Business Daily #1336 July 11, 2017

Electric vehicles to run on HKZM bridge HKZMB Page 7

Tuesday, July 11 2017 Year VI Nr. 1336 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm

www.macaubusinessdaily.com

Economy

Logistics

Consumer confidence index for housing purchases down Page 3

Concessions

Secretary Leong suggests gov’t could completely rewrite new gaming concession legislation Page 7

Strategy

Wanda retreats from theme parks sector with billionaire sale Page 8

Cosco to become main actor in Pacific trade with North America Page 10

Lengthier stay

Real estate

A new bill for the rental regime suggests a minimum of three-year contracts for both commercial and residential property rentals.

The committee revising the bill hopes to submit it before the end of the current Legislative Assembly term. Revisions propose a mechanism to allow the Chief Executive to cap rental prices by taking into account the city’s economic indicators, including inflation and the employment rate Page 2

Respecting the past, preparing the future

Watching China take the lead

One of the main dangers in shifting power dynamics globally is a unilateral approach, increasingly used

by China in initiatives such as One Belt, One Road, but also by countries in Europe, after the decreasing dominance of the United States in fields such as green energy since leaving the Paris Agreement. So explains Julien Chaisse, Director of the Centre for Financial Regulation and Economic Development of the Faculty of Law of the Chinese University of Hong Kong.

Heritage As the World Heritage Committee’s 41st session comes to a close, mandating that the MSAR submit its Protection and Management Plan for the city’s heritage to UNESCO by end-2018, an expert suggests the city set up its own specialized institution to manage, discuss with the public and negotiate with the various parties involved. Page 6

Prices keep pace

Environment | Economics Pages 4 & 5

HK Hang Seng Index July 10, 2017

25,500.06 +159.21 (+0.63%) Worst Performers

China Unicom Hong Kong

+3.83%

AIA Group Ltd

+1.63%

PetroChina Co Ltd

-1.45%

CNOOC Ltd

-0.70%

Cathay Pacific Airways Ltd

+3.41%

China Resources Power

+1.62%

Belle International Holdings

-0.97%

Bank of China Ltd

-0.55%

Link REIT

+3.31%

Cheung Kong Property

+1.33%

China Mengniu Dairy Co Ltd

-0.94%

Sino Land Co Ltd

-0.47%

HSBC Holdings PLC

+1.98%

Ping An Insurance Group Co

+1.29%

Geely Automobile Holdings

-0.81%

China Petroleum & Chemical

-0.43%

AAC Technologies Holdings

+1.90%

BOC Hong Kong Holdings

+1.22%

Swire Pacific Ltd

-0.72%

Lenovo Group Ltd

+0.52%

27° 31° 27° 31° 27° 31° 27° 31° 27° 31° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

Inflation China’s producer price gains held up, signalling that demand is maintaining pace for now. The producer price index rose 5.5 percent in June from a year earlier. The consumer price index increased 1.5 percent.

Page 8

2 Business Daily Tuesday, July 11 2017

Macau Real estate

Three-year rent contracts for residential and commercial properties proposed The revised bill also suggested additional authority for the CE to roll out measures to regulate rental prices based on economic indicators Cecilia U cecilia.u@macaubusinessdaily.com

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he chairman of the third standing committee at the Legislative Assembly (AL), legislator Cheang Chi Keong reported yesterday after a committee meeting that the new bill for the rental regime suggests at least three-year contracts for both commercial and residential property rentals.

According to Cheang, signatories of the bill previously proposed that the suggested extension of the contract to three years could only apply to commercial properties, noting that tenants usually need time to refit shops before starting a business.

However, the chairman said some of the members of the committee voiced displeasure, stating the measure was unfair given that it didn’t also apply to residential properties, resulting in the application of the contract term to both types.

Pursuant to the proposed three-year contracts, landlords of properties cannot terminate a contract in less than three years, but tenants have the right to request termination, the committee noted, given that a number of non-resident workers may reside in the city for less than that period of time.

Meanwhile, another significant proposal of the bill is the mechanism to allow the Chief Executive (CE) to cap rental prices by taking

into account the city’s economic indicators, such as the inflation rate or employment rate.

The chairman stressed that the discussion yesterday concluded that the new points of the mechanism are “temporary” and “exceptional”.

“The mechanism can be imposed to certain types of real estate,” explained Cheang. “For example [...] a coefficient can be rolled out to cope with the high rental prices for private parking lots.”

He added that the mechanism allows the CE to roll out coefficients to cap rental prices for all types of real estate properties.

“This will be one of the ‘tough measures’ to stabilise the city’s development in the future,” remarked legislator Cheang.

The chairman stressed that the proposed bill does not prohibit landlords from raising rental prices.

“What we are proposing is to roll out the highest coefficient and landlords should

not increase rent over the suggested coefficient,” stressed the legislator.

Arbitration mechanism and mandatory notary

On the other hand, the proposed bill also suggested the setting up of an arbitration mechanism in order to simplify the process of resolving any disputes, rather than having to involve the Courts.

“The proposed bill now suggests allowing the government to make use of the existing arbitration centres to resolve rental disputes,” indicated Cheang, while adding that the government could also set up a particular arbitration centre to only handle rental disputes, depending on the number of cases in the future.

According to the legislator, there are currently four arbitration centres: one in the World Trade Centre, one at the Macau Lawyers Association (Associação dos Advogados de Macau), and one each in the Housing Bureau and the Consumer Council.

However, currently only the two at the World Trade Centre and Macau Lawyers Association provide arbitration services.

Regarding the mandatory notary mechanism, Cheang said opinions were expressed that the involvement of a notary when signing rental contracts would protect both landlords and tenants, in particular in regards to the verification of the identities of the involved parties.

“There are cases in which the landlord’s identification is faulty when disputes happen,” revealed the legislator.

Opinions were also expressed that the notary mechanism would be effective in combating illegal provision of accommodation.

Cheang also noted that a mandatory notary would also benefit real estate agencies.

According to the chairman, the committee has completed its deliberation of the final reading, adding that the bill will be able to be sent for voting at the plenary session before the end of this

AL session.

Hopefully the proposal will be signed by the end of this month, legislator Cheang stated.

The first reading of the proposed bill was passed in November of 2015 and the proposed bill has been signed by nine legislators.

Suitable adjustment for healthier development

One of the proposers of the bill, legislator Song Pek Kei, said the intention of revising the rental law is “to adjust the rental market accordingly to ensure the healthy growth of the market, but not to completely intervene in the real estate rental market.”

Recently, representatives of the real estate market voiced the opinion that it is inappropriate for the government to intervene in the free market.

Legislator Song emphasised that the current proposed bill suggests the setting up of a system, rather than the roll out of an instant policy for the real estate market.

Money laundering

Taiwanese customs confiscate money under AML law Cecilia U cecilia.u@macaubusinessdaily.com

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ustoms o f f i cials in Taiwan have confiscated US$380,000 (approximately MOP3 million) from two Taiwanese nationals who transported US$400,000 from Macau.

The seizure came pursuant to the anti-money laundering law enacted in June 28 of this year in Taiwan, Apple Daily Taiwan reported.

The two travellers revealed that they were assigned by an anonymous person involved with casinos to transport the amount to Taiwan.

The two did not respond when asked by the Taiwanese Customs whether they were being paid for their services.

In Macau, according to the

newly revised law “Control of Cross-Boundary Transport of Currency and Bearer Negotiable Instruments (CBNIs)”, arriving passengers are requested to use the Red Channel and fill in a declaration form to declare to Customs Services if they are bringing in CBNIs equal to or exceeding MOP120,000.

Meanwhile, the law also mandates that passengers leaving the MSAR truthfully declare their assets to local customs authorities, otherwise they can be liable to pay a fine of between MOP1,000 and MOP500,000.

Mandatory declaration objects do not include gold and other precious metals and stones, and declarations are not required for transit passengers who have a layover in the MSAR. The new law will be enacted

on November 1 of this year.

The law proposal was advanced by the government in December of last year,

as one of the measures to enhance local anti-money laundering measures in the MSAR and to comply with

the recommendations of the inter-governmental body the Financial Action Task Force (FATF).

Business Daily Tuesday, July 11 2017 3

Macau Economy

Local consumers still pessimistic about buying houses Cecilia U cecilia.u@macaubusinessdaily.com

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verall consumer confidence in the MSAR is slightly down, according to a study, in particular in the area of housing purchases.

The consumer confidence index for housing purchases reached 51.16 in the second quarter of this year, down 4.15 per cent when compared to the previous quarter, according to a study conducted by the Macau University of Science and Technology (MUST), released yesterday.

The index for housing purchases was the lowest among

the six indicators, ‘suggesting a further worsening of the negative sentiment among potential residential home buyers,’ according to the study.

The overall consumer confidence levels of five of the six indicators fell during the second quarter, according to the data.

According to MUST, the index is calculated based on indicators for: ‘local economy’, ‘employment’, ‘consumer prices, ‘living standards’, ‘housing purchase’ and ‘stock investment.’ Index scores below 100 suggest a lack of confidence, while scores over 100 imply a positive outlook.

The confidence index for the three months stood at 85.30, down 1.21 per cent when compared to the first quarter of this year.

‘In the second quarter of 2017, five of the six sub-indexes included in MCCI decreased while only one increased compared with the 1st quarter of 2017,’ notes MUST. The index for ‘local economy’ stood at 102.28, which was the only indicator that experienced growth, up 0.85 per cent quarter-to-quarter.

Although the ‘employment’ index score decreased by 1.15 per cent to 105.52, the number registered was the highest amongst the indicators during the quarter.

‘Consumer prices’ stood at 74.22, down 0.75 per cent quarter-to-quarter, ‘implying a slightly increased concern of Macau residents due to local inflation,’ stated the researchers.

MUST stressed again in its report that: ‘the higher the consumers’ education levels, the higher their confidence,’ adding that such a trend has been consistent in the past 35 quarters. ‘Focusing more on education and training as well as motivating and supporting citizens’ continuous learning and self-enhancement should be of fundamental importance for increasing Macau consumers’ confidence,’ notes the institute.

year-on-year.

According to the latest data released by the HKTDC Research, Zhuhai’s tertiary industry sector accounted

for 48.1 per cent of the city’s GDP composition, while the secondary industry sector represented 49.7 per cent of the total. S.Z.

Industry

Zhuhai leading growth in the Greater Bay Zhuhai recorded the strongest industry growth in the Pearl River Delta region from January to May of this year, according to information provided by that city’s statistics bureau, the Hengqin New Area official online portal reported.

According to the bureau, the overall added value of Zhuhai’s industries in the first five months of 2017 amounted to RMB44.48 billion (US$6.52 billion/MOP52.62 billion),

representing a 13.5 per cent increase year-on-year.

The main industries contributing to the increase include advanced manufacturing, equipment manufacturing, and high-tech manufacturing.

According to the portal, Zhuhai also registered a 13.8 per cent growth year-onyear in infrastructure construction projects over the same period, totaling RMB55 billion in investment.

Amongst the most important infrastructure developments, the Zhuhai statistics bureau cited projects such as the Hong Kong-Zhuhai-Macau Bridge (HZMB), the Zhuhai Port, and the Xianghai Bridge, which is part of a tridimensional hub being developed within the framework of the 13th Five-Year Development Plan, NewsGD. com reported.

Consumption was also reportedly up 10.1 per cent,

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4 Business Daily Tuesday, July 11 2017

Macau

Professor Julien Chaisse, Director of the Centre for Financial Regulation and Economic Development of the Faculty of Law of the Chinese University of Hong Kong

Interview | Environment

Green power dynamics Avoiding a unilateral approach will be key to moving forward both in business and the environment, explains Professor Julien Chaisse, Director of the Centre for Financial Regulation and Economic Development of the Faculty of Law of the Chinese University of Hong Kong. Initiatives such as the Greater Bay Area and One Belt, One Road, coupled with a wider shift in power dynamics, are hallmarks of China’s expansion, albeit through investment rather than negotiation of trade agreements. Meanwhile the U.S. has given up its leadership role in clean energies, but the effects may only be seen in a decade’s time Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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ith the G20 happening this past weekend, what are some of the direct parallels you can see between what took place and what we need to inform people about the Paris Agreement?

I think there are two important things.

The first is: the U.S. at the federal level decided to leave the Paris Agreement.

That’s a big decision because the U.S. at the time of Obama was leading the negotiations on climate change.

And so last year, just a year ago, you had three leaders – the U.S., the EU, China – now we are left with only two leaders. The U.S. is stepping down, at a federal level, at a central level if I may say. That doesn’t mean the Paris Agreement becomes irrelevant to the U.S. as a whole because some states, most states in fact, most cities – will stick to the many promises in the Paris Agreement. However, I think it has an impact on the U.S. leadership both when you look at climate change issues – no one is going to rely anymore on them, that U.S. leadership, people will be looking more at the EU and China. And this is what’s going to impact the G20, because in addition to the Paris Agreement, Trump mentioned that he wanted to renegotiate NAFTA (North American Free Trade Agreement). He also expressed many doubts about the WTO (World

Trade Organization). So overall the feeling at the G20 in Hamburg this [past] week is that the U.S. is in retreat, wants to get less involved in international affairs. Some people may think it’s good, because it had a cost; some people may say it’s bad, but the immediate effect is that it’s going to reinforce the leadership of both China and the EU. By being located in this part of the world, and with China pushing the Greater Bay Area, what will be the impact of letting China step in to take on that role?

I think what is now changing is that we don’t have enough leaders at a global level to encourage others to agree on trade agreements, investment agreements, climate change agreements, whatsoever. We are losing this traction to do things at the multilateral level. So, in that connection, China is developing a different approach, which is I think more unilateral.

So China is not against multilateralism, but it’s not really a country that is transparent enough to engage the others. By this I mean the Chinese government is doing things which can be very interesting, very important, but it’s very hard to predict what they are going to do and how far they are going to go. For instance, on the special economic zones, they have the old ones and there’s a new generation now including Zhuhai. But what are

going to be the concrete incentives given to national and foreign companies when they set up in Zhuhai?

No one knows. So is Zhuhai going to be a success? No one knows.

“The industrial lobbies in Germany really need to get access to a market like China – you’ve got to think Siemens, BMW, all the heavy industries. For them it’s very, very important” People may say that, ‘well, it is China led, so it’s going to be a success, whatever it takes, whatever it costs’. But there are doubts, because it’s a totally different approach, and this idea that China decides where to set up zones, which by the way may compete or create competition for countries like Vietnam, Kazakhstan, etc., these countries may in turn take the same kind of approach. So I think we are going towards something which is more difficult to control.

Unilateralism can work well for a country like China, as long as the others do not replicate some of the solutions if they are good. That’s one thing.

And also the Belt and Road, which is important. Is it something which is a true project, or is it just marketing? It’s very hard to say. Because it’s very unique, in terms of design and ambition. The ambition is huge and the design…well it’s not a trade agreement. It’s not something that’s the result of negotiations, where you have China and 60 countries saying ‘okay we agree on that’. There’s nothing of this kind. It’s just China approaching one-by-one a number of partners to say ‘this is what I want to give, and in exchange, we’ll see later’. You can say it’s soft power, or it’s a form of perhaps soft-hard power. But in any case, it is very hard to say how things are going to unfold because there are no institutions that are going to review what’s happening, it’s very hard to get data, to get information about certain investments that are reported now in Kazakhstan, Tajikistan. It’s happening, but how much is it viable, profitable, no one knows.

So that too is interesting and difficult.

I think that’s the big difference with the world of the [19]90s where you got the WTO, the Rio Declaration, NAFTA. These agreements could have been bad to some extent, but they were public, they could be read, they could be criticized. They were the basis to both predict the future and suggest reforms.

I think we are moving towards something which is more unilateral and more difficult to control, more difficult to predict.

On your side of the Delta, do you find that it is easier to obtain information about the Greater Bay Area from the government?

I would need to compare, to know exactly what’s been asked from the

Business Daily Tuesday, July 11 2017 5

Macau Macau government. On the Hong Kong side I think there are some efforts to disclose a number of information. It’s not perfect, but for the time being, I think there are a number of institutions, even NGOs (non-governmental organizations) or people that are around and that can encourage the government to share a number of information. But all this is very relative, and I would say that also, yeah, the Hong Kong government could do better.

How do you see the power-shift from the U.S. to China?

I think the power shift is something that’s more like a process and in fact it started in the mid-2000s. Meaning that in the mid-2000s we had a power shift from the trans-Atlantic relationship – U.S.-EU – to the Asia-Pacific.

That’s very obvious when you look at trade, the type of investment, the number of transactions. That’s something I began to observe really in 2000, mid 2000, 2006/2007.

It’s not very precise, but it’s in these years that you have first a decline of European economies, and then you have Greece, Spain, many other issues. I mean you can choose difficulties. To also digest the 2014 enlargement [of the EU], we’ll see in the coming years how things evolve.

But in that process, the connection, the ties between the EU and the U.S. have somehow lost their strength.

And at the same time you have the rise of China, plus India, and a few other countries.

So the U.S. is not out, because the U.S. tried to maintain a presence, and a strong relationship with Asia. I think that was Obama’s idea, which was good - this vision that Europe was a good partner, but should not be the only partner and for a number of reasons, economic, but also military, just strategic. It was very important to anchor the U.S. in the Pacific and Asia Region. He [Obama] tried, he tried hard – the TPP, many other things.

And it’s very unfortunate that in just a few weeks, a few months, you get Trump and not the Democrats. You had the TPP and the U.S. withdrew and a few other things, including the Paris Agreement. So the consequence I think is to leave the region to China, in fact, as simple as this.

“That’s the big difference with the world of the [19]90s where you got the WTO, the Rio Declaration, NAFTA. These agreements could have been bad to some extent, but they were public, they could be read, they could be criticized. They were the basis to both predict the future and suggest reforms” I think we don’t have to be afraid of saying so, this is simply what’s happening. I’m not judging, nothing is good or bad, it’s just a matter of geo-strategy.

The U.S. is in retreat from that region, so the field is empty, someone should take the lead. Can it be Japan?

Very difficult, historical reasons that you understand. Japan has been in recession for many years so they don’t really have the capacity. They can maintain their role and the importance, but they cannot increase it.

The power that’s on the ascent is China, that’s very clear.

If we look beyond trade, the South China Sea, the other issues about economic zones in the East Sea, and many other issues. The recent visit of Xi Jinping in Hong Kong saying CY Leung has done a good job and further declaration saying that the Sino-British declaration is materially irrelevant. You feel that the pressure is increasing, and I think that’s going to increase in fact.

“The power that’s on the ascent is China, that’s very clear” And you know, if you go to - I do a lot of work in countries like Vietnam, Pakistan – people would say the same.

I mean, who is willing to do business in most of these countries? Not the Americans, not the Europeans.

Alliances are being established.

Germany is partnering with China.

What are the implications for Europe?

Germany is a major EU exporter.

It’s the country that’s really leading the EU exports, heavy industry that didn’t suffer from the strong Euro. I understand the German interest and in particular I understand the German lobbies. So the industrial lobbies that in Germany really need to get access to a market like China - you’ve got to think Siemens, BMW, all the heavy industries. For them it’s very, very important.

Now, politically I would be quite careful, because the EU is navigating in very troubled waters. You’ve got Brexit, there were a few elections in the recent months that have been somehow reassuring – Austria, Netherlands, France – I understand the need for Merkel to preserve the interest of the German industry, but at the same time there is a real risk of EU implosion, of delusion at least.

So the very idea of a specific German alliance with China, I don’t really believe in that and I think that would be a mistake. There are other ways for Germany to lead some EU negotiations, for the benefit of the EU as a whole and Germany in particular.

I would be very careful with all these unilateral initiatives within the EU. Do you see another Paris Agreement coming about, without the U.S.?

The UN has carried on negotiations, there’ll be COP this year, later in November, again next year. They already decided it’ll be in Bonn [Germany] this year and again next year. So they still work on a number of issues.

Frankly I would be cautious on this and say, what they got in 2015 was already largely unexpected. If you had asked many experts in say September, October of 2015 ‘will they get anything in Paris in December?’

Most people would have said ‘oh, no. It’s impossible’. And I remember talking to many people at that time, they were very sceptical.

So the Paris Agreement is a little miracle, there was momentum to get that done, with John Kerry and a few other key people.

The Paris Agreement in itself is a bit disappointing. There’s not much binding in it, it’s up to each country.

In the meantime we’ve lost the U.S., so I don’t really imagine China, the EU going faster in the coming two or three years. I think it’s going to take another five years, or perhaps a decade, before we get another deeper Paris Agreement.

In the meantime what’s going to be important, is to improve the linkages between the Paris Agreement and the WTO, the trade organization, and some of the investment treaties which are in force or which are being negotiated.

This is, in the short-term, what countries should be doing: ensuring that

free trade does not constitute an obstacle to environmental protection and that investment protection, liberalisation, does not also create an obstacle to climate-change related investment – clean energies and the like. And we get some signals that it’s becoming a problem.

What about in regards to the U.S.China relationship itself? What is the first industry that the U.S. will then fall behind China in?

I think it’s very likely that for the U.S. there’ll be a kind of redirecting of investments, modernization of the old industries – oil, gas, fracking – because it’s highly profitable and that provides the energy needed to the country’s economy. So that’s highly probable, and at the same time a number of companies that could have invested more in clean energies will not do it. They will invest less in research, because the market is not ready, or will not be that attractive in the U.S. for the coming four or five or eight years. So that’s going to in fact infiltrate all the clean energies [with the effect] that the U.S. risks being a bit behind the other major economies.

At the end of the day, the worst effect falls on the citizens. Within the next ten years, will that mean citizens will be unable to afford their energy in the U.S. if we continue like this?

I don’t think it’s going to be such a catastrophe. But it’s certain that, for the most important part, if we look beyond economics, the U.S. is not contributing to the global effort to reduce gas emissions, for instance.

And to develop clean energies. So that’s something that is going to harm the U.S. I think politically for quite some time, really.

Then there will always be some U.S. based companies that could work for the foreign markets. So – increase

of pollution in the U.S., perhaps a problem in terms of also mindset.

You know, after all, even at the time of the Obama administration there were a number of scientists within the U.S. who denied the climate change effects, so what I perceive is a risk for the U.S. to be lagging behind, to miss that train that would have contributed to a better understanding of climate change issues and that could have brought the country to the forefront on that fight.

“What I perceive is a risk for the U.S. to be lagging behind, to miss that train that would have contributed to a better understanding of climate change issues and that could have brought the country to the forefront on that fight” For what’s purely economic, I don’t think the losses will be severe and immediate, and that’s why Trump can carry on for quite a while with that policy.

That’s the problem of climate change, if you think of the climate itself or the technologies that support green energies, you’re going to feel that in 10 years and beyond, because at the same time it’s also very likely that the others are going to accelerate. advertisement

6 Business Daily Tuesday, July 11 2017

Macau Opinion

Albano Martins*

Events difficult to forecast 1. I remember that my forecast for inflation in June in Macau is that it will be between 1.27 and 1.29 per cent.

At best or at worst: between 1.26 and 1.30 per cent.

If it happens, it will be a big step forward.

However, the indicator needs to be much improved.

Yesterday we learned China’s inflation rate in June.

Ours only comes out on July 21! And we are so small!

We must learn from China to make statistics an instrument of economic policy and not simply for history.

2. [Legislator] Pereira Coutinho, who shot himself in his healthy foot, with all that anger thrown at the Liaison Office, shot himself again, but this time in his head.

Who believes that a simple department decides by itself whom the Head of Delegation is going to have dinner with?

But why does anyone think it is reasonable to force the owner of the house to invite him for dinner?

3. The young Judiciary Police officer, who mistreated a small dog in January of this year, has been suspended.

This was a simple accident along the path, because until now the cooperation between the police, including the fire department, and Anima, has been impeccable!

Therefore, seeing this accident as more than this is a mistake.

Of course it was a more serious act, because it came from a police officer, in violation of the law that he was supposed to uphold!

But walking behind the man with a war axe wanting to cut off his head or make his life hell does not make sense! His attitude was wrong, he was punished by the Secretary and probably by the animal protection law and that’s all!

Let me be straight, the police should not behave under a corporate spirit!

4. Trump is going to be party hype for some more time.

Trump embarrasses us and, of course, much more so his own people.

These accidents also happen in democracies, fooling those who think the free exercise of their rights only produces fairer, healthier systems!

With his favourite horse, Twitter, Trump has been clumsy, quickly sinking the pride and respect of the U.S.A., by surfing on a wave of daily madness!

A danger to humanity.

An American Kim Jong Un, playing cowboys with an ego the size of a nuclear arsenal!

It is much easier to predict inflation than where the insanity of some great people goes! * an economist and contributor to this newspaper

Heritage conservation

Heritage and the MSAR, a long affair As the 41st session of the World Heritage Committee (WHC) reaches its conclusion, the credibility of local authorities is being put to the test, says António Conceição Junior, a member of the Macau Cultural Heritage Committee Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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elays in the implementation of the Protection and Management Plan (PMP) could affect the city’s heritage, points out António Conceição Junior, one of the incumbent members of the local Cultural Heritage Committee.

“One of the main issues at stake here is, first of all, the credibility of the institution that is in charge of fulfilling the recommendations of a Management Plan,” he told Business Daily.

The comments come as the 41st session of the World Heritage Committee (WHC) is wrapping up in Krakow (Poland), set to end July 12.

In the meeting so far, the WHC has adopted a draft regarding Macau’s current state of heritage affairs, in which it criticized the state of conservation of World Heritage properties in the MSAR, as one of 16 other cases presenting ‘serious problems,’ according to a release by the Cultural Affairs Bureau.

UNESCO initially requested that the Macau SAR Government submit the PMP by February 1, 2015. The organization requests it now be submitted

by December 1, 2018.

Managing the management

Overall, the WHC report raised issues relating to poor heritage management and the inability of the local government to fulfil previous recommendations delivered by the State Party of China, as well as the Committee itself.

If the authorities want to “maintain a highly responsive and efficient response,” Conceição Junior advocates that the management of heritage “would require a specialized institution that should be separated and equipped with specialists that could propose a management programme and with capability to discuss, educate the population, and negotiate with the various interests in Macau.”

In previous comments to Business Daily, Imon Shams Sharif, head of the Heritage Management Programme at the Institute for Tourism Studies (IFT), explained that the local authorities “would try their best not to de-list [the city]” from the World Heritage list, adding however that, if “the main value [of a site] is lost, [UNESCO] can de-list it.”

In such a case, Conceição Júnior believes that “there would be a downgrade in the status of the city,” arguing that it would also represent “an international humiliation of Macau after the city’s candidacy that started in 2001 was accepted in 2005.”

On the waterfront

On the list of concerns raised by UNESCO are future construction projects on the new reclaimed land areas of Zone B and building height restrictions for the projects planned at Fisherman’s Wharf – namely that of the Legendale Hotel.

Noting that he does not have detailed knowledge about that particular

Heritage conservation

The Cultural Affairs Bureau has spent nearly MOP70 million on the ‘renovation and refurbishment’ heritage projects (both locally Projects

case, Conceição Junior suggested that many problems could be “avoided” if there were “clear rules” defined through a “master plan for Macau and islands.”

Another reason for concern raised

by UNESCO, which has been appointed by local political representatives, such as the New Macau Association, as well as protection groups formed to pressure the government, such as the League of Guia Lighthouse Protectors, refers to construction projects in the surrounding area of Guia hill.

The main case in point related to a residential building located at 18-20 Calçado do Gaio, a project by San Va Construções e Fomento Predial initially planned to reach 126 metres – Guia Hill is 91 metres high – of which construction was suspended in 2006 due to public pressure.

By executive decision in 2008, the height limit for construction in the area was set at 52.5 metres when the construction had already reached 80 metres.

In reply to Business Daily’s questions, the Cultural Affairs Bureau said that the bureau, ‘through the State Administration of Cultural Heritage, has provided the UNESCO with explanations and, at this stage, has not yet received comments from the UNESCO through the State Administration of Cultural Heritage’ on the matter.

and UNESCO-listed) it conducted in 2016, according to information provided by the bureau. The amount was distributed as follows: Renovation and refurbishment cost

Treasure of Sacred Art of St. Joseph’s Seminary

MOP7.8 million

Patane Library

MOP26 million

Chong Sai Dispensary (No. 80, Rua das Estalagens)

MOP14 million

Maritime Workshops (Doca D. Carlos I, SW)

MOP22 million

Macau’s attendance

The President of the Macau Cultural Affairs Bureau (IC), Leung Hio Meng, and the head of the Cultural Heritage Department,

Leong Wai Man, have been attending the WHC meeting as part of China’s delegation sent by the State Administration of Cultural Heritage.

Business Daily Tuesday, July 11 2017 7

Macau Concessions

Gov’t could review gaming concession legislation: Secretary Leong

T

he government could completely redo the legislation relating to the new gaming concessions, according to statements made by the Secretary of Economy and Finance, Lionel Leong Vai Tac. Given the increased competition regionally - one of the major developments

since the original gaming concessions were granted - the government will ‘study the viability, including evaluating the necessity of reviewing the legislation, among other options,’ states a government press release.

The Secretary pointed out that the government will be particularly attentive to the gross gaming revenues

registered during the ‘high months’ of July and August this year, and conduct an evaluation on a ‘macroscopic and economic environment’ scale. In addition, the government will ‘proceed with an economic analysis of the first semester of this year, with the objective of understanding the most recent economic structure of the city’.

While not clarifying whether the two gaming concessions set to come up in 2020 – those of MGM China and Sociedade de Jogos de Macau – would be extended for a further two years to match the expiration of the other four concessions/sub-concessions, the Secretary reiterated the termination dates.

Gaming

New headquarters for Power of the Macao Gaming Association Local gaming activist association Power of the Macao Gaming Association (PMGA) has launched its new official headquarters in the centre of the city, inaugurating the new space last Saturday.

The director of the association, Lei Iok

Po, reported that there are currently 1,800 members comprising the PMGA. Before the opening of the official headquarters, the association was registered as being located at the Associação dos Trabalhadores da Função Pública de

Macau (ATFPM), where legislator José Pereira Coutinho also locates his main office.

The PMGA director said they took half a year to settle at the current office.

“Our mission would be more or less

the same as before,” said Lei, stressing that the association strives for rights through peaceful approaches.

In addition, the director said the association would also strive, on the side, to conduct charity work.

The project is scheduled to be completed and put into use by the end of 2017, in tandem with the completion of the super bridge.

The stations will serve different types of electric vehicles, including public buses, long-distance coaches, travel and shuttle buses, as well as electric taxis.

Regarding the types of chargers, Power Grid’s plan is to install a total of 429 Direct Current (DC) charging stations and 121 Alternating Current (AC) charging stations.

Business Daily contacted relevant government departments but had not received a reply by the time this went to print.

Power Grid has investments and operations in networks in several provinces in China, such as Guangdong, Guanxi, and Yunnan, with a total service area of roughly one million square kilometres, according to the company.

Contacted by Business Daily, the company had not provided further details on its investment plans by the closing of this edition.

According to previous reports, China is currently the world’s biggest electric vehicle market, with a total of 352,000 new electric vehicles in 2016, compared with 159,000 in the U.S. in the same period, MIT Technology Review reported.

HZMB

Super bridge to cater for electric vehicles A project for a green energy transport solution was announced for the Hong Kong-Zhuhai-Macau Bridge, starting by the end of 2017 Sheyla Zandonai sheyla.zandonai@macaubusiness.com

A plan to build a total of 550 electric vehicle-charging stations on one of the artificial islands of the Hong Kong-Zhuhai-Macau Bridge (HZMB) was announced during the weekend,

state news agency Xinhua reported yesterday.

According to the agency, the Guangdong branch of the China Southern Power Grid Co. Ltd. is in charge of implementing the system, with total investment of RMB90 million (US$13.22 million/MOP106.46 million).

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8 Business Daily Tuesday, July 11 2017

Greater China Inflation

Factory prices subdued on modest raw materials recovery Consumer prices rose 1.5 per cent from a year earlier, in line with market expectations and May’s reading Sue-Lin Wong

C

hina’s producer price inflation was unchanged in June and remained well off highs seen earlier this year, amid lingering oversupply issues in the steel sector and as signs of economic weakness weighed on the outlook for prices.

The producer price index (PPI) rose 5.5 per cent in June from a year earlier, the National Bureau of Statistics (NBS) said yesterday. This

was in line with analyst forecasts and unchanged from the previous month. Prices of raw materials are making a modest recovery, helped by stronger futures prices in China over the past few weeks, after an earlier hit taken from a broader cooling in economic activity since March.

China’s June consumer prices rose 1.5 per cent from a year earlier, in line with market expectations and May’s reading, the NBS said, with food prices continuing their

declines albeit at a slower pace.

There are some concerns among analysts that price pressures could weaken throughout the rest of the year as economic fundamentals soften.

“The upshot is that, having eased in previous months, price pressures appear to have stabilised in June,” Julian Evans-Pritchard from Capital Economics in Singapore wrote in a note.

“Nonetheless, with slowing credit growth likely to weigh on economic activity in coming quarters we think that, volatility in food prices aside, inflation still has further to fall. This will disappoint those hoping for a

sustained period of reflation that could help to erode corporate debt burdens.”

Food prices, the biggest component of the consumer price index, fell at a slower 1.2 per cent from the previous year, after sliding 1.6 per cent in May and 3.5 per cent in April.

“Falling food prices can be attributed to a high build-up of food reserves and seasonal factors,” Zhu Baoliang, chief economist at the State Information Centre (SIC), said, according to a story published on Monday in China’s Financial News newspaper, affiliated with the People’s Bank of China (PBOC).

Tepid inflation comes despite signs of a pickup in factory activity. China’s manufacturing sector expanded at the quickest pace in three months in June, buoyed by strong production and new orders.

Meanwhile, spot iron ore and construction steel prices have risen as investors continued to focus on China’s capacity cutbacks and industrial upgrade in the steel sector.

“High margins after the government’s effort to eliminate low-grade steel are enticing mills to produce more steel, which increases the need for iron ore,” said Zou Mingdong, Shanghai-based steel manager at Zhongcai Merchants Investment

Group.

“However, the rising price doesn’t change the fundamental situation of oversupply and weak demand.”

China’s biggest steel maker, Baoshan Iron & Steel, cut its main steel products prices for May and June after a long series of increases.

Key Points China June PPI +5.5 pct y/y (poll +5.5 pct), same as previous month PPI -0.2 pct m/m in June vs -0.3 pct in May Prices of raw materials make modest recovery But oversupply, weak demand remain problems - analyst China June CPI +1.5 pct y/y (poll +1.5 pct), same as previous month

On a month-on-month basis, the PPI fell 0.2 per cent in June.

China is targeting economic growth of around 6.5 per cent this year and inflation of 3 per cent. Chinese Premier Li Keqiang said in a speech at the World Economic Forum that China is capable of achieving its full-year growth target and controlling systemic risks despite challenges. Reuters

Strategy

Wanda steps back from theme park, hotel drive S&P downgraded Wanda Commercial in December citing rising financial leverage and slower-than-expected asset disposal Clare Jim

Dalian Wanda Group said it would sell Chinese tourism projects and hotels to Sunac China for US$9.3 billion, marking a step back for the property giant from its theme park ambitions.

The sale - the second-biggest real estate deal ever in China according to Reuters data - is however expected to help Wanda cut its debt pile and strengthen its case for a listing on the Mainland after it delisted from Hong Kong last year.

Wanda said it would sell 91 per cent of 13 cultural tourism projects, that typically include theme parks and leisure complexes, as well as 76 hotels to the acquisitive Tianjin-based developer Sunac for a total of RMB63.18 billion.

The Chinese group, with businesses spanning real estate, films, sports and entertainment, had plans to build at least 20 such cultural projects around China. Its billionaire owner Wang Jianlin had last year said his “wolf pack” of parks would beat U.S. rival Walt Disney Co. “This (deal) signifies a

retreat from Wanda’s previous strategy in cultural tourism, and marks a pivot to an asset-light strategy,” said Qin Gang, senior researcher at State Information Center, a government-linked thinktank.

Key Points Wanda will sell 91 pct of 13 tourism projects for RMB29.58 bln Will also sell 76 hotels for RMB33.6 billion Move could mark a retreat from major push into theme parks Wanda Hotel Development shares more than double on the news

While Wanda did not give a reason for the sale, local business magazine Caixin quoted Wang saying the deal would greatly reduce Wanda Commercial’s debt level and help the property unit to achieve an “asset-light” operation.

“Through this asset transfer, Wanda Commercial’s debt ratio will be greatly reduced, all the proceeds

will be used to repay loans.

Wanda Commercial plans to repay most of the bank loans this year,” Wang told Caixin.

S&P downgraded Wanda Commercial in December citing rising financial leverage and slower-than-expected asset disposal at China’s largest commercial developer. Another downgrade would push the rating into “junk” category.

Wanda has been investing heavily in entertainment, leisure and financial businesses and the buying spree has drawn the attention of Chinese regulators, who ordered lenders last month to assess exposure to overseas deals by Wanda, HNA Group, Anbang Insurance and Fosun.

Wanda had earmarked a more than RMB300 billion investment for its cultural and tourism projects. It has also been very active globally, buying U.S. cinema chain operator AMC Entertainment Holdings Inc and taking a controlling stake in U.S. film studio Legendary Entertainment last year.

The 91 per cent stake in Wanda cultural and tourism projects, located across the country from the northern city of Harbin to Kunming in the south, will fetch RMB29.58 billion. The price tag for the hotels is RMB33.6 billion.

Sunac and Wanda are expected to sign an agreement

by the end of this month.

Shares in Wanda Hotel Development surged more than 150 per cent after the news.

Wanda said Tianjin-based Sunac, led by magnate Sun Hongbin, will be responsible for all the loans for the

Wanda owner Wang Jianlin

projects, but the brand name and design of the projects will remain unchanged, and they will still be operated and managed by Wanda.

Sunac, whose shares in Hong Kong were suspended from trading ahead of what it said would be a “very substantial acquisition” announcement, declined to comment further. Reuters

Business Daily Tuesday, July 11 2017 9

Greater China Traders

Quants wanted as era of easy bond returns draws to end The lack of hedging tools has been partly why overseas holdings of onshore bonds is less than 2 per cent On a recent morning in Shanghai’s Lujiazui financial district, Xiong Yun’s eyes darted around the four computer screens at his desk, scanning activity in China’s bond and futures markets.

Staring at the matrix of numbers, the former BNP Paribas SA trader was making sure his algorithms pounced on any arbitrage opportunities that popped up between government notes and their derivatives contracts. Xiong, now a fund manager and partner at Lingwang (Shenzhen) Investment Management Co., is part of China’s new breed of traders, making money from more than just plain bonds.

While Xiong’s approach would seem standard in credit markets around the world, debt-linked derivatives have until recently been a non-factor in China. But they’re being used more after a central bank clampdown ended a three-year bull run and increased volatility: in the past year, trading in bond futures more than doubled and interest rate swaps volume rose by a third. The shift brings China’s US$10 trillion bond market closer in line with developed economies, and should offer more incentives to foreign investors who’ve stayed away.

“Derivatives such as bond futures and interest-rate swaps are on the rise, as traders pick up new tools to find returns,” said Xiong, whose firm manages RMB3 billion (US$441 million) and has returned about 7 per cent this year. “It’s a sign that the market is maturing and it

gives quants like us more opportunities.”

China’s bond traders have had an easy time in recent years, with total returns of 11 per cent in 2015, according to Chinabond. But the market turned late last year after the People’s Bank of China took steps to rein in growing risks in the financial system. Returns fell to 8 per cent in 2016, said Chinabond, and this year are 1.3 per cent. Adding to the pain was a clampdown by authorities on leverage, which had been widely used to boost strategies. Yields on 10-year government bonds have climbed 57 basis points this year to 3.58 per cent, following a 19 basis point increase in 2016, according to Chinabond.

‘Total value traded of benchmark 10-year government bond futures was RMB5.8 trillion this year’ One reason the market has been volatile is that there is a lack of consensus on market outlook, said Le Huajun, an investment manager at Bluestone Asset Management Co. As making money by simply owning bonds became more difficult, traders have turned to derivatives, such as futures and swaps.

Lu Congfan, an assistant

fund manager at HFT Investment Management Co., is among a growing legion of market participants who have reacted to recent events by creating trading accounts for bond futures. Derivatives are more useful now that market has become volatile, he said.

A fully fledged derivatives market is also a necessary element in luring foreign investors, who use the instruments to hedge their positions. The lack of hedging tools has been partly why overseas holdings of onshore bonds is less than 2 per cent, despite the fact that China has almost fully opened its interbank market to offshore participants. The Mainland’s bond link with Hong Kong, which started last week, is a sign of how keen authorities are to attract assets.

Total value traded of benchmark 10-year government

bond futures was RMB5.8 trillion this year through June 9, according to the China Securities Regulatory Commission -- a relatively small size, though a 155 per cent increase from the same period last year. Yuan-denominated interest-rate swaps volume rose 32 per cent year-onyear to RMB2.7 trillion in the first quarter, according to the PBOC. The Mainland still has a long way to go in comparison with more developed fixed-income markets. The China Financial Futures Exchange only has contracts on 5- and 10-year government bonds, for example, and there are no options contracts on swaps and futures. Government interference still looms large: two years ago a crackdown in the stock-index futures market saw a 99 per cent plunge in volume.

Still, appetite is growing

among investors, though the fact the market is fairly new poses difficulties when it comes to building teams.

Xiong, one of the first into government bond futures when trading resumed in 2013 after an 18-year halt, said that because it’s so hard to find good derivatives traders, he chooses ones with math and science backgrounds and spends about a year training them.

Wang Ming, chief operating officer at Shanghai Yaozhi Asset Management Co. who said his fund was one of the first to add bond futures to its portfolios, is also on the lookout for recruits who can do more than just buy and sell fixed-income securities.

“We hope to hire versatile traders, preferably those who know how to trade both cash bonds and bond derivatives,” said Wang. Bloomberg News

Payment systems

Stripe strikes global partnerships with Alipay, WeChat Pay Founded by brothers John and Patrick Collison in 2010, Stripe provides technology that enables merchants in 25 countries to accept payments online Anna Irrera

Silicon Valley start-up Stripe has partnered with digital payment providers Alipay and WeChat Pay to enable merchants using its platform globally to accept payments from hundreds of millions of Chinese consumers.

Starting Sunday, the partnerships will allow online merchants using Stripe to integrate the ability for Chinese users to pay with Alipay and WeChat Pay on their websites, the company said.

Stripe hopes the integration will help boost its revenues by allowing clients to tap China’s vast consumer market, where credit cards account for only a fraction of online spending, the company said.

Alipay is the flagship payment service of Ant Financial, the financial affiliate of major Chinese ecommerce company Alibaba Group Holdings and has over 520 million users. WeChat Pay has more than 600 million users and is the payment app of entertainment and social network firm Tencent Holdings.

“If you are an internet business this unlocks a new vast customer base,” John Collison, Stripe’s president and co-founder, said in an interview. In turn, Chinese consumers will have expanded choice as to which international online merchants they can purchase products and services from, he added.

“If you are an internet business this unlocks a new vast customer base” John Collison, Stripe’s president and co-founder Founded by brothers John and Patrick Collison in 2010, Stripe provides technology that enables merchants in 25 countries to accept payments online. It charges a fee on each payments

transactions processed through its platform.

“If we can help a business double their sales, then it doubles our revenue from that business,” Collison said.

The partnership coincides with the company’s launch in Hong Kong.

One of the most valuable venture-backed financial technology companies globally, Stripe has risen in popularity among software developers and online merchants because of its ease of use.

It is among the cohort of young fintech companies seeking to reinvent

the payments landscape by taking better advantage of digital technologies to offer more user-friendly financial services and products.

It had previously partnered with Alipay to enable only the U.S. merchants on its platform to integrate the Chinese payment service. The new global partnership builds on that experience.

“Demand for services from Chinese consumers is at all-time high,” Souheil Badran, president of Alipay for North America, said in an interview.

The new partnerships will connect them to hundreds of thousands of Stripe-powered businesses around the world, he added. Reuters

10 Business Daily Tuesday, July 11 2017

Greater China

M&A

Mainland takes lead in Pacific shipping after US$6.3 billion deal The Cosco-Orient Overseas combination would have the capacity to move a weekly average of 77,208 containers between Asia and North America Kyunghee Park, Daniela Wei and Shawna Kwan

C

hina is the new leader of shipping trade to the Americas.

State-owned Cosco Shipping Holdings Co.’s US$6.3 billion offer to buy Orient Overseas International Ltd. would create an entity that’s the biggest shipping company moving boxes to the North American continent from Asia, beating Copenhagen-based A.P. MollerMaersk A/S and France’s CMA CGM SA. The takeover, announced Sunday in Hong Kong, would also create the biggest sea-box carrier through the Pacific Ocean.

The consolidation may help raise container rates on the Americas route -- the second-busiest in the world -- a critical piece in the survival of the shipping industry that has been battling slumping charges and overcapacity. Earlier this year, Maersk and Hyundai Merchant Marine Co. said that they managed to get higher fees from customers on their annual rate-negotiation talks on the trans-Pacific routes. Moving goods to Europe from Asia is the world’s biggest shipping trade route.

The Cosco-Orient Overseas combination would have the capacity to move a weekly average of 77,208 containers between Asia and North America, based on end-May data from Alphaliner, a shipping data provider. In the Asia-Europe trade lane, the combination will become only the third biggest.

Shares of Orient Overseas surged 20 per cent to HK$72 yesterday in Hong Kong, the biggest gain in eight years. Cosco shares jumped 5.4 per

cent following Friday’s 11 per cent advance.

The Mainland shipping company will receive bridge loans from Bank of China to help fund the purchase, Chief Financial Officer Deng Huangjun told reporters in Hong Kong Monday.

Officials also said Cosco has no plans for further acquisitions and has no timeline on when it expects to get all the regulatory approvals needed to complete the transaction.

“There’s a very good chance we will get all the regulatory approvals because we always comply with all rules,” Cosco’s Executive Director Xu Zunwu said at a press conference in the city.

Cosco’s offer to buy Orient Overseas was a 49 per cent premium, based on the average 20-day trading price before the announcement.

That is the biggest for a major container-shipping deal since 1997, the year Hong Kong passed from British hands to China. In the same year, Singapore’s Neptune Orient Lines Ltd. bought APL Ltd. for $833 million, offering a premium of 57 per cent.

The controlling shareholders of Orient Overseas have accepted Cosco’s offer at HK$78.67 a share. The family of Tung Chee-hwa, the first chief executive of Hong Kong, holds about 69 per cent of the shipping line.

The deal was announced a little more than a week after China’s President Xi Jinping visited Hong Kong as the former British colony marked the 20th anniversary of the handover.

Tung, currently a vice chairman of China’s top political advisory body, Chinese People’s Political Consultative Conference, was hand-picked by Beijing in 1997 for the top job in the financial hub and has been advising

the central leadership on foreign policies especially China-U.S. relations.

The purchase could also stoke concerns the city’s role as a major shipping and financial hub is diminishing amid further inroads by stateowned companies and the rise of other centres on the Mainland such as Shenzhen, Guangzhou and Shanghai.

“Rather than being one shiny spot, Hong Kong is now more seen as part of the Pearl River delta,” said Yu Zhanfu, a Beijing-based principal at Roland Berger Strategy Consultants.

“For the companies being acquired, there’s more to gain than to lose.

They will benefit from having closer access to the broader market in the Mainland.” Mainland Chinese companies can also learn from the city-based firms that have thrived in a market-based environment, he said.

‘Cosco’s offer to buy Orient Overseas was a 49 per cent premium, based on the average 20-day trading price before the announcement’ China and the U.S. have been negotiating over trade as President Donald Trump pushes the Asian nation to cede greater access to American exporters to help address a US$347 billion deficit. The so-called 100-day talks due to end July 16 have been marred by North Korea’s testing of an intercontinental ballistic missile last week.

Global trade, measured by volume of goods and services, is set to expand 3.8 per cent this year and accelerate to 3.9 per cent in 2018, according

to projections by the International Monetary Fund. Global trade probably rose 2.2 per cent last year, the slowest pace since 2009.

Cosco currently has a market share of 8.4 per cent while Orient Overseas has 3.2 per cent, according to Alphaliner. Their combined 11.6 per cent share would make the merged entity the third-biggest container-shipping company, overtaking CMA CGM with 11.2 per cent, according to the shipping data provider.

The enlarged company will operate more than 400 vessels with capacity exceeding 2.9 million twenty-foot equivalent units, including order book.

“That is the example of a sudden new competitive challenge and we have to react and move quickly against that,” said Jeremy Nixon, chief executive officer of Ocean Network Express Pte., the operating company for the combined container business of Japan’s three biggest shipping lines.

The industry is “fragmented ” and consolidation can help transform the business for the benefit of customers, Maersk, the world’s biggest container operator, said Monday in reaction to Cosco’s takeover. A representative for Hyundai Merchant said the company is “closely monitoring to see how this development will impact the industry.”

Yildirim Holding AS is seeking buyers for its stake in CMA CGM as the family-owned Turkish company looks to acquire Ports America Holdings Inc., a terminal operator.

Earnings of shipping companies will improve in the second half of the year “driven by higher trans-Pacific annual contracts,” said Andrew Lee, an analyst at Jefferies in Hong Kong.

Cosco said in a filing last week that it expects to turn profitable in the first half of 2017, with a net income of RMB1.85 billion (US$272 million) versus a loss of RMB7.2 billion a year earlier. Bloomberg News

Business Daily Tuesday, July 11 2017 11

Asia Downgrade

Japan’s machinery orders unexpectedly fall Bank of Japan Governor Haruhiko Kuroda reiterated the central bank’s resolve to maintain its massive stimulus programme Minami Funakoshi

J

apan’s core machinery orders unexpectedly tumbled in May on persistent weakness in the services sector, and the government downgraded the outlook for orders for the first time in eight months, raising doubts about the strength of the economic recovery.

The result is also particularly surprising given recent signs of an upswing in momentum. It suggests policymakers will have their work cut out in their quest to foster sustainable growth - especially if businesses show reluctance to invest, though some analysts caution against reading too much into the weak numbers.

Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, dropped 3.6 per cent in May from the previous month, Cabinet Office data showed yesterday.

It was the steepest month-onmonth decline since August 2016, and sharply undershot the 1.7 per cent increase expected by economists in a Reuters poll. In April, they declined 3.1 per cent.

Core orders from the services sector fell 5.1 per cent, down for a third straight month, dragged by declines

in orders from transportation firms for computer systems and railway cars, and from telecommunications and construction industries.

Orders from manufacturers rose 1.0 per cent in May from the previous month, up for a fourth straight month, led by gains in orders for turbines and boilers.

The government cut its assessment of machinery orders for the first time since September 2016, saying they are stalling, in a worrying sign businesses may be turning cautious on investing.

“Machinery orders probably won’t be very strong (in the coming months),” a Cabinet Office official said.

“We can’t say they will significantly worsen, but we don’t hear companies

saying they will start recovering in July-September,” the official said.

Some analysts echoed the government’s pessimism.

“The results were extremely weak...

There is a high chance core machinery orders will decline for the second quarter in a row (in April-June),” said Koya Miyamae, senior economist at SMBC Nikko Securities, in a note.

Miyamae said it was surprising that orders declined from sectors such as transportation, postal and construction, which have been hit by labour shortages.

Pinch of salt

However, some analysts say the yesterday’s data should be taken with a pinch of salt.

“Machinery orders are volatile... it’s better to look at the BOJ tankan in this case,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

The BOJ tankan, a closely-watched

central bank survey, showed that big firms plan to raise their capital spending by 8.0 per cent in the current fiscal year to March 2018.

Confidence among Japan’s big manufacturers hit its highest level in more than three years in the June quarter, the survey also showed.

Indeed, recent data suggested momentum was picking up, though it wasn’t clear if the economic recovery was broadening out, with industrial output falling faster in May than at any time since the devastating earthquake of March 2011.

Key Points May core orders -3.6 pct m/m vs forecast +1.7 pct Core orders +0.6 pct yr/yr vs forecast +7.7 pct Capex seen crucial for economic growth Japanese policymakers hope capital spending will help revitalise the world’s third-largest economy and pull it out of years of deflation and stagnation.

Speaking shortly after the machinery orders results were released, Bank of Japan (BOJ) Governor Haruhiko Kuroda reiterated the central bank’s resolve to maintain its massive stimulus programme until inflation is stably above its 2 per cent target.

He also said inflation is likely to gradually accelerate towards 2 per cent reflecting improvements in the economy.

Japan’s economy expanded an annualised 1.0 per cent in the first quarter on robust exports and household spending, while business confidence hit a three-year high in the three months to June. Reuters

GDP

Singapore seen dodging recession with April-June expansion Economists surveyed by Singapore’s central bank last month have raised their 2017 Singapore growth forecasts Fathin Ungku

Singapore is expected to show 1.1 per cent quarter-on-quarter growth in April-June, averting a recession thanks to an uptick in electronics output as well as a recovery in the services sector, a Reuters poll of economists showed yesterday.

The economy had got off to a weak start to the year, suffering a 1.3 per cent contraction, on a seasonally adjusted and annualised basis, in January-March compared with the final quarter of 2016.

Year-on-year, second quarter advance gross domestic product (GDP) was forecast to show growth of 2.8 per cent in April-June, according to the median estimate of 11 economists surveyed by Reuters, improving slightly on the 2.7 per cent growth posted for January-March.

The data will be reported on Friday, July 14.

International ratings agency Moody’s, which participated in the poll, saw Singapore receiving a boost from stronger foreign markets.

“The export-oriented economy has benefited in 2017 from the widespread improvement in global demand. This has supported manufacturing and service activity in Singapore,” said Moody’s in a research note.

Key Points Q2 advance GDP data Friday, July 14 at 0000 GMT (8 am local time) Q2 advance GDP likely +2.8 pct y/y, +1.1 pct q/q Economy contracted 1.3 pct q/q in Q1 Not everyone was so optimistic, however. Edward Lee, head of ASEAN economic research at Standard Chartered, said there was a risk that the wealthy-city state may enter a “statistical recession” in the second quarter due to a moderation in manufacturing output.

“I think we had a pretty strong start

in Q1, if we took a look at Q2, it is nothing too bad to be fair, but the pace has slowed down slightly,” Lee said, referring to the manufacturing sector.

Other analysts expected a recovery in services to offset any slowdown in manufacturing.

“Whatever slight slowdown we saw in manufacturing was offset by services. We did see a pickup in the property and banking sectors,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore.

Recent data pointed to a recovery in growth. Manufacturing output in May

grew from a year earlier for a tenth successive month, an outcome that was seen by economists as reducing the risk of GDP contracting again on a quarter-on-quarter basis in the second quarter.

Economists surveyed by Singapore’s central bank last month have raised their 2017 Singapore growth forecasts, upgrading their views on manufacturing and bank lending.

A majority of analysts believe that the Monetary Authority of Singapore (MAS) will keep monetary policy steady when it holds its next policy meeting in October. Reuters

12 Business Daily Tuesday, July 11 2017

Asia M&A

Australia watchdog appeals against nod for Tabcorp buy The Federal Court will hear the matter in the coming months

T

he Australian antitrust regulator said it has asked a court to review the approval granted for top horse race betting company Tabcorp Holdings Ltd to buy lottery owner Tatts Group Ltd TTS.AX for A$6.15 billion (US$4.7 billion).

The move is a potential setback

for a deal which was cleared last month, more than a decade after the companies first proposed it. Shares of both companies retreated from sharp initial gains after the news.

Tabcorp and Tatts took the unusual step of applying to the court-run Australian Competition Tribunal (ACT) after the usual arbiter, the

Australian Competition and Consumer Commission (ACCC), raised concerns about the deal.

Yesterday, the ACCC said it has applied to the Federal Court asking it to review the ACT’s decision to green-light the deal.

“We are seeking judicial review because we believe these legal principles are fundamental not only to the Tabcorp decision but to all future merger and nonmerger authorisation assessments,” ACCC Chairman

Rod Sims said in a statement.

The ACCC said it was seeking a review based on the grounds that the ACT misused certain tests which competition regulators use to determine if a deal will hurt competition, and gave inappropriate weightings to data about the effects of the takeover.

“We are seeking judicial review because we believe these legal principles are fundamental not only to the Tabcorp decision but to all future merger and nonmerger authorisation assessments” Rod Sims, Australian Competition and Consumer Commission Chairman Tabcorp said in a statement it was studying the application and would provide further information as appropriate. Spokespeople for Tatts and the ACT were not immediately available for comment.

The Federal Court will hear the matter in the coming months because the ACCC asked for an expedited hearing, a court spokesman said. When the ACT approved the deal, Tabcorp said it aimed to have the takeover completed in August.

Reuters

Strategy

Singapore state investor GIC cautious on markets GIC is ranked the world’s tenth biggest sovereign investor, with about US$343 billion worth of assets Anshuman Daga and Clara Ferreira-Marques

Singapore’s sovereign wealth fund GIC Pte Ltd, among the world’s biggest investors, said it was turning cautious and expected returns to slow over the next decade, given high valuations, uncertainty over monetary policy and modest economic growth.

“Compared to last year, the world has become more uncertain ... but the market seems quite happy,” GIC’s CEO Lim Chow Kiat said in an interview, as the fund published its annual report. “I hope the market is right, but we are cautious.”

Smaller Singapore peer Temasek Holdings focuses on equities, but GIC, set up to manage Singapore’s foreign reserves, adopts a more conservative investment strategy, with the longterm goal of beating global inflation.

GIC is ranked the world’s tenth biggest sovereign investor, with about US$343 billion worth of assets, according to Sovereign Wealth Centre.

Yesterday, the fund said its portfolio return was 5.1 per cent per annum in

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U.S. dollar nominal terms over the five years to March 31, 2017, helped by the run-up in global financial assets, versus 3.7 per cent a year ago.

That was below the 6 per cent return of GIC’s reference portfolio of 65 per cent global equities and 35 per cent bonds. However, the volatility of GIC’s portfolio was lower than the reference portfolio, for all time periods.

Key Points State fund braces for protracted uncertainty, low returns Emerging markets seen better value than developed markets “We are prepared for a period of protracted uncertainty and low returns,” said Lim, 47, who took charge as the CEO in January after a 24-year career at the fund.

While market volatility was low by historic standards, helped by accommodative monetary policies, it was

out of sync with increased overall uncertainty, the fund said.

Current valuations, it added, suggest excessive optimism over future earnings. MSCI’s gauge of world equities struck record highs last month.

“Two years ago, we said the market would return x over the next 10 years. We would argue half of the x was returned in the first year, year and a half,” said Jeffrey Jaensubhakij, GIC’s Chief Investment Officer. “Now there is only half an x over the next eight and a half years.”

Taking the long view

In a low-growth, low-yield environment, sovereign wealth funds such as GIC are facing an ever greater challenge to make enough returns to hit internal targets.

GIC reported a 20-year annualised real return - its key measurement gauge - of 3.7 per cent above global inflation for the year ended March, down from 4 per cent a year ago.

GIC invests in growth and defensive assets such as emerging and developed market equities, real estate, private equity and inflation-linked bonds and is known to be a patient investor.

GIC’s cautious comments come days before Temasek is likely to report a rebound in its assets to a record high.

With more than 1,400 staff, GIC says it manages “well over” US$100 billion of assets, but does not disclose the exact size of its portfolio. It has 34 per cent of its assets in the United States, followed by 19 per cent in Asia excluding Japan, and 12 per cent each in Japan and the Eurozone.

Emerging market equities, which accounted for 17 per cent of GIC’s portfolio, offer opportunities after a few challenging years and subsequent reform, Jaensubhakij said - as opposed to developed markets such as the United States after an election-fuelled rally.

GIC rarely comments on individual holdings, but it hit headlines in May when it pared its stake in UBS Group at a loss to 2.7 per cent from 5.1 per cent. GIC attributed the sale to changes in UBS’ strategy and business.

GIC, one of the first sovereign funds to invest in Western banks during the global financial crisis, retains the other major investment made at the time, a stake in Citigroup which is profitable at current prices. Reuters

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Business Daily Tuesday, July 11 2017 13

Asia Credit worries

In Brief

Vietnam’s central bank defends surprise rate cuts Changes that took effect from yesterday also included a 50 basis point cut to some local lending rates for priority sectors Mai Nguyen

Vietnam’s central bank yesterday defended its surprise decision to cut interest rates despite International Monetary Fund advice to keep monetary policy on hold because of concerns over the pace of credit growth.

The State Bank of Vietnam (SBV) announced late on Friday it would cut its refinancing rate by 25 basis points to 6.25 per cent and several other policy rates by the same amount.

The announcement came days after the International Monetary Fund said in a report that monetary policy should remain on hold in Vietnam, still suffering fallout from a 2011 banking crisis.

But the central bank said the ratecuts would boost economic growth, which is lagging the communist state’s 6.7 per cent target for 2017.

The economy grew at an annualised 5.73 per cent in the first half.

In 2016, Vietnam reported 6.21 per

cent growth, below the revised target of 6.3-6.5 per cent.

Yesterday’s central bank statement said the rate move was made “on the basis of having assessed slow inflation”.

Annual consumer price inflation in June was just over 2.5 per cent, the slowest pace since July 2016.

Banking expert Nguyen Tri Hieu said the rate-cuts could help spur growth, but could also push credit into sectors such as real estate, in which excess lending helped cause the last financial crisis.

At the end of March, only 2.35 per cent of Vietnam’s bank loans were bad debts, according to the SBV. In 2012, the per centage got as high as 17.2 per cent But the IMF noted that the ratio of private sector credit to gross domestic product of 124 per cent was significantly higher than in comparable Southeast Asian countries and in others at a similar levels of development.

Capital Economics said Vietnam’s rate cut could fuel a further surge in credit growth - which is targeted at 18 per cent this year.

“A sharp rise in non-performing loans is likely unless the central bank is prepared to reverse course soon,” the consultancy said.

Nguyen Duc Thanh, head of the Vietnam Institute for Economic and Policy Research, said Vietnam must be very cautious in the next six to nine months.

The cost of seeking higher GDP growth “could be rising inflation at year-end or the beginning of next year,” Thanh said.

Still, banking analyst and government advisor Can Van Luc said higher credit growth was reasonable in Vietnam because other sources of business funding such as stocks and bonds were undeveloped.

“The cut is quite nominal, which shows the central bank’s caution over rising inflation and potential interest rate pressure if the Fed increases rates further,” Luc said.

“If we keep rates high amid such low inflation, it will create an unsympathetic mentality among both businesses and citizens,” he added.

Reuters

Labour

Myanmar workers in Thailand victims of a broken system Much of the work force lacks proper documentation and lives in constant fear of exploitation from police, bosses, and traffickers Marion Thibaut / Phyo Hein Kyaw

With only meagre belongings stuffed into backpacks and duffel bags, tens of thousands of Myanmar migrants have streamed home across the Thai border over the past two weeks.

But it is not a joyous homecoming for the truckloads of men and women, who fled Thailand in fear of a new law that hardens penalties on the millions of undocumented migrant workers underpinning its economy.

Thailand’s sudden rollout of the labour decree, which hikes up fines on unregistered workers and their employers, sent a lightning bolt of panic through migrant communities.

“If we were arrested, we would have to pay money to police. If this happened, all of our money would disappear,” Thu Ya, who worked in a Thai plastics factory, told AFP while preparing to cross back into Myanmar’s eastern border town of Myawaddy.

The mass exodus of migrants -- estimated to be more than 60,000 -- is only the latest chaos to highlight the precarious lives of migrant workers who take up difficult and dangerous jobs in Thailand’s factories and fishing boats.

Much of the work force lacks proper documentation and lives in constant fear of exploitation from police, bosses, and traffickers.

And yet many Myanmar migrants scrambling across the border said these hardships still beat the prospect of dire poverty in their homeland, where jobs and good wages are difficult to come by.

“I will consider coming back in a legal way, with the full documents,” said Thu Ya, 32, who has spent much of his life in Thailand.

‘We have a problem’

Myanmar’s new civilian government, which came to power last year, was expected to usher in a windfall of foreign investment into a resource-rich country that was closed off to the world during the former junta’s 50-year reign.

In a jubilant visit to Thailand in June 2016, de facto leader Aung San Suu Kyi vowed to drive the economic growth that would bring her countrymen home.

But a year on the gains have fallen short of expectations and Myanmar is still years away from offering wages that rival those in Thailand.

A steep decline in foreign investment -- down 28 per cent in the last quarter of 2016 -- sounded alarm bells over an economy whose initial opening in 2011 was met with a rush of investor excitement.

The country’s GDP growth also fell below seven per cent for the first time in five years in 2016, clocking in at 6.5 per cent.

Having fleetingly become the fastest-growing economy in the region, Myanmar now lags behind the Philippines, Laos and Cambodia.

Economists blame the slump on a lack of clarity from the new government on its economic policies, as well as the ponderous progress in passing a new investment law.

“We have a problem because the ministers have no economic culture, and then the reforms are done too slowly,” said Myanmar economist Khin Maung Nyo. The young civilian government, stacked with political novices, faces the monumental challenge of trying to unpick the junta’s devastating economic legacy.

“We need to create thousands of jobs but I doubt we will be able to do it quickly,” Khin Maung Nyo added.

‘They’ll be back’

In the meantime, Thailand looks set to continue to be a magnet for its neighbour’s workers.

Huge sections of Thailand’s economy, especially construction and food production, rely on migrants to do jobs that comparatively wealthier Thais have long since eschewed.

And while the country has one of the slowest growth rates in Asia, the minimum wage of 305 baht (US$9) a day is more than three times the equivalent in Myanmar.

Chaebol

Samsung heir refuses to testify at former president’s trial Samsung Electronics Co. heir Jay Y. Lee has refused to testify at the bribery trial of former President Park Geunhye, arguing that doing so risked affecting his own corruption hearing. Lawyers for the de-facto chief of the country’s largest corporation invoked an article in the criminal procedure act that allows individuals to refrain from testimony that may lead to criminal prosecution.

Lee is undergoing a bribery trial of his own in connection with Park and his appearance yesterday would have marked their first encounter since an influence-peddling scandal that led to their arrests.

Cybersecurity

Reliance Jio investigating claims of alleged data breach India’s newest telecoms entrant, Reliance Jio, said it was investigating claims of customer personal data being leaked onto a website called “Magicapk.” “We have informed law enforcement agencies about the claims of the website and will follow through to ensure strict action is taken,” a Jio spokeswoman said early yesterday, adding the data on the website appeared to be “unauthentic.” Users have been registered on the Reliance Jio network using a 12-digit Unique Identification Authority of India (UIDAI) provided number, commonly known as the ‘Adhaar’ number.

Markets

Foreigners buy S.Korean bonds for 6th month

Myanmar’s de facto leader Aung San Suu Kyi

Since coming to power in 2014 Thailand’s junta has unveiled a series of campaigns to clean-up abuses in its migrant labour sector, which also attracts significant numbers of workers from Cambodia and Laos.

But rights groups say the drives are often short lived and ad-hoc, creating more confusion. This time was no different.

Caught off-guard by the mass exodus, Thailand’s junta ruled last week to suspend its new law for six months.

Junta chief Prayut Chan-O-Cha called for calm and reassured business owners: “Don’t panic, they will come back soon.”

He is likely to be right.

Silar, a Myanmar nurse working in Bangkok, went home full of hope in 2015, eager to reunite with her husband and daughter.

But she struggled to find work and is now back in the Thai capital -gripped with fear after misplacing her work permit.

“In Myanmar, there is still not enough work, especially in the countryside, and wages remain very low,” she told AFP, using a pseudonym for anonymity.

“I do not know what I’m going to do.” AFP

Offshore investors continued their purchases of South Korean bonds for six months in a row in June and stock holdings hit an all-time high, official data showed yesterday, as firming exports supported the economic recovery. Foreign investors’ bond holdings rose by a net 1.6 trillion won (US$1.39 billion) in June, less than the 2.1 trillion won net increase in May, the Financial Supervisory Service (FSS) said. The surge in investment comes amid double-digit growth in exports. South Korea’s exports grew for the sixth month in a row in June.

Index

Sensex rises to new high Indian shares rose to a new high, led by a rally in technology stocks and software exporters, after a regulator tightened rules for offshore derivatives and banned so-called “naked” bets.

The benchmark S&P BSE Sensex rose 0.6 per cent to 31,557.91, a record, as of 10:15 a.m. local time, yesterday. NSE Nifty 50 Index prices weren’t updating as National Stock Exchange of India Ltd. halted trading because of a technical problem. The Securities and Exchange Board of India late Friday banned holders of offshore derivatives tied to the nation’s equities from taking unhedged exposure.

14 Business Daily Tuesday, July 11 2017

International In Brief Slowdown

Big UK firms curtail investment plans The chances of Britain’s economy picking up steam diminished further yesterday as surveys showed major companies have curtailed their investment plans and that consumers spent less on their credit cards. The reports added to a string of lacklustre economic data that has raised questions about the chances of the Bank of England raising interest rates this year. Accountancy firm Deloitte said business optimism at large British companies fell sharply in the second quarter, dampened by the inconclusive outcome of last month’s national election.

Angola

Central bank’s currency sales rise 42 per cent last week The sale of foreign currency by the National Bank of Angola (BNA) to commercial banks increased 42 per cent in the last week, compared to the previous one, to 236.4 million euros, including covering the needs of airline operations. The information comes from the BNA’s weekly report on the evolution of the money and exchange markets between 3 and 7 July, and follows 166.4 million euros and 143.7 million euros provided in the previous two weeks. ccording to the document, consulted by Lusa, the currencies sold - exclusively euros for over a year - equivalent to US$264.1 million, covered the needs of the oil sector.

Central bank

Qatar says country has reserves to weather Arab sanctions Banking sector still has significant dependence on foreign funding

Q

atar has US$340 billion in reserves that could help the Gulf country to weather the isolation by its powerful Arab neighbours, central bank governor Sheikh Abdullah Bin Saoud al-Thani said.

“This is the credibility of our system, we have enough cash to preserve any... kind of shock,” he told the CNBC news channel in an interview published early yesterday on its website.

Al-Thani said the central bank has US$40 billion in reserves plus gold, while the Qatar Investment Authority sovereign wealth fund has US$300 billion in reserves that it could liquidate.

Qatari stocks have weakened and the riyal has been volatile in the spot market since Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with Qatar on June 5, accusing it of backing terrorism. Doha has denied these allegations.

“Qatar has already had a good and unique system. We have laws established against all these kinds of terrorists,” al Thani told CNBC. “We work with the IMF (International Monetary Fund) and other institutions to establish our laws and audits and reviews.”

“We have no challenges, we welcome those to review all our books, they are open,” he added.

Al-Thani said while the central bank has noticed fund outflows from some non-residents, the amounts weren’t particularly significant.

An amount of less than US$6 billion left Qatar over the last month, he said.

“There is more coming in,” he said, confirming that inflows are exceeding outflows.

Al-Thani said there had been an increase of up to US$15 billion in the first week in the usage of central bank’s repo facility by the commercial banks.

“We have enough CDs (certificate of deposits) and Treasury Bills and Treasury Bonds in the hand - in the asset side of the banking sector, that provide them with the liquidity,” he said.

He also said the stability of the Qatari riyal, which is pegged to the U.S. dollar, will “continue for the future.”

Al-Thani said long-term contracts in the gas and oil sectors were not seeing any disruptions.

Rating agency Moody’s Investors Service earlier this month changed the outlook on Qatar’s credit rating to negative from stable, citing economic and financial risks arising from the on-going dispute between Qatar and the Saudi-led alliance.

Despite the market ructions, economists say Qatar, the world’s top liquefied natural gas exporter, has taken a number of measures such as a planned boost in gas output and new

transport routes to weather the crisis.

Qatar’s banking sector still has significant dependence on foreign funding. Thirty-six per cent of commercial banks’ total liabilities in May were to foreigners, including others in the six-nation Gulf Cooperation Council (GCC). Saudi, UAE and Bahraini banks have already largely frozen new business with Qatar because of guidance from their central banks; some jittery foreign banks have followed suit.

“We have no challenges, we welcome those to review all our books, they are open” Sheikh Abdullah Bin Saoud al-Thani, Qatar’s central bank governor Should the rift escalate and more money flows out, the country’s banking system has enough buffers to “meet all the requirements,” according to al-Thani.

“We find our banking sector well-capitalized, meeting Basel III as they have high liquid assets, plus they have very good inter-banking activity inside and outside, and they are very stable at this moment. So we don’t believe there is anything to worry about at this moment.” Reuters

Congress return

Trump’s push to replace Obamacare faces trouble

GDP

Bank of France keeps growth forecast The Bank of France said yesterday it maintained its forecast for French second-quarter gross domestic product (GDP) growth of 0.5 per cent and predicted a pickup in the industrial, services and construction sectors for July. The central bank’s manufacturing business climate survey gave a reading of 103 points in June, down slightly from a revised 104 points in May. This reflected a dip in activity in the automotive and plastic manufacturing industries, the bank said, adding that industrial production was poised to rise more sharply in July.

Forex shortages

Zimbabwean bank suspends pay-TV payments Zimbabwe’s Steward Bank has suspended payments to the pay-TV subsidiary of South Africa’s Naspers, citing unavailability of foreign currency, in a sign that dollar shortages are worsening in the southern African nation. Local banks have been forced to limit withdrawals due to cash shortages while importers face long delays in paying for goods they bring in, forcing some businesses to buy dollars on the parallel market. Steward Bank, a unit of mobile telephony operator Econet Wireless, said in a statement that it was suspending payments to Multichoice, Africa’s largest pay-TV company, which is popular in Zimbabwe.

During a week-long recess last week that coincided with the Fourth of July holiday, liberal groups organized town halls and protests and ran ads criticizing the proposal President Donald Trump’s effort to roll back Obamacare faced growing obstacles yesterday as Republicans who control the U.S. Senate remained sharply divided over how to keep down the costs of their healthcare bill and prevent millions from losing coverage.

White House chief of staff Reince Priebus told “Fox News Sunday” that Trump, who made repeal and replacement of Obamacare a central plank of his 2016 campaign, still expected the Senate to pass a healthcare bill either before the scheduled start of Congress’ August recess “or maybe a little bit into” the recess.

Other Republicans voiced pessimism.

“My view is that it’s probably going to be dead,” Senator John McCain of Arizona said of the healthcare legislation on the CBS program “Face the Nation.”

Some conservative senators, such as Ted Cruz of Texas and Rand Paul of Kentucky, have said they cannot support the proposal unless it goes further to repeal the 2010 Affordable Care Act, popularly known as Obamacare.

Senate Majority Leader Mitch McConnell is weighing how to shore up support for the healthcare bill, which would repeal parts of Obamacare, former Democratic President Barack Obama’s signature legislation, and

get rid of tax increases that fund it.

The Republican-controlled House of Representatives in May passed its own version of a bill overhauling healthcare.

McConnell warned at a luncheon in his home state of Kentucky last week that if Republicans were unable to pass their own replacement bill, they might need to work with Democrats to bolster the insurance markets created under Obamacare, according to the Associated Press.

Most Republican senators kept a low profile on the issue, including McCain, who travelled to Afghanistan to visit troops, and Senator Jeff Flake, a fellow Arizonan who faces a tough re-election fight next year.

Medicaid cuts

Republicans have long criticized Obamacare as ineffective and a government intrusion in a key sector of the economy. But opponents deride the Republican healthcare bill as a giveaway to wealthy Americans who would see some tax increases rolled back. Critics also warn the legislation would cause millions of poor and sick Americans to lose healthcare coverage.

The Obamacare law expanded health insurance coverage to some 20 million people, in large part through an expansion of Medicaid,

a government health insurance program for the poor and disabled.

In Arizona, for example, more than 400,000 have signed up for Medicaid since its expansion there and 1.9 million are now insured by the program.

The Senate legislation would also drastically cut federal Medicaid spending beginning in 2025, repeal most of Obamacare’s taxes, end a penalty on Americans who do not obtain insurance and overhaul Obamacare’s subsidies to help people buy insurance with tax credits.

The nonpartisan Congressional Budget Office, which assesses the impact of legislation, estimated 22 million people would lose health insurance over the next decade under the Senate bill. In a separate report, it found the proposal would cut government spending on Medicaid by 35 per cent come 2036.

The Senate bill is unpopular with voters. Just 24 per cent of adults approved of the proposal, according to a Reuters/Ipsos online opinion poll of 1,554 adults taken from July 2 to 6.

McConnell can only lose two Republican votes on the bill, relying on Vice President Mike Pence to cast the tiebreaking vote. But McConnell must do so with an eye on the 2018 congressional elections, ensuring he does not imperil the party’s narrow majority in the 100-seat Senate. Reuters

Business Daily Tuesday, July 11 2017 15

Opinion Business Wires

Bangkok Post Associations of local (Thai) tour guide operators nationwide have gathered to oppose the government’s plan to allow foreign tour guides to offer services in the country, saying the policy will result in huge unemployment. A total of 22 associations and clubs of tour guide operators met Sunday and resolved to oppose the policy initiated by Deputy Prime Minister Tanasak Patimapragorn, who oversees tourism affairs. He wants to allow foreign tour guides to work in the country as a contingent measure to solve a shortfall of local tour guides.

The Star Maybank Investment Bank Bhd expects a windfall for Petronas Chemicals (PetChem) 2Q17 results underpinned by strong average selling price (ASP) and higher volumes on the full operations of Sabah Ammonia Urea (Samur) plant.

Maybank said PetChem’s 2017 was shaping up to be a record year with stronger-than-expected product margin and sturdy global demand. It added that PetChem’s earnings and dividends could potentially surprise positively. Maybank estimated that year-to-date, the ASPs have risen by 18.2 per cent y-o-y to RM3,377 per tonne. It said that it was ahead of the the house’s 10 per cent fullyear growth assumption and the nearterm outlook remains robust.

Taipei Times A plan by the Chinese Nationalist Party (KMT) to file 5,000 legislative motions to stall the budget review of the Forwardlooking Infrastructure Development Program has been criticized by lawmakers from other parties, who called for a rational debate of the program.

The Executive Yuan is to present the program’s first budget today and the budget review is planned to begin on Thursday, with Premier Lin Chuan scheduled to make a formal report to the Legislative Yuan. The KMT caucus has threatened to disrupt the review process with procedural and non-procedural tactics by tabling 5,000 motions to cut the budget and obstruct the premier’s speech.

The Phnom Penh Post Just one day after the (Cambodia) Kingdom’s microlenders mutinied and said they would not implement a government directive requiring all financial institutions to implement a 10 per cent value-added tax (VAT) on fees for financial services, the Tax Department announced it would back down and temporarily suspend the controversial decree until it could conduct a study and address private sector concerns. The General Department of Taxation said in a release that the implementation of a May 25 prakas that more clearly defines the government’s laws for nontaxable supplies concerning primary financial services would not be implemented “until further notice”.

China’s anti-addiction drive may ruin video games

S

hareholders of Tencent Holdings Ltd., the world’s biggest video game company, panicked last week. People’s Daily, the official newspaper of the Chinese Communist Party, singled out “Honour of Kings,” Tencent’s biggest game, for an unusually highprofile criticism.

“Poison,” the paper declared of a game played by roughly one in seven Chinese. “Constantly spreading ‘negative energy.’” It linked the game to recent reports in which children allegedly stole money, experienced strokes and even jumped out of a high-rise window due to “addictive” game play. Tencent’s stock fell by more than 5 per cent on the news. Although it eventually recovered, the incident should be a wake-up call to investors and gamers alike. For more than a decade, China’s government has sought to define and regulate internet addiction. Its willingness to target Tencent, the country’s most valuable company, suggests a new and more formidable campaign is under way -- one that could transform the US$100 billion gaming industry. The idea that the internet could in some sense be addictive emerged in 1995, in a satirical paper by an American researcher. Today it’s no joke: Hundreds of scientific papers are published on the subject each year. Yet defining internet addiction as a clinical disorder -- akin to, say, heroin addiction -- remains controversial in much of the world.

In China, it’s been a settled issue since 2008, when a group of doctors approved an official description of “Internet Addiction Disorder.” Among other criteria, an addict must spend more than six hours a day online for reasons other than work, become irritable when unable to connect and exhibit difficulty concentrating.

For the Chinese government, the perceived isolation and distraction of its youth is viewed as an increasingly urgent social problem. Immersive role-playing games, popular among students at ubiquitous internet cafes, are seen as a particular threat. As far back as 2004, state media reported that 90 per cent of juvenile crimes were related to excessive internet use.

True or not, the government has certainly responded as if an epidemic is under way. In 2004, it shut down 16,000 internet cafes to protect impressionable youth. Three years later, it required

“

Adam Minter a Bloomberg View columnist

that developers install “anti-addiction” systems in their games. In 2008, it banned the opening of new internet cafes entirely. Over the past decade, some 250 internet addiction “boot camps” have opened; one has treated at least 6,000 patients using electroshock therapy.

All this probably hasn’t had much effect. Very few companies have come up with effective anti-addiction measures, which is unsurprising given that users hate them and that the science of internet addiction is unsettled at best. Internet cafes remain popular, while mobile phones have provided users with more games -- and more opportunities to play them -- than ever. In 2016, mobile accounted for more than half of all gaming revenue in China, up from about 40 per cent in 2015.

Tencent has profited from this growth as much as anyone. In the fourth quarter of 2016, its smartphone game revenue was up 51 per cent over the previous year. That alone would make Tencent an obvious target if the government was looking to make an example of a game developer.

But politics (predictably) have made things worse: The People’s Daily editorial singled out “Honour of Kings” for distorting a proper understanding of China’s history -- an understanding that the Communist Party isn’t about to cede to video game developers.

Tencent appears to have known it was in trouble.

The day before the editorial was published, the company announced measures to make it more difficult for children to play its games. Clearly that wasn’t enough. People’s Daily later published another commentary calling for game developers to stop thinking only of profits, and to start taking some responsibility for the social consequences of their games.

For companies aspiring to enter the world’s biggest gaming market, that’s an ominous sign. The line between a fun game and an addictive one is thin, and determining which is which isn’t in the typical developer’s skill set. Anti-addiction regulation is sure to lead to a duller and less profitable industry.

Whether it will actually save any young Chinese from addiction is anyone’s guess. Reuters

Antiaddiction regulation is sure to lead to a duller and less profitable industry

”

16 Business Daily Tuesday, July 11 2017

Closing Import/Export

Portuguese trade deficit increases

The balance of trade deficit stood at 1.438 billion euros in May 2017, which Portuguese exports increased 15.4 per is an increase of 503 million euros compared to the same month of 2016. cent and imports rose 22.4 per cent Excluding fuels and lubricants, the trade in May compared to the same period balance reached a negative balance of last year, which translated into a worsening of the trade deficit to 1.438 1.074 billion euros, corresponding to an increase of 344 million euros compared billion euros. to the same month of 2016.

According to information released In the quarter ended in May 2017, yesterday by the National Statistical exports and imports of goods increased, Institute (INE), in April exports had registered a year-on-year rise of 0.1 per respectively, by 13.2 per cent and 16.5 per cent year-on-year, INE added. Lusa cent and imports of 11.4 per cent.

Investment

Lanzhou positions itself as new Belt and Road economic hub A freight cargo line has begun shipping goods from eastern China to western Europe through Lanzhou, with two trains arriving in the city every day

T

he city of Lanzhou signed 164 investment projects totalling more than RMB111.4 billion during the 23rd Lanzhou Investment and Trade Fair that concluded on Sunday, a sign for the government of promising economic growth as the city positions itself as a key transport link and manufacturing hub for China’s transnational “One Belt, One Road” economic plan.

Once an important trading town on the old Silk Road, Lanzhou is seeking to revive its fortunes and return to prominence as a future gateway to Western China and Central Asia in the “One Belt, One Road” initiative, the extensive network of rail lines and highways connecting Chinese factories with markets in the rest of Asia and Europe.

Already, a freight cargo line has begun shipping goods from eastern China to western Europe through Lanzhou, with two trains arriving in the city every day. On Sunday, a new high-speed rail line started service between Lanzhou and Baoji in Shaanxi province, linking the vast,

remote western half of China with the rest of the national high-speed rail network.

And last year, a new cargo rail line opened between Lanzhou and Tibet, allowing goods to be shipped to the Nepal border and then transferred to trucks to reach the capital of Kathmandu.

“Lanzhou is located in the exact centre of the country,” said Mao Yuduo, the director of the Lanzhou government’s Economic, Cooperation and Services department. “It has an obvious advantage in terms of transportation. And it’s the biggest logistics centre to deliver cargo in western China.”

Given Lanzhou’s prime location, the government has invested heavily to build a

sprawling 800-square-kilometre city known as the Lanzhou New Area to the north of the city, with a freetrade zone, scores of highrise apartment blocks, and infrastructure to support industries such as petrochemical, biomedical, and automobile and equipment manufacturing, as well as a burgeoning information technology sector.

The government is also keen to attract tourists with a just-opened dinosaur-themed amusement park (complete with water slides and a hotel), mini-replicas of the Great Sphinx in Egypt and the Parthenon in Greece, and a RMB3 billion, state-of-the-art film studio.

The Lanzhou New Area was the first state-level “new area” economic zone in northwest China—similar in status to the Pudong New Area in Shanghai—when it was founded in 2012.

“Every new district has different responsibilities and Lanzhou’s responsibility is to

An allegoric statue symbolizing the Yellow River that crosses Langzhou

be pole of economic growth of northwest China,” said Hao Jingxin, the director of the Lanzhou New Area’s Economic, Cooperation and Services department.

Since its inception, the new area has steadily attracted investors from across China and overseas, such as a German company producing steel pipes and a South Korean company making facial products, Mao said.

Shenzhen-based Amer International Group, one of the world’s largest copper companies, set up its production base for western China in the new area last year. In the first six months of 2017, the company earned RMB4billion in sales from the new factory, according to Wang Ligang, Amer’s Investment Committee vice chairman.

Wang said the factory’s position in Lanzhou saves considerable time and money shipping goods to Europe—it takes just 30 days for its copper products to reach Germany by rail, compared to the usual 45 days by ship.

“When China was the strongest country in world in the Han and Tang dynasties, it was because of the Silk Road,” Wang said. “Now, China could not realize its future development without ‘One Belt, One Road.’”

At the Lanzhou Investment and Trade Fair, dozens of businesses from across Asia, Europe and Africa were also eager to talk up the potential

market for their goods in western China. There were stalls selling everything from red wines from France and Spain to jade bracelets from Myanmar to organic jasmine rice from Cambodia.

Many Chinese provinces and localities also had their own booths promoting food products like goji berries from the Ningxia Hui Autonomous Region, buckwheat tea from Sichuan province and bags of bright-red chili peppers from the city of Chongqing.

Samir Ahmad, the China sales manager for an Indian handicraft company called Moughal Cottage Industries, said he sold so many Kashmir silk rugs and Pashmina shawls when he attended the fair for the first time last year, he decided to come back for this year’s edition.

“Lanzhou is one of the places in China which has a Muslim influence,” he said.

“I would say that’s a benefit which brings us more and more customers—it’s the culture here.”

Ugandan businessman Kasozi Samson’s stall was also doing a brisk trade in his family-run company’s shea butter and cocoa butter skincare products and handicrafts like carved wooden masks and drums.

“This fair is always good.

People always buy,” he said.

“Whenever we come here, we come with good expectations.” AFP

Diplomacy

Corruption

Mozambique

S. Korea to build ‘comfort women’ museum in Seoul

China attacks tycoon Guo for client leaks at HNA group

IMF begins mission to discuss audit on hidden debts

South Korea intends to build a museum in memory of wartime sex slaves for Japanese troops, a government minister said yesterday, re-igniting perennial tensions in the two neighbours’ relationship.

The plight of the so-called “comfort women” who were forced into sexual slavery for Japanese troops during World War II is a hugely emotional issue that has marred ties between the U.S. allies for decades.

Mainstream historians say up to 200,000 women -- mostly from Korea but also other parts of Asia including China -- were forced to work at Japanese army brothels across the region during the 1939-1945 conflict.

“We are planning to build a ‘comfort women’ museum in Seoul,” said new gender equality minister Chung Hyun-Back at a shelter for a shrinking number of survivors, who now number only 38 in total.

The “House of Sharing”, in a rural area south of Seoul, has a memorial hall but Chung said the country needed a museum in the capital with better public access.

She did not elaborate on when it will open or what kind of materials it will display. AFP

Exiled Chinese tycoon Guo Wengui is suspected of obtaining confidential client data of aviation-to-financial services conglomerate HNA from air traffic control and airline staff, the official Xinhua news agency reported, citing Chinese police.

A senior official of the air traffic control department and an airline duty manager have been arrested in connection with the matter, Xinhua said.

Chinese-born Guo, now based in New York, has unleashed a torrent of corruption allegations against high-level Communist Party officials and is facing multiple lawsuits in a number of different jurisdictions.

Chinese authorities have retaliated with stepped up attempts over the past few months to discredit Guo. Following a request from Beijing, Interpol issued a “red notice” for Guo in April. A red notice is an international alert for a wanted person.

Xinhua said Guo had, through a senior civil aviation official, Song Jun, obtained the private information on 146 clients of the HNA group, including flight times, destinations and flight numbers in order to spread and fabricate what it called “corruption” and “sexual” stories. Reuters

The International Monetary Fund (IMF) yesterday embarked on a mission to Mozambique to discuss with the authorities the audit of the country’s hidden debts, which a year ago led to a freeze on foreign aid.

According to the IMF, “there are continued information gaps, particularly with regard to the use of the loans,” worth US$2 billion, taken on by public enterprises held by the State Information and Security Services (SISE) without disclosure to parliament nd international partners in 2013 and 2014.

The IMF and donors have made resuming direct support to the State Budget dependent on the results of the inquiries and it is not yet clear what will happen.

The Kroll consultancy complained of a lack of cooperation from company executives to provide information on the final destination of the funds, as well as mentioning that several people, without giving names, were guilty of mismanagement and violation of the law and classified the plans of the companies as unrealistic.

The IMF mission is to “discuss the results of the audit with the authorities and possible follow-up measures,” the IMF said in a statement after the executive summary was published in June. Lusa