Business Daily #1282 April 25, 2017

ANZAC Day observance in Macau Tue, 25 April 2017 │ 7:30am - 9am │ MGM Macau C DAY ANZA

Followed by breakfast from 8am

Mainland closer to joining MSCI index Stocks Page 8

Tuesday, April 25 2017 Year VI Nr. 1282 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Gaming

Transportation

J.P. Morgan downgrades four gaming operators against China’s macro backdrop Page 7

www.macaubusinessdaily.com Growth

Possible cap on gaming shuttle buses to be studied, says Transport Bureau head Page 6

Markets

Hengqin expects GDP growth of 11.2 pct y-o-y in Q1 Page 2

Chinese stock exchanges suffer their worst day in 2017 Page 16

With open arms Tourism

The MSAR welcomed 2.5 mln tourists in March, a 5.7 pct uptick y-o-y.

A resurgence of visitors from across Asia prompted the rise.

The number of mainland visitors increased 11.5 pct y-o-y to 1.66 million, with South Korean visitors increasing 57 pct y-o-y, and those from Japan rising nearly 20 pct y-o-y. Taiwan was up 7.5 pct but Hong Kong visitation fell 12.6 pct y-o-y. Travellers arriving by plane increased 18.6 pct. Overall Q1 visitation hit 7.87 mln. Page 3

The first round results of the French elections are in, with candidates Le Pen and Macron proceeding to the second round.

Opinions in the MSAR among the French community are split, with votes divided despite favouring Macron. A strong concern about the current state of affairs and citizens ‘looking for change’ characterise this election, which will hinge on the ‘undecided’ voters’ decisions in the second round, French citizens in the MSAR tell Business Daily.

French elections Page 5

HK Hang Seng Index April 24, 2017

‘Illegal recruitment’ was the norm: ICM head Hiring The practice of hiring a large number of staff through acquisition of services was not related to transfer of benefits or illegal activities, and none of the heads of departments ‘violated the law intentionally’, says ICM Director Leung Hio Ming. Such hiring procedures were the norm during his career, since the previous administration, notes the director. Those currently employed and hired through the regime however, will be let go starting the end of June. Page 2

Optimistic economics

China’s GDP China’s Finance Minister expressed optimism during the G20 meeting last weekend.

Xiao Jie highlighted a series of positive signs contained in the GDP report for the first quarter of the year. Page 8 24,139.48 +97.46 (+0.41%)

Worst Performers

Cheung Kong Infrastructure

+4.10%

Power Assets Holdings Ltd

+3.11%

CK Hutchison Holdings Ltd

+2.04%

China Life Insurance Co Ltd

+1.32%

Galaxy Entertainment Group

-1.78%

China Merchants Port Hold-

Bank of Communications

+1.19%

Sands China Ltd

-1.53%

New World Development

-0.83%

HSBC Holdings PLC

+1.12%

Sun Hung Kai Properties Ltd

-1.29%

China Resources Power

-0.58%

24° 25° 22° 27° 19° 24° 21° 23° 22° 25°

-1.13%

Hang Seng Bank Ltd

+1.82%

CITIC Ltd

+1.10%

China Mobile Ltd

-1.25%

Kunlun Energy Co Ltd

-0.56%

Cathay Pacific Airways Ltd

+1.63%

China Mengniu Dairy Co Ltd

+1.07%

Geely Automobile Holdings

-1.21%

Cheung Kong Property

-0.55%

Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

A tale of two candidates

2 Business Daily Tuesday, April 25 2017

Macau Politics

"illegal recruitment" not related to transfer of benefits or other illegal activities The head of ICM also said recruitment via acquisition of services instead of through an open or central recruitment system had long been the norm since the previous administration Cecilia U cecilia.u@macaubusinessdaily.com

T

he new director of Cultural Affairs Bureau (ICM) Leung Hio Ming claimed during a press conference yesterday that the case of recruiting a large number of staff via a regime of acquisition of services was not related to any transfer of benefits or other illegal activities.

The ICM head added that the method of recruitment by the IC had long been a norm during his administrative career since the previous Portuguese administration.

“We didn’t find any chiefs or leaders who violated the law intentionally in our investigations,” said the ICM head.

In the press conference yesterday, ICM responded to the investigation report posted last month by

the Commission Against Corruption (CCAC), which slammed ICM for using illegal methods to recruit a large number of its workers, some of whom are even relatives of leaders and department chiefs.

When asked by reporters whether any chiefs or heads of departments should bear any legal responsibility, Mr. Leung stressed that it was due to a failure of staff from all departments and ranks to follow regulations.

The report, written by the anti-graft watchdog, covers the years 2010 to 2015.

ICM was headed by Guilherme Ung Vai Meng from March 2010 until the middle of February, when he left the position to “return to the world of arts”, a month before the announcement of the watchdog’s report.

The current ICM director admitted that many chiefs and frontline

staff, including himself, have limited knowledge about recruitment procedures, justifying that staff paid more attention to the commencement and outcomes of events held by the Bureau.

But he emphasised that the issues must be resolved and improvements must be made for future works.

82 still working in ICM According to CCAC, the number of workers recruited by the Bureau via a regime of acquisition of services, reached one sixth of the department’s total recruits in 2014, at 112, with the number dropping to 94 in 2016 when CCAC commenced its investigations into the Bureau.

Currently, there are 82 employees who were hired via acquisition of service still working for the Bureau.

The Bureau stated that contracts of related employees will be terminated commencing the end of June, saying that “up to some three quarters of the hired employees [via acquisition of service] will have their contracts terminated by the end of the third quarter this year”.

The given time span was

considered as a buffer for ICM to restructure and to allow time for soon-to-be-sacked employees to plan their next steps.

Aside from terminating the contracts of the other related workers, Mr. Leung said staff had already made declarations of their assets, as requested by CCAC. To prevent similar problems in the future, the ICM head disclosed that training of staff regarding legal procedures such as procurement law, was being held to strengthen staff knowledge of the local law, as well as to emphasise the importance of abiding by it, adding that similar training will continue to be held in the future.

Meanwhile, the annual report compiled by CCAC released earlier this month, exposed another case of inappropriate recruitment by ICM, of two supervisors who had less than five years of experience.

Mr. Leung explained that the aforementioned case was the result of the Bureau’s miscomprehension of some of the legal terms, while apologising for the negative impact created for its superiors.

Growth

Hengqin expects GDP to grow 11.2 pct for 2017 Q1 24 new policies to further enhance the area’s economic development were rolled out during the celebrations of the second anniversary of Hengqin’s inauguration last Friday Cecilia U cecilia.u@macaubusinessdaily.com

Business Awards

The Business Awards of Macau accepting entries Applications and nominations for The Business Awards of Macau 2017 opened yesterday and will remain open until August 20.

Now in its 5th year, the awards celebrate the achievements of local companies and entrepreneurs.

Applications and nominations are open to locally-based businesses in one or more of the eleven award categories including: Leading by Example; Entrepreneur; Young Entrepreneur; New Talent; Most Valuable Brand; Innovation; Corporate Social Responsibility; Environmental Performance; Small and Medium Enterprise (SMEs);

Non-Profit Organisation; and Grand Merit Award.

Around 200 guests from different sectors of the MSAR economy are expected to attend the Awards ceremony dinner, taking place in November of this year.

“We would strongly encourage businesses from across the city to come forward and enter the Business Awards of Macau. We know that we have some incredible businesses out there achieving great things. We want to celebrate those achievements,” said Chairman of the Business Awards of Macau, Paulo A. Azevedo.

Hengqin is expecting growth of 11.2 per cent year-on-year in its economy for the first quarter of 2017, as announced on Friday during the second anniversary celebrations of the city’s inauguration as a special economic zone.

According to official data, the investment of fixed assets in Hengqin amounted to RMB8.26 billion (MOP9.61 billion/ US$1.20 billion) for the first three months, up 19.2 per cent.

The Chinese city attracted foreign investment amounting to US$176 million and foreign trade reaching US$127 million, posting an increase of 43.3 per cent and 43.23 per cent, respectively.

In terms of the general public budget revenue, Hengqin is expected to receive RMB1.31 billion, up 15 per cent.

Currently, there are a total of 1,360 Hong Kong and Macau-based enterprises that are registered in Hengqin, of which 793 are enterprises from Macau and 567 are from Hong Kong.

The MSAR Government has endorsed 83 local projects to be involved in the Guangdong-Macau Co-operation Industrial Park, 13 of which have commenced construction with total investment for the projects amounting to RMB61.05 billion.

In addition, some 10 local investment projects have already inked land-leasing

contracts for the Guangdong-Macau Traditional Chinese Medicine Technology Industrial Park.

Meanwhile, the Macao-Hengqin Youth Entrepreneurship Valley is expected to have 191 young entrepreneurs from Macau invest in the area, with the amount of financing exceeding RMB100 million.

24 new policies

The Hengqin authorities rolled out 24 new policies to further improve the business environment in Hengqin. Some important new policies include setting up an Intellectual Property Customs Protection Centre in Hengqin, supporting ‘high quality food products’ to be exhibited in Macau, introducing mobile and e-payment of taxes, and carrying out research on establishing joint mechanisms to oversee infringement of consumer rights.

In order to attract, support, and prioritize more investments from Macau, the Hengqin authorities have established a policy that only serves Macau investors, as well as the Hengqin Guangdong-Macao Development Foundation to support Macau companies to set up in Hengqin.

In order to attract more professionals to work in Hengqin, Hong Kong and Macau residents working in the Chinese city can enjoy Individual Income Tax Differential Subsidies.

The tax rebate was implemented in 2014 on a trial basis for three years.

Courts Final testimonies for Ho Chio Meng case set for May 11 and 12

Case (almost) closed Top judge alludes that Ho tried to intervene in recouping funds from UK involved in Ao Man Long case The final testimonies in the graft trial of former Prosecutor-general Ho Chio Meng are set for May 11 and 12, despite the protests of the former official’s

defence lawyer, according to local Portuguese-language television broadcaster TDM. The President of the Court of Final Appeal, Sam Hou Fai, argued

that given the length of time the former official has been held in custody and the four months of trial already conducted, he considered that the defence had been given sufficient time to prepare its case.

A case relating to the former Secretary of Transport and Public Works Ao Man Long, involving money to be recovered from the United Kingdom, could have involved pressure from a local businessmen (involved in the Ao case) on Ho Chio Meng, alluded the court’s top official Sam Hou Fai in the trial yesterday, reports the broadcaster.

Ho made the request for the authorities in the UK to transfer the case to Macau or, eventually, send back the recovered money, which eventually happened. However, given that the local authorities had no previous experience in such fiscal matters, the case was never transferred until just prior to Ho’s arrest, when he desisted from shifting the case to the MSAR, according to the broadcaster.

The case will be heard again this Thursday, before heading to its final two days of trial.

Business Daily Tuesday, April 25 2017    3

Macau Tourism

Visitor arrivals grow 5.7 pct in March Chinese visitors are back, with the total number jumping by 11.5 per cent year-on-year to 1.66 million Kam Leong kamleong@macaubusinessdaily.com

T

he MSAR recorded 2.5 million visitor arrivals during the month of March, a jump of 5.7 per cent year-on-year, attributable to the increasing number of visitors from Mainland China, in addition to surging numbers of travellers from East Asia.

According to the latest official data released yesterday by the Statistics and Census Service (DSEC), more visitors chose to remain overnight in the territory during their stay last month, with the total number of overnight visitors reaching 1.33 million, an increase of 13.9 per cent year-on-year.

Meanwhile, the number of same-day visitors fell by 2.4 per cent year-onyear to 1.16 million.

By origin, visitors from Mainland China amounted to 1.65 million, rising by 11.5 per cent year-on-year and accounting for some 66.4 per cent of the total. In particular, those travelling under the Individual Visit Scheme jumped by 18.4 per cent year-onyear to 741,199.

According to the DSEC, the majority of the mainland tourists were from Guangdong Province, amounting to 668,681. Those from Hunan Province and Fujian Province,

meanwhile, totalled 77,639 and 66,037, respectively.

Korean & Japanese visitors soar

Meanwhile, the number of visitors to the MSAR from South Korea surged to 65,393, up by 56.9 per cent yearon-year, while those from Japan also rose significantly by 19.2 per cent year-on-year to 33,158 in the month.

Visitor arrivals from Taiwan also registered a year-on-year growth of 7.5 per cent to 84,347 but those from Hong Kong dropped by 12.6 per cent year-on-year to 492,215.

In terms of long-haul visitors, those from Australia and the United Kingdom plunged by 17.9 per cent and 12.5 per cent year-on-year, amounting to 6,720 and 4,798, respectively, whereas those from the United States

and Canada rose 1.1 per cent and 4.5 per cent year-on-year to 16,203 and 7,519, respectively.

More flying to MSAR

During the month, there was a notable increase in the number of visitors travelling to the MSAR via air.

According to the official data, this type of visitor arrival grew by 18.6 per cent year-on-year to 207,856, with those arriving at the local international airport accounting for 206,790, an increase of 18.3 per cent year-on-year.

For the first quarter of this year, the MSAR received some 7.87 million visitors, an increase of 5.6 per cent yearon-year. Of the total, the number of overnight visitors climbed by 12.1 per cent year-on-year to 3.93 million,

while same-day visitor arrivals fell by 0.2 per cent year-on-year.

A significant increase was again evident in the number of visitors from South Korea, which surged by 32 per cent year-on-year to 229,605 during the quarter, while those from Mainland China and Taiwan also posted an increase in numbers, up by 7.6 per cent and 1.9 per cent year-onyear, amounting to 5.32 million and 225,620, respectively.

Nevertheless, the number of visitors from Hong Kong decreased by 2.5 per cent year-on-year to 1.52 million in the same period.

While there were more visitors from the United States and Canada in the quarter, the city saw fewer visitors travelling from Australia and United Kingdom, DSEC said.

4 Business Daily Tuesday, April 25 2017

Macau Opinion

Albano Martins* Real estate prices will continue to rise!

With the recovery of the gaming industry and the taking back of land plots by the government, house prices will skyrocket!

There is a very positive correlation between the health of the gaming industry and the state of health of the real estate market.

Gaming revenue began a downward slide in June 2014, however, its reflection on real estate only began to become clear three months later, with prices continuing to rise until they reached a peak in August 2014, when they were 16.33 times those reached in the second quarter of 2003!

These 2003 prices will be used as a reference point for comparison throughout this article.

To get an idea of this rise, a house worth MOP1 million in Q2 2003, was worth around MOP16,325,371.21 on the market in August 2014!

Of course, we are working with average values.

The real estate market sank from there, following the gaming industry, and in January 2016 this price ratio was “only” 11.79 times!

From then on, the idea that prevailed in the gaming market was that the fall of the decline of the gaming industry was going to end.

The real estate market thus began to freak out.

Until June 2016, with the gaming industry’s declines getting ever closer to zero, the real estate market managed to reach a price ratio of 12.97 times!

In July 2016, when it was thought that decline of the gaming industry was finally going to end, real estate soon shot up to 15.77 times higher (than 2003), a sign that many people wanted to enter the market and that it was paying out well.

Gaming revenue then began to recover from August 2016 and the real estate market, with a correction in August, also began to recover, reaching a price ratio of 16.75 times in December 2016!

After that, a new correction was made, fueled by the effect caused by the government’s decision to take back undeveloped land, which created instability and some perplexity in the private market and, therefore, with investors.

Prices fell again, reaching a ratio of “only” 14.27 times in February 2017!

The double-digit rise in gaming income in February, again pulled back that ratio in March, which went up to 14.82 times!

What will the trend be from now on?

Prices will continue to rise until the gaming industry stabilizes, further fueled by the effect of the government reclaiming undeveloped land plots, which limits supply in the market.

Unless a cataclysm happens again in the gaming economy! * an economist and contributor to this newspaper

By Aivi Remulla

Luxury A 77-year-old plane on a round-the-world-trip landed yesterday

in MSAR as part of a Breitling promotional campaign

Potential in time The local representative for Swiss luxury watch company Breitling believes the city’s luxury market is still “strong” and has “great potential” with the company registering positive performance in the last six months Nelson Moura nelson.moura@macaubusinessdaily.com

T

he luxury market in Macau is still “strong” and possesses “great potential”, according to the General Manager for Hong Kong and Macau of Breitling, Queenie Chan.

The Swiss watchmaking company opened two boutiques in the city six months ago, one at integrated resort The Parisian and another at The Venetian, but according to Ms. Chan, despite the short period in the market, the company is very upbeat about the local luxury sector.

“We know that in terms of tourism arrivals the city is a bit down right now, but by seeing the performance in the last six months we’re very confident in the market here.

Our brand positioning and price

company was planning to open any new operations in the city, the general manager stated the company would continue to focus on its existing stores.

A DC-3 to conquer the world

range is actually very suitable for the current economy,” Ms. Chan told Business Daily.

The total value of retail sales of watches, clocks and jewellery reached MOP3.34 billion (US$429.4 million) in the last three months of 2016, a 1.6 per cent year-on-year decrease from the same period the previous year, according to the latest data from the Statistics and Census Service (DSEC).

Meanwhile, the value of watches imported to the MSAR in the first two months of 2017 amounted to MOP842.1 million, increasing 36.7 per cent year-on-year from the same period last year, while the value of watches exported between January and February of this year went down 6.7 per cent yearly to MOP192.3 million.

When questioned if the watch

Ms. Chan’s statements came on the sidelines of the Breitling DC-3 World Tour event, an initiative by the Swiss watchmaker to make a 77-year old plane become the oldest aircraft to fly around the world.

Having started in Geneva, Switzerland, on March 9, the world trip will pass through 55 cities finishing in the Swiss city of Sion in September.

“This aircraft model was the first able to cross the United States from one coast to the other and allowed airline companies to have profits for the first time […] The DC-3 taking part in the trip made its first flight in 1940, served as a bomber for one day in World War 2 and now has around 75,000 hours of flight time,” the airplane pilot Francisco Agullo told Business Daily.

Having already completed nine round-the-world trips in different planes, Mr. Agullo, who is also the owner of the DC-3 after purchasing it in 2008, will now attempt the trip for a tenth time in what he describes as the oldest functioning airplane in the world.

travel services and hotels.

A total of MOP78.66 million is to be paid to the company this year, with MOP49.1 million provided by the MSAR Government budget for

common expenses and MOP29.56 million from the public investments budget.

The remaining MOP27.3 million is to be paid between 2018 and 2020. N.M.

at the Economic Forum on Sustainable Cities held in Luanda, Angola, as reported by Angolan newspaper Jornal de Angola.

According to the MBSC Director, tax policies such as an income tax for individual and collective entities not above 12 per cent, and allowing the

free transfer of capital to and from the city, are part of an economic strategy to develop an open and free economy.

The MBSC is a department under the Macau Trade and Investment Promotion Institute (IPIM), with Mr. António Lei representing the MSAR at the international event. N.M.

Government

Pricey border A MOP106 million contract was signed for the development plan of the new GuangdongMacau border crossing (Qingmao Border) The government has authorised a MOP106 million (US$13.2 million) contract for the development plan of the new Guangdong-Macau border crossing (Qingmao Border), an official gazette release stated.

The release stated that the Chief Executive (CE) approved the new border project plan contract with Guangdong Nam Yue Group Limited, a group involved in construction, food supply, property investment,

Economy

Tax advantage The MSAR tax policies have contributed greatly to the city’s business envelopment, according to the Director of the Macao Business Support Centre (MBSC) António Lei Chi Wai, speaking

Business Daily Tuesday, April 25 2017 5

Macau French elections

In search of a political vision for France The 2017 French presidential elections are shaking up a very divided country. For the first time, French nationals were able to vote in Macau. And for the first time too, big party politics are out of the race.

French residents of Macau speak up Sheyla Zandonai sheyla.zandonai@macaubusiness.com

O

n Sunday, April 23, French nationals residing in Macau were for the first time able to vote in the city for the 2017 French presidential elections. A French ballot booth was installed at the premises of Alliance Française in the Penha district, open from 8am to 7pm.

Speaking to Business Daily, the Director of Alliance Française in Macau, Xavier Garnier, said that a total of 137 people had registered to vote in the city, and that nearly half of them, or 66 people, turned out to vote on Sunday.

The general results of the first round of the French presidential election were disclosed yesterday morning, Macau time.

Emmanuel Macron, of En Marche! party, won the first round of the elections, with 23.86 per cent of the votes.

Marine Le Pen, of the Front National, followed closely, with 21.43 per cent of the votes.

Mr. Garnier also revealed the number of ballots that were cast on Sunday in Macau, noting that Emmanuel Macron and François Fillon (Les Républicains) received 18 votes each, with Marine Le Pen receiving 11 and Jean-Luc Mélenchon (La France Insoumise) 9.

When asked about how Marine Le Pen, who is known for her radical proposals against immigrants in France, came third in the Macau ballot, Mr. Garnier expressed his surprise. “It is always a surprise to see French people who are also immigrants, in the position of foreigners, voting for someone as Marine Le Pen,” said Garnier.

In terms of the votes in Macau and Hong Kong combined, according to the website of the French Consulate General in Hong Kong, a total of 5,404 people out of 8,160 registered voters turned out to vote in both SARS on Sunday, representing 66.23 per cent of the total registered voters.

“This is huge, it is a record in terms of participation, and it shows that French people are really concerned about the current state of affairs,” commented Christian Audroing, a French national who left his home country nearly 30 years ago, and settled in Macau.

Jean-Pierre Cabestan, Head of the Department of Government and International Studies at the Hong Kong Baptist University told Business Daily that the turnout was pretty high at the French Consulate, noting: “I had to wait for more than 30 minutes to cast my ballot.”

Novelties in the pipeline

For the Chairman of the French Macau Business Association (FMBA), Rutger Verschuren, the French election ‘was quite unique’ this time around.

‘We can see from the campaign polls earlier that many French voters are looking for a change,’ he said in an email to Business Daily.

Mr. Garnier concurs that this election has many novelties, stating: “for one, parties from the right and leftwing were somewhat victims of several other candidates who have contributed to dividing up the votes.”

In addition to the four candidates that came on top of the list, with approximately 20 per cent of the vote each, totalling 84.9 per cent, the remainder of the poll, or 15.2 per cent, was distributed amongst seven candidates (see box).

“These, that I call the ‘undecided [voters]’, always have a decisive say in the second round,” commented Mr. Audroing.

To him, the biggest surprise was actually the unspectacular performance of Benoît Hamon in the polls.

The candidate of the Parti Socialiste (PS), the same as the incumbent President François Hollande, came in fifth in the polls, with only 6.35 per cent of the votes.

To Professor Cabestan, this was not so surprising since “what the traditional left has proposed is totally out of step with the needs of the country.”

“France needs more jobs,” he noted, “more flexibility, more growth, and, to me, more competitiveness and attractiveness for investors, not more taxes and even less social protections and benefits that in any case it cannot afford anymore, particularly with no growth and a high unemployment rate.’

Radical politics

According to Mr. Audroing, the final voting configuration shows that roughly 40 per cent of the French people “are on the extreme or radical” side of politics – with Le Pen and Mélenchon, totalling 41 per cent.

“The extreme left-wing [Mélenchon] performed much better than the moderate left-wing, and this is reason enough to be concerned about France,” said Audroing.

Jen-Luc Mélenchon of La France Insoumise party, a former socialist himself who left the PS in 2008, came fourth, receiving 19.6 per cent of the total ballot.

Yves Étienne Sonolet, a visual artist and instructor in higher education in Macau, thinks that the results were defined by “a series of circumstances.”

“It is an unprecedented case,” notes Sonolet. “For the first time, no big

parties will be represented in the second round of the presidential elections. The fact that [François] Fillon was involved in a political scandal and that [Benoît] Hamon presented himself as the continuation of the socialists, very unpopular with Hollande, both made the ascension of [Emmanuel] Macron possible,” he said to Business Daily.

Regarding his expectations for the second round, Mr. Verschuren replied that ‘Le Pen has an agenda with several hot and some controversial topics, while Macron seems more balanced. We can imagine that voters for those candidates who lost on [Sunday’s] election may turn to one of the two remaining candidates who has an agenda that closely matches their earlier favourite. In this case, one could expect that Macron will appeal more to these voters as the closest alternative.’

Citing a study recently conducted in France (the CEVIPOF), Eric Sautedé, a political scientist, told Business Daily that ‘a significant part of Mélenchon and Hamon’s electorate would have chosen Macron as a second choice (30 per cent and 35 per cent, respectively) and an absolute majority in the case of Fillon (53 per cent), so there should be an important transfer of votes in favour of Macron from the three main contenders behind the two ones participating in the second round.’

Macron on the ticket

For many people who spoke with Business Daily regarding the first round election results, Macron represents France’s choice for a change, a new face and blood, so to speak, in politics.

“Although he presents himself as someone from the right, Macron’s heritage is on the left. Besides, more than a programme - which has been criticized for not being so clear - what Macron represents is a vision,” suggested Mr. Garnier.

“Only 39 years old, Macron is quite young too. To me, this means that France has hope. Traditionally, in politics, France has been a moderate country. So, the French people want to see things change, not much, but some change,” said Mr. Audroing.

For Eric Sautedé, Macron and Le Pen’s political platforms are at two extreme opposites. ‘One is openness, the other is closed; one is all in favour of a multicultural community, the other, in favour of a very narrow

Ballots cast in Macau and Hong Kong combined

Registered voters: 8160 Effective voters: 5404 (66.23%), of which 35 abstained 1. Macron 45.82% 2. Fillon 39.11% 3. Mélenchon 5.85% 4. Le Pen 3.37% 5. Hamon 3.26% 6. Asselineau 1.32% 7. Dupont-Aignan 0.65% 8. Lasalle 0.26% 9. Poutou 0.20% 10. Cheminade 0.09% 11. Arthaud 0.06% Source: Consulate General of France in Hong Kong

definition of what being French means’.

Mr. Verschuren explained that the FMBA’s point of view is that: ‘France remains a peaceful country where the economy flourishes and where children of all backgrounds have equally excellent chances of a good education and a safe and prosperous future. Being part of Europe is part of this future, we believe.’

Le Monde reported that the overall participation rate in the election was slightly lower than in the last presidential elections, which took place in 2012. At 5pm on Sunday (GMT), French authorities estimated that the participation rate had reached 78.23 per cent, slightly down from 79.48 per cent in 2012.

The fact that the participation rate was a bit lower was not of high impact, notes Professor Garnier. “This is relative. People find other ways to express their opinions, and opposition to the status quo, as militants, without having to vote. There is fear, after all the recent terrorist attacks, and the French population is starting to react,” notes the professor.

Eric Berti, the Consul General of France in Hong Kong, and Guillaume Gallas, the President of the Voting Bureau in Macau, and Manager of Sofitel, were unable to provide comments to Business Daily’s enquiries by the time this story went to print.

Emmanuel Macron and Marine Le Pen will now face off against each other in the second and decisive round of the French presidential elections on May 7, 2017.

6 Business Daily Tuesday, April 25 2017

Macau Labour affairs

DSAL investigating fake recruitment

The Labour Affairs Bureau (DSAL) is investigating a local hotel that is alleged to have launched fake recruitment procedures, according to the bureau’s director Wong Chi Hong, as reported by local broadcaster TDM Radio. Without revealing the name of the involved hotel, the official said the Bureau had received

complaints from four workers, who claimed the hotel only informed them that there was no need for them to start the new jobs after they had signed a contract with the company. The Bureau is now investigating the case and expects the investigation will be completed in the following months with the results to be directly announced to those who lodged the complaints, said Mr. Wong.

Transport

DSAT to study cap on casino shuttle services A total of 454 casino shuttle buses were operating as of February this year Kam Leong kamleong@macaubusinessdaily.com

A

possible cap on the number of casino shuttle buses will be studied, said the director of Transport Bureau, Kelvin Lam Hin

Sang.

‘Regarding opinions on limiting the number of casino shuttle buses, the Transport Bureau will study the viability, coordinating with the licensing bureau,’ said the transport official in his reply to legislator Chan Meng Kam’s enquiry.

Currently, the Macao Government Tourism Office (MGTO) is in charge of granting authorisation for the import of tourism-use coaches and buses.

According to Mr. Lam, MGTO evaluates related applications based on passenger volumes.

As of February this year, a total of 454 casino shuttle buses were running on the roads, providing

a total of 62 routes, said the DSAT head, noting the numbers represent a decrease of 13 buses and three routes, respectively, from the end of 2016.

The official also noted the number of casino buses commuting passengers between local casinos, and those between casinos and the Border Gate, dropped by 26.3 per cent and 33.3 per cent respectively, after the six gaming operators launched joint shuttle bus services last year.

Last November, Wynn Resorts (Macau) S.A. and MGM China Holdings Ltd. launched a joint shuttle bus service connecting passengers between the Border Gate and their properties on the Peninsula, while Galaxy Entertainment Group, Melco Resorts and Entertainment Ltd. and The Venetian Macao, of Sands China Ltd., also commenced a joint shuttle bus route called the ‘Cotai Connection’ for the transport of guests and local residents within the Cotai Strip.

Paperwork

MSAR streamlines business promotion regulations to encourage investment Macau has simplified and improved some of its regulations for trade and investment promotion, the Special Administrative Region's investment promotion body said on Sunday. Macao Trade and Investment Promotion Institute (IPIM) said it has updated the regulations for companies attending promotional events, especially cutting short the list of documents that should be provided for companies to hold or participate in promotional activities such as exhibitions or forums.

Instead, such information will be provided by other government departments such as the Financial Services Bureau, the institute said.

According to IPIM, companies now don’t need to hand in the registration copy for business opening or modification, commerce registration copy, business tax form copy, occupational tax form copy, and certificate copy for no outstanding tax. The regulation updates also said the exhibition information should be issued to the public every month, which will help companies and interested visitors know the promotional activities as soon as possible.

Such information was previously publicized every year in June and December, according to the old regulations. Xinhua

eSports

Video games make it into 2022 Asian Games

The growing popularity of eSports has led to their inclusion as an official sport in the 2022 Asian Games, to be held in Hangzhou, China, according to a press release.

The arrangement was made through a partnership between the Olympic Council of Asia (OCA) and Alisports Group, a sports platform provider announced over the weekend.

The arrangement allows for eSports to make their way as an official sport

into the 2017 Ashgabat Asian Indoor and Martial Arts Games (AIMAG), as well as the 2018 Jakarta Asian Games, with the release noting that Alisports will ‘be an active partner in helping expand the market for games organized by the association’.

“The Olympic Council of Asia is committed to the heritage, development and improvement of Asian sports, and we are extremely pleased about the strategic partnership with Alisports,” said OCA President Sheikh Ahmad Al Faha Al Sabah.

The founder and CEO of Alisports, Zhang Dazhong, notes that “in the future, we will work closely together to develop new modes of developing big games and events, and to provide sponsors with more opportunities and value.” Zhang expects to eventually see eSports in the Olympic Games, noting that “it’s only a matter of time”. K.W.

In the interpellation, the legislator queried whether the authorities have any solid plans to decrease the number of casino shuttle buses, and whether the MSAR Government can effectively supervise the routes taken by the shuttle buses.

But the DSAT official said there is no law in the MSAR to punish gaming operators for changing their

bus routes, as the operations are privately run.

‘The Bureau will continuously communicate with gaming corporations and pay close attention to their execution of decreasing the number of casino shuttle buses,’ the director wrote, adding the Bureau will promote more joint shuttle bus services with the operators.

Business Daily Tuesday, April 25 2017 7

Gaming Stocks

J.P. Morgan less bullish on Macau gaming

Meanwhile, the group forecasts gaming stocks may overshoot in the near term. ‘We expect the next two weeks

to be (positively) eventful, as we think [first-quarter] earnings and two [gross gaming revenue] prints (April monthly and Labor Day weekly data) should meet or beat market expectations,’ the analysts opine.

But they added positive catalysts are not foreseen for some time after the overshooting.

‘Following three consecutive quarters of expansion, EBITDA (earnings before interest, taxation, depreciation and amortization) will turn negative sequentially from stronger-than-expected 1Q (first quarter), which, given valuations, could weigh on sentiment,’ the analysts explained.

While expecting gaming revenue growth to hit over 20 per cent in the coming two months, the brokerage’s analysts forecast that gaming revenue would be affected later by the visit of Chinese President Xi Jingping to Hong Kong in July.

‘Some gamblers might want to delay the trip given heighten(ed) security and vigilance across HK-Macau-Guangdong,’ they explained.

‘We caution investors not to be “fooled by the optics” because Macau stocks usually react to the trajectory of absolute demand, not [yearon-year] growth. Moreover, strong growth in May/June [gross gaming revenue] is very much a consensus call already, with little (if any) room for upside surprise in our view,’ they said.

the Business Mirror, and the recent granting by the Philippines Amusement and Gaming Corp (Pagcor) of 35 new licenses is set to push up office occupation even further, notes the publication.

“These companies can sub-franchise that to as much as eight other subfranchisees […] each of these 35 companies will take anywhere between 10,000 square metres and 20,000 square metres of office space,” noted Leechiu in the briefing.

Plaza, from PEZA, noted that more than 100 online gaming operations were set up in Metro Manila, with the majority in PEZA accredited

facilities, having received their gaming licenses from the Aurora Pacific Economic Zone and Freeport (APECO) or CEZA, notes Tight Poker. The publication notes that Plaza, after consulting with the PEZA board of directors, concluded that even if the gaming licenses for the operations wishing to set up in PEZA facilities were issued by Pagcor, they would not be allowed to run in their facilities. Building owners who did not cooperate with PEZA and rented out to online gaming operations would have their PEZA-accreditation cancelled, the publication quoted her as saying.

The firm downgraded four gaming operators amid China’s macro backdrop Kam Leong kamleong@macaubusinessdaily.com

J

.P. Morgan said it’s time to take some chips off the table, neutralising the firm’s “bullish” stance on local gaming stocks due to China’s macro backdrop.

‘We see limited opportunity for outsized returns from here, as upside risks to both estimates and valuation appear limited,’ wrote the firm’s analysts led by D.S. Kim in a note yesterday.

‘A positive surprise in [gross gaming revenue], a key driver behind earnings upgrade so far, could stall soon as the cyclical tailwind from last year’s China macro backdrop (e.g., liquidity easing, property rally, commodity price hikes) is waning or even rolling over,’ they added.

The brokerage downgraded four local gaming stocks, lowering Sands China Ltd and MGM China Holdings Ltd from Overweight to Neutral; and SJM Holdings Ltd and Melco International Development Ltd from Neutral to Underweight.

‘Galaxy & Wynn remain our only [Overweight]s…In our view, they

possess the outsized potential for sustainable earnings upgrade (i.e. they’ll likely keep beating expectations throughout the year) driven by strong executions and exceptional asset quality,’ the team explained, believing that this would keep the two stocks ‘relatively immune to volatile sentiments and allow them to grind higher’.

‘We’re not turning outright

negative, as fundamentals are still progressing solidly as expected,’ the analysts claimed. ‘But we wouldn’t get too greedy either, and would trim positions (except [Overweight]s) and await a re-entry point.’

Stocks to overshoot in short term

Online gaming

Blocking office rental for online Director-general of PEZA aims to prevent online gaming operations from setting up in PEZA-accredited buildings Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

Online gaming operators will be met with closed doors at Philippine Economic Zone Authority (PEZA) accredited sites, according to PEZA’s director-general Charito Plaza, as reported by local media.

This comes despite the approval granted by Philippine President Rodrigo Duterte’s office to accommodate legal online gaming groups in the country.

“The OP (office of the president) wants us to legalize online gaming,” stated Ms. Plaza, as quoted by Philstar.

“They asked PEZA for us to allow to locate BPOs (business process outsourcing companies) who are into online gaming,” said Plaza, noting that PEZA’s response was that they would “not allow” the online gaming operators to operate in their buildings.

The director-general justified this position stating: “gambling is not a mandate of PEZA,” and “it might affect operations of our legitimate BPO locators.”

“We do not want to ruin the image of the legitimate BPOs located in our sites,” Plaza stated, noting that she would ask owners of all PEZA-accredited buildings to not allow the online gaming firms to operate on their premises.

Plaza hopes to keep out online gaming companies masquerading as BPOs – the current leader in terms of office rentals - including those who “engage in technical support for online gaming firms”, as the online gaming sector quickly becomes a key office-renter.

Taking up space

A recently released report by Leechiu Property Consultants (LPC) highlighted the number of outsourcing companies looking for workspace

across the Philippines. The report, presented by the group’s CEO David Leechiu in a press briefing, placed the demand in the Philippines by BPOs this year at approximately half of the nationwide 1.2-1.5 million square metres.

“We anticipate the BPO industry to take up maybe 700,000 square metres to 800,000 square metres this year,” noted Leechiu.

The CEO stated that, despite BPO’s currently being the main renters, online gaming companies were quickly advancing in on BPOs’ territory.

“This online gaming market could easily consume 400,000 square metres [or] 500,000 square metres of office space this year,” observed the CEO, as quoted by Business Mirror.

The CEO noted that the online gaming industry’s demand was a “big surprise for all of us”, stating that “they went from zero to now the second-largest demand driver for office space”, adding “they did this practically overnight”.

“The amount of space we anticipate to take this year will be anywhere from 50 per cent to almost equal that of the BPO industry. That’s how big their potential could be,” said Leechiu.

Online conundrum

The growth comes at a crossroads for the online gaming industry in the Philippines, as the executive order

by President Duterte has left many operators unsure of which regulator to choose, with authorities such as the Cagayan Economic Zone Authority (CEZA) – who has an office in Metro Manila under the PEZA arrangement – losing some of its investors to other projects in Southeast Asia.

CEZA locators began occupying buildings in the Makati City region of Manila as early as the Ramos administration (1992-1998), notes

Gaming

Getting started in Cyprus Melco-Hard Rock consortium expected to open first temporary casino in Cyprus in October of 2017 The consortium between Melco International Development Limited, Hard Rock Entertainment and Cyprus Phassouri (Zakaki) Limited is expected to open a temporary casino in Limassol in October of 2017 as part of its 500 million euro- (MOP4.4 billion/ US$553.2 million) investment in the country, according to website Cyprus Property News.

The temporary casino is to remain operational until the consortium

opens its permanent resort on the country’s south coast in 2020, with the property including a 500-room hotel, 1,000 gaming machines and 100 gaming tables.

According to the publication, the consortium is currently waiting for the Cyprus gaming authorities to issue them operating licences, allowing the group to have a 30-year gaming licence plus the rights to a monopoly in the country for the first 15 years. N.M.

8 Business Daily Tuesday, April 25 2017

Greater China GDP

Policymakers bullish on economy Despite what some economist say it is too early to say China has won the war against capital outflows

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olicymakers in China are pushing a bullish message on the world’s second-biggest economy after a solid first quarter, pointing to a slow down in capital outflows and a stable yuan after a selloff last year stoked fears of instability.

Speaking at a G20 summit meeting of the world’s top economies in Washington last week, finance minister Xiao Jie said an increasing number of positive signs were seen in the

Chinese economy in the first quarter gross domestic product report.

China is confident of reaching the government’s 6.5 per cent GDP growth target this year, Xiao said in a notice published on the Ministry of Finance’s website on Saturday.

Separately, People’s Bank of China (PBOC) adviser Sheng Songcheng said the improving economy has been matched by a stable yuan, with signs that capital is starting to return to China.

“After breaking and even reversing expectations for yuan depreciation, there are signs of a trend of capital returning to China,” Sheng wrote in yesterday’s editorial in Financial News, a newspaper owned by the PBOC. Sheng reiterated that interest rates are on an uptrend, underscoring Beijing’s shift to a tighter policy stance to temper rampant credit growth and put the economy on an even keel.

The comments from Sheng and Xiao follow last week’s data which showed China’s economy grew a faster-than-expected 6.9 per cent in the first quarter, boosted by higher

U.S. Treasury Secretary Steven Mnuchin (L) shakes hands with Minister of Finance of China Xiao Jie (R) at the International Monetary Fund (IMF) headquarters in Washington. Lusa

government infrastructure spending and a gravity-defying property boom.

Capital outflows from China eased sharply in the first quarter and cross border flows were more balanced as expectations for further yuan depreciation have weakened significantly, the spokeswoman for the foreign exchange regulator said on Thursday.

Sources told Reuters last week that China has relaxed some curbs on capital flows as officials indicate increasing confidence that pressure on the yuan and the country’s foreign exchange reserves has diminished, thanks largely to a pullback in the surging U.S. dollar.

But some economists say it is too early to say China has won the war against capital outflows and it is unlikely Beijing will start a broad rollback of capital control measures in the near future.

“We expect the CNY (or yuan) to come under pressure again at some point, notably at times of another global strengthening of the US$,” Oxford Economics economist Louis Kuijs said in a note Friday.

“We still do not rule out further tightening if the pressures on the FX market were to rise substantially again.”

A massive build-up of debt over the past several years has been highlighted by policymakers, economists and the International Monetary Fund as a risk to financial stability in China.

In his Washington speech, Xiao said that China is making progress on supply-side structural reforms, which Beijing has been promoting as a way of reducing excess industrial capacity and cutting its reliance on debt-driven growth policies. Reuters

Stock Index

Hopes rise for share inclusion as MSCI pitches compromise One of the sources said MSCI was working around these last issues by reducing the proposed selection of 448 stocks to 169 Michelle Price

T

he chances of MSCI Inc adding China-listed shares to its global index have risen significantly since it proposed to cut the number of companies to include, investors say, but capital controls and market access snags may still pose a hurdle.

New York-based index provider MSCI will announce in June if it will add yuan-denominated Chinese shares, or A shares, to its Emerging Markets Index, a move that could draw up to US$400 billion into China stocks over the next decade.

Key Points MSCI has slimmed down proposal to include 169 Connect stocks Investors, sources see greater likelihood of inclusion in 2017 BlackRock says “supportive of” general benchmark inclusion Some investors still spooked by capital outflow curbs MSCI last year declined for the third time to include mainland-traded shares to the benchmark, tracked by around US$1.5 trillion in assets, saying more had to be done to open up the country’s tightly-controlled market.

The index provider has now narrowed the gap between China and global asset managers by proposing a smaller slate of stocks and confining

them to large-cap companies accessible to foreign investors via a trading link with Hong Kong.

“Certainly, in terms of the challenges China poses with respect to equity market access, this proposal does go some way to addressing those concerns,” said David MacKenzie, head of Asian Equity Management at Schroders. “I’d be very surprised if they didn’t push it through this year.”

BlackRock - MSCI’s largest client said in a statement it was “supportive of” China A-share inclusion in global benchmarks but did not comment on the timeline or MSCI’s new proposal.

MSCI said last June China needed to allow foreign investors to freely repatriate capital under its cross-border

Qualified Foreign Institutional Investor (QFII) investment scheme.

It also wanted the country to scrap a rule requiring foreigners seek regulatory approval before launching investment products that include A shares, and said it wanted to see fewer long-term share suspensions.

Chinese regulators and benchmark providers have been in discussions for several years to smooth out market access issues, but have reached a deadlock over the last remaining hurdles, said two people briefed on the matter.

Quality over quantity

One of the people said MSCI was working around these last issues by reducing the proposed selection of 448 stocks to 169.

“This is a bit of negotiation with the investors on one side telling MSCI what they want to see, and the Chinese regulators on the other side

saying this is what they can offer,” said Daniel Morris, senior investment strategist at BNP Paribas Investment Partners.

“This latest proposal suggests MSCI is taking a quality over quantity approach. This seems like a good start.”

The China Securities Regulatory Commission did not respond to a request for comment, while MSCI declined to comment.

MSCI will hold consultations with investors in the next few weeks and may still struggle to convince many who remain wary of Beijing’s restrictions on capital outflows, some investors said.

“There is still a lot of pushback from investors due to capital outflow restrictions, so I would say the chances of global benchmark inclusion this year are still only around 50-50,” one person closely involved in the discussions on benchmark inclusion said.

Others pointed out that the Connect scheme continues to have operational snags that prevent some investors from using it.

The smaller proposed number of stocks means the weighting of A shares in the index would be just 0.5 per cent if MSCI proceeds in June, meaning around US$12 billion would flow into Chinese shares, Nomura analysts said. China’s equities market is valued at nearly US$8 trillion.

“I do think this time round there is a greater likelihood of inclusion but it is a small selection of stocks and the actual investment amount is very small,” said Yannan Chenye, portfolio manager and head of China research at Chinese asset management giant Harvest Global Investments.

“But inclusion would be very symbolic, meaning global investors would have to look at the China market more closely.” Reuters

Business Daily Tuesday, April 25 2017 9

Greater China In Brief Editorial

Trump resorting to unilateralism with steel probe Washington’s move to probe steel imports could trigger a trade dispute between the United States and its major trading partners, who are likely to take retaliatory steps, the official China Daily said in an editorial yesterday.

The article was the strongest official response yet to U.S. President Donald Trump on Thursday launching an investigation of China and other steel producers for dumping cheap steel products into the United States. The probe could result in efforts by the United States to curb imports that will affect the interests of a number of its major trade partners, including China, it said.

AIIB President Jin Liqun. Lusa

Financial collaboration

World Bank Group, AIIB agree to deepen cooperation The AIIB and the World Bank already have co-financed five projects David Lawder

The World Bank Group and the China-led Asian Infrastructure Investment Bank said on Sunday they agreed to deepen their cooperation with a framework for knowledge sharing, staff exchanges, analytical work, development financing and country-level coordination.

The memorandum of understanding signed at the World Bank and International Monetary Fund spring meetings in Washington comes a year after the two multilateral lenders established mechanisms for cost-sharing and co-financing of investment projects.

Since then, the AIIB and the World Bank have co-financed five projects, supporting power generation in Pakistan, a natural gas pipeline in Azerbaijan, and projects in

Indonesia to rebuild slums, improve dam safety and develop regional infrastructure.

They said in a joint statement that they are discussing more projects to be co-financed in 2017 and 2018.

“Signing this memorandum of understanding fits into our vision of a new kind of internationalism,” AIIB President Jin Liqun said in a statement. “It deepens our relationship with the World Bank Group and sets up the mechanisms through which we can more easily collaborate and share information.”

A World Bank spokeswoman said the knowledge-sharing memorandum was similar to one that was in place during the AIIB’s early development stages, but which ended when the Beijing-based institution was formally launched in January 2016.

She said the new agreement does not specify financing amounts or targets, adding that those will be determined through meetings and consultations to discuss the banks’ respective portfolios.

The AIIB has been viewed as a rival to the Western-dominated World Bank and Asian Development Bank.

The United States initially opposed its creation and is not a member, but many U.S. allies, including Canada, Britain, Germany, Australia and South Korea have joined.

World Bank President Jim Yong Kim told Reuters on Thursday that he wants to push the Washington-based lender’s business model towards harnessing more private capital for development finance.

In a statement on Sunday, Kim said: “Collaboration between development institutions is essential to make the best use of scarce resources, crowd-in the private sector, and meet the rising aspirations of the people we serve.” Reuters

Environment

Nearly 30 steel firms have licenses revoked for violations 292 out of a total of 635 firms in 12 provinces and cities have already ceased production or been shut down completely Twenty-nine Chinese steel firms have had their licenses revoked as a result of long-term production suspensions or failing to comply with state capacity and pollution requirements, China’s industry ministry said yesterday.

The Ministry of Industry and Information Technology (MIIT) released a list of 29 firms that will be removed from its official register of steel enterprises. Most have already stopped producing steel, but some had illegally expanded production or violated state closure orders.

China is now in the middle of a concerted effort to reduce the total number of its steel enterprises by shedding 100 million-150 million tonnes of excess production capacity over the 2016-2020 period and by shutting around 100 million tonnes of low-grade steel production by the end of June this year.

Another 40 steel firms have been asked, according to the statement posted on the website of the MIIT, to make changes in areas such as environmental protection and safety.

The majority of the 40 steel firms were accused of failing to comply with emergency output restrictions during periods of heavy pollution,

and they must fully “rectify” their violations within a prescribed period, the industry ministry said, without giving a specific timeframe.

China set up an official steel firm register in 2009 in a bid to impose order on a chaotic and poorly regulated industry. It blamed ill-discipline and “malicious competition” for undermining the position of Chinese steel companies during price negotiations with major overseas iron ore suppliers.

Before the register was launched, even large-scale state steel producers were not technically authorized

to produce steel, and the industry was dominated by a grey economy consisting of hundreds of low-end private producers.

One of the aims of the register was to help identify the mergers and closures required to meet a target to put 60 per cent of China’s total steel capacity in the hands of its 10 biggest producers by the end of 2015.

However, industry consolidation rates actually fell to 34.2 per cent over the 2011-2015 period, from 48.6 per cent in the previous five-year period, and China has now pushed back the 60-per cent target until 2025.

According to figures published by the official China Metallurgical News earlier this month, 292 out of a total of 635 firms in 12 provinces and cities have already ceased production or been shut down completely.

Metallurgical News also said 18 out of 64 firms in China’s biggest steel producing city of Tangshan have ceased production or been shut down as a result of the latest campaign. Reuters

Unicorns

Ofo’s Zhang sees bike bubble The co-founder of Ofo Inc., China’s biggest bike-sharing start-up, sees a bubble in the industry but says his multibillion dollar business has the scale needed to survive any bust. Ofo plans to expand to 20 countries this year and 200 cities across China, Zhang Siding said Saturday in a Bloomberg Television interview in Zhengzhou, China. He said the company is valued at more than US$2 billion. Ofo’s ubiquitous canary-yellow bikes are among more than 25 services now crowding China’s sidewalks. None are seen as profitable thanks to subsidies and low costs, yet together they’ve raised billions of dollars from venture capitalists.

M&A

TCL’s Li urges Trump to allow his acquisitions TCL Corp. Chairman Li Dongsheng said the Chinese electronics giant is in the final stages of making an investment in a U.S. technology company that would be worth as much as US$300 million and urged President Donald Trump’s administration to allow him to seal the deal. Li said in a Bloomberg Television interview that he expected approval for a separate U.S. deal in November, but since then it has dragged on, without specifying the target company. “I can’t say what it was because until now the American government still has still not approved it, there has been no formal response,” Li said.

Consumption

Hainan duty-free sales exceed RMB25 bln Offshore duty-free shops on the island province of Hainan sold more than RMB25.6 billion (around US$3.7 billion) of goods over the past six years, official data showed.

According to Haikou customs, the two duty-free shops, one in the provincial capital of Haikou and one in the resort city of Sanya, received more than 8 million customers and sold over 32 million items since offshore duty-free sales began in 2011.

The State Council gave Hainan the permission to run a trial duty-free program in April 2011 to help make the island a world-class tourist destination by 2020.

10 Business Daily Tuesday, April 25 2017

Greater China

Safety

Local, global security firms in race along “Silk Road” Officials revealed then that 350 security incidents had occurred between 2010-2015 involving Chinese firms abroad Brenda Goh, Michael Martina and Christian Shepherd

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lobal security companies and their smaller Chinese rivals are jostling for business along Beijing’s modern-day “Silk Road”, the grandiose plan for land and sea routes connecting the world’s second largest economy with the rest of Asia and beyond.

Representing investments of hundreds of billions of dollars, the pet project of Chinese President Xi Jinping is seen boosting economic growth at home, and as positive for everything from steel prices to cement makers.

Security firms also expect to tap the rush, offering to protect thousands of Chinese workers - and the pipelines, roads, railways and power plants they build - as they fan out across the world under the “One Belt, One Road” (OBOR) initiative.

It won’t be easy, however, with executives warning that state-owned enterprises running or planning projects from Africa to Vietnam sometimes prefer to deal with fellow Chinese, treat safety as an afterthought and try to keep costs to a minimum.

“OBOR is a lifetime (of work) for us,” said John Jiang, managing director of Chinese Overseas Security Group (COSG).

The small consortium of security providers was set up early last year and operates in six countries: Pakistan, Turkey, Mozambique, Cambodia, Malaysia and Thailand.

“In eight years’ time, we want to run a business that can cover 50-60 countries, which fits with the One Belt One Road coverage,” Jiang told Reuters.

Chinese personnel are essentially barred under Chinese law, and that

of many host nations they work in, from carrying or using weapons.

Instead, COSG and its rivals usually work with and train local staff and focus on logistics and planning.

In Pakistan, for example, where attacks by militants and separatist insurgents are considered a serious threat, COSG has a joint venture with a local security firm with links to Pakistan’s navy.

The Pakistani army also plans to provide 14-15,000 armed personnel dedicated to guarding Chinese projects, according to local media reports.

The US$57 billion China-Pakistan Economic Corridor, the largest single project under the OBOR banner, envisages roads, railways, pipelines and power lines that link China’s western reaches with the Arabian Sea via Pakistan.

Chinese versus international

Major international security operators hope their scale and experience can convince China’s price-conscious state-owned giants to pay for foreign expertise.

Firms like Control Risks and G4S offer staff with military backgrounds and decades of experience in risky regions around the world.

G4S said it had seen an acceleration of interest in its services since OBOR began gaining traction.

Michael Humphreys, a Shanghai-based partner at Control Risks, said around a third of the security consultancy’s work in China was related to OBOR. Hong Kong-based logistics firm Frontier Services Group, co-founded

by Erik Prince who created the U.S. military security services business Blackwater, announced in December it was shifting strategy to capitalise on OBOR. It plans to set up an office in the

south-western province of Yunnan, which adjoins Southeast Asia, and another base in Xinjiang in China’s west, the starting point for the CPEC project crossing Pakistan.

Smaller Chinese firms like COSG, Shanghai-based Weldon Security and Dewei Security, meanwhile, see their advantage over multinationals in state-owned enterprises’ preference for hiring Chinese to handle sensitive projects.

Only a handful of the estimated 5,800 Chinese security companies operate overseas, with the vast majority focusing on the domestic market.

Key Points Tens of billions of dollars pour into China’s “Silk Road” Security companies compete for projects Chinese firms mostly small, lead teams of locals International rivals see advantage in scale, experience State enterprises sometimes treat safety as afterthought “For Chinese firms, especially with security work, they (state companies) want to speak with another Chinese person. We can also one hundred per cent reflect their thinking when we work,” said Dewei general manager Hao Gang.

No easy sell

Security risks facing Chinese workers abroad are varied and often unpredictable.

Yu Xuezhao, a former soldier working in Kenya for Dewei, is helping to train hundreds of local guards to protect Chinese contractors operating there, including oil giant Sinopec and China Road and Bridge.

Africa, where China invested long before OBOR was formally created, is considered a part of the initiative.

“The most common incidents we encounter are thefts and strikes,” 27-year-old Yu said, speaking from a training compound in the Kenyan capital Nairobi he has managed since 2015. “We train security guards to inspect cars and do ground patrols.”

Events can quickly escalate.

In 2015, for example, an attack on a hotel in Mali killed three workers at a Chinese state firm, leading to calls

by Beijing for beefed up security.

Officials revealed then that 350 security incidents had occurred between 2010-2015 involving Chinese firms abroad.

Such concerns do not easily translate into lucrative contracts, however.

In some cases, security companies are called in to deal with an emergency rather than to coordinate a long-term strategy.

“For a lot of companies, they come to us when they’ve (already) got a problem,” said Humphreys of Control Risks.

“They’ve started the project and they can’t move it forward because they have a labour dispute or someone is throwing petrol bombs at their trucks.”

Hao and other Chinese security executives added that most stateowned enterprises were building their overseas security capabilities from a low base.

“A lot of the larger state-owned enterprises have only just started to go out in the last few years. As such, overseas security work remains a blank space for those firms who had not gone out before,” he said.

Some Chinese experts said companies operating abroad were beginning to think more about the importance of safety.

“This is something Chinese companies need to study more,” said Lu Guiqing, general manager of private builder Zhongnan Group and former chief economist at China State Construction Engineering Corporation.

“When you ‘go out’ safety is the most important. What’s the point if you end up losing people?” Reuters

Business Daily Tuesday, April 25 2017 11

Asia Investment

Asia’s legendary savers could be making more from their cash Banks from Standard Chartered to HSBC Holdings Plc are seeking to tap into burgeoning middle-class wealth to revive earnings Darren Boey

A

sia’s legendary savers are missing out on greater wealth by being too conservative, according to a study by Standard Char-

tered Plc. An average of 39 per cent of “emerging affluent” individuals in seven Asian countries rely on savings accounts to meet their top savings goal, while just 18 per cent use investments in equities, according to figures in the survey released yesterday.

“What came out in the study, which is surprising, is the conservative nature of many of the emerging affluent,” Karen Fawcett, Standard Chartered’s retail banking head, said in a phone interview. “We’re suggesting that with a little more advice, they could be making more money from their hard-earned savings.”

The most extreme example of a cautious approach to saving came from Pakistan, where some 50 per cent of those surveyed said they keep their savings at home in cash, avoiding the banking system altogether, according to the report.

Banks from Standard Chartered to HSBC Holdings Plc are seeking to tap into burgeoning middle-class wealth to revive earnings hobbled in recent years by mounting capital charges as well as regulatory and legal costs.

The “emerging affluent” segment is one of the pillars of Fawcett’s digital-driven strategy to expand Standard Chartered retail business, which accounted for about a third of the lender’s global operating income in 2016. All but 18 per cent of the retail division’s US$4.7 billion of income

last year came from Asia, the bank’s annual report shows.

Gross savings in East Asia and the Pacific amounted to 45 per cent of the region’s gross domestic product in 2015, more than 22 per cent for the European Union and 19 per cent in North America, according to World Bank figures.

Different income ranges were applied to the Asian countries in the Standard Chartered study, which was conducted by research firm GlobeScan. Respondents from China,

for example, came from households with gross monthly incomes of between RMB20,000 (US$2,900) and RMB40,000, while in Singapore, the range was S$5,000 (US$3,580) to S$16,000.

“We’re suggesting that with a little more advice, they could be making more money from their hard-earned savings” Karen Fawcett, Standard Chartered’s retail banking head Fawcett said she defines emerging affluent as a consumer class that is able to set aside money each month to build savings for future goals. By switching from a mostly basic savings approach to a “low-risk wealth management investment strategy,” savers in these markets could boost their returns over a 10-year period significantly, for example by as much as 86 per cent in Hong Kong, according to the report.

“These types of people are big savers,” Fawcett said. “They’ve got very big dreams so they are saving for those big events: buying a house, educating their kids or for their retirement.” Bloomberg News

Trade

Japan steel industry head says concerned at “protectionism” Trump on Thursday launched a trade probe against China and other exporters of cheap steel into the U.S. market Yuka Obayashi

Japanese steelmakers are concerned at “protectionism” by U.S. President Donald Trump, Japan Iron and Steel Federation chairman Kosei Shindo said yesterday, following Trump’s first shot across China’s bows over steel exports.

Key Points Steelmakers to carefully observe U.S. probe over imports Coking coal prices to fall as rail lines resume operations Falling steel prices in China seen as temporary phenomena

Japan is the world’s second-largest steel producer, although Shindo said it was too early to assume a U.S. probe into exporters of cheap steel would draw in Japanese steel makers.

“We are greatly concerned over Trump’s protectionism, although we hear he has softened his tone on some issues with a grasp of reality,” Shindo, who is also president of Nippon Steel & Sumitomo Metal Corp, told a news conference.

“We will need to closely watch his actual policies and negotiations,” he added.

Trump on Thursday launched a trade probe against China and other exporters of cheap steel into the U.S. market, raising the possibility of new tariffs.

Diverging from the Obama administration’s approach to the issue, which relied largely on filing complaints to the World Trade Organisation, Trump ordered a probe under Section 232 of the Trade Expansion Act of 1962, which lets the president impose restrictions on imports for reasons of national security.

Shindo also said he expects coking coal prices to gradually fall as rail lines resume operations in cyclone-hit

Australia, Japan’s biggest supplier, although it could take a while for the supply chain to return to normal.

The price of coking coal - a key steel-making ingredient - has jumped since Cyclone Debbie last month cut rail lines in the world’s biggest coking coal export region.

Japanese steelmakers have bought coking coal from the United States, Canada and China to replace lost

supply from Australia, but are paying nearly double the $150 a tonne price being discussed with sellers for second-quarter supply before the supply disruption.

Shindo also said recent weakness in China’s steel market will be shortlived as domestic demand is “pretty solid”, even as the market digests higher inventories of steel panels.

Reuters

12 Business Daily Tuesday, April 25 2017

Asia Diplomacy

S.Korea presidential candidate Ahn seeks to restart six-party talks on N.Korea U.S. President Donald Trump telephoned the leaders of Japan and China on Sunday to discuss the latest North Korean developments Christine Kim

S

outh Korean software mogul-turned-presidential candidate Ahn Cheol-soo will seek to restart six-party talks aimed at denuclearising the Korean peninsula if he is elected on May 9, he said in a written interview with Reuters.

The six party talks involving North and South Korea, China, the United States, Japan and Russia collapsed in 2008 following a rocket launch

by North Korea.

Tensions have escalated on the Korean peninsula amid fears North Korea could conduct another nuclear test and with Pyongyang threatening

to sink a U.S. aircraft carrier ordered to waters off Korea as a warning to the North.

“While maintaining a two-track policy with sanctions and dialogue and strengthening cooperation with neighbouring countries, I will seek six party talks,” said Ahn, who is currently polling in second place ahead of the elections.

“By resuming the six party talks to resolve the North Korean nuclear problem, before it becomes impossible to resolve the issue, as provisional interim measures, I will pursue a freeze on the North’s nuclear weapons programme, a moratorium on nuclear tests, and return of IAEA inspectors to the North and restoring

monitoring cameras,” he said.

North Korea expelled International Atomic Energy Agency (IAEA) inspectors in 2009 after declaring it was pulling out of the 2005 six-party agreement to freeze its nuclear programme.

“Also four-party talks with North Korea, the United States and China will be sought to establish a denuclearised Korean peninsula and a peaceful regime,” he added.

Ahn, 55, has been recognised for his tougher stance on national security than the liberal frontrunner for president, Moon Jae-in. Ahn has been in second place in polls behind Moon, but has recently at times overtaken the liberal candidate.

On the economic front, Ahn said he would beef up laws to punish white collar criminals, limit pardons for corporate criminals guilty of graft and bring about more “realistic” regulations for

holding companies in order to curb the massive hold conglomerates, called chaebol, have on Asia’s fourth-largest economy.

“Reforming the chaebol is not the goal; it’s a tool and process to achieve the target that is economic development through the recovery of fair market competition,” said Ahn.

“Reforming the chaebol is not the goal; it’s a tool and process to achieve the target that is economic development through the recovery of fair market competition” Ahn Cheol-soo, South Korean presidential candidate

(L-R) Presidential candidates Yoo Seung-Min of the conservative Bareun Party, Ahn Cheol-Soo of the centrist People’s Party, Hong Joon-Pyo of the conservative Liberty Korea Party, Moon Jae-In of the liberal Democratic Party of Korea and Sim Sang-jung of the leftist Justice Party, attend their second joint debate forum for the 09 May presidential election at a TV station in Seoul, South Korea, 23 April 2017. Lusa

He added it was also inappropriate at this time to think about pardoning ex-South Korean leader Park Geun-hye who is currently in a holding facility and awaiting her corruption trial after being impeached over an influence-peddling scandal.

Park’s impeachment triggered the presidential election.

Ahn declined to clarify his stance on whether he would draw up an extra budget if he won the election.

Frontrunner Moon has said he will draft an additional budget worth over 10 trillion won (US$8.83 billion) to boost the economy if he is elected.

Ahn was a top contender for the 2012 presidential election but withdrew his candidacy to consolidate voters against Park, who won.

Trained as a medical doctor, Ahn rose to national fame when AhnLab, a provider of computer antivirus software, became a household name. Reuters

Trade

Thai exports surge far above forecast Imports in March also beat expectations with a 19.3 per cent surge from a year earlier Thailand’s customs-cleared exports surged well above expectations in March, after declining in the previous month, helped by strong demand for rubber and computers, in an encouraging sign for the export-dependent economy still trying to gain a firmer footing.

Exports jumped 9.2 per cent in March from a year earlier after February’s 2.8 per cent drop, commerce ministry data showed on Monday. A Reuters poll expected an annual rise of 1.90 per cent in March.

Shipments are worth about twothirds of Southeast Asia’s second-largest economy.

A global economic recovery and higher oil prices boosted Thai exports in March, said Pimchanok Vonkhorporn of the Commerce Ministry at a briefing.

Business Daily is a product of De Ficção – Multimedia Projects

“Demand from China and India was a record,” she said.

Imports in March also beat expectations with a 19.3 per cent surge from a year earlier, compared with the forecast of a 9.55 per cent increase and February’s 20.4 per cent jump.

The March trade numbers produced a trade surplus of US$1.62 billion, compared with a poll forecast of US$1.72 billion and February’s US$1.61 billion surplus.

Many of the materials Thailand imports are assembled into completed goods and shipped out again. Reuters

Key Points March exports +9.2 pct y/y vs +1.90 pct in Reuters poll March imports +19.3 pct y/y vs +9.55 pct seen in poll March trade surplus US$1.62 bln vs US$1.72 bln surplus in poll Q1 exports +4.9 pct y/y, imports +14.8 pct y/y The commerce ministry aims for export growth of 5 per cent this year after a rise of 0.45 per cent in 2016, the first annual growth increase in four years.

Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Tuesday, April 25 2017 13

Asia Monetary meeting

Japan central bank seen upbeat on growth, gloomy on prices Critics say the central bank cannot sustain the current framework if its price target remains elusive for too long Leika Kihara

B

rightening global growth prospects will allow Japan’s central bank to keep monetary policy steady this week and invest time solving the puzzle of why inflation remains stubbornly low despite a tightening job market and robust economic recovery.

At the two-day rate review ending on Thursday, the Bank of Japan (BOJ) is set to offer a more upbeat assessment of the economy than it did last month as a pick-up in overseas demand bolsters exports and factory output, sources have told Reuters.

But central bank policymakers still have little to cheer about with consumer inflation barely above zero per cent, as soft household spending discourages companies from raising prices.

And looming geopolitical risks, such as escalating tensions over North Korea, overshadow otherwise upbeat prospects for the global and Japanese economies.

“Japan’s economy is recovering and expanding steadily as a trend,” BOJ Governor Haruhiko Kuroda said last week, offering a brighter view than the central bank’s current assessment that a moderate recovery trend was in place.

“But price momentum, while sustained, lacks steam,” he added, signalling anew that the BOJ will maintain its massive monetary stimulus for the time being.

With the economy in good shape, the BOJ is widely expected to leave unchanged its commitment to guide short-term interest rates at minus 0.1 per cent and the 10-year government bond yield around zero per cent through aggressive asset purchases.

Analysts also expect the BOJ to maintain a loose pledge to keep increasing its government bond holdings by 80 trillion yen per year.

Japan’s economy has shown signs of life, as exports rose the most in over two years in March and manufacturers’ confidence climbed to the highest since the global financial crisis a decade ago.

But core consumer prices for February rose just 0.2 per cent from a year earlier, keeping markets doubtful of the BOJ’s forecast inflation will hit its 2 per cent target by March 2019.

At a quarterly review of its longterm projections to be released on Thursday, the BOJ may slightly cut this fiscal year’s inflation forecast but project price growth accelerating steadily toward its target in subsequent years, say sources familiar with its thinking.

“The BOJ’s price forecasts are too optimistic, so there’s a very high chance they will be revised down.

This may happen at its quarterly forecast review in April,” said Kazuo Momma, a former top BOJ economist.

In the current forecast made in January, the BOJ expects core consumer inflation to hit 1.5 per cent in the year ending in March 2018, followed by 1.7 per cent in fiscal 2018.

The BOJ may also offer an analysis on why inflation remains subdued despite a strengthening recovery, either in the quarterly report or at Kuroda’s post-meeting briefing.

The International Monetary Fund called for labour market reforms to solve the conundrum.

“Despite a tightening labour market, wage demands are not stronger than in the past few years and thus

are unlikely to kindle much-needed positive wage-price dynamics,” the IMF said in its World Economic Outlook report last week.

“To attain a durable increase in inflation and growth, a comprehensive policy approach that enhances monetary accommodation with a supportive fiscal stance and reforms to labor market policies is needed,” it said.

After three years of heavy money printing failed to drive up inflation, the BOJ revamped its policy framework last September to one better suited for a long-term war against deflation.

But critics say the central bank cannot sustain the current framework if its price target remains elusive for too long, as its heavy bond buying is already drying up market liquidity.

Reuters

Aviation

New Zealand considering restricting laptops on flights from Middle East There was no specific timeframe for when a decision would be made Alexander Cornwell and Charlotte Greenfield

New Zealand is considering restrictions on laptops and other large electronic devices on flights from some Muslim-majority countries in the Middle East, the country’s prime minister said yesterday.

The new rules would follow similar measures introduced last month by the United States, Britain and Australia.

The New Zealand leader elaborated on comments made by transport minister Simon Bridges, who told Reuters in an interview in Dubai on Sunday that the country’s Civil Aviation Authority (CAA) “is assessing the evidence to determine what is appropriate”.

Prime Minister Bill English told reporters in Wellington that the aviation agency was considering the issue and would make a decision on whether to restrict large electronic items on flights from the Middle East

independently of the government.

“A number of our security partners put those arrangements in place. With this particular proposition there’s a balance between inconvenience for passengers, many of whom live off their laptop on the one hand, but on the other hand it’s making sure that the flying is safe,” English said.

Key Points PM English says aviation agency considering restrictions Move would follow similar steps

by U.S., Britain, Australia On March 25, the United States banned electronic devices larger than a mobile phone from passenger cabins of direct flights from eight countries in the Middle East, North Africa and Turkey, including Qatar and the United Arab Emirates (UAE).

Britain followed the same day with

similar measures, including banning larger electronics on flights from some Middle East countries but not Qatar and the UAE where it instead requested additional security checks.

Additional security measures required by New Zealand would affect passengers flying from Dubai in the UAE and Doha, Qatar, where carriers Emirates and Qatar Airways, respectively, fly direct to New Zealand.

The CAA said in a statement that it was routinely monitoring security screening in international airports.

“The comments by the Minister of Transport in Dubai refer to routine activity at last ports of departure to New Zealand - assurance that security screening meets the expected standards for flights in-bound to

New Zealand,” said Mike Richards, CAA manager of communications and safety.

The agency said there was no specific timeframe for when a decision would be made.

The additional security measures by the United Kingdom, the United States and Australia were made based on intelligence suggesting flights could be targeted for attack.

Last week, Emirates said it was cutting flights to the United States after new restrictions weakened demand.

Bridges said he is scheduled to meet with Emirates Chairman Sheikh Ahmed bin Saeed al-Maktoum this week where he would make clear that New Zealand is open to additional services. Reuters

14 Business Daily Tuesday, April 25 2017

International In Brief CEO comments

HSBC confident can maintain dividend HSBC Holdings Plc is confident it can maintain dividend pay-outs in the foreseeable future and expects to exceed risk-weighted asset and cost-saving targets, the bank’s chief executive Stuart Gulliver said yesterday. Despite earnings pressure, HSBC has retained its dividend pay-out ratio at a higher level in the last few years, at a time when some of its peers including Standard Chartered withheld dividend payment for 2016. The bank may have to move “some thousand roles” from Britain to Paris depending on how the country’s Brexit negotiations with the European Union unfold, chairman Douglas Flint added.

Digital

German IT association sees boost from factories going digital Germany’s telecommunications and IT industry association said yesterday it expects sales of software, hardware and IT solutions to rise by more than a fifth both this year and next year. Industry association Bitkom presented forecasts at the Hanover industrial technology trade fair which forecast turnover will rise by 21 per cent to 5.9 billion euros (US$6.41 billion) this year and a further 22 per cent to 7 billion euros in 2018.

Bitkom represents companies employing a total of 1 million people, more than any other sector in Germany, bar engineering.

Price cap

UK defence minister Fallon says energy markets not working Britain’s ruling Conservative Party will intervene in the energy market if it wins an upcoming election in June because the current system is not working properly, Defence Secretary Michael Fallon said yesterday. Prime Minister Theresa May’s Conservatives have indicated that they will include a cap on energy prices for domestic customers in their election manifesto and Fallon said they were committed to making the markets work better. “There’s not been enough ability for people to switch, we haven’t seen the competition we were hoping to emerge amongst the energy companies,” Fallon told BBC radio.

Wealth gap

The rich are living longer and taking more from taxpayers As wealthier people live longer, they can expect to collect much more from Social Security over their lifetimes than the poor Ben Steverman

W

e’re living longer and longer. Well, some of us.

Age 100 is now an imaginable goal for young people around the world with good health care. The average woman in Japan is already living to 87. Yet many Americans are dying younger and younger. Based on the latest year of data, the Society of Actuaries last fall dropped its life expectancy estimates for 65-year-olds in the U.S. by six months. The health of middle-aged non-Hispanic white Americans is deteriorating fastest.

The result of these trends, according to a new study, is a widening gap between wealthier and poorer Americans. The richest people in the U.S. aren’t just getting several years of extra life, they’re also reaping a financial reward for their longevity – courtesy of the U.S. taxpayer. These trends will be crucial as the new administration and Congress consider any changes to Social Security, Medicare, and other programs. Even tweaks to these programs, from the retirement age to benefit formulas, could affect the rich and poor very differently.

The researchers, a group of 13 prominent economists and health policy experts, tried to figure out how long Americans can expect to live based on their income, focusing on earnings in midcareer, from 41 to 51, and using Social Security data.

The results are stark. In 1980, a 50-year-old man in the wealthiest fifth of the income distribution could expect to live five years longer than

a 50-year-old man in the lowest-income group. By 2010, the gap between them had jumped to 12.7 years.

In other words, the poorest fifth of 50-year-old American men can now expect to live just past 76, six months shy of the previous generation. The richest 50-year-olds should make it almost to 89, seven years longer than their parents’ generation.

The study focuses on men because the researchers considered the data on women less reliable. Women’s move into the workforce over the past 40 years can skew the numbers, for example, because earlier generations of women sometimes had low reported earnings while having a relatively high socioeconomic status. While the researchers weren’t prepared to produce specific estimates for women, though, they were confident that women experienced a “similar if not larger change over time” compared with men, citing a previous analysis.

One important result of this 13-year life expectancy gap: Social Security and other government programs, such as Medicare, are becoming a much better deal for well-off Americans.

Three decades ago, the richest and poorest retirees could expect about the same amount of benefits out of government programs. The richest generally got larger Social Security pay-outs, both by qualifying for higher checks and by living longer.

The poorest got more out of other programs, such as Medicaid and Social Security disability insurance.

Medicare offered about the same benefits to rich and poor.

The math has shifted dramatically.

As wealthier people live longer, they

can expect to collect much more from Social Security over their lifetimes than the poor. This chart shows the growing gap, based on the present value of benefits to a 50-year-old looking ahead, and using 2009 U.S. dollars to account for inflation.

In 1980, a wealthier 50-year-old could expect to collect US$103,000 more than a poor American. Thirty years later, the gap was US$173,000.

“These results suggest that Social Security is becoming significantly less progressive over time due to the widening gap in life expectancy,” the researchers write.

The U.S. retirement system looks more even-handed if you include in the analysis all government benefits received and all taxes paid by Americans after age 50. Still, longer lives are giving the rich and upper middle class a big financial boost, especially through Medicare and Social Security, even as the poorest Americans lose ground.

There are several theories on why the health of wide swaths of the U.S. is getting so much worse while the wealthy are thriving and living so much longer. Some cite rising levels of substance abuse, obesity, and suicide. Others point to the ways economic inequality drive health inequality. The cost of good health care has skyrocketed, even for people who are technically covered by insurance.

Your expected life span is obviously a factor when planning and saving for retirement. The longer you live, the more valuable Social Security is as a safety net to supplement your savings. Life expectancy trends also affect the long-term finances of entitlement programs such as Social Security.

For the moment, the most pressing question is why so many Americans are dying young, and how to stop it.

Bloomberg News

M&A

Luxury retailer Jimmy Choo puts itself up for sale British luxury retailer Jimmy Choo is seeking offers for the company as part of a review of its strategic options to maximise shareholder value, it said yesterday. The firm, which specialises in shoes and accessories, said it had discussed the strategic review process with its majority shareholder, JAB Luxury, which has confirmed it is supportive of the process.

JAB Luxury holds 67.7 per cent of Jimmy Choo, which trades from over 150 stores globally.

Shares in Jimmy Choo, which floated on the London Stock Exchange at 140 pence in 2014, have increased 35 per cent over the last year. They closed Friday at 168.5 pence, valuing the business at 657 million pounds (US$840 million).

Inc mood

German business confidence edges up in April Looking to different sectors, manufacturers were less upbeat than in March German businesses felt more confident in April but were cautious about the future economic outlook, a monthly survey from the Munich-based Ifo institute showed yesterday.

Ifo’s closely-watched business confidence index climbed to 112.9 points from 112.4 points in March, beating analyst expectations to reach its highest level since July 2011.

Businesses were much more confident about the present economic situation but slightly gloomier about the

future outlook, the survey of around 7,000 firms showed.

“The mood in German boardrooms has improved again,” commented Ifo president Clemens Fuest, noting that “the German economy is growing powerfully,” despite the slightly less positive expectations for the coming months.

Looking to different sectors, manufacturers were less upbeat than in March, while retailers, wholesalers and construction firms all saw the mood improve.

“The German economy seems to have entered an almost endless positive cycle,” said analyst Carsten Brzeski of ING Diba bank, pointing to “earlier reforms, low interest rates, a weak euro and strong private and public consumption”.

“Not only the German economy, but the entire eurozone economy could become the positive growth surprise of 2017,” Brzeski went on.

Jennifer McKeown of Capital Economics cautioned that “expectations softened slightly, perhaps suggesting that growth may be nearing a peak”.

But she allowed that “upside risks” to the economic forecasts seemed more likely. AFP

Business Daily Tuesday, April 25 2017 15

Opinion Business Wires

The Times of India The Indian economy will see an over three-fold expansion at US$7.25 trillion by 2030 and clock an average growth rate of 8 per cent over the next 15 years, Niti Aayog vice chairman Arvind Panagariya said. In a presentation made at its Governing Council meeting, chaired

by Prime Minister Narendra Modi and attended by 28 state chief ministers, the government think-tank projected the size of the Indian economy. “Our base GDP is large. If we grow at an 8 per cent average rate for the next 15 years, our GDP will be Rs 469 lakh crore by 2030 (around US$7.25 trillion),” Panagariya said.

Taipei Times Home prices in Taipei (pictured) fell 1.2 per cent last year from a year earlier, but the market has shown signs of stabilization this year as evidenced by a sharp increase in transactions last quarter, global real-estate consultancy Knight Frank said in a survey released last week.

Taipei’s decline bucked the average price increase of 6.6 per cent for 150 global cities tracked by Knight Frank and earned Taipei the 133th berth on the company’s market sentiment ranking, the quarterly survey showed. Taipei’s performance was better than Singapore’s 2.6 per cent fall and Russia’s 15 per cent price correction, the survey said.

The Korea Herald South Korea’s finance minister pledged to step up policy efforts to help Asia’s fourth-largest economy gather upward momentum in the midst of a global recovery. In a meeting with Moody’s officials, Finance Minister Yoo Il-ho (pictured) said the South Korean government will focus its fiscal policies on boosting consumption and investment and make constant efforts to deal with external and internal risks such as household debts, rising trade protectionism and geopolitical issues. He also said the country will manage to carry out sweeping reform in the corporate sector and solidify growth potential by actively coping with structural challenges.

Corporate China needs much better controls

W

hen it emerged last week that China Minsheng Banking Corp. had sold US$436 million in suspect wealthmanagement products, fears rose of a collapse in the loosely regulated market for such products. It now looks like a more mundane case of forgery involving a branch manager. But that’s not exactly reassuring: In fact, it suggests a different kind of systemic risk.

Internal controls -- such as auditing, document verification and risk management -- are part of the dull machinery of financial markets, which most people never notice. Yet such tedious tasks are vitally important. What can start as cornercutting at one business unit can quickly spiral into a threat to the whole company and beyond.

In much of corporate China, weak internal controls are the norm. Banks are reluctant to spend money on database or compliance software.

Forged corporate seals have been used to conduct billions of dollars in seemingly legitimate trading. Nearly 60 per cent of Chinese executives say that unethical behaviour is acceptable to keep a company going or to meet revenue targets.

In short, investors and regulators have reason to worry.

And these worries aren’t merely theoretical. Large thefts or losses from Chinese banks -- ranging up to US$560 million, in one case -- happen with frightening regularity. What makes these cases so egregious isn’t the sophistication and planning that goes into them but the relative ease with which employees walk out the door with stolen yuan in a briefcase. The thefts look less like mastermind plots from a heist movie than like a cartoon.

Many major firms impose few controls beyond what the person in charge says. I know of companies that accept hard-copy reports from regional managers with no auditing to verify information. The data is then entered by hand into basic spreadsheets used to oversee the whole operation. Although foreign investment banks typically store all employee communications conducted on company-issued phones and computers -- and often use artificial intelligence to verify compliance -- in China it remains strikingly common for people to list private e-mail addresses on their business cards.

Without precautions, this kind of thing could become a systemic problem. A bank executive sitting in an office without a strong IT system, risk-management software or internal auditing

“

Christopher Balding a Bloomberg View columnist

department relies solely on reports from provincial managers. When those managers have wide latitude in how they classify loans, and an incentive to downplay their non-performing loan ratios, it’s quite likely that risks will be underestimated by the executives -- not to mention by regulators in faraway Beijing.

Worse, firms copy each other. If one bank gains a competitive advantage by creatively cutting corners -- and seems to get away with it -- others will catch on in rapid succession. The variety of financial companies suffering significant losses because of poor internal controls in recent years suggests that these aren’t isolated incidents.

The good news is that internal controls matter to markets.

Investors seem to be pricing Chinese bank stocks on the low side, expecting additional unpleasant surprises or remaining sceptical of the official story on non-performing loans. And smaller banks, less able to hide losses with lower loan-to-deposit ratios, are showing higher levels of stress than large ones.

Even so, China’s regulators need to do more. For starters, they should require improved financial reporting and auditing. Every Chinese bank that sells shares in Hong Kong readily concedes that regulatory standards -- from loan classifications to accounting guidelines -- are different on the Mainland. The problem at Minsheng was reportedly only detected when the head office got a phone tip, not through internal mechanisms designed to prevent mismanagement. If that’s a problem at Minsheng, which is known for good management and technology, it’s a safe bet that other banks are doing worse.

When Beijing instituted regulations on government travel not long ago, as part of an anti-corruption campaign, it quickly got things under control: Spending has risen by only 0.3 per cent since 2011, and is budgeted to fall in 2017, thanks to improved internal controls. The same could happen in the private sector with better accounting and auditing standards. That would bring more transparency to China’s markets. And transparency will set you free. Bloomberg View

Many major firms impose few controls beyond what the person in charge says

Philstar The Philippine economy is capable of growing by around 7 per cent over the next two years on the back of robust domestic demand as well as a strong recovery in exports, according to the International Monetary Fund (IMF).

“Economic growth is expected to remain robust at around 7 per cent this year and next year led primarily by domestic demand and a recovery in exports,” IMF deputy director for Asia and the Pacific Department Kenneth Kang said. The economy grew 6.9 per cent last year from 5.9 per cent in 2015.

”

16 Business Daily Tuesday, April 25 2017

Closing Legislation

Beijing considers draft law revision to standardization law

Chinese lawmakers yesterday started to review a draft amendment to the Standardization Law, as the country strives to achieve quality-based development.

The draft revision, the first since the law came into force in 1989, was given a first reading at a four-day bimonthly session of the National People’s Congress Standing Committee, which opened yesterday.

“As the country’s economy and social conditions have evolved, some of the law’s existing clauses

are out of date,” Tian Shihong, head of the Standardization Administration of China, told lawmakers.

The draft expands the scope of standards to cover various sectors, including agriculture, industry, service and social programs, as they currently only cover industrial products, construction and environmental protection areas.

It will also integrate mandatory standard systems, focusing on the technical requirements of health and safety, national and ecological security, as well as on the basic needs on the management of society and the economy. Xinhua

Markets

China stocks post worst day this year as regulators tighten grip Stocks have been on a downward trajectory since mid-April

C

hina stocks tumbled more than 1 per cent yesterday in their worst day this year amid signs that Beijing will tolerate further market volatility as regulators increasingly clamp down on shadow banking and speculative trading.

Market confidence also has been hit by an expected flood of initial public offerings which will pump more supply into the weakening market, and by worries that the world’s second-largest economy will start to lose steam in coming months.

“Even the betterthan-expected Q1 data could not boost the market, as investors are concerned about regulatory risks”

rates trended higher, bond and capital markets suffered from sustained corrections and some institutions faced liquidity pressure. But these have little impact to the stability of the broader environment.”

The Xinhua comments quashed lingering hopes that the government will step in to stem a further stock market slide, as it did during a crash in mid-2015.

“You cannot count on the National Team for rescue this time,” said Shen Weizheng, fund manager at Ivy Capital, referring to a group of government-backed investors.

Chinese stocks have been on a downward trajectory since mid-April and have lost nearly 3 per cent this month, wiping out a good chunk of their gains so far this year.

The Shanghai Composite Index

slumped 1.4 per cent to 3,129.53 points -- its worst one-day loss in four months -- after suffering its biggest weekly decline of 2017 last week.

The blue-chip CSI300 index fell 1.0 per cent to 3,431.26.

Daily declines of more than 1 per cent in the indexes have been rare for notoriously volatile Chinese markets this year, though some highly speculative small cap shares have seen wild swings as first speculators, then regulators piled in.

“Even the better-than-expected Q1 data could not boost the market, as investors are concerned about regulatory risks,” wrote Larry Hu, an analyst at Macquarie Capital Ltd, referring to stronger-than-expected 6.9 per cent economic growth early in the year.

He added that “the last thing policy makers want to see amid the Party Congress this fall is a market crash like that in summer 2015. And

Larry Hu, an analyst at Macquarie Capital Recent signs of stability in China’s economy “have provided a good external environment and a window of opportunity to reduce leverage in the financial system, strengthen supervision and ward off risks,” the official Xinhua News Agency reported on Sunday.

“Over the past week, interbank

the outstanding economic performance in Q1 gives them more room to tighten.”

“Market risk appetite could continue to decline if financial regulation keeps tightening,” said Gao Ting, Head of China Strategy at UBS Securities.

“Investors seem to mostly be responding by adjusting their positions, particularly by rotating into high-quality blue-chips.”

Another big concern for investors has been the pace of new IPOs. Up to 500 IPOs are expected to be approved to raise no more than RMB300 billion ($43.57 billion) in 2017, an official with Shanghai Stock Exchange was quoted as saying.

Dozens of newly-listed stocks had lost more than 30 per cent over the past weeks amid tougher regulation and expectations of more equity supply.

Yesterday, 2,620 stocks fell, while only 390 plays rose.

Main sectors fell across the board, led by infrastructure stocks, which dived more than 3 per cent.

Bearish sentiment spread to major investment themes, including Beijing’s ambitious “One Belt, One Road” infrastructure plan to eventually connect China to European markets, and the high-profile new Xiongan Economic Zone near Beijing.

The Shanghai Stock Exchange said it would pay special attention to excessive speculation in stocks related to the Xiongan concept, and would take more stringent regulatory measures if needed to contain abnormal speculative activities that disturb the market. Reuters

Labour safety

Vision

Debt defaults

Bangladeshi workers mark four years since factory collapse

Jack Ma sees decades of pain as internet upends older economy

S.Korea CDS spreads ease as traders stand pat

Thousands of Bangladeshi garment workers staged a tearful demonstration yesterday to mark the anniversary of a factory disaster that killed 1,138 people, demanding justice for the victims and better pay.

Four years later, no one has yet been convicted over the collapse of the Rana Plaza factory complex, one of the world’s worst industrial tragedies.

Another 2,000 people were wounded in the disaster, which sent shockwaves across the world and highlighted the failure of many top Western fashion brands to protect workers in the poor developing countries where their goods are manufactured.

A court last year ordered that Rana and 40 others, including factory officials and government inspectors, should face trial for murder. They are accused of falsely certifying the factory complex as safe.

Thousands of textile workers were forced to enter the building to start their shifts even though some expressed fears after noticing cracks had appeared in the structure.

Bangladesh has 4,500 textile factories, exporting some US$30 billion worth of garments, but only a few hundred of these have been certified as safe. AFP

Alibaba Group Holding Ltd. Chairman Jack Ma said society should prepare for decades of pain as the internet disrupts the economy.

The world must change education systems and establish how to work with robots to help soften the blow caused by automation and the internet economy, Ma said in a speech to an entrepreneurship conference in Zhengzhou, China.

“In the next 30 years, the world will see much more pain than happiness,” Ma said of job disruptions caused by the internet. “Social conflicts in the next three decades will have an impact on all sorts of industries and walks of life.”

Ma, 52, also hit out at the traditional banking industry, saying that lending must be available to more members of society.

Ma also called for traditional industries to stop complaining about the internet’s effects on the economy.

He said Alibaba critics ignore that Taobao has created millions of jobs.

He also warned that longer lifespans and better artificial intelligence were likely to lead to both aging labour forces and fewer jobs. “Machines should only do what humans cannot,” he said. “Only in this way can we have the opportunities to keep machines as working partners with humans, rather than as replacements.” Bloomberg News

The cost of protection against South Korean sovereign debt defaults fell yesterday, reversing a recent expansion in spreads, as traders took a wait-and-see approach ahead of North Korea’s military anniversary and the upcoming presidential election in May. Spreads on South Korean 5-year credit default swaps, the cost of insuring against defaults, have fallen almost 8 basis points to 53/54 basis points from the near 10-month high of 60/61 basis points hit on April 19. That halts an upward trend in CDS spreads since early April as political tensions weighed on confidence in South Korean sovereign debt.

North Korea is set to mark the 85th anniversary of the creation of its military this week, with many speculating that the anniversary could be used to test an intercontinental ballistic missile or even a nuclear device.

A trader in Seoul said many are standing pat ahead of next month’s presidential election and a long holiday weekend also.

“Many are keeping quiet ahead of North Korea’s anniversary, and there’s also a bunch waiting to see the results of the (South Korean) presidential election in May,” a trader in Seoul said. Reuters