China removes ban on Brazilian meat imports Food safety Page 8
Monday, March 27 2017 Year V Nr. 1262 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Public finance
Tax contribution from gaming sector falls 5.9 pct y-o-y in 2016 Page 3
Business
Chinese entrepreneurs laud platform opportunities in Portuguese-speaking countries Page 6
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Gaming
Success Dragon completes energy company share purchase deal Page 7
Boao Forum
Chinese vice premier defends globalization in regional meeting Page 9
Insurance market heats up Insurance
Gross premiums in 2016 reached MOP20.5 bln for the city’s insurers, a nearly 50 pct jump y-o-y. Life insurance boosted operations, increasing in value by more than half from the previous year. Total gross premiums hit MOP18.4 bln, while non-life insurers recorded MOP2.16 bln for the year. China Life Insurance was the dominant player, with over 63 pct of the segment and seeing 71 pct growth y-o-y in total gross premiums. Page 3
Founder of Malo Group, Paulo Maló describes the trials and tribulations undergone during its time in the MSAR, noting however that without the experience here, it wouldn’t now be in China, Australia, Japan and more. Describing the group as having ‘no debts’ despite problems with partners involving a ‘lack of seriousness’ in fulfilling agreements, the group is ‘currently discussing’ with the Venetian to begin to operate the spa in the property again. Maló says the MSAR has all the characteristics needed for medical tourism, but is hindered by hiring restrictions. Interview | Medical Pages 4 & 5
HK Hang Seng Index March 24, 2017
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Transportation Uber’s latest offering aims to help those with impairment disabilities, working in concert with associations and providing driver training. Though facing increased competition from legal taxi services such as Radio Taxi, the group is more mobile and can ‘adjust supply based on demand’, says the group’s General Manager. The plan’s success will depend on interest in the programme, with results analysis to determine whether it will advance to Phase 2. Page 2
Carrie Lam will lead HK
Election Former senior Hong Kong government official Carrie Lam was elected as the new chief executive yesterday. The Electoral Affairs Commission of the HKSAR declared that Lam garnered 777 of 1,163 valid votes, followed by Tsang Chun-wah with 365 and Woo Kwok-hing with 21. Page 16 24,358.27 +30.57 (+0.13%)
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The road to health
2 Business Daily Monday, March 27 2017
Macau Services
Uber is back Trying a different approach, Uber Macau is launching an in-app feature today, UberASSIST, catering to people with accessibility needs Sheyla Zandonai sheyla.zandonai@macaubusiness.com
U
ber Macau is launching a new in-app feature this Monday, UberASSIST, designed to help people with impairment disabilities to access its services. Trasy Lou Walsh, Macau General Manager of Uber, said that the service was designed to provide reliable, safe, and affordable transport options for people with accessibility needs and people who require additional physical support. “Today there are nearly 12,000 people with some kind of disability in Macau, who sometimes have difficulties moving around the city. Through our technology, we really hope to be able to get them out and around,” said Ms. Walsh. Regarding whether the Macau SAR Government would be more accommodating toward Uber since the new service is targeting important social needs, the local Uber head opined that she thinks that could be the case. “We would like to hear from local associations and show that technology can help society and people with difficulties,” she said.
Trade
During the meeting, she noted that some of the local associations working with disabled people have already included the new service in their programmes.
Competition
As to whether the latest rival taxi operation to be introduced in the city, Radio Taxi, poses a threat to Uber’s operations in the city, Ms. Walsh explained that the difference in Uber’s business model is that it allows for more flexibility in its services. “On our platform, our different drivers can get online anytime, and that’s why we are able to adjust our supply based on demand. I understand that Radio Taxi has some cars which are specific to disabled people, and we haven’t got that yet. But our point is that we are able to train sufficient drivers to meet the demand and that’s how we can actually enable disabled people to get around town easily.” Uber Macau currently has 3,000 registered drivers, Ms. Walsh explained. About 100 of them have been trained in a series of ten sessions held since June 2016, to provide services for people with impairment difficulties, be it visual, hearing-related, or
physical. The training includes learning skills such as sign language and knowledge about different types of wheelchairs or ways to accommodate people comfortably in a car. There will be no additional fee for the new service, as drivers offering it will apply the same fee as UberX. In response to enquiries about the average earnings of drivers working for the car hailing service, Ms. Walsh said it varies a lot from case to case. One of the two drivers who joined the training programme who was present during the press session said that the number of passengers they get per hour usually ranges from two to three.
Programme
Ms. Walsh explained that Phase 1 of the programme will be launched today (March 27) and run for a three
to six-month trial period. If demand picks up during Phase 1, Uber Macau will continue with Phase 2, and likely train more drivers. During Phase 1, Ms. Walsh explained that the company would seek associations’ opinions in order to improve their offerings, such as by proposing free rides to a number of the groups to familiarize them with the service. “We are approaching everyone we think could benefit from the programme,” she commented. For Phase 2, Uber Macau plans to evaluate feedback from the associations and eventually partner up with them, as Uber cars will already be equipped to attend to people with accessibility needs. According to the Macau Uber team, UberASSIST was first launched in the United States, and later in the United Kingdom, Australia, Hong Kong, and Singapore.
Brazilian meat ban is ‘only temporary precaution’ according to IACM head
Gaining back trust After meeting with representatives from the local frozen meat industry, IACM stated that after updates are provided by Brazilian authorities as to which meat suppliers from the country have been certified, meat imports to the MSAR will be allowed again Nelson Moura with Lusa nelson.moura@macaubusinessdaily.com
Representatives from the Macau Frozen Meat Industry Association met with the Civic and Municipal Affairs Bureau (IACM) at the end of last week to request the government to assure the stability and the supply of Brazilian meat to the MSAR, after a general ban was enforced on meat from the South American country. With Brazilian meat representing 40 per cent of all frozen meat imports to Macau, including beef, pork and chicken meat, the president of the association, Ip Sio Man, explained to IACM that a lengthy ban on imports would have a considerable impact on the city’s meat industry. On March 21, IACM announced that the importation of all frozen or refrigerated meat from Brazil to the MSAR would be halted due to a recent scandal of tainted and/or rotten meat from Brazil.
Since then, IACM has informed local meat suppliers to seal and take off the shelves, all products from the 21 companies currently under investigation by the Brazilian authorities. During the meeting, IACM President José Tavares stated that the suspension was a temporary precaution and MSAR authorities are in contact with their Brazilian counterparts to receive updates on the on-going investigation into the country’s meat suppliers. After clarification was provided by
the Brazilian government on meat supply companies that had been cleared, in regards to sanitary and food requirements, the IACM head said meat imports from certified companies would be allowed. The department will also continue discussions with Mainland Chinese authorities in order to study ways of speeding up import-export formalities and the sanitary inspection process in the sector, while looking for alternative sources to maintain a sustainable supply of meat to the MSAR.
Meeting the top brass
The Brazilian President, Michel Temer, also announced on Friday that he would contact Chinese President Xi Jinping to clarify the current state of the country’s meat supply business. The South American country’s head of state said that Brazilian society had mobilised to resolve what could
transform into a “disastrous international event”. “We have organised a ready response and we will overcome this embarrassing situation that could cause serious losses to the country, in what is one the main sectors of our economy,” Mr. Temer said. One of the largest meat exporters in the world, Brazil has been trying to regain consumer confidence in its meat exports, after federal authorities revealed that illegal products were being sold by 21 companies in its business supply industry, including units of two of the country’s largest exporting companies, BRF and JBS. After the investigation results became public, the European Union, Mainland China, Egypt, Chile, Hong Kong, Japan, Mexico and Saudi Arabia suspended imports or imposed restrictions on the entry of Brazilian meat (see updates on ban lift on Page 8). According to data from the Brazilian Agriculture Ministry, Brazil exported more than 1 million tonnes of bovine meat in 2016, with the main destinations being Hong Kong, Egypt, China and Russia. Brazil also sells animal meat products to more than 150 countries, representing 20 per cent of the bovine, poultry and pork meat market, with the country’s export market valued at around US$14 billion (MOP112 billion) per year.
Subsidies
New medical coupons from May 1 Registration opens for MOP3,000 subsidy for university students Permanent residents of the MSAR can withdraw this year’s medical coupons starting May 1, the Executive Council announced last Friday, expecting the issuance will involve some MOP450 million (US$56.3 million) in public expenses. Since 2009, the MSAR government
has issued each permanent resident with medical vouchers worth a total of MOP600 every May. The vouchers are redeemable until August of the following year. Official data provided by the Executive Council shows a total of 476,050 permanent residents had
printed their 2016 coupons as of March 16 this year, accounting for 72.2 per cent of the total. In particular, some 2.9 million coupons were used, amounting to nearly MOP139 million. The vouchers can be used at 729 local medical units, covering 1,353 doctors. The Council also announced last Friday that from now until May 19 this year, eligible university students can apply for a MOP3,000 subsidy under ‘the Learning Materials Subsidy Scheme for Tertiary
Students’ for the 2016/2017 academic year. According to the spokesperson of the Executive Council, Leong Heng Teng, the subsidy scheme is expected to benefit some 32,800 local tertiary students, for which the budget totals some MOP98 million. According to the scheme, beneficiaries must be Macau residents studying in a tertiary course of no less than two years’ duration, either in the SAR or at other institutions recognised by local authorities. K.L.
Business Daily Monday, March 27 2017 3
Macau Insurance
Local insurers make a big leap The life-insurance market and the non-life segment together raked in MOP20.5 billion in gross premiums in 2016, growing by almost 50 per cent from 2015 Kam Leong kamleong@macaubusinessdaily.com
T
he city’s insurers generated gross premiums totalling MOP20.5 billion (US$2.56 billion) for the whole year of 2016, jumping by 45.4 per cent year-on-year, boosted by life insurance operations which increased by over half their value from the previous year. According to the latest official data from the Monetary Authority of Macau (AMCM), local life insurance companies saw their total gross premiums surge by 52.6 per cent yearon-year to MOP18.4 billion, whereas non-life insurers generated premiums of MOP2.16 billion during the same period, an increase of 3.7 per cent from one year earlier. While life insurers posted a 10 per cent increase in total claims for the year to MOP2.81 billion, non-life insurers saw claims drop by 16.6 per cent year-on-year to MOP732.4 million. Of the total claims in the life insurance market, those for death accounted for 30.6 per cent, amounting to MOP858.6 million, followed by insurers’ dividends and maturity values to policy holders, which reached MOP734.2 million and MOP675.1 million, respectively. China Life Insurance (Overseas) Co Ltd was the dominant player in the
life-insurance market, registering MOP11.6 billion in gross premiums for the year, and accounting for 63.3 per cent of the segment total. Compared to gross premiums worth MOP6.75 billion in 2015, the 2016 figure represents a notable growth of 71.2 per cent. Meanwhile, the company’s total claims reached MOP538.7 million, representing 19.2 per cent of the segment total, which grew slightly by 0.6 per cent from MOP535.5 million one year ago. Second place in the life-insurance market was AIA International Ltd,
which generated MOP3.5 billion in gross premiums for the year, a yearon-year increase of 20.3 per cent. The insurer’s total claims increased 5.3 per cent year-on-year to MOP1.28 billion. AXA China Region Ins. Co. (Bermuda) Ltd was the other life insurer to generate gross premiums of over one billion during the year, amounting to MOP1.09 billion, a jump of 45.7 per cent year-on-year. Total claims of the firm, however, surged by 80.3 per cent to MOP423.6 million.
Non-life market
For the non-life insurance segment, 41.8 per cent of the premiums were derived from contracts of Property All Risks, which amounted to MOP900.1 million, followed by employees’ compensation and motor insurance, amounting to MOP429 million and
MOP288.1 million, respectively. China Taiping Insurance (Macau) Company Ltd led the non-life segment with gross premiums totalling MOP622.7 million, a yearon-year growth of 2.9 per cent. Luen Fung Hang Insurance Company Ltd occupied second place in the non-life market in terms of premiums, which rose by 10.2 per cent year-on-year to MOP569.3 million during the year. Total claims of China Taiping and Luen Fung Hang were MOP255.1 million and MOP133 million, with a loss ratio of 40.8 per cent and 25.4 per cent, respectively. The average loss ratio of the nonlife segment was 34 per cent. AIG Insurance Hong Kong Ltd had the highest loss ratio in the sector, at 59.8 per cent, followed by that of Macau Insurance Company Ltd at 41.8 per cent.
Public finance
Infrastructure
Gov’t income from gaming taxes dipped further in 2016
Highest bid for Pac On police station fitting-out project MOP32 mln
The total income earned by the gov’t last year also declined Cecilia U cecilia.u@macaubusinessdaily.com
The MSAR Government's income from gaming taxes decreased slightly by 5.9 per cent year-onyear to MOP79.5 billion (US$9.9 billion) in 2016, the latest figures from the Financial Services Bureau (DSF) reveal. Excluding those of autonomous bodies, revenue from gaming taxes last year accounted for 77.6 per cent of the total revenue of the government, which amounted to MOP102.4 billion. When compared to MOP109.8 billion in 2015, the government saw a drop of 6.7 per cent in its
total revenue last year. The most up-to-date central account data from the DSF shows that all sectors of the government’s income decreased to different extents, with two areas – property income and other current revenue – registering the biggest year-onyear drops of 43.2 per cent and 79.8 per cent, respectively. Capital revenue -which covers sales of capital assets, financial assets and reimbursements not deducted from payments - totalled MOP986 million, down 9.5 per cent year-on-year. Within the scope of the MSAR Government's principal tax revenue, property taxes and stamp
duties (which includes special stamp duties), saw the most significant growth, with an increase of 30.3 per cent and 16.8 per cent, amounting to MOP996.2 million and MOP2.4 billion, respectively. In contrast, tax revenue acquired from business registration taxes slumped by 63.7 per cent to MOP200,000 as compared to MOP400,000 in 2015. There was also a significant decline in income generated from motor vehicle taxes, down 47.6 per cent year-on-year to MOP521 million.
Spending remained almost unchanged
Meanwhile, the government spent MOP80.73 billion last year, a slight year-on-year increase of 0.3 per cent, as indicated by the DSF. Taking up the majority of the government’s expenditure - at 86.6 per cent - was current expenditure, which reached MOP69.9 billion, a slight increase of 1.6 per cent year-on-year. Capital transfers under capital expenditure surged more than fivefold to MOP528 million, compared to MOP79 million in 2015. The DSF data also disclosed that the MSAR Government had put 4.8 per cent less into its investment plan (PIDDA) to a total of MOP8.5 billion during the year. Among all expenses, construction investment received the highest amount of capital from the government, at MOP2.7 billion, however this was still a decrease of 14 per cent year-on-year. The fiscal surplus of the central account reached MOP21.7 billion, down 26 per cent when compared to MOP29.3 billion in 2015.
A total of 29 companies have bid on the fitting-out project for the second floor of the Pac On police station, with the highest bid reaching MOP32 million and the lowest coming in at MOP23 million. During Friday’s bidding, one company abandoned the procedure, while three were rejected and one was accepted on the condition that it submit delayed documents prior to a specified deadline. The area that needs to be fitted-out occupies some 3,800 square metres, which will be used for document storage and as a warehouse. The project is expected to commence in the third quarter of this year, with a construction period of 300 days. The fitting-out project will include the rearrangement of the indoor area, installation of air-conditioners, and improvement of spaces for electricity and light supply systems. C.U.
4 Business Daily Monday, March 27 2017
Macau Interview | Health Malo Group partners with Tianjin Chase Sun Pharmaceutical Co. Ltd. to develop operations in the MSAR and Hong Kong
Trials and tribulations Portuguese businessman Paulo Maló, founder of worldwide dental health Malo Group, recounts to Business Daily the history of the Malo Clinic Macau since its opening at The Venetian Macao in 2009, its plans to revitalise the project, re-open the spa area, and open a new dental clinic in the Macau peninsula and Hong Kong Nelson Moura nelson.moura@macaubusinessdaily.com
M
alo Clinic Macau has faced difficulties in its past. Have these challenges created opportunities for the present? You can’t forget that the Macau clinic for many years had the largest medical staff in the world. Upon opening, the clinic was the most important step for the Malo Group and our first large international move. It is thanks to it that we’re now in China, Australia, Japan, South Korea, Singapore and Thailand. If we had to start everything again, we would do everything the same with some normal alterations. If you could do it again, what would you change? I believe we projected the medical area poorly. We should’ve made the dental section larger and the medical area smaller. For the kind of business we planned, I think we made too many surgical blocks, occupying areas we could’ve used for dental work. How did the evolving relationship with the Venetian impact operations? In the beginning The Venetian Macao offered many incentives to the Malo Clinic, since it was a plus for the Las Vegas Sands Corp. group too - which wanted the largest casino in the world to also have a health component besides the leisure and gaming sections. My relationship with the Sands group’s top management and with Stephen Weaver [former Sands China Ltd.’s president of Asian development] was always really good. There was a great synergy between the casino operations and the medical spa, which we included in the clinic. What happened after his departure? His departure coincided with a serious world financial crisis [20082010], which also impacted Macau, even halting the construction of some hotels. It was a phase where a lot of stores couldn’t pay rents, and obviously also affected our performance. The people that came after
A challenging history
Malo Clinic Macau opened at The Venetian Macao in 2009, and at the time, announced itself as one of the health and wellness centres in the world, offering medical, dental and spa services over a 9,000 square metre area. In 2012, Mr. Maló announced that the company had registered a 55 per cent year-on-year increase in medical and dental profits, claiming that the clinic’s success in Macau had led him to expand the brand in 2013 to Beijing, Guangzhou and then Shanghai. At the time, one of the company’s suppliers sued the clinic to recover debts amounting to over MOP8 million (US$1 million) and tried to force it into bankruptcy, with Malo Group representatives stating to Business Daily that the issue was created due to the clinic not being ‘satisfied with [the delivered equipment], including the delivery time’ and not paying immediately. According to the group representatives the costs were renegotiated, with an agreement being reached and the amount paid.
the change in management didn’t perceive how much we had invested in the operations and were quite arrogant, making us go through a difficult period that fortunately has already finished. Basically, during the crisis there were negotiations for an agreement of the property rents, that wasn’t honoured by the new management of The Venetian Macao. Unfortunately, Stephen left before we signed contracts wavering some rent payments, which the new management didn’t agree with, even though there was paperwork excusing us from some rent payments, something that had been granted to other businesses in the property. They told us that the papers hadn’t been signed by the new management and so didn’t have any value. It was something legal, but unfair. At the moment relations with the property management are good. The crisis period also led to some financial difficulties. Are those now completely resolved? We don’t have any debts at the moment. What happened is that in order to support operations we had to find a new partner. The previous partnership with Taivex Healthcare Management Services (Macau) Ltd [a subsidiary of Shanghai Taivex Healthcare Management Co Ltd. that purchased 60 per cent of the clinic operator Pacific Health Care Ltd] helped us before. After it finished, we found a strong partnership with Tianjin Chase Sun Pharmaceutical Co. Ltd., which is now the majority shareholder. With them we will be able fully develop our operations in Macau, which we didn’t really develop before. You stated previously that one of the problems with the Macau project was not having a partner with strong medical capabilities. Do you think you have now found the right partner? The main problem before was a lack of seriousness from The Venetian Macao to fulfil its part of the agreement in regards to the rent, making us
In 2013, Taivex Healthcare Management Services (Macau) Ltd, a subsidiary of Shanghai Taivex Healthcare Management Co Ltd. bought 60 percent of Pacific Health Care Ltd (PHC), which ran Malo Clinic Macau. The operations were then rebranded as Taivex Malo, corresponding to Taivex Malo Day Hospital, Taivex Malo Clinic Dental Care, Taivex Malo Beauty Care and Taivex Malo Spa. After the rebranding period, one of the PHC administrators, Jorge Valente, stated to Business Daily that The Venetian Macao had become a partner of the medical spa, allowing PHC to reduce its monthly rent from HK$2 million to HK$1 million. According to statements by former Clinic Director José Peres de Sousa, the clinic management didn’t renew the three-year rent contract for the medical spa with The Venetian Macao, which led to the spa section ceasing its operations in 2016, leaving only the hospital area in operation.
go through the crisis with no profits, as the client numbers for the medical clinic were lower. That forced us to find a partner, Taivex, to continue operations. However, what we really needed was not a partner with lots of money, but a partner with the capacity to attract clients and develop the medical activities.
“The government should reduce these restrictions on medical and auxiliary employees, promote Macau as a medical tourism destination, and help find partnerships with international health entities to develop this area in the city” Now we have managed to form a partnership with a group that not only has the financial capacity, but will also give us the capacity to network in China, which we now also have through Malo Clinic operations in the country. We can connect our
international network with their network in China. We always had a good network in terms of the dental area, but not so much the medical area, and the clinic is mainly focused on medical areas. What led to the spa closure in 2016? The medical spa was closed because our former partner made some decisions that went against the agreement we had with The Venetian Macao. It was a regretful decision by the former CEO of PHC, which led to the spa being offered to The Venetian Macao in order to settle the rent debt. The previous management of the clinic wasn’t aligned with me and the Malo Group, but the new management is 100 per cent aligned with our objectives, not just in Macau but for activities in Asia. I can understand why The Venetian Macao closed down the medical spa because it was stupidity from the head of PHC. We are currently discussing with property management so that we can again begin to operate with the largest medical staff in the world at The Venetian Macao, which will be good for both. So as of the beginning of this year, what is the situation of Malo Clinic Macau? We have a new partner and investor, which is the majority shareholder, and we’re negotiating with them on cooperation in other countries where we are majority shareholders. Currently, the medical and dental areas are active, while the medical spa is not. Together, we want to reactivate the medical spa and increase the medical and dental capacities. We’ll also open another smaller dental clinic in Macau more focused on local residents. The former clinical director, José Peres de Sousa, criticised the new
Business Daily Monday, March 27 2017 5
Macau management of the clinic and some of your decisions before he resigned, while stating that the clinic's medical area wasn’t sustainable. How would you comment on his criticisms? Mr. Sousa had some reason for some of his critiques of the former management of the clinic. Some of his other critiques might have been made in the heat of the moment, as someone who had just resigned, a bit like after a divorce when a husband and wife speak badly of each other. Malo Clinic is the largest dental health care company in the world, and I think this criticism is normal for someone who had just left the business.
“We are currently discussing with property management so that we can again begin to operate with the largest medical staff in the world at The Venetian Macao, which will be good for both” In regards to the medical area, anything can be sustainable if it’s well managed. It required a lot of effort since the crisis, and that section of our operations was never fully developed due to the local financial difficulties and the relationship with The Venetian Macao. We’ve resolved these problems one by one, and the operations were also affected by the nature of Macau tourism, more focused on gambling. So do you think Macau could further develop its medical tourism attractiveness? I think it is important for the Macau Government to realise that the city has all the conditions to develop medical tourism, having more
Paulo Maló, founder of worldwide dental health Malo Group
basic conditions than for example, Thailand. However, Macau doesn’t have quality medical services, despite having all the other conditions, such as having the financial capacity to develop it, a close airport and connectivity with Hong Kong and Mainland China, with the Hong Kong–Zhuhai–Macau Bridge close to being finished. This could create another reason for people to visit Macau. It’s like a supermarket: if you go to a supermarket to buy yoghurt, if there’s other sections you’ll end up buying other stuff too. Macau is lucky because it’s a
supermarket that already attracts a lot of people. Has the Malo Clinic Macau encountered problems in hiring non-resident personnel? We’ve had serious problems with this. We haven’t been able to hire nurses or dental professionals, which is an obstacle. There’s no logic for a city the size of Macau to place these kinds of restrictions. The government should reduce these restrictions on medical and auxiliary employees, promote Macau as a medical tourism destination and help find partnerships with international health entities to develop this area in the city. It’s so simple, I can’t understand why it hasn’t been done. What plans does the group have for Hong Kong? We will develop operations there with the same partner we have in Macau. This year, besides revitalising operations in Macau and opening the new clinic, we’re also planning to open one in Hong Kong and Japan. After Portugal, Mainland China is Malo Group’s largest market. What are your plans to develop operations in the country? We’ve been in Mainland China since 2013 and we currently have
16 clinics. Our development plans for the country involve opening a new clinic every three months. Do you have plans to turn Mainland China into your most important market? We’re looking to expand in every worldwide operation we have, not just Mainland China. The country is where that expansion has been faster, which is normal due to its population and the lack of quality competition, but we don’t want to look at different markets as more important than others. Does the Malo Group have plans to list on the stock market in Mainland China? We want to, but currently we still don’t have all the conditions for it, so I can’t put forward a date. What would you see as the largest obstacles for expansion in the mainland? Human resources are the main obstacle, not the quantity but quality. In Mainland China, human resources are not such a large problem as they are in Macau. It is possible to import medics from Europe, the problem is the quality, while in Macau the problem is not the lack of quality, but the lack of medical human resources. We can’t even get nurses.
6 Business Daily Monday, March 27 2017
Macau Opinion
Sheyla Zandonai*
Pocket parks** What is it that makes a city desirable to live in? This is a question that concerns public agents, urban planners, scholars, and citizens, mostly. Quality of life, an index to measure a city’s attractiveness, is a topic of conversation, reason for public concern, and a goal, ultimately, in people’s lives. By nature, it is contentious. Not everybody wants or seeks the same things. It is hard to strike a balance where public and private interests often clash. Eventually, it becomes a matter of which side you are on. But that’s open to negotiation. Although we cannot easily picture real estate developers lobbying for more public parks in the city, they might, if they think about the long-term return; a house with a garden, a room with a view, so the story goes. In the latest ranking of cities offering the best quality of life worldwide, released in early 2017 by Mercer, a consultant, Vienna came first. With the exception of Auckland and Vancouver, the top ten cities are all located in Europe. Safety, good welfare-state provision, and a high life expectancy, to name a few, were all part of the equation that put the Austrian capital in the coveted spot. Within this framework, however, less consideration of equally fulfilling things in life, such as food experience and exposure to natural light, lowers the appeal, so to speak, of other, more alive, organic, and global places. Hanoi, for instance, has an extremely vibrant street food scene, but the fact that it is a bit on the rack makes it a lesser contender. It came in at the 156th position on Mercer’s ranking. Hong Kong came 71st. Macau did not make the list. At the end of the day, part of it comes down to personal choice. Perhaps a wonton soup in that rundown neighbourhood speaks more to you than a tart in a fancy Viennese café. That said, there is still a ways to go here. European cities have been constantly re-adapted in line with comprehensive planning. Overall, they have gone greener and integrated more hi-tech features. Gardens remain a public entity as well as an aim in urban design. The fact that cities with hundreds of years of history remain both functional and beautiful speaks for itself. In Macau, one solution to density has been to create “pocket parks,” small green buffers in the middle of a forest of concrete and cars. It is a start. But is it what a liveable city should feel like? ** To my sharp-witted urban thinker friend *scholar and contributor to this newspaper.
Cooperation
Chinese Forum and the Portuguese-speaking countries Chinese entrepreneurs are successfully developing companies in Portuguese-speaking countries, a session with IPIM revealed. But difficulties in gaining access to the Chinese market are still apparent Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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radual progress” is being made in “small and medium enterprises [SMEs] from Macau, as well as young entrepreneurs becoming better informed about the functions and opportunities of the platform,” according to the executive representative of the Macao Trade and Investment Promotion Institute (IPIM), Ms. Gloria Batalha Ung. The comments came at a conference welcoming four Chinese entrepreneurs to share their experiences in trade, development and cooperation with Portuguese-speaking countries. The conference, also focusing on import-export trade, gathered business and government representatives together. Ms. Ung pointed out the MSAR’s role as a platform for commercial cooperation, with the aim of “accelerating the implementation of such a platform through the construction of three centres” including: the Commercial Services Centre for Small and Medium Enterprises (SMEs) of China and Portuguese-speaking countries; the Distribution Centre of Food Products from Portuguese-speaking countries; and the Conventions and Exhibition Centre for Economic and Trade Cooperation between China and Portuguese-speaking countries. Within the institution’s role of organizing study and exchange trips for business delegations from Macau and China to Portuguese-speaking countries every year, Ms. Ung noted that a new delegation is set to visit Cape Verde in June to further develop the bipartisan relationship.
Portuguese-language experience
Kicking off the experience session, the President of International Crystals Investment Group Holdings Limited, Deng Haiqiang, spoke of the company’s business in the state of Minas Gerais in Brazil, a mineral-rich territory. Mr. Deng noted that coming to Macau four years ago and enlisting the support of IPIM, has led to: “the development of closer business ties between the company and Brazil.” Mr. Deng commented that he built a “crystal palace” in his hometown in Gansu Province using “300 tones
of crystal on the floor,” presumably mined from the Portuguese-speaking nation. Regarding e-commerce development opportunities, the Director of Guangzhou-based Nai Ja Industries Limited, Mr. Chen Jian Cai, lauded IPIM’s support in the development of the group’s e-commerce platform, which helped them “explore and broaden their business abroad.” The company exports batteries to Angola. Regarding Portugal and Europe, the Vice-minister of the Department of Governmental Affairs at Huawei Technologies Co., Ltd, Chen Nan, said that Portugal was “the first entry door” of Huawei to Europe. The company currently has eight million clients in Portugal, according to information provided by Mr. Chen. “The Portuguese government is quite open to foreign companies,” Mr. Chen noted. Speaking about his previous professional experience in Vietnam, Mr. Chen suggested that a formula for good cooperation would be to “always employ local workers.” He also mentioned that Huawei is developing its research segment in partnership with the University of Lisbon, and that they are planning to create a “Faculty of Information Technology.” Closing the presentation, a spokesperson for Liu Zhixian, Project director of Longping Hi-Tech Office and President of Longping Hi-Tech East Timor Agriculture Development Co., Ltd. of Yuan Longping High-Tech Agriculture Co., Ltd., presented the company’s strategy for agricultural investment and the development of hybrid rice, honey, coffee, shrimp, and corn, among others. Longping’s spokesperson emphasized that East Timor is the least developed of the Portuguese-speaking countries, one of the reasons that the company decided to create a centre of development research, and invest in eco-tourism. “East Timor presents lots of investment opportunities and investment in the country can contribute a lot to the well-being of its people,” Longping’s spokesperson suggested.
Rebuild and link
Speaking to Business Daily on the sidelines of the session, Belarmino Paredes Vieira Barbosa, a representative of the delegation from the General Consulate of the Republic
of Angola in Macau, explained that with the implementation of the three centres, Macau is starting to promote Angola’s products in China and in the city, mainly focusing on food. “The Convention Centre will be the place to exhibit Angolan products available for sale and exchange and this will give a strong boost in our relationship and mainly in trade.” Mr. Barbosa serves with the Angolan Ministry of Commerce and has spent six years in Brazil, returning briefly to his home country before settling in Macau for the last two and a half years. He points out that Angola is now “advancing with economic diversification,” explaining that many years of war have broken down the country’s infrastructure and economy, and that falling oil prices – Angola’s main export commodity – are creating other difficulties. “China has granted us loans that we are using to recover the infrastructure destroyed during the war and to diversify the economy, for instance, the agriculture and the industry.” When asked if Angola has benefitted from the Sino-Luso Forum, by selling goods to China, the representative explained that the country’s current financial situation is not very favourable to this type of investment. “Because China is so to speak self-sufficient, at this moment, we need China more than China needs us,” stated Barbosa. He added, however, that because Macau acts as “an entry point for goods from Angola and other Portuguese-speaking countries” to the Chinese market, it is incentivizing exchange. The main challenge, he explained, is passing the “high-standard” quality controls that China sets for allowing imports. “This will be the first step to be achieved,” he acknowledged. Visiting Macau for the first time, and sitting in on the session, was Luciano Medeiros, Executive Director of NordMarket, a distributor in Brazil. The businessman noted that the opportunity to visit followed an invitation from José Alves, the dean of the Faculty of Business and Leadership at the University of Saint-Joseph, whom he met in Angola last summer. Mr. Medeiros explained that NordMarket is currently only operating within the domestic market and is seeking to diversify its business, looking potentially to the MSAR. “We are doing a prospection of Macau’s market for the import and distribution of Brazilian tropical fruits, mangoes, pineapple, avocados, bananas, and so on,” noted Medeiros, who added that the company is initially targeting the Macau market, but not yet focusing on the mainland.
Business Daily Monday, March 27 2017 7
Macau Business
Success Dragon invests in Primus Power The gaming service provider completed a purchase of shares issued by the renewable energy supplier in a bid to diversify its business Cecilia U cecilia.u@macaubusinessdaily.com
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aming service provider Success Dragon International Holdings Ltd announced last Friday that it has completed the purchase of the Series E Preferred Shares issued by Primus Power Corporation costing US$20 million (MOP160 million), according to the company’s filing with the Hong Kong Stock Exchange. The recent purchase signifies
Success Dragon is acquiring 20.82 per cent of Primus’ shares. Primus Power specialises in the provision of electrical energy storage system solutions. Founded in 2009, the company, headquartered in Hayward California, is expanding its presence in Asia through a subsidiary. According to the press release posted by Primus, the Chairman of Success Dragon, Li Xuehua said the partnership with Primus Power ‘marks Success Dragon’s first step into the renewable energy business,’ and also anticipates the introduction
of Primus’ flow battery systems into China, while helping China ‘capitalise on the rapid development of the country’s renewable energy and energy storage markets’. The chairman further stressed that the partnership ‘will also help drive Success Dragon’s business growth’. Towards the end of February, the company announced its intention to invest in the energy firm, expecting to fund the venture by placing up to 337 million new shares up for sale, or about 19 per cent of the company’s entire share capital as at the date of the announcement, for acquisition by no less than six private investors. ‘Over the last six months, Primus has been working closely with PRC state-owned enterprises with a view to advance commercial activities in
Hong Kong and in China,’ noted the February filing. Moreover, the gaming service provider announced in a March 10 filing that it had entered into a non-legally binding memorandum of understanding to acquire a group of companies engaged in the energy business in Mainland China. The company, however, did not disclose the name of the vendor at that time.
New CEO appointed
The company also announced the appointment of Jiang Dan as its executive Director and chief executive officer (CEO) last Thursday. The company’s filing states that the new appointment came into effect on March 24 (Friday). Mr. Jiang replaces Carlos Luis Salas Porras as CEO. Porras resigned ‘to focus on his other businesses’, according to the filing. Mr. Jiang, age 52, has been engaged in investment and overseas mergers and acquisitions for a number of years, previously serving as chief investment officer of Sinochem Europe Capital Limited and Sinochem Hong Kong Group Limited – companies which engage in the production and trading of chemicals and fertilizer, and the exploration and production of oil. Success Dragon International Holdings Limited is a service provider of outsourced management solutions and information technology to the gaming industry. According to the company, it provides electronic gaming equipment to casinos in Vietnam and Macau, including Pharaoh’s Palace Casino at Macau Fisherman’s Wharf, Casino Casa Real on the Macau peninsula, and Casino Grandview in Taipa.
Retail
Bonjour posts net loss for 2016 A decrease in Mainland visitors to the SARs dragged down the retailer’s turnover by 12.8 pct during the year Kam Leong kamleong@macaubusinessdaily.com
Cosmetic retailer Bonjour Holdings Ltd fell into the red for the whole year of 2016, as total turnover fell by 12.8 per cent year-on-year, according to the company’s annual results filed with the Hong Kong Stock Exchange last Friday. The Hong Kong-based retailer registered a net loss of HK$217.63 million (US$27.1 million) for the period, as compared to a net profit of HK$570.8 million for 2015. In addition, total turnover of the group dropped from HK$2.29 billion to HK$1.99 billion. According to the filing, the company’s revenue from the MSAR posted a decrease of 9.88 per cent year-onyear to HK$197.8 million, down from HK$219.5 million, while that from its home market Hong Kong also declined by 13.1 per cent year-onyear to HK$2.05 billion. In addition, the retailer noted that same-store sales in the two Special Administrative Regions recorded a decrease of 10.1 per cent year-onyear, due to a drop in Mainland Chinese customers. ‘Despite the average sales value per transaction for Mainland tourists up by 7 per cent, the total number of Mainland customers recorded a
double-digit drop in 2016. Just the drop in total number of customers contributed about 9 per cent of the overall retail sales decline in the year,’ it explained in the filing. ‘The loss recorded during the year gave Bonjour and the management insight into how the existing focus on one single line of business in a relatively small area, i.e. Hong Kong
and Macau, may need to change in the future,’ it added. Apart from the decrease in the number of Mainland Chinese visitors, the company noted that the ‘changing of customers’ preferences from higher-priced (of higher-margin) products to lower-priced (of lower-margin) products and changing of the traditional way of shopping from offline to online’ also affected its profitability. Meanwhile, the company’s revenue derived from the Mainland Chinese
market amounted to HK$13.5 million for the year, representing a drop of 2.55 per cent from HK$13.8 million for the year of 2015. The retailer claimed in the filing that it will ‘continue to uphold cost control tactics to cut down expenses and increase profits,’ adding that recent figures showed a gradual recovery for the industry. ‘We believe that the retail industry may see a revival amidst the challenging economic outlook,’ it wrote. As at the end of 2016, Bonjour was operating a total of 42 stores in Hong Kong, Macau and Guangzhou, a decrease of five from one year earlier.
8 Business Daily Monday, March 27 2017
Greater China
Patrons buy meat from a butcher stall in Hong Kong. Lusa
Food safety
Beijing lift ban on meat imports in boost for Brazil Meat is Brazil’s third-largest export, after soy and iron ore Lisandra Paraguassu and Dominique Patton
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hina lifted a ban on imports of meat from Brazil on Saturday after Brazilian authorities clarified details of a police investigation into alleged bribery of health inspectors, in a victory for President Michel Temer’s efforts to stem damage from the probe. The move by China, the biggest national consumer of Brazilian meat, was accompanied on Saturday by the lifting of import bans in Egypt and Chile, bringing hope of an end to a crisis that saw one-fifth wiped off the value of Brazilian pork and poultry exports last week. A slew of major meat importers issued bans after Brazilian federal police unveiled on March 17 an investigation into alleged payments to government health officials by meat processing companies to forego inspections and ignore abuses, codenamed “Operation Weak Flesh”. Temer’s government, alarmed the scandal could damage one of the few sectors that has defied a deep recession in Latin America’s largest economy, launched a campaign to convince trade partners that any
abuses were limited in scope. Meat is Brazil’s third-largest export, after soy and iron ore. The country sold around US$13.5 billion in chicken, beef and pork products last year. Agriculture Minister Blairo Maggi welcomed China’s decision and said the government retained a ban on exports from 21 processing plants directly linked to the federal police investigation as it carried out its own inspections. “Lifting this suspension was the result of a giant effort by Brazil to explain that the investigation targeted the conduct of individuals and not the quality of the meat,” Maggi told Reuters. Officials said that the only one of the 21 plants that exported to China is owned by Seara Alimentos Ltda, a unit of Brazil’s JBS SA, the world’s biggest meatpacking company. JBS has strongly denied any wrongdoing and said it upholds strict quality standards. Two sources in China confirmed that a ban remained in place on imports from the Seara plant, as well as any meat approved by seven Brazilian veterinary experts linked to the police investigation. Brazilian meat imports have already started being cleared in Shanghai,
one of the sources said. China had suspended imports of all meat products from Brazil, the world’s top beef exporter, on March 20 as a precautionary measure. An aide to President Temer told Reuters that he planned to call Chinese leader Xi Jinping in the coming days. In a statement, Temer voiced confidence that other countries would follow China’s example in lifting restrictions. Chile on Saturday said it was ending a ban on meat purchases from Brazil, except for the 21 suspended plants, while Egypt also resumed imports after a two day-suspension. South Korea had already called off a short-lived ban on chicken imports from Brazil’s BRF SA on Tuesday, after just one day. BRF, the world’s largest poultry producer, has denied selling rotten meat and taking part in any corrupt activities. The decision by China was crucial because of its size: it consumed some US$1.75 billion in Brazilian meat imports last year. In part, Brazil has been fortunate that rivals were ill-placed to fill the gap. With China’s second-largest beef supplier, Australia, still rebuilding its herd after drought, it could not meet fast-growing Chinese demand. In the poultry sector, where Brazil supplies more than 85 per cent of
China’s imports, other major producers, such as the United States and some smaller European markets, are banned from supplying to China due to bird flu outbreaks.
“Lifting this suspension was the result of a giant effort by Brazil to explain that the investigation targeted the conduct of individuals and not the quality of the meat” Blairo Maggi, Agriculture Minister Despite the government’s success in containing the damage from the scandal, sources familiar with the investigation said there was a large amount of unpublished evidence pointing to widespread fraud and not just isolated abuses in the meat industry, sources told Reuters on Friday. Reuters
Debt control
Vice finance minister sees risk “very much under control” A risk prevention system will be set up to monitor at-risk regions, he said Elias Glenn
China’s debt risks are “very much under control”, but local governments must ensure that the increase in their debt spending this year is within stipulated limits, Vice Finance Minister Liu Wei said on Friday. Beijing tightened controls in recent years on new local government debt to ward off risks from an earlier borrowing binge that was aimed at softening the impact of the global financial crisis. This year, China has capped the size of outstanding local government debt at RMB18.8 trillion (US$2.73 trillion), up from the RMB17.2 trillion ceiling in 2016, excluding bonds issued under a debt swap scheme. At the end of last year, outstanding local government debt totalled RMB15.32 trillion. “China’s current debt risks are very
much under control,” Liu said, but stressed that local governments must control the increase in debt within the limit set in the government’s budget report, released earlier this month. A risk prevention system will be set up to monitor at-risk regions, he said at the Boao Forum for Asia
in southern Hainan province. “The government attaches great importance to the debt issue,” said Liu, who was appointed vice finance minister at the end of February. Under a proactive fiscal policy, China has increased its overall budget deficit target by about RMB200 billion
to RMB2.38 trillion this year to make up for reduced government revenues due to cuts in taxes and fees. That is equivalent to 3 per cent of gross domestic product, unchanged from the government’s target ratio last year. “The increase in deficit spending this year should be for structural tax reform, upgrading manufacturing, and improving people’s well being,” Liu said.
“The government attaches great importance to the debt issue” Liu Wei, China’s Vice Finance Minister “With the deficit ratio at 3 per cent, we have a certain degree of leeway (in spending). But the increase in the deficit should be conducted in line with national social and economic growth needs.” Reuters
Business Daily Monday, March 27 2017 9
Greater China Boao Forum
In Brief
Vice Premier sees `unstoppable momentum’ of globalization Zhang Gaoli said Asian countries are committed to globalization Chinese Vice Premier Zhang Gaoli told a gathering of Asian leaders that the world must commit to multilateral free trade under the World Trade Organization and needs to reform global economic governance. Negotiations on the 16-nation Regional Comprehensive Economic Partnership, an Asia-wide agreement that’s favoured by China, should be concluded soon and regional cooperation such as with the Association of South East Asian Nations should be advanced, Zhang said Saturday in a speech at the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “The river of globalization and free trade will always move forward with unstoppable momentum to the vast
ocean of the global economy,” Zhang said. China will remain a strong force in the world economy and for peace and stability, he said, adding that countries must respect one another’s core interests and refrain from undermining regional stability. China has become a strong advocate for free trade after U.S. President Donald Trump’s election, with President Xi Jinping and other top leaders working to boost its role in global governance. Asian countries are committed to globalization, Zhang said, mirroring Xi’s defence of free trade before the World Economic Forum in Davos. He said that it brings new pitfalls that must be taken seriously. Globalization should be made more inclusive and leaders must work hard to address unevenness to make development fair, he said.
One Belt-One Road
Zhang, 70, serves on the Communist
Zhang Gaoli, Chinese Vice Premier
Party’s seven-member standing committee, the top ruling body. As vice premier he oversees the execution of economic policies and is head of a small leading group to promote Xi’s One Belt-One Road initiative.
“The river of globalization and free trade will always move forward with unstoppable momentum to the vast ocean of the global economy” Zhang Gaoli, Chinese Vice Premier
Major projects for this have already been undertaken and the initiative which seeks to develop new land and sea trade links with Asia, Europe and Africa has already been applauded by more than 100 countries, he said before an audience that included heads of state and top leaders from Madagascar, Micronesia, Nepal, Afghanistan and Myanmar. China’s government will hold a summit, called the Belt and Road Forum for International Cooperation in Beijing in May. In a speech earlier this month, Zhang said China opposes the many forms of protectionism and is willing to work with the rest of the world on globalization. “The world economy is in a deep adjustment, growth is weak and trade protectionism is rising,” he said. Bloomberg News
ICBC
Trump’s U.S. jobs push may open doors in Mexico State-controlled ICBC expects to grow its assets and loan portfolio in Mexico tenfold over the next three years Anthony Esposito, Dan Freed and Noe Torres
U.S. President Donald Trump’s push to force U.S. industry to bring jobs home is opening investment avenues for Chinese companies in Mexico, an executive with Industrial and Commercial Bank of China (ICBC), the country’s largest lender, said on Friday.
“If some U.S. investment projects don’t (happen), there has to be somebody to invest. ... If Chinese companies think it is profitable, they will invest” Yaogang Chen, head of ICBC’s Mexico unit
Fears of a hit to foreign investment ran high when Ford Motor Co cancelled a US$1.6 billion plant in Mexico’s central state of San Luis Potosí in January. Trump, who had railed against U.S. manufacturers investing in Mexico, hailed the decision as a major victory, but Ford put it down to declining
demand for small cars. Yaogang Chen, head of ICBC’s Mexico unit, said U.S. industry’s loss could be China’s gain. “If some U.S. investment projects don’t (happen), there has to be somebody to invest. ... If Chinese companies think it is profitable, they will invest,” he said in an interview on the side-lines of a banking conference in the resort of Acapulco. In February, China’s Anhui Jianghuai Automobile Group Co Ltd (JAC Motor) and Mexico’s Giant Motors, along with distributor Chori Co Ltd, said they would invest over US$210 million in an existing plant to build SUVs in the central state of Hidalgo. Prior to Trump’s campaign against U.S. manufacturers shipping jobs overseas, Chinese companies were making tentative inroads into Mexico. China’s BAIC Motor Corp Ltd in June
2016 started selling in Mexico its own cars imported from China and has said that it will look into building an industrial plant in Mexico to produce cars and electric vehicles. BAIC is already a client of ICBC’s in Mexico. ICBC, one of the world’s top banks by market capitalization and assets, received its banking license in Mexico in 2014 and started operations there in mid-2016. “JAC, we think, will be a client of ours in Mexico too,” Chen said. Still, Chinese foreign direct investment in Mexico is a tiny fraction of what U.S. firms have ploughed in over the years. State-controlled ICBC expects to grow its assets and loan portfolio in Mexico tenfold over the next three years to some 10 billion pesos (US$533 million), Chen said. The executive said ICBC aims to offer a service to allow clients to convert Mexican pesos to Chinese renminbi and vice versa, and make cross-border transactions cheaper. Reuters
Central bank advisor
PBOC in transition to less reserves
An advisor to China’s central bank said on Saturday that he believed the People’s Bank of China (PBOC) would want a smooth transition to holding less foreign exchange reserves. Fan Gang, director of the National Economic Research Institute, said he believed the PBOC would not want US$4 trillion in reserves in the long run. But neither would it want to go to US$2 trillion “in a few days”, said Fan, who is also a member of the PBOC’s Monetary Policy Committee. Fan was speaking at the Boao Forum for Asia in southern China’s Hainan province. Patents
Court rules in favour of Apple A Chinese court has ruled in favour of Apple in design patent disputes between the Cupertino, California company and a domestic phone-maker, overturning a ban on selling iPhone 6 and iPhone 6 Plus phones in China, Xinhua news agency reported. Last May, a Beijing patent regulator ordered Apple’s Chinese subsidiary and a local retailer Zoomflight to stop selling the iPhones after Shenzhen Baili Marketing Services lodged a complaint, claiming that the patent for the design of its mobile phone 100c was being infringed by the iPhone sales. Apple and Zoomflight took the Beijing Intellectual Property Office’s ban to court. Crackdown
More than 2,500 fugitives captured overseas China has captured 2,566 fugitives who had fled to more than 90 countries and regions and recovered RMB8.6 billion (US$1.25 billion) of illicit funds from 2014 to 2016, the official Xinhua news agency reported on Saturday. Among them, 1,283 turned themselves in or were persuaded to return to China, Xinhua reported, citing a statement issued by the office in charge of pursuing fugitives under the central anti-graft coordination group. A total of 410 were members of the Communist Party or official staff. So far, 39 suspects of China’s 100 most-wanted have returned, according to the Xinhua report. Aviation
C919 passenger jet moves closer to maiden flight China’s C919 passenger jet, the symbol of its lofty aviation ambitions, has passed a major technical assessment, and has moved closer to its first flight, the official Xinhua news agency reported on Saturday. A committee of 63 aviation specialists from across China had agreed the C919 is technically ready for its maiden flight, Xinhua reported, citing the aircraft’s Shanghai-based maker Commercial Aircraft Corp of China (COMAC). The C919’s first flight has been delayed at least twice since 2014 because of production issues.
10 Business Daily Monday, March 27 2017
Greater China Outflow
Crackdown on UnionPay cards for Hong Kong property purchases Many Mainlanders use credit cards to pay for a portion of property transactions in Hong Kong Clare Jim
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leading Hong Kong real estate agent said on Friday that some banks it works with would no longer accept payments for property transactions in the city through China’s state-backed UnionPay, the Mainland’s biggest bank card provider. The move is the latest by Chinese authorities to curb waves of capital outflows that have put pressure on the yuan and eroded the country’s foreign exchange reserves. “We received notice from the two Hong Kong banks we work with ... that they will no longer accept payment by UnionPay cards issued in the Mainland,” said Sammy Po, chief executive of the residential department of leading Hong Kong real estate agent Midland Realty International. Mainland clients, who account for 5-10 per cent of Midland’s new home clients, could still pay with other
credit cards or cash, Po said, adding that he expected the impact to be limited. Many mainland Chinese use credit cards to pay for a portion of property transactions in Hong Kong and UnionPay acknowledged it was scrutinising some purchases. “Recently, we have carried out investigations on large-sum, suspicious, cross-border UnionPay card transactions and reiterated to cooperating institutions the requirement to strengthen merchant supervision,” a spokeswoman for UnionPay International in Hong Kong told Reuters. “According to the UnionPay regulations ... it is strictly prohibited to use a UnionPay card issued in Mainland China for cross-border acquisitions of property.” Capital outflows from China surged last year to a record US$725 billion, the Institute of International Finance said in February, partly on expectations that the yuan would weaken against the dollar. The outflows, which caused a
US$320 billion decline last year in Chinese foreign exchange reserves, have prompted authorities to strengthen capital curbs. In October, UnionPay said it would tighten regulations over how Mainland customers could use its debit and credit cards to purchase Hong Kong insurance products, potentially
restricting yet another gateway for capital flight. Beijing, which has intensified a crackdown on illegal outflows this year, is concerned that buying overseas insurance has become a way for Chinese to skirt restrictions on capital outflows by disguising investment intentions. Reuters
Labour
HSBC to boost Mainland staff by up to 1,000 in 2017 HSBC makes more than half of its profit in Asia, the bulk of it in Hong Kong and China Sumeet Chatterjee
HSBC plans to add as many as 1,000 new employees to its Chinese retail banking and wealth management arm this year, the business’s regional head said, most of them in the Pearl River Delta, the heart of the bank’s growth strategy in China. If that target is hit, the new additions will mean HSBC will have hired twice as many people as it did last year for this part of the business. They will join an existing team for this unit of 2,400 employees in the world’s second-largest economy. HSBC has made the southern Pearl River Delta region - home to 11 industrial cities that are set to fuse into one megalopolis - its focus in China, betting on its growth and its own Hong Kong heritage. But since the strategy to reinvigorate profit growth after years of restructuring was announced in 2015, China’s economic growth has slowed, delaying the bank’s plans. “As of this point, we are very pleased with the progress in the Pearl River Delta. We certainly aren’t taking any backward steps,” Kevin Martin, HSBC’s Asia Pacific head of retail banking and wealth management, told Reuters. HSBC’s latest numbers for China retail and wealth management business suggest growth remained strong, with its customer base as well as mortgage volume expanding by 51 per cent in the Pearl River Delta last
year. It issued over 100,000 credit cards since launching it in December across all cities in the Pearl River Delta and 30 other cities in the country, Martin said. “We have done a lot of things in the Pearl River Delta ... It remains one of the key opportunities for us.” Of the total 2,400 staff for retail and wealth management in China, about 800 are in the Pearl River Delta, the bank said, adding 60 per cent of the hiring last year was for the southern region that counts Shenzhen and Guangzhou among its biggest cities. HSBC Group Finance Director Iain Mackay said last month the bank’s
operating profit in China in 2016 was about US$200 million lower than the previous year. That was mainly due to investments to grow the Pearl River Delta business and in financial-crime risk-management standards in China, he said.
China calling
The bank’s outgoing top management campaigned heavily to promote the region and its role in HSBC’s China strategy. Chief Executive Stuart Gulliver, took analysts and investors on a tour of its operations there a year ago, promoting the region’s role as a gateway to tech businesses like Alibaba Group Holding Ltd and Tencent Holdings Ltd as well as new start-ups. Although investors have supported
the plan, there has been increasing concern over the last few months about risks the lender faces in its Asia “pivot” strategy, due to the sluggish pace of China’s economic recovery and the patchy pace of development in the Pearl River Delta. Some sectors have struggled in the face of falling exports and tighter credit conditions. Gulliver said in February 2016 that the bank, which is facing downward pressure on its revenue in 2017 due to regulatory costs and lower rates in Britain, planned to hire 4,000 new staff in the region over five years instead of its initial three-year target.
Key Points Most of new staff hiring to be in Pearl River Delta Issued over 100,000 credit cards since launch in Dec Added 500 staff in China retail, wealth management unit in 2016 But Martin brushed aside concerns that HSBC’s investment could be scaled back as China’s economic growth slows, saying the bank remained committed to the region. HSBC’s newly appointed chairman, Mark Tucker, has also had an intense focus on Asia, most recently as head of insurer AIA Group Ltd. “We will see and we have seen it already even at 6.5 per cent growth rate, (there is) massive underlying growth for China,” Martin said. “Clearly there’s real upside on that for us.” Reuters
Business Daily Monday, March 27 2017 11
Asia Financial system
Australian banks hike home loan rates as regulators tighten screws Regulators are increasingly worried that home prices in Sydney and Melbourne Swati Pandey
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wo of Australia’s largest banks jacked up mortgage rates for speculative buyers on Friday as part of an intensifying campaign by regulators to hose down a heated housing market. The out-of-cycle hikes come at a time when the central bank held rates steady for an eighth straight month in March, citing the “buildup of risks” in home prices and household debt. Speculation is high that the main watchdog, the Australian Prudential Regulation Authority (APRA), is about to tighten the screw on bank lending, adding to rules imposed in 2015. Treasurer Scott Morrison all but confirmed that steps were afoot in a news conference on Friday, saying he and the regulators were “concerned” about the resurgence in investment borrowing seen in the last few months. “The next step is to make any announcements they think necessary to address that issue,” said Morrison. Already the banks have responded to the pressure by hiking rates on investment loans, and particularly interest-only loans favoured by speculators. ANZ on Friday raised its variable
interest rates on investor loans by 25 basis points (bps) to 5.85 per cent, effective March 31. It lifted rates on interest-only loans by 11 basis points to 5.85 per cent for investors and by 20 bps to 5.25 per cent for owner-occupiers. The changes are effective April 22. Variable interest rates for owneroccupiers who repay both principal and interest remain unchanged at 5.25 per cent. Commonwealth Bank of Australia said it was raising rates on interestonly and investment home loans
by between 24 and 26 bps, effective May 8. Last week, it demanded investors stump up a larger deposit for new loans. “These changes reflect a need to closely manage our regulatory obligations, our portfolio risk and the competitive environment,” Group Executive Fred Ohlsson said in a statement. National Australia Bank and Westpac Banking Corp made similar hikes recently, citing regulations, higher funding costs and intense competition. Regulators are increasingly worried that home prices in Sydney and Melbourne - Australia’s two
biggest cities - may be in a bubble territory. Latest government data showed home prices rose 4.1 per cent in the December quarter, from the previous quarter, with Sydney up a red-hot 5.2 per cent. The pace has quickened even further this year. Figures from property consultant CoreLogic showed prices were growing at an annual 19 per cent in Sydney, while gains across the five capital cities amounted to 12.7 per cent. Much of that fever has been fuelled by borrowing for investment properties, driving household debt up to a record 180 per cent of disposable income. Reuters
Health safety
EU recommends suspending hundreds of drugs tested by Indian firm Drug tests carried out at Indian contract research organisations have been key in getting a huge array of generic medicines approved for sale around the world over many years Europe’s medicines regulator has recommended the suspension of more than 300 generic drug approvals and drug applications due to “unreliable” tests conducted by Indian contract research firm Micro Therapeutic Research Labs. The decision, announced by the European Medicines Agency (EMA) on its website, is the latest blow for India’s drug-testing industry, which has run into a series of problems with international regulators in recent years. Nobody at the Chennai-based company was immediately available to comment. The EMA said European officials had been investigating Micro Therapeutic’s compliance with good clinical practice after Austrian and Dutch authorities raised concerns in February 2016. “The inspections identified several concerns at the company’s sites regarding misrepresentation of study data and deficiencies in documentation and data handling,” the agency said.
However, there is no evidence of harm or lack of effectiveness of the medicines, which include generic versions of many common prescription pharmaceuticals, including blood pressure tablets and painkillers.
The EMA’s recommendation on the suspension of the medicines tested by Micro Therapeutic will now be sent to the European Commission for a legally binding decision valid throughout the European Union. Drug tests carried out at Indian contract research organisations (CROs) have been key in getting a huge array of generic medicines approved for sale around the world over many years.
In 2015, Europe banned around 700 medicines that had been approved based on clinical trial data provided by GVK Biosciences, then India’s largest CRO. Other smaller Indian CROs have also been found to have fallen short of required standards.
“The inspections identified several concerns at the company’s sites regarding misrepresentation of study data and deficiencies in documentation and data handling” European Medicines Agency
In the wake of such trial data scandals, many large drugmakers have been shifting more critical trials back to the United States and Europe over the last three years, according to consultants and industry executives. Reuters
12 Business Daily Monday, March 27 2017
Asia Monetary policy
Bank of Japan chief says “no reason” to withdraw stimulus now Kuroda said the global economic recovery is gaining momentum William Mallard and Leika Kihara
B
ank of Japan Governor Haruhiko Kuroda said there is “no reason” to raise the bank’s bond yield targets now with inflation so far from its 2 per cent target, offering his strongest denial to date of the chance of withdrawing its massive stimulus any time soon. The former top Japanese currency diplomat also played down the risk that President Donald Trump’s administration will lean toward excessive protectionism since the global community, including the United States, benefits from free trade. While Japan’s economy was slowly recovering, it still lacked enough momentum to quickly boost inflation to the BOJ’s target, Kuroda said, adding that risks to both the growth and price outlooks were skewed to the downside. “There is no reason to reduce the level of monetary accommodation in light of current economic and price developments,” Kuroda told a Reuters Newsmaker event on Friday. “I don’t think we need to raise our interest-rate targets now,” he said. “It’s unclear whether inflation will hit our 2 per cent target before my term ends next April.” Japan’s long-stagnant economy has shown signs of life in recent months, with exports and factory output benefiting from a recovery in global demand. Core consumer prices are expected to rise in February at the fastest pace in nearly two years, a Reuters poll showed, and many analysts project inflation to approach 1 per cent later this year.
Bank of Japan Governor Haruhiko Kuroda
That has led to a dramatic shift in market expectations, with a majority of analysts polled by Reuters predicting the BOJ’s next move would be to scale back stimulus, possibly as early as the second half of this year. Some analysts say the BOJ may be forced to raise its yield targets to avoid ramping up bond purchases if Japanese long-term interest rates track global bond yield rises, which are being driven by expectations of higher U.S. interest rates. Kuroda said the BOJ may debate raising its interest-rate targets if Japan’s inflation accelerates sharply in the future. But he said the central bank won’t increase its bond yield targets just because overseas long-term interest rates were rising, or in response to rises in a single price indicator. “When deciding on monetary policy, we must look at the underlying trend of inflation ... We won’t change monetary policy just because oil price rises push up inflation,” he said.
The BOJ also sees no immediate need to scale back the pace of purchases of its exchange-traded funds (ETFs), Kuroda added, shrugging off speculation it could reduce buying as Japanese stock prices were on a firm note. “The comments confirmed our view that a hike in the BOJ’s longterm rate target is unrealistic for now,” said Makoto Yamashita, chief bond strategist at Deutsche Securities. Under a policy framework aimed at controlling the yield curve, the BOJ guides short-term interest rates at minus 0.1 per cent and 10-year government bond yields around zero per cent via aggressive asset purchases.
Protectionism risk exaggerated?
Kuroda said the global economic recovery is gaining momentum, with U.S. business confidence improving sharply on hopes for growth-boosting policies from Trump’s administration. “It’s obvious the BOJ should
maintain the current yield curve and make the most of improvements in the global economy,” Kuroda said, stressing his resolve to maintain an ultra-easy bias even as the U.S. Federal Reserve hikes interest rates. Underscoring Kuroda’s optimism, Japanese manufacturers’ business confidence hit a three-year high in March. But a business survey suggested manufacturing activity expanded at a slightly slower pace in March than in February, highlighting the fragile nature of the recovery as fears of Trump’s “America first” streak cloud the outlook. G20 finance leaders dropped a pledge to keep global trade free and open at last week’s gathering in Germany, acquiescing to an increasingly protectionist United States. Kuroda, who attended the G20 gathering, said it was hard to judge Washington’s stance on trade yet with no concrete policy steps taken by Trump’s administration.
Key Points BOJ Gov Kuroda says no need to raise bond yield targets now Adds unclear if inflation will hit 2 pct target before he leaves BOJ must make most of global recovery - Kuroda G20 hasn’t drifted away from free trade - Kuroda
“What I can say is that the media is portraying this as a U.S. shift to protectionism the G20 was forced to accept,” which was not the case, Kuroda said. “If you look at the contents of the G20 communiqué, it does not show that we shifted to protectionism and away from free trade, or that we accepted U.S. demands.” Reuters
Monetary challenges
Bank of Korea sees financial risk rising after Fed rate hikes The Bank of Korea said businesses in the troubled steelmaking and shipbuilding industries were at greater risk of hardship South Korea’s financial system faces a little more risk in the wake of the U.S. Federal Reserve’s interest rate hikes, the Bank of Korea said on Friday, but the system’s ability to withstand external shocks was still in “fair condition”. Despite external and internal uncertainties, foreign flows had remained steady, the Bank of Korea said, but should the Fed start raising rates more quickly than expected capital flight could accelerate. Given South Korea’s sturdy financial buffers such as massive foreign currency reserves and a big current account surplus, as of now that possibility looked limited, the BOK said in a statement issued after a meeting to discuss financial stability. High household debt remained a concern but was not yet at the point where it could turn into a major crisis, the BOK noted, although debtors in the lowest income bracket were
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vulnerable to higher interest rates. Those higher interest rates did not pose immediate risks to private entrepreneurs, except for retailers and restaurateurs. “Retail stores and restaurants are usually established to maintain
Bank of Korea headquarters
livelihoods and we’ve seen many of these get started up and go bankrupt just as easily. That’s why we believe the owners of these businesses may face hardship paying their debts,” Huh Jin-ho, a deputy governor at the Bank of Korea, told a media conference. The ability of big corporations to repay debt would not be undermined even if market interest rates jumped the maximum 150 basis points set in a scenario used to test 24,951
companies that had been subject to external audits, the BOK said. The Bank of Korea said these companies’ ratio of operating profit to interest had improved steadily since 2014, but that was largely due to low investment amid economic sluggishness.
‘The Bank of Korea said that in spite of external and internal uncertainties, foreign flows had remained steady’ The Bank of Korea said businesses in the troubled steelmaking and shipbuilding industries were at greater risk of hardship from higher borrowing rates than other industries. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Monday, March 27 2017 13
Asia Stock exchange
In Brief
India’s market regulator accuses Reliance of wrongful share trading Besides imposing a fine, regulator said it would bar Reliance and the third parties involved from trading in derivatives for one year Rafael Nam and Devidutta Tripathy
India’s market regulator accused Reliance Industries on Friday of having committed a “fraud” in taking a short trading position at the time of selling a stake in a subsidiary in 2007, ordering it to surrender 4.5 billion rupees (US$69 million) plus interest in “unlawful gains”. Reliance, the US$64 billion conglomerate controlled by India’s richest man, Mukesh Ambani, rejected the ruling by the Securities and Exchange Board of India (SEVI) and said it would appeal to the Securities Appellate Tribunal. In its ruling SEBI alleged that before Reliance Industries sold a 5 per cent stake in Reliance Petroleum in November 2007, when it was a separately listed company, it took derivative short positions through third parties in Reliance Petroleum shares, to profit from an ensuing fall in the price following the sale. SEBI, in a 54-page ruling, said Reliance had as a result made a profit
of 5.1 billion rupees and ordered it to forfeit 4.5 billion rupees plus interest within 45 days. With the interest rate set by SEBI at 12 per cent annually since Nov. 29, 2007, the total amount due to be paid could amount to more than 12 billion rupees, according to Reuters calculations. Besides imposing the fine, SEBI said it would bar Reliance and the third parties involved from trading in derivatives for one year. In imposing the penalty, SEBI said it rejected Reliance’s claim that the transactions were for hedging purposes, and said the company had instead sought to “earn undue extra profit”. “I find that Noticee No. 1 (Reliance Industries) was not genuinely hedging the risk but was aiming at reaping huge speculative profits by cornering futures positions and playing a fraud on the general investors and the market,” SEBI official G. Mahalingam said in its finding. Reliance said on Friday in rejecting
SEBI’s finding that the trades in Reliance Petroleum shares which were examined by SEBI were “genuine and bona fide transactions”. “These were carried out keeping the best interest of the company and its shareholders, in view,” Reliance said. “SEBI appears to have misconstrued the true nature of the transactions and imposed unjustifiable sanctions.”
“SEBI appears to have misconstrued the true nature of the transactions and imposed unjustifiable sanctions” Reliance statement
Reliance’s sale of a stake in unit Reliance Petroleum has sparked years of investigation from SEBI and embroiled the energy conglomerate in legal cases. Reuters
Monetary move
Sri Lanka raises rates to curb inflation Sri Lanka’s central bank raised interest rates for the first time in eight months on Friday, saying tighter policy was a precaution against a build-up of inflationary pressures. Its fourth tightening step in 16 months comes two weeks after the International Monetary Fund (IMF) urged authorities to tighten monetary policy amid heavy capital outflows as foreign investors sold government securities this year. Policymakers face a tricky balancing act as the outflows have put renewed pressure on the rupee, but higher borrowing costs are likely to further cool the economy. Information deficit
S.Korea to boost communication with U.S. South Korea plans to actively explain Seoul’s policies regarding trade and foreign exchange rates to the U.S. Donald Trump administration, the country’s finance minister said on Friday. “The new U.S. government is continuously pointing out issues like trade deficits with key trade countries,” said Finance Minister Yoo Ilho in opening remarks at a meeting with other government officials in Seoul. “Our government will not only continue to explain our foreign exchange rate policy but also actively relay our efforts to effectively carry out the bilateral free trade agreement and form a balanced trade structure.” Insurance arm
State Bank of India to begin process for unit IPO
Reliance is a US$64 billion conglomerate controlled by India’s richest man, Mukesh Ambani
Prices
Malaysia inflation highest in 8 years, but rates seen on hold The central bank expects headline inflation to dip in the second half of the year Malaysia’s consumer price index rose to an eight-year high in February, but is unlikely to lead to any change in monetary policy. Annual inflation grew 4.5 per cent in February, the highest since November 2008 when it hit 5.7 per cent.
Key Points Feb CPI +4.5 pct y/y, highest since Nov 2008 C.bank’s inflation target for year is 3-4 pct Inflation seen due to fuel price adjustments economist
In January, the annual rate was 3.2 per cent. A Reuters poll had forecast a February level of 4.1 per cent, just short of the 4.2 per cent peak hit in February last year. Economists said a fuel price hike in February and a low base stemming from a cut in transport costs from last year contributed to the month’s high inflation rate.
Rising inflation, however, was not seen as worrying Malaysia’s central bank, as it was mainly due to the adjustments in domestic fuel prices, said Brian Tan, an economist with Nomura in Singapore. “We don’t foresee any changes to policy as it’s clear they remain quite cautious to any potential downside
risk to growth, and they don’t want to jump the gun too early,” Tan said. Bank Negara said on Thursday it expected inflation to average between 3 to 4 per cent for 2017. Malaysia, an oil and natural gas exporter, has benefited from recovering global oil prices this year. The central bank expects headline inflation, which it says will be “relatively high” in the first half of 2017 due to higher fuel prices, to dip in the second half. Reuters
State Bank of India, the nation’s top lender by assets, said on Friday it would begin the process for an initial public offering (IPO) of its life insurance arm, with plans to sell a 10 per cent stake. The bank said in a filing it would explore selling an 8 per cent stake in SBI Life in the IPO, while a senior executive separately said the lender’s partner in the joint venture, BNP Paribas Cardif, would sell a 2 per cent stake. “End of September is the earliest that we can contemplate going to the market subject to all regulatory approvals and clearances,” SBI Life Chief Executive Arijit Basu said. Investment
Thailand approves investment pledges Thailand approved four investment applications worth more than 161 billion baht (US$4.65 billion) and a promotion scheme for electric cars, the state investment agency said on Friday. Of the pledges, Thailand’s Gulf Group will invest in two electricity generating projects worth a combined 118 billion baht, the Board of Investment said in a statement. In addition, two units of PTT Pcl, Thailand’s largest energy firm, will invest a combined 43.5 billion baht in gas transportation systems, it said. The agency also approved tax incentives to promote production of three types of electric cars.
14 Business Daily Monday, March 27 2017
International In Brief Central bank
Russia cuts rates as inflation falls Russia’s central bank trimmed its main lending rate on Friday and said there could now be gradual easing as inflation eases down to new post-Soviet lows. After holding the key rate at 10 per cent since September, the central bank cut it to 9.75 per cent, saying inflation was slowing down quicker than forecast. It signalled small cuts could follow in the second and third quarters of the year. “We could have pauses, though we really see a trend towards easing, towards lowering the rate in the medium term,” Central Bank Governor Elvira Nabiullina said. “But we will do that very carefully and smoothly.” PMI
Eurogroup
Portugal’s Cabral says Dijsselbloem resignation is best for EU On the U.K.’s withdrawal from the European Union, Cabral said the bloc must focus on getting good results from negotiations in the next two to five years
P
ortugal’s Economy Minister Manuel Caldeira Cabral said Jeroen Dijsselbloem, whose Dutch party lost elections this month, should quit as chairman of the European finance ministers’ group after his comments about the duties of nations getting aid were deemed offensive. “It would be the best thing for Europe and the best thing he could do,” Cabral said in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “He just lost an election and I think he should not be trying to blame others for his own failures.”
Dijsselbloem is under pressure to resign as leader of the euro area’s finance ministers after a German newspaper cited him saying, “I can’t spend all my money on women and drink and then at the end ask for your help.” That remark inflamed tensions between stronger economies in the north and weaker nations including Greece, Ireland and Portugal. The Eurogroup chief has said he regrets causing offense, but doesn’t intend to resign. “I don’t think we can let the Eurogroup be divided in that way, and for that reason that person should be out,” Cabral said. “One of the worst things that some
European responsibles have done in the past is not being leaders and trying to surpass their own difficulties at home by accusing other countries. This is a way of destroying Europe.” On the U.K.’s withdrawal from the European Union, Cabral said the bloc must focus on getting good results from negotiations in the next two to five years and then moving on to other issues. He said broader trade pacts should be the goal rather than making Brexit the only thing on the agenda for Europe and the U.K. The EU should focus on trade talks that give serious results and make a priority “of opening to the world, of negotiating with Asia, of being part of this intuitive of One Belt-One Road with China and establishing links with Asia,” he said in the interview. Bloomberg News
Euro zone economy sparkles If the latest surveys of business intentions are to be believed, the euro zone economy is sparkling, growing at a pace that easily explains the hints from some European Central Bank policymakers of a pull-back from their easy-money regime. IHS Markit’s euro zone Flash Composite Purchasing Managers’ Index (PMI), an influential guide to the buying plans of businesses and hence growth, hit a near six-year high this month. It climbed to 56.7 from February’s 56.0, its highest reading since April 2011 and better than any predictions in a Reuters poll.
“He just lost an election and I think he should not be trying to blame others for his own failures” Manuel Caldeira Cabral, Portugal’s Economy Minister
Insurers
Saudi Arabia faces U.S. lawsuit by Sept. 11 Saudi Arabia is facing a renewed US$6 billion lawsuit by dozens of insurers seeking to hold it responsible for business and property damage caused by the Sept. 11, 2001 attacks. The lawsuit filed late Thursday in the U.S. District Court in Manhattan is the latest effort to hold Saudi Arabia liable for the attacks. Insurers, including Liberty Mutual, Safeco, Wausau and many Lloyd’s syndicates, accused Saudi Arabia and a state-affiliated charity of providing funding and other material support that enabled Osama bin Laden and al Qaeda to conduct the attacks. Greek bailout
EU’s Juncker pushes for preliminary deal The European Commission President Jean-Claude Juncker said on Friday euro zone lenders and Greece should reach a technical deal before a meeting of euro zone finance ministers on April 7. In a statement responding to a letter by Greek Prime Minister Alexis Tsipras criticising International Monetary Fund (IMF) demands for labour reforms, Juncker declined to take a clear position on the contentious issue. The IMF is pushing Greece to adopt such reforms as a condition to join an 86 billion euro (US$93 billion) bailout programme, so far funded only by euro zone creditors.
Portugal’s Economy Minister Manuel Caldeira Cabral. Lusa
Industry
U.S. business spending picking up, but may slow in Q2 A separate report on Friday from data firm Markit showed its U.S. manufacturing sector index fell in March to a five-month low New orders for U.S.-made capital goods unexpectedly fell in February, but a surge in shipments amid demand for machinery and electrical equipment supported expectations for an acceleration in business investment in the first quarter. Manufacturing is recovering from a prolonged slump, driven by the energy sector, bucking a slowdown in the broader economy. The Federal Reserve last week described business investment as appearing to have “firmed somewhat.” The Commerce Department said on Friday that non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dipped 0.1 per cent last month after rising 0.1 per cent in January. That suggested a slowdown in business spending in the second quarter. Shipments of these so-called core capital goods jumped 1.0 per cent after declining 0.3 per cent in January. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. Last month’s jump reflected increases in orders at the end of 2016. Orders for machinery inched up 0.1 per cent while shipments increased 0.9 per cent. Orders for electrical
equipment, appliances and components advanced 2.2 per cent, the biggest increase in seven months, and shipments rose 1.5 per cent.
Manufacturing recovering
A recovery in oil prices from multi-year lows is driving demand for equipment in the energy sector, helping to lift the manufacturing sector. Manufacturing, which accounts for about 12 per cent of the U.S. economy is also being underpinned by a burst of confidence amid promises by the Trump administration to slash taxes for businesses, boost infrastructure spending and repeal some regulations. Details of the fiscal stimulus package, however, remain vague, resulting in a moderation in orders for equipment in the last couple of months. Economists say business spending could slow in the second quarter even as they expect an acceleration this quarter. Spending on equipment is expected to pick up after a 1.9 per cent annualized growth pace in the fourth quarter. Still, that will likely be insufficient to offset the drag on GDP from slower consumer spending and a wider trade deficit. The Atlanta Fed is forecasting the economy growing at a 1.0 per cent
rate in the first quarter after expanding at a 1.9 per cent pace in the final three months of 2016. Last month, a 4.3 per cent jump in demand for transportation equipment offset the dip in core capital goods bookings, and hoisted overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, 1.7 per cent. Durable goods orders rose 2.3 per cent in January.
Key Points Core capital goods orders slip 0.1 per cent in February Core capital goods shipments increase 1.0 per cent Durable goods orders rise 1.7 per cent Civilian aircraft orders soared 47.6 per cent in February, driven by an increase in plane orders at Boeing. Orders for motor vehicles and parts fell 0.8 per cent in February, while orders for defence aircraft declined 12.8 per cent. There were increases in orders for primary metals, but orders for fabricated metal products fell as did those for computers and electronic products. Unfilled orders for core capital goods increased 0.2 per cent last month after rising 0.5 per cent in January. Inventories of overall durable goods rose 0.2 per cent last month. Reuters
Business Daily Monday, March 27 2017 15
Opinion Business Wires
Taipei Times Japanese Deputy Minister of Internal Affairs and Communications Jiro Akama arrived in Taiwan on Saturday on a one-day visit to promote tourism in his country, becoming the highest-level Japanese official to visit Taiwan since the two nations ended official ties in 1972. Shortly after his arrival, Akama chaired the opening of a two-day Japanese tourism fair at Huashan 1914 Creative Park in Taipei. The fair, titled “Colorful Japan,” was organized by the JapanTaiwan Exchange Association, which represents Japan’s interests in Taiwan in lieu of a formal embassy.
The Korea Herald The number of cars newly registered in South Korea edged down in 2016 from a year earlier, data showed yesterday, as the prolonged economic slump weighed down consumers’ sentiment. According to the data compiled by the Korea Automobile Manufacturers Association, new vehicle registrations came to 1.82 million units last year, down 0.6 per cent from 2015. Industry watchers said the decline came as South Koreans in their 30s and 40s were less inclined to buy new cars amid the gloomy economic outlook coupled with the rising household debts.
Nationalists and globalists
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Philstar Investment banks expect the Bangko Sentral ng Pilipinas (BSP) to raise interest rates as early as May after keeping a dovish policy stance for almost three years. DBS Bank Ltd. of Singapore said in its daily research note the BSP’s Monetary Board could raise interest rates by as much as 50 basis points through two consecutive hikes before the end of the first half. “We don’t see any strong reason why the BSP would want to delay these hikes any longer. Look for 25-basis point rate hike each in May and June,” DBS said.
The Times of India Propelled by the tail wind generated by increasing domestic air travel demand, the Indian aviation industry continues to soar to new heights. The world’s fastest growing air travel market for several months in a row has added another feather on its cap by being the third-largest domestic aviation market globally with more people flying within the country last year than Japan, which has been pushed to number four spot. Calendar year 2016 saw 10 crore domestic flyers in India, more than the 9.7 crore in Japan, according to the Centre for Asia Pacific Aviation (CAPA).
he Dutch election was the first bright spot in a while for people in Europe and the United States who are deeply worried that the backlash against globalization will bring even more white “Judeo-Christian” nationalist parties to power. Dutch Prime Minister Mark Rutte defeated the anti-Islam candidate Geert Wilders, who has called for closing Dutch borders, shutting mosques, and banning the Koran. The standard way of describing political forces ranging from Viktor Orbán’s Fidesz party in Hungary to Marine Le Pen’s National Front in France to Donald Trump’s supporters in the United States is “populist.” Populism means a politics of the people, juxtaposed against a politics of the elites. But in the U.S. at least, Trump’s ideology – which has little to do with traditional Republican conservatism – frames the axis of division not as the many versus the few, but as nationalists versus globalists. In the first issue of American Affairs, a new conservative journal dedicated to “exploring the true content of our common citizenship,” Georgetown University Professor Joshua Mitchell writes that for “several generations conservatives have thought that the domestic enemy was progressivism. Now they imagine they face a new problem: populism.” In fact, Mitchell argues, what is really happening is not a mass movement of the people, but a “revolt in the name of national sovereignty.” A revolt in the name of a connected nation, of citizens connected to one another, to their “towns, cities, states, and nation.” As Mitchell depicts it, theirs is a grounded nationalism, rooted in the wealth of voluntary associations that Alexis de Tocqueville identified as the American antidote to the abstract rational universalism of both the French and the American revolutions. The key point here is the relationship between borders, culture, and connection. By maintaining sovereignty at the national rather than the global level, borders can be defended and communities defined and maintained. If those borders dissolve, what binds human beings to one another is no longer their community or their common cultures, but only their identity. Thus, Mitchell argues, globalism and identity politics go together, and both are detached from national identity. Being labelled a rootless globalist is always dangerous, as the Jewish people know all too well. The leading Soviet anti-Semitic slur was “rootless cosmopolitan,” a term used to refer to Jewish intellectuals and one that Vladimir Putin would be perfectly comfortable with today as he revives a Russian nationalism based on the Russian Orthodox Church, Mother Russia, and Slavic peasant culture. Back in the US, many Trump supporters also excoriate globalists for what they experience as sneering disdain. They rage against what they perceive as the moral sanctimony – indeed the righteousness – of the left. Sam Altman, the CEO
“
Anne-Marie Slaughter President and CEO of New America
of a prestigious start-up incubator in Silicon Valley, spent several months after the presidential election traveling across the U.S. and talking to Trump voters. When the conversation turned to the reactions of the left to Trump’s victory, many of his interlocutors argued that “the left is more intolerant than the right.” Altman observes that this view “came up a lot, with real animosity in otherwise pleasant conversations.” He quotes one person saying, “Stop calling us racists. Stop calling us idiots. We aren’t. Listen to us when we try to tell you why we aren’t. Oh, and stop making fun of us.” That perceived combination of arrogance and ridicule fans irritation into rage and revenge fantasies. Current White House advisers have a similar reaction. A new profile of Kellyanne Conway, Trump’s campaign manager turned White House counsellor, notes that she has not “forgotten how people treated her back when they thought she was a sure loser. Their attitude wasn’t one of outright rudeness or contempt; it was so much worse than that. It was syrupy condescension—the smarmy, indulgent niceness of people who think they’re better than you.” So much of higher education is about learning how to question and manage emotion. Firstyear law school students in the U.S. learn how to suppress their natural intuitions of justice – a defective car caused an accident that injured a child severely; surely the manufacturer should pay – in favour of carefully reasoned analysis of the costs and benefits to society as a whole. That training often means that highly educated “elites,” who socialize primarily with one another, either forget or wilfully ignore the role of emotion in politics – except to the extent that campaign consultants produce an endless supply of gauzy “feel-good” political commercials. Feelings of being disconnected and despised, however, are powerful emotions, strong enough to twist facts into a dark alternate reality. It is critical to look beyond a simple story of populism, of masses versus elites. A narrative of grounded, connected nationalism versus sanctimonious free-floating globalism is one that will generate support and staying power even among many well-educated people. The right response is not to deny the existence or legitimacy of a desire to stay grounded amid tumultuous change, or love of country and culture, much less to look down on the less educated. It is to build a new narrative of patriotism, culture, connection, and inclusion. Even if Wilders lost this month and Le Pen loses in May, they and their supporters will not be going away. Project Syndicate
Being labelled a rootless globalist is always dangerous, as the Jewish people know all too well
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16 Business Daily Monday, March 27 2017
Closing Health
Taiwan reports new outbreak of bird flu Taiwan is a common destination for Taiwan has confirmed a new outbreak of bird flu at two poultry farms and culled more than 14,000 birds to prevent further infection, according to the local animal inspection authority. Ducks at a farm in Pingdong county were confirmed with the H5N2 virus and more than 6,000 were culled. A chicken farm in Tainan city also reported outbreak of an H5-type virus on Saturday, and more than 8,000 chicken were slaughtered.
migrating birds. Its farms have reported more than 15 avian flu cases this year, including cases related to the highly pathogenic H5N6 virus. The general bird flu situation is “under steady control” despite sporadic infections, the animal inspection authority said. It warned farms to strengthen quarantine and sanitation work and report any unusual death of poultry. Those who report infections will get compensation for culled poultry, while cover-ups will lead to hefty fines. Xinhua
Election
Hong Kong leaders elects Carrie Lam as chief executive Lam, a career civil servant, will be the city’s first female leader when her five-year term begins on July 1 David Tweed, Natasha Khan, Crystal Tse and Annie Lee
H
ong Kong’s former No. 2 official, Carrie Lam, was elected as the city’s chief executive, giving China its preferred choice to lead the fractious financial hub. Lam, 59, won 67 per cent of votes cast yesterday by an electoral college of 1,194 businessmen, professionals and politicians that selects leaders for the former British colony, according to final results. Her chief rival, ex-Financial Secretary John Tsang, 65, got 31 per cent, despite greater popularity among the general public and support from the committee’s pro-democracy bloc. A third candidate, retired judge Woo Kwok-hing, received 1.8 per cent. The result will make Lam, a career civil servant, the city’s first female leader when her five-year term begins on July 1. She became the favourite to win after her unpopular former boss, outgoing Chief Executive Leung Chun-ying, bowed out in December and Chinese officials pushed behind the scenes to rally support for a candidate seen as compliant to Beijing’s agenda. Lam’s primary tasks will be healing divisions over Beijing’s perceived encroachment on Hong Kong’s affairs,
and bolstering an economy vulnerable to China’s slowdown and U.S. interest-rate increases. Lam’s pledge to ramp up growth through spending more and cutting taxes will be aided by a projected budget surplus of HK$92.8 billion (US$11.9 billion) for the current fiscal year. Lam’s popularity has suffered amid weeks of media reports about Chinese officials working to quash opposition to her on the loyalist-dominated election committee. She trailed Tsang 29.5 per cent to 46.6 per cent in a poll of 1,009 adults published on March 16 by the South China Morning Post newspaper. “She is viewed -- and she said so herself -- as C.Y. Leung’s successor to continue his administration and policies,” said Jason Y. Ng, a lawyer who wrote “Umbrellas in Bloom,” a chronicle of the mass democracy protests in 2014. “She is too much of a known entity. There will be no honeymoon period at all.” China promised to give Hong Kong a “high degree of autonomy” before the UK relinquished control two decades ago. Lam’s inauguration ceremony will take place on the 20th anniversary of the handover, giving her an immediate test for handling a politically sensitive occasion. President Xi Jinping may attend the event, which is accompanied by
Economic visit
an annual pro-democracy march, in what would be his first visit to Hong Kong since taking power in 2012. The Post reported on March 6 that the commander-in-chief might also review a military parade while in town. Lam has promised a more accommodating approach after the mass protests and legislative gridlock that marked Leung’s tenure. She told Bloomberg last month she would focus on boosting the economy rather than potentially divisive issues like an election reform proposal that prompted
student demonstrators to occupy swaths of the city in 2014. Lam, who had planned to retire this year, was raised in a walk-up apartment in the city’s Wan Chai district. While studying sociology at the University of Hong Kong, she showed an activist streak, supporting a group of Yau Ma Tei boat people during efforts to relocate them. Upon graduation, she joined the government. She has held about 20 positions over 36 years, including a 2007-12 stint as development secretary when she persuaded villagers to relocate to make way for new projects. As Leung’s top deputy, she was known for championing China’s policy goals without inspiring the same animosity from the opposition as her boss. That reputation took a hit during a December trip to Beijing, when Lam -- who was then mulling a run -- announced plans to build a Hong Kong offshoot of China’s Palace Museum. The surprise move prompted a backlash with lawmakers accusing her of failing to consult the public about the project or her choice of architect. Bloomberg News
Hong Kong Chief Executive Election candidates John Tsang Chun-wah (L) and Carrie Lam Yuet-ngor (C) embrace as Woo Kwok-hing (R) looks on while on the stage during the announcement of the results of the Hong Kong Chief Executive Election at the Convention Center in Hong Kong yesterday. Lusa
Official visit
Investment
France’s Hollande in Singapore Premier Li in New Zealand at start of Asian tour for trade talks
Mainalnd’s transport infrastructure investment grows
French President Francois Hollande arrived yesterday in Singapore, the first leg in the final foreign tour of his five-year term, and will go on to Malaysia and Indonesia. The tour ending Wednesday in Jakarta is dominated by economic and defence issues and is aimed mainly at strengthening ties with a region with high economic potential, according to the presidential palace. Hollande has made some 230 international trips since 2012 but has only one other major commitment abroad before his term ends in mid-May: the post-Brexit European summit in Brussels on April 29. About forty business leaders, mostly from small and medium-sized enterprises, as well as Secretary of State for Industry Christophe Sirugue and Defence Minister Jean-Yves Le Drian are accompanying him in Southeast Asia. On Tuesday he travels to Malaysia, which has a continuing relationship with France in defence matters. Hollande’s tour ends Wednesday in Indonesia, where he will make the first visit by a French head of state since Francois Mitterrand in 1986. AFP
Fixed assets investment in China’s transport infrastructure registered a robust growth in the first two months of this year, part of the efforts to build a modern and efficient transportation system. Investment in transport infrastructure projects including roads, waterways and among others reached RMB172.6 billion (about US$25.1 billion) in January and February, increasing by 33.9 per cent year on year, latest data from the Ministry of Transport revealed. The figure did not include investment in railway projects. The combined investment volume in the first two months accounted for about 9.6 per cent of the total scheduled for the whole year. Breakdown figures showed that RMB160.1 billion was invested in road construction and RMB10.5 billion went to waterway transport projects in the period, rising by 36 per cent and 2.8 per cent year on year, respectively. China is set to spend around RMB2.6 trillion on transport infrastructure projects this year, according to the ministry. That will include RMB800 billion on railways, RMB1.65 trillion on roads and RMB150 billion on waterway transport. Xinhua
New Zealand said yesterday it did not plan to “choose sides” on trade between the United States and China, as Chinese Premier Li Keqiang arrived for a visit focused on the issue. Wellington in 2008 became the first developed nation to sign a free trade agreement with Beijing and China is now New Zealand’s second-largest commercial partner, with two-way trade worth NZ$23 billion (US$16.2 billion) last year. Both sides agreed late last year to upgrade the deal and Li’s visit is seen as a way to speed up negotiations. New Zealand Trade Minister Todd McClay said closer ties with Beijing need not affect relations with Washington, which withdrew from the Trans-Pacific Partnership (TPP) regional trade deal after President Donald Trump took office. The pull-out has jeopardised the future of the TPP, which would have included New Zealand but excluded China. China is pushing a rival pact known as the Regional Comprehensive Economic Partnership, which would include New Zealand. “No, we don’t have to choose sides,” McClay told TVNZ. “Wherever there is an agreement or an opportunity that delivers a greater fairness for New Zealanders in the U.S. or China... then New Zealand will look at that.” AFP