Business Daily #1303 May 25, 2017

Local entrepreneur hears alternative wedding bells Start-ups Page 7

Thursday, May 25 2017 Year VI Nr. 1303 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Markets

MSCI: Issues pending regarding China’s inclusion in stock index Page 9

HKMZ link

No irregularities found in Delta Bridge inspections, despite arrests Page 2

Real estate

Contract awarded for developing public housing on CEM site Page 2

www.macaubusinessdaily.com

Official visit

Portuguese Secretary for Industry visits MSAR with entrepreneurs to promote start-ups Page 3

Environment

China, Canada and EU join to save Paris Climate Agreement Page 8

Reverse Gear Retailing

A policy to encourage vehicle replacement.

But it sparked local consumption. Statistics and Census Services figures reveal retail sales during 2017 Q1 were up 4.3 pct vis-a-vis the previous quarter. Page 4

Private sector dominates domestic health usage

Pillar industry under microscope

The city’s Green Book was issued yesterday.

In a joint initiative involving the Centre of Macau Studies of the University of Macau in collaboration with academics and scholars.

The publication dissects the leisure industry, providing insights into the components necessary for a World Centre of Tourism and Leisure.

Private vs. public A rise in public consultations. But the majority still turn to the private sector for healthcare in the MSAR. Official figures reveal that the number of private health establishments was 705; while those managed by the gov’t remains at 14. Page 3

Concessions depending politics

Gaming operators Expiring concessions to operate gaming business in the territory are in grey territory. With the disposition of the next Chief Executive pivotal to renewal.

All bets are currently on an extension. Despite talk of a tender. Page 6

Moody’s downgrades China debt

Tourism Page 4

HK Hang Seng Index May 24, 2017

25,428.50 +25.35 (+0.10%) Worst Performers

Cathay Pacific Airways Ltd

+6.10%

Want Want China Holdings

+1.51%

MTR Corp Ltd

-1.36%

Sands China Ltd

-0.43%

China Unicom Hong Kong

+4.28%

CK Hutchison Holdings Ltd

+1.40%

Wharf Holdings Ltd/The

-0.75%

HSBC Holdings PLC

-0.37%

China Mengniu Dairy Co Ltd

+2.32%

CLP Holdings Ltd

+1.39%

Hengan International Group

-0.63%

Galaxy Entertainment Group

-0.35%

China Shenhua Energy Co

+1.58%

China Overseas Land &

+1.34%

Lenovo Group Ltd

-0.61%

China Construction Bank

-0.32%

Link REIT

+1.55%

Swire Pacific Ltd

Tencent Holdings Ltd

-0.58%

Bank of East Asia Ltd/The

-0.31%

+1.11%

28° 31° 28° 31° 28° 32° 28° 32° 28° 32° Today

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

Ratings Moody’s cited the likelihood of a ‘material rise’ in economy-wide debt. And the burden that would place on state finances. While also changing the outlook to stable from negative. Page 8

2 Business Daily Thursday, May 25 2017

Macau Public works

IACM vows to improve co-ordination

The Civic and Municipal Affairs Bureau (IACM) said yesterday in a release that it ‘agreed’ with the recent Commission of Audit (CA) report and that it will revise and reform its co-ordination system for public street works.

A new IT system, improved co-

ordination in authorising road works and excavations and better analysis of the traffic in the areas to be developed were all measures announced yesterday by IACM. A recent CA report heavily criticised the IACM Road Construction Co-ordination Group for inefficient supervision of road construction works. N.M.

Construction

Power plant site slated for housing Government awards architect Chan Hou Kuan with MOP38.5 million contract development plan for public housing to be constructed on site of old power plant on Avenida Venceslau de Morais

T

he government has awarded a MOP38.5 million (US$4.8 million) contract for developing the plan for the construction of public housing on the site of the former power plant in Avenida de Venceslau de Morais in Areia Preta (plot pictured), an Official Gazette release announced yesterday.

According to the release the contract was provided to architect Chan Hou Kuan from ARCO Architecture Design and Consultant Company Ltd., with the contract payment expected to be completed by 2021.

Information from the Infrastructure Development Office (GDI) indicates the contract was officially awarded on March 21, with the contractor having 240 days to complete the plan.

The government is planning to

– Companhia de Electricidade de Macau, stated previously that the main chimney would be gradually removed up to the end of this year, with the station to be vacated by the second half of 2018. N.M.

Society

HKZM Bridge

Inspections yield ‘no irregularities’ on bridge Following the arrest of 21 people for alleged corruption related to the falsified test results of concrete used on the Hong Kong-Zhuhai-Macau Bridge, the government is convening a press conference today to announce more details.

The HKSAR Government’s official response to the incident, published early yesterday morning, notes that it is not able to ‘obtain relevant information’ about which segments of the works the ‘suspected false concrete test results’ would apply to, given that the ICAC investigation is ‘underway’. It has requested site staff, however, to examine for any structural damages, with visual inspections on the Hong Kong Boundary Crossing Facilities, Hong Kong Link road and Tuen Mun-Chek Lap

develop 1,000 housing units together with social facilities and a government complex in the central building of the former power plant.

Bernie Leong, chairman of the Executive Committee of CEM

Kok Link confirming ‘that the structures were in sound condition and no abnormalities (such as structural cracks) were identified’.

Further non-destructive testing of the strength of the structures will be conducted ‘in the coming two weeks’ and the group will hire ‘an independent professional organisation’ in order to have more manpower conducting tests.

Additional oversight of contractors in labs is being implemented and after reviewing test reports from other laboratories the release notes that ‘no irregularities were found’.

‘Currently, relevant departments are looking into the case in-depth and soliciting more information,’ notes the release. K.W.

Minimum wage, growing cost The implementation of a minimum wage for cleaners and security guards for buildings since its implementation a year and a half ago has led to an increase in property management fees, according to the chairman of the Property Management Business Association, Jackey Chui, speaking on the TDM programme Macao Forum yesterday.

“This pressure [increase of management fee] is not accepted by the majority of residents,” said Chui, noting that only 50 per cent of buildings in the city have owners’ associations and as such management companies might not be eligible to receive the increased fee from apartment owners.

Meanwhile, Legislator Ella Lei Cheng I, also vice-president of Macau Federation of Trade Unions (FOAM), pointed out that opaque bookkeeping records kept by management

companies results in the unwillingness of property owners to cough up the fees.

Regarding job searching in property management, the lawmaker said an oversupply of non-resident workers dominates the industry.

The vice president of the Federal General Commercial Association of Macau Small and Medium Enterprises, Peter Lei, on the other hand, said there was a shortage of local residents working for the management of properties.

A year and a half since implementing the measure, Legislator Lei denounced the government for not putting forward any framework for a universal minimum wage or a public consultation plan, expressing concern as to whether the government would be able to achieve its goal of implementing a universal minimum wage by 2019. C.U.

Business Daily Thursday, May 25 2017 3

Macau Health

Private sector still dominating domestic health sector Private health establishments are leading in the provision of medical services in Macau Sheyla Zandonai sheyla.zandonai@macaubusiness.com

A

lthough an increase of 12.2 per cent in consultations taking place in public primary healthcare establishments was followed by a decrease of 3 per cent in consultations in private establishments, the number of consultations in the private sector was still nearly four times higher than the ones taking place in the public sector, totalling 3,170,215 – versus 804,500 in the public sector – for the whole year of 2016.

According to the health statistics report released yesterday by

the Statistics and Census Bureau (DSEC), the number of private health establishments was 705, while those managed by the government totalled 14.

Questioned by Business Daily as to whether such data suggest that the public sector was not able to cope with the local demand for health services, the attendant bureau said it could not reply to our enquiries

yesterday.

Of the total number of consultations held in private clinics in the city, 65.5 per cent, or 2,075,880 of the total, took place in polyclinics, which account for 42.8 per cent (or 302) of the total number of private establishments in the city.

The report also noted that the number of in-patients in 2016 amounted to nearly 58,000, posting an increase

of 6.1 year-on-year, with the average hospital stay some 7.1 days.

In reply to our enquiries about the number of patients who have been sent to Hong Kong for medical assistance and treatment, the health services bureau only provided data for the whole year of 2013, and for the first five months of 2014, which it said amounted to 1,794 and 1,208 patients, respectively.

The health services also noted in the report that there were 1,726 doctors and 2,342 nurses in Macau in 2016, signalling increases of 3.1 per cent and 2.8 per cent, respectively, year-on-year.

Consequently, there were 2.7 doctors per 1,000 people and 3.6 nurses per 1,000 people in the city.

The Bureau was, however, unable to provide comparative data for previous years by the time this story went to print.

Finally, questioned about its total expenditure for the year 2016, the health services bureau explained that it could not release the information, since its accounts are currently in the process of being audited.

The Bureau added, however, that its expenditure for the whole year of 2015 reached MOP1.09 billion and MOP828.920 million for 2014.

Official visit

Mr. Start-ups returns to Macau The Portuguese Secretary for Industry and a group of entrepreneurs are to visit Macau, Hengqin and Qianhai to promote start-ups at the end of this month João Paulo Meneses in Portugal*

The Macau SAR is expecting the visit of the Portuguese Secretary of State for Industry as he has been invited to return to the SAR, the Secretary for Economy and Finance, Lionel Leong, revealed to Business Daily awhile ago.

Now, João Vasconcelos has not only confirmed his trip

but also the visit of a group of entrepreneurs, most of them leaders of Portuguese start-ups.

Leong invited Vasconcelos last December when he visited Portugal and will meet the Portuguese Secretary again next week, from 29th May to 1st June.

Mr. Vasconcelos will be accompanied by a delegation

Meeting in Lisbon, last December, between João Vasconcelos and Lionel Leong

of young entrepreneurs and innovation managers plus Maria João Bonifácio, Vice-Consul and representative of AICEP, a trade and investment agency. The visit to start-ups in Qianhai (Shenzhen) will be followed by a trip to Hengqin, where the delegation will gauge the development of the Youth Entrepreneurship Valley.

In Macau, the Portuguese dignitary will attend the

launch of the exhibition by artist VHILS in addition to a dinner upon the occasion of the international forum on investment and construction of infrastructures.

On the last day of his visit, the Secretary of State will visit the Entrepreneur Youth Centre and the Business Incubator Centre.

Vasconcelos was the first senior Portuguese official to visit Macau since Antonio Costa became Prime Minister. On that occasion, he promised Portugal and Macau would “soon strengthen

co-operation in the fields of science and technology”, showing Macau “a new Portugal . . . [with] . . . a new economy . . . [and] . . .new entrepreneurs”.

Last October, Mr. Vasconcelos returned to the SAR as a member of the Prime Minister’s entourage, at which time he signed an agreement with Secretary for Economy and Finance Lionel Leong to establish in Macau a Startup and Innovation Centre to open this year.

This will be his third trip to Macau. *with Alex Lee

Portuguese Delegation Name João Vasconcelos João Borga Maria Miguel Ferreira André Marquet Tiago Alves Pedro Rocha Vieira Inês Matias Clara Gonçalves António Lucena de Faria Miguel Ruas Helena Silva Miguel Zomato Paulo Dimas David Barroso Sebastião Lorena João Ramos Casey Lau Rafael Rocha Maria João Bonifácio Marcia Rodrigues

Job Title Secretário of State for the Industry Special Advisor Special Advisor CEO VP Asia President Pulse Manager Executive Director CEO Special Projects Manager General Manager Head of Growth Europe Head of Product CEO Head of Marketing Journalist Senior Partner Managing Director Vice Consul

Company Portuguese Government Portuguese Government Portuguese Government Productized Aptoide Beta-i Healthcare City UPTEC Fábrica de Startups Startup Lisboa CEiiA Zomato Unbabel Findster Science4You Expresso Web Summit Young Entrepreneurs Association AICEP / Trade & Investment Agency AICEP / Trade & Investment Agency

Transportation

Airport opens FBO tender Macau International Airport Company Limited (CAM), the local airport operator, announced yesterday that it has opened a tender for Fixed Base Operators (FBO) for the airport, closing August 9 at 5:00pm. The tender is open to both business and general aviation who wish to apply for a sub-concession lasting six years.

This comes after a previous FBO tender in December of 2013, after the exclusive rights for providing the service expired. The CAM 2014 Work Plan notes that the

FBO tender was opened, but does not indicate any bids received.

The FBO can encompass services of maintenance, storage, and passenger handling services, and include aircraft leasing as well as fuelling services, aircraft repair, aircraft component parts sales, aircraft interior modification, and even aerial sightseeing and advertising offerings, among others.

Although encompassing both areas, statements from the airport note that: ‘In order to adapt the development

needs of Macau’s business aviation, and to seek an experienced and reliable Fixed Base Operator (FBO) in MIA, CAM hereby invites the submission of proposals’.

The group notes that this introduction of FBO service providers ‘will enhance the overall quality of business aviation services and create better and enjoyable travel experiences [for] customers . . . all companies that can meet the proposal evaluation criteria as stated are welcome to join’.

Currently, the listings on the airport’s website note that there are no available spaces for leasing; in response to Business Daily enquiries,

the airport points out that its expansion - the entire North Extension project - ‘is expected to be completed and put into operation in the second half year of 2017’. This will increase the airport’s

passenger handling capacity ‘to around 7.5 million,’ notes the CAM response.

The decision on which FBO to select will be weighted 45 per cent towards the business plan presented. K.W.

4 Business Daily Thursday, May 25 2017

Macau Tourism and Leisure

Academics to establish local tourism index The first Green Book of Macau includes academic analysis of the MSAR’s development in tourism and leisure, including suggestions to the city’s authorities Cecilia U cecilia.u@macaubusinessdaily.com

T

he Dean of the Faculty of Social Science (FSS) of the University of Macau (UMAC), Professor Hao Yufan, has revealed that a tourism index will be rolled out as a reference for the MSAR Government - as well as the rest of society - apropos decision making for the city’s development of tourism and leisure.

The Centre of Macau Studies of the University of Macau jointly established the first Green Book of Macau yesterday with local scholars as well as academics from Mainland China.

The book provides comprehensive analysis of the city’s current development of tourism and leisure as well as providing suggestions fors further improvement and development.

Professor Hao said the book will be launched every year, adding that preparations for next year’s book has already started.

Professor Lin Guangzhi, Director of the Institute for Social and Cultural Research, who is also the editor together with Professor Hao of the Green Book of Macau, perceived that the city already has a good foundation for the development of tourism and leisure.

Over the past year, Professor Lin said the scale of development had been rapid, with related facilities such as hotels increasing in number as well as the introduction of various festivals and activities.

“However, we also have quantity and quality problems,” said Professor Lin, such as the significant growth of the number of visitors to Macau leading to overloaded issues in a small city, as stated in the chapter written

by Professor Lin. Meanwhile, given persistent problems such as the numerous road constructions and delay of transportation infrastructure, Professor Lin said it was necessary for the government to improve management of the city.

“The development of travel and leisure should not only be [left] to the Secretary for Social Affairs and Culture,” noted Professor Lin. “The entire society should be involved.”

Nevertheless, in terms of long-term development, Professor Lin held a positive outlook.

Vice president Pang Chuan of the Macau University of Science and Technology (MUST), on the other hand, pointed out that most visitors travel to the city for reasons other than leisure.

In order to raise the number of visitors to the city for leisure, Pang noted the utilisation of the 85 square kilometres of territory granted in 2015 by the central government.

Pang also pointed out the importance of ensuring local residents’ quality of life as the city develops tourism, remarking that the city cannot be considered a World Centre of Tourism and Leisure if it fails to ensure residents’ quality of life.

Suggestions

Professor Lin listed some major suggestions for the better development of tourism and leisure in Macau.

The MUST professor noted in his report that the development of tourism and leisure involves a wide range of

aspects such as the development of the city and tertiary education.

As such, the plan for development should be led by the MSAR Government rather than only being confined to the Secretary for Social Affairs and Culture and the city’s Tourism Office.

Secondly, Professor Lin believes that the participation of enterprises is limited.

He pointed out the importance of considering the co-ordination between the government, enterprises, citizens and tourists when drafting development plans, adding that the government could roll out policies to attract the involvement of enterprises to invent tourism products.

Given that the gaming industry occupied a significant position in Macau’s economy, Professor Lin said gaming should not be completely excluded from the planning of tourism development.

The MUST professor also suggested collaboration with other regions such as the Greater Bay Area in order to soften the problem of the city’s limited space.

The importance of scientific analysis as well as adequate arrangement to ensure use of the collaboration with other regions was important, too, he concluded.

Shops

Retail sector makes the grade thanks to Government policy After ignoring inflation, the volume of retail sales increased 4.6 per cent quarter-to-quarter and 11.5 per cent year-on-year Sheyla Zandonai sheyla.zandonai@macaubusiness.com

The value of sales of motorcycles, and parts and accessories skyrocketed 49.6 per cent in the first quarter of 2017 when compared to the same period in the previous year, while the sales volume for the same category increased 43 per cent.

According to the latest data released by the Statistics and Census Services (DSEC) yesterday, the change was mainly ‘due to the government’s subsidy scheme for

the elimination of two-stroke motorcycles.’

DSEC also noted that the total value of retail sales during the first quarter of 2017 amounted to MOP16.59 billion, up 4.3 per cent when compared to the previous quarter, when retail sales amounted to MOP15.91 billion.

Overall, luxury goods, including watches, clocks, and jewellery, also performed well, accounting for 23.2 per cent of total retail sales.

Speaking to Business Daily, the spokesperson for a

Source: DSEC

listed luxury brand retailer operating in Macau said that the company had not recorded strong sales in the first quarter, in comparison to the quarter ended 2016, registering single digit

growth.

The company, whose main custom base is from Mainland China - “especially from Guangdong Province” - has five stores in the city. Its spokesperson claimed that

their stores in Cotai (three in total) had performed better than the ones on the Macau Peninsula.

In addition to luxury goods, sales of goods in department stores accounted for 15 per cent of total sales posted in the first quarter, followed by adults’ clothing at 12.8 per cent, leather goods, at 11.8 per cent, and goods sold at supermarkets, at 7.1 per cent.

On a year basis, the statistics services noted that increases in the value of retail sales value were mainly recorded in the luxury category – comprising watches, clocks, and jewellery – up 23.2 per cent, and through the sales of cosmetics and sanitary articles, up 21.8 per cent.

Construction

Pricey training for local athletes First phase of new Athletes Training and Formation Centre at the Macau Dome will notch up MOP386.2 million Nelson Moura nelson.moura@macaubusinessdaily.com

A MOP386.2 million contract for the construction of the foundation of the new Athletes Training and Formation Centre has been granted to Consórcio de Sociedade de Investimentos e Fomento Imobiliário Chon Tit, (Macau), Limitada, to Companhia de Engenharia Iao Lek Limitada and to the Macau branch of Companhia de Engenharia de Túneis Shanghai S.A. The public tender for the first phase took place in October of last year, with a total of 14 proposals received at the time.

The development of the new centre foundations has a top completion date of 310 days, with construction kick-off established in February of

this year and its conclusion expected

by January 2018, according to the Infrastructure Development Office (GDI) website.

This contract grant is part of the first phase of development of the sports training centre, which will occupy 12,400 square metres of the parking lot at Macau Dome in Cotai, with a total construction area of 57,700 square metres.

The Centre is divided into a sports pavilion area and athlete’s residence area, with the public tender for the remaining facilities of the Centre to take place on June 14 and 15 this year.

Initially planned to be completed in 2012, the President of the Sports Bureau, Pun Weng Kun, stated previously that the completion of the

Centre would probably take place in 2019.

‘To cope with the rapid development of the Macau sports industry, and make good use of land resources, the government [seeks] through the construction of the Centre [to] provide a concentrated, safe and well equipped training environment facility for athletes to raise their

competition level,’ the Sports Bureau told Business Daily yesterday.

The department also added that the reallocation of the athletes to the Centre will help release room for sports facilities on the Macau Peninsula and in Taipa, with the Centre also including sports training facilities, accommodation services and sports medicine.

Business Daily Thursday, May 25 2017 5

Macau Sponsored Feature

Arts

MGM Creates Great Moments in Artistry Introducing A Golden Way of Life - Très’Ors and New Indoor Garden ‘Beauty in the Air’

C

elebrating 10 years of artistry and entertainment in Macau, MGM MACAU proudly presents the first-time exhibition A Golden Way of Life - Très’Ors at MGM Art Space from now to September 3, 2017. As part of the Le French May Silver Jubilee Celebrations, A Golden Way of Life - Très’Ors invites the public to embark on a fascinating journey curated by Anne Camilli from Le Musée à la Carte® and Gilles Bonnevialle of Maecenae, exploring a collection of over 250 exquisite pieces of gold creations and artifacts comprised of classic and

contemporary art works, religious artifacts, vintage furniture pieces, fashion and accessories, precious watch and jewelry, and remarkable everyday life objects from the 17th century to modern day items in gold.

The name of the exhibition is a word play on the French w or d “tr é so rs,” whi ch means “treasures,” whereas “très ors” literally means “very gold,” which fittingly sum up what can be expected from the exhibition – a treasure trove of golden delights. The exhibition is set in six zones that focus on gold creations of specific genres such as Gold Materials, Sacred Gold and Gold & Art.

Some of the highlight pieces include religious pieces from the Musée Notre-Dame de Fourvière in Lyon; Ossip Zadkine’s sculpture La Jeune Fille à la Colombe (Young Girl with a Dove) from the 1930s; contemporary artist Hélène Tran’s Kiss me forever Julien Doré – a tribute to the French singer whose last name also means golden; a collection of exceptional Boucheron jewelry pieces, fashion and accessory pieces from renowned brands Schiaparelli, Paco Rabanne, Yves Saint Laurent, Guerlain; and timeless 18th and 19th century clocks and watches from the Musée de l’Horlogerie de Morteau.

As part of MGM MACAU’s warm welcome to locals and guests, it has specially “planted” a brand-new Garden at the Grande Praça! The new art installation, “Beauty

in the Air,” in collaboration with U.S. based maestro of oversized visual display art, Stephen Stefanou, features over 17 large glass flowers of four different types (Crocuses, Anemones, Iris and Sunflowers) all made of synthetic glass, more than 100 butterflies and six custom-woven loungers.

The brightly colored indoor garden is the picture-perfect place for families and friends to spend quality time together.

This is the first time that Stephen Stefanou have created an interactive piece of art that enables people to sit down and relax, and it makes a delightful enhancement to the Garden.

Together with MGM, he wanted to fill the space of Grande Praça with colorful installation art pieces that remind guests of the magical, amazed feelings as if they were children again when they see decorations that are so large in size.

Exhibition Opening Hours: A Golden Way of Life – Très’Ors

Date: April 21 – September 3, 2017 Opening Hours: 12pm - 9pm. Closed on Mondays (except public holidays) Venue: MGM Art Space, MGM MACAU Admission: Free

Beauty in the Air at Grande Praça Date: Opening Hours: Venue: Admission:

May 15, 2017 onward 24 hours Grande Praça, MGM MACAU Free

6 Business Daily Thursday, May 25 2017

Macau Opinion

Ashley Sutherland-Winch*

Higher fares = greater responsibilities Earlier this week, Macau Taxi Drivers Mutual Association (MTDMA) president Tony Kuok Leong Son said that “the Association will soon negotiate with the government to seek approval for taxi drivers to increase taxi fares”. Is anyone else surprised that the union is requesting a fair hike when customer service is still struggling at an all-time low?

In Macau, it is clear that since Uber continues to be ‘illegal’ the taxi union has, for lack of a better phrase, ‘free reign’. Taxi drivers frequently continue to refuse fares leaving residents that live in the outer districts of Macau to suffer. Two weeks ago, the Department of Transportation Services (DSAT) removed a critical mode of transportation to the Hac Sa region of Coloane by dropping Bus 25 from its route.

Taxi drivers often refuse to take passengers to Hac Sa and now it is not only scary for some residents to request taxi rides to this region for fear of conflict, it is now potentially going to be more expensive to ride in their cars.

All businesses, regardless of customer service, deserve increases in wages based on cost of living and taxi drivers deserve this opportunity as well, but not when the public is constantly requesting and in some cases demanding better service. To be clear, I am not saying that courtesy or kindness is among these demands.

Passengers want to ride in taxis without fear of being yelled at, kicked out of the taxi, or put in potentially dangerous situations. I certainly hope that our community can be heard by the committees considering taxi fare increases in order to maintain due diligence.

Our community’s concerns must be considered before wage discussions commence.

Kuok said he “he hopes the government can propose a reasonable plan, and hopes that the updated fares can be brought in by this Summer vacation.” The countdown to Summer is looming and I encourage residents to remain vigilant in submitting safety and wellness concerns and enquiries as to the taxi drivers’ unions compensatory plans for higher rates. Higher rates should equal greater responsibility with passenger safety paramount.

Disregard for this basic right should not be ignored; to play devil’s advocate, perhaps higher fares would not be as important if better customer service was implemented.

Great customer service is often rewarded by high tips.

Imagine the potential euphoria in Macau if all taxi drivers implemented high or even moderate levels of customer service and were tipped accordingly: it would be a wonderful day indeed. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.

Concessions

Succession of concession lacking detail Although likely that the two concessions expiring in 2020 will be extended to 2022, or beyond, criteria for the new tender is lacking and current regulations are “vague”, with much weight falling on who assumes the position of Chief Executive after the incumbent’s term expires, say experts Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com

T

he choice made regarding the upcoming expiration of gaming concessions in the territory for the six current gaming concessionaires and sub-concessionaires will greatly depend upon who assumes the position of Chief Executive following the departure of the current official in 2019 as well as what conditions are set in the event of a public bidding process, reason experts.

Given the recent statements by the Secretary of Economy and Finance, Lionel Leong, noting that an automatic renewal of current concessions will not be undertaken, but rather a new tender, there is speculation that the two concessions which expire in 2020 – those of Sociedade de Jogos de Macau and MGM China – will be pushed back to 2022.

Responses for comment from the Secretary’s office are met with ‘we have nothing else to add at this time’.

Professor Wang Changbin of the Gaming Teaching and Research Centre at the Macao Polytechnic Institute believes that the government will “probably” renew the two current concessions to match with those of 2022, given that doing it “all at one time is easier and simpler for the government”.

A potential extension further beyond that is “possible” although the Professor notes that “I think there

will be a big difference” resulting from the change of Chief Executive.

“The Chief Executive actually has the right to extend the contract period, up to the most, five years,” says Professor Davis Fong, Director of the Institute for the Study of Commercial Gaming at the University of Macau, noting, however, that “he must provide a reason to the public as to why he’s going to do so . . . this is a very high-level political concern . . . I don’t think the government easily exercises its rights (of renewal)”.

Responses to Business Daily enquiries from the Gaming Inspection and Co-ordination Bureau (DICJ) note that ‘at this moment, there is no information about the granting of new concessions after the current ones expire’.

Three options

The academics suggest three options for the concessions upon expiration – a public bid, extension (five-year maximum), and termination, meaning “the government actually can collect back the rights of the concession without doing anything . . . By law, the gaming area, after the termination of the contract, belongs to the government,” points out Professor Fong, noting that it’s unlikely this will happen, especially since the operators maintain the rights to operate their non-gaming facilities on the property until their land lease expires.

“The most important thing is not

just the concessionaire or sub-concessionaire. The most important point is Macau currently. How to achieve the World Centre of Tourism and Leisure [positioning],” says Professor Fong, referencing non-gaming mandates in the new tender.

So, going to tender, who would be eligible?

“Actually the conditions that the law list are very vague. It’s not so clear, because they say the government will take into consideration the reputation, experience and the offer to Macau. They don’t give any detailed description of the conditions,” points out Professor Wang.

The academic also notes: “I heard previously that a local developer would like to do that, but recently I didn’t hear of it”. He also opines that “if somebody already does business in Macau through a satellite casino they may have some advantages” in becoming a bidder.

The bidding process can, however, be restricted.

“The government can set some criteria. For those companies who are qualified under such circumstances or conditions, they can go for public bidding,” says Fong, pointing out this would be the same arrangement as in 2001, when the government sent the invitation letter to companies.

“Everybody understands that gaming and tourism are one of the most important pillars supporting Macau’s [ambition] to achieve World Centre of Tourism and Leisure [status],” said Professor Fong.

Whether this means the industry will continue to include junkets, Professor Wang states: “I don’t know; the government didn’t give any public information about the structure of the junkets,” for the bid, although “I have a feeling that the government would like to keep the status quo, if it can”.

Business Daily Thursday, May 25 2017 7

Macau

Source: I heart You Photography

The alternative wedding Startup name: Bad Bad Maria Productions and Crafts Industry: Catering, decoration and event planning Elevator Pitch: Bad Bad Maria is a company full of love and joy spread through the organisation of parties and customised weddings in Macau, Thailand and Portugal.

Interviewee: Founder Cátia Silva Nelson Moura nelson.moura@macaubusinessdaily.com

W

hat is the idea behind Bad Bad Maria?

Bad Bad Maria was born out of an old passion for handicrafts that evolved over the years. My Bachelor’s degree was for Primary School teacher and I worked as a teacher for 10 years in Angola, Mozambique, Portugal and Macau. After I registered the company in 2014, I started getting some requests for party events. It was then I had to make a choice between my career as a teacher or as an event planner and I chose the latter.

The company was initially focused on event planning and decoration but one of my biggest passions has always been weddings so in September of last year I started Bad Bad Maria Weddings to make people’s dreams a reality.

Three months ago I also launched Destination Weddings, which focuses on weddings organised in Thailand, since I realised there was a market opening for someone to bridge the suppliers in that country and interested clients.

Is there anything different in your approach to wedding planning?

Bad Bad Maria services are mainly event organising, including weddings, catering and decoration. The competition in the market is quite large and conventional wedding planners are plenty, so the weddings we organise always have something different.

Since the company concept was initially launched in Portugal I

attempted to focus on alternative weddings - not very common in Macau - which are not traditional and are outside the conventional wedding spectrum.

We also have a decoration component, and people who want an alternative decoration normally come to me as I’m incapable of organising a dinner for a client without a special touch. Every event decoration design is made by me and we don’t repeat them. We also offer specific catering services where we try to follow our client’s special requests.

These offers comprise Bad Bad Maria’s main characteristics and it’s what distinguishes us from the others.

How many weddings and events would you say you organise every year?

On average, we organise between 50 and 60 events every year, all in Macau.

How would you describe the wedding market in Macau?

The local wedding market size is considerable but I believe my company doesn’t fit in the overall market due to the kind of alternative product I offer. Our aesthetic and decoration concepts are completely different from the usual, and we’re not a mass market product. I think the local market will gradually get used to this type of wedding.

We still have to position ourselves clearly in the market but I believe there are enough people who share our vision and after June we will start promoting Macau, Portugal

and Thailand as ideal destinations for weddings.

What would be the budget for an average event organised by your company?

The minimum budget for a simple dining event could be for around MOP3,000 (US$373) to MOP4,000.

It depends upon the client’s pocket, the location and size of the event and what the client requests for decoration. I also have an online shop that sells products for events where the prices vary a lot but are generally accessible.

Have you collaborated with local gaming operators or the Macau Government?

If I have a client who wants an event in a casino I will collaborate with but I’m not directly hired by the gaming operators. In such cases they will provide the catering and I can do the decoration.

With the government, there are several departments that sometimes request services. For example, I recently did catering and decoration for the Cinematheque Passion inauguration. Generally, however, we don’t do partnerships.

So how would you describe your target customer?

Our target customer has to have a different and less traditional sense of event aesthetics and design.

As an outsider how have you managed to stay in the Macau market?

Well, recently I had a problem where I had to decide if I continued with the company or return to my old job as a teacher. Macau is a challenging market and we’ve passed by a period of two months with no events, but inbetween I did many other services.

Thankfully, Bad Bad Maria has many other offerings.

I pondered that if I quit then what about all the money and time I invested in the company in the last fours years? This company is a dream for me and I’ve had many people help and invest in me. I don’t want to be ungrateful to myself or to them so I’ve decided to keep on.

How many employees does Bad

Bad Maria have?

Currently I’m the only full-time company employee but we sub-contract workers to help in the events.

I also have a designer and a digital communications employee who frequently works for the company. I do the design, logistics and production for the events, but on the day of the event I hire people I trust and know to help me just for that day.

Some years ago I organised a wedding in a Coloane beach house which involved six people from Bad Bad Maria plus catering, cake designer, photographer and filming. It can be around 10 people for a middle-sized wedding, but sometimes the venue has its own staff. It depends a lot on the event.

What are your company’s main challenges?

In the beginning it was challenging to work alone without a company structure. After that phase it was challenging to find an office space and find the materials I use for decoration since we have a very specific type of decoration that requires a larger investment to find. Our main inspiration comes from United States and Australian styles and we have to purchase a lot of materials abroad.

Communication is also an issue, since we also want to attract the local Cantonese speaking market and not just a foreign resident market.

It’s also hard to find suppliers for our peculiar style. Local suppliers have a lot of work offers so sometimes they can’t be bothered to deal with me.

I’ve been waiting for a month and half for the budget for a video filming package I asked a supplier to send it to me, and this is something I don’t think would happen in Portugal or Thailand.

What advice you would give other entrepreneurs?

I would advise them to take a company management degree to complement their creative side. In the beginning I only thought about the creative side but now I give as much importance to the sales and business partnership aspect. Listening to podcasts always help me a lot, and I started an online radio show focused on the wedding planning business.

8 Business Daily Thursday, May 25 2017

Greater china Financial risks

Moody’s downgrades nation’s rating China’s Finance Ministry said the downgrade overestimated the risks John Ruwitch and Yawen Chen

M

oody’s Investors Service downgraded China’s credit ratings yesterday for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

The one-notch downgrade in longterm local and foreign currency issuer ratings, to A1 from Aa3, comes as the Chinese government grapples with the challenges of rising financial risks stemming from years of credit-fuelled stimulus.

“The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows,” the rating agency said in a statement, changing its outlook for China to stable from negative.

China’s Finance Ministry said the downgrade, Moody’s first for the country since 1989, overestimated the risks to the economy and was based on “inappropriate methodology”.

“Moody’s views that China’s non-financial debt will rise rapidly and the government would continue to maintain growth via stimulus measures are exaggerating difficulties facing the Chinese economy, and underestimating the Chinese government’s ability to deepen supply-side structural reform and appropriately expand aggregate demand,” the ministry said in a statement.

China’s leaders have identified the containment of financial risks and asset bubbles as a top priority this year. All the same, authorities have moved cautiously to avoid knocking economic growth, gingerly raising short-term interest rates while tightening regulatory supervision.

At the same time, Beijing’s need to deliver on official growth targets is likely to make the economy increasingly reliant on stimulus, Moody’s said.

“While on-going progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government,” Moody’s said.

While the downgrade is likely to modestly increase the cost of borrowing for the Chinese government and its state-owned enterprises (SOEs), it remains comfortably within the investment grade rating range.

“It’s going to be quite negative in terms of sentiment, particularly at a time when China is looking to derisk the banking system, as well as at a time when there’s going to be some potential restructuring of SOEs,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank’s Treasury division.

Growth to slow

In March 2016, Moody’s cut its outlook on China’s ratings to negative from stable, citing rising debt and uncertainty about authorities’ ability to carry out reforms.

Rival ratings agency Standard & Poor’s downgraded its outlook to negative in the same month. S&P’s AA- rating is one notch above both Moody’s and Fitch Ratings, leading to speculation among analysts that S&P could also downgrade soon.

Moody’s has Japan at the same A1 rating China is now on.

“We understand the risk and the reason for downgrade but due to China being a unique system on its own – closed capital account and strong government control over all important sectors - it can tolerate a higher debt level,” said Edmund

Goh, a Kuala Lumpur-based investment manager at Aberdeen Asset Management.

Moody’s has no specific timetable for re-visiting China’s rating, but would monitor conditions on a regular basis, said Marie Diron, associate managing director of Moody’s Sovereign Risk Group.

More than two hours after the announcement from Moody’s, no Chinese state media had published news about the downgrade.

The slowing economy has become an increasingly sensitive topic in China, with authorities directing mainland Chinese economists and journalists towards more positive messaging.

Authorities have stepped up efforts over the last several months to curb debt and housing risks, and a raft of recent data has signaled a cooling in the economy, which grew a solid 6.9 per cent in the first quarter.

China’s potential economic growth was likely to slow towards 5 per cent in coming years, but the cooldown is likely to be gradual due to expected fiscal stimulus, Moody’s said.

“Our GDP will keep medium- and high-level growth and that will provide fundamental support to fend off local government debt risks,” China’s

Finance Ministry said. “China’s government debt risks will not change dramatically in the period of 20182020 from 2016.”

Government-led stimulus has been a major driver of growth over recent years, but has also been accompanied by runaway credit growth and has created a mountain of debt - now standing at nearly 300 per cent of gross domestic product (GDP).

Julian Evans-Pritchard, China Economist at Capital Economics in Singapore, said steps to resolve the debt overhang, such as debt-for-equity swaps at state-owned enterprises, were insufficient to deal with problem.

“As a result, it’s reached the point where the bad debt problem is just so large the government will have to step in to resolve it at some point and that obviously means at some point a sizeable increase in government debt,” he said.

Moody’s said it expects the government’s direct debt burden to rise gradually towards 40 per cent of GDP by 2018 “and closer to 45 per cent by the end of the decade”.

A growing number of economists believe that a massive bank bailout may be inevitable in China as bad loans mount. Reuters

Environment

Beijing forms climate pact with EU and Canada Trump has given mixed signals about the fate of the Paris deal under his administration Marine Strauss and Brian Parkin

China, Canada and the European Union are joining forces to advance the Paris Agreement while President Donald Trump is still deciding whether the U.S. should stick with the landmark deal on climate change.

Canada’s environment minister Catherine McKenna, EU Climate and Energy Commissioner Miguel Arias Cañete and China’s special envoy for climate change Xie Zhenhua are meeting Tuesday in Berlin to discuss climate leadership and how to maintain momentum if the U.S. pulls out of the Paris Agreement. In September, the three will convene a ministerial-level meeting in support of the Paris accord, Cañete said in an email.

The collaboration between the three countries is another sign that Trump, and the U.S., will become isolated from the rest of the world.

Almost 200 nations pledged to fight climate change when the Paris deal was signed in 2015 and since then only the U.S. has indicated it may step off that path.

“It’s very important that we continue the shared programs on climate change,” McKenna said in an interview at the Petersberg Climate Dialog hosted by Chancellor Angela Merkel. “There is a need to bring

together key players. We think that China, Canada and the EU are in a good position to bring together other countries at the ministerial level to have high-level discussions about how we’re going to move forward on the Paris Agreement.”

Trump has given mixed signals about the fate of the Paris deal under his administration. He’s called climate change a hoax and said during his campaign last year he would scrap the deal if elected. Since then, he’s said he would keep an open mind but has prioritized stimulating fossil fuels and especially coal, which conflicts

with U.S. promises under the deal.

Trump’s advisers are divided on the issue.

Germany is assuming Trump will indicate the position the U.S. will take regarding the Paris accord at a Group of Seven summit in Sicily on May 26 and May 27, Environment Minister Barbara Hendricks said at a climate conference in Berlin on Monday. Signatory states of the Paris accord won’t let their agenda be derailed whatever the outcome of Trump’s decision and subsequent policy, Merkel indicated Tuesday.

“We are often asked about our position when looking at the U.S. uncertainty,” said Chinese envoy Xie. “The Paris Agreement is a hardwon achievement, and all signatories

should stick to it instead of walking away. China will stick to its word.”

The United Nations climate conference, which Germany is hosting this year in Bonn, is pressing ahead with its agenda, Merkel said Tuesday.

Global warming is “something that concerns us all,” she told delegates.

We must “uphold the spirit of Paris.”

Concerns were also raised by a number of global corporate and political leaders, including the OECD which said that bringing growth and climate-change agendas together could lift 2050 economic output by as much as 2.8 per cent, a report released Tuesday said. Taking into account the economic benefits of avoiding climate change impacts such as flooding, that number goes up to almost.

“This trio is emblematic of the kind of distributed leadership we’re seeing, with a diversity of countries putting their shoulders to the wheel on climate,” said David Waskow, International Climate Director at the World Resources Institute. “It ranges from major emitters to many of the most vulnerable, and many in between.”

The agreement is broader than any previous climate accord. It calls for reducing pollution in hopes of limiting global warming to 2 degrees Celsius above temperatures at the outset of the industrial revolution.

“The Paris Agreement was a signal to the market and now it’s about how to take advantage of this opportunity and how do we make sure that every country is part of it,” McKenna said. “There’s a huge opportunity and now it’s bigger than just one country.” Bloomberg News

Business Daily Thursday, May 25 2017 9

Greater China Index

In Brief

MSCI sees “lot of issues” to solve on stock inclusion An inclusion in MSCI’s indexes would raise the US$6.5 trillion onshore market’s profile Vivek Shankar and Betty Liu

China still has some ways to go to win approval for its mainland stocks to be included in emerging-market indexes, according to the head of the company that compiles the benchmarks.

“There’s still a lot of issues to resolve in a short period of time,” MSCI Chief Executive Officer Henry Fernandez said in an interview on Bloomberg TV. “We’re making a lot of progress on all fronts but it doesn’t mean we’ll get there.”

MSCI is about half-way through consulting its clients, with about 100 left to go ahead of the June 20 announcement on the decision, according to Fernandez. This is the fourth attempt at including so-called A-shares. Last time around there were three key issues, the CEO said: Access to the market through QFII or RQFII. A Qualified Foreign Institutional Investor (QFII) is one that’s been approved by China to buy onshore securities, while an RQFII is an authorized investor using offshore yuan (renminbi) to do the same.

Problems with the suspension of

trading in some stocks. Challenges with Chinese regulators insisting on a pre-approval process for financial products abroad that are linked to indexes including A-shares.

“We’re making a lot of progress on all fronts but it doesn’t mean we’ll get there” Henry Fernandez, MSCI Chief Executive Officer

On the first criterion, Fernandez said: “We’re giving up a bit on the QFII and RQFII because the reform program is not there.” He said MSCI is “focused on the stock connect,” by which foreign investors can buy Shanghai and Shenzhen listed shares via a cross-border trading program.

On the second: “there’s still over a hundred stocks that are suspended in the country, which is by far the

largest in any emerging market. It’s about 5 per cent of the value of the index,” Fernandez said.

And the market-data issue “is a big one,” the MSCI chief said.

“We continue to be very committed to the process and we believe that the Chinese authorities, based on every discussion we have had, continue to be very committed to the pace of reform,” Fernandez said. “It’s just that at times it’s faster and at times it’s slower.”

An inclusion in MSCI’s indexes would raise the US$6.5 trillion onshore market’s profile and draw in a slice of the near-US$2 trillion investors place in assets tied to emerging-market gauges. Of that, about 15 per cent is passive investment, with one-third of that subset being exchange-traded funds, Fernandez said.

Only 169 mainland China-listed companies will be considered for inclusion, down from 448 under a previous proposal, and all will be large-cap shares currently accessible to foreign investors through the connect links with Hong Kong.

“If it happens, when it happens, it sets the stage for future steps,” Fernandez said. “We’re trying everything we can to say ‘can we make the first step so we can get going.’” Bloomberg News

Energy sector

CNPC to invest US$2 bln in Peru oil, gas block State-owned China National Petroleum Corporation (CNPC) plans to invest US$2 billion in an oil and natural gas block in southern Peru in coming years, Rafael Zoeger, the head of Peru’s state energy agency Perupetro said at a news conference on Tuesday. CNPC’s block 58 has some 3.9 trillion cubic feet of natural gas reserves, according to government data, enough to increase Peru’s total gas reserves by 27.7 per cent. Zoeger said CNPC had presented its development plan and would carry out the investments between 2017 and 2023. It plans to start drilling 60 wells this year, he said.

Corruption

Beijing anti-graft drive to reach senior banking regulator A top official at China’s banking regulator is being investigated for suspected disciplinary violations, the country’s top anti-graft body said, broadening the country’s anti-corruption drive to include more financial supervisors. Yang Jiacai, the assistant chairman of the China Banking Regulatory Commission (CBRC), is suspected of serious violations of discipline, a phrase that usually refers to graft, the Central Commission for Discipline Inspection said in a brief statement yesterday. Yang and the CBRC could not immediately be reached for comment after normal business hours.

Fostering measures

Government urges counties to accelerate innovation

Commodities

National demand for palm oil set to drop The country imported over 200,000 tonnes of palm last June Emily Chow

Palm oil demand from China, the world’s No.2 importer of the commodity, is set to drop in coming months as supplies of alternative edible oils flood local markets, industry sources said.

Sluggish Chinese appetite for palm oil, used in everything from preparing food to churning out biofuel, could pile further pressure on benchmark prices that have shed 15 per cent since the start of the year due to expectations for rising output.

“The number of cargoes to China for June to August is very low ... badly below normal, maybe less than 100,000 tonnes a month,” said a Shanghai-based analyst at an asset management firm, declining to be identified as he was not authorised to speak with media.

The country imported over 200,000 tonnes of palm last June, with shipments typically sent from top producers Indonesia and Malaysia.

The drop comes as alternative edible oils pour into Chinese markets, with the country selling rapeseed oil from national stockpiles and soybean

crushing volumes shooting up. Low domestic edible oil prices are expected to cap palm oil demand until the Mid-Autumn festival in October, when appetite typically spikes, analysts said.

Those weak domestic edible oil prices pushed the spread between Dalian soybean oil and palm oil to its narrowest in nearly a decade in April.

That prompted Chinese buyers in early May to cancel three palm oil cargoes for July and August, according

to a report by China’s National Grain and Oils Information Centre.

“In the short term, we may see China pick up more soybeans versus crude palm oil given the soy meal affordability,” said William Simadiputra, plantations equity research analyst at DBS Bank.

Monthly soybean imports to China rose to 8.02 million tonnes in April, a record for the month, supported by strong demand for soymeal. Imports are expected to rise further, as China typically buys large volumes of soybeans from May to August.

Key Points Rapeseed oil, soyoil pouring into China markets That is stifling appetite for palm oil imports Low palm demand seen continuing until Mid-Autumn festival in Oct Meanwhile, palm oil prices are expected to fall towards year-end as output recovers in the wake of an El Niño weather pattern in 2015-16 and in line with seasonal trends.

However, declines could be curbed as Malaysian output in March and April – typically when production starts to pick up – saw its lowest monthly growth in three years. Reuters

Counties and towns should accelerate technological innovation to upgrade their economy, the country’s cabinet said yesterday.

Governments at county and town-level should become hubs of innovation and promote entrepreneurship to help upgrade local industries, according to the guideline released by the State Council. Local governments should leverage innovation to develop green, high-end sectors with influential brands. Support will be given to high-tech firms to help them get listed, according to the guideline. Counties and towns should make full use of technological innovation in targeted measures to alleviate poverty, the guideline added.

Banking

ICBC lists three bonds on Nasdaq Dubai Nasdaq Dubai said yesterday in an e-mailed statement it welcomed the listing of three bonds issued by Industrial and Commercial Bank of China (ICBC) Dubai branch in the Dubai banking free zone DIFC. ICBC, the biggest lender in China in relation to assets, listed two bonds of US$400 million and US$300 million respectively, as well as a bond of 500 million euros (about US$559 million).

10 Business Daily Thursday, May 25 2017

Greater China

Proton logo is seen on the grill of their new car - the ‘Perdana’ - during the signing of agreement between DRB-HICOM Berhad (DRB-HICOM) and Geely at a ceremony yesterday. Lusa

M&A

Geely takes 49.9 pct stake in Malaysia’s national carmaker Proton Chinese carmaker is expected to offer Proton some of the latest vehicle technologies it has developed with Volvo’s input

C

hinese automaker Zhejiang Geely Holding Group yesterday said it would buy a 49.9 per cent stake in Malaysia’s national carmaker Proton from conglomerate DRB-HICOM, marking another major Chinese auto investment in Southeast Asia.

Geely, parent company of Hong Kong-based Geely Automobile Holdings Ltd and Sweden’s Volvo Car Group, would also acquire 51 per cent of Proton unit Lotus, the companies said.

The investment comes on the back of deals worth billions of dollars signed recently between China and Malaysia, but Proton is an asset wrapped in national pride as an emblem of the country’s post-independence industrialisation and economic growth.

“Proton will always remain a

national car and a source of pride, as Proton will still have a majority hold of 50.1 per cent,” Malaysia’s Second Finance Minister Johari Abdul Ghani said at a press conference to announce the deal.

“Our very own much-loved brand now has a real chance in making a comeback, a huge one I hope.”

No value for the deal was released, but a statement from DRB-HICOM said an agreement with Geely was expected to be signed in July.

Chinese automakers increasingly see Southeast Asia as a growth market as their technological know-how and vehicle quality improves. Shanghai-based SAIC Motor Corp moved to build a plant in Indonesia in 2015 and formed a joint venture in Thailand three years earlier, while Dongfeng Motor Group is also interested in the region.

“Japanese automakers already dominate Southeast Asia’s auto

market and they make the region a tough place to do business for newcomers. This deal gives Geely an already-established distribution network,” said Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight.

“Geely can inject into that Proton network better technologies and better-quality cars they have developed with Volvo’s help. It’s clear-cut in that sense.”

The vetting process to find a foreign strategic partner for Proton started last year and involved 15 global auto players, which were eventually short-listed to three final candidates, Johari said.

Other companies that have expressed interest in Proton include Peugeot maker PSA, Japan’s Suzuki Motor Corp and French car maker Renault SA.

National pride

Geely is expected to offer Proton some of the latest vehicle technologies it has developed with Volvo’s input, with the aim of growing its sales overseas and recovering some

of the global presence the Malaysian automaker has lost in recent years.

Founded in 1983 during former prime minister Mahathir Mohamed’s industrialisation push, Proton at its peak boasted of a domestic market share of 74 per cent in 1993.

But sub-par cars, poor after-sales service and tough competition from foreign automakers dented profits - with its market share currently at around 15 per cent.

The national carmaker largely re-badges cars of foreign manufacturers to sell in the Malaysian market, but the quality has diminished in recent years.

The Malaysian government handed out a 1.5 billion ringgit (US$364.08 million) financial aid to Proton in April last year, on the condition that the carmaker find a strategic foreign partner soon.

As well as an entry point into Southeast Asia, Proton gives Geely access to right-hand-drive (RHD) markets around the world, including Malaysia, Britain, India and Australia.

HSBC advised Geely on the deal.

Reuters

Strategy

LeEco to cut about 70 per cent of U.S. staff amid global pull-back The company said the cuts were not the beginning of the end of its U.S. ambitions, but that it would take a more “phased approach” Jess Macy Yu and Sijia Jiang

Chinese TV and smartphone vendor LeEco said it will cut over 300 jobs at its U.S. business, amounting to almost three-quarters of its local workforce, as the cash-strapped conglomerate streamlines global operations in

response to a shortage of cash.

The cuts are aimed at increasing focus on LeEco’s home market and core TV set and online content business after founder Jia Yueting last year said expansion had been too quick and costly.

“The breadth of our business model

is capital intensive,” LeEco said in a statement. This “made it difficult in the past few months to support” all its businesses.

“As a result, the capital we do have will have to be highly focused resulting in a significant restructuring and streamlining of our business, operations and workforce.”

Reuters earlier reported, citing a person with knowledge of the plans, that LeEco aimed to cut U.S. personnel to about 60 people. That would compare with “around 500” when LeEco formally launched U.S. operations in October.

The cuts will total 325, said Teri Daley, LeEco’s general manager of communications, including high-profile “leadership” hires formerly at Samsung Electronics Co Ltd and Qualcomm Inc. She declined to specify the size of the remaining headcount, but said an office in San Diego, California, will close whilst its presence in Los Angeles would be downsized.

“Big company disease”

LeEco, headed by founder Jia, has been scaling back overseas operations, making cuts in India, selling property in Silicon Valley and pulling out of a deal to buy U.S. TV maker Vizio Inc. Jia told reporters on Sunday the

cuts were to remove low-efficiency workers, especially from non-listed businesses.

As recently as October, Jia said a planned new North American campus would be able to house 12,000 employees. But in November, he said LeEco was facing “big company disease” and suffering a shortage of cash.

Key Points LeEco to cut 325 U.S. jobs, about 70 pct of total Cuts part of strategy to refocus on domestic market Founder said cash-strapped firm grew too quickly In March, Reuters reported that LeEco had agreed to sell the land earmarked for the campus.

While the U.S. cuts are part of a strategy to refocus on the Chinese market, businesses at home such as smartphones and sports could also face major cuts, said the person with knowledge of the U.S. job cut plans.

“They will focus more on China,” the person said. “If you’re looking for trends to follow in the future, you’ll probably see a continued focus on the TV business.” Reuters

Business Daily Thursday, May 25 2017 11

Asia Private poll

Japanese manufacturers’ mood slips despite general recovery Import-dependent industries such as food processors complain about rising commodity prices and a weak yen driving up import costs Tetsushi Kajimoto and Izumi Nakagawa

C

onfidence among Japanese manufacturers receded in May for the first time in nine months after hitting a decade-high level April, a Reuters survey found, showing guarded optimism in a nascent export-led economic recovery.

The Reuters’ monthly poll - which tracks the Bank of Japan’s key quarterly tankan - showed confidence at service-sector firms hit a four-month high, a tentative sign of a pickup in domestic demand.

The Reuters Tankan follows data last week that showed the economy expanded for a fifth straight quarter at the start of this year led by exports and private consumption, although sluggish wage growth weighed on households.

In the poll of 527 large- and midsized firms, conducted between May 9-19 in which 243 responded, the sentiment index for manufacturers fell two points to 24 in May, dragged down by the food processing, precision machinery and chemicals industries.

It followed a score of 26 in April, which was the highest reading since August 2007, a year before the collapse of a U.S. investment bank

Lehman Brothers triggered the global financial crisis.

“Sentiment remained firm in both manufacturing and non-manufacturing. The dollar has risen since bottoming in mid-April and such a recovery in market conditions should underpin business sentiment,” Yuichiro Nagai, economist at Barclays Securities Japan, noted in a report.

“Although indicators such as the Chinese PMI are showing weakness,

machine tool orders and other data look firm, suggesting any risk of a collapse in sentiment will be limited by overseas factors.”

Nagai added that the latest survey points to further improvement in both manufacturers’ and service-sector sentiment in the next BOJ tankan due out on July 3.

The Reuters Tankan’s service-sector sentiment index was up two points to 30 in May, the best reading since the beginning of this year, led by retailers.

The sentiment index was seen unchanged at 24 for manufacturers in August, while the index was expected to fall to 22 for non-manufacturers.

“We feel the economy is picking up

as suggested by recovery in resources prices, but capital spending at our clients is lagging behind,” a manager at a machinery manufacturer wrote in the survey.

Import-dependent industries such as food processors complained about rising commodity prices and a weak yen that drive up import costs. Some exporters expressed concerns over uncertainty in the global economic outlook.

The Bank of Japan’s last tankan out on April 3 showed big manufacturers’ business confidence improved for a second straight quarter to hit a one-and-a-half year high, and service-sector sentiment improved for the first time in six quarters. Reuters

All 19 economists polled by Reuters forecast no policy change on Wednesday. Most analysts expect the rates to hold through 2017 but some predicted a rate hike.

In January-March, Southeast Asia’s second-largest economy grew at its fastest quarterly pace in four years, but it has still lagged regional peers for years. Domestic demand remains sluggish and exports are just recovering.

The junta has ramped up spending to lift activity, but big-ticket infrastructure projects have been slow to kick in.

The central bank has forecast economic growth of 3.4 per cent this year, after 3.2 per cent last year. It will update its forecasts on July 5.

The BOT said recent moves in the baht remain in line with regional currencies.

The baht traded at 34.42 per dollar on Wednesday. It has appreciated about 4 per cent against the dollar this year.

Low inflation

C.bank says rates still accommodative

Monetary policy

Thai central bank holds key rate The monetary institution has forecast 3.4 per cent economic growth this year Orathai Sriring and Kitiphong Thaichareon

Thailand’s central bank on Wednesday left its key interest rate where it has been for more than two years and it could stay there for quite some time, as there’s no incentive to cut and no need to raise it.

The Bank of Thailand’s Monetary Policy Committee voted unanimously to keep the one-day repurchase rate at 1.50 per cent, where it has been since April 2015.

“The Thai economy’s growth outlook improved further despite uncertainties on the external front.

Meanwhile, demand-pull inflationary pressures remained low,” the MPC said.

“Thus, the committee viewed that monetary policy should remain accommodative, and would stand ready to utilize available policy tools to sustain economic growth while also ensuring financial stability.”

Thai rates will likely stay on a “prolonged hold”, said Krystal Tan, Asia economist of Capital Economics.

“The ongoing economic recovery means there is no need for rate cuts...

Equally, there is no strong impetus for rate hikes either,” she said.

The central bank is counting on government spending to keep the economy growing at a time of high household debt levels and risks of capital outflows as the U.S. Federal Reserve plans more rate hikes this year.

The improved growth outlook was still subject to risks including “US economic and foreign trade policies, China’s economic structural reforms, and geopolitical risks,” the MPC said.

Annual headline inflation in April was 0.38 per cent, compared with the BOT target of 1-4 per cent.

Key Points Policy rate kept at 1.50 pct, as widely expected

Says baht moves still in line with regional currencies Says improved growth outlook, but global risks remain Last month, Governor Veerathai Santiprabhob said the BOT was ready to act on any excessive baht moves and would relax previously-announced rules on capital outflows.

The BOT has cut the size of its weekly short-dated bond supply since April to try to slow foreign inflows. It will continue doing so, an official said on Wednesday.

The central bank has forecast 3.4 per cent economic growth this year, after 3.2 per cent last year. Reuters

12 Business Daily Thursday, May 25 2017

Asia Financing

Corporate borrowers run to the markets as Indian banks wilt Since September, the country has reformed its financial markets to make them easier to access Archana Chaudhary and Dhwani Pandya

I

ndia’s record-low corporate spending may be poised for a turnaround as road builders and power generators seek alternative ways to raise money.

Stymied by a lending paralysis among its domestic banks, infrastructure companies are increasingly turning to investment trusts and the corporate-debt market for funding.

India is also planning to set up new infrastructure banks to encourage spending and circumvent the world’s worst bad-loan ratio as banks grapple with more than US$180 billion in stressed assets.

“I see the beginning of a fairly historic shift in financing in which private sector companies are moving away from banks to capital market instruments,’’ said Vinayak Chatterjee, chairman of infrastructure-services firm Feedback Infra Pvt. “I see a deeper pattern.’’

Already, funds raised through corporate bonds sales surged 40 per cent to 3.31 trillion rupees (US$51.5 billion) in the year through March from the prior 12 months, according to a May 17 note from Prime Database which tracks India’s primary capital markets.

Revival in corporate investments is crucial to fill a US$1.5-trillion investment gap in the next decade as India seeks to connect its cities and electrify villages. Companies will be able to bid for projects as the government rolls out its plan to spend a record 3.96 trillion rupees on building infrastructure.

Since September, India has reformed its financial markets to make it easier to access. The country relaxed

rules for investing in infrastructure and real estate trusts and has allowed foreign investors to trade directly in the corporate bond market. This month, it amended a law to give the central bank power to spur lenders and borrowers to take write downs.

Masala bonds

The overhaul is part of a policy drive

by Prime Minister Narendra Modi to boost investment, growth and jobs ahead of elections in 2019. The latest reform, a goods and services tax designed to unify the country in to a common market and make doing business easier, is set to roll out on July 1.

India has traditionally used public-private partnerships to fund infrastructure projects, where debt came from public sector banks and equity from private investments. But the country likely recorded negative growth of 0.2 per cent in private investments in the year ended March compared with growth of 3.9 per cent last year, according to estimates cited by the India Economic Survey document.

Real estate and infrastructure trusts, which were in the making for 10 years, are expected to make available as much as US$9 billion, according to Birla Sun Life Asset Management Co. Trusts are hybrid instruments that pool investments, generate bond-like yields and are traded like an equity on the stock market.

India’s first infrastructure trust by IRB Infrastructure Developers Ltd. began trading May 18.

Indian companies mainly comprising of road developers and power generators are also seen selling at least US$1 billion of Masala bonds

-- debt in rupees issued outside the country -- in comings months.

“Bank financing to the infra sector is declining, making it imperative for investors and developers to scout for alternate sources of funding such as masala bonds, InvITs,” India Ratings and Research, a Fitch group company said in a recent report.

Greater interest

“We don’t have any problems regarding funds,’’ Nitin Gadkari, India’s roads minister, said in an interview on May 10 about raising debt. “All pension funds, insurance funds, investors, bankers are keenly interested in investing.’’

Gadkari spoke before the National Highway Authority of India sold 30 billion rupees of masala bonds earlier this month. Indian power firms are also looking to raise US$1 billion worth of masala bonds from London.

The results of easier access to funds are showing. The number of delayed infrastructure projects fell by 43 per cent in January 2017 from 2015, according to a government report. Cost

overruns have reduced to 11 per cent from 20 per cent from March 2015.

Another reason for easier funding is “far greater interest’’ among longterm institutional investors like Canadian and European pension funds, according to Chatterjee, who spoke on the phone from Gurugram, near New Delhi.

Canada’s Brookfield Asset Management Inc. and Canada Pension Plan Investment Board have raised their India investments to more than US$15 billion, much of it focused on infrastructure. Foreign investors bought 307 billion rupees in Indian debt from April to May 23, according to National Securities Depository Ltd. “For country of our size if you rely on the bank to fund infrastructure, you hit a ceiling,’’ said Pratik Agarwal, chief executive officer of Mumbai-based Sterlite Power Transmission Ltd., which also plans to raise funds through an investment trust.

“Anyone who has a growth strategy in infrastructure will not rely on the Indian bank market for his growth.’’

Bloomberg News

Energy sector

Australian power networks win fight over US$2.2 bln in revenue The federal government, under pressure from manufacturers and households, criticised the decision Australia’s biggest power distributors yesterday won a court fight that could earn them close to A$3 billion (US$2.2 billion) more in revenue over five years, boosting the prospects of recently privatised Ausgrid and Endeavour Energy.

In a decision that will stoke concern over soaring power and gas bills, the Federal Court ruled against a push by the country’s energy regulator to force electricity networks in the state of New South Wales and the nation’s capital Canberra to cut their charges over the five years to 2019.

“This decision is disappointing for New South Wales and ACT (Australian Capital Territory) electricity and gas customers overall. It may also have implications for customers in other states,” Australian Energy Regulator (AER) Chair Paula Conboy said in a statement.

The federal government, under pressure from manufacturers and households facing rocketing gas prices which have also driven up power

Business Daily is a product of De Ficção – Multimedia Projects

prices, also criticised the decision.

“Network businesses only appeal against the decision of the AER if they want to slug consumers more,” Environment and Energy Minister

Josh Frydenberg said in a statement.

Network operators said it was too early to say what the full impact of yesterday’s decision would be.

The AER had proposed allowing four major energy networks to earn total revenue of A$14.2 billion over five years, or about a third less than the companies had sought, based on a view that they needed to cut their operating costs.

Endeavour Energy, which was sold for A$7.6 billion to a consortium led

by Macquarie Group this month, said its average network charges for households and small businesses would fall by around 4.5 per cent in real terms from July 1, and the court’s decision would not change that.

“Network businesses only appeal against the decision of the AER (regulator) if they want to slug consumers more” Josh Frydenberg, Environment and Energy Minister

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

Business Daily Thursday, May 25 2017 13

Asia In Brief Forecast

Japan govt keeps its views of the economy unchanged Japan’s government has kept unchanged for May its overall assessment of the economy - that it is recovering gradually, though pockets of weakness remain. On all topics evaluated, which include household spending, capital expenditure and exports, the government repeated the views it expressed for April.

“The economy is in moderate recovery, but delays in improvement can be seen in some parts,” the Cabinet Office said in its monthly economic report yesterday, using the same expression for the sixth consecutive month.

Japan’s economy has shown signs of life in recent months, with exports and factory output benefiting from a recovery in global demand.

Indonesian President Joko Widodo inspecting a zone devastated by fire Environment

Production plans

Indonesia President approves two-year extension of forest moratorium The country is the world’s biggest palm oil producer and environmentalists blame much of the forest destruction on land clearance for the crop Indonesian President Joko Widodo has approved a two-year extension to a moratorium on issuing new licences to use land designated as primary forest and peatland, the environment and forestry minister said yesterday.

This is the third extension of the moratorium, which was established in 2011 under the previous administration of President Susilo Bambang Yudhoyono, in an effort to reduce emissions from fires caused by

deforestation.

The previous extension expired on May 20 and the latest rollover would give authorities more time to pin down regulations on forest use, environment and forestry minister Siti Nurbaya Bakar said in a text message.

“While we are gathering enough material to decide on licensing and primary forest and peatland governance, the presidential instruction is extended for now,” Bakar told Reuters.

By November 2016, the government’s forest moratorium covered an area of more than 66 million hectares.

Indonesia is prone to outbreaks of forest fires during dry seasons, often blamed on the draining of peatland forests and land clearance for agriculture.

“After completing all these (policies), the government has to have a masterplan for national palm oil” Eddy Martono of Indonesian Palm Oil Association

The resulting choking smoke often blows across to neighbouring countries such as Singapore and Malaysia, slashing visibility and causing a health hazard.

There were massive forest fires in 2015, affecting mainly the island of Sumatra and Kalimantan, the Indonesian portion of Borneo island.

The World Bank estimated that 2.6 million hectares of land in Indonesia was destroyed at that time, causing US$16 billion of damage.

Indonesia is the world’s biggest palm oil producer and environmentalists blame much of the forest destruction on land clearance for the crop.

An executive at the Indonesian Palm Oil Association (GAPKI) said he hoped the government would provide more certainty for plantation industries such as palm oil.

“After completing all these (policies), the government has to have a masterplan for national palm oil,” Eddy Martono of GAPKI said. “The reality now is Indonesian palm oil has become an economic backbone.”

Reuters

India offers tax concessions to Apple India has offered to allow Apple Inc to import mobile handset components intended for use in local manufacturing tax free, a top government official said on Tuesday. The tax concessions will be subject to the condition of increasing local value addition over a period of time. Apple Inc wants to expand its contract manufacturer’s facility in the southern Indian tech hub of Bengaluru, a federal minister said on Tuesday, as the iPhone maker seeks a bigger share in one of the world’s biggest smartphone markets.

HR

MUFG says head of core banking unit to step down Mitsubishi UFJ Financial Group Inc yesterday said Takashi Oyamada, chief executive of core banking unit Bank of TokyoMitsubishi UFJ (BTMU), would step down on June 14. Japan’s largest lender by assets named BTMU Deputy President Kanetsugu Mike as Oyamada’s successor. It did not give a reason for the change. Sources told Reuters on Tuesday that Oyamada was stepping down for health reasons, barely a year after assuming the role. Oyamada had been seen as a successor to Nobuyuki Hirano as head of the MUFG group, which has 300 trillion yen (US$2.7 trillion) in assets.

Results

CIMB’s profit soars to a record CIMB Group Holdings posted a 45 per cent jump in first-quarter profit to a record as Malaysia’s second largest lender by assets made more profitable loans at home, boosted income from non-lending activities and took lower provisions. Malaysia’s economy is strengthening in 2017 after a period of tepid growth caused by a downturn in commodity prices and the shadow of a corruption scandal involving state-owned fund 1Malaysia Development Berhad. That is benefitting CIMB and its bigger rival Malayan Banking Bhd, which will report results today.

14 Business Daily Thursday, May 25 2017

International In Brief Markets

Top banks’ Q1 commodity revenue slides Commodities-related revenue at the 12 biggest investment banks fell 29 per cent year-on-year in the first quarter of 2017 to its lowest in more than a decade, mainly due to weakness in the energy sector, a consultancy said yesterday.

Revenue from commodity trading, selling derivatives to investors and other activities in the sector fell to US$800,000 million in the first three months of the year, financial industry analytics firm Coalition said in a report. “The continued decline in revenues resulted in the lowest levels since 2006, predominantly due to poor performances in energy,” it said.

Property

Sweden’s central bank warns on housing market Rising mortgage debt is a serious threat to Sweden’s economy while regulators need to introduce tougher measures to strengthen banks against future shocks, the central bank said in its semi-annual stability report, published yesterday.

Worries have been growing about Sweden’s soaring housing market with the European Commission warning of the risks of a “disorderly correction” this week. A rapid fall in house prices would hit consumer spending as well as the banking industry, and contagion could spread across the Nordic and Baltic region.

Settlement

Judge gives RBS week to end investor suit or face trial A British judge has given Royal Bank of Scotland a week to avoid a trial by reaching a deal with investors who allege the bank misled them over its 2008 fundraising. Judge Robert Hildyard adjourned the case yesterday until June 7, but warned this would be the final chance to reach an out-of-court settlement and said the two sides must inform him whether a settlement has been reached

by June 1. RBS has already offered almost 1 billion pounds (US$1.3 billion) to avoid a trial that would rake over its near collapse and state bailout.

IPO

Retailer Carrefour’s Brazil arm files prospectus to go public Carrefour, the world’s second-largest retailer, said it had taken a preliminary step towards a possible stock market listing for its Brazilian arm, via the publication of a prospectus for that market flotation.

Atacadão S.A., the parent company of Carrefour’s Brazilian activities, had filed with the Brazilian Securities Commission (CVM) a draft preliminary prospectus in the context of its previously-announced plan to list its shares on the Novo Mercado market, Carrefour said in a statement. Bernstein analyst Bruno Monteyne said in a research note that a Brazilian initial public offering (IPO) could add 1-2 euros to Carrefour’s share price.

Ranking member of the Senate Budget Committee Bernie Sanders (L), with Senate Minority Leader Chuck Schumer (R), delivers remarks about President Trump’s proposed Fiscal Year 2018 budget. Lusa Budget

Trump seeks to slash US$3.6 trillion of spending States that voted for Clinton would collectively face a drop of 4.8 per cent, while those that backed Trump would see assistance cut by 1.2 per cent Roberta Rampton

U

.S. President Donald Trump asked lawmakers on Tuesday to cut US$3.6 trillion in government spending over the next decade, taking aim at healthcare and food assistance programs for the poor in an austere budget that also boosts the military.

Republicans who control the U.S. Congress - and the federal purse strings - will decide whether to make politically sensitive cuts, and the proposal is unlikely to be approved in its current form.

Although it is not expected to survive on Capitol Hill, the proposal puts numbers on Trump’s vision of a government that radically cuts assistance to lower-income Americans.

The biggest savings would come from cuts to the Medicaid healthcare program for the poor, which are embedded in a Republican healthcare bill passed by the House of Representatives.

Trump wants lawmakers to cut at least US$610 billion from Medicaid and more than US$192 billion from food stamps over a decade. He seeks to balance the budget within 10 years.

The Committee for a Responsible Federal Budget, a nonpartisan policy organization, said the plan relied on gimmicks, unrealistic cuts and “rosy assumptions” of economic growth that would reach 3 per cent annually by the end of Trump’s first term.

The Congressional Budget Office projects the economy to grow at an annual pace of 1.9 per cent over that period.

The White House said its proposed tax cuts would help fuel higher growth and pay for themselves by generating an additional US$2 trillion in revenue over 10 years.

Lawrence Summers, a former economic adviser to Democratic President Barack Obama, said the Trump administration was double-counting that money by saying it would help close budget deficits while also offsetting the revenue lost by cutting tax rates.

“It appears to be the most egregious accounting error in a presidential budget in the nearly 40 years I have

been tracking them,” Summers wrote in the Washington Post.

Mick Mulvaney, Trump’s budget office director, said his office made other assumptions that were probably too conservative. “We stand by the numbers,” he said.

Federal aid to states would shrink by 3 per cent, though the cuts would fall most heavily on states that backed Trump’s Democratic rival Hillary Clinton in the 2016 election. States that voted for Clinton would collectively face a drop of 4.8 per cent, while those that backed Trump would see assistance cut by 1.2 per cent.

‘The proposal puts numbers on vision of a government that radically cuts assistance to lower-income Americans’ There is some new spending in Trump’s plan for fiscal year 2018, which starts in October.

The Pentagon would get a spending hike, and there would be a US$1.6 billion down payment to begin building a wall along the border with Mexico, which was a central promise of Trump’s presidential campaign.

Trump’s proposal foresees selling half of the U.S. emergency oil stockpile, created in 1975 after the Arab oil embargo caused fears of price spikes. The announcement surprised oil markets and briefly pulled down U.S. crude prices.

Republicans are under pressure to deliver on promised tax cuts, the cornerstone of the Trump administration’s economic agenda.

But the effort has stalled as the White House grapples with the political fallout from allegations of Russian meddling in the 2016 U.S. election.

Mulvaney said the plan is the first one in a long time to pay attention to taxpayers.

“You have to have compassion for folks who are receiving the federal

funds, but also you have to have compassion for the folks who are paying it,” he told reporters.

Republican leaders in the House said lawmakers would be able to find common ground with the budget plan.

Republican voters

Senator Bernie Sanders, who ran a campaign during the Democratic presidential primary, said the budget showed that Trump’s campaign promises to stand up for working people was “just cheap and dishonest campaign rhetoric that was meant to get votes,” Sanders told a news conference.

While the plan boosts defence spending by US$54 billion, it falls short of campaign promises for a “historic” hike in military spending amid plans to rebuild the U.S. Navy.

That is only 3 per cent more than former President Barack Obama had sought in his long-term budget plan.

The president would reduce nearly a third of funding for diplomacy and foreign aid including global health and food aid, peacekeeping and other forms of non-military foreign involvement.

“If we implemented this budget, you’d have to retreat from the world or put a lot of people at risk,” said Republican Senator Lindsey Graham. “This budget is not going to go anywhere.”

Trump upheld his promise - for the most part - that he would not cut Medicare and Social Security, two expensive safety-net programs that deficit hawks have long targeted for reforms.

Those programs may not come out of Capitol Hill unscathed, however.

House Majority Leader Kevin McCarthy, a fellow Republican, said lawmakers would have to reform both programs to save them.

The White House proposed changes that would require more childless people receiving help from the Supplemental Nutrition Assistance Program, better known as food stamps, to work.

Most government departments would see steep cuts, particularly the State Department and the Environmental Protection Agency.

Treasury Secretary Steven Mnuchin said the budget plan will boost economic growth by fostering capital investment and creating jobs for workers who gave up their job hunts during tough times. Reuters

Business Daily Thursday, May 25 2017 15

Opinion Opinion

The curious case of Moody’s and its China sovereign cut

O

n one level, there’s n o th i n g s o s u r p r i si n g about Moody’s Investors Service’s decision to downgrade China’s sovereign debt one notch to A1. Since March last year, when the rating company and its rival S&P Global Ratings cut their outlook on the People’s Republic’s credit standing, an eventual demotion has been the most likely outcome.

Still, it mustn’t have been an easy decision, considering the tonguelashing they got from the Chinese finance minister at last year’s Group of 20 meeting over the “bias” in their assessment.

The timing is also puzzling because it’s embarrassingly close to last month’s all-important gathering of China’s top politicians on “safeguarding national financial-market security”. The US$450 billion that disappeared in a matter of days from Chinese stock and bond markets -- plus the roughly US$50 billion of liquidity injected by the central bank into a nervous money market -- show that investors take President Xi Jinping’s resolve to wring the economy of excessive leverage seriously. Moody’s is thus sticking its neck out a little when it says the planned reform program will

probably slow, but not prevent, the rise in debt levels.

Bravery aside, is Moody’s being too pessimistic?

The government’s indebtedness is only a problem in China because the corporate sector is overextended.

A year ago, a majority of the bonds that were rated AAA by the more effervescent local Chinese rating companies were actually junk on a Bloomberg credit-scoring metric.

But today, only 14 out of 127 such bonds -- or 11 per cent -- are in that risky category. Things are looking better for corporate debt in China, not worse.

Besides, if rating changes on Japan’s sovereign debt are any guide, investors have every reason to shrug off yesterday’s news.

After all, it costs about US$25,000 nowadays to insure US$10 million of Japanese five-year debt against default, or about half what investors had to pay when Moody’s cut Japan by one notch to A1 in December 2014.

In China’s case, it appears that both Moody’s and S&P were wrong to have rewarded Beijing’s IOUs with an upgrade to double AA territory in the final two months of 2010.

That was a year and half after Fitch

Andy Mukherjee a Bloomberg Gadfly columnist

‘Moody’s first China rating cut since 1989’

Ratings prophetically warned of the banking industry’s “steep rise in corporate exposure” that would over time “take its toll on corporate borrowers’ ability to repay.”

(Incidentally, Fitch hasn’t fiddled with its China sovereign rating in almost decade; so it’s spared the embarrassment of any dialing-down now.)

The other two have no choice. Staying pat, and hoping that reality will eventually catch up with expectations,

From Tokyo to Dallas wages fail to launch

F

rom Tokyo to Houston something strange is happening; wages are failing to grow in line with very strong employment data.

The underlying causes are unclear, and no doubt vary between the two countries, but the implication is the same: lack of robust wage growth makes it difficult to get a self-sustaining and strong recovery, and hard to return to more normal monetary policy.

In Japan the divergence between l ab o u r m a r k e t st r e n g th a n d minimal or negative wage growth is particularly jarring.

“The Japanese labour market is unambiguously as tight as it ever has been in history. Yet wage inflation remains moribund,” Albert Edwards, global strategist at Societe Generale in London, wrote in a note to clients.

“It is not that Japanese companies haven’t got the cash to splash around if they so chose. Japanese corporate profits have boomed since (Prime Minister Shinzo) Abe came to power at the end of 2012.”

Abe brought in Abenomics, a suite of ‘three arrows’ of aggressive policy

efforts: massive deficit spending, massive central bank asset purchases, and labour market and other structural reforms.

Real wages fell in March in Japan at the fastest clip in two years, with inflation-adjusted wages down 0.8 per cent compared to the year before.

Nominal wages fell 0.4 per cent, a combined performance so dire it drove the yen weaker in early May after the data came out, as investors bet Bank of Japan monetary policy might take a more accommodative path than expected.

The failure of wages to keep pace with prices contrasts with the job market, where there are now more than two openings for every applicant in metropolitan Tokyo and the national jobs-to-applicants ratio is at 1.45, a 26-year high. The 2.8 per cent unemployment rate is also at a multi-decade low.

Part of the lack of wage pressure may be due to the success of aspects of the third ‘arrow’ of Abenomics: structural, and particularly labour market, reform. Part of the point of Abenomics was to attract new supply into the labour market, in

Japanese Prime Minister Shinzo Abe (L) and U.S. President Donald Trump. Lusa

doesn’t always work. S&P saw that this week when it had to upgrade Indonesia to investment grade -- five years after its rivals.

But any feeling of relief would have been short-lived. Now that Moody’s has moved first with China, the ball is once again in S&P’s court. That begs the question: How much of this sovereign-rating guff is really about countries’ creditworthiness versus pure inter-company rivalry?

Bloomberg Gadfly

James Saft a Reuters columnist

part to help the economy outgrow its massive debts. Female labour market participation has risen by almost a percentage point, to 49 per cent, part-time work is up and the number of foreign workers in Japan passed 1 million for the first time.

Japanese companies may also, after decades of urging by Western fund managers, have taken a more shareholder-value-maximizing attitude and be declining to convert higher profits into higher wages.

Monopsony?

In the U.S., matters are less stark but the contrast is still vivid between the 4.4 per cent unemployment rate - nearly a 10-year low - and yearon-year hourly earnings gains of 2.5 per cent in April.

Consumer prices are up an unadjusted 2.2 per cent over the past year.

O n e a rg u m e n t is that the U.S. unemployment rate hides many who would like to work but have fallen out of the workforce during and after the great recession. These workers are slowly drawn back in, this line of reasoning goes, as the situation improves, capping potential wage gains.

There are puzzling facts, however.

In the Dallas-Fort Worth area the unemployment rate of 4.3 per cent is not far off the 4 per cent economists generally consider to be full employment, yet total compensation grew just 2.2 per cent in the year to March, exactly the rate of inflation.

Commenting on a New York Times story detailing some of the difficulties faced by employers in Utah, where the unemployment rate is 3.1

“

per cent, former Federal Reserve Bank of Minneapolis President Narayana Kocherlakota pointed out the disparity between this and wage growth he called “not exactly explosive.”

“Are employers bidding aggressively against each other for workers? That’s what they’d do in a *competitive* labour mkt. Low wage growth suggests that competition isn’t happening,” Kocherlakota said on Twitter.

“Sounds to me that what’s likely holding back growth in (Utah) and maybe (the nation) is monopsony power in labour markets.”

Monopsony being a situation with one buyer and many sellers, the implication may be an economy in which businesses are insufficiently competitive with one another, perhaps for both labour and customers.

That’s quite a charge, but there are several broad sets of facts which provide support.

Firstly, corporate profits have been at historically h i g h l ev e l s f o r several years, and yet investment in new capacity has remained subdued. That this happens at a time in which interest rates are exceptionally low and owners of capital eager to lend adds credence to the idea that corporate managers are veering more towards protecting margins than expanding their base.

Perhaps because they don’t face threats, or are protected from them by regulation.

Until the answer is found, wages in Japan and the U.S. and growth will remain tepid, and central bank balance sheets large. Reuters

The implication may be an economy in which businesses are insufficiently competitive with one another

”

16 Business Daily Thursday, May 25 2017

Closing Agriculture

China’s new breed of entrepreneurs are down on the organic farm Individual efforts are helping to redress the food imbalance in China and may slow the pace of rising imports

C

hina’s agricultural landscape can be summed up fairly simply: it has too little arable land, divided into too many tiny plots, tended by too many farmers, who are mostly too old. And much of the soil is contaminated.

Four-fifths of the nation’s farmland is divided up into plots of less than 3.3 hectares and most of those are even smaller—less than the size of a football field. These patches of earth are used mainly to grow cereals like rice and wheat on soil that farmers soak with government-subsidized chemicals to boost yields and keep state grain silos full.

To meet the ballooning demand from China’s newly wealthy middle class for a greater variety of foods such as meat, fruit and vegetables, China needs bigger, more efficient and safer farms. But that poses a huge dilemma for the state: if it allows all these little plots to be consolidated, it could put millions of rural workers out of a job.

Almost half the country’s population still lives in the countryside, said Hu Bingchuan, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences in Beijing. “If they can’t find jobs in the cities, it would create social unrest. Modern farms and small traditional household farming will co-exist for some time.”

China has taken steps to try to expand average farm size. Farmers can’t own land in China, but are allocated plots by a local collective, often on decades-long leases. In December, the government allowed the collectives to bundle together land rights and lease out bigger tracts to companies, who pay an annual rent.

It’s not aiming to create lots of mega-farms such as those found in the U.S., Canada or Australia, but by merging a few small plots, farmers can have enough land to efficiently use machinery and new technology.

The Chinese government defines a “proper sized” family farm as around

7 to 13 hectares.

That presents a challenge for a new breed of farming entrepreneurs, who are leasing land or finding small spaces in cities to capitalize on the rising demand for untainted and varied produce.

“Many people are getting rich and they want safe farm products,” said Li Xiaojun, 42, who studied telecommunications at Zhejiang University, but decided to start rearing chickens because of concern about the quality of shop-bought meat.

Li leased about 7 hectares of land a decade ago to produce birds for his family and friends. But his chickens were so popular that he kept expanding and now has 666 hectares of free-range fowl that he sells direct to families as far away as Hangzhou, 100 kilometres from his farm. His chickens cost as much as four times the price of normal supermarket birds.

Food safety is the driving issue for most farming entrepreneurs in China. The nation’s first national pollution-source survey in 2010 showed that it was agriculture, not industry, that was the main cause of surface water pollution, according to a World Bank report.

Chinese consumers have been

battered by a decade of food scandals that prompted many wealthier Chinese to favour foreign brands or small local and organic farms. They also want more exotic food and fresh fruit and vegetables throughout the year.

That presented an opportunity for Chen Jianming, a former auto-factory worker in Shaanxi province. Chen, 49, and his wife leased half a hectare to grow strawberries in greenhouses.

The couple use imported fertilizer and plant seeds in August so the fruit is available in the winter.

“We don’t spread pesticides, and people love our strawberries,” said Chen, who charged about US$10 a kilo during the Lunar New Year in February, with local residents harvesting the fruit themselves.

Such individual efforts are helping to redress the food imbalance in China and may slow the pace of rising imports. But for most crops and livestock China needs much bigger farms that can get the best out of its limited arable space.

That’s not easy. Even without the concerns over rural unemployment, the nation’s arable land varies widely, from small pockets of terraced rice in the mountains of Guangxi and Yunnan in the south and west, to the grain-producing black-earth belt of Dongbei in the northeast. Water in large parts of the north is scarce and often polluted by industries such as coal mining.

Much of the rich alluvial plains along the coast has been gobbled up by three decades of urbanization.

To solve the problem, the government is trying to move water from the south to the north through a massive network of dams and canals.

It is clamping down on the loss of farmland to cities. And it is helping fund model large-scale farms that can test new techniques and systems for crops and livestock.

One of those farms is in Yantai, in Shandong Province, on a peninsula of land famous for its vineyards that juts into the Yellow Sea. Operated by Penglai Hesheng Agricultural Technology Development Co., it is huge

by Chinese standards. The company leased 70,000 hectares and employs 400 workers. The project includes a food processing unit, a stud farm and a vineyard that produces 80,000 bottles a year.

Hesheng grows apples, strawberries, cherries, cucumbers and tomatoes using an automated irrigation system, and rears local breeds of pigs and goats without the use of antibiotics or hormones. It has a seed farm, a herd of spotted deer and 10 reservoirs full of fish.The showcase project is one of three large organic farms funded by the Agricultural Development Bank of China, which provided US$500,000 in finance, according to Hesheng’s General Manager, Ma Xiuqing.

The fastest-growing part of Hesheng’s business is making organic fertilizer.

The company hopes to lure more private enterprise down on the farm.

More than a third of rural households have now transferred their land to be leased out under the new rules, Qu Dongyu, vice minister of agriculture, told a conference on April 20.

In parts of central and western provinces the transfers are as much a result of demographics as agricultural efficiency. Three decades of migration to the cities to find work left much of the land to be tended by old farmers, whose children are often unwilling to return and take over the farm.

If entrepreneurs don’t move in to take over production, China may lose even more arable land as it becomes abandoned. Bloomberg News

Real estate

Trading

Markets

Mainland investment in HK property market soars

Beijing cracks down on top brokerages in latest clean-up effort

Hong Kong stocks hit 22-month high despite Moody’s China downgrade

The total property investment by Chinese mainland investors in Hong Kong soared 213 per cent year on year to US$4.6 billion in the first quarter of 2017, according to a report.

In 2016, mainland investors spent more than US$5.3 billion in the Hong Kong property market, a year-on-year increase of 60 per cent, according to a report released by Colliers International, a global leader in commercial real estate services.

So far, office buildings have been the most popular category of property for mainland corporate investors. Since 2012, mainland investors have snapped up a total of US$6.5 billion’s worth of office properties in Hong Kong.

Meanwhile, Chinese mainland investment outside Asia stood at two billion dollars in Q1 2017, down by 49 percent year on year, compared to Chinese mainland investment within Asia of US$5.2 billion, up by 62 percent year on year.

Hong Kong is expected to replace New York as the top overseas urban property investment destination for Chinese mainland capital in 2017, the report said.

The report also said the Chinese mainland investors are expected to continue to shift their focus from the United States to Asian markets at a moderate pace. Xinhua

China has fined Citic Securities, Haitong Securities and Guosen Securities for breaking brokerage rules as part of Beijing’s efforts to clean up its financial services sector.

The country’s biggest brokerage Citic Securities Co Ltd said in regulatory filings on Wednesday it had been fined RMB308.3 million (US$44.75 million) and warned by the China Securities Regulatory Commission.

China has been trying to clamp down on weak practices in its financial sector, which are seen as a key risk in the development of the world’s second largest economy.

Citic said it had violated regulations related to margin financing and securities lending when handling transactions for Citadel (Shanghai) Trading Company Limited.

Proceeds totalling RMB61.7 million had been confiscated by the regulator and two executives fined, it added.

Haitong Securities Co Ltd and smaller player Guosen Securities Co Ltd were also punished for violating margin financing rules.

Haitong and Guosen both received warnings and had proceeds from the business confiscated, they said in stock exchange filings.

Haitong was fined RMB2.5 million, while Guosen and its futures unit were fined a total of RMB105 million. Reuters

Hong Kong stocks rose for a fourth day yesterday to a fresh 22-month high, shrugging off Moody’s downgrade of China’s soveriegn credit rating.

The Hang Seng index ended up 0.1 percent at 25,428.50 points, while the China Enterprises Index was unchanged at 10,390.87.

Moody’s Investors Service cut China’s credit ratings by one notch to A1 from Aa3, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

Mainland Chinese stocks fell on the news, but investors in Hong Kong were more sanguine.

“The current market euphoria is a concern for contrarians,” wrote Hong Hao, head of research at BOCOM International.

“Hong Kong’s risk premium is plunging to its historic lows that have foreshadowed previous crises.”

Hong attributed Hong Kong’s “extreme market optimism” partly to continuous inflows of mainland money “with higher risk tolerance.”

Brokerage CICC estimated that mainland money flows into Hong Kong stocks would average RMB200-400 billion (US$29 billion to US$58 billion) over the next few years, or RMB1-2 billion each trading day, according to China Securities Journal. Reuters