Macau Business Daily, July 29, 2014

MOP 6.00 Closing editor: Sara Farr

Sovereign wealth fund an option T

Publisher: Paulo A. Azevedo

he International Monetary Fund thinks it’s a good idea that Macau establish a sovereign wealth fund. Anselmo Teng Lin Seng of the Monetary Authority here is well aware of the option. The reserves are continuing to grow; and there are other options. Prudent investment remains the mantra

Year III

Number 592 Thursday July 29, 2014

Page 3

www.macaubusinessdaily.com

Percolating nicely

Journey of a thousand miles Another milestone in China. The arrival of new private banks. The Chinese Government is determined to push through reforms as part of its massive restructuring campaign.

Both social and financial

Cafés are mushrooming around the city. But are they a fad like the Taiwanese teas? Not if your heart’s in it, say the experts. Business Daily spoke to owners and managers who think the business is fuelled by young people. They would rather splurge on themselves, they say, than pursue the impossible dream of owning property Pages

4&5

Page

Not quite so important

New horizons Macau’s unemployment rate remains stable. It was 1.7 percent in the 2Q. But workers are baling out of the gaming industry. Hotels and construction are mopping them up Page

MIM launches bank and finance management major

Auto Italia issuing 1.7 bln offer shares Page 2

Page 2

3

HSI - Movers July 28

Name

The VIP gaming segment is shrinking.

Accounting for just 60 percent of Macau’s gross gaming revenue in the 2Q. The lowest proportion since the 4Q in 2005. Cyclical or structural change?

The smart money is on structural Page

7

Chinese investment in Australian tourism set to surge

Perfect storm brewing for MGM Resorts Page 6

8

Page 6

%Day

Bank of Communica

6.22

Hong Kong Exchang

3.43

Tencent Holdings Lt

3.20

Galaxy Entertainme

2.51

China Unicom Hong

2.31

China Merchants Ho

-0.77

MTR Corp Ltd

-0.83

Hang Lung Propertie

-1.06

China Petroleum & C

-1.18

China Mengniu Dair

-1.46

Source: Bloomberg

I SSN 2226-8294

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2

July 29, 2014

Macau

Cherikoff fails mainland food safety standards

MIM launches bank and finance management major

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he Secretary for Social Affairs and Culture, Cheong U, has approved a new major on Bank and Finance Management from the Macau Institute of Management (MIM), it was announced yesterday in the Official Gazette. Classes will be conducted in Cantonese and the course will run for one year.

“Most of our former students are involved in the banking sector. From the feedback they provided us with we also learned that a course more focused on the banking and finance sectors would be very useful for those who plan to work in that area,” Kevin Lei, secretary and registrar of Macau

T

wo batches of almond cakes and egg rolls from local bakery brand R-Cherikoff Food Factory were among the foreign companies disqualified for May imports into mainland China due to failure to comply with food safety standards, Xinhua agency reported quoting information from the General Administration of Quality Superivision, Inspection and Quarantine.

Among the 232 batches of imported food in May, the quarantine authority found a batch of almond cakes manufactured by Macau’s R-Cherikoff Food Factory and exported to Zhuhai containing excess colon bacteria; another batch of egg rolls manufactured by the renowned local food souvenir brand and exported to Zhuhai in the month were also found to contain excessive aluminium potassium sulphate – a chemical compund commonly used as a raising agent in bakery products.

Both batches of the products have already been destroyed upon finding the said excess bacteria and food additives, the quarantine authority noted.

The said almond cakes and egg rolls, which were also sold in Macau, were already recalled, public broadcaster TDM Chinese Radio

quoted Cherikoff as saying. The company also said that it has already reported the recall to the Food Safety Centre of Macau.

Speaking of the problem imports, the company said that the mung bean powder purchased here that was used for producing the almond cakes was the main source of the bacteria found by the mainland authority, which prompted the bakery to switch to a Taiwanese supplier.

The company said it has also stopped using the raising agent imported from the mainland for making the egg rolls and changed it for a U.S. import instead.

Institute of Management, told Business Daily. “The introduction of this major is MIM replying to market demand.”

The course that is going to begin in the next school year will have modules dealing with topics such as financial management, annual results, banking commerce.

“This year, we’re expecting around 10 to 15 students to enrol in this major. However, we expect that the numbers will increase as the years go by,” said Mr. Lei. “The launch of this major is also part of our strategy to offer more courses and to have more qualified workers.”

J.F.

Auto Italia issuing 1.7 bln offer shares Sara Farr

sarafarr@macaubusinessdaily.com

S.L.

business as usual

The amazing world of Air Macau

Pedro Cortés 13 July, day of the final of the FIFA World Cup. Flight NX001 from Beijing to Macau.

Estimated Departure Time (ETD): 4:10 p.m.

Estimated Time of Arrival (ETA): 8:00 p.m.

These were the initial facts I had in front of me.

When I arrived at the check-in, the kind girl informed me that the flight had been delayed 30 minutes. Not a problem. Well, that was what I thought then.

Passed through the X-Ray without the lighter that I used to carry with me.

5:00 p.m. passengers were advised that the flight was ready for boarding. 50 minutes after the ETD. Still acceptable for a normal human being used to disliking planes.

When we were all in our seats, the captain informed us that we would need to wait around one hour because of the restrictions of the control tower. Well, one hour inside a plane is not what we expected, and the situation was starting to be out of the normal, at least for normal air companies.

After one hour we departed. It is now 6:00 p.m. on the Sunday of the final of the World Cup in Brazil and the new ETA in Macau is now 10:00 p.m.

Two hours in the air and the beautiful and well-dressed cabin attendant had not left her seat. Worse, the plane was circling around and around. The sun was supposed to be on my right but sometimes I saw shadows on the left. I wondered whether my geography skills had suddenly been erased from my memory.

They had not. At around 7:45 p.m. we received the information that due to bad weather the flight had to return to Beijing.

Around 8:00 p.m. we were already at the gate of Beijing Capital Airport.

After 30 minutes inside the plane, with people already visibly showing discomfort, the captain announced that he and the crew could not continue as the hours of flight had reached the maximum permissible.

8:45 p.m. we were informed that we could exit the plane and that more information would be forthcoming, including about the crew that was at that time flying from Macau and would replace the existing one.

Readers, of course I left the plane and said I wanted to go to Beijing. It was the best thing I could have done because the flight only arrived in Macau at 6:46 a.m., well after the extra time of the final.

I’m sure that the intention was to prevent me from watching Goetze’s goal or maybe to ask myself why we still have in Macau a flag air carrier, with infinite exclusive rights, that provides this type of service to its customers. Especially when these customers seemingly have no alternative to Macau. There are alternatives, of course, and I chose to fly to Zhuhai the next day.

A

uto Italia Holdings Ltd is looking at raising HK$112.4 million before expenses by issuing 1.7 billion offer shares, according to a filing with the Hong Kong Stock Exchange.

In the filing, the company says it plans on issuing each share at a price of HK$0.065. However, these will only be available to ‘qualifying shareholders’ and not extended to ‘non-qualifying shareholders.’ Under the terms of the open offer, ‘qualifying shareholders’ are those registered as a member of the company. Overseas shareholders are considered ‘nonqualifying shareholders’.

According to the filing, the group had considered other means of raising funds, mainly through bank borrowings and placing new shares; however, ‘the open offer allows the group to strengthen its balance sheet

without facing increasing interest rates and enlarging the capital base of the company.’ This, the filing reads, may ‘facilitate long-term development of the group.’

Auto Italia plans on raising around HK$112.4 million through the open offer, the net proceeds of which are expected to be around HK$110 million.

Of this, around HK$35 million will go towards the repayment of its current outstanding bank loans, and HK$65 million to expand its existing business and future investment in property. The remaining net proceeds, according to the company filing, will go towards the general working capital of the group as well as short-term investments.

Here in Macau and Hong Kong, the company is primarily engaged in the import, distribution and provision of after-sales services of car brands Ferrari and Maserati.

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July 29, 2014

Macau AMCM: More cooperation with PBOC The Monetary Authority of Macau (AMCM) and the People’s Bank of China have concluded an intent to sign ‘in the near term’ a memorandum of understanding to further enhance cooperation in anti-money laundering efforts, such as information sharing and on-site inspections, AMCM informed Business Daily in a written reply. The Monetary Authority’s head, Anselmo Teng Lin Seng, did not confirm with media yesterday if the on-site inspections were of particular reference to the casinos, but stressed that the Authority would deal with “all acts” allegedly involved with money laundering here. The intent to sign the memorandum with the People’s Bank of China came after both parties met at the 17th Annual Meeting of the Asia/Pacific Group on Money Laundering held in the city in mid-July.

Monetary Authority: Sovereign wealth fund “an option” The city’s Monetary Authority has not confirmed whether it will establish a sovereign wealth fund in the short term but said it has considered the option Stephanie Lai

sw.lai@macaubusinessdaily.com

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acau’s Monetary Authority president Anselmo Teng Lin Seng said that establishing a sovereign wealth fund as suggested by the International Monetary Authority is “one of the options” to further diversify the city’s reserves, although he did not confirm if such an option was a near-term goal.

Speaking to media on the sidelines of a Legislative Assembly sub-committee meeting yesterday, Mr. Teng said that the Authority acknowledged that there was room to further diversify the investment portfolio of the city’s increasing fiscal reserve, noting that establishing a sovereign wealth fund is a possible direction.

“The International Monetary Authority assessed our economy and financial system, including the fiscal reserve management status,” said Mr. Teng. “In reference to how the other central banks managed their reserves, they reckoned Macau’s current investment strategy, which is a prudent one, is appropriate.”

“But of course, as our fiscal reserves grow bigger, we can diversify our options and strive for better returns,” he added, although he did not confirm

to Business Daily if establishing a sovereign fund is a near-term goal aside from noting that the Authority is looking into the details of the issue.

In a report released on Friday, the IMF suggested that the Macau Government invest its large fiscal reserves in setting up a sovereign fund in order to protect the city’s economy from future headwinds like slowing gaming revenues, increased social spending arising from the ageing population and structural reforms in mainland China.

The city’s fiscal reserves may top as much as 350 billion patacas (US$43.8 billion) by the end of this year, around 90 percent of Macau’s GDP, according to Business Daily’s estimates.

The Monetary Authority noted in its annual report released in late March that the annualised rate of return is 3.02 percent of its unaudited fiscal reserve held at 168.9 billion patacas by the end of 2013, notably boosted by the investment in onshore yuan-dominated bonds.

“Returns always go with the degree

Gaming industry loses 1,500 workers in 2Q João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he gaming industry lost 1,500 workers - from 81,600 to 80,100 - from the first quarter to the second quarter of the year, the official data on unemployment rates released yesterday by the Statistics and Census Service (DSEC) shows.

According to official figures, there was a 1.8 percent drop in the number of workers in the gaming industry in the period spanning April to June.

This trend may be of concern to casinos as from next year more gaming premises will open in Cotai, which are expected to increase the demand for workers in this sector.

However, Macau’s unemployment rate stood at 1.7 percent from April to June, meaning that there was a year-on-year decrease of 0.1 percent in the number of jobless people, who

now number 6,500 persons. The 1.7 percent rate was also the figure registered during the first quarter of this year.

As for the underemployment rate, it has stabilised at the 0.4 percent figure. The rate that measures how well the labour force is being utilised in terms of skills, experience and availability to work - and that includes situations such as workers that are highly skilled but working in low paying jobs, workers that are highly skilled but work in low skill jobs and part-time workers that would prefer to be full-time – has remained unchanged since the beginning of the year.

If on the one side of the coin unemployment and underemployment rates remain the same, on the flip

side the total labour force employed increased 7.3 percent year-on-year from 357,500 in the second quarter of 2013 to 383,600 in the last quarter.

By industry sector, recreational, cultural, gaming and other services is the largest employer sector in the Macau economy. Of the 383,600 workers, 23.5 percent (roughly 90,146) are related to this sector, followed by hotels, restaurants and similar that employ 13.8 percent (around 52,937) of the workforce.

As the overwhelming demand for construction workers is leading companies to hire more and more, the sector now accounts for 13.3 percent (51,019) of the work force. That notwithstanding, sectors aggregated under classification ‘other’ still account for 17.1 percent (65,596)

of risks that you can bear. Until now, we have adopted a relatively prudent strategy, and that’s why we can be, you see, so to speak, comfortable even during the time of the financial tsunami [in 2008],” Mr. Teng remarked when asked whether the Authority is satisfied with the current returns for the fiscal reserve.

As at the end of May this year, Macau registered a fiscal reserve totalling 240.9 billion patacas, of which the portion in bonds amounted to 116.7 billion patacas and bank deposits amounted to nearly 116.5 billion patacas.

Mr. Teng noted that the Monetary Authority is going to start investing through the Qualified Foreign Institutional Investor (QFII) scheme soon, for which the China Securities Regulation Commission has approved an investment of quota of US$500 million.

QFII status allows licensed ‘foreign’ investors – including institutions based in Hong Kong and Macau – to invest in shares listed on the Shanghai and Shenzhen stock exchanges. Outside investment in mainland China’s stocks markets is limited by quota.

of the Macau workforce.

The casinos’ loss is construction’s gain. While the gambling industry lost 1,500 workers, the construction sector increased its work force by 5.3 percent quarter-on-quarter. In total, there were 50,900 workers employed in this sector from April to June, when in the first quarter that number was 48,300.

But it is not only casinos that are losing workers. This trend is similar in the retail trade (drop of 0.4 percent to 33,900 from 34,100) as well as restaurants and similar activities (drop of 1.5 percent to 26,500 from 26.900).

Hotels and similar activities were also able to attract more workers, registering an increase of 0.6 percent from 26,300 to 26,400 workers.

The statistics published yesterday also show that the median monthly employment earning increased yearon-year by 1,000 patacas for workers.

In general, workers are paid 13,000 patacas, while in the second quarter of 2013 they were paid 12,000 patacas.

Focusing only on resident workers, they are now paid 15,000 patacas, while last year they were paid 14,000.

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July 29, 2014

Macau

Café Society Cafés everywhere – the economic growth of the city may explain the reason why people prefer spending in cafés rather than Cantonese tea restaurants, even though the prices are higher. The business is becoming popular due to “the increasing demand of chasing a better quality of life,” one café owner who benefits from the business announces Kam Leong

kamleong@macaubusinessdaily.com

1

T

he café business started to boom in the city two or three years ago. More and more cafés have opened their doors. Does this mean that Macau will absorb them as part of its culture, like Cantonese tea restaurants, which have long existed and are a ‘must’ here, or will this trend vanish as did the previous trend of Taiwanese tea drinks? Business Daily talked to three café owners and representative, who shared their thoughts on their own businesses and where it was all headed.

‘Appropriate moment’ “My partner and I have been in the F&B industry for many years.

We were the pastry chefs in a 5-star hotel for a long time. We thought it was an appropriate moment to open our own café,” said Benny Tang, one of the owners of Candy Café.

Candy Café opened its doors in March 2013. A little after a year later, Mr. Tang and two of his friends opened their second café in May this year.

“As I know, café is a French word which means a smaller size restaurant that not only focuses on coffee. Hence, we have varieties of food, such as desserts, several main dishes and drinks,” he said. “I believe this kind of café will [attract] a large proportion of customers from the local Cantonese tea restaurants in the near future; as for me, tea restaurants are like markets while cafés are like supermarkets.”

When asked his opinions about the café trend in the city, he thinks that like the previous Taiwanese tea drinks stores which appeared and disappeared very fast, it will probably follow suit. “However, as you see, some of these tea drinks stores are still running well. I think that if people run their business with their hearts, for sure there will be space for them in society.”

“On the other hand, a large number of the current cafés are run by non-F&B people, and I don’t feel optimistic about their development,” said Mr. Tang, predicting that some of them cannot afford the business and will disappear between the end of this year and the middle of next.

“Firstly, they hire people to work for them because they don’t know about the industry, which actually limits their development. In addition, I think some of them are in the business because of their short-term interests not long-term plans,” he explained.

Candy Café features desserts designed by the two experienced pastry chefs themselves. According to Mr. Tang, their customers are primarily young people. During lunch hour, many students and nearby white collar staff go there.

Popularity increasing: café vs. home Mr. Tang told Business Daily that he remains very confident about his own business as well as the café industry as long as the government

does not change its economic policies.

“The high prices of private housing and the shortage of public housing are leading young people to spend their money on travelling and food rather than saving to purchase homes, which they think is impossible.”

Fellow café owner Mr. Lou agrees that the high cost of housing is the reason cafés have become popular.

“In my opinion, most café owners have realised that local consumption ability has increased. And that this increase is due to young people not having enough money to buy their own homes. They choose to spend on stuff with more aggressive prices. For example, they don’t mind spending more to get a more comfortable environment to eat in regardless of whether the quality or the taste of the food decreases or gets worse,” said Mr. Lou, who owns Café Capri.

New but confident Mr. Lou’s café opened at the end of last October, before which he and his three partners had spent nine months preparing. “At the beginning, we thought Macau was lacking places for people to hang out and chat; however, of course, some ideas were changed along with the preparation,” he said.

These young people did not have any related experience before they opened the café. However, they decide to join the industry as they think the requirements for opening a café are fewer than opening a formal restaurant.

“Opening a café doesn’t need a chef with more than ten year’s cooking experience, while a new restaurant may do,” he remarked.

Asked how he perceives cafés, he said, “For us, the café, as its name suggests, is about coffee. Hence, your coffee has to be good. Some owners may put much effort into decorating the environment of their café yet offer food like instant noodles, which I see as only a superior version of Cantonese tea restaurants,” Mr. Lou said.

In addition, Mr. Lou thinks that every café should have its own orientation in the market. “The name of our café, Capri, is the name of an island in Italy. A leisure environment is what we want to bring to our customers. Moreover, we also focus on Italian cuisine. After all, the feature of our café is the Italian style of the island.”

Although being confident about his business, Mr. Lou, like Mr. Tang, thinks that the café trend may follow the path of the previous trend of Taiwanese tea drinks, which disappeared very quickly. “People are always chasing for [something] better. After a period of time, they may change to chase higher class Western restaurants when they can afford more than now,” he said.

Solely Coffee Meanwhile, another café representative, Joyce Vong, describes the café trend as “blossoming

5

July 29, 2014

Macau

2

3

everywhere”.

She is working in the café Communal Table, which features specialty coffee, as does Simple Origin, another café opened by the same group of people.

“When you talk about cafés in Macau, it depends on how you define it. From our point of view, a café is a coffee shop, which is about coffee drinks rather than a place for people to eat or hang out,” Ms. Vong said.

“The reason we opened the café is because we want to make coffee, the drink itself,” she said. “At the beginning of last year, we opened our first café, named Simple Origin.

After a year, we wanted to expand the coffee business so we opened Communal Table,” she said.

Communal Table also serves food, such as sandwiches and baked potatoes, while Simple Origin does not, which Ms. Vong says translates into a broad customer source.

Keen competition She thinks that the competition among cafes is keen here in Macau. “The population of Macau, including the imported labour, is around 600,000 people. Hence, the competition is very obvious as the customer source is not stable even if you count the tourists as a part of the source.”

Although there is competition, Ms. Vong thinks that differences between the cafés actually offer more choices for the customers, “This has to wait for the consumers to [try] themselves. Some people may have an interest in trying many different cafés. Afterwards, they may know which style they really like.”

The Official Provisional Municipal Council of Macau told Business Daily that 131 beverage establishments were registered as cafés in 2014.

According to IACM, owners state voluntarily whether their businesses are café, tea shop, dessert restaurant or Chinese café under the category of beverage establishments. In addition, there is no specific requirement that an establishment has to meet when stating one of the aforementioned options.

Young Entrepreneurs Aid Scheme On the other hand, Business Daily and the owners discussed the government’s Young Entrepreneurs Aid Scheme, which offers interestfree loans of up to 300,000 patacas (US$ 37,500) for entrepreneurs aged between 21 and 44 for eight years to start up their own business.

These owners, who own some five cafés in Macau, all claimed that they had heard of the scheme but had not

4 1. Candy Cafe 2. Benny Tang 3 & 4. Communal table

considered applying on behalf of any of their cafés.

“I think the government has its good intentions; however, this amount of money may not be enough to sustain your business,” said Ms. Vong. “When you open a business, of course you don’t want it to finish in one or two years; instead, you prefer it to sustain. After all, keeping the business running is not an easy walk.”

Mr. Lou said he knew about the scheme yet the application procedures and details are not clear enough, hence he did not plan to apply.

Meanwhile, Mr. Tang said he and

his partners are “too old” and are not qualified to apply.

Currently, there are no specific statistics regarding the total number of applications for the scheme to open cafés. As at July 8 this year, some 29 applications had been filed for restaurants and similar establishments, including cafés, Macau Economic Services told Business Daily by e-mail. The bureau also said that the average amount of loans applied for by these applications is around 300,000 patacas, which is the maximum amount one applicant can get from the scheme.

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July 29, 2014

Macau Brands

Trends

It is here Raquel Dias

Perfect storm brewing for MGM Debt repayments and investment of MGM International Resorts are expected to peak within 2015 and 2016.

According to Fitch, this dangerous combination may compromise the group’s liquidity

newsdesk@macaubusinessdaily.com

E

very new season brings some surprise to the cosmetics and make-up industry. Usually, these are recycled from some other season, repacked and re-branded. Colours and shades change with the trends, but genuinely new products rarely ever see the light of day. We would go as far as to claim that since the introduction of the BB cream - tainted moisturiser, for those less knowledgeable - around two years ago, there has been none.

Even so, every season there are products worth mentioning, and to celebrate summer and the silly season, what better than bold colours? Dior has introduced the It-Line and it is expected to be a big hit in Asia. ItLine by Dior comes in four colours: It-Black, It-Blue, ItPink and It-Purple. The bold colours can be found in two products: It-Liner and ItLashes. Bold colours are not new to products like eyeliners and mascara, but they never stick for very long.

These, however, are quite something as the tip of the mascara brush is supposed to get everywhere. With small bristles to reach the smallest lashes on the lower lid or outer corners of the eye it really makes the peepers pop. The effect is a very retro look, recalling the mod years of the Swinging 60’s.

F

itch is worried about the challenges that MGM has to face in the next two years, the rating agency said in a report.

The world’s third biggest rating company says it is not worried about MGM defaulting on debt in the near term as the operator saw its liquidity situation improve recently. However, the group’s liquidity surges in 2015 and 2016 when the size of debt maturities and projected investments simultaneously reach their peaks.

In 2015 and 2016, the group will face debt maturities of US$2.4 billion (19.2 billion patacas) and US$1.6 billion (12.8 billion patacas), respectively, with US$3.8 billion (30.3 billion patacas) to be paid in two years.

“MGM’s liquidity has improved and we think that a near-term default is unlikely. That said, maturities through 2016 remain formidable especially when considering the somewhat thin Free Cash Flow at the U.S. restricted group level and a heavy project pipeline [about US$2 billion in the U.S. and US$2.9 billion in Macau]” says the report of the rating organisation.

At the same time, the company is expected to invest around US$4.9 billion (39.1 billion patacas): US$2 billion in United States and US$2.9 billion in MGM’s Cotai project, in the Special Administrative Region of Macau. The fact that the company may be short on liquidity concerns Fitch. The situation could be tricky if by 2015 and 2016 there is a deterioration in the capital market.

“At that point, capital spending on project capex will be at peak levels and the 2015 and 2016 maturities are material at US$2.4 billion and US$1.6 billion, respectively. A sharp negative turnaround in the operating environment and/or deterioration in

the capital market conditions around that timeframe could stress liquidity,” it reasons.

MGM International Resorts is a shareholder of MGM China in a joint venture with Pansy Ho, daughter of casino mogul Stanley Ho.

Chinese investment in Australian tourism set to surge

This is likely to double the number of Chinese tourists visiting Australia, which last year stood at around 700,000. The number of Australians visiting Macau in June dropped 5.2 percent to 6,899

CORRECTION In our weekly interview, we ran a story yesterday on pages 6 and 7 featuring Samuel Huang, Associate Professor at the Macao Polytechnic Institute, titled ‘We can never expect Macau to have a diversified economy’. The speaker pictured is Nat Wong, president of Reed Exhibitions Greater China. We apologise for any inconvenience caused.

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ajor Chinese developer Greenland Group told a recent investment forum in Sydney that it was ready to plough up to 4 billion Australian dollars (30 billion patacas) in a raft of new projects in Australian tourism, infrastructure and agriculture. That investment would come on top of its existing 1.5 billion Australian dollars projects in Sydney and Melbourne.

In separate developments, Hong Kong billionaire Tony Fung is proposing an investment of 8.2 billion Australian dollars at Yorkeys Knob near Cairns, which would include a first stage of five hotels with 4,000 rooms and a casino, a shopping centre and golf course. Stage two of Fung’s Aquis resort would include 3,500 rooms and a second casino.

Other important mega-tourism projects include the 1.8 billion Australian dollars Ella Bay in far

north Queensland near Innisfail where there are plans to redevelop a cattle station into an integrated tourism resort and residential community.

Earlier this year, a Chinese developer, ASF China Property Consortium, was named as the preferred developer for the 7.5 billion Australian dollars Broadwater Marine Terminal project on the Gold Coast.

The Australian newspaper reported that the surge in Chinese investment was related to the projected explosion in tourism numbers. Chinese outbound tourism is expected to double from 100 million in 2013 to 200 million by 2020, as the ‘rise of the Asian middle class increases the desire for international travel’.

It referred to an address by Greenland’s president Yuliang Zhang to a tourism investment roundtable discussion in Sydney a fortnight ago when Mr. Zhang said many

corporations in China were paying special attention to Australia for its tourism potential.

The newspaper quoted Tourism Minister Andrew Robb as saying the tourism sector needs to be revitalized to become a major export market for Australia. ‘Tourism and hospitality is undoubtedly one of our great strengths and we are determined to leverage that to a new level to capitalize on the demand coming from Asian markets, including China,’ Mr. Robb said.

Fung’s Aquis resort will reportedly provide 3,750 jobs in construction and 11,000 when fully operational.

The project received Foreign Investment Review Board approval in May and the Aquis Group has taken over the Reef Casino in Cairns and is in talks with the Queensland government about splitting the license to cover the proposed two venues.

7

July 29, 2014

Macau

VIP revenues hit 9-year low Revenues from the VIP sector were 60 percent of total casino revenues in the 2Q in Macau, the lowest figure since the 4Q of 2005. For the first time, mass revenues comprises more than half of those from high rollers.

Is VIP to mass shift structural and not cyclical?

Luis Goncalves

Luis.goncalves@macaubusinessdaily.com

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he weight of the VIP segment in Macau’s gaming revenues dropped to an almost decade low in the second quarter of this year, as casino operators continue to move tables to mass floors, and after the World Cup affected almost exclusively the high roller segment.

The operator’s strategy to reduce its exposure to the highly volatile VIP sector is turning Macau into an increasingly mass market gaming mecca. For the first time, mass revenues in Macau were more than half of VIP’s, the historical incumbent segment here.

According to data from the Gaming Inspection and Coordination Bureau (DICJ) compiled by Business Daily, VIP Baccarat revenues in the second quarter topped MOP54.6 billion, 60.1 percent of all casino gaming revenues.

This is the lowest figure since the 4th quarter of 2005, when VIP baccarat revenues reached 58.7 percent of all casino revenues. Baccarat (VIP and mass) is the game from which casinos make more than 90 percent

of their money in Macau - the ‘de facto’ gaming revenue.

MOP10 billion loss It was a dark quarter for the VIP sector here. In the second quarter, the segment made 12 billion patacas less in revenues than in the previous one (65billion patacas vs. 54.7billion patacas) the DICJ revealed. The drop reduced the VIP presence in total revenues from 63.7 (1Q) to 60.1 percent in the second quarter, the biggest fall since 2005.

Bloomberg analysts emphasise that the figures show that the VIP sector plunge this year is not just a cyclical trend, reflecting the slowdown in China’s economy or the World Cup factor, but a structural change in Macau’s gaming structure; one more oriented to the mass market.

With casinos here shifting tables from the VIPs - a segment highly exposed to economic tides, credit availability and junkets - to the high margin high profit mass tables, the

Macau’s VIP/Mass revenues ratio

2005

latter segment has been on the rise.

Mass market exposure to total revenues has grown for eleven quarters in a row, for almost three years. In the beginning of 2011 (1Q), mass floors were generating 18 percent of gaming revenues here. In the second quarter of this year, it had already reached 30 percent, a record since 2005, the year that DICJ started publishing records.

But that’s not all. For the first time, mass revenues were more than half VIP revenues in Macau, a segment that historically was responsible for 70 percent of total revenues. In 2011, for example, revenues coming from VIP rooms were four times bigger than the ones coming from mass floors, DICJ data show.

Cyclical vs. structural The VIP sector’s fall in the last year has divided investors. Some say it is due to the weak economic data coming out of China and credit restrictions – VIP gamblers depend on credit, unlike mass gamblers. Others

Macau ‘s percentage of VIP and Mass in total revenues

2014

2005

2014 Total VIP

argue that the table shifting from VIP rooms to the mass floors deflated the weight of the segment. Others point to the structural changes in Macau from the VIP to mass gaming market.

Some say the problem is due to the lack of definition of VIP in Macau, injecting a grey zone into revenue distribution. In an interview with Business Daily, this week, Associate Professor of Gambling Studies at Macao Polytechnic Institute Samuel Huang, said the fact that the mass market segment is outgrowing the VIP market seems to be solely related to the lack of a clear definition of the VIP market in Macau.

Other big investors debate the real impact of the World Cup on gaming revenues. According to DICJ, the punch was all on the VIP side.

If VIP revenues dropped almost 20 percent in the second quarter and mass tables remained flat, it was a sign that the gamblers exodus to bet and watch the football games held in Brazil was much deeper among the casinos’ high rolling clientele.

Total Mass

Macau’s gaming revenues Mop million

2005

2014 Total

Baccarat VIP

Baccarat

8

July 29, 2014

Greater China Cross-Strait economic talks scheduled The sixth regular meeting of the Cross-Strait Economic Cooperation Committee (ECC) will be held on August 5 in Beijing, the Chinese mainland’s Association for Relations Across the Taiwan Straits (ARATS) announced yesterday. Zheng Lizhong, convener of the ECC on the mainland and executive vice president of ARATS, and Gao Yan, ECC chief representative and vice commerce minister, will head the mainland delegation to attend the meeting, ARATS said in a press release. The decision was made according to the 11th provision in the Economic Cooperation Framework Agreement (ECFA), a wide-ranging cross-Strait economic pact signed in 2010.

Environment watch strengthened Chinese authorities will focus on environmental protection, sci-tech innovation and improvement of people’s livelihood when evaluating the performance of officials in fulfilling their economic responsibilities, a circular published on Sunday said. According to the document jointly issued by the country’s audit, state-owned asset, and human resources and social security authorities and the Communist Party of China’s disciplinary inspection and organization departments, the economic responsibility audit of Chinese officials would give spotlight to the quality and sustainability of economic and social development.

Premier says downward pressure remains

New private banks underscore reform way Other already active reform measures include a widening of the yuan trading band, a removal of controls on bank lending rates and delegation of power to lower-level governments

C

hina’s decision to approve three new private banks marked the country’s latest efforts to create impetus through deepening reform amid an economic slowdown.

The country’s banking regulator said Friday that it has given the green light for the establishment of three banks wholly funded by private firms,

including Webank by Internet giant Tencent.

All three banks, which understand private firms, will mainly target small companies, according to their founders.

The breakthrough in China’s financial reform came at a time when the country’s growth has slowed from the double-digit pace in the past few de-

cades, and various structural problems including insufficient funding to small firms, which has hindered growth.

Growth picked up slightly to 7.5 percent year on year in the second quarter from the 7.4-percent pace in the first. But the upturn is not yet on a solid footing and momentum has to be consolidated.

Chinese to reach top business travellers position in 2016 China is poised to displace the U.S. as the world’s biggest business-travel market by 2016, aided by accelerating export growth and slowing inflation

The Chinese economy performed reasonably well in the first half of 2014 although downward pressure remains, Chinese Premier Li Keqiang told a meeting of small- and medium-sized business leaders, according to the website of the Chinese government.

A steady improvement in market conditions is expected, Li added, according to the website.

Prosecutors open graft investigations into five local officials Chinese prosecutors have opened separate investigations in five officials for suspected bribery and abuse of power, the Supreme People’s Procuratorate (SPP) said yesterday.

Prosecutors with Tianjin Municipality started an investigation in Ma Baiyu, former deputy head of the city’s water utility department, for suspected abuse of power, said the SPP statement. Zhang Jiping, former vice mayor of Baotou City in Inner Mongolia, is allegedly under investigation for dereliction of duty and bribery. Yuan Yunhua and Zhao Xing’e, two officials with Wuhan City, capital of central China’s Hubei Province, are suspected of abuse of power and bribery and are under investigation.

Mary Schlangenstein

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pending worldwide for business travel will climb 6.9 percent this year to US$1.18 trillion, according to a report released yesterday by the Global Business Travel Association. Growth will accelerate by an estimated 8.6 percent next year and then slow in 2016 through 2018, the GBTA forecast shows.

In China, the increasing pace of exports since mid-2013, consumer prices running below government targets and nominal wage gains that support more spending and profit growth are contributing to an expansion in the market. That contrasts with the U.S., where economic growth has been “stubbornly low,” along with employment and wages, the GBTA said.

“China, along with the other BRIC countries of Brazil, Russia and India, are leveraging their business travel expenditures into more economic opportunities,” said Michael McCormick, GBTA executive director. “We expect to see this shift in business travel spending to continue.”

Spending in Russia may fall more than 5 percent this year, the GBTA said, amid safety concerns and the international sanctions imposed on the country, triggered by the crisis in Ukraine.

Since the GBTA began its study in 1998, the U.S. has been the world’s largest business travel market, although it’s not seen the fastest

expansion. While spending in China increased an average 16 percent a year since 2000 to reach US$225 billion in 2013, in the U.S. it rose 1.1 percent annually to US$274 billion.

Congested airspace Last year, American business travellers spent US$1.20 for every

9

July 29, 2014

Greater China To maintain medium to highspeed growth, Chinese leaders have said on various occasions that the country will seek impetus through three ways - deepening reforms, adjusting economic structure and improving people’s lives.

Setting up private banks is a major move in that direction as finance is regarded as the lifeblood of the economy, making it an important aspect in deepening comprehensive reform.

In addition, small and mediumsized companies create more jobs for the country than state firms, thus playing a big role in raising people’s incomes.

Small firms, which have lost in the race for loans against much stronger state-owned companies, and paid higher rates than their state peers, will embrace more opportunities with the introduction of the new private banks.

Sceptics may argue that what the three banks can do is limited given the large size of the Chinese economy and the great number of small firms. But it is important to note that the newcomers will create a catfish effect in the sector with increased competition. The banking regulator has also made it clear that the pilot program will expand.

China has seen acceleration in the pace of reforms in the past year, including a widening of the yuan trading band, a removal of controls on bank lending rates and power delegation to lower-level governments.

All of these are progressive examples of China’s willingness to experiment different policy approaches to fix distortion in the economy as it pursues steady and sustainable economic growth.

Xinhua

China, along with the other BRIC countries of Brazil, Russia and India, are leveraging their business travel expenditures into more economic opportunities Michael McCormick, GBTA executive director

Steelmakers grow in spite of overcapacity Chinese steel companies are growing despite widespread losses and the government’s efforts to thin the sector

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ince overtaking Japan to become the world’s largest steel producer in 1996, China’s steel production reached new heights in June with record -high averages for daily crude steel output. But the country’s soaring steel production came as the sector struggles with overcapacity and losses amid an economic slowdown.

The country’s average daily output reached 2.31 million tonnes in June, up 1.7 percent from the previous month, according to the latest data from the National Bureau of Statistics (NBS).

Total crude steel output in June was up by 4.5 percent from last year at 69.29 million tonnes, according to the NBS. The output of pig iron, an intermediary product in steelmaking, also rose 2.3 percent to 60.01 million tonnes in June, while rolled steel production expanded by 7.1 percent to 98.05 million tonnes.

In the first six months, China produced 411.91 million tonnes of crude steel, or 3 percent more than a year ago. In the same period, pig iron output grew 0.5 percent year on year to 362.02 million tonnes while rolled steel production increased 6.4 percent to reach 552.25 million tonnes.

While output grew, profits from steel production have been sluggish.

Combined profits of Chinese steel companies in the first half rebounded to 2.27 billion yuan (about 370 million U.S. dollars) following a loss of 2.33

dollar spent by the Chinese, down from US$7.70 in 2000, according to the GBTA, which analysed travel spending in 75 countries for its study.

The projections have implications in areas as diverse as hotel construction and plane purchases by airlines, and if realized will add pressure on China’s already congested airspace, where flight delays run at about 25 percent and only 20 percent of available airspace is allotted to civil aviation.

China is expected to account for half of the increase in Asia’s commercial aircraft fleet to 10,300 in 2020 from 6,000 at the end of 2013, according to Ed Greenslet, who publishes The Airline Monitor.

The U.S. fleet will grow to just over 7,200 from 6,482 in the same period, he said.

Global hotels The Asia-Pacific region is seeing almost double the hotel rooms being added in Europe, the Middle East and Africa, and about 30 percent more than the U.S., Matthew Fry, a senior vice president at Starwood Hotels and Resorts Worldwide Inc., said earlier this month. Many emerging markets have few globally branded hotels, and as these economies grow, demand for accommodation that meets international standards is climbing, he said.

Asia Pacific is the largest regional business travel market, followed

by Western Europe and the U.S., according to the GBTA study. The three regions accounted for 89 percent, or US$984 billion, of about US$1.1 trillion in spending last year.

By 2018, Asia Pacific will gain another 5 percent market share, with Western Europe and the U.S. forecast to lose 2 percent and 3 percent, respectively.

Bloomberg News

billion yuan in the first quarter, according to data by the China Iron and Steel Association (CISA).

However, their steelmaking operations incurred huge losses that were offset by 4.32 billion yuan in investment revenues and 3.88 billion in non-operating income.

The record-high production capacity indicated the government’s efforts to rein in the sector’s growth have been in vain.

This month, the Ministry of Industry and Information Technology (MIIT) again ordered the steel sector to eliminate laggard and excessive capacity by as much as 46.86 million tonnes by the end of September.

2.31 million tonnes

China’s June average daily steel output

Xinhua

Thailand rice exports to China booming A delegation of the department is scheduled to visit China on Thursday to negotiate the balance of the rice supply

T

hailand is looking to release millions of tons of rice to China and a few Southeast Asian nations throughout the latter part of this year.

According to Duangporn Rodphayathi, Thai Foreign Trade Department director general, a quantity of 900,000 tons of rice is yet to be delivered to China under a government-to-government dealing by which China had earlier agreed to buy a total of one million tons of Thai rice.

However, a single volume of 100,000 tons has been delivered to China so far while the relatively huge volume of 900,000 tons is yet to follow under the bilateral rice dealing, the department chief said.

A delegation of the department is

900,000

Tonnes of Thai rice to be exported to China in 2014 2H

scheduled to visit China on Thursday to negotiate the balance of the rice supply with COFCO Limited, a Chinese state firm, she added.

Meanwhile, Thailand will seek an increase in purchase volumes for Thai rice in neighbouring Malaysia preferably under government- togovernment dealings while private Thai rice exporters will look to expand markets in the Philippines and Indonesia.

In addition to the Foreign Trade Department’s rice export plans, the private sector will play a stepped-up role in the expanding of Thai rice markets throughout the rest of this year, according to the department chief.

Top Thai ruler Gen. Prayuth Chan-ocha earlier instructed Thai authorities to look for ways and means to release quantities of rice currently stored up at rented warehouses under a rice subsidy program earlier implemented by a previous Yingluck Shinawatra government.

He chaired a meeting of the Rice Administrative Policy Committee yesterday in a bid to streamline a substantial release of the rice to the world markets.

Millions of tons are stored up at warehouses without signs of being released in substantial volume since the nationwide populist rice program started.

Xinhua

10

July 29, 2014

Greater China

Revival of the builder bonds China’s government is authorizing developer debt sales for the first time in five years in a bid to avoid bankruptcies as the property market cools

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iangsu Future Land Co., a builder of homes in eastern China, sold 2 billion yuan (US$323 million) of five-year AA rated bonds last week to yield 8.9 percent. That’s less than the average 9.73 percent on trust products that many developers relied on for financing after authorities stopped approving onshore note issuance in 2009.

The China Securities Regulatory Commission reversed course in April when it granted four real estate companies the right to sell the securities, after the collapse of a builder south of Shanghai the previous month underscored financing strains.

The government allowed the first mortgage-backed debt sale since 2007 last week, in the latest step to ease restrictions on the industry as new home prices drop in a record number of cities.

“The issuances are obviously an easing signal,” said Xu Hanfei, a bond analyst in Shanghai at Guotai Junan Securities Co., the nation’s third-biggest brokerage. “The CSRC will probably approve more note sales as long as developers have fundraising demand. It would be helpful because bond costs are lower than trusts.”

Issuance returns The first builder to sell debentures onshore after the regulator began granting approvals again this year was Tianjin Realty Development Group Co. The residential and commercial developer issued 1.2 billion yuan of AA rated seven-year bonds in April.

That was the first sale of property bonds regulated by the CSRC, which regulates stocks and bonds, since an

offering by Guangzhou Donghua Enterprise Co. in December 2009.

The securities regulator has also approved bond sales by Wolong Real Estate Group Co., Hubei Fuxing Science & Technology Co., Chongqing Yukaifa Co. and Shanghai Jinqiao Export Processing Zone Development Co. since April.

The pressure on Chinese real estate companies was underscored by the collapse in March of Zhejiang Xingrun Real Estate Co. Developers including China Vanke Co., the nation’s biggest, and Greentown China Holdings Ltd., the largest in the eastern province of Zhejiang, have cut property prices since then to boost sales. The slump comes as economic growth is set to cool to 7.4 percent this year, the slowest in more than two decades, according to the median estimate of economists surveyed by Bloomberg.

Huge debt The move to allow Chinese builders to tap the onshore note market, instead of raising funds from so-called shadow-banking products such as trusts or through international bonds, parallels the first regulatory approvals for newstock sales in about four years. The CSRC said in March that Tianjin Tianbao Infrastructure Co. and Join.In Holding Co. were allowed to sell yuan-denominated A shares in private placements.

Jiangsu Future Land said it will spend the proceeds from its bond sale to repay bank loans and replenish working capital, according to the prospectus. Tianjin Realty Development said it will use the

Property is the single most important sector to the Chinese economy Frank Chen, head of China research, CBRE Group

money it raised to invest in a lowercost housing project and repay borrowings.

“Property companies are facing huge debt burdens,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “If the regulator hadn’t eased, there probably would have been more defaults.”

Weak demand Cooling economic expansion has pushed the yield on China’s benchmark five-year sovereign note down 44 basis points this year to 4.02 percent. The rate on AA rated similar-maturity bonds declined 104 basis points in the same period to 6.55 percent.

Even as overall borrowing costs decline, some developers are still facing a higher premium to sell debt.

While the media company Anhui Radio Film & TV Media Industry Group Co. also issued five-year AA rated bonds this month, its 6.44 percent yield was 146 basis points lower than Jiangsu Future Land’s.

“Demand for bonds issued by private property companies is weak,” said China Merchants’ Sun. “Even though the regulators have eased controls on property companies’ financing, investors are still concerned these companies’ credit risks are too high.”

Housing prices fell in 55 of 70 cities last month from May, the most since January 2011 when the government changed the way it compiles the statistics. New mortgages in Shanghai, China’s financial centre, declined 2.2 percent in the first half, according to a statement posted on the central bank’s Shanghai head office website.

Right move The central bank in May called on the nation’s biggest lenders to accelerate the granting of mortgages to first-home buyers. Some Chinese cities, including the northern city of Hohhot and the eastern city of Jinan, have started to relax property curbs to stimulate the local market.

Allowing bond sales by property companies is part of government easing measures along with the removal of property curbs and the support of mortgage lending, according to Frank Chen, head of China research at CBRE Group Inc., a commercial real-estate services company based in Los Angeles.

“The revival of property bonds is the right move in the long run,” given real estate’s close ties to many industries including cement, steel and even banking, said Chen in Shanghai.

“Property is the single most important sector to the Chinese economy.”

Bloomberg News

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July 29, 2014

Asia

New morning for Philippine Islamic bank A landmark peace deal between the Philippine government and Muslim rebels helps revive the country's south Bernardo Vizcaino

Makati skyline, home of the Al Amanah Islamic Investment Bank

A

peace plan, a lifting of foreign ownership limits and the drafting of new Islamic banking rules in the Philippines could help breathe new life into one of the world's oldest Islamic finance institutions.

Since 1974, Makatibased Al Amanah Islamic Investment Bank has been the only lender in the country offering financial products that obey religious principles such as a ban on interest and gambling.

But while Islamic banks around the globe enjoy rapid growth rates and bumper profits, Al Amanah has failed to post a profit for years, and was ultimately forced to offer conventional banking products just to keep afloat.

The case of Al Amanah highlights the challenges that Muslim minorities face in accessing interest-free banking services outside of Islamic banking's core centres in the Middle East

and Southeast Asia.

Lacking scale and Islamic banking expertise have meant Al Amanah has struggled despite a five-year rehabilitation plan started in 2009 by its parent, the Development Bank of the Philippines (DBP).

In 2012, Al Amanah posted a loss of 30.6 million pesos (US$706,400), although it was an improvement from 2008 when it posted a loss of 124.3 million pesos.

This could change as a landmark peace deal between the Philippine government and Muslim rebels helps revive the country's south, after a 40-year conflict that displaced two million and stunted economic growth.

The agreement, brokered by the Malaysian government, will give the Muslim-majority region known as Mindanao wider powers to control their economy and culture.

In line with the agreement, the central bank is preparing

Since last year, we have received a number of proposals from across Asia, Middle East and Europe, to partner or inquire on a sale Francis Nicolas Chua, officer in charge of investment banking at DBP

dedicated Islamic banking rules.

Earlier this month, the government allowed foreign banks to take full control of local lenders, replacing a cap of 60 percent on foreign ownership.

All these factors are rekindling interest from potential buyers for Al Amanah, said Francis Nicolas Chua, officer in charge of investment banking at DBP. "Since last year, we have received a number of proposals from across Asia, Middle East and Europe, to partner or inquire on a sale."

These have come from both full-fledged Islamic banks and universal banks with Islamic units, said Chua, who did not identify the parties.

"As far as Al Amanah, the government is currently in review of the whole process.

The Government wants to ensure the framework is in place before privatising."

Chua said any potential buyer would have to make a public bid for Al Amanah, as DBP's policy is to go through an open bid process for any sale.

Al Amanah has courted buyers for years not just to inject capital but also to introduce new products and reverse the use of interestbearing products in the bank's portfolio.

Islamic scholars allow such a practice under the concept of darura, or extreme necessity.

So far, however, no Islamic banks have made their intentions public.

Last week, local media reported that Malaysia's CIMB Group Holdings, parent of CIMB Islamic Bank, was planning to take a stake, but when approached

by Reuters a spokesperson at CIMB denied the bank was pursuing such an acquisition.

A source at Al Amanah said a Malaysian group did make a bid in 2006 but this was conditional on the government developing a regulatory framework for Islamic banking within a two-year time frame.

"That didn't happen so they backed away from the bid," said the source who declined to be identified as the matter is not public, although the new developments could encourage new interest.

"Maybe the right people haven't come in yet."

Reuters

Reliance Power to buy Jaypee hydropower The firm has signed a memorandum of understanding to buy the three plants, the entire hydropower business of Jaiprakash, which is part of the Delhi-based conglomerate the Jaypee Group

I

ndia's Reliance Power will buy three hydropower plants from Jaiprakash Power Ventures for an undisclosed sum to cut its dependence on coal, the firm said yesterday.

The deal will make Reliance Power -controlled by billionaire Anil Ambani, the younger brother of India's richest man Mukesh Ambani- the largest private provider of hydroelectric power in India, the firm's statement said.

Reliance has signed a memorandum of understanding to buy the three plants, the entire hydropower business of Jaiprakash, which is part of the Delhi-based conglomerate the Jaypee Group.

The plants will produce nearly 1,800 megawatts of clean energy for Reliance Power, part of the Ambani's Reliance Group, whose empire includes telecommunications and financial services.

The companies did not disclose details of the deal, but one source said Reliance would pay about 120 billion rupees (US$2.0 billion), while

a local business newspaper said the figure was around US$2.5 billion.

The deal follows the collapse last week of an attempt by an Abu

Sardar Sarovar Dam, India, one of Jaypee’s hydropower stations

Dhabi-led consortium to buy two of the plants for about US$1.6 billion, according to local reports.

The Reliance deal comes at a time when many major coal-fired power stations in India are facing possible shutdown because of an acute shortage of the fossil fuel.

India's new government has pledged to boost power and electricity output to meet growing demand from businesses and household consumers and help kick-start the ailing economy.

Blackouts, particularly during peak summer months, are common across vast swathes of India, crimping production.

Shares in Reliance Power were up 2.53 percent at 93.15 rupees, while Jaiprakash Power Ventures rose 4.49 percent to 19.80 rupees on the Bombay Stock Exchange.

Reuters

12

July 29, 2014

Asia N. Zealander to head finance markets group The deputy head of the (RBNZ) has been appointed chair of an important Asia-Pacific central bank group overseeing the region’s financial markets, the RBNZ announced yesterday. RBNZ deputy governor Grant Spencer would chair the EMEAP (Executives Meeting of East Asia-Pacific Central Banks) Working Group on Financial Markets. EMEAP is an organization of central banks and monetary authorities from Australia, the Chinese mainland, China’s Hong Kong, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore and Thailand.

Vietnam attracts US$13 bln in 14 years Stock market has attracted US$13 billion from foreign investors, both individual and institutional ones, in the past 14 years, local Vietnam News daily reported yesterday, quoting sources from the Ministry of Finance. Beginning operations in late July 2000, the southern HCM Stock Exchange (HOSE), the first securities exchange in Vietnam, had only two listed companies and no participation from foreign investors.

Currently, 700 companies are listed at HOSE and another bourse in capital Hanoi. The market capitalization of all listed shares is US$52 billion, about 32 percent of the country’s GDP, reported the ministry.

S. Korean finance minister: local shares undervalued South Korean shares are considerably undervalued compared to the strength of its economy and companies and lower dividend pay-outs than in other countries are mainly to blame, its finance minister said on Monday.

Minister Choi Kyung-hwan made the remark while explaining his ministry’s intention to pressure large companies to pay more of their income as dividends to shareholders or as wages to employees.

Cambodian defence minister flees to Thailand Cambodian Deputy Prime Minister and Defence Minister Tea Banh flew to Thailand yesterday for a two-day visit to strengthen bilateral ties and cooperation. Tea Banh is accompanied by Gen. Meas Sophea, deputy commander-in-chief of the Royal Cambodian Armed Forces, Admiral Tea Vinh, commander of the Royal Navy, and Gen. Soeung Samnang, commander of the Royal Cambodian Air Force. During the visit, he will meet with Thai Army Chief Gen. Prayuth Chan-ocha, head of the National Council for Peace and Order, Supreme Commander General Tanasak Patimapragorn and Defense Ministry permanent secretary General Surasak Karnchanarat.

The sensitive Aquino position After the Supreme Court this month declared partly illegal an economic

T

he biggest political crisis that Philippine President Benigno Aquino has faced in four years in power could damage his image as a crusader against corruption and undermine his ability to deliver on reforms to sustain strong economic growth.

The Supreme Court this month declared partly illegal a 145 billion pesos (US$3.34 billion) economic stimulus fund that Aquino created in 2011 from budget savings, sparking a storm of controversy that has distracted the government from its work.

Economists are also concerned the controversy is slowing public spending because officials are more wary about accusations of recklessness and are subjecting decisions to more scrutiny, putting at risk big infrastructure projects.

“If this leads to a slowdown in spending, the risk to growth is on the downside,” Shanaka Jayanath Peiris, International Monetary Fund resident representative in the Philippines, said on Friday.

The IMF on Friday cut its Philippine growth forecast to 6.2 percent from 6.5 percent set in March, partly because of slower spending after the stimulus scandal

Philippine President Benigno Aquino

SBI mulls share sales for Basel III compliance State Bank of India, the country’s largest lender, is considering share sales in its insurance and asset‑management units to meet tighter capital requirements

W

ith the plan, SBI is set to join companies including KKR & Co.-backed Cafe Coffee Day and Lodha Developers Pvt. that are looking to tap stock markets for funds after India’s benchmark share indexes surged to records this month. The bank needs to raise more than 800 billion rupees (US$13.3 billion) of additional equity capital by 2019 to comply with international standards laid out by the so-called Basel III regulatory regime.

SBI raised 100 billion rupees in January by selling shares to the government and institutional investors to bolster its capital adequacy ratio, in accordance with Basel III guidelines, to 12.44 percent as of March 31.

Government-controlled State Bank owns 74 percent of the capital in SBI Life Insurance Co., with BNP Paribas Cardif holding the remainder. The lender has a stake in

We are in talks with our joint-venture partners regarding the listing of the insurance units Arundhati Bhattacharya, SBI Chairman

SBI Funds Management with Amundi Asset, and SBI General Insurance Co., a joint venture with Insurance Australia Group Ltd. Shares of SBI gained 42 percent this year, after slumping 26 percent

in 2013. The S&P BSE Bankex, a gauge of 12 lenders, climbed 35 percent in 2014.

International investors have poured more than $12 billion into Indian stocks this year amid expectations a new government under Prime Minister Narendra Modi will spur growth in Asia’s third-largest economy. The S&P BSE Sensex Index has jumped 23 percent in 2014, making it the best performer among benchmark gauges in the 10 biggest stock markets.

Initial public offerings in India have raised 1.39 billion rupees this year after falling to a decade low in 2013, data compiled by Bloomberg show The lender is also in discussions with Paris-based Amundi Asset Management, which holds a stake in SBI Funds Management Pvt., for a potential equity issue.

Bloomberg News

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July 29, 2014

Asia

over economy stimulus fund, President Aquino feels handcuffed

broke. The government has set a target of 6.5 to 7.5 percent gross domestic product growth this year, after 7.2 percent last year.

First quarter GDP growth was at its slowest in two years, in part because of weaker state spending which grew an annual 2 percent in the period against 10 percent growth a year earlier.

Henry Schumacher, vice president at the European Chamber of Commerce of the Philippines, said any more delays to muchneeded infrastructure would be a “disaster”.

“There is an over-carefulness in a number of government offices not to move before they are absolutely sure that every angle where integrity could be compromised has been looked at,” Schumacher said.

Chilling effect Jose Rene Almendras, secretary to the cabinet, told a local television station last week the Supreme Court ruling on the stimulus fund had “a chilling effect on everyone”.

Under the stimulus facility, Aquino spent funds saved from cancelled projects on housing and relocation of slum residents, radars

for the weather bureau and infusing capital to the central bank to help it with its market intervention, among other activities.

A portion of the funds was distributed to senators to use on projects of their choice.

The Supreme Court said aspects of the stimulus were unconstitutional.

It did not call any actions criminal, though lawyers say the ruling could open the way for complaints alleging wrongdoing.

Critics said the allocation of funds to senators for their projects cast doubt on Aquino’s commitment to stamp out corruption. And the controversy is having an impact on how officials proceed.

“Everyone who has to sign a document now has to be doubly sure,” Almendras said in the television interview.

Aquino is the only son of highly respected parents: an assassinated opponent of dictatorship and a democracy hero who became the country’s first woman president.

He won the presidency in 2010 on a promise of good governance and fighting graft but has struggled to rid the country of its image as one of the most corrupt in Asia.

Reuters

Australia’s NAB sells UK property loan portfolio NAB said the sale would generate a small gain above net book value and would release about 127 million pounds in capital for the group

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ational Australia Bank Ltd has agreed to sell a 625 million pound (US$1 billion) portfolio of mostly non-performing UK commercial property loans to an affiliate of private equity firm Cerberus Global Investors.

NAB, which has seen its UK business drag on earnings in recent years, declined to disclose the sale price. But it said the sale would generate a small gain above net book value and would release about 127 million pounds in capital for the group.

NAB owns the Clydesdale and Yorkshire Banks in the United Kingdom.

The sale, which includes loans that are either in default, passed maturity or nearing maturity, will cut NAB’s gross loans balance of its UK commercial real estate portfolio by a fifth to 2.38 billion pounds and cut gross impaired loans by nearly half.

NAB and rivals - Commonwealth Bank of Australia, Australia and New

Zealand Banking Group and Westpac Banking Corp - are set to notch up a sixth year of record profits, helped by a focus on plain vanilla mortgages and business lending.

But NAB shares have underperformed its rivals, partly due to problems at its UK businesses.

Its Clydesdale Bank has been compensating customers after discovering in April 2009 it had miscalculated repayments on 42,500 mortgages.

“While pleased with the acceleration of the run-off in the NAB UK CRE portfolio our broader UK operations still face some challenges, in particular in relation to conduct related costs,” incoming Group Chief Executive Officer Andrew Thorburn said in a statement.

Its shares are down 0.7 percent since the start of the year. That compares with a gain of more than 4 percent in the benchmark S&P/ ASX 200 index.

Reuters

India receives Aussie OK for huge coalmine The project, which could potentially be the largest coalmine in Australia and one of the largest in the world, will play a major role in opening up Queensland’s resource-rich Galilee Basin

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ustralia has given the go-ahead to a massive coalmine in Queensland state that, Environment Minister Greg Hunt said yesterday, could ultimately provide electricity for up to 100 million Indians.

Hunt said approval for Indian firm Adani’s A$16.5 billion (US$15.5 billion) Carmichael coal mine and rail project, which has been criticised by anti-coal groups, was subject to 36 conditions.

“The absolute strictest of conditions have been imposed to ensure the protection of the environment, with a specific focus on the protection of groundwater,” he said in a statement.

State officials say the project, which could potentially be the largest coalmine in Australia and one of the largest in the world, will play a major role in opening up Queensland’s resourcerich Galilee Basin.

The development proposes open-cut and underground coal mining some 160 kilometres (100 miles) northwest of Clermont in central Queensland, as well as a 189-kilometre rail link.

It is forecast to produce 60 million tonnes of thermal coal a year for export.

The project is expected to contribute some A$2.97

While some of the conditions imposed by the environment minister are welcome, they cannot stop this mine from being an environmental disaster Ruchira Talukdar, campaigner Singareni opencast coalmines at Manuguru, India

billion to the Queensland economy each year for the next 60 years, and generate thousands of jobs.

“It is estimated the project will provide electricity for up to 100 million people in India,” Hunt added.

The minister said his conditions complemented those imposed by the Queensland government, and would ensure the developers met the highest environmental standards and that all impacts

were “avoided, mitigated or offset”.

The state government has established 190 conditions to protect landholders, flora, groundwater resources and air quality, as well as controls on dust and noise during construction and operation.

Hunt’s conditions on Adani include that it must monitor groundwater changes and ensure a minimum of 730 megalitres of water are returned to the Great Artesian

Basin every year for five years.

The developer must also contribute funding to address cumulative impacts to threatened species and communities.

The Australian Conservation Foundation said the approval was “bad news for water resources, wildlife and the global effort to tackle climate change”.

“Coal from the Carmichael mine will be shipped through the Great Barrier Reef, where

dredging for a new coal export terminal will damage coral and harm marine life,” it said.

The development would also take billions of litres of water from underground aquifers, creating problems for farmers, and destroy part of the remaining habitat of the endangered blackthroated finch, it said.

AFP

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July 29, 2014

International Ryanair sees strong Q1 Irish low-fare airline Ryanair, which hit a weak patch last year, reported a strong recovery but downward pressures on fares, in a quarterly results statement yesterday. The airline raised its first-quarter net profits by one and a half times, it said and raised its forecast for the whole year, forecasting rising passenger numbers and falling costs. Ryanair lifted its profits guidance for the whole of its year running from April to 620-650 million euros (US$833US$873 million), it said in a results statement. That compared with the previous forecast range of 580-620 million euros that was given in May.

Pfizer’s need for deal looms larger

The firm’s vulnerability to cheaper generics and its weak roster of experimental medicines will be on display when the company reports quarterly earnings today Tuesday, reviving interest in its pursuit of AstraZeneca Plc or other deals to fortify its pipeline. The largest U.S. drug maker, whose laboratories have not come up with any big-selling new medicines for a decade, is expected to report significantly lower secondquarter revenue. While many industry watchers expect Pfizer to re-engage with Britain’s AstraZeneca in coming months, some say the U.S. drug maker should consider targets more focused on biotechnology.

Obama could curb corporate ‘inversions’ President Barack Obama could act without congressional approval to limit a key incentive for U.S. corporations to move their tax domiciles abroad in so-called “inversion” deals, a former senior U.S. Treasury Department official said yesterday. By invoking a 1969 tax law, Obama could bypass congressional gridlock and restrict foreign tax-domiciled U.S. companies from using inter-company loans and interest deductions to cut their U.S. tax bills, said Stephen Shay, former deputy assistant Treasury secretary for international tax affairs in the Obama administration.

Reckitt Benckiser prepares med spinoff British household goods firm Reckitt Benckiser (RB) has decided to spin off its pharmaceuticals division, it announced yesterday after a strategic review. The company will float the unit, RB Pharmaceuticals, on the London stock market later this year, it said in a statement which also revealed that first-half net profits jumped by almost a quarter. “We believe that RB Pharmaceuticals has the potential to deliver significant long term value creation as a stand-alone business,” said Reckitt chief executive Rakesh Kapoor in the earnings release.

Russia has to compensate Yukos shareholders Russian Foreign Minister Sergei Lavrov said Moscow would most likely appeal the decision

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he Hague’s arbitration court ruled yesterday that Russia must pay a group of shareholders in defunct oil giant Yukos around US$50 billion for expropriating its assets, a big hit for a country teetering on the brink of recession.

The Hague court said it had awarded shareholders in the GML group just under half of their US$114 billion claim, going some way to covering the money they lost when the Kremlin seized Yukos, once controlled by Mikhail Khodorkovsky.

Tim Osborne, director of GML, welcomed the award, which he said was the largest ever, as “very favourable”.

But Foreign Minister Sergei Lavrov said Moscow would most likely appeal the decision, underlining that the shareholders, who have battled through the courts for a decade, will have to fight further to receive the compensation.

“The Russian side, those agencies which represent Russia in this process, will no doubt use all available legal possibilities to defend its position,” he said when news of the award leaked ahead of the official announcement.

The Permanent Court of Arbitration in the Hague announced that Russia must pay the compensation to subsidiaries of Gibraltar-based Group Menatep, a company through which Khodorkovsky, once Russia’s richest man, controlled Yukos.

Group Menatep now exists as holding company GML, and Khodorkovsky is no longer a shareholder in GML or Yukos.

Khodorkovsky, who is not a party to the action, was arrested at gunpoint in 2003 and convicted of theft and tax evasion in 2005. His company, once worth US$40 billion,

A file picture dated 10 March 2014 shows former Russian oil company Yukos owner Mikhail Khodorkovsky during a meeting with students in Kiev, Ukraine.

was broken up and nationalised, with most assets handed to Rosneft, a company run by Igor Sechin, an ally of President Vladimir Putin.

Separately, The European Court of Human Rights (ECHR) in Strasbourg is expected on Thursday to announce a decision on Yukos’s multi-billiondollar claim against Russia, ruling on ‘just satisfaction’ or compensation, a Yukos spokeswoman said.

Yukos’s application in the ECHR, which is on behalf of all Yukos shareholders, argued that Yukos was unlawfully deprived of its possessions by the imposition of bogus taxes and a sham auction of its main asset.

Kremlin justice In a case that Kremlin critics said offered a stark example of Putin’s increasingly autocratic rule, Khodorkovsky was arrested at gunpoint in 2003 and convicted

of theft and tax evasion in 2005.

Putin justified the move by saying: “A thief must be in jail,” quoting a popular Soviet blockbuster.

Putin pardoned Khodorkovsky in December after he had spent 10 years in jail. He now lives in Switzerland.

The newspaper Kommersant, which earlier reported the Hague ruling, said the court ruled that Russia had infringed an international energy charter, adopted in 1991, that envisaged legal issues for investments in energy sectors.

The court also ruled, according to the newspaper, that Russia had to start paying the compensation by January 2 next year, or face growing interest on the fine.

It cited GML director Osborne as saying GML will force Russia to pay out the compensation “if it wouldn’t make payments within the court-defined timeframe”.

Reuters

E-commerce wants to spread throughout Africa Online retailer Jumia, a would-be African Amazon set up

by German venture capital firm Rocket Internet, is expanding into three new markets - Uganda, Ghana and Cameroon, the company said yesterday

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umia, which launched in 2012, already operates in Nigeria, Morocco, Ivory Coast, Egypt and Kenya, offering up to 100,000 different items for sale from its local warehouses.

The company has recently set up local offices in Uganda after initially launching a service there in February that relied on deliveries from Kenya.

The Ghana and Cameroon sites are set to open within the coming weeks, a spokesman said.

“We know we are early. We are coming to markets which are not as mature in terms of Internet penetration and Internet savviness but still there is a big appetite for this service,” Jumia co-founder Sacha Poignonnec told Reuters.

Berlin-based Rocket Internet is

bidding to create the largest Internet empire outside the United States and China, seeking to replicate the success of Amazon and Alibaba in markets such as Africa, Latin America and Russia.

Global consulting firm McKinsey estimates about 16 percent of subSaharan Africans, or just over 160 million people, are connected to the Internet, compared with nearly 75 percent in Europe and 32 percent in Asia.

A surge in mobile Internet access means that figure is expected to rise sharply in the medium term, helping African e-commerce sales reach US$75 billion by 2025, McKinsey predicts.

Jumia, whose main investors are mobile operators MTN and Millicom

and Sweden’s Kinnevik, promises to deliver products ranging from fashion to consumer electronics in one to five days, even to remote villages.

Poignonnec said there were plenty of opportunities for synergies with MTN and Millicom as they are leading telecoms players in Jumia’s three new markets: “This helps to build a stronger business,” he said.

AIH declined to give figures for sales or hits on its websites, but the company told Reuters in November that Jumia is growing at 20 percent per month and orders had increased from US$50-US$100 per day to millions of dollars per month a few months after its launch.

Reuters

15

July 29, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

After the dollar

José Antonio Ocampo

Former United Nations Under-Secretary-General for Economic and Social Affairs and former Finance Minister of Colombia Professor and Member of the Committee on Global Thought at Columbia University

PHILSTAR The Bangko Sentral ng Pilipinas (BSP) is likely to keep key rates steady when it revisits policy settings on Thursday, UK-based investment bank Barclays said. “With inflation moving lower and the peso getting stronger, we believe the BSP will leave policy rates unchanged,” the bank said in its latest Emerging Markets Weekly report. Inflation has slowed down in June to 4.4 percent after hitting a 30-month high in May as increasing food prices were tempered by the lower rise in housing and utility rates.

THE STAR The Energy Commission (EC) and 1Malaysia Development Bhd (1MDB) have dismissed speculation of new power plants being proposed by the sovereign wealth fund. The EC has denied receiving any proposal from 1MDB to build two mega power plants of 2,000MW each, while 1MDB has described the proposals as purely speculative. “We would like to state that the EC has not received any proposal from any party regarding the issue,” the power-sector authority said in an email to StarBiz. As for 1MDB, it says it would not comment on market speculation

THE PHNOM PENH POST Cambodia Airlines, Royal Group’s airline start-up venture with partner Philippine Airlines (PAL), has again been thrown into doubt with Cambodia’s aviation authority on Sunday saying neither party had yet applied for the necessary certificate and questioning whether the US$10 million deal is still in play. Keo Sivorn, director general at the State Secretariat for Civil Aviation (SSCA) said neither firm had initiated the application process for an Airline Operations Certificate (AOC) – Cambodia’s foremost qualification for airline operations – for the proposed joint venture. Sivorn added that the future of the project was in question altogether.

THE AGE BHP Billiton is set to undertake a heap leaching trial at Olympic Dam in the hope it may unlock the enormous and complex ore body in the South Australian outback. BHP already operates an underground mine for base metals and uranium at Olympic Dam, but has long held ambitions to build one of the world’s biggest open cut mines on site to tap into the rest of the giant ore body. Plans to spend close to US$30 billion (A$31.9 billion) expanding the mine were deferred in 2012.

Mount Washington Hotel Resort at Bretton Woods witnessed the birth of the IMF 70 years ago

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EW YORK – It is symbolic that the recent BRICS summit in Fortaleza, Brazil, took place exactly seven decades after the Bretton Woods Conference that created the International Monetary Fund and the World Bank. The upshot of the BRICS meeting was the announcement of the New Development Bank, which will mobilize resources for infrastructure and sustainable development projects, and a Contingent Reserve Arrangement to provide liquidity through currency swaps.

The Bretton Woods Conference marked one of history’s greatest examples of international economic cooperation. And, while no one can say yet whether the BRICS’ initiatives will succeed, they represent a major challenge to the Bretton Woods institutions, which should respond. Rethinking the role of the US dollar in the international monetary system is a case in point.

One key feature of the Bretton Woods system was that countries would tie their exchange rates to the US dollar. While the system was effectively eliminated in 1971, the US dollar’s central role in the international monetary system has remained intact – a reality that many countries are increasingly unwilling to accept.

Dissatisfaction with the dollar’s role as the dominant global reserve currency is not new. In the 1960s, French Finance Minister Valéry Giscard d’Estaing famously condemned the “exorbitant privilege” that the dollar’s status bestowed upon the United States.

The issue is not merely one of fairness. According to the Belgian economist Robert Triffin, an international monetary system based on a national currency is inherently unstable, owing to the

resulting tensions among the inevitably divergent interests of the issuing country and the international system as a whole.

Triffin issued his warning more than 50 years ago, but it has recently gained traction, as China’s rise has made the world increasingly disinclined to tolerate the instability caused by a dollardenominated system. The solution, however, lies not in replacing the dollar with the renminbi, but in strengthening the role of the world’s only truly global currency: the IMF’s Special Drawing Rights.

Following the creation of SDRs in 1969, IMF members committed to make them “the principle reserve asset in the international monetary system,” as stated in the Articles of Agreement. But the peculiar way in which SDRs were adopted limited their usefulness.

For starters, the separation of the IMF’s SDR account from its general account made it impossible to use SDRs to finance IMF lending. Furthermore, though countries accrue interest on their holdings of SDRs, they have to pay interest on the allocations they receive. In other words, SDRs are both an asset and a liability, functioning like a guaranteed credit line for the holder – a sort of unconditional overdraft facility.

Nonetheless, SDRs have proved to be useful. After initial allocations in 19701972, more were issued to increase global liquidity during major international crises: in 1979-1981, in 1997, and, in particular, in 2009, when the largest issue – the equivalent of $250 billion – was made.

While developed countries, including the US and the United Kingdom, have drawn on their allocations, the major users have been developing and, in particular, low-income

China’s rise has made the world increasingly disinclined to tolerate the instability caused by a dollardenominated system. The solution, however, lies not in replacing the dollar with the renminbi, but in strengthening the role of the world’s only truly global currency: the IMF’s Special Drawing Rights

countries. In fact, this is the only way in which developing countries (China aside) share in the creation of international money.

Several estimates indicate that, given the additional demand for reserves, the world could absorb annual allocations of $200-300 billion or even more. This has prompted many – including People’s Bank of China Governor Zhou Xiaochuan; the United Nations-backed Stiglitz Commission; the Palais-Royal Initiative, led by former IMF Managing

Director Michel Camdessus; and the Triffin International Foundation – to call for changes to the international monetary system.

In 1979, the IMF economist Jacques Polak, who had been part of the Dutch delegation at the Bretton Woods conference, outlined a plan for doing just that. His recommendations include, first and foremost, making all of the IMF’s operations in SDRs, which would require ending the separation of the IMF’s SDR and general accounts.

The simplest way to fulfil this vision would be to allocate SDRs as a full reserve asset, which countries could either use or deposit in their IMF accounts. The IMF would use those deposits to finance its lending operations, rather than having to rely on quota allocations or “arrangements to borrow” from members.

Other provisions could be added. To address developing countries’ high currency demands, while enhancing their role in the creation of international money, a formula could be created to give them a larger share in SDR allocations than they now receive.

The private use of SDRs could also be encouraged, though that would likely be met with strong opposition from countries currently issuing international reserve currencies, especially the US. Keeping SDRs as pure “central-bank money” would eliminate such opposition, enabling them to complement and stabilize the current system, rather than upend it.

Just as the Bretton Woods framework restored order to the global economy after WWII, a new monetary framework, underpinned by a truly international currency, could strengthen muchneeded economic and financial stability. Everyone – even the US – would benefit from that.

The Project Syndicate 2014

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July 29, 2014

Closing Ginger prices jump as output falls

10 million yuan for fixing fast food fraud

Prices in China have been rising this year as output has fallen, prompting repeated calls for the building of a better information system to protect the interests of both farmers and consumers. According to information on the trading platform of agricultural products, ginger prices were quoted at around 13 yuan to 14 yuan per kilogram, almost at the same level of pork prices. Compared with the same period last year, prices have doubled. Qiu Fengyi, an analyst, attributed the price rise to falling production as farmers have reduced plantation due to the sluggish market in the previous years.

OSI Group says that they will spend 10 million yuan over 3 years on a food safety programme in Shanghai. McDonald’s outlets in Beijing and Shanghai have yanked their flagship burgers off the menu after a key US supplier recalled products made by its Shanghai factory, which is alleged to have used expired meat. Authorities in Shanghai just over a week ago shut a plant owned by privately held OSI Group for mixing out-of-date meat with fresh product and later detained five officials from the OSI subsidiary which operated it, Shanghai Husi Food Co.

Robots rise in Chinese manufacturing Industrial robots are assuming more and more prominence in China as the country’s manufacturing industry is stymied by a severe worker shortage and soaring labour costs

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hina bought one fifth of the world’s industrial robot output in 2013, overtaking Japan as the biggest buyer of such technology, according to statistics released by the China Robot Industry Alliance (CRIA) recently.

Some 36,860 industrial robots were sold in the Chinese market last year, up 36 percent on an annual basis, according to the CRIA. The passion for robots comes as Chinese businesses face pressure from a lack of manpower. A survey earlier this year showed a shortfall of 123,300 workers in the industrial southern Chinese heartland of Guangzhou, Guangdong Province. A similar warning was issued by the Fujian provincial government. According to the province’s human resources and social security bureau, it faced a shortfall of 80,000 labourers after the Spring Festival holiday, a time of high turnover among China’s army of migrant labourers.

Governments at various levels in China have announced new strategies to support the production and application of robots, hoping

developed to become a main business in the province by the end of 2020, when it is hoped it will have generated about 10 billion yuan (US$1.6 billion) in revenue.

Under the wing of governmental support, the fledgling market is gaining momentum in a variety of localities.

For instance, Wuhan East Lake High-tech Development Zone of Hubei, is already home to 40 companies engaging in robotic technology, and they are trying to attract companions to build an incubator for industrial robots. If successful, it will become the first place in China where industrial robots are designed, programmed and built on a large scale.

Meanwhile, Shanghai, Chongqing, Anhui and Guangdong have all listed developing the robotics industry as priorities on their agendas, while more than 30 cities have established production bases for robots. the technology can make businesses more profitable and steer local economic development.

Last week, the government of central China’s Hubei Province issued a circular stipulating robotics should be

Efficiency boost As Chinese enterprises feel the pinch of the lack of affordable labour, the

emergence of robots seems to offer an efficient way to ease the pain.

In the injection moulding factory of Gree Electric Appliances Inc. of Zhuhai in Guangdong, raw plastic is turned into components for air conditioners in an automated process. Robotic arms then place the finished parts on a conveyer belt, while robots also transport goods in the bustling factory.

Almost everything is done by robots, with only packaging left to be handled by human workers, slashing the number needed by the largest maker of home air conditioners in China while making the factory more efficient.

The same craze for robots can be found in Guangdong’s Dongguan City, dubbed the “Factory of the World.”

According to a government survey, 66 percent of the city’s companies have purchased robots in the past five years.

Of those surveyed, 92 percent have plans to increase such investments or to begin using robots in production.

S. Korea to keep expansionary policy

HK index reaches highest level in 3 years

Philippine budget deficit hits US$1.44 billion

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outh Korea’s finance minister said yesterday that the country will keep an expansionary economic policy till at least 2015 to boost the lacklustre domestic demand caused by the deadly ferry disaster.

Choi Kyung-hwan, Deputy Prime Minister for Economic Affairs and Finance Minister, said at a forum that it will be necessary to maintain an expansionary policy, both fiscal and monetary, for the time being.

The minister noted that the expansionary policy will not be restricted to the second half of this year, but it should be maintained till at least next year and, if necessary, later on.

Bank of Korea (BOK) also had recognition over the need for an expansionary policy, Choi said, adding that the central bank will make an appropriate response to such recognition.

His comments came as the country’s already fragile domestic demand became sour further after the deadly ferry disaster, which left more than 300 people, mostly high school students, dead or missing.

Xinhua

enchmark index finished at its highest level in more than three years yesterday, as Chinese banks jumped after a Reuters report said the country’s fifth-biggest bank by assets planned to seek more private investors. The Hang Seng Index closed up 0.9 percent at 24,428.63 points, its strongest since November 2010.

The China Enterprises Index of the leading offshore Chinese listings in Hong Kong climbed 0.7 percent at its highest close since December 11.

China’s Bank of Communications Co Ltd (BoCom) plans to sell stakes to private investors under a government reform aimed at letting private capital play a bigger role in the economy, two people familiar with the matter told Reuters on Friday.

The bank’s Hong Kong listing jumped 6.2 percent to an almost 8-month high, leading gains on the Hang Seng. Other Chinese banks were broadly stronger, with the “Big Four” state banks adding 1 to 3 percent.

The sector was further supported by the issuance of preference shares by the country’s biggest lender Industrial And Commercial Bank Of China.

Reuters

Xinhua

he Philippine government incurred a budget deficit of 62.5 billion pesos (US$1.44 billion) in June as spending rose by nearly half during the period, the Finance department said yesterday. The Finance department said a 44-percent hike in disbursements last month brought the country back to a budget deficit for the first semester. Government spending in the January to June period went up by 11 percent.

“The government’s efforts to boost revenue collections have allowed us to ramp up spending,” Finance Secretary Cesar Purisima said in a statement on yesterday. The June deficit rose by more than six-fold from 8.5 billion pesos (US$196.15 million) recorded in the same period last year. This brought the country’s fiscal position in January to June to a shortfall of 54 billion pesos (US$1.24 billion), up 5 percent year on year.

Collections of revenue-generating agencies rose by 6 percent on year to 138.6 billion pesos (US$3.19 billion) in June. This brings year-todate collections to 933.7 billion pesos (US$21.54 billion), 11 percent higher than a year before.

Xinhua