Business Daily #1304 May 26, 2017

Discover enchanting Geneva’s auctions and local cocktails Consigliere Pages 8 & 9

Friday, May 26 2017 Year VI Nr. 1304 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Air space

Chinese government to introduce changes to air space management Page 11

Law Firm

Lex Mundi shares expertise on gaming legislation Page 7

www.macaubusinessdaily.com

Labour force

Foreign manpower propping up construction and restaurants Page 2

Private report

Domestic hotel figures rivalling Asian peers Page 2

Environment

Pollution conditions in the Delta improving Page 4

Watchdogs’ barking falls on deaf ears Corruption

During yesterday’s Legislative Assembly session lawmakers queried the Administration’s resolve. Following domestic watchdogs’ reports on corrupt practices in gov’t departments.

Identifying some of the most relevant graft cases of late, they complained that the Executive is ignoring recommendations. Page 3

Misfiring info

GP False start. The Suncity Group sponsorship deal presentation for November’s Macau Grand Prix was somewhat clouded by contradictory information. Regarding the WTCC race. Organizers say no decision has been made, while the FIA has included it in its calendar. Page 6

Second wind for SMEs

Open Sesame!

Financing Different strokes for different folks. The Deputy Director of the Macao Economic Service has announced tailored funding schemes to help local small and medium enterprises. Announcing 1,726 SMEs were eligible to make the second application for the Aid Scheme. Page 4

The Alibaba Group say they won’t create an independent mobile payment service for the city.

Having created a tailored service for neighbouring Hong Kong.

Yesterday, the Legislative Assembly debated the various challenges and risks mobile payment systems present for the city.

Win-win wish with Washington

E-commerce Page 5

HK Hang Seng Index May 25, 2017

25,630.78 +202.28 (+0.80%) Worst Performers

China Resources Land Ltd

+3.71%

China Construction Bank

+1.90%

Cathay Pacific Airways Ltd

-1.97%

Cheung Kong Infrastructure

-0.08%

Lenovo Group Ltd

+3.70%

Link REIT

+1.61%

China Mengniu Dairy Co Ltd

-1.26%

CK Hutchison Holdings Ltd

+0.00%

Ping An Insurance Group Co

+3.40%

Bank of Communications

+1.36%

AIA Group Ltd

-0.82%

Hang Seng Bank Ltd

+0.00%

China Overseas Land &

+2.86%

Tencent Holdings Ltd

+1.32%

China Unicom Hong Kong

-0.71%

AAC Technologies Holdings

+0.00%

China Life Insurance Co Ltd

+2.00%

BOC Hong Kong Holdings

+1.30%

Bank of East Asia Ltd/The

-0.62%

CITIC Ltd

+0.00%

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

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Trade negotiations Yesterday, the Mainland Ministry of Commerce released a paper titled ‘Research Report on China-U.S. Economic and Trade Relations’. The document pinpoints concessions and demands. In the search for a level playing field apropos commercial relations between the two countries. Page 10

2 Business Daily Friday, May 26 2017

Macau Foreign labour

Business as usual The foreign workforce accounted for nearly 36 per cent of Macau’s population in April 2017, but bureaucracy is still an obstacle in getting the labour needed by SMEs in a timely fashion Sheyla Zandonai sheyla.zandonai@macaubusiness.com

“In Macau, there is a lack of labour force in pretty much every sector” when it comes to Small and Medium Enterprises (SMEs), the Vice-President of the Youth Entrepreneurs Association, Jorge Valente Jr., told Business Daily.

Therefore, there is a high demand.

“Non-resident workers are highly searched for [by SMEs] in terms of quantity, in what regards restaurants, for instance, but there is also a need for technical work,” he explained.

According to the statistics released by the PSP, a total of 172,662 non-resident workers were employed in Macau in April this year By sector of activity, hotels, restaurants and the like, and construction were the most important employers of foreign labour in the city, amounting to 50,039 workers and 34,969 workers, respectively.

Mainland Chinese workers constituted the largest majority at 114,860, followed by workers from the Philippines, at 27,255, and from Vietnam, amounting to 14,803.

While the two main sectors of activity for Mainland Chinese were hotels, restaurants and the like (36,981), and construction (32,271), workers from the Philippines found more jobs in domestic work (13,153), and Vietnamese in construction (2,204).

Speaking about the sectors of activity for which SMEs often seek to

employ foreign labour, Valente said that the demand for non-qualified labour was higher in construction, and that qualified labour, although smaller, was also important for activities such as IT (e.g.) coding, and trading (e.g.) logistics.

As for the country or localities of origin of non-resident workforce hired or searched for by SMEs, Valente explained that “the problem is not so much about where workers come from [but] “the processing time” for the issuance of work permits.

“The government had improved the situation [of SMEs] by allowing work permits to be applied for before the licence for operating a news business is issued,” he said.

However, he added, “it is still necessary to have more flexibility in terms of who we want to hire and the time for getting a foreign worker to be allowed access to Macau, which is still a general problem for both

qualified and non-qualified [work].”

Comments by the Association VP were sought by Business Daily as the Public Security Forces (PSP) released data about the number, country of origin, and sector of activity of non-residents working in Macau during the month of April 2017.

We also contacted the PSP to ask for more detailed information but had received no reply by the time this story had gone to print.

We sought further comments from major casino operators, since they have a large number of employees on their payroll, many of whom are likely non-resident staff, but received no replies before closing this story.

Hotels

Banking

Hotel occupancy well positioned in the region

CGD France staff representatives consider MSAR a fiscal paradise

The city’s revenue per available hotel room hit US$146 (MOP1,172) as in the month of March this year with 85.2 per cent hotel occupancy rate, according to Jones Lang Lasalle’s (JLL) latest report on Hotel Destinations Asia Pacific of May 2017.

Following Hong Kong, Macau had the second largest number of visitor arrivals of cities in the Asia Pacific region in 2016, hitting 31 million.

By comparison, the occupancy rate of other markets such as Hanoi, Ho Chi Minh City and Osaka were 85.2 per cent, 75.7 per cent and 78.9 per cent, respectively.

Meanwhile, Hong Kong, posted 56.7 million visitor arrivals in 2016, with an occupancy rate of 83.7 per cent and

US$189 revenue per available room.

Other significant cities such as Seoul, Shanghai and Singapore -6sted 71.7 per cent, 65.8 per cent and 85.3 per cent for their occupancy rate.

According to the Macao Tourism Office, the accumulative occupancy rate for the first four months of this year was 86.2 per cent, an increase of 6.6 percentage points year-on-year.

There are currently 41 3-star, 4-star and 5-star hotels, the Macau Hotel Association revealed, with a total of 3,101 new rooms being created in the city.

The hotels coming on stream in the city are The 13, MGM Cotai, Lisboa Palace, Palazzo Versace Macau and Roosevelt Hotel Macau. C.U.

Workers from Portuguese bank Caixa Geral de Depósitos (CGD) branch in France questioned the bank’s management if it intends to reduce its operations in the country while maintaining operations in the MSAR Nelson Moura with Lusa nelson.moura@macaubusinessdaily.com

Representatives of workers of the Portuguese bank Caixa Geral de Depósitos (CGD) branch in France have criticised the bank’s decision to maintain assets in Macau while allegedly planning to reduce its operations in France.

“We can’t allow that a public bank maintains branches in fiscal paradises such as the Cayman Islands and Macau, while wanting to privatise its branch in an emblematic country for Portuguese immigration,” the worker representatives stated in an open letter to CGD Executive President Paulo Macedo.

In the letter, the representatives asked Mr. Macedo if the bank’s restructuring plan would involve a reduction of French branch activity or its number of employees.

They also demanded a ‘clear and formal response regarding the future of the CGD branch in France’, in which 500 people are currently employed and where the ‘social climate [has] fallen apart [due] to ‘improper management procedures by the public company’.

The CGD France branch workers also questioned Mr. Macedo if the bank’s administration plans to ‘totally alienate the branch or reduce its activity through the alienation of

its customer portfolio, bank counters closing and suppression of activities’.

The CGD France representatives considered it to be of great importance to maintain branch operations in public hands while actively maintaining its service in what was described as ‘the largest community of Portuguese in the world’ estimated at around 1.5 million people.

Last December, CGD stated it was planning to scale down its international operations in order to focus on its operations in African Portuguese-speaking countries as well as in the MSAR.

Business Daily Friday, May 26 2017 3

Macau Government

Government ignoring watchdogs’ recommendations Legislators criticise government for not applying recommendations from oversight bodies to prevent infractions in public departments Nelson Moura nelson.moura@macaubusinessdaily.com

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egislators consider that the government does not follow recommendations by oversight departments to reform public apartments and prevent infractions, and has failed to dissuade any future infractions.

The statements were made yesterday at a Legislative Assembly (AL) plenary session, where four interpellations were presented by legislators Ng Kuok Cheng, Ella lei Cheng I, Si Ka Lon and Mak Soi Kun asking the government what practical changes had been implemented after the recent Commission Against Corruption (CCAC) and Commission of Audit (CA) reports slamming several public departments.

The legislators’ primary criticism was levelled at personnel hiring infractions by the Cultural Bureau, the alleged waste of public funds for the installation of the public network WiFi Go by the Macao Post and Telecommunications Bureau, and the Iec Long Firecracker Factory land swap.

Responding for the government, Secretary for Administration and Justice Sonia Chan Hoi Fan said the suggestions had been received and applied, with the involved public

department asked to apply these measures, while ensuring that the responsibility for such infractions was assessed.

“The Cultural Bureau created an internal audit to revise its hiring practices and it also presented the government with a proposal to change its current system,” the Secretary told legislators.

For legislator Ng Kuok Cheng the system for evaluating the performance of department heads has failed to hold accountable the leader of departments where infractions were found.

“After the cases are found the government says it will reinforce oversight but what has it really done?” he asked.

Black sheep, and hunting rats

Several legislators enquired about the consequences of the CCAC investigation last year that revealed that a 1,655 square metre plot of private land in the Iec Long Firecracker Factory was able to be exchanged for 152,073 square metres of land in Baía da Nossa Senhora da Esperança via a series of transactions and land swaps through various companies.

“I hope more information of this case can be given on how many employees are under investigation and

Government officials answer questions raised by lawmakers during a plenary meeting of the Legislative Assembly

what actions were taken to avoid future cases. The CCAC made several recommendations but residents feel like the government doesn’t follow them,” legislator Ella Lei Cheng I said.

According to Legislator Au Kam San, the reason behind the land swap infractions - if it was corruption or it involved superior orders – was not found with the government not making efforts to dissuade any future infractions.

“Hunting rats is important but cleaning the environment is more important. We need an environment where nobody feels its safe to make corrupt acts. The government can’t act only after the deed is done,” he added

For Secretary Chan the government has already made efforts to increase judicial formation initiatives to educate public employees and directors in order to prevent infractions caused by an incorrect interpretation of the law.

However, she highlighted that should investigations reveal intentional criminal action all legal consequences would be enforced.

“We have all the confidence we can achieve an uncorrupted system.

Some department directors might have conducted crimes that led to consequences but these black sheep are in a minority and we won’t ignore the crimes,” she pledged.

4 Business Daily Friday, May 26 2017

Macau Opinion

SMEs

Revised support schemes for small firms officially launched Pedro Cortés* Platforms The weekly bilingual newspaper Plataforma Macau is celebrating its third anniversary.

It’s a very interesting newspaper which covers the Lusophony markets and along with its name truly executes, in the media industry, the mandate of the People’s Republic of China (PRC) for its Special Administrative Region – that is, making Macau a platform for the geopolitical interests of the PRC apropos the Portuguesespeaking countries.

Since it started operation, we may read in Plataforma Macau articles from various sources addressing various contexts with a sense of the difference of the cultures but with a common language among all countries speaking Portuguese.

We have started to see some action on this, after some years in which only speeches addressed Lusophony issues. Every year, we hear the responsible officials focusing on the platform that Macau should be but then the subsequent acts seem to be contradictory to the words.

There are many examples out there to prove this.

With this platform in place, Macau and PRC companies have an infinite number of opportunities to engage African, South American, European and Southeast Asian markets, using Angola, Cape Verde, Guinea-Bissau, Mozambique and, most recently, São Tomé and Príncipe, Brazil, Portugal and East-Timor, respectively.

Likewise, companies from those countries may also use Macau as a platform to enter the local and national market. It is a hugely competitive advantage which seems to still be dormant and needs, once and for all, to be ignited.

This initiative, together with the ‘One Belt, One Road’ initiative, makes our People’s Republic of China the biggest economic player in the world.

It is, as a matter of fact, quite interesting to understand that the United States of America seem to have countercyclical initiatives, closing markets and closing itself to the internal market.

In the humble view of this Friday columnist, it might be a gigantic mistake in terms of balance of global power.

All that said, our congratulations to a newspaper which personifies what a platform should be: a place of connection between countries, languages, cultures and news.

An idea of the PRC that only a few entrepreneurs have really comprehended and which must be a priority for the Macau Government in all performing areas, without the past inferiority complex that, sometimes, some of our brains seem to be taxed with. *lawyer and frequent contributor to this newspaper.

The MSAR Gov’t has officially launched the second application for the SME Aid Scheme and also increased the maximum amount of guarantee under the SME Credit Guarantee Scheme Cecilia U cecilia.u@macaubusinessdaily.com

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esterday, Deputy Director of the Macao Economic Service (DSE) Lau Wai Meng said that around 1,726 SMEs are eligible to make the second application for the SME (small and medium sized enterprises) Aid Scheme.

“We estimate that some 1,700 SMEs which had previously applied for the SME Aid Scheme are also qualified to apply for a second round of the aid scheme,” said Lau on the sidelines of the introductory session of the revised SME support schemes.

The second application for the SME Aid Scheme is only applicable to SMEs who have already repaid the previous scheme and for those who have received support and repaid the Young Entrepreneurs Aid Scheme.

The regulations for the revised schemes were introduced on Tuesday.

The SME Aid Scheme, implemented in 2003 and previously updated in

2012, seeks to provide interest-free business loans to a maximum value of MOP600,000 per applicant for different financial purposes, with a repayment period of up to eight years.

According to official data provided by the DSE, the government approved 8,820 applications for the aid as at the end of April since rolling out the scheme in 2003, disbursing some MOP2.47 billion (US$307.49 million).

Meanwhile, 3,719 cases repaid the scheme in the total amount of MOP724.28 million; official data shows that the biggest beneficiary of the aid is the retail industry, receiving some MOP803.93 million.

SME Credit Guarantee Scheme

Meanwhile, the government increased the maximum amount of guarantee of the SME Credit Guarantee Scheme to MOP7 million, providing credit guarantees equal to 70 per cent of the loan approved by participating banks.

The SME Credit Guarantee Scheme

The Economic Services Bureau hosts a press briefing on the amendments to the SME Assistance Programme, SME Credit Assurance Scheme and SME Special Credit Assurance Programme.

supports the development of SMEs in Macau and seeks to assist them to be financed by banks via the offering of credit guarantees.

The revised scheme also included a new criterion for application of any newly established business, together with criteria for transforming businesses, improving products and promoting brands.

Official data reveals that 563 cases of the Credit Guarantee Scheme was approved as at the end of April, disbursing some MOP1 billion for the approved guarantee amount. The Deputy Director also affirmed that one can apply for the three support schemes (SME Aid Scheme, SME Credit Guarantee Scheme and SME Credit Guarantee Scheme Designated for Special Projects) as long as one meets all criteria or requirements of the three schemes.

Young Entrepreneurs Aid Scheme

Given that some 10 per cent of young entrepreneurs had shut down their business while benefiting from the Young Entrepreneurs Aid Scheme, the DSE Deputy Director said they had conducted follow-up work to study and investigate these failed businesses.

“There are many factors [leading to the failure of a business],” Lau indicated. “Some might have their own reason [...] some of them didn’t do business full-time [...] so they can’t manage their work.”

Others experienced disputes among business partners and there were also cases in which the business person had underestimated the impact of paying tax, revealed the government official.

As such, the DSE Deputy Director disclosed that the government is considering providing courses or training for interested young enterprises prior to them starting up their businesses. According to DSE data, the government has disbursed MOP238.53 million to 1,002 approved cases for the Young Entrepreneurs Aid Scheme.

Pollution

Better than a decade ago A 6 per cent increase in the level of nitrogen dioxide, y-o-y, resulting mainly from burning of fuel, was evident in 2016 As yesterday’s pollution levels ranged between moderate and unhealthy - with unhealthy levels rising between noon and 5:00pm in particular - the Guangdong-Hong Kong-Macau Pearl River Delta Regional Air Quality Monitoring Network reported its results, which, surprisingly, shows a reduction of pollution levels over the past years.

‘The long-term downward trend of pollutant levels was evident despite short-term fluctuations,’ notes the release.

Overall, comparing 2016 to the previous year, annual concentration levels of sulphur dioxide in the air which according to the United States Environmental Protection Agency (EPA) can increase particulate matter (PM) which can ‘penetrate deeply into sensitive parts of the lungs and cause additional health problems’, contribute to acid rain and haze and ‘harm trees and plants’ - was down 8 per cent year-on-year.

A reduction was also seen in respirable suspended particulates (RSPs), of 6 per cent year-on-year, although the level of nitrogen dioxide (NO2)

- resulting mainly from the burning of fuel, as in car emissions and power plants - went up by 6 per cent year-on-year during 2016, the only one of the six measured major air pollutants to increase from the previous year.

The report points out, however, that compared with 2006 all but one of the four pollutants measured over the ten-year period decreased in level.

The most significant of these was seen in nitrogen dioxide, with a total drop of 74 per cent. Current levels

are about 13 ppb (parts per billion), while the EPA notes that the annual mean for NO2 should not exceed 53 ppb. This is a drop from the roughly 28 ppb present in the air in 2006.

Ozone in the air was the only pollutant to increase, with a 4 per cent rise compared to 2006, which was still, however, a 6 per cent decrease from the previous year. Ozone ‘can trigger a variety of health problems, particularly for children, the elderly, and people of all ages who have lung diseases such as asthma,’ notes the EPA, and can be created by reactions with emissions from industrial facilities, vehicle exhaust and gasoline vapours, notes the EPA. Carbon monoxide and fine suspended particulates (FSPs), whose measurement only began in 2015, both saw decreases, of 1 per cent and 9 per cent, respectively, year-onyear in 2016. K.W.

Business Daily Friday, May 26 2017 5

Macau Elections

FOAM: No campaigning under events subsidised by Macao Foundation

Vice chairman of the Macau Federation of Trade Unions (FOAM) Kong Ioi Fai declared during the TDM radio programme Macao Forum that FOAM will not hold any campaigns for the upcoming legislative elections under events subsidised by the Macao Foundation, according to TDM

Radio News.

In response to comments made by the audience, the FOAM vice chairman revealed that the Union had received support from the Macao Foundation when holding some 1,000 events in the past three years with over five million participants.

He stressed that the financial support for FOAM will only be dedicated to the public and members of the Federation. C.U.

E-commerce

Behind the e-curve Alibaba Group claims not be considering developing an independent brand of its Alipay mobile payment system for the MSAR, while the government says it is in negotiations with the group to extend its cooperation with local financial entities Nelson Moura nelson.moura@macaubusinessdaily.com

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hinese e-commerce group Alibaba Group Holding Limited is not interested at the moment in creating an Alipay independent mobile payment service for the MSAR, the group told Business Daily.

On Wednesday the group launched AlipayHK, a mobile payment app based upon its Chinese counterpart Alipay but focused on Hong Kong users.

When questioned by Business Daily if it was planning to launch a similar platform for the Macau market Alibaba responded it is ‘currently focusing on upgrading user experience in Hong Kong [and] was not considering copying this product in other regions at this stage’.

AlipayHK was launched through Ant Financial Services Group - an affiliate of the Alibaba group that operates its Alipay platform - which obtained a stored value facilities (SVF) licence from the Hong Kong Monetary Authority, allowing it to provide third-party payment services in the city.

In 2015, Macau Pass SA became Alipay’s authorised agent for the settlement of mobile payment transactions made by local consumers, with AMCM regulations requiring a partnership with a local recognised credit

institution to conduct third-party payment activities in the MSAR. Yesterday, Secretary for Economy and Finance Lionel Leong Vai Tac said in a plenary session at the Legislative Assembly (AL) that with Alipay being a Mainland China entity its co-ordination with local financial entities was a “long process”. “[Alipay] direct articulation with local bank accounts implies matters related to commercial activities between external payment institutions and local financial entities, especially its cost-effectiveness and cross-border capital flow, connecting it to Mainland China policies,” the Secretary stated.

According to the him, the Macau Economic Services (DSE) and the Monetary Authority of Macau (AMCM) are discussing viable methods for Alipay to create a local institution to serve local residents or extend its co-operation with other local entities.

“Before [granting] a licence we need to take into consideration the stability of our finance system and take into account collaboration with Macau stores,” the Secretary added.

According to Secretary Leong, in the first three months of this year 1,900 terminals performed Alipay mobile payments through Macau Pass, covering more than 500 local stores.

“Macau Pass is studying the viability

of keeping its co-operation with Alipay,” he added.

Behind the e-commerce curve

The statements were made in response to an interpellation by legislator Angela Leong On Kei, whereby the Executive Director of local casino operator SJM asked the government what polices it had implemented to develop mobile payments in Macau.

According to the legislator, Mainland Chinese tourists prefer payments effected through platforms such as Alipay and Wechat Play, and with 20 million visitors to the MSAR in 2016 originating from Mainland China the government should be focusing more

effort in developing this area.

“Although the government has implemented several measures to promote mobile payments, tourists still consider its range limited, since mobile payments only cover a small percentage of restaurants, commerce and large-scale retail centres, while not covering health centres and tax payments,” she added.

In his response, Secretary Leong said developing e-commerce was one of the measures included in the government’s five-year plan presented last year and that several specific measures had been applied by the government’s Interdepartmental E-commerce work group.

“In the future we will be able to use Big Data collected from e-commerce to know what foreign consumers want and develop better initiatives for the tourism industry,” he said.

6 Business Daily Friday, May 26 2017

Macau Racing

Confusion about WTCC race during Macau Grand Prix sponsorship presentation The local Sports Bureau and FIA have different interpretations regarding the appearance of the World Touring Car Championship (WTCC) in Macau Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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here is contradictory information about whether or not the Macau Grand Prix will host the World Touring Car Championship (WTCC) in its upcoming 64th edition, scheduled to be held from November 16 to

19 this year.

Speaking on the sidelines of a press conference held yesterday to announce that junket operator Suncity Group will be the event title sponsor for the fourth consecutive year of the Macau Grand Prix, the President of the Sports Bureau, Pun Weng Kun, said in addressing an enquiry from the media that the WTCC race is not

a done deal this November.

“We have not committed to anyone in addition to the World Cup GT [Cup] and the [FIA] F3 [World Cup].

We have not committed to the other race,” he said.

Yet, on both the WTCC website and the website of the International Federation of Automobile (FIA), the touring car race appears as scheduled to take place in Macau this year.

We tried to contact the WTCC Media Centre in the U.K. by email and telephone but could not get a confirmation before this story went to print.

Pun said several races are willing to

come to Macau, acknowledging that WTCC may be among them, adding that while “those from outside Macau have their [intention] the [Macau Grand Prix Organizing] Committee has still to deliberate if those [races] have an interest for Macau.”

“As I said earlier, we only have two World Cups. The Macau GP is well known. So many races want to be part of it, and our committee has to consider and decide which ones are more beneficial to Macau,” the Sports Bureau President concluded.

Smoothing out operations

Pun Weng Kun also told reporters that the budget for this year’s Grand Prix, of some MOP200 million (HK$194.17 million/US$24.92 million), is similar to that of 2016.

In addition to Suncity Group, the main sponsor of the event, the other two principal sponsors are Sociedade de Jogos de Macau (SJM), which will sponsor the Macau GT Cup, and Companhia de Telecomunicações de Macau (CTM), sponsor of the Macau Touring Car Cup. In reply to questions by the press, the Sports Bureau President said that they are working this year to improve the infrastructure.

“In fact, last year, after the GP, the Committee initiated meetings to discuss which aspects, and what situations, should be improved. We will add more movable doors to facilitate people’s arrival and exit so that when the races finish we can move in a faster fashion to open the roads to the population,” Pun explained.

Banking

Withdrawing from Asia Portuguese bank Novo Banco sealed the sale of 75 per cent share of Novo Banco Asia to an investment group led

by Hong Kong investment company Well Link Group with 145.8 million euros Novo Banco S.A. has finalised a 145.8 million euros (MOP1.31 billion/US$163.8 million) sale of 75 per cent of share capital of Novo Banco Asia S.A. to an investment group led by Hong Kong investment company Well Link Group.

‘The signed sale agreement predicts a series of sale and purchase options with preagreed conditions that cover the remaining 25 per cent

share and could be applied over a period of five years, with the cost of the total share amount amounting to 183 million euros,’ Novo Banco announced in a release sent to the Portuguese Securities Market Commission (CMVM).

According to the bank presided over by António Ramalho the conclusion of the first transition phase in the defined terms and

agreements is expected to have a positive impact, more exactly an estimated 25 to 30 base points in the bank’s Common Equity Tier 1 (CET1) capital ratio.

‘This transaction represents another important step in investment withdrawal process by Novo Banco from its non-strategic assets, continuing a strategy to focus more on the [Portuguese] and Iberian market,’ the release informed.

Novo Banco Asia succeeded Portuguese Bank Espírito Santo (BES) when the bank’s collapse in 2014 led to the intervention of the Portuguese Government.

‘However, the preservation of a share holding presence by Novo Banco in Novo Banco Asia in the next five years will allow the development of its main strategy of

Corporate

BNU donates MOP750,000 to University of Macau

Local bank Banco Nacional Ultramarino (BNU) has made a donation to the University of Macau in the amount of MOP750,000, in a continuation of its charitable offerings to the higher education institute, which to date has amounted to over MOP3 million.

Annual donations are given by the bank to the University of Macau based upon retail spending by users of the BNU University of Macau Visa card, an arrangement continued

supporting the internationalisation of Portuguese companies in such an important

geographic area, especially in regard to trade finance,’ the bank said. Lusa

Corporate since 2003. The group notes that this arrangement ‘serves as a good example of collaboration between the financial sector and non-profit organization, for the common good of the local community’.

The university educates over 10,000 students and has over 30,000 alumni, employing about 1,500 staff on its campus in Hengqin Island.

The cheque was presented by BNU Chief Executive Officer Pedro Cardoso to University of Macau Rector Wei Zhao.

Galaxy hosts workshop with Fuhong Society of Macau

As part of its regular volunteer initiatives, gaming operator Galaxy Entertainment Group (GEG) recently organised the Potted Plant Family Workshop, a handicraft workshop that brought together team members and their families with members of the non-profit organisation (NGO) Fuhong Society of Macau.

The activity was held in the Happy Shop of Fuhong Society of Macau at Anim’Arte Nam Van at Nam Vam Lake, where the NGO provides vocational training for individuals suffering from disabilities, while selling their handmade crafts.

During the event members of the GEG volunteer team and their family members were introduced to the

Society’s daily operations, and were instructed afterwards by a disabled tutor on how to assemble their own potted plant and care for it indoors.

Since its establishment in 2011 the GEG volunteer team has organised 120 volunteer activities participated in by 2,500 volunteers from the company.

Business Daily Friday, May 26 2017 7

Gaming Law

Expertise all over the world Linking together over 21,000 lawyers worldwide from over 100 countries, worldwide law firm network Lex Mundi applies strict criteria with a strong focus on technology regarding who it lets in, sharing with clients expertise in gaming, cyber security, data privacy and more Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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“bullish” outlook for the future is what is in store for Lex Mundi, the worldwide independent law firm network present in over 100 countries, including Macau, with the group poised to grow its group of associate firms to continue to strengthen its network and jurisdictional information exchange.

So says Lex Mundi President Carl E. Anduri, Jr., who tells Business Daily that a new normal is emerging globally as more companies look for cross-border activities, with Lex Mundi poised to share its expertise.

“The level of cross-border mergers and acquisitions activity has returned to pre-GFC (global financial crisis) levels,” says the president, “so there’s a great deal of interaction among our member firms in support of their clients in their expansion and acquisition plans”.

This can come in the form of “handling negotiations and putting together cross-border teams” in order to resolve matters including “pre-merger notifications, critical aspects of compliance and, of course, post-merger integration,” says the president.

Last week, the group launched the Global Gaming Law Guide, covering 27 jurisdictions, together with local

partner firm MdME. Partner in the firm Rui Proença notes that over the course of creating the guide and the network of lawyers: “we found out that within the network there was much more expertise in gaming than we thought” and that the group is “very happy with the result”, the fruit of two years since the firm originally pitched the idea to Lex Mundi.

High standards

Aside from gaming, one of the group’s other hot areas is “liability related to cyber security and data privacy,” the group’s president notes, pointing out that given the difficulty of the matters in question, the group’s “focus now is on continuously improving Lex Mundi’s global platform [to provide] seamless cross-border advice for clients”, and, in regard to expansion, there’s no rush, stating: “if there are possibilities to explore adding new members, however, we will do so.”

To get into the club the law firm in question must meet strict criteria.

“We begin by asking all our member firms which firms in the jurisdiction they have worked with and what their experiences have been, good and bad”. This is followed by a consultation with the members of Lex Mundi’s Client Advisory Council, and online research.

“After completing these steps we are able to identify the top tier of firms in a jurisdiction,” notes Mr. Anduri,

a step which is followed by a visit to the firm in question.

“We never extend an invitation to a firm without visiting the firm’s office at least once,” concludes, noting that multiple visits to the jurisdiction and sometimes visits to “particular firms” may occur.

“During our meetings with the individual firms we learn which technologies they are using and we lean about the management structure and management philosophies of the firms,” notes the president.

“The primary characteristic we look for, beyond being a market leader in terms of quality and expertise, is a clear commitment to continuous improvement in all aspects of a firm’s client service delivery and management,” he reveals, noting that this means the firm in question “will be looking at ways that it can use technology to differentiate itself in the area of client service”.

The Lex Mundi Global Gaming Law Guide is available in book form and online on the group’s website.

Jurisdictions

A shining example in Southeast Asia Singapore’s gaming law serves as an example within the region, although not yet on a par with other more mature gaming jurisdictions, says expert Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com

Aside from being a regional gaming hub housing one of the same operators that the MSAR does, and offering online gaming (although limited in scope), Singapore is home to a landmark ruling involving the Savan Vegas Hotel and Entertainment Complex in Laos, a company originally owned by a locally registered entity.

Explaining the case, Lau Kok Keng of law firm Rajah & Tann – a firm with bases in 10 countries, including Singapore and China – tells Business

Daily that “the fact that the case was tried in Singapore had less to do with our gaming regulatory standards than with our reputation as a first class global arbitration centre” given that the “parties had designated Singapore as the seat of arbitration of disputes under the relevant investment treaty”.

The case ruled that the MSAR fell under the ‘moving treaty frontier rule’ including Macau under a bilateral investment treaty signed by Laos and China in 1993 enabling Sanum Investments to pursue capital investment benefit losses brought

about by taxes deemed unfair that were levelled by the Laos Government against it, eventually resulting in the complex’s seizure by the Laos government and subsequent sale to Macau Legend, current owner and operator.

Strong framework

Compared to other jurisdictions, Lau points out that the framework in place in Singapore is “as comprehensive a model as it can get” within Southeast Asia although there is still much “catching up to do compared with jurisdictions such as the UK, Norway and Australia, if only because they are far more mature gaming jurisdictions”.

The most common cases that the firm sees are “a good mix of cases of businesses intending to establish or who already have established part of their operations in Singapore which support the online gambling industry (and who therefore need to be advised on compliance requirements), and advising exempt operators on contractual and regulatory compliance matters”.

In addition, the lawyer points out that “overseas land-based casinos also seek advice on their dealings with Singapore customers and bank accounts,” coupled with companies “who wish to promote their products by conducting lucky draws, quizzes and sweepstakes”.

The companies supporting online gaming rely upon the 2014 Remote Gambling Act, set up in 2014, explains the legal expert, who notes that “many provisions” of the Act “were left vague and open to interpretation (perhaps deliberately),” giving rise

to an increase in legal advice being sought.

“The exempt operators themselves had compliance issues to deal with, given the level of control and scrutiny sought to be imposed by the regulator as part of the conditions of the grant of certificates of exemptions,” he points out, while noting that the firm itself worked with one of the two exempt operators granted licences last year.

The granting itself evoked resistance and opposition from various quarters in the city, he says.

“The interesting question is whether there will be a licence granted for a third integrated resort casino to operate should the economy continue to be in the doldrums over the next couple of years” Lau Kok Keng, Rajah & Tann law firm The main question, opines Lau, is “whether there will be a licence granted for a third integrated resort casino to operate should the economy continue to be in the doldrums over the next couple of years”.

Law firm Rajah & Tann is part of the Lex Mundi independent lawyer network. Comments were provided courtesy of Lex Mundi.

8 Business Daily Friday, May 26 2017

Consigliere

AUCTIONS AND ACTION Seven takeaways from Geneva’s US$63 million watch It was a record-setting week with 1,271 lots on offer

Arthur Touchot Records. A lot of them were broken last week. New records were established for beloved brands and well-known models, and every time the words “most expensive” were pronounced, they were met by loud cheers from hundreds of enthusiasts who had made the trip to Geneva to be able to say “I was there” when the gavel was swung. Yes, records were also broken in terms of attendance (or so it felt) as spectators arrived in great numbers just to see key lots go under the hammer.

While the modern watch industry nurses a bloody nose, the auction world appears to be in great shape (there are signs of weakness in places though). This past week has been particularly interesting and exciting to follow, and not just because of the incredible results by a few key pieces.

The appetite for rare pieces is incredibly strong, and the competition for these even stronger. Two names marked the sales as usual—Rolex and Patek Philippe—but the majority of the established manufacturers had very strong results.

The same cannot be said of all the auction houses however.

With a little distance and some time to think over the results, here are seven things we can learn from last week.

Some auction houses are doing much better than others In just three days, the four major auction houses (Antiquorum, Christie’s, Sotheby’s, and Phillips) sold more than 61 million CHF (US$62.6 million) worth of watches. Phillips had the strongest sales (just as it did this time last year), taking in 32.6 million CHF, up 18.5 percent from last year’s May auction, and selling 96 percent by value and 94 percent by lot. Christie’s will be happy with 16 million CHF, selling 92 percent by value and 90 percent by lot, even though they experienced a 12.7 percent drop in sales from last year. Sotheby’s had a catastrophic weekend, their sales total barely getting past 3.3 million CHF, meaning Phillips beat the entire Sotheby’s catalogue selling just one watch, while Christie’s needed just two to beat their rival.

Sotheby’s simply put too much faith (and invested too much of their marketing budget) into their top lot, the Patek Philippe Caliber 89, and when that failed to sell there was very little left in the catalogue to rescue an abysmal day.

Sales dropped 17 percent compared to last year’s Geneva auction. Without their top lots, Phillips sold the most expensive Daytona ever and Christie’s sold the most expensive Submariner ever. At Sotheby’s, three of the top five lots failed to sell, and only 83 percent of the watches were sold overall. Meanwhile, Antiquorum Geneva did well, taking in 9.5 million CHF, up 66 percent from 2016. The auction house was holding its first sale since the appointment of a new general manager and since launching a rival website to

Antiquorum USA. Despite low attendance (many I spoke to this weekend didn’t even realize Antiquorum was holding a sale at all), the weekend will go down as a win. However, almost a quarter of the watches offered failed to find a buyer.

Which brings me to my second takeaway from the week.

There are too many watches —and not enough good ones The appeal of vintage watches is stronger than ever, and as interest grows, so do the number of pages in auction catalogues.

The problem? Not all of the watches auctioneers are accepting belong in an auction room. Compared to 2016, the number of lots went up for three of the four auction houses. All in, the auction houses presented 1,271 watches this weekend, most of which were neither rare nor particularly collectible, and it’s becoming increasingly clear in some cases that watches are coming from dealers struggling to find buyers on their own, using the visibility of the auction houses to recoup their investments. That’s not a bad thing, necessarily, and it’s certainly not new, but when a domino set is one of the highlights of the weekend, you have to start asking a few questions about what’s being offered. The auction houses focusing on quality, not quantity, are reaping the rewards.

There are way too many modern watches This one goes hand-in-hand with the previous point. Of the 1,271 watches on sale this weekend, some 230 were watches born in the 21st century. That’s 18 percent, and that’s just way too much. Wanting to offer a wider selection of watches and a more diverse catalogue is understandable. There’s definitely interest in modern watchmaking, particularly modern independent watchmaking, with lots of exceptional, interesting, unique, and collectible watches in that category that deserve their place in the auction room, and which sell (Phillips sold every modern watch in their catalogue).

But the truth is, way too many modern watches don’t. An unworn Mark XVII (a watch launched by the brand only three years ago) isn’t “New Old Stock,” it’s new, and an Everose Yacht-Master ref. 116655 is “fine” but definitely not “rare”—not when two different auction houses are selling examples on the same weekend, and not when your local AD can get you the watch for approximately the same price (even if that means joining a waiting list). But don’t take my word for it. Collectors themselves expressed their disinterest in these watches. Only 68 percent of the modern watches found a buyer during the weekend.

Auction houses need to adapt to newfound popularity The top auction houses had no issues getting people to their

previews, and enthusiasts are flying (a in unprecedented numbers. The fina well attended by collectors, members curious. It’s become such a crowded a their frustration at having to wait (w very long time) to see watches they considering acquiring.

Auction houses find themselves in a where they do not want to restrict acc es to real clients—and that’s precisel should do—but aren’t sure what return showing these pieces to everyone. The is growing just as fast as the number only ones currently identifying them are members of the press.

It’s a new reality that auction house deal with, and while they should defin all of their potential clients equally, m treat the watches that way. Because t individuals, and since they are going to individuals, these watches need to be h care, and they are. But then there are m such as the Bao Dai and the Haile Selass handled by more people this weekend existence. Surely, there comes a point of a watch can be detrimental to its c be good for a piece with already damag and minute hands to be taken out of of times a day for a quick wristshot. Yo the cars at a concourse to enjoy them

Invisible collectors are transforming auction ro

The watches that fetched the highest b were the Bao Dai, the Haile Selassie, a 6263, and all three were contested by who have been buying and selling at a fore the same watches started trading f There were plenty more serious collec auction houses are definitely attractin collectors, most of them from Asia but so far the ones going for the reall keeping their distance, placing their b the phones.

That’s great, but if auction houses w tertainment value, they are going to n audiences with strong and vocal supp how to involve invisible and mute ch still have a very important role to play (a as soloists), but it’s a very different ro used to. At the moment, Aurel Bacs i capable of making a phone bid just a

Business Daily Friday, May 26 2017 9

Consigliere

TGIF

auctions

and driving) to Geneva al previews were very s of the press, and the affair that some shared what was sometimes a y were very seriously

an awkward position, cess to specific watchly the last thing they ns they are getting from e number of spectators of collectors, and the mselves as non-buyers

es are going to have to nitely continue to treat maybe they shouldn’t they belong to private belong to other private handled with extreme museum quality pieces, sie, that have just been than in the rest of their t when the popularity condition. It just can’t ged luminescent hour the cabinet hundreds ou don’t have to drive m, do you?

ooms

bids over the weekend and “The Legend” ref. y prominent collectors auction since way befor millions of dollars. ctors in the room, and ng a new crop of watch and the Middle East, ly expensive stuff are bids online or through

want to retain their enneed to replenish their porting casts, or learn haracters. Auctioneers and some are excelling ole from what they’re is the only auctioneer as entertaining (if not

Thanks God, it’s Friday!

more) than a room bid, and that’s one of the many reasons Phillips has been so dominant since it added his name to their watch department.

Rolex is king The story this weekend was the not-so-distant battle fought between the Bao Dai at La Reserve, and the Haile Selassie at the Four Seasons. These are two watches with unique imperial connections, made in the same precious metal, and presenting deceptively similar black faces (save for a few diamonds), but one of them was a triple date and the other a perpetual calendar. It would make sense for the perpetual calendar to fetch a much higher price at auction, right? Well, that watch (arguably the one with the most interesting provenance, and definitely the least available of the two before the auction) made only half what the simple calendar made, and that raises some interesting questions about the collectability of Rolex vs. Patek Philippe.

Last weekend, Rolex really owned its crown. Vintage Rolex reigned over all other watches. Phillips sold the most expensive Rolex in the world, the second most expensive Rolex in the world, and the fourth most expensive Rolex in the world. If you’re wondering about the third most expensive Rolex in the world, it was sold 12 months ago (again,

by Phillips). Back at the Four Seasons, where Christie’s dedicated an entire afternoon session to Rolex, the Crown filled every position in the top five results behind the Haile Selassie. I do believe Patek Philippe remains the epitome of watch collecting. The Bao Dai may have set a new record, but the overall most expensive wristwatch, a stainless steel Patek Philippe 1518, is way, way in front (and it’s not even a unique watch). But this week belonged to one brand and one brand only.

Any good Friday should be stressfree and buzzy. It’s the perfect time to have a drink . . . and join a party. Are you ready for some fun?

When the sky starts to darken, the exciting nightlife of Macau is just beginning. With its chic marble, crystal and chrome designs, and impressive double-height windows offering fantastic views of Macau’s impressive evening skyline, Vida Rica Bar - located in Mandarin Oriental Macau - is the best spot to hang out in with friends.

Aside from the extensive wine and champagne selection, Vida Rica Bar offers an array of signature cocktails - The Millionaire’s Mojito, Litchi Martini and Good & Lucky, to name but a few - and frequently invites talented mixologists from all over the world to serve their signature cocktails and share their unique bartending philosophy to appeal to cocktail lovers in Macau.

From 26 to 28 May, 3:00pm to 6:00 pm or after 9:00pm, Taiwan’s legendary Aki Wang proudly showcases the island’s unique bartending style at Vida Rica Bar. With 23 years’ experience, Aki Wang is a master mixologist - the only one from Taiwan who has three times walked away with the title of Champion of International Mixology. He has worked in Japan, UK, France, the United States and many other countries.

His ambition is to create a bridge between the Asian culture and the international cocktail trends he’s constantly exposed to. Don’t miss the rare opportunity to enjoy Wang’s masterpieces this

weekend. Moreover, he will also serve as an accompaniment to the weekend Fantasy Afternoon tea.

In addition to Friday night, Vida Rica Bar will be dripping in green this Saturday. From 10:00pm onwards, get ready for the ultimate Tanqueray GREEN Party with Tanqueray gin tonics crafted by four International mixologists - and exhilarating live DJ music. Deck yourself out in green for the opportunity to win a complimentary room stay at Mandarin Oriental Macau.

Last but not least, the limited edition Moët Rosé Champagne will be launched in Macau on 29 May. From 7:00pm on, you can enjoy a fantastic Flamingo-pink themed night with sparkling champagne and premium fresh oysters at Vida Rica Bar. Vida Rica Bar is always full at weekends, so pick up your phone and make that reservation now!

Edwina Liu, editor Essential Macau Magazine

Unusual is in Unique pieces are still collectible, the Daytona bubble is ballooning, nothing out of the ordinary so far. But one of the most interesting trends of this auction season was the popularity of different. The new most expensive Submariner is not a very pretty Submariner at all, but it’s a unique prototype.

The new most expensive Paul Newman doesn’t look have the typical Paul Newman look. And the biggest surprises of the week were an oversized split-seconds chronograph and a very atypical square chronograph from an almost forgotten manufacturer, and a very atypical time-only Audemars Piguet that most collectors did not even know existed.

These results can only be positive for the world of vintage watch collecting. It acts as a reminder that there are still plenty of undiscovered gems, never before seen in the auction room, and it will no doubt encourage collectors to go out and uncover the next grail. Bloomberg

‘The Taste of Yunnan’ When: May 29 to June 30 Where: Beijing Kitchen at Grand Hyatt Aside from having the chance to taste this unique and rich regional cuisine diners could win a hotel stay at Grand Hyatt Lijiang, located in Yunnan Province. The menu includes highlights like wok-fried Yunnan ham, king oyster mushrooms, the braised

chicken, wax tree seed oil, and Lijiang pancake plus mushroom ‘Ganba’.

Also a variety of teas from the region have been selected for the occasion, including Crimson glory rose, Dian Hong and Pu-erh.

Don’t miss the opportunity!

10 Business Daily Friday, May 26 2017

Greater China Negotiation

Beijing writes 117-page wish list for ‘win-win’ U.S. trade ties A paper entitled “Research Report on China-U.S. Economic and Trade Relations” uses statistics and case studies to trace the history of trading relations

C

hina has drawn up a list of concessions it says can help deliver a “win-win” trade relationship with the U.S. The government wants to beef up infrastructure cooperation with the U.S. and accept greater imports of goods ranging from soybeans to aircraft, according to a 117-page document released by the Ministry of Commerce yesterday. The report also recognizes the Trump administration’s grievances with China and globalization, urging “balanced development” of ties from now on.

A deal earlier this month to promote Chinese access for U.S. natural gas, financial services and beef was hailed as an “early harvest” in a 100-day review of the bilateral trade relationship -- characterized by a 2016 U.S. deficit of US$347 billion -- that’s due to wrap up in July. Yesterday’s report could yield a further thaw in links between the two, which had been tested by the China-baiting stance taken by President Trump during his election campaign.

“China would like to further increase imports of agricultural products such as soybeans and cotton from the U.S. and speed up negotiations with the U.S. on terms regarding traceability and inspection and quarantine for U.S. beef to enter

China, which will benefit 6 million American farmers,” the report said.

“China will increase imports of advanced manufactured goods such as aircraft, integrated circuits and machine tools.”

The paper entitled “Research Report on China-U.S. Economic and Trade Relations” uses statistics and case studies to trace the history of trading relations and defend the current World Trade Organization-based system. It could also be seen as China showing its hand to the Trump administration for a more predictable and stable negotiation environment.

“We have never seen such moves before,” said Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.

“The report is very thorough, and I think the main purpose is to enhance communication and reduce confrontation.”

China also vowed in the report to further increase exports of U.S.-made movies to China and allow the makers a greater share of revenues, and made pledges to boost services trade including tourism and education in the U.S. It also offered to enhance infrastructure cooperation with the U.S., opening-up more market access and

help create more jobs for Americans through its powerful e-commerce platforms.

In return, on the “ask” list, the report argues that the U.S. should stop using the so-called alternative state approach when calculating dumping margins in WTO trade disputes, a step that would edge China toward being considered a market economy by its major trading partners.

Apparent paradox

The document also criticizes hightech export restrictions and investment limits for companies targeting U.S. acquisitions.

“On one hand, the US side has exercised strict control over high-tech exports to China,” the report said. On the other hand, “it censured China for

encouraging independent innovation.

This is an apparent paradox.”

The report also stressed that WTO rules and multilateral and bilateral agreements provide the legal guarantee for bilateral economic and trade relations, warning that China is also vigilant on Trump’s rhetoric that the U.S. is not directly subject to the Geneva-based trade body’s decisions.

“The WTO rules provide a stable and strong institutional protection for the development of China-U.S. economic and trade relations, which are bilateral ties within the framework of WTO rules,” the report said.

“Economic globalization is a basis for the further development of China-U.S. economic and trade relations.” Bloomberg News

M&A

ChemChina raises US$20 billion for Syngenta deal Bank of China has invested US$10 billion via a perpetual bond Carol Zhong and Julie Zhu

ChemChina has raised US$20 billion in perpetual bonds and preferred shares to finance its acquisition of Swiss seeds maker Syngenta, according to a regulatory filing by the state-owned Chinese company.

ChemChina has restructured the financing of its Syngenta deal to take on more equity and reduce its short-term debt burden, but will still have nearly US$20 billion in loans to refinance within 18 months, the filing shows.

Bank of China (BoC) has invested US$10 billion via a perpetual bond, making the Chinese lender the single largest financier in the US$44 billion deal, according to the May 18 filing which also shows state-owned asset manager China Reform Holdings Corp Ltd has provided US$7 billion via a perpetual bond.

China’s Industrial Bank Co Ltd has invested US$1 billion through the same means, while Morgan Stanley has provided US$2 billion via convertible preferred shares.

The ambitious takeover is nearing the finish line after regulators last month granted the final approvals

and as more than 80 per cent of Syngenta shareholders voted in favour.

The deal gives China a portfolio of top-tier chemicals and patent-protected seeds to improve agricultural output, but has also left ChemChina facing a hefty debt burden which it has been seeking to reduce by bringing in more equity investors and replacing short-term loans with longer-term debt.

ChemChina last year arranged

US$32.9 billion in bridge loans from more than 20 Chinese, European and Asian lenders, stoking concern among investors and analysts over its leverage. The company has been trying to increase the ratio of equity financing and last year raised US$5 billion from a Chinese fund.

Perpetual bonds are financing instruments that can act as both equity and debt. They are typically treated as equity under accounting standards but rating agencies may still treat them as debt depending on the circumstances. Because perpetual bonds have no maturity date, the

new financing should help improve ChemChina’s overall debt position.

China National Chemicals Corp, as ChemChina is officially known, did not respond to requests for comment.

A spokeswoman for Bank of China declined to comment. A spokesman for Syngenta said post-close financing will be finalised in the second half of 2017.

China Reform Holdings’ spokeswoman did not immediately respond to a Reuters request seeking comment. Industrial Bank and Morgan Stanley could not immediately be reached for comment.

Key Points Bank of China invests $10 bln via perpetual bond Investment makes state-owned lender largest financier to deal New financing reduces ChemChina’s short-term debt burden In addition to the new financing, which has been privately negotiated, ChemChina on Wednesday publicly marketed another smaller-sized U.S. dollar senior perpetual bond, Thomson Reuters IFR reported. The offering was hugely oversubscribed, despite rating agency Moody’s downgrading of China’s sovereign debt on the same day. Reuters

Business Daily Friday, May 26 2017 11

Greater China Results

In Brief

Lenovo returns to profit as PC performance beats overall market Chairman of he company said Lenovo’s core PC business remained solid Sijia Jiang

China’s Lenovo Group Ltd, the world’s largest personal computer (PC) maker, yesterday said it returned to profit in a year when its PC shipments fell at a slower rate than the overall market as consumer demand continued its downward trend.

Profit reached US$535 million in the year to March on revenue that fell 4 per cent, reversing a loss of a year prior and just missing analyst estimates.

The result comes as Lenovo navigates a PC market that has shrunk markedly since the advent of tablet computers. According to researcher Gartner, global PC shipments fell for the 10th consecutive quarter in January-March, dipping below 63 million units for the first time since 2007.

Lenovo’s annual shipments fell 1 per cent versus a market fall of 3 per cent, with its share rising 0.4 percentage point to a record 21.4 per cent. Revenue in its PC and smart devices unit - which makes up 70 per cent of the total - fell 2 per cent.

The company blamed the declines on transition in its smartphone and data centre businesses, as well as on a difficult macro environment and component supply constraints.

Key Points FY profit US$535 mln vs year-earlier loss; misses estimates Revenue falls 4 pct on biz transformation, macro environment Mobile loss widens, data centre also posts loss China restructuring will not affect mobile -chairman “Despite market conditions that will remain challenging in the short term, the Group exited the year with stronger organization,” Chairman and Chief Executive Officer Yang Yuanqing said in a filing.

In an interview, Yang said

reorganising its China business, announced last week, would not affect mobile, which will be a third line outside of PCs and smart devices, and data centres.

“We need to improve our China consumer strategy ... sharpen our brand, and transform retail system,” Yang told Reuters.

Mobile loss

PC competition took a step up this week when China’s largest mobile phone maker, Huawei Technologies Co Ltd, said it would enter the market for premium consumer models.

“We are never afraid of new competition, they still need to prove themselves in PC,” Yang said.

Lenovo also competes with Huawei in mobile, which accounts for 18 per cent of revenue. The unit’s loss widened to US$566 million from US$469 million a year prior, though Lenovo said it had strong growth in Latin America and Western Europe.

Its data centre business, which includes servers and enterprise services, booked a loss of US$343 million.

Yang said Lenovo’s core PC business remained solid, transformation for its mobile business was on track, and it is accelerating efforts to improve in data centres.

For the three months through March, profit fell 41 per cent to US$107 million on revenue that rose 5 per cent. Reuters

Markets

Hong Kong regulator halts Tianhe Chemicals shares Hong Kong’s securities regulator yesterday ordered a trading halt in all shares of Tianhe Chemicals Group Ltd, without giving further details. The move comes despite shares in the specialty chemical producer not having traded since early 2015, when Tianhe requested a halt. Last month, Tianhe said media reports claiming financial irregularities had been uncovered at the company and that the Securities and Futures Commission (SFC) had directed a trading halt of the stock were “factually incorrect and misleading”. Tianhe said in a statement to the Hong Kong stock exchange it was seeking legal advice regarding its rights and how to address the SFC’s concerns.

Commerce

Authorities defend tariffs on sugar imports China’s recent decision to impose extra tariffs on sugar imports would help maintain a fairer market and trade, the Chinese commerce ministry said yesterday, its first comment on the safeguards announced earlier this week.

The comments followed criticism of the decision by major sugar exporter Brazil, which an industry group said is set to suffer a sharp reduction in exports because of the Chinese tariffs. Commerce ministry spokesman Sun Jiwen said that it “strictly followed” Chinese laws and World Trade Organization rules during its investigation into alleged dumping.

Property

Shenzhen Investment sells property assets to Evergrande Aviation

Government mulls plans to reform air space management China is set to overtake the United States as the world’s largest aviation market by 2024 Chinese regulators will submit proposals to reform management of the country’s air space by the end of this month in a bid to ease flight delays and boost aviation growth, one of the country’s top air traffic control officials said yesterday.

“We understand that reforming the management of the airspace... is an essential need” Cai Jun, deputy director of the Air Traffic Control Commission

Cai Jun, deputy director of the Air Traffic Control Commission, said at a forum in Beijing that the plan aims to eventually integrate civil and military management of China’s air space and improve the country’s flight route network.

He said air space congestion was becoming particularly severe around Beijing and the Pearl River Delta, requiring current governance systems and capabilities to be modernised.

“We understand that reforming

the management of the airspace...is an essential need,” said Cai, whose Air Traffic Control Commission is overseen by China’s State Council and Central Military Commission.

“Pushing ahead with civil and military integration is an important measure and a requirement that will help us adjust to the global air traffic management system and accelerate China’s transformation into an aviation power.”

China is set to overtake the United States as the world’s largest aviation market by 2024, but airlines and

travellers often complain that the military can unilaterally cancel or delay commercial flights for reasons such as military exercises.

Local media estimate the military may control up to four-fifths of the country’s airspace. The state-run China Daily newspaper said in January that China’s flight delays averaged at 33 minutes last year, and that the country’s biggest airports in Shanghai and Beijing faced the worst delays.

Cai said the reforms aimed to integrate civil and military management to improve decision making, and could adopt airspace classification methods used by the International Civil Aviation Organization, an agency under the United Nations. Reuters

Shenzhen Investment Ltd said it would sell four property and hotel assets to China Evergrande Group for RMB5.42 billion (US$788 million), walking away from projects in third and fourthtier cities to enhance its financial position. The Chinese developer said it would book a HK$2.9 billion gain from the sale to Evergrande’s Hengda Real Estate Group.

Shares of Shenzhen Investment rose to a 5-week high before paring gains to be up 0.6 per cent and in line with the broader market.

Evergrande’s stock jumped as high as 6.9 per cent to a new record of HK$12.46.

M&A

Mainland group buys world’s No. 2 condom maker A Chinese consortium is buying Ansell Ltd’s condom division, the world’s no. 2 condom maker, for US$600 million. The Australian firm, which put its oldest but smallest division up for sale last August, said it had reached an all-cash deal with China’s Humanwell Healthcare Group Co Ltd and CITIC Capital China Partners. Ansell’s brands include Jissbon and it is the second-largest maker in China behind Reckitt Benckiser which owns Durex.

It also competes with large local brands Donless, Double Butterfly and Gobon.

12 Business Daily Friday, May 26 2017

Asia Monetary policy

South Korea's central bank on hold as growth outlook upgraded The central bank’s base rate has been on hold at a record low 1.25 per cent since a 25 basis point cut in June 2016 Cynthia Kim and Choonsik Yoo

S

outh Korea’s central bank kept interest rates steady yesterday, taking an unusually bullish view of economic growth prospects as a new administration formulates multi-billion-dollar fiscal stimulus measures.

The Bank of Korea’s (BOK) monetary policy committee held its base rate steady at 1.25 per cent as predicted by all 19 economists surveyed

by Reuters.

recovery, and the government’s employment-oriented policy stance, wage growth is expected to accelerate in the second half,” he added.

The BOK’s base rate has been on hold at a record low 1.25 per cent since a 25 basis point cut in June 2016. The bank raised its growth outlook in April for this year to 2.6 per cent from 2.5 per cent estimated earlier.

Lee said he agreed with the incoming finance minister’s view that

fiscal policy would promote growth better than monetary policy, endorsing the new administration’s planned supplementary budget to aid job creation.

During his election campaign President Moon Jae-in pledged a 10 trillion South Korean won (US$8.95 billion) extra budget before the end of the year, to sit on top of a 400.5 trillion won budget for 2017 approved by parliament last year.

Market expectations for monetary policy easing have waned as exports surged for a sixth straight month through April, with inflation hovering near the central bank’s target of 2 per cent.

“The BOK will stay on hold through

the first quarter of next year,” said Kim Jina, fixed-income analyst at IBK Securities.

“The next policy direction will be a hike, but the bank will keep its policy easy to support growth this year and monitor the pace of interest rate tightening by the U.S. Federal Reserve,” Kim said.

Figures out this week showed household debt soared 11.1 per cent in the March quarter from a year earlier, giving the central bank little inclination to set rates any lower and encourage yet more borrowing.

Lee said he saw household debt growth slowing in future, but added “it’s still too early to tell if debt growth has turned around”. Reuters

Key Points BOK keeps rates at 1.25 pct (Reuters poll 1.25 pct) BOK reviews policy rate for first time since Moon’s inauguration New administration plans supplementary budget BOK Governor Lee hints growth outlook may be revised up in July Governor Lee Ju-yeol said the bank was inclined to revise up its growth outlook in coming months from the current 2.6 per cent, a stronger growth trajectory than it had proposed in April.

“It is likely that we will upgrade this year’s economic growth forecast in July,” Lee told a news conference.

“Given robust exports, economic

South Korean central bank headquarters

GDP

Singapore sees 2017 growth topping 2 pct The government revised up its export forecasts for 2017 to 4.0 to 6.0 per cent Fathin Ungku and Masayuki Kitano

Singapore expects its economy to grow more than 2 per cent this year on improving overseas demand after GDP contracted less than initially estimated in the first quarter, but it warned of risks to the outlook from tightening financial conditions in China.

The city state has been among a number of export-reliant Asian economies to benefit from a general uptick in global demand from late last year, enjoying strong sales of its tech products.

The positive momentum saw its economy avoid a deeper slump in the first quarter, shrinking 1.3 per cent from the previous three months on an annualised and seasonally adjusted basis, compared to the government’s initial estimate in April of a 1.9 per cent contraction.

The data released by the Ministry of Trade and Industry (MTI) yesterday was slightly worse than the median forecast in a Reuters survey of a 1.0 per cent slump.

The ministry kept its 2017 GDP forecast unchanged at 1.0-3.0 per cent this year, but said that growth is likely to come in higher than 2.0 per cent “barring the materialisation of downside risks,” and supported by

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an improving outlook for advanced economies.

The government revised up its export forecasts for 2017 to 4.0 to 6.0 per cent growth from 0.0 to 2.0 per cent previously. In the first quarter, the manufacturing sector grew 8 per cent year-on-year after a 11.5 per cent expansion in the previous quarter.

China worries

Despite the upbeat tone, however, the government warned of risks to the growth outlook from tightening

financial conditions in China and policy uncertainties in the United States and Britain.

“Should there be a steeper-than-intended pullback in credit (in China), investment spending and hence growth in China could slow down more sharply than expected,” MTI said.

Some analysts were equally cautious, warning that protectionism and China’s tighter policy stance could hurt trade and spill over to regional economies.

“Yesterday’s Moody’s downgrade for China is very much a similar picture being painted that mounting debt and slowing growth are risks on

the horizon,” said Selena Ling, head of treasury research and strategy at OCBC. Moody’s Investors Service downgraded China’s credit ratings on Wednesday, saying it expects the financial strength of the economy will erode in coming years as debt continues to rise.

While Singapore’s exports bounced in the first quarter, weak shipment numbers in April stoked worries that the city state is overly dependent on

Key Points Singapore Q1 GDP -1.3 pct q/q annualised; +2.7 pct y/y Reuters median forecasts -1.0 pct q/q; +2.7 pct y/y Manufacturing -1.5 pct q/q annualised; services -2.1 pct MTI 2017 growth forecast unchanged at 1.0 to 3.0 per cent growth

Iconic Singaporean spot with financial heart of the city behind

the electronics sector as well as trade with China.

Electronic exports in April rose 4.8 per cent, slowing from 5.2 per cent annual growth in March and some analysts warn that demand has peaked.

The Monetary Authority of Singapore kept policy steady in April and signalled that a “neutral” stance would be needed for an extended period amid lingering risks to the global outlook. Reuters

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Business Daily Friday, May 26 2017 13

Asia International trade

In Brief

Japan Inc. senses better opportunities beyond China’s 'Belt and Road' Last weekend, Chinese President Xi Jinping gathered with 29 other heads of state to promote the modern-day Silk Road Tetsushi Kajimoto

A vast majority of Japanese companies have no interest to participate in China’s sweeping “Belt and Road” initiative, seeing greater business opportunities in other international economic co-operation, a Reuters poll shows.

Only 5 per cent of 220 respondents in the monthly Reuters Corporate Survey said they would participate in the Chinese project, which aims to build infrastructure and trade links between China, central Asia, Europe and beyond.

Instead, they thought a free trade agreement (FTA) between Japan and the United States, proceeding with the Trans Pacific Partnership (TPP) without the United States or economic cooperation with Russia, among others, represented better business opportunities.

“Japanese businesses basically have no clear idea about the ‘Belt and Road’ projects,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute, who reviewed the survey results.

“Will any projects pay? Can

Japanese firms expect a level playing field when they compete with Chinese state-owned enterprises?” he asked. “A lot of questions remain unanswered. Under such circumstances, companies have no choice but to wait and see.”

Last weekend, Chinese President Xi Jinping gathered with 29 other heads of state to promote the modern-day Silk Road and they agreed to build an open economy and ensure free and inclusive trade under the initiative.

Japan’s prime minister, Shinzo Abe, did not attend the summit. Instead, the ruling party’s No. 2 official, Toshihiro Nikai, represented Japan.

The survey, conducted monthly for Reuters by Nikkei Research, polled 527 big and mid-sized businesses between May 9 and May 19. Around 220 firms, which replied on condition of anonymity, responded.

About a third of Japanese firms believed a bilateral free trade agreement with the United States would boost their business opportunities, the survey found.

A quarter picked the TPP, an 11-nation free-trade zone, despite the withdrawal of the United States.

The survey showed 14 per cent opted for Russian-Japanese economic cooperation, while just 6 per cent saw opportunities in China-led infrastructure investment. Reuters

New Zealand expects to post a bigger-than-forecast budget surplus in 2017 and plans to invest the extra cash in infrastructure to fuel the growing economy, Finance Minister Steven Joyce said yesterday.

The government predicted a NZ$1.62 billion (US$1.14 billion) surplus in the year to June versus its prior forecast for a NZ$473 million surplus in the December half-year economic and fiscal update.

“These surpluses are significant, but they will be needed to meet the cost of the very large new capital investment the Government has committed to,” said Joyce while presenting the annual budget.

Joyce announced NZ$11 billion in

Bangladesh will speed up plans to import rice that it brought in to build reserves and rein in local prices after flash floods hit domestic output, government officials said yesterday.

As part of that, a Bangladeshi delegation is now in Vietnam to finalise imports of the staple grain in a government-to-government deal, said a procurement official, declining to be identified as he was not authorised to speak with media.

He did not give further details on the transaction. Ramped up demand from Bangladesh, the world’s fourth-biggest rice producer, could underpin prices in major exporters Vietnam, Thailand and India.

IMF approves US$5.5 billion for Mongolia

Japan’s prime minister, Shinzo Abe, did not attend the One Belt, One Road summit

New Zealand expects to spend bigger surplus on infrastructure

Charlotte Greenfield

Bangladesh to speed up rice imports

Bailout

Budget

The government forecast a NZ$2.85 billion surplus in the year to June 2018

Trade

spending on infrastructure including road, rail, prisons and housing over the next four years. The budget also included a NZ$6.5 billion package to increase family incomes by adjusting tax thresholds and increasing grants as the government tries to woo voters ahead of national elections this year.

“Success breeds success,” said Cameron Bagrie, chief economist at ANZ. “They’ve worked really hard over the past five years to turn deficits into surpluses and when you’ve got money in the bank it gives you options.”

The better-than-expected result was helped by strong corporate taxes and because some government spending on reconstruction after November’s earthquake has yet to take place.

The government forecast a NZ$2.85 billion surplus in the year to June 2018, versus a prior forecast of a NZ$3.34 billion surplus.

A recovery from last year’s sharp

drop in global prices for New Zealand’s main export earner, dairy, and booming tourism has led to unemployment hovering around eightyear lows of 4.8 per cent and GDP growth at 2.7 per cent.

The Treasury lifted its forecast economic growth to 3.7 per cent in the year to June 2018 from 3.4 per cent, and 3.5 per cent in the following year from the 2.6 per cent previously forecast.

Economists questioned whether New Zealand’s growth would be that strong, given capacity constraints, particularly in the construction sector.

Despite a strong economy that remains the envy of developed country peers, fast-rising housing costs have pressured the government to do more for first-time buyers who have been priced out of the market.

Economists said raising tax thresholds was an acknowledgement that not everyone was benefiting from the fast-growing economy.

“The focus of policy initiatives was very much on assisting low-income earners and low-income families,” said ASB Bank economists, in a research note.

Record immigration, which has fuelled rises in housing prices, is also putting a strain on infrastructure. The government previously announced a plan to build 34,000 new homes over the next decade.

The ruling National party is touting its careful management of New Zealand’s NZ$250 billion economy ahead of elections on Sept. 23 as it fights for a fourth term against the centre-left Labour party.

Joyce also said the government would lift the homeowners’ earthquake levy to replenish the country’s national disaster fund, which has been wiped out by deadly earthquakes centred in Christchurch in 2011 and Kaikoura in 2016.

The budget forecasts show net debt at 23.2 per cent of GDP in the year to June 2017 and the government aims to bring it down to 10 to 15 per cent by the year to June 2025. Reuters

The International Monetary Fund (IMF) said yesterday it approved a total financial package worth around US$5.5 billion to help support cashstrapped Mongolia’s efforts to diversify its small and resource-dependent economy.

The IMF has provided a threeyear financial arrangement of about US$434.3 million to support Mongolia’s economic reform programme, with other financial partners such as the Asian Development Bank, the World Bank, Japan and South Korea also providing back-up. Mongolia grew at a double-digit annual rate over 2011-2013 as foreign investors rushed in to take advantage of its vast untapped mineral deposits.

RESULTS

Maybank posts 19 pct profit rise on loans growth Malaysia’s largest lender by assets Maybank posted a better-than-expected 19 per cent jump in first-quarter net profit as it made more loans in Southeast Asia and as a restructuring of troubled loans last year helped cut its impairment losses. Malaysian banks are benefitting from a strengthening domestic economy and a recovery in commodity prices. For most of last year, the commodities downturn and the lingering shadow of a corruption scandal involving state-owned fund 1Malaysia Development Berhad had weighed on them.

Those trends helped CIMB Group Holdings, Malaysia’s second-biggest lender, post a record quarterly profit a day before.

Energy

Coal India wins tax-cut boost State-run Coal India Ltd , saddled with millions of tonnes of unsold coal, is expected to be the biggest beneficiary of a controversial government decision to more than halve the sales tax on the fuel after a jump in local supplies. The world’s third-largest greenhouse gas emitting country said last Friday it would lower the duty on coal from July 1 and impose a new 18 per cent tax on solar cells and modules as part of a broader tax overhaul. The moves are seen as helping boost local sales of the fossil fuel, but hurting the young and booming renewable energy industry.

14 Business Daily Friday, May 26 2017

International In Brief Portugal

Finance minister speaks of country’s ‘Turning point’ The Portuguese finance minister said yesterday that the European economy has everything it needs to be successful and defended the conclusion of the Banking Union, the European Deposit Guarantee Fund and solutions for non-performing loans. Writing in an opinion article in Público newspaper, headlined “A turning point for Portugal: building the future based on confidence”, Mário Centeno said that “the Portuguese and all of Europe should be proud of what Portugal has managed after a difficult adjustment period”.

The minister went on to say that “Portugal has a balanced, sustainable budgetary situation”.

U.S. Republican bill

Watchdog says 23 million to lose health coverage A bill passed by U.S. House Republicans would cause 23 million people to lose healthcare coverage by 2026 while de-stabilizing health insurance markets in some states and making it hard for sick people to buy insurance, a budget watchdog agency said on Wednesday. The Congressional Budget Office, a non-partisan group of experts who analyse U.S. legislation, said the bill would reduce federal deficits

by US$119 billion between 2017 and 2026. The report could give added ammunition to Democrats who have accused President Donald Trump and congressional Republicans of putting sick and low-income people at risk.

FX

Central banks launch forex market code of conduct All of the major central banks involved said they would commit to sticking to the code’s guidelines Patrick Graham

R

egulators and leading financial firms launched a new code of conduct for global currency trading yesterday, including measures aimed at ensuring its universal adoption by the world’s major financial institutions.

The code is a central element of the foreign exchange industry’s response to charges of market manipulation and misuse of client order information which saw seven major banks fined around US$10 billion at the end of a huge global inquiry in 2015.

Most of the document was published a year ago and the final version brings chiefly tweaks to how it deals with electronic trading, seeking to make the basis of relationships between banks and other major players clearer and more transparent.

The 75-page document lays out 55 high-level principles - rather than hard rules - for how participants in the world’s biggest financial market should conduct business.

While it remains nominally voluntary, yesterday’s package of documents also outlined a framework that some of the officials working

on the project said should mean all major market players will commit to conforming to the new code.

All of the major central banks involved said they would commit to sticking to the code’s guidelines and would demand it of their counterparties in the US$5 trillion a day market which is the world’s largest.

Key Points Final draft of code launched after two years’ work Banks, funds will make formal commitments to comply UK, other regulators likely to use code in legal oversight New measures deal with “last look”, e-trading The industry FX committees run by each of the central banks will also require a formal commitment from the dozens of major institutions who sit on their panels and a new joint Global FX Committee will monitor implementation of the code.

“I would be surprised if a major wholesale market participant did not get behind the Code,” said David Puth, the head of settlement bank CLS

and chair of the committee of market participants who have funnelled banks and other financial firms’ input to the code.

“Over the course of the next 12 months, we will look for all wholesale market participants to adopt the principles.”

UK regulators, who oversee the world’s biggest FX trading centre in London, are expected to embed the code in the new senior managers’ regime for financial firms.

Deputy Reserve Bank of Australia Governor Guy Debelle, who has led work on the code and an earlier “preamble”, said other regulators were likely to follow suite.

“Our (Australian) securities regulator is going to utilise the code as the standard they expect,” he said.

“If that happens in the UK, given London’s importance for forex, that will add a fair bit of bite to the whole process. In our case, I know that our securities regulator is going to.”

Among the new elements to yesterday’s final document were principles for the use of “last look” practices that allow banks an extra stage where they can reject trades after receiving requests to execute.

The code also provided a list of disclosures that the new generation of algorithmic traders should make, including a clear description of their execution or aggregation strategy, fees, routing and sources of liquidity. Reuters

Inflation impact

UK economy slows more than expected Britain’s economy slowed more sharply than previously thought in early 2017 as the rise in inflation since the Brexit vote hit consumers and a weaker pound failed to boost exports, official figures showed yesterday, two weeks before an election. Britain was one of the world’s fastest-growing major economies in 2016 as it shrugged off the initial shock of last June’s vote to leave the European Union, and employment has hit a record high.

But living standards are being squeezed now as inflation rises and the economy as a whole slows.

Guinea-Bissau

CPLP, Spain, France, Belgium companies mull local opportunities Some 50 representatives of companies from members of the Community of PortugueseLanguage Countries (CPLP), Spain, France and Belgium are in Guinea-Bissau this week to discuss business opportunities in the country, as part of a meeting of the community’s Union of Exporters. The foreign representatives, from a wide range of sectors including energy, agriculture, training, construction and fisheries, gathered Wednesday and yesterday to debate business opportunities in the country together with local companies.

“Guinea-Bissau is a country full of business opportunities,” said Mário Costa, president of the Union of Exporters.

Financial crisis

Venezuela mulling options to repay debts A Reuters poll forecast the economy would shrink 3.5 percent this year after a 19 percent drop last year Ernest Scheyder

Venezuela is considering several options to repay its debts, the oil minister said yesterday, after a deep recession and low crude prices hit output and prompted Caracas to seek funds from China and Russia.

Venezuelan oil production has slipped to its lowest levels in about 20 years, hurting a nation which relies almost solely on crude exports for revenues.

Oil minister Nelson Martinez, speaking at a meeting of the Organization of the Petroleum Exporting Countries, said his country was producing up to 1.97 million barrels per day of oil, citing figures gathered by secondary sources and used by OPEC. As well as using revenues to pay foreign oil firms operating in Venezuela, Caracas needs to repay debts to China and Russia, which have

together lent at least US$50 billion in exchange for promised oil and fuel deliveries.

“We are looking forward to solving the issue of the debt,” Martinez said.

“We are looking at all options, some financial support through bonds and

“We are looking at all options, some financial support through bonds and so on” Nelson Martinez, Venezuela’s Oil minister so on.”

According to Thomson Reuters IFR, Venezuela has US$66.28 billion in outstanding debt issued by the government and other state entities such

as oil company PDVSA, which has been particularly hard-hit by the economic crisis.

In the past few weeks, thousands of people have protested against the leftist government of President Nicolas Maduro, demanding elections, freedom for jailed activists, foreign aid and autonomy for the opposition-led legislature.

A Reuters poll forecast the economy would shrink 3.5 percent this year after a 19 percent drop last year.

Inflation has hit triple digits, creating food shortages.

Venezuela has been seeking help from Russian oil major Rosneft to pay its debts. As collateral for prepayment on oil deliveries, Rosneft said last week it had received a stake in PDVSA’s U.S. refining and marketing arm Citgo.

“What has been done is to use that (collateral) as a pledge for a loan that came from Rosneft. It doesn’t mean that Rosneft is going to have 49 percent,” Martinez said, adding that talks with the Rosneft were continuing.

Reuters

Business Daily Friday, May 26 2017 15

Opinion

The era of easy money is hurtling toward an early end Mark Gilbert a Bloomberg Gadfly columnist

Aging Asian population can be perceived in labour fairs.

A

spat is developing at the European Central Bank about how -- and how soon -- the institution should signal its intention to scale back its monetary stimulus program. Data buried in the central bank’s most recent survey of companies suggests a rebound in inflation may inflame the debate sooner rather than later.

Peter Praet, the bank’s chief economist, said earlier this month that “after so many years of accommodation, you cannot change the stance very abruptly.” His colleague Benoit Coeure, who runs market operations, warned of “larger market adjustments” if signalling a change of stance is delayed too long.

Thus far, Praet can count on a lack of inflationary pressures in the euro zone to justify his wait-and-see stance. Consumer prices have accelerated, but only to 1.9 per cent in April, still below the ECB’s 2 per cent target. Economists are forecasting a rate no nigher than 1.6 per cent in the coming quarters. Stirring beneath the surface, though, there’s evidence that price pressures are starting to rise.

On Wednesday, the ECB published its biannual survey on “Access to Finance of Enterprises in the Euro Area.” It per cent quizzed more than Consumer price 11,700 small- and inflation in April medium-sized enterprises between October and March, of which more than 90 per cent had fewer than 250 employees. At the grassroots of the euro zone economy, price pressures are starting to bite.

While 19 per cent of respondents said turnover is increasing, they reported no change in profit for the second consecutive survey. The ECB blames inflation for crimping profitability: It appears that weak demand as reflected by the difficulty of finding customers prevents SMEs, in particular, to pass on higher costs to customers such that profitability does not keep pace with the rise in turnover.

That’s unlikely to be sustainable. Bigger companies in Europe are on track for their strongest earnings in more than a decade, according to Morgan Stanley. At some point, not only will those higher costs translate into higher selling prices, but the increase in labor costs will also start to show up in the inflation measures that the central bank cares about.

The key argument for maintaining the pace of the quantitative easing program and keeping official interest rates at their current negative level is to encourage banks to fund investment by lending to companies. As far as SMEs are concerned, though, access to finance is the least of their worries -- and has been since at least September 2014.

While there’s a genuine gap between strong so-called soft economic data (mostly from surveys) and not-so-robust hard data (actual economic outcomes), as far as lending is concerned, the hard data show a revival to levels not seen for almost six years.

ECB President Mario Draghi on Wednesday reaffirmed his commitment that his institution will halt its asset purchase program before it raises borrowing costs. The bond-buying is set to finish by the end of the year; if the inflation companies are seeing starts to feed into the official consumer price data in the second half of this year, an increase in interest rates could come more quickly than investors are currently anticipating. Bloomberg Gadfly

1.9

Maintaining growth in a fast-aging Asia

A

sia has been the world champion of economic growth for decades, and this year will be no exception. According to the latest International Monetary Fund Regional Economic Outlook (REO), the Asia-Pacific region’s GDP is projected to increase by 5.5 per cent in 2017 and 5.4 per cent in 2018.

Despite escalating geopolitical tensions, most countries in the region have maintained their economic momentum. They have benefited from policies supporting strong domestic demand in China and Japan, and from favourable global conditions. Growth is picking up across many advanced and emerging market economies, and financial markets have, for the most part, proven to be resilient.

Nonetheless, Asia will still have to confront fundamental medium- and long-term challenges, not least the aging of its population – a problem that is well known to most policymakers. In past decades, the region reaped a demographic dividend from its young, expanding workforce and strong growth policies. But this dividend has already run out for “old” countries such as Japan and China.

With fertility rates declining and people living longer, the workforce is shrinking and getting older at the same time.

To be sure, not all Asian countries are aging at the same rate. In China, Japan, Korea, and Thailand, these demographic trends could subtract anywhere from 0.5 to a full percentage point from annual growth over the next three decades. But in “young” countries such as India, Indonesia, and the Philippines, the working-age population will actually increase, adding from 1-1.5 percentage points to average annual growth over the same period.

And yet, even these young countries will not be spared from the effects of an aging population.

In this year’s Asia-Pacific REO, we point out a little known fact: almost all of Asia is at risk of growing old before ever becoming rich.

Why is this occurring? For starters, although Asia is not the most aged region in the world today, it is aging remarkably fast. One indicator of this is the old-age dependency ratio: the share of the population that is 65 and older. In Europe, it took 26 years, on average, for this ratio to increase from 15 per cent to 20 per cent; in the United States, it took more than 50 years. Among Asian countries, only Australia and New Zealand aged at similar speeds. In most other countries in the region, this transition took – or will take – less than 15 years.

So, being the world growth champion simply isn’t enough. To see why, consider each country’s per capita income (in terms of purchasing power parity) when its old-age dependency ratio, benchmarked against the U.S. experience, peaked or will peak.

As the chart above shows, with the exception of already-rich Asian economies such as Australia, Hong Kong, Japan, and Singapore, per capita income in Asian economies falls, or will fall, far short of other advanced economies at similar stages of the aging cycle.

F o r exa m p l e, w h e n Ch i n a r each e d i ts

“

Changyong Rhee Director of the Asia-Pacific Department at the International Monetary Fund and a former chief economist at the Asia Development Bank

old-age-population peak in 2011, its per capita income was still only at 20 per cent of the U.S. level; and when Vietnam reached it in 2014, that figure was just 10 per cent. And despite its young population and strong growth, India’s per capita income will only have reached 45 per cent of the U.S. level when its old-age population peaks in or around 2040; and that assumes, optimistically, that India will maintain very strong growth over the next few decades.

This demographic trend has far-reaching implications for the region. Asian countries will have significantly less time than advanced economies have had to prepare for the transition to an aged society. Worse, they will have to manage the high fiscal costs of aging while they are still relatively poor, which will create new social pressures, which are already apparent in the “old” Asian countries.

Moreover, slowing productivity growth could compound Asia’s demographic problem. Since the 2008 financial crisis, productivity growth has decelerated in Asia’s advanced economies and, to a lesser extent, in its emerging economies, too.

Thus, the region’s push to catch up with countries at the global technology frontier has stalled over the past decade.

To boost productivity in the future, Asian governments will have to implement welltargeted structural reforms today.

Considering Asia’s rapidly aging population, it is crucial that such reforms include policies to protect the elderly, enhance social safety nets, and drive long-term growth.

Governments will also need to make it easier for women and older workers to participate in the labor force, by expanding child-care facilities and creating incentives for firms to relax their retirement-age requirements.

As Australia, Hong Kong, New Zealand, and Singapore have shown, immigration can soften the blow from rapid aging. And by strengthening pension systems, including through minimum guaranteed benefits, governments can provide a safety net for the vulnerable elderly and reduce incentives for precautionary savings.

These policies should be supplemented by productivity-enhancing reforms. Different countries will have different priorities, but all will need to make larger investments in education and life-long training, while pressing ahead with labour- and product-market reforms.

Finally, advanced Asian economies should focus on improving innovation, by allocating research and development spending more effectively, and by raising productivity in the services sector. Emerging and developing countries, for their part, will need to attract more foreign direct investment, boost domestic investment, and expand their capacity to adopt new technologies. Project Syndicate

To boost productivity in the future, Asian governments will have to implement well-targeted structural reforms today

”

16 Business Daily Friday, May 26 2017

Closing Gasoline

China raises retail fuel prices for fourth time this year

Global oil prices have been rallying since a number of oil producing countries have voiced their intentions China will raise the retail prices of gasoline and diesel for the fourth time to cut output and U.S. oil inventory this year, tracking a global crude price has dwindled for seven weeks, the NDRC said. uptick, the country’s top economic Under the current pricing mechanism, planner said yesterday. if international crude prices change Starting today, gasoline and by more than RMB50 per tonne and diesel prices will rise by RMB140 remain at that level for 10 working (US$20.6) and US$135 yuan per days, the prices of refined oil products tonne, respectively, according to the such as gasoline and diesel in China National Development and Reform will be adjusted accordingly. Xinhua Commission (NDRC).

Basel Committee

Global regulators expect deal soon on finalising capital rules A banking industry official in Europe said a deal could come at the committee’s next meeting on June 14-15 Huw Jones

G

lobal regulators will soon finalise a suite of rules to ensure banks hold enough capital to withstand rocky markets without taxpayer aid, one of their top officials said yesterday.

The Basel Committee had hoped for a deal in January, but its members could not agree on how to set a capital backstop known as an aggregate output floor, which ensures a minimum level of capital.

The floor and other new rules complete Basel III, the world’s core regulatory response to a global banking crisis that began in 2007.

Much of Basel III has already been implemented.

U.S. President Donald Trump’s call to ease regulation on banks in a bid to boost lending to the economy, and threats by the European Union to stop the new rules if they forced European banks to find large amounts of fresh capital, have cast some doubt over the reforms.

The committee’s secretary general William Coen said setting the output floor was the “one piece of unfinished business”.

“Given the very broad support for reaching an agreement from all stakeholders, including the banking industry, I am hopeful that we can finalise the reforms in the near future,” Coen told a financial conference.

A banking industry official in

Europe said a deal could come at the committee’s next meeting on June 14-15. It would need to be formally endorsed by its oversight body.

“We have had many false dawns, but I am hearing a deal is very close.

There was a concern the U.S. would be absent from the discussions, but that has not happened,” the banker said.

The remaining elements seek to ensure banks are consistent in the way they assess risks from loans and determine the size of their capital reserves.

Regulators are tightening the rules

on the use of computer models at big banks to tot up risks from loans and work out how much capital they should hold.

Coen said the new output floor would ensure the amount of capital would not fall to, for example, 70-75 per cent of the amount a bank would need if it had used the “standard” calculation used by the vast majority of lenders globally.

Banks will have time to adapt.

Basel III was agreed in 2010, but full implementation won’t be until 2019, Coen said. “I suspect a similar approach will be taken for this set of revisions.”

The European banker said Basel could also start the floor as low as 55 per cent and build up to 70-75 per cent, the level now likely.

Banks in France and Germany

would be hit most by the new floor, and there is already talk the EU may exclude mortgages from the calculation, the banker added.

Repo rules?

With Basel III completed, Coen said a new task would be to identify “regulatory arbitrage” or the gaming of rules by banks to seek an advantage over rivals.

“We have had many false dawns, but I am hearing a deal is very close” William Coen, Basel Committee secretary general

A separate committee of global regulators has already identified swings in the repurchase agreements, or repo, market, Coen said.

These swings were likely to be a reflection of “incentives” that banks have to “window dress” or flatter their end of quarter or end of year balance sheets to ease pressure on capital requirements, Coen said.

One of Basel’s core reforms since the crisis, the leverage ratio or broad measure of capital, was one such incentive, he added.

“We will pay particular attention to regulatory arbitrage and determine the appropriate response, be it regulatory or supervisory,” Coen added. Reuters

Council President

Legislation

Oil industry

EU still at odds with U.S. over climate, trade, Russia

Mainland teams face paying OPEC extends output cut by twice for soccer stars nine months to fight glut

European Council President Donald Tusk admitted yesterday that the bloc is still at odds with the United States over issues like climate, trade and Russia.

“My feeling is that we agreed on many areas.

First and foremost, on counterterrorism... But some issues remain open, like climate and trade,” Tusk told reports after meeting with visiting U.S. President Donald Trump.

“And I am not 100 per cent sure that we can say today -- we meaning Mr. President Trump and myself -- that we have a common opinion about Russia, although when it comes to the conflict in Ukraine, it seems that we were on the same line,” he added.

Tusk said he told the billionaire U.S. president that they should consolidate “the whole free world around those values, and not just interests.”

“Values and principles first - this is what we, Europe and America, should be saying,” said Tusk.

Trump, on his first overseas trip as U.S. president, on Thursday met with Tusk and Jean-Claude Juncker, the president of the European Commission, both of whom have been critical of Trump’s remarks in the past. Xinhua

Chinese teams will effectively pay twice to purchase soccer stars after authorities announced regulations designed to curb overspending that threatens to create a bubble in the US$5 billion global player-trading market.

Money-losing clubs that buy players will be liable to pay an equivalent sum into a fund designed to promote the development of soccer in China, a priority for President Xi Jinping’s government. The move could limit teams’ ability to make big-money acquisitions and stem the flow of foreign recruits.

“All clubs should bear the overall interest for the healthy development of the Chinese football industry,” the statement said. The Asian nation was the fifth biggest spender on players in 2016, trailing only powerhouse leagues in England, Spain, Germany and Italy.

China has recently emerged as a major investor in world soccer, with some of its wealthiest business leaders and companies buying into clubs at home and abroad. Top South American and European players have been lured there, with teams paying some of the sport’s highest transfer fees, together with salaries far higher than the same individuals could command elsewhere. Bloomberg News

OPEC decided yesterday to extend cuts in oil output by nine months to March 2018, OPEC delegates said, as the producer group battles a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.

The cuts are likely to be shared again by a dozen non-members led by top oil producer Russia, which reduced output in tandem with the Organization of the Petroleum Exporting Countries from January.

OPEC’s cuts have helped push oil back above US$50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

Oil’s earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.

The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing with global crude stocks still near record highs.

Despite the output cut, OPEC kept exports fairly stable in the first half of 2017 as its members sold oil from stocks. Reuters