Women’s Day highlights rights siege Equality Page 16
Tuesday, March 7 2017 Year V Nr. 1248 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Finance
Total deposits in the banking sector reach MOP941.4 bln in Jan Pages 5
www.macaubusinessdaily.com
Tech
Food
Tencent head proposes tech zone to rival Bay Area, in southern China, including SARs Page 7
Foreign firms spreading dairy-based cooking to set foot in mainland market Page 10
Built of gold Construction
The MSAR is the second most expensive city to build in in Asia, only topped by Hong Kong. In the same spot for the second consecutive year, the city is also the fifth most expensive in the world, on a list led by New York. An unwillingness by the general population to accept “solutions based on migrant labour” is driving wage increases, while material costs continue to increase, notes the ranking. Page 2
The MSAR experienced its first population slowdown since 2009, dropping 0.4 pct between 2015 and last year, with the total population hitting 644,900 by year-end. The overall decrease was due to the completion of ‘large-scale entertainment facilities’ leading to a drop in non-resident workers in the construction sector. Immigrants from the mainland also fell by 25 pct y-o-y.
Population Page 4
HK Hang Seng Index March 6, 2017
Show me the money
SME Lending to SMEs surged last month, with the gov’t distributing some MOP39.2 mln via its SME aid schemes, an 85-pct increase m-o-m. Major recipients were the retail and construction and public works sectors. Some 87 requests under the credit guarantee scheme were also green-lighted, with total lending hitting MOP40.6 mln. Page 3
Investment for the future Private money Beijing announced its commitment to support private investors in order to find alternative ways of growing. State planner said barriers for investment will be lowered, after relying heavily on credit last year to reach growth goals. Page 8
23,596.28 +43.56 (+0.18%) Worst Performers
Cathay Pacific Airways Ltd
+4.06%
Hengan International Group
+1.56%
BOC Hong Kong Holdings
-0.96%
Geely Automobile Holdings
-0.56%
AAC Technologies Holdings
+2.90%
Tencent Holdings Ltd
+0.97%
Sun Hung Kai Properties Ltd
-0.88%
Power Assets Holdings Ltd
-0.36%
China Mengniu Dairy Co Ltd
+2.27%
China Resources Power
+0.84%
Cheung Kong Property
-0.87%
China Mobile Ltd
-0.35%
China Shenhua Energy Co
+1.62%
CLP Holdings Ltd
+0.82%
Cheung Kong Infrastructure
-0.79%
CNOOC Ltd
-0.33%
MTR Corp Ltd
+1.58%
Swire Pacific Ltd
+0.75%
Belle International Holdings
-0.57%
Hang Seng Bank Ltd
-0.19%
15° 19° 16° 19° 18° 19° 18° 21° 19° 22° Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
Room to breathe
2 Business Daily Tuesday, March 7 2017
Macau
Construction
MSAR remains Asia’s 2nd most costly for construction Regionally, construction costs in the city were only cheaper than those of Hong Kong Kam Leong kamleong@macaubusinessdaily.com
T
he MSAR remains the second most expensive city to build in in Asia, according to the latest International Construction Costs Report by global consultancy firm Arcadis. The report, which analysed the construction cost of 13 building types across 44 locations, said that in terms of construction costs in the Asian region, the city is only cheaper than neighbouring Hong Kong - the same result
as reported in the firm’s 2016 report. In addition, globally speaking, average construction costs in the territory also remained the fifth most expensive, following New York, Hong Kong, Geneva and Central London. The firm explained in the report that the continuous rise in construction costs in Hong Kong until the end of 2016 was primarily driven by increases in labour costs. “The rise of labour costs in the construction industry is mainly caused by the ageing workforce and labour force shortages. This issue is
challenging to solve because solutions based on migrant labour are not acceptable to the local population,” said the company’s Country Head for Hong Kong and Macau, Francis Au, in a press release. In Macau, according to the Statistics and Census Service (DSEC), the monthly median income of construction workers rose 7.1 per cent yearon-year to MOP15,000 (US$1,875) in the fourth quarter of 2016, while average daily wages of workers went up by 5.2 per cent year-on-year to MOP788 in 2016. In addition, the city’s price index of construction materials registered an increase of 1.7 per cent year-onyear during 2016. In particular, the average price of concrete rose by 2.5 per cent year-on-year to MOP824 per cubic metre, while that of spiral and round reinforcing steel bar went up by 4.2 per cent year-on-year to MOP4,505 per ton. The total number of workers in the industry amounted to some 37,200 as at the end of the year, DSEC’s 2016 employment survey shows, a 27.2 per cent decline when compared to the 51,160 workers as at the end of 2015, due to the completion of large-scale entertainment projects. “In order to stabilize the rise in construction costs, it is essential for the government and the construction industry to look into investing in initiatives and solutions that could
increase industry productivity,” the firm’s Country Head added. Meanwhile, the company believes Hong Kong’s current work levels are stabilizing ‘at peak levels of activity’ as a result of large-scale projects such as the Hong Kong-Zhuhai-Macau Bridge and the third airport runway at Chek Lap Kok.
Regional trend
The report noted growth rates in many Asian construction markets have actually significantly eased in the past 18 months, adding that ‘expansion at around 5 per cent to 7 per cent per year is the best prospect for many construction markets in Asia’. “The future of the construction industry in Asia is looking bright,” said the company’s Head of Buildings Solutions, Asia, Alan Hearn, in the press release. However, the executive added that the region’s construction industry drivers for the future will change due to four of the 10 highest value construction projects in 2017 being located in Asia. “Among them are One Belt One Road (OBOR) initiatives and the Delhi Mumbai Industrial Corridor. Mega projects like these are mainly funded by public-private partnership (PPP) and will continue to fuel the development of the construction industry in Asia,” added Hearn.
Asian cities’ rankings in the International Construction Costs Index*: LRT
GIT: Local training will commence after LRT operator created The city’s Transportation Infrastructure Office (GIT) confirmed that training for local staff will commence once the operator of the LRT (Light Rail Transit) is determined. The setup of the LRT operator, according to the Office’s statement, is currently under-preparation. In an interpellation submitted by Kwan Tsui Hang, the legislator enquired about the Office’s progress and plans for the training and recruitment of local workers, noting that related training plans were not mentioned in the 2017 policy address. The GIT admitted last month that there was a lack of related professionals in the city, in particular in professions such as operations and maintenance, adding that the government would invite specialists from outside the MSAR to provide advice and support. Regarding local labourers currently involved in the project, the Office
stated that local technicians are participating in the construction of the city’s LRT system. The GIT also pledged that a concrete plan for localising the LRT team will be drawn up after the operator is established, stating that the Labour Affairs Bureau will approve applications and phase out related non-resident workers according to actual market conditions. In order to attract more future talent to take part in the industry, the Office has launched promotional events at educational institutions. During a press conference last month, government representatives announced the commencement of a public consultation in order to establish laws relating to the city’s LRT system, also revealing that the government would be setting up a private company to operate the LRT when the Taipa section is completed in 2019. C.U.
Asia Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14
World Ranking 2 5 16 18 22 28 36 39 40 41 42 43 44 45
City Hong Kong Macau Singapore Tokyo Seoul Brunei Shanghai Manila Bangkok Taipei Ho Chi Minh Jakarta Kuala Lumpur Bangalore
*source: Arcadis
Construction
GDI extended to 2019 The government has extended the lifespan of the Infrastructure Development Office for a further two years, until 2019, effective from June 30, according to an Official Gazette release. The release, signed by Chief Executive Fernando Chui Sai On, delays the elimination of the department responsible for the Light Rail
Transit (LRT). The department will be replaced by a private company to be set up under the public service granting system, which will be in charge of overseeing the development of the LRT and the management of its future operations, estimated to start in 2019 with the completion of the Taipa rail section. N.M.
Business Daily Tuesday, March 7 2017 3
Macau Financial aid
Lending to SMEs surges in February The MSAR Government also offered more interest-free loans to local young start-ups during the same month Kam Leong kamleong@macaubusinessdaily.com
T
he Government’s lending to local SMEs totalled some MOP39.22 million (US$4.9 million) during the month of February, representing a notable increase of 85 per cent from MOP21.2 million a month earlier, according to official data released by the Macao Economic Services (DSE). Last month, the Bureau granted some MOP31.38 million in loans via its SME Aid Scheme, a jump of nearly 3.5 times from some MOP9.23 million granted one month earlier. Nevertheless, another financial support scheme of the Bureau – the SME Credit Guarantee Programme – only approved some MOP7.8 million worth of loans in the same month, a decrease of 34.9 per cent month-on-month. The SME Aid Scheme offers interest-free loans of up to MOP600,000 per applicant for different finance purposes, whereas the Credit Guarantee Scheme provides each beneficiary with a credit guarantee equal to 70 per cent of the loan approved by the participating banks, up to MOP 3.5 million. For the first two months of the year, total lending granted via the SME
Aid Scheme amounted to MOP40.6 million, with the city’s retail sector being the biggest beneficiary, receiving some MOP15.7 million worth of loans and accounting for 38.7 per cent of the total. In addition, SMEs engaged in construction and public works were granted some MOP6.66 million under the scheme, amounting to 16.4 per cent of the total. Meanwhile, under the credit guarantee scheme, lending received by
construction companies accounted for 48.6 per cent of the total, amounting to some MOP9.66 million, followed by those in the retail industry, which were lent some MOP3.64 million over the two months. During the month, the Bureau approved 87 applicants and rejected eight under the SME Aid Scheme, while green-lighting four and turning down one under the credit guarantee scheme.
Increased loans to young start-ups
On the other hand, the Bureau’s Young Entrepreneur Aid Scheme granted MOP8.05 million in loans
to the city’s young start-ups during the same month, up by 237.5 per cent month-on-month as compared to MOP2.35 million in January. The scheme approved lending to 35 applicants and rejected 16 others in the month of February. Total lending to the city’s start-ups hit MOP10.4 million for the first two months of the year. In the two months, the amount of loans granted to companies in the retail sector accounted for 55.3 per cent of the total, reaching MOP5.75 million, while those providing company services received some MOP1.7 million in loans from the Bureau, representing 16.3 per cent of the total. The young start-up aid scheme offers interest-free loans of up to MOP300,000 (US$37,500). Entrepreneurs aged between 21 and 44 are eligible for a loan for eight years, with repayments starting after 18 months.
E-commerce
CTM’s e-commerce platform officially launched The city’s telecom provider officially launched its e-commerce platform to facilitate local SMEs Cecilia U cecilia.u@macaubusinessdaily.com
The city’s dominant telecommunications operator Companhia de Telecomunicações de Macau (CTM) officially launched its e-commerce platform - Macau Good Hands – yesterday at Macau Tower. Ebel Cham Pou I, the vice-president of the commercial department of CTM, said the platform was created to support local SMEs (small and medium sized enterprises), pointing out the need for the service, given that, in comparison to significant operators such as Taobao in Mainland
China, local SMEs find themselves unable to receive enough support and assistance. “CTM wishes to create an e-commerce platform that belongs to the city,” remarked Ms. Cham. “We hope that local SMEs can more easily grow their e-commerce business,” she stated. Ms. Cham also noted that, with the establishment of the local e-commerce platform, SMEs in the city could receive 24/7 support whenever needed. The vice-president also pointed out that the competition between shops on Taobao is tough, saying that local
SMEs will have to compete against thousands of shops from Mainland China if they are to grow their businesses via Taobao. In comparison to other similar local platforms, Ms. Cham indicated that CTM can do advertising and promotion activities for local SMEs that are already customers of CTM, to other groups of CTM customers. In the wake of its year-long trial operation, Macau Good Hands, has accumulated about 50 merchants based on the platform, offering over a thousand commodities ranging from digital products, daily necessities, health products and food & beverages, among others. Last year, CTM’s chief executive Vandy Poon Fuk Hei told Business Daily that the online shopping system
was targeting local residents and tourists, in addition to helping local SMEs during the economic adjustment phase. According to Ms. Cham, the platform is currently facilitating over 10 transactions per month. She also disclosed that the average monthly transaction amount last year increased from thousands of patacas to tens of thousands of patacas. Regarding payment methods, the platform currently accepts payments via Visa, Mastercard and UnionPay. The vice-president also said that the use of Alipay, as well as Macau Pass, for the platform is still under discussion, expressing the hope that it would be introduced at a later stage.
Coupons to attract more
In order to draw more attention to the newly launched platform, CTM is handing out a total of MOP1.5 million in coupons to new subscribers of the CTM Home Internet Service. “From now until May 31, customers who subscribe to or upgrade to CTM’s Home Internet Service will receive a MOP100 coupon to make purchases on the platform,” said Ms. Cham. Also, via CTM, the shops from the platform are currently offering at least a 20 per cent discount to customers. When asked about what objectives CTM has for the new platform, Ms. Cham noted that the group wishes to attract 150 more shops to join the platform, aiming to reach over 200 by the end of this year. Meanwhile, the vice-president refused to answer questions relating to a report by the Audit Commission describing the public Wi-Fi service. The service was launched in September 2010 by the former Bureau of Telecommunications Regulation (DSRT) and was described in the audit report as being almost ‘useless’ and lacking efficiency given the amount of public funds spent, some MOP161.3 million.
4 Business Daily Tuesday, March 7 2017
Macau MACAU OPINION
Albano Martins*
MICE? The Statistics on the Conventions and Exhibitions sector have been made available for 2016. It is well known that the Macau Government is strongly committed to this sector, in order for the local economy to diversify more and more. Although I believe that it is healthy for all sectors to grow, if possible much more than the gaming sector, and have more weight in the GDP, my position on this subject is known. To be nice, I say that maybe by 2047 the MICE industry might have some relevance. Look at the data. In 2015, the MICE sector’s total revenue equalled only 0.1 per cent of casino gaming revenue. In 2016, although gaming revenues were lower than in 2015, that percentage fell to 0.07 per cent! That means, in simple terms, that the gaming sector in 2016 produced in 6 hours, 14 minutes and 24 seconds what the Convention and Exhibition Sector produced in the whole year! Is the sector reporting correctly? According to what we can see, revenue from the sector fell 30.3 per cent last year and government subsidies went down by 47.9 per cent, due to the misconception, advocated by the government, that we should walk in austerity when there are budgetary surpluses and no public debt, and when the economy is in recession! As a result, the government withdrew something like MOP60.62 million of support from the industry and the fall in the sector’s revenues multiplied, reaching MOP68.97 million. The reasoning seemed to be this: if there are no subsidies, there are no exhibitions or conventions! But was that really what happened? In a disaggregated way, the data does not show the right direction. The number of meetings and conferences increased by 32 per cent, from 831 to 1,195, with the number of participants increasing by 88,000, although the number of exhibitions decreased by 23 per cent, from 78 to 55, with a net loss of 893,000 visitors! The number of incentive events was 26, but there are no figures for 2015, so no comparison can be made. If these companies are all of Group B, is it worth taking time to try to make sense of all this data? The message remains: if the gaming industry continues in 30 years to produce the same income as today, it will be necessary for revenues from the convention and exhibition sector to grow by 27.32 per cent every year to be able to reach the level of revenue generated by the gaming industry in 2016! * an economist and contributor to this newspaper
POPULATION NON-RESIDENT CONSTRUCTION WORKER NUMBERS FELL BY 20.4 PCT YEARLY IN 2016
Less crowded For the first time since 2009, the MSAR population saw an annual decrease in 2016, as the completion of large construction projects contributed to a 2.2 per cent decrease in non-resident workers Nelson Moura nelson.moura@macaubusinessdaily.com
T
HE total population of Macau hit 644,900 by the end of 2016, indicating a 0.4 per cent decrease, or 1,900 fewer individuals, according to the latest data from the Statistics and Census Service (DSEC). This is the first yearly drop in the city’s population since 2009, when the population contracted by 1.3 per cent. The fall comes after Macau’s population increased by 10,600 people in 2015, a 1.6 per cent year-onyear increase. The decrease was mainly caused by a drop in the overall number of non-resident workers in 2016, down by 2.2 per cent year-on-year to 177,638. According to the data, the overall decrease was mainly attributed to the
‘successive completion of large-scale entertainment facilities’ such as The Parisian and Wynn Palace, which led to a 20.4 per cent drop in non-residents working in construction, a reduction of 8,868 individuals, as of the end of 2016.
Mainland Chinese population falling
In 2016, the number of immigrants arriving from China fell by 25.3 per cent, amounting to 6,327, a decrease of 2,141 year-on-year. Nevertheless, as of the end of 2016, workers from Mainland China still accounted for the largest percentage of the non-resident labour population, at 63.8 per cent. Workers from the Philippines represented the second largest group of overseas workers, accounting for 15 per cent, followed by Vietnam at 8.3 per cent, Hong Kong at 3.3 per cent
and Indonesia at 2.5 per cent. A total of 78,413 Non-resident Workers Identification Cards were granted in 2016, 15.2 per cent less year-on-year, while 1,447 people were granted the right to reside in the MSAR in the same period, a decrease of 18.9 per cent year-on-year.
Ageing population
The ageing ratio of the city continued to rise for the twentieth consecutive year, with the 65-plus demographic increasing slightly by 0.8 percentage points year-on-year and accounting for almost 10 per cent of the total population, while the population aged between 15-65 fell by 1.4 percentage points year-on-year. Besides an increase in the elderly population, 2016 also registered 246 more deaths than the previous year, with 2,248 deaths recorded in the whole year. According to the data, malignant neoplasms – growths linked to cancer - were the major cause of death in the MSAR in 2016, representing 36.3 per cent of the total, followed by pneumonia & influenza, and hypertension. The birth rate stayed stable with only 91 more live births being registered in 2016, making for a total of 7,146 live births recorded in the city.
CIVIL SERVANTS
Preliminary salary scheme for civil servants might be introduced in H2 The MSAR Government is currently drafting a preliminary scheme for the salary scale system for civil servants, and hoping to introduce it in the second half of this year. The system was suggested in order to prevent the concentration of salary adjustments in certain ranks of civil servants, and also so as to provide increased flexibility in adjusting the salary rate. According to the government’s response to enquiries by a local legislator, the Public Administration and Civil Service Bureau (SAFP) noted that the government will draft the document for consultation with civil servants after the preliminary scheme is introduced. The SAFP also disclosed that the ongoing research into the system will look to Hong Kong’s experience as a guide for a similar system. Given that the current salary structure for civil servants integrates three components – the position, rank and
level - the grading salary system is being put forward amidst a review procedure of the current public servant salary structure. The SAFP reiterated that the government is aware of the current
challenges encountered by lower ranked civil servants, noting that the housing subsidy for public servants has been lifted from 30 salary points to 40, a measure which came into effect at the beginning of this year. C.U.
Business Daily Tuesday, March 7 2017 2017 5
Macau MACAU
MONETARY
Resident deposits grow in January But those of non-residents and the public sector fell in the same month, on a year-on-year basis Kam Leong kamleong@macaubusinessdaily.com
T
OTAL deposits with the ci t y ’ s ba n ki n g s ect o r reached MOP941.4 billion (US$117.7 billion) for the first month of the year, with resident deposits jumping by 13.2 per cent year-on-year, the latest official data released yesterday by the Monetary Authority of Macau (AMCM) shows. In the month, resident deposits accounted for MOP521.4 billion of the total, representing an increase of 0.5 per cent month-on-month and 13.2 per cent year-on-year. Meanwhile,
deposits of non-residents and the public sector fell by 12.9 per cent and 8.6 per cent year-on-year, amounting to MOP249.1 billion and MOP281.26 billion, respectively. Of the total deposits with banks, those denominated in Hong Kong Dollars (HKD) accounted for nearly half - at 46.9 per cent - followed by those in Macau Patacas (MOP) and U.S. Dollars (USD), at 22 per cent and 23.7 per cent, respectively.
Loans up
In the same period, local banks granted a total of MOP415.5 billion worth of domestic loans to the private sector, a drop of 1.7 per cent
month-on-month, yet an increase of 6.7 per cent year-on-year. Of the total domestic loans, those denominated in MOP amounted to MOP123.63 billion, accounting for 29.8 per cent of the total. However, the majority, some 64.9 per cent, were denominated in HKD, amounting to MOP269.8 billion. Meanwhile, external loans rose 3.2 per cent month-on-month, or 2.3 per cent year-on-year, totalling MOP373.1 billion. USD-denominated loans in January reached MOP201 billion, representing 54 per cent of the total, followed by those denominated in HKD, at MOP98 billion, accounting for 26.3 per cent of the total. As at the end of the month, the loan-to-deposit ratio for the resident sector dropped 0.9 percentage
points from the previous month, to 60 per cent.
More in circulation
Currency in circulation amounted to MOP15.35 billion for the month, rising by 13.2 per cent month-on-month, or 17.1 per cent year-on-year. Monetary supply M2 amounted to MOP536.8 billion, an increase of 0.8 per cent month-on-month, or 13.3 per cent year-on-year. Of the total, the share of MOP accounted for 32.1 per cent at MOP172.3 billion, while that of HKD reached MOP280.4 billion, accounting for 52.2 per cent. In addition, the M2 of RMB and USD amounted to some MOP21.7 billion and MOP50.4 billion, accounting for 4 per cent and 9.4 per cent of the total, respectively.
6 Business Daily Tuesday, March 7 2017
Macau Courts
Paid for by the MP
D
ozens of situations involving the Public Prosecutions Office (MP) paying for hotel rooms, airplane tickets and room service, allegedly for the use of ‘friends’ of former Prosecutor-general Ho Chio Meng, were brought to light during the continuation of the corruption trial yesterday, according to broadcaster Radio Macau. The timing of the reservations, according to the Commission Against Corruption official, corresponded with the movements of Ho Chio Meng, between the Mainland and Macau.
The vast majority of the names involved in the reservations were women from the Mainland, with the
prosecution pointing out that some of these women couldn’t have been working for the MP’s office given
their age – some being 17 or 18 years old. The former official defended that one of the names on the list involved a prosecutor from Guangdong province, and others involved “missions” related to work, however a signature on a room service bill corresponding with the room reservation of one of the 'friends', at 1:00 am in at hotel in the MSAR, cast doubt on the claim, notes the broadcaster. The former Prosecutor-general defended that he ‘never stole’ from the Public Prosecutions Office. Questioned by the judge as to whether the CCAC investigator knew what happened in the hotel rooms in question, the response was in the negative.
Politics
Local legislators at China’s parliament ask Kim Jong Who? Delegates to China’s annual meeting of parliament said they knew little or nothing of the case The ki l l i ng of th e est ra n g e d half-brother of North Korea’s leader who had been living in Macau may be top news around the world, but for some Macanese legislators at China’s parliament it’s more a case of Kim Jong Who?
Kim Jong Nam was killed on Feb. 13 at Kuala Lumpur International Airport. Malaysian police believe he was assaulted by two women who smeared his face with VX, a chemical classified by the United Nations as a weapon of mass destruction. He had been planning to travel back to Macau. The story has also been widely covered in Chinese state media, though Beijing, with its close ties to Pyongyang, has had little to say about it so far in public. Macau delegates to China’s annual meeting of parliament said they knew little or nothing of the case, and were unwilling to say whether
Education
Connected schools Several measures and policies for developing education and research cooperation were announced by the Portugal and MSAR Governments Nelson Moura nelson.moura@macaubusinessdaily.com
The MSAR and Portugal agreed to further cooperation in education and research in high schools, graduate and post-graduate institutes, according to a release by the Office of the Secretary for Social Affairs and Culture (GSASC). The cooperation involves different bilateral programmes and initiatives announced by the Subcommittee for Portuguese Language and Education. In terms of high school education, a network of associated schools will be created, aimed at developing protocols to foster cooperation between high schools in Portugal - especially high schools already offering Mandarin-language courses created in partnership with the Mainland China Confucius Institute - and MSAR schools offering Portuguese-language courses. This network was also described as a possible platform for developing bilateral cooperation to improve education statistics, inclusive education and inter-school coordination.
In the areas of graduate education and investigation, it was announced that the focus would be on developing joint projects in the Research, Science and Technology areas and for post-graduate courses.
Easing access to education
In addition, several advances were made to facilitate access to graduate-level education in Portugal for MSAR students, such as increasing the number of education institutions in Portugal that accept students holding Chinese high school certificates, students who have passed the MSAR general exam, or International Student status holders. An increase in scholarships was also announced in the release, as an effort by the MSAR to develop bi-lingual professionals in areas beyond translation and judicial formation. A cooperation protocol for education professionals will also be signed in the near future, for training collaboration between the Camões Institute in Portugal and the Macau Polytechnic Institute.
Arts
Arts Festival budget cut by MOP4 mln The Macao Arts Festival, now in its 28th edition, will have a MOP4 million reduction in its budget this year, as announced by local broadcaster TDM. The festival, this year receiving
a budget of MOP23 million, will live up to the example given in previous years, despite the reduction, according to statements made at the press conference held yesterday. Running for a total of 34 days, from April 28 to May 31, the festival will open with ‘Play and Play: An evening of Movement and Music’ an hour and a half long dance piece.
Kim’s family was still in the MSAR or if they were under police protection, underscoring the case’s sensitivity. Asked on Sunday about Kim’s family, José Chui, a cousin of Macau Chief Executive Fernando Chui Sai On, first said he didn’t understand the question, and then walked away. Asked later in English whether Kim’s family was still in Macau, Chui answered: “I have no idea”. “I read (about it) in the newspaper, but I have no information from my sources. I don’t think I’m in a position to give you any details.” Lu Bo, president of Chinese-language paper the Macao Daily News, initially said he knew nothing of the case. Pressed further, he said: “I’m not interested in it.” Lionel Leong, Macau’s secretary
of economy and finance, declined to comment. Macau, like neighbouring Hong Kong, sends representatives to the annual meeting of China’s largely rubber stamp parliament, which opened on Sunday. They are all carefully chosen by Beijing. Before he was killed in Malaysia, Kim lived quietly in the MSAR, avoiding controversy and seemingly relaxed about personal safety, according to sources close to him. U.S. and South Korean government sources say they believe North Korean agents killed Kim, the half-brother of North Korean leader Kim Jong Un. Despite China’s ostensible friendship with North Korea, Beijing has been angered by Pyongyang’s repeated nuclear and missile tests. Reuters
Business Daily Tuesday, March 7 2017 7
Macau
Ma Huateng, Chairman of Tencent Holdings Ltd.
Technology
Tech zone in south China Tencent’s Ma Huateng said he doesn’t see China’s cyber security law as a hurdle
T
encent Holdings Ltd.’s Chairman Ma Huateng proposed to build China’s own Bay Area equivalent with a technology zone in southern China that would include the financial centre of Hong Kong and gaming hub of Macau. China’s fourth-richest man said on Friday that setting up a “Guangdong-H.K.-Macau” technology area could help maintain stability in the two former colonies. Ma was speaking at a press conference two days before the National People’s Congress convenes in the capital to set the year’s agenda. As a delegate at the country’s most important annual convention, Ma suggested the proposed tech bay could leverage capital from Hong Kong and manufacturing prowess from Shenzhen and the Pearl River Delta. China “has the ability to create a world-class tech bay area, and preside over the global tech revolution of the future,” said Ma, who runs the second-largest internet company in China. “It will also help the long-term stability and prosperity of Hong Kong and Macau.”
Innovation drive
Tencent’s headquarters are in Shenzhen in Guangdong province -- a region racing against Beijing and Hangzhou to forge China’s equivalent of Silicon Valley. Responding to the
central government’s call to “ignite the innovative drive,” more than 120 tech zones have mushroomed across the country, all vying for talent and capital. Best known for the instant messaging app WeChat, Tencent has built an empire of news portals, movies, online books and online games including Clash of Clans. Chinese President Xi Jinping has identified the internet as one of the most import sectors for official oversight - a level of strategic importance on par with ethnic minority leaders or Taiwan’s political parties. He has reminded the country’s technology parvenus that they should “demonstrate positive energy in purifying cyberspace” and called for regular contact with new media representatives to build support for the party’s agenda. The elevated status puts billionaires like Ma and Alibaba Group Holding Ltd.’s Jack Ma, who isn’t related, under extra scrutiny. Their riches and success have also inspired a younger generation of entrepreneurs, prompting RMB1.15 trillion (US$167 billion) of funds to be amassed by the country’s venture and private equity firms in the first 11 months last year, according to consultancy Zero2IPO Group.
Ecological cities
Ma said Tencent would be willing to
Business
‘One Belt, One Road’ MSAR development committee created The Macau Government has created a committee for the development of the Mainland’s ‘One Belt, One Road’ policy, according to a dispatch published in the Official Gazette yesterday. Named the ‘One Belt, One Road’ Construction Work Committee, it will be in charge of coordinating the short, medium and long-term plans for the participation and contribution of the MSAR to policy developments, while ‘promoting and creating studies to shape its political strategies’. The committee will also be
responsible for preparing the policy’s local annual work program and for supervising its implementation, while establishing guidelines for future activities. The newly created development group will be presided over by Chief Executive Fernando Chui Sai On, and will include as its members all the MSAR Secretaries and representatives from their offices, the Government Spokesperson Office and representatives from the Policy Research Office (GEP) and the Macao Foundation. N.M.
use its big data technology to help China built more ecological cities that, for example, would utilize marshlands to purify water. He also called for more protection of personal information and data. Ma wants the country to place national strategic importance on digital content and advocated using Chinese capital to acquire overseas intellectual property. Already, Tencent is making inroads in Hollywood, funding blockbusters including “Kong: Skull Island” and “Warcraft.” It has an abundance of intellectual property for anime and online novels distributed via its websites. The company has aspirations to create a Marvel-like movie empire, as it competes with Alibaba for viewers. In his policy proposal last year, Ma advocated making the internet more accessible, asking regulators to lower the barriers of entry to spur innovation and content creation.
With more than 800 million people using WeChat to communicate, share photos and post articles, the authorities have started efforts aimed at reining in the social media service. China passed a controversial cyber security law in November requiring internet operators to cooperate with investigations involving crime and national security. Expected to take effect in June, the law also requires companies to give government investigators full access to their data if wrongdoing is suspected. Since October, China’s law enforcement agencies have been authorized to secretly request access to personal information posted on social media services including WeChat for investigating criminal cases. Ma said he doesn’t see China’s cyber security law as a hurdle, adding that the legislation in fact is in favour of larger tech companies. Bloomberg News
Gaming
Opening date of The 13 delayed again Statements by 13 Holdings Ltd. reveal that the opening of its luxury hotel development in Cotai might be further delayed. Having announced in September of last year that the opening of The 13 was set to take place ‘in early 2017’, the company responded yesterday
to an enquiry, through public relations firm Edelman, stating that ‘an opening date will be announced later in the year’. The response was provided initially to gaming news website GGRAsia, and was also confirmed by Business Daily. This reveals another possible delay for the luxury project without any specific deadline for The 13 hotel being revealed. In the release, it is only stated that the hotel, which is said to have cost US$7 million (MOP56 million) per room, is in ‘the final stage’ with 13 Holdings Ltd. planning to ‘bring the project to the market in 2017’. In previous responses to Business Daily’s enquiries, the group affirmed that its opening date would not stretch into 2018, stating ‘the commercial opening of the property will be in 2017’. When asked about potential gaming offerings at the property, the group noted that it ‘does not comment on gaming in the market at this time as a matter of corporate policy’. In the lead up to the opening of the hotel, the group noted that it has held ‘private preview parties’ for the likes of Prince Albert II of Monaco and the Emir of Abu Dhabi in Monaco and Dubai. N.M.
8 Business Daily Tuesday, March 7 2017
Greater China Growth
Beijing seeks to boost private investment China is looking to reduce the risks from years of credit-fuelled stimulus that are concentrated in the heavily-indebted state sector
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hina will take further steps to support private investment, an official from the state planner said yesterday, as the country looks to maintain strong economic growth while undergoing structural reforms. A sharp cool down in private investment last year forced Beijing to rely more heavily on government spending and more inefficient state firms to hit its growth target, leaving
the economy unbalanced. But Zhang Yong, a vice chairman of the National Development and Reform Commission (NDRC), told a news conference that private investment is steadying and measures taken to boost such spending are showing results. Zhang said China will lower barriers to entry for private investment, simplify regulation, and further support investment through public private
partnership programmes. China is looking to reduce the risks from years of credit-fuelled stimulus that are concentrated in the heavily-indebted state sector, while at the same time maintaining a high rate of growth. The government has cut its growth target to 6.5 per cent for 2017, from 6.5-7 per cent last year, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday. The economy ultimately expanded by 6.7 per cent. NDRC head He Lifeng, speaking at his first news conference since being named to lead the agency, said
he believes “the possibility is very high” that China will maintain midto high-speed economic growth as it looks to meet its long-term development targets. Fixed asset investment by private firms rose 3.2 per cent last year after double-digit growth in previous years as companies complained of challenging business conditions. NDRC will also focus on keeping prices stable this year, after producer prices rose to a more than five-year high in January, while China will deepen price reforms, Ning Jizhe, vice chairman at the agency, said yesterday.
‘Fixed asset investment by private firms rose 3.2 per cent last year after doubledigit growth in previous years’ China “has many favourable conditions to meet (its inflation) target” this year, said Ning. Premier Li said on Sunday that China will target an increase in the consumer price index (CPI) of around 3 per cent this year, after prices rose 2 per cent last year. Rising producer pricing pressures have been due in part to China’s campaign to reduce excess steel and coal capacity, a campaign that Ning said will continue at least into 2018. China said it cut 65 million tons of steel capacity last year, higher than its target, and plans to cut another 50 million tons this year, though some market watchers say the cuts included a large amount of already-idled capacity. Reuters
Currencies
Government beats stability drum as Fed outlook risks yuan decline The PBOC may be reluctant to keep up by raising its benchmark interest rate as that would endanger the budding economic recovery If China is worried about the freshly hawkish Federal Reserve rocking the yuan, it isn’t showing - yet. Leaders of the world’s second-largest economy conveyed a message of stability as the National People’s Congress began Sunday in Beijing. Central bank deputies Pan Gongsheng and Yi Gang emphasized that the currency market was steady, with Pan reinforcing that any yuan volatility would be “normal,” even if trading is affected in the short term.
“China’s main goal is to keep the yuan stable in the first half”
With the Fed putting a March interest-rate hike in play over the past week, a turnaround in the dollar could test the PBOC. U.S. tightening erodes China’s yield advantage, stepping up depreciation pressure on the yuan and potentially stoking outflows just as policy makers seek continuity ahead of a rotation in the Communist Party’s leadership later this year. The PBOC may be reluctant to keep up by raising its benchmark interest rate as that would endanger the budding economic recovery, with the 2017 growth target of about 6.5 per cent coming with the hopeful “or higher” qualifier on Sunday.
Li Daokui, a professor at Beijing’s Tsinghua University
“China’s main goal is to keep the yuan stable in the first half,” Li Daokui, a professor at Beijing’s Tsinghua University and former adviser to the People’s Bank of China, said in an interview on the side-lines of the NPC. “Conditions aren’t ripe for allowing more volatility.” While stability pledges may be reassuring for other emerging markets, which are being anchored by Chinese policy amid shifting sands in the U.S., it could be a tough task.
Fed Chair Janet Yellen
Given the rebound in the economy is still nascent, China’s focus will be on controlling risk and deflating asset bubbles, said Zhou Hao, an economist in Singapore at Commerzbank AG. “This means that monetary policy will gradually tighten.”
Basically stable
China has so far managed to avoid an increase in benchmark borrowing costs, tightening conditions in money markets instead as it seeks to curb risks from an uptick in leverage. Yi said the yuan will be basically stable in a reasonable range, the staterun Xinhua News Agency reported Saturday. He previously told Chinese media that monetary policy should be not too loose, nor too tight, as it seeks to stick to its “prudent and neutral” mantra. Yi said Monday decision-making around rates will depend on the state of the domestic
economy. Separately, the China Securities Journal cited Yi as saying that the yuan will remain credible and flexible against other major currencies and be stable overall. With Fed Chair Janet Yellen basically locking in expectations for a March hike on Friday, and hinting at a more aggressive path beyond that, the PBOC’s middle road may become harder to tread, according to Bloomberg Intelligence economists led by Tom Orlik in Beijing.
Wording change
The PBOC “will be faced with a choice between raising rates more aggressively – adding stress for indebted corporates – or accepting more pressure for yuan depreciation and capital outflows,” they wrote in a report Sunday. Orlik also pointed to a change in wording about the yuan in Premier Li Keqiang’s work report as a sign officials may be ready to accept greater flexibility in the exchange rate. Other analysts agree. While China will continue to target yuan stability this year, that doesn’t mean they’ll keep the currency rigid amid wider market volatility, said strategists at Macquarie Group Ltd. in Singapore. Deputy Governor Pan said data will show the currency market stabilized in February and that foreign reserves remain ample. An update on the world’s biggest stockpile is due this week, with economists projecting a decline to US$2.97 trillion. That would also be the eighth straight monthly drop, the longest losing streak in at least two decades of data. Bloomberg News
Business Daily Tuesday, March 7 2017 9
Greater China In Brief Auto industry
JAC Motor sees slower sales growth in 2017 China’s Anhui Jianghuai Automobile Group (JAC Motor) expects slower growth in China’s vehicle sales this year as the world’s largest auto market nears saturation in demand, its Chairman, An Jin, told Reuters yesterday. China’s auto market grew an unexpectedly strong 13.7 per cent last year thanks to a tax cut on small-engined vehicles. The growth rate is expected to subside as the policy is rolled back this year and eliminated in 2018. “Because China already has 28 million vehicles (in annual sales) and is extremely large, having another big increase is not very likely,” An said. Trade
Investment in Belt and Road countries exceeds US$50 bln
Report
Defence budget rises at slowest pace in decades China’s military budget had seen double-digit increases for several years until last year, when it was raised 7.6 per cent China’s defence budget will rise seven per cent to US$151 billion this year, the slowest annual per centage increase since 1991 and roughly in line with decelerating economic growth, Bloomberg News reported yesterday. The budget is normally included in public documents released at the opening of the country’s 10-day annual legislative session, which began Sunday, but was absent this year, adding to perennial concerns abroad over Chinese military transparency. The 2017 budget will be RMB1.044 trillion (US$151 billion), a finance ministry information officer confirmed to Bloomberg News. The government has not indicated why the figure was not publicly disclosed at the rubber-stamp National People’s Congress on Sunday as per tradition. “ W e di d n ’ t r e m ai n p ri vat e
deliberately,” the ministry officer told Bloomberg. U.S. President Donald Trump last week outlined plans to raise American military spending by around 10 per cent. The U.S. military remains by far the world’s most powerful and most well-funded, with an annual budget of more than US$600 billion. China is engaged in a decades-long build-up and modernisation of its once-backward armed forces, as it seeks military clout commensurate with its economic might and increasingly asserts its disputed territorial claims in Asian waters. Since President Xi Jinping took office in 2012, the armed forces have undergone a massive overhaul, with shifts toward a Western-style joint command structure that gives him more military authority. China’s military budget had seen double-digit increases for several
years until last year, when it was raised 7.6 per cent. Its claimed defence budget is widely thought to understate actual outlays. A Pentagon report last year estimated that real spending exceeded the publicly-stated number by tens of billions of dollars.
‘U.S. President Donald Trump last week outlined plans to raise American military spending by around 10 per cent’ China’s “lack of transparency about its growing military capabilities and strategic decision-making continue to raise tensions and have caused countries in the region to enhance their ties to the United States,” the report said. Fu Ying, spokeswoman for China’s legislature, said on Saturday that future Chinese expenditures “will depend on U.S. intentions vis-a-vis the region, and U.S. activities (which) to a certain extent set the barometer for the situation here.” Speaking at an annual press conference, she said China’s defence buildup was aimed in part at being able to respond to “outside meddling” in its territorial disputes, an apparent reference to Washington. Reports that Beijing may be militarising artificial islands in the South China Sea have raised concerns around the region and prompted objections from Washington, which has sent military ships and aircraft close to the growing islands to buttress its calls for freedom of navigation in the strategic body of water. Fu said China’s defence capabilities remain modest compared to the United States, and dismissed the overseas concerns. “China has never caused harm to anyone, to any country,” she said. AFP
China has invested more than US$50 billion in countries along the Belt and Road since the nation proposed the initiative in 2013, a senior economic official said yesterday. The Belt and Road Initiative has won support from over 100 countries and international organizations, with nearly 50 cooperation agreements signed between governments, said He Lifeng, head of the National Development and Reform Commission, at a press conference on the side-lines of the annual parliamentary session. He said progress under the initiative was “better than expected.” Researcher
Science and technology sector on the rise China’s science and technology sector has been surging forward rapidly over the past decade, according to a leading Australian scientist. Professor Andrew Dempster, director of the Australian Centre for Space Engineering Research at the University of New South Wales told Xinhua in a recent interview that specific examples, such as the BeiDou navigation satellite system, demonstrate China’s strong commitment to science. “In the last few decades we’ve seen significant advancements coming out of China,” Dempster said. “For a long time GPS and GLONASS were the only satellite navigation systems around, but now the BeiDou system coming out of China is growing very rapidly.” Results
FAW sees robust sales growth FAW Group, a leading Chinese automaker, said that sales surged at the start of the year on the back of expanding sales outlets. FAW Group, based in the north-eastern city of Changchun, reported over the weekend that wholesale volume of various vehicles rose 21 per cent year-onyear to 552,000 units in the first two months of this year. The wholesale volume of the group in February alone jumped 32.3 per cent yearon-year to 228,000 units. FAW-Volkswagen witnessed its wholesale volume up 10.9 per cent year-on-year in February to 119,000 units.
10 Business Daily Tuesday, March 7 2017
Greater China
Food
Nation’s billionaire dining out scene draws foreign dairy firms At US$150 billion a year, China’s foodservice industry is the largest in the world after the U.S. and Japan
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n an industrial kitchen in a leafy, residential suburb of central Shanghai, a quiet culinary evolution is taking place. Beside shelves stacked with butter mounds the size of bread loaves and 5 kilogram cheese wheels, chefs are experimenting with exotic ingredients that their New Zealand supplier, Fonterra Cooperative Group Ltd., wants to become ubiquitous in China: dairy. While commonplace in western diets, cream, cheese and butter are seldom used in commercial Chinese kitchens. Dairy exporters are working to change that. Dutch dairy cooperative Royal FrieslandCampina NV opened a training kitchen in Shanghai in January, joining Fonterra in teaching Chinese cooks how to use milkbased products and incorporate them into popular dishes. In Hong Kong, where more than a century of British rule helped inspire such dishes as cheese baked rice and butter pineapple buns, dairy accounts for about 5 per cent of the ingredients used in catering, according to FrieslandCampina. Matching that would create a US$7.5 billion-a-year market in China. “We can see the rise of the middle class and the openness and adjustment to western foods,” said Batthew Pang, FrieslandCampina’s vice president of foodservice in China. “We haven’t had this scale of potential growth in foodservice anywhere else.” At US$150 billion a year, China’s
foodservice industry is the largest in the world after the U.S. and Japan, and western-style cuisine is growing in popularity, said Sally Peng, senior account manager with research firm NPD Group in Shanghai. Fonterra, the world’s biggest dairy exporter, began training Chinese chefs in 2015 and now hosts workshops in Shanghai, Beijing, Guangzhou and Chengdu for customers, which include the local chains of Hoililand bakery and Champion pizza. On a recent visit to Fonterra’s Shanghai kitchen, a food technician was comparing and contrasting the stretchiness of different lines of mozzarella on baked pizza, while another was slathering whipped cream onto a cake to evaluate its composure over time. The aim, the company says, is to help chefs become more confident working with dairy ingredients and, ultimately, to use them more. Fonterra sold the equivalent of 271 million litres of milk in consumer and food-service products to China in the quarter ended Oct. 31, a 36 per cent increase from a year earlier. The gross margin in China across both categories increased to 39 per cent from 32 percent, the company said in November. “A new generation of mainland Chinese has become more admiring of—or adapted to—western culture, especially in eating,” FrieslandCampina’s Pang said. Studies have shown that a high proportion of Chinese people are
unable to absorb lactose, the main carbohydrate in milk, causing them to develop bloating, flatulence, cramps and nausea. Intolerance to lactose though is becoming less of a problem as more people are exposed to milk products from a younger age, Pang said. Even still, the Chinese population won’t consume dairy on a per-capita basis to the extent that Americans do, said Jack Chuang, a partner for Greater China with OC&C Strategy Consultants.
“We haven’t had this scale of potential growth in foodservice anywhere else” Batthew Pang, FrieslandCampina’s vice president of foodservice in China “You would rarely see Chinese adults drinking milk,” Chuang said. “Alternative dairy products—like nut milks, which are now getting popular in the U.S.—have always been a staple in China.” Still, China’s foodservice industry is proving a worthwhile target for dairy companies. Fonterra’s sales to caterers and restaurants there are increasing more than 10 per cent a year, said Christina Zhu, Fonterrra’s managing director in China. Sales of mozzarella cheese surged 66 per cent last year.
China now accounts for a quarter of the company’s foodservice business—a share that will expand as the company targets NZ$5 billion (US$3.5 billion) in global revenue from that segment by 2023, said Zhu. It’s a lower-value business, with a profit margin 20-to-50 per cent less than selling branded dairy products to consumers via supermarkets and retail stores, according to FrieslandCampina’s Pang. China’s RMB360-billion (US$52 billion) consumer dairy market is dominated by local suppliers Inner Mongolia Yili Industrial Group Co. and China Mengniu Dairy Co., and has proven difficult for overseas companies to penetrate, according to Euromonitor International. Even Vevey, Switzerland-based Nestle SA, which opened its first factory in the country in 1979, has only a 2 per cent share, Euromonitor data show. Foodservice, on the other hand, has provided an easier way for overseas manufacturers, who have sought to build product and brand awareness. That’s resulted in concoctions like Beijing Duck pizza, and moon cakes filled with cheesecake, instead of the traditional lotus paste. “When we first entered here, people didn’t know how to make cakes with the cream and butter we had, and we had to help them with that,” said Zhu at Fonterra, which says its cheese tops more than half of all pizzas in China. “Now is the window to build your brand with this segment of customers. I think it’ll be a lot harder to compete in five years, when the market is more established.” Bloomberg News
Business Daily Tuesday, March 7 2017 11
Asia Political tension
S.Korea’s Lotte says retail stores in Mainland closed The closures came after affiliate Lotte International approved a land swap to allow a U.S. missile system deployment Joyce Lee and Adam Jourdan
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hinese authorities have closed nearly two dozen retail stores of South Korea’s Lotte Group following inspections, ramping up pressure on the conglomerate amid a diplomatic standoff that has cast a chill over business ties between the two nations. Lotte said yesterday that 23 of its China supermarket stores had been shut, reaching from Dandong on China’s North Korean border to the wealthy east coast and southern Changzhou, marking a wide clampdown on the group in its biggest overseas market. A Lotte Mart spokesman could not provide further details, but workers at three stores said the closures - which they said were temporary - were fire-safety related. The three people asked not be identified due to the sensitivity of the issue. The Anhui fire department said in a post on its Sina Weibo microblog account yesterday it had temporarily shut two Lotte Mart stores due to fire risks, part of a broader regional sweep over the last month that had led to the closure of 30 stores belonging to a range of companies including Lotte. The Lotte closures are the latest in
a series of incidents affecting South Korean companies in China after cyber attacks and a ban on sales of travel tours to South Korea. Lotte Mart had 115 stores in China as of January contributing to group sales there of over 3 trillion won (US$2.6 billion) in 2015.
Key Points Closures are latest blow to S.Korean firms in China Come after Seoul seals land swap for missile defence system China objects to U.S. system being deployed in S.Korea The incidents come after Lotte approved a land swap outside Seoul last week that will allow South Korea to install the U.S. Terminal High Altitude Area Defence (THAAD) system, in response to missile threat from North Korea. South Korea’s military earlier yesterday said North Korea fired four ballistic missiles into the sea prompting acting president Hwang Kyo-ahn to call for THAAD’s swift installation. But China’s government has objected to the deployment of THAAD, saying it has a radar capable of
South Koreans watch a television news broadcast reporting on North Korea test-firing a ballistic missile, at a station in Seoul, yesterday. Lusa
penetrating its territory, while state media has called for a boycott of South Korean goods and services.
“Declared war”
On Chinese social media yesterday, photos and videos circulated of protests outside Lotte stores, while others showed Lotte outlets with their steel grates pulled shut. Outside one store, a red banner with large white characters read: “South Korea’s Lotte has declared war on China. Lotte supports THAAD. Get the hell out of China”. The protests come days after Lotte Duty Free on Thursday said a cyber attack using Chinese internet protocol (IP) addresses had crashed its website. It is currently back online. The Lotte Group in a statement on Sunday said it was seeking assistance from the South Korean government
regarding the issues it was facing in China, where it employs around 20,000 people - a third of its overseas staff. Lotte’s troubles expanded to other South Korean firms on Thursday as China’s tourism ministry instructed tour operators in Beijing to stop selling trips to South Korea from March 15. The order has since spread to other regions across the mainland, an official at Korea Tourism Organization said yesterday. The moves have prompted backlash from South Korea, whose trade minister Joo Hyung-hwan said on Sunday he had “deep concerns over a series of actions in China”. China’s foreign ministry said yesterday it welcomed South Korean companies to invest and operate in China, but added these firms “must operate in accordance with the law and compliance”. Reuters
Consumption
Australia retail sales bounce, but consumer spending lacklustre RBA Governor Philip Lowe has also warned that high levels of household debt could curtail spending Swati Pandey
Australian retail sales rebounded in January after two months of tepid outcomes, although the underlying pulse was one of sluggish household consumption as record-low wages growth eats into spending power. Data from the Australian Bureau of Statistics out yesterday showed retail sales rose 0.4 per cent in January, in line with market forecasts and up from a 0.1 per cent fall in December. The bounce back will provide some comfort to the Reserve Bank of Australia (RBA) given it was a pick up in household consumption that helped the economy dodge a recession in the fourth quarter of last year. Australia’s A$1.6 trillion economic output climbed 1.1 per cent in the fourth quarter, handily outpacing forecasts. Yet with wages growth so anaemic, consumers only managed to spend more by saving at a slower pace, a trend that can only last so long. RBA Governor Philip Lowe has also warned that high levels of household
debt could curtail spending should consumers decide they have to put more aside to pay off that borrowing. “It is still early days, but even if growth in retail sales were to remain at 0.4 per cent in February and March, it appears that real consumption growth would still struggle to match the fourth quarter’s 0.9 per cent q/q rise,” said Kate Hickie, economist at Capital Economics.
‘Retail sector has annual sales of US$220 billion and is the country’s second-biggest employer with 1.25 million workers’ Yesterday’s data showed sales of clothing, footwear and personal
accessories dipped 0.4 per cent, likely in part due to falling prices amid intense competition, while department stores suffered a 0.5 per cent fall. “The industry data are oscillating around a soft monthly trend,” said Citi economist Josh Williamson. That matters as the retail sector has annual sales of A$290 billion (US$220 billion) and is the country’s second-biggest employer with 1.25 million workers. “The other reason why we view retail sales growth as weak is because of the on-going discounting cycle and competitive pressure from new
entrants that is keeping price growth well contained. This in turn is helping to keep overall inflation pressures mild,” Williamson said. Core inflation is already at a record low of 1.5 per cent and looks like staying under the RBA’s target band of 2-3 per cent for another year or more. While such softness might argue for a further cut in interest rates, the central bank is concerned an easing would only fuel more borrowing for speculation in housing and, ultimately, a damaging bust in the market. Reuters
12 Business Daily Tuesday, March 7 2017
Asia Political scandal
S.Korea special prosecutor says President Park colluded with friend for Samsung bribe Based on the main charges levied against Samsung’s Lee, he could face more than 20 years in prison if convicted Ju-min Park
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outh Korea’s President Park Geun-hye colluded with her friend Choi Soon-sil to receive bribes from Samsung Group aimed at cementing Samsung Chief Jay Y. Lee’s control of the conglomerate, the special prosecutor’s office said yesterday. The conclusion paved the way for state prosecutors to investigate Park if she is removed from office by the Constitutional Court reviewing her impeachment and possibly indict her for bribery and blacklisting artists and writers. In a statement detailing the findings of its investigation, the special prosecutor’s office said the National Pension Service voted in favour of a merger of two Samsung Group affiliates in 2015, despite anticipating a 138.8 billion won (US$119.87 million) loss. “Samsung Group vice chairman Lee Jae-yong colluded with others including the corporate strategy office chief Choi Gee-sung to bribe the president and Choi Soon-sil with an aim to receive support for his succession by embezzling corporate funds,” special prosecutor Park Young-soo told a televised news conference, referring to the Samsung chief’s Korean name. Lee, 48, pledged 43 billion won (US$37.19 million) in return for support from Park and Choi for a variety of steps including a merger of two
Samsung affiliates in 2015 and the 2016 domestic listing of a loss-making drug maker Samsung Biologics Cfo Ltd, the special prosecutor said. Park, Choi and Lee have all denied wrongdoing. President Park’s lawyer said on Monday that the special prosecutor’s charge against her was “fiction” and that she did not receive illicit favours from Samsung. “Future court proceedings will reveal the truth,” Samsung said in a statement, reiterating it did not pay bribes or make improper requests seeking favours. The investigation looked into an influence-peddling scandal involving Park, who was impeached by
parliament in December after accusations she had colluded with her long-time friend Choi to pressure big businesses to donate to two foundations set up to back the president’s policy initiatives.
Key Points Prosecutor says Samsung chief sought to bribe president Samsung Group repeats it did not bribe president President Park cannot be indicted while in office
The 65-year-old daughter of a former military strongman has had her powers suspended. The Constitutional Court will rule on whether
South Korea’s President Park Geun-hye
to uphold parliament’s December impeachment of Park. The court is expected to hand down its decision sometime this month. Should it uphold the impeachment, Park would become the country’s first democratically elected president to be thrown out of office and spark an election in Asia’s fourth-largest economy. South Korean law does not allow a sitting president to be indicted. No formal charges can be brought against her until she is either removed from office or her term ends as scheduled in late February of 2018. Her removal from office would subject her to a fresh investigation by state prosecutors, who have been handed the record from the special prosecutor’s office that has named her as a suspect on charges laid to Choi and Samsung chief Lee. “Bribery charges related to the president, and the culture blacklist case ... have been transferred to the prosecutors’ office,” special prosecutor Park said. The special prosecutor also said the president was instrumental in blacklisting more than 9,000 artists, authors and movie industry professionals and excluding them from government assistance that constituted an abuse of power. Lee, a third-generation leader of the Samsung tech giant “chaebol”, and four other executives, were last week charged with bribery and embezzlement over the corruption scandal. Based on the main charges levied against Lee, he could face more than 20 years in prison if convicted. Reuters
Banks
Asian lenders take Australia market share in rapid expansion Australian banks can expect to see more competition from overseas Sharon Klyne and Carol Zhong
Asian banks are ramping up their loans business in Australia, taking market share from local lenders who are trying to manage the rising regulatory costs of maintaining adequate capital to protect against potential credit defaults, according to a Basis Point report. The Australian banks, however, are sanguine about the rising foreign competition, seeing it as a route to participating in syndicated loans that keep its broad client base intact while meeting regulators’ stringent rules. “More bank liquidity is good for the borrower. There is a greater drive for more efficient capital usage and capital to support clients,” said Michael Isaacs, executive director – loan syndications at Australia and New Zealand Banking Group. A case in point is last year’s sale of New South Wales energy company AusGrid by AustralianSuper and IFM Investors. The deal was backed by a A$12.77 billion (US$9.69 billion) acquisition loan from 21 lenders, 10 of whom were Asian institutions providing A$5.71 billion of that loan, sources previously told Basis Point. Data from Thomson Reuters Loan Pricing Corp show Chinese lenders more than doubled their share of syndicated and club loans marketed in Australia in 2016 to 10.05 per cent
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from 3.9 per cent in 2015. Taiwanese banks also increased their share of all lending to 2.54 per cent from 0.60 per cent in 2015, while it was up three percentage points to 14.83 per cents for Japanese lenders. In the same period, the Australian banks had their share of lending shaved by almost 10 per centage points to 42.9 per cent in 2016, Basis Point said in a report published yesterday. Chinese companies are targeting investments in the mining sector in Australia after a recovery in commodity prices according to a senior loans banker in Beijing with a major Chinese lender, who spoke on the condition of anonymity as he was not authorised to speak to the media.
Indeed, Australian banks can expect to see more competition from overseas. Taiwan’s Taishin International Bank has received approval from Australia’s Australian Prudential Regulation Authority (APRA) to open a full branch this year, sources familiar with the process told Basis Point. China CITIC Bank and China Merchants Bank as well as Bank of Taiwan, the island’s largest bank, are also applying for branch licences, said the sources, who declined to be identified because the matter was not public. But this rapid expansion has not gone unnoticed by the Australia regulators, with the Reserve Bank Governor Glenn Stevens warning of potential systemic risks. There are signs that Chinese banksled lending growth could slow.
Since late last year, the Chinese government has delayed approving a number of overseas acquisitions by making it harder for Chinese firms to obtain cross-border guarantees and to transmit money from onshore to offshore entities.
“Liquidity from Chinese lenders may start to taper off in the second half of this year to protect their US dollar liquidity” John Corrin, global head of loan syndications for ANZ in Hong Kong These measures may start to affect Chinese banks’ ability to lend in dollars to non-Chinese firms in the second half of the year. “Liquidity from Chinese lenders may start to taper off in the second half of this year to protect their U.S. dollar liquidity,” said John Corrin, global head of loan syndications for ANZ in Hong Kong. But Corrin believes any withdrawal will be easily filled by other international lenders. “There is still plenty of other liquidity in the market… to cover the shortfall.” Reuters
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Business Daily Tuesday, March 7 2017 13
Asia In Brief Business links
NZ delegation arrives Sri Lanka A New Zealand business delegation arrived in Sri Lanka yesterday to further strengthen business links between the two countries. Led by New Zealand Food Safety Minister David Bennett, the delegation comprises some of New Zealand’s leading companies. Sri Lanka is New Zealand’s 23rd largest goods export market and New Zealand is Sri Lanka’s 54th largest goods export market. New Zealand’s top exports to Sri Lanka are milk powder, butter and fruit. Sri Lanka’s top exports to New Zealand are tea, retreaded tyres and gloves. Former Japanese economy minister Akira Amari during last year's World Economic Forum. Lusa
Malaysia palm stocks likely dropped to six-month low
Former minister
U.S.-Japan talks should avoid fiscal, monetary policy meddle Amari will visit the U.S. with other Japanese lawmakers this week to meet U.S. lawmakers to exchange views on including the economy and trade Kaori Kaneko and Ami Miyazaki
Japan and the United States should avoid trying to interfere with each other’s fiscal and monetary policies when they start bilateral economic talks next month, former Japanese economy minister Akira Amari said
Survey
yesterday. Amari, who led Japan’s negotiation team on the Trans-Pacific Partnership, which was essentially scuttled when President Donald Trump pulled the United States out, said the two nations needed to conduct talks with an eye towards
emerging markets and the world as a whole. Trump and Prime Minister Shinzo Abe agreed last month to launch a bilateral economic dialogue to discuss trade and infrastructure investment. Japan, concerned about Trump’s strident comments about trade and currencies, hopes to use the talks to seek ways to avoid trade friction and ensure Washington is engaged in the Asia-Pacific region. Asked about the possibility that the U.S. may make demands regarding Japan’s fiscal and monetary policy, Amari told Reuters in an interview: “One nation should not meddle with another nation in areas where sovereign and independent rights exist.” Taro Aso, finance minister and deputy prime minister, and Vice President Mike Pence, who is expected to visit Japan next month, will lead the bilateral talks. Amari will visit the U.S. with other Japanese lawmakers this week to meet U.S. lawmakers to exchange views on including the economy and trade.
Key Points Japan, U.S. need broad view for econ dialogue Two nations unlikely get into detailed talks immediately U.S.-Japan dialogue to build common view, cooperate each other “The economic dialogue should be a place to build a basis for how Japan and the U.S. can share common view and cooperate with each other strategically, with a view toward the Asia-Pacific region and the world but beyond the two nations,” Amari said. Trump has complained about the U.S. trade deficit with Japan and accused Tokyo of using its “money supply” to weaken the yen and give exporters an unfair advantage - seen as a criticism of the Bank of Japan’s radical policy of flooding the financial system with yen to end decades of deflation. Still, Trump avoided harsh rhetoric during a friendly summit with Abe last month that included a round of golf. Amari said Japan’s monetary policy is aimed at beating deflation because the nation needs to revive the economy and restore fiscal health. He said Japan and the United States were unlikely to have a detailed discussion on issues like trade deficit at the outset of the dialogue. “Currency manipulation and monetary policy need to be separated,” he said. Reuters
Malaysia’s palm oil inventories likely fell to their lowest in six months at the end of February, aided by declining production that dropped to its lowest in nearly a year, a Reuters poll showed. Falling inventory levels could prop up benchmark palm oil futures on the Bursa Malaysia Derivatives exchange, which declined nearly 10 per cent in the second half of February before seeing a slight rally last week, tracking soyoil prices. Stockpiles in Malaysia, the world’s second-largest palm producer, in February fell 4.4 per cent from a month earlier to 1.47 million tonnes. Philippines
C.bank says may be no need for policy change The Philippine central bank said on Monday there may be no need for it to adjust monetary policy at the moment as the market seems to have already priced in a possible interest rate increase by the U.S. Federal Reserve this month. Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco also said the central bank would “refresh” its inflation forecasts, taking into account the anticipated Fed action. “Because the market may have already priced in the March Fed move we may have no need to make adjustments to policy for the moment,” he said in a text message to reporters. Trade
Vietnam targets shrimp, catfish export Vietnam targeted shrimp and catfish as two key seafood export products in 2017, according to the Ministry of Agriculture and Rural Development (MARD) yesterday. Accordingly, the country will maintain its shrimp production area of 700,000-800,000 hectares, with a focus on intensive and extensive farming, reported local Tien Phong (Pioneer) online newspaper. Nearly 44,000 tons of shrimp were produced in the first two months of 2017, up some 24 per cent year-onyear. Meanwhile, for catfish production, Vietnam will put priority on ensuring seed quality and quantity. It is forecast that this year, catfish will enjoy high stable price.
14 Business Daily Tuesday, March 7 2017
International In Brief M&A
PSA buys Opel-Vauxhall for 1.3 billion euros French carmaker PSA yesterday announced the acquisition of General Motors’ European subsidiary, which includes the Opel and Vauxhall brands, for 1.3 billion euros (US$1.38 billion). The move sees PSA regain its position as Europe’s second-largest automobile manufacturer, after Germany’s Volkswagen, overtaking rival French firm Renault. PSA said in a statement it was also buying GM Europe’s financial operations for 900 million euros in a joint deal with bank BNP Paribas, taking the total value of the deal to 2.2 billion euros. The takeover includes six assembly plants and five component-making facilities and some 40,000 employees. C.bank
Russia says inflation expectation decline halted Russia’s central bank said on Monday that a decline in inflation expectations stopped in February. The bank cited a survey by the inFOM agency as showing that expected inflation levels for the next 12 months rose by 1.4 percentage points to 12.9 per cent, after falling for two months in a row. “In this way, the volatility of inflation expectations, which grew in the second half of 2016, remains,” the central bank said in a statement. It added that elevated and volatile inflation expectations call for maintaining moderately tight monetary policy.
Oil industry
Investors start doubting oil rally after failure to top US$55 OPEC crude output fell by 65,000 barrels a day to 32.17 million in February Mark Shenk
T
he oil market’s failure to break out of the tightest range in more than a decade is sapping investor interest. After hitting a record high last week, hedge funds reduced wagers that U.S. oil prices would rise as concern grows that the market is again becoming vulnerable to a drop. Earlier bullish sentiment was based on optimism that OPEC production cuts would ease supply gluts. Now record U.S. crude stockpiles are raising doubts about that outlook. “They’ve gone so far on hopes and dreams,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. “I’m worried they’ve overdone it, since we haven’t seen much happen with measures that would support the market -- i.e. inventories.” The Organization of Petroleum Exporting Countries (OPEC) deal with 11 other major producers to reduce output spurred a 17 per cent rally in U.S. oil prices during the last five weeks of 2016. This year, the rally has stalled as American production and supplies advanced. West Texas Intermediate (WTI) bounced between US$51.22 and US$54.94 in February, the tightest range since August 2003. Hedge funds trimmed their netlong position on WTI, or the difference between bets on a price increase
and wagers on a decline, by 6.5 per cent in the week ended Feb. 28, U.S. Commodity Futures Trading Commission data show. WTI slipped 5 cents to US$54.01 a barrel in the report week, and closed at US$53.33 on March 3. “It’s a relatively small adjustment to the overall positioning in the market,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a telephone interview. “With the sizable accumulation of net-length in the market, this raises concerns that it’s about to stall out and rollover.”
OPEC curbs
OPEC crude output fell by 65,000 barrels a day to 32.17 million in February, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. The 10 members of the group that pledged to make cuts in Vienna in November implemented 104 per cent of those reductions, largely because Saudi Arabia went beyond its target. U.S. crude inventories climbed to 520.2 million barrels in the week ended Feb. 24, the highest in weekly data going back to 1982, according to the Energy Information Administration. Production rose to 9.03 million barrels a day during the same period, the highest since March 2016. The American oil rig count rose to 609 last week, the highest since October 2015, according to Baker Hughes Inc.
M&A
Standard Life, Aberdeen agree merger Investment managers Standard Life and Aberdeen agreed an 11 billion pound (US$13.5 billion) merger that should save 200 million pounds a year in costs, pressuring rivals to follow suit as industry margins sag. The deal comes as asset managers which charge a higher fee to make active investment decisions face growing competition from low-cost index-tracking rivals and rising regulatory costs. The groups said the new company, to be headquartered in Scotland, would take a one-off 320 million pounds cash charge to cover integration costs. Obamacare
U.S. Republicans expected to unveil healthcare bill Republican U.S. lawmakers expect to unveil this week the text of long-awaited legislation to repeal and replace the Obamacare healthcare law, one of President Donald Trump’s top legislative priorities, a senior Republican congressional aide said on Sunday. Since taking office in January, Trump has pressed his fellow Republicans who control Congress to act quickly to dismantle former Democratic President Barack Obama’s Affordable Care Act and pass a plan to replace it, but lawmakers in the party have differed on the specifics. Democrats have warned that Republicans risk throwing the entire U.S. healthcare system into chaos by repealing the 2010 law.
“The market is very long and very vulnerable,” Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania, said by telephone. “They are trying to wait out the turnaround season, which will be over in a month, and are betting OPEC will continue to pull back barrels.”
Seasonal demand
U.S. crude demand typically drops in the first quarter when refiners plan maintenance programs because that’s when there’s a lull between winter preparations and the summer surge of gasoline consumption. These repairs and upgrades, known as turnarounds, usually wane in March and April.
“The market is very long and very vulnerable” Stephen Schork, president of Schork Group Inc., a consulting company in Villanova
Hedge funds reduced their net-long position in WTI by 26,930 futures and options to 386,707, the biggest decline since November. Longs slipped 3.9 per cent from an all-time high, while shorts jumped 24 per cent. WTI tumbled 2.3 per cent on March 2 as the dollar surged against its peers on speculation the Federal Reserve will raise interest rates this month. Futures also settled below the 50-day moving average for the first time since Nov. 29, the day before OPEC agreed to its first supply cut since 2008. Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees US$133 billion of assets, said he’s curious to see how the 2.3 per cent price drop on March 2 will affect the next CFTC report. Money managers “were rather quiet in the period of this report; They didn’t give up but they didn’t add either. It looks like speculators are finally becoming contemplative about the risks.” Bloomberg News
Tourism
Trump uncertainty slowing U.S. travel bookings According to travel search site Kayak, searches from Europe for flights to the U.S. are down by 12 per cent since the elections Demand for travel to the United States over the coming months has flattened out following a positive start to the year, with uncertainty over a possible new travel order likely deterring visitors, travel analysis company ForwardKeys said yesterday. ForwardKeys, which analyses 16 million flight reservations a day from major global reservation systems, also said that travel from the United States to and from the Middle East has been especially hard hit after President Donald Trump’s move to ban people from seven Muslim-majority countries. “Uncertainty reigns and the presidential rhetoric appears to be deterring visitors to the U.S.,” ForwardKeys founder Olivier Jager said in a statement. U.S. travel demand is set to be a topic at the world’s largest travel fair, the ITB, in Berlin this week.
After the travel ban was imposed in January, international travel to the U.S. dropped by 6.5 per cent in the following eight days, ForwardKeys data showed last month.
“After the travel ban was imposed in January, international travel to the U.S. dropped by 6.5 per cent in the following eight days” ForwardKeys data
In its latest update yesterday, ForwardKeys said bookings to the
United States recovered after the courts halted the ban, but dropped again in the nine days after plans for a new ban were announced on Feb. 17. Overall, bookings for travel to the United States over the next three months are 0.4 per cent down on last year, whereas they had been 3.4 per cent ahead the day before the travel restrictions were imposed. The study also showed that accumulated U.S. bookings to the Middle East were up by 12 per cent on last year in the three weeks before the ban. However, in the four weeks following the ban they were down 27 per cent. Emirates and Qatar Airways, two of the Middle East’s biggest airlines, declined to comment when asked about demand on U.S. routes. According to travel search site Kayak, searches from Europe for flights to the U.S. are down by 12 per cent since the elections. However, Germans, some of the world’s biggest spenders on travel, have not been deterred, with searches up 10 per cent in that period, Kayak said in data provided to Reuters. Reuters
Business Daily Tuesday, March 7 2017 15
Opinion Business Wires
Taipei Times Several major high-tech firms are to launch hiring campaigns to each recruit thousands of new employees this year for an upgrade in production technology and capacity expansion. Among the companies are Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, and flat-panel suppliers AU Optronics and Innolux. TSMC said that it is looking for 3,000 to 4,000 engineers this year, as output of its advanced 10 nanometre process — which began commercial production in the fourth quarter of last year — is expected to pick up significantly this year.
The Jakarta Post The (Indonesian) Trade Ministry will approach six countries, mostly nontraditional markets, to try and expand Indonesian exports and discuss the potential of sealing trade agreements during a series of high-level meetings with members and partners of the Indian Ocean Rim Association (IORA) next week. The six countries are the United Arab Emirates (UAE), South Africa, Bangladesh, Iran, the United States and the United Kingdom (UK). The UAE, South Africa, Bangladesh and Iran are IORA members, while the U.S. and the UK are IORA partners that will participate in the meetings from March 5 to March 7.
Viet Nam News The Prime Minister recently ratified a project to stimulate non-cash transactions in 2016-20 with a view to reducing the cash transactions rate to under 10 per cent. The project aims to accelerate e-commerce and implement the Master Scheme on E-commerce Development. All supermarkets and modern distribution centres will take part in e-commerce while 70 per cent of water, electricity, telecom payments will be in non-cash mode. Half of all individuals and households will switch to non-cash transactions. Financial inclusion will be targeted and at least 70 per cent of people aged over 15 will have bank accounts by 2020.
The Japan News The Japan Livestock Industry Association has created a new logo for overseas promotion of wagyu beef that more clearly shows the meat was produced in Japan. The association, which supports livestock breeders, has removed the word “WAGYU,” part of the current logo, and instead added “JAPAN” in large letters. The new version will debut at home and abroad in April. Organizations in the industry define “wagyu” as purebreds or crossbreeds from four breeds, including Japanese Black. Introduced in 2007, the current logo has been displayed abroad on restaurant menus and wagyu products in stores to promote beef produced in Japan.
Beware China’s wealth-management reforms
A
major factor behind the soaring growth of risky wealth-management products (WMPs) in China is that investors typically think the government stands behind them. Lately, nervous regulators have been emphasizing that this isn’t so. But they’ll have to do a lot more to change expectations in a statedominated economy. Wealth-management products are short-term, high-yielding investments that are issued by banks. The market for such products is now worth close to US$4 trillion, or nearly 40 per cent of China’s gross domestic product. Banks are heavily reliant on them for liquidity, and investors have come to view them as more or less risk-free, thanks to previous government bailouts. This is a problem, as China’s regulators well know. And officials have recently started signalling that the days of limitless government support are over. They’re trying to establish a market in creditdefault swaps, to better price and manage credit risk. They’re imposing some mild new restrictions on WMPs, meant to rein in new issuance. Officially, even corporate defaults are up, suggesting that the government is finally getting serious about imposing losses on investors. But there are reasons to doubt this new resolve. For one thing, regulation remains deficient. Banks are still allowed to hold wealth-management products off balance sheet, which allows them to stay within formal lending limits and meet capital requirements. When financial companies sell structured products, they typically partner with state-owned banks, lending a sheen of respectability to highly risky securities. Wealthmanagement products are even allowed to invest in wealth-management products, thus intensifying risk across the board. And implicit bailouts -- despite the rhetoric -- are still rising. Some of the most toxic corporate assets in China are being restructured to avoid significant investor losses. Rather than imposing pain on banks that made reckless loans, the government is bailing out investors with little hope of recouping their capital. Even “bad banks” -- asset-management companies created to soak up bad loans from struggling lenders -- are selling bonds to buy the toxic debt, thereby piling leverage upon leverage. Worse, all this may actually reinforce the perception that the government will step in, as it has so many times in the past. When a hugely risky product from China Credit Trust Co. nearly defaulted in 2014, and protesters promptly marched on a branch of the Industrial & Commercial Bank of China, the primary sales agent, the government arranged for
“
Christopher Balding a Bloomberg View columnist
a white knight to make investors whole. When Bohai Steel Group was teetering last year, a city government stepped in to restructure its debt while imposing almost no losses. This kind of thing has intensified moral hazard at every level. Talk to most any investor in China and they clearly expect that financial products are “guaranteed.” The same goes for local governments, banks and wealth-management firms: No one fears significant losses, and everyone expects the government will save them when things go south. They may not be wrong. China’s government is now engaged in a game of chicken. Impose losses on investors, and it risks triggering a run on the bank; continue bailing out investors, and it risks creating a problem that will swallow the economy whole. So what to do? There’s plenty of talk about merging regulatory agencies or creating new working groups. But none of that will help until the government resolves to start imposing meaningful losses, lowering overall leverage and reducing the economy’s addiction to credit. Doing so will require a delicate balancing act. In other countries, bankruptcies usually result in debt holders losing 50 to 75 per cent of what they’re owed. In China, that number is closer to zero for major companies. To avoid triggering a wave of defaults, regulators should allow for haircuts of, say, 25 per cent -enough to cause pain, but not enough to cause a panic. By publicly backing failing firms while still imposing losses, the government would begin to force companies to reckon with market forces while containing anxiety. Authorities also need to crack down on the risky lending practices that caused such problems to begin with. Some banks still hold more than half their assets off balance sheet, and their capital ratios would be well below required levels if they were forced to report them accurately. As long as regulators approve of such practices, they’re encouraging reckless behaviour. Without reform, risks will only accumulate until losses can no longer be supported, in which case China will have an even bigger problem on its hands. And that’s what makes moral hazard so pernicious: Delaying the pain only compounds the risk. Bloomberg View
No one fears significant losses, and everyone expects the government will save them when things go south
”
16 Business Daily Tuesday, March 7 2017
Closing Wealth
Sri Lanka’s capital Colombo to see growth in super rich
net worth individuals with more than US$30 million. However, no dollar billionaires listed are Sri Lanka’s capital Colombo (pictured) is likely to see a 160 per cent growth in Sri Lankan residents. the super rich over the next decade, the Only Vietnam’s Ho Chi Minh City was expected to grow faster than Colombo, local media reported yesterday. According to the 2016 Wealth Report by with a growth of 170 per cent. In 2011, Sri Lanka was listed among Knight Frank, a Britain based property six of the 10 countries in Asia with the consultancy, super rich individuals in Colombo with more than US$30 million fastest-growing millionaire populations, personal wealth will reach 182 by 2026. led by Hong Kong and Vietnam, according to the World Wealth Report Sri Lanka has 3,400 dollar millionaires, 170 multi-millionaires and 70 ultra high by Merrill Lynch. Xinhua
Gender gap
World marks women’s day with rights under attack The long-running struggle for equal pay still has a way to go Jessica Lopez
N
o self-congratulations but calls to action will mark many celebrations of the 40th International Women’s Day on Wednesday, as the fight for equality faces new threats. Murders of women in Latin America, anti-abortion movements in Europe, and machismo talk from men in power are among the growing concerns that have brought millions of women into the streets of world capitals these past few months to defend their rights. “March 8 is not only to commemorate suffragettes and to celebrate successes from the past, but more to reflect on the present situation,” said Barbara Nowacka, a Polish politician and representative of the committee “Save Women”. “There is still a lot to do concerning women’s role in the labour market, society, politics,” she told AFP ahead of the global day highlighting women’s rights started by the United Nations in 1977. Some recent developments have feminists worried about such key issues as abortion rights, pay equity and gender-based violence. In Nowacka’s own country, the ruling conservative party is trying to curtail laws on abortion rights, already among the most restrictive in Europe -- one of several signs of rising anti-abortion movements across the continent.
These groups “are uniting, are very present on social media and have political weight,” said Christine Mauget, in charge of international matters at France’s Family Planning agency. “In 2017, there is still a major problem of machismo,” Mauget added. “It is difficult to move things forward, but we try to prevent them from going backward.”
Anti-Trump marches
The worries about women’s rights in the face of sexist male attitudes were on display in the huge women’s marches following the inauguration of U.S. President Donald Trump in late January. Two million women took to the streets in cities around the globe,
especially in Washington, where protesters in pink “pussy hats” voiced their opposition to Trump’s policies and his sometimes sexist and vulgar comments about women seen on videotape during the campaign. Two days after those marches, Trump acted on his anti-abortion stance when, surrounded by male advisors, he signed a decree banning the financing of international charities that support abortions. “The problem isn’t abortion but unwanted pregnancies,” said Mauget, calling for more extensive sex education to help prevent such circumstances.
Paychecks, abuse
When it comes to women’s pocketbooks, the long-running struggle for equal pay still has a way to go. Worldwide, women earn on average 23 per cent less than men. At that
pace it would take 70 years to close the gap, according to the International Labour Organization (ILO). The statistics are also dire regarding violence against women.
“There is still a lot to do concerning women’s role in the labour market, society, politics” Barbara Nowacka, a Polish politician and representative of the committee “Save Women” According to the United Nations, about 35 per cent of women around the world have been victims of physical or sexual violence. Some 200 million women and girls have been subjected to a form of genital mutilation and 700 million have been married before the age of 18. All over Latin America in October the movement #NiUnaMenos (“Not one less”) rose up against “femicide” and abuse of women after the brutal murder in Argentina of a teenage girl who was drugged and gang raped. Ariadna Estevez, a university researcher in Mexico, described the mass women’s movement as “a wake-up call” in the region. For activists such as Nowacka, the message for women standing up for their rights is: “We feel anger, but we know we are not powerless”. AFP
Insurance
Credit
Internet
Commercial care service for elderly in Guangdong
China’s target implies adding entire German GDP
Philippines approves plan to boost broadband nationwide
Commercial insurance will cover elderly care service in Guangdong. It was the first such attempt by local authorities to help elderly care institutions cope with operating risks. Guangdong’s Department of Civil Affairs recently signed a three-year contract with a co-insurer, which is composed of several local insurers including the provincial branch of PICC Property and Casualty Company Limited (PICC P&C) -China’s largest general, non-life insurer. The province’s elderly care institutions will receive up to RMB25 million (about US$3.6 million) for patients’ personal injuries due to the provider negligence and resulting legal fees, said an official with the provincial branch of PICC P&C. The local insurance regulator said the contract will help protect the legal interests of the elderly and promote sustainable development of elderly care institutions. Official data showed that Guangdong had 2,966 elderly care institutions which could accommodate about 205,000 elderly people as of April 2016. There are currently more than 220 million people over 60 years old in the country. Xinhua
China’s credit engine will keep humming this year, adding the rough equivalent of Germany’s annual economic output to its already massive stock of total social financing, according to estimates derived from the nation’s 2017 targets. Adding higher equity market financing and about RMB5 trillion (US$725 billion) worth of local government bond swaps to the official credit growth target of 12 per cent, analysts at UBS Group AG see TSF expansion of 14.8 per cent this year. They calculate that’s equal to a whopping RMB23 trillion, or US$3.3 trillion, addition to the amount of total credit already swishing around the world’s second-largest economy. “China’s pace of leverage increase will be slowing, albeit not by that much,” economists led by Hong Kong-based Wang Tao wrote in a report. “The government’s intention for a still strong pace of credit growth and recent notable tightening in China’s money market and bond market attest to the difficulties facing the PBC in balancing monetary policy.” China’s great ball of money creates a constant headache for policy makers as money flows from asset class to asset class, creating bubbles along the way. Bloomberg News
Philippine President Rodrigo Duterte approved yesterday a broadband internet plan, estimated to cost up to US$4 billion, aimed at boosting access and service quality in a country growing at one of the world’s fastest rates but lagging behind peers in connectivity. The Southeast Asian nation is plagued by poor Internet coverage and low bandwidth, frustrating businesses and consumers, which complain of lacklustre services. The telecoms duopoly of PLDT Inc and Globe Telecom Inc have already been warned by Duterte to shape up, or face new competition. “President Duterte has approved the establishment of a National Government Portal and a National Broadband Plan,” agriculture minister Emmanuel Pinol said after a Cabinet meeting. Pinol said Duterte had emphasized the need for faster internet connection by rolling out a broadband plan that includes the deployment of fibre optics cables and wireless technologies. Department of Information and Communications Technology Secretary Rodolfo Salalima has earlier estimated the project could cost somewhere between 77 billion pesos (US$1.53 billion) to 200 billion pesos (US$3.98 billion). Reuters