Soak up the weekend with BBQs, Paris fashions . . . and Sake Lifestyle Pages 8 & 9
Friday, July 7 2017 Year VI Nr. 1334 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Forecast
Economic data expected next week to confirm sweet moment for Mainland Page 10
S. America link
Zhuhai to host first China-Latin America International Fair Page 2
Infrastructure
Undersea tunnel for superbridge ready Page 2
www.macaubusinessdaily.com Gaming
Monetary policy
Manila casino seeking to expand following attack Page 7
ECB meeting suggests hawks in the ascendancy Page 14
Government Regroups Pensions
Local authorities are adapting to an increasingly complex social environment. The MSAR Gov’t has referenced a greater number of contributors, capital and attributions. In order to cope with the changes, the Administration will strengthen personnel and structure of related agencies. Page 3
Runway ready
Experts think local aviation facilities provide enough infrastructure. To sustain a prominent role with peers in the region. The slow pace of expansion of local capacity, however, threatens the city’s erstwhile competitive advantage.
Falling into line
Financial system The Secretary for Economy has highlighted some of the financial tasks the gov’t is undertaking. During the opening of the 24th Egmont Group Meeting. The measures attempt to align the MSAR with international practices. Page 2
Potential purchaser (un)identified
The Landmark Macau Macau Legend is hopeful. That it has a possible buyer for The Landmark Macau property. In a filing with the Hong Kong Stock Exchange the firm said an anonymous party had entered into a non-legally binding letter of intent with Macau Legend. Page 6
Globalization trumps Trump Aviation Pages 4 & 5
HK Hang Seng Index July 6, 2017
25,465.22 -56.75 (-0.22%)
Hengan International Group
Worst Performers
+2.13%
AAC Technologies Holdings
+1.35%
China Unicom Hong Kong
-1.85%
China Mobile Ltd
-0.99%
Cheung Kong Property
+1.19%
BOC Hong Kong Holdings
-1.48%
CNOOC Ltd
-0.92%
+1.06%
PetroChina Co Ltd
-1.21%
Geely Automobile Holdings
-0.69%
Ping An Insurance Group Co
+1.02%
Sands China Ltd
-1.15%
China Construction Bank
-0.66%
China Overseas Land &
+0.86%
CITIC Ltd
Bank of China Ltd
-0.19%
Cathay Pacific Airways Ltd
+2.00%
Hang Lung Properties Ltd
+1.87%
Swire Pacific Ltd
Galaxy Entertainment Group
+1.77%
Want Want China Holdings
+1.72%
-1.03%
27° 30° 27° 29° 27° 30° 27° 30° 27° 30° Today
Source: Bloomberg
Best Performers
Sat
Sun
I SSN 2226-8294
Mon
TUE
Source: AccuWeather
Trade European Union and Japanese leaders endorse preliminary free-trade agreement. In countermeasure to Donald Trump’s protectionist stance. The Don is making his second trip to Europe as U.S. President. Page 16
2 Business Daily Friday, July 7 2017
Macau Money Laundering
Egmont Group Meeting kick-started in Macau
Source: GCS
S
ecretary for Economy and Finance Lionel Leong Vai Tac said during his opening speech delivered yesterday at the 24th Egmont Group Meeting that the Macao Financial Intelligence Office (GIF) has signed 20 co-operation agreements with fellow financial intelligence units (FIUs) since the GIF’s establishment, including those in Asia Pacific, Eurasia, Europe and North America regions. GIF joined the Egmont Group in 2009 to become one of its 150-plus members, according to the Secretary. “The effective sharing of information through the Egmont Secure Web platform has undoubtedly multiplied the knowledge of the GIF and law enforcement agencies of Macau in these years, in their analysis and investigation of suspicious money laundering and other predicate crimes,” said Secretary Leong. Macau was under audit by the Asia Pacific Group (APG) on AML/CFT last year, recently revising its laws for AML/CFT (Anti-Money Laundering and Countering Financing of
Secretary for Economy and Finance, Mr Leong Vai Tac, attends the opening ceremony of the 24th Egmont Group Plenary
Terrorism) which became effective in May. By the end of the year, the city will also implement a cross border cash declaration system, in line with international practices, while in 2016, the
Asset Freezing Regime was passed. The Secretary also indicated that the APG Mutual Evaluation Report of Macau will be adopted in the APG Annual Meeting. More than 350 delegates from over
110 member financial intelligence units gathered in Macau to attend the meeting at the Conrad Macao Hotel to discuss AML/CTF issues of common interest and share experiences in FIU matters.
Greater Bay Area
Zhuhai Fair tying into Latin America connection Zhuhai is holding the first China-Latin America International Fair this November, NewsGD.com reported yesterday. The event, which will take place in the Zhuhai International Convention & Exhibition Centre, will bring representatives from Latin American countries such as Brazil, Chile, Mexico, Ecuador, and Argentina, the
media outlet reported. Earlier this week, Hengqin Party Chief Niu Jing – who also serves as Director of the Hengqin New Area Administrative Committee – briefed guests, Latin American representatives, and entrepreneurs about the Fair’s goal to establish a basis for enterprises in China and Latin America to co-ordinate for “win-win
development.” The city of Zhuhai is also involved in the development of an economic co-operation and trade zone with Latin America, scheduled to begin operations in the second half of 2017, according to information published on the website of the Forum of China and Community of Latin American and Caribbean States, known as the
China-CELAC Forum. The co-operation zone is said to be aimed at becoming a specialised platform in the international trade of Chinese and Latin American products, a centre for promoting co-operation in electronic trade and the finance industry, as well as a cultural and tourist exchange hub between China and Latin America. S.Z.
an annual fee payable by the MYC of MOP52,815 fixed in 2000 but to be revised every five years. The original attributable value of the land, according to the Official Gazette, is MOP1.43 million.
The Lam Mau Marina, near which the clubhouse is to be built, can currently accommodate about 60 vessels, although most of the spaces are occupied, notes the president, with some reserved for overseas vessels. Most of the ships, however, are registered in one of the SARs, and while the MYC makes efforts to support the Zhongshan-Macau Free Yacht Scheme, it has yet to attract much interest from abroad. Expanding the berths, offering more docking space and getting more autonomy and expediency to deal with bureaucratic procedures could help the club, and the marina as a whole, notes the chairman. But so far the government has yet to accept a proposal to increase the number of berths, concerned it will block the “narrow” channel itself. Read more in this month’s edition of Macau Business, on shelves now.
HZMB
Superbridge undersea tunnel ready The completion of the undersea tunnel section of the Hong Kong-Zhuhai-Macau Bridge (HZMB) was marked by a cutting-through ceremony today, according to an announcement made by the HZMB Authority reported yesterday by the NewsGD.com. The immersed tunnel, extending to a length of some 6.7 kilometres, is said to be the largest single tube
dimension structure used in such underwater construction. It is connected to two artificial islands for the tunnel landings, and built 48 metres below the surface of the sea due to sgipping navigation requirements. According to recent reports, the HZMB Authority said the completion of the superbridge structure is slated for this year, 2017. S.Z.
Marina
Docking in the bay Nearly 17 years after having been granted a land parcel by the local government - including a two-year waiting period for a green-light from the Land, Public Works and Transport Bureau (DSSOPT) - Macau Yacht Club (MYC) has finally received the construction permit to build its clubhouse in the Inner Harbour in northern Macau. The 3,521 metre plot, tucked into a corner of the marina on Avenida Marginal do Lam Mau, received confirmation from the DSSOPT, noting the ‘work licence for the building […] has been issued and that it is valid until the end of this year’. Speaking of the development, MYC president Albert Chuck Chung Yin, serving his first year of a threeyear term, notes that “It’s done [the
permit], so we’re happy. Now we’re moving on with the construction and will try to get it done before the deadline.” The concession, initially granted in 2000, is valid for 25 years, with
Original writer: Sheyla Zandonai
Business Daily Friday, July 7 2017 3
Macau Social security
FSS expanding resources and scope The government has announced it is broadening the organisational structure and personnel of FSS to deal with an enhanced social security system Sheyla Zandonai sheyla.zandonai@macaubusiness.com
T
he Social Security Fund (FSS) is expanding its personnel and organisational structure in order to accommodate and better administer an increased number of contributors, capital and attributions, the Macau SAR Government announced in a press conference held yesterday at its headquarters. In 2016, the Fund managed approximately MOP85 billion, of which MOP70 billion were contributions to the first level social security scheme and some MOP14.9 billion to the second level central pension scheme, a representative of the Fund said during the announcement. The number of contributors also increased, reaching 350,000 people, MSAR Government spokesperson Leong Heng Teng said. In addition to creating another vice-president position, the new administrative regulation to be enacted on July 17 will create the Department of Central Pension Scheme and four new divisions within the Fund. The four divisions are General
Affairs and Accounts Management, under the new department to be created, plus Public Relations and Technical Support, as well as Investment Affairs division.
New personnel
In order to cope with expanded demand and funds, and also in view of the implementation of the Non-Mandatory Central Provident Fund System in January 2018, the Fund is further increasing by 101 the number of public servants within the service.
The total number of civil servants to assist the expansion proposal of FSS amounts to 167 people from the 66 currently employed. The Fund currently employees 202 staff, including civil servants and others. The attendant representative said that the hiring of new “logistics or management personnel” is not excluded over time.
Two-tier Social Security System
The social security scheme is divided into a compulsory and voluntary
scheme. According to FSS, workers and employers who have an employment relationship must make contributions in the compulsory scheme, while citizens who meet the legal requirements can make the payment of contributions under the voluntary scheme. In 2008, the government presented a proposal for a two-tier Social Security System covering the first level social security scheme (compulsory) and the second level central pension scheme (non-mandatory). advertisement
4 Business Daily Friday, July 7 2017
Macau
Aviation
New business aviation maintenance, repair and operations (MRO) at Macau International Airport awaiting opening after almost 10 months of delay
A bird’s eye view of the Greater Bay Area With increasing flights in the Greater Bay Area business aviation representatives and aviation experts believe the MSAR has enough infrastructure and positioning to gain a larger role in the region, especially in the business aviation sector. However, the late implantation of a plan to expand flight capacity by the local government risks Zhuhai overtaking the city in the sector Nelson Moura nelson.moura@macaubusinessdaily.com
M
acau and Zhuhai airports could play an essential role in a possible Greater Bay Area joint airspace, although the expansion of the MSAR airport to increase its aviation capacity has been slow, members of the business aviation industry have told Business Daily. According to Charlie Mularski, Chairman of the Asian Business Aviation Association (AsBAA), both Macau and Zhuhai, with their proximity to Hong Kong, can benefit from taking the business aviation operations currently at a crunch and congested in Hong Kong with the progressive exposure to business aviation creating potential economic boosts for both cities. “Recently, we’ve seen how the Greater Bay Area is an area with a comprehensive infrastructure development plan that will leverage all cities in the Greater Bay Area. Macau and Zhuhai play a key role in this area, especially when it comes to aviation connectivity,” the AsBAA chairman told Business Daily.
Flying high
The Chinese Government’s Greater Bay Area development plans to create a dynamic air space connecting the five main existing airports in the area: Hong Kong, Macau, Guangzhou, Shenzhen and Zhuhai, connecting an area in which more than 66 million
people reside. In terms of passengers, in 2016 Hong Kong International Airport registered 70.5 million passengers while the Guangzhou airport welcomed 59.7 million, Shenzhen handled almost 42 million, Macau International Airport saw 6.6 million, and the Zhuhai airport recorded 6.1 million. Meanwhile, several expansion projects for the existing airports are underway, with Hong Kong International Airport’s third runaway slated for completion by 2023. Guangzhou’s Baiyun International Airport plans to add a fourth and fifth runway by 2025, while Shenzhen’s Bao’an International Airport is considering a third runway. There are also plans to develop a regional RMB35 billion (US$5.1 billion) Pearl River Delta airport, expected to handle 30 million passengers a year, according to South China Morning Post newspaper. According to Mr. Mularski, Hong Kong International Airport’s new runway is still a long way from completion although once finished demand will quickly increase, with major airlines, low cost carriers, and cargo freighters forecast to grow significantly in the next 10 to 20 years. Consequently, Macau and Zhuhai airports could play a role in ‘absorbing and supporting’ business aviation slots with enough parking and flexibility. The aviation expert believes these could be achieved without much infrastructure development, the solution lying in an easier permit process
and more efficient utilisation of the existing ramp/parking space. “Attracting business aviation will lead to economic development in both Macau and Zhuhai; we know that business aviation hubs lead to investment, growth, job creation and overall economic development. With this in mind, we’ll see Macau and Zhuhai advance and become recognised as viable alternatives to Hong Kong for businesses looking to set up / expand in the region,” he stated.
Lagging behind
In terms of business aviation, business jet movements - including private flights - at Macau International Airport numbered 2,656 in 2016, with 11,600 helicopter movements between the city and Hong Kong and Shenzhen, the MSAR Civil Aviation Authority (AACM) told Business Daily. When asked about works to co-ordinate the MSAR’s offerings with the remaining Greater Bay Area air spaces, AACM said the aeronautical authorities of Mainland China, Hong Kong and Macau have set up a regular meeting mechanism with the aim of studying the enhancement of co-ordination for air traffic management in the Pearl River Delta Region. ‘A supervisory working group and a technical working group were established for such purpose. The three parties have since then held a number of meetings to discuss the present operations in the region and have agreed to do future planning based on the principle of joint development
in the region,’ read the response to Business Daily. When asked about the current situation of the aviation sector in the Greater Bay Area, Mike Walsh - CEO of Asia Jet Charter, a business aviation company and part of the HNA Group - told Business Daily that the situation might hav reached a “bottleneck”. “There’s a mixing of scheduled with non-scheduled flights all the time. The scheduled size keeps growing; the low cost carrier segment is growing with visitation growing, too,” he stated. However, the Asia Jet CEO believes there is “enough existing capacity and infrastructure” if the cities in the region co-operate and work to do more with their existing resources to “everyone’s benefit”. With regard to the business aviation sector, Walsh said it had registered annual double digit growth since 2015 in the Greater Bay Area, dropping to “single digits” last year due to “infrastructure headaches . . . [adding] . . . “Infrastructure takes time to build the new capacity, like the new business hangar in Macau.”
Obstacles in the way
At the beginning of the year the Macau Government stated it wanted to expand Macau International Airport’s capacity to accommodate up to 15 million passengers, 58,000 tons of freight and 107,000 aircraft movements per year. The expansion is intended to better integrate the airport into the Greater Bay Area, with an expected increase in the number of aircraft slots to 47, of which 20 would be equipped with loading bridges. Previously, CAM-Macau International Airport Company Ltd. told Business Daily it had started expanding the North passenger terminal in order to increase its total area from 45,000 square metres to 59,000 square metres by mid-2017.
Business Daily Friday, July 7 2017 5
Macau However, CAM is still working to complete a business jet hangar, with the plan for the expansion having been completed in the fourth quarter of 2015 and with Swiss airline company Jet Aviation winning a 10-year concession to operate the new maintenance, repair and operations (MRO) facilities. Initially scheduled to open in the second quarter of 2016, the new hangar, as at the time of writing, had yet to open, with AACM telling Business Daily that it is still undergoing a ‘process of inspection of fire fighting facilities’. The contract requires that the company lease half of the new 8,000 square metre hangar in addition to 1,000 square metres of workshop and office space. The new facility is expected to help alleviate congestion at other airports in the region by providing maintenance, aircraft cleaning and parking services for business jets. According to AACM, it was up to the Fire Services Bureau to decide when the hangar could start operations, with the fire inspections appearing to have been ongoing between April and June. In statements to Business Daily, the AACM Director of Airport Infrastructure & Air Navigation said he believed the new hangar would be finished by the end of June or July. Business Daily contacted the Maintenance Manager of Jet Aviation Macau, who said the group was not able to provide any new information on the opening of the new hangar at this time.
Stepping up to the plate
According to a local airline pilot who chose to remain anonymous, while the airports of Hong Kong and Zhuhai have expanded rapidly Macau has “stagnated” with the new MRO facility delayed for almost 10 months. With Hong Kong’s fourth runway development still set to take some time, Zhuhai Airport appears to have stepped up towards functioning as an extra Hong Kong Airport runway, with the Hong Kong’s Airport Authority having a 55 per cent share and a long-term management contract to run the Chinese airport. According to statements made to the South China Morning Post, Albert Yau, the General Manager of Zhuhai Airport said there were plans to “divert freighter aircraft, business jets and some international cargo handling to Zhuhai to free up space for more commercial passenger flights in Hong Kong”. The airport was still planning to develop a 260,000 square metre air cargo logistics park over the next two years, mainly to handle international cargo going to, and coming from, Hong Kong. “The links between Zhuhai and Hong Kong are becoming more and more efficient, with shorter
connection times and more viable options in the form of helicopter flights and, of course, the Hong Kong-Zhuhai-Macau Bridge,” Mr. Mularski told Business Daily. In November 2016, the AsBAA chairman flew a commemorative helicopter flight to Zhuhai from Hong Kong, with helicopter company Sky Shuttle operating the first civilian charter flight from Shun Tak Heliport to Zhuhai Jin Wan Airport. The flight followed a deal to conduct trial periods to make Customs, Immigration and Quarantine (CIQ) services available at Zhuhai Airport, with AsBAA in negotiation to reduce the period it took to get a flying permit between the two cities from seven and 10 days. “Despite a lot of challenges we’re quite proud to have had that done, and now there’s an approved routing for low altitude flights between Hong Kong and Zhuhai,” the CEO of Asia Jet told Business Daily. For Mr. Mularksi helicopter flights can reduce the journey time from Hong Kong to Zhuhai Airport from at least three hours to “about the same time it takes to drive from Central to Hong Kong International Airport”. “This makes Zhuhai a viable alternative as a destination and departure point for the 130 business jets currently based at HKIA,” he added. Meanwhile, the new Taipa Ferry Terminal was inaugurated last month with five helicopter pads, although the MSAR Government says it has not yet initiated a public tender for their use. When asked if it was planning to apply to operate from the new helipads or increase helicopter flights, Sky Shuttle Helicopters Limited - the only company operating helicopter flights based in Macau - only said that when a public tender is opened “it would carefully review and consider” its position.
Wasting space
According to a local pilot, Macau International Airport is closer to Hong Kong than Zhuhai and has plenty of space for “more parking and hangars” but “little progress is being made” in expanding capacity. “Long term plans have now been published for the development of Macau airport. However, these plans only surfaced when Hong Kong and Zhuhai airports were rumoured to be teaming up to request the closure of Macau airport. To me, the response from the Macau authorities looks suspicious, and suggests genuine concern about the sustainability of our airport,” the pilot told Business Daily. According to the local airline pilot, with Zhuhai controlling low level airspace and Hong Kong controlling all airspace to the East and South, Macau is only in control of a small air space within a few miles of the airport, and limited to up to 3,000
feet (910 metres). “Although low level airspace is cramped, and getting tighter, I don’t see how the status quo will change in the near term,” he added. For the pilot, the best option of future business plans for Macau International Airport could be to become a ‘low cost’ hub, or a ‘business aviation’ hub to complement Hong Kong. “Critical mass would certainly help Macau retain its airport, and prevent the land turning into another expensive housing development […] The truth is that no-one knows how this saga will end. One thing is certain: the bridge to Hong Kong will bring Macau to within 30 minutes of Hong Kong’s airport by road,” the pilot remarked.
With a bridge, why fly?
According to the AsBAA chairman, the expected opening of the new Hong Kong-Zhuhai-Macau Bridge at the end of the year would not make flying redundant but allow a larger “synergy of air, road, rail and rotor” that would allow the “un-bottling of any bottlenecks”. “Easier and flexible permits for business jets to land, combined with an efficient bridge connection and/
or helicopter for faster transfers will immediately increase revenues for the airports and cities,” he added. For the AsBAA chairman, the biggest challenge in increasing co-operation between the Greater Bay Area airports is overcoming different regional regulations. “We have many different countries in close proximity in the APAC (Asia-Pacific) region, which means dealing with several different governments and their regulations. Naturally, this will pose some difficulties in the way of differing policies, procedures, and timelines,” he said. However, the challenge would not be “impossible” with a common platform for aviation rules and regulations, allowing Macau, Hong Kong and Guangdong Province to operate with mutually agreed processes and regulations, permitting the leverage of all existing and future infrastructure. “A great example of this is how the greater New York area operates with the Port Authority regulating and managing over 10 airports in the zone which cover multiple counties and cities. It can be done, and the economic gain is very high,” Mr. Mularski concluded.
6 Business Daily Friday, July 7 2017
Macau Opinion
Pedro Cortés*
Houston, we have a candidate or more! I may be wrong, but here it is: Mr. Chan Meng Kam is a candidate for Chief Executive of Macau in the 2019 election. The fact that he is not running for the Legislative Assembly, not even in the so called ‘indirect’ electoral process or appointed deputy encourages people to conclude that he is running for the highest position in the Macao Special Administrative Region Government hierarchy. We will surely have more than one candidate, which is good for Macau’s political scenario. Besides Mr. Chan, there are more than rumours that the Secretary for Economy and Finance, Mr. Lionel Leong Vai Tac, and, possibly, Secretary for Security Wong Sio Chak, will also run. Mr. Chan is a leader of the most important communi ty in Macau. He has been winning election after election, has a great sense of humour and knows what real people need. Those who are sometimes not heard. Furthermore, he is someone who has worked his way up. It is probably an obstacle that his English is not very good for the position. But nothing that a good team of translators could not overcome. It will be interesting to understand how Beijing looks at this, as well as how traditional local political forces consider this important chess move. On the other hand, in what concerns the ‘indirect’ electoral process, the fact that there are now two lists – when before it was more a direct election than any other thing – will inevitably make September’s elections quite stimulating. As a matter of fact, it seems that Mr. Chan may also have people of his influence in this ‘indirect’ process. Back to traditional local political forces, it is hard to believe that they will not have a say in the electoral process of the Chief Executive. So, to add to the two foregoing Secretaries and Mr. Chan we may even have one more candidate. It is time to sit down, buy some popcorn and finally understand that this second system may be more democratic than what it may at first appear. I will be delighted to understand whether it is for the good of Macau or, otherwise, the beginning of the end of the second system as we know it. Hopefully it is not the latter. *lawyer and frequent contributor to this newspaper.
Disposal
Landmark Hotel sale: Round 2 The potential purchaser, as yet unidentified by the company, entered into a non-legally binding letter of intent with Macau Legend on July 5 Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
L
ocal hospitality operator Macau Legend Development Ltd. has found another potential purchaser for its The Landmark Macau property, according to a company filing with the Hong Kong Stock Exchange. The potential purchaser, as yet unidentified by the company, entered into a non-legally binding letter of intent with Macau Legend on July 5, pursuant to which the local operator ‘intends to sell and purchaser tends to acquire the entire share capital and all the shareholder’s loan(s) owed’ by the subsidiary of the company which has the ‘piece and parcel of land’ and the buildings upon it – The Landmark Macau. In September of last year a letter of intent for the sale of the same property to Wide Power Enterprises Limited expired after six months of negotiation, having failed to yield ‘any definitive investment agreement’. While the ‘exact amount, the
method of payment and consideration’ for the disposal ‘will be negotiated between the parties’, the agreement signed on Wednesday requires the purchaser to pay a refundable deposit of HK$460 million ‘of which HK$300 million is payable upon signing of the letter of intent and HK$160 million is payable within 30 days from the date of the letter of intent’. If the formal agreement is not entered into within 90 days of the letter of intent it ‘shall cease and terminate’, with Macau Legend obliged to refund the deposit without interest to the purchaser. ‘In such event, neither party shall have any obligations and liabilities to each other,’ notes the filing. The new funds would help ‘expand its business in Macau and overseas without taking on too much additional leverage,’ as well as focusing ‘more on the new hotels, casinos, and other tourist-related facilities at Macau Fisherman’s Wharf,’ which is still missing the Legendale Hotel as part of its overall development plan.
Speaking Wednesday at the 42nd Anniversary of the Independence of the Republic of Cape Verde, local businessman David Chow confided that he had recently signed another letter of intent, to create the “Sino-Atlantic Bank” in the country, linking it to the MSAR, according to local media. Regarding the hotel, casino and marina project Chow is constructing in the city of Praia (meaning ‘beach’) – the capital of the country - he said he hopes to complete it as soon as possible but that “I want everything to run perfectly. The scheduling is not a problem; we need to follow the budget and that everything goes smoothly. Finishing the project is not complicated, but starting it is because there are always alterations to guarantee that everything is stable and in line with the demands of the future market,” Jornal Tribuna de Macau cited Chow as saying. Chow’s company is also developing an integrated resort property in Portugal, but facing regulatory issues in developing a wharf in Setúbal noting “there’re things that aren’t under our control, but we understand because they’re the procedures of the country. But, of course, it’s important that things don’t delay much because it causes us losses,” Ponto Final cited Chow as saying.
David Chow, Executive Director and CEO of Macau Legend Development
Luxury
Shaping the pearl Innovation mixed with tradition is what is needed to resuscitate the city’s luxury jewellery industry, according to the founders of local design brand CHioFo Jewelry & Design. Mr. Chu Hio Fong and Ms. Yuki Tang are putting a twist on the typical jewellery designs in the MSAR, blending Chinese and Western styles as well as design choices, taking a “fashion-like approach” to the art. Ms. Tang, who has helped her family manage a local traditional jeweller, points out that current products on the market are “pretty bland”, comprised mostly of white diamonds and a few other gemstones “with design elements”. Mr. Chu has over a decade of
experience in jewellery making, primarily in tailor-made pieces in the high-end segment in both the Hong Kong and Macau SARs, and notes that “there’s no lack of customers, but it’s more about the awareness”. Having launched their latest collection last month, ‘Paris Fantasy’, a series based on pearls and gemstones inspired by the Eiffel Tower and liberty of the French culture, the group is applying a different technique towards this series: shaping pearls through diamond cutting. “Many youngsters think pearls are jewellery for the old generation and prefer gemstones with more brilliance, like diamonds,” said Chu,
design director of the brand, noting that they spent months looking for the right pearls to cut and polish with this technique. In regards to the balance of products and whether to include a gemstone at all, Chu notes that the gemstone should “only amount to 30-40 per cent of a jewellery piece to strive for an artistic balance.” This means that a very big gemstone comes “at the expense of other design details”. Another feature of the duo’s jewellery is that designs are visible from various angles, even making it wearable front and back. After achieving their most recent pearl challenge, for their next collection the group takes on jade. Read more in this month’s edition of Macau Business, on shelves now. Original writer: Tony Lai
Business Daily Friday, July 7 2017 7
Macau
Expansion
Manila casino aims to win back trust Closure of Resorts World Manila’s casino facility cost the company about US$1.2 million Ian Sayson and Cecilia Yap
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esorts World Manila, the Philippine casino where 38 people died after an arson attack last month, aims to complete a new gaming zone this year as it seeks to win back customers and rebuild its brand. “We’re spending a lot of time enhancing the overall security of the place and learning about what had happened,” Kingson Sian, 55, Chief Executive Officer at Travellers International Hotel Group Inc., which owns and operates the integrated casino resort, said in an interview on July 3. “We obviously have to gain back the trust of our guests and the public.” Travellers, a venture of billionaires Andrew Tan from the Philippines and Lim Kok Thay of Malaysia, is facing its toughest challenge since opening the integrated gaming facility eight years ago. On June 2, a former patron burned gaming tables with fumes asphyxiating dozens before he killed himself. The company is under probe for the security breach that led to the attack and its gaming license was suspended for almost a month. Closure of Resorts World Manila’s casino facility cost the company about 60 million pesos (US$1.2 million) a day in lost gaming revenue, Sian said, with customers to the complex, which has a shopping mall, cinemas and restaurants, dropping by as many as 10,000 a day to 20,000. Hotel occupancy plunged to 40 per cent from 90 per cent and is now at about 60 per cent. When the casino reopened on June 29, traffic was half of that before the attack. “While many of its mass-based patrons are loyal and will probably come back, the stigma from this tragedy is a setback for further growth,” said Manny Cruz, an analyst at Asiasec Securities. “Travellers must take
this opportunity to improve its image, recalibrate its business and think of its future.” Sian, who met with the families of those killed and attended victims’ wakes, said Travellers will hold off cutting jobs as it speeds up completion of a new gaming area. The company is compensating families and will pay for the education of victims’ children. Maybank ATR Kim Eng sees impact of tragedy to linger for the next two to three years, cuts gaming revenue estimates for Travellers: read more.
‘Getting back to business is crucial as the venture of Tan’s Alliance Global Group Inc. and Lim’s Genting Hong Kong Ltd. aims to open by year end a casino floor larger than the one destroyed on June 2’ Travellers is trying to woo customers with cheaper movie tickets, food discounts and free parking. Its security team has been replaced, an overseas group hired as a consultant and, within a month, it plans to unveil an enhanced “containment style” defence system, Sian said. Getting back to business is crucial as the venture of Tan’s Alliance Global Group Inc. and Lim’s Genting Hong Kong Ltd. aims to open by year end a casino floor larger than the one destroyed on June 2, six months earlier than scheduled, while the damaged
area will be converted into a retail zone, Sian said. Travellers’ earnings have fallen in seven of the previous nine quarters, while those of its rivals including Bloomberry Resorts Corp. and Melco Resorts & Entertainment Philippines Corp. have been steadily growing as they attracted more foreign players and high rollers. Competition among Manila casinos is intensifying as Universal Entertainment Corp., the casino venture of Japanese tycoon Kazuo Okada, ramps up operations. Travellers holds one of four integrated casino licenses issued by the
Philippines government in 2008 to develop Manila’s Entertainment City and grab a bigger share of Asia’s rising gambling revenue. The company has spent US$1.2 billion since opening Resorts World Manila in 2009 and is scheduled to operate a US$1 billion complex in Manila’s gaming hub by early 2021. “It’s one of the sad events in our history but, nevertheless, we believe in the long term potential of the industry,” Sian said. “We believe in the future of both tourism and gaming. We have a long view and we are committed to this.” Bloomberg News advertisement
8 Business Daily Friday, July 7 2017
Consigliere
Thirteen ways to instantly become better at grilling From smoking fish in a flower pot to using fat trimmings in startling ways, top chefs have great tips for improving your grill game this summer. Kate Krader
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few weeks ago, w e att e m p t e d to spoil summer with a list of foods that do not benefit from grilling, according to top chefs. On their hit list: Pizza. Salmon. Even burgers. But really, if you’re looking to show off on a sweet summer afternoon, one sure way is to try to be creative at the grill. Use your mad skills to impress everyone at the barbecue. To help you, we spoke to live fire cooking experts and got them to provide their best, fastest tips. Want the secret weapon for getting the best smoky flavour on your steak or pork chop or the best char on your chicken? They advise you to have some mayonnaise on hand, as well as a clean terra cotta flower pot. Confused? Read on.
Break out the mayo
Who says: Bruce Kalman, Union and Knead & Co. Pasta Bar + Market, Los Angeles Why: “To make chicken skin especially crisp and the meat juicy, rub a little bit—not a lot—of mayonnaise under the skin before throwing it on the grill. You can also add a mix of softened butter, garlic, and herbs.”
Spray flavour on ... the coals
Who says: Tim Love, Lonesome Dove, Dallas Why: “To amplify that great, smoky flavour on meats that only take a short time to cook, use a fine spray bottle filled with peanut oil and spray your coals with it right after you place the meat on the grill. It gives it much bigger flavour.”
Extra onions always
Who says: Gavin Kaysen, Spoon & Stable, Minneapolis Why: “To season my grill after I’ve cooked on it, I stick a fork in half a red or white onion and then rub down the grill with it. The onion helps clean any little bits off the grill that the brush may
have missed and adds a little caramelized onion flavor. Just don’t grill desserts afterward.” Who else says: Dan Kluger, Loring Place, New York Why: “It’s always worth grilling extra onions. You can chop them up and add them to mayo to put on a burger or refrigerate them and reheat to serve on a night you haven’t fired up your grill. It will make the dish that much better.”
Protect your bones
Who says: Josh Capon, Bowery Meat Company, New York Why: “When you burn the bones on your steak, it’s amateur hour. They can turn black and get brittle, especially lamb chops. They will then break when you pick them up, which takes away the lollipop factor. That’s what makes them easy to hold and enjoy at a BBQ on a summers day. So wrap those bones in foil, even for something major like a Tomahawk Chop. Just remove the foil toward the end of the cooking to give them a little colour.”
Use a flower pot
Who says: Terrence Gallivan, The Pass & Provisions, Houston Why: “Turn a cheap, clean, hardware-store terra-cotta planter with drain holes into a smoker. Build a hot fire on one side of the grill. Put whatever food you want to smoke—chicken, pork, your leaner meats, fish—on the other side of the grill. Cover with the upside-down planter and let the food smoke over that indirect heat. If you want a specific smoky flavour, you can add chips, like cherry wood, but you don’t have to. As a bonus, you can use the hot side of the grill for searing meat directly over high heat.”
Add smokiness with a dry rub Who says: Hugh Mangum, Mighty Quinn’s Barbeque, New York
Why: “An awesome way to add smoky flavour in the shortest period of time is to use seasonings like smoked paprika and smoked salt before grilling. I use them at home, especially on things I don’t usually cook at work, like seafood and vegetables. As a general rule for rubs, seafood should be seasoned right before cooking or the rub will dry out the fish. For red meat, poultry, and pork, add the seasoning about a half hour before cooking. And if you like big bold flavours, let it sit for a few hours. Large cuts of meat can be spice rubbed and refrigerated overnight. For a quick smoky spice rub, mix two parts smoked paprika with one part smoked salt. When you think there’s enough rub on your meats, season, season, and season some more.
Don’t touch that burger
Who says: Matt Jennings, Townsman, Boston Why: “To make the perfect grilled burger, don’t handle the meat too much when shaping the patties— the natural heat from your hands will melt the burger fat. Once the burger is on the grill, don’t poke or prod it too frequently.” Also: “The second most important step in making a perfect cheeseburger is getting the cheese to melt perfectly. I allow about 90 seconds and cover the burgers to let the cheese melt on top. [If you
have a cheese that does not come in a perfect slice,] grate the cheese and shape it into a ball, then press down to make it a thin disk that will melt evenly over the burger.”
Throw flavourings on the grill
Who says: Scott Conant, Fusco, New York Why: “I’ll brush cloves of garlic and bunches of rosemary with olive oil, and set them on the grill away from the heat —you don’t want them to catch on fire. Cover the grill, and they’ll give the meat incredible, fragrant flavour. It’s so easy and also looks gorgeous; it’s a great shot for Instagram.”
Save the scraps
Who says: Chris Cosentino Acacia House in Napa Valley, California Why: “You can throw vegetable scraps like corn husks, corn cobs, onion and garlic skins, etc. into the flames of an open-fire grill to add another layer of smoke flavour to whatever it is that you’re grilling.”
Grill right on the coals, dirty style
Who says: Chris Cosentino, Acacia House, Napa Vallley Why: “I will cooks steaks right on the coals using a shallow grill basket: I call them ‘Dirty Steaks.’ The ash from the coals imparts tons of flavour. Use a thick cut of steak, with nice marbling,
and let it come to room temperature first. You can also rub it with a good rub to pump up that ‘dirty flavour.’”
Don’t oil the grate
Who says: Isaac Toups, Toups Meatery, New Orleans Why: “Before grilling ribs, brush a little vegetable oil on the ribs—not the grate— to prevent sticking. The oil burns off the hot grill and can leave a bitter taste. When the oil chars on the meat, it creates a nice sear; it won’t burn too much because the meat has moisture acting as a barrier. The brushing oil is a great place to add flavourings, like black pepper, chilli flakes, smoked paprika, or other dry seasonings. Or rub them on the meat before the oil. Do not add organic compounds such as garlic or onion to the meat, because they will burn too quickly.”
Don’t ruin your meat going for perfect grill marks
Who says: Vitaly Paley, Imperial, Portland Why: “When you’re grilling a thick steak or a large chunk of meat, don’t chase the perfect diamond grill marks; the meat will invariably overcook. Instead, turn the meat often, which ensures even cooking—it’s an old wives tale not to turn your meat frequently. You can leave it on a little longer at the end, if you want a good char.” Bloomberg
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Consigliere
German designer Karl Lagerfeld (R) receives the Paris Grand Vermeil Medal from Paris City Mayor Anne Hidalgo (L) after presenting his Fall/Winter 2017/2018 Haute Couture collection for Chanel during the Paris Fashion Week, in Paris, France, 04 July 2017. Lusa
Fashion’s ‘kaiser’ Karl Lagerfeld crowned king of Paris Fiachra Gibbons
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hey call him the “kaiser”, and Karl Lagerfeld came as close as you can come to being crowned king of Paris on Tuesday when the French capital awarded the fashion designer its highest honour. The 83-year-old was given the Grand Vermeil medal by mayor Anne Hidalgo, who called the legendary German-born creator “an immense talent and a wonderful person.” “Paris loves you -- you are Paris,” she told him under a massive 38-metre model of the Eiffel Tower that Lagerfeld built as the centrepiece of his Chanel haute couture show. “Your genius and talent has made Paris even more magic, creative and beautiful,” Hidalgo said of the designer, whose ageless style and acid tongue have endeared him to generations of Parisians. “I am a foreigner and we foreigners see Paris and France with another eye,” he told a cheering crowd that included American singer Katy Perry and British actresses Tilda Swinton and Cara Delevingne. Lagerfeld said that a “new day is dawning in France” after the election of President Emmanuel Macron, its youngest head of state in more than a century. “Everyone is in love with Paris again, and with France, and wants to be here,” said the designer, who has lived and worked in the city since 1952 when he and a young Yves Saint Laurent became firm friends.
‘French is hip again’
“It’s great also that French is again becoming a hip language. I want to say ‘Vive la France!’ and vive Paris for the Olympics in 2024!” he added, in a reference to the city’s bid to stage the Games. Lagerfeld’s Chanel show under the
dome of the Grand Palais, dominated by his Eiffel Tower, was a celebration of Paris, with a small army of more than 60 of the world’s top models on the runway. The designer went strong on Chanel’s classic tweed look with subtly inset crystals for his winter coats and suits. Shoulders were much more rounded, and all the models bar the final bride wore brimmed hats somewhere between a boater and a bowler. As at Dior the day before, Lagerfeld went for more sombre grey hues, mixing them with black, purple and dark blue tones, lifted by the reflective sheen of tiny inlaid crystals and ankle and knee-length boots. Fellow designer Julien Fournie, who was also showing his haute couture collection Tuesday, described Lagerfeld as one of the “true greats”, paying tribute to the longevity of his creative spark. “You have to draw and design all the time. You have to produce all the time. Karl has got it so right, unlike this new generation of designers who do three sketches and walk around them for six months and call that genius.” Fournie channelled a 1940s golden age of glamour look in his show, with long sheath evening dresses that brought Lauren Bacall to mind. He told AFP that with arms and chests often covered, it was all about suggestion. “You see nothing but every form of a woman’s body is celebrated,” he told AFP, saying that he designed for “real women with hips and breasts”. “I make incredible clothes for incredible women,” he added, “women who want to decide what the world of tomorrow will be.” Russian designer Ulyana Sergeenko continued the sober theme with a collection almost entirely in black, lifted here and there by a bit of silvery grey. AFP
A model presents a creation from the Fall/Winter 2017/2018 Haute Couture collection by German designer Karl Lagerfeld for Chanel during the Paris Fashion Week. Lusa
Discovering Japan’s national tipple
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eekends often include imbibing. Apart from whisky, wine and beer - with which we are very familiar - how about treating your palate to something different this week?
A brief history of sake
Sake - known as Nihonjiu in Japan - has long been considered the national drink of the Land of the Rising Sun. It is a wine made of rice, water and yeast. And differs from the rice wine of other countries as brewing sake demands more intricate steps to create its smoother texture and magnificent flavour. Each wine has its own best tasting temperature. The largest tasting temperature ranges from 5-50 degrees Celsius. Unlike wine, however, sake does not age. Although there are a few special varieties of sake that are ‘aged’ before bottling to produce a darker, more mature flavour. All sake is meant to be drunk soon after purchase. Many premium sake makers print the bottling date on the label or cap, and the sake is best drunk within a year of that date. Once opened, sake will begin to oxidise and so it is best to consume it within a week or so. Sake can be divided into four basic types. Each requires different brewing methods and a different percentage of rice milling. The more polishing means the higher the grade. The highest level is the Daiginjo. It is the super-premium sake brewed with rice polished down to 50 per cent or less of its original weight. Sake which is polished away to at least 40 per cent rice is called Ginjo, which ferments at a low temperature so that it delivers a unique fruit flavour. Junmai is pure rice wine, with no distilled alcohol added. During the brewing process, no alcohol or sugar is added, lending it a rich rice fragrance. Until recently, at least 30 per cent of the rice used for Junmai sake had to be milled away. But the laws have changed, and Junmai no longer requires a specified milling rate these days. The last one - but also important - is the Honjozo. This kind of sake has a light but unique flavour. Because at least 30 per cent of the rice used should be polished away, however, a tad of distilled alcohol is added.
Masumi meets Yamazato
In order to promote this traditional Japanese wine to more connoisseurs, renowned Japanese Hotel Okura Macau is collaborating with the Best Japanese Sake brand to present a ‘Masumi Sake Paring’ menu in their signature fine Japanese dining restaurant Yamazato this month. Masumi Sake was founded in 1662 near Lake Suwa in the centre of the Japan Alps in Nagano Prefecture. Masumi Sake benefits directly from the region’s clean air, pure water, and long cold winters. Rice is the soul of good sake, which is why Masumi uses only the highest quality rice from Nagano. Thanks to the surrounding mountains, the water there is low in minerals and imparts a soft, light, and flavourful character to all Masumi sakes. Last but not least, yeast is the spirit of all the sake companies. Masumi Sake uses ‘yeast number seven’, which, created in 1904, continues to sweep the top awards at regional and national sake appraisals. During the promotion, a variety of sake has been selected including Karakuchi Kiippon Sake (one of the central pillars of the Masumi brand, it is dry, fresh and easy to drink); Nanago Sake (with a mild fragrance and firm acidity, it has full flavour with a ‘clean finish’ allowing you to drink all night without tiring); Sanka Sake (with a fresh, natural flavour that builds from cup to cup); Miyasaka Miyama (with a fine acidity and mild aroma, this sake is perfect with food). To pair with the sake, the talented culinary team has designed an exclusive menu which includes wasabi marinated in Masumi Sake lees, tofu skin with miso, fig with Kouji rice malt, sashimi, grilled salmon with Shinshu miso, deep fried white shrimp with sweet corn and other delicious dishes – not to mention the indispensable dessert made with Masumi Sake lees. EDWINA LIU, ESSENTIAL MACAU EDITOR
10 Business Daily Friday, July 7 2017
Greater China In Brief Markets
New Taiwan-South Korea index details unveiled A new stock index jointly managed by Taiwan’s and South Korea’s main bourses will comprise 30 blue-chip technology shares, which each have a free float market capitalization of at least US$2 billion, and will launch in the third quarter, people with direct knowledge of the matter told Reuters. Taiwan’s technology firms will account for more of the index constituents than their South Korean counterparts as they have smaller market capitalisations, one of the people said yesterday, but did not provide an exact number. Governance
Fosun says online rumours about Chairman false Chinese conglomerate Fosun saw shares in its listed units fall yesterday, prompting it to refute online rumours that it had lost contact with its billionaire chairman, Guo Guangchang. The firm said in a statement Guo was in Shaanxi province giving a speech in the city of Xi’an and that online reports he had gone missing were “sheer rumour and malicious slander”. “Fosun Group’s operations are all normal,” it said. A number of high-profile Chinese executives have gone missing for short periods of time, making investors nervous. Bonds
BRICS development bank to seek dollar funding The New Development Bank (NDB) set up by the BRICS group of emerging economies is looking raise money by issuing dollar-denominated bonds later this year, the agency’s president, K.V. Kamath, said yesterday. Speaking to reporters at a briefing, Kamath said that he expected progress on securing an investment rating by an international rating agency this year, enabling the bank to tap global markets for dollar funding “towards the very end of the year.” Kamath said leaders of the BRICS countries have indicated they would like to see local currency bonds as a means of finance, in addition to dollar bond issuance. Results
Dalian Wanda H1 revenue jumps China’s Dalian Wanda Group said yesterday that first-half revenue surged 12 per cent, with revenue from its financial businesses showing particularly strong growth. Wanda has been investing heavily in entertainment, leisure and financial businesses and the buying spree has drawn attention of Chinese regulators, who ordered lenders last month to assess exposure to overseas deals by Wanda, HNA Group, Anbang Insurance and Fosun. The property developer, which has businesses stretching from theme parks and shopping malls to sports clubs and cinema chains, said in a statement its January-June revenue reached RMB134.85 billion (US$19.8 billion), exceeding its own targets.
Fundamentals
June data to show steady growth, debt crackdown dims outlook Policy insiders say the central bank will hold off on further monetary policy tightening
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raft of Chinese data in coming weeks is expected to show steady growth in the world’s second-biggest economy, but government measures to rein in the housing market and debt risks are likely to drag on activity over the next few quarters. Many analysts say Beijing’s deleveraging campaign will pressure growth as the property sector cools in response to policy curbs, even as top leaders have pledged to maintain economic stability ahead of a key party meeting later this year. “We expect June’s data release to show overall steady growth with industrial production momentum maintained,” economists at UBS said in a research note. “Slower credit growth and higher funding costs due to supervisory tightening are expected to have an effect on fixed-asset investment and activities later in the year.” China’s industrial output is seen up 6.5 per cent in June from a year earlier, matching the rise in May, according to a Reuters poll of 34 economists. Retail sales were expected to grow 10.6 per cent, easing slightly from a 10.7 per cent rise in May, while fixed-asset investment was predicted to increase 8.5 per cent in January-June from a year earlier, versus a rise of 8.6 per cent in the first five months, the poll showed. Authorities have tightened rules to force banks to deleverage - as part of steps to control debt risks, pushing up money market rates that have started to spill over into the real economy. Moody’s Investors Service downgraded its credit rating in May, saying it expects the country’s financial strength will erode in coming years as growth slows and debt continues to rise.
Policy insiders say the central bank will hold off on further monetary policy tightening and could even slightly loosen its grip in the coming months to support economic growth and job creation. China’s exports are seen up 8.7 per cent in June from a year earlier, while imports are set for a 13.1 per cent rise, according to the Reuters poll, producing a trade surplus of US$42.4 billion. China’s exports rose a stronger than expected 8.7 per cent in May as global demand improved, while imports jumped 14.8 per cent despite falling commodity prices.
Key Points June data expected to show steady growth for China’s economy Industrial output f’cast +6.5 pct y/t (May +6.5 pct) Exports seen +8.7 pct (May +8.7 pct) Imports seen +13.1 pct (May +14.8 pct) PPI f’cast +5.5 pct y/y (May +5.5 pct) CPI f’cast +1.5 pct (May +1.5 pct) New loans f’cast RMB1.2 trln (May RMB1.11 trln) June activity indicators, Q2 GDP due out on July 17
GDP puzzle
China will release second-quarter gross domestic product (GDP) on July 17, along with June industrial output, retail sales and January-June fixed asset investment. Analysts are awaiting a few other June data releases before fine-tuning their April-June GDP forecasts, though some expect it will be slightly weaker than the solid first quarter pace of 6.9 per cent. Both the official and private factory surveys painted a robust picture for June thanks to stronger demand,
though even here signs of stress were evident in median and small firms. China’s producer price index (PPI) is tipped to rise 5.5 per cent in June from a year earlier, flat from May when factory gate inflation eased for the third straight month on tumbling raw materials prices. The consumer price index (CPI) is seen up 1.5 per cent year-on-year in June, also matching that in May, when consumer inflation quickened from April’s 1.2 per cent. Beijing is targeting consumer inflation at 3 per cent this year, unchanged from 2016. Besides the campaign to reduce high levels of debt across the economy, authorities have also been busy trying to stabilise the yuan by curbing capital outflows. That seems to have paid off with the currency pushing higher against the dollar in recent months. And China’s foreign exchange reserves are expected to edge up in June to US$3.06 trillion, rising for a fifth consecutive month as capital curbs and a weakening dollar helped staunch money outflows. China is due to announce foreign exchange reserves data on Friday, followed by inflation and trade data on Monday and Thursday respectively, while loan and money data is expected anytime from July 10-15.
Loans seen up amid shadow banking crackdown
Loan data will also be closely watched for signs of whether the economy continued to build up more debt, amid signs that banks have shifted more credit back onto their books in response to the shadow financing clampdown. Chinese banks are seen extending RMB1.2 trillion (US$176.47 billion) in new loans in June, up from RMB1.11 trillion in May. Combined trust loans, entrusted loans and undiscounted bankers’ acceptances, which are common forms of shadow banking activity, fell sharply to RMB28.9 billion in May from RMB177 billion in April, according to Reuters calculations based on central bank data. Reuters
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Greater China Support measures
Taiwan parliament approves infrastructure stimulus plan Presidential office said in a statement after the vote that the plan would bolster infrastructure investment and upgrade the economy Taiwan’s parliament on Wednesday approved an infrastructure stimulus plan aimed at bolstering domestic demand and rebalancing the island’s economy away from its heavy reliance on exports. The plan, worth T $420 billion (US$12.6 billion), was only half the size of the original stimulus plan announced by the cabinet in March, part of a political compromise to get it through parliament. It will target rail, water, green energy and the digital economy. The cabinet has said other projects will aim to even out the urban-rural divide. Opposition lawmakers had criticised the original plan as going beyond the four-year term limit of Taiwan President Tsai Ing-wen and her ruling Democratic Progressive Party. Taiwan’s parliament, the Legislative Yuan, approved
the plan for a period of four years and agreed to review it at a later date.
‘Taiwan’s government raised its 2017 economic growth outlook to a three-year high of 2.05 per cent’ Taiwan’s presidential office said in a statement after the vote that the plan would bolster infrastructure investment and upgrade the economy, adding that it hoped the budget review for individual projects would be “rationally discussed”.
Opposition lawmakers had criticised the original plan as going beyond the four-year term limit of Taiwan President Tsai Ing-wen (pictured) and her ruling Democratic Progressive Party
Taiwan’s trade-reliant economy is showing signs of recovery, but it is highly vulnerable to protectionist policies from U.S. President Donald Trump and increasing competition from Chinese manufacturers, as well as political tensions with Beijing. In late May, Taiwan’s
government raised its 2017 economic growth outlook to a three-year high of 2.05 percent, citing export-led gains. The government said the outlook did not factor in the stimulus plan because it had not yet won parliamentary approval. Analysts said they expected
the stimulus plan to provide a limited boost to economic growth. “In fact, the revision of the infrastructure stimulus plan has limited impact on our forecasts for Taiwan’s 201718 growth outlook,” said Ma Tieying, an economist with DBS in Singapore. Reuters
Diplomacy
Traders say business as usual at N.Korea border Trump complained on Wednesday that trade between China and North Korea grew almost 40 per cent in the first quarter Joanna Chiu
Trucks still line up bumper-to-bumper on the “Sino-Korean Friendship Bridge” to bring goods from North Korea into China even as Beijing faces massive pressure to strangle its Communist ally economically. Some two dozen trucks awaited clearance to enter the border city of Dandong, through which 70 per cent of North Korea’s trade passes, a day after Pyongyang successfully tested an intercontinental ballistic missile on Tuesday. While United Nations sanctions do not ban all trade with North Korea, U.S. President Donald Trump has berated China for not doing more to cut off more sources of cash that have kept the reclusive regime afloat. The U.S. administration is now leading a new push at the UN to impose tougher sanctions on Pyongyang after Trump complained that trade between China and North Korea had surged in the first quarter. Traders in Dandong acknowledge that it is business as usual at the border, with taxi drivers saying they have not seen a dip in the number of North Korean merchants visiting the city in recent days. Gold is among the raw materials from North Korea that are banned under UN sanctions. But the manager of a store selling “North Korean speciality products”
on the boardwalk of the Yalu River said her employees have had no trouble going across the border to purchase gold and silver in recent months. The manager, who refused to give her name, said the raw material is sent to factories in the southern city of Guangzhou, where it is made into rings and bracelets. “It’s cheaper to buy from North Korea, so the prices we offer shoppers are cheaper than what they can normally find in China,” she said.
“We operate as normal. We have been working with the same North Korean suppliers for years.” A clerk in another gift shop down the street, which employs a similar business model for its gold jewellery, said she does not know about any disruptions. “Most of our products are actually made in China, but items such as these traditional dresses are made by North Korean workers who have come over to Dandong to work in textile factories,” said the Chinese clerk, surnamed Yan. Trump complained on Wednesday that trade between China and North Korea grew almost 40 per cent in the first quarter. Official Chinese customs data shows a 37.4 per cent
Chinese side of the border with North Korea in Dadong
rise in yuan terms and 30.6 per cent in U.S. dollars. But China decided to stop buying North Korean coal in February and total imports from the North have steadily dropped every month from US$207 million in January to US$99 million in April.
‘We live together comfortably’
Riverboat operator Heng Ge, who brings tourists close to North Koreans on the shore, said that despite the precarious political environment, Chinese curiosity about their neighbours has not waned.
‘Total imports from the North have steadily dropped every month from US$207 million in January to US$99 million in April’ “Our tours are often packed. Chinese people really want to see what the lives of ordinary North Korean people are like, and want to see North Korean soldiers up close. This hasn’t changed,” Heng said. Dandong residents say they are grateful for the benefits the city reaps from acting as both a trade and cultural exchange point between the two countries. “Other Chinese might have hostile feelings toward our Korean neighbours,” said Peng Li, a local souvenir vendor. “But here in Dandong, we live together comfortably.” AFP
12 Business Daily Friday, July 7 2017
Asia Tag
Australia’s trade surplus balloons in boost to economy Total exports climbed 8.5 per cent to more than recover April’s slump Wayne Cole
Australia’s trade surplus rebounded sharply in May as coal shipments recovered faster than expected from cyclone-induced disruptions, putting exports back on track to add to economic growth in the quarter. Combined with recent upbeat reports on consumer and business spending, economic growth now looks likely to have picked up from the March quarter’s disappointing 0.3 per cent pace. Yesterday’s figures from the Australian Bureau of Statistics showed the trade surplus surged to A$2.47 billion (US$1.88 billion) in May, up from a downwardly revised A$90 million in April and more than twice market forecasts of A$1.1 billion. Exports of coal alone jumped 62 per cent to a cool A$5 billion as mines rushed to resume shipments after Cyclone Debbie tore up rail tracks in Queensland, one of the world’s biggest
coal-exporting regions. Total exports climbed 8.5 per cent to more than recover April’s slump, while imports edged up just 0.7 per cent. Crucially for growth, export volumes were strong across the board with hard coking coal up 180 per cent, semi-soft coal 58 per cent and iron ore fines 5 per cent. That suggests net exports made a welcome contribution to gross domestic product (GDP) in the June quarter, having been the biggest single drag on growth early in the year.
Australia has been on track to overtake Qatar as the world’s largest LNG exporter, but just this week the Gulf state announced plans to expand its output by 30 per cent. The West’s three biggest energy corporations have expressed interest in helping Qatar with its ambition to produce 100 million tonnes of LNG annually - equivalent to a third of current global
supplies - in the next five to seven years. Australian output is forecast to reach 85 million tonnes in the next one to two years. Qatar’s plans may not be a threat to Australia in the near term given the vast bulk of its LNG has already been sold on long-term contracts. Still, greater competition from such a low-cost
producer as Qatar could eventually threaten markets in Asia, where Australia is currently the largest supplier to Japan and China and the second largest to Korea. Much hangs on the fortunes of the industry, with the Reserve Bank of Australia (RBA) counting on LNG exports to add half a percentage point to economic growth in both 2017 and 2018. Reuters
Gas-powered surplus
Shipments of liquefied natural gas (LNG) are also ramping up significantly as new projects come on line, with export volumes up a huge 29 per cent in May. Analysts at National Australia Bank predict the value of LNG exports will pass A$27 billion this year and near A$35 billion in 2018, overtaking coal as the second biggest earner.
Protectionism
U.S. cars a tough sell in S.Korea even as Trump targets trade deal Imports make up just 15 per cent of the overall Korean auto market Hyunjoo Jin
U.S. auto imports from the likes of General Motors and Ford Motor must become more chic, affordable or fuel-efficient to reap the rewards of President Donald Trump’s attempts to renegotiate a trade deal with key ally South Korea, officials and industry experts in Seoul say. Meeting South Korean President Moon Jae-in last week in Washington, Trump said the United States would do more to address trade imbalances with South Korea and create a level playing ground for U.S. businesses, especially carmakers, in the world’s 11th largest auto market by sales. While imports from automakers including Ford, Chrysler and GM more than doubled last year largely thanks to free trade deal which took effect in 2012, sales account for just 1 per cent of a market dominated by more affordable models from local giants Hyundai Motor Co and affiliate Kia Motors Corp . Imports make up just 15 per cent of the overall Korean auto market, and are mainly more luxurious models from German automakers BMW and Daimler AG’s MercedesBenz, which also benefit from
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a trade deal with the European Union. “Addressing non-tariff barriers would not fundamentally raise the competitiveness of U.S. cars,” a senior Korean government official told Reuters, declining to be identified because of the sensitivity of the subject. “What we really want to say to the United States is: make good cars, make cars that Korean consumers like.”
Taste barrier
In Korea, U.S. imports are
seen as lagging German brands in brand image, sophistication and fuel economy, industry experts say. U.S. imports do have a competitive advantage in electric cars: Tesla Motors’ electric vehicles are seen as both environmentally friendly and trendy, while GM has launched a long-range Bolt EV. U.S. Commerce Secretary Wilbur Ross had cited a quota in the current trade deal as an obstacle to boosting imports. The quota allows U.S. automakers to bring in each year 25,000 vehicles that meet U.S., not necessarily Korean, safety standards. Should
GM, for example, decide to bring in more than its quota of one model - the Impala sedans - it would cost up to US$75 million to modify the cars to meet Korean safety standards, the company told its local labour union. Asked about non-tariff barriers, a spokesman at GM’s Korean unit said removing them could expand the range of models the company can bring in from the United States. No U.S. company, however, has yet to make full use of the quota, industry data shows. GM, the most popular U.S. brand, sold only 13,150 U.S.made vehicles last year.
U.S. cars could also see the benefits of a renegotiated trade deal at a time when diesel-powered cars offered by Volkswagen’s are losing appeal following cheating on emissions tests. However, they still need to appeal to the locals, experts say.
“Upgrading their vehicles to meet the luxurious tastes of consumers is more important than complaining about non-tariff barriers” Kim Pil-soo, a professor of engineering at Daelim University College “Upgrading their vehicles and meet the luxurious taste of consumers is more important than complaining about non-tariff barriers,” said Kim Pil-soo, a professor of engineering at Daelim University College near Seoul. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; 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 Friday, July 7 2017 13
Asia In Brief M&A
Konica Minolta to buy Ambry Genetics
Commodities
New tax could dampen Indian gold demand in short-term There have been fears the tax increase could stoke under-the-counter buying and drive up appetite for precious metal smuggled into India Rajendra Jadhav
A hike in taxes on gold sales in India could pressure short-term demand from the world’s No.2 consumer of the metal, the World Gold Council (WGC) said in a report. Faltering appetite in a country where gold is used in everything from investment to wedding gifts could drag further on global prices, already trading near their lowest level in 7-weeks. “In the short-term at least, we believe (the tax) may pose challenges for the industry. Small-scale artisans and retailers with varying degrees of tax compliance may struggle to adapt,” the WGC said in a report published yesterday. As part of a new nationwide sales tax regime that kicked in on July 1, the Goods and Services Tax (GST) on
gold has jumped to 3 per cent from 1.2 per cent previously. There have been fears the tax increase could stoke under-the-counter buying and drive up appetite for precious metal smuggled into India, where millions of people store chunks of their wealth in bullion and jewellery. Meanwhile, the WGC also said a government move to ban cash transactions over 200,000 rupees (US$3,090) from April 1 could hurt gold demand in rural areas where farmers often purchase the metal using cash due to limited access to cheques and electronic payment systems. Two-thirds of India’s gold demand comes from rural areas, where jewellery is a traditional store of wealth. “(The transactions rule’s) potential impact isn’t entirely clear: it could
curb gold purchases; it could encourage gold shoppers to buy smaller amounts of gold spread over more transactions; or it could push a large part of demand underground and encourage a black market in gold,” said the WGC.
‘Two-thirds of India’s gold demand comes from rural areas, where jewellery is a traditional store of wealth’ The group kept its demand estimate for India at 650 to 750 tonnes for 2017, well below average annual demand of 846 tonnes in the past five years. In the long-term, the GST will have a positive effect on the gold industry by making the sector more transparent and improving the supply chain, the WGC added. Reuters
Energy
Bangladesh LNG drive likely to hit its diesel, fuel oil demand State-run Petrobangla has signed preliminary deals for two more LNG terminals Jessica Jaganathan and Ruma Paul
Bangladesh’s plan to start importing liquefied natural gas (LNG) next year will likely dampen its demand for oil used in power generation, government and industry sources said. The South Asian nation typically ships in around 2.5 million tonnes of fuel oil and 3.2 million tonnes of diesel annually, making it one of the top 10 such importers in the region.
Key Points Bangladesh pushing to ship in more LNG Will likely dent its appetite for fuel oil, diesel First LNG import terminal due online next May But its push towards cleaner gas is likely to displace some of that appetite for oil, with the country’s first floating LNG import terminal due to begin accepting cargoes in May next year. “LNG is considered to be an environmentally friendly source of energy and its cost is cheaper than fuel oil,” said Nasrul Hamid, Bangladesh junior energy minister. He added that the country would gradually shift to greener, cheaper sources of energy for electricity generation and in industry.
State-run Petrobangla has signed preliminary deals for two more LNG terminals and a memorandum of understanding with Swiss commodity merchant AOT Energy for help lining up supplies. It has also said that it is in talks with top LNG producer Qatar. Of the total 13.3 gigawatts of installed electricity capacity in Bangladesh, about 63 per cent is from gasfired plants, 22 per cent from plants powered by fuel oil and 8 per cent from diesel, said Senthil Kumaran, senior oil analyst at energy consultancy FGE. That translates to consumption of 12,000 to 14,000 barrels-per-day (bpd) of high sulphur fuel oil for power generation and 10,000 to 12,000 bpd of diesel, he added. While it was not clear how much of
the country’s import demand for oil products would be displaced by LNG, it would probably start to happen in 2019, said FGE and an official with state-owned Bangladesh Petroleum Corp. “At the end of this year, we will get a full picture of our imports of oil products for the next year,” said the official, who declined to be identified as he was not authorised to speak with media. LNG is currently about 15 to 20 per cent cheaper than fuel oil, said Kazi Mohammad Anwarul Azim, manager of Petrobangla’s LNG unit. Bangladesh’s imports of LNG are expected to reach 5 million tonnes in 2020, said FGE’s Kumaran. Still, with not many dual-feed power plants in the country and new oil-fired power plants installed over the last few years, Bangladesh will continue to import fuel oil to run those plants, he said. Reuters
Konica Minolta Inc said it was purchasing U.S. diagnostics company Ambry Genetics in a deal valued at up to US$1 billion - an acquisition that marks a strategic shift for the Japanese firm’s healthcare business as it seeks a leading position in precision medicine. The deal is the largest ever for the photocopier maker, which has been seeking to diversify away its office equipment business. It pulled out of cameras about a decade ago. Konica Minolta said its advanced imaging technology complemented privately held Ambry’s genetic testing capabilities, with initial applications for combining the technologies seen in diagnosing hereditary cancer. M&A
Thai bank SCB halts insurance unit sale Thailand’s Siam Commercial Bank (SCB) has put off a potential US$3 billion sale of its insurance unit as talks with suitor FWD Group of Hong Kong failed on valuation disagreements, three people familiar with the matter said. Insurer FWD, owned by tycoon Richard Li, the youngest son of Hong Kong’s richest man, Li Ka-shing, was in discussions with SCB, Thailand’s third-biggest lender, on the life insurance unit deal. One of the people said that differences over using SCB’s vast branch network to sell insurance products after the completion of the deal was partly responsible for the stalemate between the two companies. Strategy
Singapore broadband firm MyRepublic plans IPO Singapore-based broadband services provider MyRepublic is gearing up for an initial public offering by the end of 2018 to fund expansion in Asia, its chief executive said yesterday. The company has also begun moves to raise S$100 million (US$72 million) from private-equity players and existing strategic investors in the next 60 to 90 days. After that fundraising, the company is eyeing a valuation of S$650 million, CEO Malcolm Rodrigues told a media briefing. He did not name potential investors in MyRepublic. The company is considering getting listed in Singapore, Hong Kong or Australia. Results
Japan’s Seven & i Holdings Q1 profit rises Japan’s Seven & i Holdings Co Ltd yesterday said operating profit rose 3.3 per cent in the three months through May, just shy of analyst estimates, boosted by strong demand for own-brand products at its domestic convenience stores. Profit reached 84.1 billion yen (US$743.66 million) for the first quarter. That compared with a 85.91 billion yen Thomson Reuters Starmine SmartEstimate, based on forecasts of three analysts. The convenience store operator stuck with its 386.5 billion yen forecast for the year ending February, versus the 391.53 billion yen SmartEstimate of 19 analysts.
14 Business Daily Friday, July 7 2017
International In Brief Government
Portugal says EU mission prove “robustness of economy” The Portuguese Government believes that the conclusions reached by European experts in the sixth post-programme mission attest to “the robust growth of the Portuguese economy,” which is based on the “structural changes underway.” The experts from the European Commission (EC) and the European Central Bank (ECB) were in Portugal from 26 June to 4 July to carry out the sixth follow-up mission to which Portugal is subject until it repays the majority of the loan it requested as part of European Financial bailout of 2011. Private report
U.S. private sector adds 158,000 jobs in June U.S. private employers added 158,000 jobs in June, below economists’ expectations, a report by a payrolls processor showed yesterday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 185,000 jobs, with estimates ranging from 140,000 to 233,000. Private payroll gains in the month earlier were revised down to 230,000 from an originally reported 253,000 increase. The U.S. private sector added 62,000 workers in October 2016. The report is jointly developed with Moody’s Analytics. The ADP figures come ahead of the U.S. Labor Department’s more comprehensive non-farm payrolls report on Friday.
Minutes
ECB opened door at June meeting to removing bond-buying pledge With inflation in the euro zone slowly rebounding, the ECB is preparing to dial back its stimulus policy Francesco Canepa and Balazs Koranyi
E
uropean Central Bank rate setters meeting last month opened the door to dropping a long-standing pledge to boost the ECB’s bond-purchase programme if necessary, minutes of the meeting showed yesterday. ECB policymakers discussed already taking out that so-called “easing bias” from their policy message at the June 7-8 meeting but decided against it because the euro zone’s economic recovery had yet to result in higher inflation - the bank’s main policy objective. But, confirming a Reuters exclusive, the central bankers said they could review at future meetings the promise to increase the “size and/ or duration” of its 2.3 trillion euro bond-buying programme, if needed. “If confidence in the inflation outlook improved further, the case for retaining this bias could be reviewed,” the ECB said in its policy accounts. German government bond yields hit new 18-month highs and the euro
edged higher after the minutes were published. With inflation in the euro zone slowly rebounding, the ECB is preparing to dial back its stimulus policy of ultra-low rates and massive bond purchases. But doing so without upsetting investors is proving a challenge, with bond yields and the euro rising sharply last week after ECB President Mario Draghi hinted at possible policy tweaks.
“Continued caution”
In the minutes, the ECB stressed the need for “continued caution in communication” as any perception that it was moving away from its stimulus policy could upset financial markets, undoing some of its stimulus effort. Indeed, ECB Chief Economist Peter Praet said earlier on Thursday the central bank needed to be patient and maintain a steady hand in policy as inflation was still far below its target of almost 2 per cent. Despite a brisk economic rebound, inflation in the euro zone was 1.3 per cent in June and is not expected to near 2 per cent at least until 2019.
ECB rate setters meeting in June said they found it “puzzling” that forecasts for core inflation had to be revised down despite stronger economic growth and a falling unemployment rate. Still, Draghi argued last week that accelerating growth would in itself provide support so the ECB could tighten policy somewhat to keep the broad level of financial accommodation unchanged.
Key Points Rate setters discussed removing pledge to boost QE Decided against it but left door open for revision Praet calls for policy patience
That message stirred markets, fuelling speculation that policymakers could decide as early as September to reduce asset purchases from next year. The ECB’s asset buys are set to run until the end of the year and policymakers will decide in September or October whether to extend, reduce or gradually wind down the purchases. Reuters
Oil industry
Saudi Aramco’s 2016 reserves slip, gas up Saudi Aramco said yesterday its recoverable crude oil and condensate reserves slipped to 260.8 billion barrels at the end of 2016 from 261.1 billion a year earlier. Its gas reserves rose to 298.7 trillion standard cubic feet from 297.6 trillion, Saudi Aramco said in its 2016 annual review. The company said it had discovered two new oilfields, Jubah and Sahaban, and one new gas field, Hadidah, all located in the Eastern Province, the main oil region in Saudi Arabia, the world’s top crude exporter. Saudi Arabia’s national oil company plans to list a stake through an initial public offering in 2018 which is expected to be the world’s biggest IPO. Angola
Oil revenues drop in May Angola’s tax revenues from oil exports fell 12 per cent from April to May to about €660 million, the second lowest monthly amount this year. The figures in the latest monthly reports from the finance ministry on oil revenues show Angola exported just over 50 million barrels of crude in May at an average price of US$50.90 a barrel. Angola was Africa’s biggest oil producer in 2016, ahead of Nigeria, but it has been going through a financial, economic and foreign exchange crisis since 2014 following the collapse of global oil prices.
Commerce
U.S. trade deficit narrows as exports hit two-year high In May, exports of goods and services rose 0.4 per cent to US$192.0 billion The U.S. trade deficit fell in May as exports increased to their highest level in just over two years, but trade could still weigh on economic growth in the second quarter. The Commerce Department said yesterday the trade gap decreased 2.3 per cent to US$46.5 billion. April’s trade deficit was unrevised at US$47.6 billion. Economists polled by Reuters had forecast the trade gap falling to US$46.2 billion in May. When adjusted for inflation, the trade deficit narrowed to US$62.8 billion from US$63.8 billion in April. Real goods exports surged to an all-time high in May, propelled by record high petroleum exports. Still, the real trade deficit averaged US$63.3 billion in April and May, above the first quarter’s average of US$62.2 billion. That suggests
trade will be a drag on gross domestic product in the second quarter after contributing 0.23 per centage point to the economy’s 1.4 per cent annualized growth pace in the first three months of the year.
‘Exports to Germany gained 7.4 per cent’ The Atlanta Federal Reserve is forecasting GDP rising at a 3.0 per cent rate in the second quarter. In May, exports of goods and services rose 0.4 per cent to US$192.0 billion, the highest level since April 2015, lifted by a surge in exports of consumer goods such as cell phones
and other household goods. There were also increases in exports of motor vehicles and parts. Food exports, however, fell by US$0.7 billion amid a US$0.6 billion drop in soybean shipments. Exports to China increased 3.6 per cent. The value of goods shipped to Mexico and Canada rose 5.4 per cent and 9.6 per cent, respectively. Exports to Germany gained 7.4 per cent. Imports of goods and services dipped 0.1 per cent to US$238.5 billion in May. Cell phone and other household goods imports fell US$0.9 billion, accounting for the bulk of the US$1.5 billion decrease in consumer goods imports. There were also declines in imports of motor vehicles and parts. However, imports of capital goods increase US$1.3 billion. The country imported 265 million barrels of oil in May, the most since August 2012. Imports of goods from China increased 11.6 per cent. The politically sensitive U.S.-China trade deficit increased 14.4 per cent to US$31.6 billion in May. The trade gap with Mexico surged 15.8 per cent to US$7.3 billion, the highest since October 2007. Reuters
Business Daily Friday, July 7 2017 15
Opinion
Yum China stock diet should be just a palate cleanser Shelly Banjo a Bloomberg Gadfly columnist
Y
um China Holdings Inc.’s belly isn’t full yet. Shares in the operator of the KFC and Pizza Hut restaurant chains in China fell 5 per cent in after-hours trading in New York on Wednesday after second-quarter revenue narrowly missed forecasts. Investors counting on Yum China as a bellwether to judge China’s consumer growth story shouldn’t be too alarmed, though. You can place this response right in the overreaction basket for now. Part of the sudden share drop can be explained by profit-taking: Shares in Yum China are up more than 50 per cent since splitting off from its parent company last November. But it’s also likely that investors freaked out after bidding up expectations in recent months well past realistic targets. Other metrics, including earnings per share and sales growth at established restaurants (typically the most closely watched figure in the industry), handily beat already lofty forecasts. Investors sitting down to feast on Yum China should pace themselves. Sure, there will be fits and starts, but the long-term growth story is there. Unlike in the U.S., where there’s little demand to open additional locations in an overly saturated restaurant market, China remains underpenetrated. That’s especially true for lower-tier cities, as my colleague Shuli Ren wrote earlier this week. Yum China opened 90 new restaurants and remodelled another 197 in the last quarter, with plenty more locations to come. It’s also being smart and fast about rolling out digital payments, delivery, and loyalty programs -- three of the most important growth drivers in today’s competitive restaurant industry. Its recently acquired controlling stake in Daojia, an online food delivery platform, will help accelerate efforts on that front. Rising wages and commodity costs are certainly a headwind. And it was disappointing that Yum China’s greatest laggard, Pizza Hut, posted flat sales this quarter compared to a year ago, especially since comparable-store sales at the chain rose 2 per cent last quarter from the year before. But I’m willing to give the company the benefit of the doubt, as it works out all the kinks necessary to turn around the pizza chain and get input costs chain wide under control. It makes sense for Yum China investors to want a mid-meal palate cleanser. But they’re going to want to come back to the table for further courses. Bloomberg Gadfly
‘Yum China opened 90 new restaurants and remodelled another 197 in the last quarter’
President of China, Xi Jinping (L), and his wife, Peng Liyuan (R), arrive at Hamburg International Airport ahead of the G20 summit in Hamburg, yesterday. Lusa
What G-20 leaders should be talking about
R
esilience is fast becoming the new buzzword in global economics. International Monetary Fund chief Christine Lagarde has warned that we need to do more to protect and enhance the global economy’s ability to withstand shocks. According to German finance minister Wolfgang Schaueble, that involves “empowering people to bounce back after a crisis.” The G-20 have made “global economic resilience” a priority for their summit this week. And yet, for all the focus on the subject, there is too little talk about the areas that potentially have the broadest impact on resilience: migration, adult education and data-collection. Governments now have a fairly standard toolkit, much advocated by the G-20 and IMF, for building economic resilience: structural reforms to increase market flexibility, a broader tax base, greater use of what are called countercyclical policies, including automatic stabilizers and macroprudential policies such as capital buffers. But beyond these tested measures, other recent recommendations for resilience make little sense. It is too much, for example, to expect governments or economists, as the IMF advises, to “anticipate the effects of technological progress and economic integration, [and] equip their populations with tools to reap the benefits.” The future is not entirely knowable, a fact which Keynes identified as being the driving force behind economic instability. Expecting public officials to have a crystal ball is a recipe for further undermining the public’s trust in elites and capitalism itself. Some have suggested that improving social cohesion will enhance resilience. That sounds appealing: Research has long suggested that an economy’s ability to adjust to a major shock depends on its degree of, and its ability to manage, social conflict. The problem is finding ways to encourage change. How trusting people are of their wider communities, and how happy they are to help the less advantaged by contributing to a common pool of resources, is deeply rooted and not easy for a government to change, as a new NBER paper helps to show. Some countries will, as a result, be naturally far better positioned when it comes to managing shocks. While the G-20 are looking at the issue, two additional shock-adjustment avenues deserve their
“
Victoria Bateman a Bloomberg View columnist
attention: migration and education, particularly adult education. Migration as a tool to balance national or regional shocks now faces increased resistance from politicians eager to appease anti-immigrant strands in public opinion. But in the late 19th and early 20th centuries, 30 million mostly poor Europeans fled to the U.S. in response to shocks to their home economies, including the Irish potato famine. The ability to migrate acted as a release valve that helped individuals respond to unemployment and poverty, often benefiting others who were left behind. Adult education can help alleviate the suffering of people in sectors that lose out from technological change and trade-based shocks. With hindsight, much more such support should have been provided to America’s rust belt and to deindustrializing northern England. Governments and multilateral bodies can help here, beginning with data collection. Measuring and comparing countries by the presence of obstacles in the way of mobility and, by building on the work of the OECD on the availability and support for adult education, governments can help identify where support and policy change is needed. The case for thinking ahead is compelling. While 2008 may be foremost in mind, history is filled with examples of one shock after another: the Iron Age, the Black Death, the Florentine banking crisis of the 14th century, the explorations of Christopher Columbus, the Irish potato famine, 1929, the Latin American Debt crisis, and the 1997 East Asian Crisis. According to the World Economic Forum’s Global Risks Report there are five types of risks to watch out for: economic, environmental, geopolitical, social and technological; as one risk recedes, another moves centre-stage. There is a limit to what government can do to build up resistance. However, acknowledging that economies are not naturally stable, and taking action to measure and compare economies in terms of the basic policy measures that can help them adjust to an ever changing landscape, would be a good start for the G-20 this week. Bloomberg View
Expecting public officials to have a crystal ball is a recipe for further undermining the public’s trust in elites and capitalism itself
”
16 Business Daily Friday, July 7 2017
Closing Trade
Vietnam to promote high quality rice to US$2.3 billion-US$2.5 billion annually between 2021 and 2030, from an expected to boost export revenues Vietnam outlined plans to boost revenues from rice exports over the next decade by focusing on a higher quality product and selling more outside Asia. The world’s third biggest rice producer wants to boost production of higher quality 5 and 10 per cent broken rice and decrease output of 15 per cent broken rice, according to a paper published on the government’s website. By doing so it aims to increase its rice exports
US$2.2 bln-US$2.3 bln a year over 2017-2020. Vietnam is facing rising competition from rice exporters Thailand and India. Under its longterm plan, Hanoi expects the volume of its exports will actually fall from 2021, to around 4 million tonnes annually - from 4.5 million to 5 million tonnes a year until 2020 - as it sells less lower grade rice. By 2030 it aims to sell 50 per cent of its rice exports in Asian countries, down from 60 per cent in 2020. Reuters
Globalization
EU, Japan officially seal free trade in signal to Trump Fears of cheaper import competition for European carmakers and Japanese dairy producers were among the thorniest issues Alastair Macdonald and Robert-Jan Bartunek
J
apan and the European Union agreed yesterday to a free trade pact, creating the world’s biggest open economic area and signalling resistance to what they see as U.S. President Donald Trump’s protectionist turn. Signed in Brussels on the eve of meetings with Trump at a summit in Hamburg, the “political agreement” between two economies accounting for a third of global GDP is heavy with symbolism. It leaves some areas of negotiation still to finish, though officials insist the key snags have been overcome.
Key Points New pact will create world’s biggest open economic area Japan’s Abe says sends “strong message” before G20 summit EU, Japan rattled by Trump’s “America First” rhetoric “Ahead of the G20 summit tomorrow, I believe Japan and the EU are demonstrating our strong political will to fly the flag for free trade against a shift toward protectionism,” Japanese Prime Minister Shinzo Abe told a joint news conference with EU institutional chiefs Donald Tusk
and Jean-Claude Juncker. “It is a strong message to the world.” In the works for four years, it has been pushed over the line towards a final treaty signature in the coming months by the election of Trump and his moves to ditch a Pacific trade pact that included Japan and leave talks with the EU in limbo. “Although some are saying that the time of isolationism and disintegration is coming again, we are demonstrating that this is not the case,” European Council President Tusk said. “There is no protection in protectionism,” added Juncker, the president of the executive European Commission, who played down any suggestion there would be further negotiating problems and said he hoped the treaty could go into effect early in 2019.
Alarm over “America First”
Fears of cheaper import competition for European carmakers and Japanese dairy producers were among the thorniest issues, but officials said the two sides were driven by a shared alarm at Trump’s apparent shift away from multilateral open trading systems towards an aggressive “America First” policy. Tariffs on much of their bilateral trade -- which Abe noted accounts for some 40 per cent of total world commerce -- will be phased out over some years and other economic areas,
Japan’s Prime minister Shinzo Abe (C) is welcomed by European Council President Donald Tusk (L) and EU Commission President Jean-Claude Juncker prior to an EU Japan leaders summit meeting in Brussels yesterday. Lusa
such as Japan’s public tender system, will be opened up. Both sides, which are also forging a parallel cooperation agreement on broader political issues such as security, crisis aid and climate change, forecast that the deal will boost economic growth and employment in Japan and in Europe. One detail to be ironed out is how complaints from business over how authorities apply the treaty will be dealt with. That is a touchy subject in Europe due to concerns that trade pacts give too much power to big multinationals. European parliaments nearly blocked a deal with Canada last year over such issues. The European carmakers’ lobby had called for at least seven years to phase out tariffs of up to 10 per cent on Japanese cars, and a senior EU official said they would “not be disappointed”. Most EU food exports to Japan will see tariffs removed over time,
although in some sensitive sectors such as cheese and other dairy products they will still be limited by quota. More than 200 European products that benefit from geographic protections -- for example Parma smoked ham must come from around the Italian city -- would not face Japanese competition under those names, he added. Scotch whisky might not benefit from such a deal, however, as Britain is due to leave the EU in 2019. Tusk took the opportunity to scoff at arguments in Britain for Brexit on the grounds that London could cut itself better trade deals outside the Union. EU leaders say the weight of the combined economy can more easily crack open foreign markets. In an ironic nod to Brexit supporters’ rallying cry of “Global Britain”, Tusk, a former Polish premier, signed off a tweet confirming the Japan deal with the words “Global Europe!” Reuters
Aviation
Monetary policy
Debt
Qatar Airways joins major rivals in lifting laptop ban on U.S. flights
PBOC to boost ability to adjust interest rates
LeEco founder resigns as chairman
Qatar Airways said yesterday passengers travelling to the United States can now carry their laptops and other large electronics on board, ending a three month in-cabin ban on devices for the Doha-based airline. Qatar Airways joins Emirates, Turkish Airlines and Etihad Airways, which have also announced this week a lifting of the ban on their U.S. flights. In March, the United States imposed the ban on direct flights originating at 10 airports in eight countries - Egypt, Morocco, Jordan, the United Arab Emirates, Saudi Arabia, Kuwait, Qatar and Turkey - to address fears that bombs could be concealed in electronic devices taken aboard aircraft. Qatar Airways said in a statement on Thursday the ban had been lifted after the airline and its hub airport Hamad International met with new U.S. security requirements. The United States announced on June 29 enhanced security measures for flights to the country which require additional time to screen passengers and personal electronic devices for possible explosives. Qatar Airways Chief Executive Akbar al-Baker said the airline was found to be in compliance with the “new draconian requirements.” Reuters
China’s central bank said yesterday that it will strengthen the ability to adjust interest rates and improve efficiency of its medium-term lending facility (MLF), standing lending facility (SLF) and reverse repos operations. The People’s Bank of China has been relying more on market-based policy tools, including the MLF, SLF and repurchase agreements to adjust liquidity and market interest rates, while keeping its benchmark interest rates steady. “We will deepen market-based interest rate reform, constantly improve the formation, regulation and transmission mechanism of market-based interest rates, and enhance the central bank’s ability to adjust interest rates,” the PBOC said in a report on financial market development in 2016, The PBOC adopted a modest tightening stance at the start of this year, guiding interest rates higher during the first quarter, including immediately after the Federal Reserve raised U.S. rates in March. But the central bank did not hike following a Fed rate rise in June, and it injected substantial liquidity last month to help avoid a end-quarter cash crunch amid a deleveraging drive. The central bank also said it will increase yuan flexibility versus dollar. Reuters
The founder of China’s debt-laden LeEco resigned as chairman of its main listed unit yesterday, just hours after making a public plea for patience amid a deepening financial crisis at the entertainment, electronics and electric vehicles group. Leshi Internet Information & Technology Corp Beijing said Jia Yueting will remain controlling shareholder without any role, having resigned as chief executive in May to focus on the electric car business, of which he will now become chairman. The announcement came after Jia on social media promised to repay debt and reaffirmed LeEco’s electric car commitment. “Please give LeEco some time, please give LeEco car some time,” Jia Yueting wrote in Chinese on his Weibo and WeChat accounts. “We will pay back creditors, suppliers and any other debts.” The plea came about a month after Jia said a cash crunch at LeEco was “far worse than expected”. He previously said the group, whose businesses include telephones, television sets and cars, expanded too quickly from its video-streaming beginnings 13 years ago. Jia’s resignation is the latest development in a week of turmoil, with asset managers seeking to pull investment after a Shanghai court granted China Merchant Bank Co Ltd’s request to freeze US$182 million in assets due to late interest payments. Reuters