Flag fall and rates increased for taxis Taxi Page 2
Tuesday, July 18 2017 Year VI Nr. 1341 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Court
No chance to appeal Ho Chio Meng’s sentence, say experts Page 4
The concept is a winner. The transportation network company Uber could not have revolutionized the transport in non-commercial vehicles better. But regardless of having paid the bill for a road revolution ahead of time - to be the first one in order to gain, for it caught societies by surprise and mainly governments unprepared and without the necessary legislation to avoid the impact of such a move - Uber lost by having poorly prepared people at its helm. ‘Losing’ here clearly has a different meaning, since the company is valued at countless billions of U.S. dollars. ‘Losing’ means not winning even more and becoming more accepted worldwide. Many of the heads in various parts of the world were unprepared for the places where they held office. It is true that a number of governments, including Macau, defended the corporate interests of the traditional taxi associations, instead of being pro-active and swiftly regulating the sector, since almost no one will deny that the existence of such companies are for the greater good. Also, in Macau, Uber could have taken advantage of the fact that most passengers prefer the company and the fact that it provided other benefits to the city than just the transportation of its people and tourists. In doing so, it would have galvanized more support, and put more pressure on the decision makers. But as so often happens, those who come to Macau to manage corporations, by not knowing the specifics of this peculiar town, do not realize that this is not Hong Kong, let alone New York, Amsterdam, Paris or even Shanghai. The result is obvious: ignorance and arrogance are clearly not bliss. Uber could have taken on a role of partnering with government and social institutions, promoting road campaigns, for example. Something that the government does little of and badly. It preferred instead, confrontation and paying millions in fines. It preferred to sit on the chair of a financial power that, without other ideas and initiatives, could only result in the ‘temporary’ suspension – says the company of its services in the city. It’s too bad. It was a good service. But who knows, maybe next time the drivers of that business here will be better prepared to give more to the city than just a ride.
Animal rights
Property
Anima has rescued over 3,400 animals, with 216 adoptions last year Page 4
M&A
Real estate in Mainland continues gradual slow down Page 8
Wanda expansion strategy triggers government crackdown Page 9
Very Important Percentages Revenue
VIP revenue from baccarat was up 35 pct y-o-y in Q2, hitting MOP35.86 bln, while H1 saw a 25.2 pct y-o-y uptick to MOP71.35 bln. Overall casino revenues were up 17.24 pct y-o-y in H1, with total gaming revenues up 17.1 pct. Dog racing and horse racing saw 50 pct and 24 pct y-o-y drops. Analysts’ expectations for July revenue are for about a 25 pct increases y-o-y. Page 7
Transactions down
Driving into the sunset
Car-hailing app Uber will ‘pause’ its services starting July 22 for a period of re-evaluation, but it is looking to ‘serve the city again’. This, the second such pause, was announced the same day taxi fares increased. Residents point out that Uber repurposed cars already on the streets, instead of adding more, while taxi drivers defend the need to have a license to operate.
Real estate New mortgage adjustment regulations were in part responsible for a near-50 pct m-o-m drop in flats sold in June, but sales were still up 7 pct y-o-y. Transactions in Taipa were hardest hit, with a 78 pct drop m-o-m, while average property prices per square metre across the city saw a 17.6 pct drop m-o-m. Both completed and off-plan units saw slides in pricing m-o-m. Page 5
Mainland exceeds expectations GDP China posted better-than-expected second quarter growth yesterday. The economy expanded 6.9 percent in April-June. Industrial production grew 7.6 percent in June, while retail sales were up 11 percent, both better than the previous month. Page 8
Uber Page 4
HK Hang Seng Index July 17, 2017
26,470.58 +81.35 (+0.31%) Worst Performers
China Merchants Port Hold-
+5.13%
China Unicom Hong Kong
+1.61%
Galaxy Entertainment Group
Hengan International Group
-0.93%
China Resources Land Ltd
+5.13%
Belle International Holdings
+1.30%
Sands China Ltd
-2.11%
Kunlun Energy Co Ltd
-0.67%
Henderson Land Develop-
+3.25%
China Mengniu Dairy Co Ltd
+1.20%
Hang Lung Properties Ltd
-1.41%
Sino Land Co Ltd
-0.61%
China Life Insurance Co Ltd
+3.20%
AAC Technologies Holdings
+1.12%
Want Want China Holdings
-1.12%
CITIC Ltd
-0.51%
Ping An Insurance Group Co
+2.27%
Hong Kong Exchanges &
+0.95%
Cathay Pacific Airways Ltd
-1.10%
New World Development
-0.39%
-3.20%
26° 28° 27° 29° 26° 30° 27° 31° 26° 32° Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
A lost ride
www.macaubusinessdaily.com
2 Business Daily Tuesday, July 18 2017
Macau Public transport
Farewell again, Uber Cecilia U with Reuters cecilia.u@macaubusinessdaily.com
U
ber Technologies Inc will ‘pause’ its services from July 22 as it has not been able to unlock the full benefits of ridesharing in the city, according to a company release. This is the second time Uber has decided to pause its operations in Macau. The large amount of fines imposed on its drivers led to the service provider
suspending its business for the first time during the month of September last year, returning however the same month after the company received some 23,000 signatures in an online petition. ‘We are already exploring ways to serve the city again, and have had initial discussions with business partners, including transport operators and hotels,’ reads the press release by the company. Trasy Welsh, general manager of Uber Macau, declined
to make a statement on Uber’s exit from the city. Although Macau is not a notable market for the U.S. firm, the branch in the city is one of the many branches in Asian cities that has faced regulatory problems, joining Korea and Japan. In addition, drivers in Hong Kong are still currently facing legal disputes. In Taiwan, the branch returned after having been suspended while discussions with related authorities were ongoing.
Meanwhile, ever since the introduction of Radio Taxi, the taxi service which obtained a ‘special taxi license’ and started operating in April this year, numerous comparisons have been made between the two services. A local resident surnamed Loi opined that Uber and Radio Taxi are two completely different services. “From the public’s perspective, Uber’s approach allows the sharing of resources, whereas Radio Taxi adds more vehicles on the
road in order to resolve the city’s transportation issues,” remarked Ms. Loi, adding that it is not resolving any problems if people are always trying to find solutions to demolish the old and to construct the new. “Uber is not just providing an alternative taxi service,” said Ms. Loi, “it is also providing ways for the city to make use of the available resources to solve problems.” Meanwhile, the president of the Professional Taxi Drivers Federation, Ho Chu Meng, said it is fair for Uber to leave the city, given that many taxi drivers have spent millions to obtain a taxi license. “They don’t need to get [a license for] anything to operate [and] they have stolen much of our business,” commented Ho, further saying that even Radio Taxi needed to obtain a license before beginning its operations. The Transport Bureau (DSAT), on the other hand, stressed during yesterday’s press conference that online car-hailing should be regulated. “We welcome those who comply with the law, and we will act according to the law to those who don’t comply with the law,” said the DSAT spokesperson.
Transportation
Taxi base fee to increase to MOP19 Cecilia U cecilia.u@macaubusinessdaily.com
The base fee for the city’s black taxis will be raised from MOP17 to MOP19 starting July 23, the Transport Bureau (DSAT) announced yesterday. According to the Bureau, the last adjustment happened in 2014. Aside from the increase in the base fee, the subsequent metre-count will be reduced from 260 metres to 240 metres, with every 240 metres after the flag costing MOP2. For additional charges, an extra
MOP5 will be charged for those whose destination is the Taipa Ferry Terminal and the University of Macau. Other additional charges such as the baggage fee remain unchanged. Lam Hin San, the director of DSAT, emphasised that the adjustment is an attempt to balance the demands of different parties in the city. He also agreed to consider setting up a regular adjustment mechanism for taxi fees, based on criteria such as the inflation rate. When asked about the quality of
taxi services, the director revealed that harsher penalties will be imposed on any taxi violations. The director said the regulation bill for taxi services will include higher penalties to act as a stronger deterrence. “We would also consider other actions such as confiscating taxi drivers’ permits,” said the DSAT director. “We will announce when we have settled on a solid plan,” he added. Director Lam noted that the new taxi fee adjustment will also be implemented for Radio Taxis.
HZMB
Hand on the wheel, on the right Driving regulations and standards for the super bridge are being fine-tuned, and mainland China’s rules are to prevail Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Mainland China traffic rules will apply to the Hong Kong-Zhuhai-Macau Bridge (HZMB) although ‘the three parties are still in discussion’ about traffic management details, the Transport Bureau (DSAT) told Business Daily yesterday. In addition, the bureau confirmed that traffic will flow on the right hand side of the road, the same as on the Mainland. A spokesperson for DSAT explained, however, that such rules will only apply up to the point that vehicles reach the artificial island (on the east side of the new urban land Zone A) where the ‘Macau boundary control zone’ will be located. ‘After going through the toll plaza and then the connecting passages
and flyovers, the drivers will enter the Macau boundary control zone, where they will have to drive on the left,’ said a spokesperson for the bureau. However, the DSAT spokesperson
said that at this stage it has been agreed that vehicles driving to Macau will have to stop at parking lots that are currently under construction on the artificial island. In addition, no decision about allowing vehicles coming from Hong Kong or the Mainland via the super bridge to enter Macau has been made. The local transport authority also informed that a number of ‘spaces have been reserved for [electric vehicle] charging stations to be used by heavy vehicles and private cars’ at the boundary control zone.
The bureau did not confirm how many stations will be set up. According to previous reports, a total of 550 electric vehicle-charging stations are reportedly being planned for the bridge, to be completed and put into use by the end of 2017, in tandem with the completion of the structure itself. According to Xinhua, the Guangdong branch of the China Southern Power Grid Co. Ltd. is in charge of implementing the vehicle-charging system, with a total investment of RMB90 million (US$13.29 million/ MOP106.86 million).
Business Daily Tuesday, July 18 2017 3
Macau
4 Business Daily Tuesday, July 18 2017
Macau Opinion
Albano Martins* Transparency is needed! The DSEC (Statistics and Census Service) makes available two simple aggregate information lines on CPI (Consumer Price Index) maps 13, 14 and 15 (for indexes General, “A”, and “B”). This is all the information available from an aggregate whose in-depth knowledge is very important if we want the economic policy to control the market and to protect the weakest! Very simple information on “actual rents for housing” accounting for only 1.84 per cent of the general expenditure basket (and 1.96 and 0.88 in the “A” and “B” indices) and on “imputed rents for housing” with a 19.76 per cent share of household expenditure (20.51 and 13.44 per cent in the “A” and “B” indices), is all we have! If my memory does not fail me, the CPI-A reflects the price evolution for 50 per cent of residents, who have an average monthly expenditure of between MOP10,000 and MOP29,999. The CPI-B applies to 30 per cent of resident families, who have an average monthly expenditure of between MOP30,000 and MOP54,999. Let’s make some calculations. Supposing a family spent MOP40,000 a month, then it means that it pays less than MOP6,000 on housing rents (by applying the “B” rate). If the family spends MOP20,000 in monthly expenses, it means that it pays less than MOP4,500 in housing (Index A). For those who spend less than MOP10,000 or more than MOP55,000 per month, the general index (CPI General) applies. Thus, they will pay rent of less than MOP2,000, in the first case, and less than MOP12,000 in the second. Of course these are just average values. For those who know the rental market and feel the speculation in their bones, the question remains: is not this scenario too whitewashed? Look. Statistical data points to decreases in rents in the last 12 months (up to May 2017) between 2 and 3 percent in all indices: General, “A” and “B”. But for the first time in many months, there was a monthly increase in rents for last May, although less than two tenths of a per cent. Will the index finally show what everyone already feels in their bones? There is nothing more about the rental market in our financial center! We cannot understand why such an important variable does not deserve quarterly treatment, as happens for instance with real estate prices! How can we be “scientific” in economic policy, without proper accurate statistical information? Our statistics department works well, but it seems to me, not well enough when we want to know the reality of the rental market!
* an economist and contributor to this newspaper
Justice
No appeal is final There is no resort to a national or international instance that could change former Prosecutorgeneral Ho Chio Meng’s sentence, according to local lawyer Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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here is no resort to appeal, be it local, national, or international, for Ho Chio Meng, the former Prosecutor-general sentenced to 21 years in prison last Friday, according to lawyer Frederico Rato. “China has delegated to the Macau SAR the faculty to judge its residents in first and final instance. By doing this, China has actually renounced its faculty to judge [Macau residents] in final appeal to the benefit of the Macau SAR,” Rato said to Business Daily. In practical terms, this means that Macau acts as its own sovereign body on such matters, he explained. The possibility of appealing to China’s central government was voiced by Ho Chio Meng’s sister following the pronouncement of the former Prosecutor- general’s sentence. Rato also said that there is no resort to appealing to international bodies, because “there is no supranational instance that can overlap a sovereign country, unless such country has delegated part of its sovereign power to such an instance, as some countries in the European Union did.” On the question of appealing the sentence, Ho’s lawyer, Oriana Inácio Pun, had also issued comments after the conclusion of the ex-official’s
sentencing, in which she mentioned her team would seek any possible mechanisms to assist Ho if he so requested. Pun also claimed that an appeal is a basic right as stated in the Basic Law of Macau as the well as in the United Nation’s Human Rights Council.
Negative segregation
A scholar working in one of the local higher education institutions, also argued that Ho’s sentence “cannot be appealed,” however there could exist a rather narrow space for maneuvering an appeal within an international instance, if laid out on the basis of human rights. The scholar claimed Ho could stretch a plea on a claim of unfair treatment or lack of facts, but pointed out that it is “highly unlikely.” “The Hague International Court is dealing with cases of massacre and genocide. The nature of Ho’s case is very far from that,” the professor
Ho Chio Meng was sentenced on July 14 to 21 years in prison, after being found guilty of more than a thousand charges of illegal activities, including accusations of embezzling public funds for sharing economic interests, gross and ordinary fraud, aggravated money laundering, and the
pointed out. According to Rato, who believes the sentence was quite “harsh,” Ho could still request clarification on parts of the sentence which seem “obscure, are not well explained, or where there is lack of foundation”. “But the sentence is a given fact,” he stressed. M aca u r esi d e n ts ex e rci si n g high-ranking public functions, such as the Chief Executive and the Prosecutor-general, are not entitled to access any instance other than the Court of Final Appeal, according to a competency defined in the Basic Law of the Macau SAR. “In spite of all protests from lawyers and citizens, there was never change on the law on the basis of the judicial organization [of Macau]. Thus, we can only conclude that there is no political will to see the law altered,” commented Rato. As other lawyers have claimed in the past, Rato concurs the system should have been developed in a way so as to guarantee equal treatment to all citizens, regardless of their professional position. “In the end, it acts as a negative segregation,” the lawyer opined.
forming and leading of criminal syndicates. The 62-year-old was originally charged with a total of 1,970 offences, but those were later reduced to 1,536, with some of the charges being combined. Ho was arrested in February of last year and his trial began last December.
Animal rights
Anima: over 3,400 animals rescued The Society for the Protection of Animals (Anima) revealed that a land dispute with the Land, Public Works and Transport Bureau (DSSOPT) has almost been resolved, but that there are still ‘some issues to be solved with the DSSOPT’, with the group having applied for a definitive concession for the plot of land in Coloane in question. The group was requested by the government to return the 40 square metre land plot in 2014 due to illegal occupation. The abandoned plot was located directly next to the association’s facilities in Coloane. Meanwhile, Anima’s yearly expenses in 2016 reached MOP9.12 million (US$1.13 million), the animal protection group revealed yesterday during their annual press conference. Of the total annual budget, MOP3.02 million was spent directly on the animals, an increase from the MOP2.40 million used for their care in 2015. The Society supports animals by providing food, medication, de-sexing, vet assistance and accommodation facilities. The biggest expense for the group
was in fact in hiring staff, with around MOP4.63 million devoted to personnel. In 2016, there were 36 staff working for Anima. Since its establishment in 2011, the group has managed to rescue some 3,424 animals, of which 961 have been dogs and 2,092 have been cats. Only 392 dogs and 192 cats however, are able to fit into the group’s shelters.
On the other hand, there were a total of 216 adoptions last year, an increase of 32 when compared to 2015, but the number of rescues was over double the number of adoptions, reaching 476 in 2016. ‘In spite of our efforts in making every day adoption days, [...] we need to have more adoptions as we have the shelter crowded,’ the press release stated. C.U.
Business Daily Tuesday, July 18 2017 5
Macau Real Estate
Property transactions plummet in June The new mortgage adjustment regulations rolled out in May had a significant impact on transactions in June, with real estate agencies predicting the problem will persist in July Cecilia U cecilia.u@macaubusinessdaily.com
I
n the month of June, a total of 847 flat units were sold, down 47.4 per cent when compared to the previous month, according to the latest data released by the Financial Services Bureau (DSF). However, property sales in June experienced a slight increase of 6.7 per cent when compared to the same period a year ago, up from the 794 registered in June of 2016. Jane Liu, managing director of Ricacorp (Macau) Properties Limited, said the performance in June is within expectations, given the introduction of the adjustment to the mortgage loan ratio last May. The government’s announced plans were intended to enable second-time buyers, if disposing of their first property, to access the same credit percentage as first-time buyers, a situation Ms. Liu reveals, can only happen once the sale is completed. “The banks cannot do [the higher mortgage rate] if buyers haven’t sold their existing property yet [...] and many buyers are afraid of selling out their properties before buying a new one,” explained Ms. Liu, while saying that the government had not communicated well with the banking sector regarding the new adjustment. Meanwhile, the number of transactions in Taipa saw the largest decrease among the three main zones of the city, dropping 78 per cent monthon-month, with only 147 transactions compared to 669 registered in May. Ms. Liu explained that many new property units were sold in May, resulting in the quieter transaction environment in June. She further said that the performance in June “could have been worse” if the new project - the Carat, located in NAPE - were not
introduced during the month. Average property prices also dropped by 17.6 per cent monthon-month in June, to MOP94,265 (US$11,729) per square metre. The price, however, registered an increase of 20.2 per cent when compared to the same month the previous year. For the Macau peninsula, the average per metre housing price stood at MOP89,801, down 5.8 per cent month-on-month, but up 18.9 per cent year-on-year. Meanwhile, prices in Taipa experienced the largest drop amongst the three areas, down 28.1 per cent when compared to May, at some
MOP95,253 per square metre, however still seeing a 13.3 per cent increase year-on-year.
Transactions dropped in both completed and off-plan units
According to DSF data, the total number of completed properties sold was 724, posting a monthly drop of 32.7 per cent. In comparison to property sales in the same period of 2016, there were two fewer transactions of completed units in June. District-wise, the number of transactions in Areia Preta stood at 71, the highest number of transactions among the city’s districts in June. Regarding off-plan unit sales, June’s performance posted a notable 77 per cent decrease month-on-month, down to 123, compared to 535 recorded in May. Nevertheless, sales posted a yearon-year increase of 80 per cent when
compared to the 68 transactions recorded in June 2016.
Prices also dropped month-on-month
The average price in June for completed units was MOP85,157 per square metre, a decrease of 16 per cent when compared to the MOP101,361 registered in May, but still a 14.1 per cent increase year-on-year. Meanwhile, the price per square metre for off-plan units also dropped month-on-month in June, from MOP139,886 in May to MOP134,204 in June, a decrease of 4.1 per cent. Similarly, the price for off-plan units per square metre increased by 24.1 per cent when compared to MOP108,114 in June of 2016. The representative from Ricacorp predicts that the gloomy real estate market will persist to July, given that no new projects are rolling out sales in July.
Interpellation
Gov’t: Internal reorganisation involving 17 public departments The government will reorganise some 17 public departments that are under the secretariats for Economy and Finance, Security and Transport and Public Works, according to a reply by the Public Administration and Civil Service Bureau (SAFP) to an interpellation by legislator Chan Meng Kam. The departments include: Macao Economic Services (DSE), Consumer Council, Macao Trade and Investment Promotion Institute (IPIM), Transport Bureau (DSAT), Financial Intelligence Office (GIF), Cartography and Cadastre Bureau, the Land, Public Works and Transport Bureau (DSSOPT), Infrastructure Development Office
(GID), Transportation Infrastructure Office, Environmental Protection Bureau (DSPA), Office for the Development of the Energy Sector, Civic and Municipal Affairs Bureau (IACM), Social Security Fund (FSS), Judiciary Police (PJ), Public Security Forces Police Force (PSP), Public Security Forces Affairs Bureau and Marine and Water Bureau (DSAMA). The reorganisation of departments will be on-going, taking place until 2019, stated the SAFP. When asked whether the government would consider combining the Cultural Industry Fund, Committee of Cultural Industries (CIC) and
Cultural Affairs Bureau (IC) into one department, the SAFP, with opinions collected from IC, stated that the government would not consider combining the departments. However, parties are looking into the feasibility of joining the CIC’s administration, secretarial and financial
side with that of the IC. In response to an enquiry by Legislator Chan about the quantity of fund departments, the SAFP described that each supports its own task – including providing financial support and helping directly on the projects funded. C.U. advertisement
6 Business Daily Tuesday, July 18 2017
Macau Junket
Cross-border warning, not ‘harbinger of doom’: analysts
A
message sent out by local junket operator Suncity Group last Friday ‘is not a harbinger of doom’, but a ‘highlight of the continued risk’ that China is determined to cut down capital outflows from the country, posing a risk ‘to Macau gaming gross gaming revenue (in the VIP and high end Premium Mass segments),’ according to analysts at Bernstein. ‘The warning largely reiterated the risk’ of authorities continuing ‘ongoing investigations into fund transfers’ in which ‘numerous bank accounts come under scrutiny and are occasionally frozen’, however ‘the exact purpose of the warning is not clear at this stage’. Short-term, this could lead to ‘some customers keeping their funds (for example, any winnings) in junket accounts rather than potentially transfer back to China’ but ‘it is likely too early though to call an end to the junket VIP recovery’. Analysts at Telsey note that ‘it is reasonable to conclude that there should not be any impact on business levels as a result’ of the communiqué,
noting that although the message was sent, ‘its contents did not indicate any new information and it did not suggest customers take any actions out of the normal course of the past couple of years’.
Analysts at Bernstein further reiterated that ‘The VIP market has shown considerable strength over the past half year. Although it is likely to continue to show strength over the next few months, in the
longer run, the VIP model will continue to face structural headwinds from a tightening regulatory environment in Macau and continued focus on capital outflows in China’. K.W.
Professionals
Macau’s got talent, abroad The Talents Development Committee is designing initiatives to foster exchanges with local talents living abroad, in the hope of luring them back to the city Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Difficulties in developing an adequate industry, lack of qualifications and professional certification, and limited access to general knowledge about Macau’s situation, as well as an inability to adapt to the city’s environment, are amongst the main reasons discouraging ‘talents’ from returning to the Macau SAR, according to research conducted by the Macau University of Science and Technology. According to a release yesterday, the Specialized Group of Incentive to the Return of Talents to Macau of the Talent Development Committee requested the study in order
to integrate the preliminary report in its action plan to encourage the return of talents to Macau. The study also pointed out that the Macau SAR’s global development, opportunities made available by political measures, a feeling of belonging and family reasons are the main incentives attracting ‘talents’ to return to the city. Actions envisaged by the Committee in order to bring back talents include the creation of contact and exchange channels with talents residing abroad, exploring their experiences in different areas, organizing exchanges between those talents and attendant professional groups in Macau, as well as
strengthening collaboration efforts with the city, considering that some talents have already returned, the Committee highlighted. A spokesperson from the Committee confirmed to Business Daily that the report has not yet been published.
Technical training
In a different release yesterday, the Committee announced it is working in collaboration with the Education and Youth Affairs Bureau (DSEJ) to develop initiatives in the field of technical and
professional education. Three reports have been prepared in this regard, focusing on existing initiatives for the development of local talents, the current demand for talents in five sectors of activity – gaming industry, retail, hotels, Food and Beverage, and MICE – as well as an index on the lack of talents. The Committee stated that the reports have been available online since May this year. A spokesperson for the C o m m i tt e e c o n fi r m e d,
however, that they are currently only available in Chinese, and that an English version “will be published soon.” According to the announcement, the reports cover topics that range from the demographic situation, and the educational regime, to the training of talents in different sectors of activities. A spokesperson from the Institute for Tourism Studies (IFT) confirmed to Business Daily that the institution is involved with the training programme.
Nuclear
Atomic uptick The operator of five nuclear power plants in neighbouring Guangdong province, CGN Power Co., Ltd saw a 23.68 per cent year-on-year increase in its power production during the January to June period of this year, according to a filing with the Hong Kong Stock Exchange by operator CGN Power Co., Ltd. The group’s nearby Taishan nuclear power plant, initially expected to go online in the first half of this year, but pushed back to the second half, had yet to contribute to the group’s power generation during the first six months of the year. However the group’s Yangjiang Nuclear Power Station, about 200
kilometres from the MSAR, saw a 32.84 per cent uptick in the amount of power generated during the period, contributing the largest amount of electricity during the six-months: 14,273 GWh. The Yangjiang station
saw its Unit 4 come online for commercial operation in mid-march of this year, contributing to the increase. The other three nuclear power stations located in Guangdong and operated by the group, together generated
22,565.1 GWh during the period, with both the Daya Bay station and the Lingdong station seeing year-on-year upticks in generation, of 13.94 per cent and 2.84 per cent respectively, while the Ling’ao station saw a 9.91 per cent drop year-on-year. Overall power generated reached 63,477.09 GWh during the six-month period. ‘In the second quarter of 2017, the overall supply of electricity has easily met the demand for the country. In order to cater for the requirements of the power grid, temporary load shedding or reserve shutdown for some of our power generating units had been conducted,’ notes the filing. As of end-June, eight more nuclear power plants were under construction under the company’s management. K.W.
Business Daily Tuesday, July 18 2017 7
Macau Results
VIP up 35 pct y-o-y in Q2 First half-year VIP Baccarat revenues reached MOP71.35 billion, a 25.21 per cent year-on-year rise Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
G
ross gaming revenue results in the second week of the month were weaker than the first week of July, but the average daily rate (ADR) registered over the two weeks saw a 35 per cent year-onyear increase, hitting MOP725 million, while that of the second week was MOP686 million, according to analysts at Bernstein. Analysts at Telsey Advisory Group saw the opposite, with higher average daily revenues in the second week, indicating MOP770 – MOP790 million during the period, as compared to MOP680-690 million the previous week. The analysts at Telsey are estimating a 25 to 28 per cent year-on-year increase in gross gaming revenues, while those at Bernstein are estimating July gross gaming revenue
reaching MOP21.7 billion to MOP22.1 billion, noting ‘this would represent a year-on-year increase in July of 22 per cent to 24 per cent.’
Second quarter
According to the latest breakdown released by the Gaming Inspection and Coordination Bureau (DICJ) yesterday, overall casino gaming saw a 17.24 per cent year-on-year uptick in revenues in the first half of the year, while total gaming revenues in the same period were up 17.1 per cent year-on-year. During the second quarter, a 22.87 per cent increase in casino gaming was recorded, despite only seeing a 0.92 per cent uptick quarter-to-quarter. Total casino game revenues hit MOP126.37 billion during the first half year, with MOP62.89 billion recorded in the second quarter. VIP Baccarat revenues recorded during the second quarter of the year saw a 34.86 per cent increase
year-on-year, but only a 1 per cent increase quarter-to-quarter, reaching MOP35.86 billion. First half-year VIP Baccarat revenues reached MOP71.35 billion, a 25.21 per cent year-onyear rise. Slot machines saw a 4.88 per cent drop in revenues during the quarter, compared to the first quarter, but underwent an 8.38 per cent rise year-on-year, hitting MOP3.07 billion during the quarter and MOP6.32 billion during the half-year. Meanwhile, Live Multi Game terminals saw a 9.25 per cent year-on-year uptick during the second quarter, with revenues reaching MOP614 million, and hitting MOP1.18 billion
during the half-year. The total number of gaming tables in the MSAR fell quarter-to-quarter, from 6,423 to 6,413, however the total number of casinos in the territory remained unchanged at 39. The amount bet on greyhound racing saw a 48.54 per cent drop yearon-year during the second quarter, with the total only reaching MOP53 million. Revenues from the activity also experienced a 50 per cent drop year-on-year and a 10 per cent drop quarter-to-quarter, at MOP11 million. Those of horse racing fell 9.7 per cent quarter-to-quarter and 24.32 per cent year-on-year, to MOP28 million during the period.
Work safety
Accident causes construction pause at Morpheus The government has suspended construction work at Melco Resorts and Entertainment Ltd’s hotel Morpheus, located in Cotai, after a fatal accident last Friday, according to a statement from the Labour Affairs
Bureau (DSAL). The worker killed in the accident was not a Macau resident. After the fatality, DSAL ordered the “immediate suspension of all works at the construction site,” claiming it
will “proceed to an exhaustive investigation about the causes involved in the accident.” The bureau claimed further that it has ordered the contractor to “review immediately all the safety and
occupational health and safety conditions, and present a detailed report of the accident.” Melco had not replied to enquiries by the time this story went to print. The same bureau said that the resumption of work on the site will only be allowed when it issues an authorization. S.Z. advertisement
8 Business Daily Tuesday, July 18 2017
Greater China GDP
Growth tops forecasts on strong investment, consumption The government is aiming for growth of around 6.5 per cent in 2017 Elias Glenn and Kevin Yao
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hina’s economy grew faster than expected in the second quarter as industrial output and consumption picked up and investment remained strong, though analysts expect slower growth over the rest of the year as policymakers seek to reduce financial risk. The economy grew 6.9 per cent in the second quarter from a year earlier, the same rate as the first quarter, the National Bureau of Statistics said yesterday. Analysts polled by Reuters had expected the economy to expand 6.8 per cent in the April-June quarter. On a quarterly basis, growth picked up to 1.7 per cent from 1.3 per cent in the first quarter, in line with expectations. Strength in retail sale and industrial output data helped offset a weak start for China stocks, which may have been linked to talk of tighter financial regulations. Growth in China’s economy this year has beaten expectations as exports recover and property construction remains strong, though many analysts expect the world’s second-largest economy to lose steam later in the year as policy measures to rein in red-hot housing prices and a rapid build-up in debt take a
greater toll on growth. “Overall, the economy continued to show steady progress in the first half...but international instability and uncertainties are still relatively large, and the domestic long-term buildup of structural imbalances remains,” the statistics bureau said in a statement with the data. The government is aiming for growth of around 6.5 per cent in 2017, slightly lower than last year’s actual 6.7 per cent, which was the weakest pace in 26 years.
Key Points China Q2 GDP growth at 6.9 pct y/y, unchanged from Q1 June factory output growth strongest since March June retail sales grow fastest since December 2015 Data helps China markets claw back earlier losses China’s factory output grew 7.6 per cent in June from a year earlier, the fastest pace in three months, while fixed-asset investment expanded 8.6 per cent in the first six months of the year, both beating forecasts. Retail sales rose 11.0 per cent in June from a year
earlier, the fastest pace since December 2015 and beating analysts’ expectations for a 10.6 per cent rise. An upturn in global demand for Chinese products could be a boon for the country’s leaders as they seek to contain a dangerous build-up in debt that has ballooned to 277 per cent of GDP. “(The new data) is encouraging for global growth as well because China is the second largest economy on the planet,” said Craig James, chief economist at Commonwealth Securities in Sydney. “Based on this data, there is no need for easing and no need really for tightening
either because inflationary pressures are very much contained. So I think the People’s Bank of China just continues to be watchful.” Data last week showed both China’s exports and imports rose faster-than-expected in June from a year earlier, which could offset weakness in other parts of economy in the second quarter. Beijing’s more modest growth target of around 6.5 per cent for 2017 theoretically offers more wiggle room for reforms after the economy grew 6.7 per cent in 2016 - the weakest pace in 26 years. China’s economic growth is
expected to cool further to 6.6 per cent in 2017, according to a Reuters poll of analysts, with the pace of expansion slowing steadily in the thirdand fourth-quarter. The PBOC shifted to a modest tightening bias at the start of this year, guiding market interest rates higher during the first quarter, including immediately after the U.S. Federal Reserve raised rates in March. But the central bank injected substantial liquidity last month to help avoid an end-quarter cash crunch as Beijing tightened regulations to force banks to deleverage. Reuters
Real estate
Property investment, sales ease in Q2 but remain resilient to curbs Policymakers have prioritised stabilising an overheated property market ahead of a Communist Party reshuffle later this year Yawen Chen and Kevin Yao
China’s real estate investment growth slowed slightly in the second quarter from the first, suggesting government curbs to rein in the red-hot property market are starting to hit speculators even though underlying demand remains resilient. As part of a broader effort to temper financial risks stemming from a build-up of debt since the 2009 financial crisis, Chinese authorities have slapped a flurry of cooling measures over the past year to defuse a housing bubble. Those steps targeted at speculators in the biggest cities appear to be paying dividends. Growth in property investment, which mainly focuses on residential but also includes commercial and office space, eased to 8.2 per cent in April-June from a year earlier, compared to a 9.1 per cent expansion in the first three months of the year, according to Reuters calculations based on data from the National Bureau of Statistics (NBS). The increase in the area of property sold also slowed to 14.1 per cent in the second quarter year-on-year, from a 19.5 per cent gain in the first quarter, Reuters calculation showed. Real estate investment is a major driver of the economy affecting more
than 40 other sectors. However, buyer demand appeared to be more resilient than expected, reinforcing analysts’ views that China’s property market is unlikely to suffer a hard landing as some have worried. “The property market has cooled a bit but there may not be a big correction, we don’t think there are systemic risks. We are not as worried as when the curbs were put out in March and April,” said ANZ economist Betty Wang. Indeed, real estate investment growth sped up in June after slowing
in May, suggesting investment in the sector remained strong, likely due to more robust demand in smaller centres that are encouraged to reduce inventory and not subject to strict curbs seen in the bigger cities. It accelerated to 7.9 per cent in June from a year earlier, compared to a 7.3 per cent expansion in May, according to Reuters calculations based on NBS data. Property sales, measured by floor area, grew 21.4 per cent, more than double the 10.2 per cent increase in May, Reuters calculations showed. New construction starts measured by floor area, a telling indicator of developer confidence, rose 14.0 per cent in June, the highest since October 2016, according to Reuters calculations. Policymakers have prioritised
stabilising an overheated property market ahead of a Communist Party reshuffle later this year, reiterating the need to avoid dramatic price volatility that could threaten the financial system and harm social stability.
Key Points China Q2 property investment +8.2 pct y/y (vs +9.1 pct in Q1) Q2 sales by floor area +14.1 pct y/y (vs +19.5 pct in Q1) June property investment +7.9 pct y/y (vs +7.3 pct in May) June sales by floor area +21.4 pct y/y (vs +10.2 pct in May) In spite of government efforts to curb property prices, household loans - mostly mortgages - rose to RMB738.4 billion in June from RMB610.6 billion in May, according to Reuters calculations based on data recently released by China’s central bank. A survey by China’s central bank in late June showed that 31.2 per cent of households expect housing prices to rise in the third quarter of this year, while 46.1 per cent of households tipped them to remain basically unchanged. Growth in inventory floor area in the first half of the year was 9.6 per cent lower than one year earlier, compared with a fall of 8.5 per cent in the January-to-May period. Reuters
Business Daily Tuesday, July 18 2017 9
Greater China M&A
Beijing is said to punish Wanda for breaching investment rules The group is poised to get some relief after it agreed to sell hotels, land and projects to Chinese developer Sunac China plans to punish billionaire Wang Jianlin’s Dalian Wanda Group Co. for breaching the nation’s restrictions on overseas investments by cutting off funding and denying the conglomerate with necessary regulatory approvals, according to people familiar with the matter. The government has found violations of China’s restrictions in six investments, four of which have been completed and two are still pending, according to the people, who asked not to be identified because the matter is private. The deals being scrutinized include a Wanda unit’s purchase of Nordic Cinema Group Holding AB and Carmike Cinemas Inc., the people said, without identifying the remaining transactions.
A Wanda representative declined to comment. China’s banking regulator didn’t immediately respond to requests for comment. The move represents an unprecedented setback for China’s second-richest man, who was among the country’s most prominent dealmakers up until last year by gobbling up Hollywood assets such as “Kong: Skull Island” producer Legendary Entertainment. For the government, targeting one of the country’s top businessmen represents an escalation of its broader efforts to crack down on capital outflows. According to the people, the four completed deals will be subject to punitive measures including:
No financing from domestic banks Assets will be barred from being injected into any listed entity in China Wanda will be barred from injecting capital into those assets from within China or involve them in any restructuring with any of Wanda’s domestic units No government approval will be given if Wanda attempts to sell those assets to any Chinese companies On the two pending deals, related authorities won’t provide support with financing or foreign-exchange-related approvals needed to move money out of China, according to the people. Wanda is among conglomerates including Fosun International Ltd., HNA Group Co. and Anbang Insurance Group Co. whose loans are under government scrutiny after China’s banking regulator asked some lenders to provide information on
Wang Jianlin
overseas loans to the companies, people familiar with the matter said in June. Though cutting off funding may pressure Wanda, the group is poised to get some relief after it agreed to sell hotels, land and projects to Chinese developer Sunac China Holdings Ltd. in a RMB63.2 billion (US$9.3 billion) deal announced last week. For Wang, the sale of the bulk of his “Wanda City” projects -massive multi-billion-dollar
complexes with theme parks and lodgings -- represented a departure from the billionaire’s past predictions that he would build a tourism empire bigger than that of Walt Disney Co. The Wall Street Journal earlier reported that China is restricting the completion of six overseas deals by Wanda Group following the government’s broader crackdown on offshore investments, citing documents. Bloomberg News
Commodities
Steel, aluminium output at record as U.S. mulls penalties Chinese steel output last month rose 5.7 per cent from the year before to a record 73.23 million tonnes Muyu Xu and Melanie Burton
China churned out record amounts of steel and aluminium in June as producers rushed to cash-in on rallying prices in the wake of a drive by Beijing to crack down on output of low-grade metal. That could fuel concerns the world’s top steel producer will export more metal, stoking global oversupply and fanning tensions with the United States after it accused the nation of flooding international markets with cheap aluminium and steel.
Key Points China June steel output hits 73.23 mln T -stats bureau Comes amid trade dispute with United States Aluminium production also climbs to highest on record U.S. President Donald Trump has threatened to use a Cold War-era law to restrict imports for national security reasons as bilateral talks between Washington and Beijing continue. China has long-denied that it has been offloading metals abroad at the expense of foreign producers. Chinese steel output last month rose 5.7 per cent from the year before
to a record 73.23 million tonnes, surpassing April’s all-time high of 72.78 million tonnes, data from the National Statistics Bureau showed yesterday. Aluminium production jumped 7.4 per cent year-on-year to 2.93 million tonnes, exceeding December’s record of 2.89 million tonnes. Export data last week showed steel products shipments fell last month, while aluminium sales abroad were steady. But analysts said the latest numbers should not be seen as provocative move ahead of a decision by the United States on possible import tariffs. “It’s wrong to think that this is some sort of unified, homogenous voice that is deliberately making some provocative statement to the U.S,” said Paul Adkins, managing director of aluminium consultancy AZ China. “That couldn’t be further from the truth. What we’re really seeing, if anything, is ... a lack of a coordinated response (from Chinese producers).” Analysts said the increases came as local steel and aluminium prices rose after the government cut back on metals producing capacity earlier in the year as it battles a glut in supply and looks to clamp down on pollution. “The reason that prices were higher in the first place was the expectation of Chinese cutting back supply of aluminium and steel, yet that is what is inducing its high utilisation rates,” said Mark Pervan, chief economist at AME Group in Sydney. Steel rebar margins were almost RMB1,000 (US$147.77) per tonne in June, enticing mills to increase output, said Bai Jing, analyst at Galaxy Futures.
“China’s crackdown on low-end steel has left a capacity gap in the market,” she said. In the first half of the year, China eliminated around 120 million tonnes of low-end steel capacity.
By May, the country had fulfilled nearly 85 per cent, or 42.4 million tonnes, of its 2016 steel capacity cutting target. The data came as better-than-expected GDP numbers brightened demand prospects for metals and spurred gains in prices, with steel rebar rising 2 per cent. Reuters advertisement
10 Business Daily Tuesday, July 18 2017
Greater China
Competition
Hong Kong’s cartel cop sees staff exits as it fights for change Companies in Hong Kong have long engaged in price agreements and sharing information Benjamin Robertson and Prudence Ho
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t took 10 years of talks for Hong Kong to pass an antitrust law. But about 18 months after it took effect, the city’s Competition Commission has seen multiple senior departures as it battles to change a culture of price controls and quasi-legal cartels. Since it started hiring in 2014, the regulator is on its third chief economist, seen its executive director for operations and its general counsel leave, and in September will welcome its third chief executive. Rank and file employees have also departed, a former staffer said. While agency officials say staff turnover is common at a new regulator and point to actions they’ve taken to enforce the new rules, the exits add to the demands facing incoming head Brent Snyder. The former U.S. Justice Department prosecutor will not only be expected to tackle antitrust issues in a city that operated for 150 years without any cross-sector competition rules, but also ensure there’s stability at the commission. “Bringing together the right blend of competition law and Hong Kong legal expertise in one team was always going to be challenging,” said Adam Ferguson, a competition lawyer with Eversheds LLP in Hong Kong. “I expect this will continue to be one of the key challenges.” Companies in Hong Kong have long engaged in price agreements and sharing information. The agency has said such conduct hurts consumers: it found in May that gas stations in the city operated a “complex and opaque” discount system that made
it difficult to compare prices. Such practices are so ingrained that before the antitrust law came into effect industry officials would meet with the commission’s current CEO Rose Webb and openly describe their price-fixing and cartel deals. The ability to set prices was essential to their business needs, they said, according to Webb. It will take time for the commission’s education and investigation efforts to affect such business practices, said lawmaker Lam Cheuk-ting, who also lobbies against bid-rigging in the construction sector.
‘The agency is assessing 130 complaints and actively investigating about a dozen cases in sectors including retail, construction and financial services’ The employee exits haven’t deterred the commission from trying to change how companies operate, Webb said in an interview in her office. She highlighted successes such as complaints from firms that rivals were now discounting, and said her international counterparts have noted the speed with which the regulator has acted. The commission
sued five information technology firms in March for rigging a contract bid for a charity, its first court case. Some successes have come without the need for litigation. In November the regulator directed the Hong Kong Institute of Architects and Hong Kong Institute of Planners to amend their codes of conduct, which restricted members from setting their own fees, while the Hong Kong Newspaper Hawker Association withdrew guidance it issued on cigarette pricing after meeting with commission officials. The agency is assessing 130 complaints and actively investigating about a dozen cases in sectors including retail, construction and financial services, said Webb, without providing details.
Concentrated holdings
Hong Kong’s grocery market is an example of the concentrated nature of some of the city’s industries. Dairy Farm International Holdings Ltd., majority-owned by Jardine Matheson Holdings Ltd., and Li Ka-shing’s AS Watson Group each control about 17 per cent of the market, according to Euromonitor International. Japan’s Seven & i Holdings Co., which operates 7-Eleven stores, is a distant third with a 6 per cent share. AS Watson’s grocery chain ParknShop said the retail market in Hong Kong is “very competitive and diverse” and it believes the new law will help ensure a level playing field in the city. An official at Dairy Farm said supermarkets and personal care stores are highly competitive businesses, and that retailers are subject to stringent regulatory oversight and media scrutiny. (The agency hasn’t said it’s looking at grocery stores.) Taking on such entrenched positions will be tougher for the commission
because of staff departures, said Carter Chim, a former legal counsel at the agency. It wasn’t just senior managers -- some departments saw nearly all their original employees leave, he said, and probes stalled when case officers exited. Chim, a barrister and law lecturer at The Chinese University of Hong Kong, said he felt investigations were not pursued because of limited resources. The commission disputed the idea that employees were leaving because of unhappiness or inefficient practices. “Having some staff turnover in the early days of an agency such as ours is not surprising, but overall the teams have been quite steady and many people have renewed their contracts,” a spokesman said in an email. “A number of those that have left have moved to private practice, which reflects well on the commission.” Timothy Lear, the agency’s first executive director for operations who left in March 2016 after less than two years, said in an interview that he had planned to leave once the body was up and running. Former General Counsel Philip Monaghan, who left in June, did not respond to messages sent via LinkedIn. Snyder, who will take over at the commission in September, was previously head of criminal enforcement at the Justice Department’s antitrust division. He was in charge of several high-profile investigations, including alleged price-fixing by generic drug makers. “He is very well regarded among the U.S. antitrust community,” said Eversheds lawyer Ferguson. “His appointment, together with that of the new General Counsel Steven Parker, reflects a desire to focus more on prosecutions, as both have litigation backgrounds.” Bloomberg News
Business Daily Tuesday, July 18 2017 11
Asia Trade
Singapore exports growth beats expectation on firm electronics Some analysts have voiced concern about Singapore’s dependence on its electronics industry
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ingapore’s non-oil domestic exports grew faster-than-expected in June from a year earlier, thanks to continued growth in electronics shipments as well as a rebound in non-electronic products. Exports grew 8.2 per cent from June last year, data from trade agency International Enterprise Singapore showed yesterday, beating a Reuters poll that predicted a 4.1 per cent expansion. Export figures in May were upwardly revised, growing 0.4 per cent on a year-on-year basis compared with the 1.2 per cent contraction
previously recorded. In April, exports contracted a revised 0.3 per cent from the year before. “It’s attributable to a high base last year. If you look at electronics, it’s still in positive territory,” said OCBC Bank analyst Selena Ling. “We’re still on track. Hopefully we won’t see a big drop off come second half of the year.” On a seasonally adjusted monthon-month basis, exports in June declined 2.7 per cent after expanding a revised 9.4 per cent in May from the previous month. The poll had projected a monthly decline of 2.1 per cent for June.
In June, exports in the electronics sector -- a major driver of shipments in recent months -- grew 5.4 per cent from the year earlier. Exports of electronics have stayed solid this year, and analysts say they are likely to remain so.
Key Points June y/y non-oil exports +8.2 pct June m/m sadj non-oil exports -2.7 pct Exports up for 1st time y/y in 2 months, growth seen broadening In the second quarter, Singapore narrowly avoided a recession, growing at 0.4 per cent from the previous three months, saved by solid global
demand for its tech products. However, some analysts have voiced concern about Singapore’s dependence on its electronics industry. “The issue most critics have with the manufacturing exports uptick is that it is very electronics-centric. If we have a broadening of the growth base, it will be more reassuring,” said Ling. Non-electronics grew 9.3 per cent in June after two straight months of contraction, spurred largely by growth of petrochemical exports. “That is not exactly what you would say would be sustainable,” Ling said. A majority of analysts believe that the Monetary Authority of Singapore will keep monetary policy steady when its next policy statement is due in October. Reuters
Singapore’s harbour
Salaries
Korea’s minimum wage hike keeps Moon on target for pay pledge According to a June survey by the Korea Federation of SMEs, about 90 per cent of companies want raises kept below 5 per cent Jiyeun Lee
South Korea’s minimum wage is set to increase next year by 16 per cent to 7,530 won (US$6.60) per hour, the biggest jump since 2001, giving President Moon Jae-in an early victory in his push to boost incomes. Moon is seeking to nudge the economy away from its export dependence to a structure that relies more on household spending, which makes higher pay and quality jobs more important. He’s pledged to be a “jobs president” and to raise the minimum wage to at least 10,000 won by 2020.
‘About 12 per cent of workers were receiving the minimum wage or lower in 2015’ The decision over the weekend by the Minimum Wage Commission ends more than a month of tug-ofwar between labour and business representatives. Labour advocates
had initially requested a 55 per cent hike while business representatives suggested just 2.4 per cent. About 12 per cent of workers were receiving the minimum wage or lower in 2015, according to an estimate by Korea Labour Institute. The finance ministry said in a statement on Sunday that the government will give financial aid to some small business owners to help them pay for part of pay hike. To meet Moon’s 10,000 won goal, the minimum wage will need to keep increasing by about 15 per cent every year, compared with average gains of 7.4 per cent over the past five years. Businesses with five or more employees increased pay to their overall work forces by an average 3.8 per cent in 2016 from previous year, according to the Korea Labour Institute.
Social welfare
“For Korea, where the social welfare system is weak, workers are more dependent on income and a higher minimum wage is important from a human rights perspective,” said Choi Pae-kun, an economics professor at Konkuk University in Seoul who supports the 10,000 won target. South Korea’s minimum wage started in 1988 at the equivalent of
half a dollar per hour. This low start made the pace of annual increase higher than those of overall wages, but the level still lags peers in the Organization for Economic Co-operation and Development. Comparative figures for 2016 show Korea’s minimum wage at about US$5.80 per hour, similar to Israel and Poland, but lower than Japan at around US$7.40 and is about half of Germany’s, according to data by OECD. Korea’s businesses have opposed big hikes, saying they hurt
profitability and would lead to lay offs. According to a June survey by the Korea Federation of SMEs, about 90 per cent of companies want raises kept below 5 per cent. If it is increased to 10,000 won over the next three years, 55 per cent said it might lead to their bankruptcy. The Korean Confederation of Trade Unions said in a July statement that 10,000 won is an amount that a family of two or three needs to lead a life with a “minimum of dignity.” Bloomberg News
12 Business Daily Tuesday, July 18 2017
Asia Trade
Indonesia exports, imports contract in June Exports of clothes, jewellery and machinery in June fell from the same month last year Nilufar Rizki and Gayatri Suroyo
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ndonesia’s exports and imports contracted in June on a yearly basis for the first time in nine months and officials from the statistics bureau blamed seasonal factors. Eid al-Fitr holidays and restrictions for trucks on toll roads were the reasons for the contraction, said
Suhariyanto, the head of the statistics bureau. The holidays started at the end of June this year, whereas last year they began in July. “The drop in imports was a bit excessive and if we compare with other growth related indicators, domestic demand may not be as strong as we had expected before in 2Q17,” said Rangga Cipta, an economist with Samuel Sekuritas in Jakarta.
However, he agreed that seasonal factors were the main reasons for the decline. Cipta expects both exports and imports to surge in July before they normalise in August, noting that China’s solid second-quarter growth may bode well for Indonesia’s exports in coming months. Indonesia’s exports in June fell 11.82 per cent to US$11.64 billion on an annual basis, the first contraction since September 2016, data from the bureau showed yesterday. Analysts in a Reuters poll had
expected a growth rate of 7.53 per cent. In May, shipments from Southeast Asia’s largest economy grew 24.08 per cent. Exports of clothes, jewellery and machinery in June fell from the same month last year, the bureau said.
Key Points June exports down 11.82 pct y/y, imports down 17.21 pct A Reuters poll had expected growth in exports, imports June trade surplus $1.63 bln, more than expected Import contraction sign of weak domestic demand - economist Meanwhile, June imports declined 17.21 per cent from last year to US$10.01 billion, compared with the 8.87 per cent expansion rate expected in the poll. That was also the first contraction since September 2016. Despite the contraction, Indonesia still posted a trade surplus in June. The statistics bureau said its estimate for June surplus was US$1.63 billion, while May’s surplus was revised to around US$580 million. In the first six months of 2017, trade surplus was US$7.63 billion, the biggest first semester trade surplus since 2012. Reuters
Tourism
Spendthrift Aussies embody Thailand’s new strategy The sector makes up about 18 per cent of gross domestic product Sunil Jagtiani
Thailand is now so popular for holidays that almost 35 million foreign tourists -- equivalent to half the country’s population -- are expected this year. As the influx gets harder to manage, the government is shifting strategy. It’s now targeting a minimum increase in tourism revenue of about 5 per cent annually instead of a particular number of visitors, Tourism Minister Kobkarn Wattanavrangkul said. That means encouraging longer stays and higher daily spending, a mix the typical Australian holidaymaker exemplifies, she said. “Maybe they’re the ones who are like: this is my time -- I eat, I shop, and I eat, and I shop,” Kobkarn, 56, said in an interview. Australian visitors were among the top 10 biggest spenders in terms of per capita daily expenditure last year, forking out 5,831 baht (US$172), Tourism Ministry data shows. Their average length of stay of almost 14 days was the highest in that group. Some nationalities take even longer holidays
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but tend to be more parsimonious. British tourists, for instance, stayed for just over 18 days on average while spending 4,376 baht daily. Tourism is a bright spot for Thailand’s economy, which faces challenges such as political uncertainty and sluggish consumer demand. The sector makes up about 18 per cent of gross domestic product, Kobkarn said in the interview in Chiang Mai last month. “We no longer have a target for number of tourists,” she said. “We shouldn’t go beyond the limit that we can cope. But there’s no statistic on that yet. When people say that Phuket may be too crowded, or Bangkok is too crowded, we have to make sure that we are introducing new destinations too.” Arrivals from overseas more than doubled in the past decade, powered by a surge in Chinese holidaymakers who contributed 28 per cent of 1.6 trillion baht in foreign tourism receipts in 2016. Affordability is one reason why Thailand has usurped Malaysia as Southeast Asia’s most popular destination, but Kobkarn said the nation
must focus on quality as well as cost to tackle emerging competitive threats from the likes of Myanmar and Vietnam. Quality doesn’t just mean targeting wealthy tourists as Thailand needs travellers on a variety of budgets, Kobkarn said. Instead, it refers to offering good value experiences that encourage return visits, increase the average length of stay and bolster daily spending per head, she said. Visitors from the Middle East are the biggest per capita daily spenders, according to the Tourism Ministry data. Chinese tourists stood out for above-average expenditure and sheer number of arrivals -- 8.8 million, dwarfing
other nationalities and making China the most important single country for tourism receipts. Thailand’s years-long tourism boom slowed somewhat in recent months. That’s partly because of terrorist bombings in resort towns in August last year and a clampdown by the military government on some operators of large Chinese tour groups, which were judged to generate insufficient local spending. Arrivals are likely to pick up in the second half of 2017 as security concerns fade and Chinese visitors embrace independent travel over package tours, according to Bloomberg Intelligence. That signals more strain
for the country’s airports, some of which are already stretched beyond capacity. State-run Airports of Thailand Pcl is planning to invest about US$6 billion over a decade to try to ease the bottlenecks. Even as Kobkarn tries to focus on revenue targets rather than visitor numbers, arrivals are projected to climb, whether drawn by the allure of white-sand beaches in resorts such as Krabi, the gastronomic delights of Bangkok or the perennially notorious sex capital Pattaya. The Bank of Thailand forecasts 34.9 million tourist arrivals this year, a climb of about 7 per cent from 2016, and 37.3 million in 2018. That’s projected to help Southeast Asia’s second-largest economy expand 3.5 per cent in 2017 and 3.7 per cent next year. Thailand needs to be a quality tourism destination since a range of factors can prevent it being seen as the cheapest, such as rising wages or an appreciating exchange rate, Kobkarn said. “We’re working very hard for people not to think only of the cost,” she said. “We’re not the best. We still have many negative things. But we’re very sincere in improving ourselves.” Bloomberg News
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Tuesday, July 18 2017 13
Asia Commodities
Australia readying fresh investment wave as prices rally Still, even with a rebound in projects, imports of mining equipment into Australia are likely to be at about 50 per cent to 60 per cent of levels in 2012 Matthew Burgess and David Stringer
Mining companies in Australia, the world’s biggest exporter of iron ore and coal, are poised to approve fresh investments in projects, driven by rallying commodity prices and the need to replace depleting deposits, according to global equipment supply giant Komatsu Ltd. “They’re looking at new fleets of equipment,“ Sean Taylor, chief executive officer
of Komatsu’s Australian unit, said in an interview in Sydney. The miners have to reinvest in output “because otherwise they can’t maintain production at the levels that they’re at,” he said. Australia’s commodity exports are set to hold above A$200 billion (US$155 billion) over the next two fiscal years and there’s a pipeline of about A$25 billion of projects approved for construction, according to government estimates. The Bloomberg
Commodity Index has advanced more than 12 per cent since slumping to a quarter-century low in January 2016. “The level of the commodity prices is pretty good now for the miners to consider reinvestment,” Taylor said in the June 29 interview. “It feels like to me we’ve got more discussion around decision making.” Conversation about greenfield sites, which can take up to 10 years to be approved, have “certainly increased a little bit in the last six months -- whereas before that, it was zero,” he said. The nation’s top iron ore exporters have already given the go-ahead for new mines amid a potential US$8 billion of investment to replace at least
170 million tons of capacity that’ll be lost as exhausted pits are closed. BHP Billiton Ltd. last month approved US$184 million in initial spending for its A$4 billion South Flank mine in Western Australia, while Rio Tinto Group last year sanctioned development of the US$338 million Silvergrass operation.
Slow recovery
Komatsu, the world’s second-biggest supplier of equipment to the construction and mining sectors, last year agreed a US$2.89 billion deal to acquire Joy Global Inc. to add expertise in rope shovels and underground mining equipment. Komatsu and competitors are positioned to benefit from a slow recovery in mining equipment
demand, particularly across Asia, according to Bloomberg Intelligence. BHP could boost annual earnings by about US$500 million from mining cost savings by adding more autonomous trucks to cover most of its fleet in the Pilbara iron ore region and about a third of its 350 vehicles at coal operations in the Bowen Basin, Deutsche Bank AG said in a July report.
“The level of the commodity prices is pretty good now for the miners to consider reinvestment” Sean Taylor, chief executive officer of Komatsu’s Australian unit Still, even with a rebound in projects, imports of mining equipment into Australia are likely to be at about 50 per cent to 60 per cent of levels in 2012, at the height of an investment boom, Taylor said. Capital expenditure by miners in Australia is forecast for a fifth annual decline in the year to July 2018, the country’s industry department said last month. Bloomberg News
Stock markets
Dual-listed stocks an accidental insurance for India’s glitches While many countries have one main domestic exchange, India’s authorities are keen for competition between the 142-year-old BSE and NSE Ameya Karve and Santanu Chakraborty
Last week’s trading halt at India’s biggest stock exchange highlighted an unusual feature in the country’s equity market -- many of its companies are listed on two venues. Reliance Industries Ltd., Infosys Ltd. and HDFC Bank Ltd. are among the firms that call both the National Stock Exchange of India Ltd. and BSE Ltd. home. While businesses often list their shares in more than one jurisdiction, doing so domestically is rare. India’s practice goes back to NSE’s debut in 1994 as a corporate exchange that was thought to bring in better governance to the country’s capital markets, according to Sankarshan Basu, a finance and accounting professor at the Indian Institute of Management, Bangalore. The legacy has become an unintended benefit in an age when exchanges run on complex software systems that sometimes fail. On July 10, as the NSE was forced to suspend trading for nearly three hours because of a malfunction, investors could still buy and sell shares on BSE’s venue. “Indian investors are protected by the fact that we are among the very few nations in the world where most of the top companies are dual-listed and the majority of the large brokers have licenses to trade on both the major bourses,” said Dipan Mehta, a member at both BSE and NSE. When the Indonesia Stock Exchange halted trading because of a glitch on the same day as NSE, there was zero trading in stocks and equity
derivatives nationwide. The same was true in Singapore in July 2016, when the local exchange suspended stock trading because of a hard disk failure. While many countries have one main domestic exchange, India’s authorities are keen for competition between the 142-year-old BSE and NSE, though the newer exchange is dominant, with an 85 per cent share in cash equities trading. As a result of the NSE outage, stock volumes on BSE climbed 77 per cent.
“Dual listings offer a unique, natural backup and augurs well for risk management in the age of frequent electronic disruptions” Vaibhav Sanghavi, who manages about 9 billion rupees for onshore hedge fund Avendus Capital Even in the U.S. where there are 12 public bourses, companies only list at one venue. Having a dozen venues means a halt at a stock’s home exchange doesn’t necessarily suspend trading across the entire market. But
single-listing still has vulnerabilities: the opening and closing auctions at the New York Stock Exchange and Nasdaq Stock Market see investors flock to the home bourse, and an outage during those periods could cause major disruptions.
Derivatives difference
While the law in India is that companies can be listed on any exchange with a nationwide network -- which currently means the NSE and BSE -- most large companies choose to dual list, said Prithvi Haldea, chairman of researcher Prime Database in New Delhi. Many small- and medium-sized companies and a few large ones choose to stick to a single exchange, he said. The dual listings don’t help in India’s derivatives market, where contracts are specific to a particular exchange
and the NSE’s dominance is greater than with cash equities. Derivatives worth a notional value of close to 4.5 trillion rupees (US$70 billion) are traded daily on the NSE, compared with a total of about 270 billion rupees of stocks on both exchanges. “If there is a major issue, all one can do is take fresh futures and options positions on the other exchange,” said Pankaj Karde, president and head of institutional sales at Mumbai-based Systematix Shares & Stocks Ltd. The NSE suffered its longest-ever halt on July 10 after an unidentified glitch disrupted orders and price feeds, forcing the operator to freeze all equities and derivatives trading. The exchange is already under pressure from an investigation into its practices toward high-speed traders, and is in the midst of a proposed initial public offering that seems to have stalled. The country’s unusual set up, however, may have saved NSE from further embarrassment. Bloomberg News
14 Business Daily Tuesday, July 18 2017
International In Brief Energy
Egypt sets sights on doubling natural gas output Three recently discovered major gas fields are expected to raise Egypt’s natural gas output by 50 per cent in 2018 and 100 per cent in 2020, the petroleum ministry said. “The fields of Zohr, North Alexandria and Nooros are among the most important projects that will increase natural gas production ... and will contribute to (Egypt’s) natural gas self-sufficiency by the end of 2018,” Petroleum Minister Tarek El Molla said in a statement, which set out the production forecasts. Egypt’s natural gas production rose to about 5.1 billion cubic feet per day in 2017 from 4.4 billion cubic feet in 2016. Prices
Nigerian annual inflation slows Annual inflation in Nigeria eased for a fifth straight month in June, slowing to 16.1 per cent, the National Bureau of Statistics (NBS) said yesterday. A separate food price index showed inflation at 19.91 per cent, up from 19.27 per cent in May, indicating continued pressure on food prices, the NBS said in a report. Annual inflation slowed in May to 16.25 per cent. It recorded its first recent slowing in February. Nigeria is in its second year of recession and is contending with a currency crisis and dollar shortages brought on by low oil prices, which is the OPEC member’s mainstay.
Labour
U.S. firms face hiring difficulties, business survey says The share of firms reporting increased wages rose eight points from April to 47 per cent
A
growing share of U.S. employers are struggling to hire new workers and some have raised wages as a result, according to a survey released yesterday. The National Association of Business Economists said its quarterly survey showed members were a little less sanguine about the prospects for strong economic expansion over the next year, although most still expect sustained quarterly growth of better than two per cent With unemployment already very low, anecdotal reports indicate employers around the country are struggling to fill open positions and have been obliged to boost compensation to lure in new candidates. But official figures show only sluggish wage growth and weak inflation -- with average hourly earnings disappointingly up less than 0.2 per cent in June -- something that has puzzled policymakers at the Federal Reserve, although it has not yet prompted them to alter
their course of gradual interest rate increases. “Slightly over one third of panellists reports that their firms have experienced some difficulty in hiring,” NABE survey chair Emily Kolinski said in a statement. The survey of 101 NABE members showed rising sales, profits, hiring and capital spending. However, “pricing power -- or lack of it -- and labour costs are generating some headwinds for a significant number of firms,” she said. The share of firms reporting increased wages rose eight points from April to 47 per cent. But expectations that wages will keep rising over the next three months rose only three points, also to 47 per cent. Half of firms reported gains in sales, up from 45 per cent in April. About 60 per cent of respondents said they expected GDP to expand by more than two per cent over the next four quarters, but the share foreseeing growth under two per cent rose eight points to 38 per cent.
Kolinski, chief economist at Ford Motor Company, said firms have not changed course on hiring and investment decisions based on any hope of stimulus from the Trump administration, which has vowed to slash taxes and regulation.
“Pricing power -- or lack of it -and labour costs are generating some headwinds for a significant number of firms” Emily Kolinski, National Association of Business Economists survey chair
And just 12 per cent said it was likely they would revisit long-term strategies in light of President Donald Trump’s decision to withdraw from the 2015 Paris Climate accord, while 50 per cent said this was unlikely. AFP
Real estate
UK house prices stabilise, but buyers still wary Asking prices for houses and apartments in England and Wales stabilised after a drop in June, but home-buyers remain cautious as wage growth falls behind inflation, a survey by property website Rightmove showed yesterday. The figures were based on property advertised between June 11 and July 8, covering the weeks after Prime Minister Theresa May unexpectedly lost her majority in parliament, creating uncertainty for investors who were already on edge about Britain’s exit from the European Union. Rightmove said average asking prices for property sold on its website increased by a monthly 0.1 per cent in July. Investment
Merkel says must tackle bottlenecks German Chancellor Angela Merkel rejected criticism from her SPD challenger on Sunday that she was neglecting the country’s infrastructure, pointing to already increased investment levels and capacity bottlenecks in some parts of the economy. SPD leader Martin Schulz has accused Merkel of making empty promises about Germany’s economic and political future as the former president of the European Parliament set out his own plans to boost investment and enhance European unity. The exchange comes 10 weeks before the federal election in which Merkel seeks a fourth term.
Lloyd’s report
Global cyber attack could spur US$53 bln in losses Economic costs typically include business interruptions and computer repairs Suzanne Barlyn
A major, global cyber attack could trigger an average of US$53 billion of economic losses, a figure on par with a catastrophic natural disaster such as U.S. Superstorm Sandy in 2012, Lloyd’s of London said in a report yesterday. The report, co-written with risk-modelling firm Cyence, examined potential economic losses from the hypothetical hacking of a cloud service provider and cyber attacks on computer operating systems run by businesses worldwide. Insurers are struggling to estimate their potential exposure to cyber-related losses amid mounting cyber risks and interest in cyber insurance. A lack of historical data on which insurers can base assumptions is a key challenge. “Because cyber is virtual, it is such a difficult task to understand how it will accumulate in a big event,” Lloyd’s of London Chief Executive Inga Beale told Reuters. Economic costs in the hypothetical cloud provider attack dwarf the US$8 billion global cost of the “WannaCry”
ransomware attack in May, which spread to more than 100 countries, according to Cyence. Economic costs typically include business interruptions and computer repairs.
‘Average losses for a scenario involving a hacking of operating systems ranged from US$9.7 billion to US$28.7 billion’ The Lloyd’s report follows a U.S. government warning to industrial firms about a hacking campaign targeting the nuclear and energy sectors. In June, an attack of a virus dubbed “NotPetya” spread from infections in Ukraine to businesses around the globe. It encrypted data on infected
machines, rendering them inoperable and disrupted activity at ports, law firms and factories. “NotPetya” caused US$850 million in economic costs, Cyence said. In the hypothetical cloud service attack in the Lloyd’s-Cyence scenario, hackers inserted malicious code into a cloud provider’s software that was designed to trigger system crashes among users a year later. By then, the malware would have spread among the provider’s customers, from financial services companies to hotels, causing all to lose income and incur other expenses. Average economic losses caused by such a disruption could range from US$4.6 billion to US$53 billion for large to extreme events. But actual losses could be as high as US$121 billion, the report said. As much as US$45 billion of that sum may not be covered by cyber policies due to companies underinsuring, the report said. Average losses for a scenario involving a hacking of operating systems ranged from US$9.7 billion to US$28.7 billion. Lloyd’s has a 20 per cent to 25 per cent share of the US$2.5 billion cyber insurance market, Beale said in June. Reuters
Business Daily Tuesday, July 18 2017 15
Opinion Business Wires
The Phnom Penh Post Angkor Wat ticket sales revenue surged during the first half of 2017 on the back of a sharp increase in tourist entry fees, with no indication that the steeper admission prices had discouraged visits to the Kingdom’s top tourist draw, government officials said yesterday. Ticket sales for Angkor Wat Archaeological Park generated US$52.2 million during the first six months of the year, compared to US$31 million during the first half of 2016, according to data released by Angkor Enterprise, the agency that manages ticketing for the historic temple complex near Siem Reap.
Milton Friedman
Appraising Milton Friedman, 50 years on Jakarta Globe Switzerland and Indonesia launched an economic cooperation and development strategy for the 2017-2020 period, renewing the European country’s commitment to support economic development in the archipelago for the next four years. The Swiss government – through its State Secretariat for Economic Affairs (SECO) – is supporting middleincome countries such as Indonesia, Egypt, Ghana, South Africa, Vietnam, Colombia and Peru with grants, technical assistance and capacity building. In Indonesia’s case, the country has committed itself to providing a total of 75 million Swiss francs (US$77.5 million) for the next four years.
The Star Foreign investors have started to mop up stocks on Bursa Malaysia again after two weeks of withdrawal. MIDF Research said the fact that there has not been a prolonged period of foreign selling bodes well for the local market. “Based on preliminary data by Bursa, foreign investors acquired RM305.1mil, the highest since the week ended May 12. “This was the higher than that reported by the exchanges in Thailand, Indonesia and Philippines. The estimate is based on transactions in the open market and excluded off market deals,” MIDF said in its weekly fund flow report.
Bangkok Post Thailand’s hotel and restaurant businesses, which employ millions of alien workers, are in a spin over the new labour law endorsed on June 23. The controversial crackdown has forced scores of restaurants to close their doors, and many travel and bus companies to stop hiring illegal workers, many of whom handle tourist luggage. Thai Restaurant Association (TRA) president Taniwan Koonmongkol said more than 250,000 illegal workers have returned to their home countries since the implementation of the act. Millions, however, are still in the country, since their grace periods have yet to expire.
P
aradigm shifts do not come often in economics. From Adam Smith to John Maynard Keynes, there is only a handful of scholars who can claim to have radically changed the way we think about how markets should work and what governments can do to improve their functioning. One such moment came almost 50 years ago when Milton Friedman delivered his presidential address to the American Economic Association in Washington D.C. The subject of the speech was the role that monetary policy can have in reducing unemployment and boosting growth. In Friedman’s view, central banks cannot reduce the long-run rate of unemployment at which an economy operates (the “natural rate of unemployment”). Were the monetary authorities to stimulate demand then, they would only prompt workers to demand even higher wages and cause inflation to accelerate. It was a matter of only a few years before Friedman’s speech acquired a near-prophetic status. In the 1970s, central banks tried to fight off the recession caused by oil shocks by slashing interest rates, but these policies only caused inflation to spiral out of control. This led to a major rethink of how monetary policy should work: Ever since, central banks have primarily sought to ensure that inflation remains low and stable and have turned wary of stimulating the economy when they think it has hit the natural rate of unemployment. In this respect, Friedman’s thinking is alive and well today. This does not mean, however, that his 1967 presidential address has passed the test of time entirely. Olivier Blanchard, the former chief economist at the International Monetary Fund and now a fellow at the Peterson Institute of International Economics, is reviewing the usefulness of the natural rate hypothesis -- known as the “nonaccelerating inflation rate of unemployment” or Nairu -- for a forthcoming publication. His assessment, which was presented in Italy last week at the University of Naples Federico II, offers a thoughtful account of the various critiques which have been levied at Friedman, but does not refute a central implication of his address: that structural policies are needed to ensure more people can find work when the economy is running at full capacity. Blanchard’s work clearly shows that downturns cause far more persistent scars than Friedman’s theory would suggest. His analysis of all the recessions that took place in 22 advanced economies over the past 50 years shows that, on average, the unemployment rate remains higher than it was during the boom, well past the moment of the crisis. This effect, which economists call “hysteresis,” is primarily the consequence of what occurs in the labour market after workers lose their jobs in a recession: The longer they remain unemployed, the higher the risk they become “disenfranchised,” either because they lose the necessary skills for
“
Ferdinando Giugliano a Bloomberg View columnist
companies to hire them or because they become discouraged and stop looking for a job. This means that the “natural rate” is far less rigid than Friedman thought or made it seem. The hysteresis hypothesis, which has been the subject of a multitude of studies in the last 30 years, has major implications for today’s central banks, especially in the U.S. and the euro zone. The U.S. Federal Reserve has begun tightening monetary policy as the unemployment rate is now stable at around 4.5 per cent, near what most economists would consider the “natural rate.” Yet, labour force participation only stands at 62.8 per cent, which may help to explain why wage growth remains subdued. Some economists, including Minneapolis Fed President Neel Kashkari, would like the Fed to pause raising rates, as there is scope for increasing employment without stoking inflation. Similarly, in the euro zone, the European Central Bank is mulling when to taper its program of quantitative easing as the recovery strengthens: At 9.3 per cent, unemployment has fallen to its lowest rate since 2009, but the ECB believes a real measure of slack in the economy may be nearly twice as high because of underemployment -- that is, people taking work that is part-time or temporary or for which they are overqualified. Assuming the “natural rate” is not stable, the ECB should keep its stimulus for some time yet to ensure more workers are absorbed back into the labour force. Blanchard is careful, however, not to draw excessive policy implications. He is right to be cautious. While he has a strong case that the scars of a recession are deeper than Friedman’s theory suggests, it is far less clear that simply pressing on with the monetary stimulus can bring workers who have lost their skills back into the workforce. More likely, what is needed is a combination of cyclical and structural policies. For central bank stimulus to help lower the “natural rate” of unemployment, governments have to put in place well-targeted retraining programs, which allow workers to rejoin the labour force. There may also be a case for tweaking the welfare system to encourage the long-term unemployed to look for work: Blanchard suggests that in a boom the U.S. government should be harsher with their disability benefits, which discouraged workers use as a form of income support during a crisis. Fifty years on from the speech that changed macroeconomics, it is pretty clear that we should not treat the “natural rate” as if it were a mathematical constant, immune to the effects of monetary policy. But an important lesson of Friedman’s speech remains valid: If we want to ensure more people are well-employed, central banks alone will certainly not suffice. Bloomberg View
Fifty years on from the speech that changed macroeconomics, it is pretty clear that we should not treat the “natural rate” as if it were a mathematical constant
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16 Business Daily Tuesday, July 18 2017
Closing Currencies
China central bank net FX sales rise for first time in seven months
Net foreign exchange sales by China’s central bank rose for the first time in seven months in June, though they remained small compared with the end of last year as capital outflows from China have slowed. The People’s Bank of China (PBOC) sold a net RMB34.3 billion (US$5.07 billion) worth of foreign exchange in
June, up from RMB29.3 billion in May, according to Reuters calculations based on central bank data released yesterday. June’s sales were still the second lowest in at least a year, following earlier data showing foreign exchange reserves edged up in June for a fifth consecutive month, in line with market expectations, as capital outflows eased in the face of tighter regulations and the dollar’s rally paused. Reuters
Biotech
Beijing approves two more genetically modified crops for import The approvals come after China promised to speed up a review of pending import applications Dominique Patton
C
hina has approved two more genetically modified (GMO) crops for import, the Ministry of Agriculture said, the second such move in the past month to expand access to biotech seeds as part of Beijing’s 100-day trade talks with Washington. The two new crops, approved from July 16 for a period of three years, are Syngenta’s 5307 insect-resistant corn sold under the Agrisure Duracade brand and Monsanto’s 87427 glyphosate-resistant corn, sold under the Roundup Ready brand, the ministry said on its website yesterday. The move brings total approvals to four after the government last month gave the go-ahead to Dow Chemical Co’s Enlist corn and Monsanto’s Vistive Gold soybeans. But it leaves four other products owned by Monsanto, Dupont and Dow still on a waiting list pending approval from Beijing. Dupont was “disappointed” its Pioneer insect-resistant corn was not included, a spokeswoman said in an
email. The other three are Dow’s Enlist soybeans and two alfalfa products developed by Monsanto. Dow’s Asia Pacific media relations representative Eileen Zeng could not be immediately reached nor could Monsanto’s China corporate affairs manager Lian Meng for comment.
Key Points Approval latest step under 100-day China-U.S. trade talks Comes after expert biotech committee met in June Dupont ‘disappointed’ its corn trait not included Hopes that all six would get the go ahead in the second round mounted after the National Biosafety Committee (NBC), a group of experts who advise the government on GMO safety, met late last month to review the six remaining products, company executives and experts said. The first batch of approvals also followed an NBC meeting. The government has not confirmed the meeting took
place or commented any further on the issue. The approvals come after China promised to speed up a review of pending import applications as part of the 100-day trade talks with the United States. China is the top export market for U.S. agricultural products. While the country does not permit planting of GMO food crops, it does allow GMO imports such as soybeans and corn for use in its animal feed industry. Getting new varieties
approved for import takes years, forcing leading agrichemical players to restrict sales during China’s review process. Earlier this year, DuPont Pioneer began a limited commercial introduction of its next-generation Qrome corn products under stewardship in the Western United States, allowing it to make the new technology available to some growers ahead of Chinese approval. Dupont continues to cooperate with Chinese regulators,
the spokeswoman said, but added that “global markets should conduct predictable, transparent regulatory reviews based on sound science and be free from political influence”. The U.S. industry has repeatedly complained about the lack of transparency in China’s biotech review process. Beijing has in the past held back approvals of imported GMO products amid concerns about anti-GMO sentiment in the country. Reuters
Internet
Fund
Major tech firms urge U.S. to retain neutrality rules
BlackRock is preparing to launch Thai junta grants king a private fund in China full control of palace wealth
A group representing major technology firms including Alphabet Inc and Facebook Inc urged the U.S. Federal Communications Commission (FCC) yesterday to abandon plans to reverse the landmark 2015 rules barring internet service providers from blocking or slowing consumer access to web content. The Internet Association said in its filing with the FCC that dismantling the net neutrality rules “will create significant uncertainty in the market and upset the careful balance that has led to the current virtuous circle of innovation in the broadband ecosystem.” The rollback will harm consumers, said the group, which also represents Amazon.com Inc, Microsoft Inc, Netflix Inc, Twitter Inc and Snap Inc. In May, the FCC voted 2-1 to advance Republican FCC Chairman Ajit Pai’s plan to reverse the former Obama administration’s order reclassifying internet service providers as if they were utilities. Pai has asked if the FCC has authority or should keep its rules barring internet companies from blocking, throttling or giving “fast lanes” to some websites, known as “paid prioritization.” Reuters
BlackRock Inc., the world’s largest money manager, said it is preparing to start a private fund in China after the nation opened the market wider to global players. The firm plans to set up a wholly foreign-owned enterprise (WFOE) first for its private fund business in the nation, according to Chen Ting, general manager at BlackRock Overseas Investment Fund Management (Shanghai) Co. Chen spoke at a press briefing organized by the Lujiazui Administration Bureau in Shanghai. Global fund managers have rushed to the world’s second-biggest economy as it quickens opening its capital markets to help counter outflows and promote global use of the yuan. Fidelity International in May beat global peers to start a private fund in Shanghai. UBS Asset Management also secured a license to offer such funds for onshore stock, bond and multi-asset investment, it said last week. Private fund companies can sell products to rich individuals and institutional investors. “The coming of foreign institutions will inject new blood into the market in China,” Chen said. Bloomberg News
Monarchy
A new law giving Thailand’s king direct control over royal assets worth billions of dollars went into force yesterday, the latest move by an increasingly assertive monarch to consolidate his power. King Maha Vajiralongkorn inherited one of the world’s great fortunes when he ascended the throne in October following the death of his father Bhumibol Adulyadej who ruled for seven decades. Thailand’s monarchy is shielded from both criticism and scrutiny by a draconian lese majeste law and does not declare its wealth. But analysts say the Chakris are one of the world’s wealthiest royal dynasties, with estimates varying between US$30-60 billion. Most of this wealth is controlled by the opaque Crown Property Bureau (CPB), a vast portfolio that includes massive property ownership and investments in major companies. On Sunday the Royal Gazette published a new law governing the CPB that was passed by the junta’s rubber-stamp legislature last week and went into effect yesterday. The main change gives Vajiralongkorn power to appoint all members of the committee that oversees the CPB. AFP