Local airport operator net profit nearly doubles CAM Page 6
Friday, March 31 2017 Year V Nr. 1266 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Profits
MSAR fuels Paradise Entertainment results Page 8
The latest suspicion, which now falls on the former president of the Cultural Institute, Gulherme Ung Vai Meng, has to be fully clarified. The image of Macau’s public administration has never been good, but 17 years after the handover could well be at its lowest ever. This is because the government insists on not acting, nor advancing with a promise made by the current Secretary for Administration and Justice, Sonia Chan, on the accountability of public office holders. Once again the city was surprised by a exit scene of a senior official for personal reasons, just to find out that he and the institute he had led had been in the center of an investigation for allegedly bad practices instated by the Commission Against Corruption since the middle of last year. An investigation that Ng Vai Meng was aware of, as confirmed this week by his superior, Alexis Tam. Over the years, countless cases have happened without the public knowing what really happened. The lack of consequence means that, in government and public administration, the idea that irresponsible and other attitudes possibly more damaging can always be clear, encourage those bad practices and behaviors. At most, those responsible leave the posts and in several other cases are placed on golden shelves, keeping full benefits and salaries. It is imperative that investigations are always carried out, even for the defense of the honor and good personal name of the persons concerned, so that they are not forever connoted with the odious suspicion of the practice of illicit acts that nobody bothered to clarify. Suspects must be cleared if they are innocent. But all legal mechanisms that the administration has at its disposal must be activated if the opposite is true. What can not continue to exist is this eternal entrance and exit by the conveniences of a system of silences and alleged webs of connection between various levels of administration. Where a head falls, as if we were before any mythological figure like that of Lerna’s Hydra, keep watch in case the others remain alive and possibly multiply again.
Right of Assembly
New Macau Association officially complains about interrupted meeting Page 5
Utilities
Macao Water Supply Company records profits fall Page 6
Results
Jimei revenue improves but still in red Page 9
Challenging Greater Bay Area
MIECF
Experts debate these days the challenges and opportunities the territory is facing. During the opening day of the Macao International Environmental Co-operation Forum & Exhibition they analysed key topics, sustainability and tourism expansion in the Pearl River Delta. Pages 10 & 11
Asian winds shift
Package tours last month decreased a 1.5 per cent year-on-year. Official data indicated that the number of visitors from non-China locations grew substantially. However, fewer groups arrived from the Mainland and Taiwan.
Land Law unaltered
AL Legislative Assembly yesterday rejected idea of changing Land legislation after Pearl Horizon case. Lawmakers empathised with affected buyers and did not rule out a change of direction if needed. Page 2
Xi and Trump close meeting date China-U.S. China’s foreign ministry confirmed that President Xi Jinping will meet with Donald Trump in Florida next week. Xi was invited by Trump to take part in meetings at his Florida club, Mar-a-Lago, on April 6 and April 7. Page 12
Tourism Page 4
HK Hang Seng Index March 30, 2017
24,325.78 -66.27 (-0.27%) Worst Performers
China Mengniu Dairy Co Ltd
+5.26%
AAC Technologies Holdings
+0.65%
China Overseas Land &
-1.77%
Kunlun Energy Co Ltd
-1.27%
China Merchants Port Hold-
+2.47%
Hang Seng Bank Ltd
+0.63%
China Resources Land Ltd
-1.62%
China Construction Bank
-1.09%
Galaxy Entertainment Group
+1.05%
Sun Hung Kai Properties Ltd
+0.61%
China Shenhua Energy Co
-1.51%
China Mobile Ltd
-1.04%
MTR Corp Ltd
+0.92%
Sands China Ltd
+0.55%
Lenovo Group Ltd
-1.36%
Bank of China Ltd
Wharf Holdings Ltd/The
+0.67%
PetroChina Co Ltd
+0.35%
Hengan International Group
-1.34%
Want Want China Holdings
-1.02% -0.94%
16° 22° 17° 22° 18° 21° 18° 21° 19° 22° Today
Source: Bloomberg
Best Performers
Sat
Sun
I SSN 2226-8294
Mon
TUE
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Change the system, now
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2 Business Daily Friday, March 31 2017
Macau Tax
Gov’t to refund MOP683 mln income tax from 2015
The Financial Services Bureau (DSF) announced the Occupational Tax Refund Scheme for 2015 will start today until April, via which a total of MOP683 million (US$85.3 million) will be returned to some 144,200 income taxpayers of the MSAR. The amount of tax refund represents an increase
of 9.9 per cent from one year ago. According to the official information, some 20.9 per cent of the taxpayers eligible for the tax refund were civil servants, which amounted to some 30,000. The tax refund amounts to 60 per cent of income taxpayers’ 2015 contribution to a ceiling of MOP12,000. Some 18,300 taxpayers reached this ceiling for 2015, according to DSF. C.U.
Pearl Horizon
Sonia Chan: gov’t currently has no intention to revise the Land Law Nevertheless the Secretary for Administration and Justice said the gov’t might not rule out adjusting the direction of the Land Law if the recording of the 2013 committee meetings disclosed a new understanding of the intention for revising the law Cecilia U cecilia.u@macaubusinessdaily.com
T
he Secretary for Administration and Justice, Sonia Chan Hoi Fan, stressed during yesterday’s plenary session at the Legislative Assembly (AL) that currently the government has no intention to revise the Land Law. “I would like to reiterate that [the government] will guarantee the benefits of the [Pearl Horizon] buyers in the biggest possible scale” said the Secretary. Secretary Chan also noted that a cross-department work force has been setup and been working on the matter in the past two years.
The head of the legislative body further revealed that the AL would review, by the end of March, the recordings of the 2013 committee meetings where the Land Law was discussed, in order to analyse if any promises were made by the government - stating that a solution would be found for land concessions made before the current law was enforced in March of 2014. Pan-democratic legislator Ng Kuok Cheong pointed out that the government would have to resume the original construction if the government wins over the lawsuit in accordance to the Land Law; on top of that, the government determines to assist the buyers. Meanwhile, lawmaker Leonel
Alberto Alves opined that the revised Land Law is problematic, saying that “the issue is whether to resolve it or not”. The majority of lawmakers expressed compassion for the affected buyers of the incomplete Pearl Horizon residential project and questioned the government to roll out concrete measures for involved parties to prepare for either possible verdict. Lawmaker Alves commented that the common consensus among the entire society is to resolve the Pearl Horizon case. In the oral enquiry made by legislator Mak Soi Kun, he questioned the government whether measures can be introduced for the current situation, noting that the majority of buyers are experiencing emotional instability which results in unfavourable impact. A group of Pearl Horizon buyers attended yesterday’s session and made a round of applause to legislators’ comments. Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, suggested possible assistance to affected
buyers such as counselling services, but added that no request from the Pearl Horizon buyers has been received for the time being. Liu Dexue, the director of Legal Affairs Bureau, replied that solutions over the matter can only be drafted after the verdict is out, adding that the government is having close contacts with affected buyers. The Secretary for Transport and Public Works, Raimundo Arrais do Rosário was absent during yesterday’s session. Pearl Horizon, located on a site known as lot-P of the Areia Preta zone on the Macau peninsula, is designed to house 18 towers with a total of 5,000-plus residential units. The MSAR Government announced that the developer’s land grant for the plot was invalid in January 2016, following the developer’s failure to complete the project before its land use term expired in December 2015. According to the government’s previous disclosures, over 3,000 of the Pearl Horizon units have already been sold off-plan.
Business Daily Friday, March 31 2017 3
Macau
4 Business Daily Friday, March 31 2017
Macau Opinion
Pedro Cortés*
Public Service Last November, in this same corner, a columnist wrote the following: “(…) the Macau Basic Law, our mini-constitution which should be a mandatory matter with a strict exam before any admission to the Macau Public Administration is made. Without knowing what is the content and the spirit of our foremost law all the other specific laws cannot be accurately executed by the Public Administration and its servants.” This week, Mr. Wang Zhimin, Director of the Liaison Office of the Central Government in Macau suggested, according to the reports of the newspaper with highest circulation in our Region, during a visit to the Commemorative Gallery of the Basic Law that such law and the Constitution of the People’s Republic of China should be part of the evaluation processes for the admission of public servants to the Macau Administration. It is a great sign from our highest representative and specially a great indication that there might be public servants who do not know the Basic Law and its principles. Without pointing to any special class of public servants, it seems that certain areas of the Administration are totally ignorant of what our mini-Constitution states and what is the principle of a rule of law state, as Macau is. In those areas, disrespecting laws and freedoms seems to be the rule to achieve a certain goal, even if, in the end, we all know that the courts – as also said by the referred columnist – will, with some exceptions of those who may not know the difference between the judicial and executive powers, override those illegal acts. The people of Macau are becoming everyday more aware of their rights and freedoms. Such awareness must be followed by a constant and strong legal education of our public servants. The name “servants”, in itself, means that those persons must serve the people. If those who do not serve the people according to the law cannot understand their ultimate role in the society, then besides having the Basic Law in the admission exams the Government shall consider having regular evaluations to understand whether they are really granting a service (from the Latin, servus) to all the persons of Macau. We would sure have a more harmonic and developed society. *lawyer and frequent contributor to this newspaper.
Tourism
Package tour visitors drop to 558,800 Meanwhile, the number of residents travelling abroad rose in the same month Kam Leong kamleong@macaubusinessdaily.com
T
he MSAR welcomed some 558,800 visitors on package tours in the month of February, a slight decrease of 1.5 percent year-on-year despite surging increases in the number of those from South Korea and Japan. The latest official data of the Statistics and Census Service (DSEC) shows the number of package tour visitors from South Korea registered a notable increase of 54.4 percent year-on-year to 48,900 for the month, while that from India jumped by 19.2 percent year-on-year to 15,000. Nevertheless, visitors on package tours from Mainland China dropped by 5.4 per cent year-on-year to 414,000, while that from Taiwan also went down by 9.3 per cent year-onyear to 35,900. For the first two months of the year, the number of visitors on package tours totalled 1.09 million, representing a decrease of 4 percent year-on-year.
Meanwhile, the number of residents travelling to Hong Kong, Taiwan and Japan went down by 22.2 percent, 20.6 percent and 35 percent year-on-year, amounting to 15,700, 9,800 and 3,300, respectively. Accumulatively, a total of 130,000 outbound travels were recorded for the first two months of the year, which represented an increase of 20.1 percent year-on-year. In particular, those to South Korea and Thailand nearly doubled to 19,400 and 7,200, as compared to the same period of last year.
More hotel guests
On the other hand, the official data shows local hotels and guesthouses received 949,100 guests during the second month of the year, which is an increase of 8.1 percent year-on-year. Average hotel occupancy rate rose 5.7 percentage points to 84.9 per cent. A total of 108 hotels and guesthouses were operating in the territory
during the month, providing a total of 36,000 guest rooms, which is up by 13.2 percent year-on-year. Among all hotel rooms, five-star ones accounted for 60.2 percent of the total, amounting to 22,000, a growth of 7 percent year-on-year. In terms of occupancy, five-star hotels also took the lead in the market, seeing 88 percent of their rooms occupied, an increase of 6.5 percentage points. Meanwhile, the average occupancy rate of three star hotels and four star hotels were 84.5 percent and 80 percent, increasing by 11.7 and 0.3 percentage points year-on-year, respectively. By origins of guests, the majority, 625,000, were from Mainland China, which increased by 10.5 percent year-on-year, while those from South Korea jumped by over half to 35,500 from one year ago. Hotel guests from Hong Kong, however, dropped by 7.7 percent year-on-year to 121,200 whereas those from India fell by 12 percent year-on-year to 4,500. For the first two months of the year, the number of hotel guests totalled 1.99 million, an increase of 11.9 percent year-on-year, while average occupancy rate went up by 5.0 percentage points to 83.2 percent, although average length of stay of guests held stable at 1.4 nights.
Outbound travels up
While the MSAR received fewer package tour visitors, local residents travelling outbound recorded a notable increase. According to the DSEC data, outbound residents using services of travel agencies rose by 9.3 percent year-on-year to 114,000, while those travelling on package tours also increased by 12.1 percent to 48,000. Mainland China was the most popular destination for local residents during the month, of which the number to the country surged 21.7 percent year-on-year to 67,100. But the countries that received highest growth in the number of Macau outbound residents were South Korea and Thailand, which soared by 76.6 per cent and 78.9 percent year-on-year to 9,200 and 3,500, respectively.
Sino-Luso
São Tomé and Príncipe now part of Forum Macao African country São Tomé and Príncipe is now a member of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao), the organization announced on Wednesday. The inclusion of the Portuguese-speaking country to the Sino-Luso body followed the country cutting its diplomatic ties with Taiwan three months ago and reinstating ties with Mainland China. “Forum Macao is now more complete as we now include all Portuguese-speaking countries. I wish São Tomé and Príncipe could benefit from this mechanism,” said the body’s Secretary-General, Xu Yingzhen. She added that the next steps for the island country will be for it to appoint a delegate and decide which Forum Macao activities it would have more interests in participating in. For the whole year of 2016, bilateral trade between São Tomé and Príncipe with Mainland China reached US$6.6 million (MOP52.8 million), according to official data from Forum Macao. Meanwhile, the body’s Secretary-General also announced on Wednesday that the relocation of the headquarters of the US$1 billion (MOP8 billion) Co-operation and
Development Fund to Macau from Beijing will take place within the first half of the year. Aiming to attract investment to Portuguese speaking countries, the fund has financed three projects in Angola, Mozambique and Brazil
since its establishment in 2013, in addition to a possible US$20 million investment from local businessman David Chow Kam Fai in Cape Verde for developing an integrated resort there, of which the plan is pending approval. N.M. with LUSA
Business Daily Friday, March 31 2017 5
Macau Transport
Zhuhai-Wuhan high-speed train to launch on April 16
Tuesday. Meanwhile, the Wuhan Railway Bureau announced that all major train services via Wuhan will be adjusted A new high-speed train service connecting neighbouring Zuhai to Wuhan for higher speeds or added trains and carriages from April. The Bureau is also of Hubei Province will commence April 16 this year, Xinhua agency reported. The planning to launch new long-distance new train service will allow a single trip of railways passing through Wuhan, such as routes linking Shanghai to Southwest five hours and 14 minutes, as compared China’s Chengdu and between Shanghai to 13 hours taken by car. Tickets have already been available for sales since last and Chongqing Municipality.
Politics Association says local authorities are reducing the residents’ civic liberties
Bit by bit
New Macau Association (NMA) filed a complaint to the CCAC claiming to have been the target of suppression of the right of assembly by police authorities Nelson Moura nelson.moura@macaubusinessdaily.com
T
he New Macau Association (NMA) filed a complaint yesterday to the Commission Against Corruption (CCAC) demanding an investigation of the police authorities for suppression of the right of assembly. According to the NMA Vice-President, Jason Teng Hei Chao, the incident that led to the complaint took place on March 24 during an assembly held by the NMA to gather citizens’ views on the group’s political platform for the 2017 Legislative Assembly elections. “A police officer approached the NMA organizers and threatened with criminal prosecution for the use of a loudspeaker system. The officer came from the Taipa police station and was sent by his superiors to deliver the warning, and after a quarrel
that lasted half an hour the event was brought to an end,” Mr. Chao said to the press. According to the NMA Vice-President under the MSAR Basic Law the police can impose restrictions on the time and space of the assembly in question through a written communication previous to the assembly, with the law not allowing restrictions on equipment used. However since the restraint was effected verbally on-site through the threat of criminal prosecution, it deprived the assembly organizers of the right to appeal to restriction requests by the police to the Court of Final Appeal. “The freedom of expression and civil liberties of Macau residents are being eaten bit by bit. Freedom is rarely lost overnight and there’s a lot of subtle methods by authorities to shrink the space of civil liberties. So I’ll use my last hours as the Vice-President of NMA to defend the
freedom of association and expression,” Mr. Chao stated. The activist stated previous complaints filed by the association during the tenure of the previous head of the CCAC, Vasco Fong Man Chong, were considered valid by the department, with Mr. Chao saying he hoped the current person responsible, André Cheong Weng Chon, will have the same decision. “It’s too hard to say for sure, as we’re losing our faith in the independence of the judiciary,” he added.
Powerful deterrent
The complaint was the last action held by the local activist as Vice-President of the NMA, having resigned his position in the association last month to launch a civil platform to monitor
Disposal
Trade
China Star to sells subsidiary for HK$84.8 mln
Back on the grill
China Star Entertainment Limited, operator of the Lan Kwai Fong Hotel, is selling its wholly-owned subsidiary Ace Season Holdings Limited to China Healthwise Holdings Limited, according to a filing of the company with the Hong Kong Stock Exchange on Wednesday evening. Net proceeds for the deal will amount to HK$84.8 million (US$10.6 million), while the company also expects to record a gain of some HK$1.6 million for the disposal, the filing noted.
‘The company considers that the disposal represents an opportunity for the group to realize its investments in [Ace Season]. It is noted that [Ace Season] has recorded losses for the last two financial years and the company considers that it is in the interests of the group to focus its resources in the other principal businesses such as property development,’ the firm wrote. China Star added that it plans to use the net proceeds as its general working capital. K.L.
IACM will allow Brazilian meat imports to the MSAR from suppliers currently not under investigation Import requests from Brazilian meat suppliers not under investigation by the country’s authorities will be allowed to the MSAR, according to the Civic and Municipal Affairs Bureau (IACM). The department will continue to block meat imports from 21
this year’s MSAR elections. When asked on the recent purchase by the local government of anti-rioting equipment the activist questioned its utility on the territory. “I don’t think large scale riots will occur in Macau. I think the purpose is as a deterrent for residents to join protests as it generates an expectation of violence (…) I can’t say there will be an increase in incidents before the elections, but we should stand against all attempts against civil liberties,” he added. Business Daily asked the Public Security Police Force (PSP) about the incident mentioned by NMA, but although the department is said to be preparing a statement, nothing was received when this newspaper went to print.
companies currently under investigation by Brazil’s sanitary authorities. Last week a full ban on Brazilian meat imports was enforced by the MSAR and several countries worldwide after some Brazilian suppliers were found to be selling tainted meat products, bribing food hygiene inspectors to overlook the infractions. N.M.
6 Business Daily Friday, March 31 2017
Macau Utility
Macao Water’s annual profits fall
T
he city’s sole water distributor Macao Water Supply Company Ltd saw its after-tax profit decrease by 5 percent year-on-year to MOP64.66 million (US$8.1 million) for 2016, according to a company press release yesterday. The company said some 81 percent of its profits for the year were
generated from its water supplying business, which reached MOP52.4 million. Total investment of the firm in the year dropped by 26.5 percent to MOP65.43 million, as compared to MOP89 million one year ago. Investment in the year included the laying and the replacement of the water supply pipeline network.
Annual water consumption was 86.7 million cubic meters, a slight increase of 2.1 percent as compared with 2015. The average daily water consumption, meanwhile, was 237,000 cubic meters. Of total water consumption, commercial and industrial water use accounted for 50.9 percent, while residential water use represented
42.7 percent and government and municipal water use was 6.4 percent. The company added that it will start the construction of its Seac Pai Van water treatment plant in the third quarter of the year, expecting the infrastructure will be operational in 2019. According to the firm, the new treatment plant in Coloane is expected to increase the city’s water supply to 520,000 cubic metres per day from the current 390,000 cubic metres. K.L.
Gaming
Chow Tai Fook denies links to crime groups Chow Tai Fook Enterprises (CTFE) has again denied accusations of its alleged connections with international crime associations due to its owners’ connection to local gaming operator Sociedade
de Jogos de Macau, S.A. (SJM), Bahamas newspaper Tribune 242 reported. An open letter from a Bahamas group to the country’s Gaming Board warned the authorities for alleged
‘documented associations with international crime’ involving the group’s owners and the Macau gaming company. Graeme Davis, the President of Chow Tai Fook Enterprises Limited - a subsidiary
of CTFE - considered the accusations were ‘baseless’ and ‘untrue’ as the group does not have ‘any oversight, control, direct or indirect influence’ in SJM. Earlier this week, Chow Tai Fook completed its US$3.5 billion purchase agreement of casino-resort complex Baha Mar Resort, while Sky Warrior Bahamas Ltd - a subsidiary of the group – is currently waiting for the approval for a casino license from the country’s gaming authorities, of which the process was described by the company’s president as “rigorous”.
This is not the first time that the Hong Kong-based conglomerate was alleged to have links with untoward activities. Last November, a Bahamas politician requested the government to carry out an investigation on the purchase deal given by the business relations between the company’s chairman, Henry Cheng Kar Shun, and Macau magnate Stanley Ho Hung Sun - founder of Sociedade de Turismo e Diversões de Macau (STDM) which owns SJM. The complaint claimed U.S. authorities’ investigations showed the gaming businessman had ties to Chinese criminal associations. N.M.
Aviation
CAM’s net profit doubles Airport operator Macau International Airport Company Ltd (CAM) saw its net profit nearly double to MOP302 million for the year of 2016 from MOP153 million one year ago, shows a company press release published yesterday. According to the announcement, CAM raked in MOP1.33 billion
(US$166.3 million) of income for the year, an increase of 8.9 per cent yearon-year. Meanwhile, total operation income of the Macau International Airport totalled some MOP4.51 billion for the whole year, which grew by 2.7 per cent year-on-year. According to the press release, the company aims to increase its total
flight movement by 8 per cent to 60,500 movements for the year as compared to 2016, in addition to boosting total passenger traffic by 3.8 per cent year-on-year to 6.85 million. Saying the airport’s north extension project is expected to be completed and be operational during the second half of this year, the company expects the project will increase capacity to around 7.5 to 7.8 million passengers upon completion.
It added the company would commence its third phase of repayment to its shareholders this year. K.L.
Telecommunications
Mobile service users slightly up The number of mobile service users has slightly increased to 1,949,556 in February 2017 from the 1,943,965 users registered in January, according to the latest statistics on major telecommunication services released by the Bureau of Telecommunications and Postal Services (CTT). The largest share of mobile service users came from 3G pre-paid users, totalling 649,314 customers, a decrease from a month earlier at 685,516 users. New LTE prepaid users totalled 40,589, with the segment reaching 604,643 users in February, up from January, when the total number of LTE prepaid users was at 564,054. Internet services remained stable, totalling 179,818 subscribers to ADSL and Fibre Broadband services, against 179,097 a month earlier.
Akin to Internet services, WiFi hotspots remained steady, with only 22 new commercial hotspots opened, reaching a total of 2,682 in February, The number of WiFi GO hotspots, which are provided by the Macau SAR Government free of charge, remained unchanged at 201. In terms of communications’ usage, CTT has recorded 5.36 million SMS messages – from both pre-paid and postpaid card phones – during the whole month of February, slightly on the hike from the previous month, with 4.90 million messages in total. According to CTT, there were 137,353 fixed line telephone services operating in January 2017, of which 78,977 were residential lines and 53,376 were commercial lines. S.Z.
Business Daily Friday, March 31 2017 7
Macau
8 Business Daily Friday, March 31 2017
Macau
Gaming
Living in Paradise Paradise Entertainment Limited’s revenue on the rise mainly due to selling of electronic gaming machines and system to Macau flagship casinos Sheyla Zandonai sheyla.zandonai@macaubusiness.com
P
aradise Entertainment Limited, a provider of gaming machines and casino management services, posted an increase in revenue and profits for the year ended 31 December 2016, mainly due to the sales of electronic gaming systems to the Macau market. According to the annual results of the company with the Hong Kong Stock Exchange, gross profits hit HK$453.75 million (US$58.38 million), up from HK$412.85 million in 2015, while revenue hit HK$ 1.16 billion, representing a 6.5 per cent increase from the HK$1.09 billion generated a year earlier.
The company noted that the rise was mainly attributable to the ‘strong demand for electronic gaming equipment and systems in the Macau market.’ Following the breakdown of the contribution of revenue by segment, the sale of electronic gaming equipment and systems – mainly Live Multi Game (LMG) terminals – posted the highest increase, hitting HK$185.73 million from the HK$53.15 generated in 2015. Revenue from leasing of electronic gaming equipment and systems was also up, hitting HK$151.22 against HK$147.86 million a year earlier, while the provision of casino management services was down 7.3 per cent to HK$826.39 million from HK$891.06 million in 2015.
Online
China enhances crackdown on cross-border online gaming In the latest addition to the crackdown in the Mainland, Public Security Minister, Guo Shengkun, announced that the central government will crackdown on efforts to entice Mainland citizens to gamble on online casinos as well as abroad, according to a report by Xinhua, cited by the South China Morning Post. The announcement comes as Macau wrapped up the iGaming Asia Congress yesterday, an event that hosts online casino, lottery, social and mobile gaming executives from around the globe. “We must seriously investigate and severely punish those companies and individuals involved in enticing and organising Chinese tourists to gamble
in overseas casinos,” the publication quoted Guo as saying. The report also notes that the official conducted a meeting with top police representatives in the country to increase oversight and stop cross-border online betting. “We must severely punish those casino-related illegal labour agents and crack down on activities for investing in overseas casinos,” stated the official. Guo additionally pointed out it would focus on rooting out “underground banks” which aid in the cross-border betting process. The statements come in advance of a Communist Party Congress to be held this autumn.
Focused on mass market, the company noted that ‘the decrease in revenue from the casino service segment in 2016 was mainly due to the lower same-day visitations to Macro and macro headwind in China.’ Overall, revenue generated by the provision of casino management service represented 71 per cent of Paradise’s total revenue, down 10.6 per cent from a year earlier.
Macau segment
By geographical area, Macau remained the company’s main market, with income generated by sales and provisions of service to local casinos reaching a total of HK$1.14 billion for the whole year of 2016, slightly up from 2015, when Paradise had collected HK$1.08 billion in revenue. The company reported that its ‘revenue and earnings showed gradual improvement in tandem with the Macau gaming market.’ The group’s revenue from the provision of casino management
services for the whole year of 2016 consisted of service income received from Casino Kam Pek Paradise and Casino Waldo – the company’s two major casino operations – as well as Casino Macau Jockey Club for mass gaming tables, LMG terminals and slot machines. Paradise reported it deployed a total of 991 LMG terminals to six casinos in Macau (893) and the overseas market (98) for the whole year of 2016, ‘a record high of LMG terminal deployment due to the strong demand from the Macau flagship casinos opening,’ according to the company. The six casinos which acquired LMG terminals from Paradise are Wynn Palace, The Parisian Macau, Galaxy Macau, Casino Diamond at Holiday Inn, Casino Babylon at the Macau Fisherman’s Wharf, and Casino StarWorld. Paradise was founded on January 1, 1997 and is headquartered in Hong Kong. In addition to casino management services and the provision of electronic gaming machines, the company is also involved in the market and software development businesses through its subsidiaries.
Business Daily Friday, March 31 2017 9
Macau Results
Jimei’s gaming revenue increases in 2016 Increased earning from its entertainment and gaming sector did not, however, stop the company from dropping into the red Kam Leong kamleong@macaubusinessdaily.com
Local junket investor Jimei International Entertainment Group Ltd posted a net loss of HK$42.6 million (US$5.3 million) for the year of 2016 as compared to a profit of HK$6.2 million one year ago, but its total revenue derived from entertainment and gaming business registered a year-on-year increase. According to the company’s filing with the Hong Kong Stock Exchange on Wednesday evening, its revenue from entertainment and gaming business totalled HK$193.1 million for the year, which grew by nearly 8 per cent year-on-year from HK$178.8 million one year ago. The company explained in the filing that the net loss for the year was due to the impairment loss on trade and other receivables, which amounted to HK$100.9 million. Total revenue of the group amounted to HK$195.6 million, which is similar to that of HK$194.9 million for 2015, as the part derived from its trading of chemical products, energy conservation and environmental protection products slumped by 85 percent year-onyear to HK$2.4 million. Meanwhile, the company noted in the filing that its junket cooperation with Cambodian casino operator NagaCorp Ltd for its casino-resort NagaWorld in Phnom Penh ended in January. Operating Jimei Casino in the Peninsula and a VIP club in City of Dreams in Cotai, the VIP promoter also has junket agreements with The Star and Crow Perth in Australia. ‘The Group shall continue to explore the possibility of further
extending its business into the gaming and entertainment market to further broaden its income sources,’ the company wrote in the filing. The junket group also ran Fontana Casino and Fort Ilocandia Hotel and Casino in the Philippines until
the country’s casino regulator, the Philippine Amusement and Gaming Corp (Pagcor), ordered the closure of the casino operations last year after its president Rodrigo Dutarte issued an arrest order against Jimei’s founder Jack Lam. The country’s authorities accused the local businessman of economic sabotage and bribing its immigration officials after over 1,300 illegal workers were discovered in a raid in Fort Llocandia.
The official website of Jimei Group yesterday stated it still operates the Fontana Hot Spring Leisure Parks – the hotel property housing the Fontana Casino located at Clark Freeport Zone, in addition to Fort Ilocandia. Last December, Jimei Group said in a filing that the incident involving Mr. Lam was his “own personal matter,” adding it ‘in no way materially affects or involves the Company and its subsidiaries’.
Gaming
MGM’s new Vegas-style casino on its way MGM Springfield has marked a ‘milestone’ this week in the construction of its US$1 billion casino resort in western Massachusetts (U.S.), with construction workers on the site raising ‘the final steel beam atop what will become the hotel rotunda,’ the Miami Herald reported. The same media outlet quoted the company as saying that the casino, which is slated to open in September 2018, would become the ‘state’s first Vegas-style gambling destination.’
MGM Springfield is also the first casino in western Massachusetts. Its construction was planned to start nearly two and half years ago, but was delayed due to controversial redesign and downsizing, WAMC reported. Springfield Mayor Domenic Sarno, was present at the ceremony, and said that the casino stands as a symbol of economic recovery after much of the city’s South End was devastated by a tornado in 2011. S.Z.
10 Business Daily Friday, March 31 2017
Macau
PRD
Building the Greater Bay Area The MSAR’s recently granted territorial waters can build off the surrounding islands and offerings to create a sustainable, multi-interest tourism offering for tourists and locals alike, but must face down logistical challenges first, point out experts Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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uilding up sustainable coastal tourism in the Pearl River Delta and the Greater Bay Area can be kick-started by the expansion of the yachting industry, points out Dr. Ieong Ho Tong, Chairman of the Macau Economic Development Promotion Association. The comments came at the opening day of this year’s Macao International Environmental Co-operation Forum & Exhibition (MIECF). Dr. Ieong’s comments came in
response to Business Daily enquiries about the outlying islands off the coast of Zhuhai, in particular Dong’ao Island, which houses a resort of international hospitality group Club Med. Both Professor Ieong and the General Manager of the Club Med property in Dong-ao (as well as for the group’s Hong Kong and Macau operations) Sebastien Portes, commented on the possibilities of expansion for the MSAR’s tourism operations to include the neighbouring island, noting that both the private sector and the government will need to collaborate for a solution. “The border control is a government
operation,” points out Dr. Ieong additionally noting: “Customs and quarantine, also waterway controls and management,” noting that the collaborative aspect comes in on practical areas. “The liners and ferries and the management of those, and facilitating business and maintenance – that could be managed by cooperation in the private sectors - and the increase in visitation and tourism is definitely a tendency in the future,” he notes. In the initial stages, however, yachting could begin to pave the way. “I think in Macau we could encourage at the preliminary stage the yachting leisure activities so as to be able to drive some of the facilitating business with yachting leisure activities,” notes Ieong, pointing out that the middle-income market could then be expanded. Mr. Portes points out that for the group’s operations already it’s started taking steps to drive visitation. “As a hotel operator we have a charter ferry. It’s a private investment but we can’t do anything without simplified immigration,” notes Portes, pointing that driving tourism to the “stunning location” also relies on “preserving this environment and participating in the improvement of the sustainable dimensions of the hotel and the whole island.”
Sustainability drives growth
This sustainability is something that is essential for the continued operations of the hospitality sector, points out Portes. “Even without any governmental constraints we have a very obvious challenge – we won’t have any more clients in five to 10 years time if we don’t comply to the standards, commit to protecting and developing our host regions,” states Portes, noting that once clients learn about a hospitality brand’s environmental, particularly millennials, they “are now choosing their destination taking into consideration the sustainability strategy and standards of the hotel they’re staying in”. Andrew Jones, Chairman of the Pacific Asia Travel Association (PATA), notes that clients are, and will continue to be the driving force behind sustainable action, not only for individual clients.
“More and more we see that the corporations who are booking rooms and for the MICE (meetings, incentives, conventions and exhibitions) events are actually going to the hotels to the organizers and asking them what is their sustainability policy. These are things that are coming into the corporate world from the client point of view,” notes Jones. “Nothing happens in isolation,” he opines, giving as example the fact that even guests eating in the resorts are concerned with the food chain, and plastics use.
Zhuhai
Developing cross-border solutions is key to the Greater Bay Area concept, suggests Dr. Ieong, even pointing out a possibility of creating a universal payment card, such as the Octopus Card mixed with Macau Pass – or contactless payment solutions such as Alipay, yet noting that building visibility could be a start at increasing length of stay. “We can explore restaurants and bars and boutique shops along the coastal areas between Zhuhai and Macau. They could be developed into a comprehensive project and new projects can be done in such a way, especially in the evenings to cater to more tourists to spend the night in Macau and for those Mainland visitors if they cannot come to Macau at their convenience they can also enjoy more tourist activities on the Zhuhai bank,” notes Ieong. This is backed up by research by PATA, points out Jones. “Some of the research PATA has done is taking tourists from central locations and moving them to others nearby, working in cooperation to extend their experience - particularly with millennials - they’ll initially go to one place and then see what else is around,” points out the chairman. However, everything needs to be done in moderation, notes the Chairman. “It’s about master planning – although the private sector is about driving development and creating tourism opportunities and destinations, we also have to work with the government to make sure we have that in balance,” notes Jones.
The Chief Executive, Mr Chui Sai On, delivers a speech at the opening ceremony of the 2017 Macao International Environmental Co-operation Forum & Exhibition (2017 MIECF). GCS
Business Daily Friday, March 31 2017 11
Macau
Manufacturing
Inspiring sustainable practices in manufacturing Utilising sustainable practices and promoting a sustainable business model is the way of the future, say experts Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
One of the ways forward in encouraging manufacturers to engage in sustainable and environmentally-friendly practices could be the issuance of ‘collective green bonds’, according to Chairman and CEO of Carbon Partners Asiatica, Mr. Junji Hatano, speaking at the Macao International Environmental Co-operation Forum & Exhibition, which commenced yesterday. “Green bonds are relatively straightforward – they are issued with explicit commitment that the funds raised by the green bonds – the proceeds – will be used for green activities,” points out Hatano, noting that there are two sides to the bonds issuance, given the scale of the companies involved. “The reason I said green ‘collective’ is that green bonds normally are issued by large multinational banks – like World Bank, Asia Development Bank – and the minimum usually is 100 million - now of course you can’t issue 100 million (green) bonds,” notes Hatano, stating that it “makes it too large
for many of the companies”, given that the start-up innovative companies are largely the ones driving the growth in the area. The solution: ‘collective green bonds’. “Instead of one company issuing a green bond of 1 million and using it for say solar panel installation,” points out Hatano, “if 100 companies get together and issue a green bond of 10 million,” then collective green bonds issued by small companies will get global attention”. One of the main selling points for this is the worldwide attention it will garner, notes the CEO. “It will make it easier for your customer to explain to their customer how they are about selecting good suppliers,” notes Hatano – pointing out that even a newspaper clipping can help, given that “the green bonds will have the rarity value and attract attention and raise your companies’ image”.
More than money
Aside from methods for companies raising money to implement green practices, taking advantage of technology to drive innovation,
and staying agile are key, points out Billy Wu, Lecturer of Dyson School of Design Engineering at the Imperial College in London. “You need agility when you manufacture, traditional manufacturing is quite rigid – each time you change it, it costs money,” pointes out Wu. “We need technologies which allow you to iterate quickly in the design process to help this be successful in large companies. The world is changing, and very quickly, if we’re not agile in responding we’ll fail,” points out Wu, noting that there’s a “valley of death” between start-ups and mass production of prototypes. “There are many start-ups that are emerging with fantastic ideas – they can manufacture one prototype – but the barrier to success is that they have to mass produce these items – there’s a ‘valley of death’ which we call batch production,” notes Wu. “We need manufacturing techniques that will move with us – digital that will tell us what to do and manufacturing that will [be flexible enough to adapt],” notes Wu. “We’ve gone through the stage of driving costs down […] As we develop as a society we demand higher and higher performance items and we are quite wasteful as a people. Looking from sustainability perspective, this can’t continue,” he notes, pointing out that technology such as 3D printing is transforming the industry.
“Warehouses which were traditionally full can shrink that down – this has an economic impact: your raw material should be sourced from local producers,” he points out noting the added gain of reducing transportation fees and fossil fuel use. The road leads to what Wu calls “Industry 4.0”. This is “being smarter about what we do – how we manage inputs and outputs,” explains Wu, stating: “there’s a myth that manufacturing requires space and lots of people – traditionally it did, but with digital manufacturing – we’re not just taking a piece of metal and hitting it – we’re doing smart things with it”. This can be in any sector from steel production to agriculture, points out Vasco Pimenta, founder and CEO of aerospace company Spin.works. The group is currently applying “satellite and drone footage [to agriculture], and transforming this data into actual information for people who are producing food,” points out the founder, noting that “this has tremendous implications in terms of being able to improve the ability to manage water to produce food […] the emissions that you can avoid by managing inputs better” and providing localized information for producers, cutting costs, increasing yields, and adding value. MIECF continues until April 1.
12 Business Daily Friday, March 31 2017
Greater China Official meeting
President Xi to meet Trump in Florida next week The summit will follow a string of other recent U.S.-China meetings and conversations aimed at mending ties
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hinese President Xi Jinping will travel to the United States to meet President Donald Trump at his Mara-Lago retreat in Florida on April 6-7, China’s Foreign Ministry said yesterday, its first official confirmation of the highly anticipated summit. It will be Xi’s first meeting with Trump, whose presidency began on Jan. 20, and comes as the two sides face pressing issues, ranging from North Korea and the South China Sea to trade disputes. Ministry spokesman Lu Kang made the announcement at a daily news briefing. Beijing had previously said that preparatory work for the meeting was underway. But it had not yet confirmed the trip, despite western media reports on a scheduled meeting
and an announcement by the Finnish government that Xi would make a brief stop in Finland on April 5. The summit will follow a string of other recent U.S.-China meetings and conversations aimed at mending ties after strong criticism of China by Trump during his election campaign. U.S. Secretary of State Rex Tillerson ended a trip to Asia this month in Beijing, agreeing to work together with China on North Korea and stressing Trump’s desire to enhance understanding. China has been irritated at being repeatedly told by Washington to rein in North Korea’s nuclear and missile programmes and by the U.S. decision to base an advanced missile defence system in South Korea. Beijing is also deeply suspicious of U.S. intentions towards self-ruled Taiwan, which China claims as its own.
During his election campaign, Trump accused China of unfair trade policies, criticised its island-building in the strategic South China Sea, and accused it of doing too little to constrain North Korea. Trump also incensed Beijing in December by taking a phone call from
Taiwanese President Tsai Ing-wen and later saying the United States did not have to stick to the so-called “one China” policy. He later agreed in a phone call with Xi to honour the long-standing policy and has also written to Xi since seeking “constructive ties.” Reuters
Markets
Repo funding costs at Mainland’s stock exchanges surge before bank health-check Exchange traded repos are used by non-banks, corporates and retail investors to borrow or lend cash against bonds The cost of borrowing short-term cash against bonds at China’s stock exchanges more than tripled to as much as 32 per cent yesterday as smaller financial institutions scrambled for funds before a central bank healthcheck on the banking industry. The surging interest rates for oneday bond repurchase agreements, or repos, at the exchanges mirror a similar but more modest trend in China’s interbank market over the past week. The one-day repo rate at the
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Shanghai Stock Exchange shot to as high as 32 per cent - jumping from Wednesday’s range of 6 to 13 per cent and to its highest level in three months - while the rate at the Shenzhen bourse touched a six-month high of 26.812 per cent. Exchange traded repos are used by non-banks, corporates and retail investors to borrow or lend cash against bonds, and the rates on these
market-determined repos are often more volatile than interbank repos that are under the central bank’s jurisdiction. Chinese banks are racing to spruce up their books, hoarding cash, paring risky investments and curbing lending ahead of a rigorous quarterly inspection of their books by the central bank known as the Macro Prudential Assessment, or MPA.
For the first time since it was launched last year, the MPA will include off-balance sheet wealth management products to give authorities a better sense of potential risks to the financial system. Because of the MPA process, “onshore banks refrained from lending to corporate and non-bank Financial institutions to reduce their credit exposure,” Ken Cheung Kin Tai, analyst at Mizuho Bank, wrote in a note yesterday. “On the other way round, it is more difficult for these parties to acquire loan funding from onshore banks. Instead, they raised short-term funding through the Shanghai Stock Exchange (SSE).” Interbank borrowing costs have also been trending higher. Last week, the seven-day repo rate - a closely-watched indictor of interbank borrowing costs - jumped to a near two-year high of 3.0883 on a trade-weighted basis. But the seven-day repo rate eased this week, falling to 2.8121 yesterday. 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 Friday, March 31 2017 13
Asia Households
Australians sitting on mountains of cash as wealth outpaces debt Cash and deposits alone topped A$1 trillion last quarter for the first time on record Wayne Cole
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ustralian households saw their wealth balloon to a record A$11.7 trillion (US$8.97 trillion) last quarter as cash holdings topped a trillion dollars for the first time ever, boding well for spending in the face of tepid wages growth. Yesterday’s figures from the Australian Bureau of Statistics showed households’ net worth, after taking into account all their liabilities, rose 3.6 per cent to A$9.4 trillion in the three months to December. Most of the gains came from a A$247 billion increase in home and land values, which took them to A$6.4 trillion. The country’s annual economic output (GDP) is worth A$1.7 trillion. This accumulation of wealth is a major reason the Reserve Bank of Australia (RBA) considers household balance sheets to be in good repair overall, even as they fret about debtfuelled speculation in the property market. Savanth Sebastian, a senior economist at asset manager CommSec,
noted that the net worth of every man woman and child in the country stood at almost A$387,000, a solid cushion to support spending in the face of sluggish wage growth. While there has been much alarm at rising debt levels in Australia, little is made of the asset side of household balance sheets which makes the picture appear less threatening. Mortgage debt in the country
stands at A$1.7 trillion, yet that is equal to just 26.7 per cent of the value of homes and land, suggesting home prices would have to fall a long way to put the average owner into the red. The ration of all debt to all assets had also dipped to just under 20 per cent, its lowest since early 2008. Australians have also been squirreling away a pile of liquid assets. Cash and deposits alone topped A$1 trillion last quarter for the first time on record, having more than doubled over the preceding decade. The ABS estimates the ratio of
household debt to liquid assets, which includes cash, deposits, debt securities and shares, fell 1.1 per centage points to 124.4 per cent in the December quarter.
‘Households’ net worth, after taking into account all their liabilities, rose 3.6 per cent’ That was considerably lower than the often-cited debt to disposable income ratio which is currently at record highs above 180 per cent. Reuters
Stock markets
Singapore Exchange said to mull tie-ups as deals grow harder Partnering with or acquiring a stake in SGX would give a U.S. or European exchange a stronger footing in Asia Annie Massa, Matthew Leising, Andrea Tan and Matthew Monks
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ven as regulators crack down on yet another round of consolidation among exchange operators, at least one major bourse is still keen to pursue deals. Singapore Exchange Ltd., which runs Southeast Asia’s largest stock and derivatives market, has in recent months held exploratory talks about possible tie-ups with overseas exchange operators, people familiar
with the matter said. Discussions with parties including Nasdaq Inc. and CME Group Inc. have ranged from potential collaborations to the sale of a stake in the company or even a full merger, the people said, asking not to be identified as the details aren’t public. SGX, with a market value of about US$5.9 billion, has been weighing its options as rivals attempt to consolidate across the industry. An outright sale would be complicated as cross-border deals between exchange operators attract intense scrutiny
from regulators, the people said. SGX has not hired any advisers and no formal decisions have been made about how to proceed, the people said. It’s unclear if any talks are currently active. Representatives for CME, Nasdaq and SGX declined to comment.
Asia footing
Partnering with or acquiring a stake in SGX would give a U.S. or European exchange a stronger footing in Asia as the fight for global capital escalates. The company, based in Singapore with offices in mainland China, Hong Kong, India, London and Japan, reported net income of S$349 million (US$250 million) in 2016, little changed from a year earlier, on total revenue of S$818 million.
The average daily value of shares traded on SGX this year was about US$847 million, up 11 per cent from US$763 million in 2016, according to data compiled by Bloomberg. Still, that’s down from US$1.12 billion a day in 2013.
‘SGX, with a market value of about US$5.9 billion, has been weighing its options as rivals attempt to consolidate across the industry’ The Singapore bourse already has an existing relationship with New York-based Nasdaq, which has a market valuation of US$11.4 billion and runs trading venues in the U.S., Europe and Canada. Nasdaq sells technology to market operators in 50 countries, and SGX is one of its customers, according to regulatory filings. In 2011, SGX’s A$8.35 billion (US$6.4 billion) bid for Sydney-based ASX Ltd. was scuttled by Australia’s government. The deal would have created the world’s fifth-largest bourse operator at that time. Bloomberg News
14 Business Daily Friday, March 31 2017
International Survey
Euro zone economy motors ahead as sentiment stays buoyant A separate business confidence indicator released yesterday by the EU Commission was stable at 0.82 points in March Francesco Guarascio
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entiment towards the euro zone economy edged down but stayed buoyant in March, signalling faster growth as inflation expectations among businesses and consumers also rose, EU data showed yesterday. The European Commission’s monthly sentiment survey showed the main index dipped to 107.9 points from 108.0 in February, remaining well above its long-term average of 100. A Reuters poll had pointed to a slight rise to 108.3 points, but economists remained upbeat about the 19-country bloc’s growth prospects. “While this release may have disappointed somewhat, it is still pointing to strength in economic activity,” Bert Colijn, senior economist at ING said.
He noted the figures signalled the first quarter was the bloc’s strongest since 2011, in line with predictions of faster economic growth in the first three months of the year. Questions remained, however, whether that acceleration would extend into the second quarter. The euro zone’s economy grew 0.4 per cent in the last three months of 2016 on the quarter, and 1.7 per cent on the year. Preliminary estimates on the actual growth in the first quarter will be released by the EU statistics office on May 3. A separate business confidence indicator released yesterday by the EU Commission was stable at 0.82 points in March, remaining at the highest level since June 2011 but also below market expectations for an increase to 0.86. Inflation expectations among consumers and manufacturers went up,
adding to signs that price pressures are normalising and fuelling a debate about when the European Central Bank might unwind its monetary stimulus. The consumer index of price trends over the next 12 months rose to 15.3 points from 14.5 in February, the highest since October 2013, although the pace of the increase slowed down. “Given that consumers’ inflation expectations are rising only slowly, we nevertheless expect the ECB to continue asset purchases throughout the year and into 2018,” said Stephen Brown, economist at Capital Economics. European statistics office Euros tat will on Friday release flash estimates of euro zone inflation for March, with economists polled by Reuters expecting 1.8 per cent, down from February’s 2 per cent and in line with the ECB’s mid-term target of below but close to 2 per cent. The indicator for selling price expectations among manufacturers rose to 9.8 points from 9.0 in February, the highest since July 2011.
The slight dip in overall economic sentiment was mainly due to less optimism in the services sector, the largest part of the euro zone economy and whose index dropped to 12.7 from 13.9 points, and in industry, where it fell to 1.2 points from 1.3.
“While this release may have disappointed somewhat, it is still pointing to strength in economic activity” Bert Colijn, senior economist at ING The drop of confidence in the two main economic sectors of the bloc was partially offset by more optimism among consumers, whose reading rose to -5.0 points from -6.2 points in February. Reuters
Brexit
UK-EU deal ‘in all our interests’, May tells European press But she also reiterated her warning that failure to reach a trade deal would hamper security ties British Prime Minister Theresa May published columns in seven European papers yesterday to stress that a Brexit deal was “in all our interests”, striking a conciliatory tone before negotiations begin. “We will continue to play our part in ensuring that Europe remains strong and prosperous and able to lead in the world,” May wrote in the Irish Times a day after she launched Britain’s withdrawal process. She said Brexit was not an attempt “to do harm to the European Union or any of the remaining member states”. But she also reiterated her warning that failure to reach a trade deal would hamper security ties. “It would be to the detriment of us all if unnecessary barriers to trade were erected,” she said. In Germany’s Frankfurter Allgemeine Zeitung she underlined close cooperation on foreign policy matters such as the conflicts in
Syria and Ukraine. “We know how valuable this partnership and enduring friendship between our two countries are,” she said, in comments translated from German. She also underlined international cooperation with Italy in La Repubblica and referred to an estimated 600,000 Italian nationals living in Britain and three million British tourists who visit Italy every year.
“It would be to the detriment of us all if unnecessary barriers to trade were erected” Theresa May, British Prime Minister “We appreciate hugely the friendship between our countries and our people,” May said. In France’s Le Parisien newspaper May underlined the importance of “the closest possible security cooperation” after Britain leaves the EU.
British Prime Minister Theresa May departs 10 Downing Street in central London, Britain, 29 March 2017 to make a statement to Parliament officially triggering Article 50 formally beginning Britain’s departure from the European Union. Lusa
She said that both sides “are faced with the same global threats of terrorism and extremism”.
May also wrote in Poland’s Rzeczpospolita, Spain’s El Pais and Sweden’s Dagens Nyheter. AFP
Business Daily Friday, March 31 2017 15
Opinion
The end of poverty in China?
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ne of the most cited statistics about China may well be the number of Chinese who have been lifted out of poverty over the last 35 years. At over 800 million, it is a huge number – and an extraordinary feat. Indeed, no other country has achieved such a level of poverty reduction in such a short period. But what about the millions of Chinese who have remained behind? China’s government is committed to finishing the task, with the aim of reducing rural poverty essentially to zero by 2020. The authorities first made the pledge at the United Nations in 2015, and have reiterated it in subsequent official settings. But fulfilling that promise – which would now entail improving the wellbeing of about 45 million people, roughly equivalent to Sudan’s entire population – will carry significant costs. Poverty reduction, like so many i m p o r t a n t e n d e av o u r s , i s subject to the law of diminishing returns: the more you do something, the less productive your efforts become. Think of winding a watch: the more you wind, the more resistance builds up in the mainspring, and the more energy it takes to move the stem the same distance. When it comes to poverty reduction, the people who benefit first are most likely those who were best equipped to do so, owing to, say, their background or geography. By the time there are only a few – or even a few million – left, one can expect reaching them to be much harder. China’s experience illustrates this phenomenon perfectly. During the first seven years of China’s official “reform and opening up,” which began in 1978, it is estimated that around 110 million people annually rose out of poverty. For the next 15 years – from 1985 to 2000 – the pace of progress slowed considerably, with around 26 million people moving above the poverty line each year. From 2000 to 2015, the figure stood at just over 22 million per year. The government’s target now is to lift ten million people out of poverty annually. As the pace of poverty-reduction has slowed, its costs have risen – a trend illustrated in a new UN report, together with World Bank data. In 2000, lifting a person out of poverty in China cost the central government approximately US$48 per year (in nominal terms). By 2010, this figure had increased more than three-fold, to US$150 per year. Now that the government is working to reach the
“
Hannah Ryder a former head of policy and partnerships for the United Nations Development Programme in China
most remote people – those without access to roads, electricity, or clean water – the cost exceeds US$200 per year. This is not to say that China will not be able to meet its 2020 target. On the contrary, the government’s plans and implementation appear as strong as ever. In fact, last year, the government exceeded its target, with 12.4 million people escaping rural poverty. And the budget for this year is 30 per cent larger, meaning that at least US$1,000 has been allocated for each of the ten million people China’s government plans to lift out of poverty in 2017. But, as the government attempts to “get to zero” on rural poverty – by moving all people above the national rural poverty line of RMB2,230 (US$324) per year – it should not lose sight of broader povertyrelated challenges. China continues to experience rapid urbanization – a phenomenon that contributed substantially to past poverty reduction, but that also places a growing number of urban dwellers at risk of destitution. According to official figures, the average income of the poorest 5 per cent of households in Chinese cities amounts to about US$1,128 (RMB7,521). That is about 3.5 times China’s rural poverty line. But, overall, the average income in cities is at least four times higher than that in the countryside, suggesting that living on such a budget may be even tougher than living at the rural poverty line. And that does not even account for the many migrant workers who live under the radar in cities and are likely to earn even less than the poorest 5 per cent. These forms of poverty may be even harder to address, not least because China has less experience doing so. Given this, just as China’s successful efforts to reduce rural poverty can serve as a model for others, other countries’ successes in managing urban poverty can – and should – help to guide China’s efforts. China is far from alone in focusing on the fight to end poverty; indeed, the very first Sustainable Development Goal calls for an end to poverty in all of its manifestations by 2030. With the process becoming increasingly challenging and costly, looking across borders could prove vital to enabling all Chinese to live decent, dignified lives. Project Syndicate
Poverty reduction, like so many important endeavours, is subject to the law of diminishing returns: the more you do something, the less productive your efforts become
”
LSE suitors have lots of time after Deutsche Boerse fail
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nvestors are hoping it won’t be long before London Chris Hughes Stock Exchange Group Plc gets a Bloomberg Gadfly columnist sucked into another big deal. The stock shot up almost 4 per cent on Wednesday after European Union regulators formally blocked create a transatlantic trading giant a planned combination with to challenge Europe. It could be seen as a boost to London as a Deutsche Boerse AG. The British exchange is certainly financial centre in the wake of vulnerable. But it’s hard to see Brexit. why potential buyers such as Still, it’s just as easy to imagine Intercontinental Exchange Inc. such a proposal getting bogged (ICE) or CME Group Inc. would down in squabbling between financial supervisors. On antitrust, be in a hurry. ICE considered a move on the LSE the failure of the tie-up with after the planned Deutsche Boerse Deutsche Boerse reinforces the merger surfaced in February impression that trust-busters 2016. A counterbid would have really don’t like exchange deals at prevented ICE from being eclipsed all. The killer regulatory objection, by the proposed Anglo-German concentration in bond clearing, market. That motive is now was a last-minute surprise. What’s more, it looks increasingly irrelevant. The logic today would be an difficult to win approval using socalled behavioural opportunistic bid to remedies -- where gain scale. The LSE’s bidders promise to defences are weak. be good, rather than Xavier Rolet, CEO for actually sell assets. nearly eight years, Then there is the had been planning million uncertainty around to leave following LSE’s buyback B r exi t . I t w o u l d the merger. He’s now surely be wiser for working in what should have been his retirement. a bidder to wait and see how things A deal would be a stretch develop. financially. An offer from ICE at That leaves the LSE and Deutsche say, 37 pounds per LSE share -- a 21 Boerse having to renew their per cent premium to LSE’s three- standalone stories. The LSE has month average price -- would announced a 200 million-pound cost 13.8 billion pounds (US$17 share buyback. Its course now will billion), including assumed debt. probably involve cost-cutting, ICE might just be able to fund a third some bolt-on deals and further of that in cash without pushing returns of capital. leverage to an uncomfortable Both companies need to resolve level. It would need comparable uncertainty over their leadership. synergies to Deutsche Boerse to Deutsche Boerse CEO Carsten make a deal deliver adequate Kengeter remains mired in an returns in the near term. All in insider trading probe, while Rolet isn’t a credible long-term leader. all, not easy. The bigger obstacles are politics The London market’s defences and regulation. An Anglo- may be weak right now. But American deal might be an easier don’t expect them to be tested sell in Britain, where it would in a hurry. Bloomberg Gadfly
£200
16 Business Daily Friday, March 31 2017
Closing Resultas
PetroChina profit plunges to record low State-owned Chinese energy giant PetroChina yesterday announced it slumped to a record-low profit for 2016 as global oil price weakness slashed earnings by 78 per cent. Net profit fell to RMB7.86 billion (US$1.1 billion), the Beijing-based company said in a statement to the Hong Kong stock exchange, where it lists shares. Bloomberg News reported that the profit figure was a record-low for PetroChina, the country’s biggest oil producer.
Citing a “complicated and severe domestic and international economic environment,” PetroChina blamed the result on depressed prices of crude oil and natural gas and a “severe” oversupply of refined products due to slower demand as China’s economic growth moderates. PetroChina said it was cautiously optimistic for 2017, if the global economy can recover. “As the global oil market gradually tends to be balanced, the international oil price is likely to rebound, but may still involve relatively great uncertainty,” the company statement said. AFP
Lending
Loan shark stabbing case highlights weak link in financial system In China, banks are often more inclined to lend to state-backed firms rather than smaller players
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he case of a son that stabbed and killed a violent debt collector in defence of his mother has stirred heated debate in China. Legal issues aside, the incident laid bare the financing difficulties for the country’s myriad small businesses and the ugly side of the private lending market. In April last year, more than 10 people went to Su Yinxia’s company in Guanxian County in east China’s Shandong Province demanding payment for loan sharks allegedly by means of insulting Su and her son Yu Huan. In disputes Yu stabbed to death one of the debt collectors. Public sympathy for Yu, who was given life sentence for the killing, erupted following a detailed coverage by Southern Weekly, with most questioning the severity of the sentence. In a statement issued March 26, the Supreme People’s Procuratorate pledged to review the case to determine whether Yu was acting in self-defence and investigate possible dereliction of duty by the police officers concerned. Apart from legal and moral controversies, the case also highlighted that credit demands from small and medium-sized enterprises (SMEs) are not being adequately met through formal channels, forcing them to turn to private lenders such as loan sharks or peer-to-peer platforms. Su borrowed more than RMB1 million (US$145,138) from a real estate
developer with a monthly interest rate of 10 per cent, way above costs of regular bank lending. In China, banks are often more inclined to lend to state-backed firms rather than smaller players, which are associated with bigger credit risks, while not without justification. China’s SMEs have played a leading role in creating jobs but face daunting challenges as most are involved in low-profit traditional sectors. Small firms are baring the brunt of the side effects associated with
Energy
China’s economy shifting gears toward a more balanced model, especially against a backdrop of insufficient market demand worldwide and rising market pressure. Moreover, Chinese banks are increasingly more cautious due to rising bad loan ratios, leaving SMEs little chance of getting credit from such outfits. According to a report by the China Banking Association and PwC, about 90 per cent of 1,794 bankers surveyed said risk management from bad loan pressure was the biggest challenge in 2016. In the absence of the support from official organs, private lending has
Results
since prospered. While the black market has, to some extent, helped satisfy the financing needs of SMEs, the industry’s relentless growth and lack of regulation have left lenders and borrowers both unprotected, and there are frequent reports of defaults and malicious debt collections such as that in Shandong. According to Yang Tao, assistant director of the Institute of Finance and Banking under the Chinese Academy of Social Sciences, there needs to be more targeted financial institutions and products, as well as improved regulatory rules to cater to the SMEs’ credit demands. To better serve SMEs, Yao stressed the importance of innovation and big data, which could help reduce loan costs and enable lenders to offer differentiated credit services to businesses. SMEs, on their part, should improve their competitiveness and credit score. The government needs to improve the related laws and regulations, and promote a credit-based culture to create fairer funding mechanisms for all market entities, he said, stressing the role of the market in the process. The government is already exploring solutions beyond traditional banking. In January, China’s State Council specified a string of measures aimed at better regulating regional equity markets to aid financing for SMEs. Regional equity platforms are an important part of China’s capital market that mainly provides financing services for non-public stock companies in equity circulation. Xinhua
Logistics
Beijing said to push talks to ICBC reports flat 2016 profit China, Australia, NZ companies create power giant as margins dip team up on food safety China’s state-owned enterprise regulator has asked coal mining giant Shenhua Group Corp. and power generator China Datang Corp. to discuss a possible merger, according to people with knowledge of the situation. The talks are at an early stage and there’s no guarantee of a deal, said the people, who asked not to be identified as the information isn’t public. Datang International Power Generation Co., Datang’s Hong Kong-listed unit, said yesterday that the parent company hasn’t received any related news and that it has no information to disclose. Its shares closed 8 per cent higher, the biggest gain in two years, at HK$2.29. A merger would combine China’s biggest coal producer with one of its largest power generators to create a utility giant with about RMB1.66 trillion (US$241 billion) of assets. China Shenhua Energy Co., Shenhua’s Hong Kong-listed company, lost 1.7 per cent to HK$18.20. The city’s benchmark Hang Seng Index dropped 0.4 per cent. The State-owned Assets Supervision and Administration Commission encouraged the discussions as the two businesses complement each other, the people said. Bloomberg News
Industrial and Commercial Bank of China Ltd (ICBC), the world’s largest lender, reported its slowest rate of yearly growth in over a decade as successive interest rate cuts continued to weigh on margins. The results came a day after three other of China’s leading banks reported modest profit growth as they battle the lowest net interest margins since at least 2011 amid a slowing economy. ICBC yesterday reported a 0.4 per cent increase in 2016 net profit, raking in RMB278.25 billion (US$40.39 billion). Meanwhile net interest margins - the difference between interest paid and earned and a key gauge of profitability for banks - fell to 2.16 per cent at end-December compared to 2.18 per cent at end-September after Beijing’s six successive benchmark interest rate cuts in 2014 to 2015. The lender said its net profit fell 0.64 per cent to RMB55.02 billion in the fourth quarter of 2016 as margins shrank. The result was above an average estimate of RMB51.0 billion from analysts polled by Thomson Reuters. Write-offs jumped around 23 per cent last year hitting RMB74.14 billion, helping to stem the flow of non-performing loans. Reuters
Chinese e-commerce giant Alibaba, consultancy PwC and New Zealand Dairy giant Fonterra have teamed up to develop a system that will track the global supply chain of food products, said PwC China. According to a memorandum of understanding signed earlier, the companies will work together to develop a blockchain solution that will track the supply chain from paddock to plate. Blockchain, a distributed database that maintains a continuously growing list of ordered records, which cannot be altered retroactively once recorded, is well-suited to reassure customers of the quality of food products, and will create a more transparent environment for the movement of shipments. Alibaba said the aim of the partnership would be to establish a system to lead food quality and safety standards and improve practice and integrity across the food sector. For the pilot period, the system will be used to track Chinese imports from Australia and New Zealand, with the aim of rolling it out across all of Alibaba Group’s online marketplaces. Australia Post, Australian health company Blackmores and New Zealand Post are also parties to the memorandum. Xinhua