Macau Business Daily, May 15, 2014

MOP 6.00 Closing editor: Alex Lee Publisher: Paulo A. Azevedo Number 539 Thursday May 15, 2014 Year III

Health jackpot Since 2011, the government has gifted more than 1.2 billion patacas to Kiang Wu Hospital.

That’s 83 percent of the Health Bureau’s budget for private entities on one single

institution. The subsidies to Kiang Wu are increasing at 15 percent per annum and could reach half a billion patacas in 2014 Page 7

Transparency needed www.macaubusinessdaily.com

The European Union heavies are in Macau. Mission: convince the government to improve tax transparency standards to fight fraud and adopt the G20’s global automatic exchange of information system. Trade between the two regions is growing almost 30 percent per year, EU Commissioner Algirdas Semeta tells Business Daily Page 2

Land of the rising opportunity

Coffee grounds

Japan’s casino market could be bigger than Macau for MGM Resorts International, says James Murren.

The company CEO is in Tokyo and expounds on the significance of the Japanese bet: fewer operators competing Page 5

Tan Heong San, best known for its Honolulu cafes, is preparing to fork out some 15 million patacas to open two ‘upscale cafes’ in Macau. Company owner Jack Ung also wants to build a hotel on Hengqin Island, a proposal made under the company’s name, he tells Business Daily

Customs crack down on food smugglers Page 6

Chinese national millions in debt to Crown casino Page 16

Brought to you by

HSI - Movers May 14

Name

%Day

China Resources Lan

5.95

China Overseas Land

4.09

China Resources Po

3.99

New World Develop

3.61

Bank of Communicat

2.24

China Unicom Hong K

-0.33

China Mengniu Dairy

-0.38

China Merchants Ho

-0.63

Tingyi Cayman Islan

-0.68

AIA Group Ltd

-1.04

Source: Bloomberg

I SSN 2226-8294

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2

May 15, 2014

Macau

EU lobbies Macau for greater Moments of clarity tax transparency opinion

The European Union wants Macau to go deeper in its tax transparency standards to fight fraud as trade between the two regions grows almost 30 percent a year, UE Commissioner Algirdas Semeta tells Business Daily José I. Duarte Economist

M

ost modern societies have, over time, developed complex mechanisms to deal with the many and oftendivergent interests that are bound to exist in big and very differentiated communities.

Governments became much bigger at the end of the 20th Century than was the case a hundred years prior, measured both by size and financial clout. This expansion raised difficult questions about the management of these big bureaucratic systems; and, also, it called for the implementation of mechanisms to control the immense power gained by governments in the process.

With great power comes (or should come) great responsibility and, also, great potential for abuse and corruption. In many countries, that has led to the creation of checks and balances aimed, one way or the other, at limiting the power of governments, in general, and public departments, in particular. To achieve those objectives, various types of bodies were created to confront corruption, to ensure compliance with the laws and promote proper administrative procedures. Typical examples of these bodies are the offices with a mandate to fight corruption or the audit offices fashioned to check the proper operation of public services.

It is well known that in the last few years both the Commission Against Corruption (CCAC) and the Commission of Audit (CA) have produced several reports that were very critical of the behaviour of various public departments or, at least, seriously questioned some of their procedures and policies. They pointed out various irregularities and undesirable practices in a number of services and public projects. So, we might think, the system safeguards exist and seem to be working. Or so we could be hastily led to believe.

We tend to assume that if the bodies exist and conduct their inspection duties, their findings should be taken on board and their recommendations followed. In the end, if they exist they must fit some purpose; they must be instrumental in improving governance and legality. And this should be all, were it not for the common perception that the targeted services do not give the impression of being much concerned with the contents of the reports; and the fact that the explanations occasionally presented are not very illuminating or, at times, even relevant to the matters under scrutiny.

Some recent comments by the director of the services for the administration and public services (SAFP), as reported by the local media, have been quite helpful in clarifying these issues. Essentially, he reminded everyone that the law does not include any rule forcing government departments “to implement [the CCAC and CA] recommendations or to agree with their findings”. They are only obliged to “pay attention” to the commissions’ recommendations and “answer the opinions” in a reasoned manner. That’s all!

If a recommendation is not followed, and no proper justification is put forward, then the commissions can raise the issue to the next hierarchical level and, on the limit, bring the issue “as soon as possible” to the attention of the Chief Executive. However, we can be reassured that the law ‘allows’ the departments to follow the recommendations, which can, we are told, be very useful to improving the management and monitoring of services and ensuring they comply with the law.

Let us simplify these statements. The commissions can criticise and ask the public departments about ways to change. The services will pretend to care; and, if they are really in a good mood, then they may even comply.

Otherwise, we’ll answer invoking whatever reason may seem appropriate and, in essence, that’s it! The commissions are very welcome to produce their reports and recommendations.

As long as the services are free to ignore them or even, at their own discretion, to follow them. Good to know that their work may not be completely wasted. Sometimes, it is good to have someone bring us back to earth.

Alex Lee

Alex.lee@macaubusinessdaily.com

E

uropean Union (EU) officials are in Macau to convince the government to upgrade its current tax transparency standards and adopt the G20’s global automatic exchange of information system that allows countries to get better and quicker information about its citizens and companies in foreign countries, and fight tax fraud.

“We’re here to discuss with Macau authorities their attitudes towards the exchange of information.

Macau is currently implementing the previous and existing standards of exchange of information but the entire world is changing to automatic exchange of information on financial accounts”, the EU comissioner for taxation, customs, statistics, audit and anti-fraud Algirdas Semeta told Business Daily.

Talking on the sidelines of a Macau European Chamber of Commerce event yesterday, the EU official claimed that “due to this global movement, Macau has to consider joining and I’ll encourage authorities to do it as quickly as possible.”

Mr. Semeta said he would “like to see Macau in this movement” because the territory is becoming a financial centre and the automatic exchange of information is now the global standard adopted by all major financial centres in the world.

Direct line The automatic exchange of information system allows tax administrations of two countries to have a direct line between them. If adopted here, the Macau tax office could ask information about the income (dividends, interest, royalties, salaries or pensions) of one of its citizens living in France, for example, and vice versa. If the UK wants to investigate a tax invasion scheme by a British national citizen living in Macau, the territory’s tax offices will automatically provide all the account information.

“The basic idea of this exchange of information is to allow tax authorities to collect all necessary information about its peers in order to apply national legislation in the correct way”, said the EU commissioner.

The system provides timely information on non-compliance where tax has been evaded either on an investment return or the underlying capital sum even where tax administrations have had no previous indications of non-compliance, according to the Organization for Economic Cooperation and Development (OECD), which proposed this global system.

The G20 countries (a group that links the biggest twenty economies in the world) fully endorses the OECD and has applied the global model of automatic exchange.

During their visit, EU officials will discuss with the government the best way to adopt the global anti-fraud mechanism. Macau could employ two

Algirdas Semeta

methods: adopt the system through a bilateral agreement with a single country or negotiate an agreement with a block of states like the EU and its 27 members.

Better as a block The former two-time Minister of Finance of Lithuania stressed that given the size of Macau it would be preferable to have negotiations with the EU as a whole and not individually with 27 countries. Macau has opted until now to make bilateral agreements on other issues like tax, emigration and trade policy.

“I’m in Macau to discuss and hear the thoughts of Macau authorities and what their preferences are [in order] to be able to report to the EU member states the best option for Macau”, Mr. Semeta told Business Daily.

The need for better tax transparency and stronger anti-fraud mechanisms is also due to the increasing trade between Europe and Macau and the interest of more European companies in the territory. According to the EU official, the trade between the two regions grew 28 percent in 2013 from the previous year to 660 million euros (7.2 billion patacas) and has been rising annually at 20 percent.

“No-one can stay in the global finance area and ignore these global trends”, he added.

Macau has to consider joining - the automatic exchange of information system - and I’ll encourage authorities to do it as quickly as possible

This Friday, the EU is also signing a number of agreements with China to reinforce Customs and taxation rules and to stifle the counterfeit trade from China to the EU, especially via Hong Kong.

4

May 15, 2014

Macau Brands

Trends

Getting a life with iPhone Raquel Dias newsdesk@macaubusinessdaily.com

Honolulu: Waking up and smelling the coffee The local coffee roasting and cafe operator Tan Heong San, known for its Honolulu cafes, is eyeing the hotel business on the mainland as well as expansion closer to home Stephanie Lai

sw.lai@macaubusinessdaily.com

Photo: Cynthia Wong

Although the gadgets surrounding Apple’s phone have been around for a while, this new one will probably still surprise you

A

s soon as the first iPhone was launched a number of businesses sprung up around it. From mere decorative accessories to highend tech innovations, the Apple mobile phone has been a source of inspiration.

It’s no secret that the devices have been used for several different healthcare innovations as well as wellness and sports.

From apps you can download to actual physical gadgets that work in conjunction with your phone, the options seem limitless. Sceptics might suggest that these only increase our dependence on the devices but certainly there is an argument that they improve the quality of life as well.

However, it looks as though things can still get better.

The US company Azoi has launched the Wello, a product that promises to revolutionise the way you read your health.

In a world obsessed with heart rates and BMIs, it seems a good bet. Wello is an iPhone case that is designed to help you keep track of your health by monitoring blood pressure, heart rate, blood oxygen levels, temperature and lung function — all just by holding your phone with both hands for a few seconds and blowing in a funny tube attached to it.

In essence, Wello is your personal check-up, one you can use anytime anywhere. You simply hold your smartphone in its Wello case and hidden sensors start testing your vitals.

The information is then sent to an app synced to your phone.

You can both track your health at that moment and access data you’ve previously stored; to give you an idea how/if you’re improving.

The price is another great asset of the product. Although the company has announced this is a limited-time offer only, the fancy, possibly life-saving case can be yours for US$199.

Although it’s not available in stores just yet you can preorder it online.

project located in a residential zone near the Patane wet market, which will provide high tea sets and dinner sets currently unavailable on the Honolulu cafe menu, Mr Ung said.

“This new cafe aims to draw in younger affluent customers from the residential zones, and hopefully it can attract tourists as well,” said Mr Ung. “We expect that it can operate within this year.”

Crossing sector

Tan Heong San is preparing to fork out about 15 million patacas to open two ‘upscale cafes’ in Macau

L

ocal coffee roasting brand Tan Heong San Enterprise Ltd, known for its selfoperated Macanese cafe ‘Honolulu’, is diversifying its business to open upscale cafes in the home market while maintaining ambitions to enter the hotel business in Hengqin, should the Macau Government lease more land from the island for local small and medium companies.

Tan Heong San Enterprise, known primarily for its ‘T.H.S. Honolulu’ cafes in the city, actually started out as a small-scale family-owned coffee roasting and supplying business servicing local restaurants in the 1950s.

The core coffee roasting and supplying business still remains: Tan Heong San produces 600,000 to 700,000 pounds of coffee a year now with its manufacturing plant in the Cross Border Industrial Zone in Ilha Verde. In addition to supplying local restaurants, Tan Heong San supplies roasted coffee to several companies in Hong Kong under an OEM (original equipment manufacturer) partnership.

In an interview with Business Daily, Tan Heong San Enterprise owner Jack Ung Chi Fong revealed that the cafe business only started in the early 1990s to help promote the company’s coffee roasting brand, since when it has undergone a gradual expansion in the wake of the city’s tourism and gaming boom.

“The Honolulu coffee shops have really helped a lot in promoting our [coffee roasting] brand...” said Mr Ung. “Our customer source is mainly locals, half of whom are residents familiar with our cafes in their neighbourhood.”

Some 10 Honolulu cafes in Macau - mostly situated in residential areas - provide a combo of self-roasted coffee from Tan Heong San and Macanese dishes. Mr Ung also runs two takeaway ‘Cafe Express’ coffee stands in the city, situated near popular tourist destinations.

But he refused to disclose further financial details of Tan Heong San’s earnings from the coffee roasting and restaurant business.

The coffee roaster and restaurant operator has avoided the bane of rental surges that burdens most of the city’s small and medium enterprises as the Tan Heong San owner is also engaged in the property development business. Classic Land Investment Co Ltd has acquired many of their Honolulu restaurant properties during the last two decades.

Nevertheless, the Tan Heong San operator expressed a wish to further tap the tourist market in Macau.

“We’ve been successful with our [Honolulu] restaurant business, and to strive for a change in terms of expanding our business, we’d like to launch a new kind of [catering] service to customers that’s totally different from our existing restaurants,” said Mr Ung. Tan Heong San is preparing to fork out about 15 million patacas (US$1.88 million) to open two ‘upscale cafes’ here, the company’s owner said.

One of these new cafes is situated on a plot of land off one of the back lanes behind São Domingos wet market, a spot near the popular tourist destination Leal Senado Square. The land, which has been acquired by the company, will see the construction of a 5-storey cafe equipped with cellar and warehousing space.

“We’d like to run the coffee house ‘boutique-style’, where we’ll also have a bar on the second floor,” said Mr Ung. “And the cafe location is a spot where more tourists pass by.”

The owner expected that a total of 13 million patacas would be spent on the 5-storey cafe project, in which the cafe construction alone will cost at least 10 million patacas. The new cafe is expected to be constructed and enter into operation next year.

Another 2 million patacas is to be invested in another upscale cafe

Mr Jack Ung, who also operates the budget Ung Hotel in the Inner Harbour district, has actually delivered an investment proposal under the name of Tan Heong San to build a hotel in Hengqin Island when the Macau Trade and Investment Promotion Institute (IPIM) earlier invited bids from local companies to start operations there.

Tan Heong San has proposed building a hotel comprising 2,000 rooms in Hengqin, constructed in three phases. The first two phases of the project are estimated at an investment budget of about 700 million yuan (US$112 million).

“We’re thinking of establishing a hotel that can offer room rates at half of what Chimelong theme park on Hengqin is offering now,” said Mr Ung. Current room rates for the Chimelong hotel are around 1,000 yuan to over 1,200 yuan a night.

“We’d have to provide a 4-star hotel service there, if Hengqin accepts our bid,” said Mr Ung. “I believe that a good profit return is possible if we can achieve effective cost control.”

“For the third phase of the project, we’re planning to launch a space for hydroponic farming to accompany the hotel, where we have a Hong Kong partner that can offer the farming technique,” said Mr Ung. Authorities in Hengqin, however, have only accepted 33 companies from more than 80 Macau enterprises planning to establish a business on the island. Tan Heong San is inches away from the shortlist, as they were rated by IPIM as the 34th applicant to be recommended to Hengqin.

In April, the city’s Chief Executive Fernando Chui Sai On revealed that the MSAR Government plans to lease further land plots from Hengqin but has not officially disclosed whether the plots will be reserved entirely for commercial purposes.

“We hope that Macau can succeed in gaining more plots of land from Hengqin,” said Mr Ung, adding that his company wants to pitch the hotel project again if Hengqin authorities can invite another round of investment proposals from Macau companies to settle in the island.

“But an important thing for both the mainland and Macau administrations to take heed of is that they should not just lease land to people to hoard and allow them to do no development at all,” said Mr Ung/ “The Cross Border Industrial Zone here [in Ilha Verde] has been a bad example.”

5

May 15, 2014

Macau

Fewer casinos, more market MGM pushing for Japan casino bill in bet market beats Macau Vinicy Chan, Yuki Yamaguchi and Stephanie Wong

J

apan’s casino market could be bigger than Macau’s for MGM Resorts International, while pressure is rising to legalize gambling resorts in time for the 2020 Olympics, said James Murren, MGM chief executive officer.

Murren is in Tokyo with executives from rivals including Las Vegas Sands Corp. and Melco Crown Entertainment Ltd. and pushing for passage of a bill to end the ban on casinos in the current session of Japan’s parliament ending June 22.

“Time is of the essence,” Murren said yesterday in an interview. “There seems to be a very strong political will to move this forward and who knows what that environment will be a year or two from now.”

Japan’s ruling party and business leaders including Lawson Inc. Chairman Takeshi Niinami have promoted casinos as a tourismboosting complement to the 2020 Summer Games in Tokyo. The current parliament offers the last chance for passage of a casino bill in time to have resorts open by then.

Officials in Prime Minister Shinzo Abe’s party have said casinos can add hotels and provide an economic boost as the country draws tourists to its capital for the Olympics. Abe

James Murren

is looking for ways to broaden an economic recovery that’s stalling, adding to pressure to end the ban on casinos in this session of parliament to maximize the tourist boost.

“These type of developments would generate millions of incremental tourists and a tremendous amount of jobs and economic benefits for the

country, and of course for the host communities,” Murren said. “The longer the delay, the more the missed opportunities.”

Murren said Japan’s market could be bigger for MGM because there would be fewer operators competing.

“MGM is one of six concessionaires in Macau,” Murren said. “In Japan,

the market has potential of being US$20 to US$40 billion and there would be far fewer integrated resorts than in Macau.”

The bill to legalize casinos in Japan, introduced in December, isn’t likely to pass in the current Diet session, where it lacks support from the New Komeito party, the Nikkei newspaper reported April 28, without saying where it got the information.

New Komeito draws support from the Soka Gakkai sect of Buddhism, which has expressed concern casinos would “worsen public safety,” according to the Nikkei.

Once the current Diet session ends, lawmakers typically come back for an extraordinary session starting in Japan’s autumn, which means the casino bill could have an additional chance to pass before the end of the year.

Gambling resorts would help the government reach its goal of attracting 30 million foreign visitors a year by 2030, Hiroshi Mizohata, former head of the Japan Tourism Agency, has said. That number is triple the 2013 level, which was a record high, according to the Japan National Tourism Organization.

Casino supporters have said the resorts would attract wealthy tourists from China and around the world, along with Japanese gamblers.

Takeshi Iwaya, secretary general of the pro-casino lawmakers group, is scheduled to speak today at the Japan Gaming Congress. Casino executives expected to speak at the conference include Murren of MGM, Las Vegas Sands President Michael Leven, Wynn Resorts Ltd. President Matt Maddox, and Thomas Arasi, president of Bloomberry Resorts Corp.

Bloomberg News

6

May 15, 2014

Macau Bridge over troubled waters A 40-year old man from Mainland China has been arrested for helping a woman aged 40 enter Macau illegally. At 4:00pm on May 1, a man named Pong was intercepted in a boat by the authorities near the Bridge of Friendship. Pong confessed to helping the Chinese woman, named Chan, to clandestinely enter Macau in exchange for 5,000 yuan that an unknown man from Zhuhai paid him.

The authorities consider that there is strong evidence that Chan is involved in the crime of helping illegal immigrants.

Customs crack down on food smugglers Yvonne Wong

G

ongbei Customs reports that it has cracked down on two ‘Ant moving’ smuggling rings. The gangs are smuggling ‘Koi Kei’ and ‘Choi Heong Yuen’ food products from Macau to Gongbei in Zhuhai, the value of which is estimated at over 13 million yuan (US$2.08million).

The leaders of the smuggling rings first purchase the food products from ‘Koi Kei’ and ‘Choi Heong Yuen’ in Macau, then they organise each parallel trader in the smuggling ring to perform multiple entries between Macau and Zhuhai. They carry a small amount of the food products each time, bypassing normal trade procedures; eventually, huge amounts of food are transported. This case resembles that of the parallel trade

in milk powder products. According to the External Trade Law, if the value of goods exceeds 5,000 patacas exporters have to file a declaration.

The food products carried by the parallel traders are being sold to many cities in Mainland China through the Chinese online shopping website TaoBao. Business Daily asked Gongbei Customs for information on the number of similar cases of rings that smuggle food and commodity products from Macau to Gongbei last year but received no reply before going to press.

No distributing agent or branch has been set up in Mainland China for the two renowned local­­­­ food souvenir brands ‘Koi Kei’ and ‘Choi Heong Yuen’.

Corporate CEM hosts seminar on energy saving More than 220 members of CEM and from the Integrated Services Centre of the Women’s General Association of Macau attended the ‘Energy Saving and Safety Seminar’ held last Tuesday to promote knowledge about energy saving and safety to the public, strengthen communication with customers, and introduce CEM’s customer services to citizens. The event was chaired by Vice Director of the Women’s General Association of Macau Un Sio Leng, Advisor to CEM Executive Committee Iun Iok Meng, CEM Customer Services Department Senior Manager Keegan Cheang and Communications and Public Affairs Senior Manager Cecilia Nip. During the course of the seminar CEM speakers introduced the know-how of electricity usage in daily life through simple presentations, interesting tips and practical examples to enhance the attendees’ awareness of energy conservation and safety.

Biennial of the Lions the pride of MGM MGM Macau is organising an exhibition during May - Biennial of the Lions - with 50 different lion sculptures to celebrate the 50th anniversary of the diplomatic relations between China and France.

The statues are to be displayed in the MGM Art space and around the streets of the city. Fifty artists from different artistic disciplines such as sculpture, painting, writing and fashion design, were challenged to apply their talent to the lion sculptures. ‘This collection of works is part of MGM Macau’s ongoing efforts to promote all forms of art and make them accessible to the public’, the company explained.

The Biennial of the Lions will be hosted by Macau on its 10th anniversary, having exhibited in Lyon (2004, France), Turin (2006, Italy), Quebec (2008, Canada) and Algiers (2012, Algeria). Admission is free.

Buyer beware T

he Court of Final Appeal has ruled that two individuals must pay HK$1.14 million in compensation for breach of contract concerning an agreement linked to the sale of an apartment in Nam Keng Street. The penalty represents double the original sum of HK$570,000 paid upfront by the buyer when the agreement was signed, plus interest,

the court said, upholding the previous decisions made by the Courts of First and Second Appeal.

The original buyer signed an agreement with the sellers to buy a flat in Nam Keng Street worth HK$2.85 million, free of liens and charges, paying HK$500,000 in advance. When the buyer discovered that the flat was subject to a pending judicial action brought by a third party for breach of contract against the sellers, the buyer decided to give up on the transaction and demanded compensation.

Ups and downs of city elevators M ost of the city’s elevators and escalators have warrantees so the government does not force the mandatory inspection of the equipment employed. According to the Public Works Bureau, 41 of 44 maintenance companies working in Macau have presented a list of equipment they are responsible for.

One year ago, new rules were introduced and must be adhered to by the maintenance companies although

building owners are not compelled to use specialised technicians for the inspections.

The DSSOPT says that the results after the new rules were put into force show that almost 5,200 items of equipment were declared, some 90 percent of the total. All of them are elevators and escalators which have security certificates and are part of a database that will be made public in the second half of the year.

7

May 15, 2014

Macau

Kiang Wu, the MOP400 million health club Since 2011, the government has allotted more than 1.2 billion patacas to Kiang Wu Hospital, spending 83 percent of the total Health Bureau’s budget for private healthcare on one single institution. Subsidies to Kiang Wu are increasing 15 percent every year and could reach half a billion patacas in 2014 Alex Lee

Alex.lee@macaubusinessdaily.com

in 2014 (no data is yet available for 2014 first quarter) then Kiang Wu’s support from the government could reach half a billion patacas.

For example, in the last quarter of 2013, the Health Bureau conceded 216 subsidies that totalled 313 million patacas. Kiang Wu got only ten but these were worth more than 277 million patacas, almost 90 percent of the total.

Nurses, join the party

I

t’s like winning the lottery without playing. Every year, Kiang Wu receives a ‘prize’ exceeding 400 million patacas from the government, representing more than 80 per cent of the total health budget put aside for private institutions and individuals in Macau. So, why bet on fortune?

According to Business Daily calculations based on data from the official gazette, between 2011 and 2013 Macau’s Health Bureau gave Kiang Wu more than 1.29 billion patacas – 1.2 billion to the hospital and 100 million to the nursing college. This figure is equivalent to 83.2 percent of the total financial support distributed by the Health Services to individuals and private institutions over the last three years.

If Kiang Wu is historically the main recipient of government funds for the health sector, its weight has been growing over the years.

In 2011, the hospital and nursing college received 78 percent of the Health Bureau budget total for private institutions, while in 2012 its share topped a record 86 percent and last year stood at 84 percent, official figures reveal.

Since 2011, the institution has received an average of 430 million patacas annually from the

government but like all medians it hides some trends. For Kiang Wu, the trend is always on the upside.

Three years ago, it received subsidies amounting to 365 million patacas.

In 2013, that figure exceeded 488 billion patacas, an increase of 33 percent in two years.

On average, the government increases its financial support to Kiang Wu 15 percent annually, a growth rate larger than the total health budget that gains 10 percent every year. If theses rates are maintained

MOP1.29 billion Government money to Kiang Wu in last 3 years

Other recent trends have been the increasing financial subsidies attributed to the Nursing College, a parent company of Kiang Wu. Last year, the nursing institution received subsidies that peaked at 47 million patacas, almost double the two previous exercises (around 25 million patacas a year), and a tenth of what the hospital earns from public coffers.

The financial support given by the government to Kiang Wu assumes several forms: subsidies for investment and development, subsidies for outpatient treatment, funds for construction and renovation, financial support for different medical specialties and services like clinical analyses.

According to the official gazette, the fourth quarter is by far the most profitable for Kiang Wu. Since 2011 at least, the hospital receives almost half of the government’s subsidies in the last three months of each year. In 2013, it landed 255 million patacas in a single quarter, 45 percent of the year’s total.

8

May 15, 2014

Macau Macau population reaches 614,500 The Macau population totalled 614,500 people at the end of the first quarter of 2014, a rise of 7,000 people compared to the same period of 2013, the region’s Statistics and Census Bureau said quoted by Macau Hub website.In the first three months of the year Macau registered 1,637 births and 543 deaths. At the end of the first quarter of 2014 there were 145,600 non-resident workers in Macau, a quarterly increase of 7,800 people. Macau currently has an area of 31,300 square kilometres and a population density of 19,632 people per square kilometre.

Cavaco Silva honours people of Macau

Portuguese President and wife

T

he Portuguese President’s visit to Macau begins and ends with him honouring its people. First on the list is Macau’s Chief Executive Chui Sai On, who will be awarded the Grand Cross of the Order of Merit.

The ceremony is to take place separately from that acknowledging six other Macau personalities.

According to an official Chinese source quoted by Portuguese news

Presidential invitation A

nibal Cavaco Silva, the Portuguese President, has called on Chinese investors to consider his country, labelling Portugal an “important gateway to Europe” with “special ties” to Africa and Brazil.

“Portugal offers particular conditions that make it a good option for investment within the European sphere,” Mr Cavaco Silva said during his opening speech at the economic forum in Shanghai, which 250 businessmen from Portugal and mainland China attended.

“I have faith that Chinese enterprisers will continue looking more and more at Portugal as an

agency Lusa, the awards ceremony has already been approved.

The Grand Cross of the Order of Merit that Chui Sai On is set to receive replicates the honour accorded former Chief Executive Edmund Ho Ha Wah in 2011. Mr Ho was Macau’s first Chief Executive following the historic handover in 1999, and this year marks the end of Mr Chui’s first term in office as SAR leader. Prior

excellent investment opportunity and business partner,” he said.

The Portuguese President, who on Monday began a weeklong visit to China, also said that Portuguese production encompasses a wide range of industrial activities and services that are competitive “on a global scale.”

“There’s a whole new generation of enterprises in Portugal with a great business capacity, innovative and technological,” he said, adding that “many of these are developing new products and service segments sought worldwide.”

Mr Cavaco Silva said some of these are management and environmental technologies but that there are also “traditional industries” such as footwear, property, agrifoods and wines. These, he said, have been able to “reinvent themselves.”

The Portuguese President also spoke of tourism, emphasising that his country is a “high-quality” destination.

to being the territory’s second Chief Executive, Mr Chui was Macau’s secretary for social affairs and culture, holding the largest portfolio in the government.

Also on the awardees list is the president of the Cultural Affairs Bureau, Ung Vai Meng, who is also an artist and continues to defend the city’s cultural inheritance.

Mr Ung has, through the years, been

at the forefront for the preservation of old historical buildings and the promotion of local culture. He has also advocated that abandoned areas, such as the old shipyards, be renovated and house exhibition spaces.

On the list of awardees in the cultural, educational and social fields are Amelia Antonio, president of the House of Portugal, who has tried to preserve and promote traditional Portuguese traditions and Rui Cunha, a local lawyer and president of the Rui Cunha Foundation, who strives to promote culture produced by local residents. He is also an ardent defender of the current Portuguese legal framework employed in Macau.

Mr Cavaco Silva will also award Jorge Fao, a former member of the Legislative Assembly and founder of the Macau Retirees Association.

Prior to that he used to head the Macau Civil Servants Association, and throughout the years he has called for better living conditions for these workers. The current president of the Macau Civil Servants Association was re-elected as a legislator in 2013, strengthening his presence on the Legislative Assembly by adding his name to the 14 members directly elected by registered voters.

Ambrose Sou Shu Fai, CEO of Sociedade de Jogos de Macau (SJM) and Portuguese honorary consul in Macau, will also be honoured by Mr Cavaco Silva. Mr So has, in addition, been an honorary professor at the University of Hong Kong since 2005, and honoris causa in Social Sciences at the University of Macau. He has also promoted cultural events and speaks strongly of the cooperation between Macau and Hong Kong with China and Portugal. Stanley Ho, founder of SJM, and his family have vast economic interests on the Iberian Peninsula.

9

May 15, 2014

Greater China

Bank of China plans to raise capital A lending slowdown and surging bad loans eased combined earnings growth at the four biggest Chinese banks to 12 percent last year from 15 percent in 2012

B

ank of China Ltd. is seeking 100 billion yuan (US$16 billion) from selling preferred stock in the largest fundraising by a Chinese bank in almost four years to comply with stricter capital requirements.

The board of the nation’s fourth-biggest bank by market value approved a plan to sell as many as 600 million of the shares through private transactions on the mainland, becoming the latest Chinese company to issue the securities domestically since the government began allowing them to two months ago. The Beijingbased company plans to sell no more

than 400 million preferred shares offshore, it said in a filing yesterday.

The sale follows Agricultural Bank of China Ltd., the country’s third-biggest, which said last week it’s seeking 80 billion yuan from private sales of preferred shares on the mainland. Tighter requirements introduced by the government in 2013 mean China’s four biggest banks will face a capital shortfall of $87 billion under the new rules by 2019, Mizuho Securities Asia Ltd. estimated in a March report.

“Investors think banks are finding ways to replenish their capital,” Steven Chan, a Hong Kong-based analyst at

Maybank Kim Eng Holdings Ltd., said by phone.

Retained earnings A lending slowdown and surging bad loans eased combined earnings growth at the four biggest Chinese banks to 12 percent last year from 15 percent in 2012, curbing their ability to retain profits as capital.

Stock valuations close to record lows make it harder for lenders to raise funds through common equity, which dilutes existing shareholdings more than preferred stock.

Last month, Shanghai Pudong Development Bank Co. said it will raise as much as 30 billion yuan and Xinjiang-based Guanghui Energy Co. said it plans to sell 5 billion yuan of the securities.

The preferred securities that are issued by banks through private placements are compulsorily converted into common equity if capital ratios fall below a certain level. For Bank of China, the trigger point is when its core Tier-1 ratio drops to 5.125 percent or below, according to yesterday’s statement.

Capital ratio Historical Bank of China building in Shanghai

Bank of China’s Tier-1 ratio fell to 9.59 percent as of March 31 from 9.70 percent in December, while its total financial buffer fell to 12.05

percent from 12.46 percent. China’s banking regulator requires big lenders to maintain a minimum Tier-1 ratio of 9.5 percent and a total ratio of 11.5 percent by the end of 2018.

Maybank’s Chan estimated Bank of China’s preferred stock would boost its capital ratios by 0.85 percentage points. The sale would the biggest fundraising by a Chinese lender since Agricultural Bank’s US$22 billion initial public offering in August 2010.

The country’s systemically important banks may see their total capital adequacy ratio fall to 10.5 percent in the event bad loans surge fivefold, according to a stress test by the nation’s central bank last month.

While they are usually accorded fewer voting rights, preferred shareholders have a higher claim on a company’s assets than common stockholders in the event of liquidation. Owners of preferred securities are typically entitled to a fixed dividend before funds are paid to common shareholders.

The lender’s Shanghai and Hong Kong-traded shares have a dividend yield of at least 7 percent, data compiled by Bloomberg show. The dividend rate in the Bank of China sale will be fixed and no higher than the average ratio of the banks’ annual weighted return on equity for the two most recent years, according to yesterday’s statement.

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May 15, 2014

Greater China Mainland proposes cross-Strait cooperation A spokesman from the Chinese mainland yesterday said the mainland has proposed cooperation with Taiwan regarding the South China Sea issue.

The mainland has communicated the proposal via various channels to the Taiwan side, said Ma Xiaoguang, spokesman of the State Council Taiwan Affairs Office, at a regular press conference.

“We are looking forward to a reply from Taiwan,” he said. Safeguarding the country’s sovereignty and territorial integrity as well as the overall interests of the Chinese nation should be a common obligation of compatriots of the two sides, he said

Taiwan to encourage strategic mergers National Development Fund said it has agreed to spend T$20 billion (US$666 million) to encourage companies of strategic importance to the economy to merge. The Taiwan government’s investment promotion website said the Fund’s key priorities historically “focused on industries such as petrochemicals and semiconductors to promote Taiwan’s economic development plans. Recent investment has focused on 10 emerging industries, including information, telecommunication, aerospace and biotechnology. “Investment is also directed at strengthening venture capital investment in innovative industries, in support of 2008 Challenge and its subsidiary plans. The goal is to raise a NT$100 billion venture capital fund. “

Shanghai free trade zone to push deregulation

PBOC calls for faster mortgage Developers scaled back housing starts by 25 percent in the first reduction ever, according to Nomura

C

hina’s central bank called on the nation’s biggest lenders to accelerate the granting of mortgages, a sign that developers’ prices cuts and incentives alone won’t boost a slumping housing market and economy.

The People’s Bank of China told 15 banks on Tuesday to “improve efficiency of service, give timely approval and distribution of mortgages to qualified buyers,” according to a statement posted on its website. It also urged lenders to give priority to families buying their first homes and strengthen their monitoring of credit risks.

Premier Li Keqiang is seeking to put a floor under a slowdown in the world’s second-largest economy. The housing market has become a drag on growth as developers, facing a surplus of empty units and falling sales, put the brakes on new construction. Home sales fell 18 percent in April from the previous month, according to data from the National Bureau of Statistics.

“China’s property sector has started a correction and that will last this year,” Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc., said. “More investors are more convinced than a couple of months ago that the sector is going downwards.”

China Vanke Co., the nation’s biggest developer by market value, climbed 1.3 percent to 7.63 yuan in Shenzhen trading, after jumping as

much as 4 percent, the most since March 21.

Discounts, incentives

Building construction reduction is openly attributed to shortage of mortgages

Developers scaled back housing starts by 25 percent in the first quarter, the biggest reduction ever, according to Nomura. To lure buyers, Vanke dropped prices in Beijing, Hangzhou and Chengdu by as much as 15 percent since March, according to China Real Estate Information Corp. Vanke and Poly Real Estate Group Co. are allowing buyers to delay making down

The supply is abundant while demand is the question mark. What exacerbates the demand uncertainty is the tightening bank lending.

Bei Fu, Standard & Poor’s analyst

payments for as long as three years in Changsha, the capital of Hunan province, according to realtor Centaline Group.

The central bank’s request to improve lending efficiency comes as China’s economic slump worsens, with unexpected decelerations in industrial output and investment growth.

Factory production rose 8.7 percent in April from a year earlier, according to the statistics bureau, down from

HSBC private bank to back new Asia hedge funds It’s cheaper to run a hedge fund in Asia where small hedge funds also find it difficult to raise capital

China will further loosen restrictions on foreign investment in the recently established Shanghai Free Trade Zone (FTZ), state media reported yesterday.

The so-called “negative list” of sectors and activities banned to foreign investors in the FTZ is likely to shrink to about 130 items this year from the current 190, Zhang Hong, director of the fiscal and financial section of the FTZ management commission, the official Shanghai Securities News reported. Reform advocates hailed the negative list approach as an important step towards granting business greater operating freedom in the FTZ when the zone was launched last year.

Vietnam protesters cause Taiwan loss Taiwan companies doing business in Vietnam have lost billions of dollars as tensions mount tensions between Vietnam and China, an industry association said yesterday. The losses included damage to manufacturing facilities which were set on fire, including those operated by Formosa Plastics Group, said Serena Liu, chairwoman of the Council of Taiwanese Chamber of Commerce in Vietnam. Tensions rose in the resource-rich South China Sea last week after China positioned a giant oil rig in an area also claimed by Vietnam. Each country accused the other of ramming its ships near the disputed Paracel Islands.

H

SBC Holdings Plc’s private bank unit, which invests US$25 billion in hedge funds globally, sees opportunities in backing new Asia-based managers, said Henry Lee, its regional head of alternative investment group.

About 15 percent of the managers in a HSBC program that provides capital to smaller hedge funds are based in Asia, Lee said in an interview in Hong Kong yesterday. It has made early- stage investments in regional managers such as Hong Kong-based Zeal Asset Management Ltd., Myriad Asset Management Ltd. and Tybourne Capital Management (HK) Ltd. HSBC is eyeing early-stage investments in Asia managers as rivals have reduced research staff in the region after the 2008 global financial crisis in attempts to cut costs, raising barriers for smaller hedge funds to expand assets.

“With less proprietary trading than before and less assets under management trading those hedgefund strategies than before, Asia’s markets are providing an excellent playground for talented individuals to express themselves,” Lee said.

While chances to back early-stage managers abound in the U.S. and Europe, “we feel Asia provides just as good opportunities and we are willing to spend time doing it.”

It’s cheaper to run a hedge fund in Asia where small hedge funds also find

it difficult to raise capital, according to a report released by Citigroup Inc. in December. Fifty-seven percent of the 167 Asia equity long-short hedge funds started with less than US$50 million still manage less than that amount after an average of 5.3 years in existence, according to data from

HSBC headquarters in Hong Kong

Singapore-based Eurekahedge Pte cited in the report.

Early investor HSBC was an early investor in now multi-billion-dollar global hedge-fund managers such as Brevan Howard

11

May 15, 2014

Greater China

lending quarter, the biggest

down-payment requirement for second homes to 60 percent. The first-tier cities of Beijing, Shanghai, Shenzhen and Guangzhou raised the deposit for second properties to 70 percent last year after prices jumped.

Price increases are moderating this year. They climbed 9.1 percent in April from a year earlier, slowing for a fourth month, according to SouFun Holdings Ltd., the nation’s biggest real estate website.

During the boom years, speculators using shadow financing, or non-bank loans, helped spur the construction of excess housing across China. The surplus now includes more than 10 “ghost cities” haunted by empty apartment blocks in places like northern Ordos, according to SouFun.

Empty homes

8.8 percent in March. Fixed-asset investment excluding rural households increased 17.3 percent in the first four months of the year, the slowest for the period since 2001.

Housing restrictions For the last four years, China has enacted restrictions to cool its housing market as prices soared. The government increased the minimum

Asset Management LLP, Lansdowne Partners Ltd., Third Point LLC and Two Sigma Investments LLC, according to Lee. In 2011, it started a “next generation” program globally to invest in new hedge funds that have the potential of becoming future winners in an attempt to replicate the

More than 10 million homes sit empty in China, and the number could rise to 18 million within two to three years, Nicole Wong, Hong Kong-based head of property research at CLSA Ltd., said on May 12. She cited estimates based on the company’s one-year survey in 12 Chinese cities.

Chinese banks trimmed property lending in the first quarter as authorities kept liquidity tight to curb shadow financing. Mortgage lending expanded 20.1 percent in the period from a year earlier, down from 21 percent at the end of last year, according to data from the PBOC. “The supply is abundant while demand is the question mark,” Bei Fu, Standard & Poor’s Hong Kong-based property credit analyst, said. “What exacerbates the demand uncertainty is the tightening bank lending.”

Bloomberg News

success of earlier ad hoc investments, he said.

Under the program, HSBC private bank invests in new managers with less than US$300 million in assets through a US$100 million fund-offunds, he said. It is allowed to account for as much as half of a small fund’s assets, instead of the usual 10 percent limit, he said.

‘Focus list’

With less proprietary trading than before and less assets under management trading those hedge-fund strategies than before, Asia’s markets are providing an excellent playground for talented individuals to express themselves Henry Lee, HSBC Holdings

HSBC also allows private-bank clients to pick their own investments with the next-generation program, he added.

Less than US$3 billion of HSBC private bank’s total hedge- fund investments are made through fundsof-funds, with the rest being held in custom-made accounts for clients, Lee said.

It maintains a list of 150 hedge funds globally that it has invested in or considers eligible for investment, Lee said. Among those are 13 Asiabased funds which it has invested in for clients.

The private bank has a “focus list” of 12 hedge funds, including those run by Och-Ziff Capital Management Group LLC and Millennium Management LLC that it recommends to Asian clients, Lee said. Four of them are based in Asia, he said.

It used to sell only funds-of-funds to Asian clients or pick investments for their custom-made accounts. Since earlier this year, it started to allow regional customers to pick their own hedge-fund investments manager by manager from the list, Lee said.

HSBC plans to add one more Asia manager as it expands the “focus list” to 15 funds in the next couple of months, Lee said.

“We’re trying to introduce more of an Asian flavor locally.”

Bloomberg News

More links than differences with U.S. Li said he hopes the United States will take substantial measures to relax its restrictions on high-tech exports to China

T

here are far more common interests than disputes between China and the United States, Premier Li Keqiang said on Tuesday as he met with visiting U.S. Treasury Secretary Jacob Lew in Beijing.

Li said China and the United States, as the largest developing and developed countries in the world respectively, are highly complementary in terms of economy and share far more common interests than disputes.

China’s market potential will provide the United States with great opportunities and the Chinese side stands ready to work together with the U.S. side to expand cooperation in trade and investment, energy and environmental conservation, and climate change among other areas, and push ahead with the negotiations on a bilateral investment deal, said the premier.

Li said he hopes the United States will take substantial measures to relax its restrictions on high-tech exports to China and provide a fair environment for Chinese companies investing in the United States.

A sound China-U.S. relationship is of great significance for the whole world as well as for the two nations, conducive to the global economic

recovery and world peace and stability.

The two sides should uphold the right direction of bilateral ties in line with the consensus reached by the two heads of states, maintain the momentum of high-level interactions, and ensure the success of the next rounds of the China-U.S. Strategic and Economic Dialogue and the China-U.S. High-Level Consultation on People-to-People Exchange, said the premier.

Li proposed the two sides enhance communication and coordination on major regional, international and global issues and sincerely respect each other’s core interests to make sure the bilateral relationship will advance in a healthy and stable way.

Reviewing the deepening and strengthening bilateral relationship over the past years, Lew said China’s reform is encouraging and that the country’s development is beneficial for economic growth of the United States and the world at large.

Lew said the U.S. side expects greater development of China and that the United States is willing to work together to ensure success of the forthcoming round of the China-U.S. Strategic and Economic Dialogue.

Xinhua

GSK bribed hospitals and doctors The allegations have damaged GSK’s reputation, thrown its China management team into turmoil and forced it to change its China business model

C

hinese police yesterday said they had charged the British former China head of drug maker GlaxoSmithKline PLC and other colleagues with corruption, after a 10-month probe found they paid billions of yuan in bribes to doctors and hospitals. Mark Reilly and two Chinese executives, Zhang Guowei and Zhao Hongyan, were also suspected of bribing officials in the industry and commerce departments of Beijing and Shanghai, the official Xinhua news agency reported, quoting police in Hunan province.

It is the biggest corruption scandal to hit a foreign company in China since the Rio Tinto affair in 2009, which resulted in four executives including an Australian being jailed for between seven and 14 years each. “(GSK) departments offered bribes to hospitals and doctors as well as personnel to boost their sales. The money involved was in the billions of yuan (hundreds of millions of dollars),” a Ministry of Public Security official told a press conference in Beijing.

A China-based GSK spokesman was not immediately available for comment.

The allegations have damaged GSK’s reputation, thrown its China management team into turmoil and forced it to change its China business model, although the firm says head office had no knowledge of alleged wrongdoing.

GlaxoSmithKline headquarters in London

China is a key growth market for large drug makers, which are counting on the country’s swelling middle class to offset declining sales in Western countries.

But bribery between sales staff and doctors is rife in the world’s secondbiggest economy, and it remains to be seen whether the GSK case will be a one-off or the first of a broader campaign to clean up the Chinese health sector.

Before the scandal, GSK’s China sales had risen 14 percent year-onyear in the three months to end-June, but revenue in the country plunged 61 percent in the third quarter and 29 percent in the final quarter of 2013.

The crackdown reflects a growing determination by Chinese authorities to stamp out corporate bribery and corruption, which can drive up prices for consumers.

Reuters

12

May 15, 2014

Asia

Tough Aussie budget defies

Indonesia’s motorbike sales faster in April Australia’s debt pales in comparison to most developed nations, Motorbike sales rose at a faster pace that many of the mooted measures are unnecessary in April, industry data showed yesterday, reflecting a stronger domestic demand. The sales were up 10.5 percent from a year earlier, compared with 9.1 percent in March. According to the Indonesian Motorbike Industry Association (AISI), there were 727,790 motorbikes sold in Southeast Asia’s biggest economy, rising marginally on a monthly basis. For April, sales were led by Honda Motor Co Ltd, Yamaha Motor Co Ltd and Suzuki Motor Corp, the data showed.

Citigroup executive Faruqui leaves Farhan Faruqui, one of Citigroup Inc’s highest-ranking bankers in Asia, is leaving the company to work for rival Australia and New Zealand Banking Group Ltd. The departure of Faruqui, a 23-year veteran of the company who heads corporate and investment banking for Asia Pacific, was announced in a Citigroup internal memo dated Tuesday. Yesterday, ANZ said Faruqui would take on the role of chief executive officer, international banking, from August. He would be based in Hong Kong, it added.

Malaysia’s Khazanah & TPG buy into Philippines State investor Khazanah and global private investment firm TPG have agreed to buy US$132 million worth of shares in 8990 Holdings Inc, the Philippine mass housing developer said yesterday. Khazanah and TPG have committed to subscribe to about two-thirds of 8990 Holdings’ follow-on equity offering that raised 9 billion pesos (US$204 million), the Philippine firm said in a stock exchange filing.

The shares bought by the two institutional investors, amounting to over 5.8 billion pesos, are equivalent to around 20 percent of the Philippine firm’s equity, according to Reuters’ computations.

Singapore state firms are most acquisitive GIC Pte and Temasek Holdings Pte, Singapore’s state-owned investment firms, are set to lead global sovereign investors in acquisitions for a second year after emerging as the most active in 2013. The US$15.7 billion spent by both companies accounted for about a third of direct investments by state investors globally last year, according to data compiled by the London-based Institutional Investor’s Sovereign Wealth Center. Temasek and one of its units announced two purchases in March that amounted to US$8.9 billion, or 57 percent what the two companies invested last year, according to data compiled by Bloomberg.

A

ustralia’s conservative government on Tuesday released a politically contentious federal budget packed with deregulation and tough spending cuts that it offers as a roadmap for returning to surplus within a decade.

The 2014/15 Federal Budget presents Prime Minister Tony Abbott and Treasurer Joe Hockey’s blueprint for tackling what they call unsustainable deficits forecast at A$29.8 billion (US$27.9 billion) next year and totalling A$60 billion over the next four years.

But the proposals would signal perhaps the most radical reshaping of Australia’s social safety network in its modern history through broad structural reforms to the welfare, healthcare, higher education and pension systems.

And with 16,500 public sector employees set to lose their jobs, the rolling back of universal healthcare and deregulation of university fees,

rises to the pension age and fresh income tax hikes, it could prove politically perilous.

What debt crisis?

Australia has fared better than most developed nations in the past decade, having avoided the implosions of the finance and housing sectors seen in the United States and Europe,

KEY POINTS Budget slashes spending on social programmes Proposals would return budget to surplus in a decade Australians to pay for doctor’s visits, more for medicines University system to be broadly deregulated

Prime Ministers’ liberal party website shows the details of the new budget

US-Japan trade agreement still blocked TPP negotiators are in Vietnam this week for another round of negotiations

P

acific trading partners are not expecting to reach a final agreement on an ambitious free trade pact at a ministerial meeting in Singapore next week, a senior U.S. official said on Tuesday.

A U.S.-Japan summit last month had shaken the two countries free of a stalemate over access to Japan’s farm and auto markets in the Trans-Pacific Partnership (TPP), but more work was needed before a broad agreement could be reached, the official said.

The deadlock between Japan and the United States, the biggest economies in the 12-nation TPP, has held up progress on the wider trade agreement in recent months as other countries awaited the outcome of the negotiations.

TPP negotiators, from countries including Canada, Australia, Mexico and Malaysia, are in Vietnam this week for another round of negotiations and ministers will meet on May 19-20 in Singapore.

“We will make sure we are on the same page and then give instructions to our teams to get back to work and work through the remaining issues,” the senior official said.

“This is a check-in meeting. This is not a ministerial where we expect to reach a final agreement.”

The senior U.S. official, who asked not to be named, said the next stage of TPP negotiations involved other countries also sitting down to work out market access issues with Japan.

Once it was clear what each country could get from the deal in terms of exports, it would be time to focus on setting common rules on issues such as labour, the environment and intellectual property, he said at

a briefing for journalists.

The U.S. official also urged China to show leadership on an agreement to eliminate duties on billions of dollars of technology products, which will be under discussion at a meeting of Asia-Pacific trade ministers in China this weekend.

The United States, China, the European Union and nearly two dozen other countries are negotiating an expansion of the World Trade Organization’s Information Technology Agreement (ITA), a 16-year-old pact that eliminated duties on a long list of products including personal computers, laptops and telephones.

Reuters

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May 15, 2014

Asia

welfare spurring criticism

while Chinese demand for resources fuelled a boom in its terms of trade.

But having gone into the 2008 global financial crisis with virtually no debt, latest projections show Australian deficits continuing, with net debt set to rise to 14.6 percent of GDP by 2016/17, the highest in about 20 years.

Still, Australia’s debt pales in comparison to most developed nations, spurring criticism that many of the mooted measures are unnecessary and might damage the AAA-rated economy.

The budget forecasts deficits to shrink to A$2.8 billion or 0.2 percent of GDP by 2017/18, which if accomplished would indeed represent a radical shrinking of the deficit from almost A$50 billion in the current year.

An end to the age of entitlement Among the widely-flagged proposals, Australia’s pension age will rise to 70 by 2035 and eligibility for pensions and other welfare payments will also be tightened.

On healthcare, a A$7 fee for all doctor’s visits will be introduced from July of next year, while at the same time decreasing government subsidies for prescription medication.

Those savings will be invested in a

A$20 billion Medical Research Future Fund, which the government says will be the largest such programme in the world within a decade.

The changes mark the biggest shift since the introduction of universal healthcare and puts Australia in the unusual position of moving away from universal coverage even as the rest of the world, including the United States, has moved to provide it.

Students will also be facing big changes from January 2016, as government caps on tuition fees for higher education will be removed while the average government contribution towards course fees will be slashed by about 20 percent.

Although the healthcare measures will primarily be felt by low-income Australians, the budget is asking the wealthy to contribute through a 2 percentage point tax rate hike on earnings of over A$180,000 per year for three years.

The foreign aid budget also came in for a major hit, with aid groups and opposition politicians blasting a proposed cut of A$7.6 billion over the next five years.

At the same time as the government is asking taxpayers to shoulder more of the burden, the budget committed to a previously-flagged 1.5 percentage point cut in the corporate tax rate and unveiled an A$11 billion infrastructure package sure to please business.

While the government has a clear majority in the House of Representatives, the upper-house Senate could yet provide significant hurdles to more contentious issues including the repeal of carbon and mining taxes, welfare cuts and the temporary deficit levy.

Reuters

CBA profits rise Mortgage credit growth was moderate

C

ommonwealth Bank of Australia, the country’s top lender by market value, on Wednesday reported a 16 percent rise in unaudited cash earnings for the third quarter and flagged intensified competition in lending.

CBA’s earnings were broadly in line with Australia’s other “Big Four” banks - New Zealand Banking Group Ltd, National Australia Bank Ltd and Westpac Banking Corp - as profits rose strongly amid margin pressures.

Lending margins at the major banks are headed for all-time lows, thwarted by competition for a share of the fast-growing housing market and as cash-rich corporates rein in bank borrowing amid a sluggish economy.

Sydney-based CBA posted record cash profit of A$2.2 billion (US$2.06 billion) for the three months to March.

That compared with A$1.9 billion in the year-ago quarter and an analysts’ consensus forecast of A$2.1 billion.

Cash profit, which excludes oneoffs and non-cash accounting items, is closely watched by investors.

CBA reports on a different schedule to its three peers, which in recent weeks posted second-half earnings that took the quartet to a record halfyear total of A$14.8 billion.

Tier I capital, a measure of a bank’s ability to absorb unforeseen losses, rose to 11.6 percent from 11.4 percent in the preceding quarter.

The third-quarter trading update provided limited information but did

Commonwealth Bank of Australia’s company headquarters in Sydney

reveal that credit quality was stable, with impaired assets unchanged at A$3.9 billion.

CBA said mortgage credit growth was moderate, as support from lower interest rates was balanced by higher levels of loan repayments. Commercial lending remained subdued, it added.

“They are not chasing market share and they are happy to manage margins, going forward. So, that’s always a good sign,” Bell Potter analyst TS Lim said.

“I think they’d probably be looking at a very good year coming up.”

Of the Big Four, CBA offers the strongest returns to its shareholders, with a return on equity (ROE) of 18.3 percent.

ANZ has an ROE of 14.9 percent, Westpac delivers 15.3 percent, followed by 12.1 from NAB, according to Thomson Reuters Starmine.

Reuters

Confronting visions over Samsung heir Dubbed the “Crown Prince of Samsung” by local media, Jay Lee has become the public face of Samsung in recent years

U

nassuming, mediashy and, as yet, unproven, Jay Y. Lee is the unofficial heirapparent to lead Samsung Electronics Co Ltd, as the world’s biggest technology group by sales approaches a crossroads after years of explosive growth.

The only son of Samsung’s frail 72-year-old chairman Lee Kun-hee, Jay has been groomed for years to take over the sprawling South Korean family-run “chaebol”, a conglomerate with interests spanning technology and insurance to shipbuilding and construction. Samsung Group’s 2012 revenue of 380 trillion won (US$371 billion) was more than a quarter of South Korea’s nominal GDP. The younger Lee, 45, became Samsung’s vice chairman in 2012 after a spell as chief operating officer in what appeared to be a well choreographed longterm succession plan. But his father’s ill-health - Lee senior was hospitalized for a heart attack at the weekend - has raised concerns over whether Jay is ready to take control. “(Our) vice chairman is a strategic thinker and is very tenacious,” said a senior

Samsung executive, who didn’t want to be named as he’s not authorised to talk to the media. “He’s been doing things that senior executives can’t easily resolve on their own. For example, he spends a lot of time meeting key clients and then manages to cut a deal that would seem almost impossible.”

“We’ve actually benefited significantly from his deal brokering and strategic decision making. He’s been doing far more than what many people outside Samsung might guess. He’s been learning for years from the chairman and has already been deeply involved in daily operations.”

Meeting people Fluent in English and Japanese and dubbed the “Crown Prince of Samsung” by local media, Jay Lee has become the public face of Samsung in recent years, at meetings with corporate leaders, and politicians from China and the United States, building relationships for a group which had been regarded as secretive.

When South Korea’s president invited Google Inc CEO Larry Page to visit

Samsung is more than a regular company. Samsung town pictured.

Seoul a year ago, one of the first to meet him was Lee, who flew Page to a display plant south of the Korean capital to show off the latest technology Samsung was working on, including flexible screens that could potentially be fitted to Google Glass wearable devices.

The two firms haven’t signed a deal on supplying

bendy screens, but have since agreed global patent crosslicensing in a joint attack against Apple Inc. - defying speculation of fraying ties as Samsung, the biggest smartphone maker using Google’s Android platform, develops its own mobile operating system.

Lee has generally shunned the limelight. He has no

official Twitter account and little is known of him outside the company - bar a high-profile divorce in early 2009. He has a degree in East Asian History from Seoul National University, an MBA from Japan’s Keio University and completed a business administration doctoral program at Harvard. He joined Samsung Electronics in 1991.

While some critics say Lee doesn’t have the experience for the top job, and lacks his father’s charisma, insiders say his quiet, urbane manner disguises a steely determination and a tenacity to get things done.

“He was born with a silver spoon. We don’t know whether he is capable of running (things) yet as he has no track record,” said a senior official at Samsung Electronics, who asked not to be identified.

However, a second Samsung executive who worked closely with Lee said he was “very insightful,” was on top of key issues and asked probing questions. “He’s very sharp and thinks outside the box,” said a third executive at the group founded by Lee’s grandfather in 1938.

Reuters

14

May 15, 2014

International

ECB readies rate cuts

ICAP profit declines

The ECB’s deposit rate already stands at zero and a cut into negative territory would see it essentially charge banks for holding their money overnight

The world’s largest broker of transactions between banks, said fullyear revenue and operating profit declined amid “extremely difficult” trading conditions. Revenue for the 12 months through March fell 5 percent to 1.4 billion pounds (US$2.4 billion), the London-based company said in a statement yesterday. Operating profit declined 4 percent to 295 million pounds, missing the 304.5 million-pound mean estimate of six analysts surveyed by Bloomberg. “Trading conditions have been and are likely to remain extremely difficult,” Chief Executive Officer Michael Spencer said in the statement.

T

he European Central Bank is preparing a package of policy options for its June meeting, including cuts in all its interest rates and targeted measures aimed at boosting lending to small- and mid-sized firms (SMEs).

Five people familiar with the measures being prepared detailed plans involving a potential rate cut, including the ECB’s deposit rate going negative for the first time, along with the targeted measures SME measures.

The package offers some stimulus for the euro zone economy but falls short of the large-scale effect the ECB could unleash with a major programme of quantitative easing (QE) - money printing to buy assets.

Such a QE plan is still some way off.

A June rate cut is “more or less a done deal”, said one of the five sources who spoke to Reuters on condition of anonymity.

A second source echoed that sentiment, and added: “This will be the first major central bank to move to a negative deposit rate. That would move the exchange rate.”

ECB Executive Board member Peter Praet also told German weekly newspaper Die Zeit the central bank could cut its deposit rate into negative territory as part of a package of policy measures that could also include a targeted long-term refinancing operation (LTRO).

The latter is a method of boosting bank liquidity in the euro zone with an eye to increasing lending.

The first two sources spoke to Reuters of a cut of 10-20 basis points, probably in all three ECB rates. The main refinancing rate is currently at 0.25 percent.

Both sources expected the move to bring down the currency exchange rate but said the ECB had made no calculation of how much it was likely to fall by, and had no target for the euro. ECB President Mario Draghi said last week the Governing Council

U.K. jobless rate falls

ECB head Mario Draghi refused to take on monetary changes. However, many experts consider June will see some important measures.

was “comfortable with acting next time” - its June 5 policy meeting but wanted to see updated economic projections from the bank’s staff first.

“Negative deposit rates are a possible part of a combination of measures,” Praet told Die Zeit. “We are preparing a range of things. We could again lend banks money for a longer time frame, possibly with conditions attached.”

Praet did not see the ECB embarking on U.S.-style QE unless economic conditions deteriorated: “I think it will only come to that if the euro zone economy and inflation develop significantly worse than we expect,” he said.

Danger zone The ECB’s deposit rate already stands at zero and a cut into negative territory would see it essentially charge banks for holding their money overnight - a move that could spur more lending, though analysts are unsure how banks would react.

The ECB is concerned by the

euro’s strength and low inflation, which Draghi is worried could get stuck in what he calls a “danger zone” below 1 percent. At 0.7 percent, inflation is running well below the ECB’s target of just under 2 percent.

The bank is also concerned about weak lending to SMEs. Another source was less sure the new staff forecasts would merit policy action but confirmed a package was under discussion should the Council decide to act. Some analysts believe a small cut in the ECB’s interest rates would have little impact.

In February, ECB Executive Board member Benoit Coeure told Reuters the idea of cutting the deposit rate into negative territory was “a very possible option”, before adding: “But you should not expect too much of it.”

Should it decide to cut rates, the ECB is looking at also deploying either a targeted long-term loan operation, or LTRO, or else announcing a purchasing programme to buy assetbacked securities (ABS) comprised of bundled SME loans.

Reuters

French inflation rises Some economists have warned for several months that inflation is too low in the Eurozone

I

nflation in France edged up in April, French official data showed yesterday against a background of speculation that the European Central Bank may soon act to ward off any threat of deflation in the Eurozone.

French consumer prices rose by 0.7 percent on a 12-month basis, the statistics institute INSEE reported.

That was an increase from a figure of 0.6 percent in March.

Prices from March to April were flat, INSEE also reported, giving its figures for any variation from month to month.

One factor for the 12-month rise was measures by the government to contain medical costs as part of efforts to contain welfare and public spending.

Among other factors was a fall in energy prices.

However, inflation in France,

the second-biggest member of the Eurozone after Germany, remains exceptionally low.

Official German data yesterday showed that German inflation rose in April to 1.3 percent, but this reflected mainly the effect of Easter holidays and a 10.4-percent rise in the price of tourist visits, after falling inflation in recent months.

German inflation on a European Union harmonised basis was 1.1 percent.

Some economists have warned for several months that inflation is so low in the Eurozone, and far below the ECB’s medium-target of just under 2.0 percent, that there is a risk of deflation, meaning an absolute fall of prices which can delay purchases and investment and trigger a vicious spiral of falling economic activity.

The governor of the French central bank, Christian Noyer, who also sits on the ECB’s monetary policy body, has warned that unduly low inflation does raise a risk that unforeseen shocks could tip an economy into deflation.

The ECB has said that it is vigilant about the possible risk of deflation and if necessary would take unconventional measures to counter it. Many economists expect it to do so in June, taking action that would also tend to weaken the euro.

France blames the strength of the euro for damaging French exports, urging the ECB to relax monetary policy.

Meanwhile official data in Spain showed that inflation there had also edged up in April to 0.3 percent on a 12-month basis.

AFP

Britain’s unemployment rate fell to a five-year low in the first quarter, intensifying the debate over when the Bank of England should begin raising interest rates. The jobless rate measured by International Labour Organization methods dropped to 6.8 percent from 6.9 percent in the three months through February, the Office for National Statistics said in London yesterday. The figure was in line with the median estimate in a Bloomberg News survey. Yesterday’s figures also showed wage growth outstripping inflation for the first time since 2010.

Italy opens books on new bonds Italy started collecting orders yesterday for a new 15-year bond it is planning to issue through a syndicate of banks, an official at one of the banks managing the deal said. Initial indications of interest from investors are for around 7 billion euros (US$9.6 billion), the official said. Based on initial price guidance, the new bond maturing in March 2030 would offer a premium of 12-14 basis points over the yield of Italy’s September 2028 bond. The pricing of the issue is expected later yesterday.

Strikers block S. Africa platinum mines About 1,000 stick-wielding strikers gathered outside Lonmin’s Marikana platinum mine in South Africa yesterday, preventing workers from breaking the longest and costliest bout of industrial action in the sector’s history.

Some of the strikers, clad in the green shirts of the Association of Mineworkers and Construction Union (AMCU), told Reuters they planned to block anyone from reaching the shafts in a dramatic show of force. London-listed Lonmin had been aiming for a “mass return” of workers, many of whom have signalled a willingness to end a crippling 16-week strike over pay.

Swiss regulator probes Credit Suisse Switzerland’s stock exchange regulator said yesterday that it had opened a probe into possible rule breaches by banking giant Credit Suisse. “SIX Exchange Regulation is opening an investigation against Credit Suisse Funds AG on the grounds of possible breaches of regular reporting obligations,” it said in a statement. The regulator said that the probe centred on regulatory information that had possibly been provided late in January 2014 related to certain exchange-traded funds of Credit Suisse Funds AG. It underlined that the potential duration of the probe had not been determined.

15

May 15, 2014

Opinion Business

Europe’s crisis treadmill

Leading reports from Asia’s best business newspapers

Barry Eichengreen

wires

Professor of Economics and Political Science at the University of California, Berkeley

THE JAKARTA POST A public opinion poll conducted by the Jakarta-based Indonesian Survey Circle (LSI) has found that the majority of respondents were undecided about who to vote for in the July 9 presidential election. The LSI survey, conducted between May 1 and 9 in 33 provinces, found that around 41 percent of the 2,400 respondents would not commit to a decision, whether the presidential election be a two- or three-horse race. The results, which were published Tuesday, were much higher than that of the 2009 election, when less than 20 percent of voters had no discernible preference.

THE PHNOM PENH POST Cambodia’s private sector is taking on a larger role in managing public finances, and companies involved in the transition say that they are well-placed to accept the added responsibility. The government began transferring close to 400,000 civil-servant salaries over to Acleda Bank, Wing and Canadia Bank in January in an effort to rid the public sector of cash payments. The three financial institutions have since been meeting with the dozens of ministries to get their business as well.

THE ASAHI SHIMBUN Sony Corp. decided May 12 that 40 senior executives will not receive company bonuses this year to take responsibility for last fiscal year’s loss in the electronics department, sources said. The company president, Kazuo Hirai, is among those affected.

Bonuses that were to be paid in June will also be withheld for presidents of the company’s major subsidiaries. Sony will release its financial results for fiscal 2013 on May 14. It will be the second consecutive fiscal year for Sony not to pay bonuses to senior officials in the electronics division.

THE AGE Prime Minister Tony Abbott and Treasurer Joe Hockey are defending accusations of untrustworthiness, saying their first budget was “fundamentally honest” and drafted in good faith. But the Prime Minister’s greatest critic yesterday morning came from an unexpected quarter and left the Coalition leader momentarily speechless.

During one of a raft of breakfast television appearances, on the Ten network’s Wake Up, Mr Abbott was confronted by an elderly woman, named only as Vilma, who was furious about changes to the age pension and responded to his explanations on broken promises with: “I have never heard such rubbish in all my life.”

B

ERKELEY – This month marks the fourth anniversary of the May 2010 financial rescue of Greece. Previously, the idea that a Eurozone member would seek emergency assistance from the International Monetary Fund, along with the European Commission and the European Central Bank, was unthinkable. The rescue thus marked Europe’s descent into full-blown crisis.

Four years later, European officials are assuring everyone that the crisis is over. The IMF has raised its forecast for Eurozone growth this year to 1.2%. Even Greece is forecast to grow by a modest but not insignificant 0.6%.

Bond markets, too, are indicating that the crisis is over. Yields on Irish government bonds have fallen below 3%. Last month, Portugal was able to issue tenyear bonds at 3.57%. Even Greece has been able to sell five-year bonds at rates below 5%.

Clearly, the supposed experts who predicted the imminent disintegration of the Eurozone have been proved wrong. But it is equally likely that those now declaring that the crisis is over will be proved wrong as well.

If we have learned one thing from the last four years, it is that the European Union lacks the capacity to act decisively.

With 28 member countries, decision-making processes are tedious and time-consuming.

Common interests are difficult to define, making burdensharing agreements difficult to reach. Action is regarded as more urgent in some quarters than in others.

Moreover, the patient is far from cured. Ireland, Portugal, Spain, and Greece have made considerable progress in lowering their unit labour costs to 1999 levels relative

to Germany. The problem is that 1999 levels are not enough, because producers now have China and other emerging markets with which to contend. Italy and France, meanwhile, have made considerably less progress on improving their international competitiveness.

Nor is it clear where the crisis countries will find the demand that they need. With domestic spending subdued, they have been relying on exports. But now that growth in emerging markets has slowed, their export markets are weakening.

Spanish exports, on a positive trend until recently, have stopped rising. And Spain may be the proverbial canary in a coalmine.

The ECB, for its part, continues to do too little to support demand. It has been behind the curve since 2011. If it finally turns to quantitative easing in June, it will take only baby steps down this path, because ECB President Mario Draghi and his team remain reluctant to embrace the kind of radical measures that would shock their political masters.

On the budgetary front, the new French and Italian prime ministers, Manuel Valls and Matteo Renzi, respectively, have proposed cutting taxes for low-paid workers and their employers. This is a positive step toward addressing the plight of those who have suffered the most from the unemployment crisis. But Valls and Renzi also plan to cut spending to prevent their budget deficits from rising, which means that their initiatives will not boost demand.

Meanwhile, Europe’s banking crisis is unresolved. Loans to finance fixed investment continue to fall. Remarkably, the European Banking Authority’s latest stress test for the Eurozone’s banks does

If we have learned one thing from the last four years, it is that the European Union lacks the capacity to act decisively. With 28 member countries, decision-making processes are tedious and time-consuming.

not contemplate the possibility of deflation in its adverse scenario. The implication is clear: The banks’ capital shortfall will be understated, and the amount of new capital they will be required to raise will be inadequate. If the goal is to restore confidence and get the banking system firing on all cylinders, this is not how to go about it.

And everyone knows that Europe’s much vaunted banking union is deeply flawed. It creates a single supervisor, but only for the largest banks. It harmonizes deposit-insurance coverage but does not provide a common deposit-insurance fund. The resolution mechanism for bad banks is incomprehensible and unworkable. The associated resolution fund will possess only €55 billion (US$76.6 billion) of its own capital, whereas European bank liabilities are on the order of €1 trillion.

Finally, there is that pesky matter of public debt, which is still 90% of Eurozone GDP. European officials propose to work this down to their target of 60% over a couple of decades. You read that right.

Check back to see how they’ve done in 2034.

All of this has the makings of a dismal prognosis. But it is how Europe progresses. Its banking union may be flawed, but at least it exists, and over time those flaws can be fixed. The stress tests may be flawed, but at least they are better than Europe’s two previous attempts. ECB action this summer may underwhelm, but at least the Eurozone’s monetary-policy officials will do something.

The Eurozone will not collapse this year, but its troubles are far from over. Europe will not draw a line under its crisis. Decisiveness is not the EU way.

The Project Syndicate 2014

16

May 15, 2014

Macau China, Japan, S.Korea investment deal

Carry on nursing

A three-way investment deal between China, Japan and South Korea will go into effect on Saturday, China’s Ministry of Commerce said yesterday, despite tension between the neighbours. The China-Japan-Republic of Korea Agreement for Promotion, Facilitation and Protection of Investment has been signed by all three countries two years after the deal was reached in May 2012, the official Xinhua news agency said, citing the ministry. The agreement will create “stable, favourable and transparent conditions for investment”, Xinhua said.

The Health Bureau denied yesterday any intention to suspend or terminate the training course for final-year nursing students. ‘The course has achieved considerable success in promoting the development of the nursing sector in Macau.

It has been supported by former students and health organisations. It has achieved the goals and results predicted since it first began in 2011’, it was announced. ‘The Health Bureau has made a strong commitment to offer vocational training to local nurses’, it added.

The cost of over-talking CITIC Securities fined the board chairman two months’ salary for a comment on ICBC while rumours spread the bank was cancelling its cooperation with the brokers

A

Chinese stockbroker has been docked two months’ salary -nearly 1 million yuan (US$164,000)- for comments he made about a bank’s huge profits.

Wang Dongming, chairman of CITIC Securities, the largest brokerage firm in China, made the barbed remarks at a finance forum in Beijing on Saturday.

Wang believes that while financial services are quite poor, institutions’ profits are quite high, and thus funds have drained from the real economy into the finance sector.

To drive his point home, Wang cited a private talk with Yang Kaisheng former president of Industrial and Commercial Bank of China (ICBC), the largest state-owned bank in China, when he told Yang that “if ICBC reported profits of 200-300 billion yuan, all the country would condemn it”.

Video records showed the comment won applause.

On Monday CITIC Securities issued an internal circular fining the board chairman two months’ salary for the comment.

Wang earned 5.83 million yuan (US$935,900) in salary last year, according to public filings. If the salary remained unchanged, he would be fined about 972,000 yuan.

Meanwhile, rumours spread that ICBC was cancelling its cooperation with the brokers.

The circular asked its staff to be cautious in public speeches and not to hurt clients’ interests and feelings.

The company encourages free speech, but clients should be considered, and staff should avoid citing clients’ names when sensitive topics are involved, the statement said.

Most netizens showed support for Wang. “The price to speak the truth: two months’ salary,” said netizen Zhangshiruhong. “I can do it, but you can not say it,” said another netizen Menglidie. “To show support for Wang Dongming, I will buy stocks of CITIC Securities,” said netizen LY_IS_GOOG. Stocks of CITIC Securities opened slightly higher yesterday.

The context for Wang’s remarks is China’s problems in direct financing, or financing without the help of financial institutions. Indirect financing made up more than 80 percent of the total, and the banking sector’s assets took more than 90 percent of the total finance assets, said Shang Fulin, head of the China Banking Regulatory Commission, in March. This indicates that the finance system relies too much on the banking sector. The imbalance between direct and indirect financing will concentrate risk at the banking sector and make it hard for the real economy to raise funds.

Besides Wang, Liu Shiyu, vice governor of the People’s Bank of China, the central bank, also touched upon the problems at the same forum.

“If every one in the society is eager to engage in financing businesses, it may be a kind of fever has influenced

Sony costs lead to loss

T

he firm announced unexpectedly forecast an annual loss, the sixth in seven years, casting further doubt on Chief Executive Officer Kazuo Hirai’s ability to revive the company.

The net loss will probably be 50 billion yen (US$490 million) in the 12 months ending March 31, the Tokyo-based company said in a statement yesterday.

That compares with the 57.1 billion-yen profit average of 19 estimates compiled by Bloomberg and a 128.4 billion-yen net loss the year earlier.

Hirai, who cut last year’s net-income forecast three times, is trying to overcome slumping demand for the TVs and personal computers that underpinned Sony’s rise into a Japanese icon. The company, which is cutting 5,000 more jobs and selling assets as it searches for new hits to build on its success with the PlayStation 4 game console, expects 135 billion yen of costs related to restructuring and exiting the PC business this year.

“If Hirai were in the U.S., shareholders would call for his resignation,” said Yasuaki Kogure, chief investment officer at Tokyo’s SBI Asset Management Co. Bloomberg News

Citic Tower in Hong Kong houses CITIC Securities offices

brain’s thinking capacity,” Liu said.

Bank profits have in the past become a political flashpoint in China, as stateowned banks like ICBC benefit from interest-rate controls that guarantee them healthy lending margins.

In 2012, then-Premier Wen Jiabao said China’s biggest banks “make profits far too easily” because “a small number of major banks occupy a monopoly position.”

Xinhua and Reuters

Zhao Li not playing the game China feeds LNG producers Packer’s Crown casino in Melbourne is trying to get on the trail of a Chinese national for an alleged unpaid debt of A$8 million. According to Melbourne’s newspaper Herald Sun the gambler accessed ‘A$13 million credit on a single day to support his staggering splurge, court documents allege.’

The Aussie newspaper reports that Crown’s lawyers have ‘started Supreme Court action against the elusive high-stakes punter to claw back an alleged A$7 million gaming debt - plus about A$1 million in interest and costs.’

During his two-week losing streak Zhao Li requested several debt extensions from the casino.

‘It is unknown what game Mr Li played, or how he fared but the next day - Melbourne Cup Day - he allegedly returned to the gaming floor and again sought credit, this time up to A$8 million’, the Herald Sun explains.

The Aussie tabloid’s journalist tried to contact Zhao Li but any legal reference proved to be false.

C

hina’s Imports of liquefied natural gas (LNG) are growing at a record pace as it aims to use cleaner fuels to cut smog in big cities, creating a powerful new source of demand that has the potential to reshape the market for the super-chilled gas.

Rising Chinese demand gives LNG producers such as Chevron, Royal Dutch Shell, ExxonMobil and Total a crucial new sales avenue as they weigh whether to go ahead with US$180 billion in investments into potential new or expanded LNG projects.

Producers face rising costs in Australia - where many LNG projects are based - and uncertainty about longer-term demand in Japan and South Korea, the world’s top two buyers of the fuel.

The Chinese, though, are spending billions of dollars in buying LNG-related interests overseas and in building new import terminals. LNG imports are up 35 percent to 5.62 million tonnes in the first quarter against the year-ago period, according to customs data.

Reuters