Macau Business Daily, April 10, 2014

MOP 6.00 Publisher: Paulo A. Azevedo Number 515 Thursday April 10, 2014 Year III

Flat out luxury Price growth for high-end homes in Macau is cued to outpace that of homes for the mass market, says estate agency Centaline (Macau) in its first quarter property review. All 210 flats of the luxury Carat project’s first phase sold out in just 48 hours Page

Hengqin harvest

BCP bank profits up 16 percent Page 3

Investors chasing a piece of the Hengqin action were culled from 89 to a shortlist of 30. Expectations are mounting as the area near Macau is considered the best next thing. But the government is only prepared to cut the suspense on Monday. What Secretary Francis Tam still needs to find out is why the Hengqin government decided to launch the Macau Affairs Bureau, to handle trade and investment projects, when communications between both sides are “smooth and close”

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Maritime museum area to expand fourfold Page4

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HSI - Movers April 9

Let’s Seoul

Name

South Korea is attracting more tourists from Macau and now leads traveller preferences. Taiwan and Japan come in second. Political instability in Thailand has taken the gloss off the Land of Smiles as a holiday haven

CTM joins billion club

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Companhia de Telecomunicações de Macau SARL (CTM) will invest more than the originally planned 1.2 billion patacas in three years. Yesterday, the largest operator announced that last year’s profits broke the 1 billion patacas barrier following a 4 percent growth Page

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Innovation points the way

%Day

Want Want China H

3.57

China Petroleum & C

3.54

Galaxy Entertainme

3.44

Sands China Ltd

3.40

Bank of East Asia Lt

2.95

PetroChina Co Ltd

-0.11

Kunlun Energy Co Lt

-2.05

AIA Group Ltd

-1.44

China Resources Po

-1.62

Swire Pacific Ltd

-3.63

Source: Bloomberg

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Experts, politicians and businessmen convene at the Boao Forum for Asia (BFA) 2014 Annual Conference.

All eyes are on China’s economy evolving from lowvalue item producer to breakaway innovation Page 9

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April 10, 2014

Macau

Korea favourite destination for Macau tourists Talent aplenty Travel agencies confirm to Business Daily that Seoul opinion

José I. Duarte Economist

L

ast week, the so-called “Commission of the Development of Talent” hosted its first meeting. It is not easy to declare that the uncertainties about the rationale and objectives of the task were clarified. Since the government, in the last Policy Address, selected the development of talent as a major policy target, doubts continue to linger about what that actually means and what the practical objectives are.

If we recall the words of the Chief Executive in December, at the Legislative Assembly, the “new basic concept” for government action was “to build Macau through the development of talent”. Such a programme would embrace three components. The first identifies the “training of elites”; the second and third seek to “create incentives” for specialised and qualified staff, and techno-professional staff, respectively.

Moreover, let us remember that in the Policy Address presentation we were also told that the government would approach companies, especially the casinos, to “advocate” - that was the word repeated in the media - “an increase in the percentage of local workers in top management positions”, as well as the “rise in their careers for non-specialised staff”.

Two different types of concern seem to come together here, in a somewhat haphazard way.

First comes the realisation that there are not enough locals to sustain current growth and the projected development. If we factor in the new casinos, projected or already under construction, and the associated activities - hotel, restaurants, shops and entertainment facilities et al - that gap becomes huge. Secondly comes the frustration, expressed by some sectors time and again, that there are not enough locals in many higher technical and management positions, especially at or close to the top of the management structure of the big foreign companies.

How the development of a talent programme can help to solve these perceived problems, not to mention how genuine they really are, are questions that recent developments have not made totally clear. At this point, inevitably, doubts creep in about the adequacy of such a programme, regardless of what it will turn out to be once actually defined.

Those uncertainties were not dispelled in the commission’s first meeting, and in some measure may have grown larger.

First, qualifications aside, no training programme can solve the overall lack of local workers. The labour market is, for all practical purposes, fully employed and the demographic trends are unfavourable. The number of new projects already approved requires additional workers in amounts that are totally out of reach of the resident labour pool. They can only be addressed by significantly increasing the number of imported workers. One cannot go back in time and ask the residents, twenty to thirty years ago, to have (many) more children to feed the present economic boom.

Second, unless qualifications are set by decree and promotions are propelled by a forced quota system, the position of locals in the companies’ hierarchy will be essentially determined by internal career structures, promotion opportunities and, last but not least, the skills and competence of the workers. A good worker does not need government “advocacy”. Either one gets a job for reasons of trust, and no amount of academic certificates will do the trick; or one gets the job based on merit, and I’m still waiting to hear a convincing argument about why a company would prefer to bring a worker in from abroad when a perfectly adequate local one is available.

Only two real new additions sprung from this meeting. First, it was the identification of two areas of concern; namely the insufficient availability of staff for the organisation of exhibitions and conferences, and the dearth of bi-lingual staff for cooperation with Portuguese-speaking countries.

Second, there were hints of more money to be distributed, now on the grounds of acquiring qualifications. These do not amount to much, in terms of policy, and do not add much to our effort to clarify what the government is actually seeking.

The objective is “to build Macau through the development of talent”? Contribute to an open and demanding education system, one that promotes freedom of thought, stimulates creativity and rewards the willingness to experiment; build it upon the ethics of fairness and merit, and talent will bloom. Sloganeering is not a substitute for a clear vision and hard policy choices.

was first choice from January-March 2014. As expected, flights to Thailand have declined dramatically Pierre-François Métayer

pf.metayer@macaubusinessdaily.com

Credit: Wikipedia

Build and they will come

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ccording to local travel agencies, the three most visited destinations by Macau residents, excluding Mainland China, are Korea, Taiwan and Japan. “Korea is the favourite destination for girls, Japan is more for masculine [types] and Taiwan is chosen by middleaged people”, says Mr. Siu Chi Shing, General Manager of Hong Thai Travel Services (Macau) Ltd. For Mrs. Sabina Iong, General Manager of EGL Tours (Macau), there are two trendy destinations: Korea is first, Japan is second. She says that Korea is favoured for its skiing facilities and shopping, and because it’s cheaper than Japan. Mr. Siu told Business Daily that the number of package travellers going to Korea via his agency in Q1 was roughly the same as individuals, and that on average they stay four to five days and spend around 7,000 patacas for the whole trip. About 800 Macau locals have travelled there. “They like Korea and especially Seoul because it’s cheaper; for women, usually young, they love to go there because there are loads of cosmetics to buy”, Mr. Siu added.

Sabina Iong said travellers booking the Hermit Kingdom through her agency stay an average of 4 to 6 days, are mainly young couples and spend between 5,000 to 10,000 patacas or so. They usually stay in 3 to 5-star hotels.

The Government Statistics and Census Service (DSEC) indicates that the cumulative outbound for Macau residents using travel agency services to visit Korea in the first two months of 2014 totalled 9,000 visitors, of which 5,500 signed up for package tours. The rate of change has increased by 7.1% compared to 2013, and 4,500 were individuals, a 3% climb compared to last year.

Siu Chi Shing said Taipei and Taichung are the favourite destinations in Taiwan, mainly because they are

not too far and there are daily flights.

“The average stay there is three days, mostly in 3 or 4-star hotels, and people spend around 5,000 patacas for the whole journey”, said Mr. Siu. He also mentioned that there are more individual arrangements than package tours. DSEC statistics show that travellers going to Taiwan have declined 1.2% in the first two months of 2014 compared to the same period in 2013: of 27,800 total visitors, 5,800 joined package tours, while 22,000 travelled independently.

4 to 6

Average number of overnight stays in Korea for Macau tourists

As for Japan, Mr. Siu said travellers would stay an average of five days, a bit more compared to last year.

He explaind that this was due to the dropping Yen. “There are more package tours than individuals; there have been approximately 550 travellers since the beginning of the year”, he concluded. Mrs. Iong said the average stay in Japan is 5 to 8 days, usually in 3 to 5-star hotels and that people spend from 7,000 to 10,000 patacas or more.

“Macau locals go there mainly to buy quality medicine, fruit, clothes and sightseeing”, she said. Government statistics reveal that visitors to Japan

increased by 93.9% compared to the same period in 2013: 2,000 were package tourists, while 2,300 were “on their own”.

Package tours or individuals booking through Hong Thai Travel agency going to Thailand have dropped 80% compared to last year due to the crisis in that country, said Mr. Siu. “Since January, only about 200 people have made reservations for flights there and they’re mostly individuals. They go to Phuket, Pattaya or to the islands and don’t stay in Bangkok anymore, unless for a plane transit”. The situation is the same at EGL Tours Ltd. Mrs. Iong confirmed that before the favourite destination was Thailand but flights have dropped from 70 to 90% from the beginning of 2014 to now compared to last year, whilst prices have not decreased. “Even if there is a crisis in Thailand, the prices do not drop, or maybe just slightly, but it’s not significant because that would mean that there is no insurance, therefore people won’t book there”, she explained.

Mainland China is still the main destination; statistics show that 99% of Macau locals would travel there but according to Mr. Siu and Mrs. Iong, these numbers regroup people going shopping for the day in Zhuhai or Guangdong province.

Mr Siu said only 300 people booked tours for destinations such as Beijing or Shanghai.

In January, outbound residents using the services of travel agencies increased by 1% year-on-year to 111,000; those travelling on package tours totalled 42,000 (38% of total), up 3% year-on-year. In February, outbound residents using the services of travel agencies decreased by 6% year-on-year to 123,000; those travelling on package tours totalled 43,000 (35% of total), down15% year-on-year.

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April 10, 2014

Macau

The magnificent 30 The Macau government has recommended 30 investments for 4.5 square kilometres of prime Hengqin real estate varying from cultural creative industries to the service sector Tony Lai

tony.lai@macaubusinessdaily.com

T

he long-waited list of 30 projects from Macau investors that the government has recommended to the Hengqin authorities will be unveiled on Monday, Secretary for Economy and Finance Francis Tam Pak Yuen has announced.

The top financial official also said yesterday that they did not know why Hengqin had set up the new ‘Macau Affairs Bureau’ as bilateral exchanges have remained smooth and close to date.

In November, the Macau administration received 89 proposals from local companies and individuals interested in investing in the 4.5 square kilometre zone on the island specially earmarked for Macau investors.

Mr Tam confirmed yesterday on the sidelines of a forum that they will

recommend 30 projects to Hengqin on Monday from a smorgasbord of industries.

He declined for the moment to reveal the names of any projects.

“There will be cultural creative industries, tourism, the service sector, and science and research, which conform to the development plan of Hengqin,” he said.

Projects with cultural creative elements will account for 30 percent of the names on the confirmed list, he added.

He said that all the 30 recommended projects scored at least half of the marks from the evaluation committee, or 450 out of 900 points.

A commercial mall plan by listed restaurant operator Future Bright Holdings Ltd and an assembly factory for gaming machines by listed casino service firm Paradise Entertainment Ltd are among

BCP Macau profits up 16pct The bank registered a profit of 204.9 million patacas in 2013

I actually don’t know why such a bureau has been set up [as] our communications with Hengqin are always smooth and close, with enough channels to push for cooperation Francis Tam, Secretary for Economy and Finance

T

he Macau branch of Banco Comercial Português (BCP) SA saw profits increase some 15.8 percent to 204.9 million patacas last year.

Portuguese news agency Lusa reported that at the end of 2013 deposits at its Macau branch totalled 12 billion patacas, “a similar amount to that registered at the end of 2012,” managing director João José Pãosinho

The total land area of the recommended projects applied for is already equal to the maximum land area of the zone, 4.5 square kilometres. But Mr Tam

said the government would still draw up a list of backup candidates from the remaining 59 proposals in case there was still land left.

On Friday, the Hengqin government set up a public body - the Macau Affairs Bureau - to specifically engage in the handling of trade and investment projects by Macau companies, state-run agency Xinhua reported.

But this is not a new concept as Hengqin used to have a body specialised in handling cooperation policies between the island, Macau and Hong Kong.

Niu Jing, director-general of the Administrative Committee of Hengqin, was quoted as saying on Friday that they hope to invite a Macau resident to serve as the deputy director of the bureau.

Mr Tam said yesterday: “The Hengqin side hopes we can think of a civil servant to serve in the position but such an additional job may contravene the mechanism of civil servants here.

“I actually don’t know why such a bureau has been set up [as] our communications with Hengqin are always smooth and close, with enough channels to push for cooperation.”

But the official quickly added that Macau is “interested” in participating in this new body. “Our participation does not necessarily mean we have to send a person there [to work in the bureau],” he explained.

The Macau government is still studying the idea as “we were just notified on Friday” about this latest arrangement, he added.

was quoted as saying.

Speaking to Business Daily, Mr Pãosinho said that a great deal of negative pressure on banks in Europe and the bank’s net interest margin performance contributed to the increase in annual profit.

In addition, credit granted by the bank had dropped 10 percent to 9.7 billion patacas.

Mr Pãosinho also told Business Daily that “as long

as the Macau and Chinese economies continue growing, as well as businesses between these and Africa, the Macau branch will benefit.”

The authorities here granted BCP a licence to operate in Macau as a retail bank, focusing on the corporate market, in 2010.

Before that BCP, Portugal’s biggest private company, had been operating here through an offshore subsidiary.

the 89 proposals vying for the 30 places to invest on the island.

“The Hengqin authorities have already received some basic information about the [recommended] projects,” Mr Tam said. “It is expected that the Hengqin authorities will hold a meeting in eight to ten days for further discussion following our recommendation.”

The Hengqin administration will then meet individually with the investors before inking any agreements or land deals, he added.

Smooth ties

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April 10, 2014

Macau

Luxury to overwhelm mass market price growth The city may continue to see sharp rises in high-end home prices, which will continue to be the major home cost driver Stephanie Lai

sw.lai@macaubusinessdaily.com

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rice growth for high-end homes in the city, in particular offplan sales, may far outpace that of homes for the mass market this year, estate agency Centaline (Macau) Property Agency Ltd observed in its first quarter property review.

While the local property market saw transactions drop in the first quarter, the price of local homes – including both first and second-hand – still remained on a growth track for the coming months due to the lack of new home supply and strong demand from both local users and the growing volume of incoming labour, the agency’s sales director Noelle Cheung noted in a press briefing announcing the review yesterday.

However, homes for the “mass market” - a category that the agency defines as those priced below HK$6 million (6.18 million patacas or US$773,853) in lump sum, or those in the range of HK$6 million to HK$10 million - will see slower year-on-year growth for 2014, Ms Cheung said.

“In the past three years, we’ve already seen a growth rate for these homes at about 25 percent to 30 percent a year,” Ms Cheung explained, “For home buyers, whose income rise cannot correspondingly cope, the price growth has already meant a heavier burden on their monthly mortgage contribution.”

“For these buyers, it’s quite hard for them to accept any further huge price surge,” Ms Cheung remarked, “and we also notice that sellers have got less aggressive in quoting the price for [mass market] second-hand flats, so the price growth for this type of home will slow in the coming quarter, or even for the rest of the year.”

Centaline Macau estimates that there will be 580 property transactions recorded in March, partly stimulated by more off-plan sales launched in the local market, such as the upmarket housing project “Carat” located in the NAPE area.

All 210 flats of the first phase of Carat were sold in two days

For the first two months of this year, some 1,215 property transactions were registered, data from the Financial Services Bureau shows; if Centaline’s projection for the March transactions transpires the total number of property transactions for the first quarter would total about 1,800 cases, or 49 percent less than a year before.

them is strong by affluent buyers.

The agency noted in the briefing that such purchasing interest in upmarket homes could be reflected in the sales of the Carat project located near the Macau Cultural Centre in

Costlier off-plan sales Centaline Macau defines homes priced over HK$20 million in lump sum or those costing over HK$13,000 a square feet as upmarket homes.

The agency’s sales director Ms Cheung reckoned that there is still room for a further price surge for upmarket homes, supported by the fact that the supply in the city is still limited while investment interest for

1,215

Registered transactions in the first two months of 2014

NAPE area.

All 210 flats of the first phase of Carat were sold in two days before the end of March, state-owned developer China Overseas Land and Investment Ltd announced at the time. The flats sold will range in size from 654 square feet to 1,770 square feet.

Ms Cheung believes that local home price growth in the coming months will mainly be fuelled by upmarket home sales.

“Overall speaking, I would even estimate that upmarket homes here may further rise by 40 percent this year,” Ms Cheung told Business Daily.

Stimulated by sales of expensive unfinished flats, local home prices in February posted a rebound from the previous month at an average 90,407 patacas per square metre. The average price of off-plan sales in that month hit a high of 143,279 patacas.

Maritime Museum casts off Expansionary plans call for the museum area to be four times the current size

M

acau’s Maritime Museum is planning revamp works that could see its area expand fourfold.

In an interview with Jornal Tribuna de Macau, the Museum’s director, Wu Chu Pang, says the project is not so much a construction as a concept. “We’ll have to analyse the situation of the Maritime Museum, not just in Macau or in Asia. We’re going to conduct a study

with regard to what place the Maritime Museum occupies in the world,” Mr Wu is quoted as saying.

The new plans will see the museum expand to four times its current area and incorporate some of the neighbouring buildings in the area around D. Carlos Wharf in the Inner Harbour.

Currently, there is no room or space for temporary exhibitions, which Mr Wu

says are very important.

“I’ve spoken with a number of international museums [whose exhibitions] I’d like to exhibit here but there just isn’t any space.”

The museum has commissioned a non-local company for the project, which has yet to be publicly named. The chosen company will budget the project and present a more detailed concept of what the revamp works will entail.

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April 10, 2014

Macau Govt accepts 111 requests for building projects The Land, Public Works and Transport Bureau has received 111 applications to develop land this year. All of the applications are to develop sites on the peninsula, many in heritage areas, Urban Planning Council secretary-general Lao Iong says. The urban planning law, which came into force on March 1, requires government to consult the public about every development plan it receives.

CTM rings up landmark profit The city’s largest telecom operator said its investment in three years will exceed original forecasts of 1.2 billion patacas (US$150 million) after last year’s profits exceeded the 1 billion pataca mark Tony Lai

tony.lai@macabusinessdaily.com

T

elecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) pledges to invest more in improving services, including a new data centre, after its profits last year exceeded 1 billion patacas for the first time.

Vandy Poon Fuk Hei, CTM’s chief executive, said yesterday that the three-year investment plan starting last year will exceed the original target of 1.2 billion patacas.

The territory’s largest operator is also ready to face competition in the fixed-line market, as well as providing fourth-generation (4G) standard mobile services, he said at a media luncheon and briefing.

The company yesterday announced that last year’s profit had grown 4 percent year-on-year to 1 billion patacas, despite a 4-perent drop in revenues to 4.7 billion patacas at the same time.

“Through effective use of resources and increased productivity, as well as with the support of customers, we have achieved a satisfactory performance in 2013,” Mr Poon said.

The decline in revenue last year was due to an 18-percent decrease in sales of mobile equipment, according to the company’s annual report also released yesterday. But excluding the sales of mobile equipment, the company actually enjoyed a 10-percent growth in revenue last year through internet and mobile services.

Talking about the work ahead, Mr Poon said: “This year is actually a year that CTM has put most of the work into the networks.”

CTM launched a three-year

investment plan involving 1.2 billion patacas last year to optimise network quality and diversify services, after suffering three major blackouts in 2012, sparking public criticism.

More arsenals The chief executive said yesterday: “Based on the progress of our works in hand now, the investment amount will surely exceed 1.2 billion patacas.”

CTM invested over 400 million patacas in capital expenditure last year, jumping 21 percent from the previous year, said Mr Poon.

For instance, the company will this year add one more floor to the existing data centre at the

KEY POINTS CTM’s profit rises 4 pct to 1bil patacas Its revenue drops due to fewer mobile equipment sales Three-year investment to exceed 1.2bil patacas New data centre but details not yet confirmed Market regulates fixed-line charges

company’s headquarters in Taipa to accommodate the growing usage by customers. CTM will also start preparations this year to establish a new data centre but Mr Poon did not reveal the exact cost of the centre and the location.

“After Citic Telecom International Holdings Ltd bought us out, our data coverage also extends to Hong Kong, Macau, Singapore and some mainland cities,” he said. “Developing a new data centre will create synergic effect with the [parent] group, too.

“Our first choice will be Macau… while we also look for opportunities on Hengqin Island.”

Hong Kong-listed Citic Telecom increased its stake in CTM to 99 percent last year from 20 percent.

CTM is currently the sole operator in local fixed-line services but another operator - MTEL Telecommunication Company Ltd - is expected to start service in November challenging CTM’s monopoly.

MTEL chairman and chief executive Michael Choi said last month that their service charges will always undercut those of CTM.

Market forces Facing the competition, Mr Poon only responded: “After opening up such a market we hope we can all blossom together.”

But he declined to say whether CTM’s charges for local leasedline services will further lower this year, only saying the price “will be regulated by the market”. CTM cut the prices for such services in October and early this month, bringing the

accumulated reduction to as much as 26 percent.

Mr Poon also said CTM is now “technically ready to provide 4G services”, after the government has unveiled plans for the licensing of this new generation standard. The Bureau of Telecommunications Regulation told Business Daily in February that it can come up with such a plan before year-end.

The company also seeks to achieve 100 percent coverage of the fibreoptic network across the territory this year, Mr Poon said that adding the households using fibre broadband Internet services had increased by up to 2,000 users a month in recent times.

By the end of 2013, the company had 152,300 Internet service subscribers, up 5 percent from the previous year, with nearly 15,000 customers using broadband. It has over 788,600 mobile service subscribers, up 6 percent year-on-year.

CTM is also not worried about finding labour to man its operations in the tight labour market, it said, and is aiming to increase its workforce to 1,080 by year-end from the current 1,030.

Govt as “centre of universe” in TV The Macau government will play a key role in the transmission of free-to-air television signals after April 21, while CTM will merely help provide the installation of equipment, its chief executive Vandy Poon Fuk Hei stressed yesterday.

He described the role of government as “the centre of the universe” in the transitional period of free-to-air TV transmission, adding that the current progress of equipment installation is progressing smoothly.

The administration announced last week that its fully-owned company, Macau Basic Television Channels Ltd, will replace Macau Cable TV Co Ltd to relay the signals to the antenna companies after the exclusive concession of Cable TV to run pay TV service expires on April 21.

Asked yesterday whether CTM is interested in bidding for a pay TV licence, Mr Poon stressed it depends on the latest policy launched by the government.

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April 10, 2014

Macau Govt defends partial on-call taxi service Brands

Transport Bureau director Wong Wan assured legislators yesterday that 60 out of 100 yellow taxis operated by Vang Iek Radio-Taxi Co Ltd have managed to run pure on-call service as required by the government in the past two months. The official remark was made when legislators José Pereira Coutinho and Leong Veng Chai queried why the government had not insisted on its initial request to have all yellow taxis running by calls as a prerequisite for taxi service contract extension. But Vang Iek remarked to the media in early February that the shortage of drivers has made it “impossible” for the company to accept the government’s initial request.

Trends

Sole sisters ... and brothers Raquel Dias newsdesk@macaubusinessdaily.com

A

lthough this won’t be news to many, perhaps the most distracted still don’t know. During this rainy season, ladies no longer have to negotiate the routine of wearing flip-flops in the downpour before changing to proper shoes once they’re safely indoors. Thanks to the hugely successful Hunter, rain boots are now de rigueur.

In point of fact, the trend started last winter but in Macau the winters are relatively dry, so April is the best month to get your hands on a pair of these beauties.

They are tough and come in every colour imaginable.

From glossy reds to teal and gold, snakeskin and textured canvas, you’ll find at least one that will speak to you.

They are not exactly cheap and come with a number of accessories. You can get special socks for colder days in contrasting colour to your boots or even in fur, if that appeals. Sure you have local shops that have similar looks. Belle sells similar style boots with a platform and brands in the other spectrum like Dolce & Gabbana also gave in to the trend. But quality is quality, and Hunter has proven its capacity to innovate and keep doing what it does best.

Men, who were the first target market for Hunter, are more than welcome to join the frenzy. Dark browns and greys as well as blacks, work as well for men as they do for women. The main thing seems to be to embrace the rainy season and don’t let it stop you.

Banzai billionaires declare their hand As it becomes more apparent that Japan will grant some casino licences in the coming months, contenders are announcing their candidacy

Melco Crown’s Altira was James Packer’s first project in Macau

E

veryone in the business wants to grab a piece of the sushi.

Sure it tastes yummy -a US$40 billion market, which represents the chance of becoming the third power after Macau and Las Vegas. Recently, some of the blushing suitors have raised their voices to search for a partner or just to lay their cards on the table.

The first bidder was the Melco Crown joint venture. Early this week, Todd Nisbet, the Crown executive in charge of the offer, announced

that their company was ready to slap down US$5 billion (40 billion patacas), The House of Dancing Water show from Macau and the growing reputation of Lawrence Ho as a marker. But yesterday, James Packer, co-partner with Ho in Melco Crown, said from Japan that he expects “to have a strong set of Japanese partners” and admitted some contacts, as yet preliminary and unnamed. More importantly, he highlighted that “the cost for the successful applicant would probably

Gov’t hold Green hotels majority shares germinate in basic TV S T

he majority shareholder of the Macau Basic Television Channels Ltd, which will be in place for two years, is the government that holds 75 percent.

Public broadcaster TDM holds 25 percent shares and Macau Post holds the remaining 5 percent.

However, the board of directors has not yet been appointed. The statute of the government-owned company was published yesterday in the Official Gazette.

ixteen hotels were awarded ‘Macau Green Hotel 2013’, an annual initiative to enhance environmental performance bestowed by the Environmental Protection Bureau and the Macau Government Tourist Office, in conjunction with local associations.

A total of 31 hotels participated in the green initiative, of which 16 were awarded. These include Sheraton Macao Hotel Cotai Central, Holiday Inn Macao Cotai Central, Conrad Macao Cotai Central and Pousada de Mong-Ha in the gold award category.

The silver award this year went to

be more than US$5 billion”.

On the other hand, Japanese tycoon Yoji Sato indicated that he was also searching for a partner, and had been contacting some candidates and, moreover, this time he leaked some names: Melco Crown, SJM and Galaxy Entertainment on the Macau front; Paradise Group from South Korea and NagaCorp from Cambodia.

Some strong non-Asia applicants including Sands, MGM and Wynn have also expressed interest.

O.G. with agencies

the Mandarin Oriental Macau, Hotel Guide, Grand Lapa Hotel, Animation Imperial Hotel, Emperor Hotel and The Westin Resort Macau, while bronze went to Hotel Metropolis, Hotel Royal, Banyan Tree Macau, Sofitel at Ponte 16, Hotel Holiday Inn and Hotel Lan Kwai Fong Macau.

The award is valid for three years and an official ceremony will be held in June.

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April 10, 2014

Macau

Public utilities in arbitration sights The Consumer Council mulls mandating public utilities to participate in arbitration in the event of consumer dispute Tony Lai

tony.lai@macaubusinessdaily.com

P

ublic utilities must participate in the arbitration process in the event of consumer dispute about their services and products to better protect the customer, according to a new direction that the Consumer Council is mulling.

The government also urges the public to express its opinions as to whether the watchdog should function as a government body or as an entity independent from the administration.

Wong Hon Neng, president of the council, said yesterday on the sidelines of a consumer protection forum that the arbitration process regarding consumer disputes can only

be conducted if both parties agree.

“But the public utilities are already mandated to take part in the [arbitration] process in Portugal,” said Mr Wong, suggesting that this could be the direction Macau can learn from.

Such a mandatory responsibility could be useful here as complaints about the telecommunication services have always figured in the top two sources of complaints in the past five years, he said.

The watchdog is studying the possibility at the moment as this may involve amendments to the current laws, the council president said.

The watchdog recorded 1,666

complaints last year, increasing 3.5 percent year-on-year, while most complaints, or 410 cases, arose from the area of telecommunication services and equipment. But the number was down 5.3 percent from a year ago.

Among the over 1,600 complaints, only “some 20 cases” went to arbitration last year. But Mr Wong defended the arbitration process as “the last resort” in a dispute before filing cases with the courts, and many arguments had already been resolved prior to arbitration.

Secretary for Economy and Finance Francis Tam Pak Yuen also said on the same occasion that “the most

urgent issue” facing the Consumer Council now is its role.

“The Consumer Council now is a public body but it also has elements of association as many figures from society also serve on the council,” he added. “But what is the next step of the council? I want to hear more opinions from the public.”

He did not comment on whether he meant that the status of the council should be changed.

Asked whether more laws are needed to better protect the consumer, Mr Tam said it was better for different industries to draft their own internal regulations.

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8

April 10, 2014

Macau

Expanding business Union Gaming is preparing to open an office in Hong Kong, while its Macau operation will assume the mantle of branch office

Ford anticipates Macau sales increase

F

ord opened their newly renovated showroom on Avenida do Dr. Francisco Vieira Machado on April 8.

According to local media, David Westerman, Ford’s managing director for Malaysia and Asia Pacific Emerging Markets, said the company’s business in Hong Kong had registered a 400 percent growth year-on-year in the first quarter of this year. The US automaker sold about 250 Ford vehicles in the first quarter in its Hong Kong showroom and predicts sales will top the 1,000 mark for the year. Westerman is optimistic that car sales in Macau will replicate the success of Hong Kong. Fords range in price from 200,000 patacas (US$25,042) to 300,000 patacas (US$37,563).

U

nion Gaming Group LLC will open an office in Hong Kong, making it its centre of operations in the area.

Macau Business reports in this month’s issue that the Las Vegas company will keep its Macau office for the time being but it’ll convert it into a branch office at some point.

The report quotes Richard Moriarty, co-founder of Union

Gaming, as saying that the Hong Kong office will give the company more exposure to private and institutional clients based there.

Mr Moriarty, a former Deutsche Bank staffer, will head the new office.

“We wanted to make sure that when we did come to Hong Kong, we were set up the right way to be effective,” he is quoted as saying.

The Hong Kong operation, which

will be called Union Gaming Securities Asia Ltd, is awaiting regulatory approval, and could open by autumn.

According to the report, it will offer research, sales, trading and banking services from an office in the Shun Tak Centre.

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com

9

April 10, 2014

Greater China

Time for innovation?

Subsidies to support R&D are unfairly distributed to state-owned enterprises (SOEs)

Prime Minister Li Keqiang confirmed his attendance at the BOAO Forum. Image: the PM’s 2012 opening address

I

t might be a bad time for Chinese manufacturers as the economic slowdown and restructuring squeeze their profit margins. It could also be good for them too, if they can embrace innovation to move up the value chain.

The good old days for China’s low-cost manufacturers are gone. They now feel the pinch due to factors including mounting excess capacity, rising labour costs and increasing

international competition.

“We found that China’s industrial revolution was less technologically innovative compared with Britain and the United States,” said Nobel Prize Laureate Ronald Harry Coase at the on-going Boao Forum for Asia (BFA) 2014 Annual Conference.

“This was disturbing and unfortunate, particular since the modern economy has become more and more knowledge-driven,” said

Coase, one of ten delegates who questioned over 40 Chinese entrepreneurs on their innovation willingness and capability at the forum.

Moving up the ladder For Chinese iPhone fans, they may lament as their smartphone screens are made by overseas manufacturers.

But they may feel a little relieved if they know that the super glass walls of some

Apple stores are made by a Chinese glass manufacturer.

“The market for ordinary glass is getting smaller with increasing competition and decreasing margins. The only way to survive is to move up the value chain through innovation,” said Dou Qinghe, vice president of AVIC Glass, a specialist glass maker in south China’s Hainan Province.

Like Dou, more Chinese entrepreneurs are racing to catch up with international competitors using expertise, talent and financial firepower.

“The speed of innovation is much higher than that in the west. Just think about how China looked 30 years ago, now you see firstclass technical universities cooperating with Chinese industries to further innovate,” said Ernst Ulrich von Weizsacker, co-President of the Club of Rome.

According to a report released by the World Intellectual Property Organization in March, China ranked third in total international patent applications to the Patent Cooperation Treaty, with over 20,000 applications, up 15.6 percent year on year.

“China is very responsive and receptive to innovative ideas and sectors, such as e-commerce and Internet finance. The embrace for such innovations in turn facilitate further reforms by helping nurture a multi-tier and freer capital market,” said Gregory D. Gibb, Chairman and CEO of Shanghai Lujiazui International Financial Asset Exchange Co., Ltd. “I believe some sectors may even outperform the

HK banks under the microscope IMF says that HK banks should be closely monitored

H

ong Kong banks’ rising exposure to mainland China requires close monitoring and cooperation with Chinese supervisors, but stress tests show they are well positioned to absorb potential losses, the International Monetary Fund said yesterday.

As financial ties between Hong Kong and China have deepened, banks’ exposure to non-bank mainland China entities have grown significantly since 2010, the IMF said.

A broad measure of banks’ exposure to non-bank mainland China entities (NBMCE) has risen to 19 percent of total assets, the IMF said in a review of the HK economy.

This was in the low single digits in 2007, according to Hong Kong Monetary Authority data.

The NBMCE is used by the HKMA, the city’s de-facto central bank, to track loans by the territory’s banks to entities in mainland China.

NBMCE includes exposure to resident mainland affiliates for use outside of Hong Kong, lending of Hong Kong bank subsidiaries in the mainland, and borrowing by foreign companies for use in the mainland.

The IMF said Hong Kong’s banking system was “well positioned”

to absorb losses in adverse scenarios, such as lower growth in China and Hong Kong, higher U.S. interest rates and asset price shocks.

The IMF expects Hong Kong’s economy to grow 3.75 percent in 2014, up from 2.9 percent in 2013 due to a recovering global economy.

It said the main domestic risk for

HK banks district from Tsim Sha Tsui

the city was a disorderly correction in property prices.

Bank deals Banks in Hong Kong have taken over lending to China that foreign banks once dominated, drawn by cheap funding rates following the

United States and Europe in three to five years thanks to their innovation-driven growth,” Gibb added.

However, Chinese entrepreneurs have mixed feelings about innovation. Some accept the necessity to upgrade themselves through technical and operational reform to gain a steadier foothold, but some complain feeling shackled due to unfavourable conditions.

Small-and-medium sized enterprises (SMEs) have the loudest complaint.

Subsidies to support R&D are unfairly distributed to state-owned enterprises (SOEs) and markets in energy, financial services and telecoms are not fully open to private firms.

According to Nobel Prize Laureate Edmund Phelps’ observation, one result of the differentiated treatment towards SMEs and SOEs is the unbalanced talent flow.

“It’s a pity that so many young people graduating from universities are going into jobs they see as more secure in the public sector instead of start-ups, the most energetic cradle of innovation,” Phelps said.

It takes a segmented and completely competitive market to foster innovation. If the market is not open to fair competition and resources are mainly relocated by government administrative approvals instead of personal competence of each company, then few are willing and capable to invest in new products or services, said Gao Jifan, Chairman & CEO of Trina Solar, Ltd. Xinhua

global financial crisis, a voracious appetite from Chinese borrowers and healthy growth in the world’s secondbiggest economy.

Hopes of that rapid growth have enticed regional and Chinese lenders to buy their way into a slice of the action.

Last week, Oversea-Chinese Banking Corp Ltd offered to pay almost US$5 billion for one of Hong Kong’s last remaining family-owned banks, Wing Hang Bank Ltd. Yue Xiu Group, the trading arm of China’s Guangzhou city government, paid a multiple of 2.08 times to buy Hong Kong’s Chong Hing Bank last year.

Reuters

10

April 10, 2014

Greater China Railway operator to increase investment China’s national railway operator will raise its annual investment by 20 billion yuan (US$3.23 billion) to 720 billion yuan in 2014 to increase the number of lines it plans to build, the head of the company said in remarks published yesterday.

Sheng Guangzu, general manager of China Railway Corp, was quoted by the official People’s Daily as saying that the company is targeting starting construction of 48 railway projects this year, up from 44 projects in its previous plan. Increased construction of railway lines is one of the measures the government has recently announced to boost economic growth.

Short term foreign debt quota raised China has set a quota for the total amount of short-term foreign debt banks and companies can borrow in 2014 at US$43.39 billion, the nation’s foreign exchange regulator said on Tuesday, implying a rise of 16 percent from last year.

The State Administration of Foreign Exchange (SAFE) did not give a comparative figure, though it has previously said the quota was US$37.3 billion in 2013.

Of the total, the quota for selected Chinese banks will be US$13.9 billion while that for qualified foreign banks operating in China will be US$16.54 billion, SAFE said in a statement.

Dev Ban increases lending The China Development Bank will increase lending to spruce up rundown housing in April, state media reported, as Beijing takes cautious steps to selectively stimulate its economy. The report follows a decision by China’s cabinet last week to speed up renovation of rundown communities in urban regions. Many economists perceive the move as a kind of “mini-stimulus” package that will allow the government to inject cash into the economy in a targeted way in response to signs of slowing growth in the first quarter.

Banks may see more bad loans China’s banks may see bad loans rising again this year because of government efforts to reduce overcapacity in some industries, Yan Qingmin, a vice chairman of the China Banking Regulatory Commission (CBRC) said on Tuesday.

Even so, the average non-performing loan (NPL) ratio of Chinese banks should be kept to around 1 percent at the end of 2014, because they have set aside enough provisions, Yan told reporters at the Boao forum in the tropical island of Hainan. Chinese official media reported last week that the CBRC would conduct regional and national bank stress tests.

Microsoft-Nokia purchase approved China’s Ministry of Commerce (MOC) said on Tuesday that it had approved Microsoft’s purchase of Nokia’s devices and services business subject to certain conditions. Nokia and Microsoft put forward their final solutions in March, which the MOC thinks can reduce the deal’s potential threat to market competition, said a MOC statement on its official website. The MOC said it had made the decision after analysing the “vertical relationship” between Nokia’s smartphone business and Microsoft’s patents for smart terminal operating system and mobile smart terminals.

Restructure products or Consumption figures lead export to lower than expected results

B

ack in 2008, Sun Qiuliang’s company generated about US$1.6 million selling flashlights in the Chinese trade hub of Yiwu. This year, business has almost dried up.

“The mobile phone for my shop sometimes doesn’t ring for a month,” said Sun, 33, sales manager of his family’s Liyuan Flashlight Works. “In the good old days there would be one or two orders every day.”

Sun’s plight is shared by small businesspeople across the eastern city, a centre for the export of cheap products from hair bands to bracelets. Chinese trade figures for March are projected to show growth below the government’s target for the full year even after a slide in the yuan, underscoring the urgency for Premier Li Keqiang to find alternative economic drivers.

“I don’t see a future for these places if they continue to make lowend products,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong. “They have to restructure their products and move up the value chain, and that applies to China more broadly.”

On a recent business day at the Yiwu International Trade Mart, a five-story marketplace with an area the size of 650 soccer fields, shopkeepers played computer games, read newspapers and even slept at their desks. The dearth of buyers reflects rising costs and lost competitiveness even after the yuan fell

Commercial Wenzhou city sits very close to Yiwu market

about 2.3 percent against the dollar this year.

China last week outlined spending on railways and low- income housing and tax relief to support the economy after a slowdown endangered Premier Li’s target of 7.5 percent growth this year.

Fake invoices Exports probably rose 4.8 percent in March from a year earlier while

imports increased 3.9 percent, based on the median estimates of analysts surveyed by Bloomberg News ahead of customs data tomorrow. The pace may be distorted by inflated numbers in early 2013, when some companies filed fake invoices to disguise capital inflows.

China is targeting foreign-trade expansion of 7.5 percent this year, matching the economic growth goal.

Exports fell 18.1 percent in February from a year earlier, the biggest drop

Xiaomi’s smart, half-priced pho Company’s devices suppose a big challenge to Samsung and Apple as

A

s China’s Xiaomi Corp. began selling smartphones in Singapore this year, each batch sold out in just a few minutes.

So when the company asked people on Facebook to spread the word that more phones would be available soon, one fan was having none of it.

“Spread the word so that my friend can compete with me to buy the phone in under 8 minutes?” wrote Zen Yeo, a 31-year-old documentary film director. “You must be kidding me.”

Such is the fervour for Xiaomi.

Though the Beijing-based company is little known beyond Asia, it has become one of China’s top competitors in four years. Xiaomi’s appeal: It offers the technology and style of Apple Inc. or Samsung Electronics Co. at less than half the cost.

Now founder Lei Jun, 44, is taking his formula abroad. He’s beginning in markets with Chinese populations like Singapore and has hired Google Inc.’s Hugo Barra to lead the effort.

Lei’s goal is to boost sales fivefold to 100 million phones in 2015.

“We’re moving as fast as we can,” Barra said. “We’re working around the clock with our supplier and manufacturing partners to meet demand.”

Xiaomi reflects a shift in China’s economy, with technology companies gaining prominence to match stateowned enterprises in sectors like oil and coal. The country’s standouts include Internet portal Tencent Holdings Ltd., computer maker

Lenovo Group Ltd. and Alibaba Group Holding Ltd., the e-commerce company headed for a multibilliondollar initial public offering.

Make people ‘scream’ Xiaomi is an example of a Chinese company succeeding through innovation and creativity, precisely the characteristics they’re supposed to have in short supply. The company’s phones run on Android, the operating system available free from Google and used by Samsung, among others. Lei makes his phones stand out through sleek design, software that anyone can customize and prices rivals won’t touch. He’s

This logo can be as familiar as Apple and Samsung very soon

100 million phones Xiamoi’s target for 2015

11

April 10, 2014

Greater China

quit

Pacific Century to sell property to Gaw The main thing is that the The real estate unit of billionaire Richard market is not good, the Li’s PCCW Ltd., agreed to sell a Beijing consumption is not good commercial and residential complex to Chen Zhenyan, Nanhong Plastic & Craft Production

since the global financial crisis.

First-quarter figures for gross domestic product are due April 16, with analysts estimating a 7.3 percent gain from a year earlier, the slowest pace since 2009.

Waning advantage The low-cost edge of the world’s biggest exporting nation has been eroded by wages that have tripled in a decade, a currency that has

appreciated about 33 percent against the dollar since July 2005 and a working-age population that began to shrink in 2012.

U.S. imports of footwear from China were US$14.2 billion last year, compared with US$14.1 billion in 2011, American statistics show.

Purchases of semiconductors and related devices fell to US$5.8 billion in 2013 from US$6.1 billion in 2011.

While flashlight-seller Sun says the yuan’s depreciation provided a “glimmer of hope,” it hasn’t helped spur clock sales at Chen Zhenyan’s Nanhong Plastic & Craft Production Co. “The main thing is that the market is not good, the consumption is not good,” said Chen, 37.

The Yiwu marketplace’s woes don’t necessarily show up in official data. The city, in coastal Zhejiang province, says its economy expanded 9.6 percent in 2013 as exports more than doubled. An index created by the Commerce Ministry to track Yiwu’s business shows conditions are better than their low in 2009 though worse than a high in 2012.

Bloomberg News

ones surge they offer top features at very reduced price said that, more than revenue or profit, he wants to create products that make people “scream.”

Though the Singapore launch has been strong, the question for Lei is how well Xiaomi will translate in other new markets. Beyond China, his brand lacks the profile of BlackBerry Ltd. and Nokia Oyj, never mind Apple or Samsung. The task is doubly complicated because Xiaomi’s secret to keeping prices low is that it doesn’t advertise and sells directly over the Web. “If nobody knows about you, certainly they are not going to buy online,” said Jeongwen Chiang, chairman of the marketing department at China Europe International

Business School in Shanghai. “There will be some difficulty to overcome.”

Market riptides Lei founded two companies before he was 30, selling one to Amazon.com Inc. for US$75 million and leading another, Kingsoft Corp., to its initial public offering. He remains chairman of the Beijing-based developer of business and gaming software.

In Xiaomi, which means millet in Chinese, he has built a successful company even as the riptides of the mobile-phone market have battered former leaders such as Nokia, BlackBerry and Motorola Mobility.

Xiaomi’s valuation hit US$10 billion with a fundraising round in August, or double the value of Waterloo, Ontario-based BlackBerry now.

“They did the right thing at the right time,” said Sandy Shen, an analyst with Gartner Inc. “Xiaomi addresses a segment that has been underserved by major brands, which craves the coolness of the latest technology at affordable prices.”

In expanding abroad, Lei is beginning in Southeast Asia, where the Chinese diaspora gives him a head start in name recognition.

Xiaomi will begin selling phones in Malaysia in a few weeks, with Indonesia, Thailand and the Philippines following shortly, Barra said. The company is actively looking at India, Brazil and Mexico, too.

Bloomberg News

Gaw Capital Partners for US$928 million.

T

he sale of Pacific Century Place to the Hong Kong-based fund manager will generate HK$2.65 billion (US$341 million) of consolidated pre-tax profit, which the company will use to pay debt and fund projects in Japan, Thailand and Indonesia, according to a filing to Hong Kong’s stock exchange.

The supply of office properties for sale in Beijing is limited. In the five years through 2012, only 61 sales of office buildings and business parks worth at least US$5 million were recorded in China’s capital, compared with 107 deals in Shanghai, Jones Lang LaSalle said in an August report.

“This is a rare opportunity to be able to acquire such a large cash flow asset in a prime and irreplaceable area in Beijing,” Kenneth Gaw, Gaw Capital’s president and co-founder, said in an e-mailed statement yesterday. “We believe this type of asset will continue to outperform.”

Shares of Pacific Century are set for their biggest decline in more than five months in Hong Kong.

London, Thailand Gaw Capital said in November it bought the Waterside House in London

for a group of South Korean investors, as interest in overseas property from Asia grows.

For Pacific Century, the sale lets the company realize its investment “at a reasonable price” to enhance its financial resources and let it explore investment opportunities worldwide, according to its statement.

Pacific Century will pay an US$100 million breakup fee if the agreement is terminated.

The company is currently developing a resort project in Japan and luxury resort complexes in southern Thailand. It also plans to build a 40-story grade-A office building in Jakarta, according to the statement.

Pacific Century plans to use the proceeds from the sale to repay HK$1.5 billion of loans and redeem HK$2.42 billion of convertible notes that will mature in May. PCCW unit PCCW-HKT Partners Ltd. holds the notes and may convert all or part of the debt into Pacific Century shares, according to the filing. PCCW may consider selling some of its Pacific Century shares to increase the company’s public float, while maintaining its majority stake, Pacific Century said.

Bloomberg News

Alibaba’s IPO race pushes TV investment Wasu Media Holding Co. surged by its daily limit after agreeing to sell a 20 percent stake to Alibaba Group Holding Ltd.

C

hairman Jack Ma and fellow billionaire Shi Yuzhu for 6.54 billion yuan (US$1.1 billion).

The board approved a plan to sell 286.7 million new shares to Ma and Shi’s Hangzhou Yunxi Investment for 22.80 yuan each, the company said in a filing to the Shenzhen Stock Exchange on Tuesday. The deal needs approval from shareholders and regulators, according to the statement.

Wasu, one of the first in China to receive an Internet TV license from the government, has been working with Alibaba to produce set-top boxes since July last year. Wasu operates cable TV and broadband networks in Hangzhou, where it’s based, and provides new media services to clients elsewhere in China with a network of 20 million subscribers, it said in a statement.

Yunxi, set up on April 2 for the transaction, plans to build Wasu into an “integrated media group,” according to the statement.

The investment will help Wasu accelerate expansion in new media and big-data services, fund purchases of cable TV networks to achieve economies of scale and cut the company’s debt-to- asset ratio to 28.2 percent from 64.3 percent as

of Dec. 31, according to its filing to the Shenzhen exchange.

Shi, chairman and founder of Giant Interactive Group Inc., is planning to sell Shanghai Goldpartner Biotech Co., a dietary supplements maker he founded more than a decade ago, people with knowledge of the matter said last month.

Intime investment Alibaba said in March that it would invest about US$692 million in Intime Retail Group Co., owner of department stores and supermarkets, as China’s biggest e-commerce operator integrates online and offline shopping.

The two companies will form a venture in China, using shopping malls, department stores and supermarkets to develop an onlineto-offline business as Alibaba competes with Tencent Holdings Ltd. and its WeChat instant messaging application.

Alibaba said March 16 it will start the process for an IPO in the U.S., without specifying how many shares it would sell or at what price. Analysts have valued the company by as much as US$200 billion.

Bloomberg News

12

April 10, 2014

Asia Australian consumer sentiment higher A measure of Australian consumer sentiment inched higher for the first time in five months in April as households became more optimistic on the near-term outlook for both the economy and their own finances. The survey of 1,200 people by the Melbourne Institute and Westpac Bank showed the index of consumer sentiment rose a seasonally adjusted 0.3 percent in April from March, when it fell 0.7 percent. The index reading of 99.7 was down 4.9 percent on April last year, but that was an improvement on March when it was down 10.0 percent.

India’s commodities futures fall again Commodity futures trading volumes in India fell 40.49 percent in the year to March 2014, its second straight year of decline, the market regulator said on Tuesday. In value terms, futures trading at commodity exchanges fell to 101.44 trillion rupees (US$1.69 trillion) in the first twelve months from April 2013 from 170.46 trillion rupees a year ago, the Forward Markets Commission said in a statement on its website. Trading in gold bullion fell more than 25 percent to 43 trillion rupees in the year to March 2014, from 78 trillion rupees in the same period last year.

David Jones agrees offer from Woolworths

SK employment rate slows Employment figures for South Korea show a light moderation after

J

ob growth in South Korea slowed last month after logging the fastest monthly gain in 12 years, but it kept a stable trend of more than 600,000 jobs added, a government report showed yesterday.

The number of people employed was 25,163,000 in March, up 649,000 from a year earlier, according to Statistics Korea.

The job growth accelerated from 705,000 in January to 835,000 in February, the highest increase in some 12 years, but it slowed down to 649,000 last month.

Job creation of more than 600,000 was viewed as the continued trend of recovery in the country, which recorded a monthly average employment of 386,000 in 2013.

The service industry led the job growth, with 551,000 jobs added.

Manufacturers employed 143,000 workers last month, maintaining an upward trend for 21 straight months.

Job creation in the construction sector rose 5,000 in March after growing 59,000 the prior month.

Those employed in their 20s expanded 41,000 in March from a year earlier, maintaining a growth trend for the seventh straight month.

Those employed in their 30s reduced by 24,000, but the figures for those in their 50s and 60s jumped 292,000 and 215,000 respectively.

Hyundai factory in Changwon city in South Korea

Jobless rate increased 0.4 percentage point from a year earlier to 3.9 percent in March. The number of people unemployed was 1,024,000 in March, up 141,000 from a year earlier.

The unemployment rate among those aged 15-29 jumped 1.3

percentage points on year to 9.9 percent in March.

The jobless rate measures the percentage of those unemployed who actively sought jobs in the past four weeks to the economically active population, or the sum of people employed and unemployed.

Wal-Mart plans 50 more outlets in India Australia’s No.2 department store operator, David Jones Ltd, said yesterday it had agreed to a takeover offer from South Africa’s Woolworths Holdings Ltd valuing the company at around A$2.15 billion (US$2 billion). David Jones said it had entered into a scheme of arrangement with Woolworths for the A$4 per share bid which represented a 25 percent premium to its closing price on Tuesday. David Jones was approached last year by larger rival Myer Holdings Ltd about possible merger but rejected the proposal.

Barclays moves Singapore staff The bank is moving more employees to an office in Singapore’s central business district from the suburbs to cut costs, said people familiar with the matter. Barclays will terminate its lease on about 15,500 square feet (1,440 square meters) of office space at a building in Tampines, an eastern suburb, and relocate the employees to Marina Bay Financial Centre by July, said one of the people, who asked not to be named because the information is private. About 300 people who work in back-office roles will be affected, the person said.

Wal-Mart Stores Inc announces plans to open 50 more wholesale outlets in India and start online operations to sell to small shopkeepers

T

he company already has 20 Indian wholesale outlets. They sell goods to small shopkeepers, who dominate the nation’s US$500 billion retail market, rather than directly to consumers. Wal-Mart has no retail stores in India. The world’s largest retailer said it would open the stores over four to five years.

Wal-Mart’s growth in India has been stunted by an internal bribery probe, uncertainty over regulations on foreign investment in the country, and in October, the severing of a partnership with New Delhi-based Bharti Enterprises aimed at opening retail stores.

Full foreign ownership of wholesale, or “cash-and-carry”, stores is allowed in India and has not generated any political opposition. Wal-Mart has been operating under the wholesale format in India since 2006.

Globally, Wal-Mart operates 359 wholesale stores, compared with 5,633 retail outlets, according to its most recent annual report.

In 2013, Wal-Mart did not open a single wholesale outlet in India despite plans to open eight during the year.

“We are evaluating and reinforcing procedures and programs relating to all compliance areas, including licensing and permits, food safety, and responsible sourcing, among others,” Scott Price, Wal-Mart’s Asia chief executive, said in a statement announcing the rollout.

A company executive in India said the first new outlets among the 50 would open soon in western and southern India, including the states of Maharashtra and Andhra Pradesh.

The executive, who requested anonymity because he was not authorized to speak to the media, said Wal-Mart would start the online business on a wholesale basis and sell goods to traders on a “very small” scale.

India does not allow foreign retailers to sell goods online directly to consumers.

KEY POINTS To add 50 wholesale outlets over 4-5 years; runs 20 now Wal-Mart has yet to apply to open retail stores in India Company did not open any India wholesale stores in 2013

Wal-Mart named a new India head in December and said then that its focus in the country would be on opening wholesale stores and building its supply chain.

The company’s desire to enter India with supermarkets has been met with fierce opposition from small shopkeepers and political parties.

Reuters

editorial council Paulo A. Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Michael Armstrong, Pierre-François Metayer, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee International editor Óscar Guijarro Brands & Trends Raquel Dias Creative Director José Manuel Cardoso WEB & IT Janne Louhikari interns Cynthia Wong, Yvonne Wong Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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13

April 10, 2014

Asia

down pace

Japan’s energy costs mount

a great year

Respite in nuclear plant production dramatically increasing Japan’s power costs

Hiring rate among those older than 15 increased 1 percentage point from a year earlier to 59.4 percent in March. The hiring rate gauges the percentage of working people to the working age population, or those aged 15 and over. It is used as an alternative to the jobless rate for

assessing labour market conditions.

The OECD-type employment rate among those aged 15-64 rose 1.1 percentage points from a year earlier to 64.5 percent last month.

The economically inactive population, or people aged over 15 minus the economically active population, reduced 372,000 from a year earlier to 16,191,000 in March, indicating more people seeking jobs in the labour market.

Among them, those in housework decreased 202,000 on year in March, with those in school for study declining 61,000. The number of job preparers, or those preparing for job-searching, reduced 46,000 last month.

People too discouraged to continue their search for jobs grew 334,000 in the cited period. Discouraged workers are those who want to work and available to do so but failed to get a job due to tough labor market conditions. They are those who looked for a job sometime in the prior 12 months.

The so-called “take-a-rest” group, or those who replied that they took a rest during the job survey period, sank 174,000 last month. The group is important as it can include those who are unemployed and too discouraged to search for work for a long period of time.

Xinhua

S

ince March 2011, Japan’s government has focused on the cost of cleaning up after Fukushima, the worst nuclear accident since Chernobyl. Now, the bill is coming due for another unbudgeted consequence of that disaster - shutting down the nation’s 48 remaining nuclear reactors for costly safety reviews that could see many of them mothballed.

While their reactors have been idled, Japan’s nuclear plant operators have had to spend around US$87 billion to burn replacement fossil fuels. This, in part, explains the utilities’ estimated combined losses of around US$47 billion as of March, and the US$60 billion wiped off the companies’ market value.

That pain is beginning to tell.

Last week, Kyushu Electric Power Co was confirmed to be seeking a near US$1 billion bailout in the form of equity financing from the government-affiliated Development Bank of Japan because of the cost of idling its reactors, joining Hokkaido Electric Power Co which has also asked the bank for financial backing.

Even as Prime Minister Shinzo Abe’s government hammers out the final terms of a delayed energy policy, the bill for a reduced role

for nuclear power in the world’s third-largest economy is becoming clearer. One way or another, Japan’s taxpayers are going to be saddled with the cost of throttling back on nuclear power through taxes and higher electricity bills, analysts say, just as the government has had to provide funding for those who lost their homes and livelihoods after the Fukushima disaster.

The government took a controlling stake in Fukushimaoperator Tokyo Electric Power Co (Tepco) in 2012 to keep it from insolvency, and the company still relies on government credits to pay compensation to those affected by the disaster, which forced 160,000 people from their homes.

The expanded government role in helping utilities pivot from nuclear power - from providing around 30 percent of Japan’s electricity to less than 10 percent - has echoes of the bailouts of Japanese banks in the 1990s, said Tom O’Sullivan, founder of energy consultancy Mathyos Japan and a former investment banker. “The banks were forced to consolidate after those losses, so the outcome might be similar in this case,” he said.

Reuters

Rubber output triggers price war risk As Vietnam’s production increases, dealers fear a price war could break out among main plantations

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fter years of massive expansion, tearing up forests and swallowing land in neighbouring countries to create rubber plantations, Vietnam is reaping what it sowed: a swelling of output that has made it the third-largest rubber producer.

Later this year rubber farmers will tap maturing trees from new plantations, but with global oversupply and limited storage capacity, Vietnam’s burgeoning output could spark a price war in a market already at multi-year lows.

With little prospect of government intervention to support prices, Vietnam’s rubber farmers will have little choice but to sell, shrugging off industry pleas to hold back and making other leading suppliers, Thailand, Indonesia and Malaysia, nervous.

“Of course we are worried,” said Edy Irwansyah, executive secretary of the North Sumatran branch of the Indonesian Rubber Association, which groups exporters in the world’s second-largest producer after Thailand. “If supply and demand don’t match, then it will definitely weigh on prices.”

In 2001, a rebound in rubber prices from 30-year lows of sub-50 cents a tonne

Rubber tree plantations have spread rapidly in Vietnam

inspired Vietnam to diversify key agricultural crops and offer loans at low interest rates to farmers to plant rubber trees.

Vietnam’s state-run rubber companies also opened plantations in neighbouring Laos and Cambodia. The Vietnam Rubber Group, the top exporter, reported its rubber area last year rose 9 percent to 392,000 hectares (968,000 acres), of which 100,000 hectares were in Laos and Cambodia.

In just seven years, the aggressive state-sponsored rubber campaign has seen output rise by 60 percent

from 2007’s 606,000 tonnes, according to data from the Association of Natural Rubber Producing Countries (ANRPC), in which Vietnam is a member.

This year, output is forecast to hit nearly 1 million tonnes, said the International Rubber Study Group, which includes rubber producing and consuming countries and forecasts supply-demand outlook.

And Vietnam’s output could rise a further 50 percent near the end of the decade.

“In the next five years (Vietnam) can move up to 1.5 million tonnes. Trees

are already there waiting to mature. You can’t ask farmers not to tap once they become mature,” said Stephen Evans, secretary-general of the International Rubber Study Group.

Price war?

Traders well remember 2001 when Vietnam was accused of flooding the coffee market sending global prices to 30-year lows. Coffee farmers now curb sales when prices slip below certain levels, but rubber growers may not have the financial means to hold back.

“I wonder if you could see this kind of discipline in the rubber market. I doubt it. It’s still a fairly new industry for them and they still haven’t as much money,” said Macquarie analyst Kona Haque in London.

Dealers say there could be price war among the main growers as production rises, with farmers possibly scrambling to cash in before any further fall in prices due to oversupply.

“They need cash to feed the family, and they can’t afford to hold back because they are smallholders,” said an exporter in Indonesia.

Rubber farmer Nguyen Bao in Binh Duong province, just outside Ho Chi Minh City, has no intention of holding back his rubber, citing farm revenues halving in the last two years to 100 million to 120 million dong (US$4,700US$5,700) per hectare.

“We do not have alternatives, no other business, so we will have to stick to rubber.

Yield has fallen, but I will not sell my rubber land,” said Bao, who has farmed around 3 hectares since the 1980s.

Thailand, Indonesia and Malaysia met in February and recommended they should not sell rubber at the current prices. It has asked Vietnam to sell less this year.

Reuters

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April 10, 2014

International Statoil disappointed with shale Norway’s Statoil, looking to become a global energy company, has been disappointed so far in its hunt for shale opportunities to match the quality of its U.S. assets, a senior executive said. In a push to find new shale basins globally as it expands outside its traditional base, the energy major has invested in shale acreage in Russia with Rosneft, in Germany with Wintershall and in Australia with PetroFrontier Corp. The company is also scouring regions from Argentina to China for more shale opportunities as U.S. acquisition prices have soared.

IMF sees a rough year for emerging economies The IMF cuts forecasts for some of the biggest middle-income countries

German imports rise German imports climbed to their highest level since reunification while exports fell in February, in a sign that domestic demand in Europe’s largest economy is gathering pace. Figures from the Federal Statistics Office showed seasonally-adjusted imports climbed by 0.4 percent to 77.6 billion euros, their highest level since the office started compiling seasonally-adjusted data for reunified Germany in January 1991. Imports had been expected to increase by a smaller 0.1 percent, according to a Reuters poll.

Exports dropped by a larger-than-expected 1.3 percent.

Banco BIC eyes global expansion Angola’s Banco BIC, backed by the billionaire daughter of the country’s president and a Portuguese cork tycoon, plans to ramp up its branch network at home while also expanding overseas to operate in four continents, its chief executive said.

Speaking as part of the Reuters Africa Summit, Fernando Teles also said Angola’s banks were ready to finance the oil-rich country’s economic diversification drive, but the private sector needed to do a better job of identifying viable projects. BIC is Angola’s biggest private bank by branches.

OECD development aid hits record Development aid from rich countries to some of the world’s poorest rose to a record high last year, data showed on Tuesday, but contributions from mainland Europe lagged as the region clawed its way out of recession. The Organisation for Economic Cooperation and Development (OECD), which is considering changing its definition of what constitutes aid, said states in the Paris-based club doled out US$134.8 billion last year.

After two years of cuts to foreign aid budgets, that was 6 percent more than in 2012 and the highest ever level, an outcome the OECD described as “heartening”.

Intel and BoA abandon Costa Rica Bank of America and microchip giant Intel announced closures in Costa Rica leading to nearly 3,000 layoffs, dealing a double blow to the Central American country’s economy. It came two days after the election of third-party candidate Luis Guillermo Solis as the next president of the nation of under five million people and represents a significant setback to its bid to become a high-tech hub. Outgoing President Laura Chinchilla tried to downplay the double impact. “Some will leave, but others will take their place,” she said.

Olivier Blanchard in the IMF press conference on Tuesday

deflation in the region.

“Sustained low inflation would not likely be conducive to a suitable recovery of economic growth,” the IMF said, calling again on the European Central Bank to ease monetary policy.

“We hope they will implement (policies) as soon as they’re technically ready to do so. Sooner is better than later,” IMF chief economist Olivier Blanchard said at a news conference.

Deflation is less of an immediate threat to Japan than it has been in the past, the IMF said, largely because a planned increase in the consumption tax would raise prices.

But it said the tax hike would likely cut into Japan’s growth and warned of a one in five chance the world’s third-largest economy could slip into recession this year.

Ukraine impact

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he International Monetary Fund on Tuesday predicted the global recovery would strengthen this year and next as output in richer nations picked up, but it warned of rising risks in emerging economies.

In its latest global economic snapshot, the Washington-based IMF nevertheless said better policies were needed in both advanced and emerging nations to avoid a prolonged period of sluggish growth.

Global output should expand 3.6 percent this year, slightly lower than forecast in January, and grow 3.9 percent next year, the IMF said in its flagship “World Economic Outlook.”

That would make 2015 the strongest year of growth in four years.

But the numbers mask an increasing divergence among countries. While less fiscal austerity should help unshackle growth in the United States and Europe, emerging markets are likely to grow more slowly than thought just a few months ago, the IMF said.

Geopolitical risks have also entered the picture because of the conflict between Russia and Western countries

over Ukraine.

“The strengthening of the recovery from the Great Recession in the advanced economies is a welcome development,” the IMF said. “But growth is not evenly robust across the globe, and more policy efforts are needed to fully restore confidence, ensure robust growth, and lower downside risks.”

Despite weather-related weakness at the start of the year, the IMF said the United States should enjoy abovetrend growth of 2.8 percent this year thanks to less severe budget cutting, a recovering housing market and an easy monetary policy.

It said it did not expect the U.S. Federal Reserve to raise interest rates until the third quarter of next year.

Economic activity in the euro zone should pick up slightly as countries slow the pace of fiscal austerity, even though the currency bloc continues to suffer from financial fragmentation and weak credit supply and demand, it said.

The IMF repeated warnings about the very low level of inflation in the euro zone and said it saw about a 20 percent chance of growth-sapping

Over six millions cars to repair Toyota Motor Corp said yesterday it would recall 6.39 million vehicles globally for faults affecting various parts ranging from steering to seats

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he world’s biggest automaker said it was not aware of any crashes or injuries caused by the glitches, which were found in 27 Toyota models including the RAV4 SUV and Yaris subcompact.

Toyota said faults were also found in the Pontiac Vibe and the Subaru Trezia, two models the automaker built for General Motors and Fuji Heavy Industries.

The automaker did not say now much the recall would cost and it was not clear if the faults stemmed from Toyota’s suppliers or its manufacturing process.

“We sincerely apologise to our

customers for the inconvenience and concern brought by this recall announcement,” Toyota added in a statement.

Large scale recalls have become more common in recent years as automakers move to fix defects quickly after Toyota was forced to recall more than 9 million vehicles to address sticky accelerators linked to fatal accidents.

That recall, which forced Toyota President Akio Toyoda to testify in U.S. Congress, weighed heavily on the company’s sales and reputation, culminating in a record US$1.2 billion settlement agreed only last

The IMF cut forecasts for some of the biggest middle-income countries, including Russia, Turkey, Brazil and South Africa. It forecast that emerging markets overall would grow 4.9 percent this year, 0.2 percentage point lower than in January.

“In emerging market economies, vulnerabilities appear mostly localized,” the IMF said. “Nevertheless, a still-greater general slowdown in these economies remains a risk.”

Blanchard said as prospects improve in advanced economies, investors will become less forgiving of countries’ problems, including large current account deficits or high debt burdens.

“And financial bumps, such as those we saw last summer and earlier this year, may well happen again,” Blanchard said, referring to large capital outflows from emerging markets as the U.S. central bank prepared to wind down its massive bond-buying program.

The IMF warned the tug of war between Russia and Western countries over Ukraine could undercut growth in other ex-Soviet economies.

Reuters

month, with more private lawsuits still pending.

Toyota said some 3.5 million vehicles were being recalled to replace a spiral cable that could be damaged when the steering wheel is turned, causing the air bag to fail to activate in the event of a crash. About half of those vehicles, produced between April 2004 and December 2010, are in North America.

Another 2.32 million three-door models made between January 2005 and August 2010 are being recalled to check the rails that could cause the seat to slide forward in a crash.

The other recalls are for faulty steering column brackets, windshield wiper motors and engine starters, Toyota said.

The 6.39 million vehicle recall is the largest announced on a single day for Toyota since October 2012, when it called back 7.43 million Yaris, Corolla and other models to fix faulty power window switches.

It also comes as rival GM is under investigation for failing for years to act on a known ignition switch defect linked to a dozen deaths.

Reuters

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April 10, 2014

Opinion Business

Cementing Europe’s Recovery

Leading reports from Asia’s best business newspapers

Mohamed A. El-Erian

Chief Economic Adviser at Allianz and a member of its International Executive Committee Chairman of President Barack Obama’s Global Development Council

wires

The New Zealand Herald Prime Minister John Key has defended new oil and gas exploration permits in a major conservation park, saying it is not a National Park and mining already takes place there. The Government’s latest block offer would open up a large part of the West Coast for prospecting, in an area that included the Victoria Forest Park. The 200,000-hectare park near Reefton does not have Schedule 4 status and is categorised as a forest park, which is a lower ranking than a National Park.

Taipei Times MediaTek Inc (聯發科), which supplies handset chips to Chinese companies, including Lenovo Group (聯想) and Xiaomi Corp (小米), yesterday again posted record-breaking monthly revenue, of NT$17.43 billion (US$576 million), boosting the current quarter’s revenue past the company’s forecast. Last month’s revenue rose 10.79 percent from February’s NT$15.73 billion and grew 84.84 percent from a year earlier after acquiring local flat-panel TV chip supplier MStar Semiconductor Corp (晨星半導體) in February.

The Age As house prices soar to flashing red levels driving up debt to income ratios to nose bleeding levels, there seems to be no end to Australia’s property boom. Australian household debt has hit a record 177 per cent of disposable income, with residential property prices equating to 4.3 times annual incomes and 28 times annual rent. With Australian dream of home ownership increasingly becoming unaffordable, economists at Australia’s biggest bank, Commonwealth, have attempted to demystify the excitement surrounding house prices. A 20% rise in mortgage rates typically chokes off a housing price boom, CBA says.

Philstar Investment pledges approved by the Board of Investments (BOI) declined 52 percent in the first quarter from a year ago. In a statement, the BOI said it approved P46.77 billion worth of investments as of end-March, down from the P97.19 billion approved in the comparable period last year.

BOI managing head Adrian Cristobal Jr. said last year’s figure was higher due to the big ticket power project of Redondo Peninsula Energy Inc. amounting to P62.86 billion approved in 2013. Cristobal said that domestic firms dominated the total investment commitments for the first quarter at 90 percent or P42.08 billion.

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RUSSELS – During my current trip to Europe, I have been encouraged by the hope and deeper sense of economic and financial calm that has arrived this spring.

With risk spreads compressing markedly, the region’s financial crisis has been relegated to the history books, and the region is again attracting the interest of foreign investors.

Consumer confidence is recovering as well, and businesses are again looking to expand, albeit cautiously.

Economic growth has picked up and unemployment, while still alarmingly high, has stopped increasing in most countries.

Remarkably, all of this is occurring in the context of a major geopolitical crisis to the east, following what the Financial Times rightly pointed out constitutes “the first annexation of another European country’s territory since the Second World War.” Equally disturbing, Russia’s annexation of Crimea has occurred with stunning ease – indeed, simply “with the stroke of a pen,” as the FT put it. And neither Western Europe nor the United States can even pretend to provide a military counterweight to Russian actions in Ukraine.

Yet, rather than disrupt its growing confidence and composure, the Ukrainian crisis has been a catalyst for renewed political cooperation and solidarity within Western Europe. It has also fostered closer relations with the US at a time when political leaders face inevitable headwinds in completing historic negotiations on the proposed Transatlantic Trade and Investment Partnership (TTIP), aimed at boosting economic ties in a manner

consistent with a strengthened multilateral system.

Europe badly needs all of this good economic and financial news. The region has only just exited a recession that has devastated many livelihoods.

Far too many citizens are still trapped in long-term unemployment, while a distressing number of young people struggle to secure a job – any job.

The region’s on-going recovery is also good news for a global economy that has yet to rebalance properly and fire on all available growth cylinders.

US growth, while edging up, is still below its potential, let alone high enough to offset prior shortfalls. After a short burst, Japanese growth has begun to sputter. And several systemically important emerging economies (including Brazil, China, and Turkey) have slowed, while their transitions to new growth models remain incomplete.

But Europe’s renewed sense of hope and confidence, however encouraging, is not sufficient – at least not yet – to produce appreciable welfare gains for current and future generations. A few things need to happen rather quickly – specifically, over the next several weeks and months – if the continent is to minimize the risk of slipping into another prolonged period of underperformance and additional asymmetrical downside financial risk.

Let us start with the immediate geopolitical threat.

To put it bluntly, Europe’s economy, and even more so the economies of Russia and Ukraine, is not particularly well positioned to weather a further disorderly escalation of tensions. Enlightened diplomacy needs to replace

The European Central Bank needs to pivot from financialcrisis prevention – an area where it has performed impressively – to striking the delicate balance of supporting growth (and countering currency overappreciation) without fuelling excessive risk taking

the Cold War-style posturing and rhetoric that have reemerged. Further escalation would mostly likely cause the West to impose deeper economic and (critically) financial sanctions on Russia, followed by Russian countersanctions that would disrupt the energy flow to Europe.

All of this would tip Europe as a whole into recession and renewed financial turmoil.

Second, the European Central Bank needs to pivot from financial-crisis prevention – an area where it has performed impressively – to striking the

delicate balance of supporting growth (and countering currency over-appreciation) without fuelling excessive risk taking. This may well involve renewed experimentation, which would again take many policymakers outside their comfort zone.

Third, with European institutions acting as catalysts, political leaders will need to reinforce efforts to place the eurozone as a whole on a firm footing. This requires complimenting monetary union with deeper political integration, better fiscal coordination (where progress has been painfully slow), and a proper banking union (last month’s agreement should be treated as a stepping stone, not the ultimate destination).

Fourth, at the national level, individual countries need to continue to rebalance their policies with a view to achieving the trifecta of structural reforms, solid aggregate demand, and fewer debt overhangs.

Finally, anti-establishment parties must not dominate the European Parliament election in May. Most of these parties are committed to greater national isolation and, at least initially, would work hard to halt and reverse recent gains made on regional economic and financial integration.

That is quite a to-do list, to be sure, especially given that it only covers the next few weeks and months. Yet every item on it is achievable, and progress on each would help to ensure that Europe’s encouraging spring leads to a bountiful harvest of economic opportunity, growth, and jobs, while reducing the risk of a hot political summer and a more frigid economic winter. © Project Syndicate, 2014

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April 10, 2014

Closing Chinese partnership with East Timor

Japan PM to visit Portugal

China wants to establish “a general partnership” with East Timor, boosting trade and bilateral cooperation, said the Chinese president, Xi Jinping. The wish was announced during a meeting with East Timor’s prime minister Xanana Gusmão, who began an official one-week visit to China on Sunday.

Xi Jinping proposed “boosting cooperation in the construction of infrastructures, communications, energy, farming and the development of special economic zones”.

The prime minister of Japan, Shinzo Abe, is to make an official visit to six European countries, including Portugal, between 29 April and 8 May, his officials announced yesterday. Abe is to visit Spain, Portugal, the UK, Germany, Belgium and France, where he is to take part in the meeting of the Organisation for Economic Cooperation and Development.

Among subjects for discussion with European leaders are the tensions in Ukraine as well as free trade deal between Japan and the EU.

Toyota recalls millions of cars Japanese automaker’s shares suffer from announcement Chang-Ran Kim

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oyota Motor Corp, in its second-largest recall announcement, said yesterday that it would call back 6.39 million vehicles globally after uncovering five different faults involving parts ranging from steering to seats.

The world’s biggest automaker said it was not aware of any crashes or injuries caused by the glitches, which were found in 27 Toyota models including the RAV4 and Yaris subcompact.

Toyota said faults were also found in the Pontiac Vibe and the Subaru Trezia, two models the automaker built for General Motors and Fuji Heavy Industries.

The automaker did not say now much the recalls would cost, and it was not clear if the faults stemmed from Toyota’s suppliers or its manufacturing process.

The move by Toyota to announce five different recalls on a single day from Tokyo comes as major automakers face increasing scrutiny in the United States on how quickly they take preventive safety action and how quickly they share information with regulators and the public.

Toyota agreed last month to pay US$1.2 billion to

the U.S. government for withholding information related to unintended acceleration in its vehicles.

That safety crisis had caused Toyota to recall more than 9 million vehicles.

In a high-profile case that has the potential to change U.S. safety regulation, Toyota

rival General Motors is under investigation for failing to act on a known ignition switch defect linked to a dozen deaths.

The company has recalled 1.6 million vehicles over the issue.

In the largest of the recalls announced yesterday, Toyota said some 3.5 million vehicles were being recalled to replace

a spiral cable that could be damaged when the steering wheel is turned. That could cause the air bag to fail in the event of a crash, the automaker said.

In total, about 2.34 million of the vehicles to be recalled were sold in North America.

Another 810,000 were sold

in Europe.

In the second-largest of the Toyota recalls, some 2.32 million three-door models made between January 2005 and August 2010 are being recalled to check for a fault in the seat rails that could cause the seat to slide forward in a crash, risking injury for the driver or passengers.

The other recalls are for faulty steering column brackets, windshield wiper motors and engine starters.

The recall announcement, which came during late afternoon Tokyo trade, knocked an additional 2 percent off Toyota’s already sagging shares.

They quickly pared the extra losses, however, and ended down 3 percent at 5,450 yen, reflecting an overall weak tone in the market where the benchmark Nikkei average fell 2.1 percent.

Toyota’s 6.39 million vehicle recall is the largest announced on a single day for the company since October 2012, when it called back 7.43 million Yaris, Corolla and other models to fix faulty power window switches.

In the first two months of 2014, major automakers had announced 18 separate recalls in the United States, now the second-largest auto market behind China, according to the latest data compiled by the National Highway Traffic Safety Administration.

The recent wave of largescale recalls represents a source of revenue for auto dealers who are paid by manufacturers to service defective cars.

Reuters

Casinos shares push index up

Where will the slowdown go?

China closely watching trade pact

Hong Kong shares ended at its highest in 11 weeks yesterday, as a rebound in casino shares and index-heavyweight Tencent pushed the index to its best close since end-January.

The Hang Seng Index closed up 1.1 percent.

The China Enterprises Index of the leading offshore Chinese listings in Hong Kong was up 0.6 percent.

Hong Kong casino stocks climbed back into positive territory, putting an end to a downward spin many had fallen into in recent days after peaking at the beginning of the month on positive gambling revenue data from Macau.

Wynn Macau Ltd closed up 3.9 percent, Galaxy Entertainment Group Ltd was up 3.4 percent, and Sands China Ltd gained 3.4 percent.

Shares in Tencent Holdings Ltd, a dominating force on the Hang Seng, were also up, gaining 2.8 percent as the stock continued to see-saw on continuing investor concerns about the overvaluation of tech shares.

China has less and less room to rely on policy tools to support the economy, the country’s top economic planning agency said yesterday, as the government tries to arrest a protracted slowdown this year.

Last week, the government announced plans to quicken construction of railways and affordable housing, and cut taxes for small firms to support the economy.

Policy fine-tuning is needed to smooth out economic volatility, but room for the government to underpin growth is narrowing, the National Development and Reform Commission (NDRC) said in a report.

“Against the backdrop of rising local government debt burdens, high debt ratios and rapid money supply growth and excessively large social financing, room for simply using fiscal and monetary policy to manage demand and promote economic growth is getting smaller and smaller,” the NDRC said.

“Improper operation will exacerbate overcapacity and delay structural adjustments, increase inflationary pressures and accumulate debt risks,” it said.

China is watching talks on the Trans-Pacific Partnership (TPP) trade agreement and is open to an eventually joining as long as the pact is inclusive and transparent, a senior Chinese trade official said yesterday.

The United States is promoting the 12-nation free trade bloc that would stretch from Vietnam to Chile to Japan and some Chinese analysts see it as a political move to isolate China. But some participating countries have said China, the world’s second biggest economy, will have to be included sooner or later.

“China is watching TPP negotiations very closely with great interest,” Assistant Commerce Minister Wang Shouwen told reporters at the Boao forum on the southern Chinese island of Hainan.

“I think as long as these regional trade agreements are open, inclusive and transparent, they could serve the purpose of the regional as well as the global economic development.”

The TPP pact is seen as crucial for U.S. efforts to ensure it helps write the rules for trade in the AsiaPacific region.

Reuters

Bloomberg

Reuters