Ng Lap Seng trial starts today Court Page 6
Monday, June 26 2017 Year VI Nr. 1325 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Transportation
City
Tesla offers trade-in for one-week test drive Page 3
www.macaubusinessdaily.com
Internet
MSAR ranked fourth most liveable city in China Page 2
Oil industry
Chinese streaming video companies feel content grip Page 9
China, India and Japan impacting crude price rebalancing Page 11
Missing title Sports
A new sponsor is needed but the Macau Open golf tournament will happen no matter what, says the Sports Bureau. With Sands China not renewing its contract as the title sponsor, and no new title sponsor so far, time is running out to avoid failing to host the event twice this decade. Still not appearing on the Asia Tour calendar, but with assurances that it will take place, the handicap is growing. Page 3
Improving the city’s public transportation system and allowing the rental of public spaces for private events would be important steps to improve the local MICE sector, event planner Bruno Simões believes. Having organized the city’s handover ceremony, and with a lengthy history in the city, Simões points out that performance bonuses are temporary, but memories from incentive events are for life. MICE Pages 4 & 5
HK Hang Seng Index June 23, 2017
Gaming The junket operator has improved its position in Vietnam with a memorandum of understanding with an IR in Hoi An. In addition to the acquisition, it has acquired consultancy services for management of the property, with HK$120 mln passed to a consultant for ‘services’. The IR will cover nearly 1,000 hectares with resort and residential areas. Page 7
High-speed trading fund fined Markets Yishidun International Trading was fined RMB300 million for manipulating China’s futures markets. Controlled by two Russians, the firm was involved in the collapse of the Mainland market in 2015. Page 10
25,670.05 -4.48 (-0.02%) Worst Performers
+2.96%
Wharf Holdings Ltd/The
+0.99%
Sands China Ltd
-2.32%
Want Want China Holdings
-0.57%
China Unicom Hong Kong
+1.74%
Industrial & Commercial
+0.97%
Galaxy Entertainment Group
-1.67%
AAC Technologies Holdings
-0.57%
CK Infrastructure Holdings
+1.52%
Bank of Communications
+0.68%
CITIC Ltd
-1.31%
China Mengniu Dairy Co Ltd
-0.52%
+1.15%
Geely Automobile Holdings
+0.68%
Link REIT
-1.14%
Tencent Holdings Ltd
-0.50%
MTR Corp Ltd
+0.46%
Hengan International Group
-1.07%
CLP Holdings Ltd
-0.42%
China Merchants Port HoldChina Resources Power
+1.05%
28° 30° 28° 30° 27° 31° 27° 30° 27° 30° Today
Source: Bloomberg
Best Performers
Kunlun Energy Co Ltd
Suncity eyes Hoi An
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Meeting the needs
2 Business Daily Monday, June 26 2017
Macau Aviation
Joining forces to go West Local airline Air Macau is in talks with Chinese airline Beijing Capital Airlines to coordinate flight connections for future mainland China-Portugal direct flights
A
ir Macau is about to sign an agreement with Chinese airline Beijing Capital Airlines, to allow the coordination of flight connections between flights from the two companies, especially the Beijing to Lisbon connection to start from July 26. “We’re still negotiating the agreement signing. The administration
signatures are still missing after which everything can begin. [Capital Airlines] will launch [the Lisbon connection] in July so we still have time,” Air Macau’s general manager for Southern China, Winston Ma Sze Lok, said. This kind of agreement for “transit” transport will be similar to the one the Macau company has with Air China, through the Beijing and
Shanghai airports, and after July, the Chengdu airport. “Passengers do the ‘check-in’ at the Macau airport, where they can obtain the boarding pass until their final destination, with their luggage also being forwarded to the same destination. From a Macau citizen or a local resident point of view, it is more convenient and more efficient to depart from Macau than take the ferry trip to Hong Kong,” he explained. When asked if the agreement would be closed by the starting date of Capital Airlines’ flight connection to Lisbon, Mr. Ma said “definitely”. “We look to Capital Airlines as a
partner, not as a competitor. If more people take the flight as a transfer to the Lisbon connection from Capital Airlines, we will generate more revenues in our flights bound to Beijing, it’s a win-win situation,” Mr. Ma added.
No immediate changes
The Air Macau representative also informed that no extra flights between Macau and Beijing will be added, nor any adjustments to current schedules made. Under the future partnership, for an initial period, tickets will only be able to be purchased through travel agencies, the same system used for the partnership with Air China. In the case of the Air China partnership - which allows passengers boarding in Macau to fly to 31 destinations in Europe or the United States - it will be possible to buy an online ticket in the last three months of this year. The direct flight connection between mainland China and Portugal will start on July 26, with three flights scheduled every week on Wednesday, Friday and Sunday, between the city of Hangzhou on the East coast of mainland China and Lisbon, with a stop in Beijing. The connection will be made using an Airbus A330-200, one of the largest commercial passenger planes produced by the European company, with a capacity of 475 passengers. Capital Airlines is a subsidiary of the Chinese group HNA, a shareholder in Portuguese semi-private airline TAP, through the Atlantic Gateway consortium and Brazilian airline Azul. Lusa
Hengqin
Ranking
Hengqin-Macau customs clearance system enhanced
MSAR 4th most liveable city in China in 2016
Starting today, the import-export business road shipping bill system will be used to accelerate customs clearance procedures in Hengqin, according to information published on the Hengqin New Area official online portal. Hengqin Customs informed that the system was set up to facilitate customs clearance procedures by enabling companies to upload electronic shipping data to customs through the road shipping bill system, in order to process their customs clearance procedures in advance. In addition to customs transfer and collective customs clearance, the new system incorporates features such as the ATA Carnet - international customs documents permitting the duty-free and tax-free temporary export and import of goods for up to one year, according to the definition
by the International Chamber of Commerce. More than 30 companies from Macau and Guangdong participated in an explanatory session organized by Gongbei Customs, the agency overseeing customs operations in Hengqin, which took place on the island on June 16. According to additional information reported by NewsGD.com, the system was piloted by Hengqin Customs from June 19 to 25 in order to prepare for the full launch today. In early January, Macau Customs signed a cooperation memorandum agreement with the customs department in Gongbei, to operate the “electronic transfer confirmation letter” system, in order to accelerate custom clearance procedures, the official Hengqin portal reported. S.Z.
The MSAR also ranked in the top ten for general economic competitiveness and sustainable competitiveness Cecilia U cecilia.u@macaubusinessdaily.com
The city was ranked as the fourth most liveable city in mainland China for 2016, according to the 15th report of Chinese competitiveness compiled by the Chinese Academy of Social Sciences (CASC). The liveable city competitiveness ranking takes into account seven criteria, namely: education, medical services, security, environment, level of comfort, convenience of city’s infrastructure and economic environment. Topping the list of most liveable cities in 2016 was Hong Kong, followed by Wuxi in Jiangsu Province and Guangzhou in Guangdong Province. The report also includes two rankings relating to general economic competitiveness and sustainable competitiveness, in which Macau positioned eighth in both rankings. In regards to general economic competitiveness, Shenzhen’s economy was the most powerful among other Chinese cities, with the second being the neighbouring SAR, Hong Kong.
Hong Kong again topped the list of most sustainable cities for competitiveness, followed by Beijing and Shanghai. During the first quarter of 2017, Macau’s gross domestic product (GDP) increased by 10.3 per cent year-on-year to MOP93.58 billion (US$11.70 million), according to the city’s Statistics and Census Service (DSEC). In Macau, starting from the 2007/2008 academic year, the government began offering 15 years compulsory free education at 65 schools as well as other subsidies. In terms of medical support, although Macau residents have been receiving health care vouchers of MOP500 since 2008, there is still no definitive completion date for the expansion of the public hospital in Taipa, which was originally announced in 2010. The official data compiled by the United Nations on predicting population density revealed that Macau’s population density as of July 1 would be around 20,821 people per square kilometre.
Business Daily Monday, June 26 2017 3
Macau Sports
Desperately looking for money With The Venetian Macao out of the picture, the Macau Open golf tournament is looking for a new sponsor. Just four months out from the event, the Sports Institute tells Business Daily the competition will take place no matter what, even if it’s still surprisingly absent from the Asia Tour calendar Alex Lee alex.lee@macaubusinessdaily.com
S
ands China Ltd. is apparently not renewing the contract that gave the Macau Open its title sponsor for the past five years, forcing the Sports Institute (ID) to look for fresh cash to
support the men’s professional golf tournament, part of the Asian Tour and founded in 1998. With time running out and Macau’s name still not included in this year’s Tour calendar, creating concerns that 2017 could be the second time in the event's almost two decade history that it has not been held, the Sports Institute
Schedule
informed Business Daily that the event will take place, no matter what. In a short message, an ID spokesperson said the: ‘Open 2017 will be held at the Macau Golf and Country Club from 19 to 22 October this year, and will be one of the events on this year’s Asian Tour calendar’. ID spokesperson Bernardino Lo added that, ‘up until this moment there is no title sponsorship for this year’s event. Notwithstanding this situation, the organizer will endeavour its best efforts to work with Asian Tour to stage a world class tournament and to continue the success of this major international sporting event in Macau.’ The Venetian Macao was the title sponsor of the last five editions, but the agreement ended last year and apparently Sands China will not renew the contract. As has become a common trend, our requests for clarification from the company were greeted with mute disdain.
Avoiding another cancellation
The Sports Institute wants to avoid a second blow to the event's history in the SAR. The tournament also failed to take place in 2010. With the Asia Tour calendar already decided (see calendar) and without Macau being listed, the ID nonetheless is guaranteeing that it will happen, scheduled to occur between the Philippines and Hong Kong Open. If it doesn’t take place, this would be a second blow to the new Sports Institute president Pun Weng Kun, since taking over in February of last year, after the still unexplained confusion regarding the return of the World Touring Car Championship (WTCC) to Macau after a two year absence from
the local Grand Prix. Recently, Pun Weng Kun said the WTCC race was still not a done deal for the upcoming 64th edition of the Macau Grand Prix, scheduled to take place from November 16 to 19. However, on both the WTCC website and the website of the International Federation of Automobile (FIA), the touring car race is scheduled to take place in Macau this year. Several attempts from Business Daily to solve this apparent puzzle found a mysterious wall of silence. Last year, the Macau Open purse was US$1.1 million (MOP8.8 million). The competition is a joint venture between the Asian Tour and IMG Media. Since 2011, the partnership has managed all TV productions and global distribution for the event, including tour-wide sponsorship agreements. advertisement
Transportation
Car swap Electric car manufacturer Tesla will allow local residents to be eligible to swap their normal car for one of the company’s models for a week-long trial Electric car manufacturer Tesla has launched its ‘Drive to Believe’ programme in the MSAR, the company informed Business Daily. Begun last Friday, the programme will allow two residents to exchange
their own car for a Tesla Model S for a week-long trial period, with the sign-up period being from June 23 to July 22. Applicants need to be at least 25 years old, and the two winners will be announced on August 1. The same programme was introduced in Hong Kong at the beginning of the month. Last year, the electric car manufacturer installed supercharger stations at the integrated resort Studio City. The company also started delivering its Model S to local buyers at the beginning of this year. Deliveries of the new Model X will begin soon. N.M.
Legislative Election
Labour sector nominates two candidates for legislative election Lam Lon Wai and Lei Chan U have been nominated by the groups and associations of the labour sector, to represent the sector by participating in the 6th edition of the legislative assembly elections as indirect-elect legislators, local broadcaster TDM Radio reported. A t o ta l o f f o u r c a n d i d at e s
participated in the pre-election process, with Lam Lon Wai receiving 84 votes, Lei Chan U 83 votes, Charles Leong 31 votes and Kelvin Choi Kam Fu 30 votes. Currently, legislator Ella Lei Cheung I and vice president of the Legislative Assembly Lam Heong Sang are representatives of the labour sector. C.U.
4 Business Daily Monday, June 26 2017
Macau
Bruno Simões, founder and Secretary of the Macau Meetings, Incentives and Special Events Association (MISE)
Interview
Private outstripping public Improving the city’s public transportation system and allowing the rental of public spaces for private events would be important steps to improve the local MICE sector, event planner Bruno Simões believes. Founder and Secretary of the Macau Meetings, Incentives and Special Events Association (MISE) and having lived in the city for almost 16 years, Simões helped to organise the 1999 handover ceremony from Portugal to mainland China, and now, as the Managing Director of DOC DMC Macau & Hong Kong and Executive Director of Small World Entertainment Ltd., Mr. Simões shares his opinions on the MSAR’s potential for MICE events Nelson Moura nelson.moura@macaubusinessdaily.com
H
ow long have you been in the MSAR? I’ve been on-and-off in Macau for two periods, totalling 16 years, with the first period from 1993 to 2000 and [the second] from 2008 until now. I
came back to start DOC DMC Macau & Hong Kong. During the first period I also worked for the government in the Macau Economic Services (DSE) then the Macau Trade and Investment Promotion Institute (IPIM) organising some events, seminars and economic delegations. I also helped organise the handover from Portugal to mainland China ceremonies. I was responsible
for the event production team with many other teams responsible for security, media and public relations. What was the handover ceremony like? While Hong Kong had a long term vision for their handover event, where they planned and built the Wan Chai convention centre before
the occasion, in Macau, a cultural centre was developed with a capacity of 1,000 people, although it was decided there would be 2,500 guests, half Chinese, half Portuguese. There was no structure in the MSAR that could hold that number of people apart from the Forum sport pavilion, which wouldn’t provide the dignity for a state ceremony of this kind. So the Chinese government told us to find a solution. Therefore we built temporary infrastructure for the ceremony, another for the dinner and another for the Portuguese farewell. Three different places but just for one event. The flag delivery ceremony was held in a space that is now occupied by the Handover Gifts Museum of Macau, near the Sands casino. What companies do you currently manage? DOC DMC Macau & Hong Kong is a
Business Daily Monday, June 26 2017 5
Macau Destination Management Company (DMC) and Professional Conference Organizer (PCO) focused on meetings and incentives in Macau and Hong Kong and operating as a one-stopshop from arrival to departure. Small World Entertainment Ltd specialises in event management and the production of themed events in Macau, and team building events in Hong Kong, Macau, mainland China and Vietnam.
“The new terminal will provide a better image of efficiency, and the majority of MICE events in the city take place in integrated resorts in the Cotai area” The two companies together have 12 employees, and we organise around 100 small-scale events every year, and around six large-scale events of more than 500 people every year. We also do wine promotion events in cooperation with wine promotion associations in Macau or outside the city in Hong Kong and Southern China. The largest event we organised was Wine & Dine Macau, which attracted around 20,000 people during four days. Normally we organise corporate events, company meetings and incentive events, where we deal directly with the companies or agencies from the countries where the companies are based. Do you believe incentive events have a positive effect on company performance? The advantage of incentive events in regards to monetary bonuses or other benefits provided is well researched, and it’s an instrument used frequently worldwide because it has two main advantages. First it creates memories and emotions that last for a long time. While you can receive a money bonus in your account, three months later you won’t remember it. You’ll remember an incentive trip for many years. The other advantage is the ties it creates between the company’s employees, since during a group trip activity you will have dinners with your managers, colleagues or even competitors, creating strong and important ties. That’s why incentive trips are used a lot, with a great deal of money being spent by multinationals from any sector. It creates an emotional attachment to the company and brand, that can’t be created by a company Christmas dinner. Are there any events you would like to see being held in the MSAR? I really would like to see the Wine & Dine Macau event we used to produce come back. Macau could be more dynamic in optimising its traditional neighbourhoods and [allowing use of spaces] that get away from the city centre. How would you say the event planning sector has evolved recently? On the Macau Peninsula-side, hotels developed some 10 years ago, and with the recent property developments in Cotai, the city reached a level that can compete with other major event cities in Asia. There are two major cities that attract the majority of business events at the moment Hong Kong and Singapore - due to their business characteristics. Hong Kong has a large level of openness and is dynamic, it’s well located and has good access. However there are many other cities of reference in the next level, such as
Shanghai, Beijing, Seoul, Bangkok, Kuala Lumpur. I believe Macau is already in the first division for Meetings, Incentives, Conventions and Exhibitions (MICE) events. The sector had a huge jump in Macau, but the business event organising or MICE sector development went at two [different] rhythms; while the private sector developed quickly and well, the public sector developed at a much slower pace, especially in terms of access. Access to a city is one of the essential aspects for business events. Without good access, people won’t come. Hong Kong and Singapore have developed and planned excellent access: their public transport, their airports and the connections to the cities all work perfectly. It took us 10 years to build a new ferry terminal, while The Venetian was built in three years and has been available for 10 years already, which shows very well the difference in pace between the private and public sectors. With the new ferry terminal opening in Taipa, and other large infrastructure projects like the HKZM bridge, what will be the impact? I believe that it will be large and significant improvement in the competitiveness of Macau. First the new ferry terminal, since the old one on the Macau Peninsula is a little bit out-dated, such as the taxi pick up stops and the bus network, which are notoriously under-developed compared to other regional cities. The new terminal will provide a better image of efficiency, and the majority of MICE events in the city take place in integrated resorts in the Cotai area. What advantages do you believe Macau has in regards to event organising? Macau has an exceptional hotel infrastructure with good prices and [which are] competitive, which is probably its main advantage. The quality-price ratio is quite good. Hotels in other cities that compete with us are not that cheap, and in that aspect Macau is very competitive with Hong Kong and Singapore. Of course, when compared to more budget cities like Ho Chi Minh City or Bangkok, we will be a bit more pricey, but they don’t have the same quality we have. The fact that we have plenty of good restaurants, luxury and casinos also gives us another competitive advantage. We also have history, while Hong Kong doesn’t exactly have a historical tour of its old city.
“We organise around 100 small-scale events every year, and around six large-scale events of more than 500 people every year” The MSAR Government provides certain MICE subsidies. Do you believe government support to be essential for the sector? It has been a great help and makes the difference closing many business deals. We’ve used it many times and I have no doubt it has been instrumental in attracting events to Macau. The competition is considerable, with the cities in the region competing for the same events, with their costs always being an important factor in picking the city; no matter how much you like a city or a hotel. What aspects could be improved? No doubt improving ferry connections to the Hong Kong airport, which could be a quick fix. Taxi transportation and taxi pick-up stops is another
“The excessive protection of local workers is creating a generation of spoiled resident workers”
In South Korea or Cambodia, you can rent temples to make gala dinner events. There are many examples like these. In Macau: zero. It would be a good competitive advantage if that obstacle could be removed, being a more political issue. For example the Dom Pedro V Theatre would be a great place for a private event, or the dock area on Nam Vam Lake where the Dragon Boats are docked and that is only used one time per year. The Macau East Asian Games Dome would also be great. The Taipa Houses [Museums] in theory can be used, but in practical terms nothing can actually be done there. If this aspect was opened up, Macau would have advantages over most of its regional competitors where the public places are generally less interesting than ours.
Another issue in the city is not being able to use public spaces to hold private events, something that is allowed in Beijing: where you can rent a section of the Great Wall of China or of the Forbidden City for events.
Have your companies had problems in terms of human resources? I think besides the MICE sector, all business sectors of Macau have had this problem. The excessive protection of local workers is creating a generation of spoiled resident workers.
sector that could be immediately improved, or the taxi hailing services. Even Uber would be a good improvement that could help the city. There could be art festivals and local gastronomy happening in different areas of the city and across more diverse dates. Events in the city tend to happen around the end of the year, normally organised by the government.
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6 Business Daily Monday, June 26 2017
Macau Opinion
Sheyla Zandonai* No talk “We are working on your questions” is probably the most common sentence journalists working in a newspaper in Goldenville are getting from public authorities lately. Mr. So, the colleague who shared these comments with me, said that his efforts to cover news beyond official data released by his city’s government, and dig into his current affairs-that-matter agenda, are often met with long delays or no replies at all. He doesn’t know why and said he can only guess, precisely, because information is not being passed on. According to him, the problem is not with the Public Relations personnel, for it seems they know well the trouble they have to go through in order to get information from superior echelons. By inference, Mr. So claimed to me, it is in the higher circles of power that relevant information is being withheld. Another problem for him and his colleagues is that the practice seems to be spreading. Listed-companies often express to them [journalists] their wish to be cautious about the information they make public. But for the same reason, they would expect them to respond promptly and come up with responses as informed as possible. Mr. So gave me one example to clarify. City of Sins, a resort in Goldenville, he said, was recently in the public eye when it was revealed that several businesses operating within its premises did not have a license. A spokesperson for the company said to Mr. So’s publication that it would “not comment publicly on licensing processes involving the government,” adding that it was “working closely with the attendant authorities on the matter.” If they are not willing to comment on government licensing procedures when this seems to be the core of the problem in a matter of which they are the pivot, Mr. So wondered, who would be? Listening to my colleague, I empathize that it is vexing for a news media outlet trying to scrutinize a story, to have to publish comments of that sort, but it might be even less flattering for the company itself. But the central point for Mr. So is that it is not satisfactory to those for whom the information is being conveyed: the readership, the public, society as a whole. The issue lessening the value of the communication business in Goldenville these days, he defined, is not one of freedom of speech, but about public right to information. He asked me about the situation in Macau. I said we had nothing to report. * Journalist.
Gaming
Academic: no chance for Taiwan casino referendum The fourth referendum to approve casinos is scheduled for October 28 this year Cecilia U cecilia.u@macaubusinessdaily.com
W
ith the date for the next casino referendum in Taiwan recently being revealed as October 28, Dr Melody Lu Chia-Wen, professor in the Department of Sociology at the University of Macau, predicts that this referendum, the fourth on the topic – to be held in Kinmen county - stands little chance of receiving a majority vote to approve the construction of casinos on the island. “Following the same trend as the last referendum in Penghu, I don’t think there will be a chance in Kinmen,” said Professor Lu to Business Daily, although noting that she considers there were differences between the islands and their inhabitants in terms of voting preferences. In October of last year, residents of the Taiwanese island of Penghu vetoed casino development for the second time in seven years, with 81 per cent voting against the proposal. In 2012, residents of the Matsu Islands approved gaming development in a referendum, although Taiwan’s parliament has yet to approve the Tourism Casino Administration Act that would effectively enforce regulations for the establishment and management of casinos. According to Taiwanese news outlet CNA, the next referendum in the county of Kinmen will be held on October 28 this year, as announced
by the county’s Election Commission. Initiated by Tsai Chun-sheng, a member of the Kinmen County Council, the referendum request has collected 5,602 signatures, exceeding the threshold of 5,178, or 5 per cent of the total number of eligible voters. Regarding the majority stance however, Professor Lu does not think “the situation will be very clear until the day of disclosure”. “Support against the legalisation of gambling has gathered a large number of voters in the past two rounds [in Matsu and Penghu],” said the professor. She explained that the economy in Kinmen is better than Matsu and Penghu, saying that Kinmen has other options for development. “For the local citizens [in Kinmen] the incentive of economic gain from building casinos is not as strong as in Matsu and Penghu,” she points out. Pushing for the referendum, Tsai, as reported by CNA, stated that the island grouping’s society has been experiencing a downturn since the termination of the military administration, opining that gaming would not create social disorder if the industry was well managed.
The Kinmen County Council revealed that TWD9 million (MOP2.38 million/US$296,575) will be budgeted for the referendum, resulting in criticism from the groups against legalization. Those against the initiative denounced the expense of the referendum, arguing that it should be paid by the initiator, and pushing for a notice of revocation of the referendum. Gaming is forbidden in Taiwan, although its parliament approved an amendment to the Offshore Islands Development Act in 2009 allowing offshore islands to hold referendums on casino development. According to the Taiwanese Referendum Act, similar referendums cannot be held in less than a threeyear period, meaning that if Kinmen residents reject casino development on this occasion, a new referendum could only be held after 2020. The country's ruling party, the Democratic Progressive Party (DPP), opposes the development of casinos, as its leader, Taiwan’s President Tsai Ing-wen, favours developing tourism on the offshore islands by promoting their natural resources instead.
Trial
Ng Lap Seng trial starts Local billionaire real estate developer Ng Lap Seng goes to trial today on charges of bribery of United Nations officials, for which he has pleaded not guilty. The bribes were allegedly to pave the way for the construction of a multi-billion-U.S. dollar conference centre in the MSAR. Ng is one of seven people charged since 2015 in the United Nations-related probe, notes Reuters. Ng is charged with bribing former UN General Assembly president John Ashe with over US$500,000 (MOP4 mln), as well as other diplomats. Ashe died while under house arrest after dropping a barbell on his neck.
Greater Bay Area
Money and law Business sector representatives suggest using the MSAR’s capital reserves to invest in the Greater Bay Area, while requesting an update of the local judicial system The MSAR should use its capital reserves to invest in the development of the Greater Bay Area, while focusing on developing itself as a ‘Headquarters Economy’, local business representatives suggested to the government on Friday. This ‘Headquarters Economy’
approach would involve increased cooperation between local companies and the insurance and real estate sectors in mainland China, to attract more companies to base their headquarters in the MSAR. A meeting organised by the Policy Research Office (GEP) on Friday
brought together members from insurance, banking, entrepreneurship and financial associations to present their views on the Greater Bay Area development plan, and Macau’s role in it. During the meeting, the association representatives expressed that the judicial system in the MSAR should be updated to follow-up with the progress made in mainland China, in order to gradually eliminate obstacles to cooperation and boost the ‘free-flow’ of human resources and investment in the region. This would be part of regional efforts to improve the ‘transparency’ of investment and judicial procedures in the cities that make up the Greater Bay Area. N.M.
Business Daily Monday, June 26 2017 7
Gaming Junket
Suncity expanding in Vietnam Alvin Chau’s Suncity Group is channelling investments to Vietnam, eyeing gaming and tourism expansion in emerging Asian markets, in particular Korea, Japan, and the Philippines, as well as London Sheyla Zandonai sheyla.zandonai@macaubusiness.com
J
unket operator Suncity Group Holdings Limited has entered into a memorandum of understanding to acquire Star Admiral Limited, a company which owns a 34 per cent equity interest in an integrated resort (IR) in Hoi An, Vietnam, the company announced in a filing with the Hong Kong Stock Exchange last Thursday after trading hours. The company noted that the project ‘represents a prime opportunity for the group to strengthen its presence and to further extend its business in Vietnam.’ Star Admiral, indirectly wholly owned by Suncity’s Chairman Alvin Chau Cheok Wa, owns 34 per cent of Hoi An South Development Ltd, the company in charge of developing the IR project in Hoi An. The remaining 32 per cent and 34 per cent equity interests in the project are indirectly owned by two independent third parties. The purchaser in the deal, Gold Summit Ltd., is a direct wholly-owned subsidiary of Suncity Group.
In connection with the agreement, the company also announced in the filing that it has entered into a memorandum of understanding for service provision of consultancy and management services related to the same IR in Hoi An. Mr. Lo Kai Bong, an executive director of the company – who Suncity claims introduced and arranged the investment opportunity for Mr. Chau – was appointed to provide advisory and consultancy services in respect to the property. The company indicated that ‘as consideration for his services,’ the Suncity Chairman has agreed to procure for the latter ‘a certain percentage of the realized profit’ up to a maximum amount of HK$120 million (US$15.38 million/MOP123.6 million). The aggregate consideration for the acquisition of Star Admiral has not been disclosed, with the company stating that it ‘will be subject to further negotiations’ between the parties.
a quarter of the country’s foreign visitors in 2016. Suncity noted that the group expects ‘there will be an increasing demand for resort facilities’ in Vietnam, given that it has been subject to ‘a robust visitor volume.’ Vietnam received nearly 10 million visitors in May 2016, representing a 26 per cent increase year-on-year, according to the Vietnam National Administration of Tourism. The project will consist of a tourism area, integrated resort, and residential areas with a total land area of some
985.5 hectares. The Phase 1 development plan consists of the building of the integrated resort complex with entertainment and retail facilities, including a casino with a total of 140 gaming tables and 1,000 slot machines, in addition to facilities such as a golf course clubhouse, and various types of hotels targeting mass and high-end markets. As of the date of the announcement, Phase 1 of the project was under development with expected completion in 2019.
Imperial Pacific construction workers upset over delays
construction companies. The development of the Imperial Pacific Resort has been delayed by protests from construction workers regarding unpaid wages and unsafe working conditions. An earlier report by Marianas Variety revealed that Imperial Pacific, of which nearly two-thirds is owned by Hong Kong billionaire Cui Lijie, is said to be the biggest contributor to the island’s economy and its largest private-sector employer, claiming it has contributed roughly US$201.56 million in taxes, fees, operation funds and donations since it began its activities in 2014.
Integrated Resort in Hoi An
The IR project is located in Quang Nam Province, Vietnam, which the company claims received almost
Gaming
The temporary permit issued to the project will be revoked if Imperial Pacific does not comply with safety measures, or if it does not hold relevant parties accountable for matters such as work-related deaths, injuries, property damage, suits or debts Cecilia U cecilia.u@macaubusinessdaily.com
Another protest erupted late last week linked to the construction of the Imperial Pacific Resort and casino. Some 43 Chinese construction workers demanded supposed remuneration, with one worker revealing that the casino had already obtained a conditional certificate of occupancy on May 16, which would allow the casino to operate with limited services, despite the fact that the construction workers had yet to receive any payment from the company, notes the Saipan Tribune. The permit of conditional occupancy allows Imperial Pacific to commence the operations of phase one of the current project, said the Commonwealth Casino Commissioner, Joseph Reyes, as
previously reported. The temporary permit – valid until November 16, 2017 – was issued to allow the development of the casino facilities and grand lobby, in addition to a bar (the Tapochau) and a couple of business offices. The permit, however, will be revoked if Imperial Pacific does not comply with safety measures, or if it does not hold relevant parties accountable for matters such as work-related deaths, injuries, property damage, suits or debts. The 43 protesters were workers from Suzhou Gold Mantis Construction Decoration (SGMCD), MCC International, CMC Macau and Beilida Overseas (CNMI) Ltd. According to the publication, one of the involved construction companies - SGMCD - allegedly offered to pay US$5,000 (MOP40,168) to each worker, mandating that
workers purchase their own flight ticket back to mainland China. No workers accepted the offer, arguing that the amount was barely enough to pay off the interest on loans they had taken out to pay the recruitment fees to get on to the Saipan project in the first place, of up to US$10,000. The protesters revealed to the news outlet that consensus is yet to be achieved between the United States Department of Labour and the lawyers representing the
Stepping down
Stanley Ho steps down as Shun Tak Holdings’ chairman Stanley Ho, Macau gambling king and one of Asia’s richest men, has stepped down as chairman of Hong Kong conglomerate Shun Tak Holdings Ltd, with his daughter Pansy Ho taking over the position. The elder Ho, 95, who founded Shun Tak - with business spanning from property to transportation and served the board for 44 years,
will take on the title of chairman emeritus, the company said in a filing to the Hong Kong Stock Exchange on Friday. Ho, who heads one of the world’s most lucrative gaming businesses through his flagship firm, SJM Holdings, would also cease to be a director or officer at Shun Tak, the company said.
The flamboyant tycoon is one o f H o n g K o n g’ s b est- k n o w n b u si n e s s m e n . Sh i e l d e d f r o m challengers by a four-decade monopoly on gambling, Ho helped transform Macau from a sleepy peninsula dotted with seedy, windowless gambling dens into the world’s biggest casino centre. Reuters
8 Business Daily Monday, June 26 2017
Greater China HKSAR
Li Ka-Shing says handover created beneficial ties with Mainland He expressed confidence that Xi’s Belt-and-Road Initiative will be an important conduit of growth Jeanny Yu
H
ong Kong’s return to Chinese rule almost 20 years ago set the stage for a smooth transition that paved the way for a mutually beneficial relationship, according to billionaire Li Ka-shing (pictured). “Not only did it provide stability for Hong Kong, its people and its businesses to thrive and evolve in an intensifying competitive environment, our ‘front row seats’ offered unparalleled views into the opportunities and changes in an advancing Chinese economy,” Li, Hong Kong’s richest man, said in comments posted on the website of the Li Ka Shing Foundation in response to questions from the Xinhua News Agency. China’s “one country, two systems” framework for Hong Kong “epitomized the creativity and the flexibility of the Chinese leaders” and China’s continued commitment to the framework is critical to Hong Kong’s ability to flourish, Li said.
The comments come as Hong Kong prepares to mark the 20th anniversary of the former British colony’s return to Chinese rule, with July 1 marking the first time Chinese President Xi Jinping will visit the city since taking office. Other business tycoons, including K. Wah Group Chairman Lui Che-Woo and Tencent’s Pony Ma,
have also voiced their views about Hong Kong recently. “If we cherish freedom and opportunities, we need to be mindful of the essence of mutual tolerance and respect” under the framework, Li said. Hong Kong must also “uphold its part, to be respectful and safeguard the foundation of law and order and to stand and fight against the corrosive force of corruption,” he said. Looking ahead, Li expressed
confidence that Xi’s Belt-and-Road Initiative will be an important conduit of growth and that the city’s incoming administration will be able to build on Hong Kong’s strengths. The city’s Chief Executive-elect Carrie Lam will began her five-year term on July 1.
“Our ‘front row seats’ offered unparalleled views into the opportunities and changes in an advancing Chinese economy” Li Ka-shing
When asked how to diversify the city’s heavy reliance on property and finance to drive economic growth, Li said Hong Kong should step up efforts in investment, education and reforms. Developing the technology industry is important to the future of Hong Kong, he added. Bloomberg News
Internet
Authorities tighten noose around online video content Analysts expect the country’s social media providers will be able to adjust to a tougher regulatory environment although with more limited content offerings Cate Cadell
Beijing has shut down online video services of three popular Chinese media sites in a swift action that unleashed financial shockwaves and posed a firm warning to the country’s online video industry: clean up, or close down. China’s internet shares tumbled after news of the unusually harsh clamp down spread, with Weibo Corp’s down 6.1 per cent, while SINA Corp, which has a stake in Weibo, fell 4.8 per cent. That amounted to a combined US$1.3 billion knock to the market value of both companies. The Twitter-like service Sina Weibo, popular online video site ACFUN and news portal iFeng.com will have to stop video streaming services that
violate the country’s regulations, the TV and film watchdog said on Thursday. “This will provide a clean and clear Internet space for the wide number of online users,” the State Administration of Press, Publication, Radio, Film and Television said in a brief statement on its website. While the move is likely to send a chill through China’s booming online entertainment industry, analysts expect the country’s social media providers will be able to adjust to a tougher regulatory environment although with more limited content offerings. Beijing tightly controls its internet space and bans content that it deems politically threatening or damaging to China’s national identity. It has advertisement
increasingly taken aim at the country’s booming internet industry. The TV and film watchdog did not give a timeline for the ban, but analysts say it is more than likely the services will open again with beefedup oversight. “Instead of a slap on the wrist, it’s a slap all the way up the arm, the neck and the head. But it’s still a slap, it’s not a kill shot,” said Beijing-based director of Marbridge Consulting Mark Natkin. It follows the controversial shuttering of 60 popular celebrity gossip social media accounts last week by China’s cyberspace authorities, who said the sites catered to poor tastes and did not “actively propagate core socialist values”. In May, it released regulations for online news sites and network portals that expanded restrictions on content and required all services to be overseen by party-sanctioned editorial staff. Several online video portals, including iFeng, have been publicly reprimanded in the last six months for conducting live-streamed interviews and other news gathering activities without state authorization. “I think this ban is much more serious than the ones before,” a former iFeng employee, who worked at the
firm until recently and declined to be identified, told Reuters. “The video department is a very important part of (iFeng). When the live stream service was reprimanded previously, it was a great blow. Now, they will feel even more nervous.”
Key Points China issues new curbs for online media Weibo shares drop 6 pct, Sina loses 5 pct Analysts say internet companies can adjust to new rules iFeng.com did not respond to a request for comment while ACFUN released a statement on social media saying it would attempt to remedy the issues. Weibo said it was communicating with relevant government authorities to understand the scope of the notice. Users of the video sites took to Weibo’s microblog on Friday to share their frustration. “In general, I think the network does require some governance,” said one commenter. “But the way they are doing it just shouldn’t be so absolute.” Reuters
Business Daily Monday, June 26 2017 9
Greater China M&A
In Brief
ICBC says checks of loans to big acquirers are routine China’s banking regulator had ordered a group of lenders to assess their exposure to offshore acquisitions by a handful of dealmakers Industrial and Commercial Bank of China (ICBC) said on Friday its checks of loans to companies that made overseas acquisitions is routine, following reports that the regulator had ordered lenders to assess credit extended to a handful of highly acquisitive firms. The assessment does not indicate the bank will reduce credit lines to those firms, ICBC added in a statement. ICBC also said it was not “dumping” bonds issued by companies whose loans it was assessing, an apparent response to market rumours on Thursday.
Reuters and other media outlets reported on Thursday that China’s banking regulator had ordered a group of lenders to assess their exposure to offshore acquisitions by a handful of dealmakers that had been on an overseas buying spree. The firms include HNA Group, Dalian Wanda Group Co, Anbang Insurance Group, Fosun International Ltd and Zhejiang Luosen, which was behind the purchase of A.C. Milan football club earlier this year, a source told Reuters. The China Banking Regulatory Commission (CBRC) made the
request as it moves to control potential systemic risk, including problems posed by domestic companies acquiring more global assets. China launched a clampdown on overseas direct investment last year. The corporate bonds listed on the Shanghai Stock Exchange of Dalian Wanda Commercial Properties, a real estate arm of Wanda Group, dropped 1.8 per cent on Thursday, but recovered on Friday with a 0.878 per cent gain.
Key Points China’s ICBC checks offshore loans to some acquisitive firms ICBC says not selling off bonds issued by those firms Bonds and shares of Dalian Wanda, Fosun rebound on Friday Shares in Wanda Film Holding Co, a subsidiary of Wanda Group, gained 3.6 per cent on Friday after dropping 10 per cent on Thursday before they were suspended. Earlier on Friday, Wanda Film announced that its controlling shareholder planned to increase its stake in the firm by up to 1 billion yuan within three months. Shares in Fosun International and Shanghai Fosun Pharmaceutical, which also slumped on the media reports on Thursday, rebounded on Friday, after Fosun issued a statement saying the firm is operating normally. The blue-chip CSI300 index edged up 0.91 per cent. Reuters
Expansion
Merchants Bank sees strong wealth unit growth as it expands overseas China is the biggest private wealth market in Asia Pacific and the second highest globally Julie Zhu and Sumeet Chatterjee
China Merchants Bank Co Ltd (CMB) expects its total private banking assets to grow 20 per cent annually over the next five years, as it expands to countries seen as top investment destinations for the wealthy Chinese. The increase in CMB’s private banking assets, however, will be slower than last year’s 33 per cent rise to about RMB1.7 trillion (US$243 billion), as the pace of expansion in the overall market eases slightly amid sluggish growth in the world’s second-largest economy.
Key Points Sees private banking assets growing 20 pct annually over 5 years Plans new overseas offices in Sydney, Luxembourg next year Sees private banking revenue contribution at 20 pct in 5 years China is the biggest private wealth market in Asia Pacific and the second highest globally. Its number of high net worth individuals has risen nearly nine times since a decade ago, a private survey by CMB and consulting firm Bain & Co shows. But many of the rich are increasingly looking overseas to diversify their investments and hedge against a weak domestic yuan currency and, according to the survey, the key destinations are Hong Kong, the United States, Australia and Canada. CMB is planning to open new private banking offices in Sydney and
Luxembourg next year, and Los Angeles, London and Vancouver over the next two-three years, Wang Jing general manger of CMB’s private banking department told Reuters. China’s sixth-largest lender by assets already has a private banking presence in Hong Kong, New York and Singapore. “We look to serve Chinese clients when they go global and manage their assets worldwide,” Wang said, adding CMB’s strong banking relationship with onshore wealthy Chinese clients means it would be in a better position to tap and help manage their offshore investments than foreign wealth managers. CMB has about 60,000 private banking clients with minimum investable assets of RMB10 million each. While the private banking units of Chinese lenders such as CMB and Industrial and Commercial Bank of
China Ltd have benefited from the surge in onshore wealth, most global private banks have not been able to cash in as the country’s regulatory curbs, dominance of local banks and less developed capital market keep them away. The international firms, instead, have chosen the offshore route to do business with the millionaires spawned by China’s booming technology sector and its surging stock market. China saw total investable assets rising 47 per cent in 2016 to RMB165 trillion, the survey shows. “We are quite optimistic about the prospect of China’s private wealth market,” Wang said. A strong onshore wealth growth outlook means more staff will be required, on top of roughly 1,400 people CMB currently has globally for the private banking business, but the lack of experienced talent in China is a challenge, she said. CMB’s private banking business raked in about RMB11 billion in revenue last year, or nearly 11 per cent of the bank’s retail banking revenue. Wang expects this contribution to grow to about 20 per cent in the next five years. Reuters
Public companies
Auditor uncovers RMB200 bln in fake revenue at state firms China’s government auditor said in its 2016 report published on Friday that 18 of 20 central state firms it audited had inflated revenue by RMB200 billion (US$29.25 billion) and profits by RMB20.3 billion in recent years. The companies audited include China National Petroleum Corporation, China Huaneng Group and Sinochem Group. The report from the National Audit Office also said that due to inadequate risk control measures, the 20 centrally-administered firms had put overseas investments worth RMB38.5 billion at risk. Debt of some local governments has risen quickly, with some also illegally raising debt, the audit office said. Watchdog
Top banking regulator tells banks to push forward with reform China’s top banking regulator has told banks to reform by tackling China’s “zombie firms”, control regional housing market bubbles and push forward with debt to equity swaps, according to a statement posted on the regulator’s website late Friday. Guo Shuqing, who was appointed chairman of China’s banking regulator in February, met with representatives from a number of the country’s largest commercial banks on Friday to check up on their progress implementing the central government’s reform agenda. Beijing is promoting supply-side structural reform as a solution to industrial capacity and cutting its reliance on debt-driven growth policies. M&A
Glencore in bidding war with Mainland to buy Rio coal assets Miner and trader Glencore on Friday hit back with an increased offer of US$2.675 billion in cash to buy Australian coal assets from Rio Tinto that earlier this week said it was favouring a Chinese bid. On Tuesday, Rio Tinto said it had selected Yancoal to buy its Coal & Allied division in Australia for US$2.45 billion. That was US$100 million lower than a previous counter-bid from Glencore, but Rio said it believed Yancoal’s offer could be completed more quickly because it had regulatory approvals. Commerce
First shipments of American beef in 14 years China let through the first shipments of beef from the United States in 14 years on Friday, after the two nations agreed to resume the trade in May, state media reported. The imports were brought in by Cofco Meat Holdings Ltd from U.S. meat processor Tyson Foods Inc, China National Radio (CNR) reported on Friday, citing Beijing Entry-Exit Inspection and Quarantine Bureau. China officially allowed U.S. beef imports from Tuesday this week after the two sides settled the conditions for exports last week.
10 Business Daily Monday, June 26 2017
Greater China 2015 crash
Authorities dole out US$100 mln punishment to Russian-controlled fund “Malicious” short selling by domestic and foreign “speculators” have been largely blamed by the government for causing the market crisis that started in the summer of 2015
A
Chinese court meted out a nearly RMB700 million (US$102.4 million) punishment to a Russian-controlled high-frequency trading firm for futures market manipulation on Friday, drawing a line under one of the most high-profile cases of misconduct Beijing blames for contributing to the 2015 stock market crash. The verdict by the Shanghai No. 1 Intermediate People’s Court, posted on its official microblog, also involves a penalty to two executives of Yishidun International Trading Co. The ruling comes at the end of a week in which index publisher MSCI agreed to include China’s domestic shares in its emerging market benchmark. “Malicious” short selling by domestic and foreign “speculators” have been largely blamed by the Chinese government for causing the market crisis that started in the summer of 2015. Yishidun, based in China’s eastern
city of Zhangjiagang, and controlled by Russian nationals Georgy Zarya and Anton Murashov, pocketed illegal gains worth RMB389 million by frequently trading China’s index futures between June 1 and July 6, 2015, the Shanghai court said in a statement.
According to the verdict, Yishidun would be fined RMB300 million, and its illegal gains would also be confiscated. In a statement emailed to Reuters, Yishidun said it had conducted an independent audit of its trading model after the company was investigated, and found nothing consistent with “market manipulation” as this term is understood outside China. The audit also found the company’s trading was subject to a functioning risk-management system, it said.
The court gave suspended sentences to Yishidun’s two executives, Gao Yan and Liang Zezhong, of three years and 2.5 years, respectively. Jin Wenxian, an employee from a brokerage the trading firm used, received a sentence of five years. In its battle against speculators
‘The fund said it had conducted an independent audit of its trading model after the company was investigated’ during the market crisis, Beijing netted journalists, senior executives in brokerages and even securities regulators. Other foreign funds punished by Beijing included Citadel Securities, whose account in Shanghai managed by a unit was suspended by the Chinese government. Reuters
Diplomacy
Beijing says Trump open to cooperating on Silk Road projects Trump told Yang that he’s happy with the positive progress made in relations since meeting Xi and is looking forward to meeting him again President Donald Trump told China’s State Councillor Yang Jiechi in a meeting that the U.S. is willing to cooperate with Beijing on projects related to its Belt and Road infrastructure initiative, according to a statement from China’s foreign ministry. Since his April meeting with Xi in Florida, Trump has toned down the anti-China rhetoric he campaigned on, and sent Matt Pottinger, National Security Council senior director for East Asia, as the U.S. representative at China’s first Belt and Road Forum in May. Engagement with President Xi Jinping’s signature project to build new trade and investment links between Asia, Europe and Africa would mark a contrast to the Obama administration, which turned down the opportunity to be a founding member of the related Asian Infrastructure Investment Bank. Yang told Trump in a White House meeting Thursday that China highly appreciated the U.S. attendance at the gathering and would be willing to work with the U.S. on the initiative, the ministry said in the statement. The president responded that he would also be open to working together on related projects, according to the statement. The White House didn’t respond to a request for comment. Trump told Yang that he’s happy with the positive progress made
in relations since meeting Xi and is looking forward to meeting him again in the Group of 20 nations summit next month in Hamburg, Germany, and visiting China within the year, according to the statement.
China visit
As signs that a visit by the U.S. President were not on the cards multiplied, China had invited Trump’s daughter Ivanka and son-in-law Jared Kushner, both of whom have official jobs in the White House, to visit later this year, Bloomberg reported this week, citing people familiar with the matter. Support from the White House for Belt and Road would be “a boon for China-U.S. relations,” said He Weiwen, deputy director of the Beijing-based Centre for China and Globalization, and a former business attache in the Chinese consulates of New York and San Francisco. “The Belt and Road projects are so big that Chinese companies can’t do them alone. They need to find partners elsewhere, including the U.S.” U.S. companies have already been deeply involved in the projects along the path, and business leaders in both sides have been calling for cooperation in third countries, he said.
Economic Exchanges, a Beijing-based think tank staffed by a number of retired senior government officials, said in a joint statement Wednesday that the two nations can engage in full cooperation under the Belt and Road initiative and through a number of other means including the AIIB, World Bank, and other multilateral investment and financing institutions. Trump isn’t the only U.S. leader who’s expressed openness to Belt and Road. California Governor Jerry Brown told Xi in a meeting in Beijing this month the most populous state is willing to join the initiative and expand cooperation on green technology, innovation and trade, according to a statement from the
Full cooperation
The U.S. Chamber of Commerce and the China Centre for International
China’s State Councillor Yang Jiechi
governor’s office and a report from the official Xinhua News Agency. Yang and Trump also discussed North Korea, with the president saying the U.S. looks forward to better cooperation with China on addressing nuclear issues and working toward the de-nuclearization of the Korean Peninsula, the ministry said. Yang reiterated that China is willing to keep working with parties including the U.S. to ease tensions in the region. Yang and other top officials were in Washington this week to take part in the new U.S.-China Diplomatic and Security Dialogue, a forum aimed at addressing key disputes between the world’s two largest economies, as well as security issues where they can work together. Bloomberg News
Business Daily Monday, June 26 2017 11
Asia Oil industry
China, India, Japan hamper Asia demand growth, efforts to balance market The stuttering demand in Asia has contributed to a 20 per cent price fall for Brent crude oil to around US$45 per barrel Henning Gloystein
A
s the global oil market frets about a stubborn supply glut, faltering demand growth in key Asian crude importers is further hampering efforts to restore market balance. A fuel glut in China, a hangover from demonetisation in India, and an ageing, declining population in Japan are holding back crude oil demand growth in three of the world’s top four oil buyers. The three countries make up a fifth of 97 million barrels per day (bpd) in global oil consumption, and any hiccups among them will mean lower-than-expected oil demand growth in Asia, helping to undercut the OPEC-led effort to support prices. “We are indeed seeing lower demand from more than a few clients - air, marine, road, industrial ... They are actually consuming less fuel than anticipated,” said Michael Corley, managing director of Mercatus Energy Advisors. In China, vying with the United States as the world’s biggest oil importer, imports in May were still at a near record of 9 million bpd, but a looming cut in refinery operations is set to hit demand for crude oil in the third quarter. In India, which overtook Japan as
the world’s third-biggest oil importer last year, crude imports fell by more than 4 per cent between April and May to around 4.2 million bpd, as after-effects of the country’s recent demonetisation programme hit consumption. For the first five months of the year, India’s imports are about flat to the same period last year, following an annual rise of 7.4 per cent last year.
Key Points China demand to falter on refinery closures
Japan oil demand is in structural decline
million bpd hit in 2005. Coupled with plentiful supplies, the stuttering demand in Asia has contributed to a 20 per cent price fall for Brent crude oil to around US$45 per barrel, in what is the biggest slump in a first half of a year since 1997.
Traders put more oil into floating storage as glut continues
Floating storage
India still grappling with effects of demonetisation
China, India and Japan make up 20 pct of world oil demand
In Japan, Asia’s most advanced economy, oil demand has been in structural decline for years due to a declining, ageing population, and the rise of cars with better mileage or that use alternative fuels. Japan in April imported around 3.5 million bpd, down from a peak of 5.9
In the latest indicator of a supply overhang, traders said that five very large crude carriers (VLCCs) have been chartered in recent days to store unsold oil. Each VLCC can hold around 2 million barrels of oil, and the five chartered for storage add to around 25 supertankers already sitting in southern Malaysian waters. In a market condition known as contango, where spot crude oil prices are cheaper than those for future
delivery, it is profitable to store oil for a later sales. Currently, spot Brent is almost US$1.50 a barrel cheaper than that for delivery in early 2018. “If oil prices head lower, floating storage will get more traction,” said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore. The cheap spot price comes despite the effort led by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by 1.8 bpd that has been in place since January. Doubts over OPEC’s compliance with its own targets and soaring U.S. output have led to scepticism that markets will re-balance soon. “The slide in oil prices continues ... as markets remain sceptical of OPEC’s ability to balance supplies,” ANZ bank said on Friday. Reuters
Property
Singapore billionaire Wee’s firms in share-swap deal With a net worth of about US$7.3 billion, Wee is Singapore’s second-richest person Pooja Thakur
UOL Group Ltd. and Haw Par Corp., two listed companies largely owned by 88-year-old Singapore billionaire Wee Cho Yaw, announced a deal that may make UOL one of the largest owners of commercial space in Singapore. Property investor UOL will sell 27.3 million new shares to Tiger Balm maker and investment holding firm Haw Par in exchange for 60 million United Industrial Corp. shares owned by Haw Par’s wholly-owned subsidiary, UOL said in a statement to the Singapore stock exchange. On completion, UOL’s stake in United Industrial will increase to 48.94 per cent from 44.71 per cent, it said. The deal “will offer greater diversification by increasing access to UIC’s commercial property portfolio in the Singapore Central Business District,” UOL said in the statement. “The proposed transaction will enable UOL and UIC to further align strategic interests and collaborate to acquire land banks, office and retail properties.” “UOL has assessed that it will exercise de-facto control over UIC
as it will become the single largest shareholder,” said Tata Goeyardi, a director at Religare Capital Markets in Singapore. The group will consolidate UIC into its accounts and UOL has plans of achieving statutory control
of UIC in the future, Goeyardi said. Investor and hotel operator UOL owns the Pan Pacific and Parkroyal brands, while United Industrial has built high-end office and residential buildings in Singapore. United Industrial has been controlled by Wee and Philippine billionaire John Gokongwei, who is aged 90. UOL has received a waiver from
the Securities Industry Council of Singapore and isn’t obligated to make a mandatory general offer for UIC as a result of the share acquisition, on condition UOL’s stake in UIC doesn’t exceed 49 per cent, the statement said. The deal is subject to shareholder and regulatory approvals with all conditions to be satisfied by Oct. 31.
“UOL has assessed that it will exercise de-facto control over UIC as it will become the single largest shareholder” Tata Goeyardi, a director at Religare Capital Markets in Singapore
Singapore billionaire Wee Cho Yaw
With a net worth of about US$7.3 billion, Wee is Singapore’s second-richest person, according to the Bloomberg Billionaires Index. He famously turned a local lender, United Overseas Bank Ltd., into Southeast Asia’s third-biggest bank. Bloomberg News
12 Business Daily Monday, June 26 2017
Asia Forecast
Bank of Japan June Tankan set to show improved business confidence The survey found that big firms will plan to raise their capital spending in this fiscal year by 7.4 per cent Kaori Kaneko
J
apanese big manufacturers’ confidence is expected to have improved for a third straight quarter in June to match the peak seen two years ago, but may recede in the coming quarter on uncertainty around conditions overseas. A Reuters poll of 16 economists found the Bank of Japan’s quarterly tankan business sentiment survey is expected to show the headline index for big manufacturers’ sentiment rising 3 points to plus 15 in June from three months ago. That would be the third straight quarterly rises, matching the level seen in the June 2015 survey and highest since March 2014 when the index stood at plus 17. “We expect big manufacturers’ mood is recovering due to a favorable export environment, stable currency and factory output recovering on a pickup in consumer spending,” said Tsuyoshi Ueno, senior economist at NLI Research Institute. “As for the outlook, in addition to uncertainty over the Trump administration, geopolitical issues such as Brexit and the North Korea situation will weigh on business sentiment.” The poll found the big non-manufacturers’ sentiment index would rise 3 points to plus 23 in June, which would be the highest level since December 2015 when the index was at plus 25.
Business confidence among big manufacturers was seen likely worsen slightly to plus 14 in the coming quarter, while non-manufacturers’ morale is seen deteriorating to plus 20, the poll found. The survey found that big firms will plan to raise their capital spending in this fiscal year by 7.4 per cent, upgrading from 0.6 per cent in the March survey. The BOJ will announce the outcome of its quarterly tankan survey at 8:50 a.m. on July 3 (2350 GMT on July 2). The Reuters monthly Tankan, which tracks the BOJ’s survey, showed confidence among Japanese manufacturers bounced in June to match a decade-high level recorded in April and is expected to rise for several months, providing more evidence of economic recovery. The poll also found the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, was expected to rise 0.4 per cent in May, up for a fifth straight month, driven by energy costs.
Factory output was thought likely to fall 3.2 per cent in May from the previous month, but analysts believe that such a drop would be in reaction to a 4.0 per cent gain in April.
Key Points June tankan big manuf mood f’cast at +15 vs +12 in March Big non-manuf mood seen at +23 vs +20 in March Big firms to upgrade capex plan for FY2017 BOJ Tankan due at 2350 GMT on July 2 May core CPI seen +0.4 pct yr/yr, due at 2330 GMT on June 29
Retail sales were forecast to rise an annual 2.6 per cent in May, up for a seventh straight month. The poll showed household spending likely slipped 0.6 per cent from a year earlier, down for 15 straight months, although the rate of decline slowed
from a 1.4 per cent drop in April. “Consumer spending on durable goods such as autos and electrical appliances is on the rise but wage recovery remains sluggish, so the pace of recovery in consumer spending will stay slow,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. The jobs-to-applicants ratio was seen steady at 1.48 in May, staying at the highest level since February 1974 when the ratio was at 1.53. And the unemployment rate likely stood at 2.8 per cent for the month, unchanged form the previous month. The internal affairs ministry will release core CPI, household spending and jobs-related data at 8:30 a.m. on Friday (23:30 GMT on Thursday). The trade ministry will announce retail sales at 8:50 a.m. on Thursday and industrial production on Friday. Japan’s government on Thursday raised its overall view of the economy for the first time in six months, reflecting a gradual pick-up in private consumption and underscoring its confidence that an export-led recovery is broadening. Reuters
Corruption
Friend of former S.Korea leader jailed for three years Choi also faces separate charges, which have yet to be heard, of extortion, abuse of power and attempted fraud Heekyong Yang
The friend of former South Korean leader Park Geun-hye, who was at the centre of an influence-peddling scandal that rocked the country’s business and political elite, has been sentenced to three years in jail, Yonhap News Agency reported on Friday. The court decision was the first ruling against Choi Soon-sil, a long-time confidante of the ousted South Korean president, who has been arrested and is being held in jail over the corruption scandal that ended her administration. Prosecutors had demanded a seven-year jail term for Choi on charges of obstruction of business and links to Park in order to force a university to give her daughter preferential treatment. In the sentencing ruling cited by Yonhap, the Seoul
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Central District Court said it “accepts the evidence that Choi conspired with school officials to give her daughter favours”. “Choi violated laws and proper procedures to benefit her daughter,” the court said. Reuters was not able to reach court officials immediately to confirm the report. Choi also faces separate charges, which have yet to be heard, of extortion, abuse of power and attempted fraud to extort bribes from business conglomerates. She and Park have denied all charges against them. Prosecutors accused Choi of facilitating her daughter’s admission to the prestigious Ewha Women’s University and conspiring with the faculty there to have her daughter’s academic records altered despite poor class attendance and plagiarised reports. The court also sentenced
the president of the university to two years in prison, Yonhap reported. C h o i ’ s 2 0 - y e a r- o l d daughter, Chung Yoo-ra, an Asian Games equestrian gold medallist, fled to Europe last year. She returned to South Korea earlier this month and claimed that she wanted to clear up any misunderstandings. Her entrance to the university and her high school diploma were cancelled after authorities found her high school attendance and test grades had been forged. Prosecutors have twice sought an arrest warrant for Chung to detain her over the corruption scandal, alleging that Samsung Electronics had provided her with financial assistance to sponsor her equestrian training. Chung has denied any involvement and had said she was unaware of how Samsung’s sponsorship had influenced her equestrian career. However, she later acknowledged during questioning that she knew about Samsung being her patron and that her mother had
asked her to keep it secret. The court denied prosecutors’ requests to arrest Chung while her mother, Park, and
Samsung Group chief Jay Y. Lee were being held in detention. Lee also denies all charges against him. Reuters
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Business Daily Monday, June 26 2017 13
Asia Negotiation
In Brief
Trump calls Modi ‘true friend’ as U.S., India approach talks The Indian leader will attempt to advance discussions on buying 100 armed Predator drones made by California-based General Atomics Iain Marlow and N. C. Bipindra
Indian Prime Minister Narendra Modi meets U.S. President Donald Trump today in a White House visit that will allow the leaders to build personal rapport but is less certain to produce significant progress on issues such as immigration. “Look forward to welcoming India’s PM Modi to @WhiteHouse on Monday,” Trump said Saturday on his presidential Twitter account. “Important strategic issues to discuss with a true friend!” Modi is likely to lobby Trump on visas for technology workers. He’s also expected to seek assurances on the Defense Technology and Trade Initiative that facilitates U.S. arms technology transfers to India. The Indian leader in a statement on Twitter after he landed in Washington thanked Trump for “the warm personal welcome. Greatly look forward to my meeting and discussions with you.” The Indian leader will attempt to advance discussions on buying 100 armed Predator drones made by California-based General Atomics, and getting U.S. help with India’s plans for a nuclear-powered aircraft carrier, according to Indian defence ministry sources. Separately, a sale of unarmed patrol drones has been approved ahead of Modi’s arrival, a General Atomics official said. The two leaders may pledge deeper defence cooperation, while also discussing a harder line on Pakistan, terrorism in South Asia, and China’s role in the region. A White House official who briefed reporters on condition of anonymity said that the U.S. seeks to treat India as a major defence partner, like other close allies.
Deeper understanding
Trump and Modi have spoken twice on the phone, the official said, insisting that the new president has not ignored India. Monday’s meeting will help deepen Trump’s strategic understanding of the country, the official said. However, there are fundamental
differences between them on issues including the H-1B visas, used by many Indian IT companies, and the Paris climate accord, which India supports and Trump has withdrawn the U.S. from. “I would expect a brief, friendly meeting that sets the right tone, but without a lot of detail or substance,” said Dhruva Jaishankar, a foreign policy fellow at Brookings India. Trump was looking forward to advancing common priorities on fighting terrorism, promoting economic growth, and expanding security cooperation in the Indo-Pacific region, White House press secretary Sean Spicer said in a statement earlier this month.
Clash of nationalism
Despite a US$66 billion trading relationship that is India’s second-largest, Trump’s “America First” rhetoric may make it difficult for him to find common ground with a prime minister prioritizing a parallel “Make in India” campaign. Both leaders are trying to boost domestic manufacturing in order to create jobs.
“I would expect a brief, friendly meeting that sets the right tone, but without a lot of detail or substance” Dhruva Jaishankar, a foreign policy fellow at Brookings India U.S. lawmakers from both parties urged Trump to push India to drop restrictions on trade and investment. “Only through concrete actions that remove actual barriers to trade and investment can the U.S.-India economic relationship flourish,” according to a letter to Trump signed by House Ways and Means Committee
Chairman Kevin Brady, the ranking Democrat on the committee Richard Neal, Senate Finance Committee Chairman Orrin Hatch, and the panel’s top Democrat Ron Wyden. “You’ve got a clash of economic nationalisms going on,” said Ian Hall, acting director of the Griffith Asia Institute in Australia. “It’s very hard to see Modi and Trump having much in common, other than having the desire to appear strong to domestic audiences.” Trump’s other priorities, from Syria, China and Russia to domestic issues including immigration, health care and investigations into his administration, have fuelled the impression among India-watchers that New Delhi is not on Trump’s radar. When India is mentioned, in relation to immigration or climate change, it’s generally been negative. And Washington signalled only this past week, unofficially, that top Trump economic aide Kenneth Juster would replace former U.S. Ambassador to India Richard Verma, who stepped down before Trump’s inauguration, according to the Press Trust of India.
‘Off the radar’
“There is a palpable fear in New Delhi that the new U.S. president’s lack of focus on India, and limited appointment of South Asia focused advisers, has resulted in India falling off the radar in Washington,” wrote Eurasia Group analysts Shailesh Kumar and Sasha Riser-Kositsky in a recent note. With Trump asking allies to shoulder more military costs, Brookings’ Jaishankar suggests Modi could signal New Delhi “is willing to play a bigger security burden in its neighbourhood and the Indian Ocean and is not dependent on U.S. security guarantees.” The two leaders are also likely to discuss Pakistan and regional terrorism, analysts said, particularly as Trump’s administration formulates a new South Asia policy. Trump could take a tougher stance on giving military aid to Pakistan as he eyes broader budget cuts. “However, contrary to India’s long held desire, the U.S. will not label Pakistan a state sponsor of terror,” the Eurasia analysts wrote. While in Washington Modi is also expected to meet with Vice President Mike Pence, Defense Secretary James Mattis and Secretary of State Rex Tillerson, as well as Wilbur Ross and Steven Mnuchin, the secretaries of Commerce and Treasury, respectively. Bloomberg News
NAB CEO
Australian bank tax spooks global investors Australia’s decision to slap a A$6.2 billion tax on its major banks has created uncertainty among global investors who no longer see the country as a stable investment destination, according to the chief executive of National Australia Bank. NAB chief executive Andrew Thornton said London-based investors he had met were concerned about the federal government levy, the Australian Financial Review reported on Saturday. “They’re saying the environment in Australia is less stable, less consistent and they have less confidence in Australia as a place to invest.” Aerospace
India sends 31 satellites into space India fired a rocket carrying 31 small satellites into space on Friday, several of them for European countries, in a boost to Prime Minister Narendra Modi’s ambition to project the country as a global low-cost provider of services in space. The Polar Satellite Launch Vehicle (PSLV) launched a 712 kg Cartosat-2 satellite for earth observation and 30 other tiny satellites from Sriharikota in the southern state of Andhra Pradesh at 9.29 a.m. (0359GMT). The rocket is carrying satellites from India and 14 other countries, including Austria, Belgium, Latvia, Lithuania and Slovakia, as part of an international commercial arrangement by the staterun Indian Space Research Organisation. (ISRO) M&A
Toshiba says open to talks with Western Digital Toshiba Corp said it was open to talks with Western Digital Corp in their dispute over the sale of the Japanese conglomerate’s prized chip unit - an apparent olive branch after it chose another suitor as preferred bidder. Toshiba would be willing to hold talks but does not expect the composition of the preferred bidder consortium, which includes Bain Capital and Japanese government investors, to change before June 28, Chief Executive Satoshi Tsunakawa told a news conference. It is aiming to clinch a deal, worth some US$18 billion, by June 28, the day of its shareholders’ annual meeting. Monetary policy
Sri Lanka cbank holds rates
India’s Prime Minister Narendra Modi (L) shakes hands with his Portuguese counterpart Antonio Costa, at the Necessidades palace in Lisbon, Portugal, 24 June 2017. He visited Portugal prior to fly to United States. Lusa
Sri Lanka’s central bank kept its benchmark interest rates steady on Friday, as forecast, saying current monetary policy was appropriate as it expected the economy to recover in the second half of the year. The central bank kept the standing deposit facility rate at a four-year high of 7.25 per cent and the standing lending facility rate at 8.75 per cent, the highest since July 2013. “The decision of the Monetary Board is consistent with the objective of maintaining inflation at mid-single digit levels over the medium term and thereby facilitating a sustainable growth trajectory,” the central bank said.
14 Business Daily Monday, June 26 2017
International In Brief Watchdog
South Africa anti-graft chief open to talks on central bank The head of South Africa’s anti-graft watchdog is open to talks on her recommendation to change the central bank’s mandate, a proposal that has drawn sharp criticism from parliament, the ruling party and investors, a local news agency said on Saturday. Public Protector Busi Mkhwebane’s recommendation to alter the South African Reserve Bank’s principal constitutional mandate of maintaining currency and price stability to focus on economic growth has highlighted worsening divisions between the country’s state institutions. Both the central bank and parliament plan to mount legal challenges to the proposal. Bailout
Moody’s raises Greece’s sovereign bond rating U.S. ratings agency Moody’s Investors Service upgraded Greece’s long-term issuer rating to ‘Caa2’ from ‘Caa3’ following the extension of a credit lifeline to the country by euro zone governments. Moody’s also changed the outlook to positive from stable and said that it sees tentative signs of the economy stabilizing. The euro zone government had given Greece another 11thhour credit lifeline worth 8.5 billion euros (US$9.51 billion), last week. The International Monetary Fund Managing Director Christine Lagarde said that the IMF would also join the bailout, offering Athens a standby arrangement of less than US$2 billion.
Budget
As debt limit looms, U.S. House leaders eye bipartisan deal The U.S. government has a statutory limit on how much money it can borrow to cover the budget deficit Ginger Gibson and Amanda Becker
C
ongressional leaders are quietly working on a bipartisan deal to raise the U.S. debt ceiling within weeks, hoping to prevent the difficult debt issue from snarling a budget fight to come in September, a senior Democratic budget writer said on Friday. John Yarmuth, top Democrat on the U.S. House of Representatives Budget Committee, told Reuters there is bipartisan interest in raising the debt limit before August. “There is talk going on, there is leadership conversation about this,” said Yarmuth, who added that House Democrats do not plan to demand concessions from Republicans in exchange for supporting a debt limit increase. Unlike most countries, the U.S. government has a statutory limit on how much money it can borrow to cover the budget deficit that
results from Washington spending more than it collects in taxes. Only Congress can raise that limit. The Trump administration has warned the debt limit will need to be raised in the fall. Treasury Secretary Steven Mnuchin last month moved the target deadline for action to September from October, saying tax receipts are coming in slower than expected. Senate Republicans remain in contact with the administration on the issue, but don’t have further updates on their plans, a senior aide said. House Democratic leader Nancy Pelosi has said Democrats will support a “clean” debt-limit bill, free of conditions. Conservative Republicans in the House Freedom Caucus have traditionally voted against clean increases and have already indicated they would like to raise the debt limit less than requested by the Trump administration. Congress’s agenda is crowded, with healthcare legislation pending
and a deal needed by late September on funding the government. Raising the debt limit adds another obligation. Over the past decade, raising the limit went from a routine job to a politically charged negotiation. In 2011, under former Democratic President Barack Obama, Republicans began demanding concessions in exchange for their votes to raise the limit. As a result, the nation twice went to the brink of busting the debt ceiling before an agreement could be reached. Yarmuth said Democrats are not opposed to attaching a debt ceiling increase to “bipartisan” legislation, but warned against adding “poison pills.” “I don’t think our side wants to play games with this,” he said. Bipartisan discussions in the Senate on the debt limit have not begun, a leadership aide confirmed. Senate Democratic leader Chuck Schumer told reporters earlier last week that the responsibility for raising the limit lies with Republicans and warned against tying the debt limit to deficit-creating tax cuts for the rich. Reuters
Tax
Nigeria hopes to generate US$1 bln from amnesty Nigeria hopes to raise at least US$1 billion from a scheme that will give tax evaders a chance to make payments retrospectively, the finance ministry said on Friday. The OPEC member, which has Africa’s largest economy, is in the second year of a recession brought on by low oil prices. Crude sales make up twothirds of national revenue and the government is seeking to boost its income from non-oil sources. The finance ministry said a scheme would be launched on June 29 to give evaders immunity from prosecution, penalty charges and interest if they “regularise their tax status” between July 1 and December 31, 2017. Real estate
U.S. new home sales jump New U.S. single-family home sales rose in May and the median sales price surged to an all-time high, suggesting the housing market had regained momentum. The Commerce Department said on Friday new home sales increased 2.9 per cent to a seasonally adjusted rate of 610,000 units last month. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units. Economists polled by Reuters had forecast new home sales, which make up about 10 per cent of all home sales, rising 5.4 per cent to a pace of 597,000 units last month. Sales were up 8.9 per cent on a yearon-year basis in May.
U.S. Congress
Corruption
Charges against Brazil’s Temer expected to come in waves The investigation is hampering the president’s ability to push his economic reforms through Congress Ricardo Brito and Maria Carolina Marcello
Brazil’s top federal prosecutor will level corruption charges against President Michel Temer one at a time instead of making all the accusations at once, a strategy aimed at weakening his defence, a source with direct knowledge of the process told Reuters on Friday. Under Brazilian law, any criminal charges against a sitting president must be approved by two-thirds of the lower house of Congress in order for the Supreme Court to put a leader on trial. Top prosecutor Rodrigo Janot is expected to charge Temer with receiving bribes this week. The president is also facing accusations of racketeering and obstruction of justice. Temer’s office and his attorney, Antonio Mariz, did not immediately respond to requests for comment. Temer has repeatedly said he is innocent of all accusations. The investigation is hampering the president’s ability to push his economic reforms through Congress. Key lawmakers in Temer’s alliance told Reuters this week, on condition of anonymity so they could speak freely, that they will set aside work
on those proposed labour law reforms if forced to vote on criminal charges against Temer. They also said they will not even consider advancing work on pension reforms until changes to the labour law are passed. Temer is being investigated in connection with a political graft scheme involving JBS SA, the world’s largest meatpacker. Company executives said in plea-bargain testimony that the president took nearly US$5 million in bribes in return for help resolving tax matters, for freeing up loans from state-run banks and other matters. Joesley Batista, one of the brothers who control JBS, also made a recording of a conversation he had with Temer earlier this year. In it the president appears to condone paying off a potential witness. Batista also accused Temer and aides of negotiating millions of dollars in illegal campaign donations for his Brazilian Social Democracy Party. Lawyers defending Temer were trying to dismiss the use of the recording in the investigation, saying it was manipulated. But police said on Friday after finishing an analysis
of the audio files and the equipment used by Joesley Batista to record the president that they were valid. Lawmakers in Temer’s alliance say they have the one-third of lower-house votes required to block any charges against Temer. Out of 513 deputies, leaders in the alliance said this week they have between 250 and 300 votes.
‘Top prosecutor Rodrigo Janot is expected to charge Temer with receiving bribes this week’ But they also told Reuters they widely expected Janot to use the strategy of dragging out the charges against Temer in an effort to wear down lawmakers with multiple votes. Those ballots will be deeply unpopular with Brazilian voters who overwhelmingly believe Temer is corrupt, according to opinion polls. It also gives more time for possible new corruption revelations to surface against Temer, said another key lawmaker speaking on condition of anonymity, potentially eroding his support in the house. Reuters
Business Daily Monday, June 26 2017 15
Opinion Business Wires
The Korea Herald South Korean food products rejected by Chinese customs surged amid heightened tensions surrounding the diplomatic row over the deployments of a U.S. antimissile defence system, official data showed yesterday. In March and April 95 shipments of food were turned back by Chinese customs, up a sharp 280 per cent from 25 rejections posted for the same two-month period in 2016, the staterun Korea Agro-Fisheries & Food Trade Corporation said. It said items rejected included various cookies and crackers, beverages and drinks as well as seafood products.
The retreat of the renminbi
The Times of India Banks for the first time have been made accountable for misselling third-party products like insurance policies or mutual fund schemes. Customers can also file complaints against banks for problems with mobile and digital banking services. The RBI (Reserve Bank of India) on Friday said that it has widened the scope of its Banking Ombudsman Scheme 2006 to include deficiencies arising out of sale of third-party investment products by lenders. Under the amended scheme, a customer would also be able to lodge a complaint against banks for nonadherence to the RBI instructions with regard to mobile or electronic banking services.
Philstar The Bangko Sentral ng Pilipinas (BSP) continued to book higher earnings in the first quarter of the year, driven by robust gains on foreign exchange rate fluctuations and lower expenses. Preliminary data from the central bank showed its net income surged to P1.66 billion from January to March, more than 10 times the P156-million profit earned in the same period last year. The BSP recorded a foreign exchange gain of P4.69 billion, up 27.8 per cent year on year. Revenues, however, slipped 4.6 per cent to P12.57 billion even as expenses declined by 6.5 per cent to P15.59 billion.
Viet Nam News (Vietnamese) Minister of Agriculture and Rural Development, Nguyễn Xuân Cường said the export potential of fruits and vegetables is huge, with the products key to restructuring the sector. Cường said the ministry has focused on promoting the use of modern technologies in agriculture, aiming to create quality products, thus improving the sector’s competitiveness and expanding export markets. “Exports of fruits and vegetables will grow in the upcoming time. The sector should develop association models for investing in hi-tech agriculture. Businesses should work with farmer collectives to establish concentrated raw material areas,” he added.
“
T
he globalization of the yuan seems r e m o r s e l e s s a n d u n s t o p p a b l e, ” pronounced The Economist in April 2014. Indeed, use of the Chinese yuan, or renminbi (RMB), in global payments would double between then and August 2015, to 2.8 per cent of the total, making China’s currency the fourth most used in the world. Since then, however, this growth has been almost entirely reversed. The RMB’s share in global payments has fallen to 1.6 per cent, knocking it down to number seven. Its use in global bond markets is down 45 per cent from its 2015 peak. RMB deposits in Hong Kong banks are also down by half. And whereas 35 per cent of China’s crossborder trade was settled in RMB in 2015 (with most of the remainder in dollars), that share has fallen to about 12 per cent today. The RMB’s reversal of fortune reflects four factors in particular. For starters, whereas the dollar value of the RMB rose nearly every year from 2005 to 2013 – by 36.7 per cent in total – it has since fallen steadily, discouraging speculators. Since 2014, the exchange rate has weakened by an increasing amount every year, and is now down over 11 per cent since the drop began, despite intervention by the People’s Bank of China (PBOC) to support the currency (not to hold it down, as U.S. President Donald Trump has alleged). As a result, investors have abandoned the idea that RMB appreciation is a one-way bet. Capital inflows driven by that bet are over. The RMB’s fall against the dollar reflects the slowing of China’s debt-fuelled economic growth and the accumulation of default risks. Chinese residents and companies are, not surprisingly, seeking new ways (legal and otherwise) to move money out of the country. In April, PBOC Deputy Governor Yi Gang tried to reassure nervous investors in a presentation in New York by saying that the level of nonperforming loans (NPLs) in the Chinese banking sector had “pretty much stabilized after a long time of climbing.” This was, he said, “a good development in the financial market.” But Yi was spinning. NPLs have stabilized as a percentage of total bank loans, but only because the number of loans has continued to rise. Many of these new loans are to deadbeat clients, and can be expected to go sour in due course. In fact, in absolute terms, NPLs grew by US$35 billion in 2016, reaching US$220 billion. Banks are also using accounting tricks to hide trillions in further exposures. In an effort to stem the weakening of the exchange rate, the authorities have made it more difficult to convert RMB to dollars. Having previously supported Chinese investment abroad, they are
“
Benn Steil Director of International Economics at the Council on Foreign Relations and author of The Battle of Bretton Woods
Emma Smith an analyst at the Council on Foreign Relations
now blocking outbound mergers and acquisitions to keep domestic companies from exporting capital. They have simultaneously made capital repatriation more difficult for foreign investors. While this helps keep existing capital in China, it is also discouraging foreigners from committing more. This is the second factor discouraging accumulation of the Chinese currency. Faced with the choice between short-term economic stability and currency flexibility, Chinese policymakers are choosing stability. This raises questions about their long-term commitment to full convertibility, an important step for the RMB to reach genuine reserve-currency status. The third factor undermining the RMB is that China has exhausted its export potential. The country and its currency have gained prominence because of China’s extraordinary integration into the global economy since its admission into the World Trade Organization in 2001. China’s share of world exports grew from 1 per cent in 1980 to 14 per cent in 2015, making it the world’s largest exporter. But its share of global exports has since fallen, to 13.3 per cent. Those who saw China as the national equivalent of Amazon.com, selling more to more people year on year, have been disappointed. The fourth factor is the reversal of globalization itself. Capital flows – in the form of equity and bond purchases, foreign direct investment, and lending – fell by over two thirds, from US$11.9 trillion to US$3.3 trillion, between 2007 and 2015. Trade barriers are up. Discriminatory measures are spreading faster than liberalizing policies. Merchandise trade is falling, too, contracting 10 per cent between 2011 and 2015, which was the largest drop over any four-year period since World War II. China is therefore not only losing exportmarket share, but is doing so in a shrinking global market. As a consequence, the dollar value of China’s exports has fallen by 9.1 per cent since its peak in early 2015. The net result is that, compared to just a few years ago, the world has little, if any, reason to continue accumulating RMB. The globalization of the RMB is no longer “remorseless and unstoppable.” On the contrary, it appears, for the foreseeable future, to be well and truly over. Project Syndicate
The RMB’s fall against the dollar reflects the slowing of China’s debt-fuelled economic growth and the accumulation of default risks
”
16 Business Daily Monday, June 26 2017
Closing Election
Mongolians fret over China investment as they prepare to vote Economy has more than doubled in size since 2010, but some regions have seen little benefit Terrence Edwards
A
few miles from Mongolia’s giant Tavan Tolgoi mine, about 2,000 trucks a day set off across the Gobi desert, delivering coal to China on a road so narrow and ridden with pot holes it has become an accident black spot. Nearby stand the foundations of a railway meant to connect Tavan Tolgoi to China to the south. The unfinished line would enable cashstrapped, landlocked Mongolia to sell more coal at higher prices to its biggest customer, which could also finance the project. But despite the obvious economic benefits, the project has become a casualty of the ambivalence Mongolians feel about China’s growing influence. Those feelings loom large over a Mongolian presidential election today. “It’s been left here for two years without any work,” said the governor of Tsogttsetsii district, Orgodol Badarch, pointing to a gravel surface where the rails should have been laid, stretching into the distance for more than 200 km. “I’m not sure, but it may have to be rebuilt completely.” Voters will choose between an
investment-friendly candidate and a populist “resource nationalist” rival in an election that is a referendum on both economic policy and China’s role. China’s share of Mongolia’s foreign trade was 68.5 per cent from January to May this year, up from 1.5 per cent in 1989. China took 90.5 per cent of Mongolia’s exports from January to May. China wants Mongolia’s coal and copper, and has the cash to build the infrastructure to get it - if Mongolia allows it. Julian Dierkes, specialist in Mongolian politics at the University of British Columbia, said there was a lot of nationalist language in the party manifestos. “Most of this must be thinking of Mongolia as united, but also, in part, united against China, even if that is not explicit,” he said. Miyeegombo Enkhbold, standing for the ruling Mongolian People’s Party (MPP), is “open to foreign investment from all countries, that of course includes investment from China”, a party official told Reuters. “The reality for today is we have the supply, China has the demand,” he said, while adding that Mongolia had to diversify and “reduce inappropriate dependence” on one country. Enkhbold’s main challenger, from
the Democratic Party, is a former martial arts star, Khaltmaa Battulga, who has voiced suspicion about China’s aims in a country that was under Chinese domination for centuries, until it gained independence in 1921. Battulga said in an emailed statement on Thursday that China “is and must be a great partner of ours”, but added that “rail and transportation for any country is both a national security and an economic issue”. “The resources will finish in 40 to 50 years and there will definitely be conflict between the Mongolians and the Chinese,” Battulga said in a 2014 television interview. Polling is not permitted during election campaigning, but in a March survey, 24.3 per cent said the MPP could best solve problems compared with 10.6 per cent for the Democratic Party.
Politics of rail
Mongolia’s economy has more than doubled in size since 2010, but some regions have seen little benefit and lack running water and reliable electricity. While growing trade has brought jobs to Tsogttsetsii, poor transport means Mongolian coal is sold at a discount. Deliveries to China earned US$66 a tonne in April, half the price of shipments from Australia. The railway track from Tsogttsetsii was meant to have been laid in 2014, but financing dried up. A tentative 2015 pact with China’s Shenhua
Group and Japan’s Sumitomo Corp to develop the mine and the railway was blocked by parliament. Progress was not helped by disputes over the gauge. Battulga, transport minister from 2008 to 2012, had favoured the wider Russian tracks, arguing that the international standard would leave Mongolia dependent on China. He recently said he’d go along with whatever parliament decided. A century ago, Chinese warlords
‘The government has been forced to implement austerity measures to secure a US$5.5 billion bailout from the International Monetary Fund in May’ used railways to help colonise Inner Mongolia, and some Mongolian nationalists argue a cross-border link could help facilitate a Chinese invasion. Though driven by Chinese demand, and by a billion-dollar deal to develop the Oyu Tolgoi copper-gold deposit now run by Rio Tinto, Mongolia’s 2011-2013 mining boom encouraged politicians to think about ways to minimise dependence on China, and they drew up plans for rail links to the Russian Far East. Parliamentarians also passed legislation blocking investment by foreign state-owned firms, aimed at blocking plans by the China Aluminium Corporation to acquire the Mongolia-based SouthGobi Resources. But Mongolia can’t be choosy. The government has been forced to implement austerity measures to secure a US$5.5 billion bailout from the International Monetary Fund in May. Ultimately, economic growth may hold more allure for voters than nationalism, said Sumati Luvsanvandev, head of the Sant Maral Foundation polling group. “Anti-China sentiment cannot bring support to Battulga. They are interested in economic prosperity,” he said of voters. “They may be suspicious, but they’re also quite pragmatic.” Reuters
Auto industry
Pollution
Commerce
Takata bankruptcy poses a risk to biggest recall
Global pact on environmental rights to be presented to UN
Japan eyes free trade talks with Britain
The expected bankruptcy of troubled air-bag maker Takata Corp. isn’t just a crisis for its employees and suppliers. It also throws a wild card into one of the biggest and most complicated recalls in automotive history. The Japan-based auto supplier has pledged to recall and replace tens of millions of defective air-bag inflators used by 19 car and truck makers around the world, from Tesla Inc. to Toyota Motor Corp. Takata is expected to file today for bankruptcy protection and announce a takeover offer from Key Safety Systems Inc. for about 180 billion yen (US$1.62 billion), according to people familiar with the matter, who asked not to be identified because the information is private. A filing to restructure doesn’t relieve a manufacturer of recall responsibilities. However, should its financial assets be exhausted before all the work is done, carmakers may have to cover the difference. U.S. bankruptcy laws permit a would-be buyer to acquire Takata’s desirable assets, but not necessarily assume unwanted liabilities -- including recall obligations, according to Robert Rasmussen, a University of Southern California law professor. Bloomberg News
Hollywood star turned activist Arnold Schwarzenegger joined politicians and legal experts in Paris Saturday to launch a campaign for a global pact to protect the human right to a clean, healthy environment. French President Emmanuel Macron promised to present the pact which its supporters want to see become an international treaty to the United Nations in September. “With the planetary plan, we need to move on to a new stage after the Paris accord,” said Macron, referring to the landmark agreement signed in December 2015 by 196 nations to take steps to reduce greenhouse gases and combat global warming. The end goal of the new pact is a legal treaty under which states can be brought to justice for flouting the rights of a group or individual. “We already have two international (human rights) pacts... The idea is to create a third, for a third generation of rights -- environmental rights,” said former French prime minister Laurent Fabius, who also presided over the Paris COP 21 conference on climate change. Seeking to underline the urgency of the need to act, Fabius said it was time for “less talk, more action.” AFP
Japan wants to hold informal free trade talks with Britain as it also works to sign a deal with the European Union, a report said yesterday. Tokyo’s moves aim to minimise Brexit’s impact on Japanese companies as Britain negotiates its exit from the EU, the business daily Nikkei reported. Prime Minister Shinzo Abe said he wants to reach a basic free trade agreement with the EU next month. More than 1,000 Japanese companies operate in Britain, employing some 140,000 people in the country, while Japan’s direct investment in the UK has topped 10 trillion yen (US$96 billion) to date. Japanese officials have already warned businesses with European headquarters based in Britain that they may have to relocate to continental Europe after a final deal is signed between London and the EU. Japan’s major automakers have so far backed the British economy, with Toyota announcing a £240 million investment in a car assembly plant while Nissan gave the green light to new investments at its plant in northeast England. AFP