Suspicious activities reported to local electoral committee Election Page 2
Monday, May 15 2017 Year VI Nr. 1295 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Summit
President Xi kicks off Belt and Road meeting with strong investment pledge Page 16
Health
Legionnaires’ bacteria found in samples from The Parisian Page 2
Probe
Chief Executive appoints preliminary investigator to Cultural Affairs Bureau case Page 2
www.macaubusinessdaily.com Lenders
China’s banks increased credit in April though household loans fell Page 10
HR
Jimei International appoints two new executive directors after sale Page 5
Skyrocketing loans Loans
The latest data on approved lending shows a skyrocketing trend driven by loans for commercial real estate. March’s figures indicate that the local real estate market is still red hot, in spite of the fact that monthly numbers tend to show a moody performance. Pages 3 & 4
Developing entertainment
The defence shows its cards
Interview The founders of platform TheatreArtLife, Anna Robb and Ashley Sutherland-Winch, believe the city needs to develop its entertainment sector simply by using its uniqueness to its advantage. Pages 6 & 7
After the Prosecution’s turn last week, the corruption case of former official Ho Chio Meng saw the defence have the last word. The chief lawyer claimed allegations lacked evidence and failed to allow the accused the assumption of innocence.
Getting satisfied
Tourism IFT’s Tourist Satisfaction Index reached its second highest quarterly index level since the third quarter of 2009. Casinos and retail shops experienced the highest year-onyear growth. A separate IFT survey also showed that 66 per cent of visitors came from Mainland China. Page 5
Deal done
Ho Chio Meng Page 4
HK Hang Seng Index May 12, 2017
25,156.34 +30.79 (+0.12%) Worst Performers
Tencent Holdings Ltd
+1.41%
China Shenhua Energy Co
+1.00%
AAC Technologies Holdings
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China Mengniu Dairy Co Ltd
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Link REIT
+1.31%
Ping An Insurance Group Co
+0.88%
Hang Lung Properties Ltd
-2.45%
Hengan International Group
-1.12%
China Unicom Hong Kong
+1.17%
Swire Pacific Ltd
+0.87%
Geely Automobile Holdings
-1.94%
Lenovo Group Ltd
Kunlun Energy Co Ltd
+1.15%
China Life Insurance Co Ltd
+0.82%
Sino Land Co Ltd
-1.63%
AIA Group Ltd
-0.81%
Want Want China Holdings
+1.12%
Belle International Holdings
+0.66%
Wharf Holdings Ltd/The
-1.57%
China Merchants Port Hold-
-0.69%
THE MARKETPLACE FOR THE ASIAN GAMING INDUSTRY 亞洲博彩業的年度盛會
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MAY 16-18, 2017 | 2017年5月16-18日 THE VENETIAN MACAO | 澳門威尼斯人 A G2E EVENT G2E 系列展會
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U.S.-China trade Beef companies, credit card firms and liquefied natural gas exporters emerged as potential corporate winners on Friday, in the wake of trade agreements reached between the United States and China. Page 8
2 Business Daily Monday, May 15 2017
Macau Society
CE: already appointed preliminary investigator to commence related disciplinary procedures Cecilia U cecilia.u@macaubusinessdaily.com
in the city, and would also welcome and analyse opinions.
rior to setting off to Beijing to attend the ‘One Belt, One Road’ forum on Friday, the city’s Chief Executive Fernando Chui Sai On said a preliminary investigator had already been appointed to commence related disciplinary procedures in the case of illegal recruitment practised by the Cultural Affairs Bureau (IC). Chui said on Friday that the IC had submitted the report on the matter and the city’s Commission Against Corruption (CCAC) had already started its analysis of the report. The IC was slammed by CCAC in March for using illegal methods to recruit a large number of its workers, however the bureau’s new director Leung Hio Ming claimed last month that the case was not related to any transfer of benefits or other illegal activities. The CE also discussed the reasons for the release of the mortgage policy earlier this month, citing the observations made by the Secretary for Economy and Finance Lionel Leong Vai Tac that over 90 per cent of Macau’s real estate transactions were made by local buyers, and a considerable number of local residents own more than one property. Chui pledged that the MSAR Government would continue to observe the financial and real estate markets
Co-operation between Macau and Beijing
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The CE, together with his delegation, had a meeting on Saturday with the Beijing deputy secretary and mayor
of Beijing Municipality, Cai Qi, where they discussed and inked agreements on the development of co-operation between the two cities. The authorities of both cities signed agreements in areas of business, education and training for civil servants. The two cities have a long
established exchange and co-operation relationship in areas of economy and trade, youth, culture and education. According to Cai, the number of joint projects between the two regions has increased from 17 to 22 projects this year.
Election
CCAC reminds that nominating committees must be formed in accordance to the law The Commission Against Corruption (CCAC) has received reports about some groups and individuals recently hosting activities under different pretexts, where meals were offered to participants for free or at discounted prices. According to the report, during such events, announcements were made in relation to certain people’s
intentions to run for the upcoming election, or nominating committee forms were given to the participants to sign. Currently, interested individuals or parties who intend to run for the election have started to collect voters’ signatures. According to Article 170 of the Electoral Regime of the Legislative
Assembly of Macau, one may be subject to imprisonment for one to eight years for offering, promising or granting, by oneself or through another person, benefits to a natural person or a legal person so that the latter will follow his direction to or not to form a nominating committee. M e a n w h i l e, t h e l a w a l s o
prescribes that anyone who receives benefits from the aforementioned case will also be subject to a maximum three years of imprisonment. The city’s watchdog has hence pledged to carry out an investigation into the reports and complaints about electoral bribery. Furthermore, CCAC is encouraging citizens to report any illegal or irregular acts related to the elections through the complaint hotline and online platform jointly provided by CCAC and the Electoral Commission Committee. C.U.
Health
Environment
Water samples reveal Legionnaires’ disease bacteria at The Parisian
Macau Airport receives ACI Airport Carbon Accreditation for the fourth-consecutive year
Legionnaires’ disease bacteria were found in water samples from The Parisian, the Health Bureau revealed. A total of 78 samples were collected from the water taps of hotel rooms, the washroom in the lobby, and shower room at the pool. Ten out of the 78 samples contained levels of bacteria that exceeded safe limits. The city’s Health Bureau received a notice last month from the Centre for Health Protection in Hong Kong regarding three infected patients who visited and stayed at The Parisian
during their incubation period. After receiving the notice, the Bureau conducted meetings with the hotel operator to take precautionary actions, including the inspection of water samples to prevent an outbreak of the disease. The inspection also exposed that the hotel’s chlorine addition system for secondary water supply had malfunctioned. Currently, the Bureau is awaiting the results of the second round of samples after the hotel took related precautionary actions. C.U.
The Macau International Airport (MIA) was awarded ACI Airport Carbon Accreditation at Level 2 “Reduction” for the fourth-consecutive year. The city’s airport succeeded in reducing its greenhouse gas emissions by 23.6 per cent last year, as compared to emissions recorded in 2012. MIA also revealed that it has exceeded its 5-year Environmental Management Plan (2014-2018) target of ‘reducing carbon emissions per aircraft movement by 20 per cent from 2012 levels’. The plan covers five areas including
green planning, energy efficiency, water quality and saving, waste management, air quality and carbon emissions. Meanwhile, the airport’s electricity consumption last year dropped by 8.63 per cent compared to 2015, resulting in savings of around MOP3 million (US$373,707). The remaining targets for the 5-year plan include: ‘Reduce power consumption of 2.8 million kWh per year (equivalent to MOP3.7 million per year)’ and ‘annual waste recycled and treated reaches 51,900 kg per year in 2018’. C.U.
Business Daily Monday, May 15 2017 3
Macau Credit
Real estate pairing up with the market Real estate loans for the acquisition of commercial property were higher than mortgage loans approved for the purchase of residential units in March 2017. But they were both on the rise Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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he amount of new lending approved for the acquisition of commercial real estate units by non-residents of Macau skyrocketed 375 per cent during the month of March 2017 when compared to the previous month, totalling MOP597.2 million, according to data released last Friday by the Monetary Authority of Macau (AMCM). New commercial real estate loans (CRELs) for residents and non-residents combined surged 91.2 per cent month-to-month, amounting to MOP5.4 billion. Of the total, CRELs to Macau residents – corresponding to 88.9 per cent of the total – were also up, by 78 per cent, with the authority noting that the results were ‘mainly attributed to larger loan amounts recorded for a number of approvals.’ Overall, the annual increase for the same category surged 77 per cent year-on-year. The amount of residential mortgage loans (RMLs) approved by Macau banks during the month in question was lower than loans conceded to commercial real estate contracts, amounting to MOP4.1 billion. It signalled an increase of 59.6 per cent from the previous month. Within the total, 97.5 per cent consisted of loans granted to residents, or MOP4 billion, a surge of 61.7 per cent month-to-month. RMLs granted to non-residents posted a slight increase of 5 per cent, amounting to MOP101.5 million. On an annual basis, RMLs rose 39.5
Monetary Authority of Macau headquarters
per cent when compared to 2016. Speaking to Business Daily, José Isaac Duarte, an economist, explained that these types of loans tend to vary a lot from month to month. On the one hand, he said, “the current values fall in tandem with the average of the last two years, with the value of credit to non-residents still being low, at about 10 per cent,” despite the fact that it posted the most significant increase month-to-month. On the other hand, the current statistics could also mean that banks and borrowers are reacting in anticipation of a heating up of the market. “When credit tends to increase this way, it could be a sign that the economy is catching up,” he suggested.
We pay our debts
The ratio of delinquency, that is, late or overdue payments – different from payment defaults, when the borrower fails to repay the loan according to the terms agreed upon – remains low, at 0.18 per cent for RMLs – down 0.01 per cent month-to-month and up 0.08 per cent year-on-year – and at 0.13 per cent for CRELs – nearly the same as a month before and up 0.11 per cent yearly. The number of new RMLs collateralised by uncompleted units – meaning that banks concede credit in exchange for the asset yet to be built as the ultimate guarantee for payment
Telecom
CTM to compensate users affected by Internet access shutdown The commercial vice-president of Companhia de Telecomunicaçōes de Macau (CTM) Ebel Cham Pou I disclosed on Saturday that the telecom operator will offer a 15 per cent refund of April Internet payments as compensation to users affected by the Internet access shutdown last month, local broadcaster TDM Radio News reported. The refund will involve
total payment of MOP2 million (US$249,141). The incident happened on April 19, with some 30,000 residents experienced no Internet access for four hours. Cham claimed that a detailed report has already been submitted to the MSAR Government and the company is currently waiting for the investigation results. C.U.
default – reached a 91.6 per cent rise month-to-month to MOP333.1 million. On an annual basis, the amount of new equitable mortgages approved dropped 53.3 per cent. “There is a series of banks in Macau that may have been dealing with difficult loan contracts, such as the likes of Pearl Horizon, by having accepted as guarantee units that have not yet been built,” Duarte highlighted.
Accumulated value of loans
The outstanding value of RMLs, or the accumulated value of mortgage loans for the acquisition of residential units approved at the end of March, totalled MOP182.7 billion, representing a minor increase of 0.2 per cent when compared to the previous month, while posting a 4.5 per cent
increase year-on-year. The resident component corresponded to 93.9 per cent of the total. Outstanding RMLs to residents were subject to a 0.2 per cent increase month-to-month, whereas RMLs to non-residents dropped 1.2 per cent. In regards to CRELs, the outstanding value of loans reached MOP169.5 billion, down 0.4 per cent from a month before and up 1.4 per cent from 2016. Residents who acquired loans for the acquisition commercial real estate amounted to 89.7 per cent of the total, representing a 0.7 per cent drop from February 2017, while loans attributed to non-residents rose 1.7 per cent. The MACM had not replied to further enquiries from Business Daily by the time this story went to print.
4 Business Daily Monday, May 15 2017
Macau Opinion
Sheyla Zandonai*
Please advise Loans for commercial and residential property acquisitions surged during the month of March. The data released by the Monetary Authority of Macau (AMCM) last week, published in Business Daily today, says a lot about the awakening of the real estate market, but not much about who is making it rise again. In general, we know the large majority of credit is being granted to people with resident status, and that they are buying both commercial spaces and residential units. Complementary information on such data would, however, be much needed in order to assess the overall picture of real estate in Macau, but AMCM has been elliptical toward further enquiries. The option remaining would be to patchwork different bits of data, covering the number of units transacted, the total amount of loans, and the aggregate value of property sales. But the picture would still be incomplete in what regards the agents of acquisition, namely, buyers who either do not resort to loans from local banks, or who have the financial capacity to acquire property in the city without having to reach out to loans at all, both residents and non-residents. We know by reading the data that non-residents represent a low percentage of the buyers with access to credit to purchase real estate – below 10 per cent in March 2017 – but we have also witnessed several moments since the liberalization when real estate agents and buyers, mainly from Hong Kong and Mainland China, have sent the local real estate market skyrocketing, especially when property acquisition was a cheap ticket to residency back a few years ago. In addition to the question of who are the agents involved in housing and commercial property transactions, there is the matter of location and the general conditions of the properties being bought. Where are the billions being poured into property acquisition materializing on the map and in what types of property – mansions, social housing, small shops, office spaces? Early this year, Fai Chi Kei had one of the most expensive prices per square metre on the Macau peninsula. The development of new condos increasing in the area, gentrification is on the way in a neighbourhood off the luxury property map until recently – a bit similar to what happened in the north of Areia Preta, with projects such as Residence and Villa de Mer. Where are buyers investing their money and speculating? Government, please advise. *scholar and contributor to this newspaper.
Crime
Ball in your court The ball passed to the defense side on the corruption case in the trial of former Prosecutor-general Ho Chio Meng on Friday Nelson Moura nelson.moura@macaubusinessdaily.com
A
s the Prosecution finished its closing arguments in the trial of former Prosecutor-general Ho Chio Meng on Friday, the final arguments phase switched to the defense team, with the period for the closing period being extended for today. “We just hope the court will provide us with the same time for the closing arguments as was given to the Prosecution,” Mr. Ho’s main defense lawyer Oriana Inácio Pun told the press. The Prosecution concluded their closing arguments by saying that the “conduct of the former Prosecutor-general constituted abuse of power and fraud,” with Mr. Ho caring only for his personal interests and giving the Public Prosecution Office a “bad image”. “No matter the amounts involved in the infractions, they were still serious crimes. We hope the [court] can charge him with an exemplary sentence and a value of MOP70 million (US$8.7 million) be restituted to the MSAR,” the Prosecution concluded.
The best defense is to attack
In its opening remarks, the defense expressed that they had a “lot of doubts” about the impartiality of the investigations into Mr. Ho’s actions, with the investigation findings having been presented as though “Mr. Ho was already guilty”. The defense criticised the Powerpoint presentation the CCAC made in court, arguing that the findings were presented without considering Mr. Ho’s presumption of innocence, while suggesting the investigation initiated and conducted by the Public Prosecution Office into “one of their own” could have been “biased”. “Only the Chief Executive could initiate an investigation and send it to the CCAC. Only he can decide if Mr. Ho’s actions constituted abuse of power,” the defense stated. The defense also added that the conclusions of the investigation were based on exaggerated assumptions of smaller details and evidence, with lawyer Oriana Pun stating that “you need a lot of imagination to come to the conclusions made through simple evidence. If [Mr. Ho] sneezed it would already be considered an order”. The main defense lawyer stated that the number of “more than 1,500 crimes” presented in the accusations was only reached by “broad
assumptions” that what happened in one contract happened in many of the more than 1,300 contracts mentioned. “Are you saying that everyday Mr. Ho came to the office [during his tenure between 1999 to 2014] he was thinking of committing a crime? We need to use some common sense while thinking of this,” she said.
Summary of the defense’s final statements regarding the main accusations against Mr. Ho Accusation: Seven fraud and one embezzlement charge related to benefits obtained by alleged Prosecutor’s Office consultant Wang Xiandi to a value of MOP4.2 million.
The defense considered that the Prosecution failed to prove Wang Xiandi had any kind of “woman and men intimate relationship” and that she hadn’t performed any work for the Public Prosecution Office. Ms. Wang was hired for two periods, first as a consultant from 2005 to 2006, and then from 2010 to 2014, as a non-resident assistant for judicial matters, with the defense stating Mr. Ho didn’t create any function for her and that if he had paid any of her expenses, they were “small amounts, and not qualified fraud of high amount”. Lawyer Oriana Pun argued that the Prosecution failed to prove Ms. Wang did not have the qualifications to allow her to be hired by the Office, failing to even research the business she operated in Guangzhou prior to being hired. The defense also noted that other employees in the Office had seen her, and that it hadn’t been proved that the received benefits were requested by Mr. Ho or that the trips they embarked on together were for leisure.
Accusations: 18 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
The defense refuted accusations that Mr. Ho had used 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 since 2000, using the properties for private use. Lawyer Oriana Pun claimed that the rent for the two properties hadn’t gone “to Mr. Ho’s pocket” but for properties that were intended for
use of the Office, either to receive official guests or as a leisure area for high officials. “There is no video footage of the private use of the [16th floor] area or evidence that someone stayed overnight there (…) It was said the area was kept in secret but the Office has other areas not open for public” Ms. Pun stated. The defense also restated that the witnesses from the Mainland China Friendship Association, led by Mr. Ho, stated in court that guests had been received in the area in the Hotline Building, with other witnesses saying that what seemed like “distinguished guests” were received in the Cheoc Van residence. “We can’t prove exactly who they were, but we can deduce the Cheoc Van house served to receive guests from Public Prosecution Offices from Hong Kong and Mainland China,” she added. Lawyer Oriana Pun also criticised the CCAC investigation for not having checked if the keys found in Mr. Ho’s house in an envelope with ‘Cheoc Van’ written on it, could actually open the house, while critiquing the assumption that the personal belongings found in the house in 2016 had been there for many years before. “The date when the house was inspected has to be taken into account. It can’t be proven the objects were placed there before,” the lawyer said. Mr. Ho previously argued in court that the objects found in the Cheoc Van house belonged to a deceased relative and were placed there temporally as he was moving houses.
Accusation: one crime of destruction of public property, value unknown
In regards to the accusations that Mr. Ho requested the moving of valuable agar wood confiscated by the Macau Customs with the intent of keeping them for himself, the defense claimed there were possible criminal implications that justified sending the wood to the Office for inspection. “Customs said they had to take the wood for investigation to the Office since their archive room was too small and humid. It wasn’t a request by Mr. Ho,” the defense said. Lawyer Oriana Pun also considered that the witnesses heard had only stated that the former top official requested a random selection of agar wood and hadn’t requested the most valuable pieces, as stated by the Prosecution. She also recalled that there was no concrete evidence that the agar wood had been moved out of the Office building to the Cheoc Van house, and that an investigation into the missing wood conducted in 2015 hadn’t found any sign of infractions.
Business Daily Monday, May 15 2017 5
Macau
Tourism
Macau Tourist Satisfaction Index grew in Q4 2016 Cecilia U cecilia.u@macaubusinessdaily.com
T
he city’s Tourist Satisfaction Index (TSI) reached a level of 72.5 during the last three months of 2016, the second highest quarterly index score since the third quarter of 2009, according to the report compiled by the IFT Tourism Research Centre. The report revealed that the events sector had the highest index score among the selected sectors during the fourth quarter of 2016, at 77.1. The casino sector (74.4) and retail shops sector (73.1) experienced the highest year-on-year TSI growth during last year’s fourth quarter. In fact, for the entire 2016, the gaming sector received the highest index score of 73.1, the same score it received in 2009 and 2010. Tour guides or operators received
the lowest score for the three-month period, at 69.2. At the same time, the IFT Tourism Research Centre also conducted a survey relating to the city’s visitor profile for the fourth quarter of 2016. The survey shows that 66 per cent of the 1,221 visitors who responded to the survey came from Mainland China, with Hong Kong visitors coming second at 17 per cent and Chinese Taiwan visitors at 9 per cent. Some 86 per cent of the tourists who visited Macau came mainly for leisure and vacation, while only 5 per cent and 4 per cent came for business and visiting friends or relatives, respectively. In specific terms, the majority of visitors from Mainland China considered shopping as their main purpose of visiting, whereas visitors from Western countries and other
Asian countries stated visiting world heritage sites as the most attractive factor. The survey also revealed that 57 per cent of the survey respondents
stayed overnight, while 43 per cent were same-day visitors. Regarding overnight visitors, the survey disclosed that 84 per cent of visitors had planned to stay two to three days. Meanwhile, 70 per cent of respondents were repeat visitors, with 66 per cent stating that they had visited more than three times in the past five years.
to a previous filing of the company with the Hong Kong bourse. Mr. Yan Xu and Ms. Chen Hong, the shareholders of Cosmic Leader, with an 80-per cent and 20-per cent stake respectively, are to be executive directors of Jimei. The company noted that the appointment of each of the new directors’ is for a term of three years starting May 11, 2017, and will be automatically renewed for a further term of one year
each subsequent year. The new directors will be entitled to a director’s salary of HK$1.2 million per annum as well as a discretionary bonus payment. Cosmic Leader Holdings currently owns 73.83 per cent of the entire issued share capital of Jimei, of which 65.04 per cent was acquired through the April agreement and 8.79 per cent prior to the latest completion, according to our previous reports. S.Z.
Executive Board
Jimei appoints two new directors Jimei International Entertainment Group Limited has appointed two new executive directors, effective May 11, a filing from the company with the Hong Kong Stock Exchange made public last Thursday after trading hours. The appointment follows an
announcement from April 19, that casino tycoon Jack Lam Yin Lok was selling his control of Jimei by a total consideration of HK$443.17 million (US$56.87 million/MOP456.46 million) after entering into a share sale and purchase agreement with Cosmic Leader Holdings Limited, according
6 Business Daily Monday, May 15 2017
Macau
TheatreArtLife Co-Founders: Anna Robb and Ashley Sutherland-Winch
Interview | Live entertainment
By the industry, for the industry Celebrating the official launch today, the founders of a new platform for live entertainment industry professionals, TheatreArtLife, Anna Robb and Ashley Sutherland-Winch, explain to Business Daily the scope of the project, the necessity to develop the entertainment sector in the city, how Macau can use its uniqueness to its advantage, and how important education is in building up the entertainment industry. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
W
hat brought about TheatreArtLife? In order to truly understand the evolution of TheatreArtLife, you have to go back in time over ten years. We (Anna and Ashley) met working on the Las Vegas production, The Beatles LOVE by Cirque du Soleil in 2006. We kept in touch and our careers brought us to Macau. Anna had been living in Macau since 2010 as the General Stage Manager of The House of Dancing Water and Ashley relocated when her husband took a job as Head of Coaching at House of Dancing Water. Anna and I had seen over the years how challenging it was for the live entertainment industry to grow as a global entity, and we wanted to create a better way for people to connect around the world for networking and seeking jobs. We started developing TheatreArtLife last summer and we have been working nonstop to make it a reality. We are thrilled to have been able to bring it to life in a 12-month period. Given the changing landscape of the entertainment industry, what does the publication hope to share with its readership? At the root of our mission, we want to ignite connections within the
industry. Social media does a great job of connecting old or current friends, but it doesn’t truly connect strangers, especially in the live entertainment and theatre industry. Our contributors who write for TheatreArtLife have worked in the industry for a very long time and have had a wide variety of experiences, from working in theatre, concerts, circus and mega shows, to cruise ships, theme parks, touring productions, ceremonies and events - all areas of live entertainment worldwide. The articles encompass performance, technology, management, administration, culture and industry roles, as our contributors share experiences, opinions, work methods, new technology and advice. Our articles share the humanity behind the people that are creating culture around the globe. We also offer a global career center that holds job postings from many countries, discussion forums for conversation and professional development. In our industry, transition into new roles and developing new skills are keys to longevity. We want to create an inclusive resource for professionals or aspiring professionals to utilize, in order to grow with the industry. How did you select the contributors? We actually recruited all of our current contributors. We personally selected a collection of writers from a wide range of entertainment genres,
cultures and locations to begin to bring this global community together. Now that we are live, we are inviting the industry as a whole to join us to begin contributing on a regular basis.
“One area where we hope to see more growth is in music. We do not have as many concerts and major music festivals as other major international cities have, and we believe there is great potential for growth in that space” Are any from Macau? Currently, we have 12 regular contributors that live in Macau. We have a burgeoning entertainment industry in Macau and so there are a lot of incredible contributor possibilities here in town. Our local contributors work in Macau and hold roles such as
heads of department in Automation, Wardrobe, Stage Management, Scenic and Lighting Design, Publicists, Arts Management, and Production. What would you say is the current state of the entertainment industry in Macau? It is an exciting time here in Macau. Our entertainment industry is growing, now that we have overcome the recent economic downturn. The House of Dancing Water is a longtime success, The House of Magic is pulling in crowds at a consistent rate, The Venetian and Parisian have brought in some great shows recently, and with the MGM opening soon, I think we will see another large-scale show. One area where we hope to see more growth is in music. We do not have as many concerts and major music festivals as other major international cities have, and we believe there is great potential for growth in that space. Our goal with TheatreArtLIfe is to ignite connections across the globe. It is important that Macau is on the map within the live entertainment industry. Macau should be considered by touring companies who might consider stopping here, for producers to create content here, and for individuals to work here. Asia as a whole is growing in its entertainment industry, and it needs be part of the global conversation we are starting. Who are you targeting as a readership and why? Our target audience is divided into two main areas: industry professionals and aspiring professionals. By sharing experiences, advice and connections, we can build a global community that can ‘raise the bar’ of global entertainment. Although many of us work in different countries, administration processes, work methods and industry standards are still not global, and through our platform, we can begin to bridge those differences. A person starting a job in another country doesn’t need to go into that experience blindly. They can connect with those who have been there before, adhere to the safety
Business Daily Monday, May 15 2017 7
Macau standards, be aware of potential problems and overall deliver their job more effectively. Is there any significance behind the date of the launch? We all have to set a deadline! We wanted to launch in April as it was just over a year since the idea came about. We also wanted to share TheatreArtLife with the public so they could assist us in directing the site. We wanted to say: ‘here is our idea. What do our subscribers want to see next? How do they want to see it grow?’ Any platform needs to respond to its audience. What articles are most popular? What parts of the site are well received? What works? What doesn’t? So April was the time to have our bases covered and the platform ready to share with the world, but still flexible enough to adapt to feedback. Today, May 15th is our global launch, and we are thrilled.
“Macau should be considered by touring companies who might consider stopping here, for producers to create content here, and for individuals to work here. Asia as a whole is growing in its entertainment industry, and it needs to be part of the global conversation we are starting” What directions do you see the local entertainment area evolving in? We think that for local entertainment to be sustainable here, producers must understand their audiences and what they want to see. What may work in Las Vegas, may not work here. Those looking to bring entertainment should draw from the well-attended venues and shows in Macau and see what it is that brings in audiences. They should look at the culture and expectations of their audiences and create accordingly. Given the stated diversification needs of the city, will it ever be able to achieve a status such as Las Vegas? Our question would be, why would Macau want to be Las Vegas? Macau, and its surroundings, is a culturally rich and diverse area. Rather than copying the formula of a place on the other side of the world, Macau would be better served drawing from their surroundings and defining themselves as a unique entity. Uniqueness is what will bring people here IF the progression of the country and its entertainment is cultivated correctly. Simply put: Don’t be Las Vegas. Be wholeheartedly Macau, a blend of Portuguese, Chinese and Western cultures, and focus on creating a unique melting pot of entertainment that can captivate the attention of the world. What lessons can be learned from Vegas? In 2008, Las Vegas entertainment started down a road that ultimately cannibalized itself. Too many productions opened from 2008-2012 and shows began to close because they were not selling enough tickets. We think that Macau’s slower build will set it up for more success. It is important to have a wide variety of entertainment and that is one thing Vegas does well. From the Electric Daisy Festival to touring
Broadway shows, Vegas is able to entice many diverse productions. We think that Macau can learn from Vegas how to bring in diverse entertainment, but with thoughtful consideration to not open too many shows too quickly. Another area that Macau must grow is to develop strong theatre and live entertainment education programs. Las Vegas is home to the University of Nevada in Las Vegas where they have major academic programming for design, production, stagecraft, performance and music. To develop as a leader in the entertainment sector, we must build our academic base to allow for future growth. How do you go about finding contributors? We (Anna and Ashley) have been working in entertainment for over 15 years each and we have worked with many great people. When we started putting together our contributor wish list, we began with people that had impressed us over the years, not only with their work and resume, but their zest for life and humanity. We also wanted to represent as many viewpoints from around the world. Currently, our contributors are from 11 countries and our articles are written in English as well as the native language of the contributor. We plan to have articles written in Chinese, Portuguese, Spanish, Italian, all of the languages of the world, but that is a longer-term goal.
“Rather than copying the formula of a place on the other side of the world, Macau would be better served drawing from their surroundings and defining themselves as a unique entity” How would you describe the Hong Kong entertainment industry? Hong Kong is a growing base for entertainment expansion in the East. Many major design and production houses are opening offices in Hong Kong in the hope of growing their brands in China. We think this is a sign of what’s to come. More major music and theatre headliners come to Hong Kong and perhaps it may be easier to obtain visas, and I think if the city supports the entertainment, it will grow as well. We think that both
Macau and Hong Kong are ready for growth in the entertainment industry. What effect do you predict the build up of the local entertainment industry will have on the MICE sector? If Macau can develop its uniqueness on the global stage and make variety a focus of its entertainment and activities, it can be a very attractive location for the MICE sector. This would also require upscaling its professional delivery of events. Is entertainment necessary for Macau’s economic success? We think as an international city, entertainment could be economically viable and part of Macau’s
success. Diversification in general will help Macau’s economic success, and building entertainment that draws people to our city can be a part of what’s happening. That being said, all countries and cities need entertainment and theatre and arts. These elements reflect on the country, its ideals, and its culture. These elements teach us about human beings, self-expression, self-knowledge, history, self-empowerment, social change, education and creativity. Whether Macau needs it for economic success is in some ways irrelevant. Macau needs entertainment and arts to retain its identity in the midst of this largely expanding casino town.
8 Business Daily Monday, May 15 2017
Greater China Commerce
U.S. inks trade deal with Mainland China agreed to give “full and prompt market access” to payments companies, like Mastercard Inc., Visa Inc. and American Express Toluse Olorunnipa and Dan Murtaugh
T
he U.S. reached agreement with China to promote market access for American natural gas, financial services and beef that Commerce Secretary Wilbur Ross said was part of a broader effort to begin reshaping the trade relationship between the world’s two largest economies. The agreement covers 10 areas where negotiators from the two sides have reached consensus, including agricultural trade and the issuance of both bond writing and settlement licenses to two qualified U.S. financial institutions. By mid-July, U.S. beef producers will have broader access to Chinese markets, while America will move forward on allowing the import of cooked poultry from China, according to a joint statement announcing the deal. The statement didn’t appear to change access for Chinese companies to U.S. natural gas exports, but welcomed China to receive shipments and engage in long-term supply contracts with American suppliers. Ross said officials from Dow Chemical Co. gave assurances that increasing exports of natural gas wouldn’t harm the U.S. industry or consumers if sales remained less than 30 per cent of total output. “This will let China diversify, somewhat, their sources of supply and will provide a huge export market for American LNG producers,” Ross told reporters at a White House briefing on Thursday, using an acronym for liquefied natural gas. The agreements, which grew out of a 100-day action plan announced during an April meeting between President Donald Trump and Chinese counterpart Xi Jinping, appeared to build on or repeat some commitments that China has already made. Still, they represented the first negotiated pact on trade for Trump, who campaigned on promises to get tough on China on trade before softening his tone as he’s sought cooperation on North Korea. The next step will be to hammer out a one-year plan that puts a timeframe
on ticking off other items on each nation’s trade “wish list,” Ross said in a Bloomberg TV interview on Friday.
‘Not a breakthrough’
Ker Gibbs, chairman of the American Chamber of Commerce in Shanghai, called the commitments a “good beginning” toward addressing several market-access issues, “but not a breakthrough.” “We’d like to see the actions that go with the commitments,” Gibbs said in an emailed statement. “Past foot-dragging means we won’t celebrate until these promises are executed.” Chinese Vice Finance Minister Zhu Guangyao, speaking at a briefing in Beijing to announce the agreements, deflected questions about details, repeatedly describing the measures as “balanced.” “The 100-day China-U.S. economic plan is a plan of cooperation, a plan of actions and a plan of win-win arrangements,” Zhu said.
Payment companies
China agreed to give “full and prompt market access” to payments companies, like Mastercard Inc., Visa Inc. and American Express Co. The U.S. brought a case against China on its electronic payment services market in 2010. After a World Trade Organization panel ruled against it in 2012, China issued new industry guidelines in 2015 that it said would clear the way for foreign firms. Also in the plan, China agreed to allow foreign-owned firms to provide credit ratings by July 16. China’s Ministry of Commerce and National Development and Reform Commission had already proposed draft regulations in December that would have opened up that market. China will issue both bond underwriting and settlement licenses to two qualified U.S. financial institutions as well. While Trump made the revival of America’s coal industry a hallmark of his campaign, his administration seems to be acknowledging the potential jobs bonanza offered by the two dozen applications under review to build LNG export terminals. Ross
said a deal for coal exports to China wasn’t likely, given the far shipping distances. Gary Cohn, director of the National Economic Council, has voiced support for an LNG terminal in the U.S. Northwest that would ship gas to Asia. China imports of U.S. liquefied natural gas picked up last year after Cheniere Energy Inc. launched the first in a wave of new plants designed to liquefy and export abundant U.S. shale gas. American supplies accounted for almost 7 per cent of China’s total imports in March, customs data shows. Chinese companies already have long-term contracts with non-U.S. suppliers for more LNG than domestic demand requires through at least 2023, according to Bloomberg New Energy Finance. The Trump administration has given the go-ahead for a handful of proposed U.S. LNG ventures to ship their fuel to countries without free-trade agreements, such as China. Those projects need to secure longterm supply agreements to underpin their financing before construction can begin.
Market sentiment
“This will only help raise the market sentiment, but not change anything materially in the foreseeable future,” said Maggie Kuang, a
Singapore-based analyst at BNEF. Ross said the agreement would help to reduce the growing U.S. trade deficit with China -- the country’s largest, totalling US$347 billion in 2016 -- and help lead to additional negotiations over the next year that could address other parts of the relationship. “This was pretty much a herculean accomplishment to get this done,” he said. “This is more than has been done in the whole history of U.S.-China relations on trade.”
Beef, poultry
The deal reaffirms a September agreement to reopen China to U.S. beef exports. This time, China promised to allow American beef into the country after one more round of technical consultations, and no later than July 16, according to the joint statement. It also paves the way for China to export cooked poultry to the U.S. The U.S. will publish a proposed rule by July 16 to help jump-start the imports, it said. Gai Xinzhe, a researcher at the Bank of China Ltd.’s Institute of International Finance in Beijing, said China appeared to offer more than the U.S., but called concessions “pretty even from both sides.” “The early harvests look like appetizers for a big meal,” Gai said. Bloomberg News
Bank
AIIB approves seven new members The new members are Bahrain, Bolivia, Chile, Cyprus, Greece, Romania and Samoa The China-backed Asian Infrastructure Investment Bank (AIIB) said on Saturday it had approved seven new members to join the bank, a day before China’s biggest diplomatic event of the year kicks off. Leaders from 29 countries will attend China’s new Silk Road forum in Beijing on Sunday and Monday, an event orchestrated to promote President Xi Jinping’s vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment. Delegations from around the world will attend including the United States and North Korea. The new members are Bahrain, Bolivia, Chile, Cyprus, Greece, Romania and Samoa, bringing the bank’s total membership to 77 countries. The bank’s president Jin Liqun held a joint press conference with Chilean President Michelle Bachelet to announce the new members. “Better infrastructure across Asia
will allow Chilean goods to access new markets, more investment in Chilean infrastructure in turn will further bind together the two great continents of Asia and Latin
America,” said Jin. “We think there are a lot of projects that can link Asia with or through Latin America,” said Bachelet, adding that she had spoken with Jin about the possibility of investing in a Trans-Pacific optic fibre cable to improve digital connectivity between Asia and Latin America.
“The cable could be considered a part of the ‘One Belt, One Road Initiative’ and transform the Pacific Ocean into a bridge between our regions,” she added, using another name for China’s “Belt and Road Initiative” or new Silk Road plan. Other investments could include tunnels and highways across the Andes Mountains and ports to link Latin America and South America to Asia, Bachelet added. Thirteen prospective new AIIB members from around the world, including Canada, were approved in March. “Expanded membership to Africa, Europe and South America, along with the addition of further members in Asia shows the level of global commitment towards the bank’s mission and illustrates the momentum that has gathered since 20 countries signed initial memoranda on establishing the bank less than three years ago,” said Jin. The multilateral institution, seen as a rival to the Western-dominated World Bank and Asian Development Bank, was initially opposed by the United States but attracted many U.S. allies including Britain, Germany, Australia and South Korea as founding members. Reuters
Business Daily Monday, May 15 2017 9
Greater China GDP
In Brief
Hong Kong Q1 grows at best pace in 6 years Private home prices hit a record high for a fifth consecutive month in March Saikat Chatterjee
Hong Kong’s economy grew at its fastest annual clip in six years in the first quarter, supported by a recovery in global trade, stronger economic activity in China and rising asset prices. The strong start to 2017 from rebounding exports and stronger domestic spending will help the city navigate risks from rising trade protectionism and higher interest rates as it begins to transition to a new government in July. Hong Kong’s US$270 billion economy expanded at a robust rate of 4.3 per cent in the March quarter from a year earlier. It was the fastest pace of expansion since the second quarter of 2011 and comfortably beat forecasts in a Reuters poll of 3.4 per cent. The government upwardly revised growth in the fourth quarter of 2016 to 3.2 per cent. “I think the trade recovery helped
underpin strong growth in the first quarter but the chances are the top line growth will slow down in the coming months as regulatory tightening in China trickles down into the broader economy,” said Raymond Yeung, chief economist for Greater China at ANZ in Hong Kong. On a seasonally adjusted basis, the economy grew 0.7 per cent in the March quarter, slower than the previous quarter’s growth of 1.2 per cent. “This is likely to be as good as it will get,” Chang Liu, an economist at Capital Economics wrote in a note. “While the external environment should remain buoyant in the months ahead, we don’t think the rapid growth in capital spending will last.” As an international financial centre and a gateway to China, the former British colony is benefitting from a cyclical rebound in trade. The International Monetary Fund last month bumped up its 2017 global
growth forecast to 3.5 per cent from 3.4 per cent in January and China clocked a growth rate of 6.9 per cent in the first quarter of 2017, its fastest in six quarters. Demand from mainland China meant more goods were shipped through Hong Kong’s ports, with March exports growing 17 per cent from a year earlier. Rising home prices and a booming stock market have resulted in homeowners feeling more wealthy while mainland buyers also flocked to Hong Kong, fuelling a rebound in retail sales. Private home prices hit a record high for a fifth consecutive month in March, raising concerns the government may announce fresh curbs on runaway prices. The Hong Kong dollar is pegged to the greenback and expectations of two more U.S. interest rate hikes this year will trigger increases in local mortgage rates. Capital Economics expects a drop of more than 30 per cent in residential property prices by 2020. Reuters
Expenditure
Fiscal spending growth slows sharply China’s fiscal spending rose 3.8 per cent in April from a year earlier, slowing sharply from a 25.4 per cent jump in March and adding to signs of cooling in the world’s second-largest economy. Central government spending rose 3 per cent in April from a year earlier while local government spending grew 3.9 per cent, the finance ministry said on Friday. The slowdown in spending was mainly due to significant expenditure earlier, the ministry said in a statement on its website. Government spending in January-April rose 16.3 per cent from a year earlier, it said. Debt
Xi offers indebted Greece strong support Chinese President Xi Jinping offered the prime minister of deeply indebted Greece strong support on Saturday, saying the two countries should expand cooperation in infrastructure, energy and telecommunications. Xi told Prime Minister Alexis Tsipras that Greece was an important part in China’s new Silk Road strategy. “At present, China and Greece’s traditional friendship and cooperation continues to glow with new dynamism,” China’s Foreign Ministry cited Xi as saying. Cooperation in infrastructure, energy and telecommunications should be “deep and solid”, Xi added, without giving details. Going public
BOCOM International prices HK IPO near bottom Legislation
Foreign business groups push for delay in controversial cyber law The new regulation includes requirements for data to be stored locally as well as contentious security reviews Cate Cadell and Michael Martina
Overseas business groups are pushing Chinese regulators to delay the June 1 implementation of a controversial cyber law that mandates strict data surveillance and storage for firms working in China, saying the rules would severely hurt business. The European Union Chamber of Commerce in China and U.S.-based Business Software Alliance say the law, passed by China’s largely rubber-stamp parliament in November, as well as rules for implementing it, need further review before being rolled out. The new regulation includes requirements for data to be stored locally as well as contentious security reviews, which critics say could unfairly target foreign firms. In a letter to the government’s Cyberspace Administration of China dated May 11 and seen by Reuters, the EU Chamber said the new rules were “fraught with weaknesses,” would lead to “great uncertainties and compliance risks” and crimp China’s booming information technology market for both foreign and domestic companies. It recommended delaying the law to “allow sufficient discussion”.
Several foreign business sources have said dozens of leading business associations from Japan, Australia, the United States and Europe are preparing a separate joint letter to Chinese cyber authorities ahead of June 1, asking the government to delay the implementation date. Lawyers say while lobbying is highly unlikely to stop the government from moving ahead with the rules, authorities probably won’t police the industry too harshly initially. Up until now, China’s data industry has been governed by loosely defined laws but no overarching data protection framework. The new law codifies much stricter controls than other regions including Europe and the United States. On top of internationally common standards, such as requiring user consent before moving data beyond country borders, China’s new
cyber law also mandates companies store all data within China and pass security reviews. The rules align with China’s own ethos of “cyber sovereignty,” the idea that states should be permitted to govern and monitor their own cyberspace, including control of incoming and outgoing data flows. The Cyberspace Administration of China, the country’s top cyber ministry, did not immediately respond to Reuters’ request for comment. China’s cyber authority said in November that the law is not intended to unfairly target foreign companies, and is a response to increased threats from cyber-terrorism and hacking. The government has already released rules as part of the new framework that restrict the movement of data outside Chinese borders and require yearly reviews of data by authorities. Reuters
BOCOM International Holdings Company, the Hong Kong investment banking arm of China’s fifth-biggest bank, priced its Hong Kong IPO near the bottom of expectations, underscoring the tough environment for financial companies in the Asian financial hub. The company, a unit of Bank of Communications Co Ltd (BoCom), priced the 667 million shares on offer at HK$2.68 each, after marketing the deal in an indicative range of HK$2.60 to HK$3.10 per share, BoCom said in a securities filing on Friday. That would put the total deal at HK$1.79 billion (US$230 million). Investment
Great Wall Motor eyes N.America plant Chinese carmaker Great Wall Motor Co Ltd is planning to build a plant in Mexico or the United States, the firm’s chairman said on Friday, but added an uncertain policy environment meant the details of the plan were still in flux. Reuters reported last month Great Wall, which says it is China’s largest SUV and pickup maker, was eyeing an auto plant in two Mexican states hit by U.S. President Donald Trump’s drive to make American companies invest at home. The carmaker’s chairman Wei Jianjun said the firm had looked at three possible states in Mexico and two states in the United States.
10 Business Daily Monday, May 15 2017
Greater China Lenders
Loans growth highlights debt challenge Banks extended RMB1.1 trillion in net new yuan loans in April Kevin Yao
C
hina’s banks unexpectedly extended more credit in April than in the previous month, though household loans fell in a sign authorities are walking a tight rope as they try to tamp down debt risks without throttling the economy. While economic growth quickened modestly in the first quarter, Beijing is worried excessive credit may undo hard won gains as risky forms of financing has boomed since the 2008-9 global financial crisis. The People’s Bank of China (PBOC) has increased its checks on banks’ off-balance sheet wealth management products - the key component of shadow banking credit, while the banking regulator has stepped up a crackdown on risky lending behaviors. Chinese banks extended RMB1.1 trillion (US$159.4 billion) in net new yuan loans in April, central bank data showed on Friday, rising from RMB1.02 trillion in March, and above the RMB714 billion predicted by analysts in a Reuters poll. “April’s credit expansion could have been due to front-load funding demand ahead of regulatory tightening, and the risk tilts to the downside in the coming
months,” said ANZ’s China economists David Qu and Betty Wang in client note. Analysts say Beijing is keen to ensure steady economic growth ahead of the 19th Communist Party Congress later in the year. Chinese leaders have pledged to shift the emphasis to addressing financial risks and asset bubbles which analysts say may pose a threat to the world’s second-largest economy if not handed well. Indeed, China’s central bank has been guiding short-term interest rates higher to help contain debt perils, though it is treading cautiously to avoid hurting economic growth. On Friday, the PBOC injected fresh funds while keeping a tight rein on short-term funding in what appeared to be a further effort to dampen speculative investment. China’s banks extended a record RMB12.65 trillion in loans in 2016 as the government encouraged credit-fueled stimulus to meet its economic growth target. The credit explosion stoked worries
about financial risks from a rapid buildup in debt, which authorities have pledged to contain this year. The effects of the crackdown are starting to show up in weakened off-balance sheet financing, or shadow banking activity, and falling household loans. Trust loans, entrusted loans and undiscounted banker’s acceptances, which are common forms of shadow banking activity in China, totalled RMB177 billion in April, down from RMB753.8 billion in March, according to Reuters calculations based on the central bank’s data.
Property lending cooling
Household loans, mostly mortgages, fell to RMB571 billion in April from RMB797.7 billion in March, the data showed. Household loans accounted for 52 per cent of total new loans last month, down from 78 per cent in March. Cities across China have been rolling out much tougher real estate restrictions
this year in an effort to contain resurgent demand from home buyers and property speculators. “The upshot is that the deceleration in credit growth which began last summer continued uninterrupted last month with a pick-up in loan growth more than offset by a decline in bond issuance,” Julian Evans-Pritchard, China economist at Capital Economics, wrote in a note to clients. Total new credit to the economy, which includes bank lending as well as other forms of credit, increased by a record RMB6.93 trillion (US$1.01 trillion) in the first quarter - roughly equivalent to the size of Mexico’s GDP. Broad M2 money supply (M2) grew 10.5 per cent from a year earlier, the central bank data showed, slowing from March’s 10.6 per cent increase and missing forecasts for an expansion of 10.8 per cent. Outstanding yuan loans grew at 12.9 per cent by month-end on an annual basis versus expectations for a 12.5 per cent rise. The economy grew a stronger-than-expected 6.9 per cent in the first quarter from a year earlier, giving it a solid tailwind to once again hit the government’s full-year growth target of around 6.5 per cent. Evans-Pritchard expects the crackdown on debt risks will temper growth in the year ahead. “This will feed through into weaker economic growth in the coming quarters but the slowdown should be gradual.” Reuters
Migration
Behind Kushner Companies, a Mainland agency skirts visa-for-investment rules Agents can make more than US$100,000 per EB-5 client Alexandra Harney
While Jared Kushner’s family company apologized last week for mentioning the White House adviser’s name when wooing Chinese investors to fund a New Jersey real estate project, one Chinese immigration agency was touting its role in the deal. For Beijing-based Qiaowai, which organized the road show for Kushner Companies’ One Journal Square project, the pitch was a chance to highlight its U.S. political connections. Shortly into the roadshow, the company posted photos on social media saying the events had prompted a “buying rush”. Migration agencies like Qiaowai have built lucrative businesses helping U.S. developers raise money through the controversial EB-5 program, which grants foreigners - mostly Chinese - a U.S. green card in exchange for investing US$500,000 or more in a qualified project. Under the rules of the program, promoters should never promise green cards to investors or guarantee that their investments will pay off. However, an examination by Reuters of some of Qiaowai’s online marketing materials show the firm has skirted those rules. Qiaowai declined to answer written questions or comment for this article. Jupiter, Florida-based U.S. Immigration Fund (USIF), which is working with Kushner Companies and private equity fund KABR Group on One Journal Square, said it believes both the firm and Qiaowai fully complied with all laws. The EB-5 program has come under fire from politicians who point to repeated fraud and abuse, and to the fact that a scheme originally intended to bring jobs to high-unemployment areas often has been used to fund projects in wealthy neighborhoods.
In addition, agents can make more than US$100,000 per EB-5 client, lawyers and advisors involved in the program say, but investors typically aren’t told how much money the agent is earning on a transaction. Despite these concerns, Congress last week extended the EB-5 program until September 30. Kushner Companies apologized for Nicole Kushner Meyer’s reference to her brother, President Donald Trump’s son-in-law, when pitching One Journal Square last weekend. It stressed that Jared Kushner was only mentioned in order to make clear to potential investors that he was not involved with the project. A company spokesman said on Thursday that Kushner Companies will skip road show events in China this weekend. In a sector where investors are wary of failing projects and policy changes that would jeopardize their visas, Qiaowai and other Chinese migration agencies emphasize their contacts with U.S. politicians in order to reassure potential investors their EB-5 projects will be successful, industry executives say. In a promotional text message seen by Reuters, Qiaowai made note of Meyer’s relationship to Trump and called her the event’s “heavyweight honoured guest”. In January, Qiaowai noted on its website that its founder and president, Ding Ying, had attended President Trump’s inauguration, meeting with the President and members of his family and cabinet. “The fact that Ms Ding has once again been invited to attend a presidential inauguration shows that the U.S. Congress values and approves of the Qiaowai group,” it wrote. The White House did not immediately respond to a request for comment about whether Trump had met with Ding Ying. A spokesman for Vice President Mike Pence said his office has no recollection or record of any meeting taking place. Checks of donors to Trump’s inaugural
committee and a review of all contributions to presidential candidates in 2016 found no donations from Ding, Qiaowai or a U.S. registered subsidiary.
Big player
One of the largest companies in the sector, Qiaowai was founded in 1999 by Ding and now advises Chinese on emigration to 15 countries, including Canada, the UK and Germany, according to its website. Chinese account for around 80 per cent of the nearly 10,000 EB-5 visas issued annually. Qiaowai has been an active marketer of EB-5 projects, raising funds for developers HFZ Capital Group and the Witkoff Group, among others, according to its website. Witkoff declined to comment, while HFZ did not respond to requests for comment. Qiaowai says it helped the Kushner Companies raise funds for Trump Bay Street, an apartment complex in Jersey City, New Jersey, that The Trump Organization licensed its name to. For the One Journal Square project, developers are seeking to raise US$150 million, or 15.4 per cent of the funding, from investors through the EB-5 program. Because the SEC considers some EB-5 offerings securities, companies and individuals selling those investments must comply with U.S. securities laws. This includes not defrauding investors, making false claims or failing to mention relevant information. There are, however, limits on the SEC’s ability to bring fraud claims where the funds solicited and the investors are based overseas, one securities lawyer said. EB-5 schemes must also comply with immigration rules. Under United States Citizenship and Immigration Services (USCIS) guidelines for the EB-5 program, investors must put their capital at risk and the green card is not guaranteed. Qiaowai’s promotional materials online and on social media, however, sometimes refer to a green card
guarantee or “safeguard”, and the safety of capital invested in EB-5 projects. Reuters found six instances where Qiaowai offered such assurances in its online promotion of the One Journal Square project, and several other instances in promotion of previous projects. In one advertisement for the One Journal Square event in Shanghai posted on Chinese social media platform WeChat on May 5, Qiaowai wrote that the project “in a real sense guarantees a permanent green card and the safety of the investment principal, and we consider it one of the best of Qiaowai’s 87 projects to date!” After Reuters asked Qiaowai for comment, the post was deleted. In an April 27 post on its website, Qiaowai noted the project “fully safeguards investors’ green cards and funds”. This phrase - and similar phrases on other parts of Qiaowai’s website that mentioned the One Journal Square project - were deleted after Reuters questioned Qiaowai about them. Several experts interviewed by Reuters said the promises by Qiaowai were a breach of the program’s rules while others played down the concerns, saying such representations were commonplace and just one aspect of a problematic program. The SEC declined to respond to written questions for this story and a spokeswoman declined to comment. USCIS said it could not comment on specific cases but said it welcomed the submission of any questionable advertising or informant tips regarding the EB-5 program. “The investment remaining at risk throughout conditional residency is a fundamental program requirement, and the petitions of those investors who cannot provide evidence that they met this requirement will be denied.” USIF said the firm was “committed to strict adherence to securities and all applicable laws,” and it required Qiaowai to certify in writing its compliance with these laws as well. USIF did not make assurances about green cards or the safety of funds, the company said in an emailed response to questions. The fees and terms of Qiaowai’s arrangements with Kushner, KABR and USIF have not been disclosed. Reuters
Business Daily Monday, May 15 2017 11
Greater China Money flow
In Brief
Central bank to maintain policy ensuring necessary liquidity The PBOC also said it will restrict credit flowing into speculative housing purchases China’s central bank said on Friday it will maintain a prudent and neutral monetary policy and keep liquidity basically stable, reinforcing its intent to dampen speculative investment while keeping the economy adequately funded. The People’s Bank of China (PBOC) said it will also strengthen oversight to prevent risks in shadow banking, including asset management products, according to its first-quarter monetary policy implementation report. The PBOC said it will continue to push for deleveraging to fend off
financial risks, but with appropriate “speed and rhythm” to stabilise market expectations. It pledged to provide necessary liquidity support for “reasonable growth of credit” -- a potential response to market fears of a liquidity squeeze. Indeed, the PBOC showed its willingness to provide longer-term credit into the market on Friday as it moved to inject fresh funds through a medium-term lending facility. China’s top leadership has identified curtailing financial risks as
a top priority this year. Regulators have stepped up efforts to clamp down on irregularities and to close potential loopholes, with China’s fast-growing US$7.7 trillion shadow banking sector in regulatory focus. The PBOC also said it will restrict credit flowing into speculative housing purchases, as China continues its battle against dangerous price bubbles in the biggest cities. China’s banking regulator also said on Friday it is paying special attention to real estate loans to small and medium-sized developers, and lending in smaller cities, amid worries of property-related financial risks. Official data on Friday showed China’s banks unexpectedly extended more credit in April than in the previous month, but household loans fell in a sign authorities are walking a tight rope as they try to tamp down debt risks without throttling the economy. Reuters
Silk Road
COSCO to invest in Kazakhstan border project China’s COSCO Shipping plans to invest in a special economic zone on Kazakhstan’s border with China as it looks to increase investment in countries involved in the new Silk Road, the company’s chairman said yesterday. Officially named the Belt and Road initiative, the Silk Road initiative unveiled in 2013 has been touted by China as a way to boost global development through expanded links between Asia, Africa, Europe and beyond, underpinned by billions of dollars in infrastructure investment. COSCO Chairman Xu Lirong said that the stateowned conglomerate will sign the deal today. Funding
SoftBank investing Didi Chuxing SoftBank Group Corp said it has agreed to invest US$5 billion in China’s Didi Chuxing, confirming it led a recent fund-raising round by the ride-hailing firm that sources said valued Didi at more than US$50 billion. Didi said last month it raised more than US$5.5 billion to expand its business overseas and develop artificial intelligence technology. Sources had said investors included SoftBank. A SoftBank spokesman said on Friday the investment was related to Didi’s last fund-raising round. SoftBank is trying to transform itself into the “Berkshire Hathaway of the tech industry.” PBOC’s headquarters
Trade
EU imposes dumping duties on steel pipes
Real estate
Hong Kong tightens rules on bank loans for property developers The HKMA said it was common for property developers to offer home buyers mortgage financing with high loan-to-value ratios to promote sales Hong Kong on Friday imposed stricter restrictions on bank lending to developers, warning there was a need to review credit risks posed by property companies in one of the world’s most expensive real estate markets. Home prices in Hong Kong have more than quadrupled since 2003, according to a government index, while the median monthly household income has risen just 61 per cent in that time, pushing home ownership out of reach for many.
be reduced to 50 per cent of the expected value of a completed property, down from 60 per cent. Mainland Chinese companies have piled into Hong Kong property, outbidding some of the territory’s most powerful developers and helping to propel prices ever higher. The HKMA said it was common for property developers to offer home buyers mortgage financing with high loan-to-value ratios to promote sales, a trend that was increasing at a rapid pace.
‘Home prices in Hong Kong have more than quadrupled since 2003’ The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, said that to strengthen credit risk management with respect to lending to developers, banks can only lend them a maximum 40 per cent of a site value instead of 50 per cent, effective June 1. Also, the cap on construction cost financing would be lowered to 80 per cent from 100 per cent, it said, while the overall lending cap would
The Hong Kong Monetary Authority
It said lending practices adopted by some developers were inconsistent with the prudent lending practices followed by banks. Denis Ma, head of research at property consultancy JLL’s Hong Kong office, said the measures announced on Friday were unlikely to have much impact on Hong Kong’s large local developers, who were mostly cash-rich. The HKMA moves “will affect (mainland Chinese) and smaller local developers the most, as these guys rely more heavily on financing for their projects compared with the local heavyweights,” Ma said. Property experts forecast that home prices in Hong Kong, among the world’s highest, will keep rising. Skyrocketing property prices have added to discontent in the city, with its 7.3 million residents already under strain from high living costs. Reuters
The European Union has imposed definitive anti-dumping duties on Chinese imports of seamless pipes and tubes of iron or steel to protect its industry from steel overcapacity. In a notice published in the official journal on Friday, the European Commission said it was imposing definitive anti-dumping duties after an investigation on a number of Chinese companies. Yangzhou Chengde Steel Pipe Co will face an anti-dumping duty rate of 29.2 per cent, while Hubei Xinyegang Special Tube Co will face a rate of 54.9 per cent. Health
Family doctor services to be extended Twenty seven provinces, autonomous regions and municipalities across China have issued guidelines or plans for promoting family doctor services, according to the top health authority. By the end of 2016, 22.2 per cent of Chinese citizens and 38.8 per cent of priority groups enjoyed services from family doctors in cities that piloted the program, the National Health and Family Planning Commission announced recently. Priority groups are seniors, pregnant women, children, the disabled, patients with chronic diseases such as hypertension, diabetes and tuberculosis, as well as those with severe mental disorders.
12 Business Daily Monday, May 15 2017
Asia Ransomware assault
Asia assesses impact but extent may not be known until today China’s official news agency Xinhua said secondary schools and universities were hit Jeremy Wagstaff
S
ome hospitals, schools and universities in Asia were hit by a global cyber attack which infected tens of thousands of computers in Europe and the United States, but officials and researchers said the extent of any damage may not yet be known. Sun Yat-sen University said it received a large number of virus complaints on Friday, the Chinese financial magazine Caixin reported on Saturday, citing a notice circulated by the university’s IT department. William Saito, cyber security adviser to the Japanese cabinet and trade ministry, said some of the country’s institutions were affected but declined to elaborate. South Korea’s Yonhap news agency said one of Seoul’s university
hospitals had been affected. An official said it wasn’t yet clear whether the hospital, which he declined to name, had been hit by the ransomware or some other malware.
‘New Zealand and Australia reported no impact on any organisations’ Two hospitals in Jakarta were hit, according to Semuel Pangerapan, a director general at Indonesia’s Communication and Information Ministry. He said officials were attempting to localise the infected server to prevent
the malware from spreading. One of Vietnam’s leading antivirus software companies said dozens of people had reported infections. “This number may increase as people return to work next week. A large number of computers will be turned back on and may be targets,” said Vu Ngoc Son, vice president of Bkav Anti Malware. He declined to identify who had been infected. None were customers of the company.
Number of infections falling
Cyber extortionists tricked victims into opening malicious malware attachments to spam emails that appeared to contain invoices, job offers, security warnings and other legitimate files. The ransomware encrypted data on the computers, demanding payments of US$300 to US$600 to restore access. Security researchers said they observed some victims paying via the digital currency bitcoin, though
they did not know what percent had given in to the extortionists. Officials in the Philippines and Singapore said there were no reports of breaches of critical infrastructure. New Zealand and Australia reported no impact on any organisations. India’s chief information security officer, Gulshan Rai, said there appeared to be no damage. Two factors may account for the limited reports of damage in Asia. The worm began to spread in Europe on Friday, by which time it was already early evening in many Asian countries. The worm spreads most efficiently through organisational networks, not home computers, said Vikram Thakur, principal research manager at Symantec. That means officials will need to wait until today, when business resumes, to gauge the impact on Japan, said Saito. “In Japan, things could likely emerge on Monday,” he said. Another factor may be that the worm’s spread was limited by the actions of a British based researcher, who told Reuters he registered a domain that he noticed the malware was trying to connect to. By buying the domain, the researcher, who declined to give his name but goes by the Twitter handle @malwaretechblog, may have curtailed the worm’s spread. “We are on a downward slope, the infections are extremely few, because the malware is not able to connect to the registered domain,” said Symantec’s Thakur. “The numbers are extremely low and coming down fast; don’t expect this to remain a major threat across this weekend apart from those in firefighting mode.” But the attackers may yet tweak the code and restart the cycle. The British-based researcher who foiled the ransomware’s spread said he hadn’t seen any such tweaks yet, “but they will.” Reuters
Rating
Fitch, Moody’s affirm Australia’s AAA But Moody’s was not so sure about the budget returning to surplus by 2020/21 Swati Pandey and Cecile Lefort
Two top ratings agencies affirmed Australia’s prized triple-A credit rating on Friday, despite concerns about persistently high budget deficits that have eroded the country’s fiscal strength compared with its rich-world peers. Australia’s conservative government pledged on Tuesday to return to surplus in four years to end more than a decade of deficits that have threatened its top-notch ratings. Although the government has projected a higher deficit for 2017/18 at A$29.4 billion (US$21.7 billion), Fitch expects policy measures announced by the government, if implemented, to help lower the shortfall earlier than it had expected. “Fitch’s fiscal forecasts are underpinned by steady economic growth,” it said in a statement. “The broad-based improvement in global demand so far this year,
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if maintained, would also support exports. The mining investment downturn continues to spill over to weaker private business investment in mining states, but we expect this to recede over the next two years.” The budget forecast Australia’s A$1.7 trillion economy to grow at 2.75 per cent in 2017/18 and strengthen
to 3 per cent through to 2020/21 much faster than other advanced economies. However, Moody’s which also reaffirmed its AAA rating of Australia was not so sure about the budget returning to surplus by 2020/21. “Moody’s expects that revenues will not rise as fast as the government projects, and that expenditure spending will remain higher than budgeted,” it said in a statement. “The government projects a rise in
revenues as a share of GDP; a trend that has not materialised in the last three years,” the ratings agency said, adding it was expecting steady revenues instead. Australia is among 10 countries still rated triple-A by all three major agencies, but slower economic growth in recent years and stubborn fiscal deficits have jeopardised its top ranking.
Key Points Policy steps may help lower budget gap sooner than Fitch expects Fitch says fiscal f’casts underpinned by steady economic growth Moody not so sure budget will return to surplus by 2020/21 Moody’s and Fitch said the 2017/18 budget had no major impact on the country’s triple-A ratings with stable outlook, while S&P Global Ratings has yet to comment. S&P put the Australian sovereign on negative watch last July, citing weakened prospects for improvement in budgetary performance. 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 Monday, May 15 2017 13
Asia Monetary policy
Malaysia’s central bank holds key rate Economy grew 4.2 per cent in 2016, its slowest pace since contracting in 2009 Malaysia’s central bank left its benchmark interest rate unchanged at 3 per cent on Friday as expected, maintaining an accommodative stance as policy makers take comfort from quickening growth this year after a difficult 2016. “For Malaysia, the growth momentum since the second half of 2016 is expected to strengthen in the first quarter of 2017, and to be sustained for the rest of the year,” the central bank said in a statement. All 10 economists polled by Reuters had correctly predicted Bank Negara Malaysia (BNM) would hold its overnight rate. A slim minority expected the bank might have to raise rates later in the year to keep inflation in check, and due to potential capital-outflow pressure from the U.S. Federal Reserve’s tightening.
“BNM had an easy decision today: inflation is high but likely peaked and the economy is recovering, although far from roaring with a vengeance,” said Trinh Nguyen, Hong Kong-based senior economist for investment bank Natixis. “The central bank is going to keep this easy monetary policy stance in H1 2017 to support the fragile economic upturn.” BNM said growth will mainly be driven by domestic demand amid continued wage and employment gains, and the implementation of new and on-going investment projects. Malaysia’s economy grew 4.2 per cent in 2016, its slowest pace since contracting in 2009, on poor global demand for oil and gas and commodity exports. Southeast Asia’s third-largest economy, however, ended a year of tepid
activity on a high as resurgent exports boosted growth by 4.5 per cent in the fourth quarter. BNM said the ringgit currency - which hit a near 19-year low of 4.4980 to the dollar on Jan. 4 - has continued to stabilise. The ringgit was up at 4.3460 in mid-afternoon trade on Friday.
High inflation
Inflation hit an eight-year high of 5.1 per cent in March, BNM, which said headline inflation accelerated to 4.3 per cent in the first quarter, doesn’t expect price pressures to hurt growth. It is maintaining its full year 2017 growth forecast of 4.3-4.8 per cent.
Key Points Benchmark interest rate unchanged at 3 pct Growth expected to quicken in Q1 - C.bank Headline inflation accelerated to 4.3 pct in Q1 “The higher headline inflation is expected to moderate in the second half of the year,” the central bank said. Controlling inflation and rising living costs is a challenge to Prime Minister Najib Razak, as he prepares to call early polls, possibly this year. Echoing this week’s warning by the International Monetary Fund, BNM said global growth faces risks from threats such as protectionism, geopolitical developments, and commodity price volatility. “These risks could also reignite financial market volatility,” the central bank said. Reuters
Bank of Japan
Governor says protectionism is no solution for fixing global inequality Kuroda said a steadily recovering global economy is having a positive effect on Japan although domestic inflation remains low Tetsushi Kajimoto
Bank of Japan Governor Haruhiko Kuroda said on Friday that trade protectionism won’t be a solution for fixing the problem of widening global inequality. Speaking to reporters ahead of a meeting of Group of Seven finance ministers and central bankers in the southern Italian city of Bari, Kuroda warned that rejecting free trade would hinder global growth and exacerbate inequality.
Key Points
dropped their traditional pledge to keep global free trade open, acquiescing to an increasingly protectionist United States. “It’s true that inequality is spreading within each country” among both advanced and developing countries, Kuroda said. “Stopping technological innovation and free trade, and resorting to protectionism, won’t be a solution to the problem.” The International Monetary Fund (IMF) has revised up its global growth estimates on improvements in trade
activity, though the optimism was tempered by uncertainty over U.S. President Donald Trump’s administration’s trade policies. Kuroda said a steadily recovering global economy is having a positive effect on Japan although domestic inflation remains low. Japan’s economy has shown signs of life with a pick-up in global demand boosting exports and factory output. But inflation remains subdued despite four years of aggressive money printing, as slow wage growth dampens household spending. The BOJ chief said Italian banks’ non-performing loans needs to be tackled quickly but he didn’t see the bad debt issue posing significant negative effects on the financial system of Italy and Europe. Reuters
Inequality is spreading in advanced and developing nations - Kuroda Rejecting free trade hinders global growth, worsens inequality Italian banks NPLs won’t have significant negative effect on Europe, Italy Rectifying inequality is high on the agenda of financial leaders gathering at the G7 summit from Thursday through Saturday, although they are unlikely to discuss the issue of trade at this meeting, officials say. Trade emerged as a sticking point at the meeting of the larger Group of 20 financial leaders in Baden Baden, Germany, in March, when ministers
World Bank Group President Jim Yong Kim (R) with Bank of Japan Governor, Haruhiko Kuroda (L), sit on the train to reach Matera, European Capital of Culture for 2019, in the context of the G7 Ministerial Meeting on Finance. Lusa
In Brief Social networks
Thailand gives Facebook until Tuesday to remove content Facebook Thailand could face legal action next week after Thai authorities warned Facebook Inc to take down content deemed threatening to national security or violating strict lese majeste laws, the telecoms regulator said on Friday. Thailand’s military government has ramped up online censorship, particularly perceived insults to monarchy, since seizing power in a 2014 coup. The National Broadcasting and Telecommunications Commission said Facebook had failed to remove 131 of 309 web addresses on its platform which were threatened security or violated the lese majeste law. M&A
Ride-hailing service Grab open to more acquisitions Singapore-headquartered Grab is open to further acquisitions after buying an Indonesian online payments start-up, one of the co-founders of the Southeast Asiafocused ride hailing service said. Grab, which competes aggressively with U.S.-based Uber Technologies Inc in the region, sees its future in mobile payments as much as in transport, and acquired Indonesia’s Kudo last month. The company did not say how much it paid, but Reuters had earlier reported that it had expected to pay US$100 million. “We’re always on the lookout, whether it’s for public partners, private partners, inorganic partnership and growth or organic growth,” Hoo Ling Tan, told Reuters. M&A
Japan Post Holdings mulls buying Nomura Real Estate Japan Post Holdings is considering buying Nomura Real Estate Holdings in a bid to make real estate operations its new earnings pillar, a source familiar with the matter said on Saturday. One option for the purchase will be for Japan Post to acquire a majority stake in Nomura Real Estate through an open tender, and the deal will likely be several hundred billions of yen (several billion dollars) in size, the source said. Japan Post has entered unofficial talks with Nomura Holdings , a major shareholder of Nomura Real Estate, on the potential deal, said the source. Whistleblower report
S.Korea orders major Hyundai, Kia recall South Korea ordered Hyundai Motor Co and affiliate Kia Motors Corp to recall 240,000 vehicles over safety defects flagged by a whistleblower - a sharp slap on the wrist that will exacerbate reputational woes for the automakers. The move marks the first compulsory recall ordered by the transport ministry for Hyundai and Kia, which had resisted an earlier request for a voluntary recall, and gives fresh credence to allegations made by Kim Gwang-ho, a Hyundai engineer with 26 years at the company. The ministry has also asked prosecutors in Seoul to investigate whether the automakers allegedly covered up the five flaws.
14 Business Daily Monday, May 15 2017
International In Brief Monetary EU
Bundesbank head optimistic on Macron’s win An economic recovery and robust outlook in the euro zone mean the European Central Bank may be able to look at normalising its ultra-loose monetary policy, German Bundesbank President Jens Weidmann said on Saturday. Weidmann, one of the most conservative ECB policymakers, said the election of Emmanuel Macron as French president should give the single currency bloc an additional economic boost. But he said a rise in inflation should become more sustainable before the ECB considers such a move. “The election victory of Macron gives a chance that the euro zone economy gets an additional momentum,” Weidmann said. Hidden debts
Mozambique receives Kroll audit The Mozambican Attorney General’s office said on Saturday it had received an audit carried out by U.S. firm Kroll into US$2 billion in secret loans taken out by state-controlled companies and would release the results to the public as soon as possible. The discovery of the loans to state-owned fishing company EMATUM, Proindicus and Mozambique Asset Management prompted the International Monetary Fund to halt its support programme and led to the collapse of Mozambique’s currency and a debt default. The audit’s release has been delayed several times. Oil industry
Russia sees oil market balance in winter if cuts deal extended Global oil markets will reach a supply-demand balance in late 2017 or early 2018 if a pact to cut output is extended, Russia’s energy minister was quoted by local news agencies as saying. “Judging from the current dynamics in the decline of the oil and oil products inventories, the markets will see such decline in inventories by the end of 2017 - early 2018, which will lead to cuts in inventories to a five-year average,” Alexander Novak was quoted as saying. The OPEC and other producers pledged to cut output by 1.8 million barrels per day (bpd) in the first half of the year to lift oil prices. Energy
South Africa to sign new nuclear power pacts South Africa plans to sign new, more transparent nuclear power agreements with five foreign countries after a high court blocked a deal with Russia due to a lack of oversight, the energy ministry said on Saturday. South Africa signed intergovernmental agreements with Russia, France, China, South Korea and the United States in 2014 as part of plans to build a fleet of nuclear power plants at a cost of between US$30 billion and US$70 billion. Many investors view the scale of the nuclear plan as unaffordable and a major risk to South Africa’s financial stability.
International relations
G7 finance chiefs warn U.S. not to upset global growth European Economic Affairs Commissioner Pierre Moscovici said he hoped Trump would not abandon multilateralism and free trade William Schomberg and Gavin Jones
F
inance chiefs from many of the world’s leading rich nations pressed the United States on Friday not to break a decades-long global consensus in areas such as trade and financial regulation criticised by U.S. President Donald Trump. Inequality, international tax rules and cyber security headed the official agenda for Group of Seven finance ministers and central bankers who kicked off a two-day meeting in the southern Italian port city of Bari. But Trump’s threats to end a multilateral approach to policies from trade to climate change dominated discussions inside the walls of a 12th century Norman castle. “We need a strong United States to lead the global economy and global politics in a sustainable way,” said German Finance Minister Wolfgang Schaeuble when asked his message for U.S. Treasury Secretary Steven Mnuchin. Later, French Finance Minister Michel Sapin said he and other ministers told Mnuchin not to weaken global policies that had been put together painstakingly over years and had helped the world economy recover from the financial crisis that broke nearly a decade ago. “It is unthinkable, and it will not happen, that one can destroy these collective achievements that give more stability... and at the end of the day are truly in everyone’s interests,” said Sapin, who is likely to lose his job soon following Emmanuel Macron’s
election as president this month. European Economic Affairs Commissioner Pierre Moscovici said he hoped Trump would not abandon multilateralism and free trade. “We can discuss, we can have different appreciations, but we are in the same world and in the same boat,” he told reporters. Several officials at the G7 raised concerns about risks to global growth from the Trump administration’s policy proposals, including tax reform, a senior U.S. Treasury official said.
Key Points G7 meets in southern Italian port city of Bari Concern over Trump’s intentions on trade, climate Final statement due with unchanged stand on trade, forex IMF: Europe must be clearer over debt relief for Greece Trump has vowed to revamp the U.S. tax code with major cuts for businesses and ease business regulatory burdens. At a meeting in March of the larger Group of 20 finance ministers in Germany, ministers dropped their traditional pledge to keep global free trade open, bowing to an increasingly protectionist United States. Mnuchin, who skipped the opening session in Bari where academics spoke on inequality and growth and arrived long after other ministers,
G7 Finance Ministers and Central Bank Governors meeting attendees pose for a group photo during the G7 Ministerial Meeting of Finance in Bari, Italy, 13 May 2017. Lusa
told reporters he was “excited” about the emerging new U.S. trade policy. “I think you probably saw last night we made an announcement of a 100day economic plan with the Chinese, so I think we are very happy with how we are proceeding on trade,” he said. In their closing statement on Saturday, the G7 will use the same language on trade, currencies and monetary policy as the G20 did in March, an Italian G7 official said. The G20’s reference to trade said only that they were “working to strengthen the contribution of trade to our economies.” The U.S. president has already pulled out of the Trans Pacific Partnership (TPP) and wants to re-negotiate the North American Free Trade Agreement (NAFTA).
Greeks for breakfast
Before the G7 meeting, several ministers and officials held an early-morning discussion of Greece’s long-running debt crisis to prepare for a May 22 meeting of euro zone finance ministers on the disbursement of new loans. Greece’s creditors, including the European Central Bank and the International Monetary Fund, are in Bari. The IMF, which insists on debt relief for Athens, complained that the euro zone was still dragging its heels on the issue. “There is not enough clarity yet,” said IMF chief Christine Lagarde after the working breakfast. “Our European partners need to be more specific in terms of debt relief, which is an imperative.” But the priority for most officials in Bari was to get a sense of how far the Trump administration intended to go with its promises of reworking trade agreements, rules to prevent a repeat of the global financial crisis and other key areas. Asked how pro-active the U.S. delegation had been on the first day of the G7, France’s Sapin said they had been “quite discreet in their presence,” and he appeared to take a swipe at Trump’s frequent use of Twitter. “You can express yourself with a tweet but you don’t debate things with a tweet and you don’t take decisions with a tweet. We have to do that in a more profound way ... and I think that is what is going on,” he said. Reuters
White House official
U.S. nears US$100 bln arms deal for Saudi Arabia The package is being developed to coincide with Trump’s visit to Saudi Arabia Steve Holland
The United States is close to completing a series of arms deals for Saudi Arabia totalling more than US$100 billion, a senior White House official said on Friday, a week ahead of President Donald Trump’s planned visit to Riyadh. The official, who spoke to Reuters on condition of anonymity, said the arms package could end up surpassing more than US$300 billion over a decade to help Saudi Arabia boost its defensive capabilities while still maintaining U.S. ally Israel’s qualitative military edge over its neighbours. “We are in the final stages of a series of deals,” the official said. The package is being developed to coincide with Trump’s visit to Saudi Arabia. Trump leaves for the kingdom on
May 19, the first stop on his maiden international trip. Reuters reported that Washington was pushing through contracts for tens of billions of dollars in arms sales to Saudi Arabia, some new, others already in the pipeline, ahead of Trump’s visit.
‘The United States has been the main supplier for most Saudi military needs’ The United States has been the main supplier for most Saudi military needs, from F-15 fighter jets to command and control systems worth tens of billions of dollars in recent
years. Trump has vowed to stimulate the U.S. economy by boosting manufacturing jobs. The package includes American arms and maintenance, ships, air missile defence and maritime security, the official said. “We’ll see a very substantial commitment ... In many ways it is intended to build capabilities for the threats they face.” The official added: “It’s good for the American economy but it will also be good in terms of building a capability that is appropriate for the challenges of the region. Israel would still maintain an edge.” While in Riyadh, the official said Trump would attend three major events: A series of meeting with Saudi officials, a separate session with leaders of the six-nation Gulf Cooperation Council and a lunch with Arab and Muslim leaders, 56 of whom have been invited, to discuss combating extremism and cracking down on illicit financing. Reuters
Business Daily Monday, May 15 2017 15
Opinion
Trump’s trade deal with China is progress Christopher Balding a Bloomberg View columnist
P
resident Donald Trump’s administration has just announced a deal with China to open its markets across a range of industries, from beef to financial services. “This is more than has been done in the whole history of U.S.-China relations on trade,” declared Commerce Secretary Wilbur Ross, with Trumpian modesty. Rhetoric aside, Trump has put China on notice that he intends to target a long list of protectionist economic policies. Given the industries covered, it seems likely that President Barack Obama’s administration could have secured a similar deal had it been a priority. By repeatedly raising the issue, and demonstrating his commitment to it, Trump actually got it done. So give credit where it’s due. That said, this deal shouldn’t be oversold. Some of the measures China agreed to are longtime obligations that it has simply been refusing to abide by. For instance, it first committed to granting access to foreign payment providers as part of its accession to the World Trade Organization in 2000. It dragged its feet for so long that the Obama administration brought a challenge at the WTO in 2010. By now, though, thedominantChinesecard provider isUnionPay Co., which is owned by the People’s B a n k o f Ch i n a . Electronic payments are dominated by national champions such as Tencent Holdings Ltd. and Alibaba Group Holding Ltd. So it’s no wonder that Beijing has now opted to yield, nearly 20 years after agreeing to: It has little to fear. Likewise, the Trump administration is touting China’s agreement to ease imports of natural gas from U.S. producers. But this is less about opening a restricted market than about new Chinese policy objectives. Facing criticism at home about extreme pollution levels, Beijing has made shifting away from coal a major priority. This means increasing generation of solar electricity, but also cleaner-burning fuels -- such as natural gas. The U.S. concessions to Beijing are similarly modest. China thinks its banks are being subjected to unfair scrutiny in the U.S., so the Trump administration agreed to apply “the same bank prudential supervisory and regulatory standards to Chinese banking institutions” as it does to other banks. It also agreed to send a delegation to this weekend’s Belt and Road Forum in Beijing. Neither is a concession of any consequence. And potential pitfalls still abound. China remains fiercely protectionist, and U.S. companies will still complain about intellectual property theft and a hostile business environment there. Nor is the agreement likely to affect the bilateral trade deficit, a persistent fixation of Trump’s. But the reality is that the U.S. simply has a weak hand to play when it comes to negotiating with China. There’s an inherent asymmetry to the relationship: With one of the world’s most open economies, the U.S. has very little to offer China in terms of market access, while China has an enormous amount it could offer the U.S. In that light, the agreement should be viewed as a stepping stone. Trump reached this deal because he highlighted real problems and prodded China relentlessly about them. He should continue to push for more openness and fairness. It would help if he did so in forums other than Twitter. Bloomberg View
‘But the reality is that the U.S. simply has a weak hand to play when it comes to negotiating with China’
A security guard stands at the entrance to the opening ceremony of the Belt and Road Forum at the China National Convention Centre in Beijing, China, 14 May 2017. Lusa
Taking the politics out of development
C
hinese President Xi Jinping hosts these days a summit for many of the leaders of the 65 countries engaged in his “one belt, one road” (OBOR) initiative, a pioneering program that will channel billions of investment dollars toward infrastructure projects across Asia, Africa, and Europe. Despite a strong economic case for the project, reactions have been mixed. The main impulse driving the OBOR initiative is physical connectivity: efficient infrastructure enhances productivity, fosters investment, and lowers the costs of trade. With effective channels for the exchange of goods and well-connected information networks, growth accelerates, economic opportunity increases, and inequality narrows. The good news is that such infrastructure can be built in an efficient and cost-effective manner. The key is cooperative efforts that exploit each country’s respective comparative advantage, be it capital, technological know-how, logistical or construction capabilities, raw materials, or even industrial goods. Such an approach can jumpstart development in low-income countries, and help emerging economies bypass the dreaded middle-income trap. But making physical connectivity work requires not only massive amounts of funding; policy coordination and regulatory harmonization are necessary as well. In the short term, infrastructure investment can be impeded by significant political, sovereign, and financial risks. For starters, there is the risk that political leaders will prioritize short-term interests above a longterm vision. For example, they may try to win votes with reductions in road tolls or water tariffs, causing otherwise good infrastructure projects to produce net losses. They may also lack motivation to raise funds for big projects, unless those efforts would translate into actual votes. It does not help that many countries are also grappling with public debt, which makes it difficult for them to borrow from multilateral development institutions. With limited fiscal space, governments might need to resort to levying taxes – a politically difficult solution – to pursue infrastructure investment. They might also have to reduce investment in other critical areas, like education, health, or environmental protection. Private investors, for their part, may be neither willing nor able to hold illiquid assets for the entire gestation and construction process. That process is long in the best of times; in developing countries with weak institutional capabilities, it is often drawn out substantially, creating massive additional costs. Many national authorities are attempting to address this by improving governance and providing an enabling environment for infrastructure investment, including by promoting public-private partnerships. But successes have been far and few between. China sees all of this. It recognizes the urgency with which developing countries need investments in roads, railroads, power plants and grids, airports, and seaports, as well as the challenges they face in securing them. And it is well aware of the potential benefits of connectivity, particularly if it extends beyond the Asia-Pacific region. Since introducing the OBOR initiative, China has often been accused of attempting to wrest greater control over the developing world, and even to replace the United States as the dominant global
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Keyu Jin a professor of economics at the London School of Economics, is a World Economic Forum Young Global Leader and a member of the Richemont Group Advisory Board
superpower. Some, pointing to the historical record, warn of the “Thucydides Trap”: a rising power will eventually try to challenge an established one. But such warnings overlook a crucial lesson of that record: the challenges almost always end badly. China is well aware of how the Thucydides Trap has ensnared both the dominant power and the challenger, even after the challenger might seem to have won. This has not, however, stopped politicians from stoking fears about China and the OBOR initiative. Sri Lanka is a case in point. Until recently, it had welcomed – and even sought – infrastructure investment from China. When politicians began to attempt to win support by sowing doubts about China’s intentions, however, the prevailing mood visà-vis China turned from appreciation to indignation. Those politicians then accepted financial support from the U.S. and India, but that money never came. Today, Sri Lanka’s government has little choice but to rekindle its relationship with China. Fortunately for Sri Lanka – and other OBOR participants – China’s intentions are far from malicious. Its real goal is to lead an inclusive and cooperative integration process that benefits all participants. And, in fact, China may well be the best-equipped country for the job. In the U.S., a major infrastructure upgrade is long overdue, with politics, among other factors, impeding progress. By contrast, China has, in the words of Jeffrey D. Sachs, “proved itself highly effective at building large and complex infrastructure” that “complements industrial capital” and has “attracted foreign privatesector capital and technology.” Of course, China may be accused of advancing its own agenda for any action that it takes abroad. And, to some extent, such accusations would be true, just as they are whenever a global power intervenes abroad, whatever the motivation. The U.S.-led Marshall Plan was aimed not just at supporting the reconstruction of Western Europe after World War II, but also at reviving markets for U.S. exports and containing the Soviet Union. This is not to say that China could not have done anything better in pursuing the OBOR initiative. On the contrary, it could have been more effective in making the economic case for physical connectivity. And Chinese companies could have taken more care to understand and appreciate local customs and cultures, thereby avoiding unnecessary tensions with local people, as well as to ensure environmental sustainability. But these lapses are fixable – and are being addressed, both by Xi’s administration and Chinese companies investing overseas. The bigger challenge lies in creating a designated institution to coordinate the many OBOR initiatives. On this front, success will be possible only if countries avoid allowing politics to cloud their judgment. There is no defence for rejecting an economically sensible global initiative just because China is the one leading it. Project Syndicate
There is no defence for rejecting an economically sensible global initiative just because China is the one leading it
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16 Business Daily Monday, May 15 2017
Closing Silk Road summit
Beijing pledges massive investment as champion of globalisation Xi said the new Silk Road would be open to all, including Africa and the Americas, which are not situated on the traditional Silk Road Brenda Goh and Yawen Chen
C
hinese President Xi Jinping pledged US$124 billion yesterday for his new Silk Road plan to forge a path of peace, inclusiveness and free trade, and called for the abandonment of old models based on rivalry and diplomatic power games. Xi used a summit on the initiative, attended by leaders and top officials from around the world, to bolster China’s global leadership ambitions as U.S. President Donald Trump promotes “America First” and questions existing global free trade deals. “We should build an open platform of cooperation and uphold and grow an open world economy,” Xi told the opening of the two-day gathering in Beijing. China has touted what it formally calls the Belt and Road initiative as a new way to boost global development since Xi unveiled the plan in 2013, aiming to expand links between Asia, Africa, Europe and beyond underpinned by billions of dollars in infrastructure investment. Xi said the world must create conditions that promote open development and encourage the building of systems of “fair, reasonable and transparent global trade and investment rules”. Hours before the summit opened, North Korea launched another ballistic missile, further testing the patience of China, its chief ally. The United States had complained to China on
Friday over the inclusion of a North Korean delegation at the event.
Massive funding boost
Xi pledged a major funding boost to the new Silk Road, including an extra RMB100 billion (US$14.50 billion) into the existing Silk Road Fund, RMB380 billion in loans from two policy banks and RMB60 billion in aid to developing countries and international bodies in countries along the new trade routes. In addition, Xi said China would encourage financial institutions to expand their overseas yuan fund businesses to the tune of RMB300 billion. Xi did not give a time frame for the new loans, aid and funding pledged yesterday. Leaders from 29 countries attended the forum, as well as the heads of the United Nations, International Monetary Fund and World Bank. Britain’s finance minister told the summit his country was a “natural partner” in the new Silk Road, while the prime minister of Pakistan, Nawaz Sharif, a close Chinese ally, praised China’s “vision and ingenuity”. “Such a broad sweep and scale of interlocking economic partnerships and investments is unprecedented in history,” Sharif said. White House adviser Matt Pottinger said the United States welcomed efforts by China to promote infrastructure connectivity as part of its Belt and Road initiative, and U.S. companies could offer top value services.
India refused to send an official delegation to Beijing, reflecting displeasure with China for developing a US$57 billion trade corridor through Pakistan that also crosses the disputed territory of Kashmir. “No country can accept a project that ignores its core concerns on sovereignty and territorial integrity,” said Indian foreign ministry spokesman Gopal Baglay, adding that there were concerns about host countries taking on “unsustainable debt.” China plans to import US$2 trillion of products from countries participating in its Belt and Road initiative over the next five years, Commerce Minister Zhong Shan said.
Unease over summit
But some Western diplomats have expressed unease about both the summit and the plan as a whole, seeing it as an attempt to promote Chinese influence globally. They are also concerned about transparency and access for foreign firms to the scheme. Australian Trade Minister Steven Ciobo said Canberra was receptive to exploring commercial opportunities China’s new Silk Road presented, but any decisions would remain incumbent on national interest. “China is willing to share its development experience with all countries,” Xi said. “We will not interfere in other countries’ internal affairs. We will not export our system of society and development model, and even more will not impose our views on others.” “In advancing the Belt and Road, we will not re-tread the old path of games between foes. Instead we will create a new model of cooperation and mutual benefit,” Xi said.
Chinese President Xi Jinping (C) poses next to his wife Peng Liyuan (C-R) and Russian President Vladimir Putin (C-L) and other delegates and guests at the welcoming banquet for the Belt and Road Forum yesterday. Lusa
North Korea, which considers China its sole major diplomatic ally and economic benefactor, raised eyebrows when it decided to send a delegation to the summit. The North Korean delegation largely kept a low profile at the summit, and there was no evidence that its presence had affected participation despite U.S. misgivings.
Financial inclusiveness
Xi said the new Silk Road would be open to all, including Africa and the Americas, which are not situated on the traditional Silk Road. “No matter if they are from Asia and Europe, or Africa or the Americas, they are all cooperative partners in building the Belt and Road.” The idea of cooperation and inclusiveness extends to funding projects and investments along the new trade routes, which are being developed both on land and at sea. “We need joint effort among Belt and Road countries to boost financing cooperation,” Zhou Xiaochuan, governor of China’s central bank, said. To sustain the projects, Belt and Road nations should allow companies to play a key role, as government resources are limited, Zhou said. The active use of local currencies will also help to mobilise local savings, lower remittance and exchange costs, and safeguard financial stability, he said. At the forum, finance ministries from 27 countries, including China, approved a set of principles that will guide project financing along the new Silk Road. Germany, which was not among the countries that approved the financing guidelines, said its firms were willing to support the Belt and Road initiative, but more transparency was needed. Some of China’s close allies and partners were at the forum, including Russian President Vladimir Putin, Cambodian Prime Minister Hun Sen and Kazakh President Nursultan Nazarbayev. There were also several European leaders attending, including the prime ministers of Spain, Italy, Greece and Hungary. Chinese state-run media has spared no effort in its coverage of the summit, including broadcasting an awkwardly-named English-language music video “The Belt and Road is How” sung by children from countries on the new Silk Road. Reuters
Diplomacy
Financial drive
Entertainment
South China Sea talks with Philippines to start
Premier Li reiterates prudent monetary policy
Mainland to build more theme parks
China and the Philippines will start bilateral consultations on the disputed South China Sea this week, the Philippine ambassador to Beijing said, as Manila looks to ease tensions with Asia’s top economic power. Philippine ambassador to China Jose Santiago Santa Romana told reporters that the consultations between the two countries would take place in China. He added that the dispute between the two countries “cannot be resolved overnight”. China has not publicly announced any such talks. Santa Romana said Duterte’s attendance at the Silk Road summit should not be seen as the Philippines abandoning or “giving up” its claim of sovereignty in the South China Sea. The previous Philippine government filed a case in 2013 with the Permanent Court of Arbitration in The Hague on maritime boundaries. Last year the tribunal invalidated China’s claim to sovereignty over most of the South China Sea. Duterte has put the ruling on the back burner and said he will revisit it later in his term. Reuters
China’s Premier Li Keqiang said the nation will continue with its prudent monetary policy and will be able to maintain stability in the financial markets, according to China Central Television. The nation will prioritize preventing financial risks while continuing with market-based, managed floating exchange rate, Li said in a meeting with International Monetary Fund Managing Director Christine Lagarde, according to the state-run television channel. China will keep the yuan at a reasonable and equilibrium level, Li said. China’s leaders have pledged a harder push to rein in risks, though the renewed focus on cutting financial leverage has yet to make a major dent in the nation’s surging credit demand. The Communist Party’s top 25-member politburo, including President Xi Jinping, gathered last month to discuss “safeguarding national financial-market security,” initiating a clampdown that has mainly focused on shadow banking and roiled stock and credit markets. The nation will strike a balance between financial market stability, gradual deleveraging and stable economic growth, CCTV cited Li as saying. Bloomberg News
China will build more theme parks in the coming years, a spokesperson from China National Tourism Administration said yesterday. In the country’s 13th Five-Year Plan for the 2016-2020 period, China will encourage tourist areas to integrate with recreation facilities, theatres, and performing centres, according to the spokesperson. Branded theme parks from overseas will be introduced into China, while domestic theme parks are also encouraged to expand overseas. A fantasy adventure indoor theme park opened to the public this weekend in Shanxi Province. With laser technology and 3-D effects, the theme park aims to offer tourists immersive experiences. Entertainment companies are strongly encouraged to use hi-tech equipment, according to the spokesperson. According to a development plan for the tourism industry, China will improve tourism infrastructure and public service facilities while pushing forward innovative development of theme parks. Xinhua