Prosecutors try to arrest South Korea’s ex-president Political scandal Page 11
Tuesday, March 28 2017 Year V Nr. 1263 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Environment
MIECF debuts two novelties for 2017, with its MOP25 mln budget exclusively from gov’t Page 6
Gaming
Over 80 pct of gamblers registering on central registry were employed, 23 pct gambled to resolve debts Page 7
www.macaubusinessdaily.com
Construction
Official tour
Lai Si Enterprise Holding Ltd sees MOP287.6 mln in revenue for 2016, a 30.3 pct increase y-o-y Page 4
Premier Li’s visit strengthens commercial ties with New Zealand Page 8
Smooth seas, rough on land Results
Conglomerate Shun Tak saw its results dip into the red for 2016, with a net loss of HK$587.1 mln, compared to HK$744.7 mln profit the previous year. The group’s hospitality business saw a HK$263 mln loss, with one property registering an average occupancy rate of just 45 pct for the year. However, the group’s transportation business contributed over 60 pct of the annual revenue, at HK$2.33 bln, moving 14 million passengers on Turbojet during the year. Page 7
Ready to retire
The 2 per cent
Unemployment hovered at 2 pct for the December 2016-February 2017 period, with a slight decrease in the total labour force. The only sector to see growth in employment levels was hotels, with a 1.7 pct increase period-toperiod to 30,400. Gaming and junket activities saw employment fall 1.4 pct, with small drops in both retail and construction.
Pensions Private pension fund assets managed under the top nine fund managers registered an 18 pct y-o-y expansion as at end-2016, with the total value hitting nearly MOP17 bln, despite just a 3.5 pct increase in the number of scheme members. The gaming industry continued to have the highest coverage, at 82 pct of workers. AIA International held the largest market share in the private pension fund market, with plans with assets worth over MOP6.07 bln. Page 2
Steady recovery
Manpower Page 5
HK Hang Seng Index March 27, 2017
24,193.70 -164.57 (-0.68%) Worst Performers
China Merchants Port Hold-
+1.13%
CLP Holdings Ltd
+0.37%
China Overseas Land &
-4.42%
AIA Group Ltd
-1.60%
Want Want China Holdings
+0.58%
Kunlun Energy Co Ltd
+0.28%
AAC Technologies Holdings
-2.86%
China Resources Power
-1.53%
China Unicom Hong Kong
+0.57%
China Petroleum & Chemical
+0.16%
China Resources Land Ltd
-2.67%
Wharf Holdings Ltd/The
-1.52%
Hong Kong & China Gas Co
+0.39%
Sun Hung Kai Properties Ltd
+0.09%
Belle International Holdings
-2.33%
China Shenhua Energy Co
-1.51%
Link REIT
+0.38%
Swire Pacific Ltd
+0.06%
Geely Automobile Holdings
-1.79%
New World Development
-1.33%
20° 22° 21° 22° 20° 23° 16° 23° 16° 22° Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
China’s industry Major industrial companies registered robust profit growth in the first two months of the year. The earnings recovery was uneven across sectors, with coal mines, oil refineries and chemicals witnessing increased profits, boosted by soaring raw material prices. Page 8
2 Business Daily Tuesday, March 28 2017
Macau Pensions
More prepared for retirement Official data shows more local workers were covered by pension fund plans in 2016, with total assets expanding by 18 per cent year-on-year Kam Leong kamleong@macaubusinessdaily.com
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early MOP17 billion in private pension fund assets were being managed by nine fund managers as at the end of 2016, an expansion of 18 per cent year-on-year, although the number of total scheme members only registered an increase of 3.5 per cent, according to official data from the Monetary Authority of Macau (AMCM). Last year, 1,032 pension plans were registered in the territory, of which 1,028 were open funds and four were closed funds, covering a total of 141,878 scheme members, compared to 968 pension plans covering 137,128 members in 2015. Meanwhile, the number of registered pension funds reached 58 as
at the end of the year, an increase of one from 2015. Global insurer AIA International Ltd held the biggest market share in the private pension fund market during the year, managing a total of 308 pension plans with total assets worth over MOP6.07 billion. The amount, accounting for 35.7 per cent of the market total, represents a notable increase of 20.9 per cent compared to MOP5.02 billion one year earlier. Luen Fung Hang Life Ltd also saw the amount of pension fund assets under its management of 226.5 plans surge by 18.1 per cent to MOP4.28 billion, as compared to MOP3.63 billion for 2015, making it the second biggest player in the market. Other primarily fund managers were ICBC (Macau) Pension Fund Management Co. Ltd., Macau Life Insurance Company and China Life
Insurance (Overseas) Co. Ltd. which respectively oversaw private fund assets amounting to MOP2.13 billion, MOP1.81 billion and MOP1.3 billion as at the end of 2016, respectively.
Coverage
By economic sectors, the gaming industry had the highest coverage of private pension funds, with 82.2 per cent of its workers covered by plans. High coverage of pension funds was also evident in other industries
including: financial intermediation; education; and electricity, gas and water supply - with 63.7 per cent, 57.5 per cent and 55.8 per cent of their employees contributing to pension plans, respectively. However, the official data shows only 2.23 per cent of those employed in the construction sector were covered by pension plans, while only some 1.71 per cent of the city’s public servants bought such pension plans.
Interpellation
Complimentary regulations of civil liability insurance to enter legislative procedures in 2019 The complimentary regulations of civil liability insurance for the Qualification System of Urban Construction and Urban Planning are scheduled to enter the legislative procedures in 2019, according to information disclosed by the Legal Affairs Bureau. In response to an interpellation submitted by Legislator Kuan Tsui Hang regarding the aforementioned complimentary regulations, the Bureau noted that it will have to undertake discussions and studies with the insurance sector. The law governing the qualification system for architects and urban
planners was approved in 2014 and implemented in 2015. The legislator also denounced the Bureau in her interpellation, stating that it has failed many times to roll out laws and complimentary regulations in tandem. For instance, the Food Safety Act was rolled out in 2013, but other regulations such as safety standards for food products were only introduced gradually from 2014 to 2016. The Legal Affairs Bureau replied that a centralised legislative mechanism would be put into effect in order to improve and strengthen co-ordination in legislative procedures.
In terms of legislative planning, the Bureau stated that it has already
drawn up the plan for the 2017 to 2019 period, adding that it will ensure that complimentary regulations of bills, such as that of the higher education system that is currently under deliberation, will come into effect together with the law itself. C.U.
Interpellation
DSAMA: IC commences mapping and data collection of items at Coloane shipyards In response to unionist legislator Ella Lei Cheng I’s enquiry about the current planning progress of the Lai Chi Vun shipyards in Coloane, the Marine and Water Bureau (DSAMA) said the Cultural Affairs Bureau (IC) is currently working on mapping and collecting data of items in the area. Also, the IC will refurbish one shipyard and two metal huts, notes the
bureau. The government has already demolished two shipyards in Lai Chi Vun Village in Coloane, which were deemed a threat to public safety due to their deteriorating state and high risk of collapse, according to a press release from DSAMA earlier this month. In response to enquiries by the legislator on the reason for demolishing
the shipyards prior to any solid conservation plans being rolled out, DSAMA emphasised the poor condition of the shipyards as the primary justification for proceeding. DSAMA reiterated in its response that it will co-ordinate with the Land, Public Works and Transport Bureau (DSSOPT) to open a public tender for a study to plan the sustainable development of
the Lai Chi Vun Village area. In addition, some 15 suggestions for the development of the Coloane shipyards have been collected by the Macao Government Tourism Office (MGTO) via the Macao Tourism Industry Development Master Plan Public Consultation and will be sent to related departments for reference after the consultation period ends in July. C.U.
Crime
Society
No Comment
Radio Silence
Local authorities refuse to confirm if the body of Kim Jong Nam has been returned to his family in the MSAR
Mainland Chinese authorities remain silent in regards to the disappearance of a Taiwanese human rights advocate who crossed the border from the MSAR into Zhuhai
Reports circulated by Malaysian news outlets stating that the body of the North Korean leader’s half-brother, Kim Jong Nam, was repatriated to his family in Macau yesterday, have yet to be confirmed by the MSAR government and airport authorities, in response to Business Daily’s enquiries. According to Malaysian newspaper The Sun Daily, the remains of Kim Jong Nam were released by the Kuala Lumpur Hospital yesterday - 41 days after the former Macau resident was assassinated at the
Malaysian capital’s airport - with the country’s authorities looking to return the corpse to his family. When questioned by Business Daily, the Macau International Airport Co. Ltd. (CAM) stated that the group does ‘not have any information about the issue’, while the Office of the Secretary for Security said it would ‘neither comment nor disclose any information regarding individual cases’ and that they would continue to ‘pay close attention to the development of the case’. N.M.
Authorities from Mainland China have offered no response to enquiries by Taiwan’s Mainland Affairs Council regarding the disappearance of human rights advocate Lee Ming-che, newspaper South China Morning Post reported. Mr. Lee, a former member of Taiwan’s Democratic Progressive Party, was confirmed by MSAR authorities to have crossed the border from Macau to Zhuhai at about 11:51am on March 19. Since departing Macau, there has been no record of Mr. Lee checking into a hotel or being arrested.
According to statements by Mr. Lee’s wife to newspaper Taipei Times, the community worker travelled to Mainland China to discuss Taiwan’s experience of democratisation with local friends, however contact was lost after he crossed the border. Taiwan’s Mainland Affairs Council stated it had not received any response to enquiries sent to the Mainland China department responsible for cross-strait relations, such as the Association for Relations Across the Taiwan Strait (Arats). N.M.
Business Daily Tuesday, March 28 2017 3
Macau Labour Number of workers from Hong Kong fell 34 pct y-o-y in February
Steady decline A 20.2 per cent year-on-year decrease in non-resident construction workers in February contributed to the overall 1.8 per cent year-on-year fall in the number of overseas workers to 178,822 Nelson Moura nelson.moura@macaubusinessdaily.com
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he n u m b e r o f non-residents working in the MSAR fell by 1.8 per cent year-onyear in February of this year, amounting to 178,822 non-resident workers at the end of the month, according to the most recent data from the Labour Affairs Bureau (DSAL). The yearly decline was mainly caused by a decrease in the number of foreign workers in the construction sector, which fell by 20.3 per cent year-on-year in February to 34,586. Despite the drop, non-resident workers in the sector still represented the second largest foreign workforce, making up 19.3 per cent of the total. The hotels and restaurants sector increased its position as the sector with the largest number of non-resident workers, growing 4.2 per cent yearly in February to 50,103 workers, or 28 per
cent of the total. The number of workers in the real estate or other industrial and commercial services sector in February grew by 6.5 per cent yearly to 19,035, while the number of those in the wholesale and retail trade business fell by almost 2 per cent to 19,925. The number of non-residents working in culture, entertainment, gaming and other activities decreased by almost 1 per cent yearon-year to 13,677, with the sector including 1,062 construction workers directly recruited by the city’s gaming corporations. Despite the overall yearly decrease, the number of non-resident workers in February saw a month-onmonth increase from January of some 1,160 workers, the majority of whom were working in the construction sector.
Supply
In terms of origin, the majority of the city’s non-resident workers came from Mainland
China, with some 113,828 accounting for 63.6 per cent of the total. However, there were 2,454 fewer Mainland Chinese workers in February this year than in the same month last year. The majority of Mainland Chinese labourers were engaged in the hotels and restaurants sector, and the construction sector. Workers from the Philippines maintained their position as the second largest non-resident worker community, with an 8 per cent yearly increase in February to 27,136 workers, while the number of overseas workers from Vietnam - the third largest source of overseas workers - remained almost stable at 14,949. Of the 25,654 domestic workers registered in February of this year, workers from Vietnam and the Philippines comprised 70.7 per cent of the total. Meanwhile, some 5,788 workers from Hong Kong were employed in the territory as at the end of the month, dropping 34 per cent from 8,734 one year ago. Nearly 40 per cent of these workers were engaged in the local construction industry, followed by those working in hotels & restaurants, and then those in the culture, entertainment, gaming and activities sector.
4 Business Daily Tuesday, March 28 2017
Macau Opinion
Markets
Lai Si’s annual revenue on the up
Albano Martins*
Let’s be more effective! A few days after the DSEC disclosed the inflation rate of 2.2 per cent for January 2017, I predicted that in February inflation would be down to less than 2 per cent. This was confirmed recently. In February inflation was at 1.91 per cent! But there is something weird about these values, as the rent values have also fallen, which is incongruent with housing sales prices, which have risen colossally in recent months. In January 2017 and January 2016, housing prices were around 14.48 and 11.79 times higher than prices in the second quarter of 2003, which confirms the rise in property prices until January 2017. Of course, there is a lag between the rise in house sale prices and its repercussions on rental values. And I refer here to the socalled “inputed rentals to housing”, weighing 19.76 per cent in Macau’s consumer expenditures basket. Any disproportionate variation of housing rents can pull inflation up or down with some intensity. That is, it can contribute heavily to the change in the value of inflation. What has happened? There has been a steady decline, since January 2016, in the year-on-year values of the variation of rents, making these values negative from June 2016 until today. If we continue on this path of negative variations of housing rents, in a scenario of rising housing prices, this is hardly acceptable. So the “inputed rentals to housing” used in calculating our inflation, give a sign that something is wrong with this calculation. I am not even talking about a lower growth in the value of rents. I’m talking about a decrease in the value of rents used for the calculation of our inflation. The DSEC does a quality job, although it seems to me that the process of collecting information likely leaves a lot to be desired. In some cases, it may even generate absurdities. So when that happens, the DSEC should question the calculations. I think the DSEC has not received the kind of support from the government that its importance demands. The Correctional Services saw their budgets rise from MOP340.3 million to MOP579.3 million between 2012 and 2017, and Statistics from MOP152 million to just MOP198.2 million. Without proper knowledge of the reality of the situation, no economic policies can be done seriously and scientifically, because the basis of work will be poorly known! * an economist and contributor to this newspaper
L
ai Si Enterprise Holding Limited, a commercial construction contractor in Macau, saw a 30.3 per cent year-on-year increase in its revenue for 2016, according to the group’s filing with the Hong Kong Stock Exchange. The group’s revenue hit MOP287.68 million during the year, compared to MOP220.71 million for whole of 2015. In addition, the group’s profit increased by 7.1 per cent year-on-year, hitting MOP44.32 million. However, including listing expenses, the profit attributable to owners of the company dropped by 26.9 per cent year-on-year, at MOP30.24 million for the year, down from MOP41.36 million in 2015. According to the report, Lai Si’s revenue represents ‘the net amounts received and receivable for fitting-out, alteration and addition works, construction works and repair and maintenance services rendered by the Group to customers, net of discounts.’
Lai Si chief executive Harry Lai Meng San
The ‘fitting-out segment, alteration and addition works’ reported the highest revenue, at MOP280.07 million, according to the filing. In terms of its customer-base operations conducted in Macau and Hong Kong, Macau represented the majority of Lai Si’s revenue, totaling MOP286.77 million throughout the
year. Hong Kong contributed approximately MOP903,000 to the group’s revenue this year, as opposed to no contribution last year. The company also reported a 22.7 per cent surge in its gross profit, to MOP73.92 million in 2016, up from MOP60.23 million in 2015. The directors of the company noted in the filing that they ‘consider that the Group is able to mitigate the liquidity risk as [it] has obtained sufficient funds upon the receipt of proceeds from the share offer of the company’s shares after the listing on the Stock Exchange subsequent to 31 December 2016.’ The group’s total liabilities as at year-end 2016 exceeded its current assets by MOP8.9 million, while for the same time period it had net bank balances and cash equivalent to MOP2.7 million, according to the filing. As of year end-2016, the group employed a total of 183 full-time employees. S.Z.
Transport
Gov’t officially regulates on-call taxi service charge Radio Taxi told Business Daily over 80 drivers are ready for its official launch of the services this Saturday The MSAR government issued an executive order yesterday, officially allowing the city’s special taxi (oncall taxi) license concessionaire - Radio Taxi Macau Taxi Service Ltd – to charge an additional MOP5 for its services, set to launch this coming Saturday. The executive order also stipulates that the additional charge will be exempted if drivers of the company fail to pick up passengers within 10 minutes of receiving the call order. Launching the first batch of 50 special taxis on April 1, the company’s general manager Kevin U told Business Daily yesterday that the firm is currently improving both its software and hardware for the official run, adding that over 80 drivers are ready. The company’s current license – which is valid for eight years – allows
it to operate 100 special taxis in the territory. Expecting that demand for the service will be more than the current supply, Mr. U said the company hopes to put the remaining 50 taxis into operation by July at the earliest. Earlier this month, the concessionaire started to offer a free-of-charge
trial service for the public. While some passengers complained that it was quite difficult to hail a cab from the company, the general manager believes the situation will improve following its official launch. “In fact, our trial service was initially carried out for our 80 internal staff, thus we only put around six to 10 taxis for the run. Later, as the news [of the free trial] spread, we decided to expand the scope to the public as well,” Mr. U said yesterday. K.L.
Auction
Sabrina Ho: might hold co-auction again next quarter Sabrina Ho Chiu Yeng, director and chief executive officer of Poly Auction Macau Limited (Poly Macau), said on the sidelines of yesterday’s press conference that Poly Macau might hold another co-auction in the coming quarter. Poly Macau and Poly Hong Kong Limited will jointly hold the first co-auction from April 1 through to April 4 this year at the Grand Hyatt Hong Kong. As it is the first co-auction to be held by the group, Ms. Ho remarked that further planning can only be determined after the event has been reviewed.
The co-auction will feature works by contemporary artist Zeng Fanzhi, with the art pieces being displayed at the Gallery of the Regency Art Hotel in Taipa. According to Ms. Ho, since the founding of Poly Macau in 2015, some 150 items have been auctioned via the group. Auctioned items have included antiques, jewellery, oil paintings, literati paintings and others. The deputy general manager of Poly Macau, Christina Chang Yiqing, revealed that antique auctions in Macau are the least popular when compared to other types of auctions
featuring items such as jewellery and paintings. Poly Macau was founded by Poly Auction Hong Kong Limited and its partner in Macau, Chiu Yeng Cultural Limited. C.U.
Tourism
Ecuador grants visa-free access to MSAR passport holders MSAR passport holders have been granted visa-free access to the Republic of Ecuador, the Identification Services Bureau announced yesterday. According to the announcement, holders of Macau passports are exempt from visa requirements for entering the South American country for a maximum stay of 90 days. Earlier this month, local passport holders were granted visa-on-arrival status for entry into Ukraine. Currently, a total of 128 countries and territories have agreed to grant visa-free access or visa-on-arrival status to local passport holders, according to the Bureau. K.L.
Business Daily Tuesday, March 28 2017 5
Macau Manpower
Jobless rate remains at 2 pct as of end-February Hotels were the only sector that saw total employment levels grow in the three months ended February 28 Kam Leong kamleong@macaubusinessdaily.com
by 0.4 percentage points to 70.9 per cent, according to the data.
he unemployment rate of the MSAR hovered at 2 per cent for the period between December 2016 and February this year, while the total labour force registered a slight decrease from the previous period. According to the latest official data released yesterday by the Statistics and Census Service (DSEC), the city’s total labour force fell by 0.7 per cent period-to-period to 387,000, of which the employed population accounted for 379,100 and those unemployed amounted to 7,900, both representing a decrease of 0.7 per cent period-to-period. Of the total unemployed, fresh labour force entrants searching for their first job accounted for 8.4 per cent, an increase of 0.8 percentage points from the period between November 2016 and January this year, the DSEC notes. The unemployment rate of local residents remained at 2.8 per cent for the period. The city’s underemployment rate also remained unchanged from one period earlier, at 0.5 per cent. However, the labour force participation rate decreased
More in hotels
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In terms of sector, the city’s principal industries all saw employment levels decline during the three month-period, except for hotels & similar activities, whose employment rose by 1.7 per cent to 30,400, as compared to 29,900 from one period earlier. Employment in gaming & junket activities reached 81,300, falling by 1.4 per cent period-to-period from the 82,500 registered in the previous period. The number of people employed in the wholesale & retail trade and construction, meanwhile, dropped by 0.2 per cent and 0.8 per cent, totalling 47,300 and 35,000, respectively. Employment in restaurants & similar activities also recorded a slight drop of 0.1 per cent to 24,800 during the three months. By proportion, 24.3 per cent of the city’s employed labour force was working for recreational, cultural, gaming & other services as at the end of February, followed by those working in hotels, restaurants & similar activities, which accounted for 14.6 per cent of the total.
Some 12.5 per cent of employed local workers were engaged in the wholesale & retail trade, while another 9.2 per cent were working in the construction sector. Other major principal sectors for local employees included real estate & business activities, public administration and social security and domestic work, which made up 7.9 per cent, 7.1 per cent and 6.9 per
cent of the employed labour force, respectively. Compared to the period between December 2015 and February 2016, the city’s unemployment rate recorded a slight growth of 0.1 percentage point, while the underemployment rate remained steady. However, the total labour force participation rate declined by 1.6 percentage points year-on-year.
6 Business Daily Tuesday, March 28 2017
Macau Environment
Keeping it green A forum for international environmental cooperation in Macau will launch an online business matching platform by the end of this month Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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he Macau SAR Government is allocating MOP25million to host the 10th edition of the 2017 Macao International Environment Co-operation Forum & Exhibition (MIECF), according to Vong Man Hung, Deputy Director of the local Environmental
Protection Bureau (DSPA) in a press conference held yesterday at the World Trade Centre. The DSPA and the Macao Trade and Investment Promotion Institute (IPIM), coordinators of the event, announced two novelties for the 10-year milestone mark for MIECF this year. First, the launching of a “Green Exchange” - an online platform created
to further ‘co-operation between Macao, the Pan-Pearl River Delta (PPRD), and the European Union regarding green projects,’ which will come online during the event, according to the press release. “Matching online is a new concept for Macau, and it will allow companies to show their products to potential clients,” commented Irene Va Kuan Lau, IPIM’s Executive Director, during her speech. The “web-based green business matching platform,” specified IPIM’s Director, Jackson Chang, “is put together by IPIM, the Guangdong Association of Environmental Protection, the European Chamber of Commerce in Hong Kong, as well as relevant chambers of commerce and associations in Macau.”
The second novelty for this year’s edition is the support offered by the Chinese Ministry of Industry and Information Technology, which is joining the line-up of institutional sponsors for the first time, according to Ms. Lau. However, funding for the event is only coming from the coffers of the local government. “All the budget comes from the Macau SAR Government, there is no money coming from China,” Ms. Lau noted in response to Business Daily’s enquiry. In addition, the IPIM Executive Director said that in the past five years or so, “there was no increase in the budget,” and that it is very likely that “they won’t exceed the amount” of MOP25 million set to finance the event this year. The event, with the theme ‘Innovative Green Development for a Sustainable Future,’ will take place from March 30 to April 1 at the Venetian.
Co-operation projects
Since its inception, MIECF has led to the signing of 241 cooperation projects and arranged more than 4,000 [physical] business-matching sessions, according to information provided by IPIM’s director during his address. He said that a total of 187 cooperation projects, or 77.6 per cent of the cooperation projects arranged, have been implemented. Of the total 241 projects, “among the 99 implemented cooperation projects which involved financial terms, 53.5 per cent are cooperation projects between Macau and the Pan-Pearl River Delta provinces and regions,” Mr. Chang added. Regarding contracts that do not “involve monetary forms,” he explained, “they usually consist of policy agreements.” When asked by the press however, the IPIM director refrained from providing the total value of investment these contracts represented.
Finance
Agreement to be a stepping-stone for the application of the OECD Common Reporting Standards in the MSAR
Improving tax information A revision of the current agreement for exchange of financial information between Portugal and the MSAR is likely to be signed during the visit of Portugal’s Secretary of State of Tax Affairs to the city in April Nelson Moura nelson.moura@macaubusinessdaily.com
A revision of the current protocols on asset and financial information exchange between banks in the MSAR and Portugal and monetary authorities in both regions, will likely be signed after Portugal’s Secretary of State of Tax Affairs arrives in the city on April 5, according to statements by a Portuguese official to newspaper Plataforma. According to Secretary Fernando Rocha Andrade, with Macau and Portugal having had an agreement to prevent double taxation and tax evasion since 1999, a revision of that agreement would focus on improving information sharing regarding assets and accounts owned by Portuguese nationals in the MSAR. Mr. Andrade stated that although the agreement wouldn’t implement the Common Reporting Standard (CRS) - an agreement developed within the Organisation for Economic Co-operation and Development (OECD) to automatically exchange information, which Macau agreed to implement by 2018 - it ‘opens a door’ for the application of these measures, and for Macau and Portugal to develop a bilateral information exchange agreement. According to Mr. Andrade, under
the OECD multilateral agreement, on the last day of every year, the Portuguese tax authorities receive a report on financial accounts held by Portuguese nationals in countries also covered by the agreement. “ P o rt u g u es e tax l egi s l ati o n does not directly tax the holding of financial assets. Therefore, obtaining information on assets does not in itself determine the application of any tax. However, it is
important information to support the determination of the income of those persons who are resident in Portugal, and as such are taxable persons of our income tax. This is the purpose, since the Common Reporting Standards refer mainly to financial assets, that is, bank accounts and other financial accounts held in financial institutions,” said the Portuguese Secretary of State of Tax Affairs, as quoted by the publication. However the Secretary underlined that the agreement wouldn’t affect Portuguese who reside and develop economic activities in the MSAR, and who already pay taxes demanded by the city’s tax authorities.
Simplifying sea trade
In the same interview, Mr. Andrade also addressed the current negotiations between the MSAR government and Mainland Chinese authorities, for Portuguese products
to be exempt from customs tax when entering China, if processed in Macau. The Tax Affairs official stated that although any measures to improve trade between Portugal, the MSAR and Mainland China were welcome, tax policy involving the country’s products had to be developed in cooperation with the European Union authorities. According to Mr. Andrade, this same dependency also prevented Portugal from enforcing any changes in valueadded tax (VAT) charges, however measures to simplify customs procedures for goods transported via sea from Mainland China and Hong Kong ports were currently being discussed. The measure would allow traders to reduce the cost of customs procedures, with Mr. Andrade stating the issue would be discussed during his visit to Macau.
Business Daily Tuesday, March 28 2017 7
Macau Problematic gambling
141 registered in gambling disorder system Nearly 22 per cent of those registered were working in the gaming industry, while over half were addicted to baccarat Kam Leong kamleong@macaubusinessdaily.com
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total of 141 people registered themselves in the Central Registry System of Individuals with Gambling Disorders at the Social Welfare Bureau last year, of which those working in the gaming industry amounted to 31, the 2016 annual report shows. The number of cases of people
seeking help from the Bureau represents a decrease of six from 2015. Of the total individuals registered in the system, some 83.7 per cent were employed, 11.35 per cent were unemployed, while 4.96 per cent were students, housewives or retired. Among the employed, 17 were dealers, while another 14 were working in the service sectors or other sectors of the gaming industry. According to the report, 23.7 per cent of the gamblers registered in
the system last year claimed they gambled primarily to resolve their financial difficulties, while 21.7 per cent stated that they gambled to relieve stress. Other major reasons for gambling included seeking excitement, killing time and entertainment, accounting for 14.97 per cent, 14.68 per cent and 14.12 per cent of the total, respectively. In terms of games, over half - 53.3 per cent - of those registered claimed they played baccarat. The other two major types of games played by these gamblers included slot machines and Sic Bo, occupying 9.81 per cent and 8.88 per cent of the total, respectively. In addition, the report reveals that
those betting on football, horses and greyhounds, accounted for 7.94 per cent, 3.27 per cent and 1.4 per cent, respectively. While over half of those registered said they were not clear how much they spent on gambling every month, 20 per cent reported that they spent between MOP10,000 and MOP50,000 on gaming activities monthly. Nearly one quarter of those registered said they did not have any debts, but over half of those who did owe money said their debts amounted to over MOP100,000 (US$12,500). In particular, those owing over MOP1 million accounted for 8.49 per cent.
Calls for help
According to the Bureau, it has measured the level of gambling disorders for 87.2 per cent of the individuals registered with the system. The results show that most of the gamblers only sought help when they found out the situation was severe. Analysing 92 of the registered people according to criteria from the fifth edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM-5), the Bureau found that 40 had a severe level of gambling disorder, 36 had a moderate level of disorder and 14 had a mild level. In addition, for 31 others who were evaluated by other methods, 22 were defined as being pathological gamblers, eight were problematic gamblers and only one was considered a social gambler. In fact, over 60 per cent of those registered said they had gambled for between five and ten years, with 6.38 per cent saying they had gambled for over 20 years. In terms of origin, 116 of those registered were Macau ID cardholders and 15 were Hong Kong ID cardholders. The number of those from the mainland or those holding non-resident work permits (blue cards) amounted to two and seven, respectively. The report reveals that the average monthly earning of the gamblers registered in the system was above MOP17,500.
Results
Shun Tak posts net loss for 2016 In particular, the conglomerate registered a HK$263 million loss in its hospitality business Kam Leong kamleong@macaubusinessdaily.com
Hong Kong conglomerate Shun Tak Holdings Ltd saw its results turn south for the year of 2016, posting a net loss of HK$587.1 million (US$73 million), compared to a profit of HK$744.7 million one year earlier, as the company’s hospitality business fell into the red. According to the company’s filing with the Hong Kong Stock Exchange yesterday, total revenue of the group reached HK$3.85 billion for the year, dropping by 12.6 per cent from HK$4.41 billion for 2015. In particular, the company’s hospitality business registered a loss of HK$263 million, down from a profit of HK$95 million the previous year. The group explained the loss was ‘mainly attributable to an impairment loss of HK$344 million, representing a 378 per cent year-on-year decline in return’. Revenue generated from the hospitality segment, meanwhile, dropped by 1.8 per cent year-on-year to HK$787.4 million. According to the filing, the group’s Mandarin Oriental Hotel in the MSAR only registered an average occupancy of 45 per cent for the year, with room rates amounting to some MOP2,000 per night. In addition, the Grand Coloane Resort, managed by the group’s subsidiary Artyzen Hospitality Group,
recorded an average occupancy of 68 per cent for the year ‘as it continues to be subject to direct competition from new hotels opening in the adjacent Cotai’. In fact, 60.5 per cent of the group’s total revenue was derived from its transportation business, totalling HK$2.33 billion. The amount,
however, represents a decrease of 3.13 per cent when compared to revenue of HK$2.41 billion earned in 2015. In the filing, Shun Tak notes that total passenger numbers recorded on its Hong Kong-Macau ferry routes operated under the TuboJet brand fell by 4 per cent year-on-year to 14 million. Claiming it ‘has been successful in weathering the downturn through disciplined yield management and strategic product diversification,’ profit generated from the segment jumped by 11 per cent year-on-year to HK$394 million.
On the other hand, the company’s property business raked in HK$495 million in revenue, plunging by 43 per cent from HK$868.8 million one year earlier. The group explained that the slump in revenue from the sector was due to ‘a lag time in revenue recognition from sale of properties,’ which drove down its segment’s profit by 67.6 per cent year-on-year to HK$124 million. Revenue earned from investment amounted to HK$238.8 million, a fall of 27.3 per cent year-on-year. The group did not propose any final dividend for the year.
8 Business Daily Tuesday, March 28 2017
Greater China Official data
Industrial profits surge as commodity prices rally Industrial firms stand to benefit from fixed-asset investment that expanded more than expected in the first two months of the year
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rofits of Chinese industrial firms surged 31.5 per cent in the first two months of 2017 from a year earlier as prices of commodities from coal to iron ore raced higher, while strong imports also pointed to a pick-up in activity. Stronger earnings could give a further boost to fixed-asset investment, which quickened early in the year, and give China’s “smokestack” industries more cash flow to start whittling away at a mountain of debt -- a key government priority this year. Total industrial profits over the first two months of the year were RMB1.01 trillion (US$147 billion), the National Bureau of Statistics said in
a statement yesterday. The increase was mostly due to faster growth in prices of coal, steel and crude oil, He Ping, a statistics bureau official, said in a note accompanying the statement. The pace of profit growth picked up sharply from a 2.3 per cent increase in December. Industrial profits rose 8.5 per cent in 2016, snapping back from a slight drop in 2015, largely due to a sharp increase in prices of coal as well as raw materials such as iron ore which were needed to help feed a construction boom. China’s economy got off to a strong start to 2017, supported by robust bank lending, a government infrastructure
spree and a much-needed resurgence in private investment. The government boosted spending at the start of the year, with outlays rising 17.4 per cent in Jan-Feb, compared to 12 per cent growth over the same period in 2016. Industrial firms stand to benefit from fixed-asset investment that expanded more than expected in the first two months of the year, including a 27.3 per cent increase in infrastructure spending. But investors in China are being torn between data showing a resilient economy and fears that expected policy tightening, while gradual, will eventually lead to higher borrowing costs and stunt business activity. Producer prices rose at the fastest pace since 2008 in February on the back of stronger demand and government-mandated cuts in excess capacity. However, most economists and
even the statistics bureau believe producer price gains may soon start to slow. “The base effects are not going to be as flattering in coming quarters. We’re going to see a decline in profit growth and producer price inflation from now onwards,” says Julian Evans-Pritchard, an economist at Capital Economics in Singapore. “We shouldn’t get too excited about some of these growth rates.” Further clouding the outlook, steel and iron ore futures prices in China posted their biggest weekly drop in three months last week as high inventories raised concerns that demand in China is not picking up as much as had been expected.
Key Points Strong raw materials prices driving best profit growth in years Industrial sales also picking up, fuelled by construction boom Higher cash flow may allow firms to reduce heavy debt load Iron ore, steel futures prices tumbling amid high inventories
As good as it gets?
Evans-Pritchard says China is near a peak after a recovery from a cyclical downturn, with policy tightening and slower credit growth eventually going to drag on growth. “There is a real risk that by the end of the year the economy could be looking quite a bit weaker. I think all those signals suggest that this quarter is probably as good as its going to get,” he said. Liabilities of industrial firms rose 6.6 per cent year-on-year as of end-February. The statistics bureau gives combined figures for the first two months of each year to smooth out seasonal distortions caused by the long Lunar New Year holidays, when most companies are closed for the celebrations. The profit figures cover large enterprises with annual revenues of more than RMB20 million from their main operations. Reuters
Premier tour
Mainland and New Zealand agree to boost already-close trade ties Premier Li signed nine pacts with New Zealand Prime Minister Bill English Charlotte Greenfield
China and New Zealand ramped up their cooperation yesterday, pledging to expand their existing free trade agreement into what visiting Premier Li Keqiang called China’s “most advanced” with a developed country. The two governments also promised to work together on a Chinese trade and business expansion strategy that Beijing calls “One Belt, One Road”. In Wellington, Li signed nine pacts with New Zealand Prime Minister Bill English, who said talks to upgrade their free trade agreement (FTA) - in effect since 2008 - would begin on April 25. The upgrade would produce an arrangement of the “most advanced level” between the nations and “the first of its kind between China and a developed country”, Li said. In a column published yesterday in the New Zealand Herald, headlined “To New Zealand, with love”, Li wrote that rising international instability and uncertainty “have made it all the more important for China and New Zealand to work together to turn challenges into opportunities”. New Zealand depends heavily on exports, and Li’s remarks echoed
those by English and New Zealand central bank governor, Graeme Wheeler, who have warned that possible disruptions of global trade is the biggest threat to prosperity.
‘One Belt’ summit
English said Paul Goldsmith, New Zealand’s regulatory reform and
innovation minister, would attend a “One Belt, One Road” summit in Beijing in May. New Zealand was the first Western country to sign an FTA with China and the first to join the China-initiated Asian Infrastructure Investment Bank (AIIB) after which it helped usher in the United Kingdom and Australia. China is the New Zealand’s second biggest trade partner, after Australia, which Li visited last week. Despite agreements on areas from
e-commerce to chilled goat exports, thornier issues emerged during Li’s talks with English. They discussed the South China Sea and English acknowledged the topic was “sensitive”, though he said he did not think it would affect the rest of their relationship. China has drawn criticism for largescale building in the disputed waterways of the South China Sea.
Key Points NZ and China to upgrade their 2008 free trade agreement Cooperation vital in the face of protectionism - China premier NZ to work with China on ‘One Belt One Road’ strategy
Premier Li addressed Australia China Economic Trade Cooperation Forum last week. Lusa
Li took issue with a local journalist’s question on whether allegations of steel dumping could impact the trade relationship, a spat that English and his predecessor John Key have tried to play down. English said there were no talk about the imports. Li said China is reducing steel production and exports only a modest amount to New Zealand. He added that while half of China’s dairy imports come from New Zealand, Beijing has not accused New Zealand of dumping them. Reuters
Business Daily Tuesday, March 28 2017 9
Greater China Diplomatic standoff
In Brief
Hyundai suspends Mainland plant for a week amid political spat The move comes less than six months after the plant started operations South Korea’s Hyundai Motor has suspended production at one of its Chinese factories for a week, a media report said on Sunday, fuelling concern that a diplomatic standoff may be hurting sales in the automaker’s top market. South Korean companies, from cosmetics firms to retailers, say they are being targeted in China because of Beijing’s objections to a planned deployment of the U.S. Terminal High Altitude Area Defence (THAAD) system in South Korea. China worries the system’s powerful radar can penetrate its territory. ChosunBiz reported Hyundai’s
China joint venture had told suppliers it would idle the factory in Cangzhou, Hebei Province from March 24 to April 1, to check its production line. The move comes less than six months after the plant started operations. Hyundai has three other factories in China. No further details were available. A Hyundai spokesperson did not have immediate comments, but industry officials and analysts say the suspension may be aimed at bringing down inventories given slowing sales in China, due to political tension and competition from local players. Ko Tae-bong, an analyst at Hi
Investment & Securities, said Hyundai’s March sales in China may have fallen year-on-year due to the political spat, after gaining in January and February. Hyundai officials have previously said the company’s business ties with Chinese companies mean they were less likely to be the main target of any punishment.
Key Points Hyundai shuts one plant in China for a week, starting March 24 A company spokesperson did not have immediate comments Reported suspension may be aimed at lowering inventory -analysts
Oil industry
Commercial crude stocks down China’s commercial crude oil inventory declined 1.4 per cent month-on-month at the end of February due to lower imports and output. Net imports of crude oil dropped 5.4 per cent in February, reducing stocks, and the amount of oil refined also declined. Despite a sharp rise in exports, diesel reserves rose significantly as a result of weak demand after the Spring Festival holiday. Gasoline stocks also rose slightly due to flat demand. Results
The company’s China operations are a 50-50 joint venture with stateowned Beijing Automotive. Reuters
BOC Aviation’s 2016 profit rises Hong Kong-listed aircraft lessor BOC Aviation Ltd reported a 22 per cent jump to record full-year net profit yesterday, supported by growth in global air travel, and signalled an upbeat industry outlook. As airlines increasingly opt to lease planes, Asian lessors are investing billions of dollars to expand, having won backing from cash-rich banks and financial investors. Last year, BOC Aviation raised US$1.1 billion in the biggest IPO by an aircraft lessor. BOC Aviation’s net profit rose to US$418 million in the year ended Dec. 31 on a 9 per cent increase in total revenue and other income to US$1.19 billion. Property
Individuals stopped from buying Beijing commercial property Reform
PBOC governor says country will open more to investors Zhou said that he expects to see more countries start to emphasize fiscal policy Elias Glenn
China will substantially cut the number of sectors closed to foreign investment, its central bank governor said on Sunday. But Zhou Xiochuan of the People’s Bank of China (PBOC) also said that as his country opens wider, “we want China to get fair treatment overseas”. Among financial sectors targeted for further opening in China were banking, insurance, investment banking, securities firms, and payments, he told the Boao Forum for Asia.
Key Points
Chinese policymakers have emphasized the need to focus on structural reform over purely high-speed growth. The PBOC has moved to a tightening bias in an effort to squeeze speculators and control asset bubbles, raising primary money market rates several times since late January. Zhou said China’s reforms need to include streamlining the fiscal relationship between central and local governments. “We need to figure out the central and local government relationship,” he said. “Different provinces have different fiscal indicators. Some provinces are already over-indebted but some still
have room.” Zhou added that China’s central government debt-to-GDP ratio is not very high. Beijing tightened controls in recent years on local government debt to contain risks from an earlier borrowing binge 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. Chinese vice finance minister Liu Wei on Friday told the forum that China’s debt risks are under control. Zhou added that China’s central government debt-to-GDP ratio is not very high. Reuters
Governor: Chinese firms should get fair treatment abroad Says awaiting US decision on moving to trade, investment pacts Some provinces ‘over-indebted’, c.bank chief says Zhou said Beijing is in talks with Japan and European and ASEAN countries about bilateral trade and investment agreements, but is “waiting for the U.S. new administration to decide” how to move forward on agreements. The governor also said that he expects to see more countries start to emphasize fiscal policy and structural reform as the period of loose monetary policy ends.
Zhou Xiochuan, Governor of the People’s Bank of China during Boao Forum address
China’s regulators have introduced rules to curb the purchase of new commercial property in Beijing by individuals in the latest step by authorities to cool the market. New commercial plots can now only be sold to enterprises, public entities and social organizations, said a statement issued by Beijing’s banking, industry and commerce, housing and urban planning authorities. The statement posted on the Beijing Municipal Commission of Housing and Urban Rural Development website on Sunday said that personal loans for buying commercial property have also been suspended. M&A
Old Mutual sells U.S. fund arm stake to China’s HNA Anglo-South African financial services firm Old Mutual said it has sold a 25 per cent stake in its U.S. fund management arm to China’s HNA for US$446 million, as part of its plan to split itself into four companies. Old Mutual, which says regulatory change has made its business too complex to run in its current form, is aiming to break into four parts by the end of next year. It has said it plans to dual-list its UK asset management and African emerging markets businesses in London and Johannesburg and reduce stakes in U.S. firm Old Mutual Asset Management and South Africa’s Nedbank.
10 Business Daily Tuesday, March 28 2017
Greater China Results
Vanke’s profits climb on record property sales Chinese developers China Overseas Land & Investment Ltd and Country Garden Holdings Company Ltd last week reported solid growth
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roperty giant China Vanke Co, the subject of a long-running battle for boardroom control, said its core profit last year rose 19 per cent, thanks to record sales. The nation’s second-biggest home builder said core profit, which excludes revaluation gains, rose to RMB20.9 billion (US$3.04 billion) from RMB17.6 billion in 2015. Analysts were expecting a profit of RMB21.1 billion according to Thomson Reuters SmartEstimate data.
The property giant has been in crisis since late 2015 as financial conglomerate Baoneng Group built up a 25 per cent stake to become its largest shareholder and sought to oust management. But last week Vanke said stateowned Shenzhen Metro Group, a key ally, became its largest shareholder in terms of voting rights after a proxy agreement with its third-biggest shareholder, paving the way for the metro operator to take control of the homebuilder.
“The group sincerely hopes that the shareholding issue will be resolved as soon as possible, allowing the group to be back on track for normal operations and creating larger values for shareholders and the society,” the company said in a statement to the Hong Kong stock exchange. In a statement to the Shenzhen stock exchange on Sunday, Vanke said Baoneng had promised to maintain Vanke’s independence and would not use its position to hurt the developer’s interests. Net profit for 2016 rose 16 per cent to RMB21 billion, while revenue stood at RMB228.9, representing a year-onyear increase of 24 per cent. “This year, the central government
will continue to implement policies according to cities to prevent market overheating and begin formulating long-term mechanisms for the promotion of steady and healthy development of the property market,” Vanke said. Beijing has been stepping up efforts to cool the property market on concerns about a bubble. Measures have included raising home purchase requirements and imposing price limits on sales.
‘In a statement to the Shenzhen stock exchange on Sunday, Vanke said Baoneng had promised to maintain Vanke’s independence’ Chinese developers China Overseas Land & Investment Ltd and Country Garden Holdings Company Ltd last week reported solid growth in 2016 but said there might be challenges for sales in some areas this year due to steps taken by the government to rein in the market. State-owned China Overseas Land said it was cautiously optimistic about the market and set a modest sales target for 2017, the same level it achieved last year. Reuters
Oil industry
Sinopec’s 2016 net profit rises helped by refining The chemicals segment recorded a strong performance as the firm optimised production to favour higher-value products Dominique Patton
China Petroleum and Chemical Corp on Sunday reported that 2016 net profit rose 44 per cent to RMB46.4 billion (US$6.74 billion) from a year earlier on the back of strong performances in refining and chemicals. The state-owned company, known as Sinopec Corp, saw fourth quarter net profit jump to RMB17.25 billion from RMB9.9 billion in the third quarter, it said in a statement to the Shanghai Stock Exchange. For 2015, Asia’s largest refiner reported total net profit of RMB32.3 billion. Sinopec said that in 2016, oil and gas production fell 8.6 per cent to 431.29 million barrels of oil equivalent (BOE), versus 471.91 million a year earlier. Crude oil production was down
13.2 per cent to 303.5 million BOE as near-decade low oil prices forced the closures of costly wells, while natural gas rose 4.3 per cent. Refinery throughput fell 0.4 per cent compared with 2015 to 235.5 million tonnes, or about 4.71 million bpd.
Key Points Q4’s profit sharply higher than Q3 level Sinopec expects 2017 capex to increase 44 pct Its total fuel sales grew 2.9 per cent. Fuel demand growth in China, the world’s second-largest consumer, moderated along with the broader economy. But domestic competition heated up following moves to allow
more than a dozen independent refineries to import crude oil for the first time since late 2015. The chemicals segment recorded a strong performance as the firm optimised production to favour higher-value products, a trend Sinopec expects to boost profitability in the coming years.
The company said it expects global oil prices to fluctuate at lower levels this year, while domestic oil products would continue to grow and the consumption structure would be further adjusted. Sinopec plans to boost capital expenditure in 2017 to RMB110.2 billion, up 44 per cent from last year’s RMB76.46 billion. This year’s refinery throughput is set to reach 240 million tonnes, and production of oil products will reach 150 million tonnes. Reuters
Business Daily Tuesday, March 28 2017 11
Asia Political scandal
Korean prosecutors seek to arrest Park on graft allegations She risks becoming the third former South Korean president to be put behind bars Kanga Kong
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outh Korean prosecutors sought to arrest former President Park Geun-hye over allegations that she abused her powers and colluded with her long-time friend and former aides to get bribes from the nation’s top businesses. Federal attorneys submitted a request at the Seoul Central District Court to issue an arrest warrant for Park, prosecutors said in a text message yesterday. It’s reasonable and lawful to detain her because there’s a risk that she will destroy evidence since she continues to deny wrongdoing, they said. Several associates of Park are already on trial for their role in the scandal that brought down the nation’s first female president. Prosecutors questioned Park for 14 hours last Tuesday after she lost her presidential immunity following her ouster. Park risks becoming the third
former South Korean president to be put behind bars. In the 1990s, Chun Doo-hwan was sentenced to death and Roh Tae-woo received a 22 1/2-year term after the pair were found guilty of creating slush funds and inciting a coup. Both were later pardoned.
Pressuring executives
She is suspected of pressuring top business executives to donate tens of millions of dollars to foundations run by her friend Choi Soon-sil in return for government favours. Prosecutors also allege that she colluded with Choi to seek bribes from Samsung Group’s heir apparent Jay Y. Lee in return for business favours. Choi and Lee are in detention as their trials proceed, and both deny wrongdoing. Park “abused her presidential position and received bribes from companies,” according to the text message. Prosecutors also allege that she infringed on the freedom of corporate management and leaked
Impeached South Korean President Park Geun-Hye bows during an address to the nation amid increasing calls for her resignation on 29 November 2016. Lusa
classified information. In upholding the parliament’s December decision to impeach her, South Korea’s constitutional court said on March 10 that Park abused
her presidential powers for the personal gain of Choi. An election for the next president is scheduled for May 9, with Park’s opponents leading in polls. Bloomberg News
Private poll
Japanese manufacturers brace for possible U.S. import tax Critics of the border tax say it could be passed on to American consumers through higher prices Chris Gallagher
Japanese manufacturers are wary of a possible U.S. border tax, with just over half expecting profits to take a hit if the United States slaps a 20 per cent levy on imports, a Reuters poll showed yesterday. In response, they are thinking of cutting costs, increasing production and procurement in the United States and raising U.S. product prices, but those steps would offset only some of the impact, the monthly Reuters Corporate Survey found. The United States is the top destination for Japanese shipments. The House Republicans’ proposal to tax imports at 20 per cent could hurt Japan’s vital automobile, electronics and other exporters. “We’d have to consider setting up production facilities in the United States,” wrote a manager at a rubber company. “But in the longer term, it could lead to a shift away from the U.S. for the manufacturing industry as a whole.” In the monthly survey, conducted March 7-21 for Reuters by Nikkei Research, 51 per cent of the 129 manufacturers that responded said earnings would be affected. The ratio was highest among automotive-related firms, at 77 per cent. The figure is lower for Japanese companies overall, at 36 per cent of the 246 that participated in the survey, which includes service-sector and other non-manufacturing firms that focus more on the domestic
economy. The plan for a border adjustment tax, backed by House Speaker Paul Ryan, is intended to encourage investment and manufacturing in the United States and pay for corporate tax cuts.
‘America first’
President Donald Trump, under his “America First” campaign, has called Japan’s auto trade “unfair” and is pressuring carmakers including Toyota Motor Corp to build more plants and create jobs in the United States. Should such a tax be implemented, 28 per cent of the manufacturers who
expect profits to be affected would consider raising output and procurement within the United States. Among automotive businesses, that figure climbs to 80 per cent, the poll showed. Critics of the border tax say it could be passed on to American consumers through higher prices, and the survey flagged potential hikes among some companies. Seventeen per cent of manufacturers would try to offset the impact on earnings through price increases, including 40 per cent of electrical machinery firms, though just 10 per cent of automotive companies would do so. Meanwhile, 38 per cent would deal with a tax through cost-cutting, most popular choice. Overall, 72 per cent of manufacturers would take some
kind of steps to cushion the earnings blow. Taro Saito, director of economic research at NLI Research Institute, said the percentage of companies anticipating an earnings hit was smaller than he had expected. He questioned whether some were taking the tax plan seriously given that cost-cutting was the top choice. “As the border tax plan becomes more of a reality, more businesses will shift to boost local production and procurement,” said Saito, who reviewed the survey results.
Key Points 51 per cent of manufacturers expect border tax would hit profits 28 per cent would mull boosting output, procurement in U.S. No Japanese company would be able to fully offset a 20 per cent import tax “It’s such a big change in policy that companies will find it hard to come up with any countermeasures. It’s simply impossible for companies to cope with a border tax rate of 20 per cent,” he said. Indeed, the survey showed that no Japanese company would be able to offset a 20 per cent border tax. Just 4 per cent would be able to cope with a tax rate of up to 10 per cent and the remainder could offset up to just 5 per cent. “’America First’ is not good,” wrote a manager at a distribution company. Reuters
12 Business Daily Tuesday, March 28 2017
Asia In Brief Report
Australia’s most popular cars misleading customers Some of Australia’s best selling cars have been found to be misleading customers after a study into fuel consumption claims found some cars used up to 60 per cent more fuel than advertised. Commissioned by the Australian Automobile Association (AAA) in the wake of the Volkswagen diesel emissions scandal, the report aimed to examine the accuracy of the government-mandated laboratory testing by driving the cars in “real-world” settings. The study of 17 passenger vehicles found that Australia’s most popular new car models were using, on average, 25 per cent more fuel than advertised, with one car using 60 per cent more fuel compared to its manufacturer claim. Expansion
Citigroup plans to double South Korea wealth assets by 2020 Citigroup Inc plans to double its wealth management assets in South Korea to around US$6 billion by 2020, setting up new offices and investing in digital technology to attract new customers. Asia has emerged as a key battleground for global wealth managers, with higher economic growth, rapidly rising wages and a thriving entrepreneurial ecosystem producing rich clients at a pace faster than in the west. U.S.-based Citi, which is marking its 50th anniversary in South Korea, said it plans to grow its target customer base in wealth management by 50 per cent by 2020 with new offices in Seoul, Dogok and Bundang. Strategy
Toshiba’s Westinghouse may file bankruptcy today Westinghouse Electric Co, the U.S. nuclear unit of Japan’s Toshiba Corp, could file for bankruptcy protection as early as today and is seeking support from South Korea’s Korea Electric Power Corp, the Nikkei said yesterday. A Chapter 11 filing could help Toshiba limit damage from losses at Westinghouse, the report by the Japanese business daily said, without citing sources for its information. Sources told Reuters on Friday that Toshiba had told its main banks it planned to have Westinghouse file for bankruptcy on Friday, expanding charges related to the U.S. unit this business year to around 1 trillion yen (US$9 billion) from its publicly flagged estimate of 712.5 billion yen.
March meeting
Japan’s monetary policy will remain easy for some time Concerns about the vigour of domestic demand linger because core consumer prices rose only 0.1 per cent on-year in January Stanley White
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ank of Japan (BOJ) board members said easy monetary policy will be in place for some time because consumer price growth is still distant from the central bank’s 2 per cent inflation target, a summary of opinions from their March 15-16 meeting showed yesterday. Members dismissed the notion that the BOJ would have to raise its 10-year government bond yield target due to gains in bond yields overseas, and instead said it should focus solely on the domestic economy. However, some members did express concern about the BOJ’s ability to control the 10-year yield in the future. “Some market participants argue that the Bank needs to change the monetary policy in response to the rise in the long-term yields overseas,” one member said.
Key Points BOJ kept policy unchanged this month BOJ’s Kuroda has dismissed talk of raising 10-yr yield target Next policy meeting is April 26-27 At the meeting, the BOJ kept policy on hold and Governor Haruhiko Kuroda pushed back against speculation that the BOJ will raise its target for the 10-year bond yield sometime this year. The BOJ maintained its shortterm interest rate target of minus 0.1 and a pledge to guide the 10-year
C.bank survey
S.Korea manufacturers to boost capital investment The central bank added that exports were expected to continue rising in coming months South Korean manufacturers are expected to spend more on capital investment this year than they did last year, although those expenditures will be conservative and mostly geared towards maintaining facilities than expansion, a central bank survey showed yesterday. The Bank of Korea (BOK) said a snap survey of 271 manufacturers nationwide showed 66.7 per cent of respondents were planning to expand facilities investment this year versus the 33.9 per cent who said their investments would decline in 2017. The survey was part of a quarterly
Bank of Korea headquarters
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“However, the monetary policy in Japan should be decided based on Japan’s economic activity and prices. It will be a considerable length of time before the Bank will need to change its monetary policy.”
government bond yield at around zero per cent. It also kept intact a loose pledge to maintain the pace of its annual increase in Japanese government bond (JGBs) holdings, which is 80 trillion yen (US$723.98 billion). The economy has shown signs of life recently with stronger exports and industrial production, but concerns about the vigour of domestic demand linger because core consumer prices rose only 0.1 per cent on-year in January. One member was doubtful about the price trend because wage increases for next fiscal year, which starts in April, are likely to be less than the current fiscal year, the summary of opinions showed. The BOJ increased its government debt purchases substantially last month to cap a rise in yields, which revealed the weakness of the BOJ’s policy to control the shape of the yield curve, another member said. This suggests the BOJ could be forced to purchase a large amount of government debt in the future to achieve its yield target, this member said. Reuters
central bank report on the regional economy. On an annual basis, capex declined for three consecutive quarters in 2016 as companies balked at boosting investment in the face of global and local uncertainties. In the fourth quarter, capital investment managed a 1.5 per cent gain over a year earlier. Revised fourth-quarter gross domestic product growth data will be announced today. This year, companies in sectors such as information technology (IT), petrochemicals, oil refining and car
production were expected to boost investment, the central bank survey showed. Capital investment across the board was expected to be conservative, with companies focusing on maintenance, repairs and boosting the efficiency of existing facilities. The BOK said protectionist policies were gaining traction globally. Combined with uncertainty stemming from domestic and foreign conditions, these policies could hamper investment.
66.7 per cent manufacturers planning to expand facilities investment this year
The central bank added that exports were expected to continue rising in coming months, with shipments of semiconductors, displays and smartphones likely to increase. Exports rose for a fourth straight month in February and at the fastest pace in five years as global demand strengthened. The government expects now March exports will also post a rise. Full-month figures for March will be announced on April 1. 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 Tuesday, March 28 2017 13
Asia Investors
Foreigners to the rescue as inflows help fund India deficit But economy is forecast to grow 7.1 per cent in the year through March Anirban Nag
Economists are betting that India has seen the back of the impact of its unprecedented cash ban, prompting foreigners to pour in investment that’s crucial to help bridge a widening current account deficit. Deutsche Bank AG estimates that foreign direct investment touched US$37.4 billion April-January, on track to exceed the previous fiscal year’s about US$45 billion, with signs of recovery after a plunge late last year as the U.S. prepared to tighten policy and India announced demonetization. Overseas investors’ holdings of Indian stocks and bonds have also picked up, rising more than US$8 billion in 2017. While Asia’s third-largest economy is forecast to grow at one of the fastest paces in the world, Prime Minister Narendra Modi needs this money. Domestic private investment is slumping and the central bank’s shift to a neutral policy stance makes it unlikely to recover soon. Meanwhile U.S. President Donald Trump’s threatened crackdown on immigration risks further slowing service exports and remittances, key revenue earners for India. “India’s current account deficit is being financed in large part by foreign direct investment inflows,” said Shilan Shah, Singapore-based economist at Capital Economics. “This is a positive reflection of Prime Minister Modi’s policies to encourage direct investment, and should make India
less vulnerable to shifts in global risk appetite.” The shortfall in the broadest measure of trade widened to US$7.9 billion in October-December from US$3.4 billion the previous quarter, data showed last week. However this was smaller than the US$12 billion gap estimated in a Bloomberg survey, as a smaller trade deficit offset a drop in service exports and remittances. Ever since its current account deficit ballooned to a record in 2013, Indian policy makers have been trying to shrink the shortfall and safeguard the economy from global swings. Finance Minister Arun Jaitley in February proposed to get rid of a bureaucratic barrier to FDI and the government says India is now one of the most open economies in the world. Foreign-exchange reserves jumped US$2.7 billion in the week to March 17 -- the biggest increase since September 2016 -- to US$366.7 billion, Reserve Bank of India data showed on Friday. The rise comes amid speculation the central bank has been intervening to mop up dollars and prevent a sharp appreciation in the rupee.
GST awaited
Modi may be comforted by the recent stabilization in global oil prices after a brief rebound, economists say. The goods and services tax, scheduled for July, is expected to simplify compliance, boost revenue and make it much easier to do business in India.
Commodities
Australia halts some coal mining ops as severe cyclone nears Aurizon, Australia’s largest freight rail operator, has stopped delivering coal to the export ports of Abbot Point, Dalrymple Bay and Hay Point Ben Sharples and Perry Williams
BHP Billiton Ltd. and Glencore Plc are halting production at some coal mines in Australia’s Queensland before the biggest cyclone to hit the state in six years approaches the east coast. Severe tropical cyclone Debbie, the biggest since 2011, is forecast to cross the coast today morning with wind gusts up to 240 kilometres per hour, according to the Bureau of Meteorology. Australia is the world’s biggest exporter of metallurgical coal, used to make steel, and previous storms have flooded mines, swamped machinery and led to price spikes. “The production impact is likely to
be from drenching rain at the mines rather than a hit to the ship-loaders or the port infrastructure,” said Robin Griffin, a research director at Wood Mackenzie Ltd. in Brisbane. “Producers are much better prepared after 2011. Most miners increased their defences by boosting their levees from a one in 500-year event to a one in 1,000 year event.” Aurizon, Australia’s largest freight rail operator, has stopped delivering coal to the export ports of Abbot Point, Dalrymple Bay and Hay Point, the company said Sunday. Trains operating on the Goonyella and Newlands systems have been stowed, or are in the process of being stowed, it said.
Cyclone yasi
Dark clouds approach over boats at Airlie Beach, Queensland, Australia yesterday. Lusa
Debbie is “very dangerous, and of a size not seen in Queensland since severe tropical cyclone Yasi in 2011,” Bruce Gunn, the state’s regional director for the Bureau of Meteorology, said in a statement on the agency’s website. Yasi was the first Category 5 storm to strike the Australian state since 1918. Debbie is expected to strengthen to a Category 4 by the time it makes landfall. Any impact to production at South Walker Creek will be reported in the company’s next quarterly update, BHP said. Glencore said the output suspension at Collinsville and Newlands is unlikely to affect annual production forecasts, while normal operations are continuing at the Oaky Creek, Clermont and Rolleston coal mines. Bloomberg News
Prime Minister Modi (pictured) may be comforted by the recent stabilization in global oil prices after a brief rebound, economists say
“We expect reforms in the FDI space to continue which, along with the focus on improving ease of doing business conditions and GST implementation should help to sustain the positive momentum in the period ahead,” said Kaushik Das, Mumbai-based senior economist at Deutsche Bank. India’s US$2 trillion economy is forecast to grow 7.1 per cent in the year through March, though that may be downgraded once there’s more clarity on the impact of the cash ban. There’s also the risk that food prices will jump in the nation of 1.3 billion
as global reflation picks up and the U.S. tightens policy. For now though, investors are attracted to India’s growth potential and the rupee, which is forecast to earn investors 2.6 per cent by March 2018 -- including interest -- the second-best in Asia after Indonesia’s rupiah. “We believe this is testament to India’s high growth rate, large potential and on-going economic reforms,” said Sonal Varma, Singapore-based chief India economist at Nomura Holdings Inc., “We expect this trend to continue.” Bloomberg News
14 Business Daily Tuesday, March 28 2017
International In Brief Investment
Qatar wealth fund to open office in Silicon Valley The Qatar Investment Authority, the Gulf Arab state’s acquisitive sovereign wealth fund, is setting up an office in San Francisco to manage its growing portfolio in the United States, its CEO said in London yesterday. “Soon we will be opening an office in the Silicon Valley in San Francisco,” Sheikh Abdullah bin Mohammed bin Saud al-Thani told reporters at an investment conference. The fund is one of the most active sovereign investors in the world, snapping up stakes in everything from real estate to luxury goods. Much of its activity has traditionally been in Europe but the fund has said it is looking to diversify into Asia and the United States. Oil industry
Goldman Sachs warns OPEC on production cuts Goldman Sachs on Sunday said an extension of the joint OPEC and non-OPEC oil production cut is not warranted unless supply and demand fundamentals deteriorate. The Organization of the Petroleum Exporting Countries (OPEC) and other major producers should be wary of extending the cuts unless there is a weakening of global oil demand or output from Libya or Nigeria increases, the bank said in a note from analysts led by Damien Courvalin. “We believe that the rebalancing of the oil market is in fact making progress despite the record high U.S. crude inventories.”
Survey
German business morale hits five-and-a-half year high The sub-indices covering the present economic situation and expectations both rose
G
erman business confidence rose to its highest level in more than five and a half years in March, a regular survey showed yesterday, beating analysts’ forecasts for a slight decline. The Ifo institute’s closely-watched business climate index improved in March, adding 1.2 points to reach 112.3 points, the highest level since July 2011. “The upswing in the German economy is gaining impetus,” commented Ifo president Clemens Fuest. The March increase in confidence surprised observers of the German economy, as analysts surveyed by Factset had forecast a slight slip in the survey result. Ifo’s headline figure is based on a survey of some 7,000 businesses which are asked about the current climate and their expectations for the next six months. The sub-indices covering the
present economic situation and expectations both rose, as businesses shook off gloom about rising inflation and political uncertainty that had clouded readings earlier in the year.
“No-one was expecting such a sharp rise” Uwe Burkert, analyst at LBBW bank
Looking to individual sectors, manufacturers, retailers and construction firms all reported an increase in confidence, with wholesalers the only group to be more pessimistic about both the present situation and the months ahead. “No-one was expecting such a sharp rise” in business confidence, analyst Uwe Burkert at LBBW bank
commented. “Anxieties about Brexit, Trump and the upcoming elections in France appear to have been dispelled.” However, “this lack of concern seems to me somewhat overblown,” he cautioned. Unlike businesses, surveys of investors and consumers this month showed that neither group has completely shaken off fears of inflation and political upset. With consumer spending increasingly important to the German economy, retailers’ confidence about the coming months fell in the March survey. While confidence indicators have pointed to faster growth since the start of 2017, “hard data have up to now been rather mixed,” noted analyst Carsten Brzeski of ING Diba bank, pointing to falls in recent industrial orders and retail sales figures. “The big question is whether hard data can make the soft data’s promises come true, or whether confidence indicators simply jumped the gun and start to adjust to a less buoyant reality,” he added. AFP
M&A
Emaar Malls’ bid for Souq. com to challenge Amazon Dubai’s Emaar Malls, operator of glitzy Middle East shopping centres, has made an US$800 million offer for regional online retailer Souq.com, setting up a potential bidding war with Amazon.com. Reuters reported last week that Amazon had agreed in principle to buy Souq.com. The U.S. e-commerce giant declined to comment, and Souq.com did not respond to emailed comment requests. The Emaar Malls bid has so far not been accepted by Souq.com’s shareholders, the firm said in a bourse statement yesterday. The Emaar Malls bid is the latest move by Dubai billionaire Mohammed Alabbar who chairs Dubai’s largest publicly listed developer Emaar Properties. Patronage
Trump taps son-in-law to head bureaucracy overhaul U.S. President Donald Trump has tapped son-in-law Jared Kushner to lead a new White House office, that aims to apply ideas from the business world to help streamline the government, the Washington Post reported Sunday. The White House Office of Innovation will have authority to overhaul the bureaucracy and fulfil key campaign promises like reforming care for veterans and fighting opioid addiction, the Post said. “I promised the American people I would produce results, and apply my ‘ahead of schedule, under budget’ mentality to the government,” Trump was quoted as saying.
The City, financial heart of London
Financial system
Bank of England to check banks ready for range of Brexit outcomes A second test is made possible by the absence this year of a European Union stress test of leading banks British banks need to prepare for a wide range of potential outcomes and avoid sudden changes to lending as the country gets ready to leave the European Union, Bank of England policymakers said yesterday. Just two days before Prime Minister Theresa May plans to formally notify the European Union that Britain is ready to start two years of exit talks, the central bank said banks will have to provide copies of contingency plans to reassure regulators that they are ready for “a range of possible outcomes”. The Bank of England’s Financial Policy Committee is asking Britain’s banks to show how they can avoid their continental customers being abruptly cut off after Brexit. Lenders worry that Britain will not secure continued, unfettered access to the bloc’s single market, and some are already planning to beef up their presence on the continent. “Sudden adjustment could disrupt the provision of market liquidity and investment banking services,” the FPC said in a quarterly policy statement. Changes to bank business models after Brexit would reduce the resilience of the UK financial system and the BoE said it was “examining appropriate mitigants”, without elaborating further.
Bank of England (BoE) Governor Mark Carney said earlier this year that he did not believe leaving the European Union was the biggest threat to British financial stability, a view that has not changed. The BoE said it was launching a review into consumer lending standards, which it now believes poses a greater risk than buy-to-let lending to small landlords, which has cooled over the past year.
‘HSBC, UBS and Morgan Stanley have decided to move about 1,000 staff each from London in the next two years’ The FPC also set out the scenario for this year’s annual stress test of top lenders. For the first time, they face a biennial parallel ‘exploratory’ test of their ability to cope with emerging or latent risks outside the usual financial cycle. The cyclical test covers a five-year period of shocks, while
the exploratory version will span seven years. A second test is made possible by the absence this year of a European Union stress test of leading banks. RBS failed last year’s test and had to take steps to bolster its capital buffers, and will be under intense pressure to pass this time round. Barclays and Standard Chartered also missed some thresholds in last year’s exercise. In January, Carney said that Britain’s large financial sector could survive some businesses moving away, but losing key activities could cause it to collapse like a precarious wooden tower in the game Jenga. Since then banks have told Reuters they are concerned at the relative lack of interest shown by May’s government towards ensuring they can continue to easily sell services into the EU after Britain leaves. HSBC, UBS and Morgan Stanley have decided to move about 1,000 staff each from London in the next two years, according to sources familiar with their plans. Last week Goldman Sachs said it would begin moving hundreds of people out of London as part of contingency plans for Britain leaving the EU. Earlier this month, the central bank said the outlook for global economic growth had improved, partly due to market expectations of tax cuts and looser regulation in the United States, as well as more spending in the euro zone. Reuters
Business Daily Tuesday, March 28 2017 15
Opinion Business Wires
Bangkok Post The Revenue Department has sent a letter to former prime minister Thaksin Shinawatra (pictured) demanding 16 billion baht in taxes for the sale of the family’s stake in Shin Corp, a department source said. The letter comes amid growing pressure on the government to find ways to chase after taxes before the statute of limitation lapses. The letter specifies how much tax Thaksin, who lives in self-imposed exile, owes the state, said the source, adding the department understands his team of lawyers would formally acknowledge the tax collection demand at the department yesterday.
Viet Nam News Việt Nam and the U.S. have witnessed remarkable strides and historical milestones in bilateral relations over the past 20 years, Deputy Prime Minister Vương Đình Huệ said on Saturday. Addressing the AmCham Gala 2017 event organised by the U.S. Chamber of Commerce in Hà Nội, he said, the relationship has particularly flourished in economics as well as education and training. The elevation of bilateral ties to that of a comprehensive partnership in 2013 has created a firm foundation for the two countries to develop their all-around rapport in the region and beyond, he said.
The Straits Times More flights and seats to existing destinations as well as services to new cities will be available to travellers at Changi Airport (Singapore) over the coming weeks. In May, Singapore Airlines will launch a new service to Stockholm in Sweden, via Moscow, while its long-haul budget arm Scoot will start flying to Athens, Greece, in June. There will also be more flights to 12 destinations in the Asia-Pacific, Changi Airport Group told The Straits Times. In all, 12,000 weekly one-way seats from Singapore will be added progressively, with about two- thirds of the growth on Asian routes.
The Phnom Penh Post Vietnamese state-owned dairy giant Vinamilk intends to spend almost US$11 million to buy its Cambodian partner’s entire stake in Angkor Dairy Products Co Ltd, better known as Angkormilk, according to Vietnamese media. The deal - which would increase Vinamilk’s investment capital in Angkormilk from US$10.2 million to US$21 million by purchasing BPC’s 49 percent stake was officially agreed upon by the two companies and signed off by Vietnam’s Ministry of Planning and Investment last Thursday, according to state-owned Vietnam News.
China’s great firewall is yet another trade barrier
T
he San Francisco-based photosharing site Pinterest would seem to rank low on the list of potential threats to China. Beloved by fashion designers, photographers, cooks and hobbyists, the seven-year-old website is a global hub for the sharing of images, trends and ideas on topics ranging from living-room design to what to cook at your Saturday barbecue. Unfortunately, Pinterest Inc.’s innocuousness couldn’t save it from the same fate as other foreign internet companies in China, including Facebook Inc. and Alphabet Inc. (formerly known as Google). Earlier this month, the Chinese government blocked Chinese internet users from accessing the site. And that should make Pinterest of interest to the Trump administration, as well as China. Pinterest’s troubles aren’t unique. Last year, China excluded thousands of U.S. websites from China, including eight of the 25 most-trafficked global sites. Yet, so far at least, there’s been hardly a word of protest out of Washington against these systematic denials of market access. Similar restrictions against U.S. automakers, say, would almost certainly have prompted complaints to the World Trade Organization. The costs imposed by this policy are adding up. In 2015, the global value of international data flows came to US$2.8 trillion, exceeding the global flow of merchandise for the first time. The U.S. economy has benefited more than most from that trade. In 2014, the U.S. exported nearly US$400 billion in digital services, accounting for more than half of all U.S. services exports and generating a US$159 billion trade surplus in the sector. Though it’s impossible to calculate what Facebook, Google and Twitter Inc. might’ve earned in China’s booming internet sector had they been allowed to compete, there’s little question that they would have added measurably to that surplus. For example, the New York Times Co., a tiny digital business compared to Facebook, claims to have lost at least US$3 million due to the blocking of its website in 2012. The Chinese government is doubtless aware of the opportunities that online protectionism creates for domestic companies. In June 2009, China blocked Twitter; two months later, Sina Corp. launched a wildly successful knock-off microblog, Weibo, that has thrived for years in the absence of foreign competition. Likewise, when Google announced in May 2010 that it was contemplating the total shutdown of its Chinese offices, the stock of Baidu Inc. -- its leading Chinese competitor and a keen observer and imitator of Google’s business -- rallied
“
Adam Minter a Bloomberg View columnist
16.6 per cent in a single day, while smaller rivals enjoyed similar bumps. Meanwhile, local Chinese versions of Pinterest have flooded China’s market since 2012 with middling success. If the recent ban holds, at least one of those companies may enjoy a highly lucrative opportunity to become “China’s Pinterest.” Pinterest’s options, on the other hand, are limited. The Chinese government is notoriously opaque about why it blocks sites, and there are no formal procedures for appeal. (Mark Zuckerberg’s years-long lobbying effort to push Facebook back into China might qualify as the informal process.) That’s not just unfair. It’s also a likely violation of China’s treaty obligations under the World Trade Organization, which requires transparency, due process and non-discrimination in government decisions affecting companies. The idea of dragging China before the WTO to argue that Great Firewall represents a trade barrier isn’t a new idea. The European Union has contemplated such an approach since at least the late 2000s. And late last year, in a move that could lay the groundwork for a case, the Obama administration argued that China’s worsening censorship posed a “significant burden” on foreign internet service providers. The next step, though -- a formal complaint and case before the WTO -- is up to the Trump Administration. Such a case wouldn’t be a slam dunk. China has long cited WTO clauses that give countries room to impose measures to protect public morality and order. Even if it lost the WTO case, the Chinese government would be highly unlikely to abide by the decision in full. But the WTO recently ruled against a Chinese attempt to invoke public morality as an excuse to restrict the import and distribution of American books, magazines, films and other published material. And any Chinese attempt to ignore WTO rulings would undermine its recent posturing as a champion of free trade. A negotiated settlement -- perhaps integrated into a long-delayed U.S.China investment treaty -- that opens China to U.S. internet companies while acknowledging China’s right to censor selectively (not wholesale) for morality and public order, might be the best outcome for all sides. Bloomberg View
The Chinese government is doubtless aware of the opportunities that online protectionism creates for domestic companies
”
16 Business Daily Tuesday, March 28 2017
Closing Innovation
More high-tech zones in China
The number of national high-tech industrial zones in China has increased to 156, with operating revenue hitting RMB27.9 trillion (US$4 trillion) in 2016. The high-tech zones accounted for 11.7 per cent of China’s GDP in 2016 and made up for 18 per cent of China’s total exports, according to Zhang Zhihong, director of Torch High Technology Industry Development Centre, Ministry of Science & Technology. “The high-tech zones have become
a major engine to China’s economic growth,” Zhang said. “Nearly 4,300 spaces provided services for more than 120,000 enterprises in 2016, attracting investment of RMB5.5 billion.” Zhang said that high-tech zones should pay more attention to strategic emerging industries as well as scientific and technical industries, adding that enterprises, research institutes, universities and innovators would also be encouraged to collaborate on independent innovation. Xinhua
Taxes
Oxfam exposes tax haven habits of EU big banks Europe’s 20 biggest banks posted more profits in the small EU duchy of Luxembourg than they did in the UK, Sweden and Germany combined The twenty biggest banks in the eurozone booked over a quarter of their 2015 profits in tax havens, with Luxembourg and Ireland the favourite destinations, a report by Oxfam said yesterday. The findings come as the tax affairs of major multinationals are under the microscope after revelations in the LuxLeaks and Panama Papers scandals showed the methods used by big companies to avoid paying tax.
taxes or help their clients dodge taxes,” she said. The report said that tax havens account for 26 per cent of the profits made by the 20 biggest banks in Europe, adding up to an estimated 25 billion euros (US$27 billion). By example, Barclays, Europe’s fifth biggest bank in 2015, booked profits of 557 million euros in Luxembourg and
paid only one million euros in taxes, an effective tax rate of 0.2 per cent. The report also uncovered that European banks posted 628 million euros in profit in tax havens where they employed zero staff. In the Cayman Islands for example, France’s BNP Paribas booked 134 million euros in profit tax free without a single employee present. Other banks reported profits in tax havens while reporting losses elsewhere. In 2015, Deutsche Bank registered no or low profits in several major markets, while booking almost 2
billion euros of profits in tax havens. Oxfam uncovered the data using new EU legislation that requires banks to report their profit on a country by country basis. The law is intended to stop big banks from artificially shifting their profits to low tax wealth centres with very low, or zero, corporate tax rates. “These rules must now be extended to ensure all large corporations provide financial reports for every country where they operate,” Aubry said. “This will make it easier for all countries – including the poorest – to establish if companies are paying their fair share of tax or not,” she said. Luxembourg and Ireland were the most favoured tax havens. Europe’s 20 biggest banks posted more profits in the small EU duchy of Luxembourg than they did in the UK, Sweden and Germany combined. AFP
“New EU transparency rules give us a glimpse into the tax affairs of Europe’s biggest banks and it’s not a pretty sight” Manon Aubry, a tax specialist at Oxfam
“New EU transparency rules give us a glimpse into the tax affairs of Europe’s biggest banks and it’s not a pretty sight,” said Manon Aubry, a tax specialist at Oxfam. “Governments must change the rules to prevent banks and other big businesses using tax havens to dodge
Pharma
Markets
PBOC
Chinese drug approval boosts HKEx CEO says MSCI consultation Beijing will improve ‘policy framework’ AstraZeneca’s lung cancer hopes may lead to index deal for cross-border yuan use AstraZeneca has won approval for its lung cancer pill Tagrisso in China, a key market for the potential blockbuster medicine. Tagrisso is designed to help cancer patients with certain genetic mutations that are very common in China and the regulatory green light boosts the British drugmaker’s prospects in a key therapy area. Lung cancer is a vital component of AstraZeneca’s ambitious sales targets, set in 2014 in response to a takeover attempt by Pfizer, with Tagrisso forecast to contribute US$3 billion. At the time, many analysts viewed the Tagrisso goal as unrealistic. Yet consensus forecasts have now risen to US$2.8 billion for 2022, according to Thomson Reuters data, helped by its strong launch and the failure of some rival products. Tagrisso sales last year totalled US$423 million. China is potentially the biggest market for the drug because 30 to 40 per cent of Asian patients with nonsmall cell lung cancer have epidermal growth factor receptor mutated tumours that are receptive to Tagrisso, a far higher rate than in the West. AstraZeneca’s head of drug development, Sean Bohen, said in a statement yesterday announcing the drug’s approval that China represented a “significant opportunity”. Reuters
Hong Kong Stock Exchange CEO Charles Li said a new consultation process initiated by global index provider MSCI suggested a compromise or interim solution to a lengthy wrangle to get Mainland China shares included in its emerging markets index could be found. “You don’t really want to do that unless you’ve decided there is a greater likelihood of some kind of action,” Li said yesterday at the annual Credit Suisse Asian Investment Conference in Hong Kong. While MSCI did not include Mainland shares in its widely tracked emerging markets index for the third year running in 2016, market watchers are slightly more optimistic about a favourable outcome this year. Li said he would consult market participants on whether or not to launch weighted voting rights which offer voting characteristics tailored to different classes of shares. Li noted the Hong Kong exchange was years away from implementing a Mainland-style “identity trading” system, in which the beneficial owner of shares traded on the exchange has to be known to or identifiable by the exchange, unlike the current system where investors can remain anonymous via nominee accounts held for them by others. Reuters
China’s central bank said yesterday that it will improve the “policy framework and infrastructure” for cross-border use of the yuan and boost the Chinese currency’s role in investment and reserves. The People’s Bank of China (PBOC) reaffirmed that it will improve the yuan regime and steadily push forward with the yuan’s convertibility on the capital account. In improving the policy framework for cross-border use of the yuan, China will pay “equal attention to development, reform and risk prevention”, the PBOC said in a statement posted on its website. The PBOC also said it aims to enhance the role of the yuan in investment, reserves and financial transactions. No details of any new policies were given. Yesterday’s statement quoted Yi Gang, a vice central bank governor, as telling a meeting on cross-border yuan business that China’s steady economic growth will be a cushion for the process of making the yuan an international currency. China will steadily achieve its goal on yuan internationalisation, which is a long-term strategy, Yi said. The central bank will guide the development of offshore yuan market, Yi added. Reuters