Taiwan to permit tax refund for MSAR companies VAT Page 7
Thursday, March 16 2017 Year V Nr. 1255 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Commodities
China to increase quality checks on coal imports Page 9
eCommerce
Legislation
Young businessmen too timid to snap up cross-border eBusiness Page 6
www.macaubusinessdaily.com
Head of AL: Consider different characteristics of Greater Bay Area co-operation Page 4
Corporations
Macau, Hong Kong and Taiwan investments in new firms soar Page 6
Education
IFT announces post graduate programmes Page 6
Rollercoaster Real Estate Real estate
February data in the property sector didn’t make the grade. Real estate in the MSAR fell in almost every detail. Although Coloane housing held its own following the Chinese New Year holiday. Page 2
Brickbats, not bouquets
Smoke and mirrors
New proposed smoking legislation may negatively impact the VIP gaming sector, say gurus. Who forecast a plunge of around 10 per cent in the high level marker. Plus a 5 per cent dip in overall gross revenues.
Election Committee A plea for participation in the upcoming legislative elections. Attracting criticism from the MSAR Electoral Committee head. A series of messages sent by Legislator José Pereira Coutinho were not well received by the electoral watchdog. Despite being perfectly legal. Page 4
Popular port of call
Cargo The domestic port saw a terrific increase in Q42016. Facilities saw a 118.1 pct rise in outward port cargo tonnage discharged. With the majority of cargo heading for the Mainland. Page 5
A steady hand
Smoking bill Page 3
HK Hang Seng Index March 15, 2017
23,792.85 -35.10 (-0.15%) Worst Performers
Wharf Holdings Ltd/The
+1.55%
CK Hutchison Holdings Ltd
+0.78%
Belle International Holdings
-1.49%
Hang Seng Bank Ltd
-0.88%
Hong Kong Exchanges &
+1.41%
Lenovo Group Ltd
+0.42%
Cathay Pacific Airways Ltd
-1.38%
China Shenhua Energy Co
-0.76%
Hengan International Group
+1.31%
China Overseas Land &
+0.40%
CNOOC Ltd
-1.12%
China Petroleum & Chemical
-0.68%
CLP Holdings Ltd
+1.23%
HSBC Holdings PLC
China Resources Land Ltd
+1.15%
Tencent Holdings Ltd
+0.31% +0.00%
China Mengniu Dairy Co Ltd
-1.03%
Industrial & Commercial
-0.59%
Bank of China Ltd
-1.02%
PetroChina Co Ltd
-0.53%
19° 21° 20° 21° 20° 22° 20° 23° 20° 23° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
NPC Premier Li Keqiang’s press conference after the close of the National People’s Congress matched expectations. He rejected the concept of a trade war with the U.S. And conceded that reaching the 2017 growth target will be hard. Although a bond market link with Hong Kong is on the agenda. Page 8
2 Business Daily Thursday, March 16 2017
Macau Creative industries
Alvin Chau’s Cultural Industries Council appointment renewed
The Council, created in April 2010, also counts as a member the official who authorised Chau’s mandate renewal, The head of the privately held junket Secretary Alexis Tam Chon Weng. Among Suncity Group, Alvin Chao Cheok Wa, the membership is the president of the has had his appointment as a member of Cultural Affairs Bureau, the head of the the Cultural Industries Council renewed, Civic and Municipal Affairs Bureau (IACM) according to a dispatch in yesterday’s plus heads of the Economic Service, Official Gazette. The junket head will continue his mandate for Financial Services Bureau, Tourism services a further two years, commencing April 2, 2017. and Education services.
Real estate
Property transactions dip in February Meanwhile, transactions increased substantially compared to the same month of the previous year Cecilia U cecilia.u@macaubusinessdaily.com
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he city saw a slight decrease of 15.3 per cent month-onmonth for total housing transactions in February but a 103.7 per cent surge when compared to the same month in 2016, the latest official data released by the Financial Services Bureau (DSF) discloses. Of the total transactions during the month of February, 427 were residential units on the Macau Peninsula, down 16.9 per cent month-on-month although double when compared to February 2016, according to Business Daily’s calculations of official data. Some 84 units were transacted in Taipa Island last month, indicating a month-on-month decrease of 27 per cent but an increase of 75 per cent year-on-year. Official data reveals that there were a total of 35 transactions of residential units in Coloane in February, which indicated increases for both monthly (16) and yearly (18) transactions. Total off-plan sales for February, meanwhile, increased 20 per cent month-on-month from 60 to 72. When compared to 32 transactions a year ago, the number from February this year climbed by 125 per cent. In particular, off-plan units on the Peninsula and Coloane both recorded 33 transactions, respectively, with the number for Coloane representing a surge of 153.8 per cent month-on-month and 83.3 per cent year-on-year.
Meanwhile, transactions on completed units, amounting to 474 in February, decreased by 19 per cent month-on-month, but the number doubled vis-à-vis the same month a year ago.
Housing prices dipped month-on-month
Apropos the average housing price in February, DSF data shows that the city experienced a small drop of 1.4 per cent month-on-month, amounting
to MOP88,440 (US$11,053) per square metre compared to MOP89,727 per square metre in January. Nevertheless, the cost increased 19.9 per cent year-on-year compared to MOP73,733 per square metre a year ago. District-wise, housing prices for Coloane experienced a slight increase, up 0.1 per cent month-onmonth from MOP123,294 in January to MOP139,374 per square metre last month. The amount, however, rose by 50 per cent year-on-year as compared to MOP92,914 per square metre. Housing on the Macau Peninsula
and in Taipa stood at MOP81,752 and MOP94,726 per square metre, representing declines of 1.7 per cent and 7.2 per cent month-on-month, respectively. According to Bureau data, the city’s average off-plan prices declined by 7.5 per cent month-on-month to MOP123,143 per square metre. But when compared to MOP94,468 a year ago, these prices represent a sharp climb of 30.4 per cent. In more specific terms, all districts of the city - the Macau Peninsula, Taipa and Coloane - saw housing prices decrease month-on-month at 9.1 per cent, 3.8 per cent and 7.2 per cent, respectively. For the average cost of completed units, a slight drop of 0.6 per cent month-on-month was recorded, to MOP82,313, with only units on the Peninsula increasing, by 1.1 per cent. The price also indicated an increase of 16.4 per cent year-on-year.
Crime
Loan shark ‘junket people’ arrested A group of 12 Mainland Chinese have been arrested by the city’s Judiciary Police (PJ) for allegedly running a loan shark group, posing as gaming operators or junkets, local broadcaster TDM Radio News reported. The suspects printed name cards that imitated cards from gaming operators and junkets to encourage gamblers to take out loans. The arrested are aged from 27 to
33, with 11 of them from Guangxi Province and one from neighbouring Guangdong Province. It is suspected that others are managing and controlling the group. According to the PJ, the criminal group had been operating since November 2015, and was mainly active in Taipa. It is alleged that gamblers would contact the group for loans and the group would extract a 30 per cent commission.
The PJ also uncovered a scam involving counterfeit banknotes circulating in casinos. In total, 180 counterfeit notes were found, in a mix of United States currency and Hong Kong dollars. One individual of Canadian descent has been arrested, while two others – one from the Mainland, and the other whose nationality was not revealed – were also apprehended.
The fist individual was discovered by casino staff as the suspect attempted to exchange chips. The suspect was allegedly using both counterfeit and real banknotes. The counterfeit notes are made of poorer quality paper than their counterparts. The other two individuals were found in two other casinos, with one Mainland Chinese woman allegedly exchanging chips at the tables with two HK$1,000 (US$129) counterfeit banknotes, and one man using HK$500 at the slot machines. C.U.
Business Daily Thursday, March 16 2017 3
Macau Gaming Melco Crown gaming revenues in 2019 could suffer largest impact if smoking bill is approved
Profits up in smoke Analysts believe that if the newly proposed smoking bill is approved gaming revenues from VIP and premium mass tables where smoking is allowed could fall by 10 per in the first year of enforcement, while overall gross gaming revenues could fall by 5 per cent Nelson Moura nelson.moura@macaubusinessdaily.com
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he approval of the newly proposed smoking bill could lead to a 10 per cent decrease in VIP and premium mass gaming revenues and a 5 per cent decrease in overall gaming revenues in 2019, the expected first year of full enforcement, according to analysts at JP Morgan. On Tuesday, the second standing committee of the Legislative Assembly (AL) announced that it agrees with the government’s proposed changes that gaming operators will have until January 1, 2019 to install new smoking lounges or update their current ones to meet new standards. With smoking currently allowed at the gaming tables in VIP rooms and premium mass rooms, a possible approval of the smoking bill would mandate gaming operators install smoking lounges in these areas by the deadline given. For JP Morgan analysts, the passing of the bill would impact gross gaming revenues from current smoking tables in both VIP rooms and premium mass rooms by up to 10 per cent once the bill is fully implemented from the beginning of 2019.
The report estimates VIP revenues currently represent around 45 per cent of gross gaming revenues and almost 20 per cent of gaming EBITDA in the city’s gaming market, while revenues from premium mass rooms where smoking is allowed comprise 15 per cent and 10 per cent of mass market gross gaming revenues and EBITDA, respectively. The impact on overall gaming revenues and EBITDA in 2019 was estimated at a 5 per cent and 3 per cent possible reduction respectively, considered by JP Morgan analysts as ‘not nothing, but manageable.’
Melco most exposed
When analysed by gaming operator, JP Morgan analysts believe Melco Crown Entertainment Ltd. could suffer the largest impact, since 35 per cent of its 2019 EBITDA was estimated to derive from premium mass smoking tables, especially in its integrated resort City of Dreams. Galaxy Entertainment Group (GEG) and local gaming operator Sociedade de Jogos de Macau, S.A. (SJM) would also suffer a considerable impact with 30 per cent and 20 per cent of their estimated 2019 EBITDA coming from tables where smoking is allowed. Gaming operators Sands China
澳門文學節 F E S T I VA L L I T E R Á R I O D E M A C A U M A C A U L I T E R A R Y F E S T I VA L
Ltd. (Sands China), Wynn Resorts (Macau) S.A. and MGM China Holdings Ltd. were considered to be ‘relatively immune’ in terms of a smoking bill impact on revenues, since only 10 per cent of their estimated revenues for 2019 would derive from smoking tables.
Silver lining
Despite the possible impact of the smoking bill, JP Morgan analysts consider that ‘it still remains to be seen’ if the law will actually pass voting in the AL, with the serious possibility of the bill being ‘scrapped’ if it is not approved before the legislative term finishes on August 15.
If the bill passes, analysts consider it still a ‘good compromise’ and should be seen as ‘positive’ considering it is ‘far more lenient’ than the law initially proposed in 2015, which considered a full smoking ban in all gaming areas without even allowing smoking lounges. Since the date granted for full implementation was ‘meaningfully later’ than what the market and analysts initially expected - at the end of this year or beginning of 2018 - the JP Morgan analysts also believe there will be enough time for the market to ‘study the potential impact and manage expectations accordingly.’
4-19
三月 | M A R Ç O | M A R C H
OLD COURT BUILDING | MACAU
4 Business Daily Thursday, March 16 2017
Macau Opinion
Ashley Sutherland-Winch*
Social media clone attack In the global technology renaissance that we live in, it is baffling that companies continue to clone competitors’ features instead of creating new and interesting tech. This week, Facebook has chosen to clone Snapchat. Instagram, owned by Facebook, had already started going head to head with Snapchat at the end of 2016 when they released Instagram Stories which enabled users to send disappearing messages and photos to friends and family. The social media platform Snapchat has been around for several years, a favourite among younger demographics due to the perceived anonymity that Snapchat provides. Users could send a photo or message that would disappear when opened giving recipients of the message only 8 seconds to watch before the message was deleted or post a photo for 24 hours on a ‘story’ and then it would disappear forever. Well, first Instagram copied Snapchat and now Facebook is doing the same. Facebook, the global giant, is close to reaching two billion registered users. It also has invested wisely acquiring both WhatsApp with one billion active users and Instagram with 500 million users, with both platforms continuing to grow quickly in all nations except China. Unfortunately, Facebook was unable to acquire Snapchat, which it tried to purchase for US$3 billion. The penalty for saying ‘no’ to a sale to Facebook, or at least it looks that way; is for Snapchat to have their technology cloned by all platforms that Facebook owns. Facebook launched Messenger Day this week. The feature within the Messenger app functions similarly to Instagram Stories and Snapchat, where users can compile posts that disappear after 24 hours. At launch, Messenger included more than 5,000 frame, effects, and stickers that users can apply to their content. For influencers and brands, the clones of social media create more work for creative departments that create content. Brands must duplicate efforts on Snapchat, Instagram Stories and now Facebook’s Messenger Day to reach followers. Previously, brands used diverse content like placing an eye-catching photo and post on Instagram, a live silly video on Snapchat and a detailed post on Facebook; but now they must create a different short story on all of the daily Snapchat clones as well as creating their regular content. Which clone will stand the test of time is anyone’s guess but until then, the cloning continues - with creatives everywhere hard at work creating new content for social media. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Politics
Government mulling if Land Law report findings will be made public
All different The Legislative Assembly chairman believes a future plan for a social and economic co-operation area embracing Guangdong, MSAR and Hong Kong would have to take into account the region’s distinct legislations
T
he head of Macau’s Legislative Assembly (AL), Ho Iat Seng (pictured), says plans for the development of the Greater Bay Area should consider the different legislative characteristics of Guangdong, the MSAR and Hong Kong, with the focus being on ‘complementarity and trilateral co-operation’, according to local broadcaster TDM. The statements, made on the sidelines of the National People’s Congress (NPC), concern the proposal made by Chinese Premier Li Keqiang in the annual work report presented during the Congress of developing a social and economic co-operation area between Guangdong, Macau and Hong Kong. “An overall blueprint for the Great Bay Area development should be created. The legislative systems are all different [in the three regions] with special characteristics […] We won’t achieve an ideal result if we compete or imitate each other,” said the head of the legislative body, as cited by the broadcaster.
the Land Law was initially discussed will be made public. With results expected by the end of March, the report seeks to review
if any promises were made by the government at the time, stating that a solution would be found for land concessions made before the current law was enforced in March of 2014. According to Mr. Ho, the report findings will be delivered to legislators and could possibly be available online - but whether the results will be divulged is still being discussed. The report was announced after Ho stated that the Chinese central government had demanded the current land disputes in the city be resolved, while reassessing that the current MSAR Land Law did not contravene the territory’s Basic Law. N.M.
Public or not public
The AL head also informed reporters that the government was still considering if the results of a planned report reviewing the recordings of the 2013 committee meetings where
Elections
Election Committee critical of legislator’s messages A series of messages sent by Legislator José Pereira Coutinho urging residents to vote in this year’s election has elicited criticism from the chairman of the MSAR Electoral Committee despite not being considered illegal under the new Electoral Law The chairman of the MSAR Electoral Committee criticised the act of appealing for participation in this year’s Legislative Assembly elections, scheduled for September 17, despite the action still being legal in a period where candidates have yet to be identified. This election will be the first after a new Macau Electoral Law was approved in 2016, imposing stricter rules for electoral campaigning and propaganda. “Maybe in the last days, sections of the population have received news or information of phone messages individuals or entities have been sending urging people to vote in the elections on September 17,” the chairman of the Commission, Tong Hio Fong, said yesterday. On Monday, directly elected
Legislator José Pereira Coutinho sent a phone message to several people, including journalists, urging residents to vote in the elections, without specifying a candidate for whom votes should be cast. “We haven’t yet found any irregularity, but to make sure of impartiality and justice during electoral campaigning, we don’t encourage society or associations to incite people to vote,” he added.
Not illegal yet
The Electoral Committee chairman justified his warning that no appeal for votes should be made prior to the electoral campaign period on the principles of justice and equality, claiming the need for self-discipline. Mr. Tong also said that although the incident cannot yet be considered
illegal, any infraction registered during the campaign period will be directed to the authorities. “At this moment while this act is not a violation we can’t act,” he stated, adding the Committee would “monitor the situation” and “stay alert.” The judge also stated that the Committee “hasn’t received any complaint” and that it discovered the phone messages through individuals who received them. The MSAR Legislative Assembly (AL) elections allow the direct election of 14 of the 33 legislators in the AL, with 12 being elected by associations and seven directly elected by Chief Executive Fernando Chui Sai On. Only permanent MSAR residents - born in Macau or who have resided in the city for more than seven years - have the right to vote in the elections. Yesterday’s Electoral Committee meeting also addressed questions related to the emission of 300,000 voting ballots, with Mr. Tong saying its design will take into consideration people with visual impairments. As in the elections that took place four years ago, voting will be done by stamp for “efficiency” reasons, while the full elections schedule will be divulged today. Last week, the Committee stated that the media could incur “infractions” if any coverage of the elections took place outside the allowed electoral period, which occurs in the 15 days before the election date. Specific requirements were requested by the Committee regarding journalistic coverage, with Mr. Tong saying yesterday no specific instructions existed on the matter and that media professionals “should know what constitutes electoral propaganda and what they can’t report.” Lusa
Business Daily Thursday, March 16 2017 5
Macau
Cargo
Triple digit growth in Q4 cargo from HKSAR The majority of cargo shipped out was destined for the Mainland, making up 52 per cent of the total, whilst cargo headed for Macau made up 5 per cent Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
T
he MSAR saw triple-digit growth in the amount of outward port cargo discharged, originating in Hong Kong, during the fourth quarter of 2016, as compared to the same quarter the previous year, according to the Hong Kong Shipping Statistics from the Census and Statistics Department of the neighbouring SAR. The cargo posted an 118.1 per cent increase in outward port cargo tonnage discharged in the MSAR, according to the data.
The majority of cargo shipped out was destined for the Mainland, making up 52 per cent of the total whilst the cargo arriving in Macau made up for 5 per cent of that loaded in terms of tonnage, ahead of both the United States and Japan, which both saw 4 per cent of the total. Trailing these were Taiwan, the Philippines and Thailand with 3 per cent each, followed by Korea and Malaysia which received 2 per cent each of the total port cargo tonnage outbound. In total, 85 per cent of China-bound cargo went to the Pearl River Delta region, notes the data. Of the outbound cargo loaded the vast majority was classified as
‘crude materials, inedible, except fuels’ at 39 per cent of the total, while the manufactured goods segment made up 26 per cent of the total. The third highest output cargo was chemicals and related products, at 15 per cent whilst food, beverages and tobacco comprised 11 per cent of the total cargo loaded during the fourth quarter.
Plying the sea
Regarding vessel origins, none of the 47,097 vessels arriving during the fourth quarter, or of the 185, 011 which arrived during the course of 2016, carried the Macau flag. By far the largest amount carried that of the Mainland, at 25,596 during the quarter, trailed by Hong Kong, at 16,415 vessels. The third highest country of origin in terms of vessel numbers was Panama, at 1,232 vessels during the quarter and 4,807
during the year. Regarding the amount of imports from the MSAR, in terms of weight the MSAR imported 28 per cent more year-on-year during the fourth quarter of last year, hitting 63,000 tonnes; however, it only saw a 13 per cent increase for the whole of 2016, when compared to the previous year, at 165,000 tonnes. Exports to the MSAR underwent a 135 per cent increase during the fourth quarter of the year, hitting 1.45 million tonnes whilst the whole year saw a 169 per cent uptick in export tonnage, at 4.95 million tonnes. The number of laden TEU (twenty-foot equivalent unit) containers which travelled to Macau from the HKSAR amounted to 12 in the fourth quarter of last year, a 15 per cent increase year-on-year; however, only 41 containers were received during the whole year, representing a 35 per cent year-on-year drop. Coming from the MSAR, only two containers were received, a 9 per cent year-on-year drop during the fourth quarter, while an 11 per cent year-onyear drop was posted throughout the whole year as only seven containers arrived from the MSAR.
6 Business Daily Thursday, March 16 2017
Macau Economy
Invest, invest
E
nterprises in the Mainland funded by investors from Macau, Hong Kong and Taiwan, as well as other foreign investors, saw a 6.8 per cent surge in their value added during the first two months of the year, according to the National Bureau of Statistics of China data. Overall, in terms of industry, that which saw the highest increase was that of the high-tech industry – which underwent a 12.6 per cent value added increase, chased by the manufacturing industry, which saw a 11.9 per cent increase. In total during the month of February, the total value added of industrial enterprises above the designated size was 0.6 per cent month-to-month, according to the data. During the same period, the total amount of investment in real estate development amounted to RMB985.4 billion, an increase of 8.9 per cent year-on-year. Investment in residential buildings saw a 9 per cent year0on-year uptick, while the floor space of newly started houses went up 14.8 per cent, hitting 172. 4 million
square metres. Residential buildings newly started saw their floor area increase by 14.8 per cent year-on-year. Commercial building sales hit
RMB1.08 billion in the first two months of the year, a 26 per cent increase year-on-year, whereas that of residential buildings grew 22.7
per cent. Real estate investment companies such as Country Garden Holdings have continued to attract local and Hong Kong investors to invest in Mainland properties, with the company earning RMB63.81 billion in contracted sales for the same twomonth period. K.W.
E-commerce
Education
Cross-border e-commerce still at preliminary stage
IFT to launch postgraduate programmes
Local young entrepreneurs are open-minded about doing business online but they are still concerned about stepping forward for crossborder e-commerce, Chan Weng Tat, the head of the Foreign Trade Management Department of the Macao Economic Services, said on local radio programme Macao Forum yesterday. The MSAR has been promoting e-commerce in the city and the response is positive - in particular, from young entrepreneurs operating SMEs (small and medium enterprises) - he said. However, local SMEs are less proactive in taking part in crossborder e-commerce, with them concerned about technology and safety as well as cumbersome procedures, Mr. Chan indicated. C u r r e n t l y , th e r e a r e s ev e n e-commerce platforms operating in Macau. Over the years, Mr. Chan said, the city has been developing auxiliary facilities such as payment platforms and logistics as well as legal
support for the operation of crossborder e-commerce. Lei Cheok Kuan, president of the Industry and Commerce Federation of Macau Central and Southern District, also attended the radio programme, and expressed the hope that the access threshold to e-commerce can be lowered. Meanwhile, the head of the E-commerce Office of the Macao Post and Telecommunications Bureau, Sun Kuan Ieong, disclosed that the amount of packaged mail imported is three times larger than the amount of mail exported to other regions. Mr. Sun said mail delivered to the city is primarily from Mainland China, Japan, South Korea and the United Kingdom. The city’s Post Office is currently providing eLocker services which run 24 hours to receive parcels for citizens. The Office also accommodates express mail services to 200 places and parcel delivery to 220 places. C.U.
The Institute for Tourism Studies (IFT) is planning to launch postgraduate programmes, according to the institute’s response to Business Daily enquiries. The launch of the programmes will be commenced after the new Higher Education Law is passed and the Charter of the institution is revised. Currently, the education institution provides diploma and degree courses as well as short courses and executive courses. IFT’s approach to introducing the postgraduate programmes is ‘to contribute further to the enhancement of the quality of the local workforce,’ one primarily engaged in the gaming and hospitality industry. The Institute is also seeking to attract more local and international students and faculty and provide international exchange experiences through its ‘ever expanding network.’ The tertiary education institution, being the only one from Macau ranked by the QS World University Rankings within the hospitality and leisure management field, was ranked second in Asia in the field of hospitality and leisure management
IFT facilities
in 2017. It is also ranked 18th in the same field when compared to the rest of the world. ‘We expect to raise more awareness of the Institute in Asia and the world as one of the top institutions of higher education in the Asia Pacific region that specialises in tourism and hospitality,’ reads the IFT reply. In the wake of the recognition, IFT is expecting ‘more local and international students and faculty to become aware of the quality of the Institute’s programmes and consider [the pursuit of] their studies or career at IFT.’ Meanwhile, the institution has been collaborating with local tourism and hospitality organisations, providing professional and tailor-made training for tourism and hospitality enterprises, student scholarships and internship programmes. The education institution claims it will further enrich its intercultural exchange on campus. IFT expanded its campus to the former facilities of the University of Macau, in Taipa in 2015, when the land was granted to the institute by the MSAR Government. C.U.
Business Daily Thursday, March 16 2017 7
Macau Markets
Great Captain holdings repositions to remain in family Joseph Lau’s Chinese Estates Holdings is selling Great Captain, which owns interests in Shengjing Bank, to the tycoon’s wife for HK$2.24 billion Sheyla Zandonai sheyla.zandonai@macaubusiness.com
C
hina Entertainment and Land Investment Company has entered into a disposal agreement with Perfect Sign Investments Limited, in which it agreed to sell the entire issued share capital of Great Captain Limited for an estimated HK$2.24 billion (US$288.34 million) according to a filing with the Hong Kong Stock Exchange from March 15. China Entertainment and Land Investment Company is a wholly owned subsidiary of Chinese Estates Holdings Limited, controlled by ailing tycoon Joseph Lau Luen Hung. Ms. Chan Hoi-wan, Joseph Lau’s wife, wholly and beneficially owns Perfect Sign Investments Limited, the purchaser in the agreement. The principal asset of Great Captain, an investment holding company and also a wholly owned subsidiary of Chinese Estates as at the date of the
announcement, is its interest in 577.18 million shares of Shengjjing Bank, a commercial bank based in Shenyang, Liaoning Province, in the north of China, bordering North Korea. The shares represent nearly 9.96 per cent interest of the total issued share capital of the bank as at February 28, 2017, the filing reads. According to South China Morning Post, the shares represent a 37.5 per cent controlling stake in Shengjing Bank. Upon completion of the acquisition, Great Captain will cease to be a subsidiary of Chinese Estates and become a wholly-owned subsidiary of Perfect Sign Investments Limited. Ms. Chan, acting as the trustee for the couple’s two minor children, indirectly holds approximately 50.02 per cent of the total issued share capital of Chinese Estates as at the date of the announcement. In addition to being a substantial shareholder of the company, Ms. Chan was also appointed one of its
executive directors in early 2017, according to the company. The reshuffling stems from recent declarations about Lau’s critical health condition, and follows his latest efforts to distribute his assets. Lau and his business associate, Steven Lo Kit Sing, were accused of bribing former Secretary of Land, Public Works, and Transport (DSSOPT) Ao
Man Long in exchange for securing five land plots for them opposite Macau International Airport for the development of the luxury residential project La Scala. In March 2014, Macau’s Court of First Instance convicted the Hong Kong billionaire and his associate of bribery and money laundering crimes linked to the case.
Crime
No connection noted between defendants in East Timor tax case East Timor Tax Office Director unaware of any connection between MSAR couple currently on trial for embezzlement and the defendant in another case As the court case led by the East Timor Government against a Portuguese couple for the alleged embezzlement of US$860,000 (MOP6.9 million) tax continued, the Director of the East Timor Tax Office, Mónica Rangel, testified she was not aware of any connection between
the couple and the defendant in another case. Former Macau residents Tiago and Fong Fong Guerra are accused by the East Timor Public Prosecutor’s Office of money laundering, embezzlement and falsifying documents in co-operation with an American
Business
Taiwan approves VAT refund for foreign businesses The Taiwanese Government will allow foreign enterprises and entities from the MSAR and Hong Kong to obtain value added tax (VAT) refunds for temporary business and exhibition activities, according to the National Taxation Bureau of Taipei, Ministry of Finance (NTBT). According to new regulations overseas institutions, associations and organisations with no fixed business in the country and that organise exhibitions or temporary business
activities in Taiwan will be able to claim a refund for VAT paid on goods and services purchased during their stay if they reach a minimum spending of NT$5000 (MOP1,296/US$162) for each fiscal year. In order to apply for the VAT refund overseas entities will have to follow specific requirements, such as having no fixed place of business in Taiwan, and entities must be registered in their respective region of origin, unless regulations in their respective countries exempt them from doing so. The VAT refund will only be applicable to goods or services purchased for participation in exhibitions or temporary business activities and for use in their business operations, and will only apply to specific countries and regions that also offer similar tax exemptions as Taiwanese companies and entities. The refund will also be available to Middle Eastern countries Qatar, Saudi Arabia, Bahrain, Kuwait and Israel plus European countries Germany, Switzerland, Austria, Finland, France, Ireland, United Kingdom, Slovenia, Belgium and Liechtenstein in addition to Australia. N.M.
consultant named Bobby Boyle with the purpose of appropriating taxes owed to the country’s government by oil companies. According to the prosecution, Mr. Boyle - currently under arrest in the United States - gave instructions to the couple to transfer the embezzled funds to the couple’s company in Macau, Olive Consultancy, with the intent of hiding the funds by moving them through several accounts and companies. Ms. Rangel stated in court that she
was aware of the Macau company, saying it was registered in East Timor and that although ‘having paid few taxes’ no tax irregularities were found. The Tax Office Director was questioned by the defence on why she did not consider it strange that a company registered in Macau had in the e-mails sent to the tax authorities the personal address of Mr. Boyle cited as a company address, to which Ms. Rangel said they had not investigated the issue. N.M.
8 Business Daily Thursday, March 16 2017
Greater china
Chinese Premier Li Keqiang gestures as he arrives for a press conference after the closing of the fifth Session of the 12th National People’s Congress (NPC) at the Great Hall of the People in Beijing. Lusa
Annual press conference
Premier Li says no hard landing, but growth target not easy He said the economy faces risks this year, but added the country has many policy tools to cope with them
P
remier Li Keqiang said yesterday that forecasts of a hard landing for the world’s second largest economy should stop, though domestic and external risks remain and meeting the target of 6.5 per cent growth for this year won’t be easy. “Almost every year I have heard a prediction of the Chinese economy having a hard landing,” Li said at his annual news conference at the end of the annual meeting of China’s parliament. “But I believe that our economic performance in the past several years...should suffice to put a full stop to such prophesies of a hard landing.” China has cut its economic growth target this year to around 6.5 per cent from its 2016 goal of 6.5 to 7 per cent, while pushing through reforms to tackle rising debt and guard against financial risks.
Key Points Meeting 6.5 pct growth target won’t be easy - Premier Li Economy faces risks, but has sufficient policy tools - Premier Li Considering HK-mainland debt market links this year - Premier Li “As for the projected target of GDP growth this year at about 6.5 per cent, I have read some foreign media describing it as a move by the Chinese government for moderate downward adjustment of GDP growth,” Li said. “I should point out that 6.5 per cent growth is not low speed and will not be easy for us to meet.” China’s gross domestic product grew 6.7 per cent last year, supported by record bank loans, a speculative housing boom and billions in government investment. Looking ahead, the head of a government research centre said the risk of a steep slide in China’s economy has reduced, adding that the country had moved through an “L-shaped” pattern of slowing to now “horizontal” growth. But China continues to pump large amounts of credit into the economy, with bank lending this January the second highest on record and new credit not slowing as much as expected in February. “We need to take very seriously the risks we are facing on the domestic
front, especially in the financial sector...We will take prompt and targeted measures to prevent them from further spreading,” Li said. “China’s financial system is generally stable and there are no systemic risks. We still have a good reserve of policy options and instruments at our disposal.”
HK links
During the conference he also said that government is considering setting up debt market links between Hong Kong and the mainland this year, as it bolsters support for the economy of the former British colony. “This year, we are considering for the first time establishing a bond market connect between the Hong Kong and the mainland, allowing foreign capital to buy mainland bonds from overseas and Hong Kong will be the first to benefit from such an arrangement,” Li said. “This will help Hong Kong maintain its status as an international financial centre and provide Hong Kong residents more investment channels,” he said. Li added that cooperation over the bond market was “what the country needs”. China has gradually opened its bond market to foreign investment and redoubled efforts to lure foreign capital, but investors have said market accessibility and concerns about the stability of the yuan currency - and capital controls enacted to protect it - could impede inflows. Standard Chartered estimated that the value of outstanding onshore bonds may rise to RMB82 trillion (US$11.86 trillion) by the end of this year from RMB64.3 trillion as of end-2016. By the end of last year, foreigners held a mere RMB870 billion worth of bonds in the Chinese market, an increase of RMB83.4 billion from the year before, the State Administration of Foreign Exchange said.
Trade war
Premier reiterated that Beijing does not want to see a trade war with the United States and urged talks between both sides to achieve common ground. “We do not want to see any trade war breaking out between the two countries. That would not make our trade fairer,” he said. “Our hope on the Chinese side is that no matter what bumps this
relationship hits, we hope it will continue to move forward in a positive direction,” he said. “We may have different statistical methods, but I believe whatever differences we may have we can all sit down and talk to each other and work together to find solutions,” Li said. Issues that cannot immediately be solved should be “shelved” for the time being, he added. Li also remarked in his remarks that China-U.S. relations are founded upon adherence to the “one China”
policy, under which Washington acknowledges the Chinese position that there is only one China, of which Taiwan is a part. The “one China” policy “has remained unshaken despite changing circumstances,” he said, adding “this foundation cannot be undermined.” Li also said China did not seek a sustained trade surplus with the European Union, and that the imbalance “would clearly improve” if Europe exported more high-tech products to China. Reuters
Business Daily Thursday, March 16 2017 9
Greater China Commodities
In Brief
Beijing cracks down on low-quality coal imports Sustained checks will unsettle global miners and traders who have enjoyed months of a coal buying spree China is ramping up controls on imports of low-quality coal due to concerns about smog and overcapacity in the world’s top coal consumer, a government official said yesterday, as traders report some cargoes have been delayed by customs checks. “As long as coal meets standards, we don’t forbid imports, but we are imposing controls on low-quality coal imports,” said Zhi Shuping, head of the Administration of Quality Supervision, Inspection and Quarantine which oversees imports safety. “If we let all kinds of coal import into domestic market, it will hit the domestic market,” Zhi said, speaking on the sidelines of the annual meeting of China’s parliament. Sustained checks will unsettle global miners and traders who have enjoyed months of a coal buying
spree by China that helped propel prices to multi-year highs, bringing the industry out of a prolonged bear market. Prices have soared to multi-year highs this week amid broader concerns about tighter supplies and robust demand. Delays in processing imports could further constrain supply, sending domestic prices higher. That could have the effect of undermining government efforts to keep prices stable as Beijing seeks to close outdated mines, increase use of cleaner, renewable fuels and make bloated heavy industry more efficient. Zhi’s comments come as some international traders have complained about delays running into weeks in getting some cargoes cleared through customs in China due to tougher inspections for sulphur and mercury
content at ports. Last year, Zhi’s agency rejected 1.5 million tonnes of imported coal, he said - less than 1 per cent of China’s total coal imports. One official at a global merchant, speaking on condition of anonymity, said his company’s shipments into Jiangsu province took longer than usual to get customs clearance. It’s not clear how widespread the checks are and Zhi did not say when the crackdown started. Some experts said it could be linked to the two-week annual meeting of China’s parliament, which ends on Wednesday.
Key Points Permitting “all kinds” of imports hits domestic market -official Traders say some cargoes delayed for weeks by customs checks Last week, a senior politician from Shanxi, one of the country’s top producing regions, proposed curbing imports of low-quality coal as a radical measure for curing China’s overcapacity problem. Speaking on the side-lines of parliament, Wang Fu, vice governor of the province, suggested targeting coal from Indonesia, which accounted for almost 40 million tonnes, or 15 per cent of total arrivals, last year. The proposal is unlikely to get passed into law and would likely face hefty resistance from power producers, which still rely on coal. But the comment underlines the challenge of getting wary provincial governments on board to tackle excess and close inefficient operations. Reuters
Real estate
Anbang denies report of Kushner property investment The company has emerged as one of China’s most aggressive buyers of overseas assets in the past two years China’s Anbang Insurance Group said it is not investing in a flagship Manhattan office tower owned by the family of Jared Kushner, U.S. President Donald Trump’s son-in-law and senior adviser. Anbang Insurance Group was named in a Bloomberg report on Monday as a possible investor in a US$4 billion deal to buy the 41-floor building located at 666 Fifth Avenue, according to a copy of the agreement that was being circulated to attract
“The information about Anbang investment in 666 Fifth Avenue is not correct, there is no investment from Anbang for this deal”
“Kushner Companies is in active discussions around 666 5th Avenue, and nothing has been finalised,” a spokesperson for the company said on Tuesday. The New York Times had reported in January that Anbang Chairman Wu Xiaohui and Jared Kushner were nearing agreement on a joint venture to redevelop the building. The aging property occupies a full block that fronts Fifth Avenue between 52nd and 53rd Street – prime real estate for retailers that is just steps from Rockefeller Centre and St. Patrick’s Cathedral, and a few blocks south of Trump Tower. Anbang, established in 2004 as an auto insurer, has emerged as one of China’s most aggressive buyers of overseas assets in the past two years, spending more than US$30 billion buying luxury hotels, insurers and other property assets. Based in Beijing, Anbang manages some RMB1.65 trillion (US$240
billion) worth of assets, and has been involved in some high-profile deals, although a handful did not make it across the finish line. The Chinese insurer abruptly pulled out of a US$14 billion bid for Starwood Hotels & Resorts Worldwide Inc last year, and its attempt to buy U.S. annuities and life insurer Fidelity & Guaranty Life is facing regulatory hurdles. In 2014, the insurer bought New York’s landmark Waldorf Astoria hotel from Hilton Worldwide Holdings Inc for US$1.95 billion. The company reportedly plans to convert as many as 1,100 of the hotel’s 1,413 rooms into condominiums. Kroll Bond Rating Agency said 666 Fifth Avenue was 20 per cent vacant as of July 2016, and valued the property at US$982.1 million. Kroll called some US$1.1 billion in debt on the building a “loan of concern.” Vornado Realty Trust, one of the largest owners of Class A office and high-end retail space in Manhattan, gained a 49.5 per cent interest as part of a US$1.215 billion recapitalization of the building in 2011. Vornado did not immediately respond to a request for comment. Reuters
Anbang statement additional investors. “The information about Anbang investment in 666 Fifth Avenue is not correct, there is no investment from Anbang for this deal,” a spokesman for Anbang said in a statement on Tuesday. The property was purchased by Kushner Cos in 2006 for US$1.8 billion, which at the time was the highest price paid for a single building in Manhattan.
In 2014, the Chinese insurer bought New York’s landmark Waldorf Astoria hotel from Hilton Worldwide Holdings Inc for US$1.95 billion
Commerce
Guangdong reports robust foreign trade growth Foreign trade volume in south China’s Guangdong Province increased by 11.4 per cent year on year in the first two months of 2016, local authorities said. Trade volume hit RMB878 billion (US$127 billion) in January and February, with exports up 7.5 per cent to RMB544.4 billion and imports up 18.5 per cent to about RMB333.5 billion, according to figures released by Guangdong sub-administration of China Customs. General trade rose 12.9 per cent to RMB400.4 billion during the reporting period, while processing trade was up 3.4 per cent to RMB311 billion. Prices
Outlets at Shanghai airports, Disneyland move to fair pricing More than 60 chain stores and restaurants in Shanghai’s two airports and Disneyland yesterday vowed to keep prices on par with those in their other outlets in the city, following pressure from Shanghai’s price regulator. The Shanghai Development and Reform Commission said that it had received a great deal of consumer complaints that dining in these areas were often much more expensive than other places. Under pressure from the commission, the outlets, owned by more than 20 international food chains and convenient stores, including Costa, KFC, McDonald’s, Subway, Pacific Coffee and Family Mart, joined together in a campaign named “same city, same price.” Investment
BBK to build R&D, production centres China’s leading electronics firm BBK will invest RMB4.75 billion (US$687 million) in R&D and production centres in southern city of Dongguan to tackle insufficient capacity, local authorities said Tuesday. BBK Electronics owns popular smartphone brands OPPO and Vivo. The company plans to invest RMB2 billion in an OPPO R&D headquarters. Work is to start this year and the HQ will be operational in 2019. A Vivo production centre will cost RMB2 billion and will also go into operation in 2019. The centre will be able produce more than 90 million smartphones, 5 million telephones and 7 million educational electronic products each year. Labour
282 mln rural migrant workers by end of 2016 The number of rural migrant workers in China hit 282 million at the end of 2016, an increase of 4.24 million from a year before, according the Ministry of Human Resources and Social Security (MHRSS) Tuesday. The ministry has helped retrieve RMB35 billion (about US$5 billion) of back pay for migrant workers, and back-pay complaints have fallen, Qiu said. Some 58.2 million workers are covered by pension insurance and 48.2 million covered by medical insurance. 46.6 million have access to unemployment insurance and 75.1 million are protected by work injury insurance.
10 Business Daily Thursday, March 16 2017
Greater China M&A
Jack Ma challenged by Kansas firm in MoneyGram fight MoneyGram said it will consult with outside advisers to review the offer and determine what would best serve the interests of the company Zeke Faux
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ix weeks after billionaire Jack Ma’s Ant Financial announced a plan to take over MoneyGram International Inc., a little-known Kansas company is swooping in with a higher bid. Euronet Worldwide Inc. is offering US$15.20 a share for the money-transfer service, topping Ant’s US$13.25 bid, according to a statement. Shares of MoneyGram jumped 25 per cent to US$15.77 in New York after the announcement on Tuesday, suggesting investors expect a bidding war. Euronet rose less than 1 per cent to US$83.22.
‘Ultimately, pulling out of the deal with Ant could subject MoneyGram to a US$30 million termination fee’
challenges at every level,” Brown said on a conference call to discuss his bid. “We are committed and ready to move expeditiously.”
Reviewing offer
MoneyGram said it will consult with outside advisers to review the offer and determine what would best serve the interests of the company and its shareholders. Meantime, the board hasn’t changed its earlier recommendation supporting a combination with Ant. Ant said it’s still working with MoneyGram toward completing their deal in the second half of 2017. “Ant Financial remains highly committed to the consummation of our merger with MoneyGram,” the company said in a statement. “We are making progress on schedule towards obtaining all required regulatory and shareholder approvals.” Western Union’s stock climbed 3.5 per cent. Investors are speculating it
too may become a takeover target, BTIG analyst Mark Palmer told clients in a note.
Previous attempts
Since Brown helped found Euronet in 1994, the Leawood, Kansas-based payments company has built a network of more than 35,000 ATMs and 800,000 point-of-sale terminals. He’s long coveted MoneyGram for its brand, bidding for it in 2008 and again in 2013. The deal would allow both companies to offer more services at more locations and would save US$60 million in cost synergies, according to a presentation on Euronet’s website. Ant is a behemoth in China, where it serves more than 450 million customers and provides services from wealth management and insurance to credit checks and consumer loans. Formerly a part of Alibaba Group Holding Ltd., it is still controlled by Ma. Ant was valued at US$75 billion by Hong Kong-based securities firm CLSA in September and is expected to go public this year. Ant has been seeking to expand abroad as competition in its home market heats up, and the MoneyGram
Ant’s plan to take over MoneyGram was presented by the two companies as a fait accompli, with the deal expected to be completed this year once regulators approved it. That acquisition, meant to help Ant expand outside China, probably faces scrutiny from a Treasury Department agency that reviews foreign purchases of U.S. companies. Michael Brown, Euronet’s chief executive officer, said his bid is superior because it’s more likely to get approved. “The Ant Financial transaction is fraught with uncertainty and
purchase was seen as a way to further that goal after recent partnerships with Paytm in India and Ascend Money in Thailand. Private equity firm Thomas H. Lee Partners and certain MoneyGram executives, who collectively own about 46 per cent the company’s voting shares, had agreed to back Ant’s proposal, Ant said on Jan. 26. That increases the pressure on Euronet to persuade MoneyGram’s board to support its offer. If that happens, Ant Financial will have to decide whether to counter. Ultimately, pulling out of the deal with Ant could subject MoneyGram to a US$30 million termination fee, according to a regulatory filing.
‘Superior’ bid
The Treasury Department’s Committee on Foreign Investment in the United States would probably scrutinize a deal between Ant and MoneyGram. While CFIUS is unlikely to deem the MoneyGram takeover a national security threat, legal experts say, the deal could face more inspection than usual given President Donald Trump’s anti-China rhetoric. Andrew Jeffrey, an analyst at SunTrust Banks Inc., said in a note to investors that Euronet’s proposal is “superior in all ways.” The offer is higher and the transaction would be more likely to close, he wrote. A substantial portion of MoneyGram’s business could come under pressure from Trump’s stance on immigration and trade, because many immigrants use the firm to transfer money from the U.S. to their families. Trump proposed a plan last year to cut off the remittances Mexican immigrants send home. Mexico represents about 10 per cent of MoneyGram transactions, according to Bloomberg Intelligence. Wells Fargo & Co. is advising Euronet, with Gibson Dunn & Crutcher LLP providing legal advice. Citigroup Inc. is Ant’s financial adviser, and Bank of America Corp. is MoneyGram’s. Bloomberg News
M&A
Li Ka-Shing firms cleared to pursue Duet bid He sweetened the offer in January by including a special dividend and split the bid among the three companies pending shareholder approvals. Billionaire Li Ka-shing won the approval of his shareholders to pursue the purchase of Australian power provider Duet Group, paving the way for the Hong Kong tycoon to diversify away from his reliance on Europe. The A$7.4 billion (US$5.6 billion) bid made by Li’s companies -- Cheung Kong Property Holdings Ltd., Cheung Kong Infrastructure Holdings Ltd. and Power Assets Holdings Ltd. -- was backed by minority investors at all three companies at shareholder meetings in Hong Kong on Tuesday, the firms said in filings. The transaction also needs approval from Duet shareholders. Duet would give Asia’s third-richest man access to an energy network covering an area three times the size of Hong Kong as the tycoon faces uncertainties in Europe -- his biggest market -- with a string of elections this year. The deal, which would be Li’s biggest in the country if completed, will need to be cleared by the government, which in August blocked Li from buying a majority stake in Ausgrid, citing national
security concerns. Duet shares have jumped about 19 per cent since Cheung Kong Infrastructure made an all-cash bid in early December. Li has yet to receive approval from Australia’s Foreign Investment Review Board, which had been expected
to make a decision by last month. Winning the FIRB’s blessing could be delayed by the Australian government’s decision to set up a Critical Infrastructure Centre, which may undertake its own national-security-risk assessment on the deal, according to a Royal Bank of Canada research note on Feb. 21. With submissions on the CIC’s powers of operation not due until Mar. 21, CKI may fail to hit a mid-May deadline for the deal to be implemented, according to RBC.
Buying Duet would help reduce Li’s reliance on the U.K., which is the biggest profit generator for his flagship firm CK Hutchison Holdings Ltd. Beyond Duet, the Hong Kong billionaire’s companies already own stakes in assets including SA Power Networks, Powercor Australia, Australian Gas Networks and CitiPower I Pty Ltd.
‘The U.K.’s decision to leave the European Union hurt Li’s businesses by weakening the pound and increasing uncertainty about the country’s global trade rules’ Duet’s assets include the Dampier-Bunbury pipeline in Western Australia, a stake in electricity distributor United Energy, gas distribution business Multinet Gas, pipelines business DBP Development Group and Energy Developments Ltd., according to Duet’s website. Bloomberg News
Business Daily Thursday, March 16 2017 11
Asia Survey
Economists raise 2017 Singapore growth forecast Experts estimated that the Singapore dollar will trade at 1.4600 against the U.S. dollar by end-2017
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conomists raised their forecasts for Singapore’s growth this year as they upgraded their views on the manufacturing sector and exports, a central bank survey showed yesterday.
Key Points Economists raise 2017 GDP growth forecast - MAS survey GDP growth in 2017 seen at 2.3 pct vs 1.5 pct previously Economists raise manufacturing, exports forecasts Q1 GDP growth forecast raised to 2.6 pct y/y from 1.3 pct Core CPI 2017 median forecast +1.5 pct vs +1.3 pct previously The median forecast of 23 economists surveyed by the Monetary Authority of Singapore (MAS) was for gross domestic product (GDP) to grow 2.3 per cent in 2017, up from the 1.5 per cent estimated in the previous
survey published in December. That would mark a slight pick-up from 2.0 per cent growth recorded in 2016, and would be in the upper half of the government’s official 2017 GDP forecast range of 1-3 per cent. Economists now expect the manufacturing sector to expand 4.5 per cent in 2017, up from 1.1 per cent in the December survey. Non-oil domestic exports are expected to grow 6.1 per cent in 2017, up from the previous median forecast of 0.3 per cent growth. The median forecast for year-onyear GDP growth in the first quarter
was 2.6 per cent, up from 1.3 per cent previously. But that would be slightly slower than the fourth quarter of last year, when GDP expanded 2.9 per cent from a year earlier. Compared with the previous quarter, GDP grew 12.3 per cent on an annualised basis in the October-December quarter. The central bank’s core inflation gauge was seen likely to rise 1.5 per cent for the whole of 2017, up from the previous median forecast of 1.3 per cent. According to the latest MAS survey, economists’ median forecast for
all-items CPI inflation in 2017 was unchanged at 1.0 per cent. Economists estimated that the Singapore dollar will trade at 1.4600 against the U.S. dollar by end-2017. It was trading near 1.4145 yesterday. Singapore’s advance estimate of first quarter GDP and the central bank’s twice-yearly monetary policy decision, are both expected to be released in mid-April. Most economists expect the MAS to keep policy unchanged, after growth picked up late last year, while inflationary pressures are seen likely to remain relatively subdued. Reuters
Energy
Australia hauls in gas majors to avert local shortages Producers blame state drilling bans, uncertainty over climate policy and potential increases in petroleum producer taxes, for deterring development of new gas fields Sonali Paul
Australia’s top gas producers, led by ExxonMobil Corp and Royal Dutch Shell, agreed to boost supply to the country’s domestic market to help avert an energy shortage following crisis talks with Prime Minister Malcolm Turnbull. Australia is on track to become the world’s largest exporter of liquefied natural gas (LNG), yet its energy market operator has warned of a domestic gas crunch from 2019 that could trigger industry supply cuts and broad power outages. “We are a massive gas exporter. It is utterly untenable - unacceptable - for us to be in a position where domestic gas consumers ... cannot have access to affordable gas,” Turnbull told reporters on Wednesday after the meeting. He said the producers had guaranteed to ensure that gas would be available for the national electricity market. Australia’s power supply problems made international headlines last
week when Tesla Inc boss Elon Musk offered to save South Australia, the country’s most renewable-energy dependent state, from blackouts by installing large-scale battery storage. The South Australian government on Tuesday outlined plans to spend A$510 million (US$385 million) to keep the lights on, including A$150 million to encourage the development of 100 megawatts of battery storage. Australian manufacturers have long complained of tight gas supplies and soaring prices as producers have focused on supplying gas to LNG plants that have locked in 20-year export contracts. Three LNG plants have opened in the country over the past
two years, which has tripled gas demand and sent gas prices rocketing from around A$6 a gigajoule (GJ) to as much as A$22/GJ. “That’s apocalyptic as far as the cost structures of energy-intensive manufacturers are concerned,” Tennant Reed, policy adviser at the Australian Industry Group, said at a gas outlook conference this week.
Reservation call
Companies like top Australian steel maker BlueScope Steel, fertiliser maker Incitec Pivot and packaging maker Orora Group have urged the government to reserve gas for the domestic market or risk losing thousands of jobs as plants shut. Both sides of government have resisted a domestic gas reservation, acknowledging that would create sovereign risk for existing projects and threaten future investment in the country, but Turnbull left the door
open to imposing a domestic quota. “We’ve made considerable progress today, but there is more work to be done. But the considerable powers the Commonwealth has are obviously ones that we would never shirk from using in the national interest,” he said. Shell, which runs the Queensland Curtis LNG plant (QCLNG) and is sitting on undeveloped coal seam gas in the state, said it has sold significant volumes into southeastern Australia. Diverting gas from LNG plants into the domestic market would be the easiest short-term solution, as two of the three LNG plants in Queensland - Shell’s QCLNG and Origin and ConocoPhillips’ Australia Pacific LNG (APLNG) - have some capacity that is not locked into export contracts. Turnbull said both QCLNG and APLNG had committed to being net suppliers to the domestic market, while Santos’ Gladstone LNG, which is short of gas, had taken the request on notice. A challenge, however, would be finding space on the gas pipeline network, said Saul Kavonic, an analyst at Wood Mackenzie. Producers blame state drilling bans, uncertainty over Australia’s climate policy and, more recently, potential increases in petroleum producer taxes, for deterring development of new gas fields. Companies also reined in spending on exploration and development after the oil price collapse in 2014. Reuters
12 Business Daily Thursday, March 16 2017
Asia Survey
Australian consumer sentiment steadies in March The index of house price expectations rose another 2.2 per cent to a hefty 26.7 per cent higher on a year ago
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measure of Australian consumer sentiment held steady in March as worries over family finances were offset by optimism over the longer-term economic outlook, a survey showed yesterday. The survey of 1,200 people by Melbourne Institute and Westpac Bank found consumer sentiment edged up by 0.1 per cent in March, from February when it climbed 2.3 per cent. That left the index at 99.7, just below the level where the number of optimists matches pessimists. The sub-indices in the survey showed respondents judged recent news on the economy as much more favourable than at the end of last year, perhaps reflecting surprisingly upbeat data on economic growth released early in March. Expectations for the economic outlook over the next 12 months rose 1.6 per cent, and the assessment of economic conditions for the next five years jumped 3.9 per cent. However, people were more
concerned about household finances amid news that wage growth slowed to record lows in the December
quarter. The measure of family finances compared to a year ago dropped 5.3 per cent, while that for finances over the next 12 months dipped 0.2 per cent. The measure of whether this was a good time to buy major household items eased 0.1 per cent. Westpac’s chief economist, Bill
Evans, noted consumers had become more risk averse in the saving habits. The proportion favouring paying down debt as the best way to save jumped five per centage points to 25.7 per cent, while buying real estate sank to the lowest since the survey began in 1974, at just 11.6 per cent.
‘Expectations for the economic outlook over the next 12 months rose 1.6 per cent’ Concerns over housing affordability have ballooned in recent years as home prices climbed in Sydney and Melbourne. Yet the survey’s measure of whether it was a good time to buy a dwelling still rose 7 per cent in March, though that was down on the same month last year. The index of house price expectations also rose another 2.2 per cent to be a hefty 26.7 per cent higher on a year ago. Reuters
Abenomics
Workers at Japan’s top companies get meagre 2017 pay hikes Despite sitting on piles of cash, Japanese companies are reluctant to raise wages as they are anxious about the economic outlook Tetsushi Kajimoto
Most major Japanese companies yesterday offered the lowest hike in base pay in four years, a setback for Prime Minister Shinzo Abe’s campaign dubbed “Abenomics” to spur the long-sluggish economy. Japan’s annual “shunto” spring wage increases are a barometer of corporate confidence, and an indicator of whether consumer spending
can get a needed boost - which this year’s hikes are unlikely to supply. “Wage growth is far from enough to accelerate economic growth and inflation,” said Hisashi Yamada, chief economist at Japan Research Institute. Toyota Motor Corp’s base pay hike, traditionally a benchmark other companies use to gauge their increases, came to 1,300 yen (US$11.34) a month - below last year’s 1,500 yen. The new hike is less than half the
union’s demand and far below the 4,000 yen given in 2015. For a Toyota mid-level technician earning 360,000 yen a month, the pay increase works out to 0.36 percent. It can buy one bowl of rice with pork cutlet with miso sauce on top, a speciality of Nagoya, near the Toyota headquarters. Despite sitting on piles of cash, Japanese companies are reluctant to raise wages as they are anxious about the economic outlook, currency swings and the chance U.S. President Donald Trump’s trade policies will hurt export sales. Major electric machinery makers such as Mitsubishi Electric and Panasonic Corp, like Toyota, lowered their wage hikes for a second year. They are giving 1,000 yen, down from 1,500 yen in 2016 and 3,0000 yen the previous year. Yamada and other analysts say that major companies on average are increasing base pay about 0.3 percent for the fiscal year starting in April, the smallest amount in four years.
Seniority system
Tokyo commuters
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Total wage growth will be higher than the hikes now being announced: Workers will see roughly 2 percent more in their pay checks because their salary goes up automatically every year under Japan’s seniority-based employment system. Still, such an increase is below last year’s 2.14 percent, and 2015’s 2.38 percent, a 17-year high. “I don’t actually feel the economy is recovering or Abenomics is really bringing benefits,” said a 33-yearold worker at a precision machinery maker in Nagano prefecture, west of Tokyo. The man, who requested anonymity, has housing loans to repay and two kids to raise.
From the early 2000s, base pay raises were virtually frozen for over a decade until Abe swept to power in late 2012 with a pledge to reboot the moribund economy. He urged companies to lift wages and they complied, to a degree. Abe’s government has intervened heavily in wage talks between management and labour unions that have lost bargaining power in the face of declining unionisation. In Japan, labour unions, which this year kept their demands unchanged from 2016, tend to attach greater importance to job security and loyalties to their company instead of aggressively seeking higher wages. “The government hopes that wage hikes are firmly realised based on corporate profits and that the trend of wage hikes will spread to small firms and non-regular workers,” Chief Cabinet Secretary Yoshihide Suga told reporters yesterday.
Limp spending
Abe wants healthy wage hikes to drive a virtuous growth cycle in which consumer spending and business investment rise, in turn lifting profits and wages. The central bank also wants to see higher wages lift prices and enable Japan to break out of its deflationary rut. But the latest meagre gains bode poorly for that scenario. In the face of rising costs of living and uncertainty about the future, ordinary workers opt for saving rather than spending. “It’s hard to make ends meet and rising vegetable prices are driving up the cost of living,” said a 22-year-old female factory worker at a watchmaker in central Japan. “I’ll set any increased income aside for food expenses rather than spending for recreation.” Reuters
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Business Daily Thursday, March 16 2017 13
Asia Political crisis
In Brief
South Korean presidential race narrows as election set for May 9 Attention now turns to an April 3 primary by the main opposition Democratic Party of Korea Shinhye Kang and Sam Kim
South Korea’s presidential race narrowed as authorities said a vote to replace ousted leader Park Geun-hye would take place on May 9. Acting President Hwang Kyo-ahn said he won’t stand in the election, leaving conservatives aligned with Park’s Liberty Korea Party without a clear-cut candidate. Hwang, the prime minister, had taken over Park’s duties after lawmakers impeached her in December. “For the sake of stable government and fair election management, I have decided it’s not appropriate for me to run,” Hwang said at the start of a televised cabinet meeting. “After deep consideration I have come to the conclusion that I should neither neglect nor delay dealing with state affairs and crises facing the nation.” Hwang’s exit boosts the odds that a left-leaning candidate will take power in South Korea after nine years of conservative rule. While policy differences exist among the opposition, most leading candidates generally favour a softer approach toward North Korea and stronger moves to
shake up the chaebol -- the conglomerates that played a role in the scandal leading to Park’s downfall. Attention now turns to an April 3 primary by the main opposition Democratic Party of Korea, home to the top two candidates in a Gallup Korea poll taken before Park’s ouster in a constitutional court ruling last Friday. Moon Jae-in led with 32 percent support, followed by Ahn Hee-jung with 17 percent. Running third in the poll was Ahn
Cheol-soo, founder of the centrist People’s Party, who has touted himself as the alternative to Moon. Prosecutors earlier yesterday told Park to appear for questioning on March 21 as a criminal suspect in the influence-peddling scandal. While in office, she had immunity and refused to be questioned by prosecutors. She will fully cooperate with the investigation, Yonhap News reported, citing one of her lawyers. Park is accused of pressuring top business executives, including Samsung Electronics Co. heir-apparent Jay Y. Lee, to donate tens of millions of dollars to foundations run by her long-time friend Choi Soon-sil in return for government favours. Both Park and Choi, who is currently on trial, have denied wrongdoing. Bloomberg News
South Korea’s foreign exchange deposits in February rose for a second month to their highest level in two and a half years, central bank data showed yesterday. Foreign exchange bank deposits stood at US$67.94 billion at the end of February, the Bank of Korea said, the biggest amount since end-August 2014. At the end of January, deposits were US$64.65 billion. The deposits rose mainly on a gain in dollar deposits as exporters and importers stowed more in their accounts for trade settlements, the bank said.
Indonesian exports, imports growth slow down
Acting South Korean President and Prime Minister Hwang Kyo-ahn heads to a Cabinet meeting at the government complex in Seoul, South Korea, yesterday. Lusa
Rising food prices push up Indian retail inflation Wholesale prices also rose by a more-than-expected 6.55 per cent Indian retail price inflation picked up in February, after having cooled the previous month to its lowest in at least five years, supporting the view that the Reserve Bank of India (RBI) no longer has room to ease monetary policy.
S. Korea’s foreign exchange bank deposits rise
Trade
Monetary data
Manoj Kumar
Forex
Last month, the central bank changed its monetary stance to “neutral” from “accommodative”, marking an end to a period in which it cut interest rates by a total of 175 bps from January 2015 to October 2016. Consumer prices rose by an annual 3.65 per cent in February compared with January’s 3.17 per cent increase,
data released by the Ministry of Statistics showed on Tuesday. Economists surveyed by Reuters had expected prices to rise by 3.58 per cent from a year earlier. Wholesale prices also rose by a more-than-expected 6.55 per cent in February year on year, compared with a 0.85 per cent fall a year ago, driven by fuel and food prices, according to separate data released earlier by the Ministry of Commerce and Industry. Prime Minister Narendra Modi’s surprise ban on high-value notes in November had hurt demand in India’s largely cash-driven economy and consumer price inflation has since been below the central bank’s target of 4 per cent. Annual retail food inflation rose to 2.01 per cent last month from an upwardly revised 0.61 per cent in January, pushed by faster increases in the prices of cereals, sugar and fruits, the data showed.
Key Points Retail prices up 3.65 pct y/y in Feb vs 3.17 pct in Jan Retail food prices up 2.01 pct y/y in Feb vs 0.61 pct in Jan RBI seen holding rates until second half of year In Asia, China’s consumer inflation slowed to 0.8 per cent in February from a year earlier, while in Indonesia retail inflation rose to 3.83 per cent. Analysts said the continued uptrend in prices would be difficult for the central bank to ignore, prompting it eventually to nudge policy rates higher to curb price pressures. “We remain out on a limb in our view that the central bank will have to reverse course and begin hiking rates over the next 12 to 18 months,” said Shilan Shah, India economist at Capital Economics. Asia’s third largest economy grew 7 per cent in the October-December quarter and is expected to grow at 7.1 per cent in the current fiscal year ending March. Reuters
Indonesia’s exports and imports expanded at a slower pace in February compared to a month earlier, as expected in a Reuters poll, data from the statistics bureau showed yesterday. Shipments from Southeast Asia’s largest economy rose 11.16 per cent on an annual basis in February to US$12.57 billion. A Reuters poll had expected a 15.19 per cent growth. Imports rose 10.61 per cent in February from the same month a year ago to US$11.26 billion. Analysts in the poll had expected a growth of 13 per cent. Auto industry
Vietnam to simplify procedures for car importers Vietnam’s Ministry of Industry and Trade (MoIT) has decided to abolish a number of procedures for importers of cars with nine seats or less to simplify imports. Under the MoIT’s new change, auto importers will be allowed to import cars with nine seats or less without having to authorize car manufacturers or dealers as their distributors in Vietnam, reported the state-run news agency VNA yesterday. Importers will also not have to obtain certificates from the transport ministry proving that they are adequately qualified to do car guarantees and maintenance. Legislation
Thai Government pushes forward national reform The Thai Government has pushed forward bills on national reform and a 20-year national strategy which will likely be endorsed by the National Legislative Assembly and turned into laws. The cabinet headed by Prime Minister Prayut Chan-o-cha approved on Tuesday the national reform and strategy bills for which varied committees will be set up to handle the detailed implementation of the bills toward Thailand’s economic and social development schemes after they become laws. Korbsak Pootrakool, a vice minister attached to the prime minister’s office, said the national reform committee will be chaired by the premier and consist of heads of parliament.
14 Business Daily Thursday, March 16 2017
International In Brief Portugal
Major projects should require 2/3 of MPs votes Portugal’s prime minister said yesterday that major infrastructure projects, such as Lisbon’s new airport, should be carefully chosen and approved by two-thirds of MPs as it has become an “emergency”. The idea of wide political consensus to approve major national projects was part of the Socialist’s election programme and was taken up again by the prime minister yesterday at a conference on public investment in Portugal organised by President Marcelo Rebelo de Sousa. António Costa said that Portugal was on the right track in terms of investment, but warned that the country faced budget constraints that required selectivity. Crude industry
IEA says oil market could tilt into deficit in H1 Global oil inventories rose for the first time in January as the market grappled with a swell in production last year, but if OPEC maintains its output cuts, demand should overtake supply in the first half of this year, the International Energy Agency said on Wednesday. The IEA’s monthly report struck a more bullish note than that issued by the Organization of the Petroleum Exporting Countries on Tuesday. OPEC also flagged rising inventory levels, but raised its estimates for production outside the group and did not see a rebalancing between supply and demand until the second half of this year.
G20 summit
Germany to press to sign off on free trade amid worries about US stance Merkel underscored the importance of free trade in a speech to business leaders in Munich this week Takashi Umekawa and Michael Nienaber
G
ermany will press G20 members to sign off on a set of principles including free trade at this week’s meeting of the group’s financial leaders, in what the Trump administration may perceive as a challenge to its more protectionist stance. In an unusual move, Germany, the host of the meeting, will stress the importance of global free trade in a document separate from the group’s main communiqué, G20 sources said. The move underscores Germany’s desire to rebuff any explicit U.S. demands to water down the group’s commitment to free trade, as German Chancellor Angela Merkel prepares for her first meeting with President Donald Trump on Friday. Attaching a separate document also would allow Germany to clarify its priorities and avoid them from being overshadowed by what could be a more heated debate on protectionism and currency policy. It is rare for a G20 chair country to issue a document separate from the
main communiqué, especially one that differs on the tone and priorities. Group of 20 finance leaders meet in Baden-Baden, Germany, on Friday and Saturday. It will be their first meeting attended by representatives of Trump’s administration. A draft of the main G20 communiqué seen by Reuters appeared to accommodate Trump’s views on trade by dropping a phrase resisting “all forms of protectionism.” But any attempts to dilute the commitment to free trade will likely face resistance from emerging economies reliant on global exports, including China, putting the onus on Germany to seek a compromise. It’s unclear if Trump and his team, which has espoused fair trade more than free trade and has discussed a border tax on imports, would sign the document. The document, which is currently being circulated among G20 members, lays out a list of about 10 principles on how a “well performing economy” should act on areas of fiscal, monetary and trade policies, the sources said. It highlights areas Germany places
Results
Zara owner Inditex profit up 10 pct The world’s biggest clothing retailer, Zara-owner Inditex, reported a 10 per cent jump in annual net profit yesterday as strong growth in emerging markets and increased online presence outweighed negative currency effects. Sales in the first six weeks of the new financial year tapered off slightly after a period of exceptional growth during which the Galicia-based company moved brands to bigger stores in prime retail locations. They beat expectations, however. Sales at constant exchange rates rose 13 per cent in the first six weeks of the new financial year as customers snapped up items from spring collections. Naval safety
Pirates demand ransom for tanker seized off Somalia Pirates off the coast of Somalia, who hijacked an oil tanker with eight Sri Lankan crew on board, are demanding a ransom for the release of the vessel, the EU Naval Force said. The pirates seized the Comoros-flagged Aris 13 tanker on Monday, the first such hijacking in the region since 2012, and took it to the port of Alula in the semi-autonomous northern region of Puntland. EU Navfor said as soon as it received an alert on the ship’s seizure, it sent patrol aircraft from its Djibouti base and managed to contact the vessel’s master by phone.
A draft of the main G20 communiqué seen by Reuters appeared to accommodate Trump’s views on trade by dropping a phrase resisting “all forms of protectionism.”
importance on, such as the need for countries to make their financial system resilient to shocks and to refrain from excessive fiscal loosening through “prudent management of public finances,” the sources said. “Among the most important issues from Germany’s point of view, regarding the world’s economy, is the issue of resilience. That’s our top priority,” one of the sources said.
‘Sources said a document lays out a list of about 10 principles on how a “well performing economy” should act on areas of fiscal, monetary and trade policies’ Germany often argues that economies should not rely too much on short-term stimulus and take steps to strengthen fundamentals so that their economies are resilient against shocks. The sources spoke on condition of anonymity because they are not authorities to speak to the media. Germany hopes to have G20 members sign off on the document in Baden-Baden, though some government officials concede not all countries would back it this week. “Let’s see if we’ll get everyone on board in Baden-Baden or only after at the summit of leaders (in July),” one official said. Merkel underscored the importance of free trade in a speech to business leaders in Munich this week. Her talks with Trump in Washington are expected to touch on a range of issues, including defence spending. Causes of friction between Berlin and Washington also include an accusation by senior Trump adviser Peter Navarro that Germany profits unfairly from a weak euro and a threat to impose 35 per cent tariffs on imported vehicles. Reuters
Brexit minister
UK can’t quantify impact of leaving EU without trade deal David Davis said he expected legislation giving May the power to trigger Article 50 of the EU’s Lisbon Treaty would be formally approved by Queen Elizabeth today The British government has not carried out an assessment of what effect leaving the European Union without a new trade deal would have on the economy, Brexit minister David Davis said yesterday. Prime Minister Theresa May, who is due to begin the formal exit process this month, has said she is prepared to walk away from negotiations with the EU without a deal if she is dissatisfied with the terms on offer. In the absence of an agreement, trade between Britain and the other 27 EU members would default to World Trade Organisation rules and tariffs, in contrast with the free access the UK has enjoyed as a member of the EU’s single market. Some proponents of a so-called ‘hard Brexit’ are relaxed about that
scenario, while critics see it as potentially disastrous for the economy. Davis said he did not think that leaving with no deal would be as good an outcome as the free trade agreement Britain is seeking with the bloc, but he agreed with May it could be better than a bad deal. “I can’t quantify it for you in detail yet. I may well be able to do so in about a year’s time. It is certainly the case that it is not as frightening frankly as some people think,” he said. “You don’t have to have a piece of paper with a number on it to have an economic assessment. I spent ... most of my working life before coming into politics dealing with business. You often knew what was a good deal even though you didn’t have
the numbers.” He told a parliamentary committee hearing the last available analysis on the ‘no deal’ scenario dated back to the campaign for the 2016 referendum in which Britons voted to leave the EU. “One of the issues that’s arisen is that those forecasts don’t appear to have been very robust,” said Davis, who became a minister in July after the vote.
Key Points Davis says last economic assessment done pre-referendum PM May has said could walk away from EU without deal Opposition Labour says no deal would be worst outcome Pressed whether any work had been done since then, he said: “If you mean under my time, no.” Davis said this was because there were too many variables and uncertainties involved, including in areas such as customs procedures. “Until we have worked out all the mitigation procedures we could not quantify the outcome,” he said. Reuters
Business Daily Thursday, March 16 2017 15
Opinion Business Wires
The Jakarta Post The opening of the Davao-General Santos-Bitung route for roll-on/roll-off (ro-ro) vessels is expected to boost trade between Indonesia and the Philippines in the long run. The route is set to be launched on April 30 by Indonesian President Joko “Jokowi” Widodo and Philippine President Rodrigo Duterte during the 2017 ASEAN Summit in the Davao City, the Philippines. It is one of the priorities within the ASEAN RO-RO Network initiative, which is projected to improve connectivity in sea channels among Southeast Asian countries as it will reduce shipping time by over 50 per cent.
The Straits Times Changi Airport has been voted the World’s Best Airport by air travellers at the 2017 World Airport Awards for the fifth year in a row. Changi Airport clinched the top spot this year ahead of Tokyo’s Haneda airport and South Korea’s Incheon International Airport. In all, this is the eighth time that Changi Airport has picked up this top international title at the World Airport Awards since it was introduced in 2000. Changi Airport was also named the Best Airport in Asia, and Best Airport for Leisure Amenities, the latter a title it has held since the award category was introduced in 2009.
A Chinese military band conductor rehearses before the closing of the fifth session of the 12th Chinese People’s Political Consultative Conference (CPPCC) National Committee at the Great Hall of the People (GHOP) in Beijing. Lusa
China schools markets on tiered leadership structure
I The Times of India The capital markets regulator will scan internal emails of brokers, their communication with the leading exchange, and trade data for past seven years to find out whether any brokerage using the ‘dark fibre’ connection received preferential treatment from bourse officials. Last week, the Securities & Exchange Board of India (SEBI) asked over a dozen brokerages to share a string of information along with their agreement with Sampark Infotainment — a little-known agency which laid the dark fibre between the National Stock Exchange and Bombay Stock Exchange.
The Korea Herald South Korea’s stock market operator made a pitch yesterday for the country’s equity market in Singapore as part of efforts to attract more global investors and firms seeking IPOs. The annual Korea Capital Market Conference is designed to promote the main KOSPI board and the tech-heavy KOSDAQ, according to the Korea Exchange. In this year’s session, Kim Jae-joon, chief executive officer of the KOSDAQ, briefed more than 150 participants on the strong points of South Korean stocks such as ample liquidity, low listing cost and the high valuation of IT and bio-related shares, added the KRX.
nvestors trying to make sense of China’s National People’s Congress last week and its relation to the more important 19th Party Congress to be held later this year should familiarize themselves with an old saying: “The mountains are high and the emperor is far away.” Orders from Beijing are often ignored in the cities and provinces. Instead, important decisions such as whether and how to restructure the debt of insolvent local governments and state-owned enterprises are made locally. Officials on the ground decide whether to actually shut down excess capacity in state-owned enterprises and whether to risk an increase in unemployment because some enterprise or industry (think coal mining, steel, solar panels) has become non-viable, a drain on the public finances and/or an environmental danger. It’s for those reasons that China’s leadership was largely unable to meet the goals of 18th Party Congress of 2012, which sought to move the nation away from an unsustainable economic development model driven by explosive growth in corporate and local government debt, exports, capital expenditures and the production of often environmentally damaging physical goods to a “greener” one driven by lower leverage and domestic demand for services. The problem was that the plan gave little regard to the disastrous “grow at any cost” mind-set of local and provincial authorities. Many markets benefited. In 2016, China imported 33 percent of the world’s total dry bulk commodities, followed by a Japan at a distant second at 8 percent and India at 6 percent. Home values skyrocketed, fuelled by the central bank’s looser monetary policies. Power may be more centralized under General Secretary Xi Jinping than it has been since Deng Xiaoping -- or even Mao Zedong. Xi is the chair of an unprecedented number of committees that span every important aspect of political, military, economic, social and cultural decision making. Indeed, Xi has been granted the designation of “Core Leader” of the Party, an honorific only ever bestowed before on Mao, Deng and Jiang Zemin. Yet, current developments suggest that even though power is centralized, it is not sufficiently securely held enough for Xi to truly focus on the economy. Global investors are intrigued by the opportunities held by the sheer size of China’s markets. But
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Junheng Li the founder of JL Warren Capital LLC, an independent equity research firm focused on Chinese companies and the Chinese economy
rather than dealing with economic issues, Xi’s domestic focus is still carrying out the anticorruption campaign that was launched following the conclusion of the 18th Party Congress. No local government or a SOE leader is willing to pursue economic reform or much of anything else for which there isn’t ample officially sanctioned precedent. Internationally Xi has also focused on regional political and geopolitical issues. His pro-globalization speech at the World Economic Forum in Davos earlier this year wasn’t about economics but about regional and geopolitics. The economy was, at best, fourth in the list of priorities. The 19th Party Congress may, at last, enable Xi to consolidate power to the point that he can give the economy the attention it has been denied but badly needs, and bolstering the confidence of international investors. Of the seven members of the Standing Committee of the Central Political Bureau of the Communist Party of China -– the supreme decision making body in China –- as many as five could be replaced “peacefully” at the 19th Party Congress because they have reached the informal age of retirement of 68. Xi is 64 and PRC Premier Li Keqiang is 61. Only one of the five, Wang Qishan, who oversaw most of the corruption purge, is a clear ally of Xi. That means by the end of 2017, Xi could at last achieve the kind of control that would permit him to focus on the economy. There is another dimension to Xi’s political control and tenure. No General Secretary of the Communist Party since Mao has served more than two terms of five years each. Xi’s first term started on Nov. 12, 2012. According to established norms, Xi would have to retire in 2022, both because he will have served two terms as General Secretary and because he will be 70 years old. If he currently has any designs on staying in office for longer than that, he could try to persuade the Party to let Wang Qishan stay on as a member of the PSC beyond the age of 68. This will definitely be an NPC worth watching.
Yet, current developments suggest that even though power is centralized, it is not sufficiently securely held enough for Xi to truly focus on the economy
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Bloomberg View
16 Business Daily Thursday, March 16 2017
Closing Tourism
Hong Kong launches first sightseeing restaurant bus
local cuisine while experiencing Hong Kong’s most representative attractions.” The sightseeing restaurant bus is a 47-seat Hong Kong’s first sightseeing restaurant bus double-decker furnished with wonderful lighting went into service yesterday, offering tourists and locals a fresh experience of sightseeing and and sound systems. It tours around the city while serving food prepared by locally famous and dining. Michelin starred restaurants. “(For tourists,) there is now no need to plan where to go or worry about where to eat, sparing Its service comprises day and night tours, with day tour covering over 20 attractions from time for shopping,” Thomas Hung, chairman of the operator Crystal Bus Holding Limited, said at Kowloon to Hong Kong Island or to the New Territories. a launching ceremony on Tuesday. The two-and-a-half-hour day tour costs each Hung said Crystal Bus “combines concepts of passenger 380 HK dollars (US$48.9). Xinhua tourism and catering, allowing tourists to enjoy
Official trip
Top US envoy begins Asian tour amid North Korea crisis At the weekend Tillerson might seek to finalise plans for Chinese leader Xi Jinping to visit Trump in April Dave Clark
W
ashington’s top diplomat arrived in Tokyo yesterday to kick off a first tour of Asian capitals under the shadow of North Korea’s nuclear posturing. An airplane carrying Secretary of State Rex Tillerson (pictured) landed at the capital’s Haneda airport yesterday night, greeted by both Japanese and US officials. Tillerson has promised to take a tough line on Kim Jong-un’s isolated regime as he talks to allies Japan and South Korea and to rival great power China. The former oilman will also talk commerce, after President Donald Trump’s belligerent campaign rhetoric raised the spectre of a trade war between the United State and China. But US officials confirmed North Korea’s provocative behaviour would be “front and centre” as Tillerson meets Japan’s Prime Minister Shinzo Abe and Foreign Minister Fumio Kishida today. After Tokyo, it will be on to Seoul, a city already within range of North Korea’s artillery and rocket batteries, for talks with the acting leader after a corruption scandal saw President Park Geun-Hye ousted last week.
And then at the weekend, there will be his much anticipated trip to Beijing, amid reports that Tillerson will seek to finalise plans for Chinese leader Xi Jinping to visit Trump in April. But Tillerson will also have to broach the topic of North Korea’s progress towards building an intercontinental ballistic missile (ICBM) that would be able to threaten US mainland cities or bases in the Pacific. “He’s going to have an opportunity at every stop to talk about next steps or what we do now, with respect to North Korea,” acting State
Department spokesman Mark Toner told reporters. “I mean, it’s obviously the looming challenge over our relations and, frankly, the security of the Korean Peninsula,” he added in a news briefing before Tillerson left Washington.
Nuclear arsenal
China is perhaps the last country with significant leverage over North Korea, which has ignored several rounds of UN-backed sanctions targeting its banned nuclear weapons program. Beijing shares US concerns over Pyongyang’s attempts to build an arsenal of nuclear devices, but has been much more measured in its reaction to the ballistic missile program. Xi’s government has been reluctant to back any moves that might destabilise Kim’s regime, and is publicly
more concerned about Washington’s decision to deploy the THAAD missile defence program in South Korea. Washington insists THAAD is a defensive system deployed to protect the South and US bases from North Korean missiles, but China fears its advanced radar system undermines China’s nuclear deterrent. In recent comments, China’s Foreign Minister Wang Yi implied the United States and North Korea were equally at fault for the latest crisis and moving towards a “head-on collision”. With apparently little prospect of a breakthrough, some foreign policy hawks in Washington have been pushing for secondary sanctions that would hurt Chinese banks doing business with North Korea. But US officials played down expectations of any announcement during the trip. Instead, Tillerson will test Chinese receptiveness to the idea of tougher measures on North Korea, while attempting to calm fears of an imminent trade dispute between the world’s two largest economies. “Everybody agrees on the challenge, which is: How do you stop North Korea’s bad behaviour?” Toner said. “I think part of this trip will be about trying to hone in on some next steps. “I think he really wants to try to drill down on that challenge for this trip. But let’s not also ignore the other 800-pound gorilla in the room here, which is our trade relations with the region. It’s hugely important.” AFP
Legislation
Investigation
Real estate
China adopts General Provisions of the Civil Law
Kim’s identity confirmed using child’s DNA
Qingdao and Nanjing to impose new property curbs
China’s national legislature yesterday passed the General Provisions of the Civil Law, the opening chapter of a civil code planned to be enacted in 2020. The General Provisions were adopted at the closing meeting of the annual session of the National People’s Congress (NPC), with 2,782 of the 2,838 deputies present voting in favour. It takes effect on October 1 this year. Compiling a civil code, a decision made by the central leadership in 2014, has been deemed as a “must-do” to promote the country’s rule of law and modernize state governance, and as a crucial move in building China into a moderately prosperous society by 2020. A two-step approach has been designed for developing the code. The adoption of the General Provisions, which lays down basic principles for regulating civil activities, marks the crucial first step. The second step, the compiling of five individual books that deal with property, contract, tort liability, marriage and inheritance, started late last year. Work on the books will be stepped up. “With the General Provisions, 1.3 billion Chinese will feel more secure and enjoy more equal opportunities and dignity,” said Sun Xianzhong, a national lawmaker and deputy head of the China Civil Law Society. Xinhua
Malaysia used a DNA sample from one of Kim Jong-Nam’s children to confirm the identity of the assassinated half-brother of North Korea’s leader Kim Jong-Un, the deputy prime minister said yesterday. The 45-year-old was poisoned with the deadly nerve agent VX in a brazen Cold War-style assassination on February 13 in Kuala Lumpur International Airport. Investigators “confirmed the identity of the body as Kim Jong-Nam based on the sample obtained from his child”, said Deputy Prime Minister Ahmad Zahid Hamidi, without elaborating further. Seoul has blamed Pyongyang for Kim’s death, but the North has rejected those claims and slammed Malaysia’s refusal to hand over his body without a DNA sample from next of kin. Ahmad Zahid told reporters the two countries began official talks on Monday to resolve the crisis and bring nine Malaysians, who are trapped in Pyongyang, home. Pyongyang has never confirmed the identity of the victim, who was carrying a passport bearing the name of Kim Chol when he was attacked. Malaysia officially confirmed his identity on Friday, nearly a month after the murder, but refused to say whether authorities had obtained a DNA sample from next of kin. AFP
China’s north-eastern port of Qingdao has joined more than two dozen major cities in rolling out property curbs as speculators from outside flood the market, while Nanjing in the east intensified policy curbs to tame the market, according to a media report and government announcement yesterday. Qingdao non-residents were now limited to buying at most one property in the city, in the eastern province of Shandong, on the condition that they had paid at least one year of local taxes or insurance continuously, it said. Policymakers also hiked the downpayment ratio for first and second home purchases by 10 percent, to 30 and 40 percent respectively, according to Qingdao News, which cited a notice jointly issued by five government bodies including the central bank’s Qingdao branch. Banks would stop issuing mortgages for third home purchases, it said. The rules, effective from March 16, also tightened lending conditions for home buyers borrowing from the country’s housing fund, which offers a lower interest rate on mortgages than banks. Nanjing, capital of China’s eastern Jiangsu province and the second runner-up in the price rally last year, suspended sales for residents who already own two houses in the city’s core area, according to a notice on the city government’s website. Reuters