Follow the leaders . . . and log onto their blogs. We point you in the right celebrity direction. Then it’s up to you. Consigliere Pages 8 & 9
Thursday, October 5 2017 Year VI Nr. 1397 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Markets
Forecast
Genting cruises strategy hard aport Page 6
www.macaubusiness.com
Retailing
Good omens for Mainland data ahead of Congress Page 10
Hengqin mall to include beauty theme zone Page 2
Audit
U.S. association says Chinese movie theatres under-reported ticket sales Page 11
Unfair Fare Plan?
Transport
Migrant associations complain about discriminatory rise in bus fares. Deeply impacting the poorer inhabitants of the city. The gov’t says it is a positive measure to benefit locals. And is at the proposal stage. Cash is also being discriminated against in favour of electronic payment. Page 5
Int’l money laundering scam spiked
A joint operation has dismantled a network linking Canada’s Richmond casinos with Mainland China and Macau. A sophisticated succession of operations allowed alleged criminals to avoid Chinese outflow controls. With drug money priming the pump.
Tourism seeks new borders
GTEF The Global Tourism Economy Forum. The 6th edition swings into action on 16th & 17th October. With some 16 Central and Eastern European countries also in attendance. This year’s edition has attracted the highest number of participants, with delegations from 50 countries and 39 Chinese cities, as well as 169 speakers. Page 2
IP protection wave
Business Daily will not be published on Friday (October 6) but returns on Monday October 9. We wish all of our readers, vendors and clients a happy, healthy and prosperous Mid-Autumn Festival! HK Hang Seng Index October 4, 2017
28,379.18 +205.97 (+0.73%) Worst Performers
China Shenhua Energy Co
+6.09%
Cathay Pacific Airways Ltd
+2.01%
Kunlun Energy Co Ltd
-2.32%
Sands China Ltd
-0.37%
Geely Automobile Holdings
+4.86%
Industrial & Commercial
+1.76%
Lenovo Group Ltd
-1.38%
China Merchants Port Hold-
-0.21%
China Overseas Land &
+2.30%
AIA Group Ltd
+1.65%
China Mengniu Dairy Co Ltd
-0.70%
CNOOC Ltd
-0.20%
China Resources Land Ltd
+2.05%
Ping An Insurance Group Co
+1.28%
CK Infrastructure Holdings
-0.66%
China Unicom Hong Kong
-0.18%
Sun Hung Kai Properties Ltd
+2.03%
Henderson Land Develop-
+1.24%
China Mobile Ltd
-0.50%
CITIC Ltd
-0.17%
28° 31° 28° 32° 28° 32° 28° 32° 27° 31° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
Money laundering Page 3
Trademarks Official Gazette announces more requests. For intellectual property protection for high profile companies and entities. The MSAR has processed a tsunami of applications in recent months. Highlighting the increasing value of the territory for international brands. Page 4
2 Business Daily Thursday, October 5 2017
Macau Tourism
Tourism forum shines sportlight on Central, Eastern European countries For its 6th edition, GTEF invited 16 central and Eastern European countries, attracting the highest number of participants since its inception in 2012 Cecilia U cecilia.u@macaubusinessdaily.com
K
icking off on October 16 and 17, the 6th edition of the Global Tourism Economy Forum (GTEF) is to feature 16 Central and Eastern European countries to emphasise the theme ‘Regional Collaboration towards a Better Future’. Introducing the event to the press yesterday at the Macau Tower Convention and Entertainment Centre, Vice Chairman and Secretary-General of the GTEF, Pansy Ho, said that this year’s edition has attracted the highest number of participants, with delegations from 50 countries and 39 Chinese cities, as well as 169 speakers. Given the importance of media in promoting the image of Macau, Ho reported that the media value of the Forum has reached US$33 million with 100 reporters attending the Forum every year. “We have been having BBC and CNN as our media for many editions,” said Ho. “For a Forum that is held for the sixth time the outcome is quite encouraging.”
(L-R) Maria Helena de Senna Fernandes, Director of Macao Government Tourism Office, Ip Peng Kin, representative of the Secretariat for Social Affairs and Culture, and Macau Tower Convention and Entertainment Centre, Vice Chairman and Secretary-General of the GTEF, Pansy Ho, during the presentation event yesterday.
Ip Peng Kin, representative of the Secretariat for Social Affairs and Culture, meanwhile, reported that the budget of the sixth GTEF is around MOP46 million, a slight increase of 2 per cent when compared to last year’s MOP45 million. Of the total funding, MOP24.2 million will come from the Tourism Fund, up 10 per cent, while the rest will be contributed by other sponsors, such as local gaming operators. With GTEF highly supported
by Chinese Premier Li Keqiang when announcing the 19 measures last year, the Forum has an important role for the development of the city’s economy. “Macau itself is also placed in an important part in the Belt and Road initiatives and the Greater Bay Area [development],” said Ip. “[In view of that] the Forum is very important in diversifying the city’s economy.” In addition, owing to the increased attention to Macau’s role, Ip divulged that
the number of Forum participants has increased every year. “This year, we’re expecting 1,500 individuals to attend the Forum,” said Ip. “Including the 7,000 participants accumulated over the past editions, we’re expecting the number to reach between 8,500 and 9,000.” Meanwhile, Maria Helena de Senna Fernandes, Director of Macao Government Tourism Office (MGTO), said the Forum has allowed the city to meet other countries and
to learn from them. “For instance, we have learned from France’s experiences in dealing with crises given the current unstable conditions occurring in Europe,” said Fernandes. With the effort of integrating the Belt and Road and the ‘16+1’ economic framework including the invitation to the 16 European countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia) to participate - the MGTO head perceived that a close relationship would be established with the invited countries following this year’s Forum. “For us, we have been focusing on the Western European countries,” said the MGTO Director. “After this Forum we might review our focus and layout.” Aside from the 16 European countries, this year the Forum is featuring Guizhou Province as the Forum’s featured partner province to bring experiences and knowledge of eco-tourism to the Forum, remarked Ho.
Hengqin
Hengqin Grand MixC taps into beauty market The project partly funded by Ng Lap Seng’s son will host a ‘multidimensional venue’ dedicated to beauty Sheyla Zandonai sheyla.zandonai@macaubusiness.com
The consortium of a Macau-based firm and two Mainland Chinese companies has signed an agreement with Hong Kong-based Asia Beauty Group Holding Co. Ltd. to open what has been called a ‘beauty park’ in Grand MixC, a new urban complex under development in Hengqin, according to information released by the Zhuhai Government. The Macau-based company involved in the deal, San Fong Wang Property Development & Investment Co. Ltd., is also funding the construction of the RMB50 billion (US$7.52 billion/ MOP60.50 billion) mixed-use complex. The two other companies participating in the development of the beauty park are China Resources Land
Limited, a real estate developer, and China Resources Trust, principally engaged in the provision of financial services. The deal was signed by Grand MixC and Asia Beauty Group last week. The 20,000 square metre park is to provide ‘one-stop fashion leading cosmetic services’ for women, which include hairdressing, beauty salons, spas, catering, wedding services, photography resources, a theme hotel, and media centre, to be located in ten theme areas, according to a spokesperson for the venture. Previously owned by Ng Lap Seng, a Macau real estate tycoon convicted on July 30 of bribery and money laundering charges in the U.S., San Fong Wa is now headed by his son, Ng Kei Nin, according to previous reports
from us. Completion of the beauty park is expected in 2018, when the first phase of the Grand MixC project is also expected to be completed. Construction of the mixeduse complex began at the end
of 2016. It is slated to become a retail and cultural destination in Hengqin, targeting the boutique trade and exhibitions, healthcare, cultural and creative activities as well as the hi-tech industry. Previous agreements for
occupying the premises of Grand MixC, inked in early August, include Ego Group Co. Ltd., Golden Maple Holdings Pte. Ltd., Valeria Lanaro Enterprise, and China Resources Healthcare Group Ltd. (CR Healthcare).
Car Parks
Money Laundering
City makes 391 more public car parks available
Anti-money laundering talks opened with Lebanon
Two public car parks are providing a total of 391 parking lots, effective yesterday, according to dispatches posted in the Official Gazette yesterday. One of the car parks, located in Edifice Cheng Tou, has 80 slots for light vehicles and 83 for motor and heavy vehicles. For the other one, in Edifice Fai Ieng,
there are 121 car parks for light vehicles and 107 for heavy and motor vehicles. Both car parks charge MOP6 per hour for light vehicles during the daytime and MOP3 per hour during the night time. Heavy vehicles and scooters will be charged MOP2 per hour during the day and MOP1 per hour at night.
Chu Un I, the new Co-ordinator of the Financial Intelligence Office (GIF) has been granted permission by the Secretary for Economy and Finance, Lionel Leong Vai Tac, to sign a memorandum with authorities from the Republic of Lebanon for the prevention and combating of money laundering and terrorist financing
crimes, according to a dispatch posted in the Official Gazette yesterday. The memorandum that is to be signed with the special investigation committee from the Republic of Lebanon is to facilitate the exchange of financial intelligence between the MSAR and the Republic of Lebanon.
Business Daily Thursday, October 5 2017 3
Macau Crime
Drug money washed through Canadian wringer A Canadian and Chinese police operation has uncovered a money laundering network based in British Columbia which diverted money from drug operations to underground Chinese banks, which would then be loaned to VIP gamblers recruited in Macau to gamble in Canadian casinos and invest in real estate Nelson Moura nelson.moura@macaubusinessdaily.com
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large police operation conducted last week in the Canadian state of British Columbia (B.C.), uncovered an alleged money laundering and underground banking network connected to Macau VIP high rollers, Canadian newspaper Vancouver Sun reported yesterday. Last week, a large police operation conducted in co-operation with the Royal Canadian Mounted Police federal organised crime unit and China’s national police service led to 10 police raids in the B.C. city of Richmond. The investigation - codenamed E-Pirate - focused on local money transfer business Silver International Investment, Asian organised crime groups and an alleged C$500 million-plus (MOP3.22 billion) international money laundering service operated in the city, with the main suspect local Richmond spa owner Paul King Jin. The report indicates Mr. Jin allegedly recruited VIP gamblers in Macau to gamble in B.C. These people were able to gamble in the state’s casinos and even invest in real estate
by borrowing drug money from Jin and his associates and using it to buy casino chips. The VIP gamblers were allowed to repay the loans in Mainland China in order to avoid Chinese capital flow controls, with investigators suspecting the players could have cashed in the casino chips in order to invest in luxury real estate in B.C. The investigation also alleges that Mr. Jin’s company could even wire funds to Mexico and Peru, allowing
drug dealers to buy narcotics without carrying cash outside Canada, and cover up the international money transfers with fake trade invoices from China. The money would then be deposited in an underground bank in China, which would lend it to the VIP gamblers to initiate the money laundering process. According to investigators Silver Heritage set up more than 600 bank accounts in Mainland China, having
sent over C$300 million offshore, laundering C$220 million in cash in B.C. and allowing more than 36 gamblers to receive cash to buy chips in B.C. casinos. Canadian police surveillance identified 40 different organisations linked to Asian organised groups dealing in cocaine, heroin and methamphetamines were delivering ‘suitcases laden with cash’ to Silver International at an alleged average rate of C$1.5 million a day. advertisement
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8th Half Page Ad Charity Golf 2017 Business Daily - outlined.indd 1
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4 Business Daily Thursday, October 5 2017
Macau Opinion
Trademarks Fair
Cultivating talent and hi-tech Ashley Sutherland-Winch* What happened in Vegas “I’m on lockdown at the Luxor, there is an active shooter.” These were the horrific words that my friend received in a text message from her husband on Sunday night. We ran to a television and watched the events unfold on the Las Vegas Strip just a mere six miles away. Ironically, just a few hours before I was asked a question that gave me pause for thought. “Do you feel safe in Macau?” I was asked at a dinner party earlier in the evening. “I absolutely feel safe in Macau. Actually, where I feel unsafe is anytime I am visiting the USA and especially here in Las Vegas.” Two hours later, the deadliest mass shooting in United States history began and I immediately regretted my earlier statement. I had been visiting Vegas for the past two weeks working on a benefit called Circus Couture. Las Vegas has long since been a major target for acts of violence and terror but the city for the most part has been unharmed. Counter terrorism units, police, and other entities protect the city and have thwarted countless events in the past. Unfortunately, the only events that make the news are when a psychopath slips under the authorities’ radar and in a single act of premeditated violence kills 59 people and leaves over 500 victims injured. The United States of America’s second amendment to the Constitution gives citizens the right to bear firearms. Every American has an opinion on this right. The death toll of gun violence is increasing and with each attack, we hear the words, “deadliest attack in history”. Will this event in Las Vegas change the gun laws in the U.S.? Most likely not, but there will be major changes in Las Vegas. The action to immediately lockdown theatres and casinos in Las Vegas as the shooter began his rampage told us that Las Vegas had a plan. They knew what to do to keep the rest of us safe. What they didn’t know was how to protect the 22,000 concert goers in the outdoor park across from the Mandalay Bay casino. #LasVegasStrong was trending on social media for over 24 hours in the aftermath of the incident. The residents in Las Vegas went into full action, donating blood, supplies, food and more. Instead of reacting with fear, Las Vegans took action. I lived in Las Vegas for eight years before moving to Macau and my heart is heavy for my previous home and now the question in my mind is, what will happen next? *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
An IT company, a networking developer and manager, and a local entrepreneurial platform have applied for brand protection in the city Sheyla Zandonai sheyla.zandonai@macaubusiness.com
F
ollowing up on previous applications for dozens of services under the ‘iCloud’ and ‘MacBook Air’ brands, Silicon Valley-based Apple Inc. has now applied for new trademark registrations in the Macau SAR, as released in yesterday’s Official Gazette. Apple’s applications comprise seven trademarks, which include brand names – APPLE, SR, Homepod, BEDDIT, and iMacPro – and the now worldwide famous Apple icon stamped on most of the company’s products and devices. The Cupertino company is just another of the recent technology conglomerates that have recently applied for the protection of commercial and industrial brands in the city, such as Alibaba Group and Baidu Online Network Technology (Beijing) Co., Ltd. Another California-based company, Linkedin, has also applied for the protection of commercial and industrial services under six listings, three for its brand name and three for its logo. The job market and business oriented social media platform is seeking commercial protection for the provision of computer software and IT services for e-learning, computer applications and networking software, business education, electronic publications,
and hosting an online database and learning management system, to name a few. In another application for trademark protection filed yesterday, the Macao Young Entrepreneur Incubation Centre has requested the commercial and industrial protection of its name for the provision of science and technology related services, industrial hardware and software design, as well as legal services in relation to its needs.
The Centre was launched in June 2015 at the Business Support Centre of the Macao Trade and Investment Promotion Institute (IPIM) to provide assistance to young entrepreneurs through training courses, consultations, and business matching. According to local law, a period of two months from the date of publication of trademark application notice in Official Gazette follows for lodging complaints.
Entertainment
Silver screen surprise A subsidiary of Lai Sun Group, the firm currently involved in the development of Novotown entertainment complex in Hengqin, has applied for the provision of services related to the film industry in Macau, according to
information published in the Official Gazette yesterday. Under the brand name ‘MCL,’ eSun Cinema Holdings Limited has requested commercial and industrial protection for the provision of
film and cinema installations, film and cinema services, reservation of tickets and reservation services for entertainment related to cinemas. eSun Holdings Group Limited is an investment holding company principally engaged in media and entertainment businesses, including music and film production and distribution, and events and artists management. The company currently owns and operates nine cinemas in Hong Kong and four cinemas in Mainland China as well as one joint venture cinema in Hong Kong. eSun is an investor in the RMB18 billion Novotown project through its parent company, Lai Sun Group, in a joint venture with Lai Fung Holdings Limited. S.Z.
Trademarks
Silk Road Fund seeks trademark registration in Macau A Beijing Government-linked fund has applied for trademark registration to provide services related to the One Belt, One Road (OBOR) initiative, according to information published in the Official Gazette yesterday. The three applications filed by the Beijing-based Silk Road Fund Co., Ltd. are seeking commercial protection for the brand name in English of ‘Silk Road Fund,’ as well as its Chinese name plus the Fund’s logo. The trademark covers the provision of loans on installments, capital investment, tax assessments, as well as financial services, management, analysis, sponsorship, consultancy and information. Some of the other services included
in the application include financial arrangement for construction projects, mortgage services, real estate appraisals and management, security services, and trusts. The Silk Road Fund was established in Beijing on December 29, 2014, with a RMB40 billion (US$6 billion/ MOP48.36 billion) capital investment from the State Administration of
Foreign Exchange, China Investment Corporation, China Development Bank and Export-Import Bank of China. The Fund claims to be a medium to long-term investment trust through a variety of forms of investment and financing, principally dedicated to supporting infrastructure, resources and energy development. S.Z.
Business Daily Thursday, October 5 2017 5
Macau
Transportation
“Positive discrimination” Migrant workers associations consider new proposal to raise bus fares for non-residents as discriminatory and incomprehensible due to the already low wages received by overseas manpower.
T
he MSAR Government proposal that non-resident workers should pay more for bus fares than local residents has sparked outrage from migrant workers associations, which noted that average salaries for overseas workers are significantly lower in comparison to locals. On Friday, the government sent a proposal to the Traffic Consultation Council - currently under evaluation - with regard to the increase in bus fares, introducing for the first time a distinction between residents and holders of resident work permits, so that the latter pay a higher price. “Why do they have to raise the price of the bus for domestic workers only, but never raise our salaries?” the president of Filipino migrant worker association Migrante Macau, Emer de Lina, asked.
Troubled stay
Non-resident workers can only remain in Macau for as long as their contract of employment is valid, having no right of residence and making up more than a quarter of the city’s population.
A significant proportion of these workers are domestic workers and with no enforced mandatory minimum wage, female workers have indicated the average monthly ‘market value’ wage ranges from MOP3,500 (US$435) to MOP4,500. The average general salary in Macau is around MOP15,000 with that of residents almost MOP18,000. “An increase in the price of bus tickets will be a burden on us. I would like to know why the increase is going to be higher for domestic servants, since our salary is so low? It is unfair, if they want to increase it, it should be uniform,” Ms. Lina lamented. The Filipino domestic worker says she is unaware of the reasons that may have led the Macau Government to go ahead with the measure, considering that if there is an economic motivation they should “get the money from those who have the highest salaries and not from maids since they already have such low wages”. On Sunday, Secretary for Transport and Public Works Raimundo Arrais do Rosário stated the decision was not motivated by economic reasons. Asked about the possibility of a
protest or of sending a direct appeal to the government, the Migrante Macau President said she felt “protests are only for the locals” and said she did not know who to approach in the executive to discuss the issue.
Not that positive
The President of the Association of Indonesian Migrant Workers, Yosa Wariyanti, reacted similarly, saying the organisation “didn’t know how to speak with the MSAR Government” and that she considered the proposal “discriminatory against migrant workers in Macau”. “The government does not value the contribution of migrants. This will affect their wellbeing since most use public transportation. The government should rather increase the wages of migrant workers,” she added. “[This news] has left us very sad. It is a policy that directly and openly separates Macau workers between local and foreign, increases the resentment of locals against foreigners,” said Ms. Waryanti. According to the Indonesian, the majority of domestic workers receives around MOP3,500 monthly
salary, and more than MOP900 in housing subsidy. “Mostly for food, phone, bus pass and for remittances to their families. It’s very hard for us,” she added. Most maids in Macau come from the Philippines and Indonesia, and having a maid is a common occurrence among Macau families, who resort to these workers not only for cleaning and cooking, but also to take care of their children. In some cases the maids live together with their bosses. On Sunday, Secretary Rosário also justified the measure, saying “it was understood that the subsidy should not be equal for all”, stressing that this is a “measure of positive discrimination” for the locals. “It was understood, and it is debatable, to [benefit] residents over non-residents; the option was this and it has nothing to do with savings or anything, but it is a proposal, there is no decision,” the official said. The government’s proposal is now being analyzed, and it proposes that the price of each trip should cost between MOP3 and MOP4 for locals, and between MOP5 and MOP6 for non-residents. Lusa
Transportation
Bus operators: Difference of fares down to the government The three representatives of the three bus operators stressed on TDM radio programme Macao Forum that the differences in bus fares would all have been subject to the MSAR Government’s wishes when bus fares are increased. Li Qijian, the Deputy GM of Transmac, said the majority of residents would enjoy the proposed bus fares arrangement given that 93 per cent of passengers use e-payment when riding buses in the city. According to Li, the difference of fares after the adjustment would be around 40 per cent. Last Friday, the Transportation Bureau submitted the increase of bus fares proposal to the Traffic Consultant Council, with fares increasing
from MOP2 to MOP3 for Macau Pass holders who take the normal bus routes while the express route would have a fare increase to MOP4. However, for cash fares, the amount would be increased by MOP6. According to Li, the proposed arrangement of prices would reduce the number of short-journey passengers. Meanwhile, given that the increased fares would be the same for routes crossing regions, bus operators anticipate a change in the distribution of passengers. Nonetheless, the price arrangement could pose a positive impact for bus drivers as they can concentrate on driving without being concerned about changing fares between regions.
6 Business Daily Thursday, October 5 2017
Macau
Cruises
A life on the ocean wave As Genting Hong Kong Limited seeks to expand its cruise businesses in North Asia, a Bernstein report indicates that if certain basic issues of the Chinese cruise market are resolved the industry would be ‘well-positioned’ to profit from the expected increase of Chinese outbound travellers in the next decade Nelson Moura nelson.moura@macaubusinessdaily.com
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enting H o n g Kong has proposed the delisting of its shares from the Singapore Exchange Securities Trading Limited in order to focus its efforts and resources upon its core business activities relating to the operation of cruise ships in Asia, especially North Asia, a filing with the Hong Kong Stock Exchange revealed yesterday. The company - a subsidiary of the Malaysian based Genting Group – is primarily engaged in cruise and cruise-related operations together with leisure, entertainment and hospitality services. Besides being listed in Hong Kong, Getting Hong Kong has a secondary listing in Singapore, informing in the filing that the decision to remove it was made in order to attract North Asian investors and to ‘eliminate the additional administrative overhead and
costs of compliance’ with the Singapore Stock Exchange requirements. Through its affiliate Genting Cruise Lines the company currently operates Star Cruises, Crystal Cruises and luxury cruise line Dream Cruises, with the company’s revenues from cruise and cruise related activities increasing 22.7 per cent to reach US$471.21 million (MOP3.79 billion) in the first half of this year, according to the company’s interim report. In September, Genting Hong Kong announced Dream Cruises’ second vessel would start operations in November, taking guests from Hong Kong and Nansha, Guangdong to destinations such as Boracay and Manila in the Philippines and Ho Chi Minh City and Nha Trang in Vietnam. At the time, the President of Genting Cruise Lines, Kent Zhu, stated the new vessel was expanding the company’s capacity and strengthening its ‘market leadership’ in the region.
Last year, the company placed an order for ten ships with the Lloyd Werft Group, comprising two mega cruise ships for Star Cruises and eight vessels for Crystal Cruises, with the two larger vessels to be delivered in 2019 and 2020.
A large and growing market
A recent report by brokerage firm Sanford C. Bernstein indicated that in 2016 a total of 2.1 million Chinese went on cruises, making it the second largest cruise market in the world after the U.S., but with outbound travel - excluding trips to Macau and Hong Kong - only representing 3 per cent of the total amount. The report considered that with outbound travel from China over the next decade expected to reach 260 million by 2025, the cruise industry will be ‘particularly well positioned to benefit’ from this increase. This future potential was anchored by the fact that cruise lines offerings were
in line with Chinese customer demands, offering transportation, attractions, food, shopping and - ‘not insignificantly’ - gambling. According to a South China Morning Post article published yesterday, an internal report on the Hong Kong casino ship business - vessels with gaming areas that operate in marine areas outside of Hong Kong jurisdiction - shows the total revenue of cruise ships operating outside of the city waters generated around HK$2.2 billion in 2014. The aforementioned report also indicates these cruise operators do not pay any duties to the ‘Hong Kong Government or any government’; should they be required to, the amount to be paid by the sector could reach HK$984 million.
Solving the basics
The Bernstein report noted, however, that it expected cruise lines to actually reduce their supply in the territory in 2018, due to lower
yields when compared to other world regions and that in order to fully explore the potential of the cruise market certain ‘fundamentals’ needed to be resolved. ‘Unlike other parts of the world, cruises in China are sold primarily via charter, which causes incentives between agents and operators to become misaligned. As a result, pricing discipline has been eroded and the market has devolved to one where close-in discounts are rampant. We believe cruise lines need to take back control of pricing and find a way to lengthen the booking curve in order to stabilise pricing and yields in the market,’ the report stated. Resolving this issue, together with the development of new homeport infrastructure in South China Tier 2 and Tier 3 cities and diverting airline customers to take outbound cruises instead, would be the key factors enabling the development of the cruise market in China, Bernstein analysts believe.
Vodka
US$5.5 mln bottle of vodka shines at Studio City on Saturday A US$5.5 million bottle of vodka is set to make its world premier at Studio City this Saturday, according to a press release. ‘The Eye of the Dragon’, a 6-litre bottle of the most premium Royal Dragon Imperial Vodka is bedecked with a ‘fancy intense yellow diamond of 50 carats’ as well as ‘almost 15,000 additional diamonds’ in addition to ‘nearly 2 kilograms of solid 18 karat gold’. The piece was created by Royal Dragon Vodka, a Dutch-owned company based in Hong Kong, in partnership with Scarselli Diamonds New York. The timing of the unveiling coincides with Studio City’s second anniversary Gala Dinner celebration, entitled ‘Ice x Fire’.
Business Daily Thursday, October 5 2017 7
Macau Leadership
Aruze President, CFO and CAO Richard Pennington resigning
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ruze Ga m i n g America is undergoing a reshuffle in its management, according to a recent company announcement noting that the group’s President, Chief Administrative Officer and Chief Financial Officer, Richard Pennington would be resigning. Pennington has spent seven years as a member of executive
management and notes: “I truly wish I could continue for another seven years, but my personal situation makes that impractical”. Pennington will stay on as Vice Chairman of the Board of Directors and Senior Advisor to the CFO and CEO. Pennington will be followed by Eric Persson in the role of President, while Persson will also take on the position of Chief Operating
Officer, replacing current Yugo Kinoshita, who will step into the role of Chief Financial Officer and Chief Strategic Officer. “Aruze is continually looking at adapting our organisation in response to changes in the gaming market and personal situations,” stated Takahiro Usui, Aruze’s CEO and Chairman of the Board, according to a press release by the group.
Sports
Capoeira fighting for recognition as a sport The Asian Federation of Capoeira, an Afro-Brazilian martial art, is being launched by month end, to be headquartered in Macau Sheyla Zandonai sheyla.zandonai@macaubusiness.com
The Asian Federation of Capoeira will be officially launched on October 27, and headquartered in Macau. Speaking to Business Daily, Edilson Almeida - a.k.a. Master Eddie Murphy, one of the fiercest representatives and advocates of the Brazilian practice said the Federation is a culmination of many years of work and promotion of a martial art practice that evolved within the African populations transported to Brazil.
According to the founding President of the recently created Federation established nearly a month ago the aims are to enable the “qualification” of people engaged in the teaching of capoeira in Asia, as well as the “professionalisation” of the practice. The countries and localities comprising the Federation are Macau, Hong Kong, Mainland China, Indonesia, Malaysia, the Philippines, Kazakhstan, and Singapore. Mr. Murphy, who has been practicing the martial art since the age of ten, for 40 years, also hopes the Federation will
enable it to seek “sponsors” for organising championships, invite masters from Brazil to train teachers in Asia, and invest in the promotion of the sport. “Because capoeira is a sport,” claims the master, adding that although it is strongly linked to culture, it is above all a physical activity that should be recognised as such. “The main problem we face is the fact that capoeira is not yet recognised as a sport in Brazil, and neither can benefit from it abroad,” he told us. In addition, he said that it has a fundamental relationship with the Portuguese
language, citing the terms and songs belonging to the routine of the practice. So it is also a way to “educate through the sport.” Mr. Murphy explained that in the nine years in which he has been practicing and teaching in Macau, he has never received subsidies from the Macau SAR Government or the Brazilian Consulate in Hong Kong. “We know that the Macau [SAR] Government funds all types of sports. The moment we win the fight to recognise it as a sport [in Brazil], we can perhaps benefit from that here as well,” he said. advertisement
8 Business Daily Thursday, October 5 2017
Consigliere
Blogging to lead Oscar Guijarro oscar.g@macaubusinessdaily.com
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he popularisation of the Internet has resulted in the explosion of the blogger phenomenon. Millions of people have begun to write vehemently, turning the Internet into the greatest platform of public expression known so far. However, and as could immediately be observed, the large number of digital publications born made it clear that the boundaries between quality and quantity were diffuse. Finding something truly interesting has become a colossal task. In addition, with advertising orientation and search optimisation standards, it is clear that quality is contingent upon other factors more related to technology and marketing. A byproduct of this situation is the proliferation of blogs talking about blogs, rankings and prizes. It is evident that certain differentiating criteria are necessary in order to distinguish quality content
from a shapeless mass of frustrated projects, wasted ideas, platforms for fraud and other foolish experiments. Thus today, in Consigliere, we reveal a selection of our favourite contents. Just some of them, since the personal total list is long and passions should not interfere with what our readers deserve! With this list we have tried to achieve the goal of placing all of you at the forefront of Trendsville. On the one hand, we show globally recognised blogs that must be followed in order not to be sidetracked by certain conversations. On the other hand, we offer content that tends to lead and that will let you lead those talks. In any case, we recommend you also choose your own references for your own subjects and, why not, tackle the exciting task of putting your own ideas in digital.
Richard Branson blog Perhaps the most interesting blog among non-professionals. Richard Branson, founder and leader of the Virgin Empire, is an example of a seamless entrepreneur. Dedicated entirely to his company and overflowing with passion for the business world, Branson is genuine and authentic, as his blog shows. Human to his boots, his blog addresses all kinds of issues that worry or amuse the tycoon: from the opiate crisis in the United States to his interventions in television programmes or his travels. It could
perfectly be the blog of your best friend relating his daily experiences. Although it must be admitted the life of Richard Branson is full of more special situations.
Why follow?
And no, it’s not making money. As he says in one of his posts: “I’ve never been interested in making lots of money - I like creating things”. https://www.virgin.com/richard-branson
Branson is a role model and an inspiration. His posts are loaded with optimism, bright ideas and opinions full of commonsense. They are also a constant reminder of what led Branson to be what he is today and what his basic motivations are in his business.
What my Boyfriend Wore The blog titled ‘What my Boyfriend Wore’ - aka WMBW is a reference to the world of young men’s fashion and the world of blogging. The idea of this blog starts with the photos that the girlfriend of the blogger used to upload on her Instagram account portraying him wearing different outfits. The author turned the concept into a blog about fashion that now also reaches travelling, gadgets, drinks and food. One size fits all. The blog design is simple and highlights the amateur feel, although it cannot
hide a pervasive exquisite touch.
Why follow? The blog provides a personal version of the bon vivant lifestyle with hipster touches. Postures posh and very dolce far niente make texts fun and easy to read. The brilliant photographs deserve a separate chapter. In a blog with a more detailed design they would shine with their very own light but cannot hide that they are the central theme of
the publication. On the other hand, the lifestyle it promotes is not tied to exclusive luxury. It simply delves into the concept of less is more. Being a dandy is an attitude in the hands of this blogger. Read it, follow it and let yourself be influenced as much as you like, but don’t ignore the South African dandy of the 21st Century in its quintessence. https://whatmyboyfriendwore.com/
Bon appétit!
M
any people mistakenly think French cuisine is only served in grand and lavish places, and costs a very unpalatable price. Actually, French cuisine offers more diversity than you might think. Just taking a look at the variety of places offering food, you can find French people distinguishing their options by restaurant, brasserie, bistro, bar and cafe. Apart from restaurants, bars and cafes are those we are probably most familiar with. However, brasseries and bistros are the most common places that French people will frequent in their daily life. Brasseries were traditionally where beer was served, with the dishes reflecting the local cuisine of the brewers. But these days a brasserie
is usually large, and generally serves food, beer and wine all day long. By contrast, bistros are generally compact with a small team in the kitchen which serves food and drinks in a casual environment. Thanks to the booming catering industry in Macau, we can taste multifarious types
Business Daily Thursday, October 5 2017 9
Consigliere
Souvlaky for the soul In a tone similar to the previous one, this blog survives under the label of new dandies blogs. This time, focused on gastronomy. The blogger, Australian by birth and Greek in his roots, says of himself: “I’m best described as a glutton. I apply this principle to all aspects of my life”. The food, however, and specifically the pix of food, reign in this blog, too. It’s a very aesthetically-minded blog and includes cooking recipes, hotel and restaurant reviews and
posts about sightseeing. Above all I love the changing structure of posts, always adapting to expressive needs.
Why follow? There are many attractions in this blog. But undoubtedly, what I most appreciate about him is the honest approach of the author when considering his own strengths. Far from encompassing hundreds of topics or turning it into an advertising
pamphlet, the author spreads with keenness and wisdom the issues he knows just to give us a pleasant and sincere experience. The mouthwatering recipes, the places reviewed could have been taken from the pages written by Thomas Mann and it even seems we could meet Tom Ripley in every corner. Take note of it all. It’s a lesson in how to be genuine. https://souvlakiforthesoul.com/
Paul Krugman This is not a blog for sensitive minds. Everyone knows or should know of Krugman. The economist lives at the forefront of heterodoxy simply because he uses common sense, doctrinal knowledge, and data as a basis for his articles. He does that rather than distorting reality to suit his needs, as is commonly seen in the submissions of some of his peers. Evidently that makes it the centre of the anger of interested opinions. Winner of the 2008 Nobel Prize in Economics, Krugman is professor of economics and international affairs at Princeton University, Centenary Professor at the London School of Economics, and
columnist for The New York Times.
Why follow? You’re reading an economic diary, so I don’t think it’s necessary to give you many reasons why you should be following Krugman. Whether you adore him or hate him, Krugman is a reference to follow. Economic theories and policies crumble before Krugman’s crushing deck of reasoning. However, to read Krugman you must do your homework. Your level of information about treated subjects (especially American) must be to the last, because
Krugman elaborates upon his opinion parting from facts, and does not report news. A few simple brushstrokes on the subject in the first few paragraphs are the only preamble needed to develop his point of view on political and economic issues. Essential. https://krugman.blogs.nytimes.com/
Gates Notes Always controversial, Bill Gates owns a blog with aspirations that go beyond sharing thoughts. After leaving the direction of Microsoft, the billionaire father (among others) of Windows, focused on the Bill and Melinda Gates Foundation. This philanthropic institution that fights against poverty captures the most important activity Gates is now devoted to. And Gates’ blog offers a personal point of view on that activity while bringing other focuses of interest that go beyond the Foundation. The blog tries to look amateur but it can be perceived
that great care has been taken in its elaboration.
Why follow? Gates has remained at the top of the list of billionaires for several decades not just because of his programming skills but because of his vision to bring business and technology together. If Gates is now away from the Microsoft day-to-day battle that does not mean he has abandoned his visionary concept of the world. On the contrary, every businessman heading a large corporation knows that Gates’
Forbes list of blogs
These are the most economically successful blogs in the world according to Forbes magazine Huffington Post – US$14,000,000 per month Engadget - US$5,500,000 per month Moz - US$4,250,000 per month Mashable - US$2,000,000 per month TechCrunch - US$2,500,000 per month CopyBlogger - US$1,000,000 per month Perez Hilton - US$575,000 per month Gizmodo - US$325,000 per month Smashing Magazine - US$215,000 per month Tuts + - US$175,000 per month
of French cuisine. For serious occasions, high-end Michelin-starred French restaurants Robuchon au Dôme or The Tasting Room must be the first choice. For chilling and relaxing, French bistro The Ritz-Carlton Café offers quality food and a comfortable environment. And if you are looking for a place for a birthday dinner that offers affordable but high quality French delicacies as well as a sumptuous interior design and romantic atmosphere, there is no better place than Macau’s only brasserie Aux Beaux Arts (ABA) in MGM Macau. Starting last month, ABA launched a new menu that reinterprets the
taste of conventional French classics. The new menu includes a large range of traditional French dishes; for instance, the signature steak tartar combines a tender sirloin and onion pan served with a secret sauce, buttery seared foie gras plus creamy homemade truffle pasta as well as braised beef short rib cooked in port wine. Seafood will definitely appear on the menu, too, and the chef says it’s all fresh, not frozen. Compared to other French restaurants, ABA not only serves a cold seafood platter but serves Seafood Flambé (grilled seafood platter). For family occasions and gatherings you can also
find a range of ‘A Partager’ (to share) platters, including Rock lobster and Assorted Grill. In addition to the sharing, I’m going to explain why I said it is the best place for a birthday dinner. Surprisingly, ABA has newly launched a three-course ‘La Diner’ menu at the friendly price of MOP350 per person. You can select one appetizer, a main dish and a dessert from the a la carte menu. You can choose from all the signature dishes mentioned in this dinner set. Isn’t that attractive? To enhance the celebratory vibes, ABA also boasts a world-class collection of wines from around the world. So, Santé! Edwina Liu, Essential Macau Editor
prescriptions for dealing with poverty are an investment in the future. It is said that Windows cemented its business domain because future programmers and entrepreneurs of the United States began to use it massively in the universities before any other operating system. And it is said Gates was behind that strategy. Several decades later Gates continues to encourage knowledge and a better way of life among those who have fewer possibilities. https://www.gatesnotes.com/
10 Business Daily Thursday, October 5 2017
Greater China
Preview
September data to show steady growth ahead of key Communist Party Congress While there is little worry of an economic hard landing, debt risks appear to be back on the radar as Beijing continues to pump out more credit to keep activity humming Yawen Chen and Ryan Woo
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hinese data in coming weeks is expected to deliver exactly what its leaders want to hear ahead of a highly sensitive Communist Party Congress - the country’s economic growth remains robust and resilient even as they work to get debt risks under control. The twice-a-decade party congress that kicks off on Oct. 18 is expected to see President Xi Jinping strengthen his grip in a leadership reshuffle, and will set the political and economic policy tone for China for the next five years. So far this year, the world’s second-biggest economy has held up better than expected despite views that a clampdown on riskier types of financing and a flurry of measures to cool heated housing prices will drag on activity. But many economists still contend growth will fade in coming months under the weight of higher borrowing costs, property curbs and the government-mandated shutdown of some highly polluting factories to reduce winter air pollution. The boost from heavy government stimulus -- Beijing’s infrastructure spending spree has helped fuel a year-long construction boom -- will also begin to ebb, sceptics argue. Still, economists polled by Reuters expect China’s economy is heading into the fourth quarter with plenty of momentum. Growth in industrial output is expected to accelerate to 6.2 per cent from a year earlier, from August’s 6 per cent, according to a Reuters poll of 24 economists. Steel mills are believed to be running at full steam to cash in on strong demand and prices, and to build up inventories in case they are ordered to reduce output over winter.
Fixed-asset investment is predicted to have increased 7.7 per cent in the first three quarters on-year, only slightly softer than a 7.8 per cent rise in January-August. Retail sales growth is seen edging up to 10.2 per cent. China’s trade performance is also expected to improve after softer-than-expected readings in August raised questions about the sustainability of its domestic and export demand. Exports are expected to have risen 8.8 per cent on-year, while imports may have jumped 13.5 per cent, producing a trade surplus of US$39.5 billion. A pullback in the strong yuan currency in recent weeks may be giving exporters some relief.
Growth versus debt
While there is little worry of an economic hard landing, debt risks appear to be back on the radar as Beijing continues to pump out more credit to keep activity humming. S&P Global Ratings downgraded the country’s credit rating last month, saying China’s attempts to reduce risks from its rapid build-up in debt are not working as quickly as expected and credit growth is still too fast. China in July set up a new financial stability committee under the State Council to coordinate financial oversight, with the central bank taking on a bigger role. The People’s Bank of China early this year included off-balance sheet wealth management products in its Macro Prudential Assessment (MPA) for the first time to give authorities a better sense of potential risks to the financial system. September’s loan data will be closely watched for signs of where policy may be going next, as banks have shifted more credit back onto their books in response to the clampdown on shadow financing.
Chinese banks are seen extending RMB1.1 trillion (US$165.33 billion) in new loans in September, up from RMB1.09 trillion in August. Credit growth could get an extra boost in coming months after the PBOC on Saturday cut the amount of cash that some banks must hold as reserves for the first time since February 2016. The move is linked with a policy to encourage more lending to struggling smaller firms and the private sector. It could trigger a flurry of lending as banks look to qualify for lower reserve requirement ratios (RRR) which go into effect in 2018, though some analysts believe the impact on the economy may be tempered if Beijing continues its campaign to rein in debt risks at the same time.
Key Points Sept data to show solid growth in lead up to Party congress Exports seen +8.8 pct (Aug +5.6 pct) Imports seen +13.5 pct (Aug +13.5 pct) Industrial output f’cast +6.2 pct y/y (Aug +6.0 pct) PPI f’cast +6.3 pct y/y (Aug +6.3 pct) CPI f’cast +1.6 pct (Aug +1.8 pct) New loans f’cast RMB1.1 trln (Aug RMB1.09 trln) September activity indicators out on Oct 19 “We believe the RRR cut may not lead to a quick pickup in total credit growth if policy makers continue to strictly enforce the macroprudential assessment (MPA) framework and the new rules related to the financial
system cleanup,” Morgan Stanley wrote in a note to clients. Inflation data may also offer clues on firms’ debt-servicing capability. The producer price index (PPI) is tipped to have risen 6.3 per cent in September on-year, steady from August. Profits at industrial companies rose the most in four years in August as commodities prices surged, though a Reuters analysis showed few listed firms have used the windfall this year to retire their debt. Again, analysts predict producer prices will start to soften in the fourth quarter due to a high base of comparison last year and as overall demand moderates along with economic growth. The consumer price index (CPI) meanwhile is seen up 1.6 per cent on-year in September, versus 1.8 per cent in August and well within Beijing’s 2017 target of 3 per cent. Besides the campaign to reduce high levels of debt across the economy, authorities have also been trying to reduce the risk from capital flight by stabilising the yuan currency. China’s foreign exchange reserves are expected to have risen for an eighth month to US$3.1 trillion in September, as capital curbs and a weakening dollar helped staunch fund outflows. China is due to announce foreign exchange reserves data on Oct. 7, followed by trade and inflation data on Oct. 13 and Oct. 16 respectively, while loan and money data is expected anytime from Oct. 10 to Oct. 15. The data will lead up to third quarter gross domestic product (GDP) on Oct. 19. China’s economy grew 6.9 per cent in the first half, and is expected to easily meet or beat the government’s full-year target of around 6.5 per cent. Reuters
Business Daily Thursday, October 5 2017 11
Asia Stock
Big HNA stake held in trust as favour, says company dealmaker HNA board reclaimed shares in 2016 after broaching the idea in 2015, it is claimed Koh Gui Qing and Matthew Miller
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n Indian-American dealmaker for HNA Group, who recently held a big stake in the Chinese conglomerate, said he kept the shares for a decade as an “accommodation” to the company and received no compensation for doing so. HNA shook up its ownership structure in July by transferring a near 30 per cent stake, comprising shares formerly held by the dealmaker, Bharat Bhise, and a Chinese man identified as Guan Jun, to a newly-formed charity in New York. Bhise said HNA’s senior executives asked him to hold the stock ahead of forming the charity. The reason was that he is not a Chinese citizen and would not need Beijing’s approval to hold shares outside of China, he said in his first interview since HNA announced the shareholding shakeup. “I’ve been put in the press as some sort of mysterious person,” Bhise, 63, said at his office in Hong Kong on Friday. “They were never my shares. I was holding them in trust.” Bhi s e, w h o m a n ag e d George Soros’s 1995 investment in Hainan Airlines, HNA’s flagship asset, and sat on the aviation company’s board until 2000, emerged
in the last decade as a top dealmaker for HNA. He is a board member of five HNA-invested companies, including Avolon Holdings, an aircraft leasing firm, and Ingram Micro, a U.S. electronics distributor. Bhise, as chairman of Bravia Capital, a Hong Kong-based boutique investment firm, also co-invested with HNA in a series of offshore investments, including in SeaCo, a marine container company, MyCargo Airlines and Africa World Airlines. Headquartered in the southern Chinese island of Hainan, the privately-owned HNA has fielded many questions about its shareholding structure this year after Guo Wengui, a fugitive Chinese billionaire, alleged that “officials in China’s Communist
Party and their relatives were undisclosed shareholders” in the group. He also alleged that HNA had allowed Chinese government officials and their relatives to use its aircraft “for purely personal reasons.”
Fundraising ability hurt
The attention on the company’s ownership has had a “terrible” impact on the group by impeding its ability to raise funds and has brought him great stress, Bhise said. Banks he has long worked with have called him to say they needed to respond to questions from U.S. regulators about who he is, he added. “I have had a very, very stressful year,” he said. HNA, which owns airlines, hotels, real estate and a near
10 per cent stake in Germany’s Deutsche Bank, has denied Guo’s allegations and has sued for defamation. It declined to comment for this story. Little is known about Guan, the other holder of shares that were transferred, and Bhise said he has not met him. Reuters was unable to track down Guan to seek comment, and when asked HNA did not provide a phone number or email address for him. “Is the Chinese government a shareholder, somehow mysteriously cloaked behind me and Guan Jun and other people? I can tell you unequivocally that I don’t believe that to be the case,” Bhise said. After HNA’s restructuring, the New York-based foundation and a China-based charity collectively hold 52.25 per cent of HNA shares. A dozen founding and senior executives hold 47.5 per cent in the group, led by HNA’s founding chairmen, Chen Feng and Wang Jian. Bhise said he held the shares from about 2004 and his understanding from the start with HNA’s management was that the shares would one day be given to charities or HNA employees. HNA holds RMB1.2 trillion (US$180.4 billion) worth of assets, according to the company’s latest filings, and Bhise said he had previously held
approximately a 12.5 per cent stake in HNA as the beneficial shareholder of Headstreams Investment Co, a Hong Kong registered firm. Bhise also said he was director of Pan American Holdings, another HNA vehicle, but was not a shareholder. Various corporate filings show Bhise as a Pan American shareholder, and with a 17.4 per cent interest in HNA. It was not immediately clear why there was a discrepancy between the size of the stake that Bhise said he held and the size shown in the filings. Bhise said the shares had “no value” for him and he received no payment for holding them. “This was an accommodation that I did because I am a trusted person,” he said. “I didn’t do anything that I believe was in any way wrong.” HNA’s board reclaimed the shares from him in 2016 after broaching the idea in 2015, he said. HNA’s founders and top management want to ensure their shares are signed over to the charities when they die, Bhise said. “The senior management are devout Buddhists,” he said. “They always had the intent that life is transitional, money is transitional, it should not go from generation to generation.” Reuters
Cinema
Hollywood purportedly shortchanged by Chinese exhibitors Authorities allowed Hollywood to conduct its own audit as the two countries prepare to renegotiate a 2012 deal that gave U.S. movie studios better access and compensation Anousha Sakoui
Chinese theatres under-reported ticket sales of U.S. movies by 9 per cent last year, according to an audit that found the operators in the world’s second-largest film market are shortchanging Hollywood studios, two people with knowledge of the matter said. The Motion Picture Association of America, representing the large U.S. movie studios including Walt Disney Co. and Comcast Corp.’s Universal Pictures, hired PricewaterhouseCoopers LLP to conduct an audit as part of a U.S. agreement with China setting the terms for imports of Hollywood movies. The people asked not to
be identified because the findings aren’t public. China has been cracking down on box-office fraud, approving fines to curb misreporting in the country’s booming cinema industry. Authorities allowed Hollywood to conduct its own audit as the two countries prepare to renegotiate a 2012 deal that gave U.S. movie studios better access and compensation. The audit was revealed by Bloomberg in June and had been expected to be completed in the third quarter. The results were first reported by the Wall Street Journal. A call yesterday to China Film Group, the state-owned giant in charge of the import and distribution of Hollywood
films, wasn’t answered amid a weeklong national holiday. Ticket revenue grew less than 3.7 per cent in China last year, slowing from more than 35 per cent average growth in the previous five years, according to researcher Artisan Gateway. Still, the box office in the country is growing faster than in North America, according to MPAA data, and China remains an important market for Hollywood, with US$6.6 billion in annual sales. The number of imported U.S. films has been limited by quota to 34 a year, and the studios behind those releases only get a quarter of box-office revenue, rather than the more typical half in most other countries.
More than 300 theatres were penalized in March for under-reporting ticket sales, China’s State Administration of Press, Publication Radio, Film & Television regulator said at the time. The biggest penalties were 90-day suspensions
of operations for exhibitors that understated revenue by more than RMB1 million (US$150,000). Theatres and distributors face revocation of licenses in “very severe” cases, according to the law, which took effect in March. Bloomberg
12 Business Daily Thursday, October 5 2017
Asia Housing
Australia’s long homebuilding boom has life in it yet The value of new loans rose 21 per cent in July alone to an all-time high of A$2.2 billion Wayne Cole and Swati Pandey
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he l a t e s t d a ta on Australia’s home building boom is showing something totally unexpected - a revival in borrowing and approvals that suggest a mainstay of economic activity has some way to run yet. Obituaries were being written for the boom, given it was already in its fifth year and long in the tooth by historical standards. Yet overlooked by mourners has been a surge in Australians borrowing to build their own houses, a shift as unexpected as it is timely. The value of new loans rose 21 per cent in July alone to an all-time high of A$2.2 billion, having climbed for six months in a row. Loans are being created at an annualised rate of 77,000 - harking back to the peaks seen in 2014 when the cycle was in its youth. That’s crucial as loans are a reliable leading indicator of building. Indeed, figures out this week showed approvals to build new homes had started to trend higher again, reversing a steep decline seen late last year.
“Residential building approvals are incredibly resilient,” said UBS economist George Tharenou, who has given up trying to call a top for home construction. “The ‘real’ side of housi n g a p p r o va l s r e m ai n s stronger than we expected at a still-booming level of 222,000 a year, supporting the overall growth outlook.” Housing is an important element of Australia’s growth story, having added half a percentage point to economic growth in each of the last three years. Its
health will determine where the economy, and interest rates, are heading. An eye-catching sign of the pipeline of work is the number of cranes that crowd the skylines of Sydney and Melbourne. The Rider, Levett, Bucknall index of cranes hit a record high in September, with 685 on projects across Australia. All key cities saw increased crane counts in the past six months. Construction is already leading job gains, with a record share of workers - 9.5
per cent - employed in the sector. It also pays handsomely and might be a factor in lifting wages growth which are crawling at a snail’s pace and suppressing inflation. While there are fears all this building will lead to a glut of housing, that does not take into account population growth which blew past all expectations this year. Annual growth of 1.6 per cent is twice that of the United States and three times that in the UK. Some 232,000 of those are migrants who need
to be housed right away. Ta p a s S t r i c k l a n d, a n economist at National Australia Bank, noted the population aged 15 years and over was expanding at 325,000 a year, which historically was consistent with a need for 216,000 new dwellings year. “Only time will tell whether the construction cycle will be more extended than first thought, but population growth would argue yes, as would the most recent trend for building approvals,” said Strickland. Reuters
Tax
Philippine central bank governor says tax reforms won’t require policy response Espenilla, who took the helm at the central bank in July, also said any cut in banks’ required reserves will be “measured” and “calculated” Billy Chan and Karen Lema
The Philippines’ plan to overhaul its tax system will only have a modest inflationary impact and will not need a monetary policy response, said the central bank governor, who also brushed off a sharp decline in the peso currency in an upbeat message on the economy. “Any moderate, short-lived inflationary impact of (the tax reform) need not be responded to by monetary policy,” Nestor Espenilla told Reuters in an interview yesterday for the Global Markets Forum. The tax reforms are crucial to President Rodrigo Duterte’s ambitious plans to foster higher, sustainable growth through his US$180 billion “Build, Build, Build” infrastructure campaign. The tax measures seek to expand the value-added tax base, raise excise taxes on fuel and automobiles, and slap levies on sugar-sweetened beverages among other changes. They were approved by the lower house of Congress in May, but have yet to be endorsed by the Senate. If implemented next year, the tax reforms should only lift consumer prices by less than half a percentage point and the impact
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will diminish from 2019 onwards, Espenilla said. The Philippines has kept its key interest rates unchanged since raising them by 25 basis points in September 2014 as inflation remained tame despite robust growth making it one of Asia’s strongest performing economies this year. Espenilla, who took the helm at the central bank in July, also said any cut in banks’ required reserves will be “measured” and “calculated”. Moreover, planned reforms to deepen the bond and capital markets should absorb the extra liquidity that
will be released with the reduction in the amount of cash banks need to hold, he said. The central bank has flagged a plan to eventually reduce the reserve requirement ratio, currently at 20 per cent and one of the highest in the region, as it reduces its reliance on this tool to manage liquidity. Espenilla said the capital market reforms, aimed at deepening domestic markets and establishing a reliable yield curve, would be completed over an 18-month period after the planned launch in November. “If you are seeking to attract longer
term investors...they need liquid markets to be able to manage their exposures, and also enhancements to the foreign exchange markets so they will be able to hedge properly their exposures,” he said.
Key Points Tax reforms to slightly lift consumer prices in 2018 Capital market reforms needed to attract more long-term money No need for foreign exchange controls
The government’s massive infrastructure-build programme has hit the peso, at one point falling to 11-year lows against the U.S. dollar, as capital goods imports have risen sharply. Espenilla, however, was sanguine on the peso, Asia’s worst performing currency this year, saying there was no need for foreign exchange controls. “Why do we need to operate foreign exchange controls as if it is a crisis economy, as if it needs to be rationed?” Reuters Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Thursday, October 5 2017 13
Asia Economy
In Brief
Japan’s economy sees output exceed capacity the most in 9 years But some studies show there can be a lag between achieving a sustained positive output gap and an actual business response Leika Kihara and Sumio Ito
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apan’s economy saw output exceed full capacity by the most in nine years in the April-June quarter, a Bank of Japan estimate showed, a positive sign for the central bank as it seeks to accelerate inflation to its elusive 2 per cent target. The output gap, which measures the difference between an economy’s actual and potential output, stood at plus 1.22 per cent in April-June, staying in positive territory for the third straight quarter, the BOJ estimate
showed yesterday. The positive output gap exceeded 1 per cent for the first time since January-March 2008 - months before the collapse of Lehman Brothers triggered a global financial crisis. The outcome backs up the BOJ’s view that Japan’s economy is gathering enough momentum for inflation to accelerate toward its 2 per cent target, and justifies it from keeping policy steady. But some studies show there can be a lag between achieving a sustained positive output gap and an actual business response, such as a boost in
investment and a pick-up in inflation. “We’ve seen a dramatic improvement in Japan’s economy,” BOJ Deputy Governor Hiroshi Nakaso told Asahi newspaper in an interview. “Corporate profits are at record-high levels, the job market is near full employment and wages are rising, albeit moderately. Monetary policy has made huge contributions,” he said. A positive output gap occurs when actual output is more than full capacity. This happens when factories and workers operate above their most efficient capacity to meet strong demand. When a positive output gap expands, it is a sign that inflationary pressure is building. Japan’s economy expanded at an annualised 2.5 per cent in the second quarter as consumer and company spending picked up, with steady growth likely to be sustained in coming quarters. Demand for labour remained at the strongest level since 1974 in August, while business confidence hit a decade-high in the third quarter thanks to robust global growth. But price and wage growth remain weak with firms still wary of passing more of their profits to employees, forcing the BOJ to push back the timing for reaching its price target six times since deploying a massive stimulus programme in 2013. Core consumer prices rose 0.7 per cent in August from a year earlier, well below the BOJ’s target, heightening the chance the central bank will cut its price forecasts again at a rate review on Oct. 30-31. Reuters
Property
Surging Singapore land bids are unsustainable: warning from Tan A jump in home sales is stoking optimism in the property market Pooja Thakur
Surging bids for Singapore land aren’t sustainable in a market constrained by demographics and the government’s cooling measures, according to the head of a developers’ association. “It is not sustainable to continue at this rate,” Augustine Tan, president of the Real Estate Developers’ Association of Singapore, said in a speech yesterday. “With property measures in place, slow growth in Singapore’s population and manpower curbs, we do not see a runaway demand in sales transaction volume and property prices in the next few years.” His comments strike a note of caution as land auctions and redevelopment deals set records, and after home prices rose for the first time in four years in the three months through September, snapping a record run of declines. City Developments Ltd., Singapore’s second-largest listed developer, and a partner yesterday won a S$907 million (US$667 million) bid for a residential redevelopment project, a record price for a freehold deal of that type. Tan’s comments contrast with Singapore developer Oxley Holdings Ltd. saying on Tuesday that it has turned “very bullish” and sees home prices elevated by developers who pay high prices for land. According to Tan, buyers are still price-sensitive and he argues that many may downgrade
to public housing because of weak economic and job growth or, in some cases, after selling their apartments for redevelopments. Vacancies of private homes are at 8.1 per cent. Of a supply of 35,400 uncompleted private residential units, 43 per cent remained unsold as of June 30. Seventeen redevelopment deals were signed this year and a potential eight such deals are in the pipeline, possibly yielding 13,000 homes over two years. A jump in home sales is stoking optimism in the property market. At the same time, the bulk of Singapore’s
cooling measures rolled out from 2009 are still in place. Before the latest data, a 15-quarter decline in prices was the longest since the index was first published in 1975. In other comments, Tan said: -If the prevailing “bullish” appetite for residential land persists and demand is not sustained, that will feed into a mix of increased supply, high vacancy rates and rising interest rates -Rents are falling and new completions are adding to inventory just when multinationals are down-sizing or cautious about hiring Bloomberg NEWS
EV
Honda to consolidate two Japanese factories into one around 2022 Honda Motor Co said yesterday it plans to consolidate production at two of its Japanese plants in a single factory within the next five years to accommodate the production of electric vehicles and other new-technology vehicles. Honda said that production at its Sayama and Yorii plants just north of Tokyo would be consolidated into the newer Yorii plant by around March 2022. Most workers currently at the Sayama plant would be transferred to the Yorii plant, it added. “We are doing this to further evolve development of new technologies,” Chief Executive Takahiro Hachigo said at a press conference. Cocoa
Indonesian cocoa output to drop more than 10 pct in 2017/18 – trader Indonesian cocoa production is likely to drop over 10 per cent in the year to September 2018, with farmers reducing the size of plantations following a deep slide in prices, a leading trader told Reuters. The country, Asia’s biggest cocoa producer, will churn out around 240,000 tonnes of the chocolate ingredient in 2017/18, down from 270,000 tonnes a year ago, Paul Davis, deputy head of cocoa at French commodity trader Sucden said in an interview yesterday. “It simply doesn’t seem to be a competitive business at these price levels,” he said. “It is brutal, if it doesn’t make money, chop it.” Industry officials say Indonesian farmers are replacing cocoa crops with pepper, corn and other commodities that offer better returns. IPO
India seeks to raise up to US$1.7 bln from state-run reinsurer GIC Re’s IPO State-run reinsurer General Insurance Corp of India’s (GIC Re) initial public offering of shares next week seeks to raise as much 113.7 billion rupees (US$1.7 billion) in what will be India’s second-biggest IPO. GIC Re set a price range of 855-912 rupees a share for its IPO that will run from Oct. 11-13, according to a public notice yesterday. At the upper end of the price range, the IPO would raise 113.7 billion rupees (US$1.7 billion). With almost US$6 billion worth of IPO sales in the first three quarters of 2017, India is set for a record year aided by strong stock markets and higher fund flows into equity from institutions as well as retail investors. High valuations of share sales have however concerned some investors. In the GIC Re IPO, the Indian government, which fully owns the reinsurer, will sell 107.5 million shares, while the company will raise funds by selling 17.2 million new shares. The total offer of 124.7 million shares constitutes 14.2 per cent of the post-offer paid up share capital.
14 Business Daily Thursday, October 5 2017
International In Brief ecommerce
EU orders Amazon to pay back 250 mln euros in taxes to Luxembourg The European Union ordered the world’s largest online retailer Amazon yesterday to pay back about 250 million euros (US$294 million) in taxes to Luxembourg, saying it had been given an unfair tax advantage from 2003. “Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” European Competition Commissioner Margrethe Vestager said in a statement. The 250 million euros is less than an estimate of 400 million which sources told Reuters last year that Vestager had calculated at that time. However, the Commission added that the exact amount of back-payment would still need to be calculated by Luxembourg authorities. Amazon is the latest big U.S. multinational company to be reined in by the EU competition regulator, which also told technology group Apple pay back arrears of up to 13 billion euros (US$15.3 billion) to Ireland. Brexit
UK may lose status as leading data market in Europe on Brexit Brexit could cost the UK its position as the leading data market in Europe, a government-funded digital innovation group warns. The British economy could miss out on as much as 67 billion euros (US$79 billion) annually by failing to play its cards right in Brexit negotiations with the European Union over data market access, according to a report published yesterday by the UK Digital Catapult. The Digital Catapult is a government-backed centre that helps industries commercialize cutting-edge technologies. The UK currently has the largest market for data -- ranging from aggregate purchase data from retail shops to information on mobile phone locations -- in Europe, worth an estimated 13 billion euros in 2016, according to figures from market research firm IDC Europe cited by the Digital Catapult. Before the UK voted to leave the EU in 2016, the European Commission forecast this could more than double by 2020. Court
EU takes Ireland to EU court over 13 billion euro Apple tax bill The European Commission said yesterday it was taking Ireland to the European Court of Justice for its failure to recover up to 13 billion euros (US$15.3 billion) of tax due from Apple Inc. The Commission ordered the U.S. tech giant in August 2016 to pay the unpaid taxes as it ruled the firm had received illegal state aid, one of a number of deals the EU has targeted between multinationals and usually smaller EU states. “More than one year after the Commission adopted this decision, Ireland has still not recovered the money, also not in part,” EU Competition Commissioner Margrethe Vestager said in a statement. “We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But member states need to make sufficient progress to restore competition,” she added. The Commission said the deadline for Ireland to implement its decision had been Jan. 3 this year and that, until the aid was recovered, the company continued to benefit from an illegal advantage.
Climate change
EPA to propose repealing Obama’s climate regulation - document The Clean Power Plan was designed to lower carbon emissions from existing U.S. power plants by 2030 to 32 per cent below 2005 levels Valerie Volcovici
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he U.S. Environmental Protection Agency will propose repealing the Clean Power Plan - the Obama administration’s centrepiece regulation to fight climate change - and plans to solicit input on a rule to replace it, according to an EPA document seen by Reuters. The decision marks the agency’s first formal step to sweep away the rule intended to cut carbon emissions from power plants, after President Donald Trump signed an executive order in March launching the EPA’s review. The Republican president has expressed doubts about the science of climate change and has blamed former Democratic President Barack Obama’s efforts to cut carbon emissions for hurting the coal mining and oil drilling industries. The Clean Power Plan, or CPP, was challenged in court by 27 states after Obama’s administration launched it in 2015. It is currently suspended by the D.C. Circuit Court of Appeals, which set a deadline of Friday for a status report from the EPA on how it plans to proceed. The EPA document, distributed to members of the agency’s Regulatory Steering Committee, said the EPA “is issuing a proposal to repeal the rule.” The agency now intends to issue what it calls an Advanced Notice of Proposed Rulemaking to solicit input as it considers “developing a rule similarly intended to reduce CO2 emissions from existing fossil fuel electric utility generating units.” The document did not provide any details of the potential new rule. The EPA did not immediately respond to a request for comment. The CPP was designed to lower carbon emissions from existing U.S.
power plants by 2030 to 32 per cent below 2005 levels. It was seen as the main tool for the United States to meet emissions cuts it promised in the Paris Climate Agreement, a global pact to fight climate change. The Trump administration has announced it will withdraw the United States from the Paris deal - which it said would cost the U.S. economy trillions of dollars without tangible environmental benefits - in a process that could take years. Industry sources following the rulemaking process expect the proposal to repeal and replace the Clean Power Plan to be released as soon as
the end of this week. Janet McCabe, who headed the EPA’s Office of Air and Radiation under Obama, said an advanced notice of proposed rulemaking could take years - meaning the replacement for CPP could be a long way off. “It certainly will draw the process out,” she said. Some conservative groups have urged the EPA to scrap the CPP without replacing it, effectively ending U.S. regulation of carbon emissions. But some industry groups want a replacement to give utilities regulatory certainty and avoid possible lawsuits by environmental groups. Reuters
Boycott
Qatar capable of supporting banks amid boycott, Governor says Adequate capital, the availability of liquidity and high profitability enjoyed by Qatari banks mean the lenders aren’t at “high risk,” the central bank said Zainab Fattah
Qatar, the gas-rich nation boycotted by three of its Gulf neighbours since June, is capable of supporting its banks with assets in the emirate’s vast sovereign wealth fund and foreign currency reserves, the central bank governor said. Stress tests routinely conducted by the central bank show the strength and efficiency of Qatari banks in the face of the “arbitrary measures” imposed by boycotting countries, Governor Abdullah bin Saoud Al Thani said in statement on the regulator’s website yesterday.
Qatar is being forced to spend heavily to support its banks and defend the currency’s peg to the U.S. dollar after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic and transport links on June 5, accusing Qatar of supporting Sunni Islamists and Iranian-backed militants. Qatar has repeatedly denied the charges. The Qatar Investment Authority, the sovereign wealth fund, pumped almost US$40 billion of the US$340 billion it controls into the economy and financial system in the first two months of the standoff, Moody’s Investors Service said on Sept. 13.
The fund, which in the past spent billions on assets around the world, is becoming a seller. Adequate capital, the availability of liquidity and high profitability enjoyed by Qatari banks mean the lenders aren’t at “high risk,” the central bank said in the statement. Broader money supply grew more than 8.3 per cent in July, while the monetary base grew 1.7 per cent, further signs of strength, it said. Qatar’s central bank has been telling lenders to tap international investors to raise financing, instead of mainly relying on the government, people familiar with the matter told Bloomberg in August. Qatari lenders have also been asked to keep track of foreign partners that have maintained business with them, as well as those that have scaled back lending during the boycott. The economy is likely to grow this year at the slowest pace since 1995, according to economists surveyed by Bloomberg in August. Gross domestic product expanded 0.6 per cent in the second quarter ended June 30 from a year earlier, compared with 2.5 per cent in the January-to-March period, according to official data. Bloomberg news
Business Daily Thursday, October 5 2017 15
Opinion
China’s bike rental firms are actually secret cash cows Tim Culpan a technology columnist for Bloomberg Gadfly
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hina’s bike rental companies Mobike and Ofo are in talks to merge, Bloomberg’s Lulu Chen reported Tuesday. There’s not a sane mind in the world who doesn’t think that’s a good idea. One parallel is the merger of Didi Dache and Kuaidi Dache to form Didi Chuxing, which then eventually folded in Uber China. They are, of course, extremely different businesses. Car-sharing companies generally don’t own inventory. This means they’re not spending buckets of money buying assets that get piled up like trash on sidewalks, nor do they have to worry about huge maintenance costs. And while they do dish out vast sums subsidizing drivers to get them to use the platform, rider-driver hookup services charge the consumer more than a token fee. Despite purchasing bikes by the ton -- Ofo and Mobike have more than 13 million combined -- they hardly charge anything for rental, making outsiders scratch their heads at how this can possibly make sense. But there is one factor ride-sharing companies don’t e n j o y : d e p o si ts . Beijing Mobike Technology Co. and Beijing Bikelock Technology Co. (trading as Ofo) require users to pay a surety upfront for the right to rent. With millions of users on their books, that translates into billions of dollars of cash on hand. Let’s run the numbers. Mobike claims to have 100 million users, and it requires a RMB299 (US$45) deposit (let’s assume this surety is similar in all markets). That means it has just shy of RMB30 billion, or US$4.5 billion, in cash. That’s four times the amount VCs have thrown at it. The deposit pile at Ofo comes in at around RMB2 billion, a lot less because it has fewer users and demands a smaller bond. It also allows deposit-free rental for some with a good Sesame Credit score. Compare the combined US$4.8 billion of deposit money with the US$2.3 billion CB Insights estimates the duo have raised through outside funding and you realize that in reality, the unwitting venture capitalists in all of this are actually China’s millions of bike riders. With only 7 million bikes but 100 million users, Mobike holds RMB4,200 cash per bike. Ofo’s numbers aren’t anywhere near as favourable. In theory, such funds are like callable deposits, but in reality, the process is a little more cumbersome --- most users won’t bother asking for their money back because they plan to keep renting bikes. Executives from both rental companies have said publicly that this cash isn’t being used to buy extra bikes or fund operations. I have no way of fact checking such an assertion, but assuming that it’s true, this would be the smartest move possible. Instead of frittering away RMB32 billion on unprofitable assets such as bicycles, the companies can easily funnel those funds into money markets and other investments that earn around 4 per cent annually. It may not make up for the billions burnt on bikes and operations, but babysitting cash is one easy way to make a dime. Bloomberg gadfly
‘There is one factor ride-sharing companies don’t enjoy: deposits’
Russia takes advantage of China’s North Korea coal ban
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hina’s coal import data for August flung up an interesting anomaly in the form of renewed imports from North Korea, but of far more interest is the surge in cargoes from Russia. Customs data showed that China imported 1.6 million tonnes from North Korea in August, the first allowed since February when Beijing tightened sanctions against its neighbour as part of international efforts to restrict the isolated dictatorship’s nuclear weapons programme. While this generated media headlines, it’s likely nothing more than a blip as Beijing had already said it would allow North Korean cargoes stranded at Chinese ports by the sanctions to be cleared. What is more interesting is how Russia has effectively supplanted North Korea as a supplier of relatively good quality coal to China. China’s imports from Russia were 2.47 million tonnes in August, taking the year-to-date figure to 17.25 million tonnes, a gain of 41 per cent over the same period last year. That equates to about an extra 5 million tonnes from Russia so far this year, while imports from North Korea have dropped by just over 10 million tonnes. North Korean coal is classified by Chinese customs as anthracite, a grade of coal that doesn’t have quite enough energy content to be coking coal, used for steel making, but is generally of higher quality than most types of thermal coal used for power generation. China generally used North Korean coal for industrial applications and for blending with lower quality coals for power generation. The industrial applications include sintering, a process of improving the feedstock quality of iron ore before it is placed in a blast furnace, and to make ceramics. As North Korean imports of anthracite coal have waned with sanctions, those from Russia have soared. Imports of Russian anthracite were 4.5 million tonnes in the first eight months of 2017, a gain of 212 per cent from the same period last year. Australia, the world’s largest coal exporter, also managed to snare a bigger share of anthracite, but its January-August total of 869,916 tonnes, while up 45 per cent from the same period a year ago, is
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Clyde Russell a Reuters columnist
only one-fifth of what Russia has supplied.
Russian price advantage
Price is undoubtedly a factor, with Russian anthracite having a landed price in China of US$101.25 a tonne, well below the US$129.71 of Australian cargoes. Price is also likely a factor in the other area of Russia’s coal success in China, namely coking coal. Chinese imports from Russia have jumped 108 per cent to 3.14 million tonnes in the first eight months of 2017 from the same period a year ago, with the August landed cost at US$119.96 a tonne. This is well below the US$153.12 a tonne for Australian cargoes, although Australia remains the dominant supplier to China with a January-August total of 20.16 million tonnes, up 7.6 per cent from the same period last year. Mongolia has also made inroads into China’s market for coking coal so far this year, with imports totalling 17.92 million tonnes for the first eight months, up 40.2 per cent from the same period last year. Where Russia has been less successful in China is in what customs terms non-coking bituminous coal, which is thermal coal of a higher quality than low-rank lignite. China imported 9.26 million tonnes of this grade from Russia in the first eight months of 2017, up 6.7 per cent, while supplies from Australia rose 15.2 per cent to 31.65 million tonnes. Neither Russia or Australia supply significant quantities of low-rank coal, which is dominated by Indonesia in China. However, Russia is on track this year to leapfrog North Korea to become China’s fourth-biggest supplier of coal. While this is largely driven by the sanctions against North Korea, it’s worth noting that Russian producers seem to have been able to capitalise on the North Korea ban more successfully than their rivals in Australia. Reuters
Russia is on track this year to leapfrog North Korea to become China’s fourthbiggest supplier of coal
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16 Business Daily Thursday, October 5 2017
Closing Nobel
Dubochet, Frank, Henderson win 2017 Nobel Prize in Chemistry
few years, scientific literature has been filled with images of everything from proteins that Jacques Dubochet from Switzerland, Joachim cause antibiotic resistance, to the surface of Frank from Germany and Richard Henderson the Zika virus.” Annual prizes for achievements in physics, from the U.K. were awarded the 2017 Nobel chemistry, medicine, peace and literature Prize in Chemistry. The winners got the prize for developing cryo- were established in the will of Alfred Nobel, the Swedish inventor of dynamite, who died electron microscopy for the high-resolution in 1896. The prize in economic sciences was structure determination of biomolecules added by Sweden’s central bank in 1968. The in solution, the Royal Swedish Academy of total amount for each of the 2017 prizes is Sciences said in a statement yesterday. The development “simplifies and improves the 9 million kronor (US$1.1 million), up from 8 imaging of biomolecules,” it said. “In the past million kronor last year. Bloomberg news
M&A
Bain files for China antitrust approval on US$18 billion Toshiba chips deal - source Besides China, the deal would need antitrust clearance from authorities elsewhere, including Japan, the European Union and the United States Kane Wu and Junko Fujita
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he Bain Capital-led consortium that bought Toshiba’s chip unit for US$18 billion last week has filed for antitrust approval in China, a source familiar with the matter said, but it may have to wait nine months or more for a green light. Toshiba is keen to complete the sale by the end of its fiscal year in March: it hopes to use the proceeds to plug a gaping balance sheet hole left by its now bankrupt U.S. nuclear subsidiary, and save itself from a potential delisting. With the clock ticking, the request for antitrust approval was filed the day after the deal was signed, the source said. But several sources familiar with the matter said the strategic nature of the semiconductor industry for China and political issues - including tense relations with South Korea, and the presence of SK Hynix in the consortium - could delay China’s already lengthy regulatory process. The sources could not be named as they were not authorised to speak to the media. China’s relationship with South Korea has soured over South Korea’s decision to install a U.S. anti-missile
defence system which China deems as a risk to its own national security. The consortium had anticipated issues around SK Hynix, though largely around antitrust clearance. As part of the deal, SK Hynix can access only limited information and is not allowed to own more than 15 per cent of voting rights for 10 years. Yet China, where both Toshiba and SK Hynix have factories, often takes a broad view of antitrust decisions and industry sources and analysts said Beijing was expected to take a close look at a deal which involves the world’s second-biggest producer of NAND chips. It could push for a concession, divestment or investment. An outright rejection, threatening the deal, is seen as unlikely. “Geopolitics probably will be a factor in the process. If you can convince them it’s good for China, it could be easier,” said one of the sources. The sources confirmed China could normally take 6-9 months to approve a deal, but said the Bain-led consortium was still confident it could secure a timely antitrust approval. Besides China, the deal would also need antitrust clearance from authorities
elsewhere, including Japan, the European Union and the United States. A delay would not automatically mean a delisting for Toshiba - Japan-based sources said it would have to turn to stopgap measures to plug the gap, including a capital injection. “The banks would support Toshiba as long as they are confident that Toshiba would
eventually get the money from the chip unit sale,” a second source said. A spokeswoman for Bain declined to comment. Bain is due to hold a press conference in Tokyo on Thursday. Contacted by Reuters, Toshiba said it intends to close the deal by the end of March, after receiving regulatory approvals. C h i n a’ s M i n i s t r y o f
Commerce (MOFCOM) usually considered China’s main antitrust regulator, even if other entities step in - did not reply to a request for comment during a holiday week. Toshiba sold its unit last Thursday to a group that includes Bain and SK Hynix, as well as Apple Inc, Dell, Seagate Technology Plc and Kingston Technology. Reuters
Technology
Energy
Results
Japan Display seeks US$900 mln for new OLED production method, shares soar
May to set out UK energy price PepsiCo’s profit beats on higher cap action in blow to utilities sales for Frito-Lay snacks
A Japan Display Inc group firm aims to raise US$900 million to mass produce OLED panels using new technology that will slash costs, a source familiar with the matter said - plans that sent shares in the Apple Inc supplier surging 24 per cent. Display makers are looking at mass producing organic light-emitting diode screens with a lower-cost printing process and if Japan Display was first, that could help it catch up with South Korean rivals after long being a laggard in OLED technology. Its affiliate, JOLED, which is majority owned by a state-backed fund, has been working towards using the technology to start mass production of medium-sized screens for medical equipment monitors in late 2018 or early 2019. JOLED has now approached dozens of investors including Sony Corp and Canon Inc for funds, the Nikkei business daily reported yesterday. Japan Display said in a statement the reported details were not something it had announced, but added that it was considering ways to utilise its domestic factories to mass produce OLED panels. Bigger rivals Samsung Electronics Co Ltd and LG Display Co Ltd are also working on the new production technology but it is not clear who is in the lead. Reuters
Prime Minister Theresa May will set out plans to limit domestic energy prices when she addresses her Conservative Party’s annual conference yesterday, Energy Secretary Greg Clark said. The action would follow through on the Tories’ manifesto pledge -- copied from a similar policy first proposed by Labour -- to rein in the so-called Big Six utilities. Last year, the Competitions and Markets Authority said consumers were overpaying on their bills by 1.4 billion pounds (US$1.9 billion) a year by remaining on default fares instead of changing suppliers. “It’s been my consistent view throughout that we can’t stand by and see this amount of detriment to the consumer uncorrected,” Clark said in a Bloomberg TV interview yesterday. “The prime minister is going to be saying something about this in her speech later in the morning.” Until now, the government has left the matter in the hands of the energy regulator Ofgem, which Clark instructed to look at the matter after the general election in June. The regulator in July said it was looking into introducing a safeguard tariff for “vulnerable” customers, a category the organization’s Chief Executive Officer Dermot Nolan said would cover about 2.2 million people. That’s far short of the 17 million the government says are affected. Bloomberg news
PepsiCo Inc reported a better-than-expected rise in quarterly profit despite a drop in demand for its beverages in the United States as it sold more snacks under the Frito-Lay brand and benefited from lower costs. Revenue from its Frito-Lay business, which includes snacks such as Cheetos and Doritos, rose 3.2 per cent in the third quarter ended Sept. 9. Total selling and general costs fell 0.7 per cent to US$5.87 billion. However, revenue from its North America beverage unit, the company’s largest, fell 3.4 per cent to US$5.33 billion in the quarter, hurt partly by weak performance of its Gatorade brand, PepsiCo said yesterday. While volume sales in the business, which also sells Diet Pepsi and Lipton tea, was down 6 per cent, net pricing rose 1 per cent. Soda consumption has been falling for the last 12 years as more consumers choose healthier options. But dollar sales have risen as soft drink makers aggressively pushed smaller packs at higher prices per ounce. Net income attributable to the company rose to US$2.14 billion, or US$1.49 per share, in the quarter, from US$1.99 billion, or US$1.37 per share, a year earlier. Net revenue rose 1.3 per cent to US$16.24 billion, coming in below the average analyst estimate of US$16.31 billion. Reuters