Business Daily #1407 October 23, 2017

First carriages for LRT to arrive in November: GIT LRT Page 2

Monday, October 23 2017 Year VI Nr. 1398 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Luxury

New Lamborghini shop opening delayed until December: company rep. Page 7

Results

Transport and storage sectors see 5 pct growth in revenue, to MOP19.9 bln in 2016 Page 3

www.macaubusiness.com

Consumers

Mainland household loans skyrocket Page 8

Xiaomi gains a foothold

Trade

Bicycle market ignites EU-China commercial differences Page 9

Newcomer

Its first retail store in the MSAR opened last Friday, targeting the ‘large purchasing power’ of the MSAR and its position as a bridge to Portuguese-speaking countries. There are also plans for expansion in Latin America and working together with a developer in the MSAR on an estate for Smart City appliances.

The company is also in negotiations with SJM, say sources. Page 6

Economy

New and likely profitable opportunities for investments in businesses in the MSAR abound, say experts, from logistics and tourism, to digital platforms and healthcare. Better inter-regional integration from infrastructure to the cultivation of emerging industries, coupled with the MSAR’s attractive tax policy will pave the way. Page 3

Bienvenue

Its first auction generated some MOP390 mln and the art auction market is set to generate some HK$1 bln in turnover this year.

Co-director of local auction house Jung Hau Dian Tsang International Auctioneer, Zhou Qiang, says the MSAR has strong potential, despite a limited art market and buyers. Being a major player in a smaller market and working to develop the cultural industries, all play into the plan.

Interview | Auctions Pages 4 & 5

HK Hang Seng Index October 19, 2017

Chamber of Commerce | After a nearly twoyear wait, the FMBA has successfully become the France Macau Chamber of Commerce. Increased exchange of information, more opportunities for events and international activities, visibility and networking, are just some of the advantages says France Consul General to the SARs. Working to push the finance and retail sectors and highlight agro-food services companies are also on the menu. Page 3

Labour data in China shines

Jobs | The unemployment rate in the Mainland reached a record low, official figures show. The Labour ministry says 10.97 million new jobs were created in China in the first nine months of the year. Page 16

28,159.09 -552.67 (-1.92%) Worst Performers

Cathay Pacific Airways Ltd

+0.62%

CLP Holdings Ltd

-0.37%

Geely Automobile Holdings

-7.45%

AAC Technologies Holdings

-2.85%

Link REIT

+0.08%

Swire Pacific Ltd

-0.52%

New World Development Co

-4.05%

China Mengniu Dairy Co Ltd

-2.80%

CK Infrastructure Holdings

+0.07%

Hong Kong & China Gas Co

-0.54%

Henderson Land Develop-

-3.61%

China Construction Bank

-2.73%

Bank of East Asia Ltd/The

-0.14%

Hang Seng Bank Ltd

-0.58%

Industrial & Commercial

-3.16%

Galaxy Entertainment Group

-2.47%

Want Want China Holdings

-0.33%

Hengan International Group

-0.60%

China Shenhua Energy Co

-3.03%

China Resources Land Ltd

-2.44%

22° 25° 22° 26° 22° 26° 22° 27° 22° 27° Today

Source: Bloomberg

Best Performers

Mon

tue

I SSN 2226-8294

wed

Thu

Source: AccuWeather

Going once, going twice

2 Business Daily Monday, October 23 2017

Macau Sino-Luso

Having your back

The head of the Macau Institute of Financial Services believes that with this year's MIF seeing announcements that an Export Credit Agency would be opened in Macau, together with branch offices from two of Angola’s largest banks, local exports and businessmen can reduce the risk of their investments abroad

I

f it comes to fruition, the recent announcement to implement an Export Credit Agency (ECA) in Macau will bring several advantages to local businessmen involved in export and import services, according to the Chairman of the Executive Board of the Macau Institute of Financial Services (IFS), António José Félix Pontes.

Speaking at the Sustainable Cities forum held at the 22nd Macau International Fair (MIF) last Friday, Mr. Pontes opined that Macau has long been at a disadvantage in terms of credit insurance, when compared to mainland China or Hong Kong, which have established mechanisms to cover risk in markets deemed to be high risk.

Last week, Portuguese credit insurance company COSEC - Companhia de Seguro de Créditos S.A. (COSEC) - signed a protocol with the Monetary Authority of Macau (AMCM) to create an ECA in the MSAR. “Credit insurance brings many advantages to exporters, together with the concession of more credit lines

by Macau. The Mainland has already played its role: it provides credit lines to all

countries and is obtaining not just financial returns, but also political returns,” the IFS head said.

According to Mr. Pontes, Portuguese-speaking countries in Africa, and others like Brazil and East Timor, are described in the Organisation for Economic Co-operation and Development (OECD) as being high-risk markets.

“This makes local businessmen a little reluctant to export to those countries.

But credit insurance, possibly covered by the Macau government, could allow them to be less reluctant.

Some businessmen consider these markets to be high risk, but also see they present very good opportunities,” he added.

Mr. Pontes pointed out that in 2001, mainland China established a state-owned insurance company called the China Export & Credit Insurance Corporation (SINOSURE), covering overseas investment insurance and medium- to long-term export credit insurance.

In the neighbouring SAR, the Hong Kong Export Credit Insurance Corporation has also provided the same service

since the 1960s, with several other insurance companies such as AIG, Euler Hermes and Coface appearing in the 1990’s.

Partners not bosses

At the same Friday event, two of Angola’s largest bank’s Banco SOL and Banco BIC - reiterated their intention to open branches in Macau, in order to assist local and Mainland companies in obtaining credit for investments in the Portuguese-speaking African country.

“We think that in the coming days we can count on a

representative office here, to enable us to better study the Asian market, to explore the opportunities it offers, and to support our Angolan business fabric,” stated the President of Banco Sol, Coutinho Nobre Miguel, on Friday.

Banco BIC had previously made a request to the Monetary Authority of Macau (AMCM) to open a local branch, with the bank’s President, Fernando Teles, stating on Friday that he would be working in the next days with local law offices and financial experts to better evaluate the economic situation of Asia and Macau.

Mr. Miguel also advised Chinese entrepreneurs on Friday to invest in agriculture, livestock and fisheries; assuring them that Angolan banks have enough liquidity to support these investments.

However, the Banco BIC President criticised the fact that, despite mainland China having made a large amount of investments in Angola, it had “forgotten its compromise that 30 per cent of developments should go to Angolan companies”.

“A large part of the Chinese companies’ contracts are mainly carried out with Chinese workers and companies. This is not welcomed in Angola,” insisted Mr. Pontes.

Arrival

First LRT carriages to arrive early-November The first series of carriages for the local Light Rail Transit system are set to arrive in ‘early November’, having begun shipment from Japan to the MSAR on Friday, according to an announcement by the Transportation Infrastructure Office (GIT).

The group notes that it maintains its goal to ‘begin operations of the Taipa line in 2019,’ guaranteeing that after arrival ‘all the system tests will begin immediately’.

‘Up to the moment, some of the segments [of the LRT] present conditions to begin the tests of the trains and the system’s equipment,’ notes the release, stating that the sending

of carriages and material would be done progressively.

The first batch coming from the manufacturer, Mitsubishi Heavy Industries, consists of four carriages and maintenance vehicles, which will need to undergo customs procedures before being transported to the Ocean Station, nearby the current Customs office in Taipa, to begin testing.

Each carriage measures 11.8 metres in length and 2.8 metres in width, is 3.8 metres tall and weighs approximately 15 tonnes, and will need to be transported ‘through some of the principal transport avenues of the centre of the city’ on their way to the testing site.

appeal

Polytec to appeal to Court of Final Appeal Developer Polytec Asset Holdings Limited has announced its intention to appeal to the Court of Final Appeal ‘as soon as practicable’, according to a filing last Friday with the Hong Kong Stock Exchange. The filing comes after a decision by the Court of Second Instance to reject the developer’s appeal regarding the Chief Executive terminating the concession of the land plot for the group’s planned Pearl Horizon project.

The land for the development is located in Macau’s Areia Preta district, and was set to house 18 towers with over 5,000 residential units, over 3,000 of which were already sold off-plan before the temporary land concession for the site expired.

‘According to the legal opinion obtained by the Company, PCL [Polytec Corporation Limited, the registered owner of the project and a wholly-owned subsidiary of Polytec Asset Holdings]

has sufficient grounds to further appeal’ to the Court of Final Appeal, ‘and the Court of the Macau SAR should consider and assess the essential points regarding the delay caused by the Macau SAR Government and the right of PCL to claim for an extension of time to complete the construction

work of the Project [Pearl Horizon] and delivery the properties to the respective purchasers,’ notes the filing.

The group halted trading starting last Friday at 9:07am and resumed trading on the stock exchange today at 9:00am.

The office of the Secretary of Administration and Justice issued a statement noting that the local government ‘gives great importance to the decision’ regarding the Court of Second Appeal’s decision and it will ‘wait on the final decision of the Court of Final Appeal regarding the case’. The statement noted the government will ‘rigorously follow the content of the decision’ made by the court regarding this final appeal and that it maintains its policy to ‘protect the interests of the purchasers of units in the Pearl Horizon building construction project’.

Business Daily Monday, October 23 2017 3

Macau Chamber of Commerce

Business with French taste The France Macau Chamber of Commerce (FMCC) was launched last Friday, enhancing the Macau SAR’s business framework with one of its main commercial partners

A

fter an application process lasting nearly two years, the France Macau Business Association (FMBA) has successfully become the France Macau Chamber of Commerce (FMCC). In an event held last Friday, the group launched in 2008 commemorated the change, with the FMCC chairman Rutger Verschuren describing it as a “new milestone” in the history of commercial relations between the MSAR and France.

Also present at the event were the France Consul General to Hong Kong and Macau, Eric Bertie, and MGM China major stockholder and FMCC Chairlady Pansy Ho Chiu-King.

“France is the third largest partner of the Macau SAR, only after [mainland] China and Hong Kong,” stated the Chairlady, also a founding member of the former iteration of the group. Within the One Belt, One Road initiative, “we are appointed to become more strategically relevant,” stated Ms. Ho. In his speech, the Consul General of France in Hong Kong and Macau, Eric Bertie, claimed that the change “is also a testimony of how the association rapidly grew into a major institution.”

Speaking to Business Daily on the sidelines of the event, the Consul

General said that a “full-fledged” chamber of commerce will enable members to increase the exchange of information, benefit from more opportunities to organize events, and extend activities in the various countries which already have a chamber of commerce.

“With the network of other chambers of commerce around the world in 90 countries, it creates many connections between chambers and much more visibility,” stated the Consul General.

Consul General Bertie added that interest from “businesspeople that want to settle in Macau” stretches back years.

“People want to know more about the [business] environment here, the procedures to set up business, what are the best sectors to invest in,” outlined the Consul General.

By sector of activity, the Consul General claimed that one of their focuses is “on the priorities of the government,” adding that French businesses are already “much present” in the environment sector, which he claimed they will “continue to develop.” The continued tagline of the government for Macau is a ‘world centre of tourism and leisure’.

Mr. Bertie pointed out there is also a mandate to “push the finance” sector and continued support for the retail sector, highlighting French businesses’ “dynamic” presence in agro-food services.

Overall, he argued, “all these sectors will benefit from this new status of chamber of commerce.”

Fmcc span

Currently with 117 members, the

number of affiliates formerly of the FMBA and now the FMCC – is “growing,” the Executive Director of the French Chamber of Commerce and Industry in Hong Kong (FCCIHK), Delphine Colson, told Business Daily, while there will be “no competition, but complementarity” between the two chambers.

FCCIHK is the fifth biggest French Chamber of Commerce in the world and currently has about a thousand members.

With headquarters in Paris, CCI France International is the largest French network of companies, with more than 45,000 members worldwide and chambers of commerce and industries in 90 countries, according to information provided by the chamber. advertisement

Industry

Transport, storage and communications receipts down However, receipts of the transport and storage sector alone were up 5.1 per cent year-on-year, amounting to MOP19.9 billion in 2016

Local businesses engaged in Transport, Storage and Communications saw their revenue drop 3 per cent year-on-year to MOP27.83 billion (US$3) last year, according to official data released by the Statistics and Census Service (DSEC).

The data reveals that 3,000 establishments were operating in the transport and storage sector last year, an increase of 242 establishments year-on-year, mainly attributable to an increase in the number of taxis.

Nine new establishments joined the local communications field during the year, amounting to a total of 40 establishments at year-end.

The Gross Value Added contribution of the companies in the three fields, which measures their contribution to the economy, totalled MOP10.22 billion, marking an increase of 4.3 per cent year-on-year.

Businesses related to transport and storage sectors posted a year-on-year rise of 5.1 per cent in revenue, reaching MOP19.9 billion, driven mainly by the growth in receipts from passenger transport (MOP8.9 billion, a 9.9 per cent

increase year-on-year) and rent of vehicles (MOP1.26 billion, up 16.9 per cent).

According to DSEC, the receipts from Supporting & Auxiliary Transport Activities rose 2.2 per cent yearon-year, to MOP10.08 billion, while those of air transport (MOP4.1 billion), land transport (MOP3.17 billion) and sea transport (MOP2.56 billion) rose by 1.9 per cent, 25.5 per cent and 1.5 per cent, respectively.

The number of persons engaged in the sector also grew 4.6 per cent to 20,244, with employees accounting for 80.2 per cent of the total.

On the other hand, the communications sector alone saw receipts drop sharply by 18.7 per cent year-on-year to MOP7.93 billion, dragged down by a 34.3 per cent drop in receipts from sales of goods (MOP3.4 billion), while the Gross Value Added of the sector amounted to MOP3.25 billion, down 11.7 per cent year-on-year.

Official data indicates that establishments operating in telecommunication services contributed 93.2 per cent, or MOP7.39 billion, to the receipts of the communications sector. Expenditure of the sector also saw a 23.5 per cent year-on-year drop, to MOP5.39 billion.

4 Business Daily Monday, October 23 2017

Macau Interview

The growth and struggle of local auctioneering Having generated some MOP390 million (US$48.53 million) in its first auction last May in the city, co-director of local auction house Jung Hau Dian Tsang International Auctioneer, Zhao Qiang, foresees that the city’s art auction market will create some HK$1 billion in turnover this year. He also reveals the potential for the artworks and antiques auction market in the city, as well as the limitations of supporting policies, despite the government’s advocacy of assisting the industry

W

hat is the background of the company?

Our company was established in Macau in 2016, although we previously had most of our auctions held in Beijing.

What is the current auction industry like in Macau?

My opinion towards Macau is, first of all, it is an international city. Most of the famous auction houses reside in big international cities such as London and New York. Let’s say for Paris, the city produces a lot of art pieces, but comparitively, the number of buyers is not significant. When compared to Paris, Macau neither produces a lot of art pieces nor are there a lot of local buyers who are interested in art or antique collections.

So in a sense, Macau does not have the prerequisites to become a trade centre for artwork, but prerequisites can be created by people.

Given the size differences in the auction market, why did you and your partners choose Macau to launch the business?

For one, with the Hong Kong-ZhuhaiMacau Bridge soon to open, a onehour living circle will be created, so in a sense it is possible that there will be one [auction] market in both Macau and Hong Kong. It is feasible that Macau can borrow the resources from Hong Kong, given that Macau has limited antique shops or collectors compared to Hong Kong. But Macau has more venues than Hong Kong. In Hong Kong, venues used

by Sotheby’s and Christie’s would be prohibited to be used by other companies.

For two, as I’ve mentioned, Macau is an international city. So with the effort in developing the art industry, there will also be the effect of magnifying the outcome. If we are to operate our business in one of the cities - in Beijing or Shanghai - we would end up as one of the many auctioneering houses, being insignificant because there are too many companies in China and some of them have been established for years.

In Macau, there are some 100 auction houses, none of which is well known by people, and the number of auctions held is not significant.

With the magnifying effect, it is very easy to become the first or the second within the industry.

Under this condition, Poly Auction entered the market in Macau. We entered the market earlier than Poly Auction, but we had not held any auctions in the city until last May. Poly Auction Macau had held two auctions and I think it is a good thing for them to establish a branch in Macau. Their participation will lead to more competition in the industry, which drives improvements in the industry.

How does your company differ from Poly Auction Macau in terms of positioning?

We are different from Poly Auction Macau in terms of the composition

Zhao Qiang, co-director of Jung Hau Dian Tsang International Auctioneer

“With the Hong KongZhuhai-Macau Bridge soon to open, a onehour living circle will be created, so in a sense it is possible that there will be one [auction] market in both Macau and Hong Kong”

of the board of directors. For us, the majority of the members of the board of directors are recognised by their experience in antiques, and the average age of the members is above 50. Our first auction held generated higher revenue than the one held by Poly Auction: we generated MOP390 million compared to Poly’s MOP170 million.

In comparison to other auction houses in other places, we don’t do mock auctions because in Macau there is this special stamp duty which requires all attendants of auctions to pay the tax of 0.005 per cent.

What is the reason for the sucess of your first auction?

The reason is our choice of art pieces to be auctioned. Initially, our focus was on overseas markets like Taiwan, Japan and Singapore. We collect art pieces from these overseas markets since Chinese collectors perceive that pieces outside of China are seldom counterfeit and are rarely seen.

Most of our clients are Chinese collectors. Given that we have been extending our business on the Mainland, we have a more well established connection with Chinese collectors.

Chinese collectors love Chinese art

pieces that come from outside the country. You can see that many of these collectors go to London or New York for art pieces.

It is impossible for us to establish a new connection in Macau without the connections we made in mainland China.

Secondly, there are relics that cannot be auctioned in China in accordance with Chinese laws, such as ancient porcelain or jade, which date back to the Tang Dynasty. Therefore, we auction the part that is not allowed in China. In fact, Macau has been positioned as the transfer station of these antique products and it has been recognised internationally.

How do you outsource art pieces and antique products?

One of our directors has residency in the United Kingdom so he has connections with collectors in the UK. Meanwhile, we also have employees who are connected with related companies in Germany and Switzerland.

Moreover, our connections with markets in Hong Kong, Taiwan and Japan allow us to be well informed about the markets in the region.

Although collectors give notable

Business Daily Monday, October 23 2017 5

Macau

pieces to auction houses like Sotheby’s or Christie’s, there are some less significant pieces that still deserve the attention of collectors in the Mainland. Plus, there are collectors who aim for less high-end products. Christie’s and Sotheby’s are long established corporations and they concern themselves a lot with the provenance of the items. But many of the pieces from China lack provenance, and as such, it is completely impossible for us to compete with the big auction houses to get those notable pieces.

What other types of auctions does the company conduct?

Aside from ancient porcelain and other objects, we also auction Chinese paintings and calligraphy, as well as contemporary art.

We had tried luxury goods such as jewellery, but the performance wasn’t satisfactory.

People here tend to attend jewellery auctions, but they don’t really aim to purchase. For Chinese buyers, they tend not to purchase a second-hand ring or handbag at auction houses.

In terms of jewellery, people would rather buy new jewellery from retail shops, it’s cheaper and better for them, while people are still skeptical of buying second-hand handbags.

Therefore, we are still exploring this part of the business.

“In Macau, there are some 100 auction houses, none of which is well known by people, and the number of auctions held is not significant” What is your opinion of the city’s general cultural industries?

The cultural industries in Macau are still not well-developed, and I was thinking to do something for the city in developing this segment.

We have been talking to some of the local artists and we wish to promote their paintings. There is no promotion of local artists to the international stage. Although there are numerous exhibitions in the city showcasing local artists’ works, very few audiences are attracted and take notice.

We hope we can use our small exhibition hall to showcase and to promote local art.

We have planned to hold a charity auction of local paintings to promote local artists. We invited a painting expert from Taiwan to come and share experiences with local young artists.

In fact, we had auctions selling local paintings previously, and the results were not bad.

How do you go about cultivating local cultural interests?

We hold exhibitions prior to any auctions, and audiences can read and take free catalogues.

However, I am aware of the low participation, in particular by local residents, of the exhibition of Chinese intangible cultural heritage held previously. I believed that they were trying to promote intangible Chinese heritage in the city, but I think the city should constantly invite these experts to promote their skills, rather than to ask them to visit the city once in a while.

However, I’d seen quite a number of local residents, some of whom even brought along their children to have a look at our prior auction exhibition. I guess it was because of our promotion strategy, [including avenues such as] a cover advertisement in the Chinese newspaper Macao Daily.

“Chinese collectors love Chinese art pieces that come from outside the country. You can see that many of these collectors go to London or New York for art pieces” I was surprised to find many collectors in Macau [who attended our auction], and these collectors came from different sectors. For instance, for our sale of this one Buddhist painting, there was this local who was willing to pay MOP10 million for the painting.

Meanwhile, there were objects sent to us to auction from the intangible cultural heritage because they weren’t able to sell them out. But we were able to sell them out with high prices. The reason is people tend to pay more attention to objects when they are being auctioned. That’s the attractiveness of auctioning.

We started cultivating the young people, and held short courses for university students for three days over three weeks. We included tours to introduce and explain art pieces and the applications were all full. We worked on this with other associations and a certificate was given to students who attended the course.

In addition, we hired these students as volunteers for our auctions or exhibitions, and it is possible that we might employ these students after they graduate from university.

We offer higher salaries to our employees because we are competing with casinos in terms of hiring. Some of our employees are not familiar with the industry when they first enter, but we are willing to train and cultivate them. Therefore, it is very important to develop the industry.

If there is positive development of an industry, young people will be attracted to take part in the industry and local talents can then be created.

One of our directors has proposed setting up a school to train talents in this particular area. In fact, we had talked to some local education institutions such as the University of Macau, and they welcome the thought of having more courses or training related to the cultural industries, such as implementing continued education programme courses.

What are the limitations of the industry in the city?

The biggest limitation of Macau is the lack of buyers. But the good thing is the MSAR government encourages the development of cultural and creative industries and art collection.

“The government approves of the development [of art and antiques auctioning] but the policies available are not helping, therefore it is reasonable that many who get involved in the industry would rather choose the market in Hong Kong”

We haven’t received much concrete support from the government.

Legislator Si Ka Lon has been supporting the cultural and creative industry. As a member of the Cultural Industries Committee, since we have had limited information during the beginning of our business, Legislator Si has given us some help. In the sense of indirect help provided by the government, I would agree to consider legislator Si as a source of assistance made by the government.

The administrative procedures in Macau are very complicated. We need to report our auctions to the government and it usually takes one month to have all the procedures done. Therefore, there were many times that legislator Si helped us with the procedures.

The government requires us to provide a lot of documents, but the fact is there were times that the government asked us to provide further information one month prior to our auction. It always makes things too late, because it takes time for us to gather the documents they need.

In addition, there is a lack of legal support for this industry, and there is not a public department that deals with this industry.

Also, there are no insurance companies willing to cover highly valued products in Macau. Macau does not have the legal support for insurance.

Therefore, we insure our objects in accordance with the Hong Kong regulations.

There might be some companies [out there] performing money laundering, but not us. But because of this, the government won’t allow us to apply for a POS (point-of-sale) machine, even if we asked for it just for three days. For example, we require our clients to deposit MOP1 million in

order to protect our business, but without the POS machine are you expecting people to smuggle money from the Mainland? So in the beginning, we invited close clients and shareholders to guarantee, but we are now still struggling with this.

We depend on the relations of other clients with other new clients and not collecting their deposits, but it is still very risky.

The government approves of the development [of art and antiques auctioning] but the policies available are not helping, therefore it is reasonable that many who get involved in the industry would rather choose the market in Hong Kong.

How do you ensure that the objects sold at auction are authentic?

It is a worldwide problem, because there is not one recognised institution which offers appraisal services. There are some groups or associations in mainland China, but all of them work for the public authorities. Therefore, it is entirely a matter of self-discipline.

Christie’s hires specialists to ensure the authenticity of objects. For us, we have a number of shareholders who are very experienced in the field.

If there are doubts over the appraisals of some relics, we invite experts that we know who work in the nationally recognised institutions to have a look.

What are your future plans?

Our next auction will be held at the end of November at the Venetian, which will be at the same time as an auction held by Christie’s in Hong Kong. Usually, many of the collectors who attend the auction in Hong Kong would not mind coming to Macau and spending a day here. This time we will also provide accommodation for clients. advertisement

6 Business Daily Monday, October 23 2017

Macau Opinion

Technology

Sheyla Zandonai* Transport problems are well known in Macau.

The quality of services provided by the three public transportation companies is not exactly laudable. Poorly trained drivers continue to be the rule, rather than the exception, making users’ lives a bit unpleasant every day.

Then, there is noise, lots of it, generated both inside and outside the vehicles.

Announcements of stations and instructions for better use of public transport playing inside the buses are frequent and unnecessarily loud. Outside, the engines can be deafening. Not to mention the honking, which has become routine.

The whole picture is not flattering.

On the other hand, we could argue that taxi services have improved a tiny thread, with more cars around and more drivers willing to pick up residents. But customer relations are still a bit far from being satisfactory.

These lead us to the problem of the types of transport themselves, and ways of integrating them in a more efficient manner. So, it is a talk about solutions, for a change.

Here it is tempting to compare Macau’s system with Hong Kong’s. Differences in size notwithstanding, the development of the local LRT is an indication that there is a will to provide a multi-modal, hopefully integrated, service to local users, residents and tourists alike, emulating the neighbouring city. At least as inspiration.

Business Daily found out last week that the government is currently mulling the possibility of adding an LRT segment between Pac On and the Border Gate.

Regardless of the fact that the new segment may or not be added, there is no reason for it to delay completion of other segments. That said, these might take some time anyways.

The government expects to launch the Taipa LRT line only in 2019, with the Macau sub-system having no scheduled date as yet.

With the LRT conclusively far from being a reality any time in the near future, we are but to rely on the good old bus type for public transportation for the few years to come.

Working to improve what is already at hand seems to be a sound strategy for coping with the problem – never mind ideas such as creating separate bus companies for residents and non-residents.

Solutions can be simple.

On the one hand, betting on training and hiring more people if necessary. On the other, taking seriously into consideration the implementation of green energy.

The latter would improve noise emissions and reduce air pollution immediately.

And would open up opportunities for new businesses.

My name is Xiaomi Chinese technology manufacturer Xiaomi opened its first retail store in the MSAR, with the group in talks to potentially implement smart technology appliances in SJM hotel rooms and other real estate developments Nelson Moura nelson.moura@macaubusinessdaily.com

C

hinese electronics and software manufacturer Xiaomi opened its first retail store in the MSAR last Friday, celebrating the opening ceremony at the 22nd Macao International Trade and Investment Fair (MIF) Xiaomi Intelligent City Forum & Xiaomi Macau Conference. The new store is located in the Tak Yuen Building on the Macau peninsula.

Inaugurated in partnership with F&Z Trade, Tai Fung Bank and China Telecom (Macau) Company Limited, this is the first official Xiaomi store in the MSAR offering the company’s smartphones and products. Previously, the nearest stores were located in Hong Kong or Zhuhai.

“The Macau market has a large purchasing power. It’s obviously not a large market, but like Hong Kong it’s a very international market that works as a bridge, enabling us to establish contact with Portuguese-speaking countries,” the Regional PR Manager for Xiaomi, Jack Liu told Business Daily.

The Xiaomi representative didn’t specify the exact volume of company products sold in Macau so far, but stated the company’s products were already popular in the city before opening its official retail store.

The inauguration ceremony was also attended by the Legislator and Executive Director of SJM Holdings Ltd. (SJM), Angela Leong On Kei, with sources informing Business Daily that SJM is in negotiations with Xiaomi to implement and integrate its technology devices in the gaming operator’s hotel rooms.

Rebound year

At the beginning of this year, Xiaomi CEO Lei Jun set a target to reach sales of over RMB100 million in 2017, Reuters reported, after the company dropped from second to fifth in mainland China’s rankings of top smartphone vendors last year.

This decrease was explained by Mr. Lei as being due to higher internal competition from other Chinese smartphone manufacturers, with the company trying to rebound this year by increasing its offline retail presence and pushing for more overseas business.

In the second quarter of this year, the Chinese company’s CEO stated that the group had shipped 23.16 million smartphones, a 70 per cent increase from the previous quarter, according to Venture Beat.

“According to the results for the third quarter of this year, Xiaomi came back to fifth worldwide in sales.

We’re happy the sales have picked up again, thanks to great new products such as the Xiaomi Mi 6,” Mr. Liu told Business Daily, referring to

the company’s smartphone model launched in April.

According to Mr. Liu, opening a store in Macau is part of Xiaomi’s global expansion plans, with the Chinese technology company having recently opened stores in European countries and in Latin America.

“We opened a flagship store in Mexico in May. It will be our starting point for Latin America,” he added.

Building it smart

When questioned on how Xiaomi products and innovations can contribute to the MSAR Government’s initiative to develop the MSAR as a Smart City, the Xiaomi representative stated the company produces several devices and smart appliances aside from smartphones that allow people to interconnect their devices in their homes, referring to a concept known as the Internet of Things (IoT).

“We’re working with a real estate developer to install our smart home devices in an estate in Macau. We have a lot of smart appliances such as smart sockets, actions sensors, sensors you can stick on your door so you’re notified when it’s open or night lamps that turn on automatically,” he added.

The Xiaomi representative said the name of the developer and the estate Xiaomi is working with in the MSAR would only be revealed in a future announcement.

Insurance

AIA on the rise The value of new business registered by insurance group AIA Group Limited went up by 34 per cent year-on-year to reach US$2.57 billion in the first nine months of this year Insurance group AIA Group Limited (AIA) saw the value of its new business (VONB) rise 34 per cent yearon-year, reaching US$2.57 billion (MOP20.65 billion) in the first nine months of this year, according to a company filing with the Hong Kong Stock Exchange.

The company’s annualised new premiums (ANP) also saw an increase of 25 per cent yearly between January and end-August of this year, reaching US$4.56 billion.

The group has wholly-owned branches and subsidiaries in 18 markets throughout Asia, including Macau, with the company considering the Hong Kong market to have ‘delivered strong double-digit VONB

growth in the third quarter’.

The insurance company also stated in the filing that its operations in China continued to be its ‘fastest growing business in the third quarter’ with growth in VONB moved by a ‘significant increase in the number of active agents,’ developed by recruiting and developing more full-time professional agents.

According to AIA’s Group Chief Executive and President Ng Keng Hooi: “Asia’s economic progress has been driven by large populations entering the workforce, generating sharply rising incomes and creating a rapidly growing middle-class,” which has led to a “step change in life insurance demand across the region”. N.M.

AIA Hong Kong

Business Daily Monday, October 23 2017 7

Macau gaming

Crown attacks Aussie lawmaker over casino misconduct allegations These are the latest setback for Melbourne-based Crown, which is now relying on domestic revenue to boost earnings Jason Scott

C

rown Resorts Ltd., controlled by billionaire James Packer, has used an open letter to label allegations made by an Australian lawmaker that it skirted anti-money laundering rules and tampered with slot machines as unfair and unfounded.

“I am angered and disappointed by the outrageous allegations that have been leveled at us by Andrew Wilkie,” Crown Executive Chairman John Alexander said in the letter. “If he believes he has evidence of wrongdoing, he should stop the political games, step out of the parliament and make his claims without privilege.”

Crown, which is emerging from a legal scandal in China that prompted a retreat from its international operations, now faces regulatory and police probes at home after Wilkie on Wednesday tabled the allegations, made by three whistleblowers who identified themselves as former staff of the company’s Melbourne casino.

The identities of the three men were heavily disguised through image pixelation and voice altering.

The whistleblowers said some Crown slot machines, commonly referred to as poker machines in Australia, were adjusted to allow buttons to remain pressed down to continuously generate bets at its Melbourne casino, against Victorian state laws.

Some buttons were disabled to reduce the choice of consumers as to how much they bet, prompting the

state’s casino regulator to order fixes, they said.

They also alleged they were instructed to use different player ID cards when processing transactions above A$10,000 (US$7,817) to avoid money-laundering oversight.

The nation’s financial crimes agency Austrac and the Victorian gambling regulator have said they are investigating the claims, while Australian Federal Police is evaluating allegations and material referred to it by Wilkie.

“Crown operates in a strictly

regulated environment, with multiple government agencies and state law enforcement bodies supervising our operations,” Alexander said in the letter. “We have a sophisticated anti-money-laundering program and we take compliance with Austrac requirements very seriously.”

The allegations are the latest setback for Melbourne-based Crown, which is now relying on domestic revenue to boost earnings. Its overseas strategy fell apart in the wake of a crackdown on its Chinese operations that saw some staff convicted

in China in June of illegally promoting gambling. Packer, 50, returned to the company’s board this year and closed most of its Asian offices to focus on profitable casinos in Australia.

Packer said in an interview published in the Weekend Australian on Saturday that he had “little choice” but to withdraw from Macau after the arrests in China and felt “let down” over the scandal.

“Crown’s experience in China has been very profitable but ended in a very embarrassing way,” Packer said, according to the newspaper. Bloomberg

Automobile

Lamborghini only after Grand Prix The Italian carmaker confirmed to Business Daily it has postponed the opening of its new showroom in the MSAR, previously scheduled for October Mini Cooper), Maserati, and Suzuki, among others, in the area.

T

he new showroom of Automobili Lamborghini in the MSAR is now scheduled to open on December 9, Business Daily learned from the company’s head of marketing in the city, Jessie Leong.

“We would have liked to have opened it before the Grand Prix, but it is taking a bit longer than expected, with all the furniture coming from Italy having not arrived yet,” Ms. Leong told Business Daily.

The Italian supercar-maker had announced in early July that it was going to open its new full-service showroom in the city in October of this year.

Lamborghini also launched a new two-storey showroom in Hong Kong last Thursday, in the Wan Chai district, according to information provided to Business Daily by the marketing team from the neighbouring city.

Ms. Leong confirmed the company is investing some MOP10 million in the four-storey 10,000-square foot outlet (encompassing sales, service, spare parts and systems services) located on Rua dos Pescadores in the Areia Preta district, in northern Macau.

Business Daily visited the facilities earmarked to house the future

Target market

showroom, finding the Lamborghini signage already in place.

Regarding the location, Ms. Leong claimed it is a sort of an “iconic” area, where the “original” Lamborghini store first opened in 2011, in addition

to hosting several other dealerships.

The area is known for accommodating various car retailers and repair service stations, with operations from several renowned international brands such as Honda, BMW (and

Ms. Leong said that Lamborghini’s sale strategy for the opening of the new store in the city is to target a “high-end clientele, business-oriented, super sport vehicle group,” thus marking a slight change of market orientation.

“In Macau, we used to target the 25-40 years of age group. Now we are targeting a bit more on the mature side,” she said, pointing out that “it is more of a quality than quantity strategy.”

“We are not a mass brand, like Mercedes and BMW,” she highlighted.

Ms. Leong also said that the company is investing in SUV (sports utility vehicle) models, launching a new line at the end of the year, since the “market seems to be doing well for SUVs.” Lamborghini’s dealership in the MSAR is to be overseen by Kingsway Holdings Cars Limited, the sole official distributor for Lamborghini in Hong Kong since 1992.

It is the first time Kingsway is representing the Lamborghini brand in the city.

Kam Bo Motors Limited had previously operated dealerships in the two previous Lamborghini outlets in the MSAR, in Areia Preta and later in Nova City in Taipa.

8 Business Daily Monday, October 23 2017

Greater China China Credit

Consumer loans surge nearly 30 pct as debt worries resurface

China’s outstanding household consumer loans surged nearly 30 per cent by end September from a year earlier, data showed on Friday, a day after its central bank governor issued a strong warning about the risks of rapidly risin

A

central bank report also showed a sharp jump of nearly 23 per cent in property loans in the same period, suggesting authorities will be in no rush to remove tough cooling measures imposed over the past year to rein in soaring home prices.

Last Thursday, People’s Bank of China Governor Zhou Xiaochuan issued a stark warning about asset bubbles in the world’s second-largest economy, which has posted more robust growth this year driven by government spending and record bank lending.

Speaking on the sidelines of a twicea-decade Communist Party Congress, one of the most pivotal events in the country, Zhou said China will fend off risks from excessive optimism that could lead to a “Minsky Moment”, referring to a sudden collapse in asset prices after long periods of growth, sparked by debt or currency pressures.

While China’s debt has built up rapidly in recent years, much is held by firms under state control.

The government and China bulls argue that its debt levels are generally manageable, given that levels of sovereign and household debt are much lower than in advanced economies, while savings rates are far higher.

The central bank report on last Friday, however, suggested consumers are

quickly catching up in the debt race, and much of the credit growth appears linked to the property market.

Outstanding household consumer loans in both yuan and foreign currencies totalled RMB30.2 trillion (US$4.56 trillion) by end September, jumping 29.1 per cent from a year earlier.

In the first nine months of this year, China’s banks issued RMB5.1 trillion of new household consumer loans.

Analysts suspect funds from some of these consumer loans are flowing illicitly into the property market and stock market. China recently launched probes into consumer loans that are being misused for home purchases, warning they cannot be used to “fuel property bubbles”.

Despite intensifying property curbs

Key Points Outstanding consumer loans +29.1 pct y/y by end-Sept Data comes day after c.bank warning against debt risks Analysts suspect consumer loans illegally flowing into property Outstanding property loans +22.8 pct y/y by end-sept

and higher mortgage rates, Chinese banks issued RMB4.4 trillion (US$664.70 billion) of property loans in the first nine months of this year, more than the RMB4.32 trillion issued in the same period last year. The figures include individual mortgages and loans for property development.

As a result, outstanding yuan-denominated property loans rose 22.8 per cent by end-September from a year earlier to RMB31.1 trillion, the

central bank said.

Outstanding individual mortgage loans rose 26.2 per cent to RMB21.1 trillion. The central bank didn’t disclose the value of new mortgages issued in the first three quarters.

China releases its latest home price data today. Restrictions on home buying have seen prices level out and even soften slightly in top cities in recent months, but there are signs that speculators are now moving into smaller

Data breakdown

Anti-dumping

Slower property, construction growth drag on Q3 GDP but services pick up

Trade with EU odd this time over elec

China posted relatively solid economic growth in the third quarter, driven by a stronger services industry, though there were signs of weakness in real estate and construction as property cooling measures start to bite, data showed on Friday

The European Commission la on Friday into the import of e or e-bikes, from China, prom Europe not to slip into protec

China’s property sector grew 3.9 per cent in the quarter from a year earlier, decelerating from 6.2 per cent in the second quarter and the slowest pace in nearly two years, the National Bureau of Statistics said in a more detailed breakdown of third-quarter GDP data issued on Thursday.

Growth in construction activity slowed from 5.4 per cent in the second quarter to 4 per cent, the weakest expansion since the fourth quarter of 2000, NBS data showed.

Property and construction together account for 13.3 per cent of the economy, with property alone directly impacting 40 other industries.

Softening in those sectors appeared to be the main drag on otherwise fairly resilient China data last Thursday.

Third-quarter growth eased only slightly to 6.8 per cent from 6.9 per cent in the previous quarter, as had been widely expected.

Analysts have long predicted a slowdown in the property sector and construction after city governments began rolling out a flurry of measures from late last year to cool soaring home prices and deter speculators.

Property sales dropped for the first time in more than two-and-a-half years in September and housing starts slowed sharply.

China had posted forecast-beating growth in the first half of the year, led by a sharp turnaround in the long-ailing industrial sector, which accounts for a third of the economy.

A construction boom -- fuelled by the housing frenzy and government infrastructure spending -- has spurred demand and prices of building materials, and the resulting return of factory gate inflation has boosted earnings for

Philip Blenkinsop and Michael Martina

Consumption industries including retail and catering and accommodation posted mostly stable growth of 7.1 per cent in the third quarter

China’s heavily indebted heavy industry.

But industrial growth slowed to 6.3 per cent in the third quarter, from 6.6 per cent in the previous period, and there is uncertainty about how “smokestack” industries will fare over the coming months as China implements drastic measures to reduce winter air pollution.

China’s steel output dropped in September from a record high the previous month as mills in the world’s top producer cut production in line with Beijing’s campaign for clearer skies, pointing to further declines as winter curbs kick in.

The services industry took up much of the slack, expanding 8 per cent in the third quarter, from 7.6 per cent in the second quarter, driven by a pickup in the financial sector and strong expansion in information technology and other areas.

Though “old economy” stalwarts like property and industry have led the way this year, Beijing continues to push for a more balanced economic growth model driven more by consumption and services.

Consumption industries including retail and catering and accommodation posted mostly stable growth of 7.1 per cent in the third quarter. Reuters

It will be the latest in a string of European Union probes into Chinese exports ranging from solar panels to steel.

The European Bicycle Manufacturers Association (EBMA) lodged a complaint in September, saying that Chinese companies were flooding the EU market with pedal-assist e-bikes at prices sometimes below the cost of production.

The Commission, which oversees trade policy among the EU’s 28 member states, said there was sufficient evidence to justify the start of an anti-dumping investigation of up to 15 months.

China’s commerce ministry said it would defend its companies’ interests and urged the EU to respect World Trade Organization rules.

“The Chinese government will closely

Business Daily Monday, October 23 2017 9

Greater China State planner

In Brief

Mainland still on track to hit growth target despite winter smog war

ng debt

China says it has cut annual crude steel capacity by as much as 110 million tonnes over the last five years Kevin Yao and Meng Meng

C cities and towns with fewer controls.

Economists say surging house prices will also start to weigh on consumer demand as homeowners divert more of their income to servicing their mortgages.

While China’s per capita disposable income rose at the fastest pace in 2 years in the first nine months of this year, spending growth slowed to the weakest on record. Reuters

ds again, ctronic bikes

aunched an investigation electronic bikes, mpting Beijing to warn ctionism watch the development of the case, and take necessary measures to resolutely defend Chinese companies’ legitimate interests,” ministry official Wang Hejun said in a statement.

He warned the EU to not let it become a “new case of trade protectionism”.

Bicycles have already been a flashpoint. The EU accused China last December of scuttling a global environmental trade deal by insisting that bicycles be included as a tariff-free green product. Conventional Chinese bicycles have been subject to EU anti-dumping duties since 1993.

EBMA Secretary General Moreno Fioravanti said in a statement that he strongly welcomed the start of the EU investigation and that his group had also asked the Commission to register Chinese e-bike imports. This would allow anti-dumping duties to be imposed retroactively.

The group also hopes for a related subsidy inquiry into the support provided by the Chinese state.

The EBMA said more than 430,000 Chinese e-bikes were sold in the EU in 2016, a 40 per cent increase on the previous year, and forecasts the figure will rise to around 800,000 in 2017.

The group said European companies had pioneered the pedal-assist technology that e-bikes use and had invested about 1 billion euros (US$1.2 billion) last year, but risked losing its industry to China.

“If this dumping is not stopped, China will quickly grab an e-bike monopoly in Europe,” Fioravanti said. Reuters

hina’s economy is on track to meet its official growth target for 2017, the head of the state planning agency said on Saturday, despite a punishing war on pollution which is expected to slash industrial output over the winter months.

China has forced 28 cities in smogprone northern regions to reduce emissions of airborne particles known as PM2.5 by at least 15 per cent from October to March 2017, with some cities expected to cut steel production by as much as 50 per cent.

But officials with the National Development and Reform Commission (NDRC) said the world’s second-largest economy will remain on track.

“We expect to achieve the full-year growth target of about 6.5 per cent,” He Lifeng, chairman of the National Development and Reform Commission (NDRC), told a briefing on the sidelines of China’s Communist Party Congress.

Most economists believe China’s actual growth should easily beat the target. The economy grew 6.8 per cent in the third quarter of the year, and 6.9 per cent in the first half. Last year’s growth rate of 6.7 per cent was a 26-year low.

China’s economy has surprised global markets and investors with robust growth so far this year, driven by a renaissance in its long-ailing “smokestack” industries such as steel and stronger demand from Europe and the United States.

But economists with Societe Generale

Key Points China set to meet 6.5 pct GDP growth target - NDRC head China says smog war, industrial curbs unlikely to hurt growth Country cuts steel capacity by 110 mln T in past 5 yrs

said in a recent note that the winter output cuts could slash industrial production growth by 0.6-0.8 percentage points and GDP growth by 0.2-0.25 percentage points in the next six months.

Industrial growth slowed to 6.3 per cent in the third quarter, from 6.6 per cent in the previous period, data showed last week, with the services sector taking up much of the slack.

Prices of commodities like steel, copper and iron ore have turned wildly volatile in China and in global markets recent weeks on fears of possible winter shortages.

China’s steel output dropped 3.7 per cent in September from a record high the previous month as mills reduced production in line with Beijing’s campaign, and analysts predict further declines as winter curbs set in.

However, Zhang Yong, vice-chairman of the NDRC, told reporters that the direct impact was likely to be limited.

“Measures to fight pollution don’t have a big impact on economic growth,” he said. “Measures to treat pollution have a positive impact on economic development in the long term.”

The government has been pushing a restructuring programme designed to “upgrade” its heavy industrial economy, cut pollution and tackle profit-sapping capacity gluts in sectors like steel and coal.

China says it has cut annual crude steel capacity by as much as 110 million tonnes over the last five years, with coal capacity slashed by as much as 400 million tonnes, though some analysts say much of the outdated, inefficient plants are merely being replaced with leaner, cleaner ones.

Ning Jizhe, vice head of the NDRC and also head of China’s National Bureau of Statistics, said the country would continue to crack down on steel overcapacity, prevent obsolete plants from restarting and promote more mergers in the sector. Reuters

Markets

Gov´t hires 10 banks for sovereign bond issue China has hired 10 banks including Agricultural Bank of China Bank of Communications, and Citigroup for its US$2 billion dollar-denominated sovereign bond issue, according to an internal bank memo seen by Reuters last Friday.

Besides Citigroup, other foreign banks hired by the People’s Republic of China (PBOC), acting through the Ministry of Finance, for the issue are Deutsche Bank, HSBC, and Standard Chartered, the memo showed. Bank of China, China Construction Bank, China International Capital Corp, and Industrial and Commercial bank of China will also be working on the transaction.

Policy

Beijing says will guide private capital into higher growth areas China will introduce measures aimed at guiding private investment into areas that have a higher growth potential, a senior official with the state planning agency said on Saturday. China also would take steps to lower the investment threshold for private investors, said Zhang Yong, the vice-head of the National Development and Reform Commission, during a briefing on the sidelines of China’s Communist Party Congress. The manufacturing industry as well as the property market, which have been driving private investment, are now quite weak, Zhang said. “Now we want to attract investment in sectors with growth potential such as subway projects.”

Political row

Ssangyong Motor reconsiders joint venture in Mainland South Korea’s Ssangyong Motor Co Ltd on Friday said it is reconsidering establishing a joint venture in China due to diplomatic tension between Seoul and Beijing over the deployment of a U.S. missile defence system. Ssangyong last year signed a letter of intent to build cars in China with Shaanxi Automobile Group Co Ltd, headquarters in Xian. But the Chinese auto maker has not pushed for the project since Seoul’s decision to deploy the system met with anti-Korean protests in China, Ssangyong said.

Stock Exchange

Naked Hub sets sights on Hong Kong IPO Shanghai-based coworking space start-up Naked Hub said last Friday it plans to go public in Hong Kong after a fresh round of fundraising next year. Hong Kong is hoping to lure future listings

by Chinese technology startups away from New York and Shenzhen. ZhongAn Online Property & Casualty Insurance Co went public in September, raising US$1.5 billion in the biggest ever IPO by a financial technology firm in Asia.

Naked Hub, backed by Hong Kong private equity firm Gaw Capital, said it expects to close its third financing round of up to US$200 million by the end of this year.

10 Business Daily Monday, October 23 2017

Greater China Trade

Taiwan export order value hits new high in Sept on tech boom But there are concerns over signs of weak demand for the iPhone 8, which caused analysts and investors to question the company’s staggered release strategy for its latest phones Jess Macy Yu

T

aiwan’s export order value hit its highest on record in September, with manufacturers pinning their hopes on Apple’s new smartphones to sustain momentum into the year-end shopping season.

Buoyant export orders, underpinned by a global economic upswing and strong demand for electronics, is set to help export-reliant Taiwan meet its GDP forecast, which was bumped up to 2.11 per cent earlier this year. Analysts expect further economic momentum into 2018 as the island’s factories continue to see strong orders.

September export orders rose 6.9 per cent from a year earlier to US$45.92 billion, the Ministry of Economic Affairs said last Friday. The pace was slightly slower than analysts’ expectations of 7.1 per cent growth, and down from 7.5 per cent in August.

Export orders totalled US$40.8 billion in August.

The ministry said in a statement that information communication devices hit a new high last month by volume.

ANZ said it expects the momentum to extend into 2018 as exports rise through the year-end holiday season.

“Taiwan’s economic recovery has been slow but sure, amid improving global demand and its strong presence in the global electronics supply chain,” ANZ said in a research note before the data.

U.S. export orders grew 2.2 per cent, after declining in August, but growth in orders from Europe slowed to 2.9 per cent from 21.3 per cent.

“September export orders were not very far from forecasts. Even though Apple launched its iPhone 8 products, the effect of the orders was not very large. Everyone is waiting for the postponed sales of the iPhone

Key Points Taiwan Sept orders +6.9 pct y/y vs +7.1 pct in Reuters poll Orders from China +14.6 pct y/y, U.S. +2.2 pct y/y Slower product rollouts now could see orders pick up - ministry X to give a boost to Oct-Nov export orders,” said Kevin Wang, economist at Taishin Investment advisory company.

Taiwan’s export orders are a leading indicator of demand for Asia’s exports and for hi-tech gadgets such as Apple’s new iPhone 8 as well as the iPhone X, which is expected to be shipped starting Nov. 3.

Lee-Jen Lin, director of the

department of statistics, told a news conference that orders could pick up in the coming months as some product launches had been rolled back.

But there are concerns over signs of weak demand for the iPhone 8, which caused analysts and investors to question the company’s staggered release strategy for its latest phones.

Wireless carriers in the United States and Canada have reported

slow third-quarter customer upgrades. While some expect a pick-up after the iPhone X goes on sale in November, others cautioned that the phone’s high price tag could weigh on demand.

The shares of some Taiwan tech gadget suppliers such as Largan Precision Co Ltd slipped last Friday, following media reports about tepid demand for the iPhone 8.

Some blue-chip companies, however, are optimistic about the fourth quarter.

Taiwan Semiconductor Manufacturing Co, a top contract chip maker, said last Thursday it sees revenue growth of 10 per cent in the fourth quarter from the third, ahead of the iPhone X launch. Reuters

Regulator

Nation´s box office revenues to bounce back in 2017 China’s movie box office revenue is expected to grow in 2017 at more than three times the pace of last year thanks to the success of blockbusters like “Wolf Warrior 2”, the media regulator said Takings would rise 11.6 per cent to RMB55 billion (US$8.31 billion) this year, beating 2016 growth of 3.7 per cent, said Zhang Hongsen, vice minister of the State Administration of Press, Publication, Radio, Film, and Television.

“The rapid development of the film industry has been a big bright spot for China’s culture industry,” Zhang told a press conference in Beijing.

The Chinese Communist Party is supporting Hollywood-style films that portray China as the rejuvenated

great power described in this week’s speech by President Xi Jinping to the Party Congress.

“Wolf Warrior 2”, a patriotic action movie that has raked in RMB5.6 billion (US$845.59 million) to become China’s highest-grossing film, depicts

“The rapid development of the film industry has been a big bright spot for China’s culture industry” Zhang Hongsen, vice minister of the State Administration of Press, Publication, Radio, Film, and Television

a Chinese hero fighting Western mercenaries in a war-torn African country.

While privately financed, the film has received strong support from state organisations, and China’s film regulators have submitted it in the foreign-language category at the 2018 Oscars.

Sun Zhijun, deputy director of the Publicity Department of the Communist Party Central Committee, said films should have social and “educational” benefits, not just make money.

“We cannot take market share, distribution figures, box office and audience ratings as the sole standard.

We cannot be the slave of the market and led by the nose,” he said at the same press conference.

After disappointing box office growth in 2016, regulators announced that all sales grosses would include service fees for each ticket purchased online. This has boosted this year’s growth, although moviemakers see little of the additional revenue.. Reuters

Business Daily Monday, October 23 2017 11

Asia Employment

Women the mystery ingredient in Australia’s jobs feast Annual jobs growth in healthcare was a scorching 8.7 per cent, and it is easily the single biggest employer with 1.6 million workers, ahead of retail and construction Swati Pandey and Wayne Cole

W

omen coming into Australia’s workforce provide the answer to an economic puzzle that analysts and policymakers alike have been struggling to solve this year.

While the country’s employment has been surging beyond all expectations, the jobless rate hardly budged.

The explanation seems to be that tax breaks on childcare and the launch of a disability insurance scheme have prompted a surge in new jobs in the healthcare sector in roles dominated by women.

The result is that the proportion of women in the workforce has reached a record high of 60 per cent, which analysts say is a big positive for the economy.

But the optimism is tempered shorter-term by the fact that most other sectors of the economy have seen limited or no jobs growth this year.

New jobs rose 2.7 per cent in the year to August, the latest quarterly figures from the Australian Bureau of Statistics (ABS) show, much faster than the 1.6 per cent growth in the population. Still, unemployment stuck at around 5.6 per cent.

A Reuters analysis of the data shows that more than a third of the 329,000 net jobs created in Australia in the year to August were in healthcare, outstripping even the booming construction industry.

Annual jobs growth in healthcare was a scorching 8.7 per cent, and it is easily the single biggest employer with 1.6 million workers, ahead of retail and construction.

Childcare and social assistance make up the bulk of the new jobs, a breakdown of the healthcare data shows, both sectors where women

Key Points Female participation in workforce at record high Male participation in long-term decline Healthcare jobs, dominated by women, grow rapidly tend to be active participants. And as they enter the workforce, many in turn are hiring carers for their own children, thus creating more jobs.

The upsurge in healthcare has happened relatively recently, and corresponds closely to the timing of tax breaks for childcare and the launch of a government-mandated, tax-payer funded National Disability Insurance Scheme (NDIS).

Healthcare created just 4,000 new positions in the 12 months to August 2016. But in the six months to last August, it added 106,000 and the

figures are set to rise.

The federal government estimates that demand for care providers due to the NDIS will double to 163,000 full-time equivalent positions in 2020 from 73,000 in 2013.

The shift to more care workers is one that more rich nations will have to consider as populations age. And, like in Australia, increased participation in the workforce by women is vital to counter shrinking working-age populations.

The proportion of men in the workforce in Australia, for example, has been in long-term decline and is currently at 70.7 per cent, down from above 79 per cent in 1978.

“Rising female participation in the economy is good for growth as it will boost the workforce and a more gender diverse workforce is good for productivity,” said Shane Oliver, head of investment strategy at AMP Capital.

However, the increase in the overall

jobs numbers this year is not as flattering for the economy as the headline figures might suggest, analysts said.

Just three of 19 industry sectors healthcare, construction, education - accounted for the vast bulk of the job gains this year, illustrating how narrowly based the revival has been.

That has left some slack in the labour market, which is restraining wage growth and consumer prices and keeping the central bank from lifting record-low interest rates of 1.50 per cent.

“The 2017 acceleration in aggregate employment all but disappears in the ex-healthcare numbers,” said JP Morgan analyst Ben Jarman.

“Employment growth in the cyclical, bellwether sectors such as manufacturing, real estate or retail remains less impressive. This suggests recent strong employment has minimal implications for unemployment or wage growth.” Reuters

Japan

Emperor Akihito likely to abdicate at end-March 2019 He will be succeeded by Naruhito, 57, and a new era will start from April 1, the Asahi reported Japan’s Emperor Akihito is likely to abdicate at the end of March 2019 and Crown Prince Naruhito is expected to ascend the throne in April, the first abdication by a Japanese monarch in nearly two centuries, the Asahi newspaper reported on Friday.

The government is in the final stage of formalising the schedule, said the Asahi, citing several sources.

In June, Japan’s parliament passed a law allowing Emperor Akihito to abdicate and the government needs to hammer out the details including the timing.

Japan’s top government spokesman denied the Asahi report.

“We are not aware of the report and there is not such fact,” Chief Cabinet Secretary Yoshihide Suga told a news conference.

“We will continue to discuss appropriately and will do our best to carry out the emperor’s abdication smoothly,” he said.

Akihito, 83, who has had heart surgery and treatment for prostate cancer, said in rare public remarks last year he feared age might make

it hard for him to continue to fulfil his duties.

He will be succeeded by Naruhito, 57, and a new era will start from April 1, the Asahi reported.

The abdication law, which applies only to Akihito and not to future emperors, included a resolution to debate letting female royals stay in the imperial family after marriage but did not touch on the controversial topic of allowing women to inherit.

Asahi said the expected 2019

Akihito said in rare public remarks last year he feared age might make it hard for him to continue to fulfil his duties Japan’s Emperor Akihito

abdication schedule would minimise the impact on people in changing to a new imperial reign from the current Heisei Era, which started in 1989 after the death of Akihito’s father Hirohito, according to the Asahi.

The Imperial Household Agency also wanted the transition to take place in spring 2019 as many ritual events are scheduled for the imperial family in autumn and winter, the report said.

Akihito, the first Japanese emperor who was never considered divine, has worked for decades at home and abroad to soothe the wounds of World War Two which was fought in his father Hirohito’s name.

In a written remarks of her 83rd birthday on Friday, Empress Michiko said that she thought this year her travels with Emperor Akihito around Japan might be their last and have become deeply emotional.

The Empress also said she felt “an immeasurable sense of peace” that Akihito will be able to rest and spend quiet days after years of pursuing how the Emperor should be. Reuters

12 Business Daily Monday, October 23 2017

Asia Infrastructure

Private sector left in dust in Indonesia’s push For most Indonesians, just getting basic infrastructure, whoever builds it, is what matters Hidayat Setiaji and Gayatri Suroyo

S

oon after Indonesian President Joko Widodo took office in 2014, he ordered his ministers to give private companies first pick of profitable infrastructure projects, until then usually grabbed by state-owned enterprises (SOEs).

Three years on, the private sector is estimated to be handling only one in five projects, sparking warnings that the dominance of SOEs is holding back billions of dollars of extra investment that could help fix shoddy infrastructure.

Now, even government insiders are questioning the status quo. Finance Minister Sri Mulyani Indrawati told a World Bank forum this month there was a need to assess whether SOEs were “really efficient in investing in infrastructure.”

“We will look at what kind of dominance, what kind of behaviour that is creating the crowding out of the private sector,” Indrawati said.

A failure to get private firms to shoulder a bigger burden is another risk for Southeast Asia’s biggest economy at a time when consumption is sluggish and interest rates have been cut twice in quick succession to spur flatlining growth.

Over 2,600 km of new roads and seven new airports have been built since Widodo took power in October 2014 - near the midpoint of targets for his full tenure, government data shows. Despite missing targets in power, rail, water and housing, an independent survey by the Centre for Strategic and International Studies showed that Indonesians were optimistic their president would improve infrastructure.

Indonesian President Joko Widodo

Over-stretched SOEs could be pushed to do yet more.

Four Indonesian state firms are preparing to issue the country’s first rupiah-denominated global bonds, which Widodo has dubbed “komodo bonds”, to raise funds for infrastructure projects. Komodo dragons are giant lizards found only in eastern Indonesia.

Share of the pie

Johannes Suriadjaja, chief executive of private construction firm Surya Semesta Internusa, said his company tried to win infrastructure work for years without much success.

“It’s difficult because everything is too concentrated at the government or the SOEs,” Suriadjaja said. State groups were prepared to take tenders he could not justify because of low profitability, he said.

Rainier Haryanto, programme director of the government’s Committee to Accelerate Priority Infrastructure, disputed this.

“We do things through open tender and the one offering the best price wins. If the private players are not competitive and they don’t win.

Don’t blame the government and SOEs,” he said.

Three years ago, at the start of his five-year term, Widodo outlined a need for US$450 billion investment in infrastructure by 2019. He anticipated 37 per cent would come from private companies, up from only 9 per cent on average in 2011-2015.

He wanted SOEs’ share of investment financing to be reduced to 22 per cent, from 33 per cent in 20112015, with the remainder coming from central and regional government budgets.

He’s nowhere near that target. Andi Rukman Karumpa, secretary general of the National Construction Services Association, estimated 80 per cent of public projects are still handled

by SOEs, using their own funding or the state budget.

Subway, airport link take shape

World Bank President Jim Yong Kim said in July SOEs had an advantage with government backing and in navigating red tape. But “for Indonesia to continue to have a thriving economy,

“We do things through open tender and the one offering the best price wins. If the private players are not competitive and they don’t win.

Don’t blame the government and SOEs” Rainier Haryanto, programme director of the Indonesian government’s Committee to Accelerate Priority Infrastructure

you need to actively encourage private sector involvement”.

The World Bank in its October economic review said Indonesia needed to spend US$1.5 trillion to catch up with other comparable emerging economies. Even if it invested at the rate promised, it would take 20 years to match the average infrastructure stock of emerging markets, the Bank said.

The government allocated around US$72 billion in infrastructure-related spending up to 2017, including capital injections to SOEs, and wants parliament to approve US$30 billion more next year.

Although Indonesia has won funding from multinational lenders such as the World Bank, as well as China and Japan, the projects mostly went to SOEs. They include a US$4.5 billion Jakarta to Bandung high-speed rail link funded by China Development Bank, which will be built by a consortium of Chinese and local SOEs. Karumpa at the construction association wants the government to double the minimum project size project that SOEs can take to 100 billion rupiah (US$7.38 million), so private firms can at least take over smaller publicly funded projects.

For most Indonesians, just getting basic infrastructure, whoever builds it, is what matters.

After a string of delays, traffic-clogged Jakarta is due to finally have a mass rapid transit system, the first for the G20 nation, in 2019 and a rail link to the city’s airport is set to launch next year.

Japanese companies, including Obayashi Corp, are working with state-run builder Wijaya Karya and private PT Jaya Konstruksi Manggala Pratama on the MRT. The airport railway is being built by two SOEs, PT Kereta Api Indonesia and PT Angkasa Pura II. Reuters

Monarchy

Thailand rehearses lavish US$90 million funeral for late king The five-day funeral will be attended by dozens of heads of state Amy Sawitta Lefevre

Drums and a band played as officials in black tops and ancient costumes rehearsed on Saturday for the funeral procession of Thailand’s late King Bhumibol Adulyadej, whose cremation this week is expected to be attended by a quarter of a million mourners.

Some held a mock-up of a golden urn that had held the remains of dead kings in the past. In the present, the king’s body is placed in a coffin but the urn is still used to represent the monarch’s remains.

The procession rehearsal, which was expected to take up to five hours, passed crowds of black-clad mourners in Bangkok’s historic quarter.

Some were visibly moved by the proceedings. Others held goldframed portraits of the late king.

The military government has set 3 billion baht (US$90 million) aside for the lavish funeral. Preparations took almost a year to complete, with thousands of artisans working to create

Business Daily is a product of De Ficção – Multimedia Projects

A Thai woman holds up a portrait of late Thai King Bhumibol Adulyadej during a funeral rehearsal on Saturday. Source: Lusa

an elaborate structure of gold-tipped Thai pavilions in a square in front of the glittering Grand Palace.

King Bhumibol, who died on Oct. 13 last year at the age of 87, ruled Thailand for seven decades and is credited by some as having revived the prestige of the monarchy.

A revival in the monarchy’s

popularity was helped by a formidable public relations machine –- the evening news in Thailand includes a daily segment dedicated to the royals and the late king was often featured in his younger days crisscrossing the country to meet the poor and disenfranchised.

That p u b l i c r e l ati o n s d ri v e

helped to enshrine the king’s status as a demi-god among some of his 68 million subjects.

The five-day funeral will be attended by dozens of heads of state including King Jigme Khesar Namgyel Wangchuck of Bhutan and Japan’s Prince Akishino and Princess Kiko, among others.

The post-funeral period could be one of uncertainty for many Thais, say analysts, who point to the king’s role over the years as a moral compass and arbiter during decades of political upheaval.

His only son King Maha Vajiralongkorn formally ascended the throne last year but his coronation will not take place until after his father’s funeral.

The king’s cremation will take place on Oct. 26.

The day has been a declared a national holiday and many businesses have announced they will shut all day or close at midday. More than 10,000 7-Eleven convenience stores across the country, a staple for many Thais, will be shut on the day. Reuters

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Business Daily Monday, October 23 2017 13

Asia Markets

Singapore’s game start-up sea raised US$884 million in New York IPO It was valued at US$3.75 billion in its 2016 fundraising and will surpass US$4 billion with the IPO Yoolim Lee and Alex Barinka

S

ingapore’ s S ea Lt d . , Southeast Asia’s most valuable start-up, raised about US$884 million in its initial public offering in New York.

The company sold 59 million American depositary shares for US$15 apiece, according to a statement Friday, offering more shares and pricing them above its initial range of US$12 to US$14 each. The total amount may be more than US$1 billion if an option to sell additional shares is exercised, according to a person familiar with the matter, asking not to be identified because the matter is private.

The games company is backed by Tencent Holdings Ltd. and has benefited from the Chinese company’s support. Sea licenses games from Tencent, which also holds a stake of about 40 per cent in the smaller company. Investors are scooping up Sea’s shares despite rising losses at the company as it diversifies into e-commerce and payments. Sea had a net loss of US$165.2 million in the first half of the year on revenue of US$195.5 million.

It was valued at US$3.75 billion in its 2016 fundraising and will surpass US$4 billion with the IPO. “Sea is a future-looking investment,” Kai-Fu Lee, founder of Beijing-based Sinovation Ventures, said before the offering. “Investors are betting that it can become the 800-pound gorilla that will make all

The games company is backed

by Tencent the money it may have lost.”

Sea was founded by Forrest Li as an online gaming company in 2009 and originally named Garena. He rebranded the company to reflect its regional ambition and diversification.

Sea branched out with a digital payments service called AirPay in 2014 and the mobile shopping business Shopee in 2015.

Sea’s games business, which retained the Garena name, still accounts for more than 90 per cent of total revenue. Like Tencent, the

company offers games for free, then collects money when players buy virtual items like armour, weapons or special skills. It makes money in e-commerce from commissions and advertising, while collecting fees from payments.

With Tencent’s support, the startup has attracted marquee backers.

They include the Ontario Teachers’ Pension Plan, Malaysia’s sovereign wealth fund and several Asian billionaires. Goldman Sachs Group Inc., Morgan Stanley and Credit Suisse Group AG are leading the public offering.

The American depositary shares are set to begin trading on the New York Stock Exchange Friday under the ticker symbol SE, the company said. Reuters

Growth ambitions are prompting CJ to bolster promotional activities

2013 K-POP World Festival in Changwon

India says ID-bank accounts link mandatory India’s central bank on Saturday dismissed media reports that it was not necessary to link national identity card numbers, known as Aadhar numbers, to bank accounts. It said in a statement the requirement remained in force under anti-money laundering rules. “The Reserve Bank clarifies that, in applicable cases, linkage of Aadhaar number to bank account is mandatory under the Prevention of Moneylaundering (Maintenance of Records) Second Amendment Rules, 2017,” it said in a statement.

New Zealand’s incoming leader flags TPP problems

K-Pop conglomerate says it’s hunting for acquisitions in U.S.

CJ Group, the South Korean company responsible for spreading much of K-pop’s popularity abroad, said it’s considering acquiring entertainment and food assets in the U.S. as part of the conglomerate’s plans to triple its revenue by the end of the decade.

“We are aggressively investing in the U.S., where our growth potential is huge,’’ CJ America co-Chief Executive Officer Suh Sung-yup said in a phone interview, though he declined to name potential acquisition targets.

“We will accelerate our growth not

Banking

Trade

Expansion

Sohee Kim

In Brief

only by expanding existing business, but also by fostering new sectors.’’

The comments underscore CJ’s renewed ambitions for growth after Chairman Lee Jay-hyun returned from jail last year after being convicted of tax evasion and embezzlement in 2014. The family-run conglomerate, which traces its roots to the founder of Samsung Group, in May announced plans to raise its global revenue to 100 trillion won (US$88 billion) from about 30 trillion won last year.

Though CJ ranks first in South Korea in food and entertainment, its

prominence is less pronounced in western markets. North America is currently CJ’s fourth-largest overseas market -- after China, Vietnam, South East Asia -- but U.S. revenue has been growing at an annual pace of 35 per cent during the past five years and that momentum is likely to persist as CJ begins sales of its cosmetics through Nordstom Inc.’s online mall soon and pushes its Bibigo-branded foods, Suh said.

“America may become the second-largest market or at least the third biggest market for our group in the next few years,” he said. CJ America is expecting revenue to reach about US$700 million this year in the U.S. In entertainment, CJ is planning to double the number of its 4DX movie screens in the Americas, Suh said. Also, KCON festival organizer CJ E&M Corp. is examining ways to turn Korean pop into a subculture in the U.S., he said.

Growth ambitions are prompting CJ to bolster promotional activities.

Marketing expenses will increase by about 40 per cent overseas in the next few years, Chief Marketing Officer Kyeong Wookho said in a separate interview. For example, CJ is sponsoring the first official PGA Tour tournament in Korea, which tees off Thursday, to reach out to a billion golf fans worldwide. Bloomberg News

New Zealand’s participation in the Trans-Pacific Partnership (TPP) has encountered an obstacle with incoming Prime Minister Jacinda Ardern insisting she will push for changes to the agreement due to be finalised next month. The prime minister-elect told TVNZ’s Q+A programme yesterday that she supports the TPP as well as lifting exports. But she also insisted on proceeding with the Labour Party’s plan to stop foreign speculation in the housing market, which would breach the draft agreement. Ardern said she would lobby for changes to the agreement at next month’s Asia-Pacific Economic Cooperation summit in Vietnam.

Investment

Mitsubishi-U.S. partner in data centres Japanese trading house Mitsubishi Corp plans to set up a joint venture with U.S. data centre operator Digital Realty Trust and build around 10 data centres in Japan by 2022 for 200 billion yen (US$1.8 billion), the Nikkei said on Saturday. Tokyobased Mitsubishi expects the centres to help meet growing demand for information storage from customers of California-based Digital Realty and generate sales of around 20 billion yen to 30 billion yen in 2022, the business daily reported, without citing sources. The two companies could invest an additional 300 billion yen in the medium term, the Nikkei reported.

Regional banks

Japan regulator to question on business models Japan’s financial regulator is planning to question regional banks that are deemed to have poor business models, sources with direct knowledge of the matter said last Friday. The Financial Services Agency is concerned some regional banks are neglecting their core lending operations to local businesses. It is worried they instead are relying heavily on securities investment and loans for apartments as rental properties, the sources said. The sources said the agency will inspect regional banks and direct them to change their business models if necessary.

It is not known how many banks will be targeted.

14 Business Daily Monday, October 23 2017

International In Brief Diplomacy

Former U.S. President Carter says would travel to N. Korea Former U.S. President Jimmy Carter said he would be willing to travel to North Korea on behalf of the Trump administration to help diffuse rising tensions, The New York Times reported on its website yesterday. “I would go, yes,” Carter, 93, told the Times when he was asked in an interview at his ranch house in Plains, Georgia whether it was time for another diplomatic mission and whether he would do so for President Trump. Carter, a Democrat who was president from 1977 to 1981, said he had spoken to Trump’s National Security Adviser Lt.-Gen. H. R. McMaster, who is a friend, but so far has gotten a negative response.

Wildfires

Portuguese protest over deadly forest fires As thousands of Portuguese protested on Saturday over the government’s handling of massive wildfires that have killed 108 people since June, government ministers pledged to spend over 400 million euros (US$470 million) in aid. The decision, announced during a special cabinet meeting which continued into the night, came on the same day as a new interior minister took over after his predecessor resigned, and ahead of Tuesday’s parliamentary vote on a motion of no-confidence launched by the opposition. Earlier thousands of protesters gathered on Lisbon’s main Comercio square, in Porto and other cities to mourn the victims of the Portugal’s worst tragedy in living memory.

Monetary policy

Yellen defends her legacy amid uncertainty over Fed leadership Fed Chair and her predecessor Ben Bernanke were heavily criticized by Republicans in Congress Christopher Condon

F

ederal Reserve Chair Janet Yellen defended the central bank’s use of unconventional and often unpopular monetary policy tools after the Great Recession, highlighting some of her achievements at the helm of the Fed as President Donald Trump weighs her reappointment.

“The U.S. economy is much stronger today than it would have been without the unconventional monetary policy tools deployed by the Federal Reserve in response to the Great Recession,” Yellen said in the text of a speech she’ll deliver Friday in Washington.

Yellen, on a short list of potential Fed chairs being reviewed by Trump, made the case for preserving policy makers’ ability to confront the next recession with more bond purchases, a strategy known as quantitative easing aimed at lowering borrowing rates.

“While I believe that influencing short-term interest rates should continue to be our primary monetary policy lever in normal times, our unconventional policy tools will likely be needed again should some future economic downturn drive short-term interest rates back to their effective lower bound,” Yellen said.

Yellen and her predecessor Ben Bernanke were heavily criticized by Republicans in Congress for bloating

Federal Reserve Chair Janet Yellen

the Fed’s balance sheet with US$3.5 trillion in Treasuries and mortgage-backed securities. They often claimed the effort only served to encourage government deficit spending and risk-taking by investors.

The Fed began shrinking that balance sheet this month.

“One should recognize that the recovery could have been much slower in the absence of our unconventional tools,” Yellen said. She said that evidence “strongly suggests” that bond purchases helped spur economic activity and lower unemployment.

If the Fed does consider bond purchases again, it’s unclear whether Yellen will have any role. Her

four-year term as chair is set to expire in February.

Trump said earlier on Friday he’s considering Yellen along with Fed Governor Jerome Powell, Stanford University professor John Taylor and “a couple of others.”

“Most people are saying it’s down to two -- Mr. Taylor and Mr. Powell,” Trump said in an interview with Fox Business broadcasted Sunday and today. “I also met with Janet Yellen, who I like a lot, I really like her a lot,” he said. “So I have three people that I’m looking at, and there are a couple of others.

I’d say I will make my decision very shortly.” Bloomberg News

UK

PM May readying concessions on welfare reform British Prime Minister Theresa May is on the verge of making concessions around a key welfare reform that has angered opposition parties as well as members of her own Conservatives, the Sunday Telegraph reported. The government has signalled that it is looking at ways to reduce the waiting time for payments from its new Universal Credit benefits system from six weeks, the newspaper said on Saturday, without citing sources. Last week some lawmakers from May’s own party vented their dismay over the government’s handling of Universal Credit.

Social media

Trump defends tweets as key to White House victory U.S. President Donald Trump defended his regular use of social media, especially Twitter, and said he may not have won the White House without it. In an interview airing yesterday on “Fox Business Network,” Trump says he can bypass what he labels unfair media coverage by speaking directly.

“Tweeting is like a typewriter -- when I put it out, you put it immediately on your show,” he said, according to a transcript released by the network.

“I doubt I would be here if weren’t for social media, to be honest with you.”

Cryptocurrency

Venezuelans use bitcoin ‘mining’ to escape inflation Bitcoin mining consultant Randy Brito estimates that about 100,000 Venezuelans are “mining” Inside a locked room in an office building in Caracas, 20 humming computers use their data-crunching power to mine bitcoins, an increasingly popular tool in the fight against Venezuela’s hyperinflation.

In warehouses, offices and homes, miners are using modified computers to perform complex computations, essentially book-keeping for digital transactions worldwide, for which they earn a commission in bitcoins.

While practiced worldwide, Bitcoin mining is part of a growing, underground effort in Venezuela to escape the worst effects of a crippling economic and political crisis and runaway inflation that the IMF says could reach 720 per cent this year.

Having no confidence in the bolivar and struggling to find dollars, many Venezuelans, who are neither computer geeks nor financial wizards, are relying on the bitcoin -- currently valued around US$6,050, or other virtual currencies.

Caracas office worker Veronica says her boss installed the 20 machines in early 2015.

“These are machines that bring in US$800 a month (more than 26 million bolivars),” says Veronica, who refused to give her full name because of fears of arrest.

Bitcoin mining consultant Randy Brito estimates that about 100,000 Venezuelans are “mining,” although it is impossible to have an exact figure because

many are protecting themselves by using servers in foreign countries.

Brito said the boom in these virtual transactions began in 2014, when Venezuela’s economic crisis intensified as a result of the collapse in the price of oil, which accounts for 96 per cent of the country’s revenue.

“Whoever buys bitcoins with bolivars earns money by increasing the price of the bitcoin against the dollar, and escapes inflation,” Brito told AFP.

Not without risk

Venezuela is something of a mining hotspot because the electricity needed to run the power-hungry computers is so heavily subsidized as to be almost free.

Thus “it is very profitable to ‘produce’ bitcoins,” said economist Asdrubal Oliveros.

Tempted by the money made by her boss, Veronica has taken the plunge at home, buying a machine for US$2,280 online from China.

“A friend took another and a boy I know bought 20,” said Veronica.

“People are buying machines like crazy.”

They set the machines up in another woman’s house, as many miners do to spread the power consumption and avoid attracting the attention of

the state intelligence service Sebin, whose agents regularly raid buildings when they notice a suspicious surge.

“If they find machines, they arrest the owners or they try to extort money,” said Veronica. “In electricity, we spend barely 15,000 bolivars a month (less than 50 cents at the black market rate).”

Lawyer Jesus Ollarves said that while bitcoin mining is legal in Venezuela, which does not have cryptocurrency laws, “those who practice it are often liable to arrest by the police for energy theft.”

According to the LocalBitcoins portal, transactions in bitcoins amounted to US$1.1 million in Venezuela in the last week of September.

Commissions, paid in bitcoin, help buy food and medicine that are currently in acutely short supply because of the crisis, said Eugenia Alcala, founder of Dash Caracas, which provides courses in cryptocurrency mining.

Veronica said her machine is producing 20 to 25 Litecoins -- another virtual currency -- per month.

“Each Litecoin is worth US$46, that’s US$920 a month,” said Veronica -- a fortune in a country where the minimum monthly salary is 135,543 bolivars (US$40), supplemented by a voucher of 189,000 bolivars (US$56). AFP

Business Daily Monday, October 23 2017 15

Opinion

Next PBOC chief will have an unenviable job Christopher Balding, Bloomberg View columnist

“

Z

Unlike most central banks, the PBOC has no fundamental insulation from politics, and lacks a transparent, predictable, rules-based framework for setting monetary policy and priorities

hou Xiaochuan, governor of the People’s Bank of China, has guided his country’s monetary policy for most of the 21st century. He was appointed in 2002, shortly after China joined the World Trade Organization, and helped steer its economy through the global financial crisis. In the process, he gained widespread respect at home and a reputation for prudent liberalism abroad.

Lately, Zhou has been circulating widely. At a forum in June, he criticized protectionism in China’s financial sector. In an interview this month, he called for liberalizing the yuan. At a recent meeting in Washington, he warned about excessive corporate debt growth. Zhou, who will reach the typical retirement age of 70 next year, certainly sounds like a man on his way out the door. “People retire eventually,” he told reporters yesterday, at an event at the 19th Communist Party Congress.

So what might be in store for his successor?

Whoever is picked as the next head of the PBOC, the policy path is fraught with risk. Despite China’s much-hyped goal of making the yuan a global currency, it can’t easily reform its foreign-exchange policy or ease capital controls without triggering a flood of outflows. A deceptive period of calm for the yuan this year was the result of a weakening U.S. dollar, which propped up foreign-exchange reserves. Any reversal for the dollar -- a likely outcome of the Federal Reserve’s plan to tighten its balance sheet -- will bring the yuan under significant pressure once again.

The picture isn’t much brighter on interest rates. To maintain the yuan’s soft peg to the dollar, the PBOC’s monetary policy generally follows the Fed’s. But the two countries are now in very different places economically. China needs relatively low interest rates and abundant liquidity, while the U.S. risks overheating if the Fed doesn’t boost rates and reduce its balance sheet. If the PBOC does follow the Fed -- with rates rising and liquidity falling -- it will place China’s over-indebted economy under enormous pressure; if it doesn’t follow the Fed, it

”

Zhou Xiaochuan, governor of the People’s Bank of China

risks breaking the yuan’s peg to the dollar.

A more serious challenge is debt. The PBOC is attempting a very difficult balancing act, spearheading China’s deleveraging efforts while also providing huge amounts of liquidity to the financial system. Through a combination of lending facilities, it has made net capital injections of RMB3.2 billion over the past year.

Zhou’s talk of restraining corporate debt was sensible, but at odds with current policy: New debt has risen by 16.4 per cent so far this year.

At the heart of all these challenges are the conflicting goals of China’s political leadership, which wants both reform and stability. China can’t internationalize the yuan while simultaneously cracking down on outflows. It can’t deleverage while ordering the central bank to increase lending by trillions of yuan.

And this suggests the biggest problem for the next governor. Unlike most central banks, the PBOC has no fundamental insulation from politics, and lacks a transparent, predictable, rules-based framework for setting monetary policy and priorities. Instead, the Communist Party dictates policy minutiae to the PBOC

across a range of areas, from interest rates to foreign exchange.

So whether the next PBOC chief ends up being Deputy Governor Yi Gang, with a Ph.D. from Indiana University, or Jiang Chaoliang, the party secretary of Hubei Province, ultimately will have little bearing on monetary and foreign-exchange policy.

A better framework for understanding how the PBOC will act is to follow the direction of policy in the second term of President Xi Jinping. So far, there’s little evidence that Xi is willing to yield control or accept the costs of addressing China’s significant economic imbalances. Absent a change of heart, that means the prioritization of growth over reform will likely continue and risk will continue to grow.

The PBOC governor is the public face of China’s economic policy. Ultimately, though, he answers to the Party. That makes at least one aspect of his job predictable: The next governor may or may not oversee the liberalization of the yuan or significant deleveraging. But he will undoubtedly try to remain in good standing with Beijing. Bloomberg View

Duterte has a Belt and Road.

Now he needs a Chinese pipe Shuli Ren, a Bloomberg Gadfly columnist

O

pposites attract. China’s billions are already flowing into the Philippines via online gaming and infrastructure spending. Hot portfolio flows could be next.

Philippine Stock Exchange Inc. (PSE) is in talks with its Shenzhen counterpart on a possible investment, CEO Ramon Monzon told Bloomberg News. The Southeast Asian exchange wants a Shenzhen-Manila connect, Monzon said, referring to the special trading links established between China’s stock markets and Hong Kong.

The PSE is in the process of selling as many as 11.5 million new shares, or a 14 per cent stake, to reduce local brokers’ ownership. Under the local Securities Regulation Code, the Shenzhen Stock Exchange would be allowed to hold at most 5 per cent of PSE’s shares.

The exchange could do with the help. Foreign institutional investors have begun to return to the market only this year, with net purchases of US$1 billion, after an exodus in 2015 and a flat 2016. The benchmark index’s 19 per cent advance in U.S. dollar terms lags a 32 per cent rally in Hong Kong’s Hang Seng Index.

Overseas commentators are quick to point the finger at President Rodrigo Duterte’s fiery rhetoric, but the truth is that lack of trading is the big problem. The total value of stock transactions was equal to only 14.5 per cent of the market’s capitalization in 2016, according to the World Bank, the least among countries

in the Association of Southeast Asian Nations.

The figure for China was 250 per cent.

Meanwhile -- and perhaps reflecting the lack of liquidity -- the Philippine Stock Exchange Index is trading at a pricey 23 times earnings, further deterring foreign investors. The exchange operator’s shares haven’t benefited from the broad market’s gains, being little changed this year.

As I wrote last week, listed companies in the Philippines are also boring. There have been few IPOs and the market is dominated by the richest families. Seven companies that belong to family-controlled groups make up more than half the market cap of the benchmark index and contributed more than 60 per cent of the gauge’s gain this year.

Shenzhen is the exact opposite. Traders there

transact more than RMB200 billion (US$30 billion) every day, or annually more than double the market value of listed companies, the highest ratio among the world’s major exchanges.

A Manila-Shenzhen connect could certainly help the Philippine exchange, though there have been no formal discussions on such an arrangement. Last year, about US$36 billion of stocks were traded on the PSE, or less than two days of trading in Shenzhen. If even a tiny fraction of that liquidity was allowed to flow to Manila, it could have a major impact.

It could also create some unexpected winners.

In Hong Kong, Chinese investors’ fondness for domestic car makers and real estate companies has driven huge rallies this year in the shares of Geely Automobile Holdings Ltd., Guangzhou Automobile Group Co. and Sunac China Holdings Ltd. A trading pipe between Shenzhen and Manila would have selling points for both sides. Duterte has moved the Philippines closer to China diplomatically, cooperating on disputed areas in the South China Sea and attracting infrastructure investments that serve to advance President Xi Jinping’s One Belt, One Road agenda.

Sparing a few drops from Shenzhen’s vast liquidity tap could be a smart move for China, helping to draw a strategic southern neighbour into a tighter embrace. Bloomberg Gadfly

16 Business Daily Monday, October 23 2017

Closing Employment

Beijing says jobless rate lowest in years, but challenges persist The labour ministry’s announcement was made as part of a once-every-five-years congress of the ruling Communist Party

C

hina’ s u n e m ployment rate has hit its lowest point in multiple years at 3.95 per cent by the end of September, but employment still face challenges as the economy pushes ahead with structural reforms, China’s labour ministry said yesterday.

The ministry of human resources and social security said in a statement that 10.97 million new jobs had been created in China from January to September this year, a growth of 300,000 compared with the previous year.

The figure represents having essentially fulfilled the ministry’s year-end target, the ministry said in a pre-prepared statement given to reporters.

Despite being ahead of schedule, Yin Weimin, head of the ministry, told reporters that “raising the capacity to employ workers overall still faces large pressures.”

“We need to create 15 million jobs per year,” Yin said, singling out China’s more than 8 million new university graduates that enter the job market each year as one group in need of additional employment.

Yin also said the low

Key Points Unemployment rate falls to 3.95 pct by end-Sept, lowest in years 10.97 mln new jobs created in China from Jan-Sept - ministry Jobs, social security still face challenges - labour minister

unemployment rate in the face of an overall slowdown in the economy was largely due to the new internet economy and entrepreneurship, adding that the ministry would actively support startups to help them “thrive”.

From 2015 to 2020 every one per cent increase in GDP is expected to equal roughly 1.8 million new jobs, Yin said.

Premier Li Keqiang said in March that China added 13.14 million new urban jobs in 2016 and aims to add another 11 million this year while keeping the registered unemployment

rate below 4.5 per cent.

The labour ministry’s announcement was made as part of a once-every-fiveyears congress of the ruling Communist Party, which opened last Wednesday and runs until Tuesday.

At the congress, the Party sets broad policy directions and reshuffles top leaders.

As China’s economy slows, Beijing has made increasing efforts to stave off mass unemployment that may spark social unrest.

China’s official unemployment rate has remained generally stable as economic

growth has dipped to a 26-year low and the government forges ahead with ambitious plans to cut back on industrial capacity.

Many analysts say, however, that the government figure is an unreliable indicator of national employment conditions as it measures only employment in urban areas and also doesn’t take into account the millions of migrant workers that form the bedrock of China’s labour force.

On an annual basis, the official unemployment rate was last below 4 per cent in 2001, when it was 3.6 per cent, according to data from the National Bureau of Statistics. The rate ended 2016 at 4.02 per cent after not budging from 4.1 per cent from 2010-2015.

The government has said that some sectors, especially those targeted by capacity cuts, such as coal and steel, still show signs of unresolved employment challenges.

The ministry of human resources in April said that China would need to resettle about half a million workers that lose jobs in the coal and steel sectors this year and will speed up development of a “black list” system for firms with wage arrears. Reuters

Australia to tighten airport control measures after police foiled “Islamic-inspired” plans for a bomb attack on an Emirates flight from Sydney.

Police said they arrested four men in city-wide raids on July 28 after one of them days earlier had allegedly tried to bring an improvised explosive device on to a flight. The device was not allowed aboard as it exceeded the baggage weight limit.

Extra screening of hand and checked luggage since the incident has led to some travel delays around the country. Reuters

Australia will introduce random searches of workers entering and inside its airports as it increases security after a recent foiled terrorism plot, officials said.

“These measures strengthen existing controls to ensure airport workers are authorised, properly identified and appropriately trained before entering secure airside areas,” Minister for Infrastructure and Transport Darren Chester said in a statement yesterday.

“They may also be subject to security screening in the course of their duties.”

Airport security was tightened in July

Real estate

Securities

South Korea

Mainland property sales will slow in fourth quarter

China regulator fines hospital President says will continue owner for insider trading phasing out nuclear power

China’s property sales will slow in the fourth quarter but prices will remain stable, the housing minister said yesterday, as more signs emerge that the country’s nearly two-year housing boom has peaked.

Property sales in China dropped for the first time in over two-and-half years in September, while housing starts slowed sharply as cooling measures started to bite, according to Reuters calculations based on official data yesterday.

Real estate, which directly effects many other business sectors, is a crucial driver for China’s economy but also poses significant policy risks as the government tries to tamp down soaring prices while avoiding a crash and an ensuing blow to confidence and economic growth.

Wang Menghui, head of China’s housing ministry, told reporters at an briefing in Beijing that “the national growth rate of transitions for commercial housing will slow in the fourth quarter.”

The rapid rise of property prices has been contained and the government will keep measures consistent and not loosen control, Wang said, adding that the market was healthy and stable. Reuters

China’s securities regulator has imposed a fine of more than RMB100 million (US$15.11 million) on the owner of a hospital for insider trading, and confiscated a further RMB34 million of his illegal gains.

Liu Yuejun, the actual controller of the Red Cross Hospital in southwest China’s Sichuan Province, had bought shares in Shenzhen-listed Hangkeng Medical Group Co Ltd knowing that his hospital would be selling a treatment centre to the company, China’s Securities Regulatory Commission (CSRC) said in a statement on its website on Friday.

Having purchased more than 7.6 million shares, Liu made over RMB30 million on the trade, CSRC said. Reuters could not reach Liu for comment.

Two other traders were also fined after they profited from stock they bought on the basis of inside information about Hengkang’s purchases, CSRC said.

“By engaging in insider trading they have severely damaged market order...and the CSRC has severely punished them for this in accordance with the law,” the statement said. Reuters

South Korea’s President Moon Jae-in said yesterday the government will continue to phase out nuclear-generated electricity, following a public opinion survey that dealt a blow to his plans to do so.

“We will completely stop all plans for the construction of new nuclear reactors like the government previously stated,” Moon said in a statement distributed to reporters by his office.

“The government will also step up usage of natural gas and renewables in order to maintain its stance of phasing out nuclear-generated power.”

Moon’s statement came after a public opinion survey on Friday found a majority of almost 60 per cent in favour of resuming the stalled construction of two reactors.

The president asked his supporters yesterday to respect the outcome of the survey, which he called a “wise and intelligent” response.

Completing the two reactors could mean a reversal of a strategy to slowly reduce nuclear energy’s share of the power mix, and also significantly eat into the liquefied natural gas (LNG) demand of the world’s second-largest consumer of the fuel. Reuters