Beijing pledges more budgetary support to its army Military spending Page 10
Monday, March 6 2017 Year V Nr. 1247 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Courts
Former Prosecutor-general’s links to defendants in corruption case sometimes based on ‘assumptions and guesses’, says corruption watchdog Page 3
Regulations
www.macaubusinessdaily.com
Residency
Nearly 70 pct of gaming worker survey respondents want a full smoking ban in casinos Page 6
Housing bubble
Applications for temporary residency fell last year, with approved applications down 37 pct y-o-y Page 7
Premier Li calls to boost land supply in cities under pressure Page 11
Criticism rejected Politics
U.S. Department of State report points to constraints on press and academic freedom, both vehemently denied by the local gov’t. The report criticises the MSAR gov’t for abuse or misuse of prosecutorial and criminal procedures in relation to political critics. It also points to the limited ability of citizens to make changes in gov’t, and self-censorship among local media outlets Page 2
Working on the right track
Workers Orders for work suspension by the Labour Affairs Bureau went up 41 pct y-o-y in 2016, with fines relating to its ‘punishment, suspension of works and immediate awareness’ campaign hitting MOP882,000. Overall, labour conflicts in the civil construction sector reached 893, a decrease from the previous year, with those in the gaming sector down 14.5 pct y-o-y. Page 2
When you need me, call me
As a fleet of 50 radio taxis are set to hit the streets on April 1, the chairman of Radio Taxi Macau sits down with Business Daily to discuss how to win over customers from the ‘black taxi’ service, his hope to substitute Uber and expectations for a “huge amount” of losses for the first year. What’s needed? More taxis, more passengers and more support from the government.
Challenges ahead
Interview | Transportation Pages 4 & 5
HK Hang Seng Index March 3, 2017
23,552.72 -175.35 (-0.74%) Worst Performers
Li & Fung Ltd
+3.24%
AAC Technologies Holdings
+0.06%
Hengan International Group
-3.25%
China Resources Land Ltd
-1.68%
Want Want China Holdings
+0.81%
Ping An Insurance Group Co
-0.12%
New World Development
-2.26%
Industrial & Commercial
-1.60%
Tencent Holdings Ltd
+0.39%
PetroChina Co Ltd
-0.17%
Hang Lung Properties Ltd
-1.82%
China Mengniu Dairy Co Ltd
-1.58%
BOC Hong Kong Holdings
+0.32%
Belle International Holdings
-0.19%
Bank of China Ltd
-1.81%
Cheung Kong Property
-1.53%
Lenovo Group Ltd
+0.21%
Power Assets Holdings Ltd
-0.22%
China Construction Bank
-1.76%
Bank of Communications
-1.47%
16° 22° 15° 18° 15° 18° 17° 19° 18° 21° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
NPC China yesterday trimmed its 2017 GDP growth target to “around 6.5 percent” as the world’s second-largest economy, already expanding at the slowest pace in a quarter-century, faces an array of challenges. Page 8
2 Business Daily Monday, March 6 2017
Macau Politics
Birds without wings The latest U.S. human rights report highlights that Macau citizens are limited in their ability to make changes in the local government, and also addresses the self-censorship problem among local media outlets Kam Leong kamleong@macaubusinessdaily.com
L
imits on the ability of local residents to change the MSAR government, and constraints on press and academic freedom were two of the prominent human rights issues in the territory last year, said the U.S. State of Department in its latest Country Reports on Human Rights Practices for 2016. In the report published last Friday, the U.S. government criticised the MSAR Government’s abuse or misuse of prosecutorial and criminal procedures in relation to political critics. ‘Activists expressed concern that the Macau Government abused prosecutorial procedures to target political dissidents, while police said they charged those they arrested with violations of the law,’ the Department wrote. ‘Activists critical of the government reported the government monitored their telephone conversations and Internet usage,’ it added. However, the report noted that ‘there were no significant instances of violence or harassment directed at journalists’.
particularly because news outlets and journalists worried certain types of coverage critical of the government might limit government funding’. ‘Journalists expressed concern the government’s limitation on news releases about its own activities and its publishing of legal notices only in preferred media outlets influenced editorial content,’ the report added. In addition, self-censorship was also apparent in the academic field, said the report. ‘[Academics] reported that they were deterred from studying or speaking on controversial topics concerning China,’ it reads. ‘Scholars
also reported that they were warned not to speak at politically sensitive events or on behalf of certain political organizations’. The report, citing university professors, added that the city’s lack of a tenure system left professors ‘vulnerable to dismissal for political reasons’. On the other hand, the lack of transparency in the MSAR government was also highlighted in the report. ‘The law does not provide for public
Gov’t: groundless and baseless
The MSAR Government said it strongly opposes the report, indicating the content relating to the city is ‘groundless and baseless’. ‘Foreign countries have no right to interfere in China’s domestic affairs and should not interfere in
access to government information,’ it noted.
Other issues
Pointing out that local authorities were building up their capacity to pursue human trafficking cases, the U.S. authorities however still indicated that ‘trafficking in persons remained a problem’ in the territory. While the city legalised its national security law - Article 23 of the Basic Law - in 2009, the report reads ‘from July 2015 to June [2016], the Macau SAR Government filed no cases against individuals or organizations in relation to this article’.
any form in the internal affairs of Macau,’ the government said in a press release on Saturday. It claimed the city has been strictly adhering to the principles of “One country, two systems,” of “Macau people governing Macau,” and ensuring a high degree of autonomy, which protect residents’ rights and freedoms.
Press & academic freedom
The U.S. Department of State pointed to concerns of self-censorship among local media, noting: ‘activists raised concerns of media self-censorship,
Work
Creating a culture of safety DSAL is expanding its information sessions to the gaming sector, and increasing on-site inspections to improve work safety and curb health hazard exposure Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Orders for the suspension of works carried out by the Labour Affairs Bureau (DSAL) went up 40.9 per cent last year when compared to the previous year, according to the latest data from the body. In addition, while following the bureau’s ‘punishment, suspension of works and immediate awareness’ campaign, the group saw a total of 309 accusation claims, with total fines resulting from them amounting to MOP882,000, an 11.36 per cent
increase from the previous year. The overall number of labour conflicts in the civil construction sector was 893 cases in 2016, down from 1,029 cases in 2015, or a decrease of 13.2 per cent year-on-year, according to data released last Friday in a conference held by the Labour Affairs Bureau (DSAL). The conference was organized to present information and results from the bureau’s actions on raising awareness and supplying information to employers and employees about their rights and obligations within the scope of the labour law
and relevant legislation. The total number of labour conflicts – or registered complaints – hit 2,713 cases in 2016, of which 1,975 were closed before the end of the year. The bureau registered a 4.8 per cent drop from 2015, when the number of complaint cases filed hit 2,851. Speaking about the DSAL report on workplace inspections, Lai Kin Lon, representing the Labour Inspection Department, added that the number of cases resolved in 2015 was 1,737. The conclusion of cases from 2015 to 2016 was, therefore, up 12 per cent. He also noted that the majority of labour-related complaints had come from the construction sector, and that the average time to deal with cases was 70 days.
Information and training
Invested in its role as a ‘platform for the resolution of labour conflicts,’ DSAL informed that it will continue to conduct inspections of major construction sites, as well as delivering services “in loco,” visiting companies and employment agencies to provide legal assistance and information. In order to raise awareness about employee safety and occupational health on construction sites, DSAL carried out 117 information sessions,
reaching 5,398 participants. In addition, DSAL and the Housing Bureau organized 17 explanatory sessions for institutions and associations regarding the law on minimum wages for cleaning and security staff, enacted on 1 January 2016, said Lai Kin Lon. For 2017, the bureau said it will continue to organize thematic information sessions, increase its presence online (e.g. Facebook, We Chat), and prepare short-films to circulate relevant legal information to a wider audience across different economic sectors. Lam Iok Cheong, from the Occupational Safety and Health Department, said they had organized various seminars during the past year, and that the bureau is preparing new actions to work closely with the gaming sector. Addressing Business Daily’s queries, Lam explained that given that “an important number of Macau’s population is employed by the sector,” they are planning “to visit gaming facilities to inform workers about their rights, to teach them how to alleviate work pressure by practicing light exercise during work shifts, and offering informative interactive games to clarify rights and obligations.”
Lai Kin Lon, from the Labour Inspection Department, reported that the number of labour conflicts within the gaming sector was down 14.5 per cent from a
year earlier, hitting 230 cases in 2016, compared to 269 in 2015. The main reasons for the conflicts included salary disputes and layoffs.
From January to September 2016, DSAL recorded five cases of deaths on construction sites. According to Ng Peng Chi, Head of the Department for Risk Prevention, two of the cases were
caused by falling persons, two of them by falling objects, and one by electrocution. For the whole year of 2015, the number of deaths caused by work accidents totalled nine cases.
Business Daily Monday, March 6 2017 3
Macau
Crime PowerPoint testimony by CCAC investigator angers defence
Guessing game Some accusations of links between the former Prosecutor-general and the remaining corruption trial defendants are based on “assumptions and guesses” according to the testimony of the CCAC investigator Nelson Moura nelson.moura@macaubusinessdaily.com
F
ormer Prosecutor-general Ho Chio Meng’s defence lawyers protested against testimony given by the main Commission Against Corruption (CCAC) investigator responsible for the case, as the corruption trial against the former top official continued on Friday. The Court of Final Appeal heard the testimony of Ao Pan San, CCAC’s top investigator, who presented the investigation procedures and facts using a PowerPoint presentation, leading the defence to object to the presiding Judge Sam Hou Fai. The PowerPoint presentation presented all the nearly 1,500 crimes allegedly committed by the former Prosecutor-general’s criminal association – supposedly carried out by Mr. Ho and his business partners and relatives. “The witness is making a speech and presenting the accusations like they’re confirmed facts, while some details of the PowerPoint were not provided to the defence,” stated Ho’s lawyer, Leong Weng Pun. Despite the protest, the judge allowed the witness to continue her testimony, stating that all the facts in the presentation had been provided to the defence and that the presentation method was made in accordance with the law.
Assumption alley
Although plenty of evidence was presented to demonstrate links between a defendant in a related case regarding the front companies managed from the Public Prosecution’s Office on the 16th floor of the Hotline building, the CCAC investigator - in charge of finding connections between the former Prosecutor-general and the other defendants - admitted that evidence for certain accusations hadn’t been found, with some conclusions being based on “assumptions”. One of the pieces of evidence presented by the CCAC investigator included records of exits and entries through the Gongbei Border that showed defendants Mak Im Tai and Wong Kuok Wai having passed
through multiple times together, with other records of Mr. Ho and his brother and brother-in-law also passing through the border at the same times. However the investigation only found one occasion where Mr. Ho and all the defendants had passed through the border together in 2014, allegedly to attend to the funeral of the father of the former top official in Mainland China. Ms. Ao argued that this was one of the facts that proved that the relationship between Mr. Ho and the other businessmen was closer than that of simply contractor and supplier. “How does going together to a funeral prove criminal association?” defence lawyer Leong demanded. Mr. Ho also responded in court that the trip was carried out to collect his father’s ashes, and that businessman Mak Im Tai wasn’t going along on the trip to organise the funeral, as was presented in the accusations. Other findings presented were in regards to records of eight phone calls to Mr. Ho, made between 2010 and 2014 from numbers belonging to some of the 10 front companies based on the 16th floor of the Hotline building. According to Ms. Ao, CCAC considered that the calls were “probably” made by Wong Kuok Wai and Mr. Ho’s brother, who were described by previous witnesses in court as both being involved in the running of the front companies said to have used illicit means to obtain almost MOP50 million (US$6.2 million) from the Office’s funds.
Night school
Other evidence presented included CCTV footage and wire tap records showing that Mr. Ho and businessman Mak Im Tai had met late at night in a spa in 2015, described on the phone as a ‘night school’. According to the CCAC investigator, the former top official used these meetings to discreetly coordinate activities to grant almost 1,300 service contracts from the Public Prosecution’s Office to the front companies run by the other defendants. Certain facts presented angered the Prosecutor, such as statements made by Ms. Ao that CCTV footage of a car
belonging to Mr. Ho’s brother - entering the car park of an apartment that the Prosecution stated Ho had purchased for the use of one of the defendants, Wang Xiandi - proved that Ho was behind the wheel of the car. According to Ms. Ao, CCAC believed Mr. Ho was driving the car because his brother wasn’t in Macau at that time. The former Prosecutor responded that the apartment was bought for the
use of his father, and that he hadn’t been driving the car, and even if he had been, it would only have been to visit his father. The court also dismissed evidence presented by Ms. Ao that a certain signature was made by Mr. Ho to approve several service contracts to be changed before presenting them to the Office. The evidence was dismissed because accusations were based only on what the CCAC investigator had heard directly from the former chief of the Group of General Administration of the MP, in his initial statements that were not registered in writing.
4 Business Daily Monday, March 6 2017
Macau Interview | Transport
A new fleet on the road Launching 50 radio taxis on April 1, the city’s new on-call taxi operator Radio Taxi Macau Taxi Service Ltd. nearly has everything ready, and expects a free-of-charge trial run can begin later this month, according to the group’s chairman Cheong Chi Man. In an interview with Business Daily, the company boss states his belief that the new business will win local customers from “black taxis” and Uber. Expecting a “huge amount” of losses for the first year, Mr. Cheong says that to make a profit, more taxis, more passengers and more support from the government are all required. Kam Leong kamleong@macaubusinessdaily.com
H
ow are the company’s preparations for the April 1 launch going? Currently, we have 50 taxis ready. I expect that some 60 taxis will be ready for operations [by February-end]. However, we will only launch 50 taxis for the moment and the remaining will be used as back-up vehicles. We are also preparing both online and offline booking systems as well as other hardware. For example, in current taxis the taxi fares start when the flag drops. But we’re preparing a more advanced payment system that allows contactless payment, which requires an online rate metre. We’re thus developing our own rate-metre system and those for online bookings. I believe our hardware will only be ready around March 20. We will strive to make the hardware installation inside all taxis by March 25. Our office is ready too. You are also launching a mobile app for taxi hailing. Is that ready? It’s basically done, but we still need to test the system before we can officially say it is OK to go. In fact, we have signed [co-operation] agreements with Macau Pass and some banks for contactless payment in our taxis already. So basically, there are no other big problems for the launch, but we can’t yet tell you that everything is ready. We had expected everything would be ready around [February] 28. But now we hope by March 10, or during the middle of the month, we can be ready for a trial run and allow passengers to try our service for free. Since we’re not charging any
money during the trial run, we may invite some associations or different social groups to try our services via mobile apps or phone calls, so we can improve and adjust services based on their opinions. And April 1 is our official launch.
“I can tell you that for sure we will lose money if we’re only running 100 taxis. And this loss could be huge” Will the app allow online payment like Uber? Fares will not be completely correct if we charge only in consideration of the route taken for a trip. Besides, this is not allowed under Macau law as the government is worried that it cannot supervise the operations. We are supervised by the government, hence, our app will only allow passengers to order a taxi online, while the other side will be the same as ordinary taxis - so we don’t allow online payments. We only accept contactless payment such as Macau Pass, or cash, and we actually prefer the first payment method as it enhances work efficiency. The government also mandates that we are not allowed to obtain bank-card information of passengers, thus we need to develop our own meters. Our meter is precise and will not change
Cheong Chi Man, chairman of Radio Taxi Macau Taxi Service Ltd.
the rate of fares. Uber can adjust their prices whenever they want. But we cannot. We charge the same as all taxis out there in Macau. And we only charge an additional MOP5 for the calling service. How is the recruitment of drivers going so far? Frankly speaking, it’s a bit difficult to hire drivers. We intended to attract a group of young drivers to join us since, after all, we use good cars. However, based on our current situation, those coming to us are primarily current taxi drivers. Those without taxi experience, meanwhile, account for some one-fourth of the total. Our cars are a comfortable model. We’re using [sport utility vehicles], all automatic transmission and hybrid. How many drivers has the company recruited so far? We have hired around 60 to 70. We’re providing them training at the moment. However, for 50 taxis, we need at least 120 drivers. Or, we will not be able to arrange three work shifts a day. The number we have can only support two work shifts and we’ll need to request drivers to work extra hours. We’re strengthening our promotional campaign for the recruitment and we hope the public can support this new industry. We’re offering at least MOP15,000 [per month] for drivers. I consider [the situation] might be due to our current promotions not being comprehensive enough. After all, we are a new company and we are not really that famous. But we’ve started posting advertisements in newspapers these days. We’re also co-operating with the Macao Federation of Trade Unions
to jointly hold a recruitment session. We’re striving to meet residents’ demands with the first batch of 50 taxis. But for the remaining ones, we’ll see how the first 50 do. We’ve bought all 100 taxis and by May they’ll have all arrived. We will gradually increase the number of taxis in operation since we want to provide better service for residents in order to build a positive image for the whole taxi industry. How does the company aim to improve the local taxi service? We will set up a bonus scheme for drivers. We will offer a grading system for passengers to rank the service provided by our taxi drivers. We will have financial rewards for drivers who get high grades. Meanwhile, we don’t allow drivers to select their own orders. Are you confident that the remaining taxis can be operational within one year, as the contract requires? If everything goes smoothly, it’s possible that we can make all taxis operational in two or three months. I cannot tell you when they can be all operational exactly. After all, we are a new company and a new operation. Of course we hope to launch all the taxis as early as possible since we have bought all the cars. Given “black taxis” also have their own hailing applications, and Uber is also operating in Macau, how do you see the competition in the industry? Improvements are only made when there are competitors. But we should note that Uber’s operations are illegal in Macau. Residents need to be concerned about the risks of using Uber. I believe, following the launch of our service, Uber will not exist anymore. If our work goes smoothly and there are not too many complaints from residents, we’ll make [all 100 taxis] operational step by step.
“We cannot only care about profits at the beginning stage of a business, but rather in gaining residents’ recognition. Once residents accept us and use our service, we’ll make a profit” When the company won the bid, you hoped the MSAR government could grant you some 40 to 50 parking spaces downtown. What is happening with this at the moment? This is really a problem that we are facing right now. For the bus industry, the government has granted a huge plot for it to park buses. The government is requiring us to pick up our passengers within five minutes after receiving the order. But if all my taxis are parked in NAPE, it won’t be possible for us to pick up passengers in Areia Preta even in 30 minutes. How can we meet that requirement? We have suggested the government should reserve three to five parking spaces for us at all public car parks so that our taxis can be spread all over Macau. We thought the government would support us. The government has asked us to guarantee our service and our company is willing to accept this responsibility. But the government should co-ordinate with us, or
Business Daily Monday, March 6 2017 5
Macau how can I fulfil my service promise to pick up passengers within five minutes? This is impossible. Say, from Areia Preta to Fai Chi Kei, it would take at least a few minutes. How about if we need to go to Barra? The government has car parks in different districts of Macau. And I believe residents would not complain about that. We’re here to serve residents. We are different from “black taxis”. We hope the government can listen to social opinions.
“In order to serve the whole of Macau, we need to be spread over all the different districts. If we can park in public car parks, it will make the service more convenient” They have already rejected our request for the reservation of public parking spaces, offering us 14 mobile parking spaces on roads, which is not sufficient at all. In fact, in order to serve the whole of Macau, we need to be spread over all different districts. If we can park in public car parks, it will make the service more convenient as we can tell residents: if you need a taxi, just go to the public car park nearby you. Where are these 14 mobile parking spaces? They’re spread over Macau, on the Peninsula, and in Taipa and Coloane. But we hope the government will grant us more parking spaces. The most ideal would be inside public car parks. In that case, we will not occupy any public space on the road. Currently, how long do you expect it will take on average to pick up a passenger? Well, we hope to reach the five-minute requirement of course. If there’s no traffic jams, I believe we can meet this target. But if there are, it’s hard to say, especially for peak hours. But our long-term target is to increase the total number of our taxis in operation
to some 300 in two years, which will fully meet the demands of local residents, based on our internal analysis. But your license only allows for 100 taxis… Yes, but the government will review our operations after one year. And we do need more taxis. I can tell you that for sure we will lose money if we’re only running 100 taxis. And this loss could be huge. We cannot pick up any random passengers on the street but only by order; there are always traffic jams downtown during peak hours; “black taxis” can choose whether to go to a district or not, but we will go to all. We won’t have any business if there are always traffic jams. In addition, we have five barrier-free taxis, which will probably contribute some MOP100,000 to our losses every month, since the time taken to service disabled passengers will be longer, so we may only handle two orders per hour, but the cost for the drivers is still there. What’s your target for the number of orders per day or month? This will depend on the support of local residents, and our promotions. For the moment, the most important issue for us is to get good feedback from passengers. At the current state, we expect to receive two to three orders per hour, which is around some MOP70 and MOP80. That’s why I’m estimating a loss of between MOP3
The new “on-call” taxi operator
mobile phone application. The company can propose a fare adjustment two years after commencing operations. In addition, the company must provide at least five barrierfree taxis and ten large-scale taxis, although the purchase expenses for the first ten barrierfree taxis will be covered by the government. According to the Transport Bureau, the operator proposed in its bid to provide free Internet service, the installation of onboard diagnostics and the establishment of a backup database for urgent situations.
On-call taxis
three bids. In addition to Radio Taxi, the two other bidders were Lai Ou Taxi Service Company Ltd., controlled by local businessman David Chow Kam Fai, and Taxigo Company Ltd., which is the operator of the “black taxi” hailing application TaxiGo. The Taxigo bid was rejected by authorities at the beginning stage of the tender as it failed to comply with the bidding rules, while bidder Lai Ou had proposed in its bid a MOP15 charge for ordering a ride, in addition to a no-show charge of MOP5.
In September 2016, Radio Taxi Macau Taxi Service Ltd. was awarded a ‘special taxi licence’, which is valid for eight years and allows the company to run 100 special taxis in the city. The first batch of 50 special taxis is required to be operational on April 1, while the remaining half will be available within the following year. Radio Taxi will charge MOP5 to order a ride, and there will be no no-show fees. The special taxis can only be hailed by telephone, by online order or a
The city’s previous radio taxi service ceased operations in November 2014. Despite operating the service for over 20 years, the single radio taxi service provider at the time, Vang Iek Radio-taxi Co. Ltd., quit when it failed to reach a new agreement with the government. Vang Iek ran 100 yellow-colour cabs in the city, which came to be known as the “yellow taxis”. Following the company’s exit, at the beginning of last year, the government re-opened a bid for the ‘special taxi licence’, receiving
million and MOP5 million for the first year of business. But we hope the performance can improve in the following years, and that the government will release more resources to reduce our costs. Given the estimated loss, will you consider increasing your fares after the first year of business? The reason I didn’t set my fares too high is I considered that people would not prefer my services if they could take a taxi with cheaper prices. Besides, I still need to pay my drivers’ salaries even when we don’t have any business – and that will cause an even bigger loss to me… Now I’m using a very good model of vehicles that can carry six passengers. Providing a comfortable environment, I believe passengers will prefer my cars rather
than “black taxis”. My aim is to get more people trying my services. I hope residents can accept and support us. Once they do, we can survive. Your license carries a term of eight years. Are you confident that you can break even within that period? I would be lying if I said we don’t care about making money. But my current focus is on how to run this business. We cannot only care about profits at the beginning stage of a business, but rather in gaining residents’ recognition. Once residents accept us and use our service, we’ll make a profit. If we maintain the level that earns only some MOP70 per hour [per taxi], there’s no way we can make a profit. To be profitable, our business needs to generate at least MOP100 per hour [per taxi].
6 Business Daily Monday, March 6 2017
Macau Opinion
Sheyla Zandonai*
Mong Ha Mong Ha is a busy neighbourhood of Macau. It is also an old, nearly mythical one, said to be the location of one of the first establishments of Chinese people in the peninsula, at a time when it was not properly a city yet, prior to the arrival of the Portuguese in the sixteenth century. Its different urban and architectural layers bear witness to its long and yet dynamic history. It has a thriving social and economic life, and a life for the after-death. Temples, cemeteries and mortuary houses find their way within the urban fabric with the living. Evolving around the hill, which carries the eponymous name, the district is surrounded by diverse remnants of Macau’s history. On the southern base of the hill, facing the main city, several ancient houses emerge here and there, telling the story of a town that belongs to the past. On the northern base, connected to the Areia Preta district and facing China, Mong Ha gives in to another type of human and urban density - where trades, crafts, and businesses form an active commercial and industrial quarter. On one side and the other, two different populations more or less converge: the Macau people, to the south, and the Mainland Chinese, to the north. Mong Ha has, thus, the particularity of being both a transitional space and a cultural midway between the local and the local to be, one day. Though the district has immense character, politics have not accomplished much in the last few years to ascribe to it proper value within the larger cultural geography of Macau. In fact, although one of the last endeavours by the Cultural Affairs Bureau, still under Guilherme Ung Vai Meng’s direction, was to list a couple of sites in the area – the dog kennel being one of them – Mong Ha has been on the map rather due to contestation over some of its old houses. Initially earmarked for renovation, they were withdrawn from the urban planning programme, with no reasonable explanation given, followed by silence on the part of public authorities. But residents are alert. For one, the Ox Warehouse keeps busy with cultural and artistic activities that engage people living in the area. Last week students from the Heritage Management programme at the Institute for Tourism Studies presented their graduation work focused on Mong Ha. “Reconnecting” the neighbourhood was their main call in the project. It may as well be time to reconsider. *scholar and contributor to this newspaper.
Smoking ban
Over half of respondents support full smoking ban Gaming workers associations revealed that nearly 70 pct of survey respondents support a full smoking ban in casinos Cecilia U cecilia.u@macaubusinessdaily.com
A
round 68.7 per cent of 1,981 survey respondents expressed their desire to work in smoking-free casinos, the Macau Gaming Enterprises Staff Association of the Federation of Trade Unions has revealed. The survey results also show that 29.43 per cent of gaming workers support the setting up of smoking lounges, while 60.98 per cent noted cases of casinos violating smoking regulations. Choi Kam Fu, the director-general of the association, said the group will maintain its stance of pursuing a full smoking ban in gaming venues, but refrained from commenting on the government’s likely U-turn in its stance towards setting up smoking lounges. “Certainly the government has its many considerations,” remarked Mr. Choi after the meeting with the Health Bureau and the Tobacco Control Office on Friday. “Whether it [the government] is U-turning, frankly speaking, we can’t comment.” Choi echoed that the government needs to consider many aspects and opinions of different parties when drafting the bill. The MSAR Government announced that it is planning to alter the drafted bill proposing a full smoking ban in casinos, to allow the establishment of smoking lounges, following the latest results of a survey conducted by the University of Macau (UM), commissioned by the six local gaming operators, that was released last month. The survey concluded that 60
per cent of the 14,301 gaming and non-gaming employees interviewed agree with ‘solutions that allow smoking lounges’ in casinos. The New Macau Gaming Professionals Association, meanwhile, gathered a total of 503 signatures on Thursday and Friday, to condemn the Health Bureau for supporting the proposal commissioned by the gaming operators.
Please leave a message
The association director-general revealed that many people failed to reach the hotline for the Tobacco Control Office when smoking violations occurred. “Very often many were asked to leave a message or call during working hours [when they dialed the hotline],” Mr. Choi said, noting that violations usually appeared after midnight or during holidays. According to the Office’s official website, the working hours of the office are from 9am to 1pm and 2:30 pm to 5:45 pm during weekdays. The survey conducted by the association also shows that 61.59 per cent of respondents were unsatisfied with the government’s performance in regards to enforcing the smoking law.
Ambrose So: higher standard smoking lounges can be achieved
CEO and Executive Director of Sociedade de Jogos de Macau (SJM), Ambrose So, stated that the local gaming operators are able to meet the standard requirements made by the city’s Health Bureau when setting up smoking lounge
Meanwhile, Mr. Choi disclosed cases, which were also confirmed by the Office, of casinos being informed in advance when inspectors visited casinos for supposedly surprise inspections. “We have members working as security guards who told us that their company already has a policy requesting them to inform the central department when they see inspectors at the entrance,” revealed Mr. Choi.
Too close to smoking lounge
The close proximity of gaming tables to smoking lounges was another issue discussed at Friday’s meeting. Mr. Choi said the Health Bureau agreed with the suggestion to move tables further away from the smoking lounges in the period before the launch of the potential full smoking ban, but added that the suggestion will be made again to relative departments that have the authority to make the changes happen. In the course of the smoking ban amendment, the association commented that it is disappointed with the government for not being able to disclose a timetable for the revision of the law. “They [The government] always talk about reviewing […] Smoking has been gradually under control [in casinos] since the smoking regulations were launched in 2012 […] it is time to create smoking-free working environments [for gaming workers],” concluded Mr. Choi.
in casinos. According to local Chinese newspaper Macao Daily, the SJM CEO revealed that the Bureau requires smoking lounges in casinos to generate negative pressure of at least -5 pascal (Pa), which is similar to operating rooms in hospitals and medical centres for the prevention of crosscontamination from room to room.
Tourism
Multi-destination cooperation Tourism authorities from Zhongshan, Zhuhai, and Macau are seeking to further cooperation in tourism by expanding their reach into each other’s visitor markets. The tourism authorities met on March 2 to evaluate the development of their multi-destination tourism program within the region during the past year, and prepare their activities and plans for further cooperation throughout 2017. Some of the proposals presented included inviting tourism authorities from Zhongshan and Zhuhai to participate in the tourism promotion of Macau in a campaign taking place in Indonesia and Malaysia. The authorities would join those of Guangdong, Guangxi, Fujian, and Hong Kong in the campaign. In addition, the tourism representatives from the three cities plan to
visit regions in eastern inner China, as well as Guilin, located within the range of the high speed train line, to cater to new markets.
Zhongshan, Zhuhai, and Macau created a tourism alliance in 2006, entitled “Xiangshan in the past, Zhongshan, Zhuhai, and Macau today.” The leadership of the alliance rotates annually between the tourism authorities from the three cities. S.Z.
Business Daily Monday, March 6 2017 7
Macau Urban planning
DSSOPT: Urban Planning Committee’s opinions are valued
T
he Land, Public Works and Transport Bureau (DSSOPT) claimed that the opinions of the Urban Planning Committee are valuable and are being considered by the government. Lawmaker Si Ka Lon queried the government about the proposed developments for reclaimed land Zone B, questioning the government’s attitude towards the Committee after the Secretary for Transport and Public Works, Raimundo Arrais do Rosário admitted that the draft of the plan was incomplete when introducing it to the Committee. During the meeting with the Committee, the Secretary reiterated that government construction projects do not require the approval of the Committee, but he also noted that the government welcomes opinions from different parties. In January of this year, Secretary
Rosário pledged to provide more information to the Committee as soon as his departments were able to gather further details from other parties. The government is planning to build a total of seven government office buildings and 2,000 housing units on the east side of Zone B, located opposite MGM Macau on the Peninsula. According to the written reply by the DSSOPT, it is currently compiling the planning conditions for Zone B, adding that discussions with government departments about their needs will be held after the compilation is completed. Meanwhile, the lawmaker also questioned why the planning progress was taking a long time. DSSOPT explained that the compiling of planning conditions is legally required to include and consider a number of factors and range of
Raimundo do Rosário, Secretary for Transport and Public Works
information, such as the differentiation between the zone and the road entering the zone, the function of the land, the extensiveness of the land coverage, the largest plot ratio, as well as the allowed height of the buildings to be constructed on the land. C.U.
Red tape
Less residents in the SAR The total number of applications for temporary residency in 2016 fell by 1,693 compared with the previous year, according to data from the Macao Trade and Investment Institute (IPIM). Total applications during the year hit 2,017. Total applications approved during the year amounted to 2,123, a drop of 1,222 or 36.5 per cent when compared with 2015. By segment, a total of 305 applications for temporary residency for managerial personnel, and technical and professional qualification holders were received, a decrease of 177 applications year-on-year. Of this group, a total of 99 were approved during the year, an 18-case increase when compared to the previous year. These types of applications for residency accounted for 91.7 per cent of the total 329 new applications in the year.
The other 7.29 per cent were applications for temporary residency on the basis of major investment and major investment plans, totalling 24 applications, a decrease of 55 cases or nearly 70 per cent from a year earlier. Only four investment-based applications were approved in 2016, a decrease of three from 2015.
Applications for the renewal of temporary residency status hit 1,610, a 46 per cent year-on-year drop, while the number of applications approved totalled 1,890, a 39 per cent fall from the year before. In 2016 there were 78 extension applications for family members, down from 91 applications registered in 2015. The number of temporary residency status granted to family members last year totalled 130 cases, 30 less approvals than in 2015. S.Z.
Economy
Labour affairs
Lionel Leong: more concerned about the general market performance
MGM China announces salary rise for employees
In the wake of the announcement that the city’s February gross gaming revenue achieved its largest growth in the past two years, the Secretary for Economy and Finance, Lionel Leong remarked that the government is more concerned about the city’s general market performance. The local gaming industry registered a 17.8 per cent year-on-year increase in total gross revenue for the month of February, amounting to MOP22.99 billion (US$2.87 billion), official data from the Gaming Inspection and Co-ordination Bureau (DICJ) revealed. During his visit to Beijing for the
2017 National People’s Congress, the Secretary said that more attention is being placed on whether local SMEs (small and medium size enterprises) were benefitting from the change in visitor numbers and their consumption patterns, in particular after the peak of the Chinese New Year holiday. According to local broadcaster TDM Radio News, the Secretary indicated that the adjustment of the Chinese Yuan has not had a significant impact on visitor consumption, affirming that the city continued to be an attractive integrated tourism destination. Regarding the performance of the gaming sector, Secretary Leong said it is necessary to study the performance on a quarterly basis to have a clearer picture, noting that different holidays attract different visitors. Meanwhile, the government is gathering opinions from different segments in order to discern the international competitiveness of the local gaming sector, said the Secretary. He also questioned whether launching new properties or facilities by gaming operators is the best way to strengthen competiveness and attractiveness, putting forward the idea that different ideas, rather than establishing new facilities, could be preferable in order to boost the city’s competiveness.
Gaming operator MGM China Holdings Ltd is increasing the monthly salaries of its eligible employees by between 2.5 per cent and 7 per cent, effective March 20, the company announced. According to the announcement, workers whose salary is equal to or below MOP16,000 (US$2,000) per month will enjoy a salary rise of MOP500 per month, representing an increase of between 3 per cent and 7 per cent, while those earning more than MOP16,000 per month will receive an increase of 2.5 per cent. MGM China is the second gaming operator to announce a salary increase for workers this year. In January, Sands China announced it was increasing the salaries of its employees by between 2 per cent and 6 per cent on average from this month.
In Brief Transport
Gov’t to increase parking fee for metered spaces from April The MSAR government is increasing parking fees for the city’s 11,000 public metered parking spaces district-by-district starting next month, and expects the adjustment will be adapted to the whole territory by next March, the director of the Transport Bureau, Kelvin Lam Hin Sang said. Parking fees will be adjusted from MOP6/hour to MOP10/hour for automobile spaces with legal parking duration of one hour, while the fee for those with legal parking duration of two hours will be lifted from MOP2/hour to MOP6/ hour. Those meters with five hour-duration, meanwhile, will be reduced to four hours, while fees will be increased from MOP1/hour to MOP3/hour. On the other hand, metered parking spaces for motorcycles will be increased to MOP2 per hour for those with two-hour parking duration. Tourism
Japan’s immigration e-channel opens to MSAR passport holders Holders of Macau SAR passports can now perform automated immigration clearance in Japan, the Identification Services Bureau announced last Friday. According to the Bureau, the MSAR has been confirmed by the Consulate General of Japan in Hong Kong as now being included in the country’s Trusted Traveller Programme. The e-system is available at the country’s Narita, Hadeda, Chubu and Kansai airports. Eligible residents will need to lodge an application via the website of the Immigration Bureau of Japan prior to entering the country, or apply in person at the registration booths in Japanese airports. Each approval will be effective for three years. Transport
Taxi violations reach 938 cases in first two months A total of 938 taxi violation cases were prosecuted by the Public Security Force (PSP) in the first two months of the year, according to recent data released by the security body. Of the total, 544 cases were for overcharging, accounting for 58 per cent of the total, followed by those of drivers refusing to take passengers, amounting to 278 and accounting for 29.6 per cent. The police force prosecuted 361 cases of unlicensed taxi services over the two months, of which those related to car-hailing app Uber amounted to 322. The PSP added that it had also prosecuted 1,402 drivers for illegally occupying on-street metered parking spaces during the period.
8 Business Daily Monday, March 6 2017
Greater China In Brief Report
Prudent, neutral monetary policy for 2017 China will pursue a prudent and neutral monetary policy in 2017, with the M2 money supply to grow by around 12 per cent, according to a government work report delivered at the annual parliamentary session yesterday. The M2 growth target was one percentage point lower from the 13 per cent set for last year. In 2016, the M2 money supply increased by 11.3 per cent, according to the report. The government will apply a full range of monetary policy instruments, maintain basic stability in liquidity, see that market interest rates remain at an appropriate level, and improve the transmission mechanism of monetary policy. Commerce
U.S. finds Mainland steel plate imports injure industry The U.S. International Trade Commission said on Friday it had made a final finding that the U.S. industry was being harmed by the dumping and subsidization of imports of carbon and alloy steel cut-to-length plate from China. The finding allows for the final imposition of duties by the U.S. Commerce Department. The investigation into the imports was prompted by a petition from Nucor Corp and U.S. subsidiaries of ArcelorMittal and SSAB. China’s Ministry of Commerce, however, said issues in the U.S. steel industry were not related to Chinese imports, pointing to obsolete equipment and subsequent low yields as the reason for decreased profits. Central bank
Interest rates to be decided by market forces China’s interest rates will be decided by market forces, and the rates are generally very stable, Yi Gang, a vice central bank governor, said on Friday. Yi said ahead of the annual meeting of the Chinese People’s Political Consultative Conference (CPPCC), which advises the parliament, when asked about whether the central bank will raise interest rate on its reverse repurchase agreements (repos). The central bank raised interest rates on its repos and the standing lending facility SLF on Feb. 3, following a rise in rates on the medium-term lending facility (MLF) in late January. Globalization
Beijing declares to oppose protectionism China opposes protectionism of different forms, according to a government work report available to the media before the opening of the annual parliamentary session yesterday. The work report noted the trend of “deglobalization” and protectionism is growing. The country will become more involved in global governance and steer economic globalization to see it more inclusive, mutually beneficial, and equitable, according to the report.
Chinese Premier Li Keqiang delivers his speech during the opening of the fifth Session of the 12th National People’s Congress (NPC) at the Great Hall of the People in Beijing yesterday. Lusa GDP
Beijing cuts growth target as it pushes through reforms The finance ministry pledged in its work report released yesterday to clamp down on local government debt risk Kevin Yao and Xiaochong Zhang
C
hina has cut its growth target this year as the world’s second-largest economy pushes through painful reforms to address a rapid build-up in debt, and constructs a “firewall” against financial risks. China aims to expand its economy by around 6.5 per cent in 2017, Premier Li Keqiang said at the opening of the annual meeting of parliament yesterday. China targeted growth of 6.5 to 7 per cent last year and ultimately achieved 6.7 per cent, the slowest pace in 26 years. A lending binge and increased government spending have fuelled worries among China’s top leaders about elevated debt levels and an overheating housing market. The 2017 target for broad money supply growth was cut to around 12 per cent from about 13 per cent for 2016, while the government’s budget deficit target was kept unchanged at 3 per cent of gross domestic product. China will continue to implement a proactive fiscal policy and maintain a prudent monetary policy, Li said, adding that government would press on with supply-side reforms and take steps to control risks and ensure safety in the financial sector. “In general, China’s policy stance has turned to ‘risk control’ and ‘bubble deflating’. This means that the monetary policy will gradually tighten,” said Zhou Hao, emerging markets economist at Commerzbank AG in Singapore. The target for consumer price inflation this year was kept unchanged at 3 per cent.
Vigilance against risks
“At present, overall, systemic risks are under control. But we must be fully alert to the build-up of risks,” Li said.
China should have higher levels of vigilance concerning risks from non-performing assets, debt defaults, shadow banking and internet finance, he said. “We will ensure order in the financial sector and build a firewall against financial risks,” Li said. It will steadily push forward with de-leveraging, mainly in the non-financial corporate sector, Li added. The finance ministry pledged in its work report released yesterday to clamp down on local government debt risk.
Key Points To target growth of around 6.5 pct of GDP in 2017 Broad money supply growth target cut to around 12 pct Consumer price inflation target unchanged at 3 pct To press on with supply-side reforms and risk controls
China’s debt-to-GDP ratio rose to 277 per cent at the end of 2016 from 254 per cent the previous year, with an increasing share of new credit being used to pay debt servicing costs, according to a recent UBS note. Chinese banks doled out a record RMB12.65 trillion (US$1.83 trillion) of loans in 2016, and recent data shows that new yuan loans hit RMB2.03 trillion in January, the second-highest ever. The central bank said in a working paper published last month that the debt deleveraging process should be managed prudently to help avoid a liquidity crisis and asset bubbles. “We will apply a full range of monetary policy instruments, maintain basic stability in liquidity, see that market interest rates remain at an
appropriate level, and improve the transmission mechanism of monetary policy,” Premier Li said. China will also press on with asset securitisation and debt-to-equity swaps this year. It will continue to implement a city-based policy to reduce real estate inventories, mainly in the third and fourth-tier cities, Li said.
Capacity cuts, layoffs
China will push forward with reform of state-owned firms and assets this year, Li said. Ownership reforms at more than 100 central government-run enterprises will be completed by the end of the year as part of efforts to use private capital to revive its lumbering state sector, state media reported last month. China is also looking to shutter more ‘zombie’ enterprises, or firms with inefficient surplus capacity and saddled with debt. The National Development and Reform Commission (NDRC) said in a work report released at the opening of the National People’s Congress that it would shut or stop construction of coal-fired power plants with capacity of more than 50 million kilowatts. China will also cut steel capacity by 50 million tonnes and coal output by more than 150 million tonnes this year, the economic planner said. Fixed-asset investment is expected to rise about 9 per cent in 2017, down from last year’s target of 10.5 per cent. “As overcapacity is cut, we must provide assistance to laid-off workers,” Li said. Funds and subsidies should be promptly allocated, and local governments and enterprises should be put in place to ensure such workers can find new jobs. The government aims to create more than 11 million new urban jobs this year, even as employment pressure grows. “This year’s target for urban job creation is 1 million more than last year, underlining the greater importance we are attaching to employment,” Li said. Reuters
Business Daily Monday, March 6 2017 9
Greater China Energy
Pipe dream? Mainland faces daunting task to suck in gas and wean itself off coal Curbing pollution is a key part of a strategy of upgrading the economy by shifting away from heavy industry Meng Meng and Josephine Mason
China has set itself a staggering task to cure its smothering pollution: switching coal-fired boilers and heating systems in at least 1.2 million households in 28 of its smoggiest northern cities to run on gas or electricity. By October. Beijing’s latest crackdown on pollution, outlined in a policy document dated Feb. 17 and seen by Reuters last week, dangles a potentially game-changing carrot for the country’s saturated global natural gas market.
Key Points Extra heating needs would up gas demand by 1/4 -WoodMac Added supply alone more than France consumes in year
at Beijing city hall that deals with villages surrounding the capital now on the front line of the battle for cleaner air. “The central government has given us very little time to remove coal heating in rural villages. We are under tremendous pressure to reach the target,” said Guo, speaking during a tour on Thursday of Beijing’s outskirts designed to highlight the scale of the task. The radical plan comes as Beijing ramps up its years-long war on pollution by attempting to wean the nation off coal, its favourite fuel but one that chokes the north during China’s cold winter months. Most power plants run on coal. The speed at which the project turned from a draft, issued in January, into an order suggests the government is determined to tackle the problem - at any cost. The issue of pollution
has become a political hot potato that will be a major topic during China’s upcoming annual parliament meeting, starting on Sunday. If Beijing official Guo’s calculations are anything to go by, that cost will be enormous: by October, the capital must convert boilers serving around 300,000 residents to run on gas or electricity rather than coal, and is ploughing RMB10 billion (US$1.45 billion) into funding the switch. And for provinces that aren’t as advanced as the capital, the challenge will be much more difficult and costly, said an official at the city’s coal department on Thursday.
Huge question marks
As well as a matter of improving national health, curbing pollution is a key part of a strategy of upgrading the economy by shifting away from heavy industry like public construction projects and tackling overcapacity. Yet analysts say the plan’s fate will rest on a massive, breakneck infrastructure build-out including
LNG terminals, storage tanks and pipelines. “If you look at the pollution in China, it’s clearly a massive problem so it’s not a surprise they want to do this,” said Neil Beveridge, senior oil and gas analyst at Sanford C Bernstein. “The big question is: how are they going to achieve it?” Underground storage capacity needs to increase to around 40 bcm, or 20 per cent of annual demand, to support the boost in demand. That’d be up at least more than double an estimated current capacity 10-20 bcm. The daunting scale of the plan leaves huge question marks over the prospects of its success. But in the meantime, construction and energy companies are gearing up for a windfall. Some, like China National Petroleum Corp (CNPC), were already at work on extending the country’s gas infrastructure. CNPC is building the fourth Shaanxi-Beijing gas pipeline, a critical 1,114 kilometre line with 25 bcm capacity reaching China’s northeastern region. The existing three lines with 35 bcm are already operating at full capacity. Whether by coincidence or design, the new pipe is due to come into operation by October this year. Reuters
At least 1.2 mln households to switch off coal systems Massive extension of gas pipeline, storage needed Anti-smog drive to create major infrastructure headache
The projected extra needs would inflate China’s gas demand by a quarter, according to consultancy Wood Mackenzie - some 50 billion cubic metres (bcm), more than the whole of France consumes in a year. That would offer the prospect of boosting prices in a seller’s market and surging liquefied natural gas (LNG) imports. There’s a large, expensive catch. Such expansion is all but impossible without investing in doubling underground storage capacity, building thousands of miles of pipeline to carry the gas in the west to the eastern cities, and installing pump stations in rural villages - all of which is supposed to be complete within a meagre seven months. “The magnitude of this policy is unprecedented,” said Guo Zihua, head of a rural development department
Strategy
LeEco not planning to quit Indian market A company representative said restructuring measures had resulted in a workforce reduction Samantha Kareen Nair and Arnab Paul
Chinese electronics maker LeEco has no plans to exit operations in India, it said on Friday, refuting a media report that the company was preparing to leave the market although it has cut almost 80 per cent of its workforce. “India is one of the most strategic markets for LeEco,” the company said in a statement, adding that it had no plans to leave and was gearing up to launch its next generation television in the country. The Economic Times reported on Friday that the company was firing 85 per cent of its Indian workforce and was looking to exit is operations in the country. LeEco, which entered the Indian market in 2016, did not mention job cuts in its statement. But a company representative said restructuring measures had resulted in a workforce reduction. “The company at the moment has over 80 employees in India. At
the end of last year, we had around 350 employees,” the representative added. In a letter to staff in November LeEco Chief Executive Jia Yueting said
the company was experiencing a cash crunch as a result of expansion at an “unprecedented rate”. Leshi Internet Information and Technology Corp Beijing is its listed smart TV subsidiary. “Globally, the company has adopted several measures to counter cash shortage. The whole idea is ‘profit or perish’. To that extent, steps to recalibrate towards that goal have been
initiated,” the representative added. Market analyst Jaipal Singh at IDC India said competition in the Indian smartphone market was very stiff. “Timing of market entry is crucial and some manufacturers tend to fall behind,” he said.
Key Points LeEco says India among most strategic markets Restructuring has led to job cuts - LeEco representative Innovation key for smartphone makers - analyst A former employee at LeEco’s Mumbai office, who quit after six months at the company, told Reuters the CEO’s letter in November had left him disillusioned and prompted him to resign. Singh said challenges in the market had mounted as Indian consumers were value conscious but also look for more features in their products. “So innovation is a key criteria for these smartphone manufacturers while keeping the cost low,” he said. Reuters
10 Business Daily Monday, March 6 2017
Greater China Politics
Anti-corruption overhaul paves way for Xi to retain key ally The Central Commission for Discipline Inspection announced in January a plan to merge itself with several institutions to create a super ministry Benjamin Kang Lim and Philip Wen
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hina’s sweeping overhaul of its anti-corruption architecture could enable President Xi Jinping to justify retaining his key ally and top graft buster Wang Qishan beyond retirement age, sources with ties to the leadership say. Breaking the unwritten retirement rule could also set a precedent for Xi, 63, to defy current expectations that he will step down as party and military chief in 2022 and as state president the following year, the sources said. A new National Supervisory Commission will combine the powers of several graft-fighting bodies, including Wang’s Central Commission for Discipline Inspection (CCDI), the principal vehicle for Xi’s signature anti-corruption drive. That drive has punished more than a million party members, jailing top military figures and retired security tsar Zhou Yongkang, the most senior official toppled for corruption since 1949. Wang is likely to head the new commission, the three sources said, a role that would under normal circumstances make a strong case for him to remain at Xi’s side on the party’s Politburo Standing
Committee (PSC) - the top table of power in China. For almost two decades, however, an informal age ceiling has meant only politicians aged 67 or younger have been eligible to remain on or be promoted to the PSC at the five-yearly party congress. Wang turns 69 this year ahead of the 19th party congress this autumn. “Wang Qishan is very likely to head the National Supervisory Commission,” one of the sources told Reuters, requesting anonymity because he is not authorised to speak to media. Whether he will stay on the PSC, and for a full term, will to some extent depend “on Wang’s intent and health”, the source said. “If Wang Qishan doesn’t retire, it makes it reasonable and lends legitimacy for Xi Jinping not stepping down in 2022,” said a separate source with leadership ties. George G. Chen, an expert on Chinese legal policy at the Berlin-based Mercator Institute for China Studies, said the formation of the new commission was a “clever, two-fold instrument”, given criticism that the current anti-corruption campaign could be used as a political instrument. “Xi Jinping could on one hand solve the problem of the legitimacy of the anti-corruption campaign, (while)
Chinese President Xi Jinping claps during the opening of the fifth Session of the 12th National People’s Congress (NPC) at the Great Hall of the People in Beijing yesterday. Lusa
also allowing Wang Qishan to (remain) in the Standing Committee,” Chen told Reuters. The CCDI and the State Council Information Office, which doubles as the spokesman’s office for the government and Communist Party, did not respond to requests for comment. The CCDI announced in January a plan to merge itself with the cabinet’s Ministry of Supervision and the anti-corruption bureau of the top prosecutor’s office and corruption prevention bodies to create a super ministry. Pilot programmes
have been set up in Beijing and the provinces of Zhejiang and Shanxi. Currently, the CCDI can only investigate party members suspected of corruption. The Ministry of Supervision can interrogate civil servants, while the anti-corruption bureau of the prosecutor’s office is not empowered to detain suspects it is investigating. The commission will eliminate duplication, with the power to supervise, question and detain all civil servants, party cadres, military personnel, judges and prosecutors, executives of state-owned enterprises, university staff and doctors and nurses of state hospitals who are suspected of corruption. It will most likely be placed under the jurisdiction of the National People’s Congress (NPC), the country’s rubberstamp parliament, but the sources said in reality the party leadership would have the final say. Wang’s current deputy, Li Shulei, 53, is the front-runner to eventually succeed Wang as head of the supervisory commission, and to secure a seat on the 25-member Politburo one rung below the PSC - at the 19th congress, said the sources. After a two-year stint as Fujian provincial propaganda chief, Li was the top graft buster in Beijing for a year before being named as Wang’s deputy this January. Since Xi declared war on corruption after taking office, 1.2 million of the party’s 88 million members have been punished for violating discipline. Reuters
Military budget
Government to strengthen defences The actual defence spending target for this year was not included in the country’s budget Christian Shepherd and Philip Wen
China pledged more support to its military yesterday including strengthening maritime and air defences amid efforts to safeguard sovereignty, but in a highly unusual move did not give spending figures for 2017 despite promises of transparency. Parliament’s spokeswoman Fu Ying said on Saturday defence spending for this year would rise about 7 per cent, accounting for around 1.3 per cent of gross domestic product - the same level as the last few years. However, the actual defence spending target for this year was not included in the country’s budget released at the opening of parliament’s annual session yesterday, as it has been in previous years. “We will support efforts to deepen the reform of national defence and the armed forces, with the aim of building a solid defence and strong armed forces that are commensurate with China’s international standing and are suited to our national security and development interests,” the budget report said.
It did not elaborate. State news agency Xinhua also did not report the figure. The Defence Ministry and parliament’s spokeswoman did not immediately respond to requests for comment. Last year, with the economy slowing, the defence budget recorded its lowest increase in six years of 7.6 per cent, the first single-digit rise since 2010, following a nearly unbroken two-decade run of double-digit increases. Officers attending parliament largely declined to talk to reporters about the budget, much in line with last year when they were instructed to keep complaints about the low rate of the increase to themselves. “Fu Ying answered this on CCTV yesterday,” major general Li Fengshan told reporters, dismissing questions about where the defence budget figures were.
Strengthening defences
Giving his annual work report to parliament, Premier Li Keqiang said China would deepen military reforms. “We will strengthen maritime and
air defence as well as border controls and ensure the important operations related to countering terrorism, safeguarding stability, international peacekeeping and providing escorts on the high seas are well organised,” he said. “We will boost military training and preparedness, so as to ensure that the sovereignty, security, and development interests are resolutely and effectively safeguarded.” It was not clear why defences numbers were not released. China has repeatedly said its defence spending is transparent. I n a g o v e r n m e n t-a r ra n g e d
interview on Saturday evening, Chen Zhou, a researcher at the Academy of Military Science, said transparency was a “historical process”. “It’s not that the government says it must not be made transparent. The man on the street believes that if it is said out loud it could influence national security,” he said. The defence budget figure for last year, RMB954.35 billion (US$138.40 billion), likely understates its investment, according to diplomats, though the number is closely watched around the region and in Washington for clues to China’s intentions. A 7 per cent rise for this year based on last year’s budget would bring the figure to RMB1.02 trillion, still only a quarter or so of the U.S. defence budget. The White House has proposed a 10 per cent increase in military spending to US$603 billion, even though the United States has wound down major wars in Iraq and Afghanistan and is already the world’s pre-eminent military power. There were calls last week for China to announce a commensurate rise in defence spending for this year. “As far as our development is concerned, defence spending is not enough,” Wang Ning, commander of the paramilitary People’s Armed Police, told Reuters on the side-lines of parliament. “Such a large country is facing so many security issues.” Reuters
Business Daily Monday, March 6 2017 11
Greater China Premier speech
In Brief
Cities pressured by home prices need to boost land supply The government has no plans to implement a nationwide property tax this year Chinese cities under pressure from soaring home prices need to boost land supply appropriately while authorities take measures to fight an inventory overhang in smaller cities, Premier Li Keqiang said yesterday. China is looking to keep the property market stable this year after prices of new homes soared 12.4 per cent last year, the most since 2011. Authorities in more than 20 cities have introduced curbs to cool the market since October. “We need to be clear that housing is for people to live in,” Li said in a work report at the opening of the annual meeting of parliament. He pledged to establish long-term mechanisms for promoting the steady and sound development of the sector, and take more category-based and targeted measures to regulate the market. But there were still “differences” in the interpretation of such long-term mechanisms, said Jia Kang, former
director at the Ministry of Finance’s Institute of Fiscal Science, on the side-lines of the parliament meeting. Last year, President Xi Jinping said China’s approach to regulating its red-hot property market would include financial, fiscal, tax, land, and regulatory measures. The government has no plans to implement a nationwide property tax this year, Fu Ying, spokeswoman for China’s parliament, said on Saturday. “There was too much resistance from all sides,” Jia said, without elaborating. The government said last month preparatory work was being done for a nationwide property tax. China has for years considered an annual property tax, which could deter speculation in real estate, though little progress has been made due to resistance from various quarters, such as local governments, which heavily rely on land sales for revenue. Li said the government supported
migrant workers in buying urban homes. To do this, Jia said additional policy support would be needed besides existing policies of making mortgage loans more available to migrant workers, as their ability to pay is quite limited. “The additional measures are likely to be more city-specific instead of a nation-wide one,” he said.
“We need to be clear that housing is for people to live in” Premier Li Keqiang
More broadly, Li said the government would help a number of counties and large towns develop into cities, and help clusters of cities to better drive development of their regions. China should also press on with its efforts to rehabilitate rundown areas in towns and cities. This year, China aims to rehabilitate another 6 million housing units while developing the rental market, Li said. Reuters
Report
Domestic “sharing economy” up China’s “sharing economy” took off in 2016 with a 103-per cent increase in transaction volume, according to a new report. The sector saw deals worth some RMB3.45 trillion (US$500 billion) last year, according to a report released by the Sharing Economy Research Center under the State Information Center. During that period, a total of 600 million people were involved in the industry, up 100 million from the previous year. Transport, short-term house renting and medical services posted strong growth, it said. Enterprises in the sector raised RMB171 billion last year, an annual increase of 130 per cent. Campaign
Beijing to dismantle illegal buildings A 200,000-square-meter building complex in Beijing’s Haidian District was dismantled earlier this week as a yearlong campaign in the Chinese capital kicked off to control overcrowding and disordered development. The municipal government of Beijing has targeted the campaign to dismantle 40 million square meters of illegal buildings within the year, including illegal construction for dwelling, renting or production. The move is part of wider efforts to address overcrowding, congestion and pollution in the capital, as its population exceeds 21 million. Markets
82 firms debut on New Third Board
Agribusiness
New Hope moves into soybean crushing with Cargill Although there is significant overcapacity in the sector Chinese agribusiness group New Hope plans to build its first soybean crushing plant in Hebei in a joint venture with Cargill, its chairman Liu Yonghao said on Saturday. New Hope and provincial state companies will own 51 per cent of the project, which will have a daily capacity of 50,000 tonnes, while U.S. commodity merchant Cargill will hold the remaining 49 per cent, he said at a briefing.
‘Chairman Liu has built New Hope from a small chicken farm into the country’s top animal feed producer’ The soy crushing industry in China, the world’s top soybean buyer, has expanded rapidly in recent years due to rising demand from breeders of livestock from hogs to poultry, although there is significant overcapacity in the sector. The U.S. government reckons crushing volume of around 76 million
tonnes last year was far below the country’s capacity. Liu has built New Hope from a small chicken farm into the country’s top animal feed producer, with businesses extending to banking and property and annual sales topping RMB90 billion (US$13.83 billion). His plans come as New Hope also aims to expand abroad. In about ten years, international farm products will account for 40 per cent of total revenue, up from 10 per cent currently, the company is setting up a European headquarters in
the Netherlands and will open a U.S. office, he said. The company already has overseas offices in Australia and Singapore. For its international strategy, Liu said New Hope will mainly build factories in under-developed countries while focusing on acquisitions and partnerships in developed countries. New Hope is building chicken and pig farms in Vietnam and plans to expand investment in countries with large populations like Indonesia, Liu said. For example, the company is considering sending its beef products in Australia to markets in southeast Asia, Liu told reporters at the briefing. Reuters
A total of 82 small- and medium-sized enterprises (SMEs) were added to China’s New Third Board over the past week, latest data showed. These newcomers brought the total number of companies listed on the National Equities Exchange and Quotation (NEEQ) system to 10,793. Weekly turnover on the board was about RMB6.3 billion (around US$913 million) during the period, a new high watermark in 2017. The NEEQ debuted in 2006 as an experimental platform for non-listed small high-tech enterprises in Beijing’s Zhongguancun Science Park. The present system was officially established on Jan. 16, 2013. Internet
Electronic information industry maintains fast growth China’s electronic information industry continued to grow quickly last year, with its value-added output expanding 10 per cent year on year, the latest official data showed. The growth was 0.5 percentage points slower than that in 2015, but outpaced overall industrial output growth by 4 percentage points, according to the Ministry of Industry and Information Technology (MIIT). The statistics took into account major electronic information companies, or those with annual revenues of more than RMB20 million (about US$3 million). The industry’s rapid development was boosted by Internetbased innovations and government efforts to improve Internet infrastructure.
12 Business Daily Monday, March 6 2017
Asia Trade minister
S.Korea says to act against discrimination against nation’s firms Data last week showed South Korean February exports to China, its biggest trade partner, posted the best growth since late 2010
S
outh Korea’s trade minister said yesterday the government’s responses against discriminating action by China towards South Korean companies will be strengthened and
he feels “deep concern” over recent measures taken by Beijing. Trade Minister Joo Hyung-hwan made the statement while visiting the United States, the ministry said in a statement.
South Korean media said last week Chinese government officials had given verbal guidance to tour operators in China, to stop selling trips to South Korea days after the Seoul government secured land for a U.S. missile-defence system from Lotte Group. China objects to the Terminal High Altitude Area Defense (THAAD) system deployment, saying its territory is the target of the THAAD’s
South Korean media said Chinese officials had given verbal guidance to tour operators in China to stop selling trips to South Korea days after the Seoul government secured land for a U.S. missile-defence system from Lotte Group
far-reaching radar. South Korea and the United States have said the missile system is only aimed at curbing North Korean provocations. “We will act accordingly to international law against any actions that violate policies of the World Trade Organisation (WTO) or the free trade agreement between South Korea and China,” Joo said. The trade ministry said it would start examining exports to China on a daily basis and any changes to South Korean exporters who do business with China in order to respond as quickly as possible against unfair action. On Friday, it requested to the Chinese embassy in Seoul that South Korean companies investing in China be protected and be shown care. Data last week showed South Korean February exports to China, its biggest trade partner, posted the best growth since late 2010, driven by sales of intermediate goods such as semiconductors and display panels used for electronics manufacturing. Economists say the THAAD-related backlash is not expected to significantly harm exports to China in the short term as a bulk of the shipments are intermediate goods, which China uses to manufacture finished products and ships to other countries. However, government officials are warily watching if diplomatic tensions grow further between South Korea and China at a time when global protectionism is rising. Reuters
Inflation
Japan consumer prices rise for first time in year The government began releasing a new index that excludes the effect of volatile fresh food and energy costs Leika Kihara
Japan’s core consumer prices rose for the first time in over a year in January thanks to a pickup in energy costs, but a slump in household spending showed why economic growth and inflation have lagged the more ambitious goals set out by policymakers.
Key Points Jan nationwide core CPI +0.1 pct vs f’cast flat growth Tokyo Feb core CPI -0.3 vs f’cast -0.2 pct Jan household spending -1.2 pct vs f’cast -0.4 pct Jobless rate slides to 3.0 pct in Jan Moderate pickup in inflation expected, relief for BOJ
As rising protectionism in the United States poses risks for the world’s third-largest economy, as well as the rest of export-reliant Asia, there is a danger companies will shy away from boosting wages seen as crucial for durable growth. That will also undermine the Bank of Japan’s (BOJ) efforts to accelerate
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inflation to its still-distant 2 per cent target, analysts say. Government data showed on Friday the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, rose 0.1 per cent in January from a year ago, posting the first increase since December 2015. It compared with a median market forecast for a flat growth and followed a 0.2 per cent drop in December. Many analysts expect core consumer prices to head toward 1 per cent later this year. But that would still be half-way to the BOJ’s goal, which was put into perspective by separate data showing household spending slipped in January even as the job market tightened further.
“Inflation will accelerate this year due to a rebound in energy costs and the weak-yen effect. But it won’t heighten much next year unless wages spike and boost spending,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “The hurdle for hitting 2 per cent inflation remains very high, which means the BOJ will maintain its ultra-loose monetary policy for the time being,” he said.
Spending remains weak
The government began releasing from Friday a new index on consumer prices that excludes the effect of volatile fresh food and energy costs, which it says is useful in tracking consumer price trends that strips away one-off factors. The index was up 0.2 per cent in January from a year earlier, suggesting that recent yen declines are pushing up imported goods prices. L o w i n f l a t i o n i n Ja p a n , a
phenomenon seen for much of the past two decades, remains the biggest hurdle to fostering a durable economic recovery - a goal that has eluded policy makers since the late 1990s. More than three years of aggressive money printing by the BOJ failed to accelerate inflation as companies remain hesitant to boost wages, forcing the bank to revamp its policy last year to one better suited for a long-term battle against deflation. Separate data released on Friday underscored the dilemma. The jobless rate fell to 3.0 per cent in January, a level many analysts see as near full employment. But household spending slumped 1.2 per cent in January from a year earlier, marking the 11th straight month of declines, a sign consumers are unconvinced that wages will increase. Japan’s economy expanded in July-September and analysts expect growth to pick up in coming quarters, thanks to a recent rise in exports and factory output driven by improvements in emerging economies. But it is uncertain whether companies will raise wages on the back of a modestly improving growth, enough to create a virtuous cycle of higher consumer spending, business investment and economic activity. “It’s not necessarily a good thing if inflation is accelerating just because of rising energy costs,” said Izuru Kato, chief economist at Totan Research. “Unless demand picks up, companies won’t have the courage to raise prices. With consumption lacking momentum, very few people in the BOJ must be cheering today’s data.” Reuters
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Business Daily Monday, March 6 2017 13
Asia Commodities
In Brief
Philippines looking at ban on ore exports in reform push Sector has come into sharp focus in recent months after the environment minister ordered the closure of more than half of the country’s mines to protect watersheds Enrico Dela Cruz and Manolo Serapio Jr
The Philippines may consider banning exports of raw minerals to encourage domestic processing and boost the value of shipments, an environment official said on Friday, as the government looks to extract more from its mining sector after a crackdown. Nickel prices rose more than 1 per cent on the potential for supply disruption from the world’s top nickel ore exporter, but miners said following in the footsteps of neighbouring Indonesia wouldn’t be viable without big government incentives. Previous governments in the Philippines have supported calls to spur domestic processing of raw minerals but earlier efforts in Congress to enact appropriate laws have failed to take off. “It’s one of the things we’re considering for any mine that we think should remain operating,”
Environment and Natural Resources Undersecretary Maria Paz Luna told reporters. “In the long term that will help our economy because that will increase the value of the products,” she said, adding that any ban would have to be considered by the entire government. Mining has come into sharp focus in the Philippines in recent months after the country’s firebrand environment minister, Regina Lopez, ordered the closure of more than half of the country’s mines to protect watersheds, prompting an industry backlash. Her decision is now being reviewed by the government’s Mining Industry Coordinating Council amid concerns over its financial impact and criticism that due process was not followed.
‘Failed experiment’
The Philippines took over as the world’s top nickel ore exporter after
Indonesia banned exports of unprocessed ore in 2014, aiming to spur development of higher value smelting industries. However, Indonesia relaxed its mining export rules in January, allowing exports of raw ore under certain conditions, after facing a hefty budget deficit and missing its 2016 revenue target by US$17.6 billion. “It means that (Indonesia’s) experiment has failed,” Ronald Recidoro, lawyer from the Chamber of Mines of the Philippines, told Reuters.
Key Points Banning ore exports part of boosting mining value Miners say processing plants won’t be viable Philippines is world’s top nickel ore supplier LME nickel rises more than 1 pct on news “The policy direction of banning ore exports will not by itself create a domestic processing industry,” he said. To encourage processing plants the government needed to provide incentives to investors and subsidise power and coal costs, he said. The Southeast Asian nation has four mineral processing plants, two for gold and two for nickel. “The question of value-added processing is a question of viability,” said Dante Bravo, president of Global Ferronickel Holdings Inc, the country’s No. 2 nickel ore miner. The mining council’s review will cover 23 mines ordered shut by the environment ministry and another five that were suspended. Finance Secretary Carlos Dominguez said the three-month review, announced in February, would continue even if Lopez’s appointment is not confirmed by Congress. Reuters
Finance minister
Sri Lanka’s drought won’t hit budget deficit Achieving the 4.6 per cent deficit target this year is one of the main goals under a US$1.5 billion International Monetary Fund loan The worst drought to hit Sir Lanka in 40 years may cost the government up to 40 billion rupees (US$264.7 million), but should not worsen the fiscal deficit, Finance Minister Ravi Karunanayake said on Friday. Sri Lanka has already decided to import its staple food -- rice -- after local rice farmers were forced to abandon cultivation due to severe water shortages.
“The budget deficit doesn’t need to swell up just because of one abnormal condition” Ravi Karunanayake, Sri Lanka’s Finance Minister In a investor note on Thursday, Moody’s said weaker economic activity due to drought would weigh on government revenues and forecast the fiscal deficit to rise to 5.2 per cent of GDP from and estimated 4.6 per cent, “if the negative credit effect of the drought worsens or is not offset by other fiscal measures”.
But Karunanayake said this was not the case. “We have drafted the budget factoring in those uncertainties. We prepared this year’s budget with stable policies and we added some percentage for these types of incidents,” he told reporters. “Drought may cost 30 to 40 billion rupees. There are revenue increases taking place. The budget deficit doesn’t need to swell up just because of one abnormal condition,” he said He also said 2017 economic growth
is expected at 6 per cent despite the drought. Achieving the 4.6 per cent deficit target this year is one of the main goals under a US$1.5 billion International Monetary Fund loan. Karunanayake said the government has not considering for a waiver on the deficit target because of the drought. Sri Lanka’s consumer price inflation hit a record high of in February pushed up also by the impact of a lingering drought. Currency dealers say drought has raised imports in the absence of local food production while reduced exports of agricultural commodities have resulted in a decline of dollar earnings, putting pressure on the rupee. Reuters
GST
India finalises bills to launch new sales tax in July India moved a step closer on Saturday towards launching a new national sales tax from July after a panel of federal and state finance officials finalised two key bills to be put before parliament. The Goods and Services Tax has missed several launch dates. On Saturday, Finance Minister Arun Jaitley said the measure is on track for a rollout from July 1 with the bills set to be discussed in parliament after it reconvenes this week. To meet the deadline, parliament must pass the bills, which spell out the operational details of the new tax, before its current session concludes in mid-April. Public spending
Australia’s budget to focus on growth, housing Australian Treasurer Scott Morrison will unveil measures to boost economic growth and address the problem of expensive housing when he hands down the budget on May 9, he said yesterday. “We’re working on a package for the budget ... and it will deal with the challenges of housing affordability from those who are reliant on social housing, all the way to those who are trying to break into the home-ownership market,” Morrison said of his second budget. Deflecting questions on tax reform, he said the National Housing Affordability Agreement with the states could face a major overhaul. Crime
Samsung chief’s “trial of the century” to start this week Samsung Group leader Jay Y. Lee will go on trial for bribery and embezzlement on Thursday, a court said, amid a corruption scandal that has rocked South Korea and led to the impeachment of the president. Lee, the 48-year-old third-generation leader of the country’s top conglomerate, was indicted on Tuesday on charges including pledging 43 billion won (US$37.24 million) in payments to a confidant of President Park Geun-hye. “We are preparing hard, thinking that the upcoming Samsung trial ... could be the trial of the century that the entire world will be watching,” special prosecutor Park Young-soo told reporters. Capex
Japan Q4 GDP seen revised up Japan’s economy likely grew faster in the fourth quarter than initially reported, as companies ramped up investment in plant and manufacturing equipment, a Reuters poll showed. Separate data is also expected to show the country’s current account surplus for January likely narrowed from the previous month due to a temporary slowdown in exports before the Lunar New Year holidays, the poll of economists showed. Any upward revision to gross domestic product is likely a welcome sign to the government, because policymakers have been counting on an increase in business investment to drive future growth and increase low productivity.
14 Business Daily Monday, March 6 2017
International In Brief HR
U.S. suspends fast processing of high-tech visa applications Foreigners aiming for temporary jobs at hightech U.S. companies will undergo a longer visa approval process after the Trump administration announced it will temporarily suspend expedited applications for H-1B visas. The U.S. Citizenship and Immigration Services (USCIS) said on Friday that starting April 3 it will suspend “premium processing” for up to six months. Under this expedited procedure, applicants can be eligible for visa approvals within 15 days, instead of a regular review period that can last for up to a few months. M&A
Deutsche Boerse blames Britain for LSE tie-up headwinds Deutsche Boerse Chairman Joachim Faber has put the blame for a failed tie-up with the London Stock Exchange on Britain and its vote to leave the European Union. The London Stock Exchange last week effectively scuppered a planned merger with Deutsche Boerse to create Europe’s biggest exchange, by rejecting an EU demand to sell a trading platform in Italy. Faber, who chairs Deutsche Boerse’s supervisory board, told a German newspaper the Brexit vote had created strong headwinds for the 29 billion euro (US$30.8 billion) deal.
GDP
Euro zone private sector business growth near 6-year high If sustained, economic growth could hit 0.6 per cent in the first quarter, according to Markit Rahul Karunakar
E
uro zone private sector business activity rose at its quickest pace in nearly six years in February, accelerating across all major economies with job creation reaching its fastest in almost a decade, surveys showed on Friday. The data, which came alongside news on Thursday that euro zone inflation had just surpassed the European Central Bank’s target, could pose a challenge to policymakers in how to explain leaving monetary policy unchanged even as the economy picks up sharply. IHS Markit’s final composite Purchasing Managers’ Index - seen as a good overall growth indicator - rose sharply to 56.0 in February from 54.4 in the previous month. It has not been higher since April 2011 and was unchanged from a flash estimate. While separate official data showed German retail sales unexpectedly dropped in January, the PMIs showed that February private sector services activity in Europe’s four largest economies Germany, France, Italy and Spain all improved. “The PMIs tell you that the economy is on a reasonably solid footing, obviously the economy is not roaring away to the extent that some of the other Anglo-Saxon economies have done over the course of recent years, but it is a pretty good place to be,” said Peter Dixon, economist at Commerzbank. The reports suggest that rising concerns about potential upsets in coming euro zone elections, particularly the prospect of far-right
leader Marine Le Pen posing a serious challenge for the presidency in France, are being shrugged off by the economy. “We don’t quite know what will happen in France following the election in April-May and that is probably the single biggest risk that the continent faces,” Dixon added.
“The final PMI numbers paint a bright picture of a euro zone economy starting to fire on all cylinders” Chris Williamson, chief business economist at IHS Markit If sustained, economic growth could hit 0.6 per cent in the first quarter, according to Markit. That would be much faster than the 0.4 per cent economists predicted in a Reuters poll just last month. That forecast was based on hopes that there would be no major upsets in several national elections this year. “The final PMI numbers paint a bright picture of a euro zone economy starting to fire on all cylinders. Growth accelerated in all of the four largest member states in February to suggest an increasingly sustainable and robust-looking upturn,” said Chris Williamson, chief business economist at IHS Markit. The reports suggest optimism is on
the rise, euro zone companies are raising prices for their services, and crucially, they are beginning to hire again. The composite PMI employment index rose to 53.8 from 53.4, its highest since October 2007. Business expectations indexes for the services sector and for all industries improved at the fastest rate in nearly six years. Manufacturers, too, enjoyed their best month in nearly six years in February, boosted by a weaker euro, which helped drive strong demand for exports, a similar survey showed on Wednesday. The euro is expected to ease a bit further, according to a Reuters poll of currency strategists. The renewed strength in the PMIs will be welcomed by the European Central Bank, which is expected to remain on the side-lines through upcoming national elections in three major economies in the currency bloc. With the Federal Reserve set to raise interest rates further this year and pressure mounting on the ECB to consider scaling back its aggressively-stimulative monetary policy, the central bank will have a challenge with its messaging in the coming months. “The acceleration in growth, employment and prices signalled by the surveys suggests that analysts will begin to pull forward their expectations of when the ECB could begin tapering its stimulus,” added Williamson. “However, it seems likely that central bank rhetoric will remain dovish in coming months, focusing on the headwinds that the economy faces in 2017, and specifically the need for policy to remain accommodative in the face of political uncertainty.” Reuters
Fed’s Yellen
March rate hike “appropriate” if data holds up The Federal Reserve is set to raise its benchmark interest rate later this month as long as economic data on jobs and inflation holds up, Fed Chair Janet Yellen said on Friday, in comments that likely cement a rate hike at its next meeting. Several of Yellen’s U.S. central bank colleagues in recent days had also put a rise at the next rate-setting meeting on March 14-15 of the committee firmly in view. In her comments, Yellen also said rates are likely to rise faster this year. Spending
UK’s growth starts to slow Britain’s unexpectedly strong economic growth since last June’s Brexit vote may be starting to fade as inflation picks up, according to a major business survey that chimed with notes of caution from several top companies. Slowing consumer spending started to hurt services companies in February, an unpromising signal for the economy ahead of Britain’s divorce with the European Union, Friday’s Markit/CIPS UK Services Purchasing Managers’ Index (PMI) showed. As finance minister Philip Hammond puts the final touches on his first annual budget on March 8, the survey is likely to reinforce his sense that Britain’s strong growth since last year’s vote to leave the EU will fade this year.
Budget
Trump administration to propose ‘dramatic reductions’ in foreign aid The United States spends just over US$50 billion annually on the State Department and USAID David Shepardson
The White House budget director confirmed Saturday that the Trump administration will propose “fairly dramatic reductions” in the U.S. foreign aid budget later this month. Reuters and other news outlets reported earlier this week that the administration plans to propose to Congress cuts in the budgets for the U.S. State Department and Agency for International Development by about one third. “We are going to propose to reduce
foreign aid and we are going to propose to spend that money here,” White House Office of Management Budget director Mick Mulvaney told Fox News on Saturday, adding the proposed cuts would include “fairly dramatic reductions in foreign aid.” Mulvaney said the cuts in foreign aid would help the administration fund a proposed US$54 billion expansion of the U.S. military budget. “The overriding message is fairly straightforward: less money spent overseas means more money spent here,” said Mulvaney, a former South Carolina Representative. The United States spends just over US$50 billion annually on the State Department and USAID, compared with US$600 billion or more each year on the Pentagon. Several Republicans this week on
Capitol Hill raised concerns about the planned cuts to the State Department. “I am very concerned by reports of deep cuts that could damage efforts to combat terrorism, save lives and create opportunities for American workers,” said U.S. Representative Ed Royce, the Republican chairman of the House of Representatives Foreign Affairs Committee. A U.S. government website said 20 government agencies plan to award US$36.5 billion in foreign assistance programs in more than 100 countries around the world during the current budget year. Senator Marco Rubio, a Florida Republican, tweeted earlier this week: “Foreign Aid is not charity. We must make sure it is well spent, but it is less than 1 per cent of budget & critical to our national security.” Mulvaney said the Trump administration will release its budget proposal on March 16. Reuters has reported the administration plans significant proposed cuts in many other domestic programs. Reuters
Business Daily Monday, March 6 2017 15
Opinion Business Wires
The Times of India Discussions by the railway ministry with top six global companies for the launch of very high speed trains in India that can travel at a speed of 600kms per hour were in the advanced stage, Railway Minister Suresh Prabhu said on Saturday. “We called for six top global companies who have technology that can travel beyond the 350km/hour speed. These trains can travel up to 600kms/hr speed. We called them and we told them that we will develop with you”, he told reporters. “Six companies have come forward and the talks are in advanced stages”.
Viet Nam News The Government Inspectorate of Việt Nam has revealed that mismanagement in tax collection between 2012 and 2014 caused mounting arrears and losses of trillions of đồng to the State exchequer. In an announcement published early this week, the Government Inspectorate said there were discrepancies in the inspection and post-inspection supervision of tax watchdogs, as well as in compliance to the established laws. The tax watchdogs were found to have applied differing punishments for the same violations, triggering unfair practices among businesses, the inspectorate said.
The Korea Herald South Korea is unlikely to reach its longheld target of US$30,000 in gross national income (GNI) per capita this year, as its economy is losing steam at a faster pace, local experts said yesterday. The GNI per capita refers to the total domestic and foreign output by residents of a country, reflecting the income level of the economy. South Korea’s GNI per capita was US$27,340 in 2015, ranking 46th in the world, with 43 countries over the US$30,000 level, regarded as “advanced economies.” South Korea has failed to pierce the US$30,000 level for 10 years since it first reached the US$20,000 line in 2006.
Philstar Property developers should put up more industrial parks in the country to capitalize on the manufacturing deals forged by foreign investors, a real estate services firm said. In a statement, Colliers International Philippines said it sees more manufacturing investments flowing into the country over the medium term given the investment pledges made by foreign businessmen during President Duterte’s (pictured) visit to Japan and China in October last year. Colliers cited commitments made by car manufacturers such as Toyota and Mitsubishi to expand their assembly operations in the Philippines as one of the anticipated investments that would generate demand for industrial spaces.
Here’s how Samsung can restore its reputation
O
n March 29, Samsung Electronics Co. will unveil its new Galaxy S8 phone. When you release a new product, you want to show off its cool new features. But Samsung’s launch stands to be overshadowed by not one but two reputational fires the company is fighting simultaneously. And “fire” isn’t just a metaphor: One of the company’s problems is that its last smartphone kept causing them. There were nearly 100 incidents in the U.S. between August and September 2016. When Samsung issued replacement phones, they started doing the same thing. Federal authorities made the company’s publicrelations problem even worse when they banned the phone from U.S. flights, warning that passengers who put it in their luggage could face criminal prosecution. “Anyone who has flown for months has heard an announcement that the FAA thinks Samsung’s phone could bring the plane down,” said Helio Fred Garcia, president of the Logos Consulting Group. “How’s that for branding?” A recent Harris Poll report found that the crisis had caused the company’s reputation to tank in the United States. In its annual ranking of the 100 most visible companies’ reputations, Samsung fell from seventh place to 49th. And that was before Jay Y. Lee, the company’s vice chairman and de facto leader, was arrested on Feb. 17 as part of a corruption investigation in South Korea that also led to the impeachment of the country’s president. So, how does a company dig itself out of a crisis this deep? Although it’s unusual to face two massive, unrelated reputational messes at the same time, there’s a proven methodology for handling each. First, Samsung needs to restore consumer trust. It not only sold a product that posed a physical threat to customers, but it took far too long to properly address the problem by pulling the phone from the market. Since the company has already stumbled twice, it can’t afford to have any defects in the Galaxy S8. “The real definition of reputation repair is taking actions that speak louder than words,” says crisis expert Jim Lukaszewski, president of the Lukaszewski Group Division of Risdall Public Relations. But how Samsung communicates those actions will also make a big difference. The way to restore trust is by making promises to consumers, fulfilling them, and then reminding consumers that the company has fulfilled them, Garcia says. The more specific and numerous the promises, the better. For example, the company took out ads during the Oscars ceremony ... proclaiming “innovation is our legacy. Quality is our priority.” The Verge described them as “basically a promise that its phones won’t explode anymore.” Other promises the company can make would be to immediately address any issue any consumer has with the phone and to provide specific technological features that outperform rivals such as Apple. “Trust is the natural consequence of expectations and promises that are fulfilled,” Garcia says. “So,
“
Kara Alaimo assistant professor of public relations at Hofstra University
you restore trust by fulfilling promises. If you provide good customer experiences but don’t frame them as delivering on promises, you may eventually restore trust, but it won’t happen as quickly.” On the other hand, if customers believe Samsung is making good on its word, they’ll begin to give the company the benefit of the doubt and share that information with family and friends, who may also choose to take a risk on its products. Samsung also needs to address its leadership issue. A company spokesperson told Bloomberg that Lee isn’t running Samsung from the detention centre where he’s being held on allegations of perjury, bribery and embezzlement. It could be 18 months before he stands trial and a verdict is reached. There’s only one way to deal with a leader who can’t be trusted: Fire him. Every business should have succession plans laying out what they’ll do if key leaders are incapacitated or disgraced. But a 2013 study by the international law firm Freshfields Bruckhaus Deringer found that companies are least prepared for the kinds of crises that involve misconduct by senior employees. According to the National Association of Corporate Directors, just 36 per cent of corporations have written or reviewed a succession plan for their chief executive. “It’s not sustainable to have people who have been accused and not yet exonerated in positions of trust and responsibility over large institutions,” Garcia says. This only causes important stakeholders -- including customers, employees and investors -- to lose faith in the organization. Yet too many companies don’t immediately fire a discredited leader. Instead, they only realize the executive needs to be replaced once stakeholders start reacting to their lost trust in the leader -- such as by not buying their products or selling stocks. By then, the reputational and monetary damage to the company has worsened. The company has also by this time forfeited the reputational rewards that could come from immediately replacing the executive, demonstrating that it’s capable of swift action and doesn’t tolerate unethical behaviour. Samsung’s situation is especially complicated because the company is family-run. Lee, who has been called the “crown prince of Samsung” in Korean media, is the grandchild of the company’s founder and oldest child of the company’s chairman, who has been in the hospital since 2014. However, this doesn’t change the fact that he needs to go. Lee should be replaced by an executive from outside the family who will be seen as bringing fresh leadership. Doing so -- along with making and delivering on pledges to consumers -- gives the company its best shot at overcoming a massive crisis of trust. That’s a promise. Bloomberg View
There’s only one way to deal with a leader who can’t be trusted: Fire him
”
16 Business Daily Monday, March 6 2017
Closing Politics
Abe gains opening to become Japan’s longest-serving premier
as prime minister ended after a year in 2007. Abe, now the second-longest serving Group of Seven leader after Germany’s Shinzo Abe has a shot at becoming the Angela Merkel, has brought stability at the longest-serving prime minister in Japan’s top of Japan’s government after a series history. of revolving-door premiers. His domestic Members of his ruling Liberal Democratic popularity has remained generally solid, Party yesterday rubber-stamped a rule with a Nikkei newspaper poll putting his change to allow party leaders to serve up support rate at 60 percent. He’s been to three consecutive three-year terms. The helped by a lack of rivals in the LDP and expected move during the party’s annual conference in Tokyo allows Abe, who came disarray in the main opposition Democratic into power in late 2012, to potentially stretch Party, which has struggled to regroup after his time in office through 2021. His first spell its 2012 election defeat. Bloomberg News
Regulator
Beijing to relax rules to boost big insurers’ expansion Smaller insurers will face tougher scrutiny when trying to expand overseas or domestically Sumeet Chatterjee and Julie Zhu
C
hina’s insurance regulator is considering an industry shake-up that could see the biggest and most solvent firms resuming an overseas expansion, while smaller, riskier insurers would come under tighter scrutiny. The plan being discussed would see the China Insurance Regulatory Commission (CIRC) move from a onesize-fits-all regulatory framework to a regime calibrated to insurers’ assets, solvency ratios and risk tolerance, four people with knowledge of the talks told Reuters. It forms part of a broader push by the CIRC to clean up the world’s second-largest insurance sector amid concern that rampant expansion by many smaller firms has caused rising systemic risk in the financial sector. Chinese insurers have snapped up billions of dollars worth of assets overseas and at home in the past two years to counter falling investment yields at home. Many have funded their expansion with cash from selling opaque investment-linked wealth management products, increasing companies’ balance sheet risk. Outbound M&A deal volume by Chinese insurers doubled last year to US$11 billion, after growing at a similar pace in 2015, according to Thomson Reuters data. But concern over the balance sheet risk, and a crackdown on capital
outflows, has made it tougher for insurers to win government approval to deploy fresh capital abroad over the past six months, causing uncertainty about their ability to do more outbound deals. Several larger insurers have lobbied the regulator to take a more tailored approach when applying the rules, arguing they should not be subject to the same investment restrictions as their smaller, riskier rivals, two of the sources said. Ongoing M&A deals with potential Chinese bidders include Australia and New Zealand Banking Group’s sale of its more than US$3 billion life insurance and wealth business, investment bankers say, and Chinese insurers have also shown interest in buying Hong Kong Life Insurance Ltd, one of few independent life insurers
in the financial centre, which could fetch US$600 million. Chinese insurers have also been looking to buy hotels and other real estate assets from New York to London to find steady and higher yields.
Investment cap
Under the new regime being discussed, the CIRC plans to look more favourably on large, solvent insurers including China Life Insurance Co Ltd and Ping An Insurance Group Co and support their expansion plans, both at home and abroad, the people said. Smaller insurers will face tougher scrutiny when trying to expand overseas or domestically. “The insurance companies have to increase their investment yields, and there are some that are considering using assets to do offshore M&A,” said Martin Tam, an insurance partner at law firm Baker McKenzie in Hong Kong. “But it will depend on the requisite
regulatory approvals which, in turn, will depend on the companies – how strong are their solvency ratios and if those investments are prudent.” The proposal is in its early stages and it’s not clear when it might be implemented, said the sources, who declined to be named because the discussions are private. The CIRC, China Life and Ping An did not respond to requests for comment.
Key Points CIRC discussing loosening rules for large insurers - sources Changes would allow bigger firms more M&A Smaller, riskier insurers to come under greater scrutiny Plan follows lobbying by large firms eyeing overseas expansion Chinese insurers can invest up to 15 per cent of their assets overseas. A sharp drop in the yuan, low interest rates and sluggish stock markets have sent firms including Ping An, China Life and Anbang Insurance Group hunting for assets from the United States to Japan. Those overseas manoeuvres took a hit after China began tightening rules for taking capital outside the country, to stem a gradual slide in its foreign exchange reserves. The CIRC plans to cut the 15 per cent overseas investment threshold to low single-digits for firms that have weaker solvency ratios and face asset and liability mismatches, two of the people said. Reuters
State sale
FTZs
EU’s Katainen
Mainland’s textile mills work off cotton inventories
Over RMB400 billion in taxes from major trade zones
Trump trade threat is uniting rest of world
China’s textile mills have worked off cotton inventory in the hope of picking up lower-priced fibre when the government in the world’s top textile market resumes annual sales of state reserves today even after getting caught short last year. China will offer 30,000 tonnes of cotton per day for sale until the end of August, the National Development and Reform Commission announced late last year, as Beijing seeks to whittle down its large, ageing stockpile. “Most of the companies have low stocks, as they expect cotton prices would drop with the coming state reserves auction,” said Ye Jianchun, vice president of China Cotton Textile Association, at an annual cotton industry conference held in Beijing on Friday. “They are also confident that the quality of auctioned cotton would be quite good,” Ye said. Last year, delays in the auctions until May from March and poor quality of the fibre in the first few sales tightened supplies, leading to panic buying by mills and spurring a surge of almost 70 per cent in prices in just under nine months. The most-active futures hit 4-1/2-year highs in November. Industry insiders, however, think this year will be different. Reuters
China collected RMB409 billion (US$59.3 billion) in taxes in four major free trade zones (FTZs) last year, data from the State Administration of Taxation (SAT) showed. The tax revenue growth was driven by fast development, reasonable industrial structure and strong innovation in the Shanghai, Tianjin, Fujian and Guangdong FTZs. Nearly 90 per cent of the tax revenue came from the modern services sector, while high-end manufacturing witnessed strong growth in tax revenue, SAT data showed. SAT data showed tax receipts from car manufacturing had annual growth of 44 per cent last year, 34 percentage points higher than the national average. Internet, software and information technology services posted stellar growth in tax revenues. The Guangdong FTZ, supported by tech-hub Shenzhen, saw tax revenues from the two sectors increase 470 per cent and 390 per cent respectively year on year. FTZs are part of government efforts to test reform policies, including interest rate liberalization and fewer investment restrictions to better integrate the economy with international practice. Xinhua
U.S. President Donald Trump’s protectionist stance may propel Asian, Middle Eastern and Latin American economic powers into market-opening alliances with the EU, a top EU official said. Jyrki Katainen, a vice president of the European Commission, the EU’s executive arm, said Trump’s rejection of multilateral commercial deals and border-tax threat are giving impetus to the 28-nation bloc’s push for free-trade or investment pacts with countries including Japan, China, India, Saudi Arabia, the United Arab Emirates, Mexico, Brazil and Argentina. “When there has been some signals to raise protectionism, especially from the U.S. side, the rest of the world seems to be fighting back and saying that this is not our line, this is something which we don’t want,” Katainen said. The comments signal that Trump’s “America First” approach that seeks to reduce the U.S.’s US$502 billion trade deficit may be as much an opportunity as a threat to the EU. The bloc is seeking renewed impulse as it grapples with challenges such as the U.K.’s planned departure from the EU, the demise of talks with Washington on a free-trade pact, Russian meddling in eastern Europe, surging populism and an influx of refugees. Bloomberg News