ANZAC Day observance in Macau Tue, 25 April 2017 │ 7:30am - 9am │ MGM Macau C DAY ANZA
Followed by breakfast from 8am
Beijing curbs to tame real estate bubble proven to be effective Property Page 10
Thursday, April 6 2017 Year VI Nr. 1269 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong M&A
Hotels
ChemChina wins U.S. approval for Syngenta merger Page 9
The 13 slated to open in July Page 7
www.macaubusinessdaily.com
Business
Monetary
Shell disposing of LPG business in Macau, HK Page 5
Deposits with local banks increase in February Page 5
Graft On The Rise Corruption
The Commission Against Corruption received 910 reports and complaints last year. This per its 2016 annual report. With the majority related to public departments regarding contracts and procurement. Macau’s watchdog also pointed to conspiracy and collusion within the government. Page 3
Between a rock and a hard place
Melco Resorts & Entertainment has dumped the Hard Rock brand for one of the hotels in City of Dreams, it announced yesterday. Replacing it with ‘The Countdown’ until March 31, 2018. The Morpheus opens in April next year.
How low can you go?
Urban planning Height concerns dominated discussions on the Wai Long public housing project yesterday. The Urban Planning Committee is seeking to decrease current proposed height limits. Citing the panorama of Taipa Grande Hill. Page 2
Every cloud has a silver lining
Gaming Page 7
HK Hang Seng Index April 5, 2017
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Lenovo Group Ltd
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Bank of Communications
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Sun Hung Kai Properties Ltd
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BOC Hong Kong Holdings
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Xi-Trump meeting American businesses operating in China have expressed their points of view regarding this week’s meeting between China and the U.S. In spite of Trump’s fierce comments, U.S. companies think the meeting could have positive effects for both parties. Page 8
2 Business Daily Thursday, April 6 2017
Macau Infrastructure
Height concerns Members of the Urban Planning Committee expressed their concerns about the government’s Wai Long Public Housing project yesterday. In particular, those related to the height of the project dominated the discussion Cecilia U cecilia.u@macaubusinessdaily.com
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he majority of the Urban Planning Committee is concerned that the proposed height for the public housing project in Avenida de Wai Long may block Taipa Grande Hill. During a plenary meeting yesterday, Cheong Ion Man, Deputy Director of the Land, Public Works and Transport Bureau (DSSOPT), said the proposed heights for the project in Taipa meet the requirements of the Civil Aviation Authority (AACM). According to the DSSOPT official, the public project, near the Macau International Airport comprises two parts, with the part for residential units set to be a maximum 155 metres high, while the other part for social and public facilities will be 90 metres at its tallest. Director of DSSOPT Li Canfeng noted that the actual height of the project can be adjusted in the future based upon the research of the Environmental Protection Bureau. Vice-Chairman of the Committee, Leong Keng Seng, enquired whether the government has conducted any evaluation of the surrounding environment, transportation and air condition for the project. The DSSOPT Director asserted that
the development plan for the area is only in its preliminary stage, adding other evaluations will only be made as the plan proceeds.
Other options
Although the Committee agrees with the inadequateness of public housing in the territory, a number of members questioned whether the land plot in Avenida de Wai Long is the best choice for the project, given the location is distant from major districts.
“It is not appropriate to construct social housing because [social housing] is for the poorest [members of the] population,” reiterated member Leong Heng Kao. “The transportation system is not complete [there] and living costs in Taipa are comparatively more expensive.” As such, many also questioned what kind of housing the government is planning to build in the area. Member Lee Hay Ip, who is also the supervisor of Macau Association of Geotechnical Engineering, suggested the government provide more information in order to consider other suitable choices for the project. In fact, the land plot was initially granted to Hong Kong businessman Joseph Lau Luen Hung for the nowscrapped La Scala project. In 2006, Moon Ocean Ltd., a company controlled by Mr. Lau, was
approved by the MSAR Government to acquire the five plots for the project for MOP1.37 billion. But the acquisition was invalidated by the authorities in 2012 once linked to the corruption case of ex-Secretary Ao Man Long. Moon Ocean filed an appeal against the government’s decision but was turned down by the Court of Final Appeal in June of last year.
Facilities and possible impacts
On the other hand, the DSSOPT vice head said 40 per cent of the land some 25,000 square metres - will be developed for auxiliary facilities for the project, which is a higher ratio in comparison to the Seac Pai Van Public Housing Complex. The DSSOPT official added that there will be no underground exploitation of the project, noting facilities such as car parks will be built within the buildings. Members also expressed concern about the noise of the project as it is close to the city’s airport.
Land
Wifi-Go
Gov’t to reclaim four more land plots
Telecom regulator stresses review of Wifi Go once more
Three of the parcels are located in Seac Pai Van Industrial Zone
The government announced it will reclaim possession of four undeveloped land plots occupying a total area of 12,865 square metres, according to yesterday’s Official Gazette. Three of the four land plots are located in Seac Pai Van Industrial Zone in Coloane, for which all land concessions were granted in 1989. The biggest allotment, exceeding 5,980 square metres in area, was granted to Companhia de Construção Cheong Kong, Limitada. According to the original agreement, the plot would accommodate an asphalt production plant and a storage facility for equipment and construction materials in addition to residential facilities for security guards on the site. The second largest plot sitting idle in the industrial zone, occupying a total area of 3,375 square metres, was to house a 10-storey building for industrial segments and a parking lot. The plot was granted to Companhia
de Desenvolvimento Imobiliário Hou Lei, Limitada. The other plot located in Coloane, occupying an area of 2,850 square metres, was granted to Chan Hoi Kwong, for the purpose of developing several two-storey building units for dog breeding. Another land plot to be reclaimed by the government is situated in Ilha Verde on the Peninsula. The plot, granted to Companhia de Engenharia e Indústria Guangdong (Macau), Limitada, occupies 659 square metres and was allocated for the development of a six-storey industrial building with a parking lot. According to the law, developers have a maximum of 25 years to commence and complete development on public land under concession agreements. Those who fail to comply within the period will have their land concession declared invalid and the plots reclaimed by the government. S.Z.
Macao Post and Telecommunications Bureau will undertake a comprehensive review of its outsourced free access wireless broadband service, WiFi Go, it stressed again in a reply to legislator Chan Meng Kam’s written enquiry. Last month, the Audit Commission slammed WiFi Go as being somewhat ‘useless’ as the city’s telecommunication regulator has failed to clearly orientate the service and its target users, as well as being slack in its supervision of the service’s operation and quality. Claiming it accepts and agrees with the suggestions of the Commission, the Bureau said it will intensify the monitoring mechanism of the service, adding that the positioning
of the free WiFi service will be re-examined. CTT is also considering gradually reducing the number of WiFi spots in public entities in order to ensure that public expenditure on the service is reasonable, it said, adding other technical support might also be applied to reduce cost and improve efficiency of the service. Wifi Go was launched in September 2010 by the former Bureau of Telecommunications Regulation (DSRT), which merged with Macao Post last month to form CTT. According to the audit report, there were 183 access points for the service as of March 2016, with the total cost amounting to some MOP161.3 million (US$20.2 million). C.U.
Business Daily Thursday, April 6 2017 3
Macau Corruption
CCAC draws a bead on government departments In 2016, the majority of reports and complaints concerning corruption received by the city’s antigraft watchdog were related to public departments Kam Leong kamleong@macaubusinessdaily.com
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ublic procurement and recruitment were the main issues on the table for the Commission Against Corruption (CCAC) in the year of 2016, of which reports or complaints against public departments accounted for the majority of the total it received last year. According to its 2016 annual report published yesterday, the city’s anti-graft watchdog received 910 reports and complaints last year, a rebounding growth of 15 per cent year-on-year following decreases in the number of cases for two consecutive years in 2014 and 2015. Of the total cases, 252 were listed as criminal while the other 658 were complaints against public departments. Most of the cases were filed by local residents - at 839 - while 23 others were transferred to the Commission by other public entities. Regarding the alleged bribery case of former Prosecutor-general Ho Chio Meng last year, Commissioner Andre Cheong Weng Chon wrote in the report that the crackdown demonstrated that the Commission is able to track down both “tigers” and “flies” –high-ranking officials and low-ranking bureaucrats. Remarking that the Ho Chio Meng case is the most noteworthy case from last year, the Commission said that the general impact of other uncovered cases were also bigger compared to previous years. ‘A crackdown of one case triggered a few other reports of similar cases. For example, after [CCAC] busted a case related to the Transport Bureau and a car park management company, many other reports were filed against car park management,’ the report reads.
Corruption cases on the rise
The Commission also noted that the criminal cases related to other public departments had expanded to bodies under different secretariats vis-a-vis previous years, when cases primarily related to within local security forces. ‘2016’s criminal cases covered the Civic and Municipal Affairs Bureau, the Health Bureau, the Social Welfare Bureau, the Marine and Water Bureau, the Housing Bureau and the list goes on,’ the report reads. The anti-graft watchdog concluded that the year’s criminal cases were primarily related to fraud, forgery and abuse of power, whereas most of the fraud cases were related to government subsidies. In addition, the anti-graft body added that criminal cases occurring in private entitles posted an increase for last year. In particular, there were a number of cases related to local property management committees and property management companies. ‘This reflects the complex relations between local property management companies, property owners and property management committee, whose inter-conflicts are quite significant, which also shows related laws on property management need to be improved,’ the Commission wrote. According to CCAC, it also received 1,102 enquiries or requests for help in the year of 2016, of which 453 were related crimes while 649 involved government departments.
It received 19 requests of assistance from other anti-graft bodies outside the MSAR last year, of which 15 were from China and four were from Hong Kong’s ICAC. Likewise, CCAC requested assistance on nine cases from Mainland China and Hong Kong authorities.
Procurement: Door to corruption
Meanwhile, the anti-graft watchdog warned that the MSAR Government should urgently address departments’ procurement procedures given the many illegalities arising from them. ‘From the criminal cases busted by CCAC last year, it is found that the situations of suspects making use of loopholes in the law system or the supervision system to conspire and collude with parties outside the government are serious,’ the Commission noted. It added that the government departments’ direct grants of service contracts to awardees – thus avoiding opening public tenders or asking for quotations for public services – were not in accordance with legal procedures and represented another significant problem to be addressed. The Commission pointed out that these wrongful procurement actions of public departments - despite the excuse of ‘saving time’ - will increase the risks of corruption and abuse of power given the reduction in publicity and transparency of public procurement. ‘CCAC perceives the current public procurement system is severely lagging behind. The Administration needs to amend the current [law and related regulations] based upon the actual social situation as soon as possible. Simplifying procurement procedures, [the government] needs to strengthen its mechanisms of supervision and inspection,’ the anti-graft body said.
Jobs not well done
Also an Ombudsman, the anti-corruption body slammed public departments’ lack of knowledge of Administration procedures and regulations regarding recruiting civil servants. ‘Some departments allow the existence of the wrongful situations even they know it’s not correct. Meanwhile, they only corrected the faults reluctantly after the Commission issued a warning,’ claimed the body. Last month, CCAC released a report revealing that the Cultural Affairs Bureau (CAB) had used an illegal method to recruit a large number of its workers via the acquisition of services, rather than launching open or central recruitment systems in a regulated way. But this does not only happen in CAB. Macao Government Tourism Office (MGTO) and the Marine and Water Bureau were also revealed to have hired workers who did not even meet the minimum education requirements for their positions.
Capricious MGTO
In 2015, CCAC found that MGTO had re-recruited an Office retiree as an officer in 2013, despite the fact that the worker did not hold any degree of territory education that the position required. Following the discovery of the Commission, MGTO wrote a letter to the anti-graft body saying it had negated its contract with the related worker. But the Commission later
Commissioner Andre Cheong Weng Chon (left) submits the 2016 annual report of the Commission Against Corruption to Chief Executive Fernando Chui Sai On
found that the tourism body had only changed this to recruiting this worker by a two-month labour contract, renewing the worker’s contract whenever it expired and offered the worker a monthly salary of MOP65,000. The situation continued until February of last year, when the tourism body obtained approval from the Secretary for Social Affairs and Culture to appoint the worker as an advisor to MGTO based upon a personal labour contract. Nevertheless, CCAC said this worker does not possess any “special talents”
for being an advisor to MGTO, adding that the worker’s job responsibilities as an advisr were exactly the same as those for his previous positions. CCAC claimed MGTO recruited the worker via administrative appointment contract in October 2016 following a warning issued by the Commission. The Marine and Water Affairs Bureau was also discovered to have hired one worker who had not obtained any tertiary education certificates as a second grade officer in the Bureau.
4 Business Daily Thursday, April 6 2017
Macau Opinion
José I. Duarte* Transparency, TBC Last week, in a statement issued by the relevant department, the government answered questions raised earlier by one of the legislators. The questions related to the use of and public access to information and data generated by the many enquiries, surveys, polls, and similar activities produced for the government every year. They are made by the hundreds every year, costing the public purse many millions. On average, on known figures, it appears that at least one is tendered every day. As they are supported by public money, there is certainly a strong case for making the collected data available. It is hard to see why aggregate data that does not disclose the identity of the respondents, and the conclusions extracted from them by those conducting the surveys, should not be accessible. First, as a matter of public transparency, an objective that is so frequently invoked. Second, and as important, to allow others to use the effort and expense already made to refine, confirm or challenge the conclusions, or to use them for other analytical purposes which the data may permit. The policy debate would be enriched, the public resources would be better used, and the collective knowledge could be enhanced. In the reply, the government states as much. It says the government values public availability of the information on two grounds - to satisfy the right of the population to be informed and to promote a stronger involvement of the community in the formulation of policies. These declarations were underlined by a statement of commitment to formulate a strategy concerning the publication of that information. These are commendable aims and deserve everyone’s support. But deeds seem harder to come by. A cursory search of local media indicates the question was raised about one year ago. Why has it taken so long to say, in practice, that the government values transparency and is going to study the issue? As the transparency policy has been asserted on many occasions, that declaration seems to fall short of what we might reasonably expect at this point. Why not start without delay by creating a repository of all the polls and surveys made? It would provide three types of information. First, the nature of the survey and its objectives. Second, the questionnaire used and the conclusions extracted from the answers collected. Third, the aggregate data for the questions asked. It would not entail especially complex operational procedures or raise any confidentiality concerns. *Economist and permanent contributor to this newspaper.
Health
Coloane health complex nears completion GDI says construction of the new healthcare complex in Seac Pai Van will be wrapped up this quarter following previous delays due to stone extraction and adverse weather Nelson Moura nelson.moura@macaubusinessdaily.com
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he construction of the new healthcare complex in Seac Pai Van is expected to be completed this quarter after the project missed its initial completion target in December last year, the Infrastructure Development Office (GDI) told Business Daily. The 10-storey complex will house a health centre, a medical treatment centre, a day-care centre and a nursing home for the elderly. The centre will be handed to the Health Bureau upon completion of construction, telling Business Daily that it will proceed to ‘re-modelling’ and ‘refitting’ works inside the property, with the opening to the public ‘on a date yet to be defined.’ The MOP325.8 million (US$40.7 million) construction contract was awarded to a consortium
comprising Companhia de Construção & Engenharia Shing Lung, Limitada / Long Cheong — Construções e Engenharia, Limitada / AD & C Engenharia e Construções Companhia Limitada, while a MOP18.8 million fiscalisation contract was awarded to Fernando Cardoso Botelho — FCB — Gabinete de Engenharia, Limitada. Construction on the project started in September 2014 and was originally slated for completion in 850 days as mandated by the contract. GDI explained on its official website that the delay was due to ‘extraction of stones in the development of foundations and adverse weather conditions.’
Health deals
According to the tender notice for the project, the complex will use energy and water sustainable technologies and will include an underground parking lot with spaces for
300 vehicles. “The Seac Pai Van Health Centre will provide adult health services, pre-birth healthcare, family planning, women and child healthcare, out-patientappointments, Traditional Chinese Medicine services and dental practice,” the Health Bureau said. “It will also provide nursing services for public and community health, diabetes, the elderly, rehabilitation and pediatrics.” Regarding the recruitment of medical personnel for the Centre, the Health Bureau claimed workers currently working in the Temporary Health Centre in Seac Pai Van would be transferred to the new project following the opening. Further medical human resources will also be shifted from other medical centres in the MSAR, the Bureau added, although it did not disclose how many extra personnel will be needed for the new project. ‘Only after the public opening, which is not yet defined, will the human resources of the health centre be adjusted, according to the needs of the community and the number of users that will require the services,’ said the Bureau.
Elections
Audited expenses an absolute must for candidates Expenses reports of candidates running for this year’s Legislative Assembly Election will have to be approved by a locally registered auditor prior to submission to the Electoral Commission, chairman Tong Hio Fong said yesterday. Maximum expenses for candidates is capped at MOP3.55 million (US$443,649) this year, while an
audited expenses report will have to be submitted to the Commission within 90 days following Election Day on September 17. Speaking to reporters yesterday, the Commission chairman said the body will wrap up its meetings for election arrangements this month. He added that the Commission may not be able to meet with the Macau
Portuguese and English Association (AIPIM) to clarify some of the Association’s doubts regarding media coverage for the election due to time restraints. In March, the Commission held a clarifying session for local media, in which it warned that local media could incur ‘infractions’ if its coverage was considered propaganda, defined by the Electoral Law as ‘activities that directs the attention’ or reports that lead residents to vote for particular candidates. Following the session, AIPIM sent a clarification request to the Commission. “We received the letter and will respond through written form although we didn’t have that much time given the past Tuesday was a holiday,” said Mr. Tong. “The issues raised are basically what we discussed in our clarifying session with the press. We respect the freedom of the press but that freedom has to respect legal requirements. Per example a report humiliating a candidate is not allowed.” N.M.
Business Daily Thursday, April 6 2017 5
Macau M&A
Shell sells SARs’ LPG business to DCC Energy
SARs. “This sale is aligned with our strategic commitment to focus our business on areas where we can be Oil giant Shell announced yesterday the conditional most competitive,” Daniel Ng, Country Chairman, sale of its liquefied petroleum gas (LPG) business Shell Hong Kong Limited, said in a press release. “The in Hong Kong and Macau to DCC Energy for a total enterprise value of US$150.3 million (HK$1,165 million). sale does not impact any of Shell’s other businesses and we remain committed to helping meet energy According to a company statement, the two parties demand in Hong Kong and Macau.” will enter into a long-term brand licence agreement The company expects the deal will be concluded in as part of the sale, which allows the Shell brand to the first quarter of next year. K.L. remain visible across the LPG business in the two
Monetary
Local bank deposits grow in February billion, respectively, whereas only MOP7 billion of the external loans were denominated in MOP. As at the end of the month, the loan-to-deposit ratio for the resident sector dropped 0.9 percentage points from the previous month to 59.1 per cent. In addition, the non-performing loan ratio was unchanged from one month earlier at 0.2 per cent.
Meanwhile, the city’s banks approved higher loan amounts internally and externally in the same month vis-a-vis January Kam Leong kamleong@macaubusinessdaily.com
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ome MOP962.2 billion (US$120.3 billion)were deposited with the local banking sector as at the end of February this year, which represents an increase of 2.2 per cent month-on-month, with those of non-residents and local residents both registering growth. According to the latest official data released yesterday by the Monetary Authority of Macau (AMCM) residents’ deposits with local banks totalled MOP526.4 billion in the second month of the year, up 0.9 per cent from the first month. Compared to the same month of 2016,
Increased monthly supply the amount even jumped 15.3 per cent year-on-year. Deposits by non-residents with local banks went up 2.5 per cent yearon-year to MOP255.3 billion in the same month. However, the amount represents a drop of 12.7 per cent as compared to one year ago. Of the total deposits with the banking sector, nearly half were Hong Kong Dollars (HKD), which accounted for 47.6 per cent, followed by U.S. Dollars (USD) and Macau Patacas (MOP) at 24 per cent and 21.6 per cent, respectively. Meanwhile, local banks approved domestic loans of MOP418 billion
in the same month, up 0.6 per cent month-on-month, of which those denominated in HKD amounted to MOP271.6 billion, representing 65 per cent, while MOP-denominated loans reached MOP124.1 billion, accounting for 29.7 per cent of the total. External loans approved by banks grew by 2.2 per cent monthon-month to MOP381.2 billion in February, of which loans denominated in USD accounted for 54.9 per cent, amounting to MOP209.4 billion. Other external loans were primarily denominated in HKD and Renminbi (RMB), which reached MOP100.6 billion and MOP40.5
Meanwhile, the city saw currency in circulation fall 6.7 per cent monthon-month in February, totalling MOP14.3 billion Money Supply (M1) increased 8.5 per cent month-on-month to MOP70.6 billion as demand deposits rose 13.2 per cent. While quasi-monetary liabilities decreased 0.3 per cent month-onmonth, M2, the sum of the item and M1, posted a slight increase of 0.7 per cent to MOP540.7 billion from one month ago. Of the total, HKD accounted for 52.1 per cent, while MOP, USD and RMB amounted to 31.7 per cent, 10.1 per cent and 4 per cent, respectively.
6 Business Daily Thursday, April 6 2017
Macau Opinion
Ashley Sutherland-Winch* How safe is your brand online? Two weeks after companies began pulling ads from YouTube because they were populating next to hate videos, Google is still navigating serious damage control. At the start of the boycott, the world’s largest digital ad-seller, Google, promised new controls for marketers but this crisis has ignited greater debate about digital advertising over quality assurance and brand safety online. Google is adding a new filter to disable ads of ‘dangerous and derogatory content and expanded its definition of hate speech to include marginalised groups’ the company said. Since the boycott began, Google has allocated more of its artificial intelligence (AI) tools to deciphering YouTube’s enormous video library. “We switched to a completely new generation of our latest and greatest machine-learning models,” said Chief Business Officer Philipp Schindler. He also reported that Google has flagged five times as many videos as too offensive for ads in recent weeks. Google must now begin the arduous task of regaining the trust of brands and continue to refine its algorithms to prevent this sort of slip up in the future. A frequent demand from advertisers has been for oversight and now Google will let other companies verify standards on YouTube. Google is creating a ‘brand safety’ reporting channel that enables YouTube ads to be monitored by external partners like comScore Inc. and Integral Ad Science Inc. Taco Bell’s CMO, Marisa Thalberg, says she considers Google an important partner, but right now she’s pulling back her brand’s ad dollars until Google makes more changes. “We are on a pause ... because at the end of the day, context matters.” Schindler of Google said he has devoted more manpower to oversee brand safety issues but stressed that only machine intelligence could contend with YouTube’s size. Companies cannot gamble with their brand reputation and must be very aware of where their advertising is presented. Historically, brands have a lot of control over where their advertising would be seen and heard on television, radio and in print but virtually little control in the digital realm with auto populated ads. This is going to be a hot topic for the foreseeable future as billions of dollars are pumped into digital advertising each year. Relying solely upon AI for ad placement is tough and I wonder how human touch could be involved with certain editorial decisions. While they are quickly working to fix their issues, I continue to urge businesses in Macau to evaluate their advertising campaigns with Google and pause ads until a complete solution is reached. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Tax
Gov’t fails to sign tax agreement with Portugal
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he MSAR failed to sign an agreement to revise current protocols on assets and financial information exchange between banks in the two regions with Portugal, although the Portuguese Secretary of State of Tax Affairs was here in the territory yesterday, local broadcaster TDM reported. According to Secretary Fernando Rocha Andrade, the Macau authorities informed him that they had not been able to ‘finish all procedures’ for the agreement but that the city was committed to continuing preparing the implementation of the
Common Reporting Standard (CRS) developed by the Organisation for Economic Co-operation and Development (OECD). The Secretary said that the Portuguese authorities were in “no rush” to sign the agreement, adding that it will continue its discussions with the MSAR to develop a bilateral information exchange protocol that will allow Portuguese authorities to receive financial information about the assets held by Portuguese nationals in Macau. As part of his official visit to the city, the Portuguese official met with the Secretary for Economy and
Finance Lionel Leong Vai Tac, the Monetary Authority of Macau (AMCM) and the management of Banco Nacional Ultramarino S.A. (BNU). In a visit to Hong Kong on April 3, the Portuguese Secretary signed a similar agreement with the authorities of the neighbouring SAR, which allows the Portuguese Government to access information on bank accounts held in Hong Kong. According to Portuguese newspaper Publico, some 2.36 billion euros (MOP20.14 billion/US$2.52 billion) has been transferred from bank accounts in Portugal to Hong Kong. N.M.
Sino-Luso
Portugal welcomes more Chinese investment The Portuguese Foreign Minister asserts his country, of all other Western countries, “can better understand what is happening in China” The Portuguese Government wants more Chinese investment in Portugal, as far as they are more channelled towards productive sectors of the economy such as the agro-industry, says Portuguese Foreign Minister Augusto Santos Silva. “We strive to increase Chinese investment. We do not consider that it is interesting for Portugal to undervalue Chinese investment,” the head of the Portuguese diplomatic corps said on Tuesday, speaking at the opening session of the conference ‘Thirty Years of the Joint Declaration, China and Macau’ at the Orient Foundation in Lisbon. Conversely, Santos Silva pointed out that “the Chinese investment that is most interesting to [attract] is that of a more productive nature, more directed towards the productive sectors of the economy [namely] the agro-industrial and industrial manufacturing sectors.” Previously, the official representative commented that Chinese investment has penetrated “very important sectors” of the national economy such as energy, banking and insurance, stressing the fact that it is a type of investment which “has come to stay” rather than being “short-term
and seeking immediate return at any price.” Observing that the relations between Portugal and China “are now much more developed than five or ten years ago, and that there is a path laid down for this economic relationship,” the Minister warned: “this implies reciprocity.” In this sense, he pointed out that there is a need for Portuguese products, particularly agricultural food products, to meet fewer barriers in order to enter the Chinese market. During his speech, Santos Silva highlighted that, among Western countries, Portugal is the one which “can better understand what is happening in China and how we can interact” given the “special connection” between the two countries which agreed 30 years ago on the terms of the transition from the Special Administrative Region of Macau to the Chinese Administration, established in 1999. “Portugal’s relationship with China has been built up over the past 30 years over a historic moment of great change taking place in Chinese civilization and the Chinese State, and whose future developments we are not able to fully anticipate,” he said.
To illustrate the good relationship between the two countries, Santos Silva recalled that China - one of the five members of the United Nations Security Council that holds the right to veto the choice of the organization’s Secretary General – was early on a supporter of the candidacy of the former Portuguese Prime Minister, António Guterres, for the position, based upon the claim that the Chinese knew the Portuguese, who had fulfilled all the commitments made 30 years ago. The Minister also referred to China’s great commitment to teaching the Portuguese language and, in particular, to the role of Macau, which “has today more programmes of teaching and learning Portuguese than ever before,” in addition to affirming itself “as the platform for the promotion of Portuguese teaching to the entire Chinese subcontinent.” Finally, the head of the Portuguese diplomatic corps underscored the “triangular relationship” between China, Portugal, and the African Portuguese-speaking countries, which has been consolidated through the Macau Forum. “It is an institutional platform that we can increasingly use in order to foster the relationship between the Portuguese-speaking countries and China, fostering further the crucial role Portugal plays in intermediating [this relationship],” he observed. He also added that this “is one of the most important points in the world for one to better understand why the community of Portuguese-speaking countries is far from being just a banner or a topic of more or less affective discourse.” Moreover, the partnership between Lisbon and Beijing is an area to strengthen bilateral relations. “The way in which Portugal and China can consider themselves as investment partners in the Portuguese-speaking countries in Africa in general is one of the essential points for advancement in bilateral relations, “he underlined. LUSA
Business Daily Thursday, April 6 2017 7
Macau Gaming
‘The Countdown’ to Morpheus Hard Rock Hotel will be re-branded ‘The Countdown’ until March 31, 2018, counting down the opening of Melco’s new hotel in Cotai - Morpheus - in April of next year. Nelson Moura nelson.moura@macaubusinessdaily.com
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elco Resorts & Entertainment Ltd. is re-branding the Hard Rock Hotel in City of Drams to ‘The Countdown’ from July 2017 until March 31 next year, it announced yesterday. According to the announcement, the hotel property will add a countdown clock timed to the opening of Melco’s new hotel property Morpheus, slated to open in April, 2018. In an e-mailed response to Business Daily’s enquiry, the gaming operator said the re-branding exercise seeks to further differentiate City of Dreams from other existing resorts in the region. ‘We unveiled a
new phase of development to render it beyond 5-star positioning by re-branding Hard Rock Hotel,’ the statement reads, adding the company has notified the Hard Rock Group. Business Daily also approached Hard Rock International regarding Melco’s re-branding but no
Melco Int’l grants restricted shares to Lawrence Ho
Meanwhile, Melco International Development Ltd. – major shareholder in Melco Resorts & Entertainment said its chairman and CEO, Lawrence Ho Yau Lung, had received 210,490 of the group’s American depositary shares (ADS) on March 31, according
response had been received from the company when this newspaper went to print. Asked by this newspaper whether the Hard Rock brand will re-emerge following the ‘The Countdown,’ a spokesperson at Strategic Public Relations Group Ltd (SPRG), a PR firm for Melco, said the “future development of the property after the aforementioned period is not yet confirmed.” Last week, the gaming operator announced it will change its name from Melco Crown Entertainment Limited to Melco Resorts & Entertainment
Limited, following Australian-based casino operator Crown Resorts reduced stake in the company in 2016.
to a company filing with Hong Kong Stock Exchange on Monday evening The number of shares received by the businessman represents about 0.04 per cent of Melco International’s total issued shares. The filing notes the offer was part of its Share Incentive Plan, with ADS valued at US$18.54(MOP148) as of
March 31 of this year, while the value of the granted Restricted Shares to Mr. Ho was estimated at around US$3.9 million. The company claimed that the offer is in recognition of ‘Mr. Ho’s contribution to the success and development’ of the group by the company’s Board of Directors.
The property currently housing Hard Rock Hotel will add a countdown clock timed to the opening of the new hotel Morpheus, according to Melco Resorts & Entertainment
Hotels
The 13 opts for July opening The new luxury hotel The 13 will only open its door by the end of July this year, its developer - The 13 Holdings Limited - announced yesterday in a filing with the Hong Kong Stock Exchange. The company said it is currently waiting to obtain the ‘necessary licences for the operation and pre-opening
preparation of the Hotel’ from the MSAR authorities. According to the filing, the company had already received an occupation permit for the hotel project occupying a 65,000 square foot plot in Coloane on March 29. The company was expecting to launch the hotel ‘in early 2017.’
The company’s joint chairman, Stephen Hung, said last month that the delay was due to the ‘incompletion of the property’s decoration works.’ The hotel was first slated to open ‘in late Summer 2016’ then ‘the fourth quarter of 2016.’ Asked by Business Daily, The 13 did not provide any additional information on the delay in opening or whether the property will host any gaming facilities in the future as this story went to press. S.Z.
8 Business Daily Thursday, April 6 2017
Greater china
Xi-Trump summit
U.S. business seeks action, not trade war China tops the list of countries who have trade surpluses with the United States, with a US$347 billion surplus last year. Michael Martina and Diane Bartz
A
lthough worried about the prospect of a trade war, American businesses operating in China nonetheless want President Donald Trump to wring some concessions on market access from China’s leader Xi Jingping when the two meet this week. Trump warned in a tweet last week the meetings at his Mar-a-Lago resort today and tomorrow will be “very difficult” and “American companies must be prepared to look at other alternatives.” Trump has said he wants U.S. companies to stop investing in China and instead create jobs at home. He has also accused China of manipulating its currency to boost exports. Critics within U.S. industry have accused China of unfair government subsidies to its companies, and of flooding the U.S. market with cheap products from steel to solar panels, while restricting foreign investment over vast swathes of the world’s second-biggest economy. But they also worry Trump’s policies on China are not entirely clear, with his trade team still not in place, and may be subject to a ‘grand bargain’ involving other issues such as North Korea. Trump is set to enter the meeting without several key advisors, including his pick for trade negotiator, Robert Lighthizer who has yet to be confirmed by Congress. His nominee as ambassador to China, Iowa Governor Terry Branstad, has also yet to be confirmed, while several posts in the U.S. State Department that formulate Asia policy remain
unfilled. “With this in mind, it is hard to imagine that there will be much in the way of concrete accomplishments at this summit, or even that there has been any significant interagency discussion on strategy leading up to it,” said Randal Phillips, Mintz Group’s Beijing-based managing partner for Asia and the former chief CIA representative in China.
‘Actions, not words’
Some of the largest U.S. companies have contributed to the billions of dollars of foreign direct investment that have poured into China over the past two decades, creating hundreds of thousands of jobs. They include tech companies like Apple, which makes much of its iPhone in China, automakers such as General Motors and Ford, heavy machinery firms like Caterpillar, retailers like Starbucks and makers of shaving foam and detergent, like Procter & Gamble. U.S. steel producers want Trump to press Xi on Chinese steel prices, according to a source who has been in discussions with the administration in advance of the summit. U.S. automakers complain about a disparity in tariffs: The United States has a 2.5 per cent tariff on auto imports, China’s is 25 per cent. But the stakes are perhaps highest for American technology firms, who worry that China’s new cyber-security law, which takes effect in June, sets potentially discriminatory standards for multinationals. The Information Technology & Innovation Foundation (ITIF), a thinktank whose board includes representatives from Apple, IBM Google and other tech heavyweights, has
urged the Trump administration to pressure China to “stop rigging markets”. It warned that possible retaliation from Beijing was not a reason for inaction. Trump has staked out various positions on China as president in his tweets, phone calls and statements. Trump signed two executive orders on trade on Friday, one to improve import tariff collection and another to study the causes of the U.S. trade deficit. Trump said at the White House signing ceremony he and Xi were “going to get down to some serious business” and vowed that “the theft of American prosperity” by foreign countries would end. Chinese Vice Foreign Minister Zheng Zeguang said on Friday the U.S.-China trade imbalance was mostly the result of differences in the two countries’ economic structures and noted China had a trade deficit in services. China tops the list of countries who have trade surpluses with the United States, with a US$347 billion surplus last year.
Trade wars
Some in the U.S. business community worry about tit-for-tat retaliation in trade disputes with China. Jacob Parker, vice president of China operations at the U.S.-China Business Council, said the two presidents need to take “positive actions that would lead to a more durable relationship, not retaliatory actions that would lead to a trade war”. The list of commercial issues between the two countries was so long, it would be impossible to make a major dent in them with one meeting, he said. China is the largest export market for U.S. soybean producers, accounting for 62 per cent of U.S. soy exports in 2016 with a value of over US$14 billion, leading some experts to suggest the sector could be particularly
vulnerable to retaliation. Steve Censky, chief executive of the American Soybean Association, told Reuters he hopes Trump will take a “prudent” approach to the trade relationship and address any issues in a “workman-like manner”, recognising that both countries have a lot to lose if the relationship suffers. William Zarit, chairman of the American Chamber of Commerce in China met senior Trump administration officials in February, and said “it was clear they were very familiar with the issues facing American companies in China, perhaps more so than previous administrations”.
Key Points U.S. business community supports targeted trade actions on China Steel prices, access to China market at issue Doubts remain over whether Trump has a coordinated China policy Industry not expecting deals, but watching tone of summit China tops list of countries with trade surpluses with U.S. But several corporate lobbyists, representing a range of companies expressed concern Trump’s lack of attention to detail could prove counterproductive when it comes to the intricacies of the massive trade and investment relationship. “It’s not yet clear whether ... this is a White House that wants to fundamentally reset the terms of the relationship or tinker at the edges and declare a public relations win,” said a China expert at a Washington business lobby who asked not to be named. Reuters
Business Daily Thursday, April 6 2017 9
Greater China Cyclone Debbie
In Brief
Beijing replaces Australian coal with U.S. cargoes China will require more coal, as the Australian outages far outstrip what is immediately available from the United States Henning Gloystein
China, the world’s biggest coking coal importer, is scrambling to cover Australian supply disruptions after Cyclone Debbie knocked out mines and rails by turning to an unusual source: the United States. Debbie, which hit Australia’s Queensland state last week, caused the evacuation of several mines and damaged coal trains supplying export terminals, triggering two miners - Yancoal Australia and QCoal - to declare force majeure on its deliveries. With other miners like BHP Billiton and Glencore also affected by the storm’s fallout, more disruptions may follow. Force majeure is a commercial term that means a buyer or seller cannot fulfil their obligations because of outside forces. It is typically invoked after natural disasters or accidents. Australia is the world’s biggest coking coal exporter and is China’s largest supplier. With markets there closed on Monday and Tuesday, its steel makers are clambering to find alternative supplies. “Markets may be closed Monday and Tuesday but there’s certainly activity. The Chinese are fixing cargoes from the United States in order to replace the shortfall from Australia,”
one coal trader with knowledge of the matter said, speaking on the condition of anonymity as he was not cleared to talk about commercial deals. “More will make its way from the U.S. to China very soon,” he said. It was not immediately clear which American miners were providing the supplies but Thomson Reuters Eikon data shows that China already has imported more than 500,000 tonnes of U.S. coking coal in 2017, ending a two-year stretch when no coking coal was shipped between the two countries. More than 427,000 tonnes of U.S. met coal imports were counted in February by the Chinese government that likely arrived in January, said Chuck Bradford of Bradford Research, Inc, who has access to the data. The coal sold for nearly US$190 per tonne, he said. Arch Coal Inc did not immediately respond to a query on whether it had exported the coal to China this year. George Dethlefsen, Corsa Coal Corp’s chief executive, said his company has been overwhelmed with inquiries for cargoes over the past few days from customers in Asia. “Right now we, like everyone else, are trying to figure out what tons are available and what we can produce to
fulfill potential new orders,” he said. Alpha Natural Resources, which emerged from bankruptcy last year, declined to comment. Luke Popovich, a spokesman for the National Mining Association trade group, said it was not clear that the demand had any link to the administration’s push to axe regulations. “Whether or not this can be related to the executive order we’re nevertheless grateful and not looking a gift horse in the mouth,” said “The minimum impact over the coming weeks we would expect would be in the region of 14 million tonnes of coal (11.5 million metallurgical, and 2.5 million tonnes thermal),” said Rodrigo Echeverri, head of energy coal analysis at commodities trading house Noble Group, adding that the current estimate was for the outages to last around five weeks. Shipping data in Eikon shows that around 70 ships are waiting to load coal off the Queensland ports of Abbot Point, Mackay, Dalrymple Bay, and Hay Point. The outages caused Australian coking coal futures on the Singapore Exchange on Monday to spike by over 25 per cent to US$197 per tonne, the biggest one-day move ever. China has recently turned to Russia for more coking coal, with imports rising to over 400,000 tonnes in February from 275,000 tonnes in December. Mongolia and Indonesia are other potential sources of coking coal for China, three coal traders said. Anthracite coal shipments from North Korea to China, also used as coking coal, have dried up after Beijing ordered an import ban following missile tests of its isolated neighbour. Overall, traders said it was unlikely that all of China’s near-term demand could be met without Queensland supplies, likely requiring inventory drawdowns, which will push up prices. “With a significant amount of the world’s premium hard coking coal now marooned onsite, prices are likely to continue to push higher,” ANZ said. Reuters
M&A
ChemChina, Syngenta win U.S. antitrust approval for deal The deal is one of several that is remaking the international market for agricultural chemicals, seeds and fertilizers Diane Bartz
The China National Chemical Corp, or ChemChina, has won U.S. antitrust approval to buy Switzerland’s Syngenta AG on condition that it divest three products, the Federal Trade Commission said. The US$43 billion deal, which was announced in February 2016, was prompted by China’s desire to use Syngenta’s portfolio of top-tier chemicals and patent-protected seeds to improve domestic agricultural output. To win approval from U.S. antitrust enforcers, the companies agreed to divest ChemChina’s generic production of the herbicide paraquat, the insecticide abamectin used for citrus and tree nuts and the fungicide chlorothalonil, used for peanut and potato crops. Syngenta owns the branded versions of the three products while ChemChina’s subsidiary ADAMA sells generic versions to U.S. farmers. ChemChina has agreed to sell the generic businesses to AMVAC, a California-based company. “Syngenta will continue to provide
a high quality, broad portfolio of products and solutions to U.S. farmers,” Syngenta spokesman Paul Minehart said in a statement. Syngenta sells its products in more than 90 countries under such brand names as Acuron, Axial, Beacon and Callisto. It sells seeds such as cereals, corn, rice, soybeans and vegetables. The deal with ChemChina has received approvals from 16 jurisdictions and is awaiting word from China, Europe, India and Mexico, Minehart
said. European antitrust enforcers said they would reach a decision this month on whether they would allow the deal to go forward. The deal is one of several that is remaking the international market for agricultural chemicals, seeds and fertilizers. The trend toward market consolidation has triggered fears among farmers that the pipeline for new herbicides and pesticides might slow. The other deals in the sector are a US$130 billion proposed merger of Dow Chemical and DuPont and Bayer’s plan to merge with Monsanto. On the fertilizer front, Potash Corp has announced plans to merge with Agrium Inc. Reuters
CPI
Food prices drop, inflation likely low The average price of food in 50 Chinese cities continued to drop between March 21 and March 30, official data showed yesterday. Prices of pork, beef and mutton posted declined from last sampled period of March 11 to March 20, according to data released by the National Bureau of Statistics (NBS). Cucumber led the fall in vegetable prices by losing 6.4 per cent, while canola and soybean oil prices dipped by 0.4 per cent. The 10-day snapshot could reflect the trend in consumer price index (CPI), a main gauge of inflation, as food prices account for nearly one-third of the prices used in calculating the index. Xiongan
New Area restricts housing purchase, construction The preparatory committee of the Xiongan New Area in north China’s Hebei Province said Tuesday night to control illegal land and housing purchase as well as construction. China announced on Saturday to establish the Xiongan New Area, a landmark new economic zone near Beijing designed to integrate the capital with its surrounding areas. The announcement attracted investors to swarm into the counties of Xiongxian, Rongcheng and Anxin in the new area, and drove up housing prices there, the committee said in a statement. The committee warned all forms of illegal trade of properties are not protected by law, and vowed to crack down on illegal construction and trading of second-hand houses. Tomb-sweeping Day holiday
Tourism sector pockets handsome revenue
China’s tourism industry raked in RMB39 billion (US$5.74 billion) in revenue during the Tomb-sweeping Day holiday, official data showed on Tuesday. The revenue was driven by 93 million domestic tourist trips, the National Tourism Administration said in a statement. Tomb-sweeping Day, also known as Qingming Festival, is an important occasion for Chinese to honour their ancestors. Many also spend the three-day holiday on leisure travel. Most of the tourists hit the road for short-haul trips. Meanwhile, Railway operator sent 35 million passengers, most of whom headed for the BeijingTianjin-Hebei area and the Yangtze River Delta region. Energy
Gazprom says CNPC to take part in plant construction Russian gas giant Gazprom said a subsidiary of China’s CNPC would take part in the construction of a gas processing plant in Russia. It said China Petroleum Engineering & Construction Corporation (СРЕСС) would take part in designing and procurement of equipment for the Amur gas processing plant in Russia’s Far East. The plant’s capacity is planned at 42 billion cubic metres of gas per year. The gas from the plant will be supplied to China.
10 Business Daily Thursday, April 6 2017
Greater China
Real estate
Beijing’s ‘shock’ measures seize up property market The number of new clients expressing interest to buy fell by nearly a third in the week following the latest curbs Yawen Chen and Ryan Woo
Ji Wei, a recently married photographer in her 20s, fears her plans to sell her Beijing apartment and upgrade to one costing RMB6.15 million (US$891,000) will collapse because of new measures aimed at reining in a soaring property market. Beijing, home to about 22 million people, is on the frontline as China takes on speculators and tries to tame home prices. Chinese authorities fear surging prices are building up household debt, heightening banks’ credit risks, and fanning resentment as home affordability fades. Apartments in Beijing on average are still cheaper than homes in Tokyo or London, but prices hit their 2016 peak in December and have continued to shatter records this year. Second-hand homes in the capital averaged RMB63,082 (US$9,165) per square metre in March, according to Fang.com, a private provider of home price data - enough to value a modest 90 square metre apartment at US$824,850. “Prices have surged almost 50 per cent for a two-bedroom apartment from when I first started looking in October,” said Jiang Yuan, 33, who works for a big data company. A previous round of restrictions cut the number of re-sale market deals in Beijing by 37 per cent in the three months to end-December, but failed to stop prices rising. In mid-March, the municipal government acted again - raising the minimum downpayment on a second home to 60 per cent from 50 per cent. On bigger homes, that minimum increases to 80 per cent from 70 per cent. They also suspended issuing individual mortgage loans of more
than 25 years, effectively forcing borrowers to take on more expensive shorter loans. Buying a third property has already been banned. And the definition of a second-home buyer has been broadened to include anyone who has a record of taking out a previous mortgage anywhere in China. Beijing has also curbed individuals buying new commercial property, and closed a loophole in buyers faking divorce to take advantage of first-home downpayment rates. The number of new clients expressing interest to buy fell by nearly a third in the week following the latest curbs, and home viewings dropped 30.7 per cent, according to data from Lianjia, Beijing’s dominant real estate broker. It may be too early to gauge the impact on prices, though. Fang.com data shows prices in Beijing’s re-sale market grew 1.07 per cent in March, slower than February’s 3.3 per cent increase. Official March home price data is due on April 18. “The market will freeze under the new measures,” said Yi Xianrong, a professor at Qingdao University and former researcher at state thinktank the Chinese Academy of Social Sciences. “Sales may drop 90 per cent.” “It was like an ambush,” said Ji, the photographer. The prospective buyer for Ji’s flat has now withdrawn, leaving her to find another buyer quickly or risk defaulting on her contract for the bigger home, and losing over half a million yuan in the deposit. “I’m worried no one wants to buy my 50 square metre apartment anymore,” she says. “I’m not the only one affected by the new policies. I’m
just one link in a long chain. If one person scraps the contract, the whole chain is likely to break.” Local property agents reckon home upgraders like Ji make up around 80 per cent of buyers in Beijing this year. Some developers, too, are concerned about the impact on the market. “This round of tightening is unprecedentedly harsh, and I’m very, very pessimistic about the market,” Sun Hongbin, chairman of Sunac China Holdings told financial magazine Caixin on March 28. “The risks are very high in our industry mainly because property prices are now limited by the government. If we buy land at current price levels, we will no doubt lose money.”
Beyond Beijing
While Ji frets, other cities are copying Beijing. In just two weeks, at least 50 cities have emulated the capital, says Yan Yuejin, an analyst with E-House China R&D Institute, which tracks China’s housing policy. Those include smaller and less developed cities that had benefited from a speculator-driven boom, such as Zhuozhou and Langfang. Last week, the housing ministry said Beijing’s tightening experience deserved to be studied by the rest of the country, state media reported. Beijing’s housing bureau representative Xu Jianyun was reported as saying the authorities would unswervingly contain upward price pressure. While the measures are aimed at speculators, genuine buyers, too, are caught. Jiang, the big data worker, has an apartment in the eastern port city of Qingdao, and wants to buy his first home in Beijing, where he works. But the re-definition on second-home buyers means he faces paying at least a 60 per cent
downpayment instead of the 35 per cent rate for first-home buyers in the capital. “My budget is up to RMB2.2 million for the downpayment for a 2-bed flat,” Jiang says, “But with the new requirement, I’d have to pay RMB3.5 million as a downpayment for my ideal home.” However, Cao Zhounan, CEO and chairman of property developer Greentown China Holdings Ltd, while predicting nationwide sales volumes will drop, says the market “will increasingly cater to genuine buyers who will actually live in the homes they buy.” The restrictions may, intentionally or not, also drive property investors to look beyond China’s capital. In a recent phone sales pitch, a telemarketer eagerly promoted projects in cities near Beijing, including earthquake-prone Tangshan, which has a poor record on pollution.
Key Points Beijing brought in tougher measures to cool rising prices Steps have cooled sales; viewings drop Other cities now copying Beijing Smaller cities may be bright spot as demand spills over “The tougher the stance that authorities take in tier-1 cities, the greater the share of activity that will be pushed into tier-2 and beyond,” Westpac said in a March 20 note. That could take some heat off tier-1 cities such as Beijing, Shanghai, Shenzhen and Guangzhou, and shift investors’ capital to smaller cities where restrictions are less severe. Household mortgages, which accounted for 39 per cent of China’s new loans last year, are not expected to pull back significantly. Reuters
Business Daily Thursday, April 6 2017 11
Asia Missile row
South Korean automakers cut China production Hyundai had already suspended output at its factory in Hebei from March 24 to April 4 Hyunjoo Jin
S
outh Korea’s Hyundai Motor Co and Kia Motors Corp have sharply cut vehicle production in China, sources said, as anti-Korean sentiment and competition from Chinese brands play havoc on sales and threaten earnings. Hyundai and Kia saw their combined China sales slump by 52 per cent in March from a year earlier, another person said, endangering not only the automakers’ earnings but those of its South Korean suppliers. China, the world’s biggest auto market, accounted for over a quarter of the pair’s 2016 overseas sales. A Chinese backlash over the deployment of a U.S. missile defence system outside Seoul has targeted South Korean firms including Lotte Group with boycott calls in state media, protests and suspensions of operations. The move angered Beijing, although Seoul says the system is a response to North Korea’s nuclear threat and is not aimed at China. While the diplomatic row is a nuisance, the bigger problem for the South Korean carmakers is stiff competition in China and the United States, where their mainstay sedans have lost market share to sport utility vehicles, analysts and sources said.
Shift cuts
Kia Motors has cut production shifts at its China factories, two of the sources familiar with the matter told Reuters. Hyundai also had eliminated a second shift from its three factories in Beijing starting mid-March, one of the people said. The sources declined to be identified because the matter was not public. Hyundai and its smaller affiliate Kia said in a statement that they were “adjusting operations at Chinese plants in line with the market
environment”, but declined to elaborate on any cuts. Hyundai had already suspended output at its factory in Hebei from March 24 to April 4. Operating one shift instead of two shifts is a “drastic, rare move” for the South Korean duo and could cut daily output by more than half, said Lee Myung-hoon, an analyst at HMC Investment & Securities. The anti-Korean sentiment was unlikely to end soon, he added, citing the example of the year-long backlash against Japan in 2012 over a territorial dispute which forced Japanese automakers to slash production. “But I don’t think the problems will be prolonged because it will have more harm on Chinese partners and
local employment,” he said. Poor consumer sentiment towards South Korean products in China had likely dragged down overseas sales in March, the companies said on Monday without putting a number on the falls. Hyundai Motor’s China sales slumped 44 per cent while sales of Kia, which has been in a dispute with dealers in China, suffered a steeper fall of 68 per cent, sources said. The sales downturn came despite the introduction of new models this year and a new Hyundai factory in China in 2016, and could explain some of the production cuts stemming from higher inventories. In the United States, Hyundai Motor posted a sales fall of 8 per cent and Kia Motors slumped 15 per cent in March from a year earlier. The U.S. market declined 2 per cent in March. Hyundai Motor shares ended down 2.9 per cent and Kia Motors declined 1.4 per cent in the wider market, which was down 0.3 per cent. Reuters
New economy
Gig economy creates ripples in Australia’s pension pool Digital companies which employ independent contractors are not obliged to contribute to superannuations Cecile Lefort
When ride-hailing company Uber started in 2014, Sydney resident Rosalina Kariotakis was among the first drivers to sign up, becoming part of the “gig economy” where freelance work is transforming the traditional job market in step with advances in technology. Mobile or online platforms are at the forefront of a boon in casual work for individuals who are seeking greater flexibility for less security - many of them are giving up benefits such as sick leave, life insurance and pension fund savings. In Australia, this sea change is putting a strain on the country’s much-admired A$2.1 trillion (US$1.60 trillion) system of retirement savings - the world’s fourth largest - which relies on mandated contributions by employers. “Our research shows that contingent and part-time workers are missing out on A$150 million a year in super payments,” said Damian Hill, chief executive of REST Super,
a superannuation fund with A$39 billion in assets. Australia is one of the few countries to have a mandatory retirement system, also known as superannuations or supers, whereby employers pay a contribution of 9.5 percent on top of the employees’ wages. But digital companies including Uber, Deliveroo, Airtasker and Foodora, which employ independent contractors are not obliged to contribute to superannuations as the workers are seen as self employed. Even Kariotakis, a former General Motors employee now in her mid40s, is nervous about the absence of retirement savings. “It’s a big problem,” Kariotakis said, in response to how she envisages her finances when she retires. “At the moment, we can’t afford to put money aside.”
Worrisome trend
So as the gig economy grows, it signals a problematic trend for the retirement savings pool in Australia which made superannuations compulsory in 1983
to reduce the reliance on the national pension system. Even though the gig economy’s “leakage” from the pension funds is a drop compared with the A$136 billion of annual contributions paid by employers in 2016, the dent on retirement savings could be significant in years to come. “When people are self-employed, their tendency to set aside money for retirement is secondary to their need to maintain cashflow for the business,” said Martin Fahy, the chief executive of Australia’s superannuation
industry body. While the scale of Australia’s gig economy - a relatively recent phenomenon - is yet to be reflected in official data, an increasing number of individuals are freelancing for various digital outfits. The Australian Industry Group, a major business lobby, said in an August 2016 report that 32 percent of the country’s workforce had free-lanced between 2014 and 2015 - meaning the digital economy is already creating irrevocable changes in the country’s labour market. In the longer term, Kariotakis is hoping to see modifications to the national benefits framework so that employers, such as Uber, are legally forced to pay pension benefits. Such changes are already being considered in the United States and Great Britain where policymakers are looking to alter the definition of employees and contractors to reinforce workers’ rights in the modern economy. “We’d like to have a situation where it doesn’t matter whether it’s an employee or a contractor doing the work as long as they end up getting the same benefits,” said Professor Kevin Davis, a research director at the Australian Centre for Financial Studies. “How you do it? I’m not sure.” Reuters
12 Business Daily Thursday, April 6 2017
Asia Prices
South Korea inflation jumps to almost 5-year high Headline inflation overshoots the central bank’s inflation target for the first time since being revised last year to 2 per cent Cynthia Kim and Christine Kim
C
onsumer price growth in South Korea picked up at the fastest pace in nearly five years in March as the prices of fresh food and services rose, signalling a rebound in domestic demand after months of weakening consumer sentiment over a corruption scandal that led to the ouster of President Park Geun-hye.
survey’s expected 0.2 per cent slide. Core inflation, which strips out volatile food and fuel prices, rose 1.4 per cent, slightly down from 1.5 per cent in February. “It is better to have inflation close to 2 per cent than somewhere around 1 per cent for stronger economic activities,” a senior finance ministry official told Reuters after the data was released. “We will see inflation at around 2
per cent through the third quarter due to the base effects of oil prices, before it drops to mid-1 per cent from the fourth quarter,” he said, asking not to be named as he was not authorised to speak to media. Fresh food prices jumped 7.5 per cent on-year, driven by the prices of tangerines that more than doubled, and cabbages which saw a 91.5 per cent jump from a year earlier. The reading also reflected a pick up in services including a 19.4 per cent jump in insurance premiums and a 4.5 per cent increase in management fees for apartments. Tuesday’s data followed figures from the trade ministry at r the
weekend, which showed imports had surged the most since September 2011. The headline inflation overshoots the central bank’s inflation target for the first time since it was revised last year to 2 per cent, and dims any expectations for further interest rate cuts. It supports the case that the Bank of Korea will keep interest rates at a record low 1.25 per cent while it monitors uncertainties ranging from the pace of Federal Reserve policy tightening and China’s responses to Seoul’s plans to deploy a U.S.-made anti-missile system. “The likelihood of further cuts has narrowed significantly, as exports continue to show solid growth,” said Stephen Lee, chief economist at Meritz Securities in Seoul. “Economic indicators released over the past few days show private consumption won’t worsen further,” Lee said. Reuters
Key Points Inflation at highest since June 2012 March CPI +2.2 pct y/y (Reuters poll +2.0 pct) March CPI 0.0 pct m/m (Reuters poll -0.2 pct) The consumer price index rose 2.2 per cent in March from a year ago, data showed on Tuesday, up from 1.9 per cent in February and marking the fastest rise since similar gains were seen in June 2012. Inflation at 2.2 per cent was ahead of a 2 per cent rise projected in a Reuters survey. The index remained flat at 0.0 per cent from a month earlier, beating the
Property
Australia’s banking watchdog warns of more curbs on housing Measures come as regulators grow increasingly worried about a run-up in borrowing at a time when household debt is already at record highs Jamie Freed and Swati Pandey
Australia’s banking watchdog said yesterday that authorities can and will take further action if needed to stop a debt-fuelled bubble in the country’s red-hot housing market. Wayne Byres, chairman of the Australian Prudential Regulatory Authority (APRA), said measures announced last week were aimed at promoting prudent lending and borrowing practices, and not to influence housing prices. Housing has become a political hot potato and have dominated newspaper headlines recently, with prices in Sydney skyrocketing almost 20 per cent a year, having more than doubled since 2008. In Melbourne, they are racing at nearly 16 per cent. The feverish pace of price increases prompted APRA to announce measures asking banks to limit new interest-only loans to 30 per cent of total new mortgages, from 40 per cent now. It also demanded that banks limit investor credit to “comfortably remain below” a previously set cap of 10 per cent annual growth. “This latest step is a tactical response to current market conditions – we can and will do more, or less, as conditions evolve,” he said at an industry conference in Sydney.
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“Our role in the current environment is to promote a higher-than-normal degree of prudence – definitely by lenders and, ideally, also borrowers – in both credit decisions and balance sheet strength.” Just this week, Australia’s corporate watchdog joined the fray, introducing a new round of industry surveillance to ensure banks and brokers were not recommending overly expensive interest-only loans to customers. The measures come as regulators grow increasingly worried about a run-up in borrowing at a time when household debt is already at record highs, risking a damaging pullback in home prices.
Australian banks are among the world’s most profitable lenders with strong capital levels. They emerged out of the global financial crisis relatively unscathed and regulators want to ensure they remain safe. Banks have largely welcomed the recent measures. “I don’t think any of us want to see house prices going backwards but more a leveling off of the trajectory would be a good thing,” said Catriona Noble, Managing Director, Retail, ANZ. “The 30 per cent cap is good and... we can manage that.”
“Unquestionably strong”
APRA was also looking at bolstering capital levels to ensure major banks are “unquestionably strong” to withstand a repeat of the global financial crisis. It had held off a decision on implementing new measures until an agreement was reached in Basel
On Tuesday, the Reserve Bank of Australia held interest rates steady at a record low 1.50 per cent for the eighth straight month
for global lenders. Although Basel has now extended its deadline APRA is pushing ahead. “It is important to remember that neither we nor the banking industry has stood still in the meantime,” Byres said. “Without clarity as to a deadline for an agreement in Basel, we have decided it does not make sense to wait any longer to deal with the question of ‘unquestionably strong’.”
Key Points APRA wants to promote higherthan-normal degree of prudence Says recent measures not aimed at determining housing prices Looking at bolstering capital levels at the banks Byres expects APRA to announce new capital rules by mid-2017 and analysts say it is increasingly likely the watchdog will introduce tighter rules on assessing mortgage risk. “We believe a combination of macro prudential measures and higher risk weights could be viewed positively by APRA, the central bank and the government,” said Richard Wiles, analyst at Morgan Stanley. “Higher capital requirements and slower investor property loan growth would enhance financial stability,” Wiles said, while higher mortgage rates for property investors “may remove the case for RBA rate hikes.” Reuters
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Business Daily Thursday, April 6 2017 13
Asia Trade
In Brief
Thai PM says “don’t worry” about U.S. policy yet Thailand ran a surplus of about US$18 billion in trade with the United States last year Aukkarapon Niyomyat and Orathai Sriring
Thailand’s prime minister said on Tuesday he had told officials to prepare for changes in U.S. trade policy under President Donald Trump, but it was too soon for the big exporter to worry. As in other Asian countries which run large trade surpluses with the United States, concern has spread in Thailand since Trump last week said he had ordered a study of the causes of U.S. trade deficits. “We should take it easy as there are no formal words about that yet,” junta leader Prayuth Chan-ocha told reporters. “I have asked deputy prime ministers and relevant agencies to look into it as we have to be prepared ... but don’t worry too much about that now.” Thailand ran a surplus of about US$18 billion in trade with the United States last year, the Thai commerce ministry says. That puts it 11th globally - well
behind China’s US$347 billion surplus or even nearby Vietnam’s US$32 billion - but the United States is Thailand’s biggest export destination at a time the military government is struggling rekindle growth. At a meeting in Bangkok on Monday, a senior U.S. trade official set out the Trump administration’s trade agenda, the Office of the United States Trade Representative said. Topics of discussion included “barriers to U.S. exports to Thailand related to customs, agriculture, intellectual property, labour, financial services, and other issues,” it said. Commerce Minister Apiradi Tantraporn said the ministry would meet businesses this week to discuss the potential impact of Trump administration policies, but it was sticking to its export growth target of 5 per cent for now. Thailand’s top five export goods to the United States last year were computers and computer parts, rubber products, jewellery, radio and television receivers, and automobiles
and parts. Exports, one of Thailand’s few drivers of growth, are just starting to recover. They rose slightly in 2016 after three years of contraction and were up 2.5 per cent from a year earlier in the first two months of this year. The central bank last week raised its 2017 export forecast to 2.2 per cent rise from no growth and upgraded its economic growth outlook to 3.4 per cent from 3.2 per cent. Southeast Asia’s second-largest economy expanded 3.2 per cent last year. Reuters
Commerce
Malaysia’s trade rises at fastest pace since 2010 The trade surplus in December widened to 8.71 billion ringgit Malaysia’s export growth hit a near seven-year high in February,
government data showed yesterday, due to a jump in shipments
of manufactured goods and commodities. Exports rose 26.5 per cent from a year earlier, the fastest growth since May 2010 and the fourth consecutive month of expansion. The annual increase beat economists’ expectations of 17.9 per cent. January shipments rose 13.6 per cent from a year earlier. Data from the International Trade and Industry Ministry showed February exports of manufactured goods rose 24.3 per cent and accounted for 80 per cent of Malaysia’s total. Exports of mining goods increased 21.6 per cent, mainly on rising crude oil prices, the data showed.
Key Points Feb exports +26.5 pct y/y vs Reuters poll +17.9 pct Feb imports +27.7 pct y/y vs poll f’cast +21.7 pct Trade surplus 8.7 bln rgt vs poll f’cast of 4.7 bln rgt Exports to China +47.6 pct y/y, U.S. +13.2 pct, EU +26.6 pct Jan-Feb exports rise 19.8 pct y/y, imports up 21.5 pct
Imports in February rose 27.7 per cent year-on-year, above the 16.1 per cent increase the previous month and the fastest rate of growth since June 2010’s 29.9 per cent. The trade surplus in December widened to 8.71 billion ringgit (US$1.97 billion), from January’s 4.7 billion ringgit. Exports to China rose 47.6 per cent from a year earlier, due to higher shipments of electrical and electronic products and commodities including petroleum products, rubber and palm oil. Exports to the United States went up 13.2 per cent on stronger demand for manufactured goods, while exports to the European Union grew 26.6 per cent. Malaysia reports trade data in ringgit. February was the fourth consecutive month where exports topped 70 billion ringgit. Reuters
Dollar depreciation
S.Korea’s foreign reserves rise South Korea’s foreign currency reserves increased last month to US$375.3 billion as the U.S. dollar depreciation increased the conversion value of non-dollar assets, central bank data showed yesterday. The country’s foreign reserves tallied in March were up US$1.39 billion compared with the previous month, the Bank of Korea (BOK) data showed. The increase was attributed to the weaker U.S. currency that boosted the value of non-dollar assets like the euro and the British pound. The European single currency picked up 0.9 per cent against the dollar in March, with the pounding appreciating 0.3 per cent. Bonds
Short-dated JGBs firm on Bank of Japan The price of short-dated Japanese government bonds rose yesterday after the Bank of Japan (BOJ) reduced purchase in those maturities less than expected, while those of longer maturities dipped ahead of an auction the following day. In its bond-buying operation yesterday, the BOJ offered to buy 280 billion yen (US$2.53 billion) of one- to three-year JGBs, 20 billion yen less than previous such operations and the lowest level in almost three years. Many market players still expected a larger reduction as the central bank said it would buy 200 billion yen to 300 billion yen of one- to three-year tenors each time this month. Financing
Snapdeal looking to raise US$100 mln Indian online retailer Snapdeal is looking to raise just over US$100 million from existing shareholders including Japan’s SoftBank and new investors, its chief financial officer said. The company, which last year lost its second place in India’s fiercely competitive online retail market to Amazon.com Inc, aims to become profitable in two years but faces falling cash reserves. CFO Anup Vikal said Snapdeal has enough cash for this year, after sources told Reuters last month that the company was seeking investment to shore up its finances after unsuccessful talks with Chinese funds and existing investor Alibaba Group Holding Ltd. Payments
PayPal extends partnership with Visa into Asia-Pacific region PayPal Holdings Inc. and Visa Inc. said they are extending into the Asia-Pacific region a partnership that currently covers only the U.S., in a move aimed at boosting transactions via digital payments for both companies. Similar to the U.S. deal announced in July last year, the collaboration will allow users of PayPal and Visa cards to choose either mode of payment, the companies said yesterday. Previously, PayPal had sparred for years with credit-card firms for control over online and in-store transactions.
14 Business Daily Thursday, April 6 2017
International In Brief Brexit talks
Bank lobby warns of possible market ructions Europe’s banking lobby warned yesterday of the dangers to wholesale banking and financial stability if negotiations over Britain’s exit from the European Union end in deadlock. “Financial stability and market efficiency must be safeguarded during the Brexit implementation process and thereafter,” the Association for Financial Markets in Europe (AFME) Chief Executive Simon Lewis said in a statement. In a report released yesterday, AFME highlighted conflicting issues faced by the key actors in Brexit talks which it said could cause disruptions, including Britain wanting to secure the best possible access to the bloc, while not wishing to remain part of the single market. Commerce
New Zealand, Angola discuss strengthening trade links Ministers of New Zealand and Angola met in Wellington yesterday to discuss increasing trade flows between the two nations. New Zealand Foreign Minister Murray McCully said the visit by Angolan Minister of External Relations Georges Rebelo Pinto Chikoti was an opportunity to deepen the relationship with the southwest African nation. “Angola had one of the fastest-growing economies of the past decade, and appointed its first ever ambassador to New Zealand, resident in Singapore, last year,” McCully said in a statement. Both countries served as non-permanent members of the UN Security Council from 2015 to 2016.
Trade
U.S. deficit falls from two-year high on weak imports In addition to trade, weak consumer spending also likely constrained the economy in the first three months of the year Lucia Mutikani
T
he U.S. trade deficit fell from a near two year high in February as slowing domestic demand weighed on imports and stronger global growth boosted exports of American goods. The politically sensitive trade gap with China narrowed sharply by 26.6 per cent from January to US$23 billion ahead of a summit between President Donald Trump and China’s Xi Jinping this week, although seasonal factors were likely behind the dramatic drop, economists said. The Commerce Department said on Tuesday the trade deficit declined 9.6 per cent to US$43.6 billion, also as exports increased to their highest level in more than two years, after rising to a near two-year high of US$48.2 billion in January. “The U.S has its work cut out for it if it is going to try to alter the pattern of trade that has developed between China and U.S. companies over the last 10 to 20 years,” said Chris Rupkey, chief economist at MUFG Union Bank in New York. Economists had forecast the overall trade gap falling to US$44.8 billion in February. When adjusted for inflation, the deficit decreased to US$59.7 billion, with exports of goods the
highest on record as an earlier drag from a strong dollar fades. The real trade deficit was US$65.1 billion in January. Despite the decline in the real trade deficit, trade will probably be either neutral or impose a small drag on gross domestic product in the first quarter after subtracting 1.82 percentage points from fourth-quarter growth. In addition to trade, weak consumer spending also likely constrained the economy in the first three months of the year. The Atlanta Federal Reserve is forecasting GDP rising at a 1.2 per cent rate in the first quarter, a deceleration from the 2.1 per cent pace logged in the October-December period. The dollar was little changed against a basket of currencies, as were stocks on Wall Street. Treasuries were trading lower.
Eliminating the trade imbalance
Trump’s administration has ordered a study into the causes of U.S. trade deficits and a clamp-down on import duty evasion. He believes that large deficits are slowing American growth and employment. Trump also wants to renegotiate the North American Free Trade Agreement (NAFTA). A second report from the Commerce
Investment
IMF chief warns on slowing productivity risks Living standards around the world could fall unless governments invest more in research and education that can help revive weak productivity growth, International Monetary Fund Managing Director Christine Lagarde warned. Lagarde said in a speech in Washington that the private sector alone will not be able to generate enough innovation to lift productivity to acceptable levels without government help. Her remarks were accompanied by release of an IMF study that found that the 2008-2009 financial crisis and deep recession played a bigger role in slowing productivity. Self-driving taxis
Mercedes joins forces with Bosch Mercedes-Benz parent Daimler and supplier Robert Bosch are teaming up to develop self-driving cars in an alliance primarily aimed at accelerating the production of “robo-taxis”. The pact between the world’s largest maker of premium cars and the world’s largest automotive supplier forms a powerful counterweight to new auto industry players like Uber and Didi which are working on self-driving cars with a business model geared toward clients who want to use rather than own cars.
Department on Tuesday showed new orders for U.S.-made goods increased for a third straight month in February on growing demand for machinery and electrical equipment, suggesting the manufacturing-led recovery was broadening. “The strength in manufacturing activity and overall job creation will result in the Federal Reserve looking through what looks likely to be a soft quarterly reading on real GDP growth,” said John Ryding, chief economist at RDQ Economics in New York.
Key Points Trade deficit drops 9.6 per cent in February Inflation-adjusted trade deficit falls to US$59.7 billion Exports rise 0.2 per cent; imports decline 1.8 per cent
In February, imports of goods and services fell 1.8 per cent to US$236.4 billion amid declines in imports of cell phones and motor vehicles. Imports had risen in recent months, in part on higher oil prices. Some of the decline in imports in February likely reflects slower consumer spending. Data on Friday showed real consumer spending decreased for a second straight month in February, the first back-to-back monthly decline since April 2009. Still, food imports hit a record high in February and imports of capital goods were the highest in nearly two years. Exports of goods and services increased 0.2 per cent to US$192.9 billion, the highest level since December 2014 as shipments of automobiles and parts hit their highest level since July 2014. Exports of industrial supplies and materials were the highest since December 2015. The nation exported more goods to Germany, the United Kingdom, Canada, Japan and Italy. However, exports to China fell 2.7 per cent and Mexico saw a 7.1 per cent drop in goods sourced from the United States. Reuters
Commerce agreement
Mexico says new EU trade deal is “paramount” The two parties agreed in 2015 to modernise their trade relations and held two rounds of talks last year A new free trade agreement with the European Union is of “paramount” importance for Mexico and both parties aim to conclude a deal this year, Mexico’s deputy economy minister has said. Mexico and the 28-nation bloc are holding a third round of negotiations this week to upgrade an existing accord dating from 2000 that principally just cut tariffs on industrial goods. “It’s paramount. Right now there’s no other issue, no other negotiation on top of the trade agenda for Mexico but this one,” Juan Carlos Baker, deputy minister for foreign trade, told Reuters in Brussels late on Monday. The election of U.S. President Donald Trump has reinforced Mexico’s need to reduce its reliance on the U.S. imports and exports. Trump has pledged to renegotiate the 23-year-old North American Free Trade Agreement (NAFTA) and Mexicans face the possibility of higher U.S. import duties. With EU-U.S. trade talks frozen, the European Union has turned its focus
to sealing deals with three other partners - Japan, Mercosur and Mexico. Brussels is particularly keen on scoring successes on the trade front to show it is moving on from Britain’s planned exit from the bloc and to prove it is a champion of free trade to counter Trump’s protectionist stance.
“The present circumstances I suppose only make it even more necessary” Juan Carlos Baker, Mexico’s deputy minister for foreign trade
Baker said there was reason for optimism that a deal could be struck this year. Most free trade agreements (FTA)
take years, but the EU and Mexico already have an existing FTA since 2000, with a number of products already tariff-free. In addition, the typically sensitive issue of agriculture might be easier to resolve because both partners were seeking greater access, albeit for different products. “There’s no issue that’s off the table or looks an unsolvable challenge,” Baker said. EU trade chief Cecilia Malmstrom and Mexican Economy Minister Ildefonso Guajardo were due to meet in May before a fourth round of negotiations in June. “Except for the summer break we will be meeting pretty much every five to six weeks,” Baker said. A new deal would add trade in services and access to public tenders and significantly boost trade in agricultural products, such as Mexican beef, sugar and bananas and EU dairy products. The European Union is Mexico’s third largest trading partner after the United States and China. EU-Mexico trade in goods more than doubled from 2000 to 53 billion euros (US$57.23 billion) in 2015. Reuters
Business Daily Thursday, April 6 2017 15
Opinion Business Wires
The Japan News New automobile sales in Japan in fiscal 2016 rebounded to top 5 million units for the first time in two years, industry data showed this week. In the fiscal year, which ended on Friday, sales of new vehicles, including mini-vehicles with an engine displacement of up to 660cc, rose 2.8 percent from the previous year to 5,077,904 units, up for the first time in three years, according to data from the Japan Automobile Dealers Association (JADA) and the Japan Light Motor Vehicle and Motorcycle Association. Mini-vehicle sales were down 5.1 percent at 1,719,971 units.
Growing out of populism?
Bangkok Post Economic experts have urged the private and industrial sectors to quickly modernise and ease the impact of the Thailand 4.0 economic development model. Apichat Satitniramai, a lecturer at Thammasat University’s Faculty of Economics, said 70% of Thai factories lack innovation and are not manufacturing local brands, so are heavily affected during world economic slowdowns. In addition, a decline in foreign investment in Thailand was the result of a lack of competitiveness when vying with other countries in the global market.
Jakarta Globe Indonesia has issued Freeport McMoRan’s local unit with a temporary “special mining permit” allowing the miner to apply for a resumption of copper concentrate exports while the two sides negotiate longer-term mining rights. Teguh Pamuji, the secretary general of the Ministry of Energy and Mineral Resources, said that Freeport could resume exports while discussions with the government continue on investment stability, divestment and domestic smelting, among other areas. With the issuance of the permit, “Freeport can export concentrate and pay an export duty,” Teguh told reporters.
The Phnom Penh Post Cambodia could expand its foreign trade by up to 16 percent, adding approximately US$2 billion worth of exports, by complying with a new international trade protocol that aims to slice through the red tape that slows and complicates cross-border trade. US Ambassador William Heidt said that Cambodia’s competitiveness would improve significantly once it fully ratifies all 12 articles of the World Trade Organization’s Trade Facilitation Agreement. He said compliance with the landmark global accord “would reduce the costs of exporting goods and services and ease the flow of commerce across Cambodia’s international borders that would directly boost economic growth”.
A
fter nine dreary years of downgrading their GDP forecasts, macroeconomic policymakers around the world are shaking their heads in disbelief: Despite a populist-propelled wave of political tumult, global growth is actually set to outperform expectations in 2017. It’s not just American exceptionalism. Although US growth is very strong, Europe has been outperforming expectations by more. There is even happy news for emerging markets, which are still bracing for US Federal Reserve interest-rate hikes but have gained a better backdrop against which to adjust. The broad story behind the global reflation is easy enough to understand. Deep, systemic financial crises lead to deep, prolonged recessions. As Carmen Reinhart and I predicted a decade ago (and as numerous other scholars have since corroborated using our data), periods of 6-8 years of very slow growth are not at all unusual in such circumstances. True, many problems remain, including weak banks in Europe, over-leveraged local governments in China, and needlessly complicated financial regulation in the United States. Nonetheless, the seeds of a sustained period of more solid growth have been planted. But will the populist tide surging across the advanced economies drown the accelerating recovery? Or will the recovery stifle leaders who confidently espouse seductively simple solutions to genuinely complex problems? With the International Monetary Fund/World Bank meetings coming up later this month in Washington, DC, leading central bankers and finance ministers will have ringside seats at Ground Zero. Who can doubt that US President Donald Trump will make a Twitter punching bag out of any of them who dares criticize his administration’s planned retreat from open trade and leadership in multilateral financial institutions? Before then, Trump will host Chinese President Xi Jinping at Mar-a-Lago, his “winter White House.” It is hard to overstate how much rides on the Sino-US relationship, and how damaging it would be if the two sides could not find a way to work together constructively. The Trump administration believes that it has the bargaining tools to recalibrate the relationship to America’s advantage, including a tariff on Chinese imports or even selectively defaulting on the more than US$1 trillion the US owes to China. But a tariff would eventually be overturned by the World Trade Organization, and a default on US debt would be even more reckless. If Trump can persuade China to open up its economy more to US exports, and to help reign in North Korea, he will have achieved something.
“
Kenneth Rogoff a former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University
But if his plan is for the US to retreat unilaterally from global grade, the outcome is likely to hurt many US workers for the benefit of a few. The threat to globalism seems to have waned in Europe, with populist candidates having lost elections in Austria, the Netherlands, and now Germany. But a populist turn in upcoming elections in either France or Italy could still tear apart the European Union, causing massive collateral damage to the rest of the world. French Presidential candidate Marine Le Pen wants to kill off the EU because, she says, “the people of Europe do not want it anymore.” And while opinion polls have the pro-EU Emmanuel Macron beating Le Pen decisively in the election’s second-round runoff on May 7, it is hard to be confident in the outcome of a two-person race, especially given Russian President Vladimir Putin’s support for Le Pen. Given the unpredictability of an angry electorate, and Russia’s proven capacity to manipulate news and social media, it would be folly to think that Macron is a lock. Italy’s election is not for another year, but the situation is even worse. There, populist candidate Beppe Grillo is leading polls and is expected to pull in about a third of the popular vote. Like Le Pen, Grillo wants to pull the plug on the euro. And, while it is hard to imagine a more chaotic event for the global economy, it is also hard to know the way forward for Italy, where per capita income has actually fallen slightly during the euro era. With flat population growth and swelling debt (over 140 per cent of GDP), Italy’s economic prospects appear bleak. Though most economists still think exiting the euro would be profoundly self-destructive, a growing number have come to believe that the euro will never work for Italy, and that the sooner it leaves the better. Many emerging-market countries are dealing with populists of their own, or in the case of Poland, Hungary, and Turkey, with populists who have already turned into autocrats. Fortunately, a patient Fed, a resilient (for now) China, and a growing Europe and US will help most emerging economies. The outlook for global growth is improving, and, with sensible policies, the next several years could be quite a bit better than the last – certainly for advanced economies, and perhaps for most others as well. But populism remains a wildcard, and only if growth picks up fast enough is it likely to be kept out of play. Project Syndicate
If Trump can persuade China to open up its economy more to US exports, and to help reign in North Korea, he will have achieved something
”
16 Business Daily Thursday, April 6 2017
Closing Stock markets
Beijing to tighten securities trading rules for institutions
insurers will be improved, with a daily cap on buy orders to block abnormal transactions. China’s stock exchanges and securities depository Trading of A shares, preference shares, bonds, warrants and repurchase agreements will be and clearing authority are soliciting opinions on subject to the new rules. their new trading rules for institutions, which Individual investors will not be affected, said are designed to prevent errors that could cause a statement jointly released by Shanghai volatility and even threaten the whole market. and Shenzhen bourses and China Securities The new rules aim to fend off abnormal Depository and Clearing Corporation. transaction and settlement risks due to technical failures or “fat finger” trading incidents, according The move was considered a response to a serious trading glitch of Everbright Securities that to the China Securities Journal. resulted in a dramatic surge in the benchmark Management on stock transactions on the own Shanghai Composite Index on August 16, 2013. Xinhua accounts of brokerages, fund companies and
Commodities
Hebei districts to end coal sales ahead of Oct ban The province said it would also strictly control the number of small businesses that burned coal directly
E
ighteen districts in northern China’s heavily polluted Hebei province will ban the sale of coal by end-June ahead of a complete ban on residential coal use in October, the official Xinhua news agency reported yesterday. Hebei, home to six of China’s 10 smoggiest cities in the first two months of the year, is on the frontline of China’s three-year war on pollution, and has targeted cutting coal consumption by 40 million tonnes over 2013-2017. It has identified the use of coal by households and small businesses as one of its main targets this year as it battles to improve air quality. In a new action plan aimed at controlling coal consumption, the province said it would also strictly control the number of small businesses that burned coal directly, and crack down on the illegal production and sale of low-grade coals. The ban is likely to hurt local suppliers of low-grade coal but is not expected to have a wider market impact. Late last year, Hebei announced that it would set up 18 “no coal zones” in the rural outskirts of Langfang and Baoding, two of China’s most polluted cities, forcing more than 1 million rural residents to switch to natural gas, electricity or biomass.
However, exceptions were made for coal-fired electricity, large-scale heat providers, and industries like steel and chemicals that use coal as a raw material. Hebei, which lags the rest of the country when it comes to switching to cleaner forms of energy, aims to extend the pilot programme to other parts of the province.
But officials claim they are already struggling to pay for the conversion of millions of coal-fired boilers used for winter heating, and the central government needs to provide more support. Vice-governor Yang Chongyong said at China’s national parliament last month that the province would require at least RMB300 billion (US$43.53 billion) over the 20162020 period to allow rural residents to switch to gas. He called on Beijing to establish a dedicated fund to help the province make the transition, and for major
policy banks to provide low-interest preferential loans. Despite reporting improvements in 2016, Hebei, together with neighbouring Beijing and Tianjin, saw concentrations of small breathable particles known as PM2.5 rise 48 per cent in the first two months of 2017 after several bouts of persistent smog. It promised on Saturday to take more action against pollution, releasing 18 new “special implementation plans” to tackle “backward” coalfired power plants and promote new energy vehicles. Reuters
PMI
Palm oil
Official trip
Euro-area economy accelerates less than forecast
Malaysia worried EU resolution Chinese President Xi visits could dent exports Finland on his way to US
Euro-area output accelerated less than forecast in March as activity in services came in slightly weaker than expected. A composite Purchasing Managers’ Index (PMI) climbed to 56.4 from 56 in February, the highest level in almost six years, IHS Markit said yesterday. Even so, the reading is below a previous flash estimate of 56.7, with a gauge for services strengthening less than previously estimated. “The expansion recorded by the final PMI numbers was not quite the growth spurt indicated by the flash release, but still points to an impressive rate of economic growth,” said Chris Williamson, chief business economist at IHS Markit. The data suggest “a broad-based upturn among the euro’s largest members.” The European Central Bank has deployed unprecedented stimulus to rekindle the region’s economy and fuel inflation, and has said it will continue doing so until at least the end of the year. Service-sector output rose less than forecast to 56 in March, according to the report, which was still the highest level since 2011. Overall, the composite number points to a first-quarter growth rate of 0.6 per cent, IHS Markit said. Bloomberg News
Malaysia said yesterday that its palm oil industry faces a “big challenge”, after the European parliament said in a non-binding resolution that only environmentally sustainable palm oil can be imported into the European Union after 2020. Malaysia’s Plantation Industries and Commodities Minister Mah Siew Keong said the resolution is unfair as it specifically targets palm oil and no other vegetable oil. The proposal calls for a single Certified Sustainable Palm Oil (CSPO) scheme for Europe-bound palm oil exports to make sure that the oil is produced using environmentally sustainable methods and prevents deforestation. “We are very disappointed. To me, the resolution is biased and damaging to palm oil,” Mah said at a news conference yesterday. “I expected it to come because now the whole world is talking about the environment and deforestation, but I still think it is not fair to target only palm oil,” Mah said. The April 4 resolution seeks to establish a common EU standard to boost efforts to stop palm oil from becoming the cause of deforestation or exploitation of communities in producing countries and phase out using vegetable oils that harm the environment, according to an European parliament statement. Reuters
China’s President Xi Jinping, on the way to his eagerly awaited first encounter with Donald Trump, met his Finnish counterpart in Helsinki yesterday, saying there was “great potential” for future bilateral trade ties. The Chinese leader’s first visit to Finland since 1995 marks the Nordic country’s 100th anniversary of independence. “Over the past 67 years of diplomatic ties, the China-Finland relationship has enjoyed steady and sound growth despite the changing international landscape,” Xi said in a statement late Tuesday after arriving in Helsinki. China is Finland’s fifth largest trading partner and Xi said he saw “great space and potential for further economic cooperation and trade”. Ahead of Xi’s and Sauli Niinisto’s official encounter yesterday, Finns were hoping Xi would make Finland the next destination for Beijing’s famed “panda diplomacy”. Finnish and Chinese officials have been in lengthy talks over China leasing a pair of giant pandas to Ahtari zoo in central Finland, where the construction of a new panda cage costing more than eight million euros (over US$8.5 million) is well underway. AFP