Macau Business Daily, June 19, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo

M

acau is all about breaking records. Every year, the territory’s gross gaming revenues and fiscal surplus balloons. The same could happen again; preliminary estimates point to gov’t tax revenues growing three times faster than expenses. Macau’s reached 90 percent of this year’s projected budget, so the fiscal surplus could bust the MOP100 billion-mark Page

5

Year III

Number 564 Thursday June 19, 2014

All-time high

Citigroup pays HK$5.4 bln for office tower

More Manila flights

Page 4

www.macaubusinessdaily.com

Weekly flight frequencies between Macau and the Philippines will increase dramatically. Aviation authorities from both sides sealed the deal yesterday.

Macau’s proximity to Hong Kong and big cities in mainland China is also piquing the interest of the Philippines’ civil aviation authorities Page 3

Chow Tai Fook buys US diamond jeweller for US$150 mln Page 6

Macau ‘inspires’ pawnshops in Singapore Page 7

HSI - Movers June 18

Name

A rose by any other name

Looking to be listed

Bitcoin machines are coming to Macau. They will be known as ‘two-way exchange kiosks’. The authorities here, and in HK, forbid the term ‘ATM’ or any wording implying a credit institution service Page

2

New money tap

Zhuhai Da Hengqin Investment Co Ltd plans to list on the Hong Kong Stock Exchange. If successful, the Chinese state-owned company will issue dim sum bonds to the tune of 1.5 billion yuan

%Day

New World Develop

1.93

CITIC Pacific Ltd

1.06

China Shenhua Ener

0.91

Ping An Insurance G

0.81

China Petroleum & C

0.68

Galaxy Entertainme

-1.15

China Life Insurance

-1.16

China Resources Po

-1.19

China Resources Lan

-1.21

Want Want China Ho

-1.91

Source: Bloomberg

I SSN 2226-8294

Page 2

Brought to you by

A new monetary tool will help adjust supply to China’s monetary base. This should help guide medium-term interest rates Page

11

2014-6-19

2014-6-20

2014-6-21

28˚ 33˚

27˚ 31˚

26˚ 30˚

2

June 19, 2014

Macau Reshuffling the pack “There will not be any more major personnel changes for our subsidiary departments before the next term of government starts,” the Secretary for Transport and Public Works told media yesterday. Following official reshuffles at the Environmental Protection Bureau, Cartography and Cadastre Bureau and the Housing Bureau, Lau Si Io told reporters that the personnel changes were made in accordance with the actual operational needs of the bureaus concerned in order to maximise the team’s talent and ensure better service for the public.

[Commercial entities are] prohibited from using the words, expressions or any other terms having or implying the idea of operating the business of a credit institution Macau Monetary Authority

Bitcoin ATM ‘Two-way exchange kiosk’ in Macau

F

orbidden by Macau’s authorities to use ‘ATM’ or any expression that implies a credit institution service, the future Bitcoin machines in Macau will be marketed as a ‘twoway bitcoin exchange kiosk,’ Coinnet, the provider of the virtual currency automatic machines, told Business Daily.

The Coinnet strategy here mimics that implemented in Hong Kong, where the Bitcoin kiosks were also denied the right to use terms like ATM or similar, contrary to the company’s experience in other jurisdictions such as the US. The Bitcoin kiosk provider also revealed that it’s still not decided which

currencies can be exchanged in Macau in the future ‘ATM’ - patacas and Hong Kong dollars are the most likely with yuan a possibility. The decision is left to the operator who has the machine in its commercial space. Coinnet confirmed, however, that the ATM will not be available in casinos here.

Hengqin gov’t-owned company plans HK listing T he state-owned Zhuhai Da Hengqin Investment Co Ltd, responsible for the land development and infrastructure projects of the city’s neighbouring Hengqin Island, is planning to list in Hong Kong and issue dim sum bonds in a scale of 1.5 billion yuan (US$240.7 million), Hengqin’s Administrative Committee director Niu

Jing told media in a press conference held in Hong Kong yesterday.

The 1,000 billion-plus offshore yuan reserve held

by Hong Kong and Macau currently could be of actual use for financing the investment projects of the two SARs on the island, and the ongoing development of Hengqin Island, Mr. Niu said. “There’s still a huge

room for how to utilise these offshore yuan and provide a cheaper financing service for firms engaged in developing Hengqin.”

The island’s head of administration revealed that the listing of stateowned Zhuhai Da Hengqin Invesment Co Ltd in Hong Kong is smoothly progressing but he declined to disclose further details on the issue

The Monetary Authority said this week that any commercial entities other than the authorised financial institutions in Macau are ‘prohibited from using the words, expressions or any other terms having or implying the idea of operating the business of a credit institution, including ‘ATM’’ here, citing the Macao Financial Systems Act in a press statement.

The Authority also stressed in its cautionary statement that Bitcoin is neither legal tender nor a financial instrument subject to its supervision.

as the firm is now in a “blackout period”.

Da Hengin Investment Co Ltd has already been approved the issuing of a scale of 1.5 billion yuan of dim sum bonds in Hong Kong, for which Mr. Niu expects that the issuance will be completed within the second half of this year.

Aside from having received interest from Macau firms investing in the island, Mr.

Niu also said yesterday that he was “very dissatisfied” that only 79 Hong Kong firms had registered in Hengqin, adding that the new area would like to see more investments from the city.

As at May this year, the registered capital from these 79 Hong Kong firms totalled some US$3.27 billion, while the investment amount generated by these firms reached nearly US$3.95 billion. Altogether, some 5,300 companies are registered in Hengqin, Mr. Niu revealed.

3

June 19, 2014

Macau

Philippines carriers sitting pretty A new memorandum inked also increases seating capacity for carriers up to 10,000 seats a week Stephanie Lai

sw.lai@macaubusinessdaily.com

Carmelo A. Arcilla, executive director of the Civil Aeronautics Board (CAB)

A

new memorandum signed yesterday between the civil aviation authorities of Macau and the Philippines allows the seating capacity for carriers to be raised from the weekly 4,500 seats for the MacauManila route to 7,020 seats, enabling higher flight frequencies.

Currently, the Macau-Manila flight services are operated by legacy carrier Philippines Airlines and low-cost carriers Cebu Pacific Air and AirAsia Zest, which totals 15 flight frequencies per week. The flight capacity that the three Philippines-based carriers are entitled to is up to a weekly 3,500 seats, of which Philippines Airlines and Cebu Pacific claim 1,530 seats respectively and AirAsia Zest the rest.

“We’re raising the seats entitlement to 7,020 weekly seats, which is roughly 5 flights a day,” executive director of Civil Aeronautics Board Mr. Carmelo L. Arcilla told Business Daily after signing the memorandum yesterday.

The memorandum, which came into effect yesterday, also contains a provisional agreement where in the event that the 7,020 seats entitlement has been fully utilised by the carriers this entitlement will automatically be raised to 10,000 seats without any need to convene further negotiation, Mr. Arcilla said.

“The market here is relatively small given the small population base of Macau, but we see a stable market and potential for growth, especially with the infrastructure projects in town that will improve the connection linking Macau to other

important cities in China, including Hong Kong,” the Civil Aeronautics Board director remarked. “This will improve the viability of commercial services between Manila and Macau.”

“There is a big project in the Philippines - Entertainment City which would sort of connect to the entertainment business here in Macau . . .” Mr Arcilla said. “We’re hopeful that Manila will be in the loop of travel by high rollers and gamblers, so we decided to have a new round of talks to cover this potential growth and demand.”

Apart from Manila, the other Philippines destination for Macau flights is Clark, currently used by Cebu Pacific alone. The carrier runs 4 flights a week between Macau and Clark.

An agreement signed between the civil aviation authority in June last year has set no restrictions on the capacity of flights between Macau and other provincial Philippines destinations; the old agreement allowed airlines to bring in only 10,000 passengers per week from provincial airports.

Refreshed interest AirAsia Zest, the merger of budget carrier giant AirAsia and Zest Airways, should be the main beneficiary of the new memorandum signed yesterday, Mr. Arcilla told Business Daily.

“Cebu Pacific has yet to fully utilise its flight capacity, while Philippines Airlines has reduced flights [to Macau], but we cannot

take the seating entitlement outright from Philippines Airlines,” said Mr. Arcilla, “So, AirAsia Zest was forced to request temporary entitlement [to run current flights to here] and now with the new memorandum we’ve agreed upon AirAsia Zest will be operating on its own regular entitlement.”

Under the old agreement, AirAsia Zest is only entitled to enjoy a flight capacity of 440 seats per week; but under the temporary entitlement that Mr. Arcilla spoke of the carrier has a seating capacity of 720 seats a week, or flying three times a week on Wednesdays, Fridays and Sundays.

Starting on July 1, AirAsia Zest will fly daily between Macau and Manila, a plan that has already been approved by the Civil Aviation Authority of Macau and a major move to provide more flight options for travellers, the chair of AirAsia Zest, Marianne B. Hontiveros, remarked to Business Daily following the signing of the memorandum.

“Right now, we are seeing a passenger load of 70 percent, which is not all that great and can get better, but we see potential with a lot more marketing campaigns here...” said Ms. Hontiveros. “We would also like to promote both individual and family travellers flying to Macau, and going back to the Philippines from Hong Kong.”

However, the passenger throughput between Macau and the Philippines has dropped in the past two years: in 2012, some 206,688 flight passengers travelled between Macau and the

Philippines, which is a 5.5 percent fall compared to a year ago; and last year, the flight passenger volume for the route further dropped by a year-on-year 7.6 percent to 190,910 passengers, data from the Civil Aviation Authority of Macau reveals.

Ms. Hontiveros recognised that the lasting impact of the murderous hijacking in 2010 of a bus-full of Hong Kong tourists did affect the flight performance between the Philippines and Macau in recent terms, but she believes that visitors’ perceptions about travelling to the country, including those from mainland China, has been improving.

Nevertheless, the AirAsia Zest chair noted that the carrier had no plans to launch flights between here and destinations other than Manila in the short term; although the carrier is already running direct flights between Shanghai, Beijing and Kalibo International Airport in the Philippines – which get tourists to the popular travel destination of Boracay.

Delegates from the low-cost carrier and subsidiary of Philippines Airlines, PAL Express, and Tiger Airways Philippines, a subsidiary of Cebu Pacific, also attended the memorandum signing ceremony Although PAL Express and Tiger Airways Philippines expressed interest last year in launching flights between their home country and Macau, the Civil Aviation Authority of Macau says that so far it has received no applications to operate flights from the two carriers.

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June 19, 2014

Macau

Morgan Stanley optimistic about Macau’s long-term economy The American bank considers the economy here will underperform in the short-term but is expected to maintain a high pace growth in the future Alex Lee

alex.lee@macaubusinessdaily.com

T

he Macau gaming industry will continue to expand at a high pace in the future, despite the nearterm slowdown. According to Morgan Stanley, the gaming industry is expected to grow an average of 13 percent from 2014 to 2016.

‘We forecast Macau gross gaming revenue to grow 12 percent in 2014 [previously 18 percent] comprising VIP and mass growth rates of 4 percent and 28 percent. For 2015, we trim our estimate a bit, to 12 percent from 13 percent, and we adjust the mix of VIP and mass growth rates to 5 percent [previously 10 percent] and 24 percent [previously 20 percent] respectively.

We expect 15 percent year-onyear growth in gross gaming revenue for 2016.’

The bank predicts VIP revenue will grow 4 percent in 2014, 5 percent in 2015 and 8 percent in 2016.

Morgan Stanley goes as far

as to say that due to the saturation of the VIP Chinese market ‘the hyper growth era may be over.’ Other reasons for this ‘slowing’ growth trend are related to regional competition in such countries as South Korea and Singapore, and the fact that

28pct 2014 mass market growth estimate

more tables are being shifted from the VIP sector to the mass market.

By contrast, the mass market is expected to continue to grow rapidly until 2017.

The fact that this market is far from saturated is one of

the reasons that the pace is expected to be fast. The American bank predicts that the mass market will grow 28 percent in 2014, 24 percent in 2015 and 25 percent in 2016.

‘Mass revenue growth has been growing at hyper pace of 30-35 percent per annum over the last five years. Unlike VIP, we see the mass segment as being far from saturation and similar growth could sustain in the next few years.’

This increase offers other positive catalysts such as the new supply of hotel rooms that are going to open in the Cotai projects up to 2016, premium mass strategies being implemented and Chinese visitor arrival growth.

As for market share, Morgan Stanley expects Sands China and Galaxy to gain as they have higher mass exposure and VIP business. On the other side, Macau Peninsula casinos

are constrained by capacity and lower mass market exposure and so they may lose market share.

For 2015 and 2016, Sands China and Galaxy are expected to continue to perform better in terms of market share ‘driven by the earlier opening of Cotai Phase 2 casinos.’

Near-term concerns Nevertheless, the Morgan Stanley report on the gaming industry expresses some concerns about the growth of the industry in the second quarter of the year.

It is believed that Macau EBIDTDA growth could experience its first decline in four years.

‘We highlight our concern that Macau EBITDA growth on a quarter-on-quarter basis could see decline for the first time in four years as growth slows down in a seasonally weak quarter.’

Other concerns involve the effect of the FIFA World

Citigroup pays HK$5.4 bln for office tower The bank’s chief executive officer for Hong Kong and Macau says the building will be used to house staff all under the one roof and insurers, including Agricultural Bank of China Ltd and Manulife Financial Corp, have bought buildings in the city, which is home to the highest office rents in the world after London, according to property broker Cushman & Wakefield Inc. “With Hong Kong being the most expensive location in Asia, most companies really have to manage their costs,” said Sigrid Zialcita, managing director of research for Asia-Pacific at Cushman & Wakefield in Singapore. Citigroup’s buy “is a testament Hong Kong hasn’t lost its luster as a regional financial hub.”

‘Continued growth’

C

itigroup Inc paid a record HK$5.4 billion (US$697 million) to a unit of Wheelock & Co for a Hong Kong office tower that will bring most of its 5,000 employees in the city under one roof.

The price for the 512,000 square-foot property in

Kowloon is the largest ever office transaction in Hong Kong, the New York-based bank said in a statement.

The tower, scheduled for completion by the end of 2015, will be used to house staff currently spread out across offices in the city, said Weber Lo, the bank’s chief

executive officer for Hong Kong and Macau.

Citigroup’s purchase may mark a return of investment demand in Hong Kong’s office market as falling vacancies and high rents pose a challenge for companies seeking large office spaces. Banks

The overall vacancy rate in Hong Kong fell for a second consecutive quarter in the first three months this year, to 3.6 percent, according to CBRE Group Inc., which advised on the transaction. Office rents in Central may drop as much as 5 percent this year on increased demand from

Cup, as ‘casinos with a higher mix of VIP revenue should be more negatively impacted.’ The effects of the smoking ban in casinos, which are only expected to be felt for a short period and the crackdown on UnionPay transactions are also pointed to as factors that may slow down the gaming industry for the rest of the year.

Morgan Stanley also highlights that labour shortages may negatively affect the opening of the new Cotai casinos.

‘We highlight that labour demand for Macau gaming companies might rise by 38% from the current 85,000 [including full-time and part-time] to 117,000 by 2017, and the net shortfall could be as many as 13,800 local Macanese.’

For the American bank this will cause a reduction in Phase 2 valuation as each project may start with 100 to 150 working tables instead of 300.

mainland Chinese firms and an improved economic outlook, the realtor said.

Manulife, Canada’s largest life insurer, paid HK$4.5 billion last year to Wheelock, controlled by the family of billionaire Peter Woo, for a similar-size tower as the one Citigroup bought at the same development in Kowloon East, the district earmarked by the Hong Kong government as an alternative financial hub in the city.

Central is Hong Kong’s main financial district, where banks including HSBC Holdings Plc and Goldman Sachs Group Inc. have their regional headquarters. Agricultural Bank, a Beijing-based lender, paid HK$4.9 billion in 2012 for a 28-story office building near Central.

Hong Kong is one of the eight markets in Asia where the bank generates over US$1 billion of sales annually and has close to 5,000 employees, Citigroup spokesman James Griffiths said.

The purchase “underlines our belief and confidence in Hong Kong’s continued growth as a leading global financial center and hub for some of our core regional businesses,” Stephen Bird, Citigroup’s Asia-Pacific chief executive officer, said in the statement.

Bloomberg

5

June 19, 2014

Macau

Fiscal surplus to top MOP120 bln this year With tax revenues growing three times faster than expenses and nil investment, Macau’s fiscal surplus has already reached 90 percent of the budget projected for the year in just five months. Put into perspective, the government amasses enough money every year to build five new mega casinos in Cotai Alex Lee

Alex.lee@macaubusinessdaily.com

T

he Macau Government is set to have another all-time record in its accounts this year with the fiscal surplus ready to surpass the 100 billion-pataca mark for the first time: some estimates put it topping 120 billion patacas. This figure is 20 percent more than 2013’s fiscal surplus and double that projected for this year with low public investment and skyrocketing gaming revenues the drivers.

In the first five months of the year, the government amassed almost 90 percent of the total fiscal surplus slated for the year. According to the Financial Services Bureau, between January and May the fiscal surplus topped 56 billion patacas, only 10 percent short of the 2104 target (63.6 billion patacas).

In an economy supported by a booming gaming industry, the tax revenues from casinos always play a decisive role, but this time low government expenses and investment is running the surplus up.

From January to May, the government spent only 18.2 percent of the total expenses budget, while on

the revenue side the level of execution was 50 percent, a more ‘normal’ figure for the middle of the year (in June).

Government expenses reached 14.1 billion patacas between January and May, 5.1 percent more than the same period last year, while revenues stayed at 70.2 billion patacas, an increase of 14.8 percent from a year ago. The result is clear: revenues grew three times faster than expenses and the public coffers earned five times more money than they spent.

Every month, the government makes a ‘profit’ of 11 billion patacas.

If the last five months trend in public finances (high revenue execution, low level of investment) is maintained for the rest of the year, the Macau Government is on track for another record year, surpassing for the first time the 100 billion-pataca mark. Last year, the fiscal surplus reached 96.2 billion patacas. With the same growth rate recorded until May – a 17.2 percent increase – the fiscal surplus for 2014 could total 120 billion patacas, enough money to build

a new Zhuhai-Hong Kong-Macau bridge or five new casinos in Cotai.

Prudent housekeeping According to the Financial Services Bureau data, the government is keeping costs down by not spending much, especially in terms of investment where the execution rate is close to zero.

With almost half of the year behind us, the government has spent only 22 percent of its current expenditure’s budget for 2014 – current expenditure is the money that the government uses to pay for its daily costs like wages, rents, office supplies and so on. In terms of investment, the government agreed to spend 15 billion patacas this year, but until May it has invested a mere 413,000 patacas, 2.7 percent of the total. The money to improve or build roads, bridges, schools and several other public services is being kept in the treasury. The government budget predicted that investment will more than double in 2014 from 7 billion patacas in 2013.

Central Account Budget 2014 Jan-May 2014 Variation Jan-May (14/13)

Execution 2014 Budget

Patacas

Patacas

%

%

Revenue Taxes Taxes from gaming

141,248 123,524 117,846

70,160 60,822 59,530

14.8 17.7 17.4

49.7 49.2 50.5

Expenditure Current Expenditure Investment

77,639 61,768 15,018

14,155 13,419 413

5.1 6.1 -21.5

18.2 21.7 2.75

Surplus

63,610

56,004

17.5

88

Source: Financial Services Bureau Values in millions of patacas

With the fiscal surplus expected to top the 100 billion-pataca mark this year, Macau will increase its fiscal reserves to 350 billion patacas [in 2013, fiscal reserves here were 237 billion patacas] or around 90 percent of GDP.

Macau’s GDP to increase 11pct until 2015 The Economist Intelligence Unit (EIU) has revised up its projections for Macau’s economy, predicting an average annual growth of 11 percent until 2015. The previous estimation called for 10 percent expansion of Gross Domestic Product (GDP). In its latest report about Macau published this week, the EIU says that the growing number of tourists and the booming casino industry here are likely to drive the economy’s growth at an 11.3 percent rate this year and 10.6 percent in 2015.

Private investment will be one of the other engines of the economy, with the on-going construction of massive integrated resorts in Cotai and the new projects in Hengquin Island, the report said. Investment will jump 14.5 percent this year, slowing to 6 percent in 2015.

Inflation will continue to accelerate as the economy heats up. Prices will increase 6 percent this year and 6.3 percent in the next. The pataca will remain stable against the currencies of Macau’s major trading partners like the yuan, yen and euro.

6

June 19, 2014

Macau Brands

Trends

Brand babies Raquel Dias newsdesk@macaubusinessdaily.com

T

Chow Tai Fook to buy US diamond jeweller for US$150 mln

H

ong Kong’s Chow Tai Fook Jewellery Group Ltd said yesterday it has agreed to buy US-based diamond jeweller Hearts on Fire Co for US$150 million (HK$1.2 billion) in a move to extend its highend product range, according to news agencies Bloomberg and Reuters.

Chow Tai Fook, the world’s largest jewellery retailer by market value, said in a statement it will buy 100 percent of the supplier of bridal and fashion jewellery from co-founder Glenn Rothman and other investors.

Established in Boston in 1996, Hearts On Fire products are sold in 31 countries.

It will pay cash for Hearts On Fire,

Chow Tai Fook said in a statement to Hong Kong Stock Exchange yesterday. Hearts on Fire, with net sales of US$105 million last year, “will introduce an exclusive and unique high value luxury diamond jewellery line” to Chow Tai Fook’s stores in China and the rest of Asia, the company said.

Hearts on Fire reported audited net sales of US$104.8 million for 2013, up from US$99.3 million a year earlier, Chow Tai Fook said.

About 75 percent of its jewellery sales in 2013 were priced between US$1,000 and US$10,000, with the most of the remainder carrying price tags above US$10,000, according to

Reuters news agency.

Chow Tai Fook will probably “experience a faster pace of recovery pace than peers on stronger gem-set product sales,” Jefferies Hong Kong Ltd analysts, including Edwin Fan, wrote in a note yesterday reiterating a buy rating on the stock. “Chow Tai Fook’s marketing effort should escalate and expect a growing sales mix from gem set jewellery which has higher margins than gold products.”

Chow Tai Fook on Tuesday reported a 32 percent jump in its profit for the year ended March, helped by strong demand for gold products early last year.

Luen Fung Hang posts profits of MOP61.63 mln T

he revenue of Luen Fung Hang Co generated by its life insurance products reached 5.13 million patacas while the revenue from its general service was 56.5 million patacas for the whole of 2013, the company announced yesterday in its annual results.

In tandem with the city’s rapid economic development, the life insurance market last year enjoyed a sustainable growth with an income from gross premium of 4.96 billion patacas, of which 13,816 patacas were from Luen Fung Hang, a 15 percent growth year-on-year. In regard to general insurance, the company enjoyed a 19.57 percent increase last year compared to 2012, some 400.04 million patacas. Macau’s gross insurance premium for non-life insurance reached 1.86 billion patacas last year.

he occasional father and all the nervous mums-to-be will probably have noticed a shift in the baby market of late.

In Macau, the movement is embryonic but the trend itself has been growing for a while. Just to give you an idea, Burberry sold $91 million-worth of clothing for children (from newborns to early teens) last year alone.

Clothing and baby gear are now made for the luxury lovers as well. It’s not enough to have a stroller; it has become important to have the right one.

Parents are now willing to invest more in their appearance during the first years of childcare. A mother, for example, will be willing to spend far more on a diaper and changing bag that carries Burberry’s checker pattern than she will on that cute pink one. Mothers are professionals, too, and generally want to look the part.

Babies are now, more than ever, a true celebration. As birth rates decline, experts agree, we tend to spend more on each child. That also means no longer buying the US$100 stroller as there are far more exciting choices on the market today. A trip to New Yaohan will introduce you to all sorts of prams, going up to a staggering MOP14,000.

If you dare go to Rainbow at One Central and have a peek at the baby sections you’ll spot mini-sized Baby Dior, Armani, Burberry’s and more. No doubt a clever way to introduce a brand to young consumers, but also a sign that a child’s image reflects a lot on its parents.

7

June 19, 2014

Macau

Macau ‘inspires’ casino cash pawnshops in Singapore The number of pawnshops in Singapore are increasing as gamblers seek quick cash, but it’s not just gamblers who pawns jewellery

P

awnbrokers are proliferating across Singapore as gamblers seeking short-term loans add to demand for quick cash from people struggling to make ends meet in the world’s most expensive city. The number of pawnshops in the citystate surged to 214 this year from 114 in 2008, according to a report by DMG & Partners Securities Pte. Loans disbursed by the industry jumped to 5.5 billion Singapore dollars (US$4.4 billion, 35.2 billion patacas) in 2013 from 1.6 billion Singapore dollars in 2007, government data show.

“Pawnshops are the most-frequent automated teller machines for regular gamblers,” Ivan Ho, president of Singapore Pawnbrokers’ Association, said in an interview. “They need capital and pawnshops offer them loans that are reasonably priced.”

Since Singapore’s two casinos opened in 2010, about 20 percent of the increase in pawnbroking activity is driven by clients raising money for gambling, said Ho, who’s also the owner of Heng Seng Pawnshop Co. The rest comes from business owners and low-income individuals who need quick cash to pay hospital bills and other unexpected costs.

“I pawn my jewellery when the need arises,” said Vikki, a businessman who runs his own security agency and asked to only be identified by his first name. “The biggest loan I got was 70,000 [Singapore] dollars to cover salaries of my staff when payments from customers got delayed.”

Soaring prices ValueMax, Maxi-Cash and MoneyMax dominate the industry, owning almost 40 percent of all pawnshops in

Singapore, according to DMG. The three companies raised a combined 103 million Singapore dollars from initial public offerings in the past two years to fund expansion, regulatory filings show.

For MoneyMax, which forecasts revenue will climb to 100 million Singapore dollars in two years, it was the opening of the casinos that created a market opportunity.

“In Macau, you see casinos and pawnshops,” MoneyMax founder Peter Lim Yong Guan said. “That gave us an

idea.” While Macau might have been the inspiration, MoneyMax’s Singapore clientele has turned out to be mainly people seeking money for living costs rather than gambling, he said.

Whatever the reason clients need cash, it’s not a pawnbroker’s job to ask.

“Sometimes we hear the customers saying maybe we’ll get lucky this time,” said Henry Kiew, who works at the ValueMax outlet in Little India, a 15-minute drive from the Marina Bay Sands casino. “Then we know they’ll go to try and win back losses.”

Shadow lenders, also known as “matao,” extend loans to gamblers backed by valuables, according to Ho, of the pawnbrokers’ association. The client gets 50 percent to 60 percent of the value of their jewellery, lower than the 80 percent to 90 percent rate offered at pawnshops.

If the customer doesn’t pay in three days, the matao takes the valuables to pawnshops and passes on the pawn ticket to the original borrower, Ho said. The pledge can be redeemed by anyone who produces the ticket, said Ho, adding that pawnshops do not know mataos or their representatives.

The city’s Registry of Pawnbrokers has not been informed of any unlicensed pawnbroking activities in casinos, it said in an e-mailed response to questions. The penalty for such an offense is a fine of as much as 20,000 Singapore dollars, with a subsequent conviction leading to a possible prison term of as long as a year, said the regulator, which operates under Singapore’s ministry of law.

“The performance of the casino resorts will be one of the key drivers empowering the pawnbroking industry moving forward,” DMG analysts Jarick Seet and Terence Wong wrote in their May 30 report.

8

June 19, 2014

Macau

Japanese parliament begins debate on casino bill Gaming operators including Las Vegas Sands Corp and Melco Crown Entertainment Ltd are vying to win the first licences to operate casinos there

J

apan started debate yesterday on a bill to legalize casinos, paving the way for its passage before the end of the year.

Discussions began in a committee of the lower house on a bill that was submitted to parliament in December by a cross- party group of lawmakers and which Economy Minister Akira Amari has said should have enough votes to pass. It will not be approved before the end of the session on Monday next week and will be taken up again when the Diet resumes in autumn, said ruling Liberal Democratic Party lawmaker Hiroyuki Hosoda, who heads the group.

Backers of the bill say it will boost tourism to Japan, which is preparing to host the 2020 Olympics, while casino operators are considering investing billions of dollars in what could become Asia’s second-largest gaming market after Macau. Japan currently allows betting on horse, bicycle and boat races, as well as pachinko.

“I want to pass it in the lower house at the beginning of the next session of parliament, then enact it without fail in the upper house,” said Hosoda, whose group backs what are called “integrated

on economic growth released on Monday. The document urged the government bureaucracy to proceed with consideration.

The experience of US-based gaming companies in dealing with anti-graft rules in other countries would reduce the risk for local leaders, Billy Ng, head of Asia gaming, lodging and leisure for the Bank of America Merrill Lynch, said in an interview. Ng declined to identify any companies that would be likely to be selected for a license.

“They have experience dealing with very tight racketeering environments in different jurisdictions, not just the US,” Ng said of the U.S. companies.

“It’s a lower risk for Japan politicians if they pick them.”

‘Healthy pastime’

resorts.” Opposition Democratic Party of Japan lawmakers agreed to the debate on certain conditions, including the holding of regional hearings on the issue.

Shares in Japanese companies that could gain from gambling advanced the day before.

The Japanese market could generate annual revenue of US$40 billion (320 billion patacas), according

to brokerage CLSA estimates.

Preventing crime “We can expect a boost to tourism, the regions and to industry, but we need to consider measures to prevent crime, maintain public order and the healthy education of the young as well as to prevent addiction,” the government said in a strategy document

Komeito party lawmaker Masakazu Hamachi, who serves on the cabinet committee, said in a May interview that it would be difficult to pass the bill in the current session for scheduling reasons. He added that once debate began, the bill had a good chance of passage in the next session, which is likely to start in September or October.

“If a vote is held, those in favor will be in the majority,” Amari told reporters on Monday. He said that allaying concerns about casinos would be an important part of the process. “I think there is know-how around the world about developing it as a healthy pastime and tourist attraction.”

Prime Minister Shinzo Abe’s LDP has enough backing from opposition parties to pass the bill in both houses.

The LDP’s junior coalition partner, New Komeito, is divided on the issue.

Bloomberg

9

June 19, 2014

Greater China

New home prices fall It was the first month-on-month drop since May 2012 Xiaoyi Shao and Koh Gui Qing

C

hina’s average new home prices edged down for the first time in two years in May, official data showed yesterday, underlining a downtrend taking hold in the market as the economy slows.

Average new home prices in 70 major cities dropped 0.2 percent in May from the previous month, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS).

It was the first month-on-month drop since May 2012.

A cooling of the real estate sector, which accounts for more than 15 percent of China’s annual economic output and directly impacts around 40 other business sectors in China, could determine the severity of an economic downturn.

“The risk of a more persistent and sharper downturn in the property sector is now the biggest risk facing China’s economy in 2014 and 2015,” Wang Tao, an economist at UBS Bank, said in a note.

Compared to a year ago, new home prices rose 5.6 percent in May, easing from the previous month’s 6.7 percent rise and marking the slowest annual rise in 13 months.

New home prices fell in 35 of the 70 cities polled in May from the previous month, up from eight cities in April, NBS data showed.

Month-on-month falls were seen in some major cities, including Shanghai and Shenzhen, which saw home prices drop 0.3 percent and 0.2 percent respectively, the NBS data showed.

Existing-home prices also dropped month-on-month in 35 cities in May, compared with 22 in April.

Indicators of a downturn in property coincide with official figures published last week that showed growth in property investment slowed while property sales and new construction fell in May. After a strong performance in 2013, China’s real estate market has softened.

Sales have slowed and banks have

KEY POINTS May home prices -0.2 pct m/m, first fall in two years Home prices +5.6 pct y/y, slowest gains in 13 months New home prices fell in 35 cities m/m in May vs 8 cities in April

become increasingly cautious about lending to developers and home-buyers.

“The high inventories in some cities and developers’ recent promotions, together with unclear market expectations that kept buyers staying on the sidelines, led the prices to fall,” said Liu Jianwei, a senior statistician at NBS, said in a statement accompanying the data.

Analysts said those high inventories and recent sluggish sales are likely to trigger wider and deeper price cuts in coming months, as developers act to maintain cash flow.

A recent private survey showed China’s vacancy rates around 23 percent suggest a considerable overhang of inventory, which could undermine property as an investment class and add momentum to price declines.

Evidence of a sharp correction in home prices, however, remains thin, putting to rest for a while at least fears of a hard landing in the property sector and the wider economy.

Among 70 cities monitored by the NBS, only the eastern city of Wenzhou saw a 4.4 percent annual drop in prices in May, the data showed.

Recent policy tweaks at local level and government efforts to speed up lending may help the market from sliding further.

Many Chinese local governments, which badly need proceeds from land sales to pay maturing debts, have eased home-buying restrictions and made it easier in recent months for buyers to borrow from local housing provident funds.

Baosteel’s bid conquers Aquila Baosteel and Aurizon have jointly offered to pay A$3.40 a share

A

ustralian iron ore developer Aquila Resources Ltd told shareholders to accept a takeover offer led by Chinese steel giant Baosteel Resources valuing the company at US$1.3 billion, in a surprise move after rejecting a higher rival bid.

At stake is Aquila’s holding in the US$7 billion West Pilbara Iron Ore mine, rail and port project, which Baosteel wants to kick start with Australian rail operator Aurizon Holdings Ltd. Baosteel and Aurizon have jointly offered to pay A$3.40 a share for shares that the Chinese steel giant doesn’t already own. That puts their offer at US$1 billion.

Aquila’s executive

chairman and co-founder Tony Poli, who with a 29 percent stake was seen as the biggest hurdle to Baosteel and Aurizon’s bid, planned to accept their offer, Aquila said.

“It remains possible that a superior proposal could emerge,” Aquila added, telling shareholders not to rush into taking any action on the offer, due to close on July 11.

The company rejected a higher offer from new shareholder, mining contractor Mineral Resources Ltd, that valued the company at A$1.54 billion (US$1.45 billion). Aquila and Mineral Resources said they had ended talks.

Mineral Resources’ bid came a week after it bought

a 13 percent stake in Aquila for A$197 million, hoping to gain a say in plans to develop the West Pilbara Iron Ore project (WPIOP), as it has been working on plans to build the project for less than the current estimate of A$7.4 billion.

At the time Mineral Resources said its share purchase was not a precursor to a bid, and that it would seek talks with all stakeholders about plans for the project.

“We remain of the view that the WPIOP is an attractive asset if it is developed using a fit-forpurpose development plan,” Mineral Resources managing director Chris Ellison said in a statement.

Reuters

Reuters

10

June 19, 2014

Greater China S.Korea to launch yuan/won trading South Korea aims to launch trading of the yuan/won pair this year, a senior government official said yesterday, which will likely boost trade with China while helping Seoul prepare for the yuan’s emergence as a major currency in the future. Bilateral trade between the two neighbouring countries has soared to US$229 billion by 2013 from just US$6 billion in 1992, when they established full diplomatic relations, but more than 99 percent of the deals are paid in the U.S. dollar, he said.

Myanmar to supply gas to China Myanmar’s earnings from natural gas exports fell in the last fiscal year as more of the resource was consumed domestically but shipments of greater volumes to China as a new pipeline comes up to speed are expected to boost earnings this year. He said a small amount of the gas was exported during 20132014 to energy-hungry neighbour China but more will be exported this year as a new cross-country pipeline is filled to capacity. Domestic power consumption in Myanmar has been rising steeply.

Guangdong to kick off first municipal bonds China’s southern province of Guangdong said that it would auction 14.8 billion yuan (US$2.4 billion) of local government bonds on Monday, becoming the first Chinese local government to ever issue U.S.-style municipal bonds in the country. The province will auction fiveyear bonds worth 5.92 billion yuan, seven-year bonds worth 4.44 billion yuan and 10-year bonds worth 4.44 billion yuan, its financial bureau said in a series of documents published late on Tuesday on the website for China’s major bond issues. After the auction, the bonds will be sold from Tuesday to Thursday, the provincial finance bureau said.

Sovereign fund mismanaged investment The fund also breached regular procedures when it hired external managers for a few of its foreign projects

C

hina’s US$575-billion sovereign wealth fund mismanaged some of its overseas investments between 2008 and 2013 that led to losses, the country’s top auditor said yesterday, without specifying the size of the loss.

The National Audit Office said some employees in China Investment Corp (CIC) did not conduct adequate due diligence before investing in 12 overseas projects in the last six years.

The CIC employees subsequently also failed to track the performance of these investments, it said.

The fund also breached regular procedures when it hired external managers for a few of its foreign projects, the report added.

In addition, several CIC units within China, such as Central Huijin, China Jianyin Investment, China Investment Development Co and China Zhongtou Trust Co, were also found to have irregularities in their businesses.

These include breaking away from their core businesses and venturing into the real estate sector, and funding illegal property projects.

Created in 2007, CIC is tasked to help China invest its US$3.95 trillion-and-growing foreign exchange reserves. But because of the mammoth size of China’s national savings, the government has formed other domestic funds that rival CIC in the

hope of further improving investment returns.

CIC reported an annual return of 10.6 percent in 2012, reversing from 2011’s loss of 4.3 percent. Its cumulative annualised return since inception is 5 percent.

The state auditor also released separate reports about Bank of China, the country’s fourth-largest bank, and Agricultural Development Bank of China, a state-owned bank that supports the government’s farm policies.

The auditor found that six Bank of China branches disbursed 6.4 billion yuan (US$1.03 billion) of loans that violated China’s lending policy in the past 10 years. It did not say if it conducted similar checks at other bank outlets.

Three other Bank of China branches were also found to have made 3.2 billion yuan worth of loans between 2009 and 2012 to businesses that were not involved in genuine trade.

China’s policymakers try to control how much banks lend a year by telling banks when and how much to lend, and whom to lend to.

Similarly for Agricultural Development Bank of China, the auditor found that the bank made a total of 6.8 billion yuan worth of “irregular” loans by relaxing its lending rules in the six years to 2012.

Bank of China [HK branch pictured] disbursed 6.4 billion yuan of loans that violated China’s lending policy

The report said the Agricultural Development Bank had also disposed of 1.5 billion yuan worth of nonperforming loans in the past five years through “irregular” means.

Reuters

Premier Li reaches currency deal Li meets Queen Elizabeth and holds talks with Prime Minister David William James and Kylie MacLellan

Venezuela-China ink surgical equipment deal Venezuela has signed a deal for the purchase of US$127 million worth of surgical equipment from China, an official said Tuesday. Venezuela’s Deputy Minister of Technology, Inputs and Regulation Aurelio Tosta said the deal was signed by Health Minister Francisco Armada at a ceremony attended by Chinese Ambassador in Caracas Zhao Rongxian. Tosta stressed the importance of the deal, saying it will provide more than 100 different types of medical equipment for Venezuela’s various treatment centres. The equipment include surgical gloves, stitching needles, cannulas, serum, syringes and other items needed for surgery.

CCB authorized as yuan clearing bank in London China’s central bank announced yesterday that it has authorized China Construction Bank (CCB), the country’s second-largest commercial bank, to be the clearing bank for renminbi businesses in London. The work will be undertaken by China Construction Bank (London) Limited, a wholly-owned subsidiary of CCB, the People’s Bank of China (PBOC) said in a statement on its website. The PBOC made the decision in accordance with a memorandum of understanding (MOU) it signed with the Bank of England on March 31, the statement explained.

B

ritain and China signed deals worth more than 14 billion pounds (US$23.5 billion) on Tuesday during a visit by Chinese Premier Li Keqiang, with energy and finance dominating the trade agenda.

In a trip aimed at deepening commercial ties between the world’s second-largest economy and Europe’s financial capital and moving past a row over Tibet, Li met Queen Elizabeth and held talks with Prime Minister David Cameron.

Cameron said the rise of China was “one of the defining events of our century” and that Britain wanted to strengthen ties on every level, from business to cultural understanding.

“Today we have signed deals worth more than 14 billion pounds, securing jobs and long-term economic growth for the British and Chinese people,” Cameron told a news conference.

Li, on his first official trip to Britain since taking office, said the two countries had extensive shared interests.

“China is ready to work with the UK to foster a partnership for growth and inclusive development to ensure that this relationship will grow faster and in a healthier way,” he said.

Offshore trading The London Stock Exchange said it had signed agreements with two

Britain’s Prime Minister David Cameron (R) and the Chinese Premier Li Keqiang (L) speak during a press conference at the Foreign Office

of China’s biggest banks to develop offshore trading in the Chinese currency, the yuan (RMB).

London, which dominates the US$5-trillion-a-day global foreign exchange market, is seeking to fend off challenges to its position as the leading yuan centre in Europe.

China views Britain, the world’s sixth largest economy and home to the only financial capital to rival New York, as Europe’s most open place to do business.

With Chinese firms keen to invest in major nuclear and high-speed rail projects, the two governments also

agreed a framework to collaborate more closely on nuclear supply chain development and signed a memorandum of understanding paving the way for more cooperation on railway design and construction.

The state-owned China Development Bank Corporation (CDB), which finances governmentled infrastructure projects and is looking to expand its overseas investments, signed a deal to build closer ties with TheCityUK, which represents Britain’s financial industry.

Lloyds Banking Group also signed a memorandum of understanding

11

June 19, 2014

Greater China PBOC headquarters in Beijing

Central bank plans new monetary tool The resource is intended to guide medium-term interest rates

C

hina’s central bank is planning to create a new monetary tool that will help adjust supply to the country’s monetary base and consequently help guide mediumterm interest rates, the semi-official China Business News said yesterday without citing sources.

The new tool is a type of supplementary lending instrument backed by collateral. Temporarily called “Pledged Supplementary Lending” (PSL), the tool is similar to the central bank’s existing re-lending monetary tool, the newspaper said.

“The central bank wants to use the interest rates on the PSL to create medium-term (benchmark) interest rates,” the newspaper said.

These would be interest rates of three months to a year.

The People’s Bank of China did not immediately respond to requests for comment.

PSLs, if deployed as China Business News described, would supplement the central bank’s existing set of targeted tools for managing interest rates and liquidity, helping its on-going campaign to rely more

during UK visit

on precision firepower in its money markets to ensure capital is routed to productive uses, as opposed to opening the capital floodgate by reducing system-wide bank reserve requirement ratios (RRR) or reducing benchmark long-term interest rates.

Such major policy moves risk provoking destabilising inflation cycles, industrial over-capacity and speculative asset price bubbles.

The PBOC is able to manage short-term rates in the interbank market because it can easily test demand using bond repurchase

The executive sought benefits for others by taking advantage of his position

A KEY POINTS Trip is Li’s first to UK since taking office UK’s Cameron announces deals worth more than 14 bln pounds China keen to put rights row behind it Trade deals focus on energy, finance sectors

Yuan vs. sterling trade China’s central bank said yesterday that the Chinese currency will be traded directly against sterling in the interbank foreign exchange market, in the latest step to facilitate investment

Reuters

Former banking executive stands trial

Cameron

with CDB to help secure inward investment from China, with a focus on energy and infrastructure.

China, whose US$9 trillion economy is over three times the size of Britain’s, wants to use the visit to move past differences with London over Tibet.

agreements (repos), which have tenors ranging from one day to 91 days. It has also deployed short-term lending facilities (SLFs) and other supplementary mechanisms, but at present its ability to test commercial bank demand for longer-term capital is more limited.

At the same time, PSLs could also serve a policy purpose, helping guide rates for lending to investment projects that are guaranteed by the government, such as infrastructure and other socially beneficial uses.

Yuan traded against sterling since Thursday and bilateral trade between China and Britain.

“The move will help to lower foreign exchange conversion costs and will promote the usage of both yuan and sterling in bilateral trade and investment, which will help strengthen financial ties between the two countries,” the central bank said in a statement on its website.

A separate statement on the China Foreign Exchange Trade System website said the trading will start from Reuters

former executive with one of China’s big four state banks went on trial yesterday for allegedly taking bribes totalling US$4.9 million, the latest target of a high-profile crackdown on corruption.

Yang Kun, former vice-president of the Agricultural Bank of China, appeared at the Intermediate People’s Court in the eastern city of Nanjing, the Supreme People’s Procuratorate said in a statement.

Yang sought benefits for others by taking advantage of his position with the bank and gained more than 30.8 million yuan (US$4.9 million) in return between 2005 and 2012, according to the statement.

He was expelled from the ruling Communist Party and stripped of his public offices following an investigation by the party’s internal disciplinary body, state media reported in May last year.

Appointments at China’s big four banks are approved by the party, which strictly controls finance in the country.

Yang is the highest-ranking bank executive to be investigated for corruption since the big four banks held stock market flotation, according to state media.

His downfall came amid an intensifying anti-graft campaign in which authorities have vowed repeatedly to bring down both senior “tigers” and low-level “flies” to maintain the “purity” of the party.

Over the weekend authorities

US$4.9 million

bribery payments

placed under investigation Su Rong, a vice chairman of the Chinese People’s Political Consultative Conference, a debating chamber that is part of the party-controlled governmental structure.

Su is being investigated for suspected disciplinary violations, a phrase which typically refer to graft.

In May a National Energy Administration official, whose job involved approving the construction of power projects, was also probed after being found to have kept more than 100 million yuan in cash at his home.

Several senior personnel have been ousted over alleged graft since President Xi Jinping took power as party chief in late 2012.

AFP

12

June 19, 2014

Asia

Asian companies fully confident NZ current account balance deficit keeps falling New Zealand’s deficit in seasonally adjusted current account balance continues to fall, registering the smallest deficit of 0.6 billion New Zealand dollars (about US$0.52 billion) since 2010, the country’ s statistics body said yesterday. Statistics New Zealand published the adjusted current account balance, showing a deficit of 0.52 billion dollars in the March 2014 quarter, 0.26 billion smaller than the December 2013 quarter deficit. An increase in the value of goods exports, combined with higher spending by overseas visitors to New Zealand contributed to the fall in the current account deficit this quarter.

Myanmar project to cover Nay Pyi Taw area Myanmar’s on-going communitybased project, supported by the World Bank, will add a township in the capital city area of Nay Pyi Taw to be covered by the project, state media reported yesterday. The project is being implemented by the Ministry of Livestock, Fisheries and Rural Development and the World Bank, which has distributed US$80 million to Myanmar’s rural development and poverty reduction measures, said the New Light of Myanmar. According to the ministry, rural development projects are being carried out in 13 villages in the capital city.

Sri Lanka holds rates Central bank kept policy rates steady at multi-year lows on Tuesday for a fifth straight month as it expects sluggish credit growth to pick up in the second half of the year. The central bank said credit extended to the private sector decelerated 3.3 percent yearon-year from a 4.3 percent growth in March. The repurchase rate and reverse repurchase rate were left at 6.50 percent and 8.00 percent, respectively.

Blackstone India bets on signal turnaround The world’s largest real estate investor, is leading a wave of investors in Indian commercial property as rents at three-year lows and Asia’s worst-performing currency lured global companies. “We are seeing rental growth in almost all markets,” said Tuhin Parikh, Blackstone’s senior managing director in the real estate group in Mumbai. Blackstone, which opened its Mumbai office in 2005, Rothschild family-backed Xander Group Inc. and APG Asset Management NV of the Netherlands are among investors increasing their office assets in Asia’s third-largest economy.

Business Sentiment Index rises significantly to 74

A

sia’s top companies reported a bullish outlook in the second quarter of 2014 compared to the first three months despite worries over the global economy and rising costs, the latest ThomsonReuters/ INSEAD Asia Business Sentiment Survey showed.

Of the 124 companies who responded to the poll, none reported a negative outlook for the first time in the survey’s history. The ThomsonReuters/INSEAD Asia Business Sentiment Index rose significantly to 74 in the second quarter compared to a 64 reading in the first quarter. A reading above 50 indicates an overall positive outlook.

Business confidence among companies in Australia recovered (index at 79 vs. 64 in Q1) in the second quarter even as half the participants continued to worry about the global economy.

Of the 12 respondents, which included Stockland Corp and Oil Search, seven companies were positive while the rest remained neutral, an improvement over the last quarter where only two of seven companies were positive.

Five companies said their new orders increased while the same number said they hired more people.

Close to a third of all companies surveyed have increased employment

levels in the second quarter.

Despite worries over the global economy, rising costs and volatility in exchange rates, Indian companies were the most optimistic (index at 100 vs. 65 in Q1) with all 10 respondents reporting a positive outlook, a level last seen in the fourth quarter of 2012.

Nine companies said new orders and sales increased in the second quarter while employment levels rose for 60 percent of the respondents.

Three companies said delays in payments from customers had declined.

One step beyond Business sentiment in Japan weakened (index at 56 vs. 59 in Q1) slightly with the global economic environment primarily weighing on corporate outlook.

Of the 16 respondents, which included Daiichi Sankyo Co Ltd , Canon Inc, Seven & I Holdings and NTT DoCoMo, 14 were neutral on the outlook and two positive, similar to the previous survey.

While risks associated with exchange rate volatility abated in the second quarter, a handful of companies continued to worry about rising costs.

Fewer companies reported an increase in new orders and employment levels over the last quarter.

Several ASEAN countries’ flags pictured

Global economic uncertainty weighed on sentiment at South Korean companies with the economy’s index falling to 50 in the second quarter from 67 last quarter.

New Zealand rejects undersea mining project The decision is being closely watched by other governments and miners around the world looking to mine copper, cobalt, manganese and other metals deeper on the ocean floor

A

project to mine undersea iron ore sand deposits off the New Zealand coast has been rejected because of uncertainty about the environmental impact of the project, the country’s Environmental Protection Authority (EPA) said yesterday.

Trans Tasman Resources Ltd had sought the final go-ahead to excavate iron sands from the seabed in waters up to 45 metres deep off the country’s west coast, but was turned down by a special committee set up by the EPA. “The major reasons for this (decision) were the uncertainties in the scope and significance of the potential adverse environmental effects and those on existing interests,” the EPA said in a statement.

The New Zealand decision was being closely watched by other governments and miners around the world looking to mine copper, cobalt, manganese and other metals deeper

on the ocean floor.

Mining of diamonds currently takes place off the coast of Namibia, but the Trans Tasman project was one of the more advanced being proposed elsewhere.

Environmental groups, fishing companies, and local indigenous Maori tribes had opposed the project because of the potential damage to the environment, marine mammals and fish stocks.

Trans Tasman Resources said it was disappointed by the decision, having spent about NZ$60 million (US$52 million) on the project so far, and having undertaken significant local consultation, and scientific research.

Chief executive Tim Crossley said in a statement the local community would miss out on hundreds of new jobs and an estimated NZ$240 million a year boost to GDP. The company would study the

US$52 million

already invested in the cancelled project ruling and look at its options. The decision can only be appealed on points of law. Environmentalists called the outcome a victory for common sense.

A second New Zealand deep-sea mining project was tabled last week

by Chatham Rock Phosphate.

Reuters

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13

June 19, 2014

Asia

India takes steps to control inflation

about future

All 19 respondents said their outlook was neutral with the majority concerned about the global economy while a handful were worried about rising costs.

While half the respondents said new orders and sales increased, only three reported higher employment.

In the previous quarter a third of the companies had a positive outlook while the remaining six were neutral.

The business outlook in Thailand turned positive after two quarters of negative sentiment as political turmoil in the country eased. The index rose to 91 from 41 last quarter - the highest level since the first quarter of 2012 - as 12 of 16 companies saw an increase in new orders and sales. Worries over political stability, among other things, remained.

The Philippines, along with India, was the most optimistic with all 15 respondents showing a positive outlook that remained unchanged at 100. Two-thirds of the respondents reported higher employment levels while almost all saw an increase in new orders and sales.

The sentiment index among companies in Singapore remained unchanged at 67 with two of six respondents showing a positive outlook and the rest remaining neutral. Only three of six companies said new orders and sales increased this quarter compared with eight of nine respondents last quarter.

Reuters

The government to keep a close watch on the price movements of 22 commodities Rajesh Kumar Singh and Aditi Shah

I

ndia’s new government on Tuesday imposed export restrictions on certain farm commodities and ordered a crackdown on hoarding to control rising food prices, a day after wholesale price inflation hit a fivemonth high.

A jump in prices of potatoes and onions last month drove inflation to 6.01 percent from 5.20 percent in April, contributing to a sell-off in financial markets.

Prime Minister Narendra Modi, who was elected last month amid widespread anger over rising prices, has made tackling inflation his top priority.

Forecasts of weak monsoon rains that irrigate much of India’s food production have added to inflation fears, and volatile vegetable prices have risen by double digits.

Finance Minister Arun Jaitley, who held a meeting on Tuesday to decide steps to control food inflation, said the government was keeping a close watch on the price movements of 22 commodities and would offload additional rice stocks in the market

to prevent a build-up in inflationary expectations.

The government also imposed a minimum export price on onions of US$300 per tonne from US$150 per tonne to discourage overseas shipments and Jaitley said a similar curb would be imposed on exports of potatoes.

“Even though the increase (in food prices) has only been marginal, we don’t want anybody to exploit the situation,” he told reporters after the meeting.

“And therefore, in anticipation of any further market reaction, a series of steps have been decided and they are being put into place.”

The weather department predicts below-average rainfall between JuneSeptember this year, which could hit summer crops such as rice, corn, soybean and cotton.

Summer monsoon rains are vital for 55 percent of India’s farmlands that lack irrigation facilities. In 2009, patchy rains led to the worst drought in nearly four decades and drove annual food inflation up to more than 21 percent.

Reuters

Japan May exports disappoint Exports to Asia and the United States fell during the month Tetsushi Kajimoto

J

apan’s exports suffered their first annual decline in 15 months in May as external demand remained soft despite a recovery in advanced economies, suggesting a bumpy ride for the world’s third-largest economy.

Exports to Asia and the United States fell during the month, Ministry of Finance data released yesterday showed, which is likely to heighten concerns about Japan’s growth outlook at a time when consumption is being crimped by a national sales tax increase.

Exports fell 2.7 percent in the year to May, the MOF data showed, compared with a 1.2 percent drop seen by economists and a 5.1 percent rise in April. On a seasonally adjusted basis, exports fell 1.2 percent in May from the prior month.

The data will be a worry for Bank of Japan Governor Haruhiko Kuroda who last week said the timing of export recovery may have been delayed.

The BOJ is counting on exports growth to partially offset the impact of a sales

Japanese Ministry of Finance showed a battery of economic results with lower than expected performance

KEY POINTS May exports -2.7 pct y/y; imports -3.6 pct y/y Trade deficit narrows from year ago, record run of 23 months Policymakers count on exports to ease tax hike pain

tax hike to 8 percent from 5 percent in April, and sees shipments eventually picking up as overseas economies, mainly advanced economies, recover.

However, the recent signs suggest that external demand is slow to pick up.

“The mechanism where exports drive activity in the manufacturing sector is not working, so this cannot offset the impact from the sales tax

hike,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. “The U.S. economy is improving, so Japan’s exports will eventually recover, but it will take more time.”

Exports to the United States decreased 2.8 percent, while shipments to China rose 0.4 percent in the year to May. Exports to Asia, which account for more than half

of Japan’s total exports, fell 3.4 percent in May from a year earlier.

The MOF data indicates weakness in external demand is more prevalent in the region than some had thought.

Singapore’s exports unexpectedly fell in May on weak shipments of electronics and pharmaceuticals to its key markets, data showed on Tuesday, indicating the citystate may not be benefiting yet

from a recovery in developed economies.

Japan’s economy picked up speed in the first quarter as consumers loaded up on goods ahead of the tax hike, but growth is expected to slump in the current quarter as the effects of the one-off consumption spike winds back. An extended period of weak shipments could hit the economy hard, which analysts say could prompt the BOJ into additional easing measures.

Reuters

14

June 19, 2014

International Russia mulls Bolivia’s invitation to join G77+China Russia is considering Bolivia’s invitation to join the Group of 77 Plus China (G77+China), Bolivian ambassador to Russia Maria Luisa Ramos said. Ramos told reporters a “top level” Russian diplomat confirmed his government was considering the invitation made by Bolivia’s President Evo Morales, whose country holds the group’s rotating presidency. During the opening of last weekend’s G77+China Summit in the eastern Bolivian city of Santa Cruz, Morales called on Russia to join the bloc, which represents more than two-thirds of United Nations (UN) member states, to help advocate “worthwhile” policies.

Gold industry to discuss benchmark system Producers to refiners to exchanges are being invited to talk about reforming the rate set system

Ukraine’s PM to dismiss central bank chief Ukrainian President Petro Poroshenko asked parliament yesterday to dismiss the country’s central bank governor, Stepan Kubiv. According to a draft resolution posted on the parliament’s website, Poroshenko had asked for his removal, part of expected changes as the Ukrainian president forms a new team after being sworn in on June 7. Kubiv was appointed central bank chief in February.

Germany eases stance on French, Italian budgets Germany’s deputy chancellor Sigmar Gabriel hinted in a newspaper interview on Wednesday that France and Italy could be given more time to get their finances in order. In comments that could restart a debate over austerity and growth in Europe, Gabriel struck a conciliatory tone to countries struggling to meet the EU’s strict fiscal rules. “I’m in favour of more honesty in the debate,” the economy minister and deputy chancellor told the mass-circulation daily Bild.

However the conservatives in Germany’s leftright coalition government are opposed to any easing of the deficit rules.

H&M reports strong profit growth

T

he gold industry will discuss changes to the century-old gold fixing benchmark that’s used by mining companies to central banks to trade and value the metal.

Producers to refiners to exchanges are being invited by the World Gold Council to meet on July 7 in London to talk about reforming the rate set daily by four banks, the industry group said in a statement today. The U.K.’s Financial Conduct Authority, which has been visiting member banks involved in the fixing as part of its review of gold benchmarks, will attend as an observer, the council said.

The price-setting ritual dating back to 1919 takes place twice a day by phone between Societe Generale SA, Bank of Nova Scotia, HSBC Holdings Plc and Barclays Plc. A similar silver process will

end in August when Deutsche Bank AG quits the daily meetings, and companies are due to make proposals this week for an alternative silver mechanism. The regulatory focus on financial benchmarks is intensifying after rigging was uncovered in everything from interbank lending rates to currencies.

“It is not surprising that it needs to change to meet today’s market expectations for enhanced regulation, transparency and technology,” Natalie Dempster, managing director, central banks and public policy at the council, said in the statement. “Modernization is imperative in order to maintain trust across the industry.”

The gold fixing takes place at 10:30 a.m. and 3 p.m. in London by phone, with the banks representing themselves and clients. The price is adjusted until the gold offered by

either side is within 50 bars, or about 620 kilograms, at which point the fix is made. Traders relay the information to clients and take fresh orders as the price is adjusted during the fixing.

Traders say the process is efficient and a crucial reference point for the market, while economists and academics have said the gold fixing is susceptible to manipulation and lacks sufficient regulation. The FCA in May fined Barclays 26 million pounds (US$44 million) after a trader sought to influence the gold fixing in 2012.

About US$18 trillion of gold circulated globally last year, according to CPM Group, a New York-based research company. Gold was fixed at US$1,267.50 an ounce in London yesterday afternoon.

“The market is very large and liquid, it needs a fix,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today by e-mail, referring to discussions on potential changes to the fixing.

Deutsche Bank stopped taking part in gold fixings last month as part of the German lender’s exit from commodities. The London Silver Market Fixing Ltd. will stop running the silver process on August 14 as Deutsche Bank’s planned withdrawal would leave just two banks to set that price. London Bullion Market Association members will hear firms’ proposals on June 20 for alternatives for the silver benchmark.

Guidelines for financial benchmarks designed to improve integrity and reliability in the wake of the Libor scandal were published by the International Organization of Securities Commissions last summer.

Bloomberg News

BOE says rate likely to be increased Governor Mark Carney said last week that interest rates might start to rise earlier than anticipated Hennes & Mauritz AB, Europe’s second-biggest clothing retailer, reported the strongest quarterly profit growth in more than four years as new store formats and online expansion fuelled sales growth. Net income for the three months through May rose to 5.81 billion kronor (US$870 million), Stockholm-based H&M said in a statement today. The average of 16 analyst estimates compiled by Bloomberg was 5.63 billion kronor. Sales in June have got off to a good start, the retailer also said. The vendor is investing in geographic expansion, new selling formats and e-commerce.

South African inflation accelerates Inflation rate climbed to 6.6 percent in May, the highest in almost five years and exceeding the central bank’s target for a second month.

Inflation accelerated from 6.1 percent in April, Pretoria- based Statistics South Africa said on its website today. The median estimate of 25 economists surveyed by Bloomberg was 6.5 percent. Prices rose 0.2 percent in the month. The Reserve Bank kept its benchmark repurchase rate unchanged at 5.5 percent last month even as it forecast inflation would stay outside the 3 percent to 6 percent target band until the second quarter of next year.

B

ank of England policy makers said a rate increase this year may be more likely than investors anticipate as the debate on the timing of the first policy tightening in seven years heats up.

In the minutes of its June 4-5 meeting, the central bank’s Monetary Policy Committee said the economy could maintain its pace of growth and slack “would be absorbed more quickly than had previously been expected.”

“In that context, the relatively low probability attached to a bank rate increase this year implied by some financial market prices was somewhat surprising,” the BOE said.

The June meeting took place before Governor Mark Carney said last week that interest rates might start to rise earlier than anticipated.

His comments prompted investors to bring forward their bets on the timing of the first increase to January from May. The minutes showed the MPC voted unanimously to keep the benchmark rate at a record-low 0.5 percent this month, where it’s been since March 2009.

In that context, the relatively low probability attached to a bank rate increase this year implied by some financial market prices was somewhat surprising Bank of England

The panel began shifting its view on the need for record- low borrowing costs last month, when it said the decision was becoming “more balanced” for some of its nine members. That phrase was repeated yesterday along with the line that all officials agreed they needed to see more evidence of slack reducing before increasing the key rate.

Divided MPC Britain’s strengthening economy is pushing the BOE closer to the point at which higher rates will be needed.

The MPC said today that the recovery has become more sustainable and the economy is “starting to return to normal.”

“The appreciation of sterling over the past year or so meant that import prices were probably starting to pull down CPI inflation,” the minutes said. “It was possible, however, that the weakness in inflation elsewhere, especially the euro area, contained information about the underlying global inflationary pressures that might yet become evident in the U.K.” Bloomberg News

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June 19, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

A requiem for technocracy

Robert P. Crease

Professor of philosophy at Stony Brook University in New York

THE STRAITS TIMES Fifteen industrial land plots will be made available for sale by the Government in the second half of this year, including a 20-year leasehold site in Penjuru Road in Jurong East. The unusually short lease is aimed at providing manufacturers with industrial space at an affordable price, according to the Ministry of Trade and Industry. “The shorter tenure will meet the needs of industrialists for multiple-user development at affordable prices,” it said in a statement yesterday. The Penjuru Road plot is among nine sites that will be put on the Confirmed List.

MYANMAR TIMES Rising gas production and investment will lead to a higher-than-expected 8.5 percent economic growth rate for the 2014-15 year, according to the International Monetary Fund (IMF). The IMF had predicted 7.7pc GDP growth for the year in January. The economy will continue to be driven by both domestic and foreign investment, said Matt Davies, head of an IMF team visiting Myanmar for Article IV talks. Continued foreign and domestic investment can drive economic growth, “but what the foreign companies need to enter is have a sound regulatory regime underpinning their entries,” he said.

VIETNAM NEWS Viet Nam and Russia have signed a Memorandum of Understanding (MoU) on the possibility of cooperating in a joint seismic research at Lots 125 and 126 in the Phu Khanh basin in Viet Nam’s continental shelf. The MoU was inked by General Director of the Vietnam National Oil and Gas Group (PetroVietnam) Do Van Hau and General Director of Russia’s Zarubezhneft Oil Company Alexander Kudasov in Moscow on Monday on the sidelines of the 21st World Petroleum Conference. The June 15-19 conference is drawing the participation of about 4,000 delegates.

THE PHNOM PENH POST Acleda Bank has reinvested US$39 million of profits back into its operations instead of paying out dividends to shareholders, an announcement on its website states. It is the 11th time Alceda has opted to increase registered capital, with the latest top-up taking the bank’s total capital to more than US$225 million, according to the statement. Acleda CEO In Channy is quoted in the statement as saying that the capital increase will fund the opening of an additional 21 branches by the end of the year.

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TONY BROOK – In 2010, when Louisiana Governor Bobby Jindal unveiled a US$220 million scheme to use sand berms to block the oil spewing into the Gulf of Mexico from a British Petroleum oilrig, scientists opposed the plan, stating that it would do little more than harm local ecosystems. Even after the national commission investigating the spill declared the initiative a failure for having captured only 1,000 of the nearly five million barrels of oil believed to have gushed into the Gulf, Jindal did not relent, calling the statements “partisan revisionist history at taxpayer expense.”

Jindal’s response reflects an on-going – and potentially catastrophic – shift away from science-based policymaking.

This is not how I imagined twenty-first-century politics would be. When I was a graduate student in the humanities in the 1970s, my mentors thundered against the coming technocratic state.

Politicians, I was told, would soon listen only to experts who would sacrifice human values for the sake of efficiency, while ordinary citizens’ voices would be drowned out.

If only more of that scenario were true. Today, issues about which facts really matter – for example, the safety of genetically modified foods, the hazards of extracting shale oil and gas, and the impact of global warming – are debated without

regard for scientific evidence or in ways that use distorted and cherry-picked information to promote a chosen position.

Politicians and activists portray these issues as social struggles or morality plays: big businesses against small farmers, oppressors versus liberators, or conspirators seeking to deceive innocent citizens.

For example, after a recent World Health Organization report warned that the Fukushima nuclear disaster in Japan had only slightly increased local residents’ risk of developing certain kinds of cancers, the environmental organization Greenpeace, deeming the figures too low, denounced the report as “a political statement to protect the nuclear industry.”

Similarly, Robert F. Kennedy, Jr., an American environmental activist, has accused the United States government and the drug industry of conspiring to obscure the link between childhood vaccines and autism – a link for which there is no scientific evidence.

Likewise, US Representative Paul Ryan, a Republican and former vice-presidential candidate, accused leading climatologists of conspiracy for arguing that climate change was real, and voted to undo climateprotection plans and eliminate White House climate advisers.

And, despite the absence of evidence that mobile phones pose any kind of danger, former Democratic Representative

The truth is that hard facts and scientific evidence never had any special authority in shaping policy in the first place; to political leaders, a scientist’s view is just another opinion

Dennis Kucinich, alleging that officials were suppressing information, introduced the “Cell Phone Right to Know Act” to require radiation warnings on the devices.

Pseudoscience and scientific illiteracy used to be the domain of astrologers, quacks, and other charlatans who lacked the influence to be a major social threat. Today, acting against scientific evidence is politically expedient: it offers left-wing

and right-wing politicians alike an opportunity to court an antielite, populist image. But this approach endangers public health and the planet, and some scientists are beginning to worry about the possibility of a new “dark age of political feudalism.”

What happened to the sciencebased technocratic state that my humanities professors feared?

The truth is that hard facts and scientific evidence never had any special authority in shaping policy in the first place; to political leaders, a scientist’s view is just another opinion. My humanities professors came of age in the aftermath of World War II – won with radar and ended with the atomic bomb – when the scientific perspective needed no proselytizing to guarantee its authority. But this reflected less a rational belief in deferring to science in decisionmaking than an enthusiastic response to the role science had played during the war.

Such enthusiasm raised fears of what the political scientist Roger Pielke, Jr. has called the transformation of “abortion politics” into “tornado politics.” The debate preceding a collective decision about abortion is about values – there is no shared goal, and scientific information is all but irrelevant. But when deciding collectively on how to confront an approaching tornado, there is an indisputable shared goal, and ignoring the experts would be wholly irrational. A technocratic culture in which scientific voices dominate, Pielke warns, tempts politicians to use expert advice on technical questions (“Does X meet safety standards?”) to disguise political agendas (“X is the right thing to do.”).

Now that science’s post-WWII charisma has faded, politicians are taking the opposite tack.

They are increasingly tempted to ignore scientific findings altogether, and make values the centre of all public-policy debates. In short, they are turning tornado politics into abortion politics.

Science is far from perfect.

Its practitioners are no more innately virtuous than anyone else, and their work is no less vulnerable to error and misuse. The difference is that scientists have struggled to institutionalize a process that involves extensive observation, experimentation, and independent review that, in the long run, provides a firmer purchase on the world than intuition and political posturing.

I am glad that we do not live in a technocracy, ruled by experts who decide our social goals rather than advancing the goals that society establishes.

But I am beginning to fear that I am living in a state whose politicians are more interested in proclaiming the nobility of goals that cannot be achieved. With no route from here to there, we are guaranteed to get lost.

The Project Syndicate 2014

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June 19, 2014

Closing Boeing in talks with ICBC for Jumbo order

China to cut value-added tax rates by 4pct

Boeing Co. is in talks to sell 747-8 jumbo jets, the four-engine model that has struggled to attract buyers, to the commercial finance arm of China’s biggest lender, three people familiar with the matter said.

ICBC Financial Leasing Co. is considering a purchase of 747-8 freighters to place the aircraft with South Korea’s Asiana Airlines Inc., which flies 10 older cargo versions of the 747, two people said. The discussions are for four or five planes, with a total list value of as much as US$1.8 billion, one person said.

China is to lower its value-added tax (VAT) rates on some goods from six or four percent to three percent in a move to ease the tax burden on businesses and boost economic vitality. According to a statement from the Ministry of Finance yesterday, a 3-percent VAT rate will replace the current 6-percent rate on tap water, some construction materials, and electricity produced by small hydropower plants. Duty-free goods sold at authorized shops will be subject to a 3-percent VAT rate instead of 4 percent, said the statement. The new rate will be effective as of July 1.

Cosco is one of the Chinese companies to compete against the failed alliance

China says no to shipping alliance Should it have succeeded, P3 would have handled more than 40 percent of Asia-Europe and trans-Atlantic trade

C

hina’s scuppering of a planned alliance of the world’s top three container shipping lines signals its protectionist stance on key industries and is a reminder to foreign firms to not take Beijing’s nod for granted on deals, analysts and lawyers said.

China’s Ministry of

Commerce (MOFCOM) said on Tuesday it would not approve the P3 ship-pooling network, a plan dreamt up last year by Denmark’s A.P. Moller-Maersk, Swiss firm Mediterranean Shipping Co (MSC) and France’s CMA CGM , due to competition concerns.

Its rejection marks

the first time China has blocked a deal proposed by foreign firms since its antimonopoly regulator was granted greater powers six years ago.

“China’s rejection of the P3 is likely more an effort to insulate Chinese domestic shipping companies... from competing with a

more effective rival than it is an effort to maintain industry fair play, in our view,” Barclays analyst Jon Windham said.

The three firms had hoped to pool about 250 ships together on three trade routes, including Asia-Europe, helping them to cut costs and increase efficiencies at a time when the global shipping industry is battling overcapacity.

The plan had already been approved by United States and European regulators.

Should it have succeeded, P3 would have handled more than 40 percent of AsiaEurope and trans-Atlantic trade, posing greater competition to China’s state-backed shippers China COSCO and China Shipping Container Lines (CSCL).

Stifling competition China’s goods trade topped the US$4 trillion mark last year, allowing it to overtake the United States as the world’s largest trading nation just 13 years after joining the World Trade Organisation.

Its shipping industry, however, has been fighting a capacity overhang since the global financial crisis after new vessels ordered earlier flooded the market, pushing down freight rates that have led COSCO and CSCL to report deep losses.

MOFCOM said one of the reasons it had blocked the

alliance was that it would have significantly boosted the firms’ joint market share to 47 percent on the AsiaEurope service route, even though each had already held a substantial share.

It also said that it had held several talks with the companies to discuss how the companies might alleviate the alliance’s impact on competition, but in the end were not sufficiently convinced by their proposals.

Ahead of the decision, local groups such as the China Shippers’ Association (CSA) had lobbied the government against approving the alliance, arguing that it would give the firms too much market power and stifle competition.

“We’re very happy, we think it’s a fair result,” Cai Jiangxiang, CSA’s vicechairman, told Reuters. “All the small and medium firms are very happy because they were worried about being squeezed out by P3 from the market.”

Up to last year, MOFCOM reviewed 740 merger proposals, blocking one - Coca-Cola’s bid to buy top juice maker Huiyuan - and imposing conditions on 22 others.

Shang Ming, MOFCOM’s anti-monopoly bureau director-general, told reporters in February, that mergers involving several jurisdictions are not already viewed in the same way by all related parties.

HK not to lose another ‘Alibaba’ IPO

BOJ feeds banks with 5 trillion yen

Free trade account launched for SFTZ

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T

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n advisory council to the Hong Kong government has recommended a raft of possible reforms to the city’s IPO regime, including considering a change to the “one-shareone-vote” rule that cost the city the listing of Chinese e-commerce giant Alibaba.

The Financial Services Development Council (FSDC) said in the report issued yesterday that Hong Kong’s government and regulators should consider revisiting the rule, which prevents companies with unusual ownership structures from listing in the city.

Alibaba Group Holding Ltd filed in the United States last month for an initial public offering (IPO) expected to raise more than US$15 billion.

Alibaba’s decision to list in the U.S. was a blow to Hong Kong’s bourse, operated by Hong Kong Exchanges and Clearing Ltd.. HKEx was initially Alibaba’s preferred IPO venue, but the city’s regulators balked at any potential violation of the “one-share-one-vote” principle.

Reuters

he Bank of Japan said yesterday that it will dole out 4.9 trillion yen (US$48.02 billion) this week to banks under a scheme it uses to encourage lending by providing financial institutions with cheap funds.

That is more than the 3.5 trillion yen the BOJ last provided in March in a sign that more banks are turning using the scheme, which could help the economy pull further away from 15 years of mild deflation.

Under the scheme, the BOJ lends funds to banks with 0.1 percent interest for four years to encourage banks to increase their overall lending to their customers.

The BOJ extended the duration of this scheme by a year and doubled its size to 30 trillion yen in February.

The central bank has provided 13.3 trillion yen in funds since the scheme started in June last year.

Reuters

Reuters

he free trade account for Shanghai’s free trade zone (FTZ) was officially launched

by China’s central bank on Wednesday, as part of efforts to test bolder financial reforms in a risk-controlled environment.

The Shanghai Head Office of the People’s Bank of China (PBoC) said five banks have met requirements to open the account. Companies registered in the FTZ - a 29-square-kilometer area to pilot economic reforms - will be able to use the account for financing, investment and other cross border transactions.

So far firms in the zone can borrow offshore funds, deploy working capital between subsidiaries both in and out of China and enjoy greater flexibility in managing foreign exchanges.

The move comes two weeks after the central bank issued operating details on the free trade accounting unit, separating cross-border transactions in the FTZ from other onshore transactions.

Xinhua