Macau Business Daily, May 27, 2014

MOP 6.00 Closing editor: Alex Lee Number 547 Tuesday May 27, 2014

Publisher: Paulo A. Azevedo

Perks on ice T

Year III

he Chief Executive has asked the Legislative Assembly to cancel today’s agenda.

The vote for the controversial bill awarding a generous welfare package to outgoing principal officials is on hold. “There’s still room for improvement on the bill”, a statement quotes Chui Sai On as saying. The leader of Sunday’s protests is planning to besiege Macau’s parliament today

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www.macaubusinessdaily.com

Moving up

Mass and Cotai success

3

MOP32 million for CE election Page 7

Macau became the seventh biggest foreign investor in Guangdong province. In 2012, Macau only secured 10th position

Two casinos stubbing out smoking lounges

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Remedial action

Brought to you by

Pharmaceutical industry’s profit margin in China is sharply declining as Government stresses price reduction and struggles against corruption surrounding medical environment Page 10

HSI - Movers May 26

Sands China led the first quarter results race in Macau, growing 60 percent above market average. It overwhelmed the competition in terms of profit, revenue and mass market. As the industry epicentre moves from VIP to mass and from Macau to Cotai, Big Six gaming operators profit climbed 28 percent. Mass revenues skyrocketed 40 percent, leaving investors “very bullish” Page 6

Money in the bank

Name

%Day

China Resources Po

1.95

Lenovo Group Ltd

1.37

China Merchants Ho

1.25

Tingyi Cayman Islan

0.92

BOC Hong Kong Holdi

0.89

Power Assets Holdin

-1.03

China Unicom Hong K

-1.04

COSCO Pacific Ltd

-2.06

Wharf Holdings Ltd

-2.91

China Resources Ent

-3.97

Source: Bloomberg

I SSN 2226-8294

Fleeting employees Brought to you by

To retain staff in Macau is a nightmare. So says a survey conducted by an insurance and broking risk management operation.

As many as 71 percent of local companies surveyed admitted to struggling with workforce-related issues

It was a good year for Bank of China Macau branch. Profits jumped more than a third to surpass the 3 billion pataca benchmark. However, further growth could be limited by the scarcity of credit

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May 27, 2014

Macau

BOC Macau profits top MOP3.3bil The 37 percent increase in profits Bank of China Macau Branch made last year was due to the robust local economy and the branch’s overseas business expansion Tony Lai

tony.lai@macaubusinessdaily.com

T

he city’s largest bank by assets held, Bank of China Macau Branch, experienced more than one-third growth in profits last year, surpassing the 3-billion-pataca benchmark due to the robust economy and overseas business expansion.

The territory’s branch of BOC, one of the big four state-owned mainland banks, reported its profit after tax last year at 3.3 billion patacas (US$412.5 million) surging 37 percent from a year earlier.

Its revenue from banking services jumped 30.4 percent to 721.82 million patacas last year but its income from securities and other financial investments dropped in similar scale to 142.56 million patacas, according to the branch’s annual report.

Ye Yixin, the branch’s general manager, reasoned in the report that the bank enjoyed solid growth as “the global economy experienced gradual recovery and Macau’s economy continued to grow steadily.”

“On the back of this upward momentum [BOC] made active efforts to expand its markets overseas while consistently delivering excellent services to its local clients, achieving

rapid and balanced growth in all its business lines,” Mr Ye said. He did not specify the overseas markets in the report but the branch’s gross loans to Hong Kong companies and individuals surged 64.1 percent yearon-year to 37.17 billion patacas last year. The bank’s lending business in the mainland Chinese market totalled 69.97 billion patacas as at the end of last year, rising 34 percent from 2012.

The bank’s lending to customers, overall, expanded 35.9 percent in 2013 to 226.26 billion patacas by the end of 2013.

The performance of the local branch of the Chinese bank was in line with industry growth, which, according to the Monetary Authority of Macau, saw a 35 percent rise in profits to a record high of 8.4 billion patacas last year.

But further growth for BOC Macau and banks here, like in the lending business, could be limited by the scarcity of credit as Ip Sio Kai, deputy general manager of BOC Macau, pointed out on February 28.

Mr Ip, acting chairman of the Macau Association of Banks at the time, said in a business seminar: “The Macau banking industry faces limited channels for financing as Macau does not have any independent capital market . . . The capital source of Macau banks mostly comes from the deposits of the customers or the interbank borrowing from other banks in other jurisdictions.”

BOC Macau’s home mortgage business surged 31.4 percent year-on-year to 44.77 billion patacas, the bank’s latest annual report reveals.

Most other local banks have also reported their results for last year.

Banco Nacional Ultramarino SA (BNU) achieved a 23.1-percent jump in net profits last year to a record high of 402.6 million patacas. Banco Weng Hang SA’s annual net profit increased by 37.5 percent to 330 million patacas in 2013.

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3

May 27, 2014

Macau Liu Jiajun wins 2014 APPT Macau main event The 2014 PokerStars Asia Pacific Poker Tour Macau main event ended with Liu Jiajun of the mainland beating the rest of the field to win the title and take home HK$2.78 million. The tournament was played over five days at the PokerStars LIVE Macau poker room in the City of Dreams. The Macau Poker Cup is the next event in Macau. It will take place from August 1 to 17. The main event is the HK$11,000 Red Dragon contest.

Administration under siege On Sunday, the organiser of a massive public protest pledged that malcontents would besiege the Legislative Assembly today if the government did not withdraw a controversial bill on welfare packages for senior outgoing officials; but Chief Executive Fernando Chui has weighed in to ‘cancel voting’ on the bill Tony Lai

tony.lai@macaubusinessdaily.com

Chui Sai On (right) met Ho Yat Seng yesterday

T

he organiser of a massive protest on Sunday insists protesters will besiege the Legislative Assembly premises today if the administration does not withdraw a controversial bill granting generous welfare packages to outgoing principal officials.

But the assertion faltered after Chief Executive Fernando Chui Sai On weighed in yesterday night proposing the Assembly “cancel voting” on the bill, which is due today.

Mr Chui’s proposal came after three Executive Council members suggested a motion demanding the push-back of the bill to the Assembly’s committee for further review.

Online group Macao Conscience mobilised thousands of protestors onto the streets – 20,000 people, it claims, versus the official figure of 7,000 – on Sunday to dispute the bill, which states outgoing officials like the Chief Executive and government secretaries are entitled to a monthly subsidy of about 70 percent of their monthly salary until they find a new paid job. “[The motion of the Executive Council members] is just a delaying tactic, which we and the public will not accept,” Sulu Sou Ka Hou, a member of Macau Conscience organising the Sunday march, told a media briefing yesterday. The members of Macau Conscience are closely affiliated with the pan-democrat group New Macau Association.

Mr Sou added that the protestors “clearly expressed they want [the government] to withdraw the bill”.

Both Mr Sou and Jason Chao Teng Hei, president of New Macau Association, pledged they [and their followers] will surround the Assembly tomorrow afternoon if Chief Executive Mr Chui does not fulfil his

“obligation” to scrap the bill. Mr Chui responded yesterday evening, a day after the city embraced a protest described as “the largest march since the city’s handover” in 1999.

The Chief Executive’s cabinet said in a press statement that Mr Chui met with Ho Iat Seng, the Assembly president, yesterday as Mr Chui had noticed “different opinions and suggestions expressed in the bill”.

Still under siege?

Mr Chui asked Mr Ho to “cancel” the assembly’s agenda today regarding the vote on the bill. The statement further quoted the city’s top official as saying: “There’s still room for improvement on the bill and [I will] hold relative government departments responsible to continue communications with the Legislative Assembly for submitting an amended version of the bill in the future.”

But the statement did not specify the length of time needed nor whether it meant the bill is shelved.

The statement only quoted Mr Ho as saying the assembly will vote to decide whether to accept Mr Chui’s proposal.

Mr Chao, president of the New Macau Association and member of Macao Conscience, said yesterday night by phone they were “still studying the CE’s statement” as it employed “peculiar terms like cancel the voting . . . It is likely the siege of the Legislative Assembly will still go on [today].”

By the time this newspaper went to press, there was no signal that Macau Conscience will cancel the siege today. The planned action has already attracted over 1,300 people saying by yesterday evening in the social media Facebook that they will

join the protest today.

Lou Shenghua, coordinator of the Macau Polytechnic Institute’s public administration programme, commented on the government’s move: “It’s a way out for the government to wait and see the public’s reaction before the next move [on the bill].”

Apart from the 70 percent subsidy, the bill also backfired as it will give one-off compensation to officials based on 14 percent to 30 percent of their salary, as well as granting the Chief Executive immunity from prosecution during his or her tenure.

Facing the largest protest turnout since at least 1999 on Sunday, the Executive Council, led by Mr Chui, called an emergency meeting on Sunday night. Three council members and legislators Cheang Chi Keong, Chan Meng Kam and Leonel Alberto Alves told media on Sunday night that they proposed a motion suggesting the bill be scaled back for scrutiny in the Assembly committee again.

Before the Chief Executive’s announcement, the cabinet of the Secretary for Public Administration and Justice Florinda Chan released a press statement early yesterday morning declaring that the administration ‘supports’ further deliberate discussion on the bill.

press statement yesterday that more time should be to the Assembly to deliberate further discussion on the bill. Political scientist Mr Lou believes the high turnout for Sunday’s protest was not merely about the bill but also “the public frustrations and anger towards government policies” accumulated over the past few years.

He said the government should increase communication channels with youths, who primarily dominated the weekend protest, to ensure smooth governance. Time will prove whether the Sunday protest represents a milestone that more youths are interested in political and democratic issues, he added.

Time-out Pro-establishment camps - the Macau Federation of Trade Unions with three legislators in the Assembly and Jiangmen Communal Society with two legislators – said yesterday separately that they support the Assembly deliberating the bill once more. The latter group had mobilised several hundreds of people – mostly elderly - to march on Sunday in support of the bill.

But two pan-democrat legislators from the New Macau Association, Ng Kuok Cheong and Au Kam San, said they want the government to scrap the bill.

Mr Ng told a media briefing yesterday before the Chief Executive’s announcement that the scrapping of the bill was “an ultimate solution” to the controversies. He added that the government should conduct a public consultation first if it wants to establish a welfare mechanism for outgoing officials.

Other political heavyweights also weighed in yesterday to help the government gain traction in garnering support.

Prominent business leader Ma Iao Lai, president of the Macau Chamber of Commerce, said in a

KEY POINTS Sunday protestors threaten to besiege Legislative Assembly today CE Fernando Chui asked to withdraw controversial bill CE responds by “cancelling” voting on the bill Pro-establishment camps voice support for more time to discuss the bill Sunday protest a breakout of accumulated public discontent: political scientist

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May 27, 2014

Macau

Macau increases investments Postal services price hike in Guangdong

T

he territory is assuming a larger role in nearby Guangdong Province, having become the seventh biggest foreign investor in Mainland China’s economic powerhouse, official data suggests.

The latest figures released by the Guangdong statistics bureau show that capital from the two Special Administrative Regions – Macau and Hong Kong – continued to dominate the investor pool of the province last year with US$26.81 billion (214.5 billion patacas).

This figure accounted for 73.8 percent of the total foreign direct investment the province attracted last year, representing a rise of

10.6 percent from US$24.2 billion in 2012.

In a breakdown of the two special regions, Hong Kong remained at the top of the list whilst Macau only placed seventh biggest foreign investment source in Guangdong.

The latter’s ranking, however, was already an improvement on its tenth place in Guangdong’s 2012 list. The statistics bureau did not reveal which areas the two cities invested the most in last year. In general, investment in the manufacturing sector – the largest industry in the province – dropped 2.1 percent year-on-year to US$12.82 billion.

By contrast, the services industries

attracted more investment last year in Guangdong. The education sector experienced a 20-fold surge in investment last year, followed by a five-fold rise in the environmental industry and an increase of nearly 350 percent in the financial services sector. Apart from Hong Kong, Macau trailed other regions in the investor list such as the British Virgin Islands – widely known for facilitating the setting up of offshore companies by entrepreneurs – Singapore, Japan, and South Korea. As for foreign investment approved by Guangdong but not yet utilised Macau ranked fifth, while Hong Kong still led the pack.

T.L.

T

he price of postal services has increased slightly by 50-pataca cents. Regular mail within Macau will now cost between 1.5 patacas and 8 patacas, mail and parcels to Mainland China will cost between 3 patacas and 50 patacas, while those to Taiwan can vary between 4.5 patacas and 67 patacas, and Hong Kong 3 patacas and 50 patacas. To other countries, parcels and documents will cost between 4.5 patacas and 90 patacas. Priority mail will cost anything from 4.5 patacas to 75 patacas, depending on whether it is sent within Macau, to Mainland China or overseas. Special pre-paid packages of up to 5 kilos can cost between 370 patacas and 820 patacas, depending on region. Registered mail can cost an additional 12 to 18 patacas on top of the postal service price. The updated prices were published in yesterday’s Official Gazette.

Macau to ink tax agreement with Argentina

T

he local government is set to sign a tax information exchange agreement (TIEA) with Argentina. No date has yet been set for when this agreement is to be signed but it was gazetted yesterday. According to the Official Gazette, Secretary for Economy and Finance Francis Tam Pak Yuen is to ink the agreement with his Argentine counterpart once Macau’s Chief Executive Fernando Chui Sai On grants him authority. The number of jurisdictions that have a TIEA or Double Taxation Conventions (DTC) with Macau will increase to 189 once Argentina has signed on the dotted line. Macau and Japan signed a Tax Information Exchange Agreement (TIEA) in March, and the United Kingdom last month.

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May 27, 2014

Macau

Retaining staff headache number one There are few things local companies worry about but an overwhelming majority agree that employee attraction and retention remain the biggest issues Sara Farr

sarafarr@macaubusinessdaily.com

S

taff retention is one of the biggest problems employers here face.

According to a survey conducted by insurance broking and risk management firm Marsh, companies in Macau are most concerned about employee attraction and retention. This comes as the territory ‘moves into the employee health and benefits arena,’ the firm says.

As many as 71 percent of respondents admitted that they ‘continue to struggle with workforce-related issues,’ mainly that of attracting and retaining staff.

Marsh director Lei Yu said, “The issue of employeerelated risks is amplified in a territory like Macau, which is an economy based on hospitality and gaming.” He also added that companies need to offer competitive benefit programmes to attract and retain talent, whilst “investing in workplace safety

and health programmes to reduce absenteeism and increase productivity.”

Customer default and non-payment came in second at 29 percent, alongside professional liability, also at 29 percent. Cyber attacks were of concern to a quarter of respondents, as were natural catastrophes.

Environmental or pollution liability was of concern to only 21 percent as was political risk, also at 21 percent. Only 8 percent said they were worried about supply chain risks, and 17 percent product liability risk.

“Macau’s rapid rise as the world’s largest gaming destination has forced companies to adopt a more sophisticated approach to risk management and insurance,” Mr Lei said.

In addition, results were evenly spread when asked about what actions companies would take to

improve risk management: one third said they would increase the risk management budget, another third said they would purchase insurance in new areas,

business as usual

Tactlessness

Paulo A. Azevedo pazevedo@macaubusinessdaily.com

W

hat should everyone think when the biggest public demonstration to be recorded in Macau in recent times necessitates members of the Executive Council and legislators stepping in to help the Chief Executive try to defuse the compensation bill time bomb?

The pension package for retiring top officials lacks everything: from common sense to timing. When the government uses the tactic of ‘public consultation’ on every little thing - many of them without a clear explanation, and with ‘delay tactic’ written all over them - to force the bill through six months before the end of the CE’s term in office and the predictable exit of secretaries, then it shows one of two things: disregard for the ability of local people to mobilise themselves vigorously to protest unpopular politics or a proud self-confidence that sooner or later will have costs.

Ironically, some of the items in the package bill can be defended. In other countries, there are different ways of rewarding officials for their time in office. However, those countries also take seriously the other side of the job. Officials are accountable for their mistakes and they just don’t disappear from the public eye into a golden orbit.

With this bill, as it is, these same officials would be rewarded later as well, when they decide to leave.

If the government wants to introduce some perks in order to attract talent it also needs to make the job more transparent and to introduce levels of accountability, so officials will start to be more highly regarded and respected.

More importantly, the move without explanation and the attempt to introduce immunity for the Chief Executive might give the wrong impression. Not only in Macau. ‘The concerns over the proposed immunity from criminal prosecution are also understandable, especially in light of the high profile corruption case involving the city’s former works chief’, South China Morning Post newspaper declared in its editorial yesterday.

Some people could argue, as they have been doing so for many years, that the newspaper always tries to ‘attack Macau’. But it’s not the newspaper that continues to commit mistakes like this one when other basic rights contemplated in the Basic Law have never been addressed and any attempt to regulate these rights is easily dismissed in the parliament by the majority connected to the business sector of Macau and a few family elites.

and another third said it would expand the use of the existing insurer.

“In many respects, the approach to risk management

has developed more quickly in Macau than in other emerging Asian markets due to its intense economic growth,” the Marsh director concluded.

Number of non-resident workers increases in April T he number of non-resident workers increased 2.4 percent in April over the previous month to 149,208. Like last month, imported workers from Mainland China continued to account for the majority at 94,980, followed by 19,926 from the Philippines and 12,675 from Vietnam. Analysed by industry, the majority of the workers from Mainland China work in the construction industry. Overall, however, the majority of imported workers here work in hotels and restaurants, some 39,596 of the total. In addition, 331 Americans were employed in Macau at the end of last month, the majority of whom work in the recreational, cultural

or gaming sectors. There were 291 non-resident workers from the United Kingdom, 235 from Australia and 139 from Canada. The majority of the latter work in the education sector, according to the data.

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May 27, 2014

Macau Brands

Trends

Dabbling in Denim Raquel Dias newsdesk@macaubusinessdaily.com

Big Six profits climb 28 percent in 1st quarter Sands China was the winner of the first quarter earnings season race in Macau, after its profits and revenues grew 60 percent faster than the industry’s median beating all-comers.

In the January-March period, the ‘Big Six’ saw their profits climb 28 percent supported by a mass-market revenue rise of 40 percent. Mass and Cotai are clearly the recipe for success Alex Lee

alex.lee@macaubusinessdaily.com

L

ong gone are the days when denim was for blue-collar workers. Also in the dim and distant past was the grunge era with its blue heavy-duty fabric embraced by the counterculture. Denim seems to be cool and elegant, fancy and fashionable all at the same time. And the growing number of brands that associate luxury and the fabric together prove it. Buying a pair of jeans can be as expensive as a good suit and men and women alike get away with wearing them in an array of situations.

Brands like Calvin Klein, Seven for All Mankind and many others have done a good job of positioning themselves - as well as denim in general - as a great luxury item. It was perhaps by taking all these changes into account that Tommy Hilfiger created the brand’s new collection.

Tommy Hilfiger has performed something akin to homage to the denim culture. Under the name True to the Blue, the collection features the evolution of denim, chambray and indigo: the designer’s calling card since foundeding the brand in 1985 ‘til today. Key pieces include blazers, pea coats, denim shirts, denim shorts, and of course jeans. The colour palette features various shades of blue and indigo but is kept fresh with a pop of neon pink and orange.

I

f you’re a casino operator who has a resort in Cotai and you’re investing and shifting tables from the VIP to mass market you’re probably winning the profit and revenue race in Macau.

That’s the major conclusion of the first quarter earning season of 2014.

The gaming companies who bet more on mass gamers last quarter were also the ones who recorded the biggest growth in revenues and profits. The first quarter trend also shows that the gaming epicentre in Macau is moving from the Peninsula to Cotai, a movement investors predict will accelerate this year and last until 2016 when the new wave of Cotai casinos open their doors.

According to the first quarter results of the six major operators in Macau (Galaxy, Sands China, MGM China, Wynn Macau, Melco Crown and SJM) those who earned more revenues from mass market tables posted the best profit performance, a trend that will likely be the norm in the months to come. In this race, Sands China was the clear winner, followed by Galaxy, Melco Crown and MGM, operators who are betting heavily on the two driving forces of the market: mass gamers and Cotai.

Sands China stands above its peers, with profits and revenues growing 60 percent faster than the sector’s median. The Macau unit of Las Vegas Sands profit jumped 49 percent in the first quarter from a year ago as The Venetian and Cotai Central resorts attracted a flow of new mass gamers. The revenue growth from this segment also posted an industry record for the January-March period, climbing 54.2 percent, boosting total revenues 36 percent.

Very bullish, say investors This performance stands above the industry as a whole. The six biggest casino companies in Macau recorded a surge in profits of 28 percent, with revenues rising 22 percent. Mass gamblers continue to be the market’s driver with the segment’s revenues expanding 40 percent in the first quarter year-on-year, while VIP gains climbed 14 percent.

Even with the recent turmoil in casino stocks - shares have lost 25 percent since the beginning of the year – and the junkets and Union Pay crackdowns, investors are still confident in Macau. “We’re very

bullish on the long term outlook for Macau”, Wells Fargo declared in a note to clients this month. The reason is simple.

With growth rates of 30 percent in profits and more than 20 percent in revenues, the casino industry is performing much better that other sectors and demonstrating stronger fundamentals despite the recent news headlines.

It’s no secret that mass gamers are the future of the industry in Macau.

Grant Bowie, MGM China CEO, recently told Business Daily, as the segment will continue to be the ‘anchor’ for future revenues and profits, while Tim Craighead, Bloomberg’s senior analyst for Asia, said in an interview with this paper that the mass market will represent the “core” of the Macau success story. The crucial role of mass

Major Figures of the Big Six 1st quarter 2014 (year on year) VIP revenues soared 14%

Mass market revenues up 40%

Profits increased 28%

Revenues climbed 22%

gamblers for operators has already become evident in the first quarter.

The more you gain with mass market the more you profit as the segment delivers three to four times more profit margin than the high rollers.

MGM and Galaxy above average Behind Sands China, Galaxy Entertainment and MGM China were next on the podium in terms of first quarter profits and revenue growth also above the sector average. Galaxy’s net income increased 38 percent with total revenues going up 33 percent and mass revenues 46 percent. MGM China posted soaring profits of 32 percent and revenues up more than 26 percent. It’s no coincidence that the operators who recorded the best performance in the first quarter - Sands and Galaxy – were also the ones who earned more with mass gamers and have resorts in Cotai.

A recent Barclays report highlighted this trend, stressing that is starting to be common to see Cotai reporting more than 50 percent of market share in Macau, especially in the busier, more profitable months. The Cotai factor in the industry is likely to expand in the next years as operators open more casinos and resorts with malls, entertainment, restaurants and other amenities to attract mass market gamblers.

SJM was the loser in the first quarter as the operator lagged the competition with profits and revenues growing only in the single digit range. Investors penalised SJM, plunging shares to an 8-month low when results missed estimates in tandem with the lack of projects for Cotai until 2017.

Race for the prize: Macau Casino Operators (1st Quarter) (Growth year on year)

Galaxy Sands China MGM China

Wynn Macau Melco Crown

SJM

Median

Profits

38

49

32

16

31

3

28

Revenues

33

36

26

14

19

5

22

- Mass Market

46

54

45

23

39

28

39

36

18

12

27

-3

-4

14

- VIP

7

May 27, 2014

Macau

MOP32 million budgeted for CE election The government has set aside 32 million patacas for the next Chief Executive election

W

hile the exact figure will be officially announced sometime this week, Song Man Lei, president of the Chief Executive Election Commission, told reporters yesterday that the overall Chief Executive election budget will comprise two parts. One is the election of the Election Commission, while the other is the election of the Chief Executive per se. The latter activity is expected to cost around 14.9 million patacas, a little less than half the total budgeted, and an 8 percent increase on the budget of the last Chief Executive election in 2009. Ms Song told reporters this is a “reasonable” increase, given inflation

over the past five years.

The budget for the election of the Chief Executive Electoral Commission rounds up to 17.4 million patacas and, according to Ms Song, voting for the Election Commission is compulsory under this year’s legislation. Since this was not the case during the last election, the budget has been increased for this year’s election, she said.

The election for the Chief Executive Election Commission is slated for June 29, and will be conducted electronically, according to Ms Song, who also said an information session outlining the procedures on this will be held next week.

Two casinos stubbing out smoking lounges: report T wo casinos have expressed the wish to completely ban smoking on their mass gaming floors thus avoiding the necessity to install airport-style smoking lounges, Chinese-language newspaper Macao Daily News reports.

Yesterday, the newspaper quoted an unidentified source in the Health Bureau as saying that two casinos have told the government that they will not set up smoking lounges on the mass floors and that mass gamblers will have to smoke outside their premises.

The report did not give any reasons why the two casinos will do so. The source was also quoted as saying that other casinos “have gradually” submitted their proposals for the smoking lounges, pending review by the Land, Public Works and Transport Bureau.

Business Daily asked the Health Bureau to comment but received no reply

before press time yesterday.

The current regulation, implemented since the start of last year, permits gaming venues here to set up smoking areas occupying not more than half their floor space including gaming equipment like gaming tables. But the Health Bureau announced this month that smoking will be banned on mass gaming floors of all casinos here starting October 6; operators are allowed to install smoking lounges without gaming equipment on the floor. The current rules still apply to VIP rooms.

Gaming analysts have said that they expect the full smoking ban on mass floors will have limited impact on the territory’s gaming revenue, which expanded by 17.5 percent to 133.52 billion patacas (US$16.69 billion) in the first four months.

T.L.

Casino staff reluctant to work in smoky VIP rooms A

survey has found that over 55 percent of casino employees are unwilling to work in VIP gaming rooms, where smoking will still be allowed after smoking is banned on casino mass gaming floors on October 6. The survey was conducted by the University of Macau and commissioned by the Health Bu-

reau. It found that 90.4 percent of the casino employees questioned approved of smoking rooms with no gaming tables or slot machines, which will be allowed after October 6. Over 1,000 casino employees were surveyed. At present smoking is allowed in designated smoking areas covering no more than half a casino’s gaming floor.

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May 27, 2014

Greater China More cinemas suspended for box office fraud Seven Chinese cinemas have been banned from screening new movies due to cheating on box office figures, two Chinese film associations announced on Monday. The cinemas were found to have used a “dual software system” to sell film tickets without registering the real box office gains to a uniform system, according to a statement issued by the China Film Producers’ Association and the China Film Distribution and Exhibition Association. Such conduct supposedly aims to avoid lawfully sharing box office earnings with filmmakers and other relevant parties. The cinemas will be punished with suspension of new movie screenings for an unspecified duration until the two semi-official industrial organizations and film authorities decide to lift the ban, according to the statement.

Power corporation executive expelled from CPC Huang Baodong, a senior executive of a state-owned power-related corporation, has been expelled from the Communist Party of China (CPC) and public office for “serious disciplinary and legal violations.” Huang was former deputy general manager of Power Construction Corporation of China.

The disciplinary inspection department of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council conducted investigation of Huang’s suspected violations and found that Huang took advantages of his post to seek benefits for other people and received a huge amount of bribes from others, the department said yesterday.

Government injected 200 billion yuan in housing projects The Chinese central government appropriated 200.3 billion yuan in 2013 to help facilitate the building of government-subsidized housing, the rebuilding of dilapidated areas and related infrastructure, said a government report yesterday. “The government-subsidized housing projects continue to make progress,” said a report on China’s human rights in 2013, issued by the State Council Information Office.

In 2013, construction of 6.6 million government-subsidized housing units and housing units in dilapidated areas started, and 5.4 million were basically finished, according to the report.

Apple supplier plans GDR sale

Hon Hai Precision, a major supplier of Apple Inc, is set to raise about T$93 billion (US$310 million) via selling new shares to foreign investors for its expansion overseas and into Taiwan’s developing 4G telecom market, a local paper reported yesterday. Hon Hai is planning to ask shareholders at its AGM in June for approval of the share sale, with the company planning to sell up to 1 billion new shares via global deposit receipts (GDR), the Economic Daily News said.

PBOC cuts corporate yield The expanding bond market is helping Premier Li Keqiang as he off-balance sheet lending known as shadow banking

C

hina’s corporate borrowing costs are falling the most since the global financial crisis as the central bank eases monetary policy to revive bond issuance and spur a flagging economy.

The extra yield over sovereign notes that AAA rated companies pay to sell three-year bonds has dropped 60 basis points since March 31 to 126 basis points, the most for any quarter in Bloomberg-compiled data going back to 2007. Falling borrowing costs have encouraged 1.005 trillion yuan (US$161 billion) of onshore yuan debt offerings in the period, poised to surpass 1.012 trillion yuan in the whole of the first quarter.

The expanding bond market is helping Premier Li Keqiang as he seeks to staunch off-balance sheet lending known as shadow banking while ensuring companies get enough cash to avoid default as manufacturing activity and the property market cool. The PBOC pumped 120 billion yuan into the economy last week, the most since January.

“Investors’ risk appetite is rising while expectations about defaults are diminishing,” said Xu Hanfei, a bond

Investors’ risk appetite is rising while expectations about defaults are diminishing” Xu Hanfei, bond analyst, Guotai Junan Securities

analyst in Shanghai at Guotai Junan Securities Co., the nation’s third- biggest brokerage. “The central bank wants to maintain an appropriately loose environment to prevent explosion of regional or systematic risks.”

MSG maker Linghua Group Inc., a manufacturing of seasonings in the

eastern province of Shandong with a local rating of AA-, shaved 10 basis points off its borrowing costs in a 250 million yuan sale of one-year securities this month compared with its last issuance of similar-maturity debt in November.

Shanxi Luan Mining Group Co.,

Carbon market worries power firms The government distributed around 160 million permits to scheme participants in 2013, which was expected to be enough for them to meet their goals Kathy Chen and Stian Reklev

S

ome of China’s biggest power generators are struggling to meet CO2-reducion targets via Shanghai’s carbon market as a lack of supply means they cannot buy enough permits to cover their emissions, sources said.

The problem is the latest hurdle the country faces in its push to curtail the nation’s spiralling greenhouse gas emissions, with over 60 manufacturers in the southern province of Guangdong already holding back from a market there.

The nearly 200 firms in Shanghai’s CO2 market, one of six set up nationwide, have until June 30 to hand over permits to the government to cover for the CO2 they emitted last year.

The government distributed around 160 million permits to scheme participants in 2013, which was expected to be enough for them to meet their goals. Those who emitted more CO2 than covered by their allotted permits must buy extra in the market.

But sources said this was proving difficult for companies such as Shanghai Electric Power Co, a subsidiary of state-owned China Power International (CPI), and Huaneng Power International, another stateowned generator.

“We are trying to find someone who can sell in bulk, otherwise there is no way for us to comply and we will have

to pay the penalty,” said a CPI official who requested anonymity because he was not allowed to speak to media.

Two officials in the company said CPI is short 400,000 permits for 2013. Even if that many permits were available, buying them at current market prices of just below 40 yuan (US$6.40) each would be much more expensive than paying a 100,000-yuan fine for non-compliance.

The CPI manager said the company’s Shanghai emissions were higher than expected as it had been forced to use dirtier coal than normal.

“Power stations can’t make independent decisions on electricity generation, it is up to the grid to assign production levels to ensure energy security,” he said.

The company would also be unable to pass on the cost for CO2 permits to their customers as electricity prices are set by the government in China.

Caught short?

Potential sellers have been reluctant to come forward due to concerns that they could be caught short in the future.

The main participant in the Shanghai market is Baosteel, one of China’s biggest companies.

It received 37 million permits for 2013, almost a quarter of the total in the Shanghai market.

The company said last week it had sold 10,000 permits in small deals, but was in no hurry to get rid of more.

“We have to prioritise compliance not only for this year but also for future years. Trading at a profit is not our priority,” said a Baosteel manager who declined to be named.

He added current market prices were far lower than the investment it would take Baosteel to cut its emissions, and said the company was comfortable waiting for more attractive offers.

Several sources told Reuters that the local government in Shanghai on Thursday last week arranged a meeting for some of the biggest companies in the market to get feedback on why they were not participating.

They said companies complained that the government had not provided adequate guidelines for how to operate in the market or clear accounting rules.

On Friday, the Shanghai Environment and Energy Exchange, which hosts trading of the CO2 permits, brought together potential buyers and sellers to try and encourage trade.

“No one wanted to sell and it ended up turning into an appeal against the (permit) allocation process,” said an exchange official.

Reuters

9

May 27, 2014

Greater China

spread seeks to staunch

a coal producer with an AAA local rating, cut fundraising costs when it issued 1 billion yuan of one-year notes this month, down 43 basis points from a similar-maturity debenture issued earlier this year.

The offerings have added to a 13 percent increase in yuan bond

sales in 2014 to 2.02 trillion yuan compared with the same period last year, according to data compiled by Bloomberg.

Rising cash supply has helped lower benchmark borrowing costs.

The yield on China’s 10-year sovereign note dropped 35 basis points since the end of March to 4.16 percent as of May 23. The seven-day repurchase rate, a gauge of interbank funding availability, has averaged 3.41 percent this quarter, the lowest since the three months ended March 2013, according to a daily fixing rate announced by the National Interbank Funding Centre.

That marks a turn from last year, when the PBOC allowed the repo rate to surge to the highest levels since a funding squeeze in June drove it to a record 10.77 percent. China needs to deleverage because total liabilities in the world’s second-largest economy reached 111.6 trillion yuan in 2012 and accounted for 215 percent of gross domestic product, Li Yang, vice president of the governmentbacked Chinese Academy of Social Sciences, wrote in an article published in Shanghai Securities News in December.

China’s economy will expand 7.3 percent in 2014, less than Li’s 7.5 percent target, according to forecasters surveyed by Bloomberg.

That would be the least since 3.8 percent in 1990. The growth rate in the first quarter was 7.4 percent.

Bloomberg News

State firms to cut ties with U.S. consulting companies China warned this week it would retaliate if Washington pressed ahead with allegations that Chinese officers hacked into U.S. nuclear, metal and solar companies

C

hina has told its state-owned enterprises to sever links with American consulting firms just days after the United States charged five Chinese military officers with hacking U.S. companies, the Financial Times reported on Sunday.

China’s action, which targets companies like McKinsey & Company and The Boston Consulting Group (BCG), stems from fears the firms are providing trade secrets to the U.S. government, the FT reported, citing unnamed sources close to senior Chinese leaders.

“We haven’t received any notification of this kind,” said Margaret Kashmir, a spokeswoman for Strategy& - formerly Booz & Company - in an email, adding that serving clients in China and globally continues to be the company’s main priority. “We are unaware of any government mandates,” added Bain & Company spokeswoman Cheryl Krauss.

A McKinsey spokeswoman did not return a call seeking comment.

A spokeswoman for BCG was not immediately able to comment.

The companies have large operations in China, the FT reported.

McKinsey, BCG and Strategy& all have Chinese state enterprises as clients, the newspaper said.

China warned this week it

would retaliate if Washington pressed ahead with allegations that the Chinese officers hacked into U.S. nuclear, metal and solar companies, including Alcoa Inc., Allegheny Technologies Inc., United States Steel Corp, Toshiba Corp unit Westinghouse Electric Co, the U.S. subsidiaries of SolarWorld AG and a steelworkers’ union. Officials in Washington have argued for years that cyber espionage is a top national security concern.

The May 19 indictment was the first criminal hacking charge the United States has filed against specific foreign officials. It follows a steady increase in public criticism and private confrontation, including at a summit last year between U.S. President Barack Obama and Chinese President Xi Jinping.

In the wake of the charges, Chinese media labelled the U.S. government a “high-level hooligan,” while officials in Beijing accused Washington of “double standards” on issues of cyber spying.

China also said it would investigate providers of IT products and services to guard “national security,” and “economic and social development.” It also banned new central government computers from using Windows 8, Microsoft Corp’s latest operating system.

Reuters

10

May 27, 2014

Greater China

Anti graft policy replaces abalone for prawns Property market is under scrutiny and new property registry may unearth unsuspected fortunes The Bund hosts some of the most exclusive clubs and residences in Shanghai

T

he Chinese developer behind an eight-storey clubhouse with a billion-dollar view over Shanghai’s Huangpu River is turning to lower-end coffee shops and restaurants to fill the space, as a broad anti-graft campaign puts the brakes on conspicuous spending.

The state-of-the-art, steel and glass building was originally designed as a playground for China’s elite, including space to mix and mingle with officials from state-owned enterprises based in offices nearby.

“Last year, we originally planned to open a clubhouse in the building, but it became too sensitive,” said Vincent Zuo, a manager of research and development at Franshion Properties , which has a market value of US$2.7 billion.

“We are now looking to open restaurants and coffee shops,” said Zuo, adding that an art museum was another option for the arch-shaped

building which sits in the middle of the company’s 30 billion yuan (US$4.8 billion) cruise terminal complex.

The decision to target middlemarket consumers comes amid a crackdown on official corruption and extravagance in China that is forcing some high-end developers and hotel operators to change tactics to adapt to the new environment.

Franshion, a unit of state-owned Sinochem Corp which also operates the five-star Grand Hyatt Shanghai, has shifted its hotel focus more towards private events from government and business dinners. The number of wedding banquets is up 50 percent from last year, said Andy Ding, vice president of Franshion’s unit China Jin Mao Group.

At the same time, consumption per head among business clients has dropped by about 30 to 40 percent since the crackdown began in 2012.

KEY POINTS Franshion seeks coffee shops and restaurants to fill clubhouse space Executives, government officials tighten purse strings to avoid scrutiny Hotel operator adjusts menu to reflect taste for less extravagance

Where once the average spending was around 1,000 yuan per person, now it is 600 to 700, Grand Hyatt Shanghai’s manager Grace Tsou said.

Corruption hangover As customers cut back, hotels are reviewing their menus. That means expensive and extravagant dishes such as abalone and lobster are out and cheaper offerings such as tiger prawns are in, said Tsou.

Also, many of these business guests now opt to bring their own liquor to restaurants - for which they are charged a service fee - rather than splurge on expensive hotel drinks.

The crackdown on corruption has already sapped profits at some liquor companies. Remy Cointreau blamed the campaign for a 32 percent fall in sales of its high-end brand, Remy Martin, in the first quarter of this year.

And last month, Kweichow Moutai Co Ltd, China’s top seller of fiery and pricey liquor baijiu, posted its weakest quarterly profit growth in three quarters as retail prices have dropped some 60 percent since the end of 2012.

Shanghai Xintiandi, a commercial and residential complex owned by Hong Kong’s Shui On Land which houses some of the financial capital’s top restaurants, bars, shops and boutiques, has also adjusted its tenant mix.

“Our restaurants are now more targeted at white-collar workers” instead of elite big-spenders, said a manager in the complex, who declined to be named as he was not authorized to speak to the media.

Developers and owners of luxury residential property are also feeling the heat. Industry watchers said owners of property priced around 40,000 to 50,000 yuan (US$6,400US$8,000) per square meter had already come under scrutiny.

In another cautious note, Soho China chairman Pan Shiyi said he expects the introduction of a property registration system in June to weigh on market supply.

The database is not only seen as vital for authorities to control a frothy housing market - it would also require local officials to report properties purchased, which could raise questions about how they funded the purchases, industry experts say.

Reuters

A joint venture will sell PlayStation console Sony and Shanghai Oriental Pearl are setting up the joint ventures in response to the suspension of the ban on game consoles within Shanghai’s free trade zone

J

apan’s Sony Corp and China’s Shanghai Oriental Pearl Group Co Ltd will set up two joint ventures to make and market Sony’s PlayStation games console in China, Shanghai Oriental Pearl said in a stock exchange filing yesterday.

One joint venture will be responsible for the console’s hardware, while the other will be focused on software, the company said in the filing to the Shanghai Stock Exchange.

The joint ventures will be set up by a subsidiary of Shanghai Oriental Pearl and by Sony’s China arm. But China is likely to be a difficult market for games consoles as Chinese gamers predominantly play PC and mobile games.

Chinese games developers and publishers have also adopted a “free to play” model where games are free and they make money by selling in-game upgrades like extra lives and special

weapons. Games consoles traditionally make their money from the sale of the console and games themselves.

Sony and Shanghai Oriental Pearl are setting up the joint ventures in response to the suspension of the ban on game consoles within Shanghai’s free trade zone, a Sony Computer Entertainment Inc. spokesman

told Reuters.

One of the joint ventures will have registered capital of 10 million yuan (US$1.60 million) and will be 51 percent owned by Shanghai Oriental Pearl Culture Development Co and 49 percent owned by Sony (China), Shanghai Oriental Pearl said in the filing.

The other will have registered capital of 43.8 million yuan and will be 30 percent owned by Shanghai Oriental Pearl Culture Development Co and 70 percent owned by Sony (China).

Sony’s move comes one month after Microsoft Corp and its jointventure partner BesTV New Media Co Ltd announced they would launch Microsoft’s flagship Xbox One games console in China in September.

Earlier in April, Shanghai’s government said console makers such as Sony, Microsoft and Nintendo Co will be able to manufacture and sell consoles in China through “foreigninvested enterprises” in Shanghai’s free trade zone, after temporarily lifting the ban on consoles in January.

China had banned game consoles in 2000, citing their negative effect on the mental health of its youth.

Reuters

11

May 27, 2014

Asia A Thai anti-coup protester holds a placard near Victory Monument in Bangkok, Thailand, 25 May 2014

Thailand Governor Prasarn Trairatvorakul attended a meeting on Sunday at the army compound in Bangkok.

Prayuth dissolved the Senate May 24, removing the last democratic institution in the country and giving the military junta more freedom to put new laws in place. He put Air Chief Marshal Prajin Juntong in charge of the key economic ministries the day before.

Prayuth said he had no choice other than to take power after meetings called by the army among key figures from both sides of the political divide failed to find a solution.

The coup threatens to increase the deep polarization that has taken hold in Thailand over the past decade between the largely rural-based supporters of former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup, and his royalist opponents.

Yingluck released

Thai king supports coup; anti-coup leaders released Officials including Bank of Thailand Governor Prasarn Trairatvorakul attended a meeting on Sunday at the army compound in Bangkok

T

hai coup leader Prayuth Chan-Ocha released 13 leaders of anti-government protests, a day after King Bhumibol Adulyadej endorsed the May 22 military takeover.

Suthep Thaugsuban was released from military detention after being summoned by prosecutors on a treason charge, according to the official Twitter page of one of his allies, Suriyasai Katasila, who jointly organized the rallies.

Thai Army Commander Prayuth will name an interim prime minister and legislative

council to implement electoral reforms and measures aimed at bolstering the economy.

Prayuth was due to attend a so-called Royal Command this morning to receive the formal backing of the monarchy, solidifying the country’s 12th putsch since 1932.

Prayuth met yesterday with the head of the central bank, the stock exchange and other economic officials to discuss measures to safeguard growth in Southeast Asia’s second-biggest economy. The military junta takes charge of an economy that shrank 0.6 percent in the first quarter

as seven months of unrest saps consumer spending and industrial production.

Overnight curfew A nationwide overnight curfew is discouraging tourists who were already wary about visiting the capital because of political violence that has killed at least 28 since November. There were protests over the weekend in Bangkok and Chiang Mai, in the north of the country, in defiance of martial law that was imposed two days before the coup.

“The task at hand now is to boost the economy, which is in pretty bad shape,” Thanavath Phonvichai, an economist at the University of the Thai Chamber of Commerce in Bangkok, said on Sunday by phone. “Low-income earners have no money, which is mainly a result of delayed payments under the ricebuying program.”

The military’s National Council for Peace and Order is handling the issue and “this should help sustain the economy from falling further,” Thanavath said.

Officials including Bank of

Kansai Electric harmed by nuke ruling

K

ansai Electric Power Co.’s bond risk soared to a sixmonth high after a Japanese court ruled against restarting two of the company’s nuclear reactors.

Kansai Electric Power Company Kyoto Branch

The cost to insure the debt of Japan’s second-biggest utility against non-payment jumped 10 basis points to 115 on May 21, the highest since November 18, according to data

provider CMA. The Markit iTraxx Japan credit-default swap index rose 1.3 to 84.8 on the day, while the gauge for North American companies declined 0.9 to 65.2, the data show.

All of Japan’s 48 operational reactors remain idled following the 2011 Fukushima nuclear crisis as the country approaches peak summer demand. The cost of importing fossil fuels resulted in a net 1.5 trillion yen (US$14.7 billion) in losses for eight regional operators of atomic plants excluding Tokyo Electric Power Co. since the record earthquake and tsunami, wiping out all of their earnings from the three years before the disaster. Analysts forecast Kansai will report its fourth-straight annual deficit in the period to March 2015.

“The company must prove that it might turn to profit, but there’s only one possibility for such a change and that’s restarting nuclear power stations,” said Yusuke Ueda, a

The junta has moved to detain key figures from Yingluck’s former government, leaders of rival street protest movements, academics and a former protest leader who once seized Bangkok’s airports. Yingluck was later released and is safe at an undisclosed location, the Thai-language Dailynews newspaper reported. Army spokesman Winthai Suvaree declined to confirm whether Yingluck had been released.

The junta has threatened to shut down media outlets and social media platforms that allow the broadcast or publication of content that might incite unrest, and international news channels remained blocked overnight.

Protests against the coup took place at Victory Monument in Bangkok and in Chiang Mai in the country’s north. Soldiers and protesters faced off outside Amarin Plaza in Bangkok’s Ratchaprasong shopping district, the site of a deadly crackdown on pro-democracy protesters in 2010 that left more than 90 people dead.

Bloomberg News

Tokyo-based credit analyst at Bank of America Merrill Lynch. “If a company reports negative numbers for three consecutive fiscal years, banks basically need to categorize their loans as requiring caution, or nonperforming. Once such a categorization is done, they cannot lend new cash.”

The Fukui District Court sided with plaintiffs arguing that Nos. 3 and 4 reactors at Osaka-based Kansai Electric’s Ohi atomic plant in western Japan may not be strong enough to withstand quakes and that their spent fuel pools were not adequately protected. They also said the reactors could be damaged in landslides that may occur during an earthquake.

Kansai Electric appealed the ruling, according to a statement on its website. Spokesman Akihiro Aoike had no immediate comment on the credit-default swaps.

The company raised 30 billion yen in a sale of 0.584 percent fiveyear bonds on May 23, paying a 40-basis point yield premium over government debt, according to Bloomberg compiled data.

Bloomberg News

12

May 27, 2014

Asia RBA justifies risky mortgage lending Australia’s banking regulator urged mortgage lenders to maintain standards as higher-risk borrowing rises and home prices surge amid record-low interest rates. The Australian Prudential Regulation Authority is “seeing increasing evidence of lending with higher risk characteristics and it does not want this trend to continue,” Chairman John Laker said in a statement. Draft mortgage guidelines released today reinforce “the importance of maintaining prudent lending standards when competitive pressures may tempt otherwise.” The Reserve Bank of Australia, which has held its cash rate at 2.5 percent since August, has signalled the housing upswing was needed to spur residential construction.

News Corp still bets on paper The head of Rupert Murdoch’s News Corp. yesterday said the group will be publishing newspapers for “decades” and hit out at the “morbid mind-set” of those who say print is dead. Chief executive Robert Thomson, who oversees more than 100 newspapers including The Wall Street Journal and The Times of London, rejected fears the medium was finished as the industry battles a slump in advertising and circulation revenues. “It’s a sign of a morbid mind-set that afflicts not just in this country but, internationally, some media groups,” Thomson told The Australian broadsheet, a News Corp. newspaper.

Indonesia to offer samurai bonds in Q4 Indonesia plans to issue more than US$500 million in samurai bonds in the fourth quarter, the finance ministry’s state bond director Loto Srinaita Ginting said yesterday. He gave no other details about the yen-denominated bonds to be issued by the government. The ministry also plans to issue up to 20 trillion rupiah (US$1.72 billion) in domestic retail bonds in September. The bonds are only for sale to Indonesians. There were no other details.

Kakao agrees to merge with Daum South Korea’s largest mobile messaging service, agreed to merge with smaller listed Internet company Daum Communications Corp. rather than pursue its own planned initial public offering next year.

The share swap values Kakao at 2.3 trillion won (US$2.2 billion), based on the terms of the deal contained in a Daum regulatory filing. Kakao will have more than 60 percent of the equity in the merged company, to be named Daum Kakao and listed in October. The deal makes Kakao board Chairman Kim Beom Su a billionaire after he jointly founded the company in 2006.

BOJ’s Sato doubts on defeating The BOJ aims to achieve 2 percent inflation in about a year Stanley White

B

ank of Japan board member Takehiro Sato proposed changing the central bank’s assessment of prices to say that risks are tilted somewhat to the downside, highlighting scepticism within the board that Japan would be able to decisively beat off deflation in a year’s time.

The minutes of the April 30 policy meeting released yesterday showed Sato had also called for changing the wording of the central bank’s price target, suggesting a loosening of BOJ’s commitment to achieving its 2 percent inflation goal by the end of the next fiscal year.

The proposal was rejected by an 8-to-1 vote, with the BOJ maintaining its stance that risks to prices are finely balanced. However, Sato’s views highlight the lingering uncertainty about the price target that could cause the central bank to alter its bullish

forecast later in the year.

“Inflation is likely to slow as the impact of yen depreciation from last year falls out of the year-on-year comparison,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co.

KEY POINTS Sato joins Shirai and Kiuchi in scepticism on price target BOJ Governor Kuroda remains bullish on consumer prices Questions linger over whether inflation will accelerate

Bank of Japan facade

Landmark PNG gas project makes first shipment The project will supply four major customers in Taiwan, Japan and China

T

he first shipment of liquefied natural gas from a landmark US$19 billion project in Papua New Guinea has left for Japan, US oil giant ExxonMobil said yesterday.

The project is the largest development ever undertaken in the Pacific country and ExxonMobil managing director Peter Graham called the shipment, which comes four years after construction began, “an historic moment”.

“This is the country’s largest resource project and it has taken the effort of many thousands of people to bring it to fruition,” he said.

“Revenue from the PNG LNG Project will support Papua New Guinea’s continued economic and social development. “The PNG LNG Project demonstrates to the world what Papua New Guinea is capable of delivering.”

The project will supply four major customers in Taiwan, Japan and China and is expected to produce an expected nine trillion cubic feet

Peter O’Neill, PNG Prime Minister

(255 billion cubic metres) of LNG over its 30-year life.

At its peak, more than 21,000 people were employed during construction with the operators having to overcome flooding and extremely steep slopes as they built infrastructure including airfields and roads from scratch.

“Not only will the people of Papua New Guinea now benefit; their children and grandchildren will

continue to enjoy the benefits and positive effects from this valuable resource development for many years to come,” PNG Prime Minister Peter O’Neill said. However, critics say the project is environmentally devastating and has inflicted human rights abuses on villagers affected.

They also query whether the PNG government, which ranks poorly in international corruption rankings, will spend the revenues wisely. The project includes gas production and processing facilities in PNG’s Southern Highlands and Western Provinces, liquefaction and storage facilities on the Gulf of Papua and more than 700 kilometres of pipelines.

ExxonMobil has the largest stake at 33.2 percent. Its partners include Oil Search Ltd (29 percent), the PNG government (16.6 percent), Australian energy firm Santos (13.5 percent), Japan’s Nippon Oil Corp.

(4.7 percent) and local landowners (2.8 percent).

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

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AFP

13

May 27, 2014

Asia

deflation

“Once this happens it will be difficult for the BOJ to maintain its aggressive outlook. Sato is merely trying to offer a more honest description of prices.”

The BOJ aims to achieve 2 percent inflation in about a year from now

with an aggressive quantitative easing scheme it put in place last year.

Sato has expressed his doubts about this target before, but taking the additional step of making a proposal to change the central bank’s language places him in a group with other sceptical board members Sayuri Shirai and Takahide Kiuichi.

Shirai and Kiuchi have repeatedly proposed changes that would loosen the timeframe for achieving 2 percent inflation or limit the central bank’s commitment to continuing with its massive purchases of government debt and risk assets.

None of their proposals has won any supporters, which shows that the remaining six members of the board form a solid core that is committed to the price stability target.

Still, signs of disagreement on the board highlight the fact that there are still many sceptics more than a year after the BOJ overhauled its monetary policy to end 15 years of mild deflation.

At the meeting on April 30, the BOJ left policy unchanged and issued consumer price forecasts for fiscal 2016/17, which show it expects to comfortably meet its inflation target.

At a subsequent meeting on May 20-21, BOJ Governor Haruhiko Kuroda expressed such optimism in the economic outlook that some economists started scaling back their expectations for additional easing.

The central bank has stood pat on policy since launching an expanded quantitative easing in April 2013, when it pledged to accelerate inflation to 2 percent in roughly a year from now, via aggressive asset purchases.

Reuters

Australia’s taxes, costs and currency choke mining firms The Australian mining sector has been going through a period of belt tightening, winding back or shutting operations

T

hree of the world’s biggest miners have warned that government taxes, high costs and a strong currency are putting pressure on their Australian operations, reports said yesterday, as they battle falling commodity prices owing to a supply glut.

Heavyweights BHP Billiton and Rio Tinto said the high costs were placing a “vice-like grip” on the coal industry and could lead to more mine closures and job cuts, The Australian Financial Review reported.

Their warnings came as the world’s biggest aluminium producer, Russia’s Rusal, said that domestic investment conditions in the sector were “extraordinarily difficult”.

The Australian mining sector has been going through a period of belt tightening, winding back or shutting operations and slashing thousands of jobs as the Asia-led mining investment boom cools.

Swiss giant Glencore Xstrata said last week it would close its Newlands underground coal mine in central Queensland state with the loss of almost 200 jobs by the end of 2015, adding to previous cuts in 2013.

The slide in coal prices also saw Integra, a subsidiary of Brazilian min-

ing powerhouse Vale, announce in mid-May a suspension of work at two mines in New South Wales.

Rio’s chief executive for energy Harry Kenyon-Slaney said his company’s leadership team was “prepared to kill sacred cows”, such as freezing salary rises as part of its cost-cutting drive.

“Quite a lot of projects that had considerable noise around them over (the) last three or four years have gone quiet,” he told the Financial Review.

“The economic reality is that it is going to be quite hard to find financing for big coal projects.”

Rusal said Australia’s high cost of construction and a stubbornly high exchange rate were putting future investment at risk.

“The industry is Australia is faced with development hurdles that pose significant obstacles for investment,” Rusal’s Australian chairman John Hannagan told The Australian broadsheet.

He added that frustration with Australia’s investment climate had prompted the firm to turn its attention to Indonesia, where it is looking into bauxite and alumina opportunities despite the country’s recent ban on exporting unprocessed bauxite.

Modi arrival improves India’s economy forecasts GDP growth will accelerate to 5.5 percent in the fiscal year ending March 2015 and reach 6.5 percent in the following 12 months

T

he strongest electoral mandate in three decades is fuelling optimism India’s new government will revive economic growth and avert a junk debt rating.

Bond risk of Indian companies slumped to the lowest in a year after Narendra Modi’s Bhartiya Janata Party swept polls ended this month with the biggest majority since 1984.

The average cost of protecting the debt of seven firms against non-payment for five years using credit-default swaps fell to 232 basis points, according to data provider CMA. Goldman Sachs Group Inc. said while it expects his government to revive stalled projects, boost investment and cut some subsidies, improving the budget deficit will take at least a year.

Standard & Poor’s warned in November that India may lose the BBB- investment grade, first awarded in 2007, should the new administration fail to revive growth from near a decade-low.

“The downgrade pressure has been pushed aside for now,” D.R. Dogra, managing

Indian Prime Minister-designate Narendra Modi (R) pays tributes at Mahatma Gandhi’s memorial ahead of his swearing-in as the 14th prime minister of India at the Rajghat in New Delhi, India, 26 May 2014

director of CARE Ratings Ltd. in Mumbai said in a May 23 telephone interview. “I don’t think there will be any such speculation for a reasonably long time.”

Credit-default swaps for State Bank of India, the nation’s largest and regarded by some investors as a proxy for the sovereign, reached 193 basis points as of May 22, the lowest since June 2013, CMA data show. Contracts protecting Reliance Industries Ltd., the nation’s secondlargest company by market value, were at a one-year low

of 165. The cost of insuring Bank of China’s debt rose to near a one-month high of 146.

Investments by private companies fell to 9.2 percent of gross domestic product in the year ended March 2013, the lowest in data going back to 2005, according official estimates.

GDP growth will accelerate to 5.5 percent in the fiscal year ending March 2015 and reach 6.5 percent in the following 12 months, Goldman analysts including Tushar Poddar wrote in a May 22 report.

The government estimates Asia’s third-largest economy grew 4.9 percent in the period ended March 31, near the decade- low of 4.5 percent in the preceding year.

Overseas borrowing costs declined to the lowest in more than 6 1/2 years after the polls. The extra yield investors demand to hold dollar-denominated Indian debt over U.S. Treasuries fell to 260 basis points as of May 21, the lowest since November 2007, a JPMorgan Chase & Co. index shows.

While three interest-rate

AFP

increases since September by central bank Governor Raghuram Rajan have helped reduce inflation, April’s 8.59 percent gain in the consumerprice index was the highest in Asia after Pakistan. Goldman analysts expect price increases to average 8 percent this fiscal year and 7 percent in the next, and predict the Reserve Bank of India will increase its benchmark repurchase rate to 8.5 percent in the second half of 2014 from 8 percent.

“Inflation isn’t at acceptable levels and its curbing would take precedence over other objectives” such as boosting growth, Rupa Rege Nitsure chief economist at state-run Bank of Baroda, said in a May 22 telephone interview.

The yield on the rupeedenominate benchmark 10year sovereign bonds will climb to 8.8 percent by yearend, from 8.63 percent May 23, because of “elevated” inflation and a large fiscal deficit, according to the Goldman report.

Currency and stock markets reflect growth optimism. The rupee surged 3.1 percent to 58.5075 per dollar this month, the most among 11 Asian currencies tracked by Bloomberg. Onemonth implied volatility, a gauge of expected exchangerate moves used to price options, fell to 7.48 percent on May 23, the lowest since March 5. The S&P BSE Sensex of shares surged 10.2 percent this month to close at a record 24,693.35.

Bloomberg News

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May 27, 2014

International ECB ‘alert’ to deflation risk The European Central Bank remains “alert” to the dangers of Eurozone inflation undershooting the central bank’s medium-term targets, president Mario Draghi said yesterday amid widespread concern about deflation risks. His comments come against a background of speculation over whether the central bank will take new steps to ease monetary conditions at its next meeting early in June. “At present, our expectation is that low inflation will be prolonged but gradually return to close to 2.0 percent,” Draghi told a central banking forum organised by the ECB in Sintra, Portugal.

German consumer confidence steady Consumer confidence in Germany remains steady following recent gains, a new poll found yesterday. “Consumer sentiment remains in good shape this month. But, as in previous months, no clear trend is discernible,” market research company GfK said in a statement. “The good piece of news this month is that consumers’ economic expectations are gaining momentum, despite the crisis in Ukraine. That is helping make them more willing to spend, albeit only modestly,” the statement said. “By contrast, income expectations could not match the post-war high reached the previous month and gave up most of its gains from April.”

Atos to buy Bull In an all-French IT sector deal worth 620 million euros (US$845 million), the merger will create the top Europe-based cloud computing company and a major player in cybersecurity.

The companies said a combined Atos and Bull, currently numbers 5 and 10 respectively in cloud computing in Western Europe, would leap to the fast-growing industry’s number-two spot by revenue behind U.S.-based Amazon and ahead of Microsoft. A presentation slide on the Atos web site after the pair announced the deal yesterday showed the cloud services market growing at a compound annual rate of between 25 and 50 percent a year.

South Africa changes finance minister President Jacob Zuma promoted deputy finance minister Nhlanhla Nene to finance minister on Sunday, replacing the widely respected Pravin Gordhan in a new cabinet line-up to start a second five-year term in office. The day after a glitzy inauguration in Pretoria, the 72-year-old Zuma also confirmed millionaire businessman Cyril Ramaphosa as his deputy president, a decision likely to go down well with investors and the private sector. Mining minister Susan Shabangu, who has been criticised for her handling of a strike in the platinum mines now in its fifth month, was replaced by Ngoako Ramatlhodi

France’s far-right triumph shakes EU politicians Socialists polled a record low of less than 14 percent of the votes cast and one in four voters backed the FN

F

rance’s Socialist government was hit by a fresh aftershock yesterday after a triumph for the far-right National Front (FN) in European elections was widely interpreted as a seismic shift in the country’s political landscape.

As he met top ministers to assess a vote in which the Socialists polled a record low of less than 14 percent of the votes cast and one in four voters backed the FN, President Francois Hollande was hit by another stinging rebuke from the country’s disgruntled electorate.

A poll released yesterday revealed that only 11 percent of voters think he would be a good presidential candidate for the Socialists in 2017.

With his authority crumbling, Hollande also faces the prospect of renewed rumblings within the ruling party where a significant minority of deputies blame the government’s attempts to comply with the rules of the euro single currency for turning voters against the party and the European Union.

Sunday’s vote marked the first time that the anti-immigration, anti-EU FN had topped a nationwide French poll.

Final results gave the party led by Marine Le Pen just under 25 percent of the vote on a turnout of just over 43 percent.

That guaranteed them 24 of France’s 74 seats in the 751-member European Parliament.

The FN’s success was also bad news for the Union for a Popular Movement (UMP) of former president Nicolas Sarkozy, which was beaten into second place with 20.8 percent of the vote and 20 seats. The Socialists polled a humiliating score of just under 14 percent.

Prime Minister Manuel Valls said the stinging reverse demonstrated the need for the EU to put more emphasis on policies to bolster growth and jobs across the bloc.

But Valls, who was appointed after the Socialists suffered a similar rout in municipal elections in March, also

President of the Front National (FN) Marine Le Pen (C) leaves the stage after delivering her speech after the far-right National Front took most votes in France’s election for the European Parliament, in Nanterre, near Paris, France, 25 May 2014

insisted that the administration would stick to its programme of economic reform and its commitment to meeting budget deficit targets set by the EU. “Our only mission is to continue our work to repair the country. If we don’t do this, we would not live up to our responsibilities,” Valls said, warning that France could become “ungovernable” if the government embarked on a radical change of direction.

Socialist ministers brushed aside FN demands for national elections in response to Sunday’s vote, and aides said there were no plans for Hollande to address the nation.

Marine Le Pen, 45, has been credited with significantly broadening the appeal of a party founded by her father Jean-Marie Le Pen and long tainted by association with his multiple convictions for inciting racism and denying the holocaust.

She said after Sunday’s vote that the French people had demonstrated they no longer wanted to be ruled

from Brussels.

“Our people demand only one type of politics - a politics of the French, for the French and with the French,” she said.

Such language and the FN’s current momentum generates unease among France’s large immigrant population, which is mostly drawn from former colonies in Arab north Africa, and has also been cited as a factor in a recent upturn in Jewish emigration to Israel.

The far right party’s resurgence over the last few years has been attributed to the appeal of its core messages at a time of record unemployment and falling living standards for many working and middle class voters.

But the FN has also benefited hugely with widespread disillusionment with the mainstream parties.

Both the UMP and the Socialists have been beset by a series of scandals over alleged corruption or cronyism which have exacerbated anger over their failure to solve France’s problems.

AFP

Colombia will need a presidential runoff vote As neither man won the 50 percent needed for first-round victory, they now go to a runoff on June 15

R

ight-wing opposition candidate Oscar Ivan Zuluaga won most votes in Colombia’s presidential election on Sunday but fell short of a first-round victory and will face President Juan Manuel Santos in a close runoff next month.

Zuluaga, who has fiercely opposed Santos’ peace talks with Marxist guerrilla leaders, took first place with 29.3 percent of the vote on Sunday.

Santos trailed with 25.7 percent.

As neither man won the 50 percent needed for first-round victory, they now go to a runoff on June 15.

The election was seen as a plebiscite on Santos’ strategy of negotiating with rebel leaders to end a 50-year-old war that has killed some 200,000 people.

Zuluaga, a former finance minister,

accuses Santos of pandering to terrorists and has suggested he would scrap the talks in favour of U.S.backed military campaigns similar to those led by his mentor, former President Alvaro Uribe.

“We will decide on June 15 if we want more of the same or change for a better Colombia, if we want a country that gets more dangerous every day or if we want to build a safe country like the one we had between 2002 and 2010,” Zuluaga told supporters, referring to Uribe’s eight years in power.

Zuluaga has vowed to give the Revolutionary Armed Forces of Colombia (FARC) eight days to lay down their weapons and halt the peace talks if they refuse.

That appeals to some Colombians

outraged that rebel leaders could eventually hold seats in Congress and potentially avoid prison sentences for their crimes.

Critics say Zuluaga is Uribe’s puppet and that the former president would rule from behind the scenes if his candidate wins the runoff.

Santos, 62, appealed to voters who hope the guerrillas will negotiate peace after seeing top leaders killed and their numbers halved to about 8,000 fighters over the last 12 years.

“In three weeks, Colombians will choose between two options: those of us who want the end of the war and those who want a war without end,” Santos told cheering supporters. He congratulated Zuluaga for his strong showing.

Reuters

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May 27, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Why Jeffrey Sachs matters Bill Gates Founder and Technology Adviser of the Microsoft Corporation

Co-Chair of the Bill & Melinda Gates Foundation

THE BANGKOK POST The business community wants the forthcoming interim government to immediately address pressing issues that have plunged the Thai economy into recession and spurred idle talk of becoming the region’s ‘‘sick man’’. The Bangkok Post surveyed business leaders across key sectors to find out what they see as the top priorities to tackle right away. High on the agenda is for the next administration to resolve the notorious ricepledging scheme, deal with widespread corruption, call a general election, end populist policies and carry out acrossthe-board reforms of political, social and economic structures.

VIETNAM NEWS Viet Nam is preparing to apply 4G (fourth-generation network) technology from 2015. However, industry insiders said the country should be in no rush to make the switch, as moving to 4G would involve significant investment in infrastructure and require end users to buy new mobile phones. Huawei Viet Nam’s General Director Yuan Song said that 3G was only introduced in Viet Nam in 2009 and was still in the fast growth stage. Thieu Phuong Nam, general director of Qualcomm pointed out that 3G market share was still on the rise.

THE PHNOM PENH POST The Ministry of Tourism held an emergency meeting with industry leaders and representatives in Phnom Penh yesterday to look at what can be done to curb the loss of cross-border visitors resulting from unrest in neighbouring countries. Minister Thong Khon on Sunday emphasised the need for Cambodia’s tourism industry –which relies on a steady flow of visitors from within the region– to remain strong amid a military coup in Thailand and tensions in Vietnam over a sovereignty dispute with China.

THE STAR ONLINE At least six toll roads offering construction jobs worth RM20bil are coming on stream in the next 18 months. Two of them, RM5.04bil West Coast Expressway and the RM1.18bil Duke extension, have achieved financial close, indicating that work on the project is to start within months. The other highways being firmed up are the RM2.5bil KinraraDamansara Expressway, the RM4.18bil Sungai Besi-Ulu Kelang elevated expressway, the RM4.3bil Damansara-Shah Alam Expressway and Ahmad Zaki Resources Bhd’s East Klang Valley Expressway. “The construction works for all the highways should be up and running by next year,” said a construction industry official.

S

EATTLE – Bono calls the economist Jeffrey Sachs “the squeaky wheel that roars.” To me, Sachs is the Bono of economics – a guy with impressive intelligence, passion, and powers of persuasion who is devoting his gifts to speaking up for the poorest people on the planet. So it was no surprise to me that a journalist would find Sachs to be a compelling central character for a book – and a good way to draw readers into the potentially dry subject of international development.

In The Idealist, Vanity Fair writer Nina Munk draws a nuanced portrait of Sachs and his Millennium Villages Project (MVP) – a US$120 million demonstration project intended to show the world that it’s possible to lift African villages out of poverty through a massive infusion of targeted assistance. It would have been easy, and perhaps more marketable, for Munk to draw a caricature, overly accentuating Sachs’s negative qualities at the expense of his great gifts.

But she doesn’t. Munk spent six years researching the book, getting to know Sachs well and living for extended periods in two of the 15 Millennium Villages. She clearly appreciates the importance and difficulty of what Sachs and his team are attempting to do.

Unlike most books about international development, Munk’s book is very readable and not long (260 pages). I’ve told everyone at our foundation that I think it is worth taking the time to read it. It’s a valuable – and, at times, heart breaking – cautionary tale.

While some of the Millennium Villages have succeeded in helping families improve their health and incomes, Munk concludes that the two villages she spent the most time studying­– Dertu, Kenya and Ruhiira, Uganda – have so far not lived up to Sachs’s vision.

Sachs did come to the foundation, asking us to support the Millennium Villages. His pitch was intriguing. He was picking a small handful of villages to be the focus of intense interventions in health, education, and agriculture – all at once. His hypothesis was that these interventions would be so synergistic that they would start a virtuous upward cycle and lift the villages out of poverty for good. He felt that if you focus just on fertilizer without also addressing health, or if you just go in and provide vaccinations without doing anything to help improve education, then progress won’t be sustained without an endless supply of aid.

My colleagues and I had a number of concerns about Sachs’s approach. We questioned his assumptions about how quickly the gains

would materialize, what would happen when the MVP funding was phased out, how much governments would contribute to offset the high per-person costs, and how feasible it was to measure progress (given the likelihood that people from the surrounding area would stream into their villages once the MVP aid started flowing).

So we decided not to invest in the MVP directly. Instead we funded his interdisciplinary work at Columbia University’s Earth Institute, because we felt it was invaluable to have him focused on the needs of poor countries.

To put it mildly, Sachs didn’t make any friends in the process of advancing his case for free bed nets. Through increasingly ruthless tirades, he wound up alienating potential allies who want to defeat malaria just as badly as he does. But history will show that Sachs was absolutely right

Based on what Munk reports about the MVP, I’m not about to throw stones. We have many projects of our own that have come up short. It’s hard to deliver effective solutions, even when you plan for every potential contingency and unintended consequence.

There is a natural tendency in almost any kind of investment – business, philanthropic, or otherwise – to double down in the face of difficulty. I’ve done it, and I think most other people have too.

So what went wrong? For one thing, the villages that Sachs picked experienced all kinds of problems – from drought to political unrest.

For another, the MVP began with an idealistic “Field of

Jeffrey Sachs at 2012 International AIDS Conference

Dreams” approach. MVP leaders encouraged farmers to switch to a series of new crops that were in demand in richer countries – and experts on the ground did a good job of helping farmers to produce good crop yields by using fertilizer, irrigation, and better seeds. But the MVP didn’t simultaneously invest in developing markets for these crops. According to Munk, “Pineapple couldn’t be exported after all, because the cost of transport was far too high. There was no market for ginger, apparently. And despite some early interest from buyers in Japan, no one wanted banana flour.” The farmers grew the crops, but the buyers didn’t come.

Of course, Sachs knows that it’s critical to understand market dynamics; he’s one of the world’s smartest economists. But in the villages Munk profiled, Sachs seems to be wearing blinders.

Warren Buffett likes to say, “The rear-view mirror is always clearer than the windshield.”

Through that rear-view mirror, we can see that the project didn’t have an economic model that could sustain successes once the MVP dollars ran out. All of the interventions involved – health, agriculture, infrastructure, education, and business seed money – make sense if carried out carefully, over time. But I am surprised by how little Sachs dug into country budgets and that he didn’t work to convince governments to commit to additional taxation to fund more of these interventions domestically. Given his background, he surely excels in that area.

Through the rear-view mirror, we can also see that many of Sachs’s ideas have proved to be exactly right. Munk details his 2007 fight with international aid donors who

were refusing to distribute insecticide-treated bed nets for free because they favoured a market-based approach where people would pay a small amount for each net. To put it mildly, Sachs didn’t make any friends in the process of advancing his case for free bed nets. Through increasingly ruthless tirades, he wound up alienating potential allies who want to defeat malaria just as badly as he does. But history will show that Sachs was absolutely right. Since then, we’ve seen that the free model has allowed for much broader distribution of bed nets – and much greater reductions in malaria – than market models.

In the end, I hope poverty fighters will not let what they read in this book stop them from investing and taking risks. In the world of venture capital, a success rate of 30 percent is considered a great track record. In the world of international development, critics hold up every misstep as proof that aid is like throwing money down a rat hole. When you’re trying to do something as hard as fighting poverty and disease, you will never achieve anything meaningful if you’re afraid to make mistakes.

I greatly admire Sachs for putting his ideas and reputation on the line. After all, he could have a good life doing nothing more than teaching two classes a semester and pumping out armchair advice in academic journals. But that’s not his style. He rolls up his sleeves. He puts his theories into action. He drives himself as hard as anyone I know.

I have no doubt that Sachs, like all relentless thinkers and doers, will come back with stronger ideas and approaches.

Sachs will always be a squeaky wheel that roars. And the world will be a better place for it.

The Project Syndicate 2014

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May 27, 2014

Closing LDK Solar gets loans after bond default

Juncker seeks EU Commission leadership

The Chinese solar manufacturer which defaulted on a bond that matured in February, said it received 2 billion yuan (US$321 million) of loans from Chinese banks. China Development Bank Corp., the nation’s biggest policy lender, is leading the funding from 11 financial institutions, LDK spokesman Peng Shaomin said in a phone interview today. LDK will spend more than 400 million yuan on a polysilicon project and use the remainder to boost its cash reserves, Peng said. Officials at China Development Bank didn’t immediately reply to faxed questions about the financing.

Jean-Claude Juncker staked a claim to the European Commission presidency after his Europe-wide party won parliamentary elections, setting up a potential clash with national government leaders over the high-profile post. Juncker, the candidate for commission chief of Europe’s Christian Democrats, said he should be picked for the job because they came in first in European Parliament elections from May 22-25. While the choice of a nominee lies with the European Union’s national leaders, a new EU-treaty rule requires them to take “into account” the election result.

Female farmer woman pursues drama dream

L

iu Yunxia owes a debt almost equal to her family’s annual income.

Yet, after publishing her script for a TV drama, she believes her dream is closer to coming true.

Liu, 38, a farmer in a remote mountainous village in northwest China’s Gansu Province, borrowed 30,000 yuan (US$4,870) from a local entrepreneur for the publication of a novel, “30 Years Is Not a Dream,” which tells the story of a rural arranged marriage and is based on her own experiences.

With only a primary school education, the woman is known in her hometown and online for her persistent dream to write dramas and produce a TV series.

Liu loved writing as a child and dreamed of becoming a doctor. But she was engaged when she was only nine by her parents and forced to get married at 19.

The couple’s life was not happy in the beginning due to poverty, lack of communication and her husband’s gambling.

Five years later, she began to feel love for her husband, Chen Yanhai, who took care of her in the hospital when she fell ill.

In 2008, Liu was inspired to shoot a TV drama after she saw a documentary on TV shot by a woman about rural children left behind by migrant workers in cities.

“The TV drama dream is to enrich our spiritual lives

I feel no meaning if I do farming work all my life.

I want to do something significant to change our concept of a higher standard for life Liu Yunxia drama writer and farmer

Jackie Chan’s hand imprints on Avenue of Stars in Hong Kong

and really to change our own lives,” said Liu. “I feel no meaning if I do farming work all my life. I want to do something significant to change our concept of a higher standard for life.”

She made the decision despite her husband’s opposition. She finally completed the first script of the drama, “Yezi’s Arranged Marriage,” in autumn 2010.

Liu then planned the shoot and persuaded her husband to support her. They spent

all their savings of some 100,000 yuan to buy a camera, computers and other equipment. Fellow villagers were invited to volunteer as actors or actresses.

But filming of the series stopped halfway after actors quit due to the lack of pay, busy farming schedules and other reasons.

She did not give up and worked to improve the script.

With the guidance of the president of the Lanzhou Film Studio, the story was published

as a book in February.

Liu said she is grateful to her husband, who has given her great support despite initial disagreement. The couple raise 24 dairy cows, which bring them an income of 3,000 to 4000 yuan a month.

Liu told Xinhua yesterday she has just finished a movie script, “The Story of Liu Xuemei’s Dream,” which is also based on her own experience.

“I hope famous directors will come to discuss with me about shooting the TV drama

or movie soon,” said Liu. She added that a photographer from the east China business hub of Shanghai is offering help to find directors and investors.

“I believe the dream will come true in the end,” said Niu Gonghe, a villager who once performed in the unfinished drama.

“To shoot a TV drama is not only a dream of Liu’s, but also mine and my fellow villagers.

We look forward to realizing the dream as early as possible.”

Xinhua

S.Korea and Malaysia agree China will retire currency swap deal polluting cars

New Japan activist fund moves to friendly grounds

South Korea and Malaysia have agreed to utilise their currency swap agreement worth around US$4.7 billion to boost the use of the won and ringgit, the Bank of Korea and the finance ministry said in a joint statement yesterday.

Starting next month, central banks in both countries will begin lending the currencies to companies through local banks to settle trade bills.

The lending facility is similar to a step in December 2012 to increase the use of the Chinese yuan and the won through a bilateral currency swap.

South Korea signed a currency swap deal with Malaysia in October last year that lets either country swap 5.0 trillion Korean won for 15 billion Malaysian ringgit. It was signed amid a flurry of swap deals with other countries, including the United Arab Emirates and Indonesia.

The swap deals were meant to improve South Korea’s financial risk management during times of extreme stress in global markets.

The Chinese government announced yesterday the country will eliminate 6 million high-polluting vehicles before the end of 2014 in a move to bring down air pollution.

The mandatory rule applies to vehicles that do not meet exhaust emissions standards. Of the vehicles to be eliminated this year, 20 percent are in the municipalities of Beijing and Tianjin, as well as Hebei Province -all northern regions frequently troubled by smoggy air in recent years.

In a further step, more vehicles will be scrapped next year, involving up to 5 million units in the nation’s economically developed regions, such as the Yangtze River Delta, Pearl River Delta and the Beijing-Tianjin-Hebei regions, according to an action plan published by the State Council, China’s Cabinet.

“Strengthening control on vehicle emissions will be a major agenda item for the country’s energy savings, emissions reductions, and low-carbon development during the next two years”.

A new Japanese investment fund is set to join a small but growing band of “friendly” activists, shunning hostile tactics that have previously failed to generate change and instead working with management to improve shareholder returns.

Yasunori Nakagami, chief executive and cofounder of newly established Misaki Capital, said he plans to launch an open-ended fund in July with a brief to invest in around 15 Japanese companies where he sees capacity for growth - with advice from shareholders such as himself.

“There are companies that have good CEOs but aren’t too good with marketing. They might have a good CEO but also a weak chief financial officer,” Nakagami told Reuters in an interview.

“We’d rather go for companies that are good but could be much, much better.”

Nakagami formerly led Japan’s Asuka Value Up Fund, which at its peak held nearly 50 billion yen (US$491 million) under management.

Reuters

Xinhua

Reuters