Business Daily #1283 April 26, 2017

Free Yacht Scheme becalmed Maritime Page 2

Wednesday, April 26 2017 Year VI Nr. 1283 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Auto industry

Beijing expects to sell 35 million cars by 2025 Page 8

Gaming

www.macaubusinessdaily.com

Funding

Analysts: Minor deceleration prior to Golden Week Page 7

Banking

Chinese authorities to crack down on illegal fundraising Page 16

Dah Sing sees MSAR “on a recovering path” Page 4

Foreign Labour Moving On

Manpower

Fewer non-resident workers in the MSAR. Decreasing by 1,557 to 179,879 y-o-y as at the end of March.

The number of construction workers alone plunged 19.2 pct y-o-y.

Although other sectors hired more non-resident workers in general. Page 3

Catch-22

Macau’s technology market has great potential.

But a lack of personnel is undermining the sector’s development. So says Jason Kei, founder and managing partner of Launcher Capital. Kei believes the Sino-Luso platform may not help the city much in developing innovative business.

DICJ wants more inspectors

Public recruitment The city’s gaming regulator needs more staff.

Even after advertising 55 vacancies. The Bureau cites a burgeoning workload. And says no application has been filed for gaming facilities by luxury hotel The 13. Page 7

Not easy going green

Hotels Local hotels agree. Environmentally friendly measures can boost economic benefits and employee satisfaction. But local academics point to the lack of gov’t regulations and human resources. Resulting, they say, in Mainland VIP’s ‘experience’ concerns as the major obstacle to going green. Page 3

Mainland employment makes the grade

HK Hang Seng Index April 25, 2017

24,455.94 +316.46 (+1.31%) Worst Performers

China Merchants Port Hold-

+3.20%

Industrial & Commercial

+2.20%

China Mengniu Dairy Co Ltd

-0.79%

Hengan International Group

+0.08%

Bank of East Asia Ltd/The

+3.05%

China Petroleum & Chemical

+2.06%

Want Want China Holdings

-0.36%

Hong Kong & China Gas Co

+0.13%

Bank of Communications

+2.87%

Tencent Holdings Ltd

+2.02%

Power Assets Holdings Ltd

-0.36%

Kunlun Energy Co Ltd

+0.14%

Cheung Kong Infrastructure

+2.42%

China Life Insurance Co Ltd

+1.96%

China Unicom Hong Kong

-0.19%

Geely Automobile Holdings

+0.18%

China Resources Land Ltd

+2.31%

China Construction Bank

+1.93%

Belle International Holdings

+0.00%

Cathay Pacific Airways Ltd

+0.18%

23° 27° 20° 24° 21° 22° 23° 25° 24° 27° Today

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

Labour market Sweet music for the economy. A Mainland job report delivered yesterday shows employment figures performing a strong start to the year. With unemployment put at 3.97 pct. Page 8

Investment Page 6

2 Business Daily Wednesday, April 26 2017

Macau E-government

ID Bureau launches e-payments for kiosks

for applications for the Certificate of Criminal Record, renewal of permanent resident identity card, the Macau SAR Passport, the Macau SAR All self-service kiosks of the Identification Travel Permit, the Visit Permit to HKSAR and Service Bureau now accept e-payments for the Certificate of Personal Data. In addition, application fees for issuance of government documents, according to a press release by the citizens can use other payment methods such as cash and credit cards or debit cards issued Bureau. by the Bank of China Macau Branch or Banco The announcement declares that citizens can Nacional Ultramarino to pay application fees at now use UnionPay QuickPass and Macau Pass to pay application fees at the self-service kiosks service counters.

Maritime

Free Yacht Scheme in the doldrums

F

ewer than 10 yachts have applied to enter the city under the Zhongshan-Macau Free Yacht Scheme since it was implemented last November, said the Director of the Marine and Water Bureau, Susana Wong Soi Man, yesterday.

“The number of applications remains in single digits. We only received one or two applications after the launch day,” the official

told reporters yesterday, as quoted by broadcaster TDM Radio.

According to Ms. Wong, the low popularity of the scheme was due to the high costs for yachts entering the MSAR and vice versa.

“As the public may have known . . . the declaration charges or deposit fees for yachts entering China may be a barrier, whereas yachts from China entering Macau can only depart from Shenwan Port

in Zhongshan and the declaration charges are relatively high, too,” she said.

In February, the Director said only seven yachts had been approved to sail to the city under the scheme.

The official said yesterday that the two governments will negotiate to improve the current hardware and software of the scheme.

Currently, Macau has 77 berths available, of which 50 are near Seac

Pai Van whilst the other 22 are at Macau Fisherman’s Wharf.

On the other hand, Ms. Wong said the government has not yet confirmed the opening date of Pac On Ferry Terminal whilst assuring it will take place within this quarter. According to the official, ferry operators are decorating the venue while other preparations for the operations are also being undertaken.

Infrastructure

Luxury

High hopes for commencement of Seac Pai Van water plant

‘Narrowing declines’ in diamond market

Local sole water distributor Macao Water Supply Co. Ltd. hopes the final proposal for the new treatment plant in Seac Pai Van can be confirmed by the government in the near term so that construction can start this year, according to its Director, Nacky Kuan Sio Peng.

According to Ms. Kuan, the company’s opinions on the plant have been submitted to the authorities.

The new plant, first proposed by the water distributor in 2014, is divided into two phases with an initial budget of around MOP1 billion to MOP1.5 billion whilst the construction of the plant was initially slated to commence in 2016.

The Director admitted yesterday that the company is planning to adjust its service fees for water supply

in order to afford the billion-pataca project.

But she guaranteed that future adjustments in water supply fees will not have any direct impact upon local residents, adding the adjustments will depend upon investments that the company can attract for the project.

Meanwhile, the company executive revealed that the city’s water consumption registered a four per cent increase this quarter compared to last year’s, which is higher than expectations.

She predicted growth will stabilise in the second half of the year, anticipating that the total water consumption of the territory will increase by 3 per cent to 4 per cent for the whole of 2017.

The diamond market in Macau is recovering from its declines, according to miner Petra Diamonds, as announced along with their third fiscal quarter results. The company notes that ‘we continue to witness further evidence of improving retail demand,’ pointing in particular to ‘encouraging trends in Mainland China, as well as narrowing declines in Hong Kong and Macau.’

Overall, the group notes ‘signs of stabilisation in the rough diamond market’ as well as ‘steady demand across all size ranges.’

The company operates mines in South Africa and Tanzania and is exploring diamond deposits in Botswana and South Africa.

During the quarter, ended March 31, the group saw production hit

999,768 carats, slightly down from the same quarter the previous year, with revenue hitting US$119.1 million (MOP952.8 million), a 1 per cent drop year-on-year.

Non-industrial diamonds, not mounted or set, imported into the MSAR last year were worth MOP36.33 million, according to data from the Statistics and Census Service (DSEC), and totalled 2,648 in number, weighing about 2 kilograms. Of the total, 89.2 per cent originated from South Africa.

According to De Beers Diamond Insight, in April of last year, 17 per cent of the world’s polished diamond consumption occurred in China, Hong Kong and Macau, while 45 per cent was taken up by the United States. K.W.

Business Daily Wednesday, April 26 2017 3

Macau Security

“Increased oversight” drives up complaints against PSP

told Business Daily. In its 2016 annual report, the Disciplinary Committee said The increase in the number of complaints it had received 64 complaints relating to the misconduct of the PSP, a 63 per cent to the Security Forces Disciplinary Committee (CFD) regarding misconduct increase year-on-year.

According to the Secretary’s Office, and abuse of power by the Public enhanced co-operation between police Security Police Force (PSP) in 2016 was primarily due to an ‘increased oversight’ departments and CFD also boosted the by the security department of its officers, growth in complaints against local police officers. N.M. the Office of the Secretary for Security

Labour

Stabilising working hands The MSAR registered a total of 179,879 non-resident workers in March of this year, down from a year ago, but up from a month ago Nelson Moura nelson.moura@macaubusinessdaily.com

A

total of 179,879 non-resident workers were working in the MSAR as at the end of March this year, a decrease of 1,557 workers compared to the same month of last year, according to official data released by the Labour Affairs Bureau (DSAL).

On a month-on-month comparison, the number of overseas workers, however, increased by 1,057 compared to 178,822 workers registered in February.

The hotels and restaurants sector was the largest employer of non-resident workers, hiring 50,019 workers as at the end of the month, a yearon-year growth of 5.4 per cent, yet a month-on-month decline of 84 workers.

The construction industry was the second largest, with 35,337 non-resident workers, a decrease of 19.2 per cent year-on-year, but an increase of 751 workers month-on-month.

Meanwhile, some 25,728 non-residents worked as domestic helpers as at the end of the month, a 7.5 per cent increase from last year, but a

Hotels

The Great Wall of green policies Local hotels say Mainland China guests visiting the city for gambling consider green policies negative to their customer experience Nelson Moura nelson.moura@macaubusinessdaily.com

Major obstacles for local hotels to implement environmental management policies are the lack of government regulations, human resources, financial constraints, and concerns that the policies will impact VIP guests from Mainland China, a survey conducted by academics from the Institute for Tourism Studies (IFT) and the University of Macau (UM) found.

The report sought to analyse ‘environmental awareness, initiatives and performance in the Macau hotel industry’ with the results based on questionnaires filled in by 31 local hotels and face-to-face interviews with 11 hotel managers, facilities managers and engineers.

According to the report, although the majority of hotels considered that implementing environmental policies in their properties was important they were concerned that these polices would affect their primary

guest: visitors from Mainland China with gambling as their main priority.

‘Respondents said [Mainland China] customers usually have relatively little green mindset and are afraid that green initiatives will compromise their luxury experience,’ the report reads.

Another main obstacle for implementing sustainable policies - especially for smaller hotels - is the lack of human resources.

The report notes that the ‘very tight labour market’ and a ‘high turnover rate’ of guests restrict ‘lower stars’ hotels from implementing green policies.

In terms of government policies, larger hotels consider that the current Eco Fund support system - set at maximum MOP500,000 (US$62,377) - was insufficient to alleviating some of the expenses for implementing green policies.

Cutting costs

Of those hotels interviewed, 61 per cent are 4-star or 5-star properties, while 42 per cent have more than 300 rooms.

The majority of hotels claim they agree that environmentally friendly polices have economic benefits and will improve employee satisfaction, although most of the initiatives applied by the properties are due to cost reduction.

Of the interviewed properties, around 96.8 per cent said they applied measures such as using energy conservation light bulbs, reducing water waste or implementing more efficient packaging.

drop of 74 month-on-month.

Workers in the wholesale and retail trade business amounted to 20,040, up 3 per cent year-on-year, while those in real estate or other industrial and commercial services amounted to 19,107, a growth of 5.8 per cent year-on-year.

In addition, the city’s culture, entertainment, gaming and other activities sector saw a slight increase in the number of non-resident workers, up 0.5 per cent year-on-year to 13,757. According to DSAL, the sector included 1,193 construction workers

directly recruited by the city’s gaming corporations.

According to DSAL, a total of 2,846 applications for work permits for 16,161 non-residents were filed in March, of which nearly 64 per cent of applicants have been authorised to work in the MSAR. In terms of origin, the majority of the city’s non-resident workers came from Mainland China, at 115,020, accounting for 64 per cent of the total, of which the majority served in hotels, restaurants, and construction.

The number of workers from Mainland China decreased by 1 per cent year-on-year. But compared to February, the number represents an increase of 1,192 workers.

Meanwhile, some 5,692 workers from Hong Kong were employed in the territory as at the end of the month, down by a third from the same month of last year when there were 8,461 Hong Kong citizens working in Macau.

Workers from the Philippines and Vietnam amounted to 27,186 and 14,849 in March, which increased by 8.6 per cent and 0.2 per cent yearon-year, respectively. These workers primarily worked as domestic helpers in the city, together making up 82 per cent of the sector’s total.

4 Business Daily Wednesday, April 26 2017

Macau Opinion

Banking

Dah Sing: ‘Balanced view’ on growth José I. Duarte*

Questions minus answers The Chief Executive went last week to the Legislative Assembly for a Q&A session.

Among the statements he made was a reference to the future population growth of Macau. According to the CE, Macau should reach 710,000 inhabitants by 2020. As much as we can gauge he did not elaborate upon the consequences of that forecast, should it materialise. Still, it deserves more attention than what it got.

Macau had, in round figures, 645,000 inhabitants at the end of last year. Assuming the end of 2020 as the forecast target point, we are talking about a rise of 65,000 people in a period of four years, corresponding to a growth of roughly 10 per cent in the total number of inhabitants.

Assuming the continuation of recent population trends for births and deaths, the ‘internal’ net population growth will hover around 5,000 people per year. That means, in rough terms, an increase of around 20,000 new ‘locals’ in the coming four years. The unavoidable consequence is that the remaining 45,000 people must come from elsewhere.

The new arrivals’ legal status is likely to be, for the most part, that of non-resident workers. The number of which stood at about 177,000 at the end of 2016. Therefore, the forecast increases the number of non-resident workers to more than 220,000 by 2020. They will represent, then, almost one-third of the total population.

These rough calculations should be enough to prompt some questions. If confirmed, such changes will impact local society in countless ways.

Some concerns are evident, others less so. Regardless, it is clear we are not dealing, in demographic and social terms, with trivial figures.

The first question we should ask is whether these figures are congruent with the expected investment and economic growth trends, and fit the anticipated needs of the various economic sectors.

Then, these people need to live somewhere. Their arrival will influence real estate and possibly affect those already living here. Will there be enough housing units, either from the existing stock or under construction? Is their typology adequate and affordable for those living and working here? What effects on traffic and congestion can we anticipate? Further, most of the new arrivals will be of working age. Broader issues concerning the functioning of the labor market and social integration matters might need additional attention.

It is somewhat unfortunate that no-one used the occasion to start the necessary debate. *economist and permanent contributor to this newspaper.

The MSAR economy looks ‘set to continue on a recovering path,’ notes banking group Dah Sing in its annual results, basing its ‘balanced view’ on ‘some opportunities for growth’ throughout the year, according to its filing with the Hong Kong Stock Exchange.

The 2.5 per cent dip in profits seen during the year, amounting to HK$2.14 billion (US$266.5 million), was contributed to by the ‘lower retail securities trading volume’ of the group’s Banco Comercial de Macau (BCM) operations, given a less optimistic stock market outlook ‘compared with the more buoyant market sentiment’ in 2015.

In addition, ‘lower lending-related fees including syndicated loan fees’ affected BCM’s performance during the year in which it operated 14 branches throughout the MSAR. Net profit for BCM, however, was still up 1 per cent year-on-year and ‘deposit growth was broadly diversified, with the growth in low cost current and savings deposits and tight control on fixed deposit cost contributing to the improvement in the overall cost of funds,’ notes the group. Growth in its loan portfolio was driven by mortgage loans, commercial lending, working capital finance and syndicated loans.

Dah Sing Chairman David Shou-Yeh

Wong is also the Chairman of BCM, as well as of Macau Insurance Company Limited (MIC) and Macau Life Insurance Company Limited (MLIC).

Recently, the Monetary Authority of Macau published a note stating it was ‘highly concerned’ about reports of alleged bid rigging by insurance companies in the MSAR. The announcement most likely refers to reports that MIC’s CEO had allegedly during an internal meeting requested staff to have “more under-the-table co-operation” with other insurance companies as well as “negotiations with other companies for reinsurance,” as noted by Apple Daily. K.W.

Infrastructure

Bridging distances China Railway is paving the way and the roads for increased revenue ensuing from infrastructure projects in Mainland China and abroad, with the completion of the main sections of the Hong KongZhuhai-Macau Bridge in its 2016 portfolio Sheyla Zandonai sheyla.zandonai@macaubusiness.com

China Railway Group Limited recorded revenues of RMB632.85 billion (MOP734.6 billion/US$91.8 billion) for the whole year of 2016, according to its annual report filed with the Hong Kong Stock Exchange.

Compared to RMB590.2 billion a year earlier, the group’s annual revenue represents an increase of 5.5 per cent as the company noted it has ‘achieved new heights in key economic indicators with the value of new contracts breaking through

the RMB1 trillion mark.’

Gross profits of the group also posted an increase of 2.3 per cent, to RMB49.78 billion for the whole year of 2016 from RMB48.68 billion in 2015.

China Railway is currently involved in the construction of segments of the Hong Kong-Zhuhai-Macau Bridge, noting in its report that the main sections of the bridge were connected in 2016.

According to the company, its infrastructure construction business, mainly derived from the construction of railways, highways, municipal

works, and urban rails, continued to be its most important business segment. It accounted for 84.2 per cent of the total revenue of the group.

In terms of revenue, infrastructure business reached RMB559.22 billion, up 2.8 per cent from RMB544.2 billion a year earlier. The company also noted that it had closed deals of some RMB982.72 billion in new contracts during 2016, representing a 27.8 per cent increase year-on-year.

Among the company’s infrastructure developments, highway constructions – in which the company includes its works for the Hong Kong-Zhuhai-Macau Bridge – reached new contracts worth a total of RMB126.19 billion, representing a 40.4 per cent year-on-year increase.

Other national and international large-scale projects of the company, which claims to be ‘a pioneer of implementation of the One Belt, One Road initiative,’ comprise the Shanghai-Kunming High Speed Railway, the Shenzhen Metro Line 11, and the Addis Ababa-Djibouti Railway.

Greater Bay Area

Silicon Valley Bank opening new branch in Shenzhen SPD Silicon Valley Bank is betting on the development of the Guangdong-Hong Kong-Macau Greater Bay Area, China Daily reported.

The bank, headquartered in Shanghai, is planning to open a branch in Shenzhen in the Summer of 2018, pursuant to a memorandum it signed with the Shenzhen Government last Thursday, said the news media. ‘[The Greater Bay Area] is definitely possible to become the cradle of a Chinese Silicon Valley,’ said Dave Jones, the bank’s President, as quoted

by China Daily.

The company executive was speaking at the 2017 China (Guangdong)-U.S. Investm e n t C o - o p e ra t i o n C o n f e rence in Guangzhou last week.

SPD Silicon Valley Bank focuses mainly on venture capital-backed innovation companies, and is planning to initially invest RMB100 million (MOP116.48 million/US$14.52 million) as the start-up capital for its Shenzhen branch.

The bank’s President highlighted e-commerce, life sciences, and mobile technology such as drones

and electric vehicles as some of ‘the hottest areas’ into which venture capital is being channelled today.

The Bank is a joint venture between Shanghai Pudong Development Bank Co., Ltd. and Silicon Valley Bank (SVB), claiming itself to be the first technology and innovation bank in China serving as an independent legal entity.

Its target clients include companies working in hardware, software, the Internet, mobile, consumer technology, life sciences, biotechnology, and clean-tech sectors. S.Z.

Business Daily Wednesday, April 26 2017 5

Macau

Aviation

Opportunities in e-commerce for air cargo Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

T

he push to invest in e-commerce in diversification attempts for some of the top airline operators out of the Mainland is bearing more fruit for those pursuing it more aggressively, as seen with main aviation companies China Eastern and Air China, who are basing not only their passenger transportation business diversification attempts on e-commerce platforms and synergies but also their cargo businesses.

Both airlines operate out of Macau, with Air China holding a 66.9 per cent stake in local airline Air Macau and China Eastern operating international flights directly to the MSAR, according to each company’s 2016 annual results.

Given the increasingly “fierce market competition, the air cargo transportation industry has relatively underperformed” notes China Eastern Chairman Liu Shaoyong, claiming

that the group saw 2.2 per cent average annual growth in the cargo and mail traffic volume in 2016 compared to 10.4 per cent annual growth in the number of passengers carried.

Going from this, the group’s Vice Chairman and President, Ma Xulun, points out that in response to an environment in which “traditional cargo aviation suffered greater impact with the possibility of corporate combination by logistics and courier companies” the group should look to “the rise of cross-border e-commerce . . . [to provide] . . . chances for traditional air cargo transportation to transform.”

The 7.92 per cent drop in the group’s cargo and mail traffic revenues yearon-year, at RMB5.98 billion, came despite a 0.2 per cent increase in cargo and mail traffic volume, hitting 4.87 billion tonne-kilometres, and made up 6.67 per cent of the group’s traffic revenues.

Updraft

Air China also faced a “sluggish” market during the year, according to its

Chairman Cai Jianjiang, with “challenges getting even more severe” although the group saw an increase during the year of 6.29 per cent in its cargo and mail volume, coupled with a 4.62 per cent increase in revenue from the sector, hitting RMB115.15 billion.

Cai noted, however, that during the year it had “accelerated its co-operation with couriers and e-commerce companies, which laid the foundation for diversified development”. The company currently operates 15 cargo aircraft and owns a 51 per cent stake in Air China Cargo – whose revenue last year hit RMB9.02 billion, after suffering a 2.24 per cent decrease in cargo and mail transportation revenue.

Nevertheless, its profit contribution to Air China saw a 23.72 per cent yearon-year increase, at RMB11 million, in the wake of it refocusing on couriers and e-commerce companies.

Air cargo and mail revenue contributed by the Macau, Hong Kong and Taiwan segment to Air China,

however, still underwent a 9.46 per cent drop, to RMB262.79 million, making up just 3.16 per cent of the group’s overall revenue, shrinking from 3.44 per cent in 2015.

The gross weight of air cargo exported from the city over the course of last year saw a 20.5 per cent increase year-on-year, more than double the growth of cargo in transit, with exports reaching 19,622 tonnes and transit hitting 6,842 tonnes, according to data from the Statistics and Census Service (DSEC). Imported air cargo, however, saw a 13.3 per cent year-on-year decrease, to 6,427 tonnes.

Air China recently announced it would be pursuing mixed-ownership reform of its air freight logistics via its controlling company China National Aviation Holding Company (CNAHC) following the central government’s announcement that it would be pursuing a project to open state-run companies to private capital under the mixed-ownership reform.

6 Business Daily Wednesday, April 26 2017

Macau

The second edition of the Bank of China Trophy One Million Dollar Macao Regional Entrepreneurship Competition took place at the University of Macau yesterday.

Investment

Dream big A Hong Kong investor perceives Macau’s potential in the technology market to be bigger and wider when compared to Hong Kong Cecilia U cecilia.u@macaubusinessdaily.com

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acau’s technology market has great potential to grow despite its small size, said Jason Kei, a Hong Kong investor attending the second edition of the Bank of China Trophy One Million Dollar Macao Regional Entrepreneurship Competition at the University of Macau yesterday.

“Macau is open to discovering or considering markets in Mainland China, such as joining the Greater Bay Area Plan,” said Mr. Kei, founder and managing partner of Launcher Capital, which is said to have invested in Wechat - a social media mobile app developed by Tencent Holdings Limited.

The investor perceives innovative businesses, in particular those related to technology, have worldwide potential, as such “it is more reasonable to consider the markets outside . . . Most big companies come from Mainland China and the United States because the [domestic] markets of these two regions are already big

...The size of their local markets are big enough to take up more of the world’s market percentage,” said Mr. Kei. The Hong Kong investor pointed out a lack of personnel in Macau is the city’s weakness in developing its technology sector.

“The weakness for Macau is the shortage of professionals, making [local entrepreneurs] locate their factories or office to places like Zhuhai or Shenzhen,” explained Mr. Kei, adding the city’s high property prices pose another disadvantage.

Meanwhile, the Hong Kong investor reckons Macau’s role as the platform between Mainland and other Portuguese countries may not help much in the development of innovative businesses.

“I have talked to some MSAR officials and they say the finance sector in the city is really small,” revealed Mr. Kei, commenting that Shenzhen would be the strongest competitor in the finance market within the Greater Bay Area.

He explained that the innovative market cannot be forcibly controlled, unlike the finance industry that can

be monitored by policies such as limiting the approval of licences.

However, the businessman perceives that Macau can focus on special finance development, in particular the city’s greatest areas such as financing gaming, tourism and Portuguese related businesses.

The competition

Christopher Chang Wan Chong, a participant in yesterday’s competition, said he hopes to gain more exposure for his company by participating in the competition.

The company, named Hazalyst Medical R&D Co. Ltd, engages in providing clinical data analysis service related to Chinese medicine.

With the medical data of 20 million Chinese from Taiwan, Mr. Chang and his partners are seeking opportunities in Mainland China.

“We know it’s always difficult for Taiwan to make direct contact with Mainland China due to the political difference,” said Mr. Chang. “Through us in Macau, we would serve as a linkage [for the two regions].”

The competition is organised by the Hong Kong University of Science and Technology and is hosted by the University of Macau (UM).

The Head of the Student Counselling Section of the Student Affairs Office of UM, Elvo Sou Kuai Long, said this year’s edition has attracted more groups of participants, comprising students from different universities.

“Last year’s [competition] had groups that comprised students from the same universities,” said Mr. Sou.

“This year we can see students from different universities grouping themselves and joining the competition.”

He also pointed out that more groups of participants have established their own companies this year.

Yesterday’s event is the Macau regional final of the One Million Dollar Entrepreneurship Competition, a competition organised by the Hong Kong University of Science and Technology (HKUST) since 2011.

The competition looks to promote entrepreneurial culture and discover potential business plans, with this year’s edition taking place in five regions – namely, Macau, Hong Kong, Guangzhou, Shenzhen and Beijing.

By comparison, other regional competitions invite participants from all sectors.

The Macau regional final will see 12 local teams - composed of local tertiary students of higher education institutes or local residents studying in higher education institutes overseas - present their business proposals and make a quick sales pitch, known as an ‘elevator pitch.’

Prizes for the first, second and third placed team are set at MOP50,000 ( US $ 6 , 243 ) , M O P 30 , 000 a n d MOP10,000, respectively, with a MOP5,000 prize to be handed to the Best Trade Show and Best Elevator Pitch winners.

The three winning teams will compete for a MOP1 million start-up fund against winners from the other regional finals in the final stage of the competition to be held in Nansha, Guangzhou, in August.

Corporate

ANZAC Day Remembrance Service held

On Tuesday April 25, around the world, Australians and New Zealanders came together to remember the ANZAC landing at Gallipoli in WW1 in 1915. The dreadful loss of life suffered has brought an enduring friendship between the two countries and the term “ANZAC” has come to play a significant role in the cultures of both Australia and New Zealand.

The word inspires thoughts of mateship, respect, remembrance and appreciation of the sacrifice of service people who have fought in all wars.

Macau was no different with between 40 and 50 guests primarily from Australia and New Zealand attending an ANZAC Remembrance Service hosted by the Australian Chamber of Commerce. The event also included official representatives of the Australian Government by way of Mr. Will Ewing and the New Zealand Government by way of Mr. Svar Barrington. The service included a formal ANZAC Day Address by Samantha Birkwood and an address on the spirit of ANZAC by Mr. Will Ewing.

The Australian Chamber of Commerce, Macau based

members Chair, Patrick Liu, said he was delighted at the strong turnout for the event which was held at MGM. Mr. Liu said that it was important to remember that WW1 was remembered as the “war to end wars” yet this has not proved to be the case over the ensuing 100 years, particularly with recent conflicts in the Middle East and current tensions on the Korean Peninsula. Mr. Liu said

that this meant that the Service today was “as relevant as ever.”

The Service was followed by a breakfast, which is another one of the great ANZAC traditions.

There was also a dawn ANZAC Service held in Taipa for Australians and New Zealanders with some attending both events.

Business Daily Wednesday, April 26 2017 7

Gaming Oversight

DICJ: Still understaffed after new hires Oversight body has yet to receive request for casino at The 13 Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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espite the new hiring being implemented by the Gaming Inspection and Co-ordination Bureau (DICJ) in order to boost the number of inspectors it has to oversee casino operations in the territory, even the newest batch of entrants will not increase the numbers sufficiently, DICJ noted in a response to Business Daily enquiries.

‘Even with the addition of the new hires, we think the staffing level has still not yet reached the ideal level in respect to the rapid growth in our workload,’ notes the oversight body in its response.

Currently, no fixed date is set for these new hires to enter the Bureau’s workforce, as it must still pass through the ‘interview and other

administration procedures’ phases, with applicants having already gone through both document submission and written exams.

Once these are complete the list of candidates will be announced, notes the Bureau.

The group states that it will continue to make the ‘effort to re-organise our manpower allocation’ as well as to ‘streamline our work process so as to stay in line with the MSAR Government’s promotion of “streamlining administration”,’ notes the group’s response.

So far this month a total of 18 job vacancies have been announced in the Official Gazette by the DICJ, while in the month of March 37 vacancies were announced. While information from the Labour Affairs Bureau (DSAL) shows that at the end of the first quarter of this year a total of 179,879 non-resident workers were

plying their trade in the MSAR, the DICJ informed Business Daily that the Bureau does ‘not employ any non-resident workers.’

In addition, the group notes that its review of the junket operators in the city – the Junket Accounting Audit 2017 – kicked off in February of this year, stating ‘audit work on over 60 licensed junket promoters have been started’. The review of the 126 licenced junket promoters is expected to ‘be finished by the end of this year,’ notes the Bureau.

Regarding enquiries into a potential casino operation at The 13, the oversight body notes that it ‘has not yet received any one of the gaming concessionaires requesting to open a new casino in The 13 Hotel location.’

According to the company’s Hong Kong Stock Exchange filing on April 3, it is ‘now in the process of obtaining necessary licences for the operation and pre-opening preparation of the Hotel. It is anticipated that the Hotel will be opened by the end of July 2017.’

Trends

Aegis Capital: Q2 revenue growth to mark peak Meanwhile, the gaming industry is experiencing a minor deceleration in revenue as Golden Week approaches, said gaming analysts Aegis Capital Corp. sees the city’s gaming revenue growth marking the peak this quarter as boosted by the notable increase in revenue derived from the VIP market.

The firm’s analyst, David Bain, said in a research note on Monday that local gaming revenue growth may exceed 18 per cent year-on-year for this quarter, as a result of which the VIP market may surge by over 24 per cent year-on-year in revenue while the mass market is expected to see growth of at least 9 per cent year-on-year.

“We base our VIP or mass forecast on a 100 basis point VIP versus mass mix decline from 1Q17 with overall GGR slightly below month-overmonth historicals. VIP growth was -16 [per cent year-on-year] in 2Q16 while mass table revenue was flat,” the analyst explained.

But Mr. Bain added that the projection suggests this quarter’s gaming revenue would be down by 4 per cent compared to the first quarter of this year. During the first three months, the industry generated some MOP35.5 billion in revenue from VIP

Baccarat, up 16.8 per cent year-onyear, according to the official data of the Gaming Inspection and Co-ordination Bureau.

Forecasting VIP growth will maintain solidity in the third quarter and mass market growth will bottom but outpace VIP in the last quarter, the analyst raised his estimates for the whole year of 2017 from a growth of 9 per cent to that of 11 per cent year-on-year, expecting VIP growth will amount to 14 per cent and mass market growth will reach 8 per cent.

Pre-Golden Week calm

Another note from the firm notes the city is seeing a minor deceleration in revenue prior to Labour Day Golden Week starting next Monday.

“We expected minor [gross gaming revenue] deceleration as we [are] near the Golden Week holiday and as we came off the long Easter weekend holiday which benefited [Hong Kong] traffic to Macau,” the same analyst wrote.

According to Mr. Bain, April’s gross gaming revenue growth is currently trending at 17 per cent.

Citing reports and checks saying room bookings for the Golden Week holiday “are strong” the analyst believes revenue in May will post an increase of between 16 per cent and 20 per cent year-on-year.

Telsey Group holds a similar view, noting indications from sources from the past week “are perhaps somewhat less meaningful than the month taken in total, although we believe the data points to support of an ongoing positive trend line.”

In his latest note on Monday, Telsey analyst David Katz expects this month’s gaming revenue is running up from 16 per cent to 18 per cent, a decrease from 22 per cent a week ago.

“We believe the data point’s importance is diminished for two reasons.

First, our sources indicate that the noted deceleration in GGR volume is the result of an expected lull ahead of the forthcoming Golden Week, which should re-accelerate this Friday,” he opines.

“The important holiday periods are integral to defining the trends of the market. Second, there are indications of table hold percentage driving results at different properties in both directions, which clouds the underlying current trends in the market,” the analyst added, claiming the firm is comfortable with its current estimates.

In Brief Gaming

Sands China appoints new CFO Gaming operator Sands China Ltd. has appointed Dave Sun MingQi as its Chief Financial Officer and Senior Vice President, according to a filing with the Hong Kong Stock Exchange on Monday. Initially appointed as a Director of Finance of the company in August 2007, Mr. Sun was promoted to the position of Senior VicePresident of Finance in 2013.

Mr. Sun was responsible for managing financial strategy and financial planning and analysis at the company at that time, in addition to overseeing the company’s accounting, treasury, tax and information technology functions. He was also said to have ‘played a key role in managing the company’s initial public offering in 2009.’

S.Z.

Appointment

IGT appoints new SVP for Gaming Portfolio Gaming company International Gaming Technology (IGT) PLC has appointed Fabio Celadon as its Senior Vice President for Gaming Portfolio, according to a press release by the company. Mr. Celadon previously served as Managing Director of IGT Greater China and Senior Vice President of IGT International. He was responsible for managing the company’s lottery, sports betting and mobile gaming business and operations in Greater China.

Taking up his new position, he will be in charge of five main areas: technological advancements and market and competitive trends; global research, development, and delivery consolidation, and related allocation of budgets and resources; content portfolio evolution; hardware and content roadmaps consolidation and execution; and product performance and results. N.M. Expansion

City of Dreams Manila plans non-gaming expansion City of Dreams Manila could have an expansion on the cards, according to Melco Resorts & Entertainment’s partner in the venture, real estate developer Belle Corp.

As reported by local media, the company’s ViceChairman Willy N. Ocier, aside from noting that City of Dreams Manila is fully operational, said it’s exploring opportunities to develop a 8,500 metres across from the site of the current property, to be used for more non-gaming facilities. The company plans to submit a licence application to the country’s gaming regulator Pagcor but is unsure whether it will be granted.

8 Business Daily Wednesday, April 26 2017

Greater china Labour market

Unemployment rate falls below 4 pct at end of Q1 There are, however, signs of employment challenges in some sectors of the economy

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hina’s registered urban unemployment rate fell below 4 per cent for the first time in years, in a hopeful sign slower economic growth is not creating the massive unemployment Beijing fears will sow social instability.

The social security ministry said yesterday that 3.34 million new jobs were created in the first quarter.

The registered urban unemployment rate was 3.97 per cent at the end of the first quarter, Ministry of Human Resources and Social Security spokesman Lu Aihong told a news conference.

China has kept employment generally stable even as economic growth has slowed to a 26-year low and the government shuts down out of date industrial capacity, though many analysts say the official figure is an unreliable indicator of nationwide employment conditions.

On an annual basis, the official unemployment rate was last below 4 per cent in 2001, when it was 3.6 per cent, according to data from the National Bureau of Statistics. The rate ended 2016 at 4.02 per cent after not budging from 4.1 per cent from 2010-2015.

China’s leadership has touted strong jobs growth even as the economy

enters a “new normal” of slower growth. Premier Li Keqiang said in March that China added 13.14 million new urban jobs in 2016 and aims to add another 11 million this year while keeping the registered unemployment rate below 4.5 per cent.

That target seems safe, as China’s official unemployment rate - which only accounts for urban, registered residents, and not including rural and migrant workers - last topped 4.5 per cent 37 years ago in 1980 when it was 4.9 per cent.

Key Points 3.34 million new jobs were created in Q1 - ministry Registered urban unemployment rate was 3.97 pct at end Q1 Half a million coal, steel sector workers need resettlement There are, however, signs of employment challenges in some sectors of the economy.

Lu said that China would need to resettle about half a million workers that lose jobs in the coal and steel sectors this year and will speed up development of a “black list” system for firms with wage arrears.

Car industry

Government targets 35 mln vehicle sales by 2025 The ministry said sales of new energy vehicles should reach 2 million by 2020 China is targeting 35 million vehicle sales by 2025 and wants new energy vehicles (NEVs) to make up at least one-fifth of that total, the industry ministry said yesterday.

The Ministry of Industry and Information Technology said in a market “road map” that China’s urbanization drive and the overseas expansion of its automakers would help drive annual vehicle sales up around 25 per cent from last year’s total.

Automakers in China, the world’s largest automobile market with sales of 28 million vehicles in 2016, are increasingly pushing into electric and hybrid vehicles to meet stringent new government quotas.

Sales of new energy vehicles should reach 2 million by 2020 and account for more than 20 per cent of total vehicle production and sales by 2025, the ministry said. That implied annual NEV sales of over 7 million within

the next decade.

Green energy car sales have risen dramatically on the back of government policies, but still represented less than 2 per cent of China’s overall auto market last year.

The government body also said it would push to create local champions in the industry who would be increasingly competitive with overseas rivals in China as well as in overseas markets.

“The quality of Chinese brand vehicles has clearly risen, while brand recognition, reputation and global influence are much stronger,” the MIIT said. “By 2025, we should have some Chinese vehicle brands that are in the global Top 10 by sales.”

China’s domestic automakers, including SAIC and Geely Automobile Holdings Co, are already challenging better-known global rivals with new models and marketing strategies.

MIIT added it would look to loosen rules on foreign joint ventures in the market. Currently, overseas carmakers, such as General Motors or Nissan Motor Co, are limited to a 50 per cent state in a China JV. “We will loosen joint venture ownership restrictions in an orderly manner,” MIIT said, without elaborating about a time frame or what stake foreign carmakers may be able to own.

The ministry added that Chinese carmakers would also look to increase exports to developed nations over the next decade, and improve battery technology for electric vehicles. Reuters

China’s cabinet said last week that risks of mass unemployment in some regions and sectors have increased and pledged more fiscal and monetary policy support to address the potential rise in the jobless rate.

Workers in China’s northern industrial centres have complained of being underemployed and underpaid, though not technically unemployed, as their previous well-paying jobs have gone away during economic restructuring.

A private manufacturing survey of Chinese companies by IHS Markit and Caixin have shown a mixed employment picture, with factories still shedding jobs, but at a slower pace, while services companies have been adding workers since mid-2016.

A survey-based unemployment rate published by the statistics bureau had fallen slightly over the past year to under 5 per cent at the end of March. Reuters

Business Daily Wednesday, April 26 2017 9

Greater China PBOC’s Yi

Bad loans, capital outflows stabilize Yi Gang said regulators will grant more licenses to foreign banks and brokers for bond underwriting and settlement Ye Xie, Lillian Chen and George Lei

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hina’s non-performing loans have stabilized and the pressure from capital outflows has eased as the nation’s economic recovery takes hold, said Deputy Central Bank Governor Yi Gang.

“NPLs are getting pretty much stabilized after a long time of climbing,” Yi said at the International Finance & Infrastructure Forum at Bloomberg’s headquarters in New York.

“That’s a good development in the financial market. Capital outflow

pressure has been alleviated recently, but still we have to watch that kind of phenomenon.”

China’s NPL ratio declined in the fourth quarter for the first time since 2012, suggesting the steady loan losses over much of the first half of the decade may finally be easing. China’s four biggest banks posted higher-than-forecast profit last month as provisions for souring loans held steady.

Capital outflows, which have troubled policy makers for the last two years, have also shown signs of easing as the yuan stabilizes. Foreign

Deputy Central Bank Governor Yi Gang

reserves rose in February and March after policy makers burnt almost US$1 trillion since 2014 to defend the currency.

The improvements reflect a broader recovery in the world’s second-largest economy as the government increased lending, curbed overproduction and redoubled efforts to boost consumption. Gross domestic product rose 6.9 per cent in the first quarter, marking the first back-to-back acceleration in seven years. Exports rose 16.4 per cent in March, the most in two years. PBOC Governor Zhou Xiaochuan said at the International Monetary Fund meetings over the weekend that the nation’s 6.5 per cent growth target for this year is “within reach.”

On Monday, Yi said the central bank will pursue “prudent” monetary policy, balancing the need for economic stability while reducing financial leverage and controlling “asset bubbles.” Yi pledged to improve transparency and regulation in the “shadow banking” industry, while monitoring bad loans, capital flows and housing prices to prevent systemic risks.

“The overall risk is under control,” he said.

As the economy stabilizes, the government will further open up stock and bond markets and promote the use of the yuan overseas, Yi said.

Regulators will grant more licenses to foreign banks and brokers for bond underwriting and settlement, while cutting red tapes and removing trading barriers to facilitate yuan transactions, he said. Policy makers will help create more hedging instruments and simplify tax codes to allure foreign investors to the domestic bond market, Yi added.

It is “an indication of the determination of the Chinese government to further open up the financial sector,” Yi said. Bloomberg News

In Brief Commodities

March corn imports fall Corn imports to China in March plunged 99.1 per cent from a year ago to their lowest since September 2013, customs data showed yesterday, as buying dried up after the gap between international prices and the domestic market closed. Imports last month dropped to 5,262 tonnes, data from the General Administration of Customs showed. Domestic corn prices have become more competitive with international prices as a result of a change in Beijing’s farm support policy last year. China is expected to import 2 million tonnes of corn in the 2016/17 season, said the China National Grain and Oils Information Center earlier this month, doubling an earlier forecast.

Steel industry

Chongqing Steel warns of bankruptcy China’s debt-stricken Chongqing Iron and Steel Company warned of the risk of bankruptcy yesterday, after one of its creditors submitted an application to a local court to reorganise its assets.

Chongqing Steel said in a notice posted to the Hong Kong Stock Exchange that the creditor, identified as Chongqing Laiquyuan Trading, told a court on Monday that the southwest China-based steelmaker’s assets were not sufficient to pay off all its debts.

“If the court formally accepts the application for reorganisation...(Chongqing Steel) will be exposed to the risk of declaration of bankruptcy,” it said.

Legislation

China reviews changes to securities law

Trade

Mainland, under pressure at WTO, suggests revamp of dumping rules The United States has submitted a 584-page document to the WTO, spelling out many of the economic programmes that Washington says China should have notified to the WTO Tom Miles

China has proposed tightening the rules on when countries can impose anti-dumping and anti-subsidy tariffs, saying their use was rising and that such charges were often misused and distorted international trade.

‘A proposal may seek to divert attention from Chinese fishing subsidies, which are under fire in negotiations at WTO committee’ In a filing published by the World Trade Organization on Monday, China said it wanted to stop anti-dumping measures from “over-reaching” and becoming permanent, giving special consideration to small- and medium-sized firms, and imposing tougher standards for the use of such tariffs.

The five-page proposal is unlikely to get the required unanimous support of the body’s 164 members, and may be flatly rejected by the United States, where Commerce Secretary Wilbur Ross has been a fierce critic

of China’s trade practices.

The proposal, which trade diplomats had anticipated for months, may seek to divert attention from Chinese fishing subsidies, which are under fire in negotiations at the same WTO committee.

Global pressure on fisheries is high because U.N. Sustainable Development Goals include a target to eliminate certain fishing subsidies by 2020, and many trade diplomats hope an agreement could come at a WTO ministerial meeting in Buenos Aires in December.

China is accused of unfairly subsidising a huge and far-flung fishing

fleet and, together with India and Russia, has sought to link the WTO negotiations on fish to a wider reform of the rules on using tariffs to counter unfair trade practices.

The United States told the WTO in 2014 that China had 30 undeclared fisheries support programmes, and it has repeatedly demanded more transparency and accused China of moving too slowly.

“China is currently sorting out fisheries subsidies and will carry out research based on the results of and the progress made in relevant work,” China said in its latest written response to U.S. questions on subsidies, published by the WTO on Monday.

Beyond fisheries, the United States has submitted a 584-page document to the WTO, spelling out many of the economic programmes that Washington says China should have notified to the WTO.

Amendments to China’s securities law aimed at combating illegal trading activity have reached their second reading in parliament, the official Xinhua news agency reported late on Monday. Xinhua said the new draft law would tighten rules preventing insider trading, ban traders from using other people’s accounts to make transactions, and better protect the interests of investors. The amendments come in the wake of lessons learned in 2015, when regulators were forced to intervene to try to halt a market crash, with shares on the Shanghai stock exchange plunging by a third.

Commodities

Beijing will boost coal stockpiles ahead of summer Beijing will boost thermal coal supplies to ensure prices return to a “reasonable” level and raise inventories in preparation for higher summer demand, the government said on Tuesday amid concerns about deepening losses at the nation’s utilities.

The statement comes after a meeting between the country’s state economic planner, the National Development and Reform Commission (NDRC), and utilities on April 14. It is the strongest sign yet that Beijing is seeking to prevent a potential coal supply crisis in the world’s top user of the fuel during the hot summer months when power demand increases.

10 Business Daily Wednesday, April 26 2017

Greater China Yearly report

Environment ministry finds patchy progress on water and soil pollution China says it is confident it can win its “war on pollution” after strengthening legislation

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fforts to tackle water pollution in China remain uneven with some areas worsening in 2016, while heavy metals and other pollutants continued to accumulate in Chinese soil, the Ministry of Environmental Protection (MEP) said.

In a yearly work report, Chen Jining, head of the MEP, told the National People’s Congress (NPC) Standing Committee, a top Chinese decision making body, that overall air, water and soil pollutants had improved in 2016, according to a post on the NPC

website late on Monday.

However, “Improvements in water quality are uneven, some bodies for water are worsening,” Chen said, noting that checks on water quality in northern China’s Liao River and Songhua River found more poor quality sections than in 2015.

Agricultural land soil quality “does not allow for optimism and “the problem of soil pollution for industry, companies and nearby land is prominent,” Chen said.

MEP samples found that 36.3 per cent of heavy polluting industries’

land and the surrounding soil did not meet government standards, he added.

Chen urged reporters in March to focus on overall trends, which showed China was making rapid progress in its anti-pollution efforts, even though serious problems remained.

China says it is confident it can win its “war on pollution” after strengthening legislation, beefing up its monitoring capabilities and cracking down on hundreds of polluting firms, and says average air quality improved noticeably in 2016.

Chen also called in his NPC work report for more to be done in the fight against air, water, and soil pollution, saying that although efforts

to manage the environment were moving forward, the job is becoming more complex and difficult as time goes on.

China detained 720 people and received 33,000 tip-offs on environmental violations in 2016 and issued fines worth RMB440 million (US$64 million), according to the report.

Air quality improved, Chen said, with 78.8 per cent of days being considered “good days”, up 2.1 per

“Improvements in water quality are uneven, some bodies for water are worsening” Chen Jining, head of the Ministry of Environmental Protection

centage points from 2015.

But air quality in January and February of 2017 was markedly worse than a year earlier according to MEP data released in March.

At the time, high winter coal consumption combined with unfavourable weather conditions to create heavy smog build-ups throughout northern China, forcing dozens of cities in the region to issue “red alerts” designed to curb industrial activity and thin traffic. Reuters

Debt

Hong Kong regulator queries banks over Huishan Dairy loan Regulators frequently request information from licensed institutions as part of their supervisory work Carol Zhong

Hong Kong’s banking watchdog is questioning lenders over a US$200 million loan raised by China Huishan Dairy Holdings Co Ltd, sources involved in the matter told Reuters, as regulators try to unpick the group’s tangled finances.

The Hong Kong Monetary Authority (HKMA) has been increasing its scrutiny of Hong Kong bank lending to mainland Chinese companies, fretting that the city’s lenders are growing increasingly exposed to worsening credit conditions there.

‘Huishan last month met creditors and local authorities in a bid to avert lenders calling in loans or filing suits’ Huishan, one of China’s biggest dairy companies, embraced ‘innovative financing’ and investors flocked to a US$1.3 billion Hong Kong listing.

But it has now missed debt payments, breached loan covenants, all but two directors have quit its board and a key executive is missing.

Two individuals working on the corporate lending team at one of the banks involved told Reuters that the

HKMA had asked banks for information on the due diligence and credit-checking processes undertaken when making the loan in 2015.

A third source at the loans team of a second bank involved said the HKMA had requested information regarding the Huishan loan - taken out with Bank of Shanghai Hong Kong Ltd , China CITIC Bank International Ltd, China Merchants Bank Co Ltd, Chong Hing Bank Ltd , Hang Seng Bank Ltd and HSBC. He did not elaborate.

Regulators frequently request information from licensed institutions as part of their supervisory work and such inquiries do not indicate wrongdoing. Reuters was not able to ascertain if the HKMA had launched a formal investigation.

However, if the banking regulator finds compliance lapses in relation

to the loan the banks could be at risk of a formal sanction such as a fine, one of the sources said.

“As part of the HKMA’s day-to-day supervision of banks, we maintain regular dialogues with the industry on different supervisory issues. We do not comment on details of any such dialogues,” a spokeswoman for the HKMA said in an email.

Bank of Shanghai Hong Kong, China Merchants Bank and Chong Hing Bank did not respond to requests for comment. China CITIC Bank International, Hang Seng Bank and HSBC declined to comment.

A spokesman for Huishan Dairy declined to comment.

From June to December 2016 Hong Kong banks’ mainland related loans rose 3.5 per cent to HK$3.6 trillion (US$458 billion), or 16 per cent of total assets, according to HKMA data.

Huishan made headlines last year when it sold and leased back part of its herd. But risks linked to its debtfuelled growth took center stage after a report from U.S.-based short-seller Muddy Waters questioned its

accounting and debt burden.

Huishan last month met creditors and local authorities in a bid to avert lenders calling in loans or filing suits.

The local China Banking Regulatory Commission (CBRC) bureau, China’s regulator, was also involved in the discussions, according to one individual familiar with the matter.

The CBRC did not immediately respond to a request for comment.

The principal of the US$200 million loan is outstanding in two tranches, US$180 million and HK$156 million (US$20.07 million).

Under the loan agreement, Huishan Chairman Yang Kai and missing executive Ge Kun must remain in their posts, and together must own at least 30 per cent of Huishan’s issued share capital.

Huishan’s controlling shareholder Champ Harvest Ltd owns over 70 per cent of its stock, and is majority held

by Yang. Champ Harvest has pledged nearly all of the shares it owns as collateral to secure loans.

Shares are currently suspended.

Reuters

Business Daily Wednesday, April 26 2017 11

Asia Mood survey

Korean consumer confidence rebounds to near pre-scandal level Exports are set to increase for a sixth straight month in April Jiyeun Lee

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onsumer confidence in South Korea rose by the most since 2013 as data suggested the economy is recovering and the nation began to move on from the impeachment of the president.

The Bank of Korea’s monthly consumer sentiment index rose to 101.2 in April from 96.7 the previous month, indicating rising optimism, data released yesterday show. The gauge is now close to the level seen before a political scandal erupted in late 2016, engulfing then-President Park Geun-hye and some of the nation’s biggest companies.

After months of uncertainty, Park was impeached and jailed on bribery charges. Now Korea is set to elect a new president on May 9. Leading candidates are advocating for a reform of the family-led chaebol conglomerate system, more jobs for young people, and strengthened scrutiny against high-level public corruption.

“The recent exports recovery and expectations for the new

government’s policies contributed to the rise in the consumer sentiment index,” said Ju Soung-jeh, an economist at the central bank’s economics statistics department.

The index was determined by surveying 2,031 households from April 11-18 on their views about subjects including income, spending and economic outlook. A reading

above 100 indicates people are more optimistic about the economy than the average seen from 2003 to 2016.

The amount of improvement was especially high for the sub-index on economic outlook, the statement showed.

Korea’s exports are set to increase for a sixth straight month in April, prompting the central bank and state Korea Development Institute to raise their growth forecasts for 2017.

While leading presidential candidate Moon Jae-in has pledged to

implement a 10 trillion won extra budget if he is elected, Finance Minister Yoo Il-ho told reporters over the weekend that fiscal stimulus may not be necessary because data showed the economy improving.

Yoo said in a meeting with Michael Corbat, chief executive of Citigroup Inc., that Korea’s economy is showing stable growth but uncertainty over U.S. policies, trade issues with China and geopolitical tensions remain risks, according to a ministry statement yesterday.

“The recent exports recovery and expectations for the new government’s policies contributed to the rise in the consumer sentiment index” Ju Soung-jeh, an economist at the central bank’s economics statistics department

Households’ inflation expectations over the next 12 months were unchanged at 2.6 per cent, the BOK’s statement show. Bloomberg News

Job market

Labour shortage a stress test for Japan’s 24/7 convenience stores To ease the burden on store owners, who bear payroll costs, 7-Eleven said it would, for the first time, cut royalty fees it charges franchisees Sam Nussey and Ritsuko Shimizu

Japan’s growing labour shortage threatens the nation’s ubiquitous convenience stores, whose business model relies on an army of part-timers packing bento lunch boxes, manning cash registers and delivering goods 24/7.

The big three “combini” operators 7-Eleven, FamilyMart and Lawson, which have expanded through Japan’s long slump, are scrambling to ease the pressure on franchisees by offering a mix of financial aid and labour-saving automation.

But their earnings outlook is the bleakest in years.

Lawson Inc projects its first drop in profit in 15 years this fiscal year, and 7-Eleven Japan, part of Seven & i Holdings, forecasts a meager 0.2 per cent increase.

Japan has around 55,000 convenience stores nationwide - roughly one for every 2,300 people - and each store needs around 20 part-timers to run it.

Some shop owners struggling to fill shifts find themselves working some nights as well as during the day.

“The labour situation is starting to get health-hazardous,” said one store owner who asked not to be identified.

Restaurant chain Royal Host and McDonald’s Japan have begun moving away from 24-hour operations, but so

far convenience chains aren’t reducing hours or cutting store numbers.

Indeed, all three of the major chains plan to expand. They fear that if they cut back they will lose market share and dent a reputation for catering to customers’ needs at any time.

“We are part of the social infrastructure,” said Koji Takayanagi, president of FamilyMart UNY Holdings,. “We have a mission we must fulfil.”

Dwindling pool

As Japan’s population shrinks, its workforce has declined to 77.2 million in 2015 from a peak of 87.2 million in 1995. By 2065, it’s expected to drop to just 45.2 million.

The decline has hit labour-intensive sectors such as delivery services, restaurant chains and retailers especially hard.

The worker crunch started last year, said a Lawson franchisee in Tokyo.

Foreigners, many of them university students, are taking up some of the slack, but he predicts the shortages will continue “indefinitely.”

Part-time wages, meanwhile, have increased, and some convenience stores have to pay more overtime to fill shifts.

“Labour costs are rising precipitously,” Ryuichi Isaka, president of Seven & i Holdings, told a recent earnings briefing.

To ease the burden on store owners, who bear payroll costs, 7-Eleven said it would, for the first time, cut royalty fees it charges franchisees - a measure that will cost the company around 160 billion yen (US$1.47 billion) a year.

“We want to turn this into an opportunity to boost store owners’ management drive, and attract new owners,” Isaka said.

Saving the day?

The industry hopes technology can overcome the shortfall.

7-Eleven, with 19,423 stores and 390,000 part-timers in Japan, is bringing labour-saving dishwashers to all stores this year, while Lawson is issuing tablet computers to help store management, and installing automatic change counting machines.

The industry also plans to introduce RFID (radio-frequency identification) tags that can track individual items from warehouse to store - hoping this may usher in an era of low-cost distribution networks and unmanned cash registers.

With the government pledging to help roll out the technology by 2025, 7-Eleven estimates RFID tags, which it will trial around August, could save 8 billion yen (US$73 million) annually in labour costs.

The increased investment in technology is partly to blame for Lawson’s forecast profit decline.

“Rather than simply focusing on increasing profits, we are critically looking at what shape Lawson should take,” said company president Sadanobu Takemasu. “By making the necessary investments we will reap the rewards.”

The labour-intensive business model is not just in the stores. It extends to a vast network of third-party suppliers and truck crews making deliveries around the clock.

The convenience store industry was built when there were plentiful workers, says Takayuki Suzuki, analyst at Primo Research Japan. But now it “must rationally look again at its excessive and unnecessary services.” Reuters

12 Business Daily Wednesday, April 26 2017

Asia Markets

Looming risks subdue Asia stock investors after stellar quarter The MSCI Asia ex-Japan index returned 12.8 per cent in the first three months of 2017 Nichola Saminather

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nvestors’ enthusiasm for Asian stocks is waning as a raft of political and economic risks takes the shine off the best first-quarter returns in 26 years.

That period of strong gains could put Asian equities in the firing line for a sell-off, as funds investing in the region play it a lot safer than they were a few months ago on concerns that economic and business cycles may have peaked.

“Most of the positive news may be priced in already. But at the same time, if we’re seeing disappointments, this could be a trigger for more profit taking,” said Tuan Huynh, Asia Pacific chief investment officer at Deutsche Bank Wealth Management, who now recommends an underweight exposure to Asian equities from overweight at the start of 2017.

“Earnings season in the U.S. and political events like elections in Europe may bring negative surprises that could lead to corrections,” he said.

The MSCI Asia ex-Japan index returned 12.8 per cent in the first three months of 2017, the best first-quarter performance since 1991, as almost $17 billion of funds flowed into the region, excluding China and Malaysia.

But they’ve returned a pittance since then, and flows slowed to only US$563 million in April through the 19th, according to Thomson Reuters data, as risks grew, including nuclear

threats from North Korea, a series of elections in Europe and delays in fiscal stimulus and protectionist rhetoric from the United States.

Business activity in Asia, which had been above trend and improving in the second half of 2016 and earlier this year, is now above trend but decelerating, Goldman Sachs’ Chief Asia Pacific Equity Strategist Timothy Moe said in a podcast this month.

Over the last 15 years, average three-month returns in a period of above-trend improving activity have been 7.9 per cent for the MSCI Asia Pacific ex-Japan index, while returns have fallen to 1.5 per cent in abovetrend decelerating phases.

“We’re going from a period of really juicy, good returns to a period where returns will be positive but decidedly more muted in magnitude,” he said.

The modest acceleration in global expansion and inflation expected in 2017 and 2018 is also not enough to return trade growth to pre-global

financial crisis levels, according to Schroders.

Earnings support

Cyclical upswings in China and the United States, which have helped trade, are likely to fade soon, Keith Wade, chief economist and strategist at the investment house, wrote in a note this month.

“Without the support of these two economies, global trade is likely to roll over (slow), at least in value terms, in the second half of 2017,” he added. “The implication is that this will take emerging market equities with it.”

Still, investors aren’t bailing out of Asia entirely, even though stocks are the most expensive relative to other emerging markets since February 2015. That is because they are still cheaper than developed markets, and earnings growth is finally materialising after years of disappointments.

Analysts expect earnings across the region to jump 17 per cent this year from 2016.

“For that earnings trajectory to roll over, you’d have to see a breakdown

in global reflation. It’s not our base case,” said John Woods, Asia Pacific Chief Investment Officer at Credit Suisse Private Banking and Wealth Management.

“We’re reasonably comfortable that this earnings story can continue for a year or so.”

However, if earnings do disappoint or expectations are downgraded -- possibilities many investors are dismissing -- that could be another catalyst for a sell-off.

For those buying, selectivity is key.

Deutsche’s Huynh and M&G Investments’ Matthew Vaight prefer North Asia, specifically South Korea and Taiwan, which, along with being the cheapest in the region, also benefit from global growth.

Vaight, emerging markets portfolio manager at M&G, is underweight India, the region’s most expensive market, and also finds Indonesia and the Philippines overvalued.

India, which received the most inflows from foreign investors in the first quarter, is trading at 21.2 times earnings, compared with the cheapest, South Korea, at 12.1.

Investors appear split on China.

While Goldman is overweight, on expectations that improving economic growth will filter through to earnings and that stability will be a priority ahead of the 19th National Congress in October, M&G cites concerns about Chinese banks.

“They are tools of state policy and poor allocators of capital,” Vaight said. The high valuations of many “new” China stocks, such as internet companies, are also difficult to justify, he said. Reuters

Finance Minister

Indonesia won’t need to repeat spending cuts this year Indrawati said the government needed to boost infrastructure spending this year for some specific projects David Lawder

Indonesia will not need to repeat last year’s major spending cut as the government’s revenue projections look “on track” amid strengthening growth, Finance Minister Sri Mulyani Indrawati told Reuters.

Indrawati said in an interview on Monday that the government would reallocate some spending within the budget to more “productive” areas that can support growth, such as land acquisition for infrastructure projects.

The former World Bank managing director also insisted that Indonesia’s international banking environment was not becoming more difficult, despite a recent row over a negative JP Morgan research report.

One of Indrawati’s first acts when she returned to Jakarta as finance minister in July 2016 was to slash state spending by US$10.2 billion to hold Indonesia’s deficit within a 3 per cent legal limit.

“We are not going to cut. The president is asking to reallocate more, focusing on the spending which is productive,” Indrawati said of this year’s budget, after the International Monetary Fund and World Bank spring meetings in Washington.

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She said revenue projections appear “on track” as the World Bank projects Indonesia’s economic growth at 5.2 per cent this year, compared to the government’s official 5.1 per cent forecast used for budget planning, and 5.0 per cent last year.

“If there is going to be a change in the revenue it will be because of the commodity prices, like oil. We are assuming US$45 a barrel, maybe it’s going to be an average of US$50,” she said.

Indrawati said the government needed to boost infrastructure spending this year for some specific projects, such as hosting the Asian Games in 2018, but added, “The overall top line is not going to change.”

Interest rates are another variable that could have an effect on revenues, depending on how far and fast the U.S. Federal Reserve raises rates this year, which could affect growth, capital flows and the value of the rupiah.

Indrawati said Indonesia was much better positioned to handle Fed rate hikes than during the “taper tantrum” of 2013, when funds flowed out of emerging markets as the Fed signaled it would scale back its bond-buying efforts.

Indrawati said this time around, the

Fed’s intentions have been well-telegraphed, and confidence in Indonesia’s growth prospects, its growing middle class and its reform efforts are also stronger.

“As long as this movement of the interest rates is being viewed by the market as a sign of strength of the U.S. economy, I think there will be less possibility of volatility,” she said.

Following the growth of religious tension in the recent election of the governor of Jakarta, Indrawati said it was “not necessarily the correct projection” to assume similar issues for 2019 national elections, and added that it would have no effect on President Joko Widodo’s reform program.

Sri Mulyani Indrawati, Indonesia’s Finance Minister. Lusa

“This is still a healthy democracy, it’s a good result of democracy.

People presenting what they wish, what they expect,” she said. “And for government, at the national level, we will continue doing our program.”

Research row

Indrawati sent shockwaves through the banking sector in January when she severed the government’s business ties with JP Morgan Chase and Co after the bank analysts downgraded Indonesian stocks to “underweight” in the wake of U.S. President Donald Trump’s election in November.

She said she wanted to encourage banks to operate in a “healthy way” for the country and independent research was welcomed as long as it was accurate. Banks working on behalf of the government, such as those handling sovereign bond issues, need to be clear on what the government expects from them, she said.

“What we discussed with JP Morgan was that the relationship between the government of Indonesia with any institution, if it is really based on mutual benefit and serving the country, it should be defined more clearly,” Indrawati said.

The removal of JP Morgan as a primary bond dealer was followed by new regulations requiring Indonesia’s primary bond dealers to “safeguard” their partnership with the government and avoid conflicts of interest. Reuters

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Business Daily Wednesday, April 26 2017 13

Asia Central bank

In Brief

Japanese deputy governor conducting simulation on exit strategy from stimulus The BOJ holds its monetary policy meeting today and Thursday and is not expected to change its policy settings Tetsushi Kajimoto

Bank of Japan (BOJ) Deputy Governor Kikuo Iwata said yesterday the central bank was conducting a study of how it could end its massive monetary stimulus in the future, but acknowledged it was still far from achieving its inflation target.

Iwata, speaking in parliament, said the BOJ did not want to publicise the exit-strategy simulation because doing so would cause market confusion given that its 2 per cent price goal remains distant.

Key Points

Totan Research, said Iwata’s comments were a direct response to a question in parliament, not a message about imminent policy intentions.

He noted Iwata has made similar comments in the past.

“Iwata does not want to discuss an exit because doing so could fuel concerns about a potential loss incurred to the BOJ’s expanding balance sheet, which would cost taxpayers’ money eventually, and prompt public criticism against the BOJ policy,” he added.

Last week, BOJ Deputy Governor Hiroshi Nakaso said the central bank has been internally debating what

tools it can use when it eventually ends its unconventional monetary stimulus programme.

When the BOJ introduced its quantitative easing policy in 2013, its holdings of Japanese government bonds rose at an annual pace of 80 trillion yen.

Since then, the BOJ has loosened its commitment to this target and focused on controlling short- and long-term yields instead.

There are major concerns among some economists about the difficulties the BOJ may face in reducing its extremely large holdings of government debt and about how it will manage money market operations to control liquidity.

The challenges associated with unwinding the massive monetary policy stimulus global central banks have unleashed in recent years have drawn renewed attention. Reuters

Deputy gov - publicising exit strategy will cause mkt confusion Sees “quite a distance” to reach 2 pct inflation Markets show muted reaction to Iwata’s comment Iwata does not intend to deliver message on exit - analyst “The BOJ is carrying out a simulation based on several assumptions of an exit strategy,” Iwata told a financial committee in Japan’s upper house, in response to a question from an opposition lawmaker.

He added the BOJ would refrain from making the details of the simulation public as that would cause market confusion at a time when the central bank is some way off achieving its 2 per cent inflation target.

Izuru Kato, chief economist at

Bank of Japan headquarters

Strategy

Ghosn wants Mitsubishi to reform A full merger of Japanese car makers Mitsubishi Motors Corp (MMC) and Nissan Motor Co Ltd is not on the table, Carlos Ghosn, chairman of both firms, said yesterday.

“Full merger is not on the table. We want Mitsubishi to reform itself,” said Ghosn, who was attending the opening ceremony of a new Mitsubishi factory on the outskirts of Jakarta. He also said it was likely for Mitsubishi and Nissan to cross-manufacture in areas where it makes sense.

Last year, Nissan bought a controlling stake in Mitsubishi for US$2.3 billion after the smaller automaker admitted to cheating on mileage tests.

Results

SK Hynix books record profit South Korea’s SK Hynix Inc yesterday booked record quarterly profit due to strong demand for high-tech memory chips, and said the DRAM supply shortage that has pushed up prices will continue throughout 2017. The extent of the shortage is likely to ease toward the end of the year, stabilising prices somewhat, but demand will keep rising due in part to the continued spread of cloud computing, SK Hynix said on an earnings conference call. The results are the industry’s first in a year when analysts expect earnings records thanks to a so-called supercycle in which demand for smaller, more sophisticated chips for servers and smartphones far outstrips production capacity.

Commodities

Bangladesh naphtha tender gets best offer from Vitol

Settlement

Malaysia to pay Abu Dhabi US$1.2 billion to settle 1MDB’s debt 1MDB and IPIC were locked in a tussle that spilled over to repayments on two sets of bonds issued by the Malaysian state fund Shamim Adam

Malaysia reached an agreement to pay Abu Dhabi about US$1.2 billion as settlement over the debt of embattled government fund 1Malaysia Development Bhd. Abu Dhabi sovereign wealth fund International Petroleum Investment Co. will get half the amount by the end of July and the rest by the end of this year, according to an IPIC statement on the London Stock Exchange on Monday. 1MDB will also assume the coupon and principal obligations for US$3.5 billion of bonds issued by it and co-guaranteed by IPIC, according

to the statement.

“These obligations will be met by 1MDB, primarily via monetization of 1MDB-owned investment fund units,” the Malaysian company said in a separate statement. “This arbitration settlement and monetization of investment fund units represents the resolution of a significant challenge, and is a major part of the 1MDB rationalization plan, which is now at its final stages of conclusion.”

1MDB and IPIC were locked in a tussle that spilled over to repayments on two sets of bonds issued by the Malaysian state fund that led to a default in April 2016. IPIC was seeking

US$6.5 billion from 1MDB and the Malaysian government for failure to perform their debt obligations as the dispute moved into arbitration at the London Court of International Arbitration.

The agreement is conditional on the arbitration tribunal making a consent award by May 31, IPIC said.

The settlement removes a key hurdle amid investigations from the U.S. to Singapore, Hong Kong and Switzerland into money laundering and embezzlement linked to 1MDB. A brainchild of Malaysian Prime Minister Najib Razak (pictured) to attract foreign investment, 1MDB accumulated billions of dollars in debt after its 2009 inception. The country’s parliamentary committee identified at least US$4.2 billion in irregular transactions.

Among the issues between the 1MDB and IPIC were billions in allegedly missing funds. 1MDB has said it could be a victim of fraud if payments intended for IPIC never made it there, while the latter had denied ownership in the company that 1MDB transferred money to.

“The parties have also agreed to enter into good faith discussions in relation to payments made by 1MDB Group to certain entities,” IPIC said.

1MDB and the Malaysian finance ministry will pay IPIC through proceeds raised from the sale of units Brazen Sky Ltd. and 1MDB Global Investment Ltd., a person familiar with the matter said last week.

The Malaysian government said all 1MDB-owned investment fund units have been monetized. Bloomberg News

State-owned Bangladesh Petroleum Corp (BPC) will sell 170,000 barrels of naphtha to Vitol at a discount of 79 U.S. cents to Singapore quotes, from a discount of 17 cents when it sold a similar-sized cargo to the oil trading giant in February.

Vitol quoted the best price among four companies competing in the tender for the cargo, scheduled to load over May 11-13 on a free-on-board (FOB) basis from Chittagong, a senior BPC official said yesterday.

Bangladesh’s sole Eastern Refinery, with a capacity of 33,000 barrels per day, produces 1.26 million barrels of naphtha a year.

Writedown

Japan Post to book US$363 mln annual loss Japan Post Holdings Co said yesterday it will book a loss of 40 billion yen (US$362.61 million) for the fiscal year ended in March, after recording a 400 billion yen impairment charge on its Australian logistics arm Toll Holdings Ltd. The Japanese company will also cut over 1,700 jobs at Toll during the year to March 2018, it said in a filing to the Tokyo Stock Exchange, adding that Toll remains a “core unit” in the Japan Post Group. Japan Post had originally forecast 320 billion yen in net profits for the financial year ended in March.

14 Business Daily Wednesday, April 26 2017

International In Brief Infrastructure

Spain, Brazil plan subsea fibre optic cable by 2019 The Spanish and Brazilian governments have teamed up to lay an undersea cable in the Atlantic Ocean to offer fast online and cloud services to citizens of both countries by 2019, underscoring efforts to rout communications outside North America.

The EllaLink subsea cable will connect to data centres in Madrid and São Paulo, as well as in Lisbon, using shielded fibre rings, officials said on Monday.

The cable will also connect the archipelagos of Madeira, Spain’s Canary Islands and Africa’s Cape Verde along the route, they added.

Angola

Central bank doubles hard currency injection The amount of government debt sold by Angola’s central bank last week was just over 29 million kwanzas (€161 million), almost twice the amount the central bank pumped into the system the previous week, and the interest rates were roughly the same as the week before. The average interest rates on T-bills were around 16.14 per cent for three-month debt and 23.90 per cent for oneyear bonds, both similar to the rates investors were charging the week before.

Hard Brexit

EU warns Britain: Don’t assume free trade deal for the City France and Germany are both among countries keen to attract more financial firms to Paris and Frankfurt respectively once Brexit cuts London off from the EU Alastair Macdonald

E

uropean Union leaders will warn Britain it cannot assume its big financial services industry will be included in any free trade deal after Brexit, diplomats said on Monday after fixing negotiating terms in a draft document.

Britain’s Prime Minister Theresa May, who will open negotiations with the EU in June assuming she wins a snap election she called last week, singled out banking and other financial services among her priorities for a future trade deal with the bloc after Brexit.

But France and other member states pressed for changes to the draft at Monday’s meeting to ram home their opening position that any deal to allow the City of London, Europe’s leading financial centre, continued easy access to EU markets must bind Britain to continuing regulation and supervision by Brussels.

“The 27 will not necessarily consider financial services in a free trade agreement, as Theresa May has expected,” one said after aides to the 27 EU leaders, who will meet

to agree the terms on Saturday, endorsed a draft of the so-called guidelines.

The new draft of the guidelines for EU Brexit negotiator Michel Barnier will be reviewed by ministers on Thursday and is expected to be signed off swiftly at Saturday’s EU27 summit.

“There is nothing controversial in this among the 27,” a second diplomat, who took part in Monday’s talks, said. “We found a way to say things so that everybody feels safe.”

Several other participants said that, as under the previous draft, there would be no specific mention of financial services as an economic sector, but that the guidelines for Barnier would stress that any future relationship should not endanger the “financial stability” of the EU’s economy.

“Any future agreement on financial services will be subject to EU supervision and regulation,” one said.

Brexit bill

Barnier, a former French minister and former EU financial services commissioner, has previously warned

EU emissions

Germany opposes testing overhaul Germany is against European Commission plans to overhaul a vehicle emissions testing scheme, Sueddeutsche Zeitung said, citing European Council documents submitted by Germany. The newspaper reported Germany has rejected an EU Commission proposal to change the way the vehicle testing authorities are funded and managed, citing consultation documents sent by Germany to Brussels. Proposals to move away from a regime based on tests funded by car companies, in favour of a new system funded with fees and state-backing, are also being opposed, the paper said.

Mozambique

First exports of natural gas delayed for two years UK-based consultancy BMI Research set back the date for the first export of natural gas from Mozambique by two years, to 2022, due to delays in the Final Investment Decisions (FID) by international oil companies. According to a report from BMI, which is part of the Fitch group, a delay in final investment decisions on liquefied natural gas projects, both on and offshore, led the consultancy to set back the dates for the launch of the project. “Mozambique is expected to export the first shipments in 2022 with volumes rising from 4 billion cubic metres (bcm) to 1.6 bcm.”

Britain’s Prime Minister Theresa May

that, due to the continuing size and importance to Europe of the London financial sector, any post-Brexit agreement must ensure it is tightly regulated to satisfy EU concerns.

France and Germany are both among countries keen to attract more financial firms to Paris and Frankfurt respectively once Brexit cuts London off from the EU. The likely election of former banker and economy minister Emmanuel Macron as French president next month is unlikely to change France’s position on setting

Key Points Governments set draft Brexit negotiating guidelines Text shows no guarantee of banking agreement -diplomats EU27 leaders set to approve plan at Saturday summit EU to push City to submit to EU rules for any access deal strict terms for British access to EU markets.

Among Monday’s other amendments to the draft negotiating guidelines, diplomats said the text would spell out that the EU wants Britain to pay Brussels a share of financial commitments made from the bloc’s seven-year budget until the end of 2020 - nearly two years after Brexit takes effect on March 30, 2019.

British ministers have voiced resistance to EU plans to ask for about 60 billion euros (US$65 billion) on departure, some of it to be paid for years after Brexit. But the EU will argue that Britain signed on to the 2014-2020 seven-year budget as a member and should pay its share of commitments.

Until Britain agrees to such terms in its “divorce” settlement during the two-year negotiating window, EU leaders say they will not open talks on a future relationship.

Relieved by Macron’s victory in Sunday’s first round of presidential voting - and by polls giving him a huge lead over anti-EU National Front leader Marine Le Pen for the May 7 run-off - EU leaders want to deny Britain benefits from Brexit that could fuel demands by Le Pen and others to break up the bloc. Reuters

Political hurdles

Trump tax push raises questions about scope of his ‘reform’ With his 100th day nearing on April 29, Trump has been ordering studies and signing executive orders President Donald Trump’s zeal to unveil a tax plan before his 100th day in office is raising questions about just how thorough his “tax reform” plans will be, amid signals that his focus for now is on slashing tax rates.

Trump has directed aides to move quickly on a plan to cut the corporate income tax rate to 15 per cent from 35 per cent, a Trump administration official said on Monday.

With his 100th day nearing on April 29, Trump has been ordering studies and signing executive orders. But he has yet to introduce a major bill to the Republican-controlled Congress on any topic or win passage of someone else’s that he supports.

He has promised a “big tax reform and tax reduction” announcement today. Some analysts said this may consist of a proposal to cut the corporate rate to 15 per cent, cap the individual tax rate at 33 per cent, repeal the estate and alternative

minimum taxes and cut taxes for the middle class.

In earlier days, Trump vowed to oversee the biggest “tax reform” since President Ronald Reagan’s in 1986, a legislative feat that has since defied every president.

‘He has promised a “big tax reform and tax reduction” announcement today’ Wall Street analysts say Trump may instead offer a package of rate reductions, like those backed by Reagan in 1981 and President George W. Bush in 2001, which left the tax system intact.

If that is the case, it “is not tax reform. It is a tax cut,” Chris Krueger,

analyst at financial firm Cowen & Co, said in a research note.

Today, Krueger said, “we will get some vague benchmarks about rate levels... with likely no detail on how to finance those reductions except for the assurance that the growth projections will take care of it.”

The announcement could also show whether Trump is turning away from a Republican plan backed by House of Representatives Speaker Paul Ryan that would pay for tax cuts with an import tax and by killing a business interest deduction.

Ryan and other Republicans will get a preview of Trump’s plan on Tuesday at a Capitol Hill meeting with Treasury Secretary Steven Mnuchin and Gary Cohn, director of Trump’s National Economic Council, aides said.

Trump’s announcement, however, could be a disappointment for investors seeking clarity.

“I don’t know that it will shed a great deal of light beyond what the administration has already said,” noted Peter Cohn, analyst at financial firm Height Securities. Reuters

Business Daily Wednesday, April 26 2017 15

Opinion Business Wires

Jakarta Globe Investors should look beyond the divisive and religiously charged Jakarta election and take confidence from a peaceful voting day as a sign of stability in the country, officials and business leaders said. Quick count results show that Anies Baswedan, the candidate backed by Muslim hardliners and conservatives, won the runoff election by a landslide against incumbent Governor Basuki “Ahok” Tjahaja Purnama, a Christian of Chinese descent. The latter ran a doomed campaign in the Muslim-majority capital while facing false blasphemy allegations, despite having scored high approval ratings of his performance in office.

China ratchets up the pressure on its aluminium producers

The Japan News The Tokyo metropolitan government is estimating a total annual loss of ¥1.1 billion for five facilities to be newly constructed for the 2020 Tokyo Olympic Games. The post-Olympic operation plan for six facilities that are to be newly constructed was recently announced by the Tokyo metropolitan government.

According to the plan, five facilities for such events as swimming and hockey are expected to incur a total loss of more than ¥1 billion per year. Preparations for the Olympic Games have been progressing steadily.

Viet Nam News With its fertile soil and development potential, Trà Vinh Province is expected to become a new centre for trading, aquatic product processing and highvalue agriculture of the southern region and the whole country in the near future, said Prime Minister Nguyễn Xuân Phúc. PM Phúc made the remarks while addressing a conference promoting investment, trade and tourism in the Mekong Delta province of Trà Vinh on Monday, which saw the participation of central and local officials, along with representatives of Vietnamese and foreign businesses.

The Phnom Penh Post Cambodian start-ups currently face several regulatory challenges in pursuing growth and profitability, according to three of the Kingdom’s most successful start-up founders who shared their experiences over the weekend with the hope to inspire increased innovation and entrepreneurship. A key outtake from the event organised by the Cambodians in Tech group was that business registration is an important step for any successful company but that given the local costs, registration should usually be avoided until a start-up becomes sustainable.

Chea Langda, founder of online bus ticketing platform BookMeBus, said it was important for start-ups to test their ideas and develop a sound business model before taking on the financial risk of registering.

I

s aluminium the new steel for China’s policy-makers?

The country’s steel producers are already being subjected to a host of measures intended to weed out excess capacity.

A wholesale restructuring of the enormous steel sector is a key component of the country’s declared war on pollution.

It also provides some negotiating leeway for China when it comes to dealing with the growing international pressure to rein in exports.

China’s aluminium producers, which like their steel counterparts now dominate global supply, seem to be next in line for “supply-side reform”.

Threats to close capacity in the region around Beijing over the winter heating months had already propelled aluminium prices higher.

They have just been given a further boost by news that Beijing has ordered the suspension of new capacity in the north-western province of Xinjiang. Further measures seem certain to follow.

The country’s aluminium output growth is already showing signs of braking sharply, although, as ever, statistical confusion may simply be adding to the general confusion as to what Beijing’s real aluminium policy goals are.

Xinjiang and beyond

Beijing’s plan to force capacity reductions in the area around the capital city next winter had already lit a fire underneath the aluminium price.

Sceptics argue that the size of the likely cuts will be dwarfed by the continuing roll-out of new capacity, particularly in the far-flung north-western province of Xinjiang.

That calculation has now just been thrown into question after three Xinjiang smelter projects were ordered suspended last weekend.

Xinjiang has emerged as the new hub of both Chinese and global aluminium capacity with more than seven million tonnes of operating production and a seemingly endless supply of new smelter projects.

Work on three of those has been ordered to stop because they have not been correctly permitted.

The order, posted on the government website of Changji County in Xinjiang and dated April 14, specifically identifies smelter projects being built by Xinjiang East Hope Ferrous Metals Co. Ltd., Xinjiang Qiya Energy Aluminium Electric Co. Ltd. and Xinjiang Jiarun Resources Co. Ltd. The amount of capacity affected is thought to be around two million tonnes.

Quite why these three projects have been singled out, and, unusually in such cases, specifically named, continues to cause head-scratching both within China and without.

The best bet is to send a warning shot across the bows of other producers.

According to consultancy AZ China, another policy document is doing the rounds calling for all the country’s smelters to submit to audits covering the full spectrum of permitting and regulatory compliance.

Previous attempts to clean up the sector after years of unbridled growth have come and gone without any noticeable impact but this time Beijing seems serious with multiple government departments involved.

AZ China’s preliminary view is that capacity closures will take place towards the end of the year.

“

Andy Home a Reuters column

The country produced 2.71 million tonnes of aluminium in March and 8.19 million tonnes in the first quarter of this year.

Quarterly production was up 14 per cent on the same period of 2016 but growth in March itself slumped to just 3.3 per cent.

The year-on-year comparisons are distorted by last year’s low and volatile base.

Expressed in annualised terms Chinese run-rates have dropped by almost 2.2 million tonnes so far this year with March’s 31.9 million tonnes the lowest since July of last year.

It’s a counter-intuitive outcome. The current high price might have been expected to encourage faster production rates, particularly from those companies now facing potential capacity cuts from the start of the winter heating season in the middle of November.

It is, of course, possible, that the statistics themselves are wrong. There have been enough problems in the past to justify a healthy degree of caution, but it’s worth noting that the two sets of official production data, from the National Bureau of Statistics and the China Nonferrous Metals Industry Association, are saying the same thing.

The new steel?

Statistical uncertainty is compounding the uncertainty over Chinese aluminium policy.

Although aluminium is now the best performer among the core base metals traded on the London Metal Exchange, up 15 per cent so far this year at a current US$1,945 per tonne, there is still a deep-seated scepticism that Beijing is serious about closing capacity.

After all, recent aluminium history is littered with restraining edicts from Beijing, none of which has prevented the runaway growth of its production sector.

Is it going to be any different this time?

Two things suggest it might be.

Environmental crackdown has risen to the top of the domestic policy agenda and aluminium smelters, as seen in the winter heating directive, are clearly in the firing line, not least because they are a major user of coal power.

Secondly, as with steel, “supplyside reform” is being given extra impetus by the proliferation of trade cases against Chinese exports.

Although it is President Trump currently grabbing the protectionist headlines, it was the outgoing Obama administration that filed a broad-reaching case against the Chinese aluminium sector with the World Trade Organization.

China has, unsurprisingly, strongly denied it has subsidised its aluminium producers, the base of the WTO complaint, and can be expected to defend itself rigorously.

But it will be easier to do so, if it can claim to be actively curtailing excess capacity.

This seems to be the policy in steel and, given the similarities between China’s role in global supply in both markets, it must offer Beijing a tempting template for aluminium.

Not least because the Trump administration has just raised the trade stakes further with a new probe into steel imports in the U.S. How long before it does the same for aluminium imports? Reuters

Beijing’s plan to force capacity reductions in the area around the capital city next winter had already lit a fire underneath the aluminium price

Stalling production?

China’s current production rate, meanwhile, seems to be slowing sharply.

”

16 Business Daily Wednesday, April 26 2017

Closing Gold

Mainland imports via Hong Kong more than double in March

Total gold imports rose to 116.68 tonnes in March from 49.026 tonnes in February.

Both total and net imports in March rose for a China’s net-gold imports via main conduit second straight month.

Hong Kong more than doubled month-on“In the past the (Chinese) banks had enough month in March, data showed yesterday. stocks to deal with the local consumption and Net-gold imports by the world’s top gold now it looks like the old inventories have been consumer through the port of Hong Kong consumed and the banks are replenishing rose to 111.647 tonnes in March from 47.931 tonnes in February, according to data emailed stocks,” said Joshua Rotbart, managing partner, J. Rotbart & Co in Hong Kong. to Reuters by the Hong Kong Census and China allows only 13 banks, including three Statistics Department.

China’s net-gold imports rose to its best since foreign lenders, to import gold, according to the Shanghai Gold Exchange. Reuters May 2016.

Funding

China’s new illegal fundraising topped US$36 billion last year Despite the number of new cases and funds involved edging down from 2015

C

hinese authorities vowed yesterday to step up a crackdown on illegal funding scams, after reporting 5,197 new criminal cases last year involving RMB251.1 billion (US$36.5 billion), state-run Shanghai Securities News reported.

More than 30 per cent of illegal fundraising cases were related to private investment and financial intermediaries, including unlicensed investment advisers and providers of third-party wealth management products, the report said.

The cases severely destroyed the order of financial markets, Yang Yuzhu, director of the joint-meeting for anti-illegal fundraising was quoted as saying, threatening China’s financial and social stability.

Authorities are now weighing a ban on organizations and individuals, except financial institutions, from publishing investment-related advertisements, the report said.

Although the number of new cases and the total amount of funds involved edged down from 2015, the government is facing heightened pressure due to the complexity of the new cases, which is slowing down their resolution, according to the report.

Moreover, financial fraud spread last year from China’s east to rural areas, where funds approached unsophisticated Chinese farmers, the office of the joint meeting said.

Last year China approved the arrest

of 9,441 people on suspicion of illegal soliciting public deposits and prosecuted 14,745, according to a separate Shanghai Securities News report yesterday.

While regulators embarked on a campaign against online finance fraud last year, focusing on peer-topeer (P2P) lending platforms, the rampant growth of the sector has created risks that will take time to resolve, the office said.

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

Another case where illegal fundraising took place was at the Fanya Metals Exchange in south-western Yunnan province, where hundreds of angry investors hit the street and complained of government inaction after losing more than RMB40 billion in investment products that had promised an annual return of up

to 14 per cent.

“The total number of cases is still at a historic high level,” the anti-illegal fundraising office said, according to the report.

The office also said it will ask provincial governments to examine potential illegal funding activities from May to July.

Targets for checks will include a variety of companies such as investment and financing intermediaries, P2P platforms, third-party payment services, crowd-funding platforms, private schools and rural organizations. Reuters

Infrastructure

Corruption

Tourism

Thai junta defends ‘cheap’ Chinese sub purchase

Beijing indicts former statistics S. Korean visitor numbers bureau director for bribery plummet due to China boycott

The Thai junta yesterday defended US$393 million earmarked for a Chinese submarine, batting back criticism of the secrecy of the deal, its cost and the questionable utility of the warship.

The submarine sale is the latest defence deal between Beijing and Bangkok, who have grown ever closer since Thailand’s 2014 coup.

Historically the Southeast Asian kingdom has been a major purchaser of western arms, especially from its traditional Cold War ally the United States.

But since the coup, which strained ties with the West, there has been a run of windfalls for China with Thailand scooping up several dozen Beijing-built tanks and inking plans to buy three submarines in total -- a purchase that will amount to US$1 billion.

Talks are also underway for China to construct a multi-million dollar armaments and military hardware repair facility in Thailand.

The military-led cabinet approved the funds for the first submarine purchase last week -- a decision that was not made public until Monday, triggering concern about a lack of transparency.

The proposed sale has long fuelled controversy with critics saying submarines are of little strategic value in a country with shallow surrounding waters and no stake in the South China Sea disputes. AFP

Wang Baoan, former head of China’s National Bureau of Statistics (NBS), was indicted on suspicion of accepting bribes, the official Xinhua News Agency reported yesterday.

Wang is accused of taking advantage of his posts as NBS chief and assistant and vice finance minister to benefit others, and “illegally accepting a huge amount of money and property” either by himself or through others, Xinhua said, citing the Supreme People’s Procuratorate. The report yesterday didn’t include any reference to the accuracy of Chinese economic data.

Wang’s name joined the long list of high-ranking officials targeted in President Xi Jinping’s campaign against corruption last year when the anti-graft authority, the Central Commission for Discipline Inspection, said he was suspected of severe disciplinary violations.

Wang was succeeded last year by Ning Jizhe, a close adviser to Premier Li Keqiang, who also continues serving in his prior role as the vice chairman of the National Development and Reform Commission, the country’s top economic planning body. Ning has said his agency must improve its accounting of the new economy and more accurately track new industries.

Former Sichuan province vice governor Li Chengyun also was indicted on suspicion of bribery. Bloomberg News

South Korea’s tourist industry has been hammered

by China’s boycott over the deployment of US missile defence system, with visitor numbers from the Asian giant plummeting 40 per cent in March, statistics showed.

Beijing banned Chinese tour groups from visiting the South from March 15 in a spat over the US Terminal High Altitude Area Defense (THAAD) system.

Normally more than half of tourists to the South are from China, but little more than 360,000 visited last month, compared to just over 600,000 a year earlier.

Total visitor numbers fell 11.2 per cent year-onyear to 1.23 million, the state Korea Tourism Organization (KTO) said.

The falls in tourism from China have also dealt a blow to duty-free shops in South Korea, with Chinese customers accounting for 70 per cent of their total sales, a Lotte spokeswoman said.

Lotte Duty Free has seen sales to Chinese customers fall 40 per cent on-year since the group tour ban in mid-March.

The South Korean retail giant has had to shut down 85 of its 99 stores in China due to boycott calls after the group agreed to provide a golf course in South Korea as a site for THAAD. AFP