Business Daily #1238 February 21, 2017

Taiwan orders stay in good shape fuelled by iPhone8 Trade Page 9

Tuesday, February 21 2017 Year V Nr. 1238 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Industry

Local manufacturing industry and energy sector record increases in production Page 7

Tourism

MSAR’s first travel alert scheme ready for launch Page 5

www.macaubusinessdaily.com

Transit

Yuan

Taxi association pushes for increased fees

Chinese central bank modifies currency-setting mechanism Page 16

Page 7

Attracting billionaires Luxury

The only sector immune to world economic crises is that comprised of billionaires, explains the founder of The Billionaire Exhibition. Attracting them to the MSAR could help solve the city’s economic woes and now is the “perfect time” to reel in the high-spenders and elite luxury clients.

The event is forgoing billionaire-hubs like Shanghai and Hong Kong and coming to the MSAR instead because “they’re already here”. Page 4

Not for the junket

Former Prosecutor-general Ho Chio Meng was not involved in a junket business, allegedly linked to him, according to a witness in the corruption case. And defendants claim to not to know very much about the inner-workings of each other’s companies, not even their locations.

Divided opinion

Retail Local retailers can’t quite figure out if December was good or bad. Department stores, retailers of leather goods, and watch and jewellery retailers all experienced y-o-y sales growth, while vehicle retailers saw an uptick in sales. However 44 pct of responding businesses saw drops in receipts, a situation expected to continue in the coming months. Page 2

Shopping flow shifts Court Page 3

HK Hang Seng Index February 20, 2017

24,146.08 +112.34 (+0.47%) Worst Performers

China Mengniu Dairy Co Ltd

+3.05%

China Petroleum & Chemical

+1.49%

Want Want China Holdings

-2.19%

Galaxy Entertainment Group

-0.68%

Bank of Communications Co

+2.28%

Lenovo Group Ltd

+1.28%

Li & Fung Ltd

-1.44%

Sands China Ltd

-0.62%

Hengan International Group

+1.83%

PetroChina Co Ltd

+1.16%

Hang Lung Properties Ltd

-1.11%

CK Hutchison Holdings

-0.54%

Kunlun Energy Co Ltd

+1.65%

MTR Corp Ltd

+1.11%

Power Assets Holdings Ltd

-1.00%

China Unicom Hong Kong

-0.43%

Bank of China Ltd

+1.52%

HSBC Holdings PLC

+1.02%

Bank of East Asia Ltd/The

-0.91%

Cheung Kong Infrastructure

-0.31%

19° 21° 17° 22° 13° 20° 12° 15° 12° 14° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

M&A The INC's shopping spree flow that marked last year, seems to be reverting. If Chinese companies took to the global scene last year, foreign companies sensing a better environment in the Mainland are now starting to lead the shopping wave. Page 8

2 Business Daily Tuesday, February 21 2017

Macau Retail

Feast or famine Half of surveyed retailers said they had recorded sales decreases in December, while nearly the same number said they had experienced the opposite Kam Leong kamleong@macaubusinessdaily.com

L

ocal retailers are split down the middle when it comes to their business performance for the month of December 2016, with 49 per cent of interviewed businesses saying they had recorded year-on-year decreases in sales in the month, while the other 42 per cent said their sales had increased.

The latest Business Climate Survey on restaurants & similar establishments and the retail trade by the Statics and Census Services (DSEC) interviewed a total of 135 retailers and 167 restaurants, representing 70 per cent and 53 per cent of their respective industries.

The survey found that all the interviewed retailers of leather goods had recorded year-on-year sales growth for the month of December, the same

situation experienced by half of the city’s department store operators, 47 per cent of watch, clock and jewellery retailers and 44 per cent of supermarket operators.

In addition, more sellers of motor vehicles reported year-on-year sales growth in December compared to the month of November, said the DSEC. The percentage of motor vehicle dealerships that saw positive results - 22 per cent of the businesses in the industry - was up by 11 percentage points month-onmonth. Meanwhile, 38 per cent of the total interviewees estimated their sales had declined for the first month of this year when compared to one year ago, while 25 per cent of them were expecting year-onyear sales growth.

Yet again, leather goods retailers were more optimistic than those in other segments, with 80 per cent

of them telling the DSEC that they expected that their business performance in January would be better than one year ago. This was followed by retailers of cosmetics & sanitary articles, of which 40 per cent held the same positive outlook.

On the other hand, the same survey indicates that only 34 per cent of the interviewed restaurants had reported year-on-year increases in receipts for December, while 44 per cent had

experienced declines in receipts.

In terms of business projection for January, 30 per cent of the surveyed restaurants believed their receipts would go up from one year ago, driven by the Chinese New Year holidays, which fell in the same month this year. However, 37 per cent of the interviewees, by contrast, forecast their receipts for the month would likely decline as compared to the same month of 2016.

Economy

Infrastructure

Hengqin GDP soars 20.1 pct in 2016

New Mong-Ha rebuilding contract worth MOP1.78 bln

Hengqin saw its economy surge by 20.1 per cent for the whole of 2016 compared to one year earlier, attracting total foreign direct investment of US$523 million (MOP4.18 billion/ RMB3.59 billion), an increase of 23 per cent year-on-year, local Chinese-language newspaper Macao Daily reported yesterday.

For the year, the free trade zone in Zhuhai reached some RMB15.7 billion in gross regional domestic product, with total fixed assets investment jumping by 19.5 per cent year-onyear to RMB34.6 billion.

The island, located adjacent to the MSAR, is set to help the city’s economic diversification, in line with Chinese

government policy.

While the MSAR’s official annual economic data for 2016 has not yet been made available, the local GDP contracted by 5.4 per cent in real terms for the first three quarters of last year to MOP258.6 million, according to official data from the Statistics and Census Service.

On the other hand, revenue received by the Hengqin government soared by 25 per cent year-on-year to some RMB4.51 billion, according to the news outlet.

As at the end of 2016, a total of 27,666 entities had registered in the free trade zone, with total registered capital totalling some RMB1.41 trillion. K.L.

The MSAR government has awarded the new construction contract of the Mong Ha Social Housing Phase 2 and the reconstruction of the basement area of the Mong Ha Sports Pavilion to Zhen Haw Harbour Construction Co Ltd and Companhia de Construção & Engenharia Shing Lung Limitada. The contract is worth a total of MOP1.78 billion (US$222.5 million).

According to yesterday’s Official Gazette, the MSAR government will pay the two companies in six instalments, of which some MOP230 million, MOP150 million and MOP220 million will be respectively paid this year and in 2018 and 2019, while the remaining amounts of MOP530 million, MOP600 million and MOP50.1 million will be paid by the authorities between 2020 and 2022.

A recent bid notice from the Infrastructure Development Office indicates the construction is expected to begin during this quarter with a maximum period of 1,470 working days, with the department stating it will also apply daily penalties for

any construction delays.

This re-awarding of the contract follows the government settling its legal disputes with the project’s first project contractor, which resulted in the project being suspended for four years.

In 2011, the government opened bids for the construction contract for the first time, with local enterprise Hobbs Construction Company Limited winning the tender for MOP685 million, from among 16 other rival bids.

The Mong Ha Social Housing Phase 2, occupying a total area of 87,500 square metres, will be a 37-storey complex, including 768 residential units, community facilities, shops, a public car park, a bus transit station and a podium garden.

In addition, the five-storey Mong Ha Sports Pavilion will be a multi-functional sports centre, providing a basketball court, a handball court, a 5-a-side football pitch, a badminton court, a squash court, a basement area car park and a tour bus station. K.L.

Business Daily Tuesday, February 21 2017 3

Macau

Court of Final Appeal, where the main trial of Ho Chio Meng is taking place, while the related trial is being held in the Court of First Instance Trial

Friends forever?

Mak Im Tai, one of the defendants in the corruption case against the former top official Ho Chio Meng, revealed that Ho had not been involved in his previous junket business Cecilia U cecilia.u@macaubusinessdaily.com

T

he former Prosecutor-general Ho Chio Meng was not involved in a junket business allegedly linked to him, according to defendant Mak Im Tai, who appeared in the Court of First Appeal yesterday.

The presiding judge, Lam Peng Fai, questioned Mak about the operations of his junket business, with the defendant stating that money obtained through a company co-established with another defendant in the case, Wong Kuok Wai, had been used. The company in question had obtained contracts from the Public Prosecutions Office (MP).

Mak added that he mostly used his own savings to invest in the junket business, and profits would have been shared with Wong if Mak had used money from their own companies.

Regarding the operation of the companies, Mak stressed that he never took part in managing the companies, claiming that he had complete trust in Wong for their operations, calling him a friend of his for over 30 years.

Mak said he only signed cheques when Wong asked him to, claiming that he was not sure what the cheques were used for.

However, the presiding judge expressed doubts about Mak’s limited engagement in the companies, questioning why Mak would create a co-account with Wong if he wasn’t involved much in his own companies.

The defendant explained that he was always busy and was not in Macau most of time, and contrary to his earlier stated “great trust” in Wong, noted that he thought it necessary to be “a little reserved”.

Judge Lam also asked the reason why the majority of companies were registered under different names. Mak answered that it was perhaps due to the different aspects and types of services and products provided.

When asked if he knew that his companies’ offices were located on the 16th floor of the Hotline Building, where the Public Prosecutions

Office (MP) is also located, Mak said he seldom visited the office, saying that he generally signed cheques outside the building in his car. Hence, he claimed he did not know exactly where his office was located.

He added that he usually signed cheques once or twice a month.

According to Judge Lam, all the suspected companies were closed down on almost the same day, after the defendants were inspected by the city’s corruption regulator, the Commission Against Corruption (CCAC). Mak stated that he had heard the companies didn’t have any business anymore and the others did not want to run the business anymore.

Long-time friends

Meanwhile, when asked by the prosecutors how he knew Ho, Mak revealed that he had first met Ho at a friend’s gathering in the 1980s, but had seldom had contact with him after Ho took on the position of prosecutor-general.

The defendant revealed that it was Ho who told him about the need for a storage room for evidence from the MP’s office, and as such rented Mak’s storage room for over 10 years.

He stressed that the rental price was determined by studying prices offered by other real estate agents, emphasising that the price was in fact lower than that of the market.

During the hearing, the prosecutor played a few taped telephone recordings, one of which was a conversation between Ho and Mak, in which one of them claimed to be being tailed by two cars.

Mak, in response, said he was not sure whether the person speaking was him.

In addition, he claimed that he had never had the nickname “the Little God of Wealth”, a name he allegedly used to conduct business dealings, according to the prosecution.

Not a friend of Ho Chio Meng

While defendant Wong Kuok Wai requested to remain silent due to unstable health during yesterday’s afternoon session, Wong claimed during the morning session that he did not know the top official at all.

According to TDM news, Wong explained that he would ask one of

his staff to send quotations to the MP’s reception before undertaking any projects from the MP. When questioned as to why he had applied for some of the MP projects when very little information was divulged, Wong explained that perhaps the MP had great confidence in his work.

Wong said he knew the former top official’s brother, another defendant in the case, stating that his company had previously taken on the refurbishment project of his residence.

Meanwhile, when asked why

his companies were paying the former official’s brother’s mobile phone charges, Wong answered that probably Lei Kuan Pun, also a defendant in the case, and one of the staff working for Wong, as well Ho Chio Meng’s brother-inlaw, had paid the bills without informing him.

A number of documents related to Ho’s brother were shown, but Wong only claimed he was not sure and did not know about the documents.

Both the case in the Court of Final Appeal and that in the Court of First Appeal will continue today.

4 Business Daily Tuesday, February 21 2017

Macau

Ash Rehman, founder of The Billionaire Concierge Luxury The Billionaire Exhibition will take

place at The Venetian from May 5 to 7

Diamonds are forever The organiser of The Billionaire Exhibition, described as the “first complete luxury exhibition” to take place in the MSAR, talks to Business Daily about how the high-end market can help bring revenue to the city Nelson Moura nelson.moura@macaubusinessdaily.com

H

igh-spendingluxuryclients could help bring extra revenue to Macau’s re-adjusting gaming-based economy, according to Ash Rehman, founder of The Billionaire Concierge, a global concierge and lifestyle management company.

The businessman describes the high-end luxury market as a sector immune to world economic crises, and attracting its members would be something a restructuring local gaming market like Macau could

benefit from.

Specialising in providing expert advice to global elite clients with very precise demands and requirements, Mr. Rehman’s company is currently organising The Billionaire Exhibition, which will take place between May 5 and 7 at The Venetian.

With 200 exhibitors and an estimated 15,000 high spenders, Mr. Rehman believes the three-day event will help attract elite luxury clients - be they local or international - to the MSAR. “There is no crisis in the market we deal with, their money is going nowhere. Macau has been losing gamers and casino revenues, and if anything

I believe this is perfect timing. We’re bringing a different kind of revenue to the city,” he tells Business Daily.

Elite needs

Having previously worked in high-end sales and financial sales in London, Mr. Rehman is comfortable in the shoes of a luxury salesman who doesn’t get “mystified by selling £300,000 (MOP3 million/US$373,905) handbags” and is used to dealing with the top 1 per cent clientele.

Mr. Rehman realised there was a market for providing instant services to the “elite” and so The Billionaire Concierge was born in 2011.

“If our clients want yacht charters, car rentals, travel planning lifestyle management, business development, tickets to events or any product they can’t find, we can provide that,” Ash Rehman the founder of Billionaire Concierge tells Business Daily.

However the businessman is adamant that the company is not a PR firm that sources what is requested and seeks to “overcharge for it”, but that it works to “understand the clients’ needs and get them what they want, while looking for the best price and offering more options”.

The company’s network is open to any members - with some vetting required - and currently offers global coverage, with offices in seven countries, mainly in cities with a concentration of high spenders, such as Los Angeles, Monaco and Hong Kong.

With Asia proving to be one of the largest high-end spender markets in the world, the idea to organise a luxury exhibition here was a sensible concept, notes Rehman.

According to a Forbes survey of the top 10 cities in 2016, in terms of number of billionaires, four were Chinese. Hong Kong was noted as being the city with the highest population of billionaires in the world, after New York, with 68 billionaires with a combined worth of US$261.3 billion (MOP2.6 trillion).

“There’s a lot of money in Asia so we thought of doing a luxury exhibition here. Initially it was planned to take place in Shanghai, then we shifted to Hong Kong, since we thought it would be more suitable, due to its large millionaire and billionaire crowd in a small area. We ended up in Macau since we figured out that since it’s the Las Vegas of the East, we don’t need to attract the crowd, since the high rollers and

spenders are already here,” Mr. Rehman tells Business Daily.

A luxury feast

According to The Billionaire Concierge founder, the event is looking to use local partners, with companies and high-end businesses hustling - or in Rehman’s words “biting their hands off” - to be a part of the event, given the type of clients coming to the city. He also added they had been in talks with gaming operators and that partners would be announced in the coming weeks.

The three-day exhibition is a “cooperation between billionaire concierges to bring clients and services all together in Macau, mixing them together with regional clients and high spenders,” with an estimated 15,000 visitors coming to inspect its multiple high-end offerings.

Despite the elite offerings, ticket prices range from a £85,1-day access pass, to a £1000 VIP access pass, with Mr. Rehman saying the event is looking to attract a crowd of “affluent business people, footballers, celebrities and anyone looking to spend”.

The event will feature 200 luxury brand exhibitors in various luxury categories, with Mr. Rehman underlining that it won’t be the usual expensive offerings of “cars, yachts and jets” but will encompass a wide range of highend offerings from quality providers ranging from lifestyle, food and health products, to gyms and personal trainers.

However, there will still be space for a VIP lounge, a gallery art show, the presence of Hollywood A-list celebrities and even the sale of a US$12 million violin.

In order to attract clients, the company is relying on a two-fold strategy in terms of marketing, with a bottom-up strategy through magazine advertising and social media, and a top-down direct approach with influential clients.

Just from Asia, the company expects to attract attendees from China, Malaysia, Singapore, Thailand, Japan, and the Philippines, while pushing for global clients from countries such as Russia, the UK and Switzerland.

“We’re doing our bit to bring people to Macau. If local businesses reciprocate, then the next one will be in the city again. If not, we will still put on a good show and the next one will be in Hong Kong, Beijing or Shanghai. We’re bringing a good crowd over and we’re waiting for Macau to come to the party,” Mr. Rehman tells Business Daily.

Business Daily Tuesday, February 21 2017 5

Macau Tourism

Gov’t launches travel alert scheme The scheme will define threats in three different levels

T

he city’s first-ever travel alert scheme will come into effect in 15 days, categorising threats into three different levels, from an imminent threat – Alert Level 1 - to an extreme threat – Alert Level 3 - according to a dispatch by the Chief Executive Fernando Chui Sai On, published in yesterday’s Official Gazette.

The scheme, designated for outbound residents, associates each alert level with a set of indicators, focusing on different types of occurrences ranging from natural to man-made crises, such as adverse meteorological conditions, threats to safety, political unrest or issues relating to public health, notes the announcement.

The scheme will cover 77 countries and destinations, but not Mainland China and Taiwan.

Additional information from the Tourism Crisis Management Office explains the alert scheme ‘take[s] into account the most popular

destinations for Macau residents.’

But it adds the scope of the scheme will also vary, based on the specific situation. “[The scheme] will depend on the type of risk and danger level of the socio-economical fabric and political frame of the destinations that may constitute a simple or complex scenario (with multiple hazards),” the information reads.

Under the new scheme, Alert Level 1 suggests “a threat has emerged,” indicating there is minimal disruption to the destination and safety of the tourists, while Alert Level 2 refers to an “elevated threat”, indicating there is a large disruption of services for visitors at a destination and there are noticeable financial losses by the tourist community and industry.

Alert Level 3, meanwhile, warns of an “extreme threat,” advising that the destination is unable to provide basic security needs for tourists, Macau residents and the media. K.L.

Medical insurance

It is official Three administrative orders regulating the civil liability of healthcare providers have been published in the Official Gazette, effective from February 26.

The texts, presented by the Macau SAR government last week, are the “Compulsory insurance scheme of professional civil liability of healthcare service providers”; the “Commission on medical error expertise”; and the “Centre for mediation of medical litigation.”

Two Executive Orders defining the insurance policy model, as well as the premium tariffs and conditions of the compulsory insurance scheme were also published in the Official Gazette. The caps for annual premiums

and indemnity for damage are fixed according to professional health activity and attendant minimum insurance amounts.

For traditional Chinese medicine, for instance, the minimum insurance is established at MOP500,000, with a maximum premium of MOP3,200 and a indemnity cap on damage of MOP10,000.

The top premium and indemnity, MOP56,000 and MOP50,000, respectively, are defined for surgical interventions in areas such as obstetrics and gynecology, and plastic surgery, for whi ch insurance is contracted at a minimum of MOP2 million. S.Z.

Alert Levels Table* Level

Scenario

Protective Measures

EXTREME THREAT

Avoid travel: Presence of an extreme threat to personal safety. Macao residents planning to travel to or in that destination should be aware of the severe situation and limits on official assistance that can be provided there. It is advised to avoid travelling to and, in some cases, leave the destination.

ELEVATED THREAT

Reconsider non-essential travel: The threat to personal safety is elevated. Macao residents planning to travel to or in that destination should reconsider the need to travel at this time. It is suggested to avoid non-essential travel to the destination.

A THREAT HAS EMERGED

Exercise caution: There is an imminent threat to personal safety. Macao residents planning to travel to or in that destination should be alert and vigilant towards own safety. It is suggested to exercise caution and monitor development that might affect personal safety.

* source: MacauTourism Crisis Management Office

6 Business Daily Tuesday, February 21 2017

Macau Opinion

Albano Martins* This way we will not go far! Let’s be more audacious!

The IMF analysed the Macau economy and made some forecasts and recommendations.

In essence, this time, it did not behave badly.

Understandably, Macau does not need to go to markets to pay public debts or public deficits that do not exist!

We took notice of the change in GDP forecast for 2017 from 0.2 to 2.8 percent. I believe we will grow better!

The most important thing that this report seems to say, has to do with probably four issues, which I have been addressing over the course of several years.

The first and second have to do with the need for the government to invest in human resources and infrastructure, as these are usually the factors that can strangle the growth of the economy, since capital is abundant and land very scarce, and now even worse since some land plots have been taken back by the government.

And my opinion has been very critical regarding the government's performance in these areas, since the later the adaptation of urban spaces to the requirements of development and the needs of tourism and the quality of life of the population, the more costly that investment will be for the economy.

Thirdly, is the question of pensions.

In this regard, I wrote in 2012 that, for a contribution of MOP45 per month, if all citizens over 65 received a pension (and at that time there were 39,728 citizens in this category, although not all of them received pensions), the government would have to inject about MOP24 billion over 20 years to be able to pay for these benefits!

If the ratio of retired people to the working population soared from 11 per cent (data from 2015) to 45 per cent in 2050, the level of government payments would increase dramatically.

Now imagine if these pensions approach a "decent" level?

This seems to me to be the great question raised: the sustainability of this social security system if pensions amounts evolve to a socially acceptable level! The community must not die working!

Finally, the question of the diversification of the tertiary economy, knowing that industrial diversification - instead of reducing its dependence on textiles, just killed the industry.

I still believe that 25 years from now, we will be able to diversify in some way, but still in the hands of the gaming industry and the Motherland, making us totally dependent and vulnerable!

A new tiger with feet of clay!

Can we work towards a bolder view!

* an economist and contributor to this newspaper

Law update

It’s about time The Macau SAR government acknowledges that the regime for acquisition of goods and provision of services intended for public purposes is currently “outdated on several levels,” says former judge, João Valente Torrão. The government plans to conclude a proposal to revise the procedures this year

F

ormer Macau judge, João Valente Torrão argues that an update of the regime relating to the acquisition of goods and the provision of services intended for public purposes is necessary, noting that the current situation could be too lax.

“The law is too permissive,” said the former member of the Supreme Administrative Court of Portugal.

Last Thursday, João Valente Torrão presented his new book entitled “Juridical Regime Applied in Public Contracting in the MSAR – Pre-Contract Procedures, Brief Notes,” a bilingual publication in Portuguese and Chinese that received the stamp of approval from the Centre for the Reflection, Study and Promotion of the Macau Law, of the Rui Cunha Foundation.

To the magistrate, the question of the matter lies in the fact that, since the law permits exceptions for public tenders, whether it’s justified to have a direct adjustment to the regime, which mandates that at least three entities be consulted, given that these can also be dismissed. This comes about due to a perception of abuse of the regime on the part of the public services.

“There could be abuse, but I think it is accepted if the dismissal of the public tender is clear and justified. If it is not justified, it is illegal,” he noted.

João Valente Torrão considers that the legislation needs to be adapted, to follow “international requirements,” recalling that the regulations regarding the acquisition of goods and services, and the execution of public works, date back to the end of the 1980s and 1990s.

The former judge, who worked in

Macau from 1994 to 1999, where he also trained judges and where he returned to after retiring in Portugal, offers the example of China, which did not immediately adopt the recommendations from the World Trade Organization (WTO) when it joined, but that has today “very important rules,” “very similar” to those proposed by the WTO. João Valente Torrão considers that “for better or worse, things keep running,” although he recognizes that “from time to time, suspicions of corruption arise” owing to “stances that are taken which, though perhaps not too thorough, are legal.”

In his opinion, this happens because there is not much predisposition for litigation: “both people and companies are not very litigious, they don't resort to court actions; even when a proposal is rejected, they don’t feel encouraged,” contrary to what happens in Portugal, for instance, “I have only found nine or ten rulings from the Macau courts,” he highlighted.

Open door

The urgency to update the legal regime relating to the acquisition of goods and the provision of services intended for public purposes has been stressed in reports by the Commission Against Corruption (CCAC) and the Commission of Audit.

One of these reports, published in November, called attention to the fact that “the lack of thorough compliance with the law, the intentional avoidance of norms or legal procedures, the laxity in internal supervision, or mere formal supervision, are not rare in the public services.”

Despite the fact that the majority of

practices do not constitute illegalities, the CCAC warned that “they could become an open door for corruption.”

The current relevance of this topic has also been brought to light by the trial case of Macau’s former Chief Prosecutor-general, Ho Chio Meng, involving thousands of direct adjudications of public contracts for the execution of works, and the provision of services and goods from the Public Prosecutions Office. Ho’s trial, involving more than 1,500 crimes including embezzlement, abuse of power, money laundering, and the promotion or formation of criminal associations, has been under way since December 9, last year.

According to a recent opinion from a commission within the Legislative Assembly, the Macau SAR government - which acknowledges that the regime is currently “outdated on several levels” - plans to conclude a proposal this year.

João Valente Torrão, who presents several suggestions in his work, suggests, for instance, a prior audience with the public tender contenders, which is, moreover, one of the principles of transparency and impartiality, which “does not appear in the Macau law, but is foreseen in the Code of Administrative Procedure.”

In addition, the former judge explains that “no regime of sanctions for any of the parts” currently exists.

He is also a proponent of electronic processing. “In Macau, the Internet is only used for the promotion of tenders and little more, but not to enable interaction between contenders and services. This is very important, not only because it facilitates [the procedure] – the European Union acknowledges it and has even shortened the deadlines – but also because it can lessen the chances of corruption, according to a report by the OECD”.

João Valente Torrão finally considers that the new regime should include other aspects such as environmental and social accountability for purchases, as well as purchasing “centres,” a mechanism which would permit the gathering of several services in order to acquire goods in a more competitive manner. Lusa

Business Daily Tuesday, February 21 2017 7

Macau Industry

Industrial production grows in Q4

T

In particular, the production index for electricity surged by 59.7 per cent year-on-year to 93.1 although that of water supply only registered a mild increase of 3.1 per cent year-on-year to 128.2.

Meanwhile, the production index

he local industrial production index (IIP) reached 102.9 for the fourth quarter of 2016, a surge of 31.1 per cent year-onyear, as the production of the manufacturing industry and that of the

energy sector both recorded increases.

According to the latest official data from the Statistics and Census Service (DSEC), the production index for electricity, gas and water supply for the quarter grew by nearly 50 per cent compared to one year earlier, to 97.

Transport

Business

Taxi group proposes flagfall rate of MOP20

A Portuguese bridge

The Macau Taxi Driver Mutual Association has submitted a taxi fare increase proposal to the Transport Bureau (DSAT), suggesting a raise in the current flag-fall rate from MOP17 (US$2.1) to MOP20.

The proposal, submitted yesterday, also suggests altering the additional charge of MOP2 charged every 260 metres (after the first 1,600 metres of ride) to every 220 metres, as well as an alteration to the waiting charge, MOP2, to be applied every 55 seconds instead of the current one minute.

In addition, the plan proposes to charge an extra MOP10 for the first three days of Chinese New Year.

Speaking to reporters yesterday, the association’s president, Tony Kuok Leong Son, said the proposed increases are reasonable, and he hoped the government could grant a green light to the plan as early as this summer, according to local broadcaster TDM Radio.

He explained that the proposal was made in consideration of the fact that the average monthly salary of taxi drivers is rather low compared to other professional drivers, ranging from between MOP12,000 and MOP13,000.

The city’s last taxi fare increase was in December 2014, which raised the flag-fall rate from MOP15 to MOP17. K.L.

A former governor of Macau, Garcia Leandro, says that Portugal could have a hand in helping China to better understand countries that it is creating closer ties with, particularly those in Africa.

“China doesn’t know the world well and so it has to discover each zone it goes to. In regards to Portuguesespeaking African countries, there is a trilateral relation that can be advantageous for everybody, since there is the possibility for Portugal to help and act as an intermediary, filling in the knowledge gap China has about Africa,” said the former governor and current President of the Jorge Álvares Foundation.

Portugal will have an important role in connecting China to Africa, according to former Macau governor, Garcia Leandro During the launch ceremony for: 'A Bridge in the Economic Relationship between China and the Portuguese Language Countries’ conference, taking place today in Lisbon, Garcia Leandro underlined the strong relations between the Asian power and Portugal.

“China has had a close relation with us for 400 years, the Macau handover went well and relations are still healthy, but in regards to Chinese investments in Africa, they don’t have such a depth of knowledge,” since “their framework is very young but with a lack of knowledge of other world regions” he added.

“The help that Portugal can provide is already being done, and

of the city’s manufacturing industry rose by 13.4 per cent year-on-year to 110.7, driven by a 35.8 per cent hike in the production index for the manufacture of food products & beverages.

However, the city saw the manufacture of tobacco, wearing apparel and other non-metallic mineral products go down, with their production indexes declining by 14.9 per cent, 81.3 per cent and 35.6 per cent year-on-year, respectively.

On a quarter-to-quarter comparison, the general industrial production index of the MSAR grew by 4.8 per cent, boosted by a 16.4 per cent growth in that of electricity. However, the production index of the manufacturing industry fell by 3.7 per cent on average from the third quarter of 2016. K.L.

the objective of this conference is to bring that process, which is made at the government and business levels, to the public’s attention,” said the General and former Macau governor.

The conference, held today, ‘promotes the debate of topics such as company financing and capitalisation in Lusophone spaces, and investment in infrastructure, looking to strengthen ties, bring economies closer and stimulate sustainable development,’ a conference release states.

Funding and capitalization of companies in the Portuguese-language space will be debated by a panel of experts from the financial sector including Pedro Reis (BCP bank), Pedro Correia (Santander bank) and Pedro de Oliveira Cardoso (BNU bank) with the participation of Lingliang Xu (Fosun).

The internationalisation of Sinoluso exports and investments will also be addressed by the president of AICEP, Miguel Frasquilho during the conference. LUSA

8 Business Daily Tuesday, February 21 2017

Greater China

Shadow banking

Mainland banks' off-book wealth products exceed US$3.8 trillion The products are a key reason behind the growth of shadow banking in China

C

hinese banks had more than RMB26 trillion (US$3.8 trillion) of wealth-management products (WMP) held off their balance sheets at the end of December, a 30 per cent increase from a year earlier, according to the central bank.

The expansion of this form of shadow banking, with money eventually being diverted to quasi-loans and bonds, outpaced the 10 per cent growth for normal lending during the same period, raising risks for the broader economy and undermining the country’s “deleveraging” efforts, the People’s Bank

of China said Friday in its quarterly monetary policy report.

The central bank is including off-balance sheet WMPs in its so-called macro prudential assessment framework starting this quarter to better gauge the expansion of credit and potential risks in the financial system. The move will probably lead to banks reporting higher credit growth and may require them to take steps to maintain sufficient capital reserves to limit risks posed by the investment products.

Since late 2014, the China Banking Regulatory Commission has been tightening rules on WMPs, most of which are non-principal guaranteed,

The central bank is including offbalance sheet WMPs in its socalled macro prudential assessment framework starting this quarter meaning they can reside off banks’ balance sheets. The products are a key reason behind the growth of shadow banking in China, and have been used

by some financial institutions as a way to extend funds to risky borrowers and evade capital requirements.

The investment vehicles are asset-management products by nature and therefore investors should shoulder any risks by themselves, the central bank said in its report. More work is needed to solve problems such as the real amount of capital banks should hold to cover WMPs, risk segmentation, regulatory arbitrage, and the perception of an implicit guarantee of repayment, the PBOC said.

Before the WMP inclusion, the central bank had taken into account loans, bond and equity investments, repurchase agreements and money deposited at other financial institutions when calculating banks’ overall levels of credit. Bloomberg News

Commodities

National steel mills caught on the hop

by North Korea coal ban Business with North Korea had become increasingly difficult under years of sanctions Meng Meng and Josephine Mason

China's steel mills and traders were scrambling to find alternative supplies of coking coal for steel making yesterday after Beijing slapped a surprise ban on coal imports from its isolated northern neighbour.

Chinese prices of steel, coking coal and coke all rallied, as traders and analysts said mills will likely be forced to buy more expensive domestic material or seek alternatives further afield from Russia or Australia, driving up costs.

While North Korea accounts for only a small portion of China's total coal imports, it is the main foreign supplier of high-quality thermal coal, called anthracite, which is used to make coke, a key ingredient in steelmaking.

"This news really took us by surprise. We are looking at a couple of alternative plans," said a steel mill purchasing manager, based in the northern province of Liaoning.

Th es e i n c l u d e d b u y i n g a n thracite from Shanxi province or buying more coke from local

providers, but both were more costly, said the manager, whose firm uses about 10,000 tonnes of North Korean anthracite each month.

Business with North Korea had become increasingly difficult under years of sanctions and the once-bustling trade handling coal from the north had shrunk to just a few private merchants.

Still few mills or traders anticipated the complete suspension of imports, which came a week after Pyongyang tested an intermediate-range ballistic missile, its first direct challenge to the international community since

U.S. President Donald Trump took office on Jan. 20.

Chi n a b o u ght 22 . 48 m i l l i o n tonnes of anthracite from North Korea in 2016, 85 per cent of its total imports.

Prices rally

Steel mills often blend anthracite with coking coal to make coke, a fuel used in blast furnaces, rather than using only more expensive coking coal.

A coke producer said he expected to ban to lead to a rebound in coke prices, which had fallen since late December due to good supply and

reduced demand for the Lunar New Year. " I a m n o t p l a n n i n g t o ta k e any new orders from new clients right now, because we believe coke powder prices will rebound sharply this week on the news," said the manager of a domestic coke plant, based in Shandong province.

Some mills could seek other i m p o r t s, b u t p r o d u c e rs s u c h a s A u s t ra l i a, R u s s i a a n d Vi etnam didn't produce enough to pick up the slack and shipping it would cost significa n t l y m o r e tha n f r o m N o rth K o r e a, t ra d e r s s a i d . Reuters

Business Daily Tuesday, February 21 2017 9

Greater China In Brief

Trade

Taiwan export orders keeps growing as world gears up for iPhone8 It is a leading indicator of demand for Asia's exports and for hi-tech gadgets Faith Hung and Jeanny Kao

Orders for Taiwan's exports rose for a sixth straight month in January on strong global demand for hi-tech gadgets such as Apple Inc's iPhones and Chinese smartphones, bolstering the government's view that economic growth could hit a three-year high this year.

The export-driven economies of Taiwan and many of its Asian neighbours are benefiting from a pick-up in global growth, and particularly in demand for electronics ahead of the upcoming launch of the new iPhone 8 later this year.

Export orders expanded 5.2 per cent in January from a year earlier, though less than the 6.65 per cent

median forecast in a Reuters poll and slower than December's 6.3 per cent growth.

But analysts remained optimistic it would be a solid year, with Apple leading a strong pipeline of new launches.

"Export orders should grow each quarter thanks to the launch of the new iPhone this year," said Wang Cheng-hung, an analyst at Cathay Financial Holding's fund unit.

Taiwan's export orders are a leading indicator of demand for Asia's exports and for hi-tech gadgets, and typically lead actual exports by two to three months.

Taiwan raised its 2017 economic growth target last week to 1.92 per cent from a preliminary estimate of 1.4 per cent in 2016, citing expectations of stronger shipments.

Exports in January rose for a fourth straight month, though momentum slowed substantially from the peak year-end shopping season in late 2016.

Export orders in January from China and the United States grew at a slightly slower pace than the previous month, but still expanded at a solid clip, while orders picked up from Europe and Japan.

The next generation iPhone 8 line is expected to be released by Apple in the back half of 2017, while demand for some up and coming Chinese smartphone brands is expected to continue to improve both domestically and globally.

Economists at Nomura believe Asia's electronics parts production may remain strong through at least the first half of this year, with improvements in Chinese phones' design and quality benefiting firms producing memory chips and displays across the region.

However, while the new launches are seen boosting business for Asian and global companies in those supply chains, the outlook for Asian exporters also is being clouded by fears of growing U.S. trade protectionism. Reuters

PBOC

Central bank injects more money into market China's central bank made a net cash injection via open market operations for the third consecutive day yesterday in an effort to ease a cash strain. The People's Bank of China conducted RMB170 billion (about US$24.7 billion) of reverse repos, a process by which the central bank purchases securities from banks through bidding with an agreement to sell them back in the future. The injection saw a net RMB100 billion pumped into the market yesterday, offset by RMB70 billion in maturing reverse repos. The operations included seven-day reverse repo priced to yield 2.35 per cent.

Fitch

PPPs to drive infrastructure investments Public-private partnerships (PPPs) will be the main financing model Chinese local governments use for infrastructure investments up to 2020, with state-owned enterprises (SOEs) to play the leading role, global ratings agency Fitch said yesterday.

The PPP model will also help Chinese construction companies to expand their order books as well, according to a recent Fitch report. However, the PPP model is in its early stages of development and SOEs have emerged as the main partners of Chinese local governments, rather than private investors, it noted.

Foreign Minister

More coordination to prepare for BRICS Summit M&A

CNPC buys billionaire stake in Abu Dhabi oil venture Abu Dhabi is seeking to boost production capacity to 3.5 million barrels a day by 2018 Anthony DiPaola and Mahmoud Habboush

China National Petroleum Corp. bought a stake in Abu Dhabi’s largest oil concession as the Middle Eastern emirate with 6 per cent of global crude reserves looks increasingly to

“If you’re Abu Dhabi and looking for demand growth, China is the future and its demand is going to continue to grow” Chris Gunson, a Dubai-based lawyer at Amereller Legal Consultants Asia, its biggest market, for investment to raise output capacity.

Abu Dhabi National Oil Co. awarded CNPC an 8 per cent stake in the onshore venture in return for a US$1.8 billion signing bonus, Adnoc said Sunday in a statement. State-run CNPC is the venture’s third Asian partner, joining Japanese and South Korean companies alongside BP Plc

and Total SA. BP signed on to the project in December, and Total in January 2015.

Asia will show the fastest growth in energy demand over the next two decades, according to the International Energy Agency. Abu Dhabi is among Persian Gulf oil producers including Saudi Arabia and Iraq that are tapping Asia for energy investments.

While European and U.S. companies have pumped oil in the Middle East for more than a century, their Asian counterparts are relative newcomers.

“If you’re Abu Dhabi and looking for demand growth, China is the future and its demand is going to continue to grow,” Chris Gunson, a Dubai-based lawyer at Amereller Legal Consultants, said Sunday. “For the big buyers in Asia, the logical source of that future supply is the Gulf.”

CNPC is joining the Abu Dhabi Company for Onshore Petroleum Operations, or ADCO. BP and Total each hold 10 per cent stakes in the venture, while Japan’s Inpex Corp. owns 5 per cent and GS Energy Corp. of South Korea holds 3 per cent. Abu Dhabi plans to retain a 60 per cent stake in ADCO and is seeking an investor for the remaining 4 per cent, Adnoc said in the statement.

Export pipeline

Japanese companies are partners in

at least four other oil-production ventures in Abu Dhabi, the largest sheikhdom in the United Arab Emirates. Korean and Chinese companies are exploring at smaller concessions in the emirate. CNPC’s engineering arm also helped build an export pipeline in Abu Dhabi.

Elsewhere in the region, CNPC is developing Iraq’s biggest oil field, together with BP. China Petroleum and Chemical Corp. is a partner in a refinery in Saudi Arabia, and Chinese firms are developing crude deposits in Iran.

Abu Dhabi is seeking to boost production capacity to 3.5 million barrels a day by 2018. ADCO pumps about half of Abu Dhabi’s roughly 3 million barrels of daily crude output.

The emirate is expanding production capacity even amid a global oil glut that cut prices to an average of about US$50 a barrel over the last two years. The Organization of Petroleum Exporting Countries, of which the U.A.E. is the fourth-biggest producer, agreed in November to cut production in effort to trim crude stockpiles and boost prices.

The 40-year concession replaces an earlier agreement under which Western oil majors pumped the emirate’s crude. Exxon Mobil Corp. and Royal Dutch Shell Plc took part in the previous venture, also called ADCO, along with BP, Total and Portugal’s Partex Oil & Gas Group. That deal expired in January 2014. Adnoc ran the concession on its own for a year, then backdated the new deal to Jan. 1, 2015. Reuters

China will strengthen coordination with BRICS members including South Africa to prepare for the BRICS leaders' summit. Chinese Foreign Minister Wang Yi made the remarks during a meeting with his South African counterpart Maite Nkoana-Mashabane Sunday in Beijing. The summit, to be held in southeast China's coastal city of Xiamen in September, will not only contribute to common development of BRICS countries, but also promote more inclusive and balanced economic globalization, allowing the BRICS mechanism to play its role of rebalancing globalization, Wang said.

Environment

Beijing criticizes several cities' response to pollution China's Ministry of Environmental Protection (MEP) on Sunday named and shamed several cities in north China for not doing enough to cope with air pollution. In an inspection on 18 cities in the BeijingTianjin-Hebei region and neighbouring areas, the MEP found several problems in their response to air pollution, including inadequate planning and poor implementation. Cangzhou city in Hebei province was criticized for failure to draw up a detailed list for business shutdowns on heavily polluted days, which made it hard to achieve desired emission-cut effects.

10 Business Daily Tuesday, February 21 2017

Greater China

M&A

Inbound expansion takes flight on consumer promise After a trial in a few of its free-trade zones, China in October expanded a new liberalisation programme to the entire country Elzio Barreto

O

verseas acquisitions by Chinese buyers are cooling after two record years as Beijing reins in capital outflows, but deals into China are on the rise, and new rules will make it easier for foreign buyers to tap China's giant consumer potential.

Inbound M&A deals have already reached US$7.1 billion so far in 2017, almost double the amount in the same period last year and are well on track to beat the 2016 total of US$46 billion, while outbound deals tumbled more than 40 per cent to US$8.4 billion, Thomson Reuters data showed.

Deals in retail and consumer staples accounted for nearly half those early transactions, far outpacing real estate and financial deals, which usually dominate inbound M&A. Belgian investment firm Verlinvest is ahead of the trend.

It set up a US$300 million venture last year with Chinese state-owned conglomerate China Resources and has already deployed more than half of the funds.

Verlinvest, which manages funds for the founding families of AnheuserBusch InBev, is investing in minority

and majority stakes in leading western brands so it can push them through China Resources' distribution channels in China, said Nicholas Cator, who is responsible for the Asia business.

"We're going to be focusing on those high-growth sectors that are based on consumer trends, like health-related food and beverage products, healthcare, education, cinema or entertainment, or anything linked to kind of cultural production and content," he said.

Verlinvest's joint venture in December bought an undisclosed stake in Oatly, a Swedish maker of dairy-free products, and plans to expand it into China, and in November it bought a majority stake in Red Sun Enterprise, which owns senior care homes in Shanghai and Nanjing.

Looser approvals regime

The leadership in Beijing has long been trying to rebalance the economy away from infrastructure, heavy industry and export-led growth and towards domestic consumption, so in theory such investment should be welcome, but in practice foreign capital has fallen foul of barriers to entry.

That appears to be changing. After a trial in a few of its free-trade zones,

China in October expanded to the entire country a new liberalisation programme.

Apart from a "negative list" of industries deemed too sensitive, foreign investments no longer need to go through a cumbersome approval system, and there has even been some loosening in the off-limits list.

"The direction China is going is that for most sectors, provided it's not in the so-called negative list, where there would be additional scrutiny, the process for corporate establishment and changes including share transfers should be simpler," said Tracy Wut, M&A partner at law firm Baker McKenzie in Hong Kong.

"From the recently amended negative list, there are further

Key Points Inbound M&A in 2017 already twice same period last year Consumer/retail account for nearly half early deals Beijing relaxed foreign deal approval regime in October High valuations remain an obstacle to foreign capital relaxations in certain sectors to which the government is trying to encourage foreign investments."

CDIB Capital International Corp, part

of Taiwanese financial group China Development Financial Holding (CDF), is also seizing the opportunities.

Last August it invested RMB200 million (US$29.2 million) for a stake in outdoor sports retailer Tutwo (Xiamen) Outdoor Co Ltd, betting on a jump in demand for hiking, skiing and camping gear in China.

"Clearly there's going to be more of a focus on domestic growth and consumption is one of the themes," said Lionel de SaintExupery, president and CEO of CDIB. "Consumption is still relatively robust, but we're not just seeking average growth, we're seeking hyper growth and that you can see in new categories."

The biggest fly in the ointment, according to David Cogman, a principal focusing on China at consulting firm McKinsey & Co, is the lofty valuations for Chinese assets.

C o n s u m p t i o n a n d s e r vi c es companies listed in Shenzhen and Shanghai trade at about 30 times their earnings, compared with a multiple of 17 for similar companies trading in Hong Kong and about 20 for U.S.listed companies, Thomson Reuters data shows.

"At the end of the day, particularly if you're a fund looking across multiple markets, your investment committees still have to think where to put the capital and that's hard to do with the current numbers you see in China," he said. Reuters

Strategic deal

Alibaba deepens retail foray with new Mainland supermarket tie-up With Bailian, Alibaba will be tapping a network of 4,700 stores across 25 Chinese provinces Alibaba Group Holding Ltd. is teaming up with Shanghai Bailian Group Co., one of China’s largest supermarket and department store chains, as Jack Ma accelerates an effort to employ technology to shake up old-fashioned retail.

Alibaba’s planning to help upgrade some of Bailian’s 4,700 stores across the country, integrating everything from customer relations to payment and logistics in a manner similar to its tie-ups with other players such as electronics chain Suning Commerce Group Co. The online juggernaut that vanquished EBay and Amazon in China has set its sights on using its data and technology to transform the US$4 trillion world of

domestic brick-and-mortar retail. In its biggest old-economy deal, Alibaba is leading a bid to buy department store chain Intime Retail Group Co. for as much as US$2.6 billion. Its billionaire co-founder wants to build a network that will allow stores and brands to monitor transactions as they happen, ridding layers of distributors so that retail outlets can place orders online in real time.

Bailian’s shares surged their daily 10 per cent limit Monday in Shanghai after the China Securities Journal reported on the partnership, citing unidentified sources.

“Our partnership with Bailian is an important milestone in the

evolution of Chinese retail, where the distinction between physical and virtual commerce is becoming

Both companies will integrate their membership databases and use facial recognition technology to improve shoppers’ experiences, according to Alibaba

obsolete,” Daniel Zhang, Alibaba’s chief executive officer, said in an e-mailed statement.

Apart from Intime, the Hangzhou, China-based company has already invested in retail operators including Suning and Sanjiang Shopping Club Co. to further its so-called new retail experiment.

Alibaba won’t be taking a stake in Bailian. But the pair will integrate their membership databases and use facial recognition technology to improve shoppers’ experiences, the company said in an e-mail. Alibaba’s online payments system, Alipay, will be available at all Bailian stores. The e-commerce giant’s delivery affiliate -- Cainiao Smart Logistics Network Ltd. -- will work with Bailian to flesh out protocols that make the system more efficient. Bloomberg News

Business Daily Tuesday, February 21 2017 11

Asia GDP

Thai quarterly growth below forecast Public consumption increased 1.5 per cent in the December quarter from a year earlier Orathai Sriring and Kitiphong Thaichareon

T

hailand's economy expanded less than expected in the last quarter of 2016 and the government left its forecast for growth this year unchanged, indicating recovery will remain a slow process.

Growth in October-December was 0.4 per cent from the previous quarter, on a seasonally-adjusted basis, below the 0.6 per cent seen in a Reuters poll. The government revised July-September growth to 0.4 per cent, from 0.6 per cent.

On an annual basis, the economy expanded 3.0 per cent in the final

"We think growth in Thailand will disappoint," Capital Economics wrote.

It said the exports will be held back by "lacklustre external demand as well as waning export competitiveness" and called the outlook for domestic demand "subdued".

The National Economic Social and Development Board, the planner, revised up its forecast for export growth this year to 2.9 per cent from 2.4 per cent.

Exports, a key growth driver, grew in 2016 for the first time in four years, but Thailand faces expected protectionism and capital outflow risks as the U.S. Federal Reserve prepares to hike rates this year.

Weak private investment

Kobsidthi Silpachai, head of capital markets research of Kasikornbank in Bangkok, said "it looks like we are still in a soft patch for growth."

Structural issues "weigh on Thailand's ability to reach potential growth in excess of 4-5 per cent," he said.

While government spending is at a "good clip", this "does not seem to generate the crowding in from private investments," he added.

Growth in Southeast Asia's second-largest economy has lagged regional peers since 2014, when the army seized power to end months of street protests. The junta has taken stimulus measures in a bid to lift domestic activity.

Public consumption increased 1.5 per cent in the December quarter

from a year earlier, while exports rose 3.6 per cent Government investment rose 8.6 per cent but private investment contracted 0.4 per cent, NESDB data showed.

NESDB chief Porametee Vimolsiri said monetary policy would have to remain "accommodative" to support the economic recovery.

The central bank has kept its policy rate unchanged at 1.50 per cent since a cut in April 2015. It next reviews monetary policy on March 29.

Pivotal tourism took a hit in the 2016's last quarter as a Thai crackdown on cheap tour packages slashed the number of visitors from China, Thailand's biggest market.

Tourist arrivals fell to 7.8 million from 8.2 million in July-September. Reuters

7.2 per cent, resulting in Japan recording its 59th straight monthly deficit against Asia's largest economy.

Overall exports rose 1.3 per cent, falling short of the market expectation for a five-per cent rise, which was the median estimate of economists surveyed by Bloomberg.

Imports increased 8.5 per cent, the first rise in more than two years, and came in higher than the market expectation of a 4.8-per cent rise.

Increases in commodity prices, triggered by oil producers' agreement

last year to reduce production, also boosted energy bills for Japan, which depends mostly on imports from the Middle East.

The yen's relative strength compared with a year ago was also seen weighing on Japanese exports.

Japan's exports to the United States fell 6.6 per cent, led by weaker automobile and semiconductor shipments, while imports rose 11.9 per cent, driven largely by gas and grains.

Asia-bound exports rose 6.0 per cent, led by steel, ships and auto parts. AFP

Key Points Q4 GDP +0.4 pct q/q sa, vs +0.6 pct in poll Q4 GDP +3.0 pct y/y, same as poll forecast Planning agency keeps 2017 forecast at 3.0-4.0 pct 2016 GDP +3.2 pct vs revised +2.9 pct in 2015 Growth will remain soft - private economists quarter, matching the poll forecast.

The national planning agency, leaving its 2017 forecast at 3.0-4.0 per cent, said expanding exports plus higher crop production and state spending will aid growth this year.

But analysts are doubtful the Thai growth pace can be much higher than 2016's 3.2 per cent.

Commerce

Japan returns to trade deficit in January Imports from China rose 7.2 per cent, resulting in Japan recording its 59th straight monthly deficit against Asia's largest economy Japan logged its first trade deficit in been trying to kick-start growth for five months in January, official data more than four years with a policy of showed yesterday, as higher energy spending, central bank policy easing prices overwhelmed slower growth and structural reform, but the outcome in exports due to the lunar new year. has been mostly disappointing.

The country routinely falls into deficit Inflation and consumer spending are in January due to weak, and companies the lunar new year have been reluctant celebrations in key to boost wages in the trade partners such world's third-largest as China, which sees economy. an extended holiday.

For January, the trillion RMB But Yuichi Kodama, trade deficit came Japan's January trade deficit chief economist at to 1.08 trillion yen Meiji Yasuda Life (US$9.6 billion), Insurance Co in Tokyo, said that the expanding 67.8 per cent from the same export weakness would not last. month a year ago.

"Exports are still on the recovery The deficit was the first since August track," he told Bloomberg News. "The and marked a sharp reversal from a global economy is steadily recovering. surplus of 640 billion yen in December.

"There’s no change to the view that Japan's China-bound exports Japan’s economy is driven by external increased 3.1 per cent in January, demand while domestic demand is sharply lower than the 12.4-per cent remaining weak." jump seen in December.

Prime Minister Shinzo Abe has Imports from China, meanwhile, rose

US$9.6

12 Business Daily Tuesday, February 21 2017

Asia Private poll

Japan Inc signals boost to domestic capex Four per cent of Japanese firms overall planning to boost U.S. procurement and 3 per cent planning to increase capacity utilisation Tetsushi Kajimoto

O

ne third of Japanese firms are looking to lift business investment at home in the next financial year, but companies are less bullish about capital spending in the United States due to uncertainty over the Trump administration's policies, a Reuters poll showed. Japanese auto firms, however, were responsive to President Donald Trump's campaign to put 'America First' with nearly a third looking to boost local procurement and others planning to raise factory utilisation rates.

The Reuters Corporate Survey found 33 per cent of companies expect to boost domestic capital spending while 57 per cent aim to maintain the previous year's levels - a hopeful sign for Prime Minister Shinzo Abe's efforts to engineer a sustainable economic recovery.

It is the first broad poll to gauge Japan Inc's business investment plans for the year beginning in April. Japanese firms tend to be very cautious in their initial capital spending forecasts and revise up as the year progresses.

"This is a positive sign," said

Hidenobu Tokuda, senior economist at Mizuho Research Institute, who reviewed the survey results.

"Japanese manufacturers have taken a wait-and-see approach about capital expenditure due to slack overseas demand but they are easing this stance," he said.

Any overall rise in domestic capital spending would follow a 5.5 per cent increase projected for big firms during the current fiscal year which comes after a 3.4 per cent increase in the previous year, according to central bank data.

In contrast to plans for Japan, only 9 per cent of firms which took part in the Jan. 31-Feb. 14 survey currently want to boost capital spending in the United States while 79 per cent saw it flat. The 9 per cent was also far less than the 21 per cent which aim to boost capital expenditure overseas in countries other than in the U.S. The monthly survey, conducted for Reuters by Nikkei Research, polled 531 big and mid-size firms and between 190 and 240 firms answered questions on capital spending. Around 13-14 auto firms, including carmakers and their suppliers, responded to questions about their U.S. business plans.

Just over half of Japanese firms said they believe U.S. demand will expand over the next year or two with many respondents saying they believed Trump's policies would create jobs and spur consumer spending. Twenty-seven per cent see demand flat while the rest predicted a contraction.

But when asked if there had been any change in stance towards their U.S.-related businesses given Trump's statements and actions since becoming president, 85 per cent said there had been none.

"We don't know yet what the U.S. is going to do," wrote a manager at chemicals company, an answer echoed by many other respondents who said they were taking a wait-and-see stance.

Japanese companies are weighing both negative factors such as border

tax and higher tariffs as well as positive factors such as deregulation and tax cuts, all of which remain unclear, said Tokuda at Mizuho Research.

Japanese auto firms were more cautious about the outlook for U.S. demand than other sectors. After record sales of more than 17.5 million vehicles in 2016, many auto executives believe the market is peaking although some consultancies are now calling for a new record to be set this year due to Trump's policies.

But the Japanese auto industry was the most responsive sector to Trump's 'America First' campaign with nearly a third of the 13 auto firms responding looking to boost local procurement and a fifth saying they planned to lift factory utilisation. Automakers in particular have come under fire from Trump for not creating sufficient U.S. jobs. Reuters

Inflation

S.Korea's producer prices post highest increase in 6 years The fast increase followed higher raw material prices in addition to soaring egg prices Prices for goods and services traded among South Korean suppliers posted the highest increase in six years, indicating faster headline inflation in the near future, central bank data showed yesterday.

The producer price index (PPI) stood at 102.17 in January, up 1.3 per cent from a month earlier, according to the Bank of Korea (BOK). It was the faster advance than any figure tallied in January in the past six years, keeping

of livestock products that surged 6.3 per cent. Egg prices skyrocketed 113.4 per cent.

Prices for coal and oil products jumped 8.5 per cent last month, raising the overall industrial products that saw the prices rise 1.9 per cent in January from a month earlier. Diesel prices soared 59.0 per cent, with other oil products recording double-digit increases.

Services prices inched up 0.3 per cent, with those for electricity, natural gas and tap water making no change.

an upward momentum for six straight months.

From a year earlier, the index picked up 3.7 per cent, the highest in over five years.

The fast increase followed higher raw material prices in addition to soaring egg prices, which were caused by the spread of avian influenza especially among layer chickens that lay eggs.

The prices for agricultural, livestock and fishery products went up 4.0 per cent in January from the previous month on the back of higher prices

Higher producer prices indicate faster consumer price inflation in the foreseeable future, which is expected to put more pressure on the BOK into raising its record-low policy rate.

The BOK cut its benchmark rate from 3.25 per cent in July 2014 to an all-time low of 1.25 per cent in June last year.

The U.S. Federal Reserve hinted at three rate increases in 2017 after lifting the policy rate by a quarter per centage point in December. It would add pressures to the BOK's accommodative policy stance. Xinhua

Junko Fujita

Business Daily is a product of De Ficção – Multimedia Projects

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 Tuesday, February 21 2017    13

Asia In Brief

GDP

Growth in New Zealand services sector accelerates

Commerce

Singapore's domestic wholesale trade remains flat Excluding petroleum, foreign wholesale trade grew by 10.4 per cent Domestic wholesale trade in Singapore was flat in the fourth quarter of 2016 on a year-on-year basis, said Department of Statistics Singapore (SingStat) yesterday in its latest report.

Excluding petroleum, domestic wholesale trade fell 3.7 per cent compared to the same period last year, said SingStat. After adjusting for price changes, overall domestic wholesale trade registered a year-onyear decrease of 7.4 per cent.

On a quarter-on-quarter basis, domestic wholesale trade expanded by

10.3 per cent in the fourth quarter over the previous one, partly due to higher prices of petroleum and chemical products. Excluding petroleum, domestic wholesale trade increased 5.3 per cent. After removing the price effect, overall domestic wholesale trade grew by 0.5 per cent over the previous quarter.

As for foreign wholesale trade, it increased 9.1 per cent year-on-year in the fourth quarter of 2016. Excluding petroleum, foreign wholesale trade grew by 10.4 per cent. After adjusting for price changes, overall foreign wholesale trade increased

1.8 per cent year-on-year.

On a quarter-on-quarter basis, foreign wholesale trade rose 9.1 per cent in the fourth quarter this year. Excluding petroleum, foreign wholesale trade expanded by 7.7 per cent over the previous quarter. After removing the price effect, overall foreign wholesale trade registered a decrease of 0.5 per cent.

Wholesale Trade Index (WTI), composed of two series, namely domestic WTI and foreign WTI, measures the short-term performance of wholesale trade activities. The indices are presented at both current prices and constant prices.

The indices at current prices measure the changes in sales value which can result from changes in both price and quantity. By removing the price effect, the indices at constant prices measure the changes in the sales volume. Reuters

Petronas considers stake sale in offshore gas project A slump in oil markets since 2014 has squeezed Petronas' cash flow

Malaysian state-owned oil and gas firm Petronas is aiming to sell a large minority stake in a prized upstream local gas project for up to US$1 billion as it seeks to raise cash and cut development costs, two sources familiar with the matter said.

Petroliam Nasional Bhd (Petronas) is looking to sell a stake of as much as 49 per cent in the SK316 offshore gas block in Malaysia's Sarawak state, the sources told Reuters, a move that would be one of its first major recent sales as it grapples with oil prices that have slumped by half from two-anda-half years ago.

Petronas is working with an investment bank on the stake sale and kicked off the process this month, one of the sources said. Petronas did not respond to a request for comment.

Gas from the NC3 field in the SK316 block feeds Malaysia's liquefied natural gas (LNG) export project, known as LNG 9, Petronas' joint venture with JX Nippon Oil & Energy Corp that started commercial production in January.

The sources said the stake is expected to include a combination of the producing NC3 gas field, the potential development of the Kasawari field in the same block and other exploration acreage in the block.

The funds raised could contribute to the future development of the Kasawari field, one of the largest non-associated gas fields in Malaysia, which has an estimated recoverable hydrocarbon resource of about three trillion standard cubic feet.

Oil industry

JX says cuts crude refining target Japan's JX Nippon Oil & Energy Corp has cut the amount of crude oil it expects to refine in February by about 4 per cent from an earlier target due to unspecified problems with secondary units at multiple refineries. A spokesman for the country's top oil refiner yesterday said it was reducing its refining target for the month to 1.07 million barrels per day (4.75 million kilolitres). He added that the firm was revising up its oil product export outlook for February by nearly 4 per cent to 189,000 bpd.

Trade

Vietnam to restrict imports from EEU

LNG industry

Anshuman Daga

Growth in New Zealand's services sector accelerated last month to its fastest rate in more than two years, according to the latest performance of services index (PSI) yesterday. The BNZBusiness New Zealand PSI for January was 59.5 on a scale where above 50 represents expansion and below 50 contraction. It was up one point from December and was the highest value since September 2015.

Business New Zealand chief executive Kirk Hope said that increased activity in the services sector was across the board.

The stake could appeal to firms such as Indonesia's state-owned Pertamina, Thailand's PTT Exploration, and Production PCL and some Japanese companies, the sources said.

As huge production comes online in Australia and the United States, LNG markets are oversupplied, resulting in an almost 70 per cent slump in the Asian spot LNG price since 2014 to US$6.40 per million British thermal units now.

Despite this, Malaysia's LNG assets are viewed as attractive thanks to comparatively low production costs and due to their proximity to North Asia's big consumption hubs of Japan, China, and South Korea.

Petronas is currently gauging interest from potential bidders, said the sources, who declined to be identified as they were not authorised to speak about the matter.

A slump in oil markets since 2014, which has seen crude prices halve to little more than US$50 per barrel, has squeezed Petronas' cash flow and forced it to announce a 50 billion Malaysian ringgit (US$11.2 billion) cut in capital expenditure in January 2016 over four years. Reuters

Vietnam will apply import tariffs quotas for tobacco material and poultry eggs from the Eurasian Economic Union (EEU) member states in 2017, 2018 and 2019, according to the Ministry of Industry and Trade (MoIT) yesterday. Accordingly, the application of import tariffs quotas for tobacco material and poultry eggs from the EEU is in accordance with Vietnam-EEU Free Trade Agreement. The ministry states the quotas for poultry eggs imported from the EEU into Vietnam in 2017 will be 8,400 dozens. The figures will be 8,820 dozens and 9,261 dozens in 2018 and 2019, respectively.

Forex

Bangladesh's reserve reaches US$31.72 bln Bangladesh's foreign exchange reserve reached US$31.72 billion at the end of January, said a central bank official yesterday.

The Bangladesh Bank (BB) Forex Reserve and Treasury Management Department official who did not like to be named told Xinhua that "the country's foreign exchange reserves stood at US$31,724.317 million in January after reaching US$32,092.19 million on Dec. 31, last year." Bangladesh's foreign exchange reserves crossed the US$32 billion mark first time in December last year on a steady inflow of remittances. Earlier in August, 2015 the country's foreign reserve reached the US$31 billion.

14 Business Daily Tuesday, February 21 2017

International In Brief

Portugal

Consumer confidence at record high The Portuguese Consumer Confidence Index in the final quarter of 2016 rose by eight points to an “all time high” of 74 points, the Nielsen Global Consumer Confidence report said. Nielsen said “the level of national consumer confidence exceeded that recorded in countries such as Finland (68), France (66), Russia (63), Italy (58) and Greece (53),” and the European Union average was 81 points and the global average was 101 points. “The perceptions of Portuguese consumers have improved significantly: 36 per (10 more percentage points year on year) they don’t consider their country to be in economic recession,” Nielsen said.

Gender gap

Nashar named Saudi Arabia's first female commercial bank CEO Rania Nashar was named chief executive of Samba Financial Group yesterday, becoming the first female CEO of a listed Saudi commercial bank in line with the government's economic and social reforms. Nashar is a board member of Samba's global markets subsidiary and a Pakistani unit, and has nearly 20 years of experience in banking. Women, banned from driving in Saudi Arabia and subject to a system of male guardianship, hold few top posts in the financial sector.

EU bailout head

Greece needs "far less" money than agreed Greece will need less in emergency loans from international lenders than originally agreed in its third bailout programme due to a better-than-expected budgetary developments, the head of the euro zone bailout fund was reported yesterday as saying. Klaus Regling told German newspaper Bild that at the end of Greece's money-for-reforms package in August 2018, the European Stability Mechanism (ESM) will "probably have paid out far less than the agreed maximum amount of 86 billion euros" because the Greek budget was developing better than expected.

Power vacuum

Nigeria signals normality by putting Buhari's deputy in charge Nigeria's deputy leader is making wide use of powers granted by President Muhammadu Buhari, who is on extended sick leave abroad, as the country seeks to avoid a debilitating power vacuum while it confronts its first recession in 25 years. The West African oil-producing nation was gripped by instability in 2010 when then President Umaru Yar'Adua spent three months in a Saudi hospital while his aides shrouded his illness in secrecy. His deputy Goodluck Jonathan only took over after he died in the midst of a constitutional crisis.

Investors

Sovereign funds pulled US$38 bln from global markets Redemptions peaked in the third quarter of 2015 at US$20.1 billion Claire Milhench

S

overeign wealth funds pulled US$37.8 billion from global stock and bond markets in 2016, data from research firm eVestment showed yesterday, although fourth quarter flows showed a slowdown in the rate of redemptions.

Oil-backed sovereign wealth funds (SWFs) have been under pressure since oil prices tumbled from their mid2014 highs of US$115 a barrel, and 2016 marks their third year of net selling.

However, sovereign investors' redemptions from third party fund managers have slowed year-on-year, down from US$45.7 billion in 2015. The rate of selling steadily reduced over the

course of 2016, with fourth quarter redemptions of US$4.9 billion, down from a revised US$7.2 billion in the third quarter, eVestment said.

This could be related to a rebound in oil prices from a low of US$27 a barrel in January 2016 to around US$57 a barrel in December after oil producers reached a deal to cut output.

Peter Laurelli, global head of research at eVestment, which collates data from 4,400 firms managing money on behalf of institutional investors, highlighted the correlation between oil prices and flows.

"If you look at when the price of oil began to fall in 2014, along with the rise in strength of the U.S. dollar, that moment coincides very closely with the shift of SWF flows to external

institutional managers from positive to negative," he said.

Redemptions peaked in the third quarter of 2015 at US$20.1 billion, though there have been no net inflows since second quarter 2014.

In fourth quarter 2016, the biggest redemptions came in U.S. equity and global equity mandates, which saw net outflows of US$3.3 billion and US$1.1 billion respectively. Passively-managed emerging market equity mandates lost US$1.4 billion.

U.S. and global equity markets have rallied to record levels since Donald Trump was elected as U.S. president in November, but Laurelli said decisions to redeem assets were not short-term in nature.

Fixed income mandates, which had attracted a total US$2.5 billion of net inflows in the third quarter, switched to net outflows of US$13.5 million in the fourth quarter. Reuters

Official visit

Pence faces anti-Trump protests, calls to oppose EU breakup He will meet European Council President Donald Tusk, European Commission President JeanClaude Juncker and NATO Secretary General Jens Stoltenberg Lachlan Carmichael

U.S. Vice President Mike Pence began talks with EU officials yesterday in the face of anti-Trump protests and calls from his Belgian hosts to oppose any breakup of the European Union.

Pence was in Brussels at the end of a European trip aimed at reassuring allies fearful that U.S. President Donald Trump might abandon them.

"No question of allowing the European Union's breakup. That message was given," Belgian Prime Minis-

"President Trump and our people are truly devoted to our transatlantic union."

Trump's criticism of NATO as "obsolete", his praise for Britain's decision to leave the European Union, and his apparent tilt to Russian President Vladimir Putin have unnerved U.S. allies.

And they continue to seek reassurance from Washington even though Pence, U.S. Defence Secretary James Mattis and U.S. Secretary of State Rex Tillerson stuck close to established policy during their foray into Europe.

that Pence had not mentioned the EU, after Trump welcomed Brexit and appeared to voice hope that other EU states would follow suit.

'Absolutely disgusting' Mogherini has said Pence's visit is "a very important political sign," though she suggested EU-U.S. relations may become more pragmatic and less automatic than before.

During her visit to Washington 10 days ago, Mogherini warned Trump's administration not to "interfere" in European politics.

Addressing fears that businessman Ted Malloch might be named the next U.S. ambassador to Brussels, Mogherini said she had been told "there is no decision taken and no specific name considered at this point".

In the German and British press, Malloch reportedly said Brexit was a harbinger of the EU's eventual disintegration and he has compared the bloc to the Soviet Union.

Tusk and Juncker, who will also

EU foreign policy chief said Pence's visit is "a very important political sign" ter Charles Michel told Belga news agency after a dinner with Pence on Sunday.

"I feel that it was heard," he said.

Pence began talks yesterday with EU foreign policy chief Federica Mogherini at the U.S. embassy as scores of protesters gathered outside, criticising the Trump administration's attitude toward women, gays and climate change.

"We are here to protest against the visit of Pence because we are revolted by the decision of the U.S. administration to undermine women's rights worldwide," Irene Donadio, who works for the International Planned Parenthood Federation, told AFP. Pence will also meet European Council President Donald Tusk, European Commission President JeanClaude Juncker and NATO Secretary General Jens Stoltenberg.

The Brussels trip follows a visit to the Munich Security Conference, where Pence told European leaders and defence experts: "The United States is and will always be your greatest ally.

United States Vice President Mike Pence (L) shakes hands with European Union (EU) High Representative Federica Mogherini (R) during a meeting at the U.S. ambassador's residence in Brussels, yesterday. Lusa

Pence said Washington would push Russia to honour the Minsk ceasefire accords in Ukraine, while Tillerson said the U.S. would only cooperate with Moscow if it benefits the American people.

But French Foreign Minister JeanMarc Ayrault said he was "struck"

meet the new vice president for the first time, have expressed concerns about Trump.

Juncker said after Trump won the election that he feared the new president will implement everything he said he would during a "campaign that I found absolutely disgusting". AFP

Business Daily Tuesday, February 21 2017 15

Opinion Business Wires

Viet Nam News The Ministry of Agriculture and Rural Development has set a shrimp export target of US$10 billion by 2030. However, Prime Minister Nguyễn Xuân Phúc disagreed with this, saying the target is too low and can be reached by 2025. He went on to say that Việt Nam should become the world’s shrimp production base. But analysts are divided on this. Some said reaching US$10 billion even in 2025 would be difficult since the agriculture sector faces many challenges like the small, household scale of production, climate change and international integration.

The art of the North Korean deal

U The Star Malaysia has recalled its ambassador to North Korea as Wisma Putra (Malaysian Foreign Office) summoned Pyongyang's ambassador to Malaysia following his strong criticism against the Government. In a strongly worded statement, Wisma Putra said it viewed the baseless allegations levelled by the North Korean Ambassador Kang Chol as a serious attempt to tarnish the country's reputation. The statement was issued as Kang was still in the Foreign Ministry building to meet Deputy Secretary-General 1 Raja Nurshirwan Zainal Abidin. The Foreign Ministry's statement said the Malaysian Government had been transparent regarding the death of Kim Jong-nam.

The Phnom Penh Post Acleda Bank, Cambodia’s largest bank in terms of assets, will have to shell out millions in the next three weeks to comply with a Council of Ministers decision last Friday that the private financial institution must redesign and replace its logo on all company materials and products to differentiate itself from the Ministry of Economy and Finance, a senior bank executive said yesterday. Acleda Bank CEO In Channy said the bank would shelve the mythological golden bird insignia it has used since 2003 when it became a commercial bank for a watered-down logo comprised purely of English and Khmer script.

Jakarta Globe The annual rate of inflation may move above 4 per cent due to the fuel price hike and the gradual increase in electricity tariffs, a director at the central bank said last weekend.

"Those factors may result in an increase in the inflation rate this year; that is why we need to put in more effort to contain volatile food prices to be able to achieve our targets," Bank Indonesia economic and monetary policy director Yoga Affandi said. The Central Statistics Agency announced previously that annual inflation stood at 3.49 per cent in January.

.S. President Donald Trump’s surprisingly restrained reaction to North Korea’s latest ballistic missile test has left many observers wondering what his next move will be. Trump has publicly declared that North Korea’s goal of developing a nuclear-capable missile that can reach the United States “won’t happen.” But what, specifically, will he do to prevent it?

Some might advise the Trump administration to launch pre-emptive strikes on North Korea’s nuclear facilities. But this is a dangerous and ineffective option, because North Korea would then likely retaliate against South Korea. South Koreans do not want to risk a war, so a U.S.-provoked attack

by North Korea would be catastrophic for the U.S.South Korean alliance.

Moreover, North Korea recently developed missiles with solid-fuel engines, which can be stowed away until just before they are launched, making it technically difficult to identify the right targets – and the right times to strike them.

Another possible response to the North Korean threat is tougher international sanctions, including secondary boycotts. But sanctions that are strong enough to make North Korea’s “Young General,” Kim Jong-un, think twice about his latest provocations will require China’s cooperation, and securing it will not be easy.

Chinese leaders might interpret overly aggressive secondary boycotts as being aimed not only at North Korea, but at China, too. And with the Communist Party of China’s 19th National Congress looming later this year, President Xi Jinping will not want to be perceived as giving in to U.S. pressure.

We know from more than two decades of nuclear diplomacy with North Korea that, to achieve a positive outcome, the Trump administration will have to resolve two fundamental dilemmas. And while past political leaders have preferred to sweep them under the carpet, Trump’s unique, untraditional leadership and negotiating style could enable him to make progress where his predecessors did not.

The first dilemma concerns China. Any diplomatic effort to denuclearize North Korea must also alleviate China’s geostrategic concerns about the future of the Korean Peninsula. For centuries, China has feared that the peninsula could become part of a chain of encirclement, or serve as an invasion route. In 1592, the Japanese general Toyotomi Hideyoshi invaded the Korean Kingdom to establish a beachhead for invading China. In response, China, under the Ming Dynasty, fought alongside Korea against the Japanese army.

Three centuries later, China’s Qing Dynasty fought the Sino-Japanese War of 1894 to prevent Japan from dominating Korea. And again, in the winter of 1950-1951, Chinese Communist Party Chairman Mao Zedong intervened in the Korean War when the U.S. army crossed the 38th parallel and advanced toward China’s border.

China’s current leaders share their forbears’ strategic concern about the Korean Peninsula, which explains their unwillingness to meet fully U.S. demands for action against North Korea. China simply does not want to run the risk of its North Korean buffer state imploding as a result of sanctions. And, because they understand China’s strategic imperative, North Korea’s leaders have felt free to develop their country’s nuclear program.

“

Yoon Young-kwan former Minister of Foreign Affairs of the Republic of Korea, is Professor Emeritus of International Relations at Seoul National University

Trump and Xi have had their first phone conversation, and may soon meet in person. My hope is that Trump will live up to his reputation for boldness, and propose a grand bargain with China that alleviates its geostrategic worries about the Korean Peninsula.

Unless the North Korea problem is separated from the strategic competition between the U.S. and China, diplomatic efforts will continue to fail. So, Trump could promise China that his administration will not seek regime change in North Korea, and instead offer security guarantees if North Korea denuclearizes. Alternatively, he could offer to withdraw the U.S.’s new THAAD (Terminal High Altitude Area Defence) anti-missile system – to which China has objected – from South Korea as soon as North Korea scraps its nuclear program.

Trump could then demand that, in exchange, China cooperate wholeheartedly on sanctions and other efforts to persuade North Korea to abandon its nuclear ambitions. With such a deal in place, China’s existing proposal – denuclearization alongside a peace treaty to bring a formal end to the Korean War – would become achievable.

But assuaging China’s strategic concerns brings us to the second dilemma at the heart of the current impasse: North Korea’s own security. In the brutal world of international relations, a small, weak, and isolated country like North Korea can feel threatened by its neighbours even when they mean it no harm. To compensate for its perceived vulnerability, it strengthens its military and acquires powerful deterrents such as nuclear weapons. But this becomes a vicious cycle, because its neighbours interpret its actions as a provocation, and start to feel threatened themselves.

Former U.S. President Bill Clinton acknowledged this problem and tried to address it. Under the 1994 Geneva Agreed Framework, the Clinton administration succeeded in freezing North Korea’s nuclear activities for several years, by promising to improve U.S.-North Korea relations. And although George W. Bush’s administration consigned North Korea to its “Axis of Evil,” it also recognized the North’s security dilemma, and tried to address it through the Six-Party Agreement on September 19, 2005.

Critics of this approach think that the U.S. has bought the same horse twice, and should focus on sanctions, while waiting for North Korea to make the next move.

But sanctions are not effective without robust Chinese support. And North Korea has taken advantage of the diplomatic pause in recent years to develop its nuclear and missile technologies. As a result, we are in a worse place now than when we started.

During his presidential campaign, Trump said he would “have no problem” speaking to Kim. He now has a chance to do just that, by exploring the possibility of a comprehensive deal with North Korea, based on a U.S. security guarantee and economic incentives. But Trump should go down this road only if he is also willing to address China’s strategic concerns. If Trump can strike simultaneous deals with China and North Korea, even his harshest critics will recognize his masterstroke. Project Syndicate

China simply does not want to run the risk of its North Korean buffer state imploding as a result of sanctions

”

16 Business Daily Tuesday, February 21 2017

Closing Budget

Singapore takes targeted steps to help spur growth

Singapore’s Finance Minister Heng Swee Keat outlined a set of targeted measures in his budget speech to help the struggling oil industry and spur construction.

The government will bring forward S$700 million (US$494 million) worth of infrastructure spending and defer levies on foreign workers in the marine and process sectors for a year, Heng told lawmakers yesterday. He also extended rebates on corporate income taxes.

“Given uneven performance across sectors we need to go beyond general stimulus,” he said.

Singapore is having to navigate immediate growth risks

-- such as weak consumer demand and the rising backlash against free trade -- alongside longer-term challenges, like a rapidly aging population. The budget seeks to flesh out initiatives outlined by a government-appointed panel two weeks ago aimed at spurring growth to 2 per cent to 3 per cent a year over the next decade.

That growth goal can be achieved “if we press on in our drive for higher productivity and work hard to help everyone who wishes to work find a place in the labour force,” Heng, 55 said.

Bloomberg News

Currency

China adjusts yuan midpoint mechanism The China Foreign Exchange Trade System reduced the reference period of yuan trading against its tradeweighted basket to 15 hours

C

hina tweaked its formula for setting daily reference midpoints for its yuan currency yesterday, three sources with direct knowledge of the matter said, in what was seen as authorities' latest move to help curb speculation in the currency.

Global attention on China's exchange rate policy has intensified since its foreign exchange reserves fell below the US$3 trillion level in January, but currency traders said it was too early to say if the latest changes were anything more than technical in nature.

The tightly managed currency is allowed to trade in a narrow daily band which is defined by a midpoint fixing rate set by the market regulator each morning.

One of the components the regulator uses to calculate its midpoint is the movements in other currencies of China's trading partners.

Yesterday's adjustment by the operator of the foreign exchange trading platform shortens the reference period for those currencies, banking sources said on the condition of anonymity.

The China Foreign Exchange Trade System (CFETS) reduced the reference period of yuan trading against its tradeweighted basket to 15 hours (from 4:30 p.m. (0830 GMT) to 7:30 a.m. (2330 GMT) from 24 hours under the previous system.

The sources said the latest adjustment was meant to better reflect changes in the forex market, and help curb intraday speculative trading activity.

Traders said the change would make the yuan midpoint more "reasonable", but believed its impact on the foreign exchange rate would be very limited.

"The latest move was more like a debugging, as changes in the yuan value (against the currency basket) during the daytime trade were counted twice in the old mechanism," said a Shanghai-based trader at a Chinese bank.

He said the 4:30 p.m. official closing price already included the changes in the yuan's value against the basket during the day.

The People's Bank of China also takes overnight changes in the U.S. dollar into account in its midpoint

Banking

calculation, as well as estimates from market contributors on the yuan's value.

The FX trading platform operator

The central bank has been trying to reform the way it manages the yuan by making it more market-driven and transparent. declined to comment on the matter when contacted by Reuters.

The central bank, which oversees the FX trading platform operator, has been trying to reform the way

Investment

it manages the yuan by making it more market-driven and transparent.

On Dec. 29, the CFETS changed the composition of the CFETS basket that is used to set the yuan's daily value.

Starting from the beginning of this year, the number of currencies in the basket was increased to 24 from 13.

Yesterday, the PBOC set the midpoint rate at 6.8743 per dollar prior to the market open, weaker than the previous fix of 6.8456.

Despite interventions by stateowned banks, the yuan lost 6.6 per cent of its value against the surging dollar last year, its biggest annual fall since 1994 and prompting authorities to tighten restrictions on capital outflows.

It has recouped about 1.2 per cent so far this year as the dollar lost steam, but most market watchers expect the yuan to resume its depreciation soon if the U.S. central bank continues to slowly raise interest rates. Reuters

Bicycle-sharing

Lending interest rate of Tencent's site said to seek funds Mainland start-up gets funding Vietnam to be fully floated at US$1.2 billion valuation from Temasek Lending rates applied by the Vietnamese banking system will be fully floated Since mid-March 2017, except for some special fields, as the Circular 39/2016/TT-NHNN comes into effect.

According to the Circular, the State Bank of Vietnam (SBV) will remove the available lending rate ceiling stipulated under the Civil Code of 2015, which stated maximum lending rate of 20 per cent "unless otherwise specified by other relevant laws", the local newspaper Saigon Times reported yesterday.

Accordingly, except for some special fields clarified by the SBV's Governor in certain periods, lending interest rates will mainly depend on market demand and supply, and the credit worthiness of customers.

Special fields currently include priority sectors such as agriculture, high-tech, import-export and small and medium business supporting.

Besides, Circular 39 forbids rollover credit as opposed to what is stipulated in Lending Regime 1627 issued in 2001. However, the forthcoming Circular reinstates revolving credit, which was earlier stopped in 2014. Xinhua

Douyu, the live-streaming service backed by Tencent Holdings Ltd. that’s been compared to Amazon’s Twitch, is in talks to raise RMB1 billion (US$145 million) in funds at a valuation of about US$1.2 billion, according to a person familiar with the matter.

The three-year-old company, whose name means “fighting fish,” needs capital to expand beyond games-streaming and fend off rivals, the person said, asking not to be named discussing a private deal. The potential valuation is only 20 per cent higher than in its previous round, but the fundraising plans are initial and could change depending on negotiations, the person said.

Douyu built a business by allowing gamers to live-stream their online death-matches and hosting discussions about strategies. It now allows people to broadcast anything from sports to singing and cooking, competing with more than 200 other Chinese start-ups including Panda TV, which is backed by Wang Sicong, the son of China’s second-richest man.

Formally known as Wuhan Douyu Network Technology Co., the company also counts Sequoia Capital as a backer. Xu Juanjuan, a spokeswoman for the company, didn’t respond to phone calls and multiple text messages requesting comment. Bloomberg News

Chinese bicycle-sharing start-up Mobike said yesterday it has raised funding in a new round led by Singapore state investor Temasek Holdings and hedge fund Hillhouse Capital, bringing its total new funding in 2017 to more than US$300 million.

The Shanghai-founded start-up said last month it raised US$215 million from a range of investors including Tencent Holdings Ltd, Warburg Pincus LLC and Chinese travel firm Ctrip.com International Ltd. Mobike also announced an undisclosed investment from Foxconn last month, in a bid to double the number of bikes it produced last year to 10 million in 2017.

A spokesman for the start-up declined to confirm the amount of the most recent investment. Mobike has not shared its valuation.

Mobike allows users to find, ride and pay for company bicycles scattered throughout 21 Chinese cities using an app and QR codes.

The firm is one of two Chinese bike-sharing start-ups that have raised hundreds of millions in funding since the beginning of 2016.

Earlier this month Mobike confirmed it has already opened an office in Singapore and is currently considering other markets outside China. Reuters