Macau Business Daily, July 7, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 576 Monday July 7, 2014

Pressurised cabins F

Year III

irst the World Cup, now the smoking ban.

Macau’s gross gaming revenues are going through the wringer. A single digit increase of 7 percent is on the cards for this month as casinos prepare to install smoking cabins on mass gaming floors by October 6

www.macaubusinessdaily.com

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3

Iao Kun posts MOP10.8 bln VIP rolling chip turnover

School’s out for summer

Page 2

GEG confident in Macau: Francis Lui

30 infrastructure projects are slated for the summer months. Road paving works, the light rail, MTEL landline network, electricity supply installation, and natural gas pipeline to name but a few.

School recess presents a window of opportunity, says the DSAT

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Forever 21 debuts in Macau Page 8

HSI - Movers July 4

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Name

Bonanza for banks Non-residents accounted for 45 percent of total deposits in May alone.

They deposited MOP208.8 billion.

Almost 40% more than the same month a year earlier. Banks are taking notice as this group favours the yuan and US dollar over patacas and HK dollars Page 5

Swiss-China Pact Switzerland and China are getting closer. Their new free trade deal means less red tape and tariffs on Swiss goods imported to China. Plus a new era in strengthening ties Page 10

Interview: Patricia Cheong

The logistics of luxury LUXE by Encanto Luxury founder Patricia Cheong talks to Business Daily.

The economic slowdown in mainland China has yet to show up in luxury retail figures here, she says. But brands are set to trim the number of shops opening in new resorts. Regardless, the middle class is coming into its own PAGEs

6&7

%Day

China Resources Lan

3.27

Galaxy Entertainme

2.63

Sands China Ltd

2.43

China Merchants Ho

2.40

China Overseas Land

1.91

Wharf Holdings Ltd

-1.32

Lenovo Group Ltd

-1.71

China Unicom Hong K

-1.96

China Resources Po

-2.44

CNOOC Ltd

-2.56

Source: Bloomberg

I SSN 2226-8294

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2

July 7, 2014

Macau

Smoking ban looms over July revenues Telsey predicts that July gaming revenues in Macau will soften with a 7 percent increase, the second worst performance of the year. Once the whistle blows on the Word Cup, the refitting of casinos to comply with the new smoking ban rules will likely disrupt revenues Alex Lee

Alex.lee@macaubusinessdaily.com

A

fter the first decline in five years last month, gaming revenues in Macau are expected to be back in the black this month, but in softer mode.

The World Cup tournament will continue to disrupt VIP and mass premium table performance, while mass floors will see less activity as operators start to refit casino floors to comply with the new smoking ban scheduled for October 6.

‘We see softness continuing into the first half of July,’ a report from Telsey Advisory Group reads. The World Cup is ‘likely to cause disruption of VIP and premium mass tables.’ The football tournament ends on July 14 in Brazil.

The brokerage firm predicts that gross gaming revenues will

June (y-o-y) Gross Gaming Revenues: -3.7 percent Mass Table Revenue: +26.9 percent Slot Revenue: +2.0 percent Total Mass Market Revenue: +24.0 percent VIP Revenue: -17.2 percent VIP Volume: -9.7 percent (excluding direct roll)

rise between 6 and 8 percent this month over that of last year. A 7 percent growth (median value) this month represents a big improvement compared to June, when revenues dropped 3.7 percent. If the predictions from Telsey are correct, July’s performance will still be the second worst of the year, according to official numbers from the Gaming Inspection and Coordination Bureau.

Chinese wall Telsey says that the imminent smoking ban is another added pressure on gaming revenues in July.

‘We expect mass floors will also see disruption as operators look to get a head start on refitting casino floors to comply with the smoking ban scheduled to take effect October.’

Gaming companies here will try to avoid making the adjustments to comply with the new smoking rules in September, a very important holiday period in Macau, said the brokerage in a note to clients.

Last week, the government clarified the rules for VIP and mass premium spaces where smoking will be allowed in casinos. Operators are obliged to create separate rooms or install barriers (physical or architectonic) to delineate VIP smoking areas on gaming floors.

SJM most affected With an underperforming market in the second quarter, Telsey revised down its estimations for the major operators in Macau, with SJM, Galaxy and Melco Crown Entertainment most affected.

Corporate

Above and beyond

Business Awards 2014 introduces talent category This years’ Business Awards will introduce a new category: new talent. This category seeks to acknowledge individuals who have demonstrated natural skills or abilities for achieving success in a particular duty or area of responsibility within an organisation.

Business Awards encourages companies to nominate an individual who has significantly revealed their potential in the past 12 months. Some of the few examples that Business Awards will honour include employees who have exceeded expectations and performed at a level that is clearly superior to the majority of other employees or someone who has positively participated and improved his or her organisation’s operations, services and products. The objective is for companies to publicly recognise an exceptional member of staff.

Companies can submit their nomination online before August 20 via the Business Awards website www.awardsmacau.com. The nominator will be asked to explain how the nominee provides extraordinary services above and beyond the basic job description.

The operating profit expected for SJM in the second quarter was lowered by 10 percent from HK$2.4 billion to HK$2.2 billion due to the slowdown in June revenues. Galaxy and Melco Crown both got a 4.6 percent reduction for the last quarter profit. The former will suffer the impact of the slowdown in revenues coming from its mass gamers, while the latter will see its VIP business softening, according to Telsey.

The brokerage estimates for Wynn and Las Vegas Sands stayed flat with MGM the exception. Telsey upgraded MGM’s profits between April and June by 1.7 percent from HK$584 million to HK$594 million.

The second half of the year could see the gaming market in Macau go back to double digit growth in terms of revenues. Telsey forecasts a hike of

SJM, Galaxy and Melco Crown second quarter profits are likely most affected by June’s drop Telsey Advisory Group

10 to 12 percent in the third quarter and an 11 to 13 percent increase for 2014, slightly above market consensus (a 11 percent rise in revenues).

Iao Kun posts MOP10.8 bln VIP rolling chip turnover Iao Kun reached a rolling chip turnover of 75.2 billion patacas for the first half of this year as the group’s application to the main board of the Hong Kong Exchange negotiates a deep vetting process Alex Lee

alex.lee@macaubusinessdaily.com

I

ao Kun Group Holding Company Ltd has announced a rolling chip turnover of 10.8 billion patacas in the company’s VIP rooms in Macau for the month of June. This amount represents a 2 percent increase yearon-year compared to 10.6 billion patacas for the month of June 2013.

As for the first half of this year, the junket operator’s rolling chip turnover was 75.2 billion patacas, which means an average of roughly 12.5 billion patacas per month. In comparison to the first six months of 2013, the value was up 10 percent from 68.1 billion patacas, which is an average of 11.3 billion patacas per month.

Iao Kun Group controls VIP gaming rooms in Macau including StarWorld, Galaxy Macau, Le Royal Arc, Sands Cotai Central and City of Dreams casinos. The group’s VIP rooms in Macau are primarily focused on high stakes baccarat. This game accounts for approximately 88 percent of total Macau casino winnings.

Last year, Iao Kun posted a net income of 43 million patacas.

However, it incurred extraordinary expenses related to the King’s

Gaming, Bao Li Gaming and Oriental VIP Room acquisitions and, as such, results are expected to be better during 2014.

Detailed vetting of HKSE application Last Friday, it was also announced that the company’s application to list its shares on the main board of the Hong Kong Stock Exchange is going through a detailed vetting process, having been reviewed for a period of three days.

‘It would be desirable and beneficial for our company to have a dual primary listing of the shares in both Hong Kong and NASDAQ as the directors believe that the stock markets in Hong Kong and NASDAQ attract different investors,’ Iao Kun Group explained in its application form to the Hong Kong Stock Exchange. ‘The directors consider that this is important for the group’s potential future growth and long term development.’

In the future, the company aims to ‘become one of the leading VIP gaming promoters in Macau,’ it was added.

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July 7, 2014

Macau

Francis Lui: GEG confident in Macau Galaxy Entertainment’s vice-chairman appears unconcerned about the June gaming performance, insisting that the group will continue to fare well in the city Stephanie Lai

sw.lai@macaubusinessdaily.com

C

asino operator Galaxy Entertainment Group Ltd expects “double digit” growth in its gross gaming revenue for Macau casinos for this year, and the company remains confident about its mid and long-term performance in the city, the vice chairman of Galaxy Entertainment, Francis Lui Yiu Tung, remarked to local media on the sidelines of its tenth anniversary.

Despite Macau’s casino revenue falling in June for the first time in five years, Mr. Lui told media on Friday that he has not changed his projection for the growth of the city’s gaming revenue for this year and said a “double digit” growth in the group’s gross gaming revenue could be expected for 2014, while the VIP segment could grow by a single digit this year.

Galaxy Entertainment saw its revenue increase by 33 percent year-on-year to HK$20.2 billion for the first quarter ended March 31 this year, while the group’s adjusted EBITDA rose by 38 percent year-on-year to HK$3.8 billion, at the time benefiting from a strong performance by both the mass and VIP gaming segment, the group noted in its unaudited first quarter earnings.

“It’s hard to use merely one to two months of performance to say whether it [the trend for gaming revenue growth] is going higher or lower,” Lui remarked when asked his views about the June gaming revenue.

The total gross gaming revenue of casinos in June dropped year-on-year by 3.7 percent to 27.2 billion patacas (US$3.4 billion), according to the Gaming Inspection and Coordination Bureau’s latest data released on July 1. The last time there was a drop in gross gaming revenue was five years ago in June 2009 when the GGR decreased 17.4 percent from 10.1 billion patacas to 8.3

Charitable foundation Galaxy Entertainment has announced the establishment of a charitable foundation with an initial capital of HK$300 million. For the next ten years, the company will allocate HK$100 million to the foundation each year, which will total an input of HK$1.3 billion. The foundation would support charity activities in both mainland China and Macau, Mr. Lui Che Woo announced.

On the sidelines of the event, Francis Lui explained to Business Daily that his company chose this timing to launch the foundation “as a way to show our appreciation to the support we have been having and a way to show that Galaxy is a company that is here to contribute back to Macau”.

Mr. Lui asserted that his main wish for the next decade was a more harmonius society. with A.L.

billion patacas.

Despite being the first drop in five years in Macau’s gaming sector, the gross revenue decrease last month was less than originally estimated by market analysts in the last two weeks of June.

Analysts’ consensus pointed to a fall of 5 percent arising from the World Cup effect.

“Until today, we still think that Macau has a bright future ahead...for mid and long-term; we feel that Macau has all the factors available for us to continue to perform well,” Mr. Lui said on Friday.

“I have no doubt about that.”

Mr. Lui also noted that Phase 2 of the Galaxy Macau resort on Cotai is on track to open by mid-2015. Mr.

Lui’s father and chairman of Galaxy Entertainment, Lui Che Woo, commented recently that he expected the company’s net profit to grow between 40 and 50 percent in 2015 thanks to the opening of Phase 2.

The gaming operator is spending HK$19.6 billion on Galaxy Macau Phase 2.

The design plans for Cotai Phases 3 and 4, with the focus on non-gaming amenities, are now in the final stage, Francis Lui said on Friday.

The two phases are targeted to be complete in 2016 and 2018, respectively.

Total investment in the construction of Phase 3 and 4 is HK$60 billion, Lui Che Woo added on Friday.

Macau, HK judicial cooperation ‘mature’ Kam Leong

newsdesk@macaubusinessdaily.com

J

udicial cooperation between Macau and its neighbouring SAR has matured, especially with regard to the penal code, Secretary of Justice in Hong Kong Rimsky Yuen Kwok-keung said after meeting with his counterpart here, Florinda da Rosa Silva Chan.

A discussed agreement primarily

focuses on turning over criminals and cooperating in matters relating to the penal code. Mr. Yuen said the discussion started a year ago. After two meetings of experts from both cities, it has gained ‘very good’ traction.

However, there is no timeframe as to when the agreement will actually come into effect at the moment.

He also said that the difference in the law systems of the two SARs is the main reason why the deliberation has taken so long.

“As everyone knows, Hong Kong uses Common Law while Macau uses Continental Law. The two systems differ a lot. Moreover, Macau has a very different way from Hong Kong

in dealing with turning over criminals or matters of criminal code. Hence, this time, it is not easy for us to reach an agreement that can be accepted by each of the two societies and applied under the two different systems.”

Ms. Chan added that the discussion has reached a stage of rationalising and detailing related articles.

4

July 7, 2014

Macau Brought to you by

HOSPITALITY Travelling Residents

Summer construction fever hits Macau The chief of the coordination department at the Transport Bureau has announced that during July and August some 30 different construction projects will be undertaken in Macau to improve the city infrastructure Alex Lee

Alex.lee@macaubusinessdaily.com

Most of the data on tourism focuses on visitors to Macau. However, many residents also travel abroad. Most of these trips are made to neighbouring regions and arranged independently and we do not get much information about them. However, travel agencies also cater to residents, including both travel packages and individual arrangements. In these cases, more details are available and they provide a glimpse of local residents’ travel patterns. In fact, just this year to May, almost 560,000 travel arrangements were made in total through travel agencies, almost one for each resident, on average. Last year, the final tally was close to 1.45 million.

“Some parts of the system are 30 years old and need to be modernised,” an engineer from the Civic and Municipal Affairs Bureau (IACM), Wong Kei Lok, told reporters.

According to Mr. Mok, the public can expect works to continue until 2018. “The works are part of a political project and so it will continue until 2018. However, we are working and studying options to reduce the impact of the works on people lives,” he said.

MTEL pushes to cover 30pct of residential area

T The biggest number of trips was made to China. In the first five months of the current year, its share exceeded 60 percent of the total number of trips arranged by travel agencies. That proportion has been rising consistently and the figure represents a very significant rise when compared with the 45 percent value registered in 2010. If we add Taiwan and Hong Kong, we find that trips to Greater China represented, in the last two full years, about 85 percent of the total. This year, the available results suggest that share may increase. But the kinds of arrangements differ noticeably. If we take the total figures for the period shown, about one third of them are package tours. In the case of China, that share rises to 46 percent. Taiwan and Hong Kong display much lower values, showing a much higher weight of individual arrangements. Only 16 percent of the travel to Taiwan involves package tours and - no surprise - the figure drops to just 7 percent in the case of Hong Kong.

252,000

number of residents travelling to China on package tours, this year to May

he chief of the coordination department at the Transport Bureau (DSAT), Mok Soi Tou, has announced that during this month and next some 30 different construction works will be initiated in different areas of Macau. Roads will be repaved, a natural gas pipeline will be installed, as will the MTEL land-line network and electric supply connection plus other works involving the Light Rail Transit (LRT) system.

“As the urban development of Macau is growing at a very fast pace the existing infrastructure has to be updated in order to meet the new demands of Macau society,” he said. “In order to avoid disturbing

the people of Macau, most of the works will be executed in July and September as the schools are closed for holidays and road traffic is at a low point.”

When asked about how much these works would cost the Macau Government, Mr. Mok admitted that he was not fully aware of the investment details. “As there are many different entities involved in the works, it is not possible to know how much money is going to be invested for now,” he explained.

Some of the works that are going to take place in Macau Peninsula, Taipa and Cotai also include renovation works of Macau’s sewage system.

In November, MTEL will join the landline telecommunication market.

The company is expected to cover 30 percent of the residential area when it enters the market. During a press conference on Friday the assistant chief executive of MTEL, Leong Cheok Teng, revealed that the company was close to its initial goal.

“By mid-July, 27 percent of the residential area of Macau will be covered by the MTEL land-line network. Although we have always aimed to avoid disturbing the people of Macau, the construction works have developed at a good speed and our goal is not far away,” he said.

Mr. Leon also explained that the MTEL network would be 80 kilometres long when finished.

According to the contract signed with the Macau Government, by its fourth year of activity the MTEL network will have to cover 99 percent of the residential area of the territory.

Elliot Management raises stake in Wing Hang

H

edge fund firm Elliott Management has raised its stake in Hong Kong lender Wing Hang Bank Ltd to nearly 8 percent, throwing a wrench in the company’s planned sale to Singapore’s Oversea-Chinese Banking Corp (OCBC), the Wall Street Journal reports.

Regulators in Hong Kong, Singapore and Macau have given OCBC the go-ahead for its US$5 billion bid to buy Wing Hang Bank.

According to the report, under Hong

Kong rules, OCBC must receive roughly 90 percent of Wing Hang shares to de-list the Hong Kong lender, which is a tougher proposition with the large stake now held by Elliott.

Last week, OCBC released the authorities’ agreement, from Hong Kong and Macau, on the preconditions for buying Hong Kong’s US$4.95 billion Wing Hang Bank Ltd, represented in Macau as Banco Weng Hang, S.A. The Wall Street Journal reported

Elliott as saying it had bought an additional 8.7 million Wing Hang shares last week for HK$125 (US$16) each, bringing its stake in the company to 7.8 percent, or HK$3 billion, according to a company filing with the Hong Kong Securities and Futures Commission.

A spokesman for Elliott declined to comment. A spokeswoman for Wing Hang Bank didn’t immediately comment. A spokeswoman for OCBC also declined to comment.

5

July 7, 2014

Macau

Non-residents’ deposits grow 39 percent in May Non-residents are occupying more of Macau’s banking system, with deposits doubling since 2012. According to Monetary Authority data, this already accounts for half of residents’ deposits Alex Lee

alex.lee@macaubusinessdaily.com

D

eposits by non-residents continue to rise fast in Macau, driven by more foreign workers arriving here to support the growing demands for labour from gaming and construction companies and with wages still on an upward trend. Deposits from non-residents have climbed almost 40 percent in one year and doubled since 2012.

According to data from the Monetary Authority of Macau (AMCM) deposits from non-residents reached 208.8 billion patacas in May. That’s 3.1 percent more than in April (202.5 billion patacas) and 38.7 percent more than a year ago, when deposits totalled 150 billion patacas.

With the increasing number of non-resident workers arriving and living in Macau in the last few years, bank deposits from these clients are also getting a bigger slice of Macau’s financial system.

In May, deposits from non-residents were almost half of the total (45 percent) of the deposits from residents

MOP208.8 billion non-residents’ May deposits

in Macau. A year ago, this share was 35 percent, according to AMCM data.

This is happening because deposits from non-residents are growing much faster than residents.’

Deposits from Macau residents increased in May to 464.2 billion patacas, 1.9 percent more than in April and a 16.2 jump compared to May of 2013, half of the growth rates recorded by non-residents, monthly and year-on-year.

The non-resident population is

also on an upward trend with the growing casino industry here planning to double capacity until 2017, with at least six mega integrated resorts to open in Cotai.

Since 2012, the non-resident population has grown 50 percent from 98,000 people to 150,000 at the end of the first quarter of this year: mainland Chinese account for two thirds of these, followed by nationals from the Philippines at 13.6 percent.

Contrary to deposits by residents, where the majority of the money is denominated in patacas or Hong Kong dollars (70 percent of total), nonresidents prefer other currencies like the yuan and US dollars. Around 75 percent (150 billion patacas) of nonresident deposits are in currencies other than patacas or Hong Kong dollars.

In its Mayw Monetary and Financial Statistics, AMCM also revealed that deposits from the government were up to 281 billion patacas, a marginal increase of 0.6 from April and 22.8

percent from a year ago.

The loans from banks here to the private sector accelerated 35.7 percent from May 2013 to 299 billion patacas, a small hike of 2.5 percent from that of April. External loans also increased. In May, they totalled 317 billion patacas, a 21.9 percent jump from a year ago.

Currency and demand deposits hiked 0.9 and 5 percent, respectively, in May, pushing the first level of the money supply (M1) to an increase of 4.3 percent compared to that of April. On a year-on-year basis, the M1 dropped 1.1 percent.

The loan-to-deposit ratio for the resident sector at the end of May rose 0.3 percentage points from the previous month to 54.3 percent. The combined ratio for both the resident and non-resident sectors also grew by 0.6 percentage points to 81.1 percent.

As total loans increased at a faster pace than total deposits, the overall loan-to-deposit ratio of the banking sector rose from a month earlier.

6

July 7, 2014

Macau

Luxury retail growth to slow down,

I

n the wake of the explosive expansion of a few years ago, with new luxury shops opening every day, Macau is set to experience a slowdown. According to Patricia Cheong, founder of LUXE by Encanto Luxury, brands will reduce the number of shops opening in new resorts, consolidating business.

Working closely with junket gamblers - luxury retail’s main customers – Ms. Cheong says that despite the economic slowdown in mainland China she has not yet really witnessed a slowdown in the luxury retail business. She does, however, expect top-of-the-line luxury business to decrease somewhat in the next few years, with regular and more affordable luxury items increasing as a result of the increasing power of mainland China’s emerging middle class.

Luciana Leitão Leitao.luciana@macaubusiness.com

You’ve shifted the focus of your business, which was PR, as managing director of M.M Marketing Communications Consulting Co. Ltd, to luxury retail.

Is luxury retail the future?

I’ve always been in the retail business. Eight years ago, I distributed the famous jewellery brand Damiani, but two years ago I changed the business model.

I had been marketing for many casino properties, so I understood the spending pattern and who they are, in junkets or casino rooms.

Plus, I had been struggling for many years with the high-end jewellery business; from about a year ago, I entered into agreements with some junket operators as well as casinos to provide services/ products to VIPs inside the room, so they can redeem them. Whether in the casinos or in junket rooms, they always have their redemption points for rooms, meals, everything. Now, I provide them first with the materials they like, because a lot of redemption points might be wasted. Junkets – I’m mostly working with junkets - need to be very competitive, so they need to create additional services for their customers in order to keep them. We’re competing on services and variety, so luxury choices are very important.

When you refer to luxury choices, do you mean jewellery?

You don’t only provide them with the redemption to be used for meals and rooms. You want them to use it also for high-end products - watches, diamonds, leather goods, golf clubs . . . anything we think the customer will appreciate.

But your customers are only junket players?

Only junket room players. My partners are junket operators, and they are also investing because if the customer is not using the redemption points, they’re wasted.

The junket needs to pay, be it for whatever their customers redeem.

It’s a very interesting model, good for the business.

Is luxury retail growing as predicted a few years ago, when we started having luxury shopping malls?

Now, in China, there are actually anti-corruption and anti-luxury [campaigns] but this does not affect Macau too much. Macau’s luxury has a lot of relevance for junket players and for a small proportion of people who come here just for shopping because Macau has built an image for entertainment and luxury retail.

So far I don’t see the figures being

For LV, they have several levels.

For leathers, there aren’t many differences. The brands are treating Macau as Hong Kong and Singapore, but for watches, they definitely put their best and rarest items in Macau. So watches are super-luxury. They’re trying to create special experiences for Chinese customers as well.

The buyers Who are the consumers - only gamblers?

I believe gamblers are the major consumers - it has a lot to do with them winning or losing. We see the behaviour once they win or lose, that’s the reason most of the watches and jewellery have to be very close to the casino. Tourists aren’t representative – they’re more mass.

We see the behaviour once they win or lose, that’s the reason most of the watches and jewellery have to be very close to the casino

affected, especially because a lot of the so-called luxury in Macau is not super-luxury; it’s just luxury, and the middle class in China is growing.

According to my partners - who are the major brands for watches, leather goods, etc. - they tell me that the overall market in Macau is still going strong, now it’s still

OK, but for the next five years, definitely it will slow down but not too much. Previously, the growth was crazy and led brands to expand too much. What they’re saying is that they don’t expect business will slow down or decrease, it will grow steadily, because of the middle class, but they will reduce the development of shops in Macau. That way they will reduce operating costs, but the business is still good. They don’t think they need to have shops in every mall - maybe just a couple more. They’re slowing down the opening of shops, they’re consolidating and trying to have a more efficient financial situation.

Do you believe the luxury product brands here aren’t offering super luxury, just more affordable items?

I think so. The LV [Louis Vuitton] bags are really for the middle class. For super-luxury, it’s about being tailor-made. That’s the trend for luxury, at least. The trend is they’re getting younger, and especially the younger ones, they prefer personalised luxury. There’s a lot of potential for tailor-made products that’s more luxurious.

Do these gamblers appreciate the items that they buy or are they still choosing simply the flashiest and exuberant items?

I’m sure there are many things they buy because of the name, that’s still the overall situation for luxury.

Those [gamblers] coming to Macau are not from the major cities – they’re coming from second, third, fourth tier cities in mainland China, so the exposure is different. They’re still learning to have their own taste. Sometimes, they surprise us by now knowing some very strong brand, but maybe they’re strong only in first tier cities.

Would you advise only very well known luxury brands to open a shop in Macau, while others that are not so famous should not come?

They should not come. For luxury, the brands here are either very well known or getting well known.

Top luxury slowdown We’re going to have a new wave of Cotai developments, but you mentioned an expected slowdown in luxury retail. So, these new resorts will not attract new luxury shops?

I don’t think the luxury slowdown will be very serious, because people don’t purchase in mainland China, they purchase here - that’s why Macau and Hong Kong are still growing.

The new hotels will bring in more middle class, and the middle class also enjoy luxury brands; that’s the reason I believe luxury brand revenues will decrease.

But if previously the increase was 50 percent on sales, it will not maintain that craziness; maybe 10 or 20 percent, depending on the brand.

7

July 7, 2014

Macau

says Patricia Cheong

I

nterview

The new hotels will bring in more middle class, and the middle class also enjoy luxury brands

Brands like LV are growing very strongly – it’s like a commodity in the luxury market. Fortunately, the middle class is growing so much, that they still want LV. On the other hand, in mainland China, almost 100 percent of consumption of Macau’s luxury market is from China. You’ll also see extreme luxury slow down as the top players slow down.

Do you believe top luxury retail will slow down because of the slowdown of VIP players?

I think so. Watches produce very small volume. If you’re talking about 6 million patacas a watch, because of the production, somehow someone will get it. But if you’re talking about 2 million patacas, not extremely rare, they produce a bigger quantity and I doubt it is that easy to sell anymore.

Considering the economic slowdown in mainland China and, as a result, the slowdown of VIP players, are we already seeing signs of that within the super-luxury market?

I haven’t seen it yet. I still see them gamble a lot; of course, we see a lot of new blood, and sometimes we don’t see the frequent visitors.

That’s my market, but I’m sure it will slow down, too. I emphasise slow down and not decrease.

Are the brands that you represent afraid of this change of trend?

They are concerned.

Will there be a change of strategy from the brands?

I think so.

In China, although the economy has been slowing down, there are still so many super-rich people.

If you really want to have their business, you have to come out with new ideas - that’s why I have so many luxury brand partners right now. We’re creating a new channel for them and usually luxury brands are very conservative with the history and the brand to protect. They’ve become my partners, because they need to change.

The brands are changing, because of the economy slowing down and the profile of the customers. They are really thinking about that. In China, probably they need to do a lot of smaller group communities according to their behaviour they usually buy in groups, probably not so much advertising, more PR. In Macau, do you believe the strategy should also be through smaller group communities?

This is what I’m doing. I hope to create this database, creating communication, so we can segment them and create small communities

and groups. Either we create a group for a brand or through our communications with the customers, we gather and collect their profile and we think a certain group is suitable for a brand. Once we get more mature, we kind of educate them in a comfortable way that they can go anywhere through our platform. We try to open their eyes and they feel they like to be with us because we provide them with the experience.

Considering the reversal in trend that seems to be occurring, in which the mass sector is growing much more than the VIP sector, don’t you need to rethink your strategy also?

No, not at all. We’re building a worldwide network, accessing the most privileged network in the world to become our partner, we have so much to do. We’re not talking about volume - it’s really one on one or really just one family we need to catch up with. It’s really at the beginning for extreme luxury.

If China decides to become more restrictive and to limit the entry and stay in Macau, will that have a big impact on the business?

If they just reduce [stays] for two days, I don’t see an impact. The average stay is three or four days for high-end players. Will they be affected? No. Unless they [the authorities] control the times they can enter Macau. For example, now they have to go back and it takes two weeks for them to arrange for next time: so, if they want to come they can come every month. If China says you can only come to Macau two, three times per year, then that will have an effect.

Is it a signal from China, that something more restrictive might be in the pipeline?

If Macau is losing control . . .

They’re controlling the UnionPay thing.

Macau needs these kinds of things from time to time. Of course, there are a lot of grey areas, but if you want Macau to maintain its prosperity somehow there’s a process and you have to deal with that. A minor adjustment, for me, is a minor adjustment. It might harm some junkets, but the middle class is growing so fast that I don’t think overall it will be harmful.

In China, almost 100 percent of consumption is from China for Macau’s luxury market; you’ll see also that extreme luxury will slow down as top players slow down

They might not gamble that much, but they will go shopping. That’s good for Macau, because we don’t want only gambling to grow. It will be healthier. I truly believe that the Chinese Government doesn’t want Macau to have any negative atmosphere in society, because they want to show the world they can manage it well.

8

July 7, 2014

Macau

Calling all CE candidates

C Forever 21 debuts in Macau

A

merican fashion brand Forever 21 opened its very first store in Macau on Saturday.

The new store, which occupies a total of more than 19,500 square feet over five levels, is located in the Yellow House, close to Macau’s iconic Ruins of Saint Paul.

“We strategically chose the vibrant and fashionforward Macau to introduce the brand further to China and the Asia market,” Linda Chang, Forever 21 general merchandise manager, said.

Forever 21 is a model for fast fashion retailing women’s and men’s clothing and accessories.

The retailer operates over 615

stores in the United States, with international operations in Canada, mainland China, Hong Kong and Europe.

The new Macau store features a selection of apparel, accessories and lingerie as well as shoes, and offers other retail brands such as 21MEM, a line of fast fashion for men.

Forever 21 is – in the United States – one of the most popular exponents of the socalled ‘fast fashion’ model used by firms such as H&M and Zara, where trends in fashion are quickly brought to market at low cost.

In addition to the clothing store, the six-storey building will house a food souvenir shop

on the premises.

The Yellow House site hit the headlines last year when it emerged that a Macau Government Tourist Office promoted exhibition – meant to showcase the diversification of the local economy by displaying products of local designers and companies – was to be displaced because Future Bright demanded a massive hike in rent. The clothing brand will pay a monthly 2.4 million patacas to Future Bright Holdings Ltd, which owns the six-storey building that was once leased to the Macau Government Tourist Office for 14 million patacas a year.

THERE ARE THINGS WE DON’T DO BUT WE DO • Advertising • Branding & marketing consulting • Marketing strategy • Creativity • Design

andidates wanting a shot at Macau’s top job have four weeks as of tomorrow to hand in their application forms.

According to the calendar laid out by the Chief Executive Electoral Affairs Committee, electoral campaigns will run from August 16 to 29, with the Chief Executive election scheduled for August 31. The incumbent Chief Executive,

Fernando Chui Sai On, has expressed his wish to serve a second term in office. He was the sole election candidate five years ago, a scenario local media here predict will happen again this year.

This will be the first year a Chief Executive is elected by a 400-member electoral college after an amendment was passed in 2012 to increase the original number by 100.

Mozambique to visit Macau, study gaming management

A

delegation from Mozambique is set to travel to Macau to study gaming management.

Local media quoted the new assistant secretary-general of the Forum for Economic and Trade Cooperation between China and Portuguesespeaking Countries, Vicente

de Jesus Manuel, as saying that Mozambique has a ‘strategic location for [the] development of the sector.’

And given gambling is legal in Mozambique, the delegation to visit Macau will also ‘gather information’ on how to improve the gaming sector there.

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

Those people and their actions are our inspiration.

•••

info@goldfishmacau.com +853 2833 1258

9

July 7, 2014

Greater China

South Korea trade pact must overcome wide gaps Beijing wants to boost exports of labour-intensive produce such as fruit and vegetables to South Korea Meeyoung Cho

C

hina and South Korea’s vow to wrap up talks on a trade deal by yearend may prove optimistic, as differences over opening markets for petrochemicals, steel and agriculture could delay a deal, a senior South Korean trade ministry source said on Friday.

Trade between the two countries totalled US$230 billion last year and Chinese President Xi Jinping and Korean President Park Geun-hye pledged at summit in Seoul to work towards concluding free trade talks by the end of the year.

However, the senior ministry source familiar with the matter told Reuters that substantial differences remained. China’s Ministry of Commerce could not be reached immediately for comment.

China is the world’s largest exporter and South Korea the seventh. A trade deal would remove or significantly lower tariffs on exports between the two.

Beijing wants to boost exports of labour-intensive produce such as fruits and vegetable to South Korea, where farmers say they have already been battered by a U.S. trade deal that took effect in March 2013.

Producers say they now face pressure to open up the

Some Chinese industries are not willing to open further, such as chemicals, shipbuilding, steel, and auto. Some are complaining about Korea’s protection, like agriculture Tu Xinquan, University of International Business and Economics

Chinese President Xi Jinping (L) and South Korean President Park Geun-Hye (R) attend the Korea-China Investment Forum at Shilla Hotel in Seoul, South Korea, 04 July 2014

country’s rice market under the World Trade Organization agreement.

China also wants more South Korean market access for cars, electronics and steel.

“We are well aware of big concerns in agricultural sectors, along with rice issues,” the source said.

South Korea is one of the few developed countries that has a trade surplus with China, its biggest export market. China accounts for more than 60 percent of South Korea’s petrochemical exports.

Some Chinese sectors that South Korea’s industrial giants covet, such as autos, steel and petrochemicals, are reluctant to open further.

“Chinese across manufacturing sectors are also very concerned about a deal although the degree of the concern varies depending on sectors,” the source added.

China and South Korea launched free trade talks in 2012.

“Some Chinese industries are not willing to open further, such as chemicals, shipbuilding, steel, and

auto. Some are complaining about Korea’s protection, like agriculture,” said Tu Xinquan of the University of International Business and Economics in Beijing.

“But the two governments need something meaningful to show friendship, so I believe the negotiation will finish as announced.”

Beijing and Seoul have been strengthening trade and diplomatic ties - this week’s summit meeting between Xi and Park was their fifth since both took office last year.

Reuters

Regulatory Commission to strengthen delisting rules It is not clear when formal rules will be published, but the draft is typically finalised with modifications within two months

C

hina has issued a draft of new rules to get loss-making companies or those in violation of regulatory practices to delist, in its latest move to improve stock market conditions.

The China Securities Regulatory Commission (CSRC) published the draft rules on Friday and is seeking public feedback.

For the first time, the regulator has offered a variety of choices for poorly-performing companies to apply for delisting, giving them preferential treatment such as priority to re-list if their performance improves. The CSRC outlined the process in a series of documents on its website, www. csrc.gov.cn.

Companies that are reluctant to delist but fall under the regulatory conditions to delist will be forced to do so, and will not be given preferential treatment, the draft rules said.

Those that make false financial declarations in initial public offerings

or earnings reports and companies that post years of losses or see their share prices close under the face value of their shares for 20 days, fall into the category.

The CSRC said 78 firms have been delisted from the Shanghai and Shenzhen exchanges since China allowed for delisting in the early 2000s for reasons including poor earnings performance.

But since the first delisting of a loss-making company, Shanghai Narcissus Electrical Co, in 2001, the progress to kick out poor performers or rule breakers has been slow and has largely been suspended since 2008 until recently, analysts said.

Among other factors, the slow delisting process was because of resistance from various parties, including local governments, to give up their listing resources, analysts said.

Poorly-performing companies were thus allowed to suspend share trading for years to conduct so-called corporate

The draft rules published today reflect improvements against the previous regulations in many aspects Qian Qimin, head of research, Shanghai Shenyin and Wanguo Securities

restructuring to the detriment of investors.

However, there have been signs that regulators are reviving the process as China steps up the pace of market reforms since the country’s new leadership took power in November 2013.

Regulators announced in April the delisting of loss-making shipping company Nanjing Tanker Corp from the Shanghai Stock Exchange after a five-day grace period, marking the first time a company backed by the central government was dropped from a domestic exchange.

“The draft rules published today reflect improvements against the previous regulations in many aspects,” said Qian Qimin, head of research at Shanghai Shenyin and Wanguo Securities. “However, past experiences have shown that in China, it is more important to force the implementation of rules.”

Reuters

10

July 7, 2014

Greater China Premier wants innovation-driven economics China needs to use innovation and intelligence as well as diligence to support its economic upgrading and job creation, Premier Li Keqiang has said. China has abundant human resources, a huge market and deep-rooted culture, so there is much potential to develop its creative industry, Li said during an inspection tour of Changsha, capital of central China’s Hunan Province, and Zhuzhou City in Hunan on Thursday and Friday. China should improve its products through intelligence and bolster job creation and industrial development through innovation to create a better Chinese image on the global stage, he said.

Switzerland gets the edge with China trade deal The deal will cut red tape and tariffs on Swiss farm and industrial During a visit to Brussels last month, Chinese President Xi Jinping won a pledge from the EU to consider an FTA

Vice premier requests more effective investments Chinese Vice Premier Zhang Gaoli has called for more efforts on effective investments and unleashing market vitality through reforms amid economic downside risks. Chinese economic growth was within a proper range up to date and positive results of economic restructuring have emerged despite downside risks, Zhang said during a research tour in northwest China’s Ningxia Hui Autonomous Region and Gansu Province from July 2 to 5. China needs to streamline administration and delegate more power to lower-level governments, he said.

7,313 smuggling cases ferreted in 5 months China’s customs authorities had investigated 7,313 cases of smuggling nationwide in the first five months of this year.

Of the total, 1,045 of them were criminal cases. Customs officials seized 385.1 kilograms of drugs in various types with 211 cases of smuggling drugs under investigation in the period, the General Administration of Customs said earlier this week. A total number of 51 cases of smuggling weapons were under investigation in the period, with 96 firearms and 9,401 bullets seized by customs officials, said the administration.

106 batches of imported toys stopped China’s quality watchdog has stopped 106 batches of unqualified imported toys last year. Some 11,922 batches were examined in 2013, and 0.89 percent of them failed to meet the quality standards, the General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ) on Friday said in a report on its website. The unqualified toys involved a total value of US$2.18 million, but the quality of imported toys was generally good, said the GAQSIQ.

Hong Kong hires banks for first Islamic bond Hong Kong has mandated HSBC, Standard Chartered, CIMB Group Holdings and National Bank of Abu Dhabi to arrange its first Islamic bond issue, IFR reported on Friday. The Hong Kong Monetary Authority is handling the deal, which is expected in September, IFR, a Thomson Reuters publication, said citing sources close to the deal. The Islamic bond, or sukuk, is expected to raise between US$500 million and US$1 billion.

It will likely have a tenor of 5 years and will be targeted at global institutional investors, Peter Pang, HKMA deputy chief executive, told a conference in April.

S

witzerland has one-upped its European Union neighbours with a free trade deal with China that its politicians and business sector say is crucial to boosting ties with the world’s second-largest economy.

The free trade agreement (FTA), in force since Tuesday, is China’s first with a mainland European country and was sealed in 2013 after two years of talks.

“We look to the huge Chinese market, but on the other side, China will find in Switzerland partners on a top technology level and a top innovation level,” said Economy Minister Johann Schneider-Ammann, as he marked the start of the FTA with Chinese officials in Basel.

The deal will cut red tape and tariffs on Swiss farm and industrial exports to China, giving them access to the country’s 1.4 billion increasingly wealthy consumers.

China already imports mainly Swiss machinery, pharmaceuticals, chemicals and watches, and experts expect the FTA to benefit the smalland medium-sized technology and engineering businesses that form the bedrock of Switzerland’s economy.

In turn, Chinese manufacturers will get duty-free access to Switzerland, where their primary products will be cheaper for factories to use.

“Customs duty savings can provide a decisive edge compared to competitors from countries who have no agreement with China,” said Swiss customs service chief Rudolf Dietrich.

Business experts say the deal could pave the way to making Switzerland a centre for Chinese companies in Europe as they increase their international investments.

The accord also bolsters intellectual property protection for Swiss goods

-- a persistent concern for Western firms in China.

“Experience has shown that FTAs give an extra push to trade growth,” Jan Atteslander, head of international affairs at Swiss business federation Economiesuisse, told AFP. “The FTA is also a positive message for global trade because China proves its commitment to open its markets.”

Model for EU deal The deal is China’s second European FTA since it signed one in April 2013 with Iceland. Like Switzerland, Iceland is not a member of the 28-nation EU. Politicians say the Swiss agreement could also offer a model for a future accord between Brussels and Beijing.

“The experience that they have with us over coming years will probably be a step towards an extension to the European Union,” said Schneider-Ammann.

EU divisions are rife, however, between the likes of Britain, a key supporter, and players such as France and Italy, which are wary of a flood of Chinese imports.

Brussels and Beijing have also been locked in tit-for-tat disputes over tariffs, Chinese rules favouring state-run companies and intellectual property.

During a visit to Brussels last month, Chinese President Xi Jinping won a pledge from the EU to consider an FTA, provided that they can wrap up a narrower investment deal first.

“One of the most important issues is political will on both sides to enhance bilateral relations,” Chinese trade envoy Yu Jianhua told reporters in Basel.

“The firm support of industries is also important, based on the actual

The small country is looking for a big market. But the big market, China, we are looking for the quality of the economy Yu Jianhua, Chinese trade envoy

needs of industries on both sides,” he added.

EU exports to China were worth almost US$192 billion in 2013, compared to US$382 billion of imports.

That dwarfs the US$9.9 billion of exports Switzerland sent to China last year, and the US$12.8 billion of goods it bought in return.

‘Small is beautiful’ “The small country is looking for a big market. But the big market, China, we are looking for the quality

11

July 7, 2014

Greater China

on EU

Investment slows amid cooling Chinese property market

exports to China

The slowing investment came as property sales fell 7.8 percent in the first five months of the year

T

he cooling real estate market in China greatly dampened property developers’ willingness to expand investment in the first half of the year, a market analyst has said.

The withering enthusiasm was reflected by a sharp slowdown in investment growth and in particular, a plunge in the number of new projects launched, said Meng Yin, vice secretary-general of the China Real Estate Research Association Market Committee.

Combined with the falling property sales, it is predicted that investment in the sector will remain sluggish in the next few months, Meng said in an article in the latest edition of Beijingpublished Caijing Magazine.

She said that property investment from developers grew 16.4 percent year on year in the January-April period, with the growth rate down by 3.4 percentage points from a year ago.

Government data showed investment in January-May further slowed to 14.7 percent.

Meanwhile, Meng said that new projects launched during January-April stood at 430 million square meters,

430 million

square meters of projects launched during January-April

down 22.1 percent year on year in terms of floor space. Newly launched projects in January-May plunged 18.6 percent year on year.

The slowing investment came as property sales fell 7.8 percent in the first five months of the year, with the decline widening by 0.9 percentage points compared to the first four months, according to government data.

Meng said that the Chinese property market had witnessed adjustments almost every three years since 2005.

Unlike on those occasions, however, the adjustment in 2014 was largely brought about by the market itself, influenced by supply and demand, and prices, she said.

Faced with the new situation, she said that property developers may be forced to adopt more discreet development strategies in opposition of rampant investment and high liabilities. They may also seek to diversify their businesses to hedge against potential risks.

Xinhua

GM expects Cadillac China sales to increase of the economy,” said Yu. “Small is beautiful,” he quipped at the FTA ceremony in Basel.

With the strong Swiss franc and high labour costs making it hard to beat rivals on price, Switzerland’s firms have long made quality their selling point.

China’s growing pool of increasingly wealthy and brandaware consumers is a major draw.

“The free trade agreement will definitively endorse our efforts to anchor our Lindt brand as Swiss premium chocolate in China,” Nathalie Zagoda of Lindt & Sprungli told AFP. For Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry, the deal “provides a framework for our economic relations with China”.

Rising Chinese labour costs are also increasing the need for automation in the world’s second-largest economy, offering new openings for the Swiss machine industry.

“The opportunities are huge,” said Peter Daetwyler, head of Daetwyler Management, which employs 550 people worldwide in the printing machine sector and currently does about a fifth of its business in China.

“The US and the Europeans don’t have an agreement with China.

Switzerland has one, so that’s a milestone,” he told AFP. Jean-Guy Carrier of the International Chamber of Commerce said the agreement could also help draw more Chinese investment into Switzerland.

“There is going to be much more investment by Chinese companies over the next few years, making acquisitions and investing in existing businesses elsewhere,” he said.

AFP

China may overtake the United States as the world’s biggest market for premium cars, consultancy McKinsey & Co has forecast

G

eneral Motors Co expects Cadillac sales in China to rise by at least 40 percent this year, as the U.S. carmaker steps up local production in a market key to transforming Cadillac into a global luxury brand, a senior executive said.

Cadillac sales in China surged 71.7 percent during the first half, outpacing roughly 32 percent growth in China’s premium vehicle market.

GM China Vice President John Stadwick forecast full-year sales of 70,000 vehicles. “If you want to be a global brand, you have to have presence in the largest (auto) market, so there’s complete focus from leadership to ensure that we do it and we do it right (in China),” Stadwick, who’s in charge of vehicle sales, service

and marketing, said in an interview in Shanghai.

To accelerate growth in China, GM will announce a second Cadillac model next month to be locally made, and a third one early next year, he said, declining to give details.

The strategy of local production, which helps skirt high import duties, would enable Cadillac to be priced more competitively in a luxury car market currently dominated by German brands BMW, Audi and Mercedes-Benz, all of which are heavily made in China.

“We believe in building where you sell ... so going forward, you will see fewer and fewer Cadillacs imported and more and more built in China,” Stadwick said, adding that the strategy

gives Cadillac an edge over rivals such as Lexus who don’t make cars in China.

Lexus, the premium brand of Toyota Motor Corp which sold 70,400 vehicles in China last year according to consultancy LMC Automotive, has no plans to make cars there due to its emphasis on quality, Lexus head Tokuo Fukuichi said in April.

Another newcomer, Ford Motor Co.’s premium brand Lincoln, will hit showrooms in China later this year, but Ford hasn’t disclosed any plans to produce it locally.

GM, which also sells Chevrolet and Buick in China, is counting on Cadillac to triple its share of the country’s luxury car market to 10 percent.

Reuters

12

July 7, 2014

Asia Thailand’s state-run PTT appoints new chairman

Commonwealth Bank persists in advising

Thailand’s largest energy firm PTT appointed a new chairman on Friday as part of the military government’s attempts to reshuffle the company and reform the country’s state enterprise system. Piyasvasti Amranand, a former energy minister, was named to the post after a PTT board meeting on Friday, Prajin Juntong, a deputy chief of the ruling military council, told reporters. Areephong Wongcha-um, permanent secretary of the energy ministry, was appointed as a company director. The junta has been scrutinising 56 state-owned companies as part of its attempt to take control of the state enterprise system.

Sri Lanka c.bank sees no overheating Sri Lanka’s economy can achieve its growth target this year without risk of overheating, central bank governor Ajith Nivard Cabraal said on Friday, despite interest rates at multi-year lows. The central bank has been maintaining low interest rates since January and yields in government treasuries have also dropped to multi-year lows. The island nation’s economy expanded 7.6 percent in the first quarter of this year, slowing from 8.2 percent in the previous quarter. The central bank has estimated growth of 7.8 percent for 2014, higher than last year’s 7.3 percent.

Brunei launches new platform to increase oil, gas production Brunei Darussalam has launched a new project aimed at extending the production life of one of its most valuable gas fields in Block B beyond 2025 and it will also increase gas production by 25 percent, the English newspaper Borneo Bulletin reported Saturday. The Maharaja Lela South (MLS) project was launched Friday in a ceremony at the PetroleumBRUNEI Services’ Fabrication Yard in Serasa, marking the beginning of a significant US$1.4 billion investment into Maharaja Lela Jamalulalam Field located in Block B offshore the Sultanate.

Investment opportunities from Asia’s urbanization Industry players at a banking forum on Friday said they see huge business opportunities from urbanization in Asia, with a researcher highlighting themes such as infrastructure, consumer products and agriculture.

The infrastructure sector of the region alone calls for investments of US$2.4 trillion in the years from now to 2030, Fraser Thompson, senior fellow from the McKinsey Global Institute, said at the DBS Asian Insights Conference.

He also expected the agricultural sector to consolidate, generating huge business opportunities. Liew Mun Leong, chairman of the Changi Airport Group, said Asia would need transport facilities, hospitals and airports.

We actually think the idea of giving customers good, affordable advice is a really critical part of what a financial institution ought to be able to do Ian Narev, CEO, Commonwealth Bank of Australia

T

he nation’s largest lender, will continue to provide financial advice to customers even after agreeing to review a decade of guidance that led to some clients losing money.

The change of management and culture, and investment in new systems is “a sign that we like the business,” Chief Executive Officer Ian Narev told Australia’s Nine television network yesterday. The review will be open to customers who received “poor advice” at two units between September 2003 and July 2012, the Sydney-based bank said in a July 3 statement.

“We’ve spent the last four years investing heavily in this business,” Narev said. “We actually think the idea of giving customers good, affordable advice is a really critical part of what

a financial institution ought to be able to do.”

Commonwealth, which has already paid about A$52 million (US$49 million) in compensation to more than 1,100 clients, set up the review after the Senate economics committee last month called for an independent inquiry following an examination of misconduct by financial advisers. The company hasn’t seen a “significant downturn” from the dispute, Narev said today.

The two units -Commonwealth Financial Planning Ltd. and Financial Wisdom Ltd.- have improved supervision and training of advisers, Narev said in the statement. The businesses have about 400,000 clients now and probably had more in the

period under review, Narev said at a news conference on July 3.

Shares of the bank closed 0.5 percent higher at A$81.95 on July 4, capping a 0.6 percent gain for the week.

The Federal government will monitor the implementation of CBA’s review with the focus on “achieving a satisfactory resolution” for the bank’s customers, Finance Minister Mathias Cormann said in an e-mailed statement on July 3.

Any compensation will be determined by losses clients suffered due to poor advice, he said.

Bloomberg News

Thai power producer EGAT plans to venture into Southeast Asia The group is in discussions to build power plants in neighbouring countries and send some of the electricity back to Thailand

S

tate-owned power producer Electricity Generating Authority of Thailand (EGAT) plans to venture overseas and could invest 17 billion baht (US$525 million) in expanding into Laos, Vietnam, Indonesia and other regional markets, a group executive said.

EGAT will be joining private Thai power producers such as Ratchaburi Electricity Generating Pcl and Electricity Generating Pcl in looking overseas for growth as a slowing economy at home saps demand and opposition from locals and environmental activists make domestic expansion harder.

The group is in discussions to build power plants in neighbouring countries and send some of the electricity back to Thailand, Thana Puttarangsri, acting President of EGAT International, told Reuters.

EGAT International is the overseas investment arm of EGAT. EGAT International planned to invest 2.6 billion baht to acquire a 30 percent stake in the 289-megawatt (MW) Nam Ngiep hydro power plant in Laos, which is expected to start

EGAT will develop hydro project in Laos

operations in 2019, Thana said.

In late June, the company signed a contract with the Vietnamese government to develop two coalfired power plants with combined capacity of 1,200 MW in Quang Tri province. It will spend 8.5 billion baht for a 40 percent stake in the two power plants, he said.

EGAT International is also planning to spend 1.5 billion baht on buying a 25 percent stake in a coal mine in Indonesia, Thana said.

Additionally, the company is planning to invest at least 55 billion

baht in two power projects which will have a combined capacity of 8,360 MW. A decision on that is pending clearer regulation by the Myanmar government, he said.

The longer term outlook for power demand in Southeast Asia’s secondlargest economy is bright. Domestic power demand is expected to reach 52,256 MW by 2030 from 26,355 in 2013, while Thailand needs to double its electricity generating capacity to 70,000 MW over the next 16 years.

Reuters

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

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13

July 7, 2014

Asia

Modi prepares huge privatization move Prime minister wants to open up industries like defence, but selling controlling stakes in bloated state enterprises is out of the question Manoj Kumar

Indian Prime Minister Narendra Modi (L) chats with Jammu and Kashmir chief minister Omar Abdullah (R), during the inaugural function at Kashmir, India, 04 July 2014.

I

ndia’s new government will seek to raise up to a record US$11.7 billion in asset sales in its maiden budget this week, a senior government source said, bolstering state finances and buying time for structural reforms to revive a weak economy.

The privatisation target could reach 700 billion rupees, almost equal to all proceeds over the last four years, in a budget Prime Minister Narendra Modi hopes will launch the growth and jobs agenda that in May won him India’s biggest election mandate in three decades.

The budget is due on Thursday.

“The finance ministry has approached different ministries to increase the divestment target,” said the senior official with direct knowledge of the budget process.

The previous government had pencilled in sell-off proceeds of 569 billion rupees (US$9.5 billion).

The 63-year-old premier has made a decisive start by naming a streamlined cabinet, approving a slew of infrastructure projects and embarking on what promises to be a whirlwind first year of trade diplomacy.

But his government has been plagued too by the economic ills that brought down its predecessor: weak growth and high inflation caused by spending too much and investing too little.

Despite the market reforms of 1991 that brought down the curtain on decades of socialist isolation, tracts of Asia’s thirdlargest economy remain off limits to outside investors.

Modi wants to open up industries like defence, but selling controlling stakes in bloated state enterprises is out of the question. They are not competitive and any job cuts ordered by a foreign owner would cause an outcry.

Instead, he will whittle down state stakes in firms that have already been partly sold, like Steel Authority of India Ltd, without surrendering overall control, said the official and other sources familiar with the plans.

Indian stocks have enjoyed a Modi boom, rallying 23 percent this year. Listed state firms have outperformed on hopes that wider ownership would discipline managers and that their bottom line would benefit from a loosening of price controls.

Leading the pack is Indian Oil, which has gained 62 percent in 2014. ONGC, another oil firm, is up 46 percent. Coal India has risen 36 percent.

Tax, subsidy reforms In setting an ambitious assetsale target, the government will face inevitable scepticism from investors who are used to seeing its predecessors miss their privatisation goals.

The Modi government will also have limited scope to put its stamp on this first budget, which has been delayed by the election and will be delivered three months into the budget year to March 2015.

The deficit is already near half the annual goal inherited from the last government: 4.1 percent of GDP. Finance Minister Arun Jaitley is expected to roll out other revenue measures in addition to the asset sales, including a General Sales Tax that would unite India’s 29 federal states into a common market.

The measure would make it easier to do business and, over time, broaden the tiny tax base, which last year was a mere 8.9 percent of India’s US$1.9 trillion gross domestic product - about a quarter of the average for the OECD

club of developed nations.

Some of the “bitter medicine” that Modi has warned Indians to expect would come, the senior government official said, in the form of reductions to subsidies on fuel, fertiliser and food that cost 2.3 percent of GDP.

KEY POINTS Finance Minister Arun Jaitley unveils budget on July 10 Share sales to raise up to 700 bln rupees - source Sales tax plan awaited, subsidies to be squeezed

Jaitley in turn has warned against “mindless populism”, heeding the advice of officials at the Reserve Bank of India (RBI) who have warned him that fiscal laxity would complicate their task of curbing inflation, now in the high single digits.

Fiscal consolidation, predictable taxes and low inflation are key anchors that India needs for economic and financial stability, Governor Raghuram Rajan wrote in the RBI’s recent financial stability report, underlining that message.

Oil companies The government has signalled its willingness to trim its stakes in listed companies by backing a regulatory move to gradually increase the minimum free-float requirement for stocks included in India’s benchmark indexes, to 25 percent from 10 percent now. Statecontrolled firms currently have a 16 percent weighting in the indexes.

“It is the right time to sell stakes in public sector companies as the stock market is booming,” said the official, who requested anonymity as the budget process is confidential.

Jaitley plans to front-load share sales, with a 5 percent stake in Steel Authority of India, worth US$340 million, on the docket for late July, say sources familiar with the deal.

That is likely to be followed by a 10 percent stake in Coal India, the world’s largest coal miner that is now 90 percent state owned. A deal would, based on current market pricing, be worth around $4 billion.

A senior oil ministry official said some of India’s leading oil companies were contenders for the share-sale programme, but did not name any names. A final decision would be taken by the finance ministry.

Deutsche Bank Securities forecasts proceeds of 600-800 billion rupees (US$10-US$13 billion) from asset sales in this fiscal year. That would enable the government to avoid borrowing more even if it raises its deficit target to 4.3-4.4 percent of GDP. Reuters

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July 7, 2014

International Portuguese PM calls for compromise on unemployment Portuguese Prime Minister Pedro Passos Coelho admitted Saturday that the country’s fiscal burden was “very high” while calling for consensus to fight high unemployment and the low birth-rate. He called for understanding and compromise from political, economical and social agents to come up with a “truly national strategy” during a visit to the municipalities of Cinfaes and Arouca in the north of Portugal. Passos Coelho also claimed that Portugal had a high level of social protection, which he said many countries in East Europe didn’t have. Portugal’s unemployment rate stands at around 15 percent.

Total CEO calls for bigger euro role in oil payments Oil major Total’s chief executive said on Saturday the euro should have a bigger role in international trade although it was not possible to do without the U.S. dollar.

Christophe de Margerie was responding to questions about calls by French policymakers to find ways at EU level to bolster the use of the euro in international business following a record U.S. fine for BNP. French Finance Minister Michel Sapin said on Thursday that euro zone finance ministers would discuss ways of boosting use of the euro in international trade in their next monthly meeting today.

Egypt cuts natural gas subsidies to factories Egypt slashed its natural gas subsidies to several industries increasing gas prices by 30-75 percent, part of a broad government strategy to cut back subsidies that eat up to a fifth of its annual budget. The new cut that was announced in the state’s official gazette on Saturday came immediately after a decision to reduce car fuel subsidies, raising mainstream fuel prices up to 78 percent. Saturday’s new decision would increase the price of natural gas to US$8 per one million thermal units for the cement factories and to US$7 for the iron, steel, aluminium, copper, ceramic and glass industries.

EU widens tax probe into multinationals The European Commission is widening its probe into how multinationals use countries such as Luxembourg to cut their tax bill, an official with knowledge of the matter said on Friday. Last month, the Commission warned Ireland, another EU country that offers companies offshore tax status, that it could investigate more companies beyond Apple Inc. as part of its probe into European tax practices.

Luxembourg is used by many multinationals including online retailer Amazon, building equipment maker Caterpillar and UK mobile telecoms group Vodafone.

Venezuela’s El Universal newspaper sold The owners of Venezuelan daily newspaper El Universal said on Saturday they had sold a controlling stake of the company to a littleknown Spanish investment firm, Epalisticia, marking the third sale of a major media group in Venezuela since last year. The sales last year of news channel Globovision and Ultimas Noticias, the nation’s most-read newspaper, resulted in changes to editorial coverage.

At Globovision, which was once ardently anti-government, there was a reduction in coverage of the opposition, and at Ultimas Noticias management changes led to a flood of resignations and dismantling of its investigative unit.

Argentina gets set for U.S. firm debt talks The government of President denounces the funds as vultures bent on crippling Argentina Hugh Bronstein

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rgentina on Friday accused a U.S. judge of being biased in favour of hedge funds that have sued the South American country for full repayment of defaulted bonds, cementing the tough stance it has taken ahead of debt talks set for New York next week.

A series of rulings by U.S. District Court Judge Thomas Griesa leave Argentina just three weeks to clinch a deal with the funds before falling into another default, which would heap financial stress on its already shrinking economy.

The government of President Cristina Fernández denounces the funds as vultures bent on crippling Argentina, Latin America’s third largest economy, for the sake of profit.

“A lot of officials in the United States say its judicial branch is independent,” Argentine cabinet chief Jorge Capitanich said. “But it is not independent of the vulture funds because its decisions show clear partiality.”

The legal fight stems from Argentina’s 2002 default on about US$100 billion in bonds. The financial crisis thrust millions of middle-class Argentines into poverty. The economy snapped back from 2003 to 2008 before being weighed down by high inflation and heavy-handed trade and currency controls.

More than 92 percent of the country’s investors agreed to receive less than 30 cents on the dollar in bond restructurings carried out in 2005 and 2010.

A group of funds rebuffed those terms after buying bonds at deep discounts and sued in U.S. federal court demanding 100 cents on the dollar. They won a judgment from

Friendship between presidents (Cristina Fernández left, Barack Obama right) is not reflected in the latest legal actions

Griesa in 2012 for US$1.3 billion, and Argentina’s appeals have failed.

The government is sending a team to New York today, Monday, to set conditions for talks by way of a court-appointed mediator aimed at settling the case. If the negotiations fail, Argentina would enter default, extending its 12-year absence from international capital markets.

Lack of foreign bond financing has pressured central bank reserves to eight-year lows of US$29.5 billion and stymied investment in roads and ports needed to keep shipments of soybeans and corn flowing from Argentina, the world’s No.3 exporter of the two crops.

Argentine farmers say they will stockpile soy due to financial uncertainty if the government is unable to cut a deal. Hoarding could push world food prices higher.

On June 30 the government was stopped from making a payment on its restructured bonds after Griesa ruled Argentina could not pay any of its creditors until a deal is clinched with the funds that went to court seeking better terms.

The June 30 coupon payment was in limbo after being deposited with the government’s transfer agent, Bank of New York Mellon, but not paid out.

Griesa wants the US$539 million deposit returned to Argentina’s accounts, but the government says the money now belongs to the holders of its restructured paper. Bank of New York Mellon is seeking advice from Griesa on how to proceed.

“As far as we are concerned, Argentina has fulfilled its obligations,” Capitanich said.

Reuters

IMF’s Lagarde sees mild global evolution The IMF’s update of its global economic outlook will be slightly different from the forecasts published in April

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lobal economic activity should strengthen in the second half of this year and accelerate in 2015 although momentum could be weaker than expected, IMF chief Christine Lagarde said yesterday, adding that the Fund did not expect a sharp slowdown in China.

Lagarde said central banks’ accommodative policies could have only limited impact on demand and that countries should also act to boost growth by investing in infrastructure, education and health, provided their debt stays sustainable.

The IMF’s update of its global economic outlook, expected later this month, will be slightly different from the forecasts published in April, she said.

“Global activity is picking up but the momentum could be less strong than we had expected because

potential growth is weaker and investment ... remains subdued.”

Lagarde estimated that growth in China this year would be between 7 and 7.5 percent.

“Despite the many responses to the crisis ... recovery is modest, laborious, fragile, and measures to boost demand, despite the goodwill of central banks, will find their limits,” she told a conference in southern France.

“We must therefore take steps to boost efforts to strengthen growth,” she added. “This is the opportunity in a number of countries to relaunch investment, without threatening the viability of public finances.”

Lagarde said several times in her speech that although now could be the time for some countries to boost public investment, not all of them could afford to do so.

After a first quarter that was “much more disappointing than expected”, there was now a “sensible rebound” in the U.S. economy, she said. Growth should accelerate as long as the Federal Reserve’s withdrawal from easy monetary policy is orderly and there is a precise medium term budget framework.

The euro zone is slowly coming out of recession and it is crucial that countries continue to carry out reforms, including completing the banking union, Lagarde said.

“Looking at emerging Asian countries, and in particular China, we are reassured because we do not see a brutal slowdown but rather a slight slowing of a growth that has become ... more sustainable and that we see at 7 to 7.5 percent this year.”

Reuters

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July 7, 2014

Opinion Business

wires

Europe’s digital reactionaries

Leading reports from Asia’s best business newspapers James Waterworth

PHILSTAR Monetary authorities are likely to raise rates further as inflationary pressures are still high and June’s deceleration is primarily led by the slowdown of housing prices, a leading bank economist said. In its latest global research, HSBC economist Trinh Nguyen said at the July 31 meeting, the Bangko Sentral ng Pilipinas (BSP) will likely increase the main policy rate (reverse repurchase agreement) by 25 basis points, taking the rate to 3.75 percent. Nguyen noted that headline inflation decelerated slightly on lower housing costs. But food prices remained elevated, reflecting supply-side constraints.

THE STAR Property developer Eastern & Oriental Bhd (E&O) is acquiring 55ha of freehold land in Elmina West, part of the City of Elmina, from Sime Darby Property Bhd, the unlisted property arm of Sime Darby Bhd, in a deal worth RM239.8mil. The deal would see E&O develop the land into a “wellness and livable city” with an estimated baseline gross development value (GDV) of RM1.5bil. As part of the agreement, the company would share 20% of the proceeds with Sime Darby should the value exceed the baseline GDV.

Vice President of the Computer and Communications Industry Association

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RUSSELS – Many European politicians praise the Internet.

Unfortunately, their lofty rhetoric often rings hollow.

While calling for a strong digital agenda in one breath, the same politicians, supported by protectionist interests at home, often argue for putting a brake on the Internet’s “disruption” by imposing strict new regulation.

Such double-talk is misguided.

If Europe is to prosper in the twenty-first century, its newly elected leaders need to embrace a positive, concrete pro-Internet agenda. That means signing digital free-trade agreements and creating a true European digital single market out of today’s fragmented 28 national jurisdictions. Long-outdated copyright and licensing laws must be overhauled. New privacy rules must protect citizens and allow innovation; calls for mandatory data localization and local versions of the “Internet” must be resisted.

If carried out, this substantive digital agenda could provide what Europe needs most after the financial crisis: economic growth. According to the OECD, the Internet now accounts for up to 13% of economic output in the US. Every type of business now depends on the digital economy. With a few keystrokes, small companies

selling Polish antiques, traditional Bavarian costumes, and Spanish shoes have burst out of their home markets and reached consumers around the globe.

By unleashing the Internet, financially strapped Europe can create new jobs without taking on new debt. European Commission figures suggest that Europe’s so-called “appeconomy” workforce will rise to 4.8 million by 2018, from 1.8 million in 2013, with revenues more than tripling, to €63 billion (US$86 billion). We also know that some 90% of jobs by 2020 will require workers to have skills in information and communication technologies.

Such success requires breaking down resistance by Europe’s market incumbents and embracing rather than blocking new entrants. Under the European Union’s current fragmented regulatory regimes, companies must obtain separate permission to sell in each of the 28 national markets.

It takes even large companies like Apple and Google years of work to open local stores and launch new offerings.

The growth of small European innovators, such as Spotify, has been stunted. Many new services that allow us to swap, rent, and share everything from taxi rides to second-hand

designer dresses are struggling to get off the ground.

Internet sceptics could also scuttle potentially transformative transatlantic free-trade talks, launched with great fanfare last year.

A growing volume of trade is conducted in bits and bytes that flow over the Internet. A new study by McKinsey finds that digital-driven, knowledgeintensive goods today comprise a full 50% of total global crossborder trade – and are growing at least 1.3 times as fast as other types of trade. If current trends persist, the volume of such goods could triple by 2025.

Yet many Europeans talk of imposing draconian privacy or data-localization rules as a precondition for signing any new free-trade deal.

Such requirements would be diametrically opposed to the Internet’s founding principles of frictionless, borderless access to information. Like Russia and China, Europe would be blocked from the rest of the global Internet, because new services that are unable to build European data centres would be locked out.

In this context, the European Court of Justice’s recent ruling, which recognizes a “right to be forgotten” – and thus requires Google to remove search information, even when legal,

on demand – represents a significant danger. By requiring every search service, including those of university libraries, to make it difficult to find legal information, we risk opening the door to large-scale private censorship.

Such unintended consequences pervade EU competition policy as well. European policymakers are considering a regulation that would require Internet platforms like app stores, social networks, search engines, and ecommerce sites to meet certain publicly specified criteria to achieve economic, social, or political ends. Such regulation, it is argued, would facilitate the emergence of European Internet platforms and guarantee “open access” to users.

By unleashing the Internet, financially strapped Europe can create new jobs without taking on new debt

THE JAPAN NEWS The government will double natural gas imports from Australia and Papua New Guinea via the Pacific Ocean over the next five years, as Japan’s major gas import route currently passes through the South China Sea, where territorial disputes are intensifying among neighbouring countries, sources said. Prime Minister Shinzo Abe leaves Japan on Sunday to meet with the prime ministers of both countries. He is expected to announce support for natural gas development in those countries during the trip.

Imports from Papua New Guinea began just last month.

THE JAKARTA GLOBE Indonesia’s Energy and Mineral Resources Ministry is adamant on its stance on the unprocessed mineral export ban despite Newmont Nusa Tenggara’s decision to take the case to arbitration court. “For us the mineral and coal law is still a priority, it is impossible we break that law,” Deputy Energy Minister Susilo Siswoutomo said on Friday. Susilo said the government would no not relax its policy despite NNT’s challenge. “Newmont filed an arbitration case so we are preparing the strategic steps,” he said.

In fact, these moves might create new barriers to entry, entrenching market leaders and undermining innovation.

Internet markets are typified by dramatic change. Witness how Facebook overtook MySpace in social networks, or how Apple upended the market for smartphones – or how new services and markets are constantly being invented.

Twitter has displaced no one; rather, it supplements and competes with all other modes of communication.

By contrast, EU competition investigations drag on and on. It took ten years to reach a settlement with Microsoft; it may end up taking that long with Google. By that point, the fast-paced Internet environment may well have evolved beyond recognition.

European authorities should avoid shackling digital progress.

Europe’s consumers should be able to buy online songs, watch online video, and shop online for whatever products they choose, and Europe’s businesses should be able to benefit fully from the EU’s giant market. Indeed, letting the Internet blossom not only makes good business sense; it might also help to restore voters’ waning faith in the European project.

The Project Syndicate 2014

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July 7, 2014

Closing Assets not attractive enough for Western investors Mexico’s Senate approves telco competition bill A flurry of initiatives by China to open up its currency, stock and bond markets inside and outside the country has failed so far to allay international investor concerns about performance, accessibility and liquidity. China has been working increasingly rapidly to liberalise its capital markets, with the eventual aim of making its currency fully convertible, giving it a larger role in the global economy.

As its markets open up, they can offer a similar appeal to investors to those enjoyed by many frontier markets - an appreciating currency over the longer term and potentially high returns.

Senate, after more than six months of delays and legal challenges, passed legislation that would force America Movil SAB and Grupo Televisa SAB to face penalties as long as they keep serving more than half of the country’s telephone and TV users. The Senate voted 85 to 12 today after 17 hours of debate to approve specifics of the laws, rejecting most proposed changes to a draft passed earlier by committees. The regulations move to the lower house with the head of the ruling PRI party in that chamber predicting today they will pass on July 8.

Chinese new fiscal system closer The top priority will be increasing the transparency of government budgets

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hina has set a clear timetable to build a modern fiscal system that will help optimize resource allocation, unify market standards, and boost social justice, the country’s finance minister has said.

Major reform tasks concerning the fiscal and tax system will be completed by 2016, before a modern fiscal system will be built by 2020, Lou Jiwei said in an interview with Xinhua.

In Lou’s words, deepened fiscal and tax reforms will not be mere amendments to current policies; rather, they will involve systemic restructuring and institutional innovation. He said the years 2014 and 2015 will be vital in pushing forward the reforms.

With the exception of confidential matters, information concerning government budgets and final accounting of revenues and expenditures by both the central and local governments will be made public, according to China’s reform agenda.

“The disclosure of such information reflects the government’s openness, and is a necessity required by governance by the law and prevention of fiscal

The property tax is being piloted in the cities of Shanghai and Chongqing (pictured)

risks,” Lou said.

Improvements will be made to cover all channels of budgets, including public finance, operating budgets of state-owned assets and budgets of government funds, he vowed.

Meanwhile, the country is planning to lock in six tax categories, including value-added tax (VAT), consumption tax, resources tax, environmental protection tax, property tax and individual income tax as major reform targets.

It will continue with a scheme to replace turnover tax with VAT in more sectors including services,

construction, real estate and financial sectors, Lou said, with turnover tax expected to be eliminated by 2015.

China has been pushing VAT reform by replacing turnover tax since the beginning of 2012 in a bid to push forward structural tax reduction and boost growth of service industries. The reform started with transportation and some modern service sectors, and expanded to railway transportation, postal services and the telecom industry.

Meanwhile, China is speeding up its resource tax reforms in the coal sector by levying tax based on sales value instead of output. Such

a reform was introduced to crude oil and natural gas in November 2011. Lou also said resource tax will expand to the ecological system, including rivers, forests, grasslands, sea coasts and lake shores.

He added that a current administrative charge on pollution will be upgraded to an environmental protection tax, in order to boost environmental and ecological protection through taxation.

According to the minister, the country will also accelerate legislation of a property tax.

Currently, the property tax is being piloted in the cities of Shanghai and Chongqing.

Lou said that a recent

meeting of the central leadership of the Communist Party of China (CPC) demonstrated its pledge to build a comprehensive, transparent and efficient fiscal and tax system.

Priority will also be given to adjusting power and spending responsibilities between central and local governments in a rational manner, adjusting distribution of revenues between them while keeping the current division of financial resources stable, said a statement released after a meeting of the Political Bureau of the CPC Central Committee on June 30.

Xinhua

Finance goes from foe to friend in France

Merkel arrives with trade topping agenda

Internet reshapes Chinese financial landscape

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inance has gone from foe to friend for France’s Socialist government.

During his election campaign in 2011, President Francois Hollande famously called finance his “greatest adversary.” In a speech today, French Finance Minister Michel Sapin called finance “a friend,” quickly specifying that he was talking about “good finance.” “Is there a happy finance in the service of happy investments,” he asked as he addressed an economic conference in Aix-en-Provence, France.

“Our friend is finance, good finance.”

The Hollande government’s new stance on finance comes as the president’s popularity is at a record low and his economic policies have drawn the ire of members of his own Socialist Party and of allied groups. Recovery in Europe’s second-largest economy remains anaemic and joblessness is a record high. Global finance, however, has stuck with Hollande. Investors have piled into French bonds, giving Hollande’s government borrowing costs that are close to the lowest on record. The yield on France’s benchmark 10-year bond is at 1.694 percent.

Bloomberg News

erman Chancellor Angela Merkel arrived in China yesterday for her seventh visit since 2005, with economic ties topping the agenda and a high-powered business delegation in tow. Merkel touched down early Sunday in the southwestern city of Chengdu, where she met local officials, visited a market and toured a factory operated by German car manufacturer Volkswagen.

Merkel is due to arrive later Sunday in Beijing, where she will wrap up the first day of the threeday visit by meeting Premier Li Keqiang for dinner at the Diaoyutai State Guesthouse.

For the EU’s biggest economy, China is a crucial mass market. Chinese companies want its technology and millions of newly prosperous citizens crave German goods ranging from Audi sedans to luxury home appliances.

Germany last year sold goods worth 67 billion euros (US$91 billion) to China, its number-two export market outside Europe after the United States. Imports from the Asian powerhouse, meanwhile, topped 73 billion euros (US$99 billion).

AFP

rom buying dinners through various apps to managing personal finances on smartphones, Internet finance has permeated daily life in China.

Now, a report in the latest edition of Beijingpublished Caijing Magazine has labelled Internet finance an “overthrowing of tradition,” backed by surging transactions online. The value of transactions via online banking services reached 352.1 trillion yuan (US$57.1 trillion) in the first quarter of this year in China, up 7.8 percent from the previous quarter, the report said, citing data from Analysys, a provider of information services for China’s Internet market. The nation’s top four state-owned commercial banks accounted for more than 70 percent of the market share.

Cell phone banking services saw even faster growth in the first quarter, with their value topping 5.5 trillion yuan, up 23.1 percent quarter on quarter, the data showed. China Construction Bank, the country’s second-largest lender, led in mobile banking transactions with a 33.6-percent market share, according to Analysys.

Xinhua