Business Daily #1378 September 7, 2017

Study: Babies born in the Year of the Dragon more successful Research Page 6

Thursday, September 7 2017 Year VI Nr. 1378 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Diplomacy

Korean crisis to take toll on Mainland banks and oil firms Page 10

Horse racing

Macau Horse Racing contract extended Page 6

Trade

Commerce with Lusophone countries continues growing Page 5

www.macaubusiness.com

Competition

HK maintaining financial dominance vs.

Shenzhen Page 9

Robotics

Workshop harnesses cutting edge technology Page 8

Financial Reckoning

Typhoon

Yesterday, the CE unveiled the financial impact of Typhoon Hato.

Revealing that the MSAR has been hit with a US$1.42 bln bill. Direct losses totalled MOP8.31bln. The gov’t also confirmed that the construction of a tidal gate had been approved by the central gov’t. And that a new department for civil protection had been created. Page 4

Hail Caesars!

Caesars World LLC, has applied for four trademark registrations in the Macau SAR. With one made under the brand name ‘Caesars’ covering gaming-related products and services.

This follows a similar move by US President Trump’s representatives several months ago.

Beware the ads

Election The Electoral Committee may fine Facebook. For displaying electoral advertising prior to the official Legislative Assembly campaign period. The Committee updated media regarding process and complaints received. Page 3

Raining billionaires

Wealth report The Hurun Wealth Report 2017 is quite a read. Placing the MSAR in fourth position on a global basis.

For multimillionaires and billionaires. The neighbouring HKSAR tops the list. Page 2

Expat paradise Trademark Page 7

HK Hang Seng Index September 6, 2017

27,613.76 -127.59 (-0.46%) Worst Performers

Kunlun Energy Co Ltd

+2.84%

Henderson Land Develop-

+0.61%

Wharf Holdings Ltd/The

-3.65%

HSBC Holdings PLC

-1.26%

Hengan International Group

+1.64%

Cathay Pacific Airways Ltd

+0.51%

AAC Technologies Holdings

-3.27%

CITIC Ltd

-1.19%

Geely Automobile Holdings

+0.94%

CK Infrastructure Holdings

+0.43%

China Mengniu Dairy Co Ltd

-1.98%

Want Want China Holdings

-1.14%

Tencent Holdings Ltd

+0.75%

Sands China Ltd

+0.41%

WH Group Ltd

-1.57%

CK Hutchison Holdings Ltd

-1.05%

Hang Seng Bank Ltd

+0.67%

Galaxy Entertainment Group

+0.29%

China Life Insurance Co Ltd

-1.42%

Industrial & Commercial

-1.03%

28° 31° 28° 31° 28° 32° 28° 32° 28° 32° Today

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

Ranking Bahrain tops the list. When it comes to expat satisfaction. A private index ranking the best to worst countries to live and work in also found that the appeal of the US and UK had fallen abruptly. Page 16

2 Business Daily Thursday, September 7 2017

Macau Economy

Macau ranked fourth in China’s multi-millionaire stakes Over 10,000 households in Macau own RMB6 mln-worth of assets in 2017 Cecilia U cecilia.u@macaubusinessdaily.com

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here is one multi-millionaire for every 91 individuals in Macau for the year 2017, ranking the city fourth in China, according to Hurun Wealth Report 2017.

For the first time, the report includes both the SARs and Taiwan.

Neighbouring Hong Kong topped the list, with one multi-millionaire for every 34 individuals. Beijing boasts one in 83, and Taipei one in 86.

‘When we first compiled this financial report nine years ago the high net worth of the family purchasing

power of Hong Kong, Macau and Taiwan were way much stronger than those in the Chinese cities,’ noted the report, while stating that the situation flipped with the Mainland having stronger purchasing power than the Special Administrative Regions.

More specifically, 17,000 households in Macau have RMB6 million-worth of assets in 2017, with 6,000 households holding RMB6 million-worth of assets that could be re-invested.

Moreover, there are 6,500 households in Macau that hold assets worth RMB10 million, with 3,300 of them holding assets that could be re-invested.

Currently, over 600,000

residents in Macau generated per capita GDP of MOP554,619 in 2016, according to the World Bank.

In Hong Kong, with the current population hitting 7.34 million, the Hurun Wealth Report reveals that 528,000 Hong Kong residents have assets worth RMB6 million, up 3.3 per

cent when compared to last year’s data; 185,000 of them have RMB6 million-worth of assets that could be re-invested.

Turning to the richer groups, some 214,000 residents have RMB10 million-worth of assets, indicating an increase of 5.4 per cent year-on-year.

As such, Hong Kong again ranks first in having the biggest number of billionaires, followed by Taipei, Beijing and Shanghai.

For all of Mainland China, some 3.62 million households are recorded as having RMB6 million-worth of assets, a 7.1 per cent increase year-on-year.

SEA-ME-WE3 first reported service disruptions on August 27, say regional media reports, with company statements from various providers indicating repair times stretching into mid-October.

Damage is believed to have occurred to the AAG cable around 88 kilometres away from its landing station in Hong Kong, while damage to ASE is believed

to be located about 63.5 kilometres away from its landing station in the HKSAR, notes Techwireasia.

The ASE is of primary importance as it is partially owned by PLDT Inc., a Philippine telecom operator that in a statement noted: ‘Multiple international undersea cable links to the city (Hong Kong) were cut, causing slowdowns in Internet connections to web

and social media sites hosted there’.

The IA cable, owned by the Tata Global Network, was said to be damaged around 54 kilometres away from Hong Kong, affecting its linkages to the United States, Vietnam, Singapore, Japan and the Philippines as well as Hong Kong.

Expectations are for slow Internet speeds to persist over the coming weeks. K.W.

Typhoon damage

Fast winds, slow uploads Two weeks since the arrival of Typhoon Hato wreaked havoc on the city, cities within the region are still struggling to recover all their facilities, in particular Internet use. While the MSAR’s general Internet access was largely unaffected by both Typhoon Hato and Pakhar, damage to four undersea cables traversing the Pacific Ocean has disrupted service in Australia,

the Philippines, Singapore, Vietnam, and other regions in Southeast Asia, as well as neighouring Hong Kong.

The four (known) cables to have been damaged were the ASE (Asia Submarine-cable Express), Asia-American Gateway (AAG), TGA-Intra Asia (IA), and SEA-ME-WE3 (South-East Asia- Middle East-Western Europe 3), according to the Straits Times.

The AAG, IA and

Support

Favourite MICE snap up lion’s share Macau Convention and Exhibitions Association received almost a third of the MOP21.4 million in financial support provided by IPIM in the first half of this year Macau Trade and Investment Promotion Institute (IPIM) granted MOP16.2 million (US$2 million) in financial support in the second quarter of this year, a dispatch in the Official Gazette revealed yesterday.

Financial support provided

by IPIM in the first half of this year reached MOP21.4 million, with the majority of support going to assist local entities participating in MICE [Meetings, Incentives, Conventions and Exhibitions]

events.

The Macau Convention and Exhibitions Association received the largest slice from IPIM in the first six months of this year, at MOP7.2 million in financial support.

That amount provided to the Association was divided between support for expenses related to the Dynamic Macau Business and Trade Fairs in Quanzhou, Fujian, and in Shenzhen, Guangdong; a Macau Convention and Exhibition Feature subsidy; and for

the financial costs of participating the 9th International Conference on PLS (Primary lateral sclerosis, a neuromuscular disease) and Related Methods (PLS’17) as well as the 40th ADFIAP (Association of Developing Financial Institutions In Asia and the Pacific) Annual Meeting.

In the last quarter of 2016 alone, Macau Convention and Exhibitions Association had received 74.7 per cent of the total MOP77.2 million disbursed by IPIM. N.M.

Typhoon

DATA

Rebuilding business

Growing number of taxi infractions filed in August

Financial support provided by the DSE to SMEs affected by Typhoon Hato reached MOP157.3 million as of September 5 Some 10,544 requests for financial support were submitted by SMEs (small and medium size enterprises) affected by Typhoon Hato to the Industrial and Commercial Development Fund of the Macao Economic Services (DSE), the department has revealed.

Of the total requests, DSE has approved 3,146, with the amount involved reaching MOP157.3 million (US$19.5 million).

DSE developed two schemes to assist SMEs to overcome difficulties following the passage of Typhoon Hato on August 23; namely, an interest-free loan of up to MOP600,000 and another subsidy of up to MOP50,000.

According to the department’s response to Business Daily, of the total 10,544 applications received more than half (5,230) applied simultaneously to both support schemes. N.M.

The Public Security Police Force (PSP) filed a total of 590 cases relating to taxi infractions, up from the 416 cases filed in July.

Of the total number of filed cases, 372 or 63.1 per cent were related to overcharging, and 156 or 26.4 per cent related to refusal to carry passengers.

PSP also prosecuted 6 cases for not following the queue to pick customers near the taxi queue line, with 56 other infractions.

The authorities also uncovered 32 illegal taxi operations, although none related to mobile taxi-hailing applications among the aforementioned cases.

The local police authority stressed

that it would continue to combat taxi violations and unlicensed taxi services in the city.

Business Daily Thursday, September 7 2017 3

Macau Parking DSAT OPENS PUBLIC TENDER FOR MANAGEMENT AND EXPLOITATION RIGHTS OF FIVE PARKING LOTS

Parking lot tender announced

Central Park, Rua da Ponte Negra, Koi Nga, Lok Kuan and Ip Heng buildings.

The Transport Bureau (DSAT) has opened The applications must be filed by businessmen a public tender for the management and or commercial bodies engaged in the exploitation rights of five parking lots, a management of parking lots in the MSAR, while dispatch in the Official Gazette declared consortiums may not apply. yesterday.

According to the release, interested parties may A MOP1 million (US$124,080) deposit will have submit their proposals by October 11 of this year to be provided upon application, with a further in order to be eligible to obtain a contract valid MOP5 million deposit for the accepted company for six years to manage the parking lots in Taipa (or companies) upon receiving the contract. N.M.

Elections 2017

Killing the messenger Social media platform Facebook could be fined by the Electoral Committee for allowing electoral candidates to have paid ads on the platform Nelson Moura nelson.moura@macaubusinessdaily.com

A

ny candidate running in this year’s Legislative Assembly (AL) elections will have to remove any paid ads or paid content on social media platform Facebook, the Electoral Committee (CAEL) announced yesterday.

The CAEL President confirmed that some four or five complaints had been filed about electoral lists using paid ads on Facebook, while admitting the possibility that more than 20 candidate groups could have been using the same method.

“We will also take the initiative to investigate ourselves but we need to have evidence and information to start an

investigation,” said Mr. Tong.

However, while the Electoral Law does not specifically mention consequences or fines for the candidates, it states that any media or advertising company participating in political propaganda after the executive order setting the date of the election could incur a fine of between MOP5,000 (US$620) and MOP50,000.

Consequently, the American social media company could face the possibility of being fined for allowing candidates to use paid ads on its platform.

“The company has to be fined and we will notify the electoral list that it can’t conduct propaganda through commercial means.

The company also has to remove the contents,” CAEL President Tong Hio Fong said yesterday.

In the event that the entity or person responsible for the medium does not comply with the removal of content considered to be electoral propaganda it can also be accused of qualified disobedience according to the law.

“We talked to the company and they will co-operate with

us (…) We need to first assess if the cases were made with intent or due to negligence,” Tong stated.

Raining infractions

CAEL also announced that as of September 4 some 64 complaints about infractions had been received by the Committee, with 20 forwarded to police authorities.

“I would like to remind candidates that they have to follow the Electoral Law; irregularities have been registered and we’re in contact with police authorities to enforce the law,” Mr. Tong said.

According to the Committee, propaganda materials have been placed outside the 23 designated spaces for this purpose.

“Propaganda materials can be fixed in campaign groups’

headquarters or inside buildings or stores but they can’t be seen by people walking in the street,” the Committee declared.

CAEL also stated it was investigating a case in which campaign posters from a candidate group had been destroyed or ripped, with authorities suspecting the poster may have been damaged by recent heavy rains.

Removing, destroying, stealing or covering electoral campaign materials can incur a prison sentence of up to three years, according to the Electoral Law. The Committee added that of the voting stations damaged by the recent typhoons, only one was still under repair but that it would be operational for the September 17 election day. advertisement

4 Business Daily Thursday, September 7 2017

Macau Opinion

Ashley Sutherland-Winch* Beware tenancy law changes Did you know that Macau real estate law has been amended? Specifically, Civil Code Articles 969-1056 relating directly to lease agreements have been revised and whether you rent or lease property in Macau you need to be aware of the changes.

After receiving increased pressure to address rising property prices, the Macau Government reviewed seven Articles in the Civil Code, with five eventually passed on August 21, 2017. With the population of Macau continuing to grow, action was required to address landlord and tenant concerns and the newly revised Articles will go into effect on February 21, 2018, affecting commercial, residential, industrial, and agricultural agreements.

In summary, the new Articles require that all rental contracts be notarised as a measure to address the operation of illegal inns and other illicit situations in the property market. The new law also extends the standard period for rental agreements from two to three years, meaning that the landlords of commercial and residential properties cannot solely terminate the rental agreements with their tenants within three years.

Along with making it easier for landlords to evict unruly tenants, the new laws also provide for arbitration in rental disputes.

I appreciate that the new laws provide protection to both tenant and landlord, but I find a three-year lease agreement to be problematic. As an international city that recruits many foreign workers, it is desirable for some workers to sign oneyear lease agreements.

When a foreign worker first arrives in Macau, it is daunting to commit to living in one location for two years, let alone three.

Should someone desire to move to a different part of the city or to a different complex, they are prevented by this long commitment of renting property in Macau. Of course, many leases have break clauses but it may come at the cost of two months rent, which in some cases can be extremely costly. In my experience of living in other cities around the world, renting month to month was possible and easy to find but here in Macau it is almost unheard of and finding a one-year lease is even more difficult.

As stated, I am pleased that the new laws give long term residents more security when renting . . . but for the transient community, three years is too long to commit to one apartment, in my opinion. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.

Chief Executive Chui Sai On, and members of the Commission for Reviewing and Monitoring the Improvements of the Response Mechanism to Major Disasters convene a press conference at Government Headquarters. Source: GCS Typhoon recovery

Binding the wounds The Chief Executive has announced preliminary typhoon losses of MOP11.47 bln and set up a special taskforce to investigate the internal issues of public departments Cecilia U cecilia.u@macaubusinessdaily.com

M

SAR Chief Executive (CE) Fernando Chui Sai On says the preliminary estimate of the direct and indirect losses caused

by Typhoon Hato totals MOP11.47 billion (US$1.42 billion).

Two weeks after the destruction of Typhoon Hato, yesterday the CE, together with his five Secretaries, met the press at Government Headquarters to give an account of the works that were being undertaken following the catastrophe plus plans and strategies for improvement.

‘Lionel Leong Vai Tac, Secretary for Economy and Finance, expects the city to grow by one digit for the whole of 2017’ Lionel Leong Vai Tac, Secretary for Economy and Finance, replied to a reporter’s enquiries that the amount was estimated by the Statistics and Census Bureau (DSEC).

According to preliminary data, the city suffered a direct loss of MOP8.31 billion and indirect losses of MOP3.16 billion from Typhoon Hato on August 23.

DSEC had collected data information from various public departments such as the data of subsidies for SMEs (small and medium sized enterprises) organised by Macao Economic Services (DSE).

In addition, members of DSEC inspected and evaluated the level of damage of buildings and structures.

DSEC also referenced two statistics systems for natural disasters composed by the China National Commission for Disaster Reduction and the Ministry of Civil Affairs.

Insurance claims hit MOP2.42 billion

Secretary Leong reported yesterday that 1,284 insurance cases had been filed, with an estimated claims of around MOP2.42 billion as of September 4.

There were 950 cases of loss of property, amounting to MOP2.4 billion in claims, while 56 were related to injuries during work, with total claims reaching MOP1.03 million.

Secretary Leong also reported that two claims of fatalities were concluded by the insurance companies, with claims totalling MOP11.26 million.

Despite the notable impact made

by Typhoon Hato, Secretary Leong remarked that the city’s economy would continue to grow after considering the macro-economic environment. As such, the Secretary expects the city to grow by one digit for the whole of 2017.

When asked by the press whether the government would consider issuing regulations for gaming personnel working in typhoon signal 8

New department to deal with serious crises

Co-ordination Bureau - to deal with prevention, response and aftermath of calamities.

The new bureau will also directly manage the current Civil Protection Action Centre located next to Taipa Ferry Terminal.

Alexis Tam: Clean up in time for Grand Prix

will be repaired and readied by October.

The Macau Grand Prix will be held from November 16 to 19.

He reported that the Sports Bureau and related departments had commenced repair of the facilities after checking and evaluations had been made.

Secretary for Security Wong Sio Chak announced yesterday during the press conference that the government will set up an independent bureau – the Civil Protection and Emergency

During yesterday’s press conference at Government Headquarters, Secretary for Social Affairs and Culture Alexis Tam Chon Weng expressed the hope that related facilities and equipment for the Grand Prix

conditions or above, Secretary Leong agreed that a mechanism for the gaming industry to follow when typhoon 8 or above occurs is necessary, noting that the mechanism should not only relate to harsh weather but other possible calamities such as the outbreak of a [contagious] virus.

“We definitely wish to set out levels [for the mechanism],” added the CE. “But [the mechanism] needs legal support.”

Investigation committee set up

The CE announced that the committee to investigate the typhoon case had already been set up.

The committee will inspect legal obligations of members of public departments, in particular those involved in works in the prevention of and recovery from the natural disaster.

The committee will be chaired by Assistant Prosecutor Mai Man Ieng, with Iu Vai Pan, Professor at the University of Macau, and auditor Louisa Ho Mei Va. The CE claimed that the committee’s investigation would not affect the ongoing investigation by CCAC, the anti-graft body.

Nod from central government

The CE revealed that the plan to build a tidal gate in the Inner Harbour had already received approval from the Chinese State Council.

He replied to the press that he is to meet related Guangdong departments to discuss the construction of tidal gates on September 11.

Regarding the supply of water, the authorities reported that the volume of reservoirs would be increased in order to ensure a water supply for at least 12 hours. In addition, the Ilha Verde reservoir would have its ability further improved to prevent flooding.

In terms of power supply, with the gradual usage of natural gas power generators, the old and less environmentally friendly heavy oil generator would be reserved for backup.

CEM - Companhia de Electricidade de Macau – also pledged to heighten the transformer station and to prioritise handling stations located in areas prone to flooding.

When the press ask about actions that could be undertaken in the short term should another serious typhoon hit the city, the CE said the government would evacuate residents, adding that the transmission of information had already improved.

Business Daily Thursday, September 7 2017 5

Macau SMEs

MGM launches SME relief programme Local gaming operator MGM China has launched an SME relief programme as 60 per cent of its SME vendors were affected by Typhoon Hato, according to an internal survey

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GM China Holdings Limited has announced it has launched an SME relief programme to help local businesses affected by Typhoon Hato.

The relief programme comprises a series of measures to address the short, mid and long-term needs of SMEs, such as expediting payment processing and upfront payments to alleviate cash flow needs, logistics support, and assistance with minor to major damage.

According to the release, MGM China conducted a survey to help assess the typhoon’s impact on 220 of MGM’s SME vendors under the categories of micro SMEs,

young entrepreneurs and Madein-Macau, considered to be the most susceptible to losses caused by the typhoon.

“Through our survey, we understand that over 60 per cent of our SME vendors have suffered losses in this typhoon (…) We will utilise our collective pledge as additional support since the rebuilding will take time,” the Chief Executive Officer and Executive Director of MGM China, Grant Bowie, stated.

Mr. Bowie added that through the SME Relief Programme the gaming operator will be able to offer immediate assistance to its vendors, while assisting with their longterm sustainable recovery. N.M.

Trade

Sino-Luso trade on the rise Trade between Mainland China and Portuguese-speaking countries jumped almost a third in the first seven months of the year Trade between Mainland China and Portuguese-speaking countries in the first seven months of the year increased by almost 31.29 per cent yearon-year, reaching US$67.61 billion, according to official data.

Data provided by China Customs and published by

the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao) revealed that Chinese imports from Lusophone countries amounted to US$47.79 billion, a 33.74 per cent yearly increase, while Chinese exports went up by

25.74 per cent year-on-year to US$19.82 billion.

Faithful friends

Brazil remained the Mainland’s largest trading partner, with trade value between the two countries reaching US$49.90 billion between January and July, a yearly

increase of 30.51 per cent from the same period of last year.

Meanwhile, exports from Mainland China to Brazil reached US$15.65 billion, a year-on-year rise of around 34.97 per cent, while imports from the South American country reached US$34.24 billion, an increase of 28.57 per cent from the same period of last year.

Trade between Mainland China and its second largest Lusophone trading partner, the African country of Angola, registered a hike of 48.61 per cent yearly to US$13.37 billion.

Beijing sold products valued at US$1.24 billion to Angola, an increase of 32.47 per cent year-on-year, while purchasing merchandise valued at US$12.12 billion, a 50.50 per cent yearly increase in the first seven months of the year.

Meanwhile bilateral trade with Portugal – Mainland China’s third largest

Portuguese-speaking trading partner - increased by only 1.19 per cent year-on-year to US$3.17 billion, with the trade balance favourable to Beijing.

Between January and July, Chinese exported goods to Portugal reached a value of US$2.07 billion, an 11.58 per cent yearly decrease, while imports from the European country went up 38.59 per cent year-on-year to US$1.10 billion.

New kid on the block

The divulged data included Sao Tome and Principe, which only became a member of Forum Macao at the end of March this year, after diplomatic relations with Mainland China following its break with Taiwan.

Trade between Sao Tome and Principe with Mainland China was comprised almost solely by Chinese exports, which amounted to US$4.11 million between January and July. Lusa advertisement

Trademark registration

Tiger moves, eyes parent company home base Russian-based company G1 Entertainment LLC has applied for registration of the Tigre de Cristal brand in Macau, an announcement in the Official Gazette revealed yesterday.

The application comprises a series of services covering gaming and the entertainment industry.

In particular, these include the provision of casino facilities, gaming services, gaming services online, organisation of lotteries, rental of gaming equipment, and amusement park and recreational facilities.

Tigre de Cristal is an Integrated Resort located in the Integrated Entertainment Zone of the Primorye Region in the Russian Far East, operated

by Summit Ascent Holdings Limited,

a subsidiary of Melco International.

Both companies are owned and operated by Lawrence Ho Yau Lung, Chairman and CEO of Melco Resorts & Entertainment.

G1 Entertainment LLC – formerly known as First Gambling Company of the East LLC –was involved in the development of the casino-resort and is a majority-owned subsidiary of Summit Ascent.

Yesterday, Melco International announced that its Chief Operating Officer of Russian Operations, Craig Robertson Ballantyne, has resigned his position in Summit Ascent, and was joining Melco, although the company did not specify which position he will assume. S.Z.

6 Business Daily Thursday, September 7 2017

Macau Concessions

Still cantering along Macau Horse Racing Co. just had its operation contract extended despite a history of losses which is hard to explain from the standpoint of orthodox economics, according to an analyst Sheyla Zandonai sheyla.zandonai@macaubusiness.com

T

he concession period of Macau Horse Racing Company Ltd., which retains exclusive rights to operate horseracing betting in the Macau SAR, has been extended for another six months, the Official Gazette announced yesterday.

The period has been extended to

February 28, 2018 from September 1, 2017.

According to previous reports, the company operating the Macau Jockey Club (MJC) had failed to make an annual profit for more than ten years, since 2005.

“When we look at the Jockey Club accounts, we cannot understand how it is possible that they have been reporting so much in losses and that shareholders continue to maintain

interest in such a company,” local economist Albano Martins told Business Daily.

The company recorded losses of MOP4.07 billion for the financial year ended December 2016, according to information published in the Official Gazette on July 19.

Total liabilities of the company amounted to some MOP1.31 billion over the period.

For the economist, it is “difficult”

to comprehend why the Macau SAR Government, in the light of China’s public concerns about “fighting corruption and money laundering practices,” has authorised that concessionaires which “operate and conduct activities on public land, systematically hide their accounts” and do not have their accounts “published in detail.”

“This is all very grey, very opaque.

It is not transparent,” he argued.

Anima after Hato

Martins, who also heads the Society for the Protection of Animals (Anima), said that a casino operator has pledged to help them in their efforts to repair the Association’s facilities following Typhoon Hato’s battering of Macau on August 23.

He explained that the operator had already sent one of its construction companies to “have a look at the current damage,” adding, however, that he did not know how long it would take for them to proceed with the necessary repairs.

“We’re struggling to find someone because we don’t have enough labour force in Macau,” he claimed.

Martins suggested that in “exceptional situations” such as catastrophe and natural disasters, the government should consider applying “exceptional measures.”

“In a situation of exception such as the one with Hato, I think the government should have allowed [Mainland] Chinese companies to come to Macau to do business on a temporary basis, for a few months.”

Education

Enter the Dragon Researchers find that children born in the Year of the Dragon are more likely to succeed Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

Children born during the Chinese zodiac sign of the Dragon appear to be more likely to be successful at school and more likely to go to – and succeed at - university, according to the results of a study published by two professors from the Louisiana State University. The two researchers - Naci H Mocan and Han Yu – wanted to test the theory that “in Chinese culture those who are born in the year of the Dragon under the zodiac calendar are believed to be destined for good fortune and greatness” by examining provincial data from the Mainland.

“Because there is no biological reason for people who are born in a certain time period to be more successful economically in comparison to those who are born in adjacent time periods, it is surprising that this superstition has persisted for many centuries,” say the researchers, noting that their studies examine “whether a cultural belief about the characteristics of a group of people is self-fulfilling”.

The findings of the results indicate that “even though children born in a Dragon year are no different from other children in the dimensions we observe in our data,

ranging from cognitive ability to family background, from self-esteem to expectations and aspirations about their future, these students are more successful in school”.

The reason is largely related to the parents, their beliefs and manifestations of those beliefs, with the researchers finding that “the parents of Dragon children have higher expectations of their children and they invest in their children more intensely” with the end results that “these higher expectations yield better educational outcomes,” ergo: “‘These expectations create this self-fulfilling prophecy”.

Reasoning

The prosperity of bearing children during the Dragon year was recorded in two spikes in fertility rate registered in Hong Kong in the Dragon years of 1988 and 2000, with similar spikes also registered “among Chinese in Taiwan, Singapore and Malaysia . . . suggesting that people of Asian culture indeed time their birth”.

Contradictorily, the report notes that “no evidence was found in Mainland China to indicate the existence of birth timing for Dragon children,” most likely influenced by the Cultural Revolution and the One Child Policy in place until the

beginning of 2016. Despite the timing not being proven, the researchers found that “using national and provincial data on live births we show that the number of live births spiked in the two most recent Dragon years” of 2000 and 2012. In addition, “the number of marriages goes up during the two years before a Dragon year,” say the researchers.

Starting from birth, parents place more importance on their infants’ education and wellbeing, note the researchers, pointing out they “are more involved in their

children’s education (they have a higher propensity to talk to their child’s teacher spontaneously during a semester), they are more likely to enroll their child in kindergarten, they give their child more pocket money, and they protect their child from doing chores around the house”.

The results speak for themselves: “Chinese middle school students have higher test scores if they are born in a Dragon year,” the researchers state. With regard to gaining admission to university in China, they found that “all

else the same, the National College Entrance Examination scores of those who are born in a Dragon zodiac are around 7.5 points higher” than their cohorts.

In addition, “those born in a Dragon year have 11 percentage points higher probability of obtaining a Bachelor’s degree or higher in comparison to individuals born in other zodiac years,” while if the Dragon child’s parents have a degree, “his/her propensity to obtain a Bachelor’s degree is increased by around 27 and 21 percentage points, respectively”.

Business Daily Thursday, September 7 2017 7

Macau Trademark registration

Et tu, Caesars?

In a bounceback move, Las Vegas-based gaming operator Caesars Entertainment Corporation has applied through a subsidiary for several gaming-related trademark registrations in the Macau SAR Sheyla Zandonai sheyla.zandonai@macaubusiness.com Nelson Moura nelson.moura@macaubusinessdaily.com

A

subsidiary of Caesars Entertainment Corporation, Caesars World LLC, has applied for four trademark registrations in the Macau SAR, according to information published in yesterday in the Official Gazette.

In particular, one of the applications made under the brand name ‘Caesars’ covers gaming-related products and services.

These include gaming machines – such as slots, poker, and entertainment gaming machines – gaming equipment and gaming tables of fortune and chance, and games for gaming machines.

The other three – two filed under the brand name ‘Caesars’ and one under ‘Caesars Palace’ – comprise commercial and industrial activities including software for video and computer games and content management systems, in addition to electronic games software for mobile phones and for social networking application and platforms.

The four applications were submitted on June 14.

Nearly a month ago, similar trademark applications for gaming and casino service provision were filed under the brand name ‘Trump’

by DTTM Operations LLC, a company managing trademarks linked to the President of the United States, Donald Trump, Business Daily reported first-hand.

The four applications submitted by DTTM Operations LLC were filed on June 7.

Caesars Entertainment Corporation, based in the American city of Paradise, Nevada, currently owns and operates 47 hotels and casinos in the United States, Canada, the United Kingdom, Egypt, and South Africa through several subsidiaries.

The company has been struggling to balance its accounts for nearly two years and a half, having recently started to emerge from its bankruptcy while proceeding to the reorganisation of its structure by regrouping its casinos and hotels under one roof, Reuters reported.

Asian bids

Caesars is also seeking a new opportunity to enter the Asian gaming market.

Like fellow casino giant Las

Vegas Sands, Caesars has recently gone public about its plans to bid for an IR concession in Japan during the public hearings that took place in the country from August 17 to 29, which presented the framework of the Integrated Resort Promotion Bill, Bloomberg reported.

The Las Vegas-based company also held previous investments in Macau.

In 2007, its corporate

predecessor, Harrah’s Entertainment, acquired a land plot near the Cotai Strip for a total consideration of US$578 million (MOP4.65 billion) with the ultimate goal of securing a licence to develop and operate a casino-resort, which never materialised, according to previous media reports.

In 2010, the company changed the property name to Caesars Golf, following the

corporate name change, San Diego Tribune reported.

It held onto the property until August 2013, when the company sold it to an Asian developer, Pearl Dynasty Investments Ltd., for a total consideration of US$438 million, claiming the proceeds would be used to fund other capital expenditures or repurchase debt obligations, according to a Reuters report. advertisement

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8 Business Daily Thursday, September 7 2017

Macau

(L-R) Didier Bouchon, Samuel Bianchini, Filipe Pais Robotics

Art in the machine Changing the way in which we react with our ever-more-robotic environment, creating interaction without function and art that makes observers think about the man-machine relationship – the next step in the world of design and art Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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hanging the way in which you understand and interact with machines, using robotics in our daily lives – in everyday objects – to dynamically interact with our environment, using robotic integration in art to teach us something about the way that we use, understand, and appreciate it. Such is the tip of the iceberg of what Samuel Bianchini, Filipe Pais and Didier Bouchon introduced their students to yesterday in a workshop entitled ‘MisB KIT WORKSHOP – A Prototyping Toolkit to Experiment with Behavioural Objects’.

Held at the University of St. Joseph’s old campus – as the institution is in the process of shifting to its new location in Ilha Verde – the workshop introduced a system involving motors which can receive wireless signals via software to perform non-traditional or task-related functions defined by their creators.

“We want to make a bridge between robotics and art and design,” explains the leader of the project, Samuel Bianchini – head of the ‘Reflective Interaction’ Research Group of the École Nationale Superiére des Arts Décoratifs in Paris.

“For us,” explains Bianchini, “it’s important to work on robotic projects without function. In this sense this kind of project [is more in the] leisure field. We are not interested in improving an object in a functional approach. One of our questions is ‘what is a new affective relationship with an object if the object could be more intelligent, could have special movement, could have reaction - but not reaction to do something - but to have a better relationship with people?’”

Bianchini, also an artist, explains the typical relationship between man-machine, noting: “If you understand action in a functional field

it’s common. But if you want to understand action without this functional idea of the world, you need to take into account choreography and take into account the movement of the body. And so what kind of movement could provoke a certain relationship with the object”.

Working together with Bianchini, and leading the workshop portion of the group’s participation in the ARTECH 2017 - 8th International Conference on Digital Arts, held by the University and running until September 8, is Filipe Pais – of the same institute, who explains the importance of using this new art format properly in order to have effect.

“If you’re just using interactive or the so called ‘digital art’ - which I really don’t like because it’s making a split, it’s creating a dualism - if this kind of art is not able to reveal something about machines, then in my opinion, it’s doing nothing.

Because it should actually show something to bring some light into what machines are doing to us.

“And of course while triggering this kind of experience - which sometimes is very playful, it can actually shed some light on the role of machines and how they really change our lives and how they put somehow at risk who we are and who we were.”

“We’re really interested in this form of robotics which have the shape of everyday life objects; for instance, a chair or a table that is able to move and to behave in a certain way,” explains Pais.

“It’s how to shift the relationship with the environment and to respect the environment as a living environment,” expounds Bianchini, explaining that art has a role in us understanding the symbiotic relationship with machines – laid plain to the user only once needed.

“If you need to help an object to do something, it changes completely the relationship with the object,”

points out Bianchini, referring also to ‘animism’ which he hopes “to provoke experience and reflection” through interaction with the otherwise-inanimate object.

What next?

While Bianchini does not believe that these inanimate objects have, or will soon develop, consciousness, his colleague Didier Bouchon believes they can; in particular, that these interactions with the objects could develop into something deeper, with humans even falling in love with the objects themselves.

“I think it will happen, yes. But there’s a difference. We can love an animal, but it’s not a love like between a man and a woman, between people […] Robots can never be like humans, because they don’t feel the world and the relationships as we feel them. Because they don’t have the same sensation,” he says.

Pais points out that “if you look at the way you feel an affection for certain objects you have, certain things someone gave you, [you notice] we establish a very deep, symbolic relationship with inanimate things.”

“It’s not very hard to guess that we might fall in love, or we might have a certain affection for computers just another kind of object,” opines Pais, countering, “then of course I’m not sure that computers will fall in love with you”.

Art-media

As this interaction with animism evolves, so too does the changing definition of art.

“Some people like one thing, some like others, and they must feel it themselves. We don’t need to tell them ‘this is art’,” says Bouchon in regard to acceptance of art involving robotics.

This can largely be defined by context – the main limitation behind this newer form of art being consumed in traditional settings such as museums, explains Bianchini.

“If you are in a museum and you have a lot of paintings, sculptures, photographs etc, and you have a context and a special relationship with the object: you need to be at a distance, not touch, etc. [but] if you after that you need to touch [the art piece] and be involved it completely changes the context,” he points out.

“Art has a value, and has an economical value, mostly because some of us can actually touch art because we can pay for it,” opines Pais. “But the thing is, art was always about interaction and interactivity, so this notion that interactive art - and that robotics bring interaction is totally false. Because we always establish an interactive relationship with a painting, with a Van Gogh [for example] because we move in a certain way, our eyes are actually “touching” the painting, we are actually scanning, we are moving in space. Of course the painting won’t change dynamically but it will bring us something, it will cause an effect, an impression upon us,” he notes.

“For the art market it’s very difficult to accept this kind of new art because it changes everything for the museums as well,” says Bianchini.

“If you want to put an art robot in a museum it’s complicated because it’s not just an object that you can put on the wall and contemplate.

It changes everything [about the experience],” he explains.

And these artists creating these dynamic, through-provoking projects cannot work alone, he continues.

“Currently, we’re all working together with an engineer - like Didier - but at the same time with cognitive science, an anthropologist, a robotician . . . It’s very important to build this kind of team for this complex subject.

And the time to mix together these different approaches and to make sense of them and to provoke experience and reflection, he notes, is now.

Business Daily Thursday, September 7 2017 9

Greater China In Brief M&A

Anbang, HNA considered buying insurance group Allianz

A panorama of Shenzhen

Regional competition

As Shenzhen overshadows Hong Kong, the ex-colony keeps its jewel In less than 40 years, Shenzhen’s population has ballooned to more than 11 million people from 30,000, government data show Eric Lam

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ong Kong is on the verge of seeing its economy surpassed in size by the former fishing village Shenzhen, a role reversal long foreshadowed by China’s massive supply of cheap labour and subsidized capital.

Shenzhen -- less than 20 miles north of central Hong Kong -- will see its gross domestic product jump to US$350 billion in 2018, ahead of its rival’s projected US$345 billion, according to an analysis by Michael Parker, head of Asia Pacific strategy at Sanford C. Bernstein & Co. Yet while Shenzhen has amply demonstrated the ability to take the original Hong Kong trade-and-manufacturing prototype to new heights, in one main area it’s the ex-British colony that still reigns supreme. Hong Kong has kept its prominence as a financial centre, with its influence highlighted most recently by the opening of a gateway to the mainland’s bond market.

“There’s almost a false premise here that it has to be one or the other, whereas they’re competing in different streams,” Parker said in a phone interview. “Hong Kong is continuing to benefit from its proximity” to the mainland, and Shenzhen is boosted by “the maturation of the services and technology sector” in China, he said.

In less than 40 years, Shenzhen’s population has ballooned to more than 11 million people from 30,000, government data show -- well ahead of Hong Kong’s 7.39 million. Meanwhile, Shenzhen’s annual GDP gains have averaged nearly 10 per cent since 2010.

Hong Kong, however, has averaged about 3 per cent annual growth in the past seven years as the city struggled with a downturn in tourism spending, pro-democracy protests in 2014 and the world’s most-expensive housing market. It’s projected to expand less than 3 per cent in each of the next two years, according to analyst estimates compiled by Bloomberg.

Like London

But the distinction between the two Pearl River Delta ports showcases China’s challenge to replicate developed-world standard financial infrastructure, even as its economy keeps expanding in excess of 6 per cent.

“It’s always going to be the financial hub and the gateway -- you’re never going to get rid of it,” Stephen Innes, the Singapore-based head of trading for Asia Pacific with Oanda Corp., said of Hong Kong. “It’s like London going through Brexit: obviously it’s not going to be the same place anymore but it will still remain the financial centre.”

Shenzhen has shined amid China’s

efforts to move up the value chain and go beyond cheap manufactured goods like plastic toys and simple textiles like T-shirts. The city is now an information-technology hub, with sector giants including Tencent Holdings Ltd., ZTE Corp. and Huawei Technologies Co. all based there -- a jump Hong Kong has struggled to make.

Hong Kong’s role as a bridge for foreign investors to China’s wealth will be key to its future, says Dong Chen, senior Asia economist with Pictet Wealth Management. As entrepreneurs expand their businesses in Shenzhen, they will inevitably need to tap Hong Kong’s deep talent pool for high-end financial services, he said.

With specializations including investment banking and legal services, Hong Kong has maintained a stark gap with Shenzhen in output per person, projected at about 60 per cent in 2018, Chen said. Hong Kong’s per capita GDP came in at just under US$44,000 in 2016, compared with about US$25,000 in Shenzhen, Hong Kong Trade Development Council data show.

“The rise in Shenzhen in general should benefit Hong Kong,” Chen said. “Hong Kong was like a role model to some extent to many coastal cities in China -- Shenzhen included -- by offering free markets.

Shenzhen definitely is a very good student.” Bloomberg News

Aviation

Beijing to spend over US$1 trln on planes over next 20 years Boeing and European rival Airbus have been jostling for market share in China Chinese airlines are likely to buy more than 7,000 planes worth US$1.1 trillion over the next 20 years, as they grow their fleets to meet robust demand for domestic and international travel, Boeing Co said in a bullish forecast yesterday.

Its latest estimate of 7,240 aircraft purchases for the period to 2036 is 6.3 per cent higher than the U.S.

planemaker’s previous prediction of 6,810 planes last year.

“China’s continuous economic growth, significant investment in infrastructure, growing middle-class and evolving airline business models support this long-term outlook,” Randy Tinseth, Boeing Commercial Airplanes vice president of marketing, said.

“China’s fleet size is expected to grow at a pace well above the world average, and almost 20 per cent of global new airplane demand will be from airlines based in China,” Tinseth said in a statement.

Boeing and European rival Airbus have been jostling for market share in China, the world’s fastest growing aviation market, with both opening assembly plants in the country.

Both firms have profited heavily from the aggressive fleet expansion plans of Chinese airlines, which are now experiencing falling passenger returns on routes, thanks to stiffer competition and capacity increases.

The U.S. firm said it expects three-quarters of the 7,240 plane

orders to be for single-aisle aircraft, thanks to strong demand for travel within China and throughout Asia.

The wide body fleet would require 1,670 new planes, it added.

Key Points Chinese airlines to buy 7,240 planes over the next two decades Boeing says China to take up a fifth of global new plane demand Optimistic over long-term outlook Tinseth said he expected more demand for wide body aircraft, adding that the falling returns now being experienced by airlines was temporary. “They are big investments, it takes time, and they will get there,” he said.

He added that there was more optimism on the long-term economic outlook, given better-than-expected economic growth in China this year, while the cargo market was also seeing a resurgence. Reuters

China’s Anbang Insurance Group Co Ltd and HNA Group Co Ltd separately considered buying stakes in German insurer Allianz SE as part of plans to create a global financial empire, people with direct knowledge of the matter said. The conglomerates considered buying a majority stake in the world’s fourth-largest insurer by market value worth over US$95 billion while HNA was also open to a minority stake, said two people who were involved in the discussions. The separate talks were called off earlier this year on expected regulatory hurdles in Germany and China and due to little interest shown

by Allianz’s management, they said.

Agriculture

Plastic film covering 12 pct of farmland pollutes soil China will expand its agricultural use of environment-damaging plastic film to boost crop production even as authorities try to curb soil pollution, a government scientist said.

Some 1.45 million metric tons of polyethylene are spread in razor-thin sheets across 20 million hectares of farmland in China. Use of the translucent material may exceed 2 million tons by 2024 and cover 22 million hectares, according to Yan Changrong, a researcher with the Chinese Academy of Agricultural Sciences in Beijing. The plastic sheets are growing in popularity because they trap moisture and heat, and prevent weeds and pests.

Strategy

Wanda likely to delay sale for unit Dalian Wanda Group Co. delayed a RMB10-billion (US$1.5 billion) share-sale plan for its internet unit amid mounting scrutiny from the Chinese government, a person familiar with the matter said. The series A fundraising, an early round of investment, for closely held Wanda Internet Technology Group will be pushed back until at least early next year, the person said, asking not to be identified discussing private information.

Billionaire Chairman Wang Jianlin (pictured) said in January that the business would begin raising funds during the third quarter.

Wanda Internet declined to comment.

10 Business Daily Thursday, September 7 2017

Greater China International relations

Banks, oil giants at risk from Trump’s sanction threat Chinese banks are especially vulnerable to sanctions because they had US$144 billion of assets in the U.S. at the end of December

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resident Donald Trump’s rhetoric about imposing widespread sanctions on China for propping up North Korea’s economy may put pressure on some of its banks and oil companies.

Harsh critics of China’s support for its neighbour have argued that American efforts to stop North Korea’s nuclear weapons program must include tougher sanctions against Chinese state-owned companies. So far, the U.S. focused on small entities such as Bank of Dandong.

But now the bigger players may be at risk after Trump threatened on Twitter to cut off trade with any country doing business with North Korea because of its latest nuclear test.

One Republican congressman called out Bank of China Ltd. as a potential sanction target, and Treasury Secretary Steven Mnuchin said punishing specific entities is an option. China is the U.S.’s largest trading partner, with US$578.6 billion in two-way trade last year, according to the Office of the U.S. Trade Representative.

“UN must impose oil embargo on N Korea ASAP,” Representative Peter King of New York wrote in a Sept.

3 message on Twitter. “If China or Russia veto, US must sanction any1 doing business with NK, including Bank of China.”

When asked by Fox News whether the U.S. would impose tougher sanctions against Chinese financial institutions and companies, Mnuchin said, “We’re going to strongly consider everything at this point.”

“If countries want to do business with the United States, they obviously will be working with our allies and others to cut off North Korea economically,” he said.

Chinese banks are especially vulnerable to sanctions because they had US$144 billion of assets in the U.S. at the end of December, according to data from the U.S. Federal Reserve.

Most of those assets are held by Bank of China and the Industrial and Commercial Bank of China. Beijing-based press officers for the two banks separately declined to comment.

“The household names -- Bank of China, all the Chinese banks on the large scale -- would be on the target list,” said John Park, director of the Korea Working Group at Harvard University’s John F. Kennedy School of Government.

Bank of China was the first Chinese bank to set up operation in the U.S. It currently has four branches in New York, Los Angeles and Chicago, with US$78.5 billion of total assets. It’s a fully licensed bank with services including corporate finance, trade finance and personal finance.

ICBC started its U.S. operation in 2008. Its financial services holding unit offers securities clearing and financing services for corporate clients.

This unit had US$40 billion of assets

by June, according to its semi-annual report.

It also has a fully licensed banking unit offering services including deposits, loans, trade finance, settlement and clearing, cash management and bank cards. It had US$2.14 billion of assets as of June 30, according to the report.

China’s oil companies also may be exposed. China is the biggest oil supplier for Kim Jong Un’s regime, providing almost all the estimated 15,000 barrels a day of crude and products reportedly imported by North Korea, according to the U.S. Department of Energy.

Most of those exports are from state-owned China National Petroleum Corp., the nation’s biggest oil producer, said Kim Kyung Sool, a senior research fellow at the Korea Energy Economics Institute. CNPC is the controlling shareholder of PetroChina Co., a Hong Kong-listed company with investors including JPMorgan Chase & Co., Blackrock Inc. and Citigroup Inc. CNPC and PetroChina don’t have any exploration or production assets in the U.S., but other oil giants -- including China Petroleum & Chemical Corp. and Cnooc Ltd. -- do. Also, Sinochem Group in 2013 bought a 40 per cent stake in Texas oil-shale acreage from Pioneer Natural Resources Co. in a US$1.8 billion deal.

There’s nothing to indicate that any of the other companies sell to North Korea.

China’s oil companies also buy burgeoning U.S. energy exports, including crude and liquefied natural gas, which the Trump administration has encouraged.

CNPC’s Beijing-based spokesman declined to comment Tuesday.

PetroChina, China Petroleum and Cnooc’s Beijing-based spokesmen didn’t reply to requests for comment. Sinochem’s Beijing-based spokesman didn’t answer calls to his office and mobile phone seeking comment.

“Any U.S. sanctions against PetroChina or even its parent CNPC will trigger a tit-for-tat kind of retaliation from China,” said Laban Yu, head of Asia oil and gas equities at Jefferies Group LLC in Hong Kong.

“If countries want to do business with the United States, they obviously will be working with our allies and others to cut off North Korea economically” Steven Mnuchin, U.S. Treasury Secretary A comprehensive oil embargo would have to be approved by the UN Security Council, which China can veto as a permanent member.

The council last month agreed to ban North Korean exports of coal, iron ore, lead ore and seafood.

China called Trump’s threat “unacceptable” and said Sept. 4 it is ready to participate in any Security Council discussions.

“China has always stayed

committed to the denuclearization of the Korean Peninsula, upholding peace and stability on the Korean Peninsula and promoting the peaceful settlement of the relevant issue through dialogue and negotiation,” Geng Shuang, a Foreign Ministry spokesman, said.

Others caution that it’s better for the U.S. to cooperate with China President Xi Jinping’s government than to slap it with sanctions. That’s because China could retaliate against U.S. companies doing business there, such as Apple Inc., Boeing Co., Starbucks Corp. and automakers.

Sales in Greater China accounted for about 23 per cent of Apple’s revenue last fiscal year, according to data compiled by Bloomberg. Heightened tensions between the two countries could dampen sales of the iPhone 8 scheduled to debut Sept. 12.

Chinese purchases of Boeing planes accounted for 11 per cent of the Chicago-based company’s revenue of US$94.6 billion.

The leaders of other major countries are divided over the question of further sanctions. Russian President Vladimir Putin dismissed them as ineffective, while German Chancellor Angela Merkel and Japanese Prime Minister Shinzo Abe spoke Sept. 5 and agreed on the importance of new sanctions, according to a statement from the German government.

“The saber rattling that has gone on has caused some concern, but it’s the sanctions that are really worrying markets -- and the potential disruption to global trade,” Michael McCarthy, Sydney-based chief market strategist for CMC Markets, said on Bloomberg Television. Bloomberg News

Business Daily Thursday, September 7 2017 11

Asia Official data

Australian economy rebounds in Q2 amid infrastructure bonanza Consumers splashed out on food, alcohol, clothes, household goods and communications Wayne Cole

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ustralia’s economy rebounded last quarter as consumers and government spent freely after a weather-beaten start to the year, while a long downturn in mining investment finally loosened its deadening grip on growth.

Yesterday’s GDP report showed the economy expanded 0.8 per cent in the second quarter, up from 0.3 per cent in the first quarter and outpacing even the much-vaunted U.S. recovery.

Yet all this growth has shown no sign of rekindling inflation and, with plenty of spare capacity in the labour market, the Reserve Bank of Australia (RBA) seems content to leave interest rates at record lows for months to come.

“We have an economy that is enjoying its longest-ever expansion,” said Craig James, chief economist at stockbroker CommSec. “Inflation is below 2 per cent; unemployment is below longer-term averages; consumers and businesses are spending.”

“It’s an economy that doesn’t need to be slowed down or sped up by policy changes like movements in interest rates.”

That was very much the view laid out by RBA Governor Philip Lowe in a speech late Tuesday.

“It will be some time before we are at what could be considered full

employment and before underlying inflation is at the mid-point of the medium-term target range,” he declared.

“This means that stimulatory monetary policy continues to be appropriate.”

Interbank futures imply virtually no prospect of a move in the 1.5 per cent cash rate this year and around a 50-50 chance of a hike by June 2018.

Key Points Q2 GDP rises 0.8 pct q/q, 1.8 pct y/y Public infrastructure, household spending drive growth Lack of inflation leaves RBA with luxury to wait on rates

Infrastructure boom

Over the year to June, gross domestic product (GDP) amounted to A$1.75 trillion (US$1.4 trillion) in current dollars, or about A$72,180 for each of Australia’s 24.5 million citizens.

The economy expanded by 1.8 per cent compared to a year ago, held back by a rare contraction in the third quarter of 2016. Australia has not suffered an outright recession typically defined as two consecutive quarters of contraction - since 1991.

Once that negative GDP number drops out of the calculation this quarter, annual growth could well approach 3 per cent.

Driving the latest pick up was a surge in public investment, including roads, rail and a major new hospital the country’s single most expensive building.

As a result, government spending alone added 0.8 percentage points to growth. Just behind was household consumption with a contribution of 0.4 percentage points.

Consumers splashed out on food,

alcohol, clothes, household goods and communications while using less gas and electricity because of rising utility prices.

Rising export volumes, particularly for liquefied natural gas, also added to growth, helping offset a rundown in inventories which was the single biggest drag in the quarter.

There was scant sign of inflationary pressures in the report with the main price measure for households up just 1.3 per cent in the year to June, while inflation across the entire domestic economy rose 1.5 per cent. Reuters

Clean power drive

S.Korea eyes lifting LNG, renewables capacity by a tenth The country now produces nearly 40 per cent of its electricity from coal Jane Chung

South Korea is lining up plans to lift its power production capacity by up to a tenth by 2030, mostly using liquefied natural gas (LNG) and renewable energy in an ambitious drive to cut decades of reliance on coal and nuclear plants.

A draft policy paper unveiled by Seoul’s energy ministry yesterday showed it hopes to meet rising demand in Asia’s fourth-largest economy by adding 5-10 gigawatts (GW) to its installed capacity base - about 4.7-9.5 per cent of current capacity - mostly from LNG and renewables.

But the numbers highlight the challenge Seoul faces in meeting new President Moon Jae-in’s campaign promises. Moon wants to generate 20 per cent of Korea’s power from renewables by 2030, up from 5 per cent now: Even if renewables take up all the new capacity outlined yesterday, other steps may be needed to meet the radical goal.

“We are working on a plan to reduce nuclear and coal power generation gradually,” said Choi Woo-seok, director of the ministry’s electric power division, speaking at a public

hearing in the capital. “But at the same time we are seeking to expand the share of renewables and LNG for power generation to keep abreast with global trends.”

The draft, which provided few numeric details, is the first step in the ministry’s plans to flesh out a new energy policy by the end of October

and finalise it by the end of the year.

South Korea now produces nearly 40 per cent of its electricity from coal, followed by nuclear at around 30 per cent. The rest comes from LNG, with around 20 per cent, oil and others 5 per cent, and renewables the final 5 per cent.

But President Moon won office in

early May this year, running on a campaign that featured pledges to move away from coal and nuclear power to allay public concerns over safety and air pollution.

The ministry plans to close seven old coal-fired power plants by 2022, while banning the building new coal-fired and nuclear power plants, according to the draft.

Key Points Ministry paper sees 5-10 GW new installed capacity by 2030 LNG, renewables to account for most of new capacity Plans highlight scale of Pres Moon’s clean energy target

The fate of two partially-completed nuclear reactors remains unclear. The government suspended construction of Shin Kori No.5 and Shin Kori No.6 reactors until it gathers public opinion

by October whether they should be cancelled amid concerns over atomic safety. Reuters

12 Business Daily Thursday, September 7 2017

Asia Salaries

Sharp drop in Japan’s real wages raises fears for consumer spending Some manufacturers such as automakers reduced the size of bonus payments as the yen’s gains until late last year weighed on profits Tetsushi Kajimoto

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apanese workers’ wages fell in July from a year earlier on a drop in summer bonus payments, casting some doubt on the sustainability of a recent improvement in consumer spending.

Wages fell in both nominal and inflation-adjusted real terms, labour ministry data showed yesterday.

Wage earners’ nominal cash earnings fell an annual 0.3 per cent, reversing from the prior month’s revised 0.4 per cent gain and the first decline since May 2016.

Reflecting a 0.6 per cent rise in

consumer prices, inflation-adjusted real wages fell 0.8 per cent, down for the second straight month and the biggest decline since June 2015.

The data is likely to raise questions over the central bank’s assertions that a tightening labour market will eventually lead to higher wages and a resulting increase in consumer spending, which will boost economic activity and inflation.

Some economists say the decline in real wages may weigh on private consumption, which led Japan’s economy to expand at the fastest pace in more than two years in the April-June quarter.

“A sharp drop in real wages is a source of concern, which could deprive households of purchasing power, hurting private consumption as increases in electricity and gas charges push up overall prices in the July-September quarter,” said Yuichiro Nagai, economist at Barclays Securities.

“Even though the pace of declines in real wages will slow from October, nominal wages are unlikely to accelerate until next year’s spring labour negotiations.”

A ministry official said a broader, improving trend was still intact.

“Excluding the decline in special

payments, wages remain in moderate increase,” a ministry official in charge of compiling the data told Reuters.

The ministry will issue later this year the average figures for the summer bonuses that were paid in June, July and August, the official added.

Key Points July nominal wages -0.3 pct yr/yr vs +0.4 pct in June Real wages -0.8 pct yr/yr vs -0.1 pct in June Sharp drop in real wages may hurt consumer spending -analyst Moderate wage increase is still intact -govt Special payments - predominantly but not entirely made up of summer bonuses - fell 2.2 per cent in July from a year ago and the first drop since January.

Some manufacturers such as automakers reduced the size of bonus payments as the yen’s gains until late last year weighed on profits.

Regular pay, which determines base wages, was up 0.5 per cent in the year to July, rising for a fourth straight month.

Overtime pay, a barometer of strength in corporate activity, rose 0.1 per cent year-on-year in July, after a revised 0.1 per cent drop in the previous month. Reuters

Philippines

Protesters storm mining event, demand halt to extraction Anti-mining protests are a fixture at mining industry events in the Philippines Enrico Dela Cruz

Around 300 protesters clashed with security yesterday at a Manila hotel where an annual mining conference was being held, demanding that mineral extraction be halted due to the environmental destruction caused.

‘Last month, lawmakers allied with Duterte filed a bill seeking to ban mining in watershed areas and exports of unprocessed ores’ The rally comes a day after President Rodrigo Duterte declared he’s supporting a ban on open-pit mining in the Southeast Asian nation, a move that could constrict supply from the world’s top nickel ore exporter.

“Words are not enough, he must act on it,” lawyer Aaron Pedrosa of Sanlakas (One Force), an activist

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political group that was among the protesters, told reporters.

“We are here to express our opposition to mining in our country and the failure of mining companies to rehabilitate mining areas,” Pedrosa said.

Anti-mining protests are a fixture at mining industry events in the Philippines. Some of the protesters, clad in business suits, managed to get past hotel security and into the lobby where they held up placards denouncing mining.

Outside the hotel, other protesters, including those from tribal communities, chanted and held streamers saying “Stop Mining Plunder” and “No to Large-Scale Mining”. The hotel was locked down for at least an hour.

Mining is a contentious issue in largely underexplored Philippines following past examples of environmental mismanagement. In 1996, for instance, a tailings leak at Canadian-owned Marcopper Mining Corp’s copper mine in Marinduque contaminated rivers.

The sector contributes less than 1 percent to the economy, with only 3 percent of the 9 million hectares identified by the state as having high mineral reserves being mined, according to government data.

Last month, lawmakers allied with Duterte filed a bill seeking

to ban mining in watershed areas and exports of unprocessed ores.

The bill would also require miners to get legislative approval before operating.

The move comes after a 10-month mining crackdown led by former Environment Secretary Regina Lopez, who ordered the closure or suspension of 26 of the country’s 41 mines and banned open-pit mining.

Lopez failed to be confirmed in her post by lawmakers and was replaced in May by Roy Cimatu, a former soldier who has so far not reversed any of her previous measures.

Gerard Brimo, president of top Philippine nickel ore producer Nickel Asia Corp, said the industry would like to show Duterte old mines that have been rehabilitated, including open pits.

Open-pit extraction is allowed under a Philippine mining law and is widely used in the country where most ore is near the surface and low grade.

“If you want minerals and metals ... that’s the reality. That’s the case in the Philippines as it is all over the world. But the other reality is that it can be rehabilitated.” Reuters

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Business Daily Thursday, September 7 2017 13

Asia Trade

In Brief

Malaysia’s July exports exceed forecast Exports to China grew 28.8 per cent from a year earlier Malaysia’s export growth in July exceeded expectations, rising 30.9 per cent from a year earlier, government data showed yesterday, on higher shipments of manufactured products and mining goods.

The pace of expansion beat the 23.1 per cent rise forecast by a Reuters poll and tripled the 10 per cent growth posted in June.

Shipments of manufactured goods, which accounted for more than

four-fifths of Malaysia’s total exports, were up 32.6 per cent from a year earlier in July, data from the International Trade and Industry Ministry showed. Most of the manufactured goods were electrical and electronic products.

Exports of mining goods expanded 27.5 per cent on higher prices and volumes of liquefied natural gas, the data showed.

July’s imports grew 21.8 per cent

from a year earlier, sharply up from the 3.7 per cent growth posted in June.

Imports of intermediate and consumption goods rose but capital goods, which totalled 13 per cent of total imports, declined by 16.5 per cent.

Malaysia reports trade data in ringgit.

The trade surplus in July narrowed to 8.0 billion ringgit (US$1.88 billion) from June’s 9.9 billion ringgit.

Exports to China grew 28.8 per cent from a year earlier, the ninth straight month of double-digit growth.

Shipments to the United States rose 14.4 per cent, while those to the EU grew 34.1 per cent.

Malaysia’s total trade surpassed the 1 trillion ringgit mark in the first seven months of the year, growing 22.7 per cent from the corresponding period last year.

Government data showed this was the fastest trade had surpassed the 1 trillion mark, two months earlier than usual. Reuters

Thai consumer confidence rises

Commodities

Diplomats have said the Security Council could consider banning North Korean textile exports, barring its airline and stopping supplies of oil to the government and military.

Other measures could include preventing North Koreans from working abroad and adding top officials to a blacklist aimed at imposing asset freezes and travel bans.

Trump and British Prime Minister Theresa May agreed in a telephone call on Tuesday that China, the North’s main ally and trading partner, must do more to persuade North Korea to cease its missile tests, a spokesman for May said.

Australian Prime Minister Malcolm Turnbull also spoke with Trump and reiterated calls for China to use its leverage to bring North Korea in line.

China and Russia have advocated a “freeze for freeze” plan, where the United States and Seoul halt major military drills in exchange for North Korea halting its weapons programmes, but neither side is willing to budge.

North Korea says it needs to develop its weapons to defend itself against what it sees as U.S. aggression.

South Korea and the United States are technically still at war with North Korea after the 1950-53 Korean conflict ended with a truce, not a peace treaty. Reuters

“More gift packages”

A top North Korean diplomat warned on Tuesday his country is ready to send “more gift packages” to the United States. South Korea’s Unification Ministry said yesterday it was still expecting more activity from the North.

Han Tae Song, Pyongyang’s ambassador to the United Nations in Geneva, confirmed that North Korea had successfully conducted its

Sentiment

More sanctions?

Japanese Prime Minister Shinzo Abe, who will discuss North Korea with Moon and Putin in Vladivostok, said yesterday he wanted the North to understand it has “no bright future” if it continues on its current path

South Korean President Moon Jae-in told Russian leader Vladimir Putin on Wednesday that the situation on the Korean peninsula could become unpredictable if Pyongyang did not halt its “provocative actions” after its latest nuclear bomb test.

Putin and Moon met on the sidelines of an economic summit in the far eastern Russian city of Vladivostok amid mounting international concerns that their shared neighbour plans more weapons tests, possibly a long-range missile launch ahead of a key weekend anniversary.

Moon, who came to power earlier this year advocating a policy of pursuing engagement with Pyongyang, has come under increasing pressure to take a harder line on North Korea.

He said on Tuesday the United Nations should consider tough new sanctions on North Korea, including halting oil shipments, after Sunday’s nuclear test.

However, Russia has reacted coolly to the prospect of more sanctions, with Putin saying on Tuesday it was a “road to nowhere”.

Sanctions have so far done little to stop North Korea boosting its nuclear and missile capacity as it faces off with U.S. President Donald Trump, who has vowed to stop Pyongyang from being able to hit the U.S. mainland with a nuclear weapon.

U.S. Ambassador to the United Nations Nikki Haley accused North Korean leader Kim Jong Un on Monday of “begging for war” with a series of nuclear bomb and missile tests. She urged the 15-member Security Council to impose the “strongest possible” sanctions to deter him and shut down his trading partners.

A senior official at India’s capital markets regulator warned yesterday about the impact of “huge” foreign investments on the rupee and called for ways to manage the inflows through “a calibrated system.” The comments, from Securities and Exchange Board of India (SEBI) Whole-Time Member G. Mahalingam, delivered during a speech at a financial event, mark the strongest public comments this year from an Indian regulator about the effects of strong inflows in pushing up the currency. Foreign investors have bought a net US$23.1 billion in Indian debt so far this year.

preparations for more activity as they pushed for a stronger international response.

S.Korea’s Moon discusses “unpredictable” N.Korea situation with Putin

sixth and largest nuclear bomb test on Sunday.

“The recent self-defence measures by my country, DPRK, are a gift package addressed to none other than the U.S.,” Han told a disarmament conference, using the acronym for North Korea’s formal name, the Democratic People’s Republic of Korea.

“The U.S. will receive more ‘gift packages’ ... as long as it relies on reckless provocations and futile attempts to put pressure on the DPRK,” he said without elaborating.

Asian stocks tracked Wall Street’s slide overnight to slip yesterday, while the dollar was on the defensive with tensions in the Korean peninsula showing few signs of abating.

Sunday’s test of what North Korea said was an advanced hydrogen bomb was its largest by far.

Japan upgraded its assessment of the North Korean test to 160 kilotons from 120 kilotons after the size of the earthquake it generated was revised to 6.1.

“Calculating based on this number, the estimated yield was 160 kilotons,” Defence Minister Itsunori Onodera told reporters. “We estimate this was far bigger than previous nuclear tests.”

Satellite imagery appeared to show the blast caused numerous landslides at North Korea’s Punggye-ri test site, according to 38 North, a Washington-based North Korean monitoring project.

South Korean officials said they continued to monitor for radioactive fallout from the test and for signs of

Regulator calls for new ways to manage foreign inflows

Thailand’s consumer confidence in August picked up for the first time in four months on expectations the economy would improve in the second half on strong exports and tourism, a private survey showed yesterday.

The index of the University of the Thai Chamber of Commerce rose to 74.5 in August from 73.9 in July.

Consumers should be more confident in spending in the final quarter of this year, and helping drive growth in the period, the university said in a statement.

Korean crisis

Denis Pinchuk and Christine Kim

India

South Korean President Moon Jae-in (L) and Russian President Vladimir Putin stand and clap at a press conference following their summit talks in Vladivostok, Russia, yesterday. Source: Lusa

Malaysian palm oil stocks believed rising Malaysian palm oil stocks likely rose for a second month in August, inching towards the 2-million tonne mark as output in the world’s second-largest producer of the commodity remains near its strongest in two years, a Reuters poll showed. Climbing inventories could drag on markets for the tropical oil, used to make products ranging from cooking oil to soap and shampoo. Benchmark prices have been gradually rising over the last couple of months, lying at around 2,760 ringgit (US$650) a tonne yesterday. Palm oil stocks at the end of August stood at 1.9 million tonnes.

Election

Cambodia says opposition party could be barred Cambodia’s government has raised the possibility that the main opposition party could be ruled out of elections if it does not replace its leader, Kem Sokha, who has been charged with treason. The opposition Cambodia National Rescue Party (CNRP) has said it will not replace its leader and the comments reinforced its fears that Prime Minister Hun Sen plans to cripple it before next year’s elections. The arrest of Kem Sokha on Sunday drew Western condemnation and marked an escalation in a crackdown on critics of Hun Sen, who has ruled for 30 years and could face possibly his toughest electoral challenge from the CNRP next year.

14 Business Daily Thursday, September 7 2017

International In Brief Rating

Madeira, Azores see Moody’s outlook upgraded to positive Rating agency Moody’s has upgraded the outlook for the autonomous regions of Madeira and the Azores from stable to positive. Moody’s has kept the non-investment rating for the Azores (‘Ba2’, the second junk level) and Madeira (‘B1’, the fourth junk level). The change in the outlook comes after the agency improved the outlook for Portuguese government debt last Friday and it “reflects the reduced pressure” on the autonomous regions. Moody’s believes the tax revenues of the two regions will increase as the medium-term perspectives of economic growth in the country improve, which will mean more transfers to the two regional governments.

Cybersecurity

Hackers gain entry into U.S., European energy sector Advanced hackers have targeted United States and European energy companies in a cyber espionage campaign that has in some cases successfully broken into the core systems that control the companies’ operations, according to researchers at the security firm Symantec.

Malicious email campaigns have been used to gain entry into organizations in the United States, Turkey and Switzerland, and likely other countries well, Symantec said in a report published yesterday.

Brexit

Leaked paper details British plans to limit EU migrants A period of at least two years following Brexit is foreseen to fully implement the plans

B

ritain intends to impose limits on low-skilled EU workers and restrict the arrival of Europeans’ family members after Brexit, according to a leaked document posted on the Guardian newspaper’s website.

The 82-page document outlines Home Office proposals to manage migration after Britain leaves the European Union, putting an end to free movement from the bloc.

“Put plainly, this means that, to be considered valuable to the country as a whole, immigration should benefit not just the migrants themselves but also make existing residents better off,” the document says.

The government envisages a dual system for EU citizens arriving after Brexit, with those wishing to stay long-term needing to apply for a two-year residence permit.

Those deemed “highly-skilled”, however, would be allowed to apply for a permit for up to five years under the proposals.

In the lengthy document, marked “sensitive”, Britain’s interior ministry also says it may “tighten up” the definition of family members allowed to accompany EU workers in Britain.

Partners, children under 18 and adult dependant relatives are the suggested limit.

Changes would also be seen at Britain’s borders, with the document

detailing government plans to require all EU citizens to travel on a passport rather than a national identity card as currently allowed.

This latter measure could be imposed as soon as Britain leaves the bloc -- set for March 29, 2019 -- but the Home Office promises “adequate notice” will be given.

A period of at least two years following Brexit is foreseen to fully implement the plans.

An ‘extreme’ hard Brexit

The proposals immediately attracted criticism and were dubbed “backof-an-envelope plans” by Britain’s trade union umbrella group, the TUC. “These plans would create an underground economy, encouraging bad bosses to exploit migrants and undercut decent employers offering good jobs,” said TUC general secretary Frances O’Grady.

London Mayor Sadiq Khan, from the opposition Labour party, said the document paved the way for “an extreme form of hard Brexit” which risked splitting up families.

“It reads like a blueprint on how to strangle London’s economy, which would be devastating not just for our city but for the whole country,” he said.

A spokesman for the Home Office told AFP the government would not comment on the leaked draft.

“We will be setting out our initial

proposals for a new immigration system which takes back control of the UK’s borders later in the autumn,” the spokesman said.

The issue of citizens’ rights has been labelled a top priority by the EU during Brexit negotiations, which are being held in stages and hosted

by Brussels.

“These plans would create an underground economy, encouraging bad bosses to exploit migrants and undercut decent employers offering good jobs” Frances O’Grady, TUC general secretary

In June the British government outlined plans for EU citizens in the country before Brexit, which would see them apply for “settled status” granting indefinite leave to remain.

AFP

Industry

German factory orders fall on weak domestic demand

After Brexit

France wants right to veto euro clearing in UK France wants European Union regulators to have a veto over how Britain supervises UK-based clearing houses of euro denominated transactions after Brexit, EU sources said. The demand marks an escalation in efforts by France, the European Central Bank and others to have a decisive say over euro-denominated clearing after Britain leaves the bloc in March 2019. LCH, a unit of the London Stock Exchange, currently dominates clearing of euro denominated derivatives. Euro clearing has become a battleground between London and Brussels.

Mozambique

Parties disagree on pilot census scheme Frelimo, Mozambique’s ruling party considers a pilot census scheme as part of the country’s election cycle to be relevant, while the main opposition party, Renamo, says it is useless and a waste of money.

Mozambique’s national Election Commission (CNE) has said it is going to run the pilot census between 6 and 30 of November in Maputo, Sofala and Nampula provinces with 58 brigades, that is expected to cost about 18 million meticals (€246,000). Lusa did not manage to get any comment from the country’s third political party, the MDM.

Recent figures have shown the number of Germans out of work falling further, consumer morale improving and the manufacturing sector expanding Michael Nienaber

German industrial orders fell unexpectedly in July on feeble domestic demand while appetite from abroad was flat, data showed on Wednesday -- a rare sign of weakness in Europe’s largest economy less than three weeks before federal elections.

Recent buoyant economic figures had underlined the strength of the German economy and its consumption-led upswing ahead of the Sept.

24 vote in which Angela Merkel is expected to win a record-equalling fourth term as chancellor.

Key Points Industrial orders down 0.7 pct in July Economists expected 0.3 per cent rise Ministry: July distorted by bulk orders Overall trend still pointing upward “This is not adding fuel to the hype about the economy,” Bankhaus Lampe economist Alexander Krueger said, although he noted that the overall trend in orders is still upwards.

Factories registered a 0.7 per cent drop in orders in July after contracts for goods made in Germany rose by 0.9 per cent in June, data from the Economy Ministry showed. The reading for July far undershot a Reuters forecast of a 0.3 per cent rise.

Excluding volatile bulk orders, the headline figure was up 0.6 per cent in July, the ministry said.

The stronger euro did not seem to

have dampened demand, with orders from countries outside the 19-member single currency bloc rising by 0.6 per cent in July, Stefan Kipar at BayernLB said.

Less consumer goods

The overall drop was mainly caused by a plunge in demand for consumer goods, but intermediate and capital goods orders also edged down on the month, a data breakdown showed.

Commerzbank analyst Ralph Solveen said the figures suggested that factories would still contribute to overall growth in the third quarter, but to a lesser extent than in the first half.

The ministry said order activity remained on a very high level overall.

“In the past three months, German companies have registered nearly as many orders as they did before the outbreak of the economic and

financial crisis in 2008,” it added.

Orders and sentiment indicators pointed to a continuation of the solid upswing in the sector, the ministry added.

Recent figures have shown the number of Germans out of work falling further, consumer morale improving and the manufacturing sector expanding.

The German economy grew by 0.7 per cent on the quarter in the first three months of the year and by 0.6 per cent from April to June, driven by increased household and state spending as well as higher investment in buildings and equipment.

The International Monetary Fund (IMF) expects the German economy to grow by 1.8 per cent in 2017 and by 1.6 per cent in 2018 in real terms. This would be slightly below the 1.9 per cent in 2016, which was the strongest rate in five years. Reuters

Business Daily Thursday, September 7 2017 15

Opinion China’s capacity cuts are mostly a mirage Christopher Balding a Bloomberg View columnist

S

ince D ecember 2 0 1 5 , C hina’ s government has been talking up what it calls supply-side reform. State media says the goal is “stimulating business through tax cuts, entrepreneurship and innovation while phasing out excess capacity.” That sounds reasonable. In reality, though, supply-side reform is doing almost nothing to reduce capacity, and may well be worsening the inefficiencies that are holding back China’s economy.

Judging by the headlines, the reforms are working fine. State media routinely reports on factories shutting and industries meeting their mandated goals for capacity reduction. But if outdated or failing plants are simply being replaced by newer ones, the net impact will be a continued increase in total capacity. And the data suggests that’s exactly what’s happening.

For one thing, China has continued investing heavily in metals processing and coal, albeit on a somewhat smaller scale. Investment in ferrous metals processing last year was a paltry 2 per cent less than in 2015 and down only 18 per cent from the peak in 2013.

Aluminium capacity is actually up 15 per cent since December 2015, with major mill rebar capacity officially unchanged.

Data on steel-mill operation also suggests little progress. Blast furnace operating rates in June and July 2015 were at 82 per cent. Over the same period this year, they had dropped only to 77 per cent. Given that crude steel output increased by 11 per cent in June and July over the same period in 2015, a decline in operating rates of 5 percentage points doesn’t exactly suggest painful capacity cuts.

What’s confusing is that prices of basic commodities, such as steel and coal, have been surging. Since Dec. 1, 2015, the futures-traded price of steam coal is up 113 per cent, iron ore up 97 per cent, and steel rebar up 149 per cent. Those numbers would seem to tell the story of an industry suffering from harsh plant closures and tight supply.

But what really happened is that China’s financial market swung into action. Financial firms increased the allocation o f c o m m o di ti es i n wealth-management products from an average of 0.9 per cent from October through December 2015 to 2.1 per cent for the last three months. This provided a large capital inflow that encouraged rampant speculation. The one-month average of daily trading turnover by value in rebar is up 295 per cent from December 2015 and coking coal turnover is up 785 per cent. By volume, the amount of iron ore traded each day now regularly exceeds the yearly output for all of China. Rising prices don’t indicate tighter supply; they’re the result of vast financial inflows into commodity trading.

Regulators show little inclination to stop this. China’s National Development and Reform Commission has proposed an inventory-control rule that would prevent companies from stockpiling coal when prices are high or running down inventories when they’re low. But relative to financial-market turnover, that won’t have much impact. In fact, given that other regulators are prodding financial companies to plough yet more money into commodities, such measures seem beside the point.

Perhaps more importantly, the restructurings that would be needed to really reduce capacity don’t seem imminent. Last week, the government approved a megamerger between the coal giant Shenhua Group Corp. and the power generator China Guodian Corp., which will result in a state-owned firm with assets worth US$271 billion. Rather than forcing two firms in surplus-capacity industries to close plants, they’re letting them scale up and obscure the problem. The combined company will have more market power and even less incentive to significantly restructure.

The stated goals of supply-side reform -- reducing capacity, writing off debt and boosting efficiency -are clearly what China needs. But meeting those goals will require some hard choices. For starters, it’s critical to reduce investment by WMPs in commodities, which drives up prices and encourages inefficient factories to ramp up production. While this may keep plants profitable in the short term, it will do nothing to reduce risk or surplus capacity. Worse, it will only delay the reckoning that China needs to move on. Reuters

‘What’s confusing is that prices of basic commodities, such as steel and coal, have been surging’

Seventy-eight billion reasons why bitcoin’s the new gold David Fickling a Bloomberg Gadfl columnist

C

ould bitcoin be the next gold?

The idea has a lot of intuitive appeal. Gold bugs and bitcoin fetishists tend to share a deep distrust of fiat currency and the nation state, an impregnable bullishness about their favoured asset class, and an obsessive attention to details of market movements combined with a blithe disinterest in bigger-picture issues.

The idea has become particularly popular as the value invested in bitcoin and other cryptocurrencies has marched upward over the past year. Even after this week’s selloff, prompted by China declaring initial coin offerings illegal, the value of all cryptocurrencies in circulation is around US$155 billion, according to Coinmarketcap.com.

That may sound small compared to the US$7.8 trillion notional value of the world’s 187,200 metric tons of gold. At the same time, it’s already about a tenth the value of the 40,000 tons of yellow metal used for investment as bullion bars and coins, and has overtaken the amount held in gold exchange-traded funds. At more than US$78 billion, Bitcoin alone isn’t far from overtaking the US$90 billion-odd invested in all gold ETFs. There are two main reasons to doubt bitcoin’s viability as an investment. One is an engineering issue: Its creaky infrastructure is likely to be a turn-off for all but the hobbyist fringe. Another is more philosophical: Digital currencies have no fundamental value, so have no place in a portfolio.

Both objections are weaker than you might think.

Take infrastructure. It’s certainly true that bitcoin’s operations are surprisingly clunky. Just confirming a single transaction typically takes more than an hour or longer -- it briefly took more than a day at one point last month, according to software company Blockchain.info.

Having said that, financial markets are generally built on similar Rube Goldberg foundations. It’s comically difficult for ordinary investors to buy an actual barrel of crude oil, as Tracy Alloway of Bloomberg News found out a few years back. The economist John Maynard Keynes, according to one possibly apocryphal story, once measured up the storage capacity of the chapel of King’s College, Cambridge after coming perilously close to having to take delivery of a month’s worth of the U.K.’s wheat supply. Completing transactions in the real world is often so clunky that some banks are already exploring using, um, blockchains instead.

What makes markets investable for the most

“

part is not their physical foundations, but the superstructure of derivatives contracts, exchanges and clearing houses built on top.

To date, the world of bitcoin exchanges has been the wild west. When Mt. Gox filed for bankruptcy in 2014, it said it had lost 850,000 coins worth more than US$450 million. Another US$70 million-odd was stolen in a hack of Bitfinex last year. The likes of Deribit and Bitmex have been offering bitcoin futures and options for some time, but major institutional investors are only going to participate if they think the clearing and settlement process is rock-solid and the exchange itself reliably solvent.

Change on that front is imminent. The Chicago Board Options Exchange is planning to start offering cash-settled bitcoin futures by next April, CNBC reported last week. Trading platform LedgerX LLC last month won regulatory approval from the U.S. Commodity Futures Trading Commission to act as a clearing house for derivatives settled in digital currencies. The ability to short or take leveraged positions in digital currencies could open them to a far wider array of investors.

What, though, is the value of a digital currency?

It’s a fair question, but one that could equally be levelled at gold. Since Richard Nixon ended the fixed US$35 an ounce convertibility of gold in 1971, its value has risen at times (the 1970s, the 2000s) and fallen at others.

The best argument to justify investing in gold these days is not that it’s an eternal “store of value” but that its very weirdness makes it special: According to modern portfolio theory, you should buy the shiny stuff not for its superior investment returns, but because it doesn’t correlate much to other asset classes such as stocks, bonds and commodities.

However, while gold did exhibit weak or negative correlations to returns on the S&P 500 for much of the 1980s and early 1990s, it’s been positively correlated for extended periods since then. During gold’s 2012 run-up, the two moved more or less in tandem. If gold deserves investment dollars because its inconsistent correlation with equities helps diversify portfolios, the same argument can be made for bitcoin, too.

Digital currencies may be as vulgar as the original barbarous relic, but neither is going away any time soon. If that makes investors in both look less like seers and more like problem gamblers betting on where a fly will land -- well, welcome to financial markets. Bloomberg Gadfly

At more than US$78 billion, Bitcoin alone isn’t far from overtaking the US$90 billion-odd invested in all gold ETFs

”

16 Business Daily Thursday, September 7 2017

Closing Expats

The best and worst countries to work in The top-ranked country in 2017 is Bahrain Ben Steverman

T

he reputations of the U.S. and U.K. as good places to live and work are in free fall among some of the world’s most mobile and cosmopolitan people.

Since last year’s presidential and Brexit votes, both the U.S. and Britain are perceived as less friendly to foreigners and less politically stable, according to a survey of almost 13,000 expatriates of 166 nationalities. Expats also say the two countries’ quality of life is declining by other measures, especially the affordability of child care and health care in the U.S. and housing in the U.K. The Expat Insider survey is conducted each year by InterNations, a network of 2.8 million expats based in Munich. It aims to capture the views of millions of executives, skilled workers, students and retirees who live outside the country where they grew up. There are about 50 million expats worldwide, according to market research by Finaccord, and the number is expected to hit 60 million over the next five years. They often have a choice of where they want to live, and their opinions matter to countries that want to attract talented and affluent people.

The top-ranked country in 2017 is Bahrain, given high marks by its expats as a place to work and raise a family and for making foreigners feel welcome. It vastly outranks Persian Gulf neighbours such as Kuwait, Saudi Arabia and Qatar, which ranked in the bottom 10 of the 65 countries in the survey.

Greece was at the very bottom of the list, weighed down by the country’s economic problems. Australia, which ranked in the top 10 last year, dropped more than any other country, to 34th place. Expats’ ratings of jobs, career prospects, work hours and work-life balance all dropped.

One of the expats’ favourite places to work is China, where two-thirds of respondents are happy with their careers. But China ranks 55 out of 65 overall because of quality of life. Expats, especially those with children,

are concerned about the severe pollution and the quality and cost of health care and education.

Elsewhere in Asia, Taiwan, which topped last year’s list, slipped to fourth place, while Singapore edged into the top 10. Hong Kong, Singapore’s long-time rival, languished at 39th, up five places on last year.

The U.K. ranks 54, down 21 places from last year’s survey, after its June 2016 vote to leave the European Union. Before the referendum, 77 per cent of expats in the U.K. had a favourable opinion of the nation’s political stability—down to 47 per cent this year. (The survey was conducted in February and March, before the most recent British election.) Just half of expats say the U.K. has a good attitude toward foreign residents, compared to 67 per cent worldwide.

Expats in Britain have also soured on its economy. The weak pound and higher inflation put the U.K. 59th for personal finance. Almost two-thirds of its expats have an unfavourable opinion of its cost of living, with 69 per cent unhappy with the

affordability of housing.

Oh, and the weather. Three in five expats don’t like it.

The U.S. seems to have lost some lustre after a year of political volatility, said Malte Zeeck, a founder and co-chief executive officer of InterNations. Just 36 per cent of expats have a positive opinion of America’s political stability, down from 68 per cent in last year’s survey.

‘One of the expats’ favourite places to work is China, where two-thirds of respondents are happy with their careers’ Overall, the U.S. is ranked 43rd of 65 contenders, 17 places lower than last year. But its reputation was already falling before the election

results came in. As recently as 2014’s survey, the U.S. was No. 5. One bright spot is that 69 per cent of expats have a favourable view of the American economy.

Current political issues are evident in the results: Some 72 per cent of expats in the U.S. say health care is unaffordable, and the U.S. ranks 50 by measures of health and well-being.

Its transportation infrastructure was rated “very good” by just 15 per cent of the expats, less than half of the global average. The U.S. ranks last for affordability of child care and 39 out of 45 countries ranked for education affordability.

Americans still have a reputation as welcoming, but that perception is shifting. Three years ago, 84 per cent of expats rated the U.S. positively on “friendly attitude to foreign residents,” and just 5 per cent negatively. By 2017, the negative ratings had tripled, and the positive ratings had dropped 16 points. Bloomberg News Note of the Editor: Macau in not included among the 68 countries measured in the list

Commodities

Markets

Auto industry

Guangzhou port halts coal imports

Goldman suspends work Nissan unveils new electric car on U.S. IPO of HNA’s Pactera unit in bid to drive off competition

Guangzhou port, the largest coal hub in southern China, has halted foreign coal imports, according to traders who use the port and said they had been informed of the shutdown by customs authorities and senior company officials.

Traders said the move caught merchants using Guangzhou by surprise - the port has 14 coal berths and can handle 60 million tonnes of shipments per year - and interpreted it as a sign of Beijing stepping up a campaign to cut pollution caused by use of coal. China already banned coal imports at small ports in July.

“We were told by customs that the port has stopped accepting foreign shipments,” said one trader, speaking on condition of anonymity because he was not authorised to speak to media. “Starting this week, we will avoid using the Guangzhou port.”

It wasn’t immediately clear how long the import halt would last, nor how many cargoes would be affected. Shipping data compiled by Thomson Reuters Eikon showed dozens of large dry-bulk ships anchoring in waters outside Guangzhou, waiting to offload.

Another trader based at Guangzhou said his company has stopped booking supplies for October arrivals, despite increasing demand from utilities. Reuters

Goldman Sachs has suspended work on a planned U.S. IPO for Chinese conglomerate HNA Group’s IT outsourcing unit Pactera, four people familiar with the matter told Reuters.

One of the sources, who could not be identified as the negotiations are not public, said the Wall Street bank shelved the project after the deal failed to meet the bank’s internal due diligence requirements, or know-your-customer checks.

Reuters reported in July that HNA had tapped Goldman to work on the U.S. initial public offering of Pactera, a Beijing-based firm it bought from Blackstone last year for US$675 million in cash. The unit was renamed HNA Ecotech Panorama Cayman Co earlier this year.

Goldman declined to comment. Representatives at HNA and Pactera did not immediately respond to requests for comment.

The sources said Goldman’s departure, even temporarily, could delay Pactera’s overall plan, which had been for a listing next year.

Pactera had initially sought to close a US$200 million pre-IPO round in the third quarter of 2017, and to list the business early 2018.

Goldman was not officially mandated for the IPO, which had been in the early stages, but had been tapping investors for the firm’s pre-IPO fundraising round. Reuters

Japanese giant Nissan yesterday unveiled a new electric car with an extended range and semi-autonomous driving functions, as it seeks to battle off competitors in a sector it once pioneered.

The second-generation Nissan Leaf has a potential range of 400 kilometres between charges, compared with 250 kilometres for its previous version.

It also boasts semi-autonomous driving capabilities such as keeping the vehicle automatically in one lane on the motorway or parking without human intervention.

Hiroto Saikawa, president and chief executive officer of Nissan, said in a statement that the new vehicle “strengthens” the firm’s “leadership” in the electric car sector.

Nissan was an innovator in the sector seven years ago when it unveiled its first Leaf -- which has sold 280,000 units -- but has since had to contend with fierce competition from General Motors and Tesla among others.

Faced with tighter global environmental regulations, most carmakers are investing heavily in the electric car sector, sparking a ferocious race to create the next green vehicle.

The price tag in Japan will be 3.15 million yen (around US$29,000). AFP