Business Daily #1312 June 7, 2017

Queen's Birthday Celebration Poolside BBQ Lunch Sat, 10 June 2017 │ 11:00am - 2:00pm │ The St. Regis Macao Join us in this relaxing and lighthearted get-together at a poolside BBQ lunch.

Bring your swimmers, and slip, slop & slap!

Police net 12 in loan sharking ring Legal Page 3

Wednesday, June 7 2017 Year VI Nr. 1312 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Labour

Gaming

FOAM pushes for labour employment solutions with Blue Book Page 2

www.macaubusinessdaily.com

Environment

Jimei changes name to ‘reflect recent change of control’ plus ‘new corporate image and identity’ Page 7

Commodities

California skips Trump to co-operate with China on clean technology Page 9

Mainlanders may boost imports of gold through Hong Kong Page 16

Venturing Into the Unknown Innovation

Not a burden, but a source of investment. The CFO of a venture capital firm encourages local start-ups to seek funding from the gaming sector. And create products for it. He gives the thumbs-up for the Greater Bay Area, MSAR’s ‘VIP status’ - and says human resource issues can be overcome by organic growth with a few “good people”. Page 6

Tech talk

Still here to support

Entrepreneurs Set up a business in Hengqin. Establish a branch in Macau. And take advantage of “a lot” of subsidies and benefits. So says the Chairman of the Asian Federation of Advertising Associations. Technology advances have ‘levelled the playing field’ for local companies, he claims.

Thus, reaching the global market has never been easier. Page 2

Fiscal support for young entrepreneurs and SMEs reached MOP138 mln in the first five months of the year. With MOP19.6 mln disbursed under the three SME schemes in May. Some MOP19.6 mln went to the young entrepreneur aid programme. Retail and construction industries continued to receive the most support.

Central bank opens tap Subsidies Page 5

HK Hang Seng Index June 6, 2017

25,997.14 +134.15 (+0.52%)

New World Development

Worst Performers

Cheung Kong Property

+2.34%

Geely Automobile Holdings

-2.08%

China Mengniu Dairy Co Ltd

-0.87%

Sun Hung Kai Properties Ltd

+4.90%

Cathay Pacific Airways Ltd

+2.24%

Want Want China Holdings

-1.78%

Sands China Ltd

-0.86%

Wharf Holdings Ltd/The

+2.66%

Hang Lung Properties Ltd

+1.72%

Galaxy Entertainment Group

-1.67%

PetroChina Co Ltd

-0.58%

Sino Land Co Ltd

+2.49%

Henderson Land Develop-

+1.64%

Kunlun Energy Co Ltd

-1.45%

Link REIT

-0.48%

China Overseas Land &

+2.35%

Ping An Insurance Group Co

+1.29%

Belle International Holdings

CNOOC Ltd

-0.45%

+7.37%

-0.99%

27° 30° 27° 30° 27° 30° 27° 31° 27° 31° Today

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

Liquidity The People’s Bank of China has injected massive liquidity into the financial system. Using the medium-term lending facility to fuel it with RMB498 billion. Page 8

2 Business Daily Wednesday, June 7 2017

Macau Innovation

The grass is greener next door Exploring the advantages of the Hengqin New Area could greatly help local entrepreneurs according to the Chairman of the Asian Federation of Advertising Associations (AFAA) Nelson Moura nelson.moura@macaubusinessdaily.com

L

ocal entrepreneurs should explore the benefits of neighbouring Hengqin New Area to initiate new businesses, the Chairman of the Asian Federation of Advertising Associations (AFAA), Raymond So, told Business Daily.

The AFAA Chairman believes that with the Hengqin New Area a primary focus of the Guangdong provincial government for business development, local companies should explore the benefits of this special economic zone while enjoying the liberty of the MSAR. “If I was a local entrepreneur I would register my company in Hengqin and get a branch office in Macau, enjoying a lot of subsidies

and benefits,” he said.

Mr. So said that with the Hong Kong Government not “doing much to develop innovation” and with Shenzhen providing subsidies for new companies and innovation incubators, young Hong Kong people were settling in Shenzhen to start companies and live “in larger apartments with lower rents”.

“The same could happen for Macau residents, who could enjoy a better life quality in Hengqin,” he added.

He also considered that the lack of qualified human resources in the city could be resolved by attracting more qualified Hong Kong residents or Macau residents who had studied in Hong Kong.

“Hong Kong has an abundance of talent. If Macau can offer good work opportunities, compensations and career development it will attract

the right people,” Mr. So said told Business Daily.

Global focus

The AFAA Chairman also advised local companies to not focus only on the local market but position themselves as South China companies with an international reach.

“In the past, maybe Macau wasn’t in an advantageous position when it came to competing with Hong Kong or Shenzhen in terms of size of business development. However, the advancement of digital technology has levelled the playing field and Macau companies can reach the global market, with lower hurdles for expanding internationally,” Mr. So said.

He also considered that technology is a “blank canvas” for innovation, creating an equal and fertile ground for new possibilities for market disruption.

“Innovation defines the future and will be a driving force for the development of Asian industry,” said So. According to him, technology

advancements allow innovation in unexpected areas, and he advised entrepreneurs to consider how technology can improve existing services or create new consumer needs.

As an example, he cited the winners of the recent editions of the ECI Awards, a competition founded in New York City by the International E-Commerce Innovation Association (IECIA) to promote innovation in digital business, such as Zhai Dai Xi (Laundry For You) a smartphone app that provides on-demand laundry services.

“Zhai Dai Xi is actually changing consumer behaviour in the laundry industry and is a very good example of disruptive innovation that creates new market behaviour,” Mr. So said.

According to Mr. So the new online world allowed the appearance of sector improvement services such as Ymm56, a mobile transportation platform that enables logistics companies to track cargo trucks and transactions, and Fabao (Pocketlawyer) an app providing legal advice through crowdsourcing.

“The logistics industry has many problems for management with owners not trusting drivers and deliverers. Ymm56 helps drivers to be better compensated and helps logistics companies be more efficient in transportation (…) Fabao shows that even legal services can be innovated through the internet, providing a platform for people to find professional legal advice,” Mr. So stated.

Innovation can even meet consumer needs in water bottles, with So giving Gululu as an example, an interactive bottle that helps parents control the amount of water consumed by their children.

“You might think this is not a great task and is a small need but it’s a great mix of tech innovation with social media elements, with the bottle incentivising kids to consume water through an interactive cartoon character,” he concluded.

Labour

Blue Book attempts to tackle local labour problems A federation of trade unions has introduced a blue book advancing solutions for tackling labour employment issues Cecilia U cecilia.u@macaubusinessdaily.com

Yesterday, the Macau Federation of Trade Unions (FOAM), together with the China Institute of Industrial Relations, introduced a Blue Book pertaining to the protection of local labour rights and development.

Given that the date of completion for amendments to the Labour Law is still unknown, FOAM has proposed a collective agreement - a commercial agreement usually negotiated collectively between the management group of companies and trade unions.

In terms of developing the Mechanism of Labour Relations Co-ordination, the union proposes two directions – namely, the improvement of the mechanism of a collective labour law via rights such as collective agreement and the continual strengthening of monitoring adequate supply of labour.

With the existence of a collective agreement ‘both the market as well as labour rights will have their stability ensured’ reads the Blue Book.

Meanwhile, despite the recent reduction in the number of non-resident workers employed in the city

the number over the past seven years is still growing - which remains one of the fundamental issues in the city, it opines.

FOAM hence propose increasing the transparency regarding supply of non-resident workers in order to improve the social participation mechanism of policies of non-resident workers’ employment as well as exit mechanism for foreign workers.

In addition, the input of more

resources towards training local workers and the strengthening of protection of minimum working conditions are also approaches to resolving the issue posed by non-resident workers, according to the book.

Current Labour Standards, which is the core of the Labour Law, still require improvements, in particular in areas such as overlapping holidays, paternity leave and labour remuneration, it says.

The union perceives that working hours should be decreased, proposing the introduction of a five-day work week and restricting employers’ rights regarding adjusting the flexibility of working hours.

Also, FOAM suggests refining the regulations for holidays and breaks, increasing the number of days for paid leave, raising salaries by diversifying the economy and rolling out a universal minimum wage law.

With the non-mandatory central pension scheme bill recently passed at the Legislative Assembly, together with the Social Security Fund (SSF), local residents, to a certain extent, receive some level of guarantee for retirement. However, as stated in the Blue Book, the level of benefits to be received when retired is relatively inadequate when compared to other regions.

With this in mind, FOAM proposes raising the level of contribution of the pension scheme, conducting research on the feasibility of linking contributors’ income and the contribution amount, as well as ensuring that the SSF appropriately support the city’s economic development.

In terms of labour disputes, FOAM should strengthen communication with employers to assist in negotiations between workers and employers, says the Blue Book.

Meanwhile, the Labour Affairs Bureau should strengthen its monitoring of employer behaviour whilst the courts should consider enhancing and improving their processing efficiency when dealing with labour cases.

With the schedule of the revision of the Labour Law unknown, the union pointed out that the city will continue to face a shortage of regulations regarding solutions for resolving labour disputes.

Business Daily Wednesday, June 7 2017 3

Macau HZMB

Hong Kong CE insists super bridge is safe

H

ong Kong Chief Executive Leung Chun-ying (CY Leung) announced yesterday that he promised to look into communication issues within the government following reports on Monday that his Secretary for Transport and Housing, Anthony Cheung Bing-leung, claimed he not been informed for nearly a year about possible irregularities related to the concrete used in the construction of the Hong Kong-Zhuhai-Macau Bridge (HZMB), South China Morning Post reported yesterday.

CY Leung has, however, declined to commit to an appeal from engineers and lawmakers who requested more detailed non-destructive

tests be conducted, even if that entailed delaying the opening of the bridge.

Accusations about the falsification of concrete test results by employees of Jacobs China, a lab service contractor, which could compromise the structural safety of the bridge, emerged in late May. Earlier this week, it was reported that highway officials, speaking with legislators from the neighbouring SAR, pointed out that 210 samples could be fake, with 203 locations on the bridge confirmed.

During a Legislative Council transport panel meeting on June 5, Hong Kong’s Secretary for Transport and Housing revealed that it was not until last month that he was finally informed about the problems related to the

alleged fake concrete employed in the construction of the super bridge, after been kept ‘in the dark’ for nearly a year.

Claims from Hong Kong

officials that they had since conducted non-destructive concrete strength tests both on the samples and on-site, were supported by the departing Hong Kong CE, who

was quoted as saying that “it is important that we have done a lot of tests on the site, and all results show that there is no problem with the concrete.” S.Z.

Crime

Loan sharking bust nets 12 people Judiciary Police have arrested 12 individuals in Taipa for involvement in a loan sharking ring Nelson Moura nelson.moura@macaubusinessdaily.com

A total of 12 people have been detained in Taipa for criminal association and loan sharking activities by Judiciary Police (PJ), according to a

release by the authority.

Following an operation in March of this year that dismantled a loan sharking group operating out of an apartment in Taipa, in which the PJ detained nine people, the authorities discovered the same group also

operated from two apartments in Rua Bragança and Rua de Aveiro.

After a search conducted on Monday of the two apartments, the PJ confiscated more than HK$30,000 (US$3,849) in cash, together with 81 Unionpay cards and a considerable number of business cards for the illegal loan operation.

The PJ also announced that the lone sharking group had rented several apartments in Macau and had recruited several people from Mainland China to conduct their operations, with the 12 detained having operated

in the city for the past 11 months.

The detainees were sent to the Public Prosecutor’s Office on charges of criminal association and loan sharking related to gambling activities, but the PJ stated it had yet to find the organisation leader.

Police authorities also announced that as part of their Thunderbolt Operation 2017 searches had been conducted on Monday in 10 local casinos and surrounding areas, with 308 people searched and one man taken into custody for holding an expired visa. advertisement

4 Business Daily Wednesday, June 7 2017

Macau

Culture

Food, music and art A restaurant located in the old neighbourhood of Taipa demonstrates how food and culture come together in one place Cecilia U cecilia.u@macaubusinessdaily.com

“

W

e want our customers to enter the restaurant surrounded by music, privacy, food and also the feeling of warmness and friendliness,” said Alice Wong, the owner of Chef’s Corner, a restaurant located in Taipa Village with a distinctive style.

The restaurant takes a different approach from its neighbours, primarily concentrating on private parties and dinners, but also offers souvenirs, takeaway food and beverages. Other unique points include an indoor garden and an art exhibition space, located on the shop’s second floor.

The space is also used for workshops and events on topics including painting and cooking.

With only one table to serve per night, Ms. Wong advocates the niche market that she and her three other partners are targeting, as well as their intention to promote and conserve local traditional culture.

“We think we should focus on a niche market and our market is only a private kitchen,” said Ms. Wong.

“We discovered that other private kitchens do not have much difference with normal restaurants out there, only having fewer tables.”

Initially, she recalled, the opening of the restaurant was to test the skills of the four cooks and, out of luck, the father of Ms. Wong provided the old house for them to start their business.

The furnishing of the place, she points out, was completely undertaken by the four owners albeit on a tight budget, leading them to design a space they deemed ideal for both customers and chefs.

“We thought a garden in the middle of the place would lighten up both our mood while we cook and customers’ - we also wish to have music and sunshine while we cook,” declared Ms. Wong.

After operating for almost four years and without investing much in advertising, Ms. Wong disclosed that most customers who come to the private kitchen are locals, although currently a significant number of customers come all the way from Hong Kong.

“As long as we provide the services that the customers want, they will recommend us to others and this is

already a kind of advertising,” she said, noting, however, that they do not want to promote more because their intention is to recreate the environment of the old days.

Trying out different things

Ms. Wong said the provision of takeaway coffee during the daytime and souvenirs were only introduced later in order to diversify content.

“We found out that it’s not enough for us just to sell souvenirs and do the private kitchen,” she said. “[We also] found that a lot of tourists pass by and many of these tourists would like to find a place to sit down after shopping, which also led us to sell souvenirs - like cooking utensils or food [...] they are basically two different segments.”

The souvenirs, on display on a shelf at the entrance to the restaurant, were mainly collected by the owners while they were travelling in other places but the shelf has also attracted attention from suppliers. However, the owners aim to introduce their own products first, and only later gradually include products from other suppliers.

“Our internal agreement is that we

have to work on our private kitchen first, since we need to make it perfect.

After gaining enough experience we can put our finest products on the shelf,” Ms. Wong said.

When asked about the difficulties encountered in the business, the owner admitted that different opinions among owners had posed challenges, and that a period of time had been necessary to make the needed adjustments among the business partners.

Nearby casinos have also created an impact on their restaurant business, she says, noting that “casinos are able to provide free meals in high-end restaurants for gamblers”.

In terms of government support, Ms. Wong revealed that people from the Administration had approached them and suggested applying for subsidies, but they chose to go their own route.

“We chose not to apply because there would have been more restrictions and control by them,” according to Ms. Wong. “We’re not running a big business; what we’re trying to do is to support the government rather than want the government to support us.”

Artistic corner

The second floor of the restaurant provides a place for local artists to exhibit their artworks as well as a place for them to sell, while also

providing a space for customers to relax over a cup of coffee.

Apart from supporting local artists, the intention of creating such an artistic place is to enable tourists to know that Macau is not only about gambling, and encouraging a positive image of the city, Ms. Wong points out.

The restaurant owner also said that aside from the physical offerings, the true experience of a traditional dining culture is what they aim to provide customers with, especially tourists.

“There are these Taipa House Museums nearby for tourists to look around, but they would not be able to experience the exact culture by just looking at the dummies in the houses,” Ms. Wong remarked. In addition, for Ms. Wong, the main goal of the project is not earning money, which is a side effect of their efforts, but enjoying her work and feeling satisfied.

Today, the four business partners have already retreated from the daily management of the restaurant, leaving it with the parents of Ms. Wong and five employees.

The next step for the space, as revealed by Ms. Wong, will be the introduction of souvenirs consisting of local art features.

Address: 5 Rua São João, G/F, Shop A, Taipa (near Temple of Pek Tai)

Business Daily Wednesday, June 7 2017 5

Macau Subsidies

SME subsidies slightly pick up No applications for subsidies from young companies received the green light in May 2017 Sheyla Zandonai sheyla.zandonai@macaubusiness.com

T

he Macau SAR Government’s support for local young entrepreneurs and small and medium enterprises (SMEs) amounted to MOP138.09 million (US$17.20 million) during the first five months of this year, the latest data released yesterday by the Macao Economic Services (DSE) revealed.

During the month of May, a total of MOP19.06 million was disbursed in public support to the three SME schemes – SME Credit Guarantee Scheme, SME Credit Guarantee Scheme Designated for Special

Projects, and the SME Aid Scheme.

The figure represents an increase of 11.2 per cent month-to-month when compared to the MOP17.66 million allocated in April.

In particular, DSE loaned MOP5.88 million under the SME Credit Guarantee Scheme and granted MOP13.18 million under the SME Aid Scheme in May, to a total of six (of eight) and 37 (of 70) applicants, respectively (Table 1).

The government did not green light any applications for loans through the SME Credit Guarantee Scheme for Specific Projects, with the latest two successful applications dating from April, for MOP2 million.

The SME Credit Guarantee Scheme

Table 1 Number of applications SME Credit Guarantee Month Scheme April 0 Mai 8 Sucessful applications SME Credit Guarantee Scheme April 0 May 6

SME Credit Guarantee Scheme for Specific Projects 0 0

SME Credit Guarantee Scheme for Specific Projects 2 0

SME Aid Scheme 55 70

SME Aid Scheme 41 37

Applications denied SME Credit Guarantee SME Credit Guarantee Scheme SME Aid Scheme Designated for Special Projects Scheme April 1 0 10 May 0 0 4

provides each beneficiary with a credit guarantee equal to 70 per cent of the loan approved by the participating banks while a similar scheme for Specific Projects offers credit guarantees of up to 100 per cent of approved bank loans for SMEs to finance special projects. No applications were filed for the latter category in May.

Five months count

In terms of sector of activity, companies applying to the SME Aid Scheme received MOP90.72 million in subsidies during the first five months of the year.

In particular, Retail and Construction & Public Works represented 33 per cent and 16.6 per cent of the total, respectively (see Table 2).

The total amount disbursed in loans under the SME Credit Guarantee Scheme reached MOP25.76 million, while subsidies granted under the SME Credit Guarantee Scheme for Specific Projects amounted to only MOP2 million during the period.

Loans attributed to import and export trade activities were only slightly up, at MOP1.4 million (5.4 per cent increase year-on year), while grants under the SME Aid Scheme for the same category reached MOP1.86 million (2.1 per cent increase year-on-year).

Young entrepreneurs credit-less

In May of this year, the Macau Government did not approve any of the 24 applications filed under the Young Entrepreneur Aid Scheme.

A month earlier, 14 application proposals were approved, of a total of 21 filed, amounting to MOP3.7 million in subsidies.

During the first five months of 2017, some MOP19.60 million was disbursed to young start-ups.

The most important participation was noted in Retail, accounting for 44.4 per cent of the total, or MOP8.7 million, followed by Services provided to companies, representing 14.8 per cent of the whole amount granted, or MOP2.9 million.

Table 2

Economic activity

SME Credit Guarantee Scheme

SME Credit Guarantee Scheme Designated for Special Projects

SME Aid Scheme

Percentage

Amount (MOP)

Percentage

Amount (MOP)

Percentage

Amount (MOP)

Construction and public works

37.5

9,660,000

50

1,000,000

16.6

15,020,000

Wholesale

12.5

3,220,000

50

1,000,000

9.4

8,525,000

19

4,900,000

0

0

33

29,900,000

Retail

6 Business Daily Wednesday, June 7 2017

Macau

CFO of Silicon Valley venture capital firm Mind Fund Venture, Rocky Chan

Innovation

No excuses An excellent positioning in the Greater Bay Area, a great amount of capital from the gaming sector and a history of cultural exchange between East and West are factors that make the MSAR an ideal location to foster innovation and start-up creation, according to Silicon Valley representatives Nelson Moura nelson.moura@macaubusinessdaily.com

T

he considerable weight of the gaming sector does not “hinder” innovation and entrepreneurialism in Macau but rather creates a source of potential investment in start-ups and new businesses, the CFO of Silicon Valley venture capital firm Mind Fund Venture, Rocky Chan, told Business Daily.

“Finding capital is the first criteria for a start-up, and Macau has a great amount of capital created by gaming which can be used to benefit its hitech start-up ecosystem,” Mr. Chan said during the Macau International Innovation Festival.

Steve Hoffman’s tips to foster innovation in your company - Define your mission - Form innovation teams - Select curious, creative people - Set your employees free

games, board games or any game for entertainment purposes that can be integrated with high technology. It can include artificial intelligence (AI), virtual reality (VR) and software and hardware combined together,” he added.

As an example of success he mentioned Tencent Holdings Limited, China’s largest gaming companies, which reached a market value of more than US$300 billion (MOP2.41 trillion) in May of this year and became one of the 10 most valuable companies in the world.

Mr. Chan also said Macau had a “VIP status” in the Greater Bay Area development plan devised by the Chinese government, with its proximity to Shenzhen and Hong Kong allowing the city to develop its potential as an innovative hub.

Having been born in Macau and studied in high school here, Mr. Chan stated he intends to bring Mind Fund Ventures to the city as a contribution to the local start-up ecosystem.

When questioned if the low number of qualified human resources

- Cut paperwork - Open channels of communication - Foster co-operation - Ensure everybody wins - Let your team know it is okay to take risks - Constantly provide education to your employees - Create a community The Mind Fund Venture CFO also considers that the gaming sector should not be “underestimated” as a small sector in terms of potential for technological innovation.

“Gaming can be video games, casino

Steven Hoffman, CEO of Founder Space

were an obstacle to the city’s innovation sector, Chan said Macau has to grow “organically” starting from the source with some “good people” and gradually creating the conditions to attract more qualified human resources.

Changing the mindset

For Steve Hoffman, the CEO of startup accelerator Founder Space, the largest obstacle to Macau entrepreneurs starting an innovative business is their mindset.

“Entrepreneurs in Macau can do anything any entrepreneur in the world can because you have access to the largest tool in the world, the Internet. The Internet has all the tools and information for entrepreneurs to succeed,” he said.

For Mr. Hoffman the limited size of Macau is not an excuse for lack of innovation, with small countries being able to create considerable digital developments despite their small population.

“Skype, the most popular means of communicating through voice in the world, was created in Estonia, a tiny country that is very focused on entrepreneurship,” he said.

According to Mr. Hofmann, Macau has more advantages than Estonia since it is part of Greater China and has access to the largest market in the world; it is a city that understands Western and Eastern culture and can work as a bridge to Portuguese-speaking countries.

The support of the Chinese government and the proximity to Shenzhen - “the city most similar to Silicon Valley in China” - were

also considered by Mr. Hoffman as some of Macau’s advantages for innovation.

“Everywhere in the world I see entrepreneurs with excuses for not being able to succeed. Starting a business is not easy but there’re always ways to get around any obstacle (…)

Macau has many chances to create great businesses and you shouldn’t let anything stop you,” he said.

Creating a culture of innovation

In terms of advice for companies to foster a culture of innovation, Hoffman said Chinese companies should allow an environment where new and unusual ideas weren’t “shut down” from the beginning for being “unusual”.

“Entrepreneurs in Macau can do anything any entrepreneur in the world can do because you have access to the largest tool in the world, the Internet” Steven Hoffman, CEO of Founder Space “Don’t filter ideas. In Silicon Valley, if somebody comes up with a crazy idea we say ‘how would we do that’ but not that it’s impossible. All great entrepreneurs in the world are a bit crazy. Steve Jobs only ate fruit for a portion of his life. He was a bit crazy but he was a genius,” he said.

The Founders Space CEO advised company managers to establish small innovation teams, foster communication between employees and avoid micromanagement.

“In China, managers want to control everything and that is good when you do the same thing every day but innovation doesn’t work like a factory.

If you always tell your employees what to do, every day they will be waiting for orders.You should always ask employees what they think needs to be done and in that way you’ll be transforming an employee from a robot to an entrepreneur,” he said.

Business Daily Wednesday, June 7 2017 7

Macau Gaming

No longer call us Jimei

J

imei International Entertainment Group Limited has changed its name to Starlight Culture Entertainment Group Limited, explaining in the group’s latest filing with the Hong Kong Stock Exchange that the name change ‘will better reflect the recent change of control’ of the company and provide ‘a new corporate image and identity’.

In April, local casino tycoon

Jack Lam Yin Lok sold his control of Jimei for a total consideration of HK$443.17 million (US$56.86 million) after entering into a share sale and purchase agreement with Cosmic Leader Holdings Limited, according to a previous filing by the company.

Following the share sale last month, the company appointed two new executive directors, Yan Xu and Chen Hong, both of whom

are shareholders of Cosmic Leader.

Meanwhile, the company announced in the same filing that a new deputy chairman - Chau Chit, formerly an executive director - had been appointed.

Chau will support the chairman of the board, Yan Xu, in formulating and implementing the development strategies of the company, as well as the overall management of the company, notes the group. C.U.

Smoking

Tourists hit with 1,300-plus fines for smoking this year In the first five months of this year, a total of 259 inspections were conducted by the Health Bureau and the Gaming Inspection and Co-ordination Bureau (DICJ) to prevent illegal smoking. Some 256 individuals were apprehended,

92.6 per cent of whom were male, with 211 or 82.4 per cent tourists, according to the Health Bureau.

These inspections were part of the 140,577 inspections of establishments conducted by the groups, amounting to an average

of 931 daily inspections.

Some 3,346 citations were recorded, with four relating to misleading information on carton labels.

In all, 1,762 fines were issued to residents for the i n f racti o n s, w i th 1 , 397 applied to tourists and 187

to non-residents. Eightyone cases required the assistance of the security forces.

Since its enforcement, some 41,295 citations have been served for breaking the prevention and control of tobacco law.

Trade co-operation

Business gathering in Praia Some 400 entrepreneurs are gathering in Cape Verde from June 16 to 18 to participate in a meeting for economic and trade co-operation between China and the Portuguese-speaking countries (PSC), as reported by LUSA. The meeting - titled ‘Exploring

Opportunities for Pragmatic Co-operation between China and Portuguese-speaking Countries’ - is being organised by Cape Verde TradeInvest, an investment agency, and will be held in the country’s capital of Praia.

Aimed at fostering new forms

of co-operation, investment, and partnership in trade, the meeting integrates the Plan of Action signed in 2003 upon the occasion of the Forum for Economic and Trade Co-operation between China and the Portuguese-speaking Countries, agreed between trade promotion and Investment organisms such as the Macao Trade and Investment Promotion Institute (IPIM) and Chambers of Commerce of those countries,

Agência Cabo-Verdiana de Notícias reported.

More than one third of the participants this year will come from China, totalling some 150 Chinese businesspeople.

In addition to attendance of representatives from Portuguese-speaking countries and China, other countries to be represented include the U.S., Spain, Morocco, Senegal, and Ghana. S.Z.

8 Business Daily Wednesday, June 7 2017

Greater china Currency

Central bank pushes cash into financial system via MLFs Three batches of earlier MLF loans totalling RMB431.3 billion are due to mature in June

C

hina’s central bank injected RMB498 billion (US$73.27 billion) into the financial system yesterday, as authorities walked a tight rope between maintaining adequate liquidity conditions and keeping a tight leash on speculative lending activity.

The injection was made through the People’s Bank of China’s (PBOC) medium-term lending facility (MLF) as some loans came due.

“We expect the PBOC to raise interest rates on its MLF loans by 10 bp again as the Fed remains on track to deliver a 25 bp rate hike next Thursday”

have been careful not to squeeze conditions too much for fear that a spike in rates could hurt the economy.

All of the funds were released via one-year loans, with the interest rate unchanged at 3.20 per cent, the PBOC said in a statement published on its website.

Three batches of earlier MLF loans totalling RMB431.3 billion are due to mature in June, according to Reuters calculations based on official data from the central bank.

The PBOC had telegraphed yesterday’s move about two weeks ago

when it said it would effectively roll over maturing MLF loans in early June.

Six-month MLF loans worth RMB151 billion were due to mature yesterday, while RMB73.3 billion worth of one-year loans will mature today. Another batch of six-month loans worth RMB207 billion is set to mature on June 16.

Since yesterday’s injection exceeded the amounts coming due, some traders said the PBOC may not pump additional cash into the system for the rest of this month although some believed a rate increase was likely.

In March, after the U.S. Federal Reserve raised interest rates, the PBOC lifted short-term interest rates in

what economists said was a bid to stave off capital outflows and keep the yuan stable.

The Fed’s rate-setting committee is due to meet on June 13-14.

Many analysts expected that the Chinese central bank was likely to raise short- and medium- term market rates this month amid rising expectations of a U.S. interest rate increase.

“We expect the PBOC to raise interest rates on its MLF loans by 10 bp again as the Fed remains on track to deliver a 25 bp rate hike next Thursday,” Scotiabank said in a note ahead of the MLF operations yesterday.

The central bank skipped daily reverse repos yesterday. Reuters

Scotiabank note The central bank has kept cash conditions relatively tight in recent months to support the government’s de-leveraging efforts, but authorities

People’s Bank of China headquarters

Financial system

Banks reshaping the sovereign dollar-bond market Chinese diplomacy is spurring a shake-up in the world of frontier-bond underwriting Annie Lee and Narae Kim

When the tiny island nation of the Maldives prepared to make its dollar-debt debut last week, it looked beyond more veteran international arrangers to Bocom International Holdings Co., the securities arm of China’s fifth-biggest bank. The firm was sole lead on the USUS$200 million, five-year bond, the latest in a slew of frontier-market dollar offerings this year.

Chinese banks also popped up in Sri Lanka’s blowout dollar-bond sale last month, with Citic Securities Co. and ICBC International Securities Ltd. -- a unit of the world’s largest lender by assets -- part of a syndicate marketing the USUS$1.5 billion issue. Their involvement comes as China ramps up its Belt and Road initiative, with almost US$80 billion in financing to be doled out to developing nations participating in President Xi Jinping’s globalization push.

“The Maldives’ government has a good relationship with the Chinese government through our development projects as well as the Belt and Road Project, and very good relationships with Chinese banks as well,” Saruvash Adam, head of the fiscal affairs division at the Maldives Ministry of Finance and Treasury, said in a phone interview. “The good relationship may have favorably affected the decision but is not the driving factor. The commercial terms and the confidence we have in Bocom International was a bigger factor.”

Representatives of Hong Kongbased Bocom International weren’t available to comment on the deal.

Launched in 2013 as a way of

deepening trade and diplomatic ties between China and countries along the ancient Silk Road route, Belt and Road has morphed into a vehicle for Xi to showcase his country’s internationalization bona fides, with Chinese companies pushed to invest in offshore infrastructure projects.

It’s also helping diversify the buyer pool for frontier debt, with Sri Lanka seeing quadruple the demand of previous year’s dollar-bond sales, in part because of bids from Chinese investors.

The cheapest borrowing costs in four years are luring smaller, lower-rated countries to the dollar bond market, with frontier issuance in Asia already at US$1.8 billion so far this year, more than triple what it was in the same period of 2016, data compiled by Bloomberg show.

The Maldives was in talks with Australia and New Zealand Banking Group Ltd., Deutsche Bank AG and DBS Group Holdings Ltd. on a sale late last year, before settling on

Bocom to run their issue, according to people familiar with the discussions.

Papua New Guinea, the impoverished Pacific Island nation planning its dollar-bond debut in the second half, has mandated Bank of China Ltd. as one of the lead underwriters, according to central bank Governor Loi Martin Bakani.

The lender, China’s fourth-largest, can deliver small countries access to investors in the world’s second-largest economy, said Sebastian Ha, head of the debt syndicate at Bank of China in Hong Kong. More than 80 per cent of the Maldives dollar notes are said to have been sold to investors in the Asia region.

“We could offer the same service that most international banks provide in the underwriting space,” said Ha. “However, more importantly, we could offer the connection between the issuing country and China.”

While its tropical beauty makes the Maldives an attractive destination for luxury tourists, the string of coral atolls faces infrastructure challenges, with almost all the materials for construction projects having to be imported, says Adam at the

finance ministry. “It means we will seek financing in both bonds and loans in the international market in the future.”

China forged a partnership with the Maldives in 2014, and has been actively involved in development in the country, with some 100 Chinese workers flown in to help build a new runway at the airport in the capital, Male, according to China’s official Xinhua News Agency.

“Under the Belt and Road initiative, I won’t be surprised to see more and more Chinese investors and banks involved in frontier markets who have good relationship with China” For Leo Hu, a portfolio manager in Singapore at NN Investment Partners For Leo Hu, a portfolio manager in Singapore at NN Investment Partners, which manages about US$208 billion in assets, issuance like the Maldives bond is welcome, helping broaden the emerging-market dollar-debt universe he invests in.

“Under the Belt and Road initiative, I won’t be surprised to see more and more Chinese investors and banks involved in frontier markets who have good relationship with China,” he said. Bloomberg News

Business Daily Wednesday, June 7 2017 9

Greater China In Brief Markets

Muddy Waters to announce new Hong Kong-listed short

Environment

California defies U.S. climate retreat with new cleantech tie-up with Mainland Joint pledges by China and the United States ahead of the Paris talks helped create the momentum required to secure a global agreement Michael Martina

California said it will cooperate with China on clean technology, emissions trading and other “climate-positive” opportunities as it bids to fill the gap left after President Donald Trump pulled the United States out of the Paris climate accord last week.

The government of California and China’s Ministry of Science and Technology would work together on developing and commercialising know-how on carbon capture and storage, clean energy, as well as advanced information technology that could help cut greenhouse gas emissions, according to yesterday statement.

President Trump announced last week that he would pull the United States out of the 2015 Paris agreement on climate change, a move branded

as “insane” by California governor Jerry Brown, who is visiting China this week.

The decision to withdraw was seen to have handed the political and diplomatic initiative to China, which has continued to pledge its unqualified support for the Paris accord.

Brown told reporters on the sidelines of a clean energy forum in Beijing yesterday that the failure of leadership from the United States was “only temporary” and said science and the market would be required to get past it.

In an earlier speech, Brown criticised those still “resisting reality”.

“The world is not doing enough,” he said. “We are on the road to a very negative and disastrous future unless we increase the tempo of change.”

Joint pledges by China and the United States ahead of the Paris talks helped create the momentum

required to secure a global agreement, and included a promise by China to establish a nationwide emissions trading exchange by this year.

“We are on the road to a very negative and disastrous future unless we increase the tempo of change” Jerry Brown, California governor

Brown told Reuters last week that he would discuss linking China’s carbon trading platforms with California’s, the biggest in the United States. Reuters

Markets

Evergrande shares hit record high on perpetual bond redemption plan The company has valued its Shenzhen backdoor listing at RMB198 billion Clare Jim

Shares of China Evergrande Group, the nation’s largest property developer, jumped on Tuesday to a record high after it said it would redeem all of its perpetual bonds by the end of this month, ahead of plan.

Key Points Plans to redeem all of its perpetual bonds by end-June Shares jump 9 pct, have gained some 260 pct this year Evergrande plans Shenzhen backdoor listing for property assets

As the bonds are high-interest debt, the redemption will save Evergrande significant interest costs. Interest costs for perpetual bonds amounted to RMB10.6 billion (US$1.6 billion) last year.

The developer, which sits on corporate China’s second-largest debt pile with US$78 billion in debt at the end of 2016, is striving to improve its balance sheet in preparation for a

backdoor listing for most of its property assets in mainland China.

The shares climbed as much as 9 per cent to HK$17.36 in early trade.

The shares were last up 7 per cent.

Evergrande’s stock has gained 260 per cent in value since the start of the year. It surged more than 20 per cent on a single day last week when Morgan Stanley initiated coverage on the developer with an “overweight” rating.

The Shenzhen backdoor listing,

which Evergrande has valued at RMB198 billion (US$29 billion), aims to take advantage of higher valuations commanded on the mainland due to a large pool of retail investors. It will also make it easier for Evergrande to raise funds.

Evergrande is a household name in China thanks to its development of many thousands of apartments for middle class buyers.

Evergrande grabbed headlines in 2010 when it bought the main soccer in its home town of Guangzhou.

Evergrande also owns a variety of other assets, including an insurance company, a bottled water company, and a New Zealand dairy firm. It is also making a big push into hospitals, tourist projects and has become an Internet provider. Reuters

Hong Kong is about to be the stage of another short-selling target. Muddy Waters founder Carson Block told Bloomberg Television’s Rishaad Salamat and Haidi Lun that his newest idea is a stock listed in the city. Block is scheduled to announce it at the Sohn Hong Kong Conference just after 2 p.m. today, he said in a separate interview. While Hong Kong’s benchmark Hang Seng Index has soared 18 per cent this year and is among the world’s best-performing major national benchmarks, the city has also hosted a series of spectacular downfalls as bearish research firms circled its companies Going public

WuXi Biologics prices HK IPO on top WuXi Biologics (Cayman) Inc priced its Hong Kong IPO at the top of expectations, a source with direct knowledge of the deal said yesterday, raising about US$511 million in the largest new listing in the Asian financial hub in 2017. The Chinese contract drug research and development company priced the 193 million shares on offer at HK$20.60 each, the top of its marketing range of HK$18.60 to HK$20.60 per share, added the source. The source declined to be named because details of the initial public offering were not yet public. The price would value the deal at HK$3.98 billion (US$511 million).

Cash flow

China City Construction warns of debt repayment problems The China City Construction Holding Group, a stateowned infrastructure and property developer, has warned it is facing cash flow problems and could struggle to repay debts due on June 12. The Beijing-based firm is also facing several lawsuits from creditors and some of its bank accounts have been frozen, it said in a statement to the Shanghai Clearing House late on Monday. It issued bonds worth RMB1.5 billion (US$220.5 million) in 2014 with an interest rate of 7 per cent. Repayment of the principle and interest is due this month, but China City Construction said its “financing channels have been restricted”. markets

Hong Kong shares close at 23-month high Hong Kong’s benchmark Hang Seng Index powered ahead yesterday, touching the 26,000 point-mark, and closed at a fresh 23-month high, aided by continued strength in property shares. The Hang Seng index rose 0.5 per cent, to end at 25,997.14 points, while the China Enterprises Index gained 0.1 per cent, to 10,606.26 points. Chinese money inflows helped property stocks surge. The property subindex jumped more than 2 per cent.

10 Business Daily Wednesday, June 7 2017

Greater China Commerce

Silk Road hub or tax haven? New border trade zone may be less than it seems Those who do trade in the “free trade zone” find they face restrictions from both sides Sue-Lin Wong and Mariya Gordeyeva

O

n the border of China and Kazakhstan, an international free trade zone has become a showpiece of Chinese President Xi Jinping’s signature “Belt and Road” Initiative to boost global trade and commerce by improving infrastructure and connectivity.

Chinese state media are filled with stories about the stunning success of Horgos, the youngest city of China’s new Silk Road. Last month at China’s Belt and Road Summit - its biggest diplomatic event of the year - promotional videos about Horgos’ booming economy ran on a loop at the press centre.

But Chinese business owners and prospective investors who had recently visited the China-Kazakhstan Horgos International Border Cooperation Centre (ICBC), told Reuters they were disappointed by the disconnect between the hype and reality.

Rather than the vibrant 21st Century trading post of Beijing’s grand vision, Horgos is instead developing a reputation as China’s very own tax haven.

“We were so unimpressed by what we saw that after looking around for three hours, we turned around and drove eight hours straight back to Urumqi,” said a businessman from the capital of China’s far western region of Xianjiang, who only wanted to give his surname, Ma, due to the sensitivity of the topic.

Several business owners echoed complaints about poor design and low visitor numbers made by Ma, who visited Horgos to investigate the viability of opening a high-end clubhouse.

“You’ve got Kazakh farmers walking around with plastic bags full of cheap Chinese t-shirts and you want me to open a club for government officials and businessmen to meet inside the zone - which, by the way, you can’t drive your car into and doesn’t have any fivestar hotels?” Ma said.

On the Chinese side of the border there are five malls selling cheap consumer goods, though traders complain there are not enough visitors.

“Sometimes I’ll sit here for a whole day and not make a single sale,” said Ma Yinggui,

56, who has a market stall selling clothes. “Some Kazakhs are rich but most are poor. They come and haggle over a RMB20 (US$2.93) t-shirt.”

More than five years after the 5.3 sq km trade zone opened, much of the Kazakh side remains empty.

Only 25 of the 63 projects on the Kazakh side have investors, according to Ravil Budukov, ICBC press secretary on the Kazakh side.

About 3-4,000 people enter from Kazakhstan each day and around 10,000 from China, he added.

The Xinjiang and Horgos governments declined to make officials available for comment to Reuters for this article.

Huang Sanping, a senior Xinjiang government official, told Reuters at a news conference in Beijing that he had just returned from a visit to Horgos, a city “performing extremely well. It’s full of vitality and flourishing”.

China’s tax haven

Beijing has bestowed numerous tax breaks and preferential policies on Horgos hoping to stimulate growth in this strategic border town in Xinjiang, a key link on the new Silk Road between China and Central Asia, where the government says it is battling to defeat Islamist extremism.

Key Points Free trade zone a showpiece of China’s “Belt and Road” plan Zone on Chinese-Kazakh border heart of “new Silk Road” Some businesses disappointed by lack of foot traffic Many companies only registered in new city for tax breaks Traders still face restrictions from both sides According to Horgos’ tax bureau, 2,411 companies registered in Horgos last year, taking advantage of five years of no company tax, and a further five years paying half rate.

At least half those companies are registered in Horgos solely for tax purposes, estimates Meng Shen, Director of Chanson & Co, a boutique investment bank in Beijing.

Chinese celebrities are opting to register production companies in Horgos and an increasing number of financial services and IT companies are also registering there, according to Guan Xuemei from Shenzhou Shunliban, a tax advisory firm that recently opened an office there.

But with no obligation to operate from Horgos or even in Xinjiang, it is unlikely this policy will create jobs or bring money to what has long been an economic backwater, say experts.

“In theory this is a good policy because it aims to stimulate the local economy,” said Shen. “But Beijing didn’t think through the fact lots of companies wouldn’t actually want to operate from Horgos which is very far away from China’s economic centres.”

Those who do trade in the “free trade zone” find they face restrictions from both sides.

The Russian-led Eurasian Economic Union (EEU) - of which Kazakhstan is a member - limits traders from the Kazakh side to importing up to 50 kg of any goods per month duty-free.

China bans imports of many food products - the Kazakh goods most desired

by Chinese consumers worried about food safety at

home - and caps traders from taking more than RMB8,000 (US$1,175) worth of goods out each day.

“The EEU is a significant barrier because Russia and Kazakhstan and other Central Asia countries want to develop their own industries, they don’t want to constantly rely on cheap Chinese goods,” said a former Chinese government official turned businessman, who spoke on the condition of anonymity.

Mao Shishi, 44, who currently raises cattle in nearby Qingshuihe, wants to import wool and wild herbs used in traditional Chinese medicine from Kazakhstan to China through Horgos.

“I’m watching and waiting for any policy changes. Right now we can’t import lamb, fish or wild herbs into China,” Mao said.

Logistics thoroughfare

Plans to develop a parallel special economic zone in Khorgos - as it is known on the Kazakh side - as a logistics hub appear to be having more success.

Trade volumes are sky-rocketing at the Khorgos Gateway dry port in Kazakhstan, where container freight is lifted off Chinese trains and onto Kazakh ones because of different gauge rail tracks.

“According to our plans, this year we are going to trans-ship around 100,000 TEUs, five times more than we are doing now,” said Asset Seisenbek, head of the commercial department at Khorgos Gateway, referring to “twenty-foot equivalent units”, an industry measure based on standard shipping container sizes.

Electronics giants HP and Foxconn both ship goods through the dry port, which is faster than sea freight but cheaper than air cargo. One container sent by sea to Europe is about three times cheaper than rail, while air freight is between five to 10 times more expensive, according to Seisenbek.

Last month China’s COSCO Shipping and Lianyungang port took a 49 per cent stake in Khorgos Gateway which Seisenbek sees as an opportunity to attract more Chinese business.

This sort of investment is what Horgos/Khorgos should hang its hat on, according to Ma, the businessman underwhelmed by the international free trade zone.

“The free trade zone doesn’t need to be that successful if the intercontinental trains and roads take off,” he said. “In the grand scheme of things, that’s the main role for this part of the world.” Reuters

Business Daily Wednesday, June 7 2017 11

Asia Official data

Australia’s central bank sticks to upbeat tune as economy underperforms Data out yesterday showed government spending had added only marginally to growth in the quarter Wayne Cole and Swati Pandey

A

ustralia’s central bank held interest rates for a 10th month yesterday, taking an optimistic tone on the economy even while acknowledging that growth likely slowed last quarter by more than it expected.

The Reserve Bank of Australia (RBA) kept rates at a record low 1.50 per cent in a widely expected move after last easing in August of 2016.

It cited a stabilisation in mining investment after years of steep falls, a rebound in the price of Australia’s top exports of iron ore and coal, and the country’s biggest-ever home building boom.

“Looking forward, economic growth is still expected to increase gradually over the next couple of years to a little above 3 per cent,” the RBA said in a statement.

That expression of confidence was enough to lift the Australian dollar closer to a 10-day high of US$0.7500 touched on Monday.

Policy makers also played down the importance of first-quarter gross domestic product (GDP) figures due on Wednesday, which are likely to show the economy had barely grown.

“It’s a pretty neutral statement from the RBA,” said Tapas Strickland, economist at National Australia Bank.

“They are going to overlook the slowdown in GDP as a temporary

blip. We think they will remain on hold until they see any signs of a pick up in the labour market.”

The futures market implies only a one-in-five chance of a cut in cash rates by year end.

The RBA described the job market as “mixed” with stronger employment growth offset by softness in hours worked and high levels of underemployment.

Key Points RBA holds rates at 1.5 pct on optimism for outlook Q1 economic growth seen around 0.2 pct q/q, 1.6 pct y/y Current account deficit of A$3.1 bln misses forecasts Net exports trim 0.7 ppt from Q1 GDP as bad weather hits volumes

Analysts forecast the economy expanded a meagre 0.2 per cent in the March quarter, a step back from the previous quarter’s brisk 1.1 per cent.

Growth for the year is seen slowing to around 1.6 per cent, from 2.4 per cent, the slowest since 2009.

Deficit shrinks

A big unknown is household consumption which surprised with its strength late in 2016, but is being

burdened by record-low wage growth and high levels of mortgage debt.

Data out yesterday showed government spending had added only marginally to growth in the quarter, restrained in part by persistent budget deficits.

Also weighing on real growth was a drop in export volumes, while imports swung higher. As a result, net exports trimmed a larger-then-expected 0.7 percentage points from growth, leading some analysts to revise down their forecasts for GDP. The country’s current account deficit did narrow to its smallest in more than 15 years at A$3.1 billion (US$2.31 billion), though that disappointed hopes for a rare surplus.

The main miss came from investment income with Australians earning less from their assets abroad.

Yet the figures from the Australian

Bureau of Statistics showed a barnstorming performance by commodity exports which boosted the surplus on goods and services to A$9.0 billion.

That was easily the biggest surplus since the series began in 1959 and owed much to higher prices for iron ore and coal, though those have come off their peaks in the last month or so.

The sharp improvement in the country’s perennial deficit with the rest of the world should make it less vulnerable to swings in investor sentiment.

It also lessens one threat to Australia’s top credit rating, which has been under pressure from persistent budget shortfalls at home. Standard & Poors recently affirmed the rating at triple-A after spending months warning that a downgrade might be warranted. Reuters

Investment

India’s Adani backs go-ahead for US$4 bln Australian coal mine One energy analyst said the huge project would drive down thermal coal prices if it was built Byron Kaye

India’s Adani Enterprises gave final investment approval yesterday for its US$4 billion Carmichael coal mine and railway in Australia’s north, shifting the focus to fund raising for the controversial project.

Adani, which hopes to secure a A$900 million (US$670 million) government loan, said in a statement it had given “final investment decision approval” to build what would be Australia’s biggest coal mine.

“We are committed to this project,” Adani Chairman Gautam Adani said.

The Carmichael mine has faced years of delays amid opposition from environment groups who argue it will contribute to global warming and damage the Great Barrier Reef, leading some banks to rule out any role in funding.

“Announcing an intention to invest is a far cry from having the finance to do so,” said Julien Vincent, executive director of environmental finance organisation Market Forces.

Greenpeace Australia Pacific said the announcement was a “PR stunt”.

The project is located in the remote

Galilee Basin, a 247,000 square-kilometre expanse in the central outback that some believe has the potential to become Australia’s largest coal-producing region.

“Announcing an intention to invest is a far cry from having the finance to do so” Julien Vincent, executive director of environmental finance organisation Market Forces Adani said the project would create 10,000 direct and indirect jobs, with pre-construction works starting in the next few months. Coal from the mine will be exported to India.

Queensland premier Annastacia Palaszczuk said Australia’s third biggest state had been hit by a global

resources downturn and Adani’s decision would help mining firms.

Adani’s decision “is a vote of confidence not just in the Queensland economy, but in Queensland people”, she said.

However, one energy analyst said the huge project would drive down thermal coal prices if it was built, putting pressure on local rivals.

“The Queensland government probably doesn’t appreciate that

they could lose thermal mines in Queensland for the sake of bringing in this one,” said the analyst, who asked not to be named as he was not authorised to comment on Adani.

The Northern Australia Infrastructure Facility, the federal agency that will decide whether to grant the government loan to Adani, was not immediately available for comment.

Reuters

12 Business Daily Wednesday, June 7 2017

Asia Salaries

Japan’s April real wages flat, bad sign for consumption Household consumption fell more than expected in April due to lower spending on cars and education Minami Funakoshi

J

apan’s real wages were flat in April from the same period a year earlier, with rising prices offsetting gains in nominal pay and possibly hurting households’ purchasing power.

Real wages, which are adjusted for moves in consumer prices, were flat in April from a year earlier, labour ministry data showed yesterday. It followed a revised 0.3 per cent annual fall in March.

months, suggesting the benefits of the recent economic recovery have yet to fully reach Japanese households. This is a headache for the government and central bank, which want sustained pay hikes to spur higher consumption and prices.

“Wages didn’t grow that much in April, so of course household

spending won’t rise that much,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“Prices will rise a bit (on higher energy costs) but will probably run out of breath,” Tonouchi said.

The world’s third-largest economy has shown signs of life in recent months as a rebound in overseas demand helped boost its exports and output. It grew in the first quarter to mark the longest period of expansion in a decade.

Key Points Japan April real wages flat y/y April nominal wages up 0.5 pct y/y Household consumption fell more than expected in April Wage hikes, consumption key to spurring prices Wage earners’ nominal cash earnings rose an annual 0.5 per cent in April, the biggest rise in four months.

Revised data showed that nominal wages were flat from a year earlier in March.

Real wage growth has been flat or even negative in the past seven

But household consumption fell more than expected in April due to lower spending on cars and education, separate data showed, signalling consumer spending continues to lag behind improvement in other areas of the economy.

Regular pay, which accounts for the bulk of total pay and determines base salaries, has been generally rising in recent months and in April grew an annual 0.4 per cent, the biggest increase in three months.

Special payments, such as bonuses, in April grew 5.6 per cent from a year earlier, following a revised 1.7 per cent annual rise the previous month, data also showed.

Special payments are generally small, so even a slight change in the amount can cause big percentage changes.

Overtime pay, a barometer of strength in corporate activity, dipped 0.2 per cent in April from a year earlier, following a revised 0.6 per cent annual decline in March.

Desperate to stimulate growth and end decades of deflation, the Bank of Japan has embraced negative interest rates and bought up mammoth volumes of bonds.

The massive extent of the central bank’s money printing, however, has barely moved it nearer to its ultimate policy goal of lifting inflation to 2 per cent, highlighting the difficulty facing the central bank as the scale of its bond buying appears unsustainable. Reuters

Monetary policy

India to hold rates steady, RBI expected to sound less hawkish The RBI had justified its hawkish stance citing the impact of planned pay hikes for government employees and the introduction of a nationwide goods and service tax Rafael Nam and Suvashree Choudhury

India’s central bank will likely strike a less hawkish tone while leaving interest rates unchanged at a policy meeting on Wednesday, according to analysts, as inflation is running well below forecasts, and the economy has slowed more than expected.

A Reuters poll showed 56 of 60 analysts expected the Reserve Bank of India’s (RBI) monetary policy committee to keep its repo rate unchanged at a 6-1/2 year low of 6.25 per cent for a fourth meeting in a row. They also expected the reverse repo rate to be left at 6.00 per cent.

What analysts and investors are looking for this time is a less hawkish policy statement to reflect reduced fears of inflationary pressures.

Until a few weeks ago, bond market investors were on guard for a possible future increases in interest rates after the RBI warned of “upside risks” to inflation at its last policy meeting in April.

“We don’t expect any change in the official neutral stance in June but we do expect RBI to tone down its hawkishness compared to the April and February policy statements,” said Siddhartha Sanyal, chief India economist at Barclays.

Investors have begun pricing in a

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softer tone from the RBI, with benchmark 10-year bond yields down about 35 basis points since hitting an over 7-month high on May 2. Some bolder investors are even betting on possible future rate cuts.

Consumer price inflation data for May will be released next week, but going by the April figures inflation is trending well below the RBI’s projection for 4.5 per cent in the six months to September, and 5.0 per cent for the six months through to March next year.

Notching its lowest annual rate in

at least five years, consumer price inflation slowed to 2.99 per cent in April from 3.89 per cent in March, just below the RBI’s target of 4.0 per cent.

Meantime, the economy suffered a sharper setback than many economists had expected from the government’s shock move last November to take high denomination currency bills out of circulation in a bid to curb tax avoidance.

Gross domestic product grew 6.1 per cent in January-March, down from 7 per cent the previous quarter, to post it slowest growth rate in more than two years.

Investors’ uncertainty over the RBI’s stance was heightened by the release of minutes from the April meeting of the monetary policy committee which showed two of its six members had proposed rate hikes,

before the committee ultimately voted 6-0 to leave rates unchanged.

The RBI had justified its hawkish stance citing the impact of planned pay hikes for government employees and the introduction of a nationwide goods and service tax (GST), as well as fears of a weaker-than-expected monsoon.

‘Gross domestic product grew 6.1 per cent in January-March’ Monsoon rains, however, arrived ahead of schedule this month and are forecast to be above-average, and government has avoided jacking up GST rates except for certain items it considers luxuries, including movie tickets.

An around 5 per cent rally in the rupee against the dollar this year could further ease inflation, while global commodity prices have eased.

HSBC said it still saw the possibility of a rate cut in August, a move the RBI could set up by adjusting its inflation projections. The central bank had changed its monetary policy to “neutral” from “accommodative” in February, leaving it open to raise, or lower, rates in months ahead.

“It’s time the RBI adjusts its inflation forecasts to strengthen its credibility,” HSBC said in a recent note to clients. Reuters

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Business Daily Wednesday, June 7 2017 13

Asia In Brief Funding

Ride-hailing firm Grab says likely to raise funds in near future

Migrants

Southeast Asia is losing best and brightest to richer nations More than 50 per cent of Filipinos, Malaysians, and Singaporeans in OECD countries are highly educated Karl Lester M Yap

Nyl Patangan, a nursing graduate from the Philippines, left his native land in search of a better life. Now working in a Chicago hospital after a stint in Dubai, he’s supporting his parents back home and is buying his mother a Toyota Vios. A recent study by the Asian Development Bank shows that the number of immigrants with university degrees who left to work in richer nations in the Organisation for Economic Cooperation and Development surged

66 per cent in the decade through 2010-2011 to 2.8 million. More than half of them came from the Philippines, with hundreds of thousands more working in regions outside the OECD like the Middle East.

The trend has persisted, with the number of Filipinos leaving for work overseas rising 27 per cent between 2011 and 2015.

Brain drain, a term which originated in the 1960s when British scientists and intellectuals immigrated to the U.S., refers to the loss of human capital. Emerging nations, where advertisement

salaries are but a fraction of those in the OECD, are vulnerable to losing their brightest talent even if it offers a silver lining in the form of remittances that support families back home. The World Bank estimates that remittances to developing countries amounted to $429 billion in 2016, with those to the Philippines rising to $30 billion, a tenth of its economy.

“This loss of human capital in the fields of medicine, science, engineering, management, and education can be a major obstacle to economic and social development,” ADB researchers Jeanne Batalova, Andriy Shymonyak, and Guntur Sugiyarto wrote in a February report.

‘The number of Filipinos leaving for work overseas rose 27 per cent between 2011 and 2015’ Close to 10 per cent of the highly-educated citizens from the Philippines, Singapore, and Vietnam live in OECD countries. For Laos and Cambodia, the ratio is about 15 per cent.

The emigration comes even as Southeast Asia has made tremendous progress in boosting education in recent decades. More than 50 per cent of Filipinos, Malaysians, and Singaporeans in OECD countries are highly educated, compared to the average of 30 per cent. Immigrants from Southeast Asia are also often more educated or more experienced than what is needed for the jobs they hold. About 52 per cent of workers from Thailand are overqualified and the ratio is more than 40 per cent for immigrants from the Philippines, Laos, Cambodia, Myanmar and Vietnam.

Despite the region’s economic boom, with countries including the Philippines, Vietnam, Laos, Myanmar and Cambodia posting growth rates of more than 6 per cent, the educated citizens are still likely to look for opportunities abroad.

“Migrants respond to other countries’ higher wages and better working conditions, prospects for professional development and continuous education, and opportunities to work with other skilled persons in talent clusters,” the report said.

In the hospital where Patangan works as a dialysis nurse, his colleagues include migrants from Cambodia, Laos and Thailand. Holding down two jobs, Patangan is now a permanent resident in the U.S. He’s traveling to Europe this month before paying his parents a visit in September in southern Philippines. “You work so hard, but at least here, you’re earning,” he said. Bloomberg News

Ride-hailing firm Grab, Uber Technologies Inc’s largest rival in Southeast Asia, is likely to embark on a round of fundraising as it works to develop new offerings such as financial services, its chief executive told Reuters yesterday. “I can’t specifically give a time line but I can imagine somewhere in the near future, there probably could be more money coming in.

That’s probably quite likely,” Anthony Tan, group chief executive officer and co-founder of Grab, said in an interview after an event to mark the firm’s fifth anniversary.

HR

Felda Global suspends CEO after he refuses to quit Malaysia’s Felda Global Ventures Holdings Bhd said its board had ordered its chief executive and chief financial officer to take leave of absence yesterday, as it looks into certain transactions at a unit. Shares in the company, the world’s third biggest palm plantations operator, dropped 4 per cent before trading was halted. CEO Zakaria Arshad had refused to resign after being asked to do so by Chairman Mohd Isa Abdul Samad, according to a letter seen by Reuters. According to the June 5 letter by Zakaria to Mohd Isa, Zakaria said he had been accused of wrongdoing in payments to a Afghan company.

Currencies

Some Sri Lankan banks stop buying Qatar Riyal Some Sri Lankan banks stopped buying Qatar Riyal yesterday, saying their counterpart banks in Singapore advised them not to accept the currency a day after the Arab world’s biggest powers cut ties with Qatar. Saudi Arabia, Egypt, the United Arab Emirates and Bahrain on Monday severed diplomatic relations with Qatar in a coordinated move, accusing Doha of supporting Islamist militants and Iran. Dealers at four local private banks told Reuters they have stopped buying Qatar Riyal. “Our counter-party in Singapore has asked us not to buy Qatar Riyal,” a senior currency dealer at a bank told Reuters.

M&A

Sumitomo Metal to buy stake in Canadian gold project Japan’s Sumitomo Metal Mining Co on Tuesday said it had agreed to take a 27.75-per cent interest in a Canadian gold mining project from Toronto-based IAMGOLD Corp for US$195 million. The purchase of the stake in the Cote Gold Project in Ontario comes as Japan’s biggest gold miner looks to boost its output through acquisitions and exploration. IAMGOLD owns 92.5 per cent of the project, currently in its so-called pre-feasiblity study phase.

Production is slated to begin in 2021, with the development expected to churn out 168 tonnes of gold over a 17-year life.

14 Business Daily Wednesday, June 7 2017

International In Brief Election

British PM May seen 22 seats short of majority Prime Minister Theresa May is on track to win 304 seats in Britain’s parliament in an election on Thursday, 22 seats short of a 326-seat majority, according to a daily projection by polling company YouGov published yesterday. May’s Conservatives had 330 seats when the snap election was called in April. On Monday, YouGov said its model suggested the Conservatives were on course to win 305 seats. The opposition Labour Party is likely to win 266 seats, YouGov’s model showed, down from 268 on Monday.

Another model, produced by Lord Ashcroft Polls, last week predicted the Conservatives were on course for a majority.

Lawsuit

RBS braces for trial over 2008 share sale case Royal Bank of Scotland is set to face a trial it had hoped to avert over its 2008 share sale, as the last group of holdout investors in the case secured the funds they need to proceed to trial, a source involved in the claim said on Monday. The claimants will receive the remaining 2 million pounds (US$2.58 million) of the 7 million pounds needed to convince a judge today they can fund what is likely to be a lengthy trial, according to Scottish businessman Neil Mitchell, a former customer and critic of the lender.

Analysts

ECB to hint at end to easy money German Finance Minister Wolfgang Schaeuble has blamed the ECB for trade tensions with the United States Tom Barfield

E

xpectations are high that the European Central Bank will hint that it is heading for the exit from its easy-money policy when governors meet in Estonian capital Tallinn Thursday.

Most analysts predict the bank’s 60-billion-euro (US$67.4 billion) monthly bond purchases will continue and interest rates will remain at historic lows.

But they believe policymakers will begin laying the groundwork for an announcement later this year about plans to wind down bond-buying, by offering a sunnier economic outlook for the 19-nation eurozone.

“The ECB governing council needs to take no major policy decision beyond tweaking its guidance a little to keep up with the eurozone’s broad-based and resilient economic recovery,” said economist Holger Schmieding of Berenberg bank.

Bond-buying and low interest rates were introduced at a time when the ECB feared the threat of deflation -- or steadily decreasing prices the undermine economic activity.

By pumping cash through the financial system and into the real economy, the bank believes it has stimulated growth and pushed inflation back towards its target of just below 2.0 per cent.

Inflation has been on a rollercoaster

ride in recent months, hitting the 2.0 per cent target in February before falling back again in March.

The same pattern was repeated with a spike in April, to 1.9 per cent, before a retreat in May. Volatile food and energy prices are to blame for such rapid changes, policymakers say, while “core”, or underlying inflation discounting those elements remains sluggish.

ECB president Mario Draghi argues that wages -- which he dubs the “linchpin” of price growth -- are not rising fast enough to drive inflation, even as the eurozone economy enjoys healthy expansion.

“Deflationary risks might have disappeared, but the ECB is still far away from reaching its inflation objective,” said economist Carsten Brzeski of ING Diba bank.

Nevertheless, “the ECB would be blind not to acknowledge the cyclical upswing in the eurozone” in its press conference Thursday, he added.

Balanced risks

In its carefully-weighed policy statements, the central bank has long warned of risks threatening the eurozone recovery.

This in turn has justified language elsewhere in its “forward guidance” suggesting that if economic activity slowed, policymakers could lower interest rates even further or boost bond-buying back to its previous level of 80 billion euros per month.

Army

U.S. State Dept approves military sales to Saudi The U.S. State Department has approved the potential sale of more than US$1.4 billion worth of military training and equipment for Saudi Arabia, the Pentagon said on Monday, part of a US$110 billion arms deal U.S. President Donald Trump sealed with the kingdom in May. The proposed sales include a radar system made

by Lockheed Martin Corp as well as a training program for the Royal Saudi Air Force and other Saudi forces inside and outside of Saudi Arabia, the Pentagon said in two separate notices on its website.

Bailout

IMF’s Lagarde offers euro zone Greek debt compromise International Monetary Fund Managing Director Christine Lagarde has offered Greece’s European creditors a way out of their impasse over Athens’ debts that would allow the euro zone to release a tranche of aid later this month. The IMF believes Greece needs a debt haircut, which Germany rejects. Lagarde suggested agreeing a deal whereby the IMF would stay on board in the bailout, as Berlin wants, but not pay out further aid until debt relief measures are clarified. “There can therefore be a programme in which the disbursement only takes place when the debt measures have been clearly outlined by the creditors,” she told Handelsblatt.

Observers now expect the ECB to highlight economic risks “balanced” between positive and negative, justifying dropping one or both commitments to signal growing confidence in the economy.

That would not herald a quick exit from bond-buying.

Draghi told European Parliament lawmakers last week he is “firmly convinced” the eurozone’s newfound robustness depends on ECB interventions.

The coming months will see policymakers “tiptoeing towards a winding down of asset purchases in 2018,” Berenberg’s Schmieding said, with an interest rate hike far over the horizon.

New economic forecasts next week from the ECB’s staff are expected to show lower inflation expectations than previously, lending support to governing council members who want to stay the course.

Taper tantrum

The ECB is keen to avoid financial market upsets as it heads for the exit from its bond-buying programme.

Removing its demand for government bonds from the market could drive up yields, the returns investors can expect when buying government debt, for the eurozone’s weaker economies.

But it is also under pressure to end the scheme, as some governing council members believe it is no longer justified without deflation risks.

Meanwhile, pressure from politicians in fiscally conservative countries like Germany is mounting over low inflation’s impact on savers.

German Finance Minister Wolfgang Schaeuble has also blamed the ECB for trade tensions with the United States, charging that the bank’s policy makes German exports too cheap.

And technical considerations could soon limit the number of government bonds available for the ECB to buy, cramping the programme’s effectiveness.

Even given those constraints, “the ECB does not seem to be in any rush,” ING’s Brzeski said.

Central bankers “will do everything possible to avoid” spooking markets by announcing any changes gradually between next week and the end of the year, he predicted. AFP

Legislative agenda

White House wants healthcare vote this summer, tax reform in fall The Trump administration has outlined a broad plan that would cut tax rates for businesses and streamline the tax system for individuals Ayesha Rascoe

The White House is hoping to kickstart its stalled legislative agenda with congressional action on healthcare reform this summer that will clear the way for lawmakers to begin work on a major tax bill after the Sept. 4 Labor Day holiday, an administration official said on Monday.

Senate Republicans will vote on their version of healthcare reform legislation before lawmakers’ August recess, White House Director of Legislative Affairs Marc Short said. The House of Representatives passed a bill in May. “There’s been a lot of discussions with staff,” Short told reporters at a briefing. “I think the text is pretty far along.”

Congress will then turn its focus to overhauling the tax code in September. While the administration

would prefer that the effort not add to the national debt, Short stressed that the top priority would be cutting taxes.

“We want it to be revenue neutral, and we are still supportive of tax reform, but I am also saying to you that what we believe is most important to get the economy going is the tax cuts,” he said.

Trump has pressed for quicker action in Congress, but his administration has also been hampered by investigations into alleged ties between Trump’s election campaign and Russia.

The Trump administration has outlined a broad plan that would cut tax rates for businesses and streamline the tax system for individuals.

But, the proposal has been short on details -- including the cost of the tax cuts and what loopholes would be closed.

The healthcare bill passed by the House could result in 23 million people losing insurance, the Congressional Budget Office estimated, a conclusion that Republicans were quick to challenge. The bill would also reduce federal deficits by US$119 billion between 2017 and 2026, according to the analysis.

Short said he believed that the Senate healthcare bill would be “similar” to the House package.

Senator John Cornyn, the No.2 Republican in the Senate, said Monday evening he thought there would be a vote on a healthcare bill in the Senate in July.

‘The healthcare bill passed by the House could result in 23 million people losing insurance’ Short also said the White House expects for Congress to raise the government’s borrowing authority, also known as the debt limit, before the August recess. Reuters

Business Daily Wednesday, June 7 2017 15

Opinion Business Wires

Taipei Times President Tsai Ing-wen (pictured) yesterday asked the Democratic Progressive Party (DPP) caucus to ensure the passage of draft bills on pension reform and infrastructure development in an upcoming extraordinary legislative session. Tsai invited 16 DPP lawmakers, Vice Premier Lin Hsi-yao and Presidential Office Deputy Secretary-General Jason Liu to a lunch in the Presidential Office Building to discuss smoothing the passage of the bills through legislative work and policy promotion. Tsai said the public has misconceptions about the Forward-looking Infrastructure Development Program because of the Chinese Nationalist Party’s (KMT) false accusations against it, and asked the lawmakers to redouble efforts to promote it.

The global recovery’s downside risks

F

The Japan News Japan Expressway International Co., a group of expressway operators including Central Nippon Expressway Co., announced that it will enter the toll road business in Vietnam. Amid the sluggish pace of new expressway projects in Japan, the company, also known as Jexway, is aiming to secure a new revenue source from the maintenance and management of expressways in Vietnam, which has seen a rise in the number of vehicles. For ¥420 million, Jexway plans to acquire a 20 per cent stake in a Hanoi company that operates about 43 kilometres of toll roads in the suburbs of that city.

The Phnom Penh Post Acleda Bank, Cambodia’s largest bank by assets, reported a net profit of US$28.39 million in first quarter this year, down slightly from US$30.19 million in the same period in 2016, according to the bank’s latest financial report. The bank said it continued to increase its deposit base, with customer deposits at US$2.98 billion as of the end of March 2017, while loans and advances given out by the bank reached a total of US$2.9 billion.

Jakarta Globe Indonesia’s state budget deficit is estimated to widen to 2.5 per cent of its gross domestic product by the end of this year from 2.41 per cent in the current plan, Finance Minister Sri Mulyani Indrawati told reporters. The minister is expected to present a revised state budget to the House of Representatives this month, with economic growth predicted in excess of the government’s 5.1 per cent-5.3 per cent target range. The fiscal deficit in 2016 was at 2.49 per cent of the GDP.

or the past two years, the global economy has been growing, but it has swung between periods of rapid expansion and deceleration. During this period, two episodes, in particular, caused U.S. and global equity prices to fall by about 10 per cent. Is a pattern emerging, or is a fitful global recovery set to stabilize?

The first episode came in August/September 2015, when many observers feared that China’s economy could be headed for a hard landing. The second episode, in January/February 2016, also stemmed from concerns about China. But investors were also increasingly worried about stalling U.S. growth, collapsing oil and commodity prices, rapid interest-rate hikes by the U.S. Federal Reserve, and unconventional negative-rate monetary policies in Europe and Japan.

Each deceleration episode lasted for about two months, at which point the correction in equity prices began to reverse. Investors’ fears were not borne out, and central banks began to ease their monetary policies; or, in the case of the Fed, put rate hikes on hold.

As a third example, one could cite the period following the United Kingdom’s Brexit referendum in June 2016. But that episode was more short-lived, and it did not cause a global slowdown, owing to the small size of the UK economy and monetary easing at the time. In fact, in the months before U.S. President Donald Trump’s election last November, the global economy actually entered a new period of expansion – albeit one in which advanced and emerging-market economies’ potential growth remained low.

We may still be living in what the International Monetary Fund calls the “new mediocre” – or what the Chinese call the “new normal” – of low potential growth. And yet economic activity has started to pick up in the U.S., Europe and the eurozone, Japan, and key emerging markets.

Owing to new stimulus measures, China’s growth rate has stabilized. And emerging markets such as India, other Asian countries, and even Russia and Brazil – which experienced recessions between 2014 and 2016 – are all doing better. So, even before the U.S. presidential election had inspired “Trump trades,” a “reflation trade” had signalled a new phase of modest global expansion.

Recent economic data from around the world suggest that growth could now accelerate. And yet one cannot rule out the possibility that the current expansion will turn into another global slowdown – if not an outright stall – if some downside risks materialize.

For example, markets have clearly been too bullish on Trump. The U.S. president will not be able to pass any of the radical growth policies he has proposed; and any policy changes that he does make will have a limited impact. Contrary to what the administration’s budget projections claim, annual economic growth in the U.S. has almost no chance of accelerating from 2 per cent to 3 per cent.

At the same time, markets have underestimated the risks of Trump’s policy proposals. For example, the administration could still pursue protectionist measures that would precipitate a trade war, and it has already imposed migration restrictions that will likely reduce growth, by eroding the labour supply.

Moreover, Trump might continue to engage

“

Nouriel Roubini CEO of Roubini Macro Associates and Professor of Economics at the Stern School of Business, NYU.

in corporatist micromanagement, which would disrupt the private sector’s investment, employment, production, and pricing decisions.

And his fiscal-policy proposals would provide excessive stimulus to an economy that is already close to full employment. This would force the Fed to raise interest rates even faster, which would derail the U.S.’s recovery, by increasing long-term borrowing costs and strengthening the dollar.

Indeed, Trump has introduced such profound fiscal uncertainty that the Fed could make a mistake in its own policymaking. If it does not increase rates fast enough, inflation might balloon out of control.

The Fed would then have to hike rates rapidly to catch up at the risk of triggering a recession. A related risk is that increasing rates too slowly could lead to an asset-price bubble and all the dangers – frozen credit markets, soaring unemployment, plummeting consumption, and more – implied by its inevitable deflation.

The current Fed chair, Janet Yellen, is unlikely to make a mistake. But over the course of the next year, Trump will have the option of appointing five, and possibly six, new members to the Fed’s seven-member Board of Governors. If he chooses poorly, the risk of serious policy errors will increase substantially.

Markets are also underestimating today’s geopolitical risks, many of which stem from Trump’s confused and risky foreign policies.

Indeed, the global economy could be destabilized by any number of scenarios involving the U.S. A military confrontation between the U.S. and North Korea now seems plausible. So, too, does a diplomatic or military conflict between the U.S. and Iran that results in an oilsupply shock; or a trade war between the U.S. and China that escalates into a larger geopolitical conflict.

But Trump is not the only global risk. China has resorted to a fresh round of creditfuelled fixed investment to stabilize its growth rate. That means that it will have to deal with more toxic assets, debt, leverage, and overcapacity in the medium term. And because growth and economic stability will top the agenda at the Chinese Communist Party’s National Congress later this year, discussions about how to rebalance growth and implement structural reforms will take a back seat. But if China does not jumpstart structural reforms and contain its debt explosion by next year, the risk of a hard landing will return.

Elsewhere, the recent Dutch and French election results (and favourable expectations for the German election this September) have reduced the risk that populists will come to power in Europe. But the EU and eurozone are still in an economic slough.

And market fears of a disintegrating eurozone will return if the anti-euro Five Star Movement comes to power in Italy’s next election, which could be held early this fall.

In the next year, a more robust and persistent global recovery will depend largely on whether policymakers avoid mistakes that could derail it.

At least we know where those mistakes are most likely to be made. Project Syndicate

We may still be living in what the International Monetary Fund calls the “new mediocre” – or what the Chinese call the “new normal” – of low potential growth

”

16 Business Daily Wednesday, June 7 2017

Closing IEA

World’s energy system not on track to meet climate goals

Energy technology innovation can help achieve a cleaner energy system but strong policy signals are needed, the report said.

Barely one tenth of renewable energy technology is ready to meet long-term climate Only three out of 26 assessed technologies electric vehicles, energy storage and mature change targets as governments have failed to variable renewables (solar PV and onshore adequately support large-scale deployment, wind) - are on track to meet climate targets, a report by the International Energy Agency according to the IEA. showed yesterday.

“Transformation towards a clean energy system Under a global climate pact, called the Paris is not in line with stated international policy Agreement, nearly 200 countries agreed last goals. Many technology areas suffer from a year to phase out greenhouse gas emissions this century and to limit a global average rise in lack of policy support and this impedes their temperature to “well below” 2 degrees Celsius. scaled-up deployment,” the report said. Reuters

Investment

Gold imports seen surging 50 per cent as investors seek haven The Chinese Gold & Silver Exchange Society is planning to build a bonded warehouse in Qianhai Ranjeetha Pakiam

C

hina, the world’s biggest gold consumer, may boost imports through Hong Kong by about half this year as local investors seek to protect their wealth from currency risks, a slowing property market and volatile stocks, according to the Chinese Gold & Silver Exchange Society.

Mainland China is set to import about 1,000 metric tons from the

territory in 2017, said Haywood Cheung, president of the century-old exchange in Hong Kong which trades physical gold and silver. That compares with net purchases of 647 tons last year and would be the highest since 2013, data from the Hong Kong Census and Statistics Department compiled by Bloomberg show.

Demand is rising on concerns over property, share and bond markets and the outlook for the yuan, amid a government drive to reduce leverage

in the financial system. Local consumption was up 15 per cent in the first quarter, with sales of bars for investment climbing more than 60 per cent and dwarfing a 1.4 per cent rise in jewellery buying, according to data from the China Gold Association. China also imports gold from Switzerland.

“People are looking at other means to invest, a safe haven to protect their renminbi because of the depreciation, so everybody starts to look for safe haven products,” Cheung said in an interview at a precious metals conference in Singapore on Monday. “So I think we’re going to

have a good year.”

The Chinese Gold & Silver Exchange Society is planning to build a bonded warehouse in Qianhai, with a storage capacity of 1,500 tons of gold, and completion is expected in two to three years, said Cheung, who has 33 years of experience in the industry. A temporary warehouse which holds about 50 to 100 tons of gold will be operational by the end of this year, he said.

Investment demand

The society has an offshore gold product, denominated and settled in renminbi, with current transactions of about RMB20 billion to RMB30 billion daily, Cheung said. This isn’t good enough and one way to improve it is to build the warehouse to get in touch with the China market, he said. The Shenzhen region supports about 3,000 jewellery manufacturing companies which supply 70 per cent of the Chinese retail market, he said.

While the case for investment demand in China is reasonably “solid,” jewellery demand will probably decline again this year in volume terms as the consumer spends money on other things such as property or travel, or prefers 18 karat instead of 24 karat products, said Philip Klapwijk, managing director of Precious Metals Insights Ltd. “I suspect that jewellery demand will be down more in tonnage terms than investment will be up,” Klapwijk said on the side-lines of the conference organized by the Singapore Bullion Market Association. “So demand in China this year could be down a tad.

Financial use of gold in China could also see some reductions.” Bloomberg News

Diplomacy

Outflows

Virtual reality

Philippines halts workers’ deployment to Qatar

Billionaire Draper shuns China investments amid capital controls

HTC says headset will be compatible with Apple’s new OS

The Philippines yesterday halted the deployment of workers to Qatar as the gas-rich Gulf state grappled with a diplomatic crisis after its neighbours cut ties with Doha.

Labour chief Silvestre Bello said Manila was taking precautions as it fears that problems like food shortages could affect the more than 200,000 Filipinos in Qatar should the crisis worsen.

Saudi Arabia and several of its allies on Monday severed relations with Qatar, accusing it of supporting extremism, in the biggest diplomatic crisis to have hit the Middle East’s Gulf region in years.

Bahrain, Egypt, the United Arab Emirates, Yemen and the Maldives also cut ties with Qatar, which Riyadh accused of supporting groups, including some backed by Iran, “that aim to destabilise the region”.

The Gulf states and Egypt said their diplomatic move includes closing transport links with Qatar, which relies on imports from its neighbours.

“We are forseeing a possible problem in Qatar,” Bello said.

“For example, we know for a fact that Qatar does not produce its own food. If anything happens that they run out of food and food riots will take place, definitely our OFWs (Overseas Filipino Workers)... will be the first victims,” he said. AFP

Billionaire investor Tim Draper, an early backer of Baidu Inc., has stopped investing in China-based companies because getting money out of the country has become too difficult.

China restricts the amount of money that can leave its borders to limit the pressure on the yuan and recently tightened capital controls. The moves have already scuttled some takeover deals.

“I’m not investing in China. I’ve stopped, I’ve closed the door,” the managing partner of Draper Associates said in an interview in Sydney yesterday. “Why would I invest in a country where they don’t let money leave? I’m a fiduciary, I have to take care of my investors.”

Draper gained fame for investments in start-ups that went on to become household names, including Tesla Inc., Hotmail and Skype. He also backed blood-testing start-up Theranos Inc. and has defended founder Elizabeth Holmes even as questions have been raised about the accuracy of the company’s technology.

While China may be off his agenda, Draper still has an appetite for investments in the developing world. A passionate supporter of bitcoin and the underlying blockchain technology, he expects the take-up of new digital forms of payment will be faster. Bloomberg News

Taiwanese consumer electronics maker HTC Corp yesterday said its virtual reality (VR) headset will be compatible with Apple Inc’s High Sierra operating system (OS), which is scheduled for release later this year.

HTC’s Vive headset works in conjunction with Valve’s SteamVR virtual reality system, and Apple is working with Valve to make SteamVR compatible with its new OS, the U.S. tech firm said in a separate statement on Monday.

Compatibility with Apple’s Macintosh computers would greatly expand HTC’s VR reach, having so far focused on personal computers such as ones powered by Microsoft Corp’s Windows 10.

HTC has also worked in VR with Intel Corp and Alphabet Inc’s Google.

“With this, Apple brings support for HTC Vive and SteamVR to the 100 million active Mac users,” said David Dai, a senior analyst of Asian Emerging Technologies at researcher Sanford C. Bernstein. “That’s certainly good for the company.”

Apple used the Vive headset in a demonstration at the Worldwide Developers Conference on Monday, the first day of a five-day event, a HTC spokesperson told Reuters. Reuters