Business Daily #1405 October 19, 2017

Insurance practitioners to attend mandatory courses to operate LICENCE RENEWAL Page 2

Thursday, October 19 2017 YEAR VI NR. 1405 MOP 6.00 PUBLISHER PAULO A. AZEVEDO CLOSING EDITOR OSCAR GUIJARRO GAMING

Crown shares impacted by slot machines tampering accusations Page 7

YOUNG ENTREPRENEURS

Local Incubator to host Portuguesespeaking countries centre Page 5

www.macaubusiness.com

IP

Alibaba registers more trademarks in the city Page 4

GLOBALIZATION

Chinese state firms’ overseas assets top RMB6 trillion Page 10

JUDICIARY

The opening of the judicial year served as a platform for complaint once more. With respected voices of the profession highlighting a multitude of unresolved issues.

The glacial pace of judicial administration and delay in reforms was blamed on Ho Chio Meng’s massive corruption trial. Page 2

Next destination: Arbitration hub

Domestic firms prepare to go global

TRADE | Macau Lawyers Association and the China International Economic and Trade Arbitration Commission have inked a document.

Promoting the city as a hub for resolving trade conflicts between Portuguese-speaking countries, China and other parties. All in the context of the One Belt One Road strategy. Page 3

The Monetary Authority of Macau and Portuguese credit insurance company COSEC are taking the first steps towards developing the Export Credit Agency.

The entity will support local companies attempting to engage in business beyond the territory.

Xi reaffirms open economy

ENTERPRISES | Page 6 HK Hang Seng Index October 18, 2017

28,711.76 +14.27 (+0.05%) Worst Performers

China Life Insurance Co Ltd

2.27%

Wharf Holdings Ltd/The

+0.89%

AAC Technologies Holdings

-4.17%

Hengan International Group

-0.73%

Ping An Insurance Group Co

+1.93%

China Merchants Port Holdings

+0.82%

Kunlun Energy Co Ltd

-1.47%

China Petroleum & Chemical

-0.69%

Cathay Pacific Airways Ltd

+1.57%

WH Group Ltd

+0.63%

Want Want China Holdings

-1.46%

Power Assets Holdings Ltd

-0.58%

CK Asset Holdings Ltd

+1.56%

China Resources Land Ltd

+0.63%

New World Development Co

-0.96%

China Mengniu Dairy Co

-0.46%

CK Hutchison Holdings Ltd

+1.29%

Henderson Land Development

+0.56%

China Construction Bank

-0.85%

CNOOC Ltd

-0.39%

28° 22° 28° 32° 28° 32° 28° 32° 27° 31° TODAY

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

CPC CONGRESS | President Xi Jinping vowed yesterday to continue along the path.

Of opening up the national economy to the world.

Xi said China will improve regulations for monetary and macro-prudential policy, and “see that interest rates and exchange rates become more market based”. Pages 8 & 9

2 Business Daily Thursday, October 19 2017

MACAU JUDICIARY

Law professionals cite same old issues Lawyers reiterating the necessity of judicial system reform and the courts explaining the hearing of the former Prosecutor-general corruption case cited as the reason for the rocketing growth of pending cases Cecilia U cecilia.u@macaubusinessdaily.com

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ESTERDAY’S opening ceremony of a new judicial year was launched with a lamentation made by the President of the Macau Lawyers Association, Jorge Neto Valente, on the continued stagnant development of the judicial field and courts of the city.

The lawyer said that the number of cases wrapped up by the courts was 10 per cent fewer than the number of cases accepted last year, remarking that the number of pending cases keeps growing.

With cases scheduled as far ahead as April 2018, the lawyer wished that the eight newly qualified judges could improve the slow progress provided by the Court of First Instance.

Valente further said related institutions had not initiated discussions about the reform of the city’s judicial system despite it being advocated two years ago, while also expressing surprise at the lack of studies of judicial conditions and public opinions on the city’s judiciary.

“Can we not have the confidential management of the judges have higher transparency and be less formalised? How should we improve the quality of adjudication?” queried the lawyer during his speech.

Meanwhile, President of the Court of Final Appeal, Justice Sam Hou Fai, said the increase in litigation cases was due to the improvement of residents’ awareness as well as the government’s efforts to rule in

Opening ceremony of the 2017/2018 Judicial Year is held at the Macao Cultural Centre. Source: GCS

accordance with the law.

“The 26 cases of appeal relating to the government's announcement of invalid land concessions are the proof [of the government’s effort to rule according to the law],” said Justice Sam. Encouraging the profession to provide opinions on the commenced revision work of the Civil Code by the government, Justice Sam remarked that “those who are the so-called experienced ones in the legal field should correctly face and embrace that fact that the Macau SAR has already returned to Mainland China for 18 years”.

He added that the old European thinking and system that restricts

a city’s development should be abandoned.

Ho Chio Meng derailed progress

Justice Sam further explained the hearing of the former Prosecutor -general of the Public Prosecutor’s Office (MP) Ho Chio Meng’s bribery case had led to the stalling of hearing other cases. The judge further argued in his speech the necessity of revising the law for judicial organisation in order to resolve the inflexibilities of procedures.

Lawyer Valante, on the other hand, questioned the closing of a case with no appeals possible after verdicts were handed down by the Court of Final Appeal. The case of Ho was

first heard and adjudicated by the top court with no appeals able to be lodged due to the absence of a higher level legal institution.

Meanwhile, incumbent MP head, Ip Son Sang, said the MP was to safeguard the responsibility as a public judicial institution and as such remained firm in bringing the lawsuit of over 1,000 accusations.against Ho The MP head commented that the sector is currently facing new challenges apropos the growing number of crimes related to money laundering, cyber and telecom crimes, but affirmed that the newly revised law provides clearer definitions of clauses which would help combat money laundering.

SECURITY

Wong Sio Chak: Budget won’t change for now

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EXT year’s budget for the Secretariat for Security will not be increased although facilities and infrastructure suffered various levels of damage during the passage of Typhoon Hato, Secretary for Security Wong Sio Chak said.

Speaking to the press after

Secretary for Security Wong Sio Chak

the the ceremony for a new judicial year, Wong revealed that the Macao Customs Service, in particular, suffered severe damage while claiming that emergent recovering works are currently ongoing.

“We will consider reviewing readjusting the setup of facilities, like placing equipment in higher positions,”

said the Secretary.

Meanwhile, he said concrete plans to prevent terrorism had yet to be finalised, while saying that relative plans can only be made supported by law.

When asked whether the government would provide more advanced security support to gaming operators to

prevent terrorism, the Secretary reaffirmed that arrangements can only be made with legal support.

“The law has indicated what [weapons] can be used and who can use [them] [...]

If changing these [arrangements] it will then require the revision of the law,” concluded Wong.

INSURANCE

ENVIRONMENT

Upgrading to meet demand

Two-stroke vehicles elimination funding slows down

Starting from 2018, practitioners in the insurance industry - in particular, personal insurance agents and insurance salespersons - will be required to receive training in order to qualify for licence renewal, according to an announcement by the Macao Monetary Authority (AMCM) as well as a dispatch posted in yesterday’s Official Gazette.

In light of the general improvement in residents’ income, AMCM aims to improve practitioners’ service quality by mandating them to receive training in order to meet the growing demands of the industry.

Practitioners who work in only one insurance segment will be required to receive no less than five hours of training every year prior to renewing their licences.

For practitioners who obtain

more than one type of licence, the new policy requires training of no less than 10 hours.

Insurance agents will be obliged to declare the number of trained hours to AMCM when renewing licences from 2019.

The new policy approves training via seminars relating to finance and insurance, talks, workshops, degrees held by local or overseas universities, and other recognised specialised courses or continued educational activities. C. U.

Subsidies for the third quarter of 2017 funded by the Environmental Protection Bureau (DSPA) totalled MOP8.91 million (US$1.12 million), a drop of 42 per cent compared to the total amount funded in the previous quarter.

According to a dispatch posted by the DSPA in the Official Gazette yesterday, the majority of third quarter funding was disbursed to support drivers ‘eliminating’ twostroke motorcycles, amounting to some MOP6.84 million, representing a decrease of 24 per cent quarter-to-quarter.

Under the MOP3,500 subsidy scheme to eliminate twostroke engine vehicles and m o t o rc y c l es, DS PA att ract e d 5,736 applications. The initiative

was linked to efforts by the Macau SAR Government to eliminate high-polluting vehicles in circulation in order to improve overall air quality in the city.

Meanwhile, some MOP2.07 million was distributed to individuals as well as companies for the support scheme using products and facilities that are environmentally friendly. The amount dropped compared to M O P 6 . 45 m i l l i o n d u ri n g th e second quarter.

The biggest amount disbursed under the aforementioned scheme was MOP248,286 to a beneficiary surnamed Lee; 16 individuals and 21 companies received the fund under the scheme during the third quarter.

Business Daily Thursday, October 19 2017 3

MACAU LAW

Major mediator in waiting Local legal authorities believe language and legal similarities of the MSAR legal system with Portuguese-speaking countries and countries involved in the One Belt, One Road initiative (OBOR) make the MSAR the perfect centre for arbitration of commercial and contractual legal disputes involving these countries and Mainland China Close enough

Nelson Moura nelson.moura@macaubusinessdaily.com

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FRAMEWORK agreement has been signed by the Macau Lawyers Association (AAM) and the China International Economic and Trade Arbitration Commission (CIETAC) in order to help the city become a centre for mediating disputes involving business deals between Portuguese-speaking countries, Mainland China and other countries involved in the One Belt, One Road initiative (OBOR).

According to AAM President Jorge Neto Valente, an Arbitration Centre should be created in Macau, with international commerce disputes its main focus, and with an arbitration panel composed of experts from the MSAR, Mainland China and Portuguese-speaking countries.

“As of this date OBOR already covers 60 countries with a total 4.4 billion population, representing more than 30 per cent of the global economy.

Just last year Chinese direct investment for OBOR countries reached US$14.5 billion (MOP116.6 billion),” he added.

Mr. Valente stated that the expansion of commerce, increased investment and infrastructure development projects created by OBOR had inevitably led to an increased demand for

judicial services, either for negotiating and managing contracts or for conflict resolution.

“We all know the difficulties, almost impossible to overcome in a short time, of recurring to state courts in different jurisdictions, such as

choosing which jurisdiction should apply, different translations and interpretations, high cost of procedures […] Almost all [of these difficulties] are more easily overcome by recurring to alternative means of resolution,” said the AAM President.

For Mr. Valente the fact that Macau’s judicial system is based upon Portuguese law makes it an appropriate mediation centre for deals involving Lusophone countries with similar judicial systems, or from countries involved in OBOR with legal systems closer to civil law.

“Business and partnership disputes are unavoidable, so each party needs to find a good location with resources to arbitrate and solve these issues.

Macau has those qualities,” the AAM Secretary General, Paulino Comandante, told Business Daily.

According to Mr. Comandante there are already five centres for legal arbitration in Macau, although with certain limitations such as only delving into consumer disputes or only mediating conflicts involving amounts not exceeding MOP50,000.

The AAM Secretary General also considered that with Macau generally not seeing a lot of arbitration or dispute resolution, the local government needs to learn from the experience of international arbitration centres in Hong Kong, Portugal and Mainland China and train more arbitration professionals.

“We still need to create better mechanisms and train arbitrators to provide these services. However, [in term of becoming a mediation centre] I don’t think we have competition,” Comandante concluded.

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4 Business Daily Thursday, October 19 2017

MACAU OPINION

Ashley Sutherland-Winch* Lessons from Las Vegas Following the aftermath of the horrific mass shooting in Las Vegas, hotel and casino establishments are reviewing their security protocols.

What happened in Las Vegas was the unexpected: a single white male shooter was able to sneak through the elaborate system of Las Vegas and Mandalay Bay Casino’s security and inflict maximum damage. In June, a lone gunman in the Philippines attacked Resorts World in Manila with bullets and fire.

Macau’s gaming oversight body and Judiciary Police met with the six gaming concessionaires on October 11 to ensure that security measures and crisis communication had been strengthened in Macau. On Monday, a press release was issued regarding the outcome of the meeting, stating: ‘Judiciary Police have suggested that in collaboration with the Gaming Inspection and Coordination Bureau a simulation of attacks on the casinos should be conducted in the short term . . . All the casino representatives have agreed to the proposal of conducting a drill, and will soon liaise with Judiciary Police regarding the details.’

Paulo Martins Chan, head of the region’s Gaming Inspection and Coordination Bureau (DICJ), reported that the six concessionaires are continuing to adopt security measures, such as the installation of metal detectors in arches of casino entrances and, until their completion, portable metal detectors would be used.

Also, included in the increased measures were that some of the six casino operators were initiating intensive physical training, crisis management and identification of suspicious persons for some of the frontline casino workers.

Other casinos are planning to increase the number of security personnel.

Chau Wai Kuong, Director of Macau’s Judiciary Police, indicated in Monday’s statement that Macau had a “relatively lower” risk of attack, but should not be complacent. Increased preventative measures, such as metal detectors, would help prevent potential crimes. Following the Nevada attack, Las Vegas Wynn casinos immediately implemented the use of handheld metal detectors to scan luggage. It has yet to be seen if Macau casinos will begin this practice but the use of metal detectors prior to entering the gaming areas of casinos has been used in Macau for some time.

The greatest lesson to be learned from both the Las Vegas and Manila attacks are that a single individual can cause mass terror and damage and possibly go undetected. Perhaps these situations were unique but now we learn, adapt, and create stronger plans.

POLITICS

Image matters in Chui Sai Cheong appointment Legal experts do not believe that any legal issues arise in new Legislative Assembly Vice-President Chui Sai Cheong also holding a position in an oversight judicial committee, but that more thought should have been given to the impression this political appointment gives to the public Nelson Moura nelson.moura@macaubusinessdaily.com

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HE President of the Macau Lawyers Association (AAM), Jorge Neto Valente, has told Business Daily that no legal or conflict of interest issues arise from the appointment of the newly elected Legislative Assembly Vice-President, Chui Sai Cheong, also being a member of the MSAR Prosecutors Committee.

He does believe, however, that before the political decision was made there should have been more consideration of the “image it transmits” to the public.

On Monday, Mr.Chui - the elder brother of current MSAR Chief Executive Fernando Chui Sai On - was elected for a four-year term as Legislative Assembly (AL) Vice-President, with 29 votes of the 33 legislators elected in the September 17 elections cast in favour of his appointment.

The businessman is also an AL legislator elected by the professional sector and holds a position on the Prosecutors Committee, an independent ruling body responsible for the appraisal and disciplinary

management of magistrates and judicial officers of the Public Prosecutor’s Office.

“I feel sorry [Mr. Chui] is not a magistrate; that way maybe he could also get a seat as a judge of the Court of Final Appeal. I don’t think this decision is appropriate […] The people who make these political decisions have to think

“I feel sorry [Mr. Chui] is not a magistrate; that way maybe he could also get a seat as a judge in the Court of Final Appeal.

I don’t think this decision is appropriate” Jorge Neto Valente, President of the Macau Lawyers Association

about the image that this decision makes to the outside,” Mr. Valente told Business Daily.

M ea n w hi l e, AAM S ec r eta r y General Paulino Comandante told Business Daily that since Mr. Chui was not a magistrate and that the Prosecutor’s Committee was “an independent body”, he “didn’t see any issue of conflict of interest, at least hypothetically”.

Doesn’t look that good

For Mr. Valente, although there “isn’t and shouldn’t be” too many regulations stating what individuals and political office representatives can or cannot do, political decisions should also take public image into account.

“We can’t have a law that regulates just everything, from what you can eat for breakfast or what time I have to go to sleep […] There doesn’t need to be a law saying what holders of political members can or cannot do, that’s up to the individual. However, there needs to be a consideration of the overall image.

We all know politics it’s not just what it is but what it looks like.

A person who assumes a position should think if that decision is the best for him and for society,” added Mr. Valente.

TRADEMARK REGISTRATION

Alibaba expands local commercial reach Alibaba Group Holding Limited has applied for new trademark registrations in the Macau SAR, a dispatch in Official Gazette revealed yesterday.

The company has applied for the protection of 14 sets of commercial services and products under two brand names in English, ‘Alisports,’ and Chinese, ‘阿里體育.’ Overall, the online business and shopping platform is seeking commercial protection for the provision of scientific services, cloud computing, and IT applications, games and toys, advertising, data processing, and provision of information, telecommunications and broadcasting, online training and education, as well juridical and legal services.

With over 50,000 employees, Alibaba Group provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals.

Its main businesses comprise core commerce, cloud computing, digital

media and entertainment.

In early July, the group has had several applications for trademark protection approved in the city for products including media, e-payment systems, nautical instruments, and file sharing software.

On August 4, the Macau SAR

government and Jack Ma, Alibaba’s co-founder and CEO, signed a framework agreement to fulfill the implementation of several services linked to the development of Macau as a ‘smart city,’ including medical services, transport logistics, and bringing talent back to the city. S.Z.

Business Daily Thursday, October 19 2017 5

MACAU INNOVATION

House for startups A Youth Innovation and Entrepreneurship Centre of China and Portuguese-speaking Countries will be included in a new startup incubation centre being developed in the Nape District, occupying 1,300 square metres and capable of accommodating in excess of 100 local and overseas startups Nelson Moura nelson.moura@macaubusinessdaily.com

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HE new Youth Innovation and Entrepreneurship Centre of China and Portuguese-speaking Countries will be located in a new space to be provided to the Macau Young Entrepreneur Incubation Centre (CINJ), authorities revealed yesterday at the 22nd Macau International Fair (MIF) Young Entrepreneurs Forum of China and Portuguese-speaking Countries. ‘[The two centres] will work to build a platform for youth entrepreneurship innovation in China and Portuguese-speaking countries, to bring together talent and share resources without regional or time zone limitations,’ MIF information stated.

Created in 2015 by the Macau Economic Services (DSE), CINJ provides support to local entrepreneurs looking to initiate their businesses, offering training courses, consultations, free temporary offices, and business matching.

CINJ is currently located in the Macau Trade and Investment Promotion Institute (IPIM) offices of China Civil Plaza building in Alameda Dr. Carlos d’Assumpção, but will move to the 3rd floor of The Carat building in NAPE district.

According to CINJ Secretary Helen Pun Wai In the new centre will attempt to attract around 20 companies already located in the IPIM Macau Business Support Centre (MBSC) to the new incubation centre, while approaching “20 to 30 local startups” to move to the space from November onwards to “test the facilities and its technologies”.

Building innovation

The new 1,300 square metre space will open around the clock, with two meeting rooms providing the capacity for 60 people, together with leisure and consultancy spaces with the CINJ

representative; the space will seek to accommodate around 100 startups.

“The new centre is much larger and we can accommodate more startups plus different events and training sessions. It will also have open area offices, lockers and five private offices in the startup accelerator,” Ms. Pun told Business Daily.

The official opening ceremony of the new startup centre is slated for December this year, with the Macau Economic Services (DSE) having inked an agreement with Parafuturo de Macau Investment and Development Limited - a company created by the Macau Government in 2015 - to

manage the space.

According to Ms. Pun - who is also the Secretary of Parafuturo de Macau - startups have difficulties creating business relations for their development, with the new centre seeking to assist entrepreneurs in their networking efforts.

In order to assist startups in “building relations” in Mainland China, Ms. Pun said Parafuturo de Macau will make use of the Macao Interaction Area in the 760 Creative Industry Park in Zhongshan, a one-stop platform for youth innovation and entrepreneurship created by the company.

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6 Business Daily Thursday, October 19 2017

MACAU SINO-LUSO

Key entity for local firms going global makes progress A protocol to create an Export Credit Agency supporting companies seeking to operate in Portuguese-speaking countries is to be inked today by Portuguese credit insurance company COSEC and the Monetary Authority of Macau Nelson Moura nelson.moura@macaubusinessdaily.com

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ORTUGUESE credit insurance company COSEC - Companhia de Seguro de Créditos S.A. (COSEC) - is to sign a protocol today with the Monetary Authority of Macau (AMCM) to create an Export Credit Agency (ECA) in the MSAR in support of companies wishing to operate in Portuguese-speaking countries, the Portuguese Secretary of Internationalisation, Eurico Brilhante Dias, said yesterday.

Speaking at the 22nd Macau International Fair (MIF) Young Entrepreneurs Forum of China and Portuguese-speaking Countries, Mr. Dias said the agreement would attempt to set up an ECA available to “all countries to promote exports and secure investments”.

This agency would allow Portuguese-speaking countries to secure their export credit and bond insurance for “civil construction, public work or metallurgic . . . [projects that] . . . usually require an anticipated bond”.

“It would be another entity that will provide a portfolio of products that allows them, for some of the territories, to buy export credit insurance,

Eurico Brilhante Dias, Portuguese Secretary of Internationalisation

covering the risk,” he added.

Having this financial backing would allow covering the risk of not receiving payments, particularly when exporting to countries of “high political risk" and where guarantees provided by governments are “usually very important”.

The ECA would also assist companies with bond insurance, with Mr.

Dias saying in most international public tenders without guarantees for the proper execution or guarantee for advances, it is difficult to compete in high risk markets.

The establishment of an export credit insurance system in the MSAR was one of the 19 measures announced

by Chinese Premier Li Keqiang furing last year’s 5th Ministerial Conference

of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries.

The announcement comes after almost a year since the Secretary for Economy and Finance, Lionel Leong Vai Tac, announced that there were plans to create an export credit insurance system that could support local companies.

GAMING SOLUTIONS

Scientific Games enhancing gaming portfolio in Macau and abroad The American gaming and machine manufacturer has filed for the protection of new brands in the MSAR, having previously announced an agreement with a Google-owned company to enhance API performance Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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AS Vegas-based Bally Gaming Inc., a subsidiary of Scientific Games, has filed for five trademark registrations, a dispatch in the Official Gazette revealed yesterday.

Bally is seeking commercial protection for services that include computer software and firmware for gaming on any computerised platform, including dedicated gaming consoles, video slot machines, reel slot machines and video lottery terminals, under five brand names; namely, Girl’s Best Friend, Bright lights, Silk Moon, Top up, and节节高.

Headquartered in Las Vegas, Bally’s parent company, Scientific Games, provides end-to-end gaming and lottery solutions, including table games and instant ticket games, as well as products, services and content

CORPORATE

Season of the

crab

for gaming, lottery and interactive markets.

The manufacturer of gaming systems and equipment for casinos has two office representations in Macau.

Scientific Games completed the merger with Bally Technologies, Inc. in November 2014, for a total consideration of US$5.1 billion (MOP41.04 billion).

Improving casino portfolio management

Scientific Games announced earlier this week that it is expanding the portfolio of casino management technology solutions for the gaming industry, having signed an agreement with Apigee, a subsidiary of Google, to use its full lifecycle application programming interface (API)

management platform in its solutions portfolio.

According to a filing of the company with NASDAQ from October 16, the agreement will enable Scientific Games to design, secure, deploy, monitor, and scale APIs by deploying Apigee API management software in its suite of casino and slot management systems solutions.

‘The Apigee API platform will help us to open up the door for more flexibility in working with third-party providers, enabling smoother integration and better security between our systems' products and third-party products,’ said the Senior Vice President of Gaming Systems for Scientific Games, Catherine Burns, in the filing.

Apigee delivers an intelligent API platform that allows companies to securely share services and data to provide connected digital experiences.

Founded in 2004, Apigee was acquired by Google in 2016.

Business Daily Thursday, October 19 2017 7

MACAU TESTIMONY

Crown hit by slot-machine tampering claims after China turmoil The whistleblowers allege that members of the Victoria regulator knew of problems with Crown’s slot machines but took no disciplinary action

Jason Scott

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N Australian lawmaker is demanding parliament and police probe claims that Crown Resorts Ltd. illegally tampered with slot machines, a potential setback for the company controlled by billionaire James Packer just two months after it closed the chapter on its legal turmoil in China.

The activity at Crown’s Melbourne casino, based on allegations by three former Crown employees, indicates “systemic breaches” relating to slot machines, federal lawmaker Andrew Wilkie said in Canberra yesterday. Crown denied the allegations, which the gaming regulator in Victoria state said it would “thoroughly investigate.”

Crown shares fell as much as 8.1 percent and traded 4.1 percent lower at A$11.27 at 3:56 p.m. in Sydney. The company’s stock has dropped about 2.7 percent this year.

Crown “rejects the allegations” made by Wilkie concerning the manipulation of slot machines and illegal conduct at its resort in Melbourne, according to a company statement yesterday. The company called on the lawmaker to immediately provide information relating to the allegations to the authorities.

The allegations are the latest setback for Melbourne-based Crown, which is now relying on domestic revenue to boost earnings. Its overseas strategy fell apart in the wake of a crackdown on its Chinese operations that saw some staff convicted in June of illegally promoting gambling. Packer, 50, returned to the company’s board this year as it retreats from its international operations and closed most of its Asian offices to focus on profitable casinos in Australia.

Whistleblower allegations

A 30-minute recorded video with three whistleblowers was tabled to parliament by Wilkie through PokieLeaks.org, a campaign he helped organize last year with other lawmakers and lobby group Alliance for Gambling Reform. The identities of the three men making the allegations were heavily disguised

through image pixelation and voice altering.

“These are very serious allegations,” Wilkie, who has long campaigned against casinos and the gambling industry, told reporters. He said he couldn’t verify the veracity of the allegations but said they were serious enough to be made public. “They could indicate systemic issues in the broader poker-machine industry right around the country.”

The whistleblowers allege that some Crown slot machines, commonly referred to as poker machines in Australia, were adjusted to allow buttons to remain pressed down to continuously generate bets at its Melbourne casino, against Victorian state laws. The testimony also claims that some buttons were disabled to reduce the choice of consumers as to how much they bet, prompting the state’s casino regulator to order fixes.

Regulator to investigate

The former employees also claim Crown didn’t act sufficiently against drug use and inebriation, and that not all violent incidents were reported to police. The whistleblowers allege that members of the Victoria regulator knew of problems with Crown’s slot machines but took no disciplinary action except to ask that they be restored to their intended condition.

The Victorian Commission for Gambling and Liquor Regulation (VCGLR) is aware of the allegations made by Wilkie and will investigate the claims, the regulator said in a statement yesterday. The regulator maintains constant oversight of the casino, it said. “We take any claims of this type extremely seriously,” according to the statement.

Crown operates about 2,600 gaming machines at its resorts in Melbourne, and has approval to operate 2,500 slots in Perth, according to its latest annual report. Crown reported normalized earnings before interest, tax, depreciation and amortization dropped 3.3 percent to A$828 million (US$650 million) for the year ended June 30.

Overall, slot machines contribute about 40 percent of Crown’s domestic revenue, said Ben Lee, a Macau-based managing partner at Asian gaming consultancy IGamiX.

‘Unhappy’ investors

“These are very serious allegations...

They could indicate systemic issues in the broader poker-machine industry right around the country” Andrew Wilkie, Australian federal lawmaker

In June, 19 current and former Crown staff were convicted by a Chinese court of illegally promoting gambling in the country and were handed jail terms of as long as 10 months. They had been detained in a crackdown last October. The last of the employees were released from jail in August.

In the wake of the arrests, Crown sold its stake in Macau casino operator Melco Crown Entertainment Ltd., halted a Las Vegas project and saw its high-roller casino revenue reduced by half.

In Singapore and Macau, home to the world’s biggest gaming hub, tampering with electronic gaming machines would result in immediate suspensions, along with huge fines, said IGamiX’s Lee. “The allegations bring further concerns on Crown to investors as they are already unhappy with the impact the China incident had on share prices,” said Roy Wheatley, CEO of gambling consultancy Global Consulting & Development Pty. “I would expect the government to launch a full-scale investigation on the casino operator under public pressure.” BLOOMBERG NEWS ADVERTISEMENT

8    Business Daily Thursday, October 19 2017

GREATER CHINA†CPC CONGRESS

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President Xi lays out vision for 'new era' led by 'still stron Communist Party He said China would relax market access for foreign investment, expand access to its services sector and deepen market-oriented reform of its exchange rate and financial system Christian Shepherd and Stella Qiu

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HINESE President Xi Jinping opened a critical Communist Party Congress yesterday with a pledge to build a "modern socialist country" for a "new era" that will be proudly Chinese and steadfastly ruled by the party but open to the world.

Xi's wide-ranging address laid out a confident vision for a more prosperous China and its place in the international community, stressing the importance of wiping out corruption and curbing industrial overcapacity, income inequality and pollution.

He made clear there were no plans for political reform, but said China's development had entered a "new era", a phrase he used 36 times in the nearly three-and-a-half hour speech.

"With decades of hard work, socialism with Chinese characteristics has crossed the threshold into a new era," he said.

The twice-a-decade congress, a week-long, mostly closed-door conclave, will culminate with the selection of a new Politburo Standing Committee that will rule China's 1.4 billion people for the next five years, with Xi expected to consolidate his control and potentially retain power beyond 2022 when the next congress takes place.

The 64-year-old Xi, widely regarded as the most powerful Chinese leader since Mao Zedong, addressed more than 2,000 delegates in Beijing's cavernous, red-carpeted Great Hall of the People, including 91-year-old former president

Jiang Zemin. Security was tight on a rainy, smoggy day in the capital.

As expected, the speech was heavy on aspiration and short on specific plans.

On the economy, Xi said China would relax market access for foreign investment, expand access to its services sector and deepen market-oriented reform of its exchange rate and financial system, while at the same time strengthening state firms.

During Xi's first term, China disappointed many expecting it to usher in more market-oriented reforms, especially in its debt-laden state sector.

"If Xi gets the political mandate that he is expected to out of the congress, then my hope is that the state sector reforms actually get done," Damien Ma, fellow and associate director at Paulson Institute, told the Reuters Global Markets Forum.

"If not, then I would also revise my assessment of the state of reforms in China. There have been talks in Beijing that the state sector will be a focus after the on-going 19th party congress, so we need to see."

In what was likely an indirect reference to U.S. President Donald Trump's "America first" policy, Xi promised that China would be fully engaged with the world, and reiterated pledges to tackle climate change. Trump earlier this year opted to withdraw the United States from the Paris climate pact.

"No country can alone address the many challenges facing mankind; no country can afford to retreat into self-isolation," Xi told the delegates,

among them Buddhist monks, Olympic medallists, farmers and at least one astronaut.

Xi set bold long-term goals for China's development, envisioning it as a "basically" modernised socialist country by 2035, and a modern socialist "strong power" with leading influence on the world stage by 2050.

But he signalled there would be no significant political reforms, calling China's system the broadest, most genuine, and most effective way to safeguard the interests of the people.

"With decades of hard work, socialism with Chinese characteristics has crossed the threshold into a new era" Xi Jinping, President of China

Xi has overseen a sweeping crackdown on civil society, locking up rights lawyers and dissidents and tightening internet controls as he has sought to revitalise the Communist Party and its place in contemporary China.

"We should not just mechanically copy the political systems of other countries," he said. "We must unwaveringly uphold and improve party leadership and make the party still stronger."

Firm on graft, Taiwan

Xi praised the party's successes, particularly his high-profile anti-graft campaign, which has seen more than a million officials punished and dozens of former senior officials jailed, and warned the campaign would never end as corruption was the "gravest threat" the party faces.

On self-ruled Taiwan, claimed by Beijing as its own, Xi said China would never allow the island to separate from China, and said China would strive to fully transform its armed forces into a world-class military by the mid-21st century.

He made no mention of neighbouring North Korea, which has angered Beijing with repeated nuclear and ballistic missile tests in defiance of U.N. sanctions. Pyongyang sent a congratulatory message ahead of the meeting.

Xi has consolidated power swiftly since assuming the party leadership in 2012, locking up rivals for corruption, restructuring the military and

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Business Daily Thursday, October 19 2017    9

GREATER CHINA RMB

FX regulator expects more stable foundation for yuan after congress The currency has gained about 5 per cent against the dollar so far this year

C

HINA'S foreign exchange regulator said yesterday he expects yuan exchange rates to have a more stable foundation after the 19th Communist Party Congress, amid market expectations of a move to widen the yuan's daily trading band.

The central bank has "basically exited" from its regular yuan intervention as the currency has recently become more stable said Pan Gongsheng, head of the State Administration of Foreign Exchange. "We can also see that the exchange rate is market-driven,� said Pan, who is also a vice central bank governor, speaking on the side-lines of the Chinese Communist Party Congress that started yesterday.

Pan reiterated the long-held stance that authorities will enhance the yuan's flexibility while keeping the currency basically stable, when asked by reporters on whether the central bank would widen the yuan's trading band.

"Some technical actions will be carried out under this basic principle," he said without elaborating.

Policy sources have told Reuters that the central bank is considering a widening of the yuan's trading band after the Communist Party Congress, a largely cosmetic move that would burnish its reform credentials as official policy focuses on reducing debt.

Key Points

Chinese President Xi Jinping delivers a speech during the opening ceremony of the 19th National Congress of the Communist Party of China (CPC) at the Great Hall of the People (GHOP) in Beijing, yesterday. Source: Lusa

Yuan has become more stable, market-driven - FX regulator Says PBOC has "exited" from regular yuan intervention C.bank is expected to widen yuan band after party congress

Pan Gongsheng, head of the State Administration of Foreign Exchange

Currently, the yuan is allowed to rise or fall 2 per cent against the dollar from the daily mid-point rate set by the central bank.

The yuan has gained about 5 per cent against the dollar so far this year.

Beijing burned through nearly US$320 billion of reserves last year and the yuan still fell about 6.5 per cent against the surging dollar, its biggest annual drop since 1994.

China's curbs on capital outflows and the adoption of an undisclosed "counter-cyclical factor" earlier in May have helped support the yuan, but raised questions about its commitment to opening up the currency.

Pan also said the central bank will stick to its prudent and neutral monetary policy but did not give further details. REUTERS

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CURRENCY

asserting China's rising might on the world stage.

Focus at the congress will be on how Xi plans to put his expanded authority to use, and any moves that would enable Xi to stay on in a leadership capacity after his second term ends in 2022. That could include resurrecting the position of party chairman, a title that would put him on par with Mao, the founding father of modern China.

"In all aspects he is on the right track to be our next Chairman Mao," Su Shengcheng, a delegate from the northwestern province of Qinghai, told Reuters. "He will lead the party and Central Committee to continue its way to success."

As with other major set-piece events held in the capital, Beijing has been blanketed with security in the run-up to the congress, with long lines at some subway stations as passengers waited to go through metal detectors and be patted down.

Large red banners plastered around Beijing welcome the congress, while censors have stepped up already tight monitoring of the internet.

Tencent Holdings Ltd's WeChat, China's top social media platform with more than 960 million users, said late on Tuesday that, due to "system maintenance", users will be unable to modify profile pictures, nicknames and tag lines until the end of the month.

The disabled features are sporadically used to show solidarity for popular social and political causes. REUTERS

Central bank vows to push forward yuan internationalisation The pace of yuan internationalisation slowed last year due to yuan weakness and tighter controls on capital outflows

C

HINA will push ahead with yuan internationalisation and boost the global usage of its currency, the central bank said, following a decline in yuan settlement in trade deals last year.

The People's Bank of China said it would keep the yuan's position stable in the global monetary system, according to its 2017 yuan internationalisation report posted on its website on Tuesday.

"Looking ahead, the scope of international usage of renminbi will be further expanded in 2017 and usage channels will be further widened," the central bank said in the report.

"Renminbi internationalisation will play a more active role in serving the real economy and facilitating trade and investment."

The yuan, also known as the renminbi, is only partially convertible and Chinese leaders have pledged to make it fully convertible, although they have never given a timetable.

Key Points China to promote global yuan usage, widen channels - c.bank Data shows yuan settlement in China's trade fell in 2016 yr/yr C.bank says yuan's function as reserve currency will increase

The report, however, said the value of trade deals settled in the yuan, fell 35.5 per cent in 2016 from the previous year.

Yuan settlement accounted for 16.9 per cent of China's total goods trade last year, it said.

Earlier central bank data showed the proportion of yuan settlement in China's trade rose to 22.6 per cent in 2015 from about 20 per cent in 2014.

Yuan settlement was close to zero in 2009, when China started to internationalise the yuan.

China's ambition to transform the yuan into a major global currency led to its inclusion in the International Monetary Fund's Special Drawing Right (SDR) basket last October, in addition to the U.S. dollar, the euro, the yen and the pound.

But the pace of yuan internationalisation slowed last year due to yuan weakness and tighter controls on capital outflows.

The yuan fell 6.5 per cent against the dollar in 2016 the biggest annual drop since 1994.

Authorities have announced a string of measures since late last year to tighten controls on capital outflows, including closer scrutiny of outbound investment deals.

The yuan has gained about 5 per cent this year due to dollar weakness and tighter controls on moving funds out of China.

The yuan's role as a reserve currency will develop, the central bank said, adding that more than 60 countries and regions have included the yuan in foreign exchange reserves. REUTERS

10    Business Daily Thursday, October 19 2017

GREATER CHINA IN BRIEF MARKETS

Qudian becomes biggest U.S. listing by a Chinese fintech firm China's online micro-credit provider Qudian Inc raised US$900 million in an IPO that priced above expectations, underscoring robust U.S. investor demand for fast-growing Chinese companies.

The offering from Qudian represents the biggest-ever U.S. listing by a Chinese financial technology firm. It is also the most high-profile company to take part in a resurgence of U.S. listings by Asian firms this year. Qudian, which is backed by Alibaba affiliate Ant Financial and became profitable last year, operates a website that allows college students and young white-collar workers to buy laptops, smartphones and other consumer electronics in monthly instalments.

YUAN

U.S. declines to name Mainlan currency manipulator The United States on Tuesday declined to name China as a currency manipulator although it remained critical of the Chinese government's economic policies ahead of a planned visit to Beijing

by President Donald Trump.

The semi-annual U.S. Treasury currency report said no countries deserved the currency manipulator label, but it kept China on a currency "monitoring list" despite a fall in China's global current account surplus since 2016. China's currency, the renminbi or yuan, also has strengthened sharply against the dollar this year, reversing three straight years of weakening. The Treasury cited China's unusually large, bilateral trade surplus with the United States.

GOVERNMENT OFFICIAL

Struggling to launch nationwide carbon market in 2017 China will struggle to launch its long-awaited nationwide carbon trading scheme this year as planned, an official from the country's state planner said yesterday. "Although China has collected industrial data for the country, it is very difficult to unify the standards and come up with one for the whole country," Dongming Ren, director of the National Development and Reform Commission's Energy Research Institute told Reuters on the side-lines of a conference.

China has launched seven pilot regional trading schemes and promised to create a national exchange as part of its pledges ahead of the 2015 Paris climate change agreement.

M&A

Orient Hontai in deal to take control of Spain's Imagina China's Orient Hontai has agreed to buy a majority stake in Spanish sports rights group Imagina for US$1 billion, the latest deal from deep-pocketed Chinese investors to transform the Asian country into a global soccer powerhouse.

Imagina, usually just known as Mediapro after the name of one of its subsidiaries, has the rights to distribute the La Liga soccer championship, Europe's third-richest league. The Chinese private equity firm had reached a preliminary deal with three of Imagina's shareholders to buy a 54 per cent stake, Imagina founder and chairman Jaume Roures told Reuters in an interview.

INVESTMENT

Overseas assets held by centrally owned firms top RMB6 trillion Total assets held by China's centrally-owned SOEs are expected to reach RMB55 trillion in 2017

T

HE value of overseas assets held by China's centrally owned enterprises has exceeded RMB6 trillion, with investments in more than 185 countries and regions, the state assets regulator said yesterday.

China's state-owned enterprises (SOEs) are spearheading investment in infrastructure projects overseas along the ancient Silk Road land and sea trade routes, part of Beijing's signature Belt and Road initiative.

Firms owned by the central government have co-built 1,676 projects with countries along "the Belt and Road", the state assets regulator said in a hand-out ahead of a news conference on the sidelines of the 19th Party Congress in Beijing.

SOEs such as shipping conglomerate COSCO and the world's biggest utility State Grid Corp of China have invested heavily in such projects in recent years to deepen China's links with economies throughout Asia and beyond.

"Overseas assets held by State Grid has reached US$57.7 billion by now, all of which are profitable," Shu Yinbiao, chairman of State Grid, said at the news conference.

But China has been increasingly scrutinising "irrational" overseas spending by both private and state-owned firms since late last year, which it suspected was one way of disguising capital flight as the yuan currency faltered.

The state assets regulator issued regulatory rules on outbound investments by centrally-controlled state firms early this year, saying it would establish a negative list of investment projects that centrally-controlled state firms would not be allowed to invest in.

Near doubling of assets

Total assets held by China's centrally-owned SOEs are expected

"We hope there will be more restructuring and less bankruptcy...to have more job relocation and fewer layoffs" Xiao Yaqing, head of State-owned Assets Supervision and Administration Commission

to reach RMB55 trillion (US$8.31 trillion) in 2017, nearly doubling over the past five years, state-run China News Service reported on Wednesday, citing the state assets regulator.

China aims to create bigger, stronger state firms and build enterprises capable of competing globally while weeding out excessive capacity in bloated sectors without risking mass layoffs or a blow to economic growth.

"Assets owned by central government companies have exceeded RMB53 trillion by now," Hao Peng, party chief of the State-owned

Assets Supervision and Administration Commission (SASAC), was quoted as saying on the side-lines of congress.

Profits at those firms in the past five years totalled RMB6.4 trillion, a more than 30 per cent jump versus the previous five years, Hao said, according to China News Service.

China will prevent the loss of state assets, deepen reforms of state firms and develop a mixed-ownership economy, President Xi Jinping said at the opening of the twice-a-decade congress.

Xiao Yaqing, head of SASAC, said yesterday that SOE restructuring must be market-driven, but added that authorities will try to avoid layoffs.

"We hope there will be more restructuring and less bankruptcy...to have more job relocation and fewer layoffs," Xiao said.

Central government-owned companies have also cut steel capacity by more than 16 million tonnes and coal capacity by more than 58 million tonnes during the past five years, Hao was quoted as saying.

The world's top coal consumer and steel maker has launched a campaign to shut down substandard steel output in its war on pollution and industrial over-capacity. REUTERS

RENEWABLES

Mainland clean energy firms face US$30 billion subsidy shortfall China will struggle to pay billions of yuan in subsidies to clean energy

T

HE total shortfall by 2020 will be RMB200 billion (US$30.2 billion), up from RMB50 billion last year, Dongming Ren, director of the National Development and Reform Commission's Energy Research Institute, told an industry conference.

"The shortfall will continue to widen if China keeps its current renewable policy of fixed power prices unchanged," he said.

The world's top energy consumer has vowed to raise non-fossil fuel to 15 per cent of its total energy mix by 2020 and cap its carbon emission by 2030 as part of its effort to wean the nation of coal.

Moody's Investors Service warned last month that the dependence of China's renewable sector on government subsidies

will be one of the main near-term challenges for clean power.

"Two years of delays in getting government subsidies will cut a solar project return by 5-6 percentage points," Pang XiuLan, deputy director at State Power Investment Corp's [CPWRI.UL] Huanghe Hydropower Development Corp, told the conference on Tuesday.

To ease the government's financial burden on renewable projects

and keep the rate of waste power under control, China has cut subsidies for new large-scale solar and onshore wind power projects and set capacity limits in regions with high waste rates.

It also introduced green electricity certificate system in February and aimed to enforce compulsory quota system on coal-fired power plants in 2018.

The country also plans to launch a nationwide carbon trade emissions trading market this year, although Ren said earlier on Wednesday that plan is delayed into 2018.

"China needs to expand the source of renewable subsidies, otherwise it would be very difficult for clean energy to compete with coal, especially before environmental costs are showed on coal-fired power prices," said Ren. REUTERS

Business Daily Thursday, October 19 2017    11

ASIA TRADE

India's tightened consumer goods standards could hurt China imports The new rules apply to both foreign manufacturers and domestic firms Neha Dasgupta and Sanjeev Miglani

I

NDIA is tightening quality controls for consumer and capital goods, officials say, a move that follows calls to curb cheap imports from China amid diplomatic tensions between the world's two most populous nations over their shared border.

The new rules target toys, electronic goods, machinery, food processing, construction and chemicals, sectors dominated by China, and come amid greater scrutiny of mainland firms looking to enter India's multi-billion dollar power transmission and telecoms business.

For India's toy retailers, who import everything from toy cars to musical phones and even robots from China, the new requirements have meant supply disruptions just ahead of the Diwali festive season.

The government's Bureau of Indian Standards (BIS) has approximately 23,000 standards across industries, many of which are never fully enforced, officials say. Now, government departments have been asked to carry out laboratory tests and spot inspection to ensure goods conform to the regulations.

"We have started this work on a war footing, to have quality control orders for almost every product that we are consuming in the country," said Ramesh Abhishek who heads the Department of Industrial Policy and Promotion.

However, two people familiar with trade policy who did not want to be named said the sectors targeted are ones in which China controls more than two-thirds of the market, such as toy and stainless steel good industries, and where there have been "chronic" complaints of substandard products.

Separately, Indian Steel Secretary Aruna Sharma said her department will soon release new guidelines, raising quality norms for welded stainless steel pipes that are used in oil and gas as well as construction sector.

"There is evidence of China exporting semi-finished and finished goods using stainless steel that do not meet the BIS standards," Sharma said.

India's trade ministry did not respond to Reuters' request for comment on the new rules. China's Foreign Ministry referred questions to the Commerce Ministry, which did not immediately respond to request for comment.

Bilateral trade between India and China boomed to US$71.45 billion in 2016-17 from US$1.83 billion in 19992000, though most of this is skewed to Chinese exports.

The trade deficit has widened to US$51.1 billion over the past year, a nine-fold increase over the last decade,

BILATERAL TRADE BETWEEN INDIA AND CHINA BOOMED TO US$71.45 BILLION IN 2016-17 FROM US$1.83 BILLION IN 1999-2000 despite repeated Indian calls for China to address the imbalance and open its markets.

Those trade differences are now being amplified by the resurfacing of a long-running border dispute, which has stirred protectionist sentiment in India.

In June, a nationalist group tied to Prime Minister Narendra Modi's ruling party began a campaign to discourage the use of Chinese goods in the country.

Th e S w a d eshi Jag ra n Manch, an affiliate of the main Hindu nationalist

organisation that fights for domestic industry and agriculture, has planned a protest rally in Delhi later this month against the influx of Chinese products.

Toys from China

The new testing requirements for toys focus on their chemical content and flammability and demand more stringent testing for those that are electrically operated.

China accounts for 85 per cent of India's US$760 million toy industry and these are priced at anything from 50 cents to US$150.

Several toy importers are urging the government to delay the new regulations until the festival season is over, saying it would choke supply.

"It comes out of the blue, with no forewarning and gives no time for retailers to prepare for compliance," said Kumar Rajagopalan, CEO, Retailers Association of India that represents

over 1,000 members.

"As a result, it will have grave consequences, such as losses in terms of huge amounts of money paid as advance by retailers to suppliers overseas and a loss of jobs as some businesses that sell only toys will have to shut shop."

While the new rules could hurt local retail consumption, other industry participants argue they will ultimately help local firms by improving standards and keeping lowend imports in check.

They follow similar moves in August, when the government ordered makers of light emitting diode (LED) bulbs to register their products with the BIS for safety checks in an industry where smuggling of Chinese products is rampant.

"There is a need for stronger enforcement for compliance to these standards," said Sumit Joshi, vice chairman and managing director, Philips Lighting India, the country's largest LED maker. REUTERS

M&A

Australia's competition watchdog to review Accor's planned buyout of Mantra There are concerns that divestments could be required in towns where the two hoteliers are the only players

A

USTRALIA'S competition regulator said yesterday it will review French hotelier Accor SA's planned US$920 million buyout of Australian hotel operator Mantra Group Ltd. The Australian Competition and Consumer Commission (ACCC) said it is monitoring the transaction and a "public review will be commenced in due course once certain information is provided by Accor and Mantra".

The deal, a takeover of Australia's second-largest hotelier by its bigger rival, would create the biggest hotel group in the country, with about 50,000 rooms and roughly 11 per cent of the market, according to IBISWorld statistics.

The buyout requires the approval

Key Points Deal would create Australia's biggest hotelier Analysts expect approval although market has priced in some doubt The combined firms would have 11 pct of Australian hotel market

of the ACCC, as well as approval from Australia's Foreign Investment Review Board.

Analysts expect a green light as the market is quite fragmented and particularly if regulators regard newer rivals such as Airbnb as competitors in the sector.

But some doubt is priced in to the market and there are concerns that divestments could be required in towns where the two hoteliers are the only players.

The ACCC announcement was made after market hours on Wednesday. Mantra shares had closed flat at A$3.89 below the offer price of A$3.96 per share.

The broader S&P/ASX 200 index was also flat, while Accor shares were flat in early trade in Paris. REUTERS

12 Business Daily Thursday, October 19 2017

ASIA ELECTION

Underdog centre-left party may outperform expectations in Japan snap poll A Sankei newspaper survey published on Tuesday predicted the CDPJ would get between 46 and 60 seats Linda Sieg

A

NEW centre-left party pledging to bring "bottom up" democracy to Japan may prove the surprise success story of an election on Sunday, although the party is forecast to win a mere sliver of seats compared to Prime Minister Shinto Abe's ruling bloc.

Abe's conservative Liberal Democratic Party-led coalition is on track to roughly match the two-thirds "super majority" it held in parliament's lower house before dissolution, helped by divisions in the opposition camp and jitters over North Korea's nuclear and missile programmes, media forecasts say.

But the Constitutional Democratic Party of Japan (CDPJ) formed just this month could become the core of opposition to Abe's LDP if, as some forecast, it challenges Tokyo Governor Yuriko Koike's flashier conservative

Party of Hope for the top opposition spot.

The CDPJ opposes Abe's proposal to revise the post-war, pacifist constitution to clarify the ambiguous status of the military. Whether to revise the U.S.-drafted charter has long been a symbolic marker dividing Japan's left and right, and Abe is expected to use his big win to push for amendments.

CDPJ founder Yukio Edano, 53, who grabbed the spotlight as Japan's top spokesman during the 2011 Fukushima nuclear crisis, formed the CDPJ on the run after the main opposition Democratic Party's leader stunningly decided the party would run no candidates and encouraged members to run on Koike's slate.

Edano told Japanese media he was inspired by the "Stand up, Edano" tweets he received after the Democrats imploded.

Many Democrats jumped on the Hope bandwagon. Others either declined to join or were shut out after refusing to sign off on a hawkish ADVERTISEMENT

A Reuters poll published yesterday showed Japanese companies overwhelmingly want Prime Minister Shinzo Abe's ruling coalition to stay in power

security stance that echoes that of the LDP. Some joined Edano's party, others are running as independents.

Outdated labels

A Sankei newspaper survey published on Tuesday predicted the CDPJ would get between 46 and 60 seats, compared to initial estimates that about 30 of its 78 candidates would be elected.

That compared to 39 to 57 seats for the Party of Hope, which is running 235 candidates.

A Kyodo news agency survey released yesterday also forecast the CDPJ could become the biggest opposition group.

If so, that would suggest voters unhappy with Abe are seeking not a conservative replica of the LDP but a more liberal alternative, political analysts said. The failed Democratic Party was a fractious mix of liberals and conservatives, saddled with an image of incompetence after a rocky 2009-2012 rule.

THE CDPJ OPPOSES ABE'S PROPOSAL TO REVISE THE POST-WAR, PACIFIST CONSTITUTION "Almost all parties have been conservative and there is no party for liberal voters to vote for," said University of Tokyo professor Yu Uchiyama. "If this party is successful in attracting liberal votes, there could be a prospect to do well."

Edano, however, eschews what he calls out-dated labels such as "liberal" or "left", terms often associated with Cold War-era socialists or communists that can turn off mainstream voters. Unlike the more authoritarian LDP, he stresses commitment to individual civil rights, rather than obligations to the state, and wants to redistribute wealth to create a more equitable society.

"I want to take a first step towards creating a 'bottom up' society ... towards a trend that is neither left, nor right, but moves forward," Edano said during a debate this month.

Struggle to differentiate

The lack of preparation time, and a shortage of cash and candidates will be formidable obstacles for the CDPJ to overcome.

It could also struggle to differentiate its economic policies from those of the LDP, which has long been more centre-left than right when it comes to bread-and-butter issues.

Edano's group wants to put off a sales tax hike and exit nuclear power.

The LDP says it will keep nuclear power as a key energy source and raise the sales tax in 2019 but divert revenue to education and child care from repaying public debt.

Both parties promise equal pay for equal work, higher wages for day care and elder care workers and more financial support for education, although they differ on details.

A Reuters poll published yesterday showed Japanese companies overwhelmingly want Prime Minister Shinzo Abe's ruling coalition to stay in power but about two-thirds want it to lose seats. The poll showed significant opposition in the corporate world to Abe's plans to raise the sales tax and to delay bringing down the fiscal deficit.

"Abenomics would be comfortably left-of-centre in most developed democracies," said Tobias Harris, an analyst at advisory firm Teneo Intelligence.

A healthy showing by the CDPJ could lure more lawmakers to its ranks after the election, although low voter turnout could diminish its performance as could competition with the Japanese Communist Party on the left.

"If the CDPJ comes in second, in a couple of months they will have grown and become the core of a new centre-left opposition party," said Chuo University professor Steven Reed. REUTERS

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Business Daily Thursday, October 19 2017 13

ASIA MONETARY POLICY

IN BRIEF

Big data is new push for Bank Indonesia as it reviews rates Like its counterparts in Russia, China, the U.K. and elsewhere, Bank Indonesia is increasingly turning to so-called big data sources Karlis Salna

I

N a country of 260 million people spread across more than 17,000 islands, gathering the right kind of information at the right time presents a unique challenge to the central bank. Explosive growth in internet use and social media among Indonesia’s young and growing population has opened up new data sources that policy makers are using to plug gaps in the official numbers.

Take the jobs data. Indonesia’s statistics agency publishes employment data every six months, so the central bank is supplementing that with information extracted from online jobs portals, said Yati Kurniati, the head of Bank Indonesia’s statistics department. In the absence of official figures, the bank is also collecting data on the secondary property market from online housing sources to give it a better sense of the health of the economy.

“Every central bank is talking about the digital economy: how we measure it and how it will have an impact on our policy,” Kurniati, who took on her new role in March, said in an interview at her office in Jakarta.

“The machines can screen very large amounts of information,” she said, although “we still have to use our own eyes to make sure the context is appropriate.”

The department’s work is feeding straight into policy decisions. For 15 days before an interest rate announcement, the unit scours social media, news sites and other content on the internet to monitor public perception and rate expectations, and transmit that to Governor Agus Martowardojo and his board. The response from policy makers has been “very positive,” Kurniati said.

Like its counterparts in Russia, China, the U.K. and elsewhere, Bank Indonesia is increasingly turning to so-called big data sources -- which cover everything from online stores to social media and datasets produced by tech companies -- to get ahead of the information curve. With private spending contributing more than half of the economy, measuring consumer

“Over time they will be able to refine it and make it more accurate, which of course, will help them with their decisions” Charu Chanana an economist at Continuum Economics in Singapore patterns and labour market dynamics are key to making policy effective.

The latest puzzle over sluggish consumer spending is a case in point. Despite the aggressive easing in monetary policy, retail sales growth remains well below the double-digit pace of past years, while private consumption has failed to pick up strongly. That’s been one of the reasons -- along with a subdued inflation environment -- why policy makers resumed rate cuts this year, in August and September.

Information gathered from big data sources and the so-called internet of things -- data stored on everyday gadgets, like coffee machines and fridges, that are linked up by wireless technology -- can’t replace conventional statistics, but plays a crucial role, said Kurniati.

Data gap

“Big data cannot solve all the problems,” she said. “It helps to provide information more rapidly and it fills a data gap.” It can help “complete the big picture,” she said.

The growth in online shopping means Bank Indonesia is now receiving “flows of information” from some of the biggest players in Indonesia’s e-commerce market, Kurniati said, without disclosing the names of the companies. PT Tokopedia and Alibaba Group Holding Ltd.’s Lazada are among the most popular online retailers in Indonesia.

Online transactions surged more than 400 per cent to 17.8 trillion rupiah (US$1.3 billion) last year from 2015 and are already at 13.8 trillion rupiah in the first eight months of the year, according to figures from Bank Indonesia.

The proportion of Indonesians with access to the internet remains low -- at about 51 per cent, compared with Malaysia at about 70 per cent -- reflecting the growth potential for e-commerce. Macquarie Research estimates the market can expand to US$65 billion by 2020 from US$8 billion today.

Charu Chanana, an economist at Continuum Economics in Singapore, said the expansion of data sources will help Bank Indonesia respond to challenges more effectively.

“Over time they will be able to refine it and make it more accurate, which of course, will help them with their decisions,” she said. “When you know the exact regions or the exact sectors that are not responding to government measures then you can dig down into those” and seek a targeted solution, she said. BLOOMBERG NEWS

ENERGY

Bangladesh set to sign 15-year gasoil import deal with India Bangladesh Petroleum Corp (BPC) is set to sign a 15-year deal with Indian oil refiner Bharat Petroleum Corp Ltd (BPCL) to import gasoil to meet the country's energy demand, two company officials with direct knowledge of the matter said Ruma Paul

T

HE sales and purchase agreement is expected to be signed on Oct. 22 during Indian Foreign Minister Sushma Swaraj’s visit to the capital of Dhaka, the BPC officials said. The deal will be the country’s first longterm agreement with any Indian supplier.

BPCL will supply up to 250,000 tonnes of gasoil each year from its majority owned Numaligarh refinery for the first three years of the deal to the BPC's northern fuel depot via a 131-km pipeline, which will be built

by India, they said.

"The volume will be increased in line with our demand," said one of the officials, adding the deal would

come into effect when the pipeline is built.

Numaligarh refinery is already supplying a small volume to the state-owned BPC for the country's northern region.

The refinery, located in the eastern Indian state of Assam, will supply around 22,000 tonnes of gasoil with a sulphur content of 500 parts per million (ppm) between October and December by railroad, the officials said.

BPC will pay a premium of US$5.50 per barrel over Middle East quotes under the 15-year deal, up from the current premiums of US$2.20 a barrel for gasoil cargoes it receives by tanker through the country's southeastern port of Chittagong, said one of the officials.

"This is cost-effective because there is no additional transport cost as the supply is being unloaded in our depot in the northern part," the BPC official said.

BPC received its first batch this month under the three-month agreement and its fourth since 2016 amid warming ties between the two neighbouring countries.

Bangladesh typically ships in around 3.2 million tonnes of diesel and 2.5 million tonnes of fuel oil annually.

Sellers include Kuwait Petroleum Corp, Malaysia's Petroliam Nasional Berhad, Emirates National Oil Company, Philippines National Oil Co, Vietnam's Petrolimex, Thailand's PTT, Indonesia's Bumi Siak Pusako and Zhenhua Oil. REUTERS

STRATEGY

Rimau to raise money to buy AirAsia unit Shareholders of Indonesian transportation firm PT Rimau Multi Putra Pratama Tbk have approved the company's plans to raise 3.4 trillion rupiah (US$251.57 million) through a rights issue to buy PT Indonesia AirAsia.

Rimau will sell 13.64 billion new shares and PT Fersindo Nusantara and AirAsia Investment Ltd - the current owner of Indonesia Airasia are acting as standby buyers, Donny P. Pratono, commissioner of Rimau, said after a meeting with shareholders on Wednesday. Rimau will use 76 percent of the proceeds, or 2.6 trillion rupiah, to buy Indonesia AirAsia's perpetual securities.

FUNERAL

Thai king marks completion of royal cremation Thailand's King Maha Vajiralongkorn yesterday presided over a ceremony marking the end of the construction of the royal crematorium that will be used in the funeral of his father, the late King Bhumibol Adulyadej, on Oct. 26. The king blessed and then raised the Nine-Tiered Great White Umbrella of State, the most sacred regalia of the Thai monarchy, to the top of the lavish crematorium - the main site of the royal funeral that was built from scratch on an open space in front of the Grand Palace in Bangkok's old quarter.

SCANDAL

Local government delays Kobe Steel coal plant assessment Japan's Kobe Steel, embroiled in a data falsification scandal in its metals business, was dealt a fresh blow as a local government suspended an environmental assessment of its plans to build a large coal-fired plant on the site of an old steelworks. The government of Hyogo in western Japan, where Kobe Steel plans to build the 1,300 megawatt (MW) coal station, delayed a scheduled meeting on Monday to discuss its data, Hiroo Iino, group leader in the prefecture's environmental assessment office, told Reuters by telephone.

CRIME

Vietnam arrests dissident for attempt to overthrow government Vietnamese police have arrested a dissident accused of attempting to overthrow the government, the communist state's official website said yesterday, bringing to at least 17 the number of dissidents arrested this year. Tran Thi Xuan, 41, was arrested in the northern province of Ha Tinh on Tuesday. The website did not give details of the alleged crime. Reuters was unable to contact her and it was not clear whether she had a lawyer. Despite sweeping economic reforms and growing openness to social change, the Communist Party tolerates little criticism.

14 Business Daily Thursday, October 19 2017

INTERNATIONAL IN BRIEF PORTUGAL

Interior minister resigns after deadly wildfires Portugal's Interior Minister Constanca Urbano de Sousa resigned yesterday after wildfires killed more than a hundred people in the past months.

Hundreds of fires have raged across northern and central Portugal since Sunday after the driest summer in nearly 90 years, killing at least 41 people. The Interior Ministry is in charge of firefighters, the police and civil protection agency.

Prime Minister Antonio Costa said in a statement he accepted the minister's resignation. An opposition politician launched a motion of no-confidence in the Socialist government on Tuesday. This year's fires have burned a total of 350,000 hectares, the worst since 2003.

MONETARY POLICY

German top court denies temporary injunction against ECB's QE A group of German plaintiffs sought the injunction, arguing that the Bundesbank’s help for the ECB is unconstitutional and the legal process is too slow, with the cases pending since 2015 Karin Matussek

MIDDLE-EAST CRISIS

U.S. will help restore water, power to Raqqa The United States will take the lead in helping to clear rubble and restore basic services after the fall of Islamic State in its Syrian stronghold of Raqqa, the U.S. State Department said on Tuesday. "We will assist and take, essentially, the lead in bringing back the water, electricity and all of that," State Department spokeswoman Heather Nauert told a briefing.

"The United States and our allies have prepared for next steps and will continue to work with partners to provide humanitarian assistance to those in need and support the stabilization efforts in Raqqa and other liberated areas," Nauert said.

EMPLOYMENT

U.K. jobless rate stays at 42-year low U.K. unemployment held at a 42-year low in the three months through August and the number of people in work approached a record high, according to figures published yesterday. The latest snapshot of the labor market from the Office for National Statistics may help explain why the Bank of England appears to be edging toward its first interest-rate for a decade.

Wage growth was little changed at just over 2 per cent, but officials are signaling they are no longer prepared to wait for a pickup before tightening policy.

The jobless rate stood at 4.3 per cent in the latest period, and the number of people looking for work fell 52,000 to 1.44 million.

CRYPTOCURRENCIES

Micro-Cap social reality is latest stock to surge on ICO mention Social Reality Inc., a micro-cap advertising technology firm, has joined the ranks of public companies latching onto the cryptocurrency world and its big, speculative returns. Shares of the Los Angeles-based company soared 71 per cent Tuesday after management unveiled plans for an initial token offering during a meeting with analysts. In a 41-page presentation, Chief Executive Officer Chris Miglino discussed plans for "BIGtoken," a digital coin customers can earn for sharing data. "BIG resolves the unanswered question others in the landscape haven’t addressed: How can blockchain put the consumer front-andcenter in the consumer data and advertising ecosystem?" the company said in the slideshow.

G

ERMANY’S top court rejected a bid to ban the Bundesbank from continuing to take part in the European Central Bank’s quantitative easing program while lawsuits challenging the bond-buying plan are pending.

The Federal Constitutional Court said granting the request would prematurely give plaintiffs what they want before the case has been fully resolved. While the judges in Karlsruhe, Germany, held open the possibility they could rule against the Bundesbank’s participation in QE, a final decision is likely months or even years off.

"Because of the high volume of purchases by the Bundesbank, disrupting bond purchases would endanger or even thwart the program’s goal to raise inflation to about 2 per cent," the court said in a statement yesterday. "Granting the interim bid now would be more than just conserving the status quo, it would be identical with granting the lawsuit.”

The decision is part of litigation pending over the ECB’s policy in Germany, where the 2.3-trillion

THE DECISION IS PART OF LITIGATION PENDING OVER THE ECB’S POLICY IN GERMANY euro (US$2.7 trillion) bond-buying program faces widespread opposition. In July, the German court put the program in doubt, asking the Luxembourg-based European Court of Justice for an interim ruling on whether it’s legal. The judges argued that QE violates the ECB’s mandate under the treaties of the European Union and the ECJ should rule against it.

The German challenges have been stayed, but the constitutional court asked its EU counterpart to hear the case under a fast-track procedure, which the ECJ declined to do last month. A group of German plaintiffs sought the injunction, arguing

that the Bundesbank’s help for the ECB is unconstitutional and the legal process is too slow. The cases have been pending since 2015.

The ruling comes at a time when the central bank is mulling reducing its purchases. ECB officials are considering cutting their monthly buying by at least half starting in January and keeping their program active for at least nine months, officials familiar with the debate said last week. Reducing QE to 30 billion euros a month from the current pace of 60 billion euros is a feasible option, said the officials, who asked not to be identified because the deliberations are private.

Policymakers led by ECB President Mario Draghi are becoming increasingly confident that they can agree on October 26 to the specifics of how much debt the euro-area’s central banks will buy in the coming months.

After more than 2 1/2 years of trying to revive the region’s economy through the purchases, some governors see the recent period of growth as a reason to rein in the support.

Others are concerned that inflation remains too weak. BLOOMBERG NEWS

CRIME

U.S. SEC charges Rio Tinto, former top executives with fraud In a lawsuit filed in U.S. federal court in Manhattan, the Securities and Exchange Commission (SEC) claimed two former top executives of Rio Tinto had failed to follow accounting standards and company policies to accurately value and record assets James Regan and Brendan Pierson

T

HE U.S. SECURITIES AND Exchange Commission (SEC) on Tuesday charged mining company Rio Tinto and two of its former top executives with fraud, saying they inflated the value of coal assets in Mozambique and concealed critical information while tapping the market for billions of dollars.

The U.K.'s Financial Conduct Authority (FCA) also said on Tuesday it had reached a settlement with Rio Tinto under which the company would pay a fine of £27 million (US$35.6 million) to settle claims that it breached accounting rules in connection with the Mozambique assets.

The Mozambican coal business, which relied on barging the product down the Zambezi River to export via a planned port on the coast, was

acquired for US$3.7 billion in 2011 from Riversdale Mining and sold a few years later for US$50 million.

In a lawsuit filed in U.S. federal court in Manhattan, the SEC said Rio Tinto, former Chief Executive Officer Thomas Albanese, and former Chief Financial Officer Guy Elliott failed to follow accounting standards and company policies to accurately value and record the assets.

The SEC said that soon after the deal was completed, Rio Tinto learned that the acquisition would yield less coal, and of a lower quality, than expected. The global miner could only transport and sell a fraction of the coal it had originally assumed, the SEC said.

By making misleading public statements, Rio Tinto and the executives were able to raise US$5.5 billion from

U.S. investors, the SEC said. They continued to solicit the investments even after executives of the Mozambique subsidiary told Albanese and Elliott that the unit was likely worth negative US$680 million, according to the SEC. "There is no truth in any of these charges," Albanese said in a statement.

Christina Mills, a spokeswoman for Elliott, said Elliott would vigorously contest the charges.

Royal Dutch Shell said yesterday Elliott had stood down as a non-executive director of the company over the matter.

Rio Tinto said it would defend itself vigorously against the SEC's allegations. The company said the U.K. FCA had "made no findings of fraud, or of any systemic or widespread failure

by Rio Tinto." REUTERS

Business Daily Thursday, October 19 2017 15

OPINION

Pure's financials probably not as toned as its clientele Shuli Ren a Bloomberg Gadfly columnist

O

WNERS OF THE PURE GROUP ARE throwing in the towel.

Buyout firm Leonard Green & Partners and businessman Bruce Rockowitz are looking to sell their controlling stakes in Hong Kong's elite chain of gyms, and Chinese private equity firms might be interested, Bloomberg News reported Tuesday, citing people familiar with the matter.

It's surprising that Pure has decided to pursue a block sale now, as opposed to going down the IPO route. Fancy gyms trade a bit like tech companies. New York-listed Planet Fitness Inc. is valued at 29 times forward earnings while YogaWorks Inc., which debuted in August, is on a 30 times multiple.

Putting aside the fact the Hang Seng Index is at a 10-year high, one could argue now is the perfect time for Pure to go public.

Businesses that are poised to expand their market share are generally well received by investors, and that's the case here.

About 12 months ago, J.V. Fitness Pte, trading as California Fitness, shuttered 12 outlets across US$500 million its the city, while Hong Kong's first Pure Group high-end mixed martial arts club, potential Epic MMA, closed sale value its doors in August.

As a result, Pure has been expanding aggressively. Last month, it opened a 10,000 square-foot facility with four yoga studios in upmarket Pacific Place and it plans to have a second yoga centre in Causeway Bay in December.

Perhaps it's the thought of subjecting its financials to public scrutiny.

As with any gym chain, rent is a big overhead, and Hong Kong has some of the highest real estate costs in the world. In the city's central business district, where Pure has eight fitness and yoga centres, office rent was US$269 per square foot annually in the second quarter, 75 per cent higher than midtown Manhattan and almost double that of London's West End, CBRE Research data show.

Going by CBRE's data, Pure's new yoga studio in Pacific Place would be costing US$2.69 million per year in rent alone. As a long-time Pure Yoga member, I pay just over US$2,000 a year and can use any outlet in Hong Kong.

At that rate, Pure would need about 1,350 new recruits to cover the landlord bill. It's not surprising that California Fitness, which attracted a less affluent clientele, lost HK$117 million (US$15 million) in under three years.

Hong Kong's crazy property market makes the financial hub a difficult place for fitness studios. Having gone through two years of teacher training with Pure Yoga, I decided to preserve my prana and stay in journalism.

Entry-level Pure Yoga teachers are offered as little as HK$350 per class, working out to a monthly income of about HK$28,000.

According to Centaline data from August, the average monthly rent for a 430-squarefoot apartment on Hong Kong Island was about HK$18,275.

Maybe it shouldn't come as any surprise that private equity firms across the water are interested in Pure. After all, mainland developers are buying up swathes of land in Hong Kong and paying top dollar. If they've got the financial muscle, Pure could well be another asset that slips into Chinese hands.

BLOOMBERG GADFLY

Who has the world's no. 1 economy?

Not the U.S. Noah Smith a Bloomberg View columnist

W

HAT’STHEMOSTPOWERFULCOUNTRY in the world? There’s a good case to be made that it’s China.

There are many kinds of power -- diplomatic, cultural, military and economic. So an easier question to ask is: What’s the world’s largest economy? That’s almost certainly China.

Many might protest when hearing this. After all, the U.S. still produces the most when measured at market exchange rates: But this comparison is misleading, because things cost different amounts in different countries.

Gross domestic product is supposed to measure the amount of real stuff -- cars, phones, financial services, back massages, etc. -- that a country produces. If the same phone costs US$400 in the U.S. but only US$200 in China, China’s GDP is getting undercounted by 50 per cent when we measure at market exchange rates. In general, less developed countries have lower prices, which means their GDP gets systematically undercounted.

Economists try to correct for this with an adjustment called purchasing power parity (PPP), which controls for relative prices.

It’s not perfect, since it has to account for things like product quality, which can be hard to measure. But it probably gives a more accurate picture of how much a country really produces.

And here, China has already surpassed the U.S.: If you don’t trust the murky PPP adjustments, a simple alternative is just to look at the price of a Big Mac. The same burger costs 1.8 times more in the U.S. than in China. Adjusting the market-exchangerate GDP numbers by that ratio would put China even farther ahead.

In some dimensions, China’s lead is even larger.

The country’s manufacturing output overtook that of the U.S. almost a decade ago. Its exports are more than a third larger as well.

American commentators may be slow to recognize China’s economic supremacy, but the rest of the world is starting to wake up to the fact: This doesn’t mean China's population is the world’s richest -- far from it. The countries with the highest income per person, in order, are Qatar, Luxembourg, Singapore, Brunei and the United Arab Emirates. But few would argue that Qatar or Luxembourg is the world’s leading economy -- while per-capita numbers are important for the well-being of a nation’s people, they don’t translate into comprehensive national power unless a country also has a large population.

China’s modest per-person income simply means that the country has plenty of room to grow.

Whereas developed countries can only get richer by inventing new things or making their economies more efficient, poor countries can cheaply copy foreign technology or imitate foreign organizational practices. That doesn’t always happen, of course -- many poor countries find themselves trapped by dysfunctional institutions, lack of human capital or other barriers to development.

“

But there’s good reason to think that China will overcome at least some of these obstacles.

Economists Randall Morck and Bernard Yeung have a new paper comparing the histories of Japan and South Korea -- both of which climbed out of poverty to achieve rich-country status -- with the recent rise of China. They find that China’s institutions are, broadly speaking, developing along the same path followed by its successful neighbours.

In other words, not only is China already the world’s largest economy, the gap between it and the U.S. can be expected to grow even wider. This continues to be borne out in the growth statistics -- though China has slowed in recent years, its economy continues to expand at a rate of more than 6 per cent, while the U.S. is at just over 2 per cent. If that disparity persists, China’s economy will be double that of the U.S. in less than two decades.

So economically, China has surpassed the U.S., and is on track to zoom far ahead in the near future. But what about military power? Here, it still looks like the U.S. reigns supreme. It spends more money on its military than China, has a larger nuclear arsenal, and -- thanks to its recent wars in Afghanistan and Iraq -- has a more seasoned fighting force as well.

But that doesn’t mean that the U.S. would win a war, if the two countries fought. A full nuclear exchange, of course, would have no winners. But in a protracted conventional struggle, there’s a good chance that China’s weight of numbers and manufacturing prowess would win out. As an analogy, consider the U.S. and Japan in World War II. At the beginning of the war, Japan’s aircraft carrier force outnumbered that of the U.S., and its navy was far more seasoned (due to Japan’s war in China). But when the war began, the U.S. greatly outproduced its opponent: The U.S. also had a 2-to-1 manpower advantage.

When two countries of similar technology levels fight, numbers tend to tell. China has a larger GDP, more manufacturing output and four times the population. And as its recent advances in stealth technology, directed energy weapons, hypersonic missiles and other areas demonstrate, its military technology isn’t that far behind the U.S. In a drawnout war, once the mighty Chinese steamroller got moving, it would be unstoppable.

In other words, China is now in a position similar to that of the U.S. at about the turn of the 20th century -- a formidable superpower that just hasn’t yet felt any reason to exercise its dominance. Once the U.S. woke up to the need to throw its weight around, no one doubted its primacy.

China may never make the same decision. It may choose to remain restrained on the international stage, with a modest nuclear arsenal and a light footprint in global institutions. If so, its dominance will remain a lurking, looming potentiality instead of a real and present fact of life.

But I wouldn't count on that happening. BLOOMBERG VIEW

IN OTHER WORDS, NOT ONLY IS CHINA ALREADY THE WORLD’S LARGEST ECONOMY, THE GAP BETWEEN IT AND THE U.S. CAN BE EXPECTED TO GROW EVEN WIDER

”

16 Business Daily Thursday, October 19 2017

CLOSING TERRORISM

EU pledges 118 million euros to redesign cities against attacks

available this year and 100 million euros in 2018 to help redesign cityscapes to mitigate The European Commission pledged 118.5 the risks. million euros (US$139.2 million) yesterday to "We can't stop all attacks, we can't deliver help Europe's cities guard against attacks and zero risk, but we can make it harder and outlined how EU countries could do more to harder for terrorists," King told a news curb the sale of bomb-making materials. conference. "We believe we can take action After a dozen cases in Europe of drivers to make public spaces less vulnerable without using vehicles to plough into pedestrians, like fundamentally changing their nature." the August attack in Barcelona (pictured), The EU executive wants cities to come up with authorities have struggled to protect public "innovative solutions" to protect buildings spaces without disrupting cities' open and crowded spaces that could be copied character or busting tight budgets. elsewhere. These could include changes to Security Commissioner Julian King said 18.5 the design of a public space, lighting or public million euros of EU funding would be made awareness campaigns. REUTERS

CPC CONGRESS

Long speech, lots of tea: party meeting with Chinese characteristics Entering the Great Hall for the event required airport-level security checks, with x-ray machines and metal detectors John Ruwitch

T

HE speech was long, the refreshments austere, but Zhang Weiguo, a Communist Party official from Hubei province in central China, was thrilled.

"It was strongly persuasive, infectious, cohesive, and had rally-appeal," Zhang said after Chinese President and party boss Xi Jinping gave a nearly three-and-a-half hour speech in Beijing's cavernous Great Hall of the People to kick off the 19th Communist Party Congress.

"I came out of the auditorium feeling infected, my motivation infinitely enhanced."

The scene is a far cry from a convention of the Democratic or Republican Party in the United States, with their rock concert-like atmosphere, balloons falling from the rafters and raucous cheering crowds.

Instead, most delegates wore conservative business suits, turned pages of the speech in unison, and clapped politely on cue, giving the start of China's most important political event in five years the vibe of an academic conference.

This is party politics with Chinese characteristics. Delegates from China's dozens of ethnic minority groups were required, as always, to wear traditional costumes, often with elaborate headgear - and news photographers swarmed.

An Olympian wore the national team's jacket. Military men and

women, as well as police, donned crisp uniforms. All, including Xi, wore red identifications badges.

Entering the Great Hall for the event required airport-level security checks, with x-ray machines and metal detectors. Outside food and drink were not allowed. Journalists, many of whom had queued in the rain since before dawn, were permitted one mobile phone each.

Inside, Xi laid out a vision for a strong and confident China stretching decades into the future. The speech will be the subject of intensive study by party members across the country in coming months and serve as a model for its content and language.

Still, it was a marathon even by Chinese politicians' standards, and some in the audience dozed off.

For those needing a refreshment, uniformed servers standing in order by height poured tea and hot water into Great Hall of the People paper cups outside the main auditorium.

One server who had been present for the 18th Party Congress five years ago said nothing had changed.

"Everything's the same. Our service is getting better, though," he said.

On stage, where the party's powerful Central Committee and former leaders sat, hosts and hostesses periodically marched from the wings in unison to pour fresh steaming water into porcelain mugs. At the two-hour mark, some started taking toilet breaks.

Luo Jialin, a member of the Sichuan province delegation, rushed to the

Former Chinese President Jiang Zemin holds a magnifying glass while reading a document during the opening ceremony of the 19th National Congress of the Communist Party of China at the Great Hall of the People in Beijing yesterday. Source: Lusa

post office at the Great Hall of People and bought five books of congress-themed stamps with the Great Hall postmark for RMB450 (US$68).

"They are very commemorative, so I want to bring some back home," said Luo. The speech was broadcast live and images of groups of people watching it quickly circulated on social media doctors at a hospital, Tibetan monks, prisoners in a detention centre, and even children in kindergarten. One posting showed a cat sitting in front of a TV broadcasting the speech.

Printed copies of Xi's speech for foreign reporters were produced in 12 languages, including Lao and Portuguese, up from eight five years ago.

The Chinese version ran to 68 pages.

Pictures of the seldom-seen 91-year-old former President Jiang Zemin peering at his copy through a chunky magnifying glass flew across the internet.

Later, someone identified Jiang's magnifying glass as German-made and posted a picture of an ad for it on Taobao. Price tag: RMB1,598, or about US$240. REUTERS

STOCK MARKET CHIEF

MONEY MANAGERS

CRIME

UK firms to flee if no Brexit deal by Xmas

Soros pours billions into foundations as tax deadline looms

Swiss 'tax spy' goes on trial in Germany

More British finance firms will move business to EU countries if Britain fails to hammer out a post-Brexit transition deal by the end of the year, London Stock Exchange chief Xavier Rolet warned yesterday.

"Unless on this side of Christmas a credible announcement is made, then my understanding is that in the first quarter of next year, the implementation stage will start," Rolet said, referring to contingency arrangements being prepared by businesses.

"In the absence of certainty in the next few months, the businesses, the CEOs, the boards the executive committees of many companies that are based here will have to start acting on worst case scenarios," he said at a meeting with MPs in parliament.

Prime Minister Theresa May has backed a twoyear transition period to ease the impact on the economy but she is beset by divisions within her own Conservative party and talks with Brussels are stalled over the size of the UK's exit bill.

A transitional deal, which could involve joint supervision of the City finance district by EU and UK regulators, would reduce the chances of London being stripped of its "clearing" role in processing international transactions made in euros. AFP

George Soros is giving his foundation a big inflow of money in part to minimize a tax bill hedge fund managers are facing this year.

Money managers have until the end of the year to pay taxes on fees they earned from investors in offshore funds and had deferred payment on. Many are now turning to charitable donations -- including to their own foundations -- to help offset the levies coming due.

Soros, founder of US$26 billion Soros Fund Management, has transferred almost US$18 billion to his Open Society Foundations over the past several years, according to a foundation official.

Tax experts have estimated that collectively managers have at least US$100 billion offshore, based on tax-advisers’ conversations with clients, brokers and fund-service providers. A New York-based money manager such as Soros could be subject to a top federal income tax rate of 39.6 per cent, plus state and city levies.

When U.S. Congress eliminated the tax break in 2008, it gave hedge fund managers until Dec. 31, 2017 to bring the cash home and pay the accumulated taxes.

At the end of 2013, Soros, 87, had amassed US$13.3 billion in his Soros Fund Management through the use of deferrals, according to Irish regulatory filings. BLOOMBERG NEWS

A Swiss man accused of spying on German officials who were hunting tax cheats went on trial in Frankfurt yesterday, in a convoluted case that has strained ties between Bern and Berlin.

Daniel M., 54, was arrested in Frankfurt in April on espionage charges after he compiled information on officials tasked by the German state of North Rhine-Westphalia with ferreting out stashes of wealth hidden at Swiss banks.

Switzerland had been seeking the identities of three German tax officers, hoping to build a case against them for illegally obtaining banking data -- which are protected under the country's strict secrecy laws.

Swiss banks had come under intense pressure in recent years as several German states started buying CDs or USB memory sticks allegedly containing data on German taxpayers who had parked their fortunes across the border.

Fearing prosecution, many of Germany's rich and famous subsequently came forward to declare their hidden wealth, boosting the tax coffers of Europe's biggest economy by billions of euros.

German investigators say Daniel M. was in the employ of Bern's spymasters by July 2011 at the latest. AFP