Macau Business Daily, June 16, 2014

MOP 6.00 Closing editor: Alex Lee

Expat haven

Innovation name of the game

M

acau is one of the cheapest places for expats to hang their hat in Asia Pacific. An ECA survey reveals that living costs here are very competitive. Lower than most of mainland China’s cities, Taiwan or South Korea, in fact. Macau ranks only 35 out of 63 Asian locations surveyed, and is 121st globally 3

PAGE 9

Year III

Number 561 Monday June 16, 2014

Publisher: Paulo A. Azevedo

PAGE

China is going all out for innovation.

New guidelines are being drawn up. The development of the domestic industry over the next three to five years will be under the microscope

www.macaubusinessdaily.com

No links, says Chui Chief Executive Fernando Chui Sai On insists he has “no relation” to any land grants or graft case. Controversial Hong Kong Next Magazine claims Beijing is probing former CE Edmund Ho Hau Wah’s alleged involvement in ‘favours’

Mobile machinations Illegal financial transfers using portable UnionPay terminals. Police authorities estimate that 180million patacas-worth of transactions have been processed in Macau. To date, 41 suspects have been identified PAGE 5

HSI - Movers June 13

Name

Interview

Rui Cunha

PAGE

Macau’s lacking excellence Rui Cunha sounds alarm bells about the local legal profession.

The founding partner of C&C Lawyers says practitioners must abandon their comfort zone.

There’s more to being a good lawyer than memorising the legal code. And it’s not about the money. Foreign or local, it’s all about added value for Macau, he says. On top of which, the legal system remains an ‘orphan’ searching for the right path PAGE 6 & 7

2

Casting off soon

%Day

China Merchants H

5.23

Wharf Holdings Ltd

3.14

CNOOC Ltd

1.91

Industrial & Comm

1.85

China Petroleum & Ch

1.78

Want Want China H

-0.38

Hengan Internation

-0.56

Tingyi Cayman IslanD

-1.14

BOC Hong Kong HolD

-1.49

China Mengniu Dairy

-2.74

Source: Bloomberg

The Outer Harbour ferry terminal renovations should be wrapped up by year-end. So says the Land, Public Works and Transport Bureau.

Expanded capacity and more convenience is the watchword

I SSN 2226-8294

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Twinkle in Zhuhai’s eye

Brought to you by

Mainland rail construction firm China Railway Group Ltd is in the upscale residential homes market. Its project in Zhuhai is now up for sale. And Macau buyers are in its sights PAGE 8

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June 16, 2014

Macau

Chui: No ties to graft accusation against former CE Chief Executive Fernando Chui Sai On has “no relation” to any land grants or graft case, Office spokesperson declares following controversial Hong Kong report Stephanie Lai

sw.lai@macaubusinessdaily.com

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he Government Spokesperson’s Office has refused to comment on the latest issue of Hong Kong Chinese-language news outlet Next Magazine’s reportage of Beijing probing former Chief Executive Edmund Ho Hau Wah’s alleged involvement in graft practice. The Office also states that incumbent Chief Executive Fernando Chui Sai Ho has no connection to the graft case of disgraced former Macau official Ao Man Long.

On Friday, the Government Spokesperson’s Office issued a press release stating that Mr. Chui, during his tenure as Secretary for Social Affairs and Culture before assuming the Chief Executive’s position, was ‘never involved in any land grant works.’ Mr. Chui has, in fact, cited this statement before whilst campaigning in the Chief Executive election of 2009, the Spokesperson’s Office noted.

The response from the Office came when Next Magazine, in its June 12 issue, cited a document for its cover story that they claimed was from Macau’s Commission Against Corruption, which has mentioned that a LUXE notebook of former Secretary for Transport and Public Works Ao Man Long dated 2005 recorded an item entered as ‘Pio/ Penha Hill/Secretary Chui.’

Mr. Ao was sentenced to jail for 29 years on May 31, 2012 for numerous corruption and money laundering charges, which included a charge of accepting bribes from Hong Kong businessmen Joseph Lau Luen Hung and Steven Lo

Kit Seng in exchange for guaranteeing their success in securing five plots of land near Macau International Airport during his term of office as public works secretary.

The item ‘Pio/Penha Hill/Secretary Chui,’ the magazine wrote, refers to a construction project involving Macau property developer Ho Weng Pio. Mr. Chui served as the Secretary for Social affairs and Culture from December 20, 1999 to May 12, 2009 when Edmund Ho assumed the post of the city’s first Chief Executive.

The citation of the note is a part of the magazine’s cover story that reported the Central Commission for Discipline Inspection of China is ‘reinvestigating’ former Chief Executive Edmund Ho’s alleged involvement in ‘corruption issues,’ citing unidentified sources.

The news outlet stated that the mainland graft watchdog did, in fact, start an investigation into Mr. Ho two years ago, investigating whether he covered for mainland officials engaged in gambling and money laundering in Macau, and whether he benefited from such corrupt practice. There have been no concrete findings from this investigation, the magazine reported.

Denial ‘Beijing’s anti-graft drive is completely dissolving the mutual governorship of Ho Hau Wah and Chui Sai On,’ Next Magazine wrote.

‘The recent move to impose through the top officials’ compensation bill an immunity for the Chief

Executive against criminal procedures whilst in office is a reflection of [Chui] trying to save himself in fear of being discovered [abetting] a governor’s criminal behaviour,” the magazine suggested.

The ‘compensation’ bill referred to proposes a generous welfare package through the format of subsidy payment for exiting top officials, which incited an unprecedented large-scale demonstration in Macau on May 25 and a sit-in outside the Legislative Assembly on May 27.

These protests ended in an eventual withdrawal of the bill announced

by Mr. Chui himself the second day after the sit-in.

While the Commission Against Corruption refused to comment to Business Daily on the citation of the document quoted by Next Magazine, developer Ho Weng Pio stated in a Saturday press statement under the name of his company Companhia de Construção e Investimento Ho Chun Kei Limitada that he “has never applied for any land lease from the MSAR Government for development projects” and that he would “reserve the right to pursue the matter in court regarding any inaccurate allegations [of Next Magazine].”

“Chief Executive Fernando Chui Sai On has no relation to any cases mentioned in the Next Magazine report,” a Chief Executive spokesperson told Business Daily, referring to the cases as Ao Man Long’s graft case and the magazine’s claimed investigation of Edmund Ho launched by Beijing.

When questioned

by Business Daily, the representative unit of Beijing here, the China Liaison Office, said it was not in a position to remark on the Hong Kong media report.

Lau’s ‘associates’ refunded for soured La Scala deals C

hinese Estates Holdings Ltd - formerly chaired by Hong Kong billionaire Joseph Lau Luen Hung who was found guilty of bribing Macau former official Ao Man Long in the La Scala case in March announced to the Hong Kong Stock Exchange on Friday its revocation and cancellation of transactions related to the disposal of La Scala properties owned by Lau’s two girlfriends and sister, as well as the refund terms.

Under the revocation agreement, Moon Ocean - a subsidiary of Chinese Estates controlling the corruptiontainted upscale home project La Scala - has consented with each of Utmost Honest, Jubilee King, Harvest Billion and Keen Dynasty that they have revoked and cancelled their respective binding letters of offer, promissory sale and purchase agreements previously entered into for the sale and purchase of the residential units in the La Scala project, Chinese Estates announced in a voluntary announcement after trading hours to Hong Kong Stock Exchange on Friday.

Pursuant to the revocation agreement, Moon Ocean has returned all paid deposit money under their respective promissory agreements and paid interest on the deposit money at the rate of 7.25 percent per annum to the four firms owned by Mr. Lau’s two girlfriends and a sister, which totalled an aggregate amount of approximately HK$19.9 million (US$2.56 million), the filing noted.

Utmost Honest is wholly-owned by Mr. Lau’s girlfriend Lui Lai Kwan, who is also an executive director of Chinese Estates; Jubilee King is wholly-owned by another girlfriend of Lau’s, Ms. Chan Hoi Wan; whilst both Harvest Billion and Keen Dynasty are wholly-owned by Ms. Mary Lau Yuk Chun, the sister of Joseph Lau. When the Friday announcement was made, Mr. Joseph Lau still remained the major shareholder of Chinese Estates with an interest of 74.99 percent of the total issued shares of the company, the announcement noted.

Less than two months since Mr. Lau was convicted of bribery and money laundering related to the La Scala land deal, an unfinished residential project oppposite Macau Airport, Chinese Estates announced on May 12 that it would revoke the presales agreements and return all deposits to buyers in full plus interest of 7.25 percent per annum ‘without admission of any liability.’

SL.

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June 16, 2014

Macau

Expats: Lower cost of living in Macau than Mainland China For a foreign worker, Macau is one of the cheapest places to live in Asia Pacific.

The territory ranks 35 in a universe of 63 locations in the region below Mainland China, Taiwan and South Korea, a survey from ECA reveals Alex Lee

Alex.lee@macaubusinessdaily.com

M

acau is one of the cheapest locations for expatriates in Asia with living costs here lower than most of China’s mainland cities or Taiwan, a survey from ECA revealed last week. The territory ranks only 35 in the most expensive locations in Asia Pacific for foreign workers in a group of 63 cities analysed by the research company (table shows first 50 locations).

According to the 2014 edition of Living Cost survey, Macau is a cheaper place to live than the majority of cities in Mainland China. From the 12 locations surveyed in Greater China by ECA, only Nanjing had a lower living cost for expats than here. Places like Xiamen, Suzhou, Chongqing, Chengdu and Wuhan are more expensive to live in today than Macau. In all Asia Pacific, a foreign worker can only spend less money per day than here if

he lives in countries with a much less developed economy such as Vietnam, Myanmar, Indonesia, Mongolia or Pakistan. When living expenses are compared to countries such as Japan, Australia, South Korea - or even Hong Kong and Taiwan - Macau is clearly a place to save a buck.

The ECA ranking is based on the prices of day-to-day goods and services including groceries, meat and fish, clothing, meals out, electronic goods, drink and tobacco. The survey excluded certain living costs like rent, electricity, gas and water expenses, car purchases and school fees because these items are normally compensated by companies in expatriate packages, ECA says.

Hong Kong on the rise This year, Tokyo continued to be the most expensive location

for an expatriate to live in Asia Pacific, while Hong Kong overtook Singapore in 8th place as price increases and the currency exchange rate were slower in the latter.

In terms of global ranking, Tokyo dropped out of top ten to the 11th spot, while Hong Kong climbed from 37th position in 2013 to 29th this year. This jump was caused by the price hikes of 4 percent this year in Hong Kong and the falling of several Australian locations in the ranking due to the weakening of the Aussie dollar.

Macau is currently the world’s 121st most expensive location for a foreign worker in a basket of more than 250 cities. Caracas, Venezuela’s capital, has become the most expensive location in the world for an expat, beating Oslo in Norway and Luanda in Angola (former leaders from 2013).

Caracas climbed 32 positions from 2013 to reach the top.

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June 16, 2014

Macau Brought to you by

HOSPITALITY Man-power The surveys on manpower needs and wages, published twice a year, provide some snapshots of the trends affecting employment in the various sectors surveyed. Among those included in the latest survey, three sectors deserve special attention: hotels, restaurants, and manufacturing. Hotels grew the most, as measured in terms of the number of employees. The last round of openings in Cotai, in particular, helped lift the number of effectives from about 32,000, in the third quarter of 2010, to almost 45,000 in the same quarter of 2012. That is, a rise of almost 40 percent in just two years. Restaurant staff went up also, but at a much slower rate.

Conversely, the slow decline of what is left of manufacturing goes on. It lost 38 percent of workers in the period observed here.

Concealed in these overall numbers is the fact that gender ratios are changing noticeably in these sectors.

In these sectors, the number of men relative to women has been rising. That change is more dramatic in manufacturing. That is an outcome of the closure of many textile-related facilities where, traditionally, the presence of women was clearly dominant. In the last three years that meant a complete reversal in the gender ratio, well illustrated in the chart: its figures jump from 0.6 to 1.1 men per women. But a similar trend is happening in the two other sectors. In the case of hotels, where the predominance of men was already the case in early 2010, the rise is slow but sustained. In the case of restaurants, where women are still the majority, changes are more irregular, possibly reflecting a more unstable market: but the upward trend is clear.

49.6%

rise in male staff in hotels, last three years to Q1

Ferry terminal revamp ready by year-end The year-long renovation of the Outer Harbour ferry terminal, which started in July last year and is being conducted in five phases, will bring fresh facilities to travellers and citizens

by December this year Aries Un

newsdesk@macaubusinessdaily.com

T

he renovation of the Outer Harbour ferry terminal, which seeks to enhance passenger facilities for the growing number of visitors to the city, is expected to be completed by the end of this year, the Land, Public Works and Transport Bureau announced to media on Friday afternoon, escorting journalists around the already completed parts of the terminal hall.

Authorities said that the entire facelift project - originally budgeted at 90 million patacas (US$11.3 million) - would cost at least 10 percent more by the time the revamp is finished.

The estimated 10 percent increase is ‘reasonable’ as the project involves some hidden parts that need to be repaired during the revamp, said Loi Seong San, head of the maintenance and repair division of the Public Works Bureau.

The service of two central escalators on the ground floor of the ferry terminal, which had served over 20 years, will be suspended starting from today until the end of September for its approximately 95-day renovation.

Security guards and service ambassadors have also been deployed on the ground floor to help maintain crowd control. Signposts are evisent on the floor and on the wall, directing passengers.

Police seize drugs worth MOP1.06mln

T

wo men and a woman from mainland China have been arrested after police confiscated a number of drugs including ketamine, methamphetamine and ecstasy. Police say the seized drugs have a street value of around 1.06 million patacas. Chinese stateowned news agency Xinhua reports that police received a tip-off last week about a man dealing drugs. During questioning, one of the men allegedly confessed to renting the residential apartment where the drugs were found. According to authorities, the drugs come from mainland China and there are still allegedly more people involved. Police say they believe the group has been operating for a month and that the drugs have primarily been sold in nightclubs and casinos.

Thai travel warning lifted next week Starting later this month, the new 12 check-in counters for Hong Kong airport ferries in the west wing of the first floor will gradually be put into service with the old ones in the east wing of the ground floor phased out to avoid crowds and chaos at the east wing entrance.

The 45 counters for travel agencies, hotels and car rental in the west wing of the ground floor, increased from 17, are also slated to be in use around the same time.

Marine and Water Bureau port control department head Ip Va Hung added that some space inside the hall will be allocated to hotel and casino greeters, currently stationed outside the hall at the entrance, so that they may carry out their duties from kiosks.

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ackage tours to Thailand go back on sale from June 24, following the lifting of the curfew on Thailand’s travel hot spots, the Tourism Crisis Management Office here said in a statement. However, tour groups departing for Thailand before June 16 will remain cancelled, while some travel agencies will re-launch Thailand tour packages as early as Monday next week. Authorities are urging residents who plan to travel to Thailand on their own to remain alert to local security developments, comply with the relevant provisions of the curfew, plan itineraries accordingly and strengthen security precautions. As at Friday, the Tourism Crisis Management Office here had received 35 enquiries but no requests for assistance.

Minimum wage set at MOP30 per hour T

he draft bill on the minimum wage is ready and set at 30 patacas (US$3.75) an hour for cleaning and security staff. If approved by the Legislative Assembly, as many as 11,800 workers in these two sectors will benefit from a wage increase.

Executive Council spokesperson Leong Heng Teng said that the government arrived at that figure based on whether workers could live on an average of 6,240 patacas a month, or 240 patacas a day. Last month, Labour Affairs Bureau director Wong Chi Hong said that figures reflecting “what local companies can afford and what employees need to be able to buy with

their pay” were taken into consideration.

Mr. Leong, however, said that the government is open to comparisons with neighbouring regions. Overtime and an extra month’s pay are, however, not included in this draft bill, which also proposes it be backdated to before the bill comes into effect. So far, there is no date on when the bill will land in the Legislative Assembly for discussion.

At present, only employees of the government’s cleaning and security contractors are entitled to a minimum wage. Nevertheless, the government supplements the earnings of low-income workers to bring their income up to a minimum of 4,700 patacas a month.

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June 16, 2014

Macau

Forex reserves total MOP122.7 bln in May M

Illegal UnionPay transfers hit MOP180 million

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llegal transactions using portable UnionPay terminals in Macau total 180 million patacas (16.6 million euros), police authorities have told news agency Lusa, indicating that 41 suspects have been identified.

The transactions detected between January and mid-May are illegal because they’re made in Macau through UnionPay terminals from China or supplied by third parties, which prevents UnionPay getting the percentage they are entitled to as the operations are registered as outside Macau.

‘According to the agreement between International UnionPay, the banks and stores in Hong Kong and Macau, traders must pay a percentage (maximum 1.4%) of the amount of the transaction in fees to the cardissuing bank, buyer and International UnionPay bank (UnionPay receives 0.2% of this figure),’ explained authorities, in a written response sent to Lusa. International UnionPay has ‘failed to receive the fees (i.e.)

360,000 patacas (EUR 33,211).’

Of the 41 suspects – all from mainland China - identified in the investigation of 19 cases, six were held by Judiciary Police on suspicion of having caused loss of high value to International UnionPay, and four had to post bail. By mid-May, none had been cleared.

According to the Penal Code, it is

considered ‘high value’ if the amount exceeds 30,000 patacas (2,767 euros) and ‘considerably high value’ if it exceeds 150,000 patacas (13,838 euros). These irregularities fall under the crime of computer fraud.

‘Given that this crime is considered semi-public, the PJ will closely watch with International UnionPay in order to have better knowledge of the situation of these irregularities.’

The scheme - which occurred

‘not only in casinos but also in restaurants and stores located on adjacent streets’ – allows people to exceed the withdrawal limit of 20,000 yuan per day (2,350 euros).

Although individuals may not carry cash, there are reports that this ceiling is surpassed with the use of debit cards in stores or entertainment venues for exchange of capital, not to pay for goods and services.

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Lusa

acau’s foreign exchange reserves amounted to 122.7 billion patacas (US$15.4 billion) at the end of May. According to preliminary estimates released by the Monetary Authority here, the reserves rebounded 2 percent from the revised value of 120.3 billion patacas for the previous month.

The territory’s foreign exchange reserves represent 13 times the currency in circulation at the end of May, or around 108.6 percent of the pataca M2 at the end of April.

‘M1’ refers to that part of the money supply that includes physical coins and currency, as well as readily liquid assets such as on-demand bank deposits and money held in cheque accounts.

‘M2’ is M1 plus all time-related deposits, savings deposits, and noninstitutional money market funds.

The trade-weighted effective exchange rate index for the pataca, a gauge of the domestic currency’s exchange rate against the currencies of Macau’s major trading partners, increased 0.14 points month-on-month but dropped 1.14 points year-on-year to 97.25 in May 2014.

There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life.

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June 16, 2014

Macau

“It’s worrying that we don’t see anyone of exemplary quality in Macau” The whole educational system of Macau, relying on memorisation, should be revised, in order to create a different type of professional. In an interview with Business Daily, the founding partner of C&C Lawyers, Rui Cunha, says he agrees with the suspension of the protocol between the Portuguese Lawyers’ Bar and the Macau Lawyers’ Association, as many professionals were entering the territory without any intention of staying for long and that wasn’t bringing any benefit to Macau as a whole. Yet, he also believes that as long as locals continue not to invest in their professional future the need to import qualified overseas legal professionals will continue unabated Luciana Leitão leitao.luciana@macaubusiness.com

Photos: Manuel Cardoso

You’ve created the Foundation with the main purpose of filling certain gaps that you believe still exist in Macau’s legal system. Have you been successful in achieving this goal?

I wouldn’t say it was created to fill certain gaps, but it was created to help in enabling some of the deficiencies that exist in Macau’s society to be filled more easily.

Right now, Macau is going through its adolescence phase. Only 15 years have passed since we became a society with faith in its own hands. A lot of time still hasn’t passed and that initial stage in many sectors ends up being reflected in many things. We still need a few years until we have a more organised society, be it in the justice department or in the legislative sector or even in the media.

The Foundation was created because of something I was very concerned about, which was faith in Macau’s law. I was concerned because, since 1999, Macau’s law has become an orphan. It left the umbilical relationship it had with Portugal, and Macau had to build its own path and create the essential legal codes to sustain the legal system; but the truth is, since then, we haven’t had any other outside support.

China’s law is not an example and cannot be one, because of the different origins. Hong Kong’s law is also from a different origin, not adjustable to Macau’s and cannot serve as an example to Macau. So, we don’t have anything close that

The new lawyers, new judges and new legal advisors entering public administration are not doing anything to be prepared. They believe the law degree is enough

can serve as a model or a guide.

We need to think more about what we do, especially when we’re dealing with instruments that deal with society. We see that, apart from the University of Macau, that is doing a great job in trying to train law specialists, not even the University has been able to become a centre for the study of law following graduation. That’s why I thought of creating a centre to further think about the law.

Part of Macau’s identity is built through solid law. And that can only exist if it’s well thought of well studied and well applied. We lack that in Macau.

But it is no longer only a centre for reflection and the study of Law. Why did you change its initial nature?

I’ve decided to create the Foundation as a support for the centre, to be able to continue — beyond me — because it will have enough funds, at least for a couple of years, to survive.

Afterwards, I realised that other sectors, not only those related to law, could benefit from support.

We’re a very small society and some things are very limited, especially if we’re talking about things that are not immediately profitable. So, people that are talented only have one possibility to pursue their talents — go abroad, become famous overseas; some return to Macau, others do not. That’s why we hear on the news about a Macau film director famous in Australia, a teacher in the US with sculptures spread through different North-American cities . . . yet no-one knew about it in Macau.

So, I decided the Foundation should also focus on another type of support for society, especially targeting the drawing of youngsters towards culture and the development of certain values, and giving them an opportunity.

We don’t want to have famous people exhibiting in our gallery — we prefer to give a chance to people that are starting and that can feel motivated. In these two years, all my fears have been confirmed: we have people that are living overseas who, by their own initiative, contacted us and showed their art in Macau, but we also have local artists that up to now have not had the courage to move

forward. That started here a short time after we exhibited in Paris.

But have you reached your goals, on what concerns the centre regarding reflection and the study of law?

I would say yes and no. Yes, because I have to recognise the efforts of the people working here. We have from time to time bilingual publications that did not exist before in Macau; we have been organising conferences about different topics. Macau’s Law will only survive if it is thought of in Chinese, applied in Chinese and known by everyone in Chinese.

That translation problem deserves great attention, [we need to] find specialists in this field, especially in the legal field. Macau does not have the capacity to train translators at a fast enough rate and in enough quantity, so we need to get them from other places, like Mainland China. And until that problem is resolved there will still be big problems in promoting bilingualism; there will be great difficulties in the whole Macau system, not only in the law sector.

We should try to make everything bilingual, if we want to have a Macau law.

Bilingual trend Do you believe the trend is to have Macau law only in Chinese, or will we continue to have it in Portuguese and Chinese?

Even though [the law is] currently in Portuguese and in Chinese, I’m always talking to my clients in English. Yet, English does not replace both official languages in the fundamentals - principles that constitute the legal system and concepts. This is wholly interconnected, so we will always have a bilingual law.

Neither of the sides alone can survive in Macau.

In that spirit, is it necessary for Portuguese lawyers to learn Chinese?

Yes, I recommend it. Everyone should be bilingual, or at least have a reasonable knowledge of the other language. Also, if a Chinese lawyer does not know a minimum of Portuguese, he faces a lot of difficulties. Without Portuguese, a legal expert will not be able to move forward much because he will not have the theoretical

support needed for someone who practices law.

We have been organising different activities. And we have not yet reached that recognition from the people we want to target.

Unfortunately, we feel that we don’t yet have enough people adhering to our conferences.

People have not yet understood that someone who works in law does not work from nine to five.

People are still thinking about obtaining a degree in law to work as a way of rapidly making money.

Macau’s Law will only survive if it is thought of in Chinese, applied in Chinese and known by everyone in Chinese

Do you believe this results in bad law professionals?

Yes, of course. And it’s dangerous.

These youngsters are not getting the risks behind it. They will reach a certain point at which they will see their limitations and they will be surpassed.

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June 16, 2014

Macau quality — if we want people in Macau to bring added value to the territory we should not open the door to everyone, just because they have a law degree. There should be a certain control on the number/ quality of people coming here, to avoid other types of negative effect.

There should be some kind of filter, starting there [in Portugal] and then here.

Yes to general partnerships

Very good students here, when they start to practice law, have serious difficulties, because it’s not only about memorising the legal code

Look at this example of the suspension of the protocol between the Portuguese Lawyers’ Bar and the Macau Lawyers Association.

This results from the fact that the locals are not preparing themselves to be as good professionals as the ones coming from overseas.

So, you mean this protocol results from the local fear of being surpassed by legal professionals from overseas?

It’s the fear of competition, and those that come from overseas are better prepared because the faculties there lead them to have a deeper knowledge, they have good libraries, books and a whole system helping them, that doesn’t exist here. So, they say: ‘We cannot let people come, because if they come we will not have any alternative.’

I would say, instead: ‘If you are better than others, I assure you that the others will have no room.’

The new lawyers, new judges and new legal advisors entering public administration are not doing anything to be prepared. They believe the law degree is enough.

They need to be ambitious to be better and better.

Poor education system What reasons are behind such lack of ambition — is it related to the quality of existing law degrees?

Considering it is such a new university [Faculty of Law University of Macau], naturally it has some deficiencies. But they have been doing a great job over the years and I’m very curious

about the new bilingual course.

I think it’s a valid idea and I’m curious about the results.

The whole educational system deserves more thought. The law is not a sector that you can rely on through memory alone. And the educational system here, due to its roots in the Chinese [system] and the memorising to learn Chinese, the law cannot be like that. If that’s the way you teach it, a student may know by heart the whole legal code, but he does not know how to apply it. Law is about a whole mental gym that has nothing to do with memory alone.

The Macau Law suffers from this.

As a result, very good students here, when they start to practice law, have serious difficulties, because it’s not only about memorising the legal code. It’s worrying that we don’t see anyone of exemplary quality in Macau.

You mean people with a degree in law in Macau?

Yes — Chinese and Portuguese.

Maybe it’s because of that lack of ambition, an ambition that can only exist if it’s sustained with training. You need to continue studying after university, with a practice that not only targets making money.

So, you’re in favour of the suspension of the protocol?

It’s complex. If, on one side, we could get qualified professionals from Portugal, that could be very useful to Macau; and we see that even the government brings judges from Portugal. And I agree with that.

But for the lawyers’ case, there’s a problem. If the doors are wide open, the locals will have a lot of problems in being able to work.

So, we need to balance the need to bring quality from overseas and the need to give opportunities to those that have the local degrees to be able to profit from that opportunity. Of course, if they continue being passive, I don’t think there is any way other than opening the door to more professionals from overseas.

Won’t this suspension, in fact, just promote such passive behaviour by the locals?

We needed this, at least to discuss the problem. If we didn’t suspend, everything would stay the same, and that could be damaging to Macau.

Not everybody that comes to Macau comes to contribute for a better Macau. There are still many coming here with a typical immigrant mentality — he has discovered a way to make money, he just wants to have his independence and then he returns, and this does not benefit Macau.

To leave the door open would mean leaving it open for people who are not benefitting the locals, and also Macau is not so big that it can allow an indefinite number of people to come in. That’s why I believe the suspension was necessary, led by circumstances, and now we need to think about it.

The Association has already decided to renegotiate the protocol and I believe that, whatever the path chosen, it should think about

Another topic that has been debated for several years is the constitution of law firms under a general partnership model, if the draft is approved. Do you agree with it?

I believe that general partnerships might be a very important step for quality improvement, controlling the qualification of all professionals and an opportunity for locals to be able to qualify themselves.

C&C has already existed for 18 years and we’ve been functioning very close to a general partnership model. We’re not a general partnership, but our experience can be valuable to choose the model of general partnership that interests Macau.

We need to have general partnerships that are, stricto sensu, general partnerships — each member is part of the partnership.

That’s very important. To have a general partnership only by name, it’s a fraud — it’s to disguise [a practice] for tax considerations or other reasons. Another model that does not interest is a bit of what happens in partnerships in countries like Mainland China when we ask about the number of lawyers, they reply 700 or 900. We should not be thinking only about the number, because after a certain number there are difficulties in having cohesion and uniformity of principles.

Will C&C adopt the general partnership model?

Yes. In 1996, we formed the current model of C&C; that is, a business corporation manager in a lawyer’s office. In the last article of our regulations we included a clause that said that we would become a general partnership when that became an option.

You’re also an executive director of SJM Holdings Ltd.. Considering we’re now expecting a tsunami of hotel-casinos in Cotai, do you believe SJM’s role, as the traditional leader of the market, might be affected?

I believe competition is already here — it’s not exactly coming — and it was already expected since the first day that it was established that there would be six operators.

Since then, SJM has always assumed a role of following its own path, without being concerned about being or not being the leader.

Fortunately, it has managed to keep that position, but this gradual erosion was something that was already expected, and would happen. Because of all the other competitors, it will end up having a certain impact on the gaming structure of Macau.

SJM will always follow its own path — it is a Macau company. It has always, during the 40 years it was STDM, worked for Macau and will continue to do so. If it is affected, it plays with the same instruments as the others and, up to now, we can be proud. There is a very healthy competition, without problems between the operators, and each follows its own path.

There has never been any need for intervention by the government.

8

June 16, 2014

Macau

More than 70 injured in ferry accident This is the second accident in less than a month

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The Macau Youth Association has around 80 members comprising different sectors here. According to Mr. Alves, these include enterprises, the banking sector, the public and administration service sector, arts and culture, gaming and MICE. Having been established two years ago, the Association is still in its infancy. “We’re spreading [the word] and gathering Macanese youth.

We have meetings and events lined up to get to know each other better and how we can represent,” Mr. Alves told Business Daily, adding that the aim of these activities is to get involved in social events and civic life.

ore than 70 people were injured when a Macaubound ferry crashed into a seawall after leaving Hong Kong on Friday, officials said, making this the second accident in less than a month.

According to the Macau Health Bureau, 45 men and 25 women were taken to the emergency ward of the public hospital here. The majority - accounting for 59 of the total of injured - are from Hong Kong, while four are Macau residents, four South Korean, one is Japanese and two are Thai. All were discharged later Friday, except for one who needed to undergo surgery, the Health Bureau said.

Authorities here say the ferry passengers sustained minor injuries, primarily comprising bruises and abrasions.

The crash happened when the ferry – reportedly a jetfoil boat – was approaching the port at around 9:30am and hit a concrete breakwater, a spokesman for Macau’s marine department said.

The authorities earlier said around 20 people were injured but later put the figure at 57.

“The vessel was carrying a total of 220 passengers and 13 crew members.

Fifty-seven passengers have suffered minor injuries, including two Koreans and one Japanese,” a spokeswoman for Shun Tak, which operates the ferry services, said in a statement.

Passenger ferries regularly ply the hour-long distance between Hong Kong and Macau.

Hong Kong broadcaster RTHK said that the ferry involved was a jetfoil and that the cause of the accident had yet to be determined.

It is the third accident on the Hong Kong to Macau ferry route in the past eight months.

There have been a number of ferry accidents in recent years, mainly collisions with other ships, buoys or docks.

In 2012, 38 people were killed and 92 injured when a Hong Kong Electric boat collided with a vessel carrying Chinese New Year revellers off Lamma Island. It was Hong Kong’s worst maritime disaster in around 40 years. Last month, a Hong Kong-bound Macau ferry collided with a mainland Chinese vessel, leaving 33 injured.

Fears over maritime safety in Hong Kong were sparked after a fatal collision between a passenger ferry and a pleasure boat carrying around 120 people claimed 39 lives in October 2012. The accident was the city’s worst boating disaster in decades and shocked the Asian financial hub, which prides itself on its good safety record.

An enquiry into the crash found a ‘litany of errors’ and ‘systematic failings’ in the marine department’s safety standards.

Fatal boat accidents are rare in Hong Kong despite its crowded waters, which often see high-speed hydrofoils vying for space with tourist junks, luxury yachts and a centuryold public ferry system.

S.F.

S.F. with AFP

Mainland railway giant beckons property purchasers

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ver the weekend, mainland rail construction firm China Railway Group Ltd launched sales of a completed upscale residential home project in Zhuhai, to which it would like to attract Macau buyers, Business Daily has learned.

The home project - called ‘Phoenix Bay’ and located adjacent to Jiangjun Mountain Park in Gongbei district in Zhuhai – has been developed by state-owned railway builder China Railway Group Ltd. The company has started to diversify into the property business in recent years.

Phoenix Bay is the first property project that China Railway Group Ltd has launched in Zhuhai, a local agent for the project, Mr. Wong Ian Man, told Business Daily following

the two-day sales promotion held at Macau Tower finished yesterday.

The railway firm is planning to sell 62 units of the Phoenix Bay home project, for which the average price is 34,000 yuan (US$5,475, or 43,717 patacas) per square metre, with flat sizes ranging from 260 square metres to 939 square metres.

“So far, we have five interested Macau buyers for this project over the weekend, and in the previous internal subscription for about a dozen units, around 40 percent of the buyers for those units were also from Macau,” said Mr. Wong.

“I would say we’re still satisfied with the sales performance so far,” he added. “China Railway has put particular focus on Macau buyers

because they think it’s the correct strategy to pursue given Macau’s skyrocketing property prices and supply drying up.”

The project comprises two 28-storey high residential blocks that were built since five years ago.

Macau’s average home price hit 91,615 patacas per square metre in April, where the average home size is 66 square metres, the latest data from the Financial Services Bureau shows.

The expensive end of the local homes priced higher than the said average can be found in the high-rise residences of Areia Preta, Fai Chi Kei, the district of Doca Lam Mau, Nam Van and central Taipa, the Bureau’s statistics note.

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Macanese Youth Association visits Portugal A delegation of around 30 youth entrepreneurs embarks upon a weeklong knowledge-enhancing visit

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he Macanese Youth Association and the Macau Youth Federation left Saturday for a weeklong trip to Portugal, where the delegation of 30 is expected to sign cooperation agreements. The exchange visit, seeking to enhance knowledge and get in touch with the realities of Portugal, marks the Association’s second anniversary.

While in Portugal, the delegation will meet the youth entrepreneurs’ national association and the IT business youth national association, in order to establish a platform for businesses between youth in Macau, mainland China and Portugal.

On the agenda are plans to visit the

cities of Lisbon and Oporto, as well as more inner areas such as Douro and Fatima, in addition to guided tours to some of the national factory headquarters there.

Speaking to Business Daily, president of the Macanese Youth Association Duarte Alves said that the group plans to create an ‘incubator’ on Hengqin island that will focus on cooperation opportunities between China and Portugal as well as Portuguese-speaking countries.

Mr. Alves also said that cooperation with Portugal will help “give life” to the business development of young entrepreneurs from mainland China and Portugal.

9

June 16, 2014

Greater China

Fund innovations to boost economy New guidelines will be a blueprint for the development of the domestic industry in the next three to five years Lu Jianxin and Pete Sweeney

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hina has issued new guidelines to encourage the US$1.2 trillion mutual fund industry to innovate, promising to let more foreign firms into the industry as part of Beijing’s recent efforts to boost the stock market and the real economy.

The guidelines will be a blueprint for the development of the domestic industry in the next three to five years, a regulatory spokesman told a weekly news conference in Beijing on Friday.

By the end of May, China’s 91 mutual fund companies with 680 funds managed a total assets of 7.25 trillion yuan (US$1.2 trillion), making the domestic fund industry the 10th biggest in the world, official data shows.

Still, stock holdings by professional institutional investors, dominated by mutual funds and brokerages, only accounted for 10.87 percent of China’s total stock market capitalisation by the end of last year.

The fledging market is dominated by much less sophisticated retail investors, a result that has led to rampant speculation in loss-making and other small-capitalised firms and a lack of interest in blue chips favoured in more mature markets.

“Aggressively expanding securities mutual funds is an important task to promote the healthy development of China’s capital markets,” the China Securities Regulatory Commission said in a summary of the guidelines published in its microblog.

“The principles to develop the industry include letting the market play a decisive role in innovations and letting the sector’s developments serve the real economy,” it said.

The new guidelines will encourage fund firms to create new investment products that cross different markets and assets, such as cooperating with banks and brokerages to launch asset management products.

Fund managers could also outsource their business so as to reduce operational costs, the regulator said in the guidelines, adding that both major and smaller fund firms would be encouraged so as to build a multi-level fund industry.

The authorities will in future raise the current foreign ownership limit of 49 percent for Chinese joint-venture mutual fund firms, the regulator said without elaborating.

Regulators will also encourage fund firms to cooperate with Internet operators and allow the establishment of more private equity entities, among other supportive measures.

China’s stock market has been relatively sluggish in the aftermath of the global financial crisis. A slowdown in the world’s second-largest economy is also threatening a recovery.

More than US$1.4 trillion in value, equivalent to 16 percent of China’s gross domestic product in 2013, has been erased from the Shanghai and Shenzhen exchanges since the main

More than US$1.4 trillion in value has been erased from the Shanghai and Shenzhen (headquarters pictured) exchanges since the main Shanghai Composite Index’s record peak of 6,124 points in 2007 Shanghai Composite Index’s record peak of 6,124 points in 2007.

That has brought the average price/earnings ratio of around 2,500 Chinese listed firms to less than 10 times historic earnings, from more than 70 times in 2007, exchange data showed.

More recently, however, domestic

Yuan’s internationalization reaches Singapore A facility will help enhance the city-state’s position in the fierce competition for offshore yuan business

As the volume of RMB activities grows in Singapore, the overnight RMB liquidity facility will help alleviate endof-day funding strains of financial institutions Jacqueline Loh MAS Deputy Managing Director

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he city-state plans to launch a facility to provide overnight yuan liquidity as trade transactions using the currency rise.

The move will help enhance the city-state’s position in the fierce

competition for offshore yuan business and is another step forward in China’s effort to internationalise the currency.

The facility, offering up to 5 billion yuan (US$805.3 million) in overnight funds on any given day to financial

institutions in Singapore, will be launched on July 1, the Monetary Authority of Singapore (MAS) said on its website.

The facility complements the existing MAS yuan facility that allows

institutional investors appear to have gone back into equity markets, following classic economics of buying low ahead of a possible turn as Beijing ramps up stimulus to boost the economy.

The main index closed up 0.93 percent on Friday but is still down 2.13 percent so far this year.

Reuters

banks to borrow yuan funds on a term basis for trade, direct investment and market stability purposes.

“As the volume of RMB activities grows in Singapore, the overnight RMB liquidity facility will help alleviate end-of-day funding strains of financial institutions. This will provide a conducive environment for the continued expansion of RMB activities in Singapore,” MAS Deputy Managing Director Jacqueline Loh said.

Meanwhile, the People’s Bank of China (PBOC) Nanjing branch also announced on Friday that it would allow eligible corporates and individuals in the Suzhou Industrial Park (SIP) to conduct cross-border yuan transactions with Singapore.

Banks in Singapore will be able to carry out cross-border yuan lending to companies in SIP and corporates in SIP can issue yuan bonds in Singapore.

Equity investment funds in SIP will also be enabled to conduct direct investment in corporates in Singapore and individuals in SIP can conduct yuan remittances between the two countries for the settlement of current account transactions and direct investment in corporates in the city-state.

Competition to be the next offshore yuan centre behind Hong Kong has intensified. Britain and China signed an agreement last month to set the service up, days after Germany clinched a similar deal.

Yuan payments rose in value by 29 percent in March from a month earlier and gained one place to seventh position as a global payment currency, latest statistics from SWIFT showed.

Reuters

10

June 16, 2014

Greater China

Pictured AcelorMittal headquarters in Luxembourg are far from the image of a steelmaker factory

Steelmaker sees car production increase 60% Output may rise to 30 million units to 35 million units in the next seven to eight years

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utomobile production in China, already the world’s biggest market, may climb about 60 percent in the next eight years, boosting demand for steel, according to ArcelorMittal, the largest producer.

Output may rise to 30 million units to 35 million units in the next seven to eight years, from 22 million units now, Lakshmi Mittal, the company’s billionaire chief executive officer,

said yesterday in an interview in Loudi, China, before the opening of a automotive steel venture with Hunan Valin Steel Co. The plant increases ArcelorMittal’s exposure in China and pits the company against Baoshan Iron & Steel Co., which supplies half of China’s autosteel. Vehicle sales could rise as much as 10 percent in 2014, after increasing every year since 2000,

the China Association of Automobile Manufacturers estimated in January.

“Automotive steel is the most profitable steel product with a fast and steady growth in demand,” said Sarah Wang, a Shanghai-based analyst with Masterlink Securities Corp. Valin is looking to the venture to help improve profits, she said.

Passenger-vehicle sales in China rose 13 percent last month, led by

China probes EU and Japan in dumping accusations The investigation is the latest in a string of trade issues involving China where companies in the healthcare sector have come under increased scrutiny

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hina on Friday launched an anti-dumping investigation into makers of blood dialysis equipment in the European Union and Japan, including market leader Fresenius Medical Care (FMC) AG & Co KGaA, challenging the international firms who currently dominate the global and Chinese markets.

China will examine any negative impact on Chinese rivals, the country’s Ministry of Commerce said in a statement posted on its website on Friday.

The investigation is the latest in a string of trade issues involving China where companies in the healthcare sector have come under increased scrutiny over the last year over pricing and allegations of corruption in China’s markets.

FMC, which controls close to half of the Chinese market for blood dialysis machines, is part of the anti-dumping investigation, a company spokesman said.

China was Fresenius’s second-largest market for dialysis products last year.

FMC believes that it has acted

General Motors Co. and Ford Motor Co. as foreign carmakers continued to take market share from domestic producers. Overseas automakers are stepping up their investment in China to win sales in the world’s secondlargest economy.

The nation produced 10.6 million vehicles in the five months ended May, including 5.6 million cars, according to data from the National Bureau of Statistics.

Autos, white goods The venture in Hunan province will have an initial production capacity of 1.5 million metric tons.

The company will focus on making steel for autos and white goods in China, Mittal said yesterday.

Luxembourg-based ArcelorMittal first announced a proposal for the autosteel plant in Hunan in 2008. It

according to a 2013 report from consultancy Research in China, with the United States, Europe and Japan the major sources of supply.

Kidney disease is a growing problem in China due to the country’s ageing population and the country already has around 119.5 million patients with chronic kidney disease, according to a 2012 paper in The Lancet medical journal.

A smaller number of patients with severe forms of disease may require dialysis.

Local boost

Fresenius Medical Care, which controls close to half of the Chinese market for blood dialysis machines, is part of the anti-dumping investigation

correctly and has not broken any laws, the spokesman said.

Foreign companies dominate the

dialysis market in China with around three quarters of the devices used in the country in 2012 imported,

The market investigation could help local firms break the hold of larger international rivals over the country’s dialysis market, Chinese companies in the sector said.

The biggest foreign companies are Germany’s Fresenius, which has 34 percent of the global market through its listed-subsidiary FMC, according to the firm’s 2013 financial report.

U.S. firm Baxter International Inc, which owns Sweden-based dialysis kit maker Gambro, has a share of around 30 percent.

Baxter officials did not respond to phone and emailed requests for comment.

“We have not yet heard the news about anti-dumping probes. But 60 to 70 percent of the market is dominated by foreign companies. If it’s true, I’m sure we would benefit from the policy,” said an official surnamed Zhu at Jihua Medical Apparatus and Instruments Co Ltd. Reuters

11

June 16, 2014

Greater China Automotive steel is the most profitable steel product with a fast and steady growth in demand Sarah Wang analyst at Masterlink Securities

has 49 percent in the venture, with Shenzhen-traded Valin Steel holding the balance.

ArcelorMittal, which also has a 20 percent stake in the Chinese steelmaker, will eventually trim its holdings to 10 percent to focus on the automotive steel venture, Wang Jun, a vice president of Valin Steel, said by phone on June 13. Valin Steel has had two annual losses in the past five years as competition and increasing costs squeezed earnings.

The new venture will face competition from nearby steel producers including Wuhan Iron & Steel Co. and Chongqing Iron & Steel Co., analyst Wang said.

Fiat SpA has a car venture with Guangzhou Automobile Group Co. in Changsha, Hunan, while Nissan Motor Co. operates Japan’s largest automotive venture in China in nearby Hubei province. General Motors is also setting up a car plant in Wuhan.

Steel demand in China may grow 3 percent to 4 percent this year, from about 7 percent last year, Mittal said today. Steel demand growth in Europe and the U.S. is expected to be higher than last year, he said, without elaborating.

Bloomberg New

Anti-graft war rages China is in the middle of a nationwide anti-corruption campaign that has toppled a swathe of government officials

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he fall of a top Chinese chief Wang Qishan called for political advisor has yet again innovation in inspections to bring articulated the Communist a “Sword of Damocles” to hangs Party of China’s (CPC) firm resolve above those in power as a deterrent. to fight corruption.

His words came with solid Su Rong, vice chairman of actions. the Chinese People’s Political Over two dozens government Consultative Conference (CPPCC) officials at or above provincial- and National Committee, has been put ministerial-levels have been put under investigation for suspected under investigation, of which close disciplinary violations, the CPC’s to half were probed in the first half internal discipline watchdog said in of this year. a statement on Saturday.

Undoubtedly, Su stands out He is the most senior Chinese from those crooks, for being the official to be highest-ranking probed for graft official to ever since the 18th be probed.

CPC National Born in Congress in late 1948, Su was 2012. elected as a vice China is in chairperson of the middle of the 12th National a nationwide Committee of anti-corruption the CPPCC in campaign that March 2013 has toppled along with 22 a swathe of others. Just two government weeks ago, he ranking high level officials. attended a topThe campaign level CPPCC under investigation targeting both conference in “tigers” and Beijing. “flies” -metaphors He is also the for senior and low-ranking corrupt fourth apprehended senior official officials- is lasting longer and striking with links to Jiangxi, where a major harder than many had anticipated. shift in the political landscape has And to many people’s delight, the taken place since an inspection team popular campaign has so far showed from the CPC Central Commission no signs of abating whatsoever. for Discipline Inspection was Speaking at a meeting on dispatched to the eastern province disciplinary inspection work in in May 2013.

March, national anti-corruption Xinhua

24 officials

Corn trade might be opened up Currently, China maintains a quota system over most grains imports in an attempt to grow almost all of its consumption domestically

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hina’s move to scrap its annual stockpiling program for soybeans shows its grain security policy is being redefined and could pave the way for liberalisation of the corn trade, the founder of the country’s largest animal feed producer said.

China, which has long been obsessed with food security, finally scrapped its stockpiling system for soybeans and cotton this year, after it failed to boost planting by farmers while also pushing domestic prices well above international markets.

“The scrapping of the soy stockpiling program shows China is moving towards the direction of separating food and feed grains,” Liu Yonghao, Chairman of the New Hope Group, told Reuters in an interview on Thursday.

New Hope is the largest consumer of corn in China and processed more than 18 million tonnes of corn into feed last year. The firm is also one of China’s largest suppliers of meat, eggs and dairy products.

“This will give farmers more choices on what they should produce and will pave the way for the opening up of overseas trade for feed grains, such as corn,” he said.

China, which became a net corn importer in 2010, currently maintains a quota system over most grains imports in an attempt to grow almost all of its consumption domestically.

KEY POINTS After scrapping of soy stockpiling program, corn trade could be opened up New Hope looking to boost overseas investments

President Xi calls for energy revolution China needs a revolution in the way it produces and consumes energy, as demand continues to rise and supply challenges mount, the country’s president Xi Jinping said in remarks published by the official Xinhua news agency. “Although our country’s energy development has achieved great successes, we are facing challenges including huge demand pressures, supply restraints, serious environmental losses caused by the production and consumption of energy and technological backwardness,” Xinhua quoted Xi as saying. Xi told a meeting of Communist Party officials that China needed to “restrain irrational energy consumption”.

More understanding on Taiwan China’s top political advisor Yu Zhengsheng said the mainland would give more understanding to the thoughts of the Taiwanese and respect their self-identity.

“We understand the mentality the Taiwanese compatriots have developed in special historical conditions; we respect their identification with the current social system, values and lifestyles; and we know that some friends still harbour misgivings on the development of the cross-Strait relations,” Yu said. Yu, chairman of the National Committee of the Chinese People’s Political Consultative Conference, made the remarks in a keynote speech at the sixth Straits Forum on Sunday.

G77+China summit searches for new order

But Chinese experts are increasingly arguing that growing grains, which require vast swathes of arable land and water, is less efficient than importing them. They also say it would be better to invest more in labour-intensive processing industries than farming.

“Opening up the feed market will help to transform China’s farming sector as well as boost food supplies,” said Liu, a member of China’s largest political advisory body and an influential voice on rural and agricultural issues.

Born in 1951 to a poor family in China’s Sichuan province, Liu’s entry into the farming sector began in the 1980s when he started a chicken farm with his three brothers.

Reuters

UN Secretary General Ban Ki-moon on Saturday opened a Group of 77 plus China summit in Bolivia, with developing countries calling for a more fair new world economic order. China, which is not a G77 member, is participating in the summit, partly in a nod to its expanding trade ties in Latin America, although President Xi Jinping will not attend. With massive purchases of commodities and exports of its manufactured goods to the region, China in recent years has emerged as a main trade partner of many Latin American countries.

Lock-up shares eligible for trade Shares worth 17.3 billion yuan (US$2.81 billion) will become eligible for trading on China’s stock markets during the next week. A total of 1.48 billion shares of 18 companies will be tradable on the Shanghai and Shenzhen stock exchanges, representing 0.35 percent of lock-up shares in China’s A share market. The volume has retreated since last week, halving from the figure of two weeks ago.

Under market rules, major shareholders of non-tradable stocks are subject to a lock-up period of one or two years before they are permitted to sell their shares.

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June 16, 2014

Asia

Indonesia revises budget deficit The adjustments are needed to account for changes to macroeconomic assumptions Adriana Nina Kusuma

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ndonesia’s fiscal deficit target has been narrowed to 2.4 percent of gross domestic product (GDP) in a revision of the 2014 budget approved by a committee late on Friday, the finance minister said, from 2.51 percent proposed earlier.

The deficit figure is 42 percent higher than the 1.69 percent fiscal deficit targeted in the original 2014 budget for Southeast Asia’s largest economy.

The adjustments are needed to account for changes to Indonesia’s macroeconomic assumptions -specifically a slower growth forecast, lower crude oil output and weaker rupiah exchange rate that has faced pressure from a yawning trade deficit and current account.

The deficit has declined to 241.49 trillion rupiah (US$20.48 billion) from a 251.72 trillion rupiah forecast, Finance Minister Chatib Basri said.

The latest figure is 38 percent higher than the deficit of 175.4 trillion rupiah set in the original 2014 budget.

“The decline primarily stems from a reduction of the total government bonds to 264 trillion (rupiah) from 274 trillion (rupiah),” Basri told parliament referring to government obligations in a draft revision.

“As a result the spending cuts by other ministries targeted at 100 trillion in the revised state budget have now been reduced to 43.025 trillion

Earlier, pictured Indonesia’s President Susilo Bambang Yudhoyono decided to cut the budget by 100 trillion rupiah

(rupiah) or a reduction in ministry spending of 56.97 trillion (rupiah).”

By law, the deficit must not exceed 3 percent. Parliament is expected to sign off on the revised budget soon.

Earlier, President Susilo Bambang Yudhoyono had decided to cut the budget by 100 trillion rupiah, Basri said.

Indonesia’s fuel subsidy spending

has increased 17 percent to 246.49 trillion rupiah in the revised budget from 210.74 trillion rupiah in the original, Basri said.

The total electricity subsidy spending in the revised budget has increased 45 percent to 103.82 trillion rupiah from 71.36 trillion rupiah, he added.

“This increase is a result of a

change in the exchange rate that has been pegged at 11,600 (per U.S. dollar) and a decline in (targeted) crude oil production from 870,000 barrels per day (bpd) to 818,000 bpd,” Basri said.

The latest economic assumptions included in the revised 2014 budget forecast growth this year at 5.5 percent, budget committee chairman Ahmadi Supit told parliament, down from 6 percent in the original. Inflation is seen at 5.3 percent, below the 5.5 percent originally forecast.

The rupiah rate assumption of 11,600 per dollar “is still realistic,” central bank governor Agus Martowardojo told lawmakers. The original budget had pegged the rupiah at 10,500.

“What needs to be noted are the government’s efforts to control the current account deficit. If possible exports will be protected so they improve and imports can be tightened,” Martowardojo said.

“Exports are a challenge for the government remembering that there is still pressure on commodity prices.

What’s more, mineral exports are still being hindered by the law on coal and minerals,” he said.

Crude oil prices are expected to remain at US$105 per barrel, while gas output is seen at 1.224 million barrels of oil equivalent per day (boepd), down from 1.24 million boepd in the original budget.

Reuters

S.Korea’s interest rate: up but no timing Lee Ju-yeol told reporters that the next interest rate move would likely be an increase

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outh Korea’s central bank chief further allayed expectations for an early increase in interest rates by saying his April comments had not aimed at flagging a hike “so soon as the market took them as indicating”.

Bank of Korea Governor Lee Juyeol told reporters on Friday that he did not have any specific timing in mind when he said at that time that the next interest rate move would likely be an increase.

His latest comment came as bond prices rallied after Lee, a 35-year career central banker who became the governor in April, softened his assessment on the strength of Asia’s fourth-largest economy at a monthly policy news conference on Thursday.

“If the market had taken my words (in April) as a blinker for a turn, I may have turned it on too

The central bank’s monetary policy board held the policy interest rate for a 13th consecutive month on Thursday in a unanimous vote. Pictured Bank of Korea square and headquarters behind

soon,” he said when asked why he denied on Thursday having flagged an interest rate increase as soon as

within this year.

The central bank’s latest forecast is for South Korea’s economic growth

to quicken 4.0 percent this year from a 3.0 percent rise in 2013, but bond traders expect the forecast to be

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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June 16, 2014

Asia

Thai junta ends curfew Military try to boost tourism that has been falling since the coup

Last weekend Thailand’s ruling junta held a happiness campaign for the public

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hailand’s junta lifted an overnight curfew in Bangkok after earlier easing restrictions in the country’s main tourist cities, as the army chief who seized power May 22 seeks to draw back travellers and investors.

Junta leader Prayuth Chan-Ocha has said the army had no choice other than to take power after months of street protests against the government headed Yingluck Shinawatra.

“The overall situation across the country has eased, and there are no sign of violence,” the junta said. “To

lowered at its next scheduled revision, due on July 10.

Lee’s latest remarks could give a further boost to bond prices, which rallied on Thursday and Friday with the benchmark 5-year treasury bond yield shedding 5 basis points to a 1-year closing low of 2.991 percent on Friday.

Analysts surveyed by Reuters before Thursday’s policy meeting were almost equally divided between this year and next over when the Bank of Korea will start raising interest rates for the first time since June 2011.

The central bank’s monetary policy board held the policy interest rate, the 7-day repurchase agreement rate, steady at 2.50 percent for a 13th consecutive month on Thursday in a unanimous vote.

Reuters

If the market had taken my words (in April) as a blinker for a turn, I may have turned it on too soon Lee Ju-yeol Bank of Korea Governor

ease the impact to people’s daily lives and boost tourism by Thais and foreigners the curfew is being lifted in the remaining areas nationwide with immediate effect.”

After ousting the elected government, the army suspended the constitution and used its powers under martial law to ban political activities, enforce the curfew and order more than 300 people to report in, including politicians, protesters, journalists and academics. At the same time, the junta vowed to accelerate spending and restarted payments to farmers under a disputed

rice-subsidy program. Global funds pumped about US$840 million into Thai stocks and bonds this month, after pulling US$2.24 billion out in May, exchange data show.

Economic momentum The Thai economy will start to recover this quarter and gain momentum in the three months through September as local demand improves in line with easing political concerns, Don Nakornthab, director for Bank of Thailand’s macroeconomic policy, told reporters in Bangkok on June 10.

Gross domestic product fell 0.6 percent in the first quarter from a year earlier, compared with the median estimate in a Bloomberg survey for a 0.4 percent increase.

The economy shrank 2.1 percent from the previous three months.

Thailand’s monetary policy is accommodative and will help support the nation’s economic recovery, central bank Governor Prasarn Trairatvorakul told reporters. The Bank of Thailand, which has cut the benchmark interest rate three times in the past year to 2 percent, will next review borrowing costs on June 18.

Total visitor arrivals to the country fell 20 percent after martial law was declared May 20, the tourism ministry estimated. The junta initially imposed a 10 p.m. to 4 a.m. curfew nationwide and gradually eased restrictions starting with tourist destinations.

Since the coup, Prayuth has pledged to “return happiness to the Thai people” by arranging concerts, street parties, and free movie screenings, while the junta this week negotiated a deal to screen all World Cup soccer matches on free-to-air television.

Bloomberg News

The benefit of a weak yen for exports appeared to have run its course

Japan to cut corporate tax

Prime Minister Shinzo Abe unveiled a plan to cut the corporate tax rate below 30 percent in stages to help pull the economy out of two decades of sluggish growth and deflation.

Investors have been scrutinising whether Japan can substantially lower the corporate tax rate -among the highest in the worldto spur growth in the world’s third-largest economy. Abe also needs to strike a delicate balance between stimulating growth and reining in snowballing public debt, twice the size of its US$5 trillion economy.

Korea to build new LNG tanks

New CEO to revive India’s Infosys

Kaori Kaneko

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Bangladesh’s exports rose 7.22 percent in May from a year earlier to US$2.7 billion, boosted by stronger clothing sales, the Export Promotion Bureau said yesterday.

In the first 11 months of this financial year, exports rose 12.56 percent to US$27.37 billion from a year earlier. Garment exports surged nearly 15 percent to US$22.2 billion in July-May. The garment industry, which supplies many Western brands such as Wal-Mart, Tesco and H&M, has been under the spotlight after a string of fatal factory accidents, including the collapse of a building housing factories.

Korea Gas Corp (KOGAS) is on track to complete construction of three new liquefied natural gas (LNG) storage tanks by endJuly for its upcoming fourth import terminal and is currently testing them, a company spokesman said on Friday. South Korea’s state-run gas company is building a total of 12 storage tanks at its fourth LNG import terminal that is coming up in the city of Samcheok, more than 250 kilometres east of Seoul. KOGAS, the world’s largest corporate buyer of LNG, aims to complete another six tanks by the end of June 2016.

Japan’s May exports’ expected fall

apan’s exports likely fell for the first time in 15 months in May due to stagnant demand overseas, and with imports expected to rise the trade balance will probably remain in deficit, where it has been for nearly two years, a Reuters poll showed.

In addition to weak demand from emerging nations, the benefit of a weak yen for exports appeared to have run its course.

The Reuters poll of 28 economists forecast exports to show a 1.2 percent fall in the year to May, which would be the first decline since a 2.9 percent fall in February last year. In April, Japan’s exports rose 5.1 percent from a year earlier.

The poll forecast a 1.7 percent increase in imports in May, largely led by higher demand for liquid natural gas.

The trade deficit was forecast at 1.17 trillion yen. It would be 23rd straight monthly deficit.

“Shipments to Europe are expected to stay solid, but those to

Bangladesh exports up

Asia will probably continue to be stagnant. In addition, exports to the U.S. are slow,” Takeshi Minami, chief economist at Norinchukin Research Institute, said.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute Said he expected the trade deficit to shrink over the summer, but a return to surplus was some way off.

“We expect the nation’s exports will pick up around July-September, led by recovering demand from the U.S.,” Shinke said.

“But if exports continue to stay tepid, this could raise a possibility that the economic recovery may undershoot.”

Japan’s economy grew in the first quarter at the fastest pace since the third quarter of 2011 thanks to a surge in capital spending and strong consumer spending.

The Ministry of Finance (MOF) will announce the trade data on June 18.

Reuters

Vishal Sikka is equally comfortable designing cutting-edge software as he is negotiating in the boardroom, skills the new chief executive of Infosys Ltd will need to turn around a company that was once the poster child of India’s US$108 billion IT services industry. Sikka, a former senior executive at German software giant SAP AG, takes over as India’s second largest IT services exporter struggles to retain staff and market share. Some investors blame its outgoing risk-averse management for blunting the innovative edge of a company that was once the employer of choice for young IT workers.

Honda to expand airbag recall Honda Motor Co expects to recall vehicles with potentially defective air bags, a move that could expand a massive, multi-company air-bag recall by more than a million, according to a person with knowledge of the matter.

The recall involves faulty air-bag inflators supplied by Takata Corp and would follow a similar move this week by Toyota Motor Corp. The Honda recall should be announced by the end of June, according to the person, who declined to be identified.

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June 16, 2014

International “More equitable” U.S. fine for BNP Paribas France’s finance minister said yesterday that discussions between BNP Paribas and U.S. authorities over a potential fine for sanctions-busting had progressed towards a “more equitable” level. U.S. authorities including the New York financial regulator are investigating whether BNP evaded U.S. sanctions against Iran, Sudan and other countries between 2002 and 2009, which could lead to a fine of US$10 billion for France’s biggest bank. “I think we have made progress towards more equitable penalties,” finance minister Michel Sapin said in an interview on Europe 1 radio and news channel iTele.

Short sellers enjoy revival as European stocks lose steam Investors are betting that there remains enough divergence within individual company fortunes

BoE’s Bean keen to raise interest rates Bank of England deputy governor Charlie Bean said he was optimistic about Britain’s economy and would welcome being able to raise interest rates from record low levels, as it would show the economy was getting back to normal after the financial crisis. Bean -who retires at the end of the month- said in an interview with the Sunday Times newspaper published late on Saturday that it would be unhealthy to keep rates low for too long.

Ukraine-Russia gas talks’ future unclear Ukraine and Russia failed to hold expected talks on a gas pricing dispute yesterday, despite a deadline for Kiev to pay a US$1.95 billion debt by today or have its gas supplies cut off. Ukraine’s Energy Ministry said it hoped the talks, being mediated by the European Union’s energy commissioner. Halting deliveries to Kiev could disrupt the gas flow to the EU, which receives gas via Ukraine, but prospects for a breakthrough have been hit by armed clashes between government forces and pro-Russian separatists in east Ukraine.

Medtronic in talks to combine with Covidien U.S. medical device maker Medtronic Inc is in advanced talks to merge with rival Covidien Plc in a deal valued at between US$45 billion and US$50 billion, a person familiar with the matter said on Saturday. The deal would allow Medtronic to be domiciled in Ireland where Covidien is based and thus take advantage of lower tax rates.

UK pursues investigation of Alstom Britain’s Serious Fraud Office (SFO) is pursuing its investigation of alleged corruption at Alstom as a major transatlantic takeover battle for the French engineering conglomerate reaches a climax, the Financial Times reported. The paper said Britain’s Attorney General - the government’s chief legal adviser - has given permission for the SFO to prosecute the company and former employees for alleged overseas bribery if considered appropriate. The paper also said the SFO has notified seven individuals that they are under investigation. The SFO declined to comment and no comment was immediately available from the Attorney General’s office.

Last week, ECB head Mario Draghi (pictured between Axel Springer CEO, Mathias Doepfner (L) and German Minister of Finance Wolfgang Schaeuble (R)) cut interest rates

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edge fund bets against selected European stocks are making a comeback, as investors pick apart a multi-year stock rally and question the market’s scope to gain from the ECB’s campaign to prevent deflation.

Short sellers -who borrow a security and sell it, betting they will be able to buy it back at a lower price before returning it to the lender- have in recent years burnt their fingers on the upward trajectory of European markets, helped by the ECB’s pledge to keep the euro zone together.

But the bears are now wading back in, with some success: short bets on specific companies like French

telecom company Alcatel Lucent or German printing machine maker Heidelberger Druckmaschinen have paid off, as markets pause for breath after hitting multi-year highs.

Overall, in April and May, Europe’s most heavily shorted stocks - those with the highest proportion of shares out on loan relative to their total share count - underperformed the overall market by about 8 percent on average, according to Markit data, for the first time since the European Central Bank pledged to save the euro in 2012.

“The relief rally that lifted stocks across the board in Europe is behind us now, and stock picking is set to play

Dipping shorts

system, and at around 50 bolivars through the Sicad 2 market.

Maduro acknowledged this week that Sicad 2 was not working as hoped, and promised an improvement in the coming months.

Opposition critics say unification of the exchange rates is a euphemism for a devaluation that will worsen inflation, which hit an annualized rate of 60.9 percent in May. “The devaluation is only useful as part of a broader toolkit of other policies to rebalance the economy,” said Alberto Ramos, a Latin America analyst at Goldman Sachs.

Ramirez added that Venezuela will move money currently held in obscure state-run funds, including the US$100 billion Fonden development fund, into international reserves.

That will be welcome news to investors who have complained about lack of transparency in Venezuela’s management of its assets.

Ramirez said Venezuela also wants to “reprofile” its debt, which includes nearly US$30 billion in maturities due by 2017.

For the time being, the overall level of investors’ negative bets on European shares remains muted, suggesting accommodative monetary policies from global central banks and signs of an economic recovery in the euro zone are supporting sentiment.

Last week, the ECB cut interest rates to record lows and launched measures to pump extra money into the sluggish economy.

But despite the expected positive impact for the economy, investors are betting that there remains enough divergence within individual company fortunes to be able to roll out selective short bets without worrying about another market boom.

“The environment is quite favourable for long/short strategies at the moment,” said Delphine Arnaud, fund manager, hedge funds and structured products, at Lazard Freres Gestion.

“There’s been a big sector rotation on the market, and typically at the end of these rotations, there are plenty of long/short ideas because there’s more dispersion,” she said.

Some of the most successful short trades feature negative bets on telecom gear maker Alcatel-Lucent one of the most shorted stocks across Europe with about 12 percent of its shares out on loan, according to data from Markit.

Its stock is down 11 percent since the start of the year, while France’s CAC 40 index is up 6 percent. The paper gain from combined short positions on the stock since the start of the year represents about 120 million euros (US$162 million), according to Reuters calculations.

Reuters

Reuters

Venezuela seeks to consolidate exchange rates V enezuela is seeking to consolidate its three-tiered exchange rate system and refinance debt to improve maturity profiles, the economy vice president said in a statement on Saturday, underlining efforts to shore up the country’s troubled finances.

Exchange rate unification is seen as a crucial step in easing economic distortions including nagging product shortages and soaring consumer prices that have set the country’s economy on a course for stagflation.

Rafael Ramirez, economy vice president and oil minister, told investors at a meeting in London that unifying the exchange rates was a primary component of the government’s plan to improve growth.

“We are going to continue holding these meetings, as per President Nicolas Maduro’s instructions to reestablish communication with financial markets,” Ramirez said.

The 11-year-old currency controls, created by late socialist leader Hugo Chavez, now disburse dollars for 6.3 bolivars for priority goods, at around 10 bolivars through the Sicad auction

a much bigger role in performance,” said Bertrand Lamielle, head of asset management at B*Capital, a Paris-based brokerage and wealth management firm.

“The focus is back on relative performances, which makes fertile ground for short selling and long/ short plays.”

Long/short strategies allow investors to bet on the performance gap between two investments, offering an alternative to simply betting on a straight fall.

15

June 16, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THANH NIEN NEWS The dong-US dollar exchange rate will remain stable despite China-Vietnam tensions in the East Sea, a banking official said. “Chinese banks currently operating in Vietnam are much smaller than other banks [owned by the Vietnamese and from other countries],” Thoi Bao Kinh Te Saigon quoted Dao Quoc Tinh, deputy chief inspector of the central bank as saying on Thursday. “Hence, [Chinese lenders’] influence on Vietnamese companies is not big, not remarkable.

In addition, the amount of dollar loans issued by Chinese banks is tiny,” Tinh said during a seminar in the northern province of Vinh Phuc.

THE STAR According to sources, Reach Energy Bhd, the oil and gas SPAC seeking a listing on Bursa Malaysia, has tweaked one the clauses in its prospectus relating to control over the assets it hopes to buy. It has now stipulated that it will seek to secure majority control over the assets it buys into.

Apparently this was done to ensure there was no confusion in this area going forward.

SPAC guidelines from the start, had a very strict view on this matter. The rules initially required SPACs to secure both majority ownership and management control over the assets they buy.

THE ASAHI SHIMBUN Universal Studios Japan expects its new Wizarding World of Harry Potter attraction to bring in 2 million more visitors to the amusement park annually after it opens July 15. USJ Co. said its newest addition will be spread across 4 hectares and include themed rides and other amenities taken from the best-selling Harry Potter book series created by British author J.K. Rowling and movies produced by Warner Bros.

The park will be the second in the world to showcase a Harry Potter attraction after the Universal Orland Resort in Florida.

THE JAKARTA GLOBE Indonesia expects to post a trade surplus in May on recovering exports, after an unexpected deficit in April, according to Bank Indonesia governor Agus Martowardojo.

The country’s trade balance took a harsh blow from its mineral ore ban in April and swung to a deficit of US$1.95 billion —to much surprise of many economists— posting its biggest fall in five years.

“The trade deficit on April was quite significant and surprising, but it seem we can reach a surplus on May,” Agus said.

China’s trilemma Yu Yongding

Director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences

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EIJING – The Nobel laureate economist Robert Mundell showed that an economy can maintain two – but only two – of three key features: monetary-policy independence, a fixed exchange rate, and free cross-border capital flows. But China is currently juggling all three – an act that is becoming increasingly difficult to sustain.

At first glance, this may not seem to be the case. Given that the People’s Bank of China (PBOC) has largely maintained its monetary-policy independence over the last three decades, and actively manages the renminbi’s exchange rate, it is natural to conclude that China imposes strict controls on capital flows.

In fact, China liberalized inward foreign direct investment more than 20 years ago, and eased controls for much of the capital account thereafter.

China’s efforts to regulate cross-border capital flows have never been very effective.

During the Asian financial crisis of the 1990s, China had to implement draconian measures to prevent capital flight. In the early 2000s, shortterm capital began to flow into China, with investors betting on the renminbi’s appreciation and, from 2004-2006, on rising asset prices. Since renminbi internationalization was launched in 2009, exchangerate arbitrage and the carry trade have surged.

Certainly, China’s capital controls, though porous, increase the transaction costs of moving short-term capital to and from China, thereby reducing upward pressure on the renminbi’s exchange rate; in extreme circumstances, this could play a decisive role

in China’s financial security.

But capital continues to flow –if not entirely freely– across China’s borders.

The PBOC keeps the exchange rate stable by intervening heavily in the foreignexchange market, creating so much liquidity that the authorities must engage in massive sterilization to avoid overshooting the targeted increase in the monetary base

This raises an obvious question: How has China managed to defy the Mundell trilemma by maintaining all three policy objectives simultaneously?

The answer lies in China’s sterilization policy.

China has run a capital-account surplus for most of the last

30 years, and a trade surplus every year since 1993. The PBOC keeps the exchange rate stable by intervening heavily in the foreignexchange market, creating so much liquidity that the authorities must engage in massive sterilization to avoid overshooting the targeted increase in the monetary base.

In China, unlike in advanced countries, monetary and sterilization policy are often one in the same. The degree to which monetary policy is expansionary depends on the degree to which the liquidity created by currencymarket intervention has been sterilized.

The most frequently used monetary instrument in sterilization is open-market operations. Given China’s twin surpluses, the PBOC sold all of the government bonds that it had accumulated in 2003, so it has been selling central-bank bills ever since, with CN¥5 trillion (US$812 billion) in such bills currently held by banks.

Another important instrument for sterilization is the reserverequirement ratio, which, when raised, locks a large amount of liquidity in the banking system. The ratio, which the PBOC has changed 42 times since 1998, currently stands at 20% – double the ratio for large banks in the United States.

Whatever the mechanism, the costs of sterilization are very high. For starters, by maintaining an undervalued real exchange rate, China has fallen into the so-called “dollar trap,” boosting the US dollar’s international importance at China’s own expense. As time passes, the senselessness of this policy will become

increasingly apparent.

Sterilization also leads to a serious misallocation of resources, most obviously by functioning as a subsidy to the export sector, at the expense of the rest of the economy. A less noticed form of resource misallocation stems from the fact that only sellers of foreign exchange gain liquidity, but the whole economy feels the effects. As a result, small and medium-size enterprises that produce non-tradable products are denied much-needed funds and suffer from sterilization’s negative externalities.

Furthermore, the high reserve ratio and forced purchase of central-bank bills squeezes commercial banks’ profits severely – a phenomenon that will be intensified by interestrate liberalization. The quest for yield on available funds will drive banks to make riskier investments.

There are also quasi-fiscal costs involved. Fortunately, despite the low returns on foreign assets, this is not yet a major problem for China, owing to the low costs of the corresponding PBOC liabilities.

Nonetheless, though predictions that China would abandon its exchange-rate controls in order to uphold monetary autonomy have proved wrong over the last decade, this time may be different. With China’s liberalization of interest rates and short-term capital flows making it increasingly difficult for the country to juggle Mundell’s “irreconcilable trinity,” one hopes that Chinese leaders will finally allow the renminbi to float, while keeping in place existing capital controls.

The Project Syndicate 2014

16

June 16, 2014

Closing China to log food company conduct

CMB reveals credit to financial leasing firms

China will keep and publish better records of the conduct of food companies as it works to improve food safety, authorities said yesterday. Ma Zhengqi, deputy head of the State Administration for Industry and Commerce, said the country has started to establish an information disclosure system to monitor corporate conduct. It has also started to draw up a black list of illegal producers. The disclosure system, logging punishment records and other administrative information, will be open to the public to encourage honest businesses.

China Merchants Bank (CMB) has extended more than 80 billion yuan in lines of credit to domestic financial leasing companies, one of its senior executives has revealed. Speaking on Thursday at the launch ceremony of Harbin Bank Financial Leasing Co., Ltd, Li Ping, vice head of CMB’s Shenzhen branch, said that her branch alone has made 48 billion yuan available in credit to such companies. Li did not address how much of the credit has been tapped. Harbin Bank Financial Leasing Co., Ltd has a registered capital of 2 billion yuan and counts Hong Kong-listed Harbin Bank as its promoter.

China’s chip addiction The country relies heavily on imported chips, which are among the country’s top four import categories in terms of value

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hen it comes to chips for powering smartphones, it has long been a story of the world’s leading smartphone chipmaker -U.S. firm Qualcomm.

This time, it is a Chinese-made chip that has caught the eye of market observers.

The octa-core Kirin 920, unveiled by Huawei-owned HiSilicon on Friday, features support for QHD displays,

4K video recording and a high-speed LTE category-6 platform, something even the global industry leaders find it difficult to offer.

While it is too early to say this signals the rise of China in the global mobile processor market, the news should still come as a boon to the country’s IT sector, especially the chip-making industry, which has been

lagging far behind the world heavyweights.

China relies heavily on imported chips, which are among the country’s top four import categories in terms of value, along with oil, iron ore and LCD panels.

As its reliance on foreign oil and iron ore cannot be reversed overnight, China has been working hard to promote the other two industries.

China has become less reliant on LCD panel imports in recent years, as its two leading makers of the panels, BOE and TCL, have been making strides in innovation. However, chips, known as the “heart” of the digital information industry for their importance, continue to be imported in massive quantities.

With China’s smartphone market booming, the country imported US$232.2 billion worth of integrated circuits, generally known as chips, in 2013, up 34.6 percent year on year, according to customs authorities.

The figure was higher than the US$219.6 billion worth of imported oil for the year, making chips top the list of imports, resulting in a trade deficit of US$144.1 billion for the industry, which had been expanding for four years in a row.

However, there is still a long way to go before China can significantly reduce its chip imports.

Li Mingjun, deputy secretary general of the Shenzhen Semiconductor Industry Association, was quoted by local media as saying that most Chinese chip-makers are still only capable of making mediumto-low-end chips.

In addition, China’s chipmaking firms are still too small to challenge the U.S. dominance of the market, at least in the near future

Qualcomm registered a business revenue of US$17.3 billion in 2013, up 31.6 percent from a year earlier.

The business revenue of HiSilicon, China’s leading chip-maker, was only one eighth of Qualcomm’s last year.

Another obstacle preventing HiSilicon’s Kirin 920 from challenging the dominance of Qualcomm and other U.S. players is Huawei’s reluctance to do so.

Huawei is not aiming to export its chips and does not see them as a stand-alone product, the 21st Century Business Herald quoted Xu Zhijun, deputy president of Huawei, as saying.

The reason for this is that Huawei doesn’t want to stir concerns with Qualcomm or other industry giants, fearing such a situation might affect chip supplies, the Herald reported.

Huawei was taught a tough lesson in March 2012 when it unveiled its quadcore processor K3V2 and said it would use the new chips in its Ascend D smartphones.

The new mobile phones appeared on the market several months later than planned. A source close to Huawei told the Herald that the delay was at least partly down to the high-profile release of the chips making its screen supplier Samsung nervous and leading it to stall the supply.

Xinhua

Dubai to show real strength Premier Li vs. property bubble to visit Greece

Turkey and EU hold fresh talks on membership

“K

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eep calm. There’s no bubble”, proclaimed a giant poster on a 40-storey building overlooking a Dubai highway, advertising a property finding portal late last year. That may have been true at the time, but the risks are rising.

A leap in bank lending to the construction industry indicates financial institutions have resumed pouring money into real estate projects in the last few months, after cutting back sharply in the wake of Dubai’s 2008 crash.

At the same time, property prices have been soaring on the back of Dubai’s economic boom, increasing the chance of the market rising to unsustainable levels.

Surging supply and unsustainable demand are a risky mix - the same combination that got Dubai into trouble six years ago, forcing state firms to reschedule tens of billions of dollars of debt and jolting financial markets around the world.

This time, authorities say they are aware of the dangers, and they have taken regulatory steps to slow demand growth. But the steps are still modest compared to those by other global cities facing the same problem, such as Hong Kong and Singapore.

Reuters

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hina and Greece know they can count on each other during difficult times and hold hands in building a prosperous future, a veteran Chinese diplomat told Xinhua prior to a landmark visit by China’s premier to the Mediterranean country.

Du Qiwen, former Chinese ambassador to Greece who spent most of his diplomatic career weaving the China-Greece ties, offered his insights into the rarely boasted, yet deeply rooted friendship between the two countries and the much-anticipated visit by Chinese Premier Li Keqiang in an exclusive interview with Xinhua.

At a time when Greek economy continues to recover and is ready for more vigour from overseas investment, Premier Li’s visit will boost bilateral cooperation and ink business deals in various areas including logistics, shipping, infrastructure, culture, ocean, wine and olive oil imports, Du said. The senior diplomat said he is confident that bilateral cooperation will be broadened and strengthened by Premier Li’s visit.

Xinhua

U Enlargement Commissioner Stefan Fule is to hold fresh talks in Turkey on its efforts to join the 28-nation bloc, a statement said yesterday, amid continued concerns over Ankara’s rights record.

Fule will meet senior officials Monday and Tuesday, including the president and foreign minister, as well as the justice minister and head of Turkey’s constitutional court, the European Commission said.

Fule will also take part in a meeting of the working group on Chapter 23 of Turkey’s EU membership bid, which covers the judiciary and fundamental rights.

This group deals “with the necessary reforms in these two areas crucial for the accession process of Turkey,” it added.

Turkey began formal EU accession talks in 2005 but they made little progress, with Ankara angered

by Brussels’ insistence on human rights protections and strong reservations in some member states against allowing in such a large Muslim country.

Negotiations resumed late last year following a three-year freeze.

AFP