Business Daily #1294 May 12, 2017

Pack your bags, fly to Venice, and check out the art biennial.

Enjoy cocktails en route on cloud nine - and ah!

Don’t forget it’s Mother’s Day this weekend.

Consigliere Pages 8 & 9

Friday, May 12 2017 Year VI Nr. 1294 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Markets

HKEx head says new Mainland platform to support futures trading Page10

ODI

Study: ‘Ice Age’ in Outbound Direct Investment from Mainland this year Page 12

www.macaubusinessdaily.com

Private data

Climate focus

Personal data protection enquiries on the rise in the MSAR Page 5

Sino-EU summit arranged and ready to pressure Trump Page 16

Prosecutors summarise case against Ho Ho Chio Meng trial

The case has mesmerised the local population.

Ex-Prosecutor General Ho Chio Meng is in the dock on multiple criminal charges. In summing up yesterday, prosecutors took turns to list a massive amount of information regarding his alleged criminal activities. Today, Ho’s defence team is expected to respond. Page 4

Land of the Rising Opportunities

Anti-laundering legal frame passed

The Legislative Assembly has assented. To rules countering money laundering and disrupting the financing of terrorism. Social housing was also debated during the session.

Japan Gaming Congress A day filled with frenetic activity at an industry Congress. As casino operators manoeuvre to get a piece of Japan’s casino development cake. Partnerships, aspirations, strategies and vision dominated a thrilling session followed closely by Business Daily. Page 7

Industrious meetings

Urban renewal Consensus reached. On tax benefits applicable to renovating industrial buildings.

So say the Urban Renewal Committee. Making progress, too, in terms of temporary accommodation for occupants of buildings under the jackhammer. Page 3

Champions of globalisation Legislation Page 2

HK Hang Seng Index May 11, 2017

25,125.55 +110.13 (+0.44%)

Geely Automobile Holdings China Resources Power

Worst Performers

+3.66% +2.71%

Want Want China Holdings

+1.51%

AAC Technologies Holdings

-10.45%

Belle International Holdings

-0.33%

Cheung Kong Property

+1.24%

China Unicom Hong Kong

-0.96%

MTR Corp Ltd

-0.32%

-0.60%

BOC Hong Kong Holdings

-0.30%

Link REIT

+2.05%

New World Development

+1.24%

CLP Holdings Ltd

China Mengniu Dairy Co Ltd

+1.90%

CNOOC Ltd

+1.24%

China Merchants Port Hold-

-0.46%

Bank of China Ltd

-0.26%

Tencent Holdings Ltd

+1.68%

CK Hutchison Holdings Ltd

+1.19%

Lenovo Group Ltd

-0.40%

China Mobile Ltd

-0.23%

25° 29° 24° 28° 25° 27° 22° 27° 23° 27° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Sil Road summit Starting Sunday, China’s hosting a major summit. Showcasing its ambitions to revive ancient Silk Road trade routes. To ignite a new era of globalisation. All are welcome to participate. The forum will spotlight President Xi Jinping’s ‘One Belt, One Road’ Initiative. Page 11

2 Business Daily Friday, May 12 2017

Macau Financial safety

New ATM technology to prevent ‘misuse’

Mr Leong noted that the technology might have some influence on visitor behaviour, particularly regarding their spending in Official information organ GCS has entertainment resorts. He expected it might announced that Leong Vai Tac, Secretary take some time for visitors to get used to for Economy and Finance, yesterday said the new measure, according to GCS. that “introducing ‘know your customer’ Local financial authorities will phase in KYC (KYC) technology in Macau’s automated technology in all ATMs across the city, GCS teller machines (ATMs) was to prevent people from misusing such cash withdrawal says. The primary phase covers ATMs in or near casinos, said Mr Leong. facilities.”

AML

AML law passed, permanent tender for social housing to be debated

Y

esterday, the local Legislative Assembly (AL) passed the law revision of two measures - money laundering measures and countering the financing of terrorism – through a series of alterations to Articles in the two relevant laws currently in effect.

Although not decided unanimously, all Articles in question were voted through, with no spoken objections being raised over the course of the voting process.

The bills passed their first reading in November and expand the current law to cover suspects who have unsuccessfully try to launder money, as well as improving review measures by gaming operators of their clients and contractors.

In the same AL session, a motion put forward by legislator Ella Lei Cheng I for debate on opening a permanent tender for social housing was approved, with 17 votes in favour, seven against and abstentions by legislators Chui Sai Cheong and Cheang Chi Keong.

A number of the favouring legislators lent their support after the approval, with legislator Ng Kuok Cheong proposing to advance the construction of public housing buildings at the same time the government is evaluating candidates who have requested it, finalising the evaluation process at the same time as building construction.

“In reality I think there are conditions to open the tender for

candidacies, even this year, and it won’t waste any time because we already have plans to construct public housing in certain areas,” noted the legislator, mentioning in particular to reclaimed land Zone A. Legislator Chan Chak Mo questioned whether the government has

resources for evaluating changing conditions of candidates throughout the waiting process, given changes in marital status or employment potentially affecting their eligibility, a waiting process which legislator Kwan Tsui Hang points out “can take up to one year”.

Legislator Melinda Chan said the attribution of social housing should be permanent and merit based, not like “a lucky draw, like a casino game . . . It should be based on those that need it most, for those who have to take care of children, those with diseases.” K.W.

Plenary meeting of the Legislative Assembly holds a second-reading debate and a vote on the amendment to Law No. 14/2009 on the regime of public service positions; the execution act on the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); Law No. 2/2006 on the prevention and suppression of the crime of money laundering; and Law No. 3/2006 on the prevention and suppression of the crimes of terrorism. GCS

Telecommunications

Urban planning

Operator ‘Three’ further abolishes roaming charges

DSSOPT solicits public opinion on land use

Telecommunications operator Three announced yesterday the abolishment of roaming charges to a further two destinations - Singapore and Brazil - effective June 15, making a total of 60 destinations which can enjoy no extra charges for roaming services abroad.

Macau and Hong Kong are also included in the 60 destinations.

Dave Dyson, Chief Executive, Chief

Executive of Three, said in a press release: “We are committed to unlocking unfair roaming charges for British travellers, not just in the EU but across the world . . . Our announcement today is testament to this, as we extend our popular ‘Feel At Home’ service with two additional worldwide destinations, taking our total to 60 with 17 of those being outside of Europe.” C.U.

The Land, Public Works and Transport Bureau (DSSOPT) commenced the gathering of opinions yesterday on 10 retrieved lands designated for other usage, as posted on the official Urban Planning Information website.

The public consultation period will last until May 25 this year, with opinions collected on three long-term land concessions and seven private plots of land.

The concession plot located near Avenida Dr. Sun Yat Sen on Taipa Island is the largest of the ten, occupying 669 square metres. According to the proposal, it is suggested the land be used for the construction of a hotel of a maximum height of 90

metres.

The remaining nine plots are earmarked for non-industrial usage.

The second largest plot, which is privately owned, is situated near Rua do Almirante Sérgio.

Occupying 433 square metres, the plot is separated into three portions, according to the proposal. It is also located within the protected heritage district.

With the implementation of the Urban Planning Law on March 1 2014, all land plots except those to be used for public infrastructure are subject to public opinions to be deliberated upon by the Urban Planning Committee.

Business Daily Friday, May 12 2017 3

Macau

Urban Planning

Urban Renewal Committee: Tax benefits for renovated industrial buildings Three taskforces of the Urban Renewal Committee also discussed legal support for residential building renewal and suggestions regarding the setup of the government’s wholly-owned company Cecilia U cecilia.u@macaubusinessdaily.com

S

peaking after the fourth plenary meeting of the Urban Renewal Committee yesterday, Paul Tse See Fan, co-ordinator of the first taskforce of the Urban Renewal Committee, reported that the Committee has basically reached consensus on the tax benefits for renovated industrial buildings.

Tse said the taskforce will consider the scope of the tax benefits vis-a-vis stamp duty and commercial tax, etc.

The first taskforce also discussed

the plan of temporary accommodation for residents living in buildings earmarked for renovation.

“Aside from providing temporary units, we would also consider providing options like rental subsidies to allow residents to find a place to rent for a temporary stay as they wish,” said Tse. He also revealed that the first taskforce advocates improving and expanding the plan of temporary accommodation, such as whether rental subsidies should include commercial units.

Meanwhile, Paulino do Lago Comandante, co-ordinator of the second

taskforce, said that suggestions on setting up the government’s wholly owned company will be compiled and sent to the government soon.

Comandante disclosed that the taskforce has referenced companies owned by the Hong Kong Urban Renewal Authority as well as local companies wholly owned by the MSAR Government, noting the nature of these companies differs from the company in question.

“So we can only reference the operation method,” said Comandante.

Suggestions will be made regarding matters such as the company’s structure of the board of directors and the monitoring mechanism of the company.

Regarding the gentrification of industrial areas, the second taskforce discussed how the current conditions of industrial buildings could meet fire safety requirements as

well as other legal requirements for renovation.

Meanwhile, the co-ordinator of the third taskforce of the Committee discussed yesterday the law guaranteeing the interests of different parties for the renovation of old buildings.

After discussing the approval ratio of ownership for reconstruction, the third taskforce perceived that the interests of residents and owners who object to renovation are important as well, indicated U. “Therefore we have referenced the law from Hong Kong on compensating residents for the demolition of buildings and also settlement of affected residents [...] We also referenced Taiwan [law],” said U. He expressed the hope of drafting laws that could balance all parties’ interests, while noting that the draft has to be in accordance with the actual conditions of Macau.

4 Business Daily Friday, May 12 2017

Macau

Crime

Prosecution sum up at Ho trial The corruption trial against former Prosecutor General Ho Chio Meng saw the prosecution present its final allegations Nelson Moura nelson.moura@macaubusinessdaily.com

Y

esterday was the first of the two days reserved for the final summing up of the trial of former Prosecutor General Ho Chio Meng, as the current 154-day trial reaches its final stages.

The session at the Court of Final Appeal took place on­ ly in the morning with cor­ ruption trial Assistant Pros­ ecutors Chan Tsz King and Kuok Un Man taking turns to summarise the 1,530 accusa­ tions against Mr. Ho and the statements made by each and every witness who took the stand.

“We make these final statements with a heavy heart since we’re talking about someone who was our superior and held a high position in the city’s judicial system. However, nobody is above the rule of law and Mr. Ho should have ensured he followed all the legal procedures a function of his stature should entail,” Assistant Prosecutor Chan said in his opening remarks.

“The prosecution will try to prove and make evident the role he had [regarding] the accusations made against him by presenting the evidence and statements collected during court hearings,” he added.

The court session was also attended by Mr. Ho’s former main defence lawyer, Leong Weng Pun, who was replaced by lawyer Oriana Inácio Pun after abandoning his position claiming unfair treatment by the court’s judges towards the defence.

“The pressure involved in the case has always been high but we’re confident,” lawyer

Oriana Pun told the press.

The prosecution will complete its final statements today, followed by the defence’s last statements.

Summary of yesterday’s final remarks regarding main accusations against Mr. Ho Accusation: 7 fraud and 1 embezzlement instances related to benefits obtained by alleged Prosecutor’s Office consultant Wang Xiandi to a value of MOP4.2 million.

The final remarks by the prosecution started with the accusation of benefits related to Wang Xiandi, a former employee of the Public Prosecutor’s Office hired for two periods from 2005 to 2006 and from 2010 to 2014.

According to the accusation, Ms. Wang was hired by the former top official as an assessor of the department despite her lack of qualifications for the position, having worked previously as an air hostess until 2005.

The prosecution stated that there were no records of the positions Ms. Wang held in the department, with former employees saying they only saw her in the department five times over a four year period.

It was also mentioned that Ms. Wang accompanied Mr. Ho on many outbound trips financed by funds from the Office at least 18 times, including a trip to Dubai in 2009 and to Shanghai in 2010.

The former prosecutor has stated Ms. Wang was hired on a ‘confidentiality’ status serving as an assistant in investigations that involved Mainland China officials, but

the prosecution mentioned the disappearance of Ms. Wang as proof of guilt.

“Mr. Ho said we didn’t question Wang but where is she? Why has she not co-operated with the investi­ gations?” the prosecution asked.

Accusation: 1 crime of criminal association or possible nine crimes of abuse of power regarding embezzled public funds of MOP3.3 million in rents from the property of the Public Prosecutor’s Office with almost MOP50 million in benefits obtained from public contracts awarded to 10 front companies managed by the alleged criminal organisation.

The prosecution sought to present Mr. Ho as the leader of a criminal association involving his older brother Ho Chiu Shun, his brotherin-law Lei Kuan Pun, and defendants Wong Kuok Wai and Mak Im Tai. “We believe Mr. Ho was the leader of an association that possessed three requirements to be considered a criminal association under the law - stability, structure and illicit acts - despite not including acts of violence,” the prosecution alleged.

The prosecution believed Mr. Ho had a close relationship with the defendants, based upon notebooks found in his house and on the phone call wiretap recording revealing the defendants had contacted Mr. Ho for advice upon knowing they were under investigation.

The other defendants were said to be in charge of the 10 front companies based on the 16th floor of the Hotline Building, with the former top official having a major role in attributing more than 1,300 service contracts for the Public Prosecution Office until he finished his functions.

The prosecution considered

it too much of a “coincidence” considering the close ties between Mr. Ho and the defendants running the companies, and the former top official being the main person responsible for allowing the system to operate.

“How can three employees without specific qualifications manage so many companies, and have the Prosecutor’s Office as their only client? (…) Mr. Ho gave his permission and altered some of the service contracts . . . Did the highest superior not know the details of these contracts?” the prosecution asked.

Accusations: 19 accusations of fraud using public funds to lease an area on the 16th floor of the Hotline Building and a residence in Cheoc Van for private use, expending MOP12.5 million of public funds On the pretext of receiving and accommodating officials from Mainland China, the former top official was accused of using public funds to pay the rent of a resting room on the 16th floor of the Hotline Building since 2006 and a Cheoc Van residence with a monthly rent of MOP48,000 since 2000.

The presence of several of Mr. Ho’s personal belongings in both locations was held up by the prosecution as proof that the former official was using the properties for his own use.

“We believe Mr. Ho wanted to get [the Cheoc Van residence] (…) In 15 years no private money was used for the house (…) A search revealed private objects, a sauna, children’s toys and a fish pond,” the prosecution stated.

Mr. Ho requested several officials from judicial representatives from Mainland China testify on his behalf that they were hosted and received in the areas but the prosecution noted how the

majority declined to take the stand.

Accusation: 1 crime of destruction of public property, value unknown The prosecution also mentioned the accusations against the former top official of destroying materials under government property [care] for having allegedly moved valuable agar wood confiscated by the Macau Customs between 2013 and 2014 to the Public Prosecutor’s Office.

This move was allegedly done without a written request to Customs, something stated by the prosecution as an attempt to not leave traces that Mr. Ho wanted to obtain the agar wood.

“Mr. Ho made the decision to transport the apprehended agar wood to the Office building saying it was placed in the 5th floor archive room.

This kind of procedure is not normal,” the prosecution mentioned.

The final remarks mentioned witnesses heard in court stated the former top official showed a great deal of interest in the valuable wood saying at least five pieces were not in good conditions and could only be used for educational purposes . The witnesses then said in 2015 he requested the “most beautiful pieces” be sent to the resting room on the 16th floor where they remained for one year.

“As a Prosecutor can he do whatever he wants? Can he take evidence or drugs from other cases?” Assistant Prosecutor Kuok Un Man asked.

The missing agar wood was only returned in February 2015 upon the request of current Prosecutor General Ip Son Seng, with Mr. Ho claiming they were never moved out of the office building but with the prosecution arguing some of the pieces were in the resting room on the 16th floor and in the house at Cheoc Van.

Business Daily Friday, May 12 2017 5

Macau Personal data

The disconnect of living in a connected world With the widespread use of social media, demands and complaints made to the Office for Personal Data Protection (GPDP) surged in 2016 Sheyla Zandonai sheyla.zandonai@macaubusiness.com

T

he development and increasing use of social media platforms have affected the volume of enquiries and demands for advice and opinion sought from the Office for Personal Data Protection (GPDP), as well as the number of investigation cases launched by the agency, according to GPDP Co-ordinator Fong Man Chong.

Speaking to the press in a conference held yesterday at the office headquarters, Fong said he expects the number of enquiries to increase further in 2017 given that “the public is more attentive, social media use is more widespread, and entities are progressively increasing their use of personal data.”

For the whole of 2016, of the 2,137 enquiries received by the Office, the biggest group, or 37.4 per cent, comprised enquiries about “notification

Representatives of the Office for Personal Data Protection brief reporters on the Office’s work of 2016 and events marking Privacy Awareness Week 2017.

and authorisation,” according to GPDP’s Co-ordinator.

Secondly came demands about “legitimate conditions in the processing of personal data”, accounting for 30.2 per cent of the total.

Regarding the profile of enquirers, the majority were private entities and individuals.

Last year, GPDP filed 224 processes of investigation, representing an increase of 44.5 per cent when compared to 2015.

The majority of cases filed, or 65.6 per cent, dealt with the “lack of legitimacy in the treatment of personal data,” while 33.5 per cent of cases referred to the “non-respect of principles of data processing,” Fong

explained.

Private entities made up the biggest group under scrutiny, corresponding to 51.4 of the cases under investigation in 2016.

The bureau Co-ordinator also noted that 72.8 per cent of the investigation processes were opened following complaints from the holders of exposed data.

Conclusions reached

Less than half of the total cases under investigation in 2016 have been duly concluded, amounting to 111 cases from a total of 302 – of which 78 were cases transferred from 2015, according to Fong.

Th e v e r di cts r each e d w e r e

categorised according to different types of conclusion, including ‘lack of proof,’ ‘allegation not substantiated,’ or ‘beyond the competency of GPDP,’ according to the slide presented by Fong during the press conference.

‘Sanctions’ in 2016 were applied to entities in 8.1 per cent of cases, while ‘suggesting improvement’ was the conclusion to 22.5 per cent of the cases.

In what regards the categories of entities subject to investigation, the majority comprised private entities (145) and individuals (125), corresponding to 51.4 per cent and 43.1 per cent, respectively. The remaining 5.5 per cent (or 15), were public entities.

6 Business Daily Friday, May 12 2017

Macau Opinion

Pedro Cortés*

Lusophone lawyers The Macau Special Administrative Region is the platform bridging China and the Portuguesespeaking countries.

Designated to play such a role, it seems that the latest decision of the General Assembly of the Macau Lawyers’ Association granting a mandate to the Board to negotiate with the Portuguese Bar Association should be considered as one more step in achieving what the People’s Republic of China considers vital to Macau.

Besides Portugal, it should be enlarged to Brazil, Angola, Mozambique, Cape Verde and all other lusophone countries without any sort of mental reservation.

A Region which is a platform should authorise lawyers of the countries of such platform to intervene with rules known to everyone.

We cannot call Macau a platform and restrict the lawyers of the platform from establishing themselves here. We should have in Macau the crème de la crème of the profession in order to better provide legal services for international clients.

Always with rules and guidelines - plus sanctions for those who fail to comply with them.

It would not shock me if, in the future, we had more Brazilian or Portuguesespeaking countries’ lawyers in Macau. As a matter of fact, we should have more and make this platform for real and not something that is nice to mention in official speeches, which, in the end, are almost devoid of content.

Side by side with the lawyers, we should also consider Macau as the appropriate forum for arbitration tribunals and any other alternative dispute resolution methods to settle clashes between entities of the lusophony.

For that, the creation of arbitration entities is essential and might be one of the goals of the government.

Our Region seems to be jettisoning opportunity after opportunity without considering that the future is happening today and that tomorrow is too late to do what we have not done yesterday. It sometimes seems like one of those rich kids who have everything but, due to that, are lazy and would rather watch TV than going out and working for a better future for himself and his family.

We all sincerely hope that the father and the grandfather put him on the correct track. *lawyer and frequent contributor to this newspaper.

Economics

Estimates for success Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

A

s the Association of Southeast Asian Nations marks its 50th birthday this year, holding the last day of The World Economic Forum on ASEAN today, ratings agency Fitch sets forward its predictions for the neighbouring superpower’s growth this year and next, estimating that growth in the gross domestic product for China at 6.5 per cent for this year, dipping below the 6 per cent mark to 5.9 per cent for next year.

This will be coupled with inflation rising from a current expected 2.2 per cent for this year to 2.5 per

cent for next year. In addition, the group estimates that the dollar will further strengthen against the yuan both this and next year, rising from US$6.95 last year to US$7.2 this year and further to US$7.4 by next year.

The local currency is also loosely pegged to the United States Dollar.

‘China’s GDP grew by 6.9 per cent in 1Q17 compared to an estimate of 6.6 per cent in the March […] and industrial production and fixed asset investment accelerated in March,’ notes the report, pointing out in particular that ‘the impact of earlier policy stimulus on activity has proved more powerful than anticipated, and the slowdown in the housing market has taken longer to materialise than

expected’.

For the second half of the current year the group believes ‘GDP growth will decline’, noting that ‘the recent tightening of onshore liquidity conditions is likely to see credit growth slow,’ while the housing market will ‘moderate’. This has historically caused a downturn in the local gaming market.

Regionally, the gaming and finance hub of Singapore takes the number one spot of highest GDP per capita of ASEAN, according to International Monetary Fund estimates, while, according to the local Statistics and Census Service (DSEC), current GDP per capita posted US$69,372 (MOP554,619) as of year-end.

The recent announcement of the MSAR’s participation in the Belt and Road Forum for International Co-operation, kicking off this Sunday, provides the city with a chance to participate in the dialogue of the mega-city building, as part of the overall One Belt, One Road initiative, taking advantage of the Greater Bay Area, proposed to comprise eleven total cities including both SARs. If suggestions such as that made by Chairman of the National People’s Congress Zhang Dejiang during his visit - that the city should look to ease access restrictions on movement between the Mainland and the MSAR - the city could stand to benefit from an influx of individuals and capital, although with less purchasing power and facing down increased inflation.

JgC

Sega Sammy says to seek majority stake in Japan casino resort Tokyo-based Sega Sammy holds a 45 per cent stake in a resort in South Korea Thomas Wilson

Slot machine maker Sega Sammy Holdings Inc said yesterday it would seek a majority stake in any Japanese casino project, one of a few domestic firms to detail plans for a sector already drawing intense interest from global gambling companies.

Japan legalised casinos in December, attracting international operators including Las Vegas Sands, Galaxy Entertainment Corp and MGM Resorts International.

But few Japanese companies have spoken publicly about their plans for the sector amid widespread public opposition to the introduction of casinos.

“We definitely want to take a bigger stake in Japan - not just the entertainment part, but the whole (casino) resort,” President and Chief Operating Officer Haruki Satomi told reporters on the sidelines of a conference in Tokyo.

“We hope (to take a majority stake). We are preparing for that,” he said.

Tokyo-based Sega Sammy holds a 45 per cent stake in a resort in South Korea, which opened last month, and provides entertainment content. Paradise Co Ltd, the country’s biggest casino operator, is the majority shareholder.

Foreign casinos operators are courting real estate, construction and transportation firms in Japan to form operating consortia, and have expressed flexibility as to the size of their equity involvement.

Galaxy has said it would not insist on a majority stake. Hard Rock Cafe International has also said it was seeking equity of between 40 and 60 per cent.

Japan is now preparing legislation, due by December, to lay out rules on selecting hosts and operators for the casino resorts. It is widely expected to grant licences to three locations initially, with Osaka and Yokohama seen as front-runners. Reuters

Investment

SeaWorld Entertainment revenue down 15 pct Theme park and entertainment company SeaWorld Entertainment, Inc. saw a decrease of 15 per cent yearon-year for its revenue in the first quarter, amounting to US$186.4 million (MOP1.50 billion).

The company released its results on Tuesday, revealing that it had generated a net loss of US$61.1 million during the first three months of this year.

The adjusted EBITDA of SeaWorld was a loss of US$30.4 million for the January-March period in 2017, compared to the adjusted EBITDA loss of US$5.9 million for the same period a year ago.

The company also revealed that it had entered an agreement with Zhonghong Holding Co., Ltd. in March this year.

Zhonghong Holding is an affiliate of ZHG Group which provides design, support and advisory services for

various potential projects, granting exclusive rights in Mainland China, Taiwan, Hong Kong and Macau.

Under the agreement, SeaWorld will work with Zhonghong Holding

‘to create and produce concept designs and development analysis for theme parks, water parks and interactive parks in the aforementioned regions.’ C.U.

Business Daily Friday, May 12 2017 7

Macau Travel

New flights to connect KL to Cambodia’s ‘Casino City’

Starting August 9, low-cost airline AirAsia is launching flight connections between the capital of Malaysia, Kuala Lumpur, and the Cambodian coastal city of Sihanoukville, the Phnom Penh Post reported this week.

According to AirAsia’s CEO, quoted in the report, four flights per week operating Airbus 320 aircraft are scheduled to travel between the two cities.

Sihanouk International Airport, currently undergoing

renovation to increase its capacity, operates seasonal scheduled international flights to Macau and Ho Chi Minh City in Vietnam, according to the same media outlet.

AirAsia also operates daily direct flights from Kuala Lumpur to Phnom Penh and Siam Reap, while its Thai subsidiary operates flights between Bangkok and Cambodia’s capital.

Sihanoukville is home to a dozen casinos. According to previous reports, the Cambodian government has plans to transform it into a ‘Casino City’ with ‘Macau of Southeast Asia status.’ S.Z.

Japan Gaming Congress

Building agreements, biding time Exposing their Japanese cards, casino companies in Tokyo told Business Daily yesterday that they are already committing to local partners Sheyla Zandonai sheyla.zandonai@macaubusiness.com

G

alaxy Entertainment Group (GEG) inked an agreement with Tange Associates, a Japanese architectural firm on May 9, on the eve of the Japan Gaming Congress (JgC). The information was provided to Business Daily by GEG Vice President Jeremy Walker and published yesterday on social media platforms Facebook and Twitter.

“Tange is probably the leading architectural firm in Japan and have designed and built many of Japan’s most iconic buildings. Tange [Associates] are assisting us in a design and architectural consulting capacity. We will be working with [them] to ensure the IR is designed sensitively and sustainably … to attract global visitors [and] to carefully integrate with local attractions and the community in mind,” Walker commented.

According to the GEG VP, the agreement is a way of showing the company’s commitment to engaging with local business and ways in its bid for a project in Japan.

“Having well respected local designers such as Tange on our team will enable us to carefully blend the amenities of the IR with the attractions of the local city,” he added.

In what regards other relations with Japanese investors and partners, Walker highlighted Galaxy’s long relationship with Okura Hotel and resorts – “for over ten years” – claiming they are “the only IR

operator with a local hotel partner such as this.”

Also in a follow-up from our additional enquiries, Alan M. Feldman, Executive Vice President of Global Industry Affairs of MGM Resorts International, said that although MGM’s delegation has met with several potential suppliers based in Japan, they “are not meeting with potential Japanese gaming companies as equity partners at this time.”

As for potential non-gaming partners, Feldman explained that 90 per cent of their list is Japanese-based, “but also includes global hospitality and entertainment companies that might join [them] in a significant investment in Japan.”

Too early to pin down IR on map

Toru Mihara, who is advising the Japan Government on the Integrated Resort Promotion Bill, and who has been in communication with us since Wednesday, said it is too early to comment upon which local governments would be selected.

“The law defines procedures - that is, criteria to select - but the selection process starts only after the implementation law [materialises].

So it is still far away,” he explained.

Comments from Jeremy Walker of GEG fell concurred.

“Legislation in Japan is not yet finalised or approved. The IR licensing timeline from government is not yet confirmed. Bidding is not expected until 2018 and construction not likely until 2020,” he said.

Acc o r di n g t o Ch ri s W ei n e rs,

Attendee List

Sociedade de Jogos de Macau (SJM) was on the list of attendees in the JgC despite earlier claims by Angela Leung that the company was not interested in pursuing the Japanese market.

Participants from the Japan Government Japanese Diet IR Diet Federation Ministry of Trade & Industry Prefecture of Nagasaki

Others

Singapore Tourism Board

Sponsorships

Galaxy Entertainment Group (GEG), Melco Resorts & Entertainment Limited, MGM Resorts International, Wynn Resorts, and Caesars Entertainment are the five ‘Operator Vision Provider Sponsors’ of JgC. Source: JgC website

Managing Partner of marketing firm Hogo Digital, who was in touch with us from the site of the Congress, said Osaka “looks solid,” while Tokyo and Yokohama are “still in the mix.”

“Osaka looks promising due to their existing site layout and their overall aggressive stance in promoting IR and its positive impact upon the community,” he explained.

Still, according to Weiners, other cities on the contenders list would include Hokkaido, Wakayama, and Nagasaki.

“There is also a lot of aggressive

promotion by the regional cities, so I believe the medium and smaller operators have a great opportunity to promote themselves and get involved with more regional locations,” he posited.

In addition to the strongest contenders – Osaka, Tokyo, Yokohama – the Galaxy VP has indicated other locations in the play.

“We have met with representatives from several cities and prefectures including Osaka, Tokyo, Yokohama, Kansai and Kanagawa among others,” said Walker.

8 Business Daily Friday, May 12 2017

Consigliere

ESTATE OF THE AIR The best airplane bars have leather banquettes, ‘morning programming’

R

emember the days when airlines wooed passengers with glamorous offerings like in-flight dining rooms and on-board pianos? Neither do we. But for every carrier that’s skimping on legroom (see American Airlines), another seems to emerge with a swanked-up bar.

Of course, there’s a reason you hear less about mile-high bars than cramped economy seats: They’re hardly ubiquitous. They’re notably absent from the U.S. legacy carriers, which focus more on pay-for-play in-seat drinking. And the airlines that do have dedicated booze spots tend to offer

Eric Rosen

them on only a select few plane types—largely double-deckers or other long-range aircraft.

But the in-flight bar scene is booming. Look no further than Emirates. In July the Dubai-based carrier will unveil a new concept for the Onboard Lounges on its fleet of flagship A380s, serendipitously alleviating the problem of what to do on a long-haul, Middle East-based flight in the aftermath of Trump’s electronics ban. The first of these updated bars will feature new seating areas inspired by yacht cabins and Emirates Executive private jets. From there on, they’ll be built into each newly delivered A380 rather than retrofitted onto older models.

Granted, Emirates’ bars, like nearly all airplane bars, are only available to those sitting in premium cabins. (The second-class denizens on the bottom deck can’t even sneak a peek at the cocktail dens up above.) But once you’ve got access, it’s allyou-can-drink—for no extra cost.

So what makes a good airline bar? Square footage is key—and ample seating space. (Nobody wants to topple their bloody mary when turbulence hits.) Design, service, and a full range of premium offerings can also make or break the experience.

With that in mind, here’s the last word on which airline bar is best.

6. Korean Air

5. Virgin Australia

The whimsically named Celestial Bar on the top deck of the Asian airline’s A380s is the product of a long-standing partnership with Absolut—which means the drinks are all vodka-based. (Other spirits are kept in the galleys.) Cocktails are made-to-order and served with a rotating mix of canapés and desserts; on our most recent flight, we got tomato mozzarella bites and mini chocolate cakes. And the décor is appropriately starry, with shimmery wallpaper that’s patterned with tiny lights. Bonus: Art and travel books set near the lounge seats make it easy to settle in and pass the time.

What to order: The Flying Champagne cocktail made with Absolut Elyx, Inniskillin icewine from Canada, and Perrier-Jouët bubbly.

Along with all-new seats in business class, Virgin Australia introduced a new bar aboard its flagship 777-300ERs last summer, which currently fly from Los Angeles to Sydney, Melbourne, and Brisbane. The Bar, as it’s formally called, is set between the two business-class cabins at the entrance to the aircraft, with a dramatically backlit white counter and an eye-catching leaf-patterned ceiling. But its most distinguishing feature is a counterintuitive one: its morning programming. Sidle into a stool or banquette to take your breakfast with freshly brewed coffee, made in a Nespresso machine that’s custom-built for high-altitude brewing.

What to order: Aussie wines, like the Coriole Sangiovese from McLaren Vale, are more interesting than the relatively standard cocktails such as mimosas and Bellinis. Light bites like mushroom arancini with basil and parmesan are also worth seeking out.

4. Virgin Atlantic

3. Etihad Airways

On Virgin Atlantic, it’s always possible to drink at altitude; the bar is a standard feature on all planes. Yes, all.

It’s also visible to all passengers—everyone boarding a flight passes through the bar—but service is open only to fliers in the airline’s Upper Class cabin. Call it a tease, or call it a genius marketing move: The burnished chrome accents and dimmable ambient lighting make for a pretty sexy space.

On the airline’s 787 Dreamliners, you’ll want to make an early move into one of the bar’s four stools, which are more coveted than the standing-room-only perch and lean-to shelf. And heed this warning: While the bar itself is great, it’s not well-separated from the Upper Class cabin seats. So avoid sitting in the back of the cabin, where noise and spills can become a serious distraction.

What to order: The menu changes seasonally. This spring, go for a mojito—either the Mile High, made with Champagne and citrus, or the Blighty, made with Bombay Sapphire instead of rum.

Etihad’s Lobby is a self-service lounge for first- and business-class passengers aboard the airline’s A380s; it’s designed with typical Emirati patterns and motifs, including an electronic Qibla-finder that shows the exact direction of Mecca at prayer times. Base yourself in one of two semi-circular Poltrona Frau leather banquettes, each with power outlets, fold-down armrests, and glossy marquetry tables as work surfaces.

Although you won’t find a bartender on duty, there are flight attendants on hand to provide small snack items, pour drinks from the adjacent bar area, or host an impromptu wine tasting. Guests, however, can also just help themselves directly from the bottles on display.

What to order: If your first-class, in-seat minibar isn’t stocked to your preferences, pillage the Lobby bar cart for some Billecart-Salmon brut rosé or a glass of Glenlivet single malt Master Distiller’s Reserve.

2. Emirates

1. Qatar Airways

Perhaps the most iconic airplane bar, the Onboard Lounge is getting a makeover. According to Terry Daly, Emirates’ senior vice president for service delivery, it’ll share the same location and footprint as the old bar but will be “more intimate and conducive for our passengers to socialize.” Expect an airier, more relaxed ambiance thanks to new leather accents, window treatments, and reconfigured seating that accommodates a few extra bodies, but new soundproof curtains will keep noise from spilling into the cabin.

What to order: Emirates’ extensive wine collection is worth sampling extensively. But if you’re in first class, you can go off-menu with an expanded selection of premium offerings. Go ahead and ask for a bottle of Dom Pérignon on ice—it’s totally fair game.

What makes Qatar’s bar the best in the skies? Sure, there’s the sultry backlighting and intricate overhead lights that give the space a Jet Age meets Arabian Nights vibe. But the real differentiator is its open-flowing space: It’s equally good for networking, catching up on emails, or simply kicking back. Rather than a self-contained bar, the counter on Qatar has an open, curved silhouette, paralleled by undulating window-side banquettes with seating for up to 10. Power ports galore only add to the appeal.

What to order: People think you can only get Krug Champagne in the airline’s first-class cabin, but the attendants will pour it at the bar, too. So get your fizz on before bed—and then come back for a macchiato before landing. Bloomberg

Business Daily Friday, May 12 2017 9

Consigliere

Venice art fest a tonic for global woes Kelly Velasquez with Ella Ide in Rome

Weary of the modern-day “global disorder” of politics and conflicts? The 57th Biennale art festival promises to lift the spirits of those frazzled by everything from Brexit to global warming.

“Viva Arte Viva”, which opens Saturday in Venice, is “a passionate outcry for art” in a world “full of conflicts and shocks”, curator Christine Macel said ahead of the opening.

Macel, chief curator of the Pompidou Centre in Paris, has brought together 120 artists from 50 countries -- with the emphasis on rediscovering great artists who may have been overlooked, rather than blowing the trumpets of rising stars.

“The Biennale challenge is to give as global a picture as possible of the artistic situation” across the world, she told AFP. Among those exhibiting are pioneering US fiber artist Sheila Hicks, West German-born American Kiki Smith and Danish-Icelandic artist Olafur Eliasson, the man behind the vast sun at Britain’s Tate Modern in 2003 and the New York waterfalls in 2008.

M

Make Mum’s Day

um is the woman who does extraordinary things without asking for recognition or anything in return. Mother’s Day only comes around once a year, so when it does we have to make it count. For those looking to treat mum on her special day this weekend, The Ritz-Carlton, Macau hosts an array of treats that spoil your mum with an unforgettable experience.

For sweet daughters, ESPA Macau is the perfect venue for a heart-to-heart time between mothers and you. Featuring a balanced use of natural materials such as dark timber, oak, and onyx, and using different illumination techniques, this award-wining spa provides a relaxing escape with therapeutic treatments that are sure to restore mothers’ inner and outer glow. The 90-minute special treatment-Spa & Tea Indulgence starts with sensory test with the 4 selected teas by Palais des Thés - mum can indulge in ESPA Foot Ritual, Palais Des Thes Tea full body scrub and warm hot stone aromatherapy massage.

Sons are always too busy to accompany mums in their job life; this weekend, in any case, please spend some time to reward her with an exquisite lunch or dinner. Michelin-starred Chinese restaurant Lai Heen is the supreme restaurant in Macau providing diners with a unique dining experience plus stunning panoramic views of the city. On this special day, the talented culinary team combines

Western ingredients with classic Cantonese cooking techniques, creating an irresistible feast for you and your dearest mother.

Steamed Vegetable Dumpling with Sea Cucumber and Cordycep Flowers, Sautéed Water Bamboo with Black Fungus and Jellyfish in Vintage Vinegar are just some of the highlights of the extensive lunch menu; for dinner time, a more sumptuous menu boasts a delectable appetizer comprising Chilled Cucumber with Orange Blossom, barbecued Iberico pork in honey sauce and Marinated Beef Tongue in Rosolio and other impeccable dishes likr Double-boiled Fish Maw Soup with Sea Whelk and Birch Seed, Simmered Spring Chicken with Abalone and Baby Ginger in Chinese Wine and Braised E-fu Noodle with Shrimp Roe, Spring Onion and Ginger.

For those who prefer Western flavours, an afternoon tea buffet specially designed for Mother’s Day at either The Ritz-Carlton Café or The Ritz-Carlton Bar & Lounge must be the ideal choice. With the charming and stylish décor, mums can enjoy an ultimate dining experience with all French gourmet flair. This two-day only buffet features more than 10 types of sweet, exquisite savoury delights. Topping off the celebration with a glass of champagne, enjoy the precious moment with your beloved mother. For teetotallers, there is an array of over ten teas available for your selection.

Editorial by Essential Macau

Music and gold

France’s Loris Greaud pays homage to the city’s famed glass blowers -- forced by the Venetian Senate in 1291 to settle on Murano island to protect the industry’s secrets -- by bringing a disused furnace back to life in “The Unplayed Notes Factory”.

Swiss-born Julian Charriere, perhaps best known for dying the feathers of live pigeons in bright colours and releasing them into Venice’s Saint Mark’s Square in 2015, brings visitors “Future Fossil Spaces” -- towers of salt bricks extracted from deposits in Bolivia.

Some exhibits are dotted around “La Serenissima”, “the most serene” as Venice is known.

Visitors should take to the gondolas for the best view of the glinting “Golden Tour” (1990) by US artist James Lee Byars, which stands proudly on the canal front next to the Peggy Guggenheim museum.

Alongside the contemporary art exhibition, 85 countries are putting on their own national pavilions at the Biennale.

The French one will be a recording studio with classical, baroque, electronic and folk instruments, which will host over 100 professional musicians from different countries during the exposition, with visitors able to drop in on some lively jam sessions.

Several countries will be showing for the first time in the north-eastern Italian city, from Antigua and Barbuda to Kazakhstan and Nigeria.

Green lights, disco beat

However it is impossible to escape the modern world’s problems altogether, even at the Biennale.

“The Pavilion of Joys and Fears”, for example, explores “new feelings of alienation due to forced migrations or mass surveillance” in a world shaken by conflicts, wars, increasing inequality and the rise of populism.

But the topics are approached with humour or warmth, aimed at energising those suffering from 21st century blues.

“At a time of global disorder, art embraces life. Art is the last bastion,” Macel says.

At the heart of her show lies Eliasson’s “green light” installation, where refugees and visitors come together in a workshop to assemble lamps designed by the artist and share stories.

As the worst migrant crisis since World War II rocks Europe, it represents the metaphorical green light he urges his homeland and other countries to give to taking in those fleeing conflict and persecution.

In the wake of the US presidential election, American artist Charles Atlas presents the large-screen video work “The Tyranny of Consciousness”, in which drag queen Lady Bunny bemoans American politics to a disco beat.

The Golden Lion for lifetime achievement goes to the pioneering US feminist performance artist Carolee Schneemann, famed for using her body to examine the role of female sensuality and the overthrow of oppressive social conventions.

The Venice Biennale is held on odd-numbered years. This year’s event will run until November 26. AFP

10 Business Daily Friday, May 12 2017

Greater China HKEx

Mainland commodity platform to support futures trading The head of the new platform, the Qianhai Mercantile Exchange, said it planned to develop a warehousing and logistics network Melanie Burton

T

he head of Hong Kong Exchanges and Clearing (HKEx) said the bourse’s upcoming commodity platform in mainland China would support futures trading at

other Chinese exchanges.

The platform, which will initially be used for spot trading in metals such as copper and nickel, is the HKEx’s latest attempt to take on China’s homegrown exchanges in Shanghai, Dalian and Shenzhen. It remains unclear when it will begin operating.

“Our strategy is to (first) develop the physical market. Without laying a solid foundation in the physical market, you cannot build a good futures market,” HKEx Chief Executive Officer Charles Li said yesterday.

He made the comment on a visit to the site of the upcoming platform in Qianhai, just 50 km from Hong Kong, where HKEx hopes to replicate the success of the London Metal Exchange after buying that bourse around five years ago. The trip to Qianhai was part of the LMEWeek Asia conference.

The aim is to connect the Qianhai platform with the LME, luring customers with opportunities to be active in both the mainland’s domestic markets and international markets.

Some industry insiders have said they are sceptical the new exchange

Key Points Platform in mainland China has not yet started operating To eventually move beyond spot trading to futures Also expected to develop warehousing and logistics network

will offer anything they don’t already have in a market where investors are turning away from commodities in favour of more tailored investment products.

The head of the new platform, the Qianhai Mercantile Exchange, said it planned to develop a warehousing and logistics network.

“Warehousing capabilities are an important indicator for a good physical market, so we need to have a large network with a lot of warehouses available for the consumers,” said Xiaoli Guo. Reuters

Financial sector

Data delay leaves FSB in the dark on riskiest shadow banking assets China’s broad shadow banking sector ranked fourth globally after the euro area, the United States and United Kingdom Michelle Price

The Group of 20 (G20) economies’ financial risk monitoring agency has criticised Beijing for being slow in providing key financial data from China, leading to the delay in a report on the risks the world faces from shadow banking.

China failed to provide data to the Financial Stability Board (FSB) in time for its annual “Global Shadow Banking Monitoring Report”, the FSB said on Wednesday.

The People’s Bank of China and the China Banking Regulatory Commission (CBRC) were not immediately available for comment.

Key Points Broad Chinese shadow banking assets jumped 31 pct on year China data too late for key FSB analysis of riskiest assets Concerns over China shadow banking, systemic risk rising FSB says China is working to improve internal processes China’s top leadership has itself identified curtailing financial risks as a top priority this year after overall leverage in the economy rose sharply, but its tighter control of bank lending appears to be pushing borrowers back to alternative sources of funding, including the opaque, often loosely regulated shadow banking sector.

China’s US$7.7 trillion shadow banking sector, which includes nonbank forms of credit such as trusts and wealth management products, is dwarfed by that of the United States and Europe, but the speed at which it

has expanded has become a concern to regulators at home and abroad worried about hidden systemic risk.

The FSB, which coordinates financial regulation for the G20, said a delay in receiving the Chinese financial sector data meant it was unable to provide a measure of shadow banking activities in China that could pose a threat to stability.

The FSB launched the annual report in the wake of the 2007-2009 global financial crisis to monitor risks arising from non-bank financial activities and to shape regulatory policy.

“The late submission of Chinese data delayed the publication of this Report, and did not allow enough time to complete the assessment of entities in China as part of the shadow banking system,” the FSB said in the report.

“Chinese authorities have committed to making improvements to their internal processes related to this exercise, and are expected to contribute fully to the 2017 monitoring exercise.”

Rapid growth

The FSB report shows China’s overall financial sector assets - including banks, insurers, central bank, and pension funds - grew 11 per cent during 2015 to reach US$89.9 trillion.

This included US$7.7 trillion in assets held by “other financial intermediaries”, a broad measure of shadow banking that includes institutions such as trusts, money market funds, hedge funds and money lenders.

China’s broad shadow banking sector ranked fourth globally after the euro area, the United States and United Kingdom, but in terms of growth was second only to Argentina’s, jumping 31 per cent year on year.

Because China submitted its data late, however, the FSB did not have time to perform an analysis of a narrower subset of shadow banking entities and activities to identify the key risks to stability, which is the focus of the report.

This includes identifying entities that increase system-wide leverage or carry liquidity risks, such as funds that may be vulnerable to runs, or lending based on short-term funding.

The rebuke is an indication of the FSB’s frustration with China, said an analyst at a large international bank who asked not be named.

“I’d be annoyed too; it’s such a big market, and they haven’t provided the data,” said the analyst, adding that it was 2015 data the FSB asked for. “(The data) may just have been very difficult to gather, but they’re using 2015 numbers,” he said the analyst.

“China’s not that opaque; they could have provided it.”

Outside China, the FSB said its “narrow” measure of the shadow banking activities that could pose a threat to

stability rose 3.2 per cent to US$34.2 trillion in 2015 from the prior year.

Data quality has long been a problem for regulators in assessing the size and risks of the shadow banking sector globally, and not all countries are covered by the report. But the missing China analysis comes amid rising concerns over systemic risk created by interconnections between entities in the world’s second-largest economy.

“Interconnectedness between mid and small sized banks and the shadow banking sector continues to grow, increasing the risk that funding structures could become fragile if confronted with a negative liquidity shock,” Michael Taylor, a managing director at Moody’s said in a note this week.

The FSB has previously warned that China needed to simplify its complex regulatory system, which comprises multiple agencies overseeing banks, stock markets, funds and capital flows, in order to increase transparency and reduce risks. Reuters

Business Daily Friday, May 12 2017 11

Greater China In Brief Financing

Mainland developers to issue interbank bonds

Chinese President Xi Jinping (L) and Vietnamese president Tran Dai Quang (C) walk past the People’s Liberation Army honour guards during a welcome ceremony at the Great Hall of the People in Beijing yesterday.

President Tran Dai Quang is on a state visit to China and attending the Belt and Road Forum for International Cooperation from 11 - 15 May 2017. Lusa

Ambition to meet reality as Mainland gathers world for Silk Road summit During the meeting, more than 50 memorandums of understanding, plans, cooperation letters and cooperation projects in transportation, energy and communications will be signed When leaders of 28 nations gather in Beijing next week for a summit to map out China’s ambitious new Silk Road project, one question is likely to be on attendees’ minds - what exactly is the Belt and Road Initiative?

Proposed in 2013 by President Xi Jinping to promote a vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment, the project is broad on ambition but still short on specifics.

China has earmarked US$40 billion for a special fund for the scheme, on top of the US$100 billion capitalisation for the China-led Asian Infrastructure Investment Bank (AIIB), many of whose projects will likely be part of the initiative.

But with a confusing name, that officially refers to the Silk Road Economic Belt and the 21st-century Maritime Silk Road, added to myriad economic and security risks, clouds hang over the plan.

Despite aggressive promotion of the May 14-15 summit in China, including media carrying positive comments from Western leaders, some diplomats are suspicious about China’s aims.

“There’s a lot of scepticism about China’s plans. Yes it is the kind of infrastructure that sounds attractive for parts of Europe, but we all know this is about China gaining influence,” said a senior European Union diplomat.

One diplomatic source familiar with discussions on the forum’s communique said: “The forum is downright glorification of Xi Jinping and One Belt, One Road”, using the straight Chinese translation of the project’s title.

However, with Donald Trump in the White House pursuing an “America First” agenda, more countries may be pushing for inclusion in China’s grand scheme.

“Countries have actually been pressuring China to get an invite rather than the other way around,” said a senior Asian diplomat, referring to the summit.

China says that between 2014 and 2016, its businesses signed projects worth US$304.9 billion in Belt and

Auto industry

Vehicle sales notch steepest fall in 20-months

One Belt, One Road

Ben Blanchard

China’s Shimao Property and Longfor Properties said they had won regulatory approval to issue medium-term notes in the interbank market, a refinancing channel local developers are increasingly tapping to circumvent restrictions aimed at cooling the property market.

The homebuilders said on Wednesday they had received approval from the interbank regulator to issue the notes for RMB8 billion (US$1.2 billion) each. The authorities have been making it harder for real estate developers to sell bonds at the exchange market since the second half of last year as part of measures to rein in property prices.

Road countries. Some of the projects could be in development for years.

Confucius and “win-win thinking”

China has taken umbrage at suggestions that the new Silk Road is about it trying to dominate the world and mould it to Beijing’s liking, saying it is good for all and anyone can join.

“Western sceptics have failed to see the fact that the Chinese don’t harbour a zero-sum mentality, but encourage win-win thinking,” Xinhua news agency said in an English-language commentary.

“As Confucius once said: ‘He who wants success should enable others to succeed’.”

China has, though, outlined its ambitions in Chinese language pieces.

Key Points Beijing to host leaders and senior officials for summit China sets great store by success of “Silk Road” initiative State media has trumpeted the huge project Western countries sceptical, security concerns remain “This is the China solution for global economic revival,” Xinhua said last month of the new Silk Road, in a commentary blazed across the front page of the official People’s Daily.

There are risks involved, however.

In Sri Lanka, there have been public protests against projects linked to the Belt and Road, and in Pakistan, where Islamist militants pose a security threat, the government has set up a new army division to protect the US$57 billion China-Pakistan Economic Corridor, a key part of the new Silk Road.

The corridor also runs through disputed Kashmir, meaning India has rebuffed China’s attempts to get it onto the Belt and Road.

“We have some serious reservations about it because of sovereignty issues,” Indian Finance Minister Arun Jaitley said in Japan last week.

With China saying the Belt and Road is open to everyone, at least

one country not widely seen as a safe investment choice is expected to show up - diplomatically isolated and nuclear-armed North Korea.

The government of Syria is also sending a Cabinet-level minister, the Syrian ambassador to China told Reuters this week.

Politics before economics?

There has been almost relentlessly upbeat coverage in China ahead of the Belt and Road Forum, including documentaries on state television and smiling citizens in project countries praising the changes it has brought.

During the meeting, more than 50 memorandums of understanding, plans, cooperation letters and cooperation projects in transportation, energy and communications will be signed, Chinese government officials say.

“This ... will be a jointly consultative document by all parties to reflect their shared consensus on advancing the Belt and Road,” foreign ministry spokesman Geng Shuang told reporters on Wednesday, referring to the summit communique.

Some Chinese experts say politics are being put ahead of economic factors.

“I believe that the national strategy is the top priority; economic considerations are secondary,” said an economist at the China Centre for International Economic Exchanges, a Beijing-based think-tank which made initial proposals to set up the AIIB. He asked not to be identified, citing the sensitivity of the topic.

There is caution, too, from some Asian countries.

Speaking last week at a meeting of the Asian Development Bank in Japan, Philippine Deputy Central Bank Governor Diwa Guinigundo said it was hard to pre-judge the new Silk Road.

“It is still a vision. You have to translate that into some working parts,” Guinigundo said.

Some Western diplomats have expressed concern in private at the high billing at the summit given to countries with poor human rights records, like Russia and the Philippines.

The diplomatic source familiar with the communique discussions said those talks had been tough, as everyone wanted a say. There had been at least three drafting sessions, one of which lasted 13 hours this week.

The original plan was for a host country press statement, but China changed that to a joint communique, the source said.

“The only explanation that one could give is that they want to add weight to this meeting.” Reuters

Chinese auto sales fell in April by the steepest in almost two years, the automakers’ association said yesterday, as a tax increase on small-engine cars from the beginning of the year discouraged buyers. Vehicle sales in China, the world’s largest auto market, fell 2.2 per cent to 2.1 million in April, compared to a 4 per cent rise in March, data from the China Association of Automobile Manufacturers’(CAAM) showed. The drop was the sharpest since sales fell 5 per cent in August 2015, data showed. In the first four months of the year, sales grew 4 per cent.

Debt

C.bank queries some banks on MLF demand The People’s Bank of China (PBOC) has queried some commercial banks on their demand for medium-term lending facility (MLF) loans yesterday, industry sources with direct knowledge of the matter said. The central bank is expected to inject the funds through the MLF on Friday, the sources said.

It was not known how much it would inject, via which tenors or whether rates would remain unchanged. Last week, the PBOC declined to roll over RMB230 billion (US$33.31 billion) of maturing sixmonth MLF funding, while another batch of RMB179.5 billion worth of six-month MLF loans are due to mature on May 16.

Output

Beijing to cut steel capacity China is serious about cutting millions of tonnes of excess steel capacity but that will not mean lower production, particularly in the next few quarters, the head of the European Union steel body Eurofer said on Wednesday. China pledged early last year to cut 150 million tonnes of excess capacity by 2020. The move, along with rising steel trade barriers and an infrastructure spending splurge by Beijing, helped global steel prices surge 45 per cent since December 2015.

12 Business Daily Friday, May 12 2017

Greater China

Study

‘Ice age’ looms for Mainland’s outbound investment China’s outbound investment hit US$170.1 billion in 2016

C

hina saw a rapid acceleration of outbound direct investment in services and industrial deals in 2016, a study showed yesterday, but an investment “ice age” is looming in 2017 as authorities crack down on capital outflows.

Beijing announced a string of measures late last year to tighten controls on money moving out of the country and rein in risks from “irrational” outbound investment in property, entertainment and sports.

“You can see over the past four months there have been almost no big transactions,” Andre Loesekrug-Pietri, founder and managing partner of A Capital, a private

equity fund specialising in Chinese outbound investments, said last month. It also compiles the Dragon Index which tracks Chinese ODI. Loesekrug-Pietri doubted if 2017 could match the US$170 billion worth of Chinese investments made overseas last year.

“I feel we are entering an ice age with difficult years ahead.”

For the first three months of this year, China’s non-financial outbound direct investment (ODI) tumbled 48.8 per cent to US$20.52 billion from the same period the previous year.

China’s Dalian Wanda Group’s offer to buy Dick Clark Productions Inc for US$1 billion collapsed in

March over problems getting currency out of China.

Last year Chinese internet and gaming giant Tencent acquired a majority stake in Supercell, a Finnish mobile game maker for US$8.6 billion.

“The importance of this transaction cannot be underestimated,” a statement from A Capital said.

This is the largest deal ever by a private Chinese company in the services industry, an indicator of China’s transition away from heavy industry towards services, the statement said.

Larger deals have been completed by state-owned enterprises in recent years including ChemChina’s Us$43 billion takeover of Syngenta and China’s CNOOC purchase of Canada’s Nexen Energy for US$15 billion.

The data shows private

companies are gaining ground on state-owned enterprises, and represented 43 per cent of outbound deals in 2016, up from 36 per cent the previous year.

‘The data shows private companies are gaining ground on state-owned enterprises’ Investments by private firms tripled to US$61.3 billion in 2016 from US$21 billion in 2015.

China’s surging ODI primarily went to developed countries, with US$50.4

billion going to the United States and US$51.7 billion to Europe in 2016, according to the Dragon Index.

China’s outbound investment hit US$170.1 billion in 2016, up 44.1 per cent from 2015.

Data from China’s commerce ministry showed the country’s non-financial ODI in countries involved in China’s Belt and Road Initiative - announced by China’s President Xi Jinping in September 2013 - totalled US$45.95 billion between 2014 and the first quarter of 2017.

The A Capital Dragon Index measures the growth rate of outbound investment stock relative to GDP. The index, started in 2010, collects information on confirmed deals exceeding US$5 million which yield a stake of more than 10 per cent in an asset. Reuters

Commerce ministry

Trade ‘off to a flying start’ in 2017 China’s trade relations with African countries are often dominated by big natural resource deals China’s trade with African countries rose nearly one-fifth in the first quarter from a year earlier, while its direct investment in the continent soared 64 per cent, the Chinese commerce ministry said yesterday.

Trade cooperation between China and Africa is “off to a flying start” in 2017, thanks to policy benefits from a cooperative framework laid down by the Chinese and African leaders in South Africa in 2015, said Sun Jiwen, spokesman at the ministry.

China has a relationship with Africa which pre-dates its current resource-hungry economic boom.

In previous decades, China’s Communist leaders supported national liberation movements and newly independent states across the continent.

Chinese President Xi Jinping announced plans to plough US$60 billion into African development projects at a summit in Johannesburg in 2015, saying it would boost

Business Daily is a product of De Ficção – Multimedia Projects

agriculture, build roads, ports and railways and cancel some debt.

China’s total trade with Africa rose 16.8 per cent to US$38.8 billion in the first quarter, its first quarterly increase on a yearly basis since 2015, Sun said during a regular news briefing in Beijing.

That’s mainly thanks to a 46 per

cent year-on-year jump in imports from Africa in the first quarter with agricultural imports rising 18 per cent, while Chinese exports recorded a smaller fall of 1 per cent from a year earlier, Sun said.

China’s non-financial direct investment to the continent also jumped 64 per cent in the quarter, as countries such as Djibouti, Senegal and South Africa all saw a more than 100 per cent rise in the quarter.

China’s growing investment in the

region is also likely to have been buoyed by its ambitious global trading strategy known as the Belt and Road Initiative, which appeared to be gaining traction recently, particularly in parts of East Africa where major infrastructure and defence projects are being built.

China’s trade relations with African countries are often dominated by big natural resource deals, triggering criticism from some quarters that China is only interested in the continent’s mineral and energy wealth.

‘China’s total trade with Africa rose 16.8 per cent to US$38.8 billion in the first quarter’ Africans broadly see China as a healthy counterbalance to Western influence but, as ties mature, there are growing calls from policymakers and economists for more balanced trade relations. Reuters

Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Friday, May 12 2017 13

Asia Trade

Japan’s current account surplus beats forecasts The trade surplus shrank in March to 865.5 billion yen Minami Funakoshi

Japan’s current account balance posted a stronger-than-expected surplus in March on solid income from overseas investments, maintaining a run of uninterrupted monthly surpluses that has continued for almost three years.

The surplus of 2.91 trillion yen (US$25.45 billion) marked the 33rd straight month in the black, finance ministry data showed yesterday, and beat the median forecast for a surplus of 2.643 trillion yen in a Reuters poll of economists.

Export-reliant Japan’s persistent current account surpluses could elevate the thorny issue of trade imbalances with U.S. President Donald Trump’s administration, which has pledged to rework the United States’

current agreements with its major trading partners.

“Usually, the current account balance shouldn’t have that big of an impact, but you just never know with Trump,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“It’s hard to read what, if any, effect this might have on Trump’s policies (with Japan).”

The trade surplus shrank in March to 865.5 billion yen, but logged the second straight month in the black.

Income from overseas investment, boosted by a pick-up in overseas economy, also helped support the current account surplus. The primary income balance in March stood at 2.2 trillion yen on increased profits from foreign direct investment.

Japan’s trade and current account

surpluses have taken on critical importance as Trump pursues an “America First” platform, via which he has pledged to shrink the U.S. trade deficit with big exporters such as Japan.

A strong current account surplus and a large trade surplus with the United States kept Japan on the U.S. Treasury’s currency watchlist released last month.

U.S. Commerce Secretary Wilbur Ross said that Washington could no longer sustain inflated trade deficits with its trading partners, according to a statement issued last week by the department.

However, Japan’s finance minister has said he had no discussion on trade deficits when he spoke with Ross last week.

Japan’s economy has sustained a modest recovery that kicked off when Prime Minister Shinzo Abe took power in late 2012 and launched his “Abenomics” package of aggressive monetary, fiscal stimulus measures and structural reforms.

A recent rebound in overseas demand has helped boost exports and output, pushing up business confidence to its highest in a year and a half.

Japan’s March trade data showed exports rose at the fastest pace in more than two years as increased shipments of car parts and steel signalled that expanding overseas demand could help boost the country’s notoriously slow economic growth.

Monetary policy

Philippine c.bank keeps rates on hold The central bank kept its forecasts for average inflation this year at 3.4 per cent Enrico Dela Cruz and Neil Jerome Morales

The Philippine central bank left policy rates unchanged yesterday in a widely expected move, saying inflation posed little threat even as the economy is set to sustain its strong growth momentum.

The Bangko Sentral ng Pilipinas (BSP) kept its benchmark interest rate at 3.0 per cent. All 10 economists in a Reuters poll expected no change in policy settings this week.

“Even amid external headwinds, the outlook for domestic activity remains intact,” central bank governor Amando Tetangco told a news conference.

Key Points Benchmark rate left unchanged at 3.0 pct, as expected C.bank maintains 2017, 2018 inflation forecasts

Philippine President Rodrigo Duterte plans to increase infrastructure spending to as much as 7 per cent of gross domestic product (GDP) by the end of his six-year term in 2022 from 5.2 per cent of GDP this year.

To fund the plan, the government has asked Congress to approve a package of tax measures to raise funds, including increasing fuel excise taxes.

“The main possible driver of inflation would still include the CTRP,” central bank managing director Francisco Dakila said, referring to the government’s comprehensive tax reform package (CTRP).

“But then it is to be emphasised the assessment is that the inflation target is not in danger,” Dakila added.

The majority of economists in the same Reuters poll have pencilled in a total 50-basis-point increase in the second half, which they said was warranted to head off rising upside risks.

By that time, the central bank would be under its new leader, Nestor Espenilla, who will succeed Tetangco.

“We are getting closer to the time for interest rates to be raised,” said Eugenia Victorino, economist at ANZ in Singapore, given that demand pull price pressures are rising, while household spending and private investment continue to be firm.

Espenilla, currently deputy governor in charge of banking supervision, has said markets should expect a lot of continuity in terms of monetary policy and reforms when he begins his six-year term in July.

“We still maintain our forecast of 50 bp in rate hikes in H2, possibly as soon as the new governor takes over, premised on our view that inflation risks are rising and could breach the BSP’s 2-4 per cent target,” said Euben Paracuelles, economist at Nomura in Singapore.

Manila is due to release first quarter GDP data on May 18 and it will likely show the economy expanded between 6.5 and 7.0 per cent, or faster, according to economic planning chief Ernesto Pernia. Reuters

Says inflation risks on upside, economic growth to remain strong The Southeast Asian economy is among the world’s fastest growing with robust consumption and infrastructure spending, which fuelled last year’s growth, continuing to bolster economic activity as exports pick up.

The central bank kept its forecasts for average inflation this year at 3.4 per cent and for next year at 3.0 per cent, but it cited upside risks from the “transitory” effect of the government’s proposed tax measures and possible increases in transport and electricity costs.

Central bank governor Amando Tetangco

In Brief Investors

Japanese dump record amount of foreign bonds Japanese investors sold a record 4.256 trillion yen (US$37.24 billion) of foreign bonds in April, the first month of their 2017/18 financial year, data from the Ministry of Finance showed yesterday.

The Japanese investors’ foray into global bonds had stopped abruptly in November as U.S. bond markets tumbled following Donald Trump’s surprise election to U.S. President.

The investors suffered another setback after French bonds, one of their favourite assets, crumbled earlier this year on worries about the French presidential election. During the five months from November to April, Japanese investors sold 8.7 trillion yen of foreign bonds.

Output

Malaysia’s factory output forecast Malaysia’s industrial production in March rose 4.6 per cent from a year earlier, government data showed yesterday, supported by strength in the manufacturing and mining sectors. Output growth was in line with a 4.6 per cent annual rise forecast by a Reuters poll and slightly slower than the 4.7 per cent increase in February.

Manufacturing output rose 5.9 per cent year-on-year in March, helped by growth in the electrical and electronic products and wood products subsectors, data from the Statistics Department showed. Electricity output, however, declined 0.2 per cent, the data showed.

Agreement

OCBC to buy NAB’s Asian mortgages Singapore’s Overseas-Chinese Banking Corp said yesterday it will acquire National Australia Bank’s private wealth business in Singapore and Hong Kong, increasing its mortgage portfolio by around 4 per cent.

The city-state’s second-biggest lender didn’t disclose the size of the deal, only saying the amount would be around the book value of the business at the time of completion. The deal will add 11,000 customers and US$1.7 billion worth of business to OCBC’s mortgage portfolio. Singapore banks have been expanding their wealth management operations in recent years.

Monetary policy

RBNZ official says inflation expectations unchanged Reserve Bank of New Zealand (RBNZ) Assistant Governor John McDermott cautioned investors and analysts not to be “fooled by the noise” around inflation expectations after the central bank defied speculation it would adopt more hawkish messaging at its policy meeting. McDermott said the RBNZ was “not unhappy” with a sharp slump in the New Zealand dollar immediately after the bank held its official cash rate steady at 1.75 per cent and retained its neutral stance on monetary policy for the foreseeable future. “It’s what we expected,” McDermott told Reuters.

14 Business Daily Friday, May 12 2017

International In Brief New economy

Uber deemed transport service

by EU top court adviser Uber provides a transport service and must be licensed, an adviser to the European Union’s top court said yesterday, in a potential blow to the U.S. firm which says it is merely a digital enabler. The non-binding opinion means the smartphone app can be regulated by European countries as a transport service, subjecting it to local licensing regulations which could have been considered disproportionate under EU law had it been deemed an “information society service”. While the opinion of Advocate General Maciej Szpunar is non-binding, the court’s judges follow it in most cases.

Aviation

Green light for EU-U.S. talks over leasing of crewed planes European Union member states yesterday gave the green light for the start of talks with the United States to scrap restrictions on EU airlines leasing planes and crew from U.S. carriers. The leasing of crewed planes from another airline - known as wet leasing - is a common practice in the industry to boost flexibility in meeting demand, and the 10-year-old EU-U.S. Open Skies aviation services agreement envisaged a liberal regime. But a dispute arose after the EU separately in 2008 imposed a seven-month duration limit, renewable once, on European airlines wet leasing from non-EU carriers, prompting retaliatory action from Washington.

Trade

French exports to rebound in 2017 France’s exports of goods should rebound this year after a deterioration in the current account weighed on growth last year, the central bank said yesterday. Bank of France governor Francois Villeroy de Galhau said that a recovery in the euro zone and broader global economies would drive a rebound in exports this year. “The net contribution from foreign trade, which was negative for growth in 2016 due to the deterioration in the current account balance, should be neutral or even slightly positive in the coming years,” Villeroy de Galhau said.

Survey

Russian consumer spending slumps Russian consumer spending on everyday items fell by 6.5 per cent in April compared with the previous month and by 4.9 per cent from the same period last year, a survey published yesterday showed, a reverse of the positive trend seen in March.

The data for April, compiled by research firm Romir, cast doubt over the pace of the recovery in the Russian economy where consumer demand remains the main growth driver. Russian consumers have borne the brunt of Russia’s economic crisis as the weaker rouble drove inflation higher and ate into their purchasing power.

Oil industry

OPEC raises 2017 estimate for supply growth from rivals Non-OPEC nations pump about 60 per cent of the world’s oil Grant Smith

O

PEC boosted estimates for growth in rival supplies by 64 per cent as the U.S. oil industry’s recovery accelerates, threatening the group’s attempts to clear a surplus.

Production from outside the Organization of Petroleum Exporting Countries will increase by 950,000 barrels a day this year, OPEC said in a report, revising its forecast up by about 370,000. The projection is four times higher than in November, when the group announced a production cut to try and re-balance oversupplied world markets. NonOPEC nations pump about 60 per cent of the world’s oil.

competitors may fuel speculation their strategy has backfired.

“U.S. oil and gas companies have already stepped up activities in 2017 as they start to increase their spending amid a recovery in oil prices,” OPEC’s Vienna-based research department said in the report.

The report echoed comments from officials such as Saudi Arabian Energy Minister Khalid Al-Falih and his Russian counterpart Alexander Novak that prolonged action will likely be required when ministers gather on May 25.

“Continued rebalancing in the oil market by year-end will require the collective efforts of all oil producers to increase market stability,” it said.

The organization raised its outlook for U.S. production growth by 285,000 barrels a day to 820,000 a day. The number of drilling rigs operating in the country has more than doubled since May, data from Baker Hughes Inc. shows, as shale

explorers emerge from a two-year rout buoyed by the initial price gains after OPEC announced its plan.

Original projection

When OPEC introduced its 2017 forecast for non-OPEC supply last July, it had projected a contraction of 100,000 barrels a day.

The report indicated that OPEC’s objective to reduce inventories to their five-year average remains some way off. While it noted that surplus oil held at sea diminished, stockpiles in the most industrialized nations increased from the fourth quarter by 31 million barrels to just over 3 billion. That’s 276 million above the five-year norm.

OPEC members are still sticking with their pledge to reduce output, the report showed. Production from all 13 members slipped by 18,200 barrels a day to 31.73 million last month, with Saudi Arabia continuing to pump below its official target. Bloomberg News

“In addition to the growth in the U.S., higher oil production is expected in Canada and Brazil” OPEC report Oil prices sank to a five-month low below US$44 a barrel in New York last week on concern that the cuts

by OPEC and 11 partners, including Russia, aren’t clearing the glut and that more supply is coming from U.S. shale drillers. While OPEC has signalled it will probably extend the cutbacks into the second half, the increased production outlook for

Commerce

In Trump’s shadow, Fed official says trade barriers a ‘dead end’ NY Fed head said he was speaking out because “we are at a particularly important juncture” Suvashree Choudhury and Jonathan Spicer

Trade protectionism is a “dead end” that may score political points but will ultimately hurt the U.S. economy, one of the most influential Federal Reserve officials said yesterday in the central bank’s strongest defence yet of open borders in the face of a sceptical Trump Administration.

William Dudley, head of the New York Fed, did not mention U.S. President Donald Trump by name in a speech at the Bombay Stock Exchange. But he gave a full-throated economic and even political argument for resisting trade barriers that he said would hurt growth and living standards in both the United States and around the world.

“Protectionism can have a siren-like appeal,” said Dudley, a close ally of Fed Chair Janet Yellen and a key decision-maker on U.S. interest-rate policy.

“Viewed narrowly, it may be potentially rewarding to particular segments of the economy in the short term,” he said in prepared remarks.

The Fed is independent but answerable to Congress, and its governors are

appointed by the White House and confirmed by the Senate. While Fed officials usually avoid recommending fiscal policies, several have highlighted the benefits of open borders since Trump was elected on an “America First” platform of revamping or ripping up trade deals.

“Viewed more broadly, (protectionism) would almost certainly be destructive to the economy overall in the long term” William Dudley, head of the New York Fed Dudley said he was speaking out because “we are at a particularly important juncture” in which trade issues could imperil the long-term health and productivity of the economy and “the economic opportunities

available to our people.”

Barriers to trade are very costly, he said, because they blunt export opportunities, make everyday goods more expensive, and they can often “backfire” by harming workers who can no longer compete in a global economy.

“There are many approaches to dealing with the costs of globalization, but protectionism is a dead end,” said Dudley, a former Goldman Sachs partner who joined the New York Fed in 2007 and became its president in the depths of the financial crisis in early 2009.

“Trying to achieve a high standard of living by following a policy of economic isolationism will fail,” he said in Mumbai.

The unusually pointed speech comes after the New York Fed published research in recent months that warned against a Republican proposal for a border-adjustment tax and Trump threat to ditch the North American Free Trade Agreement.

Both the Republicans and Trump have since largely backed down from those positions.

The U.S. central bank has hiked interest rates twice since December and expects to tighten policy about two more times this year as the economy carries on a roughly 2-per cent growth track, and as unemployment at 4.4 per cent remains low.

Dudley, who did not comment on rates in the speech, in the past has said the Fed would adapt its approach as tax, spending and trade policies emerge from Washington. Reuters

Business Daily Friday, May 12 2017 15

Opinion

China’s hidden pollution oozes to the surface Adam Minter a Bloomberg View

L

ast month, Chinese President Xi Jinping directed his government to build a new city for the “millennium to come.” It would rise on rural land about 60 miles south of Beijing, guided by the principles of “ecological protection and green development.” And it would become a model for a new kind of urban expansion.

It was an attractive vision. Over the next few weeks, however, reports emerged of vast pollution in and around Xiongan, the area Xi hopes to develop. That’s no surprise: China’s four-decade economic boom has exacted a punishing price on the environment. But it does present an enormous challenge. Xiongan, intended as the green city of the future, will have to serve as a model for how China can clean up its past.

Although China’s urban smog may get the headlines, water and soil pollution are just as bad in the countryside.

Nearly 20 per cent of farmland is dangerously polluted, and 80 per cent of groundwater is undrinkable. City dwellers have often worsened these problems by pushing their most polluting activities -- power generation, manufacturing, waste management -- to the rural fringes where they can’t be seen, heard or smelled. As China’s cities expand, many of those once-hidden problems are now being exposed, and becoming nationwide scandals.

Xiongan offers a vivid example. Beginning in the 1980s, a neighbouring county became a hub for recycling plastic waste. By 2010, when I visited the region, it was home to about 20,000 mostly small recycling shops that often disposed of caustic cleaning chemicals by dumping them into rivers or waste pits. I visited one such pit -- partly dug into a cemetery -- that was perhaps 20 feet deep and several hundred feet across. It was brimming with multi-coloured liquids that had nowhere to go but into the soil. When the local government cracked down on the recyclers in 2013, they scattered into nearby communities -including the counties constituting Xiongan.

The resulting pollution is now coming to light, along with a growing list of other calamities. Last month, an advocacy group caused a social media uproar after it published pictures of massive “industrial sewage pits” in a nearby town that had once been home to nonferrous-metal recyclers. Then there’s Baiyang Lake, a key part of Xiongan’s ecology. Once known as northern China’s “kidneys” for its ability to filter water, today it’s unfit for human contact. A casual visitor will have no trouble spotting the garbage dumps and factory discharge pipes lining the water. In 2012, scientists determined that detoxifying the lake would require “decades of clean-up efforts.”

To its credit, the government recognizes these problems.

Last year, it released a plan to rehabilitate 90 per cent of polluted industrial areas and farmland by 2020.

Although ambitious, that hardly seems realistic: It would be the world’s largest-ever soil clean-up accomplished in record time. Nor does Beijing want to devote much money to the effort. By one estimate, remediating all of China’s polluted soil would cost about US$1 trillion; in 2016, the government appropriated roughly US$1.3 billion to the goal. A similar plan for cleaning up water has been similarly underfunded.

A better approach would be to look at pollution cleanup as something of an opportunity. Over the past three decades, the government has had no problem splurging on projects, such as high-speed rail, that have no immediate financial return but are expected to spur future economic growth. A massive pollution clean-up, especially in designated development zones, could be viewed in the same way. The private sector could also play a bigger role. Shortly after the Xiongan plan was announced, real-estate prices in the area rose by as much as 37 per cent. Developers willing to pay such elevated prices should be required to pay for the cleanup, too, either through a local remediation fee based on land size or through direct efforts in partnership with the government.

If such efforts were successful, Xiongan wouldn’t be just another megalopolis. It could become an enduring symbol of a cleaner, more liveable China. Bloomberg View

‘Xiongan, intended as the green city of the future, will have to serve as a model for how China can clean up its past’

If Trump erodes democracy, stocks will suffer

D

onald Trump’s firing of FBI Director James Comey caused barely a ripple on the glassy surface of equity markets, but more than 100 years of market and social data show that might be a mistake.

Or perhaps just premature: the long-term correlation between the future returns of financial markets and indicators of a healthy democracy and society are strong, according to a recent study.

“We have documented that, over a five- or 10-year time scale, there has historically been, on average, a consistent positive correlation between future returns of a country’s stock market and past changes of the same country’s indicators that are socially ‘good’,” Scott Axelrod and James Leitner of Falcon Management wrote in a December 2016 working paper for Sweden’s Varieties of Democracy Institute.

The institute has a database of indicators of a country’s democratic health, with data for 173 countries going back as far as 1900.

The indicators cover a wide range of areas of democratic function: from equality before the law, to government attacks on the judiciary, to the ability of legislative investigations to curb abuse by the executive branch of government. Do any of these sound familiar to observers of the Trump White House?

The study looked at 158 indicators, making a subjective judgement as to whether they were “good” and then comparing them to future stock market returns.

“The average over all four studies of the total correlation (across country-year pairs) between ‘good’ past democracy indicators changes and future stock market returns is positive for 157 out of the 158 indicators that were selected solely based on whether they had enough data,” the authors write.

In other words, more democracy pays off in higher long-term stock market returns.

We should note that many of the studied indicators are not mutually independent, meaning that they will tend to move together. A country which is, for example, limiting freedom of speech will often lack a variety of viewpoints in media, both measured areas.

To be sure, it is too early to have a full understanding of the intentions of the Trump administration in firing Comey, who had responsibility over investigations into connections between his presidential campaign and Russia.

“

James Saft a Reuters columnist

Boiling a frog

Thus while the stock market is more likely to move today in reaction to estimations of how successful the administration will be in passing tax cuts, the development and strength of U.S. democratic institutions may be more important to returns over the very long term.

Interestingly, the one indicator not deemed “good” which correlated positively with future stock market returns was “institutionalized autocracy”, i.e. the extent to which power was vested in one person.

This is perhaps related to the argument which is sometimes made that China demonstrates that economic development need not go hand-in-hand with growing democratic freedom.

Perhaps not, but at least when it comes to China it seems a strong one-party state does also not go hand-in-hand with profitable stock markets. Despite China GDP increasing nine-fold from 1999-2015 its stocks have lagged. The MSCI China index only rose 29 per cent from 1991 to 2015, compared to a 326 per cent rise for emerging markets as a whole.

Putting aside the meaning of the actions of the Trump administration, anything other than a dire constitutional crisis in which, perhaps, the executive openly challenged its place in the order is unlikely to produce a big reaction.

A 2015 study by Heikki Lehkonen and Kari Heimonen of Finland’s Jyväskylä University found that while there was a positive relationship between political risk and equity returns, the relationship between the level of democracy in a given market and political risk is parabolic, meaning higher levels of political risk create outsized market impacts.

Perhaps the impact of the erosion of democracy on markets is a bit like the old metaphor of boiling a frog. The water gets warmer and warmer, and finally hot, but by the time the frog notices and decides to get out, it is too late.

We may not be frogs, and Trump may not wish or not be successful in subverting the strength of U.S. democracy, but investors inside and outside the U.S. should take careful note. Reuters

More democracy pays off in higher long-term stock market returns

”

16 Business Daily Friday, May 12 2017

Closing Chief executive

Macau vows to enhance Macau-EU relations During the EU-Macau Joint Committee meeting held The chief executive of China’s Macau Special Administrative Region (SAR) Chui Sai On pledged yesterday to maintain its long-standing and friendly relations with the European Union.

The remarks were made by Macau SAR’s Secretary for Administration and Justice Chan Hoi Fan, who delivered a speech on behalf of Chui to mark the Europe Day, which falls on May 9th in Macau’s Dom Pedro Theatre.

Chan congratulated Carmen Cano De Lasala, head of Office of the European Union to Hong Kong and Macau and all the people of the EU on the Day.

in Brussels last December, both Macau SAR and the EU has agreed to further foster cooperation in fields such as legal training, interpretation and translation training, research and innovation, combating human trafficking, as well as environment protection, Chan said.

With the unwavering support of the central government, Macau will keep moving forward on the path of economic diversification and regional economic integration, he noted, adding that more opportunities will emerge to strengthen the MacauEU partnership in various areas. Xinhua

Climate focus

EU and China to hold summit on June 2 The expected final summit statement will likely add to the pressure on Trump Robin Emmott and Alissa de Carbonnel

T

he European Union and China will hold a summit in Brussels on June 2, four EU officials said, the first since the election of U.S. President Donald Trump that has united the two economic powers against global warming and trade protectionism.

China’s premier and the heads of the European Union’s main institutions will aim to deliver a strong statement in support of the Paris climate deal that Trump has threatened to withdraw from, the officials said.

China asked that the annual the

summit, normally held in mid-July, be brought forward to press home President Xi Jinping’s defence of open trade at the World Economic Forum in Davos in January, in response to Trump’s protective stance.

While the date has not formally been announced, EU officials said it had been agreed with Beijing. The EU’s top diplomat Federica Mogherini met Chinese Premier Li Keqiang in mid-April and said afterwards that she had discussed the summit.

“The EU and China will send a very, very clear message that we will stick to the Paris climate agreement regardless of what the United States does,” said one EU official. “Climate

is a big part of the summit ... It is very high on the agenda.”

The expected final summit statement will likely add to the pressure on Trump that other Group of Seven leaders will seek to apply at a summit in Italy on May 26-27, the officials said.

Trump, who openly doubts climate change is man-made and made a campaign pledge to “cancel” the 2015 Paris Agreement, has postponed a decision on whether to stick to or abandon the global accord.

He is expected to make a decision on that after returning from the Group of Seven summit, according to the White House.

China is looking to the European Union to fill what it sees as a leadership vacuum on a host of issues in the face of a more protectionist and

inward-looking Washington.

China has also said it wants to see a strong, united Europe and has looked on with concern at the fallout of Britain’s decision to leave the EU, nervous about losing London’s support for free trade within the bloc and the economic damage that Brexit could cause to the EU, China’s largest trading partner.

Key Points Summit brought forward this year on Beijing’s request Climate, open trade to be focus; rights issues tense The European Union remains wary of its second-largest trading partner, concerned by China’s massive steel exports, its militarization of islands in the South China Sea and a turn towards greater authoritarianism under China’s President Xi. “Without the United States, it is harder to stand up for human rights, but we will bring it up with China,” a second EU official said, referring to freedom of expression, assembly and religion, as well as a crackdown on foreign non-governmental organisations in China.

But it does broadly agree with China on trade, despite a long-running spat with Beijing on what Europe sees as China’s dumping of low-cost goods on European markets.

While Trump has pulled out of a multilateral trade agreement with Asia-Pacific nations and vowed to renegotiate the U.S. free-trade deal with Canada and Mexico, the EU as the world’s biggest trading bloc welcome’s China’s commitment to trade. Reuters

Integration

Official data

Monetary stance

Germany’s Schaeuble calls for euro zone parliament

Portugal tax burden shrinks Bank of England holds rate; as surcharge eliminated trims growth forecast

German Finance Minister Wolfgang Schaeuble wants to increase in integration of euro zone countries by creating a parliament for the currency bloc.

Schaeuble said in an interview published yesterday in Italy’s La Repubblica that he discussed the idea, which would go hand in hand with his favoured plan to create a continental bailout fund, with French President-elect Emanuel Macron.

“We could strengthen the mechanisms,” he said.

“We could create a euro zone parliament made up of members of the European Parliament, which could have consultative powers over the European Stability Mechanism.”

German parties are squabbling over how to respond to Macron’s proposals for closer European integration, which include a shared budget and finance minister for the bloc.

Macron’s plans would require changes to European Union treaties, and Schaeuble said it was “unrealistic” they would get the necessary unanimous approval from all governments, some of whom would hold referendums on it.

But he signalled openness to discuss finding ways to strengthen European integration and reduce reliance on the European Central Bank, which is pumping tens of billions of euros every month into the economy. Reuters

The tax burden in Portugal shrank by 0.2 of a per centage point last year to 34.4 per cent of gross domestic product – representing the first time since 2012 that its absolute nominal increase was less than that of GDP, figures released by the National Statistics Institute (INE) yesterday showed.

“The tax burden increased nominally 2.5 per cent in 2016 after the increase of 4.6 per cent observed in 2015, reaching a value of 63.6 billion euros,” the INE said in a statement. “However, relative to PIB, a reduction of 0.2 per cent in this indicator was recorded … to 34.4 per cent of GDP, after the value of 34.6 per cent recorded in 2015.”

According to the institute, the nominal growth of 2.5 per cent in the tax burden (revenues from taxes and social security contributions) was half a per centage point below the rate of nominal GDP growth, of 3.0 per cent. It noted that “since 2012 there had not been a change in the tax burden less than that of GDP.” This resulted, the INE explained, largely from the fact that revenues from direct taxes – where personal income tax dominates - fell by 1.9 per cent, thanks in part to the elimination of the surcharge imposed during the economic adjustment programme implemented as part of Portugal’s euro-zone bailout. Lusa

The Bank of England (BoE) yesterday held interest rates at a record low 0.25 per cent and crimped its economic growth forecast, as Brexit uncertainties weigh before next month’s general election.

Policymakers voted by 7-1 in favour of keeping the rate on hold, the BoE revealed in a statement, while it also trimmed the 2017 growth forecast to 1.9 per cent.

However, the central bank suggested it could raise rates more sharply than expected if Brexit talks go smoothly and the economy remains stable.

Inflation is currently running at 2.3 per cent, above the bank’s target rate of 2.0 per cent, raising the possibility that the bank could lift rates to dampen rising prices.

The BoE put the inflation jump down to the 16-per cent fall in sterling since Britain’s referendum last year to leave the European Union.

On holding rates, policymakers argued that monetary policy could not prevent “the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements”.

“Attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth,” added the BoE. AFP