Macau Business Daily, Oct 13, 2014

MOP 6.00 Closing editor: Sara Farr

Report slams status quo

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o progress. That’s the conclusion of the U.S. Congressional-Executive Commission’s 2014 annual report on Macau’s political reform. This signals Macau is nowhere near attaining universal suffrage. Nor has the Commission observed developments this year consistent with UN Human Rights Committee 2013 recommendations. Those were that Macau set a timeline for transition to an electoral system based on universal suffrage Page

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Year III

Number 643 Monday October 13, 2014

Publisher: Paulo A. Azevedo

Macau investing US$70mln in Yunnan Page 2 | HK stability vital for development: former Macau governor Page 16

International yuan European Central Bank plans for the Chinese currency have been warmly welcomed by authorities. The ECB is considering including the yuan as a reserve currency. Quickening progress towards internationalisation

Industrial engine accelerating

Page 10 Brought to you by

Industrial production is making a greater contribution to the Macau economy. Increasing by 5.3 percent to MOP3.71 billion last year alone. Electricity, natural gas and water supply accounted for over half of the total value

Mind the gap

Page 5

The gap is widening. Casino workers’ salaries and nongaming employees will be separated by a 31 percent chasm in the next four years. When new casinos open in Cotai, casino workers will have become a ‘privileged class’, say analysts fearful of social tension. In just one year staff costs have jumped 19 percent for gaming operators. The gap right now is 24 percent

www.macaubusinessdaily.com

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HSI - Movers October 10

Name

%Day

China Merchants Hold

0.42

Austerity biting

China Shenhua Energy

0.23

Hong Kong & China Ga

-0.23

Hang Lung Properties

-0.43

Golden Week was lacklustre. Few retailers here or in Hong Kong reaped the usual profits. The majority reported declining sales. Mainland Chinese visitors spent up to 70 percent less during the National Day holiday, with luxury goods sales amassing just US$3.2 billion.

That’s compared to US$4.1 billion just a year earlier

Li & Fung Ltd

-0.44

China Mobile Ltd

-2.74

Kunlun Energy Co Ltd

-3.62

CNOOC Ltd

-4.01

Lenovo Group Ltd

-5.05

China Resources Powe

-6.25

Page 4

Source: Bloomberg

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I Buy Macau Locals are wealthier. So says Vincent Tung, general director of the Macau Shopping Festival Organising Committee 2014.

As such, he says, they should also become a prime target.

Alongside traditional mainland Chinese visitors. Mr. Tung speaks to Business Daily about how the retail market might witness a slowdown - but how this year’s ‘I Buy Macau’ campaign could help lengthen visitors’ stay

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October 13, 2014

Macau Gaming workers earn 24pct Gov’t: Vesting scale preferred for provident fund above Macau average With the new flow of casino openings in Cotai, the salary gap will widen to 31 percent by 2018, making casino employees an increasingly privileged class in Macau. For operators here, staff costs jumped 19 percent in one year, Morgan Stanley reports

The Social Security Fund’s president also noted that the nonmandatory provident fund scheme would be legislated next year Stephanie Lai sw.lai@macaubusinessdaily.com

Luís Gonçalves luis.goncalves@macaubusinessdaily.com

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t’s not only this year or the next. Staff costs will continue to pressure Macau gaming operators’ profits until 2018, as casinos spend extra millions in bonuses, compensation and wages to retain current employees and attract new ones for the upcoming venues in Cotai. The trend, however, is rapidly widening the wage difference between casino workers and the rest of Macau’s labour force, prompting the territory to risk ‘social destabilisation’, says Morgan Stanley.

Staffing costs became a hot topic in Macau this year as gaming workers started to demand better working conditions, wages, career prospects and more bonuses from operators. Since the Summer, as demands mounted, more than a dozen demonstrations with workers from throughout the gaming industry took to the streets here, making headlines all over the region and negatively impacting stocks and investor confidence.

In response, all the six big gaming operators here decided to introduce retention programmes with packages ranging from distribution of company shares to bumped-up salaries to scholarships for ermployees’ children (see box).

Costs on the upside The measures resulted in casino staff costs increasing by 19 percent in the first half of the year compared to the same period in 2013. The cost per employee rose by 12 percent, data compiled

by Morgan Stanley reveals.

In total, the gaming industry (Melco Crown was not included in Morgan Stanley’s report) in Macau spent more US$250 million more in staff costs in the first six months compared to a year ago, as its employees took home an average MOP3,000 patacas extra from salaries, bonus and other compensation the report says.

For the casinos’ financial performance this represnted a headache especially with revenues in Macau slowing.

While staff costs increased 19 percent, gaming revenues increased by 13 percent in the first six months of the year.

But with gaming revenues dropping now for four straight

months (with October likely to make it five in a row) the situation is worsening. Morgan Stanley predicts that in the first half of 2015 staff costs will increase 17 percent, while revenues will decline 15 percent, a combination that will damage the financial performance of the industry here.

Morgan Stanley expects labour costs to pressure casino profit margins until 2018, when the wave of openings in Cotai ends, with some operators likely to experience a decline in earnings in this period due to the costs of attracting new staff.

The US bank predicts that the gaming industry will face a 20 percent increase in staff costs in 2014 and 2015, three times more than average inflation here. In 2016, labour expenses will skyrocket by 40 percent.

Until 2016, at least five multibillion-dollar casinos will open in Macau. With gaming revenues forecast to go up around 10 percent between 2014 and 2016, the high staff cost growth rates are set to be of concern for companies here.

Richer But as casinos are hit with more expenses, gaming workers are earning more than ever. According to Morgan Stanley data, the all-in monthly wages (salary plus bonus plus compensation) of casino employees will go up by

almost 42 percent from MOP19,000 in 2013 to MOP27,000 in 2018.

This is opening a wide gap between casino workers and the rest of Macau’s labour force. With the retention packages and an increase in salary of MOP3,000 per month in the first half, casino employees’ wages are already 24 percent higher than the average salary here (it was 20 percent in 2013).

With the casinos opening in Cotai and the need to attract new staff, job offers and pay will make gaming workers even richer compared to the rest of the population. In 2018, Morgan Stanley predicts, casino employees will take home 31 percent more than workers from other industries here.

Today, casino wages are already a world apart in Macau. Ranging from MOP20-25,000 per month, it’s already a bigger salary than 70 percent of Macau’s labour market. With such numbers, Morgan Stanley believes the demands of gaming employees in Macau are running short of manoeuvre margin; if the situation is prolonged too long, it could trigger social instability. The US bank urges the government here to support other industries beyond gaming, as the latter are losing the war on jobs as junior staff, for example, don’t hesitate to choose a casino over another sector because of the pay.

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f the 400 opinions collected during the consultation for a non-mandatory provident fund scheme to be enacted in the city, president of Social Security Fund Ip Peng Kun said more preferred the proposal that suggests a vesting scale for the scheme, which he reckons is a better way of helping retain human resources for a company.

The vesting scale means that the amount of accrued benefits derived from the employer’s contributions that can be vested in the employees is based on their years of serving the company.

As noted in the government’s paper for the 60-day consultation period on the provident scheme, which finished in June, employees who work for three years or less in a company get zero accrued contributions from the employer.

Employees who work between three and four years are entitled to 30 percent of the accrued employer’s contributions for the provident fund; this ratio increases by 10 percent for each year the employee continues to work for the

company.

A less popular proposal is the so-called ‘hedging mechanism’, meaning bosses can use their contribution to the provident fund to compensate workers for dismissal.

Mr. Ip also noted that the report on the provident fund scheme consultation has been completed; he expects the scheme to be legislated next year. The government would review whether it would make the provident fund mandatory for companies to join after a three-year implementation of the fund.

Meanwhile, regarding the continuous four-month decline in Macau gaming revenues up to and including September, Mr. Ip admitted that there could be a “slight drop” in the transfer from the gaming tax revenue.

The social security fund supports the city’s basic layer of retirement pension and several other social benefits, and has been reliant on gaming revenue to support its operation: Mr. Ip reiterated he would strive to negotiate for a bigger contribution from both employer and employee to keep the fund sustainable.

Retention programmes SJM Double summer bonuses for employees staying put until 2018

Macau investing US$70mln in Yunnan

Wynn 1,000 Wynn shares

A

Galaxy Shares worth 3 months’ salary for employees who stay until 2017 Melco Crown Management courses, scholarships for workers’ children

s many as 49 enterprises are investing a combined total of US$70 million in Yunnan Province. Its vicegovernor Li Jiang said these include various industries mainly in the health and tourism sectors.

Mr. Li met with Macau Secretary for Economy and Finance Francis Tam Pak Yuen during the 10th PanPearl River Delta Regional Cooperation and Development Forum and Trade Fair, which ends today in Guangzhou.

Mr. Tam said the forum had allowed for deepened cultural and economic exchanges and interactions between Macau and Yunnan.

In addition, Macau is looking forward to strengthening cooperation with Yunnan in terms of tourism, economy and trade, as well as MICE, and fulfilling its role as a business and trade services platform, he added.

Earlier this year, Macau donated MOP100 million to Yunnan for earthquake relief work in Ludian.

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October 13, 2014

Macau Five more casinos with smoking lounges The Health Bureau has announced the names of five more casinos that have been given the go-ahead to set up smoking lounges. These are: President Casino, Casino Kam Pek, City of Dreams, Altira Macau and Galaxy Macau. Twelve other gaming venues had received approval before the full smoking ban was implemented on October 6. As at Friday, only 17 out of the 28 casinos that have notified the government of their plan to set up smoking lounges on their mass gaming floors, had been given green light.

US report: No progress in Macau’s political reform The U.S. Congressional-Executive Commission said it observed no progress regarding Macau’s process of transitioning to an electoral system based on universal suffrage in its annual report, in which it also indicated that human rights, freedom of speech, and the rule of law had deteriorated in China Joanne Kuai joannekuai@macaubusinessdaily.com

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here is no improvement in Macau’s transition to universal suffrage, according to the U.S. Congressional-Executive Commission (CECC)’s 2014 annual report.

The Commission acknowledged that unlike Hong Kong, Macau’s Basic Law does not mention ‘universal suffrage,’ although it includes a provision ensuring the applicability of the International Covenant on Civil and Political Rights (ICCPR) in Macau.

The report indicated it ‘has not observed developments during the 2014 reporting year consistent with the UN Human Rights Committee’s 2013 recommendation that Macau ‘set timelines for the transition to an electoral system based on universal and equal suffrage.’’

The 316-page report has dedicated roughly two pages of findings to Macau, including four added seats in the Legislative Assembly, Chief Executive Fernando Chui Sai On’s unopposed election bid this year, and the unofficial referendum in late August.

Local activist Jason Chao Tenghei’s arrest in August during the Civil Referendum has been presented as one of the cases of infringement on political freedom in the report.

Jason Chao told Business Daily that he appreciates the foreign government’s attention to Macau’s political development but the SAR should take matters into its own hands.

“Despite any report by any foreign government and their intention to push for political reform in the SAR, the Macau Government is the one that is obliged to comply with the international treaty and standard,” said Mr. Chao. “I will study the report. I am not planning on any particular action in reaction to the report because I’ve repeatedly stressed my point of view that the SAR Government should transition to an electoral system based on universal suffrage in line with the requirements of the International Covenant on Civil and Political Rights, as recommended by the United Nations Human Rights Committee.”

In the section on freedom of expression, the Commission indicated it ‘observed continued reports of self-censorship by

journalists and concern over government control of broadcast media’. Cases such as the Macau Cable TV saga, the sacking of professor Eric Sautedé and University of Macau firing professor Bill Chou Kwok-ping were cited.

Corruption and money laundering by mainland China tied to Macau’s gambling industry continued to be sources of concern for the CECC. ‘Gamblers continued to evade mainland China’s currency-export restrictions, both through the use of junkets and the fraudulent use of credit and debit cards,’ said the report.

In Macau, U.S. delegations are encouraged by the CECC to meet with members of the Legislative Assembly, especially directly elected legislators, the Macau Government administration, and civic leaders outside the government. In addition, delegations are also encouraged to urge Macau Government officials in meetings to begin the process of transitioning to an electoral system based on universal suffrage in accordance with Article 25 of the ICCPR, as recommended by the UN Human Rights Committee.

The spokesperson of the Office of the Chief Executive told Business Daily “as usual, the Macau SAR Government won’t make an official response to the (CECC’s) report”.

On a broader scope, the report provides analysis of 19 human rights and rule of law issue areas and offers specific bipartisan recommendations on ways to address these issues in the interests of the U.S.-China relationship.

The Congressional-Executive Commission on China was created by the U.S. Congress in October 2000 with the legislative mandate to monitor human rights and the development of the rule of law in China, and submit an annual report to the President and the Congress. The Commission comprises nine senators, nine members of the House of Representatives, and five senior administration officials appointed by the President. The Commission publishes an annual report for the President of the United States and Congress, typically in the Autumn of each year.

Chinese government interference in Hong Kong The report, endorsed by all 17 members of the bipartisan Commission, also called on the Hong Kong administration and the Chinese central government in Beijing to institute universal suffrage in the neighbouring SAR. The Commission has called on the US State Department to ‘renew the reporting requirements of Section 301 of the United States-Hong Kong Policy Act of 1992, paying particular attention to the development of democratic institutions in Hong Kong and China’s obligations under international treaties and agreements.’ The report, released on the 12th day of pro-democracy demonstrations in Hong Kong, listed various examples of turmoil throughout the reporting year but didn’t include the Occupy Central civil disobedience movement.

‘Fresh attention to Hong Kong is among 13 key policy recommendations from the 2014 annual report…The new language was a significant change from the Commission’s report last year,’ remarked James T. Areddy in his article ‘U.S. Human Rights Report Elevates Hong Kong on Agenda’ in the Wall Street Journal.

Another horrific year for human rights in China “This year’s report shows that human rights, freedom of speech, and rule of law deteriorated in China, while China’s compliance with international trade rules remained poor,” Senator Sherrod Brown, chairman of the CECC, said in a statement. “On issue after issue, President Xi Jinping’s government showed more interest in consolidating power, gaming the system, and denying rights than being a responsible global power.”

“No-one should still believe that President Xi Jinping will be a new type of Chinese leader, more open to reform and rights protections,” said Chris Smith, CECC Co-chair.

In a letter addressed to Barack Obama, the President was urged to press for more freedom in China as well as more aggressively engaging China over democratic aspirations in Hong Kong.

Xi Jinping and Barrack Obama are due to meet at a summit in Beijing next month.

The report drew ‘extreme dissatisfaction’ from the Chinese Ministry of Foreign Affairs, which has repeatedly said Hong Kong is a Chinese domestic issue.

“We demand that this Committee speak and act cautiously, and stop sending the wrong message to Occupy Central and other illegal activities or provide them with support,” said the spokesperson, Hong Lei, in a daily news briefing on 10 October 2014, calling the report a distortion of facts that could damage China-U.S. relations.

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October 13, 2014

Macau

Bonjour Golden Week store sales drop 16pct

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HOSPITALITY Flattening trend The number of hotel guests registered a drop of about 2.5 percent in August, when compared to the same month in 2013. That fact breaks a pattern. Their number had been growing steadily over recent years and August, one of the seasonal peaks, has recorded strong growth every year since the financial crisis. The number of guests in that month posted an average annual growth of almost 12.5 percent between 2010 and 2013. A possible slowdown, or even a slight contraction, was already on the cards. The results for April, May and June showed similar negative growth rates; but they were followed by a June pick-up, when the number of guests grew by 2.9 percent. A good result in August would have suggested that the short series of negative results earlier in the year was just a blip.

August figures raise the issue that deeper forces may be operating. If we take the combined figures for the first eight months then a slowdown is becoming evident.

osmetic retailer Bonjour Holdings Ltd registered a drop of at least 16 percent year-onyear in its store sales in Hong Kong and Macau during the National Day Golden Week, blaming the Occupy Central pro-democracy movement in Hong Kong for its sales performance.

In a filing with the Hong Kong Stock Exchange, the group said its retail sales had recorded a decline of around 8 percent during the national holiday, compared to the same period last year. Its filing states that the drop in performance was due to the decreased number of customers.

‘About half of our retail stores are located in the affected districts.

Certain stores even had to close business at the time when clashes occurred. As a result, the sales of the affected districts recorded a significant drop during the period,’ the group wrote in the filing.

Affected districts, according to the cosmetic retailer, are those hosting mass protests in Hong Kong’s Central, Causeway Bay, Mong Kok and Tsim Sha Tsui.

In addition, the group revealed that sales to both mainland Chinese tourists and local customers had also

recorded declines during Golden Week. The decreases were caused by average spending and decline in number of transactions, respectively.

During the first half of the year, the group recorded a turnover of HK$1.34 billion, an increase of 3.8 percent year-on-year during the first half of the year.

The group’s competitor, Sa Sa International Holidngs Ltd, also blamed the mass protests in Hong Kong for its retail sales falling below expectations. Sa Sa posted a 3 percent decline year-on-year in its same store sales in the 7-day holiday.

Mainlanders spend 70pct less during national holiday

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onsumer spending by mainland tourists on luxury goods in Macau, Hong Kong and Taiwan during the National Day Golden Week recorded a drop of 70 percent, accounting for only 5 percent of total expenditure by mainland tourists on high-end products beyond the Chinese border.

News agency Chinese News Services reported last Friday that the total spending of mainland tourists on luxury goods across the border

declined by almost 22 percent yearon-year, amounting to US$ 3.2 billion from the US$4.1 billion of the same period last year, according to a report by the World Luxury Association.

According to the report, mainland Chinese spent most in Europe, with their shopping alone accounting for around 68 percent of the total foreign expenditure on high-end products during the holiday. Spending in North America accounted for 27 percent of the total.

The report indicates that the amount of such goods purchased by the mainland Chinese all recorded drops while the greatest decline was evident in Hong Kong, Macau and Taiwan due to the anti-graft drive by the central government, which had also resulted in Europe experiencing a decrease of some 18 percent year-on-year in their luxury market for mainlanders during Golden Week.

K.L.

Average hotel occupancy rate down The homologous growth for this year to August stood at less than 1.2 percent. In 2013, the equivalent figure reached 14.4 percent. With the exception of China, all major regions of origin for hotel guests show a noticeable decline in this period. In particular, Hong Kong and Taiwan displayed losses of 26 percent and 4.8 percent, respectively. Guests from other Asian countries and the rest of the world also declined, and all had positive growth rates in 2013. The little growth so far this year hinges almost exclusively on the rise of 11.2 percent in guests from the mainland - with a little help from Macau residents, but these account for little.

J.I.D.

0.1pct

June & July hotel guests combined growth, the previous year

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espite the increase in registered in visitor arrivals for the National Day Golden Week from October 1 to 7, Macau Government Tourist Office (MGTO) noted a drop in the city’s average occupancy rate for 3 to 5-star hotels, along with a slight decrease in average room rate.

The average occupancy rate for the city’s 3 to 5-star hotels during Golden Week was 87.2 percent, down 1.5 percentage points year-on-year, according to statistics provided

by MGTO. The 3-star hotels saw the biggest drop in occupancy rate at 85.4 percent, down 2.2 percentage points compared to the same period last year.

The occupancy rate in 5-star hotels dropped 1.1 percentage points to 92.1 percent compared to a year ago.

Currently, there are 28,892 hotel and guesthouse rooms, the Office noted, an increase from the 27,803 rooms recorded last October.

During the National Day holiday, a peak travel season for mainland

Chinese tourists, the Public Security Police recorded a total of 1.04 million visitor arrivals (inclusive of imported labour and non-resident students here), up by 16 percent year-on-year.

Of these, over 840,000 were mainland visitors, a figure that is 17 percent more than a year ago.

For Golden Week, the average room rate for the city’s 3 to 5-star hotels also declined slightly by 2.2

percent to 1,892 patacas (US$236.8).

The 3-star hotels registered a relatively bigger drop in room rate of 6.8 percent to MOP1,654 for the period. These are, however, more expensive than 4-star hotels with an average room rate of MOP1,601, a 2.4 percent decrease year-on-year. The average room rate for 5-star hotels was MOP2,421, up 1.4 percent.

S.L

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October 13, 2014

Macau Industrial contribution to economy up 5.3pct Macau’s industrial production totalled MOP3.71 billion last year, an increase of 5.3 percent. The Electricity, Gas and Water supply sector was the biggest contributor with 53 percent of total value at MOP2 billion João Santos Filipe jsfilipe@macaubusinessdaily.com

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he contribution of the industrial sector to the economy of Macau increased 5.3 percent to MOP3.71 billion from MOP3.5 billion, Statistics and Census Services (DSEC) data shows. This is the fourth consecutive increase in gross value added since 2010.

As for the different industries’ contribution to the total MOP3.71 billion, Electricity, Gas and Water supply accounted for 53 percent of the value (MOP2 billion), Food Products and Beverages posted 15 percent (MOP522 million), Other non-metallic Mineral Products 7 percent (MOP252 million), Wearing Apparel 6 percent (MOP229 million), Publishing and Printing 5 percent (MOP187 million) and Other Manufacturing 14 percent (MOP514 million).

The total number of people engaged in the industrial sector’s production totalled 12,987, a reduction of 20 workers. This year, the reduction was not significant.

However, since 2008 there was a fall of 51.9 percent in the number of people working in the industrial sector from 25,074. The increase of 4.6 percent in the compensation of

employees – remuneration paid to employees before deductions – was not enough to stop the sector from losing more workers.

However, the introduction of natural gas in public housing increased the number of persons engaged in Electricity, Gas and Water Supply by 7.6 percent to 1,098. In relation to the Manufacturing industry, the number of workers fell by 3 percent

to 11,880. The Mining & Quarrying sector engaged 9 persons in Macau.

In 2012, and for the first time in four years, the number of industrial establishments increased from 899 to 917. However, the number remained relatively stable last year with a drop of one to make a total of 916 such establishments registered here.

In relation to the size of establishments, in 2013 the majority

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(819) engaged between 1 and 29 persons. Meanwhile, 45 working places involved between 30 and 49 workers and 34 establishments employed a workforce ranging from 50 to 99 persons. From the total of 916 establishments only 18 had more than 100 persons.

As for the Value of Production & Other Receipts of Manufacture by industry Other Non-metallic Mineral Products (MOP1.73 billion) and Food Products & Beverages (MOP1.46 billion) increased by 38.1 percent and 10.7 percent, respectively year-on-year, while that of Publishing & Printing (MOP463 million) and Manufacture of Wearing Apparel (MOP1.01 billion) decreased by 23.9 percent and 19.8 percent, respectively.

Electricity, Gas and Water Supply Value of Production & Other Receipts of the industry decreased 1.1 percent year-on-year to MOP2.6 billion.

According to DSEC, this decline was caused by the continuous shrinking of local electricity generation, as production of electricity decreased by 30 percent year-on-year to MOP510 million.

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

Those people and their actions are our inspiration.

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info@goldfishmacau.com +853 2833 1258

6

October 13, 2014

Macau

Retail might also suffer a slowdown, says Macau Shopping Festival’s general director For this year’s edition of the Macau Shopping Festival, as in the previous one, the organization will try to attract more local shoppers rather than only target Mainland Chinese visitors.

In an interview with Business Daily, the general director of Macau Shopping Festival Organizing Committee 2014, Vincent Tung, says locals are getting wealthier and more open to a different type of shopping, and increasingly represent a suitable target as well.

Looking at overall retail growth in the territory, Mr. Tung, who is also director of group marketing at Shun Tak Holdings Limited, says that in the past three to four years the figures have been very positive but this year might be more difficult, considering Beijing’s anti-corruption campaign as well as the curb on UnionPay. Luciana Leitão Photos by Manuel Cardoso

This is the fourth edition of Macau Shopping Festival. What do you expect to be different this year?

The whole idea came about five years ago — it was initiated by Sands China.

The economy was slow, especially for the retail industry; we didn’t get any shoppers and nobody would actually take Macau seriously as a shopping destination.

We wanted to get all the traders to promote Macau as a shopping destination. We believe our software and hardware are up to international standards, especially since we have all the big shopping malls in the casinos, like One Central, New Yaohan, all the local specialties, and we believed shopping could be a good support for gaming. If you look at all the tourism destinations, shopping is one of the key attractions or entertainment for tourists. Besides going sightseeing, you can buy something.

Macau is also good in a way because we have all the international brands, luxury products, plus all those products like jewellery, watches, leather, all the souvenir cookies and some ‘Made in Macau’ souvenirs.

It would do everyone good for the whole of Macau and the retail industry to let the world know Macau is also a shopping destination besides Hong Kong.

Especially a lot of Chinese tourists would visit Hong Kong and come to Macau and they could still shop here. Also, it’s a different experience to shop in Macau. Our shortcoming is that the duration of people staying in Macau is short — less than two days. That’s why last year we came up with the theme ‘One day shopping, one day playing’, trying to promote that Macau has enough shopping for you to fill up the whole day and then the next day you can enjoy playing; and playing can include gaming, food, sightseeing and trying to extend the duration of stay for these people.

So, to move forward, this year we actually had a familiarization tour to Singapore to look at their shopping festival — their focus is more on the locals. For us, 90 percent are actually visitors and less than 10 percent are locals.

Two years ago, we started off with something special — how can we turn Macau Shopping Festival into something unique as compared to other shopping destinations in Asia.

And how can you make it unique?

We did research and we see that most of the countries/cities

Last year, we only had three days. Hopefully, they will like to participate more or spend more to support the local retail industry.

would do their shopping festival during the Summer so we chose December as our shopping festival month because it’s traditionally a shopping season due to Christmas and also all the international luxury brands go on sale; otherwise, we couldn’t convince them to go on sale. The first impression of a shopping festival is a lot of discounts and sales, so that helps. Taking the month of December, everybody will go on sale.

We chose December to be our shopping festival month because it’s traditionally a shopping season due to Christmas and also all the international luxury brands will go on sale

You can actually see we have 17 organizing committee members casino operators plus the shopping malls, Macau Tower, Fisherman’s Wharf, New Yaohan - then we recruit local small and medium enterprises to participate.

Last year, we started off with a Christmas window decoration campaign, with a MOP3,000 subsidy for decoration. Two years ago, we started a free lucky draw for all inbound tourists. That actually can help to position our shopping festival as unique for Macau. It’s unique because all the other countries/cities will not offer a lucky draw upon arrival. All our members will still do our property promotion for Christmas, on top of all the discounts. That proved to be a good attraction.

Last year, we wanted to encourage more locals because locals are getting more affluent, wealthier, richer; a lot of them go overseas or to Hong Kong for shopping.

To support the local SMEs, we also offer free lucky draws for the locals, so they don’t have to do anything, they can just go to the CTM shop and enjoy a free lucky draw to see if they win any prizes.

Will you have any features this year to attract more locals?

This year, we’ll extend the local lucky draw period to seven days.

Did you see any increase in the number of local participants last year?

Yes, we did post-campaign research on all the participating SMEs. Over 60 percent of them appreciated or used the window decoration subsidy.

And over 70 percent indicated substantial growth in business during December, so these are encouraging figures.

Hopefully, this year we can make it even better for the locals. We’ll have more promotion, small interviews, more publicity and this year we’ll also have a grand opening show in the House of Dancing Water theatre. We have commissioned artist Eric Tsang to host a game show, tailormade for the Shopping Festival; this show will be recorded and broadcast in China, so the coverage will be wide.

Our main target is still the Mainland Chinese — about 70 percent of visitors are from China and they’re big spenders. Plus we work with MGTO’s overseas rep offices in the short-haul regions like Hong Kong, Taiwan, Japan, Korea, Singapore, Thailand and Malaysia, to actually promote the Macau Shopping Festival. For Macau, we need new products, more than the World Heritage Sites, the Grand Prix, fireworks, so December will have a shopping festival to complement the year’s calendar of activities.

What was the percentage of locals coming to the Macau Shopping Festival last year?

We don’t have those figures but, roughly around 10 percent came to buy something. By independently tracking, we can see that 90 percent are foreigners and 10 percent are locals.

Retail growth You said the Macau Shopping Festival was created because retail was supposed to support the growth of the gaming industry. Has that really happened?

It’s going in a positive direction. Retail revenue has gone to over MOP60 billion, year on year, with 20-plus percent increase year-on-year.

This year might be more difficult with all this anti-corruption happening in China and this curb on UnionPay. So, you cannot expect expect a trend [to last] forever. There will be a time there

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October 13, 2014

Macau In a way, yes, but this is not something we can actually control. It’s government policy.

They can make the airport more international, with more direct flights coming in. The problem for Macau is it only has 600,000 people, so the outbound travellers number is small, thus every time you come in, it’s mainly the visitors coming in, flying out. In Hong Kong, you have a lot of outbound travellers but in Macau you don’t have enough outbound travellers.

That’s one of the shortcomings for more international carriers flying directly to Macau.

Do you expect this to change when we have the Light Railway Transit and the bridge connecting Hong Kong, Zhuhai and Macau?

Yes. Let’s say our ferry service is already helping out — more international travellers can just fly to Hong Kong because it’s a more international airport, and the ferry comes to Macau, that already helps. Hopefully, the bridge will also help.

This year, it might be more difficult with all this anti-corruption happening in China and the curb on UnionPay. So, you cannot expect a trend [to last] forever

will be a slowdown and then go up again; this is the normal business cycle.

We will still have double-digit growth this year but you have to look at the Golden Week performance and see how we did on Golden Week. Especially, with Hong Kong having this Occupy Central problem . . .

Has the Occupy Central movement affected Macau?

It might affect some visitors that, instead of coming to Hong Kong/Macau, may choose other destinations. According to Hong Kong figures, they still experienced 2 percent growth. Our number of visitors is still growing but then the spending may be less.

Gaming revenue has dropped for four consecutive months and that will affect the shopping a little bit.

We had a slowdown in the past three months with the gaming revenue dropping, too.

Will this drop in gaming revenues also affect the performance of the Macau Shopping Festival?

We have yet to see. That will have a certain effect on it but hopefully locals can shop more.

Do you expect the percentage of locals coming to this year’s edition of the Macau Shopping Festival to be higher?

We would hope so. We try to encourage locals to shop more.

It’s also good because everywhere is on sale and also a lot of prizes are there to win, so why not shop here? Also, they can support the local SMEs. We did see a problem for visitors supporting local SMEs because they don’t have time or they don’t even know how to find the shop.

Visitors will always hang out in a few areas — Saint Paul’s Ruins and tourism hotspots plus casinos — but then if you want them to go to a particular shop it takes time.

Traffic is also a concern. If you go to the northern district, you may not be able to find a taxi to come back. This is still a challenge for local SMEs but we’re still doing the best we can to help them out.

Over these past three editions, what went well and what was not so good?

We still need to create more awareness, to become really well established with a festive campaign. In December, everybody will know it’s the Shopping Festival — we can also enjoy shopping coming to Macau in December. That’s something that has yet to be firmly established.

The big shopping malls have enjoyed double-digit growth yearon-year for the past three to four years. When we started off, it was after the financial tsunami — the economy was small, the shopping malls didn’t have enough visitors, tenants would complain, but in the past three years everybody was happy, enjoying 20 or 30 percent growth year-on-year, so there was no complaint. But in the past three months everybody has been concerned. This year, we came up with a simple theme - ‘I buy Macau’ — [meaning] buy like shopping but also buy like gambling. It fits Macau well, because it’s also a gaming destination. We have created a mascot and a theme song for the Shopping Festival. Hopefully, we can also build the Macau Shopping Festival brand, with a stronger image. We expect this to go further this year.

Last year, we wanted to encourage more locals because locals are getting more affluent, wealthier, richer; a lot of them go overseas or to Hong Kong for shopping

A push for other visitors Do you expect initiatives like this to help diversify the type of visitors coming to the territory?

We’re working with MGTO’s overseas rep offices, to promote in their countries or regions that Macau is having a Macau Shopping Festival, so more people could come.

This year is the 15th anniversary of the establishment of the MSAR, so there is a lot of celebration, and in itself that’s already attracting people to Macau. With Macau Shopping Festival underlying the whole month with all these celebrations, hopefully it can create a stronger impact and generate more noise in the whole region.

Hopefully, more non-Chinese visitors may also come to Macau in December.

Does Macau need this and other types of initiative to attract different visitors?

Yes. The whole policy of Macau is [about] World Tourism Leisure destination.

The objective is actually to diversify Macau from being just gaming, with more family-oriented attractions and also with Hengqin supporting the playground of Macau. Also, in two years time, the bridge will be built.

We’re actually trying to year-onyear build a stronger foothold and a foundation for the tourism industry. Of course, it cannot be successful overnight. Everything is looking positive.

In two years’ time, the bridge will be built and then in the next two or three years, three mega resorts will open, and Hengqin will also be more mature. So, hopefully, this part will be a better destination for all sorts of visitor. Then, of course, families with kids will enjoy more shopping, plus the youngsters and all those non-gaming people will be enjoying entertainment and shopping rather than just gaming.

Until now, 80 percent of Macau visitors come from Mainland China.

Is this only due to the lack of a good transportation system?

Macau Shopping Festival is also promoting local SMEs. Is this also a good way to diversify Macau’s economy?

Yes, we try to help them as much as we can. The whole economy is not getting healthier because we don’t have enough human resources. For local SMEs, it’s very difficult to hire human resources because most people prefer to work in the casinos with more benefits - the pay is higher - rather than working in a little shop. This is actually not a healthy trend.

Unless these local SMEs have very unique products most of them are still mom and pop stores.

Still, I don’t want to get into that topic because I’m not an expert on that. But from our perspective we just help to bring more shoppers to them.

Will you have other events/features in Macau Shopping Festival that might attract different types of visitor?

All of our malls or shopping centres will have promotions on top of the tenants’ discounts.

This will help because you come to Macau and when you enter you already have the chance to win prizes and then you can enjoy discounts everywhere and gifts or whatever you can get from shopping. Everywhere you go, you see Christmas decorations, you have a good atmosphere for shopping and hopefully this will help for people to come.

Foreigners appreciate Christmas. When you come to Macau, you see the whole town is decorated and there’s a Christmas atmosphere. That can also encourage people to shop. Also, with the theme ‘I buy Macau’, hopefully this can be a longerterm theme, establishing Macau as a shopping destination with the Macau Shopping Festival a good time to visit Macau. If you’re not only keen on gambling, even for families and kids, because its also the anniversary month, there are fireworks and the Latin Parade, all of this can combine together.

What kind of other visitors do you expect to attract?

We hope the Koreans and Japanese, all these short-haul visitors. You cannot really count on the long-haul, you don’t really expect someone from Europe to fly here just for the Macau Shopping Festival, they won’t really bother.

8

October 13, 2014

Macau

Galaxy slump down to Macau slowdown concerns

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ptions traders see no end to the retreat that erased about US$12 billion of market value from Galaxy Entertainment Group Ltd. this year through yesterday as declines in Macau gaming revenue accelerate.

Puts hedging against a 10 percent drop in Galaxy shares cost 3.25 points more than calls betting on a 10 percent advance yesterday, data on one-month options compiled by Bloomberg show. The price difference rose to 4.22 on September 30, the highest since July 2013. Galaxy and Sands China Ltd., a unit of billionaire Sheldon Adelson’s Las Vegas gaming company, are the worst- performing stocks on the Hang Seng Index this year amid China’s economic slowdown and a campaign to curb graft and officials’ extravagance that is scaring off high-rollers.

“Macau gaming stocks look cheap, but they’re going to remain so because the anti-corruption measures in China have affected consumption,” Kelvin Tay, Singapore-based chief investment officer for Southern AsiaPacific at UBS Wealth Management, said in an interview on October 2.

“People are less willing to spend in a very ostentatious way. The slowdown in the Chinese economy has also affected consumption, so the gaming stocks in Macau are a victim of these trends.”

Gross casino revenue in the world’s biggest gambling hub dropped 12 percent in September, the steepest slide since June 2009 and a fourth month of declines, official data

released this week showed. VIP players account for more than 60 percent of the city’s gambling receipts.

Corruption cases Chinese President Xi Jinping’s crackdown has netted high- level officials including former politburo member Bo Xilai, who was sentenced to life imprisonment for graft last year.

Liu Tienan, former vice chairman of the National Development and Reform Commission, confessed in September to taking 35.6 million yuan (US$5.8 million) in bribes along with his son.

The government in August said it will reduce salaries for executives at state- owned companies, saying “unreasonably high” pay was stoking public discontent.

Macau’s gaming revenue has also been declining amid signs growth in Asia’s biggest economy is stalling.

Data released last month showed the weakest industrial-output expansion since the global financial crisis, while moderating investment and retail sales growth and a slumping property market underscore the risks of a deepening economic slowdown.

The World Bank on October 6 cut its 2014 China growth forecast to 7.4 percent, which would the slowest pace of expansion since 1990, compared with the government’s official target of 7.5 percent.

Share slump Galaxy tumbled 31 percent this year, dragging valuations to 16.8

times estimated earnings from 29.3.

Sands China sank 33 percent and traded at a multiple of 15.7 times, compared with 10.8 for the Hang Seng Index. Yoko Ku, a spokeswoman at Galaxy, declined to comment.

Not everybody is pessimistic.

Sands China jumped by the most in six months on Oct. 6 after a report showed mainland Chinese visitors to Macau climbed 14 percent in the first five days of the week-long National Day holiday this year. There had been concern pro-democracy protests in Hong Kong would have prompted mainland Chinese to cancel their usual joint trips to the two cities, said Grant Govertsen at Union Gaming Group.

“The increase in Chinese tourists to Macau is a positive signal that gaming revenue could recover this month,” Castor Pang, head of research at CorePacific Yamaichi in Hong Kong, said by phone on October 6. “Investors will probably continue nibbling at Macau casino stocks since they’ve retreated a lot.”

Smoking ban Victor Yip, an analyst at UOB-Kay Hian Holdings Ltd. in Hong Kong, says the rebound might be short-lived as a smoking ban in casinos taking effect this month may negatively impact gaming revenue.

“It might be too early to buy Macau casino stocks,” Yip said by phone.

“VIP gaming volumes remain soft.

We still don’t know how much impact the smoking ban will have.”

The HSI Volatility Index, which measures the cost of options on the Hong Kong benchmark measure, dropped 4.7 percent to 17.54 Friday, the lowest in almost two weeks.

Implied volatility, used to gauge the cost of options, for one-month contracts with an exercise price 10 percent below Galaxy shares was 39.67 Friday, compared with 36.43 for those with a strike 10 percent above, according to data compiled

by Bloomberg. The price relationship known as skew has increased to 3.25 from minus 4.38 in April through yesterday. It was at 1.64 for Sands China.

Union demands Macau casino revenue may continue to decline in October and profit margins may soften as gaming companies face protests from workers demanding better wages, according to Pictet Asset Management Ltd. The Macau Gaming Industry Frontline Workers’ union has organized eight demonstrations so far this year compared with two in 2013.

“We’re still underweight on the Macau casinos,” said Pauline Dan, Hong Kong-based head of Greater China equities at Pictet. “The monthly gaming revenue from Macau has been declining due to China’s anticorruption clamp down. There’s also going to be cost pressures for the casino operators in the next few quarters as workers are becoming frustrated and demanding a pay rise.”

Bloomberg

Parisian leases 85pct of shops

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ighty-five percent of the 150 boutiques in the Shoppes of Parisian Macao have already been leased, the corporation has announced in a press release.

The fourth shopping mall of Sands China in the city will occupy some 320,000 square feet in the Phrase III project and will be interconnected to the group’s other malls on the Cotai Strip via air conditioned

walkways and ‘travelators.’

“Although not scheduled to open until late next year, retail space in Shoppes at Parisian has been snapped up much faster than we expected, which I believe demonstrates a very positive outlook on the part of our retailer partners, as well,” the senior vice president of Retail of Las Vegas Sands Corp David Sylvester remarked.

According to the

corporation, the avantgarde brand Maison Martin Margiela as well as cosmetics concept store Temptation will set up business in the new mall.

“For a large cosmetics concept store, the chance to open in a premium location popular with the millions of visitors that Macau attracts each year was highly compelling,” Alessandra Piovesana,

Regional Managing Director of The Nuance Group (HK) Ltd, commented on opening a store in Macau. The Nuance Group is the operator of Temptation.

Meanwhile, André, a brand managed by French fashion retailer Vivarte that Business Daily reported last week would set foot in Macau, is also mentioned by the corporation in the press release confirming

its intention to move into Parisian.

The Parisian Macao is slated to open by the end of next year and will offer more than 3,000 hotel rooms. The project, worth MOP21.6 billion, was halted in June following an on-site accident and given the go-ahead to resume construction by the government late September.

K.L

9

October 13, 2014

Gaming

Trump Union says lapsed contract can’t change: Bankruptcy

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rump Entertainment Resorts Inc. can’t modify the contract with workers at its 2,000room Taj Mahal casino because the collectivebargaining agreement has already lapsed, a union local said in court papers.

Without concessions, either voluntary or imposed by the bankruptcy court, the Atlantic City, New Jersey-based resort will close in mid-November, the company has said.

The labor contract expired by its own terms 12 days after Trump Entertainment filed for Chapter 11 protection on September 9. The company’s 906-room Trump Plaza had already closed by then.

In a filing with the U.S. Bankruptcy Court in Delaware, Unite Here Local 54 cited the leading bankruptcy treatise as saying a “majority of courts” have ruled that the court has no power to modify a union contract that already expired.

Although the issue has yet to be decided by a U.S. court of appeals, the union did say the Bankruptcy Appellate Panel in San Francisco and two New York bankruptcy judges have ruled there’s no power to address expired

union contracts.

The union pointed to the governing law, Section 1113(a) of the Bankruptcy Code, as giving power to modify a “collective bargaining agreement.”

Under U.S. Supreme Court authority, the union said, contractual obligations in expired contracts are supplanted by requirements in federal labor law. The union said the court has no power to modify the statute, although it could modify a contract if one were still in existence.

Once a contract has expired, an employer is

required to continue abiding by the CBA. At that stage in the life of a CBA, the power to modify an employer’s obligations rests solely with the National Labor Relations Board, according to the union.

Unite Here disagreed with an opinion by a New Jersey bankruptcy judge, who said that losing the power to modify an expired contract would “frustrate the purpose” of the statute.

Even if the court can alter the contract, Congress wrote special laws to make changing a CBA more difficult than terminating an ordinary

agreement, the union said.

The casinos shouldn’t have made non-negotiable demands and failed to bring “relevant decision-makers” to the negotiating table, the union said.

The union said the company’s offer of a modified contract isn’t “fair and equitable” because concessions from the workers would be permanent, while those from other stakeholders wouldn’t.

The issue will be weighed at a hearing on Oct. 14 by U.S. Bankruptcy Judge Kevin Gross, who has several options.

He could say there’s

no power to modify an expired contract. If he finds residual power, he might say it’s premature to order concessions until there’s been a more thorough exploration of the facts by the union or more concrete concessions by creditors, the city and the state. Or he could order changes.

For details on concessions the casinos want from the workers, click here for the Sept. 30 Bloomberg bankruptcy report.

Trump Entertainment filed a proposed reorganization plan on October 1. To qualify for US$100 million in new equity contributed by secured noteholders, who will convert some of their US$292.3 million of debt to equity, there must be union and tax relief plus concessions from Atlantic City and the state of New Jersey.

First-lien lenders hoping to become owners include Icahn Partners LP and affiliated funds.

The Trump casinos confirmed a reorganization plan in 2010 when the existing first-lien debt was issued.

Second-lien creditors became the primary shareholders.

Bloomberg

10

October 13, 2014

Greater China Coal resource tax set between 2-10 pct China said on Saturday that it will institute a resource tax on coal of between 2 percent and 10 percent beginning on December 1, the first official numbers to be issued for the long-anticipated plan.

The State Council, China’s cabinet, said in September that the country would impose a new resource tax on coal and cancel a series of existing charges in a move to simplify the tax structure for struggling coal producers. The range is in line with expectations, based on previous reports in Chinese media.

China welcomes ECB yuan debate While China is the world’s second-largest national economy, the yuan currently isn’t ranked among the most-held foreign reserve assets, according to data from the International Monetary Fund Stefan Riecher, Belinda Cao and Jeff Kearns

S.Korea, China agree to extend swap facility South Korea and China agreed to extend an existing swap agreement worth 64 trillion Korean won or 360 billion yuan by three more years, the Bank of Korea said in a statement on Saturday.

The decision to extend the bilateral agreement to October 10, 2017 was made to boost trade between the two countries and is expected to contribute to financial stability, the South Korean central bank said. The swap facility, which was initially signed by the two countries in 2011, had been doubled from an original swap line of 180 billion yuan launched in 2008.

U.S. cotton industry accuses Beijing Beijing’s cotton price supports have breached global trade rules, a U.S. industry association said, calling on U.S. regulators to examine China’s support levels. Prices paid to farmers by the Chinese government under the country’s farming policy exceed those allowed by the World Trade Organization, the National Cotton Council of America said in a testimony to the U.S. Trade Representative on October 1. The NCC has estimated that Beijing’s support has exceeded the allowed level of 8.5 percent of the country’s crop production value for the past four years.

Agile says chairman detained Chinese developer Agile Properties said its chairman has been detained by authorities but the company has applied to the Hong Kong stock exchange to resume share trading today Monday after a week-long suspension. The company said in a statement on Friday evening that chairman Chen Zhuo Lin was required by Kunming City prosecutor “to stay at a designated residence” since the evening of September 30. In Chen’s absence, non executive directors Fion Luk and Chan Cheuk Yin are to be acting co-chairpersons, the company said.

No “big stimulus” despite slowdown China does not need large-scale monetary stimulus in the near future despite a slowdown in the world’s second-largest economy, a senior economist with the Chinese central bank said Saturday. “I don’t see the reason for big stimulus in the foreseeable future,” Ma Jun, chief economist of the Research Bureau of the People’s Bank of China (PBOC), said at a panel discussion on the sidelines of the Annual Meetings of the International Monetary Fund (IMF) and the World Bank. Although the economic growth has “slowed a bit,” China’s job market “looks pretty stable.”

Zhou Xiaochuan, Governor of the People’s Bank of China, centre, shakes hands with Ali Babacan, Deputy Prime Minister of Turkey

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olicy makers from Beijing to Kuala Lumpur welcomed plans by the European Central Bank to consider adding the yuan to its foreign-currency reserves.

The internationalization of China’s currency emerged as a subject at the annual meeting of finance ministers and central bank governors in Washington after Bloomberg News reported that the ECB will discuss whether to begin laying the groundwork to buy yuan. Such a measure would mark a major step for the importance of the currency, also known as the renminbi.

Asked about the ECB’s plans, People’s Bank of China Governor Zhou Xiaochuan said that “it’s good that more countries are willing to adopt it as a reserve currency as our economy grows.”

The U.S. dollar leads at 61 percent of holdings.

Should ECB officials eventually

decide to buy the currency, initial purchases would be small and might start in a year at the earliest, said a person who asked not to be named because the discussions aren’t public.

The central bank’s 24-member Governing Council will consider the move when gathering in Frankfurt for their October 15 mid-month meeting.

Makes sense Malaysia’s governor Zeti Akhtar Aziz said in Washington that the yuan has been part of the central bank’s reserves since 2009, adding that the ECB’s considerations are a “positive development.”

The ECB’s push comes against a backdrop of global central bank diplomacy to ease the way for China’s currency, after a series of swap agreements on emergency liquidity.

Officials will review the IMF’s basket of so-called Special Drawing Rights,

Premier Li prioritizes quality against pace in growth In a speech to businessmen and politicians in the German port of Hamburg, Li repeated that China still expects economic growth of about 7.5 percent this year Brian Parkin

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he “quality” of economic expansion, including job creation and fighting pollution, is as important as its speed amid uncertainty over whether China will reach its growth target this year, Premier Li Keqiang said.

In a speech to businessmen and politicians in the German port of Hamburg, Li repeated that China still expects economic growth of about 7.5 percent this year. Though China may exceed or miss that target, the

nation doesn’t “face a hard landing as some say,” he said.

China has already achieved its employment target for 2014 this month after the economy added 1 million jobs, said Li, who visited Berlin on Saturday. “Stamina and perseverance” are as important as speed in the economic policy mix, underlining why China has avoided stimulus measures including using monetary policy to help meet its growth target, he said.

which doesn’t currently include the yuan, by 2015, according to the fund’s website. China hopes its currency can join, Li Bo, head of the People’s Bank of China’s second monetary policy department, said in Hong Kong in March. The basket currently includes the dollar, euro, pound and yen.

“It makes sense to talk about preparing for a greater international role of the renminbi given that China is our third-largest trading partner,” ECB President Mario Draghi said yesterday in a press conference.

The U.K. said on October 9 it has chosen banks to sell its first yuandenominated bonds as it seeks to develop Europe’s offshore trading center for the currency. The proceeds will be used to finance Britain’s reserves. In March, Germany’s Bundesbank and the PBOC agreed to cooperate in payment clearing and settlement in renminbi.

“After 35 years of amazing growth it’s a natural and healthy next stage for China’s development to liberalize capital markets, to liberalize internal financial systems, and obviously the renminbi internationalization is an integral part of that,” San Francisco Federal Reserve President John Williams said.

Even so, China’s yuan is far from challenging the dollar’s key role as a reserve currency, according to Williams. “Those risks are something that we should probably talk about in 10 years. Right now we’re still in that early stage of renminbi internationalization,” he said.

The U.S. only holds foreign reserves in euro and yen, according to the Treasury Department’s website.

Bloomberg News

The Chinese economy, like that of Europe, is at a “critical” phase of development, Li said. Complex challenges including fighting pollution are weighing on the nation’s ability to reach economic targets, he said.

Li said China is looking to Europe for cooperation on food security, environmental technology, combating terrorism and crime and fighting diseases such as the current Ebola outbreak.

Chancellor Angela Merkel, whose economy may be close to recession, said yesterday after talks with Li in the German capital that “in the difficult situation we’re seeing in the global economy, it’s a sign of stability that GermanChinese economic cooperation is developing nicely.”

With China facing a property slump and rising debt, the two governments agreed on a 28-page pledge to increase mutual investment, cooperate on innovation and boost competitiveness, even as they compete for export markets.

Li’s trip marks Merkel’s third meeting with the Chinese leadership since March.

Bloomberg News

11

October 13, 2014

Greater China IMF calls for a boost Airbus signs tentative deal in productivity to open new plant to sustain growth China is the world’s fastest-growing

airline market and is set to outstrip the United States as the biggest single market for air transport within 10 years

The IMF secretary stated that accommodating monetary policies has played a crucial role in dealing with the crisis

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From left, US Federal Reserve Chairwoman Janet Yellen, International Monetary Fund (IMF) Managing Director Christine Lagarde, speak with Tharman Shanmugaratnam, Chairman of International Monetary and Financial Committee (IMFC)

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hina needs to lay emphasis on economic structure reform and higher productivity in order to maintain sustainable growth in the long run, says the secretary of the International Monetary Fund (IMF).

After three decades of double-digit growth, China has now realized that structural reform is critical for it to sustain higher-quality growth, Lin Jianhai told Xinhua on Saturday on the side-lines of the IMF-World Bank Annul Meeting.

“The service sector has potential to play a bigger role in boosting growth, as it accounts for 60 percent of a nation’s economic output globally, but only 40 percent in China,” Lin said.

Faced with an aging society, Lin said, China has come under rising pressure in raising productivity to keep its economy expanding. During 20002008, growth in labour productivity contributed 40 percent of the annual growth. After that, its contribution dropped to about 30 percent.

“To boost productivity, China should increase spending on education and research and development and improve institutional governance,” he added.

Commenting on the global economic outlook, Lin said high debt, unemployment and lower-than-precrisis-level investment are to blame for the current fragile global economic recovery.

The IMF secretary also stated that accommodating monetary policies have played a crucial role in dealing with the crisis. However, these policies must be accompanied by fiscal policies and structural reform to stimulate the economy to grow.

Focus of the structural reform should be on labour market, price institution governance and data availability plus transparency.

Speaking of the IMF’s quota reform, Lin stressed that the reform is inevitable as emerging markets and developing countries contributed more than three quarters of economic

growth to the world after the financial crisis, with China alone around one third, which should be reflected through the governance reform of the IMF. Because of pending consent from the United States, which has veto power, the 2010 quota and governance reform is yet to be fruitful.

Lin called for public confidence in the reform, and reaffirmed that the U.S. government is also making efforts to get the green light from Congress.

Talking about the emergency reserve fund established by the emerging-market bloc of BRICS, which groups Brazil, Russia, India, China and South Africa, Lin said that the IMF welcomes the new regional funding arrangement.

Collaboration and communication between the IMF and the BRICS institution will be beneficial as both are dedicated to the economic prosperity of its members and the world, he added.

Xinhua

The service sector has potential to play a bigger role in boosting growth, as it accounts for 60 percent of a nation’s economic output globally, but only 40 percent in China Lin Jianhai International Monetary Fund secretary

irbus took a step on Friday towards opening a second plant in China by signing a letter of intent with Chinese authorities to set up a cabin completion centre for its wide-body A330 jets.

The tentative agreement, signed in Berlin during a visit by Chinese Premier Li Keqiang, coincided with a deal to sell 70 smaller A320-family jets worth US$7 billion at list prices.

The world’s second-largest plane maker after U.S. rival Boeing has been in talks for some time to try to expand its footprint in China as a way of supporting sales of its A330 jetliner to the world’s fastestgrowing aviation market.

Airbus already assembles some of its A320-family aircraft in the northern port city of Tianjin, where it also plans to bring virtually completed A330s to have their cabins fitted for the Chinese market if the two sides reach a definitive agreement.

However, industry analysts say the move depends on winning

support from Chinese airlines for a dedicated regional version of its A330 for the busy domestic market, which in turn faces competition from Boeing.

Reuters reported on Thursday that Airbus may sign a letter of intent for the A330 cabin plant and secure a new plane order during Li’s visit.

In March Airbus extended its agreement to assemble some of its A320 medium-haul jets in Tianjin and said it hoped to make progress within a year on discussions over the possible cabin centre there for the long-haul A330 model.

Airbus aims to increase A330 sales to China and ensure smooth production of the 20-year-old aircraft family by offering a medium-haul version tailored to China’s domestic market.

China has ambitions to break into the US$100 billion annual market for passenger jets, but still depends on large volumes of imported jets from the two major Western plane makers.

Reuters

12

October 13, 2014

Asia

Modi seeks state victory to support reform agenda Changes in goods and services taxes and the government’s right to acquire land faces strong opposition from some states Shilpa Jamkhandikar and Rafael Nam

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rime Minister Narendra Modi spearheaded his party’s campaign for elections later this week in Maharashtra state, knowing that victory in the home of India’s financial hub Mumbai will make it easier to push through economic reforms.

The smaller northern state of Haryana also votes on Wednesday. But it is the western state of Maharashtra that will provide the best test of how well Modi’s appeal is holding up, five months after he stormed to power in a general election with promises to mend a country battered by corruption scandals, high inflation, and sharply slowing growth.

Modi has campaigned personally in Maharashtra, betting he can help his Bharatiya Janata Party (BJP) win big in a state with a population of 110 million spread across an area the size of Italy.

Local polls predict the BJP will win, but perhaps only with a narrow margin. Newspaper Mail Today’s survey showed the party is close to gaining the 145 seats needed to clinch a majority in the 288-member state assembly. Maharashtra, along with Haryana, announces results on October 19.

The BJP surprised analysts by breaking off a decades-old alliance with Shiv Sena, a right-wing regional party popular among the region’s Marathi people that is now expected to provide formidable competition.

Unless Mumbai and Maharashtra progresses, the country won’t move forward. You have wasted 15 years - please don’t waste any more time Narendra Modi India’s Prime Minister

The opposition Congress party, which has ruled Maharashtra with an ally for 15 years, faces defeat on the same anti-incumbency wave that toppled it from power in the general election but retains pockets of support in the state.

Modi is making two dozen campaign stops across the state, and his gift for working a crowd was on full display at a rally in Mumbai on Thursday.

“Unless Mumbai and Maharashtra progresses, the country won’t move forward. You have wasted 15 years -

please don’t waste any more time,” he said as the crowd chanted his name.

Hopes that Modi would revive an economy that for two consecutive years has grown under 5 percent a rate too slow for a country with India’s demographics - have spurred a record-setting rally in shares and attracted US$34 billion worth of foreign funds in markets this year.

But Modi has so far unveiled none of the “big bang” reforms needed to revive the stagnating economy, focusing instead on small initiatives to reform governance.

Some of the major expected reforms, especially a reduction of price controls in diesel, could prove unpopular. Others such as changes in goods and services taxes or the government’s right to acquire land faces strong opposition from some states.

A big win in Maharashtra could make it easier to forge ahead on reforms in the run-up to the annual budget next February.

“Modi will have more space to undertake bolder reforms if his party receives a strong political mandate at state level,” said Rupa Rege Nitsure, chief economist of Bank of Baroda in Mumbai.

Going it alone Maharashtra will also provide the BJP a testing ground for its go-it-alone strategy for future state elections, given the need to narrow the lead

Indian Prime Minister, Narendra Modi launches the Project) in New Delhi, 11 October 2014

held by Congress and its allies in the upper house of parliament.

State elections allot seats to the Rajya Sabha, where the BJP and its allies control 56 seats, behind the opposition Congress alliance’s 90 seats. Although less powerful than the lower house, the Lok Sabha, the body still plays a critical role in passing legislation.

Kuroda closes ranks with Japan’s government Prime Minister Shinzo Abe has recently said the government must be mindful of the de-merits of a weak yen

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ank of Japan Governor Haruhiko Kuroda said there was no gap in views between the government and the central bank that a weak yen was positive for the world’s third-largest economy.

He also appeared unfazed by recent sharp declines in global stock and crude oil prices, saying that the rise in market volatility was likely temporary and came from a very low level.

Kuroda said that while a weak

yen boosts exports and revenues at companies operating overseas, it hurts consumers and service-sector firms by pushing up import costs.

“Taken together, a weak yen is positive for Japan’s economy as long as it reflects fundamentals,” Kuroda told a news conference on Friday after attending a Group of 20 finance leaders’ gathering.

Kuroda has repeatedly said a weak yen was beneficial for Japan’s

economy, which had historically suffered from a strong yen that hurt exports and aggravated deflation by keeping import prices low.

But Prime Minister Shinzo Abe has recently said the government must be mindful of the de-merits of a weak yen, paying heed to growing complaints from lawmakers that the yen’s sharp declines were hurting small firms and households of their constituencies by pushing up gasoline

Bank of Japan Governor Haruhiko Kuroda

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

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October 13, 2014

Asia Indian central bank governor positive on U.S. rate rise

Cambodian trade unions demand higher wages

The RBI has set a target of bringing inflation down to 8 percent by January 2015 and 6 percent by January 2016 but central bank governor has admitted to upside risks to the latter target

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‘Saansad Adarsh Gram Yojana’ (MP’s Ideal Village

“This is a carefully thought-out strategy,” said Girish Kuber, editor of Marathi daily Loksatta and a political analyst.

“Earlier, they didn’t have the legs to make it on their own in states where regional allies are strong, but given Modi’s pan-Indian appeal, it seems that they will succeed.”

Reuters

and raw material costs.

The slight difference in tone has led some market participants to believe the BOJ and the government were sending conflicting messages on how they perceived the effect of the weak yen on the economy, a view Kuroda tried to dispel.

“I don’t think there is any difference in views,” he said in a joint news conference with Finance Minister Taro Aso, who also attended the G20 meeting and directly oversees currency policy.

Aso declined to comment on the exchange-rate moves.

Aso and Kuroda were both optimistic about Japan’s economy, stressing that it was continuing to recover moderately from a temporary slump caused by a sales tax hike in April.

“The effect of the tax hike is ebbing.

With the job market strong and household income rising, consumption will gradually rebound,” Kuroda said.

Kuroda also said sharp falls in oil prices were beneficial for Japan as the country needs to pay less for its huge oil imports.

“At this point, I don’t think we need to worry too much about the rise in market volatility from low levels,” he said.

Stocks in major global markets closed out one of their worst weeks of the year on Friday, with an index of global equities hitting an eight-month low.

Reuters

eserve Bank of India Governor Raghuram Rajan said on Saturday there would be some volatility in emerging markets once the U.S. Federal Reserve decided to raise interest rates, but that strong growth in America was good for the world ecoonomy.

“If the Fed starts raising interest rates, as I presume they will ... it will be good for the rest of the world. The rest of the world will benefit from U.S. growth,” Rajan said at an event on the side-lines of the International Monetary Fund and World Bank fall meetings.

“It could create some volatility for the emerging markets ... my hope is that after the initial volatility there will be differentiation, and the financial investors would try to see where there is some macro-stability ... and I hope India comes out in (that) group,” he said.

Rajan said a Fed rate hike would create currency volatility and, given differences in dollar and euro interest rates, would raise a question for India - “do we go closer to the dollar, do we go close to the euro?”

Rajan also said the Indian rupee was not overvalued at this point in time and that the Indian economy was in the “beginning phases of a recovery which I hope will strengthen

over time.”

“My guess is that this quarter will be a little weaker than the previous quarter, but I think that over the course of this year, we will be solidly in the 5 percent growth range and by next year we will be solidly in the 6 percent growth range.”

He said a trajectory - or ‘glide path’ - the central bank had laid out for lower inflation had wide acceptance in financial markets, even if it had not yet been enshrined in law.

Reuters

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Myanmar to host power convention An electric power convention will be hosted by Myanmar later this month to explore ways of settling power shortage and expanding power market in the country, event organizer said yesterday. The 2nd Myanmar Electric Power Convention (MEPC)-2014, scheduled for October 21 in Yangon, will be attended by more than 250 delegates. Topics to be focused during the three-day convention include current status and challenges of Myanmar’s power market, investment policy and potential hydropower project, latest updates in new electricity law and the role of hydropower in Myanmar.

SMRT considering bid for London taxi firm Singapore public transportation operator SMRT Corp Ltd is considering an 800 million pound (US$1.3 billion) takeover bid for unlisted British taxi company Addison Lee, Sky News said on Saturday.

Sky News, which did not cite a source, said SMRT is at the early stages of considering an offer. SMRT, which operates Singapore subway lines and has bus and taxi services, did not confirm or deny the report. Private equity firm Carlyle Group has a significant stake in Addison Lee.

Pictured Reserve Bank of India Governor Raghuram Rajan

Thailand to spend on waterways system

Urban decay threatens hot Philippine economy he Philippine economy has in recent years shed its reputation as one of Asia’s laggards, with growth of 6.4 percent in the second quarter maintaining its status as the region’s best performing after China.

The country also recently gained its first investment grade scores from the big three global credit rating agencies.

Infrastructure development, however, hasn’t moved at the same pace, and economists warn the creaking systems that are of so much frustration to millions of people will also have a growing impact on economic growth.

Manila already loses 2.4 billion pesos (US$53 million) in potential income daily due to traffic jams, according to a study by the Japan International Cooperation Agency.

Among the other infrastructure problems are power shortages that lead to brownouts, clogged drainage that exacerbate frequent rainy season floods and an Internet network so slow that it sparked a parliamentary enquiry.

And Manila’s decadesold international airport, with

Six Cambodian trade unions led around 1,000 garment workers to march through streets yesterday to demand a higher minimum wage as annual talks on a wage hike are scheduled for next month. Protest workers, from various factories on the outskirts of Phnom Penh, gathered at the Freedom Park with banners reading “We Need Decent Wage” and then marched through streets to deliver petitions to the U.S. embassy, the European Union, and the National Assembly. He said the unions are urging the government and the employers to set a minimum monthly wage of US$150 for the garment and footwear sector from 2015.

malfunctioning air conditioning and leaking toilets, has been cited by a travel website as the worst in the world.

President Benigno Aquino and his team are acutely aware of the problems.

The government is planning to increase infrastructure spending from 2.2 percent of gross domestic product in 2012 to five percent by the end of Aquino’s term in 2016.

As part of that, the government will pursue its so-called public-private partnership programme. More than 50 projects are being put out to private builders.

The agency’s plan calls for an expansion of rail and toll road networks to provinces north and south of Manila, spreading economic activity, as well as a subway system for the capital.

It also envisages a new Manila airport terminal.

Many of the projects cited by the Japanese plan are included in the PPP pipeline, but these have moved painfully slowly due to regulatory delays and court cases between rival bidders.

AFP

Thailand’s military government plans to spend about 78 billion baht (US$2.4 billion) on developing the country’s waterways infrastructure over the next 10 years, the transport minister said on Saturday. That will include a 2.21 billion baht budget for the current fiscal year which began this month, Air Chief Marshal Prajin Juntong told reporters after a media briefing. Such infrastructure includes ports, bridges and canals. Among major projects are the development of Pak Bara seaport in the southern province of Satun and a rail link from that port to a port in Songkhla province, the minister said.

India’s industrial output crawls India’s industrial output expanded at a much slower-than-expected pace in August, hobbled by weak investments and consumer demand, underscoring the challenges that face an economy battling its worst spell of sub-par growth in years.

Production from mines, utilities and factories rose an annual 0.4 percent in August compared with a 2.4 percent growth estimated by economists in a Reuters poll.

Output growth for July was lowered to 0.4 percent from 0.5 percent earlier. Friday’s data still marked the fifth straight month of annual expansion in output, the best run in nearly three years.

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October 13, 2014

International U.S. and UK to test big bank collapse Regulators from the United States and the United Kingdom will get together in a war room this week to see if they can cope with any possible fall-out when the next big bank topples over, the two countries said on Friday. Treasury Secretary Jack Lew and the UK’s Chancellor of the Exchequer, George Osborne, on Monday will run a joint exercise simulating how they would prop up a large bank with operations in both countries that has landed in trouble. Also taking part are Federal Reserve Chair Janet Yellen and Bank of England Governor Mark Carney.

Crossroads for WTO Weakened by its failure in July to seal a key deal on a global customs pact amid continued wrangling with India, the World Trade Organization is at a crossroads, observers say. A draft of the so-called Trade Facilitation Agreement emerged at the WTO’s Bali conference in December last year and was meant to be finalised at the end of July. But sparring between members, notably over demands from India that the world body gives the green light to the developing power’s stockpiling of food, have put the long-sought deal on ice.

Draft US deal for Swiss banks The U.S. Department of Justice (DOJ) is seeking “total cooperation” from Swiss banks in a draft agreement aimed at allowing the banks to make amends for aiding tax evasion by wealthy Americans, a Swiss newspaper reported. About 100 Swiss banks signed up to work with U.S. authorities at the end of last year in a programme brokered by the Swiss government. That followed criminal investigations of roughly a dozen Swiss banks in the United States. These banks have now received a draft non-prosecution agreement from the United States.

Draghi taxes impede growth

Members of the International Monetary and Financial Committee (IMFC) pose for a group photo at the International Monetary Fund (IMF) and World Bank Group 2014 annual meetings, in Washington, DC, USA, 11 October, 2014

IMF members cry for bold action The IMF committee called for fiscal policy flexibility in European Union

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he International Monetary Fund’s member countries said bold action was needed to bolster the global economic recovery and they urged governments not to squelch growth by tightening budgets too drastically, although Germany poured cold water on the idea of a new global “crisis.”

With Japan’s economy floundering, the euro zone at risk of recession and even China’s expansion slowing, the IMF’s steering committee said focusing on growth was the priority.

“A number of countries face the prospect of low or slowing growth, with unemployment remaining unacceptably high,” the International Monetary and Financial Committee said on behalf of the Fund’s 188 member countries.

The Fund this week cut its 2014 global growth forecast to 3.3 percent from 3.4 percent, the third reduction this year as the prospects for a sustainable recovery from the 2007-2009 global financial crisis have ebbed, despite hefty injections of cash by the world’s central banks.

The IMF has flagged Europe as the top concern, a sentiment echoed by many policymakers, economists and

investors gathered in Washington for the Fund’s fall meetings.

European officials sought to dispel the gloom. European Central Bank President Mario Draghi said the drag from fiscal tightening in the euro zone was set to fade, while German Finance Minister Wolfgang Schaeuble downplayed the idea that the region’s largest economy was at risk of recession.

The IMF committee called for fiscal policy flexibility, but efforts to provide more room for France to meet its European Union deficit target looked set to founder on Germany’s insistence that the agreement on fiscal rectitude was set in stone and that the bloc would not be writing any new checks.

Storm clouds gather The United States has been a relative bright spot in the otherwise darkening global economic picture, and investors have rushed into dollars as a result.

Still, while U.S. growth has picked up, soft inflation and wage growth suggest the slowest-ever post-war recovery is not delivering a sustained boost to demand, and concerns are

growing that the global slowdown will undercut the U.S. economy as well.

Top officials from the U.S. Federal Reserve highlighted growing risks, with the central bank’s No. 2 saying the global slowdown could delay plans for a U.S. interest rate hike.

“In determining the pace at which our monetary accommodation is removed, we will, as always, be paying close attention to the path of the rest of the global economy and its significant consequences for U.S. economic prospects,” Fed Vice Chairman Stanley Fischer said at a conference of the Institute for International Finance.

The IMF panel urged nations to carry out politically tough reforms to labour markets and social security to free up money to invest in infrastructure to create jobs and lift growth.

The committee also called on central banks to be careful when communicating changes in policy in order to avoid financial market shocks. While not naming any central banks, the warning appeared aimed at the Fed, which is set to end its current bond-buying program this month.

Reuters

Banks accept derivatives rule change The drag of fiscal consolidation on economic growth will ease in the coming months, European Central Bank President Mario Draghi said on Saturday. “We do expect these headwinds (of fiscal consolidation) to become much more subdued in the future,” Draghi said at a news conference. “The drag on growth from fiscal consolidation should diminish in the coming months,” he said.

US rate hike dependent upon slowdown Federal Reserve officials on Saturday took stock of a slowdown in the global economy and said it could delay an increase in U.S. interest rates if serious enough.

Most notably, Fed Vice Chairman Stanley Fischer said the effort to finally normalize U.S. monetary policy after years of extraordinary stimulus may be hampered by the global outlook. “If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” he said at an event sponsored by International Monetary Fund.

Mandatory rules will also mean that another big user of derivatives, the asset management industry, will have little choice but to accept stays

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he US$700 trillion financial derivatives industry has agreed to a fundamental rule change from January to help regulators to wind down failed banks without destabilising markets.

The International Swaps and Derivatives Association (ISDA) and 18 major banks that dominate the market will now allow financial watchdogs to apply temporary stays to prevent a rush to close derivatives contracts if a bank runs into trouble, the ISDA said on Saturday.

A delay would give regulators time to ensure that critical parts of a bank, such as customer accounts, continue smoothly while the rest is wound down or sold off in an orderly way.

That would help to avoid the type of market chaos sparked by the collapse of Lehman Brothers in 2008.

The Financial Stability Board (FSB), a regulatory task force for the Group of 20 economies (G20), had asked the ISDA to make the changes with the aim of ending the too-bigto-fail scenario in which banks are

propped up with taxpayer money to avoid market disruption.

Under the new contract terms, default clauses in derivatives contracts such as interest rate or credit default swaps would be suspended for a maximum of 48 hours.

The ISDA template for millions of derivatives trades will now include the possibility of stays on both new and existing contracts, with the 18 leading players - including the likes of Credit Suisse and Goldman Sachs Group agreeing to change their contracts from January. Many derivatives are traded among banks.

More banks are expected to follow suit as regulators across the G20 countries introduce new rules next year to require counterparties to derivatives trades to accept stays.

Asset managers have resisted so far, arguing that they have a legal duty to their clients not to delay getting their money back from a failed bank and that agreeing to stays voluntarily could leave them open to lawsuits.

Reuters

Lehman Brothers tower in New York before the 2008 crisis

15

October 13, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Old measures for new mediocrity James Saft

Reuters columnist

THE KOREA HERALD South Korea’s antitrust watchdog said yesterday that it has fined two major security and safety service providers a combined 5 billion won (US$4.7 million) for hampering market competition through yearslong covert cooperation. S1 Corp., an affiliate of Samsung Group, and ADT CAPS were fined 2.5 billion won each for sharing their equipment in provincial regions with a promise not to compete against each other in those areas, according to the Fair Trade Commission (FTC).

The equipment sharing took place from 2000-2002 in places where their security infrastructure was not well established.

PHILSTAR Subsidies to governmentowned and controlled corporations (GOCCs) jumped 75.5 percent in the first eight months of the year, most of which went to healthcare, housing, rice procurement and power.

Data from the Department of Finance showed that the national government spent P59.24 billion in subsidies from January to August this year, up from the P33.75 billion disbursed in the same period a year ago. The Philippine Health Insurance Corp. (PhilHealth) got the biggest financial support at P35.6 billion or 60 percent of the total subsidies granted in the eight months ending August.

THE JAPAN NEWS Hitachi Ltd. said British subsidiary Hitachi Rail Europe Ltd. has been named preferred supplier of 234 train cars to Dutch railway operator Abellio for use in intercity services in Scotland.

The train car deal, estimated to be worth more than ¥40 billion, is expected to be formalized by the end of this year. Output of the train cars, planned to be used mainly on the Edinburgh-Glasgow route, is slated to start in 2015 in Japan, and mass production will be launched later at a British plant that is currently under construction.

Delivery will begin in 2016.

VIETNAM NEWS The capital will have 13 more industrial parks (IPs) spread over 6,000 hectares by 2020, a 300 per cent increase in comparison with the current number of parks. The latest report for the third quarter of the year, released by global property consultant Cushman & Wakefield, showed that the number of IPs in Ha Noi will increase in the near future. In the first nine months of the year, the city got 10 new IPs spread over an area of 1,423 hectares.

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he IMF’s “new mediocre” has the sound of a threat, but we may end by wishing it was a promise.

Not only has the IMF cut its world economic growth forecasts three times this year, but it is now warning of a sustained period of sub-par growth which looks similar to secular stagnation.

This is the idea that the old norms of growth will not return of their own accord, held back by high debts and the after-effects of the 20072009 financial crisis.

The global economy is “looking into the face of what we have called the risk of a new mediocre” period in economic growth,” IMF managing director Christine Lagarde said on Thursday in Washington D.C. at the annual IMF and World Bank meetings.

That points to a risk of “sustained global economic weakness over a five year period,” according to the IMF, driven specifically by under-investment and a self-perpetuating spiral of low confidence, low growth, inflation-undershoots, and yet more investment restraint.

The issue is that while the IMF has a clear idea of what we should do to blunt or avoid our mediocre shared future, its advice consists almost entirely of things we have already declined to do, or others which we have been busily implementing to unsatisfactory effect.

These reactions can briefly be divided into old bromides which we will not agree to follow and more of the same monetary

policy which helped bring us to where we are now.

Is there a new prescription?

The IMF’s advice relies heavily on what it calls growth-friendly policies on the fiscal side, a heavy dose of labour market reform, and infrastructure investment, particularly in the U.S. and Germany, with the presumption being that much of it will be debt financed by friendly financial markets.

None of this is new, and though you could argue that the importance of reform and infrastructure investment is greater in a low growth world, one in which every tenth of a percent of growth is a greater part of the whole and therefore more valuable, you have to ask

The IMF is clear that it expects the European Central Bank and Bank of Japan to provide more stimulus

why we have not done these reforms so far.

The reasons are political, or if you like cultural.

Europe is not working At a discussion at the IMF/World Bank meetings on Thursday, former U.S. Treasury Secretary Larry Summers described a Japan-like trajectory for Europe: “That is the path Europe is on without a substantial discontinuity of policy. What’s happening in Europe is not working.”

Summers noted that Europe has consistently delivered lower than expected growth and inflation in the years since the crisis, arguing for debt-financed spending on infrastructure, and not just those things which produce streams of revenue.

But German Finance Minister Wolfgang Schaeuble did not sound like a man about to reach into the pocket of the German people to fund pothole maintenance and bridge building.

“We must solve the problem of today without falling back to the mistakes of the past few years,” Schaeuble said in response to Summers, having earlier in the day remarked that “writing checks” was no way for the euro zone to boost growth.

Infrastructure is perhaps a good idea, but one of many which will find only stony soil in the current environment, particularly in Europe and the U.S. There just seems little likelihood that the G20 will actually produce much by way of new committed infrastructure spending.

That brings us to monetary policy, that most popular prescription, not least because it is one in which the money can be created by fiat by a few people around a table rather than via a messy and painful political process.

The IMF is clear that it expects the European Central Bank and Bank of Japan to provide more stimulus, and warns as well of the risk that a Federal Reserve tightening may affect the rest of its lukewarm forecast.

While it is impossible to argue that central bankers should sit on their hands while the world suffers through a period of subpar growth, it is also difficult to muster much enthusiasm for a set of policies which, while perhaps blunting the effects of the malaise, have manifestly not ended it.

Sometimes the best prediction of where things will be is simply to look at where they are now. Translating that in economic terms means we are looking at a continuation of the failure to follow structural recommendations such as infrastructure investment, while relying on monetary policy as the more easily implemented policy.

Monetary policy has undoubtedly had great impact in financial markets, but even though it is now looking like we will get more easing, or less tightening, those in the markets in the past week or two have been far less reassured.

Let’s hope that particular drug is not having a progressively diminishing effect.

Reuters

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October 13, 2014

Closing Former PBOC adviser warns on property weakness

Li’s visit to strengthen China-Russia practical cooperation

Weakening property demand will dim China’s economic prospects, dragging growth lower in the second largest economy, said Li Daokui (pictured), a former central bank adviser. Gross domestic product will expand 7.4 percent this year before growth slows further to 7.3 percent in 2015, said Li, head of the Economic Research Centre at Tsinghua University. The centre previously put China’s growth rate this year at 7.6 percent. Li’s latest forecast echoes other state-backed researchers in anticipating lower growth as economists from quasi-official sources assign little probability that leaders will splurge on stimulus to meet the government-set growth target.

Premier Li Keqiang’s upcoming visit to Russia is expected to enhance bilateral practical cooperation with a wide array of deals ranging from energy to people-to-people exchanges to be signed. Li arrived yesterday for an official visit, his first to Russia since taking office in March 2013. During the visit, the premier will attend the 19th China-Russia Prime Ministers’ Regular Meeting with his counterpart, Dmitry Medvedev, and a forum themed “open innovation.” Li is also expected to meet with Russian President Vladimir Putin. Over 50 mutually beneficial agreements will be inked during the visit.

China offers hint of growth prospects

way for third quarter gross domestic product numbers on October 21.

Annual GDP growth quickened slightly to 7.5 percent in the second quarter from 7.4 percent in the previous three months, but the economy was losing steam going into the third quarter as the property market slowed.

Analysts at UBS are expecting a mixed picture, with better export numbers offset by weaker import numbers, softer inflation and modestly slower credit growth.

That points to continuing slack domestic demand with year-on-year GDP easing back some more. UBS is expecting growth of 7.1 percent, while HSBC has pencilled in 7.3 percent.

Either number would signal the slowest year-on-year expansion in China since the first quarter of 2009 and the fourth quarter of 2001 before that.

If China is looking for an

Annual GDP growth quickened slightly to 7.5 percent in the second quarter from 7.4 percent

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hina’s economy, the second largest in the world, gets a spot check this week with a barrage of data due that should indicate how successful Beijing has been in supporting growth.

It may be even more pertinent than usual, given that the Federal Reserve has been surprisingly cautious about the U.S. economy and with euro

zone powerhouse Germany suddenly appearing to stagger.

Since April, Beijing has taken steps to keep up growth, including cutting reserve requirements for selected banks and hastening construction of railways and public housing.

Some of this week’s Chinese data - inflation, trade, bank credit, money supply and FX reserves - will pave the

From left, Zhou Xiaochuan, Governor of the People’s Bank of China, speaks with Wolfgang Schauble, German Federal Minister of Finance, before a group photo for members of the IMFC

expanding destination for its exports, it can probably skip the euro zone.

Already struggling with no growth and minimal inflation, the 18-member currency bloc has recently seen a new danger as its main economic engine, Germany, sputters.

Last week, industrial orders and output data showed the steepest drops in more than five years while the country’s dominant export sector suffered a plunge.

More bad news are expected on Tuesday when the ZEW research group issue its economic sentiment survey.

This has fallen every month since December when the index -- which primarily indicates direction -- hit 62.

European Central Bank chief Mario Draghi will speak mid-week and may repeat his calls for countries with available budget surpluses to increase spending to boost the euro zone economy. He means Germany.

Fed watch Federal Reserve policymakers will meanwhile be out in force, with Janet Yellen, who chairs the U.S. central bank, speaking in Boston on Friday.

With the Fed set to finally end its programme of bond-buying with new money at its next interest rate setting meeting on October 18-19, keen attention will be paid to any hints about the direction of interest rates.

This will especially be the case after some mixed messages in the past week about what is expected and the release of relatively dovish minutes of the last meeting.

Fed Vice Chairman Stanley Fischer said financial markets had it “more or less” right that there would be a hike in the middle of next year. But St. Louis Fed President James Bullard said investors and the central bank were far apart on their view of where interest rates will be at the end of 2015.

Reuters

EU exerts pressure on Ireland’s tricky taxes

Australian faces 1-in-7 below-poverty-line rate

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n EU probe into a tax deal between Ireland and Apple is raising pressure for a tightening of a controversial corporate tax system helping the country accelerate away from crisis.

The attention will be on any changes in Ireland’s draft budget to be presented next week.

In the face of strong criticism that Ireland’s tax policy is unduly favourable and distorts investment decisions, Ireland and Apple insist that the arrangements for the US company’s European headquarters do not amount to illegal state aid as defined by EU competition rules.

The investigation by European Union authorities in Brussels is putting the spotlight back on the tax strategy, following scathing attacks during US Senate committee hearings last year that accused Ireland of acting as a tax haven. Ireland’s strategy to attract companies has also been the target for frequent criticism from some EU leaders, notably in France, which objects that Ireland is undermining investment and tax revenues in other EU countries.

AFP

‘HK stability vital for development’

ne in seven Australians live below the poverty line, even after more than two decades of economic growth, an Australian Council of Social Service report showed.

The poverty rate in Australia climbed to 14 percent in 2012, or 2.55 million people, from 13 percent in 2010, the council said today in a report.

This included 603,000 children, or 17.7 percent of the total. The poverty line is defined as 50 percent of median disposable income, a standard measure of financial hardship in wealthy countries, it said.

“The child poverty rate should be of deep concern to us all, with over a third of children in sole-parent families” falling into this category, Cassandra Goldie, chief executive officer of Acoss, said in a statement.

“This is due to the lower levels of employment among sole-parent households.”

While a mining-investment boom sustained growth and employment in Australia’s economy, increasing numbers of people have missed out and instead seen their finances stretched by high housing costs.

Bloomberg News

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he last Portuguese governor of Macau, Vasco Rocha Vieira, says political stability is vital for Hong Kong’s development and wellbeing.

The Occupy Central movement has undermined the prosperity and stability of Hong Kong and seriously damaged the interests of its people, he said in an interview with Chinese news agency Xinhua.

“Political stability is very important to promoting the growth and the wellbeing of its population. If there continues to be agitation and violence, Hong Kong will see its stability and development, normal life of citizens and international image impaired,” he said.

Rocha Vieira served as the governor of Macau from 1991 to 1999. He also participated in negotiations on the return of Macau to China.

“The idea of ‘one country, two systems’ is a great and original ideal,” he said. “Macau was given a great level of autonomy, only possible within this idea of ‘one country, two systems’. China has respected Macau’s autonomy, its freedoms and its population’s way of life.”