewards status: Chances are they won’t be impressed.

“They don’t care about rewards that offer them amenities or free breakfasts or upgrades—they’d rather book the room they want from the beginning,” explained India.

So does that mean they don’t care about frequent flier miles, either? Sort of.

These programs are less valuable for those who tend to fly private, but when the unavoidable commercial flights rolls along, executives “do care about being recognized.”

(Privacy, it seems, is less of a concern if it’s what secures a first-class upgrade.)

Bigger isn’t better

“Since the way they live normally at home is quite lavish, they love top accommodations,” said India of her guests. The five key things they’re looking for are good light, outdoor space, seamless technology, high-end furniture, and a super-comfortable bed. Specific views (such as the Eiffel Tower or Spanish Steps) might help, too. Square footage is less important: “A good suite is not just about big for the sake of being big,” India explained.

These criteria have shaped India’s shortlist of the best hotels in the world. “In Rome, for example, everyone assumes they should be staying at the Hassler, but I don’t love it personally. It’s great for lunch, but the rooms are highly overpriced.” Instead she books guests into the just-renovated Hotel Eden, where she’s partial to the Aurora Terrace Suite. In Paris, she turns to the penthouses at the Bristol and Plaza Athénée.

As for the rooms and resorts on CEO bucket lists?

They include the Brando, a private island resort in Tahiti that was once owned by Marlon Brando; the Four Seasons Bora Bora, whose three-bedroom overwater bungalows are among the best in Polynesia; the AII Royal Suite at the Four Seasons in Lanai, Hawaii; and the private villas at Castiglion Del Bosco, a Tuscan village-turned-Rosewood resort by the fashion mogul Massimo Ferragamo.

Bloomberg

H&M Autumn / Winter collection

I

t is the time brands are sending out their invitations to preview their important 2017 Autumn/ Winter collection. Last week, H&M unveiled their catwalk-focused Studio line: H&M Home – Eat Collection as well as the H&M cosmetics collection in Hong Kong.

Through the womenswear collection, we can find the creativity and energy of New York City, street meets sophistication. The collection reflects the needs of a modern

woman’s wardrobe – sharp outerwear, soft dresses, flattering knits, versatile separates, statement accessories and a refined colour palette – but the frequent merging of different fabrics in a garment creates a more graphic structure and a new, fearless attitude. Wool, satin, jacquards, chiffon, stretch twill is being widely used in this collection.

The key items that you can’t miss are black satin sleeveless round-neck mini-dress with fishtail hem, wide trim at arm holes and seams to accentuate the female form plus oversized hooded parka-poncho hybrids with slant pockets. One in dark navy wool and another in a checked fabric with a faux fur trim at the hood. Don’t forget to finish your look with heavy leather ankle boots, padded leather handbags and oversized pearl-embellished jewellery.

Inspired by mountaineering, H&M Studio’s AW17 menswear collection focuses on the thrilling adventure and toughness of the activity, as well as the necessary skill. We are told by Andreas Löwenstam, H&M’s Head of Design, Menswear “Creating a clash between traditional menswear and the athleticism of mountaineering emphasises the notion of quality as the new accent in fashion. So, there is not only the contrast in materials, but special attention is paid to balancing new, modern silhouettes with classics.”

We can find the classics outer such as the bomber jacket and overcoat, which are mandatory items for cold climes. Meanwhile, we can find the functional details the designer makes such as integrated belts, rubberised buttons and cord stoppers contrasted by crisp, elegant tailoring. Apart from the outers, many vibrant items could be seen in this collection, including a bright purple cable-knit jumper in hairy mohair blend with round neck and orange ribbed knit jumper in hairy wool blend with polo neck

and orange turtle neck sweater.

In this preview we also saw H&M Home for the first time. The brand awareness of the importance of tableware and kitchenware to people’s lives translated into a dinnerware series with a clean design. The series has a matte finish and comes in three colours: white, black and grey.

All these collections will be available in the stores and online stores from September 14. There will be some fabulous online exclusives items for you to find. Don’t miss the opportunity. Edwina Liu, Essential Macau Editor

Business Daily Friday, August 25 2017 9

Consigliere

The fashion designer behind Athleisure is still the best at making it Alexander Wang’s latest Adidas collaboration shows he’s far from done with the idea that made him famous.

Troy Patterson

As an u ­ ndergraduate intern at Teen Vogue, Alexander Wang was charged with calling up top fashion houses and asking to borrow clothes for photo shoots. He was frequently rebuffed: “That audience doesn’t understand this level of fashion!” the 33-year-old clothing designer says he heard over and over again.

Wang knew better. Relying on a gut sense honed by observing his precociously styled classmates at the Drew School in San Francisco and working in boutiques and ­department stores, he took a leave of absence from Parsons School of Design in 2005 to start Alexander Wang Inc. His mother served as chairman, and his sister-in-law was the chief executive officer. “We were profitable from Day One,” he says. Now

the company says it takes in US$150 million in annual revenue and that sales are growing at a ­d ouble-digit rate.

“I like to break high luxury down and bring it back to Earth,” Wang says. His clothing has a louche, late-night allure that draws heavily from the American vernacular. Marina Larroudé, fashion director at Barneys New York, credits his 2010 football-inspired collection with seeding the now-­rampant athleisure trend. “That collection would still be a hit with the general audience today,” she says.

Balenciaga came calling in 2012, and for three years, Wang served as c ­ reative director of both his own label and the storied fashion house, part of luxury conglomerate Kering. “Before Balenciaga, I never had a quote-­unquote

job,” he says. “I felt redtaped.” Last year he left Balenciaga and took on the roles of CEO and chairman of his company, making him one of the few designers to have full control over his enterprise.

Wang has since renewed his focus on accessories, including boots and sandals with a signature cut-out heel, which now account for half of revenue. He’s also begun a collaboration with sportswear colossus Adidas AG that finds the brand’s trefoil logo flipped upside down and affixed to clothes suited for both health clubs and dance clubs. The first collection, which he introduced last September, set sales records.

When the second dropped in late July, its unisex cycling singles and ­fluorescent yellow hoodies were originally sold only to pedestrians

capable of reading product codes from posters scattered about Manhattan.

To Wang, such marketing novelties amount to more than hype. They’re about “creating a deeper involvement in our consumers’

lifestyle,” he says. “All the building blocks—building a brand, communicating with the customer, delivering the product—have changed. As an 11-year-old brand, it’s extremely important for us to adapt.” Bloomberg

Look inside the London workshop that still makes doctor bags Dunhill, the men’s luxury brand founded in 1887, operates a factory in the city where its wallets and bags are still made by hand.

Bourdon House, a gentleman’s hideaway just north of Berkeley Square in London, is often described as the spiritual home of the British leather goods company, Alfred Dunhill Ltd. But you can make a case for the brand’s Walthamstow workshop at 32 St. Andrews St., a 30-minute drive north, where custom-built briefcases, handbags, and wallets have been assembled since 1936.

Alfred Dunhill began his career in 1887 as an apprentice in his family’s London business, then became

obsessed with car racing and started making high-quality accessories for the age of the automobile. Not much has changed, although now it’s US$1,090 Cadogan briefcases, US$1,650 Boston backpacks, and US$5,400 Duke holdalls. It takes, on average, 30 hours to complete one piece.

Today, the luxury goods maker is a subsidiary of Cie. Financiere Richemont SA, which also owns Cartier, Montblanc, Piaget, and Van Cleef & Arpels. In January, Dunhill

introduced former Burberry Group Plc executive Andrew Maag as its new chief executive officer. His fellow ex-Burberry alum Mark Weston is the new creative director and previewed the fall 2017 collection in June. “One hundred per cent of everything is new,” Maag said of the collection. But you can still get handmade classics also at the Walthamstow workshop—including the company’s beloved Wolseley briefcase, made in the shape of a classic doctor’s bag. Bloomberg advertisement

10 Business Daily Friday, August 25 2017

Greater China Legislation

Beijing issues draft rules in crackdown on illegal fundraising More than 30 per cent of illegal fundraising cases were related to private investment and financial intermediaries

C

hina issued draft rules targeting illegal fundraising yesterday, as the authorities step up a campaign to crack down on risky and illicit behaviour in the country’s financial sector.

The draft rules, issued by the law office of China’s State Council, call for participants engaged in illegal fundraising to cover the losses stemming from those activities.

Key Points All parties to bear losses from illegal fundraising activities Local govts to maintain stability while addressing problem Firms involved in illegal activity to forfeit income, face fines

Regulators will guide financial institutions and non-bank payment service providers on tightening up their supervision of suspicious fund flows, the draft

rules said.

Local governments were called upon to maintain social stability while addressing the problem.

Financial institutions and non-bank payment service providers, if found to be negligent, will be subject to having their illegal income forfeited. They will also be subject to a fine of more than 1 time but less than five times of the illegal income, the draft rules said.

The executives responsible for the illegal activity will be removed and banned from entering the financial industry for a certain period of time and could be subject to fines of between RMB50,000 a n d RM B 500 , 000 each (US$7,507-US$75,072), the rules said.

Chinese authorities vowed in April to step up a crackdown on illegal funding scams, after reporting 5,197 new criminal cases last year involving RMB251.1 billion (US$36.5 billion), state media reported.

More than 30 per cent of illegal fundraising cases were related to private investment and financial intermediaries,

including unlicensed investment advisers and providers of third-party wealth management products.

Regulators embarked on a campaign against online finance fraud last year, focusing on peer-to-peer (P2P) lending platforms. But the rampant growth of the sector has created risks that will take time to resolve, analysts say.

Ezubao, once China’s

biggest P2P lending platform, folded last year after it turned out to be a “Ponzi scheme” that solicited RMB50 billion in less than two years from more than 900,000 retail investors through savvy marketing.

Another case where illegal fundraising took place was at the Fanya Metals Exchange in south-western Yunnan province, where hundreds

of angry investors took to the streets and complained of government inaction after losing more than RMB40 billion in investment products that had promised an annual return of up to 14 per cent.

Last year, China approved the arrest of 9,441 people on suspicion of illegally soliciting public deposits and prosecuted 14,745, state media said. Reuters

Results

BoCom optimistic on interest margins after H1 profit growth The bank’s non-performing loans stood at 1.51 per cent at the end of June Engen Tham and Matthew Miller

China’s Bank of Communications Co Ltd , the country’s No.5 lender by assets, saw its net interest margin steadying after nine quarters of drops and said the gauge for profitability could further improve in the second half of 2017.

While there are concerns that lenders may face headwinds later this year from higher funding costs and slower loan growth amid a shadow banking crackdown, BoCom said it planned to shore up margins by reducing cost of liabilities and operations as well as hiking asset pricing in the second half.

Net interest margins (NIM) - the difference between interest paid and earned by banks - have fallen sharply for Chinese banks following six benchmark interest rate cuts in 2014-15.

BoCom, the first to report sixmonth results among China’s “Big Five” listed state-owned banks, said its NIM steadied at end-June versus 1.57 per cent at end-March.

The NIM is expected to stabilise or possibly widen in the second half, BoCom Chief Financial Officer Wu

Wei said in an earnings briefing on Thursday.

Earlier in the day, BoCom reported a 3.5 per cent rise in its net profit for the first half of the year, the fastest pace of growth for January-June recorded by the lender in three years.

This implied a better-than-expected RMB19.65 billion profit for the second quarter. Four analysts on an average had expected RMB19.1 billion, Reuters data shows.

The bank’s non-performing loans stood at 1.51 per cent at the end of June,

versus 1.52 per cent at end-March.

The rest of the Big Five lenders Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China Ltd - are scheduled to report their first-half results next week.

Industry experts will be waiting to scour these financial statements for any sign of impact from government measures to reduce overall leverage and risky lending.

Analysts estimate banks have used 80 per cent of their yearly credit quota over January-June, versus the usual

60 per cent, amid the regulatory push to bring shadow financing activities to the main loan book, meaning lenders will have less money with which to make profits in the second half.

Key Points H1 net profit 39 bln yuan vs 37.7 bln yuan a year-ago Fastest pace of profit growth for Jan-June in three years Implies better-than-expected Q2 profit of 19.65 billion yuan Net interest margin steadies after long stretch of drops China’s economic growth showed signs of fading in July as lending costs rose, but a hard landing is unlikely with Beijing keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle later this year.

Moody’s Investors Service recently changed its outlook for China’s banking system to stable from negative, in its first revision of the sector in two years. Reuters

Business Daily Friday, August 25 2017 11

Greater China Crime

In Brief

Prosecutors charge Trafigura, staff member in 3-yr oil probe A document charges with fraudulently obtaining bank credit through fabricated oil deals Chen Aizhu

Chinese prosecutors have charged Trafigura’s Singapore division and a Beijing-based staff member for allegedly fabricating gasoline deals with a Chinese oil trading company following a three-year probe, according to a letter of indictment reviewed

by Reuters.

Prosecutors in Langfang, in northern China’s Hebei province, filed the charges on Aug. 4 against Trafigura (Singapore) Pte Ltd and Tian Meng, its Beijing-based oil marketer, the official document issued by prosecutors shows.

The document charges the Swiss firm and Tian with fraudulently obtaining bank credit through fabricated oil deals.

Prosecutors also charged a second individual, Zhang Wei, a Chinese fuel trader, for “conspiring with” Tian in the alleged fraud. He is a shareholder in private Chinese trader Qingdao United Energy.

The charges are the first since police

arrested Tian in August 2014 following a complaint to police by Qingdao United Energy, alleging it had lost US$32 million from trade financing deals arranged between Tian and Zhang without its knowledge.

Tian was released on bail last August after two years in a detention centre in the northern Chinese city of Cangzhou.

The prosecutor charged Trafigura’s Singapore entity because it was the counterparty of the Qingdao firm in the alleged trade financing deals, according to the document.

Trafigura declined to comment.

Senior sources at Trafigura have repeatedly said the company believes the dispute is a commercial one and is not a matter for police or state prosecutors.

Tian declined to comment when reached by phone on Wednesday.

Zhang remains in detention and Reuters was not able to contact him or his lawyer for comment.

An official with Langfang Prosecutor’s Office’s public prosecution

division confirmed that Trafigura’s Singapore unit, Tian Meng and Zhang Wei had all been charged, without giving further details.

In a message via WeChat, the founder of Qingdao United Energy, Li Yixin, said: “No matter how powerful a company is, or how eloquently it defends itself, facts are hard to remove.”

Tian and Zhang convinced Qingdao to make two gasoline purchases, but investigators found that they were fake deals and were arranged just to have the Qingdao firm issue bank lines to Trafigura, the prosecutors said.

“After Tian got approval for the deal from Trafigura, Zhang Wei signed a contract with Trafigura in the name of Qingdao United Energy and fabricated the fact that it was purchasing gasoline from Trafigura,” according to the document.

Chinese courts typically conduct trials three months after prosecutors file charges, but a trial can be postponed by up to six months.

It is not unusual for the Chinese authorities to detain a criminal suspect for two years or longer without charge if a case is deemed sensitive and complicated.

As part of the probe, Chinese authorities have also frozen US$32.9 million that Trafigura Pte Ltd had injected into a metals project jointly owned with Chinese metals producer Jinchuan Group Co Ltd in south-western China. Reuters

Trade

As appetite for steak grows, Beijing ends its beef with imports China gave the green light for beef from South Africa and Ireland earlier this year Hallie Gu and Josephine Mason

China, the world’s top meat market, is loosening longstanding restrictions on beef imports from major suppliers to feed the appetite of the country’s growing middle class for steaks and ribs.

Over the past few decades, Beijing banned imports of beef from European countries and the United States during outbreaks of mad cow disease.

Worries about the disease are subsiding following more stringent inspections on foreign arrivals, while Chinese people are seeking healthier sources of protein and adopting more Western eating habits.

Beef is now the fastest-growing meat in China, outstripping stagnant demand for more widely eaten pork as consumers look to reduce fat in their diets.

But supplies are unlikely to keep up with demand given the high cost of raising cattle in China, prompting the government to rethink its import restrictions.

After years of lobbying, the United States succeeded in getting the curbs lifted in June, ending a 14-year ban triggered by a case of mad-cow disease in Washington state.

China also gave the green light for beef from South Africa and Ireland earlier this year, and on Tuesday said it is considering bringing in beef from Namibia.

China’s beef purchases have soared in recent years, eclipsing Europe, South Korea and Japan since 2012.

Last year, it became the world’s second-largest importer of beef after the United States, bringing in more than 800,000 tonnes worth US$2.6 billion. That compares with just 6,000 tonnes in 2006. “Domestic supplies

cannot catch up with the rising demand. There is not enough premium beef, either. And there are some food safety concerns in China,” said Pan Chengjun, executive director of food and agriculture research at Rabobank in Hong Kong.

It’s a victory for cattle ranchers locked out of the world’s top market, but the increased competition from opening up the market may unsettle current top suppliers, Australia, Brazil and Argentina.

The latest steps come as Beijing aims to tighten imports of other commodities, sugar and broiler chicken, in a bid to boost the domestic industry.

China’s beef and veal consumption has risen more than 10 per cent over the past five years, while consumption of chicken and pork has actually declined in recent years.

Beef demand is expected to rise past 8 million tonnes this year, according to estimates by the U.S. Department of Agriculture, but domestic production is not rising at the same pace, hovering around 7 million tonnes.

Zhang Jianjun, purchasing manager with Sino-Australia Top Beef (Beijing) Co Ltd, a company that mainly imports beef from Australia, expected demand to rise by 10-15 per cent in the next few years.

“In the meantime, it is getting more expensive to raise cattle,” he said.

Cattle take longer to mature and farming requires large amounts of land, but China’s rapid urbanisation over the past decade has reduced the availability of quality grassland.

Even for companies that turn to intensive farming, which can attract government subsidies, beef production remains expensive and domestic beef retails at well above international levels.

The average beef price in China is currently around RMB54 (US$8.11) per kg, more than twice the price of U.S. beef.

“The potential demand for beef is huge here in China ... if foreign beef comes to China at current prices, demand will grow a lot,” said Pan. Reuters

U.S. trade probe

Mainland to use necessary means to defend interests China will use all necessary means to defend the interests of the country and its companies against a U.S. trade investigation, a spokesman for the Ministry of Commerce said yesterday. The ministry on Monday expressed “strong dissatisfaction” with the U.S. launch of the probe into China’s alleged theft of U.S. intellectual property, calling it “irresponsible”.

The probe is the Trump administration’s first direct measure against Chinese trade practices, which the White House and U.S. business groups say are bruising American industry.

Results

Life Insurance H1 profit rises China Life Insurance Co Ltd , the country’s biggest insurer by market value, yesterday said first-half net profit rose 17.8 per cent on strong investment income.

Profit for January-June was RMB12.242 billion (US$1.84 billion), the insurer said in a statement. First-half total investment income rose 11.45 per cent to RMB56.66 billion. The results underscore a broader trend in China’s insurance industry, which saw overall first-half earnings rise 10 per cent to RMB116.1 billion on strong returns from investment, the country’s insurance regulator said in July.

Commerce

Free-trade talks with Norway Norway and China have resumed talks on a bilateral free trade deal, Norway’s Industry Ministry said yesterday, in another sign that their relationship was thawing after a row over the award of the Nobel Peace Prize to dissident Liu Xiaobo.

Beijing suspended discussions immediately after the Norwegian Nobel Committee awarded the prize to Liu in 2010. The dissident was jailed for 11 years in 2009 for “inciting subversion of state power” after he helped write a petition known as “Charter 08” calling for sweeping political reforms.

Results

Vanke H1 core profit up 33.5 pct China Vanke Co, the country’s second-biggest property developer by sales, yesterday posted a 33.5 per cent rise in first-half core profit on higher margins.

The company reported core profit, which excludes revaluation gains, rose to RMB7.1 billion (US$1.07 billion) for the period. Net profit rose 36.5 per cent from a year ago to RMB7.3 billion, while revenue dropped 6.7 per cent to RMB69.8 billion, due to fewer completed projects during the period. Vanke had been embroiled in a more than year-long boardroom battle until stateowned Shenzhen Metro Group affirmed control in June by raising its stake to 29.38 per cent.

12 Business Daily Friday, August 25 2017

Greater China

Foreign Inc.

The Party’s push for influence inside foreign firms stirs fears A significant number of major foreign companies operate in China through joint ventures with state enterprises Michael Martina

L

ate last month, executives from more than a dozen top European companies in China met in Beijing to discuss their concerns about the growing role of the ruling Communist Party in the local operations of foreign firms, according to three people with knowledge of the discussions.

President Xi Jinping’s efforts to strengthen the party’s role throughout Chinese society have reached the China operations of foreign companies, and executives at some of those entities don’t like the resulting demands they are facing.

The presence of party units has long been a fact of doing business in China, where party organisations exist in nearly 70 per cent of some 1.86 million privately owned companies, the official China Daily reported last month.

Companies in China, including foreign firms, are required by law to establish a party organisation, a rule that had long been regarded by many executives as more symbolic than anything to worry about.

One senior executive whose company was represented at the meeting told Reuters some companies were under “political pressure” to revise the terms of their joint ventures with state-owned partners to allow the party final say over business operations and investment decisions.

He said the company’s joint venture partner was pushing to amend their agreement to include language mandating party personnel be “brought into the business management organisation”, that “party organisation overhead expenses shall be included in the company budget”, and that posts of board chairman and party secretary be held by the same person. Changing joint venture agreement terms is the main concern, the

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executive said, noting that his company had thus far resisted.

“Once it is part of the governance, they have direct rights,” he said.

The State Council Information Office (SCIO), which doubles as the party spokesman’s office, told Reuters in a faxed statement that there is no interference by party organisations in the normal operating activity of joint venture or foreign-invested companies.

However, it added, “company party organisations generally carry out activities that revolve around operations management, can help companies promptly understand relevant national guiding principles and policies, coordinate all parties’ interests, resolve internal disputes, introduce and develop talent, guide the corporate culture, and build harmonious labour relations.”

“They are widely welcomed within companies,” the SCIO said.

Major decisions

Of the 13 executives, all from different foreign companies, Reuters interviewed for this story, 8 expressed concerns about increasing demands from the party or noted increased activity from party groups. They all spoke on the condition that they and their companies not be identified given the sensitivity of discussing relations with the party.

Just two of 20 major multinationals queried by Reuters - Samsung Electronics Co Ltd and Nokia - confirmed having party units in their China operations. Most did not respond to questions on the subject.

Only German chemicals giant Bayer AG acknowledged participating in the meeting organised by the European Union Chamber of Commerce in China, but declined to comment on what was discussed.

Carl Hayward, general manager and director of communications at the

European Chamber’s Beijing chapter, acknowledged the meeting was held to “understand from our members if party structures are being formally introduced into the governance of joint ventures.”

“We have not noted any formal change of policy that reflects this.

This is as we would expect since such a change would act as a deterrent to foreign investment in China,” he said.

“Real muscle”

Under Xi, the party has sought to address the “weakening, watering down, hollowing out and marginalisation” of party leadership at state enterprises, the party’s official People’s Daily wrote in June. The paper cited an official with state-owned oil giant Sinopec as saying the company had demanded all its foreign joint venture partners “specify the requirement for party-building work” in their articles of association.

Key Points Executives from top European firms met to talk about concerns Communist Party’s push is part of Xi’s efforts to boost its role In some firms, Party pushing for input in investment decisions Operations management a focus State Council Information Office While plans to expand party organisations in foreign companies have been a quiet concern for several decades, only under Xi has “some real muscle” been put behind the goal, said Jude Blanchette, who studies the party at The Conference Board’s China Center for Economics and Business in Beijing.

A significant number of major foreign companies operate in China

through joint ventures with state enterprises. Foreign business groups have complained that their members are forced to allow Chinese partners access to their technology or risk losing market access.

Many Chinese state enterprises listed on the Hong Kong stock exchange have this year altered their articles of association to give an explicit role to internal party committees.

One country head at a major European manufacturer with a southern China joint venture said that late last year it allowed a party unit to meet on company premises – after hours.

The party unit asked for overtime pay to hold the meeting, which the company rebuffed. But then it also demanded the company hire more party members, and even tried to weigh in on investment decisions.

“That’s when we said this is a no-go zone. We didn’t anticipate that they would discuss investment decisions,” the manager told Reuters.

A sales and marketing head in China for a major U.S. consumer goods firm said its party cell had recently become more active, and had pushed for locating a new facility in a district where the local government was promoting investment, a move the company made.

Still, several executives with foreign companies in China said that the role of party units was benign and could help to resolve issues with officials. A party member at a U.S.-based Fortune 500 company in Shanghai said her firm’s unit was not involved in business matters and instead engaged in activities such as planting trees and sponsoring children.

“They will give you some tickets to see movies together. When the State Council has a meeting and there’s some news they will send bullet points by email,” she said. Reuters

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Business Daily Friday, August 25 2017 13

Asia Law enforcement

Australia says organised crime in financial sector costing US$28 bln a year Drugs were the prime source of illicit wealth for organised crime in Australia Alison Bevege

O

rganised crime in the financial sector is costing Australia A$36 billion (US$28.43 billion) a year, the criminal intelligence authority said yesterday.

Money laundering was the main threat amid the rise of online banking and digital currencies, the Australian Criminal Intelligence Commission (ACIC) said in a report on organized crime in the country.

Key Points Organised crime costs Australia A$36 billion per year Drug dealing biggest earner but money laundering biggest threat “Five Eyes” international alliance to combat scourge The Australian government earlier this month accused the country’s second-largest bank, Commonwealth Bank of Australia, of widespread breaches of money-laundering and counter-terrorism financing rules.

The government is concerned that encryption technology, including cryptocurrencies, allows transactions to evade detection, potentially enabling criminal activity and tax evasion.

“Bitcoin, for example, which can be traded anonymously and is as good as cash, is traded now on most significant international exchanges,” Justice Minister Michael Keenan said on Thursday.

Australia introduced legislation this month to bring Bitcoin providers under the oversight of the government’s financial intelligence unit.

The ACIC report also highlighted a rise in money laundering through sports betting, finding that

several international crime syndicates owned online bookmaking enterprises.

Online sports betting is widespread in Australia with about 25.4 million mobile handset subscribers and 13.5 million internet subscribers in a country with just 24 million people.

Authorities fined Australia’s top betting company Tabcorp Holdings A$45 million in March for alleged breaches of money laundering laws.

Drugs were the prime source of

illicit wealth for organised crime in Australia, while identity theft cost the nation an estimated A$2.2 billion (US$1.74 billion) in 2015-16, the ACIC report said.

Credit card fraud cost the nation A$521 million (US$411.38 million).

ACIC said it was working with the Five Eyes Law Enforcement Group -- an alliance of Australia, Canada, New Zealand, the United Kingdom and United States -- to combat international crime. Reuters

Markets

China-backed Singapore bourse is said to get regulator’s nod Apex would be a new rival for Intercontinental Exchange Inc. and Singapore Exchange Ltd Asia Pacific Exchange Pte, has received in-principle approval from the Monetary Authority of Singapore to start a third derivatives exchange in the city, according to people with knowledge of the matter.

Apex is now working on getting final approval from the city’s regulator, according to the people, who asked

not be identified because the information is confidential. The company, which has about 40 staff, plans to open its exchange with refined palm oil contracts, the people said. The commodity will be priced in dollars and physical delivery will be in Malaysia and Indonesia.

Apex would be a new rival

for Intercontinental Exchange Inc. and Singapore Exchange Ltd., who already operate in Southeast Asia’s biggest derivatives market.

The firm, which changed its name from Asia Investment Pte on Aug. 17, has also been filling out its board, adding KKR Inc. senior adviser Lim Hwee Hua as a director,

according to corporate filings.

Lim was Singapore’s first female minister and second finance minister until 2011.

Former CME Group Inc. Asia head Wong Chong Fatt and Mimi Ho, an ex-Monetary Authority of Singapore official who oversaw securities and futures supervision, have also joined the board, the records show.

“As a matter of policy, MAS does not comment on our dealings with individual parties,” the regulator said in an emailed response. A representative for Apex declined to comment.

Palm oil

Palm oil is the world’s most widely consumed vegetable oil, found in goods such as ice cream, instant noodles and lipstick. Indonesia and Malaysia are the world’s top producers of the agricultural commodity, and futures on crude palm oil are most actively traded at Bursa Malaysia Derivatives Bhd. About

850,000 contracts traded in July with open interest of 207,000 contracts, according to bourse data.

The total number of all derivatives traded on exchanges globally reached 25.2 billion contracts in 2016, setting a new annual record, according to figures from FIA, an industry group.

Apex said in an Aug. 14 letter to Singapore’s Accounting and Corporate Regulatory Authority that it was in the process of working with the city’s financial regulator to get a license as an approved exchange.

The company is majority-owned by Eugene Zhu Yuchen, a China markets veteran who’s served as head of the China Financial Futures Exchange and Dalian Commodity Exchange, as well as president of Shanghai Pudong Development Bank.

Chinese hedge fund manager Ge Weidong’s firm holds a minor stake, according to filings. Bloomberg News

14 Business Daily Friday, August 25 2017

International In Brief Security

Border police strike called off The Portuguese foreigners’ and border service police have called off a two-day strike scheduled for yesterday and today after the internal affairs minister agreed to hire 100 more officers this year. The new officers are over and above the 45 that have already been recruited this year. The union said that there were conditions to call off the industrial action since the ministry had “recognised the importance of their work”. Airlines had been warning passengers to arrive at the airport earlier than usual as only about twothird of the usual number of border agents were expected to be on duty over the two days.

Taxation

Brazil approves quota, 20 pct tax on ethanol imports Brazil’s government on Wednesday approved taxing ethanol imports for the first time in a move to protect local producers from growing shipments coming from the United States. Brazil’s Agriculture Ministry said the country’s foreign trade chamber, known as Camex, approved a 20-percent tax on ethanol imports, which would be levied only after a tax-free quota of 600 million litres per year is surpassed.

Brazilian ethanol imports reached 1.29 billion litres in the first half of the year alone, a 330 per cent increase compared to the same period a year earlier.

Election

Polls close in Angola to end Dos Santos’s rule Six parties are competing for 220 seats in parliament Henrique Almeida and Candido Mendes

V

oting ended in a landmark Angolan election that will bring about the first leadership change in almost four decades for Africa’s second-biggest oil producer.

“D-day has arrived,” Domingos Francisco said Wednesday as he stood in line behind dozens of voters outside a blue tent that served as a polling station in the Rangel neighbourhood in Luanda, the capital. “I arrived at 5 a.m. because I was anxious to vote.”

Balloting ended at 6 p.m. in most of the country, Zimbo television reported.

Jose Eduardo dos Santos, Africa’s second-longest serving ruler who led Angola through a civil war, an oil-fuelled boom and a bust, is stepping down after 38 years in power.

Defence Minister Joao Lourenco, the ruling Popular Movement for the Liberation of Angola’s presidential candidate, is widely expected to win the vote, according to Ricardo Soares de Oliveira, an Oxford professor and the author of a post-war study on Angola.

A defeat of the ruling party is “almost unimaginable,” Soares de Oliveira said in an emailed response to questions. “The most probable outcome remains an MPLA victory, but with a much enhanced performance by the opposition.”

Dos Santos, 74, is credited for rebuilding Angola with income from oil through glitzy infrastructure projects.

At the same time, some of his family members accumulated fortunes, while a third of the population still lives in poverty, according to the World Bank. His eldest daughter, Isabel, is Africa’s richest woman, with an estimated wealth of US$2.3 billion, according to the Bloomberg Billionaires Index.

Corruption

Lourenco made the fight against corruption and poverty the centrepiece of his campaign. If elected, he will face the challenge of reversing the worst downturn since the country emerged from civil war in 2002, according to Manuel Alves da Rocha, chief economist at the Catholic University of Angola in Luanda.

“It’s not enough to say there’s a need to improve the economy and the financial sector,” Alves da Rocha said. “We need concrete measures because the situation is serious.”

The Angolan economy, sub-Saharan Africa’s third-largest, has been crippled by oil prices that have halved since mid-2014 and led to zero growth for 2016, an inflation rate of 30 per cent and a shortage of dollars. Angola depends on oil for more than 90 per cent of its export earnings.

Lourenco, a 63-year-old army general, may have limited room for

GDP

Household spending fuels pick up in pace of Spanish growth Spending by Spanish consumers helped the economy expand at a faster pace in the second quarter, as the job market improved and households appeared to shrug off a spike in the price of goods, official data showed yesterday. Spanish gross domestic product expanded by 0.9 percent in the April to June period from the previous three months, up from the 0.8 percent growth recorded a quarter earlier, according to final data from the National Statistics Institute (INE). That was in line with a preliminary reading and marked the fastest quarterly pace of growth since the third quarter of 2015.

Commodities

South Africa wool output to rise from century low; price jumps Wool output in South Africa, the world’s second-biggest producer of the variety used for clothes, may surge about 50 per cent from the lowest in a century as local prices climbed amid global supply that’s at a 70-year low, the head of the main industry body said. Production by South Africa, as well as the neighbouring countries of Namibia and Lesotho, could climb to 75 million kilograms in the next three years as consumers’ demand for apparel made from the fibre increases, Cape Wools Chief Executive Officer Louis de Beer said.

Joao Lourenco, the candidate of the Popular Movement for the Liberation of Angola (MPLA) casts his ballot in the general elections at a polling station in Luanda, Angola, 23 August 2017. Source: Lusa

manoeuvre if he is given the keys to the presidential palace overlooking the bay of Luanda. Dos Santos will remain MPLA chairman until at least 2018 and is likely to influence politics even after he steps down.

Still, “it’s normal” to expect that things will change, General Manuel Helder Vieira Dias Jr., an influential minister of state who is widely known by his nickname Kopelipa, said in an interview Wednesday.

“Portugal isn’t the same Portugal it was 10 years ago, England isn’t the same as it was 10 years ago and, naturally, Angola’s future will also be different.”

Six parties are competing for 220 seats in parliament and the person heading the list of candidates for the winning party becomes president for a five-year term. About 9 million of Angola’s estimated 27 million people have been registered to vote, and the results have to be announced within 15 days, according to the National Electoral Commission.

Officials from the main opposition party, the National Union for the Total Independence of Angola, and the smaller opposition party, Casa-CE, have questioned the neutrality of the electoral commission. They’ve also accused state media of giving too much airtime to the ruling party, criticized the geographic allocation of polling stations and complained of difficulties registering opposition officials to monitor the vote.

Unita, which lost the civil war against the MPLA, has threatened to hold protests if it considers the elections unfair but excluded a return to armed conflict. “We’ve seen what war is,” Unita leader Isaias Samakuva said at his party’s final campaign gathering.

Dos Santos, flanked by his wife and dozens of bodyguards, didn’t speak to the media when he arrived in a black Mercedes-Benz to cast his vote at a school in downtown Luanda.

The voting process was going smoothly and there were no incidents reported, according to Manuel Pinto da Costa, a member of a team of election observers for the Community of Portuguese Language Speaking Countries.

U.K.

Immigration falls as EU citizens quit Britain after Brexit vote The slump in the value of the pound since the referendum may also have made the U.K. less attractive for migrant workers Andrew Atkinson

Net migration to the U.K. fell to a three-year low after an exodus of European workers following the June 2016 Brexit referendum.

Arrivals outnumbered departures by 246,000 in the 12 months through March, down a “statistically significant” 81,000 from a year earlier and the lowest figure since March 2014, the Office for National Statistics said yesterday.

EU nationals quitting Britain accounted for much of the change.

The outflow was most pronounced among citizens of the eight central and eastern European nations that joined the bloc in 2004, including Poland, Hungary and the Czech Republic. The number of people coming to Britain declined.

The figures “indicate that the EU referendum result may be influencing people’s decision to migrate into

and out of the U.K., particularly EU and EU8 citizens,” said Nicola White, head of international migration statistics at the ONS. “It is too early to tell if this is an indication of a longterm trend.”

“No one should celebrate these numbers” Seamus Nevin, head of employment and skills policy at the Institute of Directors

The data will be welcomed by Prime Minister Theresa May, who has promised to cut net migration to the “tens of thousands,” but business leaders say the loss of foreign workers risks harming the economy.

“No one should celebrate these numbers,” said Seamus Nevin, head of employment and skills policy at the Institute of Directors, adding that record-low unemployment meant Britain would face a labour shortage without EU residents.

“Signs that it is becoming a less attractive place to live and work are a concern.”

The rights of EU citizens in the U.K. post-Brexit, and those of Britons living in other EU countries, have yet to be resolved more than a year after the vote to leave the EU. The slump in the value of the pound since the referendum may also have made the U.K. less attractive for migrant workers.

Sectors such as hospitality and construction, which rely heavily on EU workers, are already warning of growing skills shortages. Universities have also expressed fears over losing key staff. Bloomberg News

Business Daily Friday, August 25 2017 15

Opinion Business Wires

Korea Herald South Korea’s finance chief said yesterday that the government will increase spending on job creation by more than 10 per cent in 2018 as part of its efforts to help raise income levels of ordinary people. The top economic policymaker said deepening income disparity in South Korea may pose a threat to Asia’s fourth-largest economy, which seems to be entering a low growth cycle. Job creation is one of the top priorities by new President Moon Jaein, who has embraced consumption-led economic growth as his main economic goal.

Made in the USA? China’s robots aren’t interested

Taipei Times The (Taiwan) nation’s industrial production last month expanded annually for a third consecutive month, but growth momentum was softer than government estimates due to weak production of Taiwan-made smartphones and cars, the Ministry of Economic Affairs said yesterday. Industrial output rose 2.38 per cent year-on-year, short of the ministry’s forecast of between 4 per cent and 5 per cent annual growth, the ministry said. In a separate release, the nation’s wholesale sector revenue rose 4.2 per cent to NT$838.4 billion (US$27.68 billion) last month, spurred by increasing orders for servers, memory products, chips and steel products, the ministry said.

Philstar korean manufacturing companies in the Philippines are packing up and leaving the country for Vietnam where they see lower costs and an easier way of doing business. Korean Chamber of Commerce of the Philippines president Ho Ik Lee said many Korean firms have been complaining about the higher cost of doing business as well as lack of incentives in the country. As a result, they have started closing down their Philippine offices and operations to transfer to Vietnam.

The Japan News The (Japanese) labour ministry will create a subsidy program for small companies placing limits on overtime of its workers, and establish consultation centres in all 47 prefectures across the nation to give advice on how to improve working conditions for nonregular employees and prevent excessive work, ministry officials have said. The ministry will seek expenditures for those measures under its budget request for fiscal 2018 starting next April. Work style reform-related bills aimed at preventing long hours of work will be discussed in the extraordinary session of the Diet, expected to start in late September.

Tom Orlik a Bloomberg columnist

S

peak to China experts these days and you typically get one of two contrasting views on its outlook. The prevailing wisdom is that an unreformed state-industrial sector and rising debt mean it is on an unsustainable path, with a financial crisis on the not-too-distant horizon.

The optimists acknowledge that debt is too high, but hold out hope that a growing services sector will fuel stronger consumption, reducing the need for credit-fuelled investment and putting the economy on a sustainable path for the medium-term.

What if they’re both wrong?

That’s the possibility suggested by the rapid automation of China’s factories. In 2016, China installed 87,000 industrial robots, up 27 per cent from the year before and a record for any country.

Annual growth could continue at a 20 per cent pace to 2020, according to the International Federation of Robotics. And that’s likely just the beginning: President Xi Jinping has called for a “robot revolution,” as China overtakes the manufacturing capacity of other countries. “We will make robots until there’s no more people in factories,” says Max Chu, general manager of E-Deodar, a robotics start-up.

“

What might that mean for the economy?

more toward the rich, automation risks further increasing China’s very high savings rate, and further eroding its very low consumption. If that happens, the two other sources of demand -investment and exports -- will become all the more important.

For China, that might work out OK. On the export side, by boosting competitiveness, automation could allow China’s factories to maintain their hold on low value-added parts of the production chain, while moving further into higher-value areas now dominated by Japan, South Korea and Taiwan. As for investment, high saving by rich households will mean that banks stay amply funded. Weak consumption will keep a lid on inflation, allowing the central bank to keep interest rates low and credit flowing.

For the rest of the world, however, the picture looks less positive. China’s industrial strategy will chip away at the remaining competitive a dva n t a g e s e n j o y e d b y American, German, Japanese and Korean companies, putting high-skill jobs at risk. As inequality dents the spending power of China’s middle class, the expected surge in Chinese demand for foreign goods -- and hence foreign labour -- might never arrive.

In a pessimistic scenario, robots would sustain China’s growth, but deal a larger blow to employment in the West than sweatshop labour ever did. After all, one of America’s main exports to China is food.

If Max Chu has his way, there will be no more workers left to buy it.

It’s still possible that the benefits (and costs) of automation are overstated, and that robots are far less likely to replace humans than technovisionaries assume. It’s also possible that China’s government will ease the drawbacks of automation with farsighted policies -- such as a universal income guarantee -- to prop up wages and consumption. Japan’s early experience of automation offers a hopeful example: Rising productivity and wages for low-skilled workers actually reduced inequality through the 1960s and ‘70s.

Absent a Chinese Arnold Schwarzenegger (Chow Yun-fat?) teleporting back from the future to tell us what’s going on, we’ll have to wait and see.

But the rise of the robots could well mean that the optimists and pessimists are both wrong -and that China’s future looks very different than anyone imagined. Bloomberg

It’s still possible that the benefits (and costs) of automation are overstated, and that robots are far less likely to replace humans than technovisionaries assume

At home, the news is mixed.

One benefit is that automation should increase productivity.

In South Korea, which has the highest robot density of any major economy, profit per worker at auto firms was US$152,000 in 2016.

In China, it was just US$48,000. Along with aggressive efforts to boost technology in other fields, automation has the potential to bolster China’s competitiveness and sustain rapid growth.

As its workforce ages and starts to shrink, factories staffed with robots won’t feel the pinch.

For workers, though, the news might not be so good. In China, as everywhere else, automation will likely erode incomes for those with fewer skills.

China already ranks alongside some African and Latin American countries in terms of inequality.

Based on data from the China Household Finance Survey, the richest 10 per cent of households account for 50 per cent of income, at the expense of a smaller share for everyone else.

Higher inequality, in turn, could impede China’s transition toward a consumer-driven economy.

China’s rich do almost all of its saving, while poor and some middle-class households save little or nothing. By skewing income distribution even

”

16 Business Daily Friday, August 25 2017

Closing Marketing

Disney ‘Star Wars’ campaign uses augmented reality to hype film

stores in 30 countries, Disney said in a statement yesterday.

Disney’s Star Wars movies — it’s released two since buying Lucasfilm for US$4 billion in 2012 — rank among the Walt Disney Co. is harnessing all of its media might to biggest ever, and the Burbank, California-based studio make the next Star Wars movie the biggest film of the plans a total of at least six. year, employing augmented reality and social media in As part of the campaign, Disney has created a smartphone a global campaign to promote The Last Jedi and related app that’s activated by special logos that appear on merchandise. cut-out figures in stores. Fans who turn up to buy action Starting Sept. 1, which Disney again dubs Force Friday, figures or drones from the new line-up of products can use fans of the sci-fi films can use smartphones to take part the devices to discover characters like the alien birds called in an augmented-reality treasure hunt, like the Pokemon Porgs, pose with them and share the images on social Go craze that gripped video-game fans last year. The media. Fans who post on social media can win prizes, like worldwide Find the Force hunt will take place over three days, starting in Sydney, and will involve more than 20,000 tickets to the movie’s premiere. Bloomberg News

Environment

China commits to cut northern air pollution by 15 per cent Mainland is under pressure this year to meet politically important 2017 air quality targets David Stanway

C

hina has pledged to cut average concentrations of airborne particles known as PM2.5 by more than 15 per cent year-on-year in the winter months in 28 northern cities to meet key smog targets, the environment ministry said.

In a 143-page winter smog “battleplan” posted on its website yesterday, the Ministry of Environmental Protection said the new target, for the October to March period, would apply to Beijing and Tianjin, along with 26 other cities in the smog-prone provinces of Hebei, Shanxi, Shandong and Henan.

China’s efforts to control pollution have often roiled the prices of steel, iron ore and coal with output routinely curtailed as a result of emergency smog regulations and inspection campaigns.

China is under pressure this year to meet politically important 2017 air quality targets. It aims to cut 2012 levels of PM2.5 by more than a quarter in the Beijing-Tianjin-Hebei region and bring average concentrations down to 60 micrograms per cubic metre in the Chinese capital.

But PM2.5 averages rose in the first seven months of the year as a result of near record-high smog in January and February, which China blamed on “unfavourable weather conditions”.

Experts still believe, however, that China remains on course to meet the 2017 targets set out in a groundbreaking air quality action plan published by the government in 2013.

“Actually, air quality from April to June was among the best over the last five years in Beijing and we still have confidence in achieving the target,” said Shelley Yang, a project manager at the Clean Air Alliance of China (CAAC), a non-profit organisation that includes academic, government and corporate organisations that “care about clean air”.

The extremely high PM2.5 levels in January and February will also make it easier for cities to achieve the 15 per cent cut in the new year.

The government is still leaving nothing to chance, with some of China’s smoggiest cities under pressure

to complete annual steel and coal closure targets by the end of September and implement tougher restrictions in the following months.

By October, big steelmaking cities like Tangshan and Handan must have plans in place to cut output by as much as 50 per cent to limit smog during the winter heating season starting in November.

The region is also under pressure to eliminate thousands of coal-fired boilers, further restrict coal haulage on roads and ensure that power generators, steel mills and coking plants complete upgrades aimed at controlling emissions before heating

systems are switched on.

Hebei is responsible for a quarter of China’s steel output, with Tangshan alone producing around 100 million tonnes a year, more than the United States. Neighbouring Shanxi is China’s biggest coal producer, with more than 900 million tonnes of annual output.

In a note this week, Bank of America Merrill Lynch analysts said the winter restrictions could also reduce primary aluminium output by 400,000 tonnes this year.

In a separate notice yesterday, the Hebei government promised to use an “iron fist” to deal with air pollution over the winter. Reuters

M&A

Consumption

Employment

Baidu sells food-delivery unit to Alibaba-backed Ele.me

Retail sales moderate performance

U.S. jobless claims rise modestly as labour market tightens

Alibaba-backed Chinese food delivery firm Ele.me will take over the food delivery unit of search engine giant Baidu in a deal that could be worth up to US$800 million, the firm and a report said yesterday.

Shanghai-based Ele.me, which means “Are you hungry?” in Chinese, said it would take control of Baidu Waimai, which will continue to operate under its own name and management and also will receive shares of Ele.me.

Further details were not given.

But the state-run China Business News reported that the deal will be financed with a mix of cash and Ele. me corporate shares that will value Baidu Waimai at US$500-800 million.

Alibaba, which invested US$1.25 billion in Ele.me in April 2016 together with its financial arm Ant, plans to inject at least another US$1 billion, Bloomberg News reported in May. Based on mobile apps, the food-delivery industry has boomed in China and especially in big cities like Beijing and Shanghai thanks to the growing number of mobile internet users and online payments in the country.

Ele.me has 260 million users in 2,000 Chinese cities served by three million scooter-riding delivery staff, its statement claimed. AFP

The domestic Statistics and Census Service (DSEC) said yesterday that the value of retail sales for the second quarter of 2017 increased by 10.1 per cent year-on-year to MOP14.48 billion, but decreased by 12.2 per cent as compared with the revised figure (MOP16.50 billion) in the first quarter of 2017.

Watches, Clocks & Jewellery accounted for 22.0 per cent of the total retail sales, followed by Goods in Department Stores (14.8 per cent), Adults’ Clothing (12.1 per cent), Leather Goods (12.0 per cent) and Goods in Supermarkets (7.3 per cent).

As from the second quarter of 2017, DSEC released the new retail sales volume index rebased to the period of April 2015 to March 2016. After adjusting for price changes, volume of retail sales rose by 10.5 per cent year-on-year in the second quarter.

Sales volume of the major retail trade activities recorded year-on-year increase, of which Watches, Clocks & Jewellery (+28.0 per cent), Leather Goods (+23.4 per cent), Goods in Department Stores (+12.5 per cent) and Cosmetics & Sanitary Articles (+11.8 per cent) showed notable growth.

Volume of retail sales for the first half year of 2017 went up by 10.7 per cent year-on-year, the DSEC informed.

The number of Americans filing for unemployment benefits rose less than expected last week, suggesting a further tightening in labour market conditions.

Initial claims for state unemployment benefits increased 2,000 to a seasonally adjusted 234,000 for the week ended Aug. 19, the Labor Department said yesterday. Data for the prior week was unrevised.

Claims have now been below 300,000, a threshold associated with a robust labor market, for 129 consecutive weeks. That is the longest such stretch since 1970, when the labor market was smaller.

Economists polled by Reuters had forecast claims rising to 238,000 in the latest week. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 2,750 to 237,750 last week, the lowest level since May. Low numbers of layoffs have helped reduce the unemployment rate to a 16-year low of 4.3 per cent. The labour market tightness could allow the Federal Reserve to outline a plan to begin unwinding its US$4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its Sept.

19-20 policy meeting. Reuters