Macau Business Daily, Aug 21, 2014

MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 609 Thursday August 21, 2014

Chief Executive to prioritise housing H

Year III

e promised yesterday that housing was at the top of his agenda. Chui Sai On said combating price hikes in Macau would be seriously addressed. The sole candidate in the Chief Executive election undertakes to review a raft of laws. Construction regulations will be brought up to date. And the relationship between supply and demand for private and public housing will be thoroughly examined PAGE

Mainland China adapting to shark fin ban

Flying on fumes www.macaubusinessdaily.com

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PAGE 7

Foreign currency deposits up 30 pct

Week after week it’s getting more real. Gaming revenues in Macau are headed for another flat to negative month. August performance is shaky, with declining VIP business and weakness in the mass segment.

Uncertainty will hover until the last quarter, pundits predict

PAGE 6

China LotSynergy profits jump 35 pct Page 4

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Macau boosts Keck Sang Bricks and mortar do it again. Hong Kong-listed property investment firm Keck Sang saw its first half profit rise by 12 percent. The growth in rental income from their properties in Macau keeps on giving

August 20

Name

%Day

Hang Lung Propert

3.35

Hong Kong & ChiNa G

3.15

BOC Hong Kong Hold

2.97

Sino Land Co Ltd

2.79

Wharf Holdings Ltd/T

2.76

Wynn doubles design budget

China Mobile Ltd

-1.15

China Mengniu Dairy

-1.43

China Unicom HK

-1.49

CNOOC Ltd

-1.56

Lenovo Group Ltd

-2.83

Wynn is splashing the cash. Wynn Macau will spend HK$156 million on design services this year. Wynn Palace in Cotai gets major attention. While Wynn Macau on the Peninsula gets a sweeping makeover. The size of 2014’s design budget equals that of 2012 and 2013 combined; and is twice the original slated for 2014

Source: Bloomberg

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Prices up 6 percent in July

HSI - Movers

I SSN 2226-8294

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Inflation in Macau posted 5.92 percent last month.

Housing prices skyrocketed again, more than 11 percent.

While food was 6 percent more expensive than a year ago. Some commodities were cheaper but overall prices went north PAGE

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MSCI touches the sky

Brought to you by

The MSCI Hong Kong Index has reached a 6-year record. Rebounding 21 percent from a February low.

The Index yesterday surpassed its all-time high reached in October 2007.

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August 21, 2014

Macau

Flat August Gaming analysts are expecting gross gaming revenue to be close to flat or negative during the month of August.

Market predictions are based on the decline of the VIP market and a slower growth in the mass market João Santos Filipe

jsfilipe@macaubusinessdaily.com

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rom August 1 to 17, Macau table-only gross gaming revenue was MOP15.9 billion, according to a report released by Sterne Agee. The brokerage says the run-rate for the month, that includes slot machine revenue predictions, is 30.3 billion patacas, 1.5 percent less than in the equivalent period of last year (30.7 billion patacas).

“August 12 through 17 daily table GGR showed a 1.3 percent decline from the first 11 days. Overall, we believe the month-to-date GGR check is more or less in line with cautious near-term investor expectations.

At less 1.5 percent year-on-year, August would end in a growth of 6.6 percent month over month versus the historical average of 5.7 percent”, the Sterne Agee report reads.

However, for Sterne Agee gross gaming revenue growth for the first seventeen days of the month does not change the outlook for the whole

of August, which remains within a growth of 2 percent and a decline of 3 percent year-on-year.

Wells Fargo also believes that from the first week of the month to the second there was a decline in gross gaming revenue. According to the investment bank report, the average daily revenue drop was one percent - from 991 million patacas to 983 million patacas within a week.

The American stockbroker expects

Macau gaming revenue growth to remain ‘relatively flat’ during August.

This could imply a negative growth of 7 percent in the VIP market and10 percent growth in the mass market.

Focusing on the third quarter, Sterne Agee is demonstrating caution.

They predict that gross gaming revenue will fall 3 percent due to a drop of 14 percent in the VIP market and a growth of 20 percent in the mass market. “We continue to anticipate

the worst market growth results in mass/VIP since 3Q09/2Q09” they said.

As for Wells Fargo analysts, their attention is more focused on October onwards. ‘Trends are to remain ‘rocky’ through October. With slowing mass growth in July and few signs of improvement in August, trends have turned from ‘choppy’ to ‘rocky’. In general, we expect Macau trends and uncertainty to persist into Q4’, it asserts.

The negative outlook for the second half of the year is explained by the Transit Visa policy to enter Macau that is thought to be affecting the premium mass market. In addition, Beijing’s anti-graft policy is said to be exerting an impact on players’ sentiments and spending.

In October, the smoking ban on mass casinos floors will come into effect. The result of this measure is considered unknown for Wells Fargo but after that catalysts are expected to start turning positive for the gaming industry.

Even if for the next months there is a general trend to expect results to be flat or negative, the future is still considered bright for Macau.

“We view calendar year 2014 as a transition year in Macau ahead of multiple years of sequential market growth driven by visible, high-margin mass volumes”, Sterne Agee posits.

As for the analysts of Wells Fargo, there is no reason Macau should face a bleak future. ‘We remain positive on the long-term Macau secular growth story as Macau is still significantly under-penetrated”, they predict.

Galaxy bets on VIP market While the market trend is to reduce the space allocated in casinos to VIP players and boost the mass market segment, the group owned by Lui Che Woo is adopting a different strategy João Santos Filipe

jsfilipe@macaubusinessdaily.com

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alaxy has decided to expand its resources into the VIP market, sacrificing mass market spaces in the second quarter of the year.

This trend, which runs contrary to its competitors, has paid off. According to the gaming group’s VIP metrics, Galaxy outperformed in this segment, registering a 27 percent year-on-year growth against a market decline of 6 percent.

This strategy has led Union Gaming to believe that Galaxy is building its way to being the new home for displaced VIP operators, which will end up benefiting the company.

“Given Galaxy’s long-term stature as a VIP-centric operator, we would expect the company’s VIP segment to outpace the market as a whole for the foreseeable future – especially in the context of some of its peer group seemingly placing a slightly lower focus on VIP lately”, Union Gaming analysts predict. “We are currently modelling 7.5 percent VIP gross gaming revenue growth for Galaxy in 2H14 versus declines across the company’s peer group”, they added.

In April, two new VIP rooms were added to the Galaxy Macau casino, as the company sacrificed lower-

yielding tables. Until the end of the year, Galaxy will increase its VIP capacity by adding extra VIP rooms at Galaxy Macau and adding another in StarWorld Casino.

However, the strategy of improving the group’s VIP market gaming revenue is affecting mass market growth, where the group trails its rivals. According to Union Gaming, mass market table games gross gaming revenue grew 21 percent year-on-year but declined 8 percent sequentially.

“This performance was below market-wide trends at plus 32% yearon-year and less 2% sequentially, due in part to a likely reallocation of some mass market tables into VIP”, the analysts explained.

Galaxy announced last Tuesday that during the first half of the year the group’s revenue had increased 25 percent year-on-year to HK$38.4 billion.

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August 21, 2014

Macau

Wynn Macau doubles design budget The operator has revised up design costs this year to HK$156 million as Wynn Palace prepares for its grand opening and Wynn Macau undergoes drastic renovation.

The size of 2014’s budget equals that of 2012 and 2013 combined.

Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

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ynn Macau announced yesterday that it is doubling the design costs this year to HK$156 million for its two major properties here – Wynn Macau and the upcoming Wynn Palace – which are undergoing sweeping renovations or preparations for opening, respectively.

In a filing submitted yesterday to the Hong Kong Stock Exchange, the operator, run by Steve Wynn, said it is revising up its design budget for 2014 to HK$156 million (US$20 million). The figure is double the budget announced in September 2011, when the gaming operator said it expected to spend HK$78.8 million or US$10.1 million in design costs this year.

Wynn Macau announced that the new cap for costs was related to new design services required for Wynn Palace, the company’s

new property in Cotai set to open around Chinese New Year 2016 and also includes an update on the Palace project, which was still on the drawing board in 2011 when the budget was first announced. The major renovation works for Wynn Macau this year was also a factor for revising up the budget. ‘An increase in the level of design services required by the group in connection with Wynn Palace compared to the amount initially projected when the original 2014 Annual Cap was first set in 2011 . . .and renovation works at Wynn Macau’ dictated the increase in budget, the operator said yesterday.

With the new updated budget, Wynn Macau will spend in this year alone the same on design services as in the two previous years combined. According to Wynn’s filing, in 2012 and

2013, the operator spent HK$153 million on such services. The amount paid by Wynn Design & Development totalled HK$70.6 million in 2012 and HK$83.6 million

in 2013.

While the new tranche of casinos will not open in Cotai until next year, most of the operators are already renovating their venues on

the Peninsula in order not to lag behind the competition.

Wynn Macau is undergoing a sweeping renovation and the company said recently it had spent US$12 million on renovation works in its Wynn Macau resort during the first six months of this year, namely on the renovation of 27,000 square feet of casino space for new VIP rooms.

These works are set to be completed by Chinese New Year 2015.

The US$4 billion investment in Wynn Palace is the new axis of growth for the US gaming operator.

The integrated resort will allow Wynn to double its tables in Macau and increase its number of rooms by 170 percent. It is scheduled to open at Chinese New Year 2016. Up to now, Wynn Resorts has spent a quarter of the total budget for Wynn Palace, or some US$1.1 billion.

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August 21, 2014

Macau

China LotSynergy’s Macau rentals boost net profit up 35 pct Keck Seng performance

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ottery supplier China LotSynergy Holdings Ltd saw its net profit reach HK$54.9 million (US$7 million) for the first half of this year, a 35 percent increase compared to HK$40.6 million a year ago, the firm said in a filing with the Hong Kong Stock Exchange on Tuesday.

The Hong Kong-listed lottery supplier’s first half turnover also grew by some 35 percent to HK$460 million from HK$341.6 million a year ago, the company noted in its filing.

China LotSynergy is a technology and service provider for lottery systems, terminal equipment, gaming products and their operations in China’s lottery market. The firm’s lottery products include video lottery (VLT), computergenerated ticket games, KENO-type lottery and new media lottery.

The firm is the exclusive terminal equipment provider for China Welfare Lottery’s VLT, the sales of which amounted to 1.6 billion in the first half of this year, up 28.5 percent yearon-year.

This sales growth has outpaced the overall lottery industry’s growth at 19.2 percent in mainland China for the first half of this year. Partly stimulated by the World Cup in June, China’s total lottery sales hit new heights at 178.4 billion yuan, of which the sales in Shanghai, Hunan, Guangdong, Gansu and Shandong posted relatively larger growth compared to the rest of the mainland, Ministry of Finance data shows.

S.L.

The Hong Kong-listed property investment firm said it would continue to ‘lease out as many vacant units as possible’ in the Macau market Stephanie Lai

sw.lai@macaubusinessdaily.com

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ong Kong-listed property investment firm Keck Seng Investments has announced that its first half net profit rose by 12 percent to HK$164 million (US$21 million) with turnover up 6.5 percent, thanks partly to the boost seen in rental income from its properties in Macau.

For the six months ended June 30 this year, Keck Seng Investments (Hong Kong) Ltd saw net profit grow 12 percent to HK$164 million from HK$146 million a year ago.

The firm announced its unaudited interim results to the Hong Kong Stock Exchange after trading hours on Tuesday.

Keck Seng’s first half turnover rose by a year-on-year 6.5 percent to HK$635.2 million ‘primarily attributable to the increase in hotel and club operations situated in Vietnam and the United States as well as increase in rental income in Macau’, the filing noted.

Hong Kong-based Keck Seng Investments is primarily engaged in the business of hotel room accommodation in Vietnam, the United States, mainland China, Japan and Canada. The firm also runs the leasing of retail, commercial and office properties as well as development and sales of its trading properties in Macau.

About 6 percent of the first half turnover, or HK$39.74 million, comes from the group’s property business in Macau. Of this turnover figure, the rental income alone was HK$34.5 million, up by about 19 percent when compared to a year ago – an increase that is ‘in line with the robust economic growth driven by strong visitor arrivals and construction activities relating to the gaming and hotel developments’, Keck Seng remarked in its filing.

Of property business prospects,

Keck Seng said it would continue to ‘lease out as many of the vacant units as possible’ in the Macau market.

The firm, however, registered no sales of residential properties in Macau in the first six months this year but said that it would closely watch developments in the luxury residential sector.

Total turnover from the Macau property business segment rose 14 percent from HK$34.8 million to HK$39.7 million for the first six months of this year, the filing said.

Keck Seng Investments also declared an interim dividend of HK$0.03 per share, payable by October 17.

Last week, Keck Seng Investments entered into a deal to acquire Sofitel New York for US$273 million (HK$2.1 billion) which it intends to continue operating under the Sofitel brand.

Government approves water hike

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ffective today, the government will pay the city’s sole water distributor Macao Water Supply Co Ltd MOP4.91 (US$0.62) per cubic metre of water supplied to users, a hike of 5.59 percent on the previous MOP4.65, the Official Gazette announced yesterday. The approved hike is mainly based on changes in the composite price index

(CPI) plus water supply cost for the past year, the Marine and Water Bureau explained to Business Daily.

The hike, however, is substantially lower than the 16 percent requested

by Macao Water in December. This was suggested in order to help ease the company’s financial pressure resulting from investing in largescale water supply infrastructure over the next few years.

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August 21, 2014

Macau

Private and public housing balance necessary CE candidate Chui Sai On continues his campaign activities. Yesterday, he met with representatives from the construction and property fields. All agree that a balance between public and private housing is needed to combat the high prices now ravaging the market Kam Leong

kamleong@macaubusinessdaily.com

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he sole candidate in the Chief Executive election, Fernando Chui Sai On, said yesterday that he agreed with the necessity to update the current laws and regulations of construction approval, as well as to adjust the relationship between supply and demand in the housing market to reach an equitable balance.

The CE candidate met with seven local associations tied to the construction and real estate industries yesterday afternoon in order to introduce his future programme and answer attendees’ questions.

Some of the participants raised concerns about how Mr. Chui’s future government could increase land resources in the city for the purpose of providing private housing and how it could bring public and private housing back into sync.

Mr. Chui responded that to reach a balance between private and public housing in the market an adjustment has to be made to demand and supply.

“It’s because the structure of the housing market cannot lack private housing. A low supply [of private housing] will affect the functions

of the balance in the whole housing market, in addition to causing high housing prices,” he said.

He revealed that there is still land available in the city for development.

He took Cheok Ka Village and Green Island as examples, saying the buildable area of such districts is [adequate].

On the other hand, some conferees complained about the low efficiency of the administrative procedures approving architectural drawings, noting that the related laws and regulations were outdated.

Jan-July surplus far exceeds whole year estimate

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he surplus of Macau for the January-July period at MOP66.43 billion (US$8.5 billion) has already far exceeded the initial estimate by the MSAR Government, while the execution rate for the public investment plan (Portuguese acronym ‘PIDDA’) in the period remains low.

The surplus for the period has already reached MOP66.43 billion, much higher than the initial official estimate of MOP63.6 billion for the whole of 2014, the latest figures released by the Financial Services Bureau showed yesterday.

Of the first seven months of this year, the MSAR Government sat

on a revenue of MOP95.6 billion, of which the major contributor to public income here - direct taxes from gaming - accounts for about 84 percent or MOP80.7 billion.

Government expenditure in the January-July period was MOP29 billion, which is far below the budgeted expenditure at over MOP77.6 billion.

The capital expenditure of the government in the period totalled MOP1.7 billion. The ‘PIDDA’ execution rate, or how much of the budget was spent relative to how much was allocated for spending, is only 6.7 percent in the period, official data noted.

S.L.

The incumbent CE admitted that such problems do exist and conceded that the related laws and regulations may need to catch up with the current times and be improved.

During the meeting, he stressed that his campaign will prepare and plan for the auxiliary functions of Zone A “carefully and seriously” to make the zone a livable environment.

In addition, a participant suggested that the government increase the plot ratios of the housing in Zone A to 12 times; the candidate replied that this could be considered and discussed.

Former legislator Ung Choi Kun, president of the Association of Property Agents and Realty Developers of Macau, thinks that the replies from Mr. Chui yesterday were reasonable.

“From his current platform, I can see that he is determined . . . to [resolve] the biggest problem, which is the reform of the administration system. I personally think that the reason why many shortcomings are seen in society is primarily because of the core problem, which is [the lack of] reform of the administrative system as well as updating of the laws and regulations,” said Mr. Ng. Since the campaign period started on August 16, Mr. Chui has been meeting associations from various industries. The campaign period ends on August 29.

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August 21, 2014

Macau Brands

Trends

Vamping up Versace

Prices up 5.92 percent in July Rents, fuel, food and non-alcoholic beverages are getting more expensive in Macau, while clothing and footwear are slightly cheaper João Santos Filipe

jsfilipe@macaubusinessdaily.com

Raquel Dias newsdesk@macaubusinessdaily.com

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ike the bold, golden Medusa logo suggests, Versace first opened its doors in 1978, just in time to fully embrace the 80’s.

Founded by the iconic Gianni Versace, the brand soon knew international recognition. By the 90’s the famous Versace jeans, that came in any colour and held a very standout detail with the brand’s famous bust, was all the rage.

Soon, like most luxury brands, Versace, too, launched highend leather accessories. The handbag industry boomed in the 90’s and most brands invested in their own line.

Although they’re still not as popular as Dior or even Fendi, they do have their own place in the market.

If you’re one of the fans, or have a special someone who is, there’s a great opportunity to learn about the brand and the handbags not too far away. In order to celebrate the renowned Pacific Place’s 25th anniversary, the mall and fashion icon have organised the ‘Versace for Pacific Place Limited Edition’ handbag – which will be available for viewing from 12 September and on sale only at the Pacific Place Versace boutique starting from 20 September.

Internationally renowned stylist Alvin Goh is the creative director of the campaign’s photo shoot. The bags come in a variety of colours and each has a special ‘Versace for Pacific Place Limited Edition’ tag. The signature handbag collection and photo exhibition will be displayed in Garden Court, where events will be held for the enjoyment of shoppers and commuters.

Versace and Pacific Place are doing more than just selling bags: part of the sales proceeds will be donated to the End Child Sexual Abuse Foundation.

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igher rents and the cost of eating out are driving up inflation in Macau, which stayed in July at 5.92 percent yearon-year, according to the Statistics and Census Service. On a monthon-month basis, from June to July, prices here increased 0.37 percent.

Over the course of one year, the largest price increases were registered in housing and fuel, which rose 11.45 percent, and on food and nonalcoholic beverages (6.1 percent).

Recreation and culture also became about 4.84 percent more expensive in one year.

According to DSEC, prices

continue to increase due to rising rentals, dearer prices of Liquefied Petroleum Gas and fresh meat, as well as the higher cost of eating out, package tours and recreational & sporting services.

On the other hand, people in Macau are likely to be paying less for clothing and footwear, the cost of which decreased 0.52 percent.

Month-on-month, there was a 0.37 percent increase in the inflation rate in July. Higher charges for package tours and rising rentals drove up the price index of recreation & culture 2.39 percent and housing & fuel by 0.74 percent. In one month, the

costs related to health increased 0.58 percent.

Prices for food and non-alcoholic beverages increased 0.34 percent month-on-month. While the increased cost of eating out and dearer prices of fresh pork, live chickens and vegetables pushed prices up, while the lower prices of fruit, fresh fish and seafood balanced the increase.

The clothing and footwear price index decreased by 1.96 percent.

According to DSEC, this is explained by the seasonal sale of summer clothing. Communication is also cheaper as the price index fell 0.06 percent.

Foreign currency deposits grow 30 percent in 2Q International assets continued to dominate Macau’s banking system, reaching almost 90 percent of all banking assets

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nternational assets continue to grow within Macau’s banking system, especially transactions made in foreign currencies like yuan and Hong Kong dollars. According to the Monetary Authority of Macau (AMCM) the size of international assets in the banks here amounted to MOP1,019 billion (USD$127 billion) by the end of the second quarter. This represented an increase of 9.5 percent compared to the end of March, and a jump of 29.3 percent from a year ago.

Foreign assets dominate the majority of Macau’s banking system and continue to expand. In June, the share of international assets in total banking assets climbed to 87.2 percent, 0.4 points more than three months before (86.8 percent). On the liabilities side, foreign ones increased

to 82.8 percent last quarter from 82.1 percent in March.

Foreign liabilities also increased 10 percent in the last quarter compared to the first three months of the year, and 32 percent from a year ago.

Foreign currency deposits held by residents and the government here continued to form a major component of international liabilities. This kind of deposit increased by 29.1 percent to MOP425.0 billion in June from MOP329.3 billion a year ago.

AMCM also report that in international banking transactions, the transactions made in foreign currencies were dominant. The pataca only had a marginal presence of 0.8 percent in international assets and a mere 1.5 percent in international liabilities. The Hong Kong dollar

occupied 35.7 percent, while other foreign currencies had a share of 63.6 percent.

Most of Macau’s banking assets and liabilities are linked to Asia and Europe. In June, 37.6 percent of international assets here were claims on Mainland China, followed

by Hong Kong (29.6 percent) and Singapore (1.9 percent). Portugal, Luxembourg and Germany accounted for 7.3 percent, 1.5 percent and 1 percent, respectively. For liabilities, Hong Kong, Mainland China and Thailand accounted for 39.9 percent, 25.1 percent and 8.4 percent of the total, respectively. France, Portugal and Germany reported shares of 3.6 percent, 3.4 percent and 2.3 percent, respectively.

L.G.

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August 21, 2014

Macau

Tide turns for shark’s fin consumption Still legal here, the shark’s fin delicacy is being banned all over Asia.

Pressure from activists and the government could reach the MSAR in the near future

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sprawling market floor in Guangzhou was once a prime location for shark’s fin, one of China’s most expensive delicacies.

But now it lies deserted, thanks to a ban on official banquet tables and a celebrity-driven ad campaign.

One shopkeeper in the Shanhaicheng centre quietly ate his lunch at a desk, flanked by four glumlooking colleagues and giant white sacks overflowing with thousands of dollars’ worth of unsold grey stock.

A woman at the next stall overfiddled with her mobile phone, plastic bags of dried yellow fins untouched on the shelves behind her.

Outside, the bustling, narrow streets of the southern Chinese city were packed.

“I don’t eat shark’s fin,” said a 23-year old shopper surnamed Ling, pausing between a stash of multi-coloured dried starfish and an assortment of wood ear mushrooms.

“It’s dirty. It’s cruel. And I think it’s quite expensive.

“Some people eat it because they think it gives them status. But it doesn’t. And I hear it doesn’t even taste that good.”

Fetching as much as 1,600 yuan (US$260) a bowl, shark’s fin soup has long been among China’s most prized dishes, renowned as much for its supposed medicinal qualities as for its associations with wealth and power.

“We have a saying that if you eat shark’s fin, it’s good for your health,” one woman working in a dried seafood wholesaler said of the delicacy, which has a bland taste and a chewy consistency.

There is no orthodox scientific evidence for such claims.

But the appetites of many Chinese diners appear to have been spoiled by authorities banning the dish from official banquets, and a national antishark’s fin advertising drive backed by former NBA basketball player Yao Ming and other celebrities.

Austerity drive Environmental and animal rights groups have campaigned for decades against the consumption of shark’s fin, arguing that demand for the delicacy has decimated the world’s shark population and that the methods used to obtain it are inhumane.

Fins are often sliced off while the sharks are still alive, before the fish are thrown back into the ocean to die, despite finning being banned in roughly one-third of countries, according to the Pew Environment Group.

China consumes more shark’s fin than any other country in the world, according to the campaign group WildAid. The tide began to turn in 2012, when the ruling Communist Party announced a government ban on serving shark’s fin, bird’s nest soup and other wild animal products at official functions, saying that it would set a precedent that would help protect endangered species.

Around the same time, new leader Xi Jinping launched a much-publicised austerity drive for the ruling classes, in tandem with an anti-corruption push that has claimed notable scalps despite a lack of systemic reforms.

WildAid also began its high profile, celebrity-backed ad campaign on the issue, targeting consumers with the tagline: ‘When the buying stops, the killing can, too.’

Demand has since decreased dramatically, the group says, with the biggest impact in Guangzhou, the capital of Guangdong Province and the heart of China’s shark’s fin industry.

A WildAid survey released this month said shark’s fin sales had slumped in the city, with retail prices diving an average 57 percent and wholesale costs dropping 47 percent.

In neighbouring Hong Kong, a major transit point for the trade, import-export volumes have plunged.

The largest category, undried fins with cartilage, went from almost 6,800 tonnes in 2011 to less than two tonnes last year, government statistics showed - although dried fins with cartilage still stood at around 3,800 tonnes.

Several major hotel chains and airlines in the region have banned it and WildAid’s executive director Peter Knight said: “Demand reduction can be very effective. The more people learn about the consequences of eating shark’s fin soup, the less they want to participate in the trade.”

Government bans on the dish, he added, “helped send the right message; and this could be a model to address issues such as ivory”.

‘Not necessary to kill’ In Guangzhou’s upscale Taikoo Hui shopping mall, a 36-year old businesswoman surnamed Liu said she stopped eating shark’s fin “two or three years ago”.

“It doesn’t taste all that different from eating a vegetable,” she said. “So it’s not necessary to kill an animal in order to eat it.”

The elegant dining room in the city’s Ah Yat Abalone Restaurant was full of customers but manager Ye Chaoping said most were there for the abalone - a slow-growing shellfish that is itself the object of concerns about overfishing - rather than the wide assortment of shark’s fin dishes.

“There’ve been a lot of TV ads about it, so more and more people are refusing to eat it,” she said.

“These days, a lot of government officials are afraid to eat it, too.”

AFP

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August 21, 2014

Greater China Profits of state firms accelerate China’s state-owned enterprises (SOEs) saw faster profit growth in the first seven months of 2014 as the economy showed more signs of stabilizing, according to data from the Ministry of Finance (MOF). The combined profits of China’s SOEs rose 9.2 percent year on year to 1.43 trillion yuan (US$232.2 billion) during the January-July period, accelerating slightly from the 8.9-percent rise for the first half of the year. Despite the steady gains in profits, rise in operating costs still outpaced revenue growth, dimming the outlook for future profit growth, according to the data.

Geely says H1 profit down Geely Automobile Holdings Ltd yesterday posted a 20 percent fall in first half net profit, hit by slowing sales at home. Geely, whose parent company owns Swedish carmaker Volvo, said net profit fell to 1.11 billion yuan (US$180.6 million) for the JanuaryJune period from 1.398 billion yuan the same period a year ago. The figure beat analysts’ average of forecast of a 959 million yuan profit. Turnover fell 32 percent year-on-year to 10.16 billion yuan. It sold 187,296 vehicles during the first half, down 29 percent from a year ago.

Punishment for all firms that violate laws Companies operating in China will be punished if they violate laws, regardless of whether they are domestic or foreign firms, a senior official at the country’s economic planner said yesterday.

Li Pumin, secretary general of the National Development and Reform Commission, made the comments shortly after the commission said it had fined 12 auto part makers, including foreign firms, 1.23 billion yuan (US$200 million) for manipulating prices. “China is a country ruled by law, everyone should be equal before the law. So, it’s no matter whether they are domestic or foreign-funded firms, they will receive a punishment as long as they violate laws,” Li told a conference.

MSCI Hong Kong record rockets The 39-member MSCI Hong Kong gauge advanced 11 percent this year

T

he MSCI Hong Kong Index rose to a record, rebounding 21 percent from a February low, as the city’s bourse operator led gains on optimism about a stock-trading link with Shanghai and developers jumped on record home prices.

Hong Kong Exchanges & Clearing Ltd. surged 54 percent since February 5, while Henderson Land Development Co. climbed 39 percent. PCCW Ltd., the conglomerate controlled by billionaire Richard Li with interests from telecommunications to real estate, today rose to an eight-year high.

The MSCI Hong Kong Index climbed 1.3 percent to 13,590.53 as markets closed in the city yesterday, surpassing its all-time high reached in October 2007. The benchmark Hang Seng Index extended gains after closing at its highest in six years on Tuesday. The Hang Seng China Enterprises Index of mainland companies entered a bull market last month after the government deployed targeted measures to boost flagging growth.

“Hong Kong shares have been playing catch up with the rest of the world,” Khiem Do, who helps oversee about $60 billion as Hong Kong-based head of Asian multi-asset strategy at

Baring Asset Management Ltd. “The earnings outlook has been upgraded and policy settings look supportive.

We’re likely to see more liquidity flows as a result of the Shanghai-Hong Kong connect.”

JPMorgan Chase & Co. and Pictet Asset Management Ltd. are among those tipping more gains for Hong Kong shares amid optimism the city’s equities can withstand reduced Federal Reserve stimulus and that Chinese policy makers will bolster growth in the world’s second-biggest economy.

Hong Kong’s de facto central bank spent US$9.7 billion since the start of July to maintain its currency peg to the U.S. dollar, intervening for the first time since 2012 as money flows into the city.

Relative value The 39-member MSCI Hong Kong gauge advanced 11 percent this year, while an MSCI gauge of shares across the Asia-Pacific region gained 5.1 percent. The Hong Kong measure trades at 16.8 times estimated earnings, compared with 11.6 for the Hang Seng Index and 16.6 for the Standard & Poor’s 500 Index on Tuesday.

China to deepen APEC partners

With the theme of “Shaping the Future through Asia-Pacific Partne meeting will be held in Beijing on November 10 and 11

Corrupt ex-official faces death penalty A former railway official in south China’s Kunming City was sentenced to death with a two-year reprieve over corruption charges in Beijing yesterday.

Wen Qingliang was removed from his post as head of the Kunming Bureau of Railways in the capital of south China’s Yunnan Province in 2011 for discipline investigations. The Beijing No. 2 Intermediate People’s Court heard that Wen took bribes worth more than 20 million yuan (US3.2 million) between 2005 and 2011, taking advantage of his position in the railway department in Taiyuan, capital of north China’s Shanxi Province, to provide favours to companies bidding on railway projects.

Anticipation for cross-border trading through Shanghai has boosted Hong Kong Exchanges shares since the plan was announced in April amid optimism for increased turnover. The program, expected to start in October, will offer unprecedented access to China’s US$3.7 trillion equity market while opening a route for wealthy mainland investors to buy Hong Kong stocks.

APEC family photo of last year’s meeting in Indonesia

C

hina is willing to build an AsiaPacific partnership with APEC members that will lead future cooperation in the region, said State Councilor Yang Jiechi yesterday.

Yang made the remarks at the

opening ceremony of the third Senior Officials’ Meeting (SOM3) of the APEC (Asia-Pacific Economic Cooperation) 2014 in Beijing.

Noting that the Asia-Pacific region is an important strategic position, Yang

said China cherishes the opportunity of hosting the APEC 2014 and is willing to build with APEC members an Asia-Pacific partnership that will lead future cooperation.

With 40 percent of the world’s population, 57 percent of the total world economy and 46 percent of the total global trade, the 21 APEC members have established allround, multi-level and wide-ranging cooperation that plays an active role in promoting common prosperity, according to Yang.

Various sub-regional cooperation mechanisms, emerging new initiatives and ideas within the Asia-Pacific region reflect the strong desire of all sides to strengthen cooperation, he said.

The Asia-Pacific economies will play an increasingly important role in promoting world peace and development, he said, noting the economies are reforming their development patterns and the international status of the economies will continue to be enhanced.

9

August 21, 2014

Greater China Hong Kong shares have been playing catch up with the rest of the world Khiem Do Baring Asset Management Ltd.

Home prices rose to a record for a second week in the period ended August 10, according to data from Centaline Property Agency Ltd., even after the city introduced measures to cool the market and the Fed started winding down its bond-buying program.

U.S. inflation weakened to the slowest pace in five months in July, a report showed on Tuesday, holding

below the Fed’s target and giving policy makers room to keep interest rates low well after the projected end of asset purchases in October.

The Hang Seng Index today added 0.2 percent to 25,159.76, while the Hang Seng China Enterprises Index, also known as the H-share index, slid 0.4 percent to 11,055.98.

Bloomberg News

Chinese consumption drags down cognac sales The industry blames the slowdown in China on a large build-up of stocks by retailers there

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orldwide sales of cognac fell in 2013-14 largely due to a drop in exports to China, France’s main trade body for the brandy said.

Sales for the year to August were down 6.7 percent by volume and 10.2 percent by value, the National Interprofessional Bureau of Cognac (BNIC) said yesterday.

While exports to Asia generally remained strong, with 49.2 million bottles shipped and a turnover of nearly one billion euros (US$1.3 billion), exports to the Far East were depressed, dropping by about one-fifth, BNIC said in a statement.

In the Chinese market, orders have fallen back for “all high value-added products”, it said.

An anti-corruption drive launched

by China in late 2012 cracked down on ostentatious consumption, putting a damper on sales of high-end wines and liquors.

But the industry blames the slowdown in China on a large buildup of stocks by retailers there, rather than a sign of well-heeled consumers turning away from cognac, which is considered a prestigious libation and

Japanese auto parts firms fined

ship

ership”, the 22nd AELM The companies were found to have implemented monopoly-pricing agreements for more than 10 years As the APEC members only have 80 days to go before the opening of the 22nd APEC Economic Leaders’ Meeting (AELM), Yang called on all members to promote cooperation, adhere to opening up and inclusiveness and push for the consensus on the outcome of the AELM. He called for positive progress in the areas of Asia-Pacific economic integration, innovative development, promoting reform, finding new areas of growth and strengthening connectivity, aiming to make more contributions for lasting development, prosperity and progress in the AsiaPacific region.

As a member of the Asia-Pacific family, China views the Asia-Pacific region as a permanent home and foundation of its development and prosperity, said Yang.

China is committed to promoting the Asia-Pacific development through its own development and provide new opportunities for the region’s prosperity through its own reform and opening up, he said.

China has always been thinking about ways to make new contributions for deepening the Asia-Pacific economic integration and pushing for more substantial outcomes of the AELM, he said.

Beijing is hosting the SOM3 and related meetings for the Asia-Pacific Economic Cooperation summit in Beijing from August 6 to 21, including some 100 sessions covering topics such as trade, investment, agriculture, food and anti-corruption.

Xinhua

is frequently used to toast business deals in the People’s Republic.

Hermes is another French luxury products group that has suffered from China’s clampdown on showy business entertainment and extravagant gift-giving.

Known particularly for silk scarves and handbags, Hermes reported that sales slowed in the second quarter of the year.

“Shipments for this new campaign totalled 155.5 million bottles... with a turnover that is still high at 2.2 billion euros,” BNIC said in a statement.

Despite the downturn, cognac has enjoyed a third record year, with a “good dynamic” in North America, where volume rose 6.0 percent, mainly with strong sales to the United States, the top customer with orders of 54.1 million bottles.

AFP

this matter very seriously” and “will comply with the order”.

Denso said it was its policy “to comply with all applicable antimonopoly laws”.

Both NSK and JTEKT said they took the situation with “utmost seriousness” while Sumitomo said its “highest priority” was to comply with competition laws.

AFP

C

hina has fined 10 Japanese auto parts firms a total of more than US$200 million for pricefixing, authorities said yesterday, in what state media called the biggestever penalty for violating the antimonopoly law.

The companies were found to have implemented monopoly-pricing agreements for more than 10 years, the National Development and Reform Commission (NDRC) regulator said in a statement.

It fined them a total of 1.24 billion yuan (US$201 million), in what state broadcaster CCTV said was the biggest fine China had imposed since its anti-monopoly law took effect in 2008.

“The companies... unlawfully affected prices of auto parts, finished vehicles and bearings in China and harmed the interests of downstream manufacturers and consumers,” the NDRC statement said.

Sumitomo Electric was fined the most -290.4 million yuan- of the seven car parts firms penalised for fixing auto parts prices between January 2000 and February 2010, according to the statement, the others being Denso, Aisan, Mitsubishi Electric, Mitsuba, Yazaki and Furukawa Electric.

NSK, JTEKT and NTN were fined for price collusion over bearings between 2000 and June 2011, the NDRC added, with NSK ordered to pay 174.9 million yuan.

Two other companies, Hitachi Auto Parts and Nachi, which makes roller

bearings, were found culpable but exempted from the penalties for taking the initiative to inform authorities and providing crucial evidence on the monopoly agreements, according to the NDRC. Five of the companies -Mitsubishi, Denso, Sumitomo, NSK and JTEKTissued statements confirming the penalties and pledging compliance with Chinese law and regulations.

Mitsubishi Electric said it “takes

US$200 million

fine for price-fixing

10

August 21, 2014

Greater China

Taiwan growth lower than expected Economic upgrade growth estimates is unusual when its North Asian neighbours are downgrading forecasts and rolling out stimulus measures to prop up growth

US$38.8 billion

Taiwan’s June orders

(Pictured) an ASUS motherboard. ASUS electronic designs fuel a huge amount of worldwide personal computers

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he launch of new tech products such as Apple’s iPhone 6 will help Taiwan remain one of Asia’s stronger exporters, bolstering its economic prospects this year amid a patchy global recovery.

After the government raised Taiwan’s GDP outlook for 2014 last week, export

orders will provide more evidence that prospects have improved for the trade-reliant economy. A manufacturing survey in July showed new export orders grew at their fastest rates since January 2011.

The island’s export orders in July grew +5.7 percent from a year earlier, against

+7.3 percent a Reuters poll of analysts forecast. That is far less than a 10.6 percent rise in June, which far exceeded estimates and was the fastest pace in 1-1/2 years.

Underpinning the stronger momentum is the upcoming launch of the latest smartphone from Apple Inc., expected in the fall. Taiwan

firms will be manufacturing a bulk of components and accessories for the new device.

“You usually don’t hit critical mass until about 3-6 months after the launch,” said Wai Ho Leong, regional economist at Barclays Capital in Singapore. Demand will gradually build up and is first reflected in orders and then actual exports.

The tech industry, the main driver of Taiwan’s export machine, has been facing upheaval from changing consumer tastes worldwide as bulky computers give way to handheld devices.

Adapting to the shift in trends, many of Taiwan’s contract manufacturers produce highend chips that power new generation smartphones and other digital gadgets.

Economists expect momentum to sustain through the second half of the year although it may be too soon to tell how much the orders will translate into actual exports.

Export order data includes those from Taiwan-owned factories abroad, such as in mainland China, while exports capture only domestic shipments.

Better than rivals While manufacturing slows in South Korea and Japan, Taiwanese producers have signalled a robust improvement in overall business conditions.

Manufacturers are hopeful recovering growth momentum in the United States will help to counter a slowdown

in China and soft economic conditions in Europe.

The pick-up in activity led Taiwan’s statistics agency to raise its forecast for the island’s economic growth this year, citing a healthy outlook for its semiconductor industry because of external demand in mobile devices.

China and Hong Kong together receive about 40 percent of Taiwan’s exports while the United States is the next largest destination for Taiwanese goods. Many Taiwanese companies produce and assemble goods in their plants located in China, which are then exported from the mainland.

Taiwan’s export orders are seen as a leading indicator of demand for Asia’s exports and hi-tech devices, and typically can lead actual exports by two to three months.

But just-in-time, quick turnaround manufacturing in the competitive consumer electronics sector means July orders likely won’t fully reflect coming demand for new products.

Tieying Ma, economist at DBS in Singapore, cited base effects from last year as a reason for the growth slowdown in July, but she sees order levels staying strong even if annual gains for the rest of the year fall between 5 and 8 percent.

June orders totalled US$38.8 billion, a monthly level that has been largely sustained for the past four months running.

Reuters

Taiwan court upholds acquittal of ex-president Lee The court said prosecutors failed to prove the claims that Lee embezzled US$7.79 million from the government’s diplomatic slush funds

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aiwan’s high court yesterday upheld the acquittal of former leader Lee Teng-hui on charges of embezzling state funds during his presidency between 1988 and 2000, citing a lack of evidence.

The court rejected an appeal filed by prosecutors, saying they failed to prove the claims that Lee embezzled US$7.79 million from the government’s diplomatic slush funds while in office to help set up a private think-tank.

Prosecutors are barred from appealing to the supreme court under a new speedy trial law unless they can prove that the verdict contradicts the constitution or other precedents, the court said.

It affirmed a ruling by the Taipei district court last year to clear Lee of corruption charges due to lack of evidence since he did not sign several related official documents related to the misuse of funds.

Lee, 91, became the second former Taiwanese president to face graft

charges. His successor Chen Shuibian is serving a 20-year jail term on multiple graft convictions.

Lee still enjoys support from the island’s pro-independence camp and has been a vocal critic of the current government’s China-friendly policies.

Lee has flatly rejected the graft accusations, claiming they were “invented” by the government to persecute a high-profile critic.

Current President Ma Ying-jeou has denied meddling in his graft case.

Lee irked Beijing during his presidency by promoting a separate identity for Taiwan. Beijing fired missiles near the island in 1995 and 1996, triggering a US decision to send two naval carrier groups to the area.

Taiwan and China split in 1949 after a civil war but Beijing still sees the self-ruled island as part of its territory awaiting reunification.

However, tensions have eased markedly since Ma came to power in 2008.

Former president Chen Shui-bian is in jail for graft charges

AFP

11

August 21, 2014

Asia Thai central bank confirms lower GDP forecast In June, the central bank forecast economic growth of 1.5 percent for 2014, sharply lower than the 2.7 percent expected earlier

KEY POINTS C.bank has forecast 2014 GDP growth of 1.5 pct Minutes show concerns about gov’t spending delays Sees private investment, exports lifting growth next year Most economists expect no policy rate chaNge for rest of year

Bangkok harbour

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hailand’s economic growth may be slightly lower than previously expected this year due to delays in government spending, minutes from the central bank’s last meeting showed yesterday.

But the minutes also noted that “private investment and exports should lend greater support to growth in the following year.”

The monetary policy committee (MPC) voted unanimously on August 6 to keep the one-day repurchase rate unchanged at 2.0 percent for a third straight meeting, saying the policies of the new military government would boost economic activity.

It has forecast economic growth of 5.5 percent for 2015.

The army took power on May 22 to end months of political unrest, which hurt economic activity and disrupted public spending.

Data on Monday showed Thailand

avoided a recession in the second quarter as the army’s move to defuse tensions helped shore up consumer confidence, though doubts remain about whether the economy will recover as strongly as policymakers expect.

While government spending, consumer demand and agriculture have picked up, manufacturing, private investment, exports and tourism remain weak. And, though the military government has vowed to fast track major infrastructure projects, the full benefits of such spending many not be seen until 2015.

Santitarn Sathirathai, an economist with Credit Suisse in Singapore, said on Monday that Thailand would need to expand at nearly 9 percent in the second half to meet the central bank’s 1.5 percent full-year growth forecast.

“That’s quite a demanding number especially when you don’t

have that many strong, positive catalysts this year.”

Government spending, which ground to a halt during the paralysing political crisis, “will eventually come through and help but it will probably take time,” he said.

“Although many public investments plans are already under way, including the junta’s approval of the double-tracking of railway lines and the general scope of a 2.4 trillion baht (US$75 billion) infrastructure plan, more needs to be done,” HSBC said in a research report on Tuesday.

“The government may need to speed up public investment approvals to ensure adequate growth support, especially while private investment remains weak, partly reflecting low capacity utilisation and weak export growth,” it said.

The minutes also said that muchneeded economic reforms might have

short-term economic repercussions but “would lay a strong foundation for the country in the longer term.”

Some MPC members believed demand would be stimulated by the government’s income-generating policies, while exports would benefit from increased intra-regional trade.

But the minutes also showed that some policymakers thought continued monitoring of household debt levels was needed because the rate of new debt creation still outpaced income growth.

The Bank of Thailand’s monetary policy committee has kept the policy rate at 2.0 percent since March, and many economists expect rates will remain at that level for the rest of the year as the central bank waits to see if the economy regains traction as expected.

The next policy review is on September 17.

Reuters

Woodside Petroleum sees juicier M&A prospects They are looking at assets that Apache wants to sell, which include LNG stakes in Australia and Canada

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oodside Petroleum Ltd, armed with US$4.3 billion to spend to fill a gap in its growth prospects, sees the chance of snaring an acquisition improving as rivals step up asset sales and competing bidders dwindle.

Australia’s top oil and gas producer, which reported a record half-year profit yesterday, is cashed up after shareholders rejected a US$2.68 billion plan to buy back and cancel stock held by its top shareholder, Royal Dutch Shell .

Woodside has resisted making acquisitions over the past two years as price tags were too high, but Chief Executive Peter Coleman said there were now attractive opportunities as companies from Shell to the likes of Apache Corp offload assets.

“We do have a view that M&A opportunities are coming onto the market. They are better priced than what they were two years ago,” Coleman told analysts and reporters on a conference call.

At the same time,

competitive bidding is likely to ease, Coleman said, as state-owned oil companies like China’s CNOOC and PetroChina, are no longer chasing deals after making expensive acquisitions over the past few years.

Woodside has said it is looking for growth prospects worth around US$5 billion.

Among other opportunities, he said Woodside was looking at assets that Apache wants to sell, which include LNG stakes in Australia and Canada.

Woodside is under pressure

Petroleum treatment and storage facilities at Thevenard Island, Australia

to make an acquisition to spur growth ahead of the development of its next big project, most likely the Browse floating LNG project, after scrapping a deal to buy a 25 percent stake in Israel’s massive Leviathan gas field earlier this year.

“They would be running

the ruler intently over Canadian opportunities,” said Andrew Williams, an analyst at RBC Capital Markets in Melbourne, adding those would fit with Woodside’s plan to develop an LNG export plant in British Columbia.

Reuters

12

August 21, 2014

Asia

Japanese exports rekindle hope Exports to China were up 2.6 percent in July

J

apan’s exports rose in July for the first time in three months in a tentative sign that overseas demand is starting to recover, which could raise hopes that exports can offset a slump in consumer spending.

The export data will be a relief for the Bank of Japan, which has predicated its economic growth and inflation forecasts on a rapid rise in exports as part of the government’s “Abenomics” plan to energise the Japanese economy.

“The BOJ can say with more confidence that it will keep its monetary policy on hold,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

“The government has already announced some steps to support

KEY POINTS Export recovery needed to offset domestic demand slump Offshore relocation of factories undermines export growth

Reserve Bank of Australia headquarters

corporate activity. Now it is simply a matter of reflecting these policies in next fiscal year’s budget.”

July’s 3.9 percent annual rise was roughly in line with a 3.8 percent increase expected by economists in a Reuters poll. It followed a revised 1.9 percent decline in the year to June.

Growth in exports was driven by increased shipments of cars to Europe, metal processing machinery and items such as liquid crystal displays, the data showed.

Japan’s exports have struggled with weak demand in Asia for much of this year and a growing shift in production overseas - which has disappointed officials in the BOJ and the government.

Evidence that exports are finally starting to recover suggests the economy may rebound from a sales tax hike in April, which would ease pressure on policymakers to do more to support growth.

Exports to Asia, which account for more than half of Japan’s total exports, rose 3.4 percent in July from a year ago as automobile shipments grew, finance ministry data showed yesterday, marking the first increase in three months.

Exports to China, another important market for Japan, were up 2.6 percent

People pass a store with ‘sale’ signs in the window in Tokyo. Although the government announced Japan’s economy declined at an annualized pace of 6.8 per cent in the period April-June, exports seems to revive hopes of better results

in July due to gains in shipments of metal processing equipment and car parts, the data showed.

Exports to the United States rose an annual 2.1 percent as Japan shipped more car parts.

However, exports of cars to the U.S. market tumbled 10.3 percent from a year ago, the fourth straight month of declines, as Japanese companies shifted production to the United States and other countries, a finance ministry official said.

Japan’s imports rose 2.3 percent in the year to July, compared with a median forecast for a 1.7 percent annual decline, as energy imports grew. That brought the trade balance to a deficit of 964 billion yen (US$9.4 billion).

The economy shrank an annualised 6.8 percent in April-June, its biggest slump since the March 2011 earthquake, stoking fears that consumer spending had weakened more than expected after the April sales tax hike.

Australian central bank encourages businesses to step up Head of the institution highlights that the central bank policies effect is limited

A

ustralia’s central bank chief said yesterday that record low interest rates alone cannot drive confidence or spur business activity, suggesting that firms should do more to stimulate stronger economic growth.

Reserve Bank of Australia Governor Glenn Stevens told lawmakers at his semi-annual testimony the economy now needs ‘animal spirits’ in order to support an expansion of non-mining firms, and this is not what monetary policy can directly do.

“We need an environment where there is more confidence to move ahead. I’ve allowed the horse to come to the water of cheap funding, but I can’t make it drink,” Stevens said.

“It isn’t that I’m unwilling to consider lower rates if that really would be helpful... but it is just a

sense that interest rates aren’t the answer at the moment,” he told the House of Representatives Standing Committee on Economics.

His comments led markets to pare back the probability of a cut in rates anytime soon, with a move

by December now put at no more than a one-in-four chance.

Stevens conceded that it is “pretty normal” at this point of the economic cycle that companies may be reluctant to expand due to uncertainty about the future pace of demand.

But that should change over time, he said, citing low funding costs, a hefty rise in household net worth, strong population growth and opportunities to tap Asia’s expanding middle class.

When it does, the central bank’s forecasts for sub-par growth “will

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13

August 21, 2014

Asia

Citigroup considers selling Japanese unit

Myanmar to upgrade industrial infrastructure

Years of deflation and monetary easing have left lenders in Japan with the lowest net interest margins in Asia

T

Economists expect that Japan’s gross domestic product will grow around 4 percent on an annualised basis in the current quarter, but many policymakers say exports must grow to ensure the economy remains on track.

The BOJ, however, has warned that the relocation of factories offshore, particularly for making cars, means that Japan may not be able to ramp up exports at will.

Reuters

very likely prove to be conservative”, Stevens said.

In its quarterly monetary policy report released earlier this month, the Reserve Bank of Australia (RBA) said it expected the economy to grow at a belowpotential 2.5 percent pace by December this year, down from around 2.7 percent for 2013. It saw the slowdown in mining investments deepening.

For now, the central bank will let the current stimulatory policy setting do its job, Stevens said. Earlier this month, the RBA left the cash rate unchanged at 2.5 percent, marking a full year of steady rates.

“The Board has been mindful of allowing time for measures already taken to have their effects, and of the very considerable limitations for monetary policy in fine-tuning economic outcomes over short periods,” Stevens said.

“It has also seen some value, in the present circumstances, in maintaining a sense of steadiness and stability.”

On the Australian dollar, Stevens was asked if he still thought the high exchange rate will fall significantly at some point.

“It would remain my view that the risk that it goes down materially at some point is being under appreciated,” he said.

he firm that earns the most international revenue of any U.S. lender is considering selling its consumer-banking business in Japan, two people with knowledge of the matter said.

The company has begun approaching Japanese firms including the three largest lenders, trust banks and regional lenders to gauge their interest, one of the people said, asking not to be named as the matter is confidential. New York-based Citigroup could start a bidding process next month, the people said.

Citigroup, whose 33 branches in Japan represent less than 1 percent of its global total, has pulled back from retail banking in markets with low returns, including Spain, Greece and Turkey. The U.S. bank, which has repeatedly been penalized by Japanese regulators in the past 10 years, would follow HSBC Holdings Plc. and Standard Chartered Plc. in scaling back in a country where loan profits are hampered by low interest rates.

Retail banking in Japan “isn’t profitable because interest rates

Stevens says sees value in keeping interest rates steady Says economy now needs businesses to start spending more Says still expects significant fall in local dollar

Bloomberg News

Japan crude imports fall Japan’s customs-cleared crude oil imports fell 2.7 percent in July from the same month a year earlier, while liquefied natural gas (LNG) imports hit the highest for the month of July on firm demand from utilities amid a total nuclear power plant shutdown, government data showed yesterday.

Japan, the world’s fourth-biggest crude buyer, imported 3.32 million barrels per day (16.38 million kilolitres) of crude oil last month, the preliminary data from the Ministry of Finance showed. LNG imports totalled 7.84 million tonnes last month, up 5.7 percent from a year earlier. Imports of thermal coal for power generation declined 3.7 percent in July to 9.66 million tonnes, the data showed.

Coca-Cola Aussie profit decreases

Modi to replace Soviet-style planning Last week he announced plans to replace the Planning Commission

(Pictured) Prime Minister Narendra Modi has requested people to join the reform process consultation

Reuters

KEY POINTS

remain low,” said Takashi Miura, an analyst at Credit Suisse Group AG in Tokyo. “Competition for home loans with major banks and regional banks is intense” and wealth management for individuals is less active than abroad, he said.

Selling the consumer-banking operations is only one option and nothing has been decided, the people said. Japan’s Financial Services Agency has been pressing Citigroup to build a sustainable and profitable business model in the country, one of the people said.

Citigroup’s history in Japan dates back to 1902, when a predecessor opened its first branch in Yokohama, according to its website. Apart from consumer banking, Citigroup does corporate and investment banking and trading in the country.

The U.S. firm exited the Japanese retail brokerage business in 2009, selling its Nikko Cordial Securities Inc. unit and part of its investment-banking operations to Sumitomo Mitsui Financial Group Inc.

Myanmar will upgrade an industrial training centre in Hsinde with the support of a German bank, according to the Ministry of Industry yesterday.

Under an agreement signed between the ministry and the KFW Development Bank of Germany, the development project will be implemented from 2014 to 2016, in which the German bank will provide teaching aid and 4 million euros (US$5.32 million) for the opening of technical teacher training centre and transfer technology. The ministry will also contribute 2.5 million euros to other projects of construction, maintenance and transport to support the industrial training school.

India’s prime minister sought suggestions from the public to help re-fashion the Soviet-inspired central Planning Commission that supporters say is in line with a new, open style of governance.

Since he took over in May, Narendra Modi has promised to cut red tape, fight corruption and make India easier to do business in to get the economy moving after years of slowing growth.

Last week, he announced plans to replace the Planning Commission, a lingering vestige of India’s early attempt to mimic the Soviet command economy, with a modern institution to reflect

a shift to a market-based economy where the states were the main drivers of growth rather than a central body.

“We envision the proposed institution as one that caters to the aspirations of 21st century India and strengthens participation of the states,” Modi said in a Twitter post, inviting public participation in the rebuilding of the body.

He said people could post their comments on the shape of the new institution on a portal he has launched to share ideas on issues of national importance.

The decision to involve the public is the latest of Modi’s efforts to break down governance structures that Indians see as failing them.

He has chosen to communicate to people via Twitter and Facebook, shunning mainstream media. He has asked bureaucrats to approach him directly with their ideas, bypassing government protocols.

Modi says his measures are meant to improve the performance of a broken government. But his critics contend there is no sign of real change in the first 80 days of the new administration and that the shift so far has been only in style.

There have been little signs of more serious, big-bang reforms required for breaking out from a cycle of low growth and high inflation.

Reuters

Australia’s Coca-Cola Amatil Ltd (CCA) yesterday reported a 16 percent fall in first half net profit on weak domestic consumer spending and rising costs in Indonesia and warned full-year profits would be “materially lower” than last year. Net profit of A$182.3 million (US$169.50 million) compared with A$215.9 million a year ago and were largely in line with analyst expectations of A$184.5 million, according to Thomson Reuters I/B/E/S. The food and beverage company’s first set of results under new managing director Alison Watkins, who kicked off a business strategy review within weeks of taking the job.

S.Korea debt ratio edges up South Korea’s ratio of short-term external debt to its foreign reserves edged up in the second quarter on the increased strength of the local currency against the dollar during that period as well as offshore demand for won-denominated bonds. The ratio of short-term external debt edged up to 35.9 percent of the country’s foreign reserves as of the end of June from a 34.9 percent ratio at the end of March, data from the Bank of Korea showed yesterday. Short-term external debt owed by South Korea inched up to US$131.8 billion by the end of the second quarter this year.

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August 21, 2014

International Eurozone construction output down The eurozone seasonally-adjusted production in the construction sector fell by 0.7 percent in June from the previous month, the European Union’s (EU) statistics office Eurostat said yesterday. The figure read 2.3 percent on the year-on-year basis.

In the 28-member EU, production in construction sector decreased by 0.3 percent month-on-month in June but rose by 0.5 percent from a year ago.

In May, construction production in the eurozone and the EU both fell by 1.4 percent. Among EU member states, the largest decreases in construction output were observed in Hungary at 7.5 percent, Spain at 2.9 percent, while the greatest increase was registered in Poland at 2.7 percent.

Argentina to use new law against vultures A draft bill appeared to be an attempt to bring Argentina’s debt management back under its full control

Turkey’s economic team retain posts Argentinian minister of Foreign Affairs, Hector Timerman (L), and cabinet chief, Jorge Capitanich alleged violation of Argentinian sovereignty in judicial decisions concerning the debt

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The key ministers responsible for Turkey’s economy are expected to remain in place in a new cabinet following Prime Minister Tayyip Erdogan’s ascension to the presidency later this month, senior ruling party officials told Reuters. Outgoing president Abdullah Gul said that Foreign Minister Ahmet Davutoglu was likely to take over as chairman of the party and become the next prime minister, rekindling speculation about the shape of the new cabinet. Investors have been particularly concerned about the fate of Deputy Prime Minister Ali Babacan and Finance Minister Mehmet Simsek, who have guided the Turkish economy towards unprecedented stability in recent years.

Standard Chartered fined in U.S. British banking company Standard Chartered Plc. will pay a US$300 million penalty and suspend or exit some important businesses after failing to weed out risky transactions that could be linked to money laundering. The civil settlement announced on Tuesday by Benjamin Lawsky, the New York State financial services superintendent, came two years after Standard Chartered agreed to pay US$667 million to a variety of U.S. regulators to resolve similar charges, including US$340 million to Lawsky’s office.

Balfour Beatty rejects third Carillion offer British engineering company Balfour Beatty yesterday rejected Carillion’s third merger proposal, saying it failed to address the risks in the deal and only represented a small increase in value.

Carillion had gone public with its latest approach yesterday, valuing its rival at 2.1 billion pounds (US$3.5 billion), in its bid to create a British construction giant with 80,000 staff around the world.

Both sides said they had made their decisions after consulting Balfour’s biggest shareholders.

resident Cristina Fernández unveiled legislation that seeks to push bondholders to swap defaulted debt for new notes governed by Argentine law, a move aimed at skirting a U.S. ruling that prevented her government from paying its creditors.

A draft bill appeared to be an attempt to bring Argentina’s debt management back under its full control.

“If bondholders decide - in individual or collective form - to ask for a change of the legislation and jurisdiction of their bonds ... the economy ministry is authorized to implement a swap for new public bonds under local legislation”, Fernández said in a televised statement.

A new bond swap carries legal risks, analysts said, and appeared to kill hopes that Argentina might soon reach a deal with the hedge-fund holdouts, enabling it to exit default.

A prolonged debt crisis is seen deepening the country’s economic recession, weakening the ailing currency and sapping thin foreign currency reserves.

Fernández, who has been unflinching in her refusal to pay the holdouts the full face value on their bonds, said a

new restructuring would respect the terms of earlier bond swaps in 2005 and 2010. More than 90 percent of creditors accepted large write-downs at the time.

The usually tough-talking leader appeared on the verge of tears as she neared the end of her address.

“Excuse me if I get a little nervous, I usually have more poise. However, I really feel that we are living a moment of great injustice in Argentina,” Fernández told the nation of 40 million people.

Contempt Fernández said the “vultures” could participate in the new restructuring if they accepted the same terms as other bondholders - a proposal the New York hedge funds have repeatedly scoffed at.

The draft bill also proposes removing Bank of New York Mellon - where the frozen June 30 coupon payment is held in limbo - as the exchange bondholders’ trustee. It plans replacing it with the state-run Banco Nación, which would open up an account at the central bank to enable Argentina to service its exchange debt there.

The sovereign debt bill will likely enjoy smooth passage through Congress because Fernández’s faction of the ruling Peronist movement enjoys a strong majority in both chambers.

The debt saga has strained already difficult relations with the United States.

A series of rulings by U.S. District Judge Thomas Griesa set off a wave of heated exchanges with Argentine officials. They said Griesa did not understand the complexities of the case and instead blamed Griesa for overstepping his bounds and blocking the payment.

It was not clear on Tuesday night whether the manoeuvre could succeed in sidestepping the U.S. court’s rulings and what impact it might have on the country’s default status.

“Argentina could end up in contempt,” said Alejo Costa, strategy chief at local investment bank Puente in Buenos Aires.

The proposed bond swap reduced the likelihood of Argentina reaching an agreement with the holdouts and dashes hopes of Argentina returning to global capital markets any time soon, said Costa.

Reuters

Yellen’s speech rally at risk The end of the Jackson Hole bull run may be at hand

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very time then-Federal Reserve Chairman Ben S. Bernanke spoke at the annual monetary policy symposium in the shadow of Wyoming’s Teton mountains since 2007, stocks rallied. With Janet Yellen set to make her first speech to the conference as central bank chief on August 22, investors may be setting themselves up for a fall, according to Steven Englander, global head of G-10 foreign exchange strategy at Citigroup Inc. “We worry that dovishness is increasingly anticipated and that by the time we get to her talk anything less than ‘full dovishness’ will be a disappointment,” said Englander, describing “full dovishness” as giving more room for extended monetary stimulus.

Repetition of the status quo “even accompanied by rhetoric

and optimism, is hawkish because it suggests that normalization is coming as we get closer to the targets,” Englander said in an August 18 report.

For most of the past seven years, the Fed chief’s keynote speech on the conference’s first full day proved a buy signal for U.S. stocks with the Standard & Poor’s 500 Index climbing an average 1.3 percent on such days from 2007 to 2012.

Bernanke skipped last year’s meeting.

Bernanke gains The biggest gain was the 1.9 percent of 2009, when Bernanke said economic activity appeared to be “levelling out” after the financial crisis. He perhaps spoke prematurely; at the Jackson Hole gatherings of 2010 and 2012 he signalled plans

Janet Yellen official portrait

for quantitative easing, spurring increases of 1.7 percent and 0.5 percent respectively.

Only Bernanke’s first Jackson Hole speech as Fed chairman in 2006 proved a dud; the S&P 500 Index ended that day down 0.1 percent.

To critics, Yellen is seen as a stock booster. Allan Meltzer, a Jackson Hole regular and historian of the Fed, has accused her of ‘‘goosing’’ equities with a bias toward easy money.

Bloomberg News

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August 21, 2014

Opinion Business

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Leading reports from Asia’s best business newspapers

THE BANGKOK POST National oil and gas conglomerate PTT Plc. expects to start unloading its gas pipeline business this year. Chief operating officer Sarun Rungkasiri said PTT was ready to spin off the business in response to a call by the National Energy Policy Council, which last week agreed with the energy flagship’s new board, chaired by Piyasvasti Amranand, that the pipeline business should no longer be part of the PTT empire. Mr Sarun said PTT would separate out the balance sheets and accounts of the gas pipeline business by year-end, then set up a new company to run it by mid-2015.

PHILSTAR The Philippines sold about P140 billion worth of new 10year bonds and completed its first bond exchange in three years as part of a liability management exercise aimed at stretching the average maturity of outstanding debt and reducing interest expenses.

The new 2024 bonds carry a coupon of 4.125 percent. A total P240.5 billion worth of existing eligible bonds were offered under the debt liability exchange but the government accepted only P122 billion from existing holders and P9.4 billion in bids from new investors. The government was originally looking to raise as much as P60 billion from the program.

THE STRAITS TIMES A government scheme for small and medium enterprises (SMEs) has been incorporated into another programme, which has in turn been enhanced.

The US$500 million Infocomm Technology for Productivity and Growth (IPG) scheme will now be part of the improved iSprint programme, said Dr Yaacob Ibrahim, Minister for Communications and Information yesterday. iSprint stands for “Increase SME Productivity with Infocomm Adoption and Transformation”. The combination makes it possible for SMEs to apply through iSprint for IPG incentives.

THE KOREA HERALD South Korea’s tech giant Samsung Electronics Co. has acquired 10 companies since last year at home and abroad, industry data showed Wednesday, apparently in line with the firm’s efforts to expand its business portfolio amid the slowing smartphone sector.

The world’s No. 1 smartphone maker purchased stakes in firms from various sectors encompassing health care, solid state drive software and video streaming, successfully clinching 21 merger and acquisition (M&A) deals since 2007, the data showed. The company’s second-quarter net profit plunged 19.5 percent to reach 6.25 trillion won (US$6.14 billion).

Indian Prime Minister Narendra Modi inspects the guard of honour on Indian Independence Day, at the Red Fort in New Delhi

India’s East Asian dream Sanjeev Sanyal

Deutsche Bank’s Global Strategist and a World Economic Forum Young Global Leader

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INGAPORE – On August 15, Narendra Modi delivered his first Independence Day speech as Prime Minister.

Though he continued the tradition of addressing the country from the ramparts of Delhi’s historic Red Fort, the speech broke with convention. Shunning a written text, Modi extemporized for an hour, mapping out an explicit vision for India, including an economic model that constitutes a clean break from India’s past.

Since 1991, India has been slowly changing its policy framework away from the socialist vision of its first prime minister, Jawaharlal Nehru. However, for political reasons, the changes were always justified in an almost apologetic way. Indeed, many Nehru-era institutions continue to exist – and even thrive.

In one fell swoop, Modi announced the abolition of one of the most important of these institutions: the powerful Planning Commission, which had continued to churn out Soviet-style “Five-Year Plans” and remained at the heart of a centralized resource-allocation process. Its successor, the National Development and Reform Commission, will probably function more as a think tank – providing ideas and ensuring policy coherence, but with no power to allocate.

Modi also argued for a new economic-growth model based on export-oriented manufacturing.

This means encouraging domestic entrepreneurs to manufacture goods for export and inviting the world’s top companies to relocate production to India.

This effort is important, because India’s economy and exports are dominated by services, which have grown steadily relative to overall output, now accounting for almost 60% of GDP. By contrast,

The shift to an “East Asian” growth model should not be surprising, given India’s demographic pipeline. India needs to create jobs for the ten million people per year who join the working-age population

the industrial sector’s share of GDP has remain unchanged, at around 26%, for the last three decades (the manufacturing segment is even smaller, at 14.9% of GDP).

When Modi’s emphasis on exportled manufacturing is viewed in the context of his government’s focus on heavy infrastructure projects – ranging from power generation to railways – it becomes clear that his growth model, with its mass deployment of labour and capital in industry, looks similar to East Asian countries’ strategy. It is also consistent with his frequent references to the need to create new cities, because urbanization is the spatial manifestation of industrialization.

The shift to an “East Asian” growth model should not be surprising, given India’s demographic pipeline. India needs to create jobs for the ten million people per year who join the working-age population.

It also needs to accommodate the millions who wish to shift away from agriculture, which still employs half of the workforce.

Although the service sector was able to generate growth in the past, it has proved to be a poor job creator and only employs 27% of workers, far lower than its share of the economy. By contrast, construction and manufacturing are rightly seen to be more promising outlets for the mass deployment of semi-skilled workers.

There are, of course, many obstacles in Modi’s path. India’s tax and regulatory regime is widely regarded as unfriendly to business; but Modi’s track record in government suggests that he is sensitive to this problem and will be able to make significant improvements.

The greater challenge for Modi will be financing his growth model.

The success of the East Asian model was predicated on a sharp increase in the investment rate.

Beginning with Japan, every rapidly growing East Asian economy sustained investment rates in the range of 38-40% of GDP over its rapid-growth phase. China is currently investing almost half of its GDP. India’s fixedinvestment ratio, by contrast, has declined in recent years to around 30% of GDP. Foreign capital can play a role in supporting rapid growth, but international experience shows that domestic savings is key to sustaining high investment rates.

Mobilizing these savings will require careful thinking about how the domestic financial system can be expanded by an order of magnitude without risking a future crisis.

Another major problem will be the migration of tens of millions of people as they are sucked into the expanding industrial economy. India does not have China’s socio-political controls, such as the hukou residentialpermit system, to manage such a large-scale movement of people. Japan and South Korea are perhaps too small to serve as useful precedents.

Modi may be hoping to preempt the problem through his project to create 100 “smart cities,” though how the program will be implemented remains unknown.

Despite all of the obstacles and risks, Modi has articulated an explicit economic vision for the first time since Nehru. Unlike the apologetic reforms of the past two decades, Indians have been promised a confident new beginning. It is now a matter of implementation.

The Project Syndicate 2014

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August 21, 2014

Closing Psy’s agency gets boost from LVMH

China’s property registration authority takes shape

A fund backed by French luxury giant LVMH plans to make a rare US$60 million investment in a South Korean entertainment agency that counts “Gangnam Style” star Psy among its clients, the agency said yesterday. Under the deal with YG Entertainment, L Capital Asia, the investment fund arm of the LVMH Group -known for its luxury brand Louis Vuitton- will buy YG’s new preferred shares worth 61 billion won (US$59.6 million), YG said in a regulatory filing. The Seoul-based YG has under its umbrella top names in South Korea’s thriving K-pop industry.

China’s Ministry of Land and Resources has finalized the framework for a property registration bureau, ministry officials said yesterday. The bureau will shoulder ten key tasks with 24 staff in six offices, according to a ministry plan approved by the central authority for the organization of government departments. The government has been trying to set up a national property ownership database to enable them to know who owns what. The system will make it easier to levy property taxes, which is widely expected to curb speculation in housing market.

Philippines wake-up call to answer world’s phones At an investment forum in Manila in March, Iloilo secured about 150 billion pesos of pledges for property, power, infrastructure and retail projects

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loilo, an hour’s flight south of Manila, is at the centre of the country’s biggest provincial transformation since independence in 1945 as President Benigno Aquino tries to reverse decades of migration to Manila and abroad. New airports, roads and ports are drawing property developers, retailers and business processing companies that fuelled a decade of growth in the capital, like U.S. call-centre operator StarTek Inc. and hotel chain Marriott International Inc. From Jakarta to London, governments are trying to counter the draw of dominant capital cities that soak up the lion’s share of workers and investment. In the Philippines, that means spreading some of the wealth from Manila, an urban sprawl of about 22 million people that accounts for more than a third of the nation’s economy.

Megaworld Marriott Iloilo is among those leading the charge.

Downtown, it seems like

that will be auctioned by the government this year as part of a US$20 billion Public-Private Partnership program championed by Aquino, whose single term as president ends in June 2016.

Rural migrants

Aerial panorama of Iloilo, Philippines

any other provincial city with jeepneys, motorbikes and pushcarts weaving through narrow streets of old churches, shops, peddlers and faded low-rise buildings.

On the edge of town, the contrast is stark. The old airport, replaced by a new one in 2007, is a construction site, where developer Megaworld Corp. is building a 35 billion-peso (US$800 million) business park with a Marriott hotel and condos sporting names like One Madison Place and Lafayette Park Square.

A mile down the road, the

planned hospital, shops, hotel and homes of Ayala Land Inc.’s Atria Park District may create 10,000 jobs on former salt pans. For Ilonggos and Ilonggas, as the city’s residents are known, the growth brings new opportunities.

Megaworld says its Iloilo project will create 30,000 jobs in information technology and business outsourcing, with capacity for more than 3,000 at Colorado-based StarTek’s site.

More than 900,000 people in the Philippines work in call centres and business processing, up from

383,000 in 2008, according to the Manila-based Business Process Association.

Airport highway This year, Iloilo completed 14 kilometres (9 miles) of new roads and widened the 16-kilometer highway to the airport. A 3,700-person convention centre is being built for next year’s AsiaPacific Economic Cooperation meetings to be held in the city.

Iloilo’s new airport, with non-stop flights to Hong Kong and Singapore, is among six provincial gateways

Iloilo’s growth is also fed by a tide of migration from surrounding villages. The United Nations estimates the Philippine population will grow 18 percent in the decade through 2020 to 110.4 million.

The regional boom is helping the national economy, which grew an average 7 percent in the past two years.

The World Bank forecasts a 6.4 percent expansion this year, and 6.7 percent in 2015.

Rising provincial incomes also combat poverty in a nation where the World Bank estimates 42 percent of people live on less than $2 a day.

Minimum wages in provinces are as low as 205 pesos a day, less than half the 429 pesos in Manila, according to government data.

Xi defends socialism at Deng’s anniversary

SE Asia integration to worsen inequality

Testing catastrophe insurance system

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resident Xi Jinping vowed to uphold socialism with Chinese characteristics and China’s independent “path, theory and system” yesterday as China marked the 110th anniversary of the birth of Deng Xiaoping.

Addressing a symposium to mark the anniversary, which falls on Friday, Xi said the most important political and theoretical legacies of the late Chinese leader are socialism with Chinese characteristics, which the Party and people created under the leadership of Deng.

Socialism with Chinese characteristics fits China’s reality and meets the needs of the times, which is why it works, he said.

“The independent path, theory and system are key to the sovereignty and dignity of our country as well as the self-esteem and independence of the Chinese nation,” he said.

“We will try our best to reform areas that are weak and unsound and learn from good experiences of foreign countries. But we will never completely copy foreign experience let alone absorb bad things from them,” he said.

Xinhua

plan by Southeast Asian countries to establish a European Union-inspired single market next year could worsen inequality and is likely to benefit men more than women, a new study warned yesterday.

The Association of Southeast Asian Nations (ASEAN) has set 2015 as the target to create a single economic market across the 10-nation bloc that is home to some 600 million people.

It is aimed at improving the flow of goods, services, investment and labour around the region, whose economic powers have long faced criticism for failing to work together more effectively.

The single market could add an extra 14 million new jobs and boost Southeast Asia’s annual growth 7.1 percent by 2025, according to the joint study by the UN’s International Labour Organisation and the Asian Development Bank.

However it also warned the gains may not be evenly distributed, and the plan could increase already large gaps between rich and poor across the region.

AFP

Bloomberg News

hina is testing out an insurance system to fund reconstruction work after natural disasters as part of a broader push to expand the insurance sector, a top regulator said yesterday.

At present, reconstruction work after earthquakes, floods and typhoons is mostly financed by the government and through donations.

Under the planned system, the risk will be shared between the government, insurance and reinsurance firms and individuals, Wang Zuji, vice chairman of China Insurance Regulatory Commission, told reporters.

The government will also set up a calamity insurance fund, he added, but declined to say when he expected the overall system to be launched as this was a “very difficult project”.

“The momentum in the pilot schemes is very good and that gives a tremendous support for the establishment of a catastrophe insurance system,” Wang said.

The trials are taking place in the southern city of Shenzhen and in Chuxiong region in the southwestern province of Yunnan, he added.

Reuters