China’s trade figures rebound in January Commerce Page 10
Monday, February 13 2017 Year V Nr. 1232 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Infrastructure
Development
HKZM bridge sees budget overruns, with price tag to be shared by three territories Page 4
‘Culture is key to sustainable development,’ says outgoing IC president Page 2
www.macaubusinessdaily.com
Real estate
Residential mortgage loan approvals drop 8 pct m-o-m Page 5
Protectionism
New Zealand ready to join China to lead global trade push Page 10
Nectar of the gods
Wine
Negotiating the tides of the city’s gaming industry - whose dips directly impact sales - as well as creating and holding on to human resources in a segment with an ever-increasing number of distributors, are some of the main challenges in the local wine industry. While China’s demand is driving up prices for the most prized wine to 5-year highs, consumption and lifestyle are accelerating demand for fine wine. Pages 6, 7 & 9
Casting the first stone
Can’t shake my stride
Barring unforeseen events, the gov’t is confident the city’s economy will see positive growth this year, says Secretary Leong. Although undergoing ‘economic adjustment’ in the first half of 2016, the ‘stabilization’ seen in the second half should continue this year. The gov’t will also work to change the labour structure of the city, introducing more non-gaming jobs.
Court Practices for awarding public contracts considered suspicious under former Prosecutor-general Ho Chio Meng are still in place in the Public Prosecutor’s Office, as revealed in the ongoing corruption case. Expense approvals were often left vague for trips sponsored by the office due to ‘confidentiality reasons’, and were even given for ‘preparatory trips’ to line up future meetings without any business on the itinerary. Page 3
Frictions reduced
Economy Page 4
HK Hang Seng Index February 10, 2017
23,574.98 +49.84 (+0.21%) Worst Performers
China Mengniu Dairy Co Ltd
+4.42%
Li & Fung Ltd
+1.79%
Belle International Holdings
-3.18%
AAC Technologies Holdings
-0.96%
China Merchants Port Hold-
+2.80%
Cathay Pacific Airways Ltd
+1.63%
Sino Land Co Ltd
-2.13%
Tencent Holdings Ltd
-0.78%
China Shenhua Energy Co
+2.67%
CITIC Ltd
+1.55%
China Overseas Land &
-1.43%
China Mobile Ltd
-0.74%
PetroChina Co Ltd
+2.00%
Bank of East Asia Ltd/The
+1.51%
China Resources Land Ltd
-1.38%
Want Want China Holdings
-0.73%
HSBC Holdings PLC
+1.28%
Wharf Holdings Ltd/The
-1.21%
CLP Holdings Ltd
-0.58%
Galaxy Entertainment Group
+1.87%
15° 18° 16° 19° 16° 20° 17° 20° 17° 22° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Diplomatic approach The White House said President Trump agreed in a phone call Thursday with China’s President Xi Jinping to respect the “One China” policy, which has been the basis of ties since the 1970s. The move instantly reduces tensions. Now, the focus turns to avoiding a trade war that could deal a blow to global growth. Page 8
2 Business Daily Monday, February 13 2017
Macau Land
Top court denies land appeal The developer who was supposed to build villas on a land lot near Rua de Choi Long, failed to have the government’s decision to take back the parcel overturned Kam Leong kamleong@macaubusinessdaily.com
T
he Court of Final Appeal has turned down an appeal filed by a developer attempting to suspend the contents of a government dispatch announcing the invalidity of the developer’s land concession over a land lot near Rua de Choi Long in Taipa last April. According to the Official Gazette, the land, known as Lot PO2, was granted to a developer named Raimundo Ho in 1987 for the construction of 14 three-storey villas and a clubhouse. The contract was later changed in 1992, allowing the developer to build seven additional two-storey villas to replace the clubhouse. An announcement by the top court last week shows the appeal
was against a recent ruling by the Court of Second Instance that rejects the suspension of the status of the dispatch. The developer detailed in his appeal to the top court that he would be pursued for compensation by 14 contracted buyers of the units if he needed to clear the construction on the parcels and failed to provide other facilities as promised. But the top court perceived that it was too late for the appealer to declare such possible losses, which were not mentioned in his original request to the Court of Second Instance. ‘[He] could have indicated the future losses – the predictions that he needs to compensate the third parties - in the original request but not in this one that is against a court decision,’ the top court wrote. According to the announcement,
the developer requested the second court to overturn the government’s decision on the grounds that the dispatch would harm the benefits of the 14 buyers. Nevertheless, the second court r ej ect e d th e a p p l i cati o n l ast November, saying the appealer could only use his own possible irreparable losses from the order as grounds for the appeal. The developer’s land concession over the land lot expired in June 2012,
according to the dispatch. The city’s official cadastral map shows that the involved land lot is located near the Iat Seng Building of the Taipa social housing complexes. The current Land Law mandates that no extensions are allowed for temporary or conditional land concessions, which carry a validity of 25 years, if developers fail to complete their projects, after which time their plots can be taken back by the government.
Cultural Affairs
New Year’s wishes. And promises A culturally sustainable city is IC’s wish for the year ahead. The cultural bureau’s nearly half a billion pataca-budget for 2016 was a good start, but it has not prevented the shipyards in Coloane from falling apart Sheyla Zandonai sheyla.zandonai@macaubusiness.com
“Culture is key to sustainable development,” said Guilherme Ung Vai Meng, the departing President of the Cultural Affairs Bureau (IC), regarding the group’s plans for this year and into the future. The comments came at the IC’s Spring Luncheon for the Year of the Rooster, held last Friday at the Grand Lisboa Hotel. During the encounter, the group presented a review of its 2016 activities and accomplishments in the field of the arts, heritage, and culture, in addition to highlights of some of the initiatives planned for 2017, to members of the Cultural Consultative Committee, the Cultural Heritage Committee, as well as representatives of local media and news agencies, in Chinese, English, and Portuguese. “This year, we will continue to deepen and expand the cooperation with other governmental departments and organizations, working together to develop and improve cultural activities,” Ung highlighted to the attendees. Accompanied by the two IC Vice-Presidents, Leung Hio Ming (the cultural bureau’s next President) and Chan Peng Fai, Ung updated media on the sidelines of the event, noting
two matters to be tackled regarding the Coloane shipyards: structure and content. “As for the planning, it is divided in two parts, one part is about the revitalization of the site, and another part is about its consolidation, the technical work necessary to strengthen the structure, because the facilities are currently in a dangerous state,” said Ung. In response to Business Daily’s queries, the President explained that in
accordance to an agreement with the Land, Public Works and Transport Bureau (DSSOPT), the IC had already delivered a conclusive opinion on the condition of the site to the bureau in 2012/2013. “Currently we have not yet received new demands from DSSOPT,” he noted. “First, we will reinforce the structure, trying, as far as possible, to keep the original appearance of the initial shipyard structure. The direction to follow is to preserve what is possible from the previous image and history of the site. Then, once the facilities are safer, we will proceed to invite people from different sectors to see the work.” The IC President added, however, that since they haven’t received permission to enter the site, they are unable to examine it accordingly,
Property
Agile pre-sales grow by over half in January Guangzhou-based property developer, Agile Group Holdings Ltd saw pre-sales for its residential projects in the mainland surge by 58.8 per cent year-on-year for the first month of the year, reaching a total of RMB4.62 billion (MOP5.4 billion/ US$670 million). The company’s latest operating figure updates on the Hong Kong Stock Exchange show that its total gross floor area pre-sold throughout the month amounted to 359,000
square metres, with an average selling price of RMB12,893 per square metre, an increase of 34 per cent from RMB9,614 per square metre one year ago. The group is popular among local and Hong Kong investors for their residential projects on the mainland. Its major rival in the segment catering to the SARs, is Country Garden Holdings Company Ltd. According to a filing by Country Garden last week, its contracted sales
reached RMB48.6 billion for the same month, surging by 289 per cent yearon-year, and involving gross floor area of some 5.49 million square metres, an expansion of nearly 250 per cent year-on-year. The company noted in the filing that some RMB35.3 billion of the contracted sales for the month would be attributable to owners of the company, a figure that is 294 per cent higher than the RMB8.95 billion for the same month last year. K.L.
so as to issue an opinion about the amount of technical work required in order to restore and place the site in safe condition.
No more shops, please
Regarding the three structures that will remain standing, that is, a shipyard and two stilt-houses, after the other ten or so are demolished, the IC President explained that the cultural bureau has, since the beginning, pledged to avoid pursuing “commercial plans” for the site. “We don’t want to transform the site into a commercial area, for instance, by converting it into a street with shops selling souvenirs. And for that reason we are still awaiting more questions or consulting on the part of DSSOPT.” Questioned about the development of a museum that would celebrate the maritime history of the site, Ung Vai Meng replied that such a decision falls under the scope of the Macau Government Tourism Office (MGTO). As to why no works have been carried out on the area since 2012, when IC delivered its opinion, until now, this question remained unanswered. Regarding the new central library, Ung noted that: “our team is ready and in terms of the chosen location, we will later provide more explanations to the public. In the third and fourth quarters of 2016, we received lots of questions from citizens and from different sectors. Overall, opinions were positive and we expect work on the new central library to be launched as soon as possible.” The Macau SAR Government disbursed a total of MOP445.46 million to fund activities of the cultural bureau for the whole year of 2016, according to a report in the Government Address for the 2016 Fiscal Year.
Business Daily Monday, February 13 2017 3
Macau
Crime
Officially unofficial trips Former Prosecutor-general Ho Chio Meng claimed a trip to Dubai with other defendants was for official purposes, while the current assessor of Prosecutorgeneral Ip Son Sang said suspicious practices for awarding public contracts (of which the former top official is accused of being involved in) are still being used by the current Prosecutor’s Office Nelson Moura nelson.moura@macaubusinessdaily.com
A
ccording to former Prosecutor-general Ho Chio Meng, his trip to Dubai in 2009 with former consultant and defendant Wang Xiandi, was part of a preparatory visit for an international Prosecutor’s conference scheduled to happen 10 months later in the same country. The former top official is accused of having used funds from the Prosecutor’s Office (MP) to finance a MOP132,510 (US$16,582) three-day
trip to Dubai, a visit that included expenses for two-first class tickets, a stay in the 5-star hotel Palm Jumeirah, a barbecue and visits to local attractions. During the trip, the former top official was accompanied by Ms. Wang, who was hired by Ho and worked as a judicial assistant at the Prosecutor’s Office until 2014, although it is alleged that during this time she did not provide any actual services yet received MOP4.2 million in benefits. As the corruption trial of the former prosecutor-general continued in the Court of Final Appeal last Friday, the court heard the statements from Ms.
Man, Chief of the Personnel and Finance Department of the MP between 2001 and 2010.
Out and about
When questioned by the Assistant Prosecutor as to why her department had approved expenses for a preparatory trip that included only recreational activities and not training activities, Ms. Man only stated that the expenses were presented by the Prosecutor’s Office’s Integrated Management Team (IMT) as an official visit, without official and personal expenses being differentiated. The trip plans and details were prepared by a travel agency operated by two defendants in the case, surnamed Wong and Mak, one of the alleged front companies said to have received diverse public contracts during the former prosecutor-general’s tenure. “We never had any superior officers go first to prepare official visits. I never remember that happening normally,” said Ms. Man. The court was shown the proposal for the trip handed in by the former chief of the IMT, surnamed Chan, a document with the entire trip described in one sentence – as an ‘official’ trip - something Ms. Man said was justified for “confidentiality reasons”. Like several witnesses from the Personnel and Finance Department in the trial so far, Ms. Ma said security and urgency were the reasons usually given by the IMT for supplying summarised travel expenses, with names and destinations blacked out for official visits by the Prosecutor’s Office.
Normal practice
Company structure
Amax places existing shares Casino investor Amax International Holdings Ltd announced last Friday after trading hours that the company would place up to 13 million of its existing shares at HK$0.5 per share, while its chairman and chief executive officer Ng Man San has agreed to subscribe for the shares. According to its filing with the Hong Kong Stock Exchange, the gross proceeds from the subscription are expected to reach
HK$6.5 million, while net proceeds will amount to some HK$6.1 million. The company said the gain would be used for general working capital and investments of the company. Amax holds a 24.8 per cent equity interest in Greek Mythology Casino, located inside the now-closed Beijing Imperial Palace Hotel in Taipa. The casino has been shut down for renovation since last year.
The former Chief of the Personnel and Finance Department also confirmed that under Mr. Ho’s management, she “didn’t remember having any public tenders” for service contracts awarded by the Prosecutor’s Office, with most of the contracts being granted to the same companies. However, Ms. Man supported the defence’s argument that the practice was legitimate in some situations, saying the practice continued after current Prosecutor-general Ip Son Sang took charge in December of 2014. Currently working as an assessor for the Prosecutor’s Office, Ms. Man said that apart from contracts for repair works for the new Prosecutor’s Office installations, most service and purchase contracts continued to be awarded directly or by invitation. The assessor to Ip Son Sang said
that on some occasions, security was still used as a reason for not opening public tenders for contracts worth over MOP750,000, and that dividing contracts so as not to not exceed the limit was also accepted - practices that Mr. Ho has frequently been accused of being involved in. However Ms. Man stated that during the former top official’s management tenure, irregularities such as incomplete travel receipts and rejections of cheaper contract proposals were common, something she said that even led to arguments between the former deputy director of the Prosecutor’s Office and the former chief of the Public Prosecutor’s Office, who is also a defendant in the case.
Welcoming guests
The court also heard the testimony of a former assistant in the Judiciary Assistance Department, and sister of one of the defendants and employee at Wong Kuok Wai companies, surnamed Lam. Due to the involvement of her brother in the trial, Ms. Lam was given the choice not to provide statements on the issue - something she declined, leading the prosecution to suggest her statements were prepared beforehand. Mr. Ho is accused of hiring relatives and friends of his alleged associates, with Ms. Lam saying she only realised her brother worked at the Prosecutor’s Office after she started working there, and denying she had any knowledge that her brother worked with the travel agency that prepared a trip she took to Beijing. The prosecution presented receipts for an official trip to Beijing in 2013, with a MOP16,000 single ticket paid by the MP, while other receipts from the travel agency showed Ms. Lam had also taken her two children with her. The former MP employee said she had paid for the tickets for her children directly to the travel agency, while denying having had any contact with her brother. When questioned by Judge Lai as to why she took her children on an official visit, Ms Lam stated that it was common practice by employees. Ms. Lam also confirmed the defence’s argument that several guests and visitors from Mainland China had been received at the resting room on the 16th floor of the Hotline Building and at a residence in Cheoc Van, both spaces rented by the MP. The prosecution is arguing that during Mr. Ho’s tenure, the two properties were used for his personal use, under the false pretences of being used for receiving guests from the Prosecutor’s Office. The trial will continue tomorrow.
4 Business Daily Monday, February 13 2017
Macau Opinion
Sheyla Zandonai* A man Guilherme Ung Vai Meng is stepping down from his position as President of the Macau Cultural Affairs Bureau this week. The artist-turned-bureaucrat spearheaded the cultural bureau for nearly seven years – though he joined the institution much earlier, over 30 years ago. He may have allied with the government, as he should, but on that side of affairs, he led a silent rebellion too. He, as other well-intentioned highly-positioned men and women in the administrative and political jobs of this town, got a taste of how hard it can be to get anything of worth accomplished, to pursue a vision – lest they have one to follow. Ung chose his fights. And he fought many, taking risks as well. Consider the Iec Long Fireworks Factory in Taipa. He made a U-turn on the case when the chances for renovating the site were seemingly a dead deal. Focusing on this and other sites outside World Heritage and local protection lists, he broadened Macau’s heritage fabric, restoring some of the missing links with Chinese history the city should also epitomize. Making amends with those previous heritage classifications in which Portuguese monuments and sites are overrepresented, he was aligning with the same “East meets West” rhetoric that has travelled from the times of the Portuguese administration to date. Nevertheless, he was stamping his mark. Though critics of his positioning and choices during his administrator career have lately labeled some of his preferences as strategic mistakes – seen as somewhat “downgrading” the distinction that Portuguese legacies confer to the city – his struggle to rehabilitate the old courthouse as the site for the new Central Library says otherwise. Undeniably, heritage was his main cause. He worked diligently to expand original notions tied to monumentality and materiality to an idea of heritage as living matter. Buildings should be renovated and lent back to the people, as libraries, museums, community centres. They should be revived and “inhabited” by the population – not only by tourists. Though Ung also had to comply with the latter, he demanded Macau residents be granted history and culture; more often than not, their own. Surely, a few people made business out of this – construction companies and owners of properties targeted for safeguarding actions. Now, name one sector in which business is not an underlying force in Macau. Beyond that, Ung Vai Meng is a man and an artist. His legacy should also be assessed along those lines. *scholar and contributor to this newspaper.
Economy
Lionel Leong: expecting slight economic growth The Secretary perceives that the city will head towards positive growth in the year ahead, as long as no sudden instabilities occur Cecilia U cecilia.u@macaubusinessdaily.com
I
f no unforeseen circumstances appear in the year ahead, the local government is confident that the city’s economy will produce slight positive growth this year, stated the Secretary for Economy and Finance, Lionel Leong Vai Tac on the sidelines of the Spring Lunch held by the Macau Association of Banks (AMB) last Friday. The Secretary reviewed the economic situation experienced last year, pointing out that development had been better than expected. “In the first half of 2016, we were still experiencing economic adjustment, but by the second half the economy had stabilized,” said the Secretary. “As such, the scale of adjustment was narrower than we had expected.”
Secretary Leong remarked that the uncertainties that affected the city throughout 2016 will persist this year, pointing to examples such as speculation over U.S. interest rates driving changes in the rate of the Chinese yuan.
Normal changes
Regarding local labour affairs, meanwhile, the Secretary stressed that the government will continue to support workers to broaden their opportunities in different industries. “We encourage workers who are working in the gaming industry, especially dealers, to receive training so as to gain opportunities to work in the non-gaming sectors,” Secretary Leong noted. He also explained that the change in the labour structure was the outcome of meeting the current changing demands for labour, saying that
more non-gaming jobs are being introduced in the city. “I think, most importantly, that the government should stay in close connection with industries and sectors […] in the way that we’ve always mentioned: providing on-site training, so as to enable workers to cope with the changing demands of the market,” added the Secretary.
Hong Kong-Zhuhai-Macau Bridge
With the announcement of the soonto-be-completed construction of the super bridge, the Secretary indicated that the government will carry out studies regarding the management of the operations of the bridge. “ W e m u s t h av e c a u t i o u s consideration in introducing different parties to take part in the operation of the bridge,” said Secretary Leong. “Once the bridge is opened, challenges and business opportunities will be created, such as in the logistics and retail sectors.” He further declared that the government will continue communicating with industries and will provide enough information, claiming that it will offer necessary support in areas such as personnel training.
Necessary steps taken
Meanwhile, with the decreasing rate of the yuan, the President of the Administrative Committee of the Macao Monetary Authority (AMCM), Anselmo Tang Lin Seng said it has taken necessary precautions for its yuan investments, part of its fiscal reserves. “We have taken necessary steps such as hedging,” said President Tang. The AMCM head indicated that more data about the investments will be released soon. The Deputy Director-General of the Liaison Office of the Central People’s Government, Yao Jian and the Chairman of AMB, Wang Shaojun also attended the Spring Lunch held by the Macau Association of Banks last Friday.
Infrastructure
Colossal bridge price overruns Cecilia U cecilia.u@macaubusinessdaily.com
The Hong Kong Secretary for Transport and Housing, Anthony Cheung Bing-Leung admitted last Thursday that the budget for the Hong Kong-Zhuhai-Macau Bridge will exceed the original expected cost, according to Hong Kong’s Information Services Department. The cost overruns will be shared between the three governments. However, the Hong Kong official did not reveal the exact figures, saying that there had been challenges with the construction of the main bridge at Lingdingyang (the middle channel of the Pearl River estuary) as well as manpower issues. Construction on the bridge started in 2009, and it was originally budgeted to cost some RMB15.73 billion (MOP18.27 billion/US$2.29 billion) with Macau to contribute RMB1.98 billion. After inspecting the Hong Kong section of the super bridge project last Thursday, Cheung also revealed that the Hong Kong section will be completed by the end of this year. Regarding the predicted opening date, the Hong Kong official said it would depend on the decision of the
Guangdong, Hong Kong and Macau governments. “The commissioning date is yet to
Rosário: plan to open for vehicles by this year-end
The Secretary for Transport and Public Works, Raimundo do Rosário offered no comments on the budget overruns for the Hong Kong-Zhuhai-Macau Bridge, but said that the limited time for such a large-scale construction project had posed the biggest challenge. According to local Chinese newspapers, Macau is currently focusing on the construction of
be determined,” Leung said after the inspection. “At the moment, whether the main bridge in mainland waters or the Hong Kong side works as well as the Macau, Zhuhai side works, the objective is to complete the works by the end of this year.”
the artificial island in an attempt to reach the goal of opening the bridge for vehicle travel by the end of this year. In addition, the Secretary added that discussions on the matter of border crossings, vehicles, and passenger travel are still ongoing. He affirmed that an official announcement would be released by the three governments once concrete decisions have been made.
Business Daily Monday, February 13 2017 5
Macau Banking
Home mortgages tumble But new commercial real estate loans approved by local banks surged by 126 per cent month-on-month Kam Leong kamleong@macaubusinessdaily.com
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ocal banks approved MOP4.2 billion (US$519.3 million) worth of residential mortgage loans for the last month of 2016, a decrease of 7.8 per cent compared to the MOP4.5 billion recorded one month earlier, although new approved equitable mortgages recorded a double-digit month-on-month increase for the same month. According to the latest official data, released last Friday by the Monetary Authority of Macau (AMCM), 93.5 per cent of the total newly approved home mortgages were granted to residents, amounting to MOP3.9 billion, a jump of 10.4 per cent month-on-month. But approved mortgage loans to non-residents plunged by 72.7 per cent month-on-month to MOP268.9 million. AMCM explained the notable decrease was due to the high comparison base of MOP983 million for November. Nevertheless, total approved equitable mortgages, those collateralised by uncompleted units, rose by 20.4 per cent month-on-month to MOP310.3 million, compared to MOP257.7 million one month previous.
Of the total, those to residents accounted for 97.4 per cent of the total, reaching MOP302.1 million, an increase of 20.5 per cent monthon-month. Meanwhile, those to non-residents also rose by 14.9 per cent month-on-month to MOP8.1 million, up from MOP7.1 million in November. On a year-on-year comparison, total newly approved residential mortgage loans decreased by 16.6 per cent. In particular, new equitable mortgage loans slumped by 49.6 per cent as compared to one year ago. As at the end of 2016, the outstanding value of home mortgages was
MOP181.8 billion, an increase of 1.2 per cent month-on-month, or 5 per cent year-on-year. According to AMCM, home mortgages held by residents made up 93 per cent of the total value, amounting to MOP169.1 billion, a slight increase of 0.6 per cent month-on-month, or 3.8 per cent year-on-year, while those of non-residents grew by 10.3 per cent month-on-month, or 24.3 per cent year-on-year, amounting to MOP12.8 billion.
Commercial mortgages
On the other hand, new commercial real estate loans approved by the
local banking sector reached MOP4.6 billion for the month, a jump of 125.5 per cent month-on-month. Particularly, those to non-residents surged by 653.4 per cent month-on-month to MOP357 million, up from MOP47.4 million one month earlier, which AMCM explained was because of ‘larger loan amounts recorded for a number of approvals’ in December. In addition, those made to residents also recorded a notable increase of 113 per cent month-on-month to MOP4.2 billion, accounting for 92.2 per cent of total newly approved commercial mortgages. Compared to the same month last year, new approvals of commercial real estate loans, however, decreased by 12.3 per cent, as those to residents went down by 13.2 per cent year-on-year. Meanwhile, the outstanding value of commercial mortgages declined by 2.1 per cent month-on-month to MOP169.4 billion as at the end of last year, yet the amount still represents an increase of 3.9 per cent as compared to one year ago. Of the total outstanding value, the resident component accounted for 90.1 per cent, amounting to MOP152.7 billion, a decrease of 1.1 per cent month-on-month, while that of non-residents fell by 10.6 per cent month-on-month to MOP16.8 billion. Regarding delinquency ratios, the figure for home mortgages was 0.17 per cent as at the end of the year, remaining virtually unchanged from the month previous, but up 0.08 percentage points year-on-year. Meanwhile, the delinquency ratio for commercial real estate loans went up by 0.01 percentage points monthon-month, or 0.11 percentage points year-on-year, to 0.13 per cent.
6 Business Daily Monday, February 13 2017
Macau
Interview | SMEs
Topping up the market Some industries are more closely linked than you would expect. So explains Timothy Feather, general manager of local wine company Claret Wines. Feather points out that the downturn in the MSAR’s casino industry has had a direct impact on his business, and that in order to be sustainable in the long term, diversifying wine product ranges is key. Annie Lao annie.lao@macaubusinessdaily.com
W
hen was your company established? I started my business at the end of 2014. It is still a relatively young business and has been operating in Macau for about two years. I have actually been in the wine business for a long time already. Before opening my own business I was working for a wine company, called Summergate, a wine distributor, for eight years in Macau. It was always in my mind that I wanted to do my own thing. When you work for a big company, it is great to have all the advantages. But you are not choosing the products you are selling. They were chosen by somebody else, so I wanted to set up my own business and choose my own wines to sell and think of which wines would be good for the market. I was saving my money and the year of 2014 came along and I made the move. Sometimes, you have to do it, or you never do. You never know if it is the right time or not, but you just have to take the risk. There is always a risk when you start your own business by yourself. Was it a good time in the industry to start the business? To be honest, I did not pick the best time to start my company. If I could look back to choose a perfect time to start my business, I would have done it three years before. It was when the Macau wine industry, in 2011 or 2012, seemed to be “the sky was the limit”. It was because the
casinos were buying huge quantities of wine, when the Macau gaming industry was growing every month. How are the two industries linked? The wine industry is connected to the gaming industry because we feed the gaming industry with the wines they need. When the gaming industry is successful, we are successful. When the gaming industry drops a bit, we drop a bit. 2014 was the year when the local economy dropped down a bit. Do you mainly sell your wines to the casinos? I am still here selling mainly to the casinos, probably about 90 per cent of our total sales are coming from the casinos. But I don’t really like to have 90 per cent of sales from the casinos. I would prefer to be more balanced, because the casino industry is not doing great right now, so I would like to diversify and sell more to private businesses, private individuals, shops and supermarkets. Has your company benefited from the opening of new casino resorts? Yes, sales are definitely growing. The wine industry and the gaming industry are following each other quite closely. The drop in the gaming industry was quite dramatic sometime in 2014. Our imports of wine sales dropped too. But it was not as quite bad as the gaming industry. Although the current trend for the casinos is to buy the less expensive wines, in the old days they were very much buying fine wine for the high rollers. But the market is changing: the casinos are getting away from VIP
gaming, that means they are spending less on expensive wines. However, they are buying more cheaper wines.
“The casino industry is not doing great right now, so I would like to diversify and sell more to private businesses, private individuals, shops and supermarkets” Do you consider Macau as a profitable market for selling wines? Yes it is. It is not that easy compared to the past, but it is still possible to make profits if you work hard. I would say the wine market is getting crowded though. When I started with Summergate in 2007, back then it was a much easier market. There were only a handful of wine distributors, but now there are a lot of them. Some of them are staying but some of them are leaving the industry. I am a small company and I want to grow but it is a competitive market now. The competition is not only from Hong Kong, but also from a lot of new companies who have opened in Macau. Over the last two to three years, the casinos, especially the Venetian, has a lot of programmes that reduce the amount
of vendors they are getting from other countries. Instead, they are trying to support more the local SME (small and medium enterprises) suppliers for wines. I need that support as we have a lot of competition coming from Hong Kong. What is the most popular wine that you are selling? I import wines directly from all around the world. France is always the most popular country for wine. French wines account for 85 per cent of the total amount of the wines we sell. The rest is followed by Portugal. Portuguese wines account for 4 per cent by volume, but about 20 per
Business Daily Monday, February 13 2017 7
Macau cent of the total sales because the Portuguese wines are cheaper to sell in Macau.
“Now a lot of people are interested in learning about wines and they want to taste new stuff” What are the services you provide to private companies? I am always looking for new opportunities to work with other businesses. We do private events as well. If a bank wants to hold a wine tasting for their top clients, we can come in to set up a wine tasting and present a talk about wine for them. We also do wine tasting in the hotels. We do as much as we can to promote the wine business.
cheaper wines to the supermarkets. The casinos have two concerns: one is that they don’t want their wines to be seen in the supermarkets; and another is that they don’t want their customers to be able to compare the prices. I was the first person in Macau to bring up the concept of selling unique labels only to be sold to the supermarkets. However, I need to get back on it and I don’t have the human resources to do it. Hopefully, I can do it this year. Also we have big companies that do gifting for Chinese New Year, Christmas, Mid Autumn Festival, etc. They order hampers with fruit and wines. That can be a really good business. How do you perceive local habits for drinking wines? The locals are much more open now and they are trying new things. People who are between their 20s and 30s, with jobs and a decent disposable income, are drinking wines. They not only want to know about wine, a lot of them actually are learning wine online or casually going to wine courses. All of these wine courses are getting more popular. People who join the courses are not from the industry. You see 80 per cent of students in wine courses are young people and housewives. Now a lot of people are interested in learning about wines and they want to taste new stuff. If you look back at the wine industry in Macau 15 years ago compared to now, it has really changed, as the industry now has wider variety. It has been driven by the people who want to learn more about wines.
Do you find it hard to sell your wine to the local supermarkets? Selling to supermarkets is not easy. Probably it is my problem, I think it is the language barrier. If you are talking to the big groups of supermarkets, you need to build a relationship with the managers of the supermarkets. In Macau, there are a couple of big supermarkets, which have 20 to 30 stores. If you want to sell your wines, it is like a full-time job, driving a car around the city to these shops to sell to the managers. If you can build a good relationship with them, the wines will sell really well. But if you don’t, the wines are just sitting on the shelf. At the moment, I don’t have someone yet to work on this job. I hope I can find somebody to do it soon. It is not easy because you need to hire somebody with the local language, local knowledge and wine knowledge. Having wine knowledge is good, but not essential, as wine knowledge can be taught. As long as you have somebody with good business acumen and somebody who is good with people and can talk with people. Those are the key and definitely a bonus.
What are the challenges? Hiring people is tough. I have one vacancy which has been open for one year already. It seems like locals are more interested in working in the casinos with a higher salary. It is getting harder than even before. I have never had such a long vacancy. Also, we don’t pay the biggest salary, but not the lowest. We offer competitive salaries. Within the wine industry, a lot of wine companies, when you get a good person and you train them up, all the other wine companies are watching and trying to grab the talented workers from you. So once you have them, it is also hard to keep them.
Are you selling different wines to the supermarkets than you sell to the casinos? You need to be careful with supermarkets regarding what brands you are going to sell because the casinos don’t want to see the same wines in the shops. In fact, I have developed different wines, which are only sold in the supermarkets. Usually, we sell
Is your location important for your business? The current location comes with the parking space, but it is not the best part of town. To be honest, we don’t do much business around where we are located. Almost all of my meetings, 90 per cent of them, I would go to meet my clients so they don’t have to come to meet me here. We
provide services to them so I have to be convenient for our customers. I have to go to meet them with wines and make it easy for them. Macau is small and nowhere is more than 20 minutes away. Therefore, most of the meetings can be done outside the office. What new trends are emerging? I have brought a fresh concept to Macau. All my wines in the profile are small family-owned wineries. I don’t deal with big wine companies. I only deal with small family-owned companies, which people like. I also sell organic and natural wines. People are interested in buying organic wines. It is a trend. The difference in selling wines from a small family-owned winery is that people are interested in hearing the story behind the wine made at the small wineries. If the wine has a story, people will love it.
“When the gaming industry is successful, we are successful. When the gaming industry drops a bit, we drop a bit” How do you promote your business? Promoting wines to the casinos is easy for me because I have been in Macau for a long time. Before opening my own business, I was working in the casinos for food and beverages, so I have a deep connection with a lot of people who I worked with before. The only money that I spend on advertising is on Facebook. It actually helps and does not cost that much. I have not advertised in a
magazine for years. I did it when I was in Summergate. To be honest, I don’t see the advantage of doing it. It seems like advertising on social media is the only way to do it nowadays. We want to do more with social media such as Instagram. I have started to do more advertising on Instagram. What is your strategy for sustainability in the industry? It is to build a long-term relationship with customers. We are not here to sell wines quickly and then not see the customers again. We are here to build relationships that can last a long time down the road. We want to deliver a clear message to our customers that we are here for the long-term to work with. What is the most challenging thing you face daily? Being fresh and not becoming boring, not allowing people to say that I have seen your product profiles many times and have tried out all of your wines. It is a matter of having something new, not all the time, but keeping yourself fresh all the time. Adding new product ranges to the existing products so as to keep people talking about you and keep the market aware of where you are. We keep our company fresh on social media every few weeks by adding new wines and holding events. You cannot let people forget about you. What are your future plans? I would like to expand my company organically, as I am not in a hurry. Obviously, my goal is to grow and my company has grown over the last two years. I don’t plan to take over the wine industry, but I would like to be a major force in the wine industry in Macau to keep providing wines which people find interesting and provide them with good quality wine.
8 Business Daily Monday, February 13 2017
Greater China Diplomatic boost
Trump changes tack, backs “one China” policy in call with Xi China and the United States also signalled that with the “one China” issue resolved, they could have more normal relations
U
.S. President Donald Trump changed tack and agreed to honour the “one China” policy during a phone call with China’s leader Xi Jinping, a major diplomatic boost for Beijing which brooks no criticism of its claim to self-ruled Taiwan. Trump angered Beijing in December by talking to the president of Taiwan and saying the United States did not have to stick to the policy, under which Washington acknowledges the Chinese position that there is only one China and Taiwan is part of it. A White House statement said Trump and Chinese President Xi had a lengthy phone conversation on Thursday night, Washington time. “President Trump agreed, at the request of President Xi, to honour our ‘one China’ policy,” the statement said. A spokesman for Taiwan President Tsai Ing-wen said in a statement it was in Taiwan’s interest to maintain good relations with the United States and China.
The U.S. and Chinese leaders had not spoken by telephone since Trump took office on Jan. 20. Diplomatic sources in Beijing say China had been nervous about Xi being left humiliated in the event a call with Trump went wrong and the details were leaked to the media. Last week, U.S. ties with staunch ally Australia became strained after the Washington Post published details about an acrimonious phone call between Trump and Prime Minister Malcolm Turnbull. No issue is more sensitive to Beijing than Taiwan. “Representatives of the United States and China will engage in discussions and negotiations on various issues of mutual interest,” the statement said. In a separate statement carried by China’s Foreign Ministry, Xi said China appreciated Trump’s upholding of the “one China” policy. “I believe that the United States and China are cooperative partners, and through joint efforts we can push bilateral relations to a historic new
high,” the statement quoted Xi as saying. “The development of China and the United States absolutely can complement each other and advance together. Both sides absolutely can become very good cooperative partners,” Xi said. Taiwan’s top China policymaker, the Mainland Affairs Council, said it hoped for continued support from the United States and called on Beijing to adopt a “positive attitude” and “pragmatic communication” in resolving differences with Taiwan. China is deeply suspicious of Tsai, whose ruling Democratic Progressive Party espouses the island’s formal independence, a red line for Beijing, and has cut off a formal dialogue mechanism with the island. Tsai says she wants peace with China. In Beijing, Chinese Foreign Ministry spokesman Lu Kang said the “one China” principle was the political basis of Sino-U.S. ties. “Ensuring this political basis does not waver is vital for the healthy, stable development of China-U.S. relations,” Lu said.
“Paper tiger”
Lawyer James Zimmerman, the former head of the American Chamber of Commerce in China, said Trump
should have never raised the “one China” policy in the first place. “There is certainly a way of negotiating with the Chinese, but threats concerning fundamental, core interests are counterproductive from the get-go,” he said in an email. “The end result is that Trump just confirmed to the world that he is a paper tiger, a ‘zhilaohu’ - someone that seems threatening but is wholly ineffectual and unable to stomach a challenge.” Jia Qingguo, dean of the School of International Studies at Peking University and who has advised the government on foreign policy, said Trump had created a lot of uncertainty but was now back on track. “Trump has reassured people that he will be a responsible president,” he told Reuters. “...This is good news for China, because stable U.S.-China relations are good for China. Now we can do business.” The United States switched diplomatic recognition from Taiwan to China in 1979, but is also Taiwan’s biggest ally and arms supplier and is bound by legislation to provide the means to help the island defend itself. Defeated Nationalist forces fled from China to Taiwan in 1949 after losing a civil war with the Communists. Beijing has never renounced the use of force to bring Taiwan under its control.
“Extremely cordial”
China wants cooperation with the United States on trade, investment, technology, energy and infrastructure, as well as strengthening coordination on international matters to jointly protect global peace and stability, Xi said in the statement. The White House described the call, which came hours before Trump plays host to Japanese Prime Minister Shinzo Abe, as “extremely cordial”, with both leaders expressing best wishes to their peoples. There was little or no mention in either the Chinese or U.S. statement of other contentious issues - trade and the disputed South China Sea and neither matter has gone away.
U.S. President Donald J. Trump (L) and Chinese President Xi Jinping (R). Lusa
Reuters
DreamWorks sale
U.S. SEC charges Mainlander with insider trading Civil lawsuit seeks fines, the return of illegal profit, and other remedies Jonathan Stempel and Eric Walsh
A Chinese private equity executive has been charged by the U.S. Securities and Exchange Commission with reaping US$29.05 million of illegal profit from insider trading ahead of Comcast Corp’s purchase of DreamWorks Animation SKG Inc. The SEC said it also obtained a court order freezing five brokerage accounts controlled by Shaohua “Michael” Yin, 44, a partner at Hong Kong-based Summitview Capital Management Ltd and graduate of the University of Pennsylvania’s Wharton School. Yin was accused of trading illegally in DreamWorks stock before the US$3.8 billion takeover was announced, through Interactive Brokers accounts held in the names of five other Chinese nationals, including his septuagenarian parents. The defendant, who has homes in Beijing and Palo Alto, California, was charged a week after the FBI executed
a search warrant on his mobile phone for evidence of insider trading, as he prepared to board a flight to Beijing from San Jose, California, the SEC said. Yin did not immediately respond
to an email seeking comment. It was unclear whether he has hired a lawyer. Summitview was not charged, and did not immediately respond to a request for comment outside business hours. According to the SEC, Yin spent US$56.3 million on nearly 2.15 million
Securities and Exchange Commission headquarters
DreamWorks shares in a three-week period after PAG Asia Capital, an Asia-focused private equity fund manager, made a confidential bid to buy the film studio last March 31. Yin unloaded the shares around the time of Comcast’s April 28 announcement that it would buy DreamWorks for US$41 per share, well above the US$26.25 average price he paid, the SEC said. “The precision with which these trades were timed, combined with the sheer scale in which they occurred, could not be the product of chance,” the SEC said in its complaint filed with the U.S. District Court in Manhattan. U.S. District Judge Paul Oetken froze the five accounts following what the SEC said were several withdrawal requests in the wake of the search warrant. The SEC said the accounts also profited in securities of China-based 58.com Inc, Ctrip.com International Ltd and Giant Interactive Group Inc ahead of market-moving announcements, and conducted “suspicious and profitable trading” in U.S.-based Lattice Semiconductor Corp. Friday’s lawsuit named as “relief” defendants Yin’s mother Lizhao Su, his father Zhiqing Yin, Jun Qin, Yan Zhou and Bei Xie. The DreamWorks takeover closed in August. Reuters
Business Daily Monday, February 13 2017 9
Greater China In Brief Minor quake
Taiwan’s TSMC says opers mostly fine
Investors
Capital controls are hitting wine lovers where it hurts Increased Chinese demand has seen prices for the world’s most prized wines rise to a more than five-year high Narae Kim
Wine snobs beware -- China’s crusade against capital outflows and yuan weakness are fuelling a price bump in your tipple of choice. Investors are hunting down those sought-after bottles of Grange to Lafite as they scramble to turn cash into assets amid Beijing’s curbs on capital leaving the country, and after the yuan capped its steepest annual decline versus the dollar in more than 20 years, according to Cult Wines Ltd., a U.K.-based wine investment company. “A lot of people in China suddenly have a different focus,” Tom Gearing, managing director at Cult Wines, which has £40 million (US$50 million) of funds under administration, said in an interview. “They are now asking us questions like, ‘is it a good offshore investment?’ ‘is it a good way to put money into a physical, tangible asset?’ ‘is it linked to the yuan?’ and ‘is it correlated to financial markets?”’ Increased Chinese demand has seen
prices for the world’s most prized wines -- as measured by the Livex 100 Fine Wine Index -- rise to a more than five-year high, racking up gains that would be the envy of any stock or currency investor wary of Donald Trump’s protectionist policy or upcoming European elections this year. A developing taste for wine has seen Hong Kong become the world’s second-biggest source of wine buyers after the U.K., accounting for 20 per cent of sales, according to Cult Wines, up from 12 per cent in 2014. Chinese wine drinkers are once again taking advantage of a buyerfriendly time in the market, repeating behaviour last seen back in 2008, when Asian buying helped drive wine prices to record highs. Mainland buyers snapped up mature wine last year after the British referendum result sent the pound plummeting, according to Guy Ruston, Asia-Pacific managing director at Bordeaux Index Fine Wine & Spirits Merchant in Hong Kong. “Consumption and lifestyle remain the key drivers of demand for fine
wine in China,” Ruston said. “But certainly buying as a vehicle for investment as the market matures and develops further will become an important motive for buying.” Chinese tastes are broadening beyond their traditional love for Bordeaux, with demand increasing for bottles from the Burgundy region, in central-eastern France, said Adam Bilbey, the Hong Kong-based head of Sotheby’s Wine, Asia.
“Consumption and lifestyle remain the key drivers of demand for fine wine in China” Guy Ruston, Asia-Pacific managing director at Bordeaux Index Fine Wine & Spirits Merchant in Hong Kong “While a lot of people still speculate in wine for profits, we actually see more and more highend clients within China buying wine for drinking,” he said. “So if we see wine is ending up with the end consumers who are drinking the wines, it makes for a real and healthy market.” Bloomberg News
Cryptocurrency
Bitcoin trading shrivels under government’s glare While the yuan weakened 6.6 per cent against the dollar last year, its worst performance since 1994, the bitcoin price has soared to near-record highs Brenda Goh
Trading volumes at China’s three largest bitcoin exchanges have plummeted after the central bank put the virtual currency market under sharper scrutiny a month ago in a move that coincided with official efforts to stem capital outflows. China had been the world’s leading venue for bitcoin trading, with analytics site Bitcoinity estimating that the OkCoin, Huobi and BTCC exchanges had accounted for more than 90 per cent of the global bitcoin market on Jan. 11. But data compiled by analytics platform Sosobtc showed the number of bitcoins traded on the three exchanges slumped from 13.6 million on Jan. 6 to just over 120,000 on Feb. 9. The People’s Bank of China launched checks into the three exchanges last month and they have responded by saying that they would improve their systems to prevent money laundering and the use of bitcoin to trade against the yuan. On Thursday, the People’s Bank of China said it had also warned smaller bitcoin exchanges that it would shut them down if they violated regulations.
That, and the relative anonymity the digital currency offers, has prompted some market operators to believe bitcoin had become an attractive, if niche, option for tech-savvy Chinese to hedge against the yuan and skirt rules limiting how much foreign exchange individuals can buy each year. The three main exchanges have introduced trading fees, stopped allowing margin lending and increased scrutiny of user identities, making it far less attractive for automated, high speed trades which had previously accounted for the lion’s share of their business.
The absence of trading fees had provided an advantage over overseas rivals earlier, but that advantage has now gone, traders said. Business has virtually dried up on Beijing-based high-speed bitcoin trading platform BotVS, according to chief executive Chen Zhenguo. “With the transaction fees the profits you can get from hedging (Bitcoin) are too low...You might as well put your money in Yu’e Bao,” he said, referring to a money market fund run by an Alibaba Group affiliate. Other traders voiced similar sentiments. Cai Wenhao, business manager at Sosobtc, said trading volume levels in China would likely normalise to around those seen on exchanges elsewhere, like the Hong Kong-based Bitifinex and U.S.-based Coinbase. Reuters
Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, said its operations were little affected following a minor earthquake Saturday in southern Taiwan. A 5.6-magnitude quake shook Tainan early on Saturday, according to the island’s Central Weather Bureau. The city was at the centre of a bigger 6.4-magnitude quake a year ago that injured hundreds and killed 117 people, mostly in one toppled apartment complex. TSMC’s operations were “minimally” affected by Saturday’s quake and first quarter shipments will remain on schedule, TSMC acting spokeswoman Elizabeth Sun said. Markets
Regulator still plans oil futures China’s top securities regulator is still preparing to launch oil futures and is considering lifting restrictions on stock index futures imposed during the 2015 stock market crash, the Shanghai Securities Times said on Saturday. The newspaper report cited an internal meeting at the China Securities Regulatory Commission (CSRC) held by its chairman, Liu Shiyu. It did not give any details about the timing of the crude futures contract launch or when the limits may be relaxed. A move to end curbs on equity futures would likely spur a return of institutional investors and hedge funds to the market and boost liquidity, which has shrunk due to the restrictions. Capital markets
Authorities vow to punish ‘giant crocodiles’ China’s top securities regulator vowed on Friday to apprehend law-breaking financial tycoons he called “giant crocodiles”, saying they will not be allowed to “suck the blood” of retail investors, financial magazine Caixin reported. Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), said that a group of such businessmen had circumvented regulations to ultimately control financial institutions and dominate board rooms. The market won’t allow them to “to peel the skin and suck the blood of retail investors, and China should stick to its plan to capture a group of giant crocodiles and bring them back,” Liu was quoted as saying. Investment
Sinohydro in talks for Odebrecht stake Chinese construction company Sinohydro is negotiating with Odebrecht to take over the Brazilian company’s stake in Colombia’s Magdalena River navigability project, a deal that could save the US$873 million contract, a government official said. Power China is interested in becoming involved through its Sinohydro unit, Luis Fernando Andrade, president of Colombia’s National Infrastructure Agency, told Reuters. “The only way out for this contract is another company taking it over,” he said. Odebrecht received the concession in 2014. The company is trying to divest its 87 per cent stake in the Navelena consortium.
10 Business Daily Monday, February 13 2017
Greater China
Commerce
Robust trade data a boon for Asia as protectionist risks loom China’s imports from the United States rose 23.4 per cent
C
hina posted much stronger-than-expected trade data for January as demand picked up at home and abroad, an encouraging start to 2017 for the world’s largest trading nation even as Asia braces for a rise in U.S. protectionism under President Donald Trump. Trump criticised China, Japan and Germany last week, saying the three key U.S. trading partners were engaged in devaluing their currencies to the harm of U.S. companies and consumers. But he has not followed through yet on threats to label China a currency manipulator and slap heavy tariffs on Chinese goods, and took a major step on Thursday to improve ties by holding a phone call with President Xi Jinping. China’s imports in January rose at the fastest pace in four years, fueled by a continued construction boom which is boosting demand and global prices for resources from copper to steel, preliminary customs data showed on Friday. The 16.7 per cent bounce easily
eclipsed an expected rise of 10.0 per cent in a Reuters poll. China’s imports from the United States rose 23.4 per cent in January, the fastest pace in at least a year, while its monthly trade surplus with the U.S. dipped to US$21.37 billion. Both Chinese and U.S. data show China’s surplus with the U.S. narrowed last year, but it remained well above the sustained level of more than US$20 billion that is one of three criteria used by the U.S. Treasury to designate another country as a currency manipulator. The surplus decreased US$20.1 billion to US$347.0 billion in 2016, the U.S. Commerce Department said Tuesday, while Chinese data put it somewhat lower. Led by electronics, China’s January exports climbed the most in almost a year, adding to evidence that Asia’s long trade recession may be bottoming out. January shipments rose 7.9 per cent, more than twice as much as expected, after 2016 exports slumped nearly 8 per cent. China had been lagging a recent
export recovery seen in Japan, South Korea and Taiwan, dragging on the regional supply chain. Its integrated circuit shipments rose 14.5 per cent last month, while exports of mobile phones rose 7.9 per cent. That left the country with a initial trade surplus of US$51.35 billion for the month, the highest in a year. Customs is due to release updated data for trade on Feb. 23.
Key Points China Jan exports, imports rise, beat forecasts Exports rise most since Feb 2015, imports highest in 4 years Construction boom fuels heavy commodity imports Spectre of Trump protectionism clouding trade outlook China watchers warned the long Lunar New Year holidays may have distorted the data to some degree, with companies pumping up production or rushing to build inventories before the break, which can last for weeks. But most economists agreed the
trend backed the view that manufacturing demand is improving in China and globally.
Man of steel
The world’s second-largest economy continued to hoover up commodities ranging from coal and iron ore to soybeans. Iron ore imports were the second highest on record, while crude oil imports were the third highest ever. Coal purchases also soared, for use in both power generation and steelmaking. “Steel mills are making really good money. So that means they can afford to pay for more iron ore,” said Lachlan Shaw, an analyst at UBS in Melbourne, adding that government efforts to reduce excess capacity were aiding the trend. Chinese futures prices for steel reinforcing bars used in construction have surged some 80 per cent since last February, adding to views that price pressures are slowly building in the economy. But analysts are not sure how much longer the commodities buying frenzy will last, noting that inventories are building up at Chinese ports and pointing to signs that a year-long housing boom is cooling off. Reuters
Protectionism
New Zealand to join Beijing support for free trade The NZ foreign minister said he would like to see China in TPP New Zealand and China will soon hold a series of high-level meetings and work to promote free trade, the countries’ governments said on Friday, amidst growing concerns about U.S. trade protectionism. Chinese Foreign Minister Wang Yi and his New Zealand counterpart Murray McCully met in New Zealand’s largest city, Auckland, on Friday, a day after Wang met the Pacific nation’s prime minister, Bill English. “We were setting the scene for a range of high level meetings and engagements,” McCully told Reuters in a phone interview on Friday. He declined to say which leaders from the two countries were meeting or when they would meet. However, he said the meetings would provide opportunities for investing in New Zealand. The pair discussed the upgrade of the nations’ bilateral free trade agreement, China’s possible involvement in what remains of the Trans-Pacific Partnership (TPP) negotiations and New Zealand’s role in China’s One
Belt, One Road strategy. China’s Foreign Ministry cited Wang as saying he welcomed New Zealand to participate in the One Belt, One Road programme, by which Beijing has pledged billions of dollars to build a new Silk Road connecting China to Asia, Europe and beyond. International focus has centred on China’s role as a steadying force in global affairs amid a turbulent start by new U.S. President Donald Trump,
whose first weeks in office have been marked by media feuds and protests. New Zealand and Australia have said that they hope to salvage the TPP by encouraging China and other Asian countries to join the trade pact after Trump kept an election pledge to abandon the accord. Wang invited New Zealand to attend China’s One Belt, One Road summit in May and McCully said a New Zealand government minister,
yet to be announced, would attend. The two had agreed New Zealand should ensure the government’s 30-year infrastructure plan matched China’s One Belt, One Road strategy where possible.
“We are countries that have led the way in the (free trade) process and need to show leadership again in demonstrating... the benefits of continuing down this path” Murray McCully, New Zealand’s Foreign Minister
Chinese Foreign Minister Wang Yi
New Zealand was the first Western country to sign a free trade agreement with China in 2008. China is now New Zealand’s largest goods export partner, with New Zealand exports to China at NZ$12.2 billion (US$8.54 billion) in the year to June 2016. Reuters
Business Daily Monday, February 13 2017 11
Asia Rhetoric change
Trump says U.S. committed to Japan security Abe invited Trump for a visit to Japan this year and Trump accepted Steve Holland and Kiyoshi Takenaka
W
ith a hug and a handshake, President Donald Trump and Japanese Prime Minister Shinzo Abe opened a new chapter in U.S.-Japan relations on Friday with Trump abruptly setting aside campaign pledges to force Tokyo to pay more for U.S. defence aid. The two leaders appeared to have established a quick friendship during a day of talks at the White House and a flight together aboard Air Force One to Florida for a weekend of golf. At a joint news conference with Abe, Trump avoided repeating harsh campaign rhetoric that accused Japan of taking advantage of U.S. security aid and stealing American jobs. It was a welcome affirmation for Japan in the face of challenges such as China’s maritime expansion and North Korea’s nuclear and missile development. “We are committed to the security of Japan and all areas under its administrative control and to further strengthening our very crucial alliance,” Trump said. “The bond between our two nations and the friendship between our two peoples runs very, very deep. This administration is committed to bringing those ties even closer,” he added. A joint U.S.-Japanese statement said the U.S. commitment to defend Japan through nuclear and conventional military capabilities is unwavering. The statement amounted to a victory for Abe, who came to Washington wanting to develop a sense of trust and friendship with the new U.S. president and send a message that the
decades-old alliance is unshakeable. Japan got continued U.S. backing for its dispute with Beijing over islands in the East China Sea that China also claims. The statement said the two leaders affirmed that Article 5 of the U.S.-Japan security treaty covered the islands, known as the Senkaku in Japan and the Diaoyu in China. Abe invited Trump for a visit to Japan this year and Trump accepted. U.S. Vice President Mike Pence will make an early stop in Tokyo. But uncertainty remained in another area, that of trade, after Trump abruptly pulled the United States out of the planned Trans-Pacific Partnership trade deal. Abe said he was “fully aware” of Trump’s decision to withdraw from the multilateral trade accord. But he said Japan and the United States
had agreed on a new framework for economic dialogue. “I am quite optimistic that ... good results will be seen from the dialogue,” he said, adding that Japan was looking for a fair, common set of rules for trade in the region. A senior Japanese government spokesman said Abe and Trump did not discuss currency issues and that Trump did not request a bilateral trade deal. The official told reporters that a U.S.-Japan economic dialogue will be led by Japanese Deputy Prime Minister Taro Aso and Vice President Mike Pence to address fiscal and monetary policies as well as infrastructure projects and trade. Trump, who spoke by phone on Thursday night with Chinese President Xi Jinping, also said he considered dealing with North Korea’s nuclear program a “very very high priority” but gave no hint as to how his approach would differ from that
U.S. President Donald J. Trump (L) greets Japanese Prime Minister Shinzo Abe (R) at the entrance to the West Wing before their meeting in the Oval Office of the White House in Washington. Lusa
of his predecessor, Barack Obama. He predicted a level playing field on trade with China soon.
Florida diplomacy
The Mar-a-Lago visit will be Trump’s first use of his Florida getaway for diplomatic purposes. It will also be the most time Trump will have spent with a foreign leader since taking power last month and his second face-to-face meeting with a key ally after talks with British Prime Minister Theresa May two weeks ago. Trump hosted Abe at Trump Tower last year in his first talks with a foreign leader after his surprise win in the November presidential election.
“I am quite optimistic that ... good results will be seen from the dialogue” Shinzo Abe, Japanese Prime Minister Abe played down his chances in scoring better than Trump in golf. “My scores in golf are not up to the level of Donald at all, but my policy is never up, never in, always aiming for the cup,” he said. Japan has had lingering concerns about what Trump’s self-styled “America First” strategy means for U.S. foreign policy in Asia as well as what his decision to withdraw from the Trans-Pacific Partnership trade pact means for bilateral economic ties. Abe pledged Japan would help create U.S. jobs, hoping to persuade Trump to turn down the heat on economic matters and stand by the alliance. To avoid questions about whether Japan is paying Trump for Abe to stay at the beachfront Mar-a-Lago retreat, the White House declared that the entire visit there, including golf, is the official gift for Abe from Trump. Reuters
Capital markets
India’s finance ministry official to head regulator The regulator also has plans to set new rules over high-frequency trading India has appointed senior finance ministry official Ajay Tyagi as the new chairman of its capital markets regulator, the government said on Friday, at a time when corporate governance issues have taken centre stage in the country. Tyagi, 58, currently an additional secretary at the Indian finance ministry’s economic affairs department, will succeed Upendra Kumar Sinha as the chairman of the Securities and Exchange Board of India (SEBI) for a five-year term. Sinha’s term ends on March 1. A member of the elite Indian Administrative Service, Tyagi, has been in charge of capital markets at the department of economic affairs since 2014. Despite SEBI’s efforts to improve corporate governance in the country, the on-going boardroom battle in the
Tata conglomerate has highlighted the need for better oversight and tighter rules on issues such as the role of independent directors and evaluation of the board of directors. SEBI is also due to rule on cases involving top bourse National Stock Exchange after the regulator and an external agency found instances of unfair access to its servers by certain brokers. The regulator also has plans to set new rules over high-frequency trading, amid fears that retail investors would be disadvantaged against advanced and expensive systems for high frequency trading. From tighter regulations on mutual funds and credit rating agencies to boosting foreign investment in Indian markets, Sinha who has served for over six years, has a range of transformative measures to his credit.
He took a keen interest in protecting the interests of small investors and cracked down on ponzi schemes by chit funds and collective investment schemes around the country.
SEBI headquarters
He also oversaw the merger of the country’s commodities regulator, the Forward Markets Commission with SEBI last year. Sinha is the second-longest serving chairman after D.R. Mehta, who held the position for seven years from 1995 to 2002. Reuters
12 Business Daily Monday, February 13 2017
Asia Profits
Singapore banks’ sour loans in focus as oil service sector stresses No. 2 lender OCBC is set to report a 10.8 per cent fall in fourth-quarter net profit to S$856 million Anshuman Daga
S
ingapore’s DBS Group Holdings and smaller rival United Overseas Bank are set to report their lowest quarterly profit in at least two years, hurt by bad loans provisions for a battered oil services sector.
“To a certain extent, the credibility of managements’ is on the line as well when they say there are sufficient provisions being provided for and we’ll see whether this is the case”
management, does not appear to have abated. Ezra Holdings Ltd this month flagged it may have to take a US$170 million write-down on a subsea services joint venture. All three of Singapore’s listed banks reported increases in third-quarter charges for soured loans, with DBS in particular booking a doubling to S$436 million (US$307 million). The extent of further provisions in the fourth quarter and the outlook for 2017 will be key focus as the lenders report next week. “To a certain extent, the credibility of managements’ is on the line as well when they say there are sufficient provisions being provided
for and we’ll see whether this is the case,” said Christopher Wong, senior investment manager at Aberdeen Asset Management Asia, which owns shares in the banks. Slowing loan growth - now low single digit growth from double digit growth just two years ago - as China offshore loan demand and regional trade weakens - is also clouding prospects for the lenders. DBS, Southeast Asia’s biggest bank, is expected to show a 6.6 per cent profit decline to S$936 million, its weakest performance since the quarter to December 2014, according to the average estimate of six analysts polled by Reuters. No. 2 lender OCBC is set to report a 10.8 per cent fall in fourth-quarter net profit to S$856 million, its lowest level in three quarters, while profit
at UOB is set to drop 7.4 per cent to S$730 million, the lowest in more than three years. While some analysts see the banks as well-provisioned, CIMB analyst Jessalynn Chen said the market had not fully factored in asset quality concerns. Some specific provisions were low at under 20 per cent as the loans were collateralised by vessels and other assets, but that might not be sufficient, she said. “The problem is the valuation of the vessels could be written down, especially for companies with more specialised or purpose-built assets that are unable to find new orders to support cash flows,” she added. OCBC reports on Feb. 14, DBS on Feb 16. and UOB on Feb. 17. Reuters
Christopher Wong, senior investment manager at Aberdeen Asset Management Asia
Nearly a dozen Singapore-listed firms in the offshore services sector have sought to restructure their bonds and loans over the past two years to stay afloat, hit by a slump in orders as oil prices remain low by historical standards. Stress in the sector, highlighted by Swiber Holdings decision last year to restructure under judicial
Energy consumption
Australia heat wave causes firms to power down The temperature climbed to 47 Celsius in parts of New South Wales state and the Australian Capital Territory on Friday Major energy users in Australia shut down on Friday, and the public were asked not to go home and cook or watch television, averting big blackouts amid strained supplies as an extreme heat wave moved from the desert interior to the east coast. The extreme heat caused power prices to soar to an unprecedented A$14,000 per megawatt-hour (MWh) as power stations struggle to meet skyrocketing demand for cooling. Authorities had been preparing to temporarily suspend power to selected areas of New South Wales late on Friday to prevent overload just days after 40,000 homes and businesses lost electricity in the state of South Australia. But the Australian Energy Market Operator (AEMO) said late on Friday tight power supply conditions had subsided for the day, without power cuts to residents. Earlier, NSW Energy Minister Don Harwin urged households and businesses to save electricity. “Rather than going straight home
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and turning on the television and cooking, (you might) want to consider going to a movie, going out to a shopping centre, keeping the load low, every bit like that helps,” Harwin told reporters in Sydney. A paper mill, water treatment operations and Australia’s largest
aluminium smelter, Tomago, were among businesses that halted operations to conserve energy, with many industrial users required to do so under their contracts. The Tomago smelter, which exports to Southeast Asia, Japan and China, is the single largest consumer of electricity in NSW and is jointly owned by Anglo-Australian group Rio Tinto and Oslo-based Norsk Hydro. The intense heat and power outages have sparked debate over energy security, after the market
operator told power companies in South Australia state on Wednesday to switch off some customers’ power supply for a short spell to manage demand. South Australia depends on wind for more than a third of its power supply, and the wind died down at the same time as people started cranking up air-conditioners.
Key Points Power temporarily suspended to avert demand overload Residents asked not to cook or watch TV to save power Sydney braces for power blackouts Heat wave forecast to last days That was the latest in a string of power disruptions and electricity price spikes to hit the southern state, including a state-wide blackout that forced copper mines, smelters and a steel plant to shut for up to two weeks last September. The problems have sparked a review of the national electricity market and energy policy on how to cope with rapid growth of wind and solar power and the closure of coal-fired power plants that have been essential for steady supply. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Monday, February 13 2017 13
Asia Corporate strategy
In Brief
KOGAS says interested in U.S. shale gas projects The company in 2012 signed a deal with Texas-based Cheniere to bring in 2.8 million tonnes of LNG annually for 20 years starting from this year Korea Gas Corp (KOGAS), the world’s No.2 buyer of liquefied natural gas (LNG), would be “interested” in participating in U.S. shale gas projects, with such investment curbing any potential trade pressure on South Korea from the U.S. government. “U.S. trade pressure is likely to increase, but U.S. gas investments can work as a tool against trade pressure,” Lee Seung-hoon, CEO of state-run KOGAS, said at a forum in Seoul.
Key Points KOGAS interested in U.S. natural gas investments Says could limit any pressure on South Korea from Trump govt
into the Pacific, it has been pushing to ship more cargoes to meet surging demand in parts of Asia. “Securing U.S. shale gas is crucial because it’s an important resource,” said Lee, adding that such imports would help keep its supplies stable. KOGAS in 2012 signed a deal with Texas-based Cheniere to bring in 2.8 million tonnes of LNG annually for 20 years starting from this year. Lee said the first cargoes from the deal were expected to arrive in South Korea this summer. Lee also said that the company could eventually import LNG from both the United States and Iran without socalled ‘destination restrictions’, or
clauses in contracts that limit possible buyers for any resales of the cargoes. “When new suppliers enter, they cannot request destination restrictions ... we can secure supplies that don’t carry destination restrictions,” he said. Iran, despite having some of the world’s biggest natural gas reserves, does not have LNG export facilities, so shipping its gas to South Korea would require vast investment and would take many years to develop. But Lee said that South Korean demand for LNG would keep falling in the short-term due to increased electricity output from nuclear and coal-fired power plants. The country is the world’s second-biggest LNG importer after Japan. “This year South Korea’s LNG demand is expected to remain flat at around 30 million tonnes,” Lee told Reuters on the side-lines of the event. Reuters
Malaysia’s industrial production in December rose 4.7 per cent from a year earlier, helped by growth in the mining, manufacturing and electricity sectors, government data showed on Friday. The figure was above the median forecast of 4.4 per cent in a Reuters poll, but slower than November’s pace of 6.2 per cent. Major sub-sectors that expanded in December were petroleum, chemical, rubber and plastic products, electrical and electronic products, and food, beverage and tobacco, data from the Statistics Department showed. Malaysia’s exports grew 10.7 per cent in December from a year earlier, its second straight month of expansion. the slowest pace since September.
SBI sees credit growth accelerating
Sees 2017 South Korea LNG demand flat at around 30 mln T Expected to become an importer of LNG just a decade ago, the shale gas revolution in the United States unlocked cheap, abundant gas supplies, allowing the country to become an exporter instead. Benefiting from the Panama Canal expansion last year that allows bigger ships to cross from the Gulf of Mexico
Markets
Bank of Japan increases bond buying The move was largely a surprise and some market players considered it unnecessary The Bank of Japan (BOJ) increased its buying in “superlong” bonds last Friday, helping to keep their rising yields in check for now, though its policy to control the JGB yield curve looks set to face more challenges, not least from Washington. The BOJ bought 320 billion yen of bonds with maturity of more than 10 years to 40 years on Friday, 20 billion yen more than its usual buying of 300 billion yen in those maturities. It was only the second time the BOJ increased buying in that sector since late September when the BOJ introduced the “yield curve control” policy, in which it keeps the 10-year
Malaysia factory output up
Indian banks
Company set to start importing U.S. shale gas from this summer
Hideyuki Sano
Private poll
yield around zero per cent and actively tries to manage the yield curve. The 20-year yield dipped 1.0 basis point on the day to 0.670 per cent, hitting its lowest level in more than a week and off the one-year high of 0.730 per cent hit last week. The benchmark 10-year JGB yield was up 0.5 basis point at 0.085 per cent, however, and other maturities were narrowly mixed. The BOJ’s move was largely a surprise and some market players considered it unnecessary given that market sentiment was already on the mend after Thursday’s auction of 30-year JGBs. The BOJ has been doing damage-control since the unusual
approach it took its bond buying on Jan. 25 confused the market as to its intentions. By skipping widely anticipated buying in short-term bonds that day, the BOJ reduced its bond buying in January to the lowest level since October 2014, sparking speculation it may be seeking to gradually taper off its bond purchasing. The subsequent spike in JGB yields prompted the BOJ to step up bond buying this week. It offered to take an unlimited amount of 10-year JGBs at 0.110 per cent on Monday, sending a strong signal it will not tolerate the yield rising beyond that level. But because the BOJ’s policy statements have not clarified where it think yields on other maturities should be, other maturities could remain more volatile, market players say. “I think the BOJ is still experimenting, including in assessing where the appropriate levels for the yield curve are,” said Takehiro Noguchi, senior economist at Mizuho Research Institute. “I suspect the BOJ would not mind a rise in superlong bond yields per se, but it doesn’t like rapid rises,” he added. Further complicating the BOJ’s work, comments from U.S. Donald Trump late last month criticising Japan’s currency policy stance have raised suspicions that it may become more difficult for the BOJ to take any easing measures in the future, or even to stick to aggressive monetary stimulus. With Japanese Prime Minister Shinzo Abe having met Trump on Friday and over the weekend, market players are nervous that any signs Trump thinks the yen is too cheap against the dollar could fan speculation over the BOJ’s ability to act. The 10-year JGB futures dipped 0.07 point to 149.91. The five-year JGB yield rose 0.5 basis point to minus 0.095 per cent while the two-year yield dipped 0.5 per cent to minus 0.215 per cent. Reuters
State Bank of India predicted its credit growth will accelerate in the next financial year driven by funding for new government projects, as the nation’s top lender by assets reported its first rise in quarterly profit in more than a year. The bank, which accounts for more than a fifth of India’s banking assets, also expects to keep incremental bad loans within its previously stated guidance of 400 billion Indian rupees (US$5.98 billion) for the current fiscal year to the end of March, Chairman Arundhati Bhattacharya said on Friday. Official data
Singapore to release detailed GDP data on Feb. 17 Singapore will report detailed data on gross domestic product (GDP) for the fourth quarter and the whole of 2016 on Feb. 17, the Ministry of Trade and Industry said on Friday. The advance estimate of fourth quarter GDP released on Jan. 3 showed Singapore’s economy grew 9.1 per cent in the October-December quarter from the previous three months on an annualised and seasonally adjusted basis. Full-year 2016 GDP growth was 1.8 per cent. Economists have flagged the possibility of upward revisions to both fourth-quarter and full-year GDP growth. Results
Idea Cellular reports first-ever loss Idea Cellular Ltd, India’s third-biggest telecommunications operator, reported its first quarterly loss after a new rival forced carriers to cut prices in the highly competitive market. Reliance Jio Infocomm Ltd, controlled by India’s richest man, Mukesh Ambani, opened for business in September and has shaken the Indian telecoms market with its free voice and cut-price data plans spurring a flurry of similar offers from incumbents led by Bharti Airtel Ltd. That has increased costs, eroded margins and even forced Vodafone Group Plc’s Indian unit to talk to Idea about combining their businesses, potentially creating the market’s biggest carrier.
14 Business Daily Monday, February 13 2017
International In Brief Bank deregulation
Top Federal Reserve official resigns The Federal Reserve Board’s top bank regulator said on Friday he would resign, giving a boost to President Donald Trump’s plans to ease reforms put in place after the 2007-09 financial crisis. Daniel Tarullo, a strong regulator who was dovish on monetary policy in his seven years on the board, said in his resignation letter to Trump he would leave the U.S. central bank on or around April 5. With his resignation, Trump will have three positions to fill on the Fed’s Board of Governors, which at full strength has seven members. Brexit talks
Juncker says Britain may divide EU European Commission President Jean-Claude Juncker said he fears Britain will divide the European Union’s 27 remaining members by making different promises to each country during its Brexit negotiations. “The other EU 27 don’t know it yet, but the Brits know very well how they can tackle this,” Juncker told Deutschlandfunk radio. “They could promise country A this, country B that and country C something else and the end game is that there is not a united European front.” Britain will by the end of March trigger formal divorce talks with the EU.
Fed’s Vice Chair
“Significant uncertainty” about fiscal policy under Trump Fed Vice Chair also said he thought Dodd-Frank banking regulation legislation would not be repealed, though there may be some adjustments Helen Reid and Abhinav Ramnarayan
U
.S. Federal Reserve Vice Chair Stanley Fischer said there was significant uncertainty about U.S. fiscal policy under the Trump administration, but the Fed would be strict in meeting targets of creating full employment and getting inflation to 2 per cent. Speaking at the Warwick Economics Summit on Saturday, Fischer also said he thought Dodd-Frank financial regulation would not be repealed as a whole, and he hoped capital requirements for banks would not be significantly reduced. “There is quite significant uncertainty about what’s actually going to happen, I don’t think anyone quite knows. It’s a process which involves both the administration
and the Congress in deciding fiscal policy,” Fischer said, in response to a question. “At the moment we’re going strictly according to what we see as our responsibility according to the law, which is maintaining full employment and getting inflation to 2 per cent.” “I don’t think Dodd-Frank as a whole is going to be repealed, but there may be some adjustments to it,” he said. “Significantly reducing capital requirements would reduce the safety of the system. I certainly hope it’s not going to happen.” Dodd-Frank financial regulation was passed in 2010 after the financial crisis of 2008-09, and included legislation requiring banks to maintain higher levels of capital. Fischer also mentioned adjustments to Dodd-Frank could include
being less demanding of community banks. The comments came the day after the Federal Reserve Board’s top bank regulator, Daniel Tarullo, said he would resign, giving a boost to President Donald Trump’s plans to ease reforms put in place after the 2008-09 financial crisis.
Key Points “Significant uncertainty” about fiscal policy under Trump Fischer says hopes capital requirements stay in place Dodd-Frank may not be repealed, but adjusted
Trump last week ordered reviews of major banking rules that were put in place after the 2008 financial crisis, drawing fire from Democrats and sending banking stocks higher on expectations that looser banking regulation is coming. Reuters
Mood poll
U.S. consumer sentiment falls U.S. consumer sentiment eased off a 13-year high in early February likely as some of the jubilation over Donald Trump’s election victory ebbed, but it remained strong enough to suggest that consumers will continue to drive the economy. Confidence surged in the wake of Trump’s victory last November. The jump in sentiment tracked a stock market rally as both consumers and investors focused on the business mogul-turned politician’s promises to cut taxes and reduce regulations. These proposals, whose details remain vague, were viewed as pro-business and favourable for economic growth. GDP
Nigerian economy projected to have shrunk Nigeria’s economy is projected to have contracted 1.54 per cent in 2016, according to a budget ministry document, with Africa’s most populous country mired in its first recession in a quarter of a century. Nigeria is heavily dependent on crude oil exports to fuel its economy, but low global prices and militant attacks have hammered those exports and slashed government revenues. “The Nigerian economy, in response to both external and internal economic pressures, inevitably contracted and is currently in recession with a projected growth of -1.54 per cent for 2016,” the document released to Reuters by the ministry on Saturday said.
Money-laundering
Panama detains Mossack Fonseca founders on corruption charges Defence lawyer Elias Solano called the accusations against the firm’s founders “weak” Elida Moreno
The two founders of Panamanian law firm Mossack Fonseca were arrested on Saturday, the attorney general’s office said, after both were indicted on charges of money-laundering in a case allegedly tied to a wide-ranging corruption scandal in Brazil. Firm founders Jurgen Mossack and Ramon Fonseca were detained because of the risk they might try to flee the country. Attorney General Kenia Porcell told reporters on Saturday that the information collected so far “allegedly identifies the Panamanian firm as a criminal organization that is dedicated to hiding assets or money from suspicious origins.” Porcell said the one-year investigation that led to the arrests has been aided by prosecutors in Brazil, Peru, Ecuador, Colombia, Switzerland and the United States.
Mossack Fonseca is also at the centre of a separate case known as the Panama Papers, which involved millions of documents stolen from the firm and leaked to the media in April 2016.
‘Mossack Fonseca is also at the centre of a separate case known as the Panama Papers’ The fallout from the leaks provoked a global scandal after numerous documents detailed how the rich and powerful used offshore corporations to hide money and potentially evade taxes.
On Thursday, prosecutors raided Mossack Fonseca offices seeking evidence, and the homes of the firm’s founders were searched on Friday. Fonseca, a former presidential adviser in Panama, has previously denied that the firm had any connection to Brazilian engineering company Odebrecht, which has admitted to bribing officials in Panama and other countries to obtain government contracts in the region between 2010 and 2014. “This investigation in principle is not related to Odebrecht, but to the Lava Jato case,” Porcell said, referring to the probe centred on Brazilian state-run oil company Petrobras. Fonseca has also denied any relationship with the Lava Jato case. Following the arrests, Mossack Fonseca defence lawyer Elias Solano called the accusations against the firm’s founders “weak” and said he would challenge the evidence presented against his clients. A source in the prosecutors office told Reuters that an unidentified third lawyer with the firm had also been arrested, while a fourth faces an arrest warrant, but her whereabouts are unknown. The two additional lawyers were not named by Porcell. Reuters
Business Daily Monday, February 13 2017 15
Opinion Business Wires
Philstar Inflation is unlikely to slip back towards 2 per cent anytime soon and is seen to hit 3 per cent within the first quarter of the year, DBS Bank Ltd. said. The consumer price index kicked up to its highest in over two years after climbing to 2.7 per cent in January from 2.6 per cent in December as transport prices rose to 2 per cent. “We reckon that CPI inflation will hit 3 per cent by the end of this quarter. Beyond that, much will depend on oil and food price trajectory,” DBS said.
The Korea Herald South Korea’s finance minister called for intensive structural reform to regain the growth momentum of Asia’s fourthlargest economy. “In order to make a breakthrough for the economy, we have to change the fundamentals of our economy through strong structural reform,” Finance Minister Yoo Il-ho (pictured) said in a keynote speech at a Seoul symposium. “We cannot avoid the demand for restructuring. We have to push for it as its achievement leads to the next government and generation.” South Korea's Finance Minister speaks at a symposium in Seoul on Feb. 10, 2017.
U.S. President Donald J. Trump. Lusa
Why Trump can’t bully China
A Taipei Times After Intel Corp and Foxconn Technology Group said they would build advanced factories in the U.S., it might have seemed as if the U.S. were gaining high-end manufacturing momentum. However, on Friday, California-based chipmaker GlobalFoundries Inc announced a US$10 billion project in China, showing how the centre of gravity continues to shift across the Pacific. The new advanced semiconductor factory, in the central Chinese city of Chengdu, is only the most recent in an array of investments, often by major multinationals, into China with the support of the Chinese government.
The Times of India Finance minister Arun Jaitley said Sebi (Securities and Exchange Board of India) is evolving as per the requirements of the economy and markets as a professional organisation, as he discussed his Budget initiatives with the markets regulator. After addressing Sebi’s board and top officials at a customary post-Budget meeting, Jaitley said he also discussed the future agenda for the capital markets regulatory body, including the evolving technological and policy changes. “Sebi is a professional organisation with a considerable experience in this line and has been evolving as per the needs of the economy and the markets itself,” Jaitley said.
s U.S. President Donald Trump proceeds to destabilize the post-war global economic order, much of the world is collectively holding its breath. Commentators search for words to describe his assault on conventional norms of leadership and tolerance in a modern liberal democracy. The mainstream media, faced with a president who might sometimes be badly uninformed and yet really believes what he is saying, hesitate to label conspicuously false statements as lies. But some would argue that beneath the chaos and bluster, there is an economic rationale to the Trump administration’s disorderly retreat from globalization. According to this view, the U.S. has been duped into enabling China’s ascendency, and one day Americans will come to regret it. We economists tend to view abdication of U.S. world leadership as a historic mistake. It is important to acknowledge that the roots of the antiglobalization movement in the United States run much deeper than disenfranchised blue-collar workers. For example, some economists opposed the TransPacific Partnership (a 12-country trade deal that would have covered 40 per cent of the global economy) on the questionable grounds that it would have harmed American workers. It fact, the TPP would have opened Japan far more than it would have affected the US. Rejecting it only opens the door to Chinese economic dominance across the Pacific. U.S. populists, perhaps inspired by the writings of Thomas Piketty, seem unimpressed by the fact that globalization has lifted hundreds of millions of desperately poor people in China and India into the global middle class. The liberal view of Asia’s rise is that it makes the world a fairer and more just place, where a person’s economic fate does not depend quite so much on where they happen to have been born. But a more cynical view permeates populist logic, namely that in its excessive adherence to globalism, the U.S. has sown the seeds of its own political and economic destruction. Trumpism taps into this sense of national mortality; here is someone who thinks he can do something about it. The aim is not just to “bring home” American jobs, but to create a system that will extend U.S. dominance. “We should focus on our own” is the mantra of Trump and others. Unfortunately, with this attitude, it is hard to see how America can maintain the world order that has benefited it so much for so many decades. And make no mistake: America has been the big winner. No other large country is nearly as rich, and the U.S. middle class is still very well off by global standards. Yes, Democratic Presidential candidate Bernie
“
Kenneth Rogoff a former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University
Sanders was right that Denmark is a great place to live and does many things right. He might have mentioned, however, that Denmark is a relatively homogeneous country of 5.6 million people that has very low tolerance for immigration. For better or for worse, the globalization train has long since left the station, and the idea that one can turn it back is utterly naive. Whatever might have been done differently before U.S. President Richard Nixon visited China in 1972 is no longer possible. The fate of China, and its role in the world, is now in the hands of the Chinese and their leaders. If the Trump administration thinks it can reset the clock by starting a trade war with China, it is as likely to accelerate China’s economic and military development as it is to slow it down. So far, the Trump administration has only sparred with China, concentrating its early anti-trade rhetoric on Mexico. Although the North American Free Trade Agreement, which Trump reviles, has likely had only modest effects on U.S. trade and jobs, he has attempted to humiliate Mexicans insisting that they pay for his border wall, as if Mexico were a U.S. colony. The U.S. is ill-advised to destabilize its Latin American neighbours. In the near term, Mexican institutions should prove quite robust; but in the long run, Trumpism, by encouraging antiAmerican sentiment, will undermine leaders otherwise sympathetic to U.S. interests. If the Trump administration tries such crude tactics with China, it will be in for a rude surprise. China has financial weapons, including trillions of dollars of U.S. debt. A disruption of trade with China could lead to massive price increases in the low-cost stores – for example, Wal-Mart and Target – on which many Americans rely. Moreover, huge swaths of Asia, from Taiwan to India, are vulnerable to Chinese aggression. For the moment, China’s military is relatively weak and would likely lose a conventional war with the US; but this situation is rapidly evolving, and China may soon have its own aircraft carriers and other more advanced military capabilities. The U.S. cannot “win” a trade war with China, and any victory will be Pyrrhic. The U.S. needs to negotiate hard with China to protect its friends in Asia and deal with the rogue state of North Korea. And the best way to get the good deals Trump says he seeks is to pursue a more open trade policy with China, not a destructive trade war. Project Syndicate
The fate of China, and its role in the world, is now in the hands of the Chinese and their leaders
”
16 Business Daily Monday, February 13 2017
Closing Bribery charges
S.Korean prosecutors to summon Samsung heir
executives of the country’s biggest tech company at 10 a.m. on the same day. Lee and the two will be questioned about South Korean prosecutors said yesterday that the heir apparent of Samsung Group, the additionally discovered situations involving the bribery case, according to the spokesman. country’s biggest family-run conglomerate, Lee is suspected of providing financial will be summoned today for bribery charges related to impeached President Park Geun-hye. assistance to President Park’s long-time confidante Choi Soon-sil, who is at the centre Lee Kyu-chul, spokesman of the special of the presidential scandal and now is in prosecutors independently investigating the custody, and making donations to two nonscandal involving Park, told a press briefing profit foundations Choi controlled in return that Samsung Electronics Vice Chairman Lee for getting help in the 2015 merger of two Jae-yong (pictured) will be called in at 9:30 Samsung affiliates. Xinhua a.m. local time today along with two senior
Human resources
Talent needed in industrial northeast The governments of three north-eastern provinces have introduced supporting measures to attract and secure talent
S
omewhat reluctant, Dai Ning decided to leave his hometown province of Liaoning in northeast China to work in Beijing after graduating from a local university in July. The 25-year-old postgraduate from a technology university in Dalian, a coastal city in Liaoning, has found a job in a large state-owned construction company. “Frankly speaking, I intended to stay. But I cannot get a satisfactory job here, so I have to leave,” he said. The young man is not alone. Many of his peers have also chosen to work outside the province, a problem for the north-eastern region, an old industrial base, which has been struggling to rejuvenate through restructuring. Recently released graduate employment reports from North-eastern University in Shenyang, provincial capital of Liaoning, and Dalian University of Technology show the extent of the problem. Only about a quarter of graduates in 2016 from the two universities chose to stay and work in the province, while the rest were mostly attracted to developed areas such as Beijing, Shanghai, Shandong and Guangdong provinces. The provinces of Liaoning, Jilin and Heilongjiang saw a net outflow of about 240,000 people from 2010 to
2015, according to Zhao Chenxin, spokesperson for the National Development and Reform Commission, in December. “A current phenomenon which deserves attention is that college graduates, medium and high-end technical staff, and management personnel move out of the region to seek jobs or start businesses,” he said. Last April, the central authorities published a document on rejuvenating the old industrial base, stressing that talent was a priority for the region.
Another central document last month encouraged college graduates to work in central, western and north-eastern regions. The Ministry of Education said that universities in the eastern region were not encouraged to attract talent from those areas. The governments of the three north-eastern provinces have introduced supporting measures to attract and secure talent. Liaoning supports equity investment for new high-tech firms. In Shenyang and Dalian, graduates enjoy subsidies when starting up businesses. The improved business environment in northeast China has brought returns. Yang Shuo, 32, who gave up her job in Beijing two years ago, returned
to her hometown Shenyang and founded a foreign language training school. Currently, the school has more than 200 children learning English. “There is still a gap between northeast China and the southern r eg i o n i n t e r m s o f b u si n ess environment. But I feel the local environment is changing,” Yang said. “Some of my friends have left Shanghai to go back to the northeast for work. Our parents still live there. The hometown is becoming better,” said Gao Jiaman, 29, a native of Liaoning who teaches in a Shanghai college. “Working in big cities such as Beijing, Shanghai, Guangzhou and Shenzhen looks decent and charming, but the pressure is heavy, too.” Xinhua
Dalian skyline
Forecast
LPI index
WEF chairman
IMF’s Lagarde ‘optimistic’ about U.S. economy
China’s logistics activity stable in January
“Asian values” can help overcome globalization backlash
International Monetary Fund chief Christine Lagarde yesterday voiced optimism for U.S. economic growth under President Donald Trump but warned it could herald trouble for the rest of the world. “From the little we know, and I will insist on the little we know, because this is really work in progress... but from the little we hear, we have reasons to be optimistic about economic growth in the United States,” Lagarde said at the annual World Government Summit in Dubai. Lagarde predicted tax reform and more investment in infrastructure were both likely under Trump, whose Thursday teaser of fresh tax cut proposals pushed Wall Street stocks to new records. Yet the IMF chief did not mince words in raising concern over the global repercussions of a boon in the U.S. economy. “Now that’s the good news,” said Lagarde. “The more worrying news, if you will, is that it will have consequences on the rest of the world, and we are seeing it.” She highlighted the strength of the dollar against other currencies, predicting a hike in interest rates regulated by the Federal Reserve. The IMF in January raised the U.S. growth estimate a tenth of a point this year to 2.3 percent, and fourtenths of a point to 2.5 percent for 2018. AFP
China’s logistics activity remained stable in January as the economy showed signs of stabilizing, according to an industry report. The logistics performance index (LPI) for January came in at 52.5, down 3.5 points from a month earlier, according to the China Federation of Logistics and Purchasing. A reading above 50 per cent indicates expansion from the previous month, while a reading below indicates contraction. He Hui, deputy director of the China Logistics Information Centre, attributed the decline to the influence of Spring Festival, but also stressed that the sector was stable, as the index was above 50 per cent. The federation began collecting LPI data from more than 300 logistics companies in December 2011. Since the start of the year, positive changes and bright spots continue to grow in the Chinese economy, a sign the economy is stabilizing amid an uncertain global outlook. China’s manufacturing sector has expanded for the sixth month in a row with the country’s manufacturing purchasing managers’ index coming in at 51.3 in January, according to National Bureau of Statistics data released Feb. 1. Xinhua
The Asian way of life to harmonize individual rights with obligations to serve the society can tackle the rise of anti-globalization movements, Klaus Schwab, founder and executive chairman of the world economic forum (WEF) said yesterday. Those who rose against globalization movements, like the majority of voters in the United Kingdom who opted to leave the European Union in the Brexit referendum, “overlook that globalization and liberalism have lifted one billion people worldwide out of poverty and led to lower prices across the entire consumer supply chain,” Schwab said in his opening key note at the 5th edition of the World Government Summit (WGS). “Instead of opposing globalization because jobs are in danger, we should try to harmonize the national identity of citizens with social harmony, a concept which is practiced in many East Asian societies,” he said. “I remember when I was invited to fly with Singapore’s late Prime Minster Lee Kuan Yew from Singapore to China. During our conversation aboard, he explained to me that the East Asian way of thinking is to embrace changes by trying to put apparent new developments into a harmonious balance,” Schwab said. Xinhua