Business Daily #1288 May 4, 2017 by Business Daily

Mainland traders build defences amid slower growth Markets Page 8

Thursday, May 4 2017 Year VI Nr. 1288 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm OBOR

One Belt, One Road committee mission at odds with officials skipping May forum Page 4

Infrastructure

Hong KongZhuhai-Macau Bridge enters final stretch Page 2

www.macaubusinessdaily.com

Health

Aviation

Medical tourism benefits from largest life sciences forum to be held in Zhuhai Page 2

China’s COMAC plane to make maiden flight on Friday Page 16

Fiscal Surplus Surprise Monetary

The MSAR fiscal surplus hit MOP12.82 bln in March. Already 230 pct of its budgeted amount. Gov’t revenue expanded 9.4 pct on the back of gaming revenue tax increasing 12.9 pct y-o-y. Meanwhile, indirect taxes surged 47 pct as capital revenue plunged 74 pct, with sales of capital assets down nearly 100 pct. Page 3

Sugar for thy neighbour

A near 18 pct drop y-o-y in trade volume between China and MSAR during Jan-Feb. Imports to the MSAR fell 16 pct, while exports to the Mainland plummeted 49 pct. Trade volume hit US$170 mln, up 15 pct y-o-y but down 19 pct m-o-m. Approved business investment projects from the MSAR to the Mainland increased 155 pct in the period - but investment fell one-third y-o-y.

Tasty and temporary

Imports Efforts to promote Portuguese-speaking countries’ agricultural products are hampered by an out-of-the-way location, drawing more local consumers than tourists. Making tasting activities permanent would help exhibitors promote, sell and export their products more, say participants in the Tap Seac Square food exhibition. Page 5

Yuan and rupee hand in hand

Trade Page 2

HK Hang Seng Index May 2, 2017

24,696.13 +81.00 (+0.33%) Worst Performers

Belle International Holdings

+15.18%

CK Hutchison Holdings Ltd

+0.62%

Hang Lung Properties Ltd

-3.24%

CNOOC Ltd

Geely Automobile Holdings

+2.29%

Sun Hung Kai Properties Ltd

+0.60%

China Mengniu Dairy Co Ltd

-1.99%

Bank of Communications

-1.00%

Tencent Holdings Ltd

+2.05%

Wharf Holdings Ltd/The

+0.45%

Kunlun Energy Co Ltd

-1.99%

China Petroleum & Chemical

-0.95%

+1.67%

Cheung Kong Property

+0.45%

China Resources Land Ltd

-1.62%

Want Want China Holdings

-0.89%

MTR Corp Ltd

+0.45%

New World Development

-1.14%

China Resources Power

-0.71%

AIA Group Ltd BOC Hong Kong Holdings

+0.63%

23° 27° 23° 26° 23° 26° 23° 26° 22° 26°

-1.10%

Today

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

Currencies Both currencies will weaken against the greenback this year, according to a private poll. The U.S. dollar will be supported by monetary policy. The yuan is up about 0.7 per cent so far this year, having lost nearly 7 per cent in 2016. Page 10

2 Business Daily Thursday, May 4 2017

Macau Data

Trade volume between Mainland and Macau plunges Cecilia U cecilia.u@macaubusinessdaily.com

he trade volume between Mainland China and Macau decreased 17.9 per cent year-on-year to US$380 million (MOP3.05 billion) for the first two months of 2017, according to the latest data released by the Ministry of Commerce of the People’s Republic of China. The data show that both imports to the MSAR from the Mainland as well as the city’s exports to China fell, down 16.2 per cent and 49 per cent year-on-year, amounting to US$370 million and US$10 million, respectively. For February, the trade volume between the two regions hit US$170 million,

up 14.9 per cent year-on-year but down 18.5 per cent when compared to January. Of this US$170 million, US$164 million was generated by Chinese imports to the MSAR, posting an increase of 17.3 per cent year-on-year but a decrease of 18.8 per cent when compared to the previous month. For Macau exports to the Mainland, some US$6 million was generated in February,

which amounted to a yearon-year decrease of 24.6 per cent and a month-on-month decrease of 11.4 per cent.

More investments, but less money

For the first two months of 2017, a total of 102 business investment projects from Macau were approved by the Mainland authorities, indicating a 155 per cent increase in the quantity of

approved projects when compared to the same period a year ago. However, the total amount of investment for projects from Macau was US$60 million, down 33.3 per cent year-on-year. On a monthly comparison, the amount generated (US$50 million) from the 42 approved Macau investment projects in the month of February dropped 64.3 per cent year-on-year. Up until February 2017, a total of 15,176 projects involving investment by Macau businessmen were approved by the Chinese Government, amounting to US$13.67 billion and accounting for 0.8 per cent of the total foreign investment in the Mainland. On the other hand, some US$4.39 million was invested

in Macau’s non-financial sectors by Chinese investors during the first two months of this year. The accumulated amount of Chinese investments in Macau hit US$2.19 billion as at the end of February. Meanwhile, a total of four contracts were signed between Chinese and Macau contractors in the first two months of this year, amounting to US$19.28 million, with a turnover of US$310 million after the contracts were completed. The accumulated turnover of completed Chinese contracts in Macau up to the end of February was US$14.07 billion. The data also revealed that a total of 120,912 Chinese workers worked in the MSAR as at the end of February.

HZMB

Digging down to bridge up Sheyla Zandonai sheyla.zandonia@macaubusiness.com

The immersed tunnel making up part of the Hong Kong-Zhuhai-Macau Bridge (HZMB) is a step closer to being completed and becoming a world record holder in terms of length, set to overtake the current record holder - the Oresund fixed link’s immersed tunnel built between Denmark and Sweden. According to COWI, an engineering solutions company participating in its design, the HZMB tunnel is about 40 per cent longer than the Oresund link. The tunnel forms a 6.7 kilometre-long section of the super bridge, adding to the 22.9 kilometres built over the water. A 12 metre-long key structure weighing 6,000 tons used to connect the immersed tubes of the underground tunnel was installed on May 2, Xinhua reported. ‘With approximately 32 elements submerged at depths of more than 40 metres below the water, the project pushes the boundaries for what is technically possible,’ COWI wrote. The tunnel section is located closer to the Hong Kong side of the bridge.

Why bother?

The project involves sophisticated engineering technology to build over

water, at-depth and under water, imposing extra challenges on designers and constructors. Planners chose to construct an immersed section to leave the water surface free, allowing heavy cargo ships to pass through and up the Pearl River Delta, Wired reported. ‘Without the tunnel, the bridge would have been so tall its pylons would exceed the height limits for structures near Hong Kong International Airport,’ Su Quanke, the chief engineer of the HZMB Authority was quoted as saying by the publication. Moreover, because it is being constructed on a soft seabed, the tunnel requires soil improvements to prevent elements from settling, as well as technical capacity to address the risk of earthquakes, according to COWI. ‘The tunnel is placed in a deep excavated trench and after it has been in use for a few decades, layers of sediment of up to 20 metres thick will accumulate above it. The sediment combined with water pressure from above will impose enormous forces on the tunnel’s central sections,’ the engineering company wrote.

Safety issues

Despite the engineering difficulties, the super bridge slated to open at the end of 2017, and estimated to have

Health | Medical

Press reported. Business Daily enquired with the local Infrastructure Development Office (GDI), in charge of the Macau section of the bridge, about whether or not this type of material had been used in the works conducted in the Macau section. The Office’s spokesperson did not provide further comments, directing us to information on the group’s website.

Source: Xinhua

The world’s longest bridges

The Danyang-Kunshan Grand Bridge is a railway bridge measuring over 164.8 kilometres in China. Ten thousand contractors worked for four years to build and complete the structure in 2010. It was operative in 2011. The world’s second largest bridge is located in Taiwan. The

Changhua-Kaohsiung Bridge, also a railway, measures 157.4 kilometres. It opened in 2007. The HZMB is considered to be the longest ‘bridge-cum-tunnel sea-crossing’ with dual three-lane carriageway. It is about 35.6km in length from the shore of northern Lantau to the Western shore of the Pearl River Estuary.

Festival

Life sciences forum attracts 900 professionals to Zhuhai Over 900 leaders from the life sciences sector will descend upon Zhuhai from May 31 to June 1, to attend the ninth annual ChinaBio Partnering Forum. The Forum is the largest life sciences conference in China, with companies from China and across the globe including pharmaceuticals, biotech, innovative start-ups and researchers from universities and institutes set to attend. “China continues to be a major player in drug development on the world stage,” said Anna Chrisman, Group Managing Director, EBD Group, as quoted in the press release. “As evidenced by recent partnerships between global pharma companies and China start-ups in the development of new cancer treatments and new biologics.

cost some RMB60 billion (MOP69.77 billion/US$8.70 billion) so far, has been slammed for delays, overrun costs, and poor safety standards. Last week, it was reported that the same type of fireproof electrical wiring that has been used in sections of the HZMB – produced by KeyStone Electric Wire & Cable –has not passed fireproofing tests in a laboratory in The Netherlands, the Hong Kong Free

ChinaBio Partnering Forum is a conduit to connect pharma and investors with China’s innovation and manufacturing.” As part of its mandate to diversify its economy and in line with its goal to promote medical tourism, the MSAR Government has been supporting initiatives relating to both health and Traditional Chinese Medicine through forums and activities as well as the support of the Traditional Chinese Medicine Science and Technology Industrial Park in Hengqin - which is expected to be operational in the first half of this year. In addition, the MSAR Govern ment is investing an estimated MOP10 billion (US$1.25 billion) in the development of a new health complex in Cotai. C.U.

Drunken dragons drink to health and prosperity The annual Drunken Dragon Festival was held yesterday in Red Market as part of the traditional local celebrations of Buddha’s Birthday. A tradition brought to Macau by fisherman from the Xiangshan County of Guangdong Province, the festivities involve dragon dancing, wine drinking and music, generally performed by martial arts masters. Traditionally, two dancers will hold the dragon’s tail and head

while two dancers hold wine bottles and play drums, in a celebration of life over death. The celebration generally starts in the morning in the environs of Kwan Tai Temple near Senado Square, with the drunken dragons passing through the city’s alleys and markets. Secretary of Social Affairs and Culture Alexis Tam joined the opening ceremony of the event yesterday.

Photo courtesy of GCS Information Broadcast System

Business Daily Thursday, May 4 2017 3

Macau Monetary

Fiscal surplus up 9 pct as at March Coffers see 9.4 pct growth in Q1, with taxes from gaming up 9.6 pct and indirect taxes up 46.6 pct y-o-y Cecilia U cecilia.u@macaubusinessdaily.com

he MSAR Government posted a year-on-year increase of 9 per cent in its fiscal surplus during the first quarter of 2017, amounting to MOP12.82 billion (US$1.60 billion) reveals the latest update to the central account by the Financial Services Bureau (DSF). The government’s target for the fiscal surplus for the whole year of 2017 is MOP5.57 billion, with results demonstrating that the MSAR has already achieved 230.3 per cent of the budgeted surplus in just the first quarter. For the first three months, government revenue experienced a growth of 9.4 per cent, to MOP26.42 billion, when compared to the MOP24.15 billion generated in the same period last year. The total authorised budget for revenue for 2017 is MOP90.86 billion, of which the execution has already reached 29.1 per cent in the first quarter. Taxes received from local gaming operators, in particular, generated MOP22.34 billion in the first quarter, posting an increase of 9.6 per cent year-on-year. According to the official data of the

Gaming Inspection and Co-ordination Bureau (DICJ), the city’s total gaming revenues for the first quarter, including all types of gaming activity such as lotteries and horseracing, surged 12.9 per cent year-on-year to MOP63.68 billion. The DSF data shows that the amount received from indirect taxes evidenced the most notable increase, up 46.6 per cent year-on-year to MOP1.03 billion, when compared to MOP704.5 million for the first quarter of 2016. Indirect taxes include property income, taxes for transfers and fees, fines and other penalties. Meanwhile, the capital revenue for the first three months plummeted 74 per cent to MOP32.2 million, of which the revenue from sales of capital assets dropped 96.8 per cent to MOP800,000 in the quarter, when

compared to MOP23.7 million in the same period of last year.

Expenditure grew

The MSAR Government spent some MOP13.6 billion during the threemonth period this year, posting an increase of 9.8 per cent year-on-year. The government announced previously that public expenditure for the whole of 2017 was budgeted at MOP85.3 billion. Of the total spent during the month 78 per cent, or MOP10.66 billion, was for current expenditure, a decrease of 11.3 per cent compared to MOP12.01 billion spent in the same period of 2016. The latest central account shows that the government spent more on its Investment Plan (PIDDA) during the January to March period, up 200.8 per cent year-on-year to MOP1.12 billion.

The significant increase in expenditure for PIDDA accompanies a jump in capital expenditure, up more than six-fold to MOP2.95 billion vis-a-vis the MOP376.5 million in 2016. Expenditure for other investments also increased from MOP4 million in the first quarter of last year to MOP5.8 million in the first three months of this year. During 2016, the government did not invest in financial transactions under the current expenditure, but the government placed MOP1.82 billion for the first three months this year in financial transactions. In addition, DSF stated that the amount of expenditure transferred to the city’s Social Security Fund was MOP642 million for the first three months, an 82.6 per cent decrease from MOP3.70 billion a year ago.

4 Business Daily Thursday, May 4 2017

Macau Opinion

Ashley Sutherland-Winch*

Avian flu threat intensifies The Year of the Rooster has not been a good year for chickens as the avian flu threat is cresting in Mainland China, Hong Kong and Macau. ‘The avian influenza (H7N9) virus mainly affects people who have been exposed to live poultry. It has infected nearly 1,000 people in Asia, and has a 40 per cent fatality rate since its discovery in 2013, although the latest spurt of cases has been worse than previous ones,’ according to the World Health Organization. As of Monday, the import and sale of all live poultry in Macau was banned. The Civil and Municipal Affairs Bureau (IACM) held a press conference last Friday to deliver updates. IACM stated that ‘Macau’s frozen chicken will still be provided by the farms that are currently supplying Macau’s chicken’. According to Ung Sau Hong, a member of the Administration Committee of IACM, “Macau’s frozen chicken will be slaughtered in Zhuhai. At present, Macau’s frozen chicken is transported to Macau the day after the poultry is slaughtered. IACM hopes that the quarantine process for chickens can be reduced to fewer than 10 hours in order to ensure that the chicken will still be fresh,” he stated. IACM reported that they are already in talks with the Mainland quarantine department about the chicken transporting process. Ung said the live poultry import and sale ban is “due to the consideration of public hygiene and the actual needs of epidemic prevention”. According to Ung, Macau had five avian flu outbreaks between February 2016 and February 2017. The World Health Organization has also reported 28 cases of avian influenza A (H7N9) in Mainland China as of April 21, 2017. Twenty-two of the cases were reported to have had exposure to poultry or a live poultry market. Local health authorities in Macau claim that the most effective way to prevent transmission of the virus is separating humans from poultry. The World Health Organization recommends that people avoid, if possible, poultry farms, contact with animals in live poultry markets, entering areas where poultry may be slaughtered, or contact with any surfaces that appear to be contaminated with faeces from poultry or other animals. It is also strongly recommended that people wash their hands often with soap and water, and follow good food safety and good food hygiene practices. Everyone in Macau should be mindful of this information as the threat of avian flu intensifies. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.

OBOR

Co-ordinating the unknown MSAR Government holds first Belt and Road committee meeting but doesn’t plan to attend Belt and Road Forum for International Co-operation Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

s the Belt and Road Forum for International Co-operation, set to take place mid-May in Beijing, draws closer, the MSAR is laying out its strategy of integration, with the city’s Chief Executive Fernando Chui Sai On pointing out on Tuesday the three primary goals of the newly created Work Commission for the Construction of ‘One Belt, One Road’. The primary objective of the goals, and requiring the most effort on the part of the government, will be its announced intention to co-ordinate construction between the three main initiatives affecting the MSAR: the One Belt, One Road infrastructure building plan, the Greater Bay Area trade and innovation project, and the Five-year Plan of the MSAR Government.

Projects at odds

The city’s land reclamation project Zone A has already missed its scheduled deadline due to the disruption of sand supply from Guangdong, while the largest of the city’s infrastructure projects - construction of both the Pac On Ferry Terminal and that of the Light Rail Transit system - have both gone years over deadline, leaving aside budget overruns. Meanwhile, the Hong Kong-Zhuhai-Macau Bridge, whose website states the 29.3 kilometre bridge is

expected to cost RMB15.73 billion, has already entered into its final stages of construction. The project is a joint effort between the governments of the two SARs and the central government. The Pac On Terminal, as of September last year, had already cost the government MOP3.8 billion, while statements from the Secretary of Transport and Public Works in September 2015 indicated that the government had already spent MOP9 billion on construction work on the project. Meanwhile, the government has upped the contracts for consultants, security and oversight groups on the project.

Statements made

The chief of the office of Chief Exec utive, O Lam, points to a number of works to be undertaken throughout the year by the commission - ‘name ly the organisation and supervision of the implementation of diverse priority works’ - but doesn’t offer any details as to what these will comprise. The commission is made up of the Secretaries of Administration and Justice, Economy and Finance, Security and Transport and Public Works, in addition to the Chief Executive’s Office chief, the Government Spokesperson, President of the Administration of Macau Foundation and the Co-ordinator of the MSAR Policy Research Office. According to a response to Business

Daily enquiries, the Government Information Bureau has ‘so far received no information regarding [the] Chief Executive or any officials taking part in the Belt and Road Forum for International Co-operation’. Thus, none of the officials on the committee will be attending the Forum, the opening ceremony of which will include Chinese President Xi Jinping, who will later host a round-table leaders’ summit bringing together representatives from 110 nations and more than 60 international organisations, including the UN Secretary General Antonio Guterres, World Bank resident Jim Yong Kim and MD of the International Monetary Fund Christine Lagard, notes Xinhua.

What next?

The two other stated goals of the committee, as noted by the Chief Executive, are to work on ‘awareness’ of the One Belt, One Road initiative as well as ‘to assure the good relationship with the central government and civil associations, generating a better environment that permits the discussion of ideas, the collective construction and sharing of the fruits of development,’ notes the release from the Chief Executive’s address at the committee’s first meeting. If the committee’s work yields fruit then we should start to see more information as to how exactly the city is planning to be involved in the massive initiative, as well as explanations for why our government does not plan to attend an event for which it has dedicated an entire committee of the city’s top officials, with the goal of ‘co-ordinating construction’ on a massive scale.

Corporate

Macau Energy Saving Contest enrolment now open

Local electricity provider Companhia de Electricidade de Macau, together with the Office of the Development of the Energy Sector of Macau, has opened enrolment to applicants for this year’s Macau Energy Saving Contest until June 30. This year’s contest will have two categories – Residential Building Public Facilities Group and the Hotel Group. Energy use comparisons will be made based on six consecutive months’ bills – from May to October of this year. Those that save the highest percentage of energy are deemed the winners. In addition, a Continuous Energy Saving Award will be added this year ‘to acknowledge the hotel industry for their continuous efforts in energy

conservation’. The new award will evaluate electricity consumption reduction from May to October 2015, 2016 and 2017. The results of the contest will be

announced in an awards ceremony in January of next year. Applicants can enrol through the organizers or co-organizers or can download the enrolment form from www.cem-macau.com.

Business Daily Thursday, May 4 2017 5

Macau Trade

Daily rations Local traders believe food tasting activities at the Portuguese-speaking Countries Food Products Exhibition Centre in Tap Seac Square should be held on a daily basis Nelson Moura nelson.moura@macaubusinessdaily.com

OCAL traders told Business Daily that tasting activities of food products at the Portuguese-speak ing Countries Food Products Exhibition Centre in Tap Seac Square should be held on a permanent basis instead of through occasional activities. Recently, the Macau Trade and Investment Promotion Institute (IPIM) announced the Centre at the Tap Seac Square Glass House will hold a series of activities to promote selected food products, especially wines and olive oil, which will be available for tasting by visitors. The products will be provided by the Macao Federal Commercial Association of Wine and Food Industries in Portuguese-speaking Countries and Regions, with activities taking place every Thursdays, Fridays and Saturdays until May 27. The Centre currently exhibits food and beverage products such as canned foods, coffee and alcoholic

beverages from various Portuguese-speaking countries, with products allowing visitors to scan an optical label that directs them to the suppliers’ websites.

“The activities in May will probably attract mainly local residents and consumers but I don’t believe they will attract many foreign tourists” Carlos Rodrigues, exhibitor at Portuguesespeaking countries Food Products Exhibition Centre The General Manager of F. Rodrigues (Suc.Res) Lda., Limitada, Carlos Rodrigues, has been exhibiting Portuguese food products in the Centre since the initiative started on March 31 last year; however, the businessman

believes that instead of holding occasional tasting activities visitors should always be allowed to try the exposed products. “The Centre is used mainly for exhibiting products with tasting activities only happening once in a while. It should be something continuous,” he said. Despite describing the project as “positive” so far, the businessman considers the location of the Centre has had an impact upon its success.

“The location shouldn’t be in that area; few tourists pass through that zone and it should be more central. The activities in May will probably attract mainly local residents and consumers but I don’t believe they will attract many foreign tourists,” Mr. Rodrigues told Business Daily. The President of the International Lusophone Markets Business Association (ACIML), Eduardo Ambrosio, told Business Daily that many of the Association’s

members have products in the Centre but that initiatives by government departments lack a long-term strategy. “A commission of academics, bankers, traders, government representatives and economists should be created to conduct a six or eight months long research and develop a plan on what should be the initiatives to promote Macau as a platform between Mainland China and Portuguese-speaking countries for the next five-years,” Mr. Ambrosio said.

6 Business Daily Thursday, May 4 2017

Macau Sino-Luso

Chinese news in Portuguese

in Portugal. Haiwainet announced that apart from providing content in Portuguese, its new platform in the country will be available for producing content with local news outlets

such as news agency Lusa or public service broadcasting station RTP. During the opening ceremony of the Forum, held in Lisbon on May 2, the Portuguese Minister of the

Economy, Manuel Caldeira Cabral, emphasised that Portugal “promotes openness to the world and to investment,” with the Forum an attempt by the country to “align” with China’s worldwide strategy “Portugal is present in this strategy, as a ‘pivotal’ country, that built bridges between Asia and Europe, [being also] a gateway to Europe for investment, immigration or to simply being present in the European market,” the Minister added. The event involved the collaboration of Chinese and Portuguese entities such as Huawei Portugal, Bank of China Co., Ltd. and the China Council for the Promotion of International Trade in Portugal.

E s p r i t l i k e w i s e sa w a downturn in its results for the Asia Pacific region (without supplying a China breakdown), seeing a 20.1 per cent drop in its revenue from the region in the first three months of the year, from a region that contributed 13.7 per cent of the group’s overall revenue for the period. On the flipside, however, the group’s eshop sales increased 39.9 per cent year-on-year in the quarter in China, overshadowing the 12.7 per cent year-onyear growth of the segment in Asia Pacific during the

same period. In the first quarter of the year garments and footwear saw a 3.2 per cent yearon-year increase in value

imported, while handbags and wallets increased 21.6 per cent year-on-year, according to Statistics and Census Service data. K.W.

Chinese news website Haiwainet has organised the Sino-Luso Economic Forum ‘One Belt, One Road’ in Portugal, while announcing the launch of its Portuguese-language news platform Nelson Moura with Lusa nelson.moura@macaubusinessdaily.com

ne Belt, One Road is drawing more and more attention from abroad, with its presence in Portugal felt through the Sino-Luso Economic Forum ‘One Belt, One Road, organised by Chinese online newspaper Haiwainet,

bringing together 60 politicians, economists and businessman from both countries to discuss new ways of co-operation and investment opportunities. The event was also used for the official launch of Haiwainet’s Portuguese-language news platform, described by the company as the first news entity developed by the Chinese Government

Portuguese city of Estoril, where the forum took place

Retail

Into the fitting room Clothing retailers in the MSAR are starting to come out of the slump that accompanied the dip in gaming revenues - although they aren’t out of the cold yet as major retailers like Coach and Esprit see continued year-on-year dips in revenue for the first three months of the year. Luxury accessory and lifestyle retailer Coach saw its sales increase in the Greater China region offset by ‘continued softness’ in

both the MSAR and Hong Kong markets, driving a 2 per cent year-on-year decline in sales during the first three months of the year, according to the group’s filing with the Hong Kong Stock Exchange. The group operates a total of 197 shops in the Greater China region, having opened seven new shops in the first quarter of 2017 and closing one in the same period. Clothing manufacturer

Claims

Jack Lam’s partner accuses Philippines Justice Secretary of harassment In the latest development regarding local gaming mogul Jack Lam’s involvement in the Philippines online gaming scandal, gambling operator Charlie ‘Atong’ Ang has accused Justice Secretary Vitaliano Aguirre of acting as a protector of casino junket operator Kim Wong, according to local media. Ang, according to statements made during the hearing on illegal online gambling operations based out of Lam’s Fontana Leisure Park, has had a 19-year partnership with the local businessman, and denied in the hearing that Lam’s casino had failed to pay taxes correctly, as noted by local media. “Aguirre and Kim Wong started the harassment of Jack Lam. I can prove this,” Ang stated, as quoted by the Philippine Daily Inquirer.

Local gaming mogul Jack Lam

The Justice Secretary responded by ordering the country’s National Bureau of Investigation (NBI) to investigate himself, noting the Bureau is “hereby directed and granted authority to conduct investigation and case build-up over the accusations of Ang […] against the Secretary of Justice,” as well as into National Security Adviser Hermogenes Esperon – whom Ang accuses of asking officials not to patronise Lam’s partner’s operations. The Secretary asked the NBI Director to supply him with a report of compliance with the order and the results within 15 days, notes local media reports. In addition, Aguirre noted that the current Administration would not allow Ang to continue with his gambling operation outside the Cagayan Economic Zone Authority (CEZA) in the wake of Executive Order 13 from Philippine President Duterte outlawing illegal gambling. “The operation of Meridien outside of CEZA is illegal. [The authorities] will not tolerate any illegal act” Aguirre noted, as cited by local media. In addition, the Secretary noted that Ang’s comments come due to the businessman wanting to “get back at me for busting the illegal gambling operations of Fontana […], owned by Jack Lam, his business partner and best friend. He is also paranoid that his big income from illegal gambling will come to an end,” Journal Online cited the Secretary as saying. Late last month, Jack Lam sold off control of his gaming group Jimei International Entertainment Group Ltd. for HK$443.17 million to Cosmic Leader Holdings Limited. K.W.

Business Daily Thursday, May 4 2017 7

Macau Trade

Philippine port billionaire considers Trump biggest risk to trade In April, President Trump signed an executive order that threatens to review and “renegotiate or terminate” America’s trade agreements if they are found to harm U.S. interests Norman P. Aquino and Ian Sayson

.S. President Donald Trump’s unpredictability and nationalist policies have become the biggest risk to global trade, Philippine billionaire and port operator Enrique Razon said. “There are dark clouds gathering,” Razon, chairman and president of International Container Terminal Services Inc., said in an interview on Monday with Bloomberg Television’s

Haslinda Amin in Los Angeles. “The U.S. has created the largest part of the uncertainty in an already uncertain future,” he said, referring to the U.S. leader’s protectionist moves including a proposed border-adjustment tax and his earlier threats to pull out of the World Trade Organization and North American Free Trade Agreement. House Speaker Paul Ryan has been pushing to replace corporate income tax with a tax on businesses’ domestic sales and imports, exempting exports.

The border-adjustment tax proposal raised alarm bells among importers in the U.S., as well as government officials in Mexico as they feared it would reduce shipments north of the border. Trump in April signed an executive order that threatens to review and “renegotiate or terminate” America’s trade agreements -- including its participation in the WTO -- if they are found to harm U.S. interests. Last week, he also threatened to withdraw from Nafta, but later said, after speaking with the leaders of Canada and Mexico, he would seek to renegotiate.

African terminals

While Trump has backtracked on some positions “he keeps changing what he is saying,” Razon, 57, said. “I

don’t even know if his people know exactly what he’s really gonna do.” Still, Razon said his company is willing to invest US$500 million to US$1 billion to build a terminal in every country in western and eastern Africa, a continent he considers the most immune to any globalization shifts. “Barriers to entry are very high there but once you are in, it has the best margins in our industry,” he said. Rising anti-globalization hasn’t affected International Container’s port operations in the first quarter, with trade growing in almost every region where it has a presence, Razon said. The company operates in Asia, Africa, Latin America, Europe, the Middle East and Australia. Razon, who also chairs Bloomberry Resorts Corp., said Philippine President Rodrigo Duterte’s Beijing trip, which yielded US$24 billion in investment pledges in October, has paid off with Chinese tourists more than doubling and feeding growth in the Philippine casino industry. “The market has been growing tremendously in the last two, three years so the bet is paying off,” Razon said. “We are making more money. We are seeing huge growth from visitations in China,” he said, adding he expects to sustain growth of as much as 40 per cent in VIP volume at its Solaire Resort and Casino on Manila Bay. One of the risks to his gambling business is if the Chinese government succeeds in curtailing the movement of VIP funds, which could slow the sector, something that Macau’s casino industry had to endure during an anti-corruption crackdown, Razon said.

Online

Rolling chip

Competition for gamblers’ money clouds outlook for Paddy Power Betfair

Imperial Pacific’s VIP slowing

Its main competitors include Ladbrokes Coral Group, itself the product of a merger, and William Hill which has so far been left off the M&A merry-go-round Padraic Halpin

Paddy Power Betfair said it was cautious on revenue growth in its main European market due to a “pretty extreme” level of competition, even as it almost doubled earnings across the group in the first quarter. Competition has intensified among gambling firms seeking to offset higher taxes and tighter regulation with increased revenues, leading to a flurry of mergers including last year’s 6 billion pound (US$7.75 billion) tie-up between online betting exchange Betfair and Paddy Power, which operates shops as well as an online business. The ensuing aggressive pricing and promotional activity has made it tougher to win new business, Paddy Power Betfair Chief Executive Breon Corcoran said on Wednesday, meaning the Dublin-headquartered firm was “a little bit behind where we hoped” on increasing its customer numbers in Europe. “The competitive nature of this industry right now is pretty extreme. What we have to remind our shareholders and indeed our competitors is that we have plenty of appetite to compete,” Corcoran told an analyst call. “What’s not entirely clear is whether we’re being rational or whether we’re not competing hard enough...

If this industry continues to be as competitive as it is, we have to give ourselves the flexibility to increase investment.” Its main competitors include Ladbrokes Coral Group, itself the product of a merger, and William Hill which has so far been left off the M&A merry-go-round. Corcoran used the US Masters golf tournament to illustrate the changes in the market where Paddy Power Betfair had expected to be alone in offering customers the chance to win if their pick finished in the top 8 but were among four bookmakers to offer the more generous market. The group’s online revenue in Europe, which accounts for more than half of total revenue, increased by 12 per cent on a constant currency basis in the first quarter, driven by improved sports results and growth in the amount of money staked. Overall revenue growth of 15 per cent, combined with merger-related cost savings and operational efficiencies helped push underlying core earnings or EBITDA up 87 per cent to 111 million pounds. Corcoran said it was too early to give any guidance for the year but that sports results had favoured customers since the end of March and overall gross win margins were weak in April. Reuters

VIP rolling chip turnover from Imperial Pacific International Holdings Limited amounted to US$2.15 billion (MOP17.25 billion) in April 2017, according to a company filing with the Hong Kong Stock Exchange. The company operates a ‘temporary’ casino on the island of Saipan, as it continues construction on a larger resort. According to previous filings of the company, the amount represents a 32.46 per cent year-on-year decrease from the US$3.18 billion recorded in April 2016, as well as a 27.36 per cent month-on-month decrease from US$2.96 billion in March 2017. The development of Imperial Pacific’s permanent Saipan gaming and hotel venue, known as Imperial Pacific Resort, has been delayed by protests from construction workers

– mainly from China – over unpaid wages and unsafe working conditions, according to previous reports. Earlier this week, the Governor of the Commonwealth of the Northern Mariana Islands, where Imperial Pacific operates, said it will levy a 5 per cent tax upon the company’s gaming operations if such a tax is approved in the House of Representatives. In addition to the tax, the company is bound to pay a total of US$20 million to community benefits programmes due to the construction of its new casino. Currently, Imperial Pacific pays an annual licence fee of US$15 million. The company has been recently granted an extension of its gaming licence for both its temporary casino and on the completion date of its new casino, to August 31, 2018. S.Z.

8 Business Daily Thursday, May 4 2017

Greater china Markets

Stock traders most defensive in years on growth doubts Liquor makers have been among the biggest beneficiaries of the shift to so-called defensive shares

hina’s army of stock investors are taking cover. They’ve been loading up on companies with earnings that are less reliant on economic growth, and ditching banks and oil producers. Gauges of consumer staples and health-care shares have surged to the highest levels relative to the CSI 300 Index since at least 2013 in recent days, while a measure of financial companies is near the lowest since November 2015. A crackdown on leveraged trades by regulators has only made investors more defensive. “People are turning their eyes to booze and drugs amid waning growth momentum in the economy,” said Hao Hong, Bocom International Holdings Co.’s chief strategist in Hong Kong. “Low-beta defensive plays outperform in a risk-averse market as the companies provide better earnings growth and cash flow. The rally has a further leg to go, at least in the second quarter.” Recent data appear to support such caution. Manufacturing gauges fell in April, signalling headwinds for an economy that accelerated in the past two quarters. Iron ore, considered a proxy for the nation’s infrastructure spending, entered a bear market last month amid a near-record mountain of stockpiles. The dour sentiment helped send the CSI 300 to its lowest level since Feb. 17 on Tuesday. Liquor makers have been among the biggest beneficiaries of the shift

to so-called defensive shares. The consumer staples gauge has rallied 15 per cent this year, and closed at its highest level since June 2015 on last Thursday. Luzhou Laojiao Co. and Wuliangye Yibin Co. have jumped at least 30 per cent to lead gains, followed by Yonghui Superstores Co. Utilities and health-care shares have climbed more than 9 per cent, compared with the CSI 300’s 3.4 per cent advance.

“I’m concerned; these stocks have had some decent gains, but it’s not going to be a money-making situation for all” Chen Li, Credit Suisse Group AG’s Hong Kong-based strategist There are signs of caution filtering into these industry groups as valuations swell. The consumer staples index slumped 3.1 per cent in the past two days, while the health-care index retreated 1.8 per cent. Both measures trade at least 15 per cent above their average multiple over the past five years, using price to estimated earnings. The consumer

staples index snapped its two-day loss Wednesday, gaining as much as 1.1 per cent, while health care stocks rose 0.2 per cent.

Crowded trade

For Credit Suisse Group AG’s Hong Kong-based strategist Chen Li, sectors such as liquor and home appliances are getting crowded. “I’m concerned; these stocks have had some decent gains, but it’s not going to be a money-making situation for all,” said Chen. “With everyone flocking into such investments, there’s a risk of a selling stampede should someone start to pull out and trigger a price correction.” Still, Hengsheng Asset Management Co. says the government’s focus on reducing risk in financial markets will add to investor perception that consumer and health-care shares

offer safe havens. China’s regulators have unveiled a raft of measures over the past month to curb leverage, boost transparency and prevent excessive speculation. In one sign that the reform drive has further to run, President Xi Jinping gave it a stamp of approval by presiding over a rare meeting with top financial regulators last week. The crackdown spurred a selloff in the broader market, with gauges of energy, financial and industrial companies being hardest hit over the course of April. “Risk appetite drops on tighter scrutiny,” said Dai Ming, fund manager at Hengsheng Asset Management in Shanghai. “Investors will still need something to trade on after the crackdown on speculative trades, and their choices naturally go to steady bets like consumer stocks.” Bloomberg News

Overcapacity

Rust-belt rebound is under threat from slowing inflation Thirteen provinces posted growth accelerations, while 13 registered declines and five were unchanged from 2016 China’s former industrial heartland is being helped out of its economic malaise by surging producer prices and government spending. Those supports may be about to weaken. Two of the biggest laggards posted turnarounds in the first quarter. Growth returned to Liaoning, the heavy-industry base in the northeast, where gross domestic product expanded by 2.4 per cent, compared to the 2.5 per cent contraction in the same period last year. Shanxi, the northern coal-mining province mired for years in producer-price deflation and excess capacity, grew 6.1 per cent versus 4.5 per cent in 2016. Even so, as factory inflation returned late last year, year-on-year comparisons are due to moderate, and debt-fuelled investment will likely fade as President Xi Jinping directs top policy makers to ensure financial stability before a twice-adecade leadership transition later this year. China’s official manufacturing gauge declined from an almost five-year high in April as commodity prices softened, raising doubts that the acceleration over the past two quarters will continue. Other regions which were previously star performers lost some shine in the first three months of the year. Chongqing and Guizhou, two south-western provinces that posted the fastest growth among all 31 provincial-level regions last year with expansions topping 10 per cent, decelerated slightly in the first

quarter, to 10.5 per cent and 10.2 per cent respectively. China is “now relying more on the old economy rather than the new economy,” said Zhu Ning, author of “China’s Guaranteed Bubble” and deputy director of the National Institute of Financial Research at Tsinghua University in Beijing. Still, the rust-belt rebound “paved the way for increasing leverage and financial risk that President Xi vowed to fight.” Industrial profits jumped 28.3 per cent in the first quarter from a year earlier, extending a surge as producer prices held gains, boosting steel mills, coal mines and heavy equipment makers. Earnings of state-owned industrial enterprises soared 70.5 per cent.

Rising profits enable those companies to borrow more, adding to the balance sheets of government-owned banks. Liaoning’s inventory of loans rose 6.2 per cent from a year earlier at the end of March, more than double the pace of first-quarter GDP growth. Expansion weakened slightly in Jilin, another north-eastern laggard neighbouring Liaoning, growing 5.9 per cent in the first quarter compared with a 6.9 per cent increase last year. Surging factory prices gave Shanxi the greatest support. The provincial producer price index increased 24.8 per cent in the first quarter and coal prices rose 43.4 per cent, according to the local statistics bureau. The government’s fiscal revenue also recovered, increasing 12.6 per cent in the first three months compared to a drop of 5.2 per cent last year. Expansion in Yunnan, the southern province bordering Vietnam and Myanmar, quickened to 9.9 per cent in

the first quarter from 8.7 per cent in 2016. Strength in the power-supply sector led the way, jumping 26.1 per cent from a year earlier. Fiscal support also boosted the struggling provinces, according to Chua Han Teng, a Singapore-based senior analyst at BMI Research, a unit of Fitch Group Inc. “The recovery isn’t likely to last as aggressive fiscal support is likely to be pulled back over the coming quarters,” Chua said. “Provinces will face political pressure to conduct reforms.”

“The recovery isn’t likely to last as aggressive fiscal support is likely to be pulled back over the coming quarters” Chua Han Teng, a Singapore-based senior analyst at BMI Research, a unit of Fitch Group Inc. Thirteen provinces posted growth accelerations, while 13 registered declines and five were unchanged from 2016. China’s economic growth unexpectedly picked up to 6.9 per cent in the first quarter, clocking its first back-to-back acceleration in seven years. Guangdong and Zhejiang, coastal economic powerhouses where private businesses and exporters play a more central role, both accelerated at a slower pace. Bloomberg News

Business Daily Thursday, May 4 2017 9

Greater China M&A

HNA takes top stake in Deutsche Bank It reflects a broader push by China into financial services globally as Beijing encourages its corporate sector to expand overseas Alexander Hübner and Arno Schuetze

Chinese conglomerate HNA Group has become Deutsche Bank’s biggest direct shareholder, upping its stake in the flagship lender of Europe’s top economy to just under 10 per cent, according to a U.S. regulatory filing. HNA’s buy, which one trader said would lift confidence in the lender’s stock, leaves roughly one fifth of the struggling bank in the hands of investors who may be pursuing strategic interests. It comes at a time of heightened uncertainty at the bank, as it grapples with a strategic turnaround, an uncertain global economy and the impact of Britain’s departure from the European Union. HNA’s stake puts it slightly ahead of Qatari investors. Funds controlled by Qatar’s former Prime Minister Sheikh Hamad bin Jassim al-Thani last year increased their stake, including options, to just under 10 per cent. The Chinese group has been on an acquisition spree, expanding from its traditional business of aviation and logistics into financial services,

betting on asset managers and consumer finance for growth at home and overseas. It reflects a broader push by China into financial services globally as Beijing encourages its corporate sector to expand overseas, although it faces increased regulatory scrutiny in the United States and Europe. Hefty legal penalties including for the sale of toxic U.S. mortgage debt

have hit Deutsche Bank hard and even prompted speculation last year, denied by the bank, that it needed a government bailout. Last month it asked investors to for an 8 billion euro cash injection, the fourth such request since 2010, putting it on track to raise more than its entire market value over roughly seven years. HNA last lifted its stake in Deutsche in March to 4.76 per cent. A regulatory filing with the U.S. Securities and Exchange Commission said it had now increased this to 9.9 per cent. Fund manager BlackRock owns 6.1 per cent. Reuters

Debt

Government to further regulate local financing China will further regulate local government debt issuance and financing, six national regulators said in a joint statement yesterday, reinforcing recent steps to bolster financial risk controls. China will strictly prohibit illegal debt issuance by local governments through public-private partnership projects, they said. The regulators included China’s finance ministry, the central bank, the banking regulator, the security regulator, the state planner, and the Ministry of Justice. The statement was posted on the finance ministry’s official website. Liquidity

PBOC injects RMB200 bln via OMOs

Oil industry

Traders idled as Mainland refiners fall foul of smog fight Teapots have seen their appeal fade over the past year A little over a year ago, China’s fast-growing private fuel makers were the newly minted stars of the global oil market, importing crude from the world’s biggest producers and seeking to sell their products abroad in a threat to rivals across Asia. Now, as the government cracks down on pollution and a glut of fuel at home, some traders who the refiners lured with an ambition to establish a global footprint are finding they have nothing to do. The processors, known as teapots, have been denied export licenses by the government, meaning they’ll have to remain home to compete with state-owned refining giants. That’s a relief for the wider Asian fuel market already overwhelmed by cheap supplies of Chinese gasoline and diesel, according to BMI Research. “We had specially hired three independent oil-products traders, who are now basically idled, which is quite a waste,” said Zhang Liucheng, director and vice-president at Shandong Dongming Petrochemical Group, the biggest of the private refiners. “We are still actively pitching to the Chinese government to grant us oil-product export quotas.” It’s the latest setback for the private refiners since they burst into the global oil market in 2015 armed with approvals to import crude. After being wooed by OPEC members Saudi Arabia and Iran, as well as trading giants including Trafigura Group and Glencore Plc, teapots have seen their appeal fade over the past year. Apart from the lack of pipeline and storage infrastructure, many face increased government scrutiny on taxes, and there’s mounting concerns about their environmental records. To make matters worse, China’s powerful state-owned enterprises haven’t welcomed the competition. “The government’s reluctance to grant the teapots export quotas is likely driven by the on-going debate about their contribution to pollution,” said Michal Meidan, a London-based analyst at industry consultant Energy

In Brief

Aspects Ltd. “The state-owned enterprises have probably sought to lay much of the fault with the teapots on this point.” China, the world’s biggest emitter, is strengthening its commitment to fight the air pollution that’s prompted health concerns due to the heavy smog cloaking its cities. The nation’s output of carbon dioxide from the energy industry fell 1 per cent in China in 2016, helping emissions flatline for a third year in a row, according to data from the International Energy Agency. The government controls fuel-export volumes by granting oil refiners shipment quotas through the year, which they must fulfil or risk a cut or review of those allowances. Private processors didn’t use up the export allocations they received for last year, providing the government with a reason to deny them quotas for 2017, Meidan said. They also contributed to a domestic fuel glut by boosting operations at the end of 2016 to use up crude import quotas. “Beijing seems to have realized that while the granting of crude import quotas to teapots have allowed for greater competition at home, rampant buying and subsequent production of fuels have contributed to a domestic glut,” said Peter Lee, an analyst at BMI Research, a unit of Fitch Group. “The relentless surge in Chinese output and exports has swamped the regional fuels market.”

While the private processors received approval to buy overseas crude in 2017, the amount they’ve been allowed to directly import in the first batch of quotas this year is 62 per cent of 2016’s total levels. Meanwhile, the Commerce Ministry awarded 12.4 million tons of fuel export quotas to only state firms in the first batch for 2017. In the second, government-run companies were given approval for a total of 3.34 million tons. “Lower Chinese fuel exports will prove supportive for refining margins in Asia, as the region has been grappling with an exodus of Chinese fuels over the past few quarters,” Lee said. “The void created by the easing of Chinese exports could be filled by supplies from the likes of South Korea and Japan that remain keen to win back some market share.” A refinery processing Dubai crude in Singapore had a margin of about US$3.78 a barrel as of Tuesday, down from a recent peak of US$7.38 in January, according to data compiled by Bloomberg. China exported a record 15.4 million tons, or about 314,000 barrels a day, of diesel overseas and an unprecedented 9.69 million tons, or 221,000 barrels a day, of gasoline in 2016, data from the nation’s General Administration of Customs show. Teapots started getting licenses to import foreign crude in 2015 as part of a government effort to boost private investment in China’s energy industry and reform its sprawling state enterprises by encouraging competition. The refiners previously had to rely on state-owned oil majors including PetroChina Co. and China Petroleum and Chemical Corp., known as Sinopec, for supplies of crude. “Over the years of China’s oil-market reform, the lobbying power has always been dominated by state oil companies led by PetroChina and Sinopec,” said Li Li, an analyst with ICIS China. “Teapots deserve to look outside China especially when their end market domestically is limited by powerful state competitors. They need the quota like a traveller needs a passport to see what is out there.” Bloomberg News

China’s central bank said yesterday it had injected RMB200 billion (US$29 billion) into money markets through open market operations, but it made no mention of maturing medium-term lending facility (MLF) loans. The People’s Bank of China injected RMB170 billion through seven-day reverse bond repurchase agreements, RMB20 billion through 14-day reverse repos, and an additional RMB10 billion through 28-day reverse repos, it said. The PBOC injected a net RMB70 billion into the money market last week. Yesterday, RMB230 billion worth of six-month MLF money was due to mature but in its daily announcement on open market operations the PBOC made no mention of MLFs. Oil industry

CNPC loads first crude oil into Myanmar-China pipeline China’s state-owned refiner China National Petroleum Corp (CNPC) said it has loaded the first crude oil through its Myanmar-to-China pipeline, the latest step towards supplying crude to its new refinery in Yunnan province. Some 1,150 cubic meters per hour of crude flowed into the 770-kilometre (480 mile) pipeline from Tuesday, CNPC said in a statement on Tuesday. The move comes almost a month after the first tanker carrying 140,000 tonnes of crude started discharging into the pipeline following the official launch. CNPC’s PetroChina plans to import overseas oil and pump it through the pipeline to supply its new 260,000-barrelsper-day Anning refinery in landlocked Yunnan province. Diplomacy

Trump nominee for China ambassador promises firm line President Donald Trump’s nominee for ambassador to China promised on Tuesday to take a firm line with Beijing on issues from North Korea to trade disputes and human rights, and seemed poised for an easy confirmation by the U.S. Senate. Iowa Governor Terry Branstad said he would use his decades of experience with China to press Beijing to do more to encourage North Korea to curb its nuclear ambitions. Pressed, Branstad said “there may well be” a role for measures such as imposing secondary sanctions on Chinese banks or other entities that violated U.N. Security Council resolutions by doing business with North Korea.

10 Business Daily Thursday, May 4 2017

Greater China Currencies

Yuan forecast to fall over coming year The latest predictions show less conviction in the dollar strength story than was the case last month Krishna Eluri

he Chinese yuan and Indian rupee are expected to weaken against the dollar over the coming year, a Reuters poll found, with the greenback supported by U.S. interest rate hikes, though analysts have trimmed their bearish bets on Asian currencies from the previous poll. China’s yuan is up just around 0.7

per cent so far this year, having lost nearly 7 per cent in 2016. In November, the yuan hit an eight-year low following Donald Trump’s shock election as U.S. President. In the latest poll of 60 foreign exchange strategists, taken over the past week, the yuan, also known as the renminbi, is forecast to weaken to 7.07 against the dollar in a year from around 6.89, where it was trading yesterday.

“There will be moderate strengthening in the U.S. dollar, contributing to stability in the yuan and, by extension, other emerging market currencies,” wrote Dirk Willer, EM strategist at Citi, in a note. “This is assumed to take place against the backdrop of moderately higher U.S. rates, consistent with our call for two more rate hikes from the Fed this year.” A separate Reuters poll showed investors reduced bullish bets on most Asian currencies. They fell to the lowest in a month for the Chinese yuan.

Still, the latest predictions show less conviction in the dollar strength story than was the case last month, with the latest poll medians for the yuan slightly higher than April’s poll. While concerns remain over President Trump’s policies, especially on Beijing’s large trade surplus with the U.S., the new administration has refrained from declaring China a currency manipulator despite campaign promises to do so.

“There will be moderate strengthening in the U.S. dollar, contributing to stability in the yuan and, by extension, other emerging market currencies” Dirk Willer, EM strategist at Citi Separately, the Indian rupee is forecast to weaken to 66.23 per dollar in the year, a more than 3 per cent fall from where it was trading recently at 64.22. The rupee has gained more than 5 per cent against the dollar so far this year, reaching a 20-month high of 63.92 per dollar late last month. The expected losses come despite the Reserve Bank of India having moved to a neutral stance earlier this year from an easing bias, although economists in a separate Reuters poll suggested the central bank’s next move will likely be a cut towards the end of the year. Reuters

Forex

Taiwan central bank says currency volatility ‘unavoidable’ The Taiwan dollar has strengthened about 8 per cent against the U.S. dollar so far this year Faith Hung

Taiwan’s central bank deputy governor said on Wednesday volatility in the local currency against the U.S. dollar is “unavoidable” but that it would not intervene in response to continuing foreign fund inflows. The central bank has been under pressure as the surging currency could cloud prospects for Taiwan’s export-driven economy.

Taiwan appeared again alongside China, Japan, South Korea, Switzerland and Germany on the latest watch list published last month of countries that the United States would monitor as potential currency manipulators. The semi-annual U.S. Treasury currency report has singled out those trading partners for closer scrutiny in

Key Points Taiwan cbank urges companies to be vigilant about FX hedging Says stronger Taiwan dollar is due to foreign fund inflows Says currency level is determined by demand vs. supply Despite this concern, the central bank has refrained from weakening the currency through market intervention, as a precaution against the possibility of being labelled a currency manipulator by the administration of U.S. President Donald Trump.

Taiwan central bank headquarters

an effort to curb what the U.S. calls “unfair currency practices.” The Taiwan dollar has strengthened about 8 per cent against the U.S. dollar so far this year, making it the best-performing currency in Asia. Earlier yesterday, it was traded at T$29.940, an intraday level not seen in two and half a years. “Currency volatility is unavoidable,” deputy governor Yang Chinlong said in response to questions from lawmakers at a legislative

hearing, adding that the surge can be attributed to foreign fund inflows. “Companies must be vigilant about currency hedging,” he said, adding that the central bank would not intervene if foreign fund inflows continues. “When the Taiwan dollar trades at T$29 - T$30 (to the U.S. dollar), the market perceives the U.S. dollar as too cheap,” he said. “The currency exchange rate is a matter of supply versus demand.” Reuters

Business Daily Thursday, May 4 2017 11

Asia Commodities

Combative Philippines environment chief ousted by lawmakers The Chamber of Mines of the Philippines said it would seek the reversal of Lopez’s moves to close mines Manolo Serapio Jr and Enrico Dela Cruz

hilippine lawmakers forced Environment Secretary Regina Lopez out of office yesterday, ending a 10-month tenure during which she ordered the closure of more than half the country’s mines and banned open-pit mining. Lopez’s rejection by the Commission on Appointments is final and a mining group said it would seek to reverse her controversial measures which were largely supported by President Rodrigo Duterte. His spokesman said Duterte would respect the panel’s decision. “It is the constitutional right of every Filipino to a clean and healthy environment,” an emotional, at times angry, Lopez told reporters. “It was a dream and promise we had for the country, it is unfortunate that business interests have in fact run the day.” A committed environmentalist, Lopez was selected by Duterte because of her record as an activist dedicated to the poor, which included cleaning up the Pasig river that flows through the heart of Manila, reforestation work and safeguarding areas of biodiversity. The Philippines is the world’s top supplier of nickel ore, used by China for steel production, and metals traders said suspended nickel mines could reopen. Nickel futures on the

London Metal Exchange slumped more than 2 per cent as news of Lopez’s ouster spread. The Chamber of Mines of the Philippines said it would seek the reversal of Lopez’s moves to close mines and ban open-pit mining as soon as a new minister was appointed. “We feel that those have no legal foundation,” said Chamber spokesman Ronald Recidoro. “There were no proper consultations held. And

more importantly it’s really out to kill the mining industry.” Lopez, 63, is the daughter of a media mogul. At 18, she left a life of privilege behind in the Philippines, took a vow of celibacy and became a yoga teacher and missionary in Africa, living in slums among the poor. In February, Lopez ordered the closure of 22 of the country’s 41 operating mines and the cancellation of dozens of contracts for undeveloped mines to protect water resources. Last week, she banned open-pit mining. Lopez said any replacement would “get clobbered” if they ran afoul of business interests. Lawmakers on the appointments

committee voted 16-8 in favour of removing Lopez. Senator Manny Pacquiao, head of the environment committee that held the hearings to determine Lopez’s qualifications, announced the outcome “with sadness in my heart.” “I believe in my heart no matter how several big people may be against Gina, she will always stand on what is morally and environmentally right and righteous,” said Pacquiao, referring to Lopez by her nickname. Pacquiao said the deliberation was “perhaps the longest, dramatic and most watched by all Filipinos from all walks of life.” Reuters

Key Points Lopez ordered over half of country’s mines shut She is second Duterte minister to be dismissed by Congress Mining group seeks reversal of her mine closure orders Philippines is world’s top nickel ore supplier Global nickel prices drop 2 pct

President Duterte’s spokesperson said he would respect the panel’s decision. Lusa

Employment

New Zealand posts strong Q1 job growth Wages grew at a sluggish 0.4 per cent on the quarter for 1.5 per cent annual growth Charlotte Greenfield and Cecile Lefort

New Zealand’s jobless rate fell close to eight-year lows in the first quarter, taking its employment rate to the rich world’s second highest, but even that was unlikely to dilute the central bank’s determination to keep rates on hold. The unemployment rate dropped to 4.9 per cent, just above an eightyear low of 4.8 per cent hit in the third quarter of 2016. Analysts had been expecting the unemployment rate to remain unchanged from the previous quarter at 5.2 per cent. Nevertheless the Reserve Bank of New Zealand (RBNZ) is expected to keep its official cash rate at a record low of 1.75 per cent when it meets next week, and is seen as unlikely to waver in its resolve to hold rates for two years or more. “The direct monetary policy implications from today’s figures are limited,” Philip Borkin, senior economist

at ANZ, said in a research note. “The RBNZ is going to want to see clear evidence that wage inflation is lifting...before it reacts,” he added. Wages grew at a sluggish 0.4 per cent on the quarter for 1.5 per cent annual growth, below analysts’ expectations of 0.5 per cent quarterly growth and a 1.7 per cent rise on the year.

‘The unemployment rate dropped to 4.9 per cent’ The participation rate jumped slightly to 70.6 per cent, just above analysts’ expectations that it would stay at 70.5 per cent. Jobs growth of 0.8 per cent largely due to the accommodation, food services and construction sectors taking

on workers to service the country’s tourism and building booms. The employment rate, which rose 0.3 per centage points to 67.1 per cent, was the second-highest among members of the Organization for Economic Cooperation and Development. But none of this is expected to

influence RBNZ monetary policy. The bank has cut rates seven times in the last two years to tackle low inflation and to ease fears of growing global protectionism which could damage New Zealand’s small, open trading economy. “For the RBNZ, they will be pleased but they appear to be on hold and more focused offshore with potential risks,” said Michael Turner, strategist at RBC Capital Markets. Reuters

12 Business Daily Thursday, May 4 2017

Asia Defence status

Japan’s Abe sets 2020 as target for new constitution Public opinions about amending the constitution, however, remain conflicted

apanese Prime Minister Shinzo Abe said yesterday that he hopes to see a revised constitution go into effect in 2020 under a plan that will see the first-ever change to the post-war charter. Speaking in a video message at a gathering to celebrate the he 70th anniversary of the constitution being enacted, Abe said he wanted the language in the revised constitution to mention Japan’s Self-Defence Forces.

the constitutionality of Abe and his ruling Liberal Democratic Party camp’s push to expand the scope of the nation’s forces. “By making explicit the status of the SDF in the constitution during our generation’s lifetime, we should leave no room for contending that the SDF may be unconstitutional,” the prime minister said.

In an upper house election held last July, Abe’s ruling coalition won a sweeping majority and along with conservative and pro-revision forces, the ruling camp command a twothirds majority in both chambers necessary to call a national referendum on changing the constitution. Article 9 of Japan’s pacifist constitution states that “the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes.”

It goes on to state that ... “land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized.” Public opinions about amending the Constitution, however, remain differed. According to a recent poll by Japan’s Kyodo News, 51 per cent of the respondents were against any constitutional amendments under the Abe administration, while 45 per cent were in favour. Xinhua

“By making explicit the status of the SDF in the constitution during our generation’s lifetime, we should leave no room for contending that the SDF may be unconstitutional” Shinzo Abe, Japanese Prime Minister

The current charter makes no mention of the existence of the Self-Defence Forces (SDF) in its war-renouncing pledges, which has led to a great deal of controversy regarding

Shinzo Abe, Japanese Prime Minister

Gas field row

India cuts oil import plans from Iran by a quarter Not all of India’s refiners plan to scale back orders from Iran, though Nidhi Verma

India plans to order about a quarter less Iranian crude oil than it bought last year, people familiar with the matter said, as state refiners cut term purchase deals over a row between New Delhi and Tehran on development of a natural gas field. The drop in volumes follows India’s threat to order state refiners - Hindustan Petroleum, Bharat Petroleum, Mangalore Refinery and Petrochemicals Ltd, and Indian Oil Corp - to reduce purchases from Iran if an Indian consortium is not awarded the rights to develop Iran’s huge Farzad B natural gas field. The volume cuts would put India’s imports of Iranian crude for this fiscal year at 370,000 barrels per day (bpd), according to the sources with knowledge of the planned deals. India is Iran’s top oil client after China, and last year imported about 510,000 bpd of crude from the country, according to shipping data in Thomson Reuters Eikon. The reduced 2017/2018 imports include 199,000 bpd by state refiners,

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a decline of about a third from last year, the sources said. Private refiners Essar and HPCL-Mittal Energy Ltd (HMEL) have renewed last year’s term contracts to buy 120,000 bpd and 20,000 bpd, respectively, they said. Most of the state refiners did not respond to queries on the matter, while Essar Oil, MRPL and HMEL

declined comment. India’s oil ministry also said it had no immediate comment. Analysts said apart from the gasfield row, India is also taking advantage of a narrow price spread between European oil benchmark Brent and Middle East price-setter Dubai crude, which makes it attractive to bring more oil from Europe into Asia. “Brent-related crudes are cheaper and sweeter than medium to heavy grades from Middle East,” said Ehsan ul Haq of KBC Energy Economics.

Also, Russia’s Rosneft may start bringing more non-Iranian crude, likely from Venezuela, to India after buying Essar Oil’s Vadinar refinery. Not all of India’s refiners plan to scale back orders from Iran, though. Private refiner Reliance Industries signed its first Iranian deal in seven years to buy 30,000 bpd of heavy Forozan crude oil, one of the sources said.

‘The volume cuts would put India’s imports of Iranian crude for this fiscal year at 370,000 barrels per day’ India’s overall crude demand is around 4.6 million bpd, third highest in the world behind the United States and China. It was one of the few countries that continued to deal with Iran despite international sanctions that were in place until 2016. Following are the details of India’s planned imports from Iran in 2017/18. Volumes are in ‘000 bpd and do not include condensate. Reuters

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Business Daily Thursday, May 4 2017 13

Asia Energy production

How two cutting edge U.S. nuclear projects bankrupted Westinghouse The miscalculations underscore the difficulties facing a global industry Tom Hals and Emily Flitter

In 2012, construction of a Georgia nuclear power plant stalled for eight months as engineers waited for the right signatures and paperwork needed to ship a section of the plant from a factory hundreds of miles away. The delay, which a nuclear specialist monitoring the construction said was longer than the time required to make the section, was emblematic of the problems that plagued Westinghouse Electric Co as it tried an ambitious new approach to building nuclear power plants. The approach - building pre-fabricated sections of the plants before sending them to the construction sites for assembly - was supposed to revolutionize the industry by making it cheaper and safer to build nuclear plants. But Westinghouse miscalculated the time it would take, and the possible pitfalls involved, in rolling out its innovative AP1000 nuclear plants, according to a close examination by Reuters of the projects. Those problems have led to an estimated US$13 billion in cost overruns and left in doubt the future of the two plants, the one in Georgia and another in South Carolina. Overwhelmed by the costs of construction, Westinghouse filed for bankruptcy on March 29, while its corporate parent, Japan’s Toshiba Corp, is close to financial ruin. It has said that controls at Westinghouse were “insufficient.” The miscalculations underscore the difficulties facing a global industry that aims to build about 160 reactors and is expected to generate around US$740 billion in sales of equipment in services in the coming decade, according to nuclear industry trade groups. The sector’s problems extend well beyond Westinghouse. France’s Areva is being restructured, in part due to delays and huge cost overruns at a nuclear plant the company is building in Finland. Even though Westinghouse’s approach of pre-fabricated plants was untested, the company offered aggressive estimates of the cost and time it would take to build its AP1000 plants in order to win future business from U.S. utility companies. It also misjudged regulatory hurdles and used a construction company that lacked experience with the rigor and demands of nuclear work, according to state and federal regulators’ reports, bankruptcy filings and interviews with current and former employees. “Fundamentally, it was an experimental project but they were under pressure to show it could be a commercially viable project, so they grossly underestimated the time and the cost and the difficulty,” said Edwin Lyman, a senior scientist at the Union of Concerned Scientists, who has written and testified about the AP1000 design. Westinghouse spokeswoman Sarah Cassella said the company is “committed to the AP1000 power plant technology”, plans to continue construction of AP1000 plants in China and expects to bid for new plants in India and elsewhere. She declined to comment on a detailed list of questions from Reuters.

Problems from the start

By early 2017, the Georgia and South Carolina plants were supposed to be producing enough energy to power more than a half a million homes and businesses. Instead, they stand half-finished.

Southern Co, which owns nearly half the Georgia project, and SCANA Corp, which owns a majority of the South Carolina project, have said they are evaluating the plants and could abandon the reactors altogether. “We will continue to take every action available to us to hold Westinghouse and Toshiba accountable for their financial responsibilities under the engineering, procurement and construction agreement and the parent guarantee,” Southern said in a statement. A spokesman declined to elaborate. The projects suffered setbacks from the start. In one instance, to prepare the Georgia plant for construction, Westinghouse and its construction partner in 2009 began digging out the foundation, removing 3.6 million cubic yards of dirt. But half of the backfill – the material used to fill the excavated area - failed to meet regulatory approval, delaying the project by at least six months, according to William Jacobs, the nuclear specialist who monitored construction of the plant for Georgia’s utility regulator. He declined to be interviewed. But the source of the biggest delays can be traced to the AP1000’s innovative design and the challenges created by the untested approach to manufacturing and building reactors, according to more than a dozen interviews with former and current Westinghouse employees, nuclear experts and regulators.

‘Overwhelmed by the costs of construction, Westinghouse filed for bankruptcy, while its corporate parent, Japan’s Toshiba Corp, is close to financial ruin’ Unlike previous nuclear reactors, the AP1000 would be built from prefabricated parts; specialized workers at a factory would churn out sections of the reactor that would be shipped to the construction site for assembly. Westinghouse said in marketing materials this method would standardize nuclear plant construction. Westinghouse turned to Shaw Group Inc, which held a 20 per cent stake in Westinghouse, to build sections for the reactors at its factory in Lake Charles, Louisiana. There, components for two reactors each in Georgia and South Carolina would be manufactured.

Lake Charles

Seven months after work began in the May 2010, Shaw had already conducted an internal review at the behest of the Nuclear Regulatory Commission (NRC) to document problems it was having producing components. In a letter to the NRC, Shaw’s then-executive vice president, Joseph Ernst, wrote: “The level and effectiveness of management oversight of daily activities was determined to be inadequate based on the quality of work.” He laid out a laundry list of deficiencies ranging from Shaw’s inability to weed out incorrectly made parts to the way it stored construction materials. Ernst did not respond to a phone

call seeking comment. Over the next four years, regulatory and internal inspections at Lake Charles would reveal a slew of problems associated with the effort to construct modular parts to fit the new Westinghouse design, NRC records show. When a sub-module was dropped and damaged, Shaw managers ordered employees to cover up the incident; components were labelled improperly; required tests were neglected; and some parts’ dimensions were wrong. The NRC detailed each one in public violation notices. Then there was the missing and illegible paperwork. The section that was delayed more than eight months by missing signatures would become one of 72 modules fused together to hold nuclear fuel. The 2.2 million pound unit was installed more than two years behind schedule. It was not until June 2015 that the Lake Charles facility was building acceptable modules, according to a report by Jacobs. By then, Shaw had been bought by Chicago Bridge & Iron. Gentry Brann, a CB&I spokeswoman, said the company put the Lake Charles plant under new management and installed new procedures after the 2013 acquisition. She said Westinghouse was to blame for subsequent delays, citing “several thousand” technical and design changes made after work had already started on various components. Westinghouse declined to comment.

The NRC

To some extent, Westinghouse also was hamstrung by the NRC, which

imposed stringent requirements for the new reactors. To comply, Westinghouse made some design changes that were tiny tweaks; others were larger. For instance, before the NRC would issue the utilities an operating license for the Georgia plant, it demanded changes to the design of the shield building, which protects against radiation leaks. The regulator said the shield needed to be strengthened to withstand a crash by a commercial jet, a safety measure arising from the Sept. 11, 2001 attacks. The NRC issued the new standard in 2009, seven years after Westinghouse had applied for approval of its design. The company, in bankruptcy court filings, said the NRC’s demand created unanticipated engineering challenges. A spokesman for the NRC, Scott Burnell, said the changes should not have come as a surprise, since the agency had been talking about the stringent requirements for several years. Westinghouse changed its design to protect against a jet crash, but at that point the NRC questioned whether the new design could withstand tornadoes and earthquakes. Westinghouse finally met the requirements in 2011, according to a report by Jacobs. By 2016 Westinghouse began to grasp the scope of its dilemma, according to a document filed in its bankruptcy: Finishing the two projects would require Westinghouse to spend billions of dollars on labour, abandoning them would mean billions in penalties. Westinghouse determined it could not afford either option. Reuters

14 Business Daily Thursday, May 4 2017

International In Brief Negotiation

EU Brexit chief unveils detailed vision European Union chief Brexit negotiator Michel Barnier unveiled his first detailed vision of how talks with the U.K. will take shape. “These directives are for the first phase of the negotiations only,” Barnier told reporters on Wednesday in Brussels. Barnier’s draft negotiating mandate covers the main areas that need to be tackled by the two sides when discussions get under way after the British elections on June 8, and touches on the U.K.’s financial obligations, citizens’ rights and its border with Ireland. Portugal

Wind provides 4/5 of electricity needs Wind farms generated 85 Gigawatt-hours in Portugal on Sunday, providing 79 per cent of the country’s requirements, the best performance in Europe. The European Wind Energy Association (EWEA) said the Portuguese wind production on Sunday was higher that Ireland, where it accounted for 51 per cent of consumption and Denmark (48 per cent). Germany, despite having the greatest potential output, 389 GWh, only came fifth as this only represents 36 per cent of the country’s consumption. Spain, came in fourth place.

Monetary drive

Euro-area recovery maintains pace as ECB stimulus decision nears Sentiment in the euro area could be buoyed if elections in France confirm Emmanuel Macron as the country’s next president Marcus Bensasson

he euro area maintained its growth momentum at the start of 2017, strengthening the case of those pressuring the European Central Bank to sketch out an end to extraordinary stimulus measures. Gross domestic product rose 0.5 per cent in the first three months of the year, according to an initial estimate published by the European Union’s statistics office yesterday. That’s in line with the median estimate in a Bloomberg survey of economists and matches the pace of the previous quarter. While policy makers have expressed different views on the sturdiness of the 19-nation economy, June seems to be emerging as the month in which the Governing Council will set the course for a gradual exit from monetary stimulus. ECB President Mario Draghi has characterized the recovery, now in its fourth year, as “ solid and broad” as indicators ranging

from manufacturing to employment show signs of picking up and inflation approaches the central bank’s goal.

‘ECB head Draghi recognized a shift in the region’s economic outlook when he said last week that risks are “moving toward a more balanced configuration”’ Eurostat won’t release data for individual countries until May 16 but some national institutions have already reported preliminary figures.

Sentiment in the euro area could be buoyed if elections in France confirm Emmanuel Macron as the country’s next president in a May 7 runoff with nationalist Marine Le Pen. Such a result would ease concern about political risks to the single currency. A Greek deal with bailout creditors on Tuesday also diminishes the risks of a euro breakup as it means the country will probably be able to fulfill bond repayments in July. Draghi recognized a shift in the region’s economic outlook when he said last week that risks are “moving toward a more balanced configuration.” At the same time, he maintained that the recovery continues to depend on monetary support and warned against tightening policy too soon. Since then, a report showed euro-area inflation accelerated to 1.9 per cent, the level the ECB aims to achieve over the medium term, with a measure of underlying price growth at its highest in almost four years. Ewald Nowotny, one of the first policy makers to comment publicly after the Governing Council’s April 27 meeting, told Austrian newspaper Die Presse that officials “will have to discuss” their policy strategy in June. Bloomberg News

Corruption

Brazil prosecutors lay new graft charges Brazilian prosecutors said on Tuesday they had laid new corruption charges against a one-time chief of staff for former President Luiz Inacio Lula da Silva, who is already serving long jail sentences on other graft convictions. Prosecutors accused Jose Dirceu, who was released from jail pending an appeal, of taking 2.4 million reais (US$755,880) in bribes from two engineering firms - UTC Engenharia SA and Engevix Engenharia SA. The money was allegedly used for public relations efforts to improve Dirceu’s image before, during and after a 2012 trial, in which he was convicted in a widespread scheme of making monthly payments to congressmen to win support for legislation. Labour market

German unemployment falls further German unemployment extended its four-year decline last month, suggesting companies are confident that momentum in Europe’s largest economy remains strong. The number of people out of work slid by a seasonally adjusted 15,000 to 2.543 million in April, data from the Federal Labour Agency in Nuremberg showed yesterday. Economists in a Bloomberg survey forecast an 11,000 decline. The jobless rate was unchanged at 5.8 per cent. Demand is being supported by both domestic spending and gradually strengthening global trade, brightening the outlook for companies.

Derivatives

U.S. SEC approves request to list quadruple-leveraged ETFs Regulators’ move to approve the products comes after a difficult time for sponsors of more exotic ETFs Trevor Hunnicutt

The Securities and Exchange Commission on Tuesday approved a request to trade quadruple-leveraged exchange-traded funds, marking a first for the growing market for such products in the United States. The request to list ForceShares Daily 4X US Market Futures Long Fund, under the ticker UP, and ForceShares Daily 4X US Market Futures Short Fund, under the ticker DOWN, was filed by Intercontinental Exchange Inc’s NYSE Arca exchange.

One of the funds is designed to deliver 400 per cent of the daily performance of S&P 500 stock index futures, while another fund will aim to deliver four times the inverse of that benchmark. That means a fund could go up 8 per cent on a day the index it tracks falls by 2 per cent. ETFs offering three times leverage already trade in the United States, but more reactive products have been limited to listing in Europe. “We’re excited about it,” said Sam Masucci, chief executive officer at Exchange Traded Managers Group LLC, which is distributing the product, though he said the product is “not going to be for everybody. “But for those people that are looking for the leveraged exposure to the S&P and they’re not looking to do it by way of a futures product here you have a publicly listed security,” Masucci said. Regulators’ move to approve the

products comes after a difficult time for sponsors of more exotic ETFs. Last year, the SEC presented draft rules that would restrict the use of derivatives, which was seen crimping some fund managers’ ability to keep highly leveraged products on the market. In March, the agency ruled against an application by investors Cameron and Tyler Winklevoss to bring the first Bitcoin ETF to market, although the SEC recently said it would review that decision. The U.S. Senate voted on Tuesday to confirm attorney Jay Clayton to head the SEC, a change in leadership that could prompt a change in tack by the agency through which investment products come to market. Douglas Yones, a top NYSE ETF official, said in an emailed statement that he hopes the approval “paves the way for us to work with other leveraged product issuers over the rest of the year.” The product sponsor could not immediately be reached for comment. Reuters

Business Daily Thursday, May 4 2017 15

Opinion Business Wires

Bangkok Post The business sector has revised up the growth outlook for Thai exports this year to 2-3.5 per cent amid the global economic recovery that has helped boost demand, says the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB). The revision, up from an earlier forecast of 1-3 per cent, is based on expected GDP growth of 3.5-4 per cent, said the chairman of the Thai Chamber of Commerce, Kalin Sarasin, who chaired the JSCCIB meeting. In the first quarter of 2017, Thai exports rose 4.9 per cent from the same period last year to US$56.5 billion due to rising demand in several industries.

The Times of India Indian manufacturing sector registered growth for the fourth straight month in April, but at an unchanged rate from the previous month, as rise in new orders was offset by moderate increases in output, a survey said. The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — an indicator of manufacturing activity — matched March’s reading of 52.5. Though the upturn in order books was “most pronounced” since last October and new export orders rose for the third month in a row, the rate of expansion eased from March.

Lessons from the anti-globalists

Taipei Times Chinese Nationalist Party (KMT) lawmakers yesterday again occupied the legislative speaker’s podium (in Taiwan) as they urged their colleagues to retract a bill to implement the Forward-looking Infrastructure Development Plan. With the Economics Committee scheduled to lead a second joint-committee review of the bill yesterday, the KMT caucus staged a protest against what it called the NT$880 billion (US$29.3 billion) “money-pit bill,” demanding a redrafting of the bill to reduce the expenditure and shorten its target period from eight years to four.

The Korean Herald Korean retailers are betting on suburban outlets to secure a new profit driver as they find little room for growth in the downtown department store business, industry sources said yesterday. Lotte Group, Hyundai Department Store, Shinsegae Co. and other retail conglomerates said they plan to open additional outlets or expand their existing shopping malls on the outskirts of Seoul. More than nine outlets are scheduled to open in the next two years to meet growing demand from customers who can take short drives outside the city and shop.

he likely victory of Emmanuel Macron in the French presidential election has elicited a global sigh of relief. At least Europe is not going down the protectionist path that President Donald Trump is forcing the United States to take. But advocates of globalization should keep the champagne on ice: protectionists and advocates of “illiberal democracy” are on the rise in many other countries. And the fact that an open bigot and habitual liar could get as many votes as Trump did in the U.S., and that the far-right Marine Le Pen will be in the run-off vote with Macron on May 7, should be deeply worrying. Some assume that Trump’s poor management and obvious incompetence should be enough to dent enthusiasm for populist nostrums elsewhere. Likewise, the U.S. Rust Belt voters who supported Trump will almost certainly be worse off in four years, and rational voters surely will understand this. But it would be a mistake to conclude that discontent with the global economy – at least how it treats large numbers of those in (or formerly in) the middle class – has crested. If the developed liberal democracies maintain status quo policies, displaced workers will continue to be alienated. Many will feel that at least Trump, Le Pen, and their ilk profess to feel their pain. The idea that voters will turn against protectionism and populism of their own accord may be no more than cosmopolitan wishful thinking. Advocates of liberal market economies need to grasp that many reforms and technological advances may leave some groups – possibly large groups – worse off. In principle, these changes increase economic efficiency, enabling the winners to compensate the losers. But if the losers remain worse off, why should they support globalization and pro-market policies? Indeed, it is in their self-interest to turn to politicians who oppose these changes. So the lesson should be obvious: In the absence of progressive policies, including strong socialwelfare programs, job retraining, and other forms of assistance for individuals and communities left behind by globalization, Trumpian politicians may become a permanent feature of the landscape. The costs imposed by such politicians are high for all of us, even if they do not fully achieve their protectionist and nativist ambitions, because they prey on fear, inflame bigotry, and thrive on a dangerously polarized us-versus-them approach to governance. Trump has levelled his Twitter attacks against Mexico, China, Germany, Canada, and many others – and the list is sure to grow the longer he is in office. Le Pen has targeted Muslims, but her recent comments denying French

“

Joseph E. Stiglitz a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute

responsibility for rounding up Jews during World War II revealed her lingering anti-Semitism. Deep and perhaps irreparable national cleavages may be the result. In the U.S., Trump has already diminished respect for the presidency and will most likely leave behind a more divided country. We must not forget that before the dawn of the Enlightenment, with its embrace of science and freedom, incomes and living standards were stagnant for centuries. But Trump, Le Pen, and the other populists represent the antithesis of Enlightenment values. Without blushing, Trump cites “alternative facts,” denies the scientific method, and proposes massive budget cuts for public research, including on climate change, which he believes is a hoax. The protectionism advocated by Trump, Le Pen, and others poses a similar threat to the world economy. For three-quarters of a century, there has been an attempt to create a rules-based global economic order, in which goods, services, people, and ideas could move more freely across borders. To the applause from his fellow populists, Trump has thrown a hand grenade into that structure. Given the insistence of Trump and his acolytes that borders do matter, businesses will think twice as they construct global supply chains. The resulting uncertainty will discourage investment, especially cross-border investment, which will diminish the momentum for a global rules-based system. With less invested in the system, advocates for such a system will have less incentive to push for it. This will be troublesome for the entire world. Like it or not, humanity will remain globally connected, facing common problems like climate change and the threat of terrorism. The ability and incentive to work cooperatively to solve these problems must be strengthened, not weakened. The lesson of all of this is something that Scandinavian countries learned long ago. The region’s small countries understood that openness was the key to rapid economic growth and prosperity. But if they were to remain open and democratic, their citizens had to be convinced that significant segments of society would not be left behind. The welfare state thus became integral to the success of the Scandinavian countries. They understood that the only sustainable prosperity is shared prosperity. It is a lesson that the U.S. and the rest of Europe must now learn. Project Syndicate

Like it or not, humanity will remain globally connected, facing common problems like climate change and the threat of terrorism

”

16 Business Daily Thursday, May 4 2017

Closing Annual report

Beijing will step up checks on trade, investment in 2017

Growth in China’s services trade deficit will gradually stabilise, and crossborder capital flows will become more China will boost authenticity and balanced, the regulator said. Overseas compliance checks on trade and investment this year, its forex regulator investment yields will likely increase said yesterday, and increase checks and this year. China will also push forward with punishment on illegal forex activities. It also expects a surplus in the country’s its market-based yuan exchange current account and a deficit in capital rate reform and increase the yuan’s flexibility in 2017, the regulator said, and financial accounts for 2017, the adding it would optimise diversification State Administration of Foreign of forex reserves to serve China’s Exchange said in its annual report for strategic goals. Reuters 2016 published on its website.

Aviation

Made-in-China passenger jet set to take wing Aviation analysts said Shanghai-based COMAC has a long journey ahead before it can challenge the lock on the market by Boeing and Airbus Albee Zhang

hina is expected this week to conduct the maiden test flight of a home-grown passenger jet built to meet soaring domestic travel demand and challenge the dominance of Boeing and Airbus. The C919, built by state-owned aerospace manufacturer Commercial Aircraft Corporation of China (COMAC), was set to take wing over Shanghai on Friday, the company said yesterday, according to the official Xinhua news agency. “If weather conditions are not suitable, the maiden flight will be rescheduled,” COMAC said, adding that engineers had completed some 118 tests. The narrow-body jet represents nearly a decade of effort in a state-mandated drive to reduce dependence on European consortium Airbus and US aerospace giant Boeing.

“The first flight itself is not a huge deal. (But) of course, it’s going to be a hugely symbolic moment in the evolution of China’s aviation industry,” said Greg Waldron, Asia managing editor at industry publication Flightglobal. The C919 is the country’s first big passenger plane and the latest sign of growing Chinese ambition and technical skill, coming one week after China launched its first domestically made aircraft carrier and docked a cargo spacecraft with an orbiting space lab. The C919 can seat 168 passengers and has a range of 5,555 kilometres.

Long way to go

China is a huge battleground for Boeing and Airbus, with its travellers taking to the skies in ever-growing numbers. The Chinese travel market is expected to surpass the United States by 2024, according to the International Air Transport Association.

Airbus has estimated Chinese airlines will need nearly 6,000 new planes over the next two decades, while Boeing foresees 6,800 aircraft. Both put the combined price tags for those planes at around US$1 trillion. But aviation analysts said Shanghai-based COMAC has a long journey ahead before it can challenge the lock on the market by Boeing and Airbus. “This is an important milestone for China with this new aircraft. But for it to move to the next stage, which is to sell this product, is not going to be so easy,” said Shukor Yusof, an analyst with Malaysia-based aviation consultancy Endau Analytics.

‘It had already received 570 orders by the end of last year, almost all from domestic airlines’ But COMAC may be able to rely on purchases by fast-growing Chinese airlines. It had already received 570 orders by the end of last year, almost all from domestic airlines. Waldron agreed it would take time but said that over the next century China would become a world aviation player. “You are going to have three big companies. You will have Boeing, you will have Airbus, and you will have COMAC,” he said. China has dreamed of building its

own civil aircraft since the 1970s, when it began work on the narrow-body Y-10, which was eventually deemed unviable and never entered service. COMAC’s first regional jet, the 90-seat ARJ 21, entered service in 2016, several years late.

Long-haul ambition

The ARJ 21 is currently restricted to flying domestic routes as it still lacks the Federal Aviation Administration (FAA) certification that would allow it to fly US skies. China also has been in talks with the FAA to obtain certification for the C919, without result. The C919’s first test flight had been due to take place in 2016 but was delayed. Besides the C919, China is also working with Russia to develop a long-haul wide-bodied jet called the C929. Although the C919 is made in China, foreign firms are playing key roles by supplying systems as well as the engines, which are made by CFM International, a joint venture between General Electric of the US and France’s Safran. During a visit to COMAC in 2014, President Xi Jinping expressed concern that not having a home-grown plane left China at the mercy of foreign industrial groups. China last August launched a new multi-billion dollar jet-engine conglomerate with nearly 100,000 employees, with the hope of powering its own planes with self-made engines. After the C919’s first flight, it will need to pass tests to obtain Chinese airworthiness certification before it can be sold. AFP

Markets

Regulator

Luxury

China seeks to calm investors after selloff

Mainland insurance sector’s All aboard: luxury Japanese premium income rises train has bath and fireplace

China is breaking out its mouthpieces -- and wallet -- as it seeks to soothe investors in the face of tighter financial market regulations. The central bank-run Financial News urged stock investors not to overreact to tougher regulations in front-page commentary yesterday. The monetary authority will prevent swings in liquidity from exceeding tolerable level, the official Xinhua News Agency-owned China Securities Journal added in a separate front-page opinion piece. “Policy makers are trying to send a very clear signal -- they do not want a disorderly deleveraging process,” said Tommy Xie, an economist in Singapore at Oversea-Chinese Banking Corp. “But investors are still concerned about policy risks, so any news on tighter regulation can still trigger quick market volatility in the near term.” Mainland China’s benchmark Shanghai Composite Index retreated 2.1 percent in April amid spiking bond yields as regulators overseeing banking, insurance and securities trading issued a flurry of directives, targeting everything from excessive borrowing to speculation in equities. Bloomberg News

China’s insurance sector recorded RMB1.59 trillion (US$230.7 billion) in premium income in the first quarter, up 32 percent from a year earlier, the country’s insurance regulator said in an online statement yesterday. Compared with a 42 percent on-year rise in the first quarter of 2016, the rate of growth of the insurance industry slowed down due to tighter regulations as part of Beijing’s broader effort to de-leverage the financial system and curb systematic risks. Premium income earned by life insurance companies rose 37 percent on year to RMB1.3 trillion during the first three months, while property and casualty insurers received RMB263.5 billion in premium income. Insurers earned RMB185.6 billion in investment income during the January-March period, up 34 percent from a year earlier. Equity investment accounted for 13 percent of their total outstanding investment. Total insurance industry assets stood at RMB16.18 trillion by end-March, up 7 percent from the start of the year. Reuters

It’s got Michelin-starred chefs, solid cypress bathtubs and a cosy snug complete with roaring fire: the Shiki-Shima could hold its own against any five-star hotel. Not bad for a train. In a country best known for its super-fast “Shinkansen” bullet trains, the emphasis in Japan’s latest extravaganza on rails is on savouring the moment, with no expense spared to create the most luxurious travelling experience. Customers willing to shell out up to 950,000 yen (US$8,500) per person can enjoy a top-of-therange suite aboard the Shiki-Shima for four days and three nights of unparalleled extravagance. The 10-car train has huge viewing windows through which customers can see the northern Japanese countryside used to grow the ingredients in seasonal delicacies prepared by the on-board chefs. After dinner they can gather for a drink around the piano, or sit and soak up the atmosphere next to the fireplace -- actually a trick created by steam and coloured light -- on a journey that takes them from Tokyo to the northernmost island of Hokkaido and back again. AFP