Business Daily #1221 January 25, 2017 by Business Daily

Thu, 26 January 2017 | 6pm 8 pm | Terrazza, Galaxy Macau

L’Occitane sales in SARs dip 10 pct Retail Page 4

Wednesday, January 25 2017 Year V Nr. 1221 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Outflow

Measures to prevent capital escape from China start to show results Page 16

Data

Chinese statistics bodies could put aside provincial figures to gain objectiveness Page 8

www.macaubusinessdaily.com

Gaming

Analysts project high single-digit revenue growth for January Page 6

Banking

BNU looking into suspected int’l card transactions Page 2

Good start for the year of Rooster Tourism

More visitors and higher hotel occupancy rate for this upcoming Chinese New Year predict local tourism gurus, seeing the two indicators for local tourism industry to increase up to 10 per cent. Meanwhile, outbound tourism is also expected to jump, with Mainland China and Japan being the hottest destinations. Page 5

Sonia Chan keeps silence

The Secretary for Administration and Justice stressed again at the Legislative Assembly yesterday that she would not give any comment on her alleged nepotism case of recommending a relative to work inside the Prosecutor’s Office - which is being investigated by the local corruption watchdog.

Commercial units to rebound Real estate Real estate agency Centaline (Macau) Property Agency Ltd expects the city’s more relaxed market sentiment would drive up property transactions of commercial units this year. Office purchases and sales would be the first segment to enjoy the recovery, while street shops are the next, says the realtor. Page 3

In search of stability

Politics Page 2

HK Hang Seng Index January 24, 2017

22,949.86 +51.34 (+0.22%) Worst Performers

Hengan International Group

+3.01%

Sino Land Co Ltd

+1.43%

China Construction Bank

Power Assets Holdings Ltd

-0.49%

China Shenhua Energy Co

+2.39%

China Unicom Hong Kong

+1.36%

China Merchants Port Hold-

-0.96%

China Resources Power

-0.44%

Bank of East Asia Ltd/The

+2.37%

Sun Hung Kai Properties Ltd

+1.34%

Cheung Kong Infrastructure

-0.81%

Cheung Kong Property

-0.30%

PetroChina Co Ltd

+1.64%

Belle International Holdings

+1.27%

Lenovo Group Ltd

-0.80%

Galaxy Entertainment Group

-0.28%

China Petroleum & Chemical

+1.64%

Wharf Holdings Ltd/The

+1.22%

Ping An Insurance Group Co

-0.50%

Tencent Holdings Ltd

-0.10%

-1.03%

15° 20° 15° 19° 16° 20° 18° 20° 19° 21° Today

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

Monetary PBOC raised interest rates on a key funding tool, the medium-term lending facility, yesterday in its latest bid to cut debt levels and bolster financial stability. Policymakers are trying to keep the world’s second-largest economy sufficiently greased to counter economic slowdown. Page 8

2 Business Daily Wednesday, January 25 2017

Macau

Politics

A sealed month Secretary for Administration and Justice Sonia Chan kept her mouth shut about her alleged nepotism case, stressing she will not comment on the matter under the investigation of the city’s anti-corruption body Cecilia U cecilia.u@macaubusinessdaily.com

he Secretary for Administration and Justice, Sonia Chan Hoi Fan restated at the Legislative Assembly (AL) that she will not reveal anything about the case of her being suspected of practising nepotism which the Commission Against Corruption (CCAC) is investigating. In response to the oral enquiries made by pan-democratic legislators Antonio Ng Kuok Cheong and José Maria Pereira Coutinho, Secretary Chan stressed yesterday in a plenary session of the AL that the current laws and regulations mandate the requirements including rights and obligations for all different government positions as well as penalties when they violate the laws.

At the beginning of the month, CCAC Commissioner Andre Cheong Weng Chon confirmed the city’s anti-graft watchdog had received a complaint against the Secretary’s previous recommendation of a family member to work in the Prosecutor’s Office, which was disclosed by the former-prosecutor general Ho Chio Meng during the trial of his allegedcorruption case. The Secretary assured yesterday at the Assembly that the government’s newly established central recruitment scheme would improve the city’s current recruiting procedures for public servants, adding some departments, however, also adopted other ways of recruiting such as appointments. Another pan-democratic legislator, Au Kam San criticised the legal loopholes for the recruitment of civil servants, asking the Secretary to provide proposals to resolve the

Banking

BNU: investigating unauthorized card transactions Banco Nacional Ultramarino (BNU) is looking into the cases of the reported unauthorized international transactions via the bank’s cards. Portuguese-language newspaper Ponto Final reported yesterday some local BNU card owners received phone messages on January 19 informing them an international transaction of US$2 (MOP16) was attempted via their cards but was rejected due to invalid expiry date inserted. “BNU is already investigating the case and we sent messages to all our

overseas transaction card members as an added security measure. So far, no material loss has happened to our customers,” a representative of the bank told Business Daily yesterday. The representative added cardclone attempts are ‘not usual in banking in Macau or elsewhere’. Business Daily also asked the Judiciary Police if there were any similar cases having occurred with other local banks this year, but there was no response from the police force when this newspaper went to print. N.M.

problems. “You are saying that the central recruitment is running but not all are [using central recruitment]… What we are asking is whether you have ideas to prevent [nepotism] or improve the law.” Admitting the current laws need improvement, the Secretary said the government would consider conducting research for future amendments. M r . C o u t i n h o , m e a n w h i l e, questioned the official as to the reason she did not initiate a disciplinary file against herself after the incident. He added this kind of problem is just the tip of an iceberg in the government. “I have recently read the news from TDM that over 10 staff from the Prosecutor’s Office were recommended by relatives who are working for the government,” said Coutinho. He further denounced that the government is trying to avoid the issue while CCAC is investigating. But the official claimed the government is not avoiding the matter as CCAC is part of the team, adding the anti-graft watchdog is also responsible for dealing with government workers’ violations of

obligations. Both Ng and Coutinho requested the Secretary to make an official apology to the public, but Secretary Chan said she had no comment on this matter.

Ocean World plot

On the other hand, the Secretary for Transport and Public Works Raimundo do Rosário revealed yesterday that the government is evaluating whether to announce the invalidity of a land grant for the idle plot designated for the Ocean World project in Taipa. During yesterday’s discussion at the Legislative Assembly, many legislators urged the government to provide its progress of handling idle land plots. But the deputy director of Land, Public Works and Transport Bureau (DSSOPT) Shin Chung Low Kam Hong claimed the release of information prior to a decision would bring negative impact to the plots. According to Secretary Rosário, the government had announced the invalidity of land grants for a total of 49 plots for the past 25 months since he took over the office. “That is two plots in one month, so we are definitely working,” the official claimed, adding the government would complete the reclamation of all idle plots by 2020.

Business Daily Wednesday, January 25 2017 3

Macau Property

Centaline expects commercial units to grow The realtor estimates office transactions will first rebound this year, followed by the shop segment Kam Leong kamleong@macaubusinessdaily.com

eal estate agency Centaline (Macau) Property Agency Ltd expects the city’s commercial property market to see more active transactions this year given the more relaxed market sentiment. ‘We expect commercial units will see a rebound in 2017,’ the realtor notes in its latest review and outlook for the local property market. ‘ Many companies carried out a quite conservative annual budget plan last year due to a low market sentiment […] but since the arrival of 2017, the stabilisation of gaming revenue and the market atmosphere getting less tense, many merchants will start [re-]planning their development directions for this year.’ Among the segments, the agency believes office units will first see recovery followed by street shops. For 2016, Centaline estimates total transactions of office units have reached a record-breaking low of 176 cases, although a price increase of up to 6 per cent quarter-to-quarter was seen for those located in NAPE and Nam Van from the fourth quarter of last year. In addition, the agency noted that rents for office units have started to

grow since last quarter, jumping by between 5 per cent and 15 per cent quarter-to-quarter despite a lower annual average compared to 2015.

Shops

Meanwhile, total number of street shop transactions remained at a rather low level for 2016, the agency said, estimating the total number has reduced by 16 per cent year-on-year to some 550 cases. In addition, total transacted capital

MSAR 12th most expensive high-end rental in Asia

The city fell one place in the rankings led by neighbouring Hong Kong The MSAR has moved down one position on the list of Asia’s high-end rental accommodation, according to research group ECA international. The group fell from 11th to 12th place on the list led by Hong Kong, notes the group. ‘Macau has remained relatively stationary in the regional rankings in the last year,’ notes the report, which ranked Shanghai in 5th and Beijing in 6th, just one place above Singapore. Within the past five years, the most-expensively ranked on the list, Hong Kong, underwent

values for these shops only amounted to some HK$5 billion, which is halved from over HK$10 billion in the past years, Centaline said. But the agency notes that sales and purchases for shops located in local neighbourhood areas remained stable last year, of which capital values even increased around 6 per cent to 10 per cent year-on-year, while only a single-digit number of transactions was recorded for shops located in tourism areas during the second half of 2016. Nevertheless, rents for street shops are also apparent for a rebound, the agency said.

According to the company, shop rents for those in tourist districts recorded a quarter-to-quarter increase of between 20 and 30 per cent during the fourth quarter. On the other hand, in terms of industrial property units, the company expects total transaction may have only reached some 69 cases for the whole year of 2016, which is a decrease of 7 per cent. The agency forecast the industry segment not likely to see a turnaround in transactions in short term due to the lack of stimulus, saying it is better leasing than selling such units for the time being.

a significant decrease in its percentage lead on the nearest competitor, falling from a 20 per cent lead by 6 per cent. ‘Rents for unfurnished threebedroom apartments across popular expatriate neighbourhoods in Hong Kong average US$10,189 (MOP81,488),’ notes the report, stating ‘over the past five years, Hong Kong has continued to top our regional rankings’. The neighbouring SAR’s high-end rents ‘are more than 14 per cent higher than in Asia’s next-most expensive location, Tokyo’. “Our recent review of average rent levels in China suggest that the introduction of VAT (value added tax) is a contributing factor to some landlords raising

asked rents this year,” states Lee Quane, Regional Director of ECA International. “Shanghai, Beijing, Shenzhen and Guangzhou all reported notable increases in average rents in the past year. Without the VAT changes, we would have expected many locations to post minimal changes in average rents in 2016 as expatriate demand has faltered amid economic uncertainty,” states the director. Guangzhou is ranked 20th on the list, preceded by Dalian. Across the Asia region, ‘the average rental price for a threebedroom property averages US$3,124 – just 1 per cent higher than observed last year,’ notes the report. K.W.

4 Business Daily Wednesday, January 25 2017

Macau Opinion

José I. Duarte* Parking changes Parking meters are being replaced in town. This is a change that we have reason to welcome. More modern and less numerous machines will replace thousands of older parking meters. They are less intrusive of the public space, especially, the sidewalks. It is worth noting, however, that public information is limited. There is scant information on the replacement calendar or the new operating procedure, either in the media or the most obvious government websites, such as the department of traffic and the police. If it exists someplace, it is less than readily noticeable. As was the case with the changes concerning the removal of blocked cars and related fees, alterations seem to be introduced by stealth. Do those responsible feel the residents are not entitled to explanations, or are there other ‘fine‘ changes in the pipeline they don’t want to be asked about? As the old machines are being phased out, a kind of obituary is fitting. Surely, they fulfilled their mission. Yet, it was never really understandable why such an obtrusive and antiquated system, their digital screens notwithstanding, was brought to life. The observation of the money collectors, with their wheeled collecting boxes, was a uniquely curious and noisy ritual. One wonders how they measured the revenues. Did they count every coin, or estimate the value by weighing? Or, as we found out about other parking revenues, nobody really cared about controlling the proceeds properly? This mystery will possibly remain unanswered. Then, two (minor?) features are worth mentioning. The machines did not provide change. Whatever they received, they kept in their bosom. The machines were sensitive enough to distinguish one Hong Kong dollar from one pataca – and ignore the alien coin. But, not sophisticated enough to give it back, even if such technology has been available for more than one century. A curious solution, it certainly was, albeit of dubious legality. Second, they would not provide receipts. Not a big deal, some would say, it was just a few patacas! Undoubtedly unlawful, however. For years, a public concession was happily and conveniently allowed to ignore the law and good business practices. None of the institutions (deemed to enforce legal compliance or to protect the interests of citizens and consumers) ever felt the need to address the situation. A nagging question pops up: if not in straightforward and obvious cases like this, when should we expect them to do so? *economist and permanent contributor to this newspaper.

Globalization

Giant Coca-Cola bottles in Saipan manufactured in Macau

he island of Saipan, most recently known for Hong Kong-listed Imperial Pacific’s multi-billion-dollar ‘temporary casino’ operation led by Mark Brown - former President of the Venetian, Sands and Four Seasons Macau - has a longer link to Macau than expected. According to a report by the Saipan

Tribune, a series of ‘giant concrete Coca-Cola bottles’, numbering 20 in total – of which 13 remain, with nine on Saipan itself and dotting the island since the 1970s - were manufactured in Macau. The typhoon-proof concrete bottles were then shipped to Saipan by Chinese businessman Timothy Lee Po Tin when Lee took over the

Coca-Cola’s bottling operations on the island in the 1970s, making it ‘the hub of the iconic soda brand in Micronesia,’ notes the publication. Aside from the Coca-Cola brand itself the bottles also display the Sprite and Fanta brands. The information was presented in a research paper by retired engineer Steven R. Connor.

Retail

L’Occitane sales drop 10 pct in SARs French retailer of skincare products L’Occitane International S.A., saw its sales in Hong Kong and Macau decrease by 10.2 per cent year-on-year for the nine months ending December 31 last year, according to a filing with the Hong Kong Stock Exchange yesterday. During the period, the company generated total sales of some 93.7 million euros (MOP805.3 million/ US$100.8 million) from the two Special Administrative Regions, compared to 104.4 million euros for the same period of last year. Total sales of the company reached some 1 billion euros for the nine months, a slight increase of 2.3 per cent from one year ago. Of the total, sell-out jumped by 2 per cent yearon-year to 752.6 million euros while sell-in increased by 3.1 per cent yearon-year to some 254.6 million euros. For the company’s other markets in the Greater China region, total sales in Mainland China amounted to 96.8 million euros, which represents an increase of 2.1 per cent year-on-year

from 94.8 million euros. But sales from Taiwan went down by 2 per cent year-on-year to 31.4 million euros for the period, compared to 32.1 million euros one year ago.

As at end of 2016, the retailer operated two stores in the MSAR, a decrease of one from one year ago, while its total stores in Hong Kong amounted to 10. C.U.

Lusophone

Sao Tome and Principe to lead African economic growth Most Portuguese-speaking countries in Africa are expected to register yearly increase in GDP higher than the continent’s average Nelson Moura nelson.moura@macaubusinessdaily.com

Most Portuguese-speaking countries in Africa are expected to register an economic growth above the average of that for the whole continent in 2017, according to the ‘World Economic Situation and Prospects 2017’ report released by the Analysis and Economic Development Policy Division of the United Nations (UN) Department of Economic and Social Affairs. According to the report, African countries Sao Tome and Principe and Mozambique will register the highest real gross domestic product (GDP)

increase among other Lusophone countries in the continent, which are predicted to see an increase of 5.5 per cent year-on-year. While Sao Tome and Principe are expected to keep a similar level of economic growth in 2018, Mozambique is forecast to record a higher year-on-year growth of 6.2 per cent in real GDP in 2018. The growth rate is superior to the continent’s expected average GDP growth of 3.2 per cent for 2017 and that of 3.8 per cent for 2018 following the region experiencing ‘a sharp growth deceleration according to the report.

In fact, Sao Tome and Principe have recently terminated diplomatic ties with Taiwan and re-established relations with Mainland China after a two-decade interruption. Representatives from the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (Forum Macau) have said that the organisation would welcome an African country to enter the organisation if a request is made and negotiations are initiated. Two other African Portuguese-speaking countries, Guinea-Bissau and Cape Verde, are also expected to see yearly increases in GDP above the continent’s average in 2017, projected to grow by 4 per cent and 3.5 per cent year-on-year, respectively. On the other hand, Angola – China’s largest Lusophone trading partner in Africa - is expected to see its GDP to grow modestly in the next two years – with projection of an increase of 1.8 per cent for 2017 and 2.8 per cent for 2018. The report also points out China’s slowdown in economy since 2010 has driven down Africa’s economy due to the decrease in the country’s overall import volume from the continent, as well as its reduced investment and loans to African countries. However, the report considers China’s growing middle class would provide an opportunity for African economies to profit from ‘its large domestic market and rising demand for consumption goods’, advising the continent’s economies to ‘diversify their export product structures’ and ‘prioritize policy measures to enhance productivity growth and competitiveness’.

Business Daily Wednesday, January 25 2017 5

Macau

Tourism

CNY: more visitors, higher occupancy But local luxury retailers do not see their sales would benefit from the increases Annie Lao annie.lao@macaubusinessdaily.com

he city is to see more visitors coming and more hotel rooms occupied for the upcoming Chinese New Year. Chan Chi Kit, the president of the Macau Hoteliers & Innkeepers Association told Business Daily, projecting both visitor arrivals and hotel occupancy would register an increase of between 5 and 10 per cent year-on-year. Speaking to Business Daily in a phone interview yesterday, Mr. Chan said the devaluation of renminbi and the openings of new casino-resorts in the MSAR are the main drivers attracting visitors to travel to the territory during this Chinese New Year that starts this Saturday. Given the travel pattern of Mainland Chinese visitors for the Chinese New Year, Mr. Chan expects hotel occupancy would only be around 70 to 80 per cent for the first two days of the holiday, whilst local rooms would be primarily fully occupied from next Monday until next Wednesday. “80 per cent of Macau’s visitors are from the Mainland. Mainland Chinese visitors are used to traveling outside the Mainland after spending time with their families during the first two days of the Chinese New Year, which means they will only start travelling from next Monday,” the association head explained.

Room prices plunge 40 pct

Meanwhile, due to more hotel rooms being available in the territory following the openings of new projects, Mr. Chan estimates the average hotel room rates to be cheaper by 40 per cent compared to the same period of last year, in order to lure more

visitors to stay in the city for a longer period of time. “Different hotels have launched different promotional campaigns to compete with each other to attract more visitors to stay in Macau for longer,” Mr. Chan explained, adding many local casinos are working closely with the hotel industry to offer (even free) accommodations to their clients. Meanwhile, Andy Wu Keng Kuong, president of Macau Travel Industry Council also perceives that the city’s overall hotel-room booking for the Chinese New Year would experience a slight year-on-year increase of up to 10 per cent, especially given the fact that more visitors are staying in the city overnight. “The openings of new hotel resorts and the attractive discounted prices offered for a room have boosted the hotel bookings for the period,” Mr. Wu echoed.

Outbound travel up

In terms of outbound tourism, Mr. Wu expects the number of residents travelling outside the MSAR would jump by 10 per cent year-on-year for this Chinese New Year Holiday. However, he said the number of outbound residents to South Korea could probably decrease year-on-year. “Travelling outside Macau with their families is a traditional activity for most of the locals,” Mr. Wu said. “For this Chinese New Year, they would more likely choose Japan or the Mainland as their destination.” He explained the increase of outbound tourists to the Mainland is attributable to the new train routes in the country this year.

Luxury retail sales unchanged

But local luxury retailers expect they

would not enjoy the fruits of more visitors in the city during the holiday. Ray Wong, an assistant sales manager of Hong Kong jewelry retailer Lukfook Jewelry told Business Daily that total retail sales may remain stable as the past years since customers now spend less than they used to, even though it is expected to see more customers buying gifts for family and friends for the holiday. “I don’t think our retail sales would increase and would probably remain unchanged for the Chinese New Year compared to previous years. It is because the overall global economy is not doing well and we don’t hold a positive outlook for this year, ” Mr. Wong said. The assistant sales manager

expected the city will see the highest number of visitors from the third day of the Chinese New Year, which is next Monday, for one whole week. Meanwhile, another local luxury retailer also predicts there would be no increase in the company’s sales this year. Ronald Wong, sales manager of Hong Kong Jewelry retail TSL Jewelry, told Business Daily that the company expects sales for the Chinese New Year would remain at the same level compared to last year. “Although the majority of our customers are tourists from the Mainland, and we have noticed more visitors coming to our shop, there is no increase so far in total amount of retail sales,” Mr. Wong claimed.

6 Business Daily Wednesday, January 25 2017

Macau Results

Tables open and fully booked Overall gross gaming revenue values are ‘running ahead’ year-on-year month-to-date, with a 7.5 per cent increase over last year, say analysts Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

xpectations for gross gaming revenues for the month of January predict a ‘high single digit growth rate’, according to analysts at Telsey Advisory Group. The group notes that for the first quarter of the year, they ‘remain comfortable with the expectations for strength,’ lending caution however towards the remainder of the year, given that there should be ‘limited visibility’. Up to date, the group estimates that overall gross gaming revenue values are ‘running ahead’ year-on-year month-to-date, with a 7.5 per cent increase over last year. Suggestions point to a recovery in the local market, ‘with particular focus on the sustainability of the recovery in the VIP business’, seeing a positive trend that ‘had not been expected several months ago’. Regarding the most recently opened integrated resort project in the MSAR – the Parisian – analysts at Wells Fargo point out that as a strength ‘LVS (Las Vegas Sands) and Galaxy are the only Macau operators who generate material, net non-gaming revenues’. However, predictions in advance o f L a s V e ga s S a n d s’ r e s u l t s announcement today place fourth quarter hotel occupancy from last year, in the group’s local properties, down 22 per cent year-on-year, with the decline to halve to 11 per cent year-on-year in the first quarter of this year. During the Chinese New Year period, according to analysts at Morningstar, ‘solid visitation’ is expected, and checks into room availability carried out by the group

found that the Parisian was ‘fully booked’, the same case experienced with the second most recently opened integrated resort on the strip – Wynn Palace – and its sister complex Wynn Macau. MGM was also reported to be fully booked for the CNY period, according to the analysts. On the flip side, ‘there were still some rooms available for January 28 to 29’ at the Venetian and Sands Cotai Central ‘but at what appear to be healthy room rates’ notes the group. Altogether the analysts note

the data is ‘supportive […] to our constructive view of the region’s growth opportunity’.

VIP

According to the Gaming Coordination and Inspection Bureau (DICJ), the amount made off VIP baccarat in the last quarter amounted to MOP33.33 billion (US$4.2 billion), with the whole year raking in MOP118.96 billion, a 6.9 per cent decrease year-on-year. Wells Fargo analysts comment that VIP revenues in the fourth quarter grew 13 per cent year-on-year, in the wake of a 1 per cent year-on-year drop in the fourth quarter, while noticing that the mass revenues ‘decelerated sharply’ through the fourth quarter. ‘The VIP strength has been led

by increased liquidity and the (re-) inflation of the Chinese real estate bubble,’ note the analysts, stating that ’85 per cent of fourth quarter market growth [was] driven by VIP’. ‘Thus far the expected impact from the new supply in the market has been less than anticipated for all operators,’ note analysts at Telsey, pointing out a ‘lukewarm’ opening of Wynn Palace, due to construction disruption which it states ‘should diminish over time,’ but still noting that ‘LVS has seen strong volumes at all its Macau properties since the Parisian opening’. Analysts at Morningstar note that they stand by their recently raised prediction for full-2017 of a 6 per cent year-on-year increase in gross gaming revenue.

Espionage

Investor in Zhuhai company spy for China in FBI A search of Chun’s residence found an unregistered .40 calibre handgun and an AR-15 rifle and a USB with ‘sensitive FBI information dating back to approximately 2006 and 2007 Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

A Chinese national known as Joey Chun has been sentenced to two years in prison and fined US$10,000 (MOP80,000) for being convicted ‘as an agent of the People’s Republic of China […] without providing prior notice to the Attorney General’, according to the United States Department of Justice release. Preet Bharara, the United States Attorney for the Southern District of New York commented that Chun “an FBI employee, was supposed to protect and serve the American people. But instead, he acted as a secret agent of China. For that betrayal, Chun has now been sentenced to federal prison”. Chun began working in the FBI’s New York Field Office around 1997, according to the release, as an electronics technician in the Computerized Central Monitoring Facility of the Technical Branch of the FBI, and was given a Top Secret security clearance the following year, granting him access to ‘sensitive, and in some instances, classified information’.

‘Chun received and responded to requests from Chinese nationals and at least one Chinese government official,’ notes the report. ‘Chun disclosed to Chinese Official-1 – at minimum – information regarding the FBI’s personnel, structure, technological capabilities, general information regarding the

FBI’s surveillance strategies, and certain categories of surveillance targets,’ notes the report.

Zhuhai link

Chun, and ‘certain of his relatives maintained relationships with Chinese nationals purporting to be affiliated with a company in China named Zhuhai Kolion Technology Company Ltd,’ notes the report, including an ‘indirect financial interest in Kolion’. The report notes that the Chinese nationals ‘asked Chun to perform research and consulting tasks in the United States,

purportedly for the benefit of Kolion, in exchange for financial benefits’. Chun, between 2006 and 2010 was in contact with Kolion to ‘among other things, [collect] information regarding solid-state hard drives and printer cartridges’. Kolion is a manufacturer of colour toner cartridges, was founded in 2001 and based in Zhuhai, notes Bloomberg.

Chinese Official

Chun was introduced to the Chinese Official during his time with Kolion, in 2007, however only began passing ‘sensitive information’ in 2011. After lying about his links to the Chinese Official and to Kolion on an FBI routine investigation, due to his security clearance the FBI introduced an undercover employee to catch Chun. Chun admitted to the undercover operative that Kolion had “government backing” and later offered to be a “sub-consultant” to the operative, who was acting as an independent contractor, for a fee, noting he had access to sensitive information from the U.S. government, in exchange for a “cut”. Chun was arrested on March 16 of last year and confessed to ‘having taken steps to collect sensitive FBI information in the United States in response to taskings from Chinese Official-1’. A search of Chun’s residence found an unregistered .40 calibre handgun and an AR-15 rifle and a USB with ‘sensitive FBI information dating back to approximately 2006 and 2007,’ notes the report.

Business Daily Wednesday, January 25 2017 7

Gaming Gaming

Upwind sailings Genting HK expects to fall into the red for 2016

asino ship operator Genting Hong Kong Ltd expects to record a net loss ranging from US$500 million (MOP4 billion) to US$550 million for the year ended 31 December 2016, according to a filing at the Hong Kong Stock Exchange. For the year of 2015, the company registered a net profit of US$2.1 billion (MOP16.7 billion). It explained in the filing that the anticipated annual net loss is due to the absence of a one-off accounting

gain of US$1.6 billion arising from: the reclassification of its investment in Norwegian Cruise Line Holdings Ltd.; a one-time start-up and marketing costs for the launch of new Dream and Crystal cruise brands and products in 2016; and the costs related to the start-up, re-organisation and acquisition of its shipyard operations and new building activities. Nevertheless, the group expects to record improvement on its underlying cruise business, excluding

the one-time start-up costs of Dream and Crystal cruise ships. Genting Hong Kong is a subsidiary of Singaporean casino operator Genting Singapore Plc. Last year,

Genting Singapore dissolved and liquidated Genting Star Macau, an investment holding company that it acquired in 2005 in its attempt to enter the MSAR’s gaming market. S.Z.

Bribery

Philippine senators doubt bribery stories related to Jack Lam Philippine senators are skeptical about the claims of two former officials saying they refused a bribery of 50 milllion pesos (MOP 8 million/US$1 million) offered by Macau businessman Jack Lam, but kept part of the money at their residences. According to Philippines news broadcaster TV5 News and Information, the two former officials of the Bureau of Immigration, Al Argosino and Michael Robles, offered defense during a Senate inquiry into the alleged bribery scandal - that keeping part of the money at their houses was for “evidence”. The two added that they were approached by a retired police chief

Superintendent, Wally Sombero, on behalf of Mr. Lam to negotiate the release of more than 1,300 arrested Chinese nationals working illegally at the Macau-based businessman’s property Fontana Leisure Parks and Casino in Clark on Luzon Island. Last November, the Philippines issued an arrest order against Mr. Lam, founder of local junket operator Jimei Group. The two officials were later accused of extorting the money from Mr. Lam for the release of 600 undocumented Chinese workers, even though the officials returned more than half of the amount during a press conference where they insisted to have received the money as part of a ‘sting operation’. N.M.

8 Business Daily Wednesday, January 25 2017

Greater china Statistics

Beijing said to plan steps to cut local influence on economic data The aim is to improve the nation’s official economic statistics

hina’s central government plans steps that will reduce the influence local governments have on economic statistics, according to a person familiar with the matter. The National Bureau of Statistics (NBS) will move its teams out of joint offices they share with regional counterparts around the country and shift into separate facilities, said the person, who asked not to be identified because they aren’t authorized to speak publicly. The plans also call for NBS staff to establish their own Communist Party committees and have independent channels for reporting data from the provinces back to Beijing, the person said.

‘The sum of provincial output by the country’s 31 regions regularly exceeds the published national gross domestic product figure’ The NBS didn’t respond to a fax sent Monday seeking comment on the measures. The aim is to improve the nation’s official economic statistics, which

have been dogged by disconnects. One example: the sum of provincial output by the country’s 31 regions regularly exceeds the published national gross domestic product figure. Ning Jizhe, a close adviser to Premier Li Keqiang appointed as NBS chief in February, has called for improved tracking of the economy, including better measures of new industries and business models. Ning also serves as deputy chairman of the country’s top planning body, the National Development and Reform Commission (NDRC), giving him greater influence to ensure the execution of his policies. He holds additional sway as Communist Party chief for the statistics bureau, a sprawling bureaucracy of approximately 20,000 people.

Longstanding doubts over the veracity of China’s economic data could be a roadblock as the nation seeks to lure global investors to its bond markets and currency. It may also lead to bad policy outcomes. President Xi Jinping and other leaders in October called for independent investigations to ensure the accuracy, completeness and timeliness of statistics. Scepticism about China’s numbers was exacerbated last week as the state-run People’s Daily reported Liaoning province faked fiscal revenue and other economic statistics from 2011 to 2014. Numbers were fudged because officials sought to advance their careers, the paper said, citing comments to provincial lawmakers by Governor Chen Qiufa. The fraud misled the central

government’s judgment of Liaoning’s economic status, Chen said, citing a report from the National Audit Office. Friday’s GDP report showed growth accelerated for the first time in two years with a 6.8 per cent fourth-quarter expansion. At a briefing after the release, Ning defended NBS data. Liaoning’s case has been taken very seriously, any fabrications will be eliminated, and punishments will be severe, he said. Both the NBS and NDRC are under the auspices of the State Council, China’s cabinet, which in turn is led by Premier Li, a Ph.D. economist. Ning was appointed to the statistics post after his predecessor Wang Baoan was removed from office on suspicion of accepting bribes. Bloomberg News

Monetary policy

Central bank raises interest rates on MLFs Markets participants were caught off guard by the sudden rise in rates just days before the Lunar New Year China’s central bank yesterday raised the interest rate on a key liquidity tool, the medium-term lending facility (MLF), as it rolled over maturing loans, triggering a fall in prices of benchmark bond futures. The People’s Bank of China (PBOC) pushed up the interest rate for

one-year MLFs by 10 basis points, taking it to 3.1 per cent, it said in a statement. It also increased the rate on the six-month tenor by 10 basis points to 2.95 per cent. The MLF is a supplementary policy tool the central bank uses to manage liquidity conditions and

medium-term interest rates in the banking system and money markets. Markets participants were caught off guard by the sudden rise in rates just days before the Lunar New Year. A trader at a Chinese bank in Shanghai thought the timing was odd, given the generally tight liquidity conditions ahead of the week-long holiday. “I have no idea why the bank released such bad news ahead of the holiday. The purpose of raising the interest rates on MLFs is still to cut leverage at financial institutions,” said the trader, who could not be identified by name because she was not authorised to speak to the media. The last time the PBOC adjusted

the interest rates on MLF loans was February 2016, when the bank lowered the offered rates for six-month and one-year tenors. The PBOC said it raised the rates yesterday “to maintain basic stability in the banking system”.

Key Points C.bank raises interest rates on 1-year, 6-month MLFs by 10 bps Interest rate on 1-year at 3.1 pct, 6-month at 2.95 pct C.bank injects RMB245.5 bln via MLF It also lent RMB245.5 billion (US$35.8 billion) to 22 financial institutions via MLFs, it said. Reuters

People’s Bank of China headquarters in Beijing

Business Daily Wednesday, January 25 2017 9

Greater China Benchmarks

In Brief

MSCI head expresses concern on Mainland capital controls Last June, MSCI declined to add the A shares to its global emerging markets benchmark index for the third year running Trevor Hunnicutt

China’s progress toward full inclusion of its stocks in global benchmarks could be halted if the world’s second-largest economy cracks down further on people moving money out of the country, index provider MSCI Inc’s top executive said on Monday. In recent months China has been tightening its grip on individuals and businesses trying to move money out of the country in an effort to stabilize a faltering yuan, though it has sometimes denied the measures were an effort to impose new capital controls. The yuan fell nearly 7 per cent against the dollar last year, its biggest loss since 1994, under pressure from sluggish economic growth and

a strong dollar. A decision last June by New Yorkbased MSCI to welcome the onshore Chinese stocks called “A shares” into its MSCI Emerging Markets Index could usher in hundreds of billion of dollars from asset managers, pension funds and insurers. “If they reverse course and they restrict the ‘out’ door, then how can we?” MSCI Chairman and Chief Executive Henry Fernandez told Reuters. “It’s going to be hard for the MSCI to put the A shares into the index because we will not be doing a good service to our clients.” Fernandez said capital controls have not yet affected international investors but nonetheless are the biggest potential issue MSCI is monitoring

in China. He spoke to Reuters on the sidelines of Inside ETFs, an industry conference in Florida. Last June, MSCI declined to add the A shares to its global emerging markets benchmark index for the third year running, saying China had more to do to open up its market.

“It’s going to be hard for the MSCI to put the A shares into the index because we will not be doing a good service to our clients” Henry Fernandez, MSCI Chairman and Chief Executive “China has made a lot of progress,” Fernandez said, citing the extension of a link between Shanghai and Hong Kong’s international market to a US$3 trillion market in Shenzhen. That makes it easier for international investors to access the Chinese stocks. Consultations with Chinese authorities will likely start gearing up after China celebrates its New Year later in January, Fernandez said. China Securities Regulatory Commission, the country’s markets regulator, and the State Administration of Foreign Exchange, which controls China’s capital account, could not be immediately reached for comment early in the Asia day. Reuters

WEF official

Summer Davos in Dalian to focus on environment He said China plays an increasingly vital role as a world leader in a green and sustainable development model Shen Zhonghao

The 2017 Summer Davos, to be held in the northeast Chinese city of Dalian in the coming summer, will mainly focus on environment and technology issues, a senior official with the World Economic Forum (WEF) said. Dominic Waughray, head of the Public-Private Partnership and a member of the Executive Committee of the World Economic Forum (WEF), made the remarks in a recent written interview with Xinhua.

“A common approach to protecting our global commons is required” Dominic Waughray, head of the Public-Private Partnership and a member of the Executive Committee of the World Economic Forum

According to him, the Summer Davos, also known as the Annual Meeting of the New Champions, will discuss, among others, circular and sharing economy, oceans, green investment and new technology innovations for environmental management. This was viewed as an effort of

addressing pressing global environmental risks, as the WEF stressed in its latest annual Global Risks Report. According to the report, climate change stands to be one of the top underlying trends in 2017, and environmental risks rank for the first time among the most likely and most impactful risks in the world. Actually, issues regarding climate change, environmental protection and sustainable growth were extensively discussed amid the WEF annual meeting in Davos last week. “A common approach to protecting our global commons is required,” Waughray emphasized, in view of the environmental deterioration and declining biodiversity. Global cooperation between public and private

sectors can create new alliances to reverse these trends, and demonstrate especially to young people how collaboration, rather than isolation, can bring benefit to all, he added. Investment in green energy, green transport and other green infrastructure and circular economy is actually the key to boosting economic growth, Waughray said. China plays an increasingly vital role as a world leader in a green and sustainable development model, both in the public and private sectors, said the WEF senior official. The world’s largest issuer of green bonds during 2016 was the Shanghai Pudong Development Bank, with China’s priorities placed on ecological and digital economy, he added. In terms of the current environmental challenges China is facing, such as smog, Waughray pointed out, it is a worldwide problem plaguing cities, while China is attaching great importance to improving its urban air quality. Xinhua

Forex

Regulator eases repatriation worries Repatriation of normal profits by foreign invested firms will not be restricted, the head of China’s foreign exchange regulator said yesterday. The comments follow several similar government statements meant to reassure foreign companies that stronger controls on capital leaving the country will not impact operations of foreign firms in China. Pan Gongsheng, the head of the State Administration of Foreign Exchange, also said China supports legitimate overseas direct investment by Chinese firms. Agriculture

Government vows to boost farmland protection China has vowed to step up its protection of farmland in the wake of the country’s first drop in grain output in over a decade, as rapid urbanisation swallows agricultural resources. In a document released late on Monday, the Communist Party of China Central Committee and the State Council said there was strong pressure on arable land and called for stronger protection and more efficient use of such land. “Farmland should be protected the way we protect pandas,” the government said in the document. Market regulation

Authorities to strengthen market protection China plans to strengthen market regulation by 2020 to fight fake goods, food and drug safety issues and lack of consumer protections, among other things, said the country’s cabinet in an announcement posted on its official website on Monday. China’s State Council set out principles underpinning market improvement goals in a five-year plan, which included strengthening consumer rights, improving market efficiency and removing barriers to encourage entrepreneurship. China will ensure comprehensive and transparent market access rules and improve the commercial registration system to ease market access, according to the plan. Tourism

Beijing welcomes more visitors in 2016 Beijing saw 285 million tourist arrivals across all transportation in 2016, up 4.6 per cent year on year, according to the Beijing Municipal Commission of Tourism Development yesterday. Total tourism revenue grew 9 per cent to RMB502 billion (US$73 billion) last year. In the meantime, Beijing’s inbound overseas visitors fell last year. Data from the municipal statistics bureau showed about 4.2 million overseas tourists visited Beijing in 2016, a year-onyear decline of 0.8 per cent. Song said Beijing would work on a more flexible visa service and further simplify tax-refund procedures to lure more visitors.

10 Business Daily Wednesday, January 25 2017

Greater China Mining

Safety agency says ‘illegal’ output led to fatalities The agency said the company has also been digging new tunnels that it knows are not seismically stable

hina’s State Administration of Work Safety said yesterday that “illegal” ramped-up output and poor maintenance at a state-owned coal mine in Shanxi province led to an accident that killed 10 workers last week. The Danshuigou coal mine, near Shuozhou city and owned by China’s second-largest producer China National Coal Group, has

a q u o ta f r o m th e p r o v i n c i a l government to produce 900,000 tonnes of coal a year - or 75,000 tonnes per month. But the mine has been producing up to five times that amount, at 400,000 tonnes in November and 260,000 tonnes in December, the work safety regulator said. The over-quota output and poor maintenance at the mine contributed to a tunnel collapse on Jan. 17 last

week that killed 10 workers, it also said. “The lack of maintenance for coal workers’ safety, the use of fake safety measurement data and ramped-out production rates all led to an accident with this coal mine that been granted a whole set of mining licenses,” the work safety watchdog said. The company has also been digging new tunnels that it knows are not seismically stable, the agency said. ChinaCoal’s spokesman Jiang Chun said in a phone call that the company has learned a lesson from the mine accident.

“ChinaCoal Group is seriously dealing with the case of illegal mining, and has started a company-wide investigation of over 50 mines on illegal output,” he said. ChinaCoal said the Danshuigou coal mine has already been closed until the company can address all the issues at the site. Any coal mine that produces 10 per cent more than its government quota will be shut down for an indefinite period, the safety agency said. The statement from the safety agency is the first official acknowledgement that state-owned coal mines are involved in what it terms illegal mining since prices began to rally in mid-2016. Price of thermal coal at the key n orth ern port of Qin gh uadao have soared 54 per cent in the past 12 months to around US$86 per tonne. Reuters

M&A

New Australian body fuels concerns DUET deal could be blocked Last August, Australia blocked CKI and State Grid Corp of China from buying Ausgrid Jamie Freed

Australia’s new infrastructure oversight body is fuelling concerns Hong Kong’s Cheung Kong Infrastructure Holdings’ (CKI) US$5.5 billion bid for DUET Group will be blocked or modified, pushing shares in the energy firm lower. Australia on Monday announced the formation of the Critical Infrastructure Centre, which will check whether foreign-led bids for key assets, including power grids and ports, pose any national security risks. Three investment bankers with experience in the infrastructure sector told Reuters they believed the new body increased the prospect the DUET deal was unlikely to be given the green light from the Australian government in its current form. The bankers, who are not directly involved with the deal and declined to be identified because they were not authorised to speak with media, said at a minimum, local ownership requirements were likely to be imposed on some of the assets.

CKI was not immediately available for comment, while a DUET spokesman declined to comment. The new government body has yet to comment on the deal. DUET’s shares were now down nearly 6 per cent over the past week,

as the market prices in the increased risk that the deal could be rejected or modified. “People do feel a bit nationalistic about this type of thing,” Morningstar analyst Adrian Atkins said of the assets. Last August, Australia blocked CKI and State Grid Corp of China from buying Ausgrid, the biggest power grid in the nation’s most populous

state, on national security grounds - leading to a rebuke from China which called the move protectionist. After that decision, the government said no single foreign investor would be allowed to own more than 50 per cent of the stake available in a smaller power grid, Endeavour Energy and a local investor must hold at least 20 per cent.

Key Points DUET shares trading at 8.3 per cent discount to bid price New Australian body heightens risk of rejection - bankers Local ownership requirements could be imposed - bankers DUET’s power grid United Energy in the state of Victoria is a similar asset to Endeavour. DUET also owns the Dampier-to-Bunbury gas pipeline in Western Australia, which transports fuel for half of the power generation in the country’s biggest export state, as well as a gas distributor, Multinet, in Victoria. Reuters

Business Daily Wednesday, January 25 2017 11

Asia

US President Donald J. Trump shows the Executive Order withdrawing the US from the Trans-Pacific Partnership (TPP) after signing it in the Oval Office of the White House in Washington. Lusa Trade deal

Asian TPP nations seek to salvage trade accord after U.S. exit Australia held open the possibility of China, the world’s top exporter, joining a revised deal Charlotte Greenfield and Stanley White

ustralia a n d N e w Zealand said yesterday they hope to salvage the Trans-Pacific Partnership (TPP) by encouraging China and other Asian nations to join the trade pact after U.S. President Donald Trump kept his promise to pull out of the accord. The TPP, which the United States had signed but not ratified, was a pillar of former U.S. President Barack Obama’s pivot to Asia. Japanese Prime Minister Shinzo Abe has touted it as an engine of economic reform, as well as a counter-weight to a rising China, which is not a TPP member. Fulfilling a campaign pledge, Trump signed an executive order in the Oval Office on Monday pulling the United States out of the 2015 TPP agreement and distancing the United States from its Asian allies. Australian Prime Minister Malcolm Turnbull said he had held discussions with Abe, New Zealand Prime Minister Bill English and Singaporean Prime Minister Lee Hsien Loong overnight about the possibility of proceeding with the TPP without the United States. “Losing the United States from the

TPP is a big loss, there is no question about that,” Turnbull told reporters in Canberra yesterday. “But we are not about to walk away ... certainly there is potential for China to join the TPP.” Obama framed TPP without China in an effort to write Asia’s trade rules before Beijing could, establishing U.S. economic leadership in the region as part of his “pivot to Asia”. China has proposed a counter pact, the Free Trade Area of the Asia Pacific (FTAAP) and has championed the Southeast Asian-backed Regional Comprehensive Economic Partnership (RCEP).

position of the new U.S. Administration on (TPP), we will continue to engage with our American colleagues to strengthen our bilateral trade and economic relations, given the U.S.’s importance as our third largest trading partner and a major source of investment,” Mustapa Mohamed said in a statement.

Key Points Australian PM says not about to walk away from trade pact Japan defends need for free trade after U.S. withdraws Remaining TPP members plan meetings in coming months - NZ Scope for Indonesia, China to join reformulated deal - Australia

Meetings planned

New Zealand’s English said the United States was ceding influence to China and the region’s focus could switch to alternative trade deals. “We’ve got this RCEP agreement with Southeast Asia, which up until now has been on a bit of a slow burn but we might find the political will for that to pick up if TPP isn’t going to proceed,” English said. Malaysia’s trade minister said negotiators from the remaining TPP countries would be in “constant communication” to decide the best way forward. “Notwithstanding the current

The TTP, which has been five years in the making, requires ratification by at least six countries accounting for 85 per cent of the combined gross domestic product of the member nations. Australia held open the possibility of China, the world’s top exporter, joining a revised deal. “The original architecture was to enable other countries to join,” Australian Trade Minister Steven Ciobo told the Australian Broadcasting Corporation yesterday. “Certainly I know that Indonesia

has expressed interest and there would be scope for China if we are able to reformulate it.” Japan has led the push for the partnership, which also includes Brunei, Canada, Chile, Malaysia, Mexico, Peru and Vietnam. “There is no change to our view that free trade is the source of economic growth,” Japanese E c o n o m y M i n i st e r N o b u t e r u Ishihara told reporters. When asked whether Japan would be open to negotiating a bilateral trade pact with the United States, Ishihara said it was still uncertain whether U.S. trade officials would start negotiating for such deals. Trump took office as the 45th president of the United States on Friday and pledged to end what he called an “American carnage” of rusted factories and crime. He vowed to bring jobs back by renegotiating what he called bad multilateral trade deals in favour of bilateral deals. New Zealand Trade Minister Todd McClay said he had talked with a number of TPP-member ministers at the World Economic Forum in Davos last week and he expected they would meet over the coming months. “The agreement still has value as a FTA (Free Trade Agreement) with the other countries involved,” McClay said in an emailed statement to Reuters. Reuters

12 Business Daily Wednesday, January 25 2017

Asia In Brief Budget

Philippines sees big boost in tax revenue The Philippines’ main tax agency said on Tuesday it aimed to collect a record high 1.829 trillion pesos (US$37 billion) this year, as higher infrastructure spending was expected deliver strong economic growth. The revenue target represents a big jump from last year, with collections as of November totalling 1.45 trillion pesos. The government has a 3.35 trillion peso budget this year, 11.6 per cent higher than last year’s spending plan, allowing it to spend more on roads, bridges and airports and meet a 6.5 to 7.5 per cent economic growth target. Central bank governor

Thailand to keep monetary policy ‘accommodative’ Thailand needs to keep its monetary policy accommodative given that economic recovery remains fragile and in the face of external volatility, the central bank governor said yesterday. In an interview with Reuters, Veerathai Santiprabhob said the central bank was keeping in place its forecast of 3.2 per cent economic growth for 2017, with no growth seen in exports. “Monetary policy will continue to be very accommodative at the current stage even though the recovery is gaining momentum in Thailand,” he said. He would give no timeframe for any shift to interest rates or the direction that any move might take.

World Gold Council

India demonetisation to favour country’s big jewellery store chains More than 70 per cent of the country’s gold sales have been in cash up to now Rajendra Jadhav

ndia’s drive to bring transparency to bullion trading, along with the rise of branded gold jewellery, could help major retailers raise their share of the world’s second-biggest gold market to 40 per cent by 2020, the World Gold Council (WGC) said. Somasundaram PR, managing director of the WGC’s Indian operations, said on Tuesday Prime Minister Narendra Modi’s move to scrap 500 and 1,000 rupee banknotes - a ‘demonetisation’ crackdown on corruption and tax evasion - will boost larger jewellery retailers’ market share from 30 per cent in 2015. “The issue the industry is facing today is lack of transparency,” said Somasundaram, speaking in an interview as the WGC published a

report on the Indian gold trade. “This is addressed by demonetisation... Consumers will be forced to pay by cheque or digital payments for large transactions.” Known as ‘organised retailers’, firms like Titan Co Ltd , P C Jeweller Ltd and Gitanjali Gems Ltd have seen their share of a traditionally fragmented market rocket from just 5 per cent in 2000 as young consumers switched to branded jewellery. Many of India’s 400,000 jewellers have traditionally sold gold in cash transactions, with small retailers often skipping written documentation in an attempt to avoid paying taxes while people with wealth not recorded in accounting books preferred to buy without invoices or receipts. More than 70 per cent of the country’s gold sales have been in cash up to now. Those transactions, along

Household mood

S.Korea consumer sentiment slips Consumer sentiment in South Korea fell in January for a third straight month to reach its lowest level in nearly eight years, as households felt pessimistic over their financial position, a central bank survey found yesterday. The Bank of Korea said its composite consumer sentiment index fell to 93.3 in January from a revised 94.1 in December. The initial December number was 94.2. January’s reading was the worst since the index was 75.8 in March 2009. A reading below 100 from the national survey indicates that consumers who expect economic conditions to deteriorate in the coming month outnumber those anticipating improvement. Index

Japan manufacturing PMI shows faster expansion Japanese manufacturing activity expanded in January at the fastest pace in almost three years as export orders surged, suggesting that overseas demand is not as weak as some economists and business leaders had feared. The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 52.8 in January from a final 52.4 in the previous month. The index remained above the 50 threshold that separates expansion from contraction for the third consecutive month and showed that activity expanded at the fastest since March 2014.

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with a 10 per cent import duty on gold imposed in recent years, have boosted smuggling, Somasundaram said. Prime Minister’s Modi’s drastic move - withdrawing bills equivalent to 86 per cent of the value of cash in circulation - will help curb smuggling, the WGC said in its report. Smugglers offered a discount as high as US$100 an ounce in 2016, disrupting the gold supply business.

Key Points Scrapping big bills aids transparency - World Gold Council Big chains could claim 40 pct of market vs 30 pct in 2015 Changes will also curb smuggling - WGC India chief “The grey market will disappear due to cashless transactions,” Somasundaram said. “It will help both consumers and industry in long run.” In its report, the WGC noted that the government’s move to charge lower duty on imports of dore - a semi-pure alloy made by miners than on refined bullion had boosted refining capacity in India to 1,450 tonnes per annum. However, much of that refining capacity remains unutilised due to limits on sourcing dore, the WGC said, pointing to the prospect of deals within the industry. “There could be a period of consolidation. Bigger refiners will strengthen themselves by acquiring smaller players,” Somasundaram said. Reuters

Trade

Thai exports end three years of contraction Imports in December increased 10.3 per cent from a year earlier Thailand’s customs-cleared exports rose in December, which ended a three-year streak in which shipments declined, an encouraging sign for the trade-reliant economy which has struggled to grow in the face of tepid demand abroad and at home.

Key Points Dec exports +6.2 pct y/y Dec Imports +10.3 pct y/y

Higher oil prices, which lifted the prices of other commodities, helped boost December exports. The median forecast of nine economists was for December exports to expand 8.20 pct from a year earlier. The December gain meant that total 2016 Thai shipments increased 0.45 per cent, ending three straight years of export contraction. Thai exports this year are expected to rise 2.5 to 3.5 per cent due to improved oil and commodity prices, Pimchanok Vonkhorporn, the ministry’s head of trade policy and strategy office, told reporters. Last month, the ministry predicted 2017 exports would grow 2.5-3.0 per cent.

Imports in December increased 10.3 per cent from a year earlier. Economists had expected a rise of 5.55 per cent after November’s 3.0 per cent increase. That produced a trade surplus of US$0.94 billion in December, compared with November’s US$1.54 billion. For all of 2016, the trade surplus was a record high US$20.7 billion. Many materials that Thailand imports are assembled into completed goods and shipped out again. Thai exports, worth about twothirds of the country’s GDP, have been long weak due to sluggish global demand and structural problems at home. Reuters

Jan-Dec exports +0.45 pct y/y, imports -3.9 pct y/y Dec trade surplus +0.94 bln, 2016 had a record US$20.7 bln Exports seen rising 2.5-3.5 pct in 2017 - ministry

Exports rose 6.2 per cent in December from a year earlier, a second straight month of annual gains after a 10.2 per cent jump in November, commerce ministry data showed yesterday. 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 Wednesday, January 25 2017 13

Asia Monetary policy

Bank of Japan said to be wary of yield target hike Governor said in Davos he expects GDP growth around 1.5 per cent for the fiscal year starting in April Toru Fujioka and Masahiro Hidaka

Bank of Japan (BOJ) officials would rather be late than early in raising their 10-year bond yield target from zero per cent, even if consumer price gains reach 1 per cent later this year, according to people familiar with the central bank’s discussions. Officials see considerable risks in moving too quickly and are mindful of policy exits in 2000 and 2006, said the people, who asked not to be named because the talks are private. These exits were criticized for coming too soon and prolonging deflation. BOJ officials would want to first confirm that the underlying inflation trend is improving and view it as important to look beyond the impact of higher oil prices and a weaker yen, which have the potential to change quickly. With the currency and rising energy costs showing signs of spurring inflation in Japan, economists at BNP Paribas SA and Barclays Plc are among those tipping that the BOJ will pin its 10-yield target higher later this year. JPMorgan Chase & Co. also sees the chance of a move. The 10-year target, the BOJ’s longterm policy rate, is the current focus of attention. Changes to this could also affect the central bank’s shortterm policy rate, which is now minus

0.1 per cent and anchors the interest-rate curve it’s seeking to manage. Governor Haruhiko Kuroda and his board gather for a two-day meeting Jan. 30-31, when they will consider any changes to policy and also provide updated forecasts for inflation and gross domestic product growth. Some BOJ officials think the central bank could raise its outlook for economic growth after revisions to the way the government calculates GDP data. The inflation outlook may be kept unchanged or increased slightly, said the people with knowledge of the discussions. Kuroda said in Davos, Switzerland, last week that he expects GDP growth around 1.5 per cent for the fiscal year starting in April, higher than 1.3 per cent the BOJ forecast three months ago. The BOJ in its November outlook projected inflation of 1.5 per cent for

the same period. Core consumer prices, the BOJ’s benchmark gauge, fell 0.4 per cent in November. Figures for December will be released on Jan. 27

‘Core consumer prices, the BOJ’s benchmark gauge, fell 0.4 per cent in November’ Ryutaro Kono, chief economist at BNP Paribas, wrote in a Jan. 13 report that the BOJ will probably raise the long-term policy rate in October because of an increasing

divergence with U.S. yields, which could weaken the yen too much and hurt households. BOJ officials are fairly confident they can keep the yields on 10-year Japanese government bonds around zero per cent, even if CPI moves to around 1 per cent. The more bonds the BOJ holds, the easier it gets for the central bank to influence the price, the people said. In 2000, the BOJ ended its zero interest rate policy even as the government publicly tried to stop it. Several months later, the central bank had to change course by introducing a quantitative easing program. The BOJ moved to exit this program in 2006, even as inflation was around zero per cent, reinforcing a view that it wasn’t willing to do enough to fight deflation and opening the door for years of political criticism. Bloomberg News

Goldman Sachs files US$1 bln countersuit against Indonesian businessman The bank has said the legal dispute may affect foreign investor sentiment towards Southeast Asia’s biggest economy Eveline Danubrata

Goldman Sachs filed a US$1 billion counter lawsuit yesterday against an Indonesian businessman who is seeking damages from the U.S. bank for conducting what he called “unlawful” trades in the shares of a property firm. Benny Tjokrosaputro, president director of Indonesian property developer PT Hanson International Tbk, filed a lawsuit in a Jakarta court in September against Goldman’s unit, Goldman Sachs International. Tjokrosaputro, who says that he owned the 425 million Hanson shares that Goldman traded, is seeking 15 trillion rupiah (US$1.1 billion) in

compensation from Goldman Sachs International and wants its assets frozen in Indonesia and overseas. Citibank, a custodian bank for Goldman Sachs International, was named as a co-defendant in his lawsuit. Goldman had said in response that Goldman Sachs International had bought the Hanson shares from New York hedge fund Platinum Partners in a series of “valid” transactions on the Indonesia Stock Exchange (IDX) between February 2015 and March 2016. Top executives of Platinum Partners were arrested in December and charged with running a US$1 billion fraud. Platinum has declined to

comment on the legal dispute between Tjokrosaputro and Goldman. Goldman filed the counterclaim against Tjokrosaputro for “the reputational damage and negative business impact” that Tjokrosaputro’s actions had caused, it said in a statement yesterday. It said Tjokrosaputro’s actions had caused it “at least 15 trillion rupiah in immaterial damages”.

Key Points Tjokrosaputro sued Goldman’s unit in Sept Goldman filed counterclaim against Tjokrosaputro Goldman says Tjokrosaputro has damaged its reputation In June last year, Tjokrosaputro had lodged a complaint to the Jakarta police alleging that the Hanson shares

had been “fraudulently embezzled” from him, according to Goldman’s counterclaim documents. Tjokrosaputro had also put out newspaper advertisements that damaged Goldman’s reputation, according to the documents. “Potential clients that could have wanted to do a transaction or conduct a business relationship with our client might have held themselves back as a result,” Harjon Sinaga, a lawyer representing Goldman, told reporters after he filed the counterclaim in a Jakarta court. Tjokrosaputro declined to comment when contacted by phone. His lawyer, Nadia Saphira Ganie, also declined to comment, saying the team needed to study the counterclaim by Goldman.

“Investor confidence”

Goldman has said the legal dispute may affect foreign investor sentiment towards Southeast Asia’s biggest economy. The bank’s comments came after Indonesia’s government recently raised investor concerns by cutting business ties with JPMorgan Chase & Co over a negative research report and partially reversing a mining policy. “If the challenge made against Goldman Sachs’ trades by Mr. Tjokrosaputro in the South Jakarta District Court is upheld, investor confidence in all trades by all investors crossing the IDX could be eroded,” Goldman said in the statement. Tito Sulistio, the president director of the IDX, told Reuters that “at the moment, it’s a matter for the shareholders to resolve”. The IDX will only do a review when there is an official complaint to the bourse or if the development affects share prices in the market, Sulistio added. Reuters

14 Business Daily Wednesday, January 25 2017

International In Brief Energy

Gazprom calls for investment decisions Long-term gas demand in Europe means immediate investment decisions are needed to build new infrastructure, Alexander Medvedev, a deputy chief executive officer at Russian gas giant Gazprom, said yesterday. Last year, Russia supplied Europe and Turkey with a record 179.3 billion cubic metres (bcm) of gas as consumers capitalised on low gas prices, which follow the prices of oil with a lag of six to nine months. Its share of the EU gas market rose to an all-time high of 34 per cent from 31 per cent in 2015. Juncker

EU states should guarantee minimum income The European Commission wants all EU member states to introduce minimum wages and incomes for their workers and unemployed, the head of the EU executive president said on Monday, in an effort to combat growing social inequality and poverty. The Commission, which has limited powers in the area of social policy, is preparing an overhaul of the EU’s functions and targets and wants it to include tackling social and economic injustices that have often been successfully exploited by right-wing Eurosceptic parties across the 28-nation bloc.

Royal prerogative

UK Supreme Court says Brexit must get parliament approval However, the main opposition Labour Party has said it would not slow her timetable

he UK Supreme Court ruled yesterday that Prime Minister Theresa May must get parliament’s approval before she begins Britain’s formal exit from the European Union. The UK’s highest judicial body d i s m i ss e d th e g o v e r n m e n t’ s argument that May could simply use executive powers known as “royal prerogative” to invoke Article 50 of the EU’s Lisbon Treaty and begin two years of divorce talks. However, the court rejected arguments that the UK’s devolved assemblies in Northern Ireland, Scotland and Wales should give their

assent before Article 50 is invoked. “The referendum is of great political significance, but the Act of Parliament which established it did not say what should happen as a result,” said David Neuberger, President of the Supreme Court which ruled by 8-3 against the government. “So any change in the law to give effect to the referendum must be made in the only way permitted by the UK constitution, namely by an Act of Parliament.” May has repeatedly said she would trigger Article 50 before the end of March but she will now have to seek the consent of lawmakers first,

potentially meaning her plans could be amended or delayed, although the main opposition Labour Party has said it would not slow her timetable. Last week May set out her stall for negotiations, promising a clean break with the world’s largest trading block as part of a 12-point plan to focus on global free trade deals, setting out a course for a so-called “hard Brexit”. Sterling initially rose on the news that the government had lost its appeal, but it then fell over half a cent to hit day’s lows against the dollar and euro after the court ruled that Britain’s devolved assemblies did not need to give their assent to triggering Article 50. Sterling last traded down 0.6 per cent on the day at US$1.2463. Reuters

Portugal

Left bloc calls for nationalisation of Novo Banco The coordinator of leftwing Portuguese political party the Left Bloc (Bloco de Esquerda - BE), Catarina Martins, has called for the nationalisation of the Novo Banco bank, but has not demanded it to be permanent and does not consider it is a reason for the government to fall. In an interview published on Monday in the Público newspaper, Martins said her party wanted Novo Banco to be nationalised, but does not demand that the nationalisation be permanent. According to the coordinator of BE, it is not prudent for a country to have 70 per cent of its financial system in foreign hands and. Air traffic

Dubai airport still world’s busiest Dubai International Airport remained the world’s busiest for international passengers in 2016, as existing markets grew and new routes were launched, the airport’s operator said. Annual traffic rose 7.2 per cent to 83.6 million passengers in 2016 from a year ago, the operator said in a statement yesterday. It was Dubai airport’s second slowest annual growth rate in at least eight years, according to Reuters calculations. The airport is forecasting 89 million passengers this year, which would represent growth of about 6.5 per cent, Dubai Airports Chief Executive Paul Griffiths said.

Britain’s Prime Minister Theresa May. Lusa

PMI

Euro area starts 2017 on strong note Selling prices recorded the largest two-month increase in more than five years Jana Randow

The euro-area economy expanded at a robust pace at the start of the year as inflation pressures increased, according to IHS Markit. A Purchasing Managers’ Index signalled quarterly growth of 0.4 per cent, with broad-based expansion in both manufacturing and services, the London-based company said in a statement yesterday. Although the gauge slipped to 54.3 in January from 54.4 in December, economic momentum remained robust, it said. Economists surveyed by Bloomberg predicted a reading of 54.5. “Perhaps the most encouraging development is the upturn in hiring, with January seeing the largest monthly rise in employment for nine years amid improved optimism about the year ahead,” said Chris Williamson, chief business economist at IHS Markit. While selling-price growth remained subdued, “the recent strengthening of demand is at least starting to help restore some

pricing power among suppliers, hinting at an upturn in core inflationary pressures.” The near-absence of underlying price growth is a concern for the European Central Bank, which hasn’t met its inflation mandate in almost four years. Policy makers are relying on record-low interest rates and a 2.28 trillion-euro (US$2.5 trillion) asset-purchase plan to fuel inflation, especially as euro-sceptic parties gain ground ahead of elections in some of the region’s largest economies. The price gains companies reported in January often reflected more expensive commodities as well as higher import costs as a result of the euro’s depreciation, IHS Markit said. Selling prices recorded the largest two-month increase in more than five years. A measure for manufacturing rose to 55.1 in January from 54.9 in December, the highest level in almost six years, while a services PMI eased to 53.6 from 53.7. Hiring gained momentum in both industries amid

sustained growth of new orders. An index of business expectations for the next 12 months rose to the highest level since data were first collected in 2012.

“Political risk continues to be widely eschewed, with companies focusing instead on expanding their sales in the coming year” Chris Williamson, chief business economist at IHS Markit

“The euro-zone economy has started 2017 on a strong note,” Williamson said. “Political risk continues to be widely eschewed, with companies focusing instead on expanding their sales in the coming year.” Bloomberg News

Business Daily Wednesday, January 25 2017 15

Opinion Business Wires

Bangkok Post The baht is expected to weaken to 36.5 against the greenback in the first half of this year before reversing the trend to become firmer at 35.5 at the end of the year as US President Donald Trump might not be able to deliver as strong economic growth as expected, says TMB Bank (TMB). “As the market’s expectations for Mr Trump’s policies are rather high, coupled with the fact that the Fed has signalled multiple increases in the policy rate this year, we expect the US dollar to keep appreciating in the first half of this year,” said Saranya Phuphatana, executive vice-president and head of capital markets at TMB.

Anti-trade policies would make the poor poorer Viet Nam News All credit institutions will be subject to restructuring in the next few years, according to Nguyễn Văn Hưng, deputy chief inspector of the State Bank of Việt Nam (SBV). Hưng said the restructuring would take place under a project on restructuring credit institutions in association with the settlement of nonperforming loans (NPLs) in the 2016-20 period, which the SBV is finalising under the direction of the Government to report to the Politburo for approval. The SBV will formulate detailed plans and focus all its resources on implementing the project thoroughly this year, according to Hưng.

Straits Times Singapore is the 7th most expensive location in Asia for high-end rental homes this year, falling from 4th position last year. The latest accommodation survey published by human resources firm ECA International compared rental accommodation - commonly leased by expatriates - in more than 230 locations worldwide. Hong Kong kept its top spot for being the most expensive in the region. Tokyo, which saw the largest rent increases in Asia over the past 12 months, came in second, followed by Seoul, Yokohama, Shanghai and Beijing.

New Zealand Herald Controversial American billionaire, Trump donor and venture capitalist Peter Thiel has taken New Zealand citizenship and quietly acquired a Wanaka lakefront estate. Property records show that Thiels’ New Zealand-registered company Second Star bought a 193ha Glendhu Bay farm in 2015 described as a vacant lifestyle block. Thiel, who lists San Francisco as his residence in Companies Office records, is Second Star’s sole shareholder. Forbes magazine assessed his net worth recently at US$2.7 billion. The sprawling property adds to his local real estate portfolio, following the earlier purchase of a Queenstown mansion.

ithout question, the most exciting economic story of the past half century has been the dramatic, and probably unprecedented, decline in global poverty. In a recent study, the World Bank estimated that in 2015, just over 700 million people remained trapped in desperate poverty, or 9.6 per cent of the world’s population. Those sound like big numbers until you compare them to 1990, when nearly two billion people languished in poverty -- a staggering 37 per cent of the global populace. Such progress has raised the real possibility that extreme poverty can be eradicated in the not-too-distant future. That prospect could now be in jeopardy. After the Brexit vote and election of Donald Trump, a more virulent economic nationalism has begun to spread through several Western capitals; as one of his first acts, Trump formally withdrew U.S. support for the Trans-Pacific Partnership trade pact. If taken to its logical extreme, this vision could give rise to policies that set back the world’s war on poverty, with potentially dire consequences for rich and poor alike. Any serious rollback of global trade would threaten precisely the same economic forces that have created great gains in wealth in the emerging world. Economic history since World War II has proven that the best way for countries to move from poverty to prosperity is to join the global trading system. Poor countries simply don’t possess the capital and spending power to develop industry and boost welfare on their own. Only by tapping into demand in the U.S. and other wealthy nations can these countries foster the jobs and growth necessary to increase incomes. That’s why exports lifted China, South Korea and other fast-growing Asian Tigers out of poverty. Now more countries, from India to Ethiopia, are striving to replicate their success by linking themselves more tightly to flows of international trade and investment. Their hopes depend on the survival of free trade. Ultimately, the U.S. and other advanced economies deserve much of the credit for the recent gains in global welfare. By opening their markets to imports from poor nations, the world’s richest nations created jobs in the world’s poorest -- jobs that saved millions from lives of misery. Wider trade liberalization would further aid efforts to rescue the millions who remain impoverished. A 2015 study by the World Trade Organization and the World Bank concluded that “a sustained effort to deepen economic integration and further lower trade costs is essential for ending poverty.” Ironically, however, the very success we’ve had eliminating poverty has put further progress at risk. By drawing the world’s poorest countries into the global supply chain for smartphones, blue jeans and other goods, international trade stiffened competition between the low-wage workers of the developing world and the high-cost workers of the developed world for the same jobs. It is a contest that some in the U.S., Europe and Japan

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Michael Schuman Bloomberg View

have lost, as assembly lines shifted to cheaper emerging economies. The result is widespread anger in many rich countries towards free trade. All those jobs that lifted poor Chinese and Mexicans from poverty, their citizens believe, have been “stolen” from them by “unfair” trade. Trump successfully appealed to this anger during the campaign, railing against free trade, claiming pacts like TPP and the North American Free Trade Agreement are disasters for American workers and vowing to protect them from the evils of foreign competition. We don’t yet know what more he’ll try to do, or how high he may or may not raise protectionist barriers. The business community continues to press Trump to keep vital trade flowing. But he has already threatened to slap a 45 per cent tariff on Chinese imports, and warned companies like Carrier and Toyota he’d impose a hefty border tax on anything they manufacture in Mexican factories for sale in the U.S. Such steps could quickly degenerate into a global trade war. Officials in both China and Mexico have said they’d retaliate if Trump imposed barriers to their exports. Such policies would cut off the world’s poorest people from the jobs they need to escape poverty. And a trade war between major economies would also dampen overall global growth, dealing another blow to the needy. International Monetary Fund Managing Director Christine Lagarde warned last year that sluggish growth in the emerging world was already taking a toll on the poor. Incomes in the developing world are converging with those in advanced countries at less than two-thirds the pace the IMF had forecast a decade ago. Some readers are probably thinking: Too bad. In a dog-eat-dog world, the U.S. has to worry about its own, not some destitute families in Bangladesh or Nigeria. That thinking is shortsighted. Alleviating poverty is not just a moral imperative but an economic one. With societies across the developed world aging and many, from Japan to Italy, struggling to grow at all, U.S. companies and the Americans they employ will be able to sell more airplanes, cars and insurance policies only if more poor in the emerging world join the global middle class. And even if you could care less about other countries’ poor, what about your own? A study by the National Foundation for American Policy figured that the types of tariffs Trump has threatened to impose on goods from China and Mexico would cost the poorest 10 per cent of U.S. households as much as 18 per cent of their after-tax income, or some US$4,670 over five years. That’s an extra burden none of us can afford. Bloomberg View

Any serious rollback of global trade would threaten precisely the same economic forces that have created great gains in wealth in the emerging world

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16 Business Daily Wednesday, January 25 2017

Closing M&A

State Grid gains controlling stake in Brazil’s CPFL

transmission, distribution, new energy power generation and electricity sales, and bring State Grid’s new energy power generation The State Grid Corporation of China, the technology and management experience to world’s largest utility company, announced Brazil, State Grid said in a statement on its yesterday that it has concluded a deal for website. a 54.64-per cent stake in Brazil’s largest State Grid is present in the Brazilian market, power distributor CPFL Energia SA. The value of the deal will total approximately where it operates 10,000 kilometres of power transmission lines. In April, its 14.19 billion reais (about US$4.49 billion), subsidiary State Grid Brazil Holding won according to a CPFL Energia statement. bids for two power transmission lines The deal will further boost the Chinese around the Paranatinga in Mato Grosso in giant’s presence in Brazil’s market, western Brazil. Xinhua expanding its businesses to power

Inflows

Beijing’s efforts to stem capital outflows starting to pay off A turnaround has been driven by a drop-off in outbound direct deals by Chinese companies and profit repatriation by overseas firms

hina’s campaign to stop cash flooding out of the country is showing some success. For the first time since the yuan’s devaluation in August 2015, Chinese banks last month registered net inflows under the capital account, according to cross-border payments figures released last Thursday by the currency regulator. The yuan, which plunged last year by the most in two decades, is now heading for its biggest monthly advance against the dollar since March.

“This could be a turning point for China’s capital flows”

the greenback, which has lost more than 1 per cent to the yuan this year. “This could be a turning point for China’s capital flows,” said Tommy Xie, an economist at OCBC in Singapore. “This year, the government will keep its capital controls tight, while long-term foreign investors will buy more onshore assets due to higher returns.” China is stepping up measures to stabilize the yuan and stem outflows after the currency plunged by the most in more than two decades last year. Regulators have tightened capital controls and mopped up offshore supply of the yuan to deter bearish

bets on the currency. China was reported in November to be planning to bar most foreign investments of US$10 billion or more, and authorities have also asked banks to report capital account transactions involving foreign currency of above US$5 million, people familiar with the request have said, asking not to be identified because the information is private.

Outflows halved

The return of inflows in December came amid a 48 per cent jump in foreign investment in Chinese securities to an 18-month high of US$11.7 billion, according to the State Administration of Foreign Exchange. The turnaround was also driven by a drop-off in outbound direct deals by Chinese companies and profit repatriation by overseas firms. Outflows via these channels were US$21.6

billion last month, half what they were in November, SAFE said. The greenback has given up some ground since U.S. Treasury Secretary nominee Steven Mnuchin told lawmakers an “excessively strong dollar” could have a negative shortterm effect on the economy. Trump said in a Wall Street Journal interview last week that the dollar was already “too strong” in part because China holds down its currency. Regulators would likely be pleased with the revival in inflows, said Harrison Hu, chief greater China economist at Royal Bank of Scotland Group Plc. in Singapore. “China’s capital flows will likely improve even further this month,” Hu said. “The market should be prepared for upside surprises in cross-border flows and the yuan this year.” Bloomberg News

Tommy Xie, an economist at OCBC in Singapore While the US$13.5 billion influx recorded for December is dwarfed by the estimated US$1.2 trillion that’s left China since the 2015 devaluation, the situation may be at a turning point, according to Oversea-Chinese Banking Corp. Efforts to stem the outflow tide -- from tighter restrictions on companies’ outbound investments to extra hurdles to transferring money overseas -- appear to be working. President Donald Trump has also voiced concern over the strength of

Drugs ring

Insurance sector

Historical negationism

National authorities jails two over vaccine scandal

Mainland regulator lowers China urges boycott of Japan insurers’ caps on stock investment hotel group in massacre row

A court in China yesterday jailed two people for selling vaccines without a license, state media said, after a scandal last year that sparked public anger. The case, involving possibly as much as US$90 million of illegal trades of vaccines through a black market drugs ring, underscored regulatory weaknesses in the world’s second largest pharmaceuticals market. The court in Jinan city sentenced Pang Hongwei to 15 years in prison for illegally purchasing vaccines, including rabies vaccines, which she stored in warehouses in Jinan and another city, before selling them around China, Xinhua news agency said. Pang improperly stored the vaccines she bought, and earned nearly RMB75 million (US$10.93 million) from selling them, Xinhua added. She was also given another six years for a previous accusation of illegally trading vaccines, and so will serve a total of 19 years, the news agency said. Pang’s daughter, Sun Qi, was sentenced to six years in prison for assisting her mother, Xinhua added. It was not possible to reach legal representatives of either of them for comment. Reuters

China’s insurance regulator is reimposing ceilings on funds insurers can put into the stock market, in the latest move to control risk and limit how much insurance assets are invested in listed companies. Insurers will be restricted to investing no more than 5 per cent of their total assets, as of the end of the previous quarter, in a single stock, the China Insurance Regulatory Commission (CIRC) said in a statement yesterday. Insurance firms also will be restricted to placing no more than 30 per cent of their total assets in equities, the statement said. The rules return China’s insurers to investment limits that were in place ahead of the stock market crash in 2015, when the regulator loosened rules to boost stock purchases. “Quitting the temporary market rescue policy will help insurance companies prevent stock investment concentration risks,” CIRC said in yesterday’s statement. Insurance firms will have two years or more to lower their investment allocation to the required level, the statement said. China’s insurers have invested RMB1.2 trillion (US$174.96 billion) in stocks, accounting for no more than 10 per cent of invested insurance assets, CIRC said in the statement. Reuters

China’s tourism authority called yesterday for a boycott of Tokyo-based hotel group APA in an escalating row over a book by the company’s CEO denying a Japanese wartime massacre took place. Copies of the book asserting that the 1937 massacre by Japanese soldiers in the Chinese city of Nanjing did not occur have been placed in hundreds of rooms operated by the APA hotel group, angering Beijing. APA has so far refused to remove copies of the book, written under a pen name by its CEO Toshio Motoya, despite Chinese criticism. “Seeing that Japan’s APA hotels is continuing with its erroneous ways, the China National Tourism Administration... demands that all businesses involved in overseas tourism and Internet travel-industry platforms stop all cooperation with these hotels,” said the tourism authority’s spokesman Zhang Lizhong. Zhang’s comments were made in a press conference in Beijing and posted on the agency’s website. China says 300,000 people died in Nanjing in a six-week orgy of killing, rape and destruction by the Japanese military, and accuses Tokyo of failing to fully atone for the episode. The revelation of the book’s existence caused outrage on China’s social media. AFP