Business Daily #1296 May 16, 2017 by Business Daily

Investment in property in Mainland increases in April Real estate Page 8

Tuesday, May 16 2017 Year VI Nr. 1296 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Entrepreneur

SME aid schemes great, but allowing more non-resident workers is critical for success, says association VP Page 4

Poultry

New measures to compensate live poultry vendor employees include surveys to switch jobs Page 4

www.macaubusinessdaily.com

Education

Highest number of participants in vocational courses seen in Business and Administration Page 6

Ransomware

Cyber attacks in China affect hundreds of thousands of computers Page 16

An emotional defence Graft

The former Prosecutor-general Ho Chio Meng denied that he was guilty of the totality of crimes he’s being prosecuted for, in particular fraud, while acknowledging that some actions were wrong and should be tried in civil, not criminal, court. An emotional final appeal for leniency came after Ho alleged that the charges were part of a revenge plot against him. Page 2

Served to protect

Three officers were arrested in Cotai, with nine other suspects involved, for receiving between MOP60,000 and MOP100,000 to provide help to non-residents, allegedly to illegally enter the city up to 53 times. The Secretary of Security issued a public apology and “lamented” the situation, issuing instructions to PJ and PSP forces.

Housing A small drop in housing transactions in April, but the average price per square metre was up 22 pct y-o-y. So far this year there have been 3,396 housing transactions, at an average price per square metre of MOP92,000. Special Stamp Duty paid in April hit MOP7.13 mln, a 197.4 per cent increase y-o-y. The special levy of 10 pct hit MOP28 mln in April, with the total so far this year at MOP72 mln. April saw the most transactions this year under the levy. Page 3

China figures curb enthusiasm

HK Hang Seng Index May 15, 2017

25,371.59 +215.25 (+0.86%) Worst Performers

+3.20%

BOC Hong Kong Holdings

+2.13%

AAC Technologies Holdings

-4.43%

Kunlun Energy Co Ltd

-0.71%

+2.03%

Hengan International Group

-1.92%

Geely Automobile Holdings

-0.18%

+1.75%

Hong Kong & China Gas Co

-1.52%

Wharf Holdings Ltd/The

-0.15%

China Construction Bank

+1.73%

Cathay Pacific Airways Ltd

-1.10%

Power Assets Holdings Ltd

+0.39%

China Life Insurance Co Ltd

+1.63%

Want Want China Holdings

-0.74%

Cheung Kong Infrastructure

+1.39%

China Resources Power

+3.19%

China Mengniu Dairy Co Ltd

MTR Corp Ltd

+2.68%

China Shenhua Energy Co

Bank of China Ltd

+2.37%

China Unicom Hong Kong

+2.31%

24° 28° 25° 28° 24° 27° 24° 26° 24° 27° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

Industrial output The world’s second-largest economy took a step back in April from its strong 2017 kick off, as industrial output slowed. The numbers show that growth momentum softened as policy makers seize the window to curb shadow lending and leverage. Page 8

Police Page 5

China Petroleum & Chemical

Pop me if you can

2 Business Daily Tuesday, May 16 2017

Macau Ho Chio Meng trial

Last statement The defence team of the former MP head claimed inadequate evidence to prove the former Prosecutor-general had given orders and controlled shell companies Cecilia U cecilia.u@macaubusinessdaily.com

he Final Court of Appeal continued with the closing arguments of the defence team in the case against the former Prosecutor-general Ho Chio Meng yesterday.

Accusation: Northern European trip turned into private travel and used public funds

The main defence lawyer Oriana Inácio Pun stated that prosecuting the former head of the Public Prosecutions Office for a trip that happened a decade ago was inappropriate, while also pointing out that other prosecutors who had participated in the event had also taken their wives. The trip happened in 2005 when Ho was invited to attend a Public Prosecutor’s conference in Copenhagen. Ms. Pun added that other participants of the event also confirmed the attendance of Ho’s wife. According to Antonio Lai Kin Ian, the former chief of the Public Prosecutions Office, as cited by the defence lawyer yesterday, Ho had made a phone call to the Chief Executive to request authorisation for the trip. The defence lawyer stated that the separation of payment of the trip could not be considered as an act of fraud, while also pointing out

that there was no evidence proving Ho had ordered to pay in two instalments. “Maybe there is an issue with the administrative procedures for separating the payment, but this is not fraud,” said Pun.

Accusation: setting up a criminal organisation and controlling shell companies

The defence lawyer stressed that there was no concrete evidence to prove the former Prosecutor-general had made any orders to organise a group to commit crimes, adding that the evidence did not prove the involvement of Ho either. The defence lawyer pointed out that the companies in the case had in fact performed their services, saying that the companies had paid taxes, hired workers and even contributed to the Social Security Fund. Pun also said that no complaints were made during the 15 years when these companies had taken up the projects from the Public Prosecutions Office (MP) and she emphasised that the practice of using subcontractors is common. There is no law that prohibits the existence of subcontractors, pointed out Pun. “Many departments [in MP] know the existence of subcontractors,” said the lawyer.

In regards to the higher-than-market-prices charged by the companies, Pun argued that there is no standard for a market price. Meanwhile, project proposals made by the former top official’s subordinates had usually gone through several departments prior to receiving approval from Ho, stated Pun, adding that no existing signs showed the former top official was concerned with whether those companies received the projects or not.

but not a prosecution for fraud. She added that no evidence presented proved Ho had received any benefits, while she also remarked that potential abuse of power practised by Ho could only be proven if all the contracts involved the former official. Concluding her closing arguments, Pun stressed that Ho had not committed fraud, appointed anyone or received benefits, while remarking that the Prosecutors were “quoting out of context”.

The wiretap recording

Ho’s final statement

Meanwhile, the defence team questioned the validity of the wiretap recording made after the investigation into Ho had started. Pun said that the recording could not prove that the person speaking was in fact Ho, indicating that the wiretap recording had not undergone audio identification and base station location analysis, which are commonly utilised.

Confidentiality

The lawyer said that hidden information regarding the receipts for reimbursement was in fact due to reasons of confidentiality. This, Pun said, also explained the reasoning for the MP hiring the same companies to perform certain services.

Income not from the shell companies

The defence team revealed that the former top official had properties valued at over MOP20 million (US$2.49 million), and questioned why Ho would commit fraud to allegedly embezzle only some MOP10 million over a 15-year period. Aside from the income made from interest on deposits and insurance, Pun disclosed that Ho had once made a large amount of income from gambling and also through investment in real estate in Mainland China. The lawyer said there were two people who could attest to the aforementioned income, but they had refused to attend the trial.

Should not be considered as fraud

With over 1,000 accusations, Pun stated that it was unreasonable to accuse Ho of committing fraud. She explained that the crime of fraud involves a victim being either an individual or a company, but it is impossible for a public entity like the MP to be considered a victim of fraud. Even if a case involved a scam performed by a civil servant, Pun perceived that penalisation and punishment should be in accordance with the criminal law for civil servants,

The former MP head argued that the charges brought against him were part of a revenge plot by the current MP directors, questioning the MP’s accusations, saying that the accusations were based on weak evidence. In particular, the former top official perceived that the accusation of setting up an unlawful social organisation to commit crimes was unjust, saying that he would have approached a more powerful person instead of the defendants in the case – who didn’t come from powerful social backgrounds, “with one of them having eye sickness and being 70 years old,” he stated. He also denounced the Prosecutors for starting the investigation with the underlying stance of finding evidence that would prove he had committed crimes, prior to any prosecution being made. Nevertheless, Ho pointed out his perceived wrongdoings. With only the MP having a guest house, Ho said he should have terminated the rental of a Cheoc Van property under the MP’s name years ago. Regarding the recruiting of Wang Xiandi as a former consultant at the MP, Ho said he had neglected to recognise the unfairness of the recruitment. Moreover, Ho admitted his fault for not making any records when he moved the valuable agar wood that had been confiscated by the Macau Customs Service. While admitting he had made mistakes, Ho also apologized and bowed to the court, but continued to deny the charges. After expressing his thoughts, the former top official earnestly wished, while visibly shedding tears, that the presiding judges would consider imposing a lenient sentence, given that he has two young children and that his wife is taking care of the entire family. A closed-door trial relating to special charges will be held on May 18, the presiding judge Sam Hou Fai announced.

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Macau Housing

No bubble in sight In April, the average price per square metre for housing was up 22 pct y-o-y, SSD amounts paid were up 197 pct y-o-y Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com

espite a small drop in the number of housing transactions in April, the average price per square metre still went up 21.68 per cent year-on-year, whereas the average usable space remained the same as during the same period last year, according to the most recent data from the Financial Services Bureau (DSF). So far this year, a total of 3,396 housing transactions have taken place, with an average price per square metre of MOP92,189 and an average of 69 square metres of usable space, according to the data. In addition, the amount paid under the Special Stamp Duty (SSD) in April of this year amounted MOP7.13 million, a 197.4 per cent increase year-on-year. The total amount was derived from four housing transactions amounting to an SSD of MOP6.12 million, one commercial property transaction with SSD amounting to MOP824,000 and one parking space whose SSD amounted to MOP187,460. So far this year a total of MOP11.13 million has been paid out in SSD for 17 housing transactions, MOP1.09 million in SSD for two commercial transactions and MOP657,140 in SSD for three parking spaces. In addition, under the additional 10 per cent levy on property transactions made by non-residents of the MSAR or entities, a total of MOP27.99 million was paid out for a total of 33 residential properties, bringing the total amount this year to MOP72.2 million for 97 total transactions. The month of April had the most transactions under the additional SSD levy so far this year, up by one transaction from the previous month.

All buildings in April 2017 Number of transactions Macau Peninsula Taipa Coloane Total

824 205 56 1085

Year-onyear change 3.90 -18.60 33.33 -0.20

Average Price (MOP/m2) 87,736 101,007 145,208 95,817

Year-onAverage Year-onyear usable space year change (m2) change 14.70 58 -4.90 26.49 98 19.50 41.50 101 18.82 21.68 67 0.00 Source: Financial Services Bureau (DSF)

Already constructed in April 2017 Number of transactions Macau Peninsula Taipa Coloane Total

754 204 4 962

Year-onyear change 0.27 -16.40 33.33 -3.70

Average Price (MOP/m2) 82,891 100,908 148,268 89,366

Year-onAverage Year-onyear usable space year change (m2) change 10.07 56 -8.20 31.17 97 18.30 297.52 194 100.00 18.17 66 0.00 Source: Financial Services Bureau (DSF)

Under construction in April 2017 Number of transactions Macau Peninsula Taipa Coloane Total

70 1 52 123

Year-onyear change 70.73 -87.50 33.33 39.77

Average Year-onAverage Year-onPrice year usable space year (MOP/m2) change (m2) change 128,829 27.91 72 28.57 not available not available 180 74.76 144,724 33.52 94 11.90 136,237 22.60 82 12.33 Source: Financial Services Bureau (DSF)

4 Business Daily Tuesday, May 16 2017

Macau Opinion

Aid schemes

Some things money can’t buy Albano Martins* Inflation in April will be between 1.49 and 1.52 per cent After Macau’s inflation reached 1.91 in February, due to the fact that the General Consumer Price Index (CPI) dropped by 0.46 points in absolute terms, I questioned the collection of the rents data for that basket of expenditure. The rents rise in the market, but not in CPI! For decades I have been upset by the DSEC (Statistics and Census Service) and for decades I have applauded its progress and I have mentioned the importance of its work, often regretting that there is no-one who realises that without good knowledge of reality there is no economic policy that suits us. I said a few months ago that since it was not credible that the way the data was collected could change, inflation in March would very likely hover between 1.66 and 1.77 per cent. And so it happened: inflation in March stood at 1.69 per cent. Today, I am still not satisfied with CPI falling, not because I do not like this behaviour, but because it seems a surreal idea, even if the CPI drop in March was only 0.01 points! So, for the month of April, what can we expect? Inflation even lower, although the CPI is starting to grow in absolute value, I believe. Do not ask me to explain this apparent incongruity, as I am not an academic, nor do I have the patience to do this today, although it is very easy. April’s inflation in Macau, which is expected to be officially confirmed by the end of May, should be in the range of 1.49 to 1.52 percentage points, although at the end of the year it will obviously be higher. Somewhere in the second half, maybe in August, it will begin to rise by virtue of its own calculation process. We need to go back to January 2005 in order to see lower inflation than we will have in April 2016: August 2004 was the last month we were in deflation. Do not forget that 2004 was the year of the great leap in gaming revenues that grew by nearly 44 per cent! By the end of 2017, we will most likely have inflation below the 2.37 per cent achieved last year. To have inflation higher than 2016 would require monthly average increases of 0.53 in absolute value in CPIs, including April, which does not seem possible. At least today, with the process being used for the collection of data! * an economist and contributor to this newspaper

Increased credit for SMEs is welcome, but flexibility to hire foreign workers has no price, says VP of young entrepreneurs association Sheyla Zandonai sheyla.zandonai@macaubusiness.com

ast week, the Macau SAR Government announced it is expanding the credit line to Small and Medium Enterprises (SMEs) under two supporting schemes it established in 2003. The new text of the SME Aid Scheme entitles small business that have arranged a MOP300,000 interest-free loan allowed under the scheme, to request a second loan of the same value, with the total amount of subsidy contracted by a company not exceeding MOP600,000. Under the second scheme altered last week, the SME Credit Guarantee Scheme, the cap amount for collateral under the scheme was raised to MOP4.90 million, while bank loans to companies were kept at 70 per cent, representing an increase from MOP5

million to MOP7 million. “I always believed that MOP300,000 to start a business today is little, so it is good that the government is expanding the support,” said Jorge Valente Júnior, Vice-President of the Youth Entrepreneurs Association. Members of the Association, involved on an individual basis, are engaged in several business segments including logistics, events, real estate, restaurants and information technology. “Costs are too high, with rents. Not to mention staff. Even if they are expensive, there is no staff to hire. I think that the government is increasing access to credit because it is much more difficult for companies in Macau [compared to Hong Kong and Mainland China] to succeed in getting credit by other means.” The young entrepreneur also believes that giving a second chance to

healthy companies that want to stay in business is a good way to encourage the sector. “Only those that will survive will continue to the second phase, as I understand it. And the opportunity for a second support to a business that is surviving, is good, because at the end of two years, we may be in need to do some recap,” he commented. According to the new amendment to the SME Aid Scheme, only companies that have repaid the first loan in the terms of the agreement, and which are not in debt to the government, can apply for the second MOP300,000-subsidy.

There is labour and labour

Although more credit works to the benefit of SMEs, another hindrance lies in the path to success for small and medium entrepreneurs - hiring skilled staff. “I don’t think that the laws are well done today to adapt to different business segments. The laws that prevail for Blue Card workers were made at a time to serve recruiting construction workers, and they were kept that way. We don’t even need too many workers, but to be able to choose them,” claims Valente Júnior. The solution? Striking a balance between bureaucratic procedural time and criteria required, he says. “Despite the fact that there is a differentiation today between qualified and non-qualified Blue Card holders, the truth is, this differentiation does not apply easily to what we, the SMEs, need. If I need a programmer with ten years of experience, I don’t need someone with a PhD. What I need is that he is able to do coding. Today, I cannot hire this person, because the government will say that this person is not qualified. It is too disconnected from reality,” he opines.

Produce

Protecting the workers The government is willing to provide financial support of MOP14 million to live poultry sales businesses for compensation to laid-off workers Nelson Moura nelson.moura@macaubusinessdaily.com

The government is considering providing MOP14 million (US$1.7 million) to live poultry businesses as financial support for employers to compensate laid off employees in the sector, the President of the Civic and Municipal Affairs Bureau (IACM), José Tavares, said yesterday. The statements were made after a meeting yesterday between the department and 50 representatives of the live poultry sales sector. “With the business’ employees expected to be laid off from their sales businesses. the government intends to grant this support, so that employers can compensate the employees,” the IACM President informed. An outbreak of avian influenza in the city in February led to the complete suspension of live poultry sales from May 1 of this year. The department informed that there are currently 61 employers and 154 employees in the live poultry sales sector, representing a possible compensation of MOP90,909 per employee. The workers will also be provided with an extra amount representing two month’s salary. “This pecuniary compensation should be mandatory for the employers, but since they might be unwilling or not able to provide it, the government wants to lend a hand,” Mr. Tavares informed.

The government will also provide compensation of MOP200 per culled poultry to the businesses, with around MOP6 million to be granted in June. According to the IACM head, the amount was reached after calculating the number of employees, the average salary, and the period of work provided, with the proposal being accepted by the sector representatives.

Paying the bosses

The compensation to be provided to the employers for the cessation of their businesses was also discussed, with representatives proposing compensation of a possible MOP10 million per business, which the IACM considered as “unreasonable”.

The sector representatives were also given a proposal of support, in case they would like to change their business activity, with a questionnaire being provided after the meeting for each salesperson to indicate if they were willing to undergo such a change. According to Tavares, a similar arrangement as that provided by the Hong Kong government - an MOP800,000 amount per salesperson for support - was being discussed, with the change in living expenses being considered. “The compensation could be a considerable amount, with the employers not being able or willing to provide it. But IACM is willing to guarantee support,” he added. Mr. Tavares said that with the people in the sector being generally elderly and having been in the sector for many years, finding a different job was a more difficult task, so the possibility of maintaining the same market stand but selling a different kind of produce was also presented.

Business Daily Tuesday, May 16 2017 5

Macau Crime

Bad apples Three police officers were arrested, allegedly in possession of HKD390,000 in bribes for assisting non-residents looking to enter the city. The Secretary for Security says it will “immediately” send specific instructions to the Judiciary Police and the PSP to increase its oversight and internal investigation efforts Nelson Moura nelson.moura@macaubusinessdaily.com

he Office of the Secretary for S e c u r i t y sta t e d yesterday in a release that it “lamented” the occurrence of another case of criminal association and abuse of power by police authorities. It stated it had “immediately” sent specific instructions to the Judiciary Police (PJ) and the Public S e c u r i t y P o l i c e F o rc e (PSP) to improve oversight efforts. The release referred to three Macau police officers who were arrested in Cotai on May 13, together with nine other suspects, for allegedly accepting bribes from non-residents looking to enter the city, the PJ told Business Daily. A total of HKD700,000 (US$89,894) in cash was seized from four of the suspects, together with

an amount of illegal drugs with an estimated value of MOP67,000 (US$8,353), the response informed. In a report by local broadcaster TDM, it was stated that the remaining nine suspects arrested were from Mainland China and Taiwan, with the drugs and cash having being found in the hotel rooms where the suspects were staying. The name of the hotel where the arrests took place wasn’t divulged by the PJ to Business Daily. According to the information provided by the department, the arrested police officers had been under investigation since June of last year, and are now suspected of having provided forged immigration records at least 53 times. The three officers were also suspected of having arranged cars for people staying in the city illegally to exit the city on at least six occasions, and of disclosing

confidential personal immigration data at least five times. The amount charged by the suspects for providing help to the non-residents was allegedly between HKD60,000 and HKD100,000, with officers seizing alleged bribe money worth HKD390,000 from the three on the day of the arrest. The Office of the Secretary for Security, Wong Sio Chak, also stated that the Commander of the PSP had been informed to immediately initiate disciplinary procedures against the arrested

officers and to commence a thorough internal investigation to resolve any discipline issues.

PSP abuse rising

Last month, the Security Forces Disciplinary Committee (CFD) revealed that a total of 70 complaints regarding the city’s security departments had been received by the department in 2016, relating to abuse of power and misconduct. The report revealed a 63 per cent year-on-year increase in the number of complaints against the PSP, for a total of 64 complaints,

with the remaining six complaints being against PJ officers. When questioned by Business Daily as to the reasons for the considerable increase in complaints, the PSP stated it was due to the system for residents filing complaints having been extended, while the ‘transparency’ of the department’s procedures had also been improved. ‘However this [Police] Corp. will have to improve continuously its performance in serving the public,’ said the response sent to Business Daily.

6 Business Daily Tuesday, May 16 2017

Macau Vocational training

Adults want to learn business Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

ocational courses in Business and Administration saw the highest number of participants last year, according to the most recent survey by the Statistics and Census Service (DSEC). A total of 20,271 participants joined these courses during the year, making up 30.8 per cent of all participants in vocational training courses, followed by Computing courses – at 12.5 per cent (8,223 participants), and Language courses – at 11 per cent (7,255 participants.) A total of 51 institutions were

offering vocational training courses last year, an increase of nine from the previous year. The DSEC notes that the increase in the number of participants, up 9.6 per cent to 65,751, was due to people taking advantage of the Continuing Education Development Plan last year, ‘which was the last year of the Plan’s second phase.’ Of the total 1,718 vocational courses offered, 39.6 per cent, or 681, were organized for enterprises or institutions, by 19 training institutions, seeing a 1 per cent uptick in participants, to 24,514. Most of the attendees went to Business and Administration courses - at 45.8 per cent (11,229 participants) - and language courses – at 16.6 per

cent (4,077). Of the total participants in vocational training courses, 39.4 per cent were Public Administration workers, while 15.3 per cent were from the Gaming sector. Hotel employees made up 12.9 per cent of participants, while Financial Intermediation, Restaurants, and Wholesale and Retail Trade staff made up 2.2

per cent, 1.8 per cent and 1.5 per cent, respectively. Courses lasting 10 to 19 hours attracted the highest percentage of participants, at 28.6 per cent, while those lasting less than 10 hours attracted 26.7 per cent of participants. Those lasting over 70 hours received 9.1 per cent of participants, according to the data.

Portuguese-speaking countries

Catching the Chinese train Joining the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries will be a “great advantage” to São Tomé and Príncipe, according to its President Nelson Moura with Lusa nelson.moura@macaubusinessdaily.com

The President of São Tomé and Príncipe has stated that joining the Forum for Economic and Trade Co-operation between China and

Portuguese-speaking Countries (Forum Macao) will be a “great advantage”, especially at an “economic” level and for “the possibility of allowing investments” that could boost the country’s economy.

African country São Tomé and Príncipe became a member of Forum Macao in March of this year, after cutting its diplomatic ties with Taiwan and reinstating ties with Mainland China. In an interview with news agency Lusa, President Evaristo Carvalho stated that his country reinitiated diplomatic relations with the Asian country because it couldn’t miss out on being part of Chinese development, with the decision allowing for the signing of a five-year cooperation agreement. The Prime-Minister of São Tomé and Príncipe, Patrice

Trovoada, signed a five-year cooperation agreement with his Chinese counterpart, Premier Li Keqiang on April 12 of this year. “We couldn’t have missed the train. We believe this was the right policy, and as the President, I have received many congratulatory messages from ambassadors from other countries,” the country’s President, Evaristo Carvalho, said in the interview. When questioned if the decision announced by his government on December 20 of last year to reinstate diplomatic relations with Mainland China was only motivated by

economic interests, the head of state only mentioned that it was a “correct and considered” decision. “China is nowadays one of the countries that has provided more support to development, especially to the African continent,” he added. As of now, Mainland China has provided US$1 billion (MOP8 billion) to finance projects in Portuguese-speaking countries through Forum Macao and the Co-operation and Development Fund, having granted almost US$100 billion in financial support to African countries since 2000.

Public expenditure

Extra funds for Justice and Labour The Macau SAR Government has granted an additional budget for the financial year of 2017 to the Coffer of Legal Affairs and the Labour Credit Guarantee Fund, amounting to MOP44.19 million and MOP6.03 million, respectively, according to two dispatches published in the Official Gazette yesterday. The Coffer of Legal Affairs (CAJ) was created in 2005. Its main aims are to

financially support the implementation and operations of registry and notary services, as well as the Judicial and Juridical Training Centre. The Labour Credit Guarantee Fund (FGCL) was created in 2015 in order to secure the payment of credits linked to labour relations, such as indemnity due to work accidents or compensation, when there is default by the debtor. S.Z.

Corporate

CTM celebrates World Telecom

In celebration of World Telecommunications and Information Society Day, also to be celebrated in Macau by the local Macao Post and Telecommunications Bureau (CTT), local telecom operator CTM will be launching a series of promotions including free SMS and MMS sending and receiving, as well as free voice and video calls on the day. A free CTM Wi-Fi service will also be available for

60 minutes between May 17 and 19 at the 2,300-plus hotspots throughout Macau. In addition, an extra 1GB of data usage and a MOP100 discount on handsets will be available from today until May 31. The CTT has also planned a seminar on “Big Data for Big Impact” to be held at the Macau Tower after the opening ceremony of the event, which starts at 10am, as well as well as free entry into the Communications Museum on the day.

Business Daily Tuesday, May 16 2017 7

Gaming Transformation

PokerStars owner Amaya changes name, moves HQ in transformation CEO Ashkenazi is working to pay down debt, install a new management team and lessen the company’s exposure to the unstable online-poker business Sandrine Rastello

okerStars owner Amaya Inc. is renaming itself The Stars Group Inc. and relocating to Toronto, part of Chief Executive Officer Rafi Ashkenazi’s efforts to transform the

online gambling company after a difficult period. Promoted after founder David Baazov stepped down amid insider trading charges and poor earnings performance, Ashkenazi is working to pay down debt, install a new management team and lessen the company’s exposure to the

unstable online-poker business. Amaya just hired an industry veteran from William Hill Plc to focus on mergers and acquisitions, which Ashkenazi has said could play a central role in the second half of the year. Deals could help Amaya diversify beyond poker, which made up 69 per cent of the company’s total revenue in the first quarter, compared with 75 per cent a year earlier. In a sign Ashkenazi’s efforts may be working, online casino games and sports book accounted for 27 per cent of sales, up

from 21 per cent. The company also managed to post its first increase in revenue from poker in three quarters, fuelling earnings that topped analysts’ estimates. The poker business has been in decline since the U.S. outlawed online-gaming companies and professional card players started elbowing out amateurs. Amaya will seek shareholder approval for the name change at its annual meeting, according to a statement Friday. The company is currently based outside Montreal. Bloomberg

Integrated Resorts

Sharing the gaming market north of China The first potential competitor to Lawrence Ho’s Tigre de Cristal in Russia’s Far East is back on track Sheyla Zandonai sheyla.zandonai@macaubusiness.com

NagaCorp has resumed construction of its Mayak Resort in the Primorye Krai Integrated Entertainment Zone, 50 kilometres from Vladivostok, after the project was halted in 2015 due to archaeological excavations on the site, Asia Times reported

yesterday. When finished, Mayak will be the first development to compete with Tigre de Cristal, an integrated resort owned by the Lawrence Ho Yau Lung-controlled Summit Ascent, which opened in Primorye in 2015. Unlike Tigre de Cristal, NagaCorp’s project will offer non-gaming facilities, such as a water park.

NagaWorld Hotel and Entertainment Complex in Phnom Penh, Cambodia

According to the publication, Mayak’s construction cost is estimated at some US$350 million and the project is expected to open in early 2019. The first phase will include a casino – host to some 300 slot machines and 30 table games – and a 279-room hotel. Construction of the second phase of Tigre de Cristal, estimated at MOP500 million, is expected to begin in the second half of 2019, with 100

VIP tables, 70 mass market tables, and 500 slot machines. The Macau gaming mogul’s Russian casino is reportedly the largest to date across the six zones where gambling has been allowed in Russia, since the government banned betting in major cities in 2009, Forbes reported.

Social responsibility

The Chairman and CEO of Melco Resorts & Entertainment, Lawrence Ho Yau

Lung, has donated RMB1.5 billion (US$217.50 million/ MOP1.74billion) to fund the construction of a teaching complex in Hainan, the Guangnan Primary School, a company release made public yesterday. “Over the years, Melco’s continuous efforts and innovative initiatives have offered children and young people opportunities to receive quality education, achieve full potential, and reach their dreams,” Ho was quoted as saying. According to the release, Melco’s donation will be used to build a three-storey teaching complex to be named after the company, featuring facilities such as a library and a computer room.

8 Business Daily Tuesday, May 16 2017

Greater China Official figures

Factory output, investment growth miss forecasts The country’s first quarter economic growth came in at a faster-than-expected 6.9 per cent

hina’s factory output and fixed asset investment growth cooled more than expected in April, adding to signs that momentum in the world’s second-biggest economy is slowing from a strong start in the first quarter. Factory output rose 6.5 per cent in April from a year earlier, while fixed-asset investment grew 8.9 per cent in the first four months of the year, both worse than expectations.

first four months of the year, easing from 9.2 per cent in Jan-March. Retail sales rose 10.7 per cent in April from a year earlier. Analysts had expected a 10.6 per cent rise, edging lower from the previous month. Private investment growth slowed to 6.9 per cent in January-April period from 7.7 per cent in the first quarter, the National Bureau of Statistics said on Monday, suggesting small- and medium-sized private

firms still face challenges in accessing investment-finance. Private investment accounts for about 60 per cent of overall investment in China. With growth comfortably above this year’s target of around 6.5 per cent, Chinese policymakers have shifted their focus to reining in financial risks and stamping out speculative activity in the property market. China’s National Bureau of Statistics said yesterday that more positive factors were seen in the economy in April, though structural problems remain.

China is targeting growth of around 9 per cent in fixed asset investment for 2017, and expects retail sales to increase about 10 per cent. The country’s first quarter economic growth came in at a faster-than-expected 6.9 per cent, the quickest since 2015 on higher government infrastructure spending and a gravity-defying property boom. China has cut its economic growth target to around 6.5 per cent this year to give policymakers more room to push through painful reforms and contain financial risks after years of debt-fuelled stimulus. Reuters

‘Private investment growth slowed to 6.9 per cent in January-April period from 7.7 per cent in the first quarter’ The soft activity data, combined with weak manufacturing sector growth and slowing producer prices inflation, reinforced analysts’ view that China’s economic expansion remains solid but is starting to taper off. Analysts polled by Reuters had predicted factory output would grow by 7.1 per cent in April, easing from March’s 7.6 per cent. Output growth slowed on tumbling steel and iron ore prices amid concern over rising inventories after China’s mills cranked out as much metal as possible to drive factory output to its highest since December 2014. Fixed asset investment had been forecast to grow 9.1 per cent over the

Real estate

Property investment rises in April as controls eat into sales The area of property sold grew 15.7 per cent in January-April from the same period a year earlier Real estate investment in China rose in April from March although sales growth was significantly slower, suggesting investment in the sector remained robust even as intensified government controls to rein in the market began to take effect. Growth in property investment, which mainly focuses on residential but also includes commercial and office space, accelerated to 9.6 per cent in April from a year earlier, compared to 9.4 per cent in March, according to Reuters calculations based on data from the National Bureau of Statistics (NBS). Real estate investment is a major driver of the economy affecting more than 40 other sectors. But worries over the potential bursting of price bubbles in China’s biggest cities have led to a flurry of government cooling measures in recent months as buyer demand appeared to be more resilient than expected. The area of property sold grew 15.7 per cent in January-April from the same period a year earlier, down from 19.5 per cent in the first three months of the year, the NBS said. In April alone, sales grew 7.7 per cent, the lowest since December 2015 and well short of the 14.7 per cent

increase in March. New construction starts measured by floor area, a telling indicator of developer confidence and correspondingly volatile, rose 11.1 per cent in the first four months of the year, moderating from a 11.6 per cent rise in the first three months, the bureau said. Prices in China’s sizzling property market accelerated in March

on a monthly basis, shaking off the impact of recent cooling measures introduced to dampen speculative demand. Home prices in China’s biggest cities were likely to rebound if government curbs were relaxed, a senior official from the country’s top economic planner was quoted as saying in late April, suggesting authorities are in no mood to lift restrictions soon. Some RMB1.7 trillion (US$247 billion) in property loans were issued in the first quarter of 2017, central bank data showed, reflecting robust

demand in the sector. But analysts say China’s hot property market appeared to have peaked and investment usually lags behind sales trends. Regulators intensified the crackdown on speculators by rolling out more draconian measures in big cities from late March.

Key Points China Jan-April property investment +9.3 pct y/y Sales growth slowed significantly due to curbs April sales +7.7 pct y/y vs +14.7 pct in March - Reuters calculations China’s liquidity conditions have also been tightened in the past few weeks, driven mainly by fortified regulatory efforts at financial deleveraging since late March. Various Chinese cities also adopted more lending restrictions to curb credit risks. The rate of inventory destocking appeared to be quickening in response to robust demand in recent months. Growth in inventory floor area in the first four months was 7.2 per cent lower than one year earlier, compared with a fall of 6.4 per cent in the January-to-March period. Reuters

Business Daily Tuesday, May 16 2017 9

Greater China Business relations

In Brief

EU says investment deal with Mainland urgent to support Belt and Road vision China and the EU are set to hold their own summit in Brussels in early June The need for an EU-China investment agreement is urgent and would be the easiest way for Chinese President Xi Jinping to meet pledges of making China’s economy open to the world, European Commission Vice President Jyrki Katainen said yesterday. Hosting world leaders on the second day of a two-day summit in Beijing, Xi said yesterday that it was crucial for his signature foreign policy and global development plan to “reject protectionism”. “President Xi has repeated this message several times now, and it is a good sign, and we want to help him deliver. The easiest way to deliver what he has said is to speed up EU-China investment agreement negotiations,” Katainen, the head of the European Union’s delegation to the meeting, told Reuters. Such an investment deal is “urgently needed” to boost business links between the two sides, Katainen said in an interview on the side-lines of the summit. China and the EU are set to hold their own summit in Brussels in early June, during which the Comprehensive Agreement on Investment (CAI) currently under negotiation will be a central focus. Katainen said more Europeans were demanding that China give EU

businesses access to its market in the way that EU markets were open to Chinese investment. “People in Europe are just asking for reciprocity. Nothing more,” Katainen said. “Something must change now. Also, taking into account what President Xi has said, it would be not that encouraging if the (EU-China) summit would not deliver even though the political will has been expressed

so directly several times,” he said. Katainen said Europe wanted to see “concrete, measurable outcomes” from investment talks, adding that he could imagine “results” within a year if Beijing could show strong enough political will to make market access offers. Despite China’s pledges to remove market barriers, the government has faced increasingly fervent criticism from foreign business groups and governments alike. They say Beijing has done little to address discriminatory policies that favour Chinese companies. Reuters

Over four million new jobs created to April Some 4.65 million new jobs were created in China in the first four months of this year, official data showed yesterday. The number was 220,000 higher than the same period last year, according to Xing Zhihong, spokesperson for the National Bureau of Statistics. Describing China’s employment situation as “good and stable,” Xing told a press conference that the national urban surveyed unemployment rate in April was lower than the March, and the surveyed unemployment rate in 31 major Chinese cities has remained below 5 per cent since last September. Crime

Beijing releases CEO of alleged pyramid scheme

European Commission Vice President Jyrki Katainen

Energy

Beijing eyes U.S. after US$20 billion ‘Belt & Road’ deals China is becoming more reliant on overseas crude supplies as production at home plummets China is setting its sights on U.S. energy as a growing reliance on imports forces it to look beyond traditional suppliers, according to the head of the country’s biggest oil and gas company. China National Petroleum Corp. will import more crude oil and natural gas from the U.S. and will consider participating in America’s growing liquefied natural gas export industry, Chairman Wang Yilin said in an interview Sunday with Bloomberg TV on the side-lines of the Belt and Road Forum in Beijing. The energy giant will sign US$20 billion in deals during the two-day event, a meeting of countries involved in China’s initiative to connect Europe, Asia and Africa through infrastructure and investment. “The U.S. has very rich oil and gas resources, and as China pursues a diversification of its crude supply the U.S. will of course be one of the sources.” Wang said. “We will consider exploring cooperation in areas such as jointly developing liquefied natural gas facilities and gas transport.” China’s growing use of U.S. energy is taking CNPC beyond the Belt and

Employment

Road plan, which is President Xi Jinping’s cornerstone trade initiative. Wang’s comments follow a separate deal between China and the U.S. announced Thursday by President Donald Trump’s administration that welcomed the country engaging in long-term contracts with American LNG suppliers. CNPC currently has more than 50 joint projects under way in 19 countries taking part in Belt and Road, according to Wang. In Central Asia and Russia, they’re mainly focused on natural gas, while in African and Middle Eastern nations the majority of projects concern oil.

Falling production

The world’s biggest energy user is becoming more reliant on overseas crude supplies as production at home plummets after its staterun firms -- including CNPC’s listed unit PetroChina Co. -- cut spending to cope with the price crash. China has overtaken the U.S. as the world’s biggest oil importer, and emerged in February as the largest buyer of crude from the U.S., which has boosted exports thanks to the country’s shale

oil boom. Though China’s oil giants are raising combined spending for the first time in four years, that may not be enough to halt the drop in domestic crude output, especially as focus shifts toward natural gas, according to the International Energy Agency. Production in the first four months dropped 6.1 per cent from the same period a year ago, extending the record pace of declines in 2016. Imports are up more than 12 per cent during that period. “We need to speed up our cooperation with resource countries to develop assets to meet China’s growing need for oil and gas,” Wang said. “By doing this, we can balance the higher reliance on imports with better use of foreign assets.” PetroChina rose 0.2 per cent to HK$5.32 as of the noon trading break in Hong Kong, compared with a 0.6 per cent gain in the city’s benchmark Hang Seng Index.

Aramco, Gazprom

The US$20 billion in deals to be signed during the Belt and Road Forum include Saudi Arabian Oil Co. taking a stake in the company’s Yunnan refinery, a US$4 billion agreement for a natural gas processing plant in Azerbaijan with the State Oil Co. of Azerbaijan, gas storage and gas-fired power projects with Russia’s Gazprom PJSC and a geothermal project in Kenya, according to CNPC. The agreement with the U.S. announced last week could pave the way for a second wave of investment in U.S. LNG terminals, according to Wood Mackenzie Ltd. American supplies accounted for almost 7 per cent of China’s LNG imports in March, customs da da show. The nine cargoes sent over the last year to China from Cheniere Energy Inc., the first U.S. exporter from the country’s lower 48 states, were sold on a so-called spot basis, rather than under long-term contracts, the consulting company said. Bloomberg News

Chinese prosecutors have dropped an investigation into the British chief executive of an alleged million-dollar pyramid scheme and allowed him to leave the country, a year after he was apprehended in a citizen’s arrest by an investor. The prosecutors in Anshan, northern China decided not to bring charges of fraudulent collection of funds against the businessman, named David Byrne, because they did not have enough evidence, according to an official order seen by Reuters. The prosecutors declined to comment. Byrne returned to Britain last week. Sino-Indonesia

Consortium signs loan for rail project A consortium of Indonesian and Chinese companies building Indonesia’s first high-speed railway has signed a US$4.5 billion loan with China Development Bank, Indonesia’s government said on Monday. The head of the consortium, Hanggoro Budi Wiryawan, and the chairman of China Development Bank, Hu Huaibang, signed the loan in Beijing on Sunday, during a bilateral meeting between Indonesian President Joko Widodo and China’s President Xi Jinping, according to a statement issued by Widodo’s office. Widodo was in Beijing to attend the Belt and Road Forum for International Cooperation. Subsidies

Soy growers to receive bigger subsidies than corn producers China’s top grain-producing provinces will pay greater subsidies to soybean farmers than corn growers as the country pushes to whittle a huge corn glut. The nation has been overhauling its grains policy in the wake of abandoning a state stockpiling system that amassed over 250 million tonnes of corn, more than one year’s consumption. The governments of Heilongjiang and Liaoning provinces in the north-eastern corn belt announced the move on subsidies in policy documents published late last week, although details on subsidy levels will be released later.

10 Business Daily Tuesday, May 16 2017

Greater China

China and Hong Kong accounted for almost a third of the offshore companies created by Mossack Fonseca, the law firm at the center of the Panama Papers leaks

Offshore

Caribbean haven wants new bank to keep Mainland billions’ flow The money behind the Bank of Asia comes from a Beijing-based Internet video producer and mobile-phone lottery company, V1 Group Ltd., and Sancus Financial Holdings Alfred Liu

he global campaign against money laundering combined with the Panama Papers made the Caribbean islands of sun, sand and offshore banking a near no-go zone for the world’s biggest banks. So the British Virgin Islands (BVI) has a solution: a bank to service offshore companies, many of them from China, locked out of the global banking system by HSBC Holdings Plc, Standard Chartered Plc and others. The new Bank of Asia Ltd. is to begin operating online later this year. “We have a captive client market of all these offshore companies that have had difficulties opening bank accounts, not for their own fault but because the legacy banks have stopped wanting them,” said Carson Wen, 64, a former acquisitions lawyer at Jones Day in Hong Kong and now founder and chairman of the bank. He plans to target the 200,000 out of 400,000-plus BVI companies that can’t get bank accounts. The new bank aims to be a landing place for the massive flows of money leaving China and help restore a dwindling source of revenue for the BVI, which depends on incorporations for half its budget. Caribbean havens have long been used by Chinese companies seeking tax-friendly jurisdictions for overseas acquisitions, and by the wealthy looking for discreet places to park cash. Yet making banking transfers easier for Chinese shell companies comes with transparency issues. While there’s nothing illegal about companies that shield owners’ identities, they can be used for laundering funds, evading taxes or hiding assets. More than US$900 billion is estimated to have left China last year following a record of nearly US$1 trillion in 2015, according to Bloomberg Intelligence. Chinese government

crackdowns stemmed flows earlier this year, but they started picking up again in March. The number of new BVI-incorporated companies dropped by nearly a third last year, to about 32,000, after falling since 2012. Ministries and departments were forced to reduce spending in 2017 and identify further cuts, according to government budget estimates. The idea for Bank of Asia was cooked up over dinner in Hong Kong in 2014, when Wen met with visiting BVI Prime Minister Orlando Smith. Wen knew about offshore companies from his M&A work. Smith asked for his help, according to Wen.

Restrictive practices

In a speech in January, Smith expressed hope that Bank of Asia “will mitigate against the restrictive banking practices that have impacted our incorporation numbers,” citing the effect of the Panama Papers’ revelations. Elise Donovan, director of the government’s BVI House Asia in Hong Kong, said in an emailed statement that the bank’s license was approved and that BVI officials were delighted. “Three-fifths of BVI company incorporations are from Asia, and the bank’s opening means we can continue to support our endeavors in the region,” she said. The money behind the Bank of Asia comes from a Beijing-based Internet video producer and mobile-phone lottery company, V1 Group Ltd., and Wen’s Sancus Financial Holdings, according to Hong Kong exchange filings. Wen said he met V1’s chairman when structuring an acquisition more than a decade ago. The BVI government had required US$100 million in paid-in capital, which Wen said he negotiated to reduce to US$38 million because Bank of Asia will be online-only. Shares of V1 fell 2.3 per cent in Hong Kong’s Monday morning trading, compared with a 0.6 per cent gain

of the benchmark Hang Seng Index, extending a decline of about 30 per cent since the announcement of V1’s investment late last year. Bank of Asia is the first to get a BVI license in more than 20 years, Wen said. It joins six institutions with general banking licenses, including Canada’s Bank of Nova Scotia, which mostly does BVI domestic banking, according to the Financial Services Commission.

‘More than US$900 billion is estimated to have left China last year following a record of nearly US$1 trillion in 2015’ The bank’s launch has been delayed by BVI regulatory approval of its digital technology, Wen said. Bank of Asia’s know-your-customer and anti-money-laundering systems will require a customer to pass at least four layers of identity and compliance checks, said Wen.

Global initiative

The BVI has signed a global initiative obliging it to exchange tax and account information with other countries. “You have seen laws being passed or updated and paper commitments being made,” said Maximilian Heywood, advocacy coordinator at Transparency International in Berlin. “But what actually counts is how well they are implemented and whether the companies are properly supervised and inspected.” China has been strictly enforcing rules for citizens converting the maximum allowable US$50,000 per person a year for moving money out of the country. Wen said any transaction from China above US$50,000 will attract a thorough review, including

on-the-ground checks by Chinese law firms. “If this bank opens one wrong bank account for one wrong customer, not only will it destroy the bank, it will affect the reputation of the BVI,” Wen said. China and Hong Kong accounted for almost a third of the offshore companies created by Mossack Fonseca, the law firm at the centre of the Panama Papers leaks, including shell companies of family members of powerful Chinese officials, according to a report by the International Consortium of Investigative Journalists last year. HSBC and its affiliates were involved in setting up 15 per cent of the 15,600 companies, the report found.

Boosting compliance

HSBC has been boosting compliance after a US$1.9 billion fine linked to money laundering allegations in 2012. HSBC is “quite a difficult bank now for people to open a bank account,” Chief Executive Officer Stuart Gulliver recently told shareholders in Hong Kong. An HSBC spokeswoman reiterated that the bank allows offshore accounts if clients have been thoroughly vetted or at the request of authorities. A spokeswoman for Standard Chartered declined to comment on offshore account policies. The new bank could help return BVI registrations to five-years-ago levels, said Jonathan Clifton, group managing director of company formation services at Vistra Group in Hong Kong. Some Chinese firms have been incorporating in Hong Kong or Singapore instead, even without the tax and other advantages of the BVI, Clifton said. The BVI dropped from first to third in Vistra’s ranking of incorporation jurisdictions, behind the U.K. and Hong Kong, in part because of negative publicity for offshore havens, according to Clifton. Wen hopes to change that. “We are helping China solve the problem that Chinese companies want their ability to remit money and do offshore banking,” said Wen. “That’s our captive market, meaning that people have nowhere else to go. They have to come to us.” Bloomberg News

Business Daily Tuesday, May 16 2017 11

Asia GDP

Thai growth fastest in 4 years Thailand’s economic growth has lagged other regional peers since 2014 Orathai Sriring and Kitiphong Thaichareon

hailand’s economy expanded at its fastest quarterly pace in four years in the first quarter boosted by recovering exports, but monetary policy will likely remain loose to cushion still-subdued investment activity. The government raised its export outlook for 2017, suggesting the recovery was gaining traction, but Southeast Asia’s second-largest economy faces rising global trade protectionism and capital outflow risks as the U.S. Federal Reserve prepares to hike rates again this year.

Key Points Q1 GDP +1.3 pct q/q sa, vs +1.2 pct in Reuters poll Q1 GDP +3.3 pct y/y vs +3.2 pct in poll 2017 GDP growth outlook narrowed to 3.3-3.8 pct from 3.0-4.0 pct 2017 exports seen +3.6 pct vs +2.9 pct seen earlier - agency Gross domestic product grew a seasonally adjusted 1.3 per cent in the first quarter from the fourth, aided also by household holding and tourism, the National Economic and Social Development Board (NESDB) said yesterday. The pace was slightly faster than

the 1.2 per cent forecast in a Reuters poll and the 0.5 per cent growth in the previous quarter, which was revised up from 0.4 per cent. From a year earlier, growth was 3.3 per cent, also slightly better than a median forecast of 3.2 per cent, and the 3.0 per cent in the final quarter of last year. “We expect growth to pick up a little further in the coming quarters, helped by robust external demand, supportive fiscal and monetary policies, and the current state of relative political calm,” Krystal Tan of Capital Economics wrote. The planning agency narrowed its 2017 economic growth forecast to 3.3-3.8 per cent from 3.0-4.0 per cent projected earlier. It raised its export growth outlook to 3.6 per cent

from 2.9 per cent. Exports, worth about two-thirds of the economy, are recovering after years of decline. “Growth in exports was more a result of price effects than volume effects, supported by higher commodity prices,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank. Thailand’s economic growth has lagged other regional peers since 2014, when the army seized power to end months of street protests. The junta has ramped up spending and investment in a bid to lift domestic activity. But large infrastructure projects have been slow getting off the ground. Exports in the first quarter jumped 6.6 per cent from a year earlier and household spending increased 3.2 per

cent while overall public and private investment rose 1.7 per cent, NESDB data showed. NESDB chief Porametee Vimolsiri, also a rate-setting committee member, said private investment should recover in the second half of the year and that monetary policy should continue to be accommodative. The central bank has left its benchmark interest rate unchanged at 1.50 per cent since April 2015. It next reviews policy on May 24, when most economists expect no change. Economist Barnabas Gan of OCBC Bank in Singapore, however, said the strong growth data and potentially higher U.S. rates later this year may serve as an impetus for the Thai central bank to raise rates by 25 basis points later this year. Reuters

Environment

S.Korea to temporarily close 10 old coal-fired power plants in June The Government also said it will shut the older coal plants again in 2018 from March to June South Korea will temporarily shut down 10 coal-fired power plants that are over 30 years old in June to mitigate air pollution, the office of President Moon Jae-in said in a statement yesterday. The measure comes as coal-fired power plants are being criticised for contributing to deteriorating air quality in South Korea, Asia’s fourth-largest economy. Amid these concerns, new President Moon vowed during his election campaign to close the old coal power plants and review a plan to add coal power generation. Instead he advocated increasing the share of renewables to produce more clean energy. Following through on the promise to reduce coal-fired generation, the presidential office, formally called the Blue House, said that it will temporarily suspend operations of the older coal power plants next month for one month. The temporary shutdown is likely

to have little impact on South Korea’s power supply in June, said an energy ministry official who declined to be identified.

‘In July last year, South Korea’s energy ministry announced a plan to close the 10 old coal-fired power plants by 2025’ “The old coal power plants generate about 4 per cent of the country’s total electricity, so we see power supply will be fine but we will make sure to ensure stable supply,” the official said. The Blue House also said it will shut the older coal plants again in

2018 from March to June and, furthermore, wants to close all of the old coal plants within Moon’s presidency which ends in May 2022. In July last year, South Korea’s energy ministry announced a plan to close the 10 old coal-fired power plants by 2025 in order to lower its coal power reliance and reduce greenhouse gas emissions. Coal supplies about 40 per cent of

South Korea’s total power generation because it is cheaper compared to other energy sources such as liquefied natural gas. At present, South Korea runs a total of 59 coal-fired power plants. Out of the total, the 10 old power plants make up 10.6 per cent of South Korea’s total installed coal power capacity, or 3.3 gigawatts, the statement said. Reuters

12 Business Daily Tuesday, May 16 2017

Asia In Brief Central bank

Thai banks’ bad loans seen peaking this year Thai commercial banks’ non-performing loans are expected to peak later this year as the country’s economic recovery has yet to become broad-based, a senior central bank official said yesterday. Banks may see their lending increasing 4-6 per cent in 2017 if production and investment pick up in the second-half of the year, Daranee Saeju, senior director of the central bank’s financial institutions strategy department, told reporters. Banks’ NPLs rose to 2.94 per cent of lending in the first quarter of this year from 2.83 per cent in the previous period. Agriculture

Laos prime minister concerned over banana plantations The prime minister of Laos has voiced concern over widespread chemical usage on banana plantations after a Reuters report on Chineserun farms in the Southeast Asian country. Reuters reported that while the banana boom had brought economic benefits to the impoverished region, there was also strong concern at the use of chemicals - including the herbicide paraquat, which is banned in Laos. The government had already been taking action to tackle the problem, Thongloun Sisoulith said in a Facebook posting alongside the Reuters pictures of the plantations. Real estate

Singapore private home sales in April doubles Sales in Singapore of private homes by developers more than doubled in April from a year earlier, government data showed yesterday. Developers sold 1,555 units in April, a 12.6 per cent fall from the 1,780 units in March, but doubled from the 750 units sold in April 2016, the Urban Redevelopment Authority said. Singapore private home sales in March had hit the highest in nearly four years. Results

Japan bank MUFG’s annual profit down Mitsubishi UFJ Financial Group (MUFG) said yesterday net profit fell 2.6 per cent for the year ended in March, hurt by weak lending income. Japan’s biggest lender by assets said net profit came in at 926.4 billion yen (US$8.16 billion) in the April-March period, down from 951.4 billion yen in the previous year. It compares with the 961.3 billion yen average estimate of 16 analysts compiled by Thomson Reuters and MUFG’s own conservative forecasts of an 850 billion yen profit. For the current financial year, MUFG forecast a net profit of 950 billion yen, compared to the 985.4 billion yen average estimate of 18 analysts.

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Technology

Desperately short of labour, mid-sized Japanese firms plan to buy robots The government predicts investment in laboursaving equipment will rise this fiscal year Stanley White

esperate to overcome Japan’s growing shortage of labour, mid-sized companies are planning to buy robots and other equipment to automate a wide range of tasks, including manufacturing, earthmoving and hotel room service. According to a Bank of Japan survey, companies with share capital of 100 million yen to 1 billion yen plan to boost investment in the fiscal year that started in April by 17.5 per cent, the highest level on record. It is unclear how much of that is being spent on automation but companies selling such equipment say their order books are growing and the Japanese government says it sees a larger proportion of investment being dedicated to increasing efficiency. Revenue at many of Japan’s robot makers also rose in the January-March period for the first time in several quarters. “The share of capital expenditure devoted to becoming more efficient is increasing because of the shortage of workers,” said Seiichiro Inoue, a director in the industrial policy bureau of the Ministry of Economy, Trade and Industry, or METI. If the investment ambitions are fulfilled it would show there is a silver lining as Japan tries to cope with a shrinking and rapidly aging population. It could help equipment-makers, lift the country’s low productivity and boost economic growth. The government predicts investment in labour-saving equipment will rise this fiscal year, Inoue said. The way Japan copes with an aging population will provide critical lessons for other ageing societies, including China and South Korea, that will have to grapple with similar challenges in coming years. “More than 90 per cent of Japan’s companies are small- and medium-sized, but most of these companies are not using robots,” said Yasuhiko Hashimoto, who works in Kawasaki Heavy Industries Ltd’s robot division. “We’re coming up with a lot of applications and product

packages to target these companies.” Among those products is a twoarmed, 170-centimeter tall robot. Kawasaki says it is selling well because it can be adapted to a range of industrial uses by electronics makers, food processors and drug companies. Hitachi Construction Machinery says it is getting a lot of enquiries for its computer-programmed digging machines that use a global positioning system to hew ditches that are accurate to within centimetres and can cut digging time by about half.

Key Points Mid-sized companies plan biggest capex splurge in 30 years-BOJ data Robots, automation equipment in demand as labour force shrinks METI official says share of capex spent on improving efficiency is rising

“We focus on rentals and expect business to pick up in the second half of the fiscal year, which is when most companies tend to order construction equipment for projects,” said Yoshi Furuno, a company official. Hitachi Construction declined to provide figures. Mid-sized companies are planning on increasing spending much more than large-caps, which are projecting just a 0.6 per cent increase in the fiscal year, according to the Bank of Japan. Smaller companies tend to have less flexibility in overcoming labour shortages by paying workers more or by moving production overseas.

Working population plunging

Some companies could end up spending less than originally planned. But with demographics only worsening, companies will need to continue to search for solutions to the labour shortage problem. Japan’s working-age population peaked in 1995 at 87 million and has been falling ever since. The government expects it to

fall to 76 million this year and to 45 million by 2065. In the fiscal year that ended March 31, 2016, mid-sized companies with 100 to 499 workers advertised to fill 1.1 million new positions, the highest in five years and almost five times the number of open positions at companies with 500 workers or more, Labour Ministry data show. Among the robot makers to report stronger revenue in the last quarter was Fanuc Corp . Its revenue was 7.9 per cent higher than a year earlier, the first increase in seven quarters. Meanwhile, Yaskawa Electric Corp’s revenue grew 5.1 per cent in January-March from the same period a year ago, the first increase in five quarters. Robots and labour-saving gear aren’t just found in manufacturing and construction. They are also being sought by property developers, food and beverage makers and hotel chains. The Hen na Hotel, or the “Odd Hotel,” near Tokyo Disneyland, for example, bills itself as a robot hotel because it uses 140 different robots and artificial intelligence to serve guests in its 100-room hotel and can operate with as few as two to three people, according to the manager Yukio Nagai. Each room contains an egg-shaped robot, or personal assistant, called Tapia, that uses artificial intelligence to recognize people’s faces and respond to their voice commands. It can wake you up, manage your schedule, and control other Internet-linked devices like the TV and air conditioning. Other robots can carry bags and take out the trash. “Originally we sold this product for use in the home, but now we are getting a lot of enquiries from companies,” said Sayaka Chiba, a director at MJI Co, which makes the Tapia. “Banks, hospitals, and hotels are interested in using Tapia for reception work and communicating with customers.” “Companies say they are interested in Tapia because of labour shortages. Nursing homes are also interested,” she said. “We’ll continue to sell this for use in the home, but all the interest from companies show that the market has shifted somewhat.” Reuters

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Business Daily Tuesday, May 16 2017 13

Asia Monetary policy

India government said to oppose RBI’s new cash tool proposal The new facility could prompt banks to park their excess cash with the RBI for easy interest income Siddhartha Singh, Anirban Nag and Subhadip Sircar

The Indian central bank’s proposal to introduce a new liquidity tool to help manage a banking system flooded with surplus cash is facing opposition from the government, according to people with knowledge of the matter. The government is concerned that the so-called Standing Deposit Facility, or SDF, will give the Reserve Bank of India the discretion to set an interest rate outside the purview of the monetary policy panel, two of the people said, asking not to be identified as the matter isn’t public. Allowing the facility could also

lead to the possibility of the SDF rate becoming the main operative measure in times of excess liquidity, the people said. On its part, the RBI has recommended SDF as it will allow it to mop up extra funds without having to provide lenders any collateral in exchange. It is largely seen replacing the Market Stabilization Scheme, or MSS, which uses bonds issued outside the government’s regular borrowings to suck out liquidity. Cash at Indian banks swelled after Prime Minister Narendra Modi invalidated 86 per cent of the nation’s currency in circulation late last year and mandated the worthless notes be deposited with lenders. Banks rushed to park these funds with the RBI, forcing the central bank to raise the MSS limit. The surplus, however, still persists, and has restricted the RBI’s ability to intervene in currency markets while the rupee surges. “The central bank has every scope to decide on new tools but needs to

work according to the guidelines of the monetary policy committee,” said Soumyajit Niyogi, associate director at India Ratings and Research Pvt in Mumbai. “But the creation of another new window with variable rates may create signalling problems.” The new facility could also prompt banks to park their excess cash with the RBI for easy interest income, instead of using it for lending, the people said. A spokeswoman for the RBI wasn’t immediately available for comment. Finance Ministry spokesman D.S. Malik also couldn’t be immediately reached. The government and the central bank are still engaged in talks and no decision has been taken so far, the people said. The SDF will help the central bank define a floor rate in the inter-bank market and give it a window to intervene in both directions, when needed, to achieve the operating target rate, according to a 2014 report prepared by a panel led by RBI

Governor Urjit Patel -- who was at that time a deputy governor at the authority. Patel took over as governor in September, just around the time that India created a monetary-policy panel to collectively set borrowing costs, migrating from a system where the RBI chief had the discretion to decide on rates. The SDF may be introduced with the discretion to set the rate without reference to the policy rate, the 2014 RBI panel report had stated, adding that it would also require an amendment to the RBI Act. Central banks globally that use the SDF tend to link the rate to policy rates, although the corridor is not ‘cast in stone’ and can be changed frequently, ICICI Securities Primary Dealership Ltd. wrote in a note in March. Any change in the discretionary SDF rate will be read as a policy change as it would impacting overnight borrowing rates, according to the report. Bloomberg News

Private report

Multinationals in Vietnam targeted by hackers linked to government The attacks are unrelated to the WannaCry ransomware worm that has ravaged computers around the world since Friday Jeremy Wagstaff

Hackers either working for the Vietnamese government or on their behalf have broken into the computers of multinationals operating in the country as part of an increasingly sophisticated cyberespionage campaign, cybersecurity company FireEye said. Nick Carr, senior manager of FireEye’s Mandiant Incident Response team, said in an interview the same group was also responsible for hacking into the computers of Vietnamese dissidents and journalists. He said it was impossible to identify or locate the hackers precisely or confirm they were working for the Vietnamese government but the information they sought would be of very little use to any other party. The attacks are unrelated to the WannaCry ransomware worm that has ravaged computers around the world since Friday. “All the activity we have seen is of interest to the nation of Vietnam,” Carr said in a phone interview ahead of Monday’s publication of a FireEye report on hacking in Vietnam. The government rejected the accusation. “The government of Vietnam does not allow any form of cyber-attacks against organisations or individuals,” said foreign ministry spokeswoman Le Thi Thu Hang. “All cyber-attacks or threats to cybersecurity, must be condemned and severely punished in accordance with regulations and laws.” Carr said FireEye had observed the group, which it called APT32, targeting foreign corporations with interests in Vietnam’s manufacturing, consumer products and hospitality sectors since 2014. In several cases, he said, the hackers sought information about the companies’ operations and their adherence to local regulations, something he had rarely seen other hacker groups attempt. Victims included a German manufacturing company about to build a factory in Vietnam, a Chinese hotel developer planning to expand its operations in the country, and the local office of a British-based global consulting firm.

He said in most cases the companies were household names. He declined to identify them, citing client confidentiality. Executives, human resources and finance staff were targeted, he said.

First time

The report marks the first time a cybersecurity company has pointed to Vietnam as the source of state-motivated cyber-attacks. It is also the first time FireEye had assigned the label APT - standing for advanced persistent threat, a term usually reserved for state-sponsored hacker groups - to a group outside China and Russia. Robert Trong Tran, who directs PwC (PricewaterhouseCoopers) cybersecurity services business in Vietnam, said he was not aware of any cases of European companies being hacked. Amanuel Flobbe, chairman of the Vietnam European Chamber of Commerce’s Information and Communications Technologies committee, said that while European companies in Vietnam had been damaged by hackers, it was no different to hacks seen elsewhere. Vietnam has long been vulnerable to hacking, both criminal and politically motivated. In January, Microsoft listed it behind only Mongolia of countries infected with malware, with more than double the worldwide average. Carr said the hackers “could do a lot of damage or could have a lot of impact on the organisations’ competitive advantage, their ability to successfully navigate investigations and regulations.” In the case of the German manufacturer, he said, “one would suspect the timing isn’t coincidental and the government has an unfair advantage.” The same group was responsible for earlier attacks on local and foreign journalists, as well as dissidents and the Vietnamese diaspora in Australia and Southeast Asia, he said. It was the same group that Chinese cybersecurity company SkyEye Labs called OceanLotus in 2015, Carr said. SkyEye, a part of internet company Qihoo 360, wrote that the group was behind attacks on Chinese government agencies, research

institutes and companies. It did not identify Vietnam as the source of the attacks. SkyEye did not respond to requests for comment. Carr said that his own research confirmed it was the same group, but that he didn’t have any recent evidence that APT32 continued to target China.

The group is also linked to attacks on journalists, activists, dissidents and bloggers in Vietnam reported by the Electronic Frontier Foundation in 2013. It has also targeted Vietnamese overseas and broke into the computers of a Western national parliament, Carr wrote in the report. Vietnamese media organisations have also been targeted, he said. Reuters

14 Business Daily Tuesday, May 16 2017

International In Brief M&A

Italy’s Atlantia bids US$18 bln for Spain’s Abertis in road play Italy’s Atlantia launched a 16.34 billion euro (US$18 billion) cash-and-share offer for Spain’s Abertis yesterday in a bid to create the world’s biggest operator of toll roads, with 14,095 km under its management. A tie-up with Abertis, which gets a third of its core earnings from France and has extensive operations in Latin America, would allow Atlantia to generate around 60 per cent of core earnings outside its home turf, well ahead of a self-imposed 2020 deadline. Atlantia, which is controlled by the Benetton family, is trying to diversify away from low-growth Italy. Europol

New cyber chaos appears to have been avoided European governments and companies appeared early yesterday to have avoided further fallout from a crippling global cyberattack, the police agency Europol said. “The number of victims appears not to have gone up and so far the situation seems stable in Europe, which is a success,” senior spokesman for Europol, Jan Op Gen Oorth told AFP. “It seems that a lot of internet security guys over the weekend did their homework and ran the security software updates.” Europol said more than 200,000 computers around the world had been affected over the weekend in what it said was “an unprecedented attack”. Robin Hood Tax

U.K.’s Labour to impose stamp duty on bonds and derivatives Britain’s Labour Party pledged to more than double what the government raises from taxes on financial transactions by extending stamp duty to cover derivatives and bonds, and removing an exemption for trading houses. The “Robin Hood Tax” would raise an extra 4.7 billion pounds (US$6.1 billion) a year, while eliminating “the most destabilizing forms” of high-frequency trading, the opposition party said in a statement. Last year, stamp duty on share transactions raised 3.3 billion pounds. Financial firms would be charged the tax at 0.2 per cent on each transaction, while everyone else would pay 0.5 per cent, the rate currently charged on stocks.

Oil industry

Saudi Arabia, Russia push to extend oil output cuts until March 2018 A jump in U.S. exports to Asia is a particular worry for the OPEC Chen Aizhu

audi Arabia and Russia, the world’s two top oil producers, agreed yesterday on the need to extend oil output cuts for a further nine months until March 2018 to rein in a global crude glut, pushing up prices. The timing of the announcement ahead of OPEC’s next official meeting on May 25 and the statement’s strong wording surprised markets, and the move is expected to go a long way to ensure that other OPEC members and producers who participated in the initial round of cuts fall into line. In a joint statement that followed an earlier meeting, Saudi energy minister Khalid al-Falih and his Russian counterpart Alexander Novak said they had agreed to prolong an existing deal until March next year. The ministers pledged “to do whatever it takes” to reduce global inventories to their five-year average and expressed optimism they will secure support from producers beyond those in the current deal, the statement said. “There has been a marked reduction to the inventories, but we’re not where we want to be in reaching the five-year average,” Falih told a briefing in Beijing alongside Novak. “We’ve come to conclusion that the agreement needs to be extended.” Saudi, the defacto leader of OPEC, and Russia, the world’s biggest producer, together control a fifth of global supplies, but have been spurred into action as crude futures have languished around US$50 per barrel. Under the current agreement that started on Jan. 1, the Organization of the Petroleum Exporting Countries (OPEC), and other producers including Russia pledged to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.

JPMorgan Chase & Co. agreed to purchase a Dublin office building that can accommodate more than 1,000 workers for an undisclosed price before it’s completed. The bank’s Irish unit has bought the 200 Capital Dock building from real estate firm Kennedy Wilson, Torontobased Fairfax Financial Holdings Ltd. and Ireland’s National Asset Management Agency, Kennedy Wilson said in a statement yesterday. Dublin is among the locations being considered by JPMorgan for an enlarged EU hub following the Brexit vote.

U.S. shale, the unknown

If producers maintain their cuts at the current pace, it could push the market into a small deficit by the fourth quarter, said Edward Bell, director for commodity research at Emirates NBD in Dubai. But one major unknown will be the response of low-cost U.S. shale producers, which could undermine the unified effort to prop up the market. The United States did not participate in the original agreement to cut supplies and producers there have

ramped up output this year, buoyed by the recovery in prices from multi-year lows hit in January 2016. U.S. drilling activity last week rose to its highest in two years, while U.S. production has jumped more than 10 per cent since its mid-2016 trough. A jump in U.S. exports to Asia, the world’s biggest and fastest growing market and the last region in which OPEC supplies dominate, is a particular worry for the producer club.

Key Points Plan announced at joint briefing in Beijing Ministers pledge ‘to do whatever it takes’ to cut stockpiles Russia, Saudis account for a fifth of global supplies “Russia and Saudi Arabia may be trying to coordinate a push to keep access to their most important market (China) in their favour and encourage Chinese importers to displace alternative cargoes,” said Bell. An OPEC source familiar with the market situation told Reuters earlier on Monday that oil inventories in floating storage have declined by onethird since the start of the year. Reuters

Markets

Money managers’ sales in Europe under threat from new rules Distributors on the continent are already signalling that they’ll offer a narrower range of funds as a result of the rules

Work Space

JPMorgan agrees to buy Dublin office

While it was broadly expected that OPEC and Russia would agree to extend the cut, the timing and wording of the statement sent crude prices up more than 1.5 per cent in Asian trading. “I think OPEC and Russia recognise that in order to get the market back on their side they will need ‘shock and awe’ tactics where they need to go above and beyond a simple extension of the deal,” said Virendra Chauhan, Singapore-based analyst at Energy Aspects. “The market will also be looking at export cuts and not just production cuts, which is what is required to rebalance the market.” Russia’s top producer Rosneft helped prepare the deal and is ready to comply with the extension, according to Russian media.

Sarah Jones

Asset managers face a new headache as rules aimed at making financial markets fairer and more transparent threaten their ability to sell investment funds into continental Europe. The “more onerous” regulations may encourage the banks and insurers that distribute these products to limit the number of fund managers they deal with, according to Schroders Plc. Under the MiFID II rules, which come into force next January, financial companies will have to document transactions in far more detail, raising concerns about a chilling effect on sales. “It’s simply because of the practicalities of it,” Sheila Nicoll, head of public policy at Schroders in London, said in an interview. Distributors may

start to say, “rather than dealing with 25 product providers, we are only going to deal with five,” she added. Europe became more lucrative for asset managers over the past decade as banks started to sell more third-party products. MiFID II challenges this revenue stream, not only because lenders might slim down their client lists but also because the rules could ban commissions for selling other firms’ products. Local rules already prohibit such financial inducements in the U.K. Money managers’ business in southern Europe is likely to be worst affected because banks dominate distribution there, according to a report this month by Boston-based consultancy Cerulli Associates.

‘Work harder’

“Third-party sales volumes may not suffer a significant fall, but the managers will have to work harder as there will be fewer entry points for sales and smaller buy lists,” said Barbara Wall, Cerulli’s managing director for Europe. The asset-management industry is still waiting for more guidance from the European Securities and Markets Authority on how the relationship between money managers

and distributors will be regulated under MiFID II. Distributors on the continent are already signalling that they’ll offer a narrower range of funds as a result of the rules, and being on their shortlists of preferred firms will be key for asset managers, said Nicoll of Schroders.

“It’s simply because of the practicalities of it... Rather than dealing with 25 product providers, we are only going to deal with five” Sheila Nicoll, head of public policy at Schroders in London

“What worried me is that the distributors would say, we’re not going to use external providers at all, we’re only going to use our own in-house products,” she said. “There is still some danger of that but it’s less acute now.” Bloomberg News

Business Daily Tuesday, May 16 2017 15

Opinion Business Wires

The Times of India Switzerland may be known in popular perception as an alleged haven for black money, but it is the fake Indian rupee notes which seem to have seen a huge surge in the Alpine nation. The quantum of fake Indian currency seized by the Swiss authorities saw an over four-fold increase during 2016, making it the third most seized counterfeit foreign currency in Switzerland after euro and the U.S. dollar. The fake currencies were in the denominations of Rs 500 and Rs 1,000 -- both of which have been withdrawn by the Indian government from the list of legal tenders.

The wages of wage fear Philstar (Philippine) Government spending for infrastructure slowed in the first quarter as a result of lower equity and capital transfers to local government units, Department of Budget and Management (DBM) data showed. In a report, DBM said the national government’s expenditures for infrastructure in the first quarter this year fell 2.5 per cent to P142.1 billion from P145.8 billion recorded a year ago. On a monthly basis, capital outlays for March alone amounted to P56 billion, down almost 12 per cent from last year’s P63.4 billion.

The Korea Herald The new Moon Jae-in administration will likely revise tax codes in the second half of the year to finance its election pledges to create jobs, government officials said yesterday. On the campaign trail, President Moon promised to focus more on job creation and expanding welfare for young people. In particular, he said his government will create some 800,000 public jobs during his five-year term, grant an allowance to young jobseekers and offer public residence to newlyweds at lower rent. Many estimated that some 178 trillion won (US$158 billion) will be necessary to carry out Moon’s campaign pledges in the coming five years.

The Straits Times The Great Singapore Sale, from June 9 to Aug 13, is going digital this year with a new mobile phone app called GoSpree. The free app will operate as a “super mall” platform, allowing customers to get their hands on various e-coupons from different categories of retailers across the island. Using the app, available in English and Chinese, is easy enough. Shoppers pick the discounts they want to enjoy, and the app compiles the offers in a virtual card to be used at designated physical stores before they expire.

f all else fails, try the previously unthinkable. It is not a bad principle for economic policy in the best of times. Today, it may be just what is needed: many Western countries – certainly the United States, Japan, and Germany, probably the United Kingdom, and soon much of the rest of the eurozone – should pursue direct government intervention in wage bargaining, especially for the lowest earners. Japan has spent the last 15 years struggling with slow growth, anaemic household demand (especially among poorer families), and rising inequality and poverty. Similar conditions now prevail in the U.S. as well; indeed, they helped Donald Trump to be elected president, by creating a sufficiently large group of what he quite reasonably called “forgotten Americans.” And before Trump’s victory, such conditions spurred the UK’s so-called “left behind” to vote for Brexit. Without a sharp increase in wages – mainly statutory minimum wages – populism will continue to thrive, and most Western economies will remain saddled with slow growth. Inequality not just of income and wealth, but also of perceived political voice and influence, will continue to grow. And the temptation to pursue short-sighted solutions – such as closing borders and implementing protectionism – will become irresistible. Yet the suggestion that governments should act directly to raise the price of lower-skilled labour is likely to be met with sharp intakes of breath and sotto voce comments that I must be mad. Don’t I know that higher minimum wages risk causing unemployment? Haven’t I heard of the “rise of the robots” and the growing power of automation, more generally, to destroy jobs? Don’t I believe in market solutions? The answer to all three questions is “yes.” But policies need to be tailored to conditions, and they need to reflect choices between the competing interests of different groups. (Indeed, that is the whole point of politics.) And current conditions, together with the interests of the “left behind,” indicate that the once-unthinkable has become essential, if not inevitable. The main reason why governments are leery of intervening in wage setting is the memory of the failed wage and price controls during the period of high inflation in the 1970s – controls that gave rise to large and troublesome distortions. But a second, more current reason relates to lobbying from businesses, which argue that corporate competitiveness depends on cheap labor. Governments also have their own self-interest to consider: the public sector often employs a lot of minimum-wage earners. But it is time to take courage. Fiscal policy – cutting taxes or raising public spending – is too

“

Bill Emmott a former editor-in-chief of The Economist, is Chairman of the Wake Up Foundation

constrained by high government debt to be much use in stimulating demand, and attempts to use it to redistribute resources from rich to poor have created their own problems. Monetary policy – in particular, the vast money-printing “quantitative easing” programs pursued by central banks in recent years – has run out of space, too, with price inflation ticking up and central-bank balance sheets a record size. Wage intervention is virtually the only option left. Moreover, the risks of raising the minimum wage are probably not as great as they have been made out to be – at least not now. To be sure, there are times when such wage increases can risk killing employment. But today is not one of those times: countries like the U.S., Japan, Germany, and the UK are at virtually full employment. The risk in these countries is not the risk of rising unemployment, but stagnating wages, which has caused household demand to remain depressed or grow only sluggishly, thereby deterring businesses from investing. In the U.S., low wages at the bottom end of the labor market have discouraged millions of workingage individuals from even seeking employment. That certainly can help to reduce the official unemployment rate, but it does little for the economy. The U.S. federal minimum wage of US$7.25 per hour is one-third lower in real (inflation-adjusted) terms than it was at its peak in 1968. Japan’s average statutory minimum wage of 823 yen (US$7.40) per hour is barely higher. Even where the authorities have taken steps to raise minimum wages – the UK since last year, as well as U.S. states like California and New York, which are targeting a US$15 hourly minimum wage by 2020 – they are not moving fast or far enough. Japan is raising its minimum wage only slightly faster than inflation. Inequality remains the scourge of our era, with the bargaining power of the lowest-skilled workers severely undermined by automation and developing-country competition. If “forgotten” groups are not to be permanently left behind and alienated, governments must take bolder action. In the 1960s, Japan’s “income doubling” plan helped it to develop a consumer economy. Perhaps the time has come to introduce a “minimum-wage doubling” plan, implemented over a few years, thus giving business the chance to adjust. For leaders who have received the financial support of the very rich and the electoral support of those left behind, such a plan would seem to be a political winner. Any interest, President Trump? Project Syndicate

Inequality remains the scourge of our era, with the bargaining power of the lowestskilled workers severely undermined by automation and developingcountry competition

”

16 Business Daily Tuesday, May 16 2017

Closing Reserves

Mainland net FX sales fall to nearly 2-year low in April

off devaluation of the yuan in August of that year, when net sales were RMB17.3 billion. Capital outflows from China eased sharply in the Net foreign exchange sales by China’s central bank first quarter and cross border flows were more fell to the lowest in nearly two years in April as capital outflows eased in the face of strict regulatory balanced, the foreign exchange regulator said in April. curbs and a pause in the dollar’s rally. The yuan has steadied this year after falling 6.5 per The People’s Bank of China (PBOC) sold a net cent in 2016 - the biggest annual drop since 1994. RMB42 billion (US$6.09 billion) worth of foreign Earlier data showed China’s foreign exchange exchange in April, down from RMB54.7 billion in reserves edged up by US$21 billion in April to March, according to Reuters calculations based on US$3.03 trillion, compared with an increase of central bank data released yesterday. US$3.96 billion in March. Reserves have now risen The last time the central bank sold less foreign for three months in a row. Reuters exchange was in June 2015, before a surprise one-

Cyber threat

Ransomware hits ‘hundreds of thousands’ of China PCs State-owned oil giant PetroChina said in a statement that it had to disconnect the networks linking its petrol stations nationwide for 12 hours on Saturday

“

undreds of thousands” of Chinese computers at nearly 30,000 institutions including government agencies have been hit by the global ransomware attack, a leading Chinese security-software provider has said, though the Asian impact has otherwise been relatively muted. The enterprise-security division of Qihoo 360, one of China’s leading suppliers of anti-virus software, said 29,372 institutions ranging from government offices to universities, ATMs and hospitals had been “infected” by the outbreak as of late Saturday.

In a statement dated Sunday, Qihoo 360 said the ransomware had spread particularly quickly through higher education, affecting more than 4,000 Chinese universities and research institutions. It gave few details on the extent of any damage, however, and China’s government has said little about the situation. Governments, companies and computer experts around the world braced yesterday for a possible worsening of the global cyber attack that has hit more than 150 countries as people return for another work week, but Asia so far appears to have

avoided major damage. The indiscriminate attack began Friday and struck banks, hospitals and government agencies around the world, exploiting known vulnerabilities in older Microsoft computer operating systems. Chinese state media yesterday quoted the official Cyberspace Administration of China as saying the attack is still spreading in the country, but had slowed significantly. It warned computer users to install and upgrade security software as a precaution. State-owned oil giant PetroChina said in a statement that it had to disconnect the networks linking its petrol stations nationwide for 12 hours on Saturday and accept only cash after the company’s internet payment functions were disabled. By late Sunday, around 80 per cent of its network was back online, PetroChina said.

‘Unstable’ systems

Japanese media reported that 2,000 computers at 600 companies and organisations in the country had been affected, citing the Japan Computer Emergency Response Team Coordination Centre. A spokesman for Japanese conglomerate Hitachi said yesterday that the company’s computer networks were “unstable”, crippling its email systems. “We found the problems this morning. We assume that the problems are due to the weekend’s global cyber attacks. We have not received any reports of damage to our production. We don’t know when the problem can be solved,” said the spokesman, who spoke on condition of

anonymity. Authorities across the world have issued public alerts warning computer users to beware of suspicious emails and beef up their computer security measures. “Please beware and take preventive steps against the malware attack,” said Indonesia’s information minister Rudiantara who, like many Indonesians, goes by one name.

‘Chinese state media have reported that police departments in some major cities had suspended some non-emergency services’ Rudiantara was speaking to reporters following reports that records and billing systems in at least one Indonesian hospital had been crippled. Chinese state media have reported that police departments in some major cities had suspended some non-emergency services, though it was not clear whether the ransomware threat was to blame in all cases. Dozens of Chinese universities have issued alerts about the attack and advised students to disable their internet connections before turning on their computers. The attack sent share prices of Chinese internet security firms soaring. AFP

Gambling controls

Consumption

Trade

888 plunges as UK regulator reviews problem

Mainland retail sales up in April

S. Korea’s exports keep rising in early May

Online betting operator 888 Holdings Plc plunged in London after regulators started investigating the company’s UK business over its compliance with rules to prevent problem gambling. A review by the UK Gambling Commission will assess whether 888 operates an effective self-exclusion process for such gamblers, the company said in a statement yesterday. The announcement comes about 18 months after the regulator ordered online gaming companies to let customers temporarily suspend their accounts directly through the website, rather than having to contact a call centre. The UK is stepping up scrutiny of online gambling companies’ social responsibilities, last year reaching settlements with companies including Paddy Power Betfair Plc, Betfred and Gala Coral. Should 888 be found to have breached rules, possible punishments include a fine, or in a worst-case scenario, the revocation of its license, Canaccord Genuity analysts said. “This would be an unprecedented action against a company which is fully cooperating with its review,” the analysts said in a note. “We expect 888 to be rigorous in addressing any failings in regulatory structures/processes.” Bloomberg News

China’s retail sales, a key indicator of consumption, grew 10.7 per cent year on year in April, 0.2 percentage points slower than the March level, official data showed yesterday. Total retail sales of consumer goods hit RMB2.73 trillion (about US$395.4 billion) last month, according to the National Bureau of Statistics (NBS). It increased 0.79 per cent month on month. In the first four months, total retail sales of consumer goods rose 10.2 per cent year on year, 0.2 percentage points faster than the growth in the first quarter, according to Xing Zhihong, a spokesperson with the NBS. Consumption activities were relatively stronger in rural areas, with retail sales expanding 12.6 per cent in April, outpacing urban areas, where retail sales climbed 10.4 per cent year on year. Online spending was robust. From January to April, online retail sales surged 32 per cent year on year to RMB1.92 trillion. Xing said the April figure indicates continued expansion of domestic consumer demand, which was partly driven by consumption upgrades and new business patterns such as online sales. China is trying to shift its economy toward a growth model driven by consumer spending, innovation and services, while weaning it off reliance on exports and investment. Xinhua

South Korea’s exports kept rising in early May despite fewer business days, caused by a presidential by-election, customs office data showed yesterday. Exports, which account for about half of the economy, reached US$9.7 billion for the first 10 days of May, up 4.5 per cent from the same period of last year, according to the Korea Customs Service. The country’s exports maintained a double-digit increase for four months through April when the exports jumped 24.2 per cent on a yearly basis. The continued growth came despite fewer business days stemming from the May Day and the Buddha’s Birthday. The May 9 presidential election day was designated as a temporary holiday. Excluding the working days, the daily average exports amounted to US$2.16 billion, up 27.7 per cent from the same period of last year. During the May 1-10 period, oil products exports more than doubled compared with a year earlier, with those for semiconductors logging a double-digit increase. However, exports of auto parts and smartphones declined in the cited period. Shipments to China rose 3.2 per cent, but those to the United States reduced 10 per cent. Xinhua