China insists not interested in extending yuan devaluation Currency Page 8
Monday, February 27 2017 Year V Nr. 1242 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Courts
City
Corruption trial reveals contract price raised by up to 30 pct Page 3
DICJ: Dog track could become cultural, leisure, sports and education facilities Page 3
www.macaubusinessdaily.com
Tech
iPhone 7 Plus most popular iOS device in MSAR, study shows Page 6
Economic appointments
Chinese government’s new man-in-charge for key positions Pages 8 & 10
If you like it put a stamp on it Real estate
Gov’t has received over MOP208 mln from the Special Stamp Duty since its implementation in June 2011. For the first time, the Financial Services Bureau has published the data, showing 348 housing transactions subject to the payment as at January-end, and a total of 498 property transactions subject to the SSD. Page 2
Celebrating 150 years since its establishment, Canada continues to hold its arms open to trade, immigrants and investment. Consul General Jeff Nankivell tells Business Daily how the country is facing the challenges in the global environment, managing its foreign policy stance and setting up opportunities between Canada, China, Asia Pacific and beyond. Interview | Politics Pages 4 & 5
No surprises here
Public finance The public coffers received MOP7.26 bln in gaming taxes during the first month of the year, a 7.7 pct y-o-y increase. Gaming tax revenue made up over 80 pct of total gov’t revenue, which hit MOP9 bln in the month, a 6 pct y-o-y growth. Indirect taxes surged nearly 37 pct y-o-y during the month. Page 2
Luring IPOs
Going public Beijing will facilitate the process of going public, trying to attract tech companies, the nation’s top securities regulator said. Companies being considered for a shortcut could include Alibaba Group’s Ant Financial. Page 9
HK Hang Seng Index February 24, 2017
23,965.70 -149.16 (-0.62%) Worst Performers
China Unicom Hong Kong
+2.89%
New World Development
+0.79%
AAC Technologies Holdings
-4.72%
China Mengniu Dairy Co Ltd
-1.69%
CK Hutchison Holdings Ltd
+2.16%
Hong Kong & China Gas Co
+0.67%
China Merchants Port Hold-
-1.84%
Tencent Holdings Ltd
-1.68%
Lenovo Group Ltd
+1.94%
Cheung Kong Infrastructure
+0.47%
China Resources Land Ltd
-1.83%
Hengan International Group
-1.64%
Link REIT
+1.41%
Galaxy Entertainment Group
+0.41%
Wharf Holdings Ltd/The
-1.83%
China Petroleum & Chemical
-1.45%
Sino Land Co Ltd
+1.36%
Sun Hung Kai Properties Ltd
+0.35%
Bank of China Ltd
-1.73%
BOC Hong Kong Holdings
-1.43%
16° 18° 16° 20° 15° 22° 15° 20° 17° 20° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Be like Canada
2 Business Daily Monday, February 27 2017
Macau Property
Special Stamp Duty over MOP208 mln since implementation Since June 2011, a total of 348 housing transactions have been subject to the tax payment Kam Leong kamleong@macaubusinessdaily.com
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he government has received a total of MOP208.2 million (US$26 million) from the Special Stamp Duty (SSD) since the implementation of the tax scheme in June of 2011 until the end of January, according to data revealed by the Financial Services Bureau (DSF) for the first time. According to the official data, as at the end of January, a total of 498 property re-sales were subject to the SSD. Of the total, 348 were residential units, involving taxes of MOP157.53 million. Meanwhile, the number of re-sales of shops, offices and parking spaces subject to the tax were 36, 9 and 105, involving MOP27.92 million, MOP4.46 million and MOP18.24 million, respectively. In June 2011, the MSAR government imposed a Special Stamp Duty on property or property rights transactions, to be collected in the first two years after payment of the tax stamp on the document, paper
or act evidencing such a transaction, in order to reign in speculation in the housing market. The scope was expanded in October 2012 to also include the re-sale of offices, shops and car parking spaces, but excluding industrial units. The SSD is a levy of 20 per cent on
the sale of a property if it is re-sold within a year of being purchased, or 10 per cent if it is re-sold within one and two years of being purchased.
SSD re-sales plunged since 2015
According to the official data, the total number of re-sales of properties subject to the SSD has plunged in the past two years, from its peak between 2013 and 2014. For the whole year of 2016, a total of
63 re-sales of properties were subject to the SSD, involving nearly MOP24 million. And the numbers in 2015 were similar: the government received SSD of some MOP20.9 million from 62 property re-sales. By comparison, in 2014, there were 167 property transactions subject to SSD, involving some MOP72.5 million, while the number in 2013 reached 137 transactions, involving tax amounting to some MOP57.13 million.
Additional stamp duty
Furthermore, the DSF also revealed for the first time that the government had received a total of MOP611.4 million from the additional stamp duty imposed on residential transactions as at the end of January (since the time of its implementation), involving a total of 963 units. The additional stamp duty, effective from November 2011, is an additional 10 per cent levy on a property transaction if the buyer is an entity or a non-resident. For the whole of 2016, a total of 208 home transactions were subject to the additional tax payment, which amounted to MOP129.2 million, compared to 184 transactions and related tax value of MOP76.2 million in 2015.
Public finance
Traffic
Gaming tax increases 7.7 pct in January
Disappearing motors
The government’s revenue from the gaming sector accounted for 80 pct of the total in the month
The number of vehicles removed from the streets by DSAT in the first 16 days of 2017 increased by 61.5 per cent to 827
Kam Leong kamleong@macaubusinessdaily.com
The MSAR government received revenue of MOP7.26 billion (US$907.3 million) from gaming taxes in the first month of the year, which represents an increase of 7.7 per cent from the same month of 2016, according to the latest updates of the central account by the Financial Services Bureau (DSF). During the month, the revenue from gaming taxes accounted for 80.6 per cent of the total revenue of the government – excluding those of autonomous bodies – amounting to nearly MOP9 billion, a growth of 6 per cent year-of-year. Total direct tax revenue rose by 7.5 per cent year-on-year to MOP7.95 billion. Apart from the growth in revenue from gaming taxes, revenue generated from other sectors also jumped by 6.2 per cent year-on-year to MOP691 million. In addition, indirect tax revenue surged by 36.6 per cent year-on-year to MOP313.5 million for the month. However, revenue from fees, fines and other penalties slumped by 42.1 per cent year-on-year to MOP111.2 million, while total capital revenue plummeted by 91.9 per cent yearon-year to some MOP6.8 million.
While the government’s 2016 annual central account has not yet been released, the government - excluding all autonomous bodies - has estimated it will generate a total of MOP90.9 billion in revenue for 2017, and has allocated a total of MOP85.3 billion worth of expenses. During the month, government departments spent a total of MOP2.62 billion, which only accounted for 3.1 per cent of the yearly budget, in addition to being a decrease of 28.9 per cent year-on-year. In particular, current expenditure of the government slumped by 29 per cent year-on-year to MOP2.6 billion, but capital expenditure – primarily investments – surged to MOP3.4 million, up from only some MOP40,000 one year ago. Nevertheless, the account shows the government did not make any payments to the city’s investment plan (PIDDA) in the month, while it transferred a total of MOP1.13 billion to the city’s Social Security Fund. The fiscal surplus of the central account reached MOP6.38 billion for the first month of the year, a notable increase of 32.7 per cent yearon-year. The amount has already surpassed the government’s annual surplus target of MOP5.57 billion from the central account by 14.7 per cent.
Two-stroke motorcycle removal scheme has already received almost 1,000 applications
Nelson Moura nelson.moura@macaubusinessdaily.com
A total of 827 vehicles were removed from circulation by the Transport Bureau (DSAT) from January 1 to February 16, a considerable increase of 61.5 per cent when compared to the same period last year, according to data provided to Business Daily by the Bureau. The data reveals that DSAT removed 26.2 per cent of all 3,161 applications for vehicle removals received in the first 16 days of the year, also a 61.5 per cent increase in applications received when compared to the same period last year. Of the total removal applications received 1,788 were for motorcycles, 1,344 for motor vehicles, 27 for heavy-duty vehicles and two for industrial vehicles. DSAT also informed Business Daily that the Environmental Protection Bureau (DSPA) had received almost 1,000 applications under the twostroke motorcycle removal scheme, which allows owners to apply for a MOP3,500 (US$437) subsidy for removing their higher polluting vehicles from the streets of Macau until June 30.
According to DSAT, the government has enforced a number of measures to achieve the five-year plan’s goal of reaching an annual vehicular growth rate of up to 3.5 per cent by 2020. These measures for the ‘sustainable development of the city and the convenience of the public’ include developing public transport, optimising road use and the road environment, and using economic and technological measures, together with the legal system, to control the growth of vehicles and ‘guide the rational use of vehicles’. The government has previously introduced measures such as a 50 per cent tax reduction - with a limit of MOP60,000 - in 2012 for the acquisition of energy efficient vehicles; and the city’s motor vehicle tax hike in December of 2015, which led to a 10 to 20 per cent increase in the average tax rate for newly imported automobiles and motorcycles. In 2016, the MSAR for the first time registered an annual growth rate of registered vehicles of under 1 per cent, with only a 0.6 per cent yearon-year increase to 250,450 vehicles, and the number of newly licensed vehicles decreasing by 35.5 per cent to 1,208.
Business Daily Monday, February 27 2017 3
Macau
Ho Chio Meng Trial
Special permission Registration exemptions, cleaning contract reshuffles and unknown staff to whom payments were supposedly made dominated Friday’s corruption trial session Cecilia U cecilia.u@macaubusinessdaily.com
T
he prosecutors in the bribery case against the former Prosecutor-general Ho Chio Meng brought to light during Friday’s hearing, a notice that exempted defendants in the case from registering when they allegedly needed to enter the archive room on the 16th floor of the Hotline Building. The notice was issued by the company providing security services for the Public Prosecutions Office (MP) at the time. The names of Wong Kuok Wai, Lei Kuan Pun, Antonio Lai Kin Ian, and Mr. Ho (without stating the whole
name) were stated on the notice. One of the shareholders and manager of the company, surnamed Sek, testified that the notice was requested by the client – the MP. The company was initially the major contractor providing cleaning services to the MP in 2001, but later had its service provision halted in 2005 due to the MP declining to renew the contract. The service contract was later taken on by two of the shell companies allegedly run under Ho Chio Meng. However, the cleaning company in question became the subcontractor providing the services, while Wong’s companies were hired by the MP as the main contractors. Regarding an increase in the
quotation price for the services following this reorganization, Sek said it was normal for the main contractor to raise the price when it had a subcontractor, adding that the increase was usually no more than 10 per cent. But she added that the percentage would be determined based on the nature of the services, as well as the number of personnel required. According to the financial documents that were found from another defendant, Wong’s companies had increased the price by 30 per cent.
Obscure scopes of responsibility
Another witness, surnamed Chan, the owner of the subcontracted company, revealed that he had known Wong since before the handover of Macau in 1999. He testified that Wong had offered the MP’s cleaning and security job to him after the MP had declined to renew his contract. The company owner indicated that he had asked the reason for the MP’s refusal to renew the contract with his company, with the MP staff revealing to him that it was their superior’s decision. When questioned by the prosecutors as to whether Wong had invited Chan’s company to perform the services for the MP, Chan replied that it was common for companies to request extra labour from other companies when they had a shortage of personnel, a case they encountered at the time. He added that companies need to acquire a license to provide security services and Wong did not have one, and as such asked Chan if his company could provide the service as well. The company was initially responsible for cleaning the entire 16th floor, but later had the responsibility reduced to a segment of the floor in 2008. Chan asserted that he knew Wong’s
office was on the 16th floor of Hotline Building where the MP is also located. Prosecutor Kuok Un Man scrutinized that the cleaning company in question had performed cleaning services for the MP as well as for the offices of Wong’s companies between 2004 and 2008. Chan said that Wong had told him that he had hired some people to provide the cleaning services and as such, reduced the scope of the company’s responsibility on the 16th floor. Meanwhile, in response to the defence lawyer Leong Weng Pun’s enquiry, Chan indicated that it is normal for several companies to have the same registered address and telephone number, and that he has a total of 10 subsidiaries, eight of which have the same address and telephone number.
No payment directly from top official
Meanwhile, two witnesses, both of whom had worked in a public relations company, took the stand at Friday’s hearing. The PR company had previously taken up MP projects including the purchasing of flight tickets and accommodation. Two witnesses both claimed that the former top official had never made any payments in person, and also affirmed that there were no staff in their company named “Wing” or Ho Kam Wing. The former top official had defended in a previous session that he had made the payment for his nephew’s travel expenses to a Public Prosecutors Conference in Denmark in 2005 - for which only Ho’s expenses were meant to be paid for by the MP - to a staff member at the company named “Wing”. According to the indictment, Ho is accused of taking his wife and nephew on the trip, with travel expenses paid for out of the public coffers. The hearing of the corruption case will continue today.
Development
Gov’t plans culture and leisure facilities for Canidrome The MSAR Government is considering turning the current greyhound racetrack into cultural, leisure, sports and education facilities, according to the director of the Gaming Inspection and Co-ordination Bureau (DICJ), Paulo Martins Chan. The DICJ director noted, in response to an enquiry from legislator Kwan Tsui Hang, that the government is aiming to develop the land plot with facilities that can improve the neighbourhood’s offerings. ‘The government’s basic direction is to develop the related land plot to improve the quality of life in the neighbourhood. [It is] considering modifying the land for culture and leisure, sports and education facilities, after the greyhound race track is moved from the plot,’ the director wrote. Last year, the government ordered the business’ operator, Macau (Yat Yuen) Canidrome Co., to either relocate or shut down its greyhound
racetrack within two years. The company has until July 21, 2018 to make a decision. In the enquiry, the legislator asked whether the government had collected any public opinions on the future use of the land plot, and whether the government would make use of the land plot for its ‘Blue Skies’ project – designed to relocate schools located in multi-use building spaces to their own individual spaces. The government official, meanwhile, said the government has noticed the increasing demand for sports facilities in the neighbourhood, given the growth of the population there. In addition, he cited the Education and Youth Affairs Bureau as saying that it aims to allow primary and kindergarten students in the neighbourhood nearby the Canidrome to attend schools near their homes, in order to relax unnecessary traffic pressure.
Police
Authorities found 21 illegal workers in January A total of 21 illegal works were found and arrested by authorities in January 2017, according to the most recent data presented by the Public Security Police Force (PSP). The data reveals there was a 57 per cent month-to-month reduction in
the number of illegal workers arrested when compared to the 49 illegal workers found during the last month of 2016. The arrests resulted from inspection operations conducted by the PSP, the Labour Affairs Bureau (DSAL) and other departments in 557 locations, such as construction sites, residences, and commercial and industrial establishments. According to data provided by the PSP, 474 illegal workers were found in the MSAR during the whole of 2016. N.M.
4 Business Daily Monday, February 27 2017
Macau
Consul General Jeff Nankivell
Interview | Politics & Trade
Leading by example To celebrate the 150th anniversary of the establishment of Canada, the Consulate General of Canada brought representatives from its various programs to Macau, sharing information and opportunities on trade, investment, education and tourism. Consul General Jeff Nankivell sat down with Business Daily to discuss the role of the Consulate in an ever-changing political climate, and what to look forward to in the year ahead. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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hat are the main objectives of this trip to Macau? It’s an effort to achieve a kind of a critical mass. Our objective […] is to use the opportunity of the 150th anniversary of Canada’s establishment as a country to bring awareness about Canada in Macau to a new level. I would say our target audience is business people in Macau who are looking to buy goods and services from Canadian suppliers. It would be people in the entertainment industry who are looking to source new and exciting entertainment products from Canadian suppliers that can help them to have a competitive edge in the market for tourists who are coming to Macau for entertainment. For people in the food and beverage sectors and the hospitality industry and hotels and restaurants, to be learning more about our great Canadian food and beverage products, so that they can offer that also – to give them a competitive edge in a very dynamic marketplace. How large is the Canadian population in Macau and Hong Kong? We estimate about 4,000 Canadian citizens resident in Macau. It’s hard to tell exactly. We issue about 540 passports a year. [Also] I was very interested to learn this: Canadians are the third largest nationality group visiting Macau from a long distance. Our estimate for Hong Kong is 300,000 Canadian citizens. It’s almost a fifth of Hong Kong’s [population]. In Hong Kong we issue about 29,000
passports a year. That’s our largest passport issuing office abroad. Why is there such an interest from Hong Kong citizens to move to Canada? There was, in the early 90s, a very open policy in Canada for people to emigrate from Hong Kong, and large numbers did. We estimate the population in Canada at about 500,000 people of Hong Kong origin. There have been people from southern China – Hong Kong, Macau, southern Guangdong - who have been going to Canada for around 150 years, so there were already established connections.
“There’s a lot at stake for Americans when they look at the trade relationship with Canada” Has Canada’s foreign policy had to change at all based upon the changes happening in the U.S.? I wouldn’t say that Canada’s global foreign policy has changed at all. I think what you’ve seen from Prime Minister Trudeau and from our cabinet, since the change of administration in the U.S., is a restatement of established Canadian policies. You’ve seen Canadian ministers reaffirming Canadian policies and, if there are leaders in other parts of the
world who are talking about other types of policies, then people look at what the Canadians are saying and they make their own comparisons. But I wouldn’t say there’s been a shift. Of course the government in Canada is paying a lot of attention to the relationship with the United States. The new administration, under President Trump, has stated it wants to look at the trade agreement governing free trade in North America, and our government has said that we’re open to looking at how we can make that trade agreement better. And that process will now begin. We have a border between the U.S. and Canada where roughly US$2 billion dollars of goods are crossing that border every single day; US$2 billion of goods in both directions crossing the border. It happens to be the case, that in the United States, 35 of the 50 states have Canada as their number one market for exports. So, the U.S. trade relationship with Canada is one that’s very beneficial to the United States. Our trade is roughly in balance and so it’s a mutually beneficial trading relationship where, we have an estimate, something like nine million jobs in the U.S. depend on exports to Canada. So there’s a lot at stake for Americans when they look at the trade relationship with Canada. How much strain is the U.S. pulling out of the TPP putting on trade relationships that Canada has? I wouldn’t say that it’s putting strain on those relationships. In the case of the TPP, this was the United States withdrawing from a treaty that had not come into effect yet. So there
was nothing happening that has to be reversed. So for us, it’s an agreement that we worked on, we are very keen as a nation on expanding free trade around the world. We have access as a country through the North American Free Trade Agreement (NAFTA) and through the newly signed Canada-Europe Trade Agreement. We have the largest free trade access of any country, having access within North America and to the entire EU market through these arrangements. And in the Pacific we will continue to work on other mechanisms, other than the TPP. But in the meantime, we have announced that we are launching exploratory talks with China, looking at the potential on both sides for the gains that could come from a free trade agreement or a comprehensive economic trade agreement. We continue to have discussions with India about a comprehensive economic partnership agreement. We have a newly-come into effect last year, free trade agreement with the Republic of Korea.
“What you’ve seen from Prime Minister Trudeau and from our cabinet, since the change of administration in the U.S., is a restatement of established Canadian policies” Where else is Canada focusing on in Asia Pacific? What we’ve had in China and India is new trade offices, so they’re not Consulates, but they’re satellite
Business Daily Monday, February 27 2017 5
Macau offices of Consulates, and we’re opening several new ones in each of those two countries. We’re going to continue to work on expanding relations with China. Exploratory talks have now started on the possibility of some kind of a free trade arrangement with China. We continue to be in talks with India. Those are both huge potential markets, and already important markets for us. We are [also] going to continue to work on the opportunities coming from the Canada-Korea free trade agreement, which went into affect about a year ago. [In addition], the Japan economic relationship is very important to Canada, and we continue to work at expanding that. A new office that we created in 2016 was a new separate ambassador to the Association of South East Asian Nations (ASEAN) – based in Jakarta, where ASEAN has its secretariat. So that’s 10 important economies in Southeast Asia that are growing well; tremendous potential markets there. What are your regional goals? In Macau and in Hong Kong - the areas that we cover from my office - we are really looking at ways that we can help to bring more Canadian small and medium enterprises into the markets here and also to use Hong Kong and Macau as a platform for these Canadian businesses to expand their business in Asia. We also have a special focus on helping to attract new foreign direct investment from this region into Canada, to help to build new infrastructure in Canada, to help to finance the innovative sectors of our economy where we have very exciting opportunities in areas like artificial intelligence, financial technologies, health technologies, education technologies, agricultural technologies – where we have a very vibrant start-up scene in Canada and an active venture-capital ecosystem. And we are working at raising awareness in this region, southern China, Greater China, about the opportunities for investors to participate in the growth of that innovation in Canada. And we’re starting to grow new companies that will be global champions. And we want people to know here that they have an opportunity to get in on that. When trying to attract investment from here to Canada and promote businesses to come here - is that weighted one way or the other? At the end of the day, it’s going to be up to the businesses themselves. These are private matters. It’s for the businesses and the investors to work out what the balance is. We see bringing Canadian companies into the market here as absolutely essential if these companies are going to be global players. If you’re going to grow to be global players, you have to be in Asia. If you’re going to be in Asia, you need to have a place in Asia as your base for doing business here. And certainly the Pearl River Delta is one of the prime locations to do that. What types of services does the consulate provide to companies wishing to come into these markets, and how does it vet them? Globally we have systems in place with what we call our Trade Commissioners Service – so our trade and investment sections in our offices abroad. If a company is asking for assistance, they have criteria that they use to asses - Is the company really ready to export? Does the company already have a credible plan? We have regional offices across Canada that know these companies before they come out, so there’s a degree of judgement that is exercised. So it’s not the case that a company can just call up and say ‘I’m ___ incorporated. I’m interested in Hong Kong. Please set up a dozen meetings for me with investors in Hong Kong.’ We need a lot more than that. And we
have systems in place to know who we’re dealing with when companies ask for assistance. And we also follow up, we assess how the meetings went, what kind of feedback they got from the partners that they met with when they were here… And we track that information for the next time that they ask us to help. And once we’ve worked with them, part of our job in these offices is to alert these companies that we know are active and serious about engaging in a region, to be in touch with them to let them know when we see opportunities coming up.
“We are really looking at ways that we can help to bring more Canadian small and medium enterprises into the markets here, and also to use Hong Kong and Macau as a platform for these Canadian businesses to expand their business in Asia” For Canadian-China trade, is there any added advantage to being part of the Commonwealth, being located in Hong Kong? We have a particular role in our Consulate General in Hong Kong to understand what that’s about, to look at what the opportunities are for Canadian companies, Canadian professionals – whether it’s in engineering, architecture, transportation engineering, financial engineering, the legal work that gets done alongside, when a project is being created, the accountancy work. There’s a particular advantage I’d say for Canadians being in Hong Kong because Hong Kong is a common law jurisdiction. Canadian lawyers and accountants and bankers are very comfortable working in Hong Kong and working on contracts and financial agreements in Hong Kong because of our shared legal and business and cultural heritage. So Hong Kong is a platform where Canadian’s can engage in these One Belt, One Road transactions. Canada has sometimes been portrayed as a more neutral country on the international scene. When dealing with an increasingly vocal and politically charged environment in Hong Kong, does that put strain on the objectives of the consulate in Hong Kong? I wouldn’t agree with the characterization of Canada as a neutral country generally. We’re a NATO ally, we fought in world wars, we’re part of long-standing alliances, our troops fought and died in Afghanistan. So we’re not neutral in the world. In terms of the role that we play in Hong Kong I think, of course Hong Kong is a special place for us because of the very large Canadian community that’s there. But Canada is not neutral when it comes to advancing universal causes of human rights. In the case of Hong Kong, we do speak up on issues related to the integrity of the One Country, Two Systems. I think in some ways we’re well placed to do that; we have a strong bilateral relationship with the People’s Republic of China and it’s a very positive relationships these days. So we are able to have good conversations with counterparts in Beijing. We have, for a long time, had a very strong relationship in Hong Kong. So we have good conversations and a strong relationship with the government of the Special Administrative
Region in Hong Kong, and we raise issues related to the integrity of One Country, Two Systems where we see things – as we did speak up in the case of the missing booksellers last year. We do voice our concerns. We do it in the spirit of genuine concern for the future of Hong Kong. Not only because we have many Canadian citizens there, although that is certainly a factor for us, but also because we believe that Hong Kong and Macau, as Special Administrative Regions, play a very important role in the prosperity, in the health of China, and we think it would be a shame for them not to be able to play that role. What is the Canadian Consulate’s relationship with the gaming operators? The gaming operators are proprietors of businesses that procure lots of goods and services. So I would say, in terms of the gaming industry per se, it’s not our focus, but we do have important relationships when it comes to - interior design for example: there’s a Canadian architectural firm, one of the top 50 in the world called B+H, they have an interior design studio based in Hong Kong called CHIL and they’re doing the interior design for the new Karl Lagerfeld Sky Casino project. So those are the kinds of things where we see further opportunities and where Canadian companies are engaged with the big operators here. As the major construction projects finalise, will that mean less interest from Canadian companies? I wouldn’t assume so, because – and I’m not an expert – but I think in the entertainment industry you have to be renewing your attractions all the time. So you might have built the big property, but you need to be attracting visitors to come back.
I think we would see there would be continuing opportunities – you have all of this built infrastructure here, but it’s in the nature of the entertainment business, and the tourism business, that you need to be renewing your attractions constantly. So I think you’ll find operators who are looking to replace, or refresh their offerings, and there should be lots of interesting business opportunities coming out of that.
“Canada is not neutral when it comes to advancing universal causes of human rights” Attracting more tourism to Canada is one of the goals this year. How is it looking? There are additional flights coming on-stream from Greater China to Canada; this year, there will be several new non-stop flights from Greater China to Canada. There’ll be new capacity to bring people from China, including, especially, from southern China to Canada, so that should help to keep us on a growth path for tourism. And at the same time, we’re looking to attract foreign direct investment to build more tourism infrastructure in Canada. So for any of your readers who are operating tourism businesses in Macau and are looking for growth in North America, I would encourage them to call me about what kind of opportunities might exist in Canada to invest in tourism related infrastructure, to take advantage of the anticipated growth, particularly of Chinese tourism into Canada.
6 Business Daily Monday, February 27 2017
Macau Opinion
Sheyla Zandonai* Alternative pasts Donald Trump has played his most recent hand, in a heated public game, against the press. It is not the first time and, it seems, it won’t be the last, given the short and yet bewildering series of actions Mr. President has put up to North America and the world. During the rally he organized last week, with the sole aim of boosting his not-for-a-while-self-deprecating sense of morality, and indulged himself, once again, as the guardian of the “truth,” the media became his latest target. Reporters and news platforms were proclaimed “the enemy of the people,” a “dishonest” branch of a “conspiracy” that is, apparently, devoted to pulling the man down because it is casting doubt on him. This last coup of Trump’s ire would indeed be just annoying, if it were not so troublesome. Though he cannot be taken seriously, he is dead serious when he takes the stand. The problem with Trump’s unscrupulous approach to people who are working to make him accountable for often poorly-framed and limited readings of events and facts in domestic and international policy, is that by conveying an alternative version of facts, he is actually producing something else: alternative truths to history that is being made. The press is amongst the few agencies in a position today to fight the battle it has been unwillingly dragged into. It should remain committed to its code – report the facts and protect its sources – so it is empowered. As if it were not perplexing enough, Trump announced last Saturday that he won’t be attending the White House Correspondents’ Association dinner, which will take place on April 29 (I get the feeling he might not be missed). If it stands by its ideals, the gathering should become a strong statement against the incumbent administration. And why should it be of any concern to Macau and Macau residents that the United States’ President bullies his way into governance? Because he is the image of many harms that make the world a sad place: abuse of power, manipulation, populism, and ignorance. The history and the present are crammed with examples of policies and governments who have trickled great countries and peoples down the drain of history as disillusions to human kind. We don’t have to travel as far as Europe or the Americas to find them. Can’t we just aspire to be better - not great, fantastic, or huge - but just better? *scholar and contributor to this newspaper.
Politics
Hanging up his hat Vice-President of the New Macau Association, Jason Chao Teng Hei resigns from his position after 12 years in the political organisation Nelson Moura nelson.moura@macaubusinessdaily.com
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ew Macau Association Vice-President, Jason Chao Teng Hei has announced he will resign from his position and withdraw his membership from the association as of March 31 of this year, according to a statement by the local politician on social media. The decision will put an end to nearly 12 years of involvement with the New Macau Association, as Mr. Chao became a member of the association in October 2005 at the age of 18. The political activist comments that his departure ‘does not stem from disagreement or conflict’ but is a strategy for the ‘better division of labour for the advancement of the civil society of Macau’. ‘My candidature at the 2009 Legislative Assembly Election and my capacity as the President of the Association, granted me the opportunities to speak my mind to the Macau people and interact with the outside world. The Association, as well as Macau’s civil society, underwent a
transformation in the past 11 years. A decade ago, it was hard to imagine that Macau would not be short of political critics and protest organisers. However, I hope the Macau civil society will move forward not in the absence of values,’ Mr. Chao said in his statement. According to the politician, the rejuvenation of the New Macau Association was wrongly portrayed as a ‘political purge’, stating that during his tenure the organisation’s direction
was ‘in line with international standards and practices’. Mr. Chao however points out he has sometimes been criticised for being ‘too idealistic or favouring elitism’. The politician considered that, taking into account ‘the political developments in Hong Kong and Mainland China, the emergence of post-truth politics, and the rise of right-wing populism in the West, the political climate of Macau will likely be even more challenging for like-minded colleagues’. Mr. Chao also announced he will be holding a press conference today to further explain his decision. The conference will take place at the New Macau Association’s office.
Tech
King of iPhones MSAR and Myanmar were considered the only two regions in the world where Apple’s iPhone 7 Plus was the company’s most popular device, due to their high concentration of wealth Despite ranking globally as the eighth most popular device using an iOS operating system, North American developer Apple’s iPhone 7 Plus was the company’s most popular device in Macau, representing an 18 per cent share of overall usage just five months after its release in the region in October 2016, according to a report by mobile application company Apteligent. The report considered that Macau, being China’s ‘gambling capital’ and ‘one of the richest regions in the world’ with its ‘high concentration of wealth’ in just 36 square kilometres, helped take ‘Apple’s newest and most
expensive device to the top of the rankings’. According to information provided by the official Apple store in Macau, the current retail prices for an iPhone 7 Plus range from MOP6,788 (US$849) to MOP8,536 for devices with memory between 32 gigabytes and 256 gigabytes, respectively. The Apteligent report also mentioned that apart from Macau, only Myanmar registered the iPhone 7 Plus as its most popular iOS smartphone. In the Southeast Asian country, the Apple device represented a 15 per cent share of overall iOS smartphone usage, something the company
considered was due to the country having ‘one of the highest income gaps in the world’, speculating that the ‘ruling elite in this country’ were ‘largely responsible for the popularity of the device’. In worldwide terms, Apple’s iPhone 6 was considered the most popular iOS device - mostly in wealthier countries and regions in terms of per-capita income, such as the United States, Japan, Qatar, and European countries such as Switzerland, Luxembourg, and Sweden. Devices manufactured by South Korean group Samsung were the most popular in the MSAR in terms of devices using Google’s Android operating system, representing a 78.2 per cent share in the territory. According to the report, despite the recall of its Galaxy Note 7 smartphone due to battery issues, Samsung continued to be the largest Android device provider worldwide in 83 per cent of the world’s countries and regions, followed by Huawei, Sony, and LG. N.M.
Insurance
AIA Group reports 28 pct growth in new business Insurer AIA Group Ltd. saw the value of its new business register a year-onyear growth of 28 per cent or US$2.75 billion (MOP22 billion) for the fiscal year ended November 30, 2016, according to its filing with the Hong Kong Stock Exchange last Friday. Operating a wholly-owned branch in Macau, the company’s value of
new business from the Hong Kong and Macau segment surged by 42 per cent year-on-year to US$1.16 billion during the period. The company said the notable growth in the two SARs is due to ‘higher activity and productivity levels in our agency distribution,’ as well as the ‘increased volumes
of business from Mainland Chinese customers.’ Meanwhile, the company’s Mainland market also soared by 54 per cent year-on-year in terms of value of new business, amounting to US$536 million. For the whole year, the insurer’s operating profit after tax reached US$3.98 billion, an increase of 15 per cent year-on-year, while profit generated from the SARs rose by 16 per cent year-on-year, contributing some US$1.33 billion of the total. The company’s chief executive and president, Mark Tucker, added in the filing that the group has also recorded a “strong value of new business growth in the first two months of our [2017] financial year,” without providing the related figures. The company has proposed a final dividend of 63.75 HK cents per share for the fiscal year, an increase of 25 per cent year-on-year. K.L.
Business Daily Monday, February 27 2017 7
Gaming Investment
Success Dragon buying into renewable energy
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wholly-owned subsidiary of gaming machine manufacturer and service provider Success Dragon plans to invest HK$155 million (US$20 million) in Primus Power Corporation, a company engaged in renewable energy, according to the company’s filing with the Hong Kong Stock Exchange. The investment will allow for the acquisition of approximately 20.82 per cent of the total share value of Primus. The subsidiary, Success Dragon Asset Holdings, expects to fund the venture by placing up to 337 million new shares up for sale,
or 19.14 per cent of the company’s entire share capital as at the date of the announcement, for acquisition by no less than six private investors.
New market
Japan Gaming Congress aims to speed up gaming development As the gaming world’s attention turns to Japan in the wake of its recent announcement to legalize integrated resorts in the country, the upcoming Japan Gaming Congress, to be held from May 10 to 12 in Tokyo, brings together members of the Japanese government and the private sector to pave the way for the country’s gaming future. “The Japanese will need to study and learn from a variety of existing markets, including Macau, Singapore and Las Vegas,” says Chris Wieners, managing partner of the congress’ official marketing partner HOGO. “Integral to the success will be the alignment of operators with a strong
Japanese partner,” notes Wieners, explaining that “the Japan Gaming Congress is the first of many events aimed at further developing relationships between senior executives from the operators and domestic Japanese firms interested in the future development of these integrated resorts”. These operators include groups operating locally such as MGM, Melco Crown and Las Vegas Sands, which Wieners notes as having referred to Japan “as the ‘holy grail’ of integrated resort opportunities”. The congress will be held at the Grand Hyatt in the Roppongi district in Tokyo.
Completion of the agreement is subject to the sale of Success Dragon’s shares to finance the deal. Success Dragon International Holdings Limited is a service provider of outsourced management solutions and information technology to the gaming
industry. According to the company, it provides electronic gaming equipment to casinos in Vietnam and Macau, including the Pharaoh’s Palace Casino at Macau Fisherman’s Wharf, Casino Casa Real on the Macau peninsula, and Casino Grandview in Taipa. Primus specialises in the provision of electrical energy storage system solutions. Founded in 2009, the company, headquartered in Hayward California, has a subsidiary in Asia, where it is seeking to expand its business. ‘Over the last six months, Primus has been working closely with PRC state-owned enterprises with a view to advance commercial activities in Hong Kong and in China,’ notes the filing. S.Z.
Gaming
Wynn Resorts appoints new CFO Wynn Resorts Ltd, parent company of local gaming operator Wynn Macau Ltd, has appointed Craig S. Billings as its new chief financial officer (CFO) starting from March 1, according to a company release. Mr. Billings will replace Stephen Cootey, who has held different financial positions within the group since 2014. Mr. Billings has worked as an executive at finance group Goldman Sachs, and has held several executive positions in gaming companies such as Aristocrat Leisure Limited, International Game Technology and NYX Gaming Group. The company stated in the release that, as a ‘veteran of both the gaming
and banking industries,’ Mr. Billings will bring ‘extensive experience in business innovation to the company’. N.M.
8 Business Daily Monday, February 27 2017
Greater China
Currency
Beijing says no intention of using devaluation to its advantage Chinese authorities have taken numerous steps in recent months to curb capital flight to support the weakening yuan
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hina said on Friday it had no intention of using currency devaluation to its advantage in trade, responding to U.S. President Donald Trump’s description of the Asian giant as the “grand champions” of currency manipulation. Trump said in an interview with Reuters on Thursday he had not “held back” in his assessment that China manipulates its yuan currency, just hours after his new treasury secretary pledged a more methodical approach to analysing Beijing’s foreign exchange practices. Chinese Foreign Ministry spokesman Geng Shuang said he hoped the United States could “fully and correctly” view the exchange rate issue. “China has no intention of seeking foreign trade advantages via an
intentional devaluation of the renminbi. There is no basis for the continued devaluation of the renminbi,” he told a daily media briefing in Beijing. “If you must attach the label ‘grand champion’ to China, then I think China is a grand champion. But we are the grand champions of economic development,” Geng added. The Foreign Ministry has no say in currency policy, but it is the only Chinese government department that holds a daily briefing that foreign reporters attend. The central People’s Bank of China did not respond to a request for comment. In a commentary, the official Xinhua news agency said criticising China for manipulating its currency to prop up trade was a “major myth that
has been circulating in Washington for quite a long time”. “Since July 2005, China has decided to unpeg the yuan against the U.S. dollar, and allow it to fluctuate against a basket of currencies so as to better reflect the market changes. Over the years, the renminbi has appreciated substantially against the dollar,” it said.
“There is no basis for the continued devaluation of the renminbi” Geng Shuang, Chinese Foreign Ministry spokesman Trump has frequently accused China of keeping its currency artificially low against the dollar to make Chinese exports cheaper, “stealing” American manufacturing jobs.
But he did not act on a campaign promise to declare China a currency manipulator on his first day in office. The yuan fell 6.6 per cent against the dollar in 2016, its biggest annual drop since 1994, as it was pressured by worries about slowing Chinese growth and more recently by a resurgent dollar, which has spurred capital outflows from many emerging markets. Chinese authorities have taken numerous steps in recent months to curb capital flight to support the weakening yuan currency, while trying to bring in more foreign investment. Geng said there was no basis for the continued devaluation of the Chinese currency and he hoped “the relevant side can fully and correctly view the renminbi exchange rate issue”. But China’s foreign exchange regulator said this month the economy still faced weak global demand and financial market volatility caused by expectations of further interest rate rises by the U.S. Federal Reserve. Reuters
Economic heads
Government names new planning chief, commerce minister before key meeting Chinese officials have pledged to maintain stable economic growth this year to ensure a successful party meeting Shen Yan and Kevin Yao
China has appointed a new head for its top economic planning agency and a new commerce minister as part of a reshuffle ahead of a crucial Communist Party meeting later this year. He Lifeng, a vice chairman of the National Development and Reform Commission (NDRC), has been tapped to lead the agency, state media Xinhua said Friday on its official microblog, citing a decision by the standing committee of the National People’s Congress, replacing Xu Shaoshi, who has reached retirement age. Zhong Shan, currently a vice commerce minister, has been named new head of the ministry, the Ministry of Commerce said on its website, taking over from Gao Hucheng. Reuters had earlier reported China will appoint He and Zhong as the new chiefs of the nation’s two top economic policymakers, citing sources with direct knowledge of the matter. Zhong was previously China’s international trade representative, responsible for trade negotiations,
and held official positions in Zhejiang province when Chinese President Xi Jinping served as governor and party boss of the province from 2002-2007. Beijing is struggling to cope with
weak global demand and faces risks from growing U.S. trade protectionism as the Trump administration shows an aversion to globalisation, which has benefited China hugely. The NDRC is tasked with overseeing the Chinese economy, regulating prices and approving major infrastructure projects. The once-powerful NDRC was dubbed a “super-ministry” when
China had a centrally planned economy, but has seen its influence erode as Beijing pushes for marketbased reforms and deregulation to let market forces play a bigger role.
Supply-side reforms
Prior to joining NDRC, He worked for other agencies in China’s northern city of Tianjin and south-eastern Fujian province. He, 62, is expected to push supply-side reforms and spearhead a drive to cut excess capacity in the steel and coal sectors.
Key Points He Lifeng named head of top planning agency Zhong Shan takes over commerce ministry Reshuffle expected before key party meeting this year
Zhong Shan, currently a vice commerce minister, has been named new head of the ministry, the Ministry of Commerce said on its website, taking over from Gao Hucheng
Both Xu and Gao have reached the mandatory retirement age of 65 for a Chinese cabinet minister. The 19th Party Congress, expected to be in the autumn. Chinese officials have pledged to maintain stable economic growth this year to ensure a successful party meeting. China’s economy grew 6.7 per cent last year, the slowest rate in just over a quarter of a century, and it faces risks from rising debt and growing asset bubbles, which leaders have vowed to address this year. Reuters
Business Daily Monday, February 27 2017 9
Greater China Markets
In Brief
Authorities consider faster IPO approval to lure large tech deals China has been losing out to the New York Stock Exchange and Nasdaq on key technology listings Julie Zhu and Elzio Barreto
China’s securities regulator is considering offering a shortcut for some of the country’s largest technology companies to list their shares, allowing them to jump a long queue of applicants and boost domestic bourses, according to six people with knowledge of the proposals. The sources said companies being considered for the shortcut could include Alibaba Group’s Ant Financial affiliate, the world’s most valuable financial technology company; Zhong An Online Property and Casualty Insurance, and security software maker Qihoo 360 Technology Co. Ant Financial, valued at US$60 billion at its most recent funding round last year, is expected to be one of 2017’s largest initial public offerings (IPOs). While Ant hasn’t specified a preferred listing venue, analysts and bankers have previously said the deal will likely take place in Hong Kong, given the queue in the Mainland. China has been losing out to the New York Stock Exchange (NYSE) and Nasdaq on key technology listings, so more IPOs at home could mean millions of yuan in revenue for Chinese investment banks, who dominate domestic stock issuance. There are about 700 companies waiting for a green light from the China Securities Regulatory Commission (CSRC) to go public in Shanghai or Shenzhen. Though the regulator has increased the pace of approvals in recent months, that still leaves a typical 18-month wait or longer before companies are able to raise funds, making the domestic market unattractive to fast-growing technology companies in need of funds to fuel their expansion. In September the CSRC tweaked the rules to let companies in some impoverished Chinese regions skip the queue, sharply reducing the vetting period for those issuers. In January, companies in the Xinjiang Uyghur Autonomous Region
that borders Russia and Mongolia were among those benefiting from faster approvals. The sources said the CSRC had held talks with the technology companies for months, but no final decision had yet been reached on whether to allow the faster approval. Ant Financial, Zhong An and Qihoo declined to comment. The CSRC has yet to reply to a request for comment.
Going west
Over recent years the United States has been a popular destination for listings by Chinese internet start-ups and software makers, given a larger pool of analysts familiar with the sector and fund managers used to investing in fast-growing companies who have yet to generate profits. The US$25 billion record IPO of e-commerce giant Alibaba in New York in 2014 was a high-profile loss for Mainland China and Hong Kong, where the company initially intended to list. More recently, however, some Chinese companies have opted to quit New York and relist back home, where valuations are several times higher than in international markets. Qihoo took its New York shares private in a US$9.3 billion deal last
July and has said it wants to relist in China in due course. By listing at home, Ant Financial, Zhong An and Qihoo would benefit from those high valuations, while also standing out because of their size compared with locally-listed peers. Domestic equity markets are dominated by massive stateowned enterprises (SOEs), including banks, real estate developers and conglomerates.
‘There are about 700 companies waiting for a green light from the China Securities Regulatory Commission to go public in Shanghai or Shenzhen’ While there are almost 400 tech companies listed in Shenzhen and Shanghai, the vast majority are small firms, with an average valuation of US$1.9 billion, dwarfed by the likes of Ant Financial. The two largest-listed technology companies in China, video surveillance camera maker Hangzhou Hikvision Digital Technology and display maker BOE Technology Group, have market values of US$25.7 billion and US$16.9 billion. Reuters
China passed a law on Friday to strengthen oversight of Red Cross societies, state-owned Xinhua news agency reported, after scandals involving misuse of funds by charitable organisations. The law passed by the standing committee of the National People’s Congress includes a measure that requires Red Cross societies to tell donors how their donations are used or risk civil and criminal charges, Xinhua said. In 2011 a Chinese woman was discovered to have collected donations while falsely posing as a Red Cross Society of China worker, sparking wider suspicions about misuse of funds that caused donations to decline precipitously. Insurance
Regulator bans Foresea chief from business for 10 years China’s insurance regulator said on Friday it has banned Yao Zhenhua, chairman of Foresea Life, from the insurance business for 10 years, citing violation of regulations in its usage of insurance funds. The China Insurance Regulatory Commission (CIRC) said in a statement on its website that Yao has been dismissed from the position of chairman of Foresea Life, an insurance unit of financial conglomerate Baoneng Group. The regulatory punishment came amid an intensifying sector-wide regulatory crackdown on what CIRC calls as risky activities by some aggressive insurers, particularly those that engage in stock market speculation.
Authorities to tighten oversight of asset management industry
Mainland firms buy Hong Kong land piece for record price Chinese developers have been aggressively buying land in Hong Kong, gobbling up 29 per cent of the land sold in 2015-2016
Two mainland Chinese property companies snapped up a piece of Hong Kong residential land at a record-breaking price on Friday, highlighting once again the territory’s skyrocketing real estate prices. Unicorn Bay (Hong Kong) Investments Limited, a unit of Shenzhen-based Logan Property Holdings
Government ups Red Cross oversight
Financial sector
Property
Venus Wu
Charity
Company Limited , and Guangzhou-based KWG Property Holding Limited , outbid 13 competitors when they jointly won the tender at a price of HK$16.9 billion (US$2.18 billion), shattering the previous HK$11.8 billion mark set two decades ago. Mainland Chinese developers have been aggressively buying land in Hong Kong, gobbling up 29 per cent of the land sold in 2015-2016.
Hong Kong’s Financial Secretary, Paul Chan, earlier this week warned that the city’s astronomical property prices continued to be an issue. The buying frenzy has also raised concerns that home prices, currently at a historic high in one of the least affordable cities in the world, would continue to rise. Moreover, it has deterred some major local players, including Hang Lung Properties and Hopewell Holdings, from bidding for land. A top government official said on Thursday that competition from Chinese developers is not an issue as Hong Kong is a free market that welcomes competition from abroad. “It does not matter where the capital is from. The most important thing is they are investing in Hong Kong, and they are here to build homes for Hong Kong people,” said Secretary for Development Ma Siu-cheung. This marked the first time Logan Property, ranked 32nd largest in China, and KWG Property successfully bought land in the former British colony. The companies said in a joint press release the plot of land, offering a panoramic view of the ocean in southern Hong Kong island, is a “rarity”. Reuters
China will tighten oversight of its sprawling asset management industry as it moves to rein in financial risks, a senior central bank official said in remarks published on Friday. Ruan Jianhong, head of the Survey and Statistics Department at the People’s Bank of China (PBOC), said the financial sector had shown “deviation”, with speculative activities rife in the fast-growing asset management industry. Banks, insurers and brokerages have developed complicated asset management products involving different industries and markets in the name of “innovation”, as returns from the real economy shrink, Ruan told state-owned Financial News in an interview. Reform
Beijing “closely watching” Trump’s tax cut plan China is “closely watching” tax cut plans by U.S President Donald Trump, even as the country keeps its corporate tax rate unchanged, a senior finance ministry official said on Friday. President Trump plans to announce the most ambitious tax reform plan since the Reagan era in the next few weeks, the White House said earlier this month. “We are closely watching and following corporate tax policy adjustments in the United States and other countries,” Zhang Tianli, vice head of the ministry’s department of tax policy, said. “We are studying plans to respond.”
10 Business Daily Monday, February 27 2017
Greater China Regulator
Beijing summons reformer to tackle banking woes Guo Shuqing inherits a banking sector that has expanded swiftly, fuelled by the country’s rapid credit growth Shu Zhang and Matthew Miller
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uo Shuqing, who is stepping down as governor of Shandong province to take control of China’s banking regulator, returns to Beijing at a decisive moment for the country’s financial system following years of breakneck economic growth. The immediate challenge for the new chairman of the China Banking Regulatory Commission (CRBC) is formidable - Guo must vigorously address troubled lending in the country’s RMB232 trillion (US$34 trillion) banking sector and implement tougher measures to control lightly regulated shadow banking activities. For Guo, highly regarded as one of China’s most experienced financial services professionals, returning to Beijing follows an accomplished career including appointments as chairman of China Construction Bank Corp, the head of the China Securities Regulatory Commission, and most recently as a provincial governor. Guo is considered by many as a passionate reformist, drawing up more than 70 new policies during his 18 months as chief stock market regulator from 2011 to 2013. He tried to revive a stagnant stock market, boosting participation by foreign investors while campaigning against widespread insider trading, poor information disclosure and weak corporate governance. He also advocated reform of the initial public offerings system and promoted the delisting of loss-making firms. “Guo’s appointment to CBRC brings him back to his area of core expertise: banking,” said James Stent, a former independent director at two Chinese banks and author of China’s Banking
Transformation. “CBRC is a big, complicated organization. You have to be a competent manager. Guo Shuqing has proven in spades he’s capable of doing the job.” Guo, a philosophy major and a visiting scholar at Oxford University, is a native of China’s Inner Mongolia region and is a fluent English speaker. Since 2001, he also has served as a deputy central bank governor and as a top foreign exchange regulator. Like central bank governor Zhou Xiaochuan and former finance minister Lou Jiwei, Guo is widely respected as a reform-minded policymaker. He was appointed to run CBRC to replace Shang Fulin, who has reached the official retirement age of 65.
Bad loans, shadow banking
Deleveraging and containing risk have been identified as top priorities for the current government, as China’s top leaders prepare to gather at the twice-a-decade leadership reshuffle of the ruling Communist Party this autumn.
Key Points Guo to head CBRC after 20-year financial, political career Guo seen as capable, passionate reformer “Serious, respected” regulation needed for shadow banking
China’s banking sector is dominated by state-owned lenders, which are responsible for supporting political and economic priorities of central and provincial governments. Guo, 60, also must wrestle with the thorny problems associated with helping regulate China’s fast-growing
Guo Shuqing, new chairman of the China Banking Regulatory Commission
online finance industry, which has become a hothouse for both innovation and fraud. A prolific author with more than 300 research papers and 16 books to his name, Guo inherits a banking sector that has expanded swiftly, fuelled by the country’s rapid credit growth. Banking assets over the last five years have more than doubled, helping to push the volume of non-performing loans at Chinese commercial banks to RMB1.51 trillion by the end of last year, the highest since 2005. China’s shadow banking system, comprising a range of opaque and lightly-regulated financial products, also has grown rapidly under the guise of financial innovation. Shadow banking’s entanglement with traditional financial institutions, especially more vulnerable small and mid-sized banks, has raised concerns about potential systemic risks. Shang, who led the CBRC from 2011 to 2016, faced criticism for not being firm enough on those activities. “Shang has not been a tough regulator in keeping things under control,” said Fraser Howie, an independent analyst and author of Red Capitalism.
“Banking is far more complicated and opaque than it was before.”
“Serious, respected” regulation
Guo’s needs to come out with “serious and respected” regulation addressing shadow banking products, Howie said. Guo will work closely with China’s powerful central bank, which is tightening oversight of the surging asset management industry that has drawn the eye of investors seeking high yields and quick profits. Before joining the securities regulator, Guo steered China Construction Bank Corp to its successful initial share sale, which raised US$8 billion. Guo will need to navigate the CBRC through the financial regulatory system shake-ups in the coming months and years. Market speculation about unifying banking, insurance, securities regulators under the leadership of the central bank has been rampant since China’s stock market crash in 2015. “Don’t take too much risk. But not too little either. If you don’t take any risk how can you make any money,” Guo told Reuters in an interview in 2010. Reuters
M&A
XCMG, Brazil’s OAS in joint venture talks If the deal materializes, OAS would become the latest in a series of Brazilian construction companies to discuss entering into a joint venture or getting acquired by Chinese counterparts Guillermo Parra-Bernal
Chinese heavy machinery maker Xuzhou Construction Machinery Group Co Ltd is in talks with Brazilian engineering firm OAS SA to form a joint venture for construction in Africa and Latin America, a person with direct knowledge of the matter said on Friday. According to the person, who was briefed on the talks, the firm commonly known as XCMG would contribute capital, equipment and financing to the venture. OAS would dole out expertise in civil construction and engineering projects and a pipeline of contracts outside Brazil, the person added. The venture would be the first major step in OAS’s efforts to rebuild itself almost three years after getting ensnared into Brazil’s biggest corruption scandal ever. In 2015, OAS became the first of Brazil’s major builders to file for bankruptcy after
prosecutors accused it of bribing politicians to win lucrative contracts at state firms. Both firms see the venture thriving in Africa, where Brazilian construction firms have a stable base
of customers and strong reputation following several years of successful project execution, the person added. Legal terms of the venture, or whether it would involve any cash investments or cross shareholdings, remain under discussion, said the person, who asked for anonymity to discuss the matter. For XCMG, the world’s No. 5 construction machinery firm and its listed unit XCMG Construction Machinery Co Ltd, teaming up with OAS would
help accelerate plans to grow across developing nations at a time when the price of some commodities - the main source of revenue for most of those countries - is recovering. São Paulo-based OAS declined to comment, while efforts to contact XCMG media representatives in São Paulo and Xuzhou, China, were not immediately successful. OAS, which before the scandal broke in early 2014 was Brazil’s No. 4 engineering conglomerate, has shed more than 30,000 jobs, sold assets and even filed for bankruptcy protection to wrestle the impact of the scandal.
‘China’s XCMG is the world’s No. 5 construction machinery firm’ Last year, several local media reports said China Communications Construction Co Ltd was eyeing the purchase of Construtora Camargo Correa SA, one of Brazil’s largest builders. China Gezhouba Group Co Ltd is also considering buying infrastructure assets in Brazil, through concessions, partnerships or construction projects, Reuters reported in June. Reuters
Business Daily Monday, February 27 2017 11
Asia Private poll
Japan core CPI seen halting fall for 1st time in 11 months A survey showed household spending will slip 0.4 per cent from a year earlier Kaori Kaneko
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apan’s January core consumer prices likely stopped falling for the first time in 11 months and factory output rose for a third straight month, a Reuters poll showed, due to a pickup in energy prices and the global economic recovery. Retail sales probably rose for a third month in January while household spending fell for the 11th month in a row, showing lacklustre recovery in consumer spending. The core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, was seen unchanged from a year ago, escaping from negative territory for the first time since February 2016 when it also was flat, the poll of 19 analysts showed. That index fell 0.2 per cent in December. “Downward effects from energy prices have run their course, which helped core consumer prices stopped falling,” said Takumi Tsunoda, senior economist at Shinkin Central Bank. “But consumer spending lacks momentum, so prices remained weak except those of energy related products,” he said. The internal affairs ministry will announce core CPI at 8:30 a.m. Tokyo time on March 3, when it also unveils
a new prices index that excludes fresh food and energy costs. The Bank of Japan has a similar index on consumer prices stripping away the effect of energy and fresh food, which rose 0.1 per cent in December from a year ago.
Slowing production gains
The poll showed an expectation that industrial production rose 0.3 per cent in January from the previous month, a slowdown from 0.7 per cent in December and 1.5 per cent in November.
“Exports have been recovering since late last year thanks to the global economic recovery, which helped domestic production,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Latest exports slowed due to Chinese new year holidays, which weighed down on gains in factory output in January. But it will likely continue to pick up,” he said. The trade ministry will release industrial output data at 8:50 a.m. Tokyo time on Feb. 28. The poll also showed retail sales rose 0.9 per cent in January from a year ago, while household spending slipped 0.4 per cent from a year earlier.
The unemployment rate likely declined to 3.0 per cent in January after December’s 3.1 per cent, and the jobs-to-applicants ratio improved to 1.44, the highest reading since July 1991, when it stood at the same level. Retail sales will be announced on Tuesday, and jobs data and household spending at the same time as core CPI on Friday. The government lowered its assessment of consumer spending in February, the first downgrade in 11 months, while it left unchanged its overall assessment that the economy is recovering gradually th o u gh p o c k ets o f w ea k n ess remain. Reuters
Economists forecast
India’s economic growth seen slowing A slight majority expect the current quarter growth to be dented because of the cash crunch Krishna Eluri
India’s economy is expected to have slowed sharply to a near three-year low in the final three months of 2016, as demand wilted following Prime Minister Narendra Modi’s surprise decision to ban high-value currency notes, a Reuters poll of economists showed. Modi’s announcement on Nov. 8 ordering the removal of 500-rupee and 1,000-rupee notes took out around 86 per cent of the currency in circulation, putting activity on the skids in a predominantly cash-reliant economy. The poll of 30 economists taken over the past week showed India’s gross domestic product growth slowed to 6.4 per cent annually in the October-December quarter. Several economists were uncertain about the full impact of the currency ban. In July-September, India’s economic growth had accelerated to 7.3 per cent from a year ago, making it the fastest-growing major economy in the world. That title will be lost to China if the Reuters consensus is met, putting the
country’s growth at its lowest since March 2014, with China’s economy having grown 6.8 per cent during the same period. “GDP is going to underestimate the actual impact of demonetization, simply because the major impact will be on the informal sector which does not get captured in the quarterly estimates,” said Nikhil Gupta, economist at Motilal Oswal. The government’s currency ban,
aimed at fighting tax evasion, corruption and forgery, has caused huge disruption to daily life, leaving farmers, traders and companies relying on cash transactions in disarray. Services activity plunged into contraction following the currency ban, and still hasn’t recovered fully, while factory activity also declined in December before returning to modest growth in January. Although there is no clear evidence yet of the impact of demonetisation, economists were undecided on how long its effects will drag on India’s GDP growth.
A slight majority, 13 of 34 economists, expect the current quarter growth to be dented because of the cash crunch; 12 expect the impact to prolong for at least the first half of this year. Seven economists said it will last until September, the remaining two said it will last beyond that at least one more year before the economy can fully brush off the impact.
Key Points Poll predicts annual 6.4 pct growth in Oct-Dec quarter GDP to be released at 1200 GMT on Tue, Feb 28 Around two-thirds of the respondents, however, agreed the bigger challenge to GDP growth in the Indian economy is lacklustre capital spending in the private sector, with five citing lower credit takeoff in the banking sector. Earlier this month, the Reserve Bank of India kept its policy rate on hold at 6.25 per cent and unexpectedly signalled an end to its longest easing cycle since the global financial crisis, citing inflation as a bigger threat to the economy. It is expected to keep interest rates on hold until at least the second half of next year. Reuters
12 Business Daily Monday, February 27 2017
Asia Australia
Reserve Bank head sees better ways to stimulate demand than rate cuts Since taking over the reins at the RBA in September, Lowe has repeatedly emphasised the limits to monetary policy Swati Pandey and Wayne Cole
T
he head of Australia’s central bank said on Friday that the economy would benefit little from cutting interest rates already at record lows, putting the onus on the government to make fiscal reforms and find ways to stimulate demand. Reserve Bank of Australia (RBA) governor Philip Lowe told lawmakers that growth should come from more investment in public infrastructure, while noting a lack of business investment despite the policy cash rate of 1.50 per cent. “With interest rates so low...it would be a better strategy to create
new assets and the best new assets in our country are infrastucture, particularly in transportation networks,” Lowe told a parliamentary economics committee in Sydney. “I have long thought there must be quite a few investment projects in urban transport, where the return would be greater than the government (10-year) borrowing rate of 2.8 per cent,” he added. The central bank chief said that monetary policy was not the best way to stimulate demand in the economy. “It’s really in the hands of the parliament to create an environment where firms want to invest and people want to spend,” he added. The ruling coalition has failed to
press ahead with its legislative agenda since Prime Minister Malcolm Turnbull won a razor-thin majority last July. Policies such as corporate tax cuts have been blocked in a divided Senate, leaving Turnbull’s popularity at its lowest in over a year. “Looks like we are talking about a status quo (on fiscal policy) for a couple of years,” said Michael Workman, senior economist at Commonwealth Bank of Australia in Sydney. “It’s very very difficult for the government to implement any kind of programme to restore a stronger budgetary position, to stimulate the economy again in the way that is required...and that’s because of the intransigence in the Senate.”
Balanced growth
Since taking over the reins at the RBA in September, Lowe has repeatedly emphasised the limits to monetary
Reserve Bank of Australia (RBA) governor Philip Lowe
policy and earlier this week said further cuts in interest rates would not be in the national interest. Data out this week showed investment had fallen in every quarter of last year. Domestic consumption has also been subdued with retail sales growing at a tepid pace. There is a high degree of slack in the labour market, adding pressure on wages growth which is stuck at record lows. High levels of household debt combined with subdued incomes were making households wary of spending freely, said Lowe. The ratio of household debt to disposable income is at an all-time peak around 180 per cent, while the saving rate has fallen. Mortgage debt stands at A$1.7 trillion, larger than the country’s annual economic output. “There is a balance to be struck. Too much borrowing today can create problems for tomorrow, because debt does have to be repaid,” Lowe said. “The balance that is required is to support spending in the economy today while avoiding creating frugalities in household balance sheets that could cause problems for the economy later on,” he said. The futures market has almost priced out any chance of a rate cut this year, with some investors even toying with the idea of a rate hike by early 2018. Still, Lowe said he was paying “close attention” to trends in the labour market as a high and rising unemployment rate could become a catalyst for a rate cut. The unemployment rate has been steady for a little over a year at around 5.7 per cent, although Lowe said a “sustainably lower unemployment rate should be possible in Australia.” The head of the central bank appears before the committee twice a year to answer questions on the economy and monetary policy. Reuters
Investors
South Korea plans to boost issuance of longer-dated bonds Demand for ultra-long bonds have been increasing in the country Cynthia Kim and Shin-hyung Lee
South Korea’s government plans to boost the issuance of longer-dated bonds to about 30 per cent of the total this year from 25 per cent in 2016, the head of the treasury bureau at the finance ministry said on Friday.
Key Points Plans to boost issuance of longerdated KTB to 30 pct this yr -S.Korea fin min official Wi Plan to issue about 1 trln won of 50-yr KTB 2017 Demand for super-long bonds rising with aging population, low interest rates In an interview with Reuters in Seoul, Wi Seong-bak, director general of the treasury bureau, said the plan is to gradually increase the issuance of 20-year, 30-year and 50-year bonds. “Last year it was about 25 per cent,
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so it will be of about 5 per cent more,” Wi said, referring to the proportion of the longer-dated bonds that will be sold this year. Demand for ultra-long bonds have been increasing in Asia’s fourth largest economy as life insurers and longterm investors struggled to manage their portfolio under persistently low interest rates and aging population. The government plans to issue 103.7 trillion won of treasury bonds this year, of which about 45 per cent will be three- to five-year notes. Another 25 per cent of the bonds will be of 10-year maturity, and the remaining 30 per cent will be 20-year, 30-year and 50-year bonds. The flatness of bond yield curves in South Korea shows growing demand for longer dated notes, which the government will take into account as it sets policies for the bond market, Wi said. O f th e th r e e m at u r i t i es i n longer-dated bonds category, the government will issue about 1 trillion won of 50-year bonds this year,
the nation’s longest-ever maturity. It could flexibly adjust the amount depending on investor demand, Wi added. The government sold its first 50-year bonds in October last year, to test investor demand for higher yields and secure stable government finances. Asked to comment on the increasing investor appetite for the nation’s inflation-linked bonds and whether the trend will continue, Wi declined
to give a view, but acknowledged that transactions are active. “When we first launched it years ago, demand was weak... but it seems there isn’t any need to encourage transactions now,” Wi said. Inflation expectations last week shot up to the highest level since September 2014, with the breakeven rate jumping to 1.288 per cent on Thursday from a cyclical low of 0.144 per cent in April 2015, data compiled by Reuters show. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Monday, February 27 2017 13
Asia Official visit
In Brief
Malaysia rolls out red carpet as Saudi king kicks off Asia tour After Malaysia, the King is expected to travel to Jakarta and Bali in Indonesia Joseph Sipalan and Noah Browning
Malaysia welcomed Saudi Arabia’s King Salman yesterday for the start of a rare, month-long Asian tour, where the monarch will build ties and seek to draw more investments to the oil-rich gulf nation. The visit is the first by a Saudi king to Malaysia in more than a decade, as the Arab nation courts Asian investors for the sale of a 5 per cent stake in state firm Aramco in 2018, expected to be the world’s biggest IPO. Malaysian state television yesterday showed live footage of the octogenarian king descending from his plane on an escalator flown in with his delegation. He was received by Malaysian Prime Minister Najib Razak before being whisked away in a heavily guarded convoy for a state ceremony at Malaysia’s parliament grounds. The leader was greeted in parliament with a 21-gun salute, local
media reported. King Salman also plans to visit Indonesia, Brunei, Japan, China, the Maldives and Jordan “to meet with the leaders of those countries to discuss bilateral relations and regional and international issues of common concern,” a royal court statement carried on Saudi Arabia’s state media SPA reported. Government sources with knowledge of the visit said a 600-strong delegation will accompany the king on his four-day visit to Malaysia, where cooperation on energy developments will be on the agenda. State oil firm Petroliam Nasional Bhd (Petronas) and Saudi Aramco will sign an agreement on Tuesday to collaborate in Malaysia’s Refinery and Petrochemical Integrated Development (RAPID) project, a boost for the Southeast Asian economy which has been reeling under weak global oil prices. Relations between the two countries
Saudi Arabia’s King Salman bin Abdulaziz Al Saud (2-L) inspects Malaysian guards of honour during a welcome ceremony at Parliament Square, in Kuala Lumpur, Malaysia, yesterday. Lusa
have been in the spotlight over the last two years after Saudi Arabia was dragged into a multi-billion dollar corruption scandal at Malaysian state fund 1MDB, founded by Najib. Najib has denied any wrongdoing in the money-laundering case which is now being investigated by several countries including the U.S, Switzerland and Singapore. A Malaysian government inquiry found that nearly US$700 million transferred to the Prime Minister’s bank account in 2013 was a donation from the Saudi royal family and most of it was returned.
Key Points King Salman arrives in Kuala Lumpur for start of rare Asian tour Month-long tour includes Indonesia, China, Japan and others Petronas-Saudi Aramco expected to sign historic deal on Tuesday The last time a Saudi king visited Malaysia was in 2006, when King Abdullah, King Salman’s half-brother and predecessor, flew in with a 300-member delegation. “Saudi Arabian investment in Malaysia is expected to create thousands of jobs and we are proud that Malaysian firms have been chosen to undertake projects at some of the most prestigious locations in Saudi Arabia,” Najib said in a statement on Friday. Besides travelling with his own private escalator, King Salman has also flown in two personal cars. His entourage has also completely booked out three luxury hotels in Kuala Lumpur for the duration of the visit. After Malaysia, the King is expected to travel to Jakarta and Bali in Indonesia from March 1-9 with an even larger entourage of 1,500 people, followed by a trip to Japan from March 12 to 14, officials in those countries said. King Salman is expected to spend the last two weeks of March on holiday in the Maldives, according to a Maldives diplomat. Local newspaper Mihaaru reported that three resorts have been reserved for his stay. Reuters
Green energy
India’s wind power tariffs hit new low in push for renewables The government push has prompted companies to bid aggressively for solar and wind projects Sudarshan Varadhan
Indian wind power tariffs fell to a record low in a government-run auction on Friday, weeks after solar power rates too hit an all-time low, as the country looks to cut chronic electricity shortages in one of the world’s biggest clean energy programmes. India, the world’s third-biggest greenhouse gas emitter, has set a target of raising its renewable energy generation to 175 gigawatts by 2022, around five times current usage, to supply power to its 1.3 billion people and fight climate change. The government push, personally monitored by Prime Minister Narendra Modi, has prompted companies to bid aggressively for solar and wind projects, pushing tariffs low enough to challenge power generated by fossil fuels such as coal over the long term. In an auction conducted by state-controlled Solar Energy Corporation of India (SECI) for various wind projects totalling 1 gigawatt, five companies separately quoted a tariff of 3.46 rupees (US$0.0519) per unit to win the projects. “After solar cost reduction below 3 rupees/unit, wind power cost down
to 3.46 rupees/unit through transparent auction,” India’s coal, power and renewable energy minister, Piyush Goyal, said in a tweet on Friday. Mytrah Energy, part of London-based Mytrah Group, Ostro Kutch Wind, backed by British private equity firm Actis, and Indian company Inox Wind Infrastructure won contracts for 250 megawatts (MW) each. Green Infra Wind Energy, majority-owned by Singapore-based
Sembcorp Industries Ltd, won a contract for 249.90 MW and Adani Green Energy, part of Indian billionaire Gautam Adani’s infrastructure group, was awarded a 50 MW project, according to a senior SECI official and a bid document seen by Reuters. “The auctions have been hard fought and have led to tighter pricing than one would have foreseen even a few months earlier,” said Vikram Kailas, chief executive of Mytrah Energy. The other companies were not immediately available for comment. Reuters
Growth
IMF lifts 2017 Philippine GDP forecast The Philippine economy will probably grow slightly faster this year than previously thought, fuelled by strong domestic demand and a mild export recovery, the International Monetary Fund said on Friday. Growth would probably hit 6.8 per cent in 2017, the IMF said, at the conclusion of a mission visit. The forecast is slightly better than the estimate of 6.7 per cent in its World Economic Outlook released in October last year. The IMF noted, however, that lower regional growth, capital flows from U.S. monetary policy tightening and heightened global policy uncertainty present downside risks. Commerce
Bangladesh aims to raise trade volume with Canada Bangladesh aims to raise its annual bilateral trade with Canada to US$5.0 billion by 2022 from the current US$2.0 billion, a senior government official said on Saturday. Bangladesh is the second-largest importer of Canadian food grains and other agricultural products in South Asia. Since January 2003, Canada has allowed duty-free access to Bangladeshi products, in particular ready-made garments. Clothing accounts for 96 per cent of Bangladesh’s exports to Canada. “We are confident to increase our bilateral trade volume by more than double from the present level over the next five years,” Shahriar Alam, junior minister for foreign affairs, said. Quarterly data
S.Korea household disposable income falls South Korea’s average disposable household income in the fourth quarter of last year fell at the fastest pace since the global financial crisis as earned income was hit by a sluggish economy, data showed on Friday. Real disposable income at South Korean households in the OctoberDecember period fell 1.1 per cent over a year earlier, Statistics Korea said, compared to no growth in the previous quarter. On the whole, real disposable income in 2016 fell 0.3 per cent, the first full year decline since 2009 when it dropped 2.0 per cent. LNG
Japan pays high fee for first U.S. shale cargoes Japan in January paid nearly twice as much for liquefied natural gas (LNG) derived from U.S. shale gas as it did for its cheapest imports, official trade data showed on Friday. Shale gas from the United States had been touted as a panacea to Japan’s energy crisis after the Fukushima nuclear disaster nearly six years ago. The first supplies arrived in Japan last month to much fanfare but the revelation of its higher cost would seem to undermine the initial euphoria.
14 Business Daily Monday, February 27 2017
International In Brief Commerce
China becomes Germany’s biggest trading partner China for the first time became Germany’s most important trading partner in 2016, overtaking the United States, which fell back to third place behind France, data showed on Friday. German imports from and exports to China rose to 170 billion euros (US$180 billion) last year, Federal Statistics Office figures reviewed by Reuters showed. The development is good news for the German government, which has made it a goal to safeguard global free trade after U.S. President Donald Trump threatened to impose tariffs on imports and his top adviser on trade accused Germany of exploiting a weak euro to boost exports. Crime
South Africa wants accountability in FX rigging scandal South Africa’s central bank wants commercial lenders involved in the rand currency rigging scandal to be held accountable, deputy governor Daniel Mminele said on Friday. South Africa’s Competition Commission said last week that it had found more than a dozen local and foreign banks had colluded to coordinate trading in the rand and the U.S dollar using an instant chat room called “ZAR Domination”. The central bank saw the allegations in a serious light, Mminele said in a speech posted on the bank’s website.
Environment head
Aggressive cuts to Obama-era green rules to start soon Pruitt mentioned three rules ushered in by Obama that could meet the chopping block early on
U
.S. President Donald Trump’s administration will begin rolling back Obama-era environmental regulations in an “aggressive way” as soon as next week, the head of the Environmental Protection Agency (EPA) said on Saturday - adding he understood why some Americans want to see his agency eliminated completely. “I think there are some regulations that in the near-term need to be rolled back in a very aggressive way. And I think maybe next week you may be hearing about some of those,” EPA Administrator Scott Pruitt told the Conservative Political Action summit in Washington DC. Pruitt added the EPA’s focus on combating climate change under former President Barack Obama had cost jobs and prevented economic growth, leading many Americans to want to see the EPA eliminated completely. “I think its justified,” he said. “I think people across this country look at the EPA much like they look at the IRS. I hope to be able to change that.” Pruitt was confirmed as EPA head last week. His appointment triggered an uproar among Democratic
lawmakers and environmental advocates worried that he will gut the agency and re-open the doors to heavy industrial pollution. He sued the EPA more than a dozen times as his states’ top attorney and has repeatedly cast doubt on the science of climate change. But his rise to the head of the EPA has also cheered many Republicans and business interests that expect him to cut back red tape they believe has hampered the economy. Trump campaigned on a promise to slash regulation to revive the oil and gas drilling and coal mining industries.
Puddles and dry creek beds
Pruitt mentioned three rules ushered in by Obama that could meet the chopping block early on: the Waters of the U.S. rule outlining waterways that have federal protections; the Clean Power Plan requiring states to cut carbon emissions; and the U.S. Methane rule limiting emissions from oil and gas installations on federal land. A Trump official told Reuters late Friday that the president was expected to sign a measure as early as Tuesday aimed at rescinding the
Waters of the U.S. rule. Pruitt said in his comments to the CPAC summit that rule had “made puddles and dry creek beds across this country subject to the jurisdiction of Washington DC. That’s going to change.” He also suggested longer-term structural changes were in store at the EPA.
“I think people across this country look at the EPA much like they look at the IRS. I hope to be able to change that” Scott Pruitt, EPA Administrator
“Long-term, asking the question on how that agency partners with the states and how that affects the budget and how it effects the structure is something to work on very diligently,” Pruitt said. Like Trump, he said cutting regulation could be done in a way that does not harm water or air quality. Reuters
Cryptocurrency
Bitcoin hits record high above US$1,200 Digital currency bitcoin jumped to a record high above US$1,200 on Friday, as investors speculated the first bitcoin exchange-traded fund (ETF) to be issued in the United States is set to receive regulatory approval. Traditional financial players have largely shunned the web-based “crytpocurrency”, viewing it as too volatile, complicated and risky, and doubting its inherent value. But bitcoin, invented in 2008, performed better than any other currency in every year since 2010 apart from 2014, when it was the worst-performing currency, and has added almost a quarter to its value so far this year. Diplomatic rift
Mexico vows to impose tariffs if Trump presses wall payment Mexico’s foreign minister has warned the United States that his country will impose tariffs on U.S. products if President Donald Trump taxes Mexican imports to finance a border wall. “If Mexico is faced with this as a reality, not a rhetorical threat... the Mexican government will have to respond,” Foreign Minister Luis Videgaray told Radio Formula on Friday. “The answer would not be to impose a general tax on all imports coming from the United States, because that would hurt the Mexican consumer... we would do it selectively.”
Experts
Brazil faces almost lost decade due to crisis The economy is expected to resume growth this year at a slow pace of around 0.5 per cent Luiz Gerbelli
Brazil is likely to suffer nearly a lost decade of economic development with living standards not returning to pre-crisis levels until around 2022, economists said on Friday. Brazil’s slow recovery from its worst-ever recession means it will be another five years until per-capita gross domestic product - a measure of a country’s living standards - returns to where it stood in 2013 before the crisis hit, said economist Bruno Lavieri. “It’s almost a lost decade,” said Lavieri of consultancy firm 4E. Latin America’s largest economy probably contracted more than 3 per cent for a second straight year in 2016, according to a Reuters poll on expectations for official growth figures due out on March 7. Prospects of a lost decade raise the
stakes for President Michel Temer (pictured) and his ambitious agenda of economic reforms, seen by many analysts as the only way for Brazil to boost productivity and grow at a sustainable rate in the future. The economy is expected to resume growth this year at a slow pace of around 0.5 per cent after being pummelled by weak commodities prices and political fallout from the graft scandal at state oil firm Petrobras. Since the recession began in 2014, GDP per capita has fallen 9.6 per cent, said Julio Mereb, an economist with think tank Getulio Vargas Foundation. Economists like Alessandra Ribeiro, a partner with consultancy firm Tendencias, do not expect the indicator to return to its record 2013 level of 30,800 reais (US$9,903) until 2023. Office clerk Andréia Zanetti, 34,
is among Brazilians who have felt a dramatic fall in income. She spent seven months looking for a job and agreed to earn about half of what she used to before unemployment.
‘Prospects of a lost decade raise the stakes for President Michel Temer and his ambitious agenda of economic reforms’ “I had to change shopping habits, stopped having lunch and dinner out and cancelled my landline phone,” she told Reuters. “I’ve even switched my son’s milk to a cheaper brand.” Reuters
Business Daily Monday, February 27 2017 15
Opinion Business Wires
Viet Nam News The APEC Finance and Central Bank Deputies’ Meeting (FCBDM) ended in Nha Trang City on Saturday with agreement on action plans in four priority areas including long-term financing for infrastructure. The other three areas were: Base erosion and profit shifting (BEPS); disaster risk financing and insurance; and financial inclusion. The two-day meeting was co-chaired by Vice Minister of Finance Trần Xuân Hà and Deputy Governor of the State Bank of Vietnam Nguyễn Thị Hồng. They said hosting the FCBDM was an important milestone in the Viet Nam’s chairmanship of the APEC Finance Ministers’ Process.
The Times of India Union Finance Minister Arun Jaitley on Saturday said that India aspires to be a more open economy and stay away from protectionism. “An aspirational India poised to be more open and less protectionist,” Jaitley said in his lecture on ‘Transforming India: Vision for the Next Decade’ at the London School of Economics. The finance minister is on a five-day visit to Britain, during which he will meet his British counterpart, the Chancellor of Exchequer, interaction with over 100 business leaders from the UKIndia Business Council and roundtable with prospective issuers, leading investors and fintech leaders, among others.
Philstar Barcelona-based think tank FocusEconomics forecasts the economic momentum of the Philippines losing steam, but would still be one of the fastest growing in the region. In its latest economic outlook on the Philippines, FocusEconomics said the country’s gross domestic product (GDP) expansion would slow to 6.5 per cent this year and 6.4 per cent next year. “This year’s economic activity should lose some steam, but will nevertheless remain vigorous,” the think tank said. GDP growth accelerated to 6.8 per cent last year from 5.9 per cent in 2015 due to robust domestic demand and strong investments growth.
The Korea Herald The average pay checks of small and midsized enterprises are only half of those provided by conglomerates, data showed yesterday, causing young jobseekers to shy away from applying for such positions. According to the research conducted by the Ministry of Employment and Labour, employees of companies with more than 300 staff made 5.61 million won (US$4,960) monthly in 2015. In contrast, those working at firms with a smaller number of staffs made 3.06 million won. Industry watchers said young jobseekers prefer to remain unemployed until finding positions at conglomerates instead of getting work at smaller companies due to the gap.
The WTO reborn?
F
or too long, the World Trade Organization (WTO) has languished, to lift a reference from T.S. Eliot, by the “waters of Leman” (Lake Geneva). Once the world’s preeminent multilateral trade forum, the WTO has been steadily marginalized in recent years, and recent rebukes of globalization, such as the United Kingdom’s Brexit vote and the election of Donald Trump as U.S. president, suggest that this trend will accelerate. But these outcomes may actually have the opposite effect, owing to three key developments that could enable the revival of the WTO – and of the multilateralism that it embodies. The first development is the decline of alternative trade arrangements. The WTO reached its peak in the early 2000s, a few years after the Uruguay Round of global trade negotiations concluded, and a time when more countries – most notably China – were acceding to the organization. But major trade players like the United States and the European Union subsequently shifted their focus from multilateral trade agreements to bilateral, regional, and mega-regional deals. The mega-regionals – namely, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) – posed a particularly grave threat to the WTO. Yet those are precisely the deals that the Trump administration is rejecting, or at least postponing. European integration had a similar impact on the WTO, as it provided an alternative platform for managing intraEuropean trade. But the European project has fallen on hard times, the most salient sign being the UK’s impending departure from the EU. After Brexit, the WTO will probably become an important forum for Britain’s trade relations with the world. Any further disintegration of the EU will only bolster that trend. Of course, it is possible that regional trade agreements in Asia and elsewhere will continue to flourish. But new leadership would have to emerge. And no single systemically important country today meets the rigorous requirements of such leadership: internal political stability, economic dynamism, relatively contained risk, and a steadfast commitment to open markets. However counterintuitive that may sound, a second development that bodes well for the WTO’s revival is voters’ increasing rejection of hyperglobalization. Hyper-globalization is essentially “deep” integration. It goes beyond creating open markets for goods and services to include increased immigration (in the U.S. and Europe), harmonizing regulations (the ambition of the TPP and the TTIP), and intrusive adjudication of domestic policies (the investor-settlement procedures under NAFTA and the TPP). In the EU’s case, it even entails a common currency. For such integration, regionalism is much more effective than the WTO. Now that “deep” is out, the WTO could once again become an attractive forum for trading countries to do business. Make no mistake: there will still
“
Arvind Subramanian Chief Economic Adviser to the Government of India
be a lot of globalization for the WTO to facilitate and manage, not least because of the inexorable march of technology. The mesh-like structure of trade and investment connecting countries, embodied in global value-chains – what Aaditya Mattoo of the World Bank and I have called “crisscrossing globalization” – will prevent significant backsliding. The third development that could reinvigorate the WTO is a more protectionist stance by the Trump administration. If the U.S. raises tariffs or implements a border-adjustment tax favouring exports and penalizing imports, its trade partners are likely to turn to the WTO for adjudication, given the organization’s demonstrated disputesettlement capability. The WTO could, therefore, become the place where U.S. trade policies are scrutinized and kept in check. The universality of WTO membership, previously seen as an impediment to countries eager to move ahead with new rules and agreements, could be its main strength, as it implies a high degree of legitimacy, which is essential to minimize trade tensions and the risk of conflict. In my book Eclipse, I argued that multilateralism offered the best means for ensuring the peaceful rise of new powers. But it seems that the same argument could apply equally well to the management of receding powers. But the WTO’s revival will not happen automatically. Willing stakeholders must actively pursue it. The most obvious candidates for the job are the mid-size economies that have been the greatest beneficiary of globalization, and that, unlike the U.S. and some European countries, are not currently under pressure from a globalizationaverse public. The champions of multilateralism should include Australia, Brazil, India, Indonesia, Mexico, New Zealand, South Africa, the United Kingdom, and possibly China and Japan. Because none of them is large (with the exception of China), they must work collectively to defend open markets. Moreover, they must open their own markets not only in the traditional areas of agriculture and manufacturing, but also in new areas such as services, investments, and standards. In doing so, these countries would also be responding to the increasingly transactional approach to sustaining openness that the larger traders are being compelled to adopt. The world needs a robust response to the decline of hyper-globalization. Multilateralism, championed by mid-size trading economies with a strong interest in preserving openness, may be it. To the shores of Leman they must now head. Project Syndicate
The WTO could ... become the place where US trade policies are scrutinized and kept in check
”
16 Business Daily Monday, February 27 2017
Closing Stock index
China happy to see MSCI index inclusion of A-shares
will be added to the MSCI this year. Fang said the MSCI decision will be related to their business interests and Chinese authorities are China is happy to see that the country’s A-shares willing to discuss the issue with the stock index will be added to MSCI indices, Chinese securities compiler. authority said yesterday. The MSCI decision will not affect the opening-up or “We have always wanted to see MSCI include reform of China’s capital market which goes at its Chinese mainland-listed A-shares in its global own pace, he said. benchmarks ... we believe that any international Global index provider Morgan Stanley Capital stock index without Chinese A-shares is incomplete,” said Fang Xinghai, deputy head of the International (MSCI) announced in June 2016 that it was delaying the inclusion of Chinese A-shares in China Securities Regulatory Commission (CSRC) the MSCI Emerging Markets Index for the third time at a press conference. Fang was responding to a question on whether Chinese mainland’s A-shares following its 2016 market classification review. Xinhua
Chief executive election
Tsang and Woo qualify to race for Hong Kong’s top job The minimum requirement for candidacy is 150 nominations, which need to be submitted by March 1
H
ong Kong’s former financial chief John Tsang was joined by ex-judge Woo Kwok-hing in receiving enough nominations to run as a candidate in the race for the city’s top job. Tsang submitted his nominations for the chief executive election Saturday to the city’s returning officer after getting the support of 160 people from a committee of about 1,200 members. Woo said yesterday that he secured 156 nominations but would wait until he had 160, which would be “safer.” Tsang and Woo are generally seen as Beijing’s less desired candidates after local newspapers reported that former chief secretary Carrie Lam was endorsed by senior Communist Party leaders. Beijing’s influence over the March 26 election is feeding concerns about the central government’s encroachment on Hong Kong’s affairs, sentiments that sparked protests in 2014. Regina Ip, who is also working on securing enough nominations to enter the race, said the central government leaders were “insecure” about the election result and that she had rejected offers of top appointments to Chinese national bodies in exchange for her dropping out of the leadership race, according to an interview with Cable News.
On Feb. 5, Zhang Dejiang -- the Communist Party’s No. 3 leader -- told Hong Kong business executives and political leaders during closed-door meetings in neighbouring Shenzhen that Lam was the preferred choice, the Standard reported, without saying where it got the information. Lam acknowledged in an interview with Bloomberg that perceptions of Beijing’s endorsement had dented her image, even as she continued to
canvas for support among the election committee. “It is demonstrated by the so-called popularity polls,” Lam said. “I just don’t see what I have done wrong in the last two or three weeks, but my poll seems have come down a bit.” Lam trails Tsang by 14 percentage points in a South China Morning Post poll of 1,018 adults released Feb. 10, compared with 4.4 per cent a month earlier. Still, 66 per cent believed Lam would win the job, a 20-point increase from the previous poll, compared with 18 per cent for Tsang. On Feb. 23, 30 lawyers from the legal subsector in the election committee
issued a statement outlining their “deep concerns” after the South China Morning Post reported that former chief executive Tung Chee-hwa told a closed-door meeting that Beijing wouldn’t approve the winner of the March 26 election if it deemed him or her unacceptable. Tung said that Beijing didn’t trust Tsang and that Lam was more capable. “Such action undermines the fairness of our chief executive’s election and shows a callous disregard for the aspirations of most Hong Kong people to have free and fair elections without ignorant and insensitive interference,” according to the statement by the lawyers. Bloomberg News
Hong Kong’s former financial chief John Tsang
Trade
Capital markets
Tycoon
Australia, Indonesia strengthen ties
Mainland securities regulator to focus on stability, reform
Buffett tackles Trump in defending value of immigrants
Australia and Indonesia said yesterday that full military ties between the two countries had been restored, after Indonesia’s military suspended cooperation in January because of “insulting” teaching material found at an Australian base. Prime Minister Malcolm Turnbull made the announcement alongside Indonesian President Joko Widodo, who arrived in Australia on Saturday for his first visit as president. While the primary focus of the visit was on security and economic issues, including the finalisation of a bilateral free trade deal by the end of the year, talks touched on tourism, cyber security and social links. Widodo met Australian business leaders on Saturday, telling them that investor confidence in Indonesia was strong and reassuring them that Indonesia was a stable country in which to do business. Following one-on-one talks, Turnbull said tariffs would be cut for Australian sugar and Indonesian pesticides and herbicides. He also praised changes to the export rules for live Australian cattle. Two-way trade between Australia and Indonesia was worth US$15.3 billion in 2015-16, according to Australia’s Department of Foreign Affairs and Trade. Widodo said he was confident that a free trade deal would be finalised this year. Reuters
China will focus on stable development of its capital markets this year, but will press ahead to further open its markets to foreign companies, the top securities regulator said yesterday. “We will not waver from reforms (to make China’s capital markets) more market-based, law-based and international,” Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), said. Chinese regulators have turned their sights on controlling risks in financial markets as speculative activity and leverage in the economy rise, with the securities regulator vowing to clear out “abnormal phenomena” from capital markets. Liu said earlier this month that CSRC would take down law-breaking financial tycoons he called “giant crocodiles”, saying they will not be allowed to take advantage of retail investors. China’s crackdown on illegal market activities has intensified since the mid-2015 stock market crash that wiped out almost US$3 trillion of share value. Liu, who was appointed CSRC chairman in early 2016, said that balancing the needs for stability and progress were crucial, especially in managing the primary market. Limiting or halting initial share sales in order to stabilise the secondary market doesn’t “solve the problems of long-term healthy development of capital markets,” Liu said. Reuters
Billionaire investor Warren Buffett used his annual letter Saturday to laud immigrants and their contribution to the growth of the U.S. economy amid President Donald Trump’s anti-immigrant stance. “Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers,” he wrote in the letter to shareholders of his massive Berkshire Hathaway conglomerate. The annual missive from the 86-year-old investor -- the world’s third-wealthiest person, according to Forbes magazine -- is pored over for clues to the thinking of the “Oracle of Omaha,” who lives and works in the Nebraska city. Buffett steered clear of any mention of Republican President Donald Trump, who took office on January 20. He had supported Democrat Hillary Clinton in her bid to win the White House. The letter came as the country grapples with a sharp controversy over Trump’s anti-immigrant policies and his crackdown on the estimated 11 million undocumented people living in the country. The letter accompanied Berkshire Hathaway’s release of 2016 fourth-quarter and full-year earnings. The company reported net profit of US$6.3 billion in the October-December period, a gain of nearly 15 per cent from a year ago. AFP