Business Daily #1403 October 17, 2017

China needs to set tougher targets to comply with Paris climate pact Environmental Page 9

Tuesday, October 17 2017 Year VI Nr. 1403 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Tourism

Higher prices for taxis, hotels and restaurants drive Q3 Tourist Price Index increase Page 6

Gaming

Q3 breakdown shows 35 pct y-o-y increase in VIP Baccarat revenues Page 7

www.macaubusiness.com

Reserves

MSAR’s forex reserves fell 1 pct m-o-m in September, to MOP157.9 bln Page 6

PPI

Mainland factory prices rise more than expected Page 8

Putting options on the table

Tourism

Opening up to art and culture, catering to new segments, and creating new and exciting experiences can keep the MSAR relevant on the tourist scene, while pursuing stable, not extreme growth in visitor numbers and spending, is best says GTEF Vice-chair Pansy Ho. Meanwhile working the Smart City angle to promote attractions before arrival and direct to products after, could improve efficiency, says MGTO head. Page 2

Sharing the experience

A one-stop shop for experiences, says Marco Duarte Rizollo of his startup Follow Me Macau. Drawing on a background of economics and having worked with Thomson Reuters and on table gaming solutions, the startup is a new experience for him, but timely, he says. Focusing on millennials, the company, two years in the works, officially launches Friday.

And we’re back! But different Politics The 6th Legislative Assembly has held its first meeting, electing former president Ho Iat Seng to the role again, and brother of the Chief Executive, Chui Sai Cheong to the Vice-Presidency. Some legislators praised while some critiqued, claiming potential conflicts of interest. Page 3

PBOC governor aims high

Interview | Startup Pages 4 & 5

HK Hang Seng Index October 16, 2017

28,692.80 +216.37 (+0.768%) Worst Performers

Hong Kong Exchanges &

+2.73%

Tencent Holdings Ltd

+1.83%

Geely Automobile Holdings

-1.30%

AIA Group Ltd

CK Asset Holdings Ltd

+2.62%

Henderson Land Develop-

+1.52%

Sands China Ltd

-0.79%

China Shenhua Energy Co

+0.00%

Want Want China Holdings

+2.40%

Lenovo Group Ltd

+1.34%

Hong Kong & China Gas Co

-0.27%

Bank of East Asia Ltd/The

+0.00%

New World Development

+2.15%

Swire Pacific Ltd

+1.25%

WH Group Ltd

-0.25%

CITIC LtdLtd

+0.00%

AAC Technologies Holdings

+1.93%

Bank of China Ltd

+1.23%

Hang Lung Properties Ltd

-0.21%

China Overseas Land &

+0.00%

22° 27° 24° 29° 24° 30° 23° 29° 23° 29°

-0.16%

Today

Source: Bloomberg

Best Performers

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Forecast People’s Bank of China Governor Zhou Xiaochuan says that GDP growth could speed up to 7 per cent in the second half of the year. The figures would override all predictions that set the growth below Zhou's mark. Page 8

2 Business Daily Tuesday, October 17 2017

Macau

Tourism

A shifting growth in the tourism industry GTEF vice chairman Pansy Ho advocates the constant creation of new experiences for tourists as an approach for reinvestment in the city’s tourism industry Cecilia U cecilia.u@macaubusinessdaily.com

“I

believe the next decade of growth for Macau [will require ]opening up possibilities [for foreign visitors who are interested in the art and culture of Macau] and to cater to another sector or segment of the traveling and tourism community,” stated the Vice Chairman and Secretary-General of the Global Tourism Economy Forum (GTEF), Pansy Ho Chiu King, to the press after the opening ceremony of GTEF 2017 yesterday.

Ms. Ho said that it is important for the city to create new content, otherwise “people will come [to the city] once and go elsewhere [next time]”.

“We need to re-invent ourselves,” said Ms. Ho. “Every time [tourists] come back, we want to create [the conditions] so they will think that Macau is the place that always has the next new experiences.”

Ms. Ho further claimed that currently

Macau has enough capabilities to go beyond being a gaming hub, while noting that it is vital to inform the industry worldwide about Macau’s determination to diversify.

“The Forum as such could be effective to act as a platform in allowing outsiders to know the new Macau [...] that Macau has the intention to gradually shift its focus of industry,” said the GTEF vice-chairman.

In terms of the impact made by the Forum, Ms. Ho said there is a growing knowledge and recognition from the global tourism industry members in regards to Macau’s role as a platform of exchange and business matching.

“The first two years we attracted participants from neighbouring regions, but in recent years we see that there are more overseas participants who know of the Forum,” said Ms. Ho.

Gradual growth is key

When asked her opinion about policy decisions, in particular regarding

the tourism sector, Ms. Ho said she agrees with the master plan recently introduced by the Macao Government Tourism Office (MGTO) and that the city should not pursue extreme growth in the number of visitor arrivals or tourist expenditure.

“It is impossible for the city to experience any extreme growth [...] we should pursue a more stable and gradual growth in the numbers,” said Ms. Ho. On the other hand, the GTEF vice-chairman opined that without the MSAR’s involvement in the Greater Bay Area development initiative, each region would develop independently, without sharing resources, making it impossible to build up the concept of multi-destination tourism for the region in the long run.

Art could be a way

Ms. Ho emphasised the promotion of different types of art in the city, while also suggesting bringing overseas art to the city.

“I am not suggesting building another traditional art institution like a gallery or museum,” said Ms. Ho. “In Macau [...] with the high turnover of number of tourists [...] I envisage one day to work in partnership with other art institutions to create unique experiences [...] such as the utilisation of virtual realities.”

The growing middle-class

Meanwhile, Ho opined that the city should target small, young, middle-class families as visitors to the MSAR, having foreseen their increasing presence on a global scale when the second-child policy in mainland China was established.

“These [young middle-class families] are more affluent, more educated [...] and these people would like to obviously explore,” said Ho. “[These families] would have demand for leisure and entertainment [...] it would be enough to have them re-visit Macau and become our stable customer source.”

Tourism

Smart Tourism with Alibaba under discussion MGTO head emphasised the accessibility of a wider range of information for tourists through Smart Tourism development through Macau.

“We hope to have more cooperation with the Transportation Bureau as well as the Police in the future,” said the director.

Cecilia U cecilia.u@macaubusinessdaily.com

The government has started preliminary discussions with Chinese tech giant Alibaba Group on the city’s Smart Tourism development, although no concrete plans have yet been elaborated on, according to the Director of the Macao Government Tourism Office (MGTO), Maria Helena de Senna Fernandes.

With the government’s goal of transforming Macau into a Smart City, the city’s government signed a Framework Agreement for Strategic Cooperation in the Area of Building an Intelligent City last August, with Smart Tourism as one of the first initiatives to kick-start the city’s development in the area in the coming five years.

“Aside from promoting the city’s special touristic features via the use of Smart Tourism, it can also be used for providing easier access to information in terms of linking tourism

Location for new Wine Museum remains unchanged for now

products with visitors,” said the MGTO head prior to the opening of the Global Tourism Economy Forum 2017 (GTEF), at the Grand Hyatt Hotel yesterday.

The director pointed out some specific suggestions on the usage of Big Data that could be included in the Smart Tourism plan, in particular: the management of tourism, such as the control of numbers of tourists at popular touristic sites by providing instant information to tourists via Big Data.

In light of Typhoon Khanun’s arrival to the territory on Sunday, the MGTO head remarked that providing notices about harsh weather conditions to visitors planning their trips to the MSAR would also be considered for inclusion in the construction of Smart Tourism.

Meanwhile, the MGTO director was aware of the impact posed by insufficient information about the harsh weather on Sunday, as well as taxi infractions - including overcharging - during the typhoon’s passage

The MGTO head stated that the location for the new Wine Museum would remain the same for now, but that the government welcomes other more favourable options, given that the currently selected location will mean a smaller Wine Museum compared to the existing one.

Currently, the responsible department is working on the conceptual draft for the construction, and the MGTO head said “they will seek out novelties in the construction if the original plan is not feasible”.

“We are now working on the internal design but we will see whether we can have another suitable location [for the Wine Museum],” stated the director.

Business Daily Tuesday, October 17 2017 3

Macau Politics

Taking their seats Ho Iat Seng was re-elected yesterday as the Legislative Assembly (AL) President, with Chui Sai Cheong, an indirect-elect legislator and the brother of Chief Executive Fernando Chui Sai On, elected Vice-President Nelson Moura nelson.moura@macaubusinessdaily.com

A

fter being sworn in yesterday at a ceremony held at the Chief Exe c u t i v e H e a dquarters, the 33 legislators comprising the sixth Legislative Assembly (AL) body held their first plenary session at the AL, to vote for the heads of the legislative body.

Ho Iat Seng - who received 30 votes in favour - will continue for a four year-term as the AL President, a position he was firstly elected to in 2013.

After being elected, Mr. Ho stated that he planned to fulfil the mandate period and therefore put aside temporarily a possible bid for the Chief Executive

elections in 2019.

Mr. Ho is also a deputy in the Standing Committee of the National People’s Congress (NPC) in Beijing, the Vice-President of Macau Chamber of Commerce and President of the Macau Industrial Association.

Ch ui Sai Che ong wi l l replace Lam Heong Sang as the AL Vice-President, with the legislator dismissing any concerns of conflict of interest caused by ties to the current CE, his brother, and to his roles as businessman and legislator.

Chui Sai Cheong is currently a General-Manager at Companhia de Investimento Predial Chui’s, Lda, is the President of the Macau Management Association and also a member of the Chinese People’s Political Consultative

Conference.

“Macau is a very small community so it is common to see the same people with different positions. I don’t think [conflict of interest] will be a problem,” legislator Chui said.

When questioned about a possible conflict of interest due to being a member of the Prosecutors Committee, the legislator said he would “question his legal advisor” if there is any overlap between these judicial and legislative positions.

The Prosecutors Committee is an independent ruling body responsible for the appraisal and disciplinary management of magistrates and judicial officers of the Public Prosecutions Office.

Indirectly-elected

Appointed legislator and head of the Institute for the Study of Commercial Gaming at the University of Macau (UM), Davis Fong Ka Chio, told Business Daily yesterday that he will look to “inform” other legislators and not “just defend the government” during a four-year plenary session that will delve into the issue of the renewal of the city’s gaming concessions.

“In the last 13 years we have conducted between 30 and 40 research projects in the area of gaming. I will look to assist

legislators Kou Hoi In and Chan Hong were also elected by the new legislators as the AL’s first and second secretary of the board, respectively.

Experience versus responsibility

When questioned about the election of the new AL heads, directly-elected legislator Agnes Lam told Business Daily that the experience the AL President has makes him a “good choice for President” with Ho Iat Seng having been able to “deal well with controversies from the last years”.

“Mr. Chui is also an experienced candidate and has been in the AL for quite a long time. We have a lot of newcomers to the AL, so [there’s] not a lot of people with the experience level

for these positions. In Macau, there is a tradition for indirectly-elected legislators to go to these positions, which I don’t really agree with, but respect,” Ms. Lam told Business Daily.

M e a n w h i l e t h e A L’ s youngest legislator, Sulu Sou, argued that more directly-elected legislators without connections to the business world should be elected to these positions since “they feel more responsibility towards the public and towards the citizens”.

“In the last elections, representatives from the business sector were elected, which happened again this time. It’s something I believe was decided by the indirectly-elected legislators,” legislator Sulu Sou added.

the CE in implementing policy using science and legal basis and contribute to the debate at the AL,” he added.

The gaming concessions of Sociedade de Jogos de Macau (SJM) and MGM China Holdings Ltd are set to expire in 2020, with the gaming licenses granted to Melco Resorts & Entertainment, Sands China Ltd. (Sands China), Wynn Resorts (Macau) S.A. and Galaxy Entertainment Group expiring in 2022.

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4 Business Daily Tuesday, October 17 2017

Macau

Marco Duarte Rizollo, founder of Follow Me Macau

Interview | Experiences

Selling and sharing experiences Having worked most of his professional life at Thomson Reuters, Marco Duarte Rizollo decided the MSAR was the perfect place to start his first company, a one-stop tourism online platform called Follow Me Macau. Focused on independent millennial visitors to Macau, the company allows users to search and purchase lifestyle experiences in the city. With its launch ceremony scheduled for October 20, Marco shared with Business Daily the challenges of opening a company with an online presence in mainland China, while still being firmly rooted in Macau.

Nelson Moura nelson.moura@macaubusinessdaily.com

W

hat was your professional background before coming to Macau?

I studied Economics at the Paris-Sorbonne University in Paris, and when I finished my studies moved to Portugal in 1999. When I arrived, I started working in finance and in investment banking, transitioning quickly to the Thomson Reuters commercial department where I had most of my professional career.

Although most people associate Thomson Reuters with a news agency, 98 per cent of its revenues actually comes from software, it’s a company also involved in technology selling software to investment banking and financial markets.

They have trading, analysis and graphic design software, databases and also develop legal matters software for lawyers.

So I wasn’t on the editorial section of Reuters, but on the commercial side, starting in customer support and later dealing with account management.

I was lucky to progress in the company through different international branch offices, passing from Lisbon to Madrid, where I stayed for four years and where I started specialising in the commodities or raw materials market.

After a while, I was invited to the Brazilian branch office in São Paulo and moved there in the beginning of 2010 and stayed for four years. I went there to develop the raw materials market, since Brazil is one of the largest producers of raw materials worldwide, especially agricultural and metal materials.

After that, I had the luck to be promoted to Commercial Director of Reuters, managing the whole company operations in Brazil.

What led you to move to Macau?

When my expat contract finished in Brazil and wasn’t going to be renewed, I had options to go to Canada or Portugal, but my wife was raised here so she wanted to come back

to a city where most of her family is located. During all my expat life, she always accompanied me during all the changes, so I decided I would move with her to Macau.

After arriving, I entered a British company named TCS John Huxley, the largest company of table gaming solutions in the world.

They produce all kinds of table games materials, from the table itself to roulette and Sic Bo. They produce almost 99 per cent of Sic Bo tables, producing screen displays, dice shakers and the whole thing. They’re present in Europe, United States, South Africa and of course Asia with the expansion seen in Macau, the Philippines, Singapore and with the possible future opening of the Japanese market. I stayed in that company for about a year, responsible for the Asia market.

So when did you first start to think of creating your own company?

The idea to create a start-up was that after almost 17 years working in the corporate world, I believed I needed a new challenge. During the period when I was working for TCS, [Chinese President] Xi Jinping visited Macau and there was the whole VIP gaming sector crisis, with the main speech passing to the diversification of the local economy.

One of my best friends in Brazil was responsible for expanding Smartbox [an experience gift company] in Brazil, so when I first came to Macau I already had this idea in my head, which just seemed to develop after the talk about economic diversification became more common.

I started thinking that: either I start something by myself that I enjoy doing or I will always be working for someone else, and if there’s a better time to do it, it is now and not when I’m 50-years-old.

We all know that nine out of 10 start-ups end up failing, and I’m very aware of this risk, but when you analyse Macau you see that it has a lot of potential.

It’s a territory of around 35 square kilometres, but with 30 million

visitors passing by every year. It’s the sixth largest city in the world in terms of visitation, and if we included Macau with Hong Kong, we would have the largest visitor hub in the world.

It’s true that most of those visitors are Chinese, with half don’t even stay here overnight, they just enter and leave in one day, but the bases are here to make this a viable business.

The profile of Chinese visitors is also changing, with the middle class increasing considerably and with outbound tourism predicted to be moved mainly by millennials.

Millennials are largely connected online, have a good level of English, like to travel and like new and unique experiences.

There was a study by Goldman Sachs stating that, in terms of fun related activities and experiences, if you compare mainland China with any other country, it is still not completely developed, with a large growth potential.

All these elements showed me we should try this project, despite it not being my professional background.

I also wanted to explore this side of online and digital marketing.

‘We have made partnerships with gaming operators, but it’s very important to define that we sell experiences, but we don’t rent hotel rooms or take care of visas’ What services does Follow Me Macau offer?

It’s an online experiences platform which won’t have a physical component, as services like Smartbox have,

but with a similar model. We’re a one-stop shop for experiences available to visitors to Macau, dividing them by five segments: sport, adventure, wine & dine, wellbeing & relaxation, and urban living.

Then we also have sub-sections on the website for family activities, romantic activities, for friends, for guys or girls, etc.

We have made partnerships with gaming operators, but it’s very important to define that we sell experiences, but we don’t rent hotel rooms or take care of visas. We’re not a travel agency.

A user wanting to come to Macau goes to search engines to try and find information and if they find our website they will be able to search over the categories we provide.

We then have a booking system where they can choose the day and hour, with the system providing a payment gateway and providing a voucher to be presented at the location of the activity.

The first thing we had to achieve was partnerships with gaming operators, but also with many local small and medium enterprises (SMEs).

We try to gather all these experiences in one location, since a lot of SMEs’ [information] sometimes is not in Chinese or they don’t have the booking options.

When was the company launched exactly and what difficulties have you faced so far?

It will be almost two years since we first started the company. It took some time and in my initial business project I aimed for a year or 14 months, but it stretched a bit for many reasons. Firstly because in the beginning I was the only person involved, and second due to issues with the Chinese online world.

Starting an online business in Europe or the United States can be done in two or three months, but this is different in mainland China due to the language barrier, as you have to have everything available in Traditional and Simplified Chinese.

Google or Facebook don’t exist in the

Business Daily Tuesday, October 17 2017 5

Macau Mainland due to the country’s online firewalls and you can’t have a server in Europe or in Macau to operate in mainland China. There were many things we had to learn until being able to make the website available in the Mainland.

You have to register the website on Baidu. Then for payment gateways Visa and MasterCard can’t be used, you have to use Alipay, WeChat Pay or Tenpay.

Our technological structure is in Hong Kong and all these issues delayed the establishment of the project for almost two years.

Now we will make the official launch on October 20 at the 22nd Macao International Trade and Investment Fair (MIF) and will initially offer 60 experiences, but with a plan to have much more by the end of the year.

How were the administrative procedures for starting a company in Macau?

The administrative process itself is very easy and is something where Macau is quite fast. We opened the company through the Macau Trade and Investment Promotion Institute (IPIM) and they advised us very well about the whole process. We started the company with our own capital, we didn’t want to ask for [funding] during in the beginning stages of the company. Later we will maybe apply.

We’ll see after six months how the business develops and then we’ll start contacting some angel investors.

How would you describe your target client?

Our target client is clearly not the tourist groups coming to Macau, but what we call FITs (Fully Independent Travellers), millennials that come by themselves or with friends that searched about Macau and are interested in these different experiences.

We’re in a very competitive market,

but in Macau there still isn’t a onestop shop platform with integrated booking and payment; we’ll be the first in Macau.

However, in the Mainland there are many of these platforms, around 20 companies providing these services.

The online world is much more developed in mainland China than in Europe or the United States.

How we’re looking to differentiate ourselves from these Mainland companies is to offer many more experiences, since most of these platforms only have food & beverage - mainly buffets - or tickets for shows. They don’t have the diversification we have and will have in our second phase.

‘Starting an online business in Europe or the United States can be done in two or three months, but this is different in mainland China due to the language barrier’ What short-term goals are laid out for Follow Me Macau?

After the presentation, we will launch the company to the public. Since we have only an online presence it will be mainly an online strategy of ads on Baidu, Facebook and Google, search engine optimisation and trying to appear in the top of the rankings when people search for Macau.

We also have a plan to enter WeChat in the future. In the first phase our

system allows payments through Alipay, Visa and MasterCard.

Why go for a start-up that’s not in line with your past professional experiences?

Gaming didn’t attract me that much, because gaming equipment doesn’t have such a high level of technology, at least for tables, roulette or Sic Bo. There isn’t that much innovation. It was a great experience and being involved in the gaming sector in Macau allowed me to create a valuable contact network. You’re well paid, but I wanted a new challenge.

Do you think there is a perfect time to start a company?

I don’t think it’s something related to age but more with having an idea, believing in it and bringing it together at the right time. I think that’s when entrepreneurship is born, because I think it’s more complicated if you just do it because you want to force yourself to do something. The idea needs to come first.

Do you see Macau as a good environment for start-ups or just for start-ups related to gaming or tourism?

Macau is a bit too focused on gaming and although the government’s fiveyear plan establishing the pillars for the local economy says right in the first paragraph that the city needs to diversify into a World Centre of Tourism and Leisure, the truth is that despite the political will, gambling still maintains a huge importance in the local economy.

The money the sector creates leads to some resistance to develop non-gaming attractions.

Obviously, with the new casinos there were some attempts to bet on different attractions, but still not quite the full extent of what can be done.

When I say gaming I’m also

mentioning the whole industry revolving around it such as hotels, food & beverage, gaming equipment and developers.

However, I sincerely think Macau can be a good platform for a startup looking to expand to mainland China, due to the language and due to the government support. IPIM has seven offices in the Mainland and they helped us recently to go to Guangzhou for a business matching session. They also offered us office space free of rent and recommended us to launch the company at MIF.

‘We all know that nine out of 10 start-ups end up failing, and I’m very aware of this risk, but when you analyse Macau you see that it has a lot of potential’ How about in terms of finding investors?

For investors, I think Hong Kong would be better and they have a tradition of venture capital and angel investors. I don’t think that culture exists in Macau.

Do you have plans to extend the service to mainland China, Hong Kong or other regions?

When you start a business you always think of its scalability: so why not? However, we first want to try to survive in the first year and see step by step. advertisement

6 Business Daily Tuesday, October 17 2017

Macau Opinion

Sheyla Zandonai* Populist card First, a proposal for a new public transportation company designated only for holders of a Macau ID. Then, a total cut of subsidies intended for non-resident workers so that Macau ID holders continue to fully benefit from the subsidies.

So said legislators Zheng Anting and Mak Soi Kun, and the Macau People Power.

These ideas present unwelcoming messages to foreigners; it is time to do the math.

Imagine a scenario in which Macau had no foreign workers, mainland Chinese or others - Filipinos, Indonesians, Americans, Portuguese - employed in security work, menial activities, casinos, hotels, universities and restaurants.

Now let’s refresh dormant brains by drawing a simple economic scheme.

Macau’s consumption-based economy obliges, government coffers are filled mostly with taxes, mostly corporate.

The biggest companies in this city are casinos. Real estate, another important sector, does not pay taxes as high as gambling operators do.

Once collected, those monies are generously reallocated by the Macau SAR Government through direct subsidies, funds, or wealth partaking schemes, which for the most part benefit residents – non-residents would rather benefit from indirect allocations, such as bus tariffs and lower taxes levied on income.

To go back to our hypothetical case, imagine all those people are sent away, lowering the city’s main source of income (gambling) and available labour force. Try then to figure out where subsidies would be drawn from. Who is going to provide security at banks, welcome visitors, and clean your house?

Moreover, mind you, being a ‘non-resident’ forcibly implies that such a person works in Macau. In basic economic terms, again, this means that this person spends at least part of his or her income here: buying food, clothes, paying for medical services, rent, perhaps even buying a house.

That legal alien person is, hence, reverting wages, paltry or high, in revenue for other businesses in the city.

That government representatives are not knowledgeable about the rudiments of economics is puzzling. But, truth be told, politics is one of those lines of work in which proof of intelligence is not sine qua non. A person with no brains cannot be a scientist, but can become president. It’s been proven in other parts of the world.

That said, it is still amusing that politicians continue to believe that hoeing segmentation between locals and foreigners is an efficient way of governing.

Populism is hot currency these days. Unfortunately, reason is not. * Journalist.

Tourism

Pricier visits The Tourist Price Index (TPI) increased by 2.17 per cent year-on-year in the third quarter, with the highest increases registered in average prices for Accommodation and Restaurant Services Nelson Moura nelson.moura@macaubusinessdaily.com

D

earer prices for local food products, rising taxi fares and increasing charges for hotel accommodation and restaurant services led to an increase in the Tourist Price Index (TPI) for the third quarter of this year, up 2.17 per cent year-on-year to 129.61.

The tourist price index reflects the price change of goods and services purchased by visitors, with sections of goods and services for the index selected based on the consumption patterns of visitors.

The highest yearly rise was registered in the price index of Accommodation, with the average price going up by 6.75 per cent yearly, and for Restaurant Services, which saw its average price go up 5.52 per cent year-on-year.

However, due to reduced prices of men's outer clothing, handbags and jewellery, the price indices of Clothing & Footwear and Miscellaneous Goods decreased by 3.75 per cent and 2.82 per

cent yearly, respectively.

On a quarter-to-quarter comparison, the TPI increased 2.59 per cent in the third quarter.

The average prices for Accommodation and Transport & Communications increased 10.68 per cent and 6.55 per cent quarterly, respectively, due to

higher hotel room rates and airfares during the summer holidays.

In the first nine months of this year, the TPI decreased by 0.91 per cent compared to the same period last year, with the largest decreases seen in the average price of Transport & Communications and Clothing & Footwear.

Services

To protect and maintain The contribution of the Security Services and the Real Estate Management Services sectors to the MSAR economy in 2016 increased by 8.6 per cent y-o-y to MOP1.67 billion and by 10.2 per cent yearly to MOP850 million, respectively Nelson Moura nelson.moura@macaubusinessdaily.com

The amount of receipts registered by the Security Services industry in 2016 increased by 9.1 per cent to reach MOP1.86 billion (US$231.24 million), a survey on the service sector conducted by the Statistics and Census Service (DSEC) revealed.

In 2016, a total of 44 establishments provided Security Services in Macau, employing 9,084 people, of which almost 70 per cent were security guards.

However, the level of expenses in the security business also increased by 10.2 per cent yearly to reach

MOP1.70 billion in 2016, leading the Gross Surplus in the sector to decrease by 2.9 per cent year-on-year to MOP158 million.

Managing buildings

Meanwhile, the Real Estate Management Services industry registered the second largest amount of receipts in the service sector, seeing an increase of 8 per cent yearly in 2016 to MOP1.38 billion.

Despite expenses increasing 9.5 per cent yearly to MOP589 million - with more than half being for compensation of employees - the Real Estate Management Services sector registered a small increase in its

Gross Surplus of 2.1 per cent yearly, reaching MOP260 million.

In 2016, a total of 217 establishments and 5,217 people were engaged in Real Estate Management Services in Macau. Of the people employed in the sector, 62 per cent or 3,236 were caretakers/doorkeepers, a number that increased by around 7 per cent in 2016.

The Security Services and the Real Estate Management Services Gross Value Added - which measures the sector’s contribution to the MSAR economy - increased by 8.6 per cent year-on-year to MOP1.67 billion and by 10.2 per cent yearly to MOP850 million, respectively.

Finance

SMEs

Forex slightly down

Local companies at international fair

The Macau SAR’s foreign exchange reserves had reached MOP157.9 billion (US$19.63 billion) at the end of September 2017, signaling a 1 per cent drop from MOP159.5 billion recorded a month before, according to data released by the Monetary Authority of Macao (AMCM) yesterday.

The foreign exchange reserves in September represented 11 times the currency in circulation, or 88.3 per cent of M2 of the local currency at the end of last month.

M2 is a measure of money supply which includes M1 and quasi-monetary liabilities. M1 consists of currency in circulation and demand deposits.

According to the AMCM data, the pataca trade-weighted effective exchange rate index dropped 0.71 points month-to-month and 2.16 points year-on-year to 103.6 during the month under review, suggesting the local currency’s exchange rate declined against the currencies of the MSAR’s major trading partners. S.Z.

MSAR companies and products were showcased at the 14th edition of an SMEs-based fair in Guangzhou with IPIM’s support Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Fifteen small and medium-sized enterprises from the Macau SAR successfully participated in the China International Small and Medium Enterprises Fair (CISMEF) in Guangzhou last week, the Macao Trade and Investment Promotion Institute (IPIM) confirmed to Business Daily.

This marks the tenth time the MSAR has participated in the event, held every autumn in Guangzhou.

The fair is organized from October 10 to 13, as a platform for exchange, trade, and co-operation between national and foreign SMEs. According to information provided by IPIM, the 15 Macau-based companies represented in the fair consisted mainly of ‘Macau brands, Macau products and Macau agents for Portuguese-Speaking Countries products.’

IPIM further explained that the main products on display included ‘food souvenirs, leatherwear, glasses, essential oils, skin care products and wines.’

The institute also claims that it offered ‘comprehensive support’ to the participating enterprises, by providing each exhibitor a standard booth inside the Macao Pavilion, covering the costs for booth rental and construction, as well as organizing and coordinating participation procedures with dedicated staff to assist the exhibitors throughout the event.

With the theme ‘Intelligent, Wisdom, Smart Manufacturing & Energy Conservation,’ this year’s CISMEF hosted nearly 3,000 enterprises distributed over more than 6,000 booths, China Daily reported.

Foreign participation involved some 30 countries and regions, including South Africa, Egypt, Malaysia, Greece, Japan, Poland, Germany, Indonesia, Russia, and South Korea..

Business Daily Tuesday, October 17 2017 7

Gaming

Results

VIP Baccarat saw a 35 pct y-o-y increase in Q3 Overall, games of fortune in the third quarter saw a 21.8 per cent year-on-year increase in revenues, rising to MOP67 billion Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

W

ith the first nine months of the year seeing accumulated gross gaming revenue up 18.8 per cent year-on-year, to MOP162.79 billion, the breakdown of the third quarter results released yesterday by the Gaming Inspection and Coordination Bureau (DICJ) show continued strength in VIP Baccarat.

The segment raked in a total of MOP36.69 billion during the quarter, showing a 35.04 per cent increase year-on-year, while the Baccarat segment itself brought in MOP20.88 billion, a slight increase of 7.25 per cent year-on-year.

Overall, games of fortune in the third quarter saw a 21.8 per cent yearon-year increase in revenues, rising to MOP67 billion, according to the information released by the local gaming oversight body.

Revenues from gambling activities away from the casino, namely Greyhound racing and Horse racing, tumbled in the third quarter when compared to the same quarter last year, with a 47.22 per cent drop in revenues from Horse

racing and a 7.7 per cent fall in revenues from Greyhound racing, at MOP19 million and MOP12 million, respectively.

Other sport-related gambling revenues saw mixed figures, with upticks of 93 per cent in basketball gambling revenue, to MOP44 million, and a fall of 3.6 per cent in football gambling revenue, to MOP133 million.

Revenue derived from the Chinese lottery saw a 200 per cent uptick year-on-year, reaching MOP3 million.

Both slots and Live Multi Game machine revenue increased during the third quarter when compared to last year, up 13. 4 per cent and 0.5 per cent, to MOP2.8 billion and MOP614 million, respectively.

The total number of slot machines active in the MSAR during the third quarter was 16,310, an increase of 541 machines from the same quarter last year. Meanwhile the number of gaming tables increased by 145 year-on-year.

Into the fourth round

September’s gross gaming revenues saw a 16.1 per cent uptick year-onyear, marking a solid ending to the quarter, which saw the opening of one new gaming venue in the MSAR:

SMEs

MGTO: prioritise budget accommodation applications The Macau Government Tourism Office (MGTO) has stated that applications for operating Abudget accommodations for visitors will be prioritised, in a bid to expedite the introduction of different offerings of hotels and inns in the city.

The president of the Macau Hoteliers & Innkeepers Association, Chan Chi Kit, previously revealed that the government is not in favour of lowering the standard requirements for accomodation operators in the city in order to facilitate new hostels.

Earlier this year, the government cited the results of a survey conducted

by MGTO stating that Macau residents’ intentions to start family hostels had declined, claiming factors such as public safety, environmental hygiene and traffic conditions among others.

Chief Executive Fernando Chui Sai On also announced in his 2017 Policy Address an attempt to boost and promote the development of budget hotels.

Regarding listings in Macau appearing on sites such as the Chinese short-term

home rental platform Xiaozhu.com, MGTO stated that ‘Tujia [another Chinese online home rental site] or

Xiaozhu are not operated in Macau, therefore MGTO has no comments’.

Meanwhile, the Public Security Force Police discovered four cases of illegal lodging during Golden Week (between 1 and 8 October 2017), and a total of 267 cases of illegal lodging have been detected since January 2017 until mid-October.

the Royal Dragon Casino, with 20 tables allocated through SJM’s gaming concession. The casino at the Macau Roosevelt, also under SJM via the Macau Jockey Club Casino opened at the end of June, just before the beginning of the quarter.

Predictions for the fourth quarter results could fall below expectations after the recent announcement that the newest comer to the Cotai Strip, MGM Cotai, will be unable to open in the fourth quarter as planned, due to damage inflicted by Typhoon Hato.

The new opening date is January 29, 2018.

The first week of October also marked an extended Chinese holiday, Golden Week, for which analysts at J.P. Morgan estimated average daily revenues of about MOP1 billion to MOP1.1 billion, below their predictions of over MOP1.2 billion.

Full-October expectations are for a 10 per cent to 13 per cent uptick in gross gaming revenues year-onyear, of between MOP24 billion and MOP24.6 billion. advertisement

8    Business Daily Tuesday, October 17 2017

Greater China Forecast

Central bank governor surprises with gravity-defying 7 pct growth The government had set a 2017 growth target of around 6.5 per cent Brenda Goh and Ryan Woo

C

hina’s central bank governor said the economy could grow 7 per cent in the second half of this year, accelerating from the first six months and defying widespread expectations for a slowdown.

The uncharacteristically explicit growth forecast by Zhou Xiaochuan came just days ahead of a twice-ina-decade Communist Party Congress, where President Xi Jinping is expected to strengthen his grip in a leadership reshuffle.

While China produced forecast-beating growth of 6.9 per cent in the first half, many economists and

Washington on Sunday.

Zhou, the country's longest-serving central bank chief, is likely to step down next year, sources told Reuters.

Investors are waiting to see if sustained economic growth this year will give China's leaders the confidence to quicken and deepen reforms, though many say Beijing continues to rely too heavily on debt-fuelled stimulus.

The government had set a 2017 growth target of around 6.5 per cent.

Zhou's estimate implies an expansion of about 6.95 per cent, topping growth rates in 2015-2016.

Economists had expected growth to ease to 6.8 per cent in the third quarter and 6.6 per cent in the fourth quarter, but the impact of the pollu-

Thursday. September data so far has shown imports and bank lending grew more than expected, while exports picked up.

Yesterday, data showed producer prices jumped 6.9 per cent in September on-year, confounding views that producer inflation had peaked.

A year-long construction boom has helped boost prices for building materials and resources from steel and copper to iron ore, helping to create a reflationary pulse worldwide in commodities markets and manufacturing.

Prices have turned wildly volatile in recent weeks on fears of shortages as Beijing embarks on its biggest environmental crackdown yet

private companies who don't enjoy the same access to cheap and ample credit.

Moreover, a recent Reuters analysis showed few of China's listed companies are using windfall profits this year to reduce massive debts despite Beijing's campaign to rein in risks.

Debt battle

Zhou also said China remains confident in its ability to fend off systemic risks and keep its fundamentals healthy and stable.

Risks in so-called shadow banking have somewhat eased, while non-performing loans are still at

Key Points China cbank gov sees 7 pct growth in H2, stronger than expected Rising household consumption behind GDP growth - Zhou China retail sales have been growing above 10 pct since March Economy is surprising markets with resilience China's central bank Governor Zhou Xiaochuan reads his notes prior to the IMFC plenary session the 2017 IMF World Bank Group annual meetings at the IMF headquarters in Washington, DC, USA, 14 October 2017. Source: Lusa

investors had expected momentum would start to fade later in the year.

Those views are largely predicated on three factors: higher borrowing costs; increasing curbs on home buying to cool soaring prices; and government-mandated shutdowns of some steel mills and factories in coming months to reduce winter air pollution.

But the driving force behind growth has been mainly rising household consumption, Zhou said in remarks published on the People's Bank of China's (PBOC) website yesterday.

"China's economic growth has slowed over the past few years...but economic growth has rebounded this year, with GDP reaching 6.9 per cent in the first half, and may achieve 7 per cent in the second half," Zhou was quoted as saying at the G30 International Banking Seminar in

tion shutdowns is a major wild card.

"Growth in the second half will be slower...I don't think 7 per cent growth is very possible," said Xu Hongcai, deputy chief economist at China Center for International Economic Exchanges (CCIEE), a prominent think-tank in Beijing.

"Investment and consumption growth have eased. And foreign trade is not likely to be as strong as in the first half."

The International Monetary Fund last week reiterated its stance that there may now be a now greater chance of a sharp slowdown in China, if authorities delay the withdrawal of hefty stimulus as they focus on achieving growth targets.

Firing on all cylinders?

China will report third-quarter gross domestic product (GDP) on

to reduce the country's notorious winter smog.

Some steel mills, smelters and chemical plants have cranked up output ahead of curbs on production or outright shutdowns.

Shanghai steel futures surged to a one-month high yesterday along with raw materials iron ore and coking coal, and the ripples are spreading globally, with LME copper futures hitting a three-month high.

Other data on Thursday is expected to reinforce the view that China is still in high gear, with growth in industrial output and retail sales seen accelerating while fixed investment may hold at a roughly steady pace.

Private business surveys, however, suggest the recovery has not been balanced, with large state-run firms reaping more of the benefits from robust growth than smaller,

Higher borrowing costs, housing curbs still seen dragging eventually a relatively low level, the central bank said.

Chinese authorities are trying to walk a fine line by containing riskier types of financing and slowing an explosive build-up in debt without stunting economic growth.

But authorities have also frequently kept the system well supplied with cash to avoid interest rates spiking too rapidly, which could slam the brakes on growth, and some market watchers fear "deleveraging" efforts aren't progressing fast enough.

Raymond Yeung, Greater China chief economist at ANZ in Hong Kong, said that China needs to pay attention to high loan growth even if more funds are now flowing into real investment rather than speculative activity.

"In any economy, if you see very strong loan growth, you have to be very cautious about where the money is going..." Reuters

PPI

Producer prices jump most in 6 months in boost for global inflation Analysts still predict producer prices will start to soften in the fourth quarter Sumeet Chatterjee

China's producer price inflation unexpectedly accelerated to a sixmonth high in September as a construction boom shows no signs of abating and a government crackdown on air pollution triggers fears of winter shortages and frenzied jumps in commodity prices.

China's strong demand for building materials has triggered a year-long commodities rally which is helping to buoy manufacturing activity and inflation around the world, even if it has yet to trickle down to the consumer level.

China's economy is expected to grow 7 per cent in the second half of this year, the country's central bank governor said, defying economists' expectations for a slowdown.

The producer price index (PPI) rose 6.9 per cent in September from a year

earlier, from 6.3 per cent in August, the National Bureau of Statistics (NBS) said on Monday.

The gain - the strongest since March - signals continued resilience in China's economy and industrial sector profits, welcome news for Communist Party leaders two days ahead of a twice-a-decade party congress.

Analysts polled by Reuters had expected September producer inflation would be steady from August at 6.3 per cent.

On a month-on-month basis, the PPI rose 1.0 per cent in September.

China's commodity futures prices have seesawed wildly in recent weeks as the government embarks on its biggest environmental crackdown yet to reduce the country's notoriously thick winter smog.

Some steel mills, smelters and coal companies have cranked up production ahead of expected official curbs

on output or outright shutdowns in coming months. Environmental inspections have disrupted some supply lines and added to uncertainty in the market.

Shanghai steel futures surged nearly 7 per cent on Friday, spurring a similar rally in raw materials iron ore and coking coal.

Iron ore and coal prices had tumbled sharply in September on fears of weaker demand for raw materials, but traders are confused as to how the winter supply and demand picture will play out and how much of the impact will ripple through into global commodity markets.

Top steelmaking city Tangshan became the latest to enforce production cuts this month, ahead of the previous deadline of Nov. 15, when winter heating systems in China are switched on.

Bolstered by manufacturing and a

hot property market, China's economy grew by a faster-than-expected 6.9 per cent in the first half of 2017.

China will have no problem meeting its economic growth target of around 6.5 per cent this year, and may even beat it, the head of the Statistics Bureau said last Tuesday.

Analysts still predict producer prices will start to soften in the fourth quarter due to a high base of comparison last year and as overall demand moderates along with economic growth.

China's consumer price index (CPI) rose 1.6 per cent as expected in September, versus 1.8 per cent in August and well within Beijing's 2017 target of 3 per cent.

Food prices, the biggest component of the consumer price index (CPI), fell 1.4 per cent from a year earlier.

Non-food price inflation quickened to 2.4 per cent in September from 2.3 per cent in August. Reuters

Business Daily Tuesday, October 17 2017 9

Greater China In Brief NEA

Mainland can solve renewable energy waste problem by 2020

Environment

Beijing needs tougher clean fuel targets to meet Paris climate pact If current government policy is enforced properly, non-fossil fuels should account for 60 per cent of energy supply by 2050 China will have to launch more ambitious renewable energy and non-fossil fuel targets and ramp up efforts to enforce them to avoid missing global climate accord requirements, two government think tanks said yesterday.

China's capacity for renewable energy, including hydro, wind and solar, will significantly exceed Beijing's own target set in the five-year plan to 2020, according to the report jointly issued by China National Renewable Energy Centre (CNREC) and the Energy Research Institute of Academy of Macroeconomic Research.

The world's top energy consumer pledged to install 340 gigawatts (GW) of hydropower capacity, 210 GW of wind and 110 GW solar by 2020 in the five-year plan.

But to meet commitments agreed to in 2015 in the Paris global pact to fight climate change, China should raise its target for non-fossil fuel to 26 per cent of its total energy mix from a current target of 15 per cent by 2020, the report said.

"The Paris agreement of reducing the global temperature by two degrees puts pressure on the shortterm energy transition from coal and

oil to non-fossil fuels," said Wang Zhongying, deputy director general at CNREC. China, the world's second-larg-

“The Paris agreement of reducing the global temperature by two degrees puts pressure on the short-term energy transition from coal and oil to non-fossil fuels” Wang Zhongying, deputy director general at CNREC est economy, overtook the United States as the world's biggest emitter of greenhouse gases in 2007.

China pledged to bring its carbon emissions to a peak by 2030 or earlier

as part of a joint pledge made with the United States ahead of the 2015 Paris talks.

If current government policy is enforced properly, non-fossil fuels should account for 60 per cent of energy supply by 2050, higher than an official government target of reducing coal alone to just half, the report said.

Still, getting stranded clean power in the west to urban users has been a major headache for the government as Beijing seeks wean the nation off coal, the nation's favourite fuel.

An official at the National Energy Administration said at the conference yesterday he reckons the country will solve the problem of wasted energy by 2020.

Chinese authorities have been striving to improve energy efficiency and upgrade energy infrastructure by introducing measures including national carbon trade, green certificates and promoting energy storage systems. "(But) to ensure compliance with the Paris agreement, strong support to renewable energy deployment is needed on both the national and local levels," said Wang. Reuters

Report

Li's H.K. tower sells for record US$5.15 billion The deal is the latest to signal Hong Kong’s red-hot property market shows no signs of slowing down Peter Vercoe

Li Ka-Shing’s CK Asset Holdings Ltd. sold its 75 per cent holding in The Center to a Chinese-led group for HK$40.2 billion (US$5.15 billion), a record for a Hong Kong office tower, the Hong Kong Economic Journal reported.

The deal will be announced in the near future, the Economic Journal reported, without saying where it got the information. Some domestic investors are also part of the consortium, the newspaper said. Representatives at CK Asset didn’t immediately return calls seeking comment.

LVGEM (China) Real Estate Invest-

‘The 73-story building in the Central business district is the city’s fifth-tallest’ ment Co. last week announced the HK$9 billion purchase of a building from Wheelock & Co. a record persquare-foot price for a commercial building in Hong Kong’s Kwun Tong area.

Earlier this year, Henderson Land Development Co. paid HK$23.3 billion for the first commercial land to be sold by the government in the Central district in more than 20 years. For CK Asset, which recently changed its name from

China expects to solve the problem of renewable energy waste by 2020, Liang Zhipeng, deputy director of the new energy and renewable energy department of the National Energy Administration (NEA) said in a presentation at a conference yesterday. He also said the agency expects the wind sector to wean itself off government subsidies by 2022.

Hong Kong

Top international lawyers say rule of law under threat The jailing of three Hong Kong democracy activists this year is a serious threat to the city's rule of law, a group of senior international lawyers said yesterday, adding the independence of the judiciary risks becoming a "charade". Joshua Wong, Alex Chow and Nathan Law were sentenced to community service last year for unlawful assembly but were dealt harsher punishments of jail in August after a government appeal.

In an open letter, 12 lawyers including former lord chancellor Charles Falconer criticised the imprisonment of the trio, who were among the leaders of the democracy protests in late 2014 that drew hundreds of thousands at their peak.

Golf

Wanda courses in resort shut down Two golf courses at a Dalian Wanda Group Co. resort in northeastern China were shut down by the municipal government there, in the latest setback for billionaire Wang Jianlin’s conglomerate. The Fusong County government ordered Wanda’s Changbaishan International Resort to stop golf course operations on Sept. 9, according to a notice on its website dated Oct. 13, without elaborating. Wanda declined to comment. China has been clamping down on golf courses since 2004, and a total of 176 courses have been banned, shut down or rescinded, according to a January statement by the National Development and Reform Commission, the nation’s economic planner.

Frugality

General views of IFC building and city skyline. Source: Bloomberg

CK Property, the proceeds would give the company funds to diversify away from its main real-estate business. CK Asset and affiliate CK Infrastructure Holdings Ltd. earlier this year agreed to buy a German maker of smart meters for about 4.5 billion euros (US$5.3 billion), building on the company’s expansion in infrastructure and energy.

73-story tower

CK Asset’s properties, which include the Cheung Kong Center and Hutchison House, spanned about 17 million square feet (1.6 million square meters) as of June, with more than 80 per cent located in Hong Kong, according to the company.

The 73-story building in the Central

business district is the city’s fifth-tallest, according to the Skyscraper Center.

Hong Kong’s skyscrapers command the highest rents in the world, according to a report last month from Knight Frank, which said rental costs are more than four times higher than in Singapore. Rental growth will continue to be robust on an influx of mainland Chinese tenants, Knight Frank said.

News involving the sale of The Center has been trickling out for at least a year, with the Hong Kong Economic Journal saying last year that ICBC Asia approached CK Asset about buying the stake in the tower for HK$34.8 billion.

At the time, ICBC denied the report, saying it didn’t engage in talks nor purchase the stake. Bloomberg News

Sea cucumbers and free haircuts out for congress-goers Pricey delicacies like sea cucumber and prawns are off the menu for the 2,000 delegates in Beijing for China’s 19th Communist Party congress this week, as President Xi Jinping’s long-running austerity drive makes its mark on the twice-a-decade meeting. Official Wang Lilian, who’s worked on the past three gatherings, said in an interview with China National Radio that attendees won’t be getting fruit in their hotel rooms or free haircuts either, according to Phoenix TV. “The restaurants will serve home-style food,” Wang said, according to the Phoenix report.

10 Business Daily Tuesday, October 17 2017

Greater China

Summit

Precedent-breaking Xi Jinping gets set to bolster his power What will actually happen at the congress, and what Xi will say in his state-of-the-party address at its opening, are closely guarded secrets Ben Blanchard and Philip Wen

C

hinese President Xi Jinping is set to amass even greater power at a Communist Party Congress this week, promoting close allies, having his guiding thought enshrined in the party constitution and possibly assuming a title to put him on par with Mao Zedong.

That is the view of multiple sources with ties to the Chinese leadership, including senior party officials, former officials and foreign diplomats who have talked to top officials. Much of it has also been signalled in various ways in the state media in recent months.

Xi was born into revolutionary aristocracy and came of age in the tumult of Mao's Cultural Revolution.

Since taking office five years ago, he has cast aside decades of precedent, stamping his authority on the party's 89 million members and asserting China's rising might on the global stage.

Having been perceived as a colourless, unambitious "princeling" child of the elite before catapulting into the apex of power as a Standing Committee member in 2007, Xi has surprised time and again, leadership sources, diplomats and experts say. He has locked up political rivals for corruption, accumulated titles and pushed painful reforms for the military.

China's State Council, which doubles as the party's spokesman's office, did not respond to a request for comment on Xi's plans for the 19th Party Congress or on how the party

evaluates his first five years in office.

At the congress, a twice-a-decade event that opens Wednesday, some of Xi's most trusted aides look set for promotion to the Standing Committee, such as Li Zhanshu, an advisor who worked as a junior official in Hebei province in the 1980s at the same time as Xi. In another key break with tradition, Xi looks set to retain a key ally, Wang Qishan, in some capacity despite the anti-corruption tsar passing retirement age.

Xi could also end up being called party chairman, a role that would pave the way for him to stay in office past 2022 when precedent dictates he should step down, leadership sources say.

"Xi is now moving more in the direction of a king, of 'I am China' and 'I am the Communist Party'", said Steve Tsang, director of the China Institute at the School of Oriental and African Studies in London.

In another first, Xi has already overseen two large-scale military parades in his first term, including a dramatic display of China's rising power and military capability through Beijing's Tiananmen Square in 2015.

What will actually happen at the congress, and what Xi will say in his state-of-the-party address at its opening, are closely guarded secrets, even as the party and state media have flagged the broad outlines of what will happen.

One of the most important signals to watch at the congress will be whether - or how often - Xi is referred to as "lingxiu", or leader.

That honorific has been bestowed only on two others since the 1949

founding of the People's Republic of China: Mao and his short-lived successor, Hua Guofeng.

Using the term over the congress could set him up to be named party chairman, a title that has not been used since Hu Yaobang, who died in 1989, sources with ties to the leadership and diplomats say.

Xi is currently head of the party but with the title general secretary,

‘One of the most important signals to watch at the congress will be whether - or how often Xi is referred to as "lingxiu", or leader’ and has to rule by consensus with his Standing Committee, part of a system of collective leadership set up after Mao died to prevent a recurrence of the chaos that erupted under him.

If he does become chairman, that will spell the end for the concept of collective leadership, said a senior Beijing-based Asian diplomat.

"He won't have to answer to anyone," the diplomat said.

Xi has gathered other titles gradually since late 2012, when he first became party chief, just before assuming the presidency. He also runs the National Security Commission and the top financial and reform

decision-making councils. And despite already being head of the military, he was appointed commander-in-chief last year.

Corruption crackdown

Arguably one of China's crowning achievements over the past five years, one unquestionably popular with the public, has been Xi's crackdown on corruption. Some 1.4 million officials have been punished and many jailed, including the much feared former domestic security chief, Zhou Yongkang.

Xi has also cracked down on the pomp that had previously gone with visits by high-level Chinese officials to the provinces, and flashed a deft common touch to show his connection to the ordinary person.

In one widely-reported instance, Xi visited a Beijing dumpling restaurant in late 2013; images on state media showed him lining up for his food with other patrons.

"Part of the story of Xi's rising personality profile is about the need to bolster the perceived legitimacy of the Communist Party around a leader seen as being of the people," said David Bandurski, co-director of the China Media Project.

He said the previous leadership of President Hu Jintao and Wen Jiabao had warned of a growing gap between the Communist Party and the rest of the country, partly epitomised by rampant corruption.

"So under Xi there was an immediate move to address both of these key problems of perception", Bandurski said. "The answer was Xi as the plain-talking man of the people." Reuters

Business Daily Tuesday, October 17 2017 11

Asia Election

Japan ruling bloc heads for big win despite voter distaste for PM Abe A survey showed 47 per cent of voters would prefer not to see Abe stay in his post Linda Sieg

J

apanese Prime Minister Shinzo Abe's ruling coalition is on track for a big win in Sunday's general election - even though almost half the country's voters don't want him to keep his job, a media survey showed yesterday.

Behind that paradox is a fizzling challenge by an upstart party led

by Tokyo Governor Yuriko Koike, a divided opposition and jitters about a volatile North Korea that incline wary voters toward a safe pair of hands, political analysts said.

Abe's Liberal Democratic Party (LDP) is set to win between 281 to 303 seats in the 465-member lower house, while its junior coalition partner the Komeito is on track to take 30-33 seats, the Mainichi newspaper said, based on an Oct. 13-15 survey.

That would put the ruling bloc on track to maintain the two-third's "super majority" it held before the chamber was dissolved for the snap election.

That means Abe's grip on his post is all but assured when parliament convenes to elect a premier after Sunday's poll.

The Mainichi survey, however, showed 47 per cent of voters would prefer not to see Abe stay in his post.

Abe took office nearly five years ago promising to bolster defence and boost growth with his "Abenomics" strategy.

Thirty-seven per cent want him to remain.

"Abe is not popular, but his party is trusted by enough voters to win big if only because the new parties are untested and have not generated excitement," said Jeffrey Kingston, director of Asian studies at Temple University Japan.

“Abe is not popular, but his party is trusted by enough voters to win big if only because the new parties are untested and have not generated excitement” Jeffrey Kingston, director of Asian studies at Temple University Japan An electoral system where 289 seats are from single-member districts where the candidate with a plurality of votes wins and others get no representation at all also means a split opposition benefits Abe's LDP. The rest of the chamber's

Japanese Prime Minister Shinzo Abe

seats are from proportional representation blocs.

Koike's fledgling Party of Hope, which the former LDP lawmaker launched last month as a "reformist, conservative" alternative to the LDP, is likely to win between 42-54 seats.

The Party of Hope absorbed a big chunk of the failed main opposition Democratic Party. But an early burst of voter enthusiasm seems to have dissipated after Koike declined to run for a lower house seat or say whom her party would back as a candidate for premier.

The party's platform also shares much of Abe's hawkish security

agenda, but differs by promising to freeze a planned sales tax hike and to exit nuclear power by 2030.

A smaller Constitutional Democratic Party of Japan (CDPJ), formed by liberal members from the Democratic Party, was set to win between 45-49 seats, the Mainichi said - raising the possibility that it might become the leading opposition group.

The CDPJ "crept up from nowhere," Kingston said. "It is clear there are a lot of people who feel left by the wayside by Abenomics."

The Mainichi forecasts were based on responses from 73,087 voters nationwide. Reuters

Monetary policy

Philippine central bank governor sees no need to tighten now Describing the economy as increasingly strong, Espenilla played down concerns about the impact of the weak peso Enda Curran

Philippine central bank Governor Nestor Espenilla said contained inflation means there isn’t a need to increase interest rates in the near term.

"Right now, there is no need to move policy rates looking at the inflation outlook," Espenilla said in Washington where he was attending the annual International Monetary Fund meetings. "It might be too much of an anticipation to say we will raise interest rates at the next review."

An economic boom accompanied by surging credit growth has fuelled speculation that Bangko Sentral ng Pilipinas may need to tighten monetary policy. That would be a divergence from other central banks in Southeast Asia, like Indonesia and Vietnam, that have eased this year.

The Philippines kept its benchmark interest rate unchanged at a record low of 3 per cent last month. The central bank is next scheduled to decide policy on Nov. 9.

The Philippine economy is headed for a sixth year of growth exceeding 6 per cent, among the world’s fastest.

Philippine central bank Governor Nestor Espenilla

That hasn’t yet translated into an inflation problem with the central bank maintaining forecasts for this year and next year at 3.2 per cent.

The bank’s goal is to keep inflation within a range of 2 per cent to 4 per cent until 2020.

"If you look at it purely from that perspective, that is not really a big driver for us to move policy rates," Espenilla said on Oct. 15. "Nonetheless, we review this on a six-week cycle."

The central bank governor said he won’t be pressured to lift rates if the Federal Reserve pushes ahead with further gradual tightening. In past economic cycles, central banks in Asia moved in tandem with the Fed. "Our monetary policy is not hostage to what happens in another jurisdiction. We are in a different cycle."

Weak peso

Describing the economy as increasingly strong, Espenilla played down

concerns about the impact of the weak peso, which has declined more than 3 per cent against the dollar this year, according to Bloomberg data.

"Currency traders will do what they do."

On the nation’s credit boom, the central bank governor said demand for credit is based on underlying fundamentals and that its scrutiny of banks shows that loans quality remains high. Growth in net loans accelerated to 20.4 per cent in August, the fastest pace since 2014.

Domestic credit to the private sector in the Philippines stood at 45 per cent of gross domestic product in 2016, according to data from the World Bank. The ratio exceeded 100 per cent in Malaysia, Thailand and China.

Bangko Sentral has adopted measures in the past to cool the property sector, including capping the value of real estate that can be used as loan collateral.

"It is not a situation where banks are lending to anyone who has a name and can sign a piece of paper," Espenilla said. "We know for a fact that the banks are lending very carefully into the market." Reuters

12 Business Daily Tuesday, October 17 2017

Asia Debt

Bad-loan recast failures portend more pain for India lenders Sagging economic growth in India is complicating efforts to clean up a mountain of bad debt at the nation’s banks David Yong and Anurag Joshi

Loans worth 1.7 trillion rupees (US$26 billion) have been withdrawn in total since the 2001 inception of the Corporate Debt Restructuring Mechanism through to the end of August, according to the latest data from the agency that brokers agreements between borrowers and lenders.

That’s a net increase of 446 billion rupees from the end of 2016, and already exceeds the 415 billion rupees of loans that couldn’t be revamped last year, the data show.

The jump in failures underscores the challenges banks face in rehabilitating their assets with growth in the economy forecast to slow to a four-year low. Lenders are stuck with 1.5 trillion rupees of live cases with the CDR forum, mainly from the

steel sector. The central bank had asked lenders more than

“There’s excess capacity for some of these borrowers while certain policy changes also contributed to the failures” Rajesh Mokashi, managing director at CARE Ratings in Mumbai

two years ago to choose legal action over the mechanism to tackle the problem.

“There’s excess capacity for some of these borrowers while certain policy changes also contributed to the failures,” said Rajesh Mokashi, managing director at CARE Ratings in Mumbai. “Bankers are feeling the pinch to take haircuts as offers from buyers of non-performing loans are sub-optimal.”

The record US$180 billion of stressed assets in the system is hindering the banks’ ability to bolster credit at a time when the economy is still suffering from last year’s cash ban and the disruption in supply chains triggered by a sales tax introduced on July 1.

Growth has been slowing for the past five quarters and a Bloomberg survey published last month forecast India’s GDP will grow at 6.8 Nper cent in the year to March 2018. Recent data from the manufacturing

sector indicates growth is getting back on a normal course, the finance ministry said in a statement over the weekend.

The absence of hard-coded timeline and the failures at banks and lenders’ debt resolution forum has prompted authorities into stronger actions, according to the central bank. Specific measures

taken over the past few months will add a sense of urgency to the task, Reserve Bank of India Governor Urjit Patel said last month.

There’s been some progress. The CDR panel has resolved cases involving 137 billion rupees of loans this year compared with 86 billion rupees in 2016, the data show. Bloomberg News

Refugees

Thousands of new Rohingya flee violence, hunger to Bangladesh Myanmar rejects accusations of ethnic cleansing Zeba Siddiqui

Hungry, destitute and scared, thousands of new Rohingya refugees crossed the border into Bangladesh from Myanmar early yesterday, Reuters witnesses said, fleeing attacks

by Buddhist mobs and hunger that the United Nations has called ethnic cleansing.

Wading through waste-deep water with children strapped to their sides, the Rohingya told Reuters how they had walked through bushes and forded monsoon-swollen streams for days from Myanmar's Buthidaung region before reaching the border.

A seemingly never-ending line entered Bangladesh near the village of Palongkhali. Many were injured, with the elderly on makeshift stretchers, and women balanced family belongings - pots, rice sacks, clothing - on their heads.

"We couldn't step out of the house for the last month because the military were looting people. They started firing on the village. So we escaped into another village," said Mohammad Shoaib, 29.

He wore a yellow vest and was balancing his jute bags, carrying some food and aluminium pots, on a bamboo pole.

"Day by day things kept getting worse, so we started moving towards

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Bangladesh. Before we left, I went back near my village to see my house, and the entire village was burnt down," Shoaib said.

They walked to join some 536,000 Rohingya Muslims who have fled Myanmar since Aug. 25, when coordinated Rohingya insurgent attacks sparked a ferocious military response, with the fleeing people accusing security forces of arson, killings and rape.

Myanmar rejects accusations of ethnic cleansing and has labelled the militants from the Arakan Rohingya Salvation Army who launched the initial attacks as terrorists who have killed civilians and burnt villages.

San Suu Kyi, has pledged accountability for human rights abuses and says the country will accept back refugees who can prove they were residents of Myanmar.

The United States and the European

Union have been considering targeted sanctions against Myanmar's military leaders, diplomats and officials have told Reuters, although they are wary of action that could destabilize the country’s transition to democracy. Reuters advertisement

Food, aid restricted

The refugees who arrived in Bangladesh yesterday said they were driven out by hunger because food markets in Myanmar's western Rakhine state have been shut down and aid deliveries restricted. They also reported attacks by the military and Rakhine Buddhist mobs.

Hundreds of thousands of Rohingya had already been in Bangladesh after fleeing previous spasms of violence in Myanmar, where they have long been denied citizenship and faced restrictions on their movements and access to basic services.

Myanmar's de facto leader, Aung Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Tuesday, October 17 2017    13

Asia Aviation

In Brief

Cheaper rivals target Singapore's maintenance sector

Trade

Indonesia revises up Aug exports, imports

In Thailand, the government wants to turn U-Tapao airport near Pattaya into a maintenance hub Cindy Silviana and Chayut Setboonsarng

Singapore, the dominant hub for aircraft maintenance, repair and operations (MRO) in southeast Asia, the world's fastest-growing aviation market, is under threat from low-cost rivals in nearby Indonesia, Thailand and Malaysia.

As the cheaper challengers look to muscle in on a lucrative market with annual output of S$8.9 billion (US$6.57 billion), Singapore accounts for a quarter of all Asia's MRO business - Singapore-based MRO firms are having to scramble higher up the value chain.

With government backing, the maintenance arms of national carriers Garuda Indonesia, Thai Airways International and Malaysia Airlines are looking to follow the example of Singapore Airlines' SIA Engineering Co and boost revenues from providing services to rival carriers.

"This is a real threat for the Singapore-based MRO companies," said Corrine Png, CEO of transport research firm Crucial Perspective. "The lower end and more labour-intensive heavy maintenance work for the more common aircraft models will face more competition from these locations given their much lower labour costs."

Setting up next door

Shares in Garuda Maintenance Facility AeroAsia Tbk (GMF AeroAsia) began trading last Wednesday after the company raised US$95 million from an IPO. The shares fell 9 per cent in the first three days of trading, though Png noted liquidity was hampered

by Garuda selling only 10 per cent to the public.

The maintenance offshoot of Indonesia's national carrier wants to raise another US$200 million by selling a 20 per cent stake to a potential strategic partner - to help it expand existing operations and build a new maintenance facility on Batam Island - just 31 km off Singapore's coast.

GMF AeroAsia has a longstanding partnership with Air France Industries KLM Engineering & Maintenance, which said last month it signed a letter of intent with GMF AeroAsia to "move up" that partnership. It declined to say whether it planned to buy a stake.

GMF AeroAsia CEO Iwan Joeniarto told Reuters the company aims to be a global top-10 MRO provider by revenue from 2021 - it currently ranks

13th - citing a strategic location and manpower costs a fifth lower than Singapore as its competitive advantages.

He said revenue from the Garuda Group currently makes up close to two-thirds of GMF's total, and he wants to switch that to 40 per cent, with the rest coming in from new customers.

The US$50 million Batam facility, targeted to open in 2019, will seek U.S. and European regulatory certifications that would give it a broader customer base, Joeniarto said.

Key Points Singapore home to a quarter of Asia's MRO work Indonesia, Thailand and Malaysia targeting industry Singapore trying to move up value chain in response In Thailand, the government wants to turn U-Tapao airport near Pattaya into a maintenance hub with help from investors including Airbus, which signed a memorandum of understanding with Thai Airways in March to develop a major MRO facility.

Kanit Sangsubhan, Secretary-General of Thailand's Eastern Economic Corridor Office, said he expected a formal joint venture agreement would be signed in the first quarter of next year. An Airbus spokesman declined to comment on the timing.

Thai Maintenance, the MRO arm of Thai Airways, does 70 per cent of its work for the national carrier, but that could drop to 50 per cent over time as it attracts outside customers, Kanit said.

"There are plans to eventually spin off Thai Maintenance as its own company," he added.

Malaysia Airlines, which this month gained European approvals to perform major modifications and repairs in avionics, aircraft structure and cabin interiors, intends to take on more third-party contracts over the next 18 months, CEO Peter Bellew said.

Last week, Airbus bought the 60 per cent of Malaysia's Sepang Aircraft Engineering it didn't already own for an undisclosed price. The Kuala Lumpur-based facility, which has opened a second hangar that can handle two A320s at a time, serves several southeast Asian airlines including Singapore-based low-cost carriers Scoot and Jetstar Asia.

Singapore moves higher

SIA Engineering, which now earns only a third of its business from Singapore Airlines, has set up a joint maintenance centre with Philippine low-cost carrier Cebu Air near Manila - a cheaper location than Singapore.

And rival Singapore Technologies Engineering, the world's biggest MRO firm, has a large facility in Guangzhou, China.

As the threat grows at the low-end, the Singapore government is looking to move up the value chain, focusing on research and development and high-tech aerospace manufacturing work in partnership with companies like Rolls-Royce Holdings.

Rolls-Royce, SIA Engineering and the Singapore government are investing up to S$60 million in a joint laboratory to work on advanced manufacturing technologies involving 3D printing and robotic solutions.

Professor Tan Sze Wee, executive director of Singapore's Science and Engineering Research Council, part of the Agency for Science, Technology and Research, said the city-state had in the past competed for MRO work based on productivity and cost.

"But the MRO sector as a whole, which leverages on the larger Asia aerospace sector, is a growing pie," he said.

"There are more players coming in from low-cost sites. We will be starting to segment this not just because of productivity or costs but for the more advanced technology. You need the talent to do that, which will take a while for regional countries to catch up." Reuters

Markets

Japan regulator may include exchange rates under fair disclosure Investors have expressed concerns that lack of clarity could prompt companies to hold back information for fear of unintentionally breaking the law Japan's financial regulator is likely to include exchange rates in forward contracts under fair disclosure rules for listed companies, according to two sources with direct knowledge of matter and a draft of guidelines seen

by Reuters.

The move would broaden the scope of requirements already put in place by the Tokyo Stock Exchange and explain clearly what needs to be disclosed.

Guidelines on what will be included in Japan's fair disclosure rules will come out in the near future, the sources said, ahead of full implementation of the law early next year.

The sources did not want to be named as they were not authorised to discuss

the matter publicly. A spokesman for Japan's Financial Services Agency (FSA) declined to comment.

Existing insider trading regulations prohibit the transfer to selective parties "material information" such as plans to sell new shares, merger and acquisition plans and earnings forecast revisions.

In the new guidelines, FSA will specify further instances of what could constitute material information, such as forward foreign exchange contract rates that may help recipients of the information easily estimate changes in listed companies' financial performance, said the sources.

Fair disclosure rule does not ban listed firms from engaging in talks

with investors about their business strategy, but the guidelines could ban the selective disclosure of specific plans such as profit projections, the sources said.

Listed companies are required to make public disclosure promptly if unpublished material information is given to particular parties such as analysts and institutional investors.

These measures are in line with Prime Minister Shinzo Abe's push to improve corporate governance and encourage foreign investment in a country, where the business culture has often been criticised for prioritising the interests of executives over shareholders. Reuters

Indonesia's statistics bureau yesterday said it had revised the value of August's exports and imports, but maintained the trade surplus figure. August exports were revised up to US$15.23 billion from US$15.21 billion, while imports were revised to US$13.51 billion from US$13.49 billion.

The bureau maintained Indonesia's trade surplus in August at US$1.72 billion. The bureau on Monday gave early calculations of foreign trade of Southeast Asia's largest economy in September, showing a surplus of US$1.76 billion.

Aviation

AirAsia Japan to relaunch later this month Low-cost airline AirAsia Japan yesterday said it would begin its first flights from Nagoya later this month, more than two years after Malaysia's AirAsia Bhd announced plans to re-enter the Japanese market with new partners. A prior AirAsia Japan, a joint venture with Japanese carrier ANA Holdings Inc, was dissolved in 2013 and used as the basis for the launch of ANA subsidiary Vanilla Air. AirAsia owns 49 per cent of the new AirAsia Japan, which has two Airbus SE A320 narrow body aircraft and will be based at Nagoya.

Survey

Big support for Duterte's drugs war Nearly nine out of 10 Filipinos support Philippine President Rodrigo Duterte's war on drugs, and almost three quarters believe extrajudicial killings are taking place in the bloody crackdown, an opinion poll showed yesterday.

Duterte's signature campaign has killed thousands of Filipinos and caused international alarm, amid widespread allegations by activists that police are executing suspected drug users and dealers. Police reject that and say every one of the more than 3,900 victims in their anti-narcotics operations were killed because they were armed and had violently resisted arrest.

Crime

S.Korea police seek arrest warrant for Hanjin Group chief South Korean police are seeking an arrest warrant for Cho Yang-ho, chairman of Hanjin Group, the parent of Korean Air Lines Co Ltd, on charges of breach of trust following their probe into construction work at his house, a police official said yesterday. In July, police raided the headquarters of Korean Air Lines, South Korea's top airline, as part of an investigation into allegations that company funds were used to pay for the renovation work at Cho's home. A Korean Air spokesman declined to comment.

14    Business Daily Tuesday, October 17 2017

International In Brief

Yellen

'Most' Fed members see rising inflation in 2018 The majority of policymakers at the U.S. central bank believe U.S. price pressures will rise in 2018 despite recent weakness, Federal Reserve Chair Janet Yellen said. Sharp divisions among Fed members have persisted since last year over the causes of persistently weak inflation, which has failed to rise in the face of falling unemployment and steady job creation. But the Fed is widely expected to raise rates in December for a third time this year, in the expectation that inflation will eventually kick in.

Spain politics

Catalan leader must drop independence by Thursday Spain's government will take control of Catalonia and rule it directly if Catalan leader Carles Puigdemont does not drop a bid to split the region from Spain by Thursday at 1000 a.m. (0800 GMT), deputy Prime Minister Soraya Saenz de Santamaria said.

"Mr Puigdemont still has the opportunity to start resolving this situation, he must answer 'yes' or 'no' to the declaration (of independence)," Saenz de Santamaria said. Madrid had given Puigdemont until Monday 10:00 a.m. (0800 GMT) to clarify his position on independence with a "Yes" or "No", but the Catalan leader did not directly answer the question.

M&A

T-Mobile, Sprint aim to announce merger T-Mobile U.S. Inc and Sprint Corp plan to announce a merger agreement without any immediate asset sales, as they seek to preserve as much of their spectrum holdings and cost synergies as they can before regulators ask for concessions, according to people familiar with the matter. While it is common for companies not to unveil divestitures during merger announcements, T-Mobile's and Sprint's approach shows that the companies plan to enter what could be challenging negotiations with U.S. antitrust and telecommunications regulators without having made prior concessions.

Arson

Nine dead as wildfires ravage northern Portugal, Spain At least nine people died as hundreds of wildfires ravaged northern Spain and Portugal, scorching farmland and forcing the evacuation of towns and villages, authorities said yesterday. The fires, some of which an official said had been started deliberately, were fanned by strong winds as remnants of ex-Hurricane Ophelia brushed the Iberian coast. They had spread quickly at the weekend across a landscape left tinder-dry by a hot summer, and some blazes in the northwestern Spanish region of Galicia remained out of control yesterday, authorities there said.

Commodities

Global steel demand growth to slow in 2018 Worldsteel expects demand in China to reach 765.7 million tonnes this year and next Maytaal Angel

G

lobal steel demand growth is expected to slow to 1.6 per cent next year, after strong growth in 2017 driven by demand from top consumer China, the World Steel Association (worldsteel) said yesterday.

Demand will reach 1.648 billion tonnes next year, up from 1.622 billion tonnes this year, worldsteel said. The 2017 figure corresponds to nominal growth of 7 per cent and underlying growth of 2.8 per cent.

"The risks to the global economy ... have to some extent abated. We see the best balance of risks since the 2008 economic crisis," worldsteel said in a statement at its general assembly in Brussels.

However, it added: "In 2018 we expect growth to moderate, mainly due to slower growth in China."

The steel industry, worth about US$900 billion a year, is a gauge of the world's economic health. Average global prices have climbed some 50 per cent since the 12-year lows of December 2015, according to consultants MEPS.

China this year closed most of its out-dated and in many cases illegal induction furnaces, a category not previously captured in official demand statistics, hence the one-off effect on nominal versus underlying demand.

Worldsteel expects demand in China to reach 765.7 million tonnes this year and next. The 2017 figure corresponds to nominal growth of 12.4 per cent this year and underlying growth of 3 per cent, worldsteel said. Next year, however, China's demand will be flat.

Worldsteel, which represents more than 160 steelmakers accounting for 85 per cent of global production, had forecast in April that global demand would grow just 1.3 per cent in 2017 and 0.9 per cent in 2018.

"Progress in global steel markets this year to date has been encouraging. We have seen the cyclical upturn broadening and firming ... " said T.V. Narendran, chairman of the worldsteel Economics Committee.

Future prospects are less encouraging, though, especially in the longer term.

"The lack of a strong growth engine to replace China and a long-term decline in steel intensity due to technological

and environmental factors will continue to weigh on steel demand in the future," worldsteel said.

Demand in India, the world's third-largest steel consumer and the industry's best hope after China, is expected to grow just 4.4 per cent this year and 5.7 per cent next year, compared with an April forecast of 6.1 per cent and 7.1 per cent, respectively.

On the plus side, excess capacity is being reduced, thanks largely to China's cuts, worldsteel director general Edwin Basson said at the general assembly.

"There's ample evidence that over a two-year space China will have closed capacity similar to total U.S. capacity and on top of that comes the induction furnace closures," Basson said.

"There's (still) enough capacity globally to satisfy demand for the next 20 years (but) we're positive because the G20 (Global Forum on Steel Excess Capacity) is looking at this and there's good co-operation between all member countries."

Official figures from China show it has cut nearly 100 million tonnes of legal steel capacity and 120 million tonnes of illegal induction furnace capacity since the start of last year. Reuters

Diplomacy

EU vows to save Iran deal, fears for North Korea mediation German Foreign Minister Sigmar Gabriel warned that Trump's decision not to certify the Iran accord could put any scenario in doubt Robin Emmott and Gabriela Baczynska

The European Union vowed yesterday to defend a 2015 nuclear deal between Iran and world powers and urged U.S. lawmakers not to reimpose sanctions after President Donald Trump chose not to certify Tehran's compliance with the accord.

Germany and France led a chorus of warnings to the United States, normally the EU's closest foreign policy ally, that any weakening of the agreement to prevent Iran obtaining nuclear weapons could have serious consequences for peace.

"As Europeans together, we are very worried that the decision of the U.S. president could lead us back into military confrontation with Iran," German Foreign Minister Sigmar Gabriel told reporters at a meeting with his EU counterparts.

EU foreign policy chief Federica Mogherini, who chaired the final phase of the 2015 negotiations, held closed-door talks on how the 28-nation bloc should proceed and ministers were also set to discuss how to tackle Iran's ballistic missile programme.

Mogherini has insisted the nuclear deal is working, while the International Atomic Energy Agency (IAEA) says Iran is complying. Trump

has dubbed it "the worst deal ever negotiated".

"Non-proliferation is a major element of world security and rupturing that would be extremely damaging," French Foreign Minister Jean-Yves Le Drian told reporters. "We hope that Congress does not put this accord in jeopardy."

The European Union already has members of Iran's Islamic Revolutionary Guard Corps under sanctions, which Trump on Friday singled out as he detailed a more aggressive approach to Tehran.

While NATO has a newly-installed missile shield in Romania to potentially shoot down any Iranian rockets, EU governments want to see Tehran dismantle its growing arsenal. Tehran says the rockets are for purely defensive purposes.

But while several EU governments, including the Netherlands and Britain, said Iran's ballistic missiles and Tehran's interventions in Syria and Yemen were a concern, ministers said the immediate focus had to be saving the 2015 deal.

Negotiated after 12 years of talks that EU diplomats helped to initiate and carry through, the accord with Iran is the most significant diplomatic success for the bloc in several decades.

North Korea spillover

Many worry that the EU's reputation as an honest broker in a host of future conflicts may not recover if the U.S. Congress reimposes sanctions on Iran and causes the deal to collapse.

Most UN and Western sanctions were lifted more than 18 months ago under the deal. Tehran is still subject to a U.N. arms embargo, which is not part of the deal.

At their meeting in Luxembourg, the EU's foreign ministers are also due to approve a new round of economic sanctions on North Korea after Pyongyang's nuclear test last month. Many governments still hold out hope of repeating the Iran deal with North Korea.

Sweden is one of only seven EU countries with an embassy in Pyongyang and its foreign minister, Margot Wallstrom, reiterated that Stockholm could be counted on to help negotiate if asked.

But Germany's Gabriel warned that Trump's decision not to certify the Iran accord could put any such scenario in doubt.

"My concern is that, if we want to talk to North Korea now, the possible end for the nuclear deal with Iran would jeopardise the credibility of such treaties," Gabriel said. Reuters

Business Daily Tuesday, October 17 2017 15

Opinion Business Wires

The Korea Herald Exports of information and communication technology (ICT) products increased for the eighth month in a row to hit an all-time high in September on brisk overseas sales of semiconductors and displays, government data showed yesterday.

A total of US$19.2 billion worth of ICT products were shipped overseas, up 32.6 per cent from a year earlier, according to the data compiled by the Ministry of Science and ICT. The monthly overseas shipments of ICT products surpassed the previous high of US$17.48 billion record tallied in August, the ministry said.

Philstar Foreign telco players are interested in penetrating the Philippine market, which at present remains dominated by only two – Manuel V. Pangilinan’s PLDT Inc. and Ayala-led Globe Telecom. Australia’s Telstra Corp.

Ltd. and China Telecommunications are among the companies reportedly eyeing the Philippine market, several industry and government sources told The STAR over the weekend. “Those are among the foreign telco companies interested in the Philippines,” one source said. It is not yet clear how this can happen but they may tap a local partner and together, be the third player in the industry, or participate in the government’s P77.9-billion National Broadband Project.

TAIPEI TIMES Taiwan intends to take advantage of an annual defence conference with the U.S. that was to open on Sunday in Princeton, New Jersey, to seek Washington’s support for arms sales and cooperation opportunities with U.S. defence companies, sources said. Taiwan will seek backing for its weapons procurement proposals and cooperation with U.S. defence manufacturers at the three-day U.S.Taiwan Defence Industry Conference, a source with direct knowledge of the matter said on condition of anonymity.

The conference is to focus on the U.S. administration’s Northeast Asia policies and their potential effects on Taiwan’s defence.

TIMES OF INDIA Finance minister Arun Jaitley (pictured) has said that he never talked about any stimulus package for boosting the economy. The media has spoken about it and "you should ask" them on it, Jaitley said when asked whether the government was considering a massive fiscal stimulus package. "I have not used that phrase (fiscal stimulus). I said, we will respond to situations and your fraternity translated the word respond as meaning stimulus. So you are the ones who should be answering and not me," said Jaitley. His remarks came amid increased speculation over a possible fiscal stimulus.

Sunshine in Beijing spreads a warm glow to Amazon ore David Fickling a a Bloomberg Gadfly columnist

A

ll commodities are not created equal.

If you judged the oil market by what you heard on the evening news, you'd think that a widely quoted contract like Brent crude was the same stuff most tankers carry and refineries buy.

In truth, output from the North Sea fields that goes into the Brent benchmark amounts to about 1per cent of global oil production.

Most traded oil comes in a dizzying array of varieties differentiated by sulphur content and density. The basket price for heavy, sour Venezuelan crudes is running at around US$46.76 a barrel, an almost US$10 discount to sweet, light Brent's US$56.48/barrel, which itself is cheaper than the US$60.62/barrel price of spot oil from Malaysia's Labuan terminal.

Something similar exists in the iron ore market. The red rock from which most steel is made comes with varying degrees of iron content and particle size, and prices vary accordingly.

While the cost of different grades has tended to move in fairly close sync, that's changing. Take the price for lower-quality Indian iron ore with a 58 per cent to 59 per cent iron content, and compare it to the best Brazilian ores that come in at 65 percent. For most of the past five years, the Brazilian rust has cost about a third more than its Indian equivalent. Then, over the past 18 months, this happened: There's a well-understood reason for this. The sintering plants that turn the powdery iron ore known as fines into a product that can be fed into a steel blast furnace are horrendously polluting.

Emissions from the knot of steel producers in Hebei province surrounding Beijing are one of the main reasons why China's capital has such a notorious reputation for smog. One of the best ways of reducing this pollution is to use higher-grade iron ore, which has less waste material and needs a smaller amount of coke in its sinter mix.

It's no coincidence this premium is reaching a record now. With the Communist Party's five-yearly Congress starting next week, the

“

country's steel industry and the provincial bosses who oversee it have been presented with a tough challenge. On one hand, they're trying to patriotically demonstrate the strength of the economy by having China's primary industries running at full tilt; on the other, they want blue skies for when party cadres visit.

O n e w a y t o m e et b o th objectives is shutdowns: Hebei's steelmaking hub of Tangshan announced with just a day's notice on Wednesday that it would start a seasonal closure of half the city's production a month early, according to Mysteel.com. A smarter approach, though, would be to buy more highergrade ores to ensure the best possible ratio between production and pollution.

There's evidence of the same pattern cropping up elsewhere.

The premium for lump iron ore, a variety that can be fed directly into blast furnaces without the need for sintering, also touched a record last month, based on Singaporetraded futures that reference S&P Global Platt's prices.

More to the point, the skies appear to be clearing.

Last Tuesday, there were just 4 micrograms of PM2.5 particulate pollution per cubic meter of Beijing air, according to data collected at the U.S. embassy in the city. That compares to 173 micrograms on the same date a year earlier, and 332 micrograms in 2014. The average reading so far this month has been 38μg/m³, versus 98μg/ m³ over the previous four non-Congress years.

Those conditions may be extreme due to political imperatives, but they have longer-term importance. China can't keep choking its citizens with winter smog, yet it's still having trouble kicking the habit of falling back on state heavy industry as a tool of economic development.

Squaring that circle is likely to keep the spread of higher-grade ores over lower-grade equivalents wide for some time to come. It's no surprise, then, that the price-book ratio of Fortescue Metals Group Ltd., which produces mostly lower-grade ores, is now barely ahead of highest-grade producer Vale SA, despite far superior returns on equity.

So long as the sun is shining in Beijing, the world's best-quality iron ore will feel its glow. Bloomberg Gadfly

China can't keep choking its citizens with winter smog, yet it's still having trouble kicking the habit of falling back on state heavy industry as a tool of economic development

”

16 Business Daily Tuesday, October 17 2017

Closing Internet

German ambassador warns controls could isolate China

China's Internet restrictions have struck a "new blow" against foreign companies working there, Germany's ambassador said yesterday, warning that such moves could undermine Beijing's political and commercial ties with the world.

China's on-going clampdown on cyberspace has seen WhatsApp, the messaging service run by Facebook, periodically unavailable in the past few weeks ahead of twice-a-decade Communist Party Congress that opens on Wednesday.

The government also has been tightening control over virtual private networks (VPNs) that allow users to tunnel through China's "Great Firewall" system, which blocks outlawed online content.

And its controversial Cybersecurity Law adopted late last year has been criticised by foreign business and governments for unclear provisions mandating security reviews and for data to be stored on servers in China.

"Unrestricted internet access via VPN is vital if China wants to take maximum advantage of international cooperation in research and development as well as academic and cultural exchange," German Ambassador Michael Clauss said in a statement.

The higher the digital wall grows, the less attractive living and working in China will be for professionals, researchers or artists, Clauss said, adding that repeated requests to discuss the issue with Chinese authorities "have not led to meaningful dialogue so far".

Reuters

Gambling

Jockeying for cash: North Korea allows racetrack gambling as sanctions bite North Korea's access to foreign currency has been impacted by a series of international sanctions over its nuclear weapons program Hyonhee Shin

P

unters in North K o r ea w h o o n c e risked three years hard labour for gambling are now able to bet on local horse races as the isolated country scrambles to unearth new sources of hard currency amid intensifying international sanctions.

North Korean leader Kim Jong Un has been building resorts, swimming pools and other luxurious leisure facilities in what experts say is a bid to capture some of the individual wealth generated by growing private markets for goods and services.

A series of races took place at the Mirim Horse Riding Club, one of Kim's flagship leisure developments, near Pyongyang on Sunday, according to North Korea's official KCNA news agency.

Race goers aged 12 or older were allowed to bet on jockeys in a raffle-type system, broadcaster Korean Central Television said on Friday ahead of the races.

P i c t u r e s f r o m KC NA showed hundreds of spectators watching and filming with their phones as a field of mostly white-grey horses and their riders stormed out of the starting gate.

In the communist North, horses - especially white ones - have traditionally

North Korean leader Kim Jong Un (C) attends an event in Pyongyang to celebrate the latest nuclear test, Pyongyang, North Korea, 03 September 2017. Source: Lusa

been a propaganda symbol associated with the ruling Kim family.

"Kim has been pushing for vanity projects for a theme park, sky resort and the horse riding club for the sake of propping up the people's well-being but their real purpose was to earn foreign currency," said Na Jeong-won, head of the North Korea Industry-Economy Research Institute in Seoul.

North Korea's access to foreign currency has been impacted by a series of international sanctions over its nuclear weapons program, including bans on key

exports such as coal, textiles and seafood.

Lee Sang-keun, a researcher at the Institute of Unification Studies of Ewha Womans University in Seoul, said the primary target for the leisure facilities is affluent North Koreans.

"You may have ridiculed Kim Jong Un for constructing lavish facilities while struggling to feed the people, but those things are to make foreign currency, not from foreigners but from the well-offs inside North Korea because you have to pay in U.S. dollars or Chinese renminbi there," said Lee. "Many North Koreans

make lots of money from the market, dine at hamburger restaurants and go shopping, all of which help fatten regime coffers. That’s part of the reason why the regime still has some financial latitude despite international sanctions."

Unbridled capitalism

North Korea has already been operating casinos for foreigners in Pyongyang and Rason, where it jointly runs a special economic zone with China.

Last March, the government sent out investment proposals for new casinos in Namyang, near the border of

China, and the Mount Kumkang region, home to a scenic tourist resort just north of the border with South Korea. The United Nations' latest round of sanctions, however, bans any further joint ventures with North Korean companies.

Third generation leader Kim developed the Mirim riding club by transforming a military horseman training centre in 2012 and visited the site several times until its formal unveiling a year later, KCNA has reported.

The Mirim riding club has an indoor trainiang facility, seven outdoor riding courses, a pavilion, restaurants and a sauna, as well as 120 horses including 67 famous Orlov Trotters from Russia, according to the website of Uri Tours, a U.S.-based agency specialized in guided trips through the North.

The entrance fee is US$35, which covers one-hour of horse riding with an instructor, riding gear and sauna.

The fee could be lower for North Koreans, reportedly at around US$10 - still a hefty sum for many impoverished locals.

"There seems to be growing demand for such leisure activities among North Koreans as the gap between the rich and the poor has been widening," said Na. Reuters

Real estate

Hospitality

Aviation

Singapore home sales drop

Thai hotels booked up ahead of funeral of revered king

Panic as cabin pressure drops on AirAsia plane from Australia

Singapore home sales fell in September as developers marketed fewer projects in a month considered inauspicious by Chinese homebuyers.

Developers sold 657 units last month, down from a revised 1,246 in August, according to Urban Redevelopment Authority data released yesterday. That’s the lowest sales since January. A total of 73 new units were offered, down from 794 in August, the data showed.

The seventh month of the lunar calendar year, known as the Hungry Ghost Month, is a time homebuyers avoid property purchases. This year, that period lasted for the latter part of August and most of September.

Despite a slow month, Singapore’s property market is showing signs of a turnaround. Home prices rose for the first time in four years, snapping a record run of declines and confirming recent signs that the property market is rebounding. An index tracking private residential prices gained 0.5 per cent in the three months ended Sept. 30 from the previous quarter, according to preliminary data from the Urban Redevelopment Authority released Oct. 2.

Developers have sold about 9,000 units this year, eclipsing the full-year totals for 2014 to 2016.

Hotels in Bangkok's bustling old town, home to a backpacker enclave favoured by foreign tourists, are booked up as Thailand prepares to host the lavish funeral of its revered King Bhumibol Adulyadej next week, the hotel association said yesterday.

The funeral of King Bhumibol, who died on Oct. 13 last year after seven decades on the throne, will run for five days next week, with most events centring on the Grand Palace and Sanam Luang, a public square in the historic quarter.

About 250,000 mourners are expected to attend the funeral, which will feature gold-tipped pavilions built for the occasion, and Oct. 26, the day of the cremation, has been declared a national holiday.

"Many Thais wishing to attend the cremation feel it would be more convenient having a place to stay nearby, so most hotels have been booked out already," Supawan Tanomkieatipume, president of the Thai Hotels Association, told Reuters.

A Reuters survey of three hotels on the Khao San Road, the main artery of the Banglamphu backpacker area, found no rooms were available.

Thailand's tourism industry, which accounts for 12 per cent of GDP, has been a rare bright spot for an economy that has struggled since a 2014 coup. Reuters

Passengers recounted their panic yesterday after a sudden loss of pressure on their AirAsia flight caused oxygen masks to drop from the ceiling and sent their plane into a steep drop.

AirAsia said the Airbus A320, carrying 151 people, suffered a "technical issue", with Australian media reporting the aircraft, en route to Indonesia, had dropped from 32,000 feet to 10,000 feet 25 minutes after take-off.

Video circulating online shows distressed passengers wearing oxygen masks with an alarm blaring and cabin crew calling for people to assume the brace position.

"I picked up my phone and sent a text message to my family, just hoping that they would get it," one tearful passenger named Leah told Channel Nine television.

“We were all pretty much saying goodbye to each other. It was really upsetting.”

Another holidaymaker said not knowing what was going on heightened fears.

"We didn't know what was happening because all the voice recordings on the plane were in every language but English," she said. AFP

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